WEBVTT - Bloomberg Surveillance TV: December 3rd, 2025 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.680 --> 0:00:15.480 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.520 --> 0:00:18.720 with Lisa Bromwitz and Amerie Hordern. Join us each day 0:00:18.760 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.960 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.319 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:35.880 Terminal and the Bloomberg Business app. 0:00:36.560 --> 0:00:38.960 The President saying he plans to announce his selection to 0:00:39.040 --> 0:00:41.559 lead the Federal Reserve early in the new year, possibly 0:00:41.640 --> 0:00:43.959 this giving rise to berts that the Fed is going 0:00:44.000 --> 0:00:47.080 to cut rights rates more aggressively, which is fed into 0:00:47.120 --> 0:00:51.159 this expectation of a bigger deficit and potentially what's going 0:00:51.200 --> 0:00:53.200 to be happening on both the monetary side of things 0:00:53.240 --> 0:00:55.480 and the fiscal side of things, which is the reason 0:00:55.480 --> 0:00:58.680 why we are looking at the fiscal deficit. President Trump 0:00:58.720 --> 0:01:02.760 once again suggesting revenue could replace federal income taxes and 0:01:02.880 --> 0:01:06.000 reduce the national debt. Mayamaguinnis of the Committee for for 0:01:06.080 --> 0:01:09.840 Responsible Federal Budget writing, despite all of the promises made 0:01:10.000 --> 0:01:12.800 on deficit reduction in twenty twenty five, we're heading into 0:01:12.840 --> 0:01:15.200 twenty twenty six with a little to show as far 0:01:15.240 --> 0:01:18.360 as fiscal improvements. MAYA can join us now, Maya thank 0:01:18.360 --> 0:01:19.880 you so much for being with us. I want to 0:01:19.920 --> 0:01:22.840 start with what you make of the recent discussions of 0:01:22.880 --> 0:01:25.160 the AEPA case in front of the Supreme Court of 0:01:25.280 --> 0:01:29.280 potential companies clawing back some of the revenues that they 0:01:29.280 --> 0:01:30.400 paid to the United States. 0:01:30.600 --> 0:01:32.560 Are you taking that seriously. 0:01:32.080 --> 0:01:34.400 As a potential hit to revenues that otherwise have been 0:01:34.440 --> 0:01:35.000 penciled in. 0:01:36.360 --> 0:01:39.560 Absolutely, I think everybody should be taking seriously the potential 0:01:39.600 --> 0:01:42.360 that there's going to be major shifts on what happens 0:01:42.360 --> 0:01:46.720 with the tariff revenue, both going forward and potentially if 0:01:46.720 --> 0:01:49.080 some of that money has to be paid back. Listen, 0:01:49.120 --> 0:01:51.960 I have no legal expertise at all, but having talked 0:01:51.960 --> 0:01:55.280 to many people, I'm less concerned that people are going 0:01:55.320 --> 0:01:57.040 to have to pay it back, which would be immensely 0:01:57.040 --> 0:02:00.800 disruptive to companies and distortive to the sense that you 0:02:00.840 --> 0:02:04.840 can make negotiations on foreign policy and economic policy. But 0:02:04.920 --> 0:02:06.840 I do think it's likely that they will find that 0:02:06.880 --> 0:02:10.520 those tariffs are illegal. In their present structure, the tariffs 0:02:10.520 --> 0:02:13.480 are projected to raise about two and a half trillion 0:02:13.520 --> 0:02:16.280 dollars over the next decade and reduce the debt by 0:02:16.320 --> 0:02:19.000 as much as three trillion because of interest savings. This 0:02:19.120 --> 0:02:22.240 would be a huge hit to the fiscal picture, which 0:02:22.280 --> 0:02:24.880 is already in deep, deep trouble. So I think one 0:02:24.919 --> 0:02:26.880 of the big questions is if we do find that 0:02:26.880 --> 0:02:29.680 that TEARFF revenue doesn't remain in place, and let's be honest, 0:02:29.680 --> 0:02:31.880 it's unlikely to remain in place in the current structure 0:02:31.880 --> 0:02:35.240 no matter what, because the President enjoys changing those tariffs around. 0:02:35.760 --> 0:02:38.840 But if they are pulled back and unable to go 0:02:38.880 --> 0:02:42.799 as planned, we should be thinking about a smarter, more efficient, 0:02:43.320 --> 0:02:47.280 more pro growth revenue approach that would replace them, so 0:02:47.320 --> 0:02:49.080 we wouldn't lose all of that money and make the 0:02:49.120 --> 0:02:50.359 deficit even worse. 0:02:50.840 --> 0:02:52.919 MAYA when it comes to potentially well can get done 0:02:52.919 --> 0:02:54.959 by the end of the year. What are you hearing 0:02:55.000 --> 0:02:56.120 and what do you think it's going to do the 0:02:56.120 --> 0:03:00.320 fiscal picture? If there is an extension of the AMA 0:03:00.320 --> 0:03:04.880 Care health credits enhance this This was. 0:03:04.880 --> 0:03:07.200 A really interesting part of the discussion about how to 0:03:07.200 --> 0:03:10.919 open the government. Which was the big ask was that 0:03:10.960 --> 0:03:15.560 we extend the subsidies for Obama healthcare, and that would 0:03:15.560 --> 0:03:18.680 have all told to cost three hundred and fifty billion dollars. 0:03:18.919 --> 0:03:21.280 You'll notice there was not a single discussion of how 0:03:21.320 --> 0:03:24.119 we might offset those costs. So again, here's another plan 0:03:24.160 --> 0:03:26.760 that would increase the deficit. We're not going to see 0:03:26.760 --> 0:03:29.320 them extended permanently, and so the cost will be less 0:03:29.320 --> 0:03:32.040 because it will only be for a few years. There 0:03:32.120 --> 0:03:34.480 is some chance that this will happen for one or 0:03:34.520 --> 0:03:36.840 two years before the end of this year, but I 0:03:36.880 --> 0:03:39.840 think it's likely. It seems as though the momentum for 0:03:39.840 --> 0:03:43.080 getting this done is starting to slow down. But to 0:03:43.160 --> 0:03:45.160 your point, no matter what happens at the end of 0:03:45.200 --> 0:03:47.520 this year, we'll either see nothing, which will just keep 0:03:47.520 --> 0:03:50.720 a very bad fiscal picture in place, or there is 0:03:50.800 --> 0:03:53.200 a possibility that there'll be a trade and a worsening 0:03:53.200 --> 0:03:56.600 of the fiscal picture. Let's extend those subsidies, and it's 0:03:56.600 --> 0:03:59.880 no comment in the policy. They might be a smart policy, no, 0:04:00.000 --> 0:04:01.920 but he's talking about how to offset them. But there 0:04:02.000 --> 0:04:04.600 might be a trade where you extend them unpaid for 0:04:04.600 --> 0:04:07.720 for other policies that are also unpaid for. Which is 0:04:07.760 --> 0:04:10.680 often what happens in that Christmas tree fiscal rush at 0:04:10.720 --> 0:04:11.800 the end of the calendar year. 0:04:12.040 --> 0:04:15.560 Well, when it comes to these enhanced subsidies, this was 0:04:15.600 --> 0:04:17.800 at as you mentioned, the heart of the government shutdown. 0:04:17.920 --> 0:04:21.120 Have you any seen any impact that is going to 0:04:21.160 --> 0:04:23.600 be long term of the government shutdown on the fiscal 0:04:23.600 --> 0:04:24.520 healthy United States? 0:04:25.680 --> 0:04:29.039 The government shutdown itself will not have an overall massive 0:04:29.080 --> 0:04:31.960 fiscal impact. There is a slowing and spending during that 0:04:32.000 --> 0:04:35.440 period and take a small hit on GDP usually which 0:04:35.480 --> 0:04:36.440 is made up in. 0:04:36.400 --> 0:04:37.280 The following months. 0:04:37.320 --> 0:04:40.040 So we usually just see a shift of growth and 0:04:40.120 --> 0:04:42.240 overall effects fysical effects from the shutdown. 0:04:42.560 --> 0:04:45.400 What it does do is causes us to be. 0:04:45.320 --> 0:04:47.920 A laughing stock around the world when our government can't 0:04:48.000 --> 0:04:50.600 keep the lights on. Really, it is a punchline, and 0:04:50.640 --> 0:04:54.760 it is the huge sign of an inability to govern 0:04:54.800 --> 0:04:58.160 at the most basic level, and it presents weaknesses and 0:04:58.200 --> 0:05:00.840 sort of a distraction from the big issues that are 0:05:00.880 --> 0:05:03.000 going on around the globe right now. So I think 0:05:03.240 --> 0:05:06.160 any country that's not aligned with the US looks at 0:05:06.200 --> 0:05:08.560 us and says they can't get their act together, and 0:05:08.600 --> 0:05:10.440 our allies are a little bit concerned too, So I 0:05:10.440 --> 0:05:14.240 would say it has far more of global foreign policy 0:05:14.480 --> 0:05:17.520 ramifications that it does on the actual bottom line, which 0:05:17.560 --> 0:05:19.520 is more of a shift of when money is spent. 0:05:19.720 --> 0:05:22.000 There'll be small savings in the short term, but they'll 0:05:22.040 --> 0:05:23.800 be pushed out into the subsequent months. 0:05:24.040 --> 0:05:25.760 A lot of people have said, look, this could have 0:05:25.760 --> 0:05:28.120 been said for a long time. We've had the irresponsible 0:05:28.160 --> 0:05:31.960 fiscal budget deficit for quite a while. It has gotten worse, 0:05:32.000 --> 0:05:34.520 but right now markets are not freaking out. In fact, 0:05:34.720 --> 0:05:37.240 we have a whole host of different projections for twenty 0:05:37.279 --> 0:05:39.920 twenty six coming out of Wall Street expecting a bias 0:05:40.000 --> 0:05:42.640 to lower yields by the end of next year, even 0:05:42.680 --> 0:05:45.640 on the longer denominations. Why do you think the market 0:05:45.760 --> 0:05:49.880 hasn't been particularly concerned even with everything that you're laying out. 0:05:50.839 --> 0:05:53.640 Yeah, I mean this is a long term challenge, the 0:05:53.640 --> 0:05:56.760 fiscal situation, because it's not in the US about oh, 0:05:56.800 --> 0:05:59.920 we might have a fiscal crisis in the immediate short term, 0:06:00.160 --> 0:06:03.040 because we are the reserve currency, because countries around the 0:06:03.040 --> 0:06:06.159 world and savors domestically want US treasuries. There are lots 0:06:06.200 --> 0:06:09.520 of reasons that rates don't pop up immediately. What it 0:06:09.560 --> 0:06:12.240 is is a slowing kind of erosion of our role 0:06:12.279 --> 0:06:14.800 in the world and faith in the US, and so 0:06:14.880 --> 0:06:17.880 that when there is kind of a moment of reckoning, 0:06:18.279 --> 0:06:20.480 it will be so much harder to fix. We will 0:06:20.520 --> 0:06:24.120 have ten trillion twenty trillion more in debt than we 0:06:24.160 --> 0:06:26.279 would have if we had gotten ahead of the problem. 0:06:26.520 --> 0:06:28.680 That's one big issue. The second issue I'd say is 0:06:29.040 --> 0:06:32.200 markets aren't the best predictors of when things turn bad. 0:06:32.279 --> 0:06:35.640 There's a lot of kind of frothy optimism that comes 0:06:35.640 --> 0:06:38.839 out of markets momentum that's built in it, and it's 0:06:38.839 --> 0:06:39.720 almost like a bubble. 0:06:40.000 --> 0:06:41.200 Many people understand that. 0:06:41.400 --> 0:06:44.240 Most people understand the fiscal fundamentals of the US are 0:06:44.600 --> 0:06:47.920 nothing short of terrible, but that doesn't mean there isn't 0:06:47.960 --> 0:06:49.839 money to be made in the short term as long 0:06:49.880 --> 0:06:52.400 as things kind of continue with the momentum they currently have. 0:06:53.000 --> 0:06:54.680 And when it comes to time, people don't want to 0:06:54.680 --> 0:06:56.920 pull money out of the market or make abrupt changes 0:06:56.960 --> 0:06:57.599 too quickly. 0:06:58.400 --> 0:07:03.640 So there's a refusal to acknowledge that the fundamentals are 0:07:03.680 --> 0:07:05.839 bad and hope that kind of the top line. 0:07:05.720 --> 0:07:08.240 Numbers will continue to look good for as long as possible. 0:07:08.480 --> 0:07:11.200 Stay with US. Mulpleinpeg Savanna's coming. 0:07:10.960 --> 0:07:12.000 Up off to this. 0:07:21.040 --> 0:07:23.560 Here's a view from Wall Street. Stocks inching higher as 0:07:23.640 --> 0:07:27.200 risk sentiment appears to be improving. Dana Dioria of Investment 0:07:27.280 --> 0:07:31.400 Solutions writing, the current bout of market difficulty doesn't presage 0:07:31.440 --> 0:07:34.400 a bear market. It's better to see wild buying tamed 0:07:34.440 --> 0:07:37.480 now than to witness a major bubble. Developed data joins 0:07:37.520 --> 0:07:39.160 us now from more Dana, thank you so much for 0:07:39.200 --> 0:07:41.480 being with us. This to me really is the question, 0:07:41.600 --> 0:07:44.000 is this a healthy sell off or is this a sign, 0:07:44.120 --> 0:07:47.000 especially with what we're seeing, for example, coming out of 0:07:47.000 --> 0:07:49.960 Oracle CDs, a sign that there really are some significant 0:07:50.000 --> 0:07:51.080 worries that are developing. 0:07:52.280 --> 0:07:54.440 Well, I think there've always been significant worries. 0:07:54.480 --> 0:07:56.880 I think the market has, you know, kind of plowed 0:07:56.920 --> 0:07:58.800 ahead throughout the course of the year in spite of 0:07:58.840 --> 0:07:59.360 what we all know. 0:07:59.560 --> 0:08:01.200 One of the main head winds, of course, being just 0:08:01.320 --> 0:08:02.800 valuations being so high. 0:08:03.160 --> 0:08:05.880 Another major head wind being that it's a pretty narrow 0:08:05.960 --> 0:08:08.120 story that's kind of driving all of this, right, It's 0:08:08.200 --> 0:08:10.840 this AI story, and narrow and only in the sense 0:08:10.880 --> 0:08:13.200 that we don't know yet when AI is going to 0:08:13.200 --> 0:08:15.880 pay off. We don't really know yet other than paying 0:08:15.920 --> 0:08:18.080 off for the NVIDIAs of the world, and kind of 0:08:18.080 --> 0:08:20.520 the producers if you will, but when will it actually 0:08:20.560 --> 0:08:22.520 pay off for the rest of the economy. And so 0:08:22.800 --> 0:08:26.160 you know, transformative technologies that of course are good bets 0:08:26.200 --> 0:08:28.760 in a long term sense, don't necessarily pay off in 0:08:28.800 --> 0:08:30.400 the short term at all, and it's really hard to 0:08:30.400 --> 0:08:32.640 see how that's going to disperse throughout the economy. So 0:08:32.760 --> 0:08:35.400 all being said, I think the market has kind of 0:08:35.559 --> 0:08:38.240 gone through all of that and pushed hard ahead throughout 0:08:38.280 --> 0:08:39.720 the course of the air in spite of some of 0:08:39.720 --> 0:08:42.840 these existing concerns, and so yes, to see a little 0:08:42.840 --> 0:08:45.320 bit of a pullback, to see some consideration around Hey, 0:08:45.320 --> 0:08:48.920 there's a lot of concentration here. This whole capex AI 0:08:49.840 --> 0:08:53.640 you know cycle is sort of a little bit circuitous, 0:08:53.720 --> 0:08:55.360 and you know, maybe we should back off a little 0:08:55.400 --> 0:08:57.720 I think is normal and you know, kind of to 0:08:57.760 --> 0:09:00.320 be expected and maybe probably even a little on what 0:09:00.360 --> 0:09:00.800 it could be. 0:09:01.200 --> 0:09:03.680 So Dana, going forward, what's going to get people to 0:09:03.720 --> 0:09:06.920 reverse that skepticism to actually come in and buy again. 0:09:07.000 --> 0:09:10.200 Even the valuations, yes, they've come off, still are pretty elevated. 0:09:11.200 --> 0:09:13.000 Well, certainly you've got the FED rate cut. 0:09:13.040 --> 0:09:14.840 I mean, I think everybody you know what you're seeing, 0:09:14.880 --> 0:09:16.199 even in the market is now a little bit of 0:09:16.640 --> 0:09:19.680 you know, TechEd kind of recovery. 0:09:19.720 --> 0:09:21.920 A little is based on that, right, It's. 0:09:21.840 --> 0:09:24.000 Based on the bad news is good news kind of 0:09:24.000 --> 0:09:27.239 storyline where we're still going to see some softness and employment. 0:09:27.480 --> 0:09:29.600 That softness and employment will be enough that the FED 0:09:29.640 --> 0:09:32.040 will actually cut rates in December as expected. 0:09:32.760 --> 0:09:34.840 My view is and has been that. 0:09:34.760 --> 0:09:37.240 They will cut, regardless of kind of some of the 0:09:37.400 --> 0:09:39.520 rhetoric and ups and downs that we've seen in the 0:09:39.520 --> 0:09:40.160 futures market. 0:09:40.240 --> 0:09:41.480 I think a cut is coming. 0:09:41.800 --> 0:09:43.800 I think there's enough concern about the soft patch in 0:09:43.800 --> 0:09:44.600 the economy that. 0:09:44.559 --> 0:09:45.520 They will do that. 0:09:46.360 --> 0:09:48.160 I think some of what they've said is an assertion 0:09:48.320 --> 0:09:50.880 of independence and you know, don't get ahead of yourselves 0:09:50.960 --> 0:09:51.360 kind of thing. 0:09:51.360 --> 0:09:52.960 But at the end of the day, they will cut, and. 0:09:52.960 --> 0:09:54.199 So I think that will be good, and I think 0:09:54.200 --> 0:09:55.680 it will be good for areas of the market that 0:09:55.720 --> 0:09:57.959 we want to see, you know, kind of do better, 0:09:58.040 --> 0:10:00.959 such as small caps, you know, more straight sensitive areas 0:10:00.960 --> 0:10:04.000 in the market where if you want breadth in the market, 0:10:04.120 --> 0:10:06.000 which we do, right, we want to get beyond this 0:10:06.280 --> 0:10:09.240 large cap tech only type of a trade. We want 0:10:09.280 --> 0:10:11.120 to see those areas of the market that maybe are 0:10:11.160 --> 0:10:14.080 more reliant on capital markets be able to come back more. So, 0:10:14.400 --> 0:10:16.240 you know, I think a FED rate cut is the 0:10:16.320 --> 0:10:17.599 right thing, and I think we'll get it, and I 0:10:17.640 --> 0:10:20.040 think that that is what the market is seeing right now. 0:10:20.160 --> 0:10:22.960 Is it cut in December enough though, for that burdening 0:10:22.960 --> 0:10:24.720 out you're talking about, or is it that going to 0:10:24.760 --> 0:10:26.600 have to continue this into twenty twenty six? 0:10:27.320 --> 0:10:28.640 You know, I do think you're right. 0:10:28.720 --> 0:10:31.400 I think the cutton December, of course will make everyone happy. 0:10:31.920 --> 0:10:35.800 Perhaps we'll have our Santa Claus rally, but you're absolutely right. 0:10:35.840 --> 0:10:38.040 I think we will need to continue to see at 0:10:38.080 --> 0:10:41.360 least some cutting in the new year. I also think 0:10:41.400 --> 0:10:43.960 though you know, twenty twenty six, I don't have a 0:10:44.160 --> 0:10:46.679 negative outlook, right. I mean, as we go into the 0:10:46.679 --> 0:10:51.120 next year, I think we do have a. 0:10:50.720 --> 0:10:53.280 Situation where you've got stimulus coming. 0:10:54.040 --> 0:10:56.440 You still do have what I think is a good 0:10:56.520 --> 0:10:58.320 storyline around AI and Capex. 0:10:58.320 --> 0:10:59.760 I don't think it's going anywhere. 0:11:00.000 --> 0:11:02.000 I mean, look at the bond markets and the interests 0:11:02.040 --> 0:11:06.120 that these companies have, and you know, getting credit for 0:11:06.520 --> 0:11:10.920 some of these purchases. There's credit a wash for their needs, 0:11:11.400 --> 0:11:13.200 and so I think there's a lot still there. 0:11:13.400 --> 0:11:15.800 I don't think we're ready to sort of back off. 0:11:15.600 --> 0:11:18.240 On where the market can be in twenty twenty six, 0:11:18.360 --> 0:11:20.079 but I think we just want to see more breadth. 0:11:20.200 --> 0:11:22.360 We're going to get ADP report today, We're going to 0:11:22.360 --> 0:11:26.560 get PCs very stale on Friday. We're not getting jobs 0:11:26.640 --> 0:11:29.400 data from the US government until after the FED meets. 0:11:29.760 --> 0:11:32.040 Does it unnerve you that we're going into the end 0:11:32.080 --> 0:11:35.679 of the year with really a fog out of the 0:11:35.760 --> 0:11:36.440 data story? 0:11:38.360 --> 0:11:38.920 For sure? 0:11:39.200 --> 0:11:40.880 And I think it unnerves the FED, And I think 0:11:40.920 --> 0:11:44.280 that's why you're seeing such pushback we have And really 0:11:44.280 --> 0:11:46.520 what's going on with the FED that's super interesting, of course, 0:11:46.600 --> 0:11:50.120 is that you're getting a lot of different types of feedback. 0:11:50.160 --> 0:11:52.360 You know that you're not seeing go to this monolith 0:11:52.440 --> 0:11:53.600 and how they talk about things. 0:11:54.000 --> 0:11:57.959 Different FED governors have very different viewpoints, and it tells 0:11:57.960 --> 0:11:59.679 you something, right, It tells you they're not kidding when 0:11:59.679 --> 0:12:01.640 they say that very FED or the excuse me, they're 0:12:01.760 --> 0:12:04.560 very data dependent. The FED is very data dependent, and 0:12:04.600 --> 0:12:07.199 they look to that data and they really make their decisions, 0:12:07.240 --> 0:12:09.600 and they try to make the decisions notwithstanding all the 0:12:09.600 --> 0:12:12.320 politics surrounding it. I really do think they try to 0:12:12.320 --> 0:12:15.080 make those decisions as dispassionately as they can. 0:12:15.440 --> 0:12:16.600 And so when the data is. 0:12:16.679 --> 0:12:20.120 Missing, which to your point very much is and has 0:12:20.160 --> 0:12:22.400 been now for a bit, it makes it harder for 0:12:22.440 --> 0:12:24.320 them to do their jobs. It makes it harder for 0:12:24.360 --> 0:12:26.920 them to feel confident, because of course, what happens, right 0:12:26.960 --> 0:12:29.680 if we do lower rates too quickly and there is 0:12:29.720 --> 0:12:32.079 a rebound in inflation, I mean nothing would sort of 0:12:32.080 --> 0:12:33.439 be a worse occurrence. 0:12:33.520 --> 0:12:36.400 I think for this FED in particular, given the. 0:12:36.480 --> 0:12:39.000 Nine percent inflation that we got to a couple of 0:12:39.040 --> 0:12:42.319 years ago, for the FED to let inflation rebound in 0:12:42.360 --> 0:12:44.280 any kind of big way would be a huge fail. 0:12:44.640 --> 0:12:47.400 And so I think it's real the concerns and consideration. 0:12:47.480 --> 0:12:49.000 Like I say, Net and Net, I think we will 0:12:49.040 --> 0:12:51.400 get it. But I do think it's problematic to not 0:12:51.520 --> 0:12:53.360 have the data to support what you're trying to do. 0:12:53.400 --> 0:12:55.600 I mean, you're running an entire economy here, right, You're 0:12:55.679 --> 0:13:00.440 running interest rates and monetary policy for you just the 0:13:00.480 --> 0:13:02.480 benefit not only of people in the stock market, but 0:13:02.520 --> 0:13:05.600 of everybody sort of living with affordability issues. 0:13:05.280 --> 0:13:08.280 And everything else that we've been talking about. So not 0:13:08.320 --> 0:13:10.280 having data is a serious issue. 0:13:10.440 --> 0:13:13.880 Stay with us. Mulplinpex Savanas coming up off to this. 0:13:23.280 --> 0:13:25.760 I guess the potential FED chair is here too. 0:13:25.920 --> 0:13:28.280 I don't know we shall allowed to say. 0:13:28.120 --> 0:13:32.720 That potential is a respected person that I can tell you, 0:13:33.080 --> 0:13:33.840 Thank you Kevin. 0:13:34.120 --> 0:13:36.719 The presidential praise only boosting bets that White House a 0:13:36.720 --> 0:13:39.959 NEC director Kevin Hassett will be the next Federal Reserve chair. 0:13:40.000 --> 0:13:43.280 Former Kansas City FED President Thomas ohneg joins us. Now 0:13:43.320 --> 0:13:45.960 for more, Thomas, what do you think of this sort 0:13:46.000 --> 0:13:48.920 of bachelor style a race for the next FED chair? 0:13:49.040 --> 0:13:50.840 Do you think that it has framed it correctly in 0:13:50.920 --> 0:13:51.839 terms of what's at stake? 0:13:52.520 --> 0:13:55.480 Well, I think it's been framed well as far as 0:13:55.760 --> 0:13:58.080 this is a big deal and they better picked well 0:13:59.080 --> 0:14:01.439 the and the five mandidates they originally had. We're all 0:14:01.520 --> 0:14:05.439 qualified as it is coming out as the top runner. 0:14:05.480 --> 0:14:08.000 But I don't know if that's a trial balloon they 0:14:08.120 --> 0:14:10.320 want to test it or not. That's all has to 0:14:10.360 --> 0:14:13.800 be decided. Kevin certainly qualified, and if he were chosen, 0:14:14.200 --> 0:14:16.040 I can tell you the world will be watching his 0:14:16.280 --> 0:14:19.360 or whomever has chosen his first speech with great intensity 0:14:19.400 --> 0:14:22.160 because there's so much at stake going forward, with the 0:14:22.200 --> 0:14:25.640 FED changing, lots of call for reform. Who's going to 0:14:25.720 --> 0:14:28.040 lead that it's going to be on everyone's mind, so 0:14:28.080 --> 0:14:28.800 it's a big deal. 0:14:28.960 --> 0:14:31.400 A big question is not just how much influence the 0:14:31.440 --> 0:14:33.960 FED has over the front end of the yield curve, 0:14:34.040 --> 0:14:35.600 but really what they can do for the tenure in 0:14:35.600 --> 0:14:37.840 the thirty year Given the fact that there has been 0:14:37.880 --> 0:14:41.000 a focus on home affordability and mortgage rates, what are 0:14:41.040 --> 0:14:44.280 you watching for to understand what tools they could potentially 0:14:44.280 --> 0:14:47.960 deploy to lower ten year yields, not just the very 0:14:48.000 --> 0:14:48.520 front end. 0:14:49.080 --> 0:14:51.680 Well if they, I mean, they always have the choice 0:14:51.720 --> 0:14:54.600 of trying to manage the yield curve through their monetary 0:14:54.840 --> 0:14:58.600 operations by which government securities they buy and the pressure 0:14:58.600 --> 0:15:01.360 they put on there. However, one of the issues is 0:15:01.440 --> 0:15:03.840 should they be doing that, should they be pulling away 0:15:03.920 --> 0:15:06.600 let the market take it. They do monetary policy and 0:15:06.640 --> 0:15:09.840 focus on the short end treasure yields and let the 0:15:09.840 --> 0:15:11.920 market take care of itself. That'll be a big debate 0:15:11.960 --> 0:15:14.280 I think within the FED, whomever the new chairman is, 0:15:14.320 --> 0:15:18.200 because it is so important financial conditions overall are easing. 0:15:18.280 --> 0:15:21.600 The fedest part of that, and that will be as 0:15:21.680 --> 0:15:25.160 much influence on the tenure as trying to manage that 0:15:25.240 --> 0:15:27.600 you occur, which I think will create uncertainty as much 0:15:27.600 --> 0:15:31.080 as it will help help mortgages, so they have some 0:15:31.120 --> 0:15:32.360 big choices to make ahead. 0:15:32.520 --> 0:15:35.560 Has monetary policy ever been as confusing during your tenure 0:15:35.680 --> 0:15:39.440 in terms of both the dual mandate of FED in 0:15:39.520 --> 0:15:42.680 terms of inflation as well as the labor market and 0:15:42.760 --> 0:15:46.320 also the transmission mechanism. Are financial conditions easy or are 0:15:46.360 --> 0:15:46.840 they tight? 0:15:47.720 --> 0:15:50.880 Well? Things are confusing, and you can see that within 0:15:50.920 --> 0:15:55.280 the debate within the FMC itself. Doves hawks seeming to 0:15:55.320 --> 0:15:58.600 be really at odds right now. So now, I haven't 0:15:58.600 --> 0:16:00.680 seen it like that before. I've seen it similar to 0:16:00.720 --> 0:16:04.360 that before, and it is tough, and they've got this 0:16:04.480 --> 0:16:06.480 new mandate and they're going to argue about it. But 0:16:06.600 --> 0:16:09.960 I know inflation is three percent, that's way above their target. 0:16:10.680 --> 0:16:13.040 But they're worried about employment, and I've heard and you 0:16:13.400 --> 0:16:15.040 they will say it. I'm just as sure as I'm 0:16:15.040 --> 0:16:15.640 sitting here. 0:16:15.800 --> 0:16:15.960 You know. 0:16:16.160 --> 0:16:18.440 Should we make this cut as an insurance policy to 0:16:18.440 --> 0:16:21.000 make sure the economy moves forward. That's all going to 0:16:21.040 --> 0:16:23.240 be in next week's meeting. I'm confident of that. 0:16:23.520 --> 0:16:25.880 When it comes to potentially a Kevin Hassett chair, do 0:16:25.920 --> 0:16:27.960 you think it would harden the views of the Hawks 0:16:27.960 --> 0:16:30.480 and the committee because he is so close to the president. 0:16:32.880 --> 0:16:37.360 Not well, maybe give given the diversity on that committee 0:16:37.440 --> 0:16:40.280 right now, they could harden, but I think I think 0:16:40.320 --> 0:16:43.760 basically they want to get the right the right balance 0:16:43.920 --> 0:16:46.720 in the in the policy academ so they'll be willing 0:16:46.760 --> 0:16:50.360 to discuss it and I think come to conclusions. I 0:16:50.360 --> 0:16:53.960 think it will really depend on how whoever leads, if Kevin, 0:16:54.680 --> 0:16:58.240 how careful they are in terms of making their points, 0:16:58.400 --> 0:17:02.360 how they lead the system words consensus. That is an art, 0:17:02.720 --> 0:17:05.240 and if he's good at it, they'll come to consensus. 0:17:05.280 --> 0:17:07.760 If not, you'll see this split continuing because I think 0:17:08.320 --> 0:17:12.280 the difference between inflationary goals and the employment goals will 0:17:12.320 --> 0:17:13.840 continue to haunt them going forward. 0:17:13.920 --> 0:17:16.480 Do you think it's peculiar that current Fed chair J. 0:17:16.640 --> 0:17:19.320 Powell hasn't announced whether or not he's going to give 0:17:19.359 --> 0:17:22.760 up his governorship when he leads the leaves the chair post. 0:17:23.160 --> 0:17:26.199 I think, yeah, I would be surprised if he stayed on. 0:17:26.359 --> 0:17:28.959 It's possible, but it would be surprised. But it wouldn't 0:17:28.960 --> 0:17:30.960 be his advantage to announce one way or the other. 0:17:31.040 --> 0:17:36.000 So he's just keeping his mouth quiet because it would 0:17:36.040 --> 0:17:40.080 do nothing. But I think confusings even further. So he's 0:17:40.160 --> 0:17:43.840 playing out his term as chairman. That's what matters to him, 0:17:44.119 --> 0:17:47.040 and he'll make that decision whether to stay on much later. 0:17:47.080 --> 0:17:49.000 But I would be very surprised if he stayed on. 0:17:49.400 --> 0:17:51.680 We've been talking all morning about potential cost of living 0:17:51.680 --> 0:17:54.760 concerns and fiscal stimulus that could be coming from the 0:17:54.760 --> 0:17:57.440 White House earlier next year, and I just wonder how 0:17:57.480 --> 0:18:01.560 that factors into any potential to decision by the Federal Reserve. 0:18:02.000 --> 0:18:04.640 Would that be something that could be inflationary or would 0:18:04.680 --> 0:18:09.440 that be so small as to be negligible to those discussions. 0:18:09.520 --> 0:18:11.520 Well, I think the Fed should be looking ahead to 0:18:11.560 --> 0:18:15.520 that issue because it's small in some ways, but the 0:18:15.600 --> 0:18:19.760 national spending of over seven trallion versus the revenues coming 0:18:19.800 --> 0:18:22.480 in just over five trade and that's a huge deficit. 0:18:22.520 --> 0:18:26.159 That's a huge new issuance of debt to fund that, 0:18:26.560 --> 0:18:29.439 and you know that's going to affect the economy, and 0:18:29.480 --> 0:18:34.119 it's going to affect how monetary policy, how effective it 0:18:34.200 --> 0:18:36.240 is going forward, and they're going to be under a 0:18:36.240 --> 0:18:39.240 lot of pressures to make sure that the interest rates 0:18:39.240 --> 0:18:42.440