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Speaker 1: Member s I p C. Welcome to the Bloomberg Surveillance Podcast.
Speaker 1: I'm Tom Keene with David Gura. Daily we bring you
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Speaker 1: of course on the Bloomberg How can Germany be an
Speaker 1: exploiter of the Euro, Sir Howard, given the laws of
Speaker 1: the European Union, I don't think it is in this
Speaker 1: in that sense an exploiter of the Euro. What happened
Speaker 1: was that the Germans joined the Euro at what many
Speaker 1: of them perceived to be an uncompetitive rate, and they
Speaker 1: thought that they had been manipulated by the French, if
Speaker 1: you like, who agreed a rate that was too high
Speaker 1: for the Deutsche mark. In the years following the introduction
Speaker 1: of the Euro, the Germans then focused on productivity increases
Speaker 1: and wage discipline. Unions in in Germany worried about the
Speaker 1: impact of competitiveness agreed very very tight wage deals, and
Speaker 1: German competitiveness improved dramatically. Many other countries in the euro
Speaker 1: Zone seemed to take the view that having joined the
Speaker 1: euro Zone, that couldn't have a balance of payments problem anymore,
Speaker 1: and therefore competitiveness wasn't really problem, and wage rates rose
Speaker 1: in Greece, in Spain, in Italy particularly, but also to
Speaker 1: some extent in France, and they became less competitive. Now,
Speaker 1: if you call that manipulation, well, I think that's a
Speaker 1: rather difficult word to use about it. It does, however,
Speaker 1: mean that the Germans are now operating with the currency
Speaker 1: which is an average currency for Germany, Italy, Greece, Spain, etcetera,
Speaker 1: which is certainly lower than it would be if it
Speaker 1: was just the Austria and the Netherlands. That is certainly
Speaker 1: true when you look back twenty and thirty years back
Speaker 1: the time of Green Span Ruben in Summers. Is the
Speaker 1: US the ultimate manipulator of their exorbitant privilege. I think
Speaker 1: that these loaded words like manipulation and illegal, etcetera. Are
Speaker 1: really not a helpful way of thinking about this. Barry
Speaker 1: I can Green coined the phrase exhorbitant privilege of being
Speaker 1: reserved currency, and that to some extent is true because
Speaker 1: it does mean, you know, the traditional phrase, the dollar
Speaker 1: is is our currency, but your problem is typically what
Speaker 1: fread Treasury secretaries have said to people. But I think
Speaker 1: that is just a fact that it is the global
Speaker 1: reserve currency, and that gives you certain freedoms if you like,
Speaker 1: in terms of the way you handle your own monetary policy.
Speaker 1: People don't have a voice but to own dollar assets,
Speaker 1: and that creates a kind of underpinning for you. But
Speaker 1: then to turn that round and use words like manipulation
Speaker 1: that people are doing this deliberately, I just don't think
Speaker 1: that's the way policy makers think about it. How disruptive
Speaker 1: will Donald Trump's presidency in b for European elections this year, Well,
Speaker 1: it's I'm not sure how disruptive will be European elections.
Speaker 1: It certainly is causing European leaders to think about how
Speaker 1: they come together in response to what they do perceive
Speaker 1: clearly more more so than here as a as a threat.
Speaker 1: So I think you will see more pressure for common
Speaker 1: European positions being taken. Whether that will really read across
Speaker 1: into the individual elections, where I think there's a lot
Speaker 1: more national things going on. So how do you worry
Speaker 1: about Marine Lapin becoming president of France? There are fresh
Speaker 1: allegations against possois Fillon. We now have the latest pulsing.
Speaker 1: Actually Manuel and McCallon, the Independent who used to be
Speaker 1: Finance minister under Mansieur Land, may actually win and go
Speaker 1: to the second ound. What happens if we get an
Speaker 1: e manun Malpin stand off? Yeah, I think this is
Speaker 1: quite worrying. Until recently I thought that Fillon was likely
Speaker 1: to win and that he would appeal to a lot
Speaker 1: of the kind of traditional goal list and blue collar
Speaker 1: people who are flirting with Marine le Pin. But we've
Speaker 1: now come across what I think of as Welsh wife risk,
Speaker 1: which has appeared in the case of Fion, and that
Speaker 1: has unsettled things. Macron obviously very plausible sort of guy,
Speaker 1: but with no political roots whatsoever, never been elected to anything.
Speaker 1: So I think that the idea of him in the
Speaker 1: second round versus Mary Lepin is a big throw of
Speaker 1: the dice because he's got no party to back him
Speaker 1: except his small organization called oh Marsh. He doesn't have
Speaker 1: any kind of tradition. How would he behave in a
Speaker 1: big campaign? I think this is a big throw of
Speaker 1: the dice. I would be much more comfortable if it
Speaker 1: were Lepine against either Fillon or if he has to
Speaker 1: pull out back maybe to Juppe. Okay, what happens if
Speaker 1: Marin Lepine gets elected president? And I don't know whether
Speaker 1: that's at the moment a ten percent chance or a
Speaker 1: fifty percent chance in your eyes. I think it is
Speaker 1: very serious indeed for the euro project in total, because
Speaker 1: although she has been a bit cautious about saying she
Speaker 1: wants to come out of the European Union, she wants
Speaker 1: to come out of the Euro and I think that
Speaker 1: the European project would be in big trouble. I cannot
Speaker 1: see Mrs Merkel wanting to stand there in a press
Speaker 1: conference with Marin Lepine talking about how the Franco German
Speaker 1: alliance is going to be re established. That just won't happen.
Speaker 1: So I think that's an existential threat to the European
Speaker 1: project in total, in the way that Brexit is not,
Speaker 1: Sir Howard, when we look at all that we're talking
Speaker 1: about a populism in a political turmoil. Our markets and
Speaker 1: I go to John Plender in the f T today,
Speaker 1: our markets just wildly betting on the advantages of a
Speaker 1: Trump reflation, or is a Trump reflation literally to use
Speaker 1: the British phrase on money illusion. Well, I think probably
Speaker 1: there will be a Trump reflation in the form of
Speaker 1: low corporate taxation and eventually some infrastructure spending. Though whether
Speaker 1: there are enough shovel ready projects for that to be
Speaker 1: a big factor in the short run, I don't know.
Speaker 1: So I don't think it's a complete money illusion, but
Speaker 1: maybe at the moment people are putting too much emphasis
Speaker 1: on that side of the Trump presidency and perhaps too
Speaker 1: little on the trade risk. You know, I look, sir Howard,
Speaker 1: it at all that's going on and the idea of
Speaker 1: a Trump reflation. Help me here with what Janet Yellen
Speaker 1: should do. I mean, if we we forget almost fancy
Speaker 1: and I've never seen this where we've in so much
Speaker 1: way ignored a FED decision and do a two pm today,
Speaker 1: all my radar is up on that, Sir Howard. Help
Speaker 1: me here with the response of a leading economist in
Speaker 1: Cherry yelling to all that's going on in Washington. Well,
Speaker 1: I think the FED will be asking itself whether the
Speaker 1: Trump reflection will really occur and whether there will be
Speaker 1: a corresponding depressing offset on economic growth from worries about
Speaker 1: trade policy. So that to me, if I were the Fed,
Speaker 1: would cause me to wish to hold my fire for
Speaker 1: the time being and not to take it as for
Speaker 1: granted that we are going to see the economy growing
Speaker 1: more rapidly and therefore that they can raise rates quickly.
Speaker 1: So I would expect the Fed to adopt to wait
Speaker 1: and see posture for the moment, and I think those
Speaker 1: factors will be what's in their mind. Francy. Here's the
Speaker 1: Trump reflation right now, very quickly the election. The day
Speaker 1: after the election, up we go. We've shown this chart
Speaker 1: too many times in Francy. And here's this indeterminate charn
Speaker 1: right now, the chair yelling faces this afternoon. Yeah, and
Speaker 1: so I was going back to what you were saying
Speaker 1: looking at Tom's chart and actually bring the duck want
Speaker 1: up on the Boomberg terminal. It would see outdoing once again.
Speaker 1: You see that, Tom, You see that is that we
Speaker 1: started the year where there was an alignment between what
Speaker 1: the dots were telling us in the FED fund futures
Speaker 1: put it no longer. The Feds are still saying three
Speaker 1: to four and actually the Fed funds are saying two
Speaker 1: interest rate hikes. Yeah, that that's that's not surprising because
Speaker 1: I think what I've been saying risk repeating myself, is
Speaker 1: that people are now starting to just try to weigh
Speaker 1: up the totality of Trump presidency. I think in the
Speaker 1: first week they were saying, well, it's all going to
Speaker 1: be about reflation. We're going to see the dollar rising
Speaker 1: and everything. And now people are sun say, well, maybe
Speaker 1: there are some serious threats on the horizon on the
Speaker 1: trade policy front, that that might create a bit of
Speaker 1: grinding of gears, even if you know, eventually you get
Speaker 1: to a more rational outcome, but in the short run,
Speaker 1: that could be somewhat disruptive. Thank you so much, sir,
Speaker 1: Howard Davis. What a great, great interview with the RBS
Speaker 1: chairman there, Gene Munster. Where this Loup Ventures, of course
Speaker 1: more than iconic, Piper Jaffrey. What is Loup Ventures? How's
Speaker 1: it different than the day today? Grind it fortress, Piper. Uh,
Speaker 1: From a day to day, I'm still doing research. I'm
Speaker 1: head of research, so I still write three research. No,
Speaker 1: you still stand out in front of Apple stores? Oh yeah,
Speaker 1: we uh we do that. It's not every daytime. We
Speaker 1: do that, but I would say maybe once a month.
Speaker 1: Once a month, you're out there looking at what's uh
Speaker 1: going on? Help me here with what I need to
Speaker 1: know about Apple's balance sheet. I look at the lack
Speaker 1: of goodwill, it's it's it's it's the most unique balance
Speaker 1: sheet I've ever seen. Why is that? Well, because they
Speaker 1: have a lot of cash, first of all, called billion.
Speaker 1: They have a lot of debt to call its sixty
Speaker 1: or seventy billion, you know that's correct, And they have
Speaker 1: h a boatload of that debt is outside of the US.
Speaker 1: And so if you look at the boatload of that
Speaker 1: cash is so if you look at the total cash
Speaker 1: outside the US, it's called probably a hundred a hundred
Speaker 1: billion dollars, and so that's net of debt. So there's
Speaker 1: there's a big chunk that's offshore. Still three and a
Speaker 1: half million more iPhones to new customers. Who who are
Speaker 1: these new customers buying these phones? And how is how
Speaker 1: many more can they recruit to the Apple world. Well,
Speaker 1: some of them came from Samsung. Samsung obviously had a
Speaker 1: tough fall here, so they probably we picked up about
Speaker 1: half of those from Samsung people, and they still are
Speaker 1: getting growth in merging markets, and China mainland was flat
Speaker 1: ear rear, uh, the Brazil was particularly strong. So they
Speaker 1: pick up that. I think you're getting to a bigger
Speaker 1: question around the story, which is is this really a
Speaker 1: growing market? And the answer is that it's not. The
Speaker 1: smartphone market doesn't grow um and Apple knows that, and
Speaker 1: that's why they're talking about things like augmented reality and
Speaker 1: and these shift towards wearable. Yeah, David, just so you know,
Speaker 1: the augmented reality is we're trying to break a record
Speaker 1: and get to twenty four Apple products in our house.
Speaker 1: That's our augmented reality. What it defined it for us?
Speaker 1: What is augmented real? We know virtual reality, what's augmented reality?
Speaker 1: And what's Apple? What's Apple's game plan for it? So
Speaker 1: it's super imposing um things onto the real world and
Speaker 1: stuff Pokemon Pokemon goo exactly, but but something that would
Speaker 1: be much more advanced and more usable than what I
Speaker 1: think is a clumsy game. But that's a great example.
Speaker 1: How is Apple's approach different from say Google's approach to
Speaker 1: augmented reality. You have these big companies getting into this space.
Speaker 1: What is each doing differently? Apple is gonna put position
Speaker 1: as more as a hardware play. Google seems to be.
Speaker 1: They had Google Glass that failed and their new efforts
Speaker 1: they've restarted it. Now it's kind of under wraps. But
Speaker 1: they also have a significant investment in this company, Magically,
Speaker 1: which is a very controversial company but a lot of
Speaker 1: high expectations. But Google is one of the majority investors
Speaker 1: in that. And so Apple's approach is to the hardware themselves,
Speaker 1: and they just filed a couple of patents last week
Speaker 1: around augmented reality and wearables, and Google's approach appears to
Speaker 1: be more partnering our college. Sheer Ova, who writes for
Speaker 1: a Bloomberg Gadfly, had a column yesterday looking at the
Speaker 1: Apple results saying that you can draw the comparison here
Speaker 1: to Walmart, and she sort of wondered what Steve Jobs
Speaker 1: would think about that comparison. When you look at growth,
Speaker 1: when you look at the balance sheet, Uh, what is
Speaker 1: it that's gonna kickstart growth for for applicant to get back?
Speaker 1: Can I get back to where it was, to the
Speaker 1: kind of growth that it saw before. There can be
Speaker 1: some periods where growth is going to be much quicker,
Speaker 1: and so for example, this fall, when we come into
Speaker 1: the iPhone ten, there's going to be a large pool
Speaker 1: of million plus people with really old phones and that's
Speaker 1: gonna drive growth. Should step up at that point. Uh.
Speaker 1: Then they'll come out with a foldable phone, probably the
Speaker 1: next three to five years. And so think of it
Speaker 1: as having a phone the same size that you have today,
Speaker 1: but then you can fold it open. It could be
Speaker 1: a small iPad that will be good for growth, but
Speaker 1: it still doesn't change the long term trajectory. The car
Speaker 1: is what's needed. Uh. And and the before or wearable,
Speaker 1: whether it's yeah, something along those And David Sure's comment
Speaker 1: is really important in terms of this desire for growth.
Speaker 1: General Mills, which is the ultimate basic company his return
Speaker 1: eleven points seven percent per year for the last ten years.
Speaker 1: Apple can be am I right, Gene, Apple can be
Speaker 1: a General Mills and still meant money for shareholders. Yes,
Speaker 1: And I think you're gonna see that when and even
Speaker 1: more when they report their March quarter and talk about
Speaker 1: capital allocation and buy back and improve dividends. So I
Speaker 1: remember reading, you know, Bloomberg reporting on Apple's return to
Speaker 1: services hoping to improve the services they offer. It seems
Speaker 1: like yesterday was a good moment. For the Apple portfolio
Speaker 1: of services. Are you satisfied with how well they've done
Speaker 1: turning that around? Is there still room for them to
Speaker 1: make more improvements? Services a big deal. When we look
Speaker 1: at kind of the Apple model for the next five years,
Speaker 1: the growth is going to come from services. So the
Speaker 1: iPhone is going to kind of EBB and flow, but
Speaker 1: service is going to go from college twenty billion dollar
Speaker 1: business this year to probably a forty five billion dollar business.
Speaker 1: Right now, Apple services business is about the same size
Speaker 1: as Facebook, not growing as fast. But so when you
Speaker 1: put all of this together and look at the profitability,
Speaker 1: which is much higher. Services is a critical part to
Speaker 1: the Apple story longer term, and they need to embrace
Speaker 1: it even more aggressively than they are today. It's a
Speaker 1: quick question about Google and and UH and AI. How
Speaker 1: far have they gone towards monetizing that. In other words,
Speaker 1: you have the innovation part of things, is the monetari
Speaker 1: monetization side of things close behind. It's it's slowly starting.
Speaker 1: And think of AI. Google set on their last conference
Speaker 1: call that they're going to be an AI first company,
Speaker 1: their mobile first company. They they're gonna become AI first,
Speaker 1: and they talked about three fifty AI innovations in the court.
Speaker 1: And what this will be is in terms of monetizing it,
Speaker 1: it's not going to be like an AI product that
Speaker 1: you're going to download, and it's going to be the
Speaker 1: existing products you have are just gonna get smarter in
Speaker 1: yourknees the more. Okay, Jean, if you forget your Apple
Speaker 1: I D. So if the kid wants to download apps
Speaker 1: on their iPod but they can't do it because I
Speaker 1: forgot my Apple I D, what do I do? Well,
Speaker 1: you do uh A reset and I D reset and
Speaker 1: eventually you're going to probably come up against some password problems.
Speaker 1: So the good news with Apple is you can actually
Speaker 1: have real uh support, real tech support around their services
Speaker 1: and you can call somebody. You know, there's the question
Speaker 1: you needed to get from gene Muster Hell Loop Ventures. Jean,
Speaker 1: thank you so much. We continue. This is Bloomberg, brought
Speaker 1: you by Bank of America Mary Lynch, dedicated to bringing
Speaker 1: our clients insights and solutions to meet the challenges of
Speaker 1: a transforming world. That's the power of global connections. Merrily
Speaker 1: Pierce Veneran Smith Incorporated Member s I p C. We
Speaker 1: are pleased to bring you worldwide very Ion Green Professor,
Speaker 1: Good morning, Good morning Tom. How are you? I'm very good.
Speaker 1: For President Trump has an exorbitant privilege, which is I
Speaker 1: guess he can talk anytime seven on dollar strength, dollar policy,
Speaker 1: dollar weakness. What is the icon green prescription for any
Speaker 1: president to do when discussing the US dollar? To hold
Speaker 1: his fire? Basically, Um, I think the term strong dollar
Speaker 1: policy has been unfortunate. It's really code for uh, don't
Speaker 1: comment on the dollar because the exchange rates at the
Speaker 1: single most important price in the economy, and random tweet
Speaker 1: can drive it up or down. Do you help us
Speaker 1: with that? A term that is thrown around so much,
Speaker 1: strong dollar policy goes back to Bob Rubin? Of course?
Speaker 1: Are we are we seeing a change here in policy?
Speaker 1: Do you think when it comes to the dollar? I
Speaker 1: don't think policy has been defined yet, but we are
Speaker 1: seeing much more uncertainty around policy. We don't know whether
Speaker 1: Mr Trump will tell his Treasury Department to intervene in
Speaker 1: the foreign exchange market. We don't know whether the administration
Speaker 1: will job ow the FED to adjust policy in ways
Speaker 1: with the with implications for the dollar or not. All
Speaker 1: we know for sure is that everything is on the table,
Speaker 1: conceivably at this point, everything's on the table. Mentioned there
Speaker 1: that came came via Twitter. What have you learned here
Speaker 1: over the last few days. It's hard to believe it's
Speaker 1: just been about a week plus of this administration. What's
Speaker 1: your takeaway from this this first week? The clear takeaway
Speaker 1: is that something big is likely to happen on the
Speaker 1: trade policy front um. Getting corporate tax reforman is going
Speaker 1: to be hard. Getting individual and come tax reform is
Speaker 1: going to be harder. Getting big infrastructure packages going to
Speaker 1: be harder. Still, all of those things require cooperation with
Speaker 1: the Congress, which is time consuming and can't be taken
Speaker 1: for granted. Trade policy is the one place where the president,
Speaker 1: if he grows in patient, can move in laterally. I
Speaker 1: think that's what we've seen. Going back to your wonderful
Speaker 1: in focus, this is a fabulous short read. Globalizing Capital
Speaker 1: or very Ikey Green talks about the many shades of globalization,
Speaker 1: starting with a gold standard and and moving forward from there.
Speaker 1: I can't say enough about the effort. If you were
Speaker 1: to write a chapter eight, you go chapter five, Breton Woods,
Speaker 1: chapter six, A Brave New Monetary World. You end up
Speaker 1: with a conclusion if you need you to write a
Speaker 1: back chapter on the back end for Mr Trump to read.
Speaker 1: What would your new chapter be? Look for the third
Speaker 1: edition in Tom, Thank you. UM. I think, uh, we
Speaker 1: have learned over and over again that flexible exchange rates
Speaker 1: are the worst alternatives except for all the others. We
Speaker 1: have to learn to live with this world. And what
Speaker 1: it implies for Trump is that everything that he is contemplating,
Speaker 1: from expansionary fiscal policy to create protectionism to destination based
Speaker 1: corporate tax reform is apt to drive the dollar up,
Speaker 1: uh serpificantly and frustrate his own intentions. I don't think
Speaker 1: there is any way around that other than to try
Speaker 1: to moderate a little bit those extreme policy initiatives. UM,
Speaker 1: quickly question here just about about that trade policy are
Speaker 1: we Are you any more confident what the shape of
Speaker 1: that policy is going to be? As you said, it's
Speaker 1: going to be a big event here, we're gonna see
Speaker 1: something happened with it. Do you have a better sense
Speaker 1: of what it's going to look like? No, I don't
Speaker 1: think any of us do. But I think there's some
Speaker 1: more obvious targets than others. Mexico is an obvious target,
Speaker 1: China less so, because China is a very large economy
Speaker 1: with geo political reach, and Germany even less. Though even
Speaker 1: though Germany has a big external surplus, it does not
Speaker 1: have its own currency, as Mrs Merkel reminded Mr Crump
Speaker 1: in the world. Yet that makes UH Germany a more
Speaker 1: difficult problematic target. Professor, I look at I think of
Speaker 1: Douglas or when at dartmous work on mercantilism in zero sum,
Speaker 1: in the phrases thrown around right now, are we working
Speaker 1: our way back to a colonial world? Are we becoming
Speaker 1: inward and a more closed economy like an autarchy? Again?
Speaker 1: Are we doing that? I think what what's happening is
Speaker 1: that the age of hyper globalization, when cross border creating
Speaker 1: finance for growing faster than everything else, is over. If
Speaker 1: we follow sensible policies, we don't have to have regress
Speaker 1: from here. The word you use Tom Meth's on point
Speaker 1: is mercantilism. If you look at the Peter Navarro Wilbur
Speaker 1: Ross documents from the Fall or their Financial Times column,
Speaker 1: it was all about imports bad, exports good. And that's
Speaker 1: classic mercantilism, which we know can be good politics. That
Speaker 1: is bad economics. It's not. However, zero sum. It's negative
Speaker 1: sum once we get into trade warfare and retaliation and
Speaker 1: breaking up global supply chains and so forth. When I
Speaker 1: look at the games theory that will occur, you are
Speaker 1: these students of the mistakes we made in the thirties,
Speaker 1: beginning with golden fetters years ago and the works of
Speaker 1: the International Monetary Fund. When someone says to you, does
Speaker 1: this hearken back to nineteen thirties regionalism in block thinking?
Speaker 1: Are they right? They are right, and they ought to
Speaker 1: focus on two risks that developed in the nineties. Number One,
Speaker 1: when the US lapped on the Smooth Holly tariff, we
Speaker 1: destroyed the financial position of emerging markets. Basically, indebted countries
Speaker 1: couldn't earn the dollars to pay back what they borrowed,
Speaker 1: and that then collapse the global financial system. So if
Speaker 1: we have a Trump tariff and a strong rise in
Speaker 1: the dollar, that could happen again. Number Two, trade conflicts
Speaker 1: billed over into other forms of geo political conflict. Imated
Speaker 1: much harder for countries to cooperate in opposition to rising
Speaker 1: threats like that from the Third Reich. So I I
Speaker 1: worry as well about how trade tension could spill over
Speaker 1: into other tension as it did in the nineteen You
Speaker 1: mentioned that Navar piece and the Ft, and I wonder
Speaker 1: sort of what the takeaway is from the commentary he
Speaker 1: made there about the Euro. We saw the euro move
Speaker 1: on the release of that that column in the Ft
Speaker 1: he talked about the sort of the fact of dutsch Mark.
Speaker 1: I'm misquoting it there, but you know that that there
Speaker 1: is a larger German role in the Euro right now,
Speaker 1: what's your takeaway from that? What was the importance of
Speaker 1: that to you? Number one, It doesn't seem to me
Speaker 1: that Mr Navarro really understands the Euro or how it's determined,
Speaker 1: or appreciates the fact that Germany does not have a
Speaker 1: central bank anymore. But it does reflect that same mercantilist
Speaker 1: thinking that we were talking about a moment ago, that
Speaker 1: Germany has an external surplus. Therefore, the inference follows erroneously
Speaker 1: that it must be part of the problem, even if
Speaker 1: there are other euro Zone countries who have external deficits
Speaker 1: and off set the chairman position at least in Park.
Speaker 1: What are you going to be watching. We've talked about
Speaker 1: the upcoming elections in France and the Netherlands. You've spent
Speaker 1: some time in Europe recently. I think we last spoke
Speaker 1: to you were in Berlin. What are you gonna be
Speaker 1: watching here in two thousand seventeen for indications or indicators
Speaker 1: of the eurozones health well, first and foremost growth UH.
Speaker 1: Europe has been dragged down economically and politically by a
Speaker 1: decade of stagnation. The Eurozone economy is doing better now
Speaker 1: in terms of growth. That's a big positive that not
Speaker 1: everybody yet appreciates. But number two, the banking system UH
Speaker 1: banks in Italy, in Portugal and elsewhere still a mess.
Speaker 1: The head of the European Banking Authority yesterday came out
Speaker 1: making the case for a europe wide bad bank to
Speaker 1: clean up the nonperforming loans. That they actually make progress there,
Speaker 1: that could be a positive first, so I could agree,
Speaker 1: and I want you to launch into the debate that
Speaker 1: your colleague in crime brand DeLong started, which is looking
Speaker 1: at NAFTA, looking at trade, and Danny Roderick at Harvard
Speaker 1: and Jared Bernstein a Wonderful Economists with Vice President Biden
Speaker 1: and Washington saying that there was not enough emphasis on
Speaker 1: what it did to a select group of low skill Americans.
Speaker 1: In a hindsight, should we have had a much more
Speaker 1: overt um solution or prescription or cash treatment to these
Speaker 1: people that lost their jobs in NAFTA in w t O,
Speaker 1: there's no question that the answer is yes. I do think,
Speaker 1: as that's my colleague bread DeLong, that it's mainly been
Speaker 1: technology and automation rather than NaSTA or China that has
Speaker 1: led to the decline and manufacturing employment. But in the
Speaker 1: United States, the two sets of factors trade and technology
Speaker 1: have hit the same groups of people in the same communities,
Speaker 1: uh in the same traditionally labor intensive manufacturing sectors. And
Speaker 1: to neglect the fact that they had been hit by
Speaker 1: both maralds I think has led to this political backlash
Speaker 1: and we should have been quicker to anticipate that and
Speaker 1: do something about it. What do we need to see
Speaker 1: a G twenty and G seven meetings in the coming
Speaker 1: months with the shock of populism in the developed economies?
Speaker 1: Number one, we need the Trump administration to show up.
Speaker 1: I think that would be helpful. And the United States
Speaker 1: still needs to play a role if there's going to
Speaker 1: be any kind of concerted response to this decline in
Speaker 1: this rise in volatility and uncertainty, big exchange rate movements
Speaker 1: are going to cause troubles for a variety of G
Speaker 1: twenty countries. But I don't think intervention all of the Plasa,
Speaker 1: Plaza and Louver accords from the eighties is going to work.
Speaker 1: We need sensible policies in order to get sensible exchange rates.
Speaker 1: And again G twenty is a good talking shop for
Speaker 1: raising consciousness about that, But policies are made at home
Speaker 1: in including in Washington, d C. Professor I could Green,
Speaker 1: thank you so much. Good news. It will look for
Speaker 1: another edition of Exhorbited Privilege in eighteen months or so.
Speaker 1: I'll put that book out on social media. It was
Speaker 1: one of my books of the summer a few years ago.
Speaker 1: Barry Iken Green, with the University of California at Berkeley
Speaker 1: joining us now, is truly one of the most interesting
Speaker 1: people in twentieth century politics. His public service includes governor
Speaker 1: of Missouri. I believe he was a Senator from Missouri.
Speaker 1: He was us. None of this matters. He brought Tony
Speaker 1: LaRussa to the St. Louis Cardinals, and that that's what
Speaker 1: John Ashcroft U did, among other services. Attorney General. Wonderful
Speaker 1: to speak to you this morning. I would respectfully suggest sir,
Speaker 1: that you were not as polarizing as our attorney general
Speaker 1: to be. Will Mr Sessions polarize the dialogue so much
Speaker 1: that we will think of saying ed mess of another time? Well, First,
Speaker 1: I have great respect for the Attorney General designate. I
Speaker 1: think he's going to be a great attorney general because
Speaker 1: he believes in the rule of law, and I don't
Speaker 1: believe he'll be that polarizing if you look at his
Speaker 1: record as a public servant. He last ran for public
Speaker 1: office in Alabama, and I believe he was unopposed on
Speaker 1: either the Democrat or the Republican ticket. It's hard to
Speaker 1: say that a person is really polarizing if he's so
Speaker 1: acceptable to people on the broad spectrum that he's unopposed
Speaker 1: in a race for the United States Senate. So I
Speaker 1: I believe his dedication to the rule of law, the
Speaker 1: fact that he uh sees his responsibility to inform the
Speaker 1: President exactly of what the law is on matters and
Speaker 1: to counsel him effectively there, and to prosecute and administer
Speaker 1: the justice to bartment based on the law and not
Speaker 1: based on the character of people making inquiry or the
Speaker 1: character of people who make offense. I think that will
Speaker 1: serve America. Well, so I don't see him as that polarizing.
Speaker 1: Help us understand the role of the Attorney general visae
Speaker 1: what we saw over the weekend. We were speaking with
Speaker 1: Noah Feldman, the constitutional law scholar at Harvard University, columnists
Speaker 1: for Bloomberg View, and we were looking at Sally Ates
Speaker 1: his statement at which she issued before the weekend, and
Speaker 1: he he notes in his most recent columns she referred
Speaker 1: to the Institution's solemn obligation to always seek justice and
Speaker 1: stand for what is right. Help us understand what happened
Speaker 1: here and whether or not you think she was right
Speaker 1: in speaking out after that immigration executive alarity was signed. Well,
Speaker 1: first of all, it's my understanding that the professionals at
Speaker 1: the Department of Justice determined that the execut to order
Speaker 1: was in accordance with the law. And given what I
Speaker 1: know about the Immigration Act of nineteen sixty five and
Speaker 1: its amendments and section to one two of that Act,
Speaker 1: it looks like the President clearly has the authority. And
Speaker 1: it appears to me that she had a sense of
Speaker 1: justice that didn't make as its primary reference the rule
Speaker 1: of law. But but concerns that she had personally and
Speaker 1: very frankly, it is the job of the Attorney General
Speaker 1: to defend the position of the United States and its
Speaker 1: laws and the administration of the United States, unless there
Speaker 1: isn't a legal argument in its favor. I remember on
Speaker 1: several occasions I was asked to do things in defense
Speaker 1: of policy which I disagreed with profoundly. McCain fine Gold
Speaker 1: was a campaign finance measure which I thought offended the
Speaker 1: First Amendment of the Constitution. But I defended it as
Speaker 1: a matter of my duty because it was arguably defensible,
Speaker 1: and frankly, we defended it so well that it was
Speaker 1: sustained by the Supreme Court. This is not that happened
Speaker 1: in a number of cases. David, I want you to
Speaker 1: jump into you're smarter at this than I am. But
Speaker 1: this is not a nineteenth century discussion, folks. The Attorney
Speaker 1: General is flat on his back in the hospital with pancreaitis,
Speaker 1: and you had two political guys for President Bush wanted
Speaker 1: you to take out the quill, dip in the ink,
Speaker 1: and sign the document. Right, Attorney General, Well, I really
Speaker 1: don't comment on on on my council to clients, either
Speaker 1: in private or in public, but that that that's that's
Speaker 1: a report. If you're making reference to whether or not
Speaker 1: the attorney general has a responsibility to counsel honestly the
Speaker 1: administration he does, and uh, he would disserve an administration
Speaker 1: if he would tell a president something is legal when
Speaker 1: it's not. And the idea somehow that if it would
Speaker 1: be uh uh, there's a danger in an an attorney
Speaker 1: general who would collude with the president rather than tell
Speaker 1: him what's right and what's wrong, would be to describe
Speaker 1: an attorney general who would not only be trade the
Speaker 1: American people, but would be trade the administration. No administration
Speaker 1: should want to do that which it has no authority
Speaker 1: to do. And an attorney general who has reference to
Speaker 1: the rule of law, has a profound duty to say
Speaker 1: to the president, this is outside the scope of your authority.
Speaker 1: And and you know, there is a sense in which
Speaker 1: people sometimes want to act to the limit of their
Speaker 1: power without reference to their authority, and the law describes
Speaker 1: their authority. And an attorney general should be very clear
Speaker 1: to say to whomever asks his opinion in the in
Speaker 1: the federal government, this is certainly the little level of
Speaker 1: your authority, and you should not exceed your authority. Even
Speaker 1: if some there is some way in which you have
Speaker 1: the power to do so, help us with the historical
Speaker 1: import of what happened over the weekend? And what do
Speaker 1: you think the messages for civil servants, those who have
Speaker 1: spent their careers at the Justice department, as they should
Speaker 1: unfold it over the weekend. Well, they have a duty
Speaker 1: like a lawyer has a duty to represent a client.
Speaker 1: If a person in the private sector were to disagree
Speaker 1: with what his client was doing in spite of the
Speaker 1: fact that it was legal, and were to decide to
Speaker 1: rather than defended in court, simply to walk away and
Speaker 1: not defended, that lawyer would be subject to disciplinary action
Speaker 1: by the Bar Association for failing to serve the client. Now,
Speaker 1: a person who believes that his own sense of justice
Speaker 1: is offended by doing something legal in behalf of his
Speaker 1: client has a duty either to go forward to represent
Speaker 1: the client, which lawyers do all the time, or else
Speaker 1: to resign. But the idea that somehow, um you as
Speaker 1: an attorney, have the right to make a judgment uh
Speaker 1: in favor of your own personal preferences and against the
Speaker 1: interests of your client is bankrupt And for a public
Speaker 1: let me just make this one other point, I don't
Speaker 1: know how much time you have. This is a nuance.
Speaker 1: But when when you decide you're not going to represent
Speaker 1: the United States and defend its positions in the court,
Speaker 1: you're basically saying I don't trust the court to come
Speaker 1: out of this case with something that is uh congrol
Speaker 1: with my personal opinion, John Ashcroft, We're gonna to leave.
Speaker 1: We have to leave it there. Unfortunately, we so much
Speaker 1: want to get you back on again. There's too much
Speaker 1: to talk about with the former Attorney General of the
Speaker 1: United States, John Ashcroft, of course of Missouri. Thanks for
Speaker 1: listening to the Bloomberg Surveillance Podcast. Subscribe and listen to
Speaker 1: interviews on iTunes, SoundCloud, or whichever podcast platform you prefer.
Speaker 1: I'm out on Twitter at Tom Keene. David Gura is
Speaker 1: at David Gura. Before the podcast, you can always catch
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