WEBVTT - Traders Watch How CPI and Tariffs Weigh on Markets 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business app. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.040 us live on YouTube. 0:00:27.360 --> 0:00:31.080 Zandy has been on fire out on Twitter writing this up. 0:00:31.520 --> 0:00:34.319 And you know, like he's got the fam photo on 0:00:34.360 --> 0:00:37.560 Twitter and you can tell, I mean your youngest daughter, 0:00:37.640 --> 0:00:41.440 Mark Sandy, Daffodil, your youngest daughter. Just look what is 0:00:41.479 --> 0:00:43.559 it about the youngest daughter, doctor Sandy. 0:00:43.880 --> 0:00:46.479 They're true, I hear you, I hear, but all my 0:00:46.560 --> 0:00:47.800 kids are enchanting Tom. 0:00:47.880 --> 0:00:54.240 But then there's Daffodil, the youngest daughter. How's the inflation 0:00:54.800 --> 0:00:57.760 at the Zandy house? Right now? Into this report? What 0:00:57.800 --> 0:00:59.960 do you see viscerally on inflation? 0:01:01.480 --> 0:01:04.520 You know, abstracting from the ups and downs in all rounds, 0:01:04.520 --> 0:01:07.240 it feels like consumer price inflation is three percent year 0:01:07.280 --> 0:01:11.600 over year, which is, you know, it's back closer to 0:01:11.640 --> 0:01:13.480 the Fed's target, but not quite there. I mean on 0:01:13.520 --> 0:01:15.440 the CPI, the Fed's target would be two and a 0:01:15.480 --> 0:01:20.000 half percent. The thing that you know, obviously is a 0:01:20.000 --> 0:01:23.160 bit more worrisome is where we're headed. And you know, 0:01:23.160 --> 0:01:25.600 if we had this conversation three months ago, I said 0:01:25.760 --> 0:01:27.600 we'll be back to the feed's target by the spring. 0:01:27.640 --> 0:01:30.000 But you know, with these tariffs, it doesn't feel likely 0:01:30.040 --> 0:01:30.679 at this point. 0:01:31.200 --> 0:01:34.240 So Mark, is that a valid concern for this marketplace 0:01:34.319 --> 0:01:38.199 that these terraffs will result in I don't know, meaningfully 0:01:38.800 --> 0:01:39.520 higher inflation. 0:01:40.600 --> 0:01:44.080 Yeah, you know, obviously it depends on how how high 0:01:44.120 --> 0:01:46.960 the tariffs go, how broad based they are, how persistent 0:01:47.000 --> 0:01:49.600 the tariffs are put in place. But it feels like 0:01:49.720 --> 0:01:51.720 we're going to get some real tariffs here for an 0:01:51.760 --> 0:01:55.360 extended period. And you know, here's a good rule of thumb. 0:01:55.560 --> 0:02:00.520 For every percentage point increase in the effective tear rate, 0:02:00.560 --> 0:02:04.040 that adds one tenth of one percent consumer pretemplation over 0:02:04.080 --> 0:02:07.800 the subsequent year. So we go from three percent effective 0:02:07.880 --> 0:02:10.720 ter fright where we were before you know, President Trump, 0:02:10.760 --> 0:02:14.760 to let's say ten percent, and that feels like we'reheaded. 0:02:15.240 --> 0:02:17.920 That adds seven ten percent to see PI inflation in 0:02:17.919 --> 0:02:20.440 the coming year. That's you know, that's that's meaningful. 0:02:20.520 --> 0:02:24.120 Can you calculate where we are and add three percent? Statistic? Now, 0:02:24.400 --> 0:02:26.880 are we at a zandy four point two percent this 0:02:26.960 --> 0:02:29.320 morning or on our way to ten percent? Do we 0:02:29.320 --> 0:02:31.359 know where we are? Uh? 0:02:31.600 --> 0:02:34.000 You mean Tom with what's already been implemented. 0:02:33.800 --> 0:02:36.639 What's already been implemented, you know the Yeah, I think 0:02:36.639 --> 0:02:40.120 we're Yeah, I think we're kind of closer to four 0:02:40.360 --> 0:02:41.000 four and a half. 0:02:41.000 --> 0:02:43.000 You're right, four point you know, four point you know, 0:02:43.000 --> 0:02:44.720 I have to do the calculation, but four point two 0:02:44.760 --> 0:02:46.720 sounds about right to me. Yeah, so we've gone from 0:02:46.720 --> 0:02:49.320 three to four point two. Yeah, so we got a 0:02:49.360 --> 0:02:49.960 ways to go here. 0:02:50.080 --> 0:02:51.800 You know. The real thing is the reciprocal terrafs. 0:02:51.880 --> 0:02:56.320 Right, that's if that if that's actually implemented early April, 0:02:56.440 --> 0:02:59.280 that's the kind of the schedule at the moment. Yep, 0:02:59.720 --> 0:03:01.639 that's that would get you over ten. That would get 0:03:01.680 --> 0:03:02.959 you over ten on the effective break. 0:03:03.200 --> 0:03:05.720 And what was such an environment due to your GP 0:03:05.840 --> 0:03:08.040 outlook weaker? 0:03:08.120 --> 0:03:12.160 You know, terriffs do they result in some combination of 0:03:12.400 --> 0:03:16.799 higher inflation, higher interest rates, or weaker economic growth. Pick 0:03:16.840 --> 0:03:19.400 your poison. It's you know, if you don't get the inflation, 0:03:19.440 --> 0:03:20.880 you're going to get the weaker growth. If you don't 0:03:20.880 --> 0:03:23.280 get the weaker growth, you get the inflation or higher 0:03:23.320 --> 0:03:26.600 interest rates. Were and all the above is already happening 0:03:26.720 --> 0:03:30.000 in anticipation of the tariffs, right, I mean you can 0:03:30.040 --> 0:03:33.560 see inflation expectations are up. The Fed's not moving now, 0:03:33.800 --> 0:03:36.200 and they're telling us it's because it's economic policy code 0:03:36.200 --> 0:03:40.120 where or tariffs and growth is slow, and so all 0:03:40.160 --> 0:03:42.880 the things that we think terifts are going to do, 0:03:42.960 --> 0:03:45.800 they're doing in the advance of actually the terrft's coming 0:03:45.840 --> 0:03:47.680 into place, because we're all anticipating it. 0:03:48.600 --> 0:03:53.080 Pauler, good question here. I'm sorry, it comes down to Granularity. 0:03:53.720 --> 0:03:57.440 Daffodil needs a new pair of Doc Martin Mary Janes 0:03:57.480 --> 0:03:58.680 at the Zandi house hold. 0:04:01.120 --> 0:04:03.360 It sounds scary leopard. 0:04:03.520 --> 0:04:05.920 I mean, they're ard and their incoming and they're gonna 0:04:05.960 --> 0:04:08.640 have a terrify them because they're made sure everything. I mean, 0:04:08.920 --> 0:04:12.440 you know everything. Micro Granular is going to be there. 0:04:12.520 --> 0:04:14.920 Mark Sandy with Moody's with this. We're gonna talk to 0:04:15.000 --> 0:04:19.000 him after this inflation report. There's a lift to the 0:04:19.040 --> 0:04:21.679 market today, Paul might right, it's a tentative lift. 0:04:22.000 --> 0:04:24.479 We were here the same place yesterday Tom before. Yeah, 0:04:24.520 --> 0:04:27.840 we'll get some of the tweets started coming out. So Mark, 0:04:27.960 --> 0:04:30.440 just at the inflation reading the CPI, we got a 0:04:30.440 --> 0:04:33.640 little bit better than expected in terms of lower inflation. 0:04:33.760 --> 0:04:36.200 We know it's backward looking, but what do you take 0:04:36.200 --> 0:04:37.960 away from the CPA print today. 0:04:38.960 --> 0:04:40.839 Well, that's on the face of it better. 0:04:40.960 --> 0:04:42.720 You know, it's one of these things where you have 0:04:42.760 --> 0:04:45.720 to go to the second third significant digit. I mean, 0:04:45.760 --> 0:04:48.240 I think our estimate was like zero point two five, 0:04:48.440 --> 0:04:51.640 so it would rounded up two point three. So maybe 0:04:51.800 --> 0:04:54.200 I don't know what to do the calculation, but you know, 0:04:54.279 --> 0:04:57.440 that's how much we're parsing the numbers here. But I 0:04:57.480 --> 0:05:00.279 think bottom line, you know, abstracting from the vague reason 0:05:00.360 --> 0:05:02.400 the monthly later, we're kind of, as I said earlier, 0:05:02.520 --> 0:05:04.960 still stuck around three percent, and that's that's where we're 0:05:04.960 --> 0:05:07.159 going to stay for a while until we get some 0:05:07.200 --> 0:05:09.760 clarity around and hopefully these tariffs go away, you know, 0:05:10.000 --> 0:05:11.040 sooner rather than later. 0:05:11.360 --> 0:05:14.000 Mark, where are you going to FED rate cuts through 0:05:14.040 --> 0:05:17.239 the year? I mean, everybody seems to be threeish guessing, 0:05:17.360 --> 0:05:20.520 but don't you don't guess, Mark, so you know what 0:05:20.560 --> 0:05:21.840 you're doing and what they'll do. 0:05:22.200 --> 0:05:25.520 Tell you, Tom, I'm confused. I mean the FED, right, 0:05:25.560 --> 0:05:28.159 because what do you do with the tariffs? I mean, 0:05:28.240 --> 0:05:31.360 it raises inflation, weakens gross how do you respond and 0:05:31.400 --> 0:05:34.360 they're saying, well, we don't until we get some clarity, 0:05:34.560 --> 0:05:36.440 any kind of clarity around what's going on and how 0:05:36.440 --> 0:05:38.440 it's all going to play out. I mean, in my 0:05:38.560 --> 0:05:42.080 baseline kind of official forecast, I have two rate cuts 0:05:42.200 --> 0:05:43.720 towards the end of the year. It's going to take, 0:05:44.440 --> 0:05:46.400 you know, until the second half of the year before 0:05:46.440 --> 0:05:48.120 they get enough clarity to start moving again. 0:05:48.200 --> 0:05:49.640 But ultimately, you know, I do. 0:05:49.600 --> 0:05:52.760 Think the tariffs are going to be you know, more 0:05:52.839 --> 0:05:55.800 growth negative than inflation positive. I think at the end 0:05:55.800 --> 0:05:59.480 of the day, Doctors, and that may mean more rate cuts, Doctors. 0:05:59.520 --> 0:06:01.599 And thank you so much for joining us today. Mark 0:06:01.640 --> 0:06:04.960 Sandy writing for Moody's always very strong out on Twitter. 0:06:05.000 --> 0:06:08.480 Look from there for some very important nos. Futures up 0:06:08.520 --> 0:06:10.440 seventy four, a lift of the market, not going to 0:06:10.480 --> 0:06:12.760 make too much about it. Paul and I are waiting 0:06:12.800 --> 0:06:16.839 for the next headline. Long agoing far away. A wonderful 0:06:16.920 --> 0:06:19.040 person who was a great supporter of mine in the 0:06:19.680 --> 0:06:23.599 early years and Stan Freeburg was Fred Burston, and he 0:06:23.760 --> 0:06:27.200 was at the Peterson what became the Peterson Institute. The 0:06:27.360 --> 0:06:30.479 toughest job was to pick up from Fred, and that 0:06:30.640 --> 0:06:33.920 is what Adam Posen has done with grace, to say 0:06:33.960 --> 0:06:36.920 the least. The only one working harder than Adam Posen 0:06:36.920 --> 0:06:39.960 at the Peterson Institute is Chad Bone, who hasn't a 0:06:40.080 --> 0:06:42.600 day off since time began. As we look at this 0:06:42.760 --> 0:06:48.040 trade mess, we're in bonus round. Adam Posen is expert 0:06:48.520 --> 0:06:52.760 on the German political economic experiment. Doctor Posen, thank you 0:06:52.839 --> 0:06:56.320 so much for joining us today. If Doug Ehr went 0:06:56.400 --> 0:07:00.920 up at Dartmouth was to rewrite his history of the 0:07:00.960 --> 0:07:03.839 tariffs and all, what would Doug Rwin? What would Adam 0:07:03.880 --> 0:07:05.559 Posen be writing right now? 0:07:07.000 --> 0:07:09.760 Thanks Tom for having me back. And everyone should read 0:07:09.880 --> 0:07:13.040 Chad Bound and Doug Erwin's new piece and Foreign Affairs 0:07:13.040 --> 0:07:16.560 that just came out on tariffs. Doug has made the 0:07:16.600 --> 0:07:21.000 point repeatedly there are charts on THEEPIE website that this 0:07:21.160 --> 0:07:24.960 is historically unprecedented. You really have to go back one 0:07:25.040 --> 0:07:28.520 hundred years, ninety plus years to Smooth Hollie to see 0:07:28.520 --> 0:07:32.360 anything like this in terms of the size scope of tariffs. 0:07:32.480 --> 0:07:35.960 But even more so, this is much more uncertain. As 0:07:36.000 --> 0:07:40.400 he's pointed out Chad, Mary Lovely and I in various ways, 0:07:40.800 --> 0:07:45.840 this is an exercise of discretionary presidential power. I'll leave 0:07:45.880 --> 0:07:50.280 aside the constitutionality or the issues of politics, but just 0:07:50.320 --> 0:07:53.320 from an economic point of view. In the past, when 0:07:53.320 --> 0:07:56.840 there's been large moves of tariffs, it's mostly been in 0:07:56.920 --> 0:08:01.080 the US because Congress has authorized them. This is being 0:08:01.200 --> 0:08:04.760 done day to day or as justin Wolfer's joked intra 0:08:04.960 --> 0:08:10.920 day tariff changes on presidential whim, and that creates even 0:08:10.960 --> 0:08:11.960 more uncertainty. 0:08:12.280 --> 0:08:12.640 Take them on. 0:08:12.840 --> 0:08:15.600 Doug would say, we're in new territory and it ain't pretty. 0:08:15.680 --> 0:08:18.200 Professor Erwin joining us from Dartmouth will do that on 0:08:18.320 --> 0:08:21.920 Friday here in Bloomberg Surveillance. Doctor Posen, as simple as 0:08:21.960 --> 0:08:26.000 I can. Krugman with his Nobel speech would look at 0:08:26.000 --> 0:08:28.880 the microeconomics of the moment and it'd be a lot 0:08:28.920 --> 0:08:32.320 of fancy Adam Posen talk. Forget about it. What's the 0:08:32.480 --> 0:08:37.040 dead weight loss for our audience right now, our audience 0:08:37.040 --> 0:08:40.880 in Winnipeg, our audience in Wisconsin. What's the dead weight 0:08:40.960 --> 0:08:42.320 loss given all of this. 0:08:43.760 --> 0:08:46.880 On the order of a thousand plus dollars a year 0:08:46.960 --> 0:08:50.960 for the average household, higher for lower income households. And 0:08:50.960 --> 0:08:55.080 that doesn't include the hits to retirement funds or the 0:08:55.559 --> 0:09:00.600 going forward the lower opportunities because investments getting chilled. Direct 0:09:00.679 --> 0:09:03.880 hit is on the order of one thousand dollars per household. 0:09:04.280 --> 0:09:07.400 You could argue if the tariffs get stick or if 0:09:07.400 --> 0:09:09.560 they put on the across the board tariffs, it gets 0:09:09.600 --> 0:09:12.560 closer to fifteen hundred to two thousand dollars a household. 0:09:13.600 --> 0:09:16.760 Adam, I'm hearing the recession word more and more over 0:09:16.800 --> 0:09:20.679 the last several weeks. Is that in your cacus anywhere? 0:09:22.080 --> 0:09:25.240 So I've been saying for a while the OW did. 0:09:25.360 --> 0:09:28.360 I was expecting a large boom and then fed induced 0:09:28.400 --> 0:09:31.679 bust under Trump. But I always held out that this 0:09:31.840 --> 0:09:34.960 was a radical enough program that it was bimodal, meaning 0:09:35.440 --> 0:09:38.319 again simple talk, it wasn't going to end up in 0:09:38.360 --> 0:09:40.319 the middle. It was going to be one of two outcomes. 0:09:41.000 --> 0:09:44.400 I have the recession probability only at like fifteen plus percent, 0:09:44.480 --> 0:09:48.280 so no different than anybody in a normal time. But 0:09:48.400 --> 0:09:50.120 what I kept saying, and this may have been a 0:09:50.120 --> 0:09:52.719 hedge but it turns out to be reality, was if 0:09:52.760 --> 0:09:59.800 Trump administration overdid it on tariffs, on migration, on fiscal follies, 0:10:00.480 --> 0:10:04.599 that that would swap us into the tariff rem It 0:10:04.679 --> 0:10:07.240 xues me into the recession camp. So I've up my 0:10:07.360 --> 0:10:11.240 recession subjective probability to thirty percent. I still think it's 0:10:11.280 --> 0:10:14.720 more likely than not we get a boombust. But you 0:10:14.800 --> 0:10:19.120 throw in the geopolitical shock, which is enormous and which 0:10:19.240 --> 0:10:22.560 really changes the game for Europe and for everybody. And 0:10:22.600 --> 0:10:26.360 then you throw in the fact that Doge shutting down 0:10:27.200 --> 0:10:30.559 environment education USAID. I may not like, but I expected 0:10:30.600 --> 0:10:36.000 that throwing a miasma of similar uncertainty over all government contracting, 0:10:36.080 --> 0:10:41.480 all government workforce has huge effects. So, yeah, the recession 0:10:41.559 --> 0:10:42.960 risk has gone way up. 0:10:43.640 --> 0:10:46.920 From some of President Trump's policy people were starting to 0:10:46.960 --> 0:10:49.000 hear more and more discussion that what the President is 0:10:49.040 --> 0:10:50.920 aiming to do is to kind of reshape the US 0:10:51.440 --> 0:10:57.720 economy to bring more manufacturing back to the US, and 0:10:57.840 --> 0:11:01.400 some folks are concerned that that's kind of counter intuitive 0:11:01.400 --> 0:11:04.200 to what we've experienced over the last fifty sixty seventy 0:11:04.280 --> 0:11:07.400 years of more of a globalization and at least in 0:11:07.400 --> 0:11:09.880 the US economy, of focus on the services part of 0:11:09.880 --> 0:11:14.079 the economy. How do you view this potential pology policy 0:11:14.120 --> 0:11:14.840 shift for the US. 0:11:15.760 --> 0:11:20.240 I view it as a very mistaken policy shift for 0:11:20.320 --> 0:11:24.439 two reasons. First, in line with what you said, increasing 0:11:24.520 --> 0:11:29.559 manufacturing employment or literal production within US borders isn't necessarily 0:11:29.600 --> 0:11:33.000 a good thing. If they want to force Americans to 0:11:33.080 --> 0:11:39.120 do rare earth's mining or production of generic pharmaceuticals, those 0:11:39.120 --> 0:11:43.200 are steps backward for US workers, and so you would 0:11:43.280 --> 0:11:46.680 either have to vastly overpay, which then makes it totally 0:11:46.720 --> 0:11:52.040 uncompetitive internationally and totally in inflation for the domestic household, 0:11:52.559 --> 0:11:56.680 or you're just subjecting American workers to bad jobs that 0:11:56.920 --> 0:12:00.880 were too well endowed and skilled to do. The second reason, though, 0:12:00.920 --> 0:12:03.679 is it's just not going to work. My colleague Robert Lawrence, 0:12:03.720 --> 0:12:06.439 who's at Harvard and Peterson Institute, had a book out 0:12:06.520 --> 0:12:10.240 last fall called Behind the Curve, which I think established 0:12:10.280 --> 0:12:13.960 brilliantly that even if you fantasize about going back to 0:12:14.040 --> 0:12:17.240 nineteen fifty eight and a bunch of guys getting to 0:12:17.320 --> 0:12:21.439 be big bread owners, breadwinners for their families with no education, 0:12:21.760 --> 0:12:24.960 which there's reasons you might like that, it's just not 0:12:25.080 --> 0:12:29.360 going to happen because the total taste of the world 0:12:29.760 --> 0:12:33.480 and the movement of technology, for me, globalization has made 0:12:33.480 --> 0:12:36.960 it impossible to create large numbers of manufacturing jobs of 0:12:37.000 --> 0:12:40.360 that sort. So it's a bad goal and it's not 0:12:40.400 --> 0:12:40.920 going to work. 0:12:41.080 --> 0:12:44.200 We continue with that imposing the Peterson Instituting and Doug 0:12:44.240 --> 0:12:47.439 Arwin with us on Friday from Dartmouth. Breek Rona coming 0:12:47.520 --> 0:12:49.960 up as well from Wellington. Good morning across the nation. 0:12:50.280 --> 0:12:53.480 Good morning ninety two to nine FM and Boston, and 0:12:53.520 --> 0:12:57.120 I'm down to ninety nine one FM in Washington, DC 0:12:57.679 --> 0:13:00.280 as well. Adam, we got a go to on a 0:13:00.360 --> 0:13:02.079 time here. I want to slip this in. I think 0:13:02.080 --> 0:13:06.200 it's so important. Robert Zelik is somebody that I think 0:13:06.320 --> 0:13:10.920 more than anyone, takes our international economics and our sense 0:13:10.960 --> 0:13:16.240 of constructive globalization and folds it into American business. He's 0:13:16.320 --> 0:13:20.120 been on fire recently. What's the message you've taken from 0:13:20.200 --> 0:13:21.560 one of our trade giants? 0:13:22.480 --> 0:13:27.280 I agree, Robert is Bob Zeleik is here out of 0:13:27.320 --> 0:13:32.680 me and is a statesperson of the longtime ideal for 0:13:32.760 --> 0:13:40.320 the US, and he integrates diplomacy, history, security economics like nobody. 0:13:40.720 --> 0:13:43.640 Okay, here's a sentence, and here's a sentence. The zero 0:13:43.760 --> 0:13:47.000 sum logic reverts back to a view in the nineteenth 0:13:47.000 --> 0:13:52.360 and eighteenth centuries called mercantilism. Is that's from Zelek? Is 0:13:52.360 --> 0:13:53.880 that where we are this morning? 0:13:54.640 --> 0:13:57.040 Yeah, that is where we are I mean, when you 0:13:57.160 --> 0:14:00.760 listen to the president, President Trump gives the rant he 0:14:00.920 --> 0:14:04.920 gave yesterday about Canada was very unfair. You EU is 0:14:05.040 --> 0:14:07.800 terribly unfair. On and on and on again. I don't 0:14:07.840 --> 0:14:11.120 presume the talk psychology, but as a matter of economic facts, 0:14:11.480 --> 0:14:14.720 it's just a completely self polluted view. It's not true 0:14:14.720 --> 0:14:19.920 on the facts, but it only makes sense if you 0:14:20.040 --> 0:14:24.040 have the mercantilist blinders on, which means you see trade 0:14:24.120 --> 0:14:29.520 as negative some not even zero sum. And you see, 0:14:29.720 --> 0:14:33.080 again going back to the previous comment that only making 0:14:33.160 --> 0:14:38.920 physical stuff matters, and this is just not true. You 0:14:38.920 --> 0:14:41.720 can make national security arguments and Bob would allow for 0:14:41.760 --> 0:14:47.240 this too that specifically referspect to China or given industry 0:14:47.280 --> 0:14:49.760 like semiconductors. You don't want to have too much concentration 0:14:50.000 --> 0:14:53.600 risk dependence on a particular thing. Even there though, you 0:14:53.600 --> 0:14:56.000 don't want to be putting up barriers around. So you're 0:14:56.040 --> 0:14:58.880 dependent on some American company that happens to be a 0:14:58.920 --> 0:15:02.160 friend of the president and is overly protected, too big 0:15:02.200 --> 0:15:04.080 to fail, and makes claims to drop out of the 0:15:04.120 --> 0:15:08.800 spy or semiconductors don't really work right, so you know, 0:15:09.160 --> 0:15:12.040 this is a huge step backward where I think Bob 0:15:12.120 --> 0:15:15.479 is much more articulate than I'm being is the international 0:15:15.520 --> 0:15:18.480 systemic part of this, right, there is a feedback loop 0:15:18.520 --> 0:15:22.840 for the US. And this is what I think Trump 0:15:23.160 --> 0:15:26.240 and his and Bessentin has it. Whether they know it 0:15:26.360 --> 0:15:28.440 or not, whether they think it's a means to an 0:15:28.520 --> 0:15:32.040 end or not, I don't know, but they're ignoring that. 0:15:32.840 --> 0:15:35.880 The US, as I argued in Foreign Affairs a few 0:15:35.960 --> 0:15:39.120 years ago, was chairman of the club and therefore got 0:15:39.120 --> 0:15:41.480 to set the rules, got to self deal, got to 0:15:41.560 --> 0:15:44.520 determine who was members, but it had to behave within 0:15:44.640 --> 0:15:48.000 some reasonable set of rules and provide the club some benefits. 0:15:48.560 --> 0:15:50.960 And once the US just says I'm a member and 0:15:51.000 --> 0:15:53.520 a member who may even leave the club, the club 0:15:53.560 --> 0:15:55.560 goes on without you. 0:15:55.560 --> 0:15:58.400 YouTube live chat, Thank you out on YouTube. Huge audience 0:15:58.960 --> 0:16:03.160 this morning. Paul Tom you need a beard like Adam posts. Oh, 0:16:03.520 --> 0:16:05.760 I mean there it is. Adam's not shaven until the 0:16:05.800 --> 0:16:09.080 Red Sox are in first place. We'll see when that happens. 0:16:09.080 --> 0:16:11.120 Continued sustainably in first place. 0:16:11.160 --> 0:16:14.000 Sustainably in first place. Hey, Adam, I think most Americans 0:16:14.040 --> 0:16:17.280 would agree that this US government, federal government is bloated. 0:16:17.320 --> 0:16:20.040 It's bureaucratic to wants red tape, all that good stuff. 0:16:21.680 --> 0:16:26.280 Is Doge the way to address that not so far. 0:16:26.440 --> 0:16:28.480 I mean, Paul, you're right, most Americans would agree, and 0:16:28.520 --> 0:16:31.440 there's certainly a point there. I think what I tried 0:16:31.480 --> 0:16:36.000 to say to people before Doge got started was the 0:16:36.080 --> 0:16:40.640 issue with government isn't so much waste fraud. It's that 0:16:41.120 --> 0:16:47.360 because of politics, every task has seventeen key performance indicators, 0:16:47.360 --> 0:16:52.080 has seventeen different constituencies, and then gets funded to seventy 0:16:52.080 --> 0:16:54.440 five eighty percent of what it needs to do. That 0:16:54.600 --> 0:16:57.840 at best, and so what you needed to do, and 0:16:57.880 --> 0:17:01.320 this is the place where I think announced government reform 0:17:01.480 --> 0:17:06.600 effort could have been good is saying, let's prioritize. Let's 0:17:06.640 --> 0:17:10.560 not let the accumulation through the years of individual, little 0:17:10.560 --> 0:17:16.720 congressional or special interest moves determine our budget, determine our priorities. 0:17:17.200 --> 0:17:20.840 So again, I'm not in favor of getting rid of education. 0:17:21.000 --> 0:17:24.720 I'm totally against getting rid of USAID. But in a 0:17:24.800 --> 0:17:27.239 sense as a process, if they had just come in 0:17:27.320 --> 0:17:31.320 and said we're taking out this whole department and we're 0:17:31.359 --> 0:17:36.720 doing this instead, that's okay as a process. It's not 0:17:36.920 --> 0:17:42.200 okay to create terror across the workforce. It's not okay 0:17:42.240 --> 0:17:45.200 to make government contractors not get paid for stuff they've 0:17:45.200 --> 0:17:47.240 already done and not know what they're going to get. 0:17:47.400 --> 0:17:50.200 It's not okay to blow up whole ecosystems just because 0:17:50.240 --> 0:17:53.360 they're in government. And most of all, if you did 0:17:53.400 --> 0:17:59.159 it by priorities things like energy grid, nuclear power experts, 0:17:59.359 --> 0:18:04.280 air traffic control Noah and NIH directly into world R 0:18:04.359 --> 0:18:08.720 and D, those things would have been spared because they're 0:18:08.760 --> 0:18:10.520 directly helpful to the economy. 0:18:11.400 --> 0:18:13.080 Adam, I got to do an audible here before we 0:18:13.200 --> 0:18:15.399 let you go. And you know, we all know in 0:18:15.520 --> 0:18:19.160 academics that you are expert on Germany. Let's go back 0:18:19.160 --> 0:18:22.600 to June in nineteen sixty three, when time stop President 0:18:22.600 --> 0:18:27.480 Obama reducts JFK's unbelievable speech in the heart of the 0:18:27.480 --> 0:18:33.639 Cold War, not ready for my German Paul It. I 0:18:33.760 --> 0:18:38.240 nailed it, not even close. I got a D minus there, 0:18:38.359 --> 0:18:41.200 but the professor got hockey tickets, so it worked out. 0:18:41.520 --> 0:18:44.840 Adam Posen, you are expert on this. Is this a Germany? 0:18:44.920 --> 0:18:47.879 In this new Germany? With Conrad at an Hour and 0:18:48.000 --> 0:18:49.840 Villi Brandt, would they recognize it? 0:18:51.760 --> 0:18:55.080 They'd have trouble, and that's a good thing. They would 0:18:55.080 --> 0:18:59.200 have trouble imagining a Germany that pursues security without being 0:18:59.240 --> 0:19:03.480 totally reliant in the US. They would have trouble imagining 0:19:03.520 --> 0:19:09.520 a Germany that does use its fiscal capabilities more more 0:19:10.119 --> 0:19:13.720 than not. And they would have trouble with the Germany 0:19:14.040 --> 0:19:17.840 that explicitly is going to rearm. But I think it's 0:19:17.920 --> 0:19:20.199 the right move for Germany. I mean, you've seen the 0:19:20.240 --> 0:19:25.920 meme on Twitter Tom that Chancellor Chancellor Merits incoming. Chancellor 0:19:25.960 --> 0:19:30.080 Merits is shown with the big smartest face and then 0:19:30.119 --> 0:19:32.800 the blurb is when you realize you can borrow just 0:19:32.880 --> 0:19:38.240 like any other European country. You know, this is genuine progress. 0:19:38.320 --> 0:19:41.280 It's sad that it took the threat to NATO and 0:19:41.400 --> 0:19:44.000 the threat from Russia in the US to make it happen, 0:19:44.640 --> 0:19:47.320 But I think this is a genuine leap forward as 0:19:47.320 --> 0:19:52.680 opposed to previous Chancellor Schultz site and Benda changed changing time. 0:19:53.359 --> 0:19:55.320 This is the real one right now. 0:19:55.560 --> 0:19:58.600 Generous conversation, Thank you so much. Folks. Look at Chad 0:19:58.640 --> 0:20:02.240 Boone and the rest at Peterson Institute for terrific thought 0:20:02.320 --> 0:20:05.959 provoking essays in the chaos of where we are now, 0:20:06.280 --> 0:20:08.920 as we've been saying for days, if not weeks, in 0:20:09.000 --> 0:20:13.920 this chaos, the bomb market matters ball s the stock market. Yeah, 0:20:13.920 --> 0:20:14.640 that's simple. Yep. 0:20:14.680 --> 0:20:17.120 We got a pro in here joining us today, Bridge Kurana. 0:20:17.160 --> 0:20:19.840 He's senior managing director and fixed income portfolio manager at 0:20:19.880 --> 0:20:22.680 Wellington Asset Management. Joining us here on our Bloomberg and 0:20:22.720 --> 0:20:23.719 Arrector broker studio. 0:20:24.560 --> 0:20:25.040 Bridge. 0:20:25.080 --> 0:20:27.320 It talks about, first of all, what do you think 0:20:27.320 --> 0:20:29.000 of the CPI print? Came in a little bit lower 0:20:29.000 --> 0:20:30.480 than expected? What are you sing in the bond market? 0:20:30.760 --> 0:20:33.200 Yeah, so I'm just going through my notes right now. 0:20:33.280 --> 0:20:36.480 It was universally positive, I would say, so two things 0:20:36.520 --> 0:20:39.280 that we're concerning. Last time, core CPI if you take 0:20:39.320 --> 0:20:42.200 out shelter was almost point five percent month of a month, 0:20:42.200 --> 0:20:44.399 which was the highest it was in two years. That 0:20:44.440 --> 0:20:46.680 fell back down to point two percent, so that's good. 0:20:46.960 --> 0:20:49.359 And then core services, which was what the FED really 0:20:49.359 --> 0:20:51.960 cares about because that is tied to the labor market, 0:20:52.160 --> 0:20:55.360 that was point five percent as well. Last month, month 0:20:55.400 --> 0:20:57.280 of a month print that came down to point three 0:20:57.320 --> 0:20:59.280 percent month of a month, and that was driven largely 0:20:59.280 --> 0:21:02.360 by transport and airlines. But point being that, I think 0:21:02.400 --> 0:21:04.840 this is a welcome sigh of relief for the FED 0:21:04.880 --> 0:21:07.800 after that very spicy print. I can see why the 0:21:07.840 --> 0:21:10.119 stock market likes it, because I did think this is 0:21:10.200 --> 0:21:12.239 coming into this event, this was going to be one 0:21:12.240 --> 0:21:15.200 of the most impactful CPI prints in the last few years, 0:21:15.240 --> 0:21:18.000 just because of the equity volatility we've seen. And you know, 0:21:18.040 --> 0:21:20.480 the market has been somewhat buoyed by the fact that 0:21:20.760 --> 0:21:22.840 the market's now pricing in almost three cuts for the 0:21:22.880 --> 0:21:24.840 FED throughout the rest of the year. And so in 0:21:24.880 --> 0:21:27.080 my mind, it was a very important print, and you know, 0:21:27.160 --> 0:21:28.600 I'm not surprised stocks like it. 0:21:28.720 --> 0:21:34.320 That was brilliant except Wednesdays were note free at Bloombert Monday, 0:21:35.400 --> 0:21:38.440 Monday and Tuesday we got notes. Put the damn notes aside. 0:21:39.080 --> 0:21:41.639 So what even what have you been seeing in the 0:21:41.640 --> 0:21:44.320 bond market over the last several weeks of all this volatility, 0:21:44.320 --> 0:21:48.080 all the increased trade talk, the uncertainty to economic growth, 0:21:48.119 --> 0:21:51.240 the uncertainty as it relates to potential impacts on inflation, 0:21:51.280 --> 0:21:52.399 what's a bond market been saying? 0:21:52.600 --> 0:21:54.919 So you have definitely seen a decline in yields in 0:21:54.960 --> 0:21:57.879 the US in particular. Actually it's been much higher yields 0:21:57.880 --> 0:22:01.240 abroad you know, I think the US bond market is 0:22:01.280 --> 0:22:04.840 really responding to the uncertainty in the economy, the sudden 0:22:04.920 --> 0:22:08.560 stop you might see from whether or not it's tariff policy, 0:22:08.600 --> 0:22:11.399 but also immigration as well. And you know, but I 0:22:11.440 --> 0:22:13.840 think what's interesting to me is that I look at 0:22:13.880 --> 0:22:17.679 the intersector performance between cyclical stocks and defensive stocks. To me, 0:22:18.000 --> 0:22:20.919