July 29, 2025 • 39 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
European capitals defended the trade deal struck with President Donald Trump, which will see the European Union accept a 15% tariff on most of its exports to the US while reducing levies on some American products to zero.
European Commission President Ursula von der Leyen, who met with Trump in his golf club in Turnberry, Scotland, on Sunday, hailed the agreement for the stability and predictability it will offer businesses and consumers. The EU knew that the deal would favor the US, but von der Leyen urged reporters to “not forget where we came from,” referencing tariff rates Trump threatened that were as high as 50%.
The lower rate came as a relief to member states that are dependent on exports, especially Germany, which exported $34.9 billion of new cars and auto parts to the US in 2024.
“The agreement has succeeded in averting a trade conflict that would have hit the export-oriented German economy hard,” German Chancellor Friedrich Merz said in a statement late Sunday. “This has enabled us to safeguard our core interests, even if I would have liked to have seen further easing in transatlantic trade.”
Without a deal, Bloomberg Economics estimated that the total US average effective tariff rate would rise to nearly 18% on Aug. 1 from 13.5% under current policies. The new deal brings that number down to 16%. Prior to Trump’s latest trade fight, the EU estimated the average tariff rate to be about 1% on both sides.
Today's show features:
- Nancy Lazar, Chief Economist for Piper Sandler, on the global economic outlook and trade balance in the wake of the US trade deal with the European Union
- Andrew Bishop, Senior Partner and Global Head of Policy Research at Signum Global Advisors on the pending resumption of US-China trade talks
- Bloomberg News Israel Bureau Chief Ethan Bronner on President Donald Trump’s latest comments on the situation in Gaza
- Andrejka Bernatova, Founder and CEO of Dynamix, on her firm’s business combination agreement with The Ether Reserve
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:08):
This is Bloomberg Business Week Daily reporting from the magazine
that helps global leaders stay ahead with insight on the people, companies,
and trends shaping today's complex economy. Plus global business finance
and tech news as it happens. The Bloomberg Business Week
Daily Podcast with Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 3 (00:32):
All Right, as we mentioned, Tim and I are setting
the stage at the top a lot coming out investors
this week, and I mentioned Julian Emmanuel over at Evercore
II calling this a moment of truth for the markets
because you've got big tech earning some of those mags seven,
You've got the trade negotiations like we just talked with Catherine,
You've got the FOMC, the jobs report and earnings report.
Speaker 4 (00:51):
It's a lot.
Speaker 5 (00:51):
Tim, Let's ask Nancy Lazarrel about it. She's chief economist
for Piper Sandler. She joins us from Aspen, which is
the biggest element on your radar. This week. We opened
our program talking about Okay, yes, the trade deals. Those
are obviously very big. We have everything happening when it
comes to tariff deadlines. Later this week, We've got earnings
(01:12):
out this week from some of the megacap tech players,
and then of course the jobs are coming at us
on Friday, not to mention fed share, J Powell coming
at us on Wednesday. How are you making sense of it?
Speaker 6 (01:22):
Well?
Speaker 7 (01:23):
I think really the consumer spending data we're going to
see for the month of June from an economic perspective,
is going to be really important. Our best guess is
that the consumer is going through a soft patch right now.
We have already clearly seen that in the retail sales data.
Within consumer spending, we're going to get more information on services.
We heard last week from some of the service oriented
(01:44):
consumer companies airlines, hotels, restaurants that consumer spending in the
service sector also is a little squishy. It's not just goods,
it's also the service side. So consumer spending, how week
will it be as we go into second quarter into
the third quarter? Excuse me?
Speaker 8 (02:00):
We are expecting a soft patch.
Speaker 7 (02:01):
We think it will be on the softer side, reflecting
in part demand was pulled forward in anticipation of these tariffs,
and you have already seen price increases and that's also
impacting consumer consumer spending.
Speaker 5 (02:14):
How do you make sense of that, given what we
heard from airlines over the last couple of weeks. Not
every airline, of course, but I'm talking mainly of United
and Delta, who said, you know, as we got a
little clarity about what was happening with tariffs late June
early July, we started to see a real big turnaround
when it came to consumer spending. How do you gel
those two things.
Speaker 7 (02:33):
I think it really is a bifurcated consumer. One of
these days, I look forward to not using that word anymore.
We've talked about that for a couple of years now,
but there is really a bifurcation. The higher end business
oriented airlines are I'm not an airline analyst, but they
are being supported by the higher end and businesses. Whereas
the airlines that reported last week, couple of them anyway,
(02:53):
and again today some layoffs, those are more for the
lower end consumer, and the lower end consumer is really
getting squeezed from these terrafs. It is basically a regressive
tax on the consumer. So the bifurcation companies that are
geared toward businesses and the higher end consumer can plow
through this. Those that are more tied to the lower
end consumer are struggling. The consumer really is looking at
(03:15):
price points right now.
Speaker 3 (03:16):
I want to get to what our Shawn Donnan wrote
about on the Bloomberg Today and at Bloomberg dot Com,
and that has to do Nancy with the damage to
the global economy from American protectionism. He notes that it's
becoming increasingly evident even if financial markets get somewhat excited
as we see trade deals being done. He says it
(03:36):
all amounts to another step change in the trade barrier
that the President has erected around America, which is starting
to reshape trade and investment patterns worldwide. Not his opinion,
but his reporting out that Shawn has done here at
Bloomberg and Bloomberg Economics, saying the hit to the world
economy will reach two trillion by the end of twenty
twenty seven relative to its pre trade war path.
Speaker 4 (03:57):
It's going to be a different global environment.
Speaker 7 (04:00):
Yes, well, for sure, it's going to be a different
global environment. But I think we have to look at
the economy as three dimensional chess, not just as a
flat as a flat board, no question, tearis our attacks.
I'm definitely more for free trade, but I'm also for
fair trade. Maybe we can shake one little positive out
of this and get some fair trade i e. Incrementally
(04:23):
sell more to Japan and Europe in particular. But to
be sure, right now, our effective tariff rate that we're
calculating is about seventeen. Now it's down dramatically, but seventeen
is the highest since since the nineteen thirties, and so
to be sure, that is a headwind to global growth.
But I think that is just one part of the puzzle.
(04:43):
The second thing that's going on in the United States
is the capital spending cycle, and the tax legislation or
that was just passed actually in the one Big Beautiful
bill indeed does very very very significant accelerated depreciation for
capital spending apex appreciation for eighty percent of capex. That
is going to be a significant boost to cash flow,
(05:06):
corporate cash flow.
Speaker 8 (05:07):
We've already heard that.
Speaker 7 (05:08):
Last week we had four companies AT and T, Verizon,
T Mobile, and United Rental. I'll say this tax legislation
is a support for their cash flow. So against I
think we can't just look at one level. We have
to look at what's going to happen to capital spending
and capital spending. I call it the ugly duckling of
economic data. It's underappreciated for what it does for growth.
(05:30):
It creates productivity, profitability and lists potential GDP growth and
that eventually lists living standards. So quite frankly, I think
that article is a little bit way too one sided,
and you need to look at the bigger picture and
near term again, this economic soft patch for sure, but
you're already seeing signs the companies that I mentioned, you're
seeing it in data where US capital spending is picking up,
(05:51):
and that's going to come back and help not only
productivity but the job cycle as we go through twenty
twenty six. So it's important to look at the bigger picture.
And I didn't mention deregulation. I'll stop, but that's also
another really important support for the US and therefore the
global economy.
Speaker 4 (06:06):
But is it okay?
Speaker 3 (06:07):
And you know, one of the things I want to
go back to is you say support for the labor market.
We had Rob kaplan On, former president of the Dallas Fed,
on Friday and he said, you talked repeatedly over the
tight labor market and the impact of immigration perhaps on
that and how that could then impact US growth.
Speaker 4 (06:24):
So I just want to throw that out there.
Speaker 3 (06:26):
But when you talk about capex and what it can
do for growth, certainly great for company balance sheets, Does
it help workers? Does it actually provide momentum throughout the economy.
Speaker 7 (06:39):
Absolutely, Again, it's called a business cycle for a reason,
and when businesses invest again, they improve their profitability through productivity.
And if companies aren't making more money, if their cash
flow is indeed going up, that is incentive to spend
not only on capital spending, but eventually on jobs and
in wages. And you see it, you see it historically
(06:59):
in in the data. Again, capital spending always grows faster
than housing capital spending, accept potentially in recession, capital spending
always grows faster than consumer spending. So it's really really underappreciated.
Businesses create jobs and pay and pay weaight and pay wages.
So near term, absolutely, I would argue we're in a
(07:22):
soft patch. The unemployment rate is grinding higher the Although
initial claims have come down a little bit, continuing claims
remain elevated. Companies, I'm not sure the labor market is tight.
Continuing claims remain very elevated. Companies are reluctant to hire
given the trade. Given the trade uncertainty. We think as
we go into twenty twenty six, the improvement in corporate profits,
(07:44):
which right now are sluggish but they'll improve into twenty
twenty six, then leads to a stronger a stronger labor market.
So yes, there's nothing more beneficial for the consumer than
stronger productivity growth a low inflationary environment, and that gives
you stronger real income growth.
Speaker 5 (07:59):
To what extent is that productivity growth, in your view,
hampered or not by tariffs.
Speaker 7 (08:06):
I don't think it really is hampered by tariffs per se,
incrementally maybe from a higher cost of certain certain investments.
As a result, we are seeing an increase in the
price of certain capital goods. So at the margin that
is a little bit of a nick. But this is
this is a very significant full capex depreciation, which again
those four companies early on in this earning season. I
(08:28):
can't wait to hear what happens over the next couple
of weeks that I have seen significant savings in cash
in cash flow, So we don't know yet the full
quote unquote saving to companies from this a new depreciation schedule,
and it could more than offset anything which I think
it does from a tariff from a tear perspective. So
tariffs are a one time tax versus capital spending, has
(08:52):
a very long tail and will help the economy at
least through twenty six, not into twenty sex.
Speaker 3 (08:57):
So Nancy, we've got a FED meeting, as you well know,
FED decision on Wednesday. So you say we're in a
bit of a soft patch right now, but you are
looking for improvement in twenty twenty six, and you see
profits leading to a stronger labor market. If we've already
got stimulus coming as a result of some of the
tax measures by the President's big beautiful bill, then does
the FED really should they not do anything for maybe
(09:20):
the rest of the year.
Speaker 4 (09:20):
Because they don't need to.
Speaker 3 (09:21):
They're stimulus already coming, and they've got to be careful
about inflation.
Speaker 4 (09:24):
Just got about forty seconds.
Speaker 7 (09:26):
Yes, I would agree that the FED doesn't need the
cut rates. Our guests that they probably do, according to
my colleague Benson, at least once, but we don't really
need more than that. They already cut rates one hundred
basis points last fall and that's still working its way
through into the economy. So good point. Combination of the
incremental I don't want to call it physical stimulus. It's
(09:47):
basically tax at tax and implicit tax cut for corporations,
and the regulation are not inflationary. They're actually disinflationary through
improving productivity growth. But net no, we really don't need it,
but we'll probably will probably to get at least one.
Speaker 3 (10:00):
All right, great to get some time with you again, Nancy,
Thank you so much. Have a good week, Nancy Lazar.
She's chief economist over at Piper Sandler.
Speaker 2 (10:07):
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Speaker 5 (10:22):
The US and Chinese officials finished their first two days
of talks aimed at extending their tariff truth beyond a
mid August deadline and hashing out ways to maintain trade
ties while safeguarding economic security. The agenda includes giving more
time for high stakes negotiations to play out on issues
ranging from US levies tied to fentanyl trafficking to Chinese
purchases of sanctioned Russian and Iranian oil. Andrew Bishop is
(10:45):
following this all He's Senior Partner Global Head of Policy
Research at Signam Global Advisors. He joins us from Washington, DC, Andrew,
giving your view of what has happened over these first
of two days of trade talks. Do you think that
this tariff truths will be extended?
Speaker 8 (11:04):
Oh, yes, very much so.
Speaker 9 (11:06):
I think the tariff truth is absolutely going to be extended.
But the main reason for that is not so much
because I think there's great progress being made on the
substance of these talks. Rather, I think President Trump essentially
realized back in April May that high tariffs on China
just don't work because the impact on the US economy
is too great and China has.
Speaker 8 (11:27):
Too much leverage in the form of its control over
rare earths.
Speaker 9 (11:30):
So as a consequence of that, I think the President
is in very much de escalation mode and trying to
buy time make sure that the US receives the rare
earth that China has promised in Geneva and London. And
therefore he's definitely interested in extending that pause.
Speaker 5 (11:44):
So if China has, in the in the words of
Donald Trump, maybe has the cards in this negotiation, in
your words, has too much leverage in this negotiation, then
what does the US have Aside from an economy that
relies on goods from China.
Speaker 9 (12:01):
The US really only has a terror freight, which is
why I think the Chinese side is going to be
bargaining hard for a reduction in tariffs as well as
a reduction or at least a stabilization in export controls,
in particular of semiconductors.
Speaker 8 (12:19):
What's interesting in the latest recent.
Speaker 9 (12:21):
Events of the past couple of weeks is that the
Trump detmonstration has reversed some of its earlier export controls
on VSH twenty chips, for example.
Speaker 8 (12:30):
As I'm sure you're well aware, that was.
Speaker 9 (12:32):
A view that we had at Signum that this would
be part of the deal that they struck in London.
The problem for the Trumpet demonstration is that that move
is already getting enormous pushback.
Speaker 8 (12:42):
Right So, while China is going to be.
Speaker 9 (12:45):
Demanding more of that, more repeal of export controls, it's
going to be hard for President Trump to agree to
that without facing major backlash domestically. And that's why I
think he'll start pivoting the conversation away towards tariff.
Speaker 8 (12:59):
Relief, just not as emminently as this week.
Speaker 3 (13:01):
I don't think who has more at stake here? We
so often, Andrew talk about the relationship and the dependent
relationship between the United States and China. But when you
look at this relationship, does one of the countries have
more at stake here?
Speaker 6 (13:21):
So?
Speaker 9 (13:21):
I think the answer to that is, and the reason
why you get different answers right, is that China definitely
has more to lose economically than the US does. The
problem is the US has a lower political pain tolerance,
and as consequence, though even though the US economy is
far more resilient and can absorb these shocks from a
(13:42):
political standpoint, you have a president and it would be
the case with any other president that essentially faces a
Taco situation as soon as they come under pressure.
Speaker 4 (13:51):
So then talk to us.
Speaker 3 (13:52):
Take us to China in terms of what is happening
in their economy right now, and we know that you're
right in terms of pain tall tolerance, that many much
has been reported. I guess I should say in terms
of the Chinese government that they'll do what they need
to do right in terms of potentially inflicting pain economic
(14:13):
pain on their citizens. But tell us about what is
the truth or reality, at least as you know it
to be the Chinese economy today.
Speaker 9 (14:21):
So what's interesting is you see a lot of vulnerabilities
in the Chinese economy. Youth unemployment is a major one,
you know, sort of misallocated savings and low consumption is another,
and of course problems and the major problems in the
real estate market. But what's interesting is that a lot
of those problems aren't directly related to President Trump's tariff
(14:43):
threats or tariff enactments, if you will.
Speaker 8 (14:46):
So there are two ways of looking at that.
Speaker 9 (14:48):
You could say, any marginal worsening of the situation due
to Trump makes the Chinese position even harder to sustain.
But a different interpretation, which I would lean with, is that,
you know, because China is aware that these are structural
problems that it's on its way to at least, you know,
resolve or at least tackle on its own. President Trump
(15:09):
really isn't the major agenda item on the table here,
and he can be sort of kept at bay and
handled almost like as a single singular issue in its
own bucket, if you will.
Speaker 5 (15:21):
We've spent a lot of time over the last few
weeks and all over the last few months talking about
rare earths talking about tariff rates. But one thing that
hasn't necessarily come up a lot of late has been
the fate of TikTok and how TikTok could or could
not be used as a bargaining chip in these negotiations.
What's your view?
Speaker 8 (15:40):
So my view on that is.
Speaker 9 (15:43):
My view on that is that you can have a
TikTok deal any day, right as long as the US
is willing to accept the situation where China continues to
control the algorithm. So that could look at one that
could look one of two ways. Either China controls the
algorithm and there are essentially two tiktoks, a Chinese TikTok
and an American TikTok, and the American TikTok is sort
(16:06):
of fully US owned but it just doesn't have that
initial algorithm. Or you have a situation where the TikTok
platform in the US still has the underlying algorithm, but
there's an existing dependency on China. What I don't see
is China agreeing to part ways with that algorithm. So
a simpler, a simpler version of that is to say,
(16:29):
China is not going to give away the real TikTok.
So the question is whether the US wants to continue
with the status quo or downgrade TikTok's quality.
Speaker 3 (16:38):
If you like, Hey Andrew, something we talked about in
the two o'clock hour about all of these trade agreements that.
Speaker 4 (16:45):
The devil's in the details, right.
Speaker 3 (16:46):
And it just feels like in many ways we're just
getting kind of agreements to do something. Something like a
US China trade deal is going to be a complicated
one and lots and lots of pages and items to discuss.
So I guess what my question is is we will
probably not know the specific details for a while. So
(17:08):
investors trading off of, I mean, what should they trade
off of, what do they be looking for in terms
of specifics when it comes to a US China trade
deal and how long might that take?
Speaker 9 (17:19):
And so I think one thing that they can trade
on is direction of travel, right, So, very concretely, experts
debate whether there's going to be a minor terror for
Leaf tomorrow or in November or some time in between.
But most experts at this stage agree that there is
a floor under the relationship and that it's unlikely we're
going to see TEFF increase, right, So one answer is
(17:40):
things are probably going to get better, not worse, over
the coming six months, different if you look over the two.
Speaker 8 (17:46):
To five here horizon. But that's a separate question. So
that's one answer.
Speaker 9 (17:49):
The second answer would be any deal is likely to
involve purchase commitments from China, right, so similar to the
Phase one trade agreement that they struck back during President
Trump's first term. China will probably promise to buy more
American things items, including agricultural goods. Those targets are not
likely to be as high as during the first agreement.
They were unrealistic back then. But that's a second component.
(18:13):
The third is again, oh sorry.
Speaker 3 (18:15):
No offurtunately, we've got to wrap it and leave it here,
which is a mega te Well.
Speaker 5 (18:19):
Honey, back to talk about the third one. Okay, that's
what we call a megates.
Speaker 4 (18:24):
That was great though. We really appreciate Andrew Bishop.
Speaker 3 (18:26):
He's Senior Partner, Global Head of Policy Research at Signum
Global Advisors, joining us from DC.
Speaker 1 (18:31):
This is the Bloomberg Business Week Daily Podcast. Listen live
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Just say Alexa play Bloomberg eleven thirty Now to a.
Speaker 5 (18:50):
Very serious global issue. We're going to start in the
Middle East, where President Donald Trump said the US would
work on a new effort to provide food aid to
alleviate starvation and gaza, along with other governments and organizations,
including the UK and the European Union. His comments from
this morning from Scotland in a press conference with the
UK Prime Minister Keir Starmer.
Speaker 10 (19:11):
The United States will be helping with the food. You know,
we have a lot of access to food. We got
a lot of food ourselves, and we're going to bring
it over there. We're also going to make sure that
they don't have barriers stopping people. We're going to be
getting some good, strong food. We can save a lot
of people. I mean, some of those kids are that's
real starvation stuff. I see it, and you can't fake that.
(19:33):
So we're going to be even more involved.
Speaker 5 (19:37):
That's President Trump earlier today from Scotland. We're going to
head to tele Aviv. Now to Bloomberg News Israel Bureau
Chief Ethan Bronner. Ethan, we've all seen the pictures by
now of starving Palestinians, many of whom are children. You've
wrote about this, and you wrote about this last week,
and the back and forth, what the Israeli government has
said is happening, what many in the worldwide community has
(19:59):
said is happening. The World Health Organization said is happening.
In your view, what is going on.
Speaker 6 (20:05):
Tim, I mean, you know, I wish I had the
wisdom for a genuinely deep answer. I think there can
be no question that people are going hungry in Gaza.
I think that we are now beyond any discussion of that.
The issue begins to get complicated when we're talking about
famine or starvation and whose fault it is and how
(20:27):
long it's been going on. And I have to tell
you that as a reporter here who can't get into Gaza,
I mean, the Israeli military and government have barred us
from going in. It's been a source of enormous frustration
for the entire two years almost that this war has
gone on, that you have international aid organizations talking about
(20:48):
starvation and you have the Israeli military saying none of it.
So I think that for a while it was exaggerated.
It may still be exaggerated. But it is real, and
even the Israelis have acknowledge it, and indeed, as you
just noted, so has President Trump. So a very difficult
situation is underway where people don't have food to eat,
(21:10):
just fifty miles from where I'm sitting Ethan.
Speaker 4 (21:13):
So many ways to go here.
Speaker 3 (21:15):
But one thing I want to say is you say,
for the most part, everyone has agreed that there's no starvation,
but Israeli Prime Minister Benjamin not Now who says that
there's no starvation in Gaza, So.
Speaker 6 (21:27):
Right, I said, I can think we can all agree
there is hunger, right, I mean, these are these various
technical definitions. He has said there's no starvation. He doesn't
seem to be right. I think the next question is
is they're famine. I'm not sure I know the different
you know how to distinguish among these things, but clearly
one as we go down the words, we get to
(21:48):
a more difficult situation. There is no question there is hunger.
Even the Israeli military, what's held a briefing for us
a few days ago, use the phrase food insecurity. When
I pressed, the folks been the colonel at some length
about it. So there's no doubt about that. But you know,
and we see people, we see what they look like,
(22:08):
and we hear people talking about having no food and
being afraid of dying from it. So this is not
a joke.
Speaker 5 (22:15):
How do reports of the hunger happening there coincide with
Israel blocking aid supplies for Gaza in early March, so
at that.
Speaker 6 (22:24):
Point, I mean, I'm not a government spokesman, as you know,
but the Israeli argument at that time was that the
Hamas was hoarding huge amounts of this food and that
there was enough of it for a while, and that
they were Israel was going to find a way to
keep it out of the hands of Hamas for a
bunch of reasons. Their main complaint was that Hamas was
(22:47):
taking the food aid, feeding its own militants, keeping it
from ordinary people, and then selling it on the market
so as to continue their war against Israel. That has
been challenged in various ways. Some version of that seems
to be true, and that's why Israel did it and
then set up this rather inefficient organization to try to
(23:10):
skirt Amas, and that has not gone well.
Speaker 3 (23:14):
We have a viewer who has written in and said, well,
I'm wondering why President Trump is not pushing for a
permanent end to the Gazo war.
Speaker 4 (23:23):
I guess if it was easy, it would be done.
Speaker 6 (23:25):
You're hoping I can answer that question.
Speaker 3 (23:27):
Look, I don't forgive you for giving you such a test,
but I think it's been going on.
Speaker 4 (23:32):
First look, I mean I think.
Speaker 6 (23:34):
Look, I would say the following that for most people abroad,
from most people anywhere, the idea that there's.
Speaker 8 (23:41):
A war is terrible.
Speaker 6 (23:42):
Wars are terrible, okay, but we do have a war
underway between two forces. The Israel believes that if Hamas
is not eliminated, that it will reconstitute itself and a
reconstitute itself as a threat to Israel. I think the
President Trump is somewhat sympathetic to that idea. Now, while
they're trying to eliminate Hamas, if people are starving, if
(24:05):
ordinary people have no food, this is a separate issue.
So in theory, and again I'm not the President's spokesman.
In theory, if they could flood the area with food
over the next weeks, then they could start their war
up again. Because Hamas is, after all, holding fifty Israeli
hostages and has said it will not step down from
(24:26):
power or give up its arms, which from Israel's perspective,
is a danger to Israel. So I think that the
President is somewhat sympathetic to that reasoning. Whether that's appropriate reasoning,
we can discuss at another time.
Speaker 3 (24:40):
And we should point out that this week we have
dozens of ministers that are gathering at the United Nations
in a conference to really push for a two state
solution between Israel and the Palestines. We should also point out,
tim that the US and Israel have boycotted this event.
Speaker 1 (24:55):
Ethan.
Speaker 5 (24:56):
We've spoken to you constantly over the last twenty one
months or so after October seventh, and one thing that
you've shared with us throughout that time from Israel is
the view of the Israeli public support of the war,
support of Prime Minister Benjamin NETANYAHUO. You've written in the
last couple of weeks about some weakening support within the government,
which he still does control after walkouts, But what about
(25:19):
on the ground in Tel Aviv? And based on your reporting,
is there still widespread support for this conflict?
Speaker 6 (25:26):
I think it is weakening. I would say that the
photos and the videos of starving people and especially starving
children in recent days has taken a toll on the
public support. In addition to a range of other things,
dying soldiers, the sense that Israel is increasingly isolated internationally.
(25:48):
They're increasing reports of Israelis being attacked on the street
in Greece and in Austria and so on. So there
is a growing fatigue with all that. And Hamas does
been destroyed. So I think there is We don't have
polls yet from this week showing it, but there is.
(26:08):
I hear it around dinner tables, I hear it from friends,
I hear it from colleagues. There is a growing challenge
to the legitimacy and the justice of this if with
all these things happening, people are also starving and the
hostages are not being freed. So yes, I can't tell
you that there is a majority against the war because
(26:30):
I don't know that, but my instinct is that it
is dropping.
Speaker 4 (26:33):
UMAs how powerful are they still?
Speaker 3 (26:36):
You know? And I'm just thinking about the attacks and Iran,
and we thought the proxies and we thought that.
Speaker 4 (26:41):
There was progress on this front. What do we know?
Speaker 6 (26:46):
Well, we know that they're able to recruit lots of
young people to join their forces, it's not surprising given
what's been going on for two years and longer in
Gaza for ordinary people. So I think that there is
some degree of strength. The problem is strength when you're
a gorilla organization basically means survival and being able to
(27:07):
poke the bear, which is Israel. So it still has
that ability to do it, and nobody is able to
replace Hamas right now in Gaza. Israel's argument is that
once it can really break the back of the organization properly,
people will emerge who are willing to take up governing
(27:29):
the place. We will see whether that's true or not.
With reference to what you refer to a better two
state solution, The argument there is that non Hamas Palestinians
who are associated with the Fatal movement and with the
Palestinian authority could take over. The Israeli government's argument is
that they are not sufficiently different from Hamas, They too
(27:51):
teach their children to hate Israel. And the second argument
they make is they will ultimately lose out to the
more radical forces. We can't forward to let that state exist.
So we're in a very difficult place.
Speaker 5 (28:06):
It's an impossible question to answer, Ethan, but it's a
question I think worth pondering if the situation that you
laid out is indeed what comes to pass, And I
guess I could say, if and when the hostages are released,
then what well.
Speaker 6 (28:19):
One of the problems with the question, Tim, is that everyone,
many people believe that the hostages will never all be released,
because it is the only currency that Hamas holds in
order to hold Israel over any barrel of any kind. Now,
what may happen is this government may decide that it's
gotten all the hostages out through any deals it can,
(28:41):
and it moves in fully militarily, and the remaining hostages
are either killed or rescued. And then once there are
no more hostages than Israel might continue militarily even further,
or with President Trump's encouragement and the world's anger, this
government might return to negotiating with Hamas indirect negotiations in
(29:06):
either Kata or Egypt as that have been happening, and
some attempt to cut a deal, at least a partial deal.
But you know, though, what is the future is a
very legitimate question, and I don't have the answer.
Speaker 3 (29:20):
Yeah, it's just amazing and just disturbing from so many
different angles.
Speaker 4 (29:25):
The situation.
Speaker 3 (29:27):
Do you expect any Do you expect anything to come
out of this meeting at the UN just real quickly.
Speaker 6 (29:32):
No, I don't depends on by anything. There can't be
anything definitive out of it. A state of Palestine will
not exist as a result of this meeting. It maintains,
It insists that the world would like that to be
the solution, and at the moment there is not a
majority in Israel that embraces that solution.
Speaker 3 (29:51):
All right, going to leave it there, Ethan, thank you,
Thank you as always. Ethan Brawner, Israel Bureau chief at
Bloomberg News, joining us from Tel Aviv is on this Monday.
Speaker 2 (30:02):
You're listening to the Bloomberg Business Weekdaily Podcast. Catch us
live weekday afternoons from two to five pm Eastern. Listen
on Apple CarPlay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 6 (30:17):
All right.
Speaker 3 (30:17):
From stable coins and treasuries to a crypto treasury firm,
that's where we go next.
Speaker 5 (30:21):
And Ethereum Treasury Firm has agreed to go public in
a blank check company merger backed by more than one
and a half billion dollars of crypto and stock financing.
It joins the rush of digital assets heading to public markets.
We're talking about ether Machine. It's the expected surviving company
of the merger, and it's set to be anchored by
more than one hundred and sixty nine thousand ether from
one of the co founders and a stock financing of
(30:43):
more than eight hundred million dollars. That's, according to a
statement just last week, as much as one hundred and
seventy million dollars of cash and the trust account of
Dynamics Corp. The Spack merging with the Pool would also
be included. We've got with us and Raca Bernatova, founder
and CEO of Dynamics, joins us here in the Bloomberg
Interactive Brokers studio. I said a lot of words just
(31:05):
now that might not be clear to everybody who doesn't
follow this space inside and out what is going on
with this SPEC.
Speaker 11 (31:12):
So thank you for having me, Tim and Carol. Great
to be here. We're very excited about the merger with
the ether Machine. This is our actually second SPEC transaction
in the past eighteen months or so. We're very excited
about the transaction number one. Obviously, it's in a space
that we see is a very high growth space over
the next short, medium and long term in the ethereum space.
(31:35):
But ninety percent of stable coins are in the ethereum universe,
and so we see actually the ether machine and being
one of the large beneficiaries of the recent genius actors
I just pointed out, just talked about number two. The
team is an extremely experienced team. They've been running in
(31:56):
the ethereum space for five ten years. Actually, they are
going to be fully dedicated to the business and really
grow it into a large institutional company. So it is
a business that should be public in the first place,
which was really truly one of our objectives as a
dynamics pack. And a third piece, as you just mentioned,
(32:17):
you know, one of the founders is contributing a very
large eth steak himself, which shows a high confidence and
conviction into building you know, the biggest or if not
the biggest institutional player in the space. So very exciting,
you know, we, obviously you mentioned the financing, are very
excited about the financing package. This is the biggest financing
(32:39):
that has happened in the space since twenty twenty one.
Eight our million dollar pipe that's at ten dollars back
by very large investors, electriccapital, blockchain, dot com.
Speaker 3 (32:53):
You make money the ether machine, Yeah, so ultimately the
company all of it.
Speaker 11 (32:59):
Yes, So it is a very differentiated company in our view.
It is not a treasury company. It's a company that
is really using ether for multiple purposes, staking, restaking, and
DeFi and so you have multiple ways to actually win
and create yield for end investors. So we are energy
(33:22):
and infrastructure investors, a dynamics team by training over the
past couple decades. And so the way we think about it,
Carol is basically, you can invest in oil or you
can invest in oil company it actually utilizes oil and
create more value out of oil. So we see the
ether machine in a similar manner. You can invest in
ether or just the digital asset, or you can actually
(33:44):
invest in the ether machine that's using the asset and
generating yield on top of it.
Speaker 5 (33:49):
How do you think the return of ether machine is
connected to the price of ether? It so obviously like
if you're an oil if you're going to get invest
in an oil oil company or in actual oil, those
two things are pretty closely correlated.
Speaker 11 (34:06):
There will be probably a certain correlation team in terms
of price, you know, going in multiple directions, what we
believe just given the demand for ether and stable coins,
you know, hopefully that's going to.
Speaker 4 (34:20):
Be in a positive direction.
Speaker 11 (34:22):
We are excited about the fact that obviously ethereum is
one of the big beneficiaries of some of the commercial
demand as well. You see large companies like black Rock,
JP Morgan, you know, Deutsche Bank and others really starting
to embrace the space, and so that should sort of
underpin the demand for this digital currency in particular. But
(34:46):
there will be we assume some you know, sort of correlation,
but again there will be extra value add benefit that
the team is going to create as they actually fully
utilize Ether for yield.
Speaker 4 (35:00):
So you're crypto play or an energy play.
Speaker 11 (35:03):
We our background is energy and infrastructure by training, and
we really do see sort of the digital assets space
skirl as the next frontier in uh, you know, next
generation infrastructure. Obviously you are seeing financial infrastructure or correct correct,
and so you know, a lot of the background that
we have from traditional energy and infrastructure assets are actually
(35:27):
translatable into the digital act economy as well. You know,
when you think about.
Speaker 4 (35:32):
The concept of.
Speaker 3 (35:34):
Investing in energy infrastructure, you're applying it to either correct okay, okay,
and so you.
Speaker 11 (35:40):
Have a component of you need large scale capital in
order to make these companies sustainable, long term businesses, similar
to traditional energy infrastructure. You need technical expertise again similar
to some of that energy traditional energy infrastructure, and you
just need high scalability of the overall market and the industry,
(36:00):
which again is a kind of a third underpinning factor
in the space.
Speaker 5 (36:03):
Over the last few weeks months, we've seen a real
rise in treasury companies tied to different cryptocurrencies, mostly Bitcoin,
but some Ether. I know that you said there is
a distinction between Ether machine and other crypto treasury companies.
But if somebody thinks about this in the context of
Strategy formerly known as micro strategy and Michael Saylor, the
(36:25):
guy who kind of began this all, what are the
differences in similarities between the way that ether machine is
set up.
Speaker 11 (36:31):
I think that's a good comparison. By the way, tam
with micro strategy, we are seeing the Ether machine hopefully
being the pioneer of ether, similar to what happened with
the Bitcoin and micro strategy.
Speaker 5 (36:43):
MicroStrategy is not an energy company or an infrastructure company.
They're a bitcoin company, that's.
Speaker 11 (36:47):
Right, and bitcoin, you know, it's sort of interesting because
one of the reasons why we feel that ether is
a very interesting asset class it doesn't have the energy
intensity component similar to bitcoin. And if you really take
a step back right and think about the energy infrastructure
complex over the next five to ten years, there's going
(37:08):
to be a high competing demand one from residential customers,
second from you know, onshoing manufacturing industrials, third from the
bitcoin space, and fourth from the data center and AI space.
And Ether doesn't actually necessary phase you know, the same
sort of challenges from an energy perspective as bitcoin does.
(37:28):
So there was another sort of a winning you know,
or selling factor for us in terms of partnering with
the Ether machine versus another cryptocurrency.
Speaker 6 (37:38):
You know.
Speaker 3 (37:38):
One of the things that we love looking at here
at Bloomberg as you'll put in a ticker, and we
look at the supply chain and understanding customers versus clients
who will ultimately be your biggest clients you think, and
really provide some growth going forward.
Speaker 4 (37:51):
Yes, so both commercial customers.
Speaker 11 (37:54):
So again some of the large institutions, which I think
again Carol.
Speaker 4 (37:57):
Is fin you're talking large financial.
Speaker 11 (37:59):
Institution, Yes, And that's again one of the reasons why
the timing from our perspective is is really interesting with
the Genius Act coming to play and really energizing the space,
and second actually stepping you know, some of the large
commercial customers coming in.
Speaker 4 (38:15):
But at the end of the day, there is going to.
Speaker 11 (38:17):
Be a retail component and you know, when you visualize
kind of five to ten years from now, it's going
to be a really important piece of our sort of
daily you know, sort of life on a personal basis.
Speaker 3 (38:29):
Any customers you can share with us. At this point,
just got about thirty seconds left.
Speaker 11 (38:33):
I would say that, you know, the team again is
very experienced. We have some really interesting access to large
commercial customers. So I would say stay tuned exciting developments
from Dynamics and the Ether Machine.
Speaker 4 (38:44):
Pretty soon.
Speaker 3 (38:46):
We'll see raybe in the next six months, we'll see okay, okay.
Really fascinating and certainly part of our changing world, no
doubt doubt about it.
Speaker 4 (38:55):
Andrea and Raka Bernadtova, she.
Speaker 3 (38:58):
Is founder a CEO of dynam I'm next joining us
right here in our Bloomberg Interactive Broker studio.
Speaker 2 (39:03):
This is the Bloomberg Business Week Daily podcast, available on Apple,
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Speaker 2 (00:08):
This is Bloomberg Business Week Daily reporting from the magazine
that helps global leaders stay ahead with insight on the people, companies,
and trends shaping today's complex economy. Plus global business finance
and tech news as it happens. The Bloomberg Business Week
Daily Podcast with Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 3 (00:32):
All Right, as we mentioned, Tim and I are setting
the stage at the top a lot coming out investors
this week, and I mentioned Julian Emmanuel over at Evercore
II calling this a moment of truth for the markets
because you've got big tech earning some of those mags seven,
You've got the trade negotiations like we just talked with Catherine,
You've got the FOMC, the jobs report and earnings report.
Speaker 4 (00:51):
It's a lot.
Speaker 5 (00:51):
Tim, Let's ask Nancy Lazarrel about it. She's chief economist
for Piper Sandler. She joins us from Aspen, which is
the biggest element on your radar. This week. We opened
our program talking about Okay, yes, the trade deals. Those
are obviously very big. We have everything happening when it
comes to tariff deadlines. Later this week, We've got earnings
(01:12):
out this week from some of the megacap tech players,
and then of course the jobs are coming at us
on Friday, not to mention fed share, J Powell coming
at us on Wednesday. How are you making sense of it?
Speaker 6 (01:22):
Well?
Speaker 7 (01:23):
I think really the consumer spending data we're going to
see for the month of June from an economic perspective,
is going to be really important. Our best guess is
that the consumer is going through a soft patch right now.
We have already clearly seen that in the retail sales data.
Within consumer spending, we're going to get more information on services.
We heard last week from some of the service oriented
(01:44):
consumer companies airlines, hotels, restaurants that consumer spending in the
service sector also is a little squishy. It's not just goods,
it's also the service side. So consumer spending, how week
will it be as we go into second quarter into
the third quarter? Excuse me?
Speaker 8 (02:00):
We are expecting a soft patch.
Speaker 7 (02:01):
We think it will be on the softer side, reflecting
in part demand was pulled forward in anticipation of these tariffs,
and you have already seen price increases and that's also
impacting consumer consumer spending.
Speaker 5 (02:14):
How do you make sense of that, given what we
heard from airlines over the last couple of weeks. Not
every airline, of course, but I'm talking mainly of United
and Delta, who said, you know, as we got a
little clarity about what was happening with tariffs late June
early July, we started to see a real big turnaround
when it came to consumer spending. How do you gel
those two things.
Speaker 7 (02:33):
I think it really is a bifurcated consumer. One of
these days, I look forward to not using that word anymore.
We've talked about that for a couple of years now,
but there is really a bifurcation. The higher end business
oriented airlines are I'm not an airline analyst, but they
are being supported by the higher end and businesses. Whereas
the airlines that reported last week, couple of them anyway,
(02:53):
and again today some layoffs, those are more for the
lower end consumer, and the lower end consumer is really
getting squeezed from these terrafs. It is basically a regressive
tax on the consumer. So the bifurcation companies that are
geared toward businesses and the higher end consumer can plow
through this. Those that are more tied to the lower
end consumer are struggling. The consumer really is looking at
(03:15):
price points right now.
Speaker 3 (03:16):
I want to get to what our Shawn Donnan wrote
about on the Bloomberg Today and at Bloomberg dot Com,
and that has to do Nancy with the damage to
the global economy from American protectionism. He notes that it's
becoming increasingly evident even if financial markets get somewhat excited
as we see trade deals being done. He says it
(03:36):
all amounts to another step change in the trade barrier
that the President has erected around America, which is starting
to reshape trade and investment patterns worldwide. Not his opinion,
but his reporting out that Shawn has done here at
Bloomberg and Bloomberg Economics, saying the hit to the world
economy will reach two trillion by the end of twenty
twenty seven relative to its pre trade war path.
Speaker 4 (03:57):
It's going to be a different global environment.
Speaker 7 (04:00):
Yes, well, for sure, it's going to be a different
global environment. But I think we have to look at
the economy as three dimensional chess, not just as a
flat as a flat board, no question, tearis our attacks.
I'm definitely more for free trade, but I'm also for
fair trade. Maybe we can shake one little positive out
of this and get some fair trade i e. Incrementally
(04:23):
sell more to Japan and Europe in particular. But to
be sure, right now, our effective tariff rate that we're
calculating is about seventeen. Now it's down dramatically, but seventeen
is the highest since since the nineteen thirties, and so
to be sure, that is a headwind to global growth.
But I think that is just one part of the puzzle.
(04:43):
The second thing that's going on in the United States
is the capital spending cycle, and the tax legislation or
that was just passed actually in the one Big Beautiful
bill indeed does very very very significant accelerated depreciation for
capital spending apex appreciation for eighty percent of capex. That
is going to be a significant boost to cash flow,
(05:06):
corporate cash flow.
Speaker 8 (05:07):
We've already heard that.
Speaker 7 (05:08):
Last week we had four companies AT and T, Verizon,
T Mobile, and United Rental. I'll say this tax legislation
is a support for their cash flow. So against I
think we can't just look at one level. We have
to look at what's going to happen to capital spending
and capital spending. I call it the ugly duckling of
economic data. It's underappreciated for what it does for growth.
(05:30):
It creates productivity, profitability and lists potential GDP growth and
that eventually lists living standards. So quite frankly, I think
that article is a little bit way too one sided,
and you need to look at the bigger picture and
near term again, this economic soft patch for sure, but
you're already seeing signs the companies that I mentioned, you're
seeing it in data where US capital spending is picking up,
(05:51):
and that's going to come back and help not only
productivity but the job cycle as we go through twenty
twenty six. So it's important to look at the bigger picture.
And I didn't mention deregulation. I'll stop, but that's also
another really important support for the US and therefore the
global economy.
Speaker 4 (06:06):
But is it okay?
Speaker 3 (06:07):
And you know, one of the things I want to
go back to is you say support for the labor market.
We had Rob kaplan On, former president of the Dallas Fed,
on Friday and he said, you talked repeatedly over the
tight labor market and the impact of immigration perhaps on
that and how that could then impact US growth.
Speaker 4 (06:24):
So I just want to throw that out there.
Speaker 3 (06:26):
But when you talk about capex and what it can
do for growth, certainly great for company balance sheets, Does
it help workers? Does it actually provide momentum throughout the economy.
Speaker 7 (06:39):
Absolutely, Again, it's called a business cycle for a reason,
and when businesses invest again, they improve their profitability through productivity.
And if companies aren't making more money, if their cash
flow is indeed going up, that is incentive to spend
not only on capital spending, but eventually on jobs and
in wages. And you see it, you see it historically
(06:59):
in in the data. Again, capital spending always grows faster
than housing capital spending, accept potentially in recession, capital spending
always grows faster than consumer spending. So it's really really underappreciated.
Businesses create jobs and pay and pay weaight and pay wages.
So near term, absolutely, I would argue we're in a
(07:22):
soft patch. The unemployment rate is grinding higher the Although
initial claims have come down a little bit, continuing claims
remain elevated. Companies, I'm not sure the labor market is tight.
Continuing claims remain very elevated. Companies are reluctant to hire
given the trade. Given the trade uncertainty. We think as
we go into twenty twenty six, the improvement in corporate profits,
(07:44):
which right now are sluggish but they'll improve into twenty
twenty six, then leads to a stronger a stronger labor market.
So yes, there's nothing more beneficial for the consumer than
stronger productivity growth a low inflationary environment, and that gives
you stronger real income growth.
Speaker 5 (07:59):
To what extent is that productivity growth, in your view,
hampered or not by tariffs.
Speaker 7 (08:06):
I don't think it really is hampered by tariffs per se,
incrementally maybe from a higher cost of certain certain investments.
As a result, we are seeing an increase in the
price of certain capital goods. So at the margin that
is a little bit of a nick. But this is
this is a very significant full capex depreciation, which again
those four companies early on in this earning season. I
(08:28):
can't wait to hear what happens over the next couple
of weeks that I have seen significant savings in cash
in cash flow, So we don't know yet the full
quote unquote saving to companies from this a new depreciation schedule,
and it could more than offset anything which I think
it does from a tariff from a tear perspective. So
tariffs are a one time tax versus capital spending, has
(08:52):
a very long tail and will help the economy at
least through twenty six, not into twenty sex.
Speaker 3 (08:57):
So Nancy, we've got a FED meeting, as you well know,
FED decision on Wednesday. So you say we're in a
bit of a soft patch right now, but you are
looking for improvement in twenty twenty six, and you see
profits leading to a stronger labor market. If we've already
got stimulus coming as a result of some of the
tax measures by the President's big beautiful bill, then does
the FED really should they not do anything for maybe
(09:20):
the rest of the year.
Speaker 4 (09:20):
Because they don't need to.
Speaker 3 (09:21):
They're stimulus already coming, and they've got to be careful
about inflation.
Speaker 4 (09:24):
Just got about forty seconds.
Speaker 7 (09:26):
Yes, I would agree that the FED doesn't need the
cut rates. Our guests that they probably do, according to
my colleague Benson, at least once, but we don't really
need more than that. They already cut rates one hundred
basis points last fall and that's still working its way
through into the economy. So good point. Combination of the
incremental I don't want to call it physical stimulus. It's
(09:47):
basically tax at tax and implicit tax cut for corporations,
and the regulation are not inflationary. They're actually disinflationary through
improving productivity growth. But net no, we really don't need it,
but we'll probably will probably to get at least one.
Speaker 3 (10:00):
All right, great to get some time with you again, Nancy,
Thank you so much. Have a good week, Nancy Lazar.
She's chief economist over at Piper Sandler.
Speaker 2 (10:07):
You're listening to the Bloomberg Business Weekdaily podcast. Catch us
live weekday afternoons from two to five pm Eastern. Listen
on Applecarplay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 5 (10:22):
The US and Chinese officials finished their first two days
of talks aimed at extending their tariff truth beyond a
mid August deadline and hashing out ways to maintain trade
ties while safeguarding economic security. The agenda includes giving more
time for high stakes negotiations to play out on issues
ranging from US levies tied to fentanyl trafficking to Chinese
purchases of sanctioned Russian and Iranian oil. Andrew Bishop is
(10:45):
following this all He's Senior Partner Global Head of Policy
Research at Signam Global Advisors. He joins us from Washington, DC, Andrew,
giving your view of what has happened over these first
of two days of trade talks. Do you think that
this tariff truths will be extended?
Speaker 8 (11:04):
Oh, yes, very much so.
Speaker 9 (11:06):
I think the tariff truth is absolutely going to be extended.
But the main reason for that is not so much
because I think there's great progress being made on the
substance of these talks. Rather, I think President Trump essentially
realized back in April May that high tariffs on China
just don't work because the impact on the US economy
is too great and China has.
Speaker 8 (11:27):
Too much leverage in the form of its control over
rare earths.
Speaker 9 (11:30):
So as a consequence of that, I think the President
is in very much de escalation mode and trying to
buy time make sure that the US receives the rare
earth that China has promised in Geneva and London. And
therefore he's definitely interested in extending that pause.
Speaker 5 (11:44):
So if China has, in the in the words of
Donald Trump, maybe has the cards in this negotiation, in
your words, has too much leverage in this negotiation, then
what does the US have Aside from an economy that
relies on goods from China.
Speaker 9 (12:01):
The US really only has a terror freight, which is
why I think the Chinese side is going to be
bargaining hard for a reduction in tariffs as well as
a reduction or at least a stabilization in export controls,
in particular of semiconductors.
Speaker 8 (12:19):
What's interesting in the latest recent.
Speaker 9 (12:21):
Events of the past couple of weeks is that the
Trump detmonstration has reversed some of its earlier export controls
on VSH twenty chips, for example.
Speaker 8 (12:30):
As I'm sure you're well aware, that was.
Speaker 9 (12:32):
A view that we had at Signum that this would
be part of the deal that they struck in London.
The problem for the Trumpet demonstration is that that move
is already getting enormous pushback.
Speaker 8 (12:42):
Right So, while China is going to be.
Speaker 9 (12:45):
Demanding more of that, more repeal of export controls, it's
going to be hard for President Trump to agree to
that without facing major backlash domestically. And that's why I
think he'll start pivoting the conversation away towards tariff.
Speaker 8 (12:59):
Relief, just not as emminently as this week.
Speaker 3 (13:01):
I don't think who has more at stake here? We
so often, Andrew talk about the relationship and the dependent
relationship between the United States and China. But when you
look at this relationship, does one of the countries have
more at stake here?
Speaker 6 (13:21):
So?
Speaker 9 (13:21):
I think the answer to that is, and the reason
why you get different answers right, is that China definitely
has more to lose economically than the US does. The
problem is the US has a lower political pain tolerance,
and as consequence, though even though the US economy is
far more resilient and can absorb these shocks from a
(13:42):
political standpoint, you have a president and it would be
the case with any other president that essentially faces a
Taco situation as soon as they come under pressure.
Speaker 4 (13:51):
So then talk to us.
Speaker 3 (13:52):
Take us to China in terms of what is happening
in their economy right now, and we know that you're
right in terms of pain tall tolerance, that many much
has been reported. I guess I should say in terms
of the Chinese government that they'll do what they need
to do right in terms of potentially inflicting pain economic
(14:13):
pain on their citizens. But tell us about what is
the truth or reality, at least as you know it
to be the Chinese economy today.
Speaker 9 (14:21):
So what's interesting is you see a lot of vulnerabilities
in the Chinese economy. Youth unemployment is a major one,
you know, sort of misallocated savings and low consumption is another,
and of course problems and the major problems in the
real estate market. But what's interesting is that a lot
of those problems aren't directly related to President Trump's tariff
(14:43):
threats or tariff enactments, if you will.
Speaker 8 (14:46):
So there are two ways of looking at that.
Speaker 9 (14:48):
You could say, any marginal worsening of the situation due
to Trump makes the Chinese position even harder to sustain.
But a different interpretation, which I would lean with, is that,
you know, because China is aware that these are structural
problems that it's on its way to at least, you know,
resolve or at least tackle on its own. President Trump
(15:09):
really isn't the major agenda item on the table here,
and he can be sort of kept at bay and
handled almost like as a single singular issue in its
own bucket, if you will.
Speaker 5 (15:21):
We've spent a lot of time over the last few
weeks and all over the last few months talking about
rare earths talking about tariff rates. But one thing that
hasn't necessarily come up a lot of late has been
the fate of TikTok and how TikTok could or could
not be used as a bargaining chip in these negotiations.
What's your view?
Speaker 8 (15:40):
So my view on that is.
Speaker 9 (15:43):
My view on that is that you can have a
TikTok deal any day, right as long as the US
is willing to accept the situation where China continues to
control the algorithm. So that could look at one that
could look one of two ways. Either China controls the
algorithm and there are essentially two tiktoks, a Chinese TikTok
and an American TikTok, and the American TikTok is sort
(16:06):
of fully US owned but it just doesn't have that
initial algorithm. Or you have a situation where the TikTok
platform in the US still has the underlying algorithm, but
there's an existing dependency on China. What I don't see
is China agreeing to part ways with that algorithm. So
a simpler, a simpler version of that is to say,
(16:29):
China is not going to give away the real TikTok.
So the question is whether the US wants to continue
with the status quo or downgrade TikTok's quality.
Speaker 3 (16:38):
If you like, Hey Andrew, something we talked about in
the two o'clock hour about all of these trade agreements that.
Speaker 4 (16:45):
The devil's in the details, right.
Speaker 3 (16:46):
And it just feels like in many ways we're just
getting kind of agreements to do something. Something like a
US China trade deal is going to be a complicated
one and lots and lots of pages and items to discuss.
So I guess what my question is is we will
probably not know the specific details for a while. So
(17:08):
investors trading off of, I mean, what should they trade
off of, what do they be looking for in terms
of specifics when it comes to a US China trade
deal and how long might that take?
Speaker 9 (17:19):
And so I think one thing that they can trade
on is direction of travel, right, So, very concretely, experts
debate whether there's going to be a minor terror for
Leaf tomorrow or in November or some time in between.
But most experts at this stage agree that there is
a floor under the relationship and that it's unlikely we're
going to see TEFF increase, right, So one answer is
(17:40):
things are probably going to get better, not worse, over
the coming six months, different if you look over the two.
Speaker 8 (17:46):
To five here horizon. But that's a separate question. So
that's one answer.
Speaker 9 (17:49):
The second answer would be any deal is likely to
involve purchase commitments from China, right, so similar to the
Phase one trade agreement that they struck back during President
Trump's first term. China will probably promise to buy more
American things items, including agricultural goods. Those targets are not
likely to be as high as during the first agreement.
They were unrealistic back then. But that's a second component.
(18:13):
The third is again, oh sorry.
Speaker 3 (18:15):
No offurtunately, we've got to wrap it and leave it here,
which is a mega te Well.
Speaker 5 (18:19):
Honey, back to talk about the third one. Okay, that's
what we call a megates.
Speaker 4 (18:24):
That was great though. We really appreciate Andrew Bishop.
Speaker 3 (18:26):
He's Senior Partner, Global Head of Policy Research at Signum
Global Advisors, joining us from DC.
Speaker 1 (18:31):
This is the Bloomberg Business Week Daily Podcast. Listen live
each weekday starting at two pm Eastern on Applecarplay and
Android Auto with the Bloomberg Business app. You can also
listen live on Amazon Alexa from our flagship New York station.
Just say Alexa play Bloomberg eleven thirty Now to a.
Speaker 5 (18:50):
Very serious global issue. We're going to start in the
Middle East, where President Donald Trump said the US would
work on a new effort to provide food aid to
alleviate starvation and gaza, along with other governments and organizations,
including the UK and the European Union. His comments from
this morning from Scotland in a press conference with the
UK Prime Minister Keir Starmer.
Speaker 10 (19:11):
The United States will be helping with the food. You know,
we have a lot of access to food. We got
a lot of food ourselves, and we're going to bring
it over there. We're also going to make sure that
they don't have barriers stopping people. We're going to be
getting some good, strong food. We can save a lot
of people. I mean, some of those kids are that's
real starvation stuff. I see it, and you can't fake that.
(19:33):
So we're going to be even more involved.
Speaker 5 (19:37):
That's President Trump earlier today from Scotland. We're going to
head to tele Aviv. Now to Bloomberg News Israel Bureau
Chief Ethan Bronner. Ethan, we've all seen the pictures by
now of starving Palestinians, many of whom are children. You've
wrote about this, and you wrote about this last week,
and the back and forth, what the Israeli government has
said is happening, what many in the worldwide community has
(19:59):
said is happening. The World Health Organization said is happening.
In your view, what is going on.
Speaker 6 (20:05):
Tim, I mean, you know, I wish I had the
wisdom for a genuinely deep answer. I think there can
be no question that people are going hungry in Gaza.
I think that we are now beyond any discussion of that.
The issue begins to get complicated when we're talking about
famine or starvation and whose fault it is and how
(20:27):
long it's been going on. And I have to tell
you that as a reporter here who can't get into Gaza,
I mean, the Israeli military and government have barred us
from going in. It's been a source of enormous frustration
for the entire two years almost that this war has
gone on, that you have international aid organizations talking about
(20:48):
starvation and you have the Israeli military saying none of it.
So I think that for a while it was exaggerated.
It may still be exaggerated. But it is real, and
even the Israelis have acknowledge it, and indeed, as you
just noted, so has President Trump. So a very difficult
situation is underway where people don't have food to eat,
(21:10):
just fifty miles from where I'm sitting Ethan.
Speaker 4 (21:13):
So many ways to go here.
Speaker 3 (21:15):
But one thing I want to say is you say,
for the most part, everyone has agreed that there's no starvation,
but Israeli Prime Minister Benjamin not Now who says that
there's no starvation in Gaza, So.
Speaker 6 (21:27):
Right, I said, I can think we can all agree
there is hunger, right, I mean, these are these various
technical definitions. He has said there's no starvation. He doesn't
seem to be right. I think the next question is
is they're famine. I'm not sure I know the different
you know how to distinguish among these things, but clearly
one as we go down the words, we get to
(21:48):
a more difficult situation. There is no question there is hunger.
Even the Israeli military, what's held a briefing for us
a few days ago, use the phrase food insecurity. When
I pressed, the folks been the colonel at some length
about it. So there's no doubt about that. But you know,
and we see people, we see what they look like,
(22:08):
and we hear people talking about having no food and
being afraid of dying from it. So this is not
a joke.
Speaker 5 (22:15):
How do reports of the hunger happening there coincide with
Israel blocking aid supplies for Gaza in early March, so
at that.
Speaker 6 (22:24):
Point, I mean, I'm not a government spokesman, as you know,
but the Israeli argument at that time was that the
Hamas was hoarding huge amounts of this food and that
there was enough of it for a while, and that
they were Israel was going to find a way to
keep it out of the hands of Hamas for a
bunch of reasons. Their main complaint was that Hamas was
(22:47):
taking the food aid, feeding its own militants, keeping it
from ordinary people, and then selling it on the market
so as to continue their war against Israel. That has
been challenged in various ways. Some version of that seems
to be true, and that's why Israel did it and
then set up this rather inefficient organization to try to
(23:10):
skirt Amas, and that has not gone well.
Speaker 3 (23:14):
We have a viewer who has written in and said, well,
I'm wondering why President Trump is not pushing for a
permanent end to the Gazo war.
Speaker 4 (23:23):
I guess if it was easy, it would be done.
Speaker 6 (23:25):
You're hoping I can answer that question.
Speaker 3 (23:27):
Look, I don't forgive you for giving you such a test,
but I think it's been going on.
Speaker 4 (23:32):
First look, I mean I think.
Speaker 6 (23:34):
Look, I would say the following that for most people abroad,
from most people anywhere, the idea that there's.
Speaker 8 (23:41):
A war is terrible.
Speaker 6 (23:42):
Wars are terrible, okay, but we do have a war
underway between two forces. The Israel believes that if Hamas
is not eliminated, that it will reconstitute itself and a
reconstitute itself as a threat to Israel. I think the
President Trump is somewhat sympathetic to that idea. Now, while
they're trying to eliminate Hamas, if people are starving, if
(24:05):
ordinary people have no food, this is a separate issue.
So in theory, and again I'm not the President's spokesman.
In theory, if they could flood the area with food
over the next weeks, then they could start their war
up again. Because Hamas is, after all, holding fifty Israeli
hostages and has said it will not step down from
(24:26):
power or give up its arms, which from Israel's perspective,
is a danger to Israel. So I think that the
President is somewhat sympathetic to that reasoning. Whether that's appropriate reasoning,
we can discuss at another time.
Speaker 3 (24:40):
And we should point out that this week we have
dozens of ministers that are gathering at the United Nations
in a conference to really push for a two state
solution between Israel and the Palestines. We should also point out,
tim that the US and Israel have boycotted this event.
Speaker 1 (24:55):
Ethan.
Speaker 5 (24:56):
We've spoken to you constantly over the last twenty one
months or so after October seventh, and one thing that
you've shared with us throughout that time from Israel is
the view of the Israeli public support of the war,
support of Prime Minister Benjamin NETANYAHUO. You've written in the
last couple of weeks about some weakening support within the government,
which he still does control after walkouts, But what about
(25:19):
on the ground in Tel Aviv? And based on your reporting,
is there still widespread support for this conflict?
Speaker 6 (25:26):
I think it is weakening. I would say that the
photos and the videos of starving people and especially starving
children in recent days has taken a toll on the
public support. In addition to a range of other things,
dying soldiers, the sense that Israel is increasingly isolated internationally.
(25:48):
They're increasing reports of Israelis being attacked on the street
in Greece and in Austria and so on. So there
is a growing fatigue with all that. And Hamas does
been destroyed. So I think there is We don't have
polls yet from this week showing it, but there is.
(26:08):
I hear it around dinner tables, I hear it from friends,
I hear it from colleagues. There is a growing challenge
to the legitimacy and the justice of this if with
all these things happening, people are also starving and the
hostages are not being freed. So yes, I can't tell
you that there is a majority against the war because
(26:30):
I don't know that, but my instinct is that it
is dropping.
Speaker 4 (26:33):
UMAs how powerful are they still?
Speaker 3 (26:36):
You know? And I'm just thinking about the attacks and Iran,
and we thought the proxies and we thought that.
Speaker 4 (26:41):
There was progress on this front. What do we know?
Speaker 6 (26:46):
Well, we know that they're able to recruit lots of
young people to join their forces, it's not surprising given
what's been going on for two years and longer in
Gaza for ordinary people. So I think that there is
some degree of strength. The problem is strength when you're
a gorilla organization basically means survival and being able to
(27:07):
poke the bear, which is Israel. So it still has
that ability to do it, and nobody is able to
replace Hamas right now in Gaza. Israel's argument is that
once it can really break the back of the organization properly,
people will emerge who are willing to take up governing
(27:29):
the place. We will see whether that's true or not.
With reference to what you refer to a better two
state solution, The argument there is that non Hamas Palestinians
who are associated with the Fatal movement and with the
Palestinian authority could take over. The Israeli government's argument is
that they are not sufficiently different from Hamas, They too
(27:51):
teach their children to hate Israel. And the second argument
they make is they will ultimately lose out to the
more radical forces. We can't forward to let that state exist.
So we're in a very difficult place.
Speaker 5 (28:06):
It's an impossible question to answer, Ethan, but it's a
question I think worth pondering if the situation that you
laid out is indeed what comes to pass, And I
guess I could say, if and when the hostages are released,
then what well.
Speaker 6 (28:19):
One of the problems with the question, Tim, is that everyone,
many people believe that the hostages will never all be released,
because it is the only currency that Hamas holds in
order to hold Israel over any barrel of any kind. Now,
what may happen is this government may decide that it's
gotten all the hostages out through any deals it can,
(28:41):
and it moves in fully militarily, and the remaining hostages
are either killed or rescued. And then once there are
no more hostages than Israel might continue militarily even further,
or with President Trump's encouragement and the world's anger, this
government might return to negotiating with Hamas indirect negotiations in
(29:06):
either Kata or Egypt as that have been happening, and
some attempt to cut a deal, at least a partial deal.
But you know, though, what is the future is a
very legitimate question, and I don't have the answer.
Speaker 3 (29:20):
Yeah, it's just amazing and just disturbing from so many
different angles.
Speaker 4 (29:25):
The situation.
Speaker 3 (29:27):
Do you expect any Do you expect anything to come
out of this meeting at the UN just real quickly.
Speaker 6 (29:32):
No, I don't depends on by anything. There can't be
anything definitive out of it. A state of Palestine will
not exist as a result of this meeting. It maintains,
It insists that the world would like that to be
the solution, and at the moment there is not a
majority in Israel that embraces that solution.
Speaker 3 (29:51):
All right, going to leave it there, Ethan, thank you,
Thank you as always. Ethan Brawner, Israel Bureau chief at
Bloomberg News, joining us from Tel Aviv is on this Monday.
Speaker 2 (30:02):
You're listening to the Bloomberg Business Weekdaily Podcast. Catch us
live weekday afternoons from two to five pm Eastern. Listen
on Apple CarPlay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 6 (30:17):
All right.
Speaker 3 (30:17):
From stable coins and treasuries to a crypto treasury firm,
that's where we go next.
Speaker 5 (30:21):
And Ethereum Treasury Firm has agreed to go public in
a blank check company merger backed by more than one
and a half billion dollars of crypto and stock financing.
It joins the rush of digital assets heading to public markets.
We're talking about ether Machine. It's the expected surviving company
of the merger, and it's set to be anchored by
more than one hundred and sixty nine thousand ether from
one of the co founders and a stock financing of
(30:43):
more than eight hundred million dollars. That's, according to a
statement just last week, as much as one hundred and
seventy million dollars of cash and the trust account of
Dynamics Corp. The Spack merging with the Pool would also
be included. We've got with us and Raca Bernatova, founder
and CEO of Dynamics, joins us here in the Bloomberg
Interactive Brokers studio. I said a lot of words just
(31:05):
now that might not be clear to everybody who doesn't
follow this space inside and out what is going on
with this SPEC.
Speaker 11 (31:12):
So thank you for having me, Tim and Carol. Great
to be here. We're very excited about the merger with
the ether Machine. This is our actually second SPEC transaction
in the past eighteen months or so. We're very excited
about the transaction number one. Obviously, it's in a space
that we see is a very high growth space over
the next short, medium and long term in the ethereum space.
(31:35):
But ninety percent of stable coins are in the ethereum universe,
and so we see actually the ether machine and being
one of the large beneficiaries of the recent genius actors
I just pointed out, just talked about number two. The
team is an extremely experienced team. They've been running in
(31:56):
the ethereum space for five ten years. Actually, they are
going to be fully dedicated to the business and really
grow it into a large institutional company. So it is
a business that should be public in the first place,
which was really truly one of our objectives as a
dynamics pack. And a third piece, as you just mentioned,
(32:17):
you know, one of the founders is contributing a very
large eth steak himself, which shows a high confidence and
conviction into building you know, the biggest or if not
the biggest institutional player in the space. So very exciting,
you know, we, obviously you mentioned the financing, are very
excited about the financing package. This is the biggest financing
(32:39):
that has happened in the space since twenty twenty one.
Eight our million dollar pipe that's at ten dollars back
by very large investors, electriccapital, blockchain, dot com.
Speaker 3 (32:53):
You make money the ether machine, Yeah, so ultimately the
company all of it.
Speaker 11 (32:59):
Yes, So it is a very differentiated company in our view.
It is not a treasury company. It's a company that
is really using ether for multiple purposes, staking, restaking, and
DeFi and so you have multiple ways to actually win
and create yield for end investors. So we are energy
(33:22):
and infrastructure investors, a dynamics team by training over the
past couple decades. And so the way we think about it,
Carol is basically, you can invest in oil or you
can invest in oil company it actually utilizes oil and
create more value out of oil. So we see the
ether machine in a similar manner. You can invest in
ether or just the digital asset, or you can actually
(33:44):
invest in the ether machine that's using the asset and
generating yield on top of it.
Speaker 5 (33:49):
How do you think the return of ether machine is
connected to the price of ether? It so obviously like
if you're an oil if you're going to get invest
in an oil oil company or in actual oil, those
two things are pretty closely correlated.
Speaker 11 (34:06):
There will be probably a certain correlation team in terms
of price, you know, going in multiple directions, what we
believe just given the demand for ether and stable coins,
you know, hopefully that's going to.
Speaker 4 (34:20):
Be in a positive direction.
Speaker 11 (34:22):
We are excited about the fact that obviously ethereum is
one of the big beneficiaries of some of the commercial
demand as well. You see large companies like black Rock,
JP Morgan, you know, Deutsche Bank and others really starting
to embrace the space, and so that should sort of
underpin the demand for this digital currency in particular. But
(34:46):
there will be we assume some you know, sort of correlation,
but again there will be extra value add benefit that
the team is going to create as they actually fully
utilize Ether for yield.
Speaker 4 (35:00):
So you're crypto play or an energy play.
Speaker 11 (35:03):
We our background is energy and infrastructure by training, and
we really do see sort of the digital assets space
skirl as the next frontier in uh, you know, next
generation infrastructure. Obviously you are seeing financial infrastructure or correct correct,
and so you know, a lot of the background that
we have from traditional energy and infrastructure assets are actually
(35:27):
translatable into the digital act economy as well. You know,
when you think about.
Speaker 4 (35:32):
The concept of.
Speaker 3 (35:34):
Investing in energy infrastructure, you're applying it to either correct okay, okay,
and so you.
Speaker 11 (35:40):
Have a component of you need large scale capital in
order to make these companies sustainable, long term businesses, similar
to traditional energy infrastructure. You need technical expertise again similar
to some of that energy traditional energy infrastructure, and you
just need high scalability of the overall market and the industry,
(36:00):
which again is a kind of a third underpinning factor
in the space.
Speaker 5 (36:03):
Over the last few weeks months, we've seen a real
rise in treasury companies tied to different cryptocurrencies, mostly Bitcoin,
but some Ether. I know that you said there is
a distinction between Ether machine and other crypto treasury companies.
But if somebody thinks about this in the context of
Strategy formerly known as micro strategy and Michael Saylor, the
(36:25):
guy who kind of began this all, what are the
differences in similarities between the way that ether machine is
set up.
Speaker 11 (36:31):
I think that's a good comparison. By the way, tam
with micro strategy, we are seeing the Ether machine hopefully
being the pioneer of ether, similar to what happened with
the Bitcoin and micro strategy.
Speaker 5 (36:43):
MicroStrategy is not an energy company or an infrastructure company.
They're a bitcoin company, that's.
Speaker 11 (36:47):
Right, and bitcoin, you know, it's sort of interesting because
one of the reasons why we feel that ether is
a very interesting asset class it doesn't have the energy
intensity component similar to bitcoin. And if you really take
a step back right and think about the energy infrastructure
complex over the next five to ten years, there's going
(37:08):
to be a high competing demand one from residential customers,
second from you know, onshoing manufacturing industrials, third from the
bitcoin space, and fourth from the data center and AI space.
And Ether doesn't actually necessary phase you know, the same
sort of challenges from an energy perspective as bitcoin does.
(37:28):
So there was another sort of a winning you know,
or selling factor for us in terms of partnering with
the Ether machine versus another cryptocurrency.
Speaker 6 (37:38):
You know.
Speaker 3 (37:38):
One of the things that we love looking at here
at Bloomberg as you'll put in a ticker, and we
look at the supply chain and understanding customers versus clients
who will ultimately be your biggest clients you think, and
really provide some growth going forward.
Speaker 4 (37:51):
Yes, so both commercial customers.
Speaker 11 (37:54):
So again some of the large institutions, which I think
again Carol.
Speaker 4 (37:57):
Is fin you're talking large financial.
Speaker 11 (37:59):
Institution, Yes, And that's again one of the reasons why
the timing from our perspective is is really interesting with
the Genius Act coming to play and really energizing the space,
and second actually stepping you know, some of the large
commercial customers coming in.
Speaker 4 (38:15):
But at the end of the day, there is going to.
Speaker 11 (38:17):
Be a retail component and you know, when you visualize
kind of five to ten years from now, it's going
to be a really important piece of our sort of
daily you know, sort of life on a personal basis.
Speaker 3 (38:29):
Any customers you can share with us. At this point,
just got about thirty seconds left.
Speaker 11 (38:33):
I would say that, you know, the team again is
very experienced. We have some really interesting access to large
commercial customers. So I would say stay tuned exciting developments
from Dynamics and the Ether Machine.
Speaker 4 (38:44):
Pretty soon.
Speaker 3 (38:46):
We'll see raybe in the next six months, we'll see okay, okay.
Really fascinating and certainly part of our changing world, no
doubt doubt about it.
Speaker 4 (38:55):
Andrea and Raka Bernadtova, she.
Speaker 3 (38:58):
Is founder a CEO of dynam I'm next joining us
right here in our Bloomberg Interactive Broker studio.
Speaker 2 (39:03):
This is the Bloomberg Business Week Daily podcast, available on Apple,
Spotify and anywhere else you get your podcasts. Listen live
weekday afternoons from two to five pm Eastern on Bloomberg
dot com, the iHeartRadio app tune In, and the Bloomberg
Business app. You can also watch us live every weekday
on YouTube and always on the Bloomberg terminal
Hosts And Creators
Tim Stenovec
Carol Massar
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