Latest / Balance of Power / US Debt Hits $40 Trillion, Trump Wages Economic War on Iran

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US Debt Hits $40 Trillion, Trump Wages Economic War on Iran · Balance of Power

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  Speaker 2: So much to watch in financial markets today, in the
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  Speaker 2: bond market and the equity market. Pretty incredible to see
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  Speaker 2: this move on Walmart that Matt was just talking about.
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  Speaker 2: The worst day for that stock going back to February
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  Speaker 2: of twenty twenty four. It's at the lowest level since
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  Speaker 2: November of last year, on the back of that weaker
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  Speaker 2: than expected print. Of course, in large part that is
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  Speaker 2: due to the drug negotiation. Drug price negotiations of the
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  Speaker 2: administration has been engaged in, but still could very well
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  Speaker 2: send a signal about the health of the US consumer
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  Speaker 2: and the economy overall, which of course President Trump repeatedly
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  Speaker 2: contends is hot and is doing great. At the same time,
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  Speaker 2: he also has repeatedly said that Aan's economy it's suffering,
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  Speaker 2: pointing to higher inflation rates in a weaker currency due
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  Speaker 2: in large part to the US naval blockade, that it
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  Speaker 2: is still maintaining in the Strait of horor moves. The strait,
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  Speaker 2: of course, which the President says, is still entirely in
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  Speaker 2: US control. As you said at the White House just yesterday, I.
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  Speaker 3: Can't let Iran have a nuclear weapon. We have possession,
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  Speaker 3: complete control of the Straight. We had a lot of
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  Speaker 3: oil coming out, a lot of It's not going to
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  Speaker 3: be perfect, but it's a lot of oil coming out.
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  Speaker 2: And the President's getting ready to go even further than
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  Speaker 2: just the blockade if you take him at phase value,
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  Speaker 2: and what he posted on True Social announcing perhaps what
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  Speaker 2: he described as an economic d Day against Iran, writing quote,
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  Speaker 2: no one has given the Islamic Republic of Iran a
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  Speaker 2: greater opportunity to make a deal than me. Tragically for them,
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  Speaker 2: they have failed to take it. Therefore, today I am
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  Speaker 2: announcing the most crushing economic operation ever taken against any country.
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  Speaker 2: So what exactly will that look like? Maybe, Tyler Kendall knows,
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  Speaker 2: our Washington correspondent who is here with me in the
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  Speaker 2: DC studio. So, Tyler, the most crushing economic operation ever taken,
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  Speaker 2: that operation would entail.
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  Speaker 4: Well, we're waiting for that answer, of course, not to
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  Speaker 4: you know, not make good on all that anticipation that
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  Speaker 4: you lend me with, but we'll have to see. On Monday,
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  Speaker 4: we very likely we'll get some former details. The US
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  Speaker 4: Treasury Secretary Scott Bessen did announce that he will hold
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  Speaker 4: a press conference focused on what this could entail President
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  Speaker 4: Trump to give us a few clues, if you will.
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  Speaker 4: In that truth social post, people are picking up on
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  Speaker 4: the fact that he says that this will be geared
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  Speaker 4: toward other countries, those that he says allow their financial
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  Speaker 4: institutions to supply any sort of lifeline to Iran. He
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  Speaker 4: outlined that that includes cash transfer, swaplines, ship registries, or
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  Speaker 4: any avenues to smuggle its oil out, and that is
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  Speaker 4: what everyone's picking up on, adding in part quote you
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  Speaker 4: know who you are. That is raising questions on whether
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  Speaker 4: or not that means the US is going to more
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  Speaker 4: strongly target Chinese purchases of Iranian cre food, though that
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  Speaker 4: in and of itself has a risk to the Beijing
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  Speaker 4: Washington truce about a month away from the Chinese president
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  Speaker 4: Jijingping coming here to DC. There's a few other things
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  Speaker 4: that we're tracking that are sort of on our list
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  Speaker 4: of potential ways that the US may exert economic pressure
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  Speaker 4: some more targeted actions against the so called shadow fleet
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  Speaker 4: that actually moves the oil for Iran. We could also
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  Speaker 4: see the US move to try to seize frozen Iranian
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  Speaker 4: assets that are within their jurisdiction, though I was speaking
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  Speaker 4: with one analyst who says this may be a little
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  Speaker 4: easier said than done, because even if it's in the
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  Speaker 4: US jurisdiction, you have to get third party countries involved.
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  Speaker 4: But it's definitely something to watch against the background that
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  Speaker 4: the President has already threatened so called secondary tariffs twenty
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  Speaker 4: five percent on any country that does business with Iran.
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  Speaker 4: Whether or not he follows through on that remains to
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  Speaker 4: be seen.
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  Speaker 2: Okay, so we're going to have to wait to see
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  Speaker 2: and hear detail, I guess from the Treasury Secretary on Monday.
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  Speaker 2: In the meantime, Tyler, we're hearing from the Treasury Secretary
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  Speaker 2: about issue today. Once again he's trying to talk down
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  Speaker 2: long end rates, it seems, suggesting that the Treasury could
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  Speaker 2: be buying back even more long term debt than it
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  Speaker 2: announced yesterday, which was larger than what it announced two
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  Speaker 2: weeks ago. He essentially says he's trying to bring the
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  Speaker 2: market back to equilibrium. He told reporters this at the
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  Speaker 2: White House earlier.
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  Speaker 5: Anything that happens within a twenty four hour period is noise.
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  Speaker 5: And you know, I think that once the market understands it,
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  Speaker 5: we are focusing on physical consolidation, and that we are
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  Speaker 5: trying to bring the market back into equilibrium in a
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  Speaker 5: thinly traded market, I think, you know, I'm confident that
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  Speaker 5: bonds will continue declining.
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  Speaker 2: And Tyler, you were at the White House yesterday when
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  Speaker 2: the President was asked if Americans should be concerned about
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  Speaker 2: volatility in the bond market. His answer was no. And
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  Speaker 2: yet the Treasury Secretary seems to be suggesting he's a little.
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  Speaker 4: Concerned, yeah, and willing to take additional action, as well
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  Speaker 4: as saying that administration will be unveiling a new fiscal
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  Speaker 4: initiative to addressed borrowing costs. Of course, this is becoming
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  Speaker 4: a politically fraught issue here in Washington as financing costs
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  Speaker 4: make their way through to the broader economy. This month,
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  Speaker 4: we're seeing that mortgage rates at their highest level since
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  Speaker 4: July of twenty twenty five. I picked up on this
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  Speaker 4: quote from the Treasury Secretary. He said, all we're trying
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  Speaker 4: to do is get people to focus on the fundamentals
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  Speaker 4: and not trade the headlines. He didn't specify what the
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  Speaker 4: new fiscal push would involve, nor what headlines he was
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  Speaker 4: referring to. But yesterday we got one in terms of
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  Speaker 4: the debt load, reaching out forty trillion dollars. And if
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  Speaker 4: we dig into some of that Treasury Department data, that
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  Speaker 4: includes a record July budget deficit, fueled in part by
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  Speaker 4: surgeon medicare costs, and Social Security, as well as the
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  Speaker 4: interest that we pay on that debt. But I don't
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  Speaker 4: need to tell you that it is politically difficult right
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  Speaker 4: now in Washington to cut spending, especially during an election year.
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  Speaker 2: Well, of course, Scott Bessen has blamed this in part
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  Speaker 2: for the fact that a lot of the tariff revenue
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  Speaker 2: they were counting on isn't coming in because of the
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  Speaker 2: Supreme Court decision to ref funds that have to be
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  Speaker 2: issued on tariffs. Just quickly, are we about to get
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  Speaker 2: more tariff revenue from Canada or not?
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  Speaker 4: Tyler, Well, the Usdr Jamison Greer is meeting right now
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  Speaker 4: with his Canadian counterpart. I don't have my terminal in
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  Speaker 4: front of me. I'm not sure for we're getting headlines
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  Speaker 4: on a white yet. But we're waiting for this finalized deal.
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  Speaker 4: Maybe something is in the works. We have reporting, Kaylee.
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  Speaker 4: It looks like that we are going to see lower
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  Speaker 4: tariffs when it comes to autos, maybe twenty five percent
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  Speaker 4: to fifteen percent, and metal tariffs potentially cut in half.
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  Speaker 4: But that could maybe open the door for a little
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  Speaker 4: bit more trade access between the two economies according to
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  Speaker 4: this White House, But we still need to see those
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  Speaker 4: finalized details on paper.
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  Speaker 2: Waiting for details on a lot of Thanks Tyler Kendall,
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  Speaker 2: thank you so much, our Washington correspondent here with me
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  Speaker 2: in the DC studio, And I want to return to
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  Speaker 2: what Tyler was talking about. The countries that apparently know
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  Speaker 2: who they are that the US may be looking to
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  Speaker 2: as it tries to tighten the economic screws against ron China,
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  Speaker 2: of course, the first one that comes to mind, at
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  Speaker 2: least for me, and perhaps so as well for Anna Ashton,
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  Speaker 2: who of course is the founder of Ashton Analytics and
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  Speaker 2: a former China analyst at the Department of Defense. She's
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  Speaker 2: here with us now on Bloomberg TV and Radio. Ana,
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  Speaker 2: welcome back to the program. It's good to have you.
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  Speaker 2: China has responded to what President Trump announced suggesting that
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  Speaker 2: it does not believe that pressure and economic sanctions are
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  Speaker 2: going to work, that diplomacy is what has to be pursued. Here,
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  Speaker 2: is that China basically telling the President we're not playing
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  Speaker 2: along with this effort more.
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  Speaker 6: Or less, yes, I think you know that the White
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  Speaker 6: House is probably trying to wrap it up pressure not
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  Speaker 6: just on Iran, but a little bit on China ahead
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  Speaker 6: of the September visit of s GENEP. It's been sort
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  Speaker 6: of deragor for Trump to rapt it up pressure ahead
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  Speaker 6: of meter talks. But behind the scenes, we have to
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  Speaker 6: assume that she is pretty committed to reaching some sort
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  Speaker 6: of agreement getting something done during this visit, and that
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  Speaker 6: Trump is too.
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  Speaker 7: So you know how much of this is theater?
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  Speaker 4: Is?
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  Speaker 7: I think the most important question?
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  Speaker 2: Well, on the subject of that visit, I actually discussed
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  Speaker 2: this on balance of power earlier this week with the
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  Speaker 2: former National Security advisor to President Biden, Jake Sullivan. I
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  Speaker 2: asked him specifically, who has the stronger hand, frankly, in
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  Speaker 2: that meeting that's coming up in just a few short weeks.
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  Speaker 2: This was his answer.
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  Speaker 8: In it one of the biggest things America has historically
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  Speaker 8: brought to the table in the competition with China. Is
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  Speaker 8: a network of powerful, robust alliances in both the Atlantic
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  Speaker 8: and the Pacific, and China has had a long term
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  Speaker 8: strategy of wanting to undermine those alliances, to weaken them,
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  Speaker 8: to divide the.
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  Speaker 9: United States from its allies.
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  Speaker 8: And they're looking right now and saying, wait, President Trump
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  Speaker 8: is actually doing our work for us. And I think
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  Speaker 8: it does mean that President she will come with a
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  Speaker 8: certain swagger in his step because he believes that they
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  Speaker 8: are making progress economically and technologically, they're making inroads diplomatically,
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  Speaker 8: and the United States is losing or is degrading, one
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  Speaker 8: of the most critical assets that it has.
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  Speaker 2: I wonder if you agree with that characterization, Anna.
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  Speaker 7: I couldn't agree more.
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  Speaker 6: The reality is that not only is China looking at
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  Speaker 6: a United States that has weakened its relationships with its allies,
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  Speaker 6: but on top of that, China is looking at a
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  Speaker 6: United States that has depleted a significant percentage of its
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  Speaker 6: weapons stockpiles, that is trying to both end names that
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  Speaker 6: it is going to become more reliant on itself in
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  Speaker 6: things like AI and drones, and then at the same
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  Speaker 6: time needs critical resources from China still and for the
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  Speaker 6: foreseeable future will still need those critical resources from China
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  Speaker 6: in order to be able to compete. There is definitely
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  Speaker 6: a change in terms of who seems to have the
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  Speaker 6: upper hand, and at present, I think Xi Jinping likely
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  Speaker 6: feels like.
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  Speaker 1: He does.
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  Speaker 4: Well.
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  Speaker 2: And as you talk about some of those critical materials
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  Speaker 2: that the US needs to power a lot of things
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  Speaker 2: the defense sector included, how quickly if the US were
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  Speaker 2: to actually do what the president is suggesting and punish
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  Speaker 2: those who are still going to purchase Irani and crude
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  Speaker 2: and not abide with a tighter economic choke hold that
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  Speaker 2: the US wants to get on Iran. If President Trump
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  Speaker 2: were actually to say, okay, then China, here are higher
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  Speaker 2: tariffs that you have to deal with, how quickly does
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  Speaker 2: that spiral into say, fresh export controls of critical minerals
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  Speaker 2: and wearers.
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  Speaker 7: I think that that's exactly the right question.
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  Speaker 6: I think too, that that is that is the lever
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  Speaker 6: to look at. How quickly China pulls that lever. I
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  Speaker 6: don't think it would be, you know, a significant ratcheting
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  Speaker 6: up of export controls immediately, unless what the United States
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  Speaker 6: did was explicitly targeting China and hit really hard in
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  Speaker 6: terms of punishing chinas ability to compete internationally because it
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  Speaker 6: couldn't receive oil from iron anymore.
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  Speaker 7: But that's a really hard thing for the United States
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  Speaker 7: to do.
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  Speaker 6: I mean, the reality is that China is actually quite
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  Speaker 6: diversified in terms of where it gets its oil and gas,
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  Speaker 6: and although it is dependent on the Strait of Hormus
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  Speaker 6: like so many other countries, it has plenty of fallback options.
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  Speaker 6: So I don't think that that's the lever that the
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  Speaker 6: White House thinks it is well.
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  Speaker 2: And on oil specifically, I have been told many times
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  Speaker 2: throughout the course of this conflict and the difficulties in
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  Speaker 2: the Strait of hor moves that in large part why
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  Speaker 2: oil prices haven't moved higher is because of China, because
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  Speaker 2: they've pulled back as a buyer on the global markets
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  Speaker 2: that have been leaning on their massive oil stockpiles. How
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  Speaker 2: easy would it be for China to decide also to
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  Speaker 2: pressure the global oil market to drive prices higher by
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  Speaker 2: coming out and buying and force Again.
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  Speaker 6: That's an interesting question, and I can't honestly answer that one,
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  Speaker 6: but I think that it is worth exploring.
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  Speaker 2: Well, let's go to another area. Then that is definitely
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  Speaker 2: top of mind when it comes to China, I hope
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  Speaker 2: you can weigh in on artificial intelligence. We are having
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  Speaker 2: a massive conversation here in the United States around data centers,
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  Speaker 2: the infrastructure that powers AI. The industry of course, will
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  Speaker 2: tell you we have to have these data centers. We
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  Speaker 2: have to allow these models to advance, because if not,
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  Speaker 2: we seed ground to China. Obviously, the domestic pressures in
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  Speaker 2: communities and concern over water and energy prices utility bills
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  Speaker 2: would suggest a pullback. Is there merit to the argument
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  Speaker 2: that China is within a breath of being able to
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  Speaker 2: surpass us on artificial intelligence if we slow down even slightly.
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  Speaker 7: I do think that.
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  Speaker 6: There's merits in the argument that China is catching up fast.
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  Speaker 6: And one of the reasons it's catching up is because
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  Speaker 6: it has a very different ecosystem in terms of its
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  Speaker 6: energy resources and its ability to bring these huge data
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  Speaker 6: centers online. That's cheaper and easier for them than it
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  Speaker 6: is for us, and so that is one way that
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  Speaker 6: they're going to continue likely to outcompete us.
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  Speaker 7: However, in terms of what their.
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  Speaker 6: AI capabilities are, you know, the expert seem pretty firm
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  Speaker 6: on their conviction that the China is not actually within
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  Speaker 6: a breath of catching up to US.
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  Speaker 7: I guess we'll have to see.
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  Speaker 2: Well and how much of that is dictated by the
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  Speaker 2: controls that the US has put in place, the export
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  Speaker 2: controls around chips that power this critical technology. A headline
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  Speaker 2: across the Bloomberg terminal just a few minutes ago, and
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  Speaker 2: from the information that Nvidia is plotting a new chip
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  Speaker 2: for Chinese customers that perhaps I guess would get around
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  Speaker 2: some of those export restrictions. We haven't confirmed that here
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  Speaker 2: at Bloomberg, but apparently this chip would be compliant with
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  Speaker 2: the export control rules. Does that suggest that the export
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  Speaker 2: controls are working or that there's so many loopholes at
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  Speaker 2: which China is still able to access it that they
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  Speaker 2: aren't as effective.
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  Speaker 6: I think the export controls have been working to slow
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  Speaker 6: China down because you know, it is much harder to
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  Speaker 6: achieve the goals that they want to achieve in terms
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  Speaker 6: of AI capabilities without those chips, and they don't have
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  Speaker 6: them yet. But you know, the export controls have also
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  Speaker 6: guaranteed that China is pouring more and more and more
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  Speaker 6: resources into developing them and is determined to be less
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  Speaker 6: and less reliant on sources like Nvidia for those chips.
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  Speaker 6: It's great for them in the near term if they
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  Speaker 6: can buy some Nvidia chips, but in the long term,
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  Speaker 6: what they want is to not need them, and they're
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  Speaker 6: working hard to do that.
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  Speaker 2: And we have less than a minute left here. But
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  Speaker 2: how do you think China is viewing and interpreting the
• 14:52
  Speaker 2: president's rhetoric in the last few days around the Korean
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  Speaker 2: peninsula attacking South Korea, talking about a good relationship with
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  Speaker 2: North Korea. Does drawing back on joint military exercises with
• 15:03
  Speaker 2: South Korea also send a signal to Beijing.
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  Speaker 6: Certainly it does, and I'm sure it's a positive signal
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  Speaker 6: from Beijing standpoint. And we also, you know, have been
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  Speaker 6: pulling our aircraft carriers out of the region, and we
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  Speaker 6: just are giving numerous signals that we're sort of abandoning
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  Speaker 6: the Pacific as an area of primary focus.
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  Speaker 2: All right, Ann Ashton, great to have you back on
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  Speaker 2: the program joining us from Ashton Analytics. Thanks so much.
• 15:36
  Speaker 2: And indeed we have seen the carrier that George Washington
• 15:39
  Speaker 2: leave the Pacific. It's now in the Middle East to
• 15:41
  Speaker 2: relieve the Lincoln.
• 15:43
  Speaker 10: Stay with us on balance of power. We'll have much
• 15:45
  Speaker 10: more coming up after this.
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  Speaker 1: New York station Just Say Alexa played Bloomberg eleven thirty.
• 16:08
  Speaker 2: Yields at the long end are on the climb back
• 16:10
  Speaker 2: up today, erasing a lot of the gains we saw
• 16:13
  Speaker 2: yesterday off the back of the Treasury's larger buyback announcement
• 16:17
  Speaker 2: for the long end, and the Treasury Secretary Scott Beson,
• 16:20
  Speaker 2: of course today went even further to say that that
• 16:22
  Speaker 2: could be even larger than four billion dollars per issue,
• 16:25
  Speaker 2: and yet we're still climbing five basis points on the
• 16:27
  Speaker 2: thirty year, which is sitting just around five and a
• 16:29
  Speaker 2: quarter percent as we speak. The issue here may be
• 16:33
  Speaker 2: that the market is clinging to the illness like inflation
• 16:38
  Speaker 2: and the debt, which, of course, as we told you yesterday,
• 16:41
  Speaker 2: has crossed forty trillion dollars doubling in just the last
• 16:46
  Speaker 2: ten years. The Treasury may instead be trying to address
• 16:50
  Speaker 2: the symptom, which means it could be a near term fix,
• 16:53
  Speaker 2: but not a long term one. As I heard yesterday
• 16:56
  Speaker 2: on Balance of Power from Jason Furman, the former chair
• 16:59
  Speaker 2: of the Council of ECN Advisors under President Obama.
• 17:02
  Speaker 11: There's two solutions.
• 17:04
  Speaker 12: You can cut spending, or you can raise taxes, you know,
• 17:07
  Speaker 12: or you could do some combination of the two of those.
• 17:10
  Speaker 12: There's two things pushing up inflation. One is the pushing
• 17:16
  Speaker 12: up interest rates. One is expected inflation.
• 17:19
  Speaker 8: Now.
• 17:19
  Speaker 12: The good news here is the market seems to believe,
• 17:21
  Speaker 12: and I agree with the market that the Fed is
• 17:23
  Speaker 12: going to keep inflation under control, but they're going to
• 17:26
  Speaker 12: keep it under control by raising interest rates. And second
• 17:29
  Speaker 12: is just the general upward pressure that comes every time
• 17:32
  Speaker 12: there's a voracious demand for capital, and that's what we
• 17:36
  Speaker 12: have right now. And I just don't think any of
• 17:38
  Speaker 12: those are going to change, you know, short of a
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  Speaker 12: recession or a bubble bursting or some bad event like that.
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  Speaker 12: Higher interest rates to me are likely here to stay.
• 17:49
  Speaker 2: But of course higher interest rates are exactly what President
• 17:52
  Speaker 2: Trump doesn't want, as he said again repeatedly at the
• 17:55
  Speaker 2: White House yesterday, that he thinks reach should go down
• 17:58
  Speaker 2: because the economy is strong, not up. But if the
• 18:01
  Speaker 2: things that might bring interest rates down? Are raising taxes
• 18:05
  Speaker 2: or cutting spending? As Jason Furman told us, there's a
• 18:08
  Speaker 2: real question as to whether or not Washington is ready
• 18:11
  Speaker 2: to deliver on either of those things. And it's on
• 18:13
  Speaker 2: that note we turn out to today's political panel. Rick
• 18:16
  Speaker 2: Davis is with us Bloomberg Politics contributor, Stone Court Capital
• 18:19
  Speaker 2: Partner and Republican strategists alongside Democratic strategist Caitlin Lgacki, stenior
• 18:24
  Speaker 2: fellow at Third Way. Welcome to you both, Rick, higher
• 18:29
  Speaker 2: taxes or cutting spending? Which one of those is politically appetizing?
• 18:35
  Speaker 13: Well, I think if the American public starts realizing that
• 18:37
  Speaker 13: the amount of debt that is represented in this forty
• 18:40
  Speaker 13: trillion dollar number represent it's one hundred and twenty thousand
• 18:44
  Speaker 13: dollars per American, they start to.
• 18:47
  Speaker 11: Get a little edgy about that. And we haven't gotten
• 18:49
  Speaker 11: to that point. It hasn't become a real sailing political
• 18:51
  Speaker 11: issue at this stage, but.
• 18:52
  Speaker 13: We've seen it when it has and things change, and
• 18:55
  Speaker 13: so you do see Congress in the past, when they've
• 18:58
  Speaker 13: had pressure from state trans to make changes to the
• 19:01
  Speaker 13: amount of spending they have, they impose all kinds of
• 19:04
  Speaker 13: different measures to stop spending. They rarely actually cut back
• 19:09
  Speaker 13: on the actual spending, and so I don't think you
• 19:13
  Speaker 13: can be very optimistic that either taxes are going up
• 19:17
  Speaker 13: or spending is going to come down. But I could
• 19:19
  Speaker 13: see in the very near future, certainly by the twenty
• 19:22
  Speaker 13: twenty eight cycle, a real effort to start raining back
• 19:27
  Speaker 13: on the growth in spending, which would send a good
• 19:30
  Speaker 13: message to the market. But the idea that taxes go
• 19:34
  Speaker 13: up and spending goes down very optimistic and probably unrealistic.
• 19:39
  Speaker 2: Well, so let's talk about where you could see cuts
• 19:42
  Speaker 2: in spending. This administration at least doesn't want to see
• 19:44
  Speaker 2: them come in. One of the easiest discretionary areas, perhaps
• 19:49
  Speaker 2: are the largest that you could target defense. They want
• 19:51
  Speaker 2: a bigger defense budget. You still have to pay interest
• 19:55
  Speaker 2: on the debt, Caitlin. So that leaves the non defense
• 19:57
  Speaker 2: discretionary areas which aren't really enough to make a dent,
• 20:02
  Speaker 2: and then it leaves the mandatory spending and entitlements. Is
• 20:04
  Speaker 2: there going to be any candidate Maybe not in this cycle,
• 20:07
  Speaker 2: but in twenty eight who's going to talk seriously about
• 20:11
  Speaker 2: reforms to social security or to mediciate.
• 20:15
  Speaker 14: I don't think they'll be focused on social security and medicaid.
• 20:18
  Speaker 14: But I do think that you've raised an important question,
• 20:21
  Speaker 14: which is, you know, as we are going into a
• 20:24
  Speaker 14: presidential primary, we're going to have a lot of candidates
• 20:27
  Speaker 14: throwing out big ticket spending ideas, and I do think
• 20:31
  Speaker 14: that we have to be very serious about addressing how
• 20:35
  Speaker 14: we plan to pay for those ideas, how we plan
• 20:37
  Speaker 14: to pay for those programs, and then also ensure that
• 20:40
  Speaker 14: we're delivering those services effectively. I think we saw from
• 20:45
  Speaker 14: the Doge episode that Americans agree with the idea of
• 20:48
  Speaker 14: cutting waste, fraud, and abuse, but we also saw that
• 20:51
  Speaker 14: it's really really hard to do that without hurting people.
• 20:56
  Speaker 14: And so that's going to be an important balance for
• 20:58
  Speaker 14: any candidates to strike, and unfortunately, I don't have the
• 21:01
  Speaker 14: highest degree of confidence that they're going to focus on that.
• 21:05
  Speaker 2: Well, what about when it comes to the revenue side,
• 21:07
  Speaker 2: to the idea of raising taxes, because there are plenty
• 21:10
  Speaker 2: of people on the left, Caitlin, who are floating ideas
• 21:13
  Speaker 2: around taxing the rich. You see the wealth tax that's
• 21:16
  Speaker 2: on the ballot in California in this cycle. If Democrats
• 21:20
  Speaker 2: do get power back in Washington, is that realistically what
• 21:23
  Speaker 2: should be expected.
• 21:26
  Speaker 14: I think that there's going to be a lot of
• 21:28
  Speaker 14: conversation about it, but I have a hard time seeing
• 21:31
  Speaker 14: the rubber meeting the road and actually getting done in
• 21:34
  Speaker 14: a comprehensive way, just because the kind of majority it's
• 21:39
  Speaker 14: going to take to pass that kind of revenue raiser
• 21:42
  Speaker 14: is the kind of majority that's built on a lot
• 21:44
  Speaker 14: of red and purple districts and seats, and those candidates
• 21:48
  Speaker 14: are not going to want to go into a midterm
• 21:52
  Speaker 14: election talking about how they raise taxes. And I think
• 21:55
  Speaker 14: that's part of why this is so hard, because we
• 21:56
  Speaker 14: do need to start raising revenue again. You need to
• 22:01
  Speaker 14: simplify and make our tax code fairer, and it's hard
• 22:04
  Speaker 14: to do that without actually generating more revenue and ensuring that,
• 22:08
  Speaker 14: you know, billionaires and corporations are paying their fair share.
• 22:13
  Speaker 2: Well, yeah, so a lot of this is hard. I
• 22:14
  Speaker 2: think is the lesson we're learning from you both and Rick.
• 22:18
  Speaker 2: If there are no easy answers, the Treasury Secretary at
• 22:21
  Speaker 2: least is searching for some that he can use in
• 22:23
  Speaker 2: the immediate term with things like buybacks, trying to talk
• 22:28
  Speaker 2: down the long end of the bond market. I wonder
• 22:32
  Speaker 2: what you make of the Treasury Secretary this administration. Frankly,
• 22:36
  Speaker 2: because we have seen this from President Trump as well.
• 22:38
  Speaker 2: Remember he pulled back on the initial tariffs from Liberation
• 22:43
  Speaker 2: Day in April because he said the bond market was
• 22:46
  Speaker 2: getting Yippi. It seems that the Treasury secretary is also
• 22:49
  Speaker 2: worried about the bond market getting Yippi. Here, what is
• 22:53
  Speaker 2: with this administration and taking cues from fixed income specifically.
• 23:00
  Speaker 13: Yeah, Look, when the President came in, everybody was talking
• 23:03
  Speaker 13: about how non.
• 23:03
  Speaker 11: Interventionists they're going to be.
• 23:06
  Speaker 13: They really thought that these were the policies that they
• 23:10
  Speaker 13: could pursue. And I think you know right now, the
• 23:13
  Speaker 13: Secretary vest may go down in history is the most
• 23:15
  Speaker 13: interventionist Treasury secretary of art time. And that's saying a
• 23:20
  Speaker 13: lot considering what we've seen in the markets over the
• 23:23
  Speaker 13: last twenty five years.
• 23:24
  Speaker 11: So I'm really stunned by the approach.
• 23:27
  Speaker 13: They don't seem to be willing to bite the bullet
• 23:30
  Speaker 13: into try and do the hard stuff. Look, this administration
• 23:33
  Speaker 13: is at the end of its next two years, right, they'll.
• 23:36
  Speaker 11: Never run for reelection.
• 23:37
  Speaker 13: They have an opportunity to actually get the fiscal house
• 23:41
  Speaker 13: in order without paying a political price. And it's amazing
• 23:45
  Speaker 13: to me that the only resolution they have right now
• 23:49
  Speaker 13: in this bond crisis is to just, you know, continue to.
• 23:53
  Speaker 11: Buy long term debt that has a limit to it.
• 23:57
  Speaker 13: And I'm not sure how effective that is in curbing
• 23:59
  Speaker 13: inflation in helping to spur growth.
• 24:02
  Speaker 11: If anything, it has the opposite effect. So I think
• 24:05
  Speaker 11: this administration's got themselves in a bit of a pickle.
• 24:07
  Speaker 13: I would disagree that doing things like performing Social Security
• 24:12
  Speaker 13: and Medicare and talking about things.
• 24:14
  Speaker 11: Like a flat tax are politically dangerous.
• 24:18
  Speaker 13: I've seen Canadas do very well when they talk straight
• 24:21
  Speaker 13: talk to the American public and say so, scarity is
• 24:24
  Speaker 13: not sustainable past twenty thirty.
• 24:26
  Speaker 11: We have to do something to fix it.
• 24:27
  Speaker 13: And then the process of fixing it, maybe we can
• 24:29
  Speaker 13: reduce the debt that the American public has.
• 24:32
  Speaker 11: And people like the idea of a flatter, simpler tax cut.
• 24:35
  Speaker 13: And by the way, there are a lot of billionaires
• 24:38
  Speaker 13: who would pay a lot more in tax if everyone
• 24:40
  Speaker 13: got on a flat tax.
• 24:43
  Speaker 2: Well, that is certainly a point well made, Rick, as
• 24:47
  Speaker 2: we consider the amount of wealth that is percolating out
• 24:50
  Speaker 2: there in this case shaped economy that we are dealing
• 24:53
  Speaker 2: with here in the United States. Caitlin, just on the
• 24:56
  Speaker 2: point that Rick was making about how interventionist this treat
• 25:00
  Speaker 2: secretary in particular has been, knowing how much he criticized
• 25:04
  Speaker 2: his predecessor, Janet Yellen for frankly similar behavior. When it
• 25:09
  Speaker 2: comes to the different maturities that the Treasury is issuing
• 25:13
  Speaker 2: as it tries to obviously fund all of this spending
• 25:15
  Speaker 2: that we've been talking about. What does that say about
• 25:20
  Speaker 2: is about this administration or just a changing nature of
• 25:22
  Speaker 2: the role of the Treasury in financial markets that has
• 25:27
  Speaker 2: now been forever reset.
• 25:28
  Speaker 14: Perhaps well, only Nixon could go to China, and I
• 25:32
  Speaker 14: think only Trump could intervene in the markets the way
• 25:35
  Speaker 14: that he has. But it is setting a new standard
• 25:39
  Speaker 14: and a new set of norms that you know, three
• 25:43
  Speaker 14: years ago were simply not conceivable. And you know, when
• 25:46
  Speaker 14: you look at the way they've taken stakes and equity
• 25:50
  Speaker 14: and private companies, the way they've influenced the private sector,
• 25:54
  Speaker 14: and it.
• 25:55
  Speaker 2: Is unheard of.
• 25:56
  Speaker 14: And I think the risk now for the private sector
• 25:58
  Speaker 14: is Democrats are going to this and they're going to
• 26:01
  Speaker 14: want to do it also. And so this is a
• 26:04
  Speaker 14: little bit of a Pandora's box that has been opened,
• 26:06
  Speaker 14: and I think we'll have to see how it plays
• 26:08
  Speaker 14: out long term.
• 26:11
  Speaker 2: And before I let both of you go, I also
• 26:12
  Speaker 2: want to ask you about the president's promised economic D
• 26:17
  Speaker 2: Day against Iran. Caitlin, we are awaiting the details here,
• 26:22
  Speaker 2: but it seems like what this actually is is the
• 26:24
  Speaker 2: US asking a lot of other countries to play along
• 26:27
  Speaker 2: with it in trying to tighten the economic screws. Is
• 26:30
  Speaker 2: the Trump administration likely to get that.
• 26:35
  Speaker 14: It's hard to say, but I think the bigger issue
• 26:37
  Speaker 14: is that this should have been the first step before
• 26:39
  Speaker 14: they started launching bombs. And what we have seen in
• 26:41
  Speaker 14: the past, what we've seen historically is that this kind
• 26:45
  Speaker 14: of economic sanctions is usually a good way to avoid
• 26:48
  Speaker 14: unnecessary wars. And because we're doing things a little bit backwards,
• 26:53
  Speaker 14: I think it remains to be seen whether that's actually
• 26:56
  Speaker 14: going to be effective.
• 26:59
  Speaker 2: And Rick, in our final minute here, is economic D
• 27:02
  Speaker 2: Day really going to be a D day?
• 27:04
  Speaker 11: Yeah, we've been hearing the economic D day for a
• 27:06
  Speaker 11: long time. We've had We've had sanctions on this.
• 27:10
  Speaker 13: Country for fifty years, and I'd like to hope that
• 27:13
  Speaker 13: they would actually be more effective today than they have been.
• 27:16
  Speaker 13: But you can't hold your breath on that. The reality
• 27:19
  Speaker 13: is we're not putting pressure on Russia. We're not putting
• 27:21
  Speaker 13: pressure on China. And now we're making friends with the
• 27:23
  Speaker 13: North Koreans. All of them are supporting the Iran war
• 27:26
  Speaker 13: for rank, and so until we actually get straight with
• 27:29
  Speaker 13: who our friends are and who our enemies are, I
• 27:32
  Speaker 13: can't imagine economic D Day is going to have the
• 27:34
  Speaker 13: impact that the real D Day did.
• 27:38
  Speaker 2: All right, we'll leave it on that note. Rick Davis
• 27:40
  Speaker 2: and Caitlin Lagaki, great stuff, guys, Thank you for joining
• 27:43
  Speaker 2: us on Balance of Power. And we still have more
• 27:46
  Speaker 2: coming up ahead on the program, an important conversation between
• 27:49
  Speaker 2: Bloomberg's Tyler Kendall and the Chair of the CFTC, Michael Seelig,
• 27:54
  Speaker 2: as we consider the fate of the Clarity Act when
• 27:56
  Speaker 2: Congress returns from recess.
• 27:58
  Speaker 10: Stay with us on Balance of Power. We'll have much
• 28:00
  Speaker 10: more coming up after this.
• 28:04
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• 28:08
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• 28:11
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• 28:14
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• 28:17
  Speaker 1: flagship New York station, just Say Alexa played Bloomberg eleven.
• 28:22
  Speaker 2: Thirty James Braid is expanding his horizons to the private sector.
• 28:26
  Speaker 2: He's getting set to depart the White House in September,
• 28:29
  Speaker 2: according to President Trump. James Brad of course, is the
• 28:31
  Speaker 2: White House Director of Legislative Affairs, and the President credited
• 28:35
  Speaker 2: him in his post announcing his departure on True Social
• 28:38
  Speaker 2: with many of the big accomplishments Congress has made during
• 28:41
  Speaker 2: Trump's second term, including the One Big Beautiful Bill, beating
• 28:44
  Speaker 2: the Democrats into shutdown showdowns, the President says, and passing
• 28:47
  Speaker 2: the Genius Act, as well as a number of other things.
• 28:50
  Speaker 2: The Genius Act, of course, was the stable coin legislation
• 28:54
  Speaker 2: that did get across the finish line. It was part
• 28:56
  Speaker 2: one of what Congress wants to accomplish when it comes
• 29:01
  Speaker 2: to crypto lawmaking. Part two is the Clarity Act, which
• 29:05
  Speaker 2: may have to find its way through the United States
• 29:07
  Speaker 2: Senate without the help of James Braid unless someone is
• 29:10
  Speaker 2: quickly put in his place to try to get it
• 29:13
  Speaker 2: across the finish line. The Clarity Act, of course, is
• 29:15
  Speaker 2: the market structure legislation, divvying up which digital assets should
• 29:20
  Speaker 2: be regulated by which regulatory agency, the SEC or the CFTC.
• 29:24
  Speaker 2: It gives a lot of jurisdiction to the CFTC, which
• 29:27
  Speaker 2: today is holding its inaugural Innovation Advisory Committee meeting. It
• 29:31
  Speaker 2: kicked off yesterday at the White House. The President actually
• 29:34
  Speaker 2: greeted not just the CFTC Chair and SEC chair, but
• 29:38
  Speaker 2: heads of the major exchanges as well as the big
• 29:40
  Speaker 2: crypto companies, got them all together and called on Congress
• 29:44
  Speaker 2: to pass the Clarity Act. And we'll see whether or
• 29:46
  Speaker 2: not that happens after recess. The question, of course, if
• 29:50
  Speaker 2: it doesn't, is where it leaves things. If there's no
• 29:53
  Speaker 2: firm rules of the road written into the law when
• 29:55
  Speaker 2: it comes to crypto, is it all just up to
• 29:58
  Speaker 2: the regulators? That's whar bloombergs. Tyler Kendall began her conversation
• 30:02
  Speaker 2: with the CFTC Chair, Michael Sellig, and they got into
• 30:06
  Speaker 2: a number of other subjects as well. Let's listen to
• 30:09
  Speaker 2: their conversation in full.
• 30:10
  Speaker 15: We're very optimistic that we're going to get clear rules
• 30:13
  Speaker 15: of the road for crypto asset market structure.
• 30:15
  Speaker 9: On the books, and this vote is critical. We've got
• 30:18
  Speaker 9: to get the Democrats to come.
• 30:19
  Speaker 15: Along with us. They have really obstructed. We want their support.
• 30:22
  Speaker 15: This should be bipartisan. The bill passed the House in
• 30:25
  Speaker 15: a bipartisan fashion. We've got this bill in the Senate.
• 30:28
  Speaker 15: It's very similar. We want to get it across the line.
• 30:31
  Speaker 15: It needs to be a fair bill, a bill that
• 30:33
  Speaker 15: isn't targeting the president or anybody else. It should be
• 30:36
  Speaker 15: neutral and apply to everybody in the same way.
• 30:39
  Speaker 9: We're really excited to get this bill across the line.
• 30:41
  Speaker 15: CFTC stands ready to implement upon the passage of the bill.
• 30:44
  Speaker 4: Just to quickly follow up on that, was there any
• 30:46
  Speaker 4: discussion yesterday about any updated ethics provisions related to the bill?
• 30:50
  Speaker 15: Well, the ethics provision is under negotiation. We're looking forward
• 30:54
  Speaker 15: to seeing a fair ethics provision that's not targeting the
• 30:57
  Speaker 15: president or anybody else.
• 30:58
  Speaker 4: As I said, if Clarity stalls or fails to pass,
• 31:02
  Speaker 4: the CFTC has signaled that it's prepared to unilaterally.
• 31:05
  Speaker 16: Dial up oversight. What would that look like.
• 31:08
  Speaker 4: What sort of rulemaking are you prepared to take in
• 31:10
  Speaker 4: that scenario.
• 31:11
  Speaker 15: The Safety C has a lot of authority and we're
• 31:13
  Speaker 15: not afraid to use that authority. The President has promised
• 31:16
  Speaker 15: market structure for the crypto industry, and that's what we're
• 31:19
  Speaker 15: going to do. Whether we have a bill or not,
• 31:21
  Speaker 15: but we're optimistic the bill is going to set the
• 31:24
  Speaker 15: standard we really want the United States to lead and
• 31:27
  Speaker 15: having legislation, clear law on the books is the most
• 31:30
  Speaker 15: surefire way to lock in crypto market structure, and so
• 31:34
  Speaker 15: that's what we're focused on today.
• 31:35
  Speaker 4: But for my clarity, if Clarity doesn't pass, you're still
• 31:38
  Speaker 4: going to pursue regulation related to this.
• 31:41
  Speaker 9: Well.
• 31:41
  Speaker 15: Absolutely, it's really important that we have market structure.
• 31:44
  Speaker 9: We can do that through rules. We can do that
• 31:46
  Speaker 9: through laws.
• 31:47
  Speaker 15: The Safety C has a lot of authority under its
• 31:49
  Speaker 15: existing statutes, as do other agencies, and if we have
• 31:52
  Speaker 15: to utilize that authority to create rules without the supporting legislation,
• 31:58
  Speaker 15: we'll do it. But of course legislation's the priority. That's
• 32:01
  Speaker 15: what we want to see. America needs clear rules on
• 32:04
  Speaker 15: the books. We'll use rules if we have to, but
• 32:07
  Speaker 15: we're going to focus on the lot.
• 32:08
  Speaker 4: Today, right because in theory the or non in theory,
• 32:12
  Speaker 4: in reality, the Clarity Act is there to codify this
• 32:15
  Speaker 4: into law. So I'm just wondering how you're thinking about
• 32:17
  Speaker 4: the future here to ensure that if there's a democratic
• 32:21
  Speaker 4: CFTC under a different administration, it wouldn't unwind all the
• 32:25
  Speaker 4: work that you'd be doing.
• 32:26
  Speaker 15: We're of course going to look to the bipartisan efforts
• 32:29
  Speaker 15: on the Hill no matter what. If we have legislation,
• 32:32
  Speaker 15: we'll implement that legislation. If we don't have legislation, we'll
• 32:35
  Speaker 15: of course utilize that existing work that's been developed on
• 32:39
  Speaker 15: the Hill and utilize our existing authorities and do what
• 32:42
  Speaker 15: we can to set rules of.
• 32:43
  Speaker 9: The road for crypto. But the bill's really the priority.
• 32:47
  Speaker 9: The bill has to get past.
• 32:48
  Speaker 4: Last question on this just to try to get a
• 32:50
  Speaker 4: little bit more information. Is there a timeline that you're
• 32:53
  Speaker 4: looking at where you would act. Are you already preparing
• 32:56
  Speaker 4: any of this action or does it have to happen
• 32:59
  Speaker 4: once we see ultimately the fate of that bill.
• 33:02
  Speaker 15: I've asked the staff to explore and evaluate potential rulemakings
• 33:05
  Speaker 15: utilizing our existing authority.
• 33:08
  Speaker 9: But we're folks on the bill today.
• 33:10
  Speaker 15: Until we get that across the line, until we have
• 33:12
  Speaker 15: an answer on where the bill is going, we're not
• 33:14
  Speaker 15: going to propose any new rules.
• 33:16
  Speaker 16: Okay, fair enough.
• 33:17
  Speaker 4: I have to ask you about the other side of
• 33:18
  Speaker 4: this remit as well, of course, prediction markets. This might
• 33:21
  Speaker 4: be the first election where the public at large seems hyper.
• 33:26
  Speaker 16: Aware of prediction markets.
• 33:28
  Speaker 4: How are you thinking about policing against insider trading when
• 33:31
  Speaker 4: it comes to political event contracts, and in particular, should
• 33:35
  Speaker 4: we expect the CFTC to release any specific guidance ahead
• 33:38
  Speaker 4: of the midterms.
• 33:39
  Speaker 15: Absolutely, we're utilizing all of our authorities to police these markets.
• 33:44
  Speaker 15: They are derivatives markets within our exclusive jurisdiction. We take
• 33:47
  Speaker 15: that responsibility very seriously. There's two things that we're looking for.
• 33:51
  Speaker 15: One is insider trading, as you mentioned. The others just
• 33:54
  Speaker 15: fraudum manipulation. We saw a number of cases, some of
• 33:57
  Speaker 15: them have become public.
• 33:58
  Speaker 9: Others we're still investigating.
• 34:00
  Speaker 15: Where there's just fraud, right, somebody makes a statement and
• 34:04
  Speaker 15: then takes a position on the other side, that of
• 34:06
  Speaker 15: course is not legal within our framework. But there's also
• 34:09
  Speaker 15: insider trading where people are misappropriating non public material information
• 34:14
  Speaker 15: that they obtain, whether it's from their employer, from their client, whatever, right,
• 34:19
  Speaker 15: they take that information and they trade on it.
• 34:22
  Speaker 9: That's insider trading.
• 34:23
  Speaker 15: It's no different if it's a security, a commodities contract,
• 34:27
  Speaker 15: or an event contract, and so we take that responsibility
• 34:30
  Speaker 15: very seriously.
• 34:30
  Speaker 16: But any firm guidance from your agency ahead.
• 34:33
  Speaker 15: Of election day We've put out a number of advisories
• 34:38
  Speaker 15: and reports and that sort of thing. We've settled a
• 34:41
  Speaker 15: handful of actions, will continue to do so. In terms
• 34:44
  Speaker 15: of our enforcement advisories, we believe that the rules are
• 34:47
  Speaker 15: very clear, our statute is very clear. There isn't really
• 34:50
  Speaker 15: any needed guidance necessarily on insider trading or manipulation. We
• 34:54
  Speaker 15: may put out further advisories, but we're focused on building
• 34:57
  Speaker 15: the policy side, the rulemaking, and then policing these through
• 35:00
  Speaker 15: actual investigations and bringing actions against bad actors.
• 35:04
  Speaker 16: Just as you did bring up investigations very quickly.
• 35:06
  Speaker 4: Can I ask you related to news of the day
• 35:09
  Speaker 4: the markets are watching, any sort of update when it
• 35:11
  Speaker 4: comes to the conflict in Iran? Can you give us
• 35:14
  Speaker 4: any update on your investigation into those suspiciously time trades
• 35:17
  Speaker 4: linked to the war.
• 35:18
  Speaker 15: I can't talk to any investigations. I appreciate the effort there,
• 35:23
  Speaker 15: but now it can't speak to that.
• 35:24
  Speaker 4: All right, Let's think broadly about legal strategy and the CFTC.
• 35:27
  Speaker 4: We saw this federal judge the other week rule against
• 35:30
  Speaker 4: you in Wisconsin when it comes to sport events contracts.
• 35:33
  Speaker 4: Letting state regulators move forward in terms of classifying them
• 35:36
  Speaker 4: as gambling. Can you just talk to me a little
• 35:38
  Speaker 4: bit more about your strategy and how the agency plans
• 35:41
  Speaker 4: to sustain this exclusive jurisdictional argument. If you keep getting
• 35:46
  Speaker 4: these mixed rulings from the lower court.
• 35:48
  Speaker 15: We haven't lost in a single federal appellate court. We
• 35:51
  Speaker 15: don't intend to. If we do, that's going to create
• 35:53
  Speaker 15: a split and we'll see it at the Supreme Court.
• 35:55
  Speaker 15: That's our focus. We want this to be clear, codified
• 35:59
  Speaker 15: law in the books, and we'll take it all the
• 36:01
  Speaker 15: way up to the Supreme Court.
• 36:02
  Speaker 4: So if it goes to the Supreme Court, though, and
• 36:05
  Speaker 4: the judge rules that support contracts are gambling, how will
• 36:08
  Speaker 4: that impact the CFTC and these companies that you regulate.
• 36:12
  Speaker 15: To the extent the Supreme Court were to rule against us,
• 36:15
  Speaker 15: of course, will follow the law, all right.
• 36:19
  Speaker 4: I wanted to ask ask you about the agency's June
• 36:22
  Speaker 4: twenty twenty six proposed rule, which does put some of
• 36:24
  Speaker 4: these guardrails in place. Do you think that you'll be
• 36:27
  Speaker 4: able to finalize this before the end of the year,
• 36:30
  Speaker 4: And with everything that is going on in this market
• 36:32
  Speaker 4: right now, what is most important to you in terms
• 36:34
  Speaker 4: of anti manipulation and also consumer protections in terms of
• 36:38
  Speaker 4: really getting it on the books.
• 36:39
  Speaker 15: We're making fantastic progress and finalizing these rules. We received
• 36:43
  Speaker 15: a lot of really substantive and helpful comments, both through
• 36:46
  Speaker 15: the Advanced Centers proposed rule making and the newer rule
• 36:50
  Speaker 15: forty dot eleven rule making proposal, and we're hoping to
• 36:54
  Speaker 15: finalize that very soon. We're also moving forward with We've
• 36:57
  Speaker 15: proposed some rules.
• 36:58
  Speaker 9: On record keeping reporting.
• 37:01
  Speaker 15: We're hoping to finalize that, and we'll have some new
• 37:03
  Speaker 15: rules proposed very soon.
• 37:04
  Speaker 4: I'm wondering what lessons you've learned when it comes to
• 37:06
  Speaker 4: some of the more convoluted geopolitical contracts.
• 37:09
  Speaker 16: There's a lot of talk at the beginning of.
• 37:13
  Speaker 4: The conflict related to the Iatola, for example, what lessons
• 37:17
  Speaker 4: have you learned more broadly this year that you're applying
• 37:19
  Speaker 4: going forward?
• 37:20
  Speaker 15: Well, and I came into the seat Pandora's box was
• 37:23
  Speaker 15: sort of opened, right. There were all of these novel
• 37:26
  Speaker 15: instruments and contracts trading on our markets.
• 37:28
  Speaker 9: You mentioned the Iatola contract.
• 37:30
  Speaker 15: We've had all sorts of interesting contracts, both within our
• 37:34
  Speaker 15: US markets and offshore. So I've evaluated these contracts and
• 37:38
  Speaker 15: we've began to provide guidance implement rules and address some
• 37:43
  Speaker 15: of these edge cases. A lot of these contracts, to
• 37:46
  Speaker 15: the extent they involve war terrorism, assassination gaming, will be
• 37:49
  Speaker 15: subject to the special rule. That means we get a
• 37:51
  Speaker 15: special evaluation of these contracts and they have to be
• 37:55
  Speaker 15: able to be traded, you know, in a way that
• 37:57
  Speaker 15: supports the public interest, and so we're going to valuate that.
• 38:00
  Speaker 15: We've put out some standards and rules as to what
• 38:03
  Speaker 15: the public interest factors should be, how we should evaluate that.
• 38:06
  Speaker 15: Because the Commission is not the public right, we're not
• 38:09
  Speaker 15: the ones deciding what's in the public's interest, we need
• 38:13
  Speaker 15: to put that out for notice and comment, and so
• 38:14
  Speaker 15: that's exactly what we've done, and we're hoping to set
• 38:17
  Speaker 15: standards around that. For all the contracts that do not
• 38:19
  Speaker 15: involve war, terrorism, assassination gaming illegal acts and therefore are
• 38:24
  Speaker 15: subject to this special rule, we have to consider just
• 38:28
  Speaker 15: whether they're readily susceptible to manipulation. We don't have special
• 38:32
  Speaker 15: authority to say, throw out a cultural event contract or
• 38:36
  Speaker 15: something else that's not really subject to these more severe
• 38:40
  Speaker 15: rules under our statute. So we'll evaluate the contracts. We're
• 38:44
  Speaker 15: building a regulatory framework for these. We've heard the commenters
• 38:47
  Speaker 15: loud and clear that they want more consumer protections for retail,
• 38:51
  Speaker 15: and we're going to implement that as well.
• 38:53
  Speaker 4: In the final minute, I have you, I also wanted
• 38:55
  Speaker 4: to ask you about you opening comment when it comes
• 38:57
  Speaker 4: to AI compute futures. Do you think that these are
• 39:00
  Speaker 4: the right products to help lenders but also tech companies
• 39:04
  Speaker 4: and those in the AI industry to hedge against their costs.
• 39:07
  Speaker 15: If America is going to win the AI race, we
• 39:09
  Speaker 15: have to dominate the compute markets. This is the most
• 39:12
  Speaker 15: important commodity I think of our time.
• 39:15
  Speaker 9: This is essentially a digital oil.
• 39:17
  Speaker 15: It's some have called it the gasoline of the technological revolution.
• 39:20
  Speaker 9: We've got to have these markets here.
• 39:22
  Speaker 15: We want the prices to be discovered for this valuable
• 39:25
  Speaker 15: commodity in the United States, the benchmarks to be here,
• 39:28
  Speaker 15: and we wanted to trade here in markets where it's transparent,
• 39:31
  Speaker 15: where we have kind of an open order book, and
• 39:34
  Speaker 15: all of the things that have made our markets the
• 39:35
  Speaker 15: best in the world.
• 39:36
  Speaker 9: So we're working very hard together.
• 39:38
  Speaker 15: With Secretary of Lutnik and the Department of Commerce to
• 39:40
  Speaker 15: set the standard here in the US. I don't want
• 39:43
  Speaker 15: a bunch of bad products trading in the US we
• 39:46
  Speaker 15: want the best of the best, and we're going to
• 39:48
  Speaker 15: lead in these markets. And so we put out a
• 39:50
  Speaker 15: request for comments yesterday on this issue and we'll continue
• 39:53
  Speaker 15: to build that regulatory framework so that we can win
• 39:55
  Speaker 15: the AI race.
• 39:55
  Speaker 4: But with this much excitement, do you have a timeframe
• 39:58
  Speaker 4: for when you know these exchanges can and expect to
• 40:00
  Speaker 4: be able to list these products if it does pass muster.
• 40:03
  Speaker 15: We've put out this request for comments, that's about I
• 40:06
  Speaker 15: think a thirty to forty five day comm at window.
• 40:09
  Speaker 15: We'll take that input in. We're working together with Commerce.
• 40:12
  Speaker 15: Expect some updates in the next couple months.
• 40:15
  Speaker 2: Great conversation with the Chair of the CFTC, Michael Seeleig,
• 40:18
  Speaker 2: along with Bloomberg's Tyler Kendall or Washington correspondent, doing great
• 40:23
  Speaker 2: work at this inaugural meeting of the Innovation Advisory Committee
• 40:27
  Speaker 2: at the Commission.
• 40:31
  Speaker 10: Thanks for listening to the Balance of Power podcast. Make
• 40:34
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• 40:37
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• 40:39
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• 40:43
  Speaker 10: at Bloomberg dot com.