WEBVTT - Labor Is Moving Towards Obsolescence, Henry Kaufman Says 0:00:06.320 --> 0:00:12.719 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:12.800 --> 0:00:16.239 with David Gura. Daily we bring you insight from the 0:00:16.239 --> 0:00:21.640 best of economics, finance, investment, and international relations. Find Bloomberg 0:00:21.720 --> 0:00:27.000 Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course, 0:00:27.320 --> 0:00:33.320 on the Bloomberg Henry Coffin with us now in our 0:00:33.320 --> 0:00:35.800 Bloomberg eleven three studios, formerly with Tommon Brothers. He's the 0:00:35.840 --> 0:00:38.840 author of the book Tectonic Shifts in Financial Markets, People, 0:00:39.080 --> 0:00:42.360 Policies and Institutions. He's the president of Henry Coffman and Company. 0:00:42.360 --> 0:00:45.560 Great to see him once again. You uh. The waiting 0:00:45.560 --> 0:00:47.840 continues here we we we await a decision from the president. 0:00:47.880 --> 0:00:50.159 Who will be the next fed Share. Perhaps they'll be 0:00:50.440 --> 0:00:52.440 fed Share Jenny Ellen renewed for a second term, perhaps 0:00:52.440 --> 0:00:55.000 it will be someone else. What should a president, what 0:00:55.000 --> 0:00:56.960 should a Treasury secretary? What should a chief of staff 0:00:57.000 --> 0:01:00.320 be considering at this point as they make this to decision, 0:01:00.360 --> 0:01:02.160 as they pick the next FED chair, what what should 0:01:02.160 --> 0:01:06.720 they be considering? Broadly speaking, Well, they want the first 0:01:06.720 --> 0:01:12.640 of all, have an awareness of the candidates experience. Financial 0:01:12.680 --> 0:01:19.600 experience is very helpful. Having an academic background in banking, finance, 0:01:19.640 --> 0:01:25.399 and economic theory is also extremely helpful. Being able to 0:01:25.560 --> 0:01:29.440 manage others around the chair, meaning the other members of 0:01:29.440 --> 0:01:31.520 the Board of Governors or the f O m C, 0:01:32.240 --> 0:01:37.959 who are usually PhD s. Those people have to be led, 0:01:38.160 --> 0:01:40.600 they have to be managed, to have to be influenced, 0:01:41.160 --> 0:01:45.920 and someone coming from the outside with limited experience will 0:01:45.959 --> 0:01:50.200 have some problems in doing that. Is that the hardest 0:01:50.240 --> 0:01:53.080 thing to assess in advance. We talk about John Taylor, 0:01:53.400 --> 0:01:55.680 the professor at Stanford, with a lot of government experience. 0:01:55.960 --> 0:01:59.000 Kevin worsh It's hard to estimate how somebody will be 0:01:59.040 --> 0:02:01.320 able to interact with others on the board, or bring 0:02:01.360 --> 0:02:03.080 them on board, or work with them. How do you 0:02:03.120 --> 0:02:05.400 just begin to to figure out how somebody might do 0:02:05.480 --> 0:02:10.280 with that. Well, some of these people, uh John Taylor, 0:02:10.360 --> 0:02:13.120 of course, who was Under Secretary of the Treasury, so 0:02:13.200 --> 0:02:18.000 he has had considerable government experience. When you go back 0:02:18.040 --> 0:02:24.200 through the history of the Federal Reserve chairs, uh. Bill Martin, 0:02:24.320 --> 0:02:26.880 who was the first prominent one in the postwar period, 0:02:27.200 --> 0:02:30.960 began in nineteen fifty one and served for the longest 0:02:31.000 --> 0:02:35.080 until nineteen sixty eight. He had been at the Treasury. 0:02:35.440 --> 0:02:38.360 He had been chairman of the New York Stock Exchange. 0:02:38.600 --> 0:02:41.840 He had also been the head of the Exploit Import Bank. 0:02:42.320 --> 0:02:45.919 He had considerable background and knowledge and took a lot 0:02:45.960 --> 0:02:51.400 of courses. On the other hand, Uh. There thereafter you 0:02:51.480 --> 0:02:54.680 had Author Burns, who was second, who was the chairman 0:02:54.720 --> 0:03:00.400 of the the Economic Advisors at one time, was an 0:03:00.440 --> 0:03:05.880 expert on business cycles and saw it. And but nevertheless, 0:03:06.000 --> 0:03:08.240 I can recite all of these for you with their 0:03:08.280 --> 0:03:11.840 background and experience, A good many of them had to 0:03:11.960 --> 0:03:16.680 check it experience. As chair we have all that experience, 0:03:16.680 --> 0:03:20.160 with all that knowledge and managing, they didn't perform as 0:03:20.200 --> 0:03:22.040 well as they should have. I want to talk one 0:03:22.040 --> 0:03:23.679 more question the fed that we got to get to 0:03:23.800 --> 0:03:26.680 extremely important headlines for Global Wall Street and we're honored 0:03:26.680 --> 0:03:30.040 to have you here. Uh. Dr Kaufman, let me reducts 0:03:30.040 --> 0:03:33.080 the question from television earlier. Can John Taylor be a 0:03:33.120 --> 0:03:35.480 dove or is he so rules bound that we're going 0:03:35.560 --> 0:03:39.800 to be hawk hawk hawk? Uh. The little I know 0:03:39.840 --> 0:03:44.040 about John Taylor, you can only be a dove if 0:03:44.160 --> 0:03:49.440 it fits within his formula, within his formula. Uh. And 0:03:49.480 --> 0:03:52.280 you don't think there's enough fungibility in the formula or 0:03:52.280 --> 0:03:56.360 within his Boston speech recently to calm those that worry 0:03:56.360 --> 0:04:01.000 about a restrictive John Taylor, there there is a certain 0:04:01.000 --> 0:04:05.760 amount that can give within his formula. And as I 0:04:05.800 --> 0:04:10.040 said to you before, here we are in two thousand seventeen. 0:04:10.480 --> 0:04:13.280 The unemployment rate is four and a half but below 0:04:13.320 --> 0:04:18.800 four and a half percent, and labor compensation hasn't got up. 0:04:19.320 --> 0:04:24.360 Isn't that an extraordinary event over the last eight nine years. 0:04:24.400 --> 0:04:26.240 One of our things to talk about here are the 0:04:26.240 --> 0:04:29.120 headlines in all of global Wall Street. We say good 0:04:29.120 --> 0:04:32.000 morning to you in London on Radio London, of course, 0:04:32.040 --> 0:04:34.880 in Awakening East Coast and at New York, but truly 0:04:34.880 --> 0:04:38.240 to all of our listeners worldwide. David, why don't you 0:04:38.320 --> 0:04:42.799 run through these important headlines from the Securities and Exchange Commits. 0:04:42.960 --> 0:04:45.000 We were speaking with Ben Bayne that last week about 0:04:45.000 --> 0:04:47.360 what the SEC was considering with regard to these Miffed rules, 0:04:47.400 --> 0:04:49.320 and we're getting some more clarity on that this morning. 0:04:49.360 --> 0:04:51.160 The SEC is saying it's going to ask for public 0:04:51.200 --> 0:04:53.960 comments on the market impact of these new MIFED rules. 0:04:54.120 --> 0:04:56.279 The SEC is going to give a thirty month reprieve 0:04:56.360 --> 0:05:00.440 to u S firms on EU research rules. And here 0:05:00.480 --> 0:05:02.800 the annoucement addressing me fed conflict with EU on on 0:05:02.839 --> 0:05:05.280 payments issues in particular. So those are the main headlines 0:05:05.279 --> 0:05:07.520 here that we're getting from the Security Exchange Commission in Washington. 0:05:07.640 --> 0:05:10.960 Of course, Henry Kaufman, with his legendary work and modern work, 0:05:11.000 --> 0:05:13.840 I should say it's Salomon Brothers some years ago, is 0:05:13.880 --> 0:05:17.000 a perfect person to speak about the ft. Had the 0:05:17.160 --> 0:05:21.320 article yesterday Robin Wigglesworth. Uh, the the idea of Bank 0:05:21.360 --> 0:05:25.080 of America becoming an investment advisor to accept hard dollars, 0:05:25.080 --> 0:05:28.640 to accept cash because they've got to worry Bank of America, 0:05:28.800 --> 0:05:33.080 New York, San Francisco. Uh, the Carolinas has to worry 0:05:33.080 --> 0:05:37.440 about their London clients. This is a real international issue, 0:05:37.560 --> 0:05:43.960 isn't it. It is an important issue. But the issue 0:05:44.080 --> 0:05:49.039 is how do you maintain the independence of research? How 0:05:49.080 --> 0:05:54.360 do you hold research accountable to be always objective? Can 0:05:54.440 --> 0:05:58.440 you have two regimes? A New York regime of compensation 0:05:58.520 --> 0:06:02.039 to the south Side, etcetera, and a separate regime in 0:06:02.160 --> 0:06:06.600 Europe and particularly in the city. I think that's exceedingly difficult, 0:06:08.120 --> 0:06:10.920 really auditorialized, David. But we're going there right now. And 0:06:11.320 --> 0:06:15.960 as I told you, the only way research can be 0:06:16.040 --> 0:06:21.200 objective in a cell research environment is when the head 0:06:21.240 --> 0:06:25.640 of research sits in the senior management with all the 0:06:25.720 --> 0:06:28.680 other leaders on executive I'm going to hope that James 0:06:28.760 --> 0:06:31.440 Diamonds listening to this conversation this morning. What is your 0:06:31.480 --> 0:06:34.400 advice to Mr Diamond? He's got four hundred and twenty 0:06:34.400 --> 0:06:37.400 two reports and he's got to figure out what to 0:06:37.480 --> 0:06:40.560 do with a dynamic between London and New York. What 0:06:40.720 --> 0:06:44.440 is your advice to Jamie Diamond? I advise is bring 0:06:44.520 --> 0:06:49.160 the head of research into the senior management so that 0:06:49.279 --> 0:06:55.640 he oversees the extent to which objectivity is maintained in analysis. 0:06:56.200 --> 0:06:58.320 Because if you sit on top of the other four 0:06:58.440 --> 0:07:01.760 or five, if that who comes up but defended, but 0:07:01.920 --> 0:07:04.240 come on off of vocal rule and Dodd Frank. The 0:07:04.279 --> 0:07:09.320 Europeans want to police global wall streets intellectual output. That's irrefutable. 0:07:09.400 --> 0:07:11.320 That's what they want to do, and we see that 0:07:11.400 --> 0:07:14.840 through MEFO to this is absolutely critical. Do you agree 0:07:14.840 --> 0:07:18.320 with the Europeans that we should police research or should 0:07:18.320 --> 0:07:20.920 the SEC stand up and say no, we're not going 0:07:21.000 --> 0:07:24.760 to do this longer than the thirty month headline this morning? Well, 0:07:25.680 --> 0:07:32.920 I I would say, research should be policed for its objectivity, 0:07:32.920 --> 0:07:37.880 otherwise it doesn't serve well the client, and it doesn't 0:07:37.960 --> 0:07:41.800 serve well the institution ultimately, and it will always be 0:07:41.920 --> 0:07:45.840 then looked at as being sell side research. And the 0:07:45.880 --> 0:07:49.320 definition of sell side research is to push the product, 0:07:50.160 --> 0:07:53.840 to push the item, to push the underwriting, to push 0:07:53.880 --> 0:07:59.520 the sale or the purchase of stock, and the the 0:07:59.520 --> 0:08:03.400 the investor ultimately becomes aware of this very quickly. We'll 0:08:03.400 --> 0:08:04.800 come back up with you in just a moment. But 0:08:05.000 --> 0:08:06.840 how seismic it change? Do you think this is gonna be? 0:08:06.840 --> 0:08:08.800 There so much concerned about what it's gonna mean for 0:08:08.800 --> 0:08:11.120 for jobs and for this part of the economy as well. 0:08:11.160 --> 0:08:13.880 How worried are you about the implementation of these rules? Well, 0:08:13.960 --> 0:08:18.720 I I really think, uh, the number of people in 0:08:18.880 --> 0:08:23.320 research is going to diminish. It's going to diminish, not 0:08:23.480 --> 0:08:28.000 only because of what you're talking about, but we were 0:08:28.040 --> 0:08:32.079 we're creating more exchange traded funds. We are at the 0:08:32.120 --> 0:08:36.199 same time doing much more. We've got much more money 0:08:36.200 --> 0:08:39.080 going into Van Gone and all of the passive investment. 0:08:39.440 --> 0:08:41.320 Let's do this. Let's come back and talk about this. 0:08:41.400 --> 0:08:44.280 We're honored if Henry Kaufman with us. With these important 0:08:44.280 --> 0:08:48.680 headlines from the Security and Exchange Commission, they will ask 0:08:48.679 --> 0:08:51.360 for public comments on method. Uh. They don't put it down. 0:08:51.400 --> 0:08:54.520 They don't pump the ball down the street. They go 0:08:54.720 --> 0:08:58.640 the thirty months three zero thirty months reprieved the U 0:08:58.760 --> 0:09:01.920 S firms on European research rules. I think that's a 0:09:02.000 --> 0:09:06.400 critical headline and they make clear, uh, Wall Street firms 0:09:06.400 --> 0:09:09.880 can accept research payments from EU clients. Much more on 0:09:10.000 --> 0:09:13.160 this important issue with Dr Kaufman. I think the doll 0:09:13.280 --> 0:09:16.000 was like twelve points when Henry Kaufman started his career. 0:09:16.000 --> 0:09:18.120 Where was the doubt when you walked in the Wall 0:09:18.120 --> 0:09:21.920 Street door? Oh my goodness, I walked into Wall Street 0:09:21.920 --> 0:09:26.120 door door in January of nineteen sixty two, I walked 0:09:26.120 --> 0:09:31.480 into Sottomon. It must have been in the hundreds. Hundreds, Yeah, 0:09:31.480 --> 0:09:34.680 I would say the middle. We'll look that up with 0:09:34.920 --> 0:09:39.120 David Wilson has that statistic available. He has actually memorized. Um. 0:09:39.160 --> 0:09:41.640 I sure everybody wants to know that you just celebrated 0:09:41.640 --> 0:09:45.840 your ninetieth birthday. What is the key to Kaufman longevity? 0:09:45.880 --> 0:09:47.720 As people know as we go through this, I don't 0:09:47.760 --> 0:09:51.120 do this, doctor Doom Bologna. You've always been an upbeat 0:09:51.200 --> 0:09:54.760 guy forgetting about the cliches of another time and space. 0:09:54.840 --> 0:09:58.600 What is the Kaufman longevity formula? Gura and I are 0:09:58.640 --> 0:10:06.439 taking notes? Well, I suspect it's have good genes. Uh, 0:10:06.480 --> 0:10:08.240 and it sound like a glass come out help me here? 0:10:08.320 --> 0:10:10.360 Is it like a glass of tomato juice every morning? 0:10:10.480 --> 0:10:14.240 And and stay active, stay active, don't retire. It would 0:10:14.240 --> 0:10:16.000 be one of them. Stay active, David, Why don't you 0:10:16.080 --> 0:10:18.840 jump in here with Henry Kaufman after these SEC headlines 0:10:18.880 --> 0:10:21.280 too many other topics. Yeah, we're looking ahead to the 0:10:21.320 --> 0:10:24.080 CCB meetings. They've been listening to what that policy makers 0:10:24.120 --> 0:10:25.560 have been saying, and I noticed that more and more 0:10:25.559 --> 0:10:27.839 of them are talking about the role the technology is 0:10:27.880 --> 0:10:30.160 playing when it comes to productivity and wage growth and 0:10:30.400 --> 0:10:32.840 all of that. As you see what's what's the role 0:10:32.920 --> 0:10:35.320 the technology is playing in the economy, And when you 0:10:35.320 --> 0:10:38.440 look at the data, that is a very key issue 0:10:38.920 --> 0:10:44.280 which hasn't been appreciated. There is a tectonic shift occurring 0:10:44.360 --> 0:10:48.720 actually which I didn't bring out in the book. And 0:10:48.760 --> 0:10:53.000 that's the and and that's the following. We have seen 0:10:54.720 --> 0:10:59.199 very little increase in wages in the last eight nine years, 0:10:59.559 --> 0:11:05.360 but we seen an extraordinary increase in corporate profits, I bill, 0:11:05.480 --> 0:11:10.720 and it's I believe what is occurring is a great 0:11:10.800 --> 0:11:15.400 obsolescence in labor, in the value of labor as the 0:11:15.440 --> 0:11:20.600 result of automation, robots, UH, factories that can be built 0:11:20.640 --> 0:11:24.520 all over the world rather than in one place, and 0:11:24.640 --> 0:11:29.960 the technological increase that has occurred with such rapidity that 0:11:30.040 --> 0:11:34.720 it is marginalizing labor. Much in the old days, in 0:11:34.760 --> 0:11:39.920 the nineteen fifties, in the nineteen early sixties, there were unions, 0:11:40.880 --> 0:11:46.160 unions that of course UH got higher wages for their 0:11:46.200 --> 0:11:53.960 members and they constrained corporate profits somewhat. That has gone here, 0:11:54.360 --> 0:11:59.120 and it's a really long term social problem. As is 0:11:59.200 --> 0:12:05.040 widening up occurs. Ask yourself the simple question, has labor 0:12:05.080 --> 0:12:10.840 compensation remains modest? What kind of corporate pensions going to 0:12:10.920 --> 0:12:15.439 be there years from down to help in retirements? Well, 0:12:15.480 --> 0:12:18.559 we're there right now, Alicia Mannell up at Boston College, 0:12:18.559 --> 0:12:24.600 has of people not actually justified in their retirement. Within 0:12:24.640 --> 0:12:28.920 these broader issues is our quest for hard data. You 0:12:29.040 --> 0:12:31.360 are one of the leaders of looking at hard data. 0:12:31.720 --> 0:12:35.960 Do you observe in service and goods inflation? The hard 0:12:36.080 --> 0:12:39.080 data that can let a set of good central bankers 0:12:39.160 --> 0:12:46.040 raise rates. Now, I I think, as you know, Mrs 0:12:46.080 --> 0:12:50.120 ms Yell raises the question, and she hasn't got an answer, 0:12:50.320 --> 0:12:54.080 why isn't the inflation rate higher? So here's a policymaker 0:12:54.200 --> 0:12:58.920 at the highest level is highly uncertain for this relatively 0:12:59.040 --> 0:13:04.360 modest growth in abric compensation. And I it comes from 0:13:04.400 --> 0:13:10.359 really the fact that labor is becoming more obsolescent. Robots 0:13:10.440 --> 0:13:16.760 are replacing labor. Uh. I saw recently a garbage struck. 0:13:18.800 --> 0:13:21.000 In my days, in garbage struck used to be manned 0:13:21.400 --> 0:13:24.600 by a driver and two men. Now I saw a 0:13:24.640 --> 0:13:28.040 garbage struck with a driver moving along. There weren't the 0:13:28.080 --> 0:13:31.400 two men. And what happened there was a crane that 0:13:31.520 --> 0:13:34.520 picked up the garbage pail, dumped it and put it down. 0:13:35.720 --> 0:13:38.320 As now, in about twenty years there won't even be 0:13:38.360 --> 0:13:41.640 a driver on that on that car. And if you 0:13:41.840 --> 0:13:44.720 you don't have to split your imagination far, in twenty 0:13:44.720 --> 0:13:48.800 five years a lot of taxis will be driven without 0:13:48.960 --> 0:13:53.640 a driver. And this goes on and on. A friend 0:13:53.679 --> 0:13:56.319 of mine who was just in Japan told me of 0:13:56.440 --> 0:14:01.760 a robot walking into a patient's room gives the patient 0:14:01.960 --> 0:14:04.920 a pill if the patient doesn't take the bill, an 0:14:04.960 --> 0:14:07.880 attendant comes a little and then the robot picks up 0:14:08.840 --> 0:14:12.960 the patient and puts him in a wheelchair. Now this 0:14:13.040 --> 0:14:15.880 is really but in this replacement that's going, well, we've 0:14:15.880 --> 0:14:18.280 got a circle back. Here's the point. You're ninety years old, 0:14:18.280 --> 0:14:24.280 you're not in a wheelchair. We want to know why. Well, 0:14:24.320 --> 0:14:26.360 let's leave with your Henry caufin with us and what 0:14:26.480 --> 0:14:30.200 will happen and again uh soon. It is a wonderful book. 0:14:30.280 --> 0:14:34.320 I can't say enough about tectonic shifts in financial markets, 0:14:34.400 --> 0:14:39.160 people policies, and institutions, and I would really emphasize the 0:14:39.240 --> 0:14:42.080 people part of it. It's a beautiful book. You just 0:14:42.120 --> 0:14:44.560 want to buy the book because it feels so good. 0:14:44.600 --> 0:14:48.400 From Paul Gray McMillan as well. But the real issue here, 0:14:48.960 --> 0:14:51.600 for particularly those of you of a younger vintage, it 0:14:51.720 --> 0:14:56.240 is a beautiful way to get a sense of history 0:14:56.680 --> 0:14:58.760 of where we were and how we got the two 0:14:58.800 --> 0:15:01.000 thousand seven in beyond, it's even got a lot on 0:15:01.040 --> 0:15:04.720 Walter Riston, which is a very good thing as well. 0:15:04.760 --> 0:15:08.800 Henry Kaufman, of course for years with Solomon Brothers and 0:15:09.520 --> 0:15:11.840 with an association with Lehman Brothers, which we didn't have 0:15:11.880 --> 0:15:15.040 time to talk about, but we'll do that another time. 0:15:26.160 --> 0:15:31.960 We do uh economics, finance, investment, international relations, we do politics, 0:15:32.720 --> 0:15:35.320 and we do our military, and I think, David, we 0:15:35.440 --> 0:15:39.200 get more misinformation and we struggle more to get informed 0:15:39.200 --> 0:15:42.920 guests on the military than any other thing we deal with. 0:15:43.440 --> 0:15:45.040 And that's why we were on a day of Admiral 0:15:45.160 --> 0:15:49.440 James Travitis with us at Tufts and General Kimmitt comes 0:15:49.480 --> 0:15:51.960 on as a really interesting guy in general with a 0:15:52.000 --> 0:15:55.760 c f A, an important financial degree. And it's also 0:15:55.760 --> 0:15:58.120 why we have George Friedman on because he read James 0:15:58.160 --> 0:16:01.760 as a kid. He knows every book, every ship, even worse, 0:16:01.840 --> 0:16:04.400 you knows where every boat is. And literally, David, it 0:16:04.400 --> 0:16:07.760 could be a three hour conversation. Absolutely. George Freeman here 0:16:07.800 --> 0:16:09.640 with us in our eleven three studios in the Earth, 0:16:09.680 --> 0:16:12.120 the founder and chairman of Political Future. Let's get to 0:16:12.160 --> 0:16:13.440 that in just a minute. First, let me ask you 0:16:13.440 --> 0:16:14.920 about the news of the day. We've been following what's 0:16:14.920 --> 0:16:17.560 been going on in Northern Spain, waiting to hear from 0:16:17.600 --> 0:16:20.200 the president of the region a little bit later about 0:16:20.200 --> 0:16:21.880 the path forward. There could be a call for for 0:16:22.000 --> 0:16:24.800 new elections there. What do you make of of what's 0:16:24.800 --> 0:16:26.720 playing out there. Where do you think this is leading to, 0:16:26.960 --> 0:16:29.560 not just in Spain, in this region and in Spain, 0:16:29.600 --> 0:16:31.120 but in Europe generally? What is it? What is it? 0:16:31.280 --> 0:16:33.680 What's the message about the integrity or the health of 0:16:33.720 --> 0:16:36.600 the European experiment? Well where this comes from his two 0:16:36.600 --> 0:16:39.440 thousand eight. This is the really important part of two 0:16:39.480 --> 0:16:41.080 thousand and eight. I hate to say this the people 0:16:41.160 --> 0:16:45.040 in the market, but that was a preface. What has 0:16:45.080 --> 0:16:48.520 happened is that it has created massive inequalities in Europe, 0:16:49.360 --> 0:16:53.040 failed economies, um a lot of pretense by the elite, 0:16:53.760 --> 0:17:00.680 and now you're seeing fragmentation. Scotland almost seceded from the Okay, 0:17:01.280 --> 0:17:05.399 now Catalonia. These are two three hundred year arrangements that 0:17:05.440 --> 0:17:09.680 are coming. Apart the Italians, there will be others coming. 0:17:10.040 --> 0:17:13.359 So what we're seeing here is what economic is all about. 0:17:13.960 --> 0:17:17.840 It becomes politics, and it becomes politics where the whole 0:17:18.000 --> 0:17:22.760 you know, you're talking about tectonic shifts, Mr Kaufman, this 0:17:22.840 --> 0:17:26.360 is a tectonic shift. We think two thousand and eight 0:17:26.440 --> 0:17:30.440 is over because interest rates are savalizing. Oh no, Catalogna 0:17:30.560 --> 0:17:34.439 is two thousand eight large. Our politics playing a greater 0:17:34.560 --> 0:17:39.000 role in the economy in policy than they have in 0:17:39.040 --> 0:17:41.600 the past. I think of just what happened with Brexit, 0:17:41.640 --> 0:17:43.720 what happened with the U S election, the rise of 0:17:43.720 --> 0:17:46.120 populism that we saw. When when you look at the economy, 0:17:46.119 --> 0:17:48.480 how big role is politics playing at this point? Well, 0:17:48.520 --> 0:17:54.040 the economy is politics. The tax code, the regulations of 0:17:54.600 --> 0:17:59.920 the political pressures all affected. Uh when things are rolled, 0:18:00.080 --> 0:18:03.360 the stable is is feeling that did the markets operate 0:18:03.640 --> 0:18:06.399 on their own? But historically, I mean, what made the 0:18:06.400 --> 0:18:09.800 Great expansion possible was World War Two and that was 0:18:09.840 --> 0:18:13.520 pretty political and that's set the stage for a generation 0:18:13.760 --> 0:18:18.439 of growth Vietnam intern I think we should rip up 0:18:18.480 --> 0:18:21.159 the scripture. Dr Kissinger, among others, has talked about the 0:18:21.160 --> 0:18:26.360 refugee migrant moment in Europe is to be almost transcentry, 0:18:26.400 --> 0:18:30.040 to go across centuries of historical experiment, and we've seen 0:18:30.119 --> 0:18:33.800 recently the politics of Austria, the politics of the Czech Republic. 0:18:33.840 --> 0:18:38.199 How does George Friedman filter not so much the fact 0:18:38.359 --> 0:18:42.720 of migrants and refugees in Europe, but the scale of it, 0:18:42.880 --> 0:18:47.120 the amplitude of the last twelve months, and the breathtaking 0:18:47.119 --> 0:18:51.960 indifference by the elite to the entire process, because from 0:18:51.960 --> 0:18:54.719 a European point of view, the Germans and the German 0:18:54.720 --> 0:18:57.720 elite were very generous, but they weren't going to live 0:18:57.720 --> 0:19:01.800 in the same neighborhoods with them. The people who wanted 0:19:02.240 --> 0:19:04.480 I thought the migrants should come in were very kind, 0:19:04.960 --> 0:19:07.240 but they weren't going to be the ones paying the 0:19:07.320 --> 0:19:10.000 price of social dislocation and everything else. Like when I 0:19:10.040 --> 0:19:13.959 moved to the Bronx from Hungary. Uh, everybody was very 0:19:14.040 --> 0:19:16.080 kind to me, but they weren't living there and it 0:19:16.119 --> 0:19:22.359 was a tough neighborhood. So the issue here is I 0:19:22.359 --> 0:19:25.600 came here fifty two, I was wek united. They think 0:19:25.640 --> 0:19:27.440 you are a communist. I mean, was it the enough 0:19:27.440 --> 0:19:29.000 a shift that you were the little kid that was 0:19:29.000 --> 0:19:31.280 a comy because that's how we felt, were the kids 0:19:31.280 --> 0:19:33.600 in fifty six and the debris after that. No, we 0:19:33.720 --> 0:19:35.840 were afraid of the Puerto Ricans, and we were afraid 0:19:35.880 --> 0:19:37.680 of the Italians, and we were afraid of Irish and 0:19:37.720 --> 0:19:40.000 they were afraid of us. So when you have immigration, 0:19:40.040 --> 0:19:44.639 you have social instability. And so the people who didn't 0:19:44.640 --> 0:19:48.280 want it were regarded as immoral, you know, you know, 0:19:49.119 --> 0:19:53.240 dark people who don't understand that they're evil. This ripped 0:19:53.280 --> 0:19:57.280 here of apart. It wasn't the migration, but the manner 0:19:57.320 --> 0:20:01.840 in which the same people have out of Trump we're presented. 0:20:01.960 --> 0:20:04.720 So we have a massive split between the elite, who 0:20:04.760 --> 0:20:09.159 sees themselves as moral judges, and the working class and 0:20:09.200 --> 0:20:13.000 poorer who see themselves bearing the burden of the generosity 0:20:13.040 --> 0:20:16.120 of the elite. Let me ask you about the negotiations 0:20:16.119 --> 0:20:18.760 over NAFTA, and we're talking about politics being the economy 0:20:18.800 --> 0:20:21.800 and perhaps vice versa. There, what do you make of 0:20:21.840 --> 0:20:25.040 the signaling that we've seen here? You have negotiation teams 0:20:25.080 --> 0:20:28.520 from these three countries working on rehashing that deal. All 0:20:28.560 --> 0:20:30.800 the while you have one of the three nations set 0:20:30.800 --> 0:20:34.240 of states raising the spectrum terminating the deal. Uh, there's 0:20:34.240 --> 0:20:37.760 some political signaling, if if any, how optimistic are you 0:20:37.800 --> 0:20:39.320 that this process is going to play out? And how 0:20:39.640 --> 0:20:42.680 destabilizing would it be to have no trade deal for 0:20:42.760 --> 0:20:44.840 any period of time between these three countries. I'll give 0:20:45.280 --> 0:20:50.240 one fact. The largest export partner of California is Mexico. 0:20:50.920 --> 0:20:55.240 The card largest export partner of Texas is Mexico. You've 0:20:55.240 --> 0:21:00.639 got the largest Republican, the largest Democratic UH representatives in 0:21:00.720 --> 0:21:04.320 Washington and the last thing they want is anything that 0:21:04.320 --> 0:21:09.119 screws up NAFTA. So every doesn't matter what the negotiators do, 0:21:09.359 --> 0:21:11.720 and it doesn't much matter what the President wants. This 0:21:11.800 --> 0:21:14.399 is going to be decided ultimately in Congress. Can you 0:21:14.440 --> 0:21:16.360 say this about tax reform? Can you say the same 0:21:16.359 --> 0:21:18.639 thing about Texas. It doesn't have that kind of coalition. 0:21:18.760 --> 0:21:22.400 It doesn't have that. It doesn't have California and Texas 0:21:22.960 --> 0:21:26.720 the first and the second largest delegations pulling in others 0:21:26.720 --> 0:21:30.199 saying basically, we don't want a basic change. Okay, Texas 0:21:30.280 --> 0:21:33.280 guy other than Austin, Good morning Austin Texas. Good morning, 0:21:33.359 --> 0:21:36.439 Mr Dell. Other than Austin, Texas. How many Democrats are 0:21:36.520 --> 0:21:40.120 left in Texas? Would all be je No? The state? Uh, 0:21:40.200 --> 0:21:43.439 he would devel the state because all the Democrats became Republicans. 0:21:44.000 --> 0:21:46.359 This was always a conservative state. It was a conservative 0:21:46.400 --> 0:21:51.159 democratic strait, and now it's what it was. Really changed. 0:21:51.160 --> 0:21:55.000 It somewhat is the tension between Senator Cruz and Senator Cornyn. 0:21:55.800 --> 0:21:59.959 But the Trump movement itself hasn't changed the safe that much. 0:22:00.480 --> 0:22:02.159 You don't see a shift in the Trump I mean, 0:22:02.200 --> 0:22:05.160 I just saw an MSNBC banner talking about the overnight 0:22:05.200 --> 0:22:08.119 polling and the president's at new low. And in all 0:22:08.160 --> 0:22:10.960 of that, do you see in your neck of the woods? Uh, 0:22:11.119 --> 0:22:13.520 people walking away from the president or is he still 0:22:13.520 --> 0:22:16.080 had that core base? They don't know what to walk to. 0:22:17.080 --> 0:22:21.159 So the problem that we really have is, Okay, my 0:22:21.200 --> 0:22:26.199 neighbors in Hayes County, I have problems with Trump. The 0:22:26.240 --> 0:22:30.000 problem is the system hasn't presented an alternative. The alternative 0:22:30.040 --> 0:22:32.800 is going back to Obama. They really didn't like Obama. 0:22:33.520 --> 0:22:36.600 So in Texas you've got them locked in and the 0:22:36.640 --> 0:22:39.919 party has marked in very quickly. Here one more question 0:22:39.960 --> 0:22:42.679 to the Democrats. Have anybody that understands the five sided 0:22:42.680 --> 0:22:45.560 walls of the Pentagon? Are there any William Cohen or 0:22:46.440 --> 0:22:49.000 John Carries out there that actually understand you gotta budget 0:22:49.000 --> 0:22:51.639 this stuff? Well, I think the basic problem of the 0:22:51.680 --> 0:22:54.520 think tanks in Washington. They're really smart people all work 0:22:54.600 --> 0:22:58.080 the think tanks. The think tanks are funded by various 0:22:58.080 --> 0:23:00.600 corporate interests there. They're going to put that out. The 0:23:00.720 --> 0:23:05.160 days when you had independent defense analysts in both parties 0:23:06.200 --> 0:23:08.960 were limited. The best people there you have with the 0:23:09.000 --> 0:23:12.120 former generals. They're not working for the think tanks. They 0:23:12.160 --> 0:23:14.320 do know the budget, and that's I think one of 0:23:14.359 --> 0:23:16.560 the most smart things that Trump did. He reached down, 0:23:17.320 --> 0:23:19.919 got a group of generals to run it, and they 0:23:19.920 --> 0:23:22.680 hadn't spend their time at Berking's, in Heritage and everywhere else. 0:23:22.880 --> 0:23:26.200 Gideon Rosa's Foreign Affairs magazine leads off with an article 0:23:26.240 --> 0:23:32.440 on Afghanistan. Does George Freeman have an Afghanistan policy? Leave? Look? 0:23:32.480 --> 0:23:39.560 We can't wait, That's what David Girl's policy is. I mean, look, 0:23:39.840 --> 0:23:42.960 we we can't. We can't. We have no strategy, we 0:23:43.000 --> 0:23:46.320 have no goals that are achievable. We are there because 0:23:46.359 --> 0:23:51.000 it's harder politically to leave than to stay, So we 0:23:51.080 --> 0:23:53.480 leave a token number of troops that aren't gonna do anything. 0:23:53.560 --> 0:23:57.680 So George Freeman, thank you for letting me monopolize a conversation. 0:23:58.000 --> 0:24:10.280 Girls over there doing his taxes while on the gird doctrine. 0:24:13.040 --> 0:24:15.760 The news slow this morning is extraordinary and too short 0:24:15.760 --> 0:24:18.359 to visit with Arthur love At, the former chairman of 0:24:18.440 --> 0:24:22.320 the SEC, Arthur I was amazed at the forty eight 0:24:22.359 --> 0:24:27.000 hour news slow of an SEC really saying something about 0:24:27.040 --> 0:24:31.639 the changing of how research gets paid in London. Henry 0:24:31.680 --> 0:24:34.359 Kaufman said this morning there has to be one model. 0:24:34.680 --> 0:24:37.719 Do you agree there needs to be one global model 0:24:38.200 --> 0:24:42.560 for research, intellectual and sell side compensation or could Wall 0:24:42.600 --> 0:24:46.600 Street in New York go to loone. I think it 0:24:46.640 --> 0:24:51.840 would be spectacular if we could have one model, but 0:24:52.600 --> 0:24:58.760 just judging from different cultures, it is unlikely that we 0:24:58.800 --> 0:25:04.240 will wind up with one model. I think as far 0:25:04.280 --> 0:25:11.119