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Speaker 1: Global business news twenty four hours a day at Bloomberg

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Speaker 1: dot com, the Radio, plus Globo Last and on your radio.

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Speaker 1: This is a Bloomberg business flash from Bloomberg World Handquarters.

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Speaker 1: I'm Charlie Pelt. A mixed picture for stocks. Little changed

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Speaker 1: in US equities right now. The Dow is down five,

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Speaker 1: a drop there of less than point one percent. SMP

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Speaker 1: up to a game of point one percent. Nestack up five,

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Speaker 1: also a game of point one percent. We're brought to

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Speaker 1: you by Brooks Brothers Big Event. Their semi annual sale

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Speaker 1: is going on now through June. Shop early for the

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Speaker 1: best selection. Visit Brooks Brothers dot com to shop the

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Speaker 1: entire collection, or to find the location closest to you.

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Speaker 1: Stocks are fluctuating. We've got the tenure up six thirty seconds,

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Speaker 1: the yield one point six eight percent, Gold down four

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Speaker 1: seventy ounce to twelve sixty seven, a drop of four

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Speaker 1: tenths of one percent, and crude oil down one dollar

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Speaker 1: nine cents now to seventy nine. West Texas Intermediate at

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Speaker 1: declining two point two. I'm Charlie Pellock. That's a Bloombird

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Speaker 1: business flash. Bloomberg jaging stock to the Fed in focus.

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Speaker 1: Interest rates start too row for where the economy is going.

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Speaker 1: The question is how much higher should they be. Feds

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Speaker 1: increased to fast yes, and in doing so, it has

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Speaker 1: increased its liability. Keeping interest rates at zero for a

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Speaker 1: long time is not going to cause inflation to go up.

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Speaker 1: It's very controversial. I think what we need to do

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Speaker 1: is find a way for the FED to integrate its

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Speaker 1: policy and think more about its impact on the world.

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Speaker 1: The Fed in focus on Bloomberg Radio, the Fed in

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Speaker 1: focus day to affect your Janet Allen's testimony to the Congress,

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Speaker 1: this time the House of Representatives the Financial Services Committee,

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Speaker 1: pretty much a repeat of yesterday's testimony. But when you

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Speaker 1: step back and look at the two days with Jane

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Speaker 1: Allens seems to be saying is that she no longer

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Speaker 1: is certain the Federals the economy, excuse me, is on

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Speaker 1: an upswing that will continue and warrant more rate hikes.

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Speaker 1: She is concerned even about long term slowdown with Larry

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Speaker 1: Summers from a Treasure Secretary called secular stagnation, and that

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Speaker 1: could put the FED on hold for a long time.

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Speaker 1: Joining us now is Leo Hanian, senior fellow at the

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Speaker 1: Hoover Institution at Stanford University. Lee welcome, Hi, thanks for

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Speaker 1: having me so on that particular point, do you think

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Speaker 1: Janet Yellen's acknowledgement of Larry Summer's argument, which a lot

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Speaker 1: of people have not been on his bandwagon, is justified.

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Speaker 1: You're certainly an expert on long term trends on on

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Speaker 1: US growth. What do you see? Yeah, I mean, in

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Speaker 1: terms of the data we've been seeing, there's really no

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Speaker 1: sign that the economy has recovered back to its pre

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Speaker 1: two thousand and eight trend um productivity growth, which is

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Speaker 1: is about point nine percent per year since two thousand

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Speaker 1: and nine, its historical averages two and a half percent

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Speaker 1: per year. So this is the most disturbing trend that

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Speaker 1: I'm seeing in the economy right now. Uh, And I

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Speaker 1: don't see any sign that productivity growth is going to increase.

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Speaker 1: Professor h hanean um And I just want to note

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Speaker 1: that you're not only a professor of economics at the

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Speaker 1: University of California u c l A, but also advised

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Speaker 1: many federal Reserve banks. Also to note that you are

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Speaker 1: at the Hoover Institution and the head of the enter

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Speaker 1: Family Program at u c l A. In that context,

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Speaker 1: of your research. You did some research about the New

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Speaker 1: Deal and Franklin Delano Roosevelt, if you were to do

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Speaker 1: that same kind of research on what the Federal Reserve

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Speaker 1: has been doing in the last five to ten years

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Speaker 1: in the United States, give us an idea of how

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Speaker 1: that would play out. Well. In the nineteen thirties, we

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Speaker 1: had a slow recovery where jobs didn't come back. The

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Speaker 1: big difference is that productivity growth was very, very rapid

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Speaker 1: after after three And what happened is that once we

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Speaker 1: free the economy up by removing some gum rate interventions

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Speaker 1: that were depressing job creation, depressing new business formation, the

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Speaker 1: economy really started to take off about in nineteen thirty nine.

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Speaker 1: Today we don't have the benefit of having a strong

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Speaker 1: underlying economy with with strong productivity growth. And the set

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Speaker 1: is is put themselves really into a corner. And then

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Speaker 1: they've really pinned themselves into a corner in the sense

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Speaker 1: that they've kept the interest rates obviously close to zero um,

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Speaker 1: they've embarked on a number of quantitative easing programs, and

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Speaker 1: when you look at the data, you don't see the

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Speaker 1: employment population ratio coming back anywhere close to we were

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Speaker 1: before we see very weak productivity growth. And there's not

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Speaker 1: really any evidence I'm aware of it indicates that the

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Speaker 1: if the FED continues to do this, the it will

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Speaker 1: enhance economic growth in any way. Uh, FED policy is

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Speaker 1: not really the medicine for the disease we have right now. Well,

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Speaker 1: what is the medicine then? Yeah, the biggest you know,

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Speaker 1: the biggest issue we have right now, and this is

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Speaker 1: this is a unique situation with the US economy. We're

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Speaker 1: the only country in the world has had two plus

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Speaker 1: years of systematic, persistent economic growth on average year and

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Speaker 1: year out. No other country has ever done that over

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Speaker 1: a two century period. And the reason we've been able

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Speaker 1: to do that is because we replace big businesses that

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Speaker 1: ultimately decline with new transformational businesses that take off. So

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Speaker 1: back in the twenties, it was General Electric and General

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Speaker 1: Motors in US, Deal and DuPont and Kodak, and they

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Speaker 1: helped us grow through the nineteen fifties and sixties. And

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Speaker 1: then after that it was Apple and Microsoft and Oracle

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Speaker 1: and FedEx and Walmart and Costco, and they've been the

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Speaker 1: reason we've been able to grow for the last three

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Speaker 1: five years. What we know what we're not seeing now

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Speaker 1: is who will be the new Apple, the new Microsoft,

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Speaker 1: the new fed X, the new Walmart. And we have

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Speaker 1: about a thirty drop in new business formation. We've never

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Speaker 1: seen anything like that. What new business owners tell us

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Speaker 1: is that they see high tax rates, particularly a tax

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Speaker 1: code that really impacts them much differently than the tax

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Speaker 1: code impacts very large businesses. They talk about a difficulty

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Speaker 1: finding skilled workers who are well matched for jobs. They

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Speaker 1: talk about difficulties in finding capital, and so some of

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Speaker 1: those issues I think we can sort out, such as

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Speaker 1: UM reforming dot frank, which has really impacted community banks,

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Speaker 1: which were the banks that really made it possible for

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Speaker 1: new businesses, a small businesses to grow, and they're just

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Speaker 1: having a really hard time getting loans because it's become

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Speaker 1: so expensive to make a small business loan. I think

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Speaker 1: that is that kind of pass a lot. I don't

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Speaker 1: even know where. I gotta say that's a very uh

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Speaker 1: coach and description of what's going on. Very interesting. Lee

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Speaker 1: Orhanian is a senior Fellow at the Hoover Institution at

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Speaker 1: Stanford University and also professor of Economics at u C

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Speaker 1: l A. Didn't that thank you very much for joining us,

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Speaker 1: Sir um Kathleen. Very interesting descriptions. I think so too. Honestly,

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Speaker 1: Lee is summing up so many issues, and I think

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Speaker 1: the kind of the point he was getting out and

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Speaker 1: maybe you're gonna get two PM. Can the federally fixes

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Speaker 1: by keeping race solo? I thought, that's the big questions

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Speaker 1: description of this is not the right medicine for this

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Speaker 1: particular ailment. Very telling. You're listening to taking Stock on

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Speaker 1: Bloomberg Radio, Hoover, taking Stock is a brunt to you

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Speaker 1: by um being coming up next, we're going to continue

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Speaker 1: the FED in focus