Surveillance: Returning to Work With Rep. McHenry

on petroleum and a hybrid hydrocarbons. Abraham, let me just talk about a greater idea of stimulus in endless debt, even at a low interest rate. Does that just assume currency depreciation or potential devaluation? Tomas and John's great to be on once again, and that's a great question, and

my short answers, no, it does not. And in fact, that's the point we've been making for our currency forecasts that in many cases it's the ability to stabilize the economy through these very aggressive stimulus measures that in fact we'll pull in capital inflows and will be a support for asset prices and therefore also the exchange rate. So I don't think it's generally true that we should assume currency depreciation as a result of these massive liquidity injections.

That being said, I think the aggressive actions by the FED have certainly been one major factor that has made investors more confident to bet on currencies other than the dollar. So I think in the dollar specific case, they've certainly contributed to the recent seller on a waiting of the mathematics of this lift and gold up twenty three folks after March lows, even in Mabari. When you look at gold, do you ascribe it simply to these uncommon low real yields?

Is literally negative real yields across the entire system? Is that what's driving gold higher? I think it's certainly a very important factor. And and if you look at the charts, you see that the correlation with real yields and in particular with US real yields continues to be very strong, and even most recently, if we look at the last few weeks, the latest increasing gold prices has been coming alongside a pretty steep decline and real heels as well.

But we do think that there is a second element, which is if you like the quantitative part, so you have the price driver which is on the real interest right side. But it's a quantitative driver, which is in fact, again the massive increase in central bank liquidity, and it is associated with the search for alternatives to the conventional currency. So we think there's kind of this two pronged uh, these two prompt pillars of supports for gold prices very

low he reels, but also the search for alternatives. And I think gold stands out there alongside maybe the end in currency space, but also to some degree some of the crypt occurrence. What is truly original about this moment as well, Abraham, Away from the cryptocurrencies are the extra reasons people are looking to shun the dollar in this environment, and it's the belief that the US becomes the source of instability as the reopening effort starts to stall in

many states across America. We have had so many guests on this program in the last four hours talk up a shift away from the United States and towards Europe and our swhere because of how badly the reopening process is going in America and for that reason, people are

looking to fade the U. S. Dollar. Does that argument resonate with you, Abraham, I would say a version of the argument resonates with me, but it's it's probably a little more flattering to the US because I think we should continue to ascribe a fairly exceptional position to the US outlook, and we continue to think that the US economy will bounce back earlier and more strongly than much

of the rest of the world. But what is truth from an investment standpoint is that the rest of the world is unusually heavily exposed to the US, and US s s are unusually expensive relatives to the rector of the world, and in an environment where there are a couple of clouds on the US horizon, including a fairly uncertain election, I do think it makes a great deal of sensor investors to diversify a little bit away from the US, and I think that's really what we're seeing.

We're seeing some diversification given these kind of unusually high valuations in high exposures from the US, and we also think that that should give you some further upside, for instance, for the euro against the dollar, for a couple of the other gn alternative against the dollar. But I don't think this is it's equivalent through writing off the US.

In fact, we think the US kind of growth exceptionalism probably still has some legs in it left coming perhaps out of the election, but for the next couple of months, it does put the US on the back foot, all right, Ebrahim. The weakening of the US dollar has been something a lot of people are trying to understand in order to figure out how long it has to run. You're saying

that it does have longer versus the Euro. Looking at Bank of America Global Research, they came out and they said that the FED stimulus, as you were talking about, compressing real rates was the main driver of the weakening in the dollar, which raises a question how much further can the FED and will the FED compress real yields? And that that is the key to the dollars trajectory in the months to come. So what's the answer, how

much further can the Fed go? Yes? Very interesting. And as for you real yields, I should say we were a little bit surprised how much further you really have declined.

And in particular the declining real yield of late has been driven by a pick up and an invasion expectation in an environment where I think many of us don't really expect instation to pick up so we think the driver of the recent decline and real yields is probably running a little bit out of steam, and that means maybe the nominal side, nominal interest rates have to do

more of at work. But we do think that the bulk of the move has taken place, so when it comes to real deals as a driver, there might be another ten twenty basis points in there, but we really don't expect a lot further in terms of really a downside. But it is also not the only driver. So what I was just alluding to in terms of drivers of the US dollar down, I think there is also a shift in terms of expectations of growth, perhaps some optimism

for EU measures that's coming into play as well. So if the dollar sells off, I think it's increasingly has to come from some of these other elements rather than a further decline. And really even him round Barry with us from City Group right now to drive forward the discussion and stimulus we have with us a gentleman from the town District, North Carolina, and Patrick mckenry joins is he has been steeped in Republican politics going back to

George Bush the younger. He was intimately involved and that's successful. Run for president in two thousand, Congress, and thank you so much for joining us today. What is the best outcome for conservative Republicans in this fiscal trajectory of the next six seven in eight weeks, for those that are

frugal and if frugal constituents, what's the best outcome? Well, I mean, ideological concerns are different when you have a house fire, and what we have is a is a major house fire here, So we've got to get that righted, uh, and then get back on a solid footing here. So for me, I think the approach is how do you how do you get people back in employment in safe and effective way? So the first piece there is health safety.

Without health safety, nothing else matters. So we have to have substantial funds so that we can have a pipeline of treatment options that have been borne out by scientific proof, as well as potentially a vaccine. You get that right,

that which of course requires a substantial amount of government money. UH. With the private sector innovation and then you get to the question of a rehiring bonus and tax policy then centivizes businesses to get back in the in the risk business, to safely reopen to take the proper risks and to know that they have a foundation upon which to take

that risk. So I think that's really important. So rehiring bonuses would be substantial and helpful, and and a tapering down or elimination of these uh overly generous in major parts of the country, federal benefits for unemployment. I think the combination of a bonus for rehiring and tapering down that unemployment benefit would be smart policy accompressment. Are you getting frustrated by the lack of clarity, the lack of details that you're getting from this administration in the month

of July. Yes, Look, we had a great result of the Cares Act. We saw Pelosi in the House, Democrats produce a partisan bill. They've got no Republican votes. They even lost Democrat votes. It was so far to the left. So that's not a serious point of discussion. Well, we want to hear is that is that agenda set so

we can have Trump economy too. We just came off of the best economy and most of our lifetimes, and the policy set that we implemented there gave support to what was happening in the private sector and lifted us to new heights. Let's put that agenda out, Let's be bold about it. Let's hear from the White House on the details so that we can go iron out the policy on the hill. That's really what I want to hear. And it has been frustrating that we haven't had that

that detail set yet. The Congressman, why are they dragging their feet? What's the reason behind it at the moment from your standpoint, and if it making it difficult in your constituency to talk to your constituents about why they were it isn't a plan beyond the month of July. Well, look, it's complicated because everything has changed. You got you like

the best health experts in the world. We're saying that summer was gonna sort of take this thing down like the flu season, And that was just a couple of months ago. We had we had health experts tells not to wear masks at the beginning of the year. So the idea that you're gonna see two months or three months in the future in this environment is is really hard.

So I think there's some some understanding that we wanted to be hesitant to to just lay out a whole broad policy path before we actually unders the confines of this now we're in July. We need to see that clearly from the administration, and we need to see clearly from states and localities about school reopening, because that's a vital economic set as well. If you can't have childcare, it's very difficult. Fore you get back to some semblance

of normal economic life. Congressman, you're talking about lack of cohesion and a lack of certainty around what the policies, the specific detailed policies are going to be going forward. And yet you're also you've admonished FED Chair J. Powell for perhaps blurring the lines between monetary and fiscal policy. Some argue that because there hasn't been a faster fiscal policy, it is forced the Federal Reserve to act more and in more varieties that go closer to fiscal policy to

make up for that gap. What do you say about that? I mean, do you think that you have been too slow and forced the FED to act more aggressively? Not yet. If we if we screw this up in in late July in August, I think that will be the case.

But I don't see that. What I what I was reminding when we have the Secretary of the Treasury before my committee and the Secretary I'm sorry, in the Chair of the Federal Reserve, I always remind them that there is this wall between monetary policy and fiscal policy, and the Hill should not get into the weeds of monitor policy, nor should the FED chair direct fiscal policy. And I gotta tell you, j Pal gets high marks UH for his fast, fast action UH and being very foresighted. His

foresight is just absolutely amazing in this environment. And when they when they laid out main street lending, it took a long time to get that ramped up, but it was very clear sign of policymakers on the Hill that we've got the lending piece. You guys get in the stimulus piece. You guys get people connected with their employment and you get people off the unemployment roles or give them support so they can get back into the economy. And that's something that we hear clearly. So I think

they've picked their lane smartly. I think they've stayed in their lane smartly. However, really aggressively UM. And over the long term, we're gonna have to have these FED programs pulled back from the economy. But at this stage, we're still trying to put this house fire out. The Congressman, we need to get down to Asheville, will du a remote down their teams surveillance Asheville, North Carolina. I can see it now, Patrick Henry, thank you so much, the

tenth Congressional District of North Carolina. Right now, without question, our interview of the day, if not our interview of the week on the social fabric of this nation. It would normally be an interview on trade with a former ambassador on trade with President Obama, Mr Kirk of Texas, but that's not the case. And these times we need to talk to run Kirk about the Reagan High School

in Austin, Texas. We need to talk to him as fifty seven mayor of Dallas, Texas and who we need to talk to him about the path forward for this nation. Ron Kirk, were honored to have you with us. UH today we are seeing images of statues torn down. They're not going to do that in front of the Alamo, but we're seeing images coast to coast of statue is being pulled down. How do we resurrect the new statues to come? How do we rebuild this nation? With statues

that our kids can be proud of. Well, Tom, first of all, thanks for having me, and we are taking a turn that I didn't expect that it's certainly not one that I haven't uh spoken to quite a bit

over the last several months. First of all, Um, Tom, if we to me, the more important journey isn't about which statutes we replace, what with The bigger journey is what's in our hearts and are we gonna really get to the systemic um matters that have allowed, for the most parts, the overwhelming majority of blacks and Latinos and poor people in this country to be locked out of

the economic system. And while Um and you mentioned ironically, I graduated from John H. Reagan High School, another one of the a school named for another one of those Confederate generals. My concern if we spend more attention on taking down the names and the statutes, we don't address the systemic problem we have in some of our police communities over the sparent treatment of blacks and poor people.

If we don't address those underlying factors that hold people of color black economically, we really will have only just put up a new painting pimed some new Draps declared victory and moved forward. And I'm much more interested in attacking the core issues that have plagued this country for now. You know, whether you figur it's the last seventy years or two hundred years, but far too long. I'm gonna

be blunt here. You grew up in the pragmatic, toughest now's politics of texas As, and Richards gave you guidance. You lost to Phil Graham. There's always been a grace underneath the toughness of Texas politics. How do we get that grace back to Washington after a one term President Trump, or indeed after a two term President Trump. How do we get the grace back at the federal level? Well, I know this this is a business show, not a political show. But if nothing else, President Trump has taught

us all that the tone at the top matters. And so if what people are really caring about is the restoration of grace and civility and and and that's gonna be a long path in and of itself, then you have to start with the belief that this has to be a one term president. I mean, he just does not have it within his d n A to ever demonstrate even a modicum amount of empathy or grace or forgiveness,

our recognition of when he's wrong. Uh. And voters, the American people have to recognize Donald Trump didn't start uh this degradation of our civility. Uh, he did, I think bring to the surface and give cover to a lot of Americans who are afraid over our changing demographics. And we're seeing that all across the country. All you've got to do is look at any of your news feeds in it day and see one more incident of a black family and Asian family and Hispanic family being attacked.

There's a boldness there that I don't think people would have demonstrated if they weren't getting now very overt direction from the White House. But the other thing I've told people,

we're responsible for that. If you want more civility, if you want political leaders who are willing to find the common ground, stop voting for all of these jerks who go to Washington refused to compromise, see one another's as enemy combatants, uh, versus all of us who care about and love this country wanted to live up to our ideals and are willing to fight passionately forward that so

it starts with the power of that vote. And I challenged the American people vote for vote for the kind of politicians you say in your heart you want to see representing us. But then don't stop there. Examine your own behavior in the workplace and in corporate America and see whether or not we're living up to those ideals. Ambassador, Since this is a business show, I do want to

just get a quick question in here. Given the fact that we've got so much emphasis on rejiggering supply chains in the wake of the pandemic, do you think that we do need a different trade policy with this in mind in order to bring medical supply production and other essential services back to the United States. Well, sure, and I know initially we we're going to talk about the visited of President Lopez opera over the door from Mexico to the US. But this is where trade policy does matter.

And while the new uh NAFTA, the United States Mexico Canada Agreement is an improvement on it, but it's taken the old car in the garage that your parents gave you, putting a new engine in it, putting new bells and whistles, versus having a new architecture like the Trump administration threw away with the Transpacific Partnership, that will allow us to have access to whether it's medical supplies or technology or raw materials that we need to drive our economy and

more importantly, give us free access to these new emerging markets that desperately want to grow using the best of what we make in America. But this pandemic has demonstrated the folly of having a terror policy that ends up compromising our ability to access the very things we need to fight this horrific the disease. These are many conversations, and we need longer conversations. Ryan Kirk, We've got to get you back on again soon. Thank you so much

for joining us today. He's a former mayor of Dallas, Austin Gulsby at the University of Chicago. That was pretty good. How he did that, Austin? How I got rock? You did and you didn't even know, y gua. John and I are teaching a class together right now on policy and an unweld. We're going to rip up the script right now, because folks, this is serious stuff. The third Pillar was my book of the summer last year. It's

on community. A primal screen by Professor Rodging about how we have to change how we adapt at a macro basis and also at the micro basis the community. And Austin Goulsby is one of the few guys I know that actually practices this within his academics, as he did with President. Awesome, you're in the room with Ragu and you're talking to third pillar. How's America doing the answers? Not very well right now? Yeah, it's Look, it's a tough moment. We're in the we're in the zoom room.

We don't we're not. We're still socially distanced from one another. But look, I don't know how. I don't quite know how we got to where we are on the economy, not not just the health side, but on the economy. Because even though there's no vaccine, you've got most of the advanced countries of the world have got it fairly contained. They've got a handle on it. They can start coming back.

And there are only a few exceptions. The US is one and Sweden's another where they kind of let the virus get out of control in the name of helping their economy. But actually, you see it, actual we hurt their economy, that the economies in the US and Sweden are going to have a hard time coming back if we don't contain the virus Austin just yeah, it's it's just h I was just gonna say, Tommy know, earlier,

we had Matt Winkler on Austin. He's a founder of Bloomberg News Me has a wonderful column out this morning, and Tom and I were speaking with him, and he just kind of pointed out something that you were just saying, which is the US has really done a poor job relative to a lot of other countries around the world when you look at some of the data. What do you what do you think the solution is from here, because it doesn't appear to be a federal effort to

combat this virus and the economic impact. Yeah, look that that's the problem. The optimistic thing is if we don't dawdle forever, we're not that far from getting on the

road that everybody else is on. Um. But if there's not gonna be a big federal push, which I agree with you it seems like there's not, then I think it's gonna move back to the States and you're gonna find this weird differential where you've got a few states where they're just gonna basically ignore the the evidence or the experience of other places, and those of in not very short order, those economies are gonna start to suffer again. And then in places where they're being judicious, um, they

can get out of this. And that thing is if you look at these countries in Europe, in Asia, Australia, New Zealand, it's not just that they're getting out of lockdown. Their kids are going back to school. They in Norway, they go there back in the gym's and they said they haven't had any cases of transmission in the gyms because they've got the they've got a handle on the spread of the virus. The thing is, look, nobody, everybody knows we want to get out of of this withdrawn period,

and we're all going stair crazy. But if you do it too early, you set yourself back to square zero. If you don't like being mostly in your house, don't you go to get everybody to go to a bar. Because you're gonna have to go. Everybody's gonna have to go back into their house. So I mean, I guess this kind of goes back, and there's something Tom and I've been talking about before, states rights versus you know, the heavy hand of the federal government here. Um, where

do we go from here? I mean, is this simply states having to come, you know, come to Jesus type of moment where they get where maybe New York and New Jersey were several months ago. Yeah, I think that's exactly what it is. You know, as I always say, the virus is the boss. And I got this research that I did with the with Chad Steverson where we got a lot of data on people's consumer uh activity

from their phones. We have it from the from the businesses perspective, so how many people customers walk through the door at two point three million different businesses around the country. And in that data, it shows very clearly it's not

policy that determines economic activity. So if you go to cities like the quad Cities on the border of Illinois and Iowa, where there's a shelter in place order in Illinois and there's no shelter in place order in Iowa, you would think that everybody be going to get their hair cut in Iowa and not in Illinois. And so it would show that the policy makes a big difference. Only it's not true. People stop getting their haircut on

both sides of that border. Even though they're allowed to go to the barber, they don't because they're afraid, and that idea that effectively what's happening is people are trying to feel safe, and until we get a handle on the virus, people are not going to feel safe. And so it moved it back. Every state has got to get control of the spread of the virus, and if

you do that, the economy wants to come back. It's just that if you go pull out the stops and get the virus spreading again, the economy is gonna take again because people are gonna say, whoa wait a minute, I want to go out there and get sick. Awesome, Gotta leave it there. Austin Goals, We thank you so much for the Blue School. Chicago greatly greatly appreciate it.

Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keane Before the podcast, you can always catch us worldwide. I'm Bloomberg Radio