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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom keene Jailey.

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Speaker 1: We bring you insight from the best in economics, finance,

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Speaker 1: investment and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Place.

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Speaker 1: To say that, joining us in London to continue the

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Speaker 1: conversation ahead of Tomorrow's general election, Roger Birtle joins us

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Speaker 1: now Capital Economics founder and Shairman. Good day to Roger.

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Speaker 1: Great to see you. Just walk me through what's at

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Speaker 1: stake in the next twenty four hours. Well, it's difficult

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Speaker 1: to exaggerate how important this election is. I think on

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Speaker 1: the whole, elections don't make much difference, by the way,

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Speaker 1: at least UK ones don't, because in the end the

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Speaker 1: politicians do much the same thing. This election is not

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Speaker 1: like that. And on the left and the Labor Party,

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Speaker 1: the leader of the Labor Party is effectively a sort

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Speaker 1: of Marxist. His right hand man is a Marxist. If

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Speaker 1: they were to form a government, we would have policies

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Speaker 1: in this country more left wing than anything we've ever

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Speaker 1: seen before. On the other side, the Conservatives are going

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Speaker 1: to be much the same as we've had over the

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Speaker 1: last five years. To be very clear here, Roger, that's

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Speaker 1: not an accusation. They are very open about being socialists.

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Speaker 1: They're very open about being extremely left wing. Yes, and

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Speaker 1: I don't support them, but you know, they don't make

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Speaker 1: any secret of it. I mean, these guys make some

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Speaker 1: US politicians that we all know, like Elizabeth Warren and

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Speaker 1: Bernie Sanders, they make them seem like outright right wingers.

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Speaker 1: We're talking about nationalizing areas of the economy much more

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Speaker 1: than we've ever seen before, perhaps since the nineteen seventies.

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Speaker 1: What's interesting about this particular period of UK politics for me, Roger,

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Speaker 1: going back to the election, we've now had three of

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Speaker 1: them in a round about four years. Ed Milliban was

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Speaker 1: the leader of the opposition, the Labor Party. They said

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Speaker 1: he was too left wing and then they went further left.

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Speaker 1: What does that tell you about the state of politics

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Speaker 1: right now, that we're experiencing the shift to the extremes,

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Speaker 1: not just in the United Kingdom but in the United

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Speaker 1: States as well. Yeah, I wouldn't actually saying that in

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Speaker 1: the UK we are seeing a shift to the extremes.

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Speaker 1: We are in regard to the Labor party, But interesting

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Speaker 1: me at the same time, the Conservative Party of anything,

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Speaker 1: he's moving towards the center. Very interesting this, I think

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Speaker 1: the Conservatives, we don't know what exactly what they're going

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Speaker 1: to do if they do get a majority, but in

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Speaker 1: what they've been saying recently, at least in terms of

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Speaker 1: economic policy, they've been moving leftwards towards more public spending,

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Speaker 1: concentrating on public services. Interesting that. How do you have

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Speaker 1: a stimulus driven, a fiscal space driven conservative that seems

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Speaker 1: impart greg again writing about one trillion dollar deficits in

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Speaker 1: the United States, but in Germany, in France, in the

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Speaker 1: United Kingdom. How can a conservative be pro stimulus? Well,

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Speaker 1: I think it's quite easy for that actually to happen.

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Speaker 1: Of course in the States you've had it in the past.

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Speaker 1: What about the Reagan tax cuts? How Italy all this

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Speaker 1: was justified in terms of supply side economics rather than demand.

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Speaker 1: But still you had more borrowing, deliberate borrowing by the government,

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Speaker 1: by conservative government. I think over the difference is that

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Speaker 1: circumstances have changed so much. When you've got a very

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Speaker 1: big debt and the deficits extremely high, and the markets

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Speaker 1: are very wary, a conservative government will be worried about

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Speaker 1: spending and borrowing more, but that's not the position we're in.

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Speaker 1: The deficits down the markets are desperate to lend to

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Speaker 1: the government and I think it's about time that we

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Speaker 1: borrowed more for investment. It depends what you spend the

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Speaker 1: money on. And this, I think is a big going

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Speaker 1: forward from here. The big, big focus for a lot

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Speaker 1: of people outside the United Kingdom won't just be on

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Speaker 1: the future of austerity. It will be on the path

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Speaker 1: towards brexit. Roger walk me through the kind of different

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Speaker 1: paths that are available to the UK within the next

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Speaker 1: twelve months or so off the back of this election. Well,

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Speaker 1: let's assume first of all that the Conservatives form of

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Speaker 1: majority government. Then we know pretty much that we're going

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Speaker 1: to leave the EU on the thirty one January, so

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Speaker 1: very soon. But that really, frankly, only sorts out part

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Speaker 1: of the issue, because according to Boris Johnson's deal, he's

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Speaker 1: then going to negotiate with the EU to try to

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Speaker 1: get a free tra rade agreement by the end of

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Speaker 1: next year, by the end of twenty and he said

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Speaker 1: that if he doesn't get a deal then he's not

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Speaker 1: going to seek an extension to this transition. A lot

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Speaker 1: of people don't believe that, by the way. Now, of course,

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Speaker 1: if that happens, say we don't get a deal and

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Speaker 1: he doesn't get the extension, then Britain's in the sort

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Speaker 1: of no deal territory where we then have to trade

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Speaker 1: with the EU, presumably on w t O terms. Now

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Speaker 1: if if if Labor wins, their policy, by the way,

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Speaker 1: is rather confused on Brexit, but we understand they're going

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Speaker 1: to try and renegotiate Boris's deal with the EU. Good

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Speaker 1: luck on that one, and then have yet another referendum

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Speaker 1: in the UK. So we're going to have in that case,

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Speaker 1: I think prolonged uncertain The UK has twelve months to

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Speaker 1: negotiate a free trade agreement with the European Union. It

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Speaker 1: took the Canadians about seven years. Can you do these

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Speaker 1: kind of things in twelve months? Well, I think the

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Speaker 1: answer is yes you can. As far as the economics concerned,

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Speaker 1: I think it's deadly simple. After all, we already have

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Speaker 1: effectively a deal with the EU. It's called free trade

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Speaker 1: plus bills and whistles. We don't have any tariffs or barriers.

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Speaker 1: That's the starting point. So I think given the political world.

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Speaker 1: I think it's dead easy to do actually within twelve months.

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Speaker 1: But that's the big if you know, is there going

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Speaker 1: to be the political will? And I think you're going

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Speaker 1: to see massive wrangley on both sides. Actually, what kind

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Speaker 1: of conservative is the new Boris Johnson? I understand as

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Speaker 1: a foreigner, there's three or four Boris Johnson's that can

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Speaker 1: be said of a lot of least. What kind of

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Speaker 1: conservative is he? For twos depends what newspaper you read

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Speaker 1: this name, Roger, Well, it's Tom. It's a great question.

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Speaker 1: I think that Okay, there Feral gave me the question

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Speaker 1: that the truthful answer is, we don't know. I mean,

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Speaker 1: you listen to him sometimes and he calls himself a

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Speaker 1: one nation conservative, which I guess is a bit close

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Speaker 1: in the American terms of almost being a liberal pro

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Speaker 1: public spending. And then other times he's very much in

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Speaker 1: favor of free markets, and he has been known to

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Speaker 1: wax lyrical about the importance of tax cuts and supply side.

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Speaker 1: You gotta come back, Roger Boodle, thank you so much.

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Speaker 1: Thank you, and writing for the Telegraph as well, always

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Speaker 1: interesting and out with an important new book, The A

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Speaker 1: I Economy. Will dive into that here. It's getting some

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Speaker 1: reve reviews right now. This is fascinating. She writes for

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Speaker 1: the Financial Ties, but far more than that has an

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Speaker 1: exceptionally extinguished resume of not only policy but just thinking

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Speaker 1: John in doing how you change things, and that's rare,

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Speaker 1: to say the least. To bring her in absolutely, Committa

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Speaker 1: camindists join us now, the former head of policy for

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Speaker 1: UK Prime Minister David Cameron. Commit a great to have

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Speaker 1: you with us on the program. Let's just begin the

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Speaker 1: conversation where we started it just a little bit earlier

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Speaker 1: on this hour. What is at stake with this general

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Speaker 1: election in the next twenty four hours. A lot is

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Speaker 1: at stake, which is why a lot of people are

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Speaker 1: actually going to turn out and vote. Because this election

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Speaker 1: represents two poles. I mean, it used to be said

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Speaker 1: that all politicians were the same. That is certainly not

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Speaker 1: true in this selection. We have a Conservative Party which

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Speaker 1: is bent on delivering Brexit and their slogan is get

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Speaker 1: Brexit done. And we have a Labor Party which is

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Speaker 1: further to the left than anything we've seen for forty

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Speaker 1: years and possibly for longer, which would impose a Marxist

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Speaker 1: vision upon the state and Cammilla. On top of that,

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Speaker 1: we have this really weird situation in many many constituencies

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Speaker 1: where they are traditional labor strongholds but voted leave. Then

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Speaker 1: we have these traditional conservative strongholds that voted remain. They're

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Speaker 1: regarded as the marginal seats, many of them. Com How

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Speaker 1: do you expect that to play out as the results

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Speaker 1: start to come through. Well, so this is one of

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Speaker 1: the things that makes it really hard to predict. So

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Speaker 1: the Conservatives are trying to breach what they call Labor's

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Speaker 1: red wall of seats which have traditionally been working class

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Speaker 1: labor held seats in the Midlands and the North of England.

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Speaker 1: Many of those voters voted to leave the European Union.

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Speaker 1: They're very patriotic. They think Jeremy Corbyn is anti American,

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Speaker 1: anti NATO and is not a patriot, and the Conservatives

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Speaker 1: think that they can win quite a lot of those

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Speaker 1: people back. As you said, of course, there may also

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Speaker 1: be a swap from the other direction, which is quite

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Speaker 1: a lot of remainers, particularly in London and the South,

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Speaker 1: may vote Liberal Democrat or may they may vote Labor.

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Speaker 1: So how complex does that make campaigning in the last

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Speaker 1: day of campaigning and of course, Um, you know, we

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Speaker 1: now know that. I mean, most parties are doing this

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Speaker 1: micro targeting. I mean it's all about individual seats. They're

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Speaker 1: running slightly different campaigns and different seats. To be honest, Um,

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Speaker 1: there's a lot of social media. The Conservatives have a

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Speaker 1: lot of money to spend. They are spending a great

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Speaker 1: deal of it today in the last couple of days

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Speaker 1: of the campaign, and their social media strategy I think

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Speaker 1: has improved a lot. Um. You know, the current prediction

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Speaker 1: is that the Conservatives will get a majority. The main

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Speaker 1: question is how big and how big it is does

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Speaker 1: make a lot of difference, because that makes a lot

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Speaker 1: of difference to whether Boris Johnson can get his withdrawal

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Speaker 1: agreement through Parliament really easily, and whether he can sort

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Speaker 1: of unshackle himself from his right wing If if there

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Speaker 1: wasn't breakfast breakfasts many people call it breakfast. If there

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Speaker 1: wasn't breakfast, what would be the Conservative manifesto? I mean,

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Speaker 1: is there such a thing between London elite Conservatives and

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Speaker 1: everybody else out there that's not London elite Conservatives. That's

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Speaker 1: a really interesting question which actually most people are not

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Speaker 1: asking because everybody's obsessed with breakit right to ask it.

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Speaker 1: I mean the Conservative manifesto was deliberately written this time

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Speaker 1: to be fairly low key, not give any headlines, not

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Speaker 1: actually give very many clues as to what the rest

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Speaker 1: of the prospectives looks like. Um, it is quite heavy

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Speaker 1: with spending pledges. So we now know that both parties,

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Speaker 1: I mean Britain is shifting in the direction of spending

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Speaker 1: more money under Cameron Osborne. You know, you saw a

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Speaker 1: serious tackling of the deficit after the financial crisis. Um.

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Speaker 1: We've actually they came out of that in sixteen with

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Speaker 1: a pretty strong economy and record high employment. Um. But

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Speaker 1: you know, the voters are wanting greater spending on public

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Speaker 1: services and quite a lot of voters are prepared to

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Speaker 1: pay more tax. So we're going to see a more

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Speaker 1: interventionist I think whoever went But you're right to ask

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Speaker 1: the question. You know, kind of what do the Tories

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Speaker 1: spans will be on Brexit. At the moment, their campaign

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Speaker 1: is all about two things. One is get Brexit done

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Speaker 1: and the other one is keep Jeremy Corbyn out and

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Speaker 1: they seem to think that is enough to win. Let's

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Speaker 1: take it once they're further Cammilla, Who is the party

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Speaker 1: of the working class? Now, have you'd asked me ten

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Speaker 1: years ago, I would have said labor. Similar conversation taking

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Speaker 1: place in the United States at the moment as well,

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Speaker 1: which is fascinating. Who is the party of the working

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Speaker 1: class in the United Kingdom? Yeah, well, it's a your right.

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Speaker 1: I spent a lot of time in the States. It's

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Speaker 1: the same question. Um. Look, I think the Tories aspire

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Speaker 1: to be the party of the working class. A lot

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Speaker 1: of working class voters may lend them the supported this election,

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Speaker 1: but whether they can hang on to that support in

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Speaker 1: the long term is a really big question. And whether

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Speaker 1: they can, as you say, bridge the gap between the

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Speaker 1: classif question. But look, we need to bridge that gap

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Speaker 1: because whoever becomes Prime Minister needs to govern for the

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Speaker 1: whole country, and we have too many people left behind

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Speaker 1: in this country. So I do think it is completely

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Speaker 1: plausible that the Conservatives could be the party of the

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Speaker 1: aspiring working class and the loans, which is what Mrs

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Speaker 1: Thatcher was all about. Conservatives in America are having no

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Speaker 1: trouble embracing fiscal space. It's called trillion dollar deficits. Do

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Speaker 1: you perceive that the Conservatives are the Cameron. The Conservatives

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Speaker 1: are a Jansen. The Conservatives are the Conservative of a decade.

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Speaker 1: Now can embrace fiscal space? Well, I mean Cameron was

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Speaker 1: a fiscal conservative. You know, he bought down on the deficit.

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Speaker 1: The opposition have used that very effectively against the Conservatives

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Speaker 1: because of austerity, uh, you know, which has had some

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Speaker 1: impact act are on you know, people in the lower

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Speaker 1: socio demographic groups. But now everybody is embracing fiscal space.

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Speaker 1: To use your terminology, I mean, you know, you've got

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Speaker 1: low interest rates. Whoever comes into power will borrow a lot.

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Speaker 1: They will fund massive infrastructure spending. And if we're going

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Speaker 1: to leave the EU, we need a fiscal stimulus. I mean,

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Speaker 1: we aren't going to need to get through this. There's

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Speaker 1: likely to be an economic downturn anyway in the cycle.

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Speaker 1: If you look at you, the economy are slowing. So

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Speaker 1: we're going to have a fiscal stimulus in some form.

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Speaker 1: Commit Before we let you go, I'd like to focus

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Speaker 1: on something that I know you're passionate about. Public health.

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Speaker 1: The NHS is at the epicenter of this election for

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Speaker 1: many many people. Walk me through how you thinking about

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Speaker 1: that particular subject and your thoughts on how the Conservative

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Speaker 1: Party in its current form of tackled it. Well, you're right,

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Speaker 1: NHS is the next biggest issue after Brexit. We have

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Speaker 1: an aging population, we have huge demand on our service.

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Speaker 1: We have a lot of immigration to this country. We

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Speaker 1: have low morale of doctors, and we have a particular

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Speaker 1: problem about pensions in the health service at the moment,

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Speaker 1: which just means a lot of doc as they're not

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Speaker 1: able to do as many as they should. Um, there

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Speaker 1: is huge concerns. Actually underneath all of that, there is

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Speaker 1: serious reform going on in the health service where we

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Speaker 1: are beginning in some places to join up health with

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Speaker 1: social care, which is basically care for the elderly, which

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Speaker 1: is the bit that's kind of fallen off and been

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Speaker 1: forgotten about. Um. You know whoever comes into power that

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Speaker 1: if the Tories come to power, I mean, they will

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Speaker 1: spend more money on the health service health haverpending has

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Speaker 1: been increasing in real time. It's just not very much.

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Speaker 1: What they have to do is also grasp the reform

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Speaker 1: narrative which the insiders are promoting. But you know it's

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Speaker 1: so political in this country. I mean, you have a

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Speaker 1: different healthcare system over there, but our healthcare system which

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Speaker 1: is very precious to us and is free at the

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Speaker 1: point of need, is very very political, and so making

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Speaker 1: any change to it, even if you're trying to make

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Speaker 1: it better, is fraught with difficulty. Lady Cavenish, thank you

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Speaker 1: so much bearing as Cavenish of Little Venice with us

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Speaker 1: today and of course your at work for David Cameron

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Speaker 1: what seems long ago in far away. Our next guest

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Speaker 1: is one of our most popular guests, because even if

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Speaker 1: you don't get fixed income, you haven't read your Fobos

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Speaker 1: cover to cover, everybody leans forward when she talked. She

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Speaker 1: just braces it down really really nicely for everyone, and

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Speaker 1: we always get positive feedback when she comes on the program.

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Speaker 1: So guess what we got it back lighttough. Charlie J H.

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Speaker 1: C M, Senior fund Manager, Good morning to Lalie. Good morning.

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Speaker 1: It's very lonely here without you, guys. I'm sorry. We'll

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Speaker 1: be back very soon. I promise a Federal Reserve decision

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Speaker 1: coming up later this afternoon, the least anticipated Fed decision

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Speaker 1: of the year so far for some people. Larly, will

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Speaker 1: you be going to launch? You're paying attention. If you're

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Speaker 1: paying attention, what to um you know? I think You're right,

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Speaker 1: it is the least anticipated because I think they made

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Speaker 1: it clear that they're going to be on hold from

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Speaker 1: a rate perspective. So I think what will really matter

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Speaker 1: is the commentary. Look, and I think you've seen the

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Speaker 1: b I S report that came out obviously result and

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Speaker 1: piece has just taken over the internet. I think on

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Speaker 1: what he wrote on the repo um, you know, I

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Speaker 1: think people will focus on the commentary on on that

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Speaker 1: part whether they see any problems or um they and

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Speaker 1: if they see anything where they do something about it.

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Speaker 1: Let's talk about what they're doing in the balance sheet currently.

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Speaker 1: There's a massive debate about this as to whether it

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Speaker 1: is QA, whether it isn't QA, whether the market thinks

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Speaker 1: it's QA. What are you telling people? How do you

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Speaker 1: characterize the current operations from the Federal Reserve at the

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Speaker 1: moment and that expanding balance sheet. It's not QUI because

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Speaker 1: it's not creating excess reserves UM, so it's definitely not

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Speaker 1: QUE the way it would be q E is they

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Speaker 1: extended out on the curve um. But at this point,

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Speaker 1: I think Powell has been chairman and Powell has been

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Speaker 1: very clear that he does not see this as Q

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Speaker 1: and I think, right, do you see the market lolly

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Speaker 1: behaving as it if it is q A. I think

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Speaker 1: the market is behaving with the notion that the central

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Speaker 1: Bank put globally is here and it's here to stay.

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Speaker 1: I think that's a very strong narrative. It's an unpredictable

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Speaker 1: narrative because it can change UM. But I don't think

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Speaker 1: the market necessarily sees it as que. I'm looking at

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Speaker 1: five year five year forwards, which is one gauge of

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Speaker 1: inflation folks out ten years for the United Kingdom, for

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Speaker 1: the United States and for Europe, and I believe the

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Speaker 1: chairman is going to be able to go in and

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Speaker 1: say today global inflation is the word Greenspan would use quiescent.

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Speaker 1: How quiescent do you observe inflation? As you look at

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Speaker 1: all those spread dynamics in the fixed income market UM

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Speaker 1: we have. It's been more prominent in our company conversations

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Speaker 1: on the labor side UM specifically UM the labor pressure

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Speaker 1: I think has been a que for a whole year

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Speaker 1: now where companies are actually having difficulty UM sourcing labor.

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Speaker 1: And it's actually quite interesting because as you know, you know,

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Speaker 1: typically when the company runs into a challenge whether it's

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Speaker 1: because of tariffs or UM cyclical or secular pressure as

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Speaker 1: labor goes first UM. But they've been really hesitancy on

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Speaker 1: the part of companies to tackle labor because they're actually

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Speaker 1: afraid that they won't be able to find the labor back,

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Speaker 1: which is fascinating. So I think the companies are on

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Speaker 1: a holding pattern. We're certainly seeing the labor pressure, and

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Speaker 1: I think you're you're seeing it in the financial results.

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Speaker 1: It's it's pressuring a little bit UM and I think

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Speaker 1: that seems it seems like that that's here to stay.

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Speaker 1: I mean, to me, it's absolutely fascinating that the wage

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Speaker 1: elasticity isn't there this time around. What would happen if

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Speaker 1: companies just raised wages. What would that do to the

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Speaker 1: architecture of our fixed income markets? Well, it depends by industry,

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Speaker 1: so labor is not always a large component of the

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Speaker 1: cost um. So for the labor intensive ones it will

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Speaker 1: it will certainly UM, you know, impact the girl's margins

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Speaker 1: UM and anything that's labor intensive in the services or

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Speaker 1: in the retail, etcetera. UM. You're also seeing the tariff

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Speaker 1: pressure as well, so you kind of get this jaw

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Speaker 1: impact UM and it would certainly impact. But look, I mean,

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Speaker 1: I think high yield if you're in the secularly challenge sectors,

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Speaker 1: you already have pretty large hurdles. So they will just

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Speaker 1: be icing on the cake. To be perfectly frank about it. Um.

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Speaker 1: And you know, in some of these industries they already

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Speaker 1: create at what I would call to be distressed levels.

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Speaker 1: High yields returned almost in twenty nineteen. Corporates and investment

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Speaker 1: grade what are they are? Fourteen fifteen day? Unbelievable. Now

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Speaker 1: I wanted to talk to Larne's world right now. Credit

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Speaker 1: just to wrap this conversation up. We've been in this

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Speaker 1: really interesting training range. It's on how you'd spreads of

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Speaker 1: between three fifty and full fifty. We get down to

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Speaker 1: three fifty, we bounced back up to four fifty, We're

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Speaker 1: back down to three fifty again. What does that mean

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Speaker 1: to you right now? Just where spreads are really really

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Speaker 1: tight the tides of the year once more, where's this going?

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Speaker 1: It just means you go buy some three month treasury

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Speaker 1: bills and keep it rolling it forward. Um. And as

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Speaker 1: actually the beauty of the tight spreads because by going

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Speaker 1: into higher quality you give up fifty or hundred pibs,

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Speaker 1: but you pick up an entire optionality because over six

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Speaker 1: months losing you know, half of fifty BIPs or hundred pips,

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Speaker 1: it's not going to make a big determined determination on

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Speaker 1: your overall portfolio performance. And if you're right, then we

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Speaker 1: have a volatility event. Then then you have like a

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Speaker 1: huge upside and you're able to deploy cash. I think

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Speaker 1: two twenty. If it stays put where we are, it's

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Speaker 1: very hard to see stellar returns out of credit. And

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Speaker 1: I think most people frame it as a coupon clipping

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Speaker 1: years And I got news for you. Every time somebody

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Speaker 1: says coupon clipping here, it never works. Are you thinking

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Speaker 1: about being a liquidity provide events? So as speak going

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Speaker 1: into waiting for those dislocations to take advantage of them.

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Speaker 1: We'll wait for the dislocations um and you have to

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Speaker 1: define you know, there's no blanket statement, right. It depends

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Speaker 1: what else is happening in the world and how the

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Speaker 1: world is changing, so high yield, you know. I'll leave

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Speaker 1: you with this final thought. I think everybody focuses on

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Speaker 1: the triple seas and and how bad it is, but

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Speaker 1: it's actually if even if you look at the Double Bees,

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Speaker 1: which I think is ridiculously rich. You also have another

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Speaker 1: different phenomena from the lack of covenant. Right most people

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Speaker 1: look at lack of convenance and a high quality. They go,

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Speaker 1: why do I care? This company is really good, it's

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Speaker 1: very high quality. The problem is if it's a public

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Speaker 1: company and their stock performance suffers because you know, equity

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Speaker 1: analysts do actually look at EBIT and operating income. None

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Speaker 1: of this adjusted EBITDA nonsense, which is fictitious. As we

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Speaker 1: talked about UM, you actually take on event risk, whether

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Speaker 1: the company goes private, whether the company actually spins off

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Speaker 1: an asset, and guess what, because the covenants are sold loose,

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Speaker 1: you have absolutely no claim on that cash flow. The

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Speaker 1: high yield market has structurally changed, in my opinion, based

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Speaker 1: on this Lucy Goosey documentation. We've seen a level four,

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Speaker 1: A level five is fantastic. Let's Charlie j s fun

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Speaker 1: manager lot. If we don't catch up with you, enjoy

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Speaker 1: the holidays, been great, catching up with fantastic. Contribution to

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Speaker 1: this program pleasure, hugely, hugely valuable. This is a joy,

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Speaker 1: not because it's Wendy Show or Brown University. And yes,

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Speaker 1: the topic is impeachment, but because of the authority. It

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Speaker 1: was just a few years ago. She wrote an exceptionally important,

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Speaker 1: weighty textbook, Gateways to Democracy, and at the time it

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Speaker 1: was accessible, you could reach out in actual touched the

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Speaker 1: fabric of our American political science. It's as if we

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Speaker 1: had to drag gateways of democracy from Ford to the president.

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Speaker 1: What's our gateways to democracy of this impeachment process, Professor Schiller,

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Speaker 1: I mean, if you had to rewrite that classic book today,

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Speaker 1: what would you write about the impeachment process? Well, I

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Speaker 1: mean that the point of the impeachment process that were

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Speaker 1: the struggle for the House is to exert oversight on

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Speaker 1: the president and basically that there's boundaries, there's limits on

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Speaker 1: executive power, and this president has vocally said I don't

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Speaker 1: really see it, and he's right. In the Constitution, it's

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Speaker 1: a vague document, you know, He's got a lot of

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Speaker 1: formal power in the Constitution, not legislative, but executive, and

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Speaker 1: there are a lot of things post scribe, in other words,

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Speaker 1: saying you can't do this and you can't do that,

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Speaker 1: and so whatever he thinks is in the national interests,

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Speaker 1: including his own re election, you know, might fly. So

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Speaker 1: I think The point of the impeachment is to say

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Speaker 1: that we have three branches of government and that the

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Speaker 1: founders wanted the House to have oversight. Whether you think

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Speaker 1: this amounts to removable offense, that's your opinion. But this

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Speaker 1: is structural and if the House doesn't do anything, and

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Speaker 1: the Senate doesn't do anything, and the president does exercise power,

430
00:23:16,480 --> 00:23:19,040
Speaker 1: you know, there's no control and that it's not the

431
00:23:19,080 --> 00:23:22,679
Speaker 1: intent of the system, and that's the important message of impeachment.

432
00:23:23,160 --> 00:23:25,800
Speaker 1: Then what do you do or how do you respond

433
00:23:25,960 --> 00:23:28,760
Speaker 1: rather to your students in classroom saying why don't you

434
00:23:28,800 --> 00:23:32,879
Speaker 1: just wait and vote the bum out the next time around? Um?

435
00:23:32,960 --> 00:23:36,480
Speaker 1: Because it's it's signal sending basically, right, I mean, it's

436
00:23:36,480 --> 00:23:39,119
Speaker 1: not just four years. You know. Hamilton's said, let's you know,

437
00:23:39,200 --> 00:23:41,760
Speaker 1: let's make the president of monarchy, you know, basically a

438
00:23:41,800 --> 00:23:44,080
Speaker 1: lifetime appointment. What's the problem. And he got a lot

439
00:23:44,119 --> 00:23:47,040
Speaker 1: of pushback, so he said, okay, how about four years.

440
00:23:47,359 --> 00:23:49,760
Speaker 1: This is in between the Senate's term and the House's term.

441
00:23:49,800 --> 00:23:52,080
Speaker 1: It's long enough to do something but not enough damage

442
00:23:52,240 --> 00:23:54,480
Speaker 1: and then the people can reelect the person. You know,

443
00:23:54,520 --> 00:23:56,800
Speaker 1: it seems reasonable, But that's four years with the government

444
00:23:56,840 --> 00:23:59,439
Speaker 1: of our size with the government of our power, the

445
00:23:59,480 --> 00:24:01,600
Speaker 1: government can it's a great deal of damage. It's not

446
00:24:02,920 --> 00:24:05,879
Speaker 1: eighty nine anymore. So that's the point. The point is

447
00:24:05,920 --> 00:24:09,359
Speaker 1: they also, just in case, gave the House oversight power

448
00:24:09,560 --> 00:24:12,800
Speaker 1: and the power to remove. And that's the point in

449
00:24:12,840 --> 00:24:15,840
Speaker 1: a power that's never exercises the power without practice. So

450
00:24:16,000 --> 00:24:18,800
Speaker 1: that's the point of it. Whether we think this is

451
00:24:19,040 --> 00:24:21,359
Speaker 1: you know, worth the time and effort, I think that's

452
00:24:21,400 --> 00:24:24,119
Speaker 1: what That's what gets decided at the polls. That's what

453
00:24:24,200 --> 00:24:28,040
Speaker 1: get decided. You know, at election time, Charles House knew

454
00:24:28,080 --> 00:24:30,800
Speaker 1: that he could be convicted and acquitted. I mean, I'm sorry,

455
00:24:31,040 --> 00:24:34,800
Speaker 1: convicted and removed. You know, I'm not sure the Democrats

456
00:24:34,840 --> 00:24:39,360
Speaker 1: would have moved. Interesting, Charles o Iowa emails and says time,

457
00:24:39,400 --> 00:24:42,040
Speaker 1: you shouldn't call the president a bum. That's an old phrase,

458
00:24:42,400 --> 00:24:44,400
Speaker 1: and I was hoping that that's not what you would

459
00:24:44,400 --> 00:24:46,280
Speaker 1: do it. No, it's an old phrase, and I was

460
00:24:46,320 --> 00:24:48,320
Speaker 1: thinking of it because Garrett Cole just signed for a

461
00:24:48,320 --> 00:24:51,800
Speaker 1: gazillion dollars or the Yankees, and sometime this year when

462
00:24:51,800 --> 00:24:54,080
Speaker 1: he gives up four runs, you know, with no ouse,

463
00:24:54,359 --> 00:24:59,040
Speaker 1: someone will say that context of it. Wendy, how do

464
00:24:59,080 --> 00:25:02,280
Speaker 1: we do a distinction. It's a playing electoral politics and

465
00:25:02,320 --> 00:25:07,159
Speaker 1: defending the constitution. Well, because it's not actually clear that

466
00:25:07,160 --> 00:25:09,600
Speaker 1: it's good electoral politics for the Democrats. I mean, I

467
00:25:09,680 --> 00:25:11,639
Speaker 1: think that's the sort of thing that ansty Polussi has

468
00:25:11,680 --> 00:25:14,440
Speaker 1: on her side. This is still a gamble. This only

469
00:25:14,560 --> 00:25:17,960
Speaker 1: rallies their base, but that's it, and it's not clear

470
00:25:18,000 --> 00:25:20,560
Speaker 1: what the effect will be on independent, particularly suburban voters,

471
00:25:20,680 --> 00:25:22,840
Speaker 1: and we know that in at least five states they're

472
00:25:22,840 --> 00:25:25,159
Speaker 1: going to be absolutely key to when you're losing those

473
00:25:25,200 --> 00:25:28,160
Speaker 1: states for the Democratic nominee. Plus it puts the Ukraine

474
00:25:28,160 --> 00:25:31,639
Speaker 1: Biden issue out there for the next you know, eleven months.

475
00:25:32,000 --> 00:25:34,720
Speaker 1: This is a big gamble. Now there's a Ukraine Biden

476
00:25:34,800 --> 00:25:37,680
Speaker 1: issue with Hunter. Who knew about that eight months ago?

477
00:25:37,760 --> 00:25:41,080
Speaker 1: Nobody and now it Biden's a nominee. It just covers

478
00:25:41,320 --> 00:25:45,159
Speaker 1: the Democratic nomination process and the general election. So I

479
00:25:45,200 --> 00:25:47,520
Speaker 1: think it's not at all clear that it's an electoral

480
00:25:47,600 --> 00:25:50,720
Speaker 1: win for the Democrats outside their base, which is why

481
00:25:50,760 --> 00:25:53,360
Speaker 1: the argument can stand that there's another reason that they're

482
00:25:53,359 --> 00:25:55,600
Speaker 1: doing it. Wendy. Just as a final question, that issue

483
00:25:55,680 --> 00:25:59,000
Speaker 1: is out there for Biden and for his son. Do

484
00:25:59,040 --> 00:26:01,480
Speaker 1: you think they've done a good job of explaining no,

485
00:26:01,560 --> 00:26:04,040
Speaker 1: not yet, and if he is the nominee to his

486
00:26:04,080 --> 00:26:06,360
Speaker 1: own party, doesn't really care. But if he's a nominee,

487
00:26:06,440 --> 00:26:08,199
Speaker 1: it's going to be an ever present question. He'll have

488
00:26:08,280 --> 00:26:10,280
Speaker 1: to come up with an answer, and people may say,

489
00:26:10,320 --> 00:26:12,280
Speaker 1: you know what, We'll take the person we know at

490
00:26:12,359 --> 00:26:15,199
Speaker 1: least most investigations are over versus the person who might

491
00:26:15,240 --> 00:26:18,199
Speaker 1: have four years of investigation, same prom Hillary Clinton. Ad So,

492
00:26:18,280 --> 00:26:20,000
Speaker 1: I think it's a much bigger problem for Biden than

493
00:26:20,080 --> 00:26:22,960
Speaker 1: Democrats anticipate. Right now, Wendy, thoughtful stuff. We'll have to

494
00:26:22,960 --> 00:26:25,720
Speaker 1: get you back on the program. Brown, the University Chair

495
00:26:25,720 --> 00:26:28,480
Speaker 1: of Political Science, wanging on the latest in Washington, d

496
00:26:28,600 --> 00:26:44,959
Speaker 1: c A consideration of the American economy. We can do

497
00:26:45,000 --> 00:26:47,880
Speaker 1: that with David blanche Flower. He is at Dartmouth College,

498
00:26:48,280 --> 00:26:51,080
Speaker 1: with his experience at the Bank of England, but far

499
00:26:51,200 --> 00:26:55,760
Speaker 1: more Danny blanch Fer has defined labor economics with his

500
00:26:55,840 --> 00:26:59,000
Speaker 1: classic The Wage Curve of years ago and his recent

501
00:26:59,080 --> 00:27:02,840
Speaker 1: work on a mirror because under employed, Danny, just to

502
00:27:02,880 --> 00:27:04,880
Speaker 1: get the Fed out of the way before we dive

503
00:27:04,880 --> 00:27:07,560
Speaker 1: into your labor work that you've done so well recently.

504
00:27:08,400 --> 00:27:11,639
Speaker 1: Is the FED working with an operative theory. There was

505
00:27:11,920 --> 00:27:14,840
Speaker 1: M one and M two monitorism, and then there was

506
00:27:14,960 --> 00:27:18,560
Speaker 1: a Phillips curve harketing back to LS in the fifties.

507
00:27:19,119 --> 00:27:23,080
Speaker 1: Is there an actual codified theory right now or is

508
00:27:23,119 --> 00:27:27,520
Speaker 1: every central bank making it up as they go? Well?

509
00:27:27,560 --> 00:27:29,479
Speaker 1: I think they're making it up as they go. And

510
00:27:29,520 --> 00:27:32,080
Speaker 1: I went to a conference of Brookings about a month

511
00:27:32,200 --> 00:27:34,480
Speaker 1: so ago, when all the big names with their banankee

512
00:27:34,520 --> 00:27:37,280
Speaker 1: and yelling and Krugman and everybody all trying to think

513
00:27:37,280 --> 00:27:40,520
Speaker 1: about why it is that inflation has been so low

514
00:27:40,640 --> 00:27:43,199
Speaker 1: and the central bank forecasting is going to rise, and

515
00:27:43,240 --> 00:27:45,879
Speaker 1: basically you come to the conclusion nobody has a clue.

516
00:27:46,320 --> 00:27:48,199
Speaker 1: So I think that's really where we are. And if

517
00:27:48,240 --> 00:27:51,720
Speaker 1: we look back, remember at eight rate rises from fifteen

518
00:27:51,800 --> 00:27:55,320
Speaker 1: to eighteen, with an expectation of three rises in nineteen

519
00:27:55,320 --> 00:27:59,400
Speaker 1: and four and twenty. So that's really reversed itself. Um,

520
00:27:59,440 --> 00:28:01,840
Speaker 1: and we're now in the position essentially where the central

521
00:28:01,840 --> 00:28:03,720
Speaker 1: bank just says, we don't know what we do and

522
00:28:03,760 --> 00:28:05,639
Speaker 1: we're gonna sit pap and we're going to wait for

523
00:28:05,680 --> 00:28:10,040
Speaker 1: the data. So the forecast essentially a gone that they

524
00:28:10,040 --> 00:28:12,760
Speaker 1: do STI don't know how to forecast, So really they're

525
00:28:12,800 --> 00:28:16,400
Speaker 1: sitting waiting and they're going to respond to something bad hits.

526
00:28:16,480 --> 00:28:19,240
Speaker 1: I think that's really where we are. Danny, you got

527
00:28:19,280 --> 00:28:21,360
Speaker 1: this right, Okay, some things you get right, some things

528
00:28:21,400 --> 00:28:24,320
Speaker 1: you get wrong. I've actually said in your lectures in Hanover,

529
00:28:24,800 --> 00:28:28,600
Speaker 1: where you have talked about the mystery of what's out there?

530
00:28:29,160 --> 00:28:32,679
Speaker 1: Is it technology? I mean, can we just say we

531
00:28:32,760 --> 00:28:36,360
Speaker 1: have good monitors of all political persuasions, from the late

532
00:28:36,400 --> 00:28:39,160
Speaker 1: Marvin good Friend and the late Paul Worker out to

533
00:28:39,200 --> 00:28:42,280
Speaker 1: the very living Krugman and Blanche Flower. Do we just

534
00:28:42,400 --> 00:28:47,920
Speaker 1: have good people grappling with modern technology? I don't know.

535
00:28:48,040 --> 00:28:50,880
Speaker 1: I mean, I think we can go back and go

536
00:28:50,920 --> 00:28:54,080
Speaker 1: back a hundred years and we've totally said the same thing, Tom.

537
00:28:54,200 --> 00:28:57,440
Speaker 1: I think what we've really got here is that we

538
00:28:57,440 --> 00:29:01,680
Speaker 1: were hit by a financial crisis, and people have underestimated that.

539
00:29:01,760 --> 00:29:03,880
Speaker 1: I mean, we've really had two and a hundred years, right,

540
00:29:03,880 --> 00:29:07,240
Speaker 1: we had we had the nine crash, and we had

541
00:29:07,280 --> 00:29:09,640
Speaker 1: the one in two thousand and eight, which seems to

542
00:29:09,680 --> 00:29:14,080
Speaker 1: have changed everything. And so the sort of standard rules

543
00:29:14,120 --> 00:29:16,360
Speaker 1: that applied then don't apply that. And if you think

544
00:29:16,440 --> 00:29:21,000
Speaker 1: vocal Ulcer came into a world of union power, raging inflation,

545
00:29:21,040 --> 00:29:22,760
Speaker 1: and you and you had to go in there and

546
00:29:23,000 --> 00:29:25,960
Speaker 1: put a grapple with that. The danger is that people

547
00:29:25,960 --> 00:29:28,840
Speaker 1: still have that in their head this new world where

548
00:29:28,880 --> 00:29:32,560
Speaker 1: actually our problem is exactly the opposite. We can't create

549
00:29:32,640 --> 00:29:36,040
Speaker 1: any inflation. Same story in Europe, same story in the UK,

550
00:29:36,560 --> 00:29:39,560
Speaker 1: same story around the world. And the other story is

551
00:29:39,600 --> 00:29:42,760
Speaker 1: that we also focused not just on inflation. We've focused

552
00:29:42,760 --> 00:29:46,000
Speaker 1: on our employment as our indicator of labor market slack.

553
00:29:46,040 --> 00:29:49,360
Speaker 1: And we've basically heard this week saying, well, the reality

554
00:29:49,440 --> 00:29:51,200
Speaker 1: is we've got that wrong. As I kept saying all

555
00:29:51,240 --> 00:29:53,040
Speaker 1: that I've said on your programs so many times, they

556
00:29:53,120 --> 00:29:57,720
Speaker 1: got the last decade, that's the world that changed, Danny.

557
00:29:57,760 --> 00:30:00,320
Speaker 1: You've been very good at making labor market dynamic, very

558
00:30:00,320 --> 00:30:03,200
Speaker 1: accessible for everyone, very simple. So let me ask you

559
00:30:03,240 --> 00:30:06,200
Speaker 1: a basic question. What is this economy doing producing two

560
00:30:06,680 --> 00:30:09,760
Speaker 1: sixty six thousand jobs in the latest payrolls report? Where's

561
00:30:09,760 --> 00:30:13,200
Speaker 1: that coming from? And what does it tell you? Well, John,

562
00:30:13,200 --> 00:30:16,240
Speaker 1: I think and I think that's obviously something we haven't

563
00:30:16,320 --> 00:30:20,120
Speaker 1: really expected around the world. But I guess we should

564
00:30:20,160 --> 00:30:23,160
Speaker 1: put that in context that if we just look at

565
00:30:23,160 --> 00:30:25,640
Speaker 1: the employment rate. So let's just you know, you take

566
00:30:25,960 --> 00:30:28,520
Speaker 1: you take the population of people over the age of six,

567
00:30:28,640 --> 00:30:32,000
Speaker 1: you need say what proportion of them are employed. Yes,

568
00:30:32,040 --> 00:30:35,520
Speaker 1: we've created jobs, but we aren't back for a couple

569
00:30:35,560 --> 00:30:38,960
Speaker 1: of percentage points below where we were in two thousand

570
00:30:39,040 --> 00:30:41,600
Speaker 1: and eight, and about four percentage points lower that we

571
00:30:41,600 --> 00:30:44,440
Speaker 1: were at the thel Be part of the two thousands.

572
00:30:44,480 --> 00:30:47,960
Speaker 1: So in a sense you'd say this is a slow recovery.

573
00:30:48,720 --> 00:30:52,000
Speaker 1: Jobs are still being created, but the types of jobs

574
00:30:52,440 --> 00:30:56,880
Speaker 1: not high paid enough, particularly because people can't get enough hours.

575
00:30:56,880 --> 00:30:59,240
Speaker 1: They've got a job they'd like to be a forty

576
00:30:59,280 --> 00:31:01,960
Speaker 1: hour week that they up twenty three. So I think

577
00:31:02,040 --> 00:31:05,120
Speaker 1: that's not something we would have expected. But I think

578
00:31:05,480 --> 00:31:08,560
Speaker 1: I think that we should look back and say employment

579
00:31:08,760 --> 00:31:12,239
Speaker 1: rates are below where they a decade ago. You did

580
00:31:12,480 --> 00:31:16,760
Speaker 1: this is critical. Then we can say good very quickly.

581
00:31:16,800 --> 00:31:19,720
Speaker 1: Good employers can say we got to go to part

582
00:31:19,760 --> 00:31:23,040
Speaker 1: time or lesser hours because of healthcare and benefit costs

583
00:31:23,160 --> 00:31:26,000
Speaker 1: and everybody else saying, look we need more full time workers.

584
00:31:26,280 --> 00:31:29,200
Speaker 1: Do we need to legislate or return to greater full

585
00:31:29,240 --> 00:31:31,600
Speaker 1: time work? Would that get it done? Or is that

586
00:31:31,720 --> 00:31:36,120
Speaker 1: just a dream we sing with offensives for full time work.

587
00:31:36,160 --> 00:31:39,200
Speaker 1: But I would push back against the it's the health

588
00:31:39,240 --> 00:31:42,520
Speaker 1: scare thing. I mean, it's many senses. The issue is global.

589
00:31:43,400 --> 00:31:45,600
Speaker 1: But yes, I think we have the our other. I mean,

590
00:31:45,640 --> 00:31:48,680
Speaker 1: we've got to give incentives for firms to hire people.

591
00:31:48,680 --> 00:31:51,440
Speaker 1: I mean, if you think, why why are firms making

592
00:31:52,160 --> 00:31:55,360
Speaker 1: using technology? The answers are a labor common because the

593
00:31:55,400 --> 00:31:58,680
Speaker 1: relative price of labors too high. To a simple fix

594
00:31:58,800 --> 00:32:02,280
Speaker 1: is to stop this thing. Machines replaced people, lower the

595
00:32:02,320 --> 00:32:07,760
Speaker 1: relative price of work. Government to hire people. Danny, I'm

596
00:32:07,840 --> 00:32:09,960
Speaker 1: out of time. We gotta leave it there. We will

597
00:32:10,040 --> 00:32:16,680
Speaker 1: continue this discussion David Windflower's contribution to labor economic Thanks

598
00:32:16,720 --> 00:32:20,960
Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen

599
00:32:21,200 --> 00:32:26,520
Speaker 1: to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform

600
00:32:26,640 --> 00:32:30,920
Speaker 1: you prefer. I'm on Twitter at Tom Keane before the podcast.

601
00:32:31,000 --> 00:32:34,440
Speaker 1: You can always catch us worldwide. I'm Bloomberg Radio