1 00:00:00,040 --> 00:00:02,640 Speaker 1: Who you put your trust in matters. Investors have put 2 00:00:02,680 --> 00:00:07,000 Speaker 1: their trust and independent registered investment advisors to the two 3 00:00:07,040 --> 00:00:10,680 Speaker 1: and four trillion dollars. Why learn more and find your 4 00:00:10,760 --> 00:00:26,360 Speaker 1: independent advisor dot com. Welcome to the Bloomberg Surveillance Podcast. 5 00:00:26,760 --> 00:00:30,480 Speaker 1: I'm Tom Keene with David Gura. Daily we bring you 6 00:00:30,520 --> 00:00:35,560 Speaker 1: insight from the best in economics, finance, investment, and international relations. 7 00:00:35,960 --> 00:00:40,559 Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot com, and 8 00:00:40,640 --> 00:00:47,800 Speaker 1: of course on the Bloomberg. It's a pleasure to have 9 00:00:47,880 --> 00:00:50,080 Speaker 1: with me in studio Alan Ruskin Cohea of Dutch Banks 10 00:00:50,080 --> 00:00:51,800 Speaker 1: for in Exchange Research team on the morning when there 11 00:00:51,880 --> 00:00:54,840 Speaker 1: is so much to talk about, Alan, let's be begin 12 00:00:54,920 --> 00:00:57,280 Speaker 1: with oil. In your most recently you talk about the 13 00:00:57,280 --> 00:00:59,640 Speaker 1: degree to which this is really the big macro driver 14 00:01:00,160 --> 00:01:03,800 Speaker 1: right now. Yes, it is at the center point. Keep 15 00:01:03,800 --> 00:01:07,440 Speaker 1: in mind that we did obviously see oil four very 16 00:01:07,520 --> 00:01:10,440 Speaker 1: very sharply it was so important for all the other 17 00:01:10,480 --> 00:01:13,680 Speaker 1: macro drivers. And then the rebound now is almost the 18 00:01:13,720 --> 00:01:17,280 Speaker 1: reverse effect. So you know, I think the main channels 19 00:01:17,280 --> 00:01:20,360 Speaker 1: in which this is working is higher all prices, higher 20 00:01:20,360 --> 00:01:24,440 Speaker 1: break even rates, and then expectations that um, the likes 21 00:01:24,440 --> 00:01:27,199 Speaker 1: of Treasury hills and other global bond heills will move higher. 22 00:01:27,360 --> 00:01:30,080 Speaker 1: We've seen that start to quiet and down a little 23 00:01:30,080 --> 00:01:32,160 Speaker 1: bit over the last few days. As the question as 24 00:01:32,200 --> 00:01:35,000 Speaker 1: to whether oil sticks around here or does go up, 25 00:01:35,080 --> 00:01:37,399 Speaker 1: say another ten dollars a barrel. Um, I don't think 26 00:01:37,400 --> 00:01:39,559 Speaker 1: people are thinking much more than ten dollars a barrel 27 00:01:39,600 --> 00:01:41,400 Speaker 1: and giving us some some sense of whether or not 28 00:01:41,440 --> 00:01:43,760 Speaker 1: that might happen. Is this November three meeting in Vienna, 29 00:01:43,840 --> 00:01:45,840 Speaker 1: this this Opeque meeting. From what we've heard today from 30 00:01:45,840 --> 00:01:47,840 Speaker 1: the Saudi oil minister, what we've heard over these last 31 00:01:47,840 --> 00:01:49,960 Speaker 1: few weeks, what's your sense of the likelihood that we 32 00:01:50,000 --> 00:01:52,400 Speaker 1: will get at the very least of freeze and and 33 00:01:52,440 --> 00:01:54,880 Speaker 1: perhaps cuts here in production. Yeah. So look, I'm not 34 00:01:54,920 --> 00:01:59,280 Speaker 1: an oil analyst. It's it's full disclosure here, but I 35 00:01:59,320 --> 00:02:02,880 Speaker 1: think what you have is at least stability with a 36 00:02:02,960 --> 00:02:06,440 Speaker 1: tendency towards moving towards the upper end of the range. 37 00:02:06,480 --> 00:02:08,400 Speaker 1: So you know, if the range is forty dollars a 38 00:02:08,400 --> 00:02:10,720 Speaker 1: barrel to perhaps as high as sixty dollars a barrel, 39 00:02:10,760 --> 00:02:13,280 Speaker 1: then um, you know, I think we edge a little 40 00:02:13,280 --> 00:02:16,320 Speaker 1: bit higher at least. While there's speculation that OPEC and 41 00:02:16,440 --> 00:02:21,640 Speaker 1: some big non OPEC countries really do curtail supply. The 42 00:02:21,680 --> 00:02:24,080 Speaker 1: problem I think they face is really that on the 43 00:02:24,120 --> 00:02:27,120 Speaker 1: non OPEC side, and notably on the U S side, 44 00:02:27,520 --> 00:02:30,880 Speaker 1: supply will kick in again and you'll see those rig 45 00:02:31,000 --> 00:02:34,000 Speaker 1: count numbers going up quite sharply. Really as soon as 46 00:02:34,040 --> 00:02:36,720 Speaker 1: oil does go up. So oil prices do you go up? 47 00:02:36,720 --> 00:02:38,440 Speaker 1: I want to ask you more here about the relationship 48 00:02:38,440 --> 00:02:40,760 Speaker 1: between oil and the dollar. Frustyle. So the Bloomberrick surveillance 49 00:02:40,760 --> 00:02:43,519 Speaker 1: brought to you by invest Goo investing isn't about achieving average, 50 00:02:43,520 --> 00:02:46,880 Speaker 1: It's about achieving goals. Learned how Investco's high conviction approach 51 00:02:46,919 --> 00:02:49,680 Speaker 1: can help investco dot com slash high conviction. I want 52 00:02:49,680 --> 00:02:52,600 Speaker 1: to bring in Francy and Lackworth from London, pulling a 53 00:02:52,919 --> 00:02:55,200 Speaker 1: doing yeoman's work here on the heels of a surveillance 54 00:02:55,200 --> 00:02:57,240 Speaker 1: television joining me from from London's mo Good morning frid 55 00:02:57,560 --> 00:02:59,800 Speaker 1: We sent Tom Holmes because he lost his works, so 56 00:02:59,880 --> 00:03:02,520 Speaker 1: you get me. I'm so sorry out of the building. 57 00:03:02,560 --> 00:03:04,920 Speaker 1: I'm sure Alan, if you look at so we had 58 00:03:04,960 --> 00:03:07,800 Speaker 1: those more Instanley report right, and they cut down in 59 00:03:07,840 --> 00:03:10,880 Speaker 1: trading some unless I guess we'll question whether they cut 60 00:03:10,919 --> 00:03:14,240 Speaker 1: back down too much. Then you have crude as David 61 00:03:14,280 --> 00:03:16,680 Speaker 1: was talking about, and you also have this China story. Again, 62 00:03:16,800 --> 00:03:21,440 Speaker 1: we've seen so many movements from currencies, Brexit non Brexit, 63 00:03:21,560 --> 00:03:25,080 Speaker 1: the US presidential elections. What will be the next impetus 64 00:03:25,240 --> 00:03:29,560 Speaker 1: for for big currency moves? Yes, Um, I think right 65 00:03:29,600 --> 00:03:33,880 Speaker 1: now the focus is really on treasury heels and whether 66 00:03:33,919 --> 00:03:36,200 Speaker 1: we are seeing some sort of shifting regime. As we 67 00:03:36,200 --> 00:03:38,560 Speaker 1: are talking about a little bit earlier. Oil could be 68 00:03:38,600 --> 00:03:41,800 Speaker 1: one of the catalysts for higher interest rates, at least 69 00:03:41,840 --> 00:03:44,120 Speaker 1: at the back and the curve, but there's a greater 70 00:03:44,240 --> 00:03:47,160 Speaker 1: chatter that relates to what central banks actually want for 71 00:03:47,200 --> 00:03:49,720 Speaker 1: the yield curve. So um, it's clear that the Bank 72 00:03:49,760 --> 00:03:53,000 Speaker 1: of Japan and perhaps the e c B certainly wants 73 00:03:53,000 --> 00:03:57,360 Speaker 1: a steeper heeled curve to support the financial sector. Um. 74 00:03:57,360 --> 00:04:00,040 Speaker 1: Whether that translates to the US is another question. A 75 00:04:00,080 --> 00:04:02,360 Speaker 1: little bit more skeptical that it does translate to the US. 76 00:04:02,440 --> 00:04:05,360 Speaker 1: Are we really seeing inflation? And so treasuries gained a 77 00:04:05,400 --> 00:04:08,720 Speaker 1: little bit right we saw a core inflation gauge rising 78 00:04:08,840 --> 00:04:12,200 Speaker 1: less unexpected in September. I can't figure out when we 79 00:04:12,240 --> 00:04:15,160 Speaker 1: see real inflation. I'm not talking about the UK, which 80 00:04:15,280 --> 00:04:18,600 Speaker 1: is a whole other problem with Brexit. No, I think 81 00:04:18,880 --> 00:04:23,159 Speaker 1: inflation has got a lot of global inertia still built 82 00:04:23,200 --> 00:04:27,080 Speaker 1: into a huge amount of spare capacity in the system. Actually, 83 00:04:27,080 --> 00:04:29,760 Speaker 1: not just in the international side of things, but the 84 00:04:29,839 --> 00:04:33,600 Speaker 1: cap you numbers, the capacity utilization numbers in the US 85 00:04:33,640 --> 00:04:36,280 Speaker 1: are very very low, remarkably low in the context of 86 00:04:36,400 --> 00:04:38,839 Speaker 1: central bank that might be tightening. So look, I think 87 00:04:38,920 --> 00:04:41,600 Speaker 1: at least on the goods inflation side, there's very low inflation. 88 00:04:41,760 --> 00:04:44,520 Speaker 1: On the services sector side, there's something there as there's 89 00:04:44,520 --> 00:04:46,240 Speaker 1: definitely been something. There's a little a little bit of 90 00:04:46,240 --> 00:04:50,880 Speaker 1: creep and uh, you know, I think in aggregate, will 91 00:04:50,920 --> 00:04:53,000 Speaker 1: the fair eventually hit their target over there a two 92 00:04:53,080 --> 00:04:56,080 Speaker 1: year period. I think that's there some you know, that's 93 00:04:56,080 --> 00:04:58,680 Speaker 1: what they expect, and I think that's not unreasonable. Let 94 00:04:58,680 --> 00:05:00,960 Speaker 1: me get your sense of what we heard from the 95 00:05:01,040 --> 00:05:04,240 Speaker 1: vice chair at the Federal Reserve on Monday. Maybe put 96 00:05:04,240 --> 00:05:06,040 Speaker 1: that in a continue with what we heard from Janet 97 00:05:06,120 --> 00:05:09,040 Speaker 1: Yellen on Friday. She's talking about running things a bit hard. 98 00:05:09,600 --> 00:05:12,160 Speaker 1: He having what was a fairly academic discussion here about 99 00:05:12,160 --> 00:05:14,440 Speaker 1: productivity and what is driving rates down. What did you 100 00:05:14,480 --> 00:05:18,440 Speaker 1: make of those two speeches in concert with each other. Yeah, Look, 101 00:05:18,480 --> 00:05:22,320 Speaker 1: I think they've got, you know, subtle differences of opinion really, 102 00:05:22,800 --> 00:05:26,800 Speaker 1: insomuch as I think there still is a little bit 103 00:05:26,800 --> 00:05:31,160 Speaker 1: more emphasis on the idea that low for long does 104 00:05:31,279 --> 00:05:36,159 Speaker 1: create some potential financial problems, financial instability in the long 105 00:05:36,200 --> 00:05:38,640 Speaker 1: haul really in a sense, and so nudging rates up 106 00:05:38,640 --> 00:05:41,760 Speaker 1: a little bit won't do much harm. At the same time, 107 00:05:42,920 --> 00:05:45,839 Speaker 1: waiting a little bit won't do too much harm either 108 00:05:45,960 --> 00:05:48,760 Speaker 1: on the goods inflation side and on inflation side as well. 109 00:05:48,839 --> 00:05:51,320 Speaker 1: So it's very subtle really in a way. It's in 110 00:05:51,360 --> 00:05:54,119 Speaker 1: some ways speaks the idea that central banks don't matter 111 00:05:54,160 --> 00:05:56,040 Speaker 1: as much as we might think. What did you make 112 00:05:56,080 --> 00:05:58,240 Speaker 1: of the portion of stand Fishery speech and when he 113 00:05:58,279 --> 00:06:02,120 Speaker 1: talked in which he talked about inflation targeting, he rather 114 00:06:02,160 --> 00:06:05,400 Speaker 1: forcefully addressing critics who say, perhaps it should be re evaluated, 115 00:06:05,440 --> 00:06:07,640 Speaker 1: perhaps it should be brought up. He's saying, you know, 116 00:06:07,640 --> 00:06:09,039 Speaker 1: if we can't get to two, I would be talking 117 00:06:09,040 --> 00:06:12,120 Speaker 1: about three or a number higher. Uh, what do you 118 00:06:12,120 --> 00:06:14,080 Speaker 1: make of that portion? In particularly well, I think, you know, 119 00:06:14,120 --> 00:06:17,000 Speaker 1: for central banks to shift on on on a target 120 00:06:17,040 --> 00:06:19,479 Speaker 1: like this, you know, and it's been entrenched really for 121 00:06:19,520 --> 00:06:22,159 Speaker 1: the better part of really, you know, in the likes 122 00:06:22,200 --> 00:06:26,000 Speaker 1: the United States for what forty yard years. UM. I 123 00:06:26,040 --> 00:06:29,800 Speaker 1: think that would be to really have people rethink that, 124 00:06:30,080 --> 00:06:31,840 Speaker 1: you know, the structure and the model kind of thing. 125 00:06:31,920 --> 00:06:34,440 Speaker 1: So I think that's that's that's one thing. I think 126 00:06:34,520 --> 00:06:38,680 Speaker 1: raising the inflation target also has its problems, although having 127 00:06:38,680 --> 00:06:41,320 Speaker 1: an inflation target it's you know, close to two is 128 00:06:41,920 --> 00:06:46,040 Speaker 1: proving problematic as well in the current environment. And this 129 00:06:46,080 --> 00:06:48,280 Speaker 1: is how markets are interpreting right. A lot of people 130 00:06:48,279 --> 00:06:50,440 Speaker 1: are saying maybe because of what we heard from Janet 131 00:06:50,520 --> 00:06:53,159 Speaker 1: Yellen talking about a high pressure economy and what we 132 00:06:53,200 --> 00:06:55,920 Speaker 1: also heard from Mark Karney, who in the aftermath of 133 00:06:56,279 --> 00:06:59,040 Speaker 1: breggsit is saying he will look through faster price gains, 134 00:06:59,480 --> 00:07:03,680 Speaker 1: means that they're slightly changing their inflation target. Now you 135 00:07:03,720 --> 00:07:07,480 Speaker 1: may think that they should, but are they well, I 136 00:07:07,520 --> 00:07:10,040 Speaker 1: think Karnie is in a special situation. So you've had 137 00:07:10,080 --> 00:07:13,360 Speaker 1: an exchange rate shock, and it's much easier to say, 138 00:07:13,440 --> 00:07:15,679 Speaker 1: look at an exchange rate shock is a one off shock, 139 00:07:15,760 --> 00:07:17,920 Speaker 1: as it were, and it's going to wake work its 140 00:07:17,960 --> 00:07:21,080 Speaker 1: way through the system over the next say eighteen months 141 00:07:21,080 --> 00:07:24,400 Speaker 1: to two or even three years, and uh, we look, 142 00:07:24,520 --> 00:07:27,160 Speaker 1: the markets are probably going to look past that. UM 143 00:07:27,320 --> 00:07:31,160 Speaker 1: and underlying inflation X, the exchange rate shock might well 144 00:07:31,200 --> 00:07:33,280 Speaker 1: be well behaved. So I think Connie is in that 145 00:07:33,600 --> 00:07:36,640 Speaker 1: in that particular situation. The US is uh, you know, 146 00:07:36,720 --> 00:07:40,120 Speaker 1: in a in a very different set of circumstances. I 147 00:07:40,120 --> 00:07:42,680 Speaker 1: think the idea that in the US is, look, if 148 00:07:42,720 --> 00:07:47,120 Speaker 1: we go slightly above the inflation target, that will not 149 00:07:47,160 --> 00:07:50,680 Speaker 1: be you know, too disruptive, is the premise. I think 150 00:07:50,760 --> 00:07:53,840 Speaker 1: they're probably wrong on that to the extent. Well, I 151 00:07:53,840 --> 00:07:57,200 Speaker 1: think if inflations does start to nutche above target and start, 152 00:07:57,240 --> 00:07:59,640 Speaker 1: you know, we start to see the core PC deflator, 153 00:08:00,040 --> 00:08:03,480 Speaker 1: even even in the low twos um, this bond market 154 00:08:03,600 --> 00:08:07,080 Speaker 1: is is not priced for that scenario. And if you 155 00:08:07,160 --> 00:08:09,840 Speaker 1: do see a major bond market sell off, and you know, 156 00:08:09,920 --> 00:08:12,440 Speaker 1: some people think there's a bond bubble there. If you 157 00:08:12,480 --> 00:08:14,280 Speaker 1: see a major bond market sell off, it's going to 158 00:08:14,320 --> 00:08:18,360 Speaker 1: be usually disruptive for the US economy. And yes, real 159 00:08:18,440 --> 00:08:20,440 Speaker 1: rates might not actually go up because they'll just be 160 00:08:20,480 --> 00:08:23,400 Speaker 1: catching up, you know, nominal rates will just be catching 161 00:08:23,440 --> 00:08:27,200 Speaker 1: up with inflation. But nonetheless, nominal rates matter a great deal. 162 00:08:27,560 --> 00:08:30,640 Speaker 1: And if the bond market starts setting off sharply, you 163 00:08:30,680 --> 00:08:33,280 Speaker 1: can rest assured. I think the equity market's gonna have 164 00:08:33,280 --> 00:08:35,240 Speaker 1: a hard time as well, and we've seen the dollar 165 00:08:35,320 --> 00:08:38,000 Speaker 1: weaken a little bit against the ten major currencies. This 166 00:08:38,040 --> 00:08:40,600 Speaker 1: warning when you look at the Bloomberg Dollar Spot Index 167 00:08:40,640 --> 00:08:42,160 Speaker 1: that when I was said, I was going to ask 168 00:08:42,160 --> 00:08:44,600 Speaker 1: you here about the role of the dollar and oil 169 00:08:44,679 --> 00:08:46,640 Speaker 1: right now, what are you seeing there? Yeah, I think 170 00:08:47,280 --> 00:08:50,120 Speaker 1: it's it's a circular to some extent. So traditionally you 171 00:08:50,200 --> 00:08:54,480 Speaker 1: see a stronger dollar really associated with weaker oil prices 172 00:08:54,480 --> 00:08:57,320 Speaker 1: and weaker commodity prices just because you know these commodity 173 00:08:57,320 --> 00:09:00,280 Speaker 1: prices or priced in dollars, so um. You know, that's 174 00:09:00,320 --> 00:09:04,240 Speaker 1: the sort of traditional one sided relationship. The flip side 175 00:09:04,240 --> 00:09:06,480 Speaker 1: of that, and the one we're kind of focusing on 176 00:09:06,520 --> 00:09:09,680 Speaker 1: a little bit more right now is as oil prices 177 00:09:10,000 --> 00:09:13,079 Speaker 1: go higher, and if they go still higher, um, what 178 00:09:13,280 --> 00:09:15,080 Speaker 1: effect does that have on the bottom market and then 179 00:09:15,120 --> 00:09:18,439 Speaker 1: the knock on effect to obviously the dollar. I think 180 00:09:18,480 --> 00:09:22,920 Speaker 1: the issue here is if treasury hills do bump up significantly, 181 00:09:22,960 --> 00:09:26,560 Speaker 1: say the tenure, he'll goes to two. Um, you know, 182 00:09:26,760 --> 00:09:29,000 Speaker 1: not a huge move, but in the context of where 183 00:09:29,040 --> 00:09:32,000 Speaker 1: we're at, it's a it's a decent sized move. Then 184 00:09:32,240 --> 00:09:35,480 Speaker 1: I think you're in a circumstance where the dollar will 185 00:09:35,520 --> 00:09:39,760 Speaker 1: actually benefit to some degree certainly versus the commodity currencies 186 00:09:39,800 --> 00:09:41,800 Speaker 1: and the e M currencies because we will go a 187 00:09:41,840 --> 00:09:44,680 Speaker 1: little bit risk off until we stabilize. And on the 188 00:09:44,679 --> 00:09:47,200 Speaker 1: bondom market side, David Gurry here in New York with 189 00:09:47,280 --> 00:09:51,400 Speaker 1: Francine Lackwar in London, a transatlantic version of Bloomberg Surveillance 190 00:09:51,520 --> 00:09:54,200 Speaker 1: this morning, recapping the news from Morgan Stanley this morning. 191 00:09:54,440 --> 00:09:57,840 Speaker 1: Third quarter net revenues of eight point nine billion dollars, 192 00:09:57,880 --> 00:10:00,520 Speaker 1: fixed income trading revenue almost tripling from a year ago 193 00:10:00,559 --> 00:10:03,120 Speaker 1: to one point five billion dollars. And that's where I 194 00:10:03,120 --> 00:10:05,840 Speaker 1: want to start with Alison Williams, senior US bank analysts 195 00:10:05,840 --> 00:10:08,960 Speaker 1: for Bloomberg Intelligence, who joins me here, uh in New York. Allison, 196 00:10:09,040 --> 00:10:13,640 Speaker 1: this story, this fixed story continues here with with Morgan Stanley. Yeah, 197 00:10:13,679 --> 00:10:17,920 Speaker 1: so we we've had excuse me, uh now, every single 198 00:10:17,920 --> 00:10:20,440 Speaker 1: bank beating and really sort of going out with a 199 00:10:20,480 --> 00:10:23,839 Speaker 1: bank with Morgan Stanley having a huge beat versus the 200 00:10:24,080 --> 00:10:28,560 Speaker 1: one billion estimate and bearing in mind that one billion 201 00:10:28,679 --> 00:10:32,000 Speaker 1: is about in line with management targets. So after they 202 00:10:32,040 --> 00:10:36,480 Speaker 1: restructured the business, the most restructuring, the most recent restructuring 203 00:10:36,559 --> 00:10:39,080 Speaker 1: was in the fourth quarter of last year when they 204 00:10:39,080 --> 00:10:42,520 Speaker 1: cut of the front office staff. They had said that 205 00:10:42,559 --> 00:10:45,959 Speaker 1: they wanted to target roughly four billion annual revenue. That's 206 00:10:46,000 --> 00:10:49,520 Speaker 1: about a billion a quarter. That's about what UM analysts 207 00:10:49,559 --> 00:10:52,680 Speaker 1: surveyed by Bloomberg News had been expecting for Morgan Stanley. 208 00:10:52,960 --> 00:10:55,679 Speaker 1: So obviously this is a very big number. We've been 209 00:10:55,679 --> 00:10:58,160 Speaker 1: talking a lot about restructuring. We certainly talked about it 210 00:10:58,160 --> 00:11:00,960 Speaker 1: in the context of Goldman Sax yesterday, the reduction and 211 00:11:00,960 --> 00:11:04,440 Speaker 1: head count head count that we've seen their Morgan Stanley 212 00:11:04,440 --> 00:11:07,280 Speaker 1: has its project streamline. What we learned today about the 213 00:11:07,280 --> 00:11:10,360 Speaker 1: efficacy of that so far so still going through the numbers, 214 00:11:10,360 --> 00:11:13,080 Speaker 1: but it does look like they are making um progress 215 00:11:13,120 --> 00:11:16,720 Speaker 1: on that. On on the overall basis. Uh. The other 216 00:11:16,800 --> 00:11:21,240 Speaker 1: important pre tax margin is the margin within their wealth 217 00:11:21,280 --> 00:11:24,880 Speaker 1: management business. That's a key metric. Their goal is twenty 218 00:11:24,920 --> 00:11:28,680 Speaker 1: three to twenty five percent margin they got this quarter. 219 00:11:28,760 --> 00:11:30,440 Speaker 1: So we're still going through just to see if there 220 00:11:30,440 --> 00:11:35,400 Speaker 1: were any one timers, if that's a true organic recurring margin, 221 00:11:35,480 --> 00:11:38,040 Speaker 1: but that is another positive for the company. All right, Nelson, 222 00:11:38,080 --> 00:11:40,040 Speaker 1: thank you for joining us again here As the bank 223 00:11:40,120 --> 00:11:42,880 Speaker 1: earning season rolls on, that's Alison Williams, their senior US 224 00:11:42,920 --> 00:11:46,640 Speaker 1: bank analyst for Bloomberg Intelligence. Fran Yeah, David, we were 225 00:11:46,640 --> 00:11:49,679 Speaker 1: talking a little bit about monetary policy, about inflation targets, 226 00:11:49,720 --> 00:11:52,560 Speaker 1: about what a lot of these central banks are facing. 227 00:11:52,600 --> 00:11:55,480 Speaker 1: We're back with Alan Ruskin from Deutsche Bank. He's global 228 00:11:55,520 --> 00:11:57,800 Speaker 1: co head of Foreign Exchange Research. And you know, Alan, 229 00:11:57,880 --> 00:11:59,959 Speaker 1: I was, I'm torn, I don't know whether Laski abou 230 00:12:00,120 --> 00:12:03,839 Speaker 1: yen because people are concerned about exactly what Governor Kuroda 231 00:12:03,880 --> 00:12:05,959 Speaker 1: is trying to do capping that tenure yield. We had 232 00:12:05,960 --> 00:12:09,640 Speaker 1: the story today about Japan's three largest lenders selling a 233 00:12:09,679 --> 00:12:11,719 Speaker 1: record amount of yen bonds, or whether I should ask 234 00:12:11,760 --> 00:12:15,080 Speaker 1: about China and actually what the endgame for rem NIMBI is. 235 00:12:15,440 --> 00:12:19,160 Speaker 1: Amongst those two stories, what could scupper the markets more 236 00:12:20,080 --> 00:12:23,520 Speaker 1: right now? I think China is still probably more interesting. 237 00:12:23,760 --> 00:12:27,360 Speaker 1: So China I think has been going through something of 238 00:12:27,360 --> 00:12:32,679 Speaker 1: a stealth devaluation, effectively letting its trade weighted index weekend. 239 00:12:33,040 --> 00:12:35,960 Speaker 1: The market I think has taken this on board quite nicely, 240 00:12:36,480 --> 00:12:38,920 Speaker 1: to the relief of everybody, I think, or should be 241 00:12:38,960 --> 00:12:42,720 Speaker 1: to the reef relief of everybody. And we're seeing, you know, 242 00:12:42,800 --> 00:12:46,200 Speaker 1: for example, equity markets not respond in the same way 243 00:12:46,440 --> 00:12:49,200 Speaker 1: to Chinese currency weakness as we've seen before, but I 244 00:12:49,200 --> 00:12:53,600 Speaker 1: think you will see ongoing Chinese currency weakness on an 245 00:12:53,600 --> 00:12:57,600 Speaker 1: opportunistic basis. So when China makes a decision and and 246 00:12:57,600 --> 00:12:59,760 Speaker 1: and and sees that the markets are being well behaved 247 00:13:00,280 --> 00:13:02,560 Speaker 1: in response to a weeker currency, they'll let their currency 248 00:13:02,559 --> 00:13:06,200 Speaker 1: actually weaken. You are halting right this year's longest run 249 00:13:06,200 --> 00:13:09,400 Speaker 1: of losses. Again, as we had data today showing the 250 00:13:09,480 --> 00:13:13,040 Speaker 1: nation's economy stabilizing. Do we believe those figures? Yes, I 251 00:13:13,040 --> 00:13:15,160 Speaker 1: think we do believe. The figure is in a very 252 00:13:15,200 --> 00:13:18,640 Speaker 1: broad sense in terms of you know, his growth got 253 00:13:18,640 --> 00:13:21,080 Speaker 1: a six handle. Well, that's probably as good an estimate 254 00:13:21,120 --> 00:13:25,600 Speaker 1: as any um. I think the issue you have is 255 00:13:26,200 --> 00:13:31,160 Speaker 1: the breakdown behind those numbers. So obviously public investments seems 256 00:13:31,200 --> 00:13:34,800 Speaker 1: to be a main ingredient in terms of keeping growth going. 257 00:13:34,840 --> 00:13:37,520 Speaker 1: And then more recently, of course, you've had this explosion 258 00:13:37,559 --> 00:13:42,400 Speaker 1: of mortgage lending and private related investment has been concentrated 259 00:13:42,440 --> 00:13:46,560 Speaker 1: in things housing related, and I think what you have 260 00:13:46,760 --> 00:13:50,280 Speaker 1: here is the building up of even bigger problems and 261 00:13:50,400 --> 00:13:53,880 Speaker 1: even bigger so called credit gap that I think will 262 00:13:53,880 --> 00:13:56,840 Speaker 1: manifest itself probably more in two thousand and eighteen, Given 263 00:13:56,840 --> 00:13:59,280 Speaker 1: then two thousand and seventeen doesn't really fit with the 264 00:13:59,559 --> 00:14:02,040 Speaker 1: political calendar. Now, I'm going to close here by asking 265 00:14:02,080 --> 00:14:04,720 Speaker 1: you about the dollar. Pas so we're seeing at eighteen 266 00:14:04,800 --> 00:14:07,000 Speaker 1: sixty three, this has been an incredible proxy here for 267 00:14:07,040 --> 00:14:10,640 Speaker 1: what we've been seeing in the US presidential election. Aside 268 00:14:10,640 --> 00:14:12,280 Speaker 1: from that, aside of it being kind of neat to 269 00:14:12,280 --> 00:14:14,240 Speaker 1: watch rise and fall as we see the polling change 270 00:14:14,280 --> 00:14:15,560 Speaker 1: here in the US, what do you what do you 271 00:14:15,559 --> 00:14:17,199 Speaker 1: what can you learn from what the PESO was doing 272 00:14:17,240 --> 00:14:20,160 Speaker 1: at this point? Yeah, we'll just say that the pesso's 273 00:14:20,840 --> 00:14:25,400 Speaker 1: problems are a lot deeper than Donald Trump. That the 274 00:14:25,640 --> 00:14:28,960 Speaker 1: unresponsiveness of the trade balance to the weakness in the 275 00:14:29,000 --> 00:14:31,360 Speaker 1: PESSO is being quite remarkable in that sense. And I 276 00:14:31,360 --> 00:14:33,480 Speaker 1: think what you also seeing in terms of the trading 277 00:14:34,040 --> 00:14:36,440 Speaker 1: is that the PESSO will tend to weaken a lot 278 00:14:36,520 --> 00:14:40,560 Speaker 1: more on say Donald trumpet coming up on the polls, 279 00:14:40,720 --> 00:14:43,160 Speaker 1: and will actually strengthen on say a Hillary victory at 280 00:14:43,160 --> 00:14:45,800 Speaker 1: this point in time. So the upside as far as 281 00:14:45,800 --> 00:14:48,880 Speaker 1: the PESSO is concerned, that means the downside and dollar, 282 00:14:50,000 --> 00:14:52,080 Speaker 1: But the upside as far as the PESSO is concerned 283 00:14:52,160 --> 00:14:54,920 Speaker 1: is quite limited. I think even if the politics works 284 00:14:54,920 --> 00:14:56,920 Speaker 1: in its favor. All right, We'll be watching the debate tonight, 285 00:14:56,920 --> 00:14:58,640 Speaker 1: of course, Alan Ruskin, thank you very much for joining 286 00:14:58,680 --> 00:15:01,360 Speaker 1: us here. Instant Alan Ruskin, head of Foreign Exchange research 287 00:15:01,680 --> 00:15:04,160 Speaker 1: at Deutsche Bank based here in New York. Of course, 288 00:15:04,200 --> 00:15:07,200 Speaker 1: that debate tonight at nine o'clock Wall Street time, Donald 289 00:15:07,200 --> 00:15:09,760 Speaker 1: Trump and Hillary Clinton taking the stage. Then we will 290 00:15:09,800 --> 00:15:12,920 Speaker 1: have coverage before and after here on Bloomberg Radio, also 291 00:15:13,440 --> 00:15:28,240 Speaker 1: on Bloomberg Intelligent. So pleasure to have Sebastian Mallaby here 292 00:15:28,280 --> 00:15:30,600 Speaker 1: in studio with us today. He is a Senior Fellow 293 00:15:30,600 --> 00:15:32,880 Speaker 1: to Counsel on Formulations, author of a new book called 294 00:15:32,920 --> 00:15:35,680 Speaker 1: The Man Who Knew The Life and Times of Alan Greenspan, 295 00:15:35,760 --> 00:15:39,040 Speaker 1: the culmination of five years of research interviews with Alan 296 00:15:39,080 --> 00:15:41,160 Speaker 1: Greenspan and others. And thank you very much for being here. 297 00:15:41,160 --> 00:15:43,320 Speaker 1: Appreciate it really great to be with you. Let me 298 00:15:43,320 --> 00:15:45,800 Speaker 1: ask you first. I was watching the president's news conference 299 00:15:45,880 --> 00:15:49,760 Speaker 1: yesterday and and something that came up was him commenting 300 00:15:49,760 --> 00:15:51,840 Speaker 1: on the limits of monetary policy right now. This is 301 00:15:51,880 --> 00:15:54,440 Speaker 1: a constant through line that we've heard over the last 302 00:15:54,440 --> 00:15:57,840 Speaker 1: many months here um that monetary policy can't do everything. 303 00:15:57,840 --> 00:16:00,800 Speaker 1: There has to be fiscal policy. Uh In answered with it. 304 00:16:00,840 --> 00:16:02,920 Speaker 1: We're hearing that from central bank governors, were hearing that 305 00:16:03,000 --> 00:16:05,640 Speaker 1: from finance chiefs, We're hearing it from from heads of state. 306 00:16:06,520 --> 00:16:08,360 Speaker 1: Looking back at when Alan Greenspan was FED, here was 307 00:16:08,440 --> 00:16:10,560 Speaker 1: just something that he had to reckon with the limits 308 00:16:10,560 --> 00:16:13,760 Speaker 1: of monetary policy. Well, he did have to reckon at 309 00:16:13,800 --> 00:16:16,400 Speaker 1: the beginning, with the limits of the Fed's independence and 310 00:16:16,400 --> 00:16:19,400 Speaker 1: the willingness of politicians to beat up on the FED 311 00:16:19,440 --> 00:16:22,080 Speaker 1: has happened very much in the George H. W. Bush 312 00:16:22,120 --> 00:16:25,200 Speaker 1: administration at the beginning of Greenspan's tenure, to the point 313 00:16:25,280 --> 00:16:28,840 Speaker 1: that actually the budget chief in the White House, Richard Dumman, 314 00:16:29,360 --> 00:16:33,160 Speaker 1: was going around Washington and whispering This FED chief, sixty 315 00:16:33,240 --> 00:16:36,880 Speaker 1: five years old, lives by himself, called his mother every day. 316 00:16:36,880 --> 00:16:39,960 Speaker 1: Doesn't this reminds you of Hitchcock's Psycho So, I mean, 317 00:16:40,000 --> 00:16:42,920 Speaker 1: there was there was nasty pressure on the FED. And 318 00:16:42,960 --> 00:16:45,240 Speaker 1: the fact that then the FED this stopped and the 319 00:16:45,240 --> 00:16:49,320 Speaker 1: FED became independent is a testament to Greenspan's political skills. 320 00:16:49,840 --> 00:16:51,880 Speaker 1: And I think that you know modern day experts who 321 00:16:51,880 --> 00:16:54,360 Speaker 1: are under pressure, whether it's central bankers or other experts 322 00:16:55,000 --> 00:16:57,680 Speaker 1: they need to learn a lesson from Alan Greenspan, which 323 00:16:57,760 --> 00:17:01,560 Speaker 1: is you've got to marry the expertise with political savvy 324 00:17:01,600 --> 00:17:05,280 Speaker 1: and take the fight back to the politicians. Sebashion would 325 00:17:05,320 --> 00:17:07,520 Speaker 1: mean he called his mother every day. He's Italian, right, 326 00:17:07,560 --> 00:17:12,800 Speaker 1: that's the only thing we can take it out. Same thing. Um, Look, 327 00:17:12,840 --> 00:17:15,000 Speaker 1: this is a man that was full of contradiction. First 328 00:17:15,000 --> 00:17:17,879 Speaker 1: of all, congratulations on a really fine biography. He was 329 00:17:17,960 --> 00:17:20,880 Speaker 1: considered a rock star. And yet it's it was under 330 00:17:20,920 --> 00:17:23,720 Speaker 1: his watch almost that you know, the crisis happened, the 331 00:17:23,720 --> 00:17:27,560 Speaker 1: financial crisis. Could he have done anything to avert it? Yes, 332 00:17:27,600 --> 00:17:30,520 Speaker 1: I mean you cannot be the most influential economist in 333 00:17:30,520 --> 00:17:33,439 Speaker 1: the world, presiding over the global financial system have it 334 00:17:33,520 --> 00:17:35,800 Speaker 1: blow up and say sorry, it wasn't my my fault. 335 00:17:35,840 --> 00:17:38,840 Speaker 1: I mean, clearly he got something wrong. Now, the interesting 336 00:17:38,880 --> 00:17:41,239 Speaker 1: thing is, I believe the mistake he made is not 337 00:17:41,320 --> 00:17:43,800 Speaker 1: what most people would say. Most people would say, gee, 338 00:17:44,160 --> 00:17:47,480 Speaker 1: you know, interest rates were about right because inflation was 339 00:17:47,520 --> 00:17:50,639 Speaker 1: on target. It was really on the regulatory side that 340 00:17:50,720 --> 00:17:53,240 Speaker 1: there was a mess. In my view, and I did 341 00:17:53,320 --> 00:17:55,960 Speaker 1: a Freedom of Information Act requests and so forth to 342 00:17:55,960 --> 00:17:59,600 Speaker 1: to verify this. The fact actually did try to do 343 00:17:59,680 --> 00:18:02,440 Speaker 1: something about some prime mortgages. In two thousand one, it 344 00:18:02,600 --> 00:18:06,560 Speaker 1: did pass new rules. The problem is regulation, especially in 345 00:18:06,600 --> 00:18:09,359 Speaker 1: the United States, is poorous it leaks. There are so 346 00:18:09,400 --> 00:18:12,160 Speaker 1: many different agencies trying to do regulation. There's an alphabet 347 00:18:12,240 --> 00:18:15,400 Speaker 1: soup out there of different bodies. So regulation doesn't work. 348 00:18:15,400 --> 00:18:18,200 Speaker 1: And therefore I believe green Span should have been willing 349 00:18:18,240 --> 00:18:20,720 Speaker 1: to raise interest rates to fight the bubble. We'll talk 350 00:18:20,760 --> 00:18:22,680 Speaker 1: more about this apt for a breaking in just the second. 351 00:18:22,720 --> 00:18:24,120 Speaker 1: I wanted to ask you about the degree to which 352 00:18:24,119 --> 00:18:26,160 Speaker 1: he he thinks of his position in history. He looks 353 00:18:26,160 --> 00:18:28,679 Speaker 1: back on decisions he made visa the regulation. What he 354 00:18:28,680 --> 00:18:31,160 Speaker 1: could have done differently? Is he somebody who does think 355 00:18:31,200 --> 00:18:33,879 Speaker 1: back on the past and maybe play out some counterfactuals. 356 00:18:34,080 --> 00:18:36,399 Speaker 1: The fascinating thing is, you know, I would go see him, um, 357 00:18:36,720 --> 00:18:39,240 Speaker 1: you know a lot. I lost current after seventy hours 358 00:18:39,240 --> 00:18:42,480 Speaker 1: of sitting in his office, and every time he would 359 00:18:42,480 --> 00:18:45,400 Speaker 1: want to speak about the present or the future, and 360 00:18:45,480 --> 00:18:47,840 Speaker 1: I would have to force him because I'm doing a biography, right, 361 00:18:48,119 --> 00:18:50,119 Speaker 1: I want him to talk about the past. But he's saying, 362 00:18:50,400 --> 00:18:52,359 Speaker 1: why do you think about Brexit? Is that kind of 363 00:18:52,440 --> 00:18:55,440 Speaker 1: you know, that kind of stuff? See, you know, we've 364 00:18:55,480 --> 00:18:57,719 Speaker 1: spoken with him recently ran bloom Bigridian bloom Brew Television. 365 00:18:57,760 --> 00:19:00,720 Speaker 1: He still is very actively engaged in these discussions that 366 00:19:00,720 --> 00:19:03,840 Speaker 1: they're taking place. He's a wonderfully open and curious mind, 367 00:19:04,080 --> 00:19:06,400 Speaker 1: and I think that's still true at ninety years old. 368 00:19:06,480 --> 00:19:09,200 Speaker 1: We are joined in studio by Sebastian mal But, the 369 00:19:09,240 --> 00:19:11,439 Speaker 1: author of for finding biography here of Alan Alan Greenspan, 370 00:19:11,480 --> 00:19:13,760 Speaker 1: called the man who knew the life and times of 371 00:19:13,760 --> 00:19:16,480 Speaker 1: Alan Greenspan, and Sebastian I wanted to ask you about 372 00:19:17,200 --> 00:19:20,960 Speaker 1: FED communication. Alan Greenspan leaves and we see Ben Bernanki 373 00:19:21,000 --> 00:19:24,119 Speaker 1: on sixty minutes. We watch wrapped every couple of months 374 00:19:24,119 --> 00:19:27,600 Speaker 1: when the FED chair delivers a news conference. The vice chair, 375 00:19:27,600 --> 00:19:29,400 Speaker 1: stand Fisher, spoke at the Economic Club of New York 376 00:19:29,440 --> 00:19:31,879 Speaker 1: this week to a crowd of of hundreds. What is 377 00:19:31,920 --> 00:19:35,919 Speaker 1: Alan Greenspan make of this movement toward more transparency, openness, 378 00:19:35,920 --> 00:19:38,560 Speaker 1: whatever you'd like to call it. Well, when Alan Greenspan 379 00:19:38,800 --> 00:19:41,000 Speaker 1: was chairman, first of all, he spoke less, but also 380 00:19:41,080 --> 00:19:44,560 Speaker 1: when he did speak sometimes it was highly and deliberately confusing. 381 00:19:44,560 --> 00:19:47,680 Speaker 1: I mean he was compared once to a bespectacled c 382 00:19:47,840 --> 00:19:52,240 Speaker 1: SQUI who's sensing danger, right, He emits black ink and 383 00:19:52,280 --> 00:19:55,120 Speaker 1: then glides away silently. So you know he didn't believe 384 00:19:55,119 --> 00:19:57,240 Speaker 1: in quite as much communication. I actually think he got 385 00:19:57,240 --> 00:20:00,280 Speaker 1: it right. I think the cacophony that you're here is 386 00:20:00,280 --> 00:20:02,840 Speaker 1: not constructive because what it does it dilutes the message 387 00:20:03,240 --> 00:20:05,760 Speaker 1: from the FED. And as a result, today you've got 388 00:20:05,760 --> 00:20:07,920 Speaker 1: a tax on the FED from the right, from the left. 389 00:20:08,000 --> 00:20:10,399 Speaker 1: Is it too tight? Is it too loose? And Janet 390 00:20:10,440 --> 00:20:12,840 Speaker 1: Yell it is not really shaping that debate because there 391 00:20:12,840 --> 00:20:15,120 Speaker 1: are too many different people speaking on behalf of the FED. 392 00:20:15,440 --> 00:20:17,960 Speaker 1: That is not something that Alan Greenspan would have permitted. 393 00:20:18,200 --> 00:20:19,960 Speaker 1: I'll have you come and down that. Maybe from from 394 00:20:19,960 --> 00:20:21,960 Speaker 1: your perspective here, it seems like there's spin a sort 395 00:20:21,960 --> 00:20:25,240 Speaker 1: of half moved toward openness. This is still there's still 396 00:20:25,280 --> 00:20:28,640 Speaker 1: some opacity there. Uh. It creates a kind of game 397 00:20:28,640 --> 00:20:31,640 Speaker 1: where we're constantly guessing, even as we do have more information. 398 00:20:31,680 --> 00:20:33,920 Speaker 1: Just I guess the quality of that information is debatable. 399 00:20:34,040 --> 00:20:36,720 Speaker 1: I think the fact is that the more you talk 400 00:20:36,960 --> 00:20:38,960 Speaker 1: in a way, the less you can communicate. I mean, 401 00:20:39,040 --> 00:20:42,520 Speaker 1: people have to then interpret too many statements by too 402 00:20:42,520 --> 00:20:45,760 Speaker 1: many governors. Right in Greenspan's era, if one of his 403 00:20:45,800 --> 00:20:47,919 Speaker 1: fellow governors went out and made a speech that got 404 00:20:47,920 --> 00:20:51,199 Speaker 1: too much attention. Greenspan told him stop it, stop it. 405 00:20:51,320 --> 00:20:53,440 Speaker 1: I want to be the messenger. And if there's order 406 00:20:53,440 --> 00:20:56,280 Speaker 1: of us talking at once, that just confuses the markets. 407 00:20:56,359 --> 00:20:58,560 Speaker 1: It doesn't help but seaction. I mean, we pay some 408 00:20:58,640 --> 00:21:00,760 Speaker 1: of the market participants, you know, the hedge funds are 409 00:21:00,760 --> 00:21:03,000 Speaker 1: paid handsomely to understand these markets. I mean, what the 410 00:21:03,000 --> 00:21:05,119 Speaker 1: fact is becoming is just a little bit like the 411 00:21:05,119 --> 00:21:07,159 Speaker 1: Bank of England and the NPC here where you have 412 00:21:07,200 --> 00:21:09,600 Speaker 1: different views and actually it's up to the markets to 413 00:21:09,800 --> 00:21:12,920 Speaker 1: understand the strength of the economy. Well, you know, when 414 00:21:13,840 --> 00:21:18,879 Speaker 1: the Taper tantrum occurred in ben Bernanke himself was I 415 00:21:18,920 --> 00:21:22,400 Speaker 1: think totally surprised and confused by how the markets reacted 416 00:21:22,440 --> 00:21:25,080 Speaker 1: to what he said. And that just shows you that 417 00:21:25,760 --> 00:21:28,600 Speaker 1: however much you pay people to interpret what the central 418 00:21:28,600 --> 00:21:31,400 Speaker 1: bank is doing, if the central banks statements are open 419 00:21:31,440 --> 00:21:34,919 Speaker 1: to multiple interpretations, you're gonna get these volatile swings. You know, 420 00:21:34,960 --> 00:21:36,919 Speaker 1: every time the feed is about to meet maybe it's 421 00:21:36,960 --> 00:21:40,119 Speaker 1: going to exit low rates, you see this enormous volatility 422 00:21:40,119 --> 00:21:42,920 Speaker 1: build up. I just think you had much less volatility 423 00:21:43,000 --> 00:21:45,680 Speaker 1: in the Great Moderation and the Great moderation was under 424 00:21:45,720 --> 00:21:47,959 Speaker 1: the great Alan Greenspan. Um. You know there were other 425 00:21:48,000 --> 00:21:50,600 Speaker 1: stuff going on too, but I think Greenspan was the 426 00:21:50,680 --> 00:21:55,440 Speaker 1: master of being the empowered guru in Washington. Right. The 427 00:21:55,560 --> 00:21:58,440 Speaker 1: times have changed also, haven't they. You know, yesterday we 428 00:21:58,560 --> 00:22:01,600 Speaker 1: extensively talked about this opinion piece in the Telegraph by 429 00:22:01,600 --> 00:22:05,320 Speaker 1: William Hague, whose Foreign secretary, former Foreign secretary in the UK, 430 00:22:05,880 --> 00:22:08,280 Speaker 1: and if you look at the headline, he says, central 431 00:22:08,320 --> 00:22:11,879 Speaker 1: bankers have collectively lost the plot. They must raise interest 432 00:22:11,960 --> 00:22:15,280 Speaker 1: rates or face their doom. I mean, someone as powerful 433 00:22:15,640 --> 00:22:20,280 Speaker 1: as Alan Greenspan in today's context would would be eaten alive. No, 434 00:22:20,480 --> 00:22:23,119 Speaker 1: I think Alan Greenspan would probably eat his critics in life. 435 00:22:23,240 --> 00:22:25,600 Speaker 1: I mean, the truth is that green Span Greenspan had 436 00:22:25,720 --> 00:22:29,879 Speaker 1: unbelievably a good sense of how to manipulate Washington. He 437 00:22:29,960 --> 00:22:32,439 Speaker 1: was a Machiavellian power excellence. He had contacts in the 438 00:22:32,480 --> 00:22:35,439 Speaker 1: media such that if you picked a fight in public 439 00:22:35,480 --> 00:22:37,960 Speaker 1: with Alan Greenspan, you should not be surprised if in 440 00:22:37,960 --> 00:22:40,520 Speaker 1: the next two weeks one of the major newspapers had 441 00:22:40,520 --> 00:22:42,680 Speaker 1: a front page story is saying that you were wrong. 442 00:22:42,840 --> 00:22:45,639 Speaker 1: I mean, he had such good relations with people in 443 00:22:45,640 --> 00:22:48,520 Speaker 1: the Senate that you could perhaps not be confirmed to 444 00:22:48,600 --> 00:22:51,879 Speaker 1: the job you wanted. Greenspan knew how to operate in 445 00:22:51,880 --> 00:22:54,480 Speaker 1: a way that I think other central bankers today just 446 00:22:54,560 --> 00:22:57,680 Speaker 1: cannot match him. That's that's a fascinating point. I think 447 00:22:57,720 --> 00:23:01,720 Speaker 1: about our last two FED chair Ben Bruniki and Janet Yellen, 448 00:23:01,720 --> 00:23:05,040 Speaker 1: their backgrounds are very different from from Alan Greenspans. As 449 00:23:05,040 --> 00:23:06,760 Speaker 1: you were writing this, as you were thinking about this, 450 00:23:07,119 --> 00:23:09,880 Speaker 1: do you have any sort of conclusion about what equips 451 00:23:09,920 --> 00:23:12,320 Speaker 1: somebody best for a job like that. Yes, well, one 452 00:23:12,320 --> 00:23:15,080 Speaker 1: of the revelations about Alan Greenspan in his background is 453 00:23:15,119 --> 00:23:18,040 Speaker 1: that he was super political. I mean, you know, people 454 00:23:18,119 --> 00:23:21,320 Speaker 1: might vaguely know that he had advised Richard Nixon in 455 00:23:21,359 --> 00:23:24,199 Speaker 1: the sixties. He was not just the economic advisor, he 456 00:23:24,320 --> 00:23:26,840 Speaker 1: was the polling analyst. And then if you go forward, 457 00:23:26,840 --> 00:23:29,280 Speaker 1: you know he serves in the Ford administration. He's the 458 00:23:29,359 --> 00:23:31,320 Speaker 1: kind of person who sneaks into the White House with 459 00:23:31,359 --> 00:23:34,000 Speaker 1: his allies on the weekend to rewrite the president's speech 460 00:23:34,520 --> 00:23:37,119 Speaker 1: because one of his bureaucratic adversaries has done something he 461 00:23:37,160 --> 00:23:40,600 Speaker 1: didn't like. Henry Kissinger. At one point, Henry Kissinger supposed 462 00:23:40,640 --> 00:23:45,600 Speaker 1: to be the master bureaucratic infighter, and a story appears 463 00:23:45,640 --> 00:23:48,440 Speaker 1: in The New York Times attacking Kissinger's kusting just says 464 00:23:48,560 --> 00:23:50,680 Speaker 1: where the heck did this come from? To his deputy, 465 00:23:50,720 --> 00:23:53,000 Speaker 1: and the deputy says, oh, well, Alan Greenspan must have 466 00:23:53,000 --> 00:23:55,560 Speaker 1: planted that because green Span, I mean, you know, he 467 00:23:55,640 --> 00:23:58,560 Speaker 1: was just brilliant politically, and I think that is relevant 468 00:23:58,600 --> 00:24:01,000 Speaker 1: to why he did so well at the said when 469 00:24:01,040 --> 00:24:04,600 Speaker 1: he was attacked by politicians, he took the fight to them. 470 00:24:04,720 --> 00:24:07,760 Speaker 1: He understood power, he knew how to wield it. And frankly, 471 00:24:08,119 --> 00:24:11,520 Speaker 1: experts today who are under attack on the defensive they 472 00:24:11,520 --> 00:24:14,120 Speaker 1: could learn a lot from the example of Alan Greenspan. 473 00:24:14,560 --> 00:24:17,600 Speaker 1: How would he deal with Donald Trump? I think he would, 474 00:24:17,680 --> 00:24:20,040 Speaker 1: you know, make it um. You know, he would feed 475 00:24:20,320 --> 00:24:24,800 Speaker 1: the press with very smart arguments as to why what 476 00:24:24,880 --> 00:24:29,439 Speaker 1: Trump was doing was ridiculous, and the negative commentary on Trump, 477 00:24:29,480 --> 00:24:32,840 Speaker 1: which has already been quite considerable, would have been even more. 478 00:24:33,200 --> 00:24:35,800 Speaker 1: He would have gone to people in the Senate who 479 00:24:35,840 --> 00:24:38,040 Speaker 1: were you know, who are used to getting advice from 480 00:24:38,040 --> 00:24:42,160 Speaker 1: green Span, and he would have, you know, told them 481 00:24:42,359 --> 00:24:45,720 Speaker 1: that Trump was ruining their party, and he would have 482 00:24:45,760 --> 00:24:49,800 Speaker 1: isolated Trump, you know, completely, And I think that and 483 00:24:49,880 --> 00:24:51,800 Speaker 1: you know, he might also have said things in public. 484 00:24:52,200 --> 00:24:55,640 Speaker 1: And remember, at the height of Alan Greenspan's power, there 485 00:24:55,640 --> 00:24:59,159 Speaker 1: were Alan Greenspan T shirts, There were Alan Greenspan dolls, 486 00:24:59,520 --> 00:25:01,600 Speaker 1: you know, there was there were cartoons of him so 487 00:25:01,800 --> 00:25:04,040 Speaker 1: dressed up as Superman. I mean, he was the maestro. 488 00:25:04,200 --> 00:25:07,160 Speaker 1: Somebody compared him to Prozac because he lifted the mood 489 00:25:07,160 --> 00:25:09,840 Speaker 1: of Americans. Right, So if he had gone out in 490 00:25:09,880 --> 00:25:12,879 Speaker 1: public and said, you know, something negative about what Trump 491 00:25:12,920 --> 00:25:15,720 Speaker 1: was saying, it would have had an enormous effect on 492 00:25:15,720 --> 00:25:19,160 Speaker 1: Trump's standing and credibility. I mean, John McCain, in one 493 00:25:19,160 --> 00:25:23,359 Speaker 1: of the presidential primary debates in two thousand's made the 494 00:25:23,359 --> 00:25:26,080 Speaker 1: point that even if Greenspan were to die, you would 495 00:25:26,119 --> 00:25:28,040 Speaker 1: still want him miss fed chairman. You would dress him 496 00:25:28,119 --> 00:25:31,000 Speaker 1: up but dark glasses on the guy and keep him 497 00:25:31,040 --> 00:25:34,119 Speaker 1: in office because that was the nature of Greenspan's prestige. 498 00:25:34,560 --> 00:25:36,359 Speaker 1: I have a disclaimer. I do have a T shirt, 499 00:25:36,400 --> 00:25:40,040 Speaker 1: not of Greenspan. Ruth Bader Ginsburg. That's it. I need 500 00:25:40,040 --> 00:25:42,080 Speaker 1: to say that, Sebastian. Do you think that there's a 501 00:25:42,080 --> 00:25:45,640 Speaker 1: central banker that I mean gets as close as possible 502 00:25:45,720 --> 00:25:48,159 Speaker 1: as green Span. It seems they're all getting under so 503 00:25:48,240 --> 00:25:52,879 Speaker 1: much pressure. Mark Harney now being politicized, you know, Cherry 504 00:25:52,920 --> 00:25:57,199 Speaker 1: Yellen being the markets don't seem to believer her. You 505 00:25:57,240 --> 00:26:00,520 Speaker 1: have Druggy that's basically battling with states, and then you 506 00:26:00,560 --> 00:26:03,840 Speaker 1: have Governor Kroda who's losing credibility by the day. You know. 507 00:26:03,920 --> 00:26:06,640 Speaker 1: I think Janet Yellen is the furthest from the green 508 00:26:06,680 --> 00:26:10,040 Speaker 1: Span model because she's such an economist, economist, a sort 509 00:26:10,080 --> 00:26:14,200 Speaker 1: of technocrat, rather cautious. I'd say that Mark Karne has 510 00:26:14,280 --> 00:26:17,280 Speaker 1: that political flair. Um. You know, he obviously has their 511 00:26:17,280 --> 00:26:21,959 Speaker 1: own political ambitions in Canada um. And before Justin Trudeau 512 00:26:22,040 --> 00:26:23,880 Speaker 1: became the leader there, you know, there's talk of him 513 00:26:23,880 --> 00:26:26,520 Speaker 1: becoming the leader of Canada. And I think that shows 514 00:26:26,600 --> 00:26:29,080 Speaker 1: you that Connie does have that political side to him, 515 00:26:29,080 --> 00:26:32,480 Speaker 1: which is a good thing. His his disadvantage is that 516 00:26:33,160 --> 00:26:36,960 Speaker 1: in Britain he's not embedded in the long term. I mean, 517 00:26:37,000 --> 00:26:40,320 Speaker 1: he came three or four years ago, whereas green Span 518 00:26:40,400 --> 00:26:42,679 Speaker 1: by the time he became FED chairman, he had already 519 00:26:42,680 --> 00:26:45,960 Speaker 1: had two decades in Washington of building up relationships and 520 00:26:45,960 --> 00:26:48,720 Speaker 1: they always Maria drag I think Marria drag E does 521 00:26:48,800 --> 00:26:52,200 Speaker 1: have some of that political talent and is very kind 522 00:26:52,200 --> 00:26:54,400 Speaker 1: of deeply embedded in the Eurozone. And when he made 523 00:26:54,400 --> 00:26:58,040 Speaker 1: that statement in you know, the whole Eurozone was falling apart. 524 00:26:58,119 --> 00:27:02,280 Speaker 1: Peripheral yields were going crazy, and and and Draggy stood 525 00:27:02,359 --> 00:27:04,280 Speaker 1: up and said, you know, we're going to fix this. 526 00:27:04,440 --> 00:27:06,880 Speaker 1: We will do what it takes, and believe me, it will, 527 00:27:07,080 --> 00:27:09,639 Speaker 1: you know, do enough. It's almost like Clint Eastward, you know, 528 00:27:09,720 --> 00:27:12,440 Speaker 1: curning his lip and snarling at the hedge funds. I'm 529 00:27:12,600 --> 00:27:15,960 Speaker 1: badder than you are, right and Draggy I think that 530 00:27:16,000 --> 00:27:18,479 Speaker 1: he won that battle. And that is another reminder. Draggy 531 00:27:18,560 --> 00:27:21,199 Speaker 1: had that Greenspan magic and that's what we need more 532 00:27:21,240 --> 00:27:24,680 Speaker 1: of today. Very quickly here, just about thirty seconds left. 533 00:27:24,760 --> 00:27:28,520 Speaker 1: I wonder what he makes of the policy tool kits 534 00:27:28,520 --> 00:27:30,480 Speaker 1: such as it exists now. Is it something he could 535 00:27:30,520 --> 00:27:32,040 Speaker 1: have envisioned? You mentioned you talked to him for his 536 00:27:32,080 --> 00:27:34,680 Speaker 1: severny plus hours and wrestled with some of these modern 537 00:27:34,720 --> 00:27:36,199 Speaker 1: day issues. What does he make of of what's in 538 00:27:36,240 --> 00:27:40,560 Speaker 1: that toolbox right now? I think he's highly skeptical of 539 00:27:41,080 --> 00:27:43,480 Speaker 1: the modern toolbox. He thinks that if you create that 540 00:27:43,560 --> 00:27:46,120 Speaker 1: much money in the end, there's going to be inflation. 541 00:27:46,160 --> 00:27:48,480 Speaker 1: He hasn't been improved right yet. But his view is 542 00:27:49,119 --> 00:27:51,800 Speaker 1: that this is playing with fire. S Matsha Melby, thank 543 00:27:51,840 --> 00:27:54,160 Speaker 1: you very much for for twining us here, based in London, 544 00:27:54,200 --> 00:27:55,879 Speaker 1: here in New York with us today. He's the author 545 00:27:55,920 --> 00:27:57,640 Speaker 1: of a new book, The Life The Man Who Knew, 546 00:27:57,720 --> 00:28:00,240 Speaker 1: the Life and times of Alan Greenspan. He's a Senior 547 00:28:00,240 --> 00:28:11,400 Speaker 1: Fellow in Economics at the Council on Foreign Relations. Who 548 00:28:11,480 --> 00:28:14,760 Speaker 1: you put your trust in matters. Investors have put their 549 00:28:14,800 --> 00:28:18,600 Speaker 1: trust in independent registered investment advisors to the two and 550 00:28:18,640 --> 00:28:22,159 Speaker 1: of four trillion dollars. Why they see their roles to serve, 551 00:28:22,440 --> 00:28:25,800 Speaker 1: not sell. That's why Charles Schwab is committed to the 552 00:28:25,880 --> 00:28:32,040 Speaker 1: success over seven thousand independent financial advisors who passionately dedicate 553 00:28:32,080 --> 00:28:36,880 Speaker 1: themselves to helping people achieve their financial goals. Learn more 554 00:28:37,359 --> 00:28:49,239 Speaker 1: at find your Independent Advisor dot com. I'm joined now 555 00:28:49,280 --> 00:28:51,680 Speaker 1: in studio by Alan Krueger Heath Schi of course, professor 556 00:28:51,680 --> 00:28:54,120 Speaker 1: of Economics at Princeton University, formerture of the Council of 557 00:28:54,160 --> 00:28:57,920 Speaker 1: Economic Advisors in the Obama administration, now in informal advisor 558 00:28:57,960 --> 00:29:00,280 Speaker 1: to the Hillary Clinton campaign. I certain we want to 559 00:29:00,280 --> 00:29:02,360 Speaker 1: talk about the campaign and the debate, but let me 560 00:29:02,600 --> 00:29:05,600 Speaker 1: mind your expertise here in labor economics for a minute, 561 00:29:05,600 --> 00:29:07,680 Speaker 1: free Stallen, and we had the last jobs report, a 562 00:29:07,760 --> 00:29:11,120 Speaker 1: hundred thousand jobs added, the employment rate of five percent. 563 00:29:11,120 --> 00:29:13,719 Speaker 1: I was struck by how that played in the press. 564 00:29:14,360 --> 00:29:16,520 Speaker 1: I was looking back at the headlines when when those 565 00:29:16,600 --> 00:29:18,280 Speaker 1: numbers came out the New York Times seeing the US 566 00:29:18,320 --> 00:29:21,120 Speaker 1: economy showing resilience added a hundred fifty six thousand jobs 567 00:29:21,200 --> 00:29:24,600 Speaker 1: last month. The USA today saying disappointing hundred fifty jobs 568 00:29:24,640 --> 00:29:27,760 Speaker 1: added in September. Help us process that number and put 569 00:29:27,840 --> 00:29:30,560 Speaker 1: into some context for us, well, I think the big 570 00:29:30,600 --> 00:29:33,040 Speaker 1: picture is the labor market is in much better shape 571 00:29:33,040 --> 00:29:36,640 Speaker 1: than it was five years ago, eight years ago, and 572 00:29:36,720 --> 00:29:40,280 Speaker 1: we're now seeing, uh, the benefits of the recovery. We're 573 00:29:40,280 --> 00:29:43,880 Speaker 1: seeing wage growth pick up, We're seeing the gains be 574 00:29:44,000 --> 00:29:46,960 Speaker 1: more broadly shared. And I think going forward, with the 575 00:29:47,040 --> 00:29:50,920 Speaker 1: unemployment right down to five, the expectation should be for 576 00:29:51,000 --> 00:29:55,000 Speaker 1: around a hundred and fifty thousand jobs added. There Uh 577 00:29:55,200 --> 00:29:57,360 Speaker 1: is not that big a pool of workers left looking 578 00:29:57,360 --> 00:29:59,440 Speaker 1: for work compared to where we were a few years ago. 579 00:30:00,360 --> 00:30:02,880 Speaker 1: So alan we're going to see a right hike in December, right, 580 00:30:02,880 --> 00:30:05,960 Speaker 1: I mean, if everything is so strong it would be 581 00:30:06,000 --> 00:30:09,080 Speaker 1: the wrong signal not to hike in December. Well, I 582 00:30:09,080 --> 00:30:11,880 Speaker 1: think it's likely that the hike in December, but you 583 00:30:11,880 --> 00:30:13,680 Speaker 1: know a lot of data will come in between now 584 00:30:13,720 --> 00:30:19,280 Speaker 1: and then. Uh So, nothing happens in the economics with certainty, right, 585 00:30:19,280 --> 00:30:22,400 Speaker 1: but the trend so far points to a strong or 586 00:30:22,480 --> 00:30:25,120 Speaker 1: stronger US economy than what it was six months ago. 587 00:30:25,720 --> 00:30:28,320 Speaker 1: I think there's no question that the US economy has 588 00:30:28,360 --> 00:30:31,760 Speaker 1: been resilient and is on stronger footing. At the same time, 589 00:30:31,800 --> 00:30:34,000 Speaker 1: the inflation rate, while picking up, is still below the 590 00:30:34,000 --> 00:30:36,840 Speaker 1: two percent target. Uh And there's a lot of weakness 591 00:30:36,880 --> 00:30:38,920 Speaker 1: in the rest of the world, which the f O 592 00:30:39,080 --> 00:30:41,479 Speaker 1: m C will pay attention to. An issue in this 593 00:30:41,560 --> 00:30:45,160 Speaker 1: campaign has been the disenfranchised worker or the disenfranchised American 594 00:30:45,200 --> 00:30:47,760 Speaker 1: who wants to work or or work more. It's certainly 595 00:30:47,800 --> 00:30:49,880 Speaker 1: something that Donald Trump talks about. It certainly something that 596 00:30:50,520 --> 00:30:52,680 Speaker 1: Hillary Clinton talks about, perhaps with a little more difficulty 597 00:30:52,720 --> 00:30:56,040 Speaker 1: here as the natural successor to to to President Obama. 598 00:30:56,320 --> 00:30:58,520 Speaker 1: What explains that, What explains the sentiment that we're seeing 599 00:30:58,520 --> 00:31:00,479 Speaker 1: surrounding that right now, given the act that we are 600 00:31:00,520 --> 00:31:03,280 Speaker 1: getting stronger numbers and we're seeing the unemployment rate where 601 00:31:03,280 --> 00:31:06,600 Speaker 1: it is well. Over the last year, the labor force 602 00:31:06,640 --> 00:31:09,720 Speaker 1: participation rate actually has recovered about a half a percentage point, 603 00:31:09,800 --> 00:31:12,600 Speaker 1: which frankly, I was not expecting. The reason why I 604 00:31:12,640 --> 00:31:15,360 Speaker 1: wasn't expecting it is that the main reason we've seen 605 00:31:15,440 --> 00:31:18,520 Speaker 1: labor force decline is simply because we're an older population. 606 00:31:19,000 --> 00:31:21,560 Speaker 1: More than half of the decline in labor force participation 607 00:31:21,600 --> 00:31:23,880 Speaker 1: in the US is simply the result of the baby 608 00:31:23,880 --> 00:31:28,480 Speaker 1: boom reaching retirement age um and those who criticize the 609 00:31:28,520 --> 00:31:31,440 Speaker 1: economy under President Obama are missing the fact that this 610 00:31:31,560 --> 00:31:34,520 Speaker 1: was all expected before he came to office. The Council 611 00:31:34,520 --> 00:31:37,880 Speaker 1: of Economic Advisors under President Bush was anticipating that labor 612 00:31:37,920 --> 00:31:42,120 Speaker 1: force participation would be falling because of increasing retirements from 613 00:31:42,120 --> 00:31:45,120 Speaker 1: the baby boom generation. We saw the length of the 614 00:31:45,120 --> 00:31:47,400 Speaker 1: work week took up a little bit in the last report. 615 00:31:47,880 --> 00:31:49,640 Speaker 1: When you look at wage game where two point six 616 00:31:49,640 --> 00:31:53,040 Speaker 1: percent growth over over the last twelve months. You talked 617 00:31:53,040 --> 00:31:55,840 Speaker 1: about where the overall rate should be, the number of 618 00:31:55,920 --> 00:31:57,880 Speaker 1: jobs added should be. When you look at those things, 619 00:31:57,880 --> 00:31:59,160 Speaker 1: when you look at wages, when you look at the 620 00:31:59,200 --> 00:32:00,680 Speaker 1: length of the work week, are are we nearing a 621 00:32:00,720 --> 00:32:02,840 Speaker 1: ceiling there? Do you think? I don't know if it's 622 00:32:02,840 --> 00:32:05,640 Speaker 1: the ceiling. I think we're getting close to the classical 623 00:32:05,760 --> 00:32:08,520 Speaker 1: definition of full employment. Wage growth is up two point 624 00:32:08,560 --> 00:32:12,400 Speaker 1: eight percent this year. Last year we saw the sharpest 625 00:32:12,400 --> 00:32:14,840 Speaker 1: decline in poverty since the late ninet nineties, and we 626 00:32:14,960 --> 00:32:18,400 Speaker 1: saw the fastest growth in real median household income since 627 00:32:18,720 --> 00:32:21,760 Speaker 1: the nineteen sixties. So I think those are signs that 628 00:32:21,760 --> 00:32:25,120 Speaker 1: the labor market is getting tight. Should we worry or 629 00:32:25,120 --> 00:32:29,800 Speaker 1: should the Fed worry about a stronger dollar? Um? I 630 00:32:29,840 --> 00:32:33,280 Speaker 1: think the Fed anticipates that if the US economy continues 631 00:32:33,480 --> 00:32:37,760 Speaker 1: to recover the way they have been forecasting, and if 632 00:32:37,760 --> 00:32:40,719 Speaker 1: they raise rates, then the dollar probably will move up. 633 00:32:41,120 --> 00:32:43,680 Speaker 1: Some of that's already I think built into the markets, 634 00:32:44,200 --> 00:32:47,000 Speaker 1: but I'm sure that that's part of their forecasts, right, 635 00:32:47,040 --> 00:32:49,600 Speaker 1: so they can withstand it, right as long as it 636 00:32:49,640 --> 00:32:53,880 Speaker 1: doesn't Is there an optimum level, for example, for year dollar? Well, 637 00:32:54,320 --> 00:32:59,120 Speaker 1: I think more broadly, they're balancing lots of competing forces, 638 00:32:59,360 --> 00:33:02,520 Speaker 1: and their looking for the sweet spot where we can 639 00:33:02,560 --> 00:33:05,720 Speaker 1: maintain full employment and stable prices. And so far, you know, 640 00:33:05,720 --> 00:33:07,720 Speaker 1: I wouldn't second guess what they've done. I mean, it's 641 00:33:07,800 --> 00:33:10,280 Speaker 1: kind of remarkable progress that we've made. When when I 642 00:33:10,320 --> 00:33:12,960 Speaker 1: first started to work for President Obama. In two thousand nine, 643 00:33:13,360 --> 00:33:16,240 Speaker 1: we were losing eight hundred thousand jobs a month. Now 644 00:33:16,280 --> 00:33:19,080 Speaker 1: we're a little disappointed because we only added a hundred 645 00:33:19,080 --> 00:33:22,560 Speaker 1: and fifty six thousand UM and last year we added 646 00:33:22,600 --> 00:33:24,600 Speaker 1: almost three million over the course of the year. So 647 00:33:24,720 --> 00:33:27,000 Speaker 1: I think we're in a much stronger position and also 648 00:33:27,120 --> 00:33:29,040 Speaker 1: much stronger compared to the rest of the world. Help 649 00:33:29,080 --> 00:33:32,200 Speaker 1: me with the definition here of full employment. You hear 650 00:33:32,440 --> 00:33:34,720 Speaker 1: stan Fisher talk about where we are. We're nearing full 651 00:33:34,720 --> 00:33:38,440 Speaker 1: employment in his estimation. We talk a lot about the 652 00:33:38,440 --> 00:33:41,360 Speaker 1: the maybe fracturing unanimity of the FED Reserve Board, But 653 00:33:41,520 --> 00:33:44,280 Speaker 1: is there a clear definition of what full employment is 654 00:33:44,320 --> 00:33:46,160 Speaker 1: what the FED wants to see now when it comes 655 00:33:46,160 --> 00:33:51,200 Speaker 1: to employment. I think that as you as you said, UH, 656 00:33:51,240 --> 00:33:54,120 Speaker 1: FED is not of one mind, and different governors and 657 00:33:54,240 --> 00:33:58,160 Speaker 1: regional presidents have different views. Some would like to see 658 00:33:58,200 --> 00:34:00,840 Speaker 1: the job market run very hig I put some upward 659 00:34:00,840 --> 00:34:05,600 Speaker 1: pressure on wages and see that push up prices. Others 660 00:34:05,600 --> 00:34:08,719 Speaker 1: are concerned that inflation get could get above the two 661 00:34:08,719 --> 00:34:11,799 Speaker 1: percent target. My own view is that we've been below 662 00:34:11,840 --> 00:34:13,960 Speaker 1: the two percent target for so long. I think the 663 00:34:14,000 --> 00:34:16,640 Speaker 1: FET has been right to be cautious. UH and to 664 00:34:16,760 --> 00:34:19,600 Speaker 1: move at a at a slow pace. I think the 665 00:34:19,600 --> 00:34:24,160 Speaker 1: economy could withstand uh the inflation rate UH getting to 666 00:34:24,239 --> 00:34:26,200 Speaker 1: the two percent target or above it for a little while, 667 00:34:26,200 --> 00:34:28,680 Speaker 1: because it was below it for so long. You're sympathetic 668 00:34:28,680 --> 00:34:30,520 Speaker 1: to to stand Fisher's argument there not to change that 669 00:34:30,680 --> 00:34:32,520 Speaker 1: target at this point, to to raise it leave it 670 00:34:32,520 --> 00:34:34,160 Speaker 1: where it is. Well, I think they're stuck with the 671 00:34:34,200 --> 00:34:38,040 Speaker 1: two percent target um because there there's a lot of 672 00:34:38,040 --> 00:34:40,680 Speaker 1: credibility if they were to change it. On the other hand, 673 00:34:40,680 --> 00:34:43,880 Speaker 1: the way I interpret the target is that it's an average. 674 00:34:44,400 --> 00:34:46,319 Speaker 1: Two percent is an average. The fact that we've been 675 00:34:46,360 --> 00:34:48,200 Speaker 1: at one percent one and a half percent for four 676 00:34:48,280 --> 00:34:50,960 Speaker 1: years means to make the average of two percent, we 677 00:34:51,000 --> 00:34:53,319 Speaker 1: could be at three percent for a few years. Now. 678 00:34:53,360 --> 00:34:55,480 Speaker 1: That's my interpretation. I would like to hear a little 679 00:34:55,520 --> 00:34:58,400 Speaker 1: more articulation from from the FET about how they interpret 680 00:34:58,480 --> 00:35:01,719 Speaker 1: their target and stand Fishers saying the the Economic Club 681 00:35:01,719 --> 00:35:03,640 Speaker 1: of New York really this week, indeed, the FIT things 682 00:35:03,680 --> 00:35:07,080 Speaker 1: we were close to that two percent target. Alan we 683 00:35:07,160 --> 00:35:09,080 Speaker 1: are here a few hours away from the third and 684 00:35:09,440 --> 00:35:12,879 Speaker 1: final presidential debate. We can talk about Hillary Clinton's plans 685 00:35:12,880 --> 00:35:14,960 Speaker 1: in specific here in a moment, but I wonder what 686 00:35:15,120 --> 00:35:17,160 Speaker 1: your sense is of the degree to which these candidates 687 00:35:17,160 --> 00:35:19,480 Speaker 1: have engaged with economic issues. I think back to the 688 00:35:19,560 --> 00:35:22,560 Speaker 1: last presidential debate. It had that town hall forum, and 689 00:35:23,239 --> 00:35:25,520 Speaker 1: you know, who knows how representative that that group is 690 00:35:25,520 --> 00:35:27,879 Speaker 1: of the American electric But the economy was not front 691 00:35:27,920 --> 00:35:31,000 Speaker 1: and centered, at least in the questions there. Well, I 692 00:35:31,040 --> 00:35:34,720 Speaker 1: think that's uh certainly was the case. Uh. Secretary Clinton, 693 00:35:34,800 --> 00:35:37,680 Speaker 1: I can tell you, has focused very much on economic 694 00:35:37,719 --> 00:35:42,080 Speaker 1: issues facing the country. She's developed very detailed plans about 695 00:35:42,640 --> 00:35:45,360 Speaker 1: her vision for the future, about how to improve the 696 00:35:45,400 --> 00:35:48,799 Speaker 1: work life balance, how to have an economy that works 697 00:35:48,840 --> 00:35:51,520 Speaker 1: for everyone. I've been involved in the development of some 698 00:35:51,560 --> 00:35:53,600 Speaker 1: of those plans, and I can tell you it was 699 00:35:53,680 --> 00:35:55,560 Speaker 1: reminiscent of my work in the government. Who was a 700 00:35:55,719 --> 00:35:59,840 Speaker 1: level of detail, And the other side seems really to 701 00:35:59,880 --> 00:36:02,279 Speaker 1: be flying by the seat of their parents. They don't 702 00:36:02,280 --> 00:36:05,399 Speaker 1: have specifics on what they would do to help middle 703 00:36:05,400 --> 00:36:08,880 Speaker 1: class families, um, what they would do to invest in infrastructure. 704 00:36:09,760 --> 00:36:12,600 Speaker 1: So I think that contrast couldn't be stronger. You know, 705 00:36:12,800 --> 00:36:16,200 Speaker 1: you you've been in Washington, You've seen the policy engine 706 00:36:16,200 --> 00:36:18,759 Speaker 1: grind slowly as it's been grinding over these these last 707 00:36:18,800 --> 00:36:22,120 Speaker 1: few years. We're talking with Stan Collinder about the prospects 708 00:36:22,120 --> 00:36:24,560 Speaker 1: for divided government here in the in the next year. 709 00:36:25,440 --> 00:36:29,280 Speaker 1: How would a president Hillary Clinton deal with Congress? Again, 710 00:36:29,440 --> 00:36:33,440 Speaker 1: we hear the clarion call from central bankers, from from 711 00:36:33,719 --> 00:36:37,560 Speaker 1: UH financial policymakers calling for more fiscal policy. It has 712 00:36:37,560 --> 00:36:39,600 Speaker 1: been difficult, to say the least, for the ABO administration 713 00:36:39,640 --> 00:36:42,960 Speaker 1: to get more done. Are you optimistic that with a 714 00:36:43,000 --> 00:36:44,920 Speaker 1: new president something would be possible? How is it going 715 00:36:44,960 --> 00:36:47,319 Speaker 1: to be possible? I think there would be a great 716 00:36:47,320 --> 00:36:50,240 Speaker 1: opportunity for Hillary Clinton if she were to become president. 717 00:36:50,760 --> 00:36:54,160 Speaker 1: She's worked across the aisle before. She's demonstrated that she 718 00:36:54,239 --> 00:36:58,680 Speaker 1: can make principles compromises. I think that there's scope for 719 00:36:59,360 --> 00:37:02,879 Speaker 1: improving our corporate tax system, for investing more in infrastructure, 720 00:37:02,920 --> 00:37:05,480 Speaker 1: for improving our work life balance. I think it can 721 00:37:05,480 --> 00:37:08,040 Speaker 1: be done in a fiscally responsible way, but you need 722 00:37:08,080 --> 00:37:12,799 Speaker 1: Congress well. I think if Congress remains divided, or Paul 723 00:37:12,920 --> 00:37:15,080 Speaker 1: Ryan remains Speaker of the House, I still think there's 724 00:37:15,080 --> 00:37:19,440 Speaker 1: an opportunity. Ryan has expressed interest and a lot of 725 00:37:19,880 --> 00:37:25,400 Speaker 1: issues UM which I think could lead to UH a package. 726 00:37:25,840 --> 00:37:27,920 Speaker 1: UH you know, for example, expanding their in the Coome 727 00:37:27,960 --> 00:37:32,200 Speaker 1: tax credit to be more generous to individuals without depending 728 00:37:32,320 --> 00:37:35,719 Speaker 1: children reforming the corporate tax system. So I think that 729 00:37:35,800 --> 00:37:39,680 Speaker 1: there is scope for a lot of progress even if 730 00:37:39,719 --> 00:37:43,720 Speaker 1: Congress remains divided. Ellen, let's go back to the economic 731 00:37:43,760 --> 00:37:46,160 Speaker 1: policies of Hillary Clinton, and we all read the you know, 732 00:37:46,200 --> 00:37:49,600 Speaker 1: the policies. We read some of the leaflets and their um. 733 00:37:49,680 --> 00:37:53,040 Speaker 1: You know, they seem okay on paper, But how many 734 00:37:53,200 --> 00:37:58,000 Speaker 1: unification initiatives can the Clinton administration actually push through? For example, 735 00:37:58,000 --> 00:38:00,279 Speaker 1: in infrastructure, you need to finance the spending. Where's the 736 00:38:00,280 --> 00:38:04,160 Speaker 1: money coming from. I actually helped to make some suggestions 737 00:38:04,160 --> 00:38:06,839 Speaker 1: for her infrastructure plan, so I'm intimately familiar with it. 738 00:38:07,000 --> 00:38:10,080 Speaker 1: UM it's a fiscally responsible plan. It's paid for with 739 00:38:10,160 --> 00:38:14,600 Speaker 1: corporate tax reform. It would increase investment in infrastructure UH 740 00:38:14,640 --> 00:38:17,240 Speaker 1: I think by about five billion dollars over the first 741 00:38:17,320 --> 00:38:21,640 Speaker 1: five years. Part of it would come from a Infrastructure 742 00:38:21,640 --> 00:38:25,879 Speaker 1: Investment Bank, which would be seeded by UH funds from 743 00:38:26,040 --> 00:38:28,800 Speaker 1: the government, but would leverage private capital and would benefit 744 00:38:28,840 --> 00:38:32,200 Speaker 1: I think from the judgment of private sector investors. She 745 00:38:32,280 --> 00:38:37,760 Speaker 1: would emphasize repairing on the tax so corporate income tax 746 00:38:38,200 --> 00:38:42,160 Speaker 1: would go up. No, no, you know, if you take 747 00:38:42,200 --> 00:38:45,200 Speaker 1: a look at our corporate tax system. It is so inefficient. UH, 748 00:38:45,280 --> 00:38:48,200 Speaker 1: companies have so much money deferred abroad which they owe 749 00:38:48,440 --> 00:38:52,080 Speaker 1: federal income tax on that there's plenty of scope for 750 00:38:52,840 --> 00:38:56,600 Speaker 1: UH lowering our corporate tax rate, reducing some of the loopholes, 751 00:38:57,200 --> 00:39:02,080 Speaker 1: improving the way we tax international income, and using some 752 00:39:02,200 --> 00:39:05,319 Speaker 1: of the revenue that that generates to invest in infrastructure. Right, 753 00:39:05,360 --> 00:39:07,040 Speaker 1: and you and you believe that she will be able 754 00:39:07,080 --> 00:39:09,960 Speaker 1: to reach an agreement that's acceptable to both House Republicans 755 00:39:10,000 --> 00:39:12,239 Speaker 1: and members of her own party. Well, I think there's 756 00:39:12,239 --> 00:39:14,120 Speaker 1: an agreement to be had if if you look at 757 00:39:14,160 --> 00:39:16,920 Speaker 1: the proposal that Congressman David Camp had when he was 758 00:39:17,040 --> 00:39:19,239 Speaker 1: Chairman of the House Ways and Means Committee, it wasn't 759 00:39:19,280 --> 00:39:23,479 Speaker 1: too far off of the Treasury Department proposal. So I'm 760 00:39:23,480 --> 00:39:25,920 Speaker 1: hoping that the election will free up a little bit 761 00:39:25,960 --> 00:39:29,680 Speaker 1: of space for Congress to make some progress on these issues. 762 00:39:30,040 --> 00:39:32,200 Speaker 1: Let's talk trade for a second here. One of our 763 00:39:32,239 --> 00:39:34,520 Speaker 1: reporters just sat down with an ambassador mic Frome and 764 00:39:34,560 --> 00:39:36,880 Speaker 1: the U. S Trade representative talked about the prospects for 765 00:39:36,880 --> 00:39:40,120 Speaker 1: getting the Trans Pacific Partnership voted on by Congress here 766 00:39:40,120 --> 00:39:42,640 Speaker 1: by by the end of President Obama's term. Of course, 767 00:39:42,719 --> 00:39:45,600 Speaker 1: Hillary Clinton said she doesn't support the partnership as it 768 00:39:45,640 --> 00:39:49,040 Speaker 1: stands right now. What is wrong with it is she 769 00:39:49,160 --> 00:39:51,160 Speaker 1: as she sees it when she looks at that policy, 770 00:39:51,239 --> 00:39:55,120 Speaker 1: what's missing, what needs to be changed? Of course, your 771 00:39:55,160 --> 00:39:57,800 Speaker 1: trade a a very big part of the economic backdrop 772 00:39:57,840 --> 00:40:01,960 Speaker 1: to this campaign. I can't be for the candidate on 773 00:40:02,280 --> 00:40:03,640 Speaker 1: what you would need to see, but I can tell 774 00:40:03,680 --> 00:40:07,240 Speaker 1: you as an economist, trade agreements certainly have the potential 775 00:40:07,320 --> 00:40:09,760 Speaker 1: to increase the size of the pie, but the affect 776 00:40:09,840 --> 00:40:12,560 Speaker 1: who gets which slice of the pie and the gains 777 00:40:12,640 --> 00:40:16,239 Speaker 1: from globalization have not been shared broadly enough. I think 778 00:40:16,760 --> 00:40:19,880 Speaker 1: too many workers get dislocated as a result of trade, 779 00:40:20,000 --> 00:40:22,040 Speaker 1: and we don't do enough to help them make a 780 00:40:22,080 --> 00:40:24,320 Speaker 1: transition to other sectors to help them make up for 781 00:40:24,400 --> 00:40:27,160 Speaker 1: lost income. That brings me to my next question here, 782 00:40:27,160 --> 00:40:30,239 Speaker 1: which is about economic conclusion. You certainly saw it being 783 00:40:30,239 --> 00:40:32,440 Speaker 1: talked about at the IMF World Bank meetings a few 784 00:40:32,480 --> 00:40:35,000 Speaker 1: weeks ago. It seems like any big event, any big 785 00:40:35,040 --> 00:40:37,400 Speaker 1: gathering of economists, now it's going to be something that 786 00:40:37,680 --> 00:40:42,000 Speaker 1: comes up. And I wonder why it seems like, um, 787 00:40:42,040 --> 00:40:43,399 Speaker 1: this is happening now. I think you could I think 788 00:40:43,440 --> 00:40:46,239 Speaker 1: you could criticize the field, perhaps the policy field for 789 00:40:46,280 --> 00:40:47,560 Speaker 1: coming to this too light, But there are a lot 790 00:40:47,600 --> 00:40:52,560 Speaker 1: of people who feel disenfranchised, and what tangibly can policy 791 00:40:52,600 --> 00:40:57,480 Speaker 1: makers do to to to make economic gains more inclusive. Well, 792 00:40:57,520 --> 00:41:00,160 Speaker 1: first of all, the rise and inequality that we've seen 793 00:41:00,200 --> 00:41:02,920 Speaker 1: in the US started in the early eighties, so this 794 00:41:03,000 --> 00:41:05,960 Speaker 1: is not a new phenomenon. And the only time in 795 00:41:06,000 --> 00:41:09,640 Speaker 1: the last thirty five years where we've seen the bottom 796 00:41:09,800 --> 00:41:12,319 Speaker 1: gain as much as the top, if not more than 797 00:41:12,360 --> 00:41:14,359 Speaker 1: the top, was in the late nineteen nineties and then 798 00:41:14,440 --> 00:41:17,560 Speaker 1: last year. So I think it's clear that a strong 799 00:41:17,719 --> 00:41:22,000 Speaker 1: macro economy helps, but policy can also help, for example, 800 00:41:22,080 --> 00:41:25,280 Speaker 1: raising the minimum wage, expanding their own income tax credit. 801 00:41:25,520 --> 00:41:29,160 Speaker 1: I think investing in infrastructure would would help possibly bring 802 00:41:29,160 --> 00:41:32,719 Speaker 1: back some people have left the labor force, so there's 803 00:41:32,719 --> 00:41:36,120 Speaker 1: a lot that could be done. But I think economic 804 00:41:36,160 --> 00:41:38,600 Speaker 1: forces have been following us apart and I think some 805 00:41:38,680 --> 00:41:42,840 Speaker 1: corporate decisions have been pulling us apart um. We've seen 806 00:41:43,200 --> 00:41:46,200 Speaker 1: too much of the profit go uh to the very 807 00:41:46,280 --> 00:41:48,440 Speaker 1: top in the corporations, and one of the things that 808 00:41:48,480 --> 00:41:50,759 Speaker 1: Secretary Clinton proposed and I'm a big fan of, is 809 00:41:50,880 --> 00:41:54,600 Speaker 1: more profit sharing for for employees and having tax incentives 810 00:41:54,600 --> 00:41:57,680 Speaker 1: to encourage profit sharing, which could also increase loyalty and 811 00:41:57,760 --> 00:42:00,560 Speaker 1: raised productivity. So I think there's a lot of both 812 00:42:00,600 --> 00:42:02,719 Speaker 1: the private sector and the government can do to create 813 00:42:02,760 --> 00:42:05,200 Speaker 1: a more inclusive society. All right, Alan Krueger, thank you 814 00:42:05,280 --> 00:42:07,120 Speaker 1: very much for joining us here today in New York. 815 00:42:07,120 --> 00:42:10,160 Speaker 1: That's Alan Kruger. He's a professor of economics at Princeton University. 816 00:42:10,200 --> 00:42:13,960 Speaker 1: Cours formature of President Obama's Council of Economic Advisors, now 817 00:42:13,960 --> 00:42:16,600 Speaker 1: an informal advisor. It's an advisor and awful lot of 818 00:42:16,600 --> 00:42:26,360 Speaker 1: times here to the Hillary Clinton campaign for president. Thanks 819 00:42:26,360 --> 00:42:30,800 Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen 820 00:42:30,880 --> 00:42:36,200 Speaker 1: to interviews on iTunes, SoundCloud, or whichever podcast platform you prefer. 821 00:42:36,960 --> 00:42:39,840 Speaker 1: I'm out on Twitter at Tom Keene. David Gura is 822 00:42:39,960 --> 00:42:43,719 Speaker 1: at David Gura. Before the podcast, you can always catch 823 00:42:43,800 --> 00:42:59,719 Speaker 1: us worldwide. I'm Bloomberg Radio. Who you put your trust in? 824 00:42:59,800 --> 00:43:03,560 Speaker 1: Man Letters investors have put their trust and independent registered 825 00:43:03,600 --> 00:43:07,719 Speaker 1: investment advisors to the two and four trillion dollars. Why 826 00:43:08,000 --> 00:43:12,040 Speaker 1: Learn more at find your Independent Advisor dot com.