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Speaker 1: Global business news twenty four hours a day at Bloomberg

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Speaker 1: dot com, the Radio plus mobile app, and on your radio.

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Speaker 1: This is a Bloomberg Business Flash and I'm Karen Moscow.

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Speaker 1: This updates brought to you by Eisener Amper, Hedge Week,

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Speaker 1: Institutional Investor, All Credit Intelligence. Fund managers reading these publications

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Speaker 1: out why Eisner Emper dot com slash excellence. Fiser and

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Speaker 1: Allergan agreeing to end their one hundred sixty billion dollar merger,

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Speaker 1: terminating the largest ever healthcare acquisition. Right now, Allerghan shares

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Speaker 1: are down nine tenths per cent, will Fiser shares are

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Speaker 1: up nine tenths per cent. Stocks are rebounding from a

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Speaker 1: six week low in Europe, while US stock indise futures rise,

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Speaker 1: SNP EVENI futures up three points, Dowie Mini futures of

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Speaker 1: twenty four nasdach EUNY futures of seven. The decks in

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Speaker 1: Germany down three tenths per cent, while the CAC in

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Speaker 1: Paris is up two tenths per cent. In the FT

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Speaker 1: one D six tenths per cent. Ten Your treasury down

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Speaker 1: seven thirty seconds the yield one point seven four percent,

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Speaker 1: Nimex oil up two per cent, or a dollar one

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Speaker 1: comex goal down to ten per center, two dollars ninety cents,

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Speaker 1: the euro a dollar thirteen fifty five, the n one

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Speaker 1: ten point three three And that's a Bloomberg business flash.

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Speaker 1: Tom and Mike Karen, thanks so much. With all that's

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Speaker 1: going on in finance today, we have been remiss and

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Speaker 1: not speaking to David mel Pass about our monetary policy

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Speaker 1: derby David. Michael McKee is single handedly driven forward the

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Speaker 1: debate on the joyous dot plot, and there seems to

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Speaker 1: be a distinction between Mr Williams and San Francisco and

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Speaker 1: Mr Bullet of St. Louis over the value of this

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Speaker 1: fancy word that every everybody uses. The efficacy of the

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Speaker 1: dot plot might jump in here because you're smart at

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Speaker 1: this than I am. Is a dot plot of value

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Speaker 1: or is it just yelling Stanley Fisher, Bill Dudley that matters?

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Speaker 1: The people on Wall Street who do the investing say

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Speaker 1: it doesn't matter anymore because nobody believes it. The Fed people.

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Speaker 1: I mean, you would use it for forward guidance. But

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Speaker 1: the question, David is does forward guidance have any efficacy anymore. Right,

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Speaker 1: I'm skeptical of forward guidance because it's very hard to

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Speaker 1: No one has a really good crystal ball, including the FED.

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Speaker 1: And so as you say what your forward guidance is,

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Speaker 1: really what you're doing is trying to describe a set

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Speaker 1: of rules that if the economy accelerates, we're gonna hike

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Speaker 1: Let's say that would that would be a rule? Uh

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Speaker 1: and so uh John Taylor, you know, has proposed um

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Speaker 1: more concrete rules on how the FED could give guidance

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Speaker 1: in concept of what it intended to do under certain circumstances. Instead,

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Speaker 1: the FED has gone to this soft kind of forward guidance.

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Speaker 1: I don't think it's very useful. Um and uh, maybe

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Speaker 1: they should try to wind down the dot plots. How

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Speaker 1: much twenty five basis points and even by uh FED

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Speaker 1: admission no more than fifty more are coming this year?

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Speaker 1: How much is the FED really affecting the economy at

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Speaker 1: this point? And markets? Is it just kind of the

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Speaker 1: thing that people talk about because they don't have other

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Speaker 1: things to talk about. Well, I think it was. It

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Speaker 1: was good for the FED to get off the zero bound.

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Speaker 1: The problem at the zero bound is the inner bank

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Speaker 1: market stops working. Banks don't lend to each other when

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Speaker 1: the rate is zero, and we're seeing it in Japan.

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Speaker 1: They used to have an inter bank market that worked

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Speaker 1: when interest rates where at ten basis points, but it

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Speaker 1: has completely stopped over the last month and a half,

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Speaker 1: and so that's causing the Japan a lot of problems.

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Speaker 1: So as the Fed has hiked, you begin to have

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Speaker 1: the markets begin to operate. And so I'm happy with

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Speaker 1: the twenty five basis points. I don't think it matters

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Speaker 1: so much whether they hike more UH. The issue was

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Speaker 1: to get off the zero bound. Now. The real challenge

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Speaker 1: for the Fed, though, is that all of their liabilities UH,

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Speaker 1: their margins, their liabilities on the mark argent are with

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Speaker 1: the commercial banking system. I think they should diversify their

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Speaker 1: liabilities to the money market funds and that would take

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Speaker 1: some of the burden off the economy. The Feds putting

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Speaker 1: this giant drag on the economy by borrowing only from

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Speaker 1: banks UH, and that's a bad idea. They should change it.

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Speaker 1: They're overpaying the banks fifty basis points, which is unnecessary,

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Speaker 1: and they say that if they're gonna if they hike

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Speaker 1: rates more, they're gonna actually pay the banking system more

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Speaker 1: for that money. Basis point hike means twenty five basis

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Speaker 1: points more for the banks. That doesn't make any sense.

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Speaker 1: It's just not a workable concept, tom All, we have

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Speaker 1: data here. Can I change the subject a little bit too?

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Speaker 1: To politics? Um, will you serve in the Trump administration?

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Speaker 1: You know he was telling us during the break that's

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Speaker 1: not his life goal. But you are a noted Republican

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Speaker 1: economist at one time Senate candidate in New York. I'm curious,

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Speaker 1: Poul show that taxes are not a big issue for

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Speaker 1: people in the presidential race this year. They're angry about

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Speaker 1: a lot of other things, but the level of taxes isn't.

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Speaker 1: It's not the issue that it was. So why is

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Speaker 1: the centerpiece of every Republican candidate uh massive tax cuts

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Speaker 1: rather than other growth producing ideas. Well. I think you

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Speaker 1: can get a lot of fuel out of tax cuts.

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Speaker 1: We saw in two thousand three when Bush proposed the

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Speaker 1: tax cuts, the stock market took off in the economy

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Speaker 1: jumped to eight percent growth after the proposal into That's

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Speaker 1: a third quarter of two thousand three, and so you

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Speaker 1: could achieve that now. I think it's that the public

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Speaker 1: is so mad about other things that it's drowned out

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Speaker 1: the concern about taxes that everybody fills them out. They

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Speaker 1: have to hire advisors to do it. Uh. And on

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Speaker 1: the corporate side, the US has one of the highest

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Speaker 1: tax rates in the world. So so I think there's

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Speaker 1: a lot to be said for tax reform. The question though,

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Speaker 1: is Uh, in the current environment, people are even add

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Speaker 1: or about other stuff. So that's what's dominating the campaign. Okay,

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Speaker 1: one more on that subject. If you're gonna cut taxes,

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Speaker 1: you're either gonna raise the deficit or you're gonna have

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Speaker 1: to cut spending a lot. And so far the plans

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Speaker 1: out there would require politically unrealistic shall we say, cuts

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Speaker 1: in spending. So what do you see. No, that's a

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Speaker 1: really static view, Michael. Um. So if you if you

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Speaker 1: improve the tax code, you're gonna get more growth. Well

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Speaker 1: you know, wait wait, wait wait, we're talking cuts as

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Speaker 1: opposed to the cuts part. Obviously, if you do them

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Speaker 1: as a complete tax reform, that would be a different subject. Look,

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Speaker 1: I'm a firm believer in lower rates on a broader base.

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Speaker 1: When you have the rates high than people avoid the

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Speaker 1: activity that you're talking about. So as you lower the

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Speaker 1: rates on a broader base, you get more growth. That's

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Speaker 1: pretty clear, and I really think there could be some

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Speaker 1: fruitful debate about that even as we go into November.

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Speaker 1: If a Republican candidate makes that case that lowering the

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Speaker 1: rates on a broader base will get you more jobs,

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Speaker 1: more growth, the public would support that. But we should

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Speaker 1: look at all the host of problems that's occurring. UH.

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Speaker 1: The small business portion of the economy has just been

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Speaker 1: paralyzed over the last really eight years in the regulatory environment,

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Speaker 1: the tax environment, and also I think the federal reserve environment,

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Speaker 1: the bank regulatory environment, UH has has stopped the actual

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Speaker 1: job creation at the small level. So that's gonna be

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Speaker 1: that needs to be at the core of the campaign. David,

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Speaker 1: thank you for a most interesting morning. David mel Pass

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