1 00:00:00,040 --> 00:00:02,640 Speaker 1: Who you put your trust in matters. Investors have put 2 00:00:02,680 --> 00:00:07,040 Speaker 1: their trust and independent registered investment advisors to the two 3 00:00:07,040 --> 00:00:10,680 Speaker 1: and four trillion dollars. Why Learn more at find your 4 00:00:10,760 --> 00:00:26,360 Speaker 1: Independent Advisor dot com. Welcome to the Bloomberg Surveillance Podcast. 5 00:00:26,760 --> 00:00:30,480 Speaker 1: I'm Tom Keene with David Gura. Daily we bring you 6 00:00:30,520 --> 00:00:35,560 Speaker 1: insight from the best in economics, finance, investment, and international relations. 7 00:00:35,960 --> 00:00:40,559 Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot com, and 8 00:00:40,640 --> 00:00:48,519 Speaker 1: of course on the Bloomberg I'm at the offices of 9 00:00:48,560 --> 00:00:50,839 Speaker 1: Ian Bremer's you raise your group as we look at 10 00:00:50,880 --> 00:00:54,400 Speaker 1: top risks for two thousand seventeen. Dr Bremer joining US 11 00:00:54,600 --> 00:00:58,160 Speaker 1: and now joining us from Jamaica. Lawrence Summers, he has 12 00:00:58,240 --> 00:01:02,080 Speaker 1: Elliott Professor at Harvard University and of course the president 13 00:01:02,120 --> 00:01:06,520 Speaker 1: emeritus of Harvard and a former Secretary of the Treasury. 14 00:01:06,600 --> 00:01:09,840 Speaker 1: Professor Summer is wonderful to have you with us. This 15 00:01:09,880 --> 00:01:12,360 Speaker 1: will be a new presidency, it will be a new 16 00:01:12,480 --> 00:01:18,080 Speaker 1: Capital Hill. What is your chief concern, your chief observation 17 00:01:18,640 --> 00:01:22,400 Speaker 1: as we are seventeen days from an inauguration of President Trump, 18 00:01:23,680 --> 00:01:27,600 Speaker 1: I think it's a moment of extraordinary uncertainty to an 19 00:01:27,600 --> 00:01:34,319 Speaker 1: extent that markets seem not to appreciate there are prospects 20 00:01:34,400 --> 00:01:38,720 Speaker 1: that things could work out well, at least for some interviews. 21 00:01:39,160 --> 00:01:43,440 Speaker 1: But there are enormous risks to the global economy, enormous 22 00:01:43,560 --> 00:01:48,160 Speaker 1: risks to the global economy from possible US protectionist measures, 23 00:01:48,720 --> 00:01:53,880 Speaker 1: enormous risks to the global economy from experimentation in the 24 00:01:54,080 --> 00:01:58,360 Speaker 1: world where basic pillars of American farm policy are up 25 00:01:58,440 --> 00:02:04,280 Speaker 1: for grabs, enormous risks to the American economy from a 26 00:02:04,440 --> 00:02:07,720 Speaker 1: very administration is going to take a very different approach 27 00:02:08,200 --> 00:02:15,640 Speaker 1: to American society than has been a traditional Uh. This 28 00:02:15,840 --> 00:02:23,160 Speaker 1: is probably the largest transition ideologically and in terms of 29 00:02:23,240 --> 00:02:28,000 Speaker 1: substantive policy that we've seen in the United States in 30 00:02:28,080 --> 00:02:33,280 Speaker 1: the last three quarters of a century. And those kinds 31 00:02:33,320 --> 00:02:37,440 Speaker 1: of transitions have to be given the central role of 32 00:02:37,480 --> 00:02:44,480 Speaker 1: the United States in the global system matters of enormous uncertainty, 33 00:02:45,080 --> 00:02:50,200 Speaker 1: and I don't think that's fully recognized by markets. Okay, fair, 34 00:02:50,600 --> 00:02:52,239 Speaker 1: I want to go to the market, which is the 35 00:02:52,360 --> 00:02:55,400 Speaker 1: litmus paper the system. You know, within your academics of 36 00:02:55,520 --> 00:03:00,480 Speaker 1: foreign exchange analysis goes from Robert Mundell onto Jacob Frankel, 37 00:03:00,600 --> 00:03:04,200 Speaker 1: onto Kenneth Rogoff and onto the modern age to our 38 00:03:04,320 --> 00:03:09,440 Speaker 1: markets and do our political system underestimate the risks of 39 00:03:09,480 --> 00:03:14,000 Speaker 1: a truly strong dollar policy. I think there are risks 40 00:03:14,040 --> 00:03:20,600 Speaker 1: because you have a development that is unprecedented in terms 41 00:03:20,680 --> 00:03:27,200 Speaker 1: of dollar fluctuations, which is the possibility of major policy 42 00:03:27,400 --> 00:03:33,440 Speaker 1: change in the fiscal area, not in terms of budget deficits, 43 00:03:33,480 --> 00:03:38,640 Speaker 1: but in terms of the tax burden and subsidy on 44 00:03:38,920 --> 00:03:46,000 Speaker 1: exports city imports. Remember the advocates, advocates of the tax 45 00:03:46,080 --> 00:03:50,440 Speaker 1: reform proposal that the House has put forward and in 46 00:03:50,520 --> 00:03:54,800 Speaker 1: some ways the President elect has endorsed with the Order 47 00:03:55,200 --> 00:03:59,880 Speaker 1: Sudjustment assert that the reason will work out well is 48 00:04:00,000 --> 00:04:04,160 Speaker 1: that it will lead to appreciation of the dollar. Well, 49 00:04:04,200 --> 00:04:09,400 Speaker 1: that's got huge consequences if it happens rapidly for the 50 00:04:09,440 --> 00:04:14,560 Speaker 1: financial architecture, for anyone who's a holder of dollar securities, 51 00:04:14,920 --> 00:04:18,880 Speaker 1: for anyone who's a gator denominated in dollars, for the 52 00:04:18,920 --> 00:04:24,760 Speaker 1: translation of profits back into UH dollars. And I just 53 00:04:24,880 --> 00:04:31,120 Speaker 1: think that the financial consequences have not been fully thought through. 54 00:04:31,720 --> 00:04:34,840 Speaker 1: And if there comes to be a person that that's 55 00:04:34,839 --> 00:04:37,919 Speaker 1: got a real chance of happening, I think the risks 56 00:04:37,960 --> 00:04:42,800 Speaker 1: are enormous. Okay, this is very important to synthesize this. 57 00:04:43,000 --> 00:04:47,040 Speaker 1: Dr Bremer is the important paper highly criticized by Professor 58 00:04:47,120 --> 00:04:50,560 Speaker 1: Summers and others from Peter Navarro and Wilbur Ross. The 59 00:04:50,600 --> 00:04:55,880 Speaker 1: new Secretary of Commerce, can you fold the caution and uh, 60 00:04:55,960 --> 00:04:59,880 Speaker 1: not hatred, but the distrust of China of Professor navarre 61 00:05:00,080 --> 00:05:04,080 Speaker 1: Row into what Trump economics and politics will be. Well, 62 00:05:04,480 --> 00:05:09,239 Speaker 1: there's no question that Trump comes into this office um 63 00:05:09,320 --> 00:05:13,160 Speaker 1: with a feeling that the most important bilateral relationship in 64 00:05:13,200 --> 00:05:15,680 Speaker 1: the world, that between the United States and China, is 65 00:05:15,720 --> 00:05:19,000 Speaker 1: not only not being well managed, but fundamentally this country 66 00:05:19,080 --> 00:05:21,359 Speaker 1: is taking advantage of the United States and it needs 67 00:05:21,400 --> 00:05:24,200 Speaker 1: to be It needs a hard response. And that's happening 68 00:05:24,279 --> 00:05:28,000 Speaker 1: exactly at the time when j and Ping won't take 69 00:05:28,320 --> 00:05:31,520 Speaker 1: any uncertainty because he's leading into his own political cycle. 70 00:05:31,760 --> 00:05:34,080 Speaker 1: Larry's point at the beginning is the right one, right, 71 00:05:34,200 --> 00:05:38,280 Speaker 1: which is from we started our firm. We talked about 72 00:05:38,279 --> 00:05:42,240 Speaker 1: global political risks. It was emerging markets, you know, it 73 00:05:42,320 --> 00:05:45,400 Speaker 1: was the Middle East. Then the financial crisis hits. You've 74 00:05:45,400 --> 00:05:50,160 Speaker 1: got the Eurozone in two thousand seventeen. Leading this document 75 00:05:50,320 --> 00:05:55,680 Speaker 1: is the United States America is driving global political risk 76 00:05:55,760 --> 00:05:59,000 Speaker 1: and uncertainty, and that is not reflected in the markets 77 00:05:59,080 --> 00:06:01,800 Speaker 1: right now, but it is a fundamental sea change with 78 00:06:01,880 --> 00:06:04,680 Speaker 1: anything we've seen over the past few decades. It's this 79 00:06:04,760 --> 00:06:07,000 Speaker 1: transition which matters so much for the rest of the world. 80 00:06:07,040 --> 00:06:10,360 Speaker 1: With Professor Summers, let's bring in Guy Johnson in London. Guy, 81 00:06:10,760 --> 00:06:15,680 Speaker 1: good morning, Professor Summers. Um how how possible is it 82 00:06:16,360 --> 00:06:18,760 Speaker 1: that in a few years time we are talking about 83 00:06:18,800 --> 00:06:20,760 Speaker 1: the fact that the United States has gone through a 84 00:06:20,839 --> 00:06:25,240 Speaker 1: productivity revolution. Donald Trump talks about repatriating money back to 85 00:06:25,279 --> 00:06:27,920 Speaker 1: the United States. How does that money get invested into 86 00:06:27,920 --> 00:06:30,560 Speaker 1: productive capacity? He talks about learning the tax rate. How 87 00:06:30,600 --> 00:06:34,239 Speaker 1: does that extra money get get get reinvested into productivity. 88 00:06:34,320 --> 00:06:36,480 Speaker 1: How do we make that work? Because if that would 89 00:06:36,480 --> 00:06:38,919 Speaker 1: be to that were to happen, how much would that 90 00:06:39,080 --> 00:06:41,040 Speaker 1: actually sort of lean into the kind of product of it? 91 00:06:41,320 --> 00:06:46,120 Speaker 1: To the protectionist story that you're talking about. I don't 92 00:06:46,160 --> 00:06:49,360 Speaker 1: think that gets at the drups of our difficulties. The 93 00:06:49,440 --> 00:06:53,640 Speaker 1: vast majority of the companies who have large overseas cash 94 00:06:54,279 --> 00:06:58,240 Speaker 1: also have substantial amounts of domestic cash, and so they 95 00:06:58,279 --> 00:07:01,839 Speaker 1: had attractive investment opportunity these in new capital they would 96 00:07:01,880 --> 00:07:05,240 Speaker 1: be making them out of that domestic cash. The reality 97 00:07:05,400 --> 00:07:08,960 Speaker 1: is that cast that's brought home, will will be used 98 00:07:08,960 --> 00:07:13,600 Speaker 1: to pay dividends, to payback shareholders, to buy back shares, 99 00:07:14,160 --> 00:07:18,480 Speaker 1: to engage in mergers and acquisitions, to re arrange the 100 00:07:18,520 --> 00:07:24,000 Speaker 1: financial chess board. Not true invest in large amounts of 101 00:07:24,040 --> 00:07:28,000 Speaker 1: new capital. It is a shimmer to suppose that, uh, 102 00:07:28,520 --> 00:07:33,240 Speaker 1: there will be large increases in capital investment as a 103 00:07:33,280 --> 00:07:39,160 Speaker 1: consequence of that repatriation. We've done the experiment before, funny 104 00:07:39,200 --> 00:07:43,080 Speaker 1: ambiguously during the Bush administration, the people who had been 105 00:07:43,160 --> 00:07:46,920 Speaker 1: advocates of the policy, the Republican economists who had supported it, 106 00:07:47,400 --> 00:07:50,800 Speaker 1: did honest work afterwards that evaluated it and found that 107 00:07:50,880 --> 00:07:54,960 Speaker 1: it produced very little uh in uh the way of 108 00:07:55,000 --> 00:07:58,840 Speaker 1: new investment. So this is this is potentially the worst 109 00:07:58,840 --> 00:08:04,200 Speaker 1: of all worlds. Large flows of capital back into the 110 00:08:04,280 --> 00:08:09,920 Speaker 1: United States, large adjustments of the dollar because of the 111 00:08:10,000 --> 00:08:18,920 Speaker 1: border tax stuff, but relatively little stimulus to uh new investment. 112 00:08:19,320 --> 00:08:22,200 Speaker 1: That's why I think it's quite dangerous. And I just 113 00:08:22,240 --> 00:08:26,920 Speaker 1: want to say one other thing. Uh, there are different 114 00:08:27,120 --> 00:08:36,000 Speaker 1: levels of economic US economic disagreements, and economists like me 115 00:08:36,320 --> 00:08:41,640 Speaker 1: and like Alan Blinder have disagreements with economists like uh 116 00:08:41,840 --> 00:08:46,920 Speaker 1: Glenn Glenn Harvard. At a further kind of level, their 117 00:08:47,120 --> 00:08:49,840 Speaker 1: party felt stine at a further reclined level. They are 118 00:08:49,880 --> 00:08:54,520 Speaker 1: the people who produced the proposals that, when Ronald Reagan 119 00:08:54,640 --> 00:09:00,160 Speaker 1: ran on them, were called voodoo economics. The Navarro or 120 00:09:00,200 --> 00:09:06,400 Speaker 1: Lost paper is well beyond voodoo economics. The logic of it, 121 00:09:07,240 --> 00:09:13,120 Speaker 1: the arguments made are so far out of the mainstream 122 00:09:13,240 --> 00:09:19,040 Speaker 1: of any kind of responsible economic thinking that they're the 123 00:09:19,080 --> 00:09:26,880 Speaker 1: economic equivalent of creationism UM or the economic UH, the 124 00:09:27,000 --> 00:09:33,599 Speaker 1: economic equivalent of the denial of UH of of evolution. 125 00:09:34,440 --> 00:09:38,760 Speaker 1: Makes the people who like the people who who say 126 00:09:38,840 --> 00:09:44,160 Speaker 1: that they doubt global warming looks like entirely responsible scientists. 127 00:09:44,280 --> 00:09:48,120 Speaker 1: So this paper is to be a guide to US 128 00:09:48,200 --> 00:09:50,439 Speaker 1: economic policy, and I'm not at a well shure that 129 00:09:50,600 --> 00:09:53,800 Speaker 1: will be UH in practice. I think cooler and more 130 00:09:53,880 --> 00:09:58,960 Speaker 1: rational heads made may well prevail. But the kind of 131 00:09:59,040 --> 00:10:05,280 Speaker 1: thinking that is implicit in UH that paper goes beyond 132 00:10:05,920 --> 00:10:11,920 Speaker 1: any set of doctrine that has been taken off any 133 00:10:11,960 --> 00:10:16,000 Speaker 1: administration in my lifetime. From Jamaica, we greatly appreciate Laurence 134 00:10:16,000 --> 00:10:29,760 Speaker 1: Somers for joining US. It is the top risk for 135 00:10:29,840 --> 00:10:33,480 Speaker 1: two thousand seventeen. David Gurr and I enjoying the good 136 00:10:33,520 --> 00:10:37,320 Speaker 1: coffee of Eurasia Group here in the historic Flat Iron district. 137 00:10:37,320 --> 00:10:39,120 Speaker 1: We can't we're not allowed to give away the address 138 00:10:39,160 --> 00:10:42,640 Speaker 1: and name Bremer security risk Ian Bremer with us and 139 00:10:43,000 --> 00:10:45,679 Speaker 1: joining us now to brief Dr Bremer's Nora Rebini of 140 00:10:45,720 --> 00:10:50,120 Speaker 1: New York University and noriel I read Carmen Reinhardt carefully 141 00:10:50,160 --> 00:10:54,320 Speaker 1: this weekend, and she said, the massive distinction of dollar 142 00:10:54,400 --> 00:10:58,080 Speaker 1: strength now is when we had previous dollar strains. Just 143 00:10:58,120 --> 00:11:00,880 Speaker 1: as one example, we had Japan end with six percent 144 00:11:01,000 --> 00:11:05,319 Speaker 1: GDP or even three percent GDP. We're getting dollar strength 145 00:11:05,400 --> 00:11:09,560 Speaker 1: now with many other countries economic growth flat on the back. 146 00:11:09,679 --> 00:11:13,000 Speaker 1: It's a different dollar strength this time, isn't it. It 147 00:11:13,160 --> 00:11:16,080 Speaker 1: is a different dollar strength. Unfortunately, there's going to be 148 00:11:16,080 --> 00:11:18,559 Speaker 1: a divergence within US monetary policy and the rest of 149 00:11:18,640 --> 00:11:21,719 Speaker 1: the world. E c B BO j BO, e b 150 00:11:21,840 --> 00:11:24,920 Speaker 1: B are gonna follow easy monetary policy. The FED is 151 00:11:24,920 --> 00:11:28,000 Speaker 1: gonna tighten more so because now the fiscal steamulus by 152 00:11:28,000 --> 00:11:30,680 Speaker 1: the Trump administration in the economy close to full employment 153 00:11:30,760 --> 00:11:33,080 Speaker 1: is going to lead to a pickup in inflation and 154 00:11:33,120 --> 00:11:35,920 Speaker 1: that strengthening of the dollar. Unfortunately, it's gonna then damage 155 00:11:35,960 --> 00:11:39,679 Speaker 1: the US economy. Trump says that they saved one thousand 156 00:11:39,720 --> 00:11:43,600 Speaker 1: jobs in Indiana. But this current appreciation of the dollar 157 00:11:43,679 --> 00:11:46,319 Speaker 1: five percents is the election is gonna cut five hundred 158 00:11:46,360 --> 00:11:49,200 Speaker 1: times and jobs in manufacturing in the United States. And 159 00:11:49,240 --> 00:11:52,680 Speaker 1: the risk is that then this inconsistent combination of physical 160 00:11:52,720 --> 00:11:55,280 Speaker 1: and monetary policy and strengthening of the dollar is going 161 00:11:55,320 --> 00:11:58,960 Speaker 1: to lead to more protection is, more antiglobalization, and more 162 00:11:59,800 --> 00:12:02,480 Speaker 1: by clash against migration. We saw it even during the 163 00:12:02,480 --> 00:12:05,720 Speaker 1: regular years, where the fiscal steamers tight money, the dollar strength, 164 00:12:05,800 --> 00:12:09,040 Speaker 1: and and where these unquote voluntary export restrictions on steel 165 00:12:09,080 --> 00:12:11,480 Speaker 1: and alto against Japan today is much worse than it 166 00:12:11,559 --> 00:12:14,320 Speaker 1: was then. Therefore that this is the inconsistent sense of 167 00:12:14,400 --> 00:12:16,960 Speaker 1: micro policy lead to more protection is and more of 168 00:12:16,960 --> 00:12:19,880 Speaker 1: a backlash against globalization. You both have written about the 169 00:12:19,960 --> 00:12:22,560 Speaker 1: end of Pax American and neurial you on projects indicate 170 00:12:22,600 --> 00:12:26,840 Speaker 1: recently and in the report that we're talking about today, Uh, 171 00:12:27,400 --> 00:12:29,240 Speaker 1: is the end of it inevitable? Here? And and sort 172 00:12:29,240 --> 00:12:31,439 Speaker 1: of what's the timetable for it? Is it already in progress? 173 00:12:31,440 --> 00:12:34,000 Speaker 1: The erosion of that, I think it's been coming for 174 00:12:34,040 --> 00:12:36,360 Speaker 1: a long time. I mean, you know, frankly, the United 175 00:12:36,440 --> 00:12:39,400 Speaker 1: States did a lot of damage to itself with the 176 00:12:39,440 --> 00:12:42,400 Speaker 1: wars in Iraq and Afghanistan. It's willingness to be the 177 00:12:42,440 --> 00:12:47,199 Speaker 1: global sheriff eroted dramatically. As a consequence of that um, Certainly, 178 00:12:47,320 --> 00:12:52,079 Speaker 1: Trump's election also drives a spike into two other areas 179 00:12:52,120 --> 00:12:56,080 Speaker 1: of critical global leadership for the United States, one being 180 00:12:56,120 --> 00:12:58,680 Speaker 1: its willingness to be the global trade architect the trans 181 00:12:58,760 --> 00:13:02,360 Speaker 1: Pacific partnership of worse now dead. Also its willingness to 182 00:13:02,400 --> 00:13:06,520 Speaker 1: project global values, which is the antithesis of what Trump's 183 00:13:06,520 --> 00:13:10,400 Speaker 1: America's First is. It's no more US exceptionalism. But even 184 00:13:10,440 --> 00:13:12,960 Speaker 1: if Hillary Clinton had been elected, if you look at 185 00:13:13,000 --> 00:13:15,000 Speaker 1: the rise of China, if you look at the willingness 186 00:13:15,000 --> 00:13:16,800 Speaker 1: of the Russians to undermine the U S from a 187 00:13:16,840 --> 00:13:19,320 Speaker 1: security perspective, look at the weakness of Europe, look at 188 00:13:19,360 --> 00:13:22,440 Speaker 1: the implosion of the Middle East, you recognize that the 189 00:13:22,520 --> 00:13:25,480 Speaker 1: end of paxim ar Kana was coming over time. Just 190 00:13:25,520 --> 00:13:30,640 Speaker 1: that trump selection suddenly means it's happening now. What interested 191 00:13:30,679 --> 00:13:32,680 Speaker 1: me here? And you nailed this. I remember talking to 192 00:13:32,720 --> 00:13:35,640 Speaker 1: you pre it will be my thirteen Davos, and I 193 00:13:35,679 --> 00:13:38,320 Speaker 1: remember way back you and I sitting in a modest 194 00:13:38,360 --> 00:13:41,120 Speaker 1: bar having a beverage of our choice for you talking 195 00:13:41,200 --> 00:13:44,400 Speaker 1: about the crisis to come. You nailed it, but maybe 196 00:13:44,400 --> 00:13:47,160 Speaker 1: you didn't get the amplitude right either. I didn't get 197 00:13:47,160 --> 00:13:50,280 Speaker 1: the amplitude right either. Do you have a gauge of 198 00:13:50,360 --> 00:13:53,680 Speaker 1: the amplitude of what's coming in two thousand and seventeen, 199 00:13:54,120 --> 00:13:57,000 Speaker 1: the size of movements that you would forecast, or is 200 00:13:57,000 --> 00:13:59,679 Speaker 1: there just that much uncertainty? I think there's a huge 201 00:13:59,720 --> 00:14:02,840 Speaker 1: amount uncertainty as we understood that is uncertain about the 202 00:14:02,840 --> 00:14:07,520 Speaker 1: economic policy, domestic, international and foreign policy of Trump. There 203 00:14:07,520 --> 00:14:10,160 Speaker 1: are a huge amount of uncertainty in Europe. I worried 204 00:14:10,160 --> 00:14:12,079 Speaker 1: that is a slow motion train wreck. I worried that 205 00:14:12,360 --> 00:14:14,360 Speaker 1: Leapan is going to come to power in France, that 206 00:14:14,440 --> 00:14:17,480 Speaker 1: these Shinquestele movement is going to come to power in Italy. 207 00:14:17,640 --> 00:14:19,720 Speaker 1: This could be the beginning of the end of Europe 208 00:14:19,920 --> 00:14:22,760 Speaker 1: and the Eurozone. At the time where Russia is becoming 209 00:14:22,800 --> 00:14:26,360 Speaker 1: more aggressive in Syria, in Ukraine, in the Balkans, in 210 00:14:26,360 --> 00:14:28,920 Speaker 1: the Baltics. Therefore, if the US gives up on the 211 00:14:29,680 --> 00:14:31,720 Speaker 1: NATO and its allies in Europe, that's going to be 212 00:14:31,720 --> 00:14:35,240 Speaker 1: an opening for puttings Russia. And there are concerns about, 213 00:14:35,320 --> 00:14:38,160 Speaker 1: of course, what's gonna happen with China. The rise of China. 214 00:14:38,440 --> 00:14:40,400 Speaker 1: It needs to do reform is not doing them because 215 00:14:40,400 --> 00:14:43,600 Speaker 1: there is political transformation, and there are security issues in 216 00:14:43,640 --> 00:14:46,840 Speaker 1: Asia from North Korea to Taiwan to Japan, and add 217 00:14:46,840 --> 00:14:48,760 Speaker 1: the territory issues at the time where the US might 218 00:14:48,800 --> 00:14:51,680 Speaker 1: say I'm giving up also on my premises in Asia, 219 00:14:52,120 --> 00:14:53,920 Speaker 1: let alone in the Middle East, where if you give 220 00:14:54,000 --> 00:14:56,280 Speaker 1: up on our allies and we're following a policy of 221 00:14:56,280 --> 00:15:00,400 Speaker 1: igneerge independence, then the country between Shia e On and 222 00:15:00,480 --> 00:15:03,440 Speaker 1: Sunny and his allies Sunny in the Middle East is 223 00:15:03,480 --> 00:15:05,760 Speaker 1: going to become even worse. So those are the kind 224 00:15:05,760 --> 00:15:07,840 Speaker 1: of been certainly as we're facing in the next few years. 225 00:15:09,320 --> 00:15:12,000 Speaker 1: Nor beany Thank you so much, greatly appreciate looking forward 226 00:15:12,040 --> 00:15:14,800 Speaker 1: to seeing you at the World Economics. At that modest bar, 227 00:15:14,920 --> 00:15:17,520 Speaker 1: perhaps we could go for like an hour with being 228 00:15:17,800 --> 00:15:20,680 Speaker 1: an hour, so we could do like an eight hour show. YEA, well, 229 00:15:20,840 --> 00:15:24,840 Speaker 1: I mean it's the New Years. It is the New Year, 230 00:15:25,400 --> 00:15:28,680 Speaker 1: and we're here, and did you survive the New Year? Yeah? 231 00:15:28,680 --> 00:15:30,320 Speaker 1: I didn't. You know, if I come through it more 232 00:15:30,320 --> 00:15:33,400 Speaker 1: exhausted than I started to come back to work to 233 00:15:33,440 --> 00:15:36,240 Speaker 1: get arrest, I mean, it would be the truth about it. 234 00:15:44,200 --> 00:15:47,600 Speaker 1: Who you put your trust in matters. Investors have put 235 00:15:47,640 --> 00:15:51,640 Speaker 1: their trust in independent registered investment advisors to the tune 236 00:15:51,640 --> 00:15:55,200 Speaker 1: of four trillion dollars. Why they see their roles to serve, 237 00:15:55,440 --> 00:15:58,800 Speaker 1: not sell. That's why Charles Schwab is committed to the 238 00:15:58,880 --> 00:16:04,280 Speaker 1: success of over seven thousand independent financial advisors who passionately 239 00:16:04,520 --> 00:16:09,600 Speaker 1: dedicate themselves to helping people achieve their financial goals. Learn 240 00:16:09,640 --> 00:16:20,760 Speaker 1: more and find your independent advisor dot com. Slotic Parton 241 00:16:20,840 --> 00:16:23,240 Speaker 1: joins us now he's Global Managing Partner McKinsey and come before, 242 00:16:23,240 --> 00:16:25,400 Speaker 1: we're Asia Chairman McKenzie as well as we continue to 243 00:16:25,400 --> 00:16:27,440 Speaker 1: talk about some of the risks outlined in Top Risks 244 00:16:27,480 --> 00:16:30,360 Speaker 1: two thousand seventeen from Eurasia Group and Don Burn. Great 245 00:16:30,400 --> 00:16:32,520 Speaker 1: to see you here for having there's a there's a 246 00:16:32,560 --> 00:16:34,840 Speaker 1: line in this report Eurasia Group saying we're gonna see 247 00:16:34,880 --> 00:16:37,640 Speaker 1: near term chaos that comes from an absent superpower. How 248 00:16:37,680 --> 00:16:39,200 Speaker 1: how good his sense do we have of what that 249 00:16:39,280 --> 00:16:42,600 Speaker 1: near term chaos would look like. I think part of 250 00:16:42,600 --> 00:16:45,160 Speaker 1: the challenge with chaos as we don't right about where 251 00:16:45,160 --> 00:16:47,400 Speaker 1: it is. But I um I think that part of 252 00:16:47,440 --> 00:16:50,320 Speaker 1: the issue is that is as your the Eurasia Group 253 00:16:50,320 --> 00:16:54,000 Speaker 1: and laid out there are these ten big factors that 254 00:16:54,040 --> 00:16:57,280 Speaker 1: are out there. Any one of them is significant. I 255 00:16:57,320 --> 00:17:01,080 Speaker 1: think how they all kind of work together is another issue. 256 00:17:01,120 --> 00:17:03,440 Speaker 1: So it's hard to fathom what it might be, but 257 00:17:03,480 --> 00:17:08,040 Speaker 1: it could be bad. I'm a little more optimistic in 258 00:17:08,080 --> 00:17:11,239 Speaker 1: a sense that I think we we could see some 259 00:17:11,320 --> 00:17:14,359 Speaker 1: significant growth in the US economy like we haven't seen 260 00:17:14,440 --> 00:17:18,399 Speaker 1: before UM, and that I think as business leaders we 261 00:17:18,480 --> 00:17:20,800 Speaker 1: just you have to just you can't freeze, you have 262 00:17:20,880 --> 00:17:24,359 Speaker 1: to keep moving UM. But it is a more fragile world, 263 00:17:24,359 --> 00:17:26,520 Speaker 1: and there there does seem to be I think as 264 00:17:26,520 --> 00:17:30,639 Speaker 1: Ian has said a sort of a withdrawing of the 265 00:17:30,760 --> 00:17:34,159 Speaker 1: U S superpower, which makes the world less stable. UM. 266 00:17:34,800 --> 00:17:37,640 Speaker 1: What chiefly will be driving that growth domestically, do you think? 267 00:17:37,800 --> 00:17:42,159 Speaker 1: I think it's the you know, I think tax reform, 268 00:17:42,200 --> 00:17:44,800 Speaker 1: I think deregulation. I think there's going to be in 269 00:17:44,840 --> 00:17:49,399 Speaker 1: a very aggressive approach to making it easier to do business. 270 00:17:49,480 --> 00:17:52,439 Speaker 1: At least that's what the retric is. I think the 271 00:17:52,480 --> 00:17:56,639 Speaker 1: infrastructure investment UM. You know, if with tax reform and 272 00:17:56,720 --> 00:17:58,560 Speaker 1: just being able to bring some of that two trillion 273 00:17:58,600 --> 00:18:03,320 Speaker 1: dollars from overseas back, that's a pretty significant stimulus UM 274 00:18:03,359 --> 00:18:06,639 Speaker 1: and doesn't take all these things are difficult to make happen. 275 00:18:06,680 --> 00:18:09,000 Speaker 1: But I think that's not as difficult as what does 276 00:18:09,080 --> 00:18:15,040 Speaker 1: Mackenzie's research on the value or efficacy of incentives or 277 00:18:15,160 --> 00:18:18,720 Speaker 1: policy redirection of all that money coming back from abroad. 278 00:18:19,280 --> 00:18:21,359 Speaker 1: Do you just bring it back and trust Tim Cook 279 00:18:21,440 --> 00:18:23,720 Speaker 1: to spend it correctly or does he need to be 280 00:18:23,800 --> 00:18:27,720 Speaker 1: incentivized to make that path from investment to jobs work. 281 00:18:28,119 --> 00:18:32,360 Speaker 1: I think that that um. I think it's important for countries, 282 00:18:32,400 --> 00:18:34,119 Speaker 1: even as big as the United States, to have a 283 00:18:34,160 --> 00:18:37,080 Speaker 1: bit of a of an industrial policy. If I might 284 00:18:37,119 --> 00:18:40,840 Speaker 1: even say that sounds very countercultural to say, I don't 285 00:18:40,840 --> 00:18:43,159 Speaker 1: mean picking winners, but saying there are some areas that 286 00:18:43,200 --> 00:18:46,000 Speaker 1: we really want to get in and invest behind because 287 00:18:46,000 --> 00:18:48,920 Speaker 1: there are opportunities. I think in tech that's being the case. 288 00:18:49,040 --> 00:18:52,359 Speaker 1: I so I think incentives in a sense on the 289 00:18:52,440 --> 00:18:55,320 Speaker 1: tax side, to make it easier for people to do 290 00:18:55,400 --> 00:18:59,640 Speaker 1: things deregulation, I would be very nervous about picking winners. 291 00:18:59,680 --> 00:19:01,960 Speaker 1: You must do X, Y and Z with the money. 292 00:19:02,000 --> 00:19:05,240 Speaker 1: I think that that would make me nervous. We get 293 00:19:05,720 --> 00:19:09,080 Speaker 1: CEO's get enough direction as it is from markets, and 294 00:19:09,119 --> 00:19:13,720 Speaker 1: I'd be nervous about, frankly, doing anything other than simplifying 295 00:19:13,840 --> 00:19:17,760 Speaker 1: tax and UH and on the regulatory side of things, 296 00:19:17,880 --> 00:19:23,280 Speaker 1: and putting a spotlight on opportunities getting researched and you know, 297 00:19:23,560 --> 00:19:26,520 Speaker 1: business and and and a sort of the ecosystem working 298 00:19:27,160 --> 00:19:30,040 Speaker 1: that can be useful. But more than that, I'd be 299 00:19:30,119 --> 00:19:33,520 Speaker 1: nervous because I don't think it will last. It's not sustainable. 300 00:19:33,640 --> 00:19:35,520 Speaker 1: We'll come back. But in just about thirty seconds here 301 00:19:36,359 --> 00:19:40,080 Speaker 1: the geographic divide between Washington Silicon Valleys or so, but 302 00:19:40,119 --> 00:19:43,000 Speaker 1: it seems like it's much larger through this last administration 303 00:19:43,119 --> 00:19:45,200 Speaker 1: on one before it. Are you optimistic that there's going 304 00:19:45,240 --> 00:19:50,000 Speaker 1: to be a better conversation between Silicon Valley and Washington. Um, 305 00:19:50,040 --> 00:19:53,080 Speaker 1: I am optimistic. But maybe another thing I might say is, 306 00:19:53,119 --> 00:19:54,760 Speaker 1: in some ways, I don't think it matters. I think 307 00:19:54,840 --> 00:19:57,720 Speaker 1: the Silicon Valleys kind of said, we don't frankly give 308 00:19:57,760 --> 00:20:00,840 Speaker 1: a good goddamn about what you guys are doing doing 309 00:20:00,880 --> 00:20:02,560 Speaker 1: our thing type of the thing. It's like it's a 310 00:20:02,600 --> 00:20:06,000 Speaker 1: different world. And so I think they'd been able to 311 00:20:06,000 --> 00:20:09,960 Speaker 1: operate in that environment. It's not to say that government 312 00:20:09,960 --> 00:20:12,760 Speaker 1: policy tacks and centives and so forth one affected, but 313 00:20:13,400 --> 00:20:16,360 Speaker 1: they're kind of it's almost independent in terms of how 314 00:20:16,359 --> 00:20:19,760 Speaker 1: they do things right now Don Barton with Us with Mackenzie, 315 00:20:20,240 --> 00:20:24,000 Speaker 1: which barely describes the research capability of those at don 316 00:20:24,040 --> 00:20:26,720 Speaker 1: Barton the heard of cats that he manages every day 317 00:20:26,720 --> 00:20:29,959 Speaker 1: at Mackenzie, including Richard Dobbs, James Man, you and many others. 318 00:20:30,359 --> 00:20:34,520 Speaker 1: You stopped me in my tracks last year with Poorer 319 00:20:34,560 --> 00:20:37,800 Speaker 1: than your parents, just starting with a photograph on the 320 00:20:37,880 --> 00:20:41,760 Speaker 1: cover of the Young Last from the Plymouth Charger. I 321 00:20:41,760 --> 00:20:45,679 Speaker 1: couldn't afford at the time, and it was the most 322 00:20:45,760 --> 00:20:50,520 Speaker 1: nostalgic yet smartest research piece I saw last year. Help 323 00:20:50,600 --> 00:20:54,520 Speaker 1: us with your observation when Richard dropped Dobbs dropped this 324 00:20:54,640 --> 00:20:57,439 Speaker 1: on your desk, What did dom Barton think of the 325 00:20:57,520 --> 00:21:01,520 Speaker 1: idea that our kids are poorer than our parents? Well, 326 00:21:01,640 --> 00:21:03,880 Speaker 1: it was shocking to see. It was something I think 327 00:21:03,920 --> 00:21:06,560 Speaker 1: we people have been feeling or worrying when you see 328 00:21:06,600 --> 00:21:09,159 Speaker 1: the populaces and so forth. But as you said, to 329 00:21:09,200 --> 00:21:12,520 Speaker 1: see that in so many countries. It's not one country, 330 00:21:12,720 --> 00:21:17,480 Speaker 1: it's in nine countries where it is actually worse. The 331 00:21:17,560 --> 00:21:21,560 Speaker 1: last ten years have been worse, and it's in looking 332 00:21:21,560 --> 00:21:24,600 Speaker 1: ahead it's even worse. And this is this is I 333 00:21:24,600 --> 00:21:28,560 Speaker 1: think it was shocking just to see this The specificity 334 00:21:28,600 --> 00:21:31,760 Speaker 1: of it, the breadth of it across many, many countries, 335 00:21:32,640 --> 00:21:35,520 Speaker 1: and I think it it fits right in with what 336 00:21:35,560 --> 00:21:38,280 Speaker 1: we're seeing again, as I said, with populism so deftail 337 00:21:38,320 --> 00:21:40,320 Speaker 1: that if you would force I think of Roland Friars 338 00:21:40,320 --> 00:21:42,600 Speaker 1: new research on this as well out of out of Stanford, 339 00:21:42,600 --> 00:21:46,160 Speaker 1: looking again at this, at this very same issue, we've 340 00:21:46,200 --> 00:21:49,159 Speaker 1: seen a global reach of populism. How disparate is it 341 00:21:49,160 --> 00:21:51,080 Speaker 1: when you look for threads of continuity among what we've 342 00:21:51,080 --> 00:21:53,119 Speaker 1: seen in the US and Europe and around the world. 343 00:21:53,320 --> 00:21:56,080 Speaker 1: I think there there are variations, but only in terms 344 00:21:56,080 --> 00:21:58,200 Speaker 1: of how bad it is. I mean, I think one 345 00:21:58,240 --> 00:22:01,080 Speaker 1: of the other elements of that work that that Richard 346 00:22:01,119 --> 00:22:03,520 Speaker 1: and James did was looking at the nature of work 347 00:22:03,760 --> 00:22:06,640 Speaker 1: as well, and that's changed. So you see the gig economy. 348 00:22:06,720 --> 00:22:08,240 Speaker 1: This is where I wanted to go to, the gig economy. 349 00:22:08,280 --> 00:22:10,400 Speaker 1: Alan Krueger and the work that he's doing at Princeton 350 00:22:10,400 --> 00:22:13,080 Speaker 1: and Professor Krueger has been a great I've been very kind, 351 00:22:13,080 --> 00:22:14,800 Speaker 1: I should say, to come on on job's Day and 352 00:22:14,840 --> 00:22:18,680 Speaker 1: other days were Bloomberg surveillance. Most of our audience listening 353 00:22:18,720 --> 00:22:21,120 Speaker 1: to this after putting up with their kids over the holiday. 354 00:22:21,240 --> 00:22:23,400 Speaker 1: I think the gig economy is a bunch of hotwash. 355 00:22:24,920 --> 00:22:28,040 Speaker 1: I'm sorry forget about the high end academics of Bartner Krueger. 356 00:22:28,359 --> 00:22:30,720 Speaker 1: We're going You've got to be kidding me. How do 357 00:22:30,760 --> 00:22:34,439 Speaker 1: we get back to the full time benefit laden perspective 358 00:22:34,840 --> 00:22:38,439 Speaker 1: that we were advantaged by and grew up with. I mean, 359 00:22:38,720 --> 00:22:40,560 Speaker 1: I agree, and I think about it for not only 360 00:22:40,680 --> 00:22:43,680 Speaker 1: job security but training. You think about this world that's 361 00:22:43,720 --> 00:22:47,480 Speaker 1: moving faster and faster at the half life of a skill. Well, 362 00:22:47,480 --> 00:22:50,200 Speaker 1: this speaks David to history sist to Lawrence Summers and 363 00:22:50,240 --> 00:22:53,120 Speaker 1: Blanchard histories. So so it's a you know, I think 364 00:22:53,160 --> 00:22:58,879 Speaker 1: one one in Spain of the economy around independent workers. 365 00:22:59,040 --> 00:23:01,480 Speaker 1: And you know, some people want to do that. Most 366 00:23:01,520 --> 00:23:03,560 Speaker 1: people have to do it because they don't have the job. 367 00:23:03,600 --> 00:23:06,160 Speaker 1: And what I worry most about is the safety net, 368 00:23:06,480 --> 00:23:09,720 Speaker 1: and particularly safety net around training. Who who's going to 369 00:23:09,840 --> 00:23:13,280 Speaker 1: help these people stay current as the world was faster 370 00:23:13,359 --> 00:23:15,600 Speaker 1: Because in my view, by the way, it's not trade 371 00:23:15,960 --> 00:23:18,960 Speaker 1: that's dislocating jobs, that that's been the whipping boy for 372 00:23:19,000 --> 00:23:21,800 Speaker 1: a while. For a while, it's going to be technology. 373 00:23:21,840 --> 00:23:24,879 Speaker 1: And you know, ultimately I think technology is good, but 374 00:23:25,080 --> 00:23:27,320 Speaker 1: you have to be able to retrain and who's going 375 00:23:27,320 --> 00:23:31,199 Speaker 1: to do that? And that's that's that's where I you know, 376 00:23:31,600 --> 00:23:33,800 Speaker 1: the forces, if we don't do something about it, are 377 00:23:33,800 --> 00:23:36,400 Speaker 1: going to get worse, I think before they get better. 378 00:23:36,400 --> 00:23:38,359 Speaker 1: I'll bring it back to Silicon Valley. We were watching 379 00:23:38,400 --> 00:23:40,880 Speaker 1: as Saffra Cats and Tim Cook and others walked into 380 00:23:40,920 --> 00:23:43,280 Speaker 1: Trump Towers, sat around that conference table and met with 381 00:23:43,280 --> 00:23:45,800 Speaker 1: the present elect and so much of the focus when 382 00:23:45,800 --> 00:23:47,760 Speaker 1: you when you think about Silicon Valley and the relationship 383 00:23:47,800 --> 00:23:51,080 Speaker 1: between Silicon Valley watching is centered on privacy and security issues. 384 00:23:51,160 --> 00:23:52,919 Speaker 1: But I think it's fair to say work is going 385 00:23:53,000 --> 00:23:55,800 Speaker 1: to be a big issue here and and the nation 386 00:23:55,880 --> 00:23:57,119 Speaker 1: the world is going to have to reckon with the 387 00:23:57,200 --> 00:24:00,199 Speaker 1: fact that technology has made it possible for many these 388 00:24:00,240 --> 00:24:02,720 Speaker 1: jobs to go away. What type of burden does that 389 00:24:02,840 --> 00:24:05,160 Speaker 1: place on silicon value? Will the president try to place 390 00:24:05,240 --> 00:24:07,920 Speaker 1: on on silicon value? Well, I think that um, you 391 00:24:08,000 --> 00:24:10,639 Speaker 1: know that that Silicon Valley companies are going to have 392 00:24:10,760 --> 00:24:12,639 Speaker 1: to be much more aware of it. Earlier on in 393 00:24:12,680 --> 00:24:16,560 Speaker 1: the show This Morning with with Tom Ian mentioned what 394 00:24:16,680 --> 00:24:18,560 Speaker 1: Randall Stevenson had been doing at A T and T 395 00:24:19,200 --> 00:24:23,720 Speaker 1: in terms of taking ownership for training people as they 396 00:24:24,760 --> 00:24:26,560 Speaker 1: move ahead, spending a lot of money to do it. 397 00:24:26,600 --> 00:24:29,040 Speaker 1: He could have just laid people off and rehired people. 398 00:24:29,040 --> 00:24:30,639 Speaker 1: He said, it's a commitment we have to make. I 399 00:24:30,720 --> 00:24:33,080 Speaker 1: think we're gonna have to see more of that corporate 400 00:24:33,119 --> 00:24:36,320 Speaker 1: switcher taking that ownership, because if you just let those 401 00:24:36,560 --> 00:24:40,040 Speaker 1: people go, you're gonna have a revolution. It was one 402 00:24:40,400 --> 00:24:44,280 Speaker 1: actually Silicon Valley Entrepreneur did very well. It wrote a 403 00:24:44,400 --> 00:24:46,840 Speaker 1: piece that talked about the pitchforks are coming. I can't 404 00:24:46,840 --> 00:24:50,160 Speaker 1: remember his name right now, but literally be careful because 405 00:24:50,240 --> 00:24:53,720 Speaker 1: with this amount of dislocation, without anywhere for people to go, 406 00:24:54,680 --> 00:24:57,320 Speaker 1: it could get very ugly, and we can't just flop 407 00:24:57,400 --> 00:24:59,879 Speaker 1: it off on the government. But that's an inflammatory statement, 408 00:25:00,000 --> 00:25:02,600 Speaker 1: and I'll be shocked. I'll be true, David. We've heard 409 00:25:02,600 --> 00:25:06,399 Speaker 1: a lot of inflammatory statements this morning. The pitchforks are coming. 410 00:25:07,160 --> 00:25:10,760 Speaker 1: What does the gilded aristocracy, the plutocracy do? What can 411 00:25:10,800 --> 00:25:14,080 Speaker 1: be the reaction besides me the next Charles Dickens novel, 412 00:25:14,960 --> 00:25:18,680 Speaker 1: that's no. Well, I think we all have to step 413 00:25:18,720 --> 00:25:21,879 Speaker 1: back and say what are we what can we each do? 414 00:25:21,960 --> 00:25:23,080 Speaker 1: And I think there are a lot of things we 415 00:25:23,119 --> 00:25:25,480 Speaker 1: can do as corporates. I think there are things around 416 00:25:25,800 --> 00:25:29,080 Speaker 1: said the training side of things. Being involved in the 417 00:25:29,240 --> 00:25:33,159 Speaker 1: educational institutes, we're seeing some I think inklings of what 418 00:25:33,320 --> 00:25:35,960 Speaker 1: may come in different parts of the world. Singapore with 419 00:25:36,119 --> 00:25:39,080 Speaker 1: their skills labs that are putting in place, they're putting 420 00:25:39,080 --> 00:25:42,119 Speaker 1: in giving every singapore In over the age of getting 421 00:25:42,119 --> 00:25:46,800 Speaker 1: a five Singaporean dollar in education budget doesn't seem like 422 00:25:46,840 --> 00:25:48,639 Speaker 1: a lot, but it's the notion of we've got to 423 00:25:48,720 --> 00:25:52,320 Speaker 1: take care of people. Um, you're seeing this in Australia, 424 00:25:52,400 --> 00:25:54,720 Speaker 1: trying to help understand what are the future jobs going 425 00:25:54,800 --> 00:25:58,119 Speaker 1: to be? How do we rethink what different educational institutes, 426 00:25:58,200 --> 00:26:01,119 Speaker 1: corporates do business as people need to You can't just 427 00:26:01,200 --> 00:26:03,760 Speaker 1: assume that's going to happen if if we don't get 428 00:26:03,840 --> 00:26:06,840 Speaker 1: involved to try and play a role in that, we 429 00:26:06,920 --> 00:26:10,640 Speaker 1: will suffer the consequences that that's because I think it's 430 00:26:10,720 --> 00:26:13,639 Speaker 1: moving too quickly and and so I think there has 431 00:26:13,720 --> 00:26:15,879 Speaker 1: to be more of a sense of collective ownership and 432 00:26:15,960 --> 00:26:18,760 Speaker 1: an investment. Let me ask you about China, drawing upon 433 00:26:18,800 --> 00:26:21,480 Speaker 1: your experience as that from your Asia Chairman of of mckenzy. 434 00:26:21,560 --> 00:26:24,760 Speaker 1: We have this Nineteenth Party Congress coming up in China. 435 00:26:25,119 --> 00:26:27,080 Speaker 1: In this Seriratia Group report, a lot of detail about 436 00:26:27,119 --> 00:26:30,320 Speaker 1: the pressures that places on the president of China. Now, 437 00:26:30,920 --> 00:26:32,920 Speaker 1: what's your sense of how reforms are going there? And 438 00:26:33,000 --> 00:26:35,439 Speaker 1: we talk about the pitchforks are coming, to the rise 439 00:26:35,480 --> 00:26:39,040 Speaker 1: of populism, the wealth disparity here in the US, how 440 00:26:39,119 --> 00:26:42,280 Speaker 1: does the Chinese governments have countered that as well in China? Well, 441 00:26:42,320 --> 00:26:45,639 Speaker 1: I think I think the Chinese government for decades now 442 00:26:45,720 --> 00:26:48,800 Speaker 1: has been focused on economic growth. And I would argue 443 00:26:48,920 --> 00:26:50,639 Speaker 1: I don't think they say it exactly this way, but 444 00:26:50,760 --> 00:26:54,359 Speaker 1: the focus is there on middle class growth. It's strange 445 00:26:54,400 --> 00:26:58,520 Speaker 1: for communist countries that it's it's ensuring actually to Tom's point, 446 00:26:58,600 --> 00:27:01,399 Speaker 1: that there you will see your children will have a 447 00:27:01,480 --> 00:27:03,919 Speaker 1: better life, and that is fundamental and if you can 448 00:27:04,040 --> 00:27:07,520 Speaker 1: keep that going, you're going to have the confidence that 449 00:27:07,680 --> 00:27:10,120 Speaker 1: you need from the people to be able to move forward. 450 00:27:10,119 --> 00:27:12,639 Speaker 1: So I think that reform will continue. There's and it 451 00:27:12,840 --> 00:27:15,200 Speaker 1: is continuing. I think that the challenges there's been a 452 00:27:15,800 --> 00:27:19,000 Speaker 1: very big shift on this anti corruption side, which in 453 00:27:19,040 --> 00:27:21,240 Speaker 1: a strange way, I think has actually slowed reform down 454 00:27:21,320 --> 00:27:24,480 Speaker 1: in the state enterprises because everyone's afraid to make the 455 00:27:24,560 --> 00:27:27,080 Speaker 1: big change if you need to. But they'll get through it. 456 00:27:27,160 --> 00:27:30,679 Speaker 1: There those guys are so long term on this as 457 00:27:30,720 --> 00:27:33,600 Speaker 1: long as they but they will be watching that middle 458 00:27:33,720 --> 00:27:36,720 Speaker 1: class growth and if it starts going the other way, 459 00:27:36,840 --> 00:27:41,840 Speaker 1: then that's problem. Time. Every administration steals like theft Golden Sex. 460 00:27:41,920 --> 00:27:43,760 Speaker 1: It's all the press, but come on, they all steal 461 00:27:43,840 --> 00:27:46,480 Speaker 1: guys from Mackensey, men and women from young the young 462 00:27:46,560 --> 00:27:50,480 Speaker 1: Turks of Mackensey. They disappear off to Washington. Are you 463 00:27:50,560 --> 00:27:53,000 Speaker 1: seeing a loss or do you predict a loss of 464 00:27:53,080 --> 00:27:57,200 Speaker 1: Mackensey talent to this administration or does Donald Trump just 465 00:27:57,400 --> 00:28:00,119 Speaker 1: not give a hoot about Don Barton's world. I don't no. 466 00:28:00,240 --> 00:28:02,960 Speaker 1: I think I think we we we are seeing some 467 00:28:03,119 --> 00:28:05,600 Speaker 1: of that, and I think it's not just McKinsey. It's 468 00:28:05,640 --> 00:28:11,000 Speaker 1: a broader group BCG, other Goldman as you said, other organizations. 469 00:28:11,080 --> 00:28:13,119 Speaker 1: I think there's a there are a lot of business 470 00:28:13,200 --> 00:28:16,000 Speaker 1: people that are in involved in NEST that are looking 471 00:28:16,080 --> 00:28:19,200 Speaker 1: for people to help with the analytics, with perspectives, with 472 00:28:19,520 --> 00:28:22,720 Speaker 1: longer term views of where things were, how things work. 473 00:28:23,240 --> 00:28:25,399 Speaker 1: So I think we're already seeing it and we're going 474 00:28:25,440 --> 00:28:28,399 Speaker 1: to see more of it, and we're supportive of that. 475 00:28:28,520 --> 00:28:30,560 Speaker 1: I think it's a good it's a good thing to do. 476 00:28:30,920 --> 00:28:33,920 Speaker 1: Imagine you're welcome some back from the administration as well, 477 00:28:34,000 --> 00:28:36,119 Speaker 1: And what do they bring to the to the company 478 00:28:36,240 --> 00:28:38,360 Speaker 1: having that government experience. What does it does it mean 479 00:28:38,400 --> 00:28:40,320 Speaker 1: for a company like you know, I'm a big believer 480 00:28:40,480 --> 00:28:42,560 Speaker 1: and that Joe and I have called it the trisector 481 00:28:43,000 --> 00:28:46,040 Speaker 1: athlete leader, That you're a very good business leader. Someone 482 00:28:46,160 --> 00:28:48,960 Speaker 1: said experience in the public sector and the social sector, 483 00:28:49,000 --> 00:28:51,360 Speaker 1: a very good public sector leaders, someone who's had good 484 00:28:51,440 --> 00:28:54,160 Speaker 1: experience in the other two sectors, and on on and 485 00:28:54,240 --> 00:28:56,400 Speaker 1: so I think, first you just get that because I 486 00:28:56,480 --> 00:29:00,280 Speaker 1: think that the I'm not saying that business is easier, 487 00:29:00,400 --> 00:29:03,720 Speaker 1: but I'm saying there are less variables or stakeholders that 488 00:29:03,840 --> 00:29:06,680 Speaker 1: you have to try and deal with. UM. I think 489 00:29:06,720 --> 00:29:09,880 Speaker 1: than when you're in government, in in in a major role. UM. 490 00:29:09,920 --> 00:29:13,160 Speaker 1: And I think that right away changes your mindset, UM 491 00:29:13,640 --> 00:29:16,360 Speaker 1: in thinking about the breadth of what you have to do, 492 00:29:16,760 --> 00:29:20,480 Speaker 1: how you get things done, UM is I think more complicated. 493 00:29:20,600 --> 00:29:22,920 Speaker 1: So you bring those those kind of I could call 494 00:29:22,920 --> 00:29:26,560 Speaker 1: it technical skills that are really useful as opposed to 495 00:29:26,720 --> 00:29:29,400 Speaker 1: you know, so and so down Barton. Thank you so much, 496 00:29:29,560 --> 00:29:39,480 Speaker 1: David Gore and Tom Keane from your Aisier group. UM. 497 00:29:43,560 --> 00:29:46,480 Speaker 1: I think everyone Tom King, David Gurrow. We are thrilled 498 00:29:46,520 --> 00:29:49,640 Speaker 1: you with us to begin two thousand seventeen. Our team 499 00:29:49,720 --> 00:29:54,239 Speaker 1: put together a really interesting, David fabulous morning for us 500 00:29:54,880 --> 00:29:58,000 Speaker 1: to kick off the year. Larry Summers, Nor Rabini, Ian 501 00:29:58,040 --> 00:30:00,720 Speaker 1: Bremer our host here at your Aisier group, you know 502 00:30:00,800 --> 00:30:03,400 Speaker 1: the historic flat iron building in New York. We just 503 00:30:03,480 --> 00:30:05,320 Speaker 1: heard from Don Barton and Mackenzie and we'll get to 504 00:30:05,320 --> 00:30:08,240 Speaker 1: the equity markets in a moment with the uh Douglas 505 00:30:08,400 --> 00:30:11,880 Speaker 1: cast is well, what were your thoughts over the the 506 00:30:12,040 --> 00:30:15,640 Speaker 1: interregnum that we took off and that we were apart on. 507 00:30:16,080 --> 00:30:18,440 Speaker 1: I was able to step away from the news if 508 00:30:18,520 --> 00:30:22,040 Speaker 1: only did you tweet off Mr Trump? There were livings 509 00:30:22,040 --> 00:30:24,240 Speaker 1: on my tweets. I did read I did read his. 510 00:30:24,320 --> 00:30:26,400 Speaker 1: There's a feature on the Bloominger that sends the tweets 511 00:30:26,440 --> 00:30:29,000 Speaker 1: that he does to your email. So he's following through 512 00:30:29,080 --> 00:30:31,120 Speaker 1: that and he's at with some this morning. You're talking 513 00:30:31,120 --> 00:30:34,400 Speaker 1: about Obamacare and also General Motors, another company being called 514 00:30:34,440 --> 00:30:36,880 Speaker 1: out by the President. My basic yeah, my basic take 515 00:30:37,000 --> 00:30:39,560 Speaker 1: is we're seventeen days away. It's just suddenly incredible. I 516 00:30:39,640 --> 00:30:42,160 Speaker 1: thought that more upon us than it was President giving 517 00:30:42,160 --> 00:30:45,320 Speaker 1: a speech. I believe next week a farewell addressively broadcast 518 00:30:45,400 --> 00:30:48,640 Speaker 1: in primetime. We have been dealing the morning with what 519 00:30:48,760 --> 00:30:50,800 Speaker 1: has become front and center for the markets, which is 520 00:30:50,840 --> 00:30:54,200 Speaker 1: our politics and our international relations. As you know, we 521 00:30:54,280 --> 00:30:57,760 Speaker 1: do finance, we do investment, we do economics, and the 522 00:30:57,880 --> 00:31:00,960 Speaker 1: distal that is people. Actually you have to put money 523 00:31:01,120 --> 00:31:07,040 Speaker 1: at risk. He has written for decades thoughtful notes. Douglas 524 00:31:07,160 --> 00:31:09,240 Speaker 1: Cast is one of those people that even if you 525 00:31:09,360 --> 00:31:13,920 Speaker 1: don't agree with him, you're required to read them. Doug 526 00:31:13,960 --> 00:31:17,000 Speaker 1: Cast joins us this morning by telephone. It is a 527 00:31:17,040 --> 00:31:21,360 Speaker 1: Spectrum Enterprise phone line, Spectrum Enterprise nationwide fiber based network 528 00:31:21,440 --> 00:31:26,440 Speaker 1: and I T Infrastructure solutions. Duck Cast. David Kerr, Girl 529 00:31:26,600 --> 00:31:29,480 Speaker 1: was thinking over the holiday. I was thinking over the holiday. 530 00:31:30,040 --> 00:31:33,320 Speaker 1: You were short. How painful was the holiday for the 531 00:31:33,440 --> 00:31:37,200 Speaker 1: short one? Douglas Cast? Well, as I told you when 532 00:31:37,200 --> 00:31:39,720 Speaker 1: I was on about a month ago, David and Tom, Um, 533 00:31:40,560 --> 00:31:43,080 Speaker 1: I do like I I showed stocks, but I'm very 534 00:31:43,640 --> 00:31:49,920 Speaker 1: tight in my UH loss and UH price discipline and 535 00:31:50,360 --> 00:31:53,600 Speaker 1: that that keeps me alive. I'm not actually market neutral 536 00:31:53,720 --> 00:31:58,120 Speaker 1: right now. Um. You know, seventeen days to inauguration, but 537 00:31:58,320 --> 00:32:02,440 Speaker 1: more importantly thirty days to pictures and catchers. Um, so 538 00:32:02,520 --> 00:32:05,440 Speaker 1: it depends upon your perspective. In my perspective is six 539 00:32:05,920 --> 00:32:08,760 Speaker 1: six blocks of Marrow lago with my office is well 540 00:32:08,880 --> 00:32:11,880 Speaker 1: the perspective here of politics and folding it into the 541 00:32:11,960 --> 00:32:15,320 Speaker 1: equity market for our listeners who are away from the 542 00:32:15,480 --> 00:32:19,200 Speaker 1: Cassie and not day trading. But the more short term perspective. 543 00:32:19,760 --> 00:32:22,160 Speaker 1: What does a long term investor do if I'm going 544 00:32:22,200 --> 00:32:25,160 Speaker 1: to readjust my four oh one case this morning? What 545 00:32:25,320 --> 00:32:27,440 Speaker 1: is it? Doug cast wisdom on what I should do? 546 00:32:28,840 --> 00:32:31,720 Speaker 1: I think Larry Summers in the previous segment, wasn't he 547 00:32:31,840 --> 00:32:34,480 Speaker 1: something put it well? At first? Of all? Those interviews 548 00:32:34,480 --> 00:32:37,600 Speaker 1: were great also with Dr brener Um he said he 549 00:32:37,760 --> 00:32:44,080 Speaker 1: stated very laconically that quote uncertainty, the uncertainty premium should 550 00:32:44,160 --> 00:32:47,640 Speaker 1: rise close quotes. And I think that's when you know 551 00:32:47,720 --> 00:32:50,880 Speaker 1: when I construct my surprise list in December of every 552 00:32:51,000 --> 00:32:55,400 Speaker 1: year for the following year. Um uh, that is uh 553 00:32:56,920 --> 00:33:00,520 Speaker 1: really the central theme that I'm employing. I think every 554 00:33:00,600 --> 00:33:03,320 Speaker 1: year when you do a surprise list is one dominant 555 00:33:03,360 --> 00:33:06,040 Speaker 1: theme in the dominant theme, of course, is a new presidency. 556 00:33:06,800 --> 00:33:09,000 Speaker 1: Give us a sense here how you put together that 557 00:33:09,120 --> 00:33:12,640 Speaker 1: list this year. It's it's probably improbable as you put it. 558 00:33:13,040 --> 00:33:18,760 Speaker 1: You mentioned it for a second to frame my concept um, 559 00:33:19,240 --> 00:33:23,160 Speaker 1: I think that annual forecast on Wall Street, at least 560 00:33:23,200 --> 00:33:26,920 Speaker 1: to me, are mostly an exercise in what Howard Marks 561 00:33:27,040 --> 00:33:32,320 Speaker 1: calls first level thinking. Marks rights that what's clear to 562 00:33:32,440 --> 00:33:35,840 Speaker 1: the broad consensus of investors is almost always wrong. First, 563 00:33:35,920 --> 00:33:39,200 Speaker 1: most people don't understand the process to which something comes 564 00:33:39,240 --> 00:33:42,320 Speaker 1: to have outstanding money making potential. And second, the very 565 00:33:42,440 --> 00:33:46,800 Speaker 1: coalescing of popular opinion behind an investment tends to eliminate 566 00:33:46,880 --> 00:33:51,520 Speaker 1: its profit potential. So quite frankly, anyone with a clean 567 00:33:51,600 --> 00:33:54,520 Speaker 1: shirt and a ten percent forecasted rise in the SMP 568 00:33:54,760 --> 00:33:59,040 Speaker 1: is invited uh and inhabits the business media airways. Of course, 569 00:33:59,120 --> 00:34:03,720 Speaker 1: not bloomberg um, but we we We tend David to 570 00:34:03,920 --> 00:34:08,680 Speaker 1: term experts people whose credentials consist of mostly being consistently 571 00:34:08,840 --> 00:34:11,960 Speaker 1: and wildly wrong about the so called spheres of expertise. 572 00:34:12,520 --> 00:34:16,200 Speaker 1: At the same time, they display the stunning lack of 573 00:34:16,320 --> 00:34:19,440 Speaker 1: self doubt and humility about their failures. My Grandma co 574 00:34:19,560 --> 00:34:21,359 Speaker 1: Fax used to tell me, and she was a very 575 00:34:21,440 --> 00:34:25,040 Speaker 1: wise and successful investors used to use the words often wrong, 576 00:34:25,120 --> 00:34:27,640 Speaker 1: but never in doubt. So we live in this kind 577 00:34:27,680 --> 00:34:31,280 Speaker 1: of inauthentic investment world. Yet people perceive to be telling 578 00:34:31,320 --> 00:34:34,799 Speaker 1: the truth are often shunned by the consensus. And um, 579 00:34:35,760 --> 00:34:39,480 Speaker 1: so I approached my annual surprise list more unconventionally and 580 00:34:39,600 --> 00:34:42,440 Speaker 1: outside of the ambulop envelope. And you just said, I 581 00:34:42,560 --> 00:34:46,719 Speaker 1: call them probable improbables. These are These are basically overlays 582 00:34:47,280 --> 00:34:50,160 Speaker 1: and overlays the term and embedding where the arts of 583 00:34:50,200 --> 00:34:53,600 Speaker 1: a particular wager are higher than they should. And that's 584 00:34:53,640 --> 00:34:57,360 Speaker 1: how I construct my my vision of surprises. David, I 585 00:34:57,360 --> 00:35:01,279 Speaker 1: would not that Mr Cass, it's Mr Marks. This is 586 00:35:01,280 --> 00:35:03,720 Speaker 1: where we're supposed to step in in quote Graccho Marks. 587 00:35:04,080 --> 00:35:07,520 Speaker 1: But far more importantly, we should quote Richard Marks, the 588 00:35:07,600 --> 00:35:10,279 Speaker 1: great songwriter. And I think it's sort of like the 589 00:35:10,440 --> 00:35:13,799 Speaker 1: right here Waiting where we're sitting in January. Right here 590 00:35:13,840 --> 00:35:16,680 Speaker 1: waiting is Richard Mark said his classic. Perhaps I should 591 00:35:16,719 --> 00:35:19,960 Speaker 1: be quoting Graucho more and saying, who wants to be 592 00:35:20,040 --> 00:35:21,920 Speaker 1: a member of a short club that happed me as 593 00:35:21,920 --> 00:35:24,120 Speaker 1: a member. So that would be true to David Jumping, 594 00:35:25,040 --> 00:35:27,279 Speaker 1: I'm you're surprised lest number three is no more at real. 595 00:35:27,840 --> 00:35:29,880 Speaker 1: Donald Trump that the President life might be compelled to 596 00:35:30,400 --> 00:35:33,600 Speaker 1: do away with his active use of Twitter. As I 597 00:35:33,640 --> 00:35:35,239 Speaker 1: just mentioned a few moments ago, we saw two new 598 00:35:35,239 --> 00:35:36,920 Speaker 1: tweets out this morning, one of which is calling out 599 00:35:36,960 --> 00:35:39,759 Speaker 1: a company by name walk us to how big a 600 00:35:39,840 --> 00:35:41,840 Speaker 1: risk that is for for an investor like you? Are? You? 601 00:35:42,040 --> 00:35:44,520 Speaker 1: Are you waking up? As I assume these these executives 602 00:35:44,520 --> 00:35:46,560 Speaker 1: are with some trepidation that they might be called out 603 00:35:46,600 --> 00:35:48,799 Speaker 1: by the President elect here in the early morning hours 604 00:35:48,840 --> 00:35:51,880 Speaker 1: on Twitter. Yeah. I think my surprise, Davis, that is 605 00:35:51,960 --> 00:35:55,680 Speaker 1: that the security advises of the Trump administration will basically 606 00:35:55,760 --> 00:35:58,360 Speaker 1: tell him to cease and assist, Yeah, and close his 607 00:35:58,440 --> 00:36:01,480 Speaker 1: Twitter account. And I'm pretty acting that Twitter declines. The 608 00:36:01,560 --> 00:36:05,279 Speaker 1: shares declined by about the day that is announced, and 609 00:36:05,400 --> 00:36:08,440 Speaker 1: then you have this this failed operating strategy at the company. 610 00:36:08,960 --> 00:36:11,759 Speaker 1: There was another management departure, I believe the head of 611 00:36:11,800 --> 00:36:16,160 Speaker 1: the Chinese a subsidiary of Twitter, and you're gonna get 612 00:36:16,360 --> 00:36:18,840 Speaker 1: increased in patience on the part of the initial founders 613 00:36:18,880 --> 00:36:22,120 Speaker 1: and investors. And my surprises that Twitter has sold ten 614 00:36:22,200 --> 00:36:25,799 Speaker 1: dollars and twelve dollars to take under UH in two 615 00:36:25,880 --> 00:36:28,640 Speaker 1: thousand and seventeen. So no more jumping the start the shark, 616 00:36:28,760 --> 00:36:31,600 Speaker 1: David from. No more tweets like the one we had 617 00:36:31,680 --> 00:36:33,600 Speaker 1: been over the weekend or the several that we got 618 00:36:33,680 --> 00:36:49,759 Speaker 1: this morning, David Kerr coming up, Roger and Rogers. And 619 00:36:49,800 --> 00:36:51,480 Speaker 1: there's a lot of things you can't talk about. I mean, 620 00:36:51,600 --> 00:36:54,200 Speaker 1: every nation is different on an exiting head of their sentence. 621 00:36:54,239 --> 00:36:56,440 Speaker 1: He left in August, of course, from that job is 622 00:36:56,600 --> 00:37:00,440 Speaker 1: Governor of the Bank of India. It's amazing. Each nation 623 00:37:00,960 --> 00:37:03,040 Speaker 1: is different on how they treat this about what you 624 00:37:03,080 --> 00:37:05,880 Speaker 1: can talk about but you can't. India is pretty pretty 625 00:37:05,920 --> 00:37:08,239 Speaker 1: strict about it. But no doubt it will be a 626 00:37:09,080 --> 00:37:12,440 Speaker 1: good conversation. The Dow up a hundred and thirty seven points, 627 00:37:13,560 --> 00:37:17,120 Speaker 1: and we welcome Bloomberg Radio worldwide, Bloomberg Television worldwide and 628 00:37:17,200 --> 00:37:20,600 Speaker 1: in India. Good morning with us. Now is Robin Rogen. 629 00:37:20,680 --> 00:37:22,800 Speaker 1: You know him from the Boost School and from Chicago. 630 00:37:22,920 --> 00:37:25,160 Speaker 1: He's appeared with us so many times. I've done panels 631 00:37:25,640 --> 00:37:28,120 Speaker 1: with Professor Rogen in Davos at the meetings of the 632 00:37:28,160 --> 00:37:32,120 Speaker 1: World Economic Forum. But in the recent years he has 633 00:37:32,160 --> 00:37:35,239 Speaker 1: been with the Central Bank of his India. He has 634 00:37:35,280 --> 00:37:38,360 Speaker 1: now left that position and is greatly restricted in what 635 00:37:38,480 --> 00:37:41,480 Speaker 1: he can speak of about India. Let me frame it, 636 00:37:41,719 --> 00:37:45,799 Speaker 1: uh rago if I can about the continued great distortion 637 00:37:46,040 --> 00:37:48,400 Speaker 1: you more than anyone wrote about this in your classic 638 00:37:48,480 --> 00:37:52,400 Speaker 1: book fault Lines. The great distortion is still in place. 639 00:37:52,640 --> 00:37:55,440 Speaker 1: Ken Rogoff spoke about it in his book The Curse 640 00:37:55,560 --> 00:38:01,600 Speaker 1: of Cash. When do we exit our great bond market distortion? Well, 641 00:38:01,680 --> 00:38:06,080 Speaker 1: I think we're in the process of exiting. I think 642 00:38:06,200 --> 00:38:10,960 Speaker 1: with the federal reserves seeing limited room for continued accommodation 643 00:38:11,800 --> 00:38:15,440 Speaker 1: and starting to raise interest rates, I think you will 644 00:38:15,520 --> 00:38:18,480 Speaker 1: see the pressure on other central banks also come off 645 00:38:19,600 --> 00:38:21,560 Speaker 1: as much as it has been over the last few 646 00:38:21,640 --> 00:38:25,800 Speaker 1: years to continue accommodation. So my guess is we're in 647 00:38:25,840 --> 00:38:29,120 Speaker 1: the process of exit. How fast it will be will depend, 648 00:38:29,160 --> 00:38:31,960 Speaker 1: to some extent on conditions in the United States, what 649 00:38:32,200 --> 00:38:36,240 Speaker 1: policies the new administration brings, how comfortable the Federal Reserve 650 00:38:36,440 --> 00:38:39,520 Speaker 1: feels with those policies, and whether it feels it needs 651 00:38:39,600 --> 00:38:42,600 Speaker 1: to move faster or slower, depending on what what actually 652 00:38:42,640 --> 00:38:45,400 Speaker 1: the administration proposes and how quickly it will come in. 653 00:38:45,760 --> 00:38:47,879 Speaker 1: It seems to me that as one pressure comes off, 654 00:38:47,880 --> 00:38:50,800 Speaker 1: another pressure comes on. Here. We heard the rhetoric about 655 00:38:50,880 --> 00:38:53,839 Speaker 1: politics and the Federal Reserve here during the campaign. We're 656 00:38:53,880 --> 00:38:56,440 Speaker 1: certainly seeing what's happening on Capitol Hill, a new round 657 00:38:56,480 --> 00:38:58,279 Speaker 1: of Senators and Congress and being sworn in today many 658 00:38:58,320 --> 00:39:01,280 Speaker 1: of them help bent here on changing the relationship between 659 00:39:01,719 --> 00:39:04,439 Speaker 1: Congress and the Fed Reserve. How does this bank deal 660 00:39:04,560 --> 00:39:08,320 Speaker 1: with that new politicization. I think it's a it's a 661 00:39:08,480 --> 00:39:11,240 Speaker 1: very important issue, and it's it's there across the world. 662 00:39:12,280 --> 00:39:15,399 Speaker 1: Because central banks have been the only game in town 663 00:39:15,680 --> 00:39:20,320 Speaker 1: for the last few years, they've also acquired a sense 664 00:39:20,600 --> 00:39:28,640 Speaker 1: of political power that certainly creates apprehension amongst the political establishment. Uh, 665 00:39:28,760 --> 00:39:33,080 Speaker 1: and of course they would like to control that power. Unfortunately, 666 00:39:33,239 --> 00:39:36,439 Speaker 1: it is coming at a point when increasingly central bank 667 00:39:36,480 --> 00:39:41,440 Speaker 1: independence will become important as perhaps inflationary pressures rise and 668 00:39:41,640 --> 00:39:44,399 Speaker 1: central banks are asked to do the normal thing, which 669 00:39:44,600 --> 00:39:48,920 Speaker 1: is control inflation, for which we've spent many, many years 670 00:39:49,239 --> 00:39:52,759 Speaker 1: getting an apparatus which ensures the independence, insures they can 671 00:39:52,880 --> 00:39:56,480 Speaker 1: raise rates at the time that is needed without feeling 672 00:39:56,640 --> 00:40:01,040 Speaker 1: somehow constrained by political pressures. So it does these pressures 673 00:40:01,120 --> 00:40:04,239 Speaker 1: come at a time when Uh, it is really a 674 00:40:04,560 --> 00:40:07,680 Speaker 1: very delicate situation for central banks, very delicate. Indeed, the 675 00:40:07,680 --> 00:40:09,840 Speaker 1: backdrop to this, of course, is the possibility that we 676 00:40:09,880 --> 00:40:13,600 Speaker 1: could see policy changes, tax reform, a big infrastructure spending 677 00:40:13,640 --> 00:40:15,400 Speaker 1: package for instance, it seems to me that the FED 678 00:40:15,480 --> 00:40:17,600 Speaker 1: isn't real damned if you do, damned if you don't 679 00:40:17,600 --> 00:40:19,600 Speaker 1: position when it comes to to raising grads here that 680 00:40:19,719 --> 00:40:22,480 Speaker 1: potentially could be blamed for doing the wrong thing whichever 681 00:40:22,520 --> 00:40:27,359 Speaker 1: way they go. Absolutely, and given the as you said, 682 00:40:27,400 --> 00:40:30,239 Speaker 1: the political situation, this is a time they have to 683 00:40:30,280 --> 00:40:34,080 Speaker 1: tread very carefully. But I have no doubt that given 684 00:40:34,480 --> 00:40:37,320 Speaker 1: the tradition they have established, the FED will do what 685 00:40:37,480 --> 00:40:42,759 Speaker 1: it thinks is right rather than cater to political opinion. Professor. 686 00:40:42,840 --> 00:40:45,120 Speaker 1: And again this wraps around the top risks of two 687 00:40:45,200 --> 00:40:48,760 Speaker 1: thousand seventeen from Eurisia Group, and of course Ian Bremer 688 00:40:48,800 --> 00:40:52,440 Speaker 1: and his team focus on China. We spocus Secretary Summers 689 00:40:52,520 --> 00:40:55,320 Speaker 1: this morning about dollar strength. If we look at the 690 00:40:55,400 --> 00:40:59,160 Speaker 1: research from Robert Mundel and out of Chicago Jacob Frankel 691 00:40:59,239 --> 00:41:02,400 Speaker 1: of years ago, the researcher can Rogoff, Well, we can 692 00:41:02,440 --> 00:41:05,120 Speaker 1: look at the academics of it. You've had to live 693 00:41:05,200 --> 00:41:09,920 Speaker 1: the reality of currency dynamics. Do you have a concern 694 00:41:10,200 --> 00:41:15,719 Speaker 1: over a strong dollar in this two thousand seventeen Well, 695 00:41:16,400 --> 00:41:21,239 Speaker 1: I think a strong dollar is natural. Of course, one 696 00:41:21,440 --> 00:41:24,399 Speaker 1: piece of Ken Rogoff's research says that it's very hard 697 00:41:24,440 --> 00:41:28,160 Speaker 1: for anybody to predict the exchange the exchange rate over 698 00:41:28,400 --> 00:41:32,320 Speaker 1: any sustained period of time. Uh, the expectation is the 699 00:41:32,360 --> 00:41:35,759 Speaker 1: dollar will remain strong, and that certainly is consistent with 700 00:41:35,840 --> 00:41:38,000 Speaker 1: the Federal Reserve being first out of the box and 701 00:41:38,120 --> 00:41:42,920 Speaker 1: normalizing policy That will help other countries in the sense 702 00:41:43,200 --> 00:41:49,040 Speaker 1: of reducing pressure on them to adopt increasingly aggressive policies. 703 00:41:49,719 --> 00:41:53,160 Speaker 1: For the US, it could be a head wind to 704 00:41:53,320 --> 00:41:57,560 Speaker 1: growth because uh, you know of the obvious effects on 705 00:41:57,840 --> 00:42:01,719 Speaker 1: exports and imports. But that said, I think with the 706 00:42:02,200 --> 00:42:05,480 Speaker 1: kind of fiscal packages that are being thought off or 707 00:42:05,600 --> 00:42:08,880 Speaker 1: talked about, it may be that it it does more 708 00:42:08,960 --> 00:42:13,279 Speaker 1: in neutralizing rather than in in substantially reducing growth. A 709 00:42:13,360 --> 00:42:16,359 Speaker 1: big focus here of this present elect is on manufacturing, 710 00:42:16,440 --> 00:42:19,560 Speaker 1: bringing jobs back to the US in sourcing. Some call 711 00:42:19,640 --> 00:42:22,440 Speaker 1: it here. How difficult is that path forward going to 712 00:42:22,560 --> 00:42:24,880 Speaker 1: be for Donald Trump? We've seen him meet with the 713 00:42:24,960 --> 00:42:27,800 Speaker 1: Carrier company at its furnst factory in Indiana's deal with 714 00:42:27,920 --> 00:42:32,520 Speaker 1: companies on an individual basis here, How how how difficult 715 00:42:32,600 --> 00:42:36,960 Speaker 1: is it going to be to focus so exclusively on manufacturing? Right? Well, um, 716 00:42:37,840 --> 00:42:41,840 Speaker 1: you know, the the the data on manufacturing suggests that 717 00:42:42,520 --> 00:42:46,720 Speaker 1: over the last thirty years, the US has steadily lost jobs. However, 718 00:42:47,200 --> 00:42:50,239 Speaker 1: the extent of manufacturing in the United States, the share 719 00:42:50,280 --> 00:42:53,800 Speaker 1: of GDP has remained relatively constant. So what's happening is 720 00:42:53,960 --> 00:42:57,080 Speaker 1: not that the US is losing a tremendous number of 721 00:42:57,200 --> 00:43:01,239 Speaker 1: jobs to competition elsewhere. Clearly, factories are down, but new 722 00:43:01,320 --> 00:43:04,480 Speaker 1: factories are opening up in different areas, for example in 723 00:43:04,560 --> 00:43:08,160 Speaker 1: high tech. The bottom line, however, is that the loss 724 00:43:08,200 --> 00:43:10,600 Speaker 1: of jobs is not so much because the US is 725 00:43:10,800 --> 00:43:16,359 Speaker 1: uncomparative in manufacturing, but because technology is replacing jobs, many 726 00:43:16,480 --> 00:43:19,279 Speaker 1: of them in the high tech industry. Again, because we're 727 00:43:19,400 --> 00:43:22,560 Speaker 1: manufacturing in a in a smarter way here. So in 728 00:43:22,719 --> 00:43:26,439 Speaker 1: that sense, you know you're really working against the tide 729 00:43:26,480 --> 00:43:29,000 Speaker 1: of history when you say we're going to bring back jobs. 730 00:43:29,719 --> 00:43:32,480 Speaker 1: Are you going to also stand in the way of automation, 731 00:43:32,600 --> 00:43:36,160 Speaker 1: which is probably more important in terms of reducing jobs. 732 00:43:36,520 --> 00:43:40,239 Speaker 1: And let me just say, this very fine report by 733 00:43:40,280 --> 00:43:44,239 Speaker 1: Ian Bremer's group has one sentence which which worried me, 734 00:43:44,360 --> 00:43:48,320 Speaker 1: and it was a sentence which said something like the US, 735 00:43:48,440 --> 00:43:51,960 Speaker 1: many people in the US haven't benefited from trade. I 736 00:43:52,080 --> 00:43:56,360 Speaker 1: think that's the line that's going around, which is tremendously 737 00:43:56,480 --> 00:43:59,719 Speaker 1: dangerous both for the United States and the world. Any 738 00:44:00,120 --> 00:44:03,520 Speaker 1: in the United States has benefited from trade as a consumer. 739 00:44:03,840 --> 00:44:06,960 Speaker 1: Just look at the prices at Walmart, at Target, and 740 00:44:07,040 --> 00:44:09,960 Speaker 1: so on. You wouldn't have those prices if you didn't 741 00:44:10,040 --> 00:44:12,800 Speaker 1: have imposed from other countries. Professor, in the time that 742 00:44:12,840 --> 00:44:14,760 Speaker 1: we've got left to you, I must ask you about 743 00:44:14,760 --> 00:44:18,560 Speaker 1: the International Monetary Fund. Madame Legard enjoys the second term, 744 00:44:18,640 --> 00:44:22,759 Speaker 1: even after her legal challenges in France. Your name has 745 00:44:22,800 --> 00:44:27,279 Speaker 1: been shortlisted somewhere down the road to provide leadership to 746 00:44:27,400 --> 00:44:29,920 Speaker 1: the i m F. Is that an appealing idea to 747 00:44:30,120 --> 00:44:35,040 Speaker 1: Rock and Roger? Well, first, we do have a number 748 00:44:35,080 --> 00:44:37,680 Speaker 1: of years of Madame Legard's term, so it's it's a 749 00:44:37,760 --> 00:44:41,200 Speaker 1: hypothetical question where we're going to hypothetics. Hypothetical Tuesday go 750 00:44:41,360 --> 00:44:43,919 Speaker 1: with me? I think they. I think the important question 751 00:44:43,960 --> 00:44:46,040 Speaker 1: for anybody who takes over the i m F is 752 00:44:46,560 --> 00:44:50,239 Speaker 1: how to provide leadership in a world where, as Ian 753 00:44:50,280 --> 00:44:53,560 Speaker 1: Bremer's group puts it, uh, there is no country willing 754 00:44:53,640 --> 00:44:57,200 Speaker 1: to take on the mantle of global hegemon as the 755 00:44:57,280 --> 00:45:00,799 Speaker 1: United States used to. When everybody is backing off, it's 756 00:45:00,920 --> 00:45:03,919 Speaker 1: very hard to do a job as as a multi 757 00:45:03,960 --> 00:45:07,880 Speaker 1: lateral institution, which is right, Miss Leguard is doing well, professor, 758 00:45:08,120 --> 00:45:10,280 Speaker 1: thank you so much, Rock and roging with the Boost 759 00:45:10,320 --> 00:45:14,160 Speaker 1: School in Chicago. We thank Bloomberg Television for being with 760 00:45:14,280 --> 00:45:17,000 Speaker 1: us today, David, You and I with final thoughts here. 761 00:45:17,080 --> 00:45:20,400 Speaker 1: What I love about the Eurasia Group, the geopolitical recession 762 00:45:20,520 --> 00:45:23,719 Speaker 1: top risks is the brevity of it. This is a 763 00:45:23,880 --> 00:45:27,080 Speaker 1: Ian Bremer's always rushed. He's always moving on with Willis 764 00:45:27,080 --> 00:45:29,720 Speaker 1: Sparks and the others, moving on to the next project. 765 00:45:30,239 --> 00:45:34,160 Speaker 1: And there's a breath of directness to this, which which 766 00:45:34,239 --> 00:45:37,520 Speaker 1: is great. Leading with America, Yeah, leading with America, Independent America. 767 00:45:37,600 --> 00:45:40,880 Speaker 1: The biggest risk here last year was Chancellor Mercle there 768 00:45:41,000 --> 00:45:43,480 Speaker 1: go and Chancellor mercle making appearance in this piece of armor. 769 00:45:43,520 --> 00:45:46,240 Speaker 1: Money to this photo that our colleague Francine Lockwet tweeted 770 00:45:46,239 --> 00:45:49,719 Speaker 1: out of Merkele with francois Land, Barack Obama, all of 771 00:45:49,760 --> 00:45:51,239 Speaker 1: these other leaders who have lost their jobs. There is 772 00:45:51,320 --> 00:45:54,240 Speaker 1: Mercle alone in the mix looking up. So she faces 773 00:45:54,280 --> 00:45:56,600 Speaker 1: a series of challenges just in terms of her own 774 00:45:56,600 --> 00:45:59,960 Speaker 1: political leadership within Germany this year. And that's number four 775 00:46:00,120 --> 00:46:02,960 Speaker 1: or here on the risks, as you say, a fascinating 776 00:46:02,960 --> 00:46:12,880 Speaker 1: report twenty five pages and well worth reading. Thanks for 777 00:46:13,000 --> 00:46:17,400 Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to 778 00:46:17,600 --> 00:46:22,640 Speaker 1: interviews on iTunes, SoundCloud, or whichever podcast platform you prefer. 779 00:46:23,440 --> 00:46:26,279 Speaker 1: I'm out on Twitter at Tom Keene. David Gura is 780 00:46:26,440 --> 00:46:30,200 Speaker 1: at David Gura. Before the podcast, you can always catch 781 00:46:30,280 --> 00:46:46,680 Speaker 1: us worldwide. I'm Bloomberg Radio. Who you put your trust in? Matters? 782 00:46:46,760 --> 00:46:51,200 Speaker 1: Investors have put their trust and independent registered investment advisors 783 00:46:51,560 --> 00:46:54,879 Speaker 1: to the two and four trillion dollars. Why Learn more 784 00:46:54,920 --> 00:46:58,040 Speaker 1: at find your Independent Advisor dot com