Bloomberg Audio Studios, podcasts, radio News. Welcome back to voter Nomics, where politics and markets collide. This year, voters around the world have had the ability to move markets, countries, and economies like never before. Now the biggest of those votes has happened, and we've just got a couple more episodes left to help you make sense of it all. I'm Stephanie Flanders.
And I'm adrim Woodrich Well Adrian.
As you know, I spent last week in Washington, DC, which I think geographically was one of the less happy places in the US. On the morning of November sixth, I was looking it up. It's nearly ninety three percent of Washington DC residents who cast their ballots chose Karmala Harris.
And when I left my hotel around six pm on election night, as the ribbons and balloons were being put up in the downstairs lobby of the hotel for a victory celebration for Kamala Harris, donors and people were all checking in very enthusiastically, and I have to say many hours later, I think it was about three AM that I came back to my hotel room. There wasn't a
lot of that going on. But in the past week, the entire world has weighed in on how and why Donald Trump won the election so decisively, including our own Big Take podcast which went out on this feed. We're going to be much more forward looking and focused primarily on the economy and business in this episode. But first, Adrian, I did have one more fun voting statistic which I thought you'd like, though the margin of victory overall was
not that large. Donald Trump did win decisively, and he won ninety percent of the counties in the US last week, nine to zero, but the roughly ten percent of counties that the Democrats won account for around seventy percent of
US GDP. So I think you know, one of the things that that tells you is, you know, the big fact of American politics these days, at least when you look at last week, is that in terms of their electoral coalition, the Democrats are now the party of the economic winners and the Republicans, relatively speaking, other party of the comparative economic losers.
Yeah. Absolutely, the Democrats do incredibly well among the educated elites. And one of the biggest divides now in America is not over class, not over race, but between the educated, particularly the hyper educated and the rest of the population. And I think that the Democrats' job is to try and hold together a coalition of the elites with ethnic minorities. Essentially, that's been what they've been trying to do, and this time around they failed to do that. I wasn't as
glamorous as you during an election night. I was watching the election from Clapham in London. But one of the weird things about it, and I think it tells us something about the ninety percent versus the ten percent, is that the British commentariat was absolutely convinced that Kamalo is going to win, and many of them, I'm a fred, made complete fools of themselves. But that's because they visit that ten percent and they don't visit the other ninety percent.
So there's a whole America out there, you know, the right nation, as a couple of journalists once called it, that wasn't really given a look in in party much of the coverage of what's going on. And we need to focus ourselves on the fly of a territory, not to understand what's going on in America.
The other big fact about the economy, which Donald Trump has promised to fix and has complained about so vciferously on the campaign. Is that the US is doing pretty well. And so I think one of the things that we'll want to get into with our guests is, you know, whether and how he might be able to break that economy and what it means for those voters.
Well, there's two questions really. One is whether he can break that economy, but the other is whether he can take credit for that economy. There's nothing more sensible for a politician than to than to find a victory parade and put yourself at the front of this, and he may be doing that over the US economy. It's not at all at bad time to be coming in as president. Whatever the longer term implications of his policies.
Let's get into some of that now. So Trump two point zero might mean for the economy, for interest rates, for the Federal Reserve. More broadly, I guess for the future of business and with us to talk about some of that. Two friends of the Pod, John Author's senior editor for Markets and Bloomberg opinion columnist as well as author of The Fearful Rise of Markets, and Tim O'Bryant, head of Bloomberg opinion and author of Trump Nation, The Art of Being the Donald. It's an embarrassment of riches.
We've not managed to have both of you at the same time before, but we have had you multiple times. John, Why don't we start with the Federal Reserve. They had a meeting where they were meeting the day after the election. The chairman had a press conference that was after a massive market rally that we'd seen, which is largely still continuing, and not just in Tesla. Investors seem to think Trump two point zero will be fabulous for US companies and
not so bad for inflation. And if you look at the cost of borrowing currently for the government, are they right?
That is absolutely open for question at this point. This was the landmine that blew up the Biden presidency. What he wanted to do was deliver for exactly the people who feel most passionately that he didn't deliver for them. And the main reason that the various things he tried to do didn't work was because inflation took off. And there is a risk that Trump two point zero might just fall into the same trap. If you do have big tax cuts and big tariffs, you're playing with fire.
If your mandate is coming from people who are absolutely furious that your predecessor let inflation get out of control when inflation isn't absolutely totally unambiguous under control. Now that said, he's got a lot of adults in the room with him this time, and they are one hundred percent aware
that that is the issue. And so obviously there are going to be some fascinating polls when they decide exactly how high they're going to hit tariffs, how aggressively they're going to try to cut taxes, and the way the market will move and the way inflation moves over the next few months will inform that in terms of the FED, it could be the final moment in which the economic order of reassociate with Paul Volka and Margaret Thatcher and
Order Egan finally absolutely disappears. Post Bretton Woods, the replacement for the gold standard was basically an independent federal Reserve who you could trust, run by somebody like Paul Volka, and for some decade that was a very adequate replacement for the gold standard. There's any number of reasons to question whether the current version of the FED and its independence is working. Powell's term comes up in he has
to leave in May twenty six. That gives eighteen months to have a very interesting discussion about exactly how much Trump and his administration wants to limit and change FED independence. FED is a very unpopular organization with exactly the people who have just voted for Trump. Markets would be very, very nervous about a reduction in FED independence that left somebody like Donald Trump having the last interest rangth that would be scared.
After having what you might call a predictable response on his election win. You know, you had the stock market go up, but actually but the bond yields going up, people concerned about arising interest rates, and then I guess the way that moderated and where we've sort of ended up, and sort of more generally, the mood around it, you know, given how much we've talked about the risk of to FED independence in the run up to this election, the
risk of higher inflation coming out of taris. So I was just relatively surprised that people seem to be betting on those grown ups in the room, though we aresured that there aren't going to be as many as them were last time, that they will somehow be moderating Donald
Trump's behavior. I mean, maybe, Tim, I'll bring you in because people who have spent a long time looking at Donald Trump, and you among them, have always said to me, well, it depends on whether he really cares, because anything he doesn't really care about, he's quite happy to just change his view. Is this something that he's quite happy to change his view on, or does he really care about the FED?
I think he'd be happy to change his view on the FED. I don't think he's going to go to war over FED independence. He'll go to war over immigration. I think he's deadly serious about deporting millions of migrants if he can, and I think he hasn't thought through the consequences of that. In addition to the list that John had of slationary pressures on the US economy during Trump two point zero, should they drive you know, eleven
million undocumented immigrants out of the United States. It's going to have a devastating impact on small businesses, medium sized businesses, and it'll be very much like what happened in the restaurants and hotels in England after Brexit came crashing down on the British economy. The US needs a lot of those workers and if they're not around, it's going to
be inflationary. It's going to raise inflationary pressures along with if tariffs are in play, if the debt piper is coming to, the receipts on the US debt are coming due. And I do think he will just see that through. It's so core to what his political message was. Among his earliest cabinet appointments are immigration warriors. You know, I'm glad that we're talking about the economy because I think it explains the electoral forces that are mystifying people more
than anything else. I think the big force that is landed on both of these parties is that the white middle class working coalition that got built during the New Deal in the nineteen thirties and lasted until Ronald Reagan has been falling apart of the seams because the economy changed, you know, in the same way that the US went through upheaples in the eighteen nineties when industrialization overran the
agrarian economy. We are now in the midst of the service and technology economies overrunning the industrial economy, and workers are getting displaced en moss and real wages and a living wage, not just a low ball kind of subsistence wage, but living wages of the United States are not where they should be for huge swaths of the American population.
And it's been that way and it's been degrading that way since the nineteen eighties, and those voters have been looking for a home, and essentially both the Republicans and the Democrats have ignored them. And I think you run into the two thousand and eight financial crisis and this just accelerates, and Donald Trump is an outcome and an acceleerate of these things.
Wait a minute, Tim, I don't want to be a spokesman for Trump, but I would say that they would claim that they've tried to service those people by doing two things that Trump, yes, one is addressing the problem of outsourcing, and the other is addressing the problem of immigration, both of which they would say with the downward pressure on the earnings of non educated people not entirely wrongly.
The real pressure on uneducated people is their wages, and immigration plays a role in that in driving wages down.
And so does outsturcing player role in that.
You know, it drives wages down, and it creates competition in the workplace. I don't think that Trump administration has offered authentic solutions for that population, and they're about to find that out. I don't think that Democrats have come up with long term solutions, and so I think you have this very malleable voting block that moves from party to party because they're desperate. But people who are complaining about inflation weren't just complaining about bread and gas prices.
It was really an affordability problem. That population of people can't afford college, that can't afford homes, that can't afford sending funding their own retirement, and they just aren't getting their piece of the American dream, and justifiably they're angry about it, and they take it out on both parties and Trump was the beneficiary of it this time. But it's very interesting if you look at some split ballots all across the recent electoral map, where people voted for
Trump at the top of the ticket and Democrats down ballot. AOC, a prominent left member of the Democratic Party, posted a little chart to Instagram noting that in her own district, the voters who voted her into office as a progressive Democrat also voted for Donald Trump as president, and the common thread in those voters who voted for both of them was anti institutionalism. They feel like American institutions aren't
servicing their needs and meeting their needs quite rightly. So, and that's the challenge the US faces going forward.
I think, I guess one question is whether the economy that he's inherited was already delivering a bit more for those people, and whether it will continue to deliver despite or potentially with some help from Donald Trump's policies. You know, we've tended to think that he should just not wreck what he's inherited with a lot of uncertainty and a
lot of and the tariffs and everything else. But you know, some of his policies could potentially help parts of America if it brings business back, manufacturing back to different parts of America. Do you see any scope for that.
Because I'm really struck by the comparison with the nineteen twenties, whereby you had a you know, you had a policy of tariffs, and you had a policy of restricting immigration from you know, nineteen twenty four onwards, and you've got an enormous economic boom in the short term and one that benefited big, big, big junction of the population. Of course, in the long term it was a disaster, but in the shorter term it led to higher living standards and
the biggest productivity growth in American history. I'm just not certain that in the shorter term that this will be such a disaster.
That's not my reading of what's happened in the nineteen twenties and nineteen thirties. Protectionism starts in a much much bigger way after the Wall Street Crash, which is an perfect example of how allowing free market capitalism to go a little too far with too little regulation can create dangers. I think, if you wanted to, if there is one figure that we're seeing to that Trump might be trying
to air, this goes back to very deep history. It's Louis the fourteenth Minister Colbert, who is regarded as the inventor of mechantilism, which is a sort of precursor of capitalism, the idea of trade as much as you can with your colonies and don't buy any stuff. It's about maximizing trade balance as the way to grow an economy, and that isn't a ridiculous idea. It didn't go too badly for Louis the fourteenth for a long period of time. Although I'm not a great expert, I think the way
Trump might make this really work. And this comes out from something he said to John Mecklelthwaite when he was interviewed at the Economic Club. He said that there will be no tariffs at all if you build your stuff in America. I think what he's hoping for, in an incorrect way, is a grand deal where he tells people this is not unlike what happens under Thatcher in Britain with Asian carmakers coming to Britain once the unions had
been broken in Britain. You can come here and I don't mind you taking some of the profits, providing you employ Americans to do it. And that's a very difficult deal to pull off, but that seems to be what he's interesting. He's very angry about near shoring. I used to cover Mexico. The Mexicans horrified because at one point things look great for Mexico. And it seems that he's going to try very hard. He's going to try very hard not to allow foreign producers to get away with
moving from China to Mexico. He wants to make sure they come to the States. There's definitely a way that could work out spectacularly well for rebuilding certain parts of American industry that have been in decline. It's hazardous and it's risky, but there certainly is a logic to it. If we don't like globalization, if globalization has created inequality at a level that democracies continue to show they can't tolerate,
then what are you going to do instead? Something like a coherent Colbertise merchantilism logically might be one of the things that's relatively high on the list to try next.
I mean, I think you're right, John, and it did come through in that interview that he did with the editor in chief. It's an entirely consistent, sort of internally coherent view of America. First and the use of tariffs, and he also was talking about making money from some tariffs, you know, low level of tariffs on lots of goods, just as a sort of cash machine, and then as you say, other high levels of tariffs if you really want to move production at home and those two things.
You can't use the same tariff to achieve both those things, but you can certainly do different things in different markets. The bet that the financial markets. Investors seem to be making comparisons with twenty eight A side. I mean, maybe
we're just all heading for a fall. Is that the sort of deregulation, the let rip, the Elon Musk being in a high position pro business approach transactionalism will on balance be good for American capitalism, Whereas I guess the other the argument against would be, you know what, you can have too much transactionalism. If you treat everything as a transaction with individual businesses, You're creating a lot of uncertainty. You're undermining the rule of law because you don't have
any kind of level playing field. It's just who can pick up the phone to Donald Trump? And I just wanted the investor's bet at the moment seems to be that's not going to be bad for Wall Street to have that kind of transactionalism all the way down. Ultimately, who's going to pay a price for that?
Do you think taxpayers? If they're you know, ultimately it'll be taxpayers if a bailout is needed. I think that's what happened, you know, nineteen twenty nine we ended up having to have a World war to resolve the economic dislocations that the nineteen twenties produced. I hope and don't
think it's going to come to that. But you know, Bob Burgess, some Bloomberg opinion wrote a very instructive or column about you can look at the equity markets as one barometer, but if you look at what's happening to the dollar, and what's happening in debt markets, and what's happening with credit derivatives, you know, the dollar's going in the exact opposite direction that Trump's wanted it to go in. It's strengthening. He's wanted it to weaken in order to
make US exporters more or competitive overseas. However, much Wall Street wanted Donald Trump in office, they now have to live with him, and he is a mess of contradictions with no really clear philosophic grounding other than saber rattling for the sake of saber rattling. And in financial markets, it's like nitroglycerine. And sometimes that can be useful to blow through walls when you want to do new construction, and sometimes it can just blow up in your hands.
And I think we don't know which way this will go, but I think it also depends on who he brings into the administration. Right, there's some big jobs that aren't filled. Ja Clayton has been mentioned as a possible SEC chair that would I think feel a bit like an adult in the room in a way that people may not have expected.
Remind us who that is.
He's a Wall Streeter with some regulatory experience in Washington in the securities markets. He's looking to Wall Street for the Treasury Department as well. And I don't think anybody is interested in just creating a toxic stew of deregulation
and mismatched financial policies that end up becoming explosive. But you never know, because the difference in Trump two point zero from Trump one point zero is he is on a very profound revenge tour this time, and he's got a long enemies list, and so there's just going to be a lot of non rational, non capitalistic approaches the problem solving that will surprise people.
I think I think we should focus a little bit more on the non capitalistic side as well, because I think if you go back to the nineteen nineties, you had two parties that were both absolutely pro business in their hearts. Now I think you have two parties in some ways that have big anti business elements. That's obviously true with the progressive Bernie Sanders wing, but there is a wing of the Republican Party now that is very anti business, that thinks businesses hollow out the middle classes.
Exported job jd Vance being a spokesman for that to some extent, mart Marco Rubio, who would be quite happy to squeeze business in all sorts of ways, to impose tariffs that business doesn't want, because they think business has had it too good. And that's one reason why they attracted a certain chunk of the voters, because they wanted
to stick it to business. So you have business is in a much much more delicate position than it was in the nineteen nineties, and Trump, partly for personal reasons, would quite like to stick it to chunks of corporate America.
Until they pick up the phone and kind of give him a few compliments. He's been quite clear to us that you know, if you pick up the phone to Donald Trump, he admires your hoodspur and he gives you a deal like Tim Cook.
But he also wants to give a hard time to business. So as I say, is it's almost a person who operates above class interests, partly in his own interests and partly meeting out justice or meeting out rewards, according to him. So the anti business section of the listener, as I said with JG. Vans, is it's quite a spokesman for it's quite a powerful group and could be used to bring business in line at the very least.
And Elon Musk is at mar A Lago helping Donald Trump hand pick cabinet members, so there is a you know, the Silicon Valley contingent has someone deeply imbedded in the White House. And you made such a great point, Adrian, about where both parties are with business. I think the Democrats are bad at framing all of the opportunity and innovation that comes with the American business community, and the
Republicans have lost sight of that. And there's a lot of vilification around both parties messaging towards the business community. And I think, as with any professional class, some of it's justified, including the media. We all make mistakes, but I think, you know, the having a whole group be put in the doghouse that is essentially the fuel of
the US economy is going to be really problematic. And I think this will really come home to roost in the Trump administration view of big tech, because they're broadly interested in defanging the FTC and anti trust movements, and yet they really want the big tech monopoly to be
broken up. So you have this philosophic contradiction there. And then Silicon Valley has been the hotbed of American innovation now in a profound and revolutionary way for a few decades, with Musk himself being an ambassador for that through Tesla and everything else. And yet there's also this hostility towards the power it now wields. And you can't really have it both waves. And I don't think the Trump administration has figured out how to you know, split the baby.
There you'll have in oligarchs and out oligarchs, you know, all competing for the attention of the Sun king. If you go back to the coldbet just like Russia analogy.
Yes, there's a convergence in different countries of the way things are going to do that if you try to remember my you know, my undergraduate economics. But the Nash equilibrium or whatever, the point where everybody is comfortable is where everybody does their own mechantialist thing that seems to be the moderately stable equilibrium that we might be heading towards.
I think the mention of anti trust is fascinating in that it's one of the places where, under the weird political realignment that we're seeing, that you've actually had Amy Klobisher, a very impressive Democratic senator, and Josh Hawley, who was fairly clarion of the trumpet right, very bright Republican senator from Missouri, were drafting really very aggressive anti trust bills together.
And it seemed to me that this was a kind of thing that there was a possibility of a meeting, not unlike with Theodor Roosevelt over a century ago, of yes, we sort of believe in capitalism, but this is accept something needs to be done to rein it in and make it fair. That seemed to be a version that might come through as a new consensus. I don't myself think if we're getting rid of Lena Kahan and empowering Elon Musk, I assume that's less likely than it was.
But I can, as I was saying, I can quite easily imagine Donald Trump deciding a year from now, actually, yes, let's split up some monopolies and do anti.
Truck I think the problem with that is I think there's just be too many of the big businesses that have donors that have supported Donald Trump would stand to lose from continuing that kind of pro competition thrust. But it is interesting. I think if Jadie Vance ended up being more influential and Donald Trump got fed up with Elon Musk, which I guess a lot of people suspect
might happen. Jady Vance obviously has talked favorably about Lena Kahn, and I think does have more of that focus as you suggest.
Think about Steve Schwartzmann, right, another huge Trump backer, stalwart of the Republican Party, founder and chairman of Blackstone. I think it's now probably the biggest private equity firm in the world. His portfolio companies, his firm's companies span the entire spectrum of the American business landscape in every way imaginable, and its viability as a firm depends on that, and his investments depend on it. And he is not you gonna want to see Donald Trump taking a bulldozer to
ninety five percent of Blackstone's portfolio. Having said that, even if he doesn't want to see it happen. The random thing with Trump is it could anyway.
Thank you, Tim and John, Thank you so much. That was all good fun. Well, if nothing else, we've raised the tone on this podcast. You take your common garden references to the nineteen twenties, nineteen thirties, We pooh poo those, We take them and we raised them to Louis the
fourteenth star mercantilism. Although I should say, just to clarify people who were listening to John Author's earlier, that Colbert he referenced in the context of mechantilism was Jean Baptiste Colbert and not Stephen Colbert, who we can see quite often on American television. Thanks for listening to this week's photon Nomics from Bloomberg. This episode was hosted by me Stephanie Flanders with Adrian Wildridge, and it was produced as ever by Summer Sadi, with sound design by Blake Maples
and special thanks to John Author's and Tim O'Brien. Please subscribe, rate, and review highly this podcast wherever you found it