WEBVTT - Bloomberg Surveillance TV: April 22, 2025 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.239 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.680 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.280 --> 0:00:33.919 anywhere else you listen, and as always on the Bloomberg 0:00:34.000 --> 0:00:38.320 Terminal and the Bloomberg Business app. Krishna Gouer of Evercore writing, 0:00:38.400 --> 0:00:40.880 we think any effort to remove Pale would lead to 0:00:40.920 --> 0:00:45.760 a surge in stagflation, trades, further curve steepning dollar sharply lower, 0:00:46.040 --> 0:00:48.839 and a much larger increase in the risk premium on 0:00:49.000 --> 0:00:51.120 us set. So please to say that Krishner is bank 0:00:51.159 --> 0:00:53.000 with us on a program for more Christian Welcome back 0:00:53.000 --> 0:00:55.440 to the program, sir, and good morning. You wrote about 0:00:55.440 --> 0:00:58.560 it going into the weekend last week. You said that 0:00:58.640 --> 0:01:00.880 if you love the trade of the back of the 0:01:01.240 --> 0:01:05.000 trade tobacco, then you'll love the fed independence trade the 0:01:05.080 --> 0:01:07.919 loss of fed independence. Can you talk to us about that, Krishna, 0:01:07.959 --> 0:01:10.480 did we get a flavor for it in yesterday's session? 0:01:11.880 --> 0:01:15.280 So I think we did get a little foretaste yesterday 0:01:15.880 --> 0:01:18.040 of what kind of a train wreck it would be 0:01:18.440 --> 0:01:23.440 in markets if the presidents ever decided to actually try 0:01:23.600 --> 0:01:27.559 to fire FED chair Pal. Now, to be very clear, 0:01:28.440 --> 0:01:32.400 I continue to think that it is not likely. It's 0:01:32.440 --> 0:01:36.680 not fifty percent or higher probability that Trump will actually 0:01:36.720 --> 0:01:41.000 try to terminate Pal, but it's clearly a non trivial risk, 0:01:41.040 --> 0:01:44.200 a serious risk, and when it's put before markets, you 0:01:44.240 --> 0:01:48.440 get the verdict that you got yesterday, yield higher dollar, 0:01:48.640 --> 0:01:55.240 lower stocks, lower, fundamentally reduced attractiveness of US assets across 0:01:55.280 --> 0:01:59.600 the board. That is I think a cautionary message, and 0:01:59.640 --> 0:02:03.640 I hope pits being heard in the right places. Remember 0:02:03.680 --> 0:02:06.600 that up to this point, what we've seen in markets 0:02:07.040 --> 0:02:10.960 is a clear sign of erosion of confidence in US 0:02:11.160 --> 0:02:15.920 administration economic policy making. But we have not seen a 0:02:16.040 --> 0:02:18.760 loss of confidence in the FED. We can prove that 0:02:19.200 --> 0:02:22.560 because up to this point the inflation break evens have 0:02:22.639 --> 0:02:26.720 stayed very well behaved. The market is not priced in 0:02:26.880 --> 0:02:30.520 stagflation trades. But if you ever got to the point 0:02:30.760 --> 0:02:37.040 where FED independence was actually being broken or an attempt 0:02:37.160 --> 0:02:39.320 to break it in real time. I think what you'd 0:02:39.360 --> 0:02:44.160 see is a shift towards stagflation trades, as well as 0:02:44.520 --> 0:02:48.600 a broader intensification of across the board market weakness and 0:02:48.720 --> 0:02:49.280 US assets. 0:02:49.400 --> 0:02:51.400 So, Christian, let's talk about what we've seen so far. 0:02:51.480 --> 0:02:54.680 We have seen and rebalancing away from dollar denominated assets. 0:02:54.720 --> 0:02:57.280 We've seen that over the last several weeks. How much 0:02:57.320 --> 0:02:58.960 toothpaste do you think is out of the tube? How 0:02:59.040 --> 0:03:00.639 much damage is done? Parable? 0:03:01.080 --> 0:03:02.680 Is that damage? 0:03:04.680 --> 0:03:04.880 Well? 0:03:04.919 --> 0:03:08.400 I think right now we're in an intermediate spot between 0:03:08.680 --> 0:03:12.800 business as usual ups and downs in markets and the 0:03:12.919 --> 0:03:18.320 kind of fundamental tectonic regime shift that one of your 0:03:18.400 --> 0:03:22.160 earlier guests was quoted discussing just before this segment began. 0:03:23.080 --> 0:03:26.200 What we've been seeing in the last few weeks is 0:03:26.400 --> 0:03:32.359 absolutely not business as usual. We've seen substantial upward pressure 0:03:32.760 --> 0:03:36.440 on real yields and the real term premium that investors 0:03:36.440 --> 0:03:42.440 demands a hold US government debt despite a deteriorating economic outlook. 0:03:43.120 --> 0:03:47.000 We've also seen the dollar go down on days when 0:03:47.040 --> 0:03:49.200 the yields have been going up. That's the sort of 0:03:49.200 --> 0:03:52.160 thing that you normally see in emerging markets and is 0:03:52.280 --> 0:03:55.600 a sign that capital is being reallocated out of the 0:03:55.720 --> 0:03:59.040 US at the margin. But I think it's still premature 0:03:59.480 --> 0:04:04.760 to talk about a fundamental regime shift. We're not there yet. 0:04:05.360 --> 0:04:08.920 You know, the dollar was overvalued coming in on many measures, 0:04:08.960 --> 0:04:13.720 so some dollar retracement is not perhaps extraordinary. The world 0:04:13.800 --> 0:04:17.680 was over allocated to the US, So again, reallocation out 0:04:17.720 --> 0:04:20.680 of the US at the margin not in itself the 0:04:20.760 --> 0:04:22.800 sign that the old regime is breaking. But there are 0:04:22.800 --> 0:04:26.440 lots of warning signs here. And of course the subtlety 0:04:26.480 --> 0:04:29.720 here is that if there is even a significant risk 0:04:30.080 --> 0:04:32.839 that we could be looking at an economic regime change, 0:04:32.960 --> 0:04:37.120 and that is going to affect asset prices today well 0:04:37.120 --> 0:04:40.440 in advance of whether when we discover whether the regime 0:04:40.520 --> 0:04:41.640 is actually shifting or not. 0:04:41.839 --> 0:04:44.760 Okay, so christ, let's game out what it would look 0:04:44.800 --> 0:04:47.160 like if, to use your phrase, we did see a 0:04:47.200 --> 0:04:49.919 real Liz Trust type moment in the United States, with 0:04:49.960 --> 0:04:52.480 a real loss of confidence both in fin independence as 0:04:52.520 --> 0:04:56.280 well as policy certainty going forward in the United States. 0:04:56.320 --> 0:04:58.159 What would that look like in terms of asset prices 0:04:58.200 --> 0:04:58.800 going forward? 0:05:00.520 --> 0:05:02.880 Well, so, what I wanted to sort of point to 0:05:03.000 --> 0:05:06.320 here is to begin with that the starting position is 0:05:06.520 --> 0:05:10.760 very different. Right, The US is not the UK. The 0:05:10.839 --> 0:05:15.720 US is the core holding in every global investors portfolios, 0:05:15.760 --> 0:05:19.599 the core holding in every official sector portfolio, the dollar 0:05:19.720 --> 0:05:22.920 dominant currency. So it takes a lot more to generate 0:05:22.960 --> 0:05:26.320 the type of liz Trust dynamics in the US than 0:05:26.480 --> 0:05:30.159 it did in the UK. And we're definitely not there yet. 0:05:30.400 --> 0:05:34.560 But what would that pathway look like. That pathway would 0:05:34.640 --> 0:05:41.839 essentially involve morphing from a tariff crisis to a fiscal crisis, 0:05:42.400 --> 0:05:46.080 and the mechanism by which that would happen is a 0:05:46.360 --> 0:05:50.440 global buyers strike in the treasury market at the time 0:05:50.480 --> 0:05:55.920 when the deficit blew out on an economic downturn, lack 0:05:55.960 --> 0:06:01.360 of serious physical consolidation in tax legislation, and potentially even 0:06:01.400 --> 0:06:05.560 some doubling down on unfunded tax cuts down the lines 0:06:05.640 --> 0:06:08.839 try to pull the US out of that recession. To 0:06:08.920 --> 0:06:12.400 be really clear, that's not my forecast. It's not even 0:06:12.440 --> 0:06:15.000 my main risk case. My main risk case is a 0:06:15.040 --> 0:06:18.760 garden variety recession. But it is more than a tail 0:06:18.880 --> 0:06:23.760 risk at this point already, And if the FED chair 0:06:23.800 --> 0:06:26.720 were to be fired, I think the risk of that 0:06:26.880 --> 0:06:30.200 morphing from a tariff crisis to a fiscal crisis would 0:06:30.200 --> 0:06:31.000 move up a lot. 0:06:31.560 --> 0:06:34.080 You keep saying we're not in a fundamental regime shift. 0:06:34.200 --> 0:06:37.040 Yet we're not at this Liz Trust moment yet. So 0:06:37.080 --> 0:06:39.840 the catalyst for you might be something on the fiscal front. Well, 0:06:39.839 --> 0:06:42.839 what happens when the tax negotiations become the new main 0:06:42.920 --> 0:06:48.440 driver and the president is pushing for more than just TCJA. 0:06:48.520 --> 0:06:53.240 So I think the area that we all need to 0:06:53.279 --> 0:06:57.799 be focused on and thinking about is the interaction between 0:06:58.080 --> 0:07:00.960 the trade policy, the tariffs more broadly pulling back from 0:07:01.040 --> 0:07:04.800 international economic insecurity engagement on the part of the US, 0:07:05.440 --> 0:07:08.359 and the fiscal front, where the US is already running 0:07:08.400 --> 0:07:11.600 a large structural deficit, and as you point out, you know, 0:07:11.640 --> 0:07:15.640 this tax legislation moving through that looks at this stage 0:07:15.840 --> 0:07:20.000 unlikely to tackle serious fiscal consolidation, with pressures to add 0:07:20.360 --> 0:07:23.760 more tax cuts, you know, to what is already in 0:07:23.800 --> 0:07:28.040 the hopper. So as every you know, as every economist 0:07:28.160 --> 0:07:31.280 NERD will tell you, a trade deficit is simply a 0:07:31.280 --> 0:07:35.360 capital surplus. And so when you start to to, you know, 0:07:35.440 --> 0:07:39.960 to pull away from international economic engagement on the trade side, 0:07:40.160 --> 0:07:43.480 it almost inevitably is going to have consequences on the 0:07:43.520 --> 0:07:46.200 capital account side as well. And that's where we've got 0:07:46.200 --> 0:07:48.560 to be careful because a good part of that capital 0:07:48.600 --> 0:07:50.400 is funding the US deficit. 0:07:50.680 --> 0:07:53.080 Christna looking forward to continuing the conversation with you, sir. 0:07:53.360 --> 0:07:55.960 Brilliant as always, Krista go with that of Emma Coore. 0:08:06.200 --> 0:08:09.960 Robert Starkna City marking down growth expectations, writing quote, we 0:08:09.960 --> 0:08:12.400 see global growth falling from just down to three percent 0:08:12.520 --> 0:08:15.240 last year to two point one percent in twenty twenty five, 0:08:15.440 --> 0:08:17.720 as our forecasts have been marked down for a broad 0:08:17.720 --> 0:08:21.080 group of economies, including the United States. Rob Joint just 0:08:21.160 --> 0:08:23.200 now for more rop good morning, good morning, two point 0:08:23.240 --> 0:08:26.080 one percent. That's global recession territory, isn't it. 0:08:26.080 --> 0:08:28.680 It's starting to get into that territory. 0:08:28.800 --> 0:08:31.480 It would be a distinctly weak year, much weaker than 0:08:31.520 --> 0:08:33.320 we saw over the last few years when we grew 0:08:33.720 --> 0:08:38.360 just a bit below global trend, but still probably would 0:08:38.400 --> 0:08:41.360 skirt that definition of global recession. But that being said, 0:08:41.559 --> 0:08:44.480 I think the risk to the forecasts are skewed strongly 0:08:44.520 --> 0:08:48.480 to the downside, especially because within that forecast we still 0:08:48.480 --> 0:08:51.559 have China growing at a decent rate despite this trade 0:08:51.600 --> 0:08:54.000 war going on between the US and China, and we 0:08:54.040 --> 0:08:55.240 don't have a US recession. 0:08:55.240 --> 0:08:57.400 In the forecast, we have low growth but no recession. 0:08:57.760 --> 0:09:00.439 If those two downside risk materialize, you can easily get 0:09:00.440 --> 0:09:01.320 into global recession. 0:09:01.480 --> 0:09:03.960 Just sit on China for a bait. What's driving that growth? 0:09:04.320 --> 0:09:07.280 Well, it's interesting if you go back not too long ago, 0:09:07.320 --> 0:09:09.320 we were actually marking up growth in China. We were 0:09:09.360 --> 0:09:12.200 marketingmp growth in Europe. These narratives were getting more positive 0:09:12.240 --> 0:09:14.520 in China. We were starting to see signs that private 0:09:14.520 --> 0:09:17.800 sector demand was picking up. You had the positive AI 0:09:17.920 --> 0:09:21.120 story that was developing in the investments around that. But 0:09:21.240 --> 0:09:24.360 this trade war is kind of reversed that narrative and the. 0:09:24.320 --> 0:09:25.600 Headwinds are going to be substantial. 0:09:25.720 --> 0:09:28.280 We do see the government coming out with more stimulus 0:09:28.280 --> 0:09:30.120 to try and offset some of that, which is why 0:09:30.360 --> 0:09:32.920 that forecast is not even lower on the year. But 0:09:33.080 --> 0:09:34.720 you know, it's going to be a big challenge of 0:09:34.760 --> 0:09:36.359 this trade war pers that persists. 0:09:36.600 --> 0:09:37.480 How much can. 0:09:37.360 --> 0:09:39.439 There be a huge divergence between the rest of the 0:09:39.440 --> 0:09:41.520 world and the United States or the rest of the 0:09:41.520 --> 0:09:44.480 world actually takes off and it starts expanding at a 0:09:44.520 --> 0:09:47.000 faster rate, Especially based in the fact that rates can 0:09:47.080 --> 0:09:50.760 keep going lower, you might get disinflationary forces in certain places, 0:09:51.000 --> 0:09:53.600 and you have the potential for stimulus at the same 0:09:53.640 --> 0:09:56.600 time that money is flowing into their economies and away 0:09:56.600 --> 0:09:59.319 from the United States. And it's a pretty potentially rosy 0:09:59.360 --> 0:10:02.079 scenario for outside of the United States to diverge. 0:10:02.240 --> 0:10:02.480 Yeah. 0:10:02.480 --> 0:10:05.160 Absolutely, And if you look at the contours of our forecast, 0:10:05.480 --> 0:10:07.400 you get a lot of softness in the US, you 0:10:07.440 --> 0:10:10.520 get softness elsewhere. And it depends on how these tariff 0:10:10.760 --> 0:10:14.559 negotiations and tariff uncertainty evolves. But other parts of the 0:10:14.559 --> 0:10:17.880 world hold up relatively well outside of China. Most of 0:10:17.880 --> 0:10:20.520 the EMS, we've been marking some of them down slowly, 0:10:20.559 --> 0:10:22.920 but most of them still have pretty solid growth forecasts. 0:10:22.960 --> 0:10:26.160 But I do think that the policy uncertainty and the 0:10:26.200 --> 0:10:28.080 tariffs that are emitting from the US is going to 0:10:28.120 --> 0:10:29.280 weigh on a lot of economies. 0:10:29.320 --> 0:10:30.760 I mean, for Europe it's a good example. 0:10:31.080 --> 0:10:33.600 We had one percent growth over the next four quarters 0:10:34.000 --> 0:10:37.480 prior to these tariff stresses. Now we have close to 0:10:37.559 --> 0:10:39.680 zero growth or just above that. So I think for 0:10:39.880 --> 0:10:42.000 the rest of the world, it's going to be hard 0:10:42.080 --> 0:10:46.080 to grow or at a solid rate, given that these 0:10:46.120 --> 0:10:48.839 tariffs are still looming large and trade uncertainty is still 0:10:48.880 --> 0:10:49.480 looming large. 0:10:49.520 --> 0:10:51.920 How much would you have to see to get more 0:10:52.160 --> 0:10:55.400 constructive on the global outlook where suddenly a week or 0:10:55.440 --> 0:10:58.720 dollar actually helps support US companies. You end up with 0:10:58.760 --> 0:11:00.839 a little bit more in terms of certainty with. 0:11:00.840 --> 0:11:03.800 Trade deals, and suddenly all of this sort. 0:11:03.640 --> 0:11:06.720 Of negativity versus course the hard data has been solid 0:11:06.960 --> 0:11:08.760 and things are looking a little bit more like they 0:11:08.760 --> 0:11:09.880 were maybe three months ago. 0:11:10.000 --> 0:11:10.200 Yeah. 0:11:10.200 --> 0:11:12.959 Absolutely, And I think we're in that ninety day pause, 0:11:13.120 --> 0:11:16.120 and if we start to get trade deals materializing over 0:11:16.160 --> 0:11:19.160 that period and there starts to be signs that the 0:11:19.200 --> 0:11:22.840 administration is backing off of its tougher stance on tariffs, 0:11:22.880 --> 0:11:25.160 not backing off entirely. We do think those trade deals 0:11:25.200 --> 0:11:27.600 are going to have probably a ten percent minimum tariff, 0:11:27.640 --> 0:11:29.760 those sectoral tarifs will stay in place. But if you 0:11:29.800 --> 0:11:32.240 start to see us moving away from that very high 0:11:32.320 --> 0:11:35.640 level of uncertainty where we don't know what the tariff's 0:11:35.640 --> 0:11:37.120 going to look like in a week or two weeks, 0:11:37.400 --> 0:11:39.480 and you start to get those deals emerging, I think 0:11:39.520 --> 0:11:41.840 the global economy is still going to have a tough 0:11:41.920 --> 0:11:44.720 patch for the next few quarters, but I could see 0:11:44.760 --> 0:11:47.400 that forecast for the global economy that's at two point 0:11:47.480 --> 0:11:50.000 one moving up a bit if that uncertainty starts coming 0:11:50.360 --> 0:11:53.040 off the boil. But right now, I think the risks 0:11:53.040 --> 0:11:55.959 again are still skewed to the downside, especially because more 0:11:55.960 --> 0:11:58.640 tariffs are probably likely to be announced in coming weeks 0:11:58.640 --> 0:12:00.600 and we don't know how these negotiates are going to go. 0:12:00.720 --> 0:12:05.160 And these negotiations are for trading partners, not China, where 0:12:05.280 --> 0:12:08.960 America gets most of it's good good How long can 0:12:09.000 --> 0:12:11.800 you wait around and not have a trade deal with China? 0:12:12.320 --> 0:12:14.840 Yeah, And I think that's the challenging situation, is that 0:12:15.160 --> 0:12:19.960 this trade war feels untenable from both sides. You're looking 0:12:19.960 --> 0:12:23.320 at tariffs on many goods that go across both borders 0:12:23.520 --> 0:12:24.760 of well over one hundred percent. 0:12:25.120 --> 0:12:26.760 That trade is going to be uneconomical. 0:12:26.840 --> 0:12:30.239 So if you keep those tariffs on, trading those categories 0:12:30.280 --> 0:12:33.000 is basically going to fall to zero over time. And 0:12:33.559 --> 0:12:35.960 we still get in a direct sense, that's not even 0:12:35.960 --> 0:12:39.480 including indirect trade throughout other countries, over thirteen percent of 0:12:39.480 --> 0:12:42.840 our imports from China, So it's a big headwind. I 0:12:42.880 --> 0:12:45.600 think we're probably going to see the temperature cool down 0:12:45.640 --> 0:12:48.280 there as well, but the longer that persists, the deeper 0:12:48.280 --> 0:12:51.680 the risks are. Especially one risk in that conversation is 0:12:51.800 --> 0:12:54.480 what happens with global supply chains? Are we going to 0:12:54.480 --> 0:12:57.480 get shortages and stresses like we saw during the pandemic. 0:12:57.800 --> 0:13:01.720 Given that China is still deeply entwined in global supply chains, can. 0:13:01.679 --> 0:13:04.000 China still grow if other countries put their walls up? 0:13:04.559 --> 0:13:06.880 Well, that's going to be another tough conversation is if 0:13:06.880 --> 0:13:09.800 this trade war persists. Are other countries is going to 0:13:09.840 --> 0:13:13.040 put on tariffs on China to kind of gain favor 0:13:13.040 --> 0:13:15.000 with the US, and we're going to have the world 0:13:15.040 --> 0:13:17.280 kind of breaking up into spheres again. I hope we 0:13:17.320 --> 0:13:20.880 don't go down that route. But China, I think will 0:13:20.880 --> 0:13:23.760 be okay for you know, the near term because they 0:13:23.800 --> 0:13:25.920 have enough policy stimulus space, they have a lot of 0:13:25.960 --> 0:13:29.280 connectivities with other economies. But if we're in a persistent 0:13:29.320 --> 0:13:31.960 deep trade war, it's going to wait significantly on their 0:13:32.000 --> 0:13:34.160 economy over the medium term. 0:13:34.280 --> 0:13:36.760 From the perspective of price stability, the Europeans might have 0:13:36.800 --> 0:13:40.240 to if you say a chane of USCN y ufcm 0:13:40.360 --> 0:13:42.760 y has gone from seven forty to eight forty since 0:13:42.760 --> 0:13:44.920 the stand of February, they're going to have to eat 0:13:45.000 --> 0:13:47.520 a lot of Chinese exports isn't that the biggest threat 0:13:47.559 --> 0:13:49.400 to price stability on the continent right now? 0:13:49.559 --> 0:13:53.080 It's a big challenge because these exports have to go somewhere, 0:13:53.240 --> 0:13:56.920 and again, thirteen percent of US imports, that's a lot 0:13:56.920 --> 0:13:57.400 of goods. 0:13:58.360 --> 0:13:59.840 You know. Some of that we think is going to. 0:13:59.840 --> 0:14:03.280 Be rerouted through other economies, as we were talking. 0:14:03.120 --> 0:14:04.959 About that eventually go to the US. 0:14:05.040 --> 0:14:07.319 But if the administration cracks down on that, that cuts 0:14:07.360 --> 0:14:11.199 off an important channel for those products, and a natural 0:14:11.320 --> 0:14:12.559 point for where those could. 0:14:12.400 --> 0:14:13.800 Go is Europe. 0:14:14.240 --> 0:14:16.520 But I think if that starts to happen, you again 0:14:16.559 --> 0:14:18.880 have a conversation, well, did the Europeans start to put 0:14:18.880 --> 0:14:21.600 on trade barriers of their own to kind of protect 0:14:21.600 --> 0:14:22.960 their own domestic industries. 0:14:23.120 --> 0:14:24.360 So this could get even. 0:14:24.160 --> 0:14:27.400 Messier quicker, really quick, which is saying a lot given 0:14:27.400 --> 0:14:29.440 how MESSI it's been over the last few weeks. 0:14:29.440 --> 0:14:30.840 Just to sit on Europe, do you think they'll have 0:14:30.880 --> 0:14:32.960 to that economy at the moments that still speed. I 0:14:33.000 --> 0:14:34.960 know a lot of people are excited about a prospective 0:14:34.960 --> 0:14:37.680 fiscal stimulus, but we were already talking about zero percent 0:14:37.720 --> 0:14:40.440 growth on the continent. What's this going to do to them? 0:14:40.640 --> 0:14:44.880 Disinflationary price section at the time we have zero percent 0:14:44.960 --> 0:14:46.360 growth on the continent. 0:14:46.840 --> 0:14:49.960 Yeah, exactly, and that's the real challenge. And I think 0:14:50.000 --> 0:14:53.720 in the near term they have other challenges to face 0:14:53.760 --> 0:14:56.960 as well, primarily also negotiating with the US, and I 0:14:57.000 --> 0:14:59.440 think that puts them in a very difficult spot, which 0:14:59.480 --> 0:15:02.040 is another that I think other countries are going to 0:15:02.080 --> 0:15:04.800 be putting pressure on the US and on China to 0:15:04.880 --> 0:15:07.160 kind of come to the table and make some sort 0:15:07.160 --> 0:15:09.040 of deal, because as you said, this is going to 0:15:09.120 --> 0:15:12.320 be another challenge for Europe that is going to be 0:15:12.320 --> 0:15:15.080 difficult to handle. Actually in an environment where again, if 0:15:15.080 --> 0:15:17.000 you go back a few months ago, you were finally 0:15:17.000 --> 0:15:19.360 starting to get a positive narrative emerge out of Europe 0:15:19.480 --> 0:15:22.400 for the first time in several years. Unfortunately that's largely 0:15:22.400 --> 0:15:25.120 gone away with the current trade stresses. That could come 0:15:25.160 --> 0:15:29.840 back if these trade sesses move away, but I think again, 0:15:29.880 --> 0:15:32.320 at a minimum, they're going to be facing challenges from 0:15:32.360 --> 0:15:33.200 both sides. 0:15:32.920 --> 0:15:35.400 From the USA and huge changes in the past few months. 0:15:35.400 --> 0:15:37.040 For rob it's going to say thank you, sir, Robert 0:15:37.040 --> 0:15:50.640 Suckerman of City Alex no Rastat at the Kaido Institute, Alex, 0:15:50.680 --> 0:15:52.400 welcome to the program. This is what you had to 0:15:52.400 --> 0:15:54.840 say on the fat if they were controlled by the president, 0:15:54.920 --> 0:15:57.400 rights would fold in flesh and with spiral growth wood 0:15:57.400 --> 0:16:00.760 Snack Knight a disaster. Ultimately, that seems unlikely, but we 0:16:00.760 --> 0:16:03.440 should all be vigilant to that possibility. Alex, Why do 0:16:03.480 --> 0:16:05.280 you think it remains somewhat unlikely? 0:16:06.720 --> 0:16:09.920 Remains someone unlikely because the law is fairly clear on this. 0:16:10.120 --> 0:16:13.560 The ability of the president to remove and replace the 0:16:13.600 --> 0:16:16.440 share of the Federal Reserve at whim seems to be 0:16:16.480 --> 0:16:20.120 outside of his power. This hasn't been tested, of course, 0:16:20.480 --> 0:16:22.120 in the last one hundred and twelve years of the 0:16:22.160 --> 0:16:27.040 Federal Reserve system existing, but it seems fairly robust. So 0:16:27.240 --> 0:16:29.720 you know, this president surprises us all the time, right, 0:16:29.880 --> 0:16:32.240 But I think the law is probably on our side here. 0:16:32.560 --> 0:16:35.280 So when it comes to ousting J. Powell, though, do 0:16:35.320 --> 0:16:37.960 you think the President is doing this to actually have 0:16:38.080 --> 0:16:42.080 a scapegoat if his tariff negotiations don't go as planned. 0:16:43.200 --> 0:16:47.040 I think there's no downside for President Trump politically for 0:16:47.200 --> 0:16:49.880 challenging Chairman Powell. 0:16:50.440 --> 0:16:51.480 If he doesn't get what. 0:16:51.440 --> 0:16:53.280 He wants, he doesn't get a new FED chair, then 0:16:53.320 --> 0:16:54.440 he can always blame it on him. 0:16:54.440 --> 0:16:55.520 If he does get what he wants. 0:16:55.960 --> 0:16:58.920 Then he has control over the Central Bank of the 0:16:59.000 --> 0:17:01.640 United States, which can help help him politically, So there's 0:17:01.640 --> 0:17:04.199 really no downside. Of course, the major downside is on 0:17:04.320 --> 0:17:05.320 the US economy. 0:17:05.440 --> 0:17:07.520 If he succeeds, if he succeeds. 0:17:07.080 --> 0:17:09.880 In getting power with the Central Bank, ending central bank 0:17:09.920 --> 0:17:12.720 independence in the United States, then you'll have those negative 0:17:12.720 --> 0:17:15.880 economic consequences that I talked about, higher inflation, lower growth, 0:17:16.119 --> 0:17:19.600 more political and economic uncertainty. But if he doesn't get 0:17:19.640 --> 0:17:21.719 control of the FED, but he just threatens it, then 0:17:21.720 --> 0:17:24.359 there's a chance that either Powell or future Chairman of 0:17:24.400 --> 0:17:27.439 the Federal Reserve will listen more to the threats of 0:17:27.560 --> 0:17:30.080 politicians like they did in the nineteen seventies when we 0:17:30.119 --> 0:17:33.280 had stagflation, and then we'll have this poor economic outcomes 0:17:33.320 --> 0:17:33.879 going forward. 0:17:34.160 --> 0:17:36.680 Alex where is Congress in all of this, both when 0:17:36.680 --> 0:17:39.280 it comes to tariff and trying to wrankle back some 0:17:39.359 --> 0:17:41.760 of the control on tariff policy, and also when it 0:17:41.760 --> 0:17:42.639 comes to FED policy. 0:17:42.720 --> 0:17:44.080 J Powell does have a boss. 0:17:44.359 --> 0:17:45.119 It's Congress. 0:17:46.240 --> 0:17:49.440 So I have been asking where Congress is for basically 0:17:49.480 --> 0:17:52.240 my entire career on almost every issue. I mean, the 0:17:52.320 --> 0:17:55.880 long term trend for Congress is to pull back its 0:17:55.920 --> 0:17:59.120 power and a grant more and more power to the president. 0:17:59.200 --> 0:18:01.200 So Congress is like a dead institution. 0:18:01.240 --> 0:18:02.320 It's not a dying institution. 0:18:02.440 --> 0:18:05.840 They make noises sometimes they introduced legislation to try to. 0:18:05.760 --> 0:18:06.720 Reign in the president. 0:18:07.240 --> 0:18:11.920 There is recently resolution introduced by Senator Powell to reduce 0:18:12.040 --> 0:18:15.760 his the president's power to set tariff rates. There are 0:18:15.880 --> 0:18:19.040 numerous challenges in the courts saying that no Congress has 0:18:19.080 --> 0:18:22.840 its power, but ultimately it's very difficult to make Congress 0:18:22.960 --> 0:18:26.520 exercise its power if it simply doesn't want to. And 0:18:26.560 --> 0:18:29.399 what we are seeing right now is a Congress not 0:18:29.560 --> 0:18:33.199 taking up its powers and responsibilities to either reign in 0:18:33.240 --> 0:18:36.200 the president or to govern. And they are focusing importantly 0:18:36.200 --> 0:18:39.119 on the tax cuts bill. They're focusing importantly on the 0:18:39.160 --> 0:18:42.520 Tax Cuts and Jobs Act extending that, but outside of that, 0:18:42.560 --> 0:18:46.000 they are not considering major pieces of legislation or getting 0:18:46.000 --> 0:18:48.040 a wrangle or reigns on this president. 0:18:48.440 --> 0:18:49.440 Will that change? 0:18:49.520 --> 0:18:51.600 Will they become more vocal as we head into the 0:18:51.600 --> 0:18:52.520 midterm elections? 0:18:53.640 --> 0:18:55.679 That's probably they probably will. 0:18:55.800 --> 0:18:59.119 Now for Republicans who control, you know, the House, of course, 0:18:59.760 --> 0:19:02.199 be more vocal is dangerous because the head of their 0:19:02.280 --> 0:19:06.320 party of course is President Trump, and he is in charge, 0:19:06.359 --> 0:19:08.159 and sort of the cause of a lot of this 0:19:08.280 --> 0:19:12.560 economic uncertainty is his arbitrary wielding of power, so they 0:19:13.200 --> 0:19:14.760 face a dangerous. 0:19:15.240 --> 0:19:16.359 They'll trade off there. 0:19:16.520 --> 0:19:19.640 But modern Republicans, I think will definitely start to step 0:19:19.720 --> 0:19:21.800 up and try to distance themselves from the President if 0:19:21.800 --> 0:19:23.919 the economy gets worse and it looks like a terrible 0:19:23.960 --> 0:19:25.120 midterm election for them. 0:19:25.359 --> 0:19:27.400 Democrats, of course, will always be. 0:19:27.400 --> 0:19:30.159 Out there criticizing President Trump no matter how good things 0:19:30.520 --> 0:19:33.560 are or how bad things are, but they will probably 0:19:33.600 --> 0:19:36.560 be louder if things get worse. But they might be 0:19:36.640 --> 0:19:39.360 louder in the sense of if the Republicans saying, well, 0:19:39.400 --> 0:19:41.520 you know, this means that President Trump means more power. 0:19:41.560 --> 0:19:44.439 So that doesn't necessarily bode well if they start to 0:19:44.440 --> 0:19:45.040 be louder. 0:19:45.240 --> 0:19:48.000 What a moment, Alex, Thank you, sir Alex Narrista of 0:19:48.080 --> 0:19:59.720 the Cato Institute. He has to take from the full 0:19:59.760 --> 0:20:01.760 of the your Fed, President buil Dumpley right in this 0:20:02.080 --> 0:20:04.800 Trump's pressure on the FED is counterproductive. Not only does 0:20:04.800 --> 0:20:06.960 it increase the motivation for the FED to weight, but 0:20:07.000 --> 0:20:09.720 it also makes households and businesses more concerned about the 0:20:09.720 --> 0:20:13.320 inflation consequences should the Fed's independence come to an end. 0:20:13.440 --> 0:20:15.679 Build joined just now for more, but welcome to the program. 0:20:15.720 --> 0:20:17.000 So in good morning, I want to pick up on 0:20:17.000 --> 0:20:19.600 the first part of that second line. Not only does 0:20:19.640 --> 0:20:22.680 it increase the motivation for the FED to wait? Can 0:20:22.720 --> 0:20:25.760