WEBVTT - Surveillance: Kirby on Debt Ceiling 0:00:05.120 --> 0:00:07.119 This is the Bloomberg Surveillance Podcast. 0:00:07.160 --> 0:00:11.080 I'm Tom Keane, along with Jonathan Farrow and Lisa Abramowitz. 0:00:11.280 --> 0:00:15.760 Join us each day for insight from the best an economics, geopolitics, 0:00:15.760 --> 0:00:20.720 finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, 0:00:20.960 --> 0:00:25.400 Spotify and anywhere you get your podcasts, and always on 0:00:25.520 --> 0:00:29.880 Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business app. 0:00:30.120 --> 0:00:33.080 Right now, we're going to go to Henry Hoaternet in 0:00:33.200 --> 0:00:37.000 Japan and with her is Admiral John Kirby's National Security 0:00:37.400 --> 0:00:41.800 Council Coordinator for Strategic Communications. This for America at the 0:00:41.840 --> 0:00:42.839 G seven meetings. 0:00:43.000 --> 0:00:44.080 Thanks Tom, And that's right. 0:00:44.120 --> 0:00:46.800 He's on the ground less than four hours and Admiral 0:00:46.880 --> 0:00:50.760 Kirby is joining Bloomberg first here as he lands with 0:00:50.800 --> 0:00:54.160 the President for this really important G seven summit. But 0:00:54.280 --> 0:00:57.200 of course the President is scrapping the remainder of this 0:00:57.280 --> 0:00:59.240 forum trip. You was supposed to have Papa New Guinea 0:00:59.280 --> 0:01:03.200 and Australia. How much I think that domestic policy concerns 0:01:03.240 --> 0:01:06.600 are undermining the foreign policy goals of this administration. 0:01:06.920 --> 0:01:09.800 It's not about undermining our foreign policy goals. I mean 0:01:09.840 --> 0:01:13.600 the President has really revitalized. He's really put a lot 0:01:13.600 --> 0:01:16.240 of energy, particularly into this part of the world. I mean, 0:01:16.319 --> 0:01:19.200 here we are in Japan for the G seven. You know, 0:01:19.640 --> 0:01:21.720 just a few weeks ago in San Diego, we were 0:01:21.760 --> 0:01:25.360 standing next to Prime Minister Arabanas and Prime Minister Sunak 0:01:25.600 --> 0:01:29.240 to unveil the next phase of the Akas Agreement. And 0:01:29.280 --> 0:01:30.840 of course he's already had a chance to meet with 0:01:30.880 --> 0:01:34.360 all the Pacific Island leaders at the White House last year. 0:01:34.480 --> 0:01:38.040 We'll do another one here in the near future. So 0:01:38.480 --> 0:01:40.920 we have invested a lot of time and energy into 0:01:40.920 --> 0:01:44.399 this particular part of the world. And today's today's visit, 0:01:44.720 --> 0:01:47.600 this G seven, I think is just further proof of that. 0:01:48.080 --> 0:01:50.040 But at the same time, the President loves to use 0:01:50.080 --> 0:01:51.800 these moments like a G seven. 0:01:51.840 --> 0:01:54.040 He reminds the world America is back. 0:01:54.360 --> 0:01:59.280 He tries to draw parallels for democracy visa the autocracies, 0:01:59.320 --> 0:02:02.920 what's going on in terms of Beijing, what happens in Russia. 0:02:03.000 --> 0:02:04.080 How hard is it for him to. 0:02:04.000 --> 0:02:05.920 Deliver that message to other leaders. 0:02:06.200 --> 0:02:08.200 When he was supposed to be the first. 0:02:08.000 --> 0:02:10.000 US president to go to Papua New Guinea, he was 0:02:10.000 --> 0:02:13.000 supposed to go meet the Quad in Australia, and this 0:02:13.080 --> 0:02:15.080 is where he wants to spend his time, like you said, 0:02:15.160 --> 0:02:16.280 in the Asia Pacific. 0:02:16.320 --> 0:02:19.440 But the president knows and so do these leaders leaders 0:02:19.440 --> 0:02:23.560 of democratic democratic nations, that if you don't, if you 0:02:23.600 --> 0:02:27.480 don't take care of the nation's dead, if you allow 0:02:27.639 --> 0:02:32.080 the United States to default, virtually nothing else matters in 0:02:32.160 --> 0:02:33.960 terms of what you're trying to do around the world. 0:02:34.560 --> 0:02:37.000 You know, I heard comments to know BI analysts that 0:02:37.040 --> 0:02:39.880 our credibility in the region is suffering because you know, 0:02:39.919 --> 0:02:44.239 we're not going on two other stops, but the credibility 0:02:44.280 --> 0:02:48.040 really suffers if we end up, you know, being a 0:02:48.080 --> 0:02:49.560 debtor nation if we default. 0:02:49.639 --> 0:02:51.920 That was the message I got in Nagata from the 0:02:51.960 --> 0:02:52.760 foreign ministers. 0:02:53.120 --> 0:02:56.200 Well, a president, I'm a deadbeat nation that our international 0:02:56.200 --> 0:02:59.760 credibility standing suffers. So the President is doing the right 0:02:59.800 --> 0:03:02.440 thing here. He's obviously the G seven is important. A 0:03:02.440 --> 0:03:05.200 lot of things to discuss while we're here in Japan. 0:03:05.800 --> 0:03:09.120 We can reschedule a trip to Australia, we can reschedule 0:03:09.120 --> 0:03:11.680 a trip to Papula, Nigina, which you can't reschedule. You 0:03:11.760 --> 0:03:16.000 can't reschedule the looming debt ceiling deadline. That is a 0:03:16.040 --> 0:03:18.400 hard fixed thing, and we've got to make sure we 0:03:18.480 --> 0:03:19.799 get these negotiations through. 0:03:19.880 --> 0:03:22.560 Critics will say, then the President didn't manage this correctly. 0:03:22.680 --> 0:03:25.840 He should have been speaking to Speaker McCarthy earlier so 0:03:25.880 --> 0:03:28.840 he didn't have to cancel his foreign trip. But do 0:03:28.840 --> 0:03:30.359 you think the president here in the g set will 0:03:30.360 --> 0:03:32.600 be able to say to leaders, well, West will not 0:03:32.720 --> 0:03:33.679 default on its debt. 0:03:34.120 --> 0:03:36.600 Well, the president's optimistic. He said that before we left. 0:03:36.600 --> 0:03:38.480 He said that he's optimistic that we'll get there. And 0:03:38.560 --> 0:03:40.800 so that's one of the reasons why we're going home 0:03:40.800 --> 0:03:42.440 a little bit early, so that he can be there 0:03:42.480 --> 0:03:45.000 to make sure the Congress does its job. But let's 0:03:45.040 --> 0:03:48.720 go back a little second on the talking to Speaker McCarthy. 0:03:49.360 --> 0:03:53.960 Not defaulting is a congressional duty. It's in the constitution. 0:03:55.160 --> 0:03:59.080 There didn't need to be negotiations over the debt. Now 0:03:59.120 --> 0:04:00.920 the President is willing to sit down and talk to 0:04:00.960 --> 0:04:05.160 Speaker McCarthy about the budget and appropriations, and we'll do that. 0:04:05.640 --> 0:04:08.360 But when it comes to raising the debt ceiling, that 0:04:08.480 --> 0:04:11.920 is something that has been done seventy eight times under 0:04:11.960 --> 0:04:17.640 democratic and Republican administrations, without negotiations, without having to have 0:04:17.680 --> 0:04:20.640 an argument about it. So there's no reason for I mean, 0:04:20.680 --> 0:04:23.360 the argument that we should have talked to X number 0:04:23.360 --> 0:04:26.080 of days ago, this should be this is a congressional 0:04:26.200 --> 0:04:28.440 duty there. They should just simply do their job. 0:04:28.720 --> 0:04:30.800 This is something we're going to be closely watching here 0:04:30.880 --> 0:04:33.480 from the sidelines of the G seven when it comes 0:04:33.520 --> 0:04:36.360 to of course, one of the biggest elephants in the 0:04:36.440 --> 0:04:38.240 room is going to be China. We know the US 0:04:38.360 --> 0:04:42.359 wants to go after economic coersion that's coming out of China. Also, 0:04:42.400 --> 0:04:45.800 the Papua New Guinea trip was about deterring Beijing. Is 0:04:45.839 --> 0:04:50.000 there a concern from the White House that potentially when 0:04:50.000 --> 0:04:52.839 it comes to say, Papa New Guinea, that Beijing is 0:04:52.880 --> 0:04:55.000 trying to do a security agreement like they did with 0:04:55.040 --> 0:04:58.200 the Solomon Islands. How concerned is it about making sure 0:04:58.240 --> 0:05:00.920 that countries like that are on board what the US 0:05:01.040 --> 0:05:01.680 is doing well. 0:05:01.920 --> 0:05:04.440 The trip in Papua New Guinea was not about deterring China. 0:05:04.480 --> 0:05:08.440 It was about again revitalizing, reinvigorating our vast network of 0:05:08.440 --> 0:05:11.560 alliances and partnerships in this region, a network by the way, 0:05:11.560 --> 0:05:14.960 that China can't even close to match, just can't get there. 0:05:15.440 --> 0:05:17.640 Five of our seven Treaty alliances are in this part 0:05:17.640 --> 0:05:19.479 of the world, and a lot of people don't realize that. 0:05:19.600 --> 0:05:21.840 So I mean there's a lot of a lot of 0:05:22.080 --> 0:05:25.040 network of partnerships and alliances here that we're trying to 0:05:25.600 --> 0:05:31.960 try to bolster. And we will still have discussions and 0:05:32.000 --> 0:05:34.920 some deliverables with Papua New Guinea. You'll see that even 0:05:34.920 --> 0:05:36.839 though we're not making that stop, we'll see. 0:05:36.640 --> 0:05:37.440 Those move forward. 0:05:37.960 --> 0:05:40.960 I can't speak for what China's doing with each individual 0:05:41.000 --> 0:05:45.600 Pacific Island nation. They have used a mix of intimidation 0:05:45.720 --> 0:05:50.120 and coersion economic and security wise to try to have 0:05:50.240 --> 0:05:52.760 their way in this part of the world. We are 0:05:52.800 --> 0:05:56.000 not asking countries to choose between the United States and China. 0:05:56.279 --> 0:05:59.000 They get to decide what their bilateral relationships look like 0:05:59.040 --> 0:06:02.200 and who they associate with and what that association looks like. 0:06:02.480 --> 0:06:06.320 What we are doing is trying to show in demonstrable 0:06:06.360 --> 0:06:10.320 way in ways that the United States is a reliable, stable, 0:06:10.400 --> 0:06:12.719 credible partner in this part of the world and around 0:06:12.760 --> 0:06:16.679 the world, and to give people alternatives to the coercion 0:06:16.760 --> 0:06:20.400 and the intimidation that the Chinese tend to demonstrate. 0:06:20.440 --> 0:06:23.760 How close are g seven leaders aligned on this point 0:06:24.120 --> 0:06:28.880 on making sure they are deemed risking from China, most notably, 0:06:28.880 --> 0:06:32.200 I'm thinking of Europe and Emmanuel Malcaran after his visit 0:06:32.240 --> 0:06:35.840 where he said that Europe actually has strategic autonomy when 0:06:35.880 --> 0:06:37.279 it comes to China. 0:06:37.440 --> 0:06:39.400 China is going to be key on the agenda here 0:06:39.720 --> 0:06:41.839 in Japan, and I think you're going to see the 0:06:41.920 --> 0:06:45.279 G seven leaders all speak with one voice about the 0:06:45.400 --> 0:06:48.520 challenges that China poses here in the Endo Pacific and 0:06:48.560 --> 0:06:51.120 around the world, but also what some of the opportunities 0:06:51.160 --> 0:06:55.320 are as the G seven nations are to compete, to 0:06:55.400 --> 0:06:59.640 compete fairly, but to compete well with China. 0:07:00.160 --> 0:07:01.040 Broad strokes of. 0:07:01.000 --> 0:07:05.000 Words, though, will there be any action visa E China 0:07:05.520 --> 0:07:06.640 and the G seven. 0:07:06.440 --> 0:07:08.080 Well, I'm not going to get ahead of the of 0:07:08.120 --> 0:07:11.760 the discussions, and the G seven leaders will absolutely spend 0:07:12.200 --> 0:07:14.000 quite a bit of time here as you would expect 0:07:14.040 --> 0:07:17.000 they would certainly here in Japan talking about the challenges 0:07:17.000 --> 0:07:20.440 that the PRC represents. They will think, I'm convinced of 0:07:20.440 --> 0:07:22.800 it that you'll see at the end of those discussions 0:07:22.800 --> 0:07:25.960 that they'll all speak with one voice about about how 0:07:25.960 --> 0:07:29.560 we need to treat that particular competition from not just 0:07:29.560 --> 0:07:32.320 from a security perspective, from an economic perspective, from a 0:07:32.360 --> 0:07:33.800 diplomatic perspective. 0:07:33.640 --> 0:07:36.360 Adamal John Kirby, thank you so much for joining Bloomberg TV. 0:07:37.080 --> 0:07:41.240 That was, of course, the National Security counselor Strategic Communications 0:07:41.240 --> 0:07:44.680 Director John Kirby, his first interview on the ground. He's 0:07:44.720 --> 0:07:47.400 been here for under four hours here and here as Shima, Japan. 0:07:47.720 --> 0:07:50.240 Spend most of that traffling from the airport. So to 0:07:50.280 --> 0:07:53.240 an interview with an Marie mh great work. Has always 0:07:53.280 --> 0:07:55.160 looking forward to converridge to the G seven. 0:07:59.280 --> 0:08:03.080 Ellen Ze joins us now quarters on from a transitory 0:08:03.600 --> 0:08:07.680 economics and Ellen, in your note today, you are framing 0:08:07.720 --> 0:08:08.240 out a. 0:08:08.240 --> 0:08:09.640 New job economy. 0:08:09.680 --> 0:08:11.840 We are at a two hundred and fifty thousand run 0:08:11.920 --> 0:08:15.280 rate on non farm payrolls, and you have a stunning 0:08:15.320 --> 0:08:20.800 observation of a path to forty thousand non farm payrolls. 0:08:20.840 --> 0:08:21.920 How close are we do that? 0:08:23.240 --> 0:08:23.480 Yeah? 0:08:23.520 --> 0:08:26.680 So I think we can hit that late summer tom 0:08:26.760 --> 0:08:29.560 And you know, look, you want to assume that things 0:08:29.560 --> 0:08:32.319 are linear, which they're never linear. Then if you look 0:08:32.360 --> 0:08:34.480 at the slowdown that we've had and just project that 0:08:34.559 --> 0:08:37.640 forward and say, knowing nothing else, let's just assume that continues, 0:08:37.679 --> 0:08:39.920 you would be down below one hundred thousand within a 0:08:39.920 --> 0:08:43.600 couple of prints. So, look, we see a slowing path 0:08:43.640 --> 0:08:46.040 for job gains here, but we don't see a cliff, 0:08:46.080 --> 0:08:49.040 And I think that's very important. Claims are still low, 0:08:49.480 --> 0:08:52.640 companies are still doing more labor hoarding than they are 0:08:52.760 --> 0:08:55.280 laying off. We see an employment gap that still needs 0:08:55.320 --> 0:08:58.280 to get filled, and so I think there's a lot 0:08:58.320 --> 0:09:01.880 of support here that, Yeah, let's be realistic. Things are slowing, 0:09:02.320 --> 0:09:04.640 but this is not a cliff that we're headed toward 0:09:05.280 --> 0:09:06.400 for job gains. 0:09:06.559 --> 0:09:09.560 This is, Lisa, to me, the conundrum for you, me 0:09:09.679 --> 0:09:13.720 and John into May into June into July is we 0:09:13.760 --> 0:09:16.880 don't have a clue what the is. Ellen mentions the 0:09:16.920 --> 0:09:18.719 linear flows here on labor no. 0:09:18.760 --> 0:09:21.440 Clue given the fact that it is slow. How does 0:09:21.480 --> 0:09:24.120 a feder respond to a slow burn, Given the fact 0:09:24.240 --> 0:09:27.160 that they are continuing to say inflations are pre eminent 0:09:27.200 --> 0:09:30.720 concern and inflation has been sticky, Ellen, can they afford 0:09:31.200 --> 0:09:34.079 to not hike rates again if we continue to see 0:09:34.120 --> 0:09:36.920 just a slow grind lower but not that quickly and 0:09:37.000 --> 0:09:38.200 inflation is still higher. 0:09:39.200 --> 0:09:42.760 Yeah, So, Lisa, I think it's a good question. Inflation 0:09:42.920 --> 0:09:46.240 is moving in the right direction, but very stubbornly so, 0:09:46.360 --> 0:09:49.600 and it's not moved down clearly and convincingly as Chair 0:09:49.679 --> 0:09:52.480 pal has wanted. But that was not a prerequisite to 0:09:52.559 --> 0:09:56.760 them stopping hiking, right that is a prerequisite to when 0:09:56.800 --> 0:10:01.120 they make adjustments, say normalizing policies. Inflation has down a lot, 0:10:01.200 --> 0:10:03.920 So right now we think they're at the point where, yes, 0:10:04.800 --> 0:10:09.040 it's arguable on the FED whether they are in restrictive territory. 0:10:09.080 --> 0:10:11.679 How far are they in restrictive territory? Are they close enough? 0:10:12.000 --> 0:10:14.719 We think that they're close enough. But the arguments that 0:10:14.760 --> 0:10:16.920 you are, the points that you make, would suggest that 0:10:16.960 --> 0:10:19.840 you need to keep that peak rate. 0:10:20.440 --> 0:10:22.240 There for quite some time. 0:10:22.320 --> 0:10:24.280 And I think that's the argument that the FED will 0:10:24.360 --> 0:10:27.319 lean on that as inflation slowly comes down. 0:10:27.160 --> 0:10:29.079 But they're holding rates high. 0:10:29.280 --> 0:10:33.920 Policy actually maintains its restrictive territory, and in fact it's 0:10:33.960 --> 0:10:36.760 even more restrictive throughout the year, and I think that's 0:10:36.760 --> 0:10:38.640 what policymakers ultimately will lean on. 0:10:38.880 --> 0:10:40.720 Ell And we were talking about this earlier and Tom 0:10:40.760 --> 0:10:42.920 asked the question, do we have a sense of what 0:10:43.040 --> 0:10:45.680 the new neutral really is? Do we have a sense 0:10:45.840 --> 0:10:47.880 of what it takes to really take some of the 0:10:47.960 --> 0:10:51.040 momentum out of an economy? That has defied all expectations 0:10:51.280 --> 0:10:54.440 that were incredibly gloomy heading into the year. What's your view, 0:10:54.480 --> 0:10:56.360 Do we have a better sense of what that neutral 0:10:56.440 --> 0:10:56.840 rate is? 0:10:58.040 --> 0:11:02.840 So I would say that, you know, very cynical of 0:11:02.880 --> 0:11:04.920 me to say that neutral does not exist. 0:11:05.840 --> 0:11:07.080 We're never at neutral. 0:11:07.160 --> 0:11:09.280 We pass it up and you know in hindsight whether 0:11:09.360 --> 0:11:12.600 you're at neutral, below neutral, above neutral. But we're always 0:11:12.640 --> 0:11:18.040 reaching for these sort of fictitious metrics or goals. What 0:11:18.080 --> 0:11:21.360 the Fed does know or can see is that things 0:11:21.400 --> 0:11:24.360 are slowing. We think they're going to be very slow 0:11:24.360 --> 0:11:26.160 in the middle of this the middle two quarters of 0:11:26.200 --> 0:11:29.640 this year. And that's an economy with a backdrop of 0:11:29.880 --> 0:11:34.280 banking pressures, of ball financial conditions that you might not 0:11:34.320 --> 0:11:36.160 want to push it further, but you want to maintain 0:11:36.200 --> 0:11:37.960 the option to hike. 0:11:37.760 --> 0:11:39.120 Again if you need to. 0:11:39.280 --> 0:11:41.920 And I think that's that's something that we have to consider. 0:11:41.960 --> 0:11:45.000 There are two sided risks. After the pause here, I 0:11:45.280 --> 0:11:45.760 got to rip. 0:11:45.760 --> 0:11:47.440 Up the script. You've done it with me before. 0:11:47.520 --> 0:11:49.480 Don't panic here, And the answer is that we're going 0:11:49.520 --> 0:11:53.400 to talk to Ellen Zenner foreign exchange strategist. Moments ago, 0:11:53.800 --> 0:11:57.840 Euro dollar solid one ten forever just breached through a 0:11:57.880 --> 0:12:01.320 one oh eight to a weaker euro one oh seven 0:12:02.160 --> 0:12:05.560 point ninety nine right now on YU dollar. To me, 0:12:05.640 --> 0:12:08.840 the great unspoken, along with your idea of NFP down 0:12:08.840 --> 0:12:13.080 well under one hundred thousand, is resilient to stronger dollar. 0:12:13.800 --> 0:12:17.160 Dovetail that into your call, do we get a resilient 0:12:17.320 --> 0:12:20.840 dollar again with the certitude out there the consensus of 0:12:20.920 --> 0:12:22.120 dollar weakness. 0:12:23.000 --> 0:12:27.520 Look, I think that you know, currency movements are very important, 0:12:27.520 --> 0:12:30.240 and of course where strategists are, you know, shorter term 0:12:30.320 --> 0:12:34.160 tactical tactically on the dollar matter a good deal. But 0:12:34.840 --> 0:12:37.040 I think there's going to be a realization here that 0:12:37.120 --> 0:12:42.400 the economy is not collapsing, and in fact a realization that, yes, 0:12:42.520 --> 0:12:44.880 we think the FED is paused here, but there are 0:12:44.880 --> 0:12:48.080 meread options for policy after that. Right, It's very easy 0:12:48.080 --> 0:12:51.360 to get inflation down from seven percent to four percent, 0:12:51.640 --> 0:12:53.920 is very difficult to get inflation down from four percent 0:12:53.960 --> 0:12:56.400 to two percent, and that might take more work from 0:12:56.440 --> 0:12:59.719 the FED after they pause. So I think it's more 0:12:59.720 --> 0:13:04.400 of that realization creeping in that five point one percent 0:13:04.480 --> 0:13:07.600 is the peak now, but they may have to move 0:13:07.720 --> 0:13:08.800 higher at some point. 0:13:09.200 --> 0:13:12.120 At least to me, this is so important. Dovetailing in 0:13:12.200 --> 0:13:15.040 what Ian Lincoln said, with what Ellen Zender said and 0:13:15.080 --> 0:13:18.560 the idea of the asymmetric call, and this is frankly 0:13:18.600 --> 0:13:23.080 Hollendhorst as well. Do you get a symmetric call where 0:13:23.120 --> 0:13:26.520 you get rates up or the Zenner pause and we 0:13:26.600 --> 0:13:30.079 don't understand the duration of that pause, and that's where 0:13:30.080 --> 0:13:30.840 you get the dollar. 0:13:30.760 --> 0:13:32.440 Dynamic to come in well, and we also have the 0:13:32.480 --> 0:13:34.760 sense that Europe perhaps has seen the bulk of the 0:13:34.760 --> 0:13:37.720 gains and perhaps their signs that the other side of 0:13:37.760 --> 0:13:40.199 the trade isn't doing as well as the resilience of 0:13:40.240 --> 0:13:43.040 the US economy. Ellen to that point. We were talking 0:13:43.040 --> 0:13:45.360 with Jim Bianco of Bianco Research earlier and one of 0:13:45.400 --> 0:13:47.800 the big fears about the US was the banking crisis 0:13:47.840 --> 0:13:50.920 that wasn't or the banking crisis that hasn't yet materialized, 0:13:51.120 --> 0:13:52.960 and he said it's too soon to say all clear, 0:13:53.160 --> 0:13:55.520 which a lot of people have been saying. Do you 0:13:55.600 --> 0:13:58.360 agree with this idea of a bank walk of sort 0:13:58.360 --> 0:14:01.560 of assets just kind of tiptoeing out the door over 0:14:01.559 --> 0:14:03.480 a longer period of time, more akin to the nineteen 0:14:03.480 --> 0:14:06.960 eighties SNL crisis that still hasn't fully transpired. 0:14:08.040 --> 0:14:10.440 Yeah, So I think, look, we've had a shock to 0:14:10.480 --> 0:14:14.120 the system that takes time to flow through. I don't 0:14:14.120 --> 0:14:17.200 believe this is a credit crunch where we've just choked 0:14:17.240 --> 0:14:19.240 off the flow of credit to the economy, but it's 0:14:19.280 --> 0:14:24.160 clearly a credit cycle, and it's coming also from a 0:14:24.280 --> 0:14:28.560 drop in loan demand. So I agree we can't assume 0:14:28.560 --> 0:14:32.960 that we're past sort of these evils lurking around the corner. 0:14:32.960 --> 0:14:35.240 But I think one of the difficult things here, which 0:14:35.280 --> 0:14:37.320 is very different from the eighties, is that banks are 0:14:37.320 --> 0:14:40.560 now having to contend with sentiment. So think of a 0:14:40.600 --> 0:14:43.640 bank that's had an equity event, right, and equity investor 0:14:43.680 --> 0:14:45.960 does not want to own that stock, so the stock 0:14:46.040 --> 0:14:50.120 goes down, and then like clockwork, within days outflows of 0:14:50.160 --> 0:14:53.400 deposits because you're suspicious of is that bank where I'm 0:14:53.440 --> 0:14:55.080 holding my money safe. 0:14:55.440 --> 0:14:57.080 So it's a sentiment. 0:14:57.200 --> 0:14:58.960 And then you've got bank runs that move at the 0:14:58.960 --> 0:15:02.680 speed of light, that are electronic now. And so this 0:15:02.720 --> 0:15:05.040 is all something that the banking system has to contend 0:15:05.120 --> 0:15:09.040 with and I think will continue to weigh on credit 0:15:09.120 --> 0:15:13.080 availability and lending for some time. 0:15:13.200 --> 0:15:15.800 Ellen when you talk about the bank walk and later 0:15:15.840 --> 0:15:18.920 this year, does it become that much more sort of 0:15:19.120 --> 0:15:21.920 pronounced as a result of the FED remaining on hold 0:15:22.160 --> 0:15:25.200 if the economy is also slowing in a commensurate level. 0:15:25.240 --> 0:15:28.280 So basically the relative yield that you're getting on those 0:15:28.400 --> 0:15:30.080 T bills is that much better. 0:15:31.360 --> 0:15:34.240 Yeah, So look, I think for banks it comes down 0:15:34.280 --> 0:15:37.480 to liquidity. And you know, you can look at it 0:15:37.520 --> 0:15:42.160 one way and say, well, banks are accessing the facility 0:15:42.200 --> 0:15:43.800 that the FED is put in place, or they might 0:15:43.840 --> 0:15:48.640 be accessing the discount window. But ultimately the other side 0:15:48.640 --> 0:15:50.360 is the way I would look at That's a good thing. 0:15:50.720 --> 0:15:54.760 Banks need liquidity and they're accessing it, and so that 0:15:54.920 --> 0:15:58.240 alone will help banks work through this. 0:15:58.880 --> 0:16:00.560 Ellen. I wanted one fine question. 0:16:00.720 --> 0:16:02.480 There's a guy named Gorman, I think it's the first 0:16:02.560 --> 0:16:04.640 name is James Gorman, and he said a number of 0:16:04.640 --> 0:16:07.600 months ago something like and he said it with that accent. 0:16:07.640 --> 0:16:10.760 He's got that, you know, that Australian thing going. He said, 0:16:10.800 --> 0:16:13.200 with some fury. If they can eat in a restaurant 0:16:13.240 --> 0:16:17.400 and so they can come to work. I'm fascinated what 0:16:17.520 --> 0:16:21.360 you see nationwide on back to work. It's a big 0:16:21.400 --> 0:16:24.200 debate in Manhattan, but are we going to go back 0:16:24.240 --> 0:16:24.640 to work? 0:16:24.640 --> 0:16:26.440 In America? 0:16:26.600 --> 0:16:29.200 So we are going back to work? 0:16:29.280 --> 0:16:32.120 I think when I've traveled around the country, I find 0:16:32.560 --> 0:16:36.040 a good deal of regional differences in terms of people 0:16:36.080 --> 0:16:38.840 that are back to work full time almost full time. 0:16:39.080 --> 0:16:40.800 Look, why does this need to be a worry? 0:16:40.880 --> 0:16:44.920 I mean, yes, office space for commercial real estate is 0:16:45.040 --> 0:16:49.480 working through problems resizing. It's more of a Tier B 0:16:49.600 --> 0:16:53.680 and Tier C market than a Tier A problem. But still, 0:16:54.440 --> 0:16:56.440 we don't have to be in five days a week. 0:16:56.520 --> 0:16:59.720 That's not what new work arrangements need to look like. 0:17:00.040 --> 0:17:01.200 We do need to connect. 0:17:01.240 --> 0:17:03.880 See in a restaurant in Soho. We'll try to ignore 0:17:03.960 --> 0:17:07.040 mister Gorman if we can. Ellen Zatner with Morgan Stanley 0:17:07.119 --> 0:17:08.720 working for the James. 0:17:08.680 --> 0:17:21.200 Gorman, we've found a bill. She joins us around a tangle. 0:17:21.400 --> 0:17:23.760 Bamba rhin Hop, the head of USA allocation at Voye 0:17:23.840 --> 0:17:26.760 Investment Management, Barbara, good morning, Good morning, your bullish Why. 0:17:27.000 --> 0:17:28.720 Well, Look, we think there are a couple of things 0:17:28.760 --> 0:17:31.240 that are likely to go right. Inflation is still going 0:17:31.240 --> 0:17:34.600 in the right direction. Yields are very supportive but have 0:17:34.680 --> 0:17:37.400 come off of their highs. That gives the pe multiple 0:17:37.440 --> 0:17:39.159 for the S and P five hundred a little bit 0:17:39.200 --> 0:17:42.040 of wind at its back. But mostly we think that 0:17:42.119 --> 0:17:45.240 it's going to be the economic data is slowing enough 0:17:45.520 --> 0:17:48.240 that the FED is able to take their foot off 0:17:48.280 --> 0:17:50.000 of the brakes and maybe take a break or a 0:17:50.080 --> 0:17:53.000 pause in their hiking cycle, and that is a very 0:17:53.000 --> 0:17:54.520 good tailwind for the equity market. 0:17:54.800 --> 0:17:55.840 At this point, you've. 0:17:55.680 --> 0:17:59.159 Been perhaps painfully along the US over the rest of 0:17:59.160 --> 0:18:01.200 the world, and this is been sort of a contrarian trade. 0:18:01.240 --> 0:18:02.879 Is everyone piled into Europe and the rest of the 0:18:02.880 --> 0:18:05.720 world that's harding to shift around the margins at least 0:18:05.720 --> 0:18:08.760 this week. What gives you confidence that has staying power 0:18:08.840 --> 0:18:10.600 and that you'll basically be able to say. 0:18:10.440 --> 0:18:12.320 I was right all along, It just took a little bit. 0:18:12.600 --> 0:18:16.920 We never say that, Lisa, But nonetheless, look, we think 0:18:16.920 --> 0:18:19.840 that the US has some really good qualities to it right, 0:18:20.119 --> 0:18:22.600 So the Federal Reserve was one of the first central 0:18:22.640 --> 0:18:25.960 banks to start raising interest rates. Inflation in the US 0:18:26.080 --> 0:18:28.400 peaked a number of months ago. It's on the right 0:18:28.440 --> 0:18:31.000 trajectory and going in the right direction, if not fast 0:18:31.080 --> 0:18:34.680 enough for all market participants. But in Europe, think about this, 0:18:35.720 --> 0:18:37.720 A lot of bad news had been in the price 0:18:37.840 --> 0:18:38.320 in the. 0:18:38.200 --> 0:18:39.560 Fourth quarter of last year. 0:18:40.600 --> 0:18:44.000 A lot of things didn't happen, so not necessarily incrementally 0:18:44.040 --> 0:18:47.400 good news, but the disaster scenario didn't happen. You need 0:18:47.400 --> 0:18:49.520 things to go in the right direction for Europe to 0:18:49.560 --> 0:18:52.800 continue to work. A lot of fund managers are indeed 0:18:52.800 --> 0:18:56.359 putting assets out there. We're seeing asset allocators start to 0:18:56.359 --> 0:19:00.520 put money overseas. That's generally when the data to really 0:19:00.560 --> 0:19:02.879 start breaking your way. If you think the US has 0:19:02.880 --> 0:19:05.199 an information problem, Europe has a much bigger one and 0:19:05.240 --> 0:19:07.880 a much stickier one, and their central bank is much 0:19:07.920 --> 0:19:10.280 further behind the curve than the US is. So at 0:19:10.280 --> 0:19:12.359 the margin, we think that the US is likely to 0:19:12.560 --> 0:19:13.760 outpace the rest of the world. 0:19:14.320 --> 0:19:15.160 The US to talk place. 0:19:15.240 --> 0:19:17.679 Let's be blunt more than anyone we talk to. Voya 0:19:17.800 --> 0:19:20.760 is America first? Which five does a dollar fold into that? 0:19:20.840 --> 0:19:23.160 I mean to me the big surprise here. No one 0:19:23.280 --> 0:19:24.680 is looking for resilient. 0:19:24.400 --> 0:19:27.000 Or strong dollar. John dxy A one. 0:19:26.880 --> 0:19:29.399 Oh three level BBDXY twelve thirty. 0:19:29.160 --> 0:19:31.160 Six, All of a sudden resilient dollar. 0:19:31.240 --> 0:19:32.879 Is that part of the America first story? 0:19:33.000 --> 0:19:35.320 Well, look, you don't necessarily need the currency going in 0:19:35.359 --> 0:19:37.760 your direction in order for the US to do well. 0:19:37.840 --> 0:19:40.080 I think part of it also is the visibility that 0:19:40.119 --> 0:19:42.280 you have on the US is actually quite good. The 0:19:42.359 --> 0:19:44.840 US consumer is holding in there quite well, even in 0:19:44.880 --> 0:19:48.040 the face of job openings coming down in some rebalance 0:19:48.240 --> 0:19:50.720 in the labor market. So the US just has more 0:19:50.760 --> 0:19:53.119