WEBVTT - Breaking Down the Fed and Trump's Race Comments 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.960 --> 0:00:15.560 This is the Bloomberg Surveillance Podcast. I'm Tom Keene along 0:00:15.600 --> 0:00:18.960 with Paul Sweeney. Join us each day for insight from 0:00:18.960 --> 0:00:23.160 the best in economics, finance, investment, and international relations. You 0:00:23.160 --> 0:00:26.520 can also watch the show live on YouTube. Visit the 0:00:26.520 --> 0:00:31.280 Bloomberg Podcast channel on YouTube to see the show weekday 0:00:31.280 --> 0:00:34.320 mornings from seven to ten am Eastern from our global 0:00:34.360 --> 0:00:39.000 headquarters in New York City. Subscribe to the podcast on Apple, Spotify, 0:00:39.360 --> 0:00:42.920 or anywhere else you listen. And always I'm Bloomberg Radio, 0:00:43.080 --> 0:00:47.720 the Bloomberg Terminal, and the Bloomberg Business App. Richard Clarita 0:00:47.840 --> 0:00:50.279 comes back for more this morning. Thank you so much 0:00:50.320 --> 0:00:51.640 for joining Bloomberg this morning. 0:00:51.840 --> 0:00:53.640 As always, thanks for having me. 0:00:53.840 --> 0:00:57.320 What changed yesterday? The fact that I understand there's some 0:00:57.400 --> 0:01:01.160 geopolitical yield going on there is well, but we had 0:01:01.320 --> 0:01:06.640 fixed income up yield down equities to the moon. What 0:01:07.600 --> 0:01:11.280 was the FED signaling that gave markets confidence? 0:01:12.680 --> 0:01:13.600 I think a couple things. 0:01:13.600 --> 0:01:15.920 First of all, one could argue that, if anything, the 0:01:16.000 --> 0:01:19.720 FMC statement itself maybe was a little bit less dubbish 0:01:20.080 --> 0:01:23.640 than folks might have thought. But yet again, the press conference, 0:01:23.680 --> 0:01:26.640 I think a fair reading of the press conference was 0:01:26.680 --> 0:01:29.360 that it skewed a bit dubbish. Now, again, the moving 0:01:29.440 --> 0:01:33.440 prices was quite small. The September cut was fully priced 0:01:33.440 --> 0:01:37.479 in before the meeting, it's fully priced in after the meeting. 0:01:37.520 --> 0:01:40.319 But this is a committee that cares about both sides. 0:01:39.959 --> 0:01:41.759 Of the dual mandate. 0:01:41.959 --> 0:01:46.039 They've made that clear now in the statement, and they 0:01:46.160 --> 0:01:50.160 also made clear they're getting increasing confidence that inflation's on 0:01:50.240 --> 0:01:53.040 a path to two. And finally that they actually discussed 0:01:53.760 --> 0:01:57.400 at the meeting yesterday cutting rates at the meeting yesterday. 0:01:57.480 --> 0:01:59.800 So all in, I think that's what the markets were 0:02:00.160 --> 0:02:00.920 reacting to. 0:02:00.920 --> 0:02:04.120 Tom Richard, there are folks in academia and in practice 0:02:04.160 --> 0:02:06.040 in the marketplace that feel like the FED is already 0:02:06.040 --> 0:02:08.120 behind the curve, that the real time data suggests that 0:02:08.200 --> 0:02:11.160 the economy really is slowing, and by the time they 0:02:11.160 --> 0:02:13.680 get cutting rates it may be too late. How do 0:02:13.680 --> 0:02:14.520 you respond to that? 0:02:15.240 --> 0:02:17.800 Well, good question, because I think that is a risk 0:02:17.919 --> 0:02:21.840 they have been willing to take for a couple of years. Indeed, 0:02:21.880 --> 0:02:24.560 Chirpal made that very clear of Jackson Hole in twenty 0:02:24.639 --> 0:02:29.160 twenty two. As inflation has moved towards target from above, 0:02:29.760 --> 0:02:33.200 they've increasingly and yesterday in the statement indicated that they 0:02:33.320 --> 0:02:35.760 now are looking at both sides of the dual mandate. 0:02:36.160 --> 0:02:38.400 That said, I agree with them. 0:02:38.480 --> 0:02:41.480 I think the data coming in are certainly consistent with 0:02:41.520 --> 0:02:44.919 an economy operating at or perhaps a bit above trend. 0:02:45.040 --> 0:02:48.080 So I don't think they're in a danger zone here 0:02:48.160 --> 0:02:51.080 of falling behind the curve. Moreover, they've made very clear 0:02:51.120 --> 0:02:54.440 that if they do see any softening in the labor market, 0:02:55.040 --> 0:02:57.639 looks like they won't hesitate to start cutting. So there's 0:02:57.720 --> 0:03:00.160 risk management here. Agree, But I think I think think 0:03:00.160 --> 0:03:01.040 they're in a good place. 0:03:01.240 --> 0:03:03.679 You under sell this, you know, you got to get 0:03:03.680 --> 0:03:10.200 some pr Richard. Basically, Richard Clarita made modern Columbia economics. 0:03:10.200 --> 0:03:12.960 He took the heritage of a guy named Stiglitz, a 0:03:13.040 --> 0:03:15.760 heritage of a guy named Phelps. There was some guy 0:03:15.840 --> 0:03:18.560 doing fancy math at Princeton. He said, come on up 0:03:18.600 --> 0:03:22.160 to Columbia, and what's amazing about this? Did you even 0:03:22.240 --> 0:03:26.680 teach microeconomics at Colombia? Is still like Pierre Andre Chapori, 0:03:27.320 --> 0:03:30.000 I mean, you got Mike, Well, how does microeconomics fit 0:03:30.080 --> 0:03:33.079 in it Columbia? Unlike the madness at Chicago. 0:03:33.800 --> 0:03:36.400 Well, I work in some micro in my classes. I 0:03:36.440 --> 0:03:38.840 think it's best for all concern that I stick to 0:03:38.880 --> 0:03:42.320 the stick to the macri. He also mentioned Bob Mundell, 0:03:42.400 --> 0:03:45.280 who passed away not too long ago, a dear friend 0:03:45.280 --> 0:03:46.880 and colleague. So at one point I think we had 0:03:47.240 --> 0:03:49.800 four Nobel Laureates on the faculties. 0:03:49.840 --> 0:03:52.840 So yeah, let's bring in our Nobel lawyate. Animong with 0:03:52.880 --> 0:03:56.360 a question for the former vice chairman, Anamog of Chicago 0:03:56.520 --> 0:03:57.800 in Bloomberg Economics. 0:03:58.000 --> 0:04:01.200 Yeah, Richie mentioned that this committee is one that's very 0:04:01.240 --> 0:04:04.360 focused on both sides of the mandate. And do you 0:04:04.520 --> 0:04:09.560 think that going forward, you know, suppose that we do 0:04:09.720 --> 0:04:13.440 have the Trump number two administration with what's happening with 0:04:13.520 --> 0:04:19.160 the potentially higher tariffs, would that factor in into the 0:04:19.200 --> 0:04:23.480 committee's September meeting deliberations or even November deliberations. Should they 0:04:23.560 --> 0:04:24.599 turn preemptive? 0:04:25.000 --> 0:04:28.039 Should we just leave the studio right exactly? That was 0:04:28.080 --> 0:04:32.320 a totally unfair question. Rich Well. 0:04:32.360 --> 0:04:33.719 First of all, An, as you know, I'm a big, 0:04:33.720 --> 0:04:36.159 big fan of your work, So keep up the good work. 0:04:36.279 --> 0:04:38.719 I think Jay Powell made it very clear yesterday he 0:04:38.760 --> 0:04:41.960 got a couple of questions and he said, look, we're 0:04:41.960 --> 0:04:46.320 going to base policy on achieving our mandate. I think 0:04:46.320 --> 0:04:48.479 he mentioned he'd been at the FED for now four 0:04:48.520 --> 0:04:52.359 presidential election cycles, so I don't think it will be 0:04:52.400 --> 0:04:54.600 a factor. And I'm actually glad they clarify that because 0:04:54.600 --> 0:04:56.800 there had been some meme in the markets that the 0:04:56.839 --> 0:04:59.240 pal Fed might hold off doing anything to see how 0:04:59.240 --> 0:05:01.800 the election turned out and that, and I think clearly 0:05:01.880 --> 0:05:03.640 he set that aside. 0:05:03.320 --> 0:05:06.800 And this was really something his voice changed. I'm sorry 0:05:07.760 --> 0:05:09.640 this happens like man Q when he was at the 0:05:09.640 --> 0:05:12.560 White House. Up you get upset, and all of a 0:05:12.600 --> 0:05:15.480 sudden he go into Harvard lecture form when he got upset. 0:05:15.520 --> 0:05:17.760 Bernanke used to do the same thing, And I asked 0:05:17.800 --> 0:05:19.480 another question to make us look puny. 0:05:19.640 --> 0:05:22.200 Yes, I want to push on that a little bit. 0:05:22.279 --> 0:05:22.479 Rich. 0:05:22.640 --> 0:05:25.320 You were there during the Trump first Trade War as 0:05:25.320 --> 0:05:28.760 it was. I you understand you were brieved about the 0:05:28.760 --> 0:05:32.400 inflationary impact of the first Trade War, and you probably 0:05:32.520 --> 0:05:36.240 remember that the briefing was tilting toward saying that the 0:05:37.520 --> 0:05:40.960 terrorists were inflationary, which didn't turn out to be. And 0:05:41.080 --> 0:05:43.840 right now, the mainstream economy is Wall Street economis are 0:05:43.920 --> 0:05:47.320 uniformally saying that it will be very inflationary. Again, what's 0:05:47.400 --> 0:05:48.960 your thought on that, Well, there are. 0:05:48.880 --> 0:05:49.480 A couple of things. 0:05:49.800 --> 0:05:54.559 First, if anything, during my time at the FED before 0:05:54.600 --> 0:05:57.920 the pandemic, inflation is running a little bit low. The 0:05:57.920 --> 0:06:01.200 main thing that emerged at that point in twenty nineteen 0:06:01.400 --> 0:06:04.360 was that the trade war. Concerns about the trade war 0:06:04.640 --> 0:06:09.560 were very negative on economic activity and sentiment. I do 0:06:09.600 --> 0:06:14.200 think the details will be important. I think that in particular, 0:06:15.040 --> 0:06:17.560 there'd be an inclination depending on how there were structured, 0:06:17.600 --> 0:06:20.360 if there were tariffs, to try to distinguish between if 0:06:20.400 --> 0:06:23.120 it's moving up the price level like a value added tax, 0:06:23.120 --> 0:06:25.880 whereas its inflationary. But I think the key thing for 0:06:25.920 --> 0:06:28.640 your listeners to bear in mind is that's a decision 0:06:28.720 --> 0:06:31.000 the Paler FED does not have to make now. They 0:06:31.040 --> 0:06:33.880 made it very clear twenty twenty four rate decisions are 0:06:33.880 --> 0:06:36.839 based on twenty twenty four data and outlook, they'll have 0:06:36.920 --> 0:06:40.680 plenty of time to reassess and think about this as 0:06:40.680 --> 0:06:43.400 they go into twenty twenty five. So good question, but 0:06:43.440 --> 0:06:45.479 I don't think it will be a factor now. 0:06:45.600 --> 0:06:48.479 You defended William McChesney. Martin Paul. One more question in 0:06:48.520 --> 0:06:49.960 this section with rich clarity. 0:06:50.200 --> 0:06:53.640 All right, let's assume the FED starts cutting in September. 0:06:54.200 --> 0:06:57.760 Then what how do they prosecute this policy to get 0:06:57.839 --> 0:06:59.719 rates down? Is that every other meeting? 0:07:00.000 --> 0:07:01.880 Does that work well? 0:07:01.960 --> 0:07:04.840 The TRIAD answers, it's data dependent, but I think they've 0:07:04.880 --> 0:07:07.719 acknowledged that if they cut once, they will be thinking 0:07:07.760 --> 0:07:10.720 there's more than one cut. We'll get good information on 0:07:10.800 --> 0:07:13.560 that in the projections. We'll get another set of projections 0:07:14.040 --> 0:07:17.440 in December. Here's what I think. I think they're basically 0:07:17.520 --> 0:07:20.840 a couple scenarios. One is a very very soft landing, 0:07:20.880 --> 0:07:22.840 you know, in the spirit of the Olympics, sticking the 0:07:22.960 --> 0:07:27.000 soft landing. In that case, the econmomyist chugs along trend, 0:07:27.040 --> 0:07:30.040 unemployment doesn't go up, inflation moves gradually down to two, 0:07:30.160 --> 0:07:33.520 and then they can gradually cut rates as inflation falls. 0:07:33.800 --> 0:07:34.000 You know. 0:07:34.040 --> 0:07:36.880 Another scenarios the economy slows more sharply, and then I 0:07:36.920 --> 0:07:40.240 think they can cut more rapidly. I do think the 0:07:40.280 --> 0:07:42.400 bar right now is pretty high to hike rates, and 0:07:42.480 --> 0:07:44.920 so I think if the economy gets stuck at inflation 0:07:45.000 --> 0:07:48.000 at current levels, they they may not cut very many 0:07:48.040 --> 0:07:52.320 times and keep rates at an elevated level. But importantly, 0:07:52.360 --> 0:07:55.200 it could depend on the outcome of the election. But again, 0:07:55.280 --> 0:07:57.320 that won't We won't know how that plays out until 0:07:57.320 --> 0:07:58.280 twenty twenty five. 0:07:58.400 --> 0:08:01.320 So Richard Clarin stay with us. You got so much 0:08:01.320 --> 0:08:02.560 to talk about it. I'm going to look it up 0:08:02.640 --> 0:08:05.800 right now. You can do this on the Bloomberg Professional Service, 0:08:05.960 --> 0:08:11.280 the FOMC meetings. Paul there, it is January twenty ninth, 0:08:11.480 --> 0:08:12.680 after the inauguration. 0:08:13.400 --> 0:08:14.280 That'll be the meeting. 0:08:14.800 --> 0:08:17.200 Put it on your calendar, Doctor Clarida, we're going to 0:08:17.280 --> 0:08:21.400 have you back there January at twenty nine. Annawong, thank 0:08:21.440 --> 0:08:25.120 you so much for joining us with Bloomberg Economics. Important questions, 0:08:25.360 --> 0:08:28.240 tough questions on politics. She can answer them. You know, 0:08:28.280 --> 0:08:31.600 we can't answer Wed questions. That's what I want. Yeah, 0:08:32.320 --> 0:08:35.920 it's different. It's there's a different oxygen out there. What 0:08:36.040 --> 0:08:38.320 a joint of Ana Wong with us from Chicago and 0:08:38.320 --> 0:08:41.600 Bloomberg Economics. And we continue with the former vice Chairman 0:08:41.640 --> 0:08:45.600 of the Federal Reserve System Richard Clarida. This morning, Richard, 0:08:45.600 --> 0:08:47.400 you and I could turn this into a three hour 0:08:47.720 --> 0:08:50.280 love fest. We don't have the time to do that, 0:08:50.320 --> 0:08:52.440 so I'm just going to cut to the chase. I 0:08:52.520 --> 0:08:57.040 was busting Annawan's chops about Frank Knight nineteen twenty one, 0:08:57.200 --> 0:08:59.840 one hundred and thirty four pages. It's right of passage, 0:09:00.600 --> 0:09:02.600 and it's where we really began to think in the 0:09:02.640 --> 0:09:07.320 modern era of the unknown unknowns, the idea of what's 0:09:07.360 --> 0:09:11.040 the mystery that's out there. We have a pandemic overlay 0:09:11.240 --> 0:09:12.080 we're coming out of. 0:09:12.559 --> 0:09:13.000 We have an. 0:09:13.000 --> 0:09:16.920 Immigration dynamic we don't understand on the edge of Angus Deeton. 0:09:17.480 --> 0:09:20.199 There's too many mysteries out of productivity. Yeah, there is 0:09:20.240 --> 0:09:24.080 a mystery we have. What is Richard Claared isnwn unknown 0:09:24.400 --> 0:09:27.120 If you were to sit down with the chairman this. 0:09:27.000 --> 0:09:31.880 Morning, well that those three would certainly be on Those 0:09:31.920 --> 0:09:35.160 three would certainly be on the list. I think that 0:09:35.840 --> 0:09:42.200 an additional known unknown is the global fiscal outlook is terrible. 0:09:43.240 --> 0:09:46.360 You know, twenty years ago, debt to GDP ratio was 0:09:46.400 --> 0:09:47.080 forty percent. 0:09:47.120 --> 0:09:49.240 It's north of one hundred now. 0:09:50.320 --> 0:09:53.800 Debt service cost to exceed the defense budget in the US, 0:09:53.840 --> 0:09:57.920 and so everyone acknowledges that global fiscal paths are unsustainable, 0:09:57.960 --> 0:10:00.160 but there's no political will. So I think I think 0:10:00.200 --> 0:10:03.560 that the known unknown is when and what brings about 0:10:03.600 --> 0:10:08.960 the ultimate adjustment in fiscal policy, because it will happen eventually. 0:10:09.040 --> 0:10:10.920 I don't know if it's next year, in ten years, 0:10:10.920 --> 0:10:12.840 but I think, to me, that's the known unknown. 0:10:13.000 --> 0:10:15.600 And you know, I'm of a certain vintage. I've heard 0:10:15.600 --> 0:10:18.520 that my entire life. Yeah, we've had this little sharp 0:10:18.600 --> 0:10:21.520 down in Lower Manhattan that ticks up the debt. I 0:10:21.559 --> 0:10:23.480 remember that as a kid driving the piece, you know, 0:10:23.559 --> 0:10:28.839 the east side, And when where will we see that? 0:10:28.960 --> 0:10:31.880 The concerns about global debt. 0:10:32.080 --> 0:10:35.360 So excellent point because why has it fallen? Why have 0:10:35.400 --> 0:10:38.400 the bond market vigilant has been in hibernation. Some would 0:10:38.400 --> 0:10:42.960 say they're extinct. And the simplest answer is because global 0:10:42.960 --> 0:10:45.679 interest rates have fallen by more than debt has gone up. 0:10:45.720 --> 0:10:48.400 So until recently it seemed like a free lunch to 0:10:48.480 --> 0:10:52.719 politicians borrow. But your debt service costs go down because interest. 0:10:52.520 --> 0:10:53.240 Rates are falling. 0:10:53.320 --> 0:10:56.400 And so the point is, going forward, interest rates are 0:10:56.440 --> 0:10:57.800 not going to be as low as they were in 0:10:57.840 --> 0:11:00.440 the prior twenty years, and so the cast of that 0:11:00.480 --> 0:11:03.440 debt service will be more evident, and so at some 0:11:03.559 --> 0:11:07.080 point that will drive a political outcome. 0:11:07.240 --> 0:11:08.400 But I do agree with you. 0:11:09.400 --> 0:11:11.600 The can has been kicked down the road for a 0:11:11.640 --> 0:11:13.600 long time and it may be a while. 0:11:13.640 --> 0:11:15.480 But to me that's a non unknown. 0:11:15.240 --> 0:11:17.520 And what is the fix? 0:11:17.840 --> 0:11:20.400 Ultimately from an economic. 0:11:19.960 --> 0:11:23.880 Physics, it depends on the country. But the usual if 0:11:24.000 --> 0:11:26.839 your deficits are too large and your debt service costs 0:11:26.840 --> 0:11:29.280 are too high, there's going to be some combination of 0:11:29.360 --> 0:11:33.240 adjustments on revenues and adjustments on alays. 0:11:33.280 --> 0:11:35.120 But neither party is running on. 0:11:35.080 --> 0:11:38.440 A platform to address that, and so I think it 0:11:38.480 --> 0:11:40.720 will not be It will not really be an issue 0:11:41.360 --> 0:11:42.880 in the campaign way. 0:11:42.840 --> 0:11:45.040 Lee was with this last hour stunning us with a 0:11:45.080 --> 0:11:49.120 potential three handle on China GDP growth. I want to 0:11:49.160 --> 0:11:51.199 go to a guy named Stiglitz who way back at 0:11:51.240 --> 0:11:54.160 Stanford started to think about the little G of the 0:11:54.200 --> 0:11:58.680 growth rate. Olivia, Blanchard and Stiglets have really focused on 0:11:59.400 --> 0:12:03.079 the fact the global little G growth rate is better 0:12:03.120 --> 0:12:07.520 than good to sustain our fiscal policy. Do you suggest 0:12:07.920 --> 0:12:11.640 that we could see a diminished global growth rate that 0:12:11.840 --> 0:12:13.720 finally upsets the apple cart? 0:12:14.120 --> 0:12:16.800 It could be growth, or it could happen through the 0:12:16.840 --> 0:12:20.319 interest rate channel. Remember Olivier's famous equation is it's about 0:12:20.440 --> 0:12:22.959 R minus G, and so if G. 0:12:23.120 --> 0:12:24.600 Falls or R goes up. 0:12:24.600 --> 0:12:27.240 Can you figure Can you call Stockholm after the show 0:12:27.559 --> 0:12:29.920 and say, can we get a shingle out for Blenchard 0:12:30.200 --> 0:12:31.520 on our minus G. 0:12:31.520 --> 0:12:32.839 Give it to Williams as well. 0:12:33.120 --> 0:12:36.440 Okay, exactly, So what do we do when we have 0:12:36.520 --> 0:12:40.000 two small G on our minus well exactly. And so 0:12:40.040 --> 0:12:43.200 if you have too small a G, then it brings 0:12:43.240 --> 0:12:46.880 forward the day of reckoning on fiscal adjustment. 0:12:46.920 --> 0:12:47.960 I'll just leave it at that. 0:12:48.240 --> 0:12:52.480 Okay, being careful, but this is real because Italy there 0:12:52.559 --> 0:12:56.120 was a you know, with their demographics, it was like overdone. 0:12:56.200 --> 0:12:58.920 Small g's done, and with the revolution of their politics, 0:12:59.040 --> 0:13:01.920 they've got actually very good G. Because you're spending money 0:13:02.160 --> 0:13:04.719 in that little quarter in Venice, buying. 0:13:04.520 --> 0:13:05.640 Lots of stuff. 0:13:05.720 --> 0:13:07.160 Little G matters in Italy. 0:13:07.280 --> 0:13:10.360 How about in China though, I yeah, how big of 0:13:10.400 --> 0:13:12.719 a concern is that for the global economy? Because I'll 0:13:12.720 --> 0:13:17.080 look at too, something like their population. I mean, it's 0:13:17.120 --> 0:13:19.120 just aging, and it's aging at a much higher rate 0:13:19.160 --> 0:13:21.480 than a lot of other Yeah, populations. I don't see 0:13:21.520 --> 0:13:24.680 that changing. So what does that mean for global growth? 0:13:25.520 --> 0:13:29.320 Well, obviously China's global growth has been slowing. 0:13:29.800 --> 0:13:31.400 We all remember when the number. 0:13:31.200 --> 0:13:33.120 Was seven or eight, then it was five or six, 0:13:33.200 --> 0:13:36.360 and now it's four or five. So now it's very 0:13:36.360 --> 0:13:38.760 big economy. So four and a half percent growth in 0:13:38.840 --> 0:13:41.600 China is still a big part of the global outlook. 0:13:41.640 --> 0:13:43.679 I think the real difference, though, compared to the past 0:13:43.720 --> 0:13:47.359 twenty years, is the way in which the Chinese economy 0:13:47.920 --> 0:13:51.600 interacts with the rest of the global economy. Commodity prizes activity, 0:13:52.200 --> 0:13:54.280 you know. I think everyone agrees the big era of 0:13:54.320 --> 0:13:58.880 global hyper globalization is over, and so the way in 0:13:58.920 --> 0:14:01.720 which Chinese growth drives the rest of the economy I 0:14:01.720 --> 0:14:04.120 think is changing. And it's actually something we're looking at 0:14:04.200 --> 0:14:05.120 closely at PIMCO. 0:14:05.480 --> 0:14:08.560 We mentioned this yesterday. I busted your chops as Lawrence 0:14:08.640 --> 0:14:10.319 Meyer PAULI wrote. 0:14:10.160 --> 0:14:12.480 A little small book about the green Span fed where 0:14:12.480 --> 0:14:16.079 it was Alan green Span and everybody follow I'm sorry, 0:14:16.280 --> 0:14:17.920 q Pill, Jonathan. 0:14:18.920 --> 0:14:21.720 Began Green And there's that troublemaker. 0:14:21.800 --> 0:14:23.760 Catherine Mann descent. 0:14:23.520 --> 0:14:27.479 To you, Pill is the chief economists. 0:14:27.560 --> 0:14:30.960 He's went against a governor. Why can't you fed? 0:14:31.520 --> 0:14:35.600 He as normal in Cuman as Catherine Mann's Bank of England. 0:14:35.720 --> 0:14:37.720 Well, I will say that the Bank of England is 0:14:37.760 --> 0:14:41.120 certainly beginning with my good friend and mentor Mervyn King 0:14:41.360 --> 0:14:42.600 thirty plus years ago. 0:14:43.320 --> 0:14:44.120 It was a point of. 0:14:44.080 --> 0:14:47.640 Pride that their culture did not discourage dissense. And indeed, 0:14:47.640 --> 0:14:49.320 I think it was one or two meetings when Mervyn 0:14:49.400 --> 0:14:50.080 was outvoted. 0:14:51.000 --> 0:14:52.360 In this case it was five to four. 0:14:52.400 --> 0:14:55.720 But when the chief economist votes, it definitely gets the 0:14:56.320 --> 0:14:59.920 it gets the headline. Sure, there are descents at the 0:15:00.080 --> 0:15:02.400 FED during my time, we had several meetings where there 0:15:02.440 --> 0:15:05.560 were three descents. But it is the case that in 0:15:05.600 --> 0:15:08.400 the post green spanning and era that you refer to, 0:15:09.040 --> 0:15:12.600 or green span and then post green Span, descents among 0:15:12.680 --> 0:15:16.680 governors have been pretty rare on monetary policy. And that 0:15:16.680 --> 0:15:18.720 that's an entire another show we could. 0:15:18.800 --> 0:15:19.640 I won't spend time. 0:15:19.600 --> 0:15:23.680 Talking about why that is. You may come back tomorrow, Okay, Well, okay, Rich. 0:15:23.520 --> 0:15:26.280 Clarida, thank you so much for John Fair, Lisa brown Winson, 0:15:26.400 --> 0:15:29.960 myself yesterday that decides, for Paul Sweeney and all. This 0:15:30.040 --> 0:15:32.200 has just been very generous of you at this key 0:15:32.240 --> 0:15:34.560 time for our monetary policy. 0:15:34.600 --> 0:15:36.000 What are they going to do at the next meeting. 0:15:36.600 --> 0:15:38.640 They're gonna they're gonna cut raids. 0:15:39.080 --> 0:15:42.440 There you go, that's all we know. We'll leave it there. Eric, 0:15:42.480 --> 0:15:44.920 be sure that gets a single best idea. 0:15:45.160 --> 0:15:59.040 Rich Clarida of Pimcal of Columbia an extended conversation with WAYE. 0:15:59.080 --> 0:16:00.200 Lee of Black Right. 0:16:00.440 --> 0:16:02.800 Well, let's just start with the why why do we 0:16:02.840 --> 0:16:04.800 see price up, yield down. 0:16:06.640 --> 0:16:06.880 Well? 0:16:07.520 --> 0:16:12.080 From the FED meeting yesterday. I think September is pretty 0:16:12.160 --> 0:16:17.000 much a down deal. The bar for not cutting is 0:16:17.560 --> 0:16:21.080 very high, so I think that's what markets got excited. 0:16:21.200 --> 0:16:25.760 But importantly, the way that JPAW framed the reasons for 0:16:25.880 --> 0:16:31.280 September cut is also why markets are happy with yesterday's meeting. 0:16:31.680 --> 0:16:37.000 He characterized what's happening in labor market as normalization rather 0:16:37.080 --> 0:16:42.360 than labor market weakening. And what is going to lead 0:16:42.360 --> 0:16:45.160 to a September cut that is looking very likely. It's 0:16:45.240 --> 0:16:48.360 more around better behaving inflation rather than weaker labor markets. 0:16:48.400 --> 0:16:50.560 So I think that's a good combination for risk asses and. 0:16:50.480 --> 0:16:53.680 A y access. It's lord rhythmic. You end up looking 0:16:53.680 --> 0:16:57.520 in a curve is convexity? Is there literally a short 0:16:57.640 --> 0:17:02.160 cover in bonds now? Is there literally an equity like 0:17:02.760 --> 0:17:06.639 short cover where everybody goes OMG, yields are going lower? 0:17:07.920 --> 0:17:11.160 Well, if you look at the hedge fund positioning, absolutely 0:17:13.200 --> 0:17:17.480 a lot of the speculative positions went from short bonds 0:17:17.520 --> 0:17:21.399 to long bounds. But I would observe that front end 0:17:21.400 --> 0:17:23.840 of the curve has done better than the back end 0:17:24.160 --> 0:17:27.159 of the curve, so mainly in response to kind of 0:17:27.480 --> 0:17:31.800 markets pricing in more cuts. But our concern for the 0:17:31.840 --> 0:17:34.919 back end of the curve, especially over a longer tem horizon, 0:17:35.320 --> 0:17:40.560 still stays, which is a higher fiscal trajectory, higher m 0:17:40.640 --> 0:17:43.680 premier which currently is still in the negative territory. 0:17:44.680 --> 0:17:46.720 You know, you've got a great note out here, your 0:17:46.760 --> 0:17:50.240 weekly note, Wayley, and I'm looking at your assets and review. 0:17:51.359 --> 0:17:52.280 You know, one of the best. 0:17:52.119 --> 0:17:53.560 Performers is gold here. 0:17:54.200 --> 0:17:55.200 What do you make of that? 0:17:57.440 --> 0:18:02.040 Well, I think if you look at what's been working 0:18:02.359 --> 0:18:06.720 so far this year as a diversifier, is not your 0:18:07.480 --> 0:18:11.240 go to good old duration in a portfolio, but rather 0:18:12.440 --> 0:18:17.040 some of the other assets such as such as gold. 0:18:17.600 --> 0:18:20.560 And on top of that, the negative correlation between gold 0:18:20.640 --> 0:18:24.960 and real rate has helped there as well. Now having 0:18:25.040 --> 0:18:27.520 said that, it's really hard to kind of think about 0:18:27.880 --> 0:18:31.520 gold in the context of a longer term portfolio construction 0:18:31.560 --> 0:18:35.160 simply because there's no cash flow to discount futer cash flow. 0:18:35.280 --> 0:18:38.080 With now having said that, there is a case to 0:18:38.080 --> 0:18:41.600 be made to allocate to gold in portfolio because of 0:18:41.680 --> 0:18:47.080 the characteristics that it has exhibited as you observed as well. 0:18:47.600 --> 0:18:50.159 So you know the central banks are certainly in focus 0:18:50.240 --> 0:18:52.080 yesterday with the Fed today with the Bank of England 0:18:52.359 --> 0:18:56.720 cutting interest rates. Traders believe that there'll be another rate 0:18:56.760 --> 0:18:58.920 cut in November. What do you make of the Bank 0:18:58.960 --> 0:18:59.399 of England? 0:19:00.640 --> 0:19:04.440 Well, Bank of England is very interesting, right, so hasline 0:19:04.480 --> 0:19:09.160 inflation is already at targets, but col inflation service inflation 0:19:09.520 --> 0:19:12.320 is still somewhat sticky. You can talk about some of 0:19:12.359 --> 0:19:17.080 the tailor swift effect and labor market a wage as well, 0:19:17.080 --> 0:19:21.560 but broadly we see better behaving inflation and I think 0:19:21.600 --> 0:19:25.040 that's what gave the Bank of England comfort to cut rates. 0:19:25.200 --> 0:19:26.919 We think that there is more room for them to 0:19:27.000 --> 0:19:32.000 cut than the fat because of a structurally weaker growth outlook, 0:19:32.000 --> 0:19:34.439 which is why we prefer guilts over treasuries. 0:19:34.720 --> 0:19:36.960 Right, welly, we want you to come back for the 0:19:37.000 --> 0:19:39.480 next segment. I really want to focus on Asia and 0:19:39.600 --> 0:19:42.600 China with your immense skill and heritage there. 0:19:42.640 --> 0:19:43.760 But I got to asked the question. 0:19:43.880 --> 0:19:46.440 You stumbled into it, and I hope that your badge 0:19:46.520 --> 0:19:47.480 works at black Rock. 0:19:47.560 --> 0:19:52.600 This morning you mentioned gold without cash flows. That reminds 0:19:52.640 --> 0:19:53.480 me of bitcoin. 0:19:54.280 --> 0:19:58.240 Is bitcoin developing as a gold equivalent. 0:20:00.160 --> 0:20:04.399 Well, what we have seen is that it has the 0:20:04.440 --> 0:20:10.280 ability to demonstrate a huge price appreciation but also depreciation, right, 0:20:10.320 --> 0:20:12.760 so basically a lot of volatility. So I think a 0:20:12.880 --> 0:20:16.240 case can be made, A tactical case can be made 0:20:16.760 --> 0:20:22.320 for bitcoin from a speculative kind of perspective, not unlike 0:20:22.520 --> 0:20:27.120 venture cap capital type of investment. But again, it's really 0:20:27.160 --> 0:20:29.480 hard to think about kind of the longer term allocation 0:20:29.600 --> 0:20:31.159 because there's no future cash flowing. 0:20:31.040 --> 0:20:31.920 There's no future care. 0:20:33.400 --> 0:20:35.600 I don't know how she gets launched Blackrock with because 0:20:35.800 --> 0:20:39.320 they're likely first in the easiest I bust in your chaps, Wally, 0:20:39.800 --> 0:20:42.960 I'm sorry, welly, what's the character of this ballmarket we have? 0:20:43.119 --> 0:20:46.080 The rebound in video is gone from a one oh 0:20:46.200 --> 0:20:47.920 four to a one twenty three. 0:20:48.280 --> 0:20:50.600 Is this an AI celebration. 0:20:52.000 --> 0:20:56.760 Well, let's not forget the AI nervousness that characterized the 0:20:57.040 --> 0:21:01.119 fuel trading days before Yesterday. Is meaningful rebound. So I 0:21:01.119 --> 0:21:04.440 think what we're experiencing right now is the code feet 0:21:04.560 --> 0:21:08.560 that we're now used to before PEG companies reporting earnings. 0:21:08.600 --> 0:21:13.720 This is the sixth quarter of chat GPT error and 0:21:13.920 --> 0:21:17.120