1 00:00:00,240 --> 00:00:04,040 Speaker 1: Runt you by Bank of America Mary Lynch with virtual reality, 2 00:00:04,320 --> 00:00:09,719 Speaker 1: virtually everything will change. Discover opportunities in a transforming world. 3 00:00:10,119 --> 00:00:14,440 Speaker 1: Be of a, mL dot Com, slash VR, Mary Lynch, 4 00:00:14,520 --> 00:00:28,120 Speaker 1: Pierced Fenner and Smith Incorporated. Ye. Welcome to the Bloomberg 5 00:00:28,160 --> 00:00:32,320 Speaker 1: Surveillance Podcast. I'm Tom Keene with David Gura. Daily we 6 00:00:32,440 --> 00:00:36,080 Speaker 1: bring you insight from the best of economics, finance, investment, 7 00:00:36,120 --> 00:00:42,200 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 8 00:00:42,280 --> 00:00:49,800 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. Joining 9 00:00:49,880 --> 00:00:52,159 Speaker 1: us now is James Sweeney, Chief Economistic Credits with head 10 00:00:52,200 --> 00:00:54,480 Speaker 1: of Global Fixed Income there as well. Great to see 11 00:00:54,520 --> 00:00:57,440 Speaker 1: you here in our Bloomberg eleven three oh students in tips. 12 00:00:57,520 --> 00:00:58,840 Speaker 1: Let me just start by by asking you a bit 13 00:00:58,880 --> 00:01:01,320 Speaker 1: about the FED meeting yesterday. Agree with your expectations that 14 00:01:01,360 --> 00:01:03,680 Speaker 1: were met. Let's talk about the balance sheet in a 15 00:01:03,720 --> 00:01:05,800 Speaker 1: few moments. But first when it came to the to 16 00:01:05,840 --> 00:01:07,680 Speaker 1: the outlook and what they had to say, how did 17 00:01:07,680 --> 00:01:10,280 Speaker 1: it drive with what you were expecting? Yeah? Well, I 18 00:01:10,280 --> 00:01:13,520 Speaker 1: I think the Fed was stoical in the sense that 19 00:01:14,040 --> 00:01:17,160 Speaker 1: they were not uh, they were not moved by the 20 00:01:17,240 --> 00:01:20,000 Speaker 1: recent weakness and inflation and the decline in some of 21 00:01:20,000 --> 00:01:24,440 Speaker 1: the inflation expectation indicators. They did acknowledge it, but they 22 00:01:24,520 --> 00:01:26,880 Speaker 1: went ahead and pulled the trigger on their hike, of course, 23 00:01:26,920 --> 00:01:30,080 Speaker 1: and and laid out that balance sheet policy. Um. They 24 00:01:30,080 --> 00:01:34,360 Speaker 1: still expect inflation to drift up towards their their targets 25 00:01:34,480 --> 00:01:37,559 Speaker 1: over the medium term, but they did reduce the path 26 00:01:37,640 --> 00:01:41,199 Speaker 1: of that increase somewhat, so it it looked it looked 27 00:01:41,240 --> 00:01:44,240 Speaker 1: safe and reasonable. UM. But you know, I wrote a 28 00:01:44,240 --> 00:01:49,760 Speaker 1: couple of weeks before the meeting, UM that the Fed 29 00:01:49,840 --> 00:01:53,120 Speaker 1: was ignoring the recent weakness and inflation. And I think 30 00:01:53,160 --> 00:01:57,360 Speaker 1: the market is really ignoring any any sorry, the recent 31 00:01:57,520 --> 00:02:00,360 Speaker 1: decrease in inflation. I hope, I said decrease, UM, And 32 00:02:00,400 --> 00:02:02,919 Speaker 1: the market seems to be ignoring any possibility of an 33 00:02:02,960 --> 00:02:06,680 Speaker 1: increase in inflation, um, you know, a meaningful increase above 34 00:02:06,800 --> 00:02:10,160 Speaker 1: that that recent average over over the next couple of years. 35 00:02:10,160 --> 00:02:11,760 Speaker 1: It's it seems like the market and the Fed are 36 00:02:11,840 --> 00:02:16,360 Speaker 1: jointly agreeing that inflation is a horizontal line UM right now. 37 00:02:16,560 --> 00:02:19,600 Speaker 1: And and as a result, UM, the kind of expectations 38 00:02:19,680 --> 00:02:23,040 Speaker 1: that that exists for where short term rates will be 39 00:02:23,040 --> 00:02:26,440 Speaker 1: a couple of years out, are are you know, very 40 00:02:26,720 --> 00:02:31,400 Speaker 1: low rates, very narrow um, very narrow path, and everyone 41 00:02:31,480 --> 00:02:33,320 Speaker 1: sort of agreed that too. Or three years from now, 42 00:02:33,400 --> 00:02:35,440 Speaker 1: we're going to have short term rates in the mid 43 00:02:35,480 --> 00:02:38,520 Speaker 1: two's UM and not much risk of being a lot 44 00:02:38,600 --> 00:02:41,919 Speaker 1: higher or a lot lower um. The options market actually 45 00:02:42,400 --> 00:02:46,639 Speaker 1: confirms that narrow path, which is expected, and I think 46 00:02:46,639 --> 00:02:48,840 Speaker 1: that's I think that's a little risky. How do we 47 00:02:48,880 --> 00:02:51,280 Speaker 1: get to to this point? Whereas, as you point out, 48 00:02:51,320 --> 00:02:53,480 Speaker 1: I think in a recent note progress toward full employment, 49 00:02:53,480 --> 00:02:56,080 Speaker 1: Trump's inflation and the global industrial production growth at the 50 00:02:56,080 --> 00:02:58,000 Speaker 1: FED is regarding that side of its mandate more than 51 00:02:58,040 --> 00:03:01,919 Speaker 1: the other. Yeah. Well, um, as I said, I think 52 00:03:01,960 --> 00:03:05,840 Speaker 1: the inflation news is being interpreted as a wobble against 53 00:03:05,840 --> 00:03:09,440 Speaker 1: a kind of more or less horizontal trend um. And 54 00:03:09,639 --> 00:03:12,359 Speaker 1: what's happening in the labor market is labor income has 55 00:03:12,360 --> 00:03:14,880 Speaker 1: slowed a little bit recently, but it continues to grow. 56 00:03:15,400 --> 00:03:18,200 Speaker 1: And the unemployment rate is not falling at eight five 57 00:03:18,200 --> 00:03:20,239 Speaker 1: basis points a year anymore as it did from two 58 00:03:20,280 --> 00:03:24,360 Speaker 1: thousand nine to two thousand fifteen, but it but it 59 00:03:24,400 --> 00:03:26,560 Speaker 1: does appear to still be falling. So you know, we 60 00:03:26,560 --> 00:03:28,720 Speaker 1: we could have a three handle on the unemployment rate 61 00:03:29,240 --> 00:03:32,880 Speaker 1: with within a year. Uh. And in those conditions, UM, 62 00:03:32,919 --> 00:03:36,480 Speaker 1: it's it's appropriate to uh to get short rates up 63 00:03:36,520 --> 00:03:39,840 Speaker 1: to you know, positive in real terms. But before long, 64 00:03:40,480 --> 00:03:43,680 Speaker 1: the fact that risky asset prices across a broad spectrum 65 00:03:43,720 --> 00:03:47,880 Speaker 1: of them are are looking somewhat expensive from a historical perspective, 66 00:03:48,440 --> 00:03:52,119 Speaker 1: UH is another reason that, UM, you know that that 67 00:03:52,120 --> 00:03:54,840 Speaker 1: that policy should be tightening, and so now that the 68 00:03:54,920 --> 00:03:58,000 Speaker 1: question really becomes the mode of that tightening. UH. The 69 00:03:58,040 --> 00:04:01,880 Speaker 1: sequencing of balance sheet verse is versus rate et cetera. 70 00:04:02,080 --> 00:04:03,960 Speaker 1: But you know they've they've now pulled the trigger and 71 00:04:03,960 --> 00:04:06,320 Speaker 1: they've gotten They've gotten all the way up from zero 72 00:04:06,360 --> 00:04:08,520 Speaker 1: to twenty five to one to one and a quarter. 73 00:04:08,560 --> 00:04:11,520 Speaker 1: That's that's a pretty big move, especially given the other 74 00:04:11,880 --> 00:04:14,400 Speaker 1: developed central banks are really not moving rates at all. 75 00:04:14,600 --> 00:04:16,680 Speaker 1: James Sweet with us from Chris Swiss. Let me ask 76 00:04:16,680 --> 00:04:18,479 Speaker 1: you about the balance sheet and the detail that we 77 00:04:18,560 --> 00:04:21,000 Speaker 1: got yesterday, the way in which they intend to do 78 00:04:21,080 --> 00:04:25,320 Speaker 1: this compositionally and in terms of of process itself. UH, 79 00:04:25,560 --> 00:04:27,240 Speaker 1: was that in line with your expectations as well? And 80 00:04:27,279 --> 00:04:28,720 Speaker 1: what is that? What does that tell you? What should 81 00:04:28,760 --> 00:04:31,520 Speaker 1: that tell investor? Is about the path forward here? Um? 82 00:04:31,600 --> 00:04:33,279 Speaker 1: The some of the numbers they gave here a little 83 00:04:33,320 --> 00:04:35,320 Speaker 1: more aggressive than we thought, and I think the amount 84 00:04:35,320 --> 00:04:38,400 Speaker 1: of detail was sooner than we thought. And and actually 85 00:04:38,440 --> 00:04:40,880 Speaker 1: we did slightly tweak our view in response to the 86 00:04:40,920 --> 00:04:45,000 Speaker 1: news where we now expect the balance sheet normalization to 87 00:04:45,040 --> 00:04:48,360 Speaker 1: commence in September and the next rate hike and not 88 00:04:48,480 --> 00:04:52,480 Speaker 1: to happen until December UM in two thousand and eighteen, 89 00:04:52,520 --> 00:04:56,040 Speaker 1: we expect two more hikes, so so we're only expecting 90 00:04:56,120 --> 00:04:59,960 Speaker 1: three hikes over the next eighteen months, but the balance 91 00:05:00,000 --> 00:05:03,480 Speaker 1: sheet normalization to occur at the same time. So specifically, 92 00:05:04,000 --> 00:05:06,320 Speaker 1: you know, they said that they would start out I 93 00:05:06,360 --> 00:05:08,600 Speaker 1: think it was six billion and four billion on on 94 00:05:08,680 --> 00:05:12,320 Speaker 1: treasury and mortgages where they would have a cap on 95 00:05:12,360 --> 00:05:14,719 Speaker 1: how much runof they're going to allow, you know, runoff, 96 00:05:14,720 --> 00:05:20,640 Speaker 1: meaning they're not reinvesting coupons in principle for maturing um securities, 97 00:05:20,760 --> 00:05:23,239 Speaker 1: and as a result, their balance she's gonna start shrinking, 98 00:05:23,279 --> 00:05:26,200 Speaker 1: and then they're gonna up it um basically doubling that 99 00:05:26,320 --> 00:05:29,359 Speaker 1: those numbers after three months, and then they're gonna do 100 00:05:29,400 --> 00:05:32,240 Speaker 1: it again three months after that. And so if you 101 00:05:32,279 --> 00:05:34,000 Speaker 1: go a year out and if they're if they do 102 00:05:34,120 --> 00:05:36,240 Speaker 1: manage to kind of be on a glide path of 103 00:05:36,240 --> 00:05:39,560 Speaker 1: of of of balance sheet change. You know, within kind 104 00:05:39,560 --> 00:05:41,080 Speaker 1: of a year, year and a half, they're gonna be 105 00:05:41,200 --> 00:05:45,640 Speaker 1: at que two levels of reverse quee um and and 106 00:05:45,680 --> 00:05:47,920 Speaker 1: the market will have to cope with that. James Sweeney 107 00:05:47,920 --> 00:05:50,640 Speaker 1: with this was Curt Sweets. Good morning everyone, Bloomberg Surveillance, 108 00:05:50,800 --> 00:05:52,479 Speaker 1: David Gurr and I David. We gotta thank all of 109 00:05:52,480 --> 00:05:57,360 Speaker 1: our teammates today for a marathon day. Have to say 110 00:05:57,760 --> 00:05:59,560 Speaker 1: the listen, good day. Have you hear James this morning? 111 00:05:59,600 --> 00:06:02,440 Speaker 1: On too many themes? One of the themes that we 112 00:06:02,520 --> 00:06:05,640 Speaker 1: have is what the financial markets, in the bond market 113 00:06:05,800 --> 00:06:09,400 Speaker 1: is telling James Sweeney, I believe I'm seeing a flattening 114 00:06:09,640 --> 00:06:12,400 Speaker 1: yield curve. Do you link that to slower g d 115 00:06:12,440 --> 00:06:14,560 Speaker 1: P or is it just a separate thing you're not 116 00:06:14,600 --> 00:06:17,480 Speaker 1: worried about. Well, you know, I think I think yields 117 00:06:17,520 --> 00:06:21,080 Speaker 1: are pretty sensitive to to what's happening in global growth, 118 00:06:21,080 --> 00:06:23,320 Speaker 1: the news flow, the surprises, the p M I is 119 00:06:23,360 --> 00:06:26,960 Speaker 1: all that. Um. We had an unusual period last year 120 00:06:27,080 --> 00:06:29,080 Speaker 1: where global growth was very weak at the beginning of 121 00:06:29,120 --> 00:06:32,479 Speaker 1: the year. It recovered throughout the year. Yields didn't go 122 00:06:32,600 --> 00:06:35,200 Speaker 1: up until the election. It was as if you know, 123 00:06:35,320 --> 00:06:38,080 Speaker 1: seven months of move was concentrated into three or four 124 00:06:38,080 --> 00:06:41,719 Speaker 1: weeks after the election, and we actually think global growth 125 00:06:41,800 --> 00:06:44,840 Speaker 1: hit a local peak early this year January February and 126 00:06:44,920 --> 00:06:48,120 Speaker 1: has been coming off. So you know, given some downside 127 00:06:48,120 --> 00:06:51,640 Speaker 1: surprises in the US inflation and falling global growth, it's 128 00:06:51,680 --> 00:06:54,160 Speaker 1: not so surprising that yields came back down again. Um, 129 00:06:54,200 --> 00:06:57,080 Speaker 1: but I think actually, you know, we've got a two 130 00:06:57,080 --> 00:06:59,279 Speaker 1: eight target on the ten year at the end of 131 00:06:59,279 --> 00:07:03,400 Speaker 1: the year. My colleague Privine Core Party are our rate strategist. 132 00:07:03,880 --> 00:07:06,040 Speaker 1: So I think global growth is gonna is gonna pick up. 133 00:07:06,040 --> 00:07:07,760 Speaker 1: I think the Fed is going to continue to implement 134 00:07:07,800 --> 00:07:10,760 Speaker 1: its tightening um, and I think we may be around 135 00:07:10,800 --> 00:07:14,560 Speaker 1: a temporary low in the tenure. Was it an ultra 136 00:07:14,760 --> 00:07:20,320 Speaker 1: accommodative press conference yesterday? Are we beyond ultra accommodative? As 137 00:07:20,320 --> 00:07:22,840 Speaker 1: you mentioned, they've done a set of rate increases in 138 00:07:22,840 --> 00:07:25,160 Speaker 1: the world. I believe the world has not come to 139 00:07:25,200 --> 00:07:28,720 Speaker 1: an end. The the stance of policy is a combinative. 140 00:07:28,840 --> 00:07:32,240 Speaker 1: The incremental news from yesterday was somewhat more hawkish than 141 00:07:32,280 --> 00:07:37,120 Speaker 1: the market expected, but not sufficiently hawkish to to necessarily 142 00:07:37,160 --> 00:07:39,280 Speaker 1: interrupt the party. I may see the futures are down 143 00:07:39,320 --> 00:07:41,960 Speaker 1: a little bit this morning on on stocks. UH. The 144 00:07:42,000 --> 00:07:44,640 Speaker 1: market will take a little while to digest, but basically 145 00:07:44,760 --> 00:07:48,320 Speaker 1: stocks and bonds across the board have been seeing price 146 00:07:48,440 --> 00:07:53,120 Speaker 1: gains together for months and months as this low UH, 147 00:07:53,160 --> 00:07:55,640 Speaker 1: this easy monetary policy and low real rates have have 148 00:07:55,760 --> 00:07:59,360 Speaker 1: met with the growing US economy and no wobbly but 149 00:07:59,600 --> 00:08:05,040 Speaker 1: fine in global economy. UM. The question now is could 150 00:08:05,040 --> 00:08:08,640 Speaker 1: tighter monetary policy, you know, could that trigger higher yields 151 00:08:08,760 --> 00:08:11,840 Speaker 1: UM and could it even trigger some some weakness in 152 00:08:12,040 --> 00:08:15,080 Speaker 1: equity markets and risky assets. This has been a very 153 00:08:15,080 --> 00:08:19,240 Speaker 1: technical market. There's there's a lot of frustrated traders out there, 154 00:08:19,280 --> 00:08:22,000 Speaker 1: equity traders in particular. It's been a tough market to 155 00:08:22,080 --> 00:08:25,800 Speaker 1: trade with with really these tech stocks leading aggressively and 156 00:08:25,800 --> 00:08:28,720 Speaker 1: and the rest of the equity market behaving in some 157 00:08:28,760 --> 00:08:30,800 Speaker 1: odd ways. Just got about thirty seconds here. We'll come 158 00:08:30,840 --> 00:08:32,559 Speaker 1: back with you, But let me ask you how indelible 159 00:08:32,640 --> 00:08:34,520 Speaker 1: this plan for the balance sheet is? In other words, 160 00:08:34,520 --> 00:08:36,760 Speaker 1: so with the potential for so much changeover at the Fed, 161 00:08:36,800 --> 00:08:40,079 Speaker 1: how much gredience do you give what we heard yesterday? Yeah, 162 00:08:40,160 --> 00:08:42,840 Speaker 1: I think there's a good chance that if we get 163 00:08:42,880 --> 00:08:46,360 Speaker 1: a candidate, you know, outside of Gary Cone outside of 164 00:08:46,440 --> 00:08:50,120 Speaker 1: Janet Yelling. Um that you know, I would expect a 165 00:08:50,160 --> 00:08:54,720 Speaker 1: FED chair to to obviously UM influence the implementation of 166 00:08:54,760 --> 00:08:57,240 Speaker 1: the policy. There's there's nothing to say that that this 167 00:08:57,240 --> 00:09:01,440 Speaker 1: this path um can't be paused, can't be stopped. Um. 168 00:09:01,480 --> 00:09:03,559 Speaker 1: You know, I think there are other candidates from Yelling 169 00:09:03,640 --> 00:09:06,160 Speaker 1: and Cone. UM. I think Kevin Wars for example, is 170 00:09:06,800 --> 00:09:10,880 Speaker 1: leading candidate. And UM, yeah, we will we will see, UM, 171 00:09:10,960 --> 00:09:13,920 Speaker 1: we will see. It should be it should be interesting. UM. 172 00:09:13,960 --> 00:09:15,640 Speaker 1: I think the market is gonna end up being very 173 00:09:15,640 --> 00:09:19,600 Speaker 1: focused on on this search for new leadership. And if 174 00:09:19,640 --> 00:09:22,720 Speaker 1: it's yelling, um, then then we expect this path to continue. 175 00:09:22,760 --> 00:09:24,960 Speaker 1: Of course, let's come back with James Sweeney of Credit 176 00:09:24,960 --> 00:09:27,680 Speaker 1: Sweet James, I got about eight ways to go here, 177 00:09:28,040 --> 00:09:29,840 Speaker 1: and I think you're gonna go Why quill C plus 178 00:09:29,840 --> 00:09:32,480 Speaker 1: cyplus G plus n X And something I didn't talk 179 00:09:32,520 --> 00:09:36,960 Speaker 1: about it yesterday, which is investment and the dearth of 180 00:09:37,040 --> 00:09:40,560 Speaker 1: investment here there and everywhere. Do you care the commercial 181 00:09:41,000 --> 00:09:44,840 Speaker 1: and industrial loans have rolled over or any other investment 182 00:09:44,880 --> 00:09:50,000 Speaker 1: parameter that shows a tepidness or weakness. We care, In fact, 183 00:09:50,040 --> 00:09:53,000 Speaker 1: we did a thorough piece on that recently. And why 184 00:09:53,040 --> 00:09:57,400 Speaker 1: do you know, I thank you, Tom. But what we 185 00:09:57,520 --> 00:10:00,640 Speaker 1: found is that is it C and I loan really 186 00:10:00,640 --> 00:10:04,840 Speaker 1: do very consistently lag what happened to investment last year, 187 00:10:05,280 --> 00:10:08,080 Speaker 1: and so they're really not telling us about anything new. 188 00:10:08,600 --> 00:10:11,000 Speaker 1: Last year, we had a couple of things going on. 189 00:10:11,080 --> 00:10:13,200 Speaker 1: We had a mining and energy investment slump, which was 190 00:10:13,240 --> 00:10:16,760 Speaker 1: global um that was definitely weighing in the US. We 191 00:10:16,800 --> 00:10:21,079 Speaker 1: also had dollar strength weighing on manufacturing investment. So I'm 192 00:10:21,120 --> 00:10:24,080 Speaker 1: not so worried about C n I loans, but I 193 00:10:24,120 --> 00:10:27,599 Speaker 1: think on the investment side, there was a brief overshooting 194 00:10:27,640 --> 00:10:31,040 Speaker 1: expectations about what Capex was gonna do after the after 195 00:10:31,080 --> 00:10:33,320 Speaker 1: the election and when the when the p m I spiked. 196 00:10:33,760 --> 00:10:35,360 Speaker 1: Now that the p m I s have come off, 197 00:10:35,400 --> 00:10:37,520 Speaker 1: I think people are calming down. Um. So we have 198 00:10:38,080 --> 00:10:41,720 Speaker 1: kind of mid single digit expectations for business investment in 199 00:10:41,720 --> 00:10:45,880 Speaker 1: the US going forward, which is okay, it's not great. 200 00:10:45,920 --> 00:10:48,360 Speaker 1: It's not a boom. If you get an infrastructure stimulus, 201 00:10:48,360 --> 00:10:51,120 Speaker 1: if you get tax reform, you know, maybe those numbers 202 00:10:51,160 --> 00:10:54,280 Speaker 1: go higher. But um, but I think the you know, 203 00:10:54,400 --> 00:10:57,800 Speaker 1: the reality of this whole recovery, which is the absence 204 00:10:57,840 --> 00:11:01,640 Speaker 1: of an investment boom despite very low interest rates. I 205 00:11:01,640 --> 00:11:04,120 Speaker 1: think that's likely to persist for a while until we 206 00:11:04,160 --> 00:11:07,360 Speaker 1: find some kind of trigger. I think it's possible, but 207 00:11:07,440 --> 00:11:10,800 Speaker 1: we haven't had it yet. Investments okay, it's not a disaster, 208 00:11:11,480 --> 00:11:14,160 Speaker 1: um and the specific shocks from the dollar and from 209 00:11:14,280 --> 00:11:17,400 Speaker 1: energy are really falling out of the data. Now. I'm 210 00:11:17,440 --> 00:11:20,199 Speaker 1: watching the reaction here to the b O E rate 211 00:11:20,240 --> 00:11:23,120 Speaker 1: decision on on Top Live on the Bloombergose life block 212 00:11:23,200 --> 00:11:25,240 Speaker 1: of what's happening, and so they're keeping the interest rate 213 00:11:25,280 --> 00:11:28,160 Speaker 1: A quarter percent vote was five to three. How big 214 00:11:28,160 --> 00:11:31,400 Speaker 1: a deal is that divide among policymakers at the at 215 00:11:31,440 --> 00:11:32,800 Speaker 1: the b O And what does it tell you about 216 00:11:32,840 --> 00:11:36,160 Speaker 1: the Bank of England's engagement with the UK economy, with 217 00:11:36,200 --> 00:11:39,920 Speaker 1: economic policy and with this still ongoing Brexit process in 218 00:11:39,960 --> 00:11:42,959 Speaker 1: the UK. Well, you're you're always gonna have You're always 219 00:11:43,000 --> 00:11:47,559 Speaker 1: gonna have some central bankers who are outside the consensus view. So, 220 00:11:47,840 --> 00:11:51,439 Speaker 1: um you know. I actually I recently read Sebastian Malaby's 221 00:11:51,480 --> 00:11:54,360 Speaker 1: new book on on Alan Greenspan and it was very 222 00:11:54,360 --> 00:11:57,760 Speaker 1: interesting on the committee dynamics. I think during the Greenspan era, 223 00:11:58,360 --> 00:12:02,440 Speaker 1: a um, you know, it became thought pretty widely that 224 00:12:03,000 --> 00:12:05,480 Speaker 1: the leaders of central banks just make the decisions and 225 00:12:05,480 --> 00:12:09,000 Speaker 1: the committees go along. And what Malaby detailed was how 226 00:12:09,080 --> 00:12:11,840 Speaker 1: much effort Greenspan used to put into bringing his whole 227 00:12:11,840 --> 00:12:14,560 Speaker 1: committee along. It takes a lot of work to to 228 00:12:14,679 --> 00:12:17,160 Speaker 1: herd these cats and and you know, maybe carneys and 229 00:12:17,200 --> 00:12:20,520 Speaker 1: work to do if he's got three dissenters at the moment. 230 00:12:20,559 --> 00:12:23,640 Speaker 1: But most of the time, um, the governors, the chairs 231 00:12:23,720 --> 00:12:26,559 Speaker 1: get get their way, so um, I mean definitely in 232 00:12:26,600 --> 00:12:28,560 Speaker 1: the UK the outlook is a little confusing right now. 233 00:12:28,640 --> 00:12:33,800 Speaker 1: High inflation growth rolling over, but unemployment actually pretty low 234 00:12:34,480 --> 00:12:37,000 Speaker 1: um and a lot of currency moves. So you know, 235 00:12:37,400 --> 00:12:40,520 Speaker 1: you would forgive a group of central bankers or economists 236 00:12:40,520 --> 00:12:43,400 Speaker 1: for having different views on where monetary policy ought to be. Well, 237 00:12:43,440 --> 00:12:45,280 Speaker 1: let's come full circle. Then we were talking about Kevin 238 00:12:45,280 --> 00:12:48,400 Speaker 1: warsh and uh Garry Conan, and who might be leading 239 00:12:48,440 --> 00:12:51,360 Speaker 1: this FED going forward given what you're just saying, given 240 00:12:51,400 --> 00:12:53,680 Speaker 1: the what we we've read in this Smashion Maloby's book, 241 00:12:53,679 --> 00:12:56,319 Speaker 1: how much determinism does the new FED chair have? In 242 00:12:56,360 --> 00:12:58,440 Speaker 1: other ways, we're talking about the potential for a personnel 243 00:12:58,679 --> 00:13:01,079 Speaker 1: turn over and all that might bring. Are we are 244 00:13:01,080 --> 00:13:03,960 Speaker 1: we overplaying that? Given what the committee is able to 245 00:13:03,960 --> 00:13:06,800 Speaker 1: do No, I don't think so. I think, UM, I 246 00:13:07,240 --> 00:13:11,280 Speaker 1: think it's very important who gets the leadership job, and 247 00:13:11,400 --> 00:13:15,079 Speaker 1: I think whoever accepts the leadership job has to recognize that, UM, 248 00:13:15,120 --> 00:13:17,679 Speaker 1: the president is going to be filling the seats around them. 249 00:13:17,720 --> 00:13:20,960 Speaker 1: So some people are surprised that Janet Yellen is emerging 250 00:13:21,000 --> 00:13:24,440 Speaker 1: as a as a pretty strong candidate. UM. But even 251 00:13:24,440 --> 00:13:26,720 Speaker 1: if it's yelling, it's gonna be yelling with a very 252 00:13:26,720 --> 00:13:30,679 Speaker 1: different group of governors UM around her. UM. Some people 253 00:13:30,720 --> 00:13:33,240 Speaker 1: would say that why would Yellen take such a job, 254 00:13:33,679 --> 00:13:36,280 Speaker 1: But people close to Yellen say that, well, because she's 255 00:13:36,360 --> 00:13:39,199 Speaker 1: very civic minded and if she thinks that, uh, if 256 00:13:39,200 --> 00:13:41,160 Speaker 1: she thinks that she's the best person for the job 257 00:13:41,200 --> 00:13:43,800 Speaker 1: and it's good for the country, she may go ahead 258 00:13:43,800 --> 00:13:46,439 Speaker 1: and do it. But I think we should definitely respect 259 00:13:46,880 --> 00:13:50,120 Speaker 1: a wider range of possible outcomes, given not just the 260 00:13:50,120 --> 00:13:52,800 Speaker 1: potential change in the chair, but the potential change in 261 00:13:52,800 --> 00:13:55,880 Speaker 1: those around FED. FED governors have been outvoted before that 262 00:13:55,880 --> 00:13:58,720 Speaker 1: that happened to vulcer, it can happen, and in the 263 00:13:58,760 --> 00:14:01,520 Speaker 1: Trump era, it's definitely something that should be on the 264 00:14:01,559 --> 00:14:04,400 Speaker 1: list of possibility. Interesting that's worth having you back on 265 00:14:04,480 --> 00:14:07,720 Speaker 1: along James Sweeney, Thank you so much. Here's with credit 266 00:14:07,760 --> 00:14:23,040 Speaker 1: sweet story on the Bloomberg right now that Bob Mueller 267 00:14:23,160 --> 00:14:25,720 Speaker 1: is examining whether President Trump sat to slow the probe 268 00:14:25,760 --> 00:14:28,920 Speaker 1: into net form. National Security Advisor Michael Flynn. Good to 269 00:14:28,920 --> 00:14:31,800 Speaker 1: talk about this here with one Richard Painter, former Associate 270 00:14:31,840 --> 00:14:34,760 Speaker 1: Council to the President, Chief ethics lawyer to George W. Bush, 271 00:14:34,760 --> 00:14:37,280 Speaker 1: who joins us now the Richard Professor of Corporate Law 272 00:14:37,320 --> 00:14:40,800 Speaker 1: at the University of Minnesota Law School. Mr Painter, great 273 00:14:40,800 --> 00:14:42,920 Speaker 1: to have you with us here. Help me understand what's 274 00:14:43,000 --> 00:14:45,200 Speaker 1: changed as a result of this turn this next chapter 275 00:14:45,320 --> 00:14:50,760 Speaker 1: in this investigation. It appears the investigation widens. What's changed. Well, 276 00:14:50,840 --> 00:14:55,680 Speaker 1: I think it was inevitable that the Special Council would 277 00:14:55,800 --> 00:15:01,160 Speaker 1: investigate strikes out justice by the President. Huh the President 278 00:15:02,560 --> 00:15:07,840 Speaker 1: in his statements to the Russian ambassador news media, Uh, 279 00:15:07,920 --> 00:15:10,520 Speaker 1: you know, adding it all out it it's very uh 280 00:15:11,040 --> 00:15:14,920 Speaker 1: clear that he um certainly was very very concerned about 281 00:15:14,960 --> 00:15:19,240 Speaker 1: the Russian investigation when he fired James Comy. And uh 282 00:15:19,560 --> 00:15:22,400 Speaker 1: it appears to me that he did fire James Commy 283 00:15:22,480 --> 00:15:26,400 Speaker 1: because of the Russia investigation, that because of the pretense 284 00:15:27,200 --> 00:15:30,520 Speaker 1: set forth in the Department of Justice memorandum, And you know, 285 00:15:30,840 --> 00:15:35,760 Speaker 1: so that is a strong case for obstruction of justice. 286 00:15:35,760 --> 00:15:38,600 Speaker 1: Whether it's the case that the special that the special 287 00:15:38,600 --> 00:15:41,920 Speaker 1: comfort want to prosecute or not remains to be seen. 288 00:15:41,960 --> 00:15:44,760 Speaker 1: But I think it's inevitable that there certainly would be 289 00:15:44,760 --> 00:15:50,120 Speaker 1: an investigation of whether or not the President uh committed 290 00:15:50,200 --> 00:15:54,320 Speaker 1: obstruction of justice of the sort that could be prosecuted. 291 00:15:54,600 --> 00:15:56,520 Speaker 1: How important do you think it's going to be the 292 00:15:56,520 --> 00:15:58,840 Speaker 1: the interview that you mentioned, the interview during which the 293 00:15:58,920 --> 00:16:01,760 Speaker 1: President Trump sat down with Sterhold of NBC News, the 294 00:16:01,800 --> 00:16:05,960 Speaker 1: tweets that he's made about the circumstances surrounding this this investigation. 295 00:16:06,000 --> 00:16:07,800 Speaker 1: What role is all of that going to play here 296 00:16:07,840 --> 00:16:13,080 Speaker 1: going forward. Well, that's the information that we know of. 297 00:16:13,240 --> 00:16:16,920 Speaker 1: That's what's public, uh, And I think that when it's public, 298 00:16:18,400 --> 00:16:21,960 Speaker 1: what again, I think const is a quite strong case 299 00:16:22,120 --> 00:16:26,160 Speaker 1: of starting of justice. But what the special prosecutor will 300 00:16:26,200 --> 00:16:29,720 Speaker 1: do is talk to others in the administration and kind 301 00:16:29,720 --> 00:16:32,600 Speaker 1: of what the President said privately. Did he talk to 302 00:16:32,680 --> 00:16:36,720 Speaker 1: other people other than James comy Um about trying to 303 00:16:36,760 --> 00:16:39,560 Speaker 1: stop the Russian investigation? Did he talk to other people 304 00:16:40,200 --> 00:16:44,520 Speaker 1: about what he said to James comey Um? And those 305 00:16:44,520 --> 00:16:46,600 Speaker 1: are the questions that it didn't need to be answered. 306 00:16:47,200 --> 00:16:50,520 Speaker 1: I think if people start to claim the executive privilege 307 00:16:50,600 --> 00:16:52,920 Speaker 1: of the there's starts to that the special prosecutor is 308 00:16:52,960 --> 00:16:55,600 Speaker 1: going to ask a court. And I think it's quite clear. 309 00:16:55,600 --> 00:16:57,440 Speaker 1: Out of the United States, there is the nexting case 310 00:16:57,600 --> 00:17:01,680 Speaker 1: that when involves a criminal investigation, uh, they claim executive 311 00:17:01,680 --> 00:17:04,600 Speaker 1: privileges is really quite weak. Professor, Let me ask a 312 00:17:04,680 --> 00:17:08,359 Speaker 1: dumb question. Is there a chief White House ethics lawyer 313 00:17:08,760 --> 00:17:17,320 Speaker 1: in the White House right now? I believe so. But they, uh, 314 00:17:17,440 --> 00:17:21,920 Speaker 1: they they have a very different approach to the ethnics 315 00:17:21,920 --> 00:17:25,119 Speaker 1: issues that we did the push administration is this lawyer 316 00:17:26,359 --> 00:17:29,600 Speaker 1: administration is Mr cass It was just because of time, Professor, 317 00:17:30,080 --> 00:17:38,200 Speaker 1: Is Mr cassu Wits competent to advise the president in Washington? Um? Well, 318 00:17:38,280 --> 00:17:40,840 Speaker 1: first of all, Mr Cassawits is not the chief White 319 00:17:40,840 --> 00:17:43,560 Speaker 1: House ethics lawyer. He is not a government employer, he's 320 00:17:43,640 --> 00:17:46,879 Speaker 1: not on the White House capital's death So his job 321 00:17:47,080 --> 00:17:50,240 Speaker 1: is only to advise the President in his personal capacity 322 00:17:51,160 --> 00:17:57,720 Speaker 1: with the respective investigation and defending himself against potential criminal charges. Um. 323 00:17:58,280 --> 00:18:01,480 Speaker 1: The White House people are hiring their own criminal defense attorneys, 324 00:18:02,160 --> 00:18:05,320 Speaker 1: and uh, you know, there's a very very important role 325 00:18:05,359 --> 00:18:09,000 Speaker 1: for criminal defense lawyers in this situation, but it certainly 326 00:18:09,080 --> 00:18:12,760 Speaker 1: isn't to try to advise people going forward as to 327 00:18:12,840 --> 00:18:14,960 Speaker 1: what to do with their offessional capacity. This was too short, 328 00:18:15,040 --> 00:18:17,399 Speaker 1: Richard Painter, thank you so much. With Minnesota and the 329 00:18:17,480 --> 00:18:20,879 Speaker 1: University of Minnesota, uh Law, we'll hope to get him 330 00:18:20,920 --> 00:18:22,679 Speaker 1: back on soon. That was great with David. That was 331 00:18:22,720 --> 00:18:32,639 Speaker 1: really quite good. Runch you by Bank of America Mary Lynch. 332 00:18:32,880 --> 00:18:38,399 Speaker 1: With virtual reality, virtually everything will change. Discover opportunities in 333 00:18:38,440 --> 00:18:43,040 Speaker 1: a transforming world VI of a mL dot Com slash VR, 334 00:18:43,880 --> 00:18:53,080 Speaker 1: Mary Lynch, Pierced Fenner and Smith Incorporated. This is gonna 335 00:18:53,080 --> 00:18:56,920 Speaker 1: be fun, and I don't mean working with data. It's 336 00:18:56,960 --> 00:19:02,520 Speaker 1: always fun. Which is the Journal of Economic Literature. I 337 00:19:02,560 --> 00:19:05,159 Speaker 1: was reading it last night, David, because the Yankees were 338 00:19:05,200 --> 00:19:12,040 Speaker 1: un late Volume x x x v I I December. 339 00:19:13,000 --> 00:19:19,640 Speaker 1: The Science of Monetary Policy, a new Keynsian perspective Clarta 340 00:19:19,680 --> 00:19:23,840 Speaker 1: Gali Girdler. If you read it, you gotta read this paper, folks. 341 00:19:23,840 --> 00:19:28,359 Speaker 1: In fact, you probably reread it. They lead with a 342 00:19:28,440 --> 00:19:31,560 Speaker 1: quote from Alan Blinder, having looked at monetary policy from 343 00:19:31,600 --> 00:19:35,000 Speaker 1: both sides now quoting Jody Mitchell, I can testify that 344 00:19:35,080 --> 00:19:38,760 Speaker 1: central banking and practice is as much an art as science. 345 00:19:39,160 --> 00:19:42,879 Speaker 1: I would suggest Richard Clata that art was on display yesterday. 346 00:19:42,920 --> 00:19:48,840 Speaker 1: It is amazing how complex the rationalization has got. Yeah, well, 347 00:19:48,880 --> 00:19:50,879 Speaker 1: I think what you're referring to is the fact that 348 00:19:50,920 --> 00:19:52,840 Speaker 1: we got a rate hike from the FED even though 349 00:19:52,880 --> 00:19:56,359 Speaker 1: the data has been soft. There's a FED that says 350 00:19:56,440 --> 00:19:59,720 Speaker 1: that their data dependent and I've said on this show, 351 00:19:59,800 --> 00:20:02,600 Speaker 1: but four data dependence itself is not a monetary policy. 352 00:20:02,600 --> 00:20:05,520 Speaker 1: So we saw that in full display. So the data 353 00:20:05,560 --> 00:20:08,680 Speaker 1: would have suggested pausing, but they hiked. Why did they hike? 354 00:20:08,720 --> 00:20:12,119 Speaker 1: I think two big reasons. The first, uh is they 355 00:20:12,160 --> 00:20:15,359 Speaker 1: clearly want to get the balance sheet reduction underway, and 356 00:20:15,400 --> 00:20:18,160 Speaker 1: they set a standard for themselves, which is we can't 357 00:20:18,160 --> 00:20:21,040 Speaker 1: really think about the balance sheet normalization until hikes are 358 00:20:21,040 --> 00:20:24,640 Speaker 1: well underway. So yesterday was the fourth So I think 359 00:20:24,680 --> 00:20:26,640 Speaker 1: that I think that was definitely a factor. I think 360 00:20:26,680 --> 00:20:29,439 Speaker 1: the other factor as well is the fact of the 361 00:20:29,480 --> 00:20:32,000 Speaker 1: matter is is that their models are telling them policy 362 00:20:32,040 --> 00:20:34,600 Speaker 1: still accommodative. There are raising rates, but they don't think 363 00:20:34,640 --> 00:20:39,040 Speaker 1: they're tightening policy. Um financial conditions are very easy, so 364 00:20:39,080 --> 00:20:41,040 Speaker 1: they saw an open door. They took advantage of it, 365 00:20:41,080 --> 00:20:43,760 Speaker 1: but I must admit it created sort of an interesting 366 00:20:43,800 --> 00:20:46,440 Speaker 1: press conference. Well, I'll say the least on page four 367 00:20:46,560 --> 00:20:51,359 Speaker 1: or five of CLARAA Gallant Gurtler, you walked through the 368 00:20:51,400 --> 00:20:55,359 Speaker 1: mathematics of the economy, the I S curve knocked up 369 00:20:55,400 --> 00:20:58,760 Speaker 1: against what Chare Yellin talked about yesterday, the strength thing 370 00:20:58,800 --> 00:21:01,359 Speaker 1: called the Phillips curve. Does the math in that paper 371 00:21:02,760 --> 00:21:07,160 Speaker 1: still work well? The Phillips curve obviously is a very 372 00:21:07,160 --> 00:21:09,840 Speaker 1: important part of that analysis, and Cherry yelling herself as 373 00:21:09,880 --> 00:21:12,520 Speaker 1: an expert on it and made mention of it several times. 374 00:21:12,800 --> 00:21:16,480 Speaker 1: So far, we're not seeing the traditional Phillips relationship between 375 00:21:16,560 --> 00:21:21,000 Speaker 1: unemployment and inflation. Interestingly enough, we are seeing some evidence 376 00:21:21,200 --> 00:21:24,880 Speaker 1: of the Phillips curve effect in wages once you adjust 377 00:21:24,880 --> 00:21:27,240 Speaker 1: for the fact that productivity is low. But I think 378 00:21:27,240 --> 00:21:29,600 Speaker 1: the big thing that the Fed's probably noticing, although they 379 00:21:29,600 --> 00:21:32,760 Speaker 1: didn't dwell on it yesterday, is in January, year over 380 00:21:32,840 --> 00:21:35,600 Speaker 1: year core inflation was at one eight, very close to 381 00:21:35,640 --> 00:21:38,000 Speaker 1: two percent, and now it's about one five. So it's 382 00:21:38,000 --> 00:21:40,440 Speaker 1: going in the wrong direction. I think that's probably more 383 00:21:40,480 --> 00:21:42,879 Speaker 1: of a concern. It's moving in the wrong direction. They 384 00:21:42,920 --> 00:21:47,119 Speaker 1: hope it's temporary, but so far can't tell David if 385 00:21:47,119 --> 00:21:49,440 Speaker 1: the kids can't sleep tonight. You can just read in 386 00:21:49,520 --> 00:21:53,080 Speaker 1: the footnotes from Clara to Gilly and Girdler. You know, 387 00:21:53,160 --> 00:21:57,480 Speaker 1: footnote that's my favorite right there, fot you much loved 388 00:21:57,520 --> 00:21:59,760 Speaker 1: copy of clari. Let me ask you about what we 389 00:21:59,840 --> 00:22:02,360 Speaker 1: learned about the balance sheet yesterday and how that changes 390 00:22:02,440 --> 00:22:04,640 Speaker 1: your perspective on what things are going to be like 391 00:22:04,880 --> 00:22:07,080 Speaker 1: going forward. Here we we've got some numbers, have a 392 00:22:07,080 --> 00:22:09,800 Speaker 1: better sense perhaps of the timetable for it from an 393 00:22:09,800 --> 00:22:12,320 Speaker 1: investor's perspective, What does that mean? You know? I think 394 00:22:12,320 --> 00:22:14,160 Speaker 1: I think David, it's a good question because I think 395 00:22:14,720 --> 00:22:18,760 Speaker 1: underreported fact of the Fed's plan is with these caps, 396 00:22:18,800 --> 00:22:21,000 Speaker 1: they announced their FED is still going to be buying 397 00:22:21,040 --> 00:22:24,159 Speaker 1: treasuries and mortgage backed securities. So you tell your listeners 398 00:22:24,200 --> 00:22:25,760 Speaker 1: they want to shrink the balance sheet. Oh and by 399 00:22:25,760 --> 00:22:27,560 Speaker 1: the way, every month they're still buying. You think, well, 400 00:22:27,560 --> 00:22:29,000 Speaker 1: what you know, that's sort of like I'm going on 401 00:22:29,040 --> 00:22:31,160 Speaker 1: a diet, but I'm gonna I'm gonna have a double 402 00:22:31,200 --> 00:22:34,840 Speaker 1: two desserts um and and interestingly enough, one reason why 403 00:22:34,880 --> 00:22:37,479 Speaker 1: the bond markets, I think David have taken this so well, 404 00:22:38,040 --> 00:22:41,080 Speaker 1: is that essentially, as a treasury matures, they're going to 405 00:22:41,160 --> 00:22:43,560 Speaker 1: replace it with a five or a tenure treasury. If 406 00:22:43,560 --> 00:22:46,639 Speaker 1: you adjust their perform folio for the duration that is 407 00:22:46,680 --> 00:22:49,399 Speaker 1: the maturity, it may not be shrinking at all. So 408 00:22:49,480 --> 00:22:51,600 Speaker 1: one reason the BAB market has been pretty relaxed is, 409 00:22:51,800 --> 00:22:54,679 Speaker 1: you know, this is not a very austere or dramatic 410 00:22:54,960 --> 00:22:58,679 Speaker 1: UH reduction in the balance sheet. Once you adjust for UH, 411 00:22:58,720 --> 00:23:01,480 Speaker 1: they're going to continue to buy. What was Cherry Yellen's 412 00:23:01,520 --> 00:23:03,960 Speaker 1: message to those who are skeptical about where inflation is 413 00:23:04,040 --> 00:23:07,240 Speaker 1: right now visa v the willingness or eagerness to to 414 00:23:07,359 --> 00:23:10,760 Speaker 1: keep hiking. The word transitory came up. I I know, 415 00:23:11,520 --> 00:23:14,280 Speaker 1: But how forcefully is she defended that? Well? She basically 416 00:23:14,359 --> 00:23:17,520 Speaker 1: yesterday David I'd summarized the one hour press conference in 417 00:23:17,560 --> 00:23:20,920 Speaker 1: two words. She was saying, trust me. You know it's 418 00:23:22,240 --> 00:23:27,480 Speaker 1: that clar ger trusting. You know, implicitly, I'm an expert. 419 00:23:27,760 --> 00:23:31,200 Speaker 1: I've been doing this for thirty years. You know, inflation 420 00:23:31,280 --> 00:23:34,240 Speaker 1: goes up, it goes down. Trust me. She gave the 421 00:23:34,320 --> 00:23:37,520 Speaker 1: little analogy about, you know, the arithmetic of the CPI 422 00:23:37,720 --> 00:23:41,280 Speaker 1: with cell phone prices. Uh so I think that, but 423 00:23:41,359 --> 00:23:44,080 Speaker 1: I do think that. I don't think that third rate 424 00:23:44,160 --> 00:23:47,440 Speaker 1: hike that the blue dots indicated yesterday is a slam dunk. 425 00:23:47,480 --> 00:23:50,560 Speaker 1: I think they will commence the bounty process in the fall, 426 00:23:50,760 --> 00:23:53,560 Speaker 1: But if the fall is under underwhelming, as so far 427 00:23:53,680 --> 00:23:55,080 Speaker 1: the first half of the year has been, they may 428 00:23:55,119 --> 00:23:57,800 Speaker 1: not get that third rate hike in. Uh. Do we 429 00:23:57,880 --> 00:24:00,320 Speaker 1: get any better sense of what full employ him in is? 430 00:24:00,359 --> 00:24:03,040 Speaker 1: Two policy makers on the FEN. Well, you know, they 431 00:24:03,119 --> 00:24:06,639 Speaker 1: keep revising down the unemployment rate, which is consistent with 432 00:24:06,640 --> 00:24:09,400 Speaker 1: full employment. So three years ago it was five point three, 433 00:24:09,480 --> 00:24:12,320 Speaker 1: now it's at four point six. I think the actual 434 00:24:12,359 --> 00:24:14,880 Speaker 1: unemployment rate is lower. And I think, David, the pattern 435 00:24:14,960 --> 00:24:18,720 Speaker 1: has been as unemployment continues to fall and inflation doesn't 436 00:24:18,760 --> 00:24:21,800 Speaker 1: pick up, they keep revising down. Uh. And that's not 437 00:24:22,240 --> 00:24:24,560 Speaker 1: I'm not critical for that. You know, as the data evolves, 438 00:24:24,600 --> 00:24:26,840 Speaker 1: they do need to factor that in within trust me 439 00:24:27,200 --> 00:24:29,919 Speaker 1: and within the wonderful work that you are acclaimed for. 440 00:24:30,640 --> 00:24:33,000 Speaker 1: I did a word search. Joe Stiglett's name is not 441 00:24:33,200 --> 00:24:37,520 Speaker 1: in there. He has acclaimed was Sandy Grossman. About what's 442 00:24:37,560 --> 00:24:43,359 Speaker 1: the information we have in the market? What's the information 443 00:24:43,560 --> 00:24:47,440 Speaker 1: Chair Yelling or vice chairman Fisher or Lyle Brainard what's 444 00:24:47,520 --> 00:24:51,080 Speaker 1: the the information the signals that they're getting right now 445 00:24:51,560 --> 00:24:55,840 Speaker 1: or all a Grossman stiglets? Are they flying blind? Well? 446 00:24:55,880 --> 00:24:58,399 Speaker 1: That is a classic paper. It's called the Impossibility of 447 00:24:58,440 --> 00:25:00,879 Speaker 1: informationally Efficient Markets. You you can tell I've read it, 448 00:25:00,960 --> 00:25:02,720 Speaker 1: but I think there isn't enough. I think there is 449 00:25:02,720 --> 00:25:06,120 Speaker 1: an analogy time and it's the end. It's the following 450 00:25:05,480 --> 00:25:11,439 Speaker 1: are the FED? The FED is trying to to actually 451 00:25:11,520 --> 00:25:15,680 Speaker 1: navigate and work through a pretty complicated signal extraction problem, 452 00:25:15,760 --> 00:25:18,560 Speaker 1: and in particular there's mixed messages. So for example, bond 453 00:25:18,640 --> 00:25:21,399 Speaker 1: yields have fallen. Now bond yields can fall for a 454 00:25:21,440 --> 00:25:24,640 Speaker 1: couple of reasons, uh, And they're trying to distinguish whether 455 00:25:24,720 --> 00:25:27,199 Speaker 1: or not that's a signal the economy's weakening, or if 456 00:25:27,200 --> 00:25:29,520 Speaker 1: it's just telling you something that their negative rates and 457 00:25:29,760 --> 00:25:32,840 Speaker 1: in the rest of the world. The other signal extraction 458 00:25:32,880 --> 00:25:37,360 Speaker 1: problem that they have, of course, is this inflation problem. 459 00:25:37,400 --> 00:25:41,520 Speaker 1: Is that transitory or permanent? And then financial conditions. Financial 460 00:25:41,520 --> 00:25:44,320 Speaker 1: conditions are easier, stocks are higher, credit spreads are lower. 461 00:25:44,680 --> 00:25:46,960 Speaker 1: Does that tell them they should hight more aggressively or 462 00:25:47,000 --> 00:25:49,160 Speaker 1: does that tell them basically just to take it easy. 463 00:25:49,200 --> 00:25:51,359 Speaker 1: So it is a pretty complicated problem, right, can we've 464 00:25:51,400 --> 00:25:54,080 Speaker 1: gone graduate school PhD on everybody out there, and this 465 00:25:54,160 --> 00:25:57,320 Speaker 1: is really special with Richard clairet Columbia University and of 466 00:25:57,400 --> 00:26:00,200 Speaker 1: course with PIMCO. So with what you just said, head, 467 00:26:01,040 --> 00:26:03,359 Speaker 1: I'm gonna go to the Greek letter theta, which is 468 00:26:03,400 --> 00:26:06,680 Speaker 1: belief in the time function. Trust me on the time function? 469 00:26:06,920 --> 00:26:10,560 Speaker 1: Do you have a belief in transitory out to a 470 00:26:10,600 --> 00:26:14,359 Speaker 1: permanent effect on in this case inflation? I mean, do 471 00:26:14,400 --> 00:26:16,560 Speaker 1: you do you have a knowledge of how to parse 472 00:26:17,040 --> 00:26:20,919 Speaker 1: between transitory or permanent? Where we just flying blind? Again? Well, 473 00:26:21,119 --> 00:26:23,679 Speaker 1: the reality and I've actually done empirical work in this 474 00:26:23,760 --> 00:26:27,280 Speaker 1: and I know the literature. The reality is that the econometrics, 475 00:26:27,800 --> 00:26:30,639 Speaker 1: the econometrics of signal extraction in the real world are 476 00:26:30,680 --> 00:26:33,320 Speaker 1: actually quite complicated. So even though the FAT has two 477 00:26:33,960 --> 00:26:38,400 Speaker 1: PhD economists and does brilliant econometric work, there's a pretty 478 00:26:38,440 --> 00:26:41,520 Speaker 1: big element of judgment involved as as as well. And 479 00:26:41,600 --> 00:26:45,040 Speaker 1: so the sense that's a combination of statistical models and 480 00:26:44,960 --> 00:26:47,040 Speaker 1: and sort of gut gut in the time that we've 481 00:26:47,080 --> 00:26:49,080 Speaker 1: got left, then should we go to a more rules 482 00:26:49,119 --> 00:26:51,719 Speaker 1: based fed away from that gut field that you just 483 00:26:52,000 --> 00:26:55,000 Speaker 1: spoke If we get Marvin good Friend as chairman, because Claire, 484 00:26:55,000 --> 00:26:57,359 Speaker 1: it is too much discretion based. Do we need a 485 00:26:57,359 --> 00:26:59,760 Speaker 1: more rules based fed Well, of course on my mind, 486 00:27:00,520 --> 00:27:04,439 Speaker 1: busts chuck that paper. Clara Galli Girler actually proposed what 487 00:27:04,520 --> 00:27:07,360 Speaker 1: we called a forward looking Taylor rules. So I'm very 488 00:27:07,440 --> 00:27:10,040 Speaker 1: much in the camp that a rules based approach makes sense. 489 00:27:10,080 --> 00:27:12,560 Speaker 1: I wouldn't be handcuffed to it, but it's an essential 490 00:27:12,560 --> 00:27:16,399 Speaker 1: input to doing sound policy, can I, David? I I 491 00:27:16,520 --> 00:27:19,360 Speaker 1: gotta say this, folks. We invented Bloomberg on the Economy 492 00:27:19,359 --> 00:27:22,919 Speaker 1: and Bloomberg Surveillance. Al Mayer said to me, you can't 493 00:27:22,960 --> 00:27:27,480 Speaker 1: do that every show, but every every everyone in a while, 494 00:27:28,119 --> 00:27:33,080 Speaker 1: Everyone in a while, John Tucker, we go off the rails, 495 00:27:33,480 --> 00:27:37,560 Speaker 1: Professor Claire, this will be out for your re listening pleasure. John, 496 00:27:37,880 --> 00:27:45,080 Speaker 1: This will be this will be on iTunes podcast in 497 00:27:45,160 --> 00:27:47,800 Speaker 1: the Global Wall Street where you just heard there from 498 00:27:48,160 --> 00:27:51,639 Speaker 1: Richard Clarida was just special. I can't say day to 499 00:27:51,680 --> 00:27:56,200 Speaker 1: thurstund like that. Very good. We'll go with that, Richard, Claire, 500 00:27:56,240 --> 00:27:58,719 Speaker 1: appreciate you being Richard Claid and Bloomberg eleven three studios 501 00:27:58,760 --> 00:28:02,080 Speaker 1: of course of pimp in Columbia University as well we'll 502 00:28:02,119 --> 00:28:03,639 Speaker 1: be talking more about the FED coming up here with 503 00:28:03,640 --> 00:28:07,199 Speaker 1: the Craig, Bishop of URBC as well. I promise I 504 00:28:07,240 --> 00:28:09,800 Speaker 1: will tweet out some of what Professor Clarida and I 505 00:28:09,840 --> 00:28:13,439 Speaker 1: were talking about, because it is really important work and 506 00:28:13,440 --> 00:28:16,840 Speaker 1: the foundations for what is being debated. As in the 507 00:28:16,880 --> 00:28:20,840 Speaker 1: press conference yesterday that was special Richard Clarida at PIMCO 508 00:28:33,720 --> 00:28:38,960 Speaker 1: is a really interesting what I'm gonna call political scientist 509 00:28:39,240 --> 00:28:43,520 Speaker 1: and economists. Diana Fritz goot Roth joins us now with 510 00:28:43,560 --> 00:28:49,280 Speaker 1: the Manhattan Institute UM for years in support of UM 511 00:28:49,320 --> 00:28:52,600 Speaker 1: a certain kind of political science, and that's something that 512 00:28:53,480 --> 00:28:57,560 Speaker 1: many Republicans are are very comfortable with, and maybe the 513 00:28:57,600 --> 00:29:00,280 Speaker 1: President as a Republican is comfortable with. And you will 514 00:29:00,320 --> 00:29:04,120 Speaker 1: join us. Now, how is the president doing, Diana, Just 515 00:29:04,160 --> 00:29:08,880 Speaker 1: to begin with the idea of Trump fiscal economics is 516 00:29:08,920 --> 00:29:14,440 Speaker 1: a cogent The President wants to lower spending and reduce taxes, 517 00:29:14,480 --> 00:29:18,680 Speaker 1: which is a very cogent policy, absolutely, and it's worked 518 00:29:18,680 --> 00:29:21,960 Speaker 1: in other countries, it's worked in the United States. And 519 00:29:22,080 --> 00:29:25,800 Speaker 1: almost everybody agrees that our deficit is too large, our 520 00:29:25,840 --> 00:29:28,440 Speaker 1: debt is too large. We're passing this on to our 521 00:29:28,480 --> 00:29:32,920 Speaker 1: grandchildren who have not agree. I agree. Everyone agrees with this, 522 00:29:33,080 --> 00:29:36,760 Speaker 1: but did he? And I mean this was great respect 523 00:29:36,800 --> 00:29:39,120 Speaker 1: for the debate folks, and we get tons of mail 524 00:29:39,200 --> 00:29:42,840 Speaker 1: and Dr Fricht ros On with us when when he 525 00:29:43,040 --> 00:29:48,200 Speaker 1: affected his first budget proposal? Was that a political document 526 00:29:48,800 --> 00:29:51,880 Speaker 1: or was that a Diana Frisch goot Rough document with 527 00:29:51,880 --> 00:29:56,160 Speaker 1: with some real meat to it? This was President Trump's 528 00:29:56,240 --> 00:29:59,560 Speaker 1: view of what the budget should look like, of what 529 00:29:59,720 --> 00:30:02,800 Speaker 1: the draw government, but it should look like. And it 530 00:30:02,920 --> 00:30:05,960 Speaker 1: had cuts in many places, and it had increases in 531 00:30:06,080 --> 00:30:09,440 Speaker 1: national defense, and that goes along with what President Trump 532 00:30:09,600 --> 00:30:12,760 Speaker 1: proposed during his campaign. So it was it was a 533 00:30:12,840 --> 00:30:17,959 Speaker 1: document aligned with his policy promises during the campaign. And 534 00:30:18,000 --> 00:30:20,280 Speaker 1: I should just say, I am not doctor. I'm just 535 00:30:20,440 --> 00:30:23,719 Speaker 1: Diana virtual. I have an m fill in economics from 536 00:30:23,760 --> 00:30:26,440 Speaker 1: ox Very good. Excuse me. That's what you get from 537 00:30:26,480 --> 00:30:29,720 Speaker 1: someone like Oxford. Everybody else is walking around all day. 538 00:30:29,760 --> 00:30:33,000 Speaker 1: I'm a doctor. I'm a doctor. We try to make 539 00:30:33,040 --> 00:30:36,160 Speaker 1: note of that. I do agree with with Diana's attention. Well, 540 00:30:36,200 --> 00:30:37,680 Speaker 1: it's just I don't want to be on your show 541 00:30:37,680 --> 00:30:41,320 Speaker 1: on the false pretender. Very good, Diana, excuse me. I'm 542 00:30:41,360 --> 00:30:44,920 Speaker 1: on this show on David saved me. I let me 543 00:30:44,960 --> 00:30:47,000 Speaker 1: ask you just about the degree are There are those 544 00:30:47,040 --> 00:30:50,000 Speaker 1: who complained that the President drafted this document in a vacuum. 545 00:30:50,000 --> 00:30:52,760 Speaker 1: He wasn't thinking about what what Congress would think of it, 546 00:30:52,800 --> 00:30:55,120 Speaker 1: what Republicans and Congress in particular would think about it. 547 00:30:55,160 --> 00:30:57,640 Speaker 1: I look at the reception that it got on Capitol 548 00:30:57,680 --> 00:31:01,280 Speaker 1: Hill and a good quantity of Republicans fellow publicans who 549 00:31:01,280 --> 00:31:03,880 Speaker 1: weren't happy with it. How problematic is that? In other words, 550 00:31:03,920 --> 00:31:06,400 Speaker 1: he's laying out the strictures for what he wants. Should 551 00:31:06,400 --> 00:31:08,760 Speaker 1: have had more political awareness about what was more possible 552 00:31:10,080 --> 00:31:14,240 Speaker 1: or all presidents lay out their wish list for a budget. Uh, 553 00:31:14,280 --> 00:31:16,600 Speaker 1: and then it's up to Congress and the president to 554 00:31:16,680 --> 00:31:19,840 Speaker 1: negotiate over what finally comes out. I don't think you 555 00:31:19,840 --> 00:31:23,880 Speaker 1: could think of any congressional budget over the past half 556 00:31:23,880 --> 00:31:26,800 Speaker 1: century that's come out exactly the way the president asked for. 557 00:31:27,520 --> 00:31:30,960 Speaker 1: So President Trump's budget is not at all unusual. It's 558 00:31:31,000 --> 00:31:33,400 Speaker 1: his wish list, it's his vision as to where the 559 00:31:33,440 --> 00:31:36,080 Speaker 1: economy should go and where the budget should go. Does 560 00:31:36,080 --> 00:31:39,080 Speaker 1: he does he have enough awareness of the funding deadline 561 00:31:39,080 --> 00:31:40,880 Speaker 1: that's coming up. We haven't heard a lot of clarity 562 00:31:40,920 --> 00:31:43,360 Speaker 1: from this White House about the dead ceilings, say it's 563 00:31:43,360 --> 00:31:45,440 Speaker 1: approached to the to the dead ceiling, or indeed it's 564 00:31:45,440 --> 00:31:49,320 Speaker 1: approached to this September deadline. Does he do his colleagues 565 00:31:49,360 --> 00:31:51,240 Speaker 1: need to come out more forcefully here to say what 566 00:31:51,320 --> 00:31:54,120 Speaker 1: the White House's position on all of that is. President 567 00:31:54,160 --> 00:31:57,440 Speaker 1: Trump has an excellent set of economic advisors. Gary Cone, 568 00:31:57,520 --> 00:32:01,440 Speaker 1: head of the National Economic Council. My friend Kevin Hassett 569 00:32:01,440 --> 00:32:05,440 Speaker 1: will be the starting off as Chairman of the Council 570 00:32:05,440 --> 00:32:08,400 Speaker 1: of Economic Advisors. I'm sure they have fully made him 571 00:32:08,440 --> 00:32:10,960 Speaker 1: aware of all the deadlines. Does he need to be 572 00:32:11,000 --> 00:32:14,560 Speaker 1: more incremental? I mean, so much of the liberal critique 573 00:32:14,920 --> 00:32:17,440 Speaker 1: of the of the Trump budgets and discussion so far. 574 00:32:17,920 --> 00:32:20,840 Speaker 1: Is it just too much, too hard, too soon, too abrupt? 575 00:32:21,160 --> 00:32:25,400 Speaker 1: Is there something to be said for gradation? I think 576 00:32:25,440 --> 00:32:30,680 Speaker 1: that this this proposed budget has This budget has been maligned. 577 00:32:30,720 --> 00:32:33,680 Speaker 1: First of all, people say it cuts spending. It doesn't. 578 00:32:33,720 --> 00:32:37,840 Speaker 1: It raises federal spending by about one point seven trillion 579 00:32:38,040 --> 00:32:43,120 Speaker 1: over the next uh ten years. It says it cuts medicaid, 580 00:32:43,240 --> 00:32:46,600 Speaker 1: and uh no, it raises the amount of money spent 581 00:32:46,720 --> 00:32:50,720 Speaker 1: on medicaid over the next ten years. Uh. Some functions 582 00:32:50,720 --> 00:32:55,280 Speaker 1: of government that were personally it's perfectly reasonable thirty or 583 00:32:55,520 --> 00:32:58,440 Speaker 1: forty or fifty years ago, such as the Corporation for 584 00:32:58,520 --> 00:33:03,320 Speaker 1: Public Broadcasting are no longer reasonable in light of all 585 00:33:03,360 --> 00:33:06,920 Speaker 1: the multitude of radio and TV stations that we have 586 00:33:07,120 --> 00:33:10,000 Speaker 1: right now, Why should it be the government's role to 587 00:33:10,240 --> 00:33:14,240 Speaker 1: fund television and radio when there's shows like yours that 588 00:33:14,440 --> 00:33:17,720 Speaker 1: do find without government money. So I think that a 589 00:33:17,800 --> 00:33:21,760 Speaker 1: budget should always be a time of looking over what 590 00:33:21,840 --> 00:33:24,880 Speaker 1: the government roles should be in light of changes in 591 00:33:24,920 --> 00:33:27,920 Speaker 1: the economy, and have people jump up and down and 592 00:33:27,960 --> 00:33:30,640 Speaker 1: say we need a government radio and TV station. Yes, 593 00:33:30,680 --> 00:33:33,040 Speaker 1: well we might have needed one fifty years ago. We 594 00:33:33,160 --> 00:33:35,920 Speaker 1: certainly do not need one now. That's not something that 595 00:33:36,000 --> 00:33:38,000 Speaker 1: tax pays should have to fund. Dana, I am going 596 00:33:38,040 --> 00:33:41,240 Speaker 1: to ruin your morning and come back and talk about care. 597 00:33:41,520 --> 00:33:46,040 Speaker 1: And Diana first got rots with us with the Manhattan Institute. Dana, 598 00:33:46,120 --> 00:33:47,760 Speaker 1: let me give you an open question to get the 599 00:33:47,800 --> 00:33:52,360 Speaker 1: conversation going. David Guray is poised to pounce, how close 600 00:33:52,360 --> 00:33:56,760 Speaker 1: are we to socialized medicine? Oh, we're not. We're not 601 00:33:56,920 --> 00:34:00,120 Speaker 1: close to socialized medicine, I would say, I would say it. 602 00:34:00,800 --> 00:34:04,160 Speaker 1: We can see that the Obamacay exchanges are crumbling. We 603 00:34:04,240 --> 00:34:08,520 Speaker 1: have United Healthcare pulling out Etna and some pulling out. 604 00:34:08,560 --> 00:34:11,319 Speaker 1: But I don't think that single payer is going to 605 00:34:11,360 --> 00:34:16,440 Speaker 1: be replacing uh, the Obamacare exchanges. We're probably going to 606 00:34:16,520 --> 00:34:21,840 Speaker 1: have more competition, more choice for consumers. That's what people want. 607 00:34:22,040 --> 00:34:25,120 Speaker 1: That's what the Senate is working on right now. That 608 00:34:25,239 --> 00:34:28,000 Speaker 1: was in the House bill. Where is your your optimism 609 00:34:28,040 --> 00:34:31,000 Speaker 1: for that happening? We look at the congressional calendar, how 610 00:34:31,040 --> 00:34:33,600 Speaker 1: compressed it is, how full it is, uh, and we 611 00:34:33,680 --> 00:34:36,080 Speaker 1: see the Senate's on willingness to take up the House 612 00:34:36,080 --> 00:34:38,520 Speaker 1: bill as the starting point for for what it's going 613 00:34:38,600 --> 00:34:41,360 Speaker 1: to to ultimately draft. Where does your optimism when it 614 00:34:41,360 --> 00:34:44,800 Speaker 1: comes to healthcare come from? Well, Senator Mitch McConnell is 615 00:34:44,840 --> 00:34:47,880 Speaker 1: crafting his own bill, which is going to be ready 616 00:34:48,040 --> 00:34:52,680 Speaker 1: around July the fourth, he says, or perhaps later. Senator 617 00:34:52,760 --> 00:34:59,120 Speaker 1: McConnell is an extraordinarily smart man who knows parliamentary procedure. 618 00:34:59,680 --> 00:35:04,200 Speaker 1: And I'm sure that between Health Speaker Ryan and Majority 619 00:35:04,280 --> 00:35:07,359 Speaker 1: Leader McConnell, uh, they can get it done. Because this 620 00:35:07,440 --> 00:35:10,680 Speaker 1: is what voters elected them to do. They were elected 621 00:35:10,760 --> 00:35:16,040 Speaker 1: on a platform of repealing Obamacare. Premiums arising twenty five 622 00:35:16,160 --> 00:35:21,279 Speaker 1: to every year. It's unsustainable. Insurance companies are dropping out 623 00:35:21,600 --> 00:35:25,000 Speaker 1: United Healthcare and some ethnic Okay, so give me the 624 00:35:25,080 --> 00:35:27,719 Speaker 1: I want to. I'm really fascinating by this, folks. If 625 00:35:27,719 --> 00:35:30,760 Speaker 1: it's sixteen or sevent of g d P and every 626 00:35:30,760 --> 00:35:35,080 Speaker 1: single guest from Reinhard to Diana Frisco Roth says, we 627 00:35:35,200 --> 00:35:40,840 Speaker 1: gotta fix it. What's your prescription given the realities of 628 00:35:40,880 --> 00:35:47,239 Speaker 1: two thousand eighteen society. Well, the the prescription is that 629 00:35:47,360 --> 00:35:50,160 Speaker 1: insurance companies should be allowed to offer the plans that 630 00:35:50,239 --> 00:35:53,200 Speaker 1: people want to buy, which is not the case right now. 631 00:35:53,560 --> 00:35:56,480 Speaker 1: Right now, each insurance company has to offer the same 632 00:35:56,800 --> 00:36:00,000 Speaker 1: plan with the same offerings, so there isn't any company 633 00:36:00,000 --> 00:36:02,839 Speaker 1: tisie between them. If I want to buy a plan 634 00:36:02,960 --> 00:36:06,200 Speaker 1: that just covers major expenses such as falling off my 635 00:36:06,280 --> 00:36:09,640 Speaker 1: bike in traffic when I bike to work, or getting 636 00:36:09,680 --> 00:36:12,040 Speaker 1: cancer or a heart attack, I'm not allowed to do that. 637 00:36:12,320 --> 00:36:15,240 Speaker 1: I have to buy a plan with maternity care, mental 638 00:36:15,280 --> 00:36:18,719 Speaker 1: health coverage, drug abuse coverage, all these bells and whistles 639 00:36:18,760 --> 00:36:21,440 Speaker 1: that I don't necessarily want. Well, of course, this is 640 00:36:21,520 --> 00:36:25,680 Speaker 1: raising the price of health insurance and we need a 641 00:36:25,719 --> 00:36:29,120 Speaker 1: different system. Just like with auto insurance. We can do 642 00:36:29,160 --> 00:36:32,279 Speaker 1: auto insurance because people think about auto insurance. No one 643 00:36:32,280 --> 00:36:34,399 Speaker 1: ever says I'm losing my job, I'm going to lose 644 00:36:34,440 --> 00:36:37,680 Speaker 1: my auto insurance. No, because you buy outside the system. 645 00:36:38,000 --> 00:36:39,960 Speaker 1: You have a choice of plans, you have a choice 646 00:36:39,960 --> 00:36:43,640 Speaker 1: of deductibles, you can have collision UH. You know you 647 00:36:43,680 --> 00:36:46,000 Speaker 1: do you and we can do the same kind of 648 00:36:46,120 --> 00:36:47,680 Speaker 1: To be fair, though, I have to buy it in 649 00:36:47,760 --> 00:36:49,319 Speaker 1: order to get a license, I have to prove that 650 00:36:49,360 --> 00:36:52,200 Speaker 1: I have auto insurance. Yes, but you don't have to 651 00:36:52,280 --> 00:36:56,799 Speaker 1: buy a very expensive plan that UH that has UM 652 00:36:57,600 --> 00:37:01,480 Speaker 1: changes your oil that the pays, but changing your oil 653 00:37:01,640 --> 00:37:04,399 Speaker 1: pays for routine maintenance. That's what you have to buy 654 00:37:04,680 --> 00:37:07,759 Speaker 1: for healthcare. And I do agree that in the new 655 00:37:07,800 --> 00:37:10,480 Speaker 1: health care bills there should be a penalty for not 656 00:37:10,560 --> 00:37:13,400 Speaker 1: having coverage. Otherwise you're going to have people gain the 657 00:37:13,480 --> 00:37:17,040 Speaker 1: system and just pick up the insurance when they have 658 00:37:18,000 --> 00:37:21,480 Speaker 1: UH when they have a problem. And there are protections 659 00:37:21,480 --> 00:37:24,440 Speaker 1: against that in other markets, like you can't just buy 660 00:37:24,880 --> 00:37:27,439 Speaker 1: home insurance when your house is on fire, you can't 661 00:37:27,480 --> 00:37:30,799 Speaker 1: just buy car insurance when you engage when when you 662 00:37:30,800 --> 00:37:33,759 Speaker 1: have a major crash. Should be the same with health insurance. 663 00:37:34,640 --> 00:37:37,279 Speaker 1: We have been talking about monetary policy all morning and 664 00:37:37,360 --> 00:37:39,440 Speaker 1: light of the Fed meeting yesterday. Let me ask you 665 00:37:39,480 --> 00:37:42,600 Speaker 1: about a fiscal policy. Last week the White House christ 666 00:37:42,600 --> 00:37:45,960 Speaker 1: and last week as infrastructure a week. How optimistic are 667 00:37:46,000 --> 00:37:47,680 Speaker 1: you that we're going to see some sort of fiscal 668 00:37:47,719 --> 00:37:50,400 Speaker 1: package you within within the year. Do you think that 669 00:37:50,440 --> 00:37:53,840 Speaker 1: the White House is prioritizing that enough you mean you 670 00:37:53,880 --> 00:37:57,160 Speaker 1: mean an infrastructure Indeed, indeed, the trillion dollar Plan that 671 00:37:57,239 --> 00:37:59,759 Speaker 1: the President discussed in that speech before a joint session 672 00:37:59,760 --> 00:38:05,200 Speaker 1: of well, the trillion dollar plan also means reducing barriers 673 00:38:05,600 --> 00:38:10,120 Speaker 1: to private sector companies building infrastructure. That's a large part 674 00:38:10,160 --> 00:38:14,239 Speaker 1: of the plan. The President is very serious about reducing 675 00:38:14,280 --> 00:38:17,560 Speaker 1: all the duplication that there is in the permitting. He 676 00:38:17,680 --> 00:38:23,040 Speaker 1: came out with a huge pile of environmental impact statements 677 00:38:23,080 --> 00:38:26,320 Speaker 1: that were used for a connected road between and to 678 00:38:26,560 --> 00:38:29,440 Speaker 1: seventy and said it was too big. He's absolutely right. 679 00:38:29,719 --> 00:38:32,880 Speaker 1: That raised the price of doing that road, of building 680 00:38:32,920 --> 00:38:35,279 Speaker 1: that road, So now the tolls on that road have 681 00:38:35,400 --> 00:38:38,520 Speaker 1: to be higher than they would be otherwise, reducing the ridership. 682 00:38:38,760 --> 00:38:43,280 Speaker 1: These regulations are really getting in the way of private 683 00:38:43,320 --> 00:38:46,959 Speaker 1: companies building infrastructure, and a large part of the President's plan, 684 00:38:47,320 --> 00:38:51,840 Speaker 1: as he said, is going to be encouraging public private partnerships, 685 00:38:51,880 --> 00:38:57,280 Speaker 1: reducing regulations, encouraging the private sector to build its own infrastructure, 686 00:38:57,520 --> 00:39:00,400 Speaker 1: getting out of the way. When you look at public 687 00:39:00,400 --> 00:39:03,600 Speaker 1: private partnerships, what's the role of them in improving or 688 00:39:03,640 --> 00:39:05,680 Speaker 1: building on our infrastructure here in the in the US? 689 00:39:05,800 --> 00:39:07,480 Speaker 1: Is that the the end goal to move to that 690 00:39:07,960 --> 00:39:10,879 Speaker 1: realm entirely? What role should should public private partnerships play 691 00:39:10,920 --> 00:39:14,000 Speaker 1: when it comes to infrastructure, Well, the end goal should 692 00:39:14,000 --> 00:39:16,759 Speaker 1: be moving towards a situation where they are much more 693 00:39:16,840 --> 00:39:21,400 Speaker 1: private and much less public. But in situations where the 694 00:39:21,440 --> 00:39:24,720 Speaker 1: federal government actually owns the assets, such as the bridge, 695 00:39:24,800 --> 00:39:28,760 Speaker 1: or the highway or the airport. Uh, then the federal 696 00:39:28,800 --> 00:39:32,160 Speaker 1: government has to do some kind of permission, some kind 697 00:39:32,200 --> 00:39:35,840 Speaker 1: of agreement to allow the private sector to invest. But 698 00:39:36,000 --> 00:39:40,759 Speaker 1: there should be the maximum private sector investment possible. I 699 00:39:40,840 --> 00:39:43,600 Speaker 1: look at what is going on here now in the 700 00:39:43,600 --> 00:39:48,320 Speaker 1: cacophony in the White House. Have you spoken to the president? Uh? Recently? Diana, 701 00:39:48,600 --> 00:39:50,839 Speaker 1: I have never spoken to the president. I was part 702 00:39:50,920 --> 00:39:53,160 Speaker 1: of his team, but not everyone on his team spoke 703 00:39:53,200 --> 00:39:55,200 Speaker 1: to the president. Okay, well that's fair as well. What 704 00:39:55,239 --> 00:39:57,279 Speaker 1: would be your prescription for the White House to get 705 00:39:57,280 --> 00:40:01,400 Speaker 1: a more cogent budget plans? For school plan linked with 706 00:40:01,440 --> 00:40:04,799 Speaker 1: all the other distractions out there. I think that the 707 00:40:04,840 --> 00:40:08,840 Speaker 1: White House is UH producing these budget plans, and I 708 00:40:08,880 --> 00:40:11,120 Speaker 1: would suggest that the next step is for Congress to 709 00:40:11,200 --> 00:40:14,359 Speaker 1: actually take them up and implement them. It's Congress that's 710 00:40:14,360 --> 00:40:17,360 Speaker 1: the bottleneck. It's people who are saying Congress, and you 711 00:40:17,400 --> 00:40:19,960 Speaker 1: said it earlier in the program, how is Congress going 712 00:40:20,000 --> 00:40:22,920 Speaker 1: to pass tax reform? How's it going to pass healthcare reform? 713 00:40:23,000 --> 00:40:25,920 Speaker 1: With a few legislative days left, when I suggest that 714 00:40:26,000 --> 00:40:29,520 Speaker 1: Congress take part of the August recess and stay in 715 00:40:29,560 --> 00:40:32,719 Speaker 1: Washington to work on these items and also move the 716 00:40:32,800 --> 00:40:38,160 Speaker 1: process through faster. Yesterday, UH the due to the extremely 717 00:40:38,440 --> 00:40:43,960 Speaker 1: tragic shooting of Steve Scalise, there was very little done, 718 00:40:44,560 --> 00:40:47,759 Speaker 1: which is understandable. But Congress needs to make up that 719 00:40:47,800 --> 00:40:52,720 Speaker 1: time and move these bills through. There's also debt, feeling problems. Budget, 720 00:40:52,880 --> 00:40:57,040 Speaker 1: There's many things to do infrastructure. I'll sleep that there, Diana, 721 00:40:57,080 --> 00:40:58,680 Speaker 1: Thank you so much. Danna, first to go through off 722 00:40:59,239 --> 00:41:11,520 Speaker 1: is with a man Hair Institute. Thanks for listening to 723 00:41:11,560 --> 00:41:16,239 Speaker 1: the Bloomberg Surveillance podcast. Subscribe and listen to interviews on 724 00:41:16,440 --> 00:41:22,000 Speaker 1: Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm 725 00:41:22,040 --> 00:41:25,840 Speaker 1: on Twitter at Tom Keene. David Gura is at David Gura. 726 00:41:26,280 --> 00:41:30,200 Speaker 1: Before the podcast, you can always catch us worldwide. I'm 727 00:41:30,200 --> 00:41:44,359 Speaker 1: Bloomberg Radio Brunch You by Bank of America Mary Lynch. 728 00:41:44,640 --> 00:41:50,120 Speaker 1: With virtual reality, virtually everything will change. Discover opportunities in 729 00:41:50,160 --> 00:41:54,760 Speaker 1: a transforming world. Be of a mL dot Com, slash VR, 730 00:41:55,640 --> 00:41:58,600 Speaker 1: Mary Lynch, Pierced Fenner and Smith Incorporated,