Moody's Talks - Inside Economics - China Angst and Container Cost

Episode Date: August 13, 2021

Daniel Rosen, founder of Rhodium Group, joins Mark, Ryan, and Cris to discuss all things China. Full episode transcript can be found here.Recommended Reads Deng Xiaoping and the Transformation of China, by Ezra F. Vogel,  https://www.amazon.com/Deng-Xiaoping-Transformation-China-Vogel/dp/0674725867.Japan and China, Facing History, by Ezra F. Vogel,  https://www.amazon.com/s?k=china+and+japan+facing+history&i=stripbooks&crid=BEU5K0MDV8FW&sprefix=china+and+japan%2Cstripbooks%2C178&ref=nb_sb_ss_ts-doa-p_2_15 Questions or Comments, please email us at [e-mail]. We would love to hear from you.  To stay informed and follow the insights of Moody's Analytics economists, visit Economic View. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Inside Economics. I'm Mark Sandy, the chief economist of Moody's Analytics, and I'm joined by, as is per usual, my two colleagues, Ryan Sweet. Ryan is the director of real-time economics, and Chris Dredes. Chris is the deputy chief economist. And I'm going to begin this podcast with a call out to my daughter. Happy birthday, Lily. She's my youngest. And, you know, she's, I think the hardest working person on the planet. I thought I was the hardest working person until, you know, she sheltered in place with us for a few months during the pandemic. And every morning I'd wake up, I'd go downstairs. And she had already finished her second cup of coffee. So, oh, Wawa coffee, I should say, too.

She's a little bit more eclectic, but she drinks Wawa coffee. So happy birthday, Lily. The only complaint I have is that she's at Johns Hopkins working on cancer research. It feels like she's in the CIA because I don't, it's hard to get information. out of Lily. I'm not sure exactly what's going on, but happy birthday, Lily. And we're also joined by Dan Rosen. Welcome, Dan. Thanks for joining the podcast. Hi, Mark. And Dan is the founder of Rhodium Group. And Rodium, tell us about road. Tell us a little bit about you, yourself, Dan, and Rodium. I'm really curious in how you, the little bit of your history and how you founded

the company and how things are going. Sure. I, I, spent the 90s at the Peterson Institute, which back then was just the IIE, the Institute for International Economics, worked for people like Gary Huff Bauer, Fred Burkton a lot. And nobody did China in those days, so they kept throwing the tires from China work to me. I had done Mandarin and economics, and I was interested in that stuff from 92, 93 on. So the 90s doing that, I sharpened my pencils against China WTO accession as an issue at the end of that decade, caught President Clinton's attention. He asked me to join the Anticon team, the NSC-NEC team at the White House for the last year to get China into the WTO. So people can blame me for that.

Nowadays, that's a copy of HR 44-44 on the wall behind me, the House legislation that got them in. So came out of that. loved the think tank work, but was unsatisfied just doing the usual think tank shuffle where you got to do private stuff one day a week. I wanted to be like two and a half, two and a half. And so came back to New York where I'm from and started putting together what today is about 65 people at Rhodium, working on China, global climate, a little bit of India work and some other things do. So it's an independent research company with a bunch of earnest. folks working on some globally relevant questions. Yeah, and I should have started by saying, of course, we're talking about China here.

And there's no better voice on what's going on in China. And, you know, clearly there's a lot going on in China. And of course, you has China relationship as well than you. And so we're, you know, very happy and honored to have you join us. And you told me in our conversation we had a little bit of a prep call that you think you're competing with us somehow. Oh, on the climate change side. We're a little bit of a competitor because we purchased Moody's purchased RMS, which provides a lot of climate risk information. And now we're kind of competing.

Is that right? Well, I'm sure it's more complimentary than anything else. I mean, you know, like China, like China in the United States, Mark. I'm sure, right. Exactly. I'm sure you're right. But my colleagues, my colleagues on the other side of Rodium, led by Trevor Hauser, an extraordinary, extraordinary guy, have built some. pretty powerful tools for looking at physical climate risk in assets against sea level,

temperature changes and other climate change vectors out into the future. So we have a few niches where we've gotten pretty good. And yeah, see you in the marketplace. Yeah, I'm a little nervous now, the competition. But we thrive on competition, right? This is America. So, you know, competition is good. I was going to say one other thing.

What was it? Oh, we participate. In fact, we were on a three-hour call today with the National Committee on U.S.-China Relations. Is it relations or relations? Yeah, relations. And that's a really cool group. It's been around since the 60s. And I think, I don't know if this is right, Dan, but they were involved with the mission, the ping pong mission under Nixon.

the first kind of foray into China. Is that right? Do I have that right? Ping pong, you know, played this crucial role of showing civil society that, you know, they're not, you know, aliens over there with like three heads and blood coming out of their eyes. And back then we didn't have diplomatic relations with China, right? That didn't happen formally until the end of the 70s, 79, in fact. And so if you don't have diplomatic relations, how do you issue an invitation to a foreign ping pong team to come to your country? And so it was left to a civil society organization, the National Committee, to be the host organization for this people-to-people exchange. And the rest is history, kind of.

Yeah, it's a great group because it's business people, acomeditions, both on the American side, the U.S. side, and on the Chinese side. And it's a group of people that, I don't know, know, I've been doing this now for participating. It's almost probably going on in a decade now, but they've got to, how long have you been participating? You've been. Oh, yeah. I mean, I've been involved there in one way or another, really since the late 90s even.

I'm on the board now. And this dialogue, right, we've been doing it since 2010. So, you know, the whole idea, it's so-called track two dialogue is, you know, there might come a time when your government-to-government contacts are a little bit touchy, I think. you might say. And it's good to have some unofficial people to people links to kind of keep the conversation going during those patches. And that's what we did three hours this morning, didn't we? Yeah, we did. And you really mixed things up. So we'll get back to that, though. You have a strong, you have a strong view on China or views. And I want to tease that out a little bit. But before we do

that, though, here at Inside Economics, we have a tradition of first going over the economic statistics. We're a little bit nerdy, admittedly. Ryan's more nerdy. Actually, Chris is the nerdiest one. Look at his, you know, he's back to wearing his howdy duty shirts again. Oh, come on, come on. The badge of honor. Yeah, badge of honor. Anyway, so we begin with the statistics and we play a little game here. We, because, you know, statistics can be a little dry unless you, you know, are an economist and are into the data. So we, uh, each of a single, uh, single out a statistic or two that we think is particularly important in the past week or in the coming week. And we tell the statistics and we try to guess what that is. So since Ryan is, I hate to say this,

but Ryan is probably the best at this. Would you say, Chris? Yes, admittedly. Yeah, I think he's the best at this. We'll begin with you, Ryan. So what's your statistic of the week? Forty nine percent. 49% 49% and that's a statistic that came out in this this past week

yes I stick to this week right it's tied to the labor market oh well what came out this week the Joltz numbers came out this week that's the job opening labor turnover survey that's the high there was a record number of open job positions right over

10 million open. Over 10 million. Yeah, but that's not it. I have a love, hate relationship with this release. I don't,

do you know, Chris? No, it's not 9%. Can you give us one more hint or before we, we give up? Pre-pandemic,

the highest was 38%. Oh, small business, trouble hiring. Yep. Yeah. So 49% of small business say they have at least

one open position. that's hard to fill. Really? And that's a record high, 49% say they have at least one open job position. And that ties in with the joltz number. Correct. And also kind of argues that the ending of the UI benefits

really didn't ease labor supply constraints right away at least. Right, good point. You'd expect that to ease off a little bit, but you haven't seen that. Right. Okay. Good one.

That's a good one. Chris, you have a statistic? I sure do. 2.3%. Wait, what was that? 2.3. 2.3. Positive 2.3%.

Productivity? You got it. Oh, and you wrote the release, I believe. I did. That was 2.3 was second quarter and utilized productivity growth. Non-farm business? Correct. All right.

All right. Here. Well, we'll see how good Ryan really is. Ryan, what was the increase in productivity, Q-on-Q, analyzed for, non-financial corporate business. I didn't look at that one. Oh, all right. Well, I'm a little disappointed.

Dan, are you disappointed in that? No, Dan, Dan, saying he was in front. Side lines. I'm on the sidelines. Warm up. It's a warm up. Okay, that's a good one. That's a good one.

All right, I'm going to go next. And then we'll turn to you to see if you have a statistic you want to. Actually, I have a good one for you, Dan. We'll come back to that. But here, this is a two-part question. I'm going to give you four numbers, and you've got to tell me, what I am what I'm trying to measure. Ready? You ready, guys? I'm ready. And it was this week, right? This week. They were all this week. Right. Yeah. All right. Ready? Four numbers. 2.2% inflation expectations. God, I know where you're going. I didn't say it. Wait. Okay. All right, hold on. Hold on. Hold on. Hold on. Hold on. Hold on.

Okay, that's the easy part. Okay, I'm going to give you the four statistics. And then you've got to tell me, you got to tell me what measure of inflation expectations each one corresponds to. All right, ready? 2.2%? What does that correspond to?

Five-year-five-year-fourts. Very good. That's good. Five-year-year-forths are teased out of the bond market. You go to the 10-year treasury yield. I can tease out of that what inflation expectations are in the long run. That's five-year-fif-fours. and they're saying 2.2%.

Okay, ready? 3%. U-Mish, one year ahead. Yeah. No, not one year ahead. Oh, is that 5 to 10? Yeah. Five to 10?

Yeah, yeah, okay. That was a slip-up, actually. Ready? Ready? 2.2%. Is that our? No. Inflation expectations thing?

No, no. I knew this was going to trip you up. 2.2%. It came out today. You may not have seen it. Oh, is this one of the Philly Fed survey professional forecasters? It is indeed, the Philly Fed professional survey, which by the way, I think I've said this before. I'll say it again. I think that is the best measure of inflation expectations, at least if you're trying to focus on whether this is, inflation is becoming an issue or not, because economists tend not to change their forecasts, no matter what's happening. So if they start changing their forecast like me, because we, I participate in the survey as an example,

that means inflation expectations are definitively changing. And, you know, there are 2.2% is the highest. It's been in a decade, though, that has pushed up. It was, you know, it's been, you know, closer to 2. And now it's at 2, 2, which is kind of the high. This is core consumer expenditure deflator inflation. So this is what the Fed looks at. And they've been, you know, through the business cycle, they target 2% of inflation. So 22, I think that's where they fed would want it, but that's kind of on the high side of where the Fed would want it. Okay. One more.

2.4%. 2.4%. No? All right. You said it before, though. That's our, that is our pulse, inflation expectation pulse measure. So we take 20 different measures of inflation expectations, you know, five year, five year forwards, tips, you know, Philly Fed, UMISH, a bunch of other stuff, mishmatched that all together using some statistical techniques to get kind of, to the underlying trend or, you know, cut through the noise, and it's at 2.4%.

And that is, to be precise, it's 2.37%, but I thought that would be, you know, a little too precise. But, you know, that's, that's inflation expectations by that measure. And that, that has rolled over. That, that is, you know, still high, but is coming back in. And, you know, sign again that inflation expectations remain very well contained. So very good. Okay, Dan, I got, I got one for you. Okay. And, you know, I have to admit, I'm not, I'm not sure exactly what this is, but I'm going to do this. Great. That absolves me from getting it right. I love it. Bring it on then.

I think I got it roughly right. I read it quickly and then I kind of sort of forgot it, but I thought this would be perfect for you. $15,000. Oh, I was going to use this one. Oh, were you? Yeah. $15,000. Yeah, $15,000. I mean, it's arguably sort of a Chinese PPP per capita income level. You're overthinking things, Dan.

You're overthinking things, Dan. Oh, okay. But is China related? It's China. Well, I figured it was China related if you're tossing it my way. Yeah. Cost per household of the tariffs over the past 12 months? No, but it is a cost measure.

Brian, you want to help them out? You want me to give them a clue? Yeah, give them a clue. It's going to go higher because they close down a terminal at one of the busiest ports. Oh, it's $15,000. Oh, it sounds low to me, but it's cost per shipping container. Yeah. Trans Pacific, I guess, a port of Los Angeles or something like that.

I've heard numbers as high as 20, but yeah. Oh, well, maybe it's headed higher. I mean, I think this was Shanghai, was it to New York? Yeah, Shanghai to New York. Shuiangha, I did New York for $15,000. And kind of typical was like half that, wasn't it? Oh, yeah, yeah, it should be. It's like double what it normally would be.

Yeah, I think folks would grab it at 15K right now with the Christmas season, starting to, you know, be at its, well, really at its peak right now, right? So for shipping for late year, for late year Christmas inventories. So it's a problem. Yep. Yeah, and I think what happened was they found one dock worker who had, COVID and they shut the whole thing they shut the whole terminal down that gives you a They have a no tolerance policy now that is correct well they they declared one

stevedore who was testing positive which there's a certain multiplier uh to be considered should I throw one of you guys too then yeah far away is this are you going to be easy on us or you're going to be hard on us. You'll need a couple well I don't think there's any chance you'll get it at all I wouldn't have gotten it in front of me but but just this is the competition the competition competitive juices are already kicking in. There you go. Just as a pivot, though, toward the China topic maybe, 81%. 81%.

81%. Okay, we will, I think I will need a hint. I'll give you one clue. It's out of the U.S. China Business Council's member survey of sentiment on key issues released this week. On key. Okay. Something that came out this week, 81%.

I want to say 81% of the respondents say, because Chinese inflation came, statistics came out this week, China's inflation is going to accelerate from here, something to that effect. Yeah, no, these companies don't talk about serious stuff with the U.S.-China Business Council, but it is somewhat or very concerned about China's information flow and technology security policies. Yeah, okay, yeah, you're right. That's a much better. Yeah, we're never going to get that one. Yeah, but although that's, that makes a lot of sense.

That makes a lot of sense. Sounds low to me. Yes, that sounds low, right? Show me the 19% of people who aren't concerned, right? Yeah. So are you concerned, Dan? Are you concerned? How would you have answered that question?

Am I concerned? I mean, I'm not concerned because that was my expectation that people would be freaked out by the things that are happening. And I've been arguing for some time now that, um, the direction things were taking was problematic from the perspective of private firms trying to run their businesses. And so I'm not concerned to the extent that my perspective looks prescient at present. But if I were, you know, if I were hoping for strong, sustainable, predictable Chinese growth and its relationship to global conditions too, yeah, I'd be very concerned about what we've seen over the past month.

Yeah. And we'll come back to that in just a minute or just a few minutes, because that's, an important subject to tackle. I do want to say that we do pull listeners to the podcast. And you can go to, for example, you can go to where do they go, Ryan? Economy.com. And if you go to Economy.com, you'll see a button right there. And you'll see it right there at economy.com. And we ask, what do you want us to talk to the listener? What do you want us to talk about on the podcast? And China is, far and away the number one topic that people want us to talk about. So it's, you know,

definitely top of mind. So I wanted to kind of begin. So we're now moving into part two of the podcast and this is the big topic being China. And thanks again for, you know, participating here. I guess we, uh, should we do the disclaimer? Oh, go ahead. You do the disclaimer. This is your show. I forgot it. Ryan is being very cautious and he suggested that we just let everyone know, but I'm sure everyone does know, but just to make sure that we are not in the rate, we're part of Moody's analytics, which is independent from the Moody's rating agency. So these are the views.

This has nothing to do with the rating agency. So this is this is Moody's analytics. But I think that's wise to do here, given the sensitivities. But I wanted to frame, begin the discussion by framing it this way. You know, I think it's, it's fair to say that China has been vilified during the Trump administration. Certainly, even before the Trump administration, there was a lot of hand-wringing about China, you know, going back to the WTO and the impact of China's entry into the world marketplace and the impact that had on U.S. manufacturing. A lot of really good academic research, you know, showing. you know, connecting the dots between the hollowing out of big parts of U.S. manufacturing and

in China. So there was a lot of angst about China even coming into the Trump administration. But, you know, obviously President Trump took that to a whole other level, tip for tat trade war, which by the way, I think, did a lot of damage to the entire global economy, but also to the U.S. economy. It was, you know, struggling in 2019, coming into 2020, you know, even prior to the pandemic, I think we're having some trouble. You know, the efforts to restrict American company's ability to do business with Chinese companies. Huawei, you know, is the name that comes, you know, to mind, but there was, you know, many others. And then, of course, the thing that really vilified China was over the pandemic, you know, blaming, just point blank, blaming

China for the pandemic. So, you know, China in the minds of Americans, I think certainly its stature has been significantly diminished, it's been vilified. Let me ask you, Dan, this question. Do you think I've characterized things correctly? Do I think, do I have that right? And is it fair? You know, should we think of China in that kind of a light? How do you think about it?

This has gone back and forth through like five cycles since the American Revolution, actually. And I mean, just think the 20th century, you have both the vision of the yellow parallel of millions of people in Mao suits pouring over the berm, right, in the Korean War sort of thing, versus Pearl Buck's good earth, this vision of the noble agrarian Chinese farmer who just wants to be left alone to, you know, ponder Christianity and consider, you know, consider, consider their place in the world and all. And so, you know, there is this thing about the other that keeps swinging.

back and forth. And it's not just an American phenomenon. There's a, there's a corresponding sort of idealization of the United States and in the Chinese mind. Megua, the Chinese, the Mandarin for America means beautiful country, beautiful place. And that's very much the mythology that is laden in the Chinese 20th century experience as well. And then it swings into this, phase that we're in right now where not just Chinese propagandists and wolf warrior diplomats that are saying very nasty things, even nastier than than you think of Trump saying, frankly. But among the people, too, there's a real sense of grievance right now of what they perceive the American position to China to be. Now, of course, they're not getting a free flow of

information, are they? They're getting a government curated, Chinese government curated package of ideas about what the U.S. is and isn't doing. But, you know, we haven't actually comported ourselves beautifully in the past 15 years. So there's plenty of warts to look at. But so I think it's a, it's a two-way sort of weird marriage that's gone back actually a couple hundred years with these odd swings. Oh, that's interesting way of thinking. I didn't, yeah, I hadn't put it into that broad historical context. So you think it's just a dynamic that, you know, if everything, if the future is consistent with the past, that, you know, this will swing back at some point. I certainly hope so, right? And I certainly don't think that the present gestalt of seeing each

other through such dark lenses is sustainable. I don't think it's rational on either of our parts to so quickly go to such a partial, selective, pessimistic view of the other. I don't think that's merited at all by either of our behaviors, although we have a lot of structural competition and even some conflict taking place, right? So it's going to take some real leadership to steer through this period into what will hopefully be a more thoughtful view of one another going forward. Yeah, hopefully that day sooner rather than later. You know, I think one of the reasons for kind of the American angst over China is that the

Chinese economy actually has performed so well over the last really quarter since the WTO, really, you know, it's come on incredibly rapidly and performed very, very well. And I think that gets people angs. And, you know, there's, you know, there's a second largest economy on the planet. And, you know, if you kind of do the arithmetic, do a little bit of forecasting, you know, it looks like, at least in our forecast, China's. economy will overtake the U.S. economy in terms of just sheer size, GDP, the valuable things that we produce. You know, sometime in the late 2030s, you know, something like that. Do you guys do at Rodium explicit forecasting that you have like a projection for like Chinese growth next quarter next year

over the next 10 to 15 years? We're not competing on that one. We don't have a professional grade forecast product. We don't think of ourselves as offering a forecast service per se. But we do a huge amount of analysis around the outlook for China's growth that we kind of bundle into the broader contextualized views of the future we have. And we've spent a lot of time looking at China's growth potential trend potential growth outlook. In several studies, we've written that up. And, you know, let's just kind of start there, I guess. I mean, a few things. First of all, you're right.

I think it's China's extraordinary growth is one of the. factors that drive some anxiety, economic, strategic and otherwise, right, in the United States and elsewhere. But, you know, China started this journey in 1978 in today's terms at about $300 per capita income for every man, woman, and child in the country, about one quarter of what Nicaragua was at the time. So if they had only been at Nicaragua levels of welfare, which was terrible in 1978. Then their GDP growth average to today would have been about 4% on average annual rather than the fable double-digit, you know, juggernaut that China delivered. So, you know, if you start so emissorated as China did, you can't help as long as you just stop shooting

yourself in the foot twice a day, but turn in an extraordinary performance for a long time. And, you know, that has brought them to, you know, the $17 or so trillion status are out today. But looking ahead, right, beyond the medium term, we want to use like a growth accounting framework, I guess, right? And there's just three channels. There's demographic. There's capital formation and there's total factor productivity. And I think folks have really come to appreciate how serious the demographic outlook is this year. Some just released China 2020 decodinal census.

Data showed rapidly declining birth rates nowhere near the replacement rate. By 2060, you know, those numbers suggest that Nigeria will have a higher population than China in real terms. So demographics is contributing zero, let's say, to China's GDP growth potential out over the next decade. Well, wouldn't you even say it could be even negative, right? It would be negative if it weren't for H, the education enhancement of the human capital potential, right? So when you consider that 900 million of those 1.4 billion Chinese are still deeply inadequately educated, there is a lot of catch-up potential on the demographic channel to do better than zero, but not much better than zero, I would say, right? So then you turn to capital formation, right? Capital stock, build-out. And we get into big debates with people like my colleague Logan Wright, who works for out on China credit dynamics from Hong Kong.

He and I have written about this quite a lot. But, you know, China pulled a lot of investment forward in the long arc cycle, right? And sort of prematurely built out its property sector, overbuilt its infrastructure and whatnot. And so it's pretty hard to explain why capital stock value, annual value, should grow from the level it's at right now, which is already like $8 or $9 trillion a year of annual investment. How do you grow that number while fixing the horrendous incremental capital output ratio that they're grappling with, which a decade ago was, you know, five or so, five rem and B. investment generated one rim and be of sustainable GDP growth activity. Today, it's 10, right? It just takes way too much. So that means that already they're throwing capital at everything they can and not getting as much return as they used to. So I find it hard to scrape more than like one point of

annual GDP growth out of capital stock growth going forward. And that leaves the entire burden on total factor productivity, right? And look, if you believe as I do that China today is horribly over-deploying capital to state-related industries, sunset industries, not offering enough access to that lending, that credit to private sector firms, then the silver lining is that you should be able to get some amazing TFP growth if you permit a different kind of intermediation of capital in the system. And I do believe that. But now we've got to look at the politics and ask ourselves whether this government's comfortable democratizing access to capital. What do you think? Well, they've not shown an inclination of moving. Apparently,

Moody's thinks that it's going to go swimmingly because you think they're going to pass the U.S. in a couple of years. So I guess you've already answered it. Come to think of it. No, well, I'd say to put numbers to it that underlying potential growth, and the growth accounting you just did kind of adds up to the underlying potential growth rate of the economy probably is, you know, six, seven percent, is. And then over the next 10 years, that moderates down to, you know, three and a half to four. And then if you look out 25 years or so, and we, we, at Moody's, we forecast out 100 years because of climate risk. How did you get the 10, though? How did you get the Tim, because I've got zero from demographics, one from capital stock, and you're lucky if you can scrape out two or three from TFP right now.

Yeah, it's really, well, I'd say I think it's not an argument around demographics. It's not an argument around capital stock. It's really a question of TFP. Right. And that, you know, there's a lot of uncertainty around that. And, of course, China seems to be laser focused on, you know, expanding out activities that are highly productive. and there's a lot of room to, you know, grow there. But we have it moderating as well.

And, you know, if you look out 15, 20 years from now, I think more like 25 years, if I remember the forecast correctly, U.S. and Chinese potential GDP growth are about the same. They're about the same, you know, out there. And in fact, if you look at our long run forecast, the two economies are roughly the same size, you know, in terms of GDP going out into the future because, you know, the growth rates are about the same. So this gets us right into the heart of the present moment, right? So there's these unanticipated regulatory interventions taking place, most of which are coming with a message,

Mark, like the one I mentioned during our meetings this morning, which is all, of course, off the record, but I'll say it again on the record, you know, telling entrepreneurs that they can be as entrepreneurial as they want to be consistent with patriotism and taking the country's interest in the consideration first. when they get up in the morning and thinking about their bottom line seconds, I am not familiar with another country that's managed to have that dual mandate on business people and see it work productively. Yeah.

No, I hear you. I hear you. I think there's a lot of risk around that. And that gets to the current crackdown, well, that's the right word, on the country's tech industry and on its private, educational, let's call it services industry, which confuses me to no end. You know, maybe you can describe, you know, what they're doing. And then probably more importantly, why they're doing it.

I don't quite get it. You know, what is your take on what's going on here? Yeah, let's try. There's like two schools of thought. One is, well, there's many schools of thought, I guess. But the two I've kind of heard is on, well, one is that, you know, it's around redirecting energy resources, investment from more frivolous types of technology like TikTok or, you know, Alibaba to more productive types of technology. So it's kind of redirecting, you know, the, where the resources are going to more productive activities. And the other argument is, well, no, this is the Chinese authorities view the tech sector as a threat to their ability to manage things politically.

And therefore, they're basically suppressing that sector so that it doesn't become a problem for them in terms of their, you know, their political goals. do I did that is that right do I characterize that correctly in terms of well or more than that it's partially right I think there there are multiple impulses here and there's it's sort of open season on going after companies for any number of reasons as long as you know you argue that it's what she's in ping told you to do you can do it and later we'll clean up like which of those things was actually merited but consider that going after DEDY, Uber's frenemy, a big investor

in DEDE, but also a competitor around the world, right, was motivated by anxiety around data. A car nowadays, like somebody told me that a next generation vehicle is basically processing about 100 gigabits of data an hour. With all the sensors in it, all the chips, it is a moving information collection device. If you think that,

somebody can see too much about you because you have an iPhone in your pocket. Imagine having 30 iPhones in your pocket and that's what you're doing when you're driving a Tesla, I guess. And so it occurred to somebody that, you know, letting, uh, letting DDA, you know, run, uh, unleashed, um, is, uh, opening up a lot of national security peril around data stuff. So there's data. Um, Alibaba, uh, and going after financial fintech. platform companies was not, well, it is also about data because those companies know, you know, whenever I take anybody out for a drink, they know who it is pretty much, you can put it all together. But I think that, you know, the good, the best explanation for what was so compelling about

pushing the pause button on Fentec was that the systemic risk tied up in unregulated, not bank license, regulated financial players, non-banks, with massive role at the margin in flows and solvency and counterparty risks and all sorts of stuff going on there in that sector. So you could say that that was, you know, in no small part driven by systemic financial risk concerns, actually, which given the state of liabilities in China, I think is merited to be concerned about that. So that's two things. Education technology is not really about technology or systemic risks. It's about the exposure to non-state approved ideas. Really, these are private education entities and authorities are intensely worried about their ability to control

and influence the flow of ideas and how people will react if they get heterodox views on what to think about minorities within China or about how to interpret, you know, the American behavior abroad or something like that. And so that's a very different, even more more worrisome in a way motive to want to put a leash on those kinds of companies. So that's three totally different impulses explaining these extraordinary regulatory intrusions. And yes, they all contain political considerations. There's almost always some national security, next generation national security worry about how companies can affect the national security interest. And we haven't even gotten yet to sort of competitiveness concerns about how Beijing tries to keep the scales tip the right way to make sure that Chinese

companies have a shot at being dominant in emerging and foundational industries like new energy vehicles. I guess some of those reasons are perfectly understandable, and they're motivating policymakers here in the United States, right? In Europe. So it's not like this is just a Chinese phenomenon. This is a global phenomenon where governments are nervous about tech companies and the power they have over lots of different dimensions of our lives. And in terms of fintech, there's, you know, we've got here in the United States, the SEC commissioner saying, you know, crypto is, you know, the Wild West. It's a problem. We've got to do something here.

And crypto was on the list. One of the first chickens that was killed in China, too, arguably because it was so energy intensive because it wasn't productive activity. It had no benefit for the common man, that sort of stuff. So there are antitrust motives out of Beijing. There are energy and carbon. intensity, motivations as well. There's all those things. And you're right. Many of them are present in Washington or Brussels or Berlin or somewhere else as well. Not the information control ones in order to keep everybody, you know, orthodox as opposed, you know, in terms of communist ideology. That one is not present. And but for the others, it's not so much the concern among regulators, but the manner in which it's being done.

That is so worrisome, right? Meaning, it feels kind of capricious. It seems personal. What do you mean by that? It's not being done in a predictable rule of law-based manner. Chinese institutions, right, the ability, even in the U.S., the ability of our regulators to separate, we debated this all through the Trump administration, right? He was very much taking liberties with traditional due process in America and the ability of businesses to have a chance to weigh in with the regulatory bodies before the government just announced that everything was going to be hit by a massive tariff or the businesses they were doing were now on an entities list and you weren't allowed to do business with anybody in the world.

Sometimes in the middle of contracts, such as when President Trump ordered GE to stop shipping aircraft engine, the last nine, of a 39 engine contract to China, just pointless, right? Pointless. And so, you know, I think at the end of the day, our greatest asset is our institutions, the predictability and the marketplace for businesses that, you know, if government doesn't like this, they're going to have to take the necessary steps and measures to talk to me about it to some extent. And if they don't, I can challenge it in a court of law. I can get an appeal. And I can get the law turned around. and even Chinese companies in America have managed to get themselves off some of these entities lists, get some U.S. federal government decisions overturned because we are so enamored of rule of law.

And it's a lot of lawyers slowing thing down in the short term. But in the medium term, it's so much more productive than the Chinese government's saying the entire education services industry is now nonprofit overnight. A trillion dollars of equity wiped out. And for what? With what impact assessment to back that decision up? Yeah. These are all great points. And we don't have a whole lot of time with you.

And there's a number of different things I want to get your views on. But, you know, including U.S.-China relationships, the Biden administration. I know you at Rodium have been developing a product called China Pathfinder. I want to talk about that. And then I want to push back a little bit. But before I get to all of that, and I want, China seems to have a litany of economic issues. I want to kind of list them.

And then I want to ask you to say, to complete the list and then rank order them in terms of what you think is most significantly a problem to least significant. Does that make any sense whatsoever? Let's try. Okay, great. So first up, high and rising, leverage. So, you know, the kind of before the pandemic, the hand-wringing was around the rapid

increase in debt accumulation that was occurring, particularly in the household sector, but also to some degree in the corporate sector, a little less so at the federal government level, but local governments were also leveraging up. So leverage is one. Second, asset bubbles, you know, feels like housing value, you know, we have a problem with housing values here in the United States now, but in China, over the last 10, 15, 20 years, they've been battling high and surging asset prices, speculation in housing markets, you know, kind of there's been a cycle there. So that's been an issue.

Of course, the equity market and valuation in the equity market. Third is inefficient state-owned enterprises, which, you know, the thought there was, well, they're being diminished over time, being replaced by more productive, uh, uh, uh, higher return private companies, but that this, you know, given what's going on recently, that may not be the case. It seems like state-owned enterprises are, you know, coming or flexing their muscles. Climate and the environment, you know, we've got a global problem with climate change, you know, obviously here in the U.S., but, you know, Chinese problems with the environment are notable.

And then, of course, the, you know, the political issues, the political crackdown. You know, where's Jack Ma to Hong Kong to Taiwan to the Uyghurs, you know, all those kinds of things. So it just feels like there's just a whole slew of things to worry about. And did I miss anything? And how would you rank order the, are any of those things, things I shouldn't be worried about in terms of long run Chinese growth? And how would you rank order those? Well, I'm sure I could add another 15. Okay. If we want to do that. But let's work with the five, let's work with the five that you've got. Because those are, those are good ones. and I'm going to start by putting your first one high leverage, high and rising leverage

issues at the top of the list. Okay. And I'll explain why in a second. But especially if you put the denominator of GDP underneath it, right? So the amount of, as growth slows, as we were talking before, and, you know, ostensibly, we're running at sort of a normal annualized rate of about 30. five and a half percent GDP growth right now, right? Real. I say ostensibly because I'm not sure, nobody can be sure that that is really the best number to have in mind because there's too many

there's too many data points missing presently for us to be super confident about that. But I think it's probably less than that. It's probably like, should think of it as somewhere between three and five maybe right now. And it's half of what it was a few years ago. And so whatever the leverage is, less GDP growth and, you know, and that's natural, right? It's a sign of their upper middle income status that that's going to be inexorably lower looking ahead. And yet the amount of leverage that needs to be serviced, the debt service is no less high all the time. Chinese household debt to income ratios today are worse than Las Vegas in 2006 now. And that was utterly not the case in 2009.

after the financial crisis, Chinese households were not under a lot of debt. Also, on the corporate side, people often point to the comparison of overall national debt levels in China and the U.S. The big difference between us and them, of course, right now is that all of ours is on government balance sheet at like 0 to 0.0 something percent. Most of China's is on corporate and household balance sheets at like 5 to 10 percent. effectively, depending on if you're a small business, you're effectively paying 10% for credit in China today, right? So I think that's number one and most concerning about it is that it has handcuffed them to continuing to hold rates down so that because as soon as rates go up, the whole country's loan book automatically ratchets up.

Most of their debt is not fixed. It's adjusting, especially household. And as soon as it goes up even a little bit, the number of bankruptcies start to go through the roof. They're terrified of that. So they're trying to find a way to keep it down without the misallocation into property, even more that comes along with holding it down. So they're in the trap. They are in that trap. And there's no easy way out of it.

So that's at the top. Acid bubbles, equity bubble. I'm concerned about the property sector. my colleagues seem to think that we're looking at it like a 10 to 25% correction in property prices nationwide. It is the singular store of savings in China, right? China is 97% home biased. Nobody has, you know, a diversified portfolio. And within China, you know, folks have like massively more of their wealth tied up in property than anywhere else in the world, really, just to bow for all practical purposes. And so a correction in property is really going to be quite painful for the

household sector, for four or 500 million urbanites anyway. So very concerning. The SOEs, they've been a problem. Yes, state on enterprises. Big problem. Biggest part of the problem is that they are taking up market space that dynamic private Chinese companies could grow into and would be super attractive. That would be very, a lot of TFP, a lot of productivity gains possible for the private sector if it were allowed to grow into that space. Tragedy here, Xi Jinping early in his tenure, 2013 to 15, was committed to shrinking the role of the SOEs rationalizing it, getting the state out of the tourism sector, you know, places where there was just no credible reason why the state should be the one, you know, taking up space there.

And that process was very much put on hold because the state wants to control the demand function. And it's easier to do that if you've got such a big state sector. So look, as long as government gets back to telling folks, we have a 15-year timetable to start to move the SOEs out and let private end, people will be tolerant of that if it has credibility, if they believe that because China had a great track record, right, of gradually. growing out of its mess, didn't need shock therapy, unlike other parts of the world. And so I'm willing to believe it, but they got to prove it to me again that they're really willing to do that. So climate, we're all in the same boat, political issues. Also, if China offers me a credible transition plan of where it's going to start rationalizing the role of government, I'm willing to be patient. And so it all comes down to credibility. But that first one on your list, Mark, the leverage problems.

There's just no way out of it. And it's not a long-term or even a medium-term issue anymore. Evergrand's biggest property developer in the country is, you know, halfway to going belly up. They have as much liability as Greece close to it. One company. You could add one more to the list. What would it be?

One more concerned. If there's none, it's okay. I just was wondering if there was something that immediately came to mind. Yeah. The other gargantuan one is. their relationship to the rest of the world economy. So much of China's dynamism resulted from foreign investment, atypical of any developing country,

to open your door so wide, let all these global companies in the door, let them really establish businesses for many years, terrific talent coming over, and all those companies were willing to share a lot because this wasn't, you know, the Venezuelan economy. This was China. And people, you know,

we're willing to believe that China is going to keep doing the right stuff and this market's going to keep growing and I'm willing to share a lot to be part of it. And Beijing is undervaluing how much more it has to gain from being globally engaged, both with companies coming in and allowing its own firms and individuals to go abroad. And of course, we're all talking about beyond the pandemic here because that's a giant, you know, problem that the China and everybody else is dealing with. This makes this a perfect segue into policy, U.S.-China relationships. And kind of in my simplistic way of thinking about the geopolitical relationship between the U.S.

and China was that, you know, since the WTO, the U.S., between WTO 2001 and let's say President Trump, 2016. The strategy was foster Chinese growth, help them develop, embrace them tightly. Yeah, they're not playing by the rules exactly, but that's okay. They'll see the light. They'll see the benefits of cooperation and collaboration and multinational coordination. And this will all work out and everyone's going to be better for it. And the U.S. is going to suffer to some degree, you know, but that's okay. I mean, the hollowing out of U.S. manufacturing, that was probably more than policymakers

GAM thought was going to happen, but, you know, okay, that's the cost of getting China up to speed because that's a billion plus people. We need them engaged, fully engaged. Then Trump comes along and says, you know, he grabs onto the angs created by WTO and the hauling out of the middle America and says, hey, this is not right.

And by the way, they're cheating. on lots of other and lots of otherwise, cyber and so forth and so on. And trade war, you know, we get into a trade war. And now, then we get to the Biden administration and crickets. You know, I don't know what's going on. So let me ask it this way. First, did I get that rough history right? Second, the normative and the positive.

What should the Biden administration be doing here and then the positive? What do you think they will do? So my advice when we talk to folks about this relates to that thing, Pathfinder, you mentioned a minute ago, right? And I'll tell you what that means. But there is right now so much misinformation, so much conflicting interpretation of what's going on that now more than ever, this is a great time to look at the deep fundamentals and structural factors that will determine whether China has terrific growth going out into the future. if China finds its way back to a more or less sort of liberal approach to the economic problem, which is to say that private parties discover prices by transacting together, rather than having political authorities decide how big this sector should be,

how big that sector should be, then America has a smaller China problem in the future, because there's not as much government interference in the whole thing, right? And China has a better economy that we should make compromises if we need to in order to keep our ability to access. So what we're doing at Rodium, we've got a partnership with Atlantic Council. We're putting this out at the end of September.

We're looking at six fundamental areas of what it means to be a market economy. Trade, cross-border portfolio, cross-border direct investment, China's financial system, innovation systems, and market competition as a state enterprise, that sort of stuff. And we're offering a reasonable data,

defined approximation of what the OECD leading economies look like when they say they're open to trade. And then we're using the same data to look at where China is in 2010, where China is today, and we'll be updating that fundamental database annually and doing quarterly reports, interpreting the policy signals in between the annual updates. And that really does tell us a lot, Mark. I mean, that's been where I've stood in order to try to get a sense of the direction and timing of macroeconomic challenges that China was going to have, which our guesses have been pretty good, not formal forecasting, but sort of putting the pieces together using that kind of a framework. It's been real effective. And while Donald Trump didn't realize it, and I don't think

Joe Biden does either, this is what they're experiencing. What they're experiencing is this tectonic plate shift away from using liberal approaches to manage basic functioning of how the economy works, approaches which have been demonstrably shifting in a more liberal direction from 1978 until, call it 2016, well into the Xi Jinping era, well into China's present political era. There was still evidence of serious effort in Beijing to take the next step, to keep moving away from relying on just politics and let private motivations lead the way forward. That's all become terribly murky in the past three or four years, not because China didn't want to fix it, but because every time they tried to fix it, they realized that there's a few

banking crisis on the road to OECD status. And they stopped halfway and decided whether they were really ready to go through that painful metamorphosis. So that's where we are. And I think folks in D.C. are for starters, kind of taking a sort of precautionary principle approach here. They are, first and foremost, shoring up domestic cohesion in the United States. Because after what we've just been through, the greatest risk to our own welfare, right, is that we come apart at the seams and can't manage to make productive expenditure choices and all that and work together as a team. Secondly, to be realistic about whether China is capable of bringing very much to the table right now in a big international negotiation. So how do you have a strategy to negotiate with somebody when you're not sure whether they're closing their doors or opening their doors? I mean, I don't think most of our close Chinese friends, Mark, can be confident about where Xi Jinping is taking this thing.

And so I think it's actually prudent for the Biden administration to hold back a little bit on, putting its strategic cards on the table until we get a little more clarity out of Beijing in terms of what we're supposed to make out of all this. And then the third thing that Biden's doing that I give them high marks for is burden sharing with other open market economies that have the same underlying welfare problem we have given the fabric of our market approach to things. Rather than do it unilaterally the way Trump thought he was doing it, never really did get anything done, frankly. There's a lot of low-hanging fruit on the plurilateral tree, if you will, to be picked. And I think team Biden's doing a pretty good job of starting in

Cornwall, starting in Brussels, starting in Berlin, Tokyo, Canberra, you name it. And I like the looks of that. They can't, you know, not have a China policy, quote unquote, forever. But so far, they're on a schedule that I think looks about right to me. Great. Good. I know you have to run, Dan, But, and the China Pathfinder sounds very cool. You know, I'm a little nervous about what it means for our competition with each other. So, but it sounds really, really cool. I can't wait to see it. Hopefully, I get to take a look at it.

I did want to ask one last question. And you can, if you have to run, don't worry, don't answer it. We'll have you back if you're willing. But if you're wrong, you're, you're, you're bearish on China, right? I mean, you're very, I don't want to say very pessimistic, but maybe that's what I should say. You're pessimistic about China. If you're wrong, why would you be wrong? Yeah, let me say, I'm still bullish on China on a centennial basis.

Okay, okay, fair enough. Like, okay. I'm just a little concerned about the next, you know, 20 years. Yeah, yeah. If I'm wrong, there's really, there's three ways I could be wrong. Number one, we're not out of the woods in America yet. It hasn't been that long since January 6th. We have an awful lot of remedial work to do out here in the democratic world. And, you know, I guess my best stump speech line is that market democracy is still the worst of systems except for all the others. Right. Now, is that actually still true? we have a little bit of a burden to prove that as bad as these problems are in China. Ours are not even worse. And I think we're going to demonstrate that.

But, you know, who can save? I'm not a political scientist. I can't say for sure. Number one. Number two, social capital, this, you know, ineffable thing, which cutting-edge economics would like to put a better value on. To me, it means our 1.4 billion people. really willing to be patriotic while they're trying to be entrepreneurs. And if as, you know,

propaganda tells us over there that the people of the People's Republic are happy to go through some fallow years. If that's what it takes to sustain party leadership and the Chinese model, then we will be surprised by the resilience and tenacity and willingness to stay put and not try to get capital out of the country, all the sorts of things we'd expect out of Argentina, right? So China might be special. This one might be different a little bit. And then the final point, before I take off, Mark, and it's been great to be with you. You know, I think I am actually still betting and telling people that based on my experience

of all Chinese leaders since 1978, I think that Beijing actually will make the necessary correction back in a liberal dynamic direction before they go over the cliff. I think they're making a lot of poor moves right now, but they've got a lot of assets. They've got $100 trillion of state enterprises they could sell down, et cetera, in an emergency break glass. And they're not entirely out of options yet. And I do actually think that we will see a shift back to a more productive set of choices well within my career. Hopefully that means they've got 10 years to work with or something like that. And so I hope I, you know, and I mean, I am, you know, telling our clients that as well, that, you know, you need to be keeping your head well down in the foxhole at present. There's a lot of

pretty weird stuff happening. But don't, you know, sell off all your, your beachfront property. Some of that stuff's going to be worth something. If you can. hold in, hang in there a while. Well, thanks, Dan. It was, you've been fantastic. And what a great conversation. Really appreciate it. Thank you for coming on.

And I'm going to ask Ryan and Chris to hang on. Well, because I want, and Dan, you should listen to what they have to say sometime later to the night or over the weekend. I want to get their views on what you just said. So we'll get those reviews. But like your wife, Mark, mine is going to make me listen to this all over again. And she's going to critique the whole thing. And so when we do that, take care, guys.

Thank you so much. Okay, that was, I thought an amazing conversation covered a boatload of ground. What do you guys think? Ryan, what is your thoughts? I mean, I'm really curious, you know, obviously he's very pessimistic about China's growth prospects. And I thought our forecast for China was on the conservative side, you know. That's what I thought. Yeah, but he's, he was challenging that, right?

he was saying much slower growth. So what is your perspective? What are your thoughts on what he has? Are we looking through the pandemic? Yeah, just whatever horizon. You know, his horizon is, you know, next five, next 10, 15, 20 years. Whatever horizon you want to take. Oh, I mean, the next few years is going to be really rough on China.

I mean, just look it now with the pandemic and everything. But beyond that, I was optimistic until I listened to everything he had to say. I turn much more concerned that, you know, my optimism is, you know, I'm on the other side of the pendulum than Dan is. I guess the concern, I mean, you hear all the reports and the anecdotes that their shift to the three child policy isn't working because there's just too expensive to raise children, you know, rental prices are through the roof. So I guess, you know, maybe I was optimistic that the population wouldn't be as big of a headwind. Yeah, so, you know, let's, if you take our first, you know, if you take our first, forecast, going back to the numbers, and let's say we're six, seven percent potential GDP growth in China today. We have that steadily trending lower. And let's say 20, 25 years from now, we're down to, you know, two and a half to three percent, not far from the U.S. potential growth rate. Would you, would that forecast be consistent with your thinking, or would you take the upside

or the downside to that forecast? I'd probably be close to our forecast. You would be. Yeah. Even after all the things that Dan was saying. Well, that was pre-Dan. I was comfortable. Post-dan.

Post-dan. You're still digesting it. Yeah, I'm still trying to, yeah. We might be a little too optimistic. Yeah. Chris, what do you think? What's your reaction? So I liked his framework, right?

Breaking it down into the demographics, the capital, and capital deepening and total factor productivity. And actually, I chose productivity because I thought that would be the key statistic here. So I'm a believer of his forecast of the pessimism to a point, but I think he kind of came around at the end when he said things won't go off the cliff, right? So my expectation is things do slow down. Productivity does decline. GDP growth declines as well, because you're not getting any growth from demographics

or capital deepening. But then there will be a renaissance. There will be some loosening up, right? It's cyclical, and we'll get a productivity boost at some points. And that would make it consistent with our forecast. So I guess it's short-term pessimism, longer-term optimism, or more optimism, I guess. So, Chris, you're saying your forecast, your outlook would be consistent with our baseline forecast. In the long run, I think in the short term, I think he's probably right.

The productivity is going to slow down, given. these, presuming that this crackdown continues for a while, there could be some damage. But then in long, I think cooler minds will prevail and we'll get a bit of a productivity boost consistent with our forecast. Right. So it sounds like both of you would argue that our forecast for the next several years, three, five, ten years might be a little on the high side, given all of these headwinds that we were discussing throughout the podcast.

Right. Yeah. Okay. He convinced you. Yeah. You know, I mean, I think fundamentally, the thing that makes the U.S. economy, you know, this is reflecting home bias, right? You know, because I am an American, you know, so it's not hard. It's hard not to cheer for the home team.

But the thing that makes the U.S. so exceptional is the rule of law that, you know, at the end of the day, if you disagree with something that the government is doing, there's a process, an adjudication process. You know, it sometimes doesn't work as well as one would like, you know, and there's, you know, a lot of uncertainty around. take the rental eviction moratorium, right? So as part of the pandemic response, the federal government has put a moratorium on rental eviction and has continued to extend that rental eviction moratorium. And there's a lot of questions about the legality of that. And it's been challenged in the courts

and the Supreme Court is now ruling on it. But that may not be perfect, but that's a process. It's a well-defined process that adjudicates on, you know, these kinds of questions that we have. And that's what makes our economy, I think, such a good place to invest in, right? Because, you know, you know that there are rules, there are laws, they're clearly articulated. And if you get into an argument with somebody over something, including the U.S. government,

there's a process to figure that out. And you can price that in, right? You can, there's a cost of doing business in that adjudication process. and you put it into your prices and, you know, you move forward. And, you know, it leads some more stable kinds of environment. And that's the environment that's necessary for a good long-term investment. And also, you know, people wanting to come here and put their money here, right, because they know that, you know, it's money good.

Yeah, you know, if I buy a house in Riverside, California, or I, you know, plunk down money into a checking account at JP Morgan, in New York or by a condo tower in Miami, that's mine. And, you know, no one's going to take that away. And, you know, I know the, I know the rules. So I do think that makes us very special. I mean, there's other economies like that, too. A lot of, you know, developed economies have the same kinds of rules of law. But the other thing that makes us special, I think, is that we're open, you know, to the rest of the world, you know, through immigration. I mean, no, I, I don't, There can't be too many countries in the world.

And this changed a little bit under President Trump, obviously. But there can't be too many countries in the world where we, that allow so many immigrants to come into the country, you know, and become part of the fabric of the economy, you know, very quickly. Or to allow investment, you know, both external foreign investment coming here and investment by U.S. companies overseas. Or the capital flows, you know, into financial markets. markets. You know, that's, that's, that's different. Again, there's other countries in the world that have that, but not to the same degree that we do. And then, except for Canada. Yeah, Canada is a shining, the best managed economy on the planet, probably. And then there's the openness to, to views, you know, alternative views. You can express your view, right?

And the freedom of thought. Now, you know, all these things I just said, someone could say, well, they've kind of been sort of under siege in recent years. You know, January 6th, you know, kind of strikes that point very clearly. But I would say even that is testimonial to our strength because, you know, our system held. The fundamental strengths of our economy continue to hold forth. And, you know, I judge other economies in their long run potential from that prism, from that context, from those strengths, you know, those fundamental things that make our economy tick. And, you know, from that prism, yeah, I think it's reasonable to worry a bit about, you know, how that's Chinese economy is going to unfold here and over the foreseeable future. I think that it is a reasonable concern. I was surprised he didn't bring up supply chains, given, you know, everything that's going on with the coronavirus and businesses, you know, kind of reshuffling their supply chain rather than putting all their eggs in China's basket, you know, going to Vietnam, Malaysia, things like that. I think he kind of did.

Yeah, he did. Because remember I said, well, what thing would you add to the list? Oh, yeah, yeah, yeah. You're right. I mean, it's kind of a catch-all for, you know, that kind of investment. Gotcha. So I think that's where it's more than, he was talking about more than that. But I think that's, you know, a big part of what he was thinking.

Okay. We covered a lot of ground. I thought that was very useful. Hopefully listeners thought it was useful. And we'll come back and revisit. And a great guy, a really thoughtful fellow. You can see why he's so successful. He's really, really has a good grip on this and provides a lot of insight.

But maybe what we should do, though, just around things. things out is get a China bull on, you know, to hear the other side. And we'll see if they, you know, if our views swing after that. There's, there's, there's, there's, there's, there's, there's, there's not as many out there right now, uh, China Bulls, but I'm sure we can find someone who can, uh, who would fit that, that, that, that bill. Anyway, anything else guys? Any else you want to talk about, uh, before we call it a podcast? No, you guys are good. Yeah. Did you get Lily for a birthday? What did I get Lily for our birthday? I haven't consulted. I haven't consulted. with my wife. Oh, you're hesitating.

A podcast. No, wait, wait, wait, wait. I don't know what it was. We were supposed to go down to Florida, you know, because this is tradition. She's, she, we go down to Florida. We have a home in Florida. And she brings the same three, four friends that she's been bringing down for the last, I don't know, 15 years. They all come down. But we were supposed to be down. I was supposed to do this podcast from my home in Florida, but we, we decided not to go because of the tropical storm. You know, it's going to. wash out the weekend and, you know, I've taken two business trips so far, you know, since we started up again, you know, on the post-pandemic period. And both times my flights were canceled. It's a mess out there.

So I didn't really feel like getting on a plane again. But that's what we, that was her present to take everyone down to Florida. Anyway. And a present for me, too, because I get to be with her. Oh, I'm her birthday. That was all good. Okay, very good. So, uh, thank you.

listener and again, reminder, go to economy.com, go to inside economics. There's a little, you know, button there and vote. Let us know what you want to talk about. You can see we're listening very carefully to what you're asking us for, and we will, we will oblige. So with that, thank you very much.