WEBVTT - The Fed, Airlines, War, And Return-To-Work 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.480 you interviews from CEOs, market crows, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.479 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:21.720 at Bloomberg dot com slash podcast The Fed. We've got 0:00:21.760 --> 0:00:24.479 minutes coming out today, Matt, two pm. Wall Street time 0:00:25.480 --> 0:00:27.680 rates are going up. Balance Sheet's gonna be watched. Just 0:00:27.760 --> 0:00:31.400 any minutes though, Okay, minutes that Jerome Powell said we're 0:00:31.440 --> 0:00:34.199 going to be important. You know, he recommended that we 0:00:34.280 --> 0:00:39.839 read these minutes. Really. Yeah, well, you don't have to 0:00:39.920 --> 0:00:43.560 do that for me, all right. That's get a little 0:00:43.560 --> 0:00:45.720 bit of a roundtable going here, Matt, because there's a 0:00:45.760 --> 0:00:47.400 lot to break down and when we think about this 0:00:47.440 --> 0:00:49.000 FEDER Reserve and what they're going to be doing for 0:00:49.040 --> 0:00:51.320 the remainder this year into next. Former New York Fed 0:00:51.360 --> 0:00:54.160 President Bill Dudley joins us, as well as Blomberg Blues 0:00:54.200 --> 0:00:56.640 Editor in chief Matt Winkler joining us here in our 0:00:56.640 --> 0:01:01.480 Bloomberg and actor studio emeritus absolutely founder of a bloom 0:01:01.680 --> 0:01:05.080 creator exactly, Um, Bill, thanks so much for joining us 0:01:05.200 --> 0:01:08.320 via zoom here. You know, a lot of investors are saying, 0:01:09.080 --> 0:01:11.800 you know, I think the Fed is still behind the 0:01:11.959 --> 0:01:14.640 curve here, even if we're talking multiple rate hikes fifty 0:01:14.640 --> 0:01:18.160 basis points here, fifty basis points there. What's your view? 0:01:19.440 --> 0:01:21.960 Of course, they're far far behind the Yelk curve, for 0:01:22.120 --> 0:01:24.760 far behind the curve in terms of tightening montary policy. 0:01:24.920 --> 0:01:28.320 Look at where short term indistrates are relative to inflation. 0:01:28.800 --> 0:01:31.400 Look at where short term ingistrates are relative to how 0:01:31.440 --> 0:01:34.640 tight the labor market is. The Fed basically says we 0:01:34.680 --> 0:01:37.440 want to be a neutral uh, and they're not even 0:01:37.520 --> 0:01:39.760 close to that. So they're going going to go very 0:01:39.840 --> 0:01:42.720 fast this year towards neutral over the next you know, 0:01:42.840 --> 0:01:46.880 nine months. What is neutral, Bill, Well, neutral obviously does 0:01:46.920 --> 0:01:50.440 depend a bit on where inflation settles out. If the 0:01:50.480 --> 0:01:53.280 Fed was at their two percent inflation objective, then neutral 0:01:53.560 --> 0:01:55.480 be a brown two and a half percent in terms 0:01:55.480 --> 0:01:57.880 of not all short term interest rates. But if inflation 0:01:57.880 --> 0:02:00.440 is higher, neutral fire as well. So it's also going 0:02:00.480 --> 0:02:03.760 to be important where we see inflation settle out. Matt, 0:02:03.800 --> 0:02:06.160 what do you think about? Um? It does seem that 0:02:06.200 --> 0:02:12.520 everyone's turned very hawkish and inflation, sorry, employment UM went 0:02:12.560 --> 0:02:16.600 from being questionable as to whether it's full now UM 0:02:16.800 --> 0:02:20.480 daily yesterday said it's tight, a very tight labor market. 0:02:21.480 --> 0:02:24.200 So I think the best way to look at this 0:02:24.400 --> 0:02:28.200 from the Fed's perspective is if you take a look 0:02:28.200 --> 0:02:31.320 at their preferred monthly measure of inflation, which is the 0:02:31.400 --> 0:02:35.560 US Personal consumption expenditure core Price Index, which if you 0:02:35.680 --> 0:02:39.640 juxtaposed it with a thirty trillion dollar bond markets expectation 0:02:39.680 --> 0:02:43.760 of inflation, and uh, what that shows is tenure break 0:02:43.800 --> 0:02:47.680 even rate or yield gap between the benchmark treasury and 0:02:48.400 --> 0:02:52.520 what we call treasury inflation protection securities are tips. The 0:02:52.520 --> 0:02:56.160 FED inflation measure shows us every day through yesterday, while 0:02:56.160 --> 0:02:58.560 the bond market anticipates all the days to come. And 0:02:58.600 --> 0:03:01.200 what we see is that between the second half of 0:03:01.280 --> 0:03:04.160 last year and today is an increase in inflation to 0:03:04.440 --> 0:03:09.200 five point four percent, the highest since bond investors, on 0:03:09.240 --> 0:03:12.160 the other hand, see inflation at about three percent. So 0:03:12.240 --> 0:03:16.040 this is a record divergence. And I think you know, 0:03:16.760 --> 0:03:19.799 since Bill and I started talking about such things more 0:03:19.840 --> 0:03:24.280 than three decades ago, um, you look at something else 0:03:24.520 --> 0:03:28.920 that's relevant, which is the FED Zones Survey the February 0:03:28.960 --> 0:03:34.360 survey of consumer expectations, and it shows consumers anticipate inflation 0:03:34.480 --> 0:03:39.120 subsiding to three point eight percent in three years. Um. 0:03:39.200 --> 0:03:42.080 So you know, before you go any further, I would 0:03:42.120 --> 0:03:46.000 ask Bill he has said. You have said, Bill consistently 0:03:46.080 --> 0:03:48.040 that the FED is behind the curve. So what's wrong 0:03:48.080 --> 0:03:52.360 with these pictures? The market is basically assuming that the 0:03:52.400 --> 0:03:55.520 FED is ultimately going to do their job. They may 0:03:55.520 --> 0:03:57.560 have gotten a late start, but they now are moving 0:03:57.560 --> 0:04:01.280 pretty rapidly in attaining direction of the market's view I 0:04:01.320 --> 0:04:03.520 think is that the federalis are will in fact get 0:04:03.560 --> 0:04:06.800 this done. Um. I think that's probably right. I think 0:04:06.800 --> 0:04:09.600 the big risk though, to the downside, is that whenever 0:04:09.640 --> 0:04:11.880 the FED has had to tighten sufficiently to push the 0:04:11.960 --> 0:04:15.520 unemployer rate up, the US economy has always fallen into recession. 0:04:15.920 --> 0:04:19.159 I'm not looking for a recession anytime soon, because montre 0:04:19.240 --> 0:04:21.479 policy first has to get to be tight. But I 0:04:21.640 --> 0:04:23.840 do think that the chances of the FED pulling off 0:04:23.839 --> 0:04:26.480 the soft laying this time are very very low at 0:04:26.480 --> 0:04:28.880 this point. Wait, so you don't see a recession in 0:04:28.920 --> 0:04:32.400 the next, say, twelve to eighteen months. It's retainly not 0:04:32.440 --> 0:04:34.520 in the next twelve months. The US economy has a 0:04:34.560 --> 0:04:36.680 lot of momentum behind it as we're as we're going 0:04:36.680 --> 0:04:39.720 into the opening up stage. So you've seen seeing the 0:04:39.839 --> 0:04:42.640 strength and payil employment over the last few months. We 0:04:42.720 --> 0:04:44.920 also have an imbalanced in a lot of areas between 0:04:44.960 --> 0:04:48.520 demand and supply where demand ex seeds supply. So even 0:04:48.520 --> 0:04:51.640 if the FED knocks back demand a little bit, supply 0:04:51.800 --> 0:04:55.960 is going to continue to recover as supply chains are normalized. 0:04:56.120 --> 0:04:58.600 And so I think it's quite a bit of momentum 0:04:58.600 --> 0:05:00.200 over the next twelve months or so. It's I think 0:05:00.200 --> 0:05:02.159 there's a recession coming. I don't think it's in the 0:05:02.200 --> 0:05:04.680 near room. And that's, by the way, consistent. You know, 0:05:04.720 --> 0:05:06.760 if you look at the Bloomberg's own survey of fifty 0:05:06.800 --> 0:05:10.719 seven economists, and it shows no consensus for that outcome 0:05:10.760 --> 0:05:14.280 a recession at least before the fourth quarter of And 0:05:14.680 --> 0:05:16.560 you can see that. We have a table that shows 0:05:17.160 --> 0:05:20.080 the average GDP forecast for each quarter in the next 0:05:20.120 --> 0:05:23.240 eight quarters ranges from two point three percent to four 0:05:23.279 --> 0:05:25.760 and a half percent, and even the lowest forecast and 0:05:25.800 --> 0:05:29.080 the eight quarters that we're talking about ranges from half 0:05:29.080 --> 0:05:31.679 a percent to three point two percent. So in other words, 0:05:32.080 --> 0:05:36.680 the worst of these scenarios, which we've compiled, doesn't anticipate 0:05:37.320 --> 0:05:40.359 a recession. And you've written about the strength of corporate 0:05:40.360 --> 0:05:42.360 America as well. I think a couple of columns ago 0:05:42.440 --> 0:05:48.120 you had had been quoting the Business round Table, UM 0:05:48.160 --> 0:05:51.200 and also the most recent earnings releases saying that you know, 0:05:51.839 --> 0:05:54.599 companies are looking to hire more than they ever have before. 0:05:54.800 --> 0:05:57.120 That's absolutely right. Um. You know, if you went to 0:05:57.160 --> 0:06:00.200 the Business round Table, which is the two if you like, 0:06:00.360 --> 0:06:03.799 most prominent companies c e O s, and they said 0:06:03.800 --> 0:06:08.760 they anticipated this year hiring more people than they have 0:06:08.839 --> 0:06:11.599 in the past two decades, which is saying a lot. 0:06:12.080 --> 0:06:14.599 And then if you look at something like debt ratios 0:06:14.640 --> 0:06:18.240 of American companies, even with all the record corporate borrowing 0:06:18.279 --> 0:06:21.559 that we've seen because interest rates have been so low, 0:06:21.720 --> 0:06:26.120 the debt ratios show that companies are actually very healthy. 0:06:26.200 --> 0:06:29.240 So it's not like we're coming out of, if you will, 0:06:29.320 --> 0:06:32.520 the financial crisis, which Bill is all too familiar with, 0:06:32.560 --> 0:06:37.359 because and consumers back and consumer balance sheets are healthy 0:06:37.360 --> 0:06:39.599 as well. So I mean, Bill, it's safe to say 0:06:39.640 --> 0:06:43.760 there will be a recession someday. But what pushes us 0:06:43.760 --> 0:06:46.880 in to a recession. Um. You know, even if the 0:06:46.880 --> 0:06:52.440 FED raises aggressively, we're going from uh um as close 0:06:52.520 --> 0:06:54.880 to zero as as damn it. I think the English 0:06:54.920 --> 0:06:59.080 would say um and uh. You know if the neutral 0:06:59.160 --> 0:07:02.360 rate is where where? Where you think when you think 0:07:02.400 --> 0:07:06.479 the neutral rate is um right now? Well, again it 0:07:06.520 --> 0:07:08.840 depends on where you think recession is. But would you 0:07:08.920 --> 0:07:12.240 hazard a guess? And you know, I think I think 0:07:12.240 --> 0:07:14.760 neutral today is probably you know, three and a half 0:07:14.920 --> 0:07:19.080 ish because inflation is above the fence two objective. I 0:07:19.080 --> 0:07:21.880 think the problem for the FET is this, whenever the ft, 0:07:21.960 --> 0:07:24.400 the FET needs to make the labor market looser. If 0:07:24.440 --> 0:07:27.480 it's going to actually get control of inflation, to make 0:07:27.520 --> 0:07:30.400 the labor market looser, it has to tighten sufficiently to 0:07:30.440 --> 0:07:34.280 push the unemployer rate up. Whenever the FET has pushed 0:07:34.280 --> 0:07:37.040 the unemployer rate up, it's been very difficult to control 0:07:37.200 --> 0:07:40.400 how much. Every time that has happened, the US economy 0:07:40.400 --> 0:07:42.600 has ultimately ended in recession. So don't get me wrong. 0:07:42.640 --> 0:07:44.560 The FEEN is going to try for a soft land. 0:07:45.000 --> 0:07:47.040 That's what they're going to try for, and of course 0:07:47.040 --> 0:07:48.600 they have to do that if they're going to try 0:07:48.600 --> 0:07:52.880 to control inflation. The problem is almost always, they overdo 0:07:52.960 --> 0:07:56.600 it and the commy dips into recession. So if you 0:07:56.600 --> 0:07:59.480 don't mind, Bill, let's let's go back in time. You 0:07:59.640 --> 0:08:02.840 probably we have as much experience with inflation and deflation 0:08:02.960 --> 0:08:06.000 in our time as any economists, And during your leadership 0:08:06.000 --> 0:08:09.320 at the New York Fed, you persistently defended quantitative using 0:08:09.640 --> 0:08:13.720 when so many critics derided KEWI as irresponsibly inflationary and 0:08:13.760 --> 0:08:17.120 a debasement of the dollar. The critics were wrong. When 0:08:17.200 --> 0:08:20.440 Janet Yellen became FED chair in two thousand fourteen, unemployment 0:08:20.480 --> 0:08:23.880 and the labor participation rate we're still in emic, she said, 0:08:23.880 --> 0:08:26.240 and you agreed with her at that time that the 0:08:26.240 --> 0:08:28.920 economy needed to run a little hot to get to 0:08:28.960 --> 0:08:32.680 an optimal job market. So just last Friday, we learned 0:08:33.280 --> 0:08:37.000 US gained four hundred and thirty one thousand jobs. In March, 0:08:37.080 --> 0:08:41.080 unemployment felt at three point six percent average big as 0:08:41.160 --> 0:08:44.520 we average hour le earnings registered to five point six 0:08:44.559 --> 0:08:47.800 percent increase from the same period last year, and the 0:08:47.880 --> 0:08:52.440 labor participation rate rose significantly. So I guess, Bill, why 0:08:52.600 --> 0:08:56.440 is Brad DeLong wrong when he said recently it's time 0:08:56.480 --> 0:09:01.440 for another victory lap led by the Fed. Well, they 0:09:01.480 --> 0:09:04.679 deserve a victory lap in terms of getting generating as 0:09:04.679 --> 0:09:07.320 strong I cannot recovery and getting us back to full 0:09:07.320 --> 0:09:10.680 employment quickly. The problem now, though, is that they're behind 0:09:10.800 --> 0:09:13.000 in terms of where they need to be related to 0:09:13.000 --> 0:09:15.720 what the labor market is. If the FIG wants to 0:09:15.760 --> 0:09:19.160 sustain the economic expansion, it's gonna keep inflation under control. 0:09:19.800 --> 0:09:22.400 And to keep inflation under control, they have to tighten 0:09:22.440 --> 0:09:25.040 Monterrey policy. So I think the problem for the FED 0:09:25.120 --> 0:09:29.280 here was that they adopted a monterrey policy framework that 0:09:29.720 --> 0:09:32.080 the operationalized by saying we're not gonna even begin to 0:09:32.120 --> 0:09:35.280 lift off until we've actually reached to percent inflation, where 0:09:35.320 --> 0:09:37.240 confident inflation is gonna be both two percent in the 0:09:37.280 --> 0:09:40.080 future and we're confident that we're at full employment. So 0:09:40.360 --> 0:09:43.400 we find ourselves in this unusual circumstance at the time 0:09:43.400 --> 0:09:46.240 where Monterrey policy needs to be neutral or tight, the 0:09:46.280 --> 0:09:49.000 fit still is on a very very accommodative monetary setting. 0:09:49.440 --> 0:09:52.480 Big today between where the fit should be and where 0:09:52.559 --> 0:09:56.280 it is. How much of this match is about monetary 0:09:56.360 --> 0:09:59.960 policy because there was such a huge fiscal impetus. When 0:10:00.080 --> 0:10:01.880 Bill says the FED did a great job getting us 0:10:01.880 --> 0:10:04.199 back to full employment. It seems to me the five 0:10:04.360 --> 0:10:08.040 six trillion dollars that the US government spent was also helpful. 0:10:08.640 --> 0:10:11.200 And I noticed yesterday in the Esther George interview that 0:10:11.240 --> 0:10:14.280 Michael McKee did she said, um, you know, the fiscal 0:10:14.320 --> 0:10:18.560 impetus is gonna wane here. Well, that's definitely true. I mean, 0:10:18.600 --> 0:10:22.200 and there's been considerable discussion about to what extent did 0:10:22.240 --> 0:10:26.959 the Relief Act last year have on inflation? And there 0:10:26.960 --> 0:10:30.679 are plenty of economists who say not that much, um, 0:10:30.720 --> 0:10:34.080 And you know, Frankly uh to credit Bill, he has 0:10:34.120 --> 0:10:36.839 been very consistent, going back at least a couple of 0:10:36.920 --> 0:10:39.400 years and saying the Fed really needs to get on 0:10:40.080 --> 0:10:43.280 the escalator um, and that we are going to see 0:10:43.400 --> 0:10:46.120 you know, higher interest rates. It's just a question of when. 0:10:46.240 --> 0:10:48.880 But they have to get there. So I'm not so 0:10:48.960 --> 0:10:52.920 sure it's so much a fiscal issue here with respect 0:10:52.960 --> 0:10:56.760 to inflation. It's more the latter coming out of you know, 0:10:56.840 --> 0:11:00.839 this expansion and uh, you know, interest rates and you 0:11:00.880 --> 0:11:02.920 have to come up. So that's kind of where I 0:11:02.920 --> 0:11:06.079 wanted to go, Bill. I mean, the inflation that I experience, 0:11:06.120 --> 0:11:08.720 I'm sure many Americans experience. It's at the gas pump. 0:11:09.200 --> 0:11:13.880 It's at the supermarket, it's maybe the local deli um. 0:11:14.000 --> 0:11:16.880 But a lot of that is just supplying demand in 0:11:16.920 --> 0:11:20.360 an economy. We I've got a global reopening economy. I've 0:11:20.360 --> 0:11:23.280 got these crazy supply chain issues that are vexing all 0:11:23.320 --> 0:11:26.000 types of industries. In that scenario, what can the FED 0:11:26.120 --> 0:11:30.600 really do in terms of inflation, Well, the supply chains 0:11:30.640 --> 0:11:32.840 did that. That has to be has to be patient. 0:11:33.240 --> 0:11:35.199 But the problem we have with inflation now it's not 0:11:35.280 --> 0:11:39.040 just about supply chain disruptions, because we've seen the inflation 0:11:39.080 --> 0:11:41.640 pressure broadened out. So if you look at, for example, 0:11:41.679 --> 0:11:44.440 the Cleveland fled or the Dallas that that have measures 0:11:44.440 --> 0:11:49.000 of median CPI trim mean uh, they basically show that 0:11:49.040 --> 0:11:51.920 the pressures are now much broader than they were earlier. 0:11:51.960 --> 0:11:54.520 So it's not just the question of use car prices 0:11:54.559 --> 0:11:58.240 going up because there's chip shortages that are inhibiting new 0:11:58.240 --> 0:12:00.800 car production. Is much broader then think you know, the 0:12:00.800 --> 0:12:03.760 wage trend I think is also relevant here. You know, 0:12:03.800 --> 0:12:06.560 if you act yourself, what wage inflation rate is consistent 0:12:06.600 --> 0:12:09.280 with two percent inflation? You wouldn't pick five and a 0:12:09.320 --> 0:12:11.560 half to six percent. You pick something in the probably 0:12:11.559 --> 0:12:14.520 the three or four percent Rang, So the wage trend 0:12:14.880 --> 0:12:18.800 already is higher than what's consistent with two percent inflation. 0:12:20.040 --> 0:12:22.480 I do wish the FED could somehow get General Motors 0:12:22.520 --> 0:12:26.360 to produce more Sierra fift hundred, you know, a T 0:12:26.559 --> 0:12:29.319 four x is if the FED could just supply them 0:12:29.360 --> 0:12:32.800 with the microchips, you know, maybe the price increase has 0:12:32.800 --> 0:12:34.840 been insane. By the way, I've come back just a 0:12:34.840 --> 0:12:38.079 few months ago, I've been looking at trucks, and trucks 0:12:38.120 --> 0:12:42.439 that were fifty five thousand dollars in January became sixty 0:12:42.840 --> 0:12:45.560 dollars in February. Now there's sixty five dollars. This is 0:12:45.640 --> 0:12:48.200 new m s r P. It's unbelievable. But there's not 0:12:48.280 --> 0:12:50.640 much the FED can really do about that. Matt Well, 0:12:50.679 --> 0:12:54.040 what the Fed we'll pay attention to us they should 0:12:54.320 --> 0:13:00.439 is expectations. And the one variable here that is somewhat 0:13:00.600 --> 0:13:04.800 encouraging is that we are not seeing yet built into 0:13:04.840 --> 0:13:07.800 this market the expectation like we did in the seventies, 0:13:08.120 --> 0:13:11.120 that everything is going to go up um and our 0:13:11.160 --> 0:13:14.600 behavior is measured by that. We're not there yet. So 0:13:14.800 --> 0:13:20.840 will we get there? Do you think? Hopefully not? Billy Bill, 0:13:21.080 --> 0:13:23.000 We're gonna get to that spot I mean, I mean, 0:13:23.040 --> 0:13:25.319 I think, I think Matth exactly right. That is the 0:13:25.360 --> 0:13:28.359 positive in the in the outlook is that inflation expectations 0:13:28.360 --> 0:13:31.280 are still pretty well anchored. And you could argue that's 0:13:31.280 --> 0:13:32.880 actually a little bit of a surprise. I mean, if 0:13:32.920 --> 0:13:35.000 you sort of looked at what's actually happening to in 0:13:35.080 --> 0:13:37.199 terms of inflation and how slow the FIT has been 0:13:37.240 --> 0:13:40.960 to react, it's quite striking that market participants in households 0:13:40.960 --> 0:13:43.480 and businesses still are comfortable that the FETE is ultimately 0:13:43.520 --> 0:13:46.120 going to do their job. This is precisely what you've 0:13:46.120 --> 0:13:50.359 been writing, Matt. Well, yeah, it could be a semantic discussion, 0:13:50.360 --> 0:13:52.800 but I've been saying that it's kind of hard for 0:13:52.840 --> 0:13:54.840 me to accept the fact that when the FETE is 0:13:54.920 --> 0:13:58.240 data dependent, which means that the data changes, the FED changes, 0:13:58.640 --> 0:14:01.880 that it's behind the curve, and Bill and the majority 0:14:01.880 --> 0:14:04.440 of economists say no, no, no, no no, no, they're behind 0:14:04.480 --> 0:14:07.480 the behind the curve. All right, that's fantastic, Bill Dudley, 0:14:07.480 --> 0:14:09.080 thank you so much for joining us. Former New York 0:14:09.080 --> 0:14:12.480 Fed President Bill Dudley and Bloomberg News Editor in chief 0:14:12.559 --> 0:14:15.800 emeritus founder of Bloomberg News Matt wink with joining us 0:14:15.840 --> 0:14:19.760 here in our Bloomberg Interactive Broker Studio. Fascinating discussion on 0:14:19.800 --> 0:14:22.400 what we're gonna see from this photo reserve going forward again. 0:14:22.800 --> 0:14:27.480 Fo MC meetings Meeting minutes will be released today two 0:14:27.520 --> 0:14:34.520 pm Wall Street time. Time to get the update that 0:14:34.600 --> 0:14:36.720 I think we all need on Ukraine. It is a 0:14:36.800 --> 0:14:39.920 fluid situation, certainly in some of the images coming out 0:14:39.960 --> 0:14:42.680 of parts of Ukraine are very very disturbing. Let's bringing 0:14:42.680 --> 0:14:46.480 Amor Hordern, Washington correspondent for Bloomberg Television and Marie thanks 0:14:46.480 --> 0:14:50.160 so much for joining us here. It feels what's the 0:14:50.280 --> 0:14:52.040 I guess I'll just step back and say what's really 0:14:52.120 --> 0:14:56.640 the latest thinking from Washington, d C About how this 0:14:56.800 --> 0:15:00.560 situation in the Ukraine can go, will go, and maybe 0:15:00.640 --> 0:15:04.360 how we should be continuing to engage well. Jake Sullivan 0:15:04.440 --> 0:15:06.840 recently had a briefing, was saying that they see some 0:15:07.080 --> 0:15:10.840 practical changes and in Russia and that there's going to 0:15:10.920 --> 0:15:14.280 be a focus more on eastern and southern Ukraine specifically, 0:15:14.480 --> 0:15:18.760 especially making sure they can maintain that stronghold in Luhansk 0:15:18.880 --> 0:15:21.920 and don Yesk. But what is very clear, and you 0:15:22.040 --> 0:15:24.120 just need to turn your television or open up Twitter 0:15:24.240 --> 0:15:27.720 to see, is that the assault on the Russian cities 0:15:27.960 --> 0:15:30.840 and the attacks on civilians. It's not just Bucha, it's 0:15:30.880 --> 0:15:34.920 Mario pol It's a number of cities that continues every day, 0:15:36.360 --> 0:15:41.240 and so it continues in a nasty, nasty way. And 0:15:41.320 --> 0:15:44.560 I know the atrocities are we are alleging that Russians 0:15:44.560 --> 0:15:48.600 committed atrocities. They're saying that the photographic and video evidence 0:15:48.640 --> 0:15:53.640 has been faked somehow. Um. But our Western government's prepared 0:15:53.760 --> 0:15:58.040 to really take the final step. We can say we're 0:15:58.040 --> 0:16:00.920 not going to buy any coal from Russia anymore. That's 0:16:00.960 --> 0:16:03.360 easy because we don't want coal and we have enough 0:16:03.400 --> 0:16:07.920 coal ourselves. Um. But saying for Germany to say we 0:16:08.200 --> 0:16:12.640 refused to pay hundreds of billions for natural gas, that's 0:16:12.760 --> 0:16:15.120 that's a big step to take. It would be a 0:16:15.160 --> 0:16:17.840 big step to take. And also are they prepared to 0:16:17.920 --> 0:16:21.160 take that step in the sense that not just morally prepared, 0:16:21.240 --> 0:16:24.520 which I think they wished they were at uh or 0:16:24.600 --> 0:16:27.560 they are at excuse me, but in terms of the infrastructure, 0:16:27.680 --> 0:16:30.880 I think they wished they were there. Because Shulton said 0:16:30.920 --> 0:16:34.600 today the German Chancellor, that what is going on and 0:16:34.680 --> 0:16:37.200 the image of that a Busha, these are war crimes. 0:16:37.800 --> 0:16:40.440 So you do see Germany wanting to wratch it up 0:16:40.560 --> 0:16:44.400 that pressure and really hurt Russia. For what is going 0:16:44.480 --> 0:16:47.320 on the issue is they're just way to rely on. 0:16:47.480 --> 0:16:52.360 What we can potentially see is individual European states coming 0:16:52.400 --> 0:16:56.160 out and unilaterally going further. I know Lithuania is tiny, 0:16:56.240 --> 0:16:59.240 but they did this themselves. Potentially, maybe you'll see other 0:16:59.320 --> 0:17:02.520 Baltic trees do this themselves, because it's going to take 0:17:02.560 --> 0:17:05.320 a while to get all twenty seven European countries to 0:17:05.359 --> 0:17:07.199 agree on this, right well, and most of them are 0:17:07.280 --> 0:17:09.399 so small that it doesn't matter. Right. Germany is the 0:17:09.440 --> 0:17:14.120 biggest economy in Europe m eighty million people and they 0:17:14.840 --> 0:17:18.440 gets I think sixty of their energy needs from Russian gas. 0:17:18.600 --> 0:17:21.840 So the idea is they're willing to hurt Russia, but 0:17:21.920 --> 0:17:25.240 they're not willing to hurt themselves yet. Um. You know. 0:17:25.400 --> 0:17:28.880 The the interesting thing is the Ukrainians would ask, why 0:17:29.080 --> 0:17:31.640 you know you're watching these atrocities, why haven't you done 0:17:31.720 --> 0:17:34.640 more like at least give us a no fly zone, 0:17:34.760 --> 0:17:37.359 right And NATO's response is, well, we don't want to 0:17:37.440 --> 0:17:41.160 directly engage Russia because there goes World War three. Um, 0:17:41.640 --> 0:17:46.640 you have been really excellent in your coverage of Mikhail Kardarkowski. 0:17:46.840 --> 0:17:49.359 For those who don't know, he was once Russia's richest man. 0:17:49.600 --> 0:17:52.240 He was a billionaire who ran Yukos oil and he 0:17:52.320 --> 0:17:55.640 was politically opposed to Putin. Um that didn't go well. 0:17:55.960 --> 0:17:57.840 He was accused of tax evasion to the tune of 0:17:57.880 --> 0:18:01.119 something like billion and then spent ten years in a 0:18:01.240 --> 0:18:05.479 gulag Um. Now he's out, and he's very vocal about um. 0:18:05.640 --> 0:18:08.440 Obviously his criticism of Vladimir Putin. But he said something 0:18:08.560 --> 0:18:11.240 really interesting yesterday, which is that the West is already 0:18:11.359 --> 0:18:15.600 engaged with Russia, at least from Putin's perspective. Kodakovski says, 0:18:15.800 --> 0:18:18.240 we're already. He thinks the West is already in a 0:18:18.280 --> 0:18:22.200 war against him. Yes, Michel Kolkowski is very interesting to 0:18:22.240 --> 0:18:25.119 talk to you, because you really can understand the thinking 0:18:25.480 --> 0:18:28.919 of the Russian elite and also the thinking of President 0:18:28.960 --> 0:18:32.200 Putin the Kremlin. And he says, from Putin's eyes, the 0:18:32.320 --> 0:18:36.960 United States Western allies already at war with Russia. And 0:18:37.119 --> 0:18:40.159 he says the same mistake that the West does not 0:18:40.400 --> 0:18:43.840 realized and they do not understand that. That is Putin's perspective. 0:18:44.160 --> 0:18:45.439 And a lot of the time when you hear from 0:18:45.480 --> 0:18:49.560 Western leaders is you know, we will defend NATO every 0:18:49.600 --> 0:18:52.640 single inch. But this is almost a nuance that doesn't 0:18:52.720 --> 0:18:56.520 even filter into Putin's mind. He already thinks he's there 0:18:56.640 --> 0:18:58.720 and he's fighting a war with America. And if you 0:18:58.760 --> 0:19:01.440 look at any Russian state TV, that is also the 0:19:01.560 --> 0:19:05.520 sense that you get that this is a US backed war, 0:19:05.880 --> 0:19:11.440 Western backed war against Russia and Ukraine. So, Henry, what's 0:19:11.480 --> 0:19:15.320 the feeling in Washington these days about next steps for 0:19:15.720 --> 0:19:19.040 the US and maybe the US as it relates to NATO. 0:19:19.200 --> 0:19:21.040 Is there any consensus as to what we should do? 0:19:22.320 --> 0:19:26.080 I guess next, more, better, bigger. Well, just in the 0:19:26.160 --> 0:19:29.840 past hour we got a brief on the latest sanctions, 0:19:29.960 --> 0:19:32.920 so still more economic sanctions and those included a full 0:19:32.960 --> 0:19:35.760 blocking sanctions on Spur Bank, which is Russia's biggest bank, 0:19:36.160 --> 0:19:39.200 as well as ALFA Bank. But again they include energy 0:19:39.280 --> 0:19:41.639 carve out. So it really comes full circle to the 0:19:41.640 --> 0:19:45.240 start of this conversation with winners Germany and Europe going 0:19:45.320 --> 0:19:47.760 to get on board with or be able to block 0:19:47.920 --> 0:19:51.160 Russian oil and gas. He also we also have sanctions 0:19:51.200 --> 0:19:55.840 on Putin's two adult children, Catherina and Maria. Interesting enough, 0:19:55.880 --> 0:19:59.080 Putto has gone through great lengths his entire life to 0:19:59.400 --> 0:20:03.080 really cloud them in secrecy. Uh so, quite symbolic, but 0:20:03.160 --> 0:20:06.720 also very personal, and also a ban on investments in Russia. 0:20:07.040 --> 0:20:09.800 But just to take it back to Miyaw Karakowski, because 0:20:09.800 --> 0:20:11.680 I spent more than an hour with him yesterday and 0:20:11.720 --> 0:20:15.000 he's in Washington meeting with officials as well. He says 0:20:15.080 --> 0:20:19.480 that Putin is not afraid of sanctions. Sanctions alone cannot 0:20:19.560 --> 0:20:23.080 to ter Putin. And the idea of going after the oligarch, 0:20:23.600 --> 0:20:27.320 you know, makes sense, but the presumption that they can 0:20:27.480 --> 0:20:30.680 have a change on Putin is just not there. And 0:20:30.840 --> 0:20:33.600 maybe the West thinks that could happen, but he says 0:20:33.640 --> 0:20:35.560 that is just not how Russia works. It is a 0:20:35.640 --> 0:20:39.440 complete dictatorship. Some have said that, you know, these sanctions 0:20:39.520 --> 0:20:42.399 aren't so much to deter Putin has to make the 0:20:42.440 --> 0:20:45.600 West feel better about ourselves, right, Yeah, interesting to say. 0:20:45.600 --> 0:20:48.440 It's a very difficult situation. And Re Hordern, thank you 0:20:48.520 --> 0:20:51.000 so much for joining us. We love getting your perspective 0:20:51.000 --> 0:20:53.520 from Washington, d C. And Re Hoarder, and Washington correspondent 0:20:53.560 --> 0:20:56.480 for Bloomberg Television, has a story out on the Bloomberg 0:20:56.560 --> 0:21:00.679 terminal with her interview of that ex oligarch from Russia 0:21:00.760 --> 0:21:04.080 who Henry's set is in Washington making the rounds there. 0:21:04.160 --> 0:21:10.280 So I appreciate getting her perspective. There. There's m and 0:21:10.320 --> 0:21:13.400 A activity, there's a consalination going on in the airline 0:21:13.440 --> 0:21:16.320 business today. Got Jet Blue taking a look um at 0:21:16.440 --> 0:21:18.960 the business as well, looking to make a bid for Spirit. 0:21:19.000 --> 0:21:22.439 George Ferguson the fourth, by the way, senior Aerospace, Defense 0:21:22.480 --> 0:21:25.440 and Airlines Annos with Bloomberg Intelligence joins us. So from 0:21:25.440 --> 0:21:29.840 your military intelligence to Bloomberg Intelligence exactly. So yeah, George 0:21:29.960 --> 0:21:31.920 was in the army and military intelligence. That tells you 0:21:32.000 --> 0:21:33.960 all we need to know about our military. As I 0:21:34.000 --> 0:21:36.520 always say, George, thanks so much for joining us here. 0:21:37.080 --> 0:21:40.080 What's jet Blues? What's strategy here? Why does it want 0:21:40.119 --> 0:21:44.120 to own uh Spirit Airlines? Yes to thank for having 0:21:44.160 --> 0:21:46.760 me yet, um so I really think you know Jet 0:21:46.800 --> 0:21:49.560 Blue has spent you know a number of years, um, 0:21:49.800 --> 0:21:52.520 a lot of years from on the periphery of the business. 0:21:52.640 --> 0:21:55.080 Right there's uh, you know the main carriers you have. 0:21:56.400 --> 0:21:59.280 You know you have American, United, Delta, the big full 0:21:59.320 --> 0:22:02.760 service carriers got you got the Southwest and Jet Blue 0:22:02.880 --> 0:22:05.679 and Alaska have had this smaller role in the marketplace. 0:22:06.240 --> 0:22:09.000 I think Jet Blue is looking at Spirit and Frontier 0:22:09.080 --> 0:22:11.960