Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom keene Jailey.
Speaker 1: We bring you insight from the best in economics, finance,
Speaker 1: investment and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Place.
Speaker 1: To say that, joining us in London to continue the
Speaker 1: conversation ahead of Tomorrow's general election, Roger Birtle joins us
Speaker 1: now Capital Economics founder and Shairman. Good day to Roger.
Speaker 1: Great to see you. Just walk me through what's at
Speaker 1: stake in the next twenty four hours. Well, it's difficult
Speaker 1: to exaggerate how important this election is. I think on
Speaker 1: the whole, elections don't make much difference, by the way,
Speaker 1: at least UK ones don't, because in the end the
Speaker 1: politicians do much the same thing. This election is not
Speaker 1: like that. And on the left and the Labor Party,
Speaker 1: the leader of the Labor Party is effectively a sort
Speaker 1: of Marxist. His right hand man is a Marxist. If
Speaker 1: they were to form a government, we would have policies
Speaker 1: in this country more left wing than anything we've ever
Speaker 1: seen before. On the other side, the Conservatives are going
Speaker 1: to be much the same as we've had over the
Speaker 1: last five years. To be very clear here, Roger, that's
Speaker 1: not an accusation. They are very open about being socialists.
Speaker 1: They're very open about being extremely left wing. Yes, and
Speaker 1: I don't support them, but you know, they don't make
Speaker 1: any secret of it. I mean, these guys make some
Speaker 1: US politicians that we all know, like Elizabeth Warren and
Speaker 1: Bernie Sanders, they make them seem like outright right wingers.
Speaker 1: We're talking about nationalizing areas of the economy much more
Speaker 1: than we've ever seen before, perhaps since the nineteen seventies.
Speaker 1: What's interesting about this particular period of UK politics for me, Roger,
Speaker 1: going back to the election, we've now had three of
Speaker 1: them in a round about four years. Ed Milliban was
Speaker 1: the leader of the opposition, the Labor Party. They said
Speaker 1: he was too left wing and then they went further left.
Speaker 1: What does that tell you about the state of politics
Speaker 1: right now, that we're experiencing the shift to the extremes,
Speaker 1: not just in the United Kingdom but in the United
Speaker 1: States as well. Yeah, I wouldn't actually saying that in
Speaker 1: the UK we are seeing a shift to the extremes.
Speaker 1: We are in regard to the Labor party, But interesting
Speaker 1: me at the same time, the Conservative Party of anything,
Speaker 1: he's moving towards the center. Very interesting this, I think
Speaker 1: the Conservatives, we don't know what exactly what they're going
Speaker 1: to do if they do get a majority, but in
Speaker 1: what they've been saying recently, at least in terms of
Speaker 1: economic policy, they've been moving leftwards towards more public spending,
Speaker 1: concentrating on public services. Interesting that. How do you have
Speaker 1: a stimulus driven, a fiscal space driven conservative that seems
Speaker 1: impart greg again writing about one trillion dollar deficits in
Speaker 1: the United States, but in Germany, in France, in the
Speaker 1: United Kingdom. How can a conservative be pro stimulus? Well,
Speaker 1: I think it's quite easy for that actually to happen.
Speaker 1: Of course in the States you've had it in the past.
Speaker 1: What about the Reagan tax cuts? How Italy all this
Speaker 1: was justified in terms of supply side economics rather than demand.
Speaker 1: But still you had more borrowing, deliberate borrowing by the government,
Speaker 1: by conservative government. I think over the difference is that
Speaker 1: circumstances have changed so much. When you've got a very
Speaker 1: big debt and the deficits extremely high, and the markets
Speaker 1: are very wary, a conservative government will be worried about
Speaker 1: spending and borrowing more, but that's not the position we're in.
Speaker 1: The deficits down the markets are desperate to lend to
Speaker 1: the government and I think it's about time that we
Speaker 1: borrowed more for investment. It depends what you spend the
Speaker 1: money on. And this, I think is a big going
Speaker 1: forward from here. The big, big focus for a lot
Speaker 1: of people outside the United Kingdom won't just be on
Speaker 1: the future of austerity. It will be on the path
Speaker 1: towards brexit. Roger walk me through the kind of different
Speaker 1: paths that are available to the UK within the next
Speaker 1: twelve months or so off the back of this election. Well,
Speaker 1: let's assume first of all that the Conservatives form of
Speaker 1: majority government. Then we know pretty much that we're going
Speaker 1: to leave the EU on the thirty one January, so
Speaker 1: very soon. But that really, frankly, only sorts out part
Speaker 1: of the issue, because according to Boris Johnson's deal, he's
Speaker 1: then going to negotiate with the EU to try to
Speaker 1: get a free tra rade agreement by the end of
Speaker 1: next year, by the end of twenty and he said
Speaker 1: that if he doesn't get a deal then he's not
Speaker 1: going to seek an extension to this transition. A lot
Speaker 1: of people don't believe that, by the way. Now, of course,
Speaker 1: if that happens, say we don't get a deal and
Speaker 1: he doesn't get the extension, then Britain's in the sort
Speaker 1: of no deal territory where we then have to trade
Speaker 1: with the EU, presumably on w t O terms. Now
Speaker 1: if if if Labor wins, their policy, by the way,
Speaker 1: is rather confused on Brexit, but we understand they're going
Speaker 1: to try and renegotiate Boris's deal with the EU. Good
Speaker 1: luck on that one, and then have yet another referendum
Speaker 1: in the UK. So we're going to have in that case,
Speaker 1: I think prolonged uncertain The UK has twelve months to
Speaker 1: negotiate a free trade agreement with the European Union. It
Speaker 1: took the Canadians about seven years. Can you do these
Speaker 1: kind of things in twelve months? Well, I think the
Speaker 1: answer is yes you can. As far as the economics concerned,
Speaker 1: I think it's deadly simple. After all, we already have
Speaker 1: effectively a deal with the EU. It's called free trade
Speaker 1: plus bills and whistles. We don't have any tariffs or barriers.
Speaker 1: That's the starting point. So I think given the political world.
Speaker 1: I think it's dead easy to do actually within twelve months.
Speaker 1: But that's the big if you know, is there going
Speaker 1: to be the political will? And I think you're going
Speaker 1: to see massive wrangley on both sides. Actually, what kind
Speaker 1: of conservative is the new Boris Johnson? I understand as
Speaker 1: a foreigner, there's three or four Boris Johnson's that can
Speaker 1: be said of a lot of least. What kind of
Speaker 1: conservative is he? For twos depends what newspaper you read
Speaker 1: this name, Roger, Well, it's Tom. It's a great question.
Speaker 1: I think that Okay, there Feral gave me the question
Speaker 1: that the truthful answer is, we don't know. I mean,
Speaker 1: you listen to him sometimes and he calls himself a
Speaker 1: one nation conservative, which I guess is a bit close
Speaker 1: in the American terms of almost being a liberal pro
Speaker 1: public spending. And then other times he's very much in
Speaker 1: favor of free markets, and he has been known to
Speaker 1: wax lyrical about the importance of tax cuts and supply side.
Speaker 1: You gotta come back, Roger Boodle, thank you so much.
Speaker 1: Thank you, and writing for the Telegraph as well, always
Speaker 1: interesting and out with an important new book, The A
Speaker 1: I Economy. Will dive into that here. It's getting some
Speaker 1: reve reviews right now. This is fascinating. She writes for
Speaker 1: the Financial Ties, but far more than that has an
Speaker 1: exceptionally extinguished resume of not only policy but just thinking
Speaker 1: John in doing how you change things, and that's rare,
Speaker 1: to say the least. To bring her in absolutely, Committa
Speaker 1: camindists join us now, the former head of policy for
Speaker 1: UK Prime Minister David Cameron. Commit a great to have
Speaker 1: you with us on the program. Let's just begin the
Speaker 1: conversation where we started it just a little bit earlier
Speaker 1: on this hour. What is at stake with this general
Speaker 1: election in the next twenty four hours. A lot is
Speaker 1: at stake, which is why a lot of people are
Speaker 1: actually going to turn out and vote. Because this election
Speaker 1: represents two poles. I mean, it used to be said
Speaker 1: that all politicians were the same. That is certainly not
Speaker 1: true in this selection. We have a Conservative Party which
Speaker 1: is bent on delivering Brexit and their slogan is get
Speaker 1: Brexit done. And we have a Labor Party which is
Speaker 1: further to the left than anything we've seen for forty
Speaker 1: years and possibly for longer, which would impose a Marxist
Speaker 1: vision upon the state and Cammilla. On top of that,
Speaker 1: we have this really weird situation in many many constituencies
Speaker 1: where they are traditional labor strongholds but voted leave. Then
Speaker 1: we have these traditional conservative strongholds that voted remain. They're
Speaker 1: regarded as the marginal seats, many of them. Com How
Speaker 1: do you expect that to play out as the results
Speaker 1: start to come through. Well, so this is one of
Speaker 1: the things that makes it really hard to predict. So
Speaker 1: the Conservatives are trying to breach what they call Labor's
Speaker 1: red wall of seats which have traditionally been working class
Speaker 1: labor held seats in the Midlands and the North of England.
Speaker 1: Many of those voters voted to leave the European Union.
Speaker 1: They're very patriotic. They think Jeremy Corbyn is anti American,
Speaker 1: anti NATO and is not a patriot, and the Conservatives
Speaker 1: think that they can win quite a lot of those
Speaker 1: people back. As you said, of course, there may also
Speaker 1: be a swap from the other direction, which is quite
Speaker 1: a lot of remainers, particularly in London and the South,
Speaker 1: may vote Liberal Democrat or may they may vote Labor.
Speaker 1: So how complex does that make campaigning in the last
Speaker 1: day of campaigning and of course, Um, you know, we
Speaker 1: now know that. I mean, most parties are doing this
Speaker 1: micro targeting. I mean it's all about individual seats. They're
Speaker 1: running slightly different campaigns and different seats. To be honest, Um,
Speaker 1: there's a lot of social media. The Conservatives have a
Speaker 1: lot of money to spend. They are spending a great
Speaker 1: deal of it today in the last couple of days
Speaker 1: of the campaign, and their social media strategy I think
Speaker 1: has improved a lot. Um. You know, the current prediction
Speaker 1: is that the Conservatives will get a majority. The main
Speaker 1: question is how big and how big it is does
Speaker 1: make a lot of difference, because that makes a lot
Speaker 1: of difference to whether Boris Johnson can get his withdrawal
Speaker 1: agreement through Parliament really easily, and whether he can sort
Speaker 1: of unshackle himself from his right wing If if there
Speaker 1: wasn't breakfast breakfasts many people call it breakfast. If there
Speaker 1: wasn't breakfast, what would be the Conservative manifesto? I mean,
Speaker 1: is there such a thing between London elite Conservatives and
Speaker 1: everybody else out there that's not London elite Conservatives. That's
Speaker 1: a really interesting question which actually most people are not
Speaker 1: asking because everybody's obsessed with breakit right to ask it.
Speaker 1: I mean the Conservative manifesto was deliberately written this time
Speaker 1: to be fairly low key, not give any headlines, not
Speaker 1: actually give very many clues as to what the rest
Speaker 1: of the prospectives looks like. Um, it is quite heavy
Speaker 1: with spending pledges. So we now know that both parties,
Speaker 1: I mean Britain is shifting in the direction of spending
Speaker 1: more money under Cameron Osborne. You know, you saw a
Speaker 1: serious tackling of the deficit after the financial crisis. Um.
Speaker 1: We've actually they came out of that in sixteen with
Speaker 1: a pretty strong economy and record high employment. Um. But
Speaker 1: you know, the voters are wanting greater spending on public
Speaker 1: services and quite a lot of voters are prepared to
Speaker 1: pay more tax. So we're going to see a more
Speaker 1: interventionist I think whoever went But you're right to ask
Speaker 1: the question. You know, kind of what do the Tories
Speaker 1: spans will be on Brexit. At the moment, their campaign
Speaker 1: is all about two things. One is get Brexit done
Speaker 1: and the other one is keep Jeremy Corbyn out and
Speaker 1: they seem to think that is enough to win. Let's
Speaker 1: take it once they're further Cammilla, Who is the party
Speaker 1: of the working class? Now, have you'd asked me ten
Speaker 1: years ago, I would have said labor. Similar conversation taking
Speaker 1: place in the United States at the moment as well,
Speaker 1: which is fascinating. Who is the party of the working
Speaker 1: class in the United Kingdom? Yeah, well, it's a your right.
Speaker 1: I spent a lot of time in the States. It's
Speaker 1: the same question. Um. Look, I think the Tories aspire
Speaker 1: to be the party of the working class. A lot
Speaker 1: of working class voters may lend them the supported this election,
Speaker 1: but whether they can hang on to that support in
Speaker 1: the long term is a really big question. And whether
Speaker 1: they can, as you say, bridge the gap between the
Speaker 1: classif question. But look, we need to bridge that gap
Speaker 1: because whoever becomes Prime Minister needs to govern for the
Speaker 1: whole country, and we have too many people left behind
Speaker 1: in this country. So I do think it is completely
Speaker 1: plausible that the Conservatives could be the party of the
Speaker 1: aspiring working class and the loans, which is what Mrs
Speaker 1: Thatcher was all about. Conservatives in America are having no
Speaker 1: trouble embracing fiscal space. It's called trillion dollar deficits. Do
Speaker 1: you perceive that the Conservatives are the Cameron. The Conservatives
Speaker 1: are a Jansen. The Conservatives are the Conservative of a decade.
Speaker 1: Now can embrace fiscal space? Well, I mean Cameron was
Speaker 1: a fiscal conservative. You know, he bought down on the deficit.
Speaker 1: The opposition have used that very effectively against the Conservatives
Speaker 1: because of austerity, uh, you know, which has had some
Speaker 1: impact act are on you know, people in the lower
Speaker 1: socio demographic groups. But now everybody is embracing fiscal space.
Speaker 1: To use your terminology, I mean, you know, you've got
Speaker 1: low interest rates. Whoever comes into power will borrow a lot.
Speaker 1: They will fund massive infrastructure spending. And if we're going
Speaker 1: to leave the EU, we need a fiscal stimulus. I mean,
Speaker 1: we aren't going to need to get through this. There's
Speaker 1: likely to be an economic downturn anyway in the cycle.
Speaker 1: If you look at you, the economy are slowing. So
Speaker 1: we're going to have a fiscal stimulus in some form.
Speaker 1: Commit Before we let you go, I'd like to focus
Speaker 1: on something that I know you're passionate about. Public health.
Speaker 1: The NHS is at the epicenter of this election for
Speaker 1: many many people. Walk me through how you thinking about
Speaker 1: that particular subject and your thoughts on how the Conservative
Speaker 1: Party in its current form of tackled it. Well, you're right,
Speaker 1: NHS is the next biggest issue after Brexit. We have
Speaker 1: an aging population, we have huge demand on our service.
Speaker 1: We have a lot of immigration to this country. We
Speaker 1: have low morale of doctors, and we have a particular
Speaker 1: problem about pensions in the health service at the moment,
Speaker 1: which just means a lot of doc as they're not
Speaker 1: able to do as many as they should. Um, there
Speaker 1: is huge concerns. Actually underneath all of that, there is
Speaker 1: serious reform going on in the health service where we
Speaker 1: are beginning in some places to join up health with
Speaker 1: social care, which is basically care for the elderly, which
Speaker 1: is the bit that's kind of fallen off and been
Speaker 1: forgotten about. Um. You know whoever comes into power that
Speaker 1: if the Tories come to power, I mean, they will
Speaker 1: spend more money on the health service health haverpending has
Speaker 1: been increasing in real time. It's just not very much.
Speaker 1: What they have to do is also grasp the reform
Speaker 1: narrative which the insiders are promoting. But you know it's
Speaker 1: so political in this country. I mean, you have a
Speaker 1: different healthcare system over there, but our healthcare system which
Speaker 1: is very precious to us and is free at the
Speaker 1: point of need, is very very political, and so making
Speaker 1: any change to it, even if you're trying to make
Speaker 1: it better, is fraught with difficulty. Lady Cavenish, thank you
Speaker 1: so much bearing as Cavenish of Little Venice with us
Speaker 1: today and of course your at work for David Cameron
Speaker 1: what seems long ago in far away. Our next guest
Speaker 1: is one of our most popular guests, because even if
Speaker 1: you don't get fixed income, you haven't read your Fobos
Speaker 1: cover to cover, everybody leans forward when she talked. She
Speaker 1: just braces it down really really nicely for everyone, and
Speaker 1: we always get positive feedback when she comes on the program.
Speaker 1: So guess what we got it back lighttough. Charlie J H.
Speaker 1: C M, Senior fund Manager, Good morning to Lalie. Good morning.
Speaker 1: It's very lonely here without you, guys. I'm sorry. We'll
Speaker 1: be back very soon. I promise a Federal Reserve decision
Speaker 1: coming up later this afternoon, the least anticipated Fed decision
Speaker 1: of the year so far for some people. Larly, will
Speaker 1: you be going to launch? You're paying attention. If you're
Speaker 1: paying attention, what to um you know? I think You're right,
Speaker 1: it is the least anticipated because I think they made
Speaker 1: it clear that they're going to be on hold from
Speaker 1: a rate perspective. So I think what will really matter
Speaker 1: is the commentary. Look, and I think you've seen the
Speaker 1: b I S report that came out obviously result and
Speaker 1: piece has just taken over the internet. I think on
Speaker 1: what he wrote on the repo um, you know, I
Speaker 1: think people will focus on the commentary on on that
Speaker 1: part whether they see any problems or um they and
Speaker 1: if they see anything where they do something about it.
Speaker 1: Let's talk about what they're doing in the balance sheet currently.
Speaker 1: There's a massive debate about this as to whether it
Speaker 1: is QA, whether it isn't QA, whether the market thinks
Speaker 1: it's QA. What are you telling people? How do you
Speaker 1: characterize the current operations from the Federal Reserve at the
Speaker 1: moment and that expanding balance sheet. It's not QUI because
Speaker 1: it's not creating excess reserves UM, so it's definitely not
Speaker 1: QUE the way it would be q E is they
Speaker 1: extended out on the curve um. But at this point,
Speaker 1: I think Powell has been chairman and Powell has been
Speaker 1: very clear that he does not see this as Q
Speaker 1: and I think, right, do you see the market lolly
Speaker 1: behaving as it if it is q A. I think
Speaker 1: the market is behaving with the notion that the central
Speaker 1: Bank put globally is here and it's here to stay.
Speaker 1: I think that's a very strong narrative. It's an unpredictable
Speaker 1: narrative because it can change UM. But I don't think
Speaker 1: the market necessarily sees it as que. I'm looking at
Speaker 1: five year five year forwards, which is one gauge of
Speaker 1: inflation folks out ten years for the United Kingdom, for
Speaker 1: the United States and for Europe, and I believe the
Speaker 1: chairman is going to be able to go in and
Speaker 1: say today global inflation is the word Greenspan would use quiescent.
Speaker 1: How quiescent do you observe inflation? As you look at
Speaker 1: all those spread dynamics in the fixed income market UM
Speaker 1: we have. It's been more prominent in our company conversations
Speaker 1: on the labor side UM specifically UM the labor pressure
Speaker 1: I think has been a que for a whole year
Speaker 1: now where companies are actually having difficulty UM sourcing labor.
Speaker 1: And it's actually quite interesting because as you know, you know,
Speaker 1: typically when the company runs into a challenge whether it's
Speaker 1: because of tariffs or UM cyclical or secular pressure as
Speaker 1: labor goes first UM. But they've been really hesitancy on
Speaker 1: the part of companies to tackle labor because they're actually
Speaker 1: afraid that they won't be able to find the labor back,
Speaker 1: which is fascinating. So I think the companies are on
Speaker 1: a holding pattern. We're certainly seeing the labor pressure, and
Speaker 1: I think you're you're seeing it in the financial results.
Speaker 1: It's it's pressuring a little bit UM and I think
Speaker 1: that seems it seems like that that's here to stay.
Speaker 1: I mean, to me, it's absolutely fascinating that the wage
Speaker 1: elasticity isn't there this time around. What would happen if
Speaker 1: companies just raised wages. What would that do to the
Speaker 1: architecture of our fixed income markets? Well, it depends by industry,
Speaker 1: so labor is not always a large component of the
Speaker 1: cost um. So for the labor intensive ones it will
Speaker 1: it will certainly UM, you know, impact the girl's margins
Speaker 1: UM and anything that's labor intensive in the services or
Speaker 1: in the retail, etcetera. UM. You're also seeing the tariff
Speaker 1: pressure as well, so you kind of get this jaw
Speaker 1: impact UM and it would certainly impact. But look, I mean,
Speaker 1: I think high yield if you're in the secularly challenge sectors,
Speaker 1: you already have pretty large hurdles. So they will just
Speaker 1: be icing on the cake. To be perfectly frank about it. Um.
Speaker 1: And you know, in some of these industries they already
Speaker 1: create at what I would call to be distressed levels.
Speaker 1: High yields returned almost in twenty nineteen. Corporates and investment
Speaker 1: grade what are they are? Fourteen fifteen day? Unbelievable. Now
Speaker 1: I wanted to talk to Larne's world right now. Credit
Speaker 1: just to wrap this conversation up. We've been in this
Speaker 1: really interesting training range. It's on how you'd spreads of
Speaker 1: between three fifty and full fifty. We get down to
Speaker 1: three fifty, we bounced back up to four fifty, We're
Speaker 1: back down to three fifty again. What does that mean
Speaker 1: to you right now? Just where spreads are really really
Speaker 1: tight the tides of the year once more, where's this going?
Speaker 1: It just means you go buy some three month treasury
Speaker 1: bills and keep it rolling it forward. Um. And as
Speaker 1: actually the beauty of the tight spreads because by going
Speaker 1: into higher quality you give up fifty or hundred pibs,
Speaker 1: but you pick up an entire optionality because over six
Speaker 1: months losing you know, half of fifty BIPs or hundred pips,
Speaker 1: it's not going to make a big determined determination on
Speaker 1: your overall portfolio performance. And if you're right, then we
Speaker 1: have a volatility event. Then then you have like a
Speaker 1: huge upside and you're able to deploy cash. I think
Speaker 1: two twenty. If it stays put where we are, it's
Speaker 1: very hard to see stellar returns out of credit. And
Speaker 1: I think most people frame it as a coupon clipping
Speaker 1: years And I got news for you. Every time somebody
Speaker 1: says coupon clipping here, it never works. Are you thinking
Speaker 1: about being a liquidity provide events? So as speak going
Speaker 1: into waiting for those dislocations to take advantage of them.
Speaker 1: We'll wait for the dislocations um and you have to
Speaker 1: define you know, there's no blanket statement, right. It depends
Speaker 1: what else is happening in the world and how the
Speaker 1: world is changing, so high yield, you know. I'll leave
Speaker 1: you with this final thought. I think everybody focuses on
Speaker 1: the triple seas and and how bad it is, but
Speaker 1: it's actually if even if you look at the Double Bees,
Speaker 1: which I think is ridiculously rich. You also have another
Speaker 1: different phenomena from the lack of covenant. Right most people
Speaker 1: look at lack of convenance and a high quality. They go,
Speaker 1: why do I care? This company is really good, it's
Speaker 1: very high quality. The problem is if it's a public
Speaker 1: company and their stock performance suffers because you know, equity
Speaker 1: analysts do actually look at EBIT and operating income. None
Speaker 1: of this adjusted EBITDA nonsense, which is fictitious. As we
Speaker 1: talked about UM, you actually take on event risk, whether
Speaker 1: the company goes private, whether the company actually spins off
Speaker 1: an asset, and guess what, because the covenants are sold loose,
Speaker 1: you have absolutely no claim on that cash flow. The
Speaker 1: high yield market has structurally changed, in my opinion, based
Speaker 1: on this Lucy Goosey documentation. We've seen a level four,
Speaker 1: A level five is fantastic. Let's Charlie j s fun
Speaker 1: manager lot. If we don't catch up with you, enjoy
Speaker 1: the holidays, been great, catching up with fantastic. Contribution to
Speaker 1: this program pleasure, hugely, hugely valuable. This is a joy,
Speaker 1: not because it's Wendy Show or Brown University. And yes,
Speaker 1: the topic is impeachment, but because of the authority. It
Speaker 1: was just a few years ago. She wrote an exceptionally important,
Speaker 1: weighty textbook, Gateways to Democracy, and at the time it
Speaker 1: was accessible, you could reach out in actual touched the
Speaker 1: fabric of our American political science. It's as if we
Speaker 1: had to drag gateways of democracy from Ford to the president.
Speaker 1: What's our gateways to democracy of this impeachment process, Professor Schiller,
Speaker 1: I mean, if you had to rewrite that classic book today,
Speaker 1: what would you write about the impeachment process? Well, I
Speaker 1: mean that the point of the impeachment process that were
Speaker 1: the struggle for the House is to exert oversight on
Speaker 1: the president and basically that there's boundaries, there's limits on
Speaker 1: executive power, and this president has vocally said I don't
Speaker 1: really see it, and he's right. In the Constitution, it's
Speaker 1: a vague document, you know, He's got a lot of
Speaker 1: formal power in the Constitution, not legislative, but executive, and
Speaker 1: there are a lot of things post scribe, in other words,
Speaker 1: saying you can't do this and you can't do that,
Speaker 1: and so whatever he thinks is in the national interests,
Speaker 1: including his own re election, you know, might fly. So
Speaker 1: I think The point of the impeachment is to say
Speaker 1: that we have three branches of government and that the
Speaker 1: founders wanted the House to have oversight. Whether you think
Speaker 1: this amounts to removable offense, that's your opinion. But this
Speaker 1: is structural and if the House doesn't do anything, and
Speaker 1: the Senate doesn't do anything, and the president does exercise power,
Speaker 1: you know, there's no control and that it's not the
Speaker 1: intent of the system, and that's the important message of impeachment.
Speaker 1: Then what do you do or how do you respond
Speaker 1: rather to your students in classroom saying why don't you
Speaker 1: just wait and vote the bum out the next time around? Um?
Speaker 1: Because it's it's signal sending basically, right, I mean, it's
Speaker 1: not just four years. You know. Hamilton's said, let's you know,
Speaker 1: let's make the president of monarchy, you know, basically a
Speaker 1: lifetime appointment. What's the problem. And he got a lot
Speaker 1: of pushback, so he said, okay, how about four years.
Speaker 1: This is in between the Senate's term and the House's term.
Speaker 1: It's long enough to do something but not enough damage
Speaker 1: and then the people can reelect the person. You know,
Speaker 1: it seems reasonable, But that's four years with the government
Speaker 1: of our size with the government of our power, the
Speaker 1: government can it's a great deal of damage. It's not
Speaker 1: eighty nine anymore. So that's the point. The point is
Speaker 1: they also, just in case, gave the House oversight power
Speaker 1: and the power to remove. And that's the point in
Speaker 1: a power that's never exercises the power without practice. So
Speaker 1: that's the point of it. Whether we think this is
Speaker 1: you know, worth the time and effort, I think that's
Speaker 1: what That's what gets decided at the polls. That's what
Speaker 1: get decided. You know, at election time, Charles House knew
Speaker 1: that he could be convicted and acquitted. I mean, I'm sorry,
Speaker 1: convicted and removed. You know, I'm not sure the Democrats
Speaker 1: would have moved. Interesting, Charles o Iowa emails and says time,
Speaker 1: you shouldn't call the president a bum. That's an old phrase,
Speaker 1: and I was hoping that that's not what you would
Speaker 1: do it. No, it's an old phrase, and I was
Speaker 1: thinking of it because Garrett Cole just signed for a
Speaker 1: gazillion dollars or the Yankees, and sometime this year when
Speaker 1: he gives up four runs, you know, with no ouse,
Speaker 1: someone will say that context of it. Wendy, how do
Speaker 1: we do a distinction. It's a playing electoral politics and
Speaker 1: defending the constitution. Well, because it's not actually clear that
Speaker 1: it's good electoral politics for the Democrats. I mean, I
Speaker 1: think that's the sort of thing that ansty Polussi has
Speaker 1: on her side. This is still a gamble. This only
Speaker 1: rallies their base, but that's it, and it's not clear
Speaker 1: what the effect will be on independent, particularly suburban voters,
Speaker 1: and we know that in at least five states they're
Speaker 1: going to be absolutely key to when you're losing those
Speaker 1: states for the Democratic nominee. Plus it puts the Ukraine
Speaker 1: Biden issue out there for the next you know, eleven months.
Speaker 1: This is a big gamble. Now there's a Ukraine Biden
Speaker 1: issue with Hunter. Who knew about that eight months ago?
Speaker 1: Nobody and now it Biden's a nominee. It just covers
Speaker 1: the Democratic nomination process and the general election. So I
Speaker 1: think it's not at all clear that it's an electoral
Speaker 1: win for the Democrats outside their base, which is why
Speaker 1: the argument can stand that there's another reason that they're
Speaker 1: doing it. Wendy. Just as a final question, that issue
Speaker 1: is out there for Biden and for his son. Do
Speaker 1: you think they've done a good job of explaining no,
Speaker 1: not yet, and if he is the nominee to his
Speaker 1: own party, doesn't really care. But if he's a nominee,
Speaker 1: it's going to be an ever present question. He'll have
Speaker 1: to come up with an answer, and people may say,
Speaker 1: you know what, We'll take the person we know at
Speaker 1: least most investigations are over versus the person who might
Speaker 1: have four years of investigation, same prom Hillary Clinton. Ad So,
Speaker 1: I think it's a much bigger problem for Biden than
Speaker 1: Democrats anticipate. Right now, Wendy, thoughtful stuff. We'll have to
Speaker 1: get you back on the program. Brown, the University Chair
Speaker 1: of Political Science, wanging on the latest in Washington, d
Speaker 1: c A consideration of the American economy. We can do
Speaker 1: that with David blanche Flower. He is at Dartmouth College,
Speaker 1: with his experience at the Bank of England, but far
Speaker 1: more Danny blanch Fer has defined labor economics with his
Speaker 1: classic The Wage Curve of years ago and his recent
Speaker 1: work on a mirror because under employed, Danny, just to
Speaker 1: get the Fed out of the way before we dive
Speaker 1: into your labor work that you've done so well recently.
Speaker 1: Is the FED working with an operative theory. There was
Speaker 1: M one and M two monitorism, and then there was
Speaker 1: a Phillips curve harketing back to LS in the fifties.
Speaker 1: Is there an actual codified theory right now or is
Speaker 1: every central bank making it up as they go? Well?
Speaker 1: I think they're making it up as they go. And
Speaker 1: I went to a conference of Brookings about a month
Speaker 1: so ago, when all the big names with their banankee
Speaker 1: and yelling and Krugman and everybody all trying to think
Speaker 1: about why it is that inflation has been so low
Speaker 1: and the central bank forecasting is going to rise, and
Speaker 1: basically you come to the conclusion nobody has a clue.
Speaker 1: So I think that's really where we are. And if
Speaker 1: we look back, remember at eight rate rises from fifteen
Speaker 1: to eighteen, with an expectation of three rises in nineteen
Speaker 1: and four and twenty. So that's really reversed itself. Um,
Speaker 1: and we're now in the position essentially where the central
Speaker 1: bank just says, we don't know what we do and
Speaker 1: we're gonna sit pap and we're going to wait for
Speaker 1: the data. So the forecast essentially a gone that they
Speaker 1: do STI don't know how to forecast, So really they're
Speaker 1: sitting waiting and they're going to respond to something bad hits.
Speaker 1: I think that's really where we are. Danny, you got
Speaker 1: this right, Okay, some things you get right, some things
Speaker 1: you get wrong. I've actually said in your lectures in Hanover,
Speaker 1: where you have talked about the mystery of what's out there?
Speaker 1: Is it technology? I mean, can we just say we
Speaker 1: have good monitors of all political persuasions, from the late
Speaker 1: Marvin good Friend and the late Paul Worker out to
Speaker 1: the very living Krugman and Blanche Flower. Do we just
Speaker 1: have good people grappling with modern technology? I don't know.
Speaker 1: I mean, I think we can go back and go
Speaker 1: back a hundred years and we've totally said the same thing, Tom.
Speaker 1: I think what we've really got here is that we
Speaker 1: were hit by a financial crisis, and people have underestimated that.
Speaker 1: I mean, we've really had two and a hundred years, right,
Speaker 1: we had we had the nine crash, and we had
Speaker 1: the one in two thousand and eight, which seems to
Speaker 1: have changed everything. And so the sort of standard rules
Speaker 1: that applied then don't apply that. And if you think
Speaker 1: vocal Ulcer came into a world of union power, raging inflation,
Speaker 1: and you and you had to go in there and
Speaker 1: put a grapple with that. The danger is that people
Speaker 1: still have that in their head this new world where
Speaker 1: actually our problem is exactly the opposite. We can't create
Speaker 1: any inflation. Same story in Europe, same story in the UK,
Speaker 1: same story around the world. And the other story is
Speaker 1: that we also focused not just on inflation. We've focused
Speaker 1: on our employment as our indicator of labor market slack.
Speaker 1: And we've basically heard this week saying, well, the reality
Speaker 1: is we've got that wrong. As I kept saying all
Speaker 1: that I've said on your programs so many times, they
Speaker 1: got the last decade, that's the world that changed, Danny.
Speaker 1: You've been very good at making labor market dynamic, very
Speaker 1: accessible for everyone, very simple. So let me ask you
Speaker 1: a basic question. What is this economy doing producing two
Speaker 1: sixty six thousand jobs in the latest payrolls report? Where's
Speaker 1: that coming from? And what does it tell you? Well, John,
Speaker 1: I think and I think that's obviously something we haven't
Speaker 1: really expected around the world. But I guess we should
Speaker 1: put that in context that if we just look at
Speaker 1: the employment rate. So let's just you know, you take
Speaker 1: you take the population of people over the age of six,
Speaker 1: you need say what proportion of them are employed. Yes,
Speaker 1: we've created jobs, but we aren't back for a couple
Speaker 1: of percentage points below where we were in two thousand
Speaker 1: and eight, and about four percentage points lower that we
Speaker 1: were at the thel Be part of the two thousands.
Speaker 1: So in a sense you'd say this is a slow recovery.
Speaker 1: Jobs are still being created, but the types of jobs
Speaker 1: not high paid enough, particularly because people can't get enough hours.
Speaker 1: They've got a job they'd like to be a forty
Speaker 1: hour week that they up twenty three. So I think
Speaker 1: that's not something we would have expected. But I think
Speaker 1: I think that we should look back and say employment
Speaker 1: rates are below where they a decade ago. You did
Speaker 1: this is critical. Then we can say good very quickly.
Speaker 1: Good employers can say we got to go to part
Speaker 1: time or lesser hours because of healthcare and benefit costs
Speaker 1: and everybody else saying, look we need more full time workers.
Speaker 1: Do we need to legislate or return to greater full
Speaker 1: time work? Would that get it done? Or is that
Speaker 1: just a dream we sing with offensives for full time work.
Speaker 1: But I would push back against the it's the health
Speaker 1: scare thing. I mean, it's many senses. The issue is global.
Speaker 1: But yes, I think we have the our other. I mean,
Speaker 1: we've got to give incentives for firms to hire people.
Speaker 1: I mean, if you think, why why are firms making
Speaker 1: using technology? The answers are a labor common because the
Speaker 1: relative price of labors too high. To a simple fix
Speaker 1: is to stop this thing. Machines replaced people, lower the
Speaker 1: relative price of work. Government to hire people. Danny, I'm
Speaker 1: out of time. We gotta leave it there. We will
Speaker 1: continue this discussion David Windflower's contribution to labor economic Thanks
Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen
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Speaker 1: you prefer. I'm on Twitter at Tom Keane before the podcast.
Speaker 1: You can always catch us worldwide. I'm Bloomberg Radio