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China Saber-Rattling Likely, As Trade Tensions Escalate · Bloomberg Intelligence

• 0:02
  Speaker 1: Welcome to the Bloomberg Penl Podcast. I'm Paul swing you.
• 0:05
  Speaker 1: Along with my co host Lisa Brahma Waits. Each day
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  Speaker 1: we bring you the most noteworthy and useful interviews for
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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. It's being taken by the market
• 0:24
  Speaker 1: as an escalation of the trade war, and frankly a
• 0:27
  Speaker 1: material escalation at that between the US and China. The
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  Speaker 1: question is how far will this go, what will be
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  Speaker 1: the retaliation by the United States, and what is China's goal? Here?
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  Speaker 1: Is the goal just not to even try to have
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  Speaker 1: a trade deal with the US? Joining US now? Matt Gerkin,
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  Speaker 1: geopolitical strategist for b c A Research in Montreal, joining
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  Speaker 1: US by phone. Matt, let's start there. Do you think
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  Speaker 1: that China's allowance permitting the U n to go above
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  Speaker 1: seven per dollar was a clear retaliatory sure to the
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  Speaker 1: United States saying we don't care anymore about preserving this
• 1:05
  Speaker 1: level because you guys clearly don't want to make a
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  Speaker 1: deal with US. Hi. Yes, thanks to glad to be on.
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  Speaker 1: It's absolutely a retaliation. The six point nine level was
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  Speaker 1: the level at which Trump was inaugurated, and seven, of
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  Speaker 1: course is a psychological level as well for the markets,
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  Speaker 1: and it's been known within politics political circles as well.
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  Speaker 1: So they're clearly saying, look, you've gone to all Chinese
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  Speaker 1: exports to the US. Now we're going to retaliate in
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  Speaker 1: the easiest, clearest way for US. And of course it's
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  Speaker 1: also a way of stimulating their economy, which is hitting
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  Speaker 1: getting hit from this move. So, Matt, let's step back
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  Speaker 1: a little bit. What do you think the long game
• 1:44
  Speaker 1: is for China? Because I'm sure that I think for
• 1:47
  Speaker 1: a lot of investors that they just don't have a
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  Speaker 1: good handle on that. The long game for China is
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  Speaker 1: to first of all, try to divide the United States
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  Speaker 1: from the rest of the West UH, particularly Europe, which
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  Speaker 1: is the swing play are in this entire geopolitical conflict. UH.
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  Speaker 1: It is to continue to weaken the US by continuing
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  Speaker 1: the global status quo, which is one in which China
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  Speaker 1: is able to continue state oriented, mercantilist policies of its
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  Speaker 1: own while the US suffers from political division Internally and
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  Speaker 1: is in populism, etcetera, and is not able to focus
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  Speaker 1: a constant trated Western coalition against China and the US.
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  Speaker 1: How could the US potentially retaliate here? And what's the
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  Speaker 1: goal there? I think from the US point of view,
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  Speaker 1: there's there's two goals. Trump is very short term. Trump
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  Speaker 1: is of course thinking about the election. But what he's
• 2:40
  Speaker 1: learned is that the market has climbed the wall of
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  Speaker 1: worry repeatedly on the tariffs, and the U s economy
• 2:47
  Speaker 1: is held up pretty well, and that gives him room
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  Speaker 1: to pursue the trade war with China, where Americans are
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  Speaker 1: fairly skeptical. I mean, Americans do think China treats on
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  Speaker 1: cheats on trade, and Americans don't have a very favorable
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  Speaker 1: of China. But meanwhile, he's got to try to tamp
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  Speaker 1: down other crises, whether they be domestic or you know,
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  Speaker 1: trade conflicts with other countries. He'll try to wrap those
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  Speaker 1: up in order to keep the impact on markets somewhat
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  Speaker 1: controlled on his short term timeframe. Long term, of course,
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  Speaker 1: the US is worried about technological supremacy. So Matt the
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  Speaker 1: unilateral style of negotiating trade negotiation of President Trump. Here
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  Speaker 1: are you suggesting that as it relates to the US
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  Speaker 1: and China, that that's not the way to go, that
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  Speaker 1: it needs to be more of a bilateral kind of
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  Speaker 1: a more of a global type of negotiation. Well, I
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  Speaker 1: don't have an opinion on it, but as an analyst,
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  Speaker 1: I think it's it's pretty clear that the US would
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  Speaker 1: have greater influence over China if we had a unified
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  Speaker 1: coalition of the willing, where basically about nine percent of
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  Speaker 1: China's GDP would be exposed to potential trade impacts as
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  Speaker 1: opposed to today, which is, you know, about five percent
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  Speaker 1: or less. Because essentially the U s would be able
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  Speaker 1: to get Europe in Japan on the same page UH
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  Speaker 1: and then prosecute the trade practices and and the cyber
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  Speaker 1: practices that it's most concerned about, and China at that
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  Speaker 1: point would be forced to capitulate because the entirety of
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  Speaker 1: its export profile would be threatened. UM. That's not the
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  Speaker 1: course Trump has taken, and one of the reasons is
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  Speaker 1: because it takes a long time for the diplomacy with
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  Speaker 1: Europe and Japan. UH. Instead, he's chosen to lead from
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  Speaker 1: the front and to aggressively UH prosecute the trade issues
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  Speaker 1: with China, and this has been a paradigm shift, but
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  Speaker 1: I think it was one that was long and coming.
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  Speaker 1: So just give you a sense of the market reaction
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  Speaker 1: as backed down nearly three two point nine percent decline,
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  Speaker 1: SMP down two point three percent. Clearly markets are taking
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  Speaker 1: this as a negative sign when it comes to global growth.
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  Speaker 1: But just to take a bigger historical perspective, as you're
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  Speaker 1: so good at doing matt, you know, what is the
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  Speaker 1: chance that this tip for tat becomes something more and
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  Speaker 1: escalates into something that's potentially even uh military high chance.
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  Speaker 1: I mean, I think actually we'll see saber rattling in
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  Speaker 1: the immediate term. And the reason for that is that
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  Speaker 1: the breakdown in US China relations has been taking place
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  Speaker 1: since the financial crisis. We have clearly moved beyond the
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  Speaker 1: period from nine to two thousand and eight where we
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  Speaker 1: had this huge day tent between US and China, which
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  Speaker 1: was driven by the Cold War and China's industrialization. Now
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  Speaker 1: China is a near peer competitor to the United States,
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  Speaker 1: and as I mentioned, technologically, China is gaining on the
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  Speaker 1: US and threatening the US over the long run, which
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  Speaker 1: is the ultimate determiner of the power of nations. So
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  Speaker 1: the U S is strategically rotating to Asia Pacific, regardless
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  Speaker 1: of the administration or political party. And and China, of
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  Speaker 1: course is feeling the heat. They're feeling contained, and they've
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  Speaker 1: got a slowing economy now on a again on a
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  Speaker 1: secular level. Uh, and that's going to cause them to
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  Speaker 1: indulge in nationalism and uh. And these two things combined
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  Speaker 1: mean that these two countries will continue to see sanctions, caraffs.
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  Speaker 1: It's a persistent threat and saber rattling in the near
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  Speaker 1: seas of China. So, Matt, I think one of the
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  Speaker 1: issues that President Trump has introduced recently as the talks
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  Speaker 1: seem to have kind of broken down between US and China,
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  Speaker 1: is that maybe any type of meaningful negotiation will be
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  Speaker 1: pushed beyond the presidential election. Is that a reasonable view?
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  Speaker 1: And your in your thought, we have actually consistently argued
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  Speaker 1: that China's best play is to wait until after the election.
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  Speaker 1: It it just doesn't do them good to commit to
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  Speaker 1: publicly to irreversible structural reforms that could heighten domestic economic
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  Speaker 1: risks for China before even knowing the outcome of the
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  Speaker 1: US presidential election. So I think they're playing the long game,
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  Speaker 1: as is well known about China, but even specifically, Trump
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  Speaker 1: is playing a very short game and they're taking advantage
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  Speaker 1: of that. And it's one reason why the Trump administration
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  Speaker 1: has has become angry. But also, of course Trump has
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  Speaker 1: ammunition because, as I mentioned, the market, you know, it
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  Speaker 1: climbs the wall of worry with the tariffs thus far,
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  Speaker 1: and that gave him the ammunition to decide to go
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  Speaker 1: all the way. Now he has to try to do
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  Speaker 1: damage control and make sure he doesn't create a bear
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  Speaker 1: market which could lead to a recession and get him
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  Speaker 1: kicked out of office. Matt Gerkin, thank you so much
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  Speaker 1: for joining us. Matt's a geopolitical strategists at bc A
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  Speaker 1: research based on Montreal, Quebec, giving us some very valuable
• 7:22
  Speaker 1: perspective on kind of the U. S. China negotiations, not
• 7:25
  Speaker 1: just hear what we're seeing right now, but kind a
• 7:27
  Speaker 1: little bit of a historical perspective and uh, just highlighting
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  Speaker 1: the risk to the market today and maybe even bigger
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  Speaker 1: risk going forward. Well. Trade negotiations are without question facing
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  Speaker 1: new obstacles as President Trump increases tariffs once again and
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  Speaker 1: the Chinese just allowing that you want to weaken below
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  Speaker 1: the seven to one level to get a sense of
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  Speaker 1: what that means for currencies going forward. We welcome Dr
• 8:04
  Speaker 1: Win Thin. He's a global head of currency strategy at
• 8:07
  Speaker 1: Brown Brothers Harriman in New York City joining us on
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  Speaker 1: the phone. So Dr Thin, thanks so much for joining us.
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  Speaker 1: Does it appear to you that the Chinese are weaponizing
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  Speaker 1: the one? Uh? You know, the break of the seven
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  Speaker 1: levels has always uh capture one attention. But I would
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  Speaker 1: just say that there's nothing magical about this level. Uh.
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  Speaker 1: The Chinese stories have come out in the past, and
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  Speaker 1: they have come out today and saying they will not
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  Speaker 1: weaponize the yawn, and I take them at the word
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  Speaker 1: they We saw the disaster that the two thousand and
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  Speaker 1: fifteen evaluation brought onto Chinese markets, so I think they
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  Speaker 1: will shy away from that. The one thing I would
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  Speaker 1: point out, and I read a nice correlation study using
• 8:45
  Speaker 1: your function on your Bloomberg the correlation between c N
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  Speaker 1: y on shore you on and m S c I
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  Speaker 1: E m f X has a basket of e MC currencies.
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  Speaker 1: It's running my point eight two very very high correlation.
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  Speaker 1: So what that's it's basically the Chine of the ways
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  Speaker 1: are allowing you want to sort of reflect greater market
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  Speaker 1: forces trading with the rest of EM rather than being
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  Speaker 1: somewhat pegged. So okay, if you have the mixing paste
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  Speaker 1: it down half one and half percent, two percent, you know,
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  Speaker 1: the rest of em getting clovered. It's not it shouldn't
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  Speaker 1: be surprised that the U want is trading along with it.
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  Speaker 1: Certainly that's the case. However, I do have to push
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  Speaker 1: back a little bit because this the value or the
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  Speaker 1: weakening of the U N it is was not a
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  Speaker 1: gradual issue. This was the decline was the most since
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  Speaker 1: two thousand and fifteen for any single day. It was
• 9:36
  Speaker 1: a huge plunge, and it was a shift in the
• 9:39
  Speaker 1: pboc's rhetorics. So how do you sort of interpret that. Well,
• 9:44
  Speaker 1: I have to say, look at the rest of EM.
• 9:45
  Speaker 1: It's not like it's not happening. The vacuum, the emson
• 9:49
  Speaker 1: selling off since Wednesday when the Fed delivered a lesstubblished
• 9:53
  Speaker 1: than than expected cut. So you know, again, e M
• 9:57
  Speaker 1: has been under incredible pressures, not just you want look
• 10:00
  Speaker 1: at EM equities. It's pretty much the MSc i UH
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  Speaker 1: e M has pretty much given up over three quarters
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  Speaker 1: of this year's rally and getting back towards the January lows.
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  Speaker 1: So you know, again there's a lot of moving parts.
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  Speaker 1: I have sympathy what you're saying, but I really I
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  Speaker 1: guess I'm trying to be a sort of note of
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  Speaker 1: caution saying, Look, the Chinese responding in other ways. They've
• 10:21
  Speaker 1: for instance, there's reports that they've told the state importers
• 10:24
  Speaker 1: to stop buying US agricultural goods. Uh. And we know
• 10:28
  Speaker 1: that this trade truce was really not laughing very long,
• 10:31
  Speaker 1: So uh, what's happening? I think what the authorities are
• 10:34
  Speaker 1: trying to do in China is they're separating the effects
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  Speaker 1: from the trade. I really do believe that that. Um,
• 10:41
  Speaker 1: they don't want to let the genie out of bottle.
• 10:42
  Speaker 1: We we saw what happened back into downs between massive
• 10:45
  Speaker 1: capital outflows out of China, very destabilizing, UM when they devalued.
• 10:50
  Speaker 1: I don't think they want to go down that road again.
• 10:52
  Speaker 1: So dr then, is there any sense of where the
• 10:55
  Speaker 1: Uuan could go? Here? I mean, we're in very uncharted territory.
• 10:59
  Speaker 1: It's been a you know a long time since we've
• 11:01
  Speaker 1: seen this thing get off the seven peg. Any sense
• 11:03
  Speaker 1: of where this could go? Sure? Uh? And I again,
• 11:07
  Speaker 1: I'm gonna go take it from my lens of sort
• 11:09
  Speaker 1: of the wider um e M. I'm very negative on
• 11:13
  Speaker 1: him as long as he's trade pensions continue. Um. You know,
• 11:17
  Speaker 1: EM is very very vulnerable, not not only the commodities
• 11:21
  Speaker 1: but also the Asian exporters in the China supply chain.
• 11:23
  Speaker 1: So I'm very very negative EM. And because I'm negative
• 11:25
  Speaker 1: on EM effects given that point eight to correlation, I'm
• 11:29
  Speaker 1: also very negative on on nuance. So I think it'll
• 11:32
  Speaker 1: have a seven handle and we'll go up towards seven
• 11:35
  Speaker 1: and a half. Um. Again, there's nothing magical about the
• 11:38
  Speaker 1: seven level. It's it's it's psychologically it may be important,
• 11:41
  Speaker 1: but um, you know, basically the stories of have pledged
• 11:45
  Speaker 1: to allow greater market forces for the exchange way, and
• 11:50
  Speaker 1: ironically that's what they're doing, and ironically that's what the
• 11:52
  Speaker 1: US is probably going to complain about. Now. You know,
• 11:55
  Speaker 1: we've always had Mr Trump, I think, tweet about currency manipulation, etcetera.
• 11:59
  Speaker 1: But and yes, exactly again, I say, look, this is
• 12:03
  Speaker 1: it's not manipulating. This is this is this the market work.
• 12:06
  Speaker 1: This is the markets being very negulenting him. This is
• 12:09
  Speaker 1: actually a really good point in. Jonathan Farrow was going
• 12:12
  Speaker 1: on about it this morning about how this is not
• 12:14
  Speaker 1: as assarily China devaluing the UN and is allowing the
• 12:19
  Speaker 1: UN to just sort of fluctuate and exist within its
• 12:23
  Speaker 1: market forces. So, uh, the fact that you're reiterating that
• 12:26
  Speaker 1: is an important and powerful point I am wondering going forward.
• 12:30
  Speaker 1: I remember once upon a time people used to talk
• 12:32
  Speaker 1: about central banks and sort of the reaction function there,
• 12:35
  Speaker 1: and certainly even President Trump saying, uh, you know, as
• 12:38
  Speaker 1: anyone look at currency manipulation, Hey is the Fed watching?
• 12:42
  Speaker 1: Do you think that this will induce the Fed two
• 12:45
  Speaker 1: cut rates further in order to weaken the dollar or
• 12:48
  Speaker 1: for example, the e c B as well. Well, that's
• 12:52
  Speaker 1: a very good question, and let me take this two
• 12:55
  Speaker 1: things separately. Um said, Uh, it runs monetary policy for
• 13:01
  Speaker 1: the for the U. S. Economy, but it's it's been
• 13:04
  Speaker 1: taking on a greater focus on quote unquote international and
• 13:07
  Speaker 1: global factors. We know that, you know, twenty years ago
• 13:11
  Speaker 1: global factor would barely get mentioned, but it's obviously clear
• 13:13
  Speaker 1: and they started under yelling that that international and global
• 13:17
  Speaker 1: conditions are very big important part of the fans reaction function.
• 13:20
  Speaker 1: Now Mr Power setted himself yet last week he said, look,
• 13:23
  Speaker 1: we're the biggest thing that we are uncertain about is
• 13:26
  Speaker 1: is the trade war. We don't know how to deal
• 13:27
  Speaker 1: with this. This is a very uncharted territory. And he
• 13:29
  Speaker 1: admitted that. And I think that's that's said. I would
• 13:31
  Speaker 1: admit the same thing for US analysts. That's it's it's
• 13:33
  Speaker 1: hard to analyze what the dollar it should be doing
• 13:36
  Speaker 1: within this context. That said, the Mr Power gave him
• 13:41
  Speaker 1: once uh by cutting race and he was I thought
• 13:44
  Speaker 1: on target when he said, look, let's see how the
• 13:46
  Speaker 1: data come in. UM. Think the markets, your your w
• 13:51
  Speaker 1: I r P page is showing chance of a cut
• 13:54
  Speaker 1: in September. UM, and I think that overstates the case.
• 13:58
  Speaker 1: I also think I would also point out that the
• 13:59
  Speaker 1: fret in the futures market is pricing in three more
• 14:01
  Speaker 1: cuts now by the end of the year. Uh. That
• 14:04
  Speaker 1: to me is like a recession those settings. I don't
• 14:07
  Speaker 1: think we're there yet. Obviously, recession risk has risen, but
• 14:10
  Speaker 1: I don't think the Fed is is panicking yet. Um.
• 14:14
  Speaker 1: Then you know you over the whole candle worms is
• 14:16
  Speaker 1: are they giving into the try Mr Trump and Trump
• 14:18
  Speaker 1: doing this on purpose? It's it's really crazy. Um. Yeah,
• 14:21
  Speaker 1: there's a lot of a lot of angles here that
• 14:23
  Speaker 1: everybody needs to try to get a hand along. Uh.
• 14:26
  Speaker 1: Dr Winton, thanks so much. We're gonna have to leave
• 14:28
  Speaker 1: it there. Dr Winton, Global head of Currency Strategy of
• 14:31
  Speaker 1: Brown Brothers Harriman in New York City, joining us on
• 14:34
  Speaker 1: the phone. Well, according to our next guest, the connection
• 14:54
  Speaker 1: between Trump and uncertainty and financial market angst has become
• 14:58
  Speaker 1: very clear, oddly, making trunks digital communications a leading economic indicator.
• 15:03
  Speaker 1: To get the latest, Let's welcome our next guest, Ben Brightholds.
• 15:06
  Speaker 1: Ben is chief data scientists for Arbor Research and Trading
• 15:09
  Speaker 1: based in Chicago, Illinois. Ben, thanks so much for joining us. So,
• 15:13
  Speaker 1: as you point out, Trump's tweets clearly impact the markets.
• 15:17
  Speaker 1: Can just give us a sense of kind of what
• 15:19
  Speaker 1: you think the relationship is and maybe how investors are
• 15:22
  Speaker 1: are using this data. Yes, so what we're doing here
• 15:26
  Speaker 1: is some you know, some fancy natural language processing of
• 15:29
  Speaker 1: Trump's tweets that initially started out as really me having
• 15:33
  Speaker 1: fun with the data about a year ago or so.
• 15:36
  Speaker 1: But ever since his uncertainty level measured via his tweets
• 15:40
  Speaker 1: and the natural language processing and sentiment became so negative,
• 15:43
  Speaker 1: we saw it start to actually impact not only what
• 15:46
  Speaker 1: consumers and businesses are concerned about, but also Marcus now
• 15:50
  Speaker 1: for the first time starting around May of this year,
• 15:53
  Speaker 1: and we saw a heightened connection really between the rise
• 15:58
  Speaker 1: and uncertainty across numerous topic be a trade, financial markets,
• 16:01
  Speaker 1: and now currencies. And what happened a week to two
• 16:05
  Speaker 1: weeks later and be it the SMP five or one
• 16:10
  Speaker 1: of the tightest connections really is to the short end
• 16:13
  Speaker 1: of the treasury curve and really rate hype timing. Uh.
• 16:16
  Speaker 1: And with that heightened correlation, it's it's really made Trump's
• 16:20
  Speaker 1: digital communications an important leading indicator. And if I were
• 16:24
  Speaker 1: to rate it, it would be from impacting most really
• 16:28
  Speaker 1: treasuries at the moment, and um, now it's finally starting
• 16:31
  Speaker 1: to bleed into risk as then I love the image
• 16:35
  Speaker 1: of you at your computer, like ha ha ha. Wouldn't
• 16:38
  Speaker 1: this be fun to enter these words into a little
• 16:40
  Speaker 1: system and see what it. You know, it shoots out
• 16:43
  Speaker 1: bad or it shoots out you know, negative sentiment, and
• 16:46
  Speaker 1: then you know, you realize that it actually was Wow,
• 16:49
  Speaker 1: actually a real indicator. So I'm wondering with respect to
• 16:53
  Speaker 1: its indications, how forward looking is it? So what we
• 16:57
  Speaker 1: found looking at cross correlations, which is just fancy for
• 17:00
  Speaker 1: moving around the window. And the lag or lead is
• 17:04
  Speaker 1: about a one to two week lead time with measuring
• 17:08
  Speaker 1: the uncertainty, and we do that by numerous different different topics.
• 17:11
  Speaker 1: So we look at things like the so called witch
• 17:14
  Speaker 1: hunt that's used a lot, and things like you know,
• 17:17
  Speaker 1: talks about democrats, and we remove a lot of that
• 17:19
  Speaker 1: try to getting down to the really what is important
• 17:22
  Speaker 1: from an economic standpoint, so the overall economy, the federal
• 17:25
  Speaker 1: reserve currencies, financial markets, and so on, and that grouping
• 17:30
  Speaker 1: has about a one a two week lead time on
• 17:33
  Speaker 1: most importantly rate hug timing short under the Treasury curve.
• 17:36
  Speaker 1: And now we're starting to see the same thing within
• 17:39
  Speaker 1: SMP five hundred and and the VIX. So I think
• 17:42
  Speaker 1: it's been a slow move, whereas in May of this
• 17:46
  Speaker 1: year where we got this big burst in negative sentiment
• 17:49
  Speaker 1: from Trump's tweets that started to impact mostly the Treasury curve.
• 17:54
  Speaker 1: And but that is now finally as businesses are indicating
• 17:58
  Speaker 1: that they are getting um hurt un evidence by s
• 18:03
  Speaker 1: M I s M non Manufacturing this this morning, as
• 18:05
  Speaker 1: well as numerous other surveys UM via the different regional
• 18:10
  Speaker 1: Fed surveys that is finally starting to really deteriorate and
• 18:14
  Speaker 1: show that it could end up hitting the real economy.
• 18:16
  Speaker 1: And the problem is economic data in the US has
• 18:19
  Speaker 1: been coming in below average, and everyone's been hopeful for
• 18:23
  Speaker 1: this rebound, but I think this added uncertainty is is
• 18:27
  Speaker 1: really starting to wear on investors minds. It's interesting here Bloomberg.
• 18:31
  Speaker 1: I mean, even on the Bloomberg terminal, you can type
• 18:33
  Speaker 1: in tweets by Trump and now I'll give you a
• 18:35
  Speaker 1: listing of all the tweets, and or you can set
• 18:37
  Speaker 1: up an alert to have any time the president tweets,
• 18:39
  Speaker 1: you can get a message or an ib So investors
• 18:42
  Speaker 1: clearly looking for this information. Ben, have you gotten a
• 18:45
  Speaker 1: sense of maybe how investors are in fact using some
• 18:50
  Speaker 1: of the Trump tweets into their investment process. Yeah, so
• 18:55
  Speaker 1: that's I mean, that's what we do UM here at
• 18:57
  Speaker 1: Arbor Research and Trading has helped provide a lot of
• 18:59
  Speaker 1: this content and data. And what we found is that
• 19:02
  Speaker 1: there are those that are in putting this into their
• 19:04
  Speaker 1: own be at modeling capabilities or models that that kick
• 19:09
  Speaker 1: out their actual trading signals or ideas and then also
• 19:12
  Speaker 1: subject to you know, from a subjective standpoint in terms
• 19:15
  Speaker 1: of gauging risk that is now arising in this market.
• 19:19
  Speaker 1: They're pulling this information and just like we aren't connecting
• 19:22
  Speaker 1: it to be at volatility like the VIX or volatility
• 19:26
  Speaker 1: of treasuries and so on in order to get to
• 19:29
  Speaker 1: gauge for how much that is actually impacting the market. So,
• 19:32
  Speaker 1: case in point, the US tenure note yield is down
• 19:36
  Speaker 1: to one seventy six, about twenty six basis points on
• 19:39
  Speaker 1: a month of a month basis, looking back about a month,
• 19:43
  Speaker 1: and we can attribute about sixteen basis points of that
• 19:45
  Speaker 1: twenty six basis point drop to this Trump and uncertainty
• 19:49
  Speaker 1: via just some simple modeling of taking all this uncertainty
• 19:52
  Speaker 1: measures and connecting it with major economic data releases. And
• 19:56
  Speaker 1: so it is having an impact and I think being
• 19:58
  Speaker 1: able to gauge how much it is impacting markets and
• 20:01
  Speaker 1: then what that lead time is um You know, it's
• 20:03
  Speaker 1: important for investors, and we're seeing that because the equity
• 20:06
  Speaker 1: markets for the first time in a long time are
• 20:08
  Speaker 1: finally being impacted by by this so called Trumpian uncertainty.
• 20:12
  Speaker 1: So what exactly does a data word processing function look like?
• 20:17
  Speaker 1: What's it looking for? Has it? Has it? Great things? Sure.
• 20:20
  Speaker 1: So what it does is within natural language processing, the
• 20:23
  Speaker 1: key is a dictionary or you know, so called a lexicon,
• 20:27
  Speaker 1: and what you know is a practitioner here. What we
• 20:31
  Speaker 1: need to do is go out and find those words
• 20:33
  Speaker 1: that have the meaning that you think they do um
• 20:36
  Speaker 1: and contextually. So what we do is work with a
• 20:39
  Speaker 1: variation of something called the law Law Frun McDonald lexicon,
• 20:43
  Speaker 1: which is very financial based, meaning that will have low
• 20:46
  Speaker 1: misclassification rates in picking up words, for example, that are
• 20:50
  Speaker 1: mean uncertainty um, and they really do mean uncertainty in
• 20:53
  Speaker 1: the financial standpoint. So that can be simple things like
• 20:56
  Speaker 1: picking up on words of uncertain confusion, unproductable, and words
• 21:01
  Speaker 1: like this, and then basically scoring them um on their
• 21:06
  Speaker 1: frequency that as they exist, and then contextually how they
• 21:10
  Speaker 1: exist within a given statement, be it a um, you know,
• 21:13
  Speaker 1: a paragraph, or even just an individual you know, set comment.
• 21:18
  Speaker 1: So those get summed up um with each day or
• 21:21
  Speaker 1: each tweet, and then we're looking essentially at that aggregate
• 21:24
  Speaker 1: to get a flavor for how much uncertainty or if
• 21:26
  Speaker 1: it's a sentiment, we're looking for how negative or positive
• 21:29
  Speaker 1: it is is Trump or whoever. We're measuring using words
• 21:34
  Speaker 1: that are favorable or unfavorable towards their target of what
• 21:38
  Speaker 1: they're talking about. And again that's all summed up with
• 21:41
  Speaker 1: a kind of a simple scoring mechanism to get to
• 21:44
  Speaker 1: an aggregate number to then measure quantitatively so we can
• 21:47
  Speaker 1: use this information. Ben bright Holds, thank you so much
• 21:49
  Speaker 1: for being with us. Really appreciate it. Ben bright Holds
• 21:51
  Speaker 1: is a data scientist, chief data scientist at Harbor Research
• 21:55
  Speaker 1: and treading talking about how not only does President Trump tweet,
• 21:58
  Speaker 1: but now you can measure it and put it into
• 22:01
  Speaker 1: your algorithm and trade off it, which is sort of, uh,
• 22:04
  Speaker 1: you know, this is something that people have increasingly been doing,
• 22:07
  Speaker 1: and the question is just what does it actually indicate.
• 22:09
  Speaker 1: The idea that it's got a pretty close correlation with
• 22:12
  Speaker 1: rates shouldn't necessarily be entirely surprising given how trained his
• 22:17
  Speaker 1: focus has been on the Federal Reserve. President Trump giving
• 22:35
  Speaker 1: comments at the White House following the deadly shootings over
• 22:38
  Speaker 1: the weekend UH that took the lives of twenty nine people.
• 22:44
  Speaker 1: President Trump proposing a number of measures in response, saying
• 22:49
  Speaker 1: that there is a need for a bipartisan solution to
• 22:52
  Speaker 1: identify an act early on warning signs. He really indicated
• 22:57
  Speaker 1: an intention to work with social media companies and put
• 23:00
  Speaker 1: part of the onus on them. He also talked about
• 23:04
  Speaker 1: video games, which is sort of interesting to see what
• 23:06
  Speaker 1: he might do there. And then of course mental health,
• 23:09
  Speaker 1: calling the perpetrators of the senseless crimes as mentally ill monsters.
• 23:16
  Speaker 1: Joining us down to talk about what the potential policy
• 23:18
  Speaker 1: implications are of his comments, Frank Wilkinson, Bloeberg Opinion editor
• 23:22
  Speaker 1: and Anna Edverton, Bloomberg Coggressional reporter. Frank, I want to
• 23:25
  Speaker 1: start with you what stood out the most. What stood
• 23:28
  Speaker 1: out the most to me was that he actually did
• 23:30
  Speaker 1: what he needed to do, which for him, he needed
• 23:34
  Speaker 1: to denounce racism, and he did that very clearly up
• 23:39
  Speaker 1: in the beginning. He said the words white supremacy. Uh.
• 23:43
  Speaker 1: So you know that was a step for him. That
• 23:46
  Speaker 1: was the most important thing he did. I don't, frankly
• 23:49
  Speaker 1: take the policy uh solutions offered as anything even remotely serious,
• 23:56
  Speaker 1: but the cultural concession that he made at the beginning
• 23:59
  Speaker 1: about racism was important and I think it will help
• 24:03
  Speaker 1: him and I agretain. We want to bring you in
• 24:06
  Speaker 1: and get your thoughts on the per perhaps some policy
• 24:09
  Speaker 1: implications here. UH, give us just give us a sense
• 24:12
  Speaker 1: of where you think, uh, any type of gun legislation
• 24:17
  Speaker 1: um might be right now, what the future could be.
• 24:21
  Speaker 1: There are two bills that the Democratic led House of
• 24:23
  Speaker 1: Representatives has passed this year. They passed h R eight,
• 24:26
  Speaker 1: which would close the so called gun show loophole, which
• 24:29
  Speaker 1: would require background checks for all gun purchases, including a
• 24:33
  Speaker 1: gun shows and online. The other bill that they passed
• 24:36
  Speaker 1: was called HR one twelve. They closes the so called
• 24:39
  Speaker 1: Charleston loophole, which makes it mandatory for any background check
• 24:44
  Speaker 1: to have at least twenty days to be completed before
• 24:48
  Speaker 1: the gun purchase is completed. Now that's currently three days,
• 24:51
  Speaker 1: which was how the shooter at the Charleston church years
• 24:54
  Speaker 1: ago was able to purchase a gun. Those bills have
• 24:57
  Speaker 1: been passed by the House of Representatives and have not
• 25:00
  Speaker 1: been taken up by the Republican led Senate. So if
• 25:03
  Speaker 1: there were to be very bipartisan, common sense gun control
• 25:07
  Speaker 1: legislation that's ready to go today, it would be those
• 25:11
  Speaker 1: two bills. The President notably didn't mention those bills or
• 25:15
  Speaker 1: any proposals that even resemble those bills. He did step
• 25:19
  Speaker 1: forward to say that red flag laws could be on
• 25:21
  Speaker 1: the table, which was something that came up in response
• 25:23
  Speaker 1: to Parkland and certainly would be welcomed by gun control advocates,
• 25:26
  Speaker 1: but is certainly seen as not um, not adequate to
• 25:30
  Speaker 1: respond to this, to this violence in our country. Frank,
• 25:34
  Speaker 1: I want to go back to your point, because it
• 25:36
  Speaker 1: really stands out to me that the most important thing,
• 25:38
  Speaker 1: from your perspective is less the policy proposals that may
• 25:41
  Speaker 1: or may not really be developed upon, but rather President
• 25:45
  Speaker 1: Trump's decision to denounce white supremacy and talk about white
• 25:50
  Speaker 1: supremacy and racism in one breath in his words. And
• 25:53
  Speaker 1: I'm wondering, why do you think he changed, because he
• 25:57
  Speaker 1: has sort of avoided could deemning this in the past.
• 26:01
  Speaker 1: He has very clearly and um, it's beginning to cost him.
• 26:07
  Speaker 1: That's one reason. Uh. So we have political costs in
• 26:10
  Speaker 1: a lot of American suburbs where white women in particular
• 26:14
  Speaker 1: are expressing some very strong discomfort with him on the
• 26:19
  Speaker 1: issue of race. And uh we have had, of course
• 26:22
  Speaker 1: the last couple of weeks where he used quite inflammatory
• 26:26
  Speaker 1: language to denounce four members of Congress and then subsequently
• 26:31
  Speaker 1: denounced another member of Congress, all of whom we're non white. Um,
• 26:35
  Speaker 1: there's not really a debate anymore among most people about
• 26:41
  Speaker 1: what his strategy is, and in fact, some of his
• 26:44
  Speaker 1: White House staff have been fairly explicit about it. So,
• 26:49
  Speaker 1: you know, for him to to come out and say, Okay,
• 26:52
  Speaker 1: I am drawing a line. I am not going to
• 26:56
  Speaker 1: wink at white supremacy in this case. I'm not going
• 26:59
  Speaker 1: to you know, just kind of nudge nudge as I
• 27:02
  Speaker 1: have in the past. I'm actually going to denounce it
• 27:06
  Speaker 1: because something has gone seriously too far. I think that's
• 27:10
  Speaker 1: an important development for him. So, Anna, what is the
• 27:14
  Speaker 1: sense in Washington right now about these bills that are
• 27:18
  Speaker 1: sitting on the Senate's uh floor or on the desk
• 27:22
  Speaker 1: of the senators. Will it in fact move forward or
• 27:25
  Speaker 1: will the events of this weekend perhaps you know, when
• 27:27
  Speaker 1: this Congress gets back maybe open up new negotiations. Well,
• 27:31
  Speaker 1: that's one thing I was looking for from the President's
• 27:33
  Speaker 1: speech today, whether or not he would show any openness
• 27:35
  Speaker 1: to these bills, and he didn't. And so that to
• 27:38
  Speaker 1: me says that Mitch McConnell has very little incentive to
• 27:41
  Speaker 1: actually take up these bills, and it's going to be
• 27:43
  Speaker 1: a very awkward position for the Senate majority leader. He
• 27:46
  Speaker 1: has taken great pride in declaring himself to be the
• 27:50
  Speaker 1: grim reaper of democratic legislation and that he has been
• 27:53
  Speaker 1: able to kill all bills that have been passed by
• 27:55
  Speaker 1: the House of Representatives. That's not playing well for him
• 27:58
  Speaker 1: right now, and the Republican led Senate is going to
• 28:01
  Speaker 1: come under a lot of pressure to do something besides
• 28:04
  Speaker 1: just approve the president's nominees for judicial positions. There could
• 28:11
  Speaker 1: be some negotiation and red flag laws. As the President
• 28:14
  Speaker 1: suggested this morning, he would like to pair gun legislation
• 28:18
  Speaker 1: with immigration reform, which is absolutely not going to happen.
• 28:21
  Speaker 1: They couldn't even get immigration reform that was supported by
• 28:25
  Speaker 1: Republicans through the Republican lead House, like Republicans couldn't get
• 28:30
  Speaker 1: on the same page about this, So to think that
• 28:32
  Speaker 1: that could be those two very controversial issues could be
• 28:34
  Speaker 1: paired together and become law is just absolutely not going
• 28:37
  Speaker 1: to happen in this Congress. Frank President Trump did mention guns,
• 28:42
  Speaker 1: saying that there should be rules to prevent people who
• 28:46
  Speaker 1: are at grave risk to public safety from getting access
• 28:49
  Speaker 1: to firearms and to allow law enforcement to seize them quickly,
• 28:53
  Speaker 1: just real quick. Do you think that there's anything in
• 28:56
  Speaker 1: that that has teeth or is that just sort of
• 28:58
  Speaker 1: flip service. I doubt it, And here's why, because of
• 29:02
  Speaker 1: the context it was in. I mean, when when you
• 29:04
  Speaker 1: start mentioning mental illness, which the United States has no
• 29:09
  Speaker 1: greater propensity than any other nation, when you start mentioning
• 29:12
  Speaker 1: video games, which Europe and Japan have just as much
• 29:15
  Speaker 1: as we do. Clearly, video games and mental illness are
• 29:19
  Speaker 1: not the issue that separates the United States from the
• 29:21
  Speaker 1: rest of the O E c D countries in terms
• 29:24
  Speaker 1: of guns. What separates us are our gun laws. And
• 29:28
  Speaker 1: if you're not going to address the gun laws and
• 29:30
  Speaker 1: you're bringing out these red herrings of mental illness and
• 29:34
  Speaker 1: UH and video games, that that's a different story. Frank Wilkinson,
• 29:38
  Speaker 1: UM Bloomberg Opinion Columns, thank you so much for joining
• 29:41
  Speaker 1: us here in our Bloomberg and Ractor Broker studio. And and
• 29:43
  Speaker 1: and Edgerton, congressional reporter from Bloomberg News, joining us from
• 29:47
  Speaker 1: studios in Washington in d C. Thanks for listening to
• 29:50
  Speaker 1: the Bloomberg P and L podcast. You can subscribe and
• 29:52
  Speaker 1: listen to interviews at Apple Podcasts or whatever podcast platform
• 29:55
  Speaker 1: you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney
• 29:58
  Speaker 1: and Lisa Brahm Woyd's I'm on Twitter at Lisa Abramo.
• 30:01
  Speaker 1: It's one before the podcast. You can always catch us
• 30:04
  Speaker 1: worldwide on Bloomberg Radio