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Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane

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Speaker 1: Jai Ley. We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg Jim

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Speaker 1: Glassman jointing us now as he always does ahead of

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Speaker 1: Payrolls JP Morgan Chase Commercial Banking Head economist, Jim. Great

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Speaker 1: to catch you out. Good morning. How are you. We've

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Speaker 1: gotta stop the try story, hown't we? Jim? Yeah? The

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Speaker 1: most interesting story, isn't it? How do you keep up

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Speaker 1: every single morning? You know, you have to step back

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Speaker 1: and ask. I think what we're watching is this is

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Speaker 1: not the way to get people to the table. I

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Speaker 1: think what we're learning and maybe the administration didn't really

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Speaker 1: know this that China has a lot of options also,

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Speaker 1: and they've got a more much more managed economy so

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Speaker 1: they can manage the disruptions from this. And by the way,

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Speaker 1: they say they're not going to weaponize the currency, but

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Speaker 1: when the currency goes down eight or nine percent, that

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Speaker 1: lowers the cost of merchandise we buy from China by

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Speaker 1: fifty to sixty. But so you you could fit into

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Speaker 1: this story, it's hard to tell. Just to push back

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Speaker 1: a bit, the move today doesn't seem completely controlled by China.

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Speaker 1: Their currency is weakening a little bit faster than that

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Speaker 1: they would like, clearly because they're trying to stem some

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Speaker 1: of those two clines. Uh, it's not clear thing about

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Speaker 1: China's controlled. And that's why this is not a market currency. Uh.

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Speaker 1: It is where it is because the People's Nank of

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Speaker 1: China wants it that way. And now you know, and

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Speaker 1: the capital flows are very controlled, right, the capital counts

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Speaker 1: very control. Is very tough to take money in and

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Speaker 1: out of China's So I think everything about China's works traded,

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Speaker 1: and I think this is what you know, what they're

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Speaker 1: going through is an industrial industrialization of their economy. If

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Speaker 1: they were to do what the Trump administration wants to

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Speaker 1: do would be very disruptive for them. So it's not

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Speaker 1: so much that they're trying that they're fighting trumpets. That

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Speaker 1: they've got to manage the how their own economy is

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Speaker 1: developing in the middle of this tension with the Trump administration.

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Speaker 1: So honestly, I think this is totally unconstructive attempting to control.

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Speaker 1: Something doesn't mean you have control. It doesn't necessarily look

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Speaker 1: like they have control. But I think they had more

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Speaker 1: control than anybody in the world on their on their

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Speaker 1: financial instruments, on their currencies. So it's hard to know.

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Speaker 1: I mean, I know there are pressures, but the thing is,

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Speaker 1: it's very difficult for people to you know, normally you

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Speaker 1: would worry that this is a sign of capital outflows,

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Speaker 1: people panicking they're moving capital. You can't move capital out

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Speaker 1: I mean, there are limits on what you can do,

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Speaker 1: and you can be threatened to go to jail or

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Speaker 1: whatever you want to do. Quite clearly, there's a difference

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Speaker 1: between the pain that the Chinese are experiencing currently in

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Speaker 1: the pain the experience in the summer of fifteen and

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Speaker 1: early six. You know, I'm not sure that was pain

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Speaker 1: they were they were trying. They were trying to get

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Speaker 1: into the basket of the SDR basket, right, So they

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Speaker 1: were the I m F had issues with their currency

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Speaker 1: was not looking like a market currency. So they were

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Speaker 1: trying to go through a process of liberalizing. And the

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Speaker 1: thing is they've it's it's they've got tremendous control. I

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Speaker 1: think a lot of people would describe the equity market

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Speaker 1: bursting is pain Jim, Well, not many people own This

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Speaker 1: is not like America. A very small percentage of people

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Speaker 1: stand the composition of the owners ship, but quite created.

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Speaker 1: There was some serious concern amidst the collapse that we

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Speaker 1: saw in the equity market fifteen gone through sixteen economy. Honestly,

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Speaker 1: I remember these worries we had about hard landing in

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Speaker 1: China back in two and sixteen, right, and our market

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Speaker 1: went down, And then you would if you stood back

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Speaker 1: and you said, now, wait a minute, China can turn

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Speaker 1: lots of dials here. And then with six months later

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Speaker 1: we we no longer worry about that, and we find

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Speaker 1: out that car sales have doubled. So I really think

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Speaker 1: it's very difficult to sessing. China's very managed, all right,

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Speaker 1: So difficult to assess China. Some people are saying their

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Speaker 1: signs that it is getting affected, but unclear. Let's turn

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Speaker 1: to the US. We are expecting that job's number at

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Speaker 1: eight thirty Eastern time today. Are we going to see

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Speaker 1: some bleeds through from this too? For that's escalating between

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Speaker 1: the US and frankly the rest of the world. In

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Speaker 1: the jobs number, I doubt it in the aggregate numbers.

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Speaker 1: What people are saying is when you look at employment

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Speaker 1: at very large companies, you're seeing a little bit of

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Speaker 1: a slow down. That's where you might see it, but

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Speaker 1: I think it's so subtle you won't you won't see it.

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Speaker 1: I think we're going to see something a two thousand

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Speaker 1: jobs claims, which are the most reliable indicator we have

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Speaker 1: on the US, are telling us that the labor market

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Speaker 1: strengthen further in the last six months, and it seems

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Speaker 1: like we're still running very strong. And I think the

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Speaker 1: mystery in the US is where all these people coming from?

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Speaker 1: If we're at low if we're at low levels of unemployment,

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Speaker 1: where are all these people coming from. Well, it's a

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Speaker 1: reminder that there was a lot of hidden unemployment during

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Speaker 1: the recession, and mob, bet you anything, we're gonna find

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Speaker 1: out that just some flows of new immigration coming in. Yeah.

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Speaker 1: How much do you think that the tariffs are sort

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Speaker 1: of the trade tensions are going to lead too much

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Speaker 1: higher inflation? I think pretty marginal, because, first of all,

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Speaker 1: what is the impact of tariffs. It's not just harriffs

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Speaker 1: themselves that matters it. What matters is what's the cost

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Speaker 1: of merchandise. So if you ask Walmart, what does the

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Speaker 1: cost of your merchandise that you're purchasing from China while

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Speaker 1: the currency is down eight or nine? UM. My guess

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Speaker 1: is they would tell you not much. When you add

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Speaker 1: the tariffs to the lower cost of merchandise. The story

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Speaker 1: is much more complicated than just tariffs. It also depends

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Speaker 1: on where the currency is doing. Um. Is this disruptive

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Speaker 1: to the economy. I think it would be really marginal

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Speaker 1: impact on inflation. You'll see it more in the PPI

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Speaker 1: level and the cost of steel and aluminum, where where

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Speaker 1: it already has gotten into place. But I think in

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Speaker 1: terms of uh things that we're buying from China, I

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Speaker 1: bet we don't see much of it, and you'll see

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Speaker 1: it in the import price trends. Jim Klassman, great, tap

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Speaker 1: you with the syste Morning Champ, Morgan Shanks Commercial Bank

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Speaker 1: and head economists. So I want to bring up Mike

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Speaker 1: Darta am Key m Holdings chief economists and Cheap Market

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Speaker 1: strategist to get some more reaction on what Jonathan Farrow

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Speaker 1: called a snooze fest before running out the door and

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Speaker 1: leaving it in my hands. Michael, what's your take on

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Speaker 1: this report? Thanks for having me on and I think

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Speaker 1: it's pretty you know, pretty much in line with consensus.

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Speaker 1: If we look at the fifty thousand upward revision to

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Speaker 1: the previous two months, then you know, the actual headline

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Speaker 1: figure came, you know, right in line with consensus expectations. Importantly,

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Speaker 1: I would remind viewers much better to look at moving

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Speaker 1: averages because these monthly figures do bounce around, and we

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Speaker 1: do see pretty significant revisions two previous months. So if

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Speaker 1: you look at a three month moving average, we're still

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Speaker 1: running over two, you know, to twenty, where I think

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Speaker 1: to be exact. So that's well above the pace the

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Speaker 1: FED thinks that we can sustain over a long period

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Speaker 1: of time. As a result, you know, you mentioned the

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Speaker 1: bond market not really moving, so you know, these data

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Speaker 1: would be consistent with the Fed still on track probably

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Speaker 1: to do two more rate rises this year. All right,

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Speaker 1: So two more rate rises this year? You know, I

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Speaker 1: gotta say, are we moving past the paradigm where every

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Speaker 1: payrolls report is you know, parsed in detail and people

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Speaker 1: are trying to understand things, and people are saying, you

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Speaker 1: know what, we know that things are good. We know

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Speaker 1: that in general the job market is strong on the margins.

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Speaker 1: You're going to get some variations just month to month,

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Speaker 1: but on the whole, unless there's something really dramatic, we

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Speaker 1: don't really care, I think. So, you know, it's interesting

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Speaker 1: the FED spent a few years telling us that they

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Speaker 1: weren't on a preset course, but now it looks pretty

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Speaker 1: much like a preset course and less something radical happens

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Speaker 1: to the macro data. So I don't think, you know,

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Speaker 1: one month of you know, above or below really throws

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Speaker 1: the FED much off track based on you know, what

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Speaker 1: their current intentions are. And this number was you know,

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Speaker 1: pretty much right in line. So I think you'd need

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Speaker 1: a streak of surprises on on payrolls either much lower

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Speaker 1: than expected or you know, if they're much hotter, especially

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Speaker 1: at this stage of the recovery, then that would certainly

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Speaker 1: reinforce the idea of a more hawkish FED relative to

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Speaker 1: you know, what's currently priced in. So, Mike, given given

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Speaker 1: that backdrop, given the fact that the U s economy

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Speaker 1: by all accounts is pretty strong right now, the focus

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Speaker 1: moves more to trade, and we're getting sort of the

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Speaker 1: retaliation from China to President Trump's additional tariffs on Chinese goods.

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Speaker 1: China saying that it's going to levy tariffs between five

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Speaker 1: and sixty billion dollars of additional US goods coming into

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Speaker 1: the country. Uh, you know, in retaliation. How much does

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Speaker 1: that sort of dominate the whole picture at this point

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Speaker 1: as this backdrop this sort of unknown about wage growth, etcetera, etcetera.

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Speaker 1: It's pretty much unknown right now. I'm glad you brought

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Speaker 1: that up. I mean, it's an important issue. So far,

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Speaker 1: at least as it relates to the macro data and

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Speaker 1: frankly the financial markets, it doesn't seem to be having

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Speaker 1: much of an impact at all. But you know, if

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Speaker 1: you continue to see this ratcheting effect where tariffs are

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Speaker 1: going up and then you retaliation, you know, we could

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Speaker 1: start to see more harmful effects eventually impacting the macro

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Speaker 1: data and financial markets were not there. But you know,

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Speaker 1: the way we've been advising our clients to think about

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Speaker 1: more restrictive trade policies is essentially like an adverse supply

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Speaker 1: side shock and economics one oh one. So if you're

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Speaker 1: applying tariffs or taxes, price of a good goes up,

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Speaker 1: output falls. You know, it's a headwind to efficiency. You know,

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Speaker 1: your previous guest was talking about wages and productivity in

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Speaker 1: the key to faster wage growth being through faster productivity. Well,

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Speaker 1: a trade war certainly isn't going to help on efficiency

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Speaker 1: and productivity. And so you know, if we look at

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Speaker 1: fiscal policy, we see some positives but also some negatives,

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Speaker 1: and frankly, trade I think would have to go in

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Speaker 1: the negative column. Mike, is a trade war inflationary or deflationary? Well,

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Speaker 1: it is inflationary. So an adverse supply side shock, if

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Speaker 1: you're shifting the supply curve to the left, prices go up,

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Speaker 1: output falls um, so different than the demand shock, where

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Speaker 1: they tend to go in the same direction. For the FED,

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Speaker 1: they do try to look beyond supply side shocks. So

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Speaker 1: you know, supply shocks will tend to impact inflation in

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Speaker 1: a temporary way, and it's you know, it's unclear how

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Speaker 1: the FED would, you know, would really respond if this

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Speaker 1: gets severe, But you know that what they're telling us

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Speaker 1: is that they're going to try to look beyond it.

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Speaker 1: So if you think about the feds dual mandate, what

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Speaker 1: would a dual mandate tell the FED to do in

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Speaker 1: the event of an adverse supply shock. While on the

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Speaker 1: one hand, you get higher inflation, so that would translate

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Speaker 1: into more hawkish policy. But on the other you get

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Speaker 1: weaker real growth and probably some disruptions in the labor market,

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Speaker 1: which would cut the other way easing policy. So on net,

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Speaker 1: you know, an adverse supply shock isn't good for the

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Speaker 1: US economy, probably doesn't carry significant implications for monetary policy

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Speaker 1: one way or the other. Mike Tarta, thank you so

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Speaker 1: much for being with us. Michael Darda is m k

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Speaker 1: m's chief economists and market strategistic Thank you so much

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Speaker 1: for we're spending time with those on this Perrolls Friday.

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Speaker 1: It's great to see in front of the White House again.

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Speaker 1: I've got about ten trillion dollars of assets under management

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Speaker 1: with me around the table, and they're keen to get

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Speaker 1: your insights on the job's report, a really solid jobs

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Speaker 1: report over the last few months. And around the panel, Lowry,

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Speaker 1: we've been talking about whether there's more slack in this

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Speaker 1: labor market. Do you think there is, Larry, Well, look,

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Speaker 1: you know, depending on the measurements and so forth, I

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Speaker 1: think there's a lot of people who are still outside

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Speaker 1: of you know, what what i'd call the prime age workforce,

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Speaker 1: which is what five to fifty four or some such

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Speaker 1: CAPSUL economic advisors. My Great Power cabin hasn't has looked

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Speaker 1: at this um. The estimates are wide ranging, but the

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Speaker 1: high end is twenty million. I'm a twenty two million

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Speaker 1: people are outside of the prime age workforce. Now you

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Speaker 1: might dispute that number. On the low side, I think

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Speaker 1: their estimate was about ten to twelve million. So all

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Speaker 1: labor markets have certainly firmed up, and the unemployment rate

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Speaker 1: is down. I think it ticked down to three nine today,

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Speaker 1: and you had a good jobs report today, including revisions,

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Speaker 1: it was two hundred and fifteen thousand. There are still

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Speaker 1: a lot of Americans out there who could come back

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Speaker 1: into the labor force. So I like that. I think

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Speaker 1: our potential to grow is very strong, and with the

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Speaker 1: right incentives, I think we'll get them back working. Yeah,

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Speaker 1: and so continued speaking into Kevin Hassett previously. Nowtry it

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Speaker 1: just seems that the administration is waiting for this supply

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Speaker 1: side response. Has that been you'll rather nuw wance message

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Speaker 1: over to the federal reserve as well? Well? Let me

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Speaker 1: stay with the supply side response and simply indicate it

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Speaker 1: looks to me like we are in an investment boom,

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Speaker 1: a capital goods boom, a cap X boom. Those numbers

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Speaker 1: are ring in recent quarters, and I noticed the monthly

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Speaker 1: is on you know, durables and factory orders are very

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Speaker 1: very strong. You know. That was the key intention, the

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Speaker 1: primary thrust thrust of our tax cut plan for businesses, UH,

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Speaker 1: corporate rate, full expensing, easy repatriation. I think it's working now.

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Speaker 1: It's only been in what six seven months, but the

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Speaker 1: early returns on that, just the last couple of quarters

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Speaker 1: are very very very strong. That will elevate the whole

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Speaker 1: growth rate and health of the economy. So I like

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Speaker 1: that part a lot. And some analysts, probably not everybody,

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Speaker 1: but some analysts are already making some calculations that the

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Speaker 1: productivity rate, output per hour, output per person is now

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Speaker 1: starting to creep up again. I think it's probably too

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Speaker 1: soon to um to say anything conclusively, but I've seen

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Speaker 1: these uh, I've seen these views, and it looks like

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Speaker 1: we may be moving back to say, one and a

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Speaker 1: half to two percent productivity. We were virtually zero for

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Speaker 1: quite some time. This is all good, This is all good, Larry.

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Speaker 1: I know, over the last couple of weeks we've had

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Speaker 1: a real discussion around this table about whether trend growth

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Speaker 1: in the United States has picked up, and it looks like,

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Speaker 1: relatively speaking, the US is in a position of strength.

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Speaker 1: Looking into China, Larry have sat around the table with

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Speaker 1: the Chinese many many times. What is your opinion, your

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Speaker 1: inside into what is happening with the Chinese economy currently? Well, look,

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Speaker 1: I'm not an expert. I do try to follow it,

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Speaker 1: and it looks to me, I don't know, you all

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Speaker 1: may disagree. It looks to me like the China economy

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Speaker 1: is declining and growth it's weaken it almost across the board,

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Speaker 1: and it looks like the people's value of China is

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Speaker 1: trying to pump it up by you know, adding high

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Speaker 1: powered money and and and new credit and so forth.

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Speaker 1: The currency fall, the currency fall, I think is partly

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Speaker 1: they've stopped defending the U on they think it's going

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Speaker 1: to help offset the us UH effort to get rid

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Speaker 1: of their unfair trading. Some of the currency fall, though,

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Speaker 1: I think it's just money leaving China because it allows

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Speaker 1: the investment, and if that continues, that will really damage

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Speaker 1: the Chinese economy. If money leaves China, and the currency

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Speaker 1: could be a leading indicator they're gonna be in a

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Speaker 1: heap of trouble, and so I'm gonna make the case

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Speaker 1: that they are in a weak economic position. That's not

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Speaker 1: a good place for them to be visa VI the

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Speaker 1: trade negotiations. First point. Second point, they better not underestimate

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Speaker 1: President's Trump's President Trump's determination to follow through on our asks. Okay,

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Speaker 1: I p theft, no go force, transcript technology, no go uh,

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Speaker 1: non reciprocal trading, on tariffs and non tariff barriers. You know,

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Speaker 1: the presidentcy's a trade reformer. We said many times, no tariffs,

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Speaker 1: no tariff barriers, no subsidies. We want to see trade reforms.

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Speaker 1: China is not delivering. Okay. Their economy is weak, their

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Speaker 1: currency is weak. People leaving the kind tree Um. Don't

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Speaker 1: underestimate President Trump's determination to follow through. I'm just telling you.

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Speaker 1: I can't speak for the Communist Party in China. I

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Speaker 1: can't speak for our president. Do not underestimate his determination

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Speaker 1: to change trading practices on a fair reciprocal plane. One

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Speaker 1: thing you can definitely speak to, Larry is the strategy

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Speaker 1: of the president. It just seems to me that the

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Speaker 1: strategy of the administration at the moment is to exert

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Speaker 1: maximum pain on the Chinese economy. Is that the direction

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Speaker 1: of travel for you guys, Larry, I'm sorry, what was

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Speaker 1: the end question? It is the direction of travel for

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Speaker 1: you guys to exert maximum plain pain on the Chinese

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Speaker 1: economy to get them to come to the table and

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Speaker 1: change their trade regime. Well, look, I would maybe rephrase

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Speaker 1: it a bit um. I think what we're saying is

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Speaker 1: that we are serious and in trade. As you well

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Speaker 1: know and your your guests, no negotiations often include the

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Speaker 1: use of terrors and us in And has said time

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Speaker 1: and time again that targeted tariffs are going to be

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Speaker 1: part of the game plan with China unless until they

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Speaker 1: begin to meet our requests, which so far they have not.

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Speaker 1: In fact, in recent month or so, we've had hardly

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Speaker 1: any conversations with them at all. There is some hints

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Speaker 1: now that they may wish to talk, although I can't

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Speaker 1: say that with certainty. Look, I think the biggest news

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Speaker 1: on the trade front, away from the transigent Chinese is

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Speaker 1: our progress of the European Union that occurred last week.

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Speaker 1: President had great meetings with President Younker. I was involved

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Speaker 1: in that. We're breaking ground. We will have a number

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Speaker 1: of announcements coming up by hope in the next thirty

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Speaker 1: years so days with respect to transactions and market opening

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Speaker 1: and increase investments. With the European Union, the EU, as

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Speaker 1: you know, turned down a China effort to make a deal.

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Speaker 1: The U S EO said no, And so you've got

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Speaker 1: now a better story with the U S and the EU.

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Speaker 1: We're probably gonna have some positive news on Mexico. And

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Speaker 1: I think the alliance what I sometimes called the trade

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Speaker 1: Coalition of the willing to change China's unfair and illegal

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Speaker 1: practices EU, Mexico, China, I'm sorry, uh, Japan, Australia, perhaps

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Speaker 1: Canada will eventually join us as we negotiate an after.

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Speaker 1: I like the position we are in, and I think

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Speaker 1: the President has played as cards very wisely. Larry, Just

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Speaker 1: as a final question, the President has often gone off

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Speaker 1: on his own and talks very high level with an

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Speaker 1: individual leader. What is the prospect you think that we

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Speaker 1: could see President Trump sit down with President she again

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Speaker 1: and address these issues together. You know he President Trump

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Speaker 1: liked bilaterals and he likes to go head to head.

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Speaker 1: You're quite right, that's a good insight. So if the

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Speaker 1: opportunity present to itself, UM, I don't want to speak

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Speaker 1: for the President. I don't want to get ahead of

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Speaker 1: him on this tricky question you asked. But all I

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Speaker 1: know is if the past is any prologue to the future.

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Speaker 1: President Trump enjoys bilateral discussions. Look, we just had one

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Speaker 1: with the EU. President Younker and President Trump got together

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Speaker 1: and probably probably did what nobody thought possible, which is

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Speaker 1: not only to have a respectful, peaceable meeting, but to

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Speaker 1: actually begin the process of making a grand deal to

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Speaker 1: open up, tear down barriers, and open up markets. So

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Speaker 1: there's your head to head model. Uh, you may well

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Speaker 1: see it with China, We'll have to see. I don't know,

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Speaker 1: Larry cud Look, it's great to see a healthy and

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Speaker 1: fit in front of the White House again. It's thank

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Speaker 1: you so much to Jonathan Pharaoh. That was a tremendous

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Speaker 1: interview with Larry Cutler of the U. S. Council of

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Speaker 1: Economics advising President Trump. Now here were the preview of

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Speaker 1: Sunday's Face the Nation is CBS is Margaret Brennan. Of

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Speaker 1: course you can listen to Face the Nation Sunday two

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Speaker 1: pm in New York, Washington, d C. And now Bloomberg

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Speaker 1: one oh six one Boston, Newburyport face the nation this Sunday,

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Speaker 1: two pm on Bloomberg Radio. Margaret, with all of the

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Speaker 1: back and forth this week, we've got the President who

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Speaker 1: is seems to be in full campaign mode. Yes, three

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Speaker 1: rallies this week. We had the one in Pennsylvania last night.

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Speaker 1: We got another one coming up Saturday night in Ohio,

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Speaker 1: which undoubtedly will provide fodder for US Sunday morning. Um,

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Speaker 1: we know the President last night, even though he had

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Speaker 1: all of his top national security officials from the podium

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Speaker 1: at the White House issuing stark warnings to Russia to

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Speaker 1: knock it off and to stop interfering in the upcoming

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Speaker 1: November elections, which they continue to do to oocracies in

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Speaker 1: the crosshairs, according to the Homeland Security Secretary of the

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Speaker 1: President didn't echo that language at Israeli and said once

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Speaker 1: again using terms like which hunt to describe the ongoing

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Speaker 1: investigations into election meddling in t So, Margaret, who's your

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Speaker 1: guest this week? We'll talk about some of that with

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Speaker 1: familiar phase. Adam Shift, Democratic congressman's from California has been

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Speaker 1: involved in some of those investigations. Well. Also, because we're

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Speaker 1: headed towards September sooner than you might think, and back

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Speaker 1: to school season, be taking a look at what's going

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Speaker 1: on with the state of education in America. Will bring

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Speaker 1: in Arnie Duncan, the former education secretary from the Obama administration,

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Speaker 1: has got a new book out, and talk to him

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Speaker 1: about some of what the Trump administration is trying to

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Speaker 1: do now and some of the track record of the

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Speaker 1: Obama administration and what they attempted to do to help

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Speaker 1: educate our kids. Just a little bit on Representative Adam

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Speaker 1: Shift of California. Is that going to also focus on

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Speaker 1: the ongoing investigation into Russian meddling in the US presidential election,

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Speaker 1: because the president, of course this week tweeting out that

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Speaker 1: he wants Attorney General Jeff Sessions to push to conclude

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Speaker 1: that investigation. The President did say that, which of course

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Speaker 1: the Attorney General cannot do because he's refused himself from

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Speaker 1: the investigation, which further muddies the waters here. Uh. Some

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Speaker 1: talking about this is really just a political tweet to

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Speaker 1: um draw support of some of the President's uh you know,

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Speaker 1: the most devoted supporters who are seeing this through political lens,

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Speaker 1: which is what the President claims it is. All of

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Speaker 1: which hunt Um, but with Adam Schiff, we will talk

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Speaker 1: more about what Congress is doing or not doing to

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Speaker 1: actually secure facilities. Last of what happened in sixteen, what

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Speaker 1: is happening right now? You have a head of cyber

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Speaker 1: Command standing up at the White House podium saying we

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Speaker 1: are going to take active measures against hackers who now

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Speaker 1: are trying to interfere and divide America. You know, Margaret,

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Speaker 1: I wonder just as a as a journalist when you're

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Speaker 1: questioning people on either side. Adam Schiff obviously has very

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Speaker 1: strong views. Is it ever difficult to try to find

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Speaker 1: I don't know, some kind of I don't want to

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Speaker 1: say middle ground, but a place that feels more constructive

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Speaker 1: than how heated the rhetoric has gotten on all sides.

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Speaker 1: I think you're right. I think this is something that

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Speaker 1: is very frustrating for those of us who want to

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Speaker 1: focus on policy substance, on what is being done now

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Speaker 1: to America versus getting people to to who are divided,

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Speaker 1: to be less divided, to focus on the facts rather

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Speaker 1: than the opinions here. And that is something that if

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Speaker 1: if you believe exactly what the intelligence community is telling you,

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Speaker 1: that the aim is to have divide America when we

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Speaker 1: only hear things through partisan lenses or see them that way, UM,

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Speaker 1: it only helps that attempt to bide, and I think

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Speaker 1: that's really frustrating. I think it is also very frustrating

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Speaker 1: for me UM in trying to lead conversations when you

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Speaker 1: do have everything put through the political uh filter once again,

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Speaker 1: and you rightly indicate their uh. The congressman from California

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Speaker 1: has been involved with the House Intelligence Committee investigation, but

430
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Speaker 1: he's also out there fundraising for the Democratic Party at

431
00:24:23,200 --> 00:24:27,440
Speaker 1: the very same time. Can you separate those things? Um And?

432
00:24:27,920 --> 00:24:30,320
Speaker 1: What he would say, what others would say, is when

433
00:24:30,359 --> 00:24:33,640
Speaker 1: it comes to American security, they can Will the public

434
00:24:33,800 --> 00:24:36,960
Speaker 1: listen to the facts rather than the filter? I think

435
00:24:37,080 --> 00:24:38,959
Speaker 1: is the challenge for us as journalists to keep it

436
00:24:39,480 --> 00:24:42,240
Speaker 1: focused on that, um And, And that's why I think

437
00:24:42,240 --> 00:24:44,960
Speaker 1: it was important for the White House to put out

438
00:24:45,600 --> 00:24:48,360
Speaker 1: some of the national security professionals to make these arguments

439
00:24:48,440 --> 00:24:51,440
Speaker 1: yesterday and say they're not out there for political reasons.

440
00:24:51,480 --> 00:24:55,040
Speaker 1: They're out there telling you what they're finding right now. Well, market,

441
00:24:55,600 --> 00:24:58,600
Speaker 1: I guess there's no love lost between Adam Schiff and

442
00:24:59,320 --> 00:25:07,240
Speaker 1: fellow California Congressman Devin Newness now that's always part of

443
00:25:07,280 --> 00:25:10,520
Speaker 1: the the infighting there. They are two partisans and they

444
00:25:11,080 --> 00:25:14,439
Speaker 1: very much are in disagreement with each other. That House

445
00:25:14,520 --> 00:25:18,040
Speaker 1: Committee investigation concluded, and I will point out that the

446
00:25:18,440 --> 00:25:22,040
Speaker 1: that trade Goudy, who has let his own investigations and

447
00:25:22,200 --> 00:25:25,879
Speaker 1: House oversights himself, called these things really more of a

448
00:25:25,960 --> 00:25:31,560
Speaker 1: circus than a fact finding mission when Congress leads an investigation. Um.

449
00:25:31,640 --> 00:25:35,160
Speaker 1: That aside, the reason that it will ultimately come down

450
00:25:35,160 --> 00:25:38,720
Speaker 1: in many ways to what Congress believes or what they

451
00:25:38,720 --> 00:25:41,679
Speaker 1: are able to turn up is because if we do

452
00:25:41,760 --> 00:25:45,159
Speaker 1: get into a situation post November, post these congressional races

453
00:25:45,200 --> 00:25:49,639
Speaker 1: where it comes down to not a procedure in court,

454
00:25:49,960 --> 00:25:54,720
Speaker 1: but rather a political uh task here of impeachment, what

455
00:25:54,920 --> 00:25:57,280
Speaker 1: is it, how is it that people will be uh,

456
00:25:57,320 --> 00:25:59,000
Speaker 1: what is the fact that they are looking at? And

457
00:25:59,040 --> 00:26:01,600
Speaker 1: how will they be voted? Which is why this does

458
00:26:01,680 --> 00:26:03,800
Speaker 1: come down to politics in terms of how it could

459
00:26:04,240 --> 00:26:06,680
Speaker 1: damage the president in the long run. If if the

460
00:26:06,760 --> 00:26:09,240
Speaker 1: Special Council doesn't have a case to bring to court,

461
00:26:09,880 --> 00:26:12,640
Speaker 1: does he but will he bring to Congress. We'll be listening,

462
00:26:12,800 --> 00:26:16,280
Speaker 1: Thanks very much, Margaret Brennan, host of Face the Nation.

463
00:26:16,359 --> 00:26:19,400
Speaker 1: Remember to listen to Face the Nation Sunday two pm

464
00:26:19,640 --> 00:26:22,840
Speaker 1: in New York, Washington, d C. And now Bloomberg one

465
00:26:22,840 --> 00:26:25,879
Speaker 1: oh six one Boston New report that's Face the Nation

466
00:26:26,320 --> 00:26:44,879
Speaker 1: this Sunday at two pm on Bloomberg Radio, Governor Countie

467
00:26:44,880 --> 00:26:48,320
Speaker 1: throwing himself back into the thick end of the Brexit debate,

468
00:26:48,600 --> 00:26:50,560
Speaker 1: saying the chance of the UK dropping out of the

469
00:26:50,600 --> 00:26:53,760
Speaker 1: European Union without a deal is uncomfortably high. A little

470
00:26:53,800 --> 00:26:56,440
Speaker 1: bit of tension. There also some tension in the news

471
00:26:56,560 --> 00:27:00,520
Speaker 1: conference following a decision to high interest rates. Mr Cannie

472
00:27:00,760 --> 00:27:03,520
Speaker 1: was asked about what our guest Danny blanche Flower thought

473
00:27:03,520 --> 00:27:05,920
Speaker 1: about the labor market. Take a listen to this exchange.

474
00:27:06,800 --> 00:27:11,240
Speaker 1: Given that Professor blanch flowers predictions for labor market and

475
00:27:11,320 --> 00:27:14,880
Speaker 1: particularly earn his growth have been yeah, recently a lot

476
00:27:14,920 --> 00:27:17,280
Speaker 1: more accurate in the banks, why is he wrong? And

477
00:27:17,359 --> 00:27:26,040
Speaker 1: you're right? Yeah, Where do I begin? Um? Um, Great

478
00:27:26,040 --> 00:27:29,399
Speaker 1: respect for Professor blanch Flower, but his time in the

479
00:27:29,480 --> 00:27:32,280
Speaker 1: MPC has passed, and this is the judgment of this

480
00:27:32,480 --> 00:27:37,520
Speaker 1: MPC first point. Second is that I think one bigger

481
00:27:37,600 --> 00:27:41,119
Speaker 1: point of context in terms of wages, which is not

482
00:27:41,240 --> 00:27:43,000
Speaker 1: precisely go on your question. I'll get to your question,

483
00:27:43,040 --> 00:27:49,320
Speaker 1: but going precisely is that um A, you know, given

484
00:27:49,359 --> 00:27:54,520
Speaker 1: how low productivity is, um wage growth that is in

485
00:27:54,560 --> 00:27:58,880
Speaker 1: the upper twos, low threes is actually wage growth. It's

486
00:27:58,920 --> 00:28:06,240
Speaker 1: consistent today with a two percent inflation target. Governor County there,

487
00:28:06,280 --> 00:28:09,840
Speaker 1: speaking in the news conference following that interest rate high,

488
00:28:09,920 --> 00:28:13,119
Speaker 1: Danny blanche Fled joining us now Dartmouth professor and former

489
00:28:13,200 --> 00:28:16,560
Speaker 1: bo WE Monetary Policy Committee member, Danny, good morning too,

490
00:28:16,600 --> 00:28:20,280
Speaker 1: and thank you for coming back your opportunity to Governor.

491
00:28:23,160 --> 00:28:26,560
Speaker 1: Please Danny respond, Yeah, I like the great respect it.

492
00:28:26,680 --> 00:28:32,239
Speaker 1: I mean, I think I think I think the answer was,

493
00:28:34,960 --> 00:28:38,440
Speaker 1: I mean disingenuous in the suggestion. And they continue to

494
00:28:38,480 --> 00:28:42,000
Speaker 1: make the suggestion that wage growth is in the threes

495
00:28:42,080 --> 00:28:43,880
Speaker 1: and the three and a half. Well that's what they

496
00:28:43,920 --> 00:28:48,640
Speaker 1: have been forecasting to the last eighteen forecasts in a row.

497
00:28:49,360 --> 00:28:52,480
Speaker 1: And they got all excited in December when they got

498
00:28:52,480 --> 00:28:55,760
Speaker 1: a read of three and they said, yippee, here we are,

499
00:28:55,840 --> 00:29:00,640
Speaker 1: We're completely right. And then wage growth deterior rated them,

500
00:29:00,720 --> 00:29:05,280
Speaker 1: fell and slowed. So the forecasts, the forecast, they may

501
00:29:05,320 --> 00:29:09,160
Speaker 1: have been terrible. Everything in this basically in this decision

502
00:29:09,160 --> 00:29:13,080
Speaker 1: to raise was essentially based on their forecast for wages,

503
00:29:13,360 --> 00:29:15,800
Speaker 1: which I think I've shown have been completely terrible, and

504
00:29:15,840 --> 00:29:18,000
Speaker 1: there was nothing in the data, so I really didn't

505
00:29:18,080 --> 00:29:20,840
Speaker 1: buy it. And I thought the data this morning, the

506
00:29:20,920 --> 00:29:24,080
Speaker 1: slowing of the services p M I sort of added

507
00:29:24,520 --> 00:29:26,840
Speaker 1: added to the sort of r of groups think they

508
00:29:26,880 --> 00:29:29,640
Speaker 1: made yesterday. And there's been a lot of people like

509
00:29:29,760 --> 00:29:32,240
Speaker 1: me saying, you know, this was a major mistake. The

510
00:29:32,360 --> 00:29:36,120
Speaker 1: FD editorial this morning it says this is a major mistake,

511
00:29:36,320 --> 00:29:38,920
Speaker 1: and I think I think it has been. I think

512
00:29:38,960 --> 00:29:41,920
Speaker 1: the fundamental thing is about wages, as it will be

513
00:29:41,960 --> 00:29:44,440
Speaker 1: in the Job's report this morning, and I've worked on

514
00:29:44,520 --> 00:29:47,560
Speaker 1: I wrote my PhD thesis on it over maybe forty

515
00:29:47,640 --> 00:29:50,040
Speaker 1: years ago, so I know about this stuff, and I

516
00:29:50,080 --> 00:29:52,520
Speaker 1: think I think it was just they've just gone on

517
00:29:52,560 --> 00:29:54,640
Speaker 1: and on and on saying, you know, it's all going

518
00:29:54,680 --> 00:29:57,440
Speaker 1: to explode. And the answer that listeners should have is, well,

519
00:29:57,440 --> 00:30:00,520
Speaker 1: why today if in the last seven team forecast it happens,

520
00:30:00,640 --> 00:30:05,160
Speaker 1: you're saying today it's gonna why should we ever believe you? Right? Well, Danny,

521
00:30:05,200 --> 00:30:07,280
Speaker 1: I guess that. Then the question is how much harm

522
00:30:07,720 --> 00:30:09,960
Speaker 1: did the Bank of England do with this rate hike?

523
00:30:10,040 --> 00:30:11,720
Speaker 1: I mean, couldn't you say it's just innocuous and it

524
00:30:11,720 --> 00:30:14,120
Speaker 1: gives them a little more ammunition to take care of

525
00:30:14,120 --> 00:30:18,880
Speaker 1: another downturn well, and already slowing housing and chrome commercial

526
00:30:18,920 --> 00:30:21,320
Speaker 1: property markets are going to be impacted. And the way

527
00:30:21,320 --> 00:30:23,280
Speaker 1: that I sort of think of it is, you've got

528
00:30:23,280 --> 00:30:25,640
Speaker 1: three choices. You can punch yourself hard in the face,

529
00:30:25,960 --> 00:30:28,120
Speaker 1: you can punch yourself gently in the face, or not

530
00:30:28,160 --> 00:30:32,120
Speaker 1: punch yourself in the face. So I would choose option three. Um,

531
00:30:32,200 --> 00:30:34,760
Speaker 1: and you said to me, is not is punching yourself

532
00:30:34,760 --> 00:30:36,280
Speaker 1: in the face a little bit when you don't have

533
00:30:36,360 --> 00:30:38,000
Speaker 1: too Is that a good idea? The answer is no,

534
00:30:38,080 --> 00:30:40,240
Speaker 1: it's not a good idea. So, yes, they've made a

535
00:30:40,280 --> 00:30:43,400
Speaker 1: small mistake, better than making a big mistake. But I

536
00:30:43,440 --> 00:30:45,480
Speaker 1: personally would have preferred them to not make a mistake

537
00:30:45,520 --> 00:30:48,040
Speaker 1: at So and I was on yesterday without imposing both,

538
00:30:48,200 --> 00:30:50,440
Speaker 1: he was on the MPC two and our views were

539
00:30:50,520 --> 00:30:53,680
Speaker 1: the data was much more balanced than you would have thought,

540
00:30:53,680 --> 00:30:56,880
Speaker 1: and there were clear arguments actually for a cut. So

541
00:30:57,240 --> 00:30:59,480
Speaker 1: if there are arguments are strong arguments for a cut,

542
00:31:00,080 --> 00:31:02,240
Speaker 1: and you say, well, it doesn't really hurt they've made

543
00:31:02,240 --> 00:31:05,680
Speaker 1: an error, well, okay, it's better than making a really

544
00:31:05,800 --> 00:31:09,800
Speaker 1: big error. But it looks for our listeners that weren't

545
00:31:09,800 --> 00:31:11,960
Speaker 1: with us yesterday. I just want to give the other

546
00:31:12,080 --> 00:31:13,640
Speaker 1: end of the argument so you have a chance to

547
00:31:13,680 --> 00:31:16,360
Speaker 1: respond to it. What do you make of the comment

548
00:31:16,520 --> 00:31:19,480
Speaker 1: from Governor Carney where he basically says that you used

549
00:31:19,480 --> 00:31:22,040
Speaker 1: to be on the MPC, this is today's MPC, And

550
00:31:22,160 --> 00:31:24,480
Speaker 1: I don't think it was an insult. I think it

551
00:31:24,600 --> 00:31:26,760
Speaker 1: was a suggestion that times were different back then. There

552
00:31:26,840 --> 00:31:29,880
Speaker 1: was an expectation of a productivity rebound that we probably

553
00:31:29,920 --> 00:31:34,000
Speaker 1: won't get now that's the expectation from this MPC. What

554
00:31:34,080 --> 00:31:37,240
Speaker 1: do you make of that kind of theory, Danny Well,

555
00:31:37,520 --> 00:31:39,920
Speaker 1: I certainly have written about the fact that the world

556
00:31:40,080 --> 00:31:43,520
Speaker 1: has changed, and I think it's fundamentally all to the

557
00:31:43,600 --> 00:31:47,440
Speaker 1: labor market characteristics of altered. But I think my analysis

558
00:31:47,520 --> 00:31:49,600
Speaker 1: of the labor market has actually got better and there's

559
00:31:49,640 --> 00:31:52,880
Speaker 1: has got worse. So I think that obviously that the

560
00:31:53,040 --> 00:31:57,320
Speaker 1: world has changed. Clearly we're at low rates for a

561
00:31:57,480 --> 00:32:00,680
Speaker 1: for a set of reasons. Um, I mean just because,

562
00:32:00,880 --> 00:32:02,800
Speaker 1: I mean I remember being on there and being a

563
00:32:02,920 --> 00:32:06,160
Speaker 1: lone voice then, so I guess I'm a lone voice now. Um.

564
00:32:06,360 --> 00:32:08,480
Speaker 1: But we will see. But it looks it looked to

565
00:32:08,640 --> 00:32:11,480
Speaker 1: me like this isn't an error. The market didn't receive

566
00:32:11,560 --> 00:32:15,520
Speaker 1: it that well. But I literally think today that today

567
00:32:15,560 --> 00:32:18,560
Speaker 1: we suddenly got a really bad services p M. I

568
00:32:18,720 --> 00:32:21,680
Speaker 1: came in immediately afterwards. So you have very weak growth,

569
00:32:22,200 --> 00:32:24,560
Speaker 1: no data is to sustain it, and the first piece

570
00:32:24,600 --> 00:32:27,520
Speaker 1: of data you get is bad. So yeah, maybe he

571
00:32:27,560 --> 00:32:30,520
Speaker 1: can say that, but you know, I think that their

572
00:32:30,520 --> 00:32:35,320
Speaker 1: analysis and their forecasts have been disastrous. Jenny blinch Flower,

573
00:32:35,480 --> 00:32:36,880
Speaker 1: thank you so much for being with us. I'm gonna

574
00:32:36,880 --> 00:32:39,080
Speaker 1: go ahead tonight. I'm gonna tell my son. You know,

575
00:32:39,320 --> 00:32:43,000
Speaker 1: I have some advice for you from don't just if

576
00:32:43,000 --> 00:32:44,960
Speaker 1: you're going to punch yourself in your face, don't do it.

577
00:32:45,120 --> 00:32:46,400
Speaker 1: You don't want to do it hard, you don't want

578
00:32:46,400 --> 00:32:48,440
Speaker 1: to do it soft. You could just avoid it. Um.

579
00:32:48,680 --> 00:32:51,520
Speaker 1: This from Dartmouth professor Jenny blanch Fly is great to

580
00:32:51,520 --> 00:32:54,720
Speaker 1: catch up with Danny to one such an interesting exchange

581
00:32:54,760 --> 00:33:00,120
Speaker 1: in the news conference at the Bank of England. M

582
00:33:03,360 --> 00:33:07,440
Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and

583
00:33:07,640 --> 00:33:12,880
Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast

584
00:33:13,000 --> 00:33:17,200
Speaker 1: platform you prefer. I'm on Twitter at Tom Keane before

585
00:33:17,240 --> 00:33:21,440
Speaker 1: the podcast, you can always catch us worldwide. I'm Bloomberg Radio,