Speaker 1: Runt You by Bank of America Mary Lynch. With virtual reality,
Speaker 1: virtually everything will change. Discover opportunities in a transforming world.
Speaker 1: Be of a mL dot Com, slash VR, Mary Lynch,
Speaker 1: Pierced Fenner and Smith Incorporated. Welcome to the Bloomberg Surveillance Podcast.
Speaker 1: I'm Tom Keene with David Gura. Daily we bring you
Speaker 1: insight from the best of economics, finance, investment, and international relations.
Speaker 1: Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com,
Speaker 1: and of course on the Bloomberg Getting Rose joining us
Speaker 1: now in our Bloomberg eleven three oh studios. He's the
Speaker 1: editor of Foreign Affairs and the Peter G. Peterson Chair
Speaker 1: at the Council on Foreign Relations, and I hold Gideon's
Speaker 1: Bible here the latest issue of for Affairs magazine and Time.
Speaker 1: What now Trump's next steps and let's let's take stock
Speaker 1: here Now four or five months into the presidency, do
Speaker 1: you have a clearer sense of what Trump's foreign policy prescriptions,
Speaker 1: what his what his foreign policy is given? Actually, no,
Speaker 1: I don't think we do. Um. He came into office
Speaker 1: with a very strong agenda, with a lot of both
Speaker 1: contradictory but also somewhat radical proposals, and what has been
Speaker 1: notable has been backing off of many of those, but
Speaker 1: not all of them, but not putting in its place
Speaker 1: any kind of new framework that uh explains and justifies
Speaker 1: which parts of the campaign agenda he's kept in which
Speaker 1: parts he hasn't. So right now, basically you just have
Speaker 1: a sort of mostly an inertial mishmash that is continuing
Speaker 1: on autopilot for general American foreign policy, with occasional reactions
Speaker 1: coming out of DC on particular events and issues. Let
Speaker 1: me ask you what we learned from from the speech
Speaker 1: that the President gave in Brussels when he was there
Speaker 1: for the NATOS. Since then, Susan Glasser, who's at Political
Speaker 1: Magazine has written about how I think twenty five words
Speaker 1: were stricken from the speech that he ended up reading.
Speaker 1: Those were the ones in which he would have affirmed, uh,
Speaker 1: the importance of Article five part of NATO. What do
Speaker 1: we learned from that that speech in Brussels and what happened?
Speaker 1: I think we learned a couple of things, UH. One
Speaker 1: is that the president really doesn't like NATO. Second that
Speaker 1: the responsible quote unquote adults in the administration don't necessarily
Speaker 1: get their way when it comes to the president's words.
Speaker 1: Whether it comes to actual policies is a different question.
Speaker 1: So one of the interesting things that happens, I mean,
Speaker 1: think about the question of the president's tweets, uh, and
Speaker 1: everyone's debating are the president's tweets official reflections of US policy?
Speaker 1: Increasingly the president's tweets, everybody seems to agree are the
Speaker 1: president's tweets and not actual reflections of US policy. So
Speaker 1: figuring out at this point when the president is speaking
Speaker 1: as Donald J. Trump, and when he's speaking as the
Speaker 1: authoritative commander in chief of US forces, and uh, the
Speaker 1: expression of U S foreign policy is a really kind
Speaker 1: of odd We don't know. So people, I would say,
Speaker 1: foreigners and most people should watch what the United States
Speaker 1: does and not listen to any of the words coming
Speaker 1: out of Washington, because it's not clear who at these
Speaker 1: these days is authoritatively speaking for the country. Kideon Rose,
Speaker 1: there are teen things up perfectly for me to read
Speaker 1: the latest tweet from the president now just a few
Speaker 1: minutes ago, writing well, as predicted, the Ninth Circuit did
Speaker 1: it again ruled against the travel band at such a
Speaker 1: dangerous time in the history of our country. S C.
Speaker 1: Which stands for Supreme Court. I assume where do they
Speaker 1: stand with this trass should be South Carolina on the
Speaker 1: hills of rereading Clemson at the White House. Indeed, our
Speaker 1: national champions there on the south lawn of the White House.
Speaker 1: Getting what what? What changes now that we have this
Speaker 1: Ninth Circuit decision? How much closer are we to seeing
Speaker 1: this case being argued before the Supreme Court? You know,
Speaker 1: you have to get a legal expert to talk about
Speaker 1: the specifics of the thing that The fact is, this
Speaker 1: whole thing is a bit of a joke in the
Speaker 1: sense that there wasn't actually a real problem. The solution
Speaker 1: was a fake solution, and it was driven by an
Speaker 1: agenda other than a rational policy making, which is why
Speaker 1: it has been undermined in the courts. So what really
Speaker 1: should happen is they should get the entire point of
Speaker 1: this was supposedly a temporary band of which the period
Speaker 1: now is almost over, and there was no actual real
Speaker 1: problem with betting in the first place. So it's not
Speaker 1: clear to me that other than politics and stubbornness, that
Speaker 1: there's any reason for this to go any further whatsoever.
Speaker 1: The question of immigration policy and protecting yourself from counter terrorism. UH,
Speaker 1: threats is a real and terrorist threats is a real
Speaker 1: and major issue. But the idea that that's actually what's
Speaker 1: going on in this discussion about travel band is silly.
Speaker 1: You've been complaining all morning. What do you want from
Speaker 1: Secretary Tillerson? Secretary Tillerson is a very interesting character. I mean,
Speaker 1: he's gonna go to CFR concept formulations is going to
Speaker 1: greet him. You're gonna do a foreign affairs interview. We
Speaker 1: would love to interview. We we have standing offers to
Speaker 1: interview ton of people. We would love to it. What's
Speaker 1: your first question? You know, it's really hard to where
Speaker 1: what is okay? What is the grand strategy of the
Speaker 1: Trump administration? I don't think he'd answer that. UH. And
Speaker 1: Totson has not exactly been a large public voice in
Speaker 1: American farm policy recently. UM. The what I've heard, however,
Speaker 1: is that indeed he has been working closely with Mattis
Speaker 1: and uh McMaster uh to to help guide things in
Speaker 1: ways that the people at State would feel are are responsible,
Speaker 1: in which we should be very thankful for. So. I
Speaker 1: the question of what is actually going on inside the
Speaker 1: Trump farm policy and national security apparatus is a very
Speaker 1: interesting question that for all the reporting that goes on
Speaker 1: about the White House itself and the soap opera and
Speaker 1: the melodrama of all the key characters, there's very little
Speaker 1: reportage about the details of foreign policy making and how
Speaker 1: decisions and strategic process actually plan. There's a really fascinating
Speaker 1: piece in New York Magazine this week by Jessica Pressler
Speaker 1: looking at Gary Cone, the chairman of the National Economic Council,
Speaker 1: and and she sort of looks at him as a
Speaker 1: long stay ending number two. He was the number two
Speaker 1: to to Lloyd Blank find at Goldman Saxon's with What
Speaker 1: the piece posits is why is he putting up with
Speaker 1: with all of this? And I wonder if you can
Speaker 1: extrapolate that to to Rex Tillerson as well. I'm reminded
Speaker 1: of the statement that he gave on Friday about Cutter
Speaker 1: that was immediately reversed by the President in the Rose
Speaker 1: Garden at press conference shortly thereafter. Does this president want
Speaker 1: his cabinet secretaries to have any degree of autonomy? Do
Speaker 1: you think? Uh? The answer to that last question probably
Speaker 1: is no. I mean, if we all will y'all watch
Speaker 1: that meeting yesterday and it doesn't look like this is
Speaker 1: somebody a boss who wants to have a lot of
Speaker 1: delegated authority to freelancing underlings who are Pierre players. This
Speaker 1: is more like a court than it is a cabinet um.
Speaker 1: With regard to what Tillerson's thinking, I don't know. I
Speaker 1: can't get inside Tillerson's head. I don't know the man,
Speaker 1: and it's not clear what the mindset he's bringing to
Speaker 1: diplomacy is. After an entire career spent in corporate management.
Speaker 1: What Tillerson, sorry, what McMaster the General's McMaster and Mattis
Speaker 1: are thinking, and what many of the professionals around out
Speaker 1: of thinking is, Look, the United States is the leader
Speaker 1: of the world. We are running a very important set
Speaker 1: of policies globally on a whole bunch of areas, and
Speaker 1: we need to keep the ship on track. And they're
Speaker 1: basically spending their time trying to run the world and
Speaker 1: doing a decent job of it. Anthony from New Jersey
Speaker 1: emailed in and he said, you know, very succinctly, what's
Speaker 1: going to happen next. We had Ambassador Burns with us yesterday,
Speaker 1: Nicholas Burns of Kennedy in here. Those guys aren't in
Speaker 1: a Republican government. Maybe guys like Has, guys like Ambassador
Speaker 1: Burns and such. What needs to happen to get the
Speaker 1: normal apparatus of our Republican foreign policy into the Republican Senate,
Speaker 1: Republican House, Republican White House. That's what Anthony from New
Speaker 1: Jersey wanted to know. I think that is a great question.
Speaker 1: I didn't come up with it, Anthony from New Jersey,
Speaker 1: and I think I think that that is the kind
Speaker 1: of question that many of us are asking. UM. The
Speaker 1: it's easier to ask the question than to answer it,
Speaker 1: because what we've seen increasingly is that everything we thought
Speaker 1: we knew about US farm policy and government operations does
Speaker 1: not seem to apply in the short term, at least,
Speaker 1: whether that will be true over a medium term or
Speaker 1: longer term. I cannot see how this is sustainable. I
Speaker 1: cannot see how what we've seen over the last few
Speaker 1: months goes on for too much longer, many more months longer,
Speaker 1: without something. We've been so incredibly lucky that there's been
Speaker 1: no actual crisis abroad. UM, we've posentially been stalled in
Speaker 1: the water. US farm policy is stalled in the water. UM,
Speaker 1: nothing bad has happened. No pirates have come along to
Speaker 1: attack us. No, uh, No giant whale has come to
Speaker 1: rock the boat. Uh. You didn't see the new Johnny
Speaker 1: Depp movie. What will actually happen? You know? Every month
Speaker 1: that goes by, we're running out of time when we
Speaker 1: can expect our luck to hold with no crisis. Want
Speaker 1: to come back and talk about the new Foreign Affairs
Speaker 1: magazine And this is always controversial and very balanced. There's
Speaker 1: some different views across it. What now the President's next steps?
Speaker 1: Getting rose with this Foreign Affairs magazine? The new issue?
Speaker 1: What now Trump's next SIPs? How do you make an issue?
Speaker 1: Is it like? Is it like a war? Is it
Speaker 1: like you know the bunker room there at the White House,
Speaker 1: it's like six you get in the room and screaming
Speaker 1: to each other for with the Tom King Grand strategy?
Speaker 1: When do we get that piece? And so we have
Speaker 1: to we have to two tracks. We have a daily
Speaker 1: website where we put out several pieces a day, and
Speaker 1: that's the constant production of stuff. That's like a lot
Speaker 1: of other organizations trying to add real value to contemporary
Speaker 1: commentary on breaking events. We also have a bi monthly
Speaker 1: print issue which is sort of like the carriers of
Speaker 1: the battle Fleet and the sort of you deploy them
Speaker 1: on long deployments on major subjects. What we try and
Speaker 1: do is have a steady run of articles on regular important,
Speaker 1: big topics, but we also have a lead package each issue,
Speaker 1: and we try to shape that a couple of months
Speaker 1: out so what we think will be on the news
Speaker 1: of the day. And so when we were putting this
Speaker 1: one together, we're putting it together in April, sending it
Speaker 1: to Bed in May to appear in June and July.
Speaker 1: The idea was that, Okay, after all the craziness of
Speaker 1: the first few months, it'll get It's gonna get commerce.
Speaker 1: So let's talk about actual policy stuff, right. So we
Speaker 1: had suggestions for foreign policy, suggestions for healthcare reform, suggestions
Speaker 1: for tax reform, projection for economic policy internationally. The idea
Speaker 1: being that at some point there are some people who
Speaker 1: should go about trying to govern um. Whether that is
Speaker 1: actually in sync with what's happening in d C, you
Speaker 1: never know, but those discussions should be had no matter
Speaker 1: what you mentioned. Carriers and battleships right now, they're off
Speaker 1: North Korea at Moalstavidas told us from Fletcher one of
Speaker 1: your sponsors in Foreign Affairs magazine h the idea of
Speaker 1: there's an a model off of North Korea. What is
Speaker 1: the Foreign affairs take on our risks in North Korea? So, uh,
Speaker 1: North Korea. Look at General Mattis said just the other day,
Speaker 1: that's the sort of probably the single most important or
Speaker 1: urgent immediate national security threat that people are focusing on,
Speaker 1: even more so than Russia and cyber stuff. Uh, it's dangerous.
Speaker 1: On the other hand, it's always kind of been dangerous.
Speaker 1: We've been having a Korea standoff for sixty years, So
Speaker 1: I'm not as freaked as other people are. But that
Speaker 1: doesn't mean you don't have to handle this very carefully
Speaker 1: and very securely. Probably the thing to do that makes
Speaker 1: sense is not and this is something that Richard Hass
Speaker 1: says in his piece, is not assumed that you can
Speaker 1: solve the North Korea problem. We're not going to solve
Speaker 1: the North Korea problem. So what you should be looking
Speaker 1: for is not some fundamental resolution to the issue, but
Speaker 1: some sort of interim agreement that can pause things, keep
Speaker 1: them from escalating further, and jolly things along and kick
Speaker 1: the can down the road. We've been doing that with
Speaker 1: North Korea for six decades, nobody has any better ideas.
Speaker 1: We should keep doing it now, and you want responsible
Speaker 1: adults managing that to make sure that it doesn't actually
Speaker 1: erupt to escalate into a giant war. Yeah, that's a
Speaker 1: big part of Ambassador hass Is piece where to go
Speaker 1: from here? Rebooting American foreign policy at the front of
Speaker 1: the latest issue of Foreign aferous let me ask you
Speaker 1: about Russian hacking. You mentioned that just a moment to go.
Speaker 1: Bloomberg News reporting this morning that the hacking during the
Speaker 1: election much wider than was initially thought. Hackers hit systems
Speaker 1: in a total of thirty nine states here. This is
Speaker 1: ostensibly the focus of the Senate Intelligence Committees investigation, and
Speaker 1: we heard from James Comey on this subject last week.
Speaker 1: Are we at risk of of of not seeing the
Speaker 1: forest through the trees, focusing too much here on the
Speaker 1: interpersonal conflict and not on this larger issue where we
Speaker 1: at risk of losing sight of the larger issue here,
Speaker 1: that being um, the cyber attacks that Russian made during
Speaker 1: the during the campaign I think are absolutely correct. Um.
Speaker 1: So essentially there's a bunch of different issues here, all
Speaker 1: of which are worth talking about investigating. Discussing, addressing, and
Speaker 1: so forth, but which cannon should follow separate tracks. So
Speaker 1: whatever happened on the legal front or or the whatever
Speaker 1: is going on in the investigative front, that's issue. That's
Speaker 1: one set of issues. Whatever happened between the Trump campaign
Speaker 1: and Russia's another issue. But what the Russians did and
Speaker 1: are continuing to do, and what they've they've done in
Speaker 1: other countries as well, is use cyber attacks and as
Speaker 1: part of a broader diplomatic UH and economic and UH
Speaker 1: political strategy for challenging American dominance and and overall turning
Speaker 1: various American policies they don't like. And so the this
Speaker 1: should be a major object of investigation and a major
Speaker 1: UH challenge to deal with, no matter who's in the
Speaker 1: White House. And the fact that this has gotten somehow
Speaker 1: tied up in and suck connected to the partisan split
Speaker 1: going on in Washington, in which it shouldn't matter what
Speaker 1: party affiliation you have to just determine what your stance
Speaker 1: should be on our Russian cyber attack against American democracy.
Speaker 1: And yet unfortunately it seems to be getting trapped in
Speaker 1: that as if the people who care about the Russia
Speaker 1: leaks and the Russian investigation are seemingly doing it for
Speaker 1: partisan reasons and the people on the other side are
Speaker 1: hosing them. Thank you so much for coming in. Oh,
Speaker 1: it's hugely valuable. Get here this you know, this is
Speaker 1: what the show is about. We do economics and the
Speaker 1: Fed and finance and investment, and we have to link
Speaker 1: it into the politics at the moment is well, Gideon Rose,
Speaker 1: Thank you so much. Foreign Affairs at magazine. What now
Speaker 1: Trump's next steps? We are advantaged. Um Bromberg is doing
Speaker 1: a big deal in Germany today and we've got a
Speaker 1: lot of German news coming out, including important comments by
Speaker 1: their finance minister. It would be good to have a
Speaker 1: German expert in the house. That would not be John
Speaker 1: Tucker or Tom Keane, but David Gurri, Carston Brasilski with us,
Speaker 1: with I n G. Germany. Uh, usually in Frankfurt, US
Speaker 1: Frankfort right in Berlin born, Berlin born, and good, wonderful
Speaker 1: day have you here. Let's start with something we usually
Speaker 1: don't ask. What I'm gonna ask it. Who's Mr Schreibler.
Speaker 1: How is Mr Schreibla the finance minister perceived by the
Speaker 1: German people a bit like Mr Bismarck back hundred hundred
Speaker 1: twenty years ago. I think he's the the iron He's
Speaker 1: not the iron lady. He's the iron man and the
Speaker 1: standing for a fiscal discipline and what the Germans called
Speaker 1: the black zero, so more or less balanced budgets. What
Speaker 1: what did you hear last week? We were paying attention
Speaker 1: to Admirio Druggi was saying in Estonia after the rate
Speaker 1: decision last week? What changed in terms of language last week?
Speaker 1: What stood out to you? Obviously we are the other
Speaker 1: ones on they they cut down the the easing bias,
Speaker 1: so no not interstise, will no longer could no longer
Speaker 1: be even lower than is. And also the expected thing
Speaker 1: that the drug it changed the balance of the economic
Speaker 1: out look to the balanced um. I think that that
Speaker 1: was the new thing as expected. Now the next steps
Speaker 1: will be will he gradually prepare a tapering announcement? What
Speaker 1: we're talking about personality here? What's the relationship like between
Speaker 1: Mr Scheibler and Mr Drug? Is there much of one
Speaker 1: one of Whether there is, I would call it a
Speaker 1: professional relationship because mrs as you know, Mr Schi likes
Speaker 1: to to do some some e CB bashing once in
Speaker 1: a while out of out of public um created the
Speaker 1: ECB does not like it because the journe public is
Speaker 1: very critical about the ECB. UM. So I think it's
Speaker 1: a professional relationship. But I wonder whether it goes beyond
Speaker 1: that dovetail. For is, if you would what's going on
Speaker 1: with the e c B and what we expect to
Speaker 1: see the FED due today? How cognizant is the the
Speaker 1: e c B of what the Fed is is doing
Speaker 1: or may do today tomorrow. I think what wasn't Tree share,
Speaker 1: the former SCB president who always talked about some some
Speaker 1: mutual brotherhood of central bankers. Um, Obviously they're watching what
Speaker 1: the FED is doing and and the impact on the currency.
Speaker 1: I think that that's what what's most interesting, because if
Speaker 1: the FED would not hike interest rates, if and if
Speaker 1: the ECB would continue going towards tapering, this argus in
Speaker 1: favor of a stronger euro. But for the ECB, the
Speaker 1: Euro should not get too strong because otherwise it would
Speaker 1: on the mine exports. We have a deadline coming up
Speaker 1: here for for Greece on Friday, I gather another meeting
Speaker 1: on on on Friday. Have we seen Mr choy bliss
Speaker 1: offt in his tone at all when it comes to
Speaker 1: the situation in Greece. Has has that story changed markedly? No,
Speaker 1: it has not. The only change is that hardly anyone
Speaker 1: is interested in what Chilable thinks about about the Greek
Speaker 1: because it will be muddling through, because I think we
Speaker 1: know that no one really is interested in the escalation
Speaker 1: of the situation, neither the Germans a couple of months
Speaker 1: before their own elections, nor the Greek um. So therefore
Speaker 1: we will get some muddling through and this will Morris
Speaker 1: go off the RADA screen. I mentioned he's watching the
Speaker 1: the US two year What are you watching mostly these day?
Speaker 1: What were the indicators that you pay the most attention
Speaker 1: to As we have these ECB meetings, in the FED
Speaker 1: meeting of bo J meeting on the heels of the
Speaker 1: FED meeting later this week. Obviously it is bondy heels,
Speaker 1: it's it's ten year, it's it's two year year rates,
Speaker 1: and it's a bit of the exchange. And I think,
Speaker 1: especially when you look at the the U S situation,
Speaker 1: it's also overshadowed by politics. When when I look at this,
Speaker 1: and I did this chart the other day, not only
Speaker 1: is there a yield of virgins between the negative two
Speaker 1: year in Germany and the US two year. But the
Speaker 1: first derivative, the widening divergence is tangible. That's always a symmetric.
Speaker 1: Is a divergence widening a bigger deal for the United
Speaker 1: States or is it a bigger deal for Germany? It's
Speaker 1: a it's a it's a bigger deal for the for
Speaker 1: the U S because it are always argues in favor
Speaker 1: of of a stronger of a stronger US dollar um.
Speaker 1: But it's it's also distorted by by by the fact
Speaker 1: that you have so many institutional investors who actually have
Speaker 1: to invest in shorter short materiality droan paper. And this
Speaker 1: is not just the e c B. It's the explain
Speaker 1: that because because banks actually they they could deposit the
Speaker 1: liquidity at the ECB at minds opened four. But if
Speaker 1: you look at where where one year or two year
Speaker 1: German bundyal standard is are a far lower, which means
Speaker 1: you have institutional investors which cannot dump their liquidity at
Speaker 1: the ECB, they have to buy that they are they
Speaker 1: are forced to buy German paper. And this is what
Speaker 1: what distorts the market. You can't tell me that is
Speaker 1: functional for the people of Germany. We talked to you know,
Speaker 1: Bill Gross of Janice um Henderson about this about the
Speaker 1: financial repression. What is the financial repression of one third
Speaker 1: of Germany who are savers um there? It's each one
Speaker 1: because if if if you are a savor you don't
Speaker 1: get any any any interest rates any longer on your
Speaker 1: saving accounts, it's college you can't eat well there they
Speaker 1: still have enough to eat um, but maybe they won't
Speaker 1: have enough to eat in twenty or thirty years from now.
Speaker 1: Plus the same as if when you look at the
Speaker 1: pension system in Germany, it's pay as you go, so
Speaker 1: it's also dependent on on the on the current interest rate.
Speaker 1: So it's it's not another start. This is an unfair question,
Speaker 1: but it's unfair Tuesday, right, Okay, what's the actual assumption
Speaker 1: of a German pension plan? Here? It was eight percent
Speaker 1: and maybe it's six percent for Illinois. We don't even
Speaker 1: know they're blowing up. Thanks the Bank of American zero
Speaker 1: heads for a great article that that. What's the actual
Speaker 1: assumption of a German pension pl? I think, honestly, I
Speaker 1: think it's around four percent. Of course it's not as
Speaker 1: up to missus L and I, but it's between three
Speaker 1: and four percent. Wow, I've never heard that, David. What
Speaker 1: that means cf A level seven. Wait, there's Larry the Cat.
Speaker 1: We have a we have wired in here all sorts
Speaker 1: of videos and we just have a cat siding that
Speaker 1: is like the white smoke outside the chimney. The Prime
Speaker 1: Minister will make it. Okay, back on this. This is
Speaker 1: really David. This is important because the lower the actual
Speaker 1: Taylor Riggs told me this, the lower the actuarial assumption,
Speaker 1: the more of cash you have to impute into your
Speaker 1: pension system. So Germany has got to put trillions, trillions,
Speaker 1: I say, into their system. Is that happening, Um, it's
Speaker 1: not happening. What are people doing. People are investing in
Speaker 1: in bricks and modeling, so that this is this is
Speaker 1: why we have this construction housing boom in Germany because
Speaker 1: because people do invest in housing, whether it's the best
Speaker 1: investment for the future, it meant to be seen. Um.
Speaker 1: But of course your foot ride nominally you would have
Speaker 1: you would expect that people put in more cash. It's
Speaker 1: not happening. I think I looked at the numbers. It's
Speaker 1: only two to three percent of the people actually say
Speaker 1: that they do this we focused on how the relationship
Speaker 1: between Manu macon and Uncle and Merkel, What that means
Speaker 1: for France, What does it mean for for Germany? Are
Speaker 1: we are we seeing a new political dawn in Germany
Speaker 1: as well as a result of that relationship? Is is
Speaker 1: the is the European project looking different now in light
Speaker 1: of the mccron victory from from a from a German perspective,
Speaker 1: I think it is probably a lot. Will also depend
Speaker 1: on whether or not Mr Chidley will return in the
Speaker 1: next German government, because probably he's the one standing most
Speaker 1: on the breaks, much more than Mrs Merkel. Um the
Speaker 1: entire I think German media and public embraced Mr mccon
Speaker 1: when when when he came in. UM. I don't know
Speaker 1: whether they really know what they're embracing because if you
Speaker 1: if you ask the German majority, they would say, yes,
Speaker 1: we are in favor of more European integration. If you
Speaker 1: ask them, are you in favor of of of a
Speaker 1: common Europe and of of a Eurozone finance minister, of
Speaker 1: a Eurozone budget, they would probably say no. UM. So therefore,
Speaker 1: the sentiment right now is very positive and they are
Speaker 1: embracing mccoon UM. But I think it will remain and
Speaker 1: we need more changes to receive what is needed, and
Speaker 1: that the Germans except that they have to give away something.
Speaker 1: Ask you lastly about the comments that President Trump made
Speaker 1: while he was in Europe, perhaps a little bit lost
Speaker 1: in translation, talking about trade deficits when it comes to
Speaker 1: German automakers in the U S. Tariff's in the US,
Speaker 1: how big a deal is that in Germany? What he
Speaker 1: had to say about BMW, Mercedes, all of these companies
Speaker 1: that yes, manufactured cars and sell cars here in the US.
Speaker 1: In Germany, it is a big deal. I think this
Speaker 1: is the biggest fear in in the German industry. It
Speaker 1: also in German politics that there's one single thing on
Speaker 1: which Mr Trump has been consistent over decades, and that
Speaker 1: is trade, and that is his his criticism about the
Speaker 1: trade deficits UM. So, therefore, of course the Germans have
Speaker 1: started to realize that that factual arguments do not work,
Speaker 1: even telling the U. S. Administration that I think b M,
Speaker 1: BMW exports more cars um from the S to the
Speaker 1: outside world then than then the two largest American car manufacturers.
Speaker 1: That apparently is an argument which does not fall fall
Speaker 1: well with the Yes Administration, Carson, great to see you,
Speaker 1: Thank you very much at car Yes, chief Economist Iron G.
Speaker 1: Germany joining us here in bloom leven three Studios in
Speaker 1: New York, brought you by Bank of America Mary Lynch
Speaker 1: with virtual reality Virtually everything will change, Discover opportunities in
Speaker 1: a transforming world VI of a mL dot Com slash VR,
Speaker 1: Mary Lynch, Pierced Fenner and Smith Incorporated. Um. I really
Speaker 1: thought it was interesting yesterday, uh David, when CNN lined
Speaker 1: up the cabinet meeting at the White House in our
Speaker 1: next guest fair very well. He did not, you know,
Speaker 1: kiss the President's ring or get He was really classy
Speaker 1: and it was great about it was I'm gonna let
Speaker 1: you bring in our next guess, David, because you do
Speaker 1: a lot more politics than I do. But besides fixing
Speaker 1: Detroit Tiger middle relief pitching, which he's working on in
Speaker 1: his spare time, our our next guest had a lot
Speaker 1: of bad things said about him a while back, and
Speaker 1: he's taken the high road. Not many people do that.
Speaker 1: In Washington. We have the sexually of housing urban development
Speaker 1: with us here in our Bloombergo eleven three O studios.
Speaker 1: That's Dr Ben Carson joining us here in New York.
Speaker 1: What brings you to New York. Let me start there
Speaker 1: by asking you that question. First, I was ringing the
Speaker 1: bell at the New York and Celebration of National homeowners
Speaker 1: Let me ask you, first of all, just about that
Speaker 1: the importance of homeownership. We've been through the financial crisis,
Speaker 1: We've we've seen a lot of people lose their homes. Uh,
Speaker 1: the notion of home ownership has has changed. How do
Speaker 1: you see the importance of it today? Well, it is
Speaker 1: the primary mechanism where by American families bill wealth. The
Speaker 1: average net worth of a homeowner in this country is
Speaker 1: two hundred thousand dollars and of a renter it's five
Speaker 1: thousand dollars. So hence you can understand the push several
Speaker 1: years ago for getting everybody into a home. But you're
Speaker 1: not doing anybody any favors. If you put them in
Speaker 1: home they can't afford, they lose their home, they lose
Speaker 1: their credit, they lose their future opportunities. So we've we've
Speaker 1: learned from those things obviously, um and we have to
Speaker 1: teach people the correct mechanism for home ownership. One of
Speaker 1: the things we're doing at hud is loosening their restrictions
Speaker 1: on condominium uh financing, so that's frequently the first step
Speaker 1: into home ownership, and then teaching people the principles of
Speaker 1: building equity and moving to the next step rather than
Speaker 1: jumping too far ahead and then finding themselves in financial
Speaker 1: difficulty for the rest of their lives. What have you
Speaker 1: learned here on these first few months on the job?
Speaker 1: They were speculation after the election, the perhaps surgeon gener all,
Speaker 1: you got this this position. Uh, it's all new. I
Speaker 1: imagine being in a government bureaucracy like like this one.
Speaker 1: What's most surprising to you that you've learned here over
Speaker 1: these last few months. Well, you know that the principle
Speaker 1: of problem solving goes with you anywhere, and that's something
Speaker 1: that's always been something I'd like to do to solve problems.
Speaker 1: So I'm getting ample opportunity to do that. But also
Speaker 1: a lot of people tell me that it would be
Speaker 1: extraordinarily difficult to get cooperation, particularly from government workers who
Speaker 1: have been around for a long time, and that they
Speaker 1: were lazy and they didn't want to do any work.
Speaker 1: I'm not finding that to be the case. Uh, I'm
Speaker 1: finding that as long as you're engaged with them. They're
Speaker 1: a part of the process. Everybody understands what the principles are. Uh,
Speaker 1: no problem. I've been dealing with a lot of governors
Speaker 1: and mayors. You know, a both parties. Doesn't matter what
Speaker 1: the party is, because the fact of the matter is
Speaker 1: what we're trying to do is is not a partisan thing.
Speaker 1: You know, in terms of getting people into safe, decent,
Speaker 1: affordable housing. That's not a Republican or Democrats. Do you
Speaker 1: have empty offices in your building? I mean, are you
Speaker 1: getting your nominees through? What do you what do you?
Speaker 1: Are you screaming at the president? Well, you know there's
Speaker 1: been a combination of things that has resulted in us
Speaker 1: not having Uh. Okay, I'll go most of us. Come on,
Speaker 1: you're in surgery. Did you take Sy Schwartz? Did you
Speaker 1: do general surgery T book Sy Schwartz a million years ago? Okay,
Speaker 1: I know I grew up with Sy Schwartz. Wonderful guy,
Speaker 1: Cy Schwartz. As principles of surgery, like forty seven editions.
Speaker 1: You know, in a surgeon's ward you need a team
Speaker 1: of twenty people around you. Right. The The good thing
Speaker 1: is we have a deep bench, so I'm able to
Speaker 1: get what I need while I'm searching for what I need,
Speaker 1: because what I've really wanted to do do is change head
Speaker 1: into a business model. So therefore we have with that.
Speaker 1: We we've hired, We've hired a CEO. We're looking now
Speaker 1: diligently for an excellent CFO G and a c I
Speaker 1: OH so that we can tackle the material deficiencies in
Speaker 1: a holistic manner rather than just a pin prick here
Speaker 1: and there. You you what's great about you doing this
Speaker 1: job as you lived it as a kid in Detroit?
Speaker 1: You you lived the a side. Where's the common ground
Speaker 1: between Ben Carson and the Democrats in terms of getting
Speaker 1: us to a better housing stock in the country. Well
Speaker 1: I helped. The common ground is recognition of the fact
Speaker 1: that it's not just about putting people under a roof.
Speaker 1: It's about developing people. It's about giving people an opportunity
Speaker 1: to climb up that ladder. Because for every person that
Speaker 1: we can help do that, it makes room for another
Speaker 1: that we can help. But it doesn't help if we
Speaker 1: have people sort of sessile sitting there. We've got to
Speaker 1: have a continual movement going on. If the President's budget
Speaker 1: proposal were to go through were to become law, the
Speaker 1: HUT budget would be smaller. I know that you've you've
Speaker 1: criticized the Community Development Block Grant program as well, partially
Speaker 1: because in the abodministration did this too. It's hard to
Speaker 1: track results. How do we get better at doing that?
Speaker 1: And I think that's that's maybe a critique Tom, that's
Speaker 1: that's sort of a universal one. We need we need
Speaker 1: to do a better job of seeing what's working and
Speaker 1: what's not. Without question, we need better metrics. You look
Speaker 1: at CDBG, I said, you know in my budget hearings
Speaker 1: that there have been some very excellent things that's happened
Speaker 1: to through that program, and particularly the fostering of public
Speaker 1: private partnerships, because the real money is not in the government,
Speaker 1: it's in the private sector, so you create win win situations.
Speaker 1: I'm all for that and for those principles, but also
Speaker 1: we have to remember what our primary goals are, and
Speaker 1: those goals are providing affordable, decent housing for people. So
Speaker 1: CBDG program percent of the money goes to that purpose.
Speaker 1: That's not to say that the other things aren't good,
Speaker 1: but in a in a situation of fiscal restraint, you
Speaker 1: have to prioritize. Yesterday, a leading international relations expert, a
Speaker 1: former ambassador of this nation sat in the chair you're
Speaker 1: sitting in, Ben Carson, and he is someone that would
Speaker 1: be perfect for any Republican administration. This is an administration
Speaker 1: based on loyalty, loyalty, loyalty. You're one of the few
Speaker 1: people that have been appointed by this administration where clearly
Speaker 1: that wasn't evident with the battle with you and the
Speaker 1: president during the campaign. What is the price of loyalty?
Speaker 1: What is the cost to Republicans into your administration with
Speaker 1: a litmus test of loyalty daily from this president? Well,
Speaker 1: and I think the whole loyalty argument has been blown
Speaker 1: out of proportion, uh, because there's been so many leaks
Speaker 1: and so much backstamping. I think it has been pushed
Speaker 1: to the forefront where it really doesn't need to be.
Speaker 1: But anybody that you're working with, you expect some degree
Speaker 1: of loyalty. Now it depends on your definition of loyalty,
Speaker 1: you know. Uh, to me, that does not include doing
Speaker 1: wrong things for a person or accepting things that are dishonest. That's,
Speaker 1: to me, is not loyalty. Don't be a stranger, David. David,
Speaker 1: Why don't you give our guests the appropriate correct exit
Speaker 1: towards I wanted to look at my toe when we're
Speaker 1: Secretary Ben Carson and Dr Ben Carson, the Secretary of
Speaker 1: Housing Urban Development joining us here in our Bloomberg eleven
Speaker 1: three studios in New York. Here, as he said during
Speaker 1: the belt the New York Stock Exchange, it this morning.
Speaker 1: Great to see you here in New York, and thanks
Speaker 1: for making the time to talk with us today. Hope
Speaker 1: to talk to you again. This is Bloomber Surveillance on
Speaker 1: Bloomberg Radio, David Garret and Tom Keene in New York
Speaker 1: coast to coast and worldwide. This is Bloomberg joining us
Speaker 1: now in Washington. He's retired, which I doubt because he's
Speaker 1: solving the problems of the Philadelphia Phillies. On the side
Speaker 1: is one Charles Plaza, for years the president of the
Speaker 1: Philadelphia Fed, and of course his academics noted, particularly his
Speaker 1: work at the University of Rochester. Professor Plaza, wonderful to
Speaker 1: have you back in. What's the difference in retirement now?
Speaker 1: If you leave the grind of the Fed? Are you
Speaker 1: better arrested? I hope so, because I wasn't always well
Speaker 1: arrested at the FED. But it's good to be with you, Tom,
Speaker 1: It's always it's always fun chatting with you. Let's get
Speaker 1: right to inflation. Many were worried about inflation. Their critics
Speaker 1: would call them inflation EASTA is the vectors migrating higher.
Speaker 1: It's particularly migrating higher in the United Kingdom, a little
Speaker 1: bit of a pause here into the set of meetings
Speaker 1: for the end of the year. Which way is the
Speaker 1: plaster inflation vector right now? Well, that's an interesting question.
Speaker 1: I think it's it's a it's a challenge to forecast inflation.
Speaker 1: I think, as you well know, Tom, Um, the models
Speaker 1: that policymakers tend to use have relied heavily on the
Speaker 1: Phillips curve as a means of generating forecast of inflation.
Speaker 1: That hasn't really worked very well for the last i
Speaker 1: don't know, thirty five years. Um. So I do think
Speaker 1: that my own view is that inflation right now I'm
Speaker 1: pretty happy with here. It is all the measures are
Speaker 1: clustering around two percent, give or take a few tents um,
Speaker 1: So they all are signaling the same thing at this point. Uh,
Speaker 1: you don't want to react too much to sort of
Speaker 1: month to month, uh numbers, But I think they're in
Speaker 1: pretty good place. I think that that where it's going
Speaker 1: to end up remains a big question. People say, well,
Speaker 1: you guys who were against quantitative easy and we're worried
Speaker 1: about inflation. And I think the question remains of the
Speaker 1: jury remains out and sort of how all this will
Speaker 1: end up? How much have we strayed from orthodox and
Speaker 1: and folks to be clear here, Professor plaster is a
Speaker 1: recent FED president may not want to answer these questions,
Speaker 1: but we'll give it to college. Try Charles plas Or
Speaker 1: how far is that's the nice thing about being retired? Yes,
Speaker 1: I know? How how far at the equals building are
Speaker 1: they from orthodox economics? Well, we the FED straight pretty
Speaker 1: far during the crisis, perhaps for good reason, and we
Speaker 1: could that's a kind of a question for another day.
Speaker 1: But I think that, um, they are further than I
Speaker 1: would like to see them, because what I see is
Speaker 1: a FED part of perhaps because of the because of
Speaker 1: the crisis, the FED is now much more interventionist than
Speaker 1: it used to be, much more engaged in trying to
Speaker 1: manipulate asset prices of various kinds, interest rates on various maturities,
Speaker 1: and asset classes. It's a very interventionist mentality at the
Speaker 1: FED and has been ever since the crisis, and I'm
Speaker 1: worried that that interventionist mentality is not going to go away.
Speaker 1: And that's troubling to me. Do you see it as
Speaker 1: an evolution? Are we are we at a new place
Speaker 1: and we're going to continue in that direction, Or amid
Speaker 1: the conversation about who might populate the FED next year
Speaker 1: the year after that, if we might get a more
Speaker 1: rules based FED, do you see that as a return
Speaker 1: to a different kind of orthodoxy? Or we are we are?
Speaker 1: We are we going down a path that we're not
Speaker 1: going to turn back home. Well, it's it's hard. It's
Speaker 1: hard to know exactly. Certainly, it will depend in part
Speaker 1: upon who the new appointments to the Board of Governors
Speaker 1: and to the presidents happened to be in terms of
Speaker 1: how they shape policy. Uh. And I think that certainly
Speaker 1: I would like to see people who either drifted more
Speaker 1: towards systematic policy or rules based policy less intervention is
Speaker 1: FED because I think what we've done, what the Fed's done,
Speaker 1: is set itself up for all sorts of credibility problems,
Speaker 1: communication problems, and and and expectations that they're just not
Speaker 1: going to be able to meet. So I'd like a
Speaker 1: little more humility at the FED. That's a quick question
Speaker 1: just to bount communication. When the FED chair would come
Speaker 1: out and do a press conference, what were you doing
Speaker 1: at the time. How much attention to the do the
Speaker 1: FED presidents pay to to that event every other meeting? Um,
Speaker 1: I would continue, Well, I think usually it's the case
Speaker 1: after an f o MC meeting. Oftentimes presidents are back
Speaker 1: on airplanes or trains heading heading back home. That's part
Speaker 1: of it, so they may not be in a position
Speaker 1: to hear it. But you have to understand that during
Speaker 1: the course of the meeting over the two days, uh,
Speaker 1: the chair has as a as a rule so to speak,
Speaker 1: or at least as a habit practicality, we'll talk a
Speaker 1: lot about what he or she was gonna say in
Speaker 1: terms of the opening remarks at the press conference. You
Speaker 1: don't always know what the questions are gonna be, but
Speaker 1: you kind of know the gist of what message is
Speaker 1: gonna be provided what is attention in that equals room
Speaker 1: between freshwater and saltwater economics. We toss these phrases around,
Speaker 1: but if you get Marvin good friend from Pittsburgh, Pennsylvania,
Speaker 1: or Charles Plass or the late great Alan Meltzer, whoever.
Speaker 1: If you get guys like you in the room with
Speaker 1: the saltwater people, what happened brackish that's good or muddy
Speaker 1: as the case maybe no. Uh, you know I think
Speaker 1: that obviously, Tom. You know I've known Marvin for thirty years. Um,
Speaker 1: hey and I share a lot. I have a lot
Speaker 1: in common. We think about monetary policy in similar ways,
Speaker 1: not always accurring, but we're very, very close. And so
Speaker 1: I think that right now, Uh, many of what you
Speaker 1: would describe as freshwater economists have been um, they're lacking
Speaker 1: in the EPO. Okay, let's do this. Let's come back
Speaker 1: with Charles plus. So we're gonna pick this theme up
Speaker 1: on freshwater economics. This is blue work. David Gerd and
Speaker 1: Tom Key in a few minutes right now with Charles
Speaker 1: plots Er, who long ago and far away did some
Speaker 1: really first rate academics. Professor plots I want to get
Speaker 1: back to the FED in the future of the FED,
Speaker 1: but enlightened us on OURBC real business cycle theory. What
Speaker 1: is that? Well, Tom, real business cycle theory I actually
Speaker 1: coined the phrase back in nineteen eighty one or eight two.
Speaker 1: Excuse me, I thought it well. Other days I feel
Speaker 1: like it might have been at our age. You know,
Speaker 1: the memory sales begin to fade after a while. But uh,
Speaker 1: real business cycle theory it is a way of looking
Speaker 1: at the economy. Um that rather than putting monetary policy
Speaker 1: at the center of all the things that matter for
Speaker 1: the economy. And so it says, look, lots of things
Speaker 1: happened to the economy, their shocks from all different sorts
Speaker 1: of sources. It doesn't all come from monetary policy, that
Speaker 1: didn't all come from fiscal policy. And but real business
Speaker 1: cycle tried to do which will try to build a
Speaker 1: framework for thinking about how things other than policy play
Speaker 1: out in an economy, what kind of things change, whether
Speaker 1: impacts and oftentimes that Uh, we called it real because
Speaker 1: it wasn't monetary, and so we were looking for other
Speaker 1: sources of fluctuations, if you, because we couldn't understand what
Speaker 1: happens with policy unless you learn understand what happens without
Speaker 1: those could converse in professor in oiler functions and I
Speaker 1: will I will mention the greatly respected economists Michael Woodward.
Speaker 1: UH is one example of the mathiness of modern economics.
Speaker 1: They've all been humbled over this financial crisis. Can the
Speaker 1: leaders of the next FED be more RBC like even
Speaker 1: if they're not real business cycle economists. Well, I think
Speaker 1: that even today, among lots of academic macro economists who
Speaker 1: look at things, the real business cycle model still is
Speaker 1: kind of has now mainstream in the sense that it's
Speaker 1: at the core of lots of models now. So I
Speaker 1: think that certainly people like Marvin good Friend and UH
Speaker 1: are deeply steeped and understanding real business cycle models, understanding
Speaker 1: how they work, what they have to say, what they
Speaker 1: don't have to say. So I would I would certainly
Speaker 1: hope that the fo MC and the FED in general.
Speaker 1: I think we need a little bit humility from the FED. Then,
Speaker 1: if we go to Kittling and Prescott in the work
Speaker 1: of Charles Plosser, there's an x axis as a time function,
Speaker 1: Mr Bullerd St. Louis would suggests we should not be
Speaker 1: slaves to the X axis and we should look for
Speaker 1: so called regimes change that sort of goes into a
Speaker 1: real world analysis, doesn't it. Well, somebody is trying to.
Speaker 1: I think analyzing regime changes is very challenging and determined
Speaker 1: how you get there, why they're changing and understanding those things.
Speaker 1: So um but uh, Milton Freeman used to used to
Speaker 1: tell us that changes in tastes or preferences is the
Speaker 1: um Is it the last resort of an economist who
Speaker 1: doesn't understand what's really happening? Well, that would be me
Speaker 1: excuse with David up here? Thank you? Did you see that,
Speaker 1: Ken Ken follow your technical director? Save that. That's a
Speaker 1: great moment where Charles Plasser really put me in my place.
Speaker 1: David saved me. Let me ask you a bit about
Speaker 1: how much power a person has to shape the Federal Reserve.
Speaker 1: So we could have a President Taylor, we could have
Speaker 1: a President Warsh. Given all the cacophony we hear from
Speaker 1: governors and presidents giving a lot of speeches to my
Speaker 1: ear at least ahead of these these FED meetings, how
Speaker 1: much just one person have to shape the direction of
Speaker 1: the f OMC right now? Well, it's very hard. It's
Speaker 1: a it's a it's a it's a committee after all,
Speaker 1: and it functions in a committee. And that's actually a
Speaker 1: good thing because that means that lots of different views
Speaker 1: get to be presented. I think it's very important whether
Speaker 1: it be presidents or governors, that you have people who
Speaker 1: are smart enough and knowledgeable enough to present the as
Speaker 1: different views and to force the committee to confront different
Speaker 1: perspectives and come up with a with a with a
Speaker 1: policy insight. So it's rarely, it's rarely one person, and
Speaker 1: in fact, I would prefer it not be the power
Speaker 1: of one person. That's why you have a committee. I'm
Speaker 1: very incurred. I don't know what the Trump administration's goal
Speaker 1: is for monetary policy yet they haven't said very much
Speaker 1: about it. I think the most recent names that are
Speaker 1: being discussed Marvin good Friend and Randy Quarrels Mr Jones,
Speaker 1: I don't know, um uh for me, are quite reassuring
Speaker 1: that these are both solid people in their respective fields. Uh,
Speaker 1: very moderate in their views, not extremist one way or another.
Speaker 1: And so I'm very encouraged by what I see so far.
Speaker 1: If these two individuals I just mentioned ultimately get nominated
Speaker 1: in the time we have left with you linked together
Speaker 1: from the world of Charles loss or interest rate dynamics
Speaker 1: with the diminution of the balance sheet, there are two
Speaker 1: different dynamics, are two different set of there's if you
Speaker 1: will yields up yields down first and second derivatives, and
Speaker 1: then this strange thing the balance sheet. How do you
Speaker 1: link the two together? Professor Oh, I think it's very hard.
Speaker 1: As I mentioned earlier, Tom, I'm worried about sort of
Speaker 1: the interventionist view of the FED and how it its
Speaker 1: role of manipulating or changing or intervening in different asset
Speaker 1: prices and classes, and the balance sheet kind of plays
Speaker 1: into this. And right now the FED is busy trying
Speaker 1: to raise rates at the same time claiming it's trying
Speaker 1: to keep accommodation by having a big balance sheet. Well,
Speaker 1: which is it? Those are two very different policies. How
Speaker 1: do we get calibrat and think about monetary policy. I'm
Speaker 1: really hoping that the FED will will very soon, as
Speaker 1: I tried to get the FED to do several years
Speaker 1: ago articulate its vision. But where we go to extract
Speaker 1: ourselves from all this? Where is policy headed heading to
Speaker 1: one kind of strategy or a different kind of strategy?
Speaker 1: What role is the balance sheet's gonna play? And what's
Speaker 1: gonna be the relationship with setting short term rates? For
Speaker 1: this this this effort to you know, by a bunch
Speaker 1: of stuff, I got twenty Sewonds left its Coulchu lacoda
Speaker 1: killing it at Rochester right now? Did you get on
Speaker 1: that job. I'm sure he's doing just five. I'm sure
Speaker 1: he is, Professor Colchula Coota hopefully listening up at the
Speaker 1: University of Rochester and the Simon School, Charles plus or
Speaker 1: as a former head of Philadelphia. That was great, David,
Speaker 1: that was good. That's right special on RBC. That was
Speaker 1: really really interesting. It is a wonderful time to speak
Speaker 1: to Stewart Blickman. Why would that be. We've been in
Speaker 1: a range on oil and uh, we're at the bottom
Speaker 1: of the range and we've stayed there for the last
Speaker 1: number of days. Stewart, I look at forty five six
Speaker 1: cents of barrel on West Texas intermediate, is or any
Speaker 1: indication we break the range lower? Or do you just
Speaker 1: saying we're range bound? Good morning, Tom. I think we're
Speaker 1: probably a range bound, But my my inclination would be
Speaker 1: if we are going to break down, it's probably going
Speaker 1: to be a little bit higher from here. Um the uh.
Speaker 1: With that said, I don't expect a major move and
Speaker 1: crewed um in I think I think we say kind
Speaker 1: of marooned in this call at forty five dollar fifty
Speaker 1: five dollar range for a while. When you see supply
Speaker 1: headlines come across Bloomberg, do you really know regional or
Speaker 1: country or global supply? I mean, is it? Is it
Speaker 1: something that's really countable? Well, there are some countries where
Speaker 1: it's difficult to estimate production, like China for example, is
Speaker 1: notoriously difficult to get get a handle on UM. But
Speaker 1: the International Energy Agency does a fairly good job with
Speaker 1: their oil market report, and so I think, you know,
Speaker 1: more so than the absolute numbers, I think I think
Speaker 1: they do a fairly good job of looking at the
Speaker 1: trend lines. And you know, I do think that the
Speaker 1: markets are moving into balance, but it's it's going to
Speaker 1: take a while. I think this is a longer fuse,
Speaker 1: not a shorter one. Stewart, what do we learn about
Speaker 1: OPEX relevance after this last OPEC, meaning the continuation of
Speaker 1: that that production for there was so much speculation going
Speaker 1: into the first meeting, now many months ago about how
Speaker 1: relevant the cartel the organization was. Has it re established
Speaker 1: its relevance somewhat? No? I think I think it's relevance
Speaker 1: is still open to question. David, I think that you
Speaker 1: know they they've effectively boxed themselves in by by, you know,
Speaker 1: assuming that a relatively small cut would be enough to
Speaker 1: bring US shale to its knees, and it just hasn't
Speaker 1: worked out that way. Obviously, Um, most of the US
Speaker 1: oil community on shore has spent the better part of
Speaker 1: the last two years getting their act together and cutting costs,
Speaker 1: and the even they're now at a position where they
Speaker 1: can make money at forty five dollar oil, and I
Speaker 1: think it's going to take more significant cuts from OPEC
Speaker 1: to really push it a lot are um or else
Speaker 1: we're looking at at a at a continuation of this range.
Speaker 1: I want to ask about the Paris Agreement. Obviously we're
Speaker 1: beginning to process what the landscape looks like now that
Speaker 1: the U s has withdrawn or intends to withdraw from
Speaker 1: from that that international deal. Do we have a sense
Speaker 1: of what it's going to mean for the global energy
Speaker 1: marketplace to not have the US be a party to
Speaker 1: that deal? Well, I think that, you know, the the
Speaker 1: the real import of the Paras Deal was, and again
Speaker 1: this was this was not a binding treaties, or actually
Speaker 1: wasn't even a treaty to begin with. It was a
Speaker 1: non binding accord where they were talking about what kinds
Speaker 1: of cuts they would expect to make between But I
Speaker 1: think it takes a little bit of the wind out
Speaker 1: of the sales for renewable energy. But even if you
Speaker 1: look at at companies like Exxon Mobil for example, that
Speaker 1: do thirty year strategic planning ahead, UM, renewables are are
Speaker 1: an increasing piece of that mix. It's just not a
Speaker 1: dominant piece of that mix. I think, you know, oil
Speaker 1: and natural gas particularly are still going to be you know,
Speaker 1: major fluences on energy consumption. Where's demand dynamics right now?
Speaker 1: Where are demand dynamics right now? I mean we go
Speaker 1: guests after guests. There seems to be a real distinction
Speaker 1: between people looking for good, ample demand that can support
Speaker 1: prices versus oops that ain't gonna be there. Which is it? Um,
Speaker 1: I'm a little worried about demand. I don't I don't
Speaker 1: think that If you think about who are the drivers
Speaker 1: of energy demand, it's mostly emerging markets. And I think that,
Speaker 1: you know, if you look at global GDP estimates, they're
Speaker 1: not I mean they're they're up, but they're not they're
Speaker 1: not especially bullish. So I have a hard time seeing
Speaker 1: demand being the way out of this conundrument for oil.
Speaker 1: I think it's supply got us into this mess, and
Speaker 1: I think supply is gonna have to get us at
Speaker 1: That's a really interesting way to put it. Which geography
Speaker 1: are you looking at most on the delta of supply?
Speaker 1: Is it not o Peck in particularly Russia? Is it Saud,
Speaker 1: East Saud, East Saudi? Which is it? It's definitely not
Speaker 1: opec UM, I think so. I think Opec has done
Speaker 1: about as much as they're going to be willing to do.
Speaker 1: I mean, everyone's talking about how how compliance that um
Speaker 1: Opec has been with his last round of cuts, But
Speaker 1: keep in mind the amount that they actually asked to
Speaker 1: cut in the first place was just a fraction of
Speaker 1: what they've cut in previous cuts. UM non Opec is
Speaker 1: especially interesting in particular the us UM. The thing that
Speaker 1: I'm looking at the most right now is the degree
Speaker 1: to which the older legacy wells UM are accelerating their
Speaker 1: decline rates. If those start to catch up with new
Speaker 1: wells and perhaps overtake them, then I think inventories are
Speaker 1: going to start to pull in. And if they don't,
Speaker 1: then I think inventories are gonna are going to arise.
Speaker 1: I was listening to the President speak a couple of
Speaker 1: days ago. He was in Cincinnati talking about infrastructure during
Speaker 1: what the White House branded as Infrastructure weaken And something
Speaker 1: he brought up, as he has from time to time,
Speaker 1: is the building of these pipelines, the Dakota pipeline, a
Speaker 1: Keystone XL pipeline. Help me understand that the economic landscape
Speaker 1: to all of that, does it make economic sense for
Speaker 1: those pipelines to be built right now? And if in
Speaker 1: fact we do see them build, how's that going to
Speaker 1: change the the the the energy economic landscape. Uh, there's
Speaker 1: definitely an economic rationale to have a lot of these
Speaker 1: pipelines built, in particular in the Permian basin, which is
Speaker 1: starting to get a little bit um congested because of
Speaker 1: the massive amounts of growth that have taken place there.
Speaker 1: Pipelines are not the only way to get the oil
Speaker 1: out of the producing areas and into the into the
Speaker 1: consumer areas. But you know, your alternatives like crewed by rail,
Speaker 1: for example, are more expensive. So you know if crewde
Speaker 1: remains range bound. Uh, the mid streaming space where we're
Speaker 1: which is which is the companies that actually build and
Speaker 1: maintain these pipelines and operate them that to me is
Speaker 1: actually an attractive area to be in. It's one of
Speaker 1: the only areas in fact and energy that I'm bullish
Speaker 1: on right now. Sure, thank you so much for the
Speaker 1: news slow today. Greatly appreciate having you on a on oil.
Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and
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Speaker 1: platform you prefer. I'm on Twitter at Tom Keene. David
Speaker 1: Gura is at David Gura. Before the podcast, you can
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