Hale Report Episode 41 - With Brad Setser

·      My guest for the 41^st episode of the Hale Report is Brad Setser, an economist and Whitney Shepardson senior fellow at the Council on Foreign Relations. I’ve long admired Brad for his deep knowledge of global economic data, and his ability to interpret that information.  I am sure you will soon hear what I mean.

Economist Brad Setser

·      Brad Setser is one of our country’s most highly respected analysts of global capital flows, national tax competition, and trade imbalances and sovereign debt restructuring.

·      He recently served as adviser to U.S. Trade Representative Katherine Tai and then returned to his previous work at the Council on Foreign Relations. Although I was happy for Brad’s opportunity to serve, I was delighted when he returned to the Council so I could attend his meetings and once again follow his blog “Follow the Money” and his Twitter account @Brad_Setser

·      Before joining the USTR, Setser spent the previous five years as a senior fellow at the CFR, where he first wrote the “Follow the Money” blog, analyzing global capital flows to discuss issues including Puerto Rico’s debt and Taiwan’s foreign-exchange reserves. He also previously served as an official at the Treasury Department from 2011 to 2015. He co-wrote a book with Nouriel Roubini:  Bailouts and Bail-ins: Responding to Financial Crises in Emerging Economies in 2004.

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Some of the questions we discussed:

·      China’s economic trajectory is seen as being critical to avoiding slower growth and a recession this year. But how do we know anything about Chinese statistics? You wrote: “China’s reported goods trade surplus doesn’t line up with … China’s reported goods trade surplus.”

·      Does this relate to your view that China is manipulating its currency-Isn’t Japan doing the same thing?

·      On Japan: “Bloomberg has noted, accurately I suspect, that American interest in Japan has fallen over time. I don't fit the trend. I pay way more attention to Japan's balance of payments than I did ten years ago. Big changes are afoot ...” 

·      Speaking of Japan, an industrial policy for the US? And more consumption taxes? (The reaction to this last question was rather animated!)

·      How are Russian oil sanctions going and are they causing assets of certain countries to be submerged, as the Economist has reported? Was the purpose of these US-led actions to lower the price of Russian oil?

·      What is your general view of sanctions as an effective trade tool?  The Chips Act for example.

·      Based on both financial sanctions and restrictions on free trade, do you think that the world is going to evolve into two distinct trading blocs?

·      Emerging market debt?  Trouble ahead?

Brad Setser @Brad_Setser

Good chart. Borrowing in the market is now prohibitively expensive for nearly all Africa frontier markets.

Daniel Munevar @danielmunevar

Countries in Africa are facing the most persistent episode of financial stress over the last decade. Looking at relationship between yields and coupons indicates that countries looking to issue in 23 will face steep increases in borrowing costs. Debt dynamics will worsen. https://t.co/7g0quYut5O

·      During your time at USTR one of your projects was related to taxation of multinational corporations. What should Congress be doing, and why?

·      Big question-what was the impact on Covid, long and short term, on the global economy?

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“Follow the Money” Blog by Brad Setser

Feb. 13, 2023 / Council on Foreign Relations

China's Rising Holdings of U.S. Agency Bonds

China has discovered, once again, that the best alternative to a U.S. Treasury bond is a U.S. Agency bond...

Feb. 2 2013 /Council on Foreign Relations

Three Steps to Strengthen the U.S. Treasury's Foreign Exchange Report

Co-wrote with Mark Sobel. The analytics used in the U.S. Treasury's Foreign Exchange Report should be updated to better capture the significant state flows that no longer appear as part of many country's disclosed foreign exchange reserves.

Jan. 16, 2023 / Council on Foreign Relations

The Disappearing Japanese Bid for Global Bonds

Co-wrote with Alex Etra. The rise in Japanese holdings of foreign bonds had an enormous impact on global markets between 2011 and 2020. The markets will now have to adapt to a sustained reduction in Japanese demand.

Dec. 8, 2022 / Council on Foreign Relations

China's Balance of Payments Data Does Not Add Up

China's current balance of payments data doesn't quite make sense. Significant and poorly explained gaps exist between the reported BoP data and the underlying source data. China's economy is so big that data gaps really matter.

Thank you for listening! My next guest will be Martin Wolf, senior economic commentator at the Financial Times.