WEBVTT - Surveillance: Risks of Silly Leftism & Silly Rightism With Rose 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Lee. 0:00:13.960 --> 0:00:16.960 We bring you insight from the best in economics, finance, 0:00:17.040 --> 0:00:23.480 investment and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:34.680 Bloomberg dot Com, and of course on the Bloomberg. I 0:00:34.680 --> 0:00:37.120 want to show a chart now which folds into equities, 0:00:37.159 --> 0:00:40.360 folds into commodities, folds into bonds as well before we 0:00:40.440 --> 0:00:43.159 bring in our test team guests. This surprised me. This 0:00:43.280 --> 0:00:46.120 is US trade weighted real broad dollar. This is the 0:00:46.159 --> 0:00:49.680 broadest measurement of the dollar with strong dollar up one 0:00:49.720 --> 0:00:54.120 standard deviation over the fifty year chart. The plaza chord 0:00:54.160 --> 0:00:56.480 way over on the left side, so it is a 0:00:56.600 --> 0:00:59.040 strong dollar to say the least, which is a good 0:00:59.120 --> 0:01:01.360 entry point on equ it Ease with Edmund shing A 0:01:01.480 --> 0:01:03.440 B and P. Perry by the global head of Equity 0:01:03.440 --> 0:01:07.039 in Derivative Strategy in Maryland. Watson joins us today a 0:01:07.120 --> 0:01:11.400 black Rack, their head of Global Fundamental Fixed Income Strategy Maryland. 0:01:11.440 --> 0:01:15.880 Currency dynamics and fixed income really affect the coupon right now. 0:01:16.120 --> 0:01:19.240 To begin with Euro in this this London hour, what 0:01:19.360 --> 0:01:21.679 do you do on currency as you try to find 0:01:21.760 --> 0:01:26.360 coupon in Europe. Yeah, that's right. So if you're a 0:01:26.400 --> 0:01:29.840 European investor, you're a DOMS hold investor, then it's really 0:01:29.880 --> 0:01:32.399 important to be aware of the hedging costs. And I 0:01:32.400 --> 0:01:36.280 think if you're looking for coupons then we do see um, 0:01:36.640 --> 0:01:40.280 you know, potential of the opportunities in euro credit. We 0:01:40.319 --> 0:01:45.120 see opportunities also elsewhere in Asia and also in dollars 0:01:45.120 --> 0:01:47.640 nominated assets as well. But it's really important to be 0:01:47.680 --> 0:01:50.680 aware of the carrier get then also the hedging cost 0:01:50.720 --> 0:01:52.800 back because it's about three percent, which is a lot. 0:01:53.200 --> 0:01:55.240 So I think it's very very important to be very 0:01:55.280 --> 0:01:57.520 aware of when you're tryd of looking at that coupon, 0:01:57.680 --> 0:02:00.680 what in investor actually gets back half the aging cost? 0:02:00.800 --> 0:02:03.400 And maybe you don't have the urging cars and equities, 0:02:03.400 --> 0:02:06.680 but you certainly have the current currency translation as well. 0:02:06.960 --> 0:02:09.960 What a strong dour due to US smart nationals or 0:02:10.040 --> 0:02:13.600 is it too small a part to play? Well, you 0:02:13.639 --> 0:02:15.760 can't say it's too small time because if you look 0:02:15.760 --> 0:02:19.160 at the SMP five index, something like forty of earnings 0:02:19.160 --> 0:02:23.760 are from overseas, so clearly has it has an impact, um, 0:02:23.800 --> 0:02:26.120 maybe not as much an impact as it as currency 0:02:26.160 --> 0:02:28.760 does in Asia or in the US, but an impact nonetheless, 0:02:28.800 --> 0:02:31.639 of course, I think the real issue for equities is 0:02:31.680 --> 0:02:33.839 not going to be just the currency by itself. It's 0:02:33.840 --> 0:02:37.160 going to be much more where the currency goes. And 0:02:37.200 --> 0:02:39.040 I think it's going to be much more about really 0:02:39.080 --> 0:02:41.480 the debt mountain that the US has to deal with 0:02:41.840 --> 0:02:43.680 in the coming years, and what does that do to 0:02:43.720 --> 0:02:47.240 the currency. I think that's more of an issue in 0:02:47.320 --> 0:02:49.280 terms of stability going forward. What does that do to 0:02:49.320 --> 0:02:51.280 the currency? Well, I think it makes the currency get down. 0:02:51.440 --> 0:02:53.880 I think Toma's pointed out the fact that the dollar 0:02:53.919 --> 0:02:57.440 is way high. Okay, fine, and everyone's been very bullish 0:02:57.520 --> 0:03:00.720 the dollar. Well we're not. We're pretty barished the because 0:03:00.720 --> 0:03:04.440 we think eventually the debt mountain comes to bear, someone's 0:03:04.440 --> 0:03:06.639 going to buy this U S debt. Remember, they running 0:03:06.680 --> 0:03:09.440 massive budget deficits. I love the way everyone complains about 0:03:09.440 --> 0:03:12.320 Italy in the Italian budget deficit. The US got a 0:03:12.320 --> 0:03:14.519 massive budget deficit. It's a only going to get worse. 0:03:14.560 --> 0:03:16.800 Trump is not doing anything to help that. And they 0:03:16.840 --> 0:03:19.680 think that everyone's going to buy their debts to be fair. Yeah, 0:03:19.680 --> 0:03:21.320 but the thing is they still need people to buy 0:03:21.360 --> 0:03:23.800 their debt. Front scene. Someone has to buy it. Yeah, 0:03:23.880 --> 0:03:26.679 the treasury of sellers. Who is the buyer? Not the Russians, 0:03:26.919 --> 0:03:30.000 not the Chinese. Oh, good luck, the domestic US investor. 0:03:30.520 --> 0:03:33.160 Let's see, let's see if they absorb all of the debt. Okay, Well, 0:03:33.240 --> 0:03:34.920 where do you see dollar going from here? You know, 0:03:34.960 --> 0:03:37.800 so the medium term, we also see the dollar depreciating 0:03:37.920 --> 0:03:40.560 from here. Um as has been very strong at the moment, 0:03:40.920 --> 0:03:43.240 we did see a bit of a pause after the 0:03:43.360 --> 0:03:46.280 FED sickly. J. Powell was suggesting that they might be 0:03:46.280 --> 0:03:49.680 on pausing for an extended periods of time. Um And 0:03:49.720 --> 0:03:52.160 I think as we go forward, you know, the US 0:03:52.320 --> 0:03:54.640 is in the late cycle of the business cycle as well. 0:03:55.000 --> 0:03:56.800 So our view is also the over the medium term 0:03:56.800 --> 0:03:59.320 at least the dollar will also to depreciate. Okay, what 0:03:59.440 --> 0:04:02.880 happens if we have a trade route? Does it? Does 0:04:02.920 --> 0:04:05.320 it mean that actually the FED is back at hiking 0:04:06.160 --> 0:04:08.720 far too early to say, I think the Fed will 0:04:08.800 --> 0:04:10.080 leave it a few months. Look, they're not doing a 0:04:10.080 --> 0:04:13.440 big rush. Core inflation is not going up that quickly 0:04:13.480 --> 0:04:15.920 despite the rise and wage inflation. And they're also, of 0:04:16.000 --> 0:04:17.800 course in the US. Don't forget helped by the the 0:04:17.839 --> 0:04:21.080 oil price. The oil price has a lagged effect to inflation. 0:04:21.360 --> 0:04:25.040 It was coming down, remember in December, quite considerably, and 0:04:25.080 --> 0:04:26.840 the feed through their foot core inflation is going to 0:04:26.880 --> 0:04:28.919 be someone negative rather than positive, at least for the 0:04:28.920 --> 0:04:30.760 next few months. So they have a little window where 0:04:30.760 --> 0:04:33.280 they can sit and do not very much. In particular Maryland, 0:04:33.279 --> 0:04:36.960 where is black rock and the concept of lower for longer? 0:04:37.040 --> 0:04:39.920 We had Gary Shilling and yesterday arguably the best two 0:04:39.960 --> 0:04:44.200 decades call on lower interest rates, etcetera. But but where 0:04:44.279 --> 0:04:48.480 is black rocks formal statement and how low and how 0:04:48.560 --> 0:04:53.000 long we stay with this great regime? Yeah? So, um, 0:04:53.120 --> 0:04:55.839 I also think that they're going to stay lower for 0:04:55.880 --> 0:04:58.960 a lot longer. And you know, our core view at 0:04:58.960 --> 0:05:01.240 the moment is we'll have a pause at least for 0:05:01.279 --> 0:05:04.840 the first half of this year. Um. As Edmund said, um, 0:05:04.880 --> 0:05:06.960 you know, I agree with this statement that the FEND 0:05:07.000 --> 0:05:08.679 is going to be very patient. They're in no rush 0:05:08.760 --> 0:05:11.479 to do anything. And then when you see the development 0:05:11.600 --> 0:05:15.360 of inflation, when you see the development of global factors, 0:05:15.400 --> 0:05:17.760 global trade, when you see the development of the U 0:05:17.760 --> 0:05:20.200 S economy and activity, then I think potentially in the 0:05:20.240 --> 0:05:23.480 second half of the year you could see a further 0:05:23.560 --> 0:05:26.120 hike or you could see a continued pause. But I 0:05:26.200 --> 0:05:28.479 certainly think in the US and if you look globally 0:05:28.520 --> 0:05:30.839 as well, if you look at the ECB, um, you 0:05:30.880 --> 0:05:33.800 know they're in nowhere to do anything either. Um. You know, 0:05:33.920 --> 0:05:36.120 the Bank of England wants to show up the economy 0:05:36.160 --> 0:05:38.080 and we think that you know, on the margin, at 0:05:38.080 --> 0:05:40.799 some point they will ride rates. But I think broadly, 0:05:40.839 --> 0:05:42.480 when you look at the global economy, when you look 0:05:42.480 --> 0:05:46.240 at development markets, we are in a completely different regime 0:05:46.279 --> 0:05:47.760 to the past, and we are going to see rates 0:05:47.839 --> 0:05:50.680 much lower for longer, and the end point is also 0:05:50.720 --> 0:05:52.800 going to be much much lower. To James Bullard and 0:05:52.880 --> 0:05:55.480 his phrase of regime change, it is a most interesting 0:05:55.520 --> 0:05:58.640 time administing on the markets. B and B very Maryland 0:05:58.640 --> 0:06:16.120 wantson and fixed income as well with black Crocket join. 0:06:16.200 --> 0:06:17.960 I guess a man whose career has taken him from 0:06:17.960 --> 0:06:19.719 the Fed to the I m F, from City Group 0:06:19.760 --> 0:06:22.880 and now with the Milken Institute the chief economist. It 0:06:23.000 --> 0:06:26.160 is Billy and he joins us from Washington. Good morning 0:06:26.200 --> 0:06:29.120 to your bill. Want to so help me out as 0:06:29.120 --> 0:06:32.839 always to draw a distinction between noise and news substance 0:06:33.240 --> 0:06:36.120 and happy talk. What do we have this morning? The 0:06:36.160 --> 0:06:38.479 most substantive thing you just mentioned is the fact that 0:06:38.480 --> 0:06:41.080 the dollar has been gaining stronger and stronger over the 0:06:41.160 --> 0:06:44.160 last week or so. And think about it. Interest rate 0:06:44.160 --> 0:06:46.480 parody told us that when the Fed talers, we're supposed 0:06:46.520 --> 0:06:48.960 to pause, the dollar is supposed to weaken. Instead, what 0:06:49.040 --> 0:06:52.000 has happened. It tells us that interest rate parody models 0:06:52.040 --> 0:06:54.520 don't work, and I think the traders around the world 0:06:54.560 --> 0:06:57.240 are learning that the hard wave. One thing do you 0:06:57.279 --> 0:06:59.679 have to keep in mind is that the US continues 0:06:59.760 --> 0:07:02.719 to be a magnificent global capital and everyone in the 0:07:02.760 --> 0:07:04.880 world wants to come here, despite the fact that we 0:07:04.920 --> 0:07:08.040 have rising deficits, rising death to GDP ratios. And as 0:07:08.080 --> 0:07:10.480 was saying to Tom earlier, one of the things that 0:07:10.520 --> 0:07:13.200 we have to be cautious about is keep things in perspective. 0:07:13.520 --> 0:07:15.720 All this worrying about the US is like talking worrying 0:07:15.720 --> 0:07:17.880 about pimples on a teenager's face when the rest of 0:07:17.880 --> 0:07:20.160 the world has cancer and and I think we have 0:07:20.240 --> 0:07:24.920 to remember it breaks it and even the problems within China, 0:07:24.960 --> 0:07:27.480 all the dead problems they're having, is demonstrating to us 0:07:27.520 --> 0:07:29.520 that the leverage is being put to use in the 0:07:29.560 --> 0:07:31.240 US much better than it is being put to use 0:07:31.280 --> 0:07:32.640 in the rest of the world. There is a belief 0:07:32.680 --> 0:07:34.480 Bill that if we get some kind of trade daila 0:07:34.520 --> 0:07:37.280 will go a long long way to curing the world's ills. 0:07:37.320 --> 0:07:39.760 It will be some kind of panacea. I take it 0:07:39.760 --> 0:07:42.360 from your Bill, and you don't share that belief. Well, actually, 0:07:42.600 --> 0:07:45.320 um strangely enough, I take that view, but on a 0:07:45.360 --> 0:07:49.360 on a much longer term basis. We've had social problems 0:07:49.400 --> 0:07:52.480 and political problems tearing apart Europe and Middle East and 0:07:52.640 --> 0:07:55.680 Asia for centuries. And I think one of the things 0:07:55.720 --> 0:07:58.760 that the milk and formula tells us is prosperity comes 0:07:58.800 --> 0:08:02.560 with the use of capital in a smart way to 0:08:02.680 --> 0:08:05.280 bolster social capital. In other words, when we get the 0:08:05.280 --> 0:08:08.480 global economy and regional economies to grow faster, a lot 0:08:08.520 --> 0:08:10.679 of the social problems start to go away at least 0:08:10.800 --> 0:08:13.800 become less important. And I think that's the formula that 0:08:13.800 --> 0:08:16.760 that is being used around the world now by by 0:08:16.880 --> 0:08:19.160 us when we have these regional conferences we're doing the 0:08:19.160 --> 0:08:21.360 Middle East right now, we're trying to get everyone to 0:08:21.480 --> 0:08:26.680 focus on strengthening social capital by using financial capital to 0:08:26.880 --> 0:08:30.440 build up the global economy and to build up growth. Increasingly, 0:08:30.440 --> 0:08:33.000 that build that's not what I say from many nations 0:08:33.320 --> 0:08:35.160 around the world. In fact, what I do see is 0:08:35.440 --> 0:08:38.280 an urge to limit the flow of capital in many ways, 0:08:38.320 --> 0:08:40.679 depending on where that capital is coming from. Is that 0:08:40.760 --> 0:08:42.319 of concern to you and you felt that into this 0:08:42.400 --> 0:08:44.880 tried discussion. That scares the hell out of me, John, 0:08:45.000 --> 0:08:47.120 because one of the things that I when I was 0:08:47.160 --> 0:08:49.080 at the i m F, it was absolutely forbidden to 0:08:49.080 --> 0:08:52.360 talk about global capital controls. Right, capital controls were an 0:08:52.360 --> 0:08:55.640 anathema because you wanted global to freely flow around the world. 0:08:56.080 --> 0:08:57.920 Now people at the i m F are getting promotions 0:08:57.960 --> 0:09:00.880 for writing papers like the Approach Big Use of Capital 0:09:00.920 --> 0:09:04.120 controls and small Open Economies when capital influence threatened to 0:09:04.160 --> 0:09:08.160 overwhelm domestic financial infrastructure. Wow, what a change of I 0:09:08.320 --> 0:09:10.640 m F philosophy in the last ten years. And I 0:09:10.640 --> 0:09:14.200 think that reflects the growing sense of of of not 0:09:14.240 --> 0:09:17.760 being able to build the appropriate infrastructure and capital markets 0:09:17.800 --> 0:09:21.400 that are resilient enough to to strong flows in and out. 0:09:21.600 --> 0:09:23.959 And I think that's the problem that that's not being 0:09:24.000 --> 0:09:26.680 faced by my profession, the economics profession, and the financial 0:09:26.840 --> 0:09:31.360 uh market participants out there. Flows into the United States, 0:09:32.440 --> 0:09:34.200 the flows from the rest of the world is is 0:09:34.280 --> 0:09:37.080 essentially safe, safe haven flows. I think one of the 0:09:37.080 --> 0:09:39.080 things that people are afraid of is the fact that 0:09:39.880 --> 0:09:42.320 take China for example, every rich person I know in 0:09:42.400 --> 0:09:44.720 China wants a backdoor out. They want to put their 0:09:44.800 --> 0:09:47.000 kids in Australia for education, they want to put their 0:09:47.080 --> 0:09:49.880 kids in the UK, in the US, And I think 0:09:49.880 --> 0:09:52.480 this need for a back door shows you that the 0:09:53.280 --> 0:09:55.840 world is really very unstable. And where are they going 0:09:55.880 --> 0:09:57.800 They come into the US, and I think the US 0:09:57.920 --> 0:10:00.760 represents a lot of social and there are a lot 0:10:00.800 --> 0:10:02.880 of problems that you just talked about with with Gideon 0:10:03.240 --> 0:10:05.280 um But but one of the things that we have 0:10:05.400 --> 0:10:08.679 to keep in mind is that we are very dynamic economy. 0:10:08.720 --> 0:10:12.640 And even even with that dynamism, the social problems become 0:10:12.840 --> 0:10:15.360 lessened when we are able to grow fast. And I 0:10:15.360 --> 0:10:17.200 think one of the things that has hurt us since 0:10:17.240 --> 0:10:20.360 two thousand and eight is this very very sluggish recovery 0:10:20.400 --> 0:10:23.559 that's been taking place. Right now, we have some possibility 0:10:23.600 --> 0:10:27.200 of having sustained growth. But as a practicing economist, I mean, 0:10:27.200 --> 0:10:29.560 I know you're doing bigger, broader things with milk and 0:10:29.559 --> 0:10:33.000 and as a practicing economist, what's your terminal run rate 0:10:33.720 --> 0:10:36.120 of of us g d P. I mean some of 0:10:36.160 --> 0:10:40.480 these shops, Bill Lee have really grim statistics. John Farrell, 0:10:40.640 --> 0:10:43.760 there's a couple under two percent, Right, it's a terminal 0:10:43.840 --> 0:10:48.839 run rate. What's Billy's terminal run rate? Well, well, I 0:10:48.840 --> 0:10:51.160 I keep my my my my union card as a 0:10:51.200 --> 0:10:55.040 PhD economist by saying, well, ye know, the natural growth 0:10:55.320 --> 0:10:58.000 is limited by population and productivity growth, and and and 0:10:58.040 --> 0:10:59.880 the where where I have a bit of more opt 0:11:00.080 --> 0:11:01.640 isum than a lot of the shops around that have 0:11:01.760 --> 0:11:05.000 the one handle on US growth is the possibility that 0:11:05.520 --> 0:11:09.920 US productivity will start to strengthen with appropriate use of 0:11:09.960 --> 0:11:14.640 capital invested in the right right uh assets. And I 0:11:14.679 --> 0:11:16.880 think the things that we have been having trouble with 0:11:17.040 --> 0:11:22.160 is that dead assets encourage entrepreneurs to stay with continuing 0:11:22.679 --> 0:11:25.920 uh existing technologies, because what does the deadholder want their 0:11:25.920 --> 0:11:29.880 money back? But equity capital represents the possibility of of 0:11:29.880 --> 0:11:32.800 of shooting for the moon and and and and swinging 0:11:32.840 --> 0:11:36.839 for those technologies that will raise productivity, raise proctivity growth. 0:11:36.840 --> 0:11:40.439 And I think as financing starts to resort more to equity, 0:11:40.559 --> 0:11:42.679 especially through private equity, Yeah, I think we're going to 0:11:42.720 --> 0:11:44.200 see more of that bill just to taste some of 0:11:44.200 --> 0:11:47.160 this out. Essentially, the equation you offered was the recipe 0:11:47.240 --> 0:11:51.400 for potential growth in America? Where do you see potential GDP? 0:11:51.840 --> 0:11:53.360 And I should add to this, I think the thing 0:11:53.400 --> 0:11:55.800 that markets and market participants worry about is just the 0:11:55.880 --> 0:11:58.920 rate of change from above potential while above potential three 0:11:59.000 --> 0:12:02.080 four percent back down to two how quickly we get 0:12:02.120 --> 0:12:06.160 that and whether we overshoot to the down side as well. Yeah, 0:12:06.280 --> 0:12:09.080 the possibility of soft landing has escaped the FED for 0:12:09.160 --> 0:12:11.200 for many decades, and I have to be guilty of 0:12:11.200 --> 0:12:13.439 that as myself. Um, but but I think one of 0:12:13.480 --> 0:12:15.319 the this is the best chance we have of getting 0:12:15.320 --> 0:12:17.720 a soft landing because we don't have any of the 0:12:17.760 --> 0:12:21.360 imbalances that normally cause the FED to to really spike 0:12:21.440 --> 0:12:24.160 interest rates because inflation is getting running out of hand. Uh. 0:12:24.240 --> 0:12:28.960 Structural um. Structural forces that are keeping disinflation in the 0:12:29.000 --> 0:12:31.560 front of every form C member is one thing that 0:12:31.640 --> 0:12:34.440 is I think keeping the FED from resorting to the 0:12:34.520 --> 0:12:37.880 kind of stop good policies that have killed every past recovery. 0:12:38.240 --> 0:12:41.440 Are those structural forces simply technology? I mean you mentioned 0:12:41.440 --> 0:12:45.000 earlier ability the effective Amazon and pricing is they know 0:12:45.160 --> 0:12:50.480 they essentially take retail to a perfectly competitive microeconomics. But 0:12:50.600 --> 0:12:54.680 the bottom line is technology is the great unmentionable here 0:12:54.880 --> 0:12:57.040 Should the I m F, should World Bank? Should the 0:12:57.040 --> 0:13:00.640 others be doing more in the study of these profound 0:13:00.679 --> 0:13:03.800 technological effects. I think the I m F and and 0:13:03.840 --> 0:13:06.640 World Bank aconomis even fed economists um should get some 0:13:06.720 --> 0:13:10.920 dosage of private sector experience. And I have to say 0:13:10.600 --> 0:13:12.720 I have been blessed by my years at the City 0:13:12.760 --> 0:13:16.640 because I have seen how the markets misappropriate capital. And 0:13:16.679 --> 0:13:18.880 I think one of the things that that that that 0:13:19.320 --> 0:13:22.319 productivity models go for is what is the long trend 0:13:22.360 --> 0:13:24.640 and how is the long trend changing? And my god, 0:13:24.679 --> 0:13:26.840 the last the next guy who used an HP filters 0:13:26.920 --> 0:13:29.079 estimate a potential GDP, I'm going to bash them in 0:13:29.120 --> 0:13:33.240 the head because that's completely ignoring how capital is being used. 0:13:33.360 --> 0:13:36.280 But I would love to say that you just bashing 0:13:36.320 --> 0:13:40.400 people in the hands. We can in the studio, and 0:13:40.440 --> 0:13:42.840 every time an economists says something he doesn't like, you 0:13:42.840 --> 0:13:46.120 could come up on the other hand him in the face. Billy, 0:13:46.280 --> 0:13:48.920 thank you so much for the Milken Institute for getting 0:13:49.000 --> 0:14:04.839 us started. We are thrilled to bringing with his kindness 0:14:04.880 --> 0:14:08.880 every new issue of foreign affairs magazine. Get the physical copy, 0:14:09.600 --> 0:14:12.720 reasonable subscription and it is just filled it Inside this 0:14:12.800 --> 0:14:17.480 month is a twisted view on the global new nationalism, 0:14:17.520 --> 0:14:21.000 but with a real American angle. Julapor leads it off 0:14:21.040 --> 0:14:24.440 with a controversial walk through our nationalist to Kischen Stacy 0:14:24.520 --> 0:14:27.160 Abrahams is in there in many other worries A well, 0:14:27.200 --> 0:14:30.160 I thought Michael mandel O Gideon on on Europe was 0:14:30.240 --> 0:14:34.160 really quite good. I mean, we talk about nationalism in Europe. 0:14:34.200 --> 0:14:38.640 It's an extraordinary original nationalism, isn't it. It is, you know, 0:14:38.680 --> 0:14:40.560 one of the greatest questions we have right now, and 0:14:40.600 --> 0:14:42.080 this goes back to what you were talking about with 0:14:42.280 --> 0:14:45.400 Billy in the last segment, is how much the social 0:14:45.400 --> 0:14:47.960 concerns are related to economic concerns, not just in question 0:14:48.000 --> 0:14:50.400 of growth, but also distribution. And so in Europe, where 0:14:50.440 --> 0:14:54.720 you've had uh not much progress in a lot of places, 0:14:54.800 --> 0:14:59.320 you see social divisions and social groups uh coming up 0:14:59.320 --> 0:15:01.960 and trying to get our own and pulling their own 0:15:02.000 --> 0:15:04.560 back from the larger community of the EU because they 0:15:04.600 --> 0:15:07.040 don't feel they've benefited from it. And that's for the 0:15:07.080 --> 0:15:09.320 question is not just growth but also the distribution of 0:15:09.320 --> 0:15:12.240 growth and getting people to feel like they profit getting 0:15:12.280 --> 0:15:14.800 all members of the community to feel like they're part 0:15:14.800 --> 0:15:16.960 of a national economy. And John max Foot, writing in 0:15:17.000 --> 0:15:19.800 the Washington Post, he's got the all in tex average 0:15:19.800 --> 0:15:25.479 take in Sweden of dollars. In the US, it's fifteen dollars. 0:15:25.560 --> 0:15:28.120 To Gideon's point, though, is this word feeling it's getting 0:15:28.160 --> 0:15:32.280 you to feel like you are participates. Well, now, I 0:15:32.280 --> 0:15:35.480 think it's important because you know, undoubtly the data tells 0:15:35.520 --> 0:15:37.960 you that over the last ten years, the world's richer, 0:15:38.120 --> 0:15:41.800 there is greater prosperity poverty has been Solo Martin is 0:15:41.840 --> 0:15:44.760 the best on that he would strongly endorse. And Gideon, 0:15:44.920 --> 0:15:47.800 we are obsessed and perhaps quite rightly, between the distribution 0:15:47.800 --> 0:15:50.040 of wealth as you put it. Can we make an 0:15:50.040 --> 0:15:53.120 effective argument that says wealth in equality is the price 0:15:53.160 --> 0:15:56.840 we pay for greater global prosperity. I think that that 0:15:57.000 --> 0:16:00.280 is the basic bargain that capitalism makes right, the equal 0:16:00.280 --> 0:16:03.400 distribution of riches rather than the equal distribution of poverty 0:16:03.400 --> 0:16:05.440 as Church will put it. But that doesn't mean that 0:16:05.480 --> 0:16:08.240 the policies that we have at the national level and 0:16:08.320 --> 0:16:11.400 other levels don't affect just how much of the share 0:16:11.440 --> 0:16:13.400 goes to the rich and what people like picketing everybody 0:16:13.440 --> 0:16:16.000 else has basically shown is that over the last couple 0:16:16.000 --> 0:16:19.360 of generations, as the global economy has done well, as 0:16:19.560 --> 0:16:22.720 poor people in the developing world have done extremely well, 0:16:22.840 --> 0:16:25.880 as rich people have done well, middle and working classes 0:16:25.960 --> 0:16:28.760 in the advanced industrial world have not. They have not 0:16:28.880 --> 0:16:31.680 tended to see many of the benefits from growth even 0:16:31.680 --> 0:16:34.480 in their countries, and so they have a legitimate right 0:16:34.520 --> 0:16:37.160 to say, wait a second, what about us? And the 0:16:37.240 --> 0:16:39.720 question has to be, how do you get the benefits 0:16:39.720 --> 0:16:42.240 that accrued to the economy as a whole to be 0:16:42.320 --> 0:16:45.040 delivered to the population as a whole. Let's talk about 0:16:45.040 --> 0:16:47.280 the risks. I remember one of the final addresses from 0:16:47.440 --> 0:16:50.320 Margaret Thatcher in Parliament, and essentially she made one of 0:16:50.600 --> 0:16:53.440 a very effective argument that there were elements of the left, 0:16:53.480 --> 0:16:55.920 the far left, that would be happier if the gap 0:16:56.000 --> 0:16:59.560 was smaller and everyone was poorer. So the gap between 0:16:59.560 --> 0:17:02.080 the rich and the pole was smaller, but ultimately if 0:17:02.080 --> 0:17:04.160 everyone was poor, there would be elements of the left 0:17:04.200 --> 0:17:06.280 that would still be happy with that outcome. How do 0:17:06.359 --> 0:17:09.720 we avoid the pendulum swinging aggressively to the left to 0:17:09.800 --> 0:17:12.160 bring the wealth in a quality gap all the way 0:17:12.160 --> 0:17:16.440 in without making a country poorer. Well, I would suggest 0:17:16.480 --> 0:17:20.720 that the easiest way to take the wind out of 0:17:20.720 --> 0:17:24.320 the sales of the socialists would be for the capitalists 0:17:24.320 --> 0:17:27.840 to pay a little bit more concerned to distributional effects 0:17:27.920 --> 0:17:29.880 and to actually have you can put it this way, 0:17:29.960 --> 0:17:36.320 social democracy is the price of avoiding socialism. In your 0:17:36.359 --> 0:17:40.639 new issue, do you address the new socialism that everyone's 0:17:40.800 --> 0:17:44.280 ranting and raving about now? We address aspects about it. So, 0:17:44.320 --> 0:17:47.480 for example, one of the main art main arguments used 0:17:47.800 --> 0:17:51.560 against greater social spending is that you can't have any 0:17:51.640 --> 0:17:54.600 increased deficit or debt. And there's an interesting piece in 0:17:56.080 --> 0:17:59.480 Summers Larry Ferman and sorry Larry Summers and Jason Furman 0:17:59.760 --> 0:18:03.520 argue sing that you know, deficits are not so huge. 0:18:03.520 --> 0:18:06.000 What really matters is are they going up even faster 0:18:06.080 --> 0:18:08.399 than you can afford to deal with them? And that 0:18:08.480 --> 0:18:11.399 you know, essentially keeping we don't need to reduce debt 0:18:11.480 --> 0:18:13.960 dramatically at this particular time. We need to keep things 0:18:14.000 --> 0:18:16.840 in control, they argue. And so it's not just a 0:18:16.920 --> 0:18:19.639 question of how do you do this? But what are 0:18:19.680 --> 0:18:22.240 the downfalls? What are the real pitfalls? Like Jonathan was 0:18:22.240 --> 0:18:23.639 talking about, what are the dangers you have to be 0:18:23.720 --> 0:18:26.159 really aware of. And yet taking too much money and 0:18:26.240 --> 0:18:29.600 spending too much and constricting the economy too much would 0:18:29.640 --> 0:18:33.359 be a problem. But if your publics reject the entire 0:18:33.440 --> 0:18:36.280 framework of less a fair capitalism on which your economy 0:18:36.320 --> 0:18:40.520 is based, the results will be I see a risk 0:18:40.640 --> 0:18:44.560 that silly leftism will take advantage of the opportunity created 0:18:44.560 --> 0:18:48.560 by silly right ism and that sensible policy. I feel 0:18:48.600 --> 0:18:54.960 myself stealing phrases as we go leftism. Capitalists can't reform themselves. 0:18:54.960 --> 0:18:57.320 Socialists will get the political power to do what they want. 0:18:57.800 --> 0:18:59.919 Do you believe that can compet in a country like America? 0:19:00.080 --> 0:19:02.520 I think you see it happening right now. When centrist 0:19:02.560 --> 0:19:06.280 policies on the economy don't get a good hearing, uh 0:19:06.320 --> 0:19:09.000 and and and other. You know, rich people's policies just 0:19:09.040 --> 0:19:11.320 get run the way people wanted. Then you end up 0:19:11.320 --> 0:19:15.320 getting popular pushback in a way that's often economically. When 0:19:15.359 --> 0:19:17.399 I say working, what I mean what's effective with the 0:19:17.400 --> 0:19:19.919 electra Because of the midterms, the Democrats didn't take this 0:19:20.040 --> 0:19:22.840 radical left wing approach to the mid terms, and their approach, 0:19:22.880 --> 0:19:25.879 the centrist approach, was quite effective in the House. You know, 0:19:26.200 --> 0:19:29.320 it's interesting to see what exactly the Democratic Party's agenda 0:19:29.359 --> 0:19:32.320 will be, how radical they actually are are We're giving 0:19:32.359 --> 0:19:34.680 a few a lot of attention. We're letting a couple 0:19:34.680 --> 0:19:37.320 of names, We're letting a couple of names completely, and 0:19:37.359 --> 0:19:39.720 their back ventures that are not you know, Nancy Pelosi 0:19:39.760 --> 0:19:41.679 and Chuck Schumer don't seem to me like they're going 0:19:41.720 --> 0:19:45.440 to be leading a bunch of guillotine uh crowds too. 0:19:45.720 --> 0:19:48.240 We just saw this on the Pelas and who's really 0:19:48.280 --> 0:19:50.600 matter in the last twenty four hours. Do you have 0:19:50.680 --> 0:19:54.080 a confidence that we all have a political process that 0:19:54.280 --> 0:19:58.240 melds to the middle as we go through the primary season, 0:19:58.320 --> 0:20:03.720 convention Hope, yes, hope, Okay, Hopeing audacity with Gideon Rose. 0:20:03.800 --> 0:20:06.960 I can't say enough about the new nationalism the new 0:20:07.000 --> 0:20:11.720 issue of Foreign Affairs magazine. A number of articles sided there. 0:20:11.760 --> 0:20:14.680 One I'd mentioned. We didn't even get to Russhire Sharma 0:20:14.880 --> 0:20:19.520 definitive on emerging markets, writing with great passion about India 0:20:19.640 --> 0:20:22.399 as well. That'll be the first article I'll read in 0:20:22.440 --> 0:20:39.760 this new issue. This is a joy for Paul Sweene. 0:20:39.840 --> 0:20:42.000 You and and I we are gourmands of a certain level, 0:20:42.600 --> 0:20:44.800 and we know that if you were the Austin Goulsby 0:20:44.840 --> 0:20:46.720 of the Boost School, of the former chairman of the 0:20:46.720 --> 0:20:51.560 President's Council of Economic Advisors, you can wander out to 0:20:51.760 --> 0:20:55.439 north of the Permian Basin, south of the panandle tow 0:20:55.520 --> 0:21:00.480 scenic Lubbock, Texas for ant Trina's lasagna, and it's a 0:21:00.480 --> 0:21:04.600 wonderful lesson on what we'll do within our trade policy 0:21:04.640 --> 0:21:08.400 of the United States of America. Austin, it's classic goalsby 0:21:08.480 --> 0:21:11.080 one oh one. You're at the Boost School. You're screaming 0:21:11.119 --> 0:21:14.600