Latest / Trumponomics / Live from Milken: Looking to Nixon for a Peek at Trump’s Future with Niall Ferguson and Fareed Zakaria

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Live from Milken: Looking to Nixon for a Peek at Trump’s Future with Niall Ferguson and Fareed Zakaria · Trumponomics

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  Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
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  Speaker 2: I have been a skeptic of this entire project, not
• 0:11
  Speaker 2: because of ideology, but because of economic history.
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  Speaker 3: I think the most dangerous long term trend that Trump
• 0:18
  Speaker 3: has created is a sense among America's closest allies that,
• 0:23
  Speaker 3: after eight decades of relying on the United States as
• 0:27
  Speaker 3: the pivot of geopolitical strategy and geoeconomic security, they're asking themselves,
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  Speaker 3: do we diversify a little bit? Do we buy a
• 0:35
  Speaker 3: little insurance?
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  Speaker 4: Welcome to Trumpnomics, the podcast that looks at the economic
• 0:48
  Speaker 4: world of Donald Trump, how he's already shaped the global
• 0:50
  Speaker 4: economy and what on earth is going to happen next.
• 0:54
  Speaker 4: And this week I'm in California for the annual Milken
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  Speaker 4: Institute Global Conference, where Wall Street comes to Beverly Hills.
• 1:01
  Speaker 4: It's one of the greatest concentrations of investment capital on
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  Speaker 4: the planet, as they say, with tickets starting at twenty
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  Speaker 4: five thousand dollars ahead, and it attracts thousands of attendees
• 1:11
  Speaker 4: wanting to hear from titans in the world of business
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  Speaker 4: and politics publicly and behind the seats. US Treasury sectary
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  Speaker 4: Scott Bessen kicked off the proceedings on day one, and
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  Speaker 4: that was followed by a long list of finance and
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  Speaker 4: investment luminaries and chief executives. Now it's the twenty eighth
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  Speaker 4: year of this conference, and the boast was that the
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  Speaker 4: turnout and the money represented in the room was higher
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  Speaker 4: than ever. But of course it was happening only a
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  Speaker 4: few months after the fires that have left large chunks
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  Speaker 4: of the city still looking like a post nuclear wasteland.
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  Speaker 4: That was one weird thing about this year. The other
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  Speaker 4: was well, that it felt remarkably normal. I mean, the
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  Speaker 4: rest of the world might be freaking out about the
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  Speaker 4: economic impact of Donald Trump's trade wars, America's reputation as
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  Speaker 4: a safe haven for global capital, or you know, the
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  Speaker 4: end of the rule based global order. But for the
• 2:02
  Speaker 4: big money folks gathered here, I have to say, it
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  Speaker 4: just seemed like a period of heightened uncertainty. So I
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  Speaker 4: was looking for a reality check when I sat down
• 2:11
  Speaker 4: on the first day with the historian and commentator Neil
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  Speaker 4: Ferguson and CNN's for Reid Zakaria, who's the author most
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  Speaker 4: recently of the Age of Revolutions. We've got a lightly
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  Speaker 4: edited version of that conversation for you here. I started
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  Speaker 4: by asking them to put the past hundred days, this
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  Speaker 4: moment in world history in some kind of perspective. What
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  Speaker 4: patterns do they recognize from previous eeries and what strikes
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  Speaker 4: them as genuinely new.
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  Speaker 2: Well, if you think back to the campaign last year,
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  Speaker 2: President Trump cited a previous president in one of the
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  Speaker 2: interviews he did. I think it was a Bloomberg interview,
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  Speaker 2: and he said William McKinley was his inspiration tariff man.
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  Speaker 2: And that was something that most people ignored, but I
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  Speaker 2: found it very interesting, not least because McKinley was both
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  Speaker 2: a tariff man and something of an imperial president who,
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  Speaker 2: as a result of the Spanish American War in the
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  Speaker 2: late eighty nineties.
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  Speaker 5: Acquired Puerto Rico, Guam, et cetera.
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  Speaker 2: So that was a clue as to the kind of
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  Speaker 2: president that Donald Trump wanted us to expect. And unlike
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  Speaker 2: most political figures, Donald Trump has said what he was
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  Speaker 2: going to do and done it. The second historic analogy,
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  Speaker 2: and for read and I we're talking about this on
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  Speaker 2: his show, that's relevant here is the first hundred days
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  Speaker 2: of Franklin Delana Roosevelt's presidency. I don't think we have
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  Speaker 2: seen such an active one hundred day period in American
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  Speaker 2: politics since nineteen thirty three. You have to go back
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  Speaker 2: to that extraordinary time to see a comparable level of
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  Speaker 2: presidential activity.
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  Speaker 5: And I wrote.
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  Speaker 2: A piece for Barry Weiss's Free Press saying, you kind
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  Speaker 2: of think of this as like Roosevelt in reverse, because
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  Speaker 2: Roosevelt came in after a depression with a mandate to
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  Speaker 2: expand the federal government, and Trump has come in after
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  Speaker 2: a boom with a mandate to shrink the federal government.
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  Speaker 2: I'll throw in one more way of thinking about this.
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  Speaker 2: I think behind all the bravado, Canada is going to
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  Speaker 2: be the fifty first state Greenland, We're going to annex
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  Speaker 2: the Panama Canal. All that trolling that drives liberals and
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  Speaker 2: the professors insane. I don't really think that Trump is
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  Speaker 2: acting from a sense of strength. I don't think he is.
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  Speaker 2: In fact, William McKinley, I think a strong motivation in
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  Speaker 2: Trump's mind is.
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  Speaker 5: That the United States is kind of weaker.
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  Speaker 2: Than it looks, and it can't do all the things
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  Speaker 2: that it was able to do. Say, in the nineteen eighties,
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  Speaker 2: I got into a fight with Vice President Vance about
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  Speaker 2: this and my other analogy is that I think there's
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  Speaker 2: something quite Nixonian about the second term, the shocks to allies,
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  Speaker 2: the talk of some kind of devaluation, plus tariffs. It's
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  Speaker 2: all out of the Nixon nineteen seventy one playbook, even
• 4:58
  Speaker 2: the Tacer reverse Nixon, which you hear from some of
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  Speaker 2: his advisors. We're going to somehow peal Putin away from
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  Speaker 2: season pain and somehow find some space between China and Russia.
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  Speaker 2: That is at least an appeal to Nixon as a precedent.
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  Speaker 2: And you have to ask yourself, why has no president
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  Speaker 2: since Nixon regarded Nixon as a role model.
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  Speaker 5: I'll just leave you to posit that's definite.
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  Speaker 2: But it is an unusual thing to want to rerun
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  Speaker 2: some of these Nixonian gambits, and I do think it
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  Speaker 2: has some meaningful downside risk.
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  Speaker 4: Although we are seeing in real time undoing of some
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  Speaker 4: of the things that were done directly in response to
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  Speaker 4: the Nixon experience. But we won't get we won't get
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  Speaker 4: into a left well that's right for ed place this moment.
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  Speaker 3: For us, nothing is new under the sun. But what
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  Speaker 3: is unusual and hasn't happened for a long time is
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  Speaker 3: one the rise of cultural politics. If you look back
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  Speaker 3: over the twentieth century, most politics was explained by a
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  Speaker 3: left right divide. On economics, the left wanted to tax
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  Speaker 3: more and the right wanted to tack less. Similarly, the
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  Speaker 3: divide on spending. It was the role of the state.
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  Speaker 3: We're in a new era where culture is defining the
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  Speaker 3: back life. If you try to predict how people vote
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  Speaker 3: based on their income, you find it very hard to do.
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  Speaker 3: Most of you are rich, and my guess is many
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  Speaker 3: of you voted left of center. The majority of people
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  Speaker 3: who are non college educated, working class now vote right
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  Speaker 3: of center. Why because we are in an age of
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  Speaker 3: great uncertainty and change and when that happens, and I
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  Speaker 3: owe Tony Blair this insight. When people feel deeply anxious,
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  Speaker 3: they tend to move right culturally, not left economically. They
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  Speaker 3: don't say I need one more government program. They say,
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  Speaker 3: get those damn foreigners out of my country. And you
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  Speaker 3: can see this in almost every country in the Western world.
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  Speaker 3: The left is flailing. Think of France, think of Germany,
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  Speaker 3: think of Sweden, think of Italy, and of course think
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  Speaker 3: of the United States. Because the left finds it difficult
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  Speaker 3: to address that cultural anxiety, people have. It is more
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  Speaker 3: easily addressed by a right wing populist movement, which is
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  Speaker 3: what has taken over right of center parties everywhere.
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  Speaker 5: Point two.
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  Speaker 3: What has changed is the United States has rarely had
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  Speaker 3: a culture of personality in its political system. But we
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  Speaker 3: now have a situation where the Republican Party is not
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  Speaker 3: really a party anymore. It has become a culture of personality.
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  Speaker 3: In the last Republican convention, no former nominee for the party,
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  Speaker 3: for the presidency, for the vice presidency, no former president
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  Speaker 3: or vice president, including Trump's own Vice president Mike Pence,
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  Speaker 3: was even invited to the convention, and yet five members
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  Speaker 3: of the Trump family had prime time speaking slots. That
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  Speaker 3: is not a normal political party, but certainly by Western standards.
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  Speaker 5: And finally, I would say, I.
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  Speaker 3: Mean, honestly, what is unprecedented is the fairly systematic level
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  Speaker 3: of corruption taking place at the very highest level in
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  Speaker 3: the United States. I don't think I think we have
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  Speaker 3: seen something like that for a very very long time.
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  Speaker 2: Can I jump in and say that if you go
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  Speaker 2: back far enough and you know this for ee, you
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  Speaker 2: do find exactly these things.
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  Speaker 5: I mean, this is gilded Age.
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  Speaker 3: I began by saying nothing is new under the sull.
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  Speaker 2: I just want to illustrate at the point because maybe
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  Speaker 2: not everybody's studied this.
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  Speaker 4: Morning talked about the Golden Age.
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  Speaker 1: It's a very old and gilded sound of the region.
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  Speaker 1: Regency England had lots of corruption, but he you know,
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  Speaker 1: late nineteenth century United States, the time of McKinley was
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  Speaker 1: famously dropped. It was a time when Tammany Hall was
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  Speaker 1: one of the political machines that ran the system. Foreign
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  Speaker 1: visitors were shocked by the scurrilous quality of American politics,
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  Speaker 1: and the populaces of the late nineteenth century had very
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  Speaker 1: Trumpian themes.
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  Speaker 2: You know, I have this long standing argument with people
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  Speaker 2: like Tim Snyder and Applebam about whether there's some kinshit
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  Speaker 2: between Trumpism and fascism in inter war Europe.
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  Speaker 5: And my point to them has always been, you do
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  Speaker 5: not need.
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  Speaker 2: To look so far afield, because the populace in the
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  Speaker 2: late nineteenth century were in favor of the same kind
• 9:04
  Speaker 2: of things that Donald Trump's been talking about since even
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  Speaker 2: before twenty fifteen, twenty sixteen, That is to say, restriction
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  Speaker 2: of immigration tariffs a week dollar. I mean, even that's
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  Speaker 2: part of the populist.
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  Speaker 3: But what was different about William Jennings Bryan, who was
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  Speaker 3: the great populist nominated three times by the Democratic Party.
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  Speaker 3: It was not anti democratic in quite the same way
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  Speaker 3: the extraordinary expansion of governmental authority. You know, all these
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  Speaker 3: tariffs are taking place in a situation that, frankly is illegal.
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  Speaker 3: The Constitution makes clear that Congress has the role of
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  Speaker 3: tariff's setting. It has delegated in very specific circumstances to
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  Speaker 3: the presidency. The president claims that because there is a
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  Speaker 3: national security emergency, he has this power. It's a little
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  Speaker 3: odd that you would have a national security emergency against
• 9:54
  Speaker 3: every country in the world simultaneously, including one that is
• 9:58
  Speaker 3: only inhabited by penguins.
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  Speaker 4: Yeah, right, they But Congress has over the years delegated
• 10:04
  Speaker 4: more and more of that authority, so I think they
• 10:06
  Speaker 4: could probably take it back, but they haven't chosen to
• 10:08
  Speaker 4: take it back. We've got onto the sort of cultural
• 10:11
  Speaker 4: and some of the political instincts of this administration. I
• 10:13
  Speaker 4: suspect we'll get back to it, and many people here
• 10:15
  Speaker 4: would be kind of mesmerized by those aspects of the administration.
• 10:18
  Speaker 4: But they have to live day to day, and we
• 10:19
  Speaker 4: at Bloomberg a living day to day with the economic
• 10:21
  Speaker 4: consequences trying to think about whether this administration can actually
• 10:26
  Speaker 4: do the big things that it's set out to do
• 10:29
  Speaker 4: economically in the world.
• 10:31
  Speaker 5: So maybe a sort of gut.
• 10:33
  Speaker 4: Check on that. I mean, the two very highly related
• 10:36
  Speaker 4: targets decouple from China and reindustrialize the US feasible and
• 10:43
  Speaker 4: if not feasible, what's going to happen in the attempt.
• 10:47
  Speaker 4: It's certainly possible to decouple two large economies. Of Britain
• 10:51
  Speaker 4: and Germany decoupled their economies, but that was the outbreak
• 10:55
  Speaker 4: of World War One in nineteen fourteen. To kill what
• 10:59
  Speaker 4: I called China America back in two thousand and seven,
• 11:02
  Speaker 4: when the Chinese and American economies had almost fused is
• 11:05
  Speaker 4: extremely difficult. The President tried to do it in his
• 11:08
  Speaker 4: first term, and all that happened was that Chinese goods
• 11:11
  Speaker 4: were shifted via third countries and continue to flow to
• 11:15
  Speaker 4: the United States. What he did since being inaugurated this
• 11:19
  Speaker 4: second time has been to impose.
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  Speaker 2: An embargo on US China trade. It's an extraordinary thing
• 11:25
  Speaker 2: that went even further than the worst case scenario that
• 11:29
  Speaker 2: the Chinese had been preparing for. The tariff rates on
• 11:33
  Speaker 2: imports from China are now so high that nobody's quite
• 11:36
  Speaker 2: sure what the rate is, but it amounts to prohibition.
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  Speaker 5: Now you can take the.
• 11:41
  Speaker 2: View that this is a rare case where a country
• 11:43
  Speaker 2: imposes sanctions on itself, maybe because the habit of imposing
• 11:47
  Speaker 2: sanctions has become so ingrained with the American government, we
• 11:50
  Speaker 2: finally had to sanction ourselves. But if you are running,
• 11:53
  Speaker 2: let's just say, a small sized toy company, this is
• 11:56
  Speaker 2: a catastrophic blow. You have already ordered the Christmas goods
• 12:00
  Speaker 2: from China, and you cannot afford for those goods to
• 12:04
  Speaker 2: arrive unless this trade war is called off. So decoupling
• 12:09
  Speaker 2: is in process, but its costs to the American economy
• 12:14
  Speaker 2: have yet to be felt by the majority of people.
• 12:17
  Speaker 2: Does this lead to the reindustrialization of the United States
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  Speaker 2: if the President follows through with it. I'm skeptical because
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  Speaker 2: there are lots of reasons why all mature economies go
• 12:31
  Speaker 2: through a period in where they industrialize, where manufacturing becomes
• 12:35
  Speaker 2: a larger share of employment and a larger share of
• 12:38
  Speaker 2: gross domestic product, and then after a certain per capita GDP,
• 12:42
  Speaker 2: they shift away from manufacturing and they go into services.
• 12:45
  Speaker 5: There's no exception to this rule.
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  Speaker 2: It's through of all the major economies, and the United
• 12:49
  Speaker 2: States has gone down that curve. Turning the clock of
• 12:53
  Speaker 2: history back is hard, and that's the project. The central
• 12:57
  Speaker 2: project of Trumpism is We're going to turn the clock
• 13:00
  Speaker 2: of history back and have the kind of manufacturing employment
• 13:04
  Speaker 2: that we had in let's say the nineteen fifties. Now
• 13:07
  Speaker 2: you'd have to reform permitting, you would have to make
• 13:11
  Speaker 2: American labor significantly cheaper, and you'd have to live with
• 13:16
  Speaker 2: more expensive and inferior products as a consequence. I do
• 13:21
  Speaker 2: not believe that any president can achieve those things in
• 13:25
  Speaker 2: four years, and a president who loses one or both
• 13:29
  Speaker 2: chambers of Congress that the midterms isn't going to get
• 13:32
  Speaker 2: to first base. So I have been a skeptic of
• 13:35
  Speaker 2: this entire project, not because of ideology, but because of
• 13:38
  Speaker 2: economic history. I went to see the Minecraft movie. Who
• 13:42
  Speaker 2: has seen the Minecraft movie in this audience? Okay, so
• 13:45
  Speaker 2: you have a seven year old kid. I'm not saying
• 13:47
  Speaker 2: you should go and see Jack Black in the Minecraft movie.
• 13:49
  Speaker 2: But as I was watching it and thinking about Minecraft,
• 13:52
  Speaker 2: I realized the project is kind of Minecraft because in Minecraft,
• 13:57
  Speaker 2: it's really easy to mine and manufacture and build staff
• 14:02
  Speaker 2: all you do is you're just gonna go bam and
• 14:04
  Speaker 2: magically you've made something. And unfortunately there's a sort of
• 14:08
  Speaker 2: Minecraft element to this strategy, and that's not the way
• 14:12
  Speaker 2: the world works, as anybody knows who has tried to
• 14:16
  Speaker 2: build a manufacturing entity in the United States in the
• 14:19
  Speaker 2: last ten years.
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  Speaker 3: I agree with everything Neil said, but let me add
• 14:23
  Speaker 3: to it by pointing out the entire project is unnecessary.
• 14:28
  Speaker 3: The United States in the last thirty years, contrary to
• 14:31
  Speaker 3: what you hear, has not hollowed itself out turned itself
• 14:35
  Speaker 3: into this basket case economy that is in severe need
• 14:38
  Speaker 3: of some kind of revolution. The real story of the
• 14:41
  Speaker 3: last thirty years is the United States has leapt ahead
• 14:45
  Speaker 3: of every other advanced industrial country.
• 14:48
  Speaker 5: Let me give you a few numbers.
• 14:50
  Speaker 3: In two thousand and eight, the Eurozone economy and the
• 14:53
  Speaker 3: US economy with the same size. The US economy is
• 14:56
  Speaker 3: today twice the size of the Eurozone economies, and two
• 15:00
  Speaker 3: thousand German wages in US wages were roughly the same. Today,
• 15:05
  Speaker 3: US wages are fifty percent higher than German wages. If
• 15:10
  Speaker 3: Great Britain were to join the United States, Bars Johnson
• 15:13
  Speaker 3: once joked as the fifty first state. Little did he
• 15:16
  Speaker 3: know the President from had another country in mind for
• 15:20
  Speaker 3: that honor. But let us say they joined as the
• 15:22
  Speaker 3: fifty first state. On a per capitaal GDP basis, Great
• 15:26
  Speaker 3: Britain would be the poorest state in the Union, poorer
• 15:30
  Speaker 3: than Alabama, poorer than Mississippi. Why is this because unlike
• 15:35
  Speaker 3: the other advanced industrial countries, what the United States was
• 15:38
  Speaker 3: able to do was fully embrace the services economy, digital finance, software.
• 15:46
  Speaker 5: We export a trillion.
• 15:48
  Speaker 3: Dollars worth of services to the world every year. That
• 15:51
  Speaker 3: someone doesn't show up in Donald Trump's theory of economics,
• 15:55
  Speaker 3: even though services employ eighty percent of Americans manufacturing employees
• 16:01
  Speaker 3: eight So the project that Nielss talking about also is
• 16:05
  Speaker 3: essentially a project to tax the eighty percent who work
• 16:08
  Speaker 3: in services, just subsidized the dwindling eight percent who were
• 16:12
  Speaker 3: in manufacturing, almost out of a kind of esthetic desire
• 16:17
  Speaker 3: to have a country where we build something.
• 16:20
  Speaker 2: That's the sense of which is like populism, because that
• 16:22
  Speaker 2: was about agricult Populous were farmers going when it was
• 16:26
  Speaker 2: clear that agriculture was going to decline as an employment sector.
• 16:29
  Speaker 2: But Stephanie Canda at one point, because I don't want
• 16:31
  Speaker 2: to sound entirely negative. I listened to Secretary Vescent this morning,
• 16:37
  Speaker 2: and there was much that he.
• 16:38
  Speaker 5: Said that I liked. I think it's true that the.
• 16:42
  Speaker 2: United States economy is anti fragile, as Fred says, it
• 16:46
  Speaker 2: has massively I performed the competition, particularly in the periods
• 16:50
  Speaker 2: since the financial crisis.
• 16:52
  Speaker 5: Though. I think it implies that.
• 16:54
  Speaker 2: The trade war the tariffs are a kind of shock
• 16:58
  Speaker 2: that the US is somehow going to be able to
• 17:01
  Speaker 2: power through, and maybe it is. I think your Bloomberg
• 17:04
  Speaker 2: readers will be interested to see if there really is
• 17:08
  Speaker 2: going to be a Marilago accord. If the analogy with
• 17:11
  Speaker 2: nineteen eighty five works, then you not only get tariffs,
• 17:15
  Speaker 2: but more importantly, you get a weaker dollar and you
• 17:19
  Speaker 2: get lower interest rates. If they are able to do that,
• 17:22
  Speaker 2: then it seems to me that the US may once
• 17:24
  Speaker 2: again surprise to the upside, and the Cassandras are going
• 17:28
  Speaker 2: to be left looking as they so often have, very wrong.
• 17:32
  Speaker 2: The critical issue here for everybody who's interested in markets
• 17:36
  Speaker 2: is as the dollar goes down, what the rates do.
• 17:40
  Speaker 2: Because the thing that has been most scary about the
• 17:43
  Speaker 2: last month has been that moment between Liberation Day and
• 17:47
  Speaker 2: April ninth, when the dollar did go down, but yields
• 17:51
  Speaker 2: went up, and that in a way that is very
• 17:54
  Speaker 2: very rare in modern financial history. And there you run
• 17:57
  Speaker 2: the risk of what i'll call the Nixon moment, because
• 18:00
  Speaker 2: Nixon had a weak currency strategy, he had a tariff strategy.
• 18:05
  Speaker 2: But what happened between seventy one and seventy four was
• 18:08
  Speaker 2: that the dollar was weak, but rates went up because
• 18:11
  Speaker 2: inflation went up, and you ended up with the stock
• 18:15
  Speaker 2: market declining from Nixon's re election to his resignation by
• 18:19
  Speaker 2: forty six percent. So there's risk embedded in this whole strategy.
• 18:23
  Speaker 5: But it could work.
• 18:24
  Speaker 2: And we mustn't underestimate the probability that once again Donald
• 18:28
  Speaker 2: Trump surprises to the upside, because he does seem to
• 18:31
  Speaker 2: have a strange luck as well as a powerful intuition
• 18:34
  Speaker 2: about the people that he's up against.
• 18:36
  Speaker 4: That some of this may come down to a sort
• 18:39
  Speaker 4: of fundamental tension which I think many people here and
• 18:42
  Speaker 4: you guys have certainly identified in the president's approach, which
• 18:47
  Speaker 4: is an end to forever wars, you know, channeling the
• 18:49
  Speaker 4: sort of previous past history those populists who were isolationists
• 18:53
  Speaker 4: as well. We don't want entanglements abroad, but China is
• 18:57
  Speaker 4: the real enemy, and we are going to wage at
• 18:59
  Speaker 4: least an economic war against China. Those two things certainly
• 19:04
  Speaker 4: come into tension over Taiwan in other areas. You and
• 19:08
  Speaker 4: I spoke about this on my podcast last year. Neil,
• 19:11
  Speaker 4: and you thought that the hawkish kind of bipartisan consensus
• 19:17
  Speaker 4: in the US today and certainly in Congress would prevail
• 19:20
  Speaker 4: over Trump's transactionalism. Do you still think that or do
• 19:24
  Speaker 4: you think we'll have an accommodation with China that involves
• 19:27
  Speaker 4: I don't know a few Trump towers in Taiwan.
• 19:29
  Speaker 2: It is so hard to know at this point because
• 19:32
  Speaker 2: the administration has roughly three different strategies going on at
• 19:36
  Speaker 2: the same time. There are those that they are much
• 19:39
  Speaker 2: weakened now since Mike Watz's exit, who really wanted to
• 19:43
  Speaker 2: take on the axis of authoritarians in every different theater
• 19:46
  Speaker 2: from Eastern Europe to the Middle East to the Far East.
• 19:49
  Speaker 2: Then there are the China Forest people like Bridge Colby,
• 19:52
  Speaker 2: who want to focus on the Taiwan issue and not
• 19:55
  Speaker 2: worry too much about Ukraine or even Israel. And then
• 19:58
  Speaker 2: there are the Hemisphere folks around Vice President Vance. You
• 20:02
  Speaker 2: just want to focus on the Americas, and they really
• 20:04
  Speaker 2: don't even care about Taiwan.
• 20:06
  Speaker 5: It's not clear who who comes out ahead. I will,
• 20:09
  Speaker 5: for the sake of brevity put it this way.
• 20:11
  Speaker 2: At some point on this president's watch, I believe there
• 20:15
  Speaker 2: will be a Taiwan crisis. I think season Ping has
• 20:19
  Speaker 2: that option. It is risky for him, but he has
• 20:21
  Speaker 2: to exercise it when Trump is president, because Trump does
• 20:25
  Speaker 2: not look like a president who's willing to go to war,
• 20:28
  Speaker 2: actual war, not trade war, over Taiwan. So if and
• 20:32
  Speaker 2: she I want to pose that question either next year
• 20:35
  Speaker 2: or in twenty twenty seven, not with an invasion, not
• 20:37
  Speaker 2: with a blockade. I just want to send my Coastguard
• 20:40
  Speaker 2: vessels and claim that everything going into Taiwan has to
• 20:43
  Speaker 2: clear Chinese customs, and present Trump with a choice, do
• 20:48
  Speaker 2: you want the biggest naval battle since Midway? Do you
• 20:50
  Speaker 2: actually want to have a war over Taiwan? Or do
• 20:53
  Speaker 2: you want to fold and let the Chinese have not
• 20:56
  Speaker 2: only Taiwan but TSMC and therefore the key to the
• 21:00
  Speaker 2: semiconductor industry in the world. That's a very nasty dilemma,
• 21:06
  Speaker 2: and I think that Trump may well confront it before
• 21:08
  Speaker 2: he leaves office.
• 21:09
  Speaker 4: Sie, what's the stake.
• 21:10
  Speaker 3: I think the central attention is exactly the one you described,
• 21:13
  Speaker 3: which is, you can have a China strategy, the kind
• 21:16
  Speaker 3: that Trump is talking about, but in order to have that,
• 21:19
  Speaker 3: you need to unify the rest of the world with
• 21:23
  Speaker 3: you and against China, where it's very hard to unify
• 21:26
  Speaker 3: the rest of the world when you've slapped tariffs on them,
• 21:29
  Speaker 3: and when you've disproportionately slapped tariffs on your closest allies.
• 21:33
  Speaker 3: If you look at the reciprocal tariffs, it was better
• 21:36
  Speaker 3: to be a foe of the United States than a friend.
• 21:39
  Speaker 3: Russia was exempt entirely from the tariffs. Some of the
• 21:42
  Speaker 3: worst tariffs were on Canada, there on Germany. So part
• 21:46
  Speaker 3: of the problem here is that Trump has broken the
• 21:50
  Speaker 3: trust that America's closest allies had with him. And if
• 21:54
  Speaker 3: you look at that moment that Nil was talking about,
• 21:57
  Speaker 3: that scary moment where all American assets started to decline,
• 22:01
  Speaker 3: the dollar, the bond, and stocks, it was almost certainly
• 22:05
  Speaker 3: because America's friends were selling treasury bills, the Canadians, the Japanese,
• 22:10
  Speaker 3: maybe others. And so I think the most dangerous long
• 22:15
  Speaker 3: term trend that Trump has created is a sense among
• 22:19
  Speaker 3: America's closest allies that after eight decades of relying on
• 22:23
  Speaker 3: the United States as the pivot of geopolitical strategy and
• 22:27
  Speaker 3: geoeconomic security, they're asking themselves, do we diversify a little bit?
• 22:32
  Speaker 3: Do we buy a little insurance? And they just have
• 22:35
  Speaker 3: to do it on the margin, because we are running
• 22:38
  Speaker 3: the largest deficits essentially in our history. We need enormous
• 22:42
  Speaker 3: amount of confidence for people to buy that debt every
• 22:46
  Speaker 3: few months. That is what Trump has jeopardized.
• 22:49
  Speaker 4: And obviously there's been a lot of talk about the
• 22:50
  Speaker 4: sell America trade, as Neil mentioned, was pretty popular at
• 22:54
  Speaker 4: various times over the last month or so, and it
• 22:57
  Speaker 4: feels like a structural change in the attitude to American assets,
• 23:02
  Speaker 4: maybe even to reset, as Scott Lesant said this morning.
• 23:05
  Speaker 4: But one there's a question that sell America, but then
• 23:08
  Speaker 4: buy what?
• 23:09
  Speaker 6: And you've just mentioned the right, So then there's always
• 23:12
  Speaker 6: been this problem into the dollar's role as the reserve
• 23:14
  Speaker 6: currency of the world is probably still pretty strong. Who
• 23:18
  Speaker 6: knows if the Euro is going to exist, and it's
• 23:20
  Speaker 6: a slow growth area. Japan is in demographic you know,
• 23:24
  Speaker 6: death trap. China won't open its currency to the world.
• 23:27
  Speaker 6: So Larry Summer's famous line about the dollar still holds.
• 23:31
  Speaker 3: As long as Europe is a museum, Japan is a
• 23:34
  Speaker 3: retirement home, and China is a prison, the dollar will
• 23:37
  Speaker 3: remain the reserve currency of the world.
• 23:39
  Speaker 2: And bitcoin is an experiment. Just to remember that additional
• 23:43
  Speaker 2: line that Larry had as long as bitcoin is an experiment,
• 23:46
  Speaker 2: but it's less of an experiment than it was when
• 23:49
  Speaker 2: he said that back in twenty nineteen, we're almost out
• 23:51
  Speaker 2: of time.
• 23:51
  Speaker 5: But can I just say the paradox.
• 23:53
  Speaker 2: Of all of this is that we we cudgel our
• 23:56
  Speaker 2: brains trying to understand what Trump's strategy is. Is it
• 23:59
  Speaker 2: to dimensional chess? Three dimensional chess? Is there's some master plan.
• 24:03
  Speaker 2: The more we spend our time talking about that, the
• 24:06
  Speaker 2: less we're talking about AI, the less we're talking about
• 24:09
  Speaker 2: quantum computing, the less we're talking about the ways in
• 24:11
  Speaker 2: which the United States is still far ahead of the competition.
• 24:15
  Speaker 2: I mean, you want to sell the US and buy
• 24:16
  Speaker 2: Europe when all the innovation, by far more innovation, is
• 24:20
  Speaker 2: happening here. So let's not be so distracted by politics
• 24:23
  Speaker 2: that we forget what was long ago said by Carlvin Coolidge,
• 24:26
  Speaker 2: the business of America is business, not political.
• 24:29
  Speaker 3: They give you one statistic to close, one hundred percent agre.
• 24:32
  Speaker 5: He always has the last word.
• 24:33
  Speaker 3: Have you noticed the United States is four percent of
• 24:36
  Speaker 3: the world's population, It's about twenty seven percent of global GDP.
• 24:40
  Speaker 3: It is currently seventy percent of the stock market capitalization
• 24:44
  Speaker 3: of the world. You need a lot of confidence to
• 24:47
  Speaker 3: maintain that. All I'm saying is you could go down
• 24:49
  Speaker 3: to sixty percent, we'd still be dominating the world. But
• 24:52
  Speaker 3: that's a twenty percent correction in the markets.
• 24:57
  Speaker 4: Thanks for listening to Trumponomics from Bloomberg by me Sephanie Flanders.
• 25:01
  Speaker 4: I was joined by Neil Ferguson and Farreed Zakaria. Trumponomics
• 25:05
  Speaker 4: is produced by Samasadi and Moses and Dam with help
• 25:08
  Speaker 4: from Chris Martlu, tala Ahmadi, Ammy Keene and barricatte Ugado.
• 25:13
  Speaker 4: Sound designed by Blake Maples and Brendan Francis Newnham is
• 25:17
  Speaker 4: our executive producer and special thanks also to the entire
• 25:21
  Speaker 4: team at the Milcon conference. Please do rate this show
• 25:24
  Speaker 4: wherever you listen to podcasts so other people can enjoy it.