1
00:00:00,120 --> 00:00:02,920
Speaker 1: Brought you by Bank of America, Mary Lynch. Investing in

2
00:00:03,000 --> 00:00:07,960
Speaker 1: local communities, economies and a sustainable future. That's a power

3
00:00:08,080 --> 00:00:12,360
Speaker 1: of global connections, Mary Lynch, Pierce Fenner, and Smith Incorporated

4
00:00:12,760 --> 00:00:27,400
Speaker 1: Member s I p C. Welcome to the Bloomberg Surveillance Podcast.

5
00:00:27,840 --> 00:00:31,520
Speaker 1: I'm Tom Keene with David Gura. Daily we bring you

6
00:00:31,560 --> 00:00:36,600
Speaker 1: insight from the best in economics, finance, investment, and international relations.

7
00:00:37,040 --> 00:00:41,600
Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and

8
00:00:41,680 --> 00:00:50,239
Speaker 1: of course, on the Bloomberg. In the last twenty four hours,

9
00:00:50,520 --> 00:00:55,000
Speaker 1: Lauren Adler and Matt Feeler over Brookings say fifteen million

10
00:00:55,120 --> 00:00:59,160
Speaker 1: people will go off the rolls. Do you agree. I

11
00:00:59,160 --> 00:01:01,120
Speaker 1: don't think it's gonna be fifteen million people. If you

12
00:01:01,160 --> 00:01:04,200
Speaker 1: look at those who are enrolled in the Medicaid expansion,

13
00:01:04,400 --> 00:01:08,480
Speaker 1: or a lot of them were actually eligible before Obamacare passed,

14
00:01:08,800 --> 00:01:11,920
Speaker 1: a lot of them could obtain private coverage, especially if

15
00:01:11,959 --> 00:01:16,360
Speaker 1: you repeal the Obamacare regulation regulations, which will cause premiums

16
00:01:16,400 --> 00:01:19,280
Speaker 1: to plummet for the vast majority of people in the exchanges.

17
00:01:19,600 --> 00:01:22,360
Speaker 1: That is people. Why the bill that Paul Ryan and

18
00:01:22,400 --> 00:01:25,000
Speaker 1: the Republican leaders in the House have put forward is

19
00:01:25,080 --> 00:01:28,959
Speaker 1: so inadequate. It does not repeal those regulations. Those regulations

20
00:01:28,959 --> 00:01:31,639
Speaker 1: are destabilizing in the market. They're going to toss forty

21
00:01:31,680 --> 00:01:35,319
Speaker 1: three thousand Tennessee residents out of their coverage that next year,

22
00:01:35,400 --> 00:01:37,959
Speaker 1: leaving them with nothing. These are people with cancer and

23
00:01:38,000 --> 00:01:41,319
Speaker 1: expensive conditions. Obamacare is in crisis right now, and they

24
00:01:41,360 --> 00:01:43,600
Speaker 1: are not repealing the parts that are causing that crept.

25
00:01:43,640 --> 00:01:46,840
Speaker 1: Within your note, you take Eastern Tennessee and folks, what's

26
00:01:46,840 --> 00:01:50,160
Speaker 1: so important about this is the granularity of Cannon's work.

27
00:01:50,240 --> 00:01:53,600
Speaker 1: You take Eastern Tennessee and you expand it to the nation.

28
00:01:53,920 --> 00:01:56,760
Speaker 1: The Congressional Budget Office has to do the same thing.

29
00:01:57,040 --> 00:02:00,320
Speaker 1: Can you explain to me why we have to rush

30
00:02:00,600 --> 00:02:06,280
Speaker 1: before CBO scores or estimates the cost. Well, what's happening

31
00:02:06,320 --> 00:02:08,680
Speaker 1: is that the Republican leadership is trying to manipulate its

32
00:02:08,680 --> 00:02:11,000
Speaker 1: own members. They're trying to get them to commit to

33
00:02:11,040 --> 00:02:13,760
Speaker 1: a bill before they know how much it costs. Look,

34
00:02:13,880 --> 00:02:17,600
Speaker 1: the Republican leadership, they have estimates of how much this

35
00:02:17,639 --> 00:02:21,520
Speaker 1: is gonna cost. I've spoken with staffers to the leadership

36
00:02:21,560 --> 00:02:23,760
Speaker 1: who said, you know, we've consulted with CBO, We've consulted

37
00:02:23,800 --> 00:02:27,480
Speaker 1: with OMB, We've consulted with actuaries at at multiple firms.

38
00:02:27,800 --> 00:02:30,280
Speaker 1: They have numbers, but they're not sharing them, and that

39
00:02:30,400 --> 00:02:32,399
Speaker 1: tells us that the numbers are not gonna look good.

40
00:02:32,840 --> 00:02:35,440
Speaker 1: The rank and filer are not gonna like those numbers.

41
00:02:35,480 --> 00:02:37,800
Speaker 1: So while are they asking them to commit to the

42
00:02:37,840 --> 00:02:40,560
Speaker 1: bill before seeing the numbers, it's because they want to.

43
00:02:40,919 --> 00:02:42,760
Speaker 1: They want to rope them in and make it harder

44
00:02:42,800 --> 00:02:46,320
Speaker 1: for them to UH to reject this bill after the

45
00:02:46,400 --> 00:02:49,520
Speaker 1: numbers come out. Kevin Surreally spoke with Senator Paul of

46
00:02:49,600 --> 00:02:53,000
Speaker 1: Kentucky a few days ago. I think he's a libertarian,

47
00:02:53,320 --> 00:02:56,280
Speaker 1: but he's not a Michael Cannon libertarian. What is the

48
00:02:56,400 --> 00:03:02,760
Speaker 1: distinction between Senator Paul's outrage and your academic and careful work. Well,

49
00:03:02,800 --> 00:03:06,240
Speaker 1: I think, for one thing, Senator Paul has to get reelected. UH.

50
00:03:06,280 --> 00:03:09,240
Speaker 1: But but he and I share a lot of critiques

51
00:03:09,280 --> 00:03:12,760
Speaker 1: of this law, of this of this legislation UH and

52
00:03:12,760 --> 00:03:15,000
Speaker 1: and the biggest one is that it is not repeal.

53
00:03:15,400 --> 00:03:18,120
Speaker 1: It preserves for the federal government all the powers that

54
00:03:18,200 --> 00:03:23,000
Speaker 1: Obamacare gave to the federal government over the private health

55
00:03:23,040 --> 00:03:28,200
Speaker 1: insurance market, including all the provisions that are destabilizing insurance,

56
00:03:28,240 --> 00:03:30,919
Speaker 1: not just in the in Eastern Tennessee for those forty

57
00:03:30,960 --> 00:03:33,480
Speaker 1: three thousand residents who are gonna lose all coverage. But

58
00:03:33,600 --> 00:03:36,160
Speaker 1: across the country, there are a thousand counties with only

59
00:03:36,280 --> 00:03:40,200
Speaker 1: one carrier left in the Obamacare exchange, and three million

60
00:03:40,240 --> 00:03:43,119
Speaker 1: people are subject to losing their insurance if just one

61
00:03:43,160 --> 00:03:47,360
Speaker 1: carrier leaves. Okay, So, Michaile, you're extremely extremely critical of

62
00:03:47,440 --> 00:03:51,120
Speaker 1: this GOP alternative. They must realize that there are a

63
00:03:51,120 --> 00:03:53,760
Speaker 1: lot of critics out there. What would you do in

64
00:03:53,800 --> 00:03:57,200
Speaker 1: their shoes to make it a little bit better. I

65
00:03:57,240 --> 00:03:58,680
Speaker 1: wouldn't want to make it just a little bit better.

66
00:03:58,680 --> 00:04:00,480
Speaker 1: It needs to get a lot better. So what I

67
00:04:00,520 --> 00:04:03,160
Speaker 1: would do with three things. One, push for full repeal,

68
00:04:03,280 --> 00:04:08,040
Speaker 1: including the regulations that this law doesn't even try to

69
00:04:08,440 --> 00:04:12,480
Speaker 1: This legislation doesn't even try to repeal. Uh. Second, deal

70
00:04:12,560 --> 00:04:15,040
Speaker 1: with the that will cause premiums to fall for the

71
00:04:15,120 --> 00:04:18,080
Speaker 1: vast majority of people affected. Second, you want to give

72
00:04:18,160 --> 00:04:21,240
Speaker 1: states the flexibility to spend their medicaid funds so that

73
00:04:21,279 --> 00:04:24,000
Speaker 1: they can target those funds toward the truly needy, including

74
00:04:24,040 --> 00:04:26,520
Speaker 1: people with pre existing conditions who are currently in the

75
00:04:26,839 --> 00:04:29,159
Speaker 1: exchanges and would lose their cover. So you're taking care

76
00:04:29,279 --> 00:04:32,200
Speaker 1: of those folks, But The most important thing, perhaps is

77
00:04:32,240 --> 00:04:35,440
Speaker 1: that you need to bring down healthcare prices. This legislation

78
00:04:35,480 --> 00:04:37,640
Speaker 1: doesn't do that. It takes the Obamacare approach, which is

79
00:04:38,080 --> 00:04:41,080
Speaker 1: throw more government subsidies at unaffordable care rather than make

80
00:04:41,120 --> 00:04:43,840
Speaker 1: healthcare more affordable. And the way you bring healthcare prices

81
00:04:43,960 --> 00:04:47,560
Speaker 1: down so that fewer patients are vulnerable is by giving

82
00:04:47,560 --> 00:04:51,240
Speaker 1: consumers the money that employers and government now control. They'll

83
00:04:51,240 --> 00:04:52,920
Speaker 1: bring those prices down. The way you do that is

84
00:04:52,960 --> 00:04:56,039
Speaker 1: by expanding health savings accounts. Okay, what are the chances

85
00:04:56,240 --> 00:05:00,240
Speaker 1: of them changing and doing something that you've just mentioned.

86
00:05:00,360 --> 00:05:03,720
Speaker 1: There must be people in the Trump administration that are

87
00:05:03,720 --> 00:05:06,240
Speaker 1: looking at it and that are trying to figure out

88
00:05:06,320 --> 00:05:08,599
Speaker 1: the best approach and the best way to deal with it.

89
00:05:08,640 --> 00:05:12,719
Speaker 1: Who does President Trump listen to. Well, what what's gonna

90
00:05:12,839 --> 00:05:16,280
Speaker 1: make the difference is whether conservatives in the House tell

91
00:05:16,279 --> 00:05:18,000
Speaker 1: the leadership, we're just not going to vote for this.

92
00:05:18,040 --> 00:05:19,640
Speaker 1: If they tell the leadership, we're not going to vote

93
00:05:19,640 --> 00:05:21,880
Speaker 1: for this, and the leadership has to make changes. And

94
00:05:22,200 --> 00:05:24,279
Speaker 1: a number of House conservatives already went to the White

95
00:05:24,279 --> 00:05:28,120
Speaker 1: House yesterday they spoke with President Trump about making changes

96
00:05:28,120 --> 00:05:30,240
Speaker 1: to this law, moving into more in the direction that

97
00:05:30,360 --> 00:05:33,760
Speaker 1: I've mentioned in the direction of expanding health savings accounts.

98
00:05:34,240 --> 00:05:37,799
Speaker 1: Hopefully they will get rid of the tax, the subsidies,

99
00:05:37,839 --> 00:05:42,760
Speaker 1: the entitlement spending that that this legislation would retain from Obamacare,

100
00:05:43,200 --> 00:05:47,480
Speaker 1: the the government subsidies for private health insurance companies h

101
00:05:47,560 --> 00:05:50,839
Speaker 1: and replace that with expanded health savings. You might help

102
00:05:50,880 --> 00:05:53,599
Speaker 1: me here with a question that came up three times yesterday.

103
00:05:53,880 --> 00:05:57,720
Speaker 1: Francine Laquise coming to you from London? What's wrong with

104
00:05:57,880 --> 00:06:02,480
Speaker 1: Francine's medical coverage? I had three people yesterday say to me,

105
00:06:02,760 --> 00:06:05,320
Speaker 1: why can't we do it like Canada? Why can't we

106
00:06:05,360 --> 00:06:07,479
Speaker 1: do it like England? Why can't we do it like

107
00:06:07,480 --> 00:06:11,360
Speaker 1: blah blah blah? What's wrong with Francine laquise medical coverage?

108
00:06:12,839 --> 00:06:14,760
Speaker 1: All sorts of things. For one thing, it's not very

109
00:06:14,760 --> 00:06:17,039
Speaker 1: responsive to the patients because the patient is not the

110
00:06:17,080 --> 00:06:22,880
Speaker 1: one controlling the money. Uh. There are some pretty um

111
00:06:23,480 --> 00:06:27,520
Speaker 1: horrific examples of government rationeting in those systems. I'm not

112
00:06:27,520 --> 00:06:29,360
Speaker 1: going to say that no one benefits from those systems.

113
00:06:29,400 --> 00:06:31,200
Speaker 1: Of course they do, or else these governments would have

114
00:06:31,200 --> 00:06:34,120
Speaker 1: gotten rid of them. But they do not deliver the

115
00:06:34,240 --> 00:06:37,559
Speaker 1: sorts of innovations that the United States delivers in terms

116
00:06:37,600 --> 00:06:41,200
Speaker 1: of new medical technologies, nor the sorts of innovations that

117
00:06:41,440 --> 00:06:45,359
Speaker 1: really no system delivers in terms of driving down the

118
00:06:45,400 --> 00:06:48,360
Speaker 1: price of healthcare, making it more convenient and more affordable

119
00:06:48,400 --> 00:06:51,560
Speaker 1: for everyone. Only markets are able to do that. We

120
00:06:51,640 --> 00:06:54,400
Speaker 1: see that in certain corners of the healthcare. We don't

121
00:06:54,440 --> 00:06:57,280
Speaker 1: see it anywhere in Canada or the UK. I pay taxes,

122
00:06:57,279 --> 00:06:59,400
Speaker 1: I pay a lot of taxes, but then my insurance

123
00:06:59,800 --> 00:07:02,640
Speaker 1: is free, Tom, right, it's funding. This is the problem

124
00:07:02,760 --> 00:07:04,640
Speaker 1: with my health care. It's not you have to fund

125
00:07:04,680 --> 00:07:07,359
Speaker 1: it and people have to be clea exact that you

126
00:07:07,360 --> 00:07:10,000
Speaker 1: have to pay a certain percentage of your annual income

127
00:07:10,360 --> 00:07:12,760
Speaker 1: for everyone to be protected. Francine to help me here.

128
00:07:12,880 --> 00:07:15,720
Speaker 1: I know it's Mr laquas birthday and it's a deeply

129
00:07:15,760 --> 00:07:19,560
Speaker 1: emotional weekend at the Lak house right now. Help Michael

130
00:07:19,640 --> 00:07:23,000
Speaker 1: Cannon here, Dr Laka, are you getting okay coverage for

131
00:07:23,040 --> 00:07:25,440
Speaker 1: your offspring in England or do you have to fly

132
00:07:25,560 --> 00:07:28,600
Speaker 1: to Boston or New York to get a pediatric visit

133
00:07:29,040 --> 00:07:33,600
Speaker 1: with your kids? Alright, Michael, for the record, we're all healthy,

134
00:07:33,840 --> 00:07:36,920
Speaker 1: Tom for the moment, so long may that be and

135
00:07:36,960 --> 00:07:40,000
Speaker 1: that makes everyone's life a lot easier. But Michael we

136
00:07:40,480 --> 00:07:42,600
Speaker 1: This is the point, and Tom has hit it on

137
00:07:43,000 --> 00:07:47,239
Speaker 1: the head, is that we may have certain concerns about

138
00:07:47,240 --> 00:07:50,600
Speaker 1: our systems here in Europe. But is it because people

139
00:07:51,240 --> 00:07:52,720
Speaker 1: for the fact that you don't want to give free

140
00:07:52,760 --> 00:07:55,720
Speaker 1: healthcare to everyone in the US? Is that because there's

141
00:07:55,760 --> 00:07:59,000
Speaker 1: a US mentality that you kill what you eat and

142
00:07:59,040 --> 00:08:01,280
Speaker 1: so people don't want to pay to look out for

143
00:08:01,320 --> 00:08:04,120
Speaker 1: their neighbors. Or is it really the concern that Tom

144
00:08:04,200 --> 00:08:07,600
Speaker 1: was pointing to that you need specialist help and that

145
00:08:07,600 --> 00:08:09,720
Speaker 1: would not be covered if you have basic health care

146
00:08:09,760 --> 00:08:12,920
Speaker 1: for everyone. The reason I want to get the government

147
00:08:12,960 --> 00:08:15,800
Speaker 1: out of healthcare because I want fewer people to fall

148
00:08:15,800 --> 00:08:17,560
Speaker 1: through the cracks of our health care sector. I want

149
00:08:17,600 --> 00:08:20,240
Speaker 1: to use innovations to fill in those cracks, to make

150
00:08:20,280 --> 00:08:24,520
Speaker 1: health care better, to make the price of healthcare fall

151
00:08:24,960 --> 00:08:28,360
Speaker 1: so that more people can afford medical care themselves. And

152
00:08:28,400 --> 00:08:30,160
Speaker 1: the rest of us are wealthier, so we're better able

153
00:08:30,160 --> 00:08:32,680
Speaker 1: to help those who can't help themselves. And in the

154
00:08:32,760 --> 00:08:35,720
Speaker 1: United States, you know, I'm I'm I'm a critic of

155
00:08:35,760 --> 00:08:37,760
Speaker 1: you as health care sector. But one of the things

156
00:08:37,800 --> 00:08:39,840
Speaker 1: that we do in the United States better than any

157
00:08:39,840 --> 00:08:43,280
Speaker 1: other nation is we develop new medical technologies, new drugs,

158
00:08:43,320 --> 00:08:45,840
Speaker 1: new treatments, and those help fill in the cracks not

159
00:08:45,920 --> 00:08:47,960
Speaker 1: just in our health care sector, but in the UK

160
00:08:48,400 --> 00:08:51,560
Speaker 1: and in Canada and in UH, in all sorts of

161
00:08:51,600 --> 00:08:55,160
Speaker 1: third world nations. So so that's an important part of

162
00:08:55,160 --> 00:08:58,840
Speaker 1: this puzzle. And other nations are not are not stepping up,

163
00:08:58,840 --> 00:09:14,120
Speaker 1: are not delivering them sots of innovation joining us now,

164
00:09:14,200 --> 00:09:16,960
Speaker 1: Villain Bowder, Global Chief Economists at City, great to have

165
00:09:17,000 --> 00:09:19,440
Speaker 1: you here in our Bloomberg eleven three oh at studios.

166
00:09:19,520 --> 00:09:22,480
Speaker 1: Let's start with it with your outlook, your forecast for

167
00:09:22,520 --> 00:09:25,440
Speaker 1: growth and for inflation. We had adjusted forecasts from the

168
00:09:25,440 --> 00:09:26,719
Speaker 1: o e c D at the beginning of the week.

169
00:09:26,720 --> 00:09:28,760
Speaker 1: We heard from Mario Dragging, the president of the e

170
00:09:28,840 --> 00:09:31,920
Speaker 1: c B yesterday as well. How much adjustment of you made.

171
00:09:31,920 --> 00:09:34,960
Speaker 1: Where does your forecast stand right now? For growth? City

172
00:09:35,000 --> 00:09:38,120
Speaker 1: suppiccial forecast is for two point this year. It's supposed

173
00:09:38,120 --> 00:09:39,880
Speaker 1: to one post six last year. I think you're probably

174
00:09:39,880 --> 00:09:44,000
Speaker 1: going to be UH on the up side of that

175
00:09:44,200 --> 00:09:48,280
Speaker 1: a bit so in the sort of low to mid two,

176
00:09:48,600 --> 00:09:51,880
Speaker 1: which is an approved it over last year, and be

177
00:09:52,480 --> 00:09:55,440
Speaker 1: of course UH significantly faster the potential up with growth,

178
00:09:55,440 --> 00:09:57,160
Speaker 1: so output gap they will be closing. But ever, a

179
00:09:57,160 --> 00:09:59,960
Speaker 1: full employment is will be hitting it. Mario Dragg yesterday

180
00:10:00,000 --> 00:10:02,600
Speaker 1: saying there is not a sense of urgency and monetary

181
00:10:02,640 --> 00:10:05,040
Speaker 1: policy anywhere. What did you make of what he had

182
00:10:05,080 --> 00:10:07,360
Speaker 1: to say yesterday, Yes, about the data, but just also

183
00:10:07,400 --> 00:10:11,920
Speaker 1: about the monetary policy environment. Well, he had to balance

184
00:10:12,400 --> 00:10:19,160
Speaker 1: two different objectives. Right First, it's clear that even underlying

185
00:10:19,160 --> 00:10:23,439
Speaker 1: inflation rising in ura now, let alone headline inflation, it's

186
00:10:23,440 --> 00:10:27,800
Speaker 1: a really hit two um, it becomes very difficult to

187
00:10:27,920 --> 00:10:33,240
Speaker 1: argue that continued super loose multi policy makes sense. At

188
00:10:33,280 --> 00:10:35,880
Speaker 1: the same time, he doesn't want to stop doing qui

189
00:10:36,160 --> 00:10:39,240
Speaker 1: tomorrow or raise rates the day after tomorrow. So he

190
00:10:39,320 --> 00:10:43,880
Speaker 1: had to throw a bone to the two tonics, which

191
00:10:43,960 --> 00:10:48,199
Speaker 1: was big enough for them to let him get on

192
00:10:48,920 --> 00:10:52,400
Speaker 1: doing sixty billion of worth of asset purchases until the

193
00:10:52,480 --> 00:10:56,440
Speaker 1: end of the year and probably only slow tapering after that.

194
00:10:56,600 --> 00:11:00,120
Speaker 1: Can I just jump into the conversation, David Gray, if

195
00:11:00,160 --> 00:11:03,360
Speaker 1: I said throw a bone at the two toonics, I

196
00:11:03,360 --> 00:11:09,200
Speaker 1: would be thrown off of what we're radio. Continue the

197
00:11:09,200 --> 00:11:11,240
Speaker 1: the the elephant of the room yesterday, of course, so

198
00:11:11,600 --> 00:11:14,600
Speaker 1: was politics. How big an elephant we're looking at here?

199
00:11:14,600 --> 00:11:16,679
Speaker 1: How long is the trunk? How bigger the tasks when

200
00:11:16,720 --> 00:11:18,280
Speaker 1: wh when you look at the French election coming up

201
00:11:18,280 --> 00:11:21,360
Speaker 1: before that, of course the Dutch election next week. Yeah,

202
00:11:21,600 --> 00:11:24,880
Speaker 1: the Dust election of course is not systemically important. Something

203
00:11:24,880 --> 00:11:30,880
Speaker 1: you're not following. I wouldn't do anything radical without permission

204
00:11:30,920 --> 00:11:34,600
Speaker 1: from the big neighbor to the east. Um. But yes,

205
00:11:34,720 --> 00:11:40,840
Speaker 1: it clearly would would be a huge event if the

206
00:11:41,320 --> 00:11:45,440
Speaker 1: so called Freedom Party, the Dutch right being populists, were

207
00:11:45,480 --> 00:11:47,520
Speaker 1: to be part of the next government. They may be

208
00:11:47,640 --> 00:11:50,720
Speaker 1: the largest party, even that's not clear. They won't get

209
00:11:50,840 --> 00:11:54,640
Speaker 1: in all likelihood even the vote. The Dutch have a

210
00:11:54,679 --> 00:11:58,800
Speaker 1: strictly proportional lower house, so no party has ever had

211
00:11:58,840 --> 00:12:03,120
Speaker 1: a majority. If our the government with part of a coalition. Um,

212
00:12:03,400 --> 00:12:05,000
Speaker 1: if you're part of a coalition, you won't be able

213
00:12:05,000 --> 00:12:07,559
Speaker 1: to have a referendum because I have to change the

214
00:12:07,600 --> 00:12:10,360
Speaker 1: referendum law to have a referendum the EU. So I

215
00:12:10,400 --> 00:12:13,400
Speaker 1: think it's all going to end up most likely with

216
00:12:13,440 --> 00:12:18,360
Speaker 1: another centers that coalition, without the hard hats, without the

217
00:12:18,360 --> 00:12:23,520
Speaker 1: populist but more obstructionist in your's own decision making and

218
00:12:23,559 --> 00:12:28,400
Speaker 1: the new decision making. Um. Because even the establishment parties

219
00:12:28,720 --> 00:12:31,600
Speaker 1: that have taken on the rhetoric and so the substance

220
00:12:31,800 --> 00:12:34,960
Speaker 1: of the policies of the populists. How worried are you

221
00:12:35,000 --> 00:12:37,680
Speaker 1: at this point about the commentary we're hearing about fears

222
00:12:37,679 --> 00:12:40,200
Speaker 1: about the the integrity of of of the Euros on

223
00:12:40,280 --> 00:12:42,520
Speaker 1: what might happen here if the election goes a certain way.

224
00:12:42,800 --> 00:12:45,000
Speaker 1: In France. We heard from Mario Dragging yesterday the euro

225
00:12:45,120 --> 00:12:49,040
Speaker 1: is irrevocable. Um, are you concerned about the the the

226
00:12:49,240 --> 00:12:53,240
Speaker 1: the continued cohesion of the European Union in the short run,

227
00:12:53,320 --> 00:12:58,880
Speaker 1: I'm not particularly worried. Clearly, m during uh this year

228
00:12:58,920 --> 00:13:02,959
Speaker 1: and next drag you will still be around as head

229
00:13:03,200 --> 00:13:07,000
Speaker 1: of right. Here's no, he's going to be around the

230
00:13:07,600 --> 00:13:12,040
Speaker 1: first October nineteen, So I don't start really worrying until

231
00:13:12,760 --> 00:13:15,319
Speaker 1: we get to early nineteen and people start talking about

232
00:13:15,400 --> 00:13:20,559
Speaker 1: his his successor now. Um, it is true that there

233
00:13:20,559 --> 00:13:27,160
Speaker 1: could be UH much closer disaster if France elected the PEN.

234
00:13:27,440 --> 00:13:30,680
Speaker 1: I think still very unlike, though less unlikely than it

235
00:13:30,880 --> 00:13:36,800
Speaker 1: was before Mr Field first implodeed and now he's reploading somewhat.

236
00:13:37,200 --> 00:13:41,600
Speaker 1: And Uh then of course Italy, where where's the breakup

237
00:13:41,720 --> 00:13:46,319
Speaker 1: of the Democratic Party, the leading party of government. Um,

238
00:13:46,640 --> 00:13:49,080
Speaker 1: we are likely to see an election which could result

239
00:13:49,080 --> 00:13:51,880
Speaker 1: in the majority for enter your enter youth parties. Even then,

240
00:13:53,559 --> 00:13:57,400
Speaker 1: remember this, a majority for a pen even upon presidency,

241
00:13:58,080 --> 00:14:01,520
Speaker 1: does not mean that France leaves. You don't know to you,

242
00:14:01,840 --> 00:14:05,000
Speaker 1: because not everybody who votes for the PENN also wants

243
00:14:05,000 --> 00:14:08,760
Speaker 1: to and the same in Italy, although the popular opinion

244
00:14:08,920 --> 00:14:13,439
Speaker 1: is turning quite sharply against you memberships. I'm most worried

245
00:14:13,440 --> 00:14:17,199
Speaker 1: about Italy, but the real trouble vote stat I think

246
00:14:17,280 --> 00:14:19,600
Speaker 1: until the dousand nineteen, you know, not that I would

247
00:14:19,600 --> 00:14:21,520
Speaker 1: have a beverage of my choice at the Vault bar

248
00:14:21,640 --> 00:14:24,560
Speaker 1: at the Waldorf Story in Amsterdam, but it's it's possibly

249
00:14:24,640 --> 00:14:28,280
Speaker 1: something i'd consider. Help me, and I'm sorry. The Dutch

250
00:14:28,280 --> 00:14:30,960
Speaker 1: are always out front under the sort of like David

251
00:14:31,040 --> 00:14:34,080
Speaker 1: Mike my amateur takers. They're sort of like California. The

252
00:14:34,160 --> 00:14:38,240
Speaker 1: Dutch are like California. Help me here with where we are, seriously,

253
00:14:38,280 --> 00:14:43,400
Speaker 1: Professor Powder, with neo fascism and the neo the things

254
00:14:43,440 --> 00:14:45,520
Speaker 1: we don't want to talk about as we come up

255
00:14:45,520 --> 00:14:50,960
Speaker 1: on these historic elections. What's your measurement of potential fascist

256
00:14:51,040 --> 00:14:55,760
Speaker 1: tendencies in Europe? I think it's it's clear that UH

257
00:14:56,120 --> 00:15:01,800
Speaker 1: much of the political UH populist move months have key

258
00:15:01,880 --> 00:15:06,360
Speaker 1: elements both in language, and it is post policies of fascism, right,

259
00:15:06,400 --> 00:15:14,120
Speaker 1: the call for strong leaders um, extreme nationalism, nativism, looking

260
00:15:14,160 --> 00:15:20,120
Speaker 1: down on others, um, seeing the nation as humiliated by

261
00:15:20,680 --> 00:15:29,960
Speaker 1: the elite, by the establishment, looking for strong preferably mucho leaders, racism, Um.

262
00:15:30,120 --> 00:15:33,440
Speaker 1: It's it's all there, um, and it is I think

263
00:15:33,520 --> 00:15:39,080
Speaker 1: extremely worrying. Last time Europe began to flood with fascism

264
00:15:39,120 --> 00:15:42,880
Speaker 1: in the niteyen thirties, they couldn't stop. And I hope

265
00:15:43,960 --> 00:15:46,960
Speaker 1: partly because we went through that, and I think that

266
00:15:47,040 --> 00:15:50,400
Speaker 1: even Europeans are capable of learning right that they will

267
00:15:50,800 --> 00:15:54,520
Speaker 1: pull back and not uh take the last step towards

268
00:15:55,120 --> 00:16:01,000
Speaker 1: having an actual the fact of fascist regime in empower

269
00:16:01,120 --> 00:16:04,360
Speaker 1: in a significant European nation. But it is something that

270
00:16:04,400 --> 00:16:06,640
Speaker 1: we have to be ware of as a risk. Yes,

271
00:16:06,920 --> 00:16:09,160
Speaker 1: we looked at him. What happened in the UK is

272
00:16:09,160 --> 00:16:11,080
Speaker 1: something that told us perhaps what might happen here in

273
00:16:11,120 --> 00:16:12,520
Speaker 1: the U s. As you look ahead to the Dutch

274
00:16:12,600 --> 00:16:15,640
Speaker 1: election next week, is is there any sort of indicative

275
00:16:15,720 --> 00:16:18,120
Speaker 1: value to it? Um? Is the way that that election

276
00:16:18,160 --> 00:16:19,920
Speaker 1: turns out going to tell us anything about what's going

277
00:16:19,960 --> 00:16:21,800
Speaker 1: to happen in France? Indeed, what might happen in Italy.

278
00:16:21,960 --> 00:16:27,360
Speaker 1: Not not really, it's a it's very country specific. Builders.

279
00:16:27,440 --> 00:16:31,320
Speaker 1: The leader of the Dutch Populists is in a way

280
00:16:31,320 --> 00:16:36,040
Speaker 1: an establishment politician. He's been around in politics for nineteen years,

281
00:16:36,080 --> 00:16:39,880
Speaker 1: first as a member of the traditional Conservatives and then

282
00:16:40,480 --> 00:16:43,120
Speaker 1: the last ten years or so as leader of his

283
00:16:43,200 --> 00:16:45,360
Speaker 1: own party, and if I should say, the only member

284
00:16:45,600 --> 00:16:49,440
Speaker 1: of his own party, which is a bit unique, I

285
00:16:49,960 --> 00:16:55,920
Speaker 1: think that he his um, you know, anti immigrant, especially

286
00:16:55,960 --> 00:17:01,160
Speaker 1: in the Moroccan rhetoric is so vitriolic. Zoe fishes his

287
00:17:01,280 --> 00:17:06,560
Speaker 1: anti Islam rhetoric. Let's close down all the mosque, all

288
00:17:06,600 --> 00:17:11,520
Speaker 1: the mosques, let's ban the Quran is so extreme that

289
00:17:11,880 --> 00:17:15,200
Speaker 1: even many other populists in Europe do want to have

290
00:17:15,240 --> 00:17:17,480
Speaker 1: anything to do with him. What an honor to speak

291
00:17:17,480 --> 00:17:21,280
Speaker 1: to Johan Luxury Shore yesterday and Busters Chops about seventeenth

292
00:17:21,320 --> 00:17:25,199
Speaker 1: century France economics and mercantilism, and now to rip you

293
00:17:25,280 --> 00:17:28,919
Speaker 1: apart as well on seventeenth century Dutch mercantile is um

294
00:17:29,280 --> 00:17:32,240
Speaker 1: as well explained to our audience what the Dutch and

295
00:17:32,280 --> 00:17:35,360
Speaker 1: the French wrought a number of hundreds of years ago

296
00:17:35,520 --> 00:17:39,520
Speaker 1: about mercantile is um. What is it? Well, the Dutch

297
00:17:39,520 --> 00:17:43,080
Speaker 1: were not really mercantilist. They were merchants, right. They didn't

298
00:17:43,080 --> 00:17:45,960
Speaker 1: believe it imports or a bad thing, and that exports

299
00:17:46,240 --> 00:17:50,199
Speaker 1: a measure of virtue. So, uh, they affect created a

300
00:17:50,200 --> 00:17:53,120
Speaker 1: trading empire that for the size of the country, which

301
00:17:53,119 --> 00:17:54,880
Speaker 1: I think at two and a half people at a time,

302
00:17:55,240 --> 00:17:58,879
Speaker 1: despite almost a Portuguese standards. So I think the Dutch

303
00:17:58,920 --> 00:18:05,680
Speaker 1: did trade ride inch basically the precursor of Navarro. Yeah, well,

304
00:18:06,119 --> 00:18:09,639
Speaker 1: the precursor of Professor Navarro. Now our audience knows that

305
00:18:09,720 --> 00:18:13,480
Speaker 1: Mr Navarro is advising as president. What is the element

306
00:18:13,600 --> 00:18:18,520
Speaker 1: of trump navarro economics that hearkens back to the seventeenth century,

307
00:18:19,240 --> 00:18:26,520
Speaker 1: The statement that, uh, they believe that you help a

308
00:18:26,600 --> 00:18:31,520
Speaker 1: country by restricting imports. One of the oldest insights dates

309
00:18:31,680 --> 00:18:37,000
Speaker 1: nty six about Learner trade is that a tariff on

310
00:18:37,160 --> 00:18:42,520
Speaker 1: imports is equivalent to attacks on exports. They both stick trade, right,

311
00:18:42,760 --> 00:18:46,880
Speaker 1: So when you go after imports, give or take um

312
00:18:47,400 --> 00:18:51,280
Speaker 1: a small period of adjustment, you will be hurting exports

313
00:18:51,520 --> 00:18:54,399
Speaker 1: as much as you heart imports. You'll be hurting trade,

314
00:18:54,800 --> 00:18:59,240
Speaker 1: and the world and your country will be worse off.

315
00:18:59,600 --> 00:19:04,200
Speaker 1: Of course, the Games fell trade very unfairly distributed attend

316
00:19:04,280 --> 00:19:06,679
Speaker 1: is an issue, but that's a domestic political issue that

317
00:19:06,720 --> 00:19:09,560
Speaker 1: has to be addressed by taxation of public spending, not

318
00:19:09,760 --> 00:19:13,960
Speaker 1: by protection is m David jump into this academic treatise, folks.

319
00:19:14,000 --> 00:19:17,600
Speaker 1: I'm gonna put out learners symmetry theorem with the major

320
00:19:17,720 --> 00:19:21,119
Speaker 1: thank you to jug Dis Bugwadi of Columbia University for

321
00:19:21,280 --> 00:19:23,680
Speaker 1: driving it. For see about it right. We're scoring points

322
00:19:23,680 --> 00:19:25,520
Speaker 1: about her. He may come back. Can you come back

323
00:19:25,560 --> 00:19:30,199
Speaker 1: next week on the Dutch Dutch elections in America? Wherever

324
00:19:30,240 --> 00:19:32,160
Speaker 1: you are in the planet, we need you. We're honored

325
00:19:32,200 --> 00:19:35,080
Speaker 1: to have you back on the Dutch elections. But David,

326
00:19:35,080 --> 00:19:37,800
Speaker 1: pick up the seminar here from the there's no math

327
00:19:37,880 --> 00:19:41,720
Speaker 1: in this. The Learners symmetry theorem very good. We're hearing

328
00:19:41,760 --> 00:19:43,880
Speaker 1: so much debate about this border adjusted tax. I note

329
00:19:43,880 --> 00:19:46,159
Speaker 1: that in your fiscal projections you're you're not factoring that

330
00:19:46,200 --> 00:19:48,639
Speaker 1: in Why why is that? And how likely are we

331
00:19:48,680 --> 00:19:51,240
Speaker 1: to see a tax reform without a border just vod

332
00:19:51,240 --> 00:19:54,560
Speaker 1: just tax is simply a switch of Edith value out

333
00:19:54,560 --> 00:19:57,440
Speaker 1: of tax with just doesn't have a profit tax from

334
00:19:57,560 --> 00:20:03,040
Speaker 1: a tax base. The Texas exports and exempts imports to

335
00:20:03,119 --> 00:20:08,080
Speaker 1: one of the taxes imports and exacts exports, and there's

336
00:20:08,400 --> 00:20:13,960
Speaker 1: parva facia. Looks like a great way to stimulate exports

337
00:20:14,000 --> 00:20:17,639
Speaker 1: and heard imports, and that's how certainly the importing next

338
00:20:17,680 --> 00:20:20,280
Speaker 1: putting industries have faced it. It's also likely to be

339
00:20:20,359 --> 00:20:22,120
Speaker 1: viewed the rest of the world as a hostile act.

340
00:20:22,359 --> 00:20:27,679
Speaker 1: But learning symmetry implies that this will be neutral. That basically,

341
00:20:28,440 --> 00:20:33,119
Speaker 1: the tax inclusive relative price of imports uh no bill

342
00:20:33,520 --> 00:20:36,840
Speaker 1: go up, but the tax exclusive reurprisive imports to exports

343
00:20:36,840 --> 00:20:39,639
Speaker 1: will go down and nothing real will be affected. It

344
00:20:39,680 --> 00:20:43,199
Speaker 1: may take a while, but that's the story. Um uh.

345
00:20:43,280 --> 00:20:46,800
Speaker 1: The world doesn't believe this, and so it is very,

346
00:20:46,920 --> 00:20:51,360
Speaker 1: very contentious. So far, there is no sign that Mr

347
00:20:51,400 --> 00:20:54,879
Speaker 1: Trump has brought it effectly compleatably be too complicated. The

348
00:20:54,960 --> 00:21:00,119
Speaker 1: one reason I think that mayopic politicians like this out

349
00:21:00,160 --> 00:21:04,399
Speaker 1: from benefiting exports and hooting imports is that it would

350
00:21:04,480 --> 00:21:07,000
Speaker 1: be a short run revenue win for for the US

351
00:21:07,040 --> 00:21:10,520
Speaker 1: because imports the exports. So if you switch taxation from

352
00:21:10,600 --> 00:21:14,440
Speaker 1: exposure imports, you're getting a win for about if corporate

353
00:21:14,520 --> 00:21:16,919
Speaker 1: tax rate in the new regime about point six of

354
00:21:16,960 --> 00:21:20,320
Speaker 1: GDP annually. Of course, she's the US is a data

355
00:21:20,440 --> 00:21:24,480
Speaker 1: country externally right you expected. The present value of future

356
00:21:24,520 --> 00:21:26,879
Speaker 1: exports has to be greater. The personality inputs a long

357
00:21:26,960 --> 00:21:30,880
Speaker 1: run revenue negative, but politicians don't do the long run.

358
00:21:31,160 --> 00:21:33,399
Speaker 1: It feeling better. Great to see here, global chief economists.

359
00:21:33,560 --> 00:21:38,240
Speaker 1: We'll come back next week if we can. It's symmetry

360
00:21:47,600 --> 00:21:51,119
Speaker 1: brought you by Bank of America. Mary Lynch. Dedicated to

361
00:21:51,240 --> 00:21:55,080
Speaker 1: bringing our clients insights and solutions to meet the challenges

362
00:21:55,240 --> 00:21:58,959
Speaker 1: of a transforming world. That's the power of global connections.

363
00:21:59,359 --> 00:22:04,280
Speaker 1: Mary Lynch, Pierce Federan Smith Incorporated, Member s I p C.

364
00:22:07,880 --> 00:22:11,560
Speaker 1: Job's Day, Jim Blast and Bill Gross to be along,

365
00:22:11,720 --> 00:22:14,800
Speaker 1: but always on jobs. Today we try to corral the

366
00:22:14,840 --> 00:22:17,800
Speaker 1: professor from Princeton. Alan Krueger joins as a former Chairman

367
00:22:17,800 --> 00:22:22,399
Speaker 1: of the President's Council of Economic Advisors. Like a magnet.

368
00:22:22,560 --> 00:22:26,800
Speaker 1: Alan Krueger goes where nineties six thousand were screaming just

369
00:22:26,840 --> 00:22:30,920
Speaker 1: a few days ago. Barcelona, Spain. Is the city still

370
00:22:31,240 --> 00:22:35,359
Speaker 1: lit up over this football match, the greatest game. Supposedly

371
00:22:38,880 --> 00:22:41,919
Speaker 1: had a little trouble checking into my hotel room because

372
00:22:41,960 --> 00:22:45,160
Speaker 1: people store are flocking to the city. You know, I

373
00:22:45,560 --> 00:22:48,160
Speaker 1: just extraordinan folster. I thinking of the Telegraph for great

374
00:22:48,200 --> 00:22:51,480
Speaker 1: coverage on something I don't understand. Paris anger Man taking

375
00:22:51,480 --> 00:22:53,480
Speaker 1: it on the nose. They add up the two games,

376
00:22:53,560 --> 00:22:55,919
Speaker 1: David Cura. They do one game and then they do

377
00:22:56,000 --> 00:22:59,600
Speaker 1: another added up in Barcelona with a great victory. What's

378
00:22:59,640 --> 00:23:02,560
Speaker 1: gonna be the great victory here for Cherry Yellen Alan

379
00:23:02,640 --> 00:23:05,640
Speaker 1: Krueger is a wage growth. It's gonna perfectly time where

380
00:23:05,680 --> 00:23:09,639
Speaker 1: her rate rises. Well, yeah, so far, I think she's

381
00:23:09,680 --> 00:23:15,840
Speaker 1: shown um remarkable perception in reading the economy, and we

382
00:23:15,920 --> 00:23:18,800
Speaker 1: are seeing inflation moved to the two percent target. Unemployment

383
00:23:18,880 --> 00:23:22,160
Speaker 1: rate I think is pretty close to full employment. So

384
00:23:22,200 --> 00:23:25,800
Speaker 1: the next, uh, next step would be wage growth approaching

385
00:23:25,800 --> 00:23:28,720
Speaker 1: three or a bit higher. You know, we haven't talked

386
00:23:28,960 --> 00:23:31,439
Speaker 1: enough on this show about immigration policy, what the President

387
00:23:31,520 --> 00:23:33,399
Speaker 1: has proposed, at least in broad strokes, and what that

388
00:23:33,440 --> 00:23:35,960
Speaker 1: could mean for the labor market. Have you and others

389
00:23:36,000 --> 00:23:38,840
Speaker 1: begun to think about that issue in particular here that

390
00:23:38,880 --> 00:23:41,920
Speaker 1: if we see more people asked to or forced to

391
00:23:41,960 --> 00:23:44,639
Speaker 1: leave this country, if we see more restrictions placed on immigration,

392
00:23:44,680 --> 00:23:47,680
Speaker 1: if we see Alan Krueger a merit based system, how

393
00:23:47,680 --> 00:23:52,639
Speaker 1: that could affect the contours of the US labor market. Well,

394
00:23:52,680 --> 00:23:56,480
Speaker 1: I think the proposal to build a wall and to

395
00:23:56,600 --> 00:23:59,240
Speaker 1: restrict immigration to the US is kind of productive for

396
00:23:59,280 --> 00:24:02,080
Speaker 1: our economy, and you know we're going to face a

397
00:24:02,160 --> 00:24:05,600
Speaker 1: worker shortage. Look at our demographics. Um, we want to

398
00:24:05,640 --> 00:24:07,480
Speaker 1: raise our growth rate. I don't think the way to

399
00:24:07,520 --> 00:24:11,280
Speaker 1: do it is by by restricting immigration. I think the

400
00:24:11,320 --> 00:24:15,200
Speaker 1: impact of immigration on wages is actually not all that great.

401
00:24:15,320 --> 00:24:18,520
Speaker 1: The studies have found that immigration doesn't have much of

402
00:24:18,520 --> 00:24:21,439
Speaker 1: an effect on wages of natives and immigrants. Common they

403
00:24:21,480 --> 00:24:23,959
Speaker 1: create demand. You know, it's not only an issue of supply.

404
00:24:24,119 --> 00:24:28,480
Speaker 1: They also uh by by goods and services. So I

405
00:24:28,520 --> 00:24:31,320
Speaker 1: think the economy will shrink if we have a sharp

406
00:24:31,440 --> 00:24:34,800
Speaker 1: change in our immigration policy. How surprised were you by

407
00:24:34,800 --> 00:24:37,080
Speaker 1: by all of the commentary last week from from FED

408
00:24:37,119 --> 00:24:39,640
Speaker 1: policy makers. I wonder if if if we're any closer

409
00:24:39,640 --> 00:24:42,600
Speaker 1: to getting some unanimity here on the tabled our star

410
00:24:42,680 --> 00:24:45,440
Speaker 1: on that neutral rate, are we seeing more cohesion among

411
00:24:45,480 --> 00:24:50,359
Speaker 1: FED policymakers. I think so, you know, I think that

412
00:24:51,440 --> 00:24:53,879
Speaker 1: the stars are aligning for for the FED, and that

413
00:24:54,400 --> 00:24:56,960
Speaker 1: the economy has been improving it about the rate that

414
00:24:57,040 --> 00:25:00,800
Speaker 1: they've been expecting the last year or two. Ellen helped

415
00:25:00,840 --> 00:25:04,120
Speaker 1: me here with the Great Debate which is are we

416
00:25:04,240 --> 00:25:07,760
Speaker 1: fully employed? I mean, you've been in the absolute crucible.

417
00:25:08,000 --> 00:25:09,840
Speaker 1: Did you ever sit on a couch in the Oval

418
00:25:09,920 --> 00:25:13,639
Speaker 1: office with your legs up on the couch taking taking

419
00:25:13,640 --> 00:25:17,280
Speaker 1: a selfie like we've seen with the Trump administration. You

420
00:25:17,320 --> 00:25:22,080
Speaker 1: never did that, right? No, Okay, I just wanted to

421
00:25:22,080 --> 00:25:24,719
Speaker 1: clear that up on a Friday before the jobs report.

422
00:25:24,800 --> 00:25:30,040
Speaker 1: Are we fully employed? I think you know, we are

423
00:25:30,080 --> 00:25:34,359
Speaker 1: still affected by the Great Recession. And I think there

424
00:25:34,359 --> 00:25:36,840
Speaker 1: are two major developments in the economy over the last

425
00:25:36,840 --> 00:25:39,040
Speaker 1: ten years. One was the Great Recession, and then the

426
00:25:39,080 --> 00:25:42,760
Speaker 1: other is the Baby boom heading retirement age and labor

427
00:25:42,800 --> 00:25:45,399
Speaker 1: force has been tranking for both of those reasons, but

428
00:25:45,520 --> 00:25:47,879
Speaker 1: mainly I think because of the aging of the population.

429
00:25:48,600 --> 00:25:50,760
Speaker 1: And I think those who left the labor force because

430
00:25:50,760 --> 00:25:53,159
Speaker 1: of the Great Recession is going to be very to

431
00:25:53,160 --> 00:25:56,040
Speaker 1: bring them back. Do you know where the neutral rate

432
00:25:56,160 --> 00:26:00,879
Speaker 1: is for the interest rates for the Fed? The target rate?

433
00:26:00,880 --> 00:26:06,159
Speaker 1: How many rate rises gets us to gets us to neutrality? Yeah? Uh,

434
00:26:06,280 --> 00:26:07,560
Speaker 1: you know, I'm going to plead that I'm not a

435
00:26:07,600 --> 00:26:13,440
Speaker 1: monetary content. There you go. I don't know. I think

436
00:26:13,480 --> 00:26:15,840
Speaker 1: that for the next year at the economy's kind of

437
00:26:15,880 --> 00:26:18,959
Speaker 1: got momentum and maybe next year and a half and

438
00:26:19,040 --> 00:26:21,200
Speaker 1: after that, I'm not sure. The question is kind of

439
00:26:21,240 --> 00:26:24,960
Speaker 1: how many rate increases school we have by then? Professor Krueger,

440
00:26:25,119 --> 00:26:29,159
Speaker 1: you were in the crucible of Obamacare. When the critics

441
00:26:29,200 --> 00:26:33,000
Speaker 1: of Obamacare speak, how do you respond? I'm not saying

442
00:26:33,440 --> 00:26:38,520
Speaker 1: you directly developed it, but you certainly were within the debate.

443
00:26:38,840 --> 00:26:43,960
Speaker 1: How do you respond after watching the sausage get made? Well?

444
00:26:43,960 --> 00:26:48,600
Speaker 1: You know, I think, uh, the Affordable Care Act has

445
00:26:49,200 --> 00:26:53,840
Speaker 1: changed our country. I think for the better. I think, uh,

446
00:26:54,000 --> 00:26:56,080
Speaker 1: it means something different to be an American When we

447
00:26:56,119 --> 00:26:59,880
Speaker 1: have universal health insurance, it's the same as Social Security

448
00:27:00,000 --> 00:27:04,080
Speaker 1: out and having twenty million plus additional Americans have health

449
00:27:04,119 --> 00:27:07,240
Speaker 1: insurance coverage, I think is a major achievement. There's certainly

450
00:27:07,400 --> 00:27:09,720
Speaker 1: parts of the Affordable Care Act that I think could

451
00:27:09,720 --> 00:27:12,959
Speaker 1: have been designed better. Um, but I think it needs

452
00:27:12,960 --> 00:27:15,199
Speaker 1: to scalpel rather than a meat cleaverer in terms of

453
00:27:15,240 --> 00:27:18,440
Speaker 1: trying to improve it. What makes this such a difficult

454
00:27:18,480 --> 00:27:20,639
Speaker 1: issue to deal with? I was talking with the head

455
00:27:20,640 --> 00:27:23,720
Speaker 1: of an insurance company yesterday who said that politics often

456
00:27:23,760 --> 00:27:26,800
Speaker 1: Trump's thoughtful policy when it comes to healthcare. There was

457
00:27:26,800 --> 00:27:28,879
Speaker 1: a lot of criticism of the Affordable Care Act that

458
00:27:28,920 --> 00:27:31,040
Speaker 1: Democrats pushed it through very quickly. Of course, that was

459
00:27:31,080 --> 00:27:33,719
Speaker 1: a nine month process. Here we're seeing this happened over

460
00:27:33,720 --> 00:27:36,720
Speaker 1: the course of a matter of days. Why the reluctance

461
00:27:36,800 --> 00:27:39,040
Speaker 1: to to take one's time with this, to try to

462
00:27:39,040 --> 00:27:42,960
Speaker 1: get it right, to try to get as right as possible. Right, Well,

463
00:27:42,960 --> 00:27:44,960
Speaker 1: it didn't seem so fast when it was happening in

464
00:27:44,960 --> 00:27:48,439
Speaker 1: two thousand nine. It's felt like, especially in the Senate

465
00:27:48,480 --> 00:27:51,880
Speaker 1: side U that Senator Baucus had been reaching out quite

466
00:27:51,880 --> 00:27:54,879
Speaker 1: a bit to try to get bipartisan support. But health

467
00:27:54,920 --> 00:27:59,200
Speaker 1: insurance health care is a very complicated issue. It's almost

468
00:27:59,200 --> 00:28:02,480
Speaker 1: one fifth of the u US economy. Uh, whenever you

469
00:28:02,520 --> 00:28:06,760
Speaker 1: have taxes and transfers, it's complicated when you can uh

470
00:28:07,200 --> 00:28:10,240
Speaker 1: change incentives in the health care system which affect life

471
00:28:10,240 --> 00:28:13,639
Speaker 1: and death decisions. You know, obviously it's going to be

472
00:28:13,680 --> 00:28:17,560
Speaker 1: controversial and should take time to make sure, uh that

473
00:28:17,640 --> 00:28:20,679
Speaker 1: we move in the right directions. Well, what can we

474
00:28:20,760 --> 00:28:23,040
Speaker 1: learn from the way this process is unfolding about how

475
00:28:23,080 --> 00:28:26,399
Speaker 1: tax reform might unfold on Capitol Hill? I'm curious for

476
00:28:26,480 --> 00:28:30,280
Speaker 1: your perspective here, as an academic economist goes into government

477
00:28:30,280 --> 00:28:33,000
Speaker 1: watches this legislative process unfold what you make of it,

478
00:28:33,040 --> 00:28:37,280
Speaker 1: what you make of how this proceeds well. One lesson

479
00:28:37,359 --> 00:28:39,880
Speaker 1: I learned is that as an academic, we shouldn't let

480
00:28:39,880 --> 00:28:42,640
Speaker 1: the best be the enemy of the good. And if

481
00:28:42,640 --> 00:28:46,200
Speaker 1: the political process is moving generally in the right direction,

482
00:28:46,520 --> 00:28:48,640
Speaker 1: even if it's not what we consider to be optimal,

483
00:28:49,320 --> 00:28:51,959
Speaker 1: I think we should view that as success. And I

484
00:28:52,000 --> 00:28:54,880
Speaker 1: think as as academics, we tend to think of what's

485
00:28:54,960 --> 00:28:57,520
Speaker 1: the ideal, what's the optimal, and not compromised from that.

486
00:28:58,320 --> 00:29:01,120
Speaker 1: And in a political environment, you have to have to

487
00:29:01,120 --> 00:29:03,760
Speaker 1: make compromises. So that that's one lesson that I took away.

488
00:29:04,480 --> 00:29:09,040
Speaker 1: Another is our corporate tax system is awful. There's so

489
00:29:09,160 --> 00:29:11,479
Speaker 1: many things we can do to improve it, even if

490
00:29:11,480 --> 00:29:14,600
Speaker 1: it's not ideally, will be steps in the right direction. Um.

491
00:29:14,960 --> 00:29:17,920
Speaker 1: But the politics are extremely complicated because you have so

492
00:29:17,960 --> 00:29:22,800
Speaker 1: many interest roots involved that um, I think it'll take

493
00:29:22,840 --> 00:29:25,960
Speaker 1: quite a while. Alan you have the advantage at Princeton

494
00:29:26,520 --> 00:29:29,640
Speaker 1: of one of our national treasures. Conservatives and liberals alike

495
00:29:30,160 --> 00:29:35,040
Speaker 1: read everything of a Reinehardt writes on healthcare, and he

496
00:29:35,240 --> 00:29:39,160
Speaker 1: you know, he's predicted the collapse of Obamacare, etcetera. When

497
00:29:39,160 --> 00:29:43,600
Speaker 1: when you sit with a Reinhardt in Lincoln Krueger what

498
00:29:43,680 --> 00:29:50,360
Speaker 1: I'm gonna call reality economics with Reinhardt's just grizzled incentives

499
00:29:50,440 --> 00:29:54,080
Speaker 1: within the medical care system, what is the best outcome

500
00:29:54,920 --> 00:29:58,120
Speaker 1: short of what is anathema to Americans, which is a

501
00:29:58,200 --> 00:30:05,200
Speaker 1: national health care system. You know. I think the exchanges

502
00:30:05,680 --> 00:30:08,360
Speaker 1: are a step in the right direction. The exchanges were

503
00:30:08,400 --> 00:30:11,120
Speaker 1: not controversial before they were put in place at the

504
00:30:11,200 --> 00:30:15,719
Speaker 1: national level. States like Utah we're moving towards exchanges prior

505
00:30:15,880 --> 00:30:18,800
Speaker 1: to the Affordable Care Act. So I think that there

506
00:30:18,840 --> 00:30:20,800
Speaker 1: are areas where we can have concessus and in the

507
00:30:20,800 --> 00:30:25,040
Speaker 1: exchanges you can pool risk, you can help uh, entrepreneurs,

508
00:30:25,080 --> 00:30:29,560
Speaker 1: individuals get the advantage of group rates, also the advantage

509
00:30:29,560 --> 00:30:34,000
Speaker 1: of kind of group bargaining more transparency. So I think

510
00:30:34,040 --> 00:30:36,120
Speaker 1: that there are some steps like that where there should

511
00:30:36,160 --> 00:30:39,800
Speaker 1: be universal support. Want just move back to the jobs

512
00:30:39,800 --> 00:30:41,640
Speaker 1: report that we're going to get today. Just looking data?

513
00:30:42,400 --> 00:30:45,760
Speaker 1: Oh that, uh, look at the data what we've gotten.

514
00:30:45,800 --> 00:30:48,560
Speaker 1: More broadly, it seems like the soft data has been

515
00:30:48,600 --> 00:30:51,440
Speaker 1: so strong. There's so much sentiment that's good in the

516
00:30:51,480 --> 00:30:53,560
Speaker 1: economy here in the US and indeed many in many

517
00:30:53,600 --> 00:30:56,600
Speaker 1: parts of of the of the world. When does the

518
00:30:56,640 --> 00:30:59,480
Speaker 1: soft data begin to intersect with the with the hard data.

519
00:30:59,480 --> 00:31:01,320
Speaker 1: When are we can to see the sentiment influencing a

520
00:31:01,360 --> 00:31:07,480
Speaker 1: pickup and hiring? Do you think I think that, UM,

521
00:31:07,880 --> 00:31:10,760
Speaker 1: the key question is what impact doesn't have on consumer spending,

522
00:31:10,880 --> 00:31:14,000
Speaker 1: consumption as well as investment, but mostly for the U.

523
00:31:14,080 --> 00:31:18,640
Speaker 1: S economy. Consumption and UH confidence can increase, but if

524
00:31:18,640 --> 00:31:24,520
Speaker 1: it doesn't translate into people taking more risk um UH

525
00:31:24,560 --> 00:31:29,520
Speaker 1: spending more taking chances, then I don't think it's gonna

526
00:31:29,720 --> 00:31:34,040
Speaker 1: lead to a particularly faster pace of growth. Help me

527
00:31:34,080 --> 00:31:37,240
Speaker 1: here with something that we've talked about before, which is

528
00:31:37,280 --> 00:31:39,840
Speaker 1: some of the experiments going on, and one of them

529
00:31:39,840 --> 00:31:42,560
Speaker 1: in your wheelhouse, Professor, has been the rise in the

530
00:31:42,600 --> 00:31:47,560
Speaker 1: minimum wage. What is your recent observation on what cities

531
00:31:47,600 --> 00:31:50,160
Speaker 1: have done. I'm going to suggest leading the way to

532
00:31:50,240 --> 00:31:54,880
Speaker 1: a higher minimum wage. What what's the Kruger up observation

533
00:31:54,960 --> 00:32:00,360
Speaker 1: of these many experiments. Well, we're in a situation much

534
00:32:00,680 --> 00:32:02,760
Speaker 1: like where we were twenty years ago when the federal

535
00:32:02,760 --> 00:32:05,840
Speaker 1: minimum wage lagged behind, and the states and the cities

536
00:32:05,920 --> 00:32:10,440
Speaker 1: have UH moved ahead of the federal government, and so far,

537
00:32:10,440 --> 00:32:12,280
Speaker 1: I don't think we're seeing the adverse I don't think

538
00:32:12,320 --> 00:32:15,800
Speaker 1: we're seeing adverse effects. Of it um. I do worry

539
00:32:15,840 --> 00:32:19,360
Speaker 1: about a minimum wage of fifteen dollars at the federal level.

540
00:32:19,960 --> 00:32:21,760
Speaker 1: On the other hand, I think seven dollars in twenty

541
00:32:21,800 --> 00:32:25,480
Speaker 1: five cents an hour is nearer historical low. Donald Trump

542
00:32:25,560 --> 00:32:27,840
Speaker 1: said during the campaign that he supported that ten dollar

543
00:32:27,920 --> 00:32:30,920
Speaker 1: federal minimum wage. I haven't heard him say anything about

544
00:32:30,960 --> 00:32:33,720
Speaker 1: it since then. I hope when he has the Labor

545
00:32:33,760 --> 00:32:36,400
Speaker 1: Secretary that he delivers on that promise that seems to

546
00:32:36,400 --> 00:32:39,680
Speaker 1: me like the reasonable compromise at the national level, and

547
00:32:39,680 --> 00:32:41,720
Speaker 1: then the cities and states can go above that if

548
00:32:42,120 --> 00:32:46,160
Speaker 1: if the conditions weren't in those areas. Now generous of

549
00:32:46,160 --> 00:32:48,960
Speaker 1: you to be with us from Barcelona, Spain this morning,

550
00:32:48,960 --> 00:32:52,000
Speaker 1: Alan Krueger, just be sure, professor that if you're in

551
00:32:52,000 --> 00:32:55,600
Speaker 1: a bar you love, you love Barcelona football and enjoy

552
00:32:55,680 --> 00:33:00,600
Speaker 1: the topics. The best outcome on this job, say Allen Kruger.

553
00:33:00,600 --> 00:33:15,840
Speaker 1: With us with Princeton University and and joining us now

554
00:33:15,880 --> 00:33:20,080
Speaker 1: in Bloomberg Radio, Bloomberg Television worldwide. When William Gross of

555
00:33:20,200 --> 00:33:22,840
Speaker 1: Janice Capital, Bill, I want to get to the bond

556
00:33:22,880 --> 00:33:25,280
Speaker 1: market in a moment. But you wrote a scathing note

557
00:33:25,280 --> 00:33:29,880
Speaker 1: I thought yesterday on Mr Trump and Trump economics. I mean,

558
00:33:29,920 --> 00:33:33,560
Speaker 1: it's morning in America. Who takes credit for this job's report?

559
00:33:33,800 --> 00:33:41,240
Speaker 1: President Obama, President Trump or Bill Gross Well, if it

560
00:33:41,360 --> 00:33:44,640
Speaker 1: was a bad report, Trump would certainly dismiss it. But

561
00:33:44,880 --> 00:33:47,400
Speaker 1: since it's a good report as part of his administration,

562
00:33:47,480 --> 00:33:51,160
Speaker 1: I'll take credit for it. But you know, to to

563
00:33:51,280 --> 00:33:54,680
Speaker 1: think that these types of numbers two hundred forty thousand

564
00:33:55,200 --> 00:33:58,560
Speaker 1: jobs created will continue, it is a bit of a

565
00:33:58,560 --> 00:34:02,080
Speaker 1: stretch to my way of thinking. Uh, the economy itself

566
00:34:02,200 --> 00:34:05,440
Speaker 1: is only growing at one point two percent according to

567
00:34:05,520 --> 00:34:10,920
Speaker 1: the Atlanta Now forecast, and then that follows a paltry

568
00:34:11,000 --> 00:34:14,640
Speaker 1: two percent that quarter before, So economic growth itself is

569
00:34:14,920 --> 00:34:18,240
Speaker 1: not gangbusters. The jobs appear to be here, and wages

570
00:34:18,280 --> 00:34:21,360
Speaker 1: are moving ahead decently, so all of those are good

571
00:34:21,480 --> 00:34:25,600
Speaker 1: for the future. But we shall see it. It's a

572
00:34:25,680 --> 00:34:30,680
Speaker 1: situation where productivity determines growth, and uh, propos yet to

573
00:34:30,680 --> 00:34:33,640
Speaker 1: put forth plans for productivity help us here with the

574
00:34:33,680 --> 00:34:36,000
Speaker 1: managing of money and linking it into our day to

575
00:34:36,080 --> 00:34:39,000
Speaker 1: day lives. Do we assume a federal reserve that is

576
00:34:39,040 --> 00:34:41,920
Speaker 1: going to be in some form one or two or

577
00:34:42,040 --> 00:34:44,799
Speaker 1: three and done, or do you look at this as

578
00:34:44,840 --> 00:34:48,360
Speaker 1: a measured green span like move of a many set

579
00:34:48,480 --> 00:34:53,279
Speaker 1: arising interest rates. Yeah, I think it's a mini set.

580
00:34:53,320 --> 00:34:55,400
Speaker 1: I think the FED or any central bank has to

581
00:34:55,400 --> 00:34:59,080
Speaker 1: be careful in terms of where they move to. You know,

582
00:34:59,120 --> 00:35:02,200
Speaker 1: the FED has a a target called our star, which

583
00:35:02,239 --> 00:35:05,720
Speaker 1: is the neutral real rate of interest or the neutral

584
00:35:05,760 --> 00:35:08,880
Speaker 1: real FED funds rate, and you know it's assumed with

585
00:35:08,920 --> 00:35:12,880
Speaker 1: two percent inflation that that would be zero on a

586
00:35:12,920 --> 00:35:16,480
Speaker 1: real basis or two percent nominally. So the FED at

587
00:35:16,480 --> 00:35:19,080
Speaker 1: the moment appears to be headed to two percent nominally.

588
00:35:19,200 --> 00:35:23,360
Speaker 1: But it's a difficult type of calculation. No one really

589
00:35:23,400 --> 00:35:26,040
Speaker 1: knows what the neutral rate of interest is in this

590
00:35:26,680 --> 00:35:32,600
Speaker 1: new normal type of economy. Tom I I characterize what

591
00:35:33,040 --> 00:35:36,040
Speaker 1: Trump would hope for as the old usual, you know,

592
00:35:36,200 --> 00:35:40,400
Speaker 1: three to four percent economic growth versus two percent in

593
00:35:40,440 --> 00:35:44,200
Speaker 1: the Obama administration, the new normal. If we can't get

594
00:35:44,239 --> 00:35:48,440
Speaker 1: to the old usual, then certainly our star and the

595
00:35:48,480 --> 00:35:51,000
Speaker 1: neutral rate of interest has to be a little bit

596
00:35:51,040 --> 00:35:56,719
Speaker 1: lower than what would be assumed under a Trump assumption bill.

597
00:35:56,719 --> 00:35:59,400
Speaker 1: Gross Mario drag You, the President of the ECB, speaking yesterday,

598
00:35:59,400 --> 00:36:02,360
Speaker 1: said there's not sense of urgency in monetary policy in

599
00:36:02,440 --> 00:36:04,560
Speaker 1: light of what we saw today with these jobs numbers.

600
00:36:04,560 --> 00:36:06,920
Speaker 1: In light of what we heard from FED policy makers

601
00:36:07,040 --> 00:36:09,160
Speaker 1: last week. Do you disagree with them? Do you think

602
00:36:09,200 --> 00:36:11,040
Speaker 1: we are seeing a new sense of urgency among policy

603
00:36:11,040 --> 00:36:15,560
Speaker 1: makers at least in the US. Well, certainly in the US,

604
00:36:15,920 --> 00:36:17,960
Speaker 1: you know, we've we've seen them hikes. We're gonna see

605
00:36:18,000 --> 00:36:20,680
Speaker 1: some more. Um. You know, we've been helped in the

606
00:36:20,760 --> 00:36:23,439
Speaker 1: United States, certainly by the e c B in terms

607
00:36:23,440 --> 00:36:27,320
Speaker 1: of their quantitative sing about eight billion a month that

608
00:36:27,440 --> 00:36:29,840
Speaker 1: we've helped, been helped by the B O J, you know,

609
00:36:29,920 --> 00:36:32,480
Speaker 1: to the tune of the same amount. And without those

610
00:36:32,480 --> 00:36:36,799
Speaker 1: two central banks buying their particular bonds and having those

611
00:36:37,000 --> 00:36:39,839
Speaker 1: UH funds flow back into the United States and ended

612
00:36:39,880 --> 00:36:42,680
Speaker 1: treasuries that I would think treasures would be much higher.

613
00:36:42,719 --> 00:36:45,680
Speaker 1: So what drug he does is important. He did talk,

614
00:36:46,040 --> 00:36:48,319
Speaker 1: you know, very neutral e back and forth as a

615
00:36:48,360 --> 00:36:51,840
Speaker 1: two handed economist, would you know in the past few days.

616
00:36:51,840 --> 00:36:55,280
Speaker 1: And it's hard to know exactly when he begins to taper,

617
00:36:55,920 --> 00:36:59,719
Speaker 1: but when the taper comes from UH, from drug and

618
00:36:59,760 --> 00:37:03,759
Speaker 1: I was assume it would come before carona Um, then

619
00:37:04,520 --> 00:37:08,600
Speaker 1: the bull market in certainly in those countries you know,

620
00:37:08,800 --> 00:37:11,319
Speaker 1: can can come to an end, and perhaps in the

621
00:37:11,360 --> 00:37:14,520
Speaker 1: United States as well. I've said two point six percent

622
00:37:14,719 --> 00:37:17,920
Speaker 1: target for the Treasury. We're not there yet, but if

623
00:37:17,960 --> 00:37:20,920
Speaker 1: that succeeded, I would think it would be because, you know,

624
00:37:21,000 --> 00:37:24,520
Speaker 1: dragging in, because corona are moving away from their own

625
00:37:24,520 --> 00:37:28,879
Speaker 1: particular maneuvers. Bloomberg Radio, Bloomberg Television worldwide, throwed you where

626
00:37:28,880 --> 00:37:31,040
Speaker 1: this worldwide? This morning? A quick day to check here,

627
00:37:31,200 --> 00:37:34,080
Speaker 1: futures up nine before the report. We're now futures up twelve.

628
00:37:34,280 --> 00:37:39,279
Speaker 1: The Dow advances up, putting futures near one, not quite there.

629
00:37:39,760 --> 00:37:43,359
Speaker 1: Yields are higher. Bill Gross having a lousy morning yields up,

630
00:37:43,560 --> 00:37:47,560
Speaker 1: price down. But David, it does begin to show the bounce.

631
00:37:47,600 --> 00:37:50,440
Speaker 1: Here is now we moved to March fifteenth. Bill Gross,

632
00:37:50,600 --> 00:37:52,960
Speaker 1: you referred to Janet Yellen is a modern day Goldilocks

633
00:37:53,200 --> 00:37:55,240
Speaker 1: yesterday in your note. And I've been reading that story

634
00:37:55,239 --> 00:37:57,000
Speaker 1: with my daughter, So let me torture the metaphor a

635
00:37:57,040 --> 00:38:00,360
Speaker 1: little bit here. At the end of that story, Goldilocks escapes,

636
00:38:00,400 --> 00:38:02,560
Speaker 1: she escapes with their life, and the bears get their porridge.

637
00:38:02,560 --> 00:38:07,320
Speaker 1: How does all this end? Do you think? Well? It

638
00:38:07,320 --> 00:38:09,799
Speaker 1: depends on your time frame. I I think in the

639
00:38:09,840 --> 00:38:14,360
Speaker 1: long run it ends badly because central banks have created

640
00:38:14,480 --> 00:38:17,400
Speaker 1: credit at an enormous rate. Let's go back to seventy

641
00:38:17,480 --> 00:38:19,799
Speaker 1: one one trillion dollars worth a credit, and now we

642
00:38:19,840 --> 00:38:22,680
Speaker 1: have sixty trillion dollars with a credit. That's an enormous

643
00:38:22,680 --> 00:38:25,319
Speaker 1: growth rate of ten or eleven or twelve percent, same

644
00:38:25,320 --> 00:38:27,719
Speaker 1: thing in China, or or even more. And so when

645
00:38:27,760 --> 00:38:31,000
Speaker 1: you create credit, and when you create credit at four

646
00:38:31,040 --> 00:38:33,400
Speaker 1: times as much as you create one unit of GDP,

647
00:38:33,920 --> 00:38:37,719
Speaker 1: then ultimately the situation can't last. It doesn't mean it

648
00:38:37,760 --> 00:38:40,360
Speaker 1: has to crash, doesn't speak to arm again, but it

649
00:38:40,400 --> 00:38:44,239
Speaker 1: does suggest that economy slowdown once credit creation can no

650
00:38:44,320 --> 00:38:47,359
Speaker 1: longer be sustained. And I think ultimately that's where we're here,

651
00:38:47,400 --> 00:38:49,720
Speaker 1: and Bill, this is important. Let's tell you, let's expand

652
00:38:49,719 --> 00:38:52,319
Speaker 1: out the timeline. Here is clearly you would like to

653
00:38:52,360 --> 00:38:55,000
Speaker 1: do this morning. We've got rising rates, we have a

654
00:38:55,040 --> 00:38:57,520
Speaker 1: new regime, thank you Jim Bullard, where the feed is

655
00:38:57,560 --> 00:39:01,120
Speaker 1: finally going to act. We have massive transit lant divergences.

656
00:39:01,160 --> 00:39:04,919
Speaker 1: Forget about the politics in Korea. The reality is you

657
00:39:05,200 --> 00:39:09,600
Speaker 1: suggest the great distortion of low rates and low real

658
00:39:09,719 --> 00:39:14,440
Speaker 1: rates will continue. How do our institutions get us back

659
00:39:14,520 --> 00:39:21,359
Speaker 1: to normal if you've got financial repression going out many years, Well,

660
00:39:21,360 --> 00:39:23,200
Speaker 1: I think it's very difficult, and that's what the FED

661
00:39:23,320 --> 00:39:27,800
Speaker 1: has to measure in terms of walking the proverbial fine line.

662
00:39:28,000 --> 00:39:30,480
Speaker 1: You know, when when an economy is highly levered, as

663
00:39:30,520 --> 00:39:32,520
Speaker 1: the US is and the rest of the world is,

664
00:39:33,280 --> 00:39:38,040
Speaker 1: then the Goldilocks metaphor where you can't be too hot

665
00:39:38,160 --> 00:39:42,600
Speaker 1: or too cold, as Janet Yelling is doing, it comes

666
00:39:42,640 --> 00:39:45,440
Speaker 1: into play. If interest rates are too high, like they

667
00:39:45,440 --> 00:39:49,120
Speaker 1: were at five and a quarter percent under the Bernankee

668
00:39:49,160 --> 00:39:54,120
Speaker 1: FED way back when, then subprimes and other housing related

669
00:39:54,200 --> 00:39:58,480
Speaker 1: vehicles come crashing down, as well as related leverage related

670
00:39:58,960 --> 00:40:01,759
Speaker 1: types of vehicles. If they're too cold, as you mentioned, Tom,

671
00:40:02,160 --> 00:40:05,880
Speaker 1: they're too low, if they're financially repressed, then institutions like

672
00:40:05,920 --> 00:40:10,440
Speaker 1: insurance companies, banks, pension funds and the like, you can't

673
00:40:10,440 --> 00:40:13,840
Speaker 1: really survive and pay for the liabilities that they've assumed.

674
00:40:13,880 --> 00:40:16,440
Speaker 1: We're seeing that in Puerto Rico, we're seeing that in Illinois,

675
00:40:16,440 --> 00:40:19,240
Speaker 1: we're seeing that in many spots in the United States.

676
00:40:19,280 --> 00:40:22,200
Speaker 1: And so not too hot, not too cold. It's a

677
00:40:22,280 --> 00:40:25,440
Speaker 1: very fine line, and it suggests to me that they

678
00:40:25,480 --> 00:40:30,040
Speaker 1: can't really raise rates too high or else, um, you know,

679
00:40:30,120 --> 00:40:33,000
Speaker 1: something happens. Bill Gross, thank you so much for joining

680
00:40:33,040 --> 00:40:35,440
Speaker 1: us into all of you on Bloomberg Television worldwide for

681
00:40:35,520 --> 00:40:38,680
Speaker 1: joining us. This job's day here at twenty minutes to

682
00:40:38,840 --> 00:40:41,640
Speaker 1: the hour, David Gerin to I'm keen with Bill Gross

683
00:40:41,640 --> 00:40:44,440
Speaker 1: at Jannis. Let's get right to it with Mr Gross. Bill,

684
00:40:44,480 --> 00:40:46,920
Speaker 1: it used to be an easier business. There were no

685
00:40:47,000 --> 00:40:49,720
Speaker 1: Greek letters. You had a Monroe trader on your desk,

686
00:40:50,080 --> 00:40:53,359
Speaker 1: and you're worried about convexity, You're worried about duration, and

687
00:40:53,400 --> 00:40:56,080
Speaker 1: I believe you worried about making money, getting the coupon,

688
00:40:56,520 --> 00:40:59,840
Speaker 1: making total return. I'm going to suggest within your Janis

689
00:41:00,160 --> 00:41:05,640
Speaker 1: folio right now, it's about not losing money. Tell our

690
00:41:05,760 --> 00:41:10,360
Speaker 1: audience how to not lose money when rates go up

691
00:41:10,560 --> 00:41:17,520
Speaker 1: and price goes down. Well, it's a simple solution. It

692
00:41:17,600 --> 00:41:21,080
Speaker 1: doesn't say how much money you will make, which would

693
00:41:21,120 --> 00:41:26,160
Speaker 1: be scant because you're you're flushing into money market funds.

694
00:41:26,160 --> 00:41:28,719
Speaker 1: What's you know, yield one per cent or less. But

695
00:41:29,719 --> 00:41:32,120
Speaker 1: the key to not losing money in a bare bond

696
00:41:32,120 --> 00:41:35,960
Speaker 1: market when interest rates rise and the duration becomes a

697
00:41:36,040 --> 00:41:39,480
Speaker 1: factor to the downside, is you lower your duration or

698
00:41:39,560 --> 00:41:44,240
Speaker 1: you even go negative duration. You know, most total return funds,

699
00:41:44,239 --> 00:41:47,719
Speaker 1: most bond funds to actually follow what's called the Barkley's

700
00:41:47,760 --> 00:41:50,319
Speaker 1: aggregate index, which has a duration of about five and

701
00:41:50,320 --> 00:41:52,759
Speaker 1: a half years and an average maturity of seven. And

702
00:41:52,840 --> 00:41:56,960
Speaker 1: so that the key to not watching those bond prices

703
00:41:57,000 --> 00:41:59,080
Speaker 1: decline is to not own them and to have a

704
00:41:59,160 --> 00:42:03,399
Speaker 1: duration year or a or a negative So critically, right now, Bill,

705
00:42:03,440 --> 00:42:06,520
Speaker 1: if I go to the Bloomberg Barclays Lehman Brothers Gross Index,

706
00:42:06,520 --> 00:42:09,720
Speaker 1: whatever you want to call the index to the permutations

707
00:42:09,760 --> 00:42:13,160
Speaker 1: of thirty years. If I go to the Bloomberg Barclays index,

708
00:42:13,560 --> 00:42:16,840
Speaker 1: I want to buy shorter maturity. But where do I

709
00:42:16,920 --> 00:42:20,280
Speaker 1: buy it? You've got a preponderance of British Columbia paper.

710
00:42:20,400 --> 00:42:22,800
Speaker 1: Where in the world, you know, it sounds like Waldo.

711
00:42:23,200 --> 00:42:26,880
Speaker 1: Where in the world, Bill, is the value in short

712
00:42:27,000 --> 00:42:32,200
Speaker 1: duration paper? Well, I think there's in value in Argentina.

713
00:42:32,360 --> 00:42:35,160
Speaker 1: You know, Argentina has some problems in terms of inflation,

714
00:42:35,200 --> 00:42:39,000
Speaker 1: and Argentina has some recent problems in terms of default

715
00:42:39,080 --> 00:42:42,759
Speaker 1: or not defaulting. But there are ninety day bills, so

716
00:42:42,800 --> 00:42:44,759
Speaker 1: to speak, yield too to two and a half to

717
00:42:44,880 --> 00:42:48,120
Speaker 1: three percent. It's a premium of a hundred basis points.

718
00:42:48,120 --> 00:42:50,399
Speaker 1: That are a hundred and fifty basis points or some more.

719
00:42:50,560 --> 00:42:53,280
Speaker 1: So you know, you go to some you know, hopefully

720
00:42:53,320 --> 00:42:56,359
Speaker 1: safe emerging market countries. If you're willing to take that risk.

721
00:42:56,920 --> 00:43:01,520
Speaker 1: You also go to a twelve to eighteen month time frame.

722
00:43:01,560 --> 00:43:05,840
Speaker 1: In terms of corporate bonds, double B, triple B, the

723
00:43:06,000 --> 00:43:09,160
Speaker 1: minus types of bonds which yield one point eight one

724
00:43:09,200 --> 00:43:12,120
Speaker 1: point nine two, and those formed the base of a

725
00:43:12,239 --> 00:43:18,560
Speaker 1: Janison constrained portfolio upon which we layer derivatives that put

726
00:43:18,600 --> 00:43:20,840
Speaker 1: on some more yield. David, you're gonna go out and

727
00:43:20,880 --> 00:43:26,160
Speaker 1: by Argentina paper this weekend. Yes, Phil Gross, is there

728
00:43:26,160 --> 00:43:28,000
Speaker 1: anything that would draw you to Europe? I was struck

729
00:43:28,000 --> 00:43:31,200
Speaker 1: by what Mario Draggy said yesterday about the irrevocability of

730
00:43:31,360 --> 00:43:33,040
Speaker 1: the Euro. I wonder what you made of that comment,

731
00:43:33,480 --> 00:43:38,959
Speaker 1: in particular, if there's anything that's attractive across the Atlantic. Well,

732
00:43:39,000 --> 00:43:41,120
Speaker 1: I don't. I don't think so. You know, to my

733
00:43:41,280 --> 00:43:44,560
Speaker 1: way of thinking, the negative yields in Germany, which partly

734
00:43:44,600 --> 00:43:48,880
Speaker 1: reflects the breakup or the potential breakup of the EU

735
00:43:49,080 --> 00:43:52,960
Speaker 1: or the e z uh and Germany leaving and moving

736
00:43:53,040 --> 00:43:55,719
Speaker 1: to a mark as opposed to a euro. There's a

737
00:43:55,719 --> 00:43:58,680
Speaker 1: little bit of a safety premium there. But you know,

738
00:43:58,719 --> 00:44:03,720
Speaker 1: when you buy a five your German OBOL at minus

739
00:44:03,920 --> 00:44:06,160
Speaker 1: fifty basis points, I can ensure you you're not gonna

740
00:44:06,239 --> 00:44:09,320
Speaker 1: make any money. So you know, the German tenure Bund

741
00:44:09,360 --> 00:44:12,719
Speaker 1: at the forty five basis points, that's the same type

742
00:44:12,719 --> 00:44:15,920
Speaker 1: of situation. So instead of buying them, you want to

743
00:44:15,920 --> 00:44:19,440
Speaker 1: short them. You want to take advantage of higher yields

744
00:44:19,440 --> 00:44:23,000
Speaker 1: and um. Shorting the German market and shorting the other

745
00:44:23,040 --> 00:44:26,440
Speaker 1: markets within your land is really a key to total

746
00:44:26,520 --> 00:44:30,000
Speaker 1: return in an unconstrained type of portfolio building. The time

747
00:44:30,000 --> 00:44:32,239
Speaker 1: that we have left and we could talk bond talk

748
00:44:32,320 --> 00:44:34,920
Speaker 1: all day, but I think the nation is certainly riveted

749
00:44:35,600 --> 00:44:40,200
Speaker 1: on what we're seeing in Washington. What is your prescription

750
00:44:40,360 --> 00:44:44,680
Speaker 1: for stability in Washington? I was talking with our Matthew

751
00:44:44,719 --> 00:44:48,279
Speaker 1: Winkler the other day about the success of your California.

752
00:44:48,360 --> 00:44:52,440
Speaker 1: California University had a governmental system that was able to

753
00:44:52,520 --> 00:44:55,319
Speaker 1: come out of it and do better than good is

754
00:44:55,360 --> 00:44:59,520
Speaker 1: witnessed within their bond market. What is the thing that

755
00:45:00,120 --> 00:45:03,400
Speaker 1: to trump, President Trump, and why should you can learn

756
00:45:03,480 --> 00:45:10,480
Speaker 1: from the recovery of your California. Well, that innovation is

757
00:45:10,520 --> 00:45:14,000
Speaker 1: the key to uh to growth and productivity going forward.

758
00:45:14,080 --> 00:45:16,720
Speaker 1: California is famous for that. It's not the only state,

759
00:45:16,800 --> 00:45:20,279
Speaker 1: but the Silicon Valley and the areas we have here

760
00:45:20,400 --> 00:45:23,600
Speaker 1: down south in terms of Irvine and U see I

761
00:45:23,719 --> 00:45:27,080
Speaker 1: are key to UH to growth. California has been a

762
00:45:27,160 --> 00:45:30,600
Speaker 1: key to growth for a long time. UM. So to

763
00:45:30,760 --> 00:45:34,920
Speaker 1: learn from California is to innovate, is to invest is

764
00:45:34,960 --> 00:45:38,720
Speaker 1: to expect that productivity instead of a half a percent,

765
00:45:38,840 --> 00:45:41,400
Speaker 1: will rise to one and a half to two percent.

766
00:45:41,520 --> 00:45:44,440
Speaker 1: But it takes careful planning on the part of the

767
00:45:44,600 --> 00:45:49,000
Speaker 1: private sector h and careful planning. In terms of investment

768
00:45:49,040 --> 00:45:52,000
Speaker 1: going forward, we haven't seen investment from the private sector.

769
00:45:52,040 --> 00:45:54,879
Speaker 1: And you know, the mystery behind that would probably take

770
00:45:54,880 --> 00:45:57,799
Speaker 1: five to ten minutes of discussion. But to my way

771
00:45:57,840 --> 00:46:01,640
Speaker 1: of thinking, um, you know, unless the California models adopted,

772
00:46:01,719 --> 00:46:05,160
Speaker 1: than productivity at a half a percent, than labor growth

773
00:46:05,160 --> 00:46:07,359
Speaker 1: at a half of per cent equals one to one

774
00:46:07,360 --> 00:46:09,520
Speaker 1: and a half percent real growth. And that's not the

775
00:46:09,600 --> 00:46:12,920
Speaker 1: solution for the Trump administration bill gross is it easier

776
00:46:12,960 --> 00:46:15,759
Speaker 1: to ignore the animal spirits endemic to Washington? Right now?

777
00:46:15,800 --> 00:46:18,480
Speaker 1: From Newport Beach? Have they made their way across I

778
00:46:18,640 --> 00:46:20,960
Speaker 1: forty all the way to California? How do you ignore

779
00:46:21,400 --> 00:46:23,920
Speaker 1: all the enthusiasm, all the excitement that we're seeing in Washington.

780
00:46:23,960 --> 00:46:26,120
Speaker 1: If it's not based on something that you think is

781
00:46:26,120 --> 00:46:30,520
Speaker 1: going to lead to much progress. Yeah, I think it

782
00:46:30,560 --> 00:46:32,319
Speaker 1: does help to be on the West Coast. It's helped

783
00:46:32,360 --> 00:46:35,520
Speaker 1: for a long time, thirty forty fifty years of my

784
00:46:35,680 --> 00:46:37,640
Speaker 1: experience to be out here as opposed to back in

785
00:46:37,719 --> 00:46:40,760
Speaker 1: the bars. Uh, you know, just off of Wall Street.

786
00:46:41,400 --> 00:46:46,200
Speaker 1: I think, um, I think to know that. You know,

787
00:46:46,280 --> 00:46:48,720
Speaker 1: there's a lot of hype, there's a lot of hope.

788
00:46:48,920 --> 00:46:53,360
Speaker 1: There always isn't a beginning administration in terms of policies

789
00:46:53,400 --> 00:46:56,680
Speaker 1: that will lead to growth. We're talking about regulatory policies

790
00:46:56,680 --> 00:46:59,680
Speaker 1: and lack of them, the diminishing of them, and the

791
00:46:59,719 --> 00:47:03,560
Speaker 1: Trump administration. We're talking about lower taxes, we're talking about infrastructure.

792
00:47:03,600 --> 00:47:06,759
Speaker 1: All of those things. You know, maybe positives in the

793
00:47:06,840 --> 00:47:09,120
Speaker 1: short term, but in a long term, it really depends

794
00:47:09,120 --> 00:47:12,920
Speaker 1: on getting companies to invest. And yes, as Trump tried

795
00:47:12,960 --> 00:47:16,320
Speaker 1: to do that by talking to individual companies and bringing

796
00:47:16,680 --> 00:47:20,040
Speaker 1: labor back into the United States as opposed to outside,

797
00:47:20,280 --> 00:47:23,320
Speaker 1: I think so, but that still doesn't speak to investment

798
00:47:23,360 --> 00:47:26,520
Speaker 1: in plant equipment as opposed to investment in labor, and

799
00:47:26,560 --> 00:47:28,960
Speaker 1: that's the key going forward. I don't think he's addressed

800
00:47:28,960 --> 00:47:32,400
Speaker 1: that problem as of yet. Let's hope the presidents listening here.

801
00:47:32,400 --> 00:47:34,480
Speaker 1: He did just tweet out something as citing a Bloomberg

802
00:47:34,520 --> 00:47:37,000
Speaker 1: News article about the Job's report. If he's not listening

803
00:47:37,000 --> 00:47:38,640
Speaker 1: to the program right now, But what would you say

804
00:47:38,640 --> 00:47:41,400
Speaker 1: to him if you were one of those executives invited

805
00:47:41,400 --> 00:47:43,400
Speaker 1: into the Oval Office, into the Roosevelt Room to to

806
00:47:43,440 --> 00:47:45,200
Speaker 1: talk to him. But what would you tell him about

807
00:47:45,200 --> 00:47:49,200
Speaker 1: the economy right now and what he should be doing well?

808
00:47:49,320 --> 00:47:53,160
Speaker 1: I would tell him that that in addition to capital,

809
00:47:53,320 --> 00:47:57,840
Speaker 1: that the labor is a quite important component um the

810
00:47:58,200 --> 00:48:02,960
Speaker 1: labor situation in terms of UM universal income. And here's

811
00:48:03,000 --> 00:48:06,520
Speaker 1: a stretch of a idea that's five fifteen years out.

812
00:48:06,640 --> 00:48:11,960
Speaker 1: But um labor has been displaced by technology, will continue

813
00:48:11,960 --> 00:48:14,759
Speaker 1: to be displaced by technology. It's fine to have better

814
00:48:14,880 --> 00:48:19,200
Speaker 1: jobs and better training and to to make humans into robots,

815
00:48:19,239 --> 00:48:22,439
Speaker 1: so to speak. But ultimately universal income in some form

816
00:48:22,480 --> 00:48:25,440
Speaker 1: of fashion is coming not just to Denmark, not just

817
00:48:25,480 --> 00:48:28,240
Speaker 1: to Sweden, but to the United States. And I'd say

818
00:48:28,719 --> 00:48:31,399
Speaker 1: politicians and the United States have to prepare for it. Bill.

819
00:48:31,440 --> 00:48:34,200
Speaker 1: One final question this morning. I assume President Trump or

820
00:48:34,200 --> 00:48:37,319
Speaker 1: maybe even Secretary Monution are listening advise them on the

821
00:48:37,440 --> 00:48:40,839
Speaker 1: US dollar. That's the president's worst nightmare. Do we get

822
00:48:40,840 --> 00:48:43,040
Speaker 1: a brutal move in the dollar or can it be

823
00:48:43,080 --> 00:48:49,160
Speaker 1: a measured and manageable dollar strength? Well, I think it's

824
00:48:49,160 --> 00:48:51,960
Speaker 1: been measured so far, tom It. It can't go too

825
00:48:52,040 --> 00:48:57,040
Speaker 1: much further um for two reasons. Basically, a stronger dollar

826
00:48:57,160 --> 00:49:01,480
Speaker 1: basically hurts US exports, and a stronger dollar, you know,

827
00:49:01,640 --> 00:49:04,399
Speaker 1: hurts emerging market countries that have taken out a lot

828
00:49:04,400 --> 00:49:06,960
Speaker 1: of debt in dollar denominated terms. And so if the

829
00:49:07,000 --> 00:49:09,640
Speaker 1: dollar UH in terms of the d X Y went

830
00:49:09,680 --> 00:49:11,840
Speaker 1: from you know, a hundred two to a hundred and

831
00:49:11,880 --> 00:49:16,800
Speaker 1: five six, seven, eight, then the situation becomes not critical,

832
00:49:16,960 --> 00:49:19,800
Speaker 1: but becomes dicey in terms of the ability of emerging

833
00:49:19,840 --> 00:49:23,400
Speaker 1: markets to repay over the long term and the ability

834
00:49:23,440 --> 00:49:27,719
Speaker 1: of US corporations to become competitive in terms of their exports.

835
00:49:27,719 --> 00:49:29,799
Speaker 1: So you've got to watch the dollar, and that means

836
00:49:29,960 --> 00:49:33,800
Speaker 1: ultimately that the Fed can't raise interest rates too high

837
00:49:34,400 --> 00:49:37,800
Speaker 1: or else the strong dollar will will do the reverse

838
00:49:37,840 --> 00:49:41,480
Speaker 1: in terms of its negatives as opposed to positives, explaining

839
00:49:41,520 --> 00:49:44,400
Speaker 1: they are the second and third order movements of certitude

840
00:49:44,400 --> 00:49:46,920
Speaker 1: of the first order condition, Bill Gross, thank you so

841
00:49:47,040 --> 00:49:50,239
Speaker 1: much with Jana's capital, I guess is the message from

842
00:49:50,239 --> 00:49:53,319
Speaker 1: Bill Gross David Gurra is the maximum durations about two

843
00:49:53,320 --> 00:49:59,760
Speaker 1: weeks page everybody's wantin it is so it is so hard, folks,

844
00:49:59,840 --> 00:50:03,200
Speaker 1: for those of you that have never enjoyed, uh, watching

845
00:50:03,320 --> 00:50:07,400
Speaker 1: price go down within bond portfolios. I hate to report

846
00:50:07,480 --> 00:50:11,440
Speaker 1: that this does occasionally occur. It is an immovable force,

847
00:50:11,640 --> 00:50:14,360
Speaker 1: David when it starts. Street recap what we heard here

848
00:50:14,400 --> 00:50:17,160
Speaker 1: this morning in terms of why not again we had

849
00:50:17,200 --> 00:50:19,719
Speaker 1: this big beat, the thousand, the change in non farm

850
00:50:19,760 --> 00:50:22,160
Speaker 1: payrolls in February, and the unemployment right here at four

851
00:50:22,200 --> 00:50:25,160
Speaker 1: point seven percent, wage growth, paying such close attention to

852
00:50:25,239 --> 00:50:28,120
Speaker 1: that average hourly earnings the survey was point three percent.

853
00:50:28,239 --> 00:50:31,480
Speaker 1: Came in at point two percent, so slightly lower but

854
00:50:31,560 --> 00:50:41,960
Speaker 1: still inline, I think with expectations very good. Thanks for

855
00:50:42,080 --> 00:50:46,480
Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to

856
00:50:46,680 --> 00:50:51,720
Speaker 1: interviews on iTunes, SoundCloud, or whichever podcast platform you prefer.

857
00:50:52,520 --> 00:50:55,360
Speaker 1: I'm out on Twitter at Tom Keene, David Gura is

858
00:50:55,520 --> 00:50:59,239
Speaker 1: at David Gura. Before the podcast, you can always catch

859
00:50:59,360 --> 00:51:15,920
Speaker 1: us worldwide. I'm Bloomberg Radio, brought you by Bank of America.

860
00:51:16,000 --> 00:51:20,160
Speaker 1: Mary Lynch dedicated to bringing our clients insights and solutions

861
00:51:20,520 --> 00:51:23,800
Speaker 1: to meet the challenges of a transforming world. That's the

862
00:51:23,920 --> 00:51:29,000
Speaker 1: power of global connections. Mary Lynch, Pierce, Fenner and Smith, Incorporated,

863
00:51:29,200 --> 00:51:30,800
Speaker 1: Member s I p C