1 00:00:09,840 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,360 Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg. Good 5 00:00:27,360 --> 00:00:29,880 Speaker 1: morning to Raphael Bostik, the President of the Atlanta Fed, 6 00:00:29,920 --> 00:00:32,800 Speaker 1: and welcome to Bloomberg Radio and television worldwide. Thanks for 7 00:00:32,840 --> 00:00:36,160 Speaker 1: being with us this morning. I want to start by 8 00:00:36,200 --> 00:00:40,159 Speaker 1: asking about the new framework. We know what it is appropriate. 9 00:00:40,360 --> 00:00:44,320 Speaker 1: Monetary policy will likely aim to achieve inflation moderately above 10 00:00:44,360 --> 00:00:47,600 Speaker 1: two percent for some time, But what does that mean 11 00:00:47,640 --> 00:00:50,239 Speaker 1: to you? How do you define moderately above and how 12 00:00:50,280 --> 00:00:53,960 Speaker 1: long is sometime? Well, first of all, Mike, thank you 13 00:00:54,040 --> 00:00:56,360 Speaker 1: for having me on Bloomberg this morning. It's really good 14 00:00:56,360 --> 00:00:58,320 Speaker 1: to be here. I don't talk to you often enough. 15 00:00:59,120 --> 00:01:01,680 Speaker 1: But in terms of your question, what I would say 16 00:01:01,960 --> 00:01:05,360 Speaker 1: is for me, one of the challenges that we've had 17 00:01:05,400 --> 00:01:09,200 Speaker 1: historically is that when unemployment or when the employment level 18 00:01:09,240 --> 00:01:12,800 Speaker 1: has gotten too low, there's been a concern among economists 19 00:01:12,800 --> 00:01:16,320 Speaker 1: and policymakers that that would trigger inflation that wouldn't be 20 00:01:16,360 --> 00:01:20,200 Speaker 1: able to be controlled and so the action typically has 21 00:01:20,240 --> 00:01:23,679 Speaker 1: been that we're going to try to stop that that 22 00:01:24,720 --> 00:01:28,520 Speaker 1: labor market from overheating, and then in turn that can 23 00:01:28,720 --> 00:01:31,480 Speaker 1: put a damper on inflation. What we saw over the 24 00:01:31,520 --> 00:01:34,440 Speaker 1: last ten years or so is that we could get 25 00:01:34,800 --> 00:01:38,679 Speaker 1: employment to a very high level without seeing that inflation, 26 00:01:38,959 --> 00:01:41,440 Speaker 1: and and so we wanted to be very clear in 27 00:01:41,680 --> 00:01:44,720 Speaker 1: the longer run goal statement that we're going to wait 28 00:01:44,760 --> 00:01:48,960 Speaker 1: to see for evidence of that overheating before we start 29 00:01:49,000 --> 00:01:52,120 Speaker 1: to take action. And I think that's the biggest the 30 00:01:52,200 --> 00:01:54,520 Speaker 1: message that to come out of that statement. Well, what 31 00:01:54,760 --> 00:01:56,960 Speaker 1: is the evidence that you would look for? Is there 32 00:01:57,000 --> 00:01:59,920 Speaker 1: a a level of inflation above two percent? That is 33 00:02:00,040 --> 00:02:03,800 Speaker 1: kind of your ceiling. So for me, I would say 34 00:02:04,400 --> 00:02:08,560 Speaker 1: I'm comfortable being above two and and it's actually more 35 00:02:08,639 --> 00:02:11,200 Speaker 1: the trajectory than the levels. So if we were at 36 00:02:11,280 --> 00:02:13,160 Speaker 1: two point two or two point three and it looked 37 00:02:13,160 --> 00:02:14,799 Speaker 1: like we were going to be stable there for a while, 38 00:02:15,400 --> 00:02:17,799 Speaker 1: that would be fine. You know, over the last five 39 00:02:17,919 --> 00:02:20,239 Speaker 1: or six years, we've been at one six and one 40 00:02:20,280 --> 00:02:23,200 Speaker 1: seven and been at a stable level, So that would 41 00:02:23,240 --> 00:02:26,079 Speaker 1: be kind of the flip side of that. By contrast, 42 00:02:26,120 --> 00:02:28,280 Speaker 1: if we were at two point two and then the 43 00:02:28,320 --> 00:02:29,880 Speaker 1: next quarter or at two point four and then we 44 00:02:29,919 --> 00:02:32,280 Speaker 1: were two point six. That trajectory is the thing that 45 00:02:32,320 --> 00:02:34,680 Speaker 1: would give me some concerns. So for me, I'm going 46 00:02:34,720 --> 00:02:37,120 Speaker 1: to be certainly the level is going to be something 47 00:02:37,160 --> 00:02:39,600 Speaker 1: to pay attention to, but for me, the trajectory is 48 00:02:39,680 --> 00:02:43,079 Speaker 1: much more important. Well, give me your levels of from 49 00:02:43,120 --> 00:02:45,800 Speaker 1: the forecast that you made. Where do you think growth 50 00:02:45,960 --> 00:02:50,720 Speaker 1: and inflation and unemployment are going to be in three years. Well, 51 00:02:50,720 --> 00:02:53,720 Speaker 1: in three years, hopefully we will have the pandemic past us. 52 00:02:54,600 --> 00:02:57,200 Speaker 1: We will have sort of figured out what all the 53 00:02:57,200 --> 00:03:00,720 Speaker 1: structural changes that have gone on mean. The economy will 54 00:03:00,760 --> 00:03:03,960 Speaker 1: be back on our robust path. So our long term 55 00:03:04,480 --> 00:03:08,359 Speaker 1: estimate for our models is around two percent growth. Inflation 56 00:03:08,600 --> 00:03:12,560 Speaker 1: can go at above two percent as well. I actually 57 00:03:12,600 --> 00:03:15,600 Speaker 1: think the risk before the crisis we were head in 58 00:03:15,600 --> 00:03:18,160 Speaker 1: that direction. I was pretty optimistic about how things were going. 59 00:03:18,560 --> 00:03:21,040 Speaker 1: And in terms of unemployment, I think we can see 60 00:03:21,120 --> 00:03:24,160 Speaker 1: levels approaching the three and a half to three and 61 00:03:24,240 --> 00:03:27,840 Speaker 1: three quarters that we saw before. So I'm pretty bullish 62 00:03:27,880 --> 00:03:29,960 Speaker 1: three or four years out. But we still have a 63 00:03:29,960 --> 00:03:32,000 Speaker 1: lot of work to do right now to make sure 64 00:03:32,040 --> 00:03:35,520 Speaker 1: that the amount of pain and damages that happens to 65 00:03:35,560 --> 00:03:38,880 Speaker 1: this economy is minimized. So I think that that staying 66 00:03:38,920 --> 00:03:41,800 Speaker 1: on the local and the immediate term is something that 67 00:03:41,880 --> 00:03:45,320 Speaker 1: we all should to try to to continue doing for 68 00:03:45,400 --> 00:03:47,920 Speaker 1: a bit longer. Well, I'm sure you know. One of 69 00:03:47,920 --> 00:03:50,680 Speaker 1: the criticisms on Wall Street after the meeting was that 70 00:03:50,920 --> 00:03:53,880 Speaker 1: you can talk about getting over two percent, but you 71 00:03:53,880 --> 00:03:55,800 Speaker 1: can't get to two percent. Why why do you think 72 00:03:55,800 --> 00:03:59,920 Speaker 1: that's going to happen. Well, for me, I've been talking 73 00:04:00,120 --> 00:04:03,600 Speaker 1: my team a lot on this and just before the crisis, 74 00:04:03,600 --> 00:04:05,960 Speaker 1: and this is something that I've I tried to say 75 00:04:06,080 --> 00:04:08,920 Speaker 1: in interviews and I've told talk to my colleagues about this. 76 00:04:09,600 --> 00:04:13,960 Speaker 1: Many of the signals of inflation were at two percent, 77 00:04:14,240 --> 00:04:16,680 Speaker 1: if not above two percent, So I think we were 78 00:04:16,680 --> 00:04:21,120 Speaker 1: actually much much closer to our target just pre crisis. Uh. 79 00:04:21,120 --> 00:04:23,640 Speaker 1: Then I think has been really recognized in the press 80 00:04:24,080 --> 00:04:27,560 Speaker 1: m that said, uh, we are not in that place now. 81 00:04:27,920 --> 00:04:30,039 Speaker 1: But I have confidence that once we get back into 82 00:04:30,200 --> 00:04:34,159 Speaker 1: sort of stable growth and robust recovery, uh, that we 83 00:04:34,200 --> 00:04:37,000 Speaker 1: can get back to that pre pre crisis level where 84 00:04:37,040 --> 00:04:40,080 Speaker 1: all the science were positive. So I think that we 85 00:04:40,080 --> 00:04:42,400 Speaker 1: we in the last few years have done a lot 86 00:04:42,640 --> 00:04:45,680 Speaker 1: to get inflation to a place where where I could 87 00:04:45,680 --> 00:04:48,040 Speaker 1: be comfortable with it and would suggest that the economy 88 00:04:48,120 --> 00:04:50,640 Speaker 1: is really moving in a sustained way well as your 89 00:04:50,680 --> 00:04:55,960 Speaker 1: policy now inflationary in and of itself. So that's an 90 00:04:55,960 --> 00:04:58,240 Speaker 1: interesting question. I guess what I would say right now 91 00:04:58,480 --> 00:05:01,839 Speaker 1: is the pandemic is something that's we've never seen before. 92 00:05:02,040 --> 00:05:05,120 Speaker 1: This is a historic type of event, and if you 93 00:05:05,160 --> 00:05:07,599 Speaker 1: look at the inflation numbers, there's a lot of noise 94 00:05:07,600 --> 00:05:10,080 Speaker 1: in there, so month to month and quarter to quarter, 95 00:05:10,200 --> 00:05:14,160 Speaker 1: the elements of a CPI, for example, are showing wide 96 00:05:14,279 --> 00:05:16,839 Speaker 1: swings and much wider swings than you would ordinarily see, 97 00:05:17,000 --> 00:05:19,520 Speaker 1: so it's hard to know exactly what signal we're seeing 98 00:05:19,600 --> 00:05:22,680 Speaker 1: right now. At the same time, how labor markets have 99 00:05:22,760 --> 00:05:26,080 Speaker 1: evolved has been so dramatic, and the stresses that have 100 00:05:26,160 --> 00:05:29,960 Speaker 1: happened to particular businesses, and how the pandemic has hit 101 00:05:30,040 --> 00:05:33,480 Speaker 1: certain sectors much differently than others. It really makes it 102 00:05:33,520 --> 00:05:37,200 Speaker 1: hard to tell exactly what's happening in terms of inflation. 103 00:05:37,520 --> 00:05:39,360 Speaker 1: Is something that we're going to continue to work on. 104 00:05:39,680 --> 00:05:43,440 Speaker 1: I'm hopeful that as we get further along in the recovery, 105 00:05:43,480 --> 00:05:46,320 Speaker 1: a lot of these signals will become clearer. A lot 106 00:05:46,360 --> 00:05:49,120 Speaker 1: of the noise that's happening and the extreme values will 107 00:05:49,320 --> 00:05:51,960 Speaker 1: will be reduced and be eliminated, so we can really 108 00:05:52,040 --> 00:05:55,520 Speaker 1: understand sort of where the economy is standing. I'm wondering 109 00:05:55,680 --> 00:05:58,320 Speaker 1: what more, if anything, you can do. Your tool is 110 00:05:58,360 --> 00:06:01,080 Speaker 1: interest rates. You've got interest rate to zero, you have 111 00:06:01,160 --> 00:06:03,719 Speaker 1: tools to push down interest rates. But is there anything 112 00:06:03,760 --> 00:06:07,000 Speaker 1: more the Fed can do to stimulate the economy or 113 00:06:07,040 --> 00:06:10,600 Speaker 1: is it really over to Congress now? Well, I would 114 00:06:10,600 --> 00:06:14,040 Speaker 1: say Congress has a very significant role. Fiscal policy is 115 00:06:14,080 --> 00:06:16,919 Speaker 1: going to be important because the types of things that 116 00:06:16,960 --> 00:06:20,039 Speaker 1: can happen in fiscal policy are not things that were 117 00:06:20,080 --> 00:06:23,480 Speaker 1: actually have authority to do. So. Grants have been very 118 00:06:23,520 --> 00:06:27,200 Speaker 1: important to small businesses through things like the paycheck Protection Program. 119 00:06:27,200 --> 00:06:30,520 Speaker 1: Those sorts of things create much more stable bridges than 120 00:06:30,560 --> 00:06:33,520 Speaker 1: the type of lending that we can do. What I 121 00:06:33,560 --> 00:06:36,760 Speaker 1: am doing here at our bank is a couple of things. 122 00:06:37,120 --> 00:06:40,400 Speaker 1: So first, really trying to monitor the economy, make sure 123 00:06:40,480 --> 00:06:44,640 Speaker 1: we're talking to small businesses, to families, and to banking 124 00:06:44,640 --> 00:06:49,080 Speaker 1: institutions so we understand where things are working well and 125 00:06:49,080 --> 00:06:51,040 Speaker 1: where things are not working well, and we can deliver 126 00:06:51,120 --> 00:06:55,159 Speaker 1: that information to policymakers in Washington. A second thing that 127 00:06:55,200 --> 00:06:59,000 Speaker 1: we're doing is we are trying to engage with communities 128 00:06:59,040 --> 00:07:03,680 Speaker 1: across this country, giving them advice on things around economic development, 129 00:07:03,880 --> 00:07:07,360 Speaker 1: around sustaining a small businesses and times of crisis that 130 00:07:07,400 --> 00:07:11,840 Speaker 1: we've learned over years and decades of research and engagement 131 00:07:11,840 --> 00:07:14,640 Speaker 1: in that space. So while we don't have a lot 132 00:07:14,720 --> 00:07:18,640 Speaker 1: of energy uh in terms of interest rates, UH, there 133 00:07:18,640 --> 00:07:20,280 Speaker 1: are lots of other ways that we can try to 134 00:07:20,320 --> 00:07:22,760 Speaker 1: sustain things, and we're doing all of those things. Another 135 00:07:22,800 --> 00:07:24,760 Speaker 1: thing I would say is we're we're also engaging with 136 00:07:24,800 --> 00:07:29,080 Speaker 1: banking institutions, encouraging them to deploy their capital and also 137 00:07:29,240 --> 00:07:32,400 Speaker 1: to find ways to to provide relief for businesses and 138 00:07:32,440 --> 00:07:35,680 Speaker 1: too families who are struggling with their cash flows as 139 00:07:35,680 --> 00:07:38,360 Speaker 1: a result of the public health response to the crisis. 140 00:07:38,840 --> 00:07:41,480 Speaker 1: We're speaking with Dr Raphael Bostick, the president of the 141 00:07:41,520 --> 00:07:45,520 Speaker 1: Atlanta Federal Reserve Bank. If you were to talk to 142 00:07:45,880 --> 00:07:48,520 Speaker 1: a member of Congress today, what would you say about 143 00:07:48,680 --> 00:07:52,560 Speaker 1: the economy? Earlier this month you saw you saw definite 144 00:07:52,600 --> 00:07:55,960 Speaker 1: signs of slowing. Do you still see that? So we 145 00:07:56,040 --> 00:07:58,800 Speaker 1: definitely see signs of slowing, you know, Mike, is interesting 146 00:07:59,160 --> 00:08:02,360 Speaker 1: for me are our team has been thinking about how 147 00:08:02,400 --> 00:08:06,000 Speaker 1: do you characterize the economy today, and what we're actually 148 00:08:06,000 --> 00:08:08,320 Speaker 1: seeing is something that's akin to a less than signal 149 00:08:08,840 --> 00:08:11,960 Speaker 1: or symbol, where some parts of the economy, both in 150 00:08:12,040 --> 00:08:14,679 Speaker 1: terms of geographies and sectors, are doing quite well and growing, 151 00:08:15,040 --> 00:08:18,720 Speaker 1: and others are struggling or or can have struggled, or 152 00:08:18,760 --> 00:08:21,880 Speaker 1: are actually getting worse. And and so one of the 153 00:08:21,880 --> 00:08:24,920 Speaker 1: things that's been very interesting and challenge for all of 154 00:08:25,000 --> 00:08:27,120 Speaker 1: us is how do you take an aggregate number that 155 00:08:27,280 --> 00:08:30,200 Speaker 1: is really an average of those two things and convert 156 00:08:30,280 --> 00:08:34,240 Speaker 1: that into a discussion of the economy. What I would 157 00:08:34,240 --> 00:08:37,079 Speaker 1: tell a policymaker is, look, there are lots of sectors 158 00:08:37,080 --> 00:08:39,760 Speaker 1: where there's still a lot of pain and disruption that's 159 00:08:39,800 --> 00:08:42,880 Speaker 1: going on. There are a lot of families who have 160 00:08:43,120 --> 00:08:46,640 Speaker 1: a significant amount of uncertainty, and those things will wear 161 00:08:46,679 --> 00:08:49,240 Speaker 1: on our psyche and our ability to grow. So I 162 00:08:49,240 --> 00:08:51,560 Speaker 1: would encourage them to think about ways that they might 163 00:08:51,640 --> 00:08:56,359 Speaker 1: provide support to help those who are in more precarious 164 00:08:56,400 --> 00:09:00,320 Speaker 1: positions UH not have to struggle and worry. You know, 165 00:09:00,400 --> 00:09:04,840 Speaker 1: we do an analysis of evictions. For example, we have 166 00:09:05,080 --> 00:09:08,640 Speaker 1: an evictions monitor and we even working with Georgia Tech 167 00:09:08,920 --> 00:09:11,839 Speaker 1: and some folks here in Atlanta. UH eviction levels in 168 00:09:11,880 --> 00:09:15,480 Speaker 1: Atlanta are higher now than they were a year ago too, 169 00:09:15,640 --> 00:09:18,600 Speaker 1: and the trend is going in the wrong direction. I've 170 00:09:18,600 --> 00:09:21,040 Speaker 1: heard reports this happening all over the place. Was suggested 171 00:09:21,120 --> 00:09:25,080 Speaker 1: this precariousness is very present and to the extent that 172 00:09:25,080 --> 00:09:28,640 Speaker 1: that becomes a reality for a large number of people. Uh, 173 00:09:28,679 --> 00:09:30,320 Speaker 1: the amount of pain we're going to have in the 174 00:09:30,320 --> 00:09:33,360 Speaker 1: economy and the challenges we face to get to a 175 00:09:33,400 --> 00:09:36,760 Speaker 1: full robust recovery are just gonna be much greater. I 176 00:09:36,800 --> 00:09:39,599 Speaker 1: don't know if you use whee chat or TikTok. I 177 00:09:39,800 --> 00:09:43,439 Speaker 1: kind of hope we don't see you on TikTok, but no, no, no, no, 178 00:09:44,520 --> 00:09:46,360 Speaker 1: Given that it's the news of today, let me ask 179 00:09:46,400 --> 00:09:51,199 Speaker 1: you the policy that the trade tariff policy towards China 180 00:09:51,520 --> 00:09:55,200 Speaker 1: has that had a direct impact on your district. So 181 00:09:55,280 --> 00:09:59,599 Speaker 1: the tariff policy has has impacted UH companies in a 182 00:10:00,080 --> 00:10:03,359 Speaker 1: complex set of ways. So you know, some some businesses 183 00:10:03,720 --> 00:10:09,000 Speaker 1: in my district have direct and important business activities in 184 00:10:09,160 --> 00:10:14,679 Speaker 1: China itself, and they're reporting significant UH difficulties. UH. A 185 00:10:14,679 --> 00:10:19,160 Speaker 1: lot of our agriculture sector exports to China and has 186 00:10:19,320 --> 00:10:22,319 Speaker 1: relationships with them in that regard, and so it's been 187 00:10:22,360 --> 00:10:25,920 Speaker 1: harder for them. UH. And that thatjustment is something that 188 00:10:25,920 --> 00:10:28,760 Speaker 1: that we're trying to um Well, I'm trying to see 189 00:10:28,760 --> 00:10:30,600 Speaker 1: how they're adjusting and what types of things they're going 190 00:10:30,640 --> 00:10:33,720 Speaker 1: to do. But it definitely has taken a toll. But 191 00:10:33,840 --> 00:10:37,360 Speaker 1: that's it. You know, the relationship with China is complex, uh, 192 00:10:37,400 --> 00:10:41,040 Speaker 1: and the trade issue has to be weighed against things 193 00:10:41,080 --> 00:10:44,760 Speaker 1: like in an intellectual property and the protection of of 194 00:10:44,760 --> 00:10:49,120 Speaker 1: our comparative advantage, and so how this goes and how 195 00:10:49,120 --> 00:10:52,480 Speaker 1: it plays out is important we we um Well. I 196 00:10:52,480 --> 00:10:54,800 Speaker 1: would say I don't have a state a stake in 197 00:10:54,840 --> 00:10:57,440 Speaker 1: this in terms of having authority to do things, but 198 00:10:57,520 --> 00:11:00,240 Speaker 1: it is something that as I see things happening, I 199 00:11:00,280 --> 00:11:02,760 Speaker 1: try to make sure that policymakers in d C no 200 00:11:03,360 --> 00:11:07,439 Speaker 1: and I try to explain to our businesses and contacts 201 00:11:07,440 --> 00:11:11,920 Speaker 1: across the district how this might look moving forward. You've 202 00:11:11,960 --> 00:11:15,480 Speaker 1: noted that the pandemic has had a disproportionate effect on 203 00:11:15,600 --> 00:11:19,360 Speaker 1: low income people and communities of color, and there's really 204 00:11:19,400 --> 00:11:22,000 Speaker 1: no argument about that. But what can the FED do 205 00:11:22,080 --> 00:11:26,000 Speaker 1: about that? Well, you know, I get calls about this 206 00:11:26,080 --> 00:11:29,040 Speaker 1: all the time, and our bank has been an important 207 00:11:29,360 --> 00:11:33,360 Speaker 1: source of information for communities across the CIS district and 208 00:11:33,679 --> 00:11:35,640 Speaker 1: some of the things that we're doing are working with 209 00:11:35,760 --> 00:11:39,440 Speaker 1: local government officials trying to give them advice on a 210 00:11:39,480 --> 00:11:42,679 Speaker 1: way so they might help their businesses. Um, we've been 211 00:11:42,720 --> 00:11:48,240 Speaker 1: talking a lot actually just about how you maintain business 212 00:11:48,320 --> 00:11:51,800 Speaker 1: activities in the time of COVID, So how do you 213 00:11:51,840 --> 00:11:56,000 Speaker 1: think about customer flows in and out of stores to 214 00:11:56,160 --> 00:11:59,880 Speaker 1: engage with that. We've also tried to engage with philanthropy 215 00:12:00,360 --> 00:12:03,199 Speaker 1: UH to tell to tell them about the natures of 216 00:12:03,240 --> 00:12:05,719 Speaker 1: stresses and suggest that there may be ways for them 217 00:12:05,720 --> 00:12:08,680 Speaker 1: to have real significant impacts in the communities that they serve. 218 00:12:09,160 --> 00:12:11,920 Speaker 1: And so we're actually going much more micro in terms 219 00:12:11,960 --> 00:12:14,560 Speaker 1: of trying to help those communities because there are so 220 00:12:14,600 --> 00:12:17,480 Speaker 1: many different contexts. You know, I would also say this 221 00:12:17,559 --> 00:12:21,160 Speaker 1: is not just a lower income and minority community issue. 222 00:12:21,400 --> 00:12:23,199 Speaker 1: You go to a lot of the rural places and 223 00:12:23,280 --> 00:12:26,520 Speaker 1: more rural places of the district, they're struggling as well. UM, 224 00:12:26,559 --> 00:12:29,679 Speaker 1: they had had challenges before, and as we've seen UH 225 00:12:29,960 --> 00:12:34,000 Speaker 1: in many many instances, this COVID crisis has exacerbated a 226 00:12:34,000 --> 00:12:37,080 Speaker 1: lot of the disparities that we've seen, and so we're 227 00:12:37,080 --> 00:12:40,000 Speaker 1: trying to work with rural areas as well to help 228 00:12:40,040 --> 00:12:43,320 Speaker 1: them figure out solutions for this new world that we 229 00:12:43,400 --> 00:12:46,800 Speaker 1: live in. Joe Biden has suggested that FED should act 230 00:12:46,920 --> 00:12:52,520 Speaker 1: aggressively to combat racial inequality, even leaving open the possibility 231 00:12:52,559 --> 00:12:56,240 Speaker 1: of adding a third mandate for the FED. There's also 232 00:12:56,280 --> 00:12:59,440 Speaker 1: talked that perhaps you should incorporate the black unemployment rate 233 00:12:59,520 --> 00:13:03,840 Speaker 1: into your framework. What do you think of those ideas? Well, 234 00:13:03,880 --> 00:13:07,000 Speaker 1: they're interesting ideas. I think that we have to consider 235 00:13:07,080 --> 00:13:10,400 Speaker 1: those sorts of things in a broader context. So for me, 236 00:13:10,679 --> 00:13:13,480 Speaker 1: the black unemployment rate is one measure of how the 237 00:13:13,520 --> 00:13:17,760 Speaker 1: economy is performing for an important segment of our population. 238 00:13:18,000 --> 00:13:21,200 Speaker 1: But we have a Latino unemployment rate that is also 239 00:13:21,320 --> 00:13:23,280 Speaker 1: higher than the national average and has been for a 240 00:13:23,320 --> 00:13:27,079 Speaker 1: long time. You can think about labor force participation for women, 241 00:13:27,120 --> 00:13:30,320 Speaker 1: for example. So this is a multidimensional issue, and I 242 00:13:30,360 --> 00:13:33,400 Speaker 1: think that we've got to think hard about how do 243 00:13:33,440 --> 00:13:36,959 Speaker 1: we capture those all those dimensions to figure out what's 244 00:13:36,960 --> 00:13:39,320 Speaker 1: going on. I will tell you though, I think that 245 00:13:39,600 --> 00:13:41,679 Speaker 1: the policy is coming out of the long run framework 246 00:13:42,040 --> 00:13:46,360 Speaker 1: are important because we are committing to letting the economy 247 00:13:46,440 --> 00:13:49,199 Speaker 1: grow a little more robustly than we might have otherwise, 248 00:13:49,480 --> 00:13:53,000 Speaker 1: and that has and should have positive implications for the 249 00:13:53,040 --> 00:13:56,480 Speaker 1: ability of minorities and women and lower income people to 250 00:13:56,559 --> 00:14:00,000 Speaker 1: be fully attached to the economy. One of us quite 251 00:14:00,000 --> 00:14:03,120 Speaker 1: sin here. The FED has suggested it is looking into 252 00:14:03,200 --> 00:14:07,120 Speaker 1: its communications strategies. You struct all the language about the 253 00:14:07,120 --> 00:14:10,360 Speaker 1: summary of economic projections from the new framework, and I'm 254 00:14:10,360 --> 00:14:12,720 Speaker 1: wondering if we're going to see a different kind of 255 00:14:12,760 --> 00:14:18,120 Speaker 1: communications arriving by the end of the year. So I 256 00:14:18,360 --> 00:14:20,080 Speaker 1: don't know about that. What I'm gonna try to do 257 00:14:20,200 --> 00:14:23,440 Speaker 1: is to make sure that I continue to communicate as 258 00:14:23,440 --> 00:14:26,280 Speaker 1: clearly as possible with my constituencies. I think we've done 259 00:14:26,440 --> 00:14:28,680 Speaker 1: a pretty good job. And Mike, let me just say 260 00:14:28,680 --> 00:14:31,000 Speaker 1: one other thing on on that last question, which is 261 00:14:31,360 --> 00:14:33,760 Speaker 1: another thing that we're trying to do is engage communities 262 00:14:33,800 --> 00:14:37,680 Speaker 1: and constituencies. Today we're actually having a conference on Racial 263 00:14:37,720 --> 00:14:40,240 Speaker 1: Justice and Finance where we're going to try to to 264 00:14:40,320 --> 00:14:43,840 Speaker 1: bring in different voices and have them grap them much 265 00:14:43,880 --> 00:14:47,480 Speaker 1: more deeply with issues about race. We're going to continue 266 00:14:47,480 --> 00:14:50,120 Speaker 1: to have those sorts of conversations moving forward, and I 267 00:14:50,160 --> 00:14:52,160 Speaker 1: think we're going to try as much as possible, and 268 00:14:52,200 --> 00:14:53,520 Speaker 1: I'm going to work to make sure that the Federal 269 00:14:53,560 --> 00:14:56,520 Speaker 1: Reserve is a place that people look to for thoughtful 270 00:14:56,720 --> 00:15:01,920 Speaker 1: solutions to issues around racial equity, UH and disparities that 271 00:15:01,960 --> 00:15:05,480 Speaker 1: we've seen historically. Raphael Albustic, thank you very much for 272 00:15:05,560 --> 00:15:08,280 Speaker 1: joining us. The President of the Atlanta Federal Reserve, joining 273 00:15:08,360 --> 00:15:11,040 Speaker 1: us on Blueberg Radio and television worldwide. Thanks for coming 274 00:15:11,080 --> 00:15:18,560 Speaker 1: on today. We're thrilled that David Kirkpatrick could join us 275 00:15:18,560 --> 00:15:21,600 Speaker 1: on short notice with technolomy obviously and of course his 276 00:15:21,640 --> 00:15:24,720 Speaker 1: wonderful book to Facebook Effect, and he has been looking 277 00:15:24,960 --> 00:15:28,840 Speaker 1: particularly at wheat chat for many years for its ability 278 00:15:28,920 --> 00:15:32,960 Speaker 1: to monitor and move forward social messaging, as well as 279 00:15:33,000 --> 00:15:37,520 Speaker 1: its sheer app utilization. David Kirkpatrick, what is the impact 280 00:15:37,600 --> 00:15:42,640 Speaker 1: to Americans if wheat chat goes away? The impact to 281 00:15:42,720 --> 00:15:45,960 Speaker 1: Americans if wheat Chat goes away is not huge because 282 00:15:46,000 --> 00:15:49,240 Speaker 1: Americans generally don't use we Chat. The people that use 283 00:15:49,280 --> 00:15:52,520 Speaker 1: wa Chat in the United States are people who are 284 00:15:53,280 --> 00:15:55,960 Speaker 1: trying to communicate with people in China. For the most part. 285 00:15:56,080 --> 00:15:58,240 Speaker 1: I think that the probably the biggest single group of 286 00:15:58,560 --> 00:16:01,800 Speaker 1: people in the US who use we Chat our Chinese 287 00:16:01,800 --> 00:16:04,240 Speaker 1: students who are here in the United States, as well 288 00:16:04,280 --> 00:16:06,800 Speaker 1: as Chinese business people who are traveling in the United 289 00:16:06,840 --> 00:16:09,920 Speaker 1: States and Americans with close ties to China. I mean 290 00:16:10,000 --> 00:16:15,880 Speaker 1: in China whe Chat is an indispensable, not daily, not hourly, 291 00:16:16,080 --> 00:16:19,200 Speaker 1: moment to moment tool for life. It is kind of 292 00:16:19,240 --> 00:16:26,600 Speaker 1: a combination of Facebook, Google, eBay, Amazon, Uh, you know, 293 00:16:26,840 --> 00:16:30,680 Speaker 1: all rolled into one. Oh, PayPal, Uh, it all rolled 294 00:16:30,680 --> 00:16:33,120 Speaker 1: into one. You know. You can kind of do everything 295 00:16:33,160 --> 00:16:35,480 Speaker 1: with wee chat. You can order your lunch, you can 296 00:16:35,800 --> 00:16:38,600 Speaker 1: talk to your kid, you can you know, arrange to 297 00:16:38,600 --> 00:16:41,640 Speaker 1: get a car. You can do anything. David, you're the 298 00:16:41,680 --> 00:16:44,800 Speaker 1: author of the book The Facebook Effect, Uh, the inside 299 00:16:44,800 --> 00:16:47,080 Speaker 1: story of a company that is connecting the world. We're 300 00:16:47,120 --> 00:16:49,760 Speaker 1: talking now about we chat that can feed my kids 301 00:16:49,760 --> 00:16:52,040 Speaker 1: and also homeschool them. I am looking forward to some 302 00:16:52,120 --> 00:16:55,160 Speaker 1: app that can do that. Frankly, I am wondering what 303 00:16:55,240 --> 00:16:58,320 Speaker 1: it means for the media world to have Chinese media 304 00:16:58,360 --> 00:17:01,680 Speaker 1: companies that are taking over in connecting the world. What 305 00:17:01,840 --> 00:17:05,399 Speaker 1: is the significance of that. Well, in the larger sense, 306 00:17:05,720 --> 00:17:10,800 Speaker 1: there's no question it's a geopolitical threat um that you know, 307 00:17:10,920 --> 00:17:14,600 Speaker 1: and that that this is one of the real challenges. 308 00:17:14,680 --> 00:17:18,080 Speaker 1: Something we've talked about on this program before, the necessity 309 00:17:18,119 --> 00:17:21,120 Speaker 1: and the likelihood of regulation coming down on American tech 310 00:17:21,160 --> 00:17:24,479 Speaker 1: companies that have a global presence. Um. The reality is 311 00:17:25,240 --> 00:17:28,960 Speaker 1: that in in any vacuum that we're created. If we 312 00:17:29,000 --> 00:17:32,879 Speaker 1: do start to suppress, for even for good reasons, our 313 00:17:32,920 --> 00:17:35,920 Speaker 1: own tech companies. Chinese companies will come in to fill 314 00:17:35,960 --> 00:17:39,480 Speaker 1: the void because they are growing very rapidly, They're enormously capable, 315 00:17:39,840 --> 00:17:42,760 Speaker 1: and they do have the full backing of the Chinese government, 316 00:17:42,800 --> 00:17:47,120 Speaker 1: which gives them enormous resources, even beyond the more obvious 317 00:17:47,119 --> 00:17:50,960 Speaker 1: financial ones that they have. So uh, you know this 318 00:17:51,040 --> 00:17:53,560 Speaker 1: is this is combined with the fact that, for example, 319 00:17:53,640 --> 00:17:56,679 Speaker 1: Huawei has already built the internet infrastructure for most of 320 00:17:56,680 --> 00:17:59,560 Speaker 1: the planet. You know, they Mao had this I was 321 00:17:59,600 --> 00:18:03,159 Speaker 1: just read yesterday. Mao had a philosophy of surrounding the 322 00:18:03,240 --> 00:18:08,120 Speaker 1: cities by starting with the villages. And you know, Chinese technology, 323 00:18:08,280 --> 00:18:11,240 Speaker 1: especially infrastructure technology, has done the same thing with the 324 00:18:11,280 --> 00:18:14,800 Speaker 1: developing world moving toward the developed world. So now they 325 00:18:14,800 --> 00:18:20,359 Speaker 1: have basically one in the physical infrastructure, and these these apps, 326 00:18:20,400 --> 00:18:23,680 Speaker 1: which are more the content apps, are easily to come 327 00:18:23,720 --> 00:18:26,920 Speaker 1: in their way. They're already flowing across all the infrastructure. 328 00:18:26,920 --> 00:18:31,520 Speaker 1: But the point is that China is enormously compres and technologically, 329 00:18:32,160 --> 00:18:35,840 Speaker 1: and and they have a very clear global strategy for 330 00:18:36,000 --> 00:18:39,520 Speaker 1: soft power and hard power, but particularly soft power influence 331 00:18:39,880 --> 00:18:43,480 Speaker 1: which we lack because of our free market system. And 332 00:18:43,520 --> 00:18:46,040 Speaker 1: I'm not saying that's been a mistake, but we are 333 00:18:46,080 --> 00:18:48,800 Speaker 1: in a very precarious situation when it comes to Chinese 334 00:18:48,800 --> 00:18:52,680 Speaker 1: influence in tech at a global level. It's Ivan Makberg, 335 00:18:52,760 --> 00:18:54,840 Speaker 1: of face, but mate that argument a couple of months 336 00:18:54,840 --> 00:18:58,160 Speaker 1: ago on Capital Hill. Do you think that arguments starting 337 00:18:58,200 --> 00:19:01,760 Speaker 1: to resonite in d C? Yes, I think it is. 338 00:19:02,200 --> 00:19:06,680 Speaker 1: I'm very suspicious whenever Zuckerberg makes any argument these days, 339 00:19:06,680 --> 00:19:10,480 Speaker 1: because I think he's so self interested. But but in 340 00:19:10,520 --> 00:19:18,119 Speaker 1: that sense, I don't disagree with him on this rare occasion. Um. Yeah, 341 00:19:18,800 --> 00:19:23,879 Speaker 1: it's particularly making fact interestingly among conservative Republicans like Marco 342 00:19:24,000 --> 00:19:29,680 Speaker 1: Rubio and Josh Holly Republican senators. But but I think 343 00:19:29,720 --> 00:19:32,879 Speaker 1: you can't help looking at anything right now through the 344 00:19:32,880 --> 00:19:36,600 Speaker 1: inevitable lens of the presidential campaign. And even if you 345 00:19:36,640 --> 00:19:40,000 Speaker 1: look at the Commerce Department announcement this morning that they're 346 00:19:40,000 --> 00:19:42,800 Speaker 1: going to ban wha Chad and TikTok, you know, the 347 00:19:42,840 --> 00:19:46,520 Speaker 1: first sentence of the thing is in keeping with President 348 00:19:46,560 --> 00:19:49,119 Speaker 1: Trump's great leadership and desire to do this and this 349 00:19:49,200 --> 00:19:51,360 Speaker 1: and that. I mean, we never used to get government 350 00:19:51,400 --> 00:19:54,800 Speaker 1: regulations issued that way. You know, with fealty to the 351 00:19:54,880 --> 00:19:58,280 Speaker 1: Great Leader kind of thing. Uh. That's that's been coming 352 00:19:58,320 --> 00:20:02,560 Speaker 1: more and more and worries me. David in the in 353 00:20:02,640 --> 00:20:06,399 Speaker 1: the bluster of all this and the emotion is Business 354 00:20:06,440 --> 00:20:13,320 Speaker 1: Insider just has out a nice question. Is this enforceable? Yes? 355 00:20:13,440 --> 00:20:18,040 Speaker 1: I think it's enforceable. Probably. Um, you can enforce it 356 00:20:18,320 --> 00:20:22,040 Speaker 1: by you know, first of all, banning them in the 357 00:20:22,080 --> 00:20:26,720 Speaker 1: app stores of Google and uh and uh Apple and 358 00:20:26,880 --> 00:20:30,720 Speaker 1: and and Yes, you can use a lot of tools 359 00:20:30,760 --> 00:20:35,639 Speaker 1: to force internet activity not to happen in certain ways. 360 00:20:35,840 --> 00:20:40,800 Speaker 1: And um, I think there will be ways around it. 361 00:20:40,880 --> 00:20:43,800 Speaker 1: I mean people, you know, in the US, people probably 362 00:20:43,800 --> 00:20:48,480 Speaker 1: could use VPNs to use Chinese apps, just like Americans 363 00:20:48,520 --> 00:20:52,400 Speaker 1: can use VPNs to use American apps in China. So 364 00:20:52,480 --> 00:20:54,920 Speaker 1: there's elements that would be unenforceable. But I don't think 365 00:20:54,960 --> 00:20:58,199 Speaker 1: that would be my concern. I think my concern is 366 00:20:58,240 --> 00:21:03,120 Speaker 1: more or less chaos. Um. And I think also it's 367 00:21:03,200 --> 00:21:07,159 Speaker 1: a very odd thing in a way, considering that the 368 00:21:07,280 --> 00:21:10,240 Speaker 1: young people of America, the youngest people, but even some 369 00:21:10,640 --> 00:21:14,960 Speaker 1: medium young people are so devoted to TikTok uh. To 370 00:21:15,080 --> 00:21:18,160 Speaker 1: take away one of their favorite toys and and favorite 371 00:21:18,160 --> 00:21:22,280 Speaker 1: ways of spending their time right before an election doesn't 372 00:21:22,280 --> 00:21:28,639 Speaker 1: strike me as necessarily that strategically wise. Devin Kirkpatrick ry 373 00:21:28,680 --> 00:21:34,520 Speaker 1: to catch ups that contributor. One thing I would say, 374 00:21:34,600 --> 00:21:38,040 Speaker 1: Lisa brand what's more than anything is then the news 375 00:21:38,280 --> 00:21:41,960 Speaker 1: takes over and it is news of the many stories 376 00:21:42,040 --> 00:21:44,720 Speaker 1: of China and the United States. And this has been 377 00:21:44,760 --> 00:21:47,440 Speaker 1: something percolating the backdrop. But now there is the increasing 378 00:21:47,480 --> 00:21:51,879 Speaker 1: uncertainty between US and China over TikTok over we chat, 379 00:21:52,320 --> 00:21:55,440 Speaker 1: uh and and really on the relationship going forward between 380 00:21:55,480 --> 00:21:58,080 Speaker 1: these two countries with the hardliners digging heels in and 381 00:21:58,080 --> 00:22:00,920 Speaker 1: Brad Setzer has been following this from the flow is 382 00:22:01,000 --> 00:22:03,480 Speaker 1: the money flows state of the picture, which I love 383 00:22:03,560 --> 00:22:05,679 Speaker 1: Tom because we could talk a lot about the politics, 384 00:22:05,960 --> 00:22:08,080 Speaker 1: but really we have to look at the numbers and 385 00:22:08,119 --> 00:22:09,560 Speaker 1: the money, and what the money is saying is that 386 00:22:09,600 --> 00:22:13,280 Speaker 1: the trade deficit between the US with China is deepening. 387 00:22:13,320 --> 00:22:16,320 Speaker 1: Brad Sssor from the Council on Foreign Relations Senior Fellow 388 00:22:16,800 --> 00:22:21,719 Speaker 1: for International Affairs and also longstanding background in in in 389 00:22:21,720 --> 00:22:24,879 Speaker 1: in international relations in the government as well. Brad, what 390 00:22:24,960 --> 00:22:28,600 Speaker 1: do you make of this whole TikTok we chat news 391 00:22:28,640 --> 00:22:33,040 Speaker 1: this morning? Oh? I think uh, well for one, the 392 00:22:33,119 --> 00:22:37,320 Speaker 1: US hasn't been very clear about the demands that it 393 00:22:37,400 --> 00:22:40,879 Speaker 1: was placing on TikTok. I mean, there was the whole 394 00:22:41,040 --> 00:22:45,399 Speaker 1: deal with Oracle for a while suggested that TikTok could 395 00:22:45,640 --> 00:22:50,120 Speaker 1: retain or by dance could retain majority control, which would 396 00:22:50,119 --> 00:22:53,480 Speaker 1: be unusual. And then I think China is also flexing 397 00:22:53,560 --> 00:22:58,639 Speaker 1: its muscles trying to limit the export of various source code. 398 00:22:59,119 --> 00:23:01,959 Speaker 1: And so I think for now, you know, the U 399 00:23:02,040 --> 00:23:06,520 Speaker 1: s seems to be signaling that it wants a full 400 00:23:06,600 --> 00:23:10,520 Speaker 1: divester or at least a shifting majority control, in China's 401 00:23:10,600 --> 00:23:13,719 Speaker 1: resisting that, and the company is caught in between. If 402 00:23:13,760 --> 00:23:15,600 Speaker 1: you take a step back, you've been doing a lot 403 00:23:15,640 --> 00:23:18,200 Speaker 1: of great work on the flows, the international flows between 404 00:23:18,200 --> 00:23:21,040 Speaker 1: the US and China, And if you take a look 405 00:23:21,119 --> 00:23:24,240 Speaker 1: at what the legacy of the Trump administration is, has 406 00:23:24,280 --> 00:23:27,680 Speaker 1: it created a more even playing field between these two countries? 407 00:23:29,880 --> 00:23:32,560 Speaker 1: I mean no, I mean I think it pretty clearly 408 00:23:33,800 --> 00:23:40,560 Speaker 1: hasn't addressed the broad set of concerns that many US 409 00:23:40,640 --> 00:23:45,800 Speaker 1: firms had operating in China, nor from the Chinese point 410 00:23:45,800 --> 00:23:50,359 Speaker 1: of view, has it given them certainty around their relationship 411 00:23:50,440 --> 00:23:55,280 Speaker 1: with the US. But it is striking that after the 412 00:23:55,320 --> 00:23:58,840 Speaker 1: Phase one trade deal, US imports from China and China's 413 00:23:58,880 --> 00:24:04,199 Speaker 1: exports US really have rebounded. Uh and so even with 414 00:24:04,320 --> 00:24:10,240 Speaker 1: all the friction, all of the uncertainty, right now China 415 00:24:10,320 --> 00:24:12,480 Speaker 1: is exporting about as much to the US as it 416 00:24:12,560 --> 00:24:17,760 Speaker 1: ever has. It's a really quite striking outcome, one probably 417 00:24:17,800 --> 00:24:20,879 Speaker 1: influenced by some of the changes in demand around the pandemic, 418 00:24:21,280 --> 00:24:23,960 Speaker 1: but I think it also illustrates how difficult, at the 419 00:24:24,040 --> 00:24:27,200 Speaker 1: end of the day it is to really fully decouple. 420 00:24:27,760 --> 00:24:30,800 Speaker 1: Brad Setser. This is one big game of chicken, and 421 00:24:30,840 --> 00:24:34,399 Speaker 1: whether it's Vanida Agerol at Berkeley or Avanage dicks it 422 00:24:34,520 --> 00:24:37,720 Speaker 1: in the artist strategy at Princeton or what you studied 423 00:24:37,760 --> 00:24:42,040 Speaker 1: at Oxford, chickens a lot more sophisticated than we perceive. 424 00:24:42,680 --> 00:24:49,720 Speaker 1: What is the risk to America of this game of chicken? Well, 425 00:24:49,760 --> 00:24:55,920 Speaker 1: I think there are If you're thinking purely about byte 426 00:24:55,960 --> 00:24:58,720 Speaker 1: dance and TikTok, it is that some teenagers may not 427 00:24:58,840 --> 00:25:02,200 Speaker 1: be uh amused on their phone as much as they 428 00:25:02,200 --> 00:25:06,960 Speaker 1: normally would be for a period of time from the travesty. 429 00:25:07,040 --> 00:25:11,439 Speaker 1: From the broader strategic point of view, I think you know, 430 00:25:11,960 --> 00:25:14,520 Speaker 1: a game of chicken and threats and blusters is probably 431 00:25:14,560 --> 00:25:18,520 Speaker 1: not the most efficient way to move both economies to 432 00:25:18,600 --> 00:25:21,880 Speaker 1: a slightly less to a state where they are slightly 433 00:25:21,960 --> 00:25:24,800 Speaker 1: less integrated with each other. And the hard part has 434 00:25:24,800 --> 00:25:29,280 Speaker 1: been defining what the slightly less integrated world looks like. 435 00:25:29,440 --> 00:25:32,480 Speaker 1: Do you perceive bread Setser is one of our great 436 00:25:32,560 --> 00:25:36,800 Speaker 1: economic thinkers that the United States is prepared for the 437 00:25:36,880 --> 00:25:40,880 Speaker 1: response of China to what is perceived by many is bluster. 438 00:25:41,119 --> 00:25:44,280 Speaker 1: How are we going to respond to whatever they say 439 00:25:44,400 --> 00:25:51,080 Speaker 1: about wheat chat or indeed about TikTok as well? I 440 00:25:51,119 --> 00:25:53,480 Speaker 1: think you have to be prepared to deal with the 441 00:25:53,640 --> 00:25:58,080 Speaker 1: consequences of your action. Uh. And if China says, as 442 00:25:58,080 --> 00:26:01,400 Speaker 1: a matter of policy, we would other shot TikTok down 443 00:26:01,480 --> 00:26:05,280 Speaker 1: than have a for sale, uh, TikTok well by dance 444 00:26:05,280 --> 00:26:08,000 Speaker 1: will be forced to do so. Uh. One of the 445 00:26:08,040 --> 00:26:12,679 Speaker 1: classic insights of strategy is you shouldn't make a threat 446 00:26:12,960 --> 00:26:16,560 Speaker 1: that you're not willing to carry out. And to the 447 00:26:16,600 --> 00:26:25,320 Speaker 1: extent that the US assumes that China will easily accommodate, 448 00:26:25,400 --> 00:26:28,240 Speaker 1: what China perceives is the irrational demands on the part 449 00:26:28,280 --> 00:26:31,400 Speaker 1: of the US, the US is making a mistake. Does 450 00:26:31,400 --> 00:26:33,560 Speaker 1: the election play into this? We've had a number of 451 00:26:33,560 --> 00:26:37,040 Speaker 1: conversations this morning, Professor Setzer, that's say, well, maybe does 452 00:26:37,200 --> 00:26:40,520 Speaker 1: maybe it doesn't. Does the election play into this or 453 00:26:40,560 --> 00:26:46,480 Speaker 1: is this a bipartisan in separate discussion with China. I mean, 454 00:26:46,920 --> 00:26:49,399 Speaker 1: there's always a balance. I think at the end of 455 00:26:49,440 --> 00:26:55,359 Speaker 1: the day, there is a bipartisan sense that the economic 456 00:26:55,440 --> 00:26:59,840 Speaker 1: relationship with China still needs to evolve, further change in 457 00:27:00,040 --> 00:27:05,920 Speaker 1: areas ways, and that plays out through a set of actions, 458 00:27:05,960 --> 00:27:11,200 Speaker 1: and whenever UH decision is made that forces a deadline 459 00:27:11,240 --> 00:27:15,840 Speaker 1: in the period before a presidential election, it's impossible to 460 00:27:15,880 --> 00:27:18,240 Speaker 1: say that politics didn't play some role in the timing. 461 00:27:18,720 --> 00:27:21,080 Speaker 1: But I think it's a reflection of a you know, 462 00:27:21,359 --> 00:27:25,160 Speaker 1: as an ongoing struggle on the part of the US 463 00:27:25,240 --> 00:27:30,400 Speaker 1: political system to translate a desire for a different economic 464 00:27:30,480 --> 00:27:34,800 Speaker 1: relationship with China into a into reality. And Brad, we've 465 00:27:34,840 --> 00:27:36,520 Speaker 1: been talking all morning and you just flicked at this, 466 00:27:36,960 --> 00:27:39,879 Speaker 1: at this bipartisan wish to even the playing field between 467 00:27:39,880 --> 00:27:41,920 Speaker 1: the U. S and China, this feeling that something's gotten 468 00:27:41,920 --> 00:27:44,000 Speaker 1: out of whack. And you served in the U. S. 469 00:27:44,040 --> 00:27:48,560 Speaker 1: Treasury Department studying the economic relationships internationally, what do you 470 00:27:48,600 --> 00:27:52,040 Speaker 1: think people should be looking to do to actually create 471 00:27:52,560 --> 00:27:55,960 Speaker 1: a better environment that would be agreed upon on all sides, 472 00:27:56,000 --> 00:28:01,280 Speaker 1: at least within the parties in the US. MH. Well, 473 00:28:01,320 --> 00:28:08,400 Speaker 1: I mean, I do think that you know that the 474 00:28:08,480 --> 00:28:12,959 Speaker 1: basic question about how open the U s should be 475 00:28:13,000 --> 00:28:15,879 Speaker 1: to China when China is not going to be fully 476 00:28:15,920 --> 00:28:19,879 Speaker 1: open to the US is an important one. That's the 477 00:28:19,920 --> 00:28:27,199 Speaker 1: implicit question being addressed in the byte Dance TikTok discussion, 478 00:28:27,280 --> 00:28:31,840 Speaker 1: given that China's own Internet is pretty closed to consumer 479 00:28:32,000 --> 00:28:35,679 Speaker 1: applications from outside UH. And then I think there is 480 00:28:35,840 --> 00:28:40,880 Speaker 1: the broader question of how much China will change. And 481 00:28:40,920 --> 00:28:43,160 Speaker 1: if the answer is that China isn't going to change 482 00:28:43,280 --> 00:28:48,080 Speaker 1: very much, then the question becomes how much further or 483 00:28:48,120 --> 00:28:50,240 Speaker 1: how much do you want to roll back our current 484 00:28:50,320 --> 00:28:54,920 Speaker 1: level of integration with an unchanged Chinese economy. The tariffs 485 00:28:54,960 --> 00:28:58,240 Speaker 1: have played some role in that, but the tariffs have 486 00:28:58,360 --> 00:29:01,600 Speaker 1: probably you know, I mean striking thing is that even 487 00:29:01,640 --> 00:29:06,480 Speaker 1: with the terroiffs, the train imbalance with China has basically 488 00:29:06,520 --> 00:29:08,800 Speaker 1: bounced back in the past couple of months. It's not 489 00:29:08,880 --> 00:29:13,240 Speaker 1: fully back, but it is really returned, and so probably 490 00:29:13,280 --> 00:29:16,600 Speaker 1: the policies that are in place to date aren't sufficient. 491 00:29:17,040 --> 00:29:18,640 Speaker 1: I think the new factor and I think this is 492 00:29:18,640 --> 00:29:22,480 Speaker 1: a potentially important factor is that the direction of pressure, 493 00:29:22,480 --> 00:29:26,480 Speaker 1: at least my judgment on China's currency, looks to be changing. 494 00:29:26,800 --> 00:29:30,360 Speaker 1: It looks like China's currencies under pressure to appreciate and 495 00:29:30,440 --> 00:29:33,960 Speaker 1: a stronger Chinese currency in the past has been much 496 00:29:33,960 --> 00:29:38,680 Speaker 1: more effective than terroiffs at creating broad incentives to move 497 00:29:39,920 --> 00:29:43,400 Speaker 1: production and supply chains around the world and have them 498 00:29:43,440 --> 00:29:46,080 Speaker 1: less focused on China. Brad, thank you so much better 499 00:29:46,200 --> 00:29:53,760 Speaker 1: was the Council on Foreign Relations right now? This is 500 00:29:53,800 --> 00:29:56,680 Speaker 1: a joy. Rebecca Patterson in held Carta JP Morgan for 501 00:29:56,760 --> 00:30:01,200 Speaker 1: years and then ran Bessemer Trust. We're looking long term, 502 00:30:01,200 --> 00:30:05,240 Speaker 1: serious money. For some reason unknown, she decided to dive 503 00:30:05,280 --> 00:30:08,040 Speaker 1: off the deep end late last year into the land 504 00:30:08,040 --> 00:30:11,560 Speaker 1: of dahlo In Prince. I can't think any I honestly 505 00:30:11,600 --> 00:30:14,440 Speaker 1: can't think, Rebecca of a greater shift than going from 506 00:30:14,520 --> 00:30:18,440 Speaker 1: Bessemer Trust to the hell hole known as Bridgewater Associates 507 00:30:18,680 --> 00:30:23,720 Speaker 1: in Connecticut. Have you survived in doing research to help 508 00:30:23,800 --> 00:30:28,240 Speaker 1: these animals? What was the first day like? So the 509 00:30:28,280 --> 00:30:31,120 Speaker 1: biggest surprise for me at Bridgewater I've been there since 510 00:30:31,200 --> 00:30:34,600 Speaker 1: January is that for whatever you read in the media, 511 00:30:35,040 --> 00:30:37,000 Speaker 1: and I'm a former journalist, I have a lot of 512 00:30:37,000 --> 00:30:40,440 Speaker 1: respect for the media, but I have to say no, no, no, seriously, 513 00:30:40,480 --> 00:30:44,640 Speaker 1: my experience there has been so different from what you read. Um, 514 00:30:44,640 --> 00:30:47,600 Speaker 1: it's humbling, his heck, it's it's some of the smartest 515 00:30:47,600 --> 00:30:51,240 Speaker 1: people I've ever worked with, and and they question everything, 516 00:30:51,320 --> 00:30:53,720 Speaker 1: so everything you think you know you have to re examine. 517 00:30:54,200 --> 00:30:56,920 Speaker 1: But it's also been one of the warmest places I've 518 00:30:56,960 --> 00:30:59,320 Speaker 1: ever worked at. And I did not see that coming. 519 00:30:59,480 --> 00:31:02,120 Speaker 1: I did not expect people to be calling me at 520 00:31:02,160 --> 00:31:04,080 Speaker 1: home every couple of weeks saying, how's it going. I 521 00:31:04,080 --> 00:31:06,960 Speaker 1: know you're on boarding via zoom. Um, so that's been 522 00:31:06,960 --> 00:31:10,520 Speaker 1: really lovely. I'm I'm working harder than I've ever worked 523 00:31:10,520 --> 00:31:13,360 Speaker 1: in my life. But it's good. I'm challenged. I love it. 524 00:31:13,480 --> 00:31:16,000 Speaker 1: I do a banner the Dahlio Honeymoon, but that would 525 00:31:16,000 --> 00:31:18,000 Speaker 1: get us in trouble. Okay, Rebecca, I want to get 526 00:31:18,040 --> 00:31:21,040 Speaker 1: done to business right now. Bob Prince stopped the world 527 00:31:21,040 --> 00:31:24,040 Speaker 1: at Davos talking about the challenges of the lower bound. 528 00:31:24,560 --> 00:31:28,720 Speaker 1: It ain't working. I mean Katherine Burton's essay the other day, 529 00:31:29,200 --> 00:31:32,360 Speaker 1: your major all weather fun It's single digit returns and 530 00:31:32,440 --> 00:31:36,960 Speaker 1: some selected losses as well. It's just not working. Can 531 00:31:37,120 --> 00:31:42,040 Speaker 1: risk parity strategies work at the lower bound. You know, 532 00:31:42,680 --> 00:31:46,360 Speaker 1: bonds certainly are not providing the level of return or 533 00:31:46,400 --> 00:31:49,280 Speaker 1: the level of diversification they have had for the last 534 00:31:49,320 --> 00:31:53,480 Speaker 1: couple of decades. That's obvious to everybody. But what all 535 00:31:53,520 --> 00:31:57,240 Speaker 1: Weather is all about is really getting smart diversification and 536 00:31:57,320 --> 00:32:00,800 Speaker 1: figuring out how to get betas in different environments, whether 537 00:32:00,800 --> 00:32:03,400 Speaker 1: you're in a rising or falling growth environment, arising or 538 00:32:03,440 --> 00:32:07,080 Speaker 1: falling inflation environment, and so what the team of Bridge 539 00:32:07,040 --> 00:32:09,160 Speaker 1: Wire has been doing for the last couple of years, 540 00:32:09,160 --> 00:32:12,560 Speaker 1: but really obviously focusing very much on over this past year, 541 00:32:13,080 --> 00:32:16,320 Speaker 1: is thinking what other combinations of assets can we put 542 00:32:16,320 --> 00:32:19,000 Speaker 1: in a portfolio that are going to achieve that same balance. 543 00:32:19,440 --> 00:32:21,160 Speaker 1: And the good news is, I think there are plenty 544 00:32:21,160 --> 00:32:23,640 Speaker 1: of ways to do it. So it's not saying dump 545 00:32:23,640 --> 00:32:27,160 Speaker 1: all your bonds, absolutely, it's saying, make sure you have 546 00:32:27,400 --> 00:32:31,320 Speaker 1: that diversification and balance and things like inflation linked bonds, 547 00:32:31,360 --> 00:32:35,080 Speaker 1: things like looking at a basket of global still bonds, 548 00:32:35,280 --> 00:32:38,480 Speaker 1: things like gold, things like looking at different types of 549 00:32:38,520 --> 00:32:41,440 Speaker 1: equities that are going to have more stable cash flows. 550 00:32:41,800 --> 00:32:44,400 Speaker 1: There are ways you can continue to achieve that balance. 551 00:32:44,440 --> 00:32:47,400 Speaker 1: So so we have to be creative but in a 552 00:32:47,440 --> 00:32:50,720 Speaker 1: world where interest rates are, you know, converging around zero, 553 00:32:51,160 --> 00:32:53,960 Speaker 1: but it's still absolutely possible to achieve the aims of 554 00:32:54,000 --> 00:32:57,280 Speaker 1: all weather. Rebecca, what I find fascinating here around the 555 00:32:57,280 --> 00:33:01,720 Speaker 1: Cord Bridgewater theme the Dahlio invented of of return equals 556 00:33:01,800 --> 00:33:05,240 Speaker 1: cash plus ala beta plus alpha. Great. I mean, I 557 00:33:05,320 --> 00:33:08,920 Speaker 1: get the foundational idea, but things have changed now that 558 00:33:09,000 --> 00:33:13,200 Speaker 1: formula is founded on full faith and credit. Bonds is 559 00:33:13,240 --> 00:33:17,680 Speaker 1: an anchor to the mathematics. Your new strategies don't have 560 00:33:18,280 --> 00:33:21,600 Speaker 1: that full faith and credit anchor, do they. Oh? Yeah, 561 00:33:21,680 --> 00:33:24,320 Speaker 1: sure they do. I mean you're still anchoring to cash. 562 00:33:24,560 --> 00:33:28,320 Speaker 1: You're still anchoring to what are the risk premia for 563 00:33:28,520 --> 00:33:31,840 Speaker 1: different asset classes and kind of adding those up together 564 00:33:31,880 --> 00:33:33,720 Speaker 1: and then figuring out how much risk you want to 565 00:33:33,760 --> 00:33:35,920 Speaker 1: have in each. So I think that basic principle is 566 00:33:35,920 --> 00:33:38,400 Speaker 1: still in place. You just have to think about the 567 00:33:38,600 --> 00:33:41,600 Speaker 1: that bond portion of your portfolio differently than the past. 568 00:33:41,600 --> 00:33:43,480 Speaker 1: So I think I think it's not as big a 569 00:33:43,520 --> 00:33:48,440 Speaker 1: deal perhaps as you're suggesting. Rebecca, Good morning from London. 570 00:33:48,440 --> 00:33:50,360 Speaker 1: Talk to me a little bit about correlations. I mean, 571 00:33:50,480 --> 00:33:53,040 Speaker 1: we've spent a fair amount of time also looking at 572 00:33:53,040 --> 00:33:55,760 Speaker 1: the rally in August to try and figure out what 573 00:33:55,800 --> 00:33:58,800 Speaker 1: these correlations mean, whether they were really any different to 574 00:33:58,840 --> 00:34:02,080 Speaker 1: what we saw after, you know, the dot com bubble burst. 575 00:34:02,440 --> 00:34:04,560 Speaker 1: What can you tell us about what it will take 576 00:34:04,600 --> 00:34:08,919 Speaker 1: to have correlations that go back to a bit more normality. Well, 577 00:34:09,800 --> 00:34:12,799 Speaker 1: I understand what you're saying about August and even in 578 00:34:12,840 --> 00:34:15,000 Speaker 1: September with some some of the moves we've seen in 579 00:34:15,040 --> 00:34:17,960 Speaker 1: the market. But I think if we take a step back, 580 00:34:18,480 --> 00:34:20,880 Speaker 1: we are seeing a lot of differentiation still in the 581 00:34:20,920 --> 00:34:23,960 Speaker 1: markets this year, especially around the pandemic. You know, between 582 00:34:25,000 --> 00:34:29,000 Speaker 1: how different countries have handled the virus and franceing you 583 00:34:29,040 --> 00:34:31,200 Speaker 1: in London, you're seeing one version of that. We're seeing 584 00:34:31,239 --> 00:34:33,680 Speaker 1: a different version of the US. If some countries like 585 00:34:33,760 --> 00:34:36,960 Speaker 1: China doing an amazing job, other countries like Mexico not 586 00:34:37,120 --> 00:34:40,960 Speaker 1: so much. Um So you have differentiation in the virus control, 587 00:34:41,160 --> 00:34:44,960 Speaker 1: you have differentiation in the policy response, So the US, 588 00:34:45,480 --> 00:34:49,200 Speaker 1: you know, huge monetary and fiscal easing very quickly, other 589 00:34:49,239 --> 00:34:52,600 Speaker 1: countries doing a lot less or maybe later. So that's 590 00:34:52,600 --> 00:34:54,560 Speaker 1: a second factor. And then the third factor, and you 591 00:34:54,640 --> 00:34:57,480 Speaker 1: just touched on this with the bank stocks in Europe, 592 00:34:58,000 --> 00:35:00,160 Speaker 1: is the makeup of the economy and the makeup of 593 00:35:00,239 --> 00:35:02,720 Speaker 1: those markets, and when you put those three things together, 594 00:35:03,200 --> 00:35:05,400 Speaker 1: what I think you are seeing is a lot of 595 00:35:05,440 --> 00:35:08,879 Speaker 1: differentiation in how the markets are moving near to date 596 00:35:09,080 --> 00:35:13,160 Speaker 1: in terms of equity returns a country and currency returns 597 00:35:13,160 --> 00:35:16,640 Speaker 1: as well. Country like Mexico versus a country like China, 598 00:35:16,800 --> 00:35:19,920 Speaker 1: you're getting very very different performance. So I while I 599 00:35:20,000 --> 00:35:22,520 Speaker 1: hear you on what you're saying about recent correlations, I 600 00:35:22,560 --> 00:35:25,160 Speaker 1: think if you can take a slightly wider lens on 601 00:35:25,200 --> 00:35:28,680 Speaker 1: that question, what you're seeing from the pandemic, as horrible 602 00:35:28,719 --> 00:35:31,600 Speaker 1: as it is, is that it is providing investors with 603 00:35:31,960 --> 00:35:36,479 Speaker 1: some pretty good opportunities for diversification and portfolios that comes 604 00:35:36,480 --> 00:35:39,360 Speaker 1: from lower correlations because of these three factors, the virus, 605 00:35:39,400 --> 00:35:42,280 Speaker 1: the policy response, and then the makeup of the economy 606 00:35:42,280 --> 00:35:46,640 Speaker 1: and economy that's heavily service oriented, tourism oriented, global trade 607 00:35:46,640 --> 00:35:49,840 Speaker 1: oriented is obviously going to be hit a lot differently 608 00:35:49,880 --> 00:35:52,480 Speaker 1: than a country where it's more focused on goods, more 609 00:35:52,520 --> 00:35:56,480 Speaker 1: focused inward domestically. And we're like at one of the 610 00:35:56,560 --> 00:35:58,080 Speaker 1: other things that we've been trying to figure out is, 611 00:35:58,120 --> 00:36:00,480 Speaker 1: of course you know these deflationary pressure is that a 612 00:36:00,480 --> 00:36:03,360 Speaker 1: lot of central banks are worried around the world about, 613 00:36:03,400 --> 00:36:06,040 Speaker 1: including the fit. Is there really a danger that a 614 00:36:06,080 --> 00:36:09,080 Speaker 1: lot of our Western democracies and Western economies are becoming 615 00:36:09,160 --> 00:36:12,319 Speaker 1: much more like Japan? And what has Japan taught us 616 00:36:12,360 --> 00:36:15,000 Speaker 1: in how to deal with it? Oh? I love that 617 00:36:15,040 --> 00:36:18,560 Speaker 1: you asked that question, um And and Tom, Tom and 618 00:36:18,640 --> 00:36:21,080 Speaker 1: I share this francy, and I don't know you well 619 00:36:21,200 --> 00:36:22,960 Speaker 1: enough and to know if you're part of the club. 620 00:36:23,080 --> 00:36:26,719 Speaker 1: But history is so much fun to study and understand 621 00:36:26,760 --> 00:36:29,600 Speaker 1: because while it doesn't predict the future, it definitely informs 622 00:36:29,760 --> 00:36:32,000 Speaker 1: your view on the future. And Japan is such a 623 00:36:32,120 --> 00:36:35,000 Speaker 1: great case study right now as you think about what 624 00:36:35,120 --> 00:36:37,799 Speaker 1: Japan tried to do. When Abe came to office in 625 00:36:37,920 --> 00:36:42,360 Speaker 1: the end of two thousand twelve early thirteen, he launched Abeonomics. 626 00:36:42,719 --> 00:36:46,920 Speaker 1: They raised the inflation target, they increased asset purchases, they 627 00:36:46,960 --> 00:36:49,200 Speaker 1: did everything you would want to do to try to 628 00:36:49,239 --> 00:36:53,120 Speaker 1: generate some inflation. But what they failed to do in 629 00:36:53,239 --> 00:36:56,680 Speaker 1: two thousand and fourteen is continue with the fiscal easy 630 00:36:56,760 --> 00:37:00,440 Speaker 1: to support the monetary policy. So when they started tightening fiscally, 631 00:37:00,920 --> 00:37:03,919 Speaker 1: you had fiscal and monetary policy at odds, and that 632 00:37:04,080 --> 00:37:06,920 Speaker 1: undermined their goal and you saw inflation start to come 633 00:37:06,920 --> 00:37:10,160 Speaker 1: back down. So what we're seeing now in the world. 634 00:37:10,320 --> 00:37:12,759 Speaker 1: And I think this is such an important thing for 635 00:37:12,880 --> 00:37:16,000 Speaker 1: your listeners and viewers to understand, is we've really moved 636 00:37:16,040 --> 00:37:19,080 Speaker 1: into a new era, almost a new paradigm is what 637 00:37:19,120 --> 00:37:22,239 Speaker 1: we're calling it. In that monetary policy the way we 638 00:37:22,280 --> 00:37:24,759 Speaker 1: grew up with it, it doesn't work anymore. You know, 639 00:37:24,840 --> 00:37:27,320 Speaker 1: the the ammunition for central banks just to raise and 640 00:37:27,360 --> 00:37:30,400 Speaker 1: lower interest rates, especially lowering interest rates, that's pretty much 641 00:37:30,440 --> 00:37:33,120 Speaker 1: behind us. It's been behind us for a while. That's 642 00:37:33,120 --> 00:37:37,040 Speaker 1: why they adopted asset purchases, quantitative easing. But even now 643 00:37:37,440 --> 00:37:40,160 Speaker 1: that's not doing the trick. It Quantitative easines is going 644 00:37:40,200 --> 00:37:43,080 Speaker 1: to reflate equities, reflate financial assets, but it doesn't get 645 00:37:43,120 --> 00:37:45,160 Speaker 1: money into the hands of the people who need it. 646 00:37:45,520 --> 00:37:47,360 Speaker 1: So now you're in this world where you have to 647 00:37:47,400 --> 00:37:51,400 Speaker 1: have more coordinated fiscal and monetary policy. So what the 648 00:37:51,440 --> 00:37:55,120 Speaker 1: FEDS doing to try to avoid becoming Japan having entrenched 649 00:37:55,160 --> 00:37:58,880 Speaker 1: low inflation or deflation, God help us. What they're trying 650 00:37:58,880 --> 00:38:02,040 Speaker 1: to do is be aggressed if pushing up this in 651 00:38:02,120 --> 00:38:05,400 Speaker 1: the interpretation of its mandate to try to get higher inflation, 652 00:38:05,640 --> 00:38:09,880 Speaker 1: keep rates at zero at least till two But that's 653 00:38:09,920 --> 00:38:13,560 Speaker 1: only gonna work if they have fiscal policy supporting them, 654 00:38:13,600 --> 00:38:15,520 Speaker 1: and so that's what I think we need to watch 655 00:38:15,520 --> 00:38:18,320 Speaker 1: really carefully right now. Is the fiscal policy going to 656 00:38:18,440 --> 00:38:21,360 Speaker 1: be there to go hand in hand with the monetary policy. 657 00:38:21,600 --> 00:38:24,000 Speaker 1: Chairman Paul and President Trump on the same page with 658 00:38:24,120 --> 00:38:28,160 Speaker 1: Rebecca Patterson of Bridgewater, Francine wants to go eight different 659 00:38:28,160 --> 00:38:31,239 Speaker 1: ways here, Rebecca, I've got one more Bridgewater question. The 660 00:38:31,320 --> 00:38:35,440 Speaker 1: massive issue for any alternative investment hedge fund property, including 661 00:38:35,760 --> 00:38:39,000 Speaker 1: your heritage of Bessemer Trust in JP Morgan, is you've 662 00:38:39,000 --> 00:38:41,319 Speaker 1: got to do better than the other guys. And that's 663 00:38:41,400 --> 00:38:46,400 Speaker 1: all wrapped around some form of actual assumption or guestimate 664 00:38:46,480 --> 00:38:49,880 Speaker 1: of what the proper return is. For Ray Dalio and 665 00:38:50,000 --> 00:38:55,360 Speaker 1: your shop. What's the new assumption of what your portfolios 666 00:38:55,440 --> 00:38:59,280 Speaker 1: can do. Are you wedded to a single digit grind 667 00:38:59,600 --> 00:39:02,719 Speaker 1: to or to recover from August back to that or 668 00:39:02,760 --> 00:39:07,560 Speaker 1: can you actually do better and deliver double digit return Well, 669 00:39:07,600 --> 00:39:11,120 Speaker 1: we're certainly aspiring to deliver double digit returns. That's what 670 00:39:11,160 --> 00:39:14,279 Speaker 1: we're trying to do for our clients. Um, I think 671 00:39:14,520 --> 00:39:17,279 Speaker 1: you know what this environment shows us in terms of 672 00:39:17,320 --> 00:39:21,279 Speaker 1: returns is that you you have to think outside the box. 673 00:39:21,360 --> 00:39:24,680 Speaker 1: You can't just look at the SMP and think that's 674 00:39:24,680 --> 00:39:26,800 Speaker 1: going to do it for you. Even though that market 675 00:39:26,880 --> 00:39:29,920 Speaker 1: has led for the last decade more or less, it 676 00:39:30,000 --> 00:39:32,520 Speaker 1: doesn't mean you should extrapolate that and assume you're going 677 00:39:32,560 --> 00:39:34,719 Speaker 1: to get the same thing over the next decade. So 678 00:39:35,120 --> 00:39:39,400 Speaker 1: thinking about not just one equity market, but a basket 679 00:39:39,400 --> 00:39:42,920 Speaker 1: of different equities get you some of that correlation reduction 680 00:39:43,000 --> 00:39:46,200 Speaker 1: but also the possibility of return. And then look beyond that, 681 00:39:46,480 --> 00:39:50,040 Speaker 1: um are there opportunities and currency markets and credit markets. 682 00:39:50,360 --> 00:39:54,200 Speaker 1: Are there opportunities in inflation linked bonds? Gold one thing 683 00:39:54,239 --> 00:39:57,600 Speaker 1: investors are not grappling with yet. In my opinion, we 684 00:39:57,600 --> 00:39:59,279 Speaker 1: don't know if we're going to get inflation in the 685 00:39:59,280 --> 00:40:00,960 Speaker 1: next year to We don't know if the FED is 686 00:40:01,000 --> 00:40:03,960 Speaker 1: going to be successful, but we know the scope for 687 00:40:04,080 --> 00:40:07,440 Speaker 1: higher inflation over the next couple of years is greater 688 00:40:07,480 --> 00:40:09,920 Speaker 1: today than we've seen for a very long time, because 689 00:40:09,960 --> 00:40:13,160 Speaker 1: of the money printing, the fiscal deficits, because of the 690 00:40:13,200 --> 00:40:16,080 Speaker 1: central bank focus on this, and so what we want 691 00:40:16,080 --> 00:40:18,960 Speaker 1: to do is think about, Okay, how do we make 692 00:40:18,960 --> 00:40:21,160 Speaker 1: sure we get the returns we want for our clients, 693 00:40:21,400 --> 00:40:24,400 Speaker 1: but also protect them against what we could see that 694 00:40:24,520 --> 00:40:27,480 Speaker 1: we haven't even had to think about um as, as 695 00:40:27,480 --> 00:40:30,880 Speaker 1: Pal says, we don't even think about thinking about it inflation. 696 00:40:31,160 --> 00:40:34,359 Speaker 1: So do you look at your portfolio and say, if 697 00:40:34,400 --> 00:40:37,280 Speaker 1: I need a certain outcome and I can't afford mistakes, 698 00:40:37,320 --> 00:40:40,200 Speaker 1: am I prepared for this possible mistake? I? Well, it's 699 00:40:40,200 --> 00:40:42,280 Speaker 1: not a mistake now we want it, but the inflation 700 00:40:42,360 --> 00:40:45,680 Speaker 1: side of it. So, yes, we're still aiming for high returns. 701 00:40:45,800 --> 00:40:48,040 Speaker 1: Yes we still think we can achieve them. But in 702 00:40:48,080 --> 00:40:50,319 Speaker 1: addition to that, we also want to make sure we 703 00:40:50,320 --> 00:40:53,240 Speaker 1: don't take our eye off the inflation ball, which hasn't 704 00:40:53,239 --> 00:40:54,719 Speaker 1: been with us in a long time, but it could 705 00:40:54,800 --> 00:40:59,640 Speaker 1: come back. Rebecca, what do you do with something like euro? Right, 706 00:41:00,040 --> 00:41:03,360 Speaker 1: the strength and euro it could be problematic for the 707 00:41:03,400 --> 00:41:05,960 Speaker 1: European Central Bank and they're kind of, you know, navigating 708 00:41:06,800 --> 00:41:08,880 Speaker 1: how to handle it because they can't target it, but 709 00:41:08,960 --> 00:41:11,640 Speaker 1: of course it has an impact on inflation expectations and 710 00:41:11,719 --> 00:41:14,800 Speaker 1: all of that. Are we looking at a possible currency 711 00:41:14,840 --> 00:41:17,960 Speaker 1: war on our hands? Yeah, Francy, and I think that's 712 00:41:18,000 --> 00:41:20,319 Speaker 1: a really good question. You know, with the FED kind 713 00:41:20,320 --> 00:41:23,520 Speaker 1: of throughout the opening salvo by changing it's how it's 714 00:41:23,560 --> 00:41:27,240 Speaker 1: interpreting its mandate aiming for two percent inflation over a cycle, 715 00:41:27,360 --> 00:41:30,279 Speaker 1: aiming for maximum employment. And it'll be great to have 716 00:41:30,400 --> 00:41:33,279 Speaker 1: Bostick here on your show later today to talk more 717 00:41:33,320 --> 00:41:36,799 Speaker 1: about that, especially the employment part. So when the FED 718 00:41:36,880 --> 00:41:39,840 Speaker 1: did that, you know, all else equal, It probably pushes 719 00:41:39,880 --> 00:41:42,960 Speaker 1: down the US dollar, but we all know currencies are pairs, 720 00:41:42,960 --> 00:41:45,480 Speaker 1: so all your other currencies are going up. But who 721 00:41:45,520 --> 00:41:49,600 Speaker 1: wants a stronger deflationary currency right now? Not many places. 722 00:41:50,080 --> 00:41:54,480 Speaker 1: So Europe obviously has started some very benign verbal intervention 723 00:41:54,520 --> 00:41:57,359 Speaker 1: to talk down the euro. It needs to do more. 724 00:41:57,680 --> 00:42:00,759 Speaker 1: It's doing its strategic review now, it's going to come 725 00:42:00,760 --> 00:42:02,839 Speaker 1: out next year. It would not surprise me at all 726 00:42:02,880 --> 00:42:05,040 Speaker 1: if they follow the Fed almost because they have to. 727 00:42:05,440 --> 00:42:07,759 Speaker 1: They can't afford to have that. You're a wane on 728 00:42:07,800 --> 00:42:11,480 Speaker 1: their economy, especially given what large percent of GDP as 729 00:42:11,560 --> 00:42:14,799 Speaker 1: exports for them. Again, I go back to the monetary 730 00:42:14,840 --> 00:42:17,160 Speaker 1: can't do it by itself anymore. We're in a world 731 00:42:17,480 --> 00:42:20,640 Speaker 1: where fiscal and monetary have to work more in coordination. 732 00:42:20,840 --> 00:42:23,920 Speaker 1: So you've got to get the fiscal stimulus from Europe. 733 00:42:24,000 --> 00:42:26,879 Speaker 1: That's a tall order for them. Okay, Rebecca, we are 734 00:42:26,960 --> 00:42:29,040 Speaker 1: out of time. Thank you so much, generous of you 735 00:42:29,080 --> 00:42:32,440 Speaker 1: to be with us this morning. Rebecca Patterson of the Bridgewater. 736 00:42:32,760 --> 00:42:36,960 Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and 737 00:42:37,040 --> 00:42:42,360 Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast 738 00:42:42,400 --> 00:42:46,640 Speaker 1: platform you prefer. I'm on Twitter at Tom Keane before 739 00:42:46,680 --> 00:42:50,880 Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg Radio.