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Speaker 1: Brought you by Bank of America Mary Lynch. Investing in

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Speaker 1: local communities, economies and a sustainable future. That's the power

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Speaker 1: of global connections, Mary Lynch, Pierce Fenner and Smith Incorporated

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Speaker 1: member s I p C. Welcome to the Bloomberg Surveillance Podcast.

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Speaker 1: I'm Tom Keene with David Gura. Daily we bring you

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Speaker 1: insight from the best in economics, finance, investment, and international relations.

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Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and

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Speaker 1: of course on the Bloomberg. On the show today, Max Bauchus,

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Speaker 1: the former Senator, former US Ambassador to China, Libby Cantrell

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Speaker 1: from PIMCO, and we'll talk to Black Rock's head of

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Speaker 1: inflation linked to bond portfolios. But first Ed Himan joins

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Speaker 1: us here in our Bloomberg eleven three studios. He's the

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Speaker 1: rman of Evercore I s I. There was sort of

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Speaker 1: a beautiful moment on surveillance television a little while ago,

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Speaker 1: Tom Keene having his Warren Beatty moment. He held up

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Speaker 1: the ever Cores I s I note with headlines about

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Speaker 1: the economy, good and bad event diagram with some on

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Speaker 1: both sides of of the chart. There Ed Hyman, how's

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Speaker 1: the economy look? When you look at the panoply of

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Speaker 1: data right now about the U. S economy, what's your

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Speaker 1: sense of how it's doing. I think the economy is

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Speaker 1: doing okay. I have a little different view than most people. Um.

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Speaker 1: I see an economy that is pretty solid. Uh. I

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Speaker 1: look at all the data, you know, like the leading

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Speaker 1: indicator retail sales. But I also travel around a lot,

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Speaker 1: and I go to different cities, and whether it's Denver

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Speaker 1: or Boulder, or Dallas or Boston, Seattle, they're all doing

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Speaker 1: pretty well. It doesn't really smack of secular stagnation. So

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Speaker 1: I think the economy is pretty solid. My main mantra

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Speaker 1: has been slow and steady wins the race, and seems

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Speaker 1: to me that that's still pretty accurate description of what's

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Speaker 1: going on. We've been growing for seven or eight years,

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Speaker 1: and I think over those years have made a fair

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Speaker 1: amount of progress. We're learning a little bit here about

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Speaker 1: what the White House hope it's hopes to advance, and

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Speaker 1: it's in its budget. And one thing that Stephen Manwton,

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Speaker 1: the new Treasury Secretary, said last week to Bloomberg News.

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Speaker 1: Over the weekend to to Fox News in an interview

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Speaker 1: is that his his assumption for growth is now two

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Speaker 1: point four percent, So that's less than what candidate Donald

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Speaker 1: Trump said when he was on the campaign trails. There

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Speaker 1: a new realism pervading Washington here a little over a

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Speaker 1: month into the new administration. Uh, the airs out out

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Speaker 1: of the balloon. A fair amount what looked like a

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Speaker 1: case at the very beginning of this episode has faded

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Speaker 1: quite a quite a bit, and that's probably a good

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Speaker 1: assessment of it. My forecast is for growth of to

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Speaker 1: an a percent for this year, which it doesn't sound

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Speaker 1: like a lot, but it's frankly a fairly heroic number

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Speaker 1: because we haven't had to an apercent growth. Also assuming

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Speaker 1: and inflation something like one and a half or two percent,

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Speaker 1: so you're starting to get normal grow up over four percent,

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Speaker 1: which is a key level to get. As you mentioned,

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Speaker 1: your your growth is something there two point five percent.

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Speaker 1: What are the driving factors? There was so much enthusiasm,

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Speaker 1: it seemed, in the market for a big infrastructure spending

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Speaker 1: package after the elections. He said the era has maybe

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Speaker 1: begun to dissipate from that that limited watching didn't what's

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Speaker 1: going to be the driver there? Do you think Okay, well,

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Speaker 1: I didn't have big hopes that because they're talking about

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Speaker 1: a trillion dollars over a decade. Uh So that's that's

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Speaker 1: not enough to fix the potholes, you know, a hundred

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Speaker 1: billion dollars a year. But the economy is slowly becoming

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Speaker 1: self sustaining with emplument gains leading to retail sales. House

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Speaker 1: prices are up something like seven percent. It's not markets up,

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Speaker 1: so you're getting a broadening out of growth in the US.

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Speaker 1: What you invented at C. J. Lawrence, and I think

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Speaker 1: of Chairman Greenspan as well, is looking at tangible real

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Speaker 1: economic data like what trucks are doing, what railroads are doom,

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Speaker 1: what capital goods is doing. Within the I S I

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Speaker 1: report that you created every day, what's the one metric

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Speaker 1: that gets you to some enthusiasm about a better nominal GDP? Well,

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Speaker 1: we we survey about two or three d companies of

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Speaker 1: a week. Uh and so I have a very I'm

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Speaker 1: almost a perfect knowledge how the economy is doing currently.

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Speaker 1: That forecasting, though and not predictive, and those have edged

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Speaker 1: up a little bit, consistent with a little over two

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Speaker 1: percent real GDP growth and probably something like four percent

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Speaker 1: nominal GDP growth. But uh, Thomas and I discussed a

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Speaker 1: minute or so ago, what's driving the economy today is

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Speaker 1: not what drove it forty years ago. Today it's sports

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Speaker 1: and entertainment. It's a new tech, you know, like a

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Speaker 1: Facebook or a Snap. It's e e commerce, And then

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Speaker 1: it's healthcare and higher education. Of those things that you mentioned,

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Speaker 1: the only ones that are gonna employ bodies, warm American

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Speaker 1: bodies is healthcare and maybe education. Where are the jobs

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Speaker 1: going to come from? Where is how are we going

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Speaker 1: to get the people employed that voted for Senator Sanders

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Speaker 1: and that voted for Mr Trump. The You know, we've,

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Speaker 1: as you well know, because you're such as a student

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Speaker 1: of this stuff, Tom, we've had emplument gains, you know,

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Speaker 1: pretty steady around a hundred thousand for years now. Uh

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Speaker 1: stan Fisher says, we're fully employed, and Danny Blanche Flower

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Speaker 1: Upper Dharma says, no, we're done. So it's a debate

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Speaker 1: and they and the coach or the referee on that

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Speaker 1: will be what happens to wages, And so far wages

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Speaker 1: have disappointed me. I thought they'd be over three percent

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Speaker 1: by now and they're not. But when you get the

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Speaker 1: full employment, you'll know it because you see wages accelerate.

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Speaker 1: You know, when the FED makes its decision here March

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Speaker 1: whether or not to raise rates, is that is that

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Speaker 1: the big X factor here is our wages, the big

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Speaker 1: factor that they're going to be weighing. I think so.

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Speaker 1: Uh So, I'm I'm sort of in the hole here

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Speaker 1: because I've been acting wages to pick up for some time.

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Speaker 1: There were one eight and now they're like two and

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Speaker 1: a percent. So they have picked up, but not as

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Speaker 1: much as I thought. The January number, which set the

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Speaker 1: market back a lot, was only point one. Uh And

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Speaker 1: when I look back at history, uh, it suggests that

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Speaker 1: the February number will be point four. Now if if

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Speaker 1: it is, then that will put the next meeting squarely

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Speaker 1: on track. Within this is the idea of Okay, we

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Speaker 1: get rising wages, and I'm getting a lot of mail

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Speaker 1: from listeners on this. We get rising, rising wages, but

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Speaker 1: we also get inflation with it. So my real wage,

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Speaker 1: my inflation adjusted wage, is flat or diminished. Is that

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Speaker 1: a tangible risk inflation getting in the way of the

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Speaker 1: goods you're talking about? I don't think so at the moment,

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Speaker 1: because pricing power is so difficult to come by particularly

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Speaker 1: in the old economy. Like we talked about target this morning,

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Speaker 1: there's no pricing power there autos all the time you

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Speaker 1: shot up the term. Wait when I asked the question

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Speaker 1: for you, continue and let me ask you about sentiment

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Speaker 1: and optimism. We talked to Bill Dunkelberg. Every time the

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Speaker 1: n f i B Survey Small business has come out,

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Speaker 1: optimism seems very high. How much currency should we give

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Speaker 1: that at this point in time? In other words, we

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Speaker 1: see we see optimism about growth and hiring and spending

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Speaker 1: money on capex. Uh what from there? In other words,

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Speaker 1: we see that optimism, what does that lead to? Well? Uh?

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Speaker 1: One of the things I do, I think is to

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Speaker 1: connect the dots. And consumer confidence has also moved up,

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Speaker 1: and unlike the or say in addition to UH dunks

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Speaker 1: is affectionately called an n f i B a survey

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Speaker 1: which is skyrocketed. The Conference Board does a survey of

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Speaker 1: employment expectations by consumers and that has a similar hockey

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Speaker 1: stick look to it. Uh. So I got three different

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Speaker 1: measures of confidence and they've all moved up a fair amount.

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Speaker 1: As I mentioned, Uh, animal spirits is one of the

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Speaker 1: ways that you know trump Atomics can can work through

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Speaker 1: the economy that precedes getting any fiscal stimulus working. We

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Speaker 1: we talked to our calleing Michael McKee. He was down

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Speaker 1: in Mexico City talking with the economic minister there. UH.

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Speaker 1: And something he said in that interview is the moment

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Speaker 1: that in those negotiations with the U S. Should they

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Speaker 1: happen over uh import tariffs? Uh that they mentioned tefne cars.

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Speaker 1: In his words, he said, we say bye bye. Where

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Speaker 1: do you see things going from here? What's the weight

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Speaker 1: of this new protection? Isn't going to be on the

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Speaker 1: U S economy? So I don't. My own personal view

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Speaker 1: is that it's more barked than bite. But I'll watch

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Speaker 1: it every day, uh to see if the bite starts

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Speaker 1: to happen. But my my guess is that Trump is

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Speaker 1: trying to uh to redo trade deals that are more

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Speaker 1: advantageous for the US and his opinion as opposed to

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Speaker 1: tear up and after or tear up debut. Oh. But

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Speaker 1: it's not clear, is it? Uh? As we sit here

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Speaker 1: right now, I want to find out question to get

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Speaker 1: your started on your day at time and Professor Summers

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Speaker 1: talks about secular stagnation? Do you agree with Larry Summers

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Speaker 1: that it's pretty moldy out there, and that we need

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Speaker 1: a real jump start of policy. Boy, I don't so

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Speaker 1: I think. I think, uh, Larry Summers, so I I

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Speaker 1: think it's terrific. And you mentioned public service earlier. He's

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Speaker 1: really given and it continues to give. But he lives

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Speaker 1: in Boston. Boston is booming. You walk out and it's

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Speaker 1: just booming. Has all the things I mentioned, and then

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Speaker 1: he spends a lot of time in Washington, d C.

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Speaker 1: At Washington d C is strong too, still standing, still standing?

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Speaker 1: Is that understatement? So? I think I think the U. S.

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Speaker 1: Economy is slow and steady, and it's like managing money.

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Speaker 1: If you can avoid to lose money, you can actually

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Speaker 1: make some real progress. Thank you so much for coming

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Speaker 1: by today and particularly answering our questions in the future

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Speaker 1: of the FED and Kevin Warshon and all that. Greatly appreciated.

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Speaker 1: Edward Hyman is with ever core. I s I, David,

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Speaker 1: I think it would be safe. I showed at the

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Speaker 1: beginning of television the secret ed him and memo mentioned

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Speaker 1: the bad news between the famous the famous. Yeah, really

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Speaker 1: the red that's what they should have done. They should

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Speaker 1: add at him and be in charge of the envelopes

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Speaker 1: at the Oscar that would have fixed things at Himan.

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Speaker 1: Whatever core I s David bringing on our next guest.

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Speaker 1: All I know is the newspapers in Bloomberger Trump Trump, Trump, Trump,

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Speaker 1: Trump TRUMPA Trump, and our steam next guest doesn't agree

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Speaker 1: with that. She believes the House has a little bit

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Speaker 1: of Republicans have a little bit to do with it. Okay,

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Speaker 1: Liffy Cantell joins us now. She's executive vice president and

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Speaker 1: had a public policy at Pimpco. Here with us in

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Speaker 1: our eleven three oh studios in New York. Let's start

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Speaker 1: with the budget. We're beginning to get some contries. What

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Speaker 1: that's gonna look like? The White House budget's gonna look like.

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Speaker 1: We have this fifty four billion dollar figure when it

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Speaker 1: comes to defense spending, increasing defense spending. Help us understand

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Speaker 1: what we should make of that. We haven't had regular order,

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Speaker 1: we haven't had reconciliation uttered on Capitol Hill for many

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Speaker 1: years now. Are things changing? Are you optimistic that we're

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Speaker 1: going to see a normal budget process here? And what

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Speaker 1: should we make of this document that's going to be

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Speaker 1: released by the White House here presumably in these next

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Speaker 1: few days. Yeah, I mean It's a great question. I mean,

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Speaker 1: I think that just from as a starting point, everyone

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Speaker 1: sort of needs to qualify kind of what the president's

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Speaker 1: budget is. I mean, it's much more of a political

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Speaker 1: document than it is UM in terms of actually having

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Speaker 1: sort of the force of law. So it has to

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Speaker 1: go through the normal kind of congressional machinations. It's really

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Speaker 1: the Congress that actually sets the budget, and then also

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Speaker 1: UM does the implementing, like the implementing bills, like the

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Speaker 1: appropriations bills. So what this is though, and what it

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Speaker 1: should sort of be viewed as, is where Donald Trump's

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Speaker 1: priorities are. So we knew that he was going to

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Speaker 1: be supportive of defense spending. I think some people didn't

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Speaker 1: know how much he was going to be, you know,

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Speaker 1: supportive of that. UM. So this is I think sort

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Speaker 1: of a living testament to that. But again it should

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Speaker 1: be caveated that this does not have the force of law.

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Speaker 1: This has to go through the congressional machinations and actually

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Speaker 1: in order to get enacted. Yesterday the White House, the

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Speaker 1: President sat down with the House Speaker Paul Ryan and

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Speaker 1: the Senate Majority leader as well. Presumably they talked about

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Speaker 1: the budget, talked about this speech, that the President is

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Speaker 1: going to deliver tonight. What's your sense of the relationship

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Speaker 1: there between the White House and Congress. Tom mentions the

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Speaker 1: the disarray even among the House. Uh, you know, what's

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Speaker 1: your sense of how well the machine is operating and

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Speaker 1: Washington right now? Well, you know, it's it's interesting because

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Speaker 1: I think you know, certainly what markets will be looking

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Speaker 1: at for the speech tonight will be some specifics around

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Speaker 1: President Trump's pro growth agenda, tax, your format, infrastructure exactly.

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Speaker 1: But I also think that congressional Republicans want those specifics

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Speaker 1: because while sort of campaign slogans and sort of generalities

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Speaker 1: and platitudes are certainly helpful, um, at this point, the

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Speaker 1: rubber really needs to to meet the road, and Congress

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Speaker 1: has set out on an incredibly ambitious legislative agenda. They

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Speaker 1: need the president to provide some directions. Tell us about

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Speaker 1: the power metric right now, I mean, we're gonna see

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Speaker 1: all these He's like the oscars. They're gonna be all

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Speaker 1: these egos in the room, all focused on the president.

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Speaker 1: I get, what is the power of the Republican leadership,

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Speaker 1: What is the power of the chairman and chairwoman, What

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Speaker 1: are the power of the tea party in the run

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Speaker 1: of the mill conservative, austere Republicans give us a power

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Speaker 1: template right now? Well, it's it's a good question because

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Speaker 1: I think if you just simply look at the fact

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Speaker 1: that Republicans have majorities in the House and the Senate,

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Speaker 1: and they dominate the White House, you would sort of think, Okay,

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Speaker 1: well they're gonna be it's gonna be very easy for

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Speaker 1: them to enact the their agenda. But within the Republicans

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Speaker 1: there's quite a number there's quite a lot of divide.

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Speaker 1: There's a divide between the House and the Senate. Say,

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Speaker 1: on tax reform, the House supports this border adjustment tax,

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Speaker 1: some of the Republican senators have come out against it.

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Speaker 1: Um there within House Republicans there's some divide, right there's

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Speaker 1: the sort of the deficit hawks or the people who

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Speaker 1: actually want to see some increase in spending, especially on defense.

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Speaker 1: So there is not this is not a cohesive Republican

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Speaker 1: party necessarily. I think they can be brought together, and

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Speaker 1: President Trump really, I think has an opportunity to do

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Speaker 1: that tonight. It's just a question whether he's actually gonna

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Speaker 1: be able to do that or not. If I'm your client,

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Speaker 1: I want to know what we're talking about when we

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Speaker 1: talk about a tax reform with a pologies to Raymond

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Speaker 1: Carver there, but you get the Paul Ryan Brady plan,

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Speaker 1: you have Gary Cone working on a tax plan of

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Speaker 1: his own. How do I make sense of what's most

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Speaker 1: likely to be the blueprint for a tax reform and

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Speaker 1: watched in right now? Do you have a sense of

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Speaker 1: what it is? It's a great question, and honestly, this

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Speaker 1: is the number one question that we're getting from our

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Speaker 1: clients is what will tax reform look like? You know?

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Speaker 1: I think the conventional wisdom was right after the election

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Speaker 1: that since Speaker Ryan had done so much work on

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Speaker 1: tax reform as the head of Ways and means um

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Speaker 1: in House leadership, that that President Trump would be more

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Speaker 1: inclined just to defer to him, and that the Senate

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Speaker 1: would likely to defer to him as well. I think

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Speaker 1: that plan has been upended, um partly because of this

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Speaker 1: border adjustment tax, which is at the center of the

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Speaker 1: House tax reform plan. We think that it is unlikely

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Speaker 1: that at the end of the day that stays in

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Speaker 1: and because it's a big revenue raisor and it allows,

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Speaker 1: you know, the corporate tax rate to be cut even more. Um,

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Speaker 1: you'll probably see a smaller plan and it will probably

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Speaker 1: take longer going with the market, I believe it's billion

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Speaker 1: is a delta on defense spending. How much does a

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Speaker 1: border tax bring in? Have you seen a good so?

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Speaker 1: The Tax Foundation has its scored at one point one

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Speaker 1: trillion over ten years. The Tax Policy Center has it

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Speaker 1: about one trillion, So it is a huge revenue raisor

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Speaker 1: so without that by definition and the tax reform, I believe,

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Speaker 1: like what Tip O'Neill would say is, Okay, what's the number,

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Speaker 1: what's what's a border tax propos So what if we

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Speaker 1: see a two percent or four percent border tax? Yeah,

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Speaker 1: you know, and you might see some some sort of

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Speaker 1: iteration around that. You Also, what I think is actually

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Speaker 1: even more likely if it is included, is that you

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Speaker 1: would see a very long phase in time, So it

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Speaker 1: would be at the rate, but it would be phasing

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Speaker 1: it maybe something like commodities twenty seconds left. And it's

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Speaker 1: not about the Denver broncos. Are we going back to

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Speaker 1: nineteen seventy six, nineteen seventy eight where there's actually the

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Speaker 1: strange thing called legislation? Are we actually going to see that?

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Speaker 1: I think that as more time goes by, and it's

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Speaker 1: more time that goes by that President Trump doesn't endorse

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Speaker 1: a specific plan. I think it becomes increasingly harder to

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Speaker 1: a tax reform as we get close to the intern.

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Speaker 1: John Tucker, do you see how I said nineteen seventy

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Speaker 1: six and nineteen seventy eight, and Libby Cantrill equated that

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Speaker 1: with Jefferson. I wasn't actually born yet. I'm just killing

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Speaker 1: it here. I'm just thinking, oh, go away, let me

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Speaker 1: control with Pimco. Thank you so much. I think this

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Speaker 1: is Bloomberg brought you by Bank of America Mary Lynch,

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Speaker 1: dedicated to bringing our clients insights and solutions to meet

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Speaker 1: the challenges of a transforming world. That's the power of

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Speaker 1: global connections. Mary Lynch, Pierce feederin Smith Incorporated, Member s

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Speaker 1: I PC. What we're trying to do here today within

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Speaker 1: the quiet markets is really recalibrate into a new month,

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Speaker 1: the last month of the first quarter that I believe

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Speaker 1: that begins tomorrow. Today is too there's no leap here

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Speaker 1: this year. He's the last day. Martin Haggerty where this

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Speaker 1: black rock and what's great about him as he synthesizes

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Speaker 1: in the fixed income that, excuse me, gas, Kate Moore

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Speaker 1: and Jeff Rosenberg do, and everyone else but Martin, Howardy

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Speaker 1: filters in the inflation dynamics is described by UH the

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Speaker 1: fixed income market, he joins us. Now, Martin, what does

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Speaker 1: like the five year five year forward tell you right

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Speaker 1: now that inside baseball idea of looking out five years

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Speaker 1: at the view out five years from there? Well, Tom,

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Speaker 1: I think it's worth while looking at that from two aspects. Basically,

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Speaker 1: what is it telling us now and what was it

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Speaker 1: telling us roughly a year ago? Um, right now, it's

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Speaker 1: telling us that headline CPI, as priced by the US

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Speaker 1: Chips market is priced to be in the vicinity of

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Speaker 1: two percent between two thousand and twenty two and two

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Speaker 1: thousand and twenty seven. Now, if we compare that to

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Speaker 1: the FITS inflation target, the FIT has an inflation target

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Speaker 1: that is driven by PC inflation, and that is a

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Speaker 1: slightly different metric that tends to run about thirty to

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Speaker 1: forty basis points below CPI. So are we basically pricing

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Speaker 1: in a run rate of PC inflation into the future

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Speaker 1: of about one point six to one point seven percent,

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Speaker 1: which implies that despite the significant improvement in that metric,

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Speaker 1: that we've seen over the last twelve months that the

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Speaker 1: FED is still never going to hit its inflation target

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Speaker 1: in that time period that I specified. I mean, I

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Speaker 1: mean this folds right into FED policy in the ancient

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Speaker 1: thing that all of our listeners know is simply a

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Speaker 1: fear of inflation. Do you wake up in the morning

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Speaker 1: at Black Rock with a fear of inflation? You know,

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Speaker 1: I was born and brought up in Zimbabwe, so that's

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Speaker 1: somewhat genetic for me. Yeah, that's true. I guess it's

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Speaker 1: it's yeah, I'll say. But I mean, I mean, I mean,

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Speaker 1: we get this, David, and I get this in the

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Speaker 1: mail where we receive we're gonna have runaway inflation, sixties inflation,

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Speaker 1: oh my, oh mg, four percent inflation, eight percent nominal GDP,

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Speaker 1: and yet none of the evidence shows that, does it? No?

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Speaker 1: And I think you know, a lot of the the

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Speaker 1: views in that regard have been misfounded. And I particularly

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Speaker 1: recall to the immediate aftermath of the crisis, where any

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Speaker 1: sort of pundit you had on on on various platforms

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Speaker 1: was talking about a Zimbabwe style inflation with the FED

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Speaker 1: expanding the balance sheet and Kewi Operation twists and the

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Speaker 1: various iterations of policy that we had, and I think

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Speaker 1: that that was completely unfounded and continues to be so.

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Speaker 1: But when we look at the macro backdrop, the economy

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Speaker 1: continues to heal in the aftermath. And I do think

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Speaker 1: there are some dictionary disinflationary impacts from technology that are

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Speaker 1: obviously pushing some UH some components of CPI down, as

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Speaker 1: well as some of the international factors with respect to globalization.

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Speaker 1: But if if we sort of mark to market where

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Speaker 1: we are today and look at core CPI at two

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Speaker 1: point three, do I see runaway inflation? Does that number

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Speaker 1: get up to four or five? I don't think so.

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Speaker 1: I I can see that the labor market in the

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Speaker 1: US continues to improve. We're at levels of unemployment consistent

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Speaker 1: with nehru Um. We have had a tremendous amount of

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Speaker 1: stability in the currency markets more recently on the back

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Speaker 1: of significant dollar strength we saw from two thousand and

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Speaker 1: fourteen into two thousand and sixteen. That is allowing some

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Speaker 1: of the UH internationally set drivers of disinflation. Now we

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Speaker 1: have seen UH start to stabilize, and I'm of the

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Speaker 1: opinion that course c p I as long as the

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Speaker 1: US labor market continues to improve UM and and stay

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Speaker 1: at a relatively healthy run rate in line or below NEHRU.

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Speaker 1: Then we're in a in a path where core CPI

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Speaker 1: by the end of two thousand and eighteen is probably

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Speaker 1: going to be somewhere in the vicinity of two point

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Speaker 1: seven percent. Alright, So tom asks is the zimbabweb barn

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Speaker 1: Martin Hagerty is worried about inflation? How about Fed? Sheer

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Speaker 1: Janna Yellen? Is this something that she is still concerned about?

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Speaker 1: Is the shifted almost entirely at the FED here too

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Speaker 1: to the labor market? Well, I think it's it's one

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Speaker 1: can never quite pin down what the focus at the

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Speaker 1: FED currently is UM. But if you look at the

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Speaker 1: two pillars of their mandate, full employment and price stability UM,

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Speaker 1: one could argue that we're at full employment and one

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Speaker 1: could argue that we're at or very close to price stability.

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Speaker 1: So it appears that the FED is looking at a

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Speaker 1: host of of other metrics as well. And when you

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Speaker 1: look at the real policy path priced into the front

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Speaker 1: end of rate markets, i e. Where are FED funds

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Speaker 1: priced to be less inflation, you still have real policy

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Speaker 1: rates that are negative out to two thousand and eighteen,

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Speaker 1: and I would argue that that that is not necessarily

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Speaker 1: consistent with an economy at full employment and and basically

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Speaker 1: at price stability. So, you know, trying to to sort

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Speaker 1: of reference that back to the question you asked, um,

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Speaker 1: you know what we have seen in the aftermath of

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Speaker 1: the of the Trump election. We've we've seen sort of

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Speaker 1: economic surprise. Data indices moved sharply to the highside. But

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Speaker 1: when we break down those economic data surprises, a lot

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Speaker 1: of the strength seems to be coming from survey based measures.

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Speaker 1: So we have not yet seen that translate into hard

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Speaker 1: macroeconomic data, apart from the labor market and the pricing

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Speaker 1: components that that I mentioned. So perhaps the FED are

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Speaker 1: being a little more patient and waiting to see if

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Speaker 1: the improved psychology prevalent in a lot of these survey

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Speaker 1: based measures actually begins to show up into the hard

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Speaker 1: data you mentioned Fed funds futures. I've got w ARAP

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Speaker 1: go up here on the Bloomberg now looking at the

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Speaker 1: probability of a hike at that March meeting. Now at

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Speaker 1: cent we saw it move yesterday. Help an amateur like

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Speaker 1: me here, How predictive is w ARAP? What? What? What?

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Speaker 1: Credence do you give to here? Well, I think that

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Speaker 1: stems back to the FEDS reaction function, where we know

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Speaker 1: that this fit is not or has not been one

429
00:24:08,760 --> 00:24:13,240
Speaker 1: to surprise markets. So the greater the probability that that

430
00:24:13,359 --> 00:24:18,080
Speaker 1: March pricing of a March hike goes, I e. The

431
00:24:18,080 --> 00:24:22,400
Speaker 1: the if it if it continues to mention north, I

432
00:24:22,400 --> 00:24:25,520
Speaker 1: think the March becomes more and more into play. And

433
00:24:26,000 --> 00:24:30,640
Speaker 1: actually I have been perplexed why March has been priced

434
00:24:30,680 --> 00:24:33,919
Speaker 1: at such a low probability given the data evolution that

435
00:24:33,960 --> 00:24:36,760
Speaker 1: I alluded to. Okay, I get that, and I take

436
00:24:36,840 --> 00:24:40,919
Speaker 1: great note of your two point seven corps UH inflation

437
00:24:41,040 --> 00:24:44,200
Speaker 1: rate out a bit and that's quite a lift. What

438
00:24:44,280 --> 00:24:47,640
Speaker 1: we're waiting for, I would suggest, respectfully, sir, what you're

439
00:24:47,640 --> 00:24:51,399
Speaker 1: waiting for, and more importantly, what chair yellings waiting for

440
00:24:52,160 --> 00:24:55,440
Speaker 1: is decent economic growth? Help me here with a horse

441
00:24:55,480 --> 00:24:58,240
Speaker 1: and the cart. What's the horse and what's the cart?

442
00:24:58,320 --> 00:25:01,080
Speaker 1: For chair yelling? Is it age growth as a horse?

443
00:25:01,520 --> 00:25:04,119
Speaker 1: Is it just g DPS the horse? Or is it

444
00:25:04,200 --> 00:25:10,240
Speaker 1: inflation expectations? I in this odd financial repression that we're in,

445
00:25:10,680 --> 00:25:12,520
Speaker 1: I'm not sure I know what the horse looks like.

446
00:25:14,000 --> 00:25:18,600
Speaker 1: I think that is a constant pursuit UM where obviously

447
00:25:19,240 --> 00:25:21,119
Speaker 1: the I think all of them you mentioned Tom, to

448
00:25:21,160 --> 00:25:24,600
Speaker 1: tell the truth, are are very important horses. Where you

449
00:25:24,680 --> 00:25:27,880
Speaker 1: have had the the healthy labor market data, the average

450
00:25:27,880 --> 00:25:32,159
Speaker 1: hourly earnings has not necessarily correlated with the improvement in

451
00:25:32,160 --> 00:25:35,480
Speaker 1: the labor market we've seen UM and at the same time,

452
00:25:35,480 --> 00:25:40,679
Speaker 1: there appears to be a an inherent mismatch between UH

453
00:25:41,560 --> 00:25:44,840
Speaker 1: the unemployment rate and GDP growth, implying some sort of

454
00:25:45,080 --> 00:25:49,920
Speaker 1: collapse in productivity. Now we can talk about, obviously the

455
00:25:49,920 --> 00:25:52,800
Speaker 1: the mismeasurement of of g d P and how it

456
00:25:52,880 --> 00:25:55,760
Speaker 1: may not necessarily be the mist of the best measure

457
00:25:55,880 --> 00:25:58,840
Speaker 1: for for economic growth today. And I think a lot

458
00:25:58,920 --> 00:26:02,600
Speaker 1: of those discussions are are well entrenched within the f

459
00:26:02,640 --> 00:26:05,879
Speaker 1: O m c UM. But I think that one cannot

460
00:26:05,920 --> 00:26:08,960
Speaker 1: necessarily hop on on one data point where if we

461
00:26:09,080 --> 00:26:12,720
Speaker 1: got a soft average hourly earnings for January, we need

462
00:26:12,760 --> 00:26:15,440
Speaker 1: to look at it in in a in a greater context,

463
00:26:15,480 --> 00:26:19,439
Speaker 1: I look at other labor market data with respective wages

464
00:26:19,960 --> 00:26:23,360
Speaker 1: and reassess um that sort of three months run rate

465
00:26:23,359 --> 00:26:25,960
Speaker 1: and average hourly earning right that we may see, well,

466
00:26:26,000 --> 00:26:28,280
Speaker 1: this is really important. I haven't looked at the h

467
00:26:28,560 --> 00:26:30,120
Speaker 1: chart and well, folks, I'm going to put it out

468
00:26:30,119 --> 00:26:32,840
Speaker 1: on Twitter. It's a great Bloomberg chart that shows the

469
00:26:32,920 --> 00:26:36,359
Speaker 1: pullback that we've seen recently. But nevertheless, I'm gonna say,

470
00:26:36,400 --> 00:26:39,080
Speaker 1: making back two thirds of the way to the lift

471
00:26:39,160 --> 00:26:42,199
Speaker 1: of average early earnings seen in two thousand seven. In

472
00:26:42,240 --> 00:26:45,399
Speaker 1: two thousand what did joy to speak to you about

473
00:26:45,440 --> 00:26:49,960
Speaker 1: our miss our fictions of inflation, the gap between service

474
00:26:50,000 --> 00:26:53,880
Speaker 1: sector and goods producing inflation. I went back and looked

475
00:26:53,920 --> 00:26:56,720
Speaker 1: in the reality as we've seen this before, this great

476
00:26:56,800 --> 00:27:01,280
Speaker 1: divide between a three percent service sector and zero to

477
00:27:01,400 --> 00:27:06,679
Speaker 1: sub percent goods. When does that end? That is a

478
00:27:06,880 --> 00:27:09,720
Speaker 1: very very good question. And you know when when we

479
00:27:09,760 --> 00:27:11,680
Speaker 1: look at cp I, we look at it in much

480
00:27:11,720 --> 00:27:15,240
Speaker 1: the same way, and we break down the the components

481
00:27:15,320 --> 00:27:19,320
Speaker 1: into high volatility and low volatility, and the low voll

482
00:27:19,440 --> 00:27:23,000
Speaker 1: components tend to be those service based measures, obviously with

483
00:27:23,000 --> 00:27:27,360
Speaker 1: a significant contribution from shelter Um that continues to run

484
00:27:28,080 --> 00:27:32,480
Speaker 1: basically very close to three. Now, looking at the goods component,

485
00:27:32,840 --> 00:27:36,760
Speaker 1: or the the sort of more international components of CPI,

486
00:27:36,800 --> 00:27:40,639
Speaker 1: they're driven by by global demand and supply and and

487
00:27:40,720 --> 00:27:43,480
Speaker 1: the value of the dollar. Now, if you go back

488
00:27:43,520 --> 00:27:49,120
Speaker 1: to basically since when tips were first introduced and at

489
00:27:49,119 --> 00:27:51,600
Speaker 1: the time when China was about to enter the trade

490
00:27:51,800 --> 00:27:56,679
Speaker 1: the World Trade Organization. Subsequent from that point on, goods

491
00:27:56,680 --> 00:28:01,440
Speaker 1: inflation has basically been zero so on average for for

492
00:28:01,480 --> 00:28:05,880
Speaker 1: the prior twenty odd years. And if one can look

493
00:28:06,000 --> 00:28:09,680
Speaker 1: at the pace of globalization that has occurred, one can

494
00:28:09,800 --> 00:28:12,399
Speaker 1: can understand that and rationalize that where if you were

495
00:28:12,400 --> 00:28:14,879
Speaker 1: an owner of capital, you were incentivized to go and

496
00:28:14,920 --> 00:28:17,840
Speaker 1: find cheap labor, and you did that either going to

497
00:28:17,960 --> 00:28:20,760
Speaker 1: South America or to Asia. And at the same time

498
00:28:21,119 --> 00:28:25,840
Speaker 1: that those parts of the world received a tremendous demographic dividend.

499
00:28:25,880 --> 00:28:28,879
Speaker 1: By UM Eastern Europe you had a couple or a

500
00:28:28,960 --> 00:28:32,440
Speaker 1: hundred odd million workers enter the global labor supply, and

501
00:28:32,760 --> 00:28:36,520
Speaker 1: in China you you had the same dynamic. And I'm

502
00:28:36,560 --> 00:28:39,040
Speaker 1: of the opinion that we have reached the end of

503
00:28:39,360 --> 00:28:43,600
Speaker 1: that demographic dividend to per se, and now we have

504
00:28:43,880 --> 00:28:47,240
Speaker 1: a global labor market that is a lot tighter than

505
00:28:47,280 --> 00:28:51,880
Speaker 1: it was twenty years ago. UM. So the disinflationary impact

506
00:28:51,880 --> 00:28:55,880
Speaker 1: from globalization that has been in place, I think is

507
00:28:56,080 --> 00:28:59,560
Speaker 1: on the verge of of going the other way now

508
00:29:00,000 --> 00:29:04,520
Speaker 1: ahead young um. Obviously there are some currency influences that

509
00:29:04,520 --> 00:29:08,640
Speaker 1: that play a pronounced role on a more short term basis,

510
00:29:08,680 --> 00:29:11,880
Speaker 1: And as I said in the segment before the break,

511
00:29:11,960 --> 00:29:16,800
Speaker 1: that the US dollar appreciated meaningfully in in fourteen to

512
00:29:16,960 --> 00:29:21,800
Speaker 1: two thousand and sixteen, obviously having a significant disinflationary impact

513
00:29:21,880 --> 00:29:26,280
Speaker 1: on import prices. So if we look at the trajectory

514
00:29:26,360 --> 00:29:30,520
Speaker 1: of the dollar going forward, UM, my expectation is unless

515
00:29:30,520 --> 00:29:34,480
Speaker 1: we get some significant border tax adjustment UM that could

516
00:29:34,480 --> 00:29:39,160
Speaker 1: potentially move the Z dollar significantly stronger. I'm of the

517
00:29:39,200 --> 00:29:43,160
Speaker 1: opinion that the run rate of good disinflation or lack

518
00:29:43,200 --> 00:29:45,400
Speaker 1: of inflation now we have seen in the past couple

519
00:29:45,440 --> 00:29:49,920
Speaker 1: of years is definitely behind us. You talk about global developments,

520
00:29:50,120 --> 00:29:52,960
Speaker 1: let's let's talk in specific about China here and the

521
00:29:53,080 --> 00:29:55,280
Speaker 1: role it's playing and how that's going to affect this

522
00:29:55,360 --> 00:30:01,080
Speaker 1: market here in two thousand seventeen. Well, China is the

523
00:30:01,120 --> 00:30:06,240
Speaker 1: second biggest economy in the world, UM, outside of of

524
00:30:06,280 --> 00:30:10,760
Speaker 1: the U S and and ultimately the largest consumer of commodities,

525
00:30:11,320 --> 00:30:15,160
Speaker 1: and the market is paying very close attention to Chinese

526
00:30:15,200 --> 00:30:18,600
Speaker 1: p p I and the developments that ensue from that.

527
00:30:18,680 --> 00:30:22,920
Speaker 1: We're looking more at sub components of that consumer goods

528
00:30:22,960 --> 00:30:26,760
Speaker 1: prices within PPI to try and extract the the the

529
00:30:26,920 --> 00:30:30,880
Speaker 1: significant influence of commodities, but they are obviously central to

530
00:30:31,000 --> 00:30:34,880
Speaker 1: the global reflationary theme, and I think from a couple

531
00:30:34,880 --> 00:30:38,800
Speaker 1: of perspectives. Obviously we can look at the macroeconomic variables

532
00:30:38,840 --> 00:30:42,640
Speaker 1: and and and analyze them. However, I think the role

533
00:30:42,680 --> 00:30:47,080
Speaker 1: of global reserve managers in particular China have had a

534
00:30:47,120 --> 00:30:52,000
Speaker 1: significant impact on asset prices globally over the last uh

535
00:30:52,560 --> 00:30:54,760
Speaker 1: In fact, going back over the last fifteen to twenty years,

536
00:30:54,760 --> 00:30:58,880
Speaker 1: where we've seen reserves accumulate meaningfully and then be drawn

537
00:30:58,920 --> 00:31:02,520
Speaker 1: down in the last twenty four months, and that draw

538
00:31:02,560 --> 00:31:06,480
Speaker 1: down of reserves I think had significant implications for global

539
00:31:06,520 --> 00:31:09,880
Speaker 1: asset prices, particularly in Q one of two thousands sixteen,

540
00:31:09,920 --> 00:31:14,680
Speaker 1: where as reserve pressure began to accumulate due to uncertainty

541
00:31:14,720 --> 00:31:20,160
Speaker 1: regarding Chinese effects policy, they were or they basically were

542
00:31:20,200 --> 00:31:23,560
Speaker 1: forced to liquidate assets that that they held in an

543
00:31:23,600 --> 00:31:28,760
Speaker 1: attempt to stem currency outflows, and that had As Tom

544
00:31:28,800 --> 00:31:31,240
Speaker 1: said earlier, we live in a very in a world

545
00:31:32,120 --> 00:31:37,680
Speaker 1: very sensitive to financial conditions, and ultimately that instability had

546
00:31:37,800 --> 00:31:42,760
Speaker 1: had a significant impact on global financial conditions. Fascinating, never

547
00:31:42,840 --> 00:31:46,040
Speaker 1: have young enough for the inflation dynamics and the myths

548
00:31:46,120 --> 00:31:48,800
Speaker 1: that are out there in Martin agaty is with black

549
00:31:48,880 --> 00:32:06,360
Speaker 1: Rock your discussion today on inflation dynamics in this hour

550
00:32:06,560 --> 00:32:09,160
Speaker 1: the Senator, and if you're from Montana, there's trust me,

551
00:32:09,200 --> 00:32:12,120
Speaker 1: there's only one senator. I think they have two. Based

552
00:32:12,120 --> 00:32:14,520
Speaker 1: on civics. We'll go to President Trump for a civics

553
00:32:14,600 --> 00:32:17,160
Speaker 1: lesson on that. But Max bauchus Uh with us here.

554
00:32:17,200 --> 00:32:19,360
Speaker 1: We hope you have a great conversation. Of course, recently

555
00:32:19,760 --> 00:32:23,440
Speaker 1: a minted ambassador to China, he's looking for a job

556
00:32:23,480 --> 00:32:26,760
Speaker 1: in New York City. No, when he's gonna here, you

557
00:32:26,880 --> 00:32:29,480
Speaker 1: got one here. We'll get to the Senator in a moment.

558
00:32:29,560 --> 00:32:32,040
Speaker 1: David Gurrow, an exciting day. You've got an important duty

559
00:32:32,080 --> 00:32:34,560
Speaker 1: tonight at nine pm. Yes, we'll be We'll be helming

560
00:32:34,600 --> 00:32:36,760
Speaker 1: the coverage here on Bloomberg Television Bloomberg Radio of that

561
00:32:36,760 --> 00:32:38,840
Speaker 1: speech tonight before it joined session of Congress kicking off

562
00:32:38,840 --> 00:32:41,520
Speaker 1: at nine o'clock Eastern time, and we will go through

563
00:32:41,520 --> 00:32:43,320
Speaker 1: the address to have some analysis afterward and carry the

564
00:32:43,320 --> 00:32:46,600
Speaker 1: Democratic responses as well as will be here til can

565
00:32:46,640 --> 00:32:49,160
Speaker 1: I go third two miles south of Missoula. Can we

566
00:32:49,200 --> 00:32:53,640
Speaker 1: do that down the bitter Root Mountains there Lifeline Artisanal Butter.

567
00:32:53,760 --> 00:32:57,600
Speaker 1: Tonight's discussion is about guns in butter, and Senator Bacchus

568
00:32:57,680 --> 00:33:01,720
Speaker 1: knows in Montana, if you want good butter, you go

569
00:33:01,800 --> 00:33:06,480
Speaker 1: to Lifeline Farm Creamery, Scenic Victor, Montana. You do that, David,

570
00:33:06,640 --> 00:33:09,360
Speaker 1: It's great. It's it's great stuff, and it's what you know.

571
00:33:09,400 --> 00:33:11,360
Speaker 1: It's a story here. We're all New York, New York.

572
00:33:11,480 --> 00:33:15,120
Speaker 1: Our vision, Senator is about six blocks from Lexington and

573
00:33:15,200 --> 00:33:18,080
Speaker 1: fifty ninth Street. We're not very good at it, but

574
00:33:18,360 --> 00:33:21,120
Speaker 1: it's wonderful to have you here today, and it's about

575
00:33:21,160 --> 00:33:23,640
Speaker 1: the effect of all that we talked about, David, every day,

576
00:33:23,960 --> 00:33:27,000
Speaker 1: I'm Montana. You've you've sat through a few of these

577
00:33:27,000 --> 00:33:30,040
Speaker 1: speeches before, and there's some expectation on our our audience

578
00:33:30,040 --> 00:33:32,400
Speaker 1: in particular, that we're gonna get more detail here out

579
00:33:32,400 --> 00:33:33,720
Speaker 1: of the speech that we have in the past. Are

580
00:33:33,720 --> 00:33:35,440
Speaker 1: you at all optimistic we're gonna get that? Or? Is

581
00:33:35,680 --> 00:33:37,680
Speaker 1: a State of the Union is a joint speech before

582
00:33:37,680 --> 00:33:40,200
Speaker 1: a joint session of Congress, often just focused on soaring

583
00:33:40,280 --> 00:33:43,240
Speaker 1: rhetoric and that's it. Well, it's a circus as going

584
00:33:43,320 --> 00:33:47,320
Speaker 1: to be greater circus. Tonight I'm a new president, new Congress,

585
00:33:48,080 --> 00:33:52,719
Speaker 1: and Donald Trump was very controversial and publicans are going

586
00:33:52,760 --> 00:33:55,840
Speaker 1: to be shouting, jumping up and down. Democrats are gonna

587
00:33:55,840 --> 00:33:57,600
Speaker 1: be sitting on their hands. I was gonna ask you

588
00:33:57,760 --> 00:34:00,760
Speaker 1: how you think Democrats will respond to this some Republicans

589
00:34:00,760 --> 00:34:02,320
Speaker 1: as well. I mean, it's a it's a crowd that

590
00:34:02,440 --> 00:34:04,760
Speaker 1: is a mixed minds. I think it makes a half

591
00:34:04,840 --> 00:34:07,800
Speaker 1: jumping up, half not jumping up. And the big question

592
00:34:07,840 --> 00:34:11,200
Speaker 1: for me is what Trump says. But the second question is, well,

593
00:34:12,160 --> 00:34:16,760
Speaker 1: how will able will be to resist the Republican shouting

594
00:34:16,760 --> 00:34:19,960
Speaker 1: and screaming? That is, will he say something and it's

595
00:34:20,000 --> 00:34:22,880
Speaker 1: not on the teleprompter because he's just reacting to what

596
00:34:23,000 --> 00:34:25,080
Speaker 1: that's going on to the circus. On the campaign trail,

597
00:34:25,080 --> 00:34:26,440
Speaker 1: we heard from him, we heard from others that he

598
00:34:26,480 --> 00:34:28,160
Speaker 1: was going to be different if he were elected, that

599
00:34:28,200 --> 00:34:29,960
Speaker 1: he was going to carry himself differently, he was going

600
00:34:30,000 --> 00:34:32,640
Speaker 1: to act differently. We've now seen him in a variety

601
00:34:32,640 --> 00:34:37,040
Speaker 1: of settings as president. I detected, most notably when he

602
00:34:37,040 --> 00:34:40,480
Speaker 1: doesn't joint press conference with the world leader. The tenor

603
00:34:40,520 --> 00:34:42,279
Speaker 1: of that press conference seems to be different than when

604
00:34:42,280 --> 00:34:44,840
Speaker 1: he does it alone in the Eastern with with reporters

605
00:34:45,040 --> 00:34:48,520
Speaker 1: just speaking before Congress in this way have an effect

606
00:34:48,560 --> 00:34:50,120
Speaker 1: on the speaker to see all of those folks that

607
00:34:50,160 --> 00:34:53,439
Speaker 1: are gathering to have the import of the moment itself. Well,

608
00:34:53,640 --> 00:34:57,839
Speaker 1: he's not going to White House correspondence dinner. He's got

609
00:34:57,880 --> 00:35:00,400
Speaker 1: a captive audience there. You may even hold up business

610
00:35:00,640 --> 00:35:04,319
Speaker 1: is is iPhone and tweet something during the middle of it.

611
00:35:04,360 --> 00:35:07,799
Speaker 1: Who knows, But it is a captive audience, and it's

612
00:35:07,840 --> 00:35:11,680
Speaker 1: it's all sorry, we'll see what's go ahead. And well, Senator,

613
00:35:12,040 --> 00:35:15,560
Speaker 1: you come out of Stanford in economics and law, and

614
00:35:15,680 --> 00:35:17,640
Speaker 1: we think of the passing of Kenneth Arrow here, the

615
00:35:17,680 --> 00:35:22,480
Speaker 1: giant of Stanford economics at here in the last week,

616
00:35:22,880 --> 00:35:25,560
Speaker 1: we need to get back to core principles. We've all

617
00:35:25,600 --> 00:35:29,960
Speaker 1: been distracted, either Republicans or Democrats, we've been distracted, to

618
00:35:30,040 --> 00:35:32,600
Speaker 1: say the least. How do we get back on track.

619
00:35:32,760 --> 00:35:35,920
Speaker 1: What is the thing you're watching in the cacophony of

620
00:35:36,080 --> 00:35:40,880
Speaker 1: Washington that will signal an administration it's getting on track

621
00:35:41,000 --> 00:35:45,719
Speaker 1: to dispose and to make legislation. What's the process that

622
00:35:45,760 --> 00:35:49,200
Speaker 1: we're going to go through. I think the town meetings

623
00:35:49,239 --> 00:35:53,719
Speaker 1: are part of it. I think that the outrage people

624
00:35:53,760 --> 00:35:55,840
Speaker 1: are expressing it. A lot of these meanings around the

625
00:35:55,920 --> 00:36:01,280
Speaker 1: country are sobering. Did you really have to face that anger?

626
00:36:01,920 --> 00:36:03,719
Speaker 1: I faced anger. I faced a lot of questions, but

627
00:36:03,800 --> 00:36:08,800
Speaker 1: nothing quite like that. What you were so instrumental, integraty

628
00:36:08,800 --> 00:36:12,799
Speaker 1: involved with with crafting financial reform with the Affordable Care

629
00:36:12,840 --> 00:36:14,640
Speaker 1: Act as well? What do you make of what's happening

630
00:36:14,719 --> 00:36:16,560
Speaker 1: right now as you listen to Tonight's speech, as you

631
00:36:16,560 --> 00:36:19,920
Speaker 1: listen to what's coming out of Washington. How optimistic are

632
00:36:19,960 --> 00:36:22,120
Speaker 1: you here that those two pieces of legislation are going

633
00:36:22,160 --> 00:36:25,719
Speaker 1: to be preserved at least in good part. Uh? And

634
00:36:25,760 --> 00:36:28,160
Speaker 1: how difficult and undertaking is it to tweak those two

635
00:36:28,160 --> 00:36:32,200
Speaker 1: pieces of legislation? Well? I care. I worry a bit

636
00:36:32,200 --> 00:36:36,560
Speaker 1: about our country, Frankly. Um. In my last job over

637
00:36:36,640 --> 00:36:41,120
Speaker 1: in China, I'm watching the Chinese think they can get

638
00:36:41,160 --> 00:36:45,400
Speaker 1: an advantage of the United States, UM by seeing Washington

639
00:36:45,840 --> 00:36:51,560
Speaker 1: protectionist inward dysfunctional, and it gives them China a bit

640
00:36:51,600 --> 00:36:55,040
Speaker 1: of an advantage. Frankly, that's so. I I have very

641
00:36:55,120 --> 00:36:57,759
Speaker 1: much hope that we in America can start showing that

642
00:36:57,800 --> 00:37:02,040
Speaker 1: we're adults, we can take care our destiny. Um. We

643
00:37:02,800 --> 00:37:05,080
Speaker 1: want to make sure that people do have adequate healthcare

644
00:37:05,440 --> 00:37:07,320
Speaker 1: a reasonable price. We want to make sure that the

645
00:37:07,400 --> 00:37:09,920
Speaker 1: tax code is fair and efficient, and it means we're

646
00:37:09,920 --> 00:37:13,160
Speaker 1: just gonna have to sit down and really work together.

647
00:37:13,160 --> 00:37:16,480
Speaker 1: There really is no other approach to all of this.

648
00:37:16,560 --> 00:37:21,279
Speaker 1: And I'm hoping that the President Trump tonight indicates that

649
00:37:20,960 --> 00:37:24,239
Speaker 1: he's turned the corner bit, turned the page a bit.

650
00:37:24,360 --> 00:37:27,400
Speaker 1: He says he's listening to lots of people, business groups, etcetera.

651
00:37:27,440 --> 00:37:30,120
Speaker 1: And and certainly he eats about the town meetings, and

652
00:37:30,320 --> 00:37:34,160
Speaker 1: I hope that he starts to signal um that he

653
00:37:34,200 --> 00:37:37,520
Speaker 1: wants to work with with the rest of us. I'm

654
00:37:37,520 --> 00:37:41,239
Speaker 1: making jokes about Victor Montana and artisanal butter you started

655
00:37:41,360 --> 00:37:46,160
Speaker 1: in the politics record out of Missoula Montien did years ago.

656
00:37:46,480 --> 00:37:49,799
Speaker 1: Would you please explain to our global audience and our

657
00:37:49,920 --> 00:37:54,160
Speaker 1: national audience how a guy that lives on Fifth Avenue

658
00:37:54,160 --> 00:37:59,160
Speaker 1: at fifty six is supposed to represent the sprawl of

659
00:37:59,400 --> 00:38:03,840
Speaker 1: agricult cultural, rural Midwest America. I mean, you're one of

660
00:38:03,880 --> 00:38:07,239
Speaker 1: the voices, you and grass Lely of Iowa that they

661
00:38:07,280 --> 00:38:09,600
Speaker 1: can answer that question. How do we get to this

662
00:38:09,719 --> 00:38:14,120
Speaker 1: point where a plutocrat is representing the Montana ethos. I

663
00:38:14,160 --> 00:38:16,719
Speaker 1: just don't buy it for a minute. Well, he is

664
00:38:16,920 --> 00:38:20,600
Speaker 1: the president. He did get elected irrespective where he lives

665
00:38:20,600 --> 00:38:22,960
Speaker 1: and where he grew up. He is the president. And

666
00:38:23,560 --> 00:38:28,000
Speaker 1: it's you know, you know, we are in charge. But

667
00:38:28,080 --> 00:38:30,879
Speaker 1: that I mean the people are the employers. People still

668
00:38:30,920 --> 00:38:33,400
Speaker 1: are in charge, and members of Congress and the president

669
00:38:33,400 --> 00:38:36,600
Speaker 1: really are the employees. And it means we the people,

670
00:38:37,080 --> 00:38:39,799
Speaker 1: as has have the town meetings, have to stand up

671
00:38:39,840 --> 00:38:41,919
Speaker 1: more and make it very clear what we want. How

672
00:38:41,920 --> 00:38:47,439
Speaker 1: should the Democrats respond tonight, Senator Schumer, Speaker Pelosi, there

673
00:38:47,480 --> 00:38:50,800
Speaker 1: there there has to be a method to their madness tonight.

674
00:38:50,800 --> 00:38:53,400
Speaker 1: Should they do it with grace or would you suggest

675
00:38:53,480 --> 00:38:57,640
Speaker 1: they do protest? They've got to be firm, very firm.

676
00:38:57,719 --> 00:39:01,760
Speaker 1: Can't roll over employed head about all this. I would

677
00:39:02,440 --> 00:39:07,160
Speaker 1: air a little on the side of protest um. Democrats

678
00:39:07,160 --> 00:39:09,600
Speaker 1: have to show to people in the country, especially Democrats,

679
00:39:10,040 --> 00:39:12,400
Speaker 1: that they care to Chuck Schulbar asked to show it

680
00:39:12,480 --> 00:39:14,760
Speaker 1: to Democrats around that country that he cares to British

681
00:39:14,800 --> 00:39:17,440
Speaker 1: Sanders a bunch and so forth. Then after a while,

682
00:39:18,120 --> 00:39:20,640
Speaker 1: we Democrats have to come up, I would hope, with

683
00:39:20,680 --> 00:39:24,960
Speaker 1: an alternative and solids and and shop that around the country.

684
00:39:24,960 --> 00:39:26,480
Speaker 1: It's gonna be difficult, but that's what I think we

685
00:39:26,520 --> 00:39:28,480
Speaker 1: should do. I'm reminded of a piece that was in

686
00:39:28,520 --> 00:39:30,439
Speaker 1: the New York I think in two thousand ten. George Packer,

687
00:39:30,560 --> 00:39:32,560
Speaker 1: the great staff writer, goes down to Washington to cover

688
00:39:32,640 --> 00:39:35,000
Speaker 1: the Senate and stays there for a couple of months,

689
00:39:35,040 --> 00:39:36,480
Speaker 1: and the advice he gets going into it is, you've

690
00:39:36,480 --> 00:39:39,040
Speaker 1: got to cover this like a foreign capital in such

691
00:39:39,080 --> 00:39:41,000
Speaker 1: a strange place. You brought up dysfunction. This has been

692
00:39:41,040 --> 00:39:44,080
Speaker 1: an institution, a place that's been dysfunctional for a long while.

693
00:39:44,120 --> 00:39:46,120
Speaker 1: Imagine on some of those fifteen hour flights to Beijing,

694
00:39:46,160 --> 00:39:48,360
Speaker 1: you had some time to think about the state of

695
00:39:48,360 --> 00:39:51,960
Speaker 1: the Senate today. What's caused it to be as messy,

696
00:39:52,040 --> 00:39:54,279
Speaker 1: as device ive, as dysfunctional as it is right now?

697
00:39:54,320 --> 00:39:57,400
Speaker 1: And what's the hope for getting out of that? Sometimes

698
00:39:57,440 --> 00:40:00,840
Speaker 1: I think it has to get worse for it gets better, Um,

699
00:40:01,120 --> 00:40:03,680
Speaker 1: and it can you think it can still and and

700
00:40:03,840 --> 00:40:05,719
Speaker 1: but if it gets worse, as soon as we can

701
00:40:05,760 --> 00:40:09,359
Speaker 1: bounce back up, um, I can get worse. I hope

702
00:40:09,400 --> 00:40:11,920
Speaker 1: that's not where we had I hope that doesn't happen.

703
00:40:12,360 --> 00:40:17,160
Speaker 1: But we Americans have to get realized in a sober way. Hey,

704
00:40:17,320 --> 00:40:19,319
Speaker 1: we can't keep going on like this. We can't keep

705
00:40:19,320 --> 00:40:21,440
Speaker 1: fighting each other. We just can't be locked in our

706
00:40:21,440 --> 00:40:24,319
Speaker 1: little worlds as much as we have. We gotta democracy.

707
00:40:24,520 --> 00:40:26,239
Speaker 1: I guess it is tough after all. I guess it

708
00:40:26,280 --> 00:40:29,680
Speaker 1: does take some responsibility. After all. Then if it gets

709
00:40:29,680 --> 00:40:33,040
Speaker 1: bad enough, then I think people start to Is it

710
00:40:33,080 --> 00:40:35,440
Speaker 1: a problem with collegiality in the body? Is it a

711
00:40:35,440 --> 00:40:37,120
Speaker 1: problem with some of the rules we heard about the

712
00:40:37,360 --> 00:40:39,439
Speaker 1: nuclear option? All of this stuff is is that what's

713
00:40:39,520 --> 00:40:41,680
Speaker 1: led to it? Or is it something greater? I guess greater,

714
00:40:41,960 --> 00:40:44,560
Speaker 1: no question. You know, the rules are the rules. It's

715
00:40:44,560 --> 00:40:47,240
Speaker 1: the old thing life. You know. Sometimes people talk about

716
00:40:47,239 --> 00:40:49,319
Speaker 1: float charts in the box. I think that's all all

717
00:40:49,320 --> 00:40:51,839
Speaker 1: of it. It's the people. It's the people really make

718
00:40:51,880 --> 00:40:55,040
Speaker 1: the decisions. When we're gonna have you back for another

719
00:40:55,080 --> 00:41:01,880
Speaker 1: black hair, Senator, if we could what Senator Schumer's approach

720
00:41:02,080 --> 00:41:07,480
Speaker 1: me to galvanize a minority? Protest you're gonna be a minority.

721
00:41:07,680 --> 00:41:09,960
Speaker 1: Do you go out and try to find Republicans that

722
00:41:10,000 --> 00:41:11,960
Speaker 1: have had it? Do you just try to get to

723
00:41:12,000 --> 00:41:15,200
Speaker 1: the mid term elections? What does a minority do? You

724
00:41:15,320 --> 00:41:20,680
Speaker 1: faced this before, Chuck Um, far be it from me

725
00:41:20,680 --> 00:41:23,680
Speaker 1: any advice to use such a character. He's quite a guy,

726
00:41:24,160 --> 00:41:26,560
Speaker 1: but I would my advice would be, it's it's all

727
00:41:26,560 --> 00:41:32,600
Speaker 1: if they'd be very stand up for people. People don't

728
00:41:32,680 --> 00:41:36,800
Speaker 1: want to be disenfranchised, they don't want to have bad healthcare,

729
00:41:36,920 --> 00:41:39,400
Speaker 1: they want to be respect to stand up for people,

730
00:41:39,760 --> 00:41:43,680
Speaker 1: and and and surely really care about people that he

731
00:41:43,719 --> 00:41:46,279
Speaker 1: has to he has to convey that in a measured way.

732
00:41:46,400 --> 00:41:49,200
Speaker 1: David gurin Tom Keene. Of course Mr Gurrow heavily involved

733
00:41:49,200 --> 00:41:51,600
Speaker 1: in our coverage of the Trump speech tonight, the President's

734
00:41:52,040 --> 00:41:54,400
Speaker 1: speech at nine pm. We are the great honor speaking

735
00:41:54,440 --> 00:41:58,680
Speaker 1: with a senator from Montana, Mr bachus Uh and of

736
00:41:58,719 --> 00:42:01,279
Speaker 1: course the former ambassador to China. David, why don't you

737
00:42:01,320 --> 00:42:03,719
Speaker 1: pick it up because you're a lot more in Washington.

738
00:42:04,000 --> 00:42:06,359
Speaker 1: A few months back, I was in Beijing staying at

739
00:42:06,360 --> 00:42:09,560
Speaker 1: that West and overlooking the massive US embassy complex there

740
00:42:09,600 --> 00:42:11,520
Speaker 1: that you're very familiar with, the of course, and I

741
00:42:12,160 --> 00:42:13,600
Speaker 1: was struck by the size of it. Wonder how it

742
00:42:13,600 --> 00:42:16,560
Speaker 1: fits into the whole apparatus in China. You've got your

743
00:42:16,560 --> 00:42:18,960
Speaker 1: successor head of their now, Terry Brandstad, to be the

744
00:42:19,000 --> 00:42:21,480
Speaker 1: new ambassador to China. What advice do you give him?

745
00:42:21,520 --> 00:42:24,720
Speaker 1: About carrying the flag over there, talking with government officials,

746
00:42:24,719 --> 00:42:29,440
Speaker 1: making the case for UM American economic raighttness in concert

747
00:42:29,480 --> 00:42:32,000
Speaker 1: with the with the Chinese economy. Well, I fluted to

748
00:42:32,080 --> 00:42:34,760
Speaker 1: mone about a month ago to C Terry A given advice,

749
00:42:35,360 --> 00:42:37,439
Speaker 1: and my basic point to him was, you just gotta

750
00:42:37,520 --> 00:42:40,600
Speaker 1: show very very strongly how much you care about this relationship,

751
00:42:41,040 --> 00:42:45,080
Speaker 1: and you just gotta worked very hard to get access

752
00:42:45,160 --> 00:42:48,560
Speaker 1: and talk to people and explained that you are carrying

753
00:42:48,800 --> 00:42:50,840
Speaker 1: and do you want to make sure this relationship works.

754
00:42:51,360 --> 00:42:53,480
Speaker 1: What We've asked a number of guests who have a

755
00:42:53,480 --> 00:42:56,000
Speaker 1: lot of State Department experience, who drives this relationship? Is

756
00:42:56,000 --> 00:42:58,279
Speaker 1: it driven out of the State Department in DC? Is

757
00:42:58,320 --> 00:42:59,920
Speaker 1: it driven out of the Treasury Department. I was in

758
00:43:00,080 --> 00:43:03,520
Speaker 1: Beijing for the Strategic and Economic Dialogue and saw that firsthand.

759
00:43:04,320 --> 00:43:07,200
Speaker 1: What person or what persons within the government drive this relationship.

760
00:43:07,239 --> 00:43:10,200
Speaker 1: Is it the Ambassador to China? Well, it's it's there

761
00:43:10,200 --> 00:43:12,480
Speaker 1: are a lot of players, and Ambassador is certainly as one,

762
00:43:13,000 --> 00:43:16,520
Speaker 1: and it's really sets the tone. And the master is

763
00:43:16,520 --> 00:43:20,279
Speaker 1: the highest ranking American official UM in them in in

764
00:43:20,719 --> 00:43:26,160
Speaker 1: the country, but obviously the White House, State Department, Defense Department,

765
00:43:26,160 --> 00:43:29,359
Speaker 1: they're all part of this. It's it's somewhat coordinated out

766
00:43:29,360 --> 00:43:32,160
Speaker 1: of the White House with the National Security Council, but

767
00:43:32,160 --> 00:43:34,320
Speaker 1: a lot of these other agencies they've got their own agenda.

768
00:43:34,680 --> 00:43:37,479
Speaker 1: They're pushing hard. So it's it's it's my job back

769
00:43:37,520 --> 00:43:40,200
Speaker 1: there trying to keep everybody working together and on the

770
00:43:40,200 --> 00:43:44,240
Speaker 1: same page. My perspective the other day was to hearken

771
00:43:44,280 --> 00:43:46,640
Speaker 1: back to Mike Mansfield and what he did with our

772
00:43:46,640 --> 00:43:49,680
Speaker 1: relationship with Japan at a crucial time or even time

773
00:43:49,760 --> 00:43:51,560
Speaker 1: fully I believe was over there on the watch at

774
00:43:51,560 --> 00:43:55,280
Speaker 1: one point. We have a president who doesn't have that vision.

775
00:43:55,320 --> 00:43:57,360
Speaker 1: Whether the president's right or wrong is not the issue.

776
00:43:57,760 --> 00:44:00,600
Speaker 1: We have a zero sum. Neil merc Until is inward

777
00:44:00,680 --> 00:44:03,680
Speaker 1: tone that we'll hear in that speech, you make America,

778
00:44:03,760 --> 00:44:06,799
Speaker 1: make Montana great again. I get all that. How do

779
00:44:06,880 --> 00:44:10,799
Speaker 1: we get back to what Mike Mansfield represented and what

780
00:44:10,920 --> 00:44:13,520
Speaker 1: you represented with your service. How do we get there?

781
00:44:14,080 --> 00:44:17,279
Speaker 1: First to the president. You need a president who has

782
00:44:17,320 --> 00:44:20,440
Speaker 1: those points of view, who looks at the world the

783
00:44:20,480 --> 00:44:23,600
Speaker 1: way Mike Mansfield did and and Tom Foley did and

784
00:44:23,640 --> 00:44:26,719
Speaker 1: so forth. That's number one. Number two. Um, you know,

785
00:44:26,760 --> 00:44:29,200
Speaker 1: I did my very best to explain to the Chinese,

786
00:44:29,239 --> 00:44:33,080
Speaker 1: how important this relationship is, and all the things I'm doing,

787
00:44:34,000 --> 00:44:37,080
Speaker 1: things they should do China should do to show that

788
00:44:37,160 --> 00:44:40,520
Speaker 1: we really want to work together. That's my view, frankly,

789
00:44:40,600 --> 00:44:44,800
Speaker 1: is that it's the old rising power and established power question,

790
00:44:45,239 --> 00:44:48,360
Speaker 1: so called vicidities trap. And I say this over and

791
00:44:48,400 --> 00:44:50,120
Speaker 1: over again, the Chinese, you gotta show to us, not

792
00:44:50,239 --> 00:44:51,719
Speaker 1: just tell us, but show it to us. You when

793
00:44:51,800 --> 00:44:53,600
Speaker 1: I work with us, David, you again your more informed

794
00:44:53,600 --> 00:44:55,640
Speaker 1: on this, advise us. And David jumping here with a

795
00:44:55,680 --> 00:44:57,920
Speaker 1: better question than me on what we should look for

796
00:44:58,040 --> 00:45:01,520
Speaker 1: from the Senate intelligence community, but this up river Russia,

797
00:45:01,600 --> 00:45:04,840
Speaker 1: David rephrase that, yeah, we we hear about these investigations.

798
00:45:04,880 --> 00:45:07,799
Speaker 1: We hear calls for an independent investigation. You've experienced with

799
00:45:07,800 --> 00:45:09,640
Speaker 1: with that as well. I mean, how important is that?

800
00:45:09,640 --> 00:45:12,440
Speaker 1: Do you think to have an independent investigation into what

801
00:45:12,480 --> 00:45:15,160
Speaker 1: we saw during the election and and uh, indeed afterwards,

802
00:45:16,400 --> 00:45:19,200
Speaker 1: we do whatever it taste to get the facts. Um,

803
00:45:19,239 --> 00:45:22,480
Speaker 1: if it requires an independent prosecutor, and so be it.

804
00:45:22,760 --> 00:45:25,480
Speaker 1: On the other hand, if the Trump administration wants to

805
00:45:25,640 --> 00:45:28,520
Speaker 1: reveal everything that happened telephone records and so forth, logs

806
00:45:28,520 --> 00:45:31,080
Speaker 1: and so forth, that's fine too. But we just need

807
00:45:31,080 --> 00:45:32,959
Speaker 1: to get the facts and it's gotta past the smell test.

808
00:45:33,719 --> 00:45:36,120
Speaker 1: With the U. S. China relationship, there has been so

809
00:45:36,160 --> 00:45:38,279
Speaker 1: much focus on the national security side of things. Help

810
00:45:38,360 --> 00:45:40,920
Speaker 1: us with the balance here, uh, national security in the

811
00:45:40,960 --> 00:45:42,440
Speaker 1: one hand, economic on the other. I think back to

812
00:45:42,480 --> 00:45:44,960
Speaker 1: the Trans Pacific Partnership now dead in the water, at

813
00:45:45,000 --> 00:45:47,080
Speaker 1: least from a U. S perspective. A lot of the

814
00:45:47,160 --> 00:45:50,120
Speaker 1: argument that Maastaard Mike Froman made was about the security

815
00:45:50,160 --> 00:45:52,560
Speaker 1: reasons for doing it and giving power to the Chinese.

816
00:45:52,600 --> 00:45:54,520
Speaker 1: They would have more power if this, if this fell apart,

817
00:45:55,360 --> 00:45:58,279
Speaker 1: did we focus too little on the economic side of

818
00:45:58,320 --> 00:45:59,880
Speaker 1: things and too much on national scured when it came

819
00:45:59,920 --> 00:46:02,400
Speaker 1: to right In particular, I think failure to pass t

820
00:46:02,440 --> 00:46:05,560
Speaker 1: PP is a major mistake. It's we are hurting ourselves

821
00:46:05,680 --> 00:46:09,799
Speaker 1: a big time UM from security perspective and also from

822
00:46:09,800 --> 00:46:14,160
Speaker 1: a geopolitical perspective UM and frankly from a trade perspective

823
00:46:14,200 --> 00:46:17,200
Speaker 1: to it it create smart jobs in the loses jobs,

824
00:46:17,640 --> 00:46:21,680
Speaker 1: and it's I wish there were some way to go

825
00:46:21,719 --> 00:46:25,279
Speaker 1: back and resurrect and bring back t p P. I

826
00:46:25,320 --> 00:46:28,120
Speaker 1: don't care. Maybe Trump could bring it back a little bit.

827
00:46:28,160 --> 00:46:31,600
Speaker 1: And then he called Trump PP I don't care. I

828
00:46:31,680 --> 00:46:34,080
Speaker 1: just gotta find some way to get the thing passed. Senator,

829
00:46:34,320 --> 00:46:38,120
Speaker 1: What the Democratic Party need to do to get Trump

830
00:46:38,200 --> 00:46:42,320
Speaker 1: supporters in your Montana back into the full They lost Michigan,

831
00:46:42,600 --> 00:46:46,560
Speaker 1: the lost Wisconsin, etcetera. How does the Democratic Party the

832
00:46:46,640 --> 00:46:50,960
Speaker 1: coastal progresses, how do they re engage with the Max Bokas,

833
00:46:51,000 --> 00:46:54,920
Speaker 1: Scoop Jackson Democrats of another time in place? Well, I

834
00:46:54,920 --> 00:46:57,120
Speaker 1: can only to say what I did, which is it

835
00:46:57,239 --> 00:47:01,880
Speaker 1: just tons of town meetings. I gave my personal telephone

836
00:47:01,960 --> 00:47:04,920
Speaker 1: number to everybody. I get my personal private email to

837
00:47:05,000 --> 00:47:09,640
Speaker 1: everybody in Montana, and it got to meet people and

838
00:47:09,719 --> 00:47:14,600
Speaker 1: talk to people, reach out politics and with respect. You'll listen.

839
00:47:14,840 --> 00:47:19,240
Speaker 1: You'll listen, and you're listen to their assumptions with they're

840
00:47:19,280 --> 00:47:21,359
Speaker 1: worries or fears, and you show that you're really trying

841
00:47:21,400 --> 00:47:24,279
Speaker 1: to find some common cause to solve it. Well, very good,

842
00:47:24,560 --> 00:47:26,360
Speaker 1: Thank you so much for attendant. I would love to

843
00:47:26,360 --> 00:47:30,040
Speaker 1: see your Washington. Do we have Montanas? Do we need

844
00:47:30,080 --> 00:47:33,440
Speaker 1: to get them? I'll follow up. I'll open it up.

845
00:47:34,040 --> 00:47:37,080
Speaker 1: We'll get you David. We'll get your David from Brooklyn, Senator,

846
00:47:39,000 --> 00:47:45,360
Speaker 1: you know from Brooklyn. The okay, I did not know yes, Senator,

847
00:47:45,400 --> 00:47:47,880
Speaker 1: thank you so much to look at your career. David,

848
00:47:48,360 --> 00:47:50,600
Speaker 1: the Senator will be listening, no doubt tonight at nine

849
00:47:50,640 --> 00:47:53,520
Speaker 1: pm to the President and we'll have coverage. David Girl,

850
00:47:53,920 --> 00:47:58,239
Speaker 1: I'm Bloomberg Television, Bloomberg Radio worldwide at nine pm. This

851
00:47:58,320 --> 00:48:10,920
Speaker 1: is Bloomberg. Thanks for listening to the Bloomberg Surveillance Podcast.

852
00:48:11,320 --> 00:48:16,440
Speaker 1: Subscribe and listen to interviews on iTunes, SoundCloud, or whichever

853
00:48:16,600 --> 00:48:21,000
Speaker 1: podcast platform you prefer. I'm out on Twitter at Tom Keene.

854
00:48:21,080 --> 00:48:24,880
Speaker 1: David Gura is at David Gura. Before the podcast, you

855
00:48:24,920 --> 00:48:41,200
Speaker 1: can always catch us worldwide on Bloomberg Radio. Brought you

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Speaker 1: by Bank of America. Mary Lynch. Dedicated to bringing our

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Speaker 1: clients insights and solutions to meet the challenges of a

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Speaker 1: transforming world. That's the power of global connections. Mary Lynch,

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Speaker 1: Pierce Feerin Smith Incorporated, Member s I p C.