Surveillance: Tariff Rollback Unlikely, Kudlow Says

us earlier at this week. He and Laurence Summer with pathbreaking research on the effect of the duration of unemployment over time. But nowhere in the research, at least have I ever, would have could ever suggests that we've seen the abruptness that we see now. The abruptness is seen

in the market. Await to the tape. The tape has been green, red, green, right now some red on the I scream with the vix forty nine point seven seven and yields come in and the tenant thirty years space with us that I really am pleased that Jeffrey Rosenberg could find time to join us today. He is with black Rock and he does a number of things over there, but mostly he writes acute summaries of the fixed income space.

So we're gonna touch on jobs here a little bit, but and I really want to get to a discussion of what we've got and fixed income down we do this, We're thrilled to tell you without commercial interruption, to the top of the hour, Jeff, thank you so much for being with us. We are seeing an economists pull out their duration of this slowdown in the duration of slogging recovery. The V shaped recovery seems to have disappeared in the last forty eight hours. How do you fold that into

fixed incomes? What does it mean, for example, for the benchmark tenure yield. Well, you know what we're debating is is you know, what is the pace? What is the shape of the recovery for the tenure yield? However, um it may be less about that. And what we seen here is just a historic structural change in the relationship between the federal reserve and fiscal policy. We are now operating in a different structural environment. Monetary policy is in

the control of the fiscal authority. This is akin to wartime finance because we are fighting a war. We're fighting a war against the pandemic. And so when you think about how interest rates move, Um, you really have to stop thinking about, well, what is the shape of the economy and what is the outlook for inflation, because there's something much much more important that a lot of these headlines you've seen. The Fed, for example, this week, change

the regular regulations around the supplementary leverage ratio. This is all about securing the interest rate that the government will pay to fund the massive fiscal policy response that we've

seen to fight the pandemic. And so interest rates are going to be much more about fiscal policy than they are about monetary policy, the shape of the economic recovery, and the said reacting to the shape of the economic recovery, because it's gonna be a long time, as as Diane was saying, it's gonna be a long time before, you know, consumer behavior and confidence comes back. But it's also going to be a long time before we get back to the pre crisis setting a monetary policy and interest rate.

So let's talk about the monetary policy currently underway. It is uh off the charts. I'm looking right now at the balance sheet growth for the Federal Reserve and it blows me away. I mean, in one week, six hundred

billion dollar expansion in the balance sheet. More than a trillion dollars added to the Federal reserves holdings of assets in two weeks, and I'm wondering, we're looking at a five point eight trillion dollar balance sheet on the other side of this, What will the Federal Reserve look like, considering that it is expanding its power and its scope

well beyond its historical role into fiscal stimulus. Well, again, I think we've got to be careful about history here and which history we're comparing to, because the operative history to compare is not the one we experienced. That's the modern FED. The poste Fed Treasury Accord establishes the modern

said the independence of monetary policy. But again, if we take the analogy two we're at war against the pandemic and we've just shifted the structure into wartime finance, then the better historical analog is what did the Fed, what did its balance she'd look like during World War Two?

And what we saw during that time period was explicit pegging of interest rates three eighths on the bills, two and a half on the thirty year, and the subordination of the Federal reserve institutions to the needs of the fiscal policy in that case, of course, fighting the war effort here very similar fighting the war effort in terms of providing the funding for these massive amounts of stimul and the Balance Street expansion that you're talking about, that

that that barely scratches the circles, because we have the main street business lending facilities still to come. The funding of it the four and fifty four billion, but you leverage that up up to ten times, and you're talking about nearly an additional expansion of five trillion, and the

Federal Reserve providing that funding into the real economy. Beautifully explained Jeffrey Rosenberg with this black Rock, folks, And at this time with the jobs report, we have to turn a little bit too a discussion for Global Wall Street. Will try to keep it in English for all of you out there not familiar with some of these arcane phrases.

Jeff Rosenberg. I thought Ben Emmons was just brilliant yesterday writing a note on CMBs, the idea that millions can't pay their rent, landlords are left hanging, and all of a sudden it redounds over into commercial real estate and mortgage securitized ideas. Clos R and b s and stuff like that. How urgent is this on a Friday morning across America? Is there really going to be a collapsing in securitized instruments like we saw in two thousand eight,

in two thousand nine. So so there's their differences in kind and and what we saw already, what we saw in the fixing markets in March is kind of the first wave of the impact of the pandemic. That was a liquidity orientation, that was a liquidity source of market drops in prices, and very simply quickly what happened was you had this massive demand for liquidity from the real economy into the financial economy as a result of the sudden stop in the economy at a size that the

financial economy was never equipped to ever fulfill. The squeezing from the real economy of that liquidity out of the financial economy. That pivoted back and squeezed financial market liquidity, and you saw some large drops. Okay, So now the Federal Reserve intervenes, it plugs the whole of that liquidity with its balance sheet. That's where we are today. Your question is now, well, where do we go from here? When you look at the fundamentals of the daisy chain

of the furbearances. Where does it stop right and where it stops is at the investor, at the holdings, at the bond level of the securitizations. And so this is now what we're considering. But it's about a temporary halt to payments as a result of this sudden stop. And so the difference in kind relative to nine is the two nine was about a fundamental collapse in the value

of the underlying property. These properties might collapse fundamentally if there's a permanence to the halting of those payments, and certainly in some sectors of the economy, the structural changes that the pandemic brings change ages and how we behave may render some of those securities, valuations, and cash flows

permanently impaired. But the larger broader issue here is this is a temporary stop at what we're trying to finance, and that earlier program that I just highlighted up the best four and a half five trillion dollars of lending capacity from the federal Reserve maybe needed to call to be called upon, or maybe even additional forms. There's legislation and discussion about how do you handle other areas of the securitization the mortgage market, How do we fund the

temporary stop of these forbearances. It all leads to back on the federal fisk to provide that bridge. Jeff. Just by everything that I've read, the mortgage market is in much better shape heading into this, and it's not being fundamentally threatened as you're saying, in the same kind of way as it was in two thousand seven, two thousand eight, and two thousand nine. The corporate debt market, however, is and I would argue that the leverage ratios and companies

have reached level that do exceed historical precedents. And we are currently seeing the fastest pace of downgrades by credit rating agencies in records going back to two thousand and two, and you're expecting default rates up to nine percent and beyond, with rating agencies downgrading their expectations going forward on a daily basis, how big of a hit is that going to be to the corporate credit sector, regardless of any fedback stop. Yeah, and and again let's a frame Mike answer.

In those two phases. The first phase of what we've seen has been primarily liquidity phase. And you've seen the primary market credit facility, the secondary market credit facility helped to stabilize the market. But then you move from liquidity to solvency, from liquidity concerns to fundamental credit concerns. And so as we roll through to the earlier questions to Diane, what is the recession look like? What is the depth in the duration? Is it be? Is it you is

at flat bottom? Now you're talking about real fundamental economic impact to which the Federal Reserve is not really designed and intended to solve those issues. And you came in

as your highlighting. You came into this crisis with greater vulnerability because the debt stocks not so much historically unprecedented, but we're running at kind of very late cycle extended level of indebtedness, primarily because the burden of that debt, the interest rate burden was so low, but the interest rate burden is high when you have an environment of zero cash flow. So it's really about how quickly do

the cashless the economy come back online. And certainly there's gonna be an elevated level where the most vulnerable, smaller companies less financial flexibility or the areas in the sectors of the market that are structurally impaired. Uh, see those restructurings in default. Jeffrey Rosenberg, thank you so much to black Reck. Greatly appreciate it today and fixed income Ellen too was for Morgan Standard today. Ellen, what did you glean from the report? The report is so much more

than five or six numbers. Clearly a shock with seven hundred thousand uh non farm payroll loss. But what was the other data but that you saw beneath the headline data? Yeah, so I think, uh, you know, this is a time Tom, when you get these numbers right, that you want a grand stand and if ever there was a time that it's inappropriate the grand standards. Now, so we had an estimate of minus seven hundred thousand uh. And the underlying details here that this this had I know, I was

one thousand off um Uh. The underlying details are that this this does not even capture the jobless claims that began jumping by the millions, right, that is for the April survey periods for the April reports. So how did we get this number right and and think that it was still going to be so deeply negative? It's about hiring, so we always uh we alluson forget the other side of this. It's net job games. How many were separated from employment? How many were hired? Uh, And it's the

drop in hiring that drove this number. So think about it. March comes around, things are highly uncertain. You have a hundred open positions at your company, and you say let's hold off on filling those positions. That gets counted in these numbers. And you can imagine that that no one would have been hiring given the back drop in March and how uncertain it was. So that's I think an important point because it means in April we'll start drawing in not just the drop and hiring, but the firings.

And so that's how you're going to get expectations for the job lost to be in the millions. It will make this minus seven hundred thousand look like small potatoes. It's gonna be on average out go ahead. Well, it's gonna be it's gonna be brutal going forward. And we know this by all by all accounts, And I just want to focus on the other side of this. And you were saying you do expect the recovery to take less time than back following the two thousand and eight

thousand and nine crisis. How how realistic is that given the hit to this consumer psychology, to the idea of feeling like your reality has been ripped out from under you. I mean, could that prolonged things to the same type of length that we saw heading out of the last crisis. Yeah, So it's a it's a it's a really fair question. And uh, the answer is that we really don't know.

And so from here the modeling takes over um and tells you that that as the economy gets back on track, um, we're gonna have millions in businesses that are just lost, that go under. But to the extent that we do start to poke our heads outdoors and activity does very slowly begin to pick up, that we slowly start to bring that unemployment rate down. How slowly it comes down

will be the question of how slowing has demand. So one question is maybe households are out there spending again, Um, but the patterns have shifted, and that's where I think they're a significant amount of behavioral economics that will that will go into the study of this. I totally get it, and you know, I frankly I'm optimistic Ellen that we could see a redounding rebound when we're done with this virus.

And let's be sure, folks, in the tragedy that we see here in New York City, we're gonna be done with this virus at some point. Ellen, you're completely wired in um Morgan Stanley, including with James Gorman, on the policy prescriptions right now. You know, John Farrell is going to talk to Lawrence Cudlow here in thirty forty minutes or whatever, and you know he's gonna say the usual drill.

How urgent is it for Washington to shift from the institutionalized response to they get the money in their hands now response? Or even say there's a national rent for bearance mortgage for barns. Everybody's just gonna wait for X number of weeks or months. So Tom, I think that's where we're headed. I mean, I think those conversations are already being had in terms of you know, monetary and fiscal policy acting in concert. We've never seen this before,

so acting in tandem, supporting each other. You know, this main street lending program from the said that we're waiting for details from that has meant to complement the Small Business Administration loan program. UH. You know, don't be surprised if the said also goes for something like a loan holiday program. You know, these are things that can be

broadly UH. Have brought buy in from small businesses and from households in order to help be sure that when we come out of this, that those that went into this with good credit don't then have their credit ruined during this time, which would then linked in the recovery and it would start to look like something of a

de leveraging cycle. I do believe that in the future that what we've learned from this is that in the future, monetary policy and fiscal policy acting in concert will now most likely be woven into the fabric of of response crisis response. And so I do think that this does set a precedent, uh for future downturn turns, and that's important.

We're speaking with Ellen Zentner, Managing Director, chief US Economist and Morgan Stanley, who has nailed the jobless claims calls and nailed what we were expecting to see today, one of the very few who has consistently gotten it right. And Ellen, I want to continue with the idea that you were talking about that the economy coming out of this will look different than the one coming in, and that behavioral economics will play a role in this. Can you just humor us and give us a sense of

how you expect certain industries to shift? What some of the beneficiaries maybe of this? Well? I think some of the things that we've been um thinking about is, you know, work from home arrangements. So businesses are probably going to have to revisit their business continuity plans and have some sort of rolling work from home arrangements or will be very slow to brain work work from home back into the office and have a greater share of permanent work

from Now what does that mean for business centers? Uh? Do we get uh you know, a glove of office space uh in say a midtown Manhattan uh and other business concentration centers? Will we have enough services in more residential areas if more people are working from home going forward? So I think those are just some of the just

a few of the ships that we're thinking about. What happens when people that never ordered delivery services uh, and particularly for food from full service restaurants before until now, uh, and now that they've tried it, they want to keep doing that or they used to go into the grocery store. Now they're having their groceries delivered and decide that they actually really like that. So in some ways it would accelerate some of those trends that have already been in place. Ellen,

we look forward to your weekend report. Ellen Sentner with Morgan Stanley just extraordinary. Erica can't convey folks how difficult it is to game any non farm payroll statistic for the White House? Is you on the jobs report? Were joined live on bloom Blow TV and on Bloomberg Radio from the White House. National Economic Counsel Director Larry Cuddlo Larry,

fantastic to have you with us. I just want to set the stage for our audience so they and understand where you and I are going in the next couple of minutes. We do have some technical difficulties which means there will be a little bit of a delay that so that you and I need to be a little bit careful about treading on each other. Let's start with the payrolls report and reflect on the huge plan that

Washington pushed through last week. Larry, the numbers are dreadful, but this is a mandated stay at home government push, and we're trying to offset that with some big, big initiatives, and one of them is some help for small businesses with small business loans, and they're set to go forward be activated today for our audience, Larry, some much needed clarity is needed because it's unclear to us which banks are ready to deliver those loans today. Larry, do you

have some clarity on that. Do you have a list of banks that are ready to do those loans as soon as a night? Well? I do my best, Jonathan, thank you, by the way, Um, in terms of the banks, I want to get to the broader subject also. But on the bank point, uh, today is the first day for applications, and any federally deposits, any federally insured depository institution is eligible. Now there's also a whole group of

very significant group of s b A certified lenders. But any f D I C bank, any federally insured credit union, farm credit institution, all those are participating in this program, which, as you know, our loans to keep payrolls all right, payroll protection. I think this is one of the essential points of the economic assistance plans so we can get through this very difficult period. Regarding the impact of the of the virus. So any bank and it will be guaranteed,

so the bank will have no problem. Is at one percent interest rate, h it will be payable, um in several months. Actually we've got quite a us at least six months. Um. Yeah, six months. Loan payments will be deferred for six months. No collateral or personal guarantees are required. Um. It should be very effective. But the thrust of it, Jonathan, is to deal with the issue of unemployment, which of course the surfaced today as we all expected, and payroll protection.

Sev of the loan has to go to maintaining payrolls, and then the remainder of the loan will go to helping business meet their various expenses, rent leases, mortgage payments and so forth. It's on Larry, you're talking about eligibility. I'm talking about whether these banks are actually ready to deploy the cash. Are they ready as soon as today, because the reports that we're seeing is the money banks are not and perhaps won't be for several weeks. Do you have a list of banks that are ready to

lend out this money today? I know who's eligible to do the work, but who's actually doing it today. Well, look, uh we I guess we have a different perspective. I'm not going to read you a list of banks. The list is gigantic, but they're ready to go. U banks have been talking to the Treasury Department, uh, the s b A, and Congress as this program was rolled out. So I I don't see any barriers and roadblocks, Jonathan. There may be some you know, small glitches as this

thing goes out, but but they are ready. Secretary Manution, you know, had a big presser yesterday on this very point. So I don't think that's gonna be a problem. I mean, what matters here is that we've set aside three hundred and fifty billion dollars for paycheck protection. That's absolutely the key point, and the hope is that most folks, or at least many folks will stay affiliated, stay linked to their businesses during this very very difficult business interruptions and

the economic contraction period and the virus. You want people now, you can have a good job without a good business. So we've also given a payroll tax holiday to the business side, and a number of other assistance plans. But on this one in particular, I think the key is trying to keep the workforce connected to the small business to the extent we can. And I think I think the bankers just look leading bankers. I'm not going to

name names, but leading bankers. We're talking to Secretary Minution and others of us right up to the deadline yesterday, So I think they are ready to go. Larry, let's talk about the poll of lines that's available three in fifty billion dollars. I understand that it's first come, first served. How easy will it be to go ahead and top up that program if we drain the three inchin of fifty billion really quite quickly. There's gonna be massive demand

for this. We know that people are gonna be working really, really hard. We have to understand there's going to be some technical difficulties along the way to deploy that cash. But as it drops down, Larry, are you confidently and pop it up very quickly? You know? I would say so, Jonathan, I don't want to get ahead of the story. Uh, I think there will be a very significant demand for it. I agree with your point, Um, but right now the trick, and this is true for all the assistance programs that

we've run through. Uh. Two point to trillion worth, plus the said lending programs at least another four trillion. We're assisting roughly one third of the entire economy right now. But I don't want to get ahead of my reckoning. Is if this program is filled quickly, uh, we could probably get some kind of supplemental assistance here through the Congress too to expand it, or we might find other ways and means. But let's let's see how we do first.

That's the important thing. And again this is tied, as you well know, this is tied to the coronavirus story. Um, that story could be improving. I don't want to make any forecasts. I just listened to our health specialists, are health experts. That story may be improving, hopefully or prayerfully, in the next four to eight weeks. That's a possibility, and so perhaps we won't have to oversubscribe these programs.

Let's let's see what happens. It's a dated time week at time, gentlethan well, Larry, I want to keep this later focus on economic policy. The likes of Tiny Faucci doing a great job. Let's leave the health issues to them where it should be. For economic policy, You and I had an honest and open, frank conversation a month ago. And I recall that you said to me after the payrolls report that we didn't want to be thrown around three hundred and four hundred billion dollars Willy, nearly including

twelve hundred one thousand dollar checks. Now we're handing out twelve hundred dollar checks. This is moved really quickly, and this is not a got your moment, Larry. What I'm trying to understand here is whether the administration now understands that it's no longer about hoping for the best, it's preparing for the worst, and we need to prepare to do a whole lot more. Well, look, that's fair enough. I mean, this story moved incredibly rapidly, um, beginning in March,

really and uh. What started out as something that you know, we thought would be smaller, uh, And we put up travel restrictions with China, and for a bit that looked okay, and then it exploded. The virus exploded, so I and others here Secretary Ammunition, we had to change our point of view. And we realized as it rose exponentially, as the virus and its consequences rose, exponentially, something frankly I

thought nobody could foresee. But nonetheless, then yes, we went into full gear and move quickly through Congress as best we could, and um, you know, starting with them, uh, covering sickly for people who were hit by the virus or family members, and then going through this economic assistance package of two point two trillion to put as much help into the economy as we possibly could. Events move rapidly, and we moved rapidly. And I'll say in by bars

and send, Congress moved rapidly. They moved quickly. Maybe not quickly enough. And you'll appreciate that this story has just moved a whole lot faster. One thing the executive branch can do on its own. The White House can get together and do something about Harris. We understand there is a consideration about announcing a ninety day deferral of tariff payments. Larry, where are we on that decision? I don't think. I know, I've read a lot about that. I don't expect that

to be the case. Actually, we we never looked, we never looked in any serious way at rolling back caraps. I mean, the deal with China is in place. Um, that's going to be implemented U S m C as in place. UM, we looked a little bit at some most favorite nation custom duties and we decided it was too complicated and it might give send the wrong signals. So UM, I would not expect to see any movement on paraps right now. I mean, the issue here is

besides the paycheck tection. You know, we've poured um six hundred billion dollars apart from the business loans, six hundred billion dollars to individuals, families, and that includes the unemployment grows up. UM, We've we are giving checks to a hundred and seventy five million Americans. Let me repeat that, a hundred and seventy five million Americans. And on top

of that, leveraging from the Treasury's emergency fund. As you well know, the Federal Reserve is embarked on a number of lending programs, purchasing programs, and broad based industry assistance programs. So you've got monetary and fiscal policy working. It is the largest package in the history of the US. Is principally a main main street package, middle class package. So I don't think we're gonna We're not gonna change any

of the tariff policies right now. I mean, frankly, the president cut from pretty good trade deals with China and U. S. M c A. And when we return to prosperity, which I think will occur before this year is out. When we return, part of that return is going to be an export boom in my judgment, from these good trade deals, so that we knocked down onto A trading practices. But no, not now, there's no tarra pullback right now. Well, Larry, let's not get far too far down the road. Let's

focus on the right now. You say no tariff pullback right now. As you know, Go Joe, which manufactures parl. One of the inputs into the dispenses is an input from China that subjects with tariff. They've requested an exemption. U STR has declined. I'm trying to understand why. I just can't get my hands around why the administration would go forward and not exempt that request. You said it

would send the wrong signals, send the wrong signal to who. Well, sending the wrong signal in terms of the president's trade policy is what we're concerned about, Jonathan. On specific matters like this, Uh, I don't want to rule anything in are out. You have to talk to usdr and and see on on that particular point. Okay, we're trying to keep the flow going. You know, we've imported a lot of healthcare products from China and the rest of Asia.

We also exported some assistance. We're trying to work together in terms of the unity of the nations around the world to fight this pandemic. So I don't want to get into specifics. You know, your question was really a broad based question about tariff reduction, and what I'm saying is there's no change in those policies, whether it's three oh ones or the two thirty twos on steel and so forth. Um, individual cases can be examined, and I have to find out more about the particular a matter

you just raise. I'm not up to speed on that. I guess what I'm struggling with, Larry's that you and I can identify areas where we can help American businesses with tariffs exemptions. You're saying that you don't want to send the wrong signal on trade policy, but simultane viously saying that this health crisis is top of the priorities. Nothing tops it. But at the moment. Aren't we putting bad signals in your words, on trade ahead of alleviating

some of the pain on American businesses? No, I don't think so. I mean, I'm not sure what you're thinking about here. We have some very good trade deals that the President completed before this pandemic broke out, and we want to maintain those trade deals. And regarding assistance or specific areas you know, for example, ventilators or masks, um we're looking at that one step at a time, and

we have imported a huge amount. We've had planes from Shanghai landing in the key US cities to provide relief to the medical people in the hospitals and so forth. So that's wide open. But that's a different matter than generic trade policy. Well, hopefully we can get some more clarity on that in the next several way. Some clarity on Monday we've been needed as well. Opec cluss is holding a meeting. Is the US providing a representative to

take place in that meeting? Would there be participating in that meeting on Monday, Larry, we are not members of OPEC. OPA plus is open and inviting people from outside of the organization of OPEG for others to join. I'm wondering if whether America will send a representative to have a conversation with the Saudis with the other members of OPEC. Well, let me, UH sort of pivot to what's actually happened.

That is, First of all, the President has been in touch on the phone with the MBS in Saudi Arabia and Putin in Russia. He's been on the phone several times. UM. Other people in the administration have been talking to their counterparts in both of those countries. So we do that independently in America's interest, we don't have to go to

the OPEC meeting. UM. The President told me yesterday and he did so presequently tweet this out, that he believes that Russia and Saudi Arabia will move away from their quibbling our argument and will allow market forces to dominate and instead of loading up the markets that are already oversupplied, that they will pull back. UM. We will see how that turns out. Presidents said that oil prices have gone up quite a bit seven or eight dollars since that statement.

I see no reason why these discussions with President Trump UH and Prutent MBS will not bear fruit. I think they will. I think flooding the market with oil on top of the pandemic, which is crushed aggregate demand was a very, very poor decision by both of those countries. But I think the President's negotiations will bear fruit. Larry, will the United States be part of those production cuts? Well, look, our oil. We don't dictate oil policies. Are oil and

gas sectors, Uh, they're smart businesses. The US is still the number one energy producer in the world, and we expect to remain. So we've taken a number of policies to to open the door and permit that to happen. We don't dictate I think, as you would guess, oil companies seeing a decline and price are going to pull back in production. I think that's just common business sense. But we don't dictate those decisions. The government doesn't dictate those.

Just to just to find a question for you, just to jump in, I know you've got to run, you've got a busy morning. I appreciate that. But as a final question, on a day when these small business loans are coming down, on a day where Americans are struggling to pay the bills, can you communicate to a broader audience as to why there is such a big focus on the oil market and meeting with all process producers today. Well, look, first of all, we have I'm looking forward to the

meetings today with our producers. I myself have done a number of conference calls with the oil and overall energy sectors. You know we have. Let me just put this, insert this. The degree of public and private government and private partnership here is unparalleled. We have worked with every industry, every industry, and President has seen them in person or done conference calls and so and the rest of us have done conference calls. So that's point number one. Point number two.

Energy is obviously a key part of our economy. It was a key part of the tremendous economic growth we had in recent years before it was interrupted by this pandemic. So it's important motorists, UH, people who get heating fuel, on gasoline prices, all that is very key parts of

American life. So we always take an interest. But I will say this regarding any collusion attempts UH by other countries in and or out of OPEC that seemed to be doing damage to American interest is something that President Trump will get engaged with right away to protect the American economy. That's what we're doing here. This is you know we talked about paycheck protection for small businesses and to avoid layoffs. Well, this is just general economic energy.

I mean, we we have to stand up for American interests. That's what the President has done energy to keep part of the economy. So to me, it's, um, you know, an American operation. That's what we're concerned about. How you say from well, it's good to hear from Larry Carlo, their National Economic Council's director. There we are on oil and gas, folks, and it's good. I think the terror

part the microeconomics. Edward Morrisset City Group wrote a skating note this morning devolving down to teens oil and even single digit oil. Joining us now is the acuity of emerita, sin energy aspects and RITA. How do we get a demand destruction that gets us to teens rent crude and even a wipe out that clears the market in the single digits? How do you even get there? We are

already there. We've got the bulk of global crude prices in single digits, and you know we've been calling for ten dollar brand for a while, and the issue has been that future prices has kind of held around twenty at the lows. But the differentials in the world. You know, there are crudes in the Permian that are trading at three dollars today. Um, the physical markets already think they're going to be full. Inventories are going to be full, so you have to scale back production right now or

at least from May onwards. The crude curve is just fascinating to look at, and for our listeners worldwide, I'm ready, I'll give you a little picture to put in your mind. It is very, very depressed at the front end, just north at twenty five dollars, and then it stapens quite aggressively all the way out to thirty approaching fifth the dollars. And I'm rate. So what's interesting about this curve is that if you ask many people in the oil market right now, why does it look like that? Give me

one answer? They say demand and not supply. And I'm just want to get rate to how much would have to be done on the supply side to account for the collapse that we've got in demand worldwide. I think no amount of supply huts which are organized or orchestrated can actually take care of the demand losses. This is why our view has been the market is going to force shut ins, which means demand collapses at million barrels,

but in April you run out of storage. Sometime in May, prices have to collapse to the point where you are shutting in production of whatever that magnitude is, say ten million barrels per day um. This has to be market driven. And I know OPAC and OPEC pass rather than US are talking about production curtailment. These curtailments would have happened regardless because the market simply cannot absorb all this gud well.

And this goes to exactly the social media intervention the President Trump staged yesterday, which seemed to be somewhat effective in posting oil prices, at least temporarily. When he tweeted out that there were discussions between Saudi Arabia and Russia of cutting ten million barrels, he didn't specify a time frame. People took it per day, which would agree, which would amount to about ten percent of the world's oil production. We are hearing about a virtual meeting on Monday with

Opeque plus and perhaps the United States. How likely is it, Amrita, that the United States is going to also agree to some production cuts, which I don't believe is precedented. Well, I don't think the US can um join what it calls a cartel. It just goes against everything the US has said and stands for for the past decades about oil market. The reality is that, of course there's a lot of focus on texting jobs, and this is an election year, and I think there is a realization that

actually no oil prices does hold the US economy. But this is so messy. How can I mean? At best, you're going to get some kind of um an agreement, a gentleman's agreement, rather where there will be some form of okay, Yes, Texas has said it's going to cut by x, but again, how do you devise that mechanism of Texas cuts? What? What about an Optakota? What about Oklahoma and Russia hands Audireada, both particularly Russia has said

US has to join the cuts, we are to cut. Okay, Well, that makes sense, I guess what's the likelihood of that? What is the process for the United States to join them in production cuts? Look, I think what we're going to get lots of positive headlines because this is political now. It's a lot of window dressing. That's the word I'm

going to use. Because US production is falling anyways because of lower prices, and they will just quotify those losses somehow two CAPEX carts and whatever else and say, oh, look, you know action is following by X and that's how they're going to massage these numbers to get to the ten million dollars. But they they're talking about the reality is this is exactly what the market isn't what was going to force them to do anyway, So these aren't

real cuts to balance the month. I'm rached. Just a quick final question for me, just to help us all navigate this situation. We keep hearing from the Texas Railroad Commissioner, and when people hear from him, they're wondering what this means and what kind of power the Texas Railroad Commissioner has on oil output in America. Can you give us some clarity there? Well, I know he is quite through these cuts, but there are plenty who are against it.

There were senior officials from the Trump administration who came out yesterday. There was excell who came out yesterday and said we don't want a government intervention. So by no means this is a done deal. Yes, there are some who are for rationing production and it's been done once in Texas, but this isn't a coherent thought through process at all. At the stitch and read descent of energy aspects, the chief oil analyst langing on this the curious situation.

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