Speaker 1: Brought you by Bank of America, Mary Lynch. Investing in
Speaker 1: local communities, economies and a sustainable future. That's a power
Speaker 1: of global connections, Mary Lynch, Pierce Fenner, and Smith Incorporated
Speaker 1: Member s I p C. Welcome to the Bloomberg Surveillance Podcast.
Speaker 1: I'm Tom Keene with David Gura. Daily we bring you
Speaker 1: insight from the best in economics, finance, investment, and international relations.
Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and
Speaker 1: of course, on the Bloomberg. In the last twenty four hours,
Speaker 1: Lauren Adler and Matt Feeler over Brookings say fifteen million
Speaker 1: people will go off the rolls. Do you agree. I
Speaker 1: don't think it's gonna be fifteen million people. If you
Speaker 1: look at those who are enrolled in the Medicaid expansion,
Speaker 1: or a lot of them were actually eligible before Obamacare passed,
Speaker 1: a lot of them could obtain private coverage, especially if
Speaker 1: you repeal the Obamacare regulation regulations, which will cause premiums
Speaker 1: to plummet for the vast majority of people in the exchanges.
Speaker 1: That is people. Why the bill that Paul Ryan and
Speaker 1: the Republican leaders in the House have put forward is
Speaker 1: so inadequate. It does not repeal those regulations. Those regulations
Speaker 1: are destabilizing in the market. They're going to toss forty
Speaker 1: three thousand Tennessee residents out of their coverage that next year,
Speaker 1: leaving them with nothing. These are people with cancer and
Speaker 1: expensive conditions. Obamacare is in crisis right now, and they
Speaker 1: are not repealing the parts that are causing that crept.
Speaker 1: Within your note, you take Eastern Tennessee and folks, what's
Speaker 1: so important about this is the granularity of Cannon's work.
Speaker 1: You take Eastern Tennessee and you expand it to the nation.
Speaker 1: The Congressional Budget Office has to do the same thing.
Speaker 1: Can you explain to me why we have to rush
Speaker 1: before CBO scores or estimates the cost. Well, what's happening
Speaker 1: is that the Republican leadership is trying to manipulate its
Speaker 1: own members. They're trying to get them to commit to
Speaker 1: a bill before they know how much it costs. Look,
Speaker 1: the Republican leadership, they have estimates of how much this
Speaker 1: is gonna cost. I've spoken with staffers to the leadership
Speaker 1: who said, you know, we've consulted with CBO, We've consulted
Speaker 1: with OMB, We've consulted with actuaries at at multiple firms.
Speaker 1: They have numbers, but they're not sharing them, and that
Speaker 1: tells us that the numbers are not gonna look good.
Speaker 1: The rank and filer are not gonna like those numbers.
Speaker 1: So while are they asking them to commit to the
Speaker 1: bill before seeing the numbers, it's because they want to.
Speaker 1: They want to rope them in and make it harder
Speaker 1: for them to UH to reject this bill after the
Speaker 1: numbers come out. Kevin Surreally spoke with Senator Paul of
Speaker 1: Kentucky a few days ago. I think he's a libertarian,
Speaker 1: but he's not a Michael Cannon libertarian. What is the
Speaker 1: distinction between Senator Paul's outrage and your academic and careful work. Well,
Speaker 1: I think, for one thing, Senator Paul has to get reelected. UH.
Speaker 1: But but he and I share a lot of critiques
Speaker 1: of this law, of this of this legislation UH and
Speaker 1: and the biggest one is that it is not repeal.
Speaker 1: It preserves for the federal government all the powers that
Speaker 1: Obamacare gave to the federal government over the private health
Speaker 1: insurance market, including all the provisions that are destabilizing insurance,
Speaker 1: not just in the in Eastern Tennessee for those forty
Speaker 1: three thousand residents who are gonna lose all coverage. But
Speaker 1: across the country, there are a thousand counties with only
Speaker 1: one carrier left in the Obamacare exchange, and three million
Speaker 1: people are subject to losing their insurance if just one
Speaker 1: carrier leaves. Okay, So, Michaile, you're extremely extremely critical of
Speaker 1: this GOP alternative. They must realize that there are a
Speaker 1: lot of critics out there. What would you do in
Speaker 1: their shoes to make it a little bit better. I
Speaker 1: wouldn't want to make it just a little bit better.
Speaker 1: It needs to get a lot better. So what I
Speaker 1: would do with three things. One, push for full repeal,
Speaker 1: including the regulations that this law doesn't even try to
Speaker 1: This legislation doesn't even try to repeal. Uh. Second, deal
Speaker 1: with the that will cause premiums to fall for the
Speaker 1: vast majority of people affected. Second, you want to give
Speaker 1: states the flexibility to spend their medicaid funds so that
Speaker 1: they can target those funds toward the truly needy, including
Speaker 1: people with pre existing conditions who are currently in the
Speaker 1: exchanges and would lose their cover. So you're taking care
Speaker 1: of those folks, But The most important thing, perhaps is
Speaker 1: that you need to bring down healthcare prices. This legislation
Speaker 1: doesn't do that. It takes the Obamacare approach, which is
Speaker 1: throw more government subsidies at unaffordable care rather than make
Speaker 1: healthcare more affordable. And the way you bring healthcare prices
Speaker 1: down so that fewer patients are vulnerable is by giving
Speaker 1: consumers the money that employers and government now control. They'll
Speaker 1: bring those prices down. The way you do that is
Speaker 1: by expanding health savings accounts. Okay, what are the chances
Speaker 1: of them changing and doing something that you've just mentioned.
Speaker 1: There must be people in the Trump administration that are
Speaker 1: looking at it and that are trying to figure out
Speaker 1: the best approach and the best way to deal with it.
Speaker 1: Who does President Trump listen to. Well, what what's gonna
Speaker 1: make the difference is whether conservatives in the House tell
Speaker 1: the leadership, we're just not going to vote for this.
Speaker 1: If they tell the leadership, we're not going to vote
Speaker 1: for this, and the leadership has to make changes. And
Speaker 1: a number of House conservatives already went to the White
Speaker 1: House yesterday they spoke with President Trump about making changes
Speaker 1: to this law, moving into more in the direction that
Speaker 1: I've mentioned in the direction of expanding health savings accounts.
Speaker 1: Hopefully they will get rid of the tax, the subsidies,
Speaker 1: the entitlement spending that that this legislation would retain from Obamacare,
Speaker 1: the the government subsidies for private health insurance companies h
Speaker 1: and replace that with expanded health savings. You might help
Speaker 1: me here with a question that came up three times yesterday.
Speaker 1: Francine Laquise coming to you from London? What's wrong with
Speaker 1: Francine's medical coverage? I had three people yesterday say to me,
Speaker 1: why can't we do it like Canada? Why can't we
Speaker 1: do it like England? Why can't we do it like
Speaker 1: blah blah blah? What's wrong with Francine laquise medical coverage?
Speaker 1: All sorts of things. For one thing, it's not very
Speaker 1: responsive to the patients because the patient is not the
Speaker 1: one controlling the money. Uh. There are some pretty um
Speaker 1: horrific examples of government rationeting in those systems. I'm not
Speaker 1: going to say that no one benefits from those systems.
Speaker 1: Of course they do, or else these governments would have
Speaker 1: gotten rid of them. But they do not deliver the
Speaker 1: sorts of innovations that the United States delivers in terms
Speaker 1: of new medical technologies, nor the sorts of innovations that
Speaker 1: really no system delivers in terms of driving down the
Speaker 1: price of healthcare, making it more convenient and more affordable
Speaker 1: for everyone. Only markets are able to do that. We
Speaker 1: see that in certain corners of the healthcare. We don't
Speaker 1: see it anywhere in Canada or the UK. I pay taxes,
Speaker 1: I pay a lot of taxes, but then my insurance
Speaker 1: is free, Tom, right, it's funding. This is the problem
Speaker 1: with my health care. It's not you have to fund
Speaker 1: it and people have to be clea exact that you
Speaker 1: have to pay a certain percentage of your annual income
Speaker 1: for everyone to be protected. Francine to help me here.
Speaker 1: I know it's Mr laquas birthday and it's a deeply
Speaker 1: emotional weekend at the Lak house right now. Help Michael
Speaker 1: Cannon here, Dr Laka, are you getting okay coverage for
Speaker 1: your offspring in England or do you have to fly
Speaker 1: to Boston or New York to get a pediatric visit
Speaker 1: with your kids? Alright, Michael, for the record, we're all healthy,
Speaker 1: Tom for the moment, so long may that be and
Speaker 1: that makes everyone's life a lot easier. But Michael we
Speaker 1: This is the point, and Tom has hit it on
Speaker 1: the head, is that we may have certain concerns about
Speaker 1: our systems here in Europe. But is it because people
Speaker 1: for the fact that you don't want to give free
Speaker 1: healthcare to everyone in the US? Is that because there's
Speaker 1: a US mentality that you kill what you eat and
Speaker 1: so people don't want to pay to look out for
Speaker 1: their neighbors. Or is it really the concern that Tom
Speaker 1: was pointing to that you need specialist help and that
Speaker 1: would not be covered if you have basic health care
Speaker 1: for everyone. The reason I want to get the government
Speaker 1: out of healthcare because I want fewer people to fall
Speaker 1: through the cracks of our health care sector. I want
Speaker 1: to use innovations to fill in those cracks, to make
Speaker 1: health care better, to make the price of healthcare fall
Speaker 1: so that more people can afford medical care themselves. And
Speaker 1: the rest of us are wealthier, so we're better able
Speaker 1: to help those who can't help themselves. And in the
Speaker 1: United States, you know, I'm I'm I'm a critic of
Speaker 1: you as health care sector. But one of the things
Speaker 1: that we do in the United States better than any
Speaker 1: other nation is we develop new medical technologies, new drugs,
Speaker 1: new treatments, and those help fill in the cracks not
Speaker 1: just in our health care sector, but in the UK
Speaker 1: and in Canada and in UH, in all sorts of
Speaker 1: third world nations. So so that's an important part of
Speaker 1: this puzzle. And other nations are not are not stepping up,
Speaker 1: are not delivering them sots of innovation joining us now,
Speaker 1: Villain Bowder, Global Chief Economists at City, great to have
Speaker 1: you here in our Bloomberg eleven three oh at studios.
Speaker 1: Let's start with it with your outlook, your forecast for
Speaker 1: growth and for inflation. We had adjusted forecasts from the
Speaker 1: o e c D at the beginning of the week.
Speaker 1: We heard from Mario Dragging, the president of the e
Speaker 1: c B yesterday as well. How much adjustment of you made.
Speaker 1: Where does your forecast stand right now? For growth? City
Speaker 1: suppiccial forecast is for two point this year. It's supposed
Speaker 1: to one post six last year. I think you're probably
Speaker 1: going to be UH on the up side of that
Speaker 1: a bit so in the sort of low to mid two,
Speaker 1: which is an approved it over last year, and be
Speaker 1: of course UH significantly faster the potential up with growth,
Speaker 1: so output gap they will be closing. But ever, a
Speaker 1: full employment is will be hitting it. Mario Dragg yesterday
Speaker 1: saying there is not a sense of urgency and monetary
Speaker 1: policy anywhere. What did you make of what he had
Speaker 1: to say yesterday, Yes, about the data, but just also
Speaker 1: about the monetary policy environment. Well, he had to balance
Speaker 1: two different objectives. Right First, it's clear that even underlying
Speaker 1: inflation rising in ura now, let alone headline inflation, it's
Speaker 1: a really hit two um, it becomes very difficult to
Speaker 1: argue that continued super loose multi policy makes sense. At
Speaker 1: the same time, he doesn't want to stop doing qui
Speaker 1: tomorrow or raise rates the day after tomorrow. So he
Speaker 1: had to throw a bone to the two tonics, which
Speaker 1: was big enough for them to let him get on
Speaker 1: doing sixty billion of worth of asset purchases until the
Speaker 1: end of the year and probably only slow tapering after that.
Speaker 1: Can I just jump into the conversation, David Gray, if
Speaker 1: I said throw a bone at the two toonics, I
Speaker 1: would be thrown off of what we're radio. Continue the
Speaker 1: the the elephant of the room yesterday, of course, so
Speaker 1: was politics. How big an elephant we're looking at here?
Speaker 1: How long is the trunk? How bigger the tasks when
Speaker 1: wh when you look at the French election coming up
Speaker 1: before that, of course the Dutch election next week. Yeah,
Speaker 1: the Dust election of course is not systemically important. Something
Speaker 1: you're not following. I wouldn't do anything radical without permission
Speaker 1: from the big neighbor to the east. Um. But yes,
Speaker 1: it clearly would would be a huge event if the
Speaker 1: so called Freedom Party, the Dutch right being populists, were
Speaker 1: to be part of the next government. They may be
Speaker 1: the largest party, even that's not clear. They won't get
Speaker 1: in all likelihood even the vote. The Dutch have a
Speaker 1: strictly proportional lower house, so no party has ever had
Speaker 1: a majority. If our the government with part of a coalition. Um,
Speaker 1: if you're part of a coalition, you won't be able
Speaker 1: to have a referendum because I have to change the
Speaker 1: referendum law to have a referendum the EU. So I
Speaker 1: think it's all going to end up most likely with
Speaker 1: another centers that coalition, without the hard hats, without the
Speaker 1: populist but more obstructionist in your's own decision making and
Speaker 1: the new decision making. Um. Because even the establishment parties
Speaker 1: that have taken on the rhetoric and so the substance
Speaker 1: of the policies of the populists. How worried are you
Speaker 1: at this point about the commentary we're hearing about fears
Speaker 1: about the the integrity of of of the Euros on
Speaker 1: what might happen here if the election goes a certain way.
Speaker 1: In France. We heard from Mario Dragging yesterday the euro
Speaker 1: is irrevocable. Um, are you concerned about the the the
Speaker 1: the continued cohesion of the European Union in the short run,
Speaker 1: I'm not particularly worried. Clearly, m during uh this year
Speaker 1: and next drag you will still be around as head
Speaker 1: of right. Here's no, he's going to be around the
Speaker 1: first October nineteen, So I don't start really worrying until
Speaker 1: we get to early nineteen and people start talking about
Speaker 1: his his successor now. Um, it is true that there
Speaker 1: could be UH much closer disaster if France elected the PEN.
Speaker 1: I think still very unlike, though less unlikely than it
Speaker 1: was before Mr Field first implodeed and now he's reploading somewhat.
Speaker 1: And Uh then of course Italy, where where's the breakup
Speaker 1: of the Democratic Party, the leading party of government. Um,
Speaker 1: we are likely to see an election which could result
Speaker 1: in the majority for enter your enter youth parties. Even then,
Speaker 1: remember this, a majority for a pen even upon presidency,
Speaker 1: does not mean that France leaves. You don't know to you,
Speaker 1: because not everybody who votes for the PENN also wants
Speaker 1: to and the same in Italy, although the popular opinion
Speaker 1: is turning quite sharply against you memberships. I'm most worried
Speaker 1: about Italy, but the real trouble vote stat I think
Speaker 1: until the dousand nineteen, you know, not that I would
Speaker 1: have a beverage of my choice at the Vault bar
Speaker 1: at the Waldorf Story in Amsterdam, but it's it's possibly
Speaker 1: something i'd consider. Help me, and I'm sorry. The Dutch
Speaker 1: are always out front under the sort of like David
Speaker 1: Mike my amateur takers. They're sort of like California. The
Speaker 1: Dutch are like California. Help me here with where we are, seriously,
Speaker 1: Professor Powder, with neo fascism and the neo the things
Speaker 1: we don't want to talk about as we come up
Speaker 1: on these historic elections. What's your measurement of potential fascist
Speaker 1: tendencies in Europe? I think it's it's clear that UH
Speaker 1: much of the political UH populist move months have key
Speaker 1: elements both in language, and it is post policies of fascism, right,
Speaker 1: the call for strong leaders um, extreme nationalism, nativism, looking
Speaker 1: down on others, um, seeing the nation as humiliated by
Speaker 1: the elite, by the establishment, looking for strong preferably mucho leaders, racism, Um.
Speaker 1: It's it's all there, um, and it is I think
Speaker 1: extremely worrying. Last time Europe began to flood with fascism
Speaker 1: in the niteyen thirties, they couldn't stop. And I hope
Speaker 1: partly because we went through that, and I think that
Speaker 1: even Europeans are capable of learning right that they will
Speaker 1: pull back and not uh take the last step towards
Speaker 1: having an actual the fact of fascist regime in empower
Speaker 1: in a significant European nation. But it is something that
Speaker 1: we have to be ware of as a risk. Yes,
Speaker 1: we looked at him. What happened in the UK is
Speaker 1: something that told us perhaps what might happen here in
Speaker 1: the U s. As you look ahead to the Dutch
Speaker 1: election next week, is is there any sort of indicative
Speaker 1: value to it? Um? Is the way that that election
Speaker 1: turns out going to tell us anything about what's going
Speaker 1: to happen in France? Indeed, what might happen in Italy.
Speaker 1: Not not really, it's a it's very country specific. Builders.
Speaker 1: The leader of the Dutch Populists is in a way
Speaker 1: an establishment politician. He's been around in politics for nineteen years,
Speaker 1: first as a member of the traditional Conservatives and then
Speaker 1: the last ten years or so as leader of his
Speaker 1: own party, and if I should say, the only member
Speaker 1: of his own party, which is a bit unique, I
Speaker 1: think that he his um, you know, anti immigrant, especially
Speaker 1: in the Moroccan rhetoric is so vitriolic. Zoe fishes his
Speaker 1: anti Islam rhetoric. Let's close down all the mosque, all
Speaker 1: the mosques, let's ban the Quran is so extreme that
Speaker 1: even many other populists in Europe do want to have
Speaker 1: anything to do with him. What an honor to speak
Speaker 1: to Johan Luxury Shore yesterday and Busters Chops about seventeenth
Speaker 1: century France economics and mercantilism, and now to rip you
Speaker 1: apart as well on seventeenth century Dutch mercantile is um
Speaker 1: as well explained to our audience what the Dutch and
Speaker 1: the French wrought a number of hundreds of years ago
Speaker 1: about mercantile is um. What is it? Well, the Dutch
Speaker 1: were not really mercantilist. They were merchants, right. They didn't
Speaker 1: believe it imports or a bad thing, and that exports
Speaker 1: a measure of virtue. So, uh, they affect created a
Speaker 1: trading empire that for the size of the country, which
Speaker 1: I think at two and a half people at a time,
Speaker 1: despite almost a Portuguese standards. So I think the Dutch
Speaker 1: did trade ride inch basically the precursor of Navarro. Yeah, well,
Speaker 1: the precursor of Professor Navarro. Now our audience knows that
Speaker 1: Mr Navarro is advising as president. What is the element
Speaker 1: of trump navarro economics that hearkens back to the seventeenth century,
Speaker 1: The statement that, uh, they believe that you help a
Speaker 1: country by restricting imports. One of the oldest insights dates
Speaker 1: nty six about Learner trade is that a tariff on
Speaker 1: imports is equivalent to attacks on exports. They both stick trade, right,
Speaker 1: So when you go after imports, give or take um
Speaker 1: a small period of adjustment, you will be hurting exports
Speaker 1: as much as you heart imports. You'll be hurting trade,
Speaker 1: and the world and your country will be worse off.
Speaker 1: Of course, the Games fell trade very unfairly distributed attend
Speaker 1: is an issue, but that's a domestic political issue that
Speaker 1: has to be addressed by taxation of public spending, not
Speaker 1: by protection is m David jump into this academic treatise, folks.
Speaker 1: I'm gonna put out learners symmetry theorem with the major
Speaker 1: thank you to jug Dis Bugwadi of Columbia University for
Speaker 1: driving it. For see about it right. We're scoring points
Speaker 1: about her. He may come back. Can you come back
Speaker 1: next week on the Dutch Dutch elections in America? Wherever
Speaker 1: you are in the planet, we need you. We're honored
Speaker 1: to have you back on the Dutch elections. But David,
Speaker 1: pick up the seminar here from the there's no math
Speaker 1: in this. The Learners symmetry theorem very good. We're hearing
Speaker 1: so much debate about this border adjusted tax. I note
Speaker 1: that in your fiscal projections you're you're not factoring that
Speaker 1: in Why why is that? And how likely are we
Speaker 1: to see a tax reform without a border just vod
Speaker 1: just tax is simply a switch of Edith value out
Speaker 1: of tax with just doesn't have a profit tax from
Speaker 1: a tax base. The Texas exports and exempts imports to
Speaker 1: one of the taxes imports and exacts exports, and there's
Speaker 1: parva facia. Looks like a great way to stimulate exports
Speaker 1: and heard imports, and that's how certainly the importing next
Speaker 1: putting industries have faced it. It's also likely to be
Speaker 1: viewed the rest of the world as a hostile act.
Speaker 1: But learning symmetry implies that this will be neutral. That basically,
Speaker 1: the tax inclusive relative price of imports uh no bill
Speaker 1: go up, but the tax exclusive reurprisive imports to exports
Speaker 1: will go down and nothing real will be affected. It
Speaker 1: may take a while, but that's the story. Um uh.
Speaker 1: The world doesn't believe this, and so it is very,
Speaker 1: very contentious. So far, there is no sign that Mr
Speaker 1: Trump has brought it effectly compleatably be too complicated. The
Speaker 1: one reason I think that mayopic politicians like this out
Speaker 1: from benefiting exports and hooting imports is that it would
Speaker 1: be a short run revenue win for for the US
Speaker 1: because imports the exports. So if you switch taxation from
Speaker 1: exposure imports, you're getting a win for about if corporate
Speaker 1: tax rate in the new regime about point six of
Speaker 1: GDP annually. Of course, she's the US is a data
Speaker 1: country externally right you expected. The present value of future
Speaker 1: exports has to be greater. The personality inputs a long
Speaker 1: run revenue negative, but politicians don't do the long run.
Speaker 1: It feeling better. Great to see here, global chief economists.
Speaker 1: We'll come back next week if we can. It's symmetry
Speaker 1: brought you by Bank of America. Mary Lynch. Dedicated to
Speaker 1: bringing our clients insights and solutions to meet the challenges
Speaker 1: of a transforming world. That's the power of global connections.
Speaker 1: Mary Lynch, Pierce Federan Smith Incorporated, Member s I p C.
Speaker 1: Job's Day, Jim Blast and Bill Gross to be along,
Speaker 1: but always on jobs. Today we try to corral the
Speaker 1: professor from Princeton. Alan Krueger joins as a former Chairman
Speaker 1: of the President's Council of Economic Advisors. Like a magnet.
Speaker 1: Alan Krueger goes where nineties six thousand were screaming just
Speaker 1: a few days ago. Barcelona, Spain. Is the city still
Speaker 1: lit up over this football match, the greatest game. Supposedly
Speaker 1: had a little trouble checking into my hotel room because
Speaker 1: people store are flocking to the city. You know, I
Speaker 1: just extraordinan folster. I thinking of the Telegraph for great
Speaker 1: coverage on something I don't understand. Paris anger Man taking
Speaker 1: it on the nose. They add up the two games,
Speaker 1: David Cura. They do one game and then they do
Speaker 1: another added up in Barcelona with a great victory. What's
Speaker 1: gonna be the great victory here for Cherry Yellen Alan
Speaker 1: Krueger is a wage growth. It's gonna perfectly time where
Speaker 1: her rate rises. Well, yeah, so far, I think she's
Speaker 1: shown um remarkable perception in reading the economy, and we
Speaker 1: are seeing inflation moved to the two percent target. Unemployment
Speaker 1: rate I think is pretty close to full employment. So
Speaker 1: the next, uh, next step would be wage growth approaching
Speaker 1: three or a bit higher. You know, we haven't talked
Speaker 1: enough on this show about immigration policy, what the President
Speaker 1: has proposed, at least in broad strokes, and what that
Speaker 1: could mean for the labor market. Have you and others
Speaker 1: begun to think about that issue in particular here that
Speaker 1: if we see more people asked to or forced to
Speaker 1: leave this country, if we see more restrictions placed on immigration,
Speaker 1: if we see Alan Krueger a merit based system, how
Speaker 1: that could affect the contours of the US labor market. Well,
Speaker 1: I think the proposal to build a wall and to
Speaker 1: restrict immigration to the US is kind of productive for
Speaker 1: our economy, and you know we're going to face a
Speaker 1: worker shortage. Look at our demographics. Um, we want to
Speaker 1: raise our growth rate. I don't think the way to
Speaker 1: do it is by by restricting immigration. I think the
Speaker 1: impact of immigration on wages is actually not all that great.
Speaker 1: The studies have found that immigration doesn't have much of
Speaker 1: an effect on wages of natives and immigrants. Common they
Speaker 1: create demand. You know, it's not only an issue of supply.
Speaker 1: They also uh by by goods and services. So I
Speaker 1: think the economy will shrink if we have a sharp
Speaker 1: change in our immigration policy. How surprised were you by
Speaker 1: by all of the commentary last week from from FED
Speaker 1: policy makers. I wonder if if if we're any closer
Speaker 1: to getting some unanimity here on the tabled our star
Speaker 1: on that neutral rate, are we seeing more cohesion among
Speaker 1: FED policymakers. I think so, you know, I think that
Speaker 1: the stars are aligning for for the FED, and that
Speaker 1: the economy has been improving it about the rate that
Speaker 1: they've been expecting the last year or two. Ellen helped
Speaker 1: me here with the Great Debate which is are we
Speaker 1: fully employed? I mean, you've been in the absolute crucible.
Speaker 1: Did you ever sit on a couch in the Oval
Speaker 1: office with your legs up on the couch taking taking
Speaker 1: a selfie like we've seen with the Trump administration. You
Speaker 1: never did that, right? No, Okay, I just wanted to
Speaker 1: clear that up on a Friday before the jobs report.
Speaker 1: Are we fully employed? I think you know, we are
Speaker 1: still affected by the Great Recession. And I think there
Speaker 1: are two major developments in the economy over the last
Speaker 1: ten years. One was the Great Recession, and then the
Speaker 1: other is the Baby boom heading retirement age and labor
Speaker 1: force has been tranking for both of those reasons, but
Speaker 1: mainly I think because of the aging of the population.
Speaker 1: And I think those who left the labor force because
Speaker 1: of the Great Recession is going to be very to
Speaker 1: bring them back. Do you know where the neutral rate
Speaker 1: is for the interest rates for the Fed? The target rate?
Speaker 1: How many rate rises gets us to gets us to neutrality? Yeah? Uh,
Speaker 1: you know, I'm going to plead that I'm not a
Speaker 1: monetary content. There you go. I don't know. I think
Speaker 1: that for the next year at the economy's kind of
Speaker 1: got momentum and maybe next year and a half and
Speaker 1: after that, I'm not sure. The question is kind of
Speaker 1: how many rate increases school we have by then? Professor Krueger,
Speaker 1: you were in the crucible of Obamacare. When the critics
Speaker 1: of Obamacare speak, how do you respond? I'm not saying
Speaker 1: you directly developed it, but you certainly were within the debate.
Speaker 1: How do you respond after watching the sausage get made? Well?
Speaker 1: You know, I think, uh, the Affordable Care Act has
Speaker 1: changed our country. I think for the better. I think, uh,
Speaker 1: it means something different to be an American When we
Speaker 1: have universal health insurance, it's the same as Social Security
Speaker 1: out and having twenty million plus additional Americans have health
Speaker 1: insurance coverage, I think is a major achievement. There's certainly
Speaker 1: parts of the Affordable Care Act that I think could
Speaker 1: have been designed better. Um, but I think it needs
Speaker 1: to scalpel rather than a meat cleaverer in terms of
Speaker 1: trying to improve it. What makes this such a difficult
Speaker 1: issue to deal with? I was talking with the head
Speaker 1: of an insurance company yesterday who said that politics often
Speaker 1: Trump's thoughtful policy when it comes to healthcare. There was
Speaker 1: a lot of criticism of the Affordable Care Act that
Speaker 1: Democrats pushed it through very quickly. Of course, that was
Speaker 1: a nine month process. Here we're seeing this happened over
Speaker 1: the course of a matter of days. Why the reluctance
Speaker 1: to to take one's time with this, to try to
Speaker 1: get it right, to try to get as right as possible. Right, Well,
Speaker 1: it didn't seem so fast when it was happening in
Speaker 1: two thousand nine. It's felt like, especially in the Senate
Speaker 1: side U that Senator Baucus had been reaching out quite
Speaker 1: a bit to try to get bipartisan support. But health
Speaker 1: insurance health care is a very complicated issue. It's almost
Speaker 1: one fifth of the u US economy. Uh, whenever you
Speaker 1: have taxes and transfers, it's complicated when you can uh
Speaker 1: change incentives in the health care system which affect life
Speaker 1: and death decisions. You know, obviously it's going to be
Speaker 1: controversial and should take time to make sure, uh that
Speaker 1: we move in the right directions. Well, what can we
Speaker 1: learn from the way this process is unfolding about how
Speaker 1: tax reform might unfold on Capitol Hill? I'm curious for
Speaker 1: your perspective here, as an academic economist goes into government
Speaker 1: watches this legislative process unfold what you make of it,
Speaker 1: what you make of how this proceeds well. One lesson
Speaker 1: I learned is that as an academic, we shouldn't let
Speaker 1: the best be the enemy of the good. And if
Speaker 1: the political process is moving generally in the right direction,
Speaker 1: even if it's not what we consider to be optimal,
Speaker 1: I think we should view that as success. And I
Speaker 1: think as as academics, we tend to think of what's
Speaker 1: the ideal, what's the optimal, and not compromised from that.
Speaker 1: And in a political environment, you have to have to
Speaker 1: make compromises. So that that's one lesson that I took away.
Speaker 1: Another is our corporate tax system is awful. There's so
Speaker 1: many things we can do to improve it, even if
Speaker 1: it's not ideally, will be steps in the right direction. Um.
Speaker 1: But the politics are extremely complicated because you have so
Speaker 1: many interest roots involved that um, I think it'll take
Speaker 1: quite a while. Alan you have the advantage at Princeton
Speaker 1: of one of our national treasures. Conservatives and liberals alike
Speaker 1: read everything of a Reinehardt writes on healthcare, and he
Speaker 1: you know, he's predicted the collapse of Obamacare, etcetera. When
Speaker 1: when you sit with a Reinhardt in Lincoln Krueger what
Speaker 1: I'm gonna call reality economics with Reinhardt's just grizzled incentives
Speaker 1: within the medical care system, what is the best outcome
Speaker 1: short of what is anathema to Americans, which is a
Speaker 1: national health care system. You know. I think the exchanges
Speaker 1: are a step in the right direction. The exchanges were
Speaker 1: not controversial before they were put in place at the
Speaker 1: national level. States like Utah we're moving towards exchanges prior
Speaker 1: to the Affordable Care Act. So I think that there
Speaker 1: are areas where we can have concessus and in the
Speaker 1: exchanges you can pool risk, you can help uh, entrepreneurs,
Speaker 1: individuals get the advantage of group rates, also the advantage
Speaker 1: of kind of group bargaining more transparency. So I think
Speaker 1: that there are some steps like that where there should
Speaker 1: be universal support. Want just move back to the jobs
Speaker 1: report that we're going to get today. Just looking data?
Speaker 1: Oh that, uh, look at the data what we've gotten.
Speaker 1: More broadly, it seems like the soft data has been
Speaker 1: so strong. There's so much sentiment that's good in the
Speaker 1: economy here in the US and indeed many in many
Speaker 1: parts of of the of the world. When does the
Speaker 1: soft data begin to intersect with the with the hard data.
Speaker 1: When are we can to see the sentiment influencing a
Speaker 1: pickup and hiring? Do you think I think that, UM,
Speaker 1: the key question is what impact doesn't have on consumer spending,
Speaker 1: consumption as well as investment, but mostly for the U.
Speaker 1: S economy. Consumption and UH confidence can increase, but if
Speaker 1: it doesn't translate into people taking more risk um UH
Speaker 1: spending more taking chances, then I don't think it's gonna
Speaker 1: lead to a particularly faster pace of growth. Help me
Speaker 1: here with something that we've talked about before, which is
Speaker 1: some of the experiments going on, and one of them
Speaker 1: in your wheelhouse, Professor, has been the rise in the
Speaker 1: minimum wage. What is your recent observation on what cities
Speaker 1: have done. I'm going to suggest leading the way to
Speaker 1: a higher minimum wage. What what's the Kruger up observation
Speaker 1: of these many experiments. Well, we're in a situation much
Speaker 1: like where we were twenty years ago when the federal
Speaker 1: minimum wage lagged behind, and the states and the cities
Speaker 1: have UH moved ahead of the federal government, and so far,
Speaker 1: I don't think we're seeing the adverse I don't think
Speaker 1: we're seeing adverse effects. Of it um. I do worry
Speaker 1: about a minimum wage of fifteen dollars at the federal level.
Speaker 1: On the other hand, I think seven dollars in twenty
Speaker 1: five cents an hour is nearer historical low. Donald Trump
Speaker 1: said during the campaign that he supported that ten dollar
Speaker 1: federal minimum wage. I haven't heard him say anything about
Speaker 1: it since then. I hope when he has the Labor
Speaker 1: Secretary that he delivers on that promise that seems to
Speaker 1: me like the reasonable compromise at the national level, and
Speaker 1: then the cities and states can go above that if
Speaker 1: if the conditions weren't in those areas. Now generous of
Speaker 1: you to be with us from Barcelona, Spain this morning,
Speaker 1: Alan Krueger, just be sure, professor that if you're in
Speaker 1: a bar you love, you love Barcelona football and enjoy
Speaker 1: the topics. The best outcome on this job, say Allen Kruger.
Speaker 1: With us with Princeton University and and joining us now
Speaker 1: in Bloomberg Radio, Bloomberg Television worldwide. When William Gross of
Speaker 1: Janice Capital, Bill, I want to get to the bond
Speaker 1: market in a moment. But you wrote a scathing note
Speaker 1: I thought yesterday on Mr Trump and Trump economics. I mean,
Speaker 1: it's morning in America. Who takes credit for this job's report?
Speaker 1: President Obama, President Trump or Bill Gross Well, if it
Speaker 1: was a bad report, Trump would certainly dismiss it. But
Speaker 1: since it's a good report as part of his administration,
Speaker 1: I'll take credit for it. But you know, to to
Speaker 1: think that these types of numbers two hundred forty thousand
Speaker 1: jobs created will continue, it is a bit of a
Speaker 1: stretch to my way of thinking. Uh, the economy itself
Speaker 1: is only growing at one point two percent according to
Speaker 1: the Atlanta Now forecast, and then that follows a paltry
Speaker 1: two percent that quarter before, So economic growth itself is
Speaker 1: not gangbusters. The jobs appear to be here, and wages
Speaker 1: are moving ahead decently, so all of those are good
Speaker 1: for the future. But we shall see it. It's a
Speaker 1: situation where productivity determines growth, and uh, propos yet to
Speaker 1: put forth plans for productivity help us here with the
Speaker 1: managing of money and linking it into our day to
Speaker 1: day lives. Do we assume a federal reserve that is
Speaker 1: going to be in some form one or two or
Speaker 1: three and done, or do you look at this as
Speaker 1: a measured green span like move of a many set
Speaker 1: arising interest rates. Yeah, I think it's a mini set.
Speaker 1: I think the FED or any central bank has to
Speaker 1: be careful in terms of where they move to. You know,
Speaker 1: the FED has a a target called our star, which
Speaker 1: is the neutral real rate of interest or the neutral
Speaker 1: real FED funds rate, and you know it's assumed with
Speaker 1: two percent inflation that that would be zero on a
Speaker 1: real basis or two percent nominally. So the FED at
Speaker 1: the moment appears to be headed to two percent nominally.
Speaker 1: But it's a difficult type of calculation. No one really
Speaker 1: knows what the neutral rate of interest is in this
Speaker 1: new normal type of economy. Tom I I characterize what
Speaker 1: Trump would hope for as the old usual, you know,
Speaker 1: three to four percent economic growth versus two percent in
Speaker 1: the Obama administration, the new normal. If we can't get
Speaker 1: to the old usual, then certainly our star and the
Speaker 1: neutral rate of interest has to be a little bit
Speaker 1: lower than what would be assumed under a Trump assumption bill.
Speaker 1: Gross Mario drag You, the President of the ECB, speaking yesterday,
Speaker 1: said there's not sense of urgency in monetary policy in
Speaker 1: light of what we saw today with these jobs numbers.
Speaker 1: In light of what we heard from FED policy makers
Speaker 1: last week. Do you disagree with them? Do you think
Speaker 1: we are seeing a new sense of urgency among policy
Speaker 1: makers at least in the US. Well, certainly in the US,
Speaker 1: you know, we've we've seen them hikes. We're gonna see
Speaker 1: some more. Um. You know, we've been helped in the
Speaker 1: United States, certainly by the e c B in terms
Speaker 1: of their quantitative sing about eight billion a month that
Speaker 1: we've helped, been helped by the B O J, you know,
Speaker 1: to the tune of the same amount. And without those
Speaker 1: two central banks buying their particular bonds and having those
Speaker 1: UH funds flow back into the United States and ended
Speaker 1: treasuries that I would think treasures would be much higher.
Speaker 1: So what drug he does is important. He did talk,
Speaker 1: you know, very neutral e back and forth as a
Speaker 1: two handed economist, would you know in the past few days.
Speaker 1: And it's hard to know exactly when he begins to taper,
Speaker 1: but when the taper comes from UH, from drug and
Speaker 1: I was assume it would come before carona Um, then
Speaker 1: the bull market in certainly in those countries you know,
Speaker 1: can can come to an end, and perhaps in the
Speaker 1: United States as well. I've said two point six percent
Speaker 1: target for the Treasury. We're not there yet, but if
Speaker 1: that succeeded, I would think it would be because, you know,
Speaker 1: dragging in, because corona are moving away from their own
Speaker 1: particular maneuvers. Bloomberg Radio, Bloomberg Television worldwide, throwed you where
Speaker 1: this worldwide? This morning? A quick day to check here,
Speaker 1: futures up nine before the report. We're now futures up twelve.
Speaker 1: The Dow advances up, putting futures near one, not quite there.
Speaker 1: Yields are higher. Bill Gross having a lousy morning yields up,
Speaker 1: price down. But David, it does begin to show the bounce.
Speaker 1: Here is now we moved to March fifteenth. Bill Gross,
Speaker 1: you referred to Janet Yellen is a modern day Goldilocks
Speaker 1: yesterday in your note. And I've been reading that story
Speaker 1: with my daughter, So let me torture the metaphor a
Speaker 1: little bit here. At the end of that story, Goldilocks escapes,
Speaker 1: she escapes with their life, and the bears get their porridge.
Speaker 1: How does all this end? Do you think? Well? It
Speaker 1: depends on your time frame. I I think in the
Speaker 1: long run it ends badly because central banks have created
Speaker 1: credit at an enormous rate. Let's go back to seventy
Speaker 1: one one trillion dollars worth a credit, and now we
Speaker 1: have sixty trillion dollars with a credit. That's an enormous
Speaker 1: growth rate of ten or eleven or twelve percent, same
Speaker 1: thing in China, or or even more. And so when
Speaker 1: you create credit, and when you create credit at four
Speaker 1: times as much as you create one unit of GDP,
Speaker 1: then ultimately the situation can't last. It doesn't mean it
Speaker 1: has to crash, doesn't speak to arm again, but it
Speaker 1: does suggest that economy slowdown once credit creation can no
Speaker 1: longer be sustained. And I think ultimately that's where we're here,
Speaker 1: and Bill, this is important. Let's tell you, let's expand
Speaker 1: out the timeline. Here is clearly you would like to
Speaker 1: do this morning. We've got rising rates, we have a
Speaker 1: new regime, thank you Jim Bullard, where the feed is
Speaker 1: finally going to act. We have massive transit lant divergences.
Speaker 1: Forget about the politics in Korea. The reality is you
Speaker 1: suggest the great distortion of low rates and low real
Speaker 1: rates will continue. How do our institutions get us back
Speaker 1: to normal if you've got financial repression going out many years, Well,
Speaker 1: I think it's very difficult, and that's what the FED
Speaker 1: has to measure in terms of walking the proverbial fine line.
Speaker 1: You know, when when an economy is highly levered, as
Speaker 1: the US is and the rest of the world is,
Speaker 1: then the Goldilocks metaphor where you can't be too hot
Speaker 1: or too cold, as Janet Yelling is doing, it comes
Speaker 1: into play. If interest rates are too high, like they
Speaker 1: were at five and a quarter percent under the Bernankee
Speaker 1: FED way back when, then subprimes and other housing related
Speaker 1: vehicles come crashing down, as well as related leverage related
Speaker 1: types of vehicles. If they're too cold, as you mentioned, Tom,
Speaker 1: they're too low, if they're financially repressed, then institutions like
Speaker 1: insurance companies, banks, pension funds and the like, you can't
Speaker 1: really survive and pay for the liabilities that they've assumed.
Speaker 1: We're seeing that in Puerto Rico, we're seeing that in Illinois,
Speaker 1: we're seeing that in many spots in the United States.
Speaker 1: And so not too hot, not too cold. It's a
Speaker 1: very fine line, and it suggests to me that they
Speaker 1: can't really raise rates too high or else, um, you know,
Speaker 1: something happens. Bill Gross, thank you so much for joining
Speaker 1: us into all of you on Bloomberg Television worldwide for
Speaker 1: joining us. This job's day here at twenty minutes to
Speaker 1: the hour, David Gerin to I'm keen with Bill Gross
Speaker 1: at Jannis. Let's get right to it with Mr Gross. Bill,
Speaker 1: it used to be an easier business. There were no
Speaker 1: Greek letters. You had a Monroe trader on your desk,
Speaker 1: and you're worried about convexity, You're worried about duration, and
Speaker 1: I believe you worried about making money, getting the coupon,
Speaker 1: making total return. I'm going to suggest within your Janis
Speaker 1: folio right now, it's about not losing money. Tell our
Speaker 1: audience how to not lose money when rates go up
Speaker 1: and price goes down. Well, it's a simple solution. It
Speaker 1: doesn't say how much money you will make, which would
Speaker 1: be scant because you're you're flushing into money market funds.
Speaker 1: What's you know, yield one per cent or less. But
Speaker 1: the key to not losing money in a bare bond
Speaker 1: market when interest rates rise and the duration becomes a
Speaker 1: factor to the downside, is you lower your duration or
Speaker 1: you even go negative duration. You know, most total return funds,
Speaker 1: most bond funds to actually follow what's called the Barkley's
Speaker 1: aggregate index, which has a duration of about five and
Speaker 1: a half years and an average maturity of seven. And
Speaker 1: so that the key to not watching those bond prices
Speaker 1: decline is to not own them and to have a
Speaker 1: duration year or a or a negative So critically, right now, Bill,
Speaker 1: if I go to the Bloomberg Barclays Lehman Brothers Gross Index,
Speaker 1: whatever you want to call the index to the permutations
Speaker 1: of thirty years. If I go to the Bloomberg Barclays index,
Speaker 1: I want to buy shorter maturity. But where do I
Speaker 1: buy it? You've got a preponderance of British Columbia paper.
Speaker 1: Where in the world, you know, it sounds like Waldo.
Speaker 1: Where in the world, Bill, is the value in short
Speaker 1: duration paper? Well, I think there's in value in Argentina.
Speaker 1: You know, Argentina has some problems in terms of inflation,
Speaker 1: and Argentina has some recent problems in terms of default
Speaker 1: or not defaulting. But there are ninety day bills, so
Speaker 1: to speak, yield too to two and a half to
Speaker 1: three percent. It's a premium of a hundred basis points.
Speaker 1: That are a hundred and fifty basis points or some more.
Speaker 1: So you know, you go to some you know, hopefully
Speaker 1: safe emerging market countries. If you're willing to take that risk.
Speaker 1: You also go to a twelve to eighteen month time frame.
Speaker 1: In terms of corporate bonds, double B, triple B, the
Speaker 1: minus types of bonds which yield one point eight one
Speaker 1: point nine two, and those formed the base of a
Speaker 1: Janison constrained portfolio upon which we layer derivatives that put
Speaker 1: on some more yield. David, you're gonna go out and
Speaker 1: by Argentina paper this weekend. Yes, Phil Gross, is there
Speaker 1: anything that would draw you to Europe? I was struck
Speaker 1: by what Mario Draggy said yesterday about the irrevocability of
Speaker 1: the Euro. I wonder what you made of that comment,
Speaker 1: in particular, if there's anything that's attractive across the Atlantic. Well,
Speaker 1: I don't. I don't think so. You know, to my
Speaker 1: way of thinking, the negative yields in Germany, which partly
Speaker 1: reflects the breakup or the potential breakup of the EU
Speaker 1: or the e z uh and Germany leaving and moving
Speaker 1: to a mark as opposed to a euro. There's a
Speaker 1: little bit of a safety premium there. But you know,
Speaker 1: when you buy a five your German OBOL at minus
Speaker 1: fifty basis points, I can ensure you you're not gonna
Speaker 1: make any money. So you know, the German tenure Bund
Speaker 1: at the forty five basis points, that's the same type
Speaker 1: of situation. So instead of buying them, you want to
Speaker 1: short them. You want to take advantage of higher yields
Speaker 1: and um. Shorting the German market and shorting the other
Speaker 1: markets within your land is really a key to total
Speaker 1: return in an unconstrained type of portfolio building. The time
Speaker 1: that we have left and we could talk bond talk
Speaker 1: all day, but I think the nation is certainly riveted
Speaker 1: on what we're seeing in Washington. What is your prescription
Speaker 1: for stability in Washington? I was talking with our Matthew
Speaker 1: Winkler the other day about the success of your California.
Speaker 1: California University had a governmental system that was able to
Speaker 1: come out of it and do better than good is
Speaker 1: witnessed within their bond market. What is the thing that
Speaker 1: to trump, President Trump, and why should you can learn
Speaker 1: from the recovery of your California. Well, that innovation is
Speaker 1: the key to uh to growth and productivity going forward.
Speaker 1: California is famous for that. It's not the only state,
Speaker 1: but the Silicon Valley and the areas we have here
Speaker 1: down south in terms of Irvine and U see I
Speaker 1: are key to UH to growth. California has been a
Speaker 1: key to growth for a long time. UM. So to
Speaker 1: learn from California is to innovate, is to invest is
Speaker 1: to expect that productivity instead of a half a percent,
Speaker 1: will rise to one and a half to two percent.
Speaker 1: But it takes careful planning on the part of the
Speaker 1: private sector h and careful planning. In terms of investment
Speaker 1: going forward, we haven't seen investment from the private sector.
Speaker 1: And you know, the mystery behind that would probably take
Speaker 1: five to ten minutes of discussion. But to my way
Speaker 1: of thinking, um, you know, unless the California models adopted,
Speaker 1: than productivity at a half a percent, than labor growth
Speaker 1: at a half of per cent equals one to one
Speaker 1: and a half percent real growth. And that's not the
Speaker 1: solution for the Trump administration bill gross is it easier
Speaker 1: to ignore the animal spirits endemic to Washington? Right now?
Speaker 1: From Newport Beach? Have they made their way across I
Speaker 1: forty all the way to California? How do you ignore
Speaker 1: all the enthusiasm, all the excitement that we're seeing in Washington.
Speaker 1: If it's not based on something that you think is
Speaker 1: going to lead to much progress. Yeah, I think it
Speaker 1: does help to be on the West Coast. It's helped
Speaker 1: for a long time, thirty forty fifty years of my
Speaker 1: experience to be out here as opposed to back in
Speaker 1: the bars. Uh, you know, just off of Wall Street.
Speaker 1: I think, um, I think to know that. You know,
Speaker 1: there's a lot of hype, there's a lot of hope.
Speaker 1: There always isn't a beginning administration in terms of policies
Speaker 1: that will lead to growth. We're talking about regulatory policies
Speaker 1: and lack of them, the diminishing of them, and the
Speaker 1: Trump administration. We're talking about lower taxes, we're talking about infrastructure.
Speaker 1: All of those things. You know, maybe positives in the
Speaker 1: short term, but in a long term, it really depends
Speaker 1: on getting companies to invest. And yes, as Trump tried
Speaker 1: to do that by talking to individual companies and bringing
Speaker 1: labor back into the United States as opposed to outside,
Speaker 1: I think so, but that still doesn't speak to investment
Speaker 1: in plant equipment as opposed to investment in labor, and
Speaker 1: that's the key going forward. I don't think he's addressed
Speaker 1: that problem as of yet. Let's hope the presidents listening here.
Speaker 1: He did just tweet out something as citing a Bloomberg
Speaker 1: News article about the Job's report. If he's not listening
Speaker 1: to the program right now, But what would you say
Speaker 1: to him if you were one of those executives invited
Speaker 1: into the Oval Office, into the Roosevelt Room to to
Speaker 1: talk to him. But what would you tell him about
Speaker 1: the economy right now and what he should be doing well?
Speaker 1: I would tell him that that in addition to capital,
Speaker 1: that the labor is a quite important component um the
Speaker 1: labor situation in terms of UM universal income. And here's
Speaker 1: a stretch of a idea that's five fifteen years out.
Speaker 1: But um labor has been displaced by technology, will continue
Speaker 1: to be displaced by technology. It's fine to have better
Speaker 1: jobs and better training and to to make humans into robots,
Speaker 1: so to speak. But ultimately universal income in some form
Speaker 1: of fashion is coming not just to Denmark, not just
Speaker 1: to Sweden, but to the United States. And I'd say
Speaker 1: politicians and the United States have to prepare for it. Bill.
Speaker 1: One final question this morning. I assume President Trump or
Speaker 1: maybe even Secretary Monution are listening advise them on the
Speaker 1: US dollar. That's the president's worst nightmare. Do we get
Speaker 1: a brutal move in the dollar or can it be
Speaker 1: a measured and manageable dollar strength? Well, I think it's
Speaker 1: been measured so far, tom It. It can't go too
Speaker 1: much further um for two reasons. Basically, a stronger dollar
Speaker 1: basically hurts US exports, and a stronger dollar, you know,
Speaker 1: hurts emerging market countries that have taken out a lot
Speaker 1: of debt in dollar denominated terms. And so if the
Speaker 1: dollar UH in terms of the d X Y went
Speaker 1: from you know, a hundred two to a hundred and
Speaker 1: five six, seven, eight, then the situation becomes not critical,
Speaker 1: but becomes dicey in terms of the ability of emerging
Speaker 1: markets to repay over the long term and the ability
Speaker 1: of US corporations to become competitive in terms of their exports.
Speaker 1: So you've got to watch the dollar, and that means
Speaker 1: ultimately that the Fed can't raise interest rates too high
Speaker 1: or else the strong dollar will will do the reverse
Speaker 1: in terms of its negatives as opposed to positives, explaining
Speaker 1: they are the second and third order movements of certitude
Speaker 1: of the first order condition, Bill Gross, thank you so
Speaker 1: much with Jana's capital, I guess is the message from
Speaker 1: Bill Gross David Gurra is the maximum durations about two
Speaker 1: weeks page everybody's wantin it is so it is so hard, folks,
Speaker 1: for those of you that have never enjoyed, uh, watching
Speaker 1: price go down within bond portfolios. I hate to report
Speaker 1: that this does occasionally occur. It is an immovable force,
Speaker 1: David when it starts. Street recap what we heard here
Speaker 1: this morning in terms of why not again we had
Speaker 1: this big beat, the thousand, the change in non farm
Speaker 1: payrolls in February, and the unemployment right here at four
Speaker 1: point seven percent, wage growth, paying such close attention to
Speaker 1: that average hourly earnings the survey was point three percent.
Speaker 1: Came in at point two percent, so slightly lower but
Speaker 1: still inline, I think with expectations very good. Thanks for
Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to
Speaker 1: interviews on iTunes, SoundCloud, or whichever podcast platform you prefer.
Speaker 1: I'm out on Twitter at Tom Keene, David Gura is
Speaker 1: at David Gura. Before the podcast, you can always catch
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