you're going to stay in it. your final? >> transocean. this is one of the more risky names in the energy sector, but oil demand is high, and you will have to search for it offshore. that means day rates will go up. >> 73.88, about a 1.5% gain as crude tries to bounce back. i'll see you in a couple of hours. that does it for us. "the exchange" is now. thank you very much, scott. hi, everybody. i'm kelly evans. here is what is ahead this hour. regulators in the hotseat today, and in the cross hairs of lawmakers demanding answers. how could svb and signature fail so fast? could it happen again? and should we extend fdic insurance to all bank accounts to matter the size? plus, speaking of banks, morgan stanley hailing block

cash app as the place for millennials do all their banking. the analyst behind that call makes his case. and why the dollar is losing its special reserve status would be a good thing. that's all ahead, dom. but first, let's get to the markets. >> the markets are mixed for the most part and in turmoil. if you take a look at the reasons we are seeing a little bit of this move, people are trying to figure out right now what the bank story is going to be all about. if you look at this, the s&p 500, 3968, down about nine points. at the lows of the session, we were down 17 points. at the highs, up two. so tilting towards the lower end of that. the dow industrials, the relative outperformer, up 18 points. the nasdaq down 86 points. one thing that we are keeping a close eye on is chinese big tech and internet stocks.

alibaba is going to restructure itself, with the ability to raise capital. allment to unlock shareholder value. that's up 13%. the rest of the chinese big tech complex may be getting a sympathy tail wind. even kwde is up 4%. ali baba is the big driver. and the stock of the day is lyft, ride sharing, second place to uber in terms of market share, but the story is the loss of mmomentum. the ceo is going to step back, and the stock is up 8% at the highs of the day.

it's now down 3%. so an executive change, it was a positive catalyst earlier, kelly. it's now kind of waned a little bit. lyft shares a big focus. >> a big swing, too. dom, thanks. we begin with the banking regulators in the hotseat on capitol hill, facing questions about the collapse of svb and signature bank, and most importantly, whether it could happen again. steve liesman brings us some of the highlights of that hearing. steve? >> yeah, kelly, dramatic new details about how fast events were moving in the final hours of silicon valley bank before it was shut down. the fed vice chair testified to the senate banking committee that after $42 billion left the banks on the thursday before it closed, svb said they feared more than double that amount was headed out the door friday morning. >> a total of $100 billion was

scheduled to go out the door that day. the bank did not have enough collateral to meet that, and therefore, they were not able to actually meet their obligations to pay their depositors over the course of that day, and they were shut down. >> the detailed highlights, a hyper contagion challenge facing regulators these days. the speed which they can flee with the technology and spread to other banks, a problem for which regulators at the moment have no answer. barr had harsh words about the interest rate modeling, calling it not aligned with reality. barr's testimony made clear that supervisors cited problems at svb numerous times in 2021 and 2022, and the fed board itself knew about this in february of 2023. not clear if anything the board did about that. another key issue, new rules adopted by the federal reserve

in 2019 exempted silicon valley bank from stress testing for several years. but stress testing would not have solved the problem. the fed last year stress tested in falling interest rates when banks were stressed by surging interest rates. let's turn to someone that has been a federal regulator, and a former chief economist to vice president pence and author of "shelter from the storm." welcome to all of you. what meltdown was averted, mark? >> let's remember that in march 2020, we came very close to a financial crisis, particularly in the mortgage market with the mortgage rates and the money market mutual funds. so part of the book is to really walk you through that stress we went through in 2020. but the other part is how we

kept foreclosures from getting out of a control. as a reminder, we lost 22 million jobs in that spring of covid. any time you lose that number of jobs, you face the potential of mass foreclosures in the mortgage market. it's the shoe that didn't drop in a sense. so i thought it was important to write the story of why it didn't drop and why we stopped it from dropping. >> maybe that's a good segue to the shoe that has dropped at svb, and let's put it this way. you say you don't support the idea of backstopping all deposits, that's what we have in place functional now, isn't it? >> it is. but there is some ambiguity whether you are a small community bank in oklahoma or louisiana, and if you are under $1 billion assets, are your depositors really backed? we know secretary yellen has gone back and forth. so unfortunately, that answer is not 100% clear.

obviously, one of the largest banks, you're backed. but this is a decision that needs to be made by congress. and if congress ups it up to $250,000. it's not up to the regulators to make this permanent. but i want to take a little different -- let me focus on -- >> one second. steve, what are you hearing on that front? again, the whole point is to figure out we have this kind of de facto, if these the right term, coverage of deposits right now, and everybody says oh, we can't keep it this way, but what steps might congress take, as far as you can tell, to change that and keep it from being enshrined? >> well, if i could look at the negative, like a picture on this and answer the question, the biden administration hasn't proposed it to congress, so that might tell you where they think the most votes are, or in this case, aren't.

i don't think they have support for it yet. it may be one of those situations, unfortunately, like if you remember the tart vote that went down the first time the market fell. they went back and put it back in. i want to respond -- i want mark to make his argument about why he's against 250. and i want to respond to that, because i have a slightly different point of view. >> in a nutshell, if you could, mark. >> i appreciate it. i want to take the other side of this and say the uninsured depositors forcing the closure of silicon valley bank was a good thing, because the regulators were at least six months, if not a year behind the curve. if the uninsured depositors had not forced this bank to close, who knows how long it would have taken? the hole could have gotten deeper and deeper. again, you look at the savings and loan crisis, you look at 2008. one to have primary problems is that bank regulators take too long to act. and so, again, this to my view

was not some sort of mindless panic run. the bank wasn't solvent. and uninsured depositors forced the regulators do something about it that they wouldn't otherwise. >> steve? >> so mark is right about that. there's a legitimate -- >> can i quote you on that, steve? >> the question is whether depositors, equity holders ought to be access. my point is against this moral hazard issue relative to the depositors. i made this point before, kelly, i will make it again. if the supervisors don't see it enough to shut down the bank, the equity holders don't see it enough, the bond holders respect selling their bonds. how in god's name are the depositors supposed to see it? these are mostly folks trying to run their businesses, and really want the financial institutions

to operate in the background. the idea that they are enforcing any discipline on the banks to me is suspect at best. >> no one was looking at this metric until this crisis happened. the percentage of uninsured deposits is now obvious. mark, i want to point out first republic, these banks are trading down another 5%, 6% again today. can you comment on that? it seems like it would be connected to the idea that maybe everything isn't going to stay covered. >> you know, it is a great concern and important to keep in mind that silicon valley bank had at least half a dozen problems, and even the first republics only have a small number of those problems. i haven't walked away from the hearing seeing what the evidence of contagion is, and to emphasize, you don't need 100% of depositors. prices are set at the margins.

all you need is a small sliver, 5% can result in market discipline. so, again, i would disagree with everybody monitoring. but there is a small segment, and most of the banks we publicly know, the information on uninsured depositors, ton recognized losses in securities, we have seen those names out there. i really want to emphasize, it's largely -- >> so let's say someone came to you and said i'm a customer of first republic, what do i do? >> again, if you have over $250,000, you can put it in multiple banks. there are a number of services that allow you to do that. that's the interesting thing. the great thing about capitalism, you can pay someone else to monitor it for you, and there are services that do that. so to me, it does speak to the relative unsophistication. i agree with steve, nobody wants to monitor their bank.

again, you can buy services that do that for you. >> let's say there is a blanket guarantee but only for a year. what do you think is feasible? >> let me start with what i'm concerned about and we'll talk about your likely feasible. never in history has the cap been raised and gone back down. every time it's -- >> i mean, the idea is in principle the $250 k should be inflation adjusted. >> the $250-k is six times the inflation adjusted value of deposit insurance when it was created in 1933. so it's more than kept up with inflation. in fact, it's six times as high as what it would be simply if we adjusted it for inflation. of course, the typical household has something like $10,000 in deposits. the richest 1% households holds a quarter of all insured deposits. so this isn't about ma-pa, it's

about small businesses, but let's get to what's feasible. i agree with the biden administration, you have seen members of congress, the freedom caucus, whatever they're calling themselves today, have come out against it. so you would have a very tough time. although there is a lot of bipartisan support. the real wrinkle is going to come here, if it was a clean increase in the limit, you could probably get it through congress. but i don't know how you will do that without the elizabeth warrens of the world piling on regulations. so maybe a 30% chance that congress does a permanent chance to something like $500,000. hard to imagine they would go far beyond that. >> that helps explain why we're seeing renewed weakness. mark doesn't see the political will to do something bigger here, and that leaves us with the status quo.

>> until it's there. i just think if i have a pizza restaurant or a mega corporation, i should have safe access to dollar liquidity. and i don't know how to provide that in a way that doesn't create additional moral hazard, and allows banks to do what they do, which is to take on the risk of maturity transformation. i think that -- kelly, i led my piece with this issue of technology and the speed with which things can move. there was a testimony today that -- in one of the bank failures in '08, it took ten days to move $16 billion. they moved $42 billion on thursday and were going to move $100 billion on friday. things have moved faster than the regulators have figured out how to supervise it. the idea that they were all sort

of concentrated in one industry, but we have to start to think about this new world of being able to move lots of money with a couple clicks on the phone. >> last word, mark? >> $800 billion in deposits left the system in the previous 12 months of silicon valley bank. there are better returns elsewhere. >> we'll see what more that reveals about the solvency of some of these institutions. for now, thank you both. let's get to the five-year note option. rick santelli is tracking this for us. rick? >> a much better auction today, kelly. $43 billion hit the auction block at five years. my grade, a b-plus, that's afternoon important thing to

think about, the yields. 3.665. the issue market was on the high yield at the time, which was 3.675. one basis point higher, lower yield, higher price. one of the main reasons, the grade was up there a bit. all the other metrics were solid against the ten auction average. and i think the reason that this auction is important, this is one of the first ones where i saw really good demand, as we are discussing the odds in the banking and financial systems, all a little nervous that the fed turns a nose blind to all the aromas in the room. but this makes me think maybe the high yield, the comeback to all of this, may be about to run its course. kelly, back to you. >> rick, thank you very much. ric. markets have turned lower with the dow down 32 points.

my next guest isn't buying the rally that we are trying to build over the last four days or so and warns the fed may have to cut rates sooner than later. let's bring in the ceo of zoe financial. people have been chasing bitcoin with the idea that maybe a rate cut is a good thing. what would you say? >> stocks didn't do well during the period when the feds lowered rates. why? the fed is catching up to what is happening in the economy. so if the fed were to lower interest rates to help financial stability, i don't think that's good for stocks. if they lowered interest rates because they beat inflation, maybe that's a better story. but with inflation at 6%, i don't think that's going to be the case this year. >> you are emphasizing -- we are so obsessed with the failure of

svb today, obviously. but to you, in some ways that was a markets event, and the scars of what happened in the two-year, that three-tay plunge, you think that's telling, no? >> absolutely. the bond market reacted much stronger, telling us the fed is going to have to blink. they went from solely focused oven price stability, the bond market is going to have to focus on the financial stability, the stock market didn't react as harsh. >> you know, you make the argument, we heard from other voices here. paul mcculley is very much in this camp. if you listen to them, you would think it's a very different economic reality. why? >> i'm so glad i'm not in those seats right now. everyone's crystal ball just got

a little hazier. once the financial stability concerns become larger, we learn how quickly the world can change in three weeks. so there is a tough job of having that price stability goal not going away. so i think they're stuck in a hard place with no easy decisions. >> they could get up there and say, hey, everybody, inflation has receded by a third, falling almost as quickly as it rose. look at the home price data. they could choose to start building that narrative. we're not doing this inspite of inflation but because of inflation heading way back down. i don't know why they just don't seem to want to talk about that. >> i think the issue is if they do that, and they're wrong, core cpi stays elevated, are they going to go back to hiking interest rates in an environment where recession is a danger?

so they're just stuck between really not good options, last on the table when it comes to price stability. >> it's just odd. people in the markets go, we see the accidents forming. we think the fed knows it, but it's just odd. so what would you do with strategy at this point for the next 6 to 12 months? >> that's the key. important caveat here, if you are investing for retirement ten years out, you don't make any drastic changes. i think we're just going to expect a lot more price instability on the markets. not just on inflation. and what that means is stocks are basically stuck in purgatory. i don't know if we're going to break through october lows, but i don't see the ingredients for a bull market to emerge. >> what would you do? tee bill and chill was the refrain until it kind of blew up the economy.

so what would you do with those still high yields? >> we definitely have seen the importance of cash management becoming part of asset allocation. a lot of people didn't realize they were marking 1% or half a percent on their cash. so that becomes a key part. talk to your financial advisers. a lot of that will happen. which is the danger with the regional banks. deposits are so low, there's better options out there in money markets. >> but you would endorse moving it to the higher yielding areas? >> it depends on your current situation. some people didn't realize that was an option. we encounter a lot of times people still sitting on checking or savings accounts, yielding 1%. so there's still a lot to be done there without having to shift everything away from stocks and bonds to generate better returns. >> all right, andre, great to

see you this morning. coming up, how are home prices holding up after all the turmoil in the banking industry? we'll get the latest read. but first, what if cash app builds a bank? the analyst behind the call joinstous make his case. the dow is lower by 30 points. the s&p down a third of a percent. the dow is down three quarters of a percent. back after this.

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welcome back. the bank turmoil and last week's bearish report, paypal and others are down. the one major crypto vc just told us he thinks block is a name to watch. and my next guest sees big opportunities. joining me is james faucet. welcome. >> thanks. happy to be here. >> so you think -- i mean, you're saying they really build out. do they have a banking license right now, a bank charter i should say? >> they have an ilc, which gives

them the opportunity to operate in a lot of cases like a bank without all the traditional restrictions. >> why is this such a big opportunity for block right now in >> one of the big opportunities is just the emerging youth group generally. not only do you have the millennials but gen-z where they can have their own banking accounts, et cetera. and one of the things that we have seen is that as banks generally have become more conservative and we can just see the events of the last few weeks as to why that is, it makes it harder for them to really go after these younger consumers because they're not really profitable customers yet. but in the case of cash app, they can, cash app can take advantage of its position.

they can on board customers very inexpensively and mature with them as those customers become more profitable banking customers. >> so if the right products are made, cash app and after pay can operate like a bank. i think there's people having panic attacks hearing about this. we all read the hindenberg report. are these really the right assets to build a durable financial institution? >> i think so. the basics you start with is a way to acquire customers. right now, cash app is using the p to p. they have some revenue streams. i think in that report, there was a lot of things that were highlighted. but the thick that stood out to me, none of those were new. in fact, most everybody that we talked to, whether they were long, short, or indifferent, knew about all the issues that

were raised in the report itself. certainly, there are questions on durability of some of the revenue streams, like the debit revenue stream, how is after pay going to perform. these are like very basic questions around any banking institution. so from our perspective, the ability and opportunity to take advantage of winning the younger consumers and maturing with them is what is driving the valuation, and the expectation around cash app generally. >> also, to put it differently, would be if they don't do this, they will miss a big opportunity, because those customer also end up maturing into somebody else's market. i wonder if this is -- from a customer base, if they'll be flighty. this is mobile app technology, and we were all just talking about whether it was $40 billion or $100 billion out the door at svb, would there be some concern

with, you know, just keeping people on this app? it's trendy. people might move on. there might be a new payment technology that might raise their cost over time and make it less profitable than today. just curious what you think about that. >> yeah, that's always a question. in our proprietary survey, what we find is that already about three-fourths of cash app existing customers want cash app to do more things, deliver more value, new products, and more traditional banking services. is there a flight risk? yeah, i guess so, but that's the trick with any business is how to retain customers. there, i don't think the formula to do so is magic. you have to do it, reasonable costs, good service, make sure the customers are seeing value. if you're able to do that through retention, it will be fine. >> what about venmo?

couldn't they make the case about building more of a bank there? >> venmo is interesting. from our perspective, i think venmo, its opportunity to is turn into an ala paypal. that's probably a better business being a digital wallet than being a bank. but certainly, they have a pull position to take advantage of the opportunities presented to them. i don't see a lot of direct competition, even if there is today. >> very interesting. james, thouk for your time today. >> thank you. still ahead, the dollar has been the world's reserve currency for nearly 80 years. what would happen if it lost that status? our guest says dethroning king dollar would be a good thing. he joins us to make his case. and here is a look at the sector, as we see markets

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welcome back to "the exchange," everybody. we're near session lows. the s&p is down.04%, and the nasdaq is down about 0.8%. take a look at a firm, we were just talking about the buy now, pay later name. session lows down 9% now, after apple today unveiled a buy now, pay later feature for apple pay. apple says users can split

purchases into four payments with zero interest. affirm is down 80% in the past year. let's get over to tyler mathisen. >> here is your cnbc news update at this hour. fighting has intensified near a nuclear power plant in ukraine. the head of the international atomic nrmg agency tells the associated press this kind of fighting increases the risk of a war-related nuclear accident. he is in ukraine, visiting the facility, and has said that the two sides are close to reaching an agreement to protect the plant. so that at least is good news. protests and strikes continue in france in response to president emmanuel macron's plan to raise the country's retirement age from 62 to 64. today marks the 10th day of street protests. the u.s. has reached a trade deal with japan to bolster the supply of critical minerals for

electric vehicles. this helps diversify supply chains and reduce reliance on china. kelly, back to you. >> thank you very much, ty. see you soon. coming up, regulators are testifying today over the testifying today over the collapsof svb.e lily! welcome to our third bark-ery. oh, i can tell business is going through the “woof”. but seriously we need a reliable way to help keep everyone connected from wherever we go. well at at&t we'll help you find the right wireless plan for you. so, you can stay connected to all your drivers and stores on america's most reliable 5g network. that sounds just paw-fect. terrier-iffic i labra-dore you round of a-paws at&t 5g is fast, reliable and secure for your business. - double check that. at&t 5g is fast, eh, pretty good! (whistles) yeek. not cryin', are ya? let's tighten that. (fabric ripping) ooh. - wait, wh- wh- what was that? - huh? what, that? no, don't worry about that. here we go. - asking the right question can greatly impact your future. - are, are you qualified to do this? - what? - especially when it comes to your finances. - yeehaw!

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welcome back. lawmakers questioning regulators, including fdic chair and the fed chair michael barr today about the collapse of silicon valley bank and signature bank. >> i look at all this and i think among all these statutes and regulations, the fed had plenty of authority to prevent silicon valley bank and the problems it encountered, and was aware pretty early on that there were unique problems there, and that it was a very, very unique financial institution because of its risk profile, but didn't do it. >> my next guest says the fed's powers are still pretty limited. joining me now is pimco's head of public policy. livy, welcome. what do you mean by that? >> yeah, we are talking about

the administration's ability to insure deposits to provide a broad-based guarantee, kelly. and it's very much -- the federal reserve has a lot of discretion regarding the requirements that they can impose on banks with assets over $100 billion. there's been a lot of focus on senate bill 2155 that was for 2018 regulatory relief bill. that bill still allowed for the fed to have discretion again in terms of imposing liquidity and capital requirements. i think vice chair barr previewed that very likely the fed will use that discretion going forward. so just to be clear, our comments have been really about the uninsured depositors, what the administration has a unilateral ability to increase

that $250-k level. but, again, the fed does have and did have discretion over banks with assets over $100 billion, which could have captured svb and signature bank. >> so your comments echo what mark said earlier this hour. he think there is is a 30% chance that anything happens on the fdic cap. if nothing happens, that leads us back to where we started from, doesn't it? maybe that explains why the banks are trading the way they are today. >> this is very much on display in today's hearing. it was a post mortem about the lack of supervision, potential gaps in regulation, about the sale of svb and signature bank. it really wasn't about what congress plans to do going forward. there was some senators aruding to potential legislation. but there's not anonymity on capitol hill to move forward,

whether it is the increase in the deposit guarantee level, or broad-based guarantee. we think the threshold for congress to act is incredibly high given the nature of congress. but also, as you heard today, there is a lot of hand ringing about supervision and the management blog at svb, as well. >> oh if i'm either a wealthy american household or a business with funds, i'm going all right, i better make sure i have my money at different bank accounts under that cap or larger institutions that are implicitly too big to fail and that sort of thing. you know, this just -- i guess this raises the question of what happen it is we get into a situation again? are we still facing the issue of bank one, or is this more of a question of solvency for the smaller and regional banks around the country? that could take months or years to fully play out.

>> i think the banking analysts here would say real banks are not a monolith. some banks have dealt with their duration mismatch better than others. so to sort of characterize them with a broad brush stroke is a mistake. i think what you have seen with secretary yellen and fed chair powell is they are trying to assuage folks that yes, their deposits are safe, that the administration does have some tools. what we did see with the fdic and treasury is they do have tools for those banks that are put into receivership and we don't question those. it's just a question whether the administration can provide a broad-based deposit insurance guarantee. our view is no, this is statutory. this really falls within the limits of congress. to your point, if there is a broader run, and i don't think is necessarily saying there is going to be, but if there were,

of course congress may change and they may see them act. but i think just assuming there is a steady -- again, the threshold for congress to act here seems to be very high. >> what do i do now, especially because we know there will be further -- he said that he thought depositors are rational in pulling their funds out. say other banks run into trouble. are we acting now, is the fed acting now to get ahead of that? what are they doing, are they raising capital in the institutions? what direction does this point them? because it's still playing out in front of our eyes. >> of course. again, the real action will be at the fed, at the fdic to a lesser extent. again, the fed -- again, vice chairman barr spoke to this, as

well. they already have the discretion to impose more stringent capital and i will-- and liquidity. so we expect them to move forward on that. it will be lengthy, kelly, to your point. this is not necessarily something happening in realtime. there is a rule-making process, and there are processes in place that the fed will have to adhere to. vice chair barr was very clear that he does expect to move forward, and fdic chair reiterated that, that they believe more regulation is in important. we'll have to wait and see what the fed is putting together. what this a gap in regulation if the liquidity recovery ratio had been applied to this bank, would this have not happened? we'll have to wait for their report. but i think the general sense is more regulation is coming. the last thing i'll say, kelly, that could have a read through

from an economic growth perspective. banks are pulling back on their lending activity. that could really have reverberations for the economy, as well and something the fed will be taking into consideration. >> it goes back to the downgrade of united rentals, citing the lending weakness they expect. livy, great stuff. thank you. >> thanks, kelly. still ahead, home prices are finally starting to fall in some cities, but with higher rates, will that be enough to start buying this spring season?

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welcome back, everybody. home prices cooled in january, even declining outright in some west coast cities. hi, diana. >> yeah, that's right. prices were only up 3.8% national in january, from january of last year. if you remember last summer, they were still up in double digits. now this is down from a 5.6%

increase in december. on a monthly basis, prices have been coming down for seven straight months. the monthly drop in january was smaller than previous months. that was likely due to a brief drop in mortgage rates and a resulting jump in home sales. you see the average rate on the 30-year fixed was around 7% in the fall. and started coming back down in january. these numbers would only capture a little bit of that, and more more recent price index fees have shown prices bump up in markets in january because of the lower rates. but rates are heading higher again. the picture is a little more interesting locally, with some major markets finally going negative compared to a year ago. san francisco, seattle, san diego, and prices were flat in phoenix. other cities, miami, tampa, atlanta, still hot and seeing transplants even three years after the start of the pandemic. kelly? >> more to come. this needs to be a whole series, because there is probably about

18 questions. thank you, diana. ahead, we'll dig into the dollar. with russia adding some fuel to with russia adding some fuel to china's bid sfx: [soft beach sounds] c'mon ref, that's a foul! jay? jay's back? gimme a time out. huddle up! i call the time outs. didn't expect to see me so soon, huh? well, i invest in a fund that fuels innovation, like next gen video conferencing, and when i saw your defense in the first half, i had to step in! anyone can become an agent of innovation with invesco qqq, a fund that gives you access to nasdaq-100 innovations. coach, what are you doing?! this thing goes fast. before investing carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com

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welcome back to "the exchange." russia making moves to wean itself off of the dollar as its war in ukraine pushes into aw3 second year. it's turning to the chinese yuan. and with the dollarçó weakening this year some experts are warning ofçó a potential crisisf the greenback loses its global reserve status. but my next guest says the opposite is true,ñi it would benefit america if that were to happen. joining me now is michael petis, senior fellow at the carnegie endowment and a finance essor at peking university. michael, thanks for joining us. i know it'só[■ the middle of th night for you. we really appreciate it. and let's start with this idea that it's actually not in china's irpt to have azv■ reser currency. why? >> well, in order to have a reserve currency you have to have an environment in which foreigners want to depositt( thr excess savings. and to do that you have to give up control of your capital account, something that china is determined not to do. you have to give up control of your trade account. ande1 china has to work onfá surpluses in order to balance the weakness in domestic demand.

it has very weak domestic demand. so it has to really go through a major transformation of its economy and runxd from a persistent surplus economy to a persistent deficit economy. if it wants the renminbi to be a major global currency. >> right. >> and so far nobody really wants that. >> and ie1 wanted you to make tt point in particular because you're there in beijing and you know that they know this. so a lot of this is posturing by the chinese, by the russians, i suppose. you know, can you just connect 4■e dots for us to understand because it's counterintuitive that the dollar be be being the global reserve currency you think hurts us more than it helps? has that always been truej "r i this just true lately? >> no, it'sq beene1 true for something like 40 years, 50 years, for quite a while. and in china it's not that everybody is opposed to making the renminbijf the dominant currency. likeçó in the u.s. certain grou,

the banks, the foreign affairs establishment, the military establishment see currency dominance as a very powerful weapon. and it is a very powerful weapon. but it comes at a cost. and in the case of the u.s. the deficits year after yeare1 afte year in order to satisfy the weak demand in the rest of the world. so what i would argue isqñi tha rather than think about the dollar'sq being good or bad for the u.s. we have to understand really that it's goodok for som sectors. again, owners of movable capital, wall street, the military establishment, foreign affairs establishment, very powerful sectors. but it's bad for american workers, farmers, producers,çó middle class ñisavers. because it -- >> so if i were -- >> i'm sorry, go ahead. >> i want to hear your explanation. but i guess in telling us that, if i were president biden and i said i want to do what's good for american workers and all

those groups you've justlánamed i can't exactly imagine i'm going to gete1 up there and say hey, russia and china, forget about theñ■ dollar, just forget about it, but that's kind of the direction that ite1 would need go. >> yeah. he pretty much. i mean, one of the things the u.s. could do is to impose cost on thee1 ability of foreigners acquire assets. you know, there's this myth that we importlp foreign savings because we need to fund our deficit. and it's exactly the opposite. people direct their foreign savings intolp thee1 u.s. for l of reasons,e1 their excess savings. very high-qualitye1 governance. very deep and liquid markets. and there's no discrimination, or very little discrimination between americans and non-american owners of american assets. so if you have money that you want to put into safet( assets,f you're very wealthy and you want to take money out of your country, if you want to invest in ae1 diversified portfolio of good companies you tend to put

your money in the u.s. or other similar markets, england, australia, canada. and so it'sçoe1 coincidence tha these countries all have massive nflows. no coincidence that they run large deficits. they have to run large deficits as a result of those inflows. >> so final question he. i love,000 we're trying to fit all of this into 30 seconds. but should we even be trying to fix our deficits then? you make it sound like that would be shooting ourselves in the foot. that they're note1çó our fault something. it's just an odd thing. we talk about deficits, got to fix them, got toe1 fix them, an then i heare1 what you're sayin and you're saying no, they're not even irrational, i guess. they're not our fault. maybe we just leave them the way they are. >> well, no, i don't think we should leave them the way they are becaujb these deficits force the u.s. constantly to chooseq between higher unemployment orç higher debt. and ixd don't think we want eitr of those. the problem is that most economists seem to i]think, and certainly president trump did,

that the way to attack the deficits is with tariffs. but if what's really driving th1 deficits are these capital inflows, then the real way to attack the deficits is toç address the capital inflows. >> interesting. >> not to impose tariffs. >> thank you, professor, forçó joining us. trying to explain it a little bit better. most significant ♪ ♪ luxury exemplified. innovation electrified. with apple music seamlessly integrated. the all-new, all-electric eqs suv from mercedes-benz. see your dealer for exceptional offers on mercedes-benz electric vehicles. so, am i still on track to reach my goals? the plan we created can withstand uncertainty.

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