Latest / Bloomberg Intelligence / China Trade Ceasefire Expected Soon, Punting To 2020

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China Trade Ceasefire Expected Soon, Punting To 2020 · Bloomberg Intelligence

0:02
Speaker 1: Welcome to the Bloomberg Penl Podcast. I'm Paul Sweene. You,
0:05
Speaker 1: along with my co host Lisa Brahma wits each day
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Speaker 1: we bring you the most noteworthy and useful interviews for
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Speaker 1: you and your money, Whether at the grocery store or
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Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple
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Speaker 1: podcast or wherever you listen to podcasts, as well as
0:17
Speaker 1: at Bloomberg dot com. Well back in May, our next
0:24
Speaker 1: guest said the odds for a China trade deal are
0:27
Speaker 1: optimistically at ten percent. Let's see if those odds have
0:31
Speaker 1: changed in this succeeding months. Mike McDonough, chief economists for
0:34
Speaker 1: financial Products that Bloomberg joins us here in a Bloomberg
0:37
Speaker 1: eleven three oh studio in New York. So, Mike, we've
0:39
Speaker 1: had a lot of rhetoric back and forth in the interim.
0:42
Speaker 1: As your outlook changed at all for a trade deal.
0:46
Speaker 1: I guess it depends on how you to find a
0:47
Speaker 1: trade deal, right. I think that you know a comprehensive
0:50
Speaker 1: trade deal. I think optimistically ten percent still seems about right.
0:54
Speaker 1: But if we're going to use war terminology, I think
0:58
Speaker 1: that we may be about to see a C S
1:01
Speaker 1: I think that both sides have realized they have a
1:04
Speaker 1: lot to lose in the interim if this continues to escalate.
1:08
Speaker 1: They realize they will not quickly be able to solve
1:11
Speaker 1: these problems. And I think both sides are are are
1:14
Speaker 1: are willing finally to compromise, but not not to let's say,
1:19
Speaker 1: have a deal, but to agree to stop the escalation.
1:23
Speaker 1: So what does that look like in terms of how
1:26
Speaker 1: they both save face and don't just say this is dumb,
1:29
Speaker 1: We're just laying down their weapons for now and figuring
1:31
Speaker 1: this out after the elections. No. So I think what's
1:34
Speaker 1: going to happen is that you will see UM China
1:40
Speaker 1: agree to buy more agricultural products, the magnitude of which
1:44
Speaker 1: will be determined by how much the US negotiators are
1:47
Speaker 1: willing to give up UH. And you'll also see some movement,
1:52
Speaker 1: some nascent advancements on the intellectual property side in China.
1:56
Speaker 1: There's there, there's been some some things going on behind
1:59
Speaker 1: the scenes. I think that that that will come into
2:00
Speaker 1: play at some point. And I think on the U
2:03
Speaker 1: s side, UH baseline scenario in my mind would be
2:07
Speaker 1: they will agree to they I don't think they'll remove
2:09
Speaker 1: tariffs I think that that that seems like a hefty ask.
2:14
Speaker 1: But I think that the new round of tariffs due
2:16
Speaker 1: to come online in October won't be put on, and
2:20
Speaker 1: I think that that will be what they give up.
2:21
Speaker 1: I think if there is any removal of tariffs, you
2:23
Speaker 1: will probably see you could see China agree to purchase
2:28
Speaker 1: more agricultural products. But I think that's what a ceasefire
2:31
Speaker 1: looks like. And I think that um, it won't be said,
2:36
Speaker 1: but I think both sides are kind of saying, maybe
2:38
Speaker 1: we should wait until after the election and see what
2:42
Speaker 1: happens and then do the heavy lifting at that point.
2:45
Speaker 1: Even to get this ceasefire type of deal, Even that
2:48
Speaker 1: seems one could argue optimistic, given that we haven't seen
2:52
Speaker 1: either side really show any you know, softness on their
2:58
Speaker 1: either negotiating side. What gives you a sense of something,
3:02
Speaker 1: you know, the tweets and everything, that's all kind of
3:03
Speaker 1: a bit of noise. We don't really know what's going
3:05
Speaker 1: on behind the scenes or where things stand. Uh, you know,
3:08
Speaker 1: the rehed rick is inverse to how markets are performing generally.
3:12
Speaker 1: I think what you're seeing is, if you're President Trump
3:15
Speaker 1: and you want to get reelected in you're realizing, okay,
3:18
Speaker 1: escalating this trade war is having a detrimental impact on markets,
3:22
Speaker 1: is having a detrimental impact on the economy. Uh and markets,
3:26
Speaker 1: and this isn't good for me, right. You know, if
3:28
Speaker 1: you're an incumbent president and the economy is doing poorly,
3:30
Speaker 1: that's death knell for your re election chances. Uh. So
3:34
Speaker 1: there's some impetus there. And I think in China, the
3:38
Speaker 1: economies there is getting hit a bit harder than the
3:41
Speaker 1: government may have anticipated. Uh So I think that, you know,
3:44
Speaker 1: for them, uh, it would be good to kind of, um,
3:48
Speaker 1: at least stop the escalation. I think, you know, if
3:50
Speaker 1: you look at what has been put in place so far,
3:52
Speaker 1: I think both sides think, okay, well, as long as
3:55
Speaker 1: this is an escalating we bring some certainty for the
3:58
Speaker 1: foreseeable future back into markets and businesses. Uh, this is
4:03
Speaker 1: good for both of us. Is the feeling among the
4:05
Speaker 1: officials who you speak with that the US has actually
4:09
Speaker 1: weathered this fairly well and that China has had a
4:11
Speaker 1: much harder time. Um. You know, you have to figure out,
4:17
Speaker 1: in China's case, how much of the weakening economies due
4:20
Speaker 1: to the trade war versus how much is due to
4:22
Speaker 1: domestic factors. There's a bit of both there. They're they've
4:24
Speaker 1: been going through this deleveraging cycle, which is a bit challenging.
4:29
Speaker 1: Excuse me, what happened to that? Is that that that's
4:32
Speaker 1: kind of it's kind of been put on hold. But
4:34
Speaker 1: I think the slowdown was originally caused by that um
4:38
Speaker 1: and they are gradually putting reversing some of that, putting
4:42
Speaker 1: in some stimulus. They haven't pulled out all the all
4:45
Speaker 1: the weapons yet out of their arsenal that they could use,
4:47
Speaker 1: but you know, there's definitely some meaningful slow down there.
4:50
Speaker 1: And it's also that the sentiment impact doesn't fully get appreciated.
4:54
Speaker 1: It's the uncertainty of what happens next. So if you
4:58
Speaker 1: remove that, if you kind of know what happens next,
5:00
Speaker 1: and it's the status quo at least for a while,
5:03
Speaker 1: that should help calm things down and and help bolster
5:06
Speaker 1: confidence a bit. So Mike, in terms of you know this,
5:11
Speaker 1: you know agreement light if you will, or trade agreement light.
5:14
Speaker 1: So what is the timing of that, because it seems
5:16
Speaker 1: like October one when these tariffs go into effect, I
5:19
Speaker 1: believe UM or sometime in October that's when it's gonna
5:22
Speaker 1: become really hit the pocketbook and the wallet of general
5:27
Speaker 1: USA consumer. Yeah, I think I think as a courtesy
5:29
Speaker 1: to China for the seventieth anniversary that the start date
5:33
Speaker 1: was pushed back to the fifteenth. And that also tells
5:35
Speaker 1: me by pushing that back, maybe there was something going
5:38
Speaker 1: on in the background that we weren't privy to. That
5:40
Speaker 1: is a positive sign. Uh So I think it happens
5:43
Speaker 1: before then. I think, you know, I think a ceasefire
5:46
Speaker 1: is a good word for it, and I think we
5:48
Speaker 1: see it soon. I'm trying to understand what that does
5:50
Speaker 1: to the other aspects of the trade discussion in terms
5:53
Speaker 1: of intellectual property, uh in terms of you just to
5:57
Speaker 1: sort of enforcement mechanism of some of the the ideas
6:00
Speaker 1: as far as fair trade practices. Well, people just sort
6:04
Speaker 1: of say, you know what this is good for now,
6:07
Speaker 1: we won't think about those things, or will there be
6:09
Speaker 1: a lot of pressure saying Trump what happened to that?
6:14
Speaker 1: I'm I'm sure no matter what happens, it will be
6:16
Speaker 1: celebrated as a win. And you know the fact that
6:20
Speaker 1: you know, China will continue or these China's not paying
6:23
Speaker 1: the tariffs, but these tariffs will remain in place as
6:27
Speaker 1: a as a kind of punitive measure until the negotiations
6:31
Speaker 1: are complete. I think that that it's going to be
6:33
Speaker 1: looked at as it might not even be called a ceasefire.
6:36
Speaker 1: It's going to be may be referred to as a
6:38
Speaker 1: step in the right direction. Negotiations are continuing, China's continuing.
6:42
Speaker 1: But how about it? I mean, is this how about
6:43
Speaker 1: the old trade you know, the t PP the Trans
6:45
Speaker 1: Pacific Pack. I mean, is it gonna be better than that?
6:48
Speaker 1: That's kind of the standard, right, Oh, the trans the
6:51
Speaker 1: t p P as and I haven't heard that in
6:53
Speaker 1: a while. I mean, no, the t p P is
6:55
Speaker 1: very different. Actually, because um China was not a member
6:58
Speaker 1: of the t p P. I used to say that
7:00
Speaker 1: there were two groups of people who really didn't want
7:03
Speaker 1: to see the t p P initiated, and it was
7:05
Speaker 1: China and Trump supporters, right. I used to kind of
7:08
Speaker 1: as for a rationalization of that, the t p P
7:10
Speaker 1: was more of a it was a trade deal, but
7:12
Speaker 1: it was more of a geopolitical pact that kind of
7:15
Speaker 1: said the US still has influence within this region and
7:18
Speaker 1: help set policy. So that failure was actually, in my opinion,
7:22
Speaker 1: a positive for China because then it opened doors. It
7:25
Speaker 1: wasn't the members of people who were part of the
7:28
Speaker 1: t p P had to look at China differently and
7:30
Speaker 1: starts saying, well, maybe we should be dealing with China
7:32
Speaker 1: more directly. Maybe Chinese has greater influence this region than
7:35
Speaker 1: they otherwise would have had. Well, Mike, I will say
7:38
Speaker 1: thank you very much. We'll have to have you back soon.
7:40
Speaker 1: You've nailed it so far in terms of the unlikelihood
7:44
Speaker 1: of a deal when things were, when people were very
7:46
Speaker 1: helpful before, and now you're saying there might be I
7:49
Speaker 1: don't know if it's fair to call it a deal,
7:51
Speaker 1: some sort of ceasefire, stopping with the escalation. Mike McDonald,
7:55
Speaker 1: chief economist for Financial Products of Bloomberg LP, weighing in
7:58
Speaker 1: with great insight. I like avocado toast and I love
8:17
Speaker 1: drinking water with a slice of lemon in it. We
8:19
Speaker 1: are very lucky to be speaking with the biggest US
8:22
Speaker 1: lemon and avocado crower Limonera. Harold Edwards, the chief executive
8:27
Speaker 1: officer of the company, joining us here in our Bloomberotta
8:30
Speaker 1: Active Broker Studios. Harold, thank you so much for being here.
8:33
Speaker 1: I want to start with some of the weather fluctuations
8:37
Speaker 1: that we saw this year that affected your company, especially
8:39
Speaker 1: on this climate change day, uh, with resulting in very
8:44
Speaker 1: big lemons and poultry avocado harvesting. Can you just give
8:48
Speaker 1: us a sense of where we are in terms of
8:50
Speaker 1: weather disruptions and how that's affected your business. I'm happy
8:53
Speaker 1: to thank you for having me today. So, UM, last
8:56
Speaker 1: July a year ago, we had a week of temperatures
9:00
Speaker 1: over a hundred degrees. In fact, in some areas of
9:02
Speaker 1: coastal California it was a hundred and fifteen degrees for
9:05
Speaker 1: a long period of time. And that was right during
9:07
Speaker 1: the bloom and set period for our avocados, and the
9:10
Speaker 1: vast majority of them, approximately of what was hanging on
9:13
Speaker 1: the tree fell to the ground and became unmarketable. So
9:16
Speaker 1: that was the first weather phenomena to hit us. And
9:19
Speaker 1: then if you fast forward, UH and UH, think back
9:22
Speaker 1: to the last seven years that California has been enduring
9:25
Speaker 1: a sustained drought. And last year was a godsend year
9:29
Speaker 1: for us. We had tripled the amount of rainfall that
9:32
Speaker 1: we normally have. I think we had thirty five inches
9:34
Speaker 1: of rain last year and so it was technically a
9:37
Speaker 1: great thing, except it prevented us and everybody in the
9:40
Speaker 1: in the coastal industry of citrus production from being able
9:43
Speaker 1: to get into harvest our citrus. So by the time
9:46
Speaker 1: we were actually able to get our citrus harvested in
9:48
Speaker 1: this case, our lemons, everything had grown to be of
9:52
Speaker 1: a very large size. And what's normally eight sizes and
9:54
Speaker 1: three different grades of what we sell fresh, we had
9:58
Speaker 1: three sizes. And the market is a only so big.
10:00
Speaker 1: If you think about a gigantic lemon floating in your
10:03
Speaker 1: iced tea, it doesn't work. So Harold, it's interesting. One
10:07
Speaker 1: of the things I know that your industry and I
10:09
Speaker 1: think about it. You're in southern California, the Santa Clara Valley, beautiful,
10:13
Speaker 1: just in southern California, so the greatest situs growing regions
10:16
Speaker 1: of the world, but you depend upon migrant labor. Talk
10:20
Speaker 1: to us about the immigration policies and discussions that are
10:23
Speaker 1: happening in the country right now, how it's impacting your
10:26
Speaker 1: business and your region of the country. Sure, having having
10:28
Speaker 1: a captive workforce is is absolutely essential for us as
10:32
Speaker 1: it relates to our harvest labor are pruning labor, just
10:35
Speaker 1: are our labor in general. So the company just celebrated
10:38
Speaker 1: it's one and twenty six year of operation. We've been
10:41
Speaker 1: a lot around a long time. I haven't been there
10:43
Speaker 1: the whole time, but I've been there part of it,
10:44
Speaker 1: and UH, having access to a captive workforce has been critical.
10:49
Speaker 1: We've invested into our workforce. We provide housing, we educate
10:52
Speaker 1: our employees, so we we really try to minimize our
10:56
Speaker 1: own workforce attrition. That being said, the rhetoric that's going
11:00
Speaker 1: on with migrant labor has made it extremely difficult to
11:04
Speaker 1: keep some of the outsourced labor as it relates to
11:07
Speaker 1: harvesting and pruning around. And so even just the rhetoric
11:13
Speaker 1: of the discussion of building the wall and UH, the
11:16
Speaker 1: relations between the United States and Mexico, most of our
11:19
Speaker 1: most of our workforce comes from Mexico, has been really
11:22
Speaker 1: challenging to keep that labor accessible to us. So here's
11:26
Speaker 1: here's why I don't totally understand. We've got the tariff
11:29
Speaker 1: issues and the trade talks and that built the wall
11:31
Speaker 1: issues with migrant labor kind of coming under attack in
11:35
Speaker 1: the political sphere. You have weather disruptions causing some problems
11:39
Speaker 1: in terms of harvesting, UH, whether it be avocados or
11:42
Speaker 1: or big lemons, Um, why are the prices not higher?
11:48
Speaker 1: So we're very fortunate globally to have other sources of
11:52
Speaker 1: fresh produce and in this case fresh citrus and avocados. Today,
11:56
Speaker 1: the United States consumes about three billion pounds of avocados
12:00
Speaker 1: every year. Of that comes from Mexico, and Mexico produces
12:05
Speaker 1: about three billion pounds of avocados, and Peru now produces
12:08
Speaker 1: almost a billion pounds of avocados. So between Peru, Mexico,
12:12
Speaker 1: and Chile, you've got more than enough to satisfy this
12:15
Speaker 1: insatiable demand almost that we experience here in the United States.
12:19
Speaker 1: The same holds true with fresh citrus and lemons. Today
12:23
Speaker 1: our business we source lemons in Mexico, and we actually
12:25
Speaker 1: produce and pack and ship out of Chile, Argentina, and
12:28
Speaker 1: South Africa, but more to have counter seasonality, uh, combined
12:33
Speaker 1: and complemented by our California and Arizona production. Interesting, now
12:36
Speaker 1: I know you. The business is a global business. Real quickly,
12:39
Speaker 1: how are you doing with China? I'm guessing Chinese like
12:42
Speaker 1: the lemons, I like their avocados. I'm guessing, Um, how
12:44
Speaker 1: do you get product into China? So the Chinese market
12:48
Speaker 1: is is just has massive potential. And if you go
12:50
Speaker 1: break it down by cities and and and areas of consumption,
12:55
Speaker 1: burgeoning middle classes and prosperity is more people are eating
12:58
Speaker 1: out every day, and more people are opping in supermarkets
13:01
Speaker 1: every day, and so the opportunity for consumption and that
13:04
Speaker 1: demand growth as it relates to citrus and avocadas is huge.
13:08
Speaker 1: The the dynamic trade policy and changes makes it really
13:13
Speaker 1: difficult to shift or a ship directly into many of
13:16
Speaker 1: those markets. One thing that we've noticed historically is that
13:19
Speaker 1: China they're inconsistent trade policy with the United States. Whether
13:23
Speaker 1: the markets are open or closed. The total amount of
13:26
Speaker 1: consumption is growing at north of twelve percent annually. But
13:30
Speaker 1: when that market gets a big terraff for a duty
13:32
Speaker 1: you put on it, usually that fruit diverts through Hong
13:35
Speaker 1: Kong and then somehow miraculously finds its way into the
13:38
Speaker 1: markets that um ultimately creates higher pricing for the Chinese consumers. Okay,
13:43
Speaker 1: but you're still gonna need your product there. Howld Edwards,
13:44
Speaker 1: thank you so much for joining us. As always, Harold's
13:46
Speaker 1: the CEO of limon Era based in Ventura County, uh In,
13:51
Speaker 1: I'm sorry, California. So very interesting story on the lemon business,
13:55
Speaker 1: the avocado business, and just the global agricultural business. Um.
13:59
Speaker 1: You know, it's just amazing the consumption going up for avocados.
14:02
Speaker 1: I think we know why. Lisa Bramwins is contributing to that.
14:05
Speaker 1: I was in Chile when I developed the habit. So
14:26
Speaker 1: Federal Reserve has taken crisis era actions this week to
14:30
Speaker 1: try to regain some sort of calm in the repo
14:33
Speaker 1: market of the fourth day. Uh, they've added liquidity to
14:37
Speaker 1: the overnight repo markets. The question is will this happen
14:42
Speaker 1: again and what will the Federal Reserve do on an
14:44
Speaker 1: ongoing basis to make sure that there is a little
14:47
Speaker 1: more stability in these basic fundamental markets for financial worlds.
14:53
Speaker 1: Joining us now as Dr Bob Eisenbeis Vice chair in
14:56
Speaker 1: chief Monetary Economistic Cumberland Advisors. He was formerly the ex
15:00
Speaker 1: I COULD Advice President and director of Research at the
15:02
Speaker 1: Atlanta Fed. Bob, thank you so much for joining us.
15:05
Speaker 1: First of all, do you think that we are going
15:08
Speaker 1: to see additional rounds of disruption in the repo markets
15:12
Speaker 1: going forward like the ones that we saw this week, Well,
15:16
Speaker 1: that's going to be hard to determine, because even as
15:20
Speaker 1: of now there's not a lot of consensus as to
15:23
Speaker 1: what the cause of the pressures were, and to really
15:27
Speaker 1: get to the numb of it, you have to understand
15:30
Speaker 1: a little bit in terms of how this market was
15:33
Speaker 1: set up and it was designed to provide a source
15:37
Speaker 1: of liquidity. Two banks, G s c s, money market funds,
15:41
Speaker 1: and primary dealers. Banks and G s c s really
15:45
Speaker 1: haven't been players in this market at all, and it's
15:48
Speaker 1: mainly the primary dealers, and my understanding was that the
15:51
Speaker 1: primary dealers were experiencing a a squeeze. The primary dealers
15:57
Speaker 1: are the security are securities arms broker dealers, some of
16:02
Speaker 1: which are affiliated with commercial banks, but they cannot tap
16:05
Speaker 1: commercial bank funds, so they have large portfolios of securities
16:10
Speaker 1: that they have to finance, and typically they were financing
16:13
Speaker 1: them through overnight repose with money market funds. But a
16:19
Speaker 1: couple of things happened this past week. One was this
16:23
Speaker 1: about a seventy billion dollar tax h draw that required
16:29
Speaker 1: money market funds to liquidate the securities. At the same time,
16:33
Speaker 1: the Treasury issued about fifty billion dollars worth of securities
16:37
Speaker 1: that had to be financed. All this had to be
16:39
Speaker 1: financed through the repo market. Basically by the primary dealers
16:43
Speaker 1: and they were squeezed. And so this is how what
16:47
Speaker 1: the FED did there. The FED is really the only
16:49
Speaker 1: option in this particular case. The security affiliates, even though
16:54
Speaker 1: they may have been associated with a commercial bank, can't
16:58
Speaker 1: really borrow from the commercial of banks, and the banks
17:01
Speaker 1: are unwilling to lend to the primary dealers of other banks.
17:04
Speaker 1: So the FED is really the only UH source here.
17:09
Speaker 1: And what really needs to be done is that FED
17:12
Speaker 1: has to decide what this facility is going to be
17:15
Speaker 1: and who should have access to essentially FED resources. And
17:22
Speaker 1: the real mystery is what the cause of the problem was,
17:26
Speaker 1: and people are just guessing at this point. I'm pretty
17:29
Speaker 1: sure that people in New York FED no. But that's
17:33
Speaker 1: another problem that they just haven't been forthcoming and telling
17:36
Speaker 1: us what they do know. Right, So that's kind of
17:38
Speaker 1: where I wanted to go, Bob. I mean, there's some
17:40
Speaker 1: market participants that are saying, you know, the FED kind
17:44
Speaker 1: of got caught off guard here and kind of didn't
17:47
Speaker 1: really have it the finger on the pulse of this
17:49
Speaker 1: part of the market. Is that something you ascribed to No,
17:53
Speaker 1: I don't think. So. They have daily interactions with all
17:57
Speaker 1: these firms, and uh, they should of benement. It was
18:00
Speaker 1: well known about this text day for example, and the
18:04
Speaker 1: said does announce or the ex the Treasury does announce
18:09
Speaker 1: what it's security stealings are going to be. So I'm
18:13
Speaker 1: surprised at this, to be honest with you. Alright, so
18:17
Speaker 1: you're surprised at this. And there is a lot of
18:19
Speaker 1: talk that the Federal Reserve is going to probably increase
18:22
Speaker 1: its balance sheet, not in a quantitative easing type of manner,
18:25
Speaker 1: but in some kind of way to make sure that
18:28
Speaker 1: there is just enough liquid assets there to prevent this
18:31
Speaker 1: from happening going forward. I want to sort of put
18:34
Speaker 1: that aside for a minute, because this whole REPO action
18:38
Speaker 1: totally overshadowed the actual FED meeting that we got in
18:41
Speaker 1: the rate cut that we got this week, And I'm
18:42
Speaker 1: just wondering, uh, to take stock of what happened with
18:47
Speaker 1: Fed share Powell and what you're expecting going forward. How
18:50
Speaker 1: many times do you think the Fed's gonna cut rates
18:52
Speaker 1: in additional rounds this year? Well, if you look at
18:56
Speaker 1: the dot chart in particular, um, there's at most a
19:01
Speaker 1: group of seven people who think there should be one
19:03
Speaker 1: more cut. There's ten people who don't think there should
19:07
Speaker 1: be either a move or perhaps even an increase. So
19:11
Speaker 1: at most I think at this juncture you're gonna if,
19:14
Speaker 1: if the present voting structure continues, we might get one
19:18
Speaker 1: more rate cut, but I would be quite surprised at that.
19:23
Speaker 1: And I think it's going to be really dependent on,
19:29
Speaker 1: among other things, what the third quarter GDP number looks like.
19:33
Speaker 1: And as some of the discussions you've already had today
19:37
Speaker 1: suggests that certain parts of the economy are doing pretty
19:39
Speaker 1: well except for the investment side of things, and of
19:44
Speaker 1: course that's I think really related slow down. There is
19:48
Speaker 1: more related to uncertainty about trade. And we saw another
19:51
Speaker 1: switch in what policy on trader is going to be
19:53
Speaker 1: today in terms of exemption of certain goods and so
19:56
Speaker 1: on by both the Chinese and the United States. So
20:00
Speaker 1: there's this constant. I don't know, And if you're a businessman, uh,
20:04
Speaker 1: at this point, the prudent thing is probably just to
20:07
Speaker 1: sit on your hands for a bit. But I want
20:09
Speaker 1: to go back to the point you made that you
20:11
Speaker 1: wanted to set aside the fact that the FED might
20:14
Speaker 1: increase the size of its balance sheet if in fact
20:18
Speaker 1: the primary dealers are the ones who are having problems.
20:22
Speaker 1: Increasing the size of the balance sheet and injecting in
20:25
Speaker 1: the reserves into the system is not going to necessarily
20:28
Speaker 1: provide the funds to those particular institutions at all. So
20:33
Speaker 1: to me, the real issue has to do with how
20:36
Speaker 1: do they change and what do you do with the
20:37
Speaker 1: structure of that repo market. And it's unrelated to the
20:41
Speaker 1: size of the FED. So what do you think they
20:43
Speaker 1: should do well? I think one of the arguments is
20:47
Speaker 1: that they should essentially allow the primary dealers to have
20:51
Speaker 1: accounts at the FED, which would give them access to
20:53
Speaker 1: the discount window, which would solve the problem um And
20:57
Speaker 1: of course the FED could also do some other things.
21:00
Speaker 1: I firmly argued for a long time they should be
21:03
Speaker 1: buying and selling FED funds at the desired rate on
21:08
Speaker 1: a continuing basis, not just one time a day. That
21:11
Speaker 1: would solve a lot of problems. Dr Robert Eisenbis, thank
21:16
Speaker 1: you so much. Dr Eisambiss, vice Chairman and chief Monetary
21:19
Speaker 1: Economist at Cumberland Advisers, joining us on the phone from Sarasota, Florida.
21:36
Speaker 1: All right, Paul, I'm gonna tell you a little story
21:38
Speaker 1: from last night. All right, So last night, my ten
21:41
Speaker 1: year old son comes to me and he says, Mommy, tomorrow,
21:44
Speaker 1: I'm going to walk out of school. And I said, okay,
21:46
Speaker 1: where do you Where do you plan to go? He's like,
21:48
Speaker 1: I'm going to this park. I'm going to this park.
21:50
Speaker 1: I've made signs. We're going in a group. But people
21:53
Speaker 1: in charge don't understand that they're wrecking our earth. Did
21:55
Speaker 1: we need to go fix it? Um? So he's being
21:58
Speaker 1: taking part in all of the climate change UH protests, etcetera.
22:03
Speaker 1: And then this is a global thing and I actually
22:08
Speaker 1: am pretty negligent and that I was not as aware
22:11
Speaker 1: of it as I probably should be. So to get
22:13
Speaker 1: a little bit more on exactly what this is, because
22:16
Speaker 1: I'm curious, I'm sort of allowing my son to throw
22:19
Speaker 1: himself out into uh. Eric Roston joining us here. He's
22:23
Speaker 1: sustainability editor for Bloomberg News. Eric, what are these protests
22:28
Speaker 1: that are going on all over the world today. It's
22:30
Speaker 1: quite a remarkable story. Actually, there are many, many thousands
22:35
Speaker 1: of people protesting the lack of global action on climate
22:40
Speaker 1: change in major cities around the world. And they were
22:44
Speaker 1: really sparked into this by one sixteen year old Swedish
22:49
Speaker 1: girl who in the last couple of years has through
22:54
Speaker 1: uh you know, unusual succession of events, become a global
23:01
Speaker 1: spokesperson for the urgency of the climate crisis. Uh. They
23:05
Speaker 1: this coincides with major un events next week on the topic.
23:09
Speaker 1: So again, the this rally again, I've seen some amazing
23:13
Speaker 1: video from Australia and from Berlin and then just tens
23:17
Speaker 1: of thousands of people maybe more in all these cities.
23:20
Speaker 1: What what's kind of the objective here? Is it just
23:22
Speaker 1: to raise awareness or are there asking for certain concrete
23:26
Speaker 1: things to be done? They're not. I think I think
23:29
Speaker 1: it would be a remarkable feat in the history of
23:33
Speaker 1: humanity of that many people agreed on anything. Uh, to
23:36
Speaker 1: the extent they do agree on something, it's that this
23:39
Speaker 1: topic needs more attention than it does from people in power.
23:43
Speaker 1: A number of things have crystallized in the last year
23:46
Speaker 1: two that have really brought this into the public h
23:50
Speaker 1: to the public attention in a way it never has before.
23:53
Speaker 1: Probably the most powerful thing are just these very strange,
23:57
Speaker 1: very destructive, massive unusual events, the hurricanes, the droughts, the flooding. Uh,
24:05
Speaker 1: that's hard to miss. Another thing is the science, which
24:10
Speaker 1: basically hasn't changed for thirty or forty years has been
24:14
Speaker 1: getting increasingly higher pitched, including in October a pretty dramatic
24:20
Speaker 1: report from the main UN authoritative climate body that says, look,
24:25
Speaker 1: this is by we have to have net zero greenhouse
24:30
Speaker 1: gas emissions and by we have to slice in half
24:35
Speaker 1: what we're putting out into the atmosphere now. And we
24:38
Speaker 1: got that with a pledge to eliminate carbon emissions out
24:43
Speaker 1: of the EU, out of Germany, with Angel America making
24:46
Speaker 1: a pledge this morning. In the meantime, there's a very
24:49
Speaker 1: real implication for a lot of businesses, whether it comes
24:52
Speaker 1: to carbon taxes, whether it comes to different regulations, or
24:55
Speaker 1: whether it comes to just public relations issues and how
24:58
Speaker 1: people perceive different companies. There was a report out showing
25:01
Speaker 1: that Amazon dot COM's emissions are bigger than some of
25:04
Speaker 1: its retail rivals, although they did trail Walmart. Can you
25:09
Speaker 1: talk a little bit about that Amazon did really changed
25:13
Speaker 1: the conversation yesterday that climate activists certainly have about them.
25:20
Speaker 1: Amazon has not really participated, really over the last fifteen years,
25:25
Speaker 1: in any of the increasingly common voluntary disclosure mechanisms that
25:31
Speaker 1: companies have been participating in where they reveal their their
25:34
Speaker 1: climate emissions. For investors. Even over the past year it's
25:39
Speaker 1: been getting more and more intense for Amazon. Is that
25:41
Speaker 1: the spring that was an employee walk out, people protesting
25:46
Speaker 1: the lack of attention to climate issues. UH. And yesterday,
25:52
Speaker 1: after never having published their carbon number before, UH, they
25:56
Speaker 1: issued UH quite detailed and very sort of strategic policy
26:04
Speaker 1: for getting on top of all of their direct and
26:07
Speaker 1: indirect emissions over the next two decades. So, Eric, can
26:12
Speaker 1: these global you know, emission goals for the UN put out?
26:19
Speaker 1: Are they reasonably achievable if the US does not play
26:23
Speaker 1: a leading role because it appears that this administration is
26:27
Speaker 1: not as big a supporter of sustainability as perhaps other
26:30
Speaker 1: parts of the world. That's fair. UH. One thing that
26:36
Speaker 1: I think is underplayed a lot because it's it's fuzzy
26:39
Speaker 1: and it's difficult to write about, is that leadership really matters,
26:44
Speaker 1: and leadership catalyzes change on this topic in a way.
26:50
Speaker 1: UH that's different. And you can look to UH the
26:54
Speaker 1: two thousand fourteen bilateral agreement between the US and China
27:00
Speaker 1: over climate goals that really set in motion momentum that
27:05
Speaker 1: became a year later, the Paris Agreement on Climate Change UH,
27:10
Speaker 1: and that international collaboration is really powerful. There's uh, you know,
27:19
Speaker 1: it's very difficult to get everybody to commit, hard to
27:23
Speaker 1: get everybody to jump in the water at the same
27:25
Speaker 1: time if if there's fear that not everybody's going to right. Yeah,
27:30
Speaker 1: So a long term story here. Eric Rosston, thanks so
27:33
Speaker 1: much for joining us, Eric's sustainability editor for Bloomberg News.
27:37
Speaker 1: Joining us here in our Bloomberg Interactive Broker studio talking
27:39
Speaker 1: about UH, the World Climate Rally that is taking a
27:42
Speaker 1: place around the globe as we speak, in UH in
27:46
Speaker 1: major cities. I've seemed again just some amazing video from
27:50
Speaker 1: major rallies in major cities around the world. So people
27:53
Speaker 1: really getting behind this issue. The question is to what
27:55
Speaker 1: extent will the U s N Corporate America. Thanks for
27:59
Speaker 1: listening to the Bloomberg P and L podcast. You can
28:01
Speaker 1: subscribe and listen to interviews at Apple Podcasts or whatever
28:04
Speaker 1: podcast platform you prefer. I'm Paul Sweeney. I'm on Twitter
28:07
Speaker 1: at pt Sweeney. I'm Lisa abram Woyit's I'm on Twitter
28:10
Speaker 1: at Lisa abram woits one before the podcast. You can
28:12
Speaker 1: always catch us worldwide. I'm Bloomberg Radio