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Speaker 1: Who you put your trust in matters Investors have put

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Speaker 1: their trust and independent registered investment advisors to the tune

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Speaker 1: of four trillion dollars. Why learn more and find your

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Speaker 1: independent advisor dot com. Welcome to the Bloomberg Surveillance Podcast.

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Speaker 1: I'm Tom Keene with David Gura. Daily we bring you

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Speaker 1: insight from the best in economics, finance, investment, and international relations.

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Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot com, and

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Speaker 1: of course, on the Bloomberg. Let's bring in now Lord

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Speaker 1: Robert Skidelski. He is a meritus professor of Political economy

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Speaker 1: at the University of Warwick. Remember the House of Lords,

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Speaker 1: of course, and Lord Skodolski, it's great to have you

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Speaker 1: with us. Thanks so much for the time. Thank you,

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Speaker 1: Thank you. Fosking me. I don't think that that Donald

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Speaker 1: Trump would call himself a Canzian, but in light of

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Speaker 1: what what he's proposing here, all of these tax cuts,

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Speaker 1: all of this infrastructure spending, is he is sort of

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Speaker 1: neo Canzian? Is he is? He somewhat? Does he have

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Speaker 1: a foot in the school. Let's say, look, no one ever,

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Speaker 1: no one in the United States has ever called themselves

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Speaker 1: at Canesian, even when even in the in the heyday

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Speaker 1: of the Canes in economics, it was always the new economics. Um.

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Speaker 1: They don't like they don't like the thought that they're

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Speaker 1: taking their economics from somewhere someone else. So um. Of

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Speaker 1: course he wouldn't have called himself at Canison. But if

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Speaker 1: you if you add up the package, the tax cuts

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Speaker 1: and the infrastructure spending, the implications are very Canesian. I mean,

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Speaker 1: of course you can argue about the detail, who benefits

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Speaker 1: from his particular tax proposals and so on, But broadly

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Speaker 1: it's a stimulus package and a fiscal stimulus package, and that,

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Speaker 1: in my way of thinking, is kinzin. He's talked about

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Speaker 1: this on the campaign trail in broad strokes. Now he's elected,

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Speaker 1: there are a few months here until he takes office.

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Speaker 1: What are you going to be looking for? What are

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Speaker 1: you gonna be listening for? Is that package comes together, well,

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Speaker 1: i'd be I'd be obviously listening for the detail of it.

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Speaker 1: Um and and and of course you would have to

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Speaker 1: gauge the political situation. It goes against the conservative instincts,

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Speaker 1: the instincts of the of the Republicans, who have of

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Speaker 1: course been very austerity minded, and he hasn't repudiated austerity.

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Speaker 1: In other words, he's left everything quite ambiguous in terms

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Speaker 1: of um, in terms of rhetoric, but the thrust of

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Speaker 1: the policy is very It was very clearly actually spelled

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Speaker 1: out of the Financial Times by one of his leading

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Speaker 1: advisers and I can't remember his name, and he said, look, um,

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Speaker 1: if this package causes the economy to grow as I

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Speaker 1: think it will, then the debt GDP ratio will fall automatically.

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Speaker 1: It is the way of balancing the budget. It that is,

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Speaker 1: to get the economy to grow more strongly. If it

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Speaker 1: can grow by three or four percent a year rather

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Speaker 1: than one two percent a year, you're you're you're on

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Speaker 1: the way to licking the budget problem. And that is

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Speaker 1: total kines in it from where you sit as it

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Speaker 1: does it make sense that does it stand to make

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Speaker 1: a difference in the short term, if not the medium

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Speaker 1: term in the long term, Well, all these, all these

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Speaker 1: policies have to be taken in medium term, in medium term,

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Speaker 1: including say the inflation target. I mean, it's ridiculous to

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Speaker 1: say as soon as the central Bank does this, inflation

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Speaker 1: rate will go up or down. That that's not the

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Speaker 1: point the medium term target is important, but some of

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Speaker 1: the programs should be what's called shovel ready, and then

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Speaker 1: the other. The other thing is expectations, isn't it. I mean,

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Speaker 1: once business knows that certain things are going to happen

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Speaker 1: and they will be able to gear up for them,

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Speaker 1: and that will have an effect before before they actually happen.

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Speaker 1: So the timing of the thing is not very very clear,

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Speaker 1: but there should be some shold time effects just through

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Speaker 1: the expectations channel with us this morning. Robert Skodelski here

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Speaker 1: in our studios in London. Of course his three volumes

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Speaker 1: on John Mannard Keine's, but much more his Treaties after

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Speaker 1: the Crash I thought was just wonderful, a book that

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Speaker 1: conservatives and liberals alike, UH could get much out of.

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Speaker 1: We have so much for you this hour, David Gurr

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Speaker 1: in New York on Tom keenan London. Robert Skadelski, you

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Speaker 1: write of history. You're right, of political history. The conservatives

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Speaker 1: um sometimes grumble at Skadelski economics. I want to do

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Speaker 1: a little Canes and Hicks I s LM theory. A

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Speaker 1: lot of people, including President elect Trump, are talking about

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Speaker 1: moving the real economy curve, the I S curve out

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Speaker 1: with stimulus. In this distortion of interest rates that we

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Speaker 1: have now, is the real economy curve attached to the

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Speaker 1: l M curve attached to the money curve? Or are

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Speaker 1: we so distorted those models don't work well. We we

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Speaker 1: are distorted in one in one very important respect, which

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Speaker 1: is once you got once the policy rate hit the

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Speaker 1: zero bound almost as low as it could go, you

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Speaker 1: ran out of monetary policy tools, so you you lost

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Speaker 1: any ability by orthodox interest rate policy to affect the

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Speaker 1: real economy. That tool just disappeared once you'd hit zero,

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Speaker 1: so you had to do something else. Now I would

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Speaker 1: have said at that point you should have this is

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Speaker 1: we're talking about two thousand ten, two thousand and eleven,

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Speaker 1: even a bit earlier. You should have gone for fiscal

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Speaker 1: um and but they didn't because at that at that moment,

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Speaker 1: the whole emphasis was on austerity. The whole fear was

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Speaker 1: that governments would default, that they were in such a

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Speaker 1: big debt debt crisis that you couldn't use fiscal policies,

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Speaker 1: so they use monetary policy. And monetary policy he was

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Speaker 1: just printing money essentially um and it was trying to

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Speaker 1: do the job of of interest rate policy. But unfortunately

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Speaker 1: it didn't work because, um, you can you know, as

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Speaker 1: the saying is, you can bring the horse to water,

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Speaker 1: but you can't actually make a drink, And there were

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Speaker 1: too many leaks in monetary policy for it to really

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Speaker 1: revive the economy. Help us with a liberal interpretation of

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Speaker 1: how to deal with Republican House, Republican Senate, Republican president.

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Speaker 1: I mean, we've seen that for a cup of coffee.

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Speaker 1: I believe it was in the early seventies. It really

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Speaker 1: harkens back almost the Coolidge in the nineteen twenties, doesn't it. Yeah,

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Speaker 1: But Coolidge didn't have the same ideas as as Trump. Um,

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Speaker 1: I mean, Coolidge was a fiscal conservative. Well, most people

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Speaker 1: with fiscal conservatives in those days. My my take on

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Speaker 1: it is that a Republican Congress, even if it were

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Speaker 1: wholly committed to austerity policy, would not be able to

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Speaker 1: defy a president with a mandate to get the economy

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Speaker 1: moving in the way he promised. Uh. And and it's

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Speaker 1: his own party, after all, they'll give him, they'll give

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Speaker 1: him some leeway that bound to do that. Robert Skodolski

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Speaker 1: with us in his book from a few years ago,

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Speaker 1: folks kines The Return of the Master. I really can't

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Speaker 1: say enough about it. It's a book that you can

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Speaker 1: love to agree and disagree with. It is beautifully Unlike

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Speaker 1: his biographies of kings, which were what four thousand pages each?

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Speaker 1: They were like old Testament length, that's exaggerate. Caine's a

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Speaker 1: Return of the Master, highly readable and I really I'll

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Speaker 1: put it out on Twitter here today moving forward, a

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Speaker 1: global dialogue and national dialogue on the most historic Tuesday.

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Speaker 1: David just remarkable. It was a week ago. Hard to believe.

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Speaker 1: It seems like it was a month ago. It's been

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Speaker 1: a long week. But there are we have someone that

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Speaker 1: conservatives love to hate. He is the arch liberal, the

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Speaker 1: great political economist of John Maynard Keys, Robert Skidelsky in

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Speaker 1: our studios in London. How do you respond to conservatives

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Speaker 1: that say, oh, there goes that liberal again. What can

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Speaker 1: you take away from a conservative ethos, particularly in American

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Speaker 1: conservative ethos, is Donald Trump comes to power? Well, Donald

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Speaker 1: Trump is a hybrid, isn't he? And he's not a

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Speaker 1: classical conservative by any means. I don't know where he

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Speaker 1: comes from. I mean, he's how he's put together all

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Speaker 1: the ideas um that he seems to hold. He's drawn

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Speaker 1: on a variety of sources. But I think he understands

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Speaker 1: one thing that a lot of Americans felt betrayed by

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Speaker 1: the the economic policies of the last ten fifteen years.

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Speaker 1: I mean, we know that in the data and American

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Speaker 1: median incomes of fall and real wages of last sway,

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Speaker 1: the population are lower than they were even even even

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Speaker 1: fifteen years ago. So he knows that, and and and

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Speaker 1: and and he knows what what what the sources of

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Speaker 1: discontent are. So he also knows you can't just have

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Speaker 1: more of the same thing. Um. Now, whether whether he

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Speaker 1: genuinely believes that a stimulus is the right way um

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Speaker 1: to deal with with with with the problems of jobs,

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Speaker 1: I don't know, but certainly that's what he said, and

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Speaker 1: and and that is not a cons classic conservative position.

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Speaker 1: You write about trump armics in your most recent column

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Speaker 1: for for Projects indicate and I was struck by the

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Speaker 1: call that you make here for I think democrats here

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Speaker 1: in the US in particular to at least engage with

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Speaker 1: with trump armics. Yeah, you write that it might have

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Speaker 1: some some positive potential. You're saying you don't reject it

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Speaker 1: out of hand, no, and neither neither did did Bernie Sanders,

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Speaker 1: and neither as Joe Stiglets. I mean, all these people say, look,

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Speaker 1: there are good, good things here in the program. Let's

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Speaker 1: make it better now. They don't therefore commit to all

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Speaker 1: the other things that Trump has disgracefully stood for. Of

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Speaker 1: course they don't, But I mean, here's something you can

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Speaker 1: work on, and let's try and make it work. I

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Speaker 1: think I think that's only sensible. Barring, barring some totally

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Speaker 1: unforeseen event, he's going to be president for the next

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Speaker 1: four years. You've got to try and make sure the

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Speaker 1: policy works. We were speaking with that with Neil ferguson

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Speaker 1: a couple of days ago, and he said, very explicitly,

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Speaker 1: very concisely, this is not the nineteen thirties. From from

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Speaker 1: your vantage, with your historical perspective, give us the analog.

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Speaker 1: Is that an appropriate analog to look back at the nineties? Well,

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Speaker 1: it's it's it's appropriate in the sense that there's this

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Speaker 1: feeling that an existing order is is in a state

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Speaker 1: of profound crisis. But there are many, many differences, and

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Speaker 1: I think one or two of those difference is a

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Speaker 1: very very important. First of all, there's a constitution in

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Speaker 1: the United States that limits the power of the president.

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Speaker 1: The president may seem all powerful abroad, but at home

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Speaker 1: the president is not all powerful. There was nothing in

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Speaker 1: the Weimar Constitution of Germany to limit hitless power domestically.

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Speaker 1: So I mean, that's one very very important difference. A

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Speaker 1: second is that the crisis was much worse in the

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Speaker 1: nineteen thirties than it is today, and it came out

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Speaker 1: of the most savage war of modern times. Now all

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Speaker 1: that is lacking. So actually the feeling it is not

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Speaker 1: nearly as despondent or angry as it was in in

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Speaker 1: that period. And I think we've got to bear that

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Speaker 1: in mind, because I mean, when you know, we're we've

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Speaker 1: been used to something that's so tranquil really that any change,

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Speaker 1: you know, strikes Lord sky. When does labor get its

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Speaker 1: act together? In England, there's a labor they're waiting for

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Speaker 1: you to come to the rescue. Well, it first got

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Speaker 1: its act together in they are they are wait. They

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Speaker 1: are of course on the same on the same wave. Uh.

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Speaker 1: As far as fiscal policies concerned, they have come out

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Speaker 1: against esterity. They should have come out against esterity five

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Speaker 1: years ago. They didn't, but now they are that fully

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Speaker 1: signed up to an infrastructure program um and and not

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Speaker 1: um not placing priority on the opposite reduction. Thank you

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Speaker 1: so much for coming intoday. World Headquarters. Robert Skidelsky folks

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Speaker 1: I put out on Twitter as wonderful book on Kane's

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Speaker 1: A Return of the Master and looking at Stimulus, which

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Speaker 1: was remarkably prescient in two thousand and ten as we

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Speaker 1: look at both candidates in the U S. Secretary Clinton

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Speaker 1: and Mr Trump talking up stimulus, and of course President

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Speaker 1: elect Trump will try to put that into effect. That

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Speaker 1: would be a good time to bring in Luigi's and

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Speaker 1: Galis of the Boostool of Chicago UM as a gentleman

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Speaker 1: of Italian persuasion. He has written brilliantly on the culture

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Speaker 1: in fabric of America professors in Gallis. After a Trump victory,

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Speaker 1: can a president somehow boost consumption in why equals C

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Speaker 1: plus I plus G plus n X. Can any given

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Speaker 1: president move the sea? Uh? Certainly a massive sort of

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Speaker 1: good action in taxes could boost see UM. Also you

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Speaker 1: can increase G which is government expenditure. I think Trump

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Speaker 1: has announced uh from the vasus the beginning, that he's

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Speaker 1: gonna boost in prastructure spending, so I think he's going

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Speaker 1: to do it, and he's gonna spend more in defense.

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Speaker 1: So I think everything is suggesting a higher deficit and

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Speaker 1: probably high information. How much of this is is a continuum?

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Speaker 1: Do you see? This is a continuum going from the

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Speaker 1: Brexit vote, to the referendum in Columbia, the US president election,

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Speaker 1: and now the referendum in Italy all all part and

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Speaker 1: parcel of the same thing. I think that the Brexit

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Speaker 1: vote and the Trump bote are indeed they similar because

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Speaker 1: they represent a vote or vote US against an economic

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Speaker 1: system that doesn't seem to benefit them sufficiently. I think

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Speaker 1: that the Italian story is quite different. I think this

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Speaker 1: referendum is a self depicted wound. Rensey could have evoded referendum.

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Speaker 1: He thought he could win big time, and now he

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Speaker 1: finds himself sort of at the risk of losing. Now

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Speaker 1: the surendum type go ahead, well, let me let me

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Speaker 1: I want to frame this up here, folks. Professors in

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Speaker 1: Gallis of course at both school. But he's been more

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Speaker 1: than courts or whether us over the years to speak

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Speaker 1: of his Italian economy and what has changed. David Gura

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Speaker 1: is our interview yesterday with David Folcus Landau and esteemed

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Speaker 1: writer of economic papers with Michael Dooley and Peter Garber,

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Speaker 1: and here's focus. Landau yesterday heatedly speaking of the importance

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Speaker 1: of the Italian referendum not only folks for all of Italy,

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Speaker 1: but all of Europe and indeed the global economy professors

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Speaker 1: in Gallics, do you agree with Dr Folcus Landau that

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Speaker 1: this is a time of moment for your Italy? Yes

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Speaker 1: and no. In a sense I want to ashacize that

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Speaker 1: the rest endum is about some rather technical aspect of

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Speaker 1: the constitution that don't perceive mean much. However, did he

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Speaker 1: is perceived as a moment in which Rency takes his

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Speaker 1: h his government and he might end up losing and

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Speaker 1: could be the spark in all full of Catherine. I

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Speaker 1: think that the Italian situation has been dire for a

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Speaker 1: long time, the problem as being sort of anesthetized by

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Speaker 1: Druggy and the quantitive easy, but it's not the resolved,

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Speaker 1: and so little later we have to take out the

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Speaker 1: anesthesia and the problem we serve us. Whether this is

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Speaker 1: about to take place on December fourth or a little

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Speaker 1: bit later, that I don't know, but sooner or later

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Speaker 1: will take place. Help us understand what happens here if this,

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Speaker 1: If this referendum does not pass, what's what are the

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Speaker 1: next steps here for for Mr Renzi? So he announced

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Speaker 1: that if he will lose the referendum, he will resign now. Unfortunately,

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Speaker 1: I don't have so much confidence that it will follow

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Speaker 1: through on his war. Unfortunately I don't know, but the

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Speaker 1: the tradition of Italian politicians is not like the one

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Speaker 1: of British politicians that when they say something they followed

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Speaker 1: by Cameron. I think that the most likely scenario is

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Speaker 1: that either vent will stay in power anyway, although would

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Speaker 1: be a coalitional government, they seemilar to the existing one

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Speaker 1: with some other figure ahead. I don't think that there

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Speaker 1: would be a dramatic change in anything. However, it will

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Speaker 1: make Italy look less table and as I said, this

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Speaker 1: could be the spot. David Gura here in New York,

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Speaker 1: Tom Keene in London this week Bloomberg surveillance on Bloomberg Radio.

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Speaker 1: Pleasure to have with us, Luigi's and Gallis. Robert McCormick,

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Speaker 1: Distinguished Professor of Entrepreneurship and Finance at the Both School

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Speaker 1: at the University of Chicago, we were talking about the

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Speaker 1: Italian referendum, among other things, and there is a lot

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Speaker 1: to talk about here. It strikes me that a thread

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Speaker 1: running through that vote, the US presidential election, the vote

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Speaker 1: in Colombia, the vote in the UK a few months

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Speaker 1: back as well, Luigi, is this notion of inclusion. There's

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Speaker 1: been a lot of talk about including more people UH

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Speaker 1: in economic success. What's it going to take to to

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Speaker 1: bring that from being lip service talking about inclusion to

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Speaker 1: actually doing something about it in light of what we've

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Speaker 1: seen here, UM, let me first say that I think

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Speaker 1: they tele referendum is different because Italy did not have

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Speaker 1: any economic success in the last twenty years. So before

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Speaker 1: a problem with inclusion in Italy, there is a problem

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Speaker 1: of creation. UH. In the United States and Great Britain,

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Speaker 1: there is a problem of inclusion, and the question is

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Speaker 1: how to make how First of all, how to give

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Speaker 1: opportunities to everybody. I think that some people feel they're

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Speaker 1: left out, and they are. If you don't have a

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Speaker 1: decent UH primary and secondary education, you start from such

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Speaker 1: a disadvantage that is very hard to to make up

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Speaker 1: in life. The second is I think there is an

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Speaker 1: increase in industry concentration that doings sort of higher prices

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Speaker 1: that damage consumers. So I think any an agenda of

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Speaker 1: enforcing more antle trust could be they beneficial to spread

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Speaker 1: the benefits of innovation to everybody. And Trump has sort

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Speaker 1: of pay lift service to this idea, but I doubt

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Speaker 1: is going to actually implement it once it's an office.

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Speaker 1: I think we last spoke after John Stuff stepped down

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Speaker 1: from from Wells Fargo as as CEO. We're talking a

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Speaker 1: bit about banking regulation now that the election is over

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Speaker 1: with forecast out a bit for us here news yesterday

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Speaker 1: that Mary Joe White, the chair of the SEC, is

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Speaker 1: going to step down at the end of President Obama's term.

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Speaker 1: What does the regulatory landscape look like? You bring up antitrust.

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Speaker 1: Certainly there are a number of mergers here waiting for

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Speaker 1: for a stamp of approval or a rejection from the

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Speaker 1: Department of Justice. I think that again you have to

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Speaker 1: make a forecast of which Trump we're going to see

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Speaker 1: in action as the president. I think Trump as at

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Speaker 1: least two images. One is the populous image that actually

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Speaker 1: talks against the A T and T and Time Warner merger,

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Speaker 1: the one that sort of seemed to be changing this attitude,

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Speaker 1: and then we have the more traditional sort of Republican

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Speaker 1: conservative who says we should get rid of all this

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Speaker 1: regulation and we should let firms do whatever they want.

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Speaker 1: And I think at the end of the day, probably

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Speaker 1: the second one would prevail another first one. Louis, do

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Speaker 1: you help me here with the amplitude? Lauren Summers writing

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Speaker 1: in the f T I believe it was the other day. Okay,

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Speaker 1: you can have stimulus, but how much is enough? I

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Speaker 1: know the University of Michigan has done a lot of

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Speaker 1: study on this, Matt Shapiro, and I would assume out

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Speaker 1: of both school you've done it as well. Do we

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Speaker 1: underestimate how much stimulus it takes to move the needle

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Speaker 1: to shift the I S curve? Actually, honestly, I think

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Speaker 1: that probably in the United States, who are the wrong

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Speaker 1: moment in the cycle to stimulate the economy. I think

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Speaker 1: that this is not a decision that comes from the chronics.

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Speaker 1: This is the decision that comes from politics in order

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Speaker 1: to try to give an opportunity in the job to

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Speaker 1: middle class, uneducated white folks who voted for Trump. And

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Speaker 1: probably there are better ways to deal with the problem,

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Speaker 1: but this is totally the simplest one, how much does

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Speaker 1: composition matter? Again that the thing is so in cod

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Speaker 1: right now, we've heard about tax cuts, We've heard about

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Speaker 1: five hundred billions up to a trillion dollars. Here tom

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Speaker 1: asks about size, what what in the medium term makes

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Speaker 1: a difference Compositionally, I think that actually focusing on defense

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Speaker 1: and construction is what probably will bring the biggest bank

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Speaker 1: for the back because of both of these activities that

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Speaker 1: a huge US content. I would say probably almost US content.

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Speaker 1: Anything out a form of stimulus increased consumption, But consumption

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Speaker 1: is also important, and then the impact on the economy

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Speaker 1: will be different. So I think that partly for ideological

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Speaker 1: reasons but partly for economic reason, the similars will be

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Speaker 1: focused on these two particular effectors. So, in fact, I

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Speaker 1: think would be quite big. Amid all of this uncertainty

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Speaker 1: about policy are the looming questions about the the individuals

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Speaker 1: Donald Trump is going to appoint to key jobs in

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Speaker 1: his administration, including Treasury Secretary. In this day and age,

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Speaker 1: what is the role of the Treasury Sectary? Do we

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Speaker 1: place particular importance on him in this administration as doing

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Speaker 1: more here to guide to craft and to guide economic

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Speaker 1: policy well certainly. I think that Trump is not particularly

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Speaker 1: experienced in economic policy, and I use like a British understatement,

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Speaker 1: so he will depend day heavily on his advisors, and

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Speaker 1: the people who are in place now have a gigantic

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Speaker 1: opportunity of shaping the agenda. So I think that the

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Speaker 1: personality and the track record, all the but chosen is

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Speaker 1: the improduct, you know, Luigi, I I look at all

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Speaker 1: this in the historic moment. What it's about is republican

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Speaker 1: republican Republican. Give us your thoughts, and particularly with your

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Speaker 1: wonderful book on capitalism about a grid luck free Washington

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Speaker 1: or is that a fiction? No? I think that probably

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Speaker 1: we're going to have a short period of unity in Washington.

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Speaker 1: If we don't have it now, then people will revolt,

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Speaker 1: and rightly, so there is a united government and so

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Speaker 1: they better reconcile. And I think that if there is

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Speaker 1: one positive thing to be said about Trump is that

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Speaker 1: he's experiencing deal. So I think he's gonna go with

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Speaker 1: the way to have a deals that make him look

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Speaker 1: good at this upfront. And and also that a publican

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Speaker 1: establishment desinitely need a deal. I think that not not

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Speaker 1: approving any package a Trump proposes will make the senators

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Speaker 1: and representatives in the Republicans I look like idiot because

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Speaker 1: they have a pause Obama for eight years now they pause. Also,

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Speaker 1: this president said that what you want. So I think

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Speaker 1: that we are paused for a deal. The question is

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Speaker 1: how good this deal would be in the short and

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Speaker 1: in the long term. Yeah. I think of what Jim

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Speaker 1: Bullard of the St. Louis for a couple of days

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Speaker 1: after the election about how uh, you know, at least

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Speaker 1: the prospects for action and Congress are higher than they were.

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Speaker 1: And of course that's that's kind of from a very

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Speaker 1: lad there was a very low bar before then. But

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Speaker 1: let me ask you lastly here just when you look

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Speaker 1: at the agenda. We've talked about the prospects for for

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Speaker 1: a big infrastructure package. Donald Trump has talked about tax

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Speaker 1: reform with real seriousness, so has how Speaker Paul Paul Ryan.

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Speaker 1: What's the likelihood of that happening big corporate tax reform

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Speaker 1: and and what else from the the economic agenda laid

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Speaker 1: out on the campaign trail, do you think we could

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Speaker 1: see movement on here in the next Congress. So I

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Speaker 1: expect of adoption in copporate taxes, the question is, uh,

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Speaker 1: what is the effect of this In a sense, if

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Speaker 1: this reduction tax rate is joined by an increase in

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Speaker 1: in the base and increasing the UH enforcement of reduction

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Speaker 1: ad action, so ill support this could be a vague

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Speaker 1: thing effectively, so thatwise lashing of the rage, This is

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Speaker 1: going to create a gigantic hall in the deficit, and

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Speaker 1: later we're gonna have to pay for that, you know.

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Speaker 1: I look, Luigi at I guess the economics of where

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Speaker 1: we are, and clearly the idea of that within the

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Speaker 1: new populism culture and demographics and populism subsume all in economics.

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Speaker 1: I don't buy it for a minute. The summary here

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Speaker 1: before we let you go is an absolute primal scream

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Speaker 1: for economic growth. It's my chart of the your folks,

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Speaker 1: from essentially four down to two real g d P.

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Speaker 1: Where does the economic growth come from? If from anything

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Speaker 1: but investment? And can policy spur investment? I think that

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Speaker 1: there will be some increasing investment, not only infrastructure but

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Speaker 1: also private investment. I think that, uh, the I'm pretty

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Speaker 1: sure that Trump would do something to bring back the

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Speaker 1: money that corporation have abroad, and and so there will

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Speaker 1: be a moment in which corporation of flash with even

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Speaker 1: more money and will be under under storm pressure to

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Speaker 1: invest it. So I think that in the short term

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Speaker 1: we're going to have a boosting investments. Whether this will

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Speaker 1: last long term, it means to be seen. Luigis and

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Speaker 1: gals thank you so much. He's with the Booth Schools Chicago.

430
00:26:32,600 --> 00:26:35,320
Speaker 1: I'll tell you, David, it is just extraordinary to talk

431
00:26:35,359 --> 00:26:38,000
Speaker 1: to Luigians and Galas about the U S and his Italy.

432
00:26:38,320 --> 00:26:40,720
Speaker 1: Italy has been front and center here, starting with Focus

433
00:26:40,880 --> 00:26:44,159
Speaker 1: Lendo yesterday. It seems to be the topic of discussion,

434
00:26:44,160 --> 00:26:46,240
Speaker 1: maybe more than Brexit. A lot of talking about what's

435
00:26:46,240 --> 00:26:47,760
Speaker 1: happened in the Netherlands. Next, I mean that we have

436
00:26:47,920 --> 00:26:50,679
Speaker 1: a host of these, uh, these referendum votes coming up

437
00:26:50,680 --> 00:26:53,840
Speaker 1: in Europe. Yeah, yeah, I think that's true. There's gonna

438
00:26:53,840 --> 00:26:56,480
Speaker 1: be a real geographical field. But then it all goes

439
00:26:56,520 --> 00:26:59,760
Speaker 1: back to here, at least London, and I would assume

440
00:27:01,240 --> 00:27:05,400
Speaker 1: by observation that London certainly surprising the skeptics and doing

441
00:27:05,480 --> 00:27:18,120
Speaker 1: better than good. Who you put your trust in matters.

442
00:27:18,280 --> 00:27:22,920
Speaker 1: Investors have put their trust in independent registered investment advisors

443
00:27:23,200 --> 00:27:26,240
Speaker 1: to the tune of four trillion dollars. Why they see

444
00:27:26,240 --> 00:27:29,760
Speaker 1: their roles to serve, not sell. That's why Charles Schwab

445
00:27:29,840 --> 00:27:34,360
Speaker 1: is committed to the success over seven thousand independent financial

446
00:27:34,400 --> 00:27:40,160
Speaker 1: advisors who passionately dedicate themselves to helping people achieve their

447
00:27:40,200 --> 00:27:52,840
Speaker 1: financial goals. Learn more and find your independent advisor dot com.

448
00:27:53,040 --> 00:27:54,960
Speaker 1: In a couple of days, the FED Chair Janet Yellent

449
00:27:55,000 --> 00:27:56,960
Speaker 1: will head up to Capitol Hill to testify before the

450
00:27:57,040 --> 00:28:00,399
Speaker 1: Joint Economic Committee, And I wondered through read which she

451
00:28:00,440 --> 00:28:03,439
Speaker 1: will be asked about the effects of this election on

452
00:28:03,480 --> 00:28:05,760
Speaker 1: the economy so far as we felt them thus far.

453
00:28:05,880 --> 00:28:07,920
Speaker 1: Gary Stern is the former president and CEO of the

454
00:28:07,920 --> 00:28:10,080
Speaker 1: Federal or Bank of Minneapolis, kind enough to join us

455
00:28:10,080 --> 00:28:12,800
Speaker 1: here in the studio. Nice to see you. What do

456
00:28:12,840 --> 00:28:14,760
Speaker 1: you expect to hear from from Janet Ellen? We've seen

457
00:28:14,800 --> 00:28:18,040
Speaker 1: these these undulections, these massive moves, and in the market's

458
00:28:18,080 --> 00:28:21,600
Speaker 1: quieting a bit here today. Uh what do you expect

459
00:28:21,600 --> 00:28:24,720
Speaker 1: she'll face when she sits at that table on Thursday morning? Well,

460
00:28:24,760 --> 00:28:27,680
Speaker 1: I think Janet herself is likely to be quite cautious,

461
00:28:27,720 --> 00:28:31,600
Speaker 1: because you know, it's early days, uh, and while and

462
00:28:31,680 --> 00:28:34,800
Speaker 1: talk is cheap, and so there's there's lots of ideas

463
00:28:34,840 --> 00:28:37,640
Speaker 1: floating around. But but you know how many of those

464
00:28:37,680 --> 00:28:41,000
Speaker 1: ideas actually turn into action and policy and so forth

465
00:28:41,320 --> 00:28:44,560
Speaker 1: remains to be seen. Um, so that's what I expect

466
00:28:44,600 --> 00:28:48,400
Speaker 1: from her. I suppose, you know, if I were asking

467
00:28:48,440 --> 00:28:52,920
Speaker 1: her questions, I'd want to get a feel for, you know,

468
00:28:52,960 --> 00:28:55,960
Speaker 1: what she thinks is appropriate for the federal reserve. Let's

469
00:28:55,960 --> 00:28:59,440
Speaker 1: assume that there is a significant tax cut. Let's assume

470
00:28:59,480 --> 00:29:04,480
Speaker 1: there's this significant increase in federal spending on infrastructure, possibly

471
00:29:04,560 --> 00:29:09,320
Speaker 1: on defense, etcetera. Um, you know, what's the appropriate FED

472
00:29:09,400 --> 00:29:14,480
Speaker 1: policy under those circumstances, or at least at a minimum,

473
00:29:14,520 --> 00:29:17,200
Speaker 1: how does she think they will affect the economy, How

474
00:29:17,240 --> 00:29:20,560
Speaker 1: does she think they'll affect the budget deficit, etcetera, etcetera.

475
00:29:20,640 --> 00:29:23,840
Speaker 1: At least that's where I'd start. How much assuming is

476
00:29:23,840 --> 00:29:26,400
Speaker 1: going on inside the Echoes building right now? We hear

477
00:29:26,440 --> 00:29:29,280
Speaker 1: so much about the potential for policy new policy from

478
00:29:29,280 --> 00:29:32,360
Speaker 1: from President elect Donald Trump. We haven't seen much in

479
00:29:32,400 --> 00:29:35,520
Speaker 1: the way of details yet. Does that force caution or force,

480
00:29:35,560 --> 00:29:38,080
Speaker 1: as you're saying here, assumption planning out to what all

481
00:29:38,080 --> 00:29:41,520
Speaker 1: the scenarios might be. Well, in some sense both because

482
00:29:41,720 --> 00:29:44,480
Speaker 1: first of all, the fet is inherently a cautious institution.

483
00:29:44,640 --> 00:29:48,480
Speaker 1: Let's let's not forget that. But the FED, you know,

484
00:29:48,640 --> 00:29:53,440
Speaker 1: the FT has some quite sophisticated economic models that enables

485
00:29:53,440 --> 00:29:57,600
Speaker 1: them to analyze the effects of various actions, and they

486
00:29:57,640 --> 00:30:01,000
Speaker 1: can run as many scenarios as they feel like. So

487
00:30:01,480 --> 00:30:04,560
Speaker 1: you know, they're not constrained in terms of their analytical

488
00:30:04,600 --> 00:30:08,400
Speaker 1: capabilities at all. Uh, nor are they constrained and bringing

489
00:30:08,760 --> 00:30:11,960
Speaker 1: you know, independent judgment and experience to all this. The

490
00:30:12,560 --> 00:30:16,840
Speaker 1: problem they face, as we are commented earlier, is you know,

491
00:30:16,880 --> 00:30:19,760
Speaker 1: at this stage there are lots of things out there

492
00:30:19,880 --> 00:30:23,960
Speaker 1: floating around. Uh. Nothing is very concrete. We don't even

493
00:30:24,000 --> 00:30:26,160
Speaker 1: know at this point, of course, who the players are

494
00:30:26,160 --> 00:30:29,000
Speaker 1: going to be for from the administration side for the

495
00:30:29,040 --> 00:30:31,960
Speaker 1: most part. So you know, that's why I think while

496
00:30:32,000 --> 00:30:35,520
Speaker 1: the FED can can run infinite numbers of scenarios, they're

497
00:30:35,520 --> 00:30:38,800
Speaker 1: gonna be cautious about placing any bets at this point.

498
00:30:38,840 --> 00:30:43,240
Speaker 1: I would think they would avoid uh, bet places. Gary,

499
00:30:43,280 --> 00:30:45,680
Speaker 1: I would suggest that you have been one of the

500
00:30:45,760 --> 00:30:49,360
Speaker 1: great great thinkers of this FED, and of course, uh

501
00:30:49,360 --> 00:30:51,760
Speaker 1: with a wonderful idea that you were not infected in

502
00:30:51,800 --> 00:30:55,120
Speaker 1: Washington and had the sense to stay in Minneapolis. Uh.

503
00:30:55,200 --> 00:30:59,240
Speaker 1: That being a good thing. What is our central economics

504
00:30:59,280 --> 00:31:02,440
Speaker 1: now is this a Phillip's curve FED. Is this a

505
00:31:02,520 --> 00:31:05,719
Speaker 1: FED that is unorthodox or is this a FED? As

506
00:31:05,760 --> 00:31:09,040
Speaker 1: Stanley Fisher lectured to the Economic Club of New York

507
00:31:09,080 --> 00:31:10,760
Speaker 1: a couple of weeks ago, Is this a FED? Just

508
00:31:10,800 --> 00:31:15,520
Speaker 1: searching for a conventional I s M model? Well, I

509
00:31:15,520 --> 00:31:19,480
Speaker 1: I think I think if I were trying to describe it, tom,

510
00:31:19,520 --> 00:31:23,160
Speaker 1: I would say, this is a Phillips curve FED. But

511
00:31:23,360 --> 00:31:28,520
Speaker 1: people are confront confronted with, you know, high employment and

512
00:31:28,600 --> 00:31:33,520
Speaker 1: low inflation. People have to be questioning the viability of

513
00:31:33,520 --> 00:31:38,400
Speaker 1: of that approach, and uh so, you know, I guess

514
00:31:38,480 --> 00:31:41,520
Speaker 1: I would say it's it's probably a Phillips curve FED,

515
00:31:42,080 --> 00:31:46,080
Speaker 1: with only modest conviction about that. And I think your

516
00:31:46,120 --> 00:31:49,000
Speaker 1: reference to I S l M, you know, is obviously

517
00:31:49,000 --> 00:31:52,200
Speaker 1: a starting point if you start to think about fiscal stimulus,

518
00:31:52,880 --> 00:31:55,520
Speaker 1: but it's not necessarily the ending point. And the reason

519
00:31:56,080 --> 00:31:59,000
Speaker 1: I would say it's not the ending point is that

520
00:31:59,240 --> 00:32:02,360
Speaker 1: I think there's a a real difference between what I

521
00:32:02,400 --> 00:32:07,280
Speaker 1: would call responsible or judicious fiscal stimulus and fiscal stimulus

522
00:32:07,320 --> 00:32:12,080
Speaker 1: that is so outsized and and and and prospective federal

523
00:32:12,120 --> 00:32:15,960
Speaker 1: budget deficits are so large for so long that you know,

524
00:32:16,000 --> 00:32:18,920
Speaker 1: they're perverse, and you don't. You don't get as much

525
00:32:18,920 --> 00:32:21,400
Speaker 1: stimulus and fat out of it as you might expect.

526
00:32:21,800 --> 00:32:25,800
Speaker 1: You get a reaction that says, boy, this doesn't look

527
00:32:25,840 --> 00:32:30,120
Speaker 1: sustainable to us. This is trouble. And and so you know,

528
00:32:30,200 --> 00:32:36,320
Speaker 1: I'm hopeful that fiscal stimulus will be responsible, but I'm

529
00:32:36,360 --> 00:32:39,000
Speaker 1: not convinced at this point that it will be. Is

530
00:32:39,040 --> 00:32:43,400
Speaker 1: the outcome here of let's called a more assertive Republican House,

531
00:32:43,440 --> 00:32:47,000
Speaker 1: Senate and President that this is a federal reserve that

532
00:32:47,120 --> 00:32:50,320
Speaker 1: becomes ever more expost that they have to wait and

533
00:32:50,360 --> 00:32:54,200
Speaker 1: wait for the evidence, and evermore the institution reacts after

534
00:32:54,240 --> 00:32:59,200
Speaker 1: the fact. Well, that clearly has been the stance. And

535
00:32:59,280 --> 00:33:02,920
Speaker 1: I don't get the sense that preemptive action is something

536
00:33:03,000 --> 00:33:06,480
Speaker 1: that a majority of FED policy makers are in favor

537
00:33:06,520 --> 00:33:09,080
Speaker 1: of right now, and I think they'd have trouble justifying

538
00:33:09,120 --> 00:33:15,080
Speaker 1: it in any event. Um, you know, it hasn't in

539
00:33:15,200 --> 00:33:18,200
Speaker 1: defense of what they've been doing, it hasn't worked out

540
00:33:18,240 --> 00:33:22,240
Speaker 1: badly so far. I think we have to admit that, Uh,

541
00:33:22,400 --> 00:33:26,320
Speaker 1: we've seen very healthy gains in employment for several years now,

542
00:33:26,360 --> 00:33:29,640
Speaker 1: inflation has remained low. I mean, the FED in many

543
00:33:29,680 --> 00:33:34,920
Speaker 1: ways could declare victory Um, obviously they're they're they're not

544
00:33:34,960 --> 00:33:37,760
Speaker 1: going to do that and start pounding their chests. They're

545
00:33:37,800 --> 00:33:40,840
Speaker 1: pounding on the table because that will lead to that

546
00:33:40,840 --> 00:33:44,840
Speaker 1: will lead to trouble for sure. But uh, you know,

547
00:33:44,920 --> 00:33:48,720
Speaker 1: I think the current approach has has served us well

548
00:33:48,960 --> 00:33:51,360
Speaker 1: to date, and maybe the reason for that is, of

549
00:33:51,400 --> 00:33:54,360
Speaker 1: course it's come out on top of a major financial crisis.

550
00:33:54,920 --> 00:33:58,760
Speaker 1: As the crisis continues to fade into the background. UM,

551
00:33:58,920 --> 00:34:02,680
Speaker 1: I think the Fed is going to have to reassess, uh,

552
00:34:02,720 --> 00:34:06,360
Speaker 1: their approach. I don't think that necessarily means they'll get real,

553
00:34:06,920 --> 00:34:09,360
Speaker 1: real aggressive, but I think it does mean they're going

554
00:34:09,440 --> 00:34:12,800
Speaker 1: to have to reassess the approach because the hangover for

555
00:34:12,880 --> 00:34:16,799
Speaker 1: the financial crisis is clearly diminishing. What does this FED

556
00:34:16,880 --> 00:34:19,640
Speaker 1: reserve look like in two thousand and eighteen, Uh, if

557
00:34:19,719 --> 00:34:23,080
Speaker 1: Janet Yellen doesn't stick around, there's a huge opportunity here

558
00:34:23,120 --> 00:34:24,879
Speaker 1: for the president elect to pick as many as five

559
00:34:25,400 --> 00:34:27,879
Speaker 1: new people at the FED. There are these calls frame

560
00:34:28,000 --> 00:34:30,719
Speaker 1: or rules based system by members of Congress. What does

561
00:34:30,719 --> 00:34:32,560
Speaker 1: the FED look like in a couple of years. Well,

562
00:34:32,600 --> 00:34:35,000
Speaker 1: I think you're right, there'll be new players for sure,

563
00:34:35,560 --> 00:34:39,400
Speaker 1: and presumably I don't know how how ideological they'll be,

564
00:34:39,520 --> 00:34:43,960
Speaker 1: but they'll be presumably people that the Republican majority and

565
00:34:44,000 --> 00:34:48,560
Speaker 1: the new administration are comfortable with. Um whether that will

566
00:34:48,640 --> 00:34:51,760
Speaker 1: go to a rules based approach, I think that issue

567
00:34:52,360 --> 00:34:55,120
Speaker 1: will be on the table and will clearly be on

568
00:34:55,160 --> 00:34:57,600
Speaker 1: the table, and we'll stay on the table. Whether it

569
00:34:57,600 --> 00:34:59,920
Speaker 1: gets resolved. I doubt it will get resolved in an

570
00:35:00,000 --> 00:35:03,000
Speaker 1: next two years. Whether it will get resolved, say in

571
00:35:03,040 --> 00:35:07,279
Speaker 1: the next four or five, that will depend your your

572
00:35:07,360 --> 00:35:09,719
Speaker 1: question is right on target. That will depend on who

573
00:35:09,800 --> 00:35:13,279
Speaker 1: the players are and whether they embrace If the FED

574
00:35:13,320 --> 00:35:15,920
Speaker 1: em If the FED policy bakers, the Board of Governors

575
00:35:16,360 --> 00:35:20,560
Speaker 1: embraces a rule rule based approach, my guess is they

576
00:35:20,600 --> 00:35:23,640
Speaker 1: won't have any trouble getting Congress to go along if

577
00:35:23,680 --> 00:35:26,960
Speaker 1: they oppose it. Yeah, you know that it's gonna be Uh,

578
00:35:27,120 --> 00:35:29,920
Speaker 1: it's gonna be more of what we've had recently. Lots

579
00:35:29,920 --> 00:35:33,000
Speaker 1: of disagreement. But you know, people on both sides of

580
00:35:33,000 --> 00:35:35,880
Speaker 1: the question, we need lower rates, we need higher rates,

581
00:35:35,880 --> 00:35:38,239
Speaker 1: we need rules. We don't need rules. Da da da,

582
00:35:39,000 --> 00:35:40,400
Speaker 1: you're crossing the bloomberg. I want to get in here.

583
00:35:40,480 --> 00:35:43,320
Speaker 1: VW said to agree to with regulators to fix about

584
00:35:43,320 --> 00:35:46,319
Speaker 1: sixty thou diesel cars. These are the tainted three Leader

585
00:35:46,360 --> 00:35:49,560
Speaker 1: cars that have been the subject of much scrutiny and controversy.

586
00:35:49,840 --> 00:35:52,880
Speaker 1: VW said to have avoided about four billion dollars in

587
00:35:52,920 --> 00:35:55,000
Speaker 1: paying to buy back all of those cars. VW going

588
00:35:55,000 --> 00:35:57,160
Speaker 1: to fix them. That news crossing the bloomberg right now,

589
00:35:57,160 --> 00:35:59,719
Speaker 1: we're here with Gary Stern, former presidency of the fit

590
00:35:59,840 --> 00:36:03,200
Speaker 1: was Bank of Minneapolis. Let me ask you lastly here

591
00:36:03,239 --> 00:36:06,200
Speaker 1: about Minnesota. We saw in the run up to the election,

592
00:36:06,920 --> 00:36:10,280
Speaker 1: Donald Trump saying the state was solidly in play, fighting

593
00:36:10,280 --> 00:36:13,279
Speaker 1: for it, when when a lot of posters thought that

594
00:36:13,400 --> 00:36:17,759
Speaker 1: was was folly. What was it that resonated in Minnesota

595
00:36:17,880 --> 00:36:21,279
Speaker 1: from what Donald Trump had to say? Economically, Well, it's

596
00:36:21,320 --> 00:36:24,400
Speaker 1: certainly true. I think that Minnesota turned out to the

597
00:36:24,480 --> 00:36:28,920
Speaker 1: election there turned out to be closer between Trump and

598
00:36:29,520 --> 00:36:34,160
Speaker 1: UH Clinton than expected. And I think part of it

599
00:36:34,200 --> 00:36:37,160
Speaker 1: was the same thing you see nationally. That is, he

600
00:36:37,680 --> 00:36:41,960
Speaker 1: his message resonates with people in rural areas, in smaller towns,

601
00:36:42,280 --> 00:36:46,759
Speaker 1: people who feel they haven't shared in UM the benefits

602
00:36:46,800 --> 00:36:50,200
Speaker 1: of the economic growth and the improvement of the economy

603
00:36:50,200 --> 00:36:53,680
Speaker 1: that we've had since the crisis and maybe for a

604
00:36:53,760 --> 00:36:57,320
Speaker 1: decade or more. UH. Part of it is also that Minnesota,

605
00:36:57,360 --> 00:37:00,600
Speaker 1: which used to be a very solidly Democrat out of state.

606
00:37:01,120 --> 00:37:05,279
Speaker 1: You know, the suburbs and exurbs around Minneapolis, I think

607
00:37:05,280 --> 00:37:09,879
Speaker 1: are are more Republican than um, than expect, than the

608
00:37:10,000 --> 00:37:14,120
Speaker 1: national press realizes, and are more inclined to vote Republican,

609
00:37:14,640 --> 00:37:17,920
Speaker 1: at least on occasion. And and I think that's just

610
00:37:18,120 --> 00:37:21,440
Speaker 1: demographics and the nature of the people who work and

611
00:37:21,520 --> 00:37:24,480
Speaker 1: live in those areas. And uh, I don't think there's

612
00:37:24,520 --> 00:37:28,200
Speaker 1: anything unique about Minnesota. I think that's what you see. Gary.

613
00:37:28,200 --> 00:37:30,040
Speaker 1: Thank you very much, Garry storing there from our president

614
00:37:30,040 --> 00:37:32,399
Speaker 1: and CEO of the Federal Serve Bank of Minneapolis. Joining

615
00:37:32,440 --> 00:37:35,000
Speaker 1: us here in the studios in New York, Janet Yellen,

616
00:37:35,040 --> 00:37:37,160
Speaker 1: of course, preparing to head to Capitol Hill on Thursday

617
00:37:37,200 --> 00:37:53,880
Speaker 1: to testify before the US Joint Economic Committee. Our guest

618
00:37:54,480 --> 00:37:56,160
Speaker 1: that we hope to go to here in a moment

619
00:37:56,320 --> 00:37:59,560
Speaker 1: is a very special guest. Join Claudetryche. You've heard me

620
00:37:59,680 --> 00:38:03,440
Speaker 1: say anytimes, folks, as the engineer from Nancy. He has

621
00:38:03,440 --> 00:38:07,880
Speaker 1: the most original economics. It has always the feeling of

622
00:38:07,920 --> 00:38:12,680
Speaker 1: control and the plug in of engineering, the thinking of engineering,

623
00:38:12,680 --> 00:38:16,560
Speaker 1: and that's something that we value, uh greatly. Mr Triche

624
00:38:16,719 --> 00:38:21,280
Speaker 1: of course, coming after Mr Deuisenberg and before Mr Drogs

625
00:38:21,320 --> 00:38:24,160
Speaker 1: a president of the European Central Bank, as someone who

626
00:38:24,239 --> 00:38:28,560
Speaker 1: managed the crisis, there was accolade and there was criticism.

627
00:38:28,600 --> 00:38:31,640
Speaker 1: And now joining as Jean Claude Trouche on my trip

628
00:38:31,719 --> 00:38:35,200
Speaker 1: to London, Mr Triche and good morning my trip to London.

629
00:38:35,640 --> 00:38:39,080
Speaker 1: Clearly the talk is of Italy. How urgent is the

630
00:38:39,160 --> 00:38:42,200
Speaker 1: moment for an Italy that must come to grip with

631
00:38:42,400 --> 00:38:48,320
Speaker 1: slow economic growth. Well, I I think really that Italy

632
00:38:48,560 --> 00:38:51,040
Speaker 1: is a conendrum because on the one hand you have

633
00:38:51,200 --> 00:38:56,759
Speaker 1: a very very solid manufacturing sector which is keeping its

634
00:38:56,800 --> 00:39:01,120
Speaker 1: market chair quite well and can be compare really to

635
00:39:01,800 --> 00:39:04,960
Speaker 1: what you see in Austria and the south of Germany.

636
00:39:05,040 --> 00:39:08,120
Speaker 1: And on the other hand you have this longstanding stagnation

637
00:39:08,560 --> 00:39:12,600
Speaker 1: of the economy. I can explain that only because mismanagement

638
00:39:12,800 --> 00:39:16,400
Speaker 1: in part of Italy, particularly it's a public management in

639
00:39:16,440 --> 00:39:22,000
Speaker 1: the South of Italy is absorbing the surplus that Italy

640
00:39:22,200 --> 00:39:26,640
Speaker 1: is producing in its manufacturing sector. So they they have

641
00:39:26,960 --> 00:39:33,960
Speaker 1: really to embark on a very solid management of the

642
00:39:34,000 --> 00:39:37,279
Speaker 1: public side, if I may, of the economy, and and

643
00:39:37,400 --> 00:39:39,640
Speaker 1: I trust that it is possible, but it's difficult. But

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00:39:39,719 --> 00:39:43,880
Speaker 1: it calls for structural reforms, and it calls for eliminating

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00:39:44,239 --> 00:39:49,759
Speaker 1: largely you know, the kind of clientelism which exists in

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00:39:49,440 --> 00:39:53,279
Speaker 1: the in the Italy and particularly in the South. Mr Uche,

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00:39:53,480 --> 00:39:56,040
Speaker 1: I have always killed you about your engineering in your

648
00:39:56,080 --> 00:40:00,600
Speaker 1: foundation approach to economics. How can we have a European

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00:40:00,719 --> 00:40:04,959
Speaker 1: economics amid negative rates? Do you know where the risk

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00:40:05,040 --> 00:40:07,480
Speaker 1: free rate is? David ger and I are going in

651
00:40:07,520 --> 00:40:10,239
Speaker 1: search of it and we can't find it. Is the

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00:40:10,320 --> 00:40:15,360
Speaker 1: risk free rate out there somewhere. Well, it is clear

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00:40:15,480 --> 00:40:18,520
Speaker 1: that very low rates for a very long period of time,

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00:40:19,880 --> 00:40:24,239
Speaker 1: even if necessary, from the would say economic standpoint and

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00:40:24,400 --> 00:40:29,799
Speaker 1: from the looking at the hill equiliborium rates standpoint, which

656
00:40:29,800 --> 00:40:32,320
Speaker 1: are very very low or even negative in some cases,

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00:40:32,520 --> 00:40:37,520
Speaker 1: including i would say, in all advanced economy, despite the

658
00:40:37,600 --> 00:40:41,920
Speaker 1: necessity of having this negative rates in some cases, not

659
00:40:41,960 --> 00:40:45,240
Speaker 1: only as you know in the euro Area, but also

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00:40:45,280 --> 00:40:49,440
Speaker 1: in Switzerland, also in Sweden, also in Denmark, and also

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00:40:49,480 --> 00:40:53,920
Speaker 1: in Japan. Of course, they are negative consequences that we

662
00:40:54,000 --> 00:40:57,840
Speaker 1: have to fully take into account. So in my opinion,

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00:40:58,280 --> 00:41:02,080
Speaker 1: all taken into account, the contages were superior to the

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00:41:02,480 --> 00:41:06,600
Speaker 1: inconveniences and to the drawbacks. But of course it cannot

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00:41:06,840 --> 00:41:09,640
Speaker 1: last forever. So I hope very much that we will

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00:41:09,680 --> 00:41:13,319
Speaker 1: get out of that situation and have which is very

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00:41:13,320 --> 00:41:18,839
Speaker 1: important of course, UH inflation expectations, going back to the

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00:41:18,880 --> 00:41:22,440
Speaker 1: present definition of price stability, which is the same by

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00:41:22,440 --> 00:41:25,720
Speaker 1: the way in Europe, in the US, in Japan, namely

670
00:41:26,280 --> 00:41:31,640
Speaker 1: around two percent, as we say in Europe below two percent,

671
00:41:31,680 --> 00:41:34,239
Speaker 1: but very close to two percent, so that that is

672
00:41:34,280 --> 00:41:37,400
Speaker 1: the key. Of course, The key is really that the

673
00:41:37,440 --> 00:41:41,279
Speaker 1: central banks in their present fight, will succeed, and if

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00:41:41,320 --> 00:41:44,960
Speaker 1: they succeed, then we can get out of this difficult

675
00:41:45,520 --> 00:41:49,040
Speaker 1: It's a period which has of course a lot of drawbacks.

676
00:41:49,320 --> 00:41:53,320
Speaker 1: We've reached you in Frankfurt where it's euro Finance Week,

677
00:41:53,800 --> 00:41:55,600
Speaker 1: give us a sense of of how much of the

678
00:41:55,640 --> 00:41:59,439
Speaker 1: conversation has been consumed with talk about the transition here

679
00:41:59,440 --> 00:42:03,120
Speaker 1: in the US US UH Donald Trump bec coming in

680
00:42:03,120 --> 00:42:05,960
Speaker 1: as president, how how much of the conversation is focused

681
00:42:05,960 --> 00:42:07,360
Speaker 1: on that and the fact that that will have on

682
00:42:07,400 --> 00:42:09,440
Speaker 1: Europe and indeed on on the e c B S plans.

683
00:42:10,920 --> 00:42:12,880
Speaker 1: I think, of course, it is something which is of

684
00:42:12,920 --> 00:42:19,560
Speaker 1: the essence because the US is the most important country economically,

685
00:42:20,000 --> 00:42:24,080
Speaker 1: because the US has an influence which is very very

686
00:42:24,120 --> 00:42:28,080
Speaker 1: important because it clearly demonstrates that there is a level

687
00:42:28,120 --> 00:42:32,000
Speaker 1: of frustration of the people and of the middle class

688
00:42:32,040 --> 00:42:35,440
Speaker 1: in the advanced economy, which is shared very largely, not

689
00:42:35,520 --> 00:42:37,799
Speaker 1: only in the UK, but also in the US and

690
00:42:37,880 --> 00:42:41,239
Speaker 1: certainly in many European countries. So it is it is

691
00:42:41,280 --> 00:42:44,120
Speaker 1: something which is very important, I would say, both for

692
00:42:44,280 --> 00:42:49,400
Speaker 1: political reasons and also for economic reasons, because the market

693
00:42:49,440 --> 00:42:52,839
Speaker 1: are expecting a new course of action we will see.

694
00:42:52,880 --> 00:42:56,040
Speaker 1: I mean, we have to be very very putent. You

695
00:42:56,120 --> 00:43:00,719
Speaker 1: might remember the result of the vote was considered negatively

696
00:43:00,880 --> 00:43:03,640
Speaker 1: than very positively. In some respect. I think we have

697
00:43:03,719 --> 00:43:08,399
Speaker 1: to be cautious, prudent on the economic side, on the

698
00:43:08,440 --> 00:43:12,160
Speaker 1: monetary side, on the exchange right side, thinks are not

699
00:43:12,400 --> 00:43:15,360
Speaker 1: moving that you know, rapidly and so forth. So I

700
00:43:15,440 --> 00:43:19,360
Speaker 1: remained myself very important. But what is absolutely clear is

701
00:43:19,400 --> 00:43:23,759
Speaker 1: that we are in a universe where, because of the

702
00:43:23,800 --> 00:43:28,040
Speaker 1: competition of the emerging ecomies, because of the rapidity of

703
00:43:28,080 --> 00:43:32,040
Speaker 1: the search of technology, we have a frustration, we have

704
00:43:32,120 --> 00:43:36,399
Speaker 1: a stress of our people. Mr. Thank you so much

705
00:43:36,440 --> 00:43:47,719
Speaker 1: John Potriche this morning from Europe. Thanks for listening to

706
00:43:47,760 --> 00:43:53,799
Speaker 1: the Bloomberg Surveillance podcast. Subscribe and listen to interviews on iTunes, SoundCloud,

707
00:43:54,280 --> 00:43:58,520
Speaker 1: or whichever podcast platform you prefer. I'm out on Twitter

708
00:43:58,600 --> 00:44:02,360
Speaker 1: at Tom Keene, David eurra Is at David Gura. Before

709
00:44:02,400 --> 00:44:06,760
Speaker 1: the podcast, you can always catch us worldwide. I'm Bloomberg Radio.

710
00:44:19,200 --> 00:44:21,879
Speaker 1: Who you put your trust in matters? Investors have put

711
00:44:21,880 --> 00:44:26,239
Speaker 1: their trust and independent registered investment advisors to the two

712
00:44:26,239 --> 00:44:29,879
Speaker 1: and four trillion dollars. Why learn more and find your

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00:44:29,960 --> 00:44:32,759
Speaker 1: independent advisor dot com