1 00:00:00,120 --> 00:00:02,920 Speaker 1: Brought you by Bank of America, Mary Lynch. Investing in 2 00:00:03,000 --> 00:00:07,840 Speaker 1: local communities, economies and a sustainable future. That's a power 3 00:00:08,080 --> 00:00:12,360 Speaker 1: of global connections, Mary Lynch, Pierce Fenner and Smith Incorporated 4 00:00:12,760 --> 00:00:26,400 Speaker 1: Member s I p C. Welcome to the Bloomberg Surveillance Podcast. 5 00:00:26,440 --> 00:00:29,920 Speaker 1: I'm Tom Keene with David Gura. Daily we bring you 6 00:00:29,960 --> 00:00:34,800 Speaker 1: insight from the best of economics, finance, investment, and international relations. 7 00:00:35,240 --> 00:00:40,760 Speaker 1: Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com, 8 00:00:40,800 --> 00:00:47,440 Speaker 1: and of course, on the Bloomberg. There is something in 9 00:00:47,479 --> 00:00:51,800 Speaker 1: the oxygen of Providence Road Island. No one knows what 10 00:00:51,840 --> 00:00:55,160 Speaker 1: it is, but it was a certain chemistry and ether, 11 00:00:55,440 --> 00:00:59,200 Speaker 1: a theory from long ago and far away. The patron 12 00:00:59,320 --> 00:01:02,480 Speaker 1: saint of all that economics. It was when William Poole, 13 00:01:02,520 --> 00:01:06,000 Speaker 1: who ended up with wonderful public service at the Federal 14 00:01:06,040 --> 00:01:09,320 Speaker 1: Reserve Bank of St. Louis years ago. David, why don't 15 00:01:09,319 --> 00:01:11,880 Speaker 1: you bring her two guests in? Other than to say 16 00:01:11,920 --> 00:01:17,440 Speaker 1: that this is a special Brown University moment, we say that, uh, 17 00:01:17,480 --> 00:01:20,680 Speaker 1: to all of Brown economics and Brown scholarship. Probably a 18 00:01:20,720 --> 00:01:22,800 Speaker 1: school song to be sung, but we'll save that for later. 19 00:01:23,120 --> 00:01:24,840 Speaker 1: In the our Bob Sinch with US Global Strategies at 20 00:01:24,840 --> 00:01:26,840 Speaker 1: Amber's pierpoint, and Heroshi wat not be the president of 21 00:01:26,840 --> 00:01:30,119 Speaker 1: the Institute for International Monetary Affairs joining us as well. 22 00:01:30,120 --> 00:01:34,160 Speaker 1: You too were roommates, roommate, office mates, office made providence. 23 00:01:34,200 --> 00:01:36,080 Speaker 1: So tell us a bit about what you were doing 24 00:01:36,160 --> 00:01:37,680 Speaker 1: doing at brand. Let me move these mics a little 25 00:01:37,680 --> 00:01:40,160 Speaker 1: bit as well. Sorry, I take care of some housekeeping 26 00:01:40,160 --> 00:01:41,920 Speaker 1: as well. You met each other, and give us a 27 00:01:41,920 --> 00:01:45,480 Speaker 1: sense of of what brought you guys together. Well, you 28 00:01:45,480 --> 00:01:50,000 Speaker 1: know they it was a relatively small class. Yeah, I 29 00:01:50,040 --> 00:01:52,720 Speaker 1: think only about about twenty of us in the in 30 00:01:52,800 --> 00:01:55,560 Speaker 1: the program, and uh Haroshi and I and a third 31 00:01:55,600 --> 00:02:00,840 Speaker 1: guy shared an office together. Um, you know office hours 32 00:02:00,920 --> 00:02:04,760 Speaker 1: with the undergrads. Um, we did have a special time 33 00:02:04,800 --> 00:02:07,440 Speaker 1: between two and two thirty afternoon when we in the 34 00:02:07,440 --> 00:02:10,040 Speaker 1: afternoon we did not have office hours because, believe it 35 00:02:10,120 --> 00:02:11,800 Speaker 1: or not, the Gong Show was on and all the 36 00:02:11,840 --> 00:02:15,400 Speaker 1: graduate students in economics would go into one office and 37 00:02:15,639 --> 00:02:18,840 Speaker 1: unfortunately watched the Gong Show for thirty minutes while undergrads 38 00:02:18,840 --> 00:02:21,880 Speaker 1: cooled their heels out in the hallway. Hero you have 39 00:02:22,000 --> 00:02:26,600 Speaker 1: gone into great acclaim within Japanese economics and and part 40 00:02:26,600 --> 00:02:29,240 Speaker 1: of what I think of Brown University is the underlying 41 00:02:29,400 --> 00:02:33,560 Speaker 1: theories involved? Now, what is the underlying theory right now? 42 00:02:34,160 --> 00:02:38,440 Speaker 1: A Bank of Japan and Ministry of Finance economics away 43 00:02:38,480 --> 00:02:43,720 Speaker 1: from those simplicity of abbyonomics, what's the underlying theory? Well, 44 00:02:43,760 --> 00:02:47,240 Speaker 1: there's sometimes we quote the content of governments policy. It 45 00:02:47,280 --> 00:02:51,040 Speaker 1: is three outlets operation too that. So the first one 46 00:02:51,080 --> 00:02:54,280 Speaker 1: needs the policy change, and the sick on the one 47 00:02:54,280 --> 00:02:56,880 Speaker 1: needs of his coup policy estimo us, and this other 48 00:02:56,960 --> 00:03:00,520 Speaker 1: one need the structural reform including some of the uh 49 00:03:00,680 --> 00:03:04,840 Speaker 1: the gross strategy to that. So the well, but the 50 00:03:04,840 --> 00:03:08,440 Speaker 1: original meaning of the three arrows, it should be done 51 00:03:08,440 --> 00:03:11,400 Speaker 1: in the simultaneously. But the current government did a little 52 00:03:11,480 --> 00:03:15,560 Speaker 1: squeeze on the situation and it should be shot one 53 00:03:15,639 --> 00:03:19,080 Speaker 1: by one to that. And the very frankly speaking, and 54 00:03:19,120 --> 00:03:21,720 Speaker 1: the first one, the manatory change has been working so 55 00:03:21,800 --> 00:03:24,960 Speaker 1: hard and so drastic to that, and the second one 56 00:03:25,000 --> 00:03:28,160 Speaker 1: did a little bit working and though they in addition 57 00:03:28,200 --> 00:03:30,200 Speaker 1: to such kind of the manetor policy change to that. 58 00:03:30,360 --> 00:03:33,000 Speaker 1: So the the government did that is not a little 59 00:03:33,000 --> 00:03:36,200 Speaker 1: bit ready to perform the third arrows of the strate, 60 00:03:36,800 --> 00:03:40,640 Speaker 1: the structural reform to that. But now the government realized 61 00:03:40,720 --> 00:03:42,880 Speaker 1: the first one in the mantal change is just giving 62 00:03:42,920 --> 00:03:46,400 Speaker 1: with the time allowance is not the fundamental change would 63 00:03:46,400 --> 00:03:49,200 Speaker 1: be given by the manager changes. So I think now 64 00:03:49,240 --> 00:03:52,800 Speaker 1: the government started to work on the sad arrows, especially 65 00:03:52,800 --> 00:03:55,920 Speaker 1: that the starting the end of the fifteen they can 66 00:03:55,960 --> 00:03:58,960 Speaker 1: work on that. If you're just joining us, No herocary 67 00:03:59,320 --> 00:04:01,200 Speaker 1: on trying to be with us UH. He is with 68 00:04:01,280 --> 00:04:05,120 Speaker 1: the Japan Bank for International Cooperation, the governor and chief 69 00:04:05,120 --> 00:04:08,520 Speaker 1: executive officer, and Robert Sinch with US is Ambers Pierre Punt. 70 00:04:08,760 --> 00:04:10,640 Speaker 1: They're gonna be with us through the hour. We will 71 00:04:10,680 --> 00:04:14,120 Speaker 1: speak with Bob Sinch about sterling and the lamentous moves 72 00:04:14,120 --> 00:04:16,640 Speaker 1: in foreign exchange. Will do that later in the next 73 00:04:16,640 --> 00:04:18,960 Speaker 1: half hour. David, Yeah, but let me just ask you 74 00:04:18,960 --> 00:04:20,680 Speaker 1: about what Rosi was saying there a little bit that 75 00:04:20,680 --> 00:04:22,600 Speaker 1: they're a little bit squeezed right now. What do you 76 00:04:22,680 --> 00:04:24,680 Speaker 1: think as you look at Japan from from your perch 77 00:04:24,720 --> 00:04:27,120 Speaker 1: here in the US. You know, I think what's happening 78 00:04:27,120 --> 00:04:29,720 Speaker 1: in Japan is not dissimilar to what's happening in the 79 00:04:29,720 --> 00:04:32,000 Speaker 1: rest of the developed world. Right there has been an 80 00:04:32,000 --> 00:04:36,920 Speaker 1: excessive reliance on monetary policy UH to drive the economic expansion. 81 00:04:37,120 --> 00:04:40,640 Speaker 1: We're now getting into that expansion mode UM. And and 82 00:04:40,680 --> 00:04:43,960 Speaker 1: the real questions now are, you know, can we implement 83 00:04:44,000 --> 00:04:48,480 Speaker 1: structural reform uh Japan, I think it's a big issue UH, Europe, 84 00:04:48,520 --> 00:04:51,400 Speaker 1: it's also a very big issue UM. And these are 85 00:04:51,440 --> 00:04:55,039 Speaker 1: really structural reforms and needed to to generate faster potential 86 00:04:55,080 --> 00:04:58,880 Speaker 1: growth as the working age populations are shrinking shrinking in 87 00:04:58,920 --> 00:05:02,520 Speaker 1: many of these countries and we're not seeing big productivity gains. 88 00:05:03,560 --> 00:05:06,560 Speaker 1: And so the result is you have potential GDP growth 89 00:05:06,560 --> 00:05:09,960 Speaker 1: that in in in the Eurozone is maybe one to 90 00:05:10,000 --> 00:05:12,599 Speaker 1: one and a half percent, in Japan maybe a half 91 00:05:12,640 --> 00:05:16,240 Speaker 1: to one percent, UH, in the US maybe somewhere around 92 00:05:16,240 --> 00:05:19,800 Speaker 1: two percent, and you really need to get much faster 93 00:05:20,279 --> 00:05:24,200 Speaker 1: um potential growth to to uh, you know, to generate 94 00:05:24,240 --> 00:05:26,560 Speaker 1: the kind of momentum in the global economy that everybody 95 00:05:26,560 --> 00:05:30,080 Speaker 1: would like to see. And now it becomes incumbent upon 96 00:05:30,200 --> 00:05:35,080 Speaker 1: fiscal policy, regulatory policy, and structural reforms, and as we know, 97 00:05:35,200 --> 00:05:39,000 Speaker 1: those are very difficult and and surprisingly um, you know, 98 00:05:39,080 --> 00:05:41,680 Speaker 1: we think about the political morass here in the US 99 00:05:41,720 --> 00:05:45,040 Speaker 1: and the inability to get policy really moving forward. You 100 00:05:45,080 --> 00:05:47,520 Speaker 1: would think it would be easier in Japan, where the 101 00:05:47,800 --> 00:05:50,720 Speaker 1: where the LDP has UH, you know, pretty pretty good 102 00:05:50,720 --> 00:05:56,880 Speaker 1: control over policy. Let's come back as well, both Brown University, 103 00:05:57,120 --> 00:05:59,960 Speaker 1: this is Bloomberg, this is a real tree. We're gonna 104 00:06:00,000 --> 00:06:01,640 Speaker 1: I aggress here. We're gonna get the Bob SINCHI in 105 00:06:01,680 --> 00:06:04,840 Speaker 1: a bit here on the huge moves his brilliant call 106 00:06:04,960 --> 00:06:08,359 Speaker 1: on Sterling strength will do that in a bit Heroshi 107 00:06:08,640 --> 00:06:11,200 Speaker 1: went ton of me with us who was a classmate 108 00:06:11,240 --> 00:06:14,680 Speaker 1: of Bob Cinches at Brown University, And what this means. 109 00:06:14,720 --> 00:06:18,440 Speaker 1: We're gonna go a little want them here eight money 110 00:06:18,480 --> 00:06:22,480 Speaker 1: in the economy, Bill Pool. That was the Bible, the gospel. 111 00:06:22,520 --> 00:06:26,080 Speaker 1: There were a few other papers, Bobson's Translate for our 112 00:06:26,120 --> 00:06:30,680 Speaker 1: audience The Effect and the power of a monitorist theory 113 00:06:31,160 --> 00:06:35,120 Speaker 1: in the late seventies. It was gospel, wasn't it. You know? 114 00:06:35,200 --> 00:06:38,640 Speaker 1: The seventies was a very interesting time because, um, you know, 115 00:06:38,720 --> 00:06:41,920 Speaker 1: there was some some view that the business cycle had 116 00:06:41,960 --> 00:06:45,960 Speaker 1: been conquered, um. And and we found out later that 117 00:06:46,040 --> 00:06:49,000 Speaker 1: a lot of that was the result of very stimulative 118 00:06:49,000 --> 00:06:53,839 Speaker 1: fiscal policy and accommodative monetary policy in the late sixties 119 00:06:53,880 --> 00:06:57,080 Speaker 1: into the early seventies, which of course manifest itself into 120 00:06:57,120 --> 00:07:01,359 Speaker 1: a rapid acceleration of inflation pressure as higher energy prices. 121 00:07:02,160 --> 00:07:06,159 Speaker 1: We know the history and you know, monitorism really was 122 00:07:06,279 --> 00:07:11,840 Speaker 1: not very widely followed and UH and certainly practiced amongst 123 00:07:11,920 --> 00:07:15,200 Speaker 1: government economists. It was very much a Kinesian world. And 124 00:07:15,240 --> 00:07:20,239 Speaker 1: what Bill Pool did was really introduced monetary analysis UM 125 00:07:20,280 --> 00:07:22,680 Speaker 1: to a you know, to to a broad array of 126 00:07:22,680 --> 00:07:26,480 Speaker 1: of students, certainly, and something that I gravitated toward UH 127 00:07:26,520 --> 00:07:29,880 Speaker 1: and found very very useful in terms of analyzing inflation 128 00:07:29,920 --> 00:07:32,200 Speaker 1: pressures as we went through the seventies and then the 129 00:07:32,240 --> 00:07:36,240 Speaker 1: whole disinflation process of the nineteen eighties. UM that was 130 00:07:36,280 --> 00:07:39,040 Speaker 1: really eshered in by a much tighter monetary policy. So 131 00:07:39,360 --> 00:07:42,600 Speaker 1: I think the seventies and the eighties was really the 132 00:07:42,600 --> 00:07:46,280 Speaker 1: the peak period for monetary analysis and and useful not 133 00:07:46,360 --> 00:07:48,960 Speaker 1: only in in policy but also in markets. Okay, with 134 00:07:49,040 --> 00:07:51,760 Speaker 1: the Russia. Wanted to help me here with the names 135 00:07:51,800 --> 00:07:56,440 Speaker 1: Carl Brunner, Allan Meltzer, Anna Short maybe David Laidler of 136 00:07:56,480 --> 00:08:00,040 Speaker 1: Western Ontario as well. We used the world used to 137 00:08:00,080 --> 00:08:02,680 Speaker 1: stop when young, since you know I sent you storing 138 00:08:02,720 --> 00:08:06,320 Speaker 1: Golie pads Uh in the job that but help me 139 00:08:06,440 --> 00:08:10,920 Speaker 1: here with the world stopped on Thursdays for M one, 140 00:08:11,400 --> 00:08:16,640 Speaker 1: M two, M three. It was gospel. What happened? What 141 00:08:16,800 --> 00:08:20,000 Speaker 1: did you learn about the end of our worship of 142 00:08:20,280 --> 00:08:23,160 Speaker 1: M one, M two, M three. Yeah, we discussed the 143 00:08:23,320 --> 00:08:25,400 Speaker 1: M one two M three These day do we have 144 00:08:25,440 --> 00:08:28,400 Speaker 1: another M? So? So many by big varieties do that, 145 00:08:28,520 --> 00:08:32,640 Speaker 1: and that's the Bob says. In the seventies eighties, that 146 00:08:32,760 --> 00:08:37,480 Speaker 1: period is very much and the suitable to such kind 147 00:08:37,520 --> 00:08:40,439 Speaker 1: of discussion to that. But the last twenty five years 148 00:08:40,840 --> 00:08:45,480 Speaker 1: always now we see the abundance of the money. That's 149 00:08:45,520 --> 00:08:48,680 Speaker 1: quite different from the agent of the semites eighties. So 150 00:08:48,720 --> 00:08:51,560 Speaker 1: since that they are the nineties, almost every year the 151 00:08:51,559 --> 00:08:54,400 Speaker 1: holidays say is going down and down and down there 152 00:08:54,520 --> 00:08:56,880 Speaker 1: there is no sign of the pickup to death. So 153 00:08:56,960 --> 00:09:00,559 Speaker 1: that's coded too much big the change or even such funcility. 154 00:09:00,720 --> 00:09:03,760 Speaker 1: And those that's going to analysis do that. How have 155 00:09:03,800 --> 00:09:06,640 Speaker 1: you seen the study of monetary policy evolve? Where where 156 00:09:06,640 --> 00:09:09,480 Speaker 1: does the monetary policy you learned at Brown the Brown 157 00:09:09,520 --> 00:09:13,680 Speaker 1: School continue today? You know, I think there's there there's 158 00:09:14,880 --> 00:09:18,080 Speaker 1: one issue that that started in the seventies and eighties 159 00:09:18,200 --> 00:09:21,600 Speaker 1: in terms of financial innovation and what impact that had 160 00:09:21,640 --> 00:09:26,760 Speaker 1: on analyzing monetary policy. Um, but I think really what's 161 00:09:26,760 --> 00:09:30,480 Speaker 1: happened is a realization of how important the banking system 162 00:09:30,600 --> 00:09:35,719 Speaker 1: is to monetary analysis. And you know, monetary analysis and 163 00:09:35,800 --> 00:09:39,400 Speaker 1: monitorism and its impact on nominal g GDP and inflation 164 00:09:40,120 --> 00:09:43,960 Speaker 1: works under the assumption of a steady money multiplier, so 165 00:09:44,000 --> 00:09:46,240 Speaker 1: the ratio of money supply in the system to the 166 00:09:46,240 --> 00:09:50,480 Speaker 1: monetary base and also stable velocity of money, so the 167 00:09:50,600 --> 00:09:54,760 Speaker 1: relationship of nominal GDP to monetary growth. And what we've 168 00:09:54,800 --> 00:09:59,839 Speaker 1: seen is as banking systems become dysfunctional, these monetary linkages 169 00:10:00,200 --> 00:10:04,280 Speaker 1: begin to break down, and so you know, we're accustomed 170 00:10:04,280 --> 00:10:08,000 Speaker 1: to a period where you know, monetary analysis could give 171 00:10:08,080 --> 00:10:11,080 Speaker 1: us results. We've now come to realize how important the 172 00:10:11,120 --> 00:10:15,800 Speaker 1: banking sector is globally to turning monetary policy from central 173 00:10:15,800 --> 00:10:20,079 Speaker 1: banks into economic outcomes. Piochi Antonomy with US Governor and 174 00:10:20,080 --> 00:10:24,400 Speaker 1: the Chief Executive Officer of the Japan Bank for International Cooperation, 175 00:10:24,880 --> 00:10:27,720 Speaker 1: we really begin today our international coverage as we go 176 00:10:27,840 --> 00:10:31,439 Speaker 1: to the World Bank at i MF meetings Thursday and Friday. 177 00:10:31,440 --> 00:10:34,479 Speaker 1: Francine will Jett in tonight. She's she's on the surveillance 178 00:10:34,480 --> 00:10:36,920 Speaker 1: golf stream, right, David, I think she's going to pick 179 00:10:36,920 --> 00:10:38,480 Speaker 1: her up and she'll be here tomorrow. Right, She's in 180 00:10:38,480 --> 00:10:40,360 Speaker 1: New York tomorrow teter Bro. It's easier to get the 181 00:10:40,360 --> 00:10:44,400 Speaker 1: Teter than JFK. And it's Francine will be in tomorrow. 182 00:10:44,400 --> 00:10:46,000 Speaker 1: Maybe she'll be able to stop by and b with 183 00:10:46,080 --> 00:10:49,960 Speaker 1: me and David as well. Much to talk about on 184 00:10:50,040 --> 00:10:54,200 Speaker 1: international economics. But we demand that Bob sinch of Amer's 185 00:10:54,240 --> 00:10:55,959 Speaker 1: peer point here with Mr one time to me his 186 00:10:56,000 --> 00:11:00,480 Speaker 1: classmate at Brown take a victory lap. I'm Sterling, you 187 00:11:00,520 --> 00:11:04,040 Speaker 1: called the bottom and Sterling you went long strong Sterling, 188 00:11:04,480 --> 00:11:07,120 Speaker 1: You were right right right? Did you ever imagine a 189 00:11:07,200 --> 00:11:11,959 Speaker 1: one in a snap election? You know, I I didn't 190 00:11:11,960 --> 00:11:13,760 Speaker 1: think we'd get up to these kind of levels. I 191 00:11:13,800 --> 00:11:18,719 Speaker 1: thought around one would probably be it on on Sterling. Um. 192 00:11:18,840 --> 00:11:21,240 Speaker 1: Clearly this is an aggressive move by the Prime Minister 193 00:11:21,440 --> 00:11:26,280 Speaker 1: in terms of UH, in terms of solidifying her leadership. UM. 194 00:11:26,360 --> 00:11:29,439 Speaker 1: And I think there are a lot of uncomfortable shorts 195 00:11:29,440 --> 00:11:32,600 Speaker 1: in Sterling. I think they're you know, complacent short positions 196 00:11:32,600 --> 00:11:34,560 Speaker 1: in Sterling that are really getting squeezed in the frame. 197 00:11:34,679 --> 00:11:37,320 Speaker 1: Some of the houses on this HSBC in Deutsche Bank, 198 00:11:37,360 --> 00:11:41,680 Speaker 1: with weak Sterling calls ubs and Kitchuk's over at such 199 00:11:41,800 --> 00:11:45,040 Speaker 1: and with leveling to even a stronger Sterling call, there's 200 00:11:45,040 --> 00:11:48,240 Speaker 1: winners and losers on this. But Alan Ruskin with a 201 00:11:48,280 --> 00:11:50,800 Speaker 1: wonderful note this morning, is Deutsche Bank through in the 202 00:11:50,840 --> 00:11:54,520 Speaker 1: towel and looked for Sterling stability and such? What are 203 00:11:54,559 --> 00:11:57,520 Speaker 1: the legs here? If the shorts all cover, can that 204 00:11:57,760 --> 00:12:03,240 Speaker 1: drive Sterling to unimaginable recent levels like one five is 205 00:12:03,280 --> 00:12:07,439 Speaker 1: Allen alludes to, or even back to a Brexit one 206 00:12:07,520 --> 00:12:10,560 Speaker 1: forty something, you know, I don't think so. I think 207 00:12:10,559 --> 00:12:14,120 Speaker 1: we've traced out over the last four or five months. Uh, 208 00:12:14,280 --> 00:12:17,920 Speaker 1: the range, which I think is one one thirty um, 209 00:12:17,960 --> 00:12:20,719 Speaker 1: so you have calls for one ten that got frustrated 210 00:12:20,760 --> 00:12:23,120 Speaker 1: on the downside, we may get calls for one thirty 211 00:12:23,160 --> 00:12:27,120 Speaker 1: five and higher get frustrated on the upside. Actually, I 212 00:12:27,160 --> 00:12:29,720 Speaker 1: think that in the midst of this big short covering, 213 00:12:30,280 --> 00:12:33,320 Speaker 1: what we're facing is I think a UK economy that 214 00:12:33,400 --> 00:12:37,520 Speaker 1: is in the process of slowing down. Last year surprised 215 00:12:37,520 --> 00:12:41,040 Speaker 1: that that the initial bregsit decision had very little impact 216 00:12:41,080 --> 00:12:43,400 Speaker 1: on the economy. I think it was actually stimulative for 217 00:12:43,440 --> 00:12:47,959 Speaker 1: the economy because consumers seeing a big drop in the pound, 218 00:12:48,640 --> 00:12:51,760 Speaker 1: expected higher prices in the future. When you expect higher 219 00:12:51,760 --> 00:12:55,520 Speaker 1: prices in the future, you accelerate your consumption into the present. 220 00:12:55,640 --> 00:12:58,680 Speaker 1: So I think the consumer did a lot of anticipatory 221 00:12:58,760 --> 00:13:01,520 Speaker 1: buying in the second half of two thousand and sixteen. 222 00:13:02,440 --> 00:13:05,720 Speaker 1: They've run out of that spending power. We're now seeing 223 00:13:05,720 --> 00:13:09,480 Speaker 1: a slowdown of employment growth. We're now seeing prices actually 224 00:13:09,520 --> 00:13:13,000 Speaker 1: moving higher, so real income growth has slumped to close 225 00:13:13,040 --> 00:13:15,319 Speaker 1: to zero in the UK. So I think just as 226 00:13:15,320 --> 00:13:18,600 Speaker 1: we're getting this big short covering rally, in fact, the 227 00:13:18,640 --> 00:13:21,120 Speaker 1: economy is going to surprise a bit on the down side. 228 00:13:21,120 --> 00:13:23,400 Speaker 1: I think Prime Minister May is lucky that is a 229 00:13:23,480 --> 00:13:27,280 Speaker 1: very short time between the announcement and the actual election, 230 00:13:27,360 --> 00:13:29,319 Speaker 1: because I think the economy is in the process of 231 00:13:29,360 --> 00:13:32,600 Speaker 1: slowing pretty significantly. And David and my reading, i've heard 232 00:13:32,640 --> 00:13:36,320 Speaker 1: that theme. There's a huge advantage you're to June eight, Hurs. 233 00:13:36,840 --> 00:13:39,640 Speaker 1: Let me pull back here and ask about currency more generally. 234 00:13:39,679 --> 00:13:41,719 Speaker 1: We've had the President of the United States saying he's 235 00:13:41,720 --> 00:13:44,679 Speaker 1: not going to declare China currency manipulator. You've had to 236 00:13:44,760 --> 00:13:47,319 Speaker 1: Stephen manuch In the Treasury Secretary talking about the strength 237 00:13:47,840 --> 00:13:50,800 Speaker 1: of the dollar. How does all of that rhetoric sound 238 00:13:50,960 --> 00:13:53,520 Speaker 1: in Japan when you hear uh, not just the Treasury 239 00:13:53,520 --> 00:13:56,520 Speaker 1: Secretary but the President job boning about about currency issues. 240 00:13:56,559 --> 00:13:59,320 Speaker 1: Here in the US. Yeah, we are literally the pass 241 00:13:59,440 --> 00:14:02,840 Speaker 1: of the because the many voices from the President and 242 00:14:02,880 --> 00:14:05,400 Speaker 1: as so the Secretary, so they have so many different 243 00:14:05,480 --> 00:14:08,000 Speaker 1: on that. So they were going to know how the 244 00:14:08,080 --> 00:14:10,880 Speaker 1: exactly the US is going to think about it, but 245 00:14:11,040 --> 00:14:13,719 Speaker 1: maybe nobody knows even in the United States to that. 246 00:14:14,280 --> 00:14:17,120 Speaker 1: So I think the current position of the Japanese end 247 00:14:17,160 --> 00:14:19,720 Speaker 1: and the Dalla is not so much the bad for 248 00:14:19,960 --> 00:14:22,440 Speaker 1: the either country to that. So from now on, I 249 00:14:22,520 --> 00:14:25,960 Speaker 1: think there's some politicularly the confusion in the Europe is 250 00:14:26,000 --> 00:14:30,240 Speaker 1: going to make the euro weaker and even the starting 251 00:14:30,280 --> 00:14:33,720 Speaker 1: pound is somewhat moving on. But I the generally agree 252 00:14:33,720 --> 00:14:35,400 Speaker 1: with what the Bob said to that, so that I 253 00:14:35,440 --> 00:14:37,400 Speaker 1: think the European currency is going to be a little 254 00:14:37,400 --> 00:14:39,640 Speaker 1: bit weaker and the Dalla and the end would be 255 00:14:39,640 --> 00:14:42,600 Speaker 1: a little bit the stronger. But between the Dalla and 256 00:14:42,640 --> 00:14:44,720 Speaker 1: the end, I don't think at this moment we don't 257 00:14:44,720 --> 00:14:48,600 Speaker 1: have any big the impact to move either way to that, 258 00:14:49,080 --> 00:14:52,080 Speaker 1: especially for the current of the the trade of policy 259 00:14:52,080 --> 00:14:54,480 Speaker 1: over the United States is going to make the Dalla 260 00:14:54,800 --> 00:14:57,480 Speaker 1: a little bit stronger, and also as well as the 261 00:14:57,600 --> 00:15:00,320 Speaker 1: madam Yan is going to raise the inter story to 262 00:15:00,400 --> 00:15:02,720 Speaker 1: coming again in that case, the different three in the 263 00:15:02,720 --> 00:15:05,880 Speaker 1: basic position is going to help the stronger data. Even 264 00:15:05,880 --> 00:15:09,040 Speaker 1: the President is going to make the weaker the data. 265 00:15:09,160 --> 00:15:11,480 Speaker 1: It would be fine to that, but I think the 266 00:15:11,520 --> 00:15:14,320 Speaker 1: market doesn't work in that way. To that. And also 267 00:15:14,400 --> 00:15:18,960 Speaker 1: the the president has the weakened the attack to the 268 00:15:19,040 --> 00:15:22,400 Speaker 1: China because even they they stopped the China to make 269 00:15:22,400 --> 00:15:24,640 Speaker 1: an intervention to the market lend me me would be 270 00:15:24,760 --> 00:15:26,920 Speaker 1: much much of the weaker. That means more easy to 271 00:15:26,960 --> 00:15:30,119 Speaker 1: sell the product of the United States. So now the 272 00:15:30,280 --> 00:15:33,280 Speaker 1: president is realized what the really reality is. That is 273 00:15:33,400 --> 00:15:36,560 Speaker 1: very good astration at this moment to that. So Pobs 274 00:15:36,600 --> 00:15:38,640 Speaker 1: and just Tom said he's headed to the IMF meetings 275 00:15:38,640 --> 00:15:40,480 Speaker 1: that later this week. We got the growth forecast and 276 00:15:40,520 --> 00:15:44,560 Speaker 1: he revised growth forecast yesterday. Christine Leguard telling France in 277 00:15:44,640 --> 00:15:46,320 Speaker 1: Lackwell last week that spring is in the air for 278 00:15:46,360 --> 00:15:48,680 Speaker 1: the global economy. What's your reaction to what the IMF 279 00:15:48,760 --> 00:15:52,720 Speaker 1: had to say yesterday, So leaving us growth projections at 280 00:15:52,760 --> 00:15:54,760 Speaker 1: the same amount, there were a few changes therein But 281 00:15:54,800 --> 00:15:56,440 Speaker 1: what do you make of the sort of rosy assessment 282 00:15:56,480 --> 00:16:00,440 Speaker 1: of the rosier assessment I should say of the global ecount. Well, 283 00:16:00,480 --> 00:16:02,200 Speaker 1: I think it's A, it's a it's a great look 284 00:16:02,240 --> 00:16:04,240 Speaker 1: in the rear view mirror. UM. You know, the i 285 00:16:04,400 --> 00:16:07,640 Speaker 1: m F late last year was was still fairly downbeat 286 00:16:07,680 --> 00:16:10,960 Speaker 1: on global growth. And I think the the green shoots 287 00:16:11,000 --> 00:16:13,960 Speaker 1: here for early two thousand seventeen were pretty clear at 288 00:16:14,000 --> 00:16:16,360 Speaker 1: that time. And we've gotten uh, I think a pretty 289 00:16:16,400 --> 00:16:19,360 Speaker 1: nice acceleration hasn't showed up in the US GDP numbers, 290 00:16:19,720 --> 00:16:21,320 Speaker 1: but if you look around the rest of the world, 291 00:16:21,320 --> 00:16:24,000 Speaker 1: I think we're heading towards real GDP growth of over 292 00:16:24,040 --> 00:16:26,120 Speaker 1: two percent year over year. In the year zone, we 293 00:16:26,160 --> 00:16:29,120 Speaker 1: haven't seen that for a number of years. UM Japan 294 00:16:29,160 --> 00:16:32,360 Speaker 1: has had I think five quarters of consecutive increases in 295 00:16:32,360 --> 00:16:35,360 Speaker 1: in growth. It's not spectacular, but that's not bad by 296 00:16:35,440 --> 00:16:38,360 Speaker 1: recent standards. So I think we are going through a 297 00:16:38,360 --> 00:16:40,800 Speaker 1: better growth pattern in the early part of this year. 298 00:16:40,840 --> 00:16:43,200 Speaker 1: And and and in a sense the i m F 299 00:16:43,400 --> 00:16:45,880 Speaker 1: is just confirmation of that because they move very very 300 00:16:45,880 --> 00:16:49,120 Speaker 1: slowly in their analysis forecast. Is this a calendar reset 301 00:16:49,240 --> 00:16:52,200 Speaker 1: and that's just the time of year where the certitude 302 00:16:52,200 --> 00:16:55,280 Speaker 1: at the end of the year, the certitude of January 303 00:16:55,320 --> 00:16:56,960 Speaker 1: is the FED will do this, The Fed will do that, 304 00:16:57,080 --> 00:16:59,800 Speaker 1: the Bank of Japan will do this, etcetera, etcetera, and 305 00:16:59,840 --> 00:17:01,520 Speaker 1: you sort of get to sell in May and go 306 00:17:01,600 --> 00:17:05,720 Speaker 1: away and everything begins to get lengthened out. Just just 307 00:17:06,160 --> 00:17:11,680 Speaker 1: it's oops were not so certain and there's just yeah autumn. Yeah, 308 00:17:11,720 --> 00:17:13,520 Speaker 1: I think we're going through a little bit of that. 309 00:17:13,600 --> 00:17:15,720 Speaker 1: I think that late last year, early this year there 310 00:17:15,720 --> 00:17:18,399 Speaker 1: were surprises to the upside and growth. You know, the 311 00:17:18,440 --> 00:17:21,960 Speaker 1: economic surprise indexes that are calculated, we're all very very 312 00:17:22,000 --> 00:17:26,919 Speaker 1: strong readings. Now expectations have been have been brought higher. 313 00:17:27,600 --> 00:17:30,760 Speaker 1: Going to be difficult to beat those expectations going forward, 314 00:17:31,440 --> 00:17:33,920 Speaker 1: but I do think there is some sustained momentum. The 315 00:17:34,040 --> 00:17:37,720 Speaker 1: question I think for markets is will central banks around 316 00:17:37,720 --> 00:17:39,880 Speaker 1: the world do anything about that? And I think we've 317 00:17:39,880 --> 00:17:42,440 Speaker 1: gotten another indication from the Bank of Japan that they 318 00:17:42,440 --> 00:17:47,080 Speaker 1: have no intention of restraining monetary policy anytime soon. There 319 00:17:47,119 --> 00:17:50,760 Speaker 1: was a little, i think very unfounded uh bubbling up 320 00:17:50,800 --> 00:17:53,760 Speaker 1: of optimism that the ECB might hike rates this year. 321 00:17:54,080 --> 00:17:56,520 Speaker 1: With a core inflation print that was just confirmed at 322 00:17:56,600 --> 00:17:58,640 Speaker 1: zero point seven percent, I don't think there's a chance 323 00:17:58,640 --> 00:18:01,480 Speaker 1: in the world the ECB titan policy this year, which 324 00:18:01,520 --> 00:18:03,480 Speaker 1: is why I think they're still upside for the dollar 325 00:18:03,720 --> 00:18:06,680 Speaker 1: as we go through the year, please hope us soon. 326 00:18:06,800 --> 00:18:09,399 Speaker 1: I think of Robert Feldman at Morgan Stanley and others 327 00:18:09,400 --> 00:18:12,600 Speaker 1: that have given us a wonderful perspective on your Japan. 328 00:18:13,320 --> 00:18:19,159 Speaker 1: Is there a generational shift within obonomics? You have students 329 00:18:19,280 --> 00:18:23,080 Speaker 1: you speak to the younger of Japan. Is there a 330 00:18:23,200 --> 00:18:27,439 Speaker 1: generational shift going on in your Japan? You know the 331 00:18:27,480 --> 00:18:31,919 Speaker 1: country we have some the internal struggle between generation to that, 332 00:18:32,000 --> 00:18:33,960 Speaker 1: and also they were going to think about how the 333 00:18:34,040 --> 00:18:36,399 Speaker 1: patient system is going to be sustained to that, so 334 00:18:36,760 --> 00:18:39,200 Speaker 1: the who the bears it's such kind of burden is 335 00:18:39,200 --> 00:18:41,040 Speaker 1: a big constant way are going to have to that. 336 00:18:41,720 --> 00:18:44,280 Speaker 1: But they do you know the we have about the 337 00:18:44,320 --> 00:18:46,800 Speaker 1: one thousand, six hundred three on the end of the 338 00:18:46,920 --> 00:18:50,680 Speaker 1: individual asset mainly two sad or more would be held 339 00:18:50,720 --> 00:18:53,600 Speaker 1: by the aged people to that, so that could be 340 00:18:53,960 --> 00:18:58,000 Speaker 1: transferred to the younger generation. Is that an idea to that? 341 00:18:58,359 --> 00:18:59,880 Speaker 1: And also the way I'm going to have the mode 342 00:19:00,000 --> 00:19:04,480 Speaker 1: alliance to the consumption tax instead of the individual income 343 00:19:04,480 --> 00:19:07,560 Speaker 1: tax to that. That means that the smaller number of 344 00:19:07,600 --> 00:19:10,240 Speaker 1: the labors, generally for the younger generation, is going to 345 00:19:10,320 --> 00:19:12,639 Speaker 1: have a lesser bodan of a tax payment. And also 346 00:19:12,720 --> 00:19:14,720 Speaker 1: the age of people who is going to councume more 347 00:19:15,040 --> 00:19:17,200 Speaker 1: is going to have the more tax building such kind 348 00:19:17,200 --> 00:19:19,119 Speaker 1: of what the balance would be also discussed on that. 349 00:19:19,240 --> 00:19:23,360 Speaker 1: So even though they anytime the more the taxation would 350 00:19:23,440 --> 00:19:27,000 Speaker 1: be appreciated, but I think the such kinds of the 351 00:19:27,040 --> 00:19:29,280 Speaker 1: tradeoff would be one of the big constant we're going 352 00:19:29,320 --> 00:19:31,280 Speaker 1: to going to help do that. Thank you so much 353 00:19:31,320 --> 00:19:34,240 Speaker 1: for joining us today, Heroshi one Ton of these Governor 354 00:19:34,280 --> 00:19:38,320 Speaker 1: and Chief Executive Officer of the Japan Bank for International Cooperation. 355 00:19:38,320 --> 00:19:40,680 Speaker 1: I made a joke earlier ten seconds. You're not predicting 356 00:19:40,720 --> 00:19:43,600 Speaker 1: one forties Sterling, right, absolutely. I want to be sure. 357 00:19:44,520 --> 00:19:47,720 Speaker 1: I don't want to put Bob Sinch of Amber's pier punt. 358 00:19:47,760 --> 00:19:50,280 Speaker 1: Thank you so much. We say good morning to Awe 359 00:19:50,359 --> 00:20:08,280 Speaker 1: of Brown University Economics worldwide. This is Bloomberg. He is 360 00:20:08,320 --> 00:20:12,879 Speaker 1: out of first Boston long ago and far away, and 361 00:20:12,920 --> 00:20:16,480 Speaker 1: then he co founded something in and everybody's like, yeah, 362 00:20:16,520 --> 00:20:21,480 Speaker 1: you know, okay, great black Stone, black Rock, Blackness and 363 00:20:21,560 --> 00:20:26,200 Speaker 1: Lawrence Fink is built a juggernaut at black Rock. The 364 00:20:26,280 --> 00:20:28,679 Speaker 1: announced earnings today and of course their knee deep in 365 00:20:28,720 --> 00:20:32,520 Speaker 1: the asset management business, uh and such. He speaks on 366 00:20:32,640 --> 00:20:35,560 Speaker 1: politics as well. He's out of u c l A 367 00:20:35,560 --> 00:20:38,760 Speaker 1: a bit ago and the Anderson School. Our Eric Shatsker 368 00:20:38,880 --> 00:20:40,960 Speaker 1: sat down with Mr Fink today and of course the 369 00:20:41,000 --> 00:20:45,960 Speaker 1: conversation had to turn to the new United Kingdom. I 370 00:20:45,960 --> 00:20:48,600 Speaker 1: would say from our fears as the third and fourth 371 00:20:48,680 --> 00:20:50,560 Speaker 1: quarter going into the first quarter, I would say the 372 00:20:50,600 --> 00:20:54,720 Speaker 1: fears have abated somewhat. Uh, we still don't understand what 373 00:20:54,760 --> 00:20:57,800 Speaker 1: Brexit will mean for the UK. I've been in constant 374 00:20:57,800 --> 00:21:02,280 Speaker 1: dialogue with with the May administration. Uh. They ask us 375 00:21:02,440 --> 00:21:04,680 Speaker 1: what do we what our intentions and our intentions is 376 00:21:04,760 --> 00:21:09,480 Speaker 1: to stay pat and watch until we understand what Brexit means. 377 00:21:09,520 --> 00:21:13,440 Speaker 1: Related to Europe and one of the key elements that 378 00:21:13,520 --> 00:21:17,240 Speaker 1: people have not talked about. The Europeans have been discussing 379 00:21:17,720 --> 00:21:22,120 Speaker 1: items like we want you to manage all European liabilities 380 00:21:22,280 --> 00:21:26,840 Speaker 1: in Europe. Now most firms use London as its platform 381 00:21:26,960 --> 00:21:30,000 Speaker 1: for that. If they can find a way to force 382 00:21:30,080 --> 00:21:32,760 Speaker 1: that type of behavior change that you move that you 383 00:21:32,920 --> 00:21:35,000 Speaker 1: have to manage. So you have to have your traders, 384 00:21:35,000 --> 00:21:39,200 Speaker 1: your portfolio managers in continental Europe. That is the key 385 00:21:39,400 --> 00:21:42,920 Speaker 1: element because if if we have to move to Europe 386 00:21:43,000 --> 00:21:45,320 Speaker 1: the manage it, then the banks will move their trading 387 00:21:45,359 --> 00:21:48,720 Speaker 1: desk to Europe and the custodio and everything can be 388 00:21:49,119 --> 00:21:53,080 Speaker 1: you know, it could be quite disarming and and difficult. 389 00:21:53,200 --> 00:21:56,959 Speaker 1: But um so, until we know where that stands out, 390 00:21:57,000 --> 00:22:01,520 Speaker 1: that's pretty anti trade. That's a real severe issue. But 391 00:22:01,640 --> 00:22:05,199 Speaker 1: that is a pivotal issue for financial institutions related to 392 00:22:05,240 --> 00:22:08,320 Speaker 1: being in the city of London or outside. Beyond that, 393 00:22:08,480 --> 00:22:10,520 Speaker 1: I mean it to me, Brexit is a wait and 394 00:22:10,560 --> 00:22:14,159 Speaker 1: see issue. Um. You know, I think the Prime Minister 395 00:22:14,240 --> 00:22:17,359 Speaker 1: is doing a very aggressive thing. But you know, the 396 00:22:17,760 --> 00:22:21,160 Speaker 1: popularity of the party is very strong. It valid if 397 00:22:21,400 --> 00:22:26,280 Speaker 1: obviously if if the polling is correct and there's an 398 00:22:26,320 --> 00:22:29,879 Speaker 1: overwhelming wind and valid dates and solidifies herself as a 399 00:22:29,920 --> 00:22:32,960 Speaker 1: PM and and the party. And so I look at 400 00:22:32,960 --> 00:22:36,440 Speaker 1: this as a moment more of a gesture of strength 401 00:22:36,520 --> 00:22:39,280 Speaker 1: than than anything else. But we have the French election 402 00:22:39,400 --> 00:22:43,920 Speaker 1: this weekend, um and I don't know, I mean, you know, uh, 403 00:22:44,160 --> 00:22:46,720 Speaker 1: we we still have a strong view that it looks 404 00:22:46,760 --> 00:22:51,320 Speaker 1: like Macrone can can eke it out. But every day 405 00:22:51,359 --> 00:22:53,480 Speaker 1: is a different day, and we we see you know, 406 00:22:53,560 --> 00:22:57,920 Speaker 1: an incredible horse race there. Um So the market today 407 00:22:58,400 --> 00:23:04,360 Speaker 1: is anticipating I would say, a probable good outcome. Why 408 00:23:04,440 --> 00:23:09,520 Speaker 1: is macro on a good outcome, Well, I think they're 409 00:23:09,520 --> 00:23:16,000 Speaker 1: more fearful with the two tales UM, and I think 410 00:23:16,000 --> 00:23:19,440 Speaker 1: a Fione outcome would be perceived to be good too. 411 00:23:19,480 --> 00:23:22,560 Speaker 1: So the marketplace is looking at a more centrist outcome, 412 00:23:22,920 --> 00:23:26,520 Speaker 1: an outcome that that has government, the French government wishing 413 00:23:26,560 --> 00:23:32,800 Speaker 1: to stay within the eurozone, UM, more pro trade UH. 414 00:23:32,880 --> 00:23:35,680 Speaker 1: And so we'll see. I mean, I think it would 415 00:23:35,720 --> 00:23:40,160 Speaker 1: be a It would be a very difficult thing if 416 00:23:40,320 --> 00:23:42,720 Speaker 1: if we had one of the tales winning UH, and 417 00:23:42,760 --> 00:23:46,520 Speaker 1: the markets would would probably reverse and go down even further. Larry, 418 00:23:46,560 --> 00:23:50,960 Speaker 1: can we draw a contrast between Europe and the United States? 419 00:23:51,280 --> 00:23:55,040 Speaker 1: There are risks, of course, there are risks, and then 420 00:23:55,080 --> 00:23:59,040 Speaker 1: there's the question as to whether the risks are appropriately 421 00:23:59,160 --> 00:24:03,400 Speaker 1: reflected in asset values. You're among the people and there 422 00:24:03,440 --> 00:24:07,520 Speaker 1: are many who were surprised that the US equity market 423 00:24:07,600 --> 00:24:10,760 Speaker 1: rallied as hard as it did after the election and 424 00:24:10,800 --> 00:24:17,360 Speaker 1: furthermore consolidated those games. So paint us a picture. How 425 00:24:17,400 --> 00:24:20,280 Speaker 1: does the future look for US assets? How does the 426 00:24:20,280 --> 00:24:24,359 Speaker 1: future look for European assets on the underlying macro fundamentals. Obviously, 427 00:24:24,480 --> 00:24:27,840 Speaker 1: the US market is probably the market that is that 428 00:24:28,040 --> 00:24:32,359 Speaker 1: is probably the most expensive relative to focus. UM. This 429 00:24:32,440 --> 00:24:34,920 Speaker 1: is why earning season it is probably the most important 430 00:24:34,960 --> 00:24:39,479 Speaker 1: issue for the markets today. I would the marketplace was 431 00:24:39,880 --> 00:24:43,680 Speaker 1: had higher expectations on quick actions out of our government 432 00:24:43,680 --> 00:24:50,160 Speaker 1: related to tax reform, in the infrastructure UM and and 433 00:24:50,160 --> 00:24:52,920 Speaker 1: and and then deregulations. So are the three things that 434 00:24:52,960 --> 00:24:55,919 Speaker 1: the marketplace looked for, and that's going to take um 435 00:24:56,320 --> 00:25:01,639 Speaker 1: obviously more time. And so if we don't have earnings 436 00:25:01,720 --> 00:25:04,840 Speaker 1: validating these higher pees and we're you know, we we 437 00:25:04,840 --> 00:25:09,600 Speaker 1: could adjust dour five or ten percent from here UM. 438 00:25:09,640 --> 00:25:13,080 Speaker 1: And if the administration does succeed in some of these items, 439 00:25:13,080 --> 00:25:17,040 Speaker 1: and the market will then reassert itself going higher. Laurence 440 00:25:17,040 --> 00:25:18,840 Speaker 1: Fink of Black Rock, of course they're out with the 441 00:25:18,960 --> 00:25:21,640 Speaker 1: rings today and really the elephant in the room David Gura, 442 00:25:21,720 --> 00:25:25,040 Speaker 1: and you know, you know we're speculating yesterday on before 443 00:25:25,119 --> 00:25:27,760 Speaker 1: Prime Minister May spoke, and we don't like to do 444 00:25:27,800 --> 00:25:31,680 Speaker 1: that on Bloomberg surveillance, but you really speculate where as 445 00:25:31,920 --> 00:25:36,240 Speaker 1: active and passive management will be within all the major 446 00:25:36,280 --> 00:25:38,800 Speaker 1: by side shops. You wonder where this will be in 447 00:25:38,920 --> 00:25:41,800 Speaker 1: five years. Yeah, we've had such an interesting conversation about 448 00:25:41,840 --> 00:25:43,840 Speaker 1: this over these last few months. Black Rock, of course 449 00:25:43,880 --> 00:25:46,680 Speaker 1: investing in a lot of robo investors making a move 450 00:25:46,680 --> 00:25:48,960 Speaker 1: more into that. That's basically interesting to see how that 451 00:25:48,960 --> 00:25:51,640 Speaker 1: shakes with the complement of what's happening at Fidelities. We've 452 00:25:51,800 --> 00:25:54,160 Speaker 1: as we've discussed as well, I should say, Larry Fink 453 00:25:54,200 --> 00:25:57,000 Speaker 1: interviewed by Eric Schatskrey in Bloomberg Markets magazine as well 454 00:25:57,240 --> 00:26:00,159 Speaker 1: his visage on the cover of that most recent you 455 00:26:00,280 --> 00:26:03,359 Speaker 1: of of the magazine. A wide ranging conversation there with 456 00:26:03,480 --> 00:26:06,880 Speaker 1: Eric Schatzker and our colleagues on Bloomberg day Break Americas. 457 00:26:06,920 --> 00:26:09,520 Speaker 1: They talked a bit about the the US political scene 458 00:26:09,520 --> 00:26:11,199 Speaker 1: as well and about the company. Of course, we got 459 00:26:11,240 --> 00:26:14,040 Speaker 1: earnings from Blackrock earlier this morning. They had a conversation 460 00:26:14,040 --> 00:26:16,239 Speaker 1: about regulation with with Larry Fink, and I thought what 461 00:26:16,280 --> 00:26:18,560 Speaker 1: was interesting there was he talked about how he didn't 462 00:26:18,600 --> 00:26:23,480 Speaker 1: necessarily think that the changing the tone of regulations will 463 00:26:23,480 --> 00:26:26,360 Speaker 1: do much more than easing concerns within that that regulations 464 00:26:26,359 --> 00:26:29,000 Speaker 1: really has an inhibited loaning, and that's an interesting point. 465 00:26:29,040 --> 00:26:31,360 Speaker 1: I agree with all this. I think it's great. All 466 00:26:31,400 --> 00:26:35,639 Speaker 1: I want to know is what how this how global 467 00:26:35,680 --> 00:26:37,919 Speaker 1: Wall Street the people that are core audience and we 468 00:26:38,359 --> 00:26:40,760 Speaker 1: honor and thank you every day that you tune in 469 00:26:41,080 --> 00:26:42,639 Speaker 1: five days a week. I mean you turn off and 470 00:26:42,960 --> 00:26:45,000 Speaker 1: Michael bars On, I mean I get that Michael bark 471 00:26:45,080 --> 00:26:48,080 Speaker 1: comes on Global Wall Street Tunes on goes okay, what 472 00:26:48,280 --> 00:26:51,120 Speaker 1: what what are the Tigers doing today? Anyways, And I'd 473 00:26:51,160 --> 00:26:54,520 Speaker 1: like to thank my wife and my cousin, you know, 474 00:26:54,720 --> 00:26:57,280 Speaker 1: I mean, we we are honored that you all listen 475 00:26:57,359 --> 00:26:58,760 Speaker 1: to it. I just want to know where the by 476 00:26:58,840 --> 00:27:01,679 Speaker 1: side is going to be in five years. If you know, folks, 477 00:27:01,720 --> 00:27:04,800 Speaker 1: email innerd tweet us or you know at David ger whatever. 478 00:27:04,840 --> 00:27:07,479 Speaker 1: We'd like to hear from you, as Eric did with 479 00:27:07,600 --> 00:27:11,679 Speaker 1: Mr Fink early in their their wonderful interview. I just 480 00:27:12,240 --> 00:27:15,399 Speaker 1: I don't know how much more Vanguardi, Van Guardy and 481 00:27:15,440 --> 00:27:18,399 Speaker 1: everybody else can yet it's fascinating just ask you there. 482 00:27:18,400 --> 00:27:19,919 Speaker 1: I was. I was struck by what Larry Finn had 483 00:27:19,960 --> 00:27:22,119 Speaker 1: to say about how he's approaching breaksit, the fact that 484 00:27:22,160 --> 00:27:24,840 Speaker 1: he's having this NonStop conversation with the main administration, but 485 00:27:24,880 --> 00:27:26,800 Speaker 1: also that he's he's playing a real waiting game. And 486 00:27:26,840 --> 00:27:28,960 Speaker 1: I know that every morning at five am, you're focusing 487 00:27:28,960 --> 00:27:31,960 Speaker 1: more specifically and more narrowly on Europe and the UK 488 00:27:32,520 --> 00:27:34,080 Speaker 1: is that something that you hear from from the folks 489 00:27:34,119 --> 00:27:35,840 Speaker 1: you're interviewing that right now. This is a sort of 490 00:27:35,880 --> 00:27:38,920 Speaker 1: stand pat wait and see time. Here's what I would suggest. 491 00:27:39,080 --> 00:27:43,040 Speaker 1: One word in America, folks, you'll know it in the Northeast, 492 00:27:43,040 --> 00:27:48,359 Speaker 1: certainly Stanford. That's the one word in the head of 493 00:27:48,520 --> 00:27:53,439 Speaker 1: every single managing officer of every firm. Is a number 494 00:27:53,480 --> 00:27:56,520 Speaker 1: of firms went up to Bob Stinch just Stanford, Connecticut 495 00:27:56,960 --> 00:28:00,200 Speaker 1: years ago and it was a great idea and till 496 00:28:00,200 --> 00:28:01,639 Speaker 1: the kids said, no, I want to be hip and 497 00:28:01,640 --> 00:28:04,359 Speaker 1: cool like Michael Barr and stay in New York City. 498 00:28:04,720 --> 00:28:06,240 Speaker 1: I mean, they didn't want to go. They didn't want 499 00:28:06,240 --> 00:28:08,919 Speaker 1: to go up to Connecticut. That's all there is to it. 500 00:28:09,400 --> 00:28:11,440 Speaker 1: And they had to move a lot of their intellectual 501 00:28:11,480 --> 00:28:15,080 Speaker 1: capacity back to Manhattan. So we're seeing that movement taking place. 502 00:28:15,119 --> 00:28:17,560 Speaker 1: It's it's a more more vacancy as you're driving down. 503 00:28:18,080 --> 00:28:20,640 Speaker 1: Larry's got to keep the manpower, as does everyone else. 504 00:28:20,680 --> 00:28:23,280 Speaker 1: Deutsche Bank with their huge platform in London u b 505 00:28:23,560 --> 00:28:26,800 Speaker 1: s right by our president. Offices in London are new 506 00:28:26,880 --> 00:28:29,600 Speaker 1: offices by Mansion. How's the same thing. You gotta keep 507 00:28:29,640 --> 00:28:32,320 Speaker 1: the troops in London because that's where they want to stay, 508 00:28:32,560 --> 00:28:34,960 Speaker 1: is why you see the waiting. I would say check 509 00:28:35,000 --> 00:28:37,480 Speaker 1: out that whole interview on the blooms Bloomberg dot Com. 510 00:28:37,600 --> 00:28:39,760 Speaker 1: Eric shatzkare in our colleagues in conversation with Larry Fink, 511 00:28:39,760 --> 00:28:48,200 Speaker 1: the chairman and CEO of black Rock, brought you by 512 00:28:48,440 --> 00:28:52,160 Speaker 1: Bank of America Mary Lynch, dedicated to bringing our clients 513 00:28:52,240 --> 00:28:56,440 Speaker 1: insights and solutions to meet the challenges of a transforming world. 514 00:28:56,880 --> 00:29:00,720 Speaker 1: That's the power of global connections. Mary Lynch or Federan 515 00:29:00,800 --> 00:29:10,360 Speaker 1: Smith Incorporated Member s I p C. There's something new 516 00:29:10,400 --> 00:29:13,760 Speaker 1: from Bloomberg. It's called Lens. Starting right now, you can 517 00:29:13,880 --> 00:29:17,720 Speaker 1: use the Bloomberg Io s app off your iPhone or iPad, 518 00:29:18,280 --> 00:29:22,200 Speaker 1: or our new Google Chrome extension to read any news 519 00:29:22,200 --> 00:29:26,560 Speaker 1: story on any website, scan it, and then instantly see 520 00:29:26,600 --> 00:29:30,720 Speaker 1: the news stories relevant market data from Bloomberg. In addition, 521 00:29:31,040 --> 00:29:34,120 Speaker 1: see all the bios of the key people mentioned in 522 00:29:34,200 --> 00:29:37,360 Speaker 1: the story. It's called Lens, and it is just that, 523 00:29:37,560 --> 00:29:40,640 Speaker 1: a lens into the people and the data of any 524 00:29:40,720 --> 00:29:44,600 Speaker 1: story you may be reading. Again, Lens brings you the 525 00:29:44,640 --> 00:29:48,120 Speaker 1: power of Bloomberg's news and data. Download or Io s 526 00:29:48,160 --> 00:29:51,480 Speaker 1: app or search for the Bloomberg extension at the Chrome 527 00:29:51,600 --> 00:29:55,080 Speaker 1: Store to try lens out. Learn more at Bloomberg dot 528 00:29:55,080 --> 00:30:03,600 Speaker 1: com slash lens. This is well timed. We usually have 529 00:30:03,640 --> 00:30:06,360 Speaker 1: the privilege of the former governor of the Federal Reserve 530 00:30:06,440 --> 00:30:11,360 Speaker 1: System in Columbia, economist Frederick Michigan. We usually speak to 531 00:30:11,400 --> 00:30:15,160 Speaker 1: him under the compressing rush of seven minutes wrapped around something. 532 00:30:15,280 --> 00:30:18,160 Speaker 1: Cheery yelling said, what a joy to speak to Rick 533 00:30:18,240 --> 00:30:21,520 Speaker 1: Michigan this morning with a little bit of pace and wind. 534 00:30:22,160 --> 00:30:25,560 Speaker 1: Uh to to to talk about we're gonna have for 535 00:30:25,600 --> 00:30:29,200 Speaker 1: the whole half hour, which is a good and beautiful thing. Uh, 536 00:30:29,600 --> 00:30:34,600 Speaker 1: Rick Michigan. In your book, Your Wonderful Macroeconomics, Policy and Practice, 537 00:30:35,200 --> 00:30:39,680 Speaker 1: is there any discussion of the great distortion and the 538 00:30:39,800 --> 00:30:43,080 Speaker 1: idea of interest rates at the zero bound and what 539 00:30:43,120 --> 00:30:47,080 Speaker 1: that means for everyone? Yeah, well, certainly. I mean the 540 00:30:47,160 --> 00:30:50,760 Speaker 1: issue of the zero lower bound is a very big deal. Uh, 541 00:30:51,080 --> 00:30:54,800 Speaker 1: something that actually is quite remarkable that we actually never 542 00:30:54,840 --> 00:30:58,400 Speaker 1: dealt with in terms of monetary economics until very recently, 543 00:30:58,480 --> 00:31:01,240 Speaker 1: because we just didn't think this would be a real problem. 544 00:31:01,400 --> 00:31:04,640 Speaker 1: Because the remarkable episode that we're in is one where 545 00:31:04,840 --> 00:31:07,440 Speaker 1: in fact inflation has not been too high but too low, 546 00:31:07,640 --> 00:31:10,800 Speaker 1: something that's been really not common at all in the 547 00:31:10,840 --> 00:31:13,640 Speaker 1: post war period. So we're now in a brave new world. 548 00:31:13,680 --> 00:31:18,280 Speaker 1: We're actually the new normal, and that changes things very dramatically. Clearly, 549 00:31:18,600 --> 00:31:21,080 Speaker 1: you're not completely happy about having to be in a 550 00:31:21,160 --> 00:31:24,800 Speaker 1: zero lower abound situation, having interest rates so low, But 551 00:31:24,880 --> 00:31:26,640 Speaker 1: on the other hand, you may not have a choice. 552 00:31:27,040 --> 00:31:29,080 Speaker 1: This is just the reality of the way the economy 553 00:31:29,120 --> 00:31:32,880 Speaker 1: has developed in recent years. And we're in a situation 554 00:31:32,920 --> 00:31:35,920 Speaker 1: where it's true that having interest rates near zero does 555 00:31:36,000 --> 00:31:39,800 Speaker 1: create some strange aspects to the way the economy works. 556 00:31:40,480 --> 00:31:42,560 Speaker 1: But the other end, people will get used to it, 557 00:31:42,800 --> 00:31:44,840 Speaker 1: and so this is just the way life is sometimes. 558 00:31:45,040 --> 00:31:47,960 Speaker 1: Here's here's the real life, folks. I have Rick Michigan's 559 00:31:48,000 --> 00:31:51,680 Speaker 1: textbook on my coffee table in my living room at home, 560 00:31:51,840 --> 00:31:55,000 Speaker 1: and you really want to bore people. I don't know. No, 561 00:31:55,080 --> 00:31:56,880 Speaker 1: we use it. We use it as we use its 562 00:31:56,880 --> 00:32:00,680 Speaker 1: old cocktails up. But Rick, it's right near John Hicks 563 00:32:00,760 --> 00:32:04,080 Speaker 1: Value and Capital from a few years ago. Can we 564 00:32:04,160 --> 00:32:07,840 Speaker 1: do traditional modeling in your book and in the great 565 00:32:07,920 --> 00:32:10,920 Speaker 1: John Hicks books? Can we do that with the interest 566 00:32:11,000 --> 00:32:13,760 Speaker 1: rates structure we're in right now? I say we can't 567 00:32:13,800 --> 00:32:19,360 Speaker 1: do I s LM modeling or aggregate suprupt supplied demand analysis. 568 00:32:19,400 --> 00:32:22,960 Speaker 1: Given the artificial model we're in. No, I actually I 569 00:32:22,960 --> 00:32:25,200 Speaker 1: don't agree with you here, But what I think is 570 00:32:25,200 --> 00:32:28,320 Speaker 1: is different is the way you think about the conduct 571 00:32:28,320 --> 00:32:31,720 Speaker 1: of monetary policy. So and by the way, one thing 572 00:32:31,720 --> 00:32:33,440 Speaker 1: that's important to say is the U s may I 573 00:32:33,560 --> 00:32:35,600 Speaker 1: be actually be coming out of this problem that we're 574 00:32:35,640 --> 00:32:38,720 Speaker 1: actually in the phase of of raising interest rates that 575 00:32:38,920 --> 00:32:41,160 Speaker 1: U that if the economy does is we hope it 576 00:32:41,200 --> 00:32:44,240 Speaker 1: will do U, that will be in a situation where 577 00:32:44,280 --> 00:32:47,000 Speaker 1: it will be more normal. Interest rates will be lower 578 00:32:47,040 --> 00:32:50,200 Speaker 1: than they've been typically. But on the hand, monetary policy 579 00:32:50,240 --> 00:32:52,600 Speaker 1: will now be more conventional in terms of what is 580 00:32:52,680 --> 00:32:56,600 Speaker 1: monetary policy changing interest rates. However, when you had a 581 00:32:56,680 --> 00:33:00,680 Speaker 1: situation where you hit the zero lower bad and you're 582 00:33:00,680 --> 00:33:04,680 Speaker 1: in such a low inflation world where inflation is too low, uh, 583 00:33:04,760 --> 00:33:07,240 Speaker 1: and that you actually need to have what we call 584 00:33:07,320 --> 00:33:10,080 Speaker 1: real interest rates, that is the interest rate adjusted for 585 00:33:10,160 --> 00:33:14,200 Speaker 1: inflation to be actually lower than is normal because the 586 00:33:14,200 --> 00:33:16,720 Speaker 1: economy is not doing as well as you'd like. Then 587 00:33:16,720 --> 00:33:18,840 Speaker 1: you're in a situation where you may not be able 588 00:33:18,880 --> 00:33:21,240 Speaker 1: to lower nominal interest rates, the actual interest rate that 589 00:33:21,320 --> 00:33:23,560 Speaker 1: you hear about when somebody sucks about a five percent 590 00:33:23,600 --> 00:33:27,320 Speaker 1: interest rate, they're talking about a five percent nominal rate. UH. 591 00:33:27,360 --> 00:33:30,280 Speaker 1: In that situation, what you need to do is you 592 00:33:30,320 --> 00:33:34,800 Speaker 1: may have to take other steps to pursue expansionary monetary policy. 593 00:33:35,200 --> 00:33:36,720 Speaker 1: And in fact, this is what we've seen the Federal 594 00:33:36,760 --> 00:33:39,520 Speaker 1: Reserve due. So for example, one are the things that 595 00:33:39,560 --> 00:33:42,640 Speaker 1: we saw happen is the FED expanded its balance sheet tremendously, 596 00:33:43,600 --> 00:33:47,800 Speaker 1: not to actually uh think of changing the balance sheet 597 00:33:48,280 --> 00:33:51,440 Speaker 1: so important expanding the the the assets of the Federal Reserve, 598 00:33:51,760 --> 00:33:54,320 Speaker 1: but actually at that credit market, so the Fed shifted 599 00:33:54,400 --> 00:33:57,160 Speaker 1: to buying a lot of long term treasuries and long 600 00:33:57,280 --> 00:34:01,040 Speaker 1: term uh mortgage backed securities. What were they trying to do? 601 00:34:01,120 --> 00:34:05,080 Speaker 1: They couldn't lower the federal funds rate below zero. But 602 00:34:05,240 --> 00:34:07,960 Speaker 1: by actually buying a lot of longer term securities, you 603 00:34:07,960 --> 00:34:11,000 Speaker 1: can actually lower the long term interest rates on those securities. 604 00:34:11,320 --> 00:34:14,000 Speaker 1: And importantly, it's longer term interest rates that are more 605 00:34:14,040 --> 00:34:16,360 Speaker 1: important to what people do in terms of decisions. Nobody 606 00:34:16,360 --> 00:34:18,440 Speaker 1: worries about the sorrow funds rate in terms of what 607 00:34:18,440 --> 00:34:20,279 Speaker 1: I'm going to do, which is an overnight rate. You 608 00:34:20,400 --> 00:34:22,480 Speaker 1: worry much more about the red and your mortgage, which 609 00:34:22,520 --> 00:34:24,960 Speaker 1: is a very long term rate or the mortgage or 610 00:34:25,040 --> 00:34:27,760 Speaker 1: the interest rate in your car loan, which is UH 611 00:34:28,000 --> 00:34:31,000 Speaker 1: is intermediate term rate. So in a sense, what it 612 00:34:31,040 --> 00:34:33,520 Speaker 1: means is that monetary policy and the ability to affect 613 00:34:33,560 --> 00:34:37,359 Speaker 1: actric demand is still there, but it can't be done 614 00:34:37,360 --> 00:34:41,200 Speaker 1: with conventional tools, and furthermore, it may be not as 615 00:34:41,200 --> 00:34:43,640 Speaker 1: effective as using conventional tools. This is one of the 616 00:34:43,640 --> 00:34:46,120 Speaker 1: reasons why the Federals is very happy to be raising 617 00:34:46,200 --> 00:34:50,160 Speaker 1: rates right now. Professor Michigan, taking his PhD a few 618 00:34:50,200 --> 00:34:53,600 Speaker 1: years ago at the Massachusetts Institute of Technology, help me 619 00:34:53,640 --> 00:34:57,160 Speaker 1: your Rick Michigan with the kool aid of Rudy dorn 620 00:34:57,200 --> 00:35:01,120 Speaker 1: Bush Stan Fisher in all M I T and what 621 00:35:01,160 --> 00:35:05,480 Speaker 1: it means for a strong dollar? Policy should cheer, yell, 622 00:35:05,600 --> 00:35:09,640 Speaker 1: and worry of a strong dollar? Well, I think the 623 00:35:09,719 --> 00:35:12,000 Speaker 1: issue here is if the U S economy is doing 624 00:35:12,120 --> 00:35:14,680 Speaker 1: better than other economies, then in fact the dollar will 625 00:35:14,719 --> 00:35:16,640 Speaker 1: be strong. That's a good thing, not a bad thing. 626 00:35:16,960 --> 00:35:19,200 Speaker 1: So in a sense, the fact that we've had a 627 00:35:19,239 --> 00:35:22,320 Speaker 1: strong dollar is an indication that the US has actually 628 00:35:22,400 --> 00:35:25,080 Speaker 1: been done has done better, and that actually that the 629 00:35:25,120 --> 00:35:27,640 Speaker 1: Federal Reserve has actually managed it better than many other 630 00:35:27,640 --> 00:35:31,800 Speaker 1: central banks have managed their situations. We the Federal reserve 631 00:35:31,880 --> 00:35:34,040 Speaker 1: in the US was much more aggressive in terms of 632 00:35:34,040 --> 00:35:37,920 Speaker 1: easing policy than, for example, the European Central Bank, and 633 00:35:37,960 --> 00:35:40,160 Speaker 1: that's one of the reasons that the US has done better. 634 00:35:40,320 --> 00:35:43,200 Speaker 1: So the strong dollar is actually a reflection of the 635 00:35:43,239 --> 00:35:46,520 Speaker 1: fact that the US is actually doing pretty pretty reasonably. 636 00:35:47,480 --> 00:35:49,520 Speaker 1: There is a big issue in the long run that 637 00:35:49,640 --> 00:35:52,000 Speaker 1: we're not growing at staffs as we we we should 638 00:35:52,080 --> 00:35:54,200 Speaker 1: that it really doesn't have to do with monetary policy. 639 00:35:54,840 --> 00:35:58,359 Speaker 1: Uh and hopefully and some of the latest policies in 640 00:35:58,440 --> 00:36:00,520 Speaker 1: terms of trade that Trump has been pushed and probably 641 00:36:00,520 --> 00:36:02,480 Speaker 1: won't help in that record. Is it Is it tougher 642 00:36:02,560 --> 00:36:05,680 Speaker 1: for the Chinese now because twenty years ago and thirty 643 00:36:05,760 --> 00:36:09,040 Speaker 1: years ago there were so many more fixed or quasi 644 00:36:09,200 --> 00:36:12,160 Speaker 1: fixed exchange rates and now we're much more in a 645 00:36:12,239 --> 00:36:17,680 Speaker 1: floating exchange rate world. Does that disadvantage Chinese policy? No, 646 00:36:17,800 --> 00:36:20,400 Speaker 1: I don't think so. I think that that what is 647 00:36:20,440 --> 00:36:23,080 Speaker 1: creating some issues for China is that they're not in 648 00:36:23,120 --> 00:36:26,759 Speaker 1: the situation they were twenty years ago, which is that 649 00:36:26,840 --> 00:36:31,160 Speaker 1: they were extremely low wage country and in fact that 650 00:36:31,360 --> 00:36:34,560 Speaker 1: the global markets really opened up for them and that 651 00:36:34,800 --> 00:36:37,799 Speaker 1: was a huge boon to their economy. Now that we're 652 00:36:37,840 --> 00:36:39,880 Speaker 1: in the world where in fact, China is no longer 653 00:36:40,239 --> 00:36:43,239 Speaker 1: that cheaper place to manufacture goods, that there are other 654 00:36:43,280 --> 00:36:46,120 Speaker 1: places that have become much cheaper. This is actually, in 655 00:36:46,160 --> 00:36:48,280 Speaker 1: one sense a good thing for China because they've gotten 656 00:36:48,280 --> 00:36:51,520 Speaker 1: so much richer over time, but it's actually much more 657 00:36:51,560 --> 00:36:54,040 Speaker 1: difficult than then. The second problem is that we're seeing 658 00:36:54,080 --> 00:36:58,400 Speaker 1: in the world, uh somewhat of a of a setback 659 00:36:58,680 --> 00:37:02,200 Speaker 1: from globalization, a step back from free trade, and we're 660 00:37:02,239 --> 00:37:05,719 Speaker 1: seeing this the rise of nationalism in many countries, particularly 661 00:37:05,760 --> 00:37:08,680 Speaker 1: not just elsewhere but also in the United States. And 662 00:37:08,719 --> 00:37:10,640 Speaker 1: all of this means that it is maybe a little 663 00:37:10,680 --> 00:37:14,880 Speaker 1: bit far harder for China to access markets, both because 664 00:37:14,960 --> 00:37:17,920 Speaker 1: they're not a cheap producer anymore and because markets may 665 00:37:17,920 --> 00:37:19,520 Speaker 1: not be as open to them. So there is a 666 00:37:19,560 --> 00:37:22,439 Speaker 1: problem for them. But but but I think that's where 667 00:37:22,440 --> 00:37:24,880 Speaker 1: the where the problem lies. Rick Miskin, you welcome to 668 00:37:25,000 --> 00:37:27,640 Speaker 1: stand Fisher, the vice chair that fed up to Morningside Heights. 669 00:37:27,640 --> 00:37:29,680 Speaker 1: Earlier this week he delivered a speech at Columbia and 670 00:37:29,840 --> 00:37:31,440 Speaker 1: the headline for me was a line he said, we 671 00:37:31,480 --> 00:37:34,080 Speaker 1: appeared less likely to face major market disturbances now than 672 00:37:34,120 --> 00:37:36,320 Speaker 1: we did in the case of the taper. At tantrum. 673 00:37:36,400 --> 00:37:38,960 Speaker 1: What did he have to say about the prospects for 674 00:37:39,040 --> 00:37:42,239 Speaker 1: unwinding the balance sheet and doing that while raising rates? Well, 675 00:37:42,280 --> 00:37:45,080 Speaker 1: I think that that the I think stands is absolutely right. 676 00:37:45,120 --> 00:37:48,000 Speaker 1: And it's also that there are lessons learned from the 677 00:37:48,040 --> 00:37:51,080 Speaker 1: from the from the what is frequently called the taper tantrum, 678 00:37:51,840 --> 00:37:53,919 Speaker 1: which is that the FET has to do a better 679 00:37:54,000 --> 00:37:58,560 Speaker 1: job of communication that the issue of actually UH having 680 00:37:58,560 --> 00:38:01,200 Speaker 1: the balance sheet wind down it is something that's really 681 00:38:01,200 --> 00:38:03,839 Speaker 1: a technical issue. It should not be something that should 682 00:38:03,840 --> 00:38:06,840 Speaker 1: be a major impact on monetary policy. How do you 683 00:38:06,920 --> 00:38:08,960 Speaker 1: do that? Well, one thing is you give people a 684 00:38:09,000 --> 00:38:11,279 Speaker 1: lot of advance, want to really explain what you're gonna do, 685 00:38:11,760 --> 00:38:14,279 Speaker 1: start doing it six months ahead of time, and then 686 00:38:14,320 --> 00:38:16,680 Speaker 1: actually then when it happens, it becomes a non event. 687 00:38:16,960 --> 00:38:20,200 Speaker 1: So the set is clearly moved very much in this 688 00:38:20,480 --> 00:38:24,600 Speaker 1: in this direction. And when the taper tamp term occurred 689 00:38:24,680 --> 00:38:27,799 Speaker 1: several years ago, the big problem there was that the 690 00:38:27,840 --> 00:38:30,359 Speaker 1: market's interpreted the fact that the faith that the setter 691 00:38:30,400 --> 00:38:33,400 Speaker 1: reserved would no longer be buying as much UH taper 692 00:38:33,440 --> 00:38:36,080 Speaker 1: off it's buying of of of long term bonds and 693 00:38:36,120 --> 00:38:39,080 Speaker 1: mortgage backed securities. They interpreted that as the stead was 694 00:38:39,120 --> 00:38:41,960 Speaker 1: going to tighten monetary policy more than it otherwise would. 695 00:38:42,440 --> 00:38:45,760 Speaker 1: And in fact that this case is very clear that 696 00:38:45,760 --> 00:38:48,640 Speaker 1: that the wanting down of the balance sheet, trying to 697 00:38:48,640 --> 00:38:51,279 Speaker 1: get it down to a much more reasonable level, is 698 00:38:51,280 --> 00:38:54,120 Speaker 1: not a monetary policy action, it's a technical action, and 699 00:38:54,120 --> 00:38:56,200 Speaker 1: that it will not actually indicate that the FET is 700 00:38:56,239 --> 00:38:58,239 Speaker 1: going to be tighter on monetary policy than it other 701 00:38:58,239 --> 00:39:00,719 Speaker 1: than an otherwise would. I think the FET's doing a 702 00:39:00,800 --> 00:39:03,839 Speaker 1: much better job of communication. They're studying much earlier, and 703 00:39:03,880 --> 00:39:06,520 Speaker 1: I think this actually will be a non event. He 704 00:39:06,600 --> 00:39:08,680 Speaker 1: talked also just about the role of data in FED 705 00:39:08,719 --> 00:39:11,600 Speaker 1: decisions at the task. Moving from information like the dot 706 00:39:11,640 --> 00:39:14,280 Speaker 1: plot forecasts to a right decision is quote not simple 707 00:39:14,280 --> 00:39:16,200 Speaker 1: and requires a great deal of analysis and back and 708 00:39:16,239 --> 00:39:19,360 Speaker 1: forth among FOMC participants at each meeting. What did that 709 00:39:19,400 --> 00:39:21,400 Speaker 1: tell you about how this FET is is thinking, the 710 00:39:21,400 --> 00:39:24,319 Speaker 1: process that this FET is using well, So, in fact, 711 00:39:24,320 --> 00:39:26,359 Speaker 1: this is something that actually I've done some research on. 712 00:39:27,080 --> 00:39:28,960 Speaker 1: About a year ago I was involved in writing a 713 00:39:29,000 --> 00:39:34,120 Speaker 1: research paper. Were very critical offense communications about about the 714 00:39:34,160 --> 00:39:37,319 Speaker 1: dot plots and so called forward guidance in terms of 715 00:39:37,800 --> 00:39:41,680 Speaker 1: telling people what would happen to the future policy path 716 00:39:41,719 --> 00:39:44,799 Speaker 1: of the Federal of the Federal funds rate UH and 717 00:39:44,960 --> 00:39:49,080 Speaker 1: our criticism basically was that the feed was getting into 718 00:39:49,080 --> 00:39:51,200 Speaker 1: a trap where people were thinking that when they said 719 00:39:51,200 --> 00:39:54,239 Speaker 1: they were going to be you know, in in their projections, 720 00:39:54,280 --> 00:39:55,960 Speaker 1: said that they were going to be three rate rises 721 00:39:55,960 --> 00:39:58,239 Speaker 1: over the course of the year, that that would mean 722 00:39:58,239 --> 00:40:01,040 Speaker 1: that that's actually what they would do. What is really 723 00:40:01,160 --> 00:40:04,560 Speaker 1: key is to make it clear that what you're going 724 00:40:04,600 --> 00:40:07,320 Speaker 1: to do is going to depend on how the data evolves, 725 00:40:07,680 --> 00:40:10,719 Speaker 1: so that you when you actually talk about projections, their 726 00:40:10,760 --> 00:40:13,560 Speaker 1: projections which in fact you're almost surely not going to 727 00:40:13,640 --> 00:40:16,359 Speaker 1: actually have happened. Why because the data is not going 728 00:40:16,400 --> 00:40:18,960 Speaker 1: to be exactly what you expected it to be. And 729 00:40:19,000 --> 00:40:21,320 Speaker 1: what we've seen is that the set has moved away 730 00:40:21,520 --> 00:40:24,440 Speaker 1: from what we used what we called time based forward guidance, 731 00:40:24,560 --> 00:40:28,160 Speaker 1: telling people exact dates, to saying that what's really relevant 732 00:40:28,200 --> 00:40:30,959 Speaker 1: here is actually how the data evolves. And in fact, 733 00:40:31,440 --> 00:40:33,600 Speaker 1: what we've seen, for example, that that kept in saying 734 00:40:33,600 --> 00:40:36,200 Speaker 1: that it would raise rates and then did not do 735 00:40:36,280 --> 00:40:38,839 Speaker 1: so why the economy didn't. It wasn't as strong as 736 00:40:38,880 --> 00:40:41,800 Speaker 1: the set had hoped, and even more importantly, inflation stayed 737 00:40:41,800 --> 00:40:44,600 Speaker 1: too low. So I think that the set has actually 738 00:40:44,680 --> 00:40:48,040 Speaker 1: done a much better job and communication. They're what I 739 00:40:48,080 --> 00:40:52,480 Speaker 1: call now database, which is that given what what might 740 00:40:52,520 --> 00:40:54,560 Speaker 1: happen to the data, you might do different things. So, 741 00:40:54,640 --> 00:40:59,120 Speaker 1: for example, UH, if inflation inflation has still been very tame, 742 00:40:59,239 --> 00:41:02,279 Speaker 1: if inflation starts to heat up more than than then 743 00:41:02,320 --> 00:41:04,680 Speaker 1: we're seeing right now, then the Fed is going to 744 00:41:04,760 --> 00:41:07,960 Speaker 1: have to do more aggressive at raising rates. Uh. Similarly, 745 00:41:08,000 --> 00:41:11,799 Speaker 1: if the economy UH gets weaker that we right now 746 00:41:11,800 --> 00:41:14,200 Speaker 1: we have a projection that basically economy is going to 747 00:41:14,239 --> 00:41:17,800 Speaker 1: be growing solidly, then unemployment is going to stay below 748 00:41:17,880 --> 00:41:22,000 Speaker 1: five percent. If that changed because something bad happened, then 749 00:41:22,000 --> 00:41:25,000 Speaker 1: the Fed actually should stop raising rates. So I think 750 00:41:25,040 --> 00:41:27,640 Speaker 1: that they've been much clearer on this, and I think 751 00:41:27,680 --> 00:41:30,960 Speaker 1: that's part of what Stan was trying to to get across, 752 00:41:31,480 --> 00:41:33,720 Speaker 1: which is that the Feds looking a lot of data 753 00:41:34,280 --> 00:41:36,080 Speaker 1: that they're trying to figure out what's going to happen 754 00:41:36,080 --> 00:41:38,799 Speaker 1: to the economy, and depending on how strong the economy is, 755 00:41:38,800 --> 00:41:42,120 Speaker 1: how strong inflation is, that's going to change the actual 756 00:41:43,000 --> 00:41:46,080 Speaker 1: the path of of the Federal funds rate, the future 757 00:41:46,080 --> 00:41:48,480 Speaker 1: policy path. Very quickly, we got a thirty seconds left. 758 00:41:48,520 --> 00:41:50,719 Speaker 1: Let me ask about Randy Quarrel's reportedly going to be 759 00:41:50,840 --> 00:41:55,359 Speaker 1: named to head up the FEDS regulatory responsibilities private equity guy. 760 00:41:55,440 --> 00:41:58,200 Speaker 1: His wife's maiden name is on the building echoes is 761 00:41:58,239 --> 00:42:00,520 Speaker 1: her is her maiden name? Uh? What kind of role 762 00:42:00,600 --> 00:42:02,200 Speaker 1: is he going to play here? What do you think 763 00:42:02,239 --> 00:42:04,320 Speaker 1: he's going to do in terms of shaping the Fed's direction. 764 00:42:05,040 --> 00:42:06,680 Speaker 1: Is this the strongest signal yet that we're moving to 765 00:42:06,760 --> 00:42:10,839 Speaker 1: more rules based FED? No? I think not. I think 766 00:42:10,880 --> 00:42:14,840 Speaker 1: that that, uh, his primary role is going to be 767 00:42:14,920 --> 00:42:19,640 Speaker 1: on the regulatory front uh and uh, and clearly that 768 00:42:19,680 --> 00:42:22,840 Speaker 1: there's an issue that that the Trump administration has indicated 769 00:42:22,880 --> 00:42:26,600 Speaker 1: they think that that the banking regulation has gotten too 770 00:42:26,600 --> 00:42:31,320 Speaker 1: onerous uh, and that that Coals has actually indicated that 771 00:42:31,320 --> 00:42:33,840 Speaker 1: that he'd like some moving back from that. So I 772 00:42:33,840 --> 00:42:35,920 Speaker 1: think that's where his real role is going to be. 773 00:42:36,640 --> 00:42:40,520 Speaker 1: It is true that he's that he's actually uh talked 774 00:42:40,560 --> 00:42:42,760 Speaker 1: about the fact that the FED should be more rules based. 775 00:42:43,360 --> 00:42:45,920 Speaker 1: I think, by the way, what he's saying there is 776 00:42:45,960 --> 00:42:47,640 Speaker 1: something that I think I do not agree with. And 777 00:42:47,680 --> 00:42:49,640 Speaker 1: I think that when he starts talking to people inside 778 00:42:49,640 --> 00:42:52,160 Speaker 1: the FED, he's going to change his views. Okay, welieve 779 00:42:52,160 --> 00:43:04,000 Speaker 1: that they're Rick Michigan, Thank you, m Thanks for listening 780 00:43:04,040 --> 00:43:08,360 Speaker 1: to the Bloomberg Surveillance podcast. Subscribe and listen to interviews 781 00:43:08,760 --> 00:43:13,840 Speaker 1: on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. 782 00:43:14,400 --> 00:43:17,480 Speaker 1: I'm on Twitter at Tom Keene. David Gura is at 783 00:43:17,560 --> 00:43:22,400 Speaker 1: David Gura. Before the podcast, you can always catch us worldwide. 784 00:43:22,600 --> 00:43:36,719 Speaker 1: I'm Bloomberg Radio, brought you by Bank of America Mary Lynch. 785 00:43:36,840 --> 00:43:41,080 Speaker 1: Dedicated to bringing our clients insights and solutions to meet 786 00:43:41,120 --> 00:43:44,600 Speaker 1: the challenges of a transforming world. That's the power of 787 00:43:44,640 --> 00:43:49,760 Speaker 1: global connections. Mary Lynch, Pierce Feeder and Smith Incorporated Member 788 00:43:50,360 --> 00:43:51,040 Speaker 1: s I p C