Speaker 1: Runt you by Bank of America Mary Lynch with virtual reality,
Speaker 1: virtually everything will change. Discover opportunities in a transforming world.
Speaker 1: Be of a, mL dot Com, slash VR, Mary Lynch,
Speaker 1: Pierced Fenner and Smith Incorporated. Welcome to the Bloomberg Surveillance Podcast.
Speaker 1: I'm Tom Keene with David Gura. Daily we bring you
Speaker 1: insight from the best of economics, finance, investment and international relations.
Speaker 1: Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com,
Speaker 1: and of course on the Bloomberg Market. Sist all summity
Speaker 1: in weekend this morning, as the Bank of Japan kept
Speaker 1: its lunchist in this program on changed to make a
Speaker 1: got a boost. As a result, will Central Bank also
Speaker 1: pushed back the projected timing for reaching it's two percent
Speaker 1: inflation target for a six time or for more. We're
Speaker 1: joined by Kathy mat Suey Goldman Sachs, Japan Vice President
Speaker 1: and chief Equity stretches to here in London, we still
Speaker 1: have Richard turning Blackbrock. Cathy, great to have you on
Speaker 1: the program. What do you make of the challenges for
Speaker 1: the b o j What is their number one question
Speaker 1: that investors want answered, is it inflation or is it
Speaker 1: just simply well Governor Croda stay on after his term
Speaker 1: ends in two thousand and eighteen. Well, I think the
Speaker 1: top of mind question for many investors that we speak
Speaker 1: with is UH, what is the kind of the endgame
Speaker 1: for this so called yield curve control, quantitative easing framework
Speaker 1: and asset purchase program. Of course, you mentioned the other question,
Speaker 1: which is will Coroda stay on as central bank governor
Speaker 1: here post his UH expiration of next April? But the
Speaker 1: number one question is how much longer can the Banque
Speaker 1: of Japan sustain the current program? For what it's worth,
Speaker 1: our view is because they've set their inflation target quite
Speaker 1: high and ambitious at two percent, it is quite likely
Speaker 1: that they will persist with the current framework, including both
Speaker 1: yield curve control as well as the asset purchases that
Speaker 1: they are currently executing. Having said that, we are also
Speaker 1: of the view that there are some signs of UH
Speaker 1: of inflation beginning to creep through some green shoots. Wages
Speaker 1: are beginning to pick up, Inflation expectations are creeping a
Speaker 1: little bit higher, while not the two percent that the
Speaker 1: Bank of Japan is aiming for, we are definitely going
Speaker 1: to start to see some increasing signs of inflation, we
Speaker 1: think in the next six to twelve months down the road.
Speaker 1: But yeah, by again delaying the time for hitting their
Speaker 1: price targets where their price goals, is the bo J
Speaker 1: effectively acknowledging that they'll need to continue easing for many
Speaker 1: years to come. It would appear so UM and so
Speaker 1: we don't know exactly how long that will be. And
Speaker 1: again a lot will ride on whether KROTA stays or
Speaker 1: leaves post next spring. But for the time being, the
Speaker 1: fact that they did delay or postpone the timeline for
Speaker 1: reaching their target inflation level, obviously the market is interpreting
Speaker 1: that as more for longer UH. And so I think
Speaker 1: we're seeing a divergence of central banks UH. The FED
Speaker 1: and the e c BE on the one hand, versus
Speaker 1: the Bank of Japan is probably going to continue this
Speaker 1: quite aggressive stimulus program at least for the foreseeable future. Kathy,
Speaker 1: good morning. I want to bring up a chart here.
Speaker 1: Let's bring it up right now. This is Japan nominal
Speaker 1: g d P. We've got Robert Schiller with us in
Speaker 1: the next hour, where there's acclaimed work with Professor Akerloff.
Speaker 1: Mr Janet yelling on animal spirit. The animal spirit Kathy
Speaker 1: is evaporated. Nominal g d P, which was really on
Speaker 1: an albionomics friendly trend. Here's the US hurdle rate of
Speaker 1: four percent nominal it's failed, it's rolled over. How critic
Speaker 1: is it that nominal GDP has rolled over? Um, it's obviously,
Speaker 1: you know, super critical because at the end of the day,
Speaker 1: I think corporate managers and mrs what another think in
Speaker 1: nominal terms as opposed to real terms. Right, uh So, clearly,
Speaker 1: you know, there has been an initial sort of jump
Speaker 1: start to getting the economy out of the getting growth
Speaker 1: to expand in all of that, but more needs to
Speaker 1: be done. And I think the concern of the markets
Speaker 1: is that the government currently in Japan may be distracted
Speaker 1: by other issues and needs to refocus its attention on
Speaker 1: the economy, stimulating the economy, trying to get those animal
Speaker 1: spirits to revive once again. Not to be fair, the
Speaker 1: corporate sector is in completely fine shape and we have
Speaker 1: record profits, record profit markets, record cash balances, so it's
Speaker 1: not as if there's no cash around. But you you're
Speaker 1: putting thing on the right point, which is where is
Speaker 1: the trigger, where's the catalyst to get corporate managers to
Speaker 1: deploy that cash into the real economy through capex and
Speaker 1: other means to lead to a virtuous cycle. But again,
Speaker 1: it's not as if everything is in inflation. And back
Speaker 1: to five years ago. We are a little much better
Speaker 1: place than we were five years ago, but more needs
Speaker 1: to be done to make sure the cycle is sustained.
Speaker 1: Go go back to this chart if you what, I
Speaker 1: want to do this on television, like it's Facebook Live
Speaker 1: right now. You're gonna see me make the sausage right now,
Speaker 1: which is the average twenty year line of nominal g
Speaker 1: d P. You can barely see it there. I'm gonna
Speaker 1: make it a big, bright, ugly red for you. Nominal
Speaker 1: GDP over two decades in Japan his flat line. So
Speaker 1: there you go, there's that red line right down by zero.
Speaker 1: I mean, is there any demand by society Kathy in
Speaker 1: Japan to jump start societal animal spirit? Are they all
Speaker 1: doing this for Honda and Toyota? Well, I think I
Speaker 1: think you have to think about this in terms of
Speaker 1: uh if. For example, if you look at the demographic
Speaker 1: I call it, the demograph would divide right the older
Speaker 1: Japanese cohorts who are retired no more you know, earned income,
Speaker 1: but they're trying to live off their savings. Frankly, for them,
Speaker 1: deflation is the best thing since life, because deflation means
Speaker 1: they can stretch their savings, right, Versus those that are
Speaker 1: not retired, they're younger, they're seeing their wages a stagnant
Speaker 1: or falling. So it's been this real battle between these
Speaker 1: two cohorts. Uh And we had seen, of course the dominant,
Speaker 1: that the former group really winning the game. But now
Speaker 1: the other group is now beginning to raise its voices
Speaker 1: and say, look, this is not good for us, it's
Speaker 1: not good for posterity. We really need to change the
Speaker 1: dynamic here. So again I think you're painting a picture
Speaker 1: that is exactly why albinomics came came through, right, It's
Speaker 1: exactly why the society said enough is enough. We made
Speaker 1: the sort of the retired community happy for a while,
Speaker 1: but this is really terrible for our future. Again, the
Speaker 1: verdict is still out whether this is going to be
Speaker 1: sustainable and successful sufficiently, but at least I think they've
Speaker 1: come to recognize as a society that we can't just
Speaker 1: you know, sort of cater to that formal move any longer.
Speaker 1: I cannot throw off as a mention here in our
Speaker 1: Bloomberg and Lemons your studios in New York. Great to
Speaker 1: have you applies. Let me start by asking you to
Speaker 1: respond to what we're seeing here out of Brussels, the
Speaker 1: beginnings of these negotiations between the the U and the
Speaker 1: UK obviously early stages here yet, but in terms of
Speaker 1: what's what the flashpoints are, what the big issues are,
Speaker 1: how do you respond to it? To what we're hearing
Speaker 1: here about sort of the issue of citizens rights in
Speaker 1: the UK and how being an issue that's going to
Speaker 1: be going forward. I don't even know where to start.
Speaker 1: I wonder what I would say that the sort of
Speaker 1: damocles as hanging over the UK here with this bracts
Speaker 1: that they haven't begun to feel the effects, particularly the
Speaker 1: financial sector. If they have to move twenty percent of
Speaker 1: the financial sector out of London, it's going to be very,
Speaker 1: very painful for the UK economy. I think they'll come
Speaker 1: to some kind of reasonable agreement on citizenship and citizens rights,
Speaker 1: but I don't know. Tor resume had this disastrous election, uh,
Speaker 1: will the government fall? I mean, it's hard to see
Speaker 1: how long they can last when they don't really have
Speaker 1: the power to negotiate and whether the very thin working
Speaker 1: majority they have will fray. So it's very very hard
Speaker 1: for her to, uh, you know, really come to a
Speaker 1: deal here. And yet the clock is ticking. We had
Speaker 1: this ECB form a couple of weeks back in Central Portugal,
Speaker 1: and you had a number of central bankers talking about
Speaker 1: working together, collaborate, that collaboration cooperation. I suppose you could say,
Speaker 1: among them, what did you make of what came out
Speaker 1: of that meeting in Central Well, obviously, you know, the
Speaker 1: most striking thing was what Mario Droggy said the markets
Speaker 1: paid attention to. But there is a lot of exchange
Speaker 1: of ideas across central banks. They're all seeing the same thing.
Speaker 1: And the biggest thing in the world over the last
Speaker 1: five or ten years has been the steady drop in
Speaker 1: the inflation adjusted interest rate. For everybody, they weren't expecting it,
Speaker 1: it was. It's it's a couple percent lower than it was,
Speaker 1: you know, at the start of the financial crisis, and
Speaker 1: it's lasted and I don't know if it will stay.
Speaker 1: But obviously, if you're talking about raising interest rates, but
Speaker 1: the you know, the rate of interest, that kind of
Speaker 1: clears the market when you adjust for inflation hasn't been rising,
Speaker 1: they won't, So I think that's gonna as that continues
Speaker 1: to get pushed out the day of quote unquote normalization
Speaker 1: of interest rates. They're all going so they're all seeing
Speaker 1: the same thing. Hey, interest rates were a lot higher
Speaker 1: ten years ago, but where are they going now? There
Speaker 1: was a moment of misinterpretation, I suppose you could call it.
Speaker 1: During that that form, the market seem to misunderstand what
Speaker 1: Mario jogging intended to to say, how how big an
Speaker 1: issue steal this communication by central margages. We push a
Speaker 1: head here to a news conference from the the prison
Speaker 1: of the ECB later this morning. Are you satisfied with
Speaker 1: the green to which central bankers are communicating their policy positions. Well,
Speaker 1: they each have different challenges. So in the case of
Speaker 1: Mario dragging, the European Central Bank is both fiscal policy
Speaker 1: and monetary policy for the Eurozone, and yet he has
Speaker 1: to couch it in this language about inflation, the quantitative
Speaker 1: easing and the slowing quantitative easing. It's not about inflation.
Speaker 1: It's about propping up bonds in Portugal, Italy and the
Speaker 1: rest of Europe. And if the Eurozone can't step in
Speaker 1: to do something. Maybe the new French president will be
Speaker 1: able to catalyze something. It's a problem in the US. Actually,
Speaker 1: I think the interesting problem is it does matter what
Speaker 1: people think you're going to do two years from now,
Speaker 1: five years now, but the Fed doesn't even know what
Speaker 1: its constitution is going to be. Two years, five years
Speaker 1: from now. We have this uh, you know, disruptive president
Speaker 1: the Federal Reserve, you know, puts on a brave face.
Speaker 1: Nothing's going to change whoever your points. He'll just get
Speaker 1: you know, institutionalized into the fat way of doing things.
Speaker 1: But the President Trump does an enormous power to appoint
Speaker 1: people can roll off with us with Harvard University, Good
Speaker 1: morning everyone, Green on the screen features up one, Features
Speaker 1: up eleven is David mentions Mr Drog will have a
Speaker 1: sporting morning, will of course have his important press conference
Speaker 1: in Q and a always a raft of headlines out
Speaker 1: with Mr Drog. I want to get one monetary question
Speaker 1: in before we talk about and celebrate my book of
Speaker 1: the year, the Curse of Cash from last year, and
Speaker 1: I've felt Rogueff you spend a lot of Matthew moments
Speaker 1: on this strange word. Expectations are expectations different today because
Speaker 1: of technology, because of speed of news, speed of transfer,
Speaker 1: maybe because of a smarter household, of smarter consumer. Our
Speaker 1: expectations different now than Obsfeld Rogueff of another time and place. Well,
Speaker 1: I sort of expectations of what I think they were
Speaker 1: pretty sophisticated for a long time, but inflations become something
Speaker 1: of a mystery. I think, what's going on with inflations?
Speaker 1: The world's adjusting to this ever lower lowering share of
Speaker 1: labor that's putting downwardressure on wages. And if wages aren't
Speaker 1: going up, there's not a lot of pressure on firms prices.
Speaker 1: That may turn around at some point, but it hasn't,
Speaker 1: and that's that's mystified. How do you respond to Professor
Speaker 1: Roach of Yale University, Steve Roach, the great of invented
Speaker 1: Morgan Stanley economics, who says part of that inflation is
Speaker 1: asset inflation. Should we have a central bank that looks
Speaker 1: not only at inflation and jobs but also at asset dynamics? Well,
Speaker 1: so that's an age old question. Ben Bernanke addressed this
Speaker 1: a lot. He had a very decisive answer no, And
Speaker 1: that's the classic central bank answers we care about asset
Speaker 1: price inflation to the extent if stock prices go up
Speaker 1: and people spend more money, it's upward pressure on output inflation.
Speaker 1: But we don't care about the stock prices themselves. We
Speaker 1: don't know what they should be. But in the case
Speaker 1: of housing and debt fueled housing, it's a little trickier
Speaker 1: because housing is often at the central center of financial crisis.
Speaker 1: Canada recently raised its interest rate, pointing at housing. Um,
Speaker 1: you've got the safe box here with the cash, and
Speaker 1: on the cover of the new course of cash. If
Speaker 1: the death threats slowed down, Uh, yeah, they've slowed down
Speaker 1: a little bit. Although I just got one the other day.
Speaker 1: Just go on the other day. Do you have security
Speaker 1: up at Harvard like the president has two blocks over
Speaker 1: from us. I have had some of the people across
Speaker 1: the half of me wonder if they should move their office.
Speaker 1: If somebody walks into their office my mistake now and
Speaker 1: asks their me. But no, I think in the in
Speaker 1: the new paperback that I put out, first of all,
Speaker 1: I extended the title to make it clear that my
Speaker 1: policy is not getting rid of cash, which it says
Speaker 1: on page one, page two about my policy is more
Speaker 1: about come on, cut to chase every building contractor hate
Speaker 1: your guns because they love being paid under the table
Speaker 1: in cash. The construction industry is a big user of
Speaker 1: cash worldwide. There are lots of studies. I mean, I
Speaker 1: don't mean to pick on contractors have it and they're safe.
Speaker 1: And I mean, David, you're doing something over in Brooklyn
Speaker 1: on the man's so you pay the rule of the
Speaker 1: neighborhood and seriously you go to you're going to India,
Speaker 1: by the way. I don't have a moral thing about this.
Speaker 1: I mean I use cash. People my generation I'm sixty
Speaker 1: four use cash. I use cash. But I think the
Speaker 1: question is scale. Uh, you know how ordinary people use
Speaker 1: cash for whatever reason. I don't have a moral thing
Speaker 1: about this, but we're a lot of the cash is
Speaker 1: using big dealings and huge cach like kill gardens on
Speaker 1: top of his roof and the sweet green over here,
Speaker 1: where I can use cash by a salad tongue. Well,
Speaker 1: that's a different matter, is David. I mentioned your year
Speaker 1: off to India. What will be your message to Indian
Speaker 1: financial leaders about their experiment with the curse of cash? Quickly? Unfortunately? Well,
Speaker 1: I think whenever you're speaking to the India audience, it's
Speaker 1: they move very slowly. Actually normally normally they're moving in
Speaker 1: the right direction, but very slowly. And you you say, well,
Speaker 1: if you moved a little faster, it would be even better.
Speaker 1: In the case of this one, they moved way too fast.
Speaker 1: David gerin time came with kenro of Harvard University and
Speaker 1: celebration of my book of the Year last year, The
Speaker 1: Curse of Cash Out in paperback with an important update
Speaker 1: on India. Professor I cut you off at our last
Speaker 1: section on the India. What can the United States? What
Speaker 1: can Europe learn about trying to deal with corruption and
Speaker 1: cash within the new Indian experiment? Well, I think India
Speaker 1: is innovated in a lot of ways to try to
Speaker 1: have financial inclusion. Um, something I don't think we could
Speaker 1: do in the United States, although it probably happened someday.
Speaker 1: Is they have taken biometric data for now over one
Speaker 1: point one billion Indians and they're moving to do the
Speaker 1: rest and you get basically a free debit account when
Speaker 1: you get to do that. It's made financial inclusion very easy.
Speaker 1: And uh, they've also done things like make it impossible
Speaker 1: to pay certain kinds of license fees in cash you
Speaker 1: have to pay online. It's a big source of corruption.
Speaker 1: They haven't done that with houses. Apartments and houses routinely
Speaker 1: trade for cash, and India it's an enormous source of corruption.
Speaker 1: But they're trying to approach these things. There's many, many dimensions.
Speaker 1: I think the demonetization, which is MODI called it was
Speaker 1: very theatric and maybe highlighted these things. I think he
Speaker 1: did it way too fast. I say you should take
Speaker 1: five to seven years. He did it in a few hours.
Speaker 1: I don't think they did it the right way. I
Speaker 1: think that was counterproductive. But the larger picture, they've done
Speaker 1: a lot of good things. Ken, we are ten years
Speaker 1: on from a financial crisis. You are exceptionally generous with
Speaker 1: your time with Bloomberg on the economy and Bloomberg surveillance
Speaker 1: and the heat of two thousand and seven and two
Speaker 1: thousand eight. Of course you did your iconic book with
Speaker 1: Carmen Reinhardt. This time is different, Where this time is different?
Speaker 1: Down ten years, what have you learned well? I mean,
Speaker 1: first I want to say, when academic study these things,
Speaker 1: they do it forever. Ben Bernanke wrote a path breaking
Speaker 1: paper reinterpreting the Great Depression in a way, we still
Speaker 1: think it's important fifty years after it happened. Barry Ikens
Speaker 1: Green's book on the gold standard ten years after that,
Speaker 1: so there's constant rethinking of this. Uh, but I think
Speaker 1: it's still pretty robust. The results that Reinhardt and I
Speaker 1: got from this time is different, which shows that the
Speaker 1: run up to a financial crisis has pretty similar characteristics
Speaker 1: across time, across country, and it's never that painless. That
Speaker 1: is debated. There are papers by Michael Porto, David and
Speaker 1: Christina Romer who say, well, depends on what you call
Speaker 1: a financial crisis. I think we're focusing on deep systemic
Speaker 1: ones that have a big effect on the economy as
Speaker 1: opposed to more minor ones. Did we do okay? Did
Speaker 1: the United States all the jumpeter of Harvard? Did we
Speaker 1: clear our markets better than others? Oh? I think the
Speaker 1: United States did very well not to have a great depression,
Speaker 1: and they, you know, certainly behaved very courageously and remarkably.
Speaker 1: Ben BERNANKI of course widely celebrated President Obama. Uh, you know,
Speaker 1: his actions helped a lot. But George Bush also was
Speaker 1: very courageous going on with a fifty billion dollars stimulus right,
Speaker 1: you know, pretty quickly, contrary to like what all his
Speaker 1: beliefs and statements were, so they were very flexible. There's
Speaker 1: a lot of sort of Monday morning quarterbacking about what
Speaker 1: they should have done better. I think everyone agrees they
Speaker 1: should have done more infrastructure, they should have kept stimulus
Speaker 1: going longer. But I think people forget that the forecasts
Speaker 1: that were coming out from the FED, from Wall Street,
Speaker 1: from everyone where that the Reinhardt rogue off was not
Speaker 1: going to happen. It was going to be much faster.
Speaker 1: And the White House and the Congress, we're looking at
Speaker 1: this and saying, well, why are we doing crazy things?
Speaker 1: That things are going to get better? And as aggressive
Speaker 1: as monetary policy was, I think it could have been
Speaker 1: more aggressive. I think they were a little bit too
Speaker 1: concerned with maintaining inflation not going up, and not looking,
Speaker 1: you know, at really what the core problem was. Very quickly,
Speaker 1: you have but three seconds left. I wanted to sort
Speaker 1: of how your expectations for growth or your sense of
Speaker 1: where the U. S. Economy is going has changed in
Speaker 1: light of the disruptiveness. I think that was the word
Speaker 1: you used of of this president. How have you reavalid
Speaker 1: where you think things are heading well. I think for
Speaker 1: the moment it's just growth deferred and not reversed. I
Speaker 1: think the US economy is fundamentally very strong, and if
Speaker 1: the President of the Senate and President Congress don't end
Speaker 1: up doing much, it could be a lot worse. Um So,
Speaker 1: I do think productivity will start to improve. I do
Speaker 1: think investment will start to come back. We've gone on
Speaker 1: this long trend, but at least part of that the
Speaker 1: aftermath of the financial crisis, there's this view of Robert Gordon,
Speaker 1: We're not inventing anything anymore. I think that will look
Speaker 1: ridiculous in ten years. Can congratulations In my book of
Speaker 1: the Year last year, the Curse of Cash still most
Speaker 1: current out in paperback. Can't say enough about it, The
Speaker 1: Curse of Cash. This is Bloomer Brunts you by Bank
Speaker 1: of America Mary Lynch. With virtual reality, virtual everything will change.
Speaker 1: Discover opportunities in a transforming world, be of a mL
Speaker 1: dot Com, slash VR, Mary Lynch, Pierce Fenner and Smith Incorporated.
Speaker 1: We've had a wonderful week on a housing Jonathan Miller
Speaker 1: joined us, who is truly the smartest guy on per
Speaker 1: square foot in the major cities Uh. Doug Duncan joined
Speaker 1: his studios in in his little cases. UH from Fannie
Speaker 1: May and now the academic authority were the late Carl
Speaker 1: Case of Wellesley and Harvard, Robert Scholler, the laureate from Yale.
Speaker 1: On a housing Bob Shower, Why isn't there affordable housing
Speaker 1: across much of California? Well? Uh, I would say restrictions
Speaker 1: on supply. There's two kinds of restrictions as natural restriction uh,
Speaker 1: the mountains the ocean that limits building. But then there's
Speaker 1: other restrictions which are human created. Uh. And people are
Speaker 1: resistant to new construction. Uh. It's still possible in California,
Speaker 1: but people don't people existing homeowners don't want it. What
Speaker 1: what determines where there is affordable housing? Is it geographies
Speaker 1: You've just mentioned the mountains, the oceans, etcetera. Or is
Speaker 1: it something more than that when you look at the
Speaker 1: world and you look at where you can find affordable
Speaker 1: housing in major cities. Yeah, there's evidence that geography matters.
Speaker 1: So part of it is you know, San Francisco is
Speaker 1: on a on a sort of peninsula around the Bay.
Speaker 1: Uh that limits uh, limits construction, and cities like that
Speaker 1: do have higher prices. That's a fact of life. Uh.
Speaker 1: Then the question is what other factors? Well, the other
Speaker 1: factors are people preserving neighborhoods. And also there's a kind
Speaker 1: of a coordination problem. How can we what people like
Speaker 1: urban living? The problem is there isn't enough of it?
Speaker 1: How can we start new city centers? That's that's a difficult,
Speaker 1: difficult thing to do. It does happen eventually, It was
Speaker 1: a long lag. Let's let's chew on that or congitate
Speaker 1: on it. There, How how do you begin to do that?
Speaker 1: As you think about that, as we hear stories of
Speaker 1: companies moving to new cities, new towns and and intending
Speaker 1: to grow. What what kick starts that kind of growth?
Speaker 1: It does take a long time, as you say, but
Speaker 1: what are the catalysts that make it work? Well? I
Speaker 1: think it has something to do with civic spirit, with
Speaker 1: people who who think about what to do with our city,
Speaker 1: people who plan, uh, and a general atmosphere of cooperation.
Speaker 1: So for example, Stanford can etiquette to go back fifty
Speaker 1: to a hundred years, it was an industrial town. Uh,
Speaker 1: the industry started moving out. We were losing jobs to
Speaker 1: the foreign countries. But they decided that this is a
Speaker 1: city which is, uh, within an hour's commute of New
Speaker 1: York City on the rail line. So they were lucky
Speaker 1: they were on the rail line. And they decided to
Speaker 1: try to court corporate headquarters and get some out of
Speaker 1: out of the city. Whether it's it's more more lands
Speaker 1: prices are lower, and they transformed Stanford into a into
Speaker 1: a like a second downtown for New York. What would
Speaker 1: you propose to allow for upper middle class forget about
Speaker 1: middle class or lower middle class, upper middle class mortal
Speaker 1: housing where the rich people don't want that in their
Speaker 1: backyard or in the backyard next to their backyard. How
Speaker 1: do we do we just get you know, within the
Speaker 1: New York metaphor, forget about three million dollar properties? How
Speaker 1: do we get more non affordable affordable dollar properties? Eight
Speaker 1: d well not for all of us, but uh yeah,
Speaker 1: I think that when you talk about that level, you're
Speaker 1: talking about people who uh might nice area, really nice,
Speaker 1: I mean more than eight hundred thousand. Uh, they might
Speaker 1: resist having the riff raff come in. Well, that's a
Speaker 1: society issue. They don't want them. What can policy do
Speaker 1: about that? Well, I think that we have to appeal
Speaker 1: to people's Uh, this is what we call the American
Speaker 1: dream that, uh, we respect people for what they are
Speaker 1: and what they make themselves. We're not all about making money. Uh.
Speaker 1: And you're the value of your house isn't everything, and
Speaker 1: we we Uh. This is also part of the American dream.
Speaker 1: It's tolerance of other people, it's other kinds of people.
Speaker 1: And this is really the the success story of this country.
Speaker 1: You have to appeal to that and help people remember that. Yeah,
Speaker 1: two bedroom to bath square feet down the street from
Speaker 1: Laureate Schiller in New Haven, Connecticut, within reach of Joe's
Speaker 1: Pizza and two other good parlors. David Girl four dred
Speaker 1: thousand dollars. All right, all right, there's nothing. There's nothing
Speaker 1: like that within three zip codes where we're very true,
Speaker 1: Professor Sheller. You you write about inequality and inequality of income,
Speaker 1: and then you write about inequality of housing. This one
Speaker 1: lead the other. In other words, when you look at
Speaker 1: what's the biggest detriment to somebody having economic mobility, how
Speaker 1: big a role is inequality of of housing? Yeah? Well,
Speaker 1: inequality of in terms of housing exacerbates the problem of
Speaker 1: other forms of inequality. The problem is that when you
Speaker 1: have a city developing with limited land, it's going to
Speaker 1: force people out right, and the higher bidders for the
Speaker 1: land in that city maybe to build a to tear
Speaker 1: down the house and build something. Uh. They they are
Speaker 1: eventually have effect of pushing the others out. So you
Speaker 1: might have lived in a neighborhood all your life. You
Speaker 1: have a sense of identity with this neighborhood and neighbors
Speaker 1: and you know where the jobs are where you're used
Speaker 1: to know where they are. Um, and now all that
Speaker 1: changes and you kind of are pushed out by your
Speaker 1: inability to afford housing and that uh, that also is
Speaker 1: an inability to to have opportunities. You're no longer where
Speaker 1: the action is. You've moved out to some area with
Speaker 1: other low income people and you're just too far away
Speaker 1: to make contact. So that that worsens an equality because
Speaker 1: it harms opportunity, It harms feebla's ability to develop themselves
Speaker 1: into something better. Well, let's do this. We are fortunate.
Speaker 1: We have Robert Schiller with us of Yale University and
Speaker 1: he is a Nobel Lord, the Laureate of Newport Beach.
Speaker 1: Bill Gross is just published for Janice Anderson and Bill
Speaker 1: Gross is writing about the world of Robert Schiller, which
Speaker 1: is our orthodox monetary policy and some of our newer concepts.
Speaker 1: Let's come back with Bob Schiller and talk about the
Speaker 1: FED and not so much, you know, the parlor game,
Speaker 1: A We're gonna raise rates in December. Yes, no, maybe, whatever,
Speaker 1: But let's come back and talk to Bob Schiller about
Speaker 1: what the new orthodox should be for our economics. This
Speaker 1: ten years on in the financial crisis, and again Bill
Speaker 1: Gross just publishing on on the linkage here of finance
Speaker 1: and investment into UH Schiller Economics. Professor Schiller where us
Speaker 1: from Yale the Laureate of Yale University UH Professor Schiller,
Speaker 1: Professor Gross of Janice Henderson publishes on our orthodox economics?
Speaker 1: Are we beyond the efficacy of the Taylor rule the
Speaker 1: efficacy of the Phillips curve? Have we moved on to
Speaker 1: a new economics? From what Madigliani taught you at M
Speaker 1: I T a few years ago. That was more than
Speaker 1: a few years ago. Back then, under Franco Modigliani, we
Speaker 1: thought we had the whole economy reduced to a computer simulation.
Speaker 1: Did Yeah, that worked out well. Unfortunately, that model is
Speaker 1: not capable of predicting any recessions before they start to happen.
Speaker 1: This is a fundamental problem that even the causes, the
Speaker 1: causes of the secular stagnation are still not I mean,
Speaker 1: maybe we have some hints why it's happening, but we
Speaker 1: don't know. We don't have a Uh. It's like we
Speaker 1: have a secular stagnation disease which is more effective in
Speaker 1: Europe than in the US. But it's there and we
Speaker 1: don't understand it. We don't know whether it's a virus
Speaker 1: or a bacteria or carcinoma. It's just not u not understood.
Speaker 1: That makes it makes it difficult for Druggy and others.
Speaker 1: How political is the fund Reserve right now? Well, this
Speaker 1: is I don't know if I'm the right person to
Speaker 1: answer that. It's a time, it's a time when we
Speaker 1: are the most polarized society I've seen in my lifetime,
Speaker 1: and uh, maybe the most polarized since eighteen sixty or
Speaker 1: eighteen sixty five. Uh, And so you know, the the
Speaker 1: the job of the said chairman shouldn't be that politicized,
Speaker 1: but unfortunately it's it's a time just of tensions and
Speaker 1: anxieties and u uh at a time of mistrust. So
Speaker 1: it puts anybody in a position like that. I I
Speaker 1: sympathize with Janet Yellen Um. What she's doing is very sensible,
Speaker 1: but I can see that it's open to criticism. Let
Speaker 1: me rip up the script here. In the last couple
Speaker 1: of minutes we have with you. We had, of course
Speaker 1: Ken Rogoff on the show a few minutes ago, and
Speaker 1: we were asking him during a break just about academic
Speaker 1: life in Cambridge these days, talking about what he's teaching,
Speaker 1: how much he's teaching. You had a lecture that you
Speaker 1: delivered when you were a president of the of the
Speaker 1: American Economic Association on the importance of of humanities, and
Speaker 1: I know that's been exerted by the Booth School recently.
Speaker 1: Give us a process of that. Give us your your
Speaker 1: argument here that we should be investing more in stressing
Speaker 1: the importance of humanities. Complimenting this out of economics. Well, economics,
Speaker 1: you know, in any academic field there's specialization, and economics
Speaker 1: has has proven itself to be valuable in its present form.
Speaker 1: But I think that we've lost something as well when
Speaker 1: we uh when we assume that people are strictly rational,
Speaker 1: that they have well defined preferences and are responding only
Speaker 1: to information. So the people in the other departments that
Speaker 1: I normally wouldn't have any interaction with humanities. People have
Speaker 1: a different view of human nature. You know. It's not
Speaker 1: like we have a utility function and we know what
Speaker 1: we want. We don't know what we want, and we're
Speaker 1: affected by humans and by stories. So my presidential address
Speaker 1: that the a e A was called narrative economics. It's
Speaker 1: because I think that, you know, it's not as if
Speaker 1: people have clear expectations, what will the interest rate be
Speaker 1: next year, what will the f o MC due next
Speaker 1: It's not what not the way most people think, uh,
Speaker 1: and they're they're kind of story or they want to
Speaker 1: know what is the story of my life and what's
Speaker 1: going on as in a way that has some emotional significance.
Speaker 1: Bob Schuler, thank you so much. A couple of years back, Tom,
Speaker 1: I was in New Orleans on a reporting trip and
Speaker 1: we parked by the old Charity Hospital which had been
Speaker 1: boarded up, and made our way to the new University
Speaker 1: Medical Center, which is a beautiful new building several blocks
Speaker 1: away from where that old hospital stands, and I got
Speaker 1: a tour of the new space from the chief medical
Speaker 1: officer there, a guy named Dr Peter to Blue, if
Speaker 1: I remember the name correctly, and it really was an
Speaker 1: amazing space decorated with Chihuli sculptures and a really radical
Speaker 1: sense of how you can take care of a lot
Speaker 1: of patients, particularly patients dealing with trauma. Emergency room that
Speaker 1: had a lot of pods. I think is he described
Speaker 1: a very innovative space. And I know that somebody who
Speaker 1: is partially responsible for the creation the building of that
Speaker 1: structure is the Mayor of the City of New Orleans,
Speaker 1: Mitch Lander, who joins us now on our phone lines.
Speaker 1: Mayor Landra has been vociferous wighing in a lot about
Speaker 1: the healthcare debate here nationally, and I wonder, Mayor, if
Speaker 1: I could start by asking you what we could learn
Speaker 1: about healthcare from how it's played out here in recent
Speaker 1: years in the city of New Orleans. Well, thank first
Speaker 1: of all, thank you for recognizing that Hospitals of Beautiful.
Speaker 1: The gentleman's name is Dr pet who's one of the
Speaker 1: great heroes. He was on the ground after Katrina, saving
Speaker 1: a lot of people, and he's a great guy that
Speaker 1: runs the trauma center, the emergency medical unit. You know
Speaker 1: what's interesting is this is this issue across the country
Speaker 1: of affordable characters played out in Louisiana, you know, Katrina
Speaker 1: hit And when we started rebuilding our healthcare delivery system,
Speaker 1: one of the things we had learned from our failures
Speaker 1: earlier on is that you can't provide preventative care and
Speaker 1: acute care in emergency room hospitals of public hospitals that
Speaker 1: have no money to eventually break the state and make
Speaker 1: people less healthy. So one of the things we knew
Speaker 1: was we had to get on the front end of it.
Speaker 1: We and we created primary care clinics in the Metromolin
Speaker 1: area of New Orleans, where people who didn't have access
Speaker 1: to health care before now have access to preventative care.
Speaker 1: What used to happen was for working folks, they used
Speaker 1: to have to go to the emergency room and sit
Speaker 1: there to get the ear ache, and the kids taking
Speaker 1: care of get triage with the gunshot. Victims stayed at
Speaker 1: the thirteen hours get fired and it was catastrophic. And
Speaker 1: so the important part was to make sure that you
Speaker 1: got on the front end and of the back end,
Speaker 1: you kept the cost down, you spread the risk. And unfortunately,
Speaker 1: what's happened in Washington and they seem to be stuck
Speaker 1: on on making the same mistake, which is not coming
Speaker 1: up with a bipartisan approach that is broad based at
Speaker 1: the country supports. There is an answer to this very
Speaker 1: difficult question. And so I think on behalf of the
Speaker 1: U S Conference of Management, we're asking is for leading
Speaker 1: McConnell to step back for a minute, to go ahead
Speaker 1: and create a bipartisan working group, get some smart pyres,
Speaker 1: ipartisan groups, some governors, and then let's see if we
Speaker 1: can have this thing out. Get it right. Mats, you
Speaker 1: kill it to your senator, the doctor, doctor Cassidy, and
Speaker 1: in paragraph six of your latest missile to Mrs to Washington,
Speaker 1: you go into the economics of the ninth Ward of
Speaker 1: your Louisiana, your New Orleans. Rather, the ninth Ward is
Speaker 1: the people that nobody's talking about in this debate. What
Speaker 1: does it mean for the people in the trenches at
Speaker 1: the Baptist Community Health Services Center of the ninth Ward
Speaker 1: of New Orleans, Hannah Pounds, Edward Lynn, the nurse, Robert Jemison,
Speaker 1: there in the trenches of our health care system? What
Speaker 1: what do what do they need from the politicians in
Speaker 1: the fancy suits. Well, first, first, that's a great question
Speaker 1: First of all, I want to thank because he's really
Speaker 1: been trying hard, unlike some other senators to find some
Speaker 1: common ground. Hadn't been able to do it yet, but
Speaker 1: at least he has an open mind. One of the
Speaker 1: things at folks in Washington, miss is what their words
Speaker 1: mean when they hit the ground in a specific spot
Speaker 1: in an American city, in a real neighborhood, affecting a
Speaker 1: real person. So what you basically talked about it was
Speaker 1: a clinic in the lower ninth ward. And of course
Speaker 1: we have a bunch of these where these individuals are
Speaker 1: not going to be able to get the kind of
Speaker 1: care that they need, which in some instances is going
Speaker 1: to cost them their job, it's going to cost them
Speaker 1: to lose their home, or are they going to get sick,
Speaker 1: And if they don't have the kind of care that
Speaker 1: they need, they could potentially die. So this isn't a
Speaker 1: political fight for people on the ground. This is a
Speaker 1: life of death decision about how they're going to have
Speaker 1: a good quality of life. And you know the President
Speaker 1: said when he ran, I want better health care for
Speaker 1: more Americans for lower costs. That's what he said the
Speaker 1: goal was. And I don't think we're moving there right now,
Speaker 1: we're stuck in this. Are the Republicans going to pretend
Speaker 1: a bill? Are the Democrats gonna do it? What the
Speaker 1: mayors are saying is, look, get rid of all that
Speaker 1: that ideologically bent talk, and let's get down to tactics
Speaker 1: of how we're going to make sure that America can
Speaker 1: be strong by being healthy. And the process that's being
Speaker 1: using Washington is not getting us there. So now Senator
Speaker 1: McConnell is in a position of saying, well, let's try
Speaker 1: to go ahead and go back to the original House bill,
Speaker 1: which is gonna make sure that thirty two million Americans
Speaker 1: lose healthcare. And if we don't do that, you know,
Speaker 1: let's go back to some place that's even worse than that.
Speaker 1: I think we've got to scrap it, start over again
Speaker 1: and find the answers to the things in the Affordable
Speaker 1: Care Act that are broken. And every Democrat in America
Speaker 1: that serving knows that the issues with the Affordable Care Act,
Speaker 1: notwithstanding the fact that we have used that particular law
Speaker 1: to make sure other people are more healthy, so it's
Speaker 1: not perfect. It needs to be fixed. Let's figure out
Speaker 1: how to fix it. We can get this done. I
Speaker 1: was talking with John hick and Looper, the governor Colorado,
Speaker 1: last week, and we we were having a conversation about
Speaker 1: the role that states are taking on here now. The
Speaker 1: federal government might be taking up a more backseat roles,
Speaker 1: the governor seat that as an opportunity to get together
Speaker 1: and do more on the issues of policy themselves. Do
Speaker 1: you feel that same way when it comes to the
Speaker 1: group of mayors that you're heading up now to. Mayors
Speaker 1: feel like they have a greater responsibility here to craft
Speaker 1: and and and put forward policy. Well, well, not only
Speaker 1: do we have a responsibility, were the ones that actually
Speaker 1: do the work. You know, when you get down on
Speaker 1: the ground. Mayors are like the emergency room physicians in
Speaker 1: a war zone, where the guys that run the emergency
Speaker 1: medical services. So you were talking about Peter W's Hospital,
Speaker 1: Essentially that's trauma center. When something bad happens in the
Speaker 1: in the city, it's it's our vehicles and you know,
Speaker 1: pick the folks up, bring them to the emergency room.
Speaker 1: All of our first responders are engaged in it. So
Speaker 1: we're the ones that are actually doing the work. And
Speaker 1: we don't think that Congress ought to be passing any
Speaker 1: major piece of legislation without the mayors of the major
Speaker 1: American cities and the small cities in partnership with the governors,
Speaker 1: given them our view about what their words mean when
Speaker 1: they actually hit the grounds. And this is we don't
Speaker 1: govern in theory, we don't govern in philosophy. We govern
Speaker 1: in real time and in reality, and we don't really
Speaker 1: have a whole lot of time for ideologically meant debates.
Speaker 1: And so that's why it's important for us to be
Speaker 1: on the table so we can tell our senators exactly
Speaker 1: what it is that they're talking about means when it
Speaker 1: hits the streets. You check your blood pressure? How many
Speaker 1: how many nights a week do you eat at Charlie's Steakhouse.
Speaker 1: Charlie steakhous is great killer. Don't tell my doctor said
Speaker 1: fruit in the ring or leave it there. I love that.
Speaker 1: Rich Landry, the President of the Conference of Mayor's, joining
Speaker 1: us here on our phone lines. Thanks for listening to
Speaker 1: the Bloomberg Savannas podcast. Subscribe and listen to interviews on
Speaker 1: Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm
Speaker 1: on Twitter at Tom Keene. David Gura, Is that David Gura?
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