WEBVTT - Stanford's Taylor Sees Advantage in Normalizing Rates (Audio)

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<v Speaker 1>Global business news twenty four hours a day at Bloomberg

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<v Speaker 1>This is a Bloomberg Business Flash from Bloomberg World Headquarters

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<v Speaker 1>on Katherine Cownderie. Stocks are headed for a three week

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<v Speaker 1>low as concern about global economic growth sends equities lower

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<v Speaker 1>around the world. The SMP five hundred is down for

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<v Speaker 1>the fourth time in five days, with industrial shares losing

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<v Speaker 1>more than one percent and eighteen percent rally from February

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<v Speaker 1>lows is faltering. Reports today showed service companies expanded last

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<v Speaker 1>month at the fastest pace in four months, while fewer

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<v Speaker 1>jobs were added than projected, which have the markets every

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<v Speaker 1>fifteen minutes throughout the trading day down, Bloomberg Radio down.

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<v Speaker 1>Industrial average is down one hundred thirty points three quarters

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<v Speaker 1>of a percent, trading at seventeen thousand, six hundred twenty.

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<v Speaker 1>SMP f ive foundered down sixteen point three quarters of

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<v Speaker 1>a percent to two thousand forty seven. The NASDACT is

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<v Speaker 1>down forty five points nearly one percent at forty seven eighteen.

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<v Speaker 1>West Texas Intermediate cord oil down thirty four to barrel

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<v Speaker 1>at forte Spot gold is down sixteen dollars eighty cents

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<v Speaker 1>anounce at twelve seventy five and the tenure Treasury is

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<v Speaker 1>up three thirty seconds with the yield of one point

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<v Speaker 1>seven eight percent. And that's a Bloomberg business splash. This

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<v Speaker 1>is taking Stock with Kathleen Hayes and Pin Fox on

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<v Speaker 1>Bloomberg Radio. What's it take to get for Federal Reserve

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<v Speaker 1>Bank presidents in one place on one day to debate

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<v Speaker 1>a very contentious, very hot topic and monetary policy. Well,

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<v Speaker 1>if your name is John Taylor, and you have a

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<v Speaker 1>rule named after the Taylor Rule, and if you are

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<v Speaker 1>holding a monetary policy conference for the third year in

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<v Speaker 1>a row, that's what you can get. John Taylor is

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<v Speaker 1>with us here at the Hoover Institution at Stanford University. John,

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<v Speaker 1>of course the George P. Schult's Senior Fellow in Economics

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<v Speaker 1>at Hoover. He's the Mary and Robert Raymond Professor of

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<v Speaker 1>ECON at Stanford University, and so much more. In this

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<v Speaker 1>year the conference is entitled International Monetary Stability, Past, Present

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<v Speaker 1>and Future. So John, thank you for inviting me back

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<v Speaker 1>to the conference. It's great to be here. Glad you

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<v Speaker 1>could could become Glad you could be here and I

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<v Speaker 1>wanted to have you on the show today. The conference

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<v Speaker 1>officially kicks off tomorrow, but I wanted to get you

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<v Speaker 1>on the show today so we could really take our

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<v Speaker 1>time to put the issues on the table, so our

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<v Speaker 1>listeners will be already for tomorrow. So the monetary policy

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<v Speaker 1>rule that you have, the Taylor rule, in essence, takes

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<v Speaker 1>a look at unemployment and inflation, a couple of coefficients

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<v Speaker 1>and then says, what what what a central bank should do.

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<v Speaker 1>You say, we're not even we're not exactly applying to

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<v Speaker 1>the United States, but you say, it's really important now

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<v Speaker 1>to apply that rule overseas for starters. What's the rule?

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<v Speaker 1>Why is it so important? Well, when when they fed

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<v Speaker 1>another central banks came close to using this type of

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<v Speaker 1>rule or procedure, things work really well. They moved the

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<v Speaker 1>interest rate around in a pretty predictable way, and the

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<v Speaker 1>economy was good. Is it's a good time, And when

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<v Speaker 1>other center banks do the same thing. So there's a

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<v Speaker 1>lot of evidence both in economics and experience that this

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<v Speaker 1>kind of thing works and read sutly central banks have

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<v Speaker 1>gone different directions, and in some sense that's the purpose.

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<v Speaker 1>Our conferences say, why is there so much difference in

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<v Speaker 1>exchange rates are moving and capital flows are moving, and

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<v Speaker 1>that's the instability that we're concerned about. And the thought

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<v Speaker 1>is of central banks and the sense got back to

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<v Speaker 1>a more normal approach, which is a policy rule approach

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<v Speaker 1>that they could eliminate a lot of this instability. John Taylor,

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<v Speaker 1>I don't know whether you're familiar with Bill Maher, the

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<v Speaker 1>television interviewer, but he has a segment where he says

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<v Speaker 1>new rules, and I'm wondering if you could talk about

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<v Speaker 1>new rules based systems or a new rules based world economy.

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<v Speaker 1>Tell us about how a rules based system would work. Well,

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<v Speaker 1>what we've seen with experiences when central banks have more

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<v Speaker 1>predictable policies, so people know what they're doing when they're

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<v Speaker 1>moving the interest rate around, which is what they usually do,

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<v Speaker 1>then it provides more stability. And so a rules base

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<v Speaker 1>means you kind of know what's up, what the government's

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<v Speaker 1>up to, what the center banks are up to, and

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<v Speaker 1>they around the world know what each other is up to,

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<v Speaker 1>so it provides a real sort of sense of guidance

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<v Speaker 1>and stability. It's kind of natural you know what your

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<v Speaker 1>counterparts are doing. Other parts of the world. We've sent

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<v Speaker 1>We've seen it work in other areas of international policy,

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<v Speaker 1>trade policy. Rules based strategies have been out there a

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<v Speaker 1>long time and experienced people people like poll Vocal used

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<v Speaker 1>to run the FED, people like George SCHULTZU many cabinet

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<v Speaker 1>posts recognize this importance of a strategy and advocating we

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<v Speaker 1>moved back to this kind of thing. It's really not

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<v Speaker 1>so new. The world is different, but it's it's something

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<v Speaker 1>that's worked in the past and it will work again. Well,

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<v Speaker 1>is there really a rules for all season though? John?

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<v Speaker 1>It doesn't discretion have a role because there a certain center.

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<v Speaker 1>Feds always sid inflation rises, raise rates, you know, job

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<v Speaker 1>the job market gets too tight, going to start headquarter recession,

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<v Speaker 1>you cut rates and there's a certain then there's something

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<v Speaker 1>discretion based around your evaluation of those numbers and what

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<v Speaker 1>they're with the trends are where they're going. Well, the

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<v Speaker 1>advantage of a rule of procedures, you know when they're

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<v Speaker 1>going to do it and by how much, And it's

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<v Speaker 1>not just winging it and saying we're going to move

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<v Speaker 1>by this amount when we think we will and and

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<v Speaker 1>get off of it. So there's quite a bit of

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<v Speaker 1>difference and and of course in any situation, you need

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<v Speaker 1>to have some discretion. All the proposals that I've certainly

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<v Speaker 1>worked on that are being proposed now allow for some

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<v Speaker 1>discretion in a case of emergency, In case of a panic,

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<v Speaker 1>of course you have to have that, but that doesn't

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<v Speaker 1>mean you do it all the time. That doesn't mean

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<v Speaker 1>you don't have a system or a strategy in place. Again,

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<v Speaker 1>so people know what you're up to. Interest rates. Are

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<v Speaker 1>interest rates too low? Yes? I think they are at

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<v Speaker 1>this point. There has been a real effort to try

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<v Speaker 1>to raise them in the US last year they took

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<v Speaker 1>a stab at into somebody seem to be backing off.

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<v Speaker 1>At this point, they've been near zero for a law

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<v Speaker 1>a long time. Other central banks have followed the FED

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<v Speaker 1>down quite frankly, and it's become more of a global things.

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<v Speaker 1>So a good fraction of the center banks in the

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<v Speaker 1>world have rates which are nears are or even slightly

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<v Speaker 1>less than zero. Very unusual situation, and I think that's

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<v Speaker 1>part of the sense in which it's it's unusual and

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<v Speaker 1>therefore not rule like. So the idea that that's what

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<v Speaker 1>will be you're discussing at this conference with real practitioners

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<v Speaker 1>and people have been working at this for many, many

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<v Speaker 1>years to see why are we in this unusual situation.

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<v Speaker 1>Some people think it's just right. I don't, but I

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<v Speaker 1>think we're gonna explore that, and I believe see that

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<v Speaker 1>there's an advantage of normalizing rates at this point in

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<v Speaker 1>time if you're a country like Japan which has had deflation.

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<v Speaker 1>Europe's with with the deflation, are negative interest rates consistent

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<v Speaker 1>with the Taylor rule? Well, at this point in Japan's situation,

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<v Speaker 1>they've tried everything they could. They have had a new

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<v Speaker 1>central bank with a gigantic amount of quantitative easy and

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<v Speaker 1>that means purchases of security. So it's it's much more

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<v Speaker 1>in the zero or negative rates, and and it really

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<v Speaker 1>hasn't worked. I think that's the concern. These policies don't

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<v Speaker 1>seem to be working, and they're basically exchanged the exchange rates.

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<v Speaker 1>They make a big difference on that, and that's that's

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<v Speaker 1>what really the attention is at this point is exchange

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<v Speaker 1>rates moving around and capital flows moving around, and they're

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<v Speaker 1>really not helping the Japanese economy. If anything, they're going

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<v Speaker 1>the wrong way. We're going to continue the conversation with

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<v Speaker 1>John Taylor. He is the Professor of Economics at Stanford University,

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<v Speaker 1>Senior Fellow in Economics at the Hoover Institution. You're listening

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<v Speaker 1>to taking Stock. I'm Kim Fox, my co host, Kathleen Hayes,

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<v Speaker 1>and this is Bloomberg Radio. Coming up on taking Stock.

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<v Speaker 1>Roger mcmeee, founding partner of the venture capital firm Elevation

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<v Speaker 1>Partners on Facebook, Apple, and cannabis. That's next broadcasting live

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<v Speaker 1>to New York, Bloomberg eleven, Rio to Washington, d C,

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<v Speaker 1>Bloomber to Boston, Bloomberg dwell Under to San Francisco, Bloomberg

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<v Speaker 1>nine six to the country's series Exam General one nine

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<v Speaker 1>and around the globe the Bloomberg Radio plus Appen Bloomberg

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<v Speaker 1>dot Com. This is taking Stock. I'm Kathleen Hayes at

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<v Speaker 1>the Hoover Institution at Stanford University, along with Pim Fox

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<v Speaker 1>at Bloomberg le headquarters in New York City. But a

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<v Speaker 1>lot of global market instability, a lot of economist, a

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<v Speaker 1>lot economies having trouble. Could it have something to do

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<v Speaker 1>with a monetary policy situation that could use some more

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<v Speaker 1>rule based procedures. We're gonna look at the international aspect

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<v Speaker 1>of John Taylor's rule. Pim with John Taylor of the

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<v Speaker 1>Hoover Institution, and will also be talking about Donald Trump,

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<v Speaker 1>who seems to be taking over the Republican nomination for president.

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<v Speaker 1>Bill Bes come up with the Mark Halpern John Hilman

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<v Speaker 1>of with all due respect or right now, with all

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<v Speaker 1>due respect, let's go to Katherine Cowndery in the Bloomberg

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<v Speaker 1>news room. Thank you, pam Well. Stocks are declining. Mixed

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<v Speaker 1>economic reports are weighing on the market. One report showed

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<v Speaker 1>service companies expanded in April at the fastest pace in

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<v Speaker 1>four months. Another from the Payrolls Processor a DP showed

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<v Speaker 1>companies hired fewer workers in April than estimated. Peter Dickson,

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<v Speaker 1>Global Equities Economy as at Commerce Bank, told Bloomberg Radio

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<v Speaker 1>that investors are not getting much direction from economic data.

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<v Speaker 1>They're not really getting an awful lot of steer from

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<v Speaker 1>central banks either. There was a sense of there at

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<v Speaker 1>central banks is from the kitchen sink up to the problem.

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<v Speaker 1>We're not seeing any real signs of significant recovery, and

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<v Speaker 1>I think as a consequence, investors just feel a little

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<v Speaker 1>bit chitch you right now. We jacked the markets every

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<v Speaker 1>fifteen minutes throughout the trading day. Down Industrial average is

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<v Speaker 1>currently down one hundred points six tenths of a percent,

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<v Speaker 1>trading at seventeen thousand, six hundred fifty. The S and

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<v Speaker 1>P five foundered down twelve point six tenths of a cent,

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<v Speaker 1>trading at two thousand fifty. Then NASTAC is down thirty

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<v Speaker 1>six points three quarters of a percent, trading at forty

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<v Speaker 1>seven twenty seven. West Texas West Texas an immediate crude

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<v Speaker 1>oil is up twenty six cents of barrel at two,

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<v Speaker 1>spout golled down sixteen dollars seventy cents an ounce at

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<v Speaker 1>twelve seventy, and the tenure Treasury is of one thirty

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<v Speaker 1>second with the yield of one point seven nine percent.

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<v Speaker 1>Among today's talk business stories, the trade deficit fellon March

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<v Speaker 1>to the lowest level in sixteen months. Imports plunged by

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<v Speaker 1>the largest amount since the depths of the recession seven

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<v Speaker 1>years ago. The trade deficit narrative forty point four billion

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<v Speaker 1>dollars in March. That's a drop of thirteen point nine

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<v Speaker 1>percent from February. It was the smallest trade gap since November.

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<v Speaker 1>And now let's get an update of some of the

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<v Speaker 1>other stories. We're following today. Thank you, Katherine from the

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<v Speaker 1>Bloomberg News room. I'm Ramie in essentio. John Kazik, last

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<v Speaker 1>man standing in Donald Trump's path to the Republican nomination,

0:10:52.320 --> 0:10:55.400
<v Speaker 1>will end his campaign later today, making Trump the party's

0:10:55.440 --> 0:10:58.680
<v Speaker 1>presumptive nominee. Two people close to the campaign tell Bloomberg

0:10:58.679 --> 0:11:01.719
<v Speaker 1>News the Ohio governor will suspend his campaign in a

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<v Speaker 1>speech at five pm Eastern Time. In columns Ohio. Despite

0:11:05.360 --> 0:11:08.440
<v Speaker 1>his inability to win any contest beyond his state, Kasik

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<v Speaker 1>held onto becoming the last candidate battling Trump, if only

0:11:12.080 --> 0:11:14.880
<v Speaker 1>for a few hours. Since Ted Cruz dropped out last night.

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<v Speaker 1>As the presumptive nominee, Trump is now looking toward the

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<v Speaker 1>general election and thinking about a running mate. Trump tells

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<v Speaker 1>ABC News his pick for VP will be someone with

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<v Speaker 1>political experience. I would like to have somebody that could

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<v Speaker 1>truly be good with respect to dealing with the Senate,

0:11:31.280 --> 0:11:36.520
<v Speaker 1>dealing with Congress, getting legislation passed, working towards something where

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<v Speaker 1>we're not signing executive orders every three days like President

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<v Speaker 1>Obama does. On the Democratic side, Bernie Sanders says the

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<v Speaker 1>race is not over after beating Hillary Clemson in Indiana. Yesterday,

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<v Speaker 1>Defense Secretary Ash Carter is warning the war against Islamic

0:11:50.760 --> 0:11:53.600
<v Speaker 1>state is quote far from over. Carter said, the death

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<v Speaker 1>of a Navy seal in a rock at the hands

0:11:55.360 --> 0:11:58.440
<v Speaker 1>of extremists, it's evidence of the fight that remains. These

0:11:58.600 --> 0:12:04.839
<v Speaker 1>risks will continue you and we greatly regret his loss.

0:12:05.280 --> 0:12:09.240
<v Speaker 1>Carter spoke today in Stuttgart, Germany, and Governor Andrew Cuomo says,

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<v Speaker 1>quote justice was served in the Sheldon Silver case and

0:12:12.440 --> 0:12:15.760
<v Speaker 1>the former Assembly speakers twelve years sentence sends a message

0:12:15.800 --> 0:12:19.480
<v Speaker 1>to officials who abuse the public's trust. Silver was convicted

0:12:19.600 --> 0:12:22.560
<v Speaker 1>in a five million dollar corruption case. Global News twenty

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<v Speaker 1>four hours a day, powered by our journalists in more

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<v Speaker 1>than one fifty news bureaus around the world. From the

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<v Speaker 1>Bloomberg newsroom, I'm Ramy and a cent Cio gatherin. Thank you,

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<v Speaker 1>and now let's get a quick update of the equity benchmarks.

0:12:34.400 --> 0:12:37.920
<v Speaker 1>Del Industrial Average is down one one point at seventeen thousand,

0:12:37.960 --> 0:12:40.280
<v Speaker 1>six hundred fifty s and p f F foundered down

0:12:40.320 --> 0:12:43.160
<v Speaker 1>twelve points to two thousand fifty one. Then Naztac is

0:12:43.240 --> 0:12:46.360
<v Speaker 1>down thirty six points at forty seven. And that's a

0:12:46.400 --> 0:12:51.240
<v Speaker 1>Bloomberg Business flash. He is taking Stock The FED in

0:12:51.440 --> 0:12:58.800
<v Speaker 1>focus on Bloombird Radio. The FED in focuses Rachi Bay

0:12:58.880 --> 0:13:02.199
<v Speaker 1>Willoughby since eight, New York City's boutique camera store for

0:13:02.320 --> 0:13:05.439
<v Speaker 1>precision crafted, Hazzle, blood and Like a cameras, plus a

0:13:05.520 --> 0:13:09.240
<v Speaker 1>full selection of go pro action adventure cameras. Willoughby's corner

0:13:09.360 --> 0:13:13.439
<v Speaker 1>of Fifth Avenue and thirty first Street. You're listening to

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<v Speaker 1>taking Stock, I'm pim Fox. My co host Kathleen Hayes.

0:13:17.200 --> 0:13:20.880
<v Speaker 1>Joining us now is John Taylor for a continuing conversation

0:13:20.960 --> 0:13:25.079
<v Speaker 1>about economics. He's a professor of economics at Stanford University

0:13:25.160 --> 0:13:28.080
<v Speaker 1>has also Senior Fellow in Economics at the Hoover Institution.

0:13:28.559 --> 0:13:35.199
<v Speaker 1>Professor Taylor. And denying that something is true just because

0:13:35.280 --> 0:13:38.640
<v Speaker 1>it suits your fancy doesn't make it any less true.

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<v Speaker 1>And what I mean by that is if you ask

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<v Speaker 1>a child if something happens in another part of the country,

0:13:46.800 --> 0:13:50.439
<v Speaker 1>and will it affect them, many of them understand yes,

0:13:50.720 --> 0:13:54.520
<v Speaker 1>it will global warming, various types of things. Why our

0:13:54.679 --> 0:13:59.679
<v Speaker 1>economists seemingly immune to this connection, Well, I don't or

0:13:59.800 --> 0:14:04.280
<v Speaker 1>that or FED officials, I guess I should say more specifically, Well,

0:14:04.320 --> 0:14:06.719
<v Speaker 1>I think you know quite candidly, a lot of FED

0:14:06.800 --> 0:14:10.120
<v Speaker 1>officials think too much about what's happening all over the place,

0:14:10.200 --> 0:14:12.400
<v Speaker 1>and maybe just the opposite of what you're saying that

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<v Speaker 1>there's a sense in which if they react to every

0:14:15.800 --> 0:14:18.320
<v Speaker 1>little wiggle and every little movement all around the world,

0:14:18.320 --> 0:14:20.800
<v Speaker 1>they're going to be doing too many things. So the

0:14:20.880 --> 0:14:23.040
<v Speaker 1>trick is to find the big things that are really

0:14:23.160 --> 0:14:27.080
<v Speaker 1>moving the economy or require some response, and and that

0:14:27.240 --> 0:14:29.600
<v Speaker 1>does take judgment, but it also takes experience. That's why

0:14:29.640 --> 0:14:33.000
<v Speaker 1>I think these rules or strategies which shay which is

0:14:33.040 --> 0:14:35.200
<v Speaker 1>the things you're gonna react to and which are not,

0:14:35.520 --> 0:14:37.600
<v Speaker 1>isn't so important. So let's take a look a couple

0:14:37.640 --> 0:14:40.840
<v Speaker 1>of papers that are coming up at the conference tomorrow, John,

0:14:40.840 --> 0:14:44.160
<v Speaker 1>particularly for our listeners who are FED nerds like us,

0:14:44.200 --> 0:14:46.480
<v Speaker 1>and I really want to dive into these which will

0:14:46.480 --> 0:14:51.360
<v Speaker 1>be accessible as well. Um the fan often says when

0:14:51.400 --> 0:14:54.040
<v Speaker 1>it comes to its moves that sure it could impact

0:14:54.120 --> 0:14:57.360
<v Speaker 1>emerging markets, but remember a very extensive analysis that FED

0:14:57.440 --> 0:14:59.160
<v Speaker 1>had a couple of years ago about oh, there are

0:14:59.200 --> 0:15:01.240
<v Speaker 1>all these other things in markets are reacting to when

0:15:01.240 --> 0:15:04.560
<v Speaker 1>they sold off, not FED moves, right. But Sebastian Edwards,

0:15:04.600 --> 0:15:07.440
<v Speaker 1>actually economist has done a paper which suggests that there's

0:15:07.520 --> 0:15:10.080
<v Speaker 1>direct links and direct impact of the FEDS moves on

0:15:10.200 --> 0:15:12.760
<v Speaker 1>the rest of the world. Yes, he is one of

0:15:12.840 --> 0:15:16.120
<v Speaker 1>the people giving papers a dis conference which he studied

0:15:16.160 --> 0:15:18.800
<v Speaker 1>carefully and saw these impacts in Latin American countries, but

0:15:18.920 --> 0:15:21.280
<v Speaker 1>you can see them in other countries as well, and

0:15:21.360 --> 0:15:24.400
<v Speaker 1>so it's there, and you know, you you think that

0:15:24.520 --> 0:15:27.320
<v Speaker 1>there's reasons the exchange rates could move, interest rates couldn't move,

0:15:27.440 --> 0:15:31.040
<v Speaker 1>and the US is a powerful federal reserve, has a

0:15:31.080 --> 0:15:33.200
<v Speaker 1>powerful set of reserves, so that's going to have these impacts.

0:15:33.280 --> 0:15:35.520
<v Speaker 1>So the question is how do we deal with that?

0:15:35.640 --> 0:15:37.280
<v Speaker 1>And that's why that's why I think you need to

0:15:37.360 --> 0:15:40.400
<v Speaker 1>have some sense of cooperation or some sense of global

0:15:40.480 --> 0:15:43.760
<v Speaker 1>aspects of this. One of the most outspoken central bankers

0:15:43.800 --> 0:15:46.080
<v Speaker 1>in the world these days as the central banker runs India,

0:15:46.960 --> 0:15:49.600
<v Speaker 1>ragu Rajan, and he can see some of these impacts

0:15:49.640 --> 0:15:52.120
<v Speaker 1>on his own country. So I think it's important for

0:15:52.680 --> 0:15:56.120
<v Speaker 1>the world to take these into account. Does the world

0:15:56.160 --> 0:15:59.560
<v Speaker 1>pay too much attention to the Federal Reserve? The Federal

0:15:59.560 --> 0:16:03.760
<v Speaker 1>Reserve is the most significant central bank. The dollar is

0:16:03.840 --> 0:16:07.360
<v Speaker 1>the most significant currency, so they have to pay attention

0:16:07.440 --> 0:16:09.680
<v Speaker 1>to the Federal Reserve. I think what we need to

0:16:09.760 --> 0:16:11.760
<v Speaker 1>do is find a way for the Bank of the

0:16:12.240 --> 0:16:15.440
<v Speaker 1>United States, the FED, to integrate its policy and think

0:16:15.520 --> 0:16:18.000
<v Speaker 1>more about its impact on the world, because the world

0:16:18.040 --> 0:16:20.120
<v Speaker 1>does feedback on the United States. Even if you're just

0:16:20.200 --> 0:16:22.440
<v Speaker 1>concerned about the United States, if you're mandated to be

0:16:22.480 --> 0:16:26.320
<v Speaker 1>concerned about US inflation and unemployment, you've got to think

0:16:26.600 --> 0:16:28.400
<v Speaker 1>about the impacts on the rest of the world because

0:16:28.440 --> 0:16:31.440
<v Speaker 1>it can come back and hurt you. So the FED

0:16:31.720 --> 0:16:35.280
<v Speaker 1>as a superpower that maybe he has gotten too powerful.

0:16:35.400 --> 0:16:38.280
<v Speaker 1>That's also being addressed at the conference tomorrow. John. Yeah,

0:16:38.400 --> 0:16:41.600
<v Speaker 1>one of the interesting papers David Beckworth is giving is

0:16:41.720 --> 0:16:45.080
<v Speaker 1>about the FED as a superpower. That reflects the reality

0:16:45.240 --> 0:16:48.000
<v Speaker 1>that the Federal Reserve is a is a a power

0:16:48.360 --> 0:16:51.880
<v Speaker 1>full central bank and superpower. Is maybe wanted to underline that,

0:16:52.720 --> 0:16:54.760
<v Speaker 1>but you need to take that into account and the

0:16:54.880 --> 0:16:57.600
<v Speaker 1>dollar its role. The dollar is important. It's not disappearing.

0:16:57.680 --> 0:17:00.120
<v Speaker 1>There's lots of people talking about the Chinese currency can

0:17:00.200 --> 0:17:02.840
<v Speaker 1>be more important, but it's still the dollar, and we

0:17:02.880 --> 0:17:05.520
<v Speaker 1>need to think about how to make that work. How

0:17:05.600 --> 0:17:09.240
<v Speaker 1>would you debate or how would you push forward the

0:17:09.359 --> 0:17:13.280
<v Speaker 1>idea of interest rate increases to the Federal Reserve Bank

0:17:13.359 --> 0:17:16.960
<v Speaker 1>presidents that vote against them, how would you convince them? Well,

0:17:17.000 --> 0:17:19.200
<v Speaker 1>the main thing is in the past, when we've had

0:17:19.240 --> 0:17:23.159
<v Speaker 1>policies with higher interest rates, in these circumstances, things that

0:17:23.240 --> 0:17:26.960
<v Speaker 1>work much better. And there are colleagues of those people

0:17:27.040 --> 0:17:29.360
<v Speaker 1>at the FED who think exactly the same. They've seen

0:17:29.520 --> 0:17:33.000
<v Speaker 1>history and they can see it works. Economics is a

0:17:33.080 --> 0:17:35.920
<v Speaker 1>confusing science for lots of people, so there's different viewpoints.

0:17:36.000 --> 0:17:37.880
<v Speaker 1>That's the way it is. So you've got to persuade,

0:17:37.880 --> 0:17:40.840
<v Speaker 1>you gotta talk, and you know, there are times where

0:17:41.000 --> 0:17:42.920
<v Speaker 1>policy is not great. You've got to find a way

0:17:42.960 --> 0:17:44.600
<v Speaker 1>to get back to good policy. It'll be better for

0:17:44.640 --> 0:17:46.800
<v Speaker 1>the economy. John, what would you change about the federalssor

0:17:46.840 --> 0:17:48.520
<v Speaker 1>of Peter Fisher, who was the head of the Market's

0:17:48.520 --> 0:17:51.040
<v Speaker 1>Desk of the New York Fed, gave a talk just

0:17:51.119 --> 0:17:53.320
<v Speaker 1>a few days ago saying that the size of the

0:17:53.600 --> 0:17:55.720
<v Speaker 1>f o MC, the Board of Governors plus the Fed

0:17:55.800 --> 0:17:57.600
<v Speaker 1>Bank President should be cut back. I think he wants

0:17:57.640 --> 0:17:59.720
<v Speaker 1>to get rid of the board, have fewer Fedbank presidents,

0:17:59.760 --> 0:18:03.399
<v Speaker 1>to have more transparency. It's a good idea. Well, you know,

0:18:03.600 --> 0:18:07.239
<v Speaker 1>just step back. There's an enormous number of proposals put

0:18:07.320 --> 0:18:09.000
<v Speaker 1>out there right now, and Peters is one of them.

0:18:09.040 --> 0:18:12.040
<v Speaker 1>I think it's it's worth thinking about, and that reflects

0:18:12.080 --> 0:18:14.080
<v Speaker 1>the fact that policy is not working so well and

0:18:14.119 --> 0:18:17.760
<v Speaker 1>there's some problems, and there's legislation in Congress to actually

0:18:17.840 --> 0:18:21.400
<v Speaker 1>make some changes. I think some of that legislation's promising,

0:18:21.480 --> 0:18:23.960
<v Speaker 1>maybe more promising than what Peter is referring to what

0:18:24.080 --> 0:18:26.480
<v Speaker 1>we discussed it and that really requires the FED to

0:18:26.560 --> 0:18:29.440
<v Speaker 1>simply report it strategy, to simply say what they're doing

0:18:29.520 --> 0:18:31.520
<v Speaker 1>as clearly as they can. I think that would be

0:18:31.600 --> 0:18:36.720
<v Speaker 1>uge improvement. John Taylor, thank you so very much, joining

0:18:36.800 --> 0:18:39.720
<v Speaker 1>us here at the Hoover Institution at Stanford University on

0:18:39.840 --> 0:18:43.480
<v Speaker 1>the eve of his third annual Monetary Policy conference. This

0:18:43.640 --> 0:18:48.000
<v Speaker 1>year it's International Monetary Stability, Past, Present and Future. We're

0:18:48.040 --> 0:18:51.240
<v Speaker 1>speaking a lot more about the conference today and tomorrow.

0:18:51.840 --> 0:19:01.680
<v Speaker 1>This is taking Stock on Bloomberg Radio. The FED Hour

0:19:01.880 --> 0:19:04.960
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