1 00:00:09,880 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Lee. 2 00:00:13,960 --> 00:00:16,960 Speaker 1: We bring you insight from the best in economics, finance, 3 00:00:17,040 --> 00:00:23,480 Speaker 1: investment and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:34,680 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. I 5 00:00:34,680 --> 00:00:37,120 Speaker 1: want to show a chart now which folds into equities, 6 00:00:37,159 --> 00:00:40,360 Speaker 1: folds into commodities, folds into bonds as well before we 7 00:00:40,440 --> 00:00:43,159 Speaker 1: bring in our test team guests. This surprised me. This 8 00:00:43,280 --> 00:00:46,120 Speaker 1: is US trade weighted real broad dollar. This is the 9 00:00:46,159 --> 00:00:49,680 Speaker 1: broadest measurement of the dollar with strong dollar up one 10 00:00:49,720 --> 00:00:54,120 Speaker 1: standard deviation over the fifty year chart. The plaza chord 11 00:00:54,160 --> 00:00:56,480 Speaker 1: way over on the left side, so it is a 12 00:00:56,600 --> 00:00:59,040 Speaker 1: strong dollar to say the least, which is a good 13 00:00:59,120 --> 00:01:01,360 Speaker 1: entry point on equ it Ease with Edmund shing A 14 00:01:01,480 --> 00:01:03,440 Speaker 1: B and P. Perry by the global head of Equity 15 00:01:03,440 --> 00:01:07,039 Speaker 1: in Derivative Strategy in Maryland. Watson joins us today a 16 00:01:07,120 --> 00:01:11,400 Speaker 1: black Rack, their head of Global Fundamental Fixed Income Strategy Maryland. 17 00:01:11,440 --> 00:01:15,880 Speaker 1: Currency dynamics and fixed income really affect the coupon right now. 18 00:01:16,120 --> 00:01:19,240 Speaker 1: To begin with Euro in this this London hour, what 19 00:01:19,360 --> 00:01:21,679 Speaker 1: do you do on currency as you try to find 20 00:01:21,760 --> 00:01:26,360 Speaker 1: coupon in Europe. Yeah, that's right. So if you're a 21 00:01:26,400 --> 00:01:29,840 Speaker 1: European investor, you're a DOMS hold investor, then it's really 22 00:01:29,880 --> 00:01:32,399 Speaker 1: important to be aware of the hedging costs. And I 23 00:01:32,400 --> 00:01:36,280 Speaker 1: think if you're looking for coupons then we do see um, 24 00:01:36,640 --> 00:01:40,280 Speaker 1: you know, potential of the opportunities in euro credit. We 25 00:01:40,319 --> 00:01:45,120 Speaker 1: see opportunities also elsewhere in Asia and also in dollars 26 00:01:45,120 --> 00:01:47,640 Speaker 1: nominated assets as well. But it's really important to be 27 00:01:47,680 --> 00:01:50,680 Speaker 1: aware of the carrier get then also the hedging cost 28 00:01:50,720 --> 00:01:52,800 Speaker 1: back because it's about three percent, which is a lot. 29 00:01:53,200 --> 00:01:55,240 Speaker 1: So I think it's very very important to be very 30 00:01:55,280 --> 00:01:57,520 Speaker 1: aware of when you're tryd of looking at that coupon, 31 00:01:57,680 --> 00:02:00,680 Speaker 1: what in investor actually gets back half the aging cost? 32 00:02:00,800 --> 00:02:03,400 Speaker 1: And maybe you don't have the urging cars and equities, 33 00:02:03,400 --> 00:02:06,680 Speaker 1: but you certainly have the current currency translation as well. 34 00:02:06,960 --> 00:02:09,960 Speaker 1: What a strong dour due to US smart nationals or 35 00:02:10,040 --> 00:02:13,600 Speaker 1: is it too small a part to play? Well, you 36 00:02:13,639 --> 00:02:15,760 Speaker 1: can't say it's too small time because if you look 37 00:02:15,760 --> 00:02:19,160 Speaker 1: at the SMP five index, something like forty of earnings 38 00:02:19,160 --> 00:02:23,760 Speaker 1: are from overseas, so clearly has it has an impact, um, 39 00:02:23,800 --> 00:02:26,120 Speaker 1: maybe not as much an impact as it as currency 40 00:02:26,160 --> 00:02:28,760 Speaker 1: does in Asia or in the US, but an impact nonetheless, 41 00:02:28,800 --> 00:02:31,639 Speaker 1: of course, I think the real issue for equities is 42 00:02:31,680 --> 00:02:33,839 Speaker 1: not going to be just the currency by itself. It's 43 00:02:33,840 --> 00:02:37,160 Speaker 1: going to be much more where the currency goes. And 44 00:02:37,200 --> 00:02:39,040 Speaker 1: I think it's going to be much more about really 45 00:02:39,080 --> 00:02:41,480 Speaker 1: the debt mountain that the US has to deal with 46 00:02:41,840 --> 00:02:43,680 Speaker 1: in the coming years, and what does that do to 47 00:02:43,720 --> 00:02:47,240 Speaker 1: the currency. I think that's more of an issue in 48 00:02:47,320 --> 00:02:49,280 Speaker 1: terms of stability going forward. What does that do to 49 00:02:49,320 --> 00:02:51,280 Speaker 1: the currency? Well, I think it makes the currency get down. 50 00:02:51,440 --> 00:02:53,880 Speaker 1: I think Toma's pointed out the fact that the dollar 51 00:02:53,919 --> 00:02:57,440 Speaker 1: is way high. Okay, fine, and everyone's been very bullish 52 00:02:57,520 --> 00:03:00,720 Speaker 1: the dollar. Well we're not. We're pretty barished the because 53 00:03:00,720 --> 00:03:04,440 Speaker 1: we think eventually the debt mountain comes to bear, someone's 54 00:03:04,440 --> 00:03:06,639 Speaker 1: going to buy this U S debt. Remember, they running 55 00:03:06,680 --> 00:03:09,440 Speaker 1: massive budget deficits. I love the way everyone complains about 56 00:03:09,440 --> 00:03:12,320 Speaker 1: Italy in the Italian budget deficit. The US got a 57 00:03:12,320 --> 00:03:14,519 Speaker 1: massive budget deficit. It's a only going to get worse. 58 00:03:14,560 --> 00:03:16,800 Speaker 1: Trump is not doing anything to help that. And they 59 00:03:16,840 --> 00:03:19,680 Speaker 1: think that everyone's going to buy their debts to be fair. Yeah, 60 00:03:19,680 --> 00:03:21,320 Speaker 1: but the thing is they still need people to buy 61 00:03:21,360 --> 00:03:23,800 Speaker 1: their debt. Front scene. Someone has to buy it. Yeah, 62 00:03:23,880 --> 00:03:26,679 Speaker 1: the treasury of sellers. Who is the buyer? Not the Russians, 63 00:03:26,919 --> 00:03:30,000 Speaker 1: not the Chinese. Oh, good luck, the domestic US investor. 64 00:03:30,520 --> 00:03:33,160 Speaker 1: Let's see, let's see if they absorb all of the debt. Okay, Well, 65 00:03:33,240 --> 00:03:34,920 Speaker 1: where do you see dollar going from here? You know, 66 00:03:34,960 --> 00:03:37,800 Speaker 1: so the medium term, we also see the dollar depreciating 67 00:03:37,920 --> 00:03:40,560 Speaker 1: from here. Um as has been very strong at the moment, 68 00:03:40,920 --> 00:03:43,240 Speaker 1: we did see a bit of a pause after the 69 00:03:43,360 --> 00:03:46,280 Speaker 1: FED sickly. J. Powell was suggesting that they might be 70 00:03:46,280 --> 00:03:49,680 Speaker 1: on pausing for an extended periods of time. Um And 71 00:03:49,720 --> 00:03:52,160 Speaker 1: I think as we go forward, you know, the US 72 00:03:52,320 --> 00:03:54,640 Speaker 1: is in the late cycle of the business cycle as well. 73 00:03:55,000 --> 00:03:56,800 Speaker 1: So our view is also the over the medium term 74 00:03:56,800 --> 00:03:59,320 Speaker 1: at least the dollar will also to depreciate. Okay, what 75 00:03:59,440 --> 00:04:02,880 Speaker 1: happens if we have a trade route? Does it? Does 76 00:04:02,920 --> 00:04:05,320 Speaker 1: it mean that actually the FED is back at hiking 77 00:04:06,160 --> 00:04:08,720 Speaker 1: far too early to say, I think the Fed will 78 00:04:08,800 --> 00:04:10,080 Speaker 1: leave it a few months. Look, they're not doing a 79 00:04:10,080 --> 00:04:13,440 Speaker 1: big rush. Core inflation is not going up that quickly 80 00:04:13,480 --> 00:04:15,920 Speaker 1: despite the rise and wage inflation. And they're also, of 81 00:04:16,000 --> 00:04:17,800 Speaker 1: course in the US. Don't forget helped by the the 82 00:04:17,839 --> 00:04:21,080 Speaker 1: oil price. The oil price has a lagged effect to inflation. 83 00:04:21,360 --> 00:04:25,040 Speaker 1: It was coming down, remember in December, quite considerably, and 84 00:04:25,080 --> 00:04:26,840 Speaker 1: the feed through their foot core inflation is going to 85 00:04:26,880 --> 00:04:28,919 Speaker 1: be someone negative rather than positive, at least for the 86 00:04:28,920 --> 00:04:30,760 Speaker 1: next few months. So they have a little window where 87 00:04:30,760 --> 00:04:33,280 Speaker 1: they can sit and do not very much. In particular Maryland, 88 00:04:33,279 --> 00:04:36,960 Speaker 1: where is black rock and the concept of lower for longer? 89 00:04:37,040 --> 00:04:39,920 Speaker 1: We had Gary Shilling and yesterday arguably the best two 90 00:04:39,960 --> 00:04:44,200 Speaker 1: decades call on lower interest rates, etcetera. But but where 91 00:04:44,279 --> 00:04:48,480 Speaker 1: is black rocks formal statement and how low and how 92 00:04:48,560 --> 00:04:53,000 Speaker 1: long we stay with this great regime? Yeah? So, um, 93 00:04:53,120 --> 00:04:55,839 Speaker 1: I also think that they're going to stay lower for 94 00:04:55,880 --> 00:04:58,960 Speaker 1: a lot longer. And you know, our core view at 95 00:04:58,960 --> 00:05:01,240 Speaker 1: the moment is we'll have a pause at least for 96 00:05:01,279 --> 00:05:04,840 Speaker 1: the first half of this year. Um. As Edmund said, um, 97 00:05:04,880 --> 00:05:06,960 Speaker 1: you know, I agree with this statement that the FEND 98 00:05:07,000 --> 00:05:08,679 Speaker 1: is going to be very patient. They're in no rush 99 00:05:08,760 --> 00:05:11,479 Speaker 1: to do anything. And then when you see the development 100 00:05:11,600 --> 00:05:15,360 Speaker 1: of inflation, when you see the development of global factors, 101 00:05:15,400 --> 00:05:17,760 Speaker 1: global trade, when you see the development of the U 102 00:05:17,760 --> 00:05:20,200 Speaker 1: S economy and activity, then I think potentially in the 103 00:05:20,240 --> 00:05:23,480 Speaker 1: second half of the year you could see a further 104 00:05:23,560 --> 00:05:26,120 Speaker 1: hike or you could see a continued pause. But I 105 00:05:26,200 --> 00:05:28,479 Speaker 1: certainly think in the US and if you look globally 106 00:05:28,520 --> 00:05:30,839 Speaker 1: as well, if you look at the ECB, um, you 107 00:05:30,880 --> 00:05:33,800 Speaker 1: know they're in nowhere to do anything either. Um. You know, 108 00:05:33,920 --> 00:05:36,120 Speaker 1: the Bank of England wants to show up the economy 109 00:05:36,160 --> 00:05:38,080 Speaker 1: and we think that you know, on the margin, at 110 00:05:38,080 --> 00:05:40,799 Speaker 1: some point they will ride rates. But I think broadly, 111 00:05:40,839 --> 00:05:42,480 Speaker 1: when you look at the global economy, when you look 112 00:05:42,480 --> 00:05:46,240 Speaker 1: at development markets, we are in a completely different regime 113 00:05:46,279 --> 00:05:47,760 Speaker 1: to the past, and we are going to see rates 114 00:05:47,839 --> 00:05:50,680 Speaker 1: much lower for longer, and the end point is also 115 00:05:50,720 --> 00:05:52,800 Speaker 1: going to be much much lower. To James Bullard and 116 00:05:52,880 --> 00:05:55,480 Speaker 1: his phrase of regime change, it is a most interesting 117 00:05:55,520 --> 00:05:58,640 Speaker 1: time administing on the markets. B and B very Maryland 118 00:05:58,640 --> 00:06:16,120 Speaker 1: wantson and fixed income as well with black Crocket join. 119 00:06:16,200 --> 00:06:17,960 Speaker 1: I guess a man whose career has taken him from 120 00:06:17,960 --> 00:06:19,719 Speaker 1: the Fed to the I m F, from City Group 121 00:06:19,760 --> 00:06:22,880 Speaker 1: and now with the Milken Institute the chief economist. It 122 00:06:23,000 --> 00:06:26,160 Speaker 1: is Billy and he joins us from Washington. Good morning 123 00:06:26,200 --> 00:06:29,120 Speaker 1: to your bill. Want to so help me out as 124 00:06:29,120 --> 00:06:32,839 Speaker 1: always to draw a distinction between noise and news substance 125 00:06:33,240 --> 00:06:36,120 Speaker 1: and happy talk. What do we have this morning? The 126 00:06:36,160 --> 00:06:38,479 Speaker 1: most substantive thing you just mentioned is the fact that 127 00:06:38,480 --> 00:06:41,080 Speaker 1: the dollar has been gaining stronger and stronger over the 128 00:06:41,160 --> 00:06:44,160 Speaker 1: last week or so. And think about it. Interest rate 129 00:06:44,160 --> 00:06:46,480 Speaker 1: parody told us that when the Fed talers, we're supposed 130 00:06:46,520 --> 00:06:48,960 Speaker 1: to pause, the dollar is supposed to weaken. Instead, what 131 00:06:49,040 --> 00:06:52,000 Speaker 1: has happened. It tells us that interest rate parody models 132 00:06:52,040 --> 00:06:54,520 Speaker 1: don't work, and I think the traders around the world 133 00:06:54,560 --> 00:06:57,240 Speaker 1: are learning that the hard wave. One thing do you 134 00:06:57,279 --> 00:06:59,679 Speaker 1: have to keep in mind is that the US continues 135 00:06:59,760 --> 00:07:02,719 Speaker 1: to be a magnificent global capital and everyone in the 136 00:07:02,760 --> 00:07:04,880 Speaker 1: world wants to come here, despite the fact that we 137 00:07:04,920 --> 00:07:08,040 Speaker 1: have rising deficits, rising death to GDP ratios. And as 138 00:07:08,080 --> 00:07:10,480 Speaker 1: was saying to Tom earlier, one of the things that 139 00:07:10,520 --> 00:07:13,200 Speaker 1: we have to be cautious about is keep things in perspective. 140 00:07:13,520 --> 00:07:15,720 Speaker 1: All this worrying about the US is like talking worrying 141 00:07:15,720 --> 00:07:17,880 Speaker 1: about pimples on a teenager's face when the rest of 142 00:07:17,880 --> 00:07:20,160 Speaker 1: the world has cancer and and I think we have 143 00:07:20,240 --> 00:07:24,920 Speaker 1: to remember it breaks it and even the problems within China, 144 00:07:24,960 --> 00:07:27,480 Speaker 1: all the dead problems they're having, is demonstrating to us 145 00:07:27,520 --> 00:07:29,520 Speaker 1: that the leverage is being put to use in the 146 00:07:29,560 --> 00:07:31,240 Speaker 1: US much better than it is being put to use 147 00:07:31,280 --> 00:07:32,640 Speaker 1: in the rest of the world. There is a belief 148 00:07:32,680 --> 00:07:34,480 Speaker 1: Bill that if we get some kind of trade daila 149 00:07:34,520 --> 00:07:37,280 Speaker 1: will go a long long way to curing the world's ills. 150 00:07:37,320 --> 00:07:39,760 Speaker 1: It will be some kind of panacea. I take it 151 00:07:39,760 --> 00:07:42,360 Speaker 1: from your Bill, and you don't share that belief. Well, actually, 152 00:07:42,600 --> 00:07:45,320 Speaker 1: um strangely enough, I take that view, but on a 153 00:07:45,360 --> 00:07:49,360 Speaker 1: on a much longer term basis. We've had social problems 154 00:07:49,400 --> 00:07:52,480 Speaker 1: and political problems tearing apart Europe and Middle East and 155 00:07:52,640 --> 00:07:55,680 Speaker 1: Asia for centuries. And I think one of the things 156 00:07:55,720 --> 00:07:58,760 Speaker 1: that the milk and formula tells us is prosperity comes 157 00:07:58,800 --> 00:08:02,560 Speaker 1: with the use of capital in a smart way to 158 00:08:02,680 --> 00:08:05,280 Speaker 1: bolster social capital. In other words, when we get the 159 00:08:05,280 --> 00:08:08,480 Speaker 1: global economy and regional economies to grow faster, a lot 160 00:08:08,520 --> 00:08:10,679 Speaker 1: of the social problems start to go away at least 161 00:08:10,800 --> 00:08:13,800 Speaker 1: become less important. And I think that's the formula that 162 00:08:13,800 --> 00:08:16,760 Speaker 1: that is being used around the world now by by 163 00:08:16,880 --> 00:08:19,160 Speaker 1: us when we have these regional conferences we're doing the 164 00:08:19,160 --> 00:08:21,360 Speaker 1: Middle East right now, we're trying to get everyone to 165 00:08:21,480 --> 00:08:26,680 Speaker 1: focus on strengthening social capital by using financial capital to 166 00:08:26,880 --> 00:08:30,440 Speaker 1: build up the global economy and to build up growth. Increasingly, 167 00:08:30,440 --> 00:08:33,000 Speaker 1: that build that's not what I say from many nations 168 00:08:33,320 --> 00:08:35,160 Speaker 1: around the world. In fact, what I do see is 169 00:08:35,440 --> 00:08:38,280 Speaker 1: an urge to limit the flow of capital in many ways, 170 00:08:38,320 --> 00:08:40,679 Speaker 1: depending on where that capital is coming from. Is that 171 00:08:40,760 --> 00:08:42,319 Speaker 1: of concern to you and you felt that into this 172 00:08:42,400 --> 00:08:44,880 Speaker 1: tried discussion. That scares the hell out of me, John, 173 00:08:45,000 --> 00:08:47,120 Speaker 1: because one of the things that I when I was 174 00:08:47,160 --> 00:08:49,080 Speaker 1: at the i m F, it was absolutely forbidden to 175 00:08:49,080 --> 00:08:52,360 Speaker 1: talk about global capital controls. Right, capital controls were an 176 00:08:52,360 --> 00:08:55,640 Speaker 1: anathema because you wanted global to freely flow around the world. 177 00:08:56,080 --> 00:08:57,920 Speaker 1: Now people at the i m F are getting promotions 178 00:08:57,960 --> 00:09:00,880 Speaker 1: for writing papers like the Approach Big Use of Capital 179 00:09:00,920 --> 00:09:04,120 Speaker 1: controls and small Open Economies when capital influence threatened to 180 00:09:04,160 --> 00:09:08,160 Speaker 1: overwhelm domestic financial infrastructure. Wow, what a change of I 181 00:09:08,320 --> 00:09:10,640 Speaker 1: m F philosophy in the last ten years. And I 182 00:09:10,640 --> 00:09:14,200 Speaker 1: think that reflects the growing sense of of of not 183 00:09:14,240 --> 00:09:17,760 Speaker 1: being able to build the appropriate infrastructure and capital markets 184 00:09:17,800 --> 00:09:21,400 Speaker 1: that are resilient enough to to strong flows in and out. 185 00:09:21,600 --> 00:09:23,959 Speaker 1: And I think that's the problem that that's not being 186 00:09:24,000 --> 00:09:26,680 Speaker 1: faced by my profession, the economics profession, and the financial 187 00:09:26,840 --> 00:09:31,360 Speaker 1: uh market participants out there. Flows into the United States, 188 00:09:32,440 --> 00:09:34,200 Speaker 1: the flows from the rest of the world is is 189 00:09:34,280 --> 00:09:37,080 Speaker 1: essentially safe, safe haven flows. I think one of the 190 00:09:37,080 --> 00:09:39,080 Speaker 1: things that people are afraid of is the fact that 191 00:09:39,880 --> 00:09:42,320 Speaker 1: take China for example, every rich person I know in 192 00:09:42,400 --> 00:09:44,720 Speaker 1: China wants a backdoor out. They want to put their 193 00:09:44,800 --> 00:09:47,000 Speaker 1: kids in Australia for education, they want to put their 194 00:09:47,080 --> 00:09:49,880 Speaker 1: kids in the UK, in the US, And I think 195 00:09:49,880 --> 00:09:52,480 Speaker 1: this need for a back door shows you that the 196 00:09:53,280 --> 00:09:55,840 Speaker 1: world is really very unstable. And where are they going 197 00:09:55,880 --> 00:09:57,800 Speaker 1: They come into the US, and I think the US 198 00:09:57,920 --> 00:10:00,760 Speaker 1: represents a lot of social and there are a lot 199 00:10:00,800 --> 00:10:02,880 Speaker 1: of problems that you just talked about with with Gideon 200 00:10:03,240 --> 00:10:05,280 Speaker 1: um But but one of the things that we have 201 00:10:05,400 --> 00:10:08,679 Speaker 1: to keep in mind is that we are very dynamic economy. 202 00:10:08,720 --> 00:10:12,640 Speaker 1: And even even with that dynamism, the social problems become 203 00:10:12,840 --> 00:10:15,360 Speaker 1: lessened when we are able to grow fast. And I 204 00:10:15,360 --> 00:10:17,200 Speaker 1: think one of the things that has hurt us since 205 00:10:17,240 --> 00:10:20,360 Speaker 1: two thousand and eight is this very very sluggish recovery 206 00:10:20,400 --> 00:10:23,559 Speaker 1: that's been taking place. Right now, we have some possibility 207 00:10:23,600 --> 00:10:27,200 Speaker 1: of having sustained growth. But as a practicing economist, I mean, 208 00:10:27,200 --> 00:10:29,560 Speaker 1: I know you're doing bigger, broader things with milk and 209 00:10:29,559 --> 00:10:33,000 Speaker 1: and as a practicing economist, what's your terminal run rate 210 00:10:33,720 --> 00:10:36,120 Speaker 1: of of us g d P. I mean some of 211 00:10:36,160 --> 00:10:40,480 Speaker 1: these shops, Bill Lee have really grim statistics. John Farrell, 212 00:10:40,640 --> 00:10:43,760 Speaker 1: there's a couple under two percent, Right, it's a terminal 213 00:10:43,840 --> 00:10:48,839 Speaker 1: run rate. What's Billy's terminal run rate? Well, well, I 214 00:10:48,840 --> 00:10:51,160 Speaker 1: I keep my my my my union card as a 215 00:10:51,200 --> 00:10:55,040 Speaker 1: PhD economist by saying, well, ye know, the natural growth 216 00:10:55,320 --> 00:10:58,000 Speaker 1: is limited by population and productivity growth, and and and 217 00:10:58,040 --> 00:10:59,880 Speaker 1: the where where I have a bit of more opt 218 00:11:00,080 --> 00:11:01,640 Speaker 1: isum than a lot of the shops around that have 219 00:11:01,760 --> 00:11:05,000 Speaker 1: the one handle on US growth is the possibility that 220 00:11:05,520 --> 00:11:09,920 Speaker 1: US productivity will start to strengthen with appropriate use of 221 00:11:09,960 --> 00:11:14,640 Speaker 1: capital invested in the right right uh assets. And I 222 00:11:14,679 --> 00:11:16,880 Speaker 1: think the things that we have been having trouble with 223 00:11:17,040 --> 00:11:22,160 Speaker 1: is that dead assets encourage entrepreneurs to stay with continuing 224 00:11:22,679 --> 00:11:25,920 Speaker 1: uh existing technologies, because what does the deadholder want their 225 00:11:25,920 --> 00:11:29,880 Speaker 1: money back? But equity capital represents the possibility of of 226 00:11:29,880 --> 00:11:32,800 Speaker 1: of shooting for the moon and and and and swinging 227 00:11:32,840 --> 00:11:36,839 Speaker 1: for those technologies that will raise productivity, raise proctivity growth. 228 00:11:36,840 --> 00:11:40,439 Speaker 1: And I think as financing starts to resort more to equity, 229 00:11:40,559 --> 00:11:42,679 Speaker 1: especially through private equity, Yeah, I think we're going to 230 00:11:42,720 --> 00:11:44,200 Speaker 1: see more of that bill just to taste some of 231 00:11:44,200 --> 00:11:47,160 Speaker 1: this out. Essentially, the equation you offered was the recipe 232 00:11:47,240 --> 00:11:51,400 Speaker 1: for potential growth in America? Where do you see potential GDP? 233 00:11:51,840 --> 00:11:53,360 Speaker 1: And I should add to this, I think the thing 234 00:11:53,400 --> 00:11:55,800 Speaker 1: that markets and market participants worry about is just the 235 00:11:55,880 --> 00:11:58,920 Speaker 1: rate of change from above potential while above potential three 236 00:11:59,000 --> 00:12:02,080 Speaker 1: four percent back down to two how quickly we get 237 00:12:02,120 --> 00:12:06,160 Speaker 1: that and whether we overshoot to the down side as well. Yeah, 238 00:12:06,280 --> 00:12:09,080 Speaker 1: the possibility of soft landing has escaped the FED for 239 00:12:09,160 --> 00:12:11,200 Speaker 1: for many decades, and I have to be guilty of 240 00:12:11,200 --> 00:12:13,439 Speaker 1: that as myself. Um, but but I think one of 241 00:12:13,480 --> 00:12:15,319 Speaker 1: the this is the best chance we have of getting 242 00:12:15,320 --> 00:12:17,720 Speaker 1: a soft landing because we don't have any of the 243 00:12:17,760 --> 00:12:21,360 Speaker 1: imbalances that normally cause the FED to to really spike 244 00:12:21,440 --> 00:12:24,160 Speaker 1: interest rates because inflation is getting running out of hand. Uh. 245 00:12:24,240 --> 00:12:28,960 Speaker 1: Structural um. Structural forces that are keeping disinflation in the 246 00:12:29,000 --> 00:12:31,560 Speaker 1: front of every form C member is one thing that 247 00:12:31,640 --> 00:12:34,440 Speaker 1: is I think keeping the FED from resorting to the 248 00:12:34,520 --> 00:12:37,880 Speaker 1: kind of stop good policies that have killed every past recovery. 249 00:12:38,240 --> 00:12:41,440 Speaker 1: Are those structural forces simply technology? I mean you mentioned 250 00:12:41,440 --> 00:12:45,000 Speaker 1: earlier ability the effective Amazon and pricing is they know 251 00:12:45,160 --> 00:12:50,480 Speaker 1: they essentially take retail to a perfectly competitive microeconomics. But 252 00:12:50,600 --> 00:12:54,680 Speaker 1: the bottom line is technology is the great unmentionable here 253 00:12:54,880 --> 00:12:57,040 Speaker 1: Should the I m F, should World Bank? Should the 254 00:12:57,040 --> 00:13:00,640 Speaker 1: others be doing more in the study of these profound 255 00:13:00,679 --> 00:13:03,800 Speaker 1: technological effects. I think the I m F and and 256 00:13:03,840 --> 00:13:06,640 Speaker 1: World Bank aconomis even fed economists um should get some 257 00:13:06,720 --> 00:13:10,920 Speaker 1: dosage of private sector experience. And I have to say 258 00:13:10,600 --> 00:13:12,720 Speaker 1: I have been blessed by my years at the City 259 00:13:12,760 --> 00:13:16,640 Speaker 1: because I have seen how the markets misappropriate capital. And 260 00:13:16,679 --> 00:13:18,880 Speaker 1: I think one of the things that that that that 261 00:13:19,320 --> 00:13:22,319 Speaker 1: productivity models go for is what is the long trend 262 00:13:22,360 --> 00:13:24,640 Speaker 1: and how is the long trend changing? And my god, 263 00:13:24,679 --> 00:13:26,840 Speaker 1: the last the next guy who used an HP filters 264 00:13:26,920 --> 00:13:29,079 Speaker 1: estimate a potential GDP, I'm going to bash them in 265 00:13:29,120 --> 00:13:33,240 Speaker 1: the head because that's completely ignoring how capital is being used. 266 00:13:33,360 --> 00:13:36,280 Speaker 1: But I would love to say that you just bashing 267 00:13:36,320 --> 00:13:40,400 Speaker 1: people in the hands. We can in the studio, and 268 00:13:40,440 --> 00:13:42,840 Speaker 1: every time an economists says something he doesn't like, you 269 00:13:42,840 --> 00:13:46,120 Speaker 1: could come up on the other hand him in the face. Billy, 270 00:13:46,280 --> 00:13:48,920 Speaker 1: thank you so much for the Milken Institute for getting 271 00:13:49,000 --> 00:14:04,839 Speaker 1: us started. We are thrilled to bringing with his kindness 272 00:14:04,880 --> 00:14:08,880 Speaker 1: every new issue of foreign affairs magazine. Get the physical copy, 273 00:14:09,600 --> 00:14:12,720 Speaker 1: reasonable subscription and it is just filled it Inside this 274 00:14:12,800 --> 00:14:17,480 Speaker 1: month is a twisted view on the global new nationalism, 275 00:14:17,520 --> 00:14:21,000 Speaker 1: but with a real American angle. Julapor leads it off 276 00:14:21,040 --> 00:14:24,440 Speaker 1: with a controversial walk through our nationalist to Kischen Stacy 277 00:14:24,520 --> 00:14:27,160 Speaker 1: Abrahams is in there in many other worries A well, 278 00:14:27,200 --> 00:14:30,160 Speaker 1: I thought Michael mandel O Gideon on on Europe was 279 00:14:30,240 --> 00:14:34,160 Speaker 1: really quite good. I mean, we talk about nationalism in Europe. 280 00:14:34,200 --> 00:14:38,640 Speaker 1: It's an extraordinary original nationalism, isn't it. It is, you know, 281 00:14:38,680 --> 00:14:40,560 Speaker 1: one of the greatest questions we have right now, and 282 00:14:40,600 --> 00:14:42,080 Speaker 1: this goes back to what you were talking about with 283 00:14:42,280 --> 00:14:45,400 Speaker 1: Billy in the last segment, is how much the social 284 00:14:45,400 --> 00:14:47,960 Speaker 1: concerns are related to economic concerns, not just in question 285 00:14:48,000 --> 00:14:50,400 Speaker 1: of growth, but also distribution. And so in Europe, where 286 00:14:50,440 --> 00:14:54,720 Speaker 1: you've had uh not much progress in a lot of places, 287 00:14:54,800 --> 00:14:59,320 Speaker 1: you see social divisions and social groups uh coming up 288 00:14:59,320 --> 00:15:01,960 Speaker 1: and trying to get our own and pulling their own 289 00:15:02,000 --> 00:15:04,560 Speaker 1: back from the larger community of the EU because they 290 00:15:04,600 --> 00:15:07,040 Speaker 1: don't feel they've benefited from it. And that's for the 291 00:15:07,080 --> 00:15:09,320 Speaker 1: question is not just growth but also the distribution of 292 00:15:09,320 --> 00:15:12,240 Speaker 1: growth and getting people to feel like they profit getting 293 00:15:12,280 --> 00:15:14,800 Speaker 1: all members of the community to feel like they're part 294 00:15:14,800 --> 00:15:16,960 Speaker 1: of a national economy. And John max Foot, writing in 295 00:15:17,000 --> 00:15:19,800 Speaker 1: the Washington Post, he's got the all in tex average 296 00:15:19,800 --> 00:15:25,479 Speaker 1: take in Sweden of dollars. In the US, it's fifteen dollars. 297 00:15:25,560 --> 00:15:28,120 Speaker 1: To Gideon's point, though, is this word feeling it's getting 298 00:15:28,160 --> 00:15:32,280 Speaker 1: you to feel like you are participates. Well, now, I 299 00:15:32,280 --> 00:15:35,480 Speaker 1: think it's important because you know, undoubtly the data tells 300 00:15:35,520 --> 00:15:37,960 Speaker 1: you that over the last ten years, the world's richer, 301 00:15:38,120 --> 00:15:41,800 Speaker 1: there is greater prosperity poverty has been Solo Martin is 302 00:15:41,840 --> 00:15:44,760 Speaker 1: the best on that he would strongly endorse. And Gideon, 303 00:15:44,920 --> 00:15:47,800 Speaker 1: we are obsessed and perhaps quite rightly, between the distribution 304 00:15:47,800 --> 00:15:50,040 Speaker 1: of wealth as you put it. Can we make an 305 00:15:50,040 --> 00:15:53,120 Speaker 1: effective argument that says wealth in equality is the price 306 00:15:53,160 --> 00:15:56,840 Speaker 1: we pay for greater global prosperity. I think that that 307 00:15:57,000 --> 00:16:00,280 Speaker 1: is the basic bargain that capitalism makes right, the equal 308 00:16:00,280 --> 00:16:03,400 Speaker 1: distribution of riches rather than the equal distribution of poverty 309 00:16:03,400 --> 00:16:05,440 Speaker 1: as Church will put it. But that doesn't mean that 310 00:16:05,480 --> 00:16:08,240 Speaker 1: the policies that we have at the national level and 311 00:16:08,320 --> 00:16:11,400 Speaker 1: other levels don't affect just how much of the share 312 00:16:11,440 --> 00:16:13,400 Speaker 1: goes to the rich and what people like picketing everybody 313 00:16:13,440 --> 00:16:16,000 Speaker 1: else has basically shown is that over the last couple 314 00:16:16,000 --> 00:16:19,360 Speaker 1: of generations, as the global economy has done well, as 315 00:16:19,560 --> 00:16:22,720 Speaker 1: poor people in the developing world have done extremely well, 316 00:16:22,840 --> 00:16:25,880 Speaker 1: as rich people have done well, middle and working classes 317 00:16:25,960 --> 00:16:28,760 Speaker 1: in the advanced industrial world have not. They have not 318 00:16:28,880 --> 00:16:31,680 Speaker 1: tended to see many of the benefits from growth even 319 00:16:31,680 --> 00:16:34,480 Speaker 1: in their countries, and so they have a legitimate right 320 00:16:34,520 --> 00:16:37,160 Speaker 1: to say, wait a second, what about us? And the 321 00:16:37,240 --> 00:16:39,720 Speaker 1: question has to be, how do you get the benefits 322 00:16:39,720 --> 00:16:42,240 Speaker 1: that accrued to the economy as a whole to be 323 00:16:42,320 --> 00:16:45,040 Speaker 1: delivered to the population as a whole. Let's talk about 324 00:16:45,040 --> 00:16:47,280 Speaker 1: the risks. I remember one of the final addresses from 325 00:16:47,440 --> 00:16:50,320 Speaker 1: Margaret Thatcher in Parliament, and essentially she made one of 326 00:16:50,600 --> 00:16:53,440 Speaker 1: a very effective argument that there were elements of the left, 327 00:16:53,480 --> 00:16:55,920 Speaker 1: the far left, that would be happier if the gap 328 00:16:56,000 --> 00:16:59,560 Speaker 1: was smaller and everyone was poorer. So the gap between 329 00:16:59,560 --> 00:17:02,080 Speaker 1: the rich and the pole was smaller, but ultimately if 330 00:17:02,080 --> 00:17:04,160 Speaker 1: everyone was poor, there would be elements of the left 331 00:17:04,200 --> 00:17:06,280 Speaker 1: that would still be happy with that outcome. How do 332 00:17:06,359 --> 00:17:09,720 Speaker 1: we avoid the pendulum swinging aggressively to the left to 333 00:17:09,800 --> 00:17:12,160 Speaker 1: bring the wealth in a quality gap all the way 334 00:17:12,160 --> 00:17:16,440 Speaker 1: in without making a country poorer. Well, I would suggest 335 00:17:16,480 --> 00:17:20,720 Speaker 1: that the easiest way to take the wind out of 336 00:17:20,720 --> 00:17:24,320 Speaker 1: the sales of the socialists would be for the capitalists 337 00:17:24,320 --> 00:17:27,840 Speaker 1: to pay a little bit more concerned to distributional effects 338 00:17:27,920 --> 00:17:29,880 Speaker 1: and to actually have you can put it this way, 339 00:17:29,960 --> 00:17:36,320 Speaker 1: social democracy is the price of avoiding socialism. In your 340 00:17:36,359 --> 00:17:40,639 Speaker 1: new issue, do you address the new socialism that everyone's 341 00:17:40,800 --> 00:17:44,280 Speaker 1: ranting and raving about now? We address aspects about it. So, 342 00:17:44,320 --> 00:17:47,480 Speaker 1: for example, one of the main art main arguments used 343 00:17:47,800 --> 00:17:51,560 Speaker 1: against greater social spending is that you can't have any 344 00:17:51,640 --> 00:17:54,600 Speaker 1: increased deficit or debt. And there's an interesting piece in 345 00:17:56,080 --> 00:17:59,480 Speaker 1: Summers Larry Ferman and sorry Larry Summers and Jason Furman 346 00:17:59,760 --> 00:18:03,520 Speaker 1: argue sing that you know, deficits are not so huge. 347 00:18:03,520 --> 00:18:06,000 Speaker 1: What really matters is are they going up even faster 348 00:18:06,080 --> 00:18:08,399 Speaker 1: than you can afford to deal with them? And that 349 00:18:08,480 --> 00:18:11,399 Speaker 1: you know, essentially keeping we don't need to reduce debt 350 00:18:11,480 --> 00:18:13,960 Speaker 1: dramatically at this particular time. We need to keep things 351 00:18:14,000 --> 00:18:16,840 Speaker 1: in control, they argue. And so it's not just a 352 00:18:16,920 --> 00:18:19,639 Speaker 1: question of how do you do this? But what are 353 00:18:19,680 --> 00:18:22,240 Speaker 1: the downfalls? What are the real pitfalls? Like Jonathan was 354 00:18:22,240 --> 00:18:23,639 Speaker 1: talking about, what are the dangers you have to be 355 00:18:23,720 --> 00:18:26,159 Speaker 1: really aware of. And yet taking too much money and 356 00:18:26,240 --> 00:18:29,600 Speaker 1: spending too much and constricting the economy too much would 357 00:18:29,640 --> 00:18:33,359 Speaker 1: be a problem. But if your publics reject the entire 358 00:18:33,440 --> 00:18:36,280 Speaker 1: framework of less a fair capitalism on which your economy 359 00:18:36,320 --> 00:18:40,520 Speaker 1: is based, the results will be I see a risk 360 00:18:40,640 --> 00:18:44,560 Speaker 1: that silly leftism will take advantage of the opportunity created 361 00:18:44,560 --> 00:18:48,560 Speaker 1: by silly right ism and that sensible policy. I feel 362 00:18:48,600 --> 00:18:54,960 Speaker 1: myself stealing phrases as we go leftism. Capitalists can't reform themselves. 363 00:18:54,960 --> 00:18:57,320 Speaker 1: Socialists will get the political power to do what they want. 364 00:18:57,800 --> 00:18:59,919 Speaker 1: Do you believe that can compet in a country like America? 365 00:19:00,080 --> 00:19:02,520 Speaker 1: I think you see it happening right now. When centrist 366 00:19:02,560 --> 00:19:06,280 Speaker 1: policies on the economy don't get a good hearing, uh 367 00:19:06,320 --> 00:19:09,000 Speaker 1: and and and other. You know, rich people's policies just 368 00:19:09,040 --> 00:19:11,320 Speaker 1: get run the way people wanted. Then you end up 369 00:19:11,320 --> 00:19:15,320 Speaker 1: getting popular pushback in a way that's often economically. When 370 00:19:15,359 --> 00:19:17,399 Speaker 1: I say working, what I mean what's effective with the 371 00:19:17,400 --> 00:19:19,919 Speaker 1: electra Because of the midterms, the Democrats didn't take this 372 00:19:20,040 --> 00:19:22,840 Speaker 1: radical left wing approach to the mid terms, and their approach, 373 00:19:22,880 --> 00:19:25,879 Speaker 1: the centrist approach, was quite effective in the House. You know, 374 00:19:26,200 --> 00:19:29,320 Speaker 1: it's interesting to see what exactly the Democratic Party's agenda 375 00:19:29,359 --> 00:19:32,320 Speaker 1: will be, how radical they actually are are We're giving 376 00:19:32,359 --> 00:19:34,680 Speaker 1: a few a lot of attention. We're letting a couple 377 00:19:34,680 --> 00:19:37,320 Speaker 1: of names, We're letting a couple of names completely, and 378 00:19:37,359 --> 00:19:39,720 Speaker 1: their back ventures that are not you know, Nancy Pelosi 379 00:19:39,760 --> 00:19:41,679 Speaker 1: and Chuck Schumer don't seem to me like they're going 380 00:19:41,720 --> 00:19:45,440 Speaker 1: to be leading a bunch of guillotine uh crowds too. 381 00:19:45,720 --> 00:19:48,240 Speaker 1: We just saw this on the Pelas and who's really 382 00:19:48,280 --> 00:19:50,600 Speaker 1: matter in the last twenty four hours. Do you have 383 00:19:50,680 --> 00:19:54,080 Speaker 1: a confidence that we all have a political process that 384 00:19:54,280 --> 00:19:58,240 Speaker 1: melds to the middle as we go through the primary season, 385 00:19:58,320 --> 00:20:03,720 Speaker 1: convention Hope, yes, hope, Okay, Hopeing audacity with Gideon Rose. 386 00:20:03,800 --> 00:20:06,960 Speaker 1: I can't say enough about the new nationalism the new 387 00:20:07,000 --> 00:20:11,720 Speaker 1: issue of Foreign Affairs magazine. A number of articles sided there. 388 00:20:11,760 --> 00:20:14,680 Speaker 1: One I'd mentioned. We didn't even get to Russhire Sharma 389 00:20:14,880 --> 00:20:19,520 Speaker 1: definitive on emerging markets, writing with great passion about India 390 00:20:19,640 --> 00:20:22,399 Speaker 1: as well. That'll be the first article I'll read in 391 00:20:22,440 --> 00:20:39,760 Speaker 1: this new issue. This is a joy for Paul Sweene. 392 00:20:39,840 --> 00:20:42,000 Speaker 1: You and and I we are gourmands of a certain level, 393 00:20:42,600 --> 00:20:44,800 Speaker 1: and we know that if you were the Austin Goulsby 394 00:20:44,840 --> 00:20:46,720 Speaker 1: of the Boost School, of the former chairman of the 395 00:20:46,720 --> 00:20:51,560 Speaker 1: President's Council of Economic Advisors, you can wander out to 396 00:20:51,760 --> 00:20:55,439 Speaker 1: north of the Permian Basin, south of the panandle tow 397 00:20:55,520 --> 00:21:00,480 Speaker 1: scenic Lubbock, Texas for ant Trina's lasagna, and it's a 398 00:21:00,480 --> 00:21:04,600 Speaker 1: wonderful lesson on what we'll do within our trade policy 399 00:21:04,640 --> 00:21:08,400 Speaker 1: of the United States of America. Austin, it's classic goalsby 400 00:21:08,480 --> 00:21:11,080 Speaker 1: one oh one. You're at the Boost School. You're screaming 401 00:21:11,119 --> 00:21:14,600 Speaker 1: in a bunch of over smart educators and you're saying, Hey, 402 00:21:14,640 --> 00:21:20,119 Speaker 1: it's about Aunt Trina's lasagna. Discuss. Yeah, Well, my my 403 00:21:20,240 --> 00:21:23,280 Speaker 1: Auntriina and my uncle Bob. They've moved to Abilene, where 404 00:21:23,280 --> 00:21:27,520 Speaker 1: my parents are. But at that time my aunt Traina's 405 00:21:27,640 --> 00:21:31,359 Speaker 1: lasagna or maybe it was pot roast stuffed down the 406 00:21:31,520 --> 00:21:37,800 Speaker 1: sink in their kitchen clogged the drain. My uncle goes 407 00:21:37,920 --> 00:21:43,000 Speaker 1: and gets a product since band called the bomb. It's 408 00:21:43,000 --> 00:21:48,159 Speaker 1: a combination of plunger and firearm, and he blows the 409 00:21:48,240 --> 00:21:51,840 Speaker 1: clog out of that drain. But of course they live 410 00:21:51,920 --> 00:21:56,520 Speaker 1: in a converted apartment, so he blows it not to 411 00:21:56,680 --> 00:22:00,560 Speaker 1: the sewer. But blows it into the neighbors during and 412 00:22:00,720 --> 00:22:05,639 Speaker 1: all over the fitchen of the neighbors. And so my 413 00:22:05,720 --> 00:22:10,159 Speaker 1: analogy was that that is what's wrong carriffs, because you 414 00:22:10,280 --> 00:22:12,679 Speaker 1: blow it out of the steel industry, but you just 415 00:22:12,800 --> 00:22:15,560 Speaker 1: blow it onto the auto industry or or something. Well, 416 00:22:15,600 --> 00:22:18,879 Speaker 1: bring this over seriously, Professor Goldsby to Booth School in 417 00:22:18,920 --> 00:22:23,720 Speaker 1: the University of Chicago. And when Jacob Winer, I mean, 418 00:22:23,800 --> 00:22:26,880 Speaker 1: with the bomb down the drain, are we heading towards 419 00:22:26,960 --> 00:22:32,080 Speaker 1: mercantilis M. Golsby style? Don't say Goolsby style, that's terrible. 420 00:22:32,400 --> 00:22:35,800 Speaker 1: If we are, it certainly feels many days like that's 421 00:22:35,840 --> 00:22:40,000 Speaker 1: what what the president has in mind, that that he 422 00:22:40,119 --> 00:22:44,959 Speaker 1: kind of wants to go back to some mercantilist enterprise 423 00:22:45,080 --> 00:22:49,119 Speaker 1: for the United States. And I wish somebody which would 424 00:22:49,560 --> 00:22:52,200 Speaker 1: explain to him the way the way mercantilism went away 425 00:22:52,280 --> 00:22:56,960 Speaker 1: is because merganialism doesn't work. Uh. And so I think 426 00:22:57,000 --> 00:22:59,159 Speaker 1: that's one of the bigger risks that we face, is 427 00:22:59,240 --> 00:23:03,879 Speaker 1: that that we could spiral into some trade war situation 428 00:23:03,960 --> 00:23:07,560 Speaker 1: with China and drive both of us into recession. Um, 429 00:23:07,560 --> 00:23:10,600 Speaker 1: but hopefully not Look, ah, you know, maybe they can 430 00:23:10,680 --> 00:23:14,159 Speaker 1: find some way like with NAFTA, light they did with 431 00:23:14,240 --> 00:23:18,040 Speaker 1: Europe that they they basically just backed away. They had 432 00:23:18,080 --> 00:23:20,199 Speaker 1: a lot of bluster, we're gonna beat you up, we're 433 00:23:20,200 --> 00:23:22,359 Speaker 1: gonna put it in terrorists, but at the end of 434 00:23:22,400 --> 00:23:25,440 Speaker 1: the day they just kind of backed away and moved on. 435 00:23:25,520 --> 00:23:29,240 Speaker 1: And so that's what I'm hoping happens. So, Professor gouldsby 436 00:23:29,320 --> 00:23:33,200 Speaker 1: the U. S. Trade delegation is in China this week. Um, 437 00:23:33,240 --> 00:23:38,679 Speaker 1: what do you think is a realistic negotiated agreement between 438 00:23:38,680 --> 00:23:44,680 Speaker 1: the two sides at this point? It's the reason that's 439 00:23:44,680 --> 00:23:47,639 Speaker 1: hard to say is I don't think that there's any 440 00:23:47,680 --> 00:23:53,720 Speaker 1: substantive agreement that that is that is material to the 441 00:23:54,200 --> 00:23:58,400 Speaker 1: to the economy or to our trade that that they 442 00:23:58,400 --> 00:24:04,919 Speaker 1: can negotiate. So the answer to that question is whatever 443 00:24:05,240 --> 00:24:09,360 Speaker 1: gets the President to stop threatening a trade war, and 444 00:24:09,480 --> 00:24:13,240 Speaker 1: if that means vague commitments on the part of China 445 00:24:13,320 --> 00:24:17,240 Speaker 1: that in the future they'll buy more stuff and you know, 446 00:24:17,240 --> 00:24:20,760 Speaker 1: to make some announcement of things that they largely already 447 00:24:20,760 --> 00:24:24,199 Speaker 1: agreed to, which is the style of the of the 448 00:24:24,280 --> 00:24:28,959 Speaker 1: quote unquote new NAFTA, and was certainly the style of 449 00:24:29,000 --> 00:24:35,560 Speaker 1: the quote unquote deals with Europe, where they agreed only 450 00:24:35,640 --> 00:24:39,679 Speaker 1: to keep negotiating with a certain goal in mind. I 451 00:24:39,720 --> 00:24:43,520 Speaker 1: think something like that would be realistic. I think any 452 00:24:44,040 --> 00:24:46,560 Speaker 1: let's let's say they went there and there was a 453 00:24:46,600 --> 00:24:49,159 Speaker 1: delightening struck and there was a meeting of minds and 454 00:24:49,200 --> 00:24:53,360 Speaker 1: they said, ah, we've got a new comprehensive trade agreement. 455 00:24:54,320 --> 00:24:57,080 Speaker 1: They would not be able to pass such an agreement 456 00:24:57,119 --> 00:25:02,560 Speaker 1: through Congress in the next two years. So in a way, 457 00:25:03,000 --> 00:25:07,880 Speaker 1: the the most expansive things, There's no way it's realistic. Who, 458 00:25:07,920 --> 00:25:10,920 Speaker 1: in your opinion, is is which side has more incentive 459 00:25:10,960 --> 00:25:12,879 Speaker 1: to get a deal done. We see, we know the 460 00:25:12,880 --> 00:25:15,119 Speaker 1: political ramifications on our side, but we also know the 461 00:25:15,119 --> 00:25:18,520 Speaker 1: economic issues affecting China. The growth is slowing, and one 462 00:25:18,520 --> 00:25:21,240 Speaker 1: can argue that they certainly need do not need a 463 00:25:21,240 --> 00:25:25,000 Speaker 1: trade war. So who was the most incentive? Well, you 464 00:25:25,000 --> 00:25:27,919 Speaker 1: don't like Like I always say, every day without a 465 00:25:27,960 --> 00:25:31,960 Speaker 1: trade war is a good day for America. Um, maybe 466 00:25:32,119 --> 00:25:37,200 Speaker 1: there they have more incentive, but but it is the 467 00:25:37,400 --> 00:25:41,159 Speaker 1: situation where we threatened to burn their house down, they 468 00:25:41,200 --> 00:25:44,600 Speaker 1: threatened to burn our house down. And you say, oh, 469 00:25:44,640 --> 00:25:47,800 Speaker 1: but our house is smaller than your house, So you 470 00:25:47,800 --> 00:25:52,040 Speaker 1: know you you have You're in a worse position than US. Yes, 471 00:25:52,800 --> 00:25:56,680 Speaker 1: maybe that's a relatively worse position, but both these houses 472 00:25:56,720 --> 00:26:00,560 Speaker 1: will be burnt down. So this I just think this 473 00:26:00,680 --> 00:26:07,120 Speaker 1: mercantilist mentality is the wrong approach and it doesn't take 474 00:26:07,160 --> 00:26:11,159 Speaker 1: into account the way business works in America or around 475 00:26:11,160 --> 00:26:15,440 Speaker 1: the world. So if you if you escalate the disputes 476 00:26:15,520 --> 00:26:19,240 Speaker 1: like this with China, there's a whole bunch of American 477 00:26:19,280 --> 00:26:22,840 Speaker 1: manufacturing companies that get a lot of their you know, 478 00:26:22,920 --> 00:26:26,920 Speaker 1: the power supply that goes into the machine that's being 479 00:26:26,920 --> 00:26:30,240 Speaker 1: made in the United States, the power supplies coming from China. 480 00:26:30,720 --> 00:26:34,520 Speaker 1: So if you go to start throwing tariffs in, you 481 00:26:34,560 --> 00:26:39,320 Speaker 1: will find exactly what happened with steel and aluminum, which 482 00:26:39,400 --> 00:26:43,200 Speaker 1: is a whole bunch of people in the United States say, wait, 483 00:26:43,359 --> 00:26:46,240 Speaker 1: you were doing this to help the US, but actually 484 00:26:46,600 --> 00:26:49,040 Speaker 1: we have to shut down production and lay people off 485 00:26:49,480 --> 00:26:52,920 Speaker 1: because those are our inputs. So I just people need 486 00:26:52,960 --> 00:26:56,119 Speaker 1: to just take one step back and think there's nothing 487 00:26:56,119 --> 00:26:59,959 Speaker 1: wrong with trying to get trying to change China's behavior. 488 00:27:00,040 --> 00:27:02,639 Speaker 1: You're in some way that you want them to. The 489 00:27:02,760 --> 00:27:06,280 Speaker 1: question is is getting jumping up and down, having a tantrum, 490 00:27:06,359 --> 00:27:08,639 Speaker 1: screaming and trying to shove their facing It is that 491 00:27:08,720 --> 00:27:12,320 Speaker 1: going to work, and I think that's that's much more 492 00:27:12,400 --> 00:27:16,400 Speaker 1: likely to do the opposite of work that China agreed 493 00:27:16,440 --> 00:27:21,639 Speaker 1: to publicly do some some vague promises, but then turn 494 00:27:21,720 --> 00:27:25,560 Speaker 1: around and mess with the United States using the channels 495 00:27:25,600 --> 00:27:28,640 Speaker 1: they have, but which might be helped North Korea, which 496 00:27:28,720 --> 00:27:32,760 Speaker 1: might be investigate Apple and stop people buying iPhones. You know, 497 00:27:32,760 --> 00:27:35,399 Speaker 1: there's a whole bunch of channels. But Austin on a 498 00:27:35,480 --> 00:27:38,960 Speaker 1: Matthew basis, I mean all of the equations of fancy 499 00:27:39,000 --> 00:27:43,000 Speaker 1: pants algebraic equations in Opsfeldt Rogoff, which I'm sure you 500 00:27:43,080 --> 00:27:45,879 Speaker 1: read cover to cover, yell or m I T. I 501 00:27:45,880 --> 00:27:50,119 Speaker 1: mean any graduate level textbook. There's lots of time functions 502 00:27:50,160 --> 00:27:55,400 Speaker 1: within the equations. May I respectfully suggest our time functions 503 00:27:55,640 --> 00:27:59,399 Speaker 1: and our presidential time function is a little bit different 504 00:27:59,440 --> 00:28:05,000 Speaker 1: than the long your time functions of China. Yeah, well 505 00:28:05,119 --> 00:28:09,480 Speaker 1: you look. Maybe I'm in the Great Economist. Bob Solo, 506 00:28:09,560 --> 00:28:15,439 Speaker 1: my my former teacher, said that at the heart every 507 00:28:15,480 --> 00:28:19,120 Speaker 1: explanation of growth goes from the equations that goes down 508 00:28:19,160 --> 00:28:23,280 Speaker 1: in a blaze of amateur sociology. And I'm whatever I 509 00:28:23,359 --> 00:28:27,479 Speaker 1: say about that statement of the what's the time function? 510 00:28:27,520 --> 00:28:31,800 Speaker 1: What's the time horizonees versus the US is going to 511 00:28:31,880 --> 00:28:35,560 Speaker 1: go down in a blaze of amateur sociology. But said 512 00:28:35,920 --> 00:28:42,560 Speaker 1: I agree. In my I'm not a super expert, but 513 00:28:42,600 --> 00:28:45,160 Speaker 1: I was involved in the in the S and E 514 00:28:45,240 --> 00:28:49,400 Speaker 1: D meetings with China and UH in the Obama administration, 515 00:28:49,760 --> 00:28:53,760 Speaker 1: we negotiated multiple things with China. They do have a 516 00:28:53,800 --> 00:28:59,520 Speaker 1: long view and my my experience is public humiliation of 517 00:28:59,560 --> 00:29:02,440 Speaker 1: the China needs to try to get them to late 518 00:29:03,120 --> 00:29:07,840 Speaker 1: UM is really quite well defeating. We are out of time, Austin. 519 00:29:07,880 --> 00:29:10,680 Speaker 1: We got to continue this conversation. This is absolutely brilliant 520 00:29:10,680 --> 00:29:13,160 Speaker 1: Austin Gouldsby. Of course, of Y L M. I T. 521 00:29:13,320 --> 00:29:16,160 Speaker 1: And of course it's Booth Schools Chicago right now to 522 00:29:16,200 --> 00:29:21,480 Speaker 1: small school UH Paul in Chicago's absolute best economists coming 523 00:29:21,480 --> 00:29:25,160 Speaker 1: out of sports teams are awesome as well. Austin Goolsby, 524 00:29:25,200 --> 00:29:27,960 Speaker 1: thank you so much. He's a former chairman of the 525 00:29:28,000 --> 00:29:32,320 Speaker 1: President's Council of Economic Advisers. Thanks for listening to the 526 00:29:32,320 --> 00:29:38,840 Speaker 1: Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, 527 00:29:39,200 --> 00:29:43,440 Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at 528 00:29:43,480 --> 00:29:47,680 Speaker 1: Tom Keane. Before the podcast. You can always catch us worldwide. 529 00:29:48,200 --> 00:30:00,880 Speaker 1: I'm Bloomberg Radio.