Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.
And I'm Joe. Isn't thal Joe?
Do you remember what we were doing this time last year?
No?
Oh no, no, I have no idea, And that feels like ages ago, So no, I have no idea.
We were actually talking to Sultan Posar about his vision of a Breton three. Do you remember that?
Okay, yes, yes, absolutely, I do remember that conversation very specifically, setting aside that sort of Bretton Wood's three framework specifically, I do think like overall, like he sort of anticipated extremely well a lot of the discussions that people are having, like over the course of the next year, and then so it's some respects, I think that's held up well.
Right.
So, there were a lot of different themes in that note, including this idea of more of an emphasis on real assets or commodities. But one of the big ideas that was in there was this theme of a more multi polar world and possible challenges to US hegemony in the financial system, including the dollars very unique role in that system. And while it is true that the dollars spent most of the past year being really strong, and we put
out a couple episodes on that. I think we have seen efforts at de dollarization, or at least we've seen a lot of discussion of dedollarization that has really increased in the same time period.
Yeah, there's sort of a few interesting dimensions here. So for one, of course, like price does what it's going to do in the short term, and ultimately I don't think like prices the ultimate orbitter, but you know, late last year or middle of last year, the dollar rallied a lot. The other thing is, you know, you get these headlines about dedollarization or the rise of the un or some barrel of oil somewhere in the world was not priced in dollars, and everyone starts to flip out
about whatever that means. And on the one hand, okay, that's interesting. But on the other hand, like again you and I, like how many times have we heard this story?
People love talking about this possibility.
Yeah yeah, Oh suddenly some benchmark barrel of oil somewhere is gonna be priced at something and that's the end of dollar hedgemony. But I will say, like there's a couple things like I don't want to say it's different this well, why I think it's still worth having this
conversation because obviously a lot of things have changed. You know, one of my theses that I talk a lot about all the time is how like the twenty twenties are sort of the inverse twenty tens, And so I do think to some extent it's a good time to revisit
our assumptions. And when you do start to see you know, expanding China trade and so forth, and talk of decoupling and rising role of the UN, I think it is worth having that conversation again, even if sometimes it seems like some of these end of the dollar stories are a little bit overcooked.
Or premature or premature. On that note, one of the things that has been happening is we've heard a lot of noise from the Bricks group of countries, so that's Brazil, Russia, India, China, and South Africa about possibly creating some sort of alternative to the dollar. So we really need to dive into the de dollarization story from an emerging markets perspective, and who better to do that with than with Paul McNamara.
He's an investment director over at GAM. We've had him on the show before and we are going to do another deep dive with him now.
Yeah.
Wait, Paul, thanks so much for coming back on all thoughts.
Thanks very much for having me.
So maybe just to begin with give us the state of play when it comes to de dollarization talks, because I know there have been all these little bits and pieces over the past year or so, but what has jumped out at you the most.
I think the thing that we're focused on is we've seen very big current account surpluses, especially in the oil exporters, so Saudi Arabian particular. I mean, Russia is obviously another story. I mean, the surpluces in China are not as big as they've been. But what's been interesting is that the Saudis in particular, and I think that some evidence that Abu Dhabi as well have not been pushing money straight into US treasuries or well U S securities markets in particular,
but sort of treasury treasuries. I mean, there's there's been a lot of talk in terms of China for a long time. You know, China has run the Belton Road program has clearly been that there is a general drive for those companies which continue to run these big external surpluses they're clearly trying to branch out significantly away from well, let's just stick it in medium duration treasuries, you know, and if they're really adventurous into listed US equities into
a all globally diversified basket. It's not just about sanctions and what happened to Russia's reserves in the aftermath of the attack on Ukraine, but clearly that's given it fresh impetus.
So okay, so this is interesting.
There is something going on, like I think it sounds like from your answer, and as Tracy and I said in the beginning, and I'm sure you've heard it for many years and year long in the illustrious career, this l of the dollars over, the dollars over, and usually it is sort of overcooked. But just based on even just your preliminary answer, it sounds like there is something going on that maybe there is some impulse to try something new.
I think there is, and I think you mentioned salten Poza, this idea of a multipolar world. I mean, we have moved away from you know, the US being by far the globally dominant economy to China. You know, the Chinese economy is now about the same size as the US. So I mean, clearly there's got to be some sort of rebalancing in terms of finance to match the economic dominance and the political movement that goes with it.
Absolutely.
I mean the two people you always hear spoken about in this context is well, obviously number one is Sultan. Number two would be Michael Pettis and co author Matthew Klein, who would make the point that, Okay, if you've got these big surpluses being generated, then they have to end up somewhere else, and the only place they can end up is the US, because the US is the only economic block which is generating these big deficits to soak
up the surpluses. Historically, I think it's not clear that it's as simple as that, but I think as long as the policy in China relies, the whole framework of economic policy in China relies on running very big external surpluses, they invest a lot, but they save even more. Those excess savings, you know, they have to end up somewhere, and it is going to be very difficult to put them somewhere else. The question that is historically, you know,
difficult is not the same as impossible. You know that before the US dollar, you know, you had the sterling zone, and ok, it was linked to gold, but you did have a reserve currency, which wasn't the dissavor of last resort, you know. So I mean there are two things which are not the same, which I think are being confused. Which is one the rise of China being an economy of similar importance to the US, which I think is indisputable.
And two, you know, does China or the global none Western bloc have as many options if they don't want to change the policy mix which has been very reliant on running very large external surfaces.
So I definitely want to get into more of the challenges of you know, moving away from treasuries and into
other assets. But before we do that, you mentioned the idea that there are some emerging market economies that have been buying fewer treasuries recently, and I guess my question is like what is driving that and is it the case that there definitely trying to move away from US exposure or is it the case that maybe in an environment of high rates and inflation and general uncertainty, maybe it doesn't make a lot of sense to buy US treasuries at that particular moment.
There's a bunch of things.
I mean, we have more assertive politics in pretty much
every large country. We talk about a lot about the bricks, which I think is problematic in this context because sort of Russia and South Africa and Brazil really don't matter that much in a global context, whereas, for example, Saudi Arabia, which has you know, very nearly a trillion dollars of assets abroad, clearly does you know, and they have different reasons, but you know, if it's NBS in Saudi Arabia, if it's Mody in India, you know, as you go to
the countries, you know there is more and more pushback against you know, US hegemony. However you want to describe it, and I think politics is part of it. The other is, you know one you probably want to diversify a bit more generally too. You know, you're very dependent on FED policy. I mean last year was a horrible year for pretty
much any asset. I mean, clearly you might want to look a bit beyond that, you know, so that you know that there's I wouldn't say it's just one reason, but it really is striking, you know that for example, just how big the surplus is, especially in the OPEC countries have been over the last year, and how little we've seen a tick up, you know, not just in holdings some treasuries, but in you know, specifically US securities themselves, you know, I mean part of the problem is that
it really hits quite hard to put large amounts of money. You end up putting it in stuff like the Vision fund or credit sweee or you know, or stuff like that.
Is oh, you already said vision fund. Yeah.
Yeah, I mean there's a whole rabbit hole here and it's always tricky, but you know, it's very difficult. There aren't a lot of places to put large chunks of money like this, and especially where you could expect you won't be the dominant in yes, which yeah, yes, it brings some perks, but it also brings some you know, some very significant problems with it as well.
You could build like what is it, like, a two hundred mile long city in the middle of the desert and have it be a blockchain capital at the universe. Anyway, I'm digressing a little bit. I want to actually go back to the comment you made about a sort of politics, because we could talk economics, we could talk about the rise of trade with China, but obviously a lot of some of these impulses are going to come from domestic
political choices. What is going on, like, what are you seeing specifically, and what is the sort of common thread across multiple countries that you say is driving this sort of like shift in political or global political consideration.
I think the sanctions applied to Russia, you know, after the invasion of Ukraine stand out because I mean it's usually spoken about in the context of a possible Chinese attack on Taiwan, but you go around pretty much every country has reasonably severe disagreements with the US, with the West in various ways. There is you know, a huge amount of resentment, which really is not something I should
be trying, you know, trying to diagnose the politics. But I think, you know, it just ensure practical terms that at least three hundred billion and we think probably a decent chunk more of Russian money was put beyond the use of the Russians simply because it was placed within the.
US financial system.
I think that's given a lot of urgency, you know, even to countries you know, who might not expect to have a major dispute with the US the way that the Russians have it really does become then a question of well, you know, how do we protect this savings pot.
You know, there is that argument, and you touched on it already a little bit, but there is an argument to be made that maybe for reasons of financial stability, this would make sense. So you know, if you're an emerging market economy, maybe you don't want your country to be tied too closely to what the US is doing, because maybe the US is raising rates at a time when you really need financial conditions to loosen. And we've spoken with Jun Sung Shin at the Bank for International
Settlements a lot about this. He's done a lot of research on the topic. How valid are those concerns and how do you disaggregate the sort of financial conditions diversification argument versus the political sanctions concerns about future financial control type thing.
I mean it comes back to the old quote.
I mean, I think this is from the seventies that you know, a US policy make has said, you know, it's our currency and your problem. That you know, we've seen that US financial conditions just affect anywhere else if you look at I mean you have to disaggregate that we've had a big burst of inflation everywhere, and interest rates would have gone up everywhere. This has not been the Fed chasing everybody else's interest rates around the last
year or so. But high US rates have led to a stronger dollar, and a stronger dollar does mean significantly tight of financial conditions for anyone who borrows in dollars, you know, the cost of repaying that debt. And this is I think a lot of what people are talking about when they say that, you know that they want independence from the dollar.
I mean whether you necessarily want.
The renmn b instead, and if you think the renmen mimi is going to be much easier, that's another question. But yeah, I mean, as long as the borrowing currency of choice. And you know, I kind of agree with Joe that, you know, just because somebody invoices a barrel of you know, awesome gas that they bought from Abu Dhabi for dollars and then they sell it to somebody else for renmen b, I'm not sure that's quite the
game changer it's being pitched to be. I mean, you can send me a gas bill in bitcoin and I will turn my pounds into bitcoin, and I will pay the gas bill and whoever is you know, and whoever sells me that gas will sell the bitcoin for sterling. And I'm not really sure that's quite the game changer it's being pitched at. What does matter is, you know, especially these surplus countries, One, are they going to continue
to run these surpluses? And to what extent can they immunize themselves from US political influence, to the extent that they're still holding a lot of their assets in dollars. My view is, and the impact on markets will be is it's very, very difficult because you know, the surpluses coming out of China are a fraction of what they were in I mean, they're down to about two and a half percent of GDP now when they were up
at ten around the time of the financial crisis. But if you know, if the renminb is going to become a reserve currency, then effectively it becomes impossible for China to run surpluces. You know, so at a minimum, you're
closing off possible policy options in the future. And really, i mean, does the rest of the world really, you know, want to start denominating its debt in that of a currency where they might suddenly start, you know, moving to moving to huge surpluses versus the rest of the world, and then that's going to impact the monetary policy everywhere everywhere else on Earth. Yeah, I mean, it's it's not it's not simple as never a satisfactory answer, but I think,
you know, the problems are. It's very easy to say that these countries want to be independent of US agnominia of the US dollar, but in almost every case that's going to involve policy choices which are going to have difficult policy ramifications. I mean, we got here for a reason, you.
Know, speaking of policy choices. However, and you talk about the sort of assertiveness of some various nations, there's also policy choices happening in the US. It appears, I mean you arguably the US itself is becoming more inward looking, and arguably it started under Trunk. But there seems to be a lot of content with Biden in terms of some of these domestic investments, whether it's semiconductors, whether it's energy.
Some of these investments particularly antagonizing allies or friends in Europe who feel we're sort of like pulling away the supply chain from them. Like, how much of this is also, like now just a story about US trading partners turning away from the US or turning away from sort of dollar assets, but a US decision to sort of focus more inward and you know, rely less on the rest of the world.
I yeah, I don't really see that.
I mean, whatever your objections to the US as a hegemon, you know, try somebody else. I mean, the specific example that sticks with me is the is the dollar swap lines which were extended to you know, the big Western ally central you know, and specifically the Western allies that you know, they weren't extended to certain other countries which could have benefited from them. While the US does make it clear that in monetary policy is not run for
the benefit of anybody but Americans. You know that we had a big push in the ninety seven Asian crisis, and then ninety eight everybody was saying, well, you know, you can't keep hiking, because that's going to screw things up for everybody else, to which the u s response
was rightly, well, too bad. You know, US monetary policy, you know, the FED has no mandate to look after anybody who isn't an American but you know, these the swap lines were absolutely critical in protecting the rest of the world, especially during two thousand and eight, you know, but also during COVID we saw the lines rolled out in the past that you know, however much you know the rest of US might you know, complain or be unkind about, you know, about Donald Trump or anybody else.
The US has always, you know, go back to the Marshall Plan or whatever, you know, the US has always at a minimum had a defensible case that of enlightened self interest. And you know, and I think there are question marks about whether you know the alternatives, whether it's gold, whether it's the RENMN be.
Mean, let's be honest, those are the only two.
You know, The rubles no use to anyone, you know, or bitcoin or whatever mad scheme you have. That you know that there are policymakers in the US who are making choices which I think benefit the rest of the world, and it's not clear that the alternatives would be adequate for the rest of us.
So just to kind of crystallize this idea in our minds, like walk us through what would need to happen in order to make some other types of reserve assets more viable options than US treasuries, Like what would make a South African bond a proper replacement for a US tenure or what would make I don't know, a Brazilian bond of replacement.
Well, I mean those two countries, I think, are you're making absolute maximum difficulty because.
I ask the hard question.
Both of those economies rise and fall with commodity prices.
You know, Brazil its iron ore and soybeans, South Africa sort of platinum, palladium in particular, also coal that you know, as commodity prices rise and fall, that dictates everything for those economies. It even dictates the credit cycle because Brazil and South Africa are in a much better position to cut interrast rates when the external balances are healthy and commodity prices are overwhelmingly driven by China, I mean, especially
in Brazil. I think Brazil you know, comes second after Australia in terms of economies sort of most driven by the Chinese property cycle.
So you know, I don't see scope there.
I mean what you're looking at are well, one is alternatives to US treasuries sort of within US financial markets. But you know, a US investment grade corporate bond doesn't really trade that much. I mean, an investment grade emerging market debt bond in dollars, you know, does tend to trade very much off the treasury market, and the extent it doesn't very much of US dollar denominated credit.
It's very, very difficult.
I mean, the question is also is China, And again it's China, It's not anyone else. Maybe the Saudist to a certain extent, doing this in a context where they're continuing to use the external surplus, they're continuing to have massive excess savings for domestic policy means, because deploying ten percent of GDP is a colossally more difficult task than deploying you know, two percent of GDP.
Which is where they are at the moment.
You can probably slip two percent of GDP into emerging markets and venture capital and Europe and whatever else. You can't put ten percent of GDP. I mean, the problem with emerging markets is that they're allocated as a special asset class to people like me because they are different.
You know, the legal rules are very difficult. You know, the idea that a minority shareholder should get some benefit from the success of a company in Russia is really regarded as ludicrous by most, you know, by most people of influence within Russia. It's you know, if you can go through the history, if you you know, you look at ucas, you look at the contact, you know, sort of. I mean, Russia is a particularly bad example, but it's not out there. You can look at what's going on
with the Dani in India. You know, the the returns on a long horizon from emerging market investments have been absolutely dismal for a long time. And I think that institutional backdrop that you know, that does narrow the field
for profitable investments. So is there a supply of you know, not necessarily liquid, because there's nothing remotely as liquid as treasuries, but you know, investible with a reasonable chance of positive economic returns in the medium term that isn't plugged into the US or its or its allies.
I think, you know that there's quite a big question mark over that.
I mean, that's not to say that you can't do what Turkey is doing, you know, and sell influence, you know, and I think that there's a lot of money going into places like Turkey sort of to buy influence rather than you know, for pure economic reasons.
But what do you mean I want to ask you a question about China, but can you explain what you mean by by influence what's going on in Turkey?
Yeah, I mean Turkey is an interesting one because you're never sure if this is purely driven by what the current Turkish administration wants to do, purely, you know, for its own reasons, or.
Whether they're doing it. The Turks are running a very big external deficit.
They've they've pegged the lira effectively to the US dollar for about nine months now, even as they're running sort of double digit credit growth, growing external surplus, and yet at the same time their growth, foreign exchange reserves are growing with it.
You know, it's pretty clear.
That there's Saudi and ka Tari money, probably some Abudhabi money in as well. At the same time, Turkey is a major conduit for sanctions busting gas flows out of Russia. They've been instrumental in holding out the expansion of NATO, you know, they you know, at the same time, you know, the NATO air base in in Chillik is still open.
It's there's a question.
Of whether this is just Turkish pre electoral politics or whether that there are you know, they they're relying on or they've been paid off. Sounds awfully crude, but you know that there are financial flows which are playing part of that calculation. You know, we've seen it with Hungary, the promise of cheap gas that doesn't seem seem to
have been fulfilled. But you know, as you go around the even stuff like you know, Honduras recently took itself off the very short list of countries which recognized Taiwan as an independent country.
You know, that's not a huge amount of money in.
Chinese terms, but certainly there were financial flows involved there.
Since you mentioned China there, and I wanted to ask a broader follow up on it, which is that Okay, Like Tracy asked the really hard question, the almost a possible question of what does the world look like or a Brazilian or a ten year or a South African ten years a replacement for a treasury, But like, let's ask the less hard question of, like, okay, what would it for the R and B or Chinese debt to
start really becoming a meaningful global reserve asset? What would be the policy choice that China would have to make domestically or the trade off that China would have to make behind just trading globally and expanding its trade position. In order for its financial assets to play their role globally, the Chinese would.
Have to stop creating such vast surpluses, which means that all the various incentives in place to create massive excess saving in China, or some of them, are going to have to be relaxed. You know, if you're a Chinese person, there's a very weak social safety net. Until recently, you're only allowed one child. So to protect yourself with the future, you had to make sort of much higher levels of financial saving than pretty much anyone else in the world, you.
Know, financial oppression. You can't invest abroad.
That whole apparatus for creating you know, savings forty to fifty percent of GDP has to be at.
The very least wound back.
You probably need to relax capital controls materially. You need to reframe economic policy very seriously. I mean, the thing that makes China so important to the global financial system means that it's actually not a great destination for capital because you know, to the extent that the Chinese want to get rid of these excess savings, they certainly don't want excess Saudi or Indian or anybody else's savings because
that just makes the task that much more difficult. But I think, you know, it has to address this issue of huge excess savings.
So the idea of certain emerging market economies kind of banding together to do this, And I mentioned this in the intro, But we have seen the bricks, for instance, make some noises about. I think Russia slash Vladimir Putin talked explicitly about this common currency bricks idea. But what is the driving force there? Like who stands to benefit the most? Is it Russia or China? And I guess what I'm kind of getting at is what is the common thread that unites these countries if there are any.
I mean, I think it's a negative rather than a positive. It's independence from you know, one, the effect of US policy actions on asset prices, that if you have asset prices that aren't overwhelmingly denominated in US dollars, then you have a little bit more detachment from the US.
Two is independence from US.
Financial regulation and US sanctions, And I think those two are really the big driver. Ideally, there's a de linking from the impact of the US dollar that you but I mean, whatever you switch to, you're going to have the same issues with So I'm not sure that's as central as as it's been been pitched at. But mostly it's you know, it's de linking from the dollar. It's a negative. Rather than that there's you know that there's
some holy grail out there that might be attainable. I mean, I you know, I made this comparison before, but you know, the bricks really isn't you know that it's not the bricks that matter. It's China that matters. China is seventy two percent of bricks GDP, it's eighty percent of bricks growth. Yeah, it's you know, it's the bulk of the external surplus.
It's you know, it's it's everything else. I mean, I made the Dictator of Albanian and Vohoha used to sort of say, together the Chinese and the Albanians are a quarter of the world's population, you know, And I think, you know, it's a it's an overstatement. You know, I'm in India, clearly you know matters a bit. But you know, I think we spend a lot of time talking about the bricks when we really should be talking about China.
Well, we did an episode recently with Henry Williams and David Ogg's sort of taking a long term view one global development, and it was sort of the same theme that there are all these numbers that look really good in terms of the globe is getting richer and people are rising, et cetera. And really that number is just it's a large part basically the incredible boom in Chinese wealth over the last decades. When you sort of look ex China, the numbers are significantly less rosy.
So that makes sense.
You know, let's just say there, let's accept the sort of premise that there is this sort of new impulse among multiple countries to tilt somewhat the reserve mix, to think about maybe being less inclined to automatically put money
in treasuries. Is there a cost to the US from that, because I mean, you know, if we go back to the sort of like Michael Pettis Matthew Klein framework that you mentioned, the dominant role of the dollar, maybe it was making it artificially or sort of like I don't know if artificial is the right word, but a premium that was parstly in some way to US workers and so forth, like in your view, like what is the cost of some of these shifts to sort of US interests?
That's it. That's it.
I mean, it's an incredibly complicated question. You know, does the US you know, the exorbitant privilege? I mean it the main thing the US has which nobody else has is that it really doesn't have to care about anybody else. You know that You've that not only have you got relatively closed economy, but nobody else is really you know, the decisions of other central banks aren't affecting US monetary conditions. You don't have to adjust for that. And I think
that's the key case. I think the very low cost of borrowing in the US. I mean, it's most clearly felt in the treasury market. I mean of a total trade. I mean, the total treasury stock is about thirty billion, and about a quarter of that is owned by foreigners, you know, and that include you know, and the biggest holder is Japan. So it's not all breaks and it's
not all countries which are looking at the paradigm. But I think the idea that excess savings elsewhere feed through to the US exceptionally because of dollar dominance, so you've had a lower cost of capital, but you know, have financial conditions. Has a US benefited unconditionally from looser financial conditions over the last twenty years. I think there's a
very strong case that it hasn't. The impact of the dollar has been that financial conditions have been we have been looser, that treasury yields have been lower as a result of it. But I mean it's a removal of control, I think, and it's having to factor in thing, you know, decisions made by people who don't have your best interests at heart, that that suddenly becomes a consideration for US policymakers.
Again, I want to go back to this idea of you know, a lot of merging market narrative being basically all about China. And this is again Joe already mentioned the episode that we recently did on the failure of globalization.
But is the takeaway from all of this that, you know, we have been having conversations about the global economy pivoting towards ems, pivoting towards places like China, India, Brazil for literally decades now, and maybe in the case of China, there is some evidence that it's happening in China is now the world's second biggest economy, but for the most part, a lot of the EM strength that was anticipated hasn't
actually materialized. Is that the big takeaway here that the EM narrative just is failing.
Yeah, I mean, as an EM professional, am.
I basically asking are you in the wrong job?
You're asking, you know, have I wasted my career? I think there's a reasonable case that I have.
It's just I mean you divide it in sort of two that sort of pre two thousand and eight, before the global financial crisis, you had emerging markets rely on growing about two three percent faster than developed markets, and you could use that to build the narrative of the bricks. You know that there's catch up that a wildly disproportionate part of marginal growth is going to accrue to emerging.
Markets and people.
And as you say, people got very confused and started attributing to emerging markets when they actually meant China. But pre two thousand and eight, you could make it. You could really make a case that something important was happening in emerging markets that weren't China or India. I think since the global financial crisis, or more precisely since twenty eleven, when we got past the immediate impacts of the huge Chinese stimulus, which whacked up commodity prices and got Brazil
and Prue and all the metals exporters humming again. Since then, it's been very, very hard to make a convincing case that there's anything that's really going to matter to the rest of the world that isn't really pretty much all about China and maybe India, which is something for me to reflect on.
Yeah, I think that's a good place to leave it with Paul in Existential Crisis. Paul McNamara, thank you so much for coming on all lots. Appreciate your insights and your reflection on your own career.
Thanks very much. Chiz.
Yeah, that was great, Paul, thank you so much.
Great talking to.
Joe.
I found that really interesting. I mean, I do think we have to get Zultan back on the podcast at some point, but this was like a very good overview of some of the issues. Because people throw around the dedollarization idea all the time without actually thinking through a lot of the technicalities, and I think Paul's point about what are the viable alternatives or substitutes is a really salient one, and we have It is true that we have seen some central banks start to move away from
US treasuries. I know there's been a big boom in gold buying by official accounts over the past here, but realistically, you need a big market to actually put that money into, and there aren't that many viable options.
No, totally.
I mean I think you nailed it.
Well.
What's striking to me, just sort of broadly, is this is a perennial or every decade conversation, the end of the dollar, dedollarization, et cetera. It's usually and probably even still is today somewhat overhyped and overcooked. But to hear someone like Paul say like, look, there is something real
here going on. They can't be entirely dismissed that there is a political shift in several countries around the world, whether they look at the loss of foreign reserves that Russia experienced or other things that even preceded the war, perhaps related to inflation as well. I think we have to stand up and sort of take note. Absolutely, still a long way.
Yeah, absolutely, it's never It's never good when you know, if you think about the US's biggest export, it's financial assets, right, it's US treasuries, And it's never good when your customers are actively and vocally trying to get away from you. I do think it's worth discussing and even thinking back to a year ago again when Sultan's first research note came out and there was this idea of the multipolar
world deed auorization. There was a lot of pushback on that, but over the past year or so we've seen that theme sort of calcify.
But the other thing, too, I completely agree.
Like the other thing too is I.
Think to some extent, like the US, starting under Trump, is making this sort of I don't know how purposeful it is, but kind of purposeful sort of assessment of, well, maybe we don't want our biggest export to be financial assets. And so when you see like some of the shift towards domestic manufacturing, domestic chip capability, building, more LNG export terminals, et cetera. But no, I think, but I just think
like both parts both are moving parts. Like I don't think we could totally dismiss that there's something going on domestically the US where it's like, no, totally also making this decision where we don't really love the status quo either.
But the counter argument to that would be, do you want an economy in which the main buyers of US treasuries are all domestic financial institutions like banks?
Sure? And then yeah, sure, and then we.
Have problems like what we saw over the past month. I think you and I could talk about this, probably for another hour and go round it around.
We'll get some guests on instead.
Yeah, follow up, Let's do that. Okay, shall we leave it there?
Let's leave it there.
This has been another episode of the Odd Thoughts podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Alloway.
And I'm Joe Wisenthal. You can and follow me on Twitter at the Stalwart. Follow our guest Paul McNamara. He's at m Underscore Paul McNamara. Follow our producers Carmen Rodriguez at Carmen Arman and Dash Bennett at dashbot. And for all the Bloomberg podcasts, check us out under the handle at podcasts, and for more odd Lots content, go to Bloomberg dot com slash odd Lots, where we post transcripts.
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