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This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and Amrie Hordernt. Join us each day for insight from the best in markets, economics, and geopolitics from our global headquarters in New York City. We are live on Bloomberg Television weekday mornings from six to nine am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and as always on the Bloomberg Terminal and the Bloomberg Business app.
Let's turn to the Federal Reserve.
The newest Federal Reserve Governor, Stephen Myron, making the case for aggressively luring interest rates to avoid damaging the economy. Diverging from some other FMC members, I'm pleased to say that joining us this morning live from the Federal Reserve is Governor Myron himself. Governor, Welcome to the program, sir. We've got tons of time to talk about what's going to happen next. Your thoughts on the labor market, the balance of risk, the broader economy. I actually wanted to
lead the conversation with this one Governor. What was your experience, like I'm sure this was unexpected twelve months ago. What was it like walking into the room and was it different to what you expected?
Good morning, and thanks for having me. It's great to see you again. Look, you know, walking into the room, you know, I had had a good briefing ahead of time about what the meeting would what the meeting would be like, and so that was very helpful. But I will say that everyone was extremely friendly and welcoming and
kind and collegial, and I really appreciated that. And you know, it's important to understand that the FMC is a body, the Federal Open Market Committee is a body that makes decisions by arguing on the merits of the economics and the economics and the merits of policy.
And that's how it was.
And everyone was very collegial and airing their views, and I the same, and that's what it will continue to be. You know, we make policy, as the chairman said last week, by persuasion, and so I will continue to try to lay up my views and make the cases best I can.
The governor, I essentially got the opportunity to articulate your argument. Just how much daylight did you sense? Was there was between you and everyone else on the committee.
Well, I mean, you know, it's sort of funny.
If you look at the dots in the summary of economic projections, you know, obviously there's a divergence between my projection for appropriate policy for twenty twenty five versus where the weight of everyone else's is. But if you look at next year in the year after, you know, I'm sure I'm still on the low end. But you know, there's not really that much daylight between all the rest
of the dots and myself in the following years. So it's really just about the speed with which we come down to what's closer to neutral.
Well, let's get into the neutral argument. I think that's what separates you from a lot of people. So you've got it in the mid two's, Governor, and you think we should get there quickly. Can you just build out why you believe that's the case and why we should get there so fast?
Sure?
So, look, you know I discussed a number of forces which have kicked in over the course of this year and which are I think can start contrast to where they were last year year. So I've argued that neutral was higher in the past than it is now and
that neutral was higher for a variety of reasons. But I've highlighted recently fiscal policy, you know, sort of driving up net national borrowing, decreasing national savings, as well as immigration policy driving what was the biggest positive population growth shock in my lifetime and has now turned into the biggest negative population growth shock in my lifetime in very rapid succession relative to how changes in population growth you
normally normally occur in the data. And so to me, when you have huge swings in net national savings driven by fiscal policy and you have huge swings in population growth driven by changes to border policy, it would be bizarre for me to think that that wouldn't have implications for the fundamental structure of the economy that gets reflected for Montaria policy.
In the neutral rate.
So my view is that neutral was higher last year because of these reasons. And so last year policy was not as tight as a lot of people believed. And now neutral has come down or is in the process of coming down, and now neutral and now policy is more tight than people believe.
And this has happened recently.
You know, these policies didn't change, you know, sort of overnight they've been kicking in over the course of the year, and that means that policy is becoming tighter every day as these policies continue.
To kick in.
And my view is not one of enormous economic pessimism. You know, I don't think the economy is about to creator. I don't think the labor market's about to fall off a cliff. However, the neutral rate is drifting down, and as a result of that, it's in comment upon policy to adjust in response. And the longer that policy stays excessively excessively restrictive, the greater the risks to the downside
for the economy. If policy stays excessively restrictive for too long, then you do get to in a situation in which you have a meaningful, meaningful increase in an employment rate and a failure of the employment mandata.
So, Governor, that's the tension. I think in your view, that's worth exploring just a little bit more. On the one hand, you don't think the economies at risks have breaking down, but you also think we are sessively tight at the moment and getting tighter. There are some people who would say, and we've had this conversation around the table this morning, if we were as tight as you suggesting, why is the market within one percent of record highs?
Why credit spreads super tight, and why is this economy still doing Okay, Yeah.
So that's a perfectly natural thing to ask. Sorry, and let me say, let me say two things. One, I don't think that all financial conditions are universally loose like that. In particular, if you look at the housing market, I think it's in quite a different state than you know, sort of some financial markets and you know, sort of security markets. So I don't think that that's necessarily a holistic look at the world of financial conditions in the economy.
But even that aside, I think that, you know, people in financial markets tend to focus a lot on monetary policy because interest rates are you know, sort of huge tradable instruments, right, But there's so much more that goes into determining economic growth and the state of economy and inflation and employment than monetary policy. And I think that attributing all changes in financial assets to monetary policy can
be a mistake. And in particular, that's what I tried to do in my speech, you know, was to draw out some of these some of these effects from non monetary policies that are affecting the economy, and of course therefore also financial markets. And so if you have changes in tax policy, right like significant incentives for investing that lower the effective tax rate on capital, of course that's
going to get reflected into capital assets. If you have significant changes to the regulatory environment where you're removing barriers to operations that companies can make more more cheaply, which by the way, is disinflationary and pushes at the applicap, then of course that's also going to be reflected in asset markets. So I think it's a mistake to conflate
the state of financial conditions with monitary policy. They're connected, they're related, they affect each other, but they're not exactly the same thing. And in the speech I go line by line through these different items. And the reason why monetary policy doesn't have to react to the hawkish side in response to these back to these policy changes is because they push out the supply side of the economy
at the same time that they push out demand. And so if you're increasing supply and demand at the same time, there's no change to the apput gap. And of course it's monetary's policy job at the end of the day to be balancing the apput gap, to be balancing aggregate supply and aggregthm indity economy so it doesn't overheat or underheat.
I think there are a lot of people, Governor Myron, who'd agree with you that probably the neutral rate is quite a bit below.
Where we are now.
You said, even the other Fed governors did seem to agree with that.
But not necessarily the speed.
And I'm still unclear.
Why do you think it is so important to get rates down by one hundred and twenty five or one hundred and fifty one hundred and fifty basis points more this year if inflation is still running hot and you're not seeing anything alarming in the underlying economy.
Yeah, so this year is merely a function of where the calendar is. So my view is that policy is quite restrictive, and so I'd like to adjust quickly to get back to a more neutral area.
Right.
That just means a series of fifties get until you get much closer to zero. The fact that it's this year is just just a function, just to function of the calendar. But again it comes back to the longer that you stay restrictive, the greater the risks. And let me put it this way, like it was just a few years ago that we were having endless conversations about declining population growth rates in the whole world's becoming Japan
in terms of interest rate profiles. Right, those forces are still real, those dynamics are still real.
They didn't go away.
Those channels, you know, those channels by which population growth effects, neutral rates didn't disappear.
I would rather react.
I would rather act proactively, right and sort of we know that we just had the biggest population growth shocks in many people's lifetimes, mine included, Right, I would we know what the consequences.
Of those are economically.
I would rather act proactively and lower rates as a result ahead of time, rather than wait for some you know, giant catastrophe to occur, because you suddenly wake up and find out that you are sort of resuming those dynamics. In my mind, if you wait to sort of to see the result of that, you have waited too long, and there will be there will have been a potentially quite material.
Downside miss to the employment mandate.
A lot of people on this show have been wondering what the reaction mechanism is going to be for a federal reserve. This does start to see inflation as transitory. Once again, the idea that we have been above two percent, the two percent target for the federal reserve for fifty three consecutive months, for more than four years. If there is an upsurgeon inflation, how long are you willing to look through that if you are cutting rates before you say, hold on a second, maybe we need to stop.
Yeah, So I would want to understand why there was an obsurgent inflation and what was driving it, and then sort of think about whether that shock is likely to be persistent or whether the shock is likely to be transitory. And it's the nature. It's the nature of the shock. It's not just as inflation higher for a certain number of months. It's why is it higher or why is it lower? And how long are those and how long
are those shocks likely to persist? And if you have a situation in which inflation is much higher because there's you know, let's say a very significant expansion in national borrowing that drives up demand could be driven by fiscal it could be driven by something else. That might be the type of thing that you would expect to be
to be more persistent. In my mind, if you have the type of shock that's driven by a you know, basically one off change to tax rates, right, whether that's a VAT tax or tariffs or anything else, you know, that, in my mind is not the type of chalk that would lead you to think that inflation is going to
be sticky for a long period of time. And in fact, there's you know, most central banks around the world, I think actually all of them would sort of you know, encounter this in a much more direct manner through changes in value added taxes, and they always look through them, you know, they always say, okay, look the VAT went up or the BAT went down, and that's going to
affect the inflation stistics for a period of time. But then we all know that this was basically a fiscally mandated price change, and monetary policy shouldn't respond necessarily to fiscally mandated price changes because that's not indicative of changes to the underlying supplied demand balance in the economy, which ultimately drives the type of persistent inflation that the central bank cares about.
Governor mar and I love to get your thoughts a little bit more deeper on housing this thing. Matt Misk and Neil Gotta have talked a lot on this program about going into next year. Do you think the housing market will weigh on a deceleration of inflation? Is that part of your thesis on inflation coming down?
Yeah, I mean it explicitly is I mean, Look, you know, supply and demand dominates all things economically, right, and if you're increasing the demand for housing by dramatically increasing population growth without a material increase in the supply of housing at the same time, of course, you are going to get upward pressure on shelter inflation.
And then vice versa.
If you start decreasing population growth because of a change in border policies without destroying shelter supply, or or shelter supply keeps and expanding at a rate that it has been in the previous years, then you get a relative change in shelter inflation once again. So it's just it's simple, you know, it's simple supply and demand. If we have a material downward population shock because we have negative migration,
that's an increase in the supply of shelter. And I think that the study that I cited in the speech on Monday Work where Albert says found that Needless city of one basically that a one percent increase in the in the number of immigrant renters leads to a one percentage point change in the rents.
Right, but immigration is short term? Right, this is a short term story. Would you be willing to revise up neutral if immigration is.
Not much of a drag?
Well, I mean, you know, I have good reason for expecting that the immigration story is going to persist at least for another three and a half years, and I think quite likely potentially after that. Also, So I'm not convinced that immigration is really a short term story.
He Governor, just before you go, because I know you've got a run. Have you got a taste for this? Is this a position you'd like to keep beyond the end of this year?
Look, you know, I love this country and I'm happy to serve this country in any way that I'm asked to do so. But personal decisions are not decisions that I make.
Stay with us more Bloomberg Surveilance can coming up after this.
I's turn to the Federal Reserve.
Chris Heisi of ME and Bank of America Private Bank writing loosening conditions including further FED rate cuts support risk assets further.
Chris joins us now for more Chris and Mornic, Good morning.
Top decent numbers like that labor market dates. So what you make of that claims data?
I make of it what I always do, which is week to week is data points are pretty noisy. It doesn't necessarily mean it's a trend, but it is something that I think will likely see which is right around those numbers for the foreseeable future. There's a little bit of a supply and demand balance in the job market overall. Some many companies are still in the weight and see mode as it relates to how you democratize artificial intelligence.
So claims numbers are pretty much in line.
With what our belief is, which is a reacceleration coming not just in real growth but nominal growth and ultimately profit growth.
Are you seeing any signs event already beyond that job as claims number? Why are you seeing signs of a reacceleration? Where are things firm enough?
You know it comes down at the beginning of the year, before the tariffs were put in place, there was this notion that you'd have double digit profit growth for this year and then next year. Then it was ratcheted back by pretty much everybody across Wall Street. Now we're back to the numbers again where they were at the beginning of the year. So it's a reacceleration. We're seeing it already in profit revisions, not just for third and fourth quarter, but already for twenty six.
Do CEOs and CFOs believe it? Do they believe it enough to actually take big steps and engage in some of the m and a engage in some of the hiring plans that they were talking about maybe late last year early.
This really depends on the actual sector obviously, but in terms of the general broader community, you're starting to see sentiment the soft data start to change for the better. Remember when we were all talking about soft data being weak and then it was going to filter into the hard data.
Never did.
Now soft data is coming back. You're seeing in the small business segment a little bit because of the rates coming down, but a little bit better economy, perhaps an adjustment to the neutral rate coming down a little bit. As Governor Myron just said, all of that coalesces around better optimism. From the corporate side, I would say this though, margins are held in there, and that's the key. The
bottom line is being used on an efficient basis. Some productivity is increasing, but when you get a little bit above average inflation, that feeds directly to the revenue line and you don't have to produce as much to get that higher revenue number. So that's why margins have actually stayed in there in some cases actually widened out.
This sounds like a perfect scenario. It sounds like just Nirvana investing Nirvana. It's priced as though it's investing Nirvana too. Though at what point if we priced all of that in a then sum, that leaves it kind of vulnerable to anything that doesn't look like what we just got from Jovis claims.
Yeah, at least that's a great point.
And I think a lot of that is priced in in the here too now, but much of it it's still not priced in for next year. There's a little bit of discounting of what the story I just laid
out already. Given where the SMP is twenty two twenty three times forward, I would say that in this asset light world that is driven the index, higher multiples are higher because they're still driving higher revenue growth, And if you look at the contribution of the tech sector, it's about forty four percent or so of the market cap of the SMP, but its earnings contribution is in the thirties.
It's very different than ninety.
Nine and two thousand, when the earnings contribution was almost one half of that peak.
The investors you speak with, are they more worried about some sort of downturn in the economy or are they more worried about missing out in the next leg higher.
You know, they're still worried about the downside scenario. There still have that frame of mind of the credit crisis, little frame of mind of what happened in August through December of twenty eighteen when the Federal Reserve is raising rates when inflation was below their target.
At that point, and then fast forward.
Into twenty two with the inverted yield curve, and then the tariff situation in April. So they still have all of this in their mind and they're comfortable still getting a decent yield on their cash.
On the flip side.
There are some that are very worried about missing the next move, particularly as it relates to the infrastructure build out of artificial intelligence.
We believe there's some room to go there.
We would caution, though, the signs of artificial intelligence and infrastructure build out peaking are all about the margin, all about the price side of the equation.
We're not seeing that yet, but we.
Need to watch that closely to understand what the demand for that will be once all of this is built.
Clients that are concerned about the downside is it because they think we're in a bubble.
They always talk about bubble.
Number one question I get right now is are we in a bubble? Are we four different meetings yesterday?
Number one question?
In some cases, in areas that are low quality, that don't have any revenues, that are built to sky high valuations, you can argue yes.
In other areas where.
They're still kicking off very good free cash flow. The answers now, so what's your advice. The advice is diversified portfolio. I know that sounds like, okay, that's easy, Chris, right, we talked, But diversification works when you need it the most and you can still participate. So for us, it's about having a little bit more non us than you
would traditionally. Have we heard before about potential weeker dollar week of dollars, probably a fading dollar story, not necessarily a week or dollar story, given where growth is for US relative to the rest of the world and their deficits relative to ours. Small caps benefiting from a little bit of lower rates on the short end and potentially reaccelerating economy mid caps for whatever m and A cycle is around the corner. And then on the large cap side,
I think it's two stories. It's the rest that we always talk about that are starting to rotate a little bit, you know, a little bit on the value side, those areas that were starved for capital, like materials.
And energy and others.
We're still overweight financials, We're still overweight industrials, consumer discretionary, and utilities. We're trying to make sure that we stay.
Balanced where we can but participate in the AI growth story.
This balance main a little bit ago as well.
Well. It's fortune.
We don't actually have it in our acid allocation schema overall, but yes, gold is showing some incredibly different signs than it normally would. Has a negative correlation with treasuries right now, which a lot of people aren't talking about.
And a positive correlation with risk anssets for the ES.
That's right, and also defensive assets. It's throwing off signs. Again, it's not perfect.
But when you get one of the largest central banks in the world recycling their own foreign reserves and Euro reserves are not going up, but gold is, that's an interesting story.
Which you think is behind of that is redominant driver or just multiple pillars.
I think it's this regional economic trade zone developments from this ultra competitive global world we were in for so long as the world look to the US to fund their growth. Now with all of that switching, I think you're going to have to see some of these central banks diversify their reserve.
Stay with US.
Multiple IMPEG Savanna's coming up after this, Let's turn to tech. Following weeks of massive investment announcements, there are growing rumplings of an AI bubble. Ozan Taman of Deutsche Bank struck En off concerns, saying those crying the loudest are the ones who missed the triade. Osan, join morning and welcome to New York.
Wonderful to be here.
So is a bubble when you're not in it? Is that? The takeaway on this one.
Definitely there is a little bit of bitterness defensiveness. But that being said, maybe for this show. Right the night before I held this big Macro dinner, almost thirty c lines, trends, somwealth funds, h funds, real money, the question round session, questioning the bubble, questioning that close circle, AI to Nimidia to Oracle, questioning where we are in the labor cycle. But then trade idea session, GOLDMP Gold semple longly so even for me as somebody you know, we exchange messages.
You guys know, it's like being in in the family. I do believe in the disparity has been a great call since the April nine fear, but to music to this has ears a bit. This is a bit too much. I sense a bit of a fly.
In the soup.
Even today, like they talked up, they talked about how do we start again? Read nothing major but red These memes flying around on Gold on AI. Don't get me wrong. I think when I come back either from London or here in December, I think we'll still be talking possibly about Gold, about AI, about naz Dak. But fear of missing out is turning into a bit of orange seng.
Can I just put on this a little bit the relationship between risk and God, what the traditional relationship typically is and why is developed into something else. Why is this the long call on both gold and the nasdag what's the relationship between the two?
Now?
Very good question. It's working on risk on and risk of John. So obviously orthodogs at this moment it should work because finally they're not exactly going seven mins way, but they are cut, so that's going to help cold. But before that, because of everything going on in geopolitics Russia, Ukraine, center banks feeling much better when they hold their reserves in gold, and it got a big trigger besides that, as you know, FX at the end of the day
is storytelling. You need the dollars, but you need the other side of the story as well. Even though i'm dotsche Bank, I share some of your anxiety on what's going on in Europe. On engine of Germany. We can go into our deer Island, UK, Japan, China, laggers. So where do you go? You don't like the dollars for very understandable reasons. Soft dollar is working, but you need somebody, some horse that keeps running, and that's gold.
Well, this sort of goes to the question of what can possibly disrupt these trades, and right now the feeling is that the only thing that could really disrupt some of the long tech trade would be earnings that didn't come in more positively. Do you see it the other way? The isnt that actually more negativity in the economic growth picture has the bigger potential to be that disruptive factor to cause three percent to climb?
I do actually because November nineteen, even if Nvidia is so called missus, we can find another good story in another earnings. But all of us, you know how these markets are narrative, markets are storytelling. Three more days like this, Jenatan will start opening or will open the show a little bit differently.
So please tell us how he's going to open the show.
No, he's going You're going to talk about these Orangstein's more and more. Also, one thing that I want to keep in the radar because Macro, we need to talk about races as well. Spreme Court, these terrors talking about narratives all the way from January to April. Terrace was the bad guy or you know he's going to do this that lightizer nineteen thirties, and because of that, Ty was going to go to five percent, Euros going to zero point ninety five all of a sudden, Now terrors
are the good guys. Maybe he was right on certain things reveny, big revenue generation. On Twitter, my dear friend towardson Slow talking about might research is talking about it. So if Supreme Court blocks, that's off the left field. I know, and Mary will say maybe three oh one, they have their plan bis et cetera. But that's going to take four to five months, and that can finally move the long end.
I love how we don't even have to ask the question, so I.
Already knows exactly which I love.
It's fantastic, champion, Okay, fantastic.
I will just say though, that this is one reason why people keep buying big tech, and even though they're worried about valuations, that's the one area of growth that's kind of empowered really the US economy out of potentially what could have been a recession otherwise. Isn't that the only clean trade right now? Given all the hair on the narratives that you're talking about.
Agreed with gold Aside. Gold as well works on risk, on risk golf. That's why I even look. I'm a macro guy even if we have a and I pull people and they all go for higher the lower end of that was three percent. If we get for this or that isn't three percent quaration on SMP, my Binkie will probably come out on the show and say buy
the dip. As important as Binky retail who want this day or another beat the professionals since April nine, that big panic day on buying those dips, will continue to believe so that even my scenario Supreme Court stopping the tariffs, etcetera, we need something else. We need more deep sick moments. We need to question all this closed circle between open eyes and oracles and naividia. I'm not sure we're there. Maybe two three percent correction, but doomsday I don't see.
But the Supreme Court stopping the terriffs, won't there be bolish for equities.
I hear you.
At the end of the day, they will say, look, then they'll have to do more physically, even more fiscal loosening. The equities may find a way to see that as glass helpful as well. That risk would be the bigger trigger for the long ends. We came into summer end of summer waiting for these famous transforments everywhere, UK fans, Japan, of course US, big beautiful bill. It happened for four hours on September two, led by my eye. And then look what the long ends are doing now? So steep
in their crowds. Do you hear them now? Much more quiet on these studios, on the macrod in the roundtables. Maybe they're waiting for something new and that can be that can be their catalysts in US.
When you have these dinners and you're talking to investors, as you say, real money, are they concerned about what we're seeing out of the US government and taking stakes? And then basically companies may be wanting to have a better reputation with this administration considering even investing in those companies the US government cares about.
Very good question I can be to hear you Intel Apple right, they do so because of that, maybe we have a world in which Namedia's keep rising, but though it also keeps eroding a litive its so in that sense, it's not exactly attached Reagan world, is it? So? For many different reasons, this institutional decay difference approach to us seeing more how do I put it? Hung Turkey, Argentina, like developments in Tragity Center Bank working to get together in.
Our USA as well.
That makes people hedge more. The important age Issios my partner and success George Rados, I think a very important piece. Everybody was questioning, Okay Ozan, you guys are saying sell the dollar, but you know, if Nimidia, Microsoft Meta keeps going higher, that has to help the King Kong dollars. Well, no, if they are hedging. What if they're heging when they buy their NI media, Maybe we can have this equivalrium in which dollar remains soft and ny Media continues to go higher.
As and just to find a question, what's the difference between appatcient to take risks right now? Comparing the investors you've dined with this week in New York to what you've experienced on a weekly basis in London.
Beautiful question much more US centered doesn't care that much about you know, France, very is Germany when that stimulus coming, et cetera. I would say it's still almost sucked into the equity and credit trade. Look at Oracle yesterday, three three basis one conversation.
That's it.
So whether they like it or not, they almost get sucked into the whether I give it Udan signs or not, into equity and credits much more quiet many on the rates and FAX. Unfortunately I'm macro guy. I need to talk about woltilty. But the three at the moment is Waltioty is on its is on its needes and they need we need some supplace. Otherwise FX and rate three that's contune to sell those cells.
Stay with us. More Bloomberg surveillance coming up after this.
The Treasury Secretary scale best and reaffirming America's commitments supporting Argentine President Javi A. Melee, praising his tireless efforts to make urgency in a great again at a gala in New York. Joining us now to extend the conversation, Haidi creeper Redica of the Council on Formulations, highly welcome back to the program. Just want to build on some of the thoughts of scorn Bess and the Treasury Secretary who
talked about supporting the economic reforms of Argentina. Can we talk about the regional politics why the reforms of Argentina is so important to this White House.
So I think that Malay has really made some tremendous progress with an economy that has been a chronic defaulter and has had had suffered with huge problems over many decades. So he's brought inflation down beyond where anybody really could
have expected and stabilized the currency. So I think everybody was really hoping that the reforms would actually take but Malay lost lost support in a regional election recently, and there's an upcoming election on the twenty sixth of October where if Malay loses support in this nationwide midterm, then you'll have a very difficult time pushing his reforms forward. And the markets know that, and so he's faced a
lot of instability in the past. In the past several days last week they ran through about a billion plus of their reserves just defending the currency. And so I think really the ambition is for this White House to step in between now and October twenty sixth, give the markets short term stability whatever it takes moment and put the devil is really in the details with the use
of the Exchange Stabilization Fund, because that's actually tricky. It's tricky in any circumstance, but Argentina is a very unique circumstance.
Well, Also, I sat down with the Treasury Secretary in Argentina in April when he was there to meet Mille, and this wasn't on the table then. And when the treasure Secretary talks about it being negotiated, the Treasury can't give a swap line on the federal reserve could And if it is going to be alone, then Argentina's Congress needs to vote on it.
So what exactly is the US willing to do so, I mean that's the big question. And as you rightly point out, the FED gives swap lines, the Treasury does not, in it does not use the Exchange Stabilization Fund for that purpose. There are conversations if you do use that twenty billion ish of liquid assets that are that are within the ESF, then you know, the US government has a process to basically price the risk of the use of those funds.
And that's a conversation.
This is a little in the weeds, but that's a conversation with omb how do you price this risk? And are we going to put this on the table for Argentina And how are we actually going to do that?
Are we going to make the same bed?
I mean, this echoes you know, what Trump Trump one did in supporting a massive IMF program for Argentina back in twenty eighteen and the imflint fifty billion to Argentina and took a big political risk and sort of lost that risk. And so the question is if we do this,
how do we structure to protect taxpayers? How do we do it in a way that is useful for Argentina without putting taxpayer taxpayer funds on the line that it might lose, and you know, and and and really at the end of the day, how can we do this? The swap line, I think is just terminology to make it simple for the you know, for the headline, but this is actually a very complicated financial engineering exercise that's going on.
Well, China has a swap line with Argentina. Is this also the US maybe countering China in South America?
Absolutely?
I mean that's part of it. Not only is this relationship that I think is is real and substantial between the Trump administration and Malay, but China has an eighteen billion R and B swap line and it's and it could be you know, this, this could be wound down. I don't think that they that China. I think that the US would really like to see itself be the dominant player in providing any kind of of support that
Argentina needs. Argentina also is very resource rich, and I think you know this would be this would be a strategic play as well for the US in a very strategic part of the world, Latin America, where it was pointed out we don't have a lot of great relationships.
This is the Bloomberg Surveillance Podcast, bringing you the best in markets, economics, angiopolitics. You can watch the show live on Bloomberg TV weekday mornings from six am to nine am Eastern. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen, and as always, on the Bloomberg Terminal and the Bloomberg Business app.