China-U.S. Relations Out of Balance, Schell Says

of course on the Bloomberg Jim Glassman Joints. We were both off on Friday for Jobs Day. Perhaps we were both at the Super Bowl. Tom, I don't know, but let me let me just get your sense of what we saw in those numbers on on Friday. Hi, you reacted to the headline number, and I know you've dug into the numbers. You know, I'm I'm more interested in in the employment picture because weights trends which got everybody threw everybody off. We're are very volatile. So this month

they're very soft. But uh, the fact, when you're saying steady job growth month after month, here we are eight years in recovery and we're still seeing this, it tells

you we still have a lot of momentum. You would think that if we're getting close to full employment, these trends are gonna start slowing down, and just it's a reminder that we still have a lot of people out there looking for jobs, and it makes me feel like we're not yet up to our full potential to So that means to me there's more good news to come. So I was more focused on that now that The

other thing is really interesting in the background. What you see going on is as the job market is doing better, there's more opportunities opening up. And what's happening is people, particularly in the thirty five year bracket, the participation rates coming back. So a lot of these guys dropped out during the recession, maybe they had support from family, but with the job market doing better, there's more compelling reason

to come back in look for a job. And I think that's that's a healthy sign that this hidden unemployment that's been going on is really we're addressing it, and we're seeing lots of signs of this. So I I take more. I take comfort in the trends that we see in the employment numbers and that but by the way.

The other thing that's interesting in this For the last couple of years we've been dealing with the the oil sector has been going through some major cutbacks and you're seeing it showing up in mining, utilities, and manufacturing and capex bending down. Well, uh, it looks to me like we're mostly working got through that because now you're starting to see job growth in mining, in manufacturing, and construction.

So for so these are the three areas that have been kind of soft, and this report showed maybe the beginning of some return to something more normal. You mentioned the volatility of those those wage trends. If you take a step back, what are we seeing in terms of wage growth from a from a broader perspective, Well, these numbers show sort of the wage growth is shifted up from two percent annual growth forever to about two and

a half percent. We're still doing a little better of an inflation but frankly, we would I would expect this is going to do a little better. It looked to me like we were heading our way towards three percent growth, which would be quite decent given where inflation is. And it may be that we're there. And the thing that's surprised everybody is there were a bunch of states that implemented minimum wages when minimum wage hikes in January that

didn't show up. So I think you don't really know what's going on here until you see a couple of months behind you. Because these numbers are so volatile, they swing around a lot, and it wouldn't be surprising to me if by spring you see the trend is back to where we were thinking before two and a half. Heading toward three, I want to ask you about retraining.

I was looking at your most recent note, and you're at there are five point five million unfilled job openings today compared with three point five to four million job openings the last time unemployment stood at the current level, implying that quite a few new jobs could be created by retraining folks. So people taking that more seriously, Yeah, you see moving towards them. You see in action businesses

talk about this a lot. Uh. It's it's very difficult for small business to train people because what happens is you train them and then they jump. You can't you can't be sure they're gonna stay your job. So where I see it as more in the community college system, that's where go to Miami Day Community College. It's massive system. They've got a lot of specialized skill programs that tons of kids are going into. And I think, I think it's just a matter of time people figure out that

where the opportunities are. You just can't turn yourself into a technician overnight. It takes time, and you've gotta get some skills that we used to get in shop class, or you're gonna have some interest in math. So I think it just takes time. And my guess is we

won't be talking about this five years from now. But that's that's why to us economists, this is music to our ears because when we hear people complaining but they can't find people, that tells me there's opportunities there and it's not gonna be long before someone figures that out. Strike me as a successful public private partnership. When you look at the where the companies are working with these communic college yeah, you know what that The thing is

what used to happen is you're union. Used to have a union as a shop that would set or set these up. Well, we don't a lot of people don't work in unions anymore, particularly manufacturing so we do. We're missing an institution that really used to do this. Jim,

do you just presume a stronger dollar? No, I I don't think it makes I think the reason we've seen the dollar stronger in the last couple of years is because the FETE stopped doing quantitative easing, and the Europeans and the Japanese stepped in and and just emulated with the FETE was doing. So I don't think it's obvious

that the US dollars should be stronger. The dollar is kind of on a trade weighted basis about where it's been on average over the last forty years, so to me, unless the US is able to sort of fundamentally change the amount of energy in the economy and generates all of this new optimism about productivity or something that's unique to the US and not others, I don't think there's a reason to expect the dollar to keep going up, And particularly now that we're seeing more signs maybe not

in Greece, but in Europe, European and Japanese economies are doing a little better, so central banks are getting a little more You get the sense that people are thinking more about maybe slowing down the asset purchases, and that's why the Europeans are doing starting March. So that to me, that prospect is what kind of limits the upside for the dollar. Get trade balance date of here at eight thirty and you've written about trade deaths. That's how we

should regard trade deaths. That's saying that you should seem as paid forward story. I think, so okay. So here here is that here's the US. We are among the richest of the economies in the world. Right America is already great, and and so is Europe. And in terms of living standard, much of the world is very poor. So to me, trade deficits symbolize an effort on our part.

It allows companies that are countries that are allowed to access our consumer markets, means they can sell to us, means they can they can generate their own economic development. And so trade deficits are a sign that the world is all out of balance. There we're trading with people who are poor, but as they do better, they're going

to be buying more of our stuff. And so to me, trade death there's a temporary dislocation that is uh is a reflection of a world that's out of saying it's not a reflection of countries manipulating their currency to take advantage of the US. It's a it's a sign of countries waking up. And you know, if you're if you're Bangladesh or India or China, you're living standards ten the US level. You're not going to be buying the same

things that we're buying from them. So to me, this is a stepping stone to a world where we're all going to be doing better and we benefit from that process because as these as Asia in particular, continue to develop, there's vast new consumer markets that are gonna be developing, and our our businesses are gonna be benefiting from that. Americans,

American jobs are going to be created by that. Is this conversation too colored by politics, in other words, to be focused too much on China and Mexico because of the debate over the border or about who is wh who is wielding a heavier hand in the age of Pacific region for instance. You know, I can understand the

focus on China Mexicans. That's where the that's the most amic that there's were the biggest changes have taken place right in China is big, but it really is a mistake to think that China and Mexico are stealing our jobs. China and Mexico, as they develop, are creating jobs for us. We don't see them every day. Honestly, in my company, I don't know how much of JP Morgan's revenues are being generated by economic the economic pie growing, but I know it's true, and I know that I'm benefiting from

what's going on around the world. Jim Glastman with US. He's economist for Commercial Banking and JP Morgan. Jim Blastman, you had a great phrase earlier this morning, bogged down. Well, you're bogged down by distractions, whether it's Mr Putin or the New England Patriots. We are bogged down. How do

we get out of this boggedness. It's lovely to be bogged down by the patriots, but the problem is we're Yeah, it's just it's distracting from the issue that has been helping the market, which is focusing on economic initiatives to get the economy moving. Regulation, tax reform, infrastructure spending that's coming. We know that's percolating in the background. But I think all of this other stuff is really kind of worrying people that maybe if we're not careful, that can start

fragmenting the team that's trying to put this together. So it's you know, the market, the markets holding on to the hope because we have not really seen where they're going to go on some of these things. And that

doesn't have to happen tomorrow. But as long as we see that there there's reform coming their actions and we know it takes time to get a tax reform put in place, but as long as um it looks like we're moving in that direction, the you know, it doesn't disrupt the market, and I think the benefits from that we're sort of already been monetized. We've already seen the market move up a lot, and the benefits of the higher stock markets created a couple of trillion dollars of wealth.

So that's going to be affecting consumer spending. But but but it's true, we really need to get we were hoping that the debate gets refocused on the economic issues and we get away from some of these other things that are distracting. How much do you pay attention to readings of sentiment when you're looking at capex, when you're looking at the inventory investment. What does sentiment tell us

about that? You know, Normally, like consumer sentiment, I never really pay much attention to it because you can't spend sentiment. You have to spend your not to get money yet, you know, and the thing is, we're seeing car sales off the charts, so that tells you that the consumer is feeling pretty good about things. I think in the business area, sentiment does matter a lot because there's a

lot of activity businesses do. Business investment, for example, in cap X, that requires that you have some confidence in the future. So sentiment can sometimes tell you if there's a mind a change in the mindset, and you know, if a business has has to put in place a project that requires confidence that things are gonna be better in the future. Business sentiment can tell you something about

what's going on. And we are seeing an improvement in cap picks surveys, for example, that's probably more about sentiment than it is about real plans. That's what that's that's what we're gonna have to sort of watch to see whether in fact we do get follow up on some of this improvement that we've seen in the sentiment numbers. When you look at we've talked about energy and energy

in the labor market. How big of a driver is the energy sector right now when you look at the US kind of how important is it to get it back online perhaps to where it was. Well, it was a big deal because you know, as of two thousand fourteen, employment was growing about two fifty thousand a month. It just kind of slowed down quite significantly to under two thousand as that industry was going through its cutback. So I don't know that, and it's a it's a big

deal for the U. S. Economy. We still use more energy than we produced, but it's a real big deal for the economy. And it's hard to tell all the all the impact its seat of indirect I mean, it affects transportation, capex, oil servicing, and there's a lot of jobs to spin out of this. And now, folks, at seven twenty three oh seven on a Tuesday morning, we begin a discussion the Jim Glassman and I have done

a few times tax reform. Greg Velier this morning in his travels is tax reform is front and center and even goes to the idea Jim Glassman back dating when we back date back to the advantages of tax reform, do you and does JP Morgan and your team do you do actually feel we'll see tax reform? We do because this seems that this is an important part of the program, and it seems to be supported by folks in the Senate and the House and the President, so

it would be I mean, we do. We do have issues because our companies are not competitive on the global landscape, so we know that our corporate tax rate rate is putting companies out a disadvantaged compared to others. We would like to see the tax coach shift more to a consumption based tax and that's part of what's going on. Yeah, come on, we were you know, we were children when we were talking about know, yeah, we were. We were at one time they were trying to turn the tax

code into a consumption based income tax code. Well diminish, you know, there was some bivirus and effort to do that. But I think it's I think it's reasonable to assume we're going to get some measure of tax reform here because it's an important part of the program. Jim Blastmo, thank you so much, greatly appreciate it. With Jim, what a perfect time to talk to Orville shall, David, why don't you bring in Mr Shaw? Absolutely few Americans know China as well as our next guests have as much

experience focusing on the country. Orbit Show, co author of Wealth and Power, China's Long March to the Twenty Free Century, editor of The China Reader, and many other books. Now he is co chair of a task force the Asia Society convene to look at U. S. China relations. They're out with a new report just this morning. He's former dean of the Graduate School of Journalism at You see Burke now the Arthur Ross Director of the Center on

US China Relations at the Age of Society. And Orville Shell joins us now from our bureau in Washington at d C. Great to have you with us, and why don't we start just by talking about the relationship, the U. S. China relationship that this president inherited. What does it look like? Well, I think he inherited one of the most important relationships in the world between two countries, but one that was

increasingly out of balance. I think that China has been pressing in myriad ways in the South China see East China see has been somewhat of a laggered in terms of pitching into help constrict North Korea and keep them from gaining nuclear weapons. I think you see increasingly repressive environment within China itself, very level, unlevel playing field in

terms of trade and investment within China itself. So I think Trump comes in at a time when already the sort of Chinese side, the equation was out of balance, and now he has in effect, uh thrown the puzzle on the floor on the American side as well. So we have a very curious situation where there are very few constants and everything is in the up for grabs and in the process of being kind of reinvented, if you will. We've seen North Korea amp up it's it's

testing regime, testing more ballistic weapons. And one of the things that this report concludes is there needs to be more engagement between the US and China on that issue. When you look at President she does he strike you as someone who is willing to engage, wants to engage

more with the US. At this point, I think that the Chinese government under Jinping has been quite distrustful of the United States, suspecting that deep down inside the agenda is regime change, because after all, they have a sort of a retrograde Leninist government. We have values differences, political system differences. On the other hand, I think President she is a realistic man. He knows that in this globalized world he has to get along with the major players.

In the US is one of them. Uh. In Korea, we have a curious situation because we do actually share a very common interest with China. Neither country US or China wants to see Kim Jong un with nuclear weapons

and and uh, you know, long range ballistic missiles. So the question is, is there any possibility with Trump the negotiator par excellence, of him coming to some sort of the deal was she on Korea where China agrees, yes, we'll cooperate with the US, will forge a better relationship, and will squeeze North Korea off, will shut off the oil pipeline, will close down the trading companies, will stop the banking that enables North koreata continue within the zero

sum architecture and the certitude, which is very anti rable show within the certitude of our new administration, everyone vaults back to game theory. I think of an ode agerwal At Berkeley is someone who's really looked at the game theory of trade and diplomacy. What will be the game theoretic response of China to the possible actions of our new administration. Well, that's a very good question. I think

you know. I'm here in Washington now, We've been talking with White House people and Senate Defense Department, State Department. As you go around, you find that nobody has an answer to that question. And Uh, this is sort of trumpion uh strategy at its sort of highest state of evolution. Now it's virtue is, of course, it does throw everyone off balance. It also throws the Chinese a little off balance. It puts them on notice that things are going to

be different. So that's not in itself a bad thing. But you know, at some point you have to begin putting the thing, the puzzle back together. There. You have to have some new strategy to replace whatever it is that you've taken off the table. David, could I mention and I the professor, I can't believe I'm saying this. Forty years ago next year, you weren't cool unless you had in the People's Republic Orville Shell paperback. David, you had to be too cool for school if you didn't

own a copy of that thirty nine years ago. Thirty nine years I mean you had to have it to pick up girls, professor, shall let me ask you. Let me ask you about who the point person should be on US China relations. There was there was a lot made of Terry Brandson being picked to be the ambassador to China. In actual fact, how much power does the ambassador to China have? In other words, is that the State Department who should be pushing for these relations to

improve is at the Treasury Department. Where does that? Where does that come from? Well? I think the ambassador actually has very little power. And in the present scheme of things in China, our ambassadors lately have been completely got out. They can't even see a Vice minister, whereas the Chinese ambassador here is fetted at the highest levels, even gets into the White House to see the president. So here too,

we are way out of balance. I think that, you know, uh, the president obviously has to set the tone, but I think in this administration it may well be that he sort of remands uh, more than day to day exercise of policy to his cabinet secretaries, as we've seen with Mattis just got back from Korea, Japan. Uh, and the President did kind of defer to him. Now, Tillerson is a smart, able man. Uh, He's got to get his sea legs and find out just exactly you know, where

he's standing. But it's possible that he will be uh more and more in charge. And then we have people like in the White House Peter Navarro, who is an economist and who's staked his um, you know, his his future in the White House on trade. This is a very a delicate question, and he is um, I would say,

quite neuralgic about China. You're you're being gracious. If you were to write in the People's Republican Americans firsthand View of China, if you were to rewrite it today, Orville Shell, how would you rewriting to explain to the Trump administration that it's not a zero sum America, it's not a zero sum system and in some way we need to work with China. How do you write that today? Well, that's the paradox. We absolutely have to work with China. Therefore,

it doesn't make sense to meddle with the one China policy. Uh. You know, if you do that, you tear the whole edifice down on the other hand, it's also undeniably true that things need to change. Uh. The China has become much more assertive aggressive, uh, much less flexible, and you know, we cannot solve problems like nuclear proliferation, pandemics, climate change uh worth China as a partner if they have such

a rigid posture. So this is the real question. Can we find some new grounds of of collective action or are the rather more negative retrograde uh uh tensions going to prevail. Do you foresee that we can have a conversation about trade with China without the bellicoast rhetoric. It seems like it's so imbued with that. It's been so imbued with that. Uh. Is there a chance we can

put that aside? I think it's possible, actually, But the US is going to have to arch its back, as it did for instance on cyber hacking, where the you know, the Minister of Public Security came over here in a few days notice because he knew there was trouble and he knew that his president visit to Washington would be a failure if he didn't do it, and they worked something out. I think when the United States makes it indelibly clear to China. That's enough. This can't go on

and there will be consequences. There's a price to pay if we don't work this out, then sometimes they come around. Or fiel Shell with us. He is co chair of the Task Force on US China Relations the Asia Society has assembled there out with a new report today, US Policy towards China, recommendations for a new administration. Or fiel Shell the Arthur Ross, director of the Center on US China Relations at AGE at the Asia Society. And or let me ask you about the history here. You've written

more than fifteen books on China. The history is so important are you Are you worried about how cognizant this

new administration is of the history of this relationship. Well, it's an incredibly important element in the U. S. China relationship because there's such tremendous sensitivities and the whole Chinese narrative about you know, China having been occupied by Japan, the Opium War, is the history of the West sort of predatory postures towards China, and this this, I think fuels it's the deep desire that's expressed in the most obvious ways by President she of China to become great again,

in other words, to undergo a rejuvenation. And that's part of what I think is driving. It's pushing the South China see the East China. See it's sort of silk road, uh policies of trying to extend these roots maritime and overland to Europe. So China is really on the march an effort to regain its old sort of historical ascendant power not only within Asia but the world. Let me ask you to play that a little bit more. You've called it. President she a realistic man. What is his

vision of China's role in the world. I think his is. The first step is China should be pre eminent in Asia. And this is why the Seventh Fleet and America's sort of twentieth century presence as the predominant sort of power in Asia, at least maritime power is uh not not acceptable. And that's why we see it claiming that the entire South China see in the so called nine dash line

that goes all almost down to Indonesia. So you know it, it wants to rearrange the furniture of Asia in terms of who is in charge, who is calling the shots and in this sense too, it's very historically rentalent that it wants the surrounding powers Korea, Japan, Vietnam that once we're tribute bearing subsidiary nations to again being a subsidiary role to China the leader. Let me ask you about a watchword or a watch phrase, something we hear time

and time again. That's civil society. And one of your recommendations here has to do with civil society saying that there are policies in place that harm US organizations, companies, individuals and the broader relationship, and the U s should respond to that. Haven't we been doing that? I think back on the last Strategic and Economic Dialogue, there was a whole component part on how how these organizations can act independently in China. How does that change? How does

that conversation begin to change? You know, I think that as relations get more tents on a state to state level between our governments, it becomes ever more imperative that we have a functional sort of second set of muscles, namely in civil society, NGO's cultural exchange, you know, music education, And I would also say here the media is an incredibly important role and the playing field when it comes

to the media is completely out of balance. China has any reporter from China can come in from the New China News Agency, the People's Daily. There's CCTV television channels playing in the US and Chinese and English radio networks. None of these things are possible for Americans in China. So this is another area where if we're gonna have a healthy relationship, we need to recalibrate. Did you ever meet Mao? I never? Did you say, Mr Trump remind

you of Mao? Yeah, discuss that's quite a statement. Well, Mao and Trump are both populists. They're both I think quite anti elitist. They both are dedicated to sort of

turning over the order such as it is. They both imagined themselves to be representing kind of people who've lost their voice, who are looked down upon, who feel disesteemed, disrespected, I think, and you know, Mal Datong had an expression that you can't uh, no construction can happen without destruction, and I think that's very similar to sort of Donald

Trump's notion that they both grew up wealthy. Right, Well, Mal grew up he was sort of uh not a poor and a not a poor peasant family, but a peasant family, so he had a very different kind of rural upbringing. But interestingly he had tremendous issues as as we may say, with his father and became very anti authoritarian, which was I think fed into his pench for making revolution. And I think there was some of that in Donald

Trump's family history as well. Last question, here's just about business. A lot of people in business say the biggest issue in China is cybersecurity. Just the last thirty seconds we have here, what do you recommend change with regard to cybersecurity in China. Well, there's a lot of hacking not just of government networks by the Chinese, but also theft of intellectual property and cyber hacking into corporate accounts. And uh, this is, you know, not something that the US accepts.

And I think actually, as we said earlier, this is one of the areas where the U. S and China did actually come to an agreement that was reasonably affective. Thank you so much, or we'll show with the age of society with an important new task force on China, brought you by Bank of America Mary Lynch, dedicated to bringing our clients insights and solutions to meet the challenges of a transforming world. That's the power of global connections.

Marylynch Pierce Federan Smith Incorporated Member s I p C. One of our favorite guests, Phil Verlager, who has been very cautious about an oil price recovery for decades of study out of m I T a few years ago studying oil as well, Phil, do you still maintain a cautious view of the certitude that oil will recover? Very cautious. Um, Thank you very much. Tom. It's what has happened is

the open interest in features has surged. It's up over since the election, and globally we have something like five point three million barrels on the IMAX, UH the and the International Petroleum Exchange, and it's we could be at eight million barrels by the end of the year. That's eight billion barrels. If you look at the composition. There's a huge surge on the buying side from speculators they're

betting on OPEC. Refiners have been big buyers. Uh and UH there's producers are using this as an opportunity to sell. And what this is doing is setting up a bubble. Uh. Now, maybe the bubble doesn't pomp. But based on this you've got first OPEC, which is uncertain. But secondly you have the what I'll call the Trump put like the Greenspan put. And what we're what we have is a situation where one way or another, US producers are pretty well guaranteed

of high prices. The free market that Ronald Reagan opened in January closed January twentie of this year. Uh, if prices start to fall, we know some sort of protectionist measure will be taken. It could be the pre tax, or could be go ahead. I want to rip up

the script here, folks. One the most important moments in Bloomberg on the Economy years ago was Dr Verligo talking about NAFTA and and fulfill what people don't know within your cottage industry of oil is you have real tangible, firsthand experience with NAFTA and the analysis of this border tax. Let I know David wants to jump in here. Let me ask you one simple question. Is NAFTA been as lousy of a deal is the President makes it? No,

NAFTA has been a very good deal for consumers. It's been a terrible deal for many of the people who work in the auto industry and other industries because of all the jobs that have moved south. How many of those jobs would have been lost anyway. But the arguments in favor of trade agreements have always been the consumer benefits, lower prices. Uh. The downside has always been that UH jobs get lost and that they're supposed to be job retraining.

My criticism has been that we we were happy with the consumer benefits and we didn't do enough for the people in Michigan, Wisconsin, Ohio, and Pennsylvania. And so it depends where you sit. But after I think for the economy has has been good. UM, but it's you know, ripping it up isn't going to change the trade deficit. Marty Selstein's right, he said it on Bloomberg TV. I'm sure he said it on Bloomberg Radio, that you know,

the trade deficits a difference between savings and investment. And and everybody talking about the border tax UH neglects the fact that we're going to get a big jump in the dollar and we could wind up with a Mexican debt crisis or an Asian debt crisis third time around. Maybe this is the Chinese debt crisis. Still I went into this interview thinking we might need the stage a little intervention with you. You have you admittedly been obsessed with this border tax. Why have you been so concerned

with it? What are you looking into? Well? I looked into it because I have plants who follow the do the oil market, and in fact, people don't understand it, and so I have you know, I just got on to it, and then I just started following it, and people kept saying, we'll keep going because nobody else is looking at it. I mean, we did the Brittle study

in December what's the impact on the consumer price? And that it was sponsored by coke and the coke it's it's actually works against the things the coke industries but best interests, but they are they're worried about all the other implications. And uh I was I was the first person to start writing about it. And if nobody else writes about it, you know, in this business, what you try to do is kind of create a little uh economic advantage for yourself. You say that the ignorance regarding

it should frighten everyone. What is what is the oil industry writ large not understand about this tax? What it's going to do? Is change the flow of products. One, so that Gulf Coast refiners are going to be supplying the East coast not your European two. Uh, everybody says, well, people, I want to export the last year, we had our year before last discussion on lifting the export fan. What it hasn't been noticed is every independent producer is going

to be paying no tax. Uh. Nail Resources spends more than it takes in this. We know independence have always done this. They take they have essentially negative cash flow. That means they have zero taxes. So they're all going to be pushing to sell their crew to Valero or to other domestic producers and so Valero, of which can take up to a million barrels a day of domestic glow sweet crew will displace Canadian heavy crew, which costs more and take as much of its as light crew,

but it won't be paying as much. It's going to you know, the the deduction of instead of depreciation of capital expenditures is going to have a significant impact. However, if a company wants to buy a coker, say from Europe, they won't be able to deduct the cost. So three billion dollars for a coker, well sorry, you know, depreciation nothing, you just have to take a write off. It is going to change the way all the business plans. And I don't think anybody, very few people have really played

all the the moves. It's it's a chess game. And I keep getting feed back from companies saying, oh, we didn't think of that. What's the fair price of oil? Then? UH tell me and no, there's no fair And asked you that question eighteen times over the No. But the thing is, uh, there's all this buying. I mean, as I said, I call it the Trump put. So the

producers and the speculators have all come in. If you remember the Greenspan put, as a Shiller Robert Shiller explained, whoever investors knew they thought there was a guarantee that Greenspan would intervene in the financial markets to prevent stocks from going down. Uh. Now with the Trump administration, we'll either get an import fee or we'll get this border tax, which will hold up crude at What is happening is all the independent producers seeing this are rushing expand drillings.

What was it like Silverlager to teach up in Calgary? I mean they had a Canadian boom in Calgary. Is the boom over? Did they throw you out because they couldn't pay anymore? No, it was a It was a lot of It was a lot of fun. And I have friends up there just to the paper for the Canadian Patrol and produced association on the impact of the tax um because I ran into a problem. And then, uh, you can't uh if you under US tax code, if you buy a house up there, you pay Canadian taxes,

pay worldwide taxes on your income. And so I was gonna wind up paying a marginal tax rate on my my professor salary. What's so what I did is fly back and John Tucker, I mean anybody can do that, right, Okay, So it was yeah, and the Canadian tax structure it was, it was different. And you know, a corporation would have put me a clue on that. The universities don't prepare the people quite as well. So we compromised. And but after three years, uh, the contractor was out and let everyone.

My trend to the business move to New Jersey. But I like California, Colorado really nice. But so this is important when we talk simplistically about tax reform and corporate tax reduction abroad and all that money will come home. It's really quite a simplistic statement, isn't it. It's very simplistic. And that's the problem with doing any kind of taxes. You know, I worked for Mike wilmothal In in the Carter Treasury and I was the author with two other

people of the crude oil Windfall profit tax. And I haven't done a lot of taxes writing. But what you learn is you have to be think about all the

possible implications. It is a three dimensional chess game. It's not just a simple statement, Okay, all this cash is going to come home when we do this, and we did it I think a few years ago on corporate taxes, but it's uh, the corporate tax holiday, any kind of tax adjustment UH moves all sorts of things because companies have hundreds of lawyers and economists working out all the details. And if you suddenly just changed the whole whole spectrum, uh,

it forces many radical changes. And and that's why this is it is quite worrisome. Let me ask you about energy policy. From moving from tax policy to energy policy and specific, what is this administration said about It's it's direction that it's going in. UH, you're gonna have a new head of the Interior Department who is from is from the from the region. We could say, do you have a clear sense of what the policy is going forward? Well, yes,

they're going to open up the federal lands for drilling. UH. The Obama administration had imposed rules in terms of UH methane emissions, limited access to certain areas. They put the stage grounds on the endanger or trying to put the sage grounds on the endangered species list. They're gonna undo as many of those as possible and try to open

it up as much US land as possible. Indians here in Colorado, the Indians have much more trouble getting selling, leasing their land for drilling because of all the hoops you have to jump through with the Interior Department, then neighboring UH landowners. They're going to open those lands up so that there's gonna be a lot more pushed to drill. I think at t v A they're going to push to use more coal. But it's it's essentially the supply is going to go up, and you combine opening lands

up in some of these areas. Yeah, you know there's one area when I started there were twenty billion barrels of US reserves. A few months ago the uh USGS said there were twenty billion barrels in just one part of the Permian basin. The rate at which we're able to penetrate these reserves with new technology, so the IINK

supply is just gonna mushroom. And uh four years from now, we're gonna be looking at this in the U s. Is it could be the case that the US is going to have to be looking for buyers for a crude oil because it's gonna have so much crude that we won't be able to consume at all. You know, the change is going to be quite dramatic. Give us your read on the state of technology in the energy

sector today. We were talking with Jim Glassman at the top of the show about the slowdowns in the layoffs we've seen in the energy sector over these last few years. Is that impacted technological development in the energy sector. No, I don't think so. I think to the contrary, it's accelerated it more as law applies to the finding of finding oil, also to the renewables. UH say, technology is is changing at an increasing rate, so that I think

the cost of rice. Data is the firm in Norway that looks at cost of drilling, and they they had shown it and following by ten percent excuse me, over the last several years and hight years, and I think it's going to increase the fifteen that costs of finding oil in the United States and many areas will will drop down to twenty dollars UH barrelers or maybe fifteen UH. And at the same time, the renewable technology costs are gonna come down. So that you know, for most of

my career we've been looking at higher and higher energy costs. UH. It's quite possible that uh in ten years we're gonna be looking at oil being in many parts of the world less expensive and other reforms than less expensive than the water give us the the Opeque update I have to I have to ask here now that we're a few months out from those meetings and in Vienna, are the parties up holding their ends of the bargain and what effect is that having on energy here in the US.

They're they're upholding their bargain into the bargain. UH. The compliance seems to be about so that's holding up prices right now. But I mean this is their last gasp. I mean they are the high cost producers except for Saudi Arabia. Yeah, five years from now, Venezuela is going to be a just a devastated state because of the all these technological changes that they're coming here. Argentina is starting to adopt them. Rush has got a lot of

shale oil. The renewables are coming, renewables are going accelerating in developing countries. So you know, the beat shell Shell was probably pessimistic when they say oil demand is gonna peak in I think it probably peaks a little earlier. This situation is just changing so rapidly. Phil, Thank you so much, particularly those discussions on trade. Now to the border Texas well. Mr Furliger. Furliger, when he's with us,

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