Speaker 1: Welcome to the Bloomberg Surveillance podcast and I'm Tom Keane
Speaker 1: Jai Lely. We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. The
Speaker 1: two presidents walking down to the cliffs above Omaha Beach
Speaker 1: and truly extraordinary. What is so amazing of this is
Speaker 1: those of us with a collective memory of Ronald Reagan
Speaker 1: in nine four and our time has moved on over
Speaker 1: forty You're truly extraordinary. Is the two presidents try to
Speaker 1: understand the sacrifice that was given. We'll continue to stay
Speaker 1: with us and joining us right now, I am absolutely
Speaker 1: honored to bring to you the Councel General of the
Speaker 1: United Kingdom to New York, Her Majesty's Trade Commissioner for
Speaker 1: North America and also the former Commissioners Singapore. At this moment,
Speaker 1: have Anthony Phillipson with us is amazing. To the east
Speaker 1: at Gold Beach where the British and of course Montgomery
Speaker 1: leading the way, explained to us what this moment also
Speaker 1: means for the British. Um if I may i mean, Tom,
Speaker 1: the emotion in your voices, you talk about the fact
Speaker 1: that they're walking the way that the soldiers didn't go.
Speaker 1: I think has been a constant theme of the commemorations
Speaker 1: this week and also actually over the last semi five years.
Speaker 1: But the moment that really struck me was when Her
Speaker 1: Majesty the Queen was speaking in Portsmouth yesterday talking about
Speaker 1: the sacrifice of the wartime generation, which of course she
Speaker 1: was part of, as the President recognized in his remarks
Speaker 1: at the state banquet on Monday night, and she talked
Speaker 1: about the resilience and of course you know there's a
Speaker 1: much has been written, much i will be written about
Speaker 1: the the extraordinary special relationship between the UK and US,
Speaker 1: but also our other partners in that extraordinary endeavor seventy
Speaker 1: five years ago today. Um, you know, we've we've seen
Speaker 1: the films, we've read the books, we've all watched Band
Speaker 1: of Brothers. But it's I think just important to remember
Speaker 1: what exactly happened on that day and the process that
Speaker 1: it began, of the liberation of Europe. And that's what
Speaker 1: you're watching there on the screen is George will says
Speaker 1: in his new book, quoting Abraham Lincoln then and other
Speaker 1: Worthies and then times slips away. That's really what we
Speaker 1: see her at Normandy today, the ninety five commemoration. Well,
Speaker 1: but this, I think is the important thing, as the
Speaker 1: Queen said, is that you know that those soldiers who
Speaker 1: are there today, they're ninety four ninety five. I tweeted
Speaker 1: last night about an extraordinary moment watching a ninety five
Speaker 1: year old former paratrooper repeating the jump with the gentleman
Speaker 1: on the back of the journelan. Yeah, he's will he
Speaker 1: be this? This generation is passing away. But this is
Speaker 1: why it's so important we tell their story, whether it's
Speaker 1: in the books or by commemorating the events as we're
Speaker 1: seeing now, because the people who lived it are inevitably
Speaker 1: and extorably passing away, so we must the memory live.
Speaker 1: Rick Atkinson out with this wonderful first volume on uh
Speaker 1: the War of the Rebellion. This is where the colonies
Speaker 1: left the United Kingdom a number of years ago, and
Speaker 1: you look at the shared history here which goes towards
Speaker 1: your true expertise in trade relations. What is the media
Speaker 1: getting wrong now about the tone of coming post Broxit
Speaker 1: UK US trade discussions? Well, I think the way I
Speaker 1: would look at it. I honestly, I think we need
Speaker 1: to get behind the headlines. We need to sort of
Speaker 1: we need to talk about the extraordinary relationship that we
Speaker 1: already have between the UK and US, whether it's in
Speaker 1: terms of trade, investment, people to people, links um. And
Speaker 1: then we need to look to the future. Then we
Speaker 1: need to think about what are we going to do
Speaker 1: with this relationship. How are the UK and US going
Speaker 1: to continue to build that trans atlantic corridor as we
Speaker 1: leave the EU. It will be part of our global engagement,
Speaker 1: both with the EU, with the US with other parts
Speaker 1: of the world. I think we have a shared commitment
Speaker 1: to a system of global rules that are free and fair,
Speaker 1: as the Prime Minister the President talked about in their
Speaker 1: business round table said James's Palace on Tuesday morning. That's
Speaker 1: the agenda that we need to get to. That's the
Speaker 1: substance of it, and that's what we need to start
Speaker 1: to map. Let us talk Elizabeth the First and Elizabeth
Speaker 1: the Second. Elizabeth Second is a successful or Cardian experience
Speaker 1: of a global trade, a multilateral world, and all that
Speaker 1: we learned out of World War to Elizabeth the First
Speaker 1: was a mercantilism of another time in place. How do
Speaker 1: we get the dialogue on a bilateral basis and on
Speaker 1: a multilateral basis back to the good of the Atlantic
Speaker 1: Charter and forward. I think you start there. You start
Speaker 1: with the principles. You start with the values that underpend
Speaker 1: our relationship, not just the UK US but the others
Speaker 1: who are at their commemoration today and we're in Port
Speaker 1: Smith yesterday. You think about the world that we want
Speaker 1: to create, both the world that we want to live in,
Speaker 1: the world that you know, whether it's climate change or
Speaker 1: how we deal with increasing sort of global challenges around resources.
Speaker 1: And we we also talk about global peace and security
Speaker 1: Council General. If I could interrupt, what is so important
Speaker 1: here is a belief of the President that for the
Speaker 1: US to win, we must take unit trade from Europe.
Speaker 1: Where a guy like you, within your modern history at
Speaker 1: Oxford knows that new trade can be additive upon present trade.
Speaker 1: How do we get to a trade agreement where good
Speaker 1: new American UK trade is additive upon EU UK trade.
Speaker 1: I think the way we do it is we set
Speaker 1: out a sort of a comprehensive, holistic agenda. If you
Speaker 1: look at the Trade and Investment Working Group that Secretary
Speaker 1: State Liam Fox and investor Bob Lightheiser have been pursuing
Speaker 1: since the summer two than seventeen. It includes talking about
Speaker 1: our bilateral relationship, but it also talks about what we
Speaker 1: can do to help our sames in the here and now,
Speaker 1: and it also talks about what we can do together
Speaker 1: to address challenges. We need to take that into those
Speaker 1: glob before and keep talking about what's what makes our
Speaker 1: lives better. Council General, thank you so much. So this
Speaker 1: is with the trade on top, Tom, Mexico in a
Speaker 1: really tough spot, in a tough spot, and let's say
Speaker 1: I would just kill the good sharing on your line today.
Speaker 1: I'm sure however in the coming days, John, but this
Speaker 1: you go right to the point, which is this is
Speaker 1: a complexity of any given country. It happens to be
Speaker 1: on our border. But some of the simplistic phrases that
Speaker 1: we're hearing in analysis or just just wonderfully naive about
Speaker 1: the complexities of any given country. So do you just
Speaker 1: assume that we go five percent Monday and escalate as
Speaker 1: the months progress. Let's bring a Neil sharing and joined
Speaker 1: us here in London. Capital Economics Group Chief Economy so
Speaker 1: near is that the assumption at Capital Economics, that my
Speaker 1: working assumption in all of this now is that we
Speaker 1: I think if you'd have asked me that three months ago,
Speaker 1: I would have said that we'll find a way through,
Speaker 1: both on the Mexican side and the China side. There'll
Speaker 1: be a way through these talks, and we'll get an
Speaker 1: impasse if you like. I don't think that's happening now.
Speaker 1: I think these trade at tension is going to continue
Speaker 1: to escalate. We're in a new era of globalization and
Speaker 1: we're in a new era of growing protectionism. The one
Speaker 1: caveat to that, I think is that Mexico may fold.
Speaker 1: Mexico has far more to lose in this than China.
Speaker 1: It does, it exports the US GDP, and as you
Speaker 1: rightly touched upon, it has its own domestic, both political
Speaker 1: and economic challenges to particularly pem X. Oil production internal
Speaker 1: declined despite the previous government government efforts to try and
Speaker 1: reverse that. So I think pem X really has to
Speaker 1: give something. It has to do everything its Mexico has
Speaker 1: to do everything it can to try and head these
Speaker 1: tariffs off. I suspect they'll my hunches, they'll find a
Speaker 1: way to try and do little hunches that we could
Speaker 1: avoid five percent months US US China actually not least
Speaker 1: because for the US it's a bigger deal as well. Right,
Speaker 1: we're just getting into the phase where US companies are
Speaker 1: thinking about their investment plans for twenty election year. Are
Speaker 1: they going to be investing if there's a big tariffs
Speaker 1: going on effects and all those supply chains back and
Speaker 1: forth over the US Mexico order. I think the US
Speaker 1: has perhaps a bit more to lose us China much
Speaker 1: different scenario, much different scenarios. And we've all seen the
Speaker 1: briefings that show, to use a fancy word, they use
Speaker 1: a capital economics genormousness of the Mexico you were, relation
Speaker 1: is the technical term we all know, in particularly out
Speaker 1: of our academics, that tariff increase is a nonlinear exercise.
Speaker 1: Explain the reality of going five, ten, fIF and tariffs.
Speaker 1: Where does that impenge on a trade system? Well, you're
Speaker 1: write that. I think the key point is is exactly
Speaker 1: that that it's nonlinear. And for US at the longer
Speaker 1: these tariffs and particularly this uncertainty persists, the greater the
Speaker 1: cross starts to build, and they building an expert investment
Speaker 1: ground zero. I'm not sure where they grounds to zero,
Speaker 1: but certainly investment in particular sectors is going to be
Speaker 1: moth board. If you're an auto producer right now, you're
Speaker 1: thinking about your supply chains criss crossing the US Mexican border, semiconductors, electronics,
Speaker 1: consumer goods, all these type of things. I think that's
Speaker 1: where it hits. I mean, does it hit healthcare, Does
Speaker 1: it hit energy? Not so much, no, But I think
Speaker 1: in particular sectors it has a really big effect. And
Speaker 1: it's not the tariffs that are doing the damage. It's
Speaker 1: the uncertainty and the second un effects pticular financial conditions
Speaker 1: doing the damage. It's a difficult question. And now Michael
Speaker 1: McKee has asked this question of several f WEBC policymakers,
Speaker 1: and Muhammad Alarion asked the question this morning too. Con
Speaker 1: FED rate cuts achieve the Fed's goals. If this is
Speaker 1: the environment you describe right now to rate cuts help,
Speaker 1: I'm not sure they necessarily do. I mean, they certainly
Speaker 1: don't do any harm. I don't think at this stage
Speaker 1: unless you're going to get into a world in which
Speaker 1: is going to reinflate financial bubbles and cause instability further
Speaker 1: down their own and we're not there yet. The key
Speaker 1: challenge and the key issue from my side and now,
Speaker 1: is what's happening on the supply side of the U
Speaker 1: S economy. This increase in productivity growth that we've seen
Speaker 1: over the past twelve months, is that for real? Is
Speaker 1: it a late cycle blip? Is thinking structural? My gut
Speaker 1: says that it's a late cycle blip. But you know
Speaker 1: who knows this. This is stuff that economists really tried
Speaker 1: to wrestle with and it's quite difficult, but be You're
Speaker 1: right to the extent that tariffs do damage on the
Speaker 1: supply side of the global economy. Moneture policy has nothing
Speaker 1: to do with that. So let's get your thoughts on
Speaker 1: monty policy in Europe. The ECB on tour today, they're
Speaker 1: in Lithuania. We get that decision and around forty minutes
Speaker 1: time interest rate guidance currently no change. Nobody thinks the
Speaker 1: e CP is going to hike this year anyway. What
Speaker 1: can they do today of anything at all? Well, I
Speaker 1: think there's two things. One is they can reinforce that guidance,
Speaker 1: perhaps to shift to a slightly more Davish language. The
Speaker 1: second thing is around tell truths, what the terms and
Speaker 1: conditions that will be attached to those. I think we're
Speaker 1: moving into a world in which, pretty quickly next year,
Speaker 1: the ECB is starting to have to think again about
Speaker 1: more quantitative easy restarted. What do they do to do
Speaker 1: more quantitative easy, Whether they've still got room to purchase
Speaker 1: soffering debt within their limits. So this is a call
Speaker 1: from A bien, A B and M are out there
Speaker 1: with this call. They think the ECB restarts Q. They've
Speaker 1: got a big call out there there. I say Capital
Speaker 1: Economics that we've had this call for the last three months.
Speaker 1: We think early said they've got enough room to restart
Speaker 1: it on a modest scale, just doing softeign debt. And
Speaker 1: then you're right, Tom, there's corporate debt, there's equities, there's
Speaker 1: e t f s. The e c B are going
Speaker 1: to be dragged, kicking and screaming into that stuff. But
Speaker 1: I think there's enough space that they can do more
Speaker 1: softwing debt. But buying equity, I mean, I've talked to
Speaker 1: Rick Reader of black Rock about this. Who actually thinks
Speaker 1: who actually thinks it could be a good idea to
Speaker 1: buy equity Because if you look down the capital stack
Speaker 1: right now, the dead of these companies is not the problem.
Speaker 1: It's the cost of the equity, right. The trouble is
Speaker 1: that you're dealing with a we've seen this from Japan. Actually,
Speaker 1: once you start to get into that stage as a
Speaker 1: que you've got to be dragged kicking on that. And
Speaker 1: the ECB is incredibly conservative bodies. We know. I still
Speaker 1: think there's room they can they can do more softwing
Speaker 1: debt purchase capitalism. That is getting kicked and screaming all
Speaker 1: the way down through Frankfort and through Tokyo through Washington.
Speaker 1: Thank you so much. Sounds so depressing out No, I'm
Speaker 1: not depressed. We're dashing it, Reddy and we'll be there
Speaker 1: for job today tomorrow in New York and throw it
Speaker 1: to be back. Over the decades, there have been any
Speaker 1: number of George will books. Um I find interesting. At
Speaker 1: one point years ago, discussion of how he would fish
Speaker 1: with one of his daughters, I find interesting. The great
Speaker 1: George Will quote something to do with adults, do not
Speaker 1: make children, Children make adults. But then there is a
Speaker 1: book that is a tour to force. He has finally
Speaker 1: delivered that in a seventy eighth year. It comes off
Speaker 1: his graduate work at Princeton of a few years back,
Speaker 1: and it is the conservative sensibility. I will not mince words, folks.
Speaker 1: Robin Rodgings book The Third Pillar and Simon Johnson's wonderful
Speaker 1: book Jump Starting America are my books of the summer.
Speaker 1: This will be one of my two books of the year,
Speaker 1: the Conservative Sensibility. George Will. Thank you for joining Paul
Speaker 1: Sweeney in New York and I mean London. George. I
Speaker 1: look at the conservative sensibility and I've got to go
Speaker 1: right to the immediate politics. And we'll just gous this
Speaker 1: in the half hour. You are brutal, is always we
Speaker 1: can dignify our present disputes among small persons of little learning.
Speaker 1: George Will, how did we get here? Well, would say,
Speaker 1: this is what democracy looks like. Uh. But the fact
Speaker 1: that it's untidy doesn't mean that it isn't dignified. Also,
Speaker 1: you know, the woman making her maiden speech in the
Speaker 1: House of Commons recently in Britain said democracies like sex.
Speaker 1: If it isn't messy, you're not doing it right. And uh, George,
Speaker 1: this is radio. Be careful. I know this is anything
Speaker 1: goes though, George. I look at the conservative sensibility I
Speaker 1: know Paul wants to jump in here as well. The
Speaker 1: reason it's one of my books of the year is
Speaker 1: because you've had the courage to write not just for conservatives,
Speaker 1: but those of the debris of Woodrow Wilson. You're right
Speaker 1: for progressives, You're right for the liberals of another time
Speaker 1: and place. What can aggresses in liberals learned from the
Speaker 1: conservative sensibility? They can go back to nineteen sixty four
Speaker 1: when I cast my first vote for president for Barry Goldwater,
Speaker 1: to the memory of whom the book is dedicated, and
Speaker 1: progressive should look at the numbers in nineteen sixty four
Speaker 1: of the American people said they trusted the federal government
Speaker 1: to do the right thing all the time, or almost
Speaker 1: all the right time. Today that numbers under as the
Speaker 1: government's pretensions have grown, its prestige has plummeted. And progressives
Speaker 1: who want to use the government for large enterprises, I'll
Speaker 1: dispute with them about the virtue of that, but that's
Speaker 1: their stand. They should be as concerned as I am
Speaker 1: about the fact that government today seems to have lost
Speaker 1: all sense of its proper scope and actual competence. So George,
Speaker 1: just give us a state of where you think conservatism
Speaker 1: is today in America? Well, frankly, it's it's an orphan
Speaker 1: without a political party, but an idea, a set of
Speaker 1: ideas with a distinguished pedigree that derives momentum from Hamilton
Speaker 1: and Jefferson and particularly Madisone and Lincoln above all, doesn't
Speaker 1: go disappear because the party that at one point was
Speaker 1: its vessel has become cracked a little bit. Uh. The
Speaker 1: ideas are still valid. They have to be argued for, however,
Speaker 1: and that argument will continue until the Republican Party comes
Speaker 1: to its senses, or until someone else comes along to
Speaker 1: to be the representative of that persuasion. Well, how did
Speaker 1: we get to that point where the conservative conservative movement
Speaker 1: in the US has been effectively orphaned by the party,
Speaker 1: by the Republican partyw do we get here? Well? Mr Trump,
Speaker 1: when he ran for president, said pointedly, it's not called
Speaker 1: the Conservative Party, It's called the Republican Party. And he
Speaker 1: set out to say that much of what Republicans have believed,
Speaker 1: particularly in free trade, most dramatically, uh, he said, by
Speaker 1: the way, you don't believe that anymore, and appallingly most
Speaker 1: of them said, okay, we don't believe that anymore, they
Speaker 1: sort of nibble at the edges of presidential discretion and
Speaker 1: applying tarrorists, which means raising taxes on Americans unilaterally without
Speaker 1: any letter hindrance from Congress. But basically the Party has
Speaker 1: become against medicine's great assumptions, a teammate of the president.
Speaker 1: What Madison had in mind was an equilibrium among equal
Speaker 1: and rival risk institutions, with their own sense of dignity
Speaker 1: and their own sense of purpose and their own sense
Speaker 1: of independence. That has has gone away largely because of
Speaker 1: the legacy of Woodrow Wilson and the Progressives. The Progressives
Speaker 1: were amazingly forthright at the turn of the twentieth century.
Speaker 1: In rejecting the Founders, Woodrow Wilson said, don't read the
Speaker 1: first two paragraphs of the Declaration of Independence. It's mere
Speaker 1: fourth of July rhetoric. The Founder's view was, first come rights,
Speaker 1: then comes government. That government exists to indep language of
Speaker 1: the Declaration, secure our rights. The Progressives that no, actually
Speaker 1: governments give rights as dispensations. They are approved areas of
Speaker 1: autonomy that the government likes. Whether it's George Will the
Speaker 1: new book the Conservative sensibility as a triumph It's written
Speaker 1: off of his graduate paper of just a few years
Speaker 1: ago at Princeton. It is exceptionally thoughtful. I'm gonna say
Speaker 1: it one more time. It is not only the obvious
Speaker 1: book for conservatives lost in the wilderness, it is a
Speaker 1: must read for those lost in the middle of America's politics,
Speaker 1: and also for liberals and enthusiastic progressives as well. George Weill,
Speaker 1: I'm gonna go back to the doom and gloom that
Speaker 1: George Wills associated with Paul You're gonna love this. Our
Speaker 1: listeners in Boston are gonna love this. Many thoughtful Americans
Speaker 1: worry that the Republic peaked a little early and has
Speaker 1: been trundling downhill since Bunker Hill. How to conservatives, George
Speaker 1: will lose the gloom that had all ended a few
Speaker 1: years ago. Well, my my book is in part explicitly
Speaker 1: a summons to pessimism. But pessimism is not fatalism. By pessimism,
Speaker 1: I means there's so many ways things can go wrong.
Speaker 1: The democracy and free markets are not the default position
Speaker 1: of the human race. They are complex social structures and
Speaker 1: government structures at the paradox. I notice, say, but LEAs
Speaker 1: a fair as a government project, It requires courts, contracts, arbitration,
Speaker 1: laws against fraud, information dispersal, all the rest. So the
Speaker 1: simple truth is that this is a complex system we're
Speaker 1: trying to defend. My book is a particularly chapter on
Speaker 1: political economy is as robust a defensive capitalism as you'll find.
Speaker 1: This side of Hyak and Hik, of course figures largely
Speaker 1: in my in my book. Uh, my view is that
Speaker 1: capitalism does not just make us better off, which it
Speaker 1: manifestly does, it makes us better that the argument between
Speaker 1: Hamilton and Jefferson was an argument about what kind of
Speaker 1: people we would be. I want to swing the discussion
Speaker 1: forward Georgia, because they know Paul Sweeney wants to get
Speaker 1: into the clear and present with our present president. Let's
Speaker 1: swing forward, folks to my ute. Look, look, there's this
Speaker 1: particular fringe, and there one fundamental problem is they simply
Speaker 1: never accepted the New Deal, Boynihan of New York, And
Speaker 1: there's a whole tone in America that's never gotten over
Speaker 1: f DR and that's the raison detra of certainly a
Speaker 1: new Republican party. Well, there's no question that the New
Speaker 1: Deal is an accomplished fact. It's interesting, however, that Ronald Reagan,
Speaker 1: who came of age during the New Deal, never assaulted
Speaker 1: New Deal institutions or approaches to government. It was the
Speaker 1: great society that he had in his sights. The New
Speaker 1: Deals signature achievement with social security, which is some the
Speaker 1: government knows how to do. It identifies an eligible population
Speaker 1: and mails out checks to it. That's fine. When government
Speaker 1: goes wrong is when it says it's going to deliver
Speaker 1: model cities or head starts or meaningful work, when it
Speaker 1: undertakes two minutely regulate us to paradise. Government is a
Speaker 1: blunt instrument, a necessary instrument, capable of much good, but blunt. Nonetheless, George,
Speaker 1: are you surprised or that the Republican Party, some of
Speaker 1: the conservative members of the Republican Party haven't maybe pushed
Speaker 1: back on some of the current presidents maybe questionable actions,
Speaker 1: actions that may not be in the conservative venaculars, such
Speaker 1: as free, free trader. Are you surprised we haven't gotten
Speaker 1: the Republican Party has been so silent. I guess it's
Speaker 1: been silent, with a few honorable exceptions. Uh. Senator Department
Speaker 1: of Ohio says, all right, if we're going to pretend
Speaker 1: that imported Volkswagen's or a national security threat. Shouldn't we
Speaker 1: have the Defense to Apartment rather than the Commerce Department
Speaker 1: established the criterion for a national security threat? Uh. Senator
Speaker 1: to me has been pushing back of Pennsylvania Republicans, saying,
Speaker 1: we have over the years, we have spun off far
Speaker 1: too much power, investing presidents of both parties from congresses
Speaker 1: of both parties with an enormous discretion that enables them
Speaker 1: to do essentially legislative things such as tariffs, which are
Speaker 1: raising taxes unilaterally. George Will with us. I've got time,
Speaker 1: George for only one more question. John writes in and says,
Speaker 1: I really don't care about the conservative sensibility. Please ask
Speaker 1: Mr Will about the baseball sensibility. George Will, Cobby, how
Speaker 1: do we save baseball? Where you've got to do something
Speaker 1: to cure the following? In two thousand and eighteen season,
Speaker 1: for the first time in history, there were more strikeouts.
Speaker 1: Thank you. The ball is put in play, that is
Speaker 1: not walk strike out. Her home run put in play
Speaker 1: once every four minutes. You know. Red Smith once said
Speaker 1: baseball's doll only to the doll. Unfortunately, baseball is becoming
Speaker 1: dull because it's becoming one dimensional. We've got to find
Speaker 1: I think markets work. I think there will be a
Speaker 1: demand for Rod carews and Wade bugs and Tony Gwin's
Speaker 1: see that and the demand will be met. Paul. Do
Speaker 1: you see how his voice changes when he gets away
Speaker 1: from Madison and with Roe Wilson. I only write about
Speaker 1: politics to support my baseball have it. Well, here's what
Speaker 1: I'm gonna do. I'm in London. I'm gonna put out
Speaker 1: one of my books of the year, The Conservative Sensibility.
Speaker 1: And when that writing with George Will in the Washington Post,
Speaker 1: there was a tour to force article a few oh
Speaker 1: five six seven days ago on the strikeout to Walks Ratio.
Speaker 1: Just an absolutely spectacular effort. And we'll get that out
Speaker 1: as well. George Will, of course with the Washington Post
Speaker 1: and many many books over the many decades, and I
Speaker 1: could just simply say that The Conservative Sensibility is a
Speaker 1: tour to thank you so much. Thank you this morning. Well, Tom,
Speaker 1: you know, one of the things we've seen since the
Speaker 1: financial crisis is the big New York investment banks getting
Speaker 1: more and more into the commercial banking side of the business,
Speaker 1: the retail side of the business. If you will interesting
Speaker 1: ubs just recently is out there now offering ultra high
Speaker 1: savings rates to try to attract some cash from the
Speaker 1: listing clients. Exactly. It's kind of like an assumed toast toaster.
Speaker 1: I'm not sure gonna toaster toaster. So we would talk
Speaker 1: when we talk in vestment banks time, we always talk
Speaker 1: to Shanelli Bassik Bloomberg News investment banking reporters. So what's
Speaker 1: UVUS doing here, Snelli? Their ultra high savings rate. You know,
Speaker 1: in the US particularly, there are a lot smaller than
Speaker 1: a lot of you know, the Morgan Stanleys, the Goldman
Speaker 1: Saxes of the world. So they're saying, at least through
Speaker 1: the end of September, we're gonna offer you a rate
Speaker 1: that's higher so long as you have ten thousand dollars
Speaker 1: to put in our bank and away from another one.
Speaker 1: And so they're definitely trying to lure money away from
Speaker 1: the big US contenders. They need to do this, frankly,
Speaker 1: Um they have a lot of growth in Asia, but
Speaker 1: the results in the America's were flat in the last quarter,
Speaker 1: and so it's something that if they don't do it,
Speaker 1: they're going to have a harder time one's volatility kicks
Speaker 1: in and people start saving instead. So it's it's interesting,
Speaker 1: am I right? In kind of my view? That goshly
Speaker 1: even Goldman Sachs. You know, the blue chip corporate investment
Speaker 1: bank is getting in more and more into the retail
Speaker 1: side of individual investor side of the business. What's the
Speaker 1: trend here? You know, one's got to wonder if this
Speaker 1: is a very late cycle behavior right their biggest corporate
Speaker 1: clients right now. Um, and you know we were just
Speaker 1: talking about this. I've been doing invest in banking meetings
Speaker 1: all week and everyone's pretty bored. There's not a lot
Speaker 1: of big ticket deals going on, and the ones that
Speaker 1: are happening are either tied up for a year in
Speaker 1: a regulatory hurdle or falling apart. And so when you
Speaker 1: know big corporations are under a lot of pressure here
Speaker 1: and maybe deal making, especially this big ticket deal making,
Speaker 1: is slowing down, then can you lean on the individual
Speaker 1: investor and then you know, mom and pop investors really
Speaker 1: to make money for the bank. Yeah, okay, so I'll
Speaker 1: go there, but you know, I hit her like you
Speaker 1: you go out to the Hampton Coffee Company to pick
Speaker 1: up a cup of coffee or John's Pancake House, Montauk, wherever,
Speaker 1: you know the power players like Hugo Schnali. What's the
Speaker 1: mood into the summer among Wall Street banking? I don't
Speaker 1: see it? Is it there? Like I was saying, pretty bored.
Speaker 1: I'm sure that you know. It's funny you mentioned the hampa,
Speaker 1: But board means nobody makes any money, right, nobody makes
Speaker 1: any money. But you know, while you're not making money,
Speaker 1: you kind of wait for a better September ahead. And
Speaker 1: things are slower in the summer. People are taking time off.
Speaker 1: Ever since Memorial Day turn, things were just slower, right,
Speaker 1: I was writing four stories a day, and now it's
Speaker 1: just a lot less going on. Well, within that is
Speaker 1: bank merges, I mean Commerce bank, and I n G.
Speaker 1: I know that's off your beat, but I guess they're
Speaker 1: picking up the thrust and we've got to figure out
Speaker 1: what to do with Deutsche Bank. Very importantly, Paul, I
Speaker 1: missed this. Deutsche Bank had rallied this morning now five
Speaker 1: point nine nine euros. I did not see that. You're
Speaker 1: on that six euro watch for long. Well, that may
Speaker 1: be because Shnelli showed up to get in front of
Speaker 1: the mic. I don't know Deutsche Bank self. What is
Speaker 1: the mood in Wall Street? Come on, you're you're wired
Speaker 1: of this totally. What are the young turks of Wall
Speaker 1: Street doing right now? It's funny the young Turks as
Speaker 1: with a bunch of young Turks yesterday, which is a
Speaker 1: very exciting thing. Uh Again, not a whole lot going on.
Speaker 1: You know, you think about how much bad news there is, right,
Speaker 1: we were talking about deals falling apart too. But the
Speaker 1: hedge fund industry, you know, we're still waiting for some
Speaker 1: big launches, but there hasn't been a whole lot going
Speaker 1: on in that industry either. I p O world, right,
Speaker 1: we're finally seeing Uber hit above its I p O prices.
Speaker 1: So in the I p O world is where there's
Speaker 1: some real excitement going on and people are ready to
Speaker 1: kind of be in every New York hotel at these
Speaker 1: road shows coming up in some really sexy ones, right,
Speaker 1: peloton Um, Endeavor. There's some really exciting names that make
Speaker 1: for really great stories, but but also frankly something you
Speaker 1: just to talk about. It's just interesting. Yesterday we had
Speaker 1: Mark Schaeffer, the co head of Global m and A
Speaker 1: for a City Group in talking about the business. He
Speaker 1: was speaking at the Bloomberg Panel yesterday investment panel in
Speaker 1: New York. He was saying that, you know, the year
Speaker 1: to date M and A volumes are down pretty significantly
Speaker 1: after January personage to one digit. Ye, and you're interesting,
Speaker 1: it's you know, I was just wondering, are they claiming
Speaker 1: when you talk to M and A bankers, are they saying, oh,
Speaker 1: it's just the trade uncertainty or it's slowing economy. What's
Speaker 1: kind of you know, the excuses this time around. It's
Speaker 1: a little bit of both and volatility. Let's not discount it.
Speaker 1: I know it's nowhere where it was at the end
Speaker 1: of last year, but it is a little higher this
Speaker 1: year so far. Um, you don't want to pay for
Speaker 1: something when you don't know what the price is really
Speaker 1: gonna end up on, especially for Stofferson deals. Um, you
Speaker 1: know you're mentioning a Deutsche Bank and Commerce Bank. The
Speaker 1: prospect of financial steals are very exciting to people, both
Speaker 1: for smaller finn tech companies and consolidation across Europe. Right,
Speaker 1: the fact that Deutsche Bank and Commerce Bank died, right,
Speaker 1: but now Commerce Bank is talking to I m G again.
Speaker 1: That's again more excitement for the investment bankers and nervousness
Speaker 1: for the staff because it does usually mean some job cuts,
Speaker 1: but are there's still too many firms doing too many
Speaker 1: things where a given Wall Street firm Cinale will cut
Speaker 1: out a hunk of business just because they say, we
Speaker 1: don't want to be number four, we don't want to
Speaker 1: be number three, we don't want to be number eight.
Speaker 1: That's the big question. We think that there's going to
Speaker 1: be a lot of consolidation, but what kind of consolidation.
Speaker 1: It's really hard for the biggest banks to keep getting bigger.
Speaker 1: There's a lot of talk earlier this year about a
Speaker 1: lot of banks trying to get bigger under the Trump administration,
Speaker 1: in particular in case the Dems take over in the
Speaker 1: next cycle, they'll have a harder time for our audience.
Speaker 1: Those are Democrats she's talking about. Than sorry, but you know,
Speaker 1: if they're going to get bigger, they might as well
Speaker 1: get bigger now there. That means through buying companies or
Speaker 1: what UBS is doing, and diversifying into businesses that they're
Speaker 1: not as big as already. Yes, the big want to
Speaker 1: get bigger for certain, and that will wipe out the
Speaker 1: smaller end of the pie. To be clear, we just
Speaker 1: got off a bunch of job cuts as well, all
Speaker 1: across Wall Street done? Is Wall Street done? What the
Speaker 1: job cuts? You know, Wall Street can be a little
Speaker 1: fickle and it really depends, you know, in the next
Speaker 1: couple of weeks or so. We're really going to see
Speaker 1: the next second quarter numbers come out. So far, James Gorman,
Speaker 1: for example, Morgan Stanley had been pretty optimistic about what
Speaker 1: the second quarter looks like. People are trading, People are
Speaker 1: not staying away from the markets necessarily. Um, you know,
Speaker 1: we talk dealmakers are staying away, but generally traders and
Speaker 1: bankers are not staying away from markets. So hopefully that
Speaker 1: means not too many job cuts ahead. It's similar Bassic,
Speaker 1: thank you so much writing on Global Wall Street for Bloomberg.
Speaker 1: And now we've take a different tact with a book.
Speaker 1: We have Alan Krueger's Rock Eonomics, and of course Professor
Speaker 1: Krueger told me much about this book over the last
Speaker 1: number of years, his excitement of looking at the music business,
Speaker 1: which was an inquiring mind. We lost Alan Krueger in
Speaker 1: March is untimely death and joining us this morning to
Speaker 1: um to look briefly at Rockconomics, a wonderful book from
Speaker 1: Princeton University at Press. But also to speak of Professor
Speaker 1: Krueger is Austin Guelsby. He is a gentleman from Milton
Speaker 1: Academy and out of University of Chicago and the Boost School.
Speaker 1: Austin Guelsby, of course, like Professor Krueger, a former chairman
Speaker 1: of the President's Council of Economic Advisors. Austin, I spoke
Speaker 1: to you yesterday, thrilled to have you on Worldwide today.
Speaker 1: What permeates Alan Krueger's rock economics is what permeated his
Speaker 1: study of terror, his study of his core economic theories,
Speaker 1: his study of any number of things, which is just
Speaker 1: an insatiable curiosity. And here about music, from your great,
Speaker 1: great uh knowledge of Alan Krueger, Why did he choose music?
Speaker 1: You know? To a well, Tom, First of all, thanks
Speaker 1: for having me back, and thanks for for giving me
Speaker 1: a chance to talk about Alan and and this book.
Speaker 1: Alan always loved music, you know, as you know, and
Speaker 1: as you said there in the opening, he loved talking
Speaker 1: about music, He loved listening to music. And he was
Speaker 1: a you know, absolutely world class economist. And I think
Speaker 1: he couldn't help but apply his economics to this thing
Speaker 1: that that he enjoyed so much, and and and in
Speaker 1: the end, that's that's where the book came out. The
Speaker 1: book is basically going to popular music, UM and talking
Speaker 1: about how popular it is and measuring that, but then
Speaker 1: just analyzing the economics of it and the ways enriched
Speaker 1: the music business reflect kind of these broader trends that
Speaker 1: have happened in the labor market over the last fifty years. UM.
Speaker 1: And so that's kind of the premise of the Okay,
Speaker 1: But what's what permeates the book, Austin, and this includes
Speaker 1: your work at Chicago, is this this and all of
Speaker 1: us are living this right now in music and outside music.
Speaker 1: Is the technological overlay. He's got ahod chapter on streaming,
Speaker 1: and that's going out lights people. We saw the Apple
Speaker 1: announcement two days ago. They're gonna lose iTunes. I mean,
Speaker 1: what do we learn about technological change in music that
Speaker 1: goes over to what all of us are confronting in
Speaker 1: our lives with our families. Super important topic obviously and
Speaker 1: clearly UM. I think one of the things that that
Speaker 1: this suggests is as the technology of of digital copying,
Speaker 1: let's call it, and digital distribution makes it easier to
Speaker 1: reach these big markets. It does have a tendency who
Speaker 1: lead to winner take all superstar um type factors in
Speaker 1: the labor market. So so in the book, Krueger shows
Speaker 1: that the share of the tworldwide UH music revenue is
Speaker 1: getting more and more concentrated among the very most popular artists.
Speaker 1: And if you're if you're struggling in the middle, um,
Speaker 1: you you are struggling. And part of that is from
Speaker 1: the technology change um. And there's a there's an ironic
Speaker 1: bid in there for anybody who's who's a ficionado of economics,
Speaker 1: which is the great economist Alfred Marshall, kind of inventor
Speaker 1: of supply and demand. In his original writings he made
Speaker 1: a big deal about there are some industries and jobs
Speaker 1: that are scalable and some are not. And the example
Speaker 1: of a job that was not scalable he had was
Speaker 1: a very famous singer. And they said, well, obviously everybody
Speaker 1: can't listen to that singer. That they have to go
Speaker 1: town to town and only the people who can hear them,
Speaker 1: because there were no microphones and U And now you know, however,
Speaker 1: many years later it's the complete reverse. So now if
Speaker 1: you add an example of what somebody where technology makes
Speaker 1: their market bigger, and bigger makes for more winner take all.
Speaker 1: You would say, well, what about Beyonce. You know she
Speaker 1: can she can sing once and and record it and
Speaker 1: everybody listen. So, Professor, how does a new band or
Speaker 1: a new artist break intoday? It used to be just
Speaker 1: try to get a record deal than the record company
Speaker 1: promotes you. How did the new uh, the new bands
Speaker 1: do it? Yeah, I think it's uh, it's gotten harder.
Speaker 1: That's part of the thing about the superstar model is
Speaker 1: it's gotten harder to be a super If you get
Speaker 1: to be a superstar, you make more than you've ever
Speaker 1: made before. Um, But if you're just starting out, the
Speaker 1: marketing component has gotten more difficult because you don't have
Speaker 1: the radio side, and the labels are are not investing
Speaker 1: as much in the discovering the bands. Austin, I want
Speaker 1: to go to the legacy of Allan Krueger, and to
Speaker 1: do that in this short time is grossly unfair to
Speaker 1: Professor Krueger and frankly to Professor Goulsby as well. Let
Speaker 1: us cut to the chase. Krueger and Card in the
Speaker 1: middle nineties changed the dialogue on what the most basic
Speaker 1: people in America should be paid. We're not talking about
Speaker 1: minimum wage lifts. Walmart and uproar at their annual meeting,
Speaker 1: et cetera, at the fifteen dollars an hour. Did the
Speaker 1: Allen Krueger win the war of the minimum wage? You
Speaker 1: know that war continues, but he certainly won a major battle. Uh.
Speaker 1: And you know, took over one continent in the in
Speaker 1: the old game of risk. You know, if you if
Speaker 1: you could get control of one of the continents, Uh,
Speaker 1: you're You're on your way. And I would say he
Speaker 1: was part one of the leaders of a of a
Speaker 1: movement that got us to rethink employers and employees and
Speaker 1: the thinking of maybe employers have a lot more bargaining power,
Speaker 1: monopoly power than than we thought before. Maybe it's not
Speaker 1: as competitive each particular employer as we thought. And if
Speaker 1: it's not, then textbook kind of examples like hey, if
Speaker 1: you raise the minimum wage, it automatically leads everyone to
Speaker 1: get fired kind of thing, um are not accurate. And
Speaker 1: so there there are many aspects of labor economics that
Speaker 1: Allen was a leader of, but this whole space which
Speaker 1: continued up to more recent times where he was one
Speaker 1: of the first people documenting the way that employers were
Speaker 1: signing non competes. And no I'm not talking about you know,
Speaker 1: law firms or or things like that. Literally McDonald's signing
Speaker 1: making their employees signed non competes for bidding them from
Speaker 1: working at other fast food restaurants, um, and showing the
Speaker 1: ways that that allowed employers to kind of depress the
Speaker 1: wages of the people who worked for them because they
Speaker 1: didn't have to worry about um that you would go
Speaker 1: to a competitor. All of that goes to to Alan's
Speaker 1: intellectual curiosity and working on important problems. You know. That's
Speaker 1: why President Obama identified him as a leader made him
Speaker 1: Chair of the c E. A before that, President Clinton
Speaker 1: had made him the chief Economists at the Department of Labor.
Speaker 1: He was he was a rare bird in that he
Speaker 1: was a world leading economist researcher, but but he was
Speaker 1: very practical. Well, Austin Goes, We thank you so much
Speaker 1: from Chicago Today in support of the late Alan Krueger's
Speaker 1: Rock Economics. Thanks for listening to the Bloomberg Surveillance podcast.
Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or
Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom
Speaker 1: Keene before the podcast. You can always catch us worldwide.
Speaker 1: I'm Bloomberg Radio