WEBVTT - Surveillance: Monetary Policy Can't Do It All, Says Rissmiller 0:00:09.840 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Ley. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.600 Bloomberg dot Com, and of course, on the Bloomberg Don't 0:00:27.680 --> 0:00:29.720 risk joining us here in New York's to take us 0:00:29.840 --> 0:00:32.440 research chief economists, Good Morney to It's on Good Morning. 0:00:32.479 --> 0:00:35.320 Can we begin with the headline out of Germany? Why 0:00:35.360 --> 0:00:37.120 do we have to wait for the crisis? Why do 0:00:37.200 --> 0:00:39.240 we have to wait for the recession for them to 0:00:39.320 --> 0:00:43.040 loosen the past race? Oh, it's an excellent, excellent question, 0:00:43.320 --> 0:00:46.519 and so the answer is we shouldn't have to, but 0:00:46.840 --> 0:00:50.199 there have been political reasons in the past that have 0:00:50.520 --> 0:00:54.320 meant we have not been preemptive globally. So I think 0:00:54.320 --> 0:00:56.880 the issue here is now you have the Bundesbank and 0:00:56.920 --> 0:00:59.800 others saying we may be getting to some sort of 0:01:00.040 --> 0:01:02.240 racist doesn't have to be as bad as the last crisis. 0:01:02.600 --> 0:01:05.000 But that's what I think is being used to justify 0:01:05.040 --> 0:01:08.000 that this time could be different. There's enough intellectual support, 0:01:08.000 --> 0:01:12.360 there's enough academic support for some sort of spending fiscal 0:01:12.360 --> 0:01:15.280 policy is clearly the right answer in a world where 0:01:15.280 --> 0:01:17.880 monetary policy looks exhausted. And I'd say if you look 0:01:17.880 --> 0:01:20.440 at the amount of negative yielding debt in the world, 0:01:20.520 --> 0:01:23.679 monetary policy is looking exhausted. Yeah, looking at the German 0:01:23.680 --> 0:01:27.640 tenual negative point six three and nine percent, So we've 0:01:27.680 --> 0:01:29.880 seen that for a long period of time, don I mean? 0:01:30.000 --> 0:01:32.240 So if I'm Germany, am I to what extent am 0:01:32.240 --> 0:01:34.920 I discounting a hard brexit at this point, because it 0:01:34.959 --> 0:01:36.400 seems like some of the rhetor are coming out of 0:01:36.400 --> 0:01:39.720 the UK is that is still very much on the table. Yeah, 0:01:39.760 --> 0:01:42.319 and certainly that has to be part of any contingency plan. 0:01:42.720 --> 0:01:44.840 So if you're thinking about what could cause a crisis 0:01:44.880 --> 0:01:47.840 that's just a few months away here, Even if it's 0:01:47.880 --> 0:01:50.600 not the hard breaks that you're seeing a slowdown in 0:01:50.640 --> 0:01:53.200 the economy that's been affected by some of the uncertainty 0:01:53.200 --> 0:01:56.440 created by it, and that's impacted investment, and that's filtered 0:01:56.480 --> 0:01:59.800 through to the European economy. So hard or not, I 0:01:59.800 --> 0:02:02.400 think you're discounting some of those drags, whether they're coming 0:02:03.040 --> 0:02:05.520 from the UK side or the China side, which is 0:02:05.520 --> 0:02:07.520 a whole other story. The mood of the markets is 0:02:07.560 --> 0:02:10.079 better this morning, but overwhelmingly, i'd say over the last 0:02:10.080 --> 0:02:14.240 couple of months, investors, economists desperately looking searching for a 0:02:14.280 --> 0:02:16.960 policy anchor. We have had a policy anchor throughout this 0:02:17.000 --> 0:02:19.120 whole expansion over the last ten years, whether it was 0:02:19.160 --> 0:02:21.680 the federal reserve, whether it was China and it's spending 0:02:21.680 --> 0:02:23.760 in a stimulus package, or whether it was the tax 0:02:23.840 --> 0:02:26.120 cuts of a couple of years ago. Where does that 0:02:26.200 --> 0:02:29.520 policy anchor come from now, because quite clearly Chairman Powell 0:02:29.919 --> 0:02:34.080 is struggling to be that guy, struggling to distinguish what 0:02:34.160 --> 0:02:37.240 that policy actually is. Yeah, so that's an important point 0:02:37.280 --> 0:02:40.760 that markets like normal distributions, they're like a central tendency 0:02:40.880 --> 0:02:43.640 with tail outcomes there aren't all that likely. And in 0:02:43.680 --> 0:02:46.960 the world today we have some things that look not normal. 0:02:47.240 --> 0:02:50.040 Whether it's Brexit where you could have a variety of 0:02:50.040 --> 0:02:52.880 tail outcomes, whether it's what's going on in Hong Kong 0:02:52.880 --> 0:02:56.160 where there could be tail outcomes that are quite different. 0:02:56.600 --> 0:02:59.760 It's hard to find what the central tendency is, and 0:03:00.040 --> 0:03:03.040 unfortunately it may come back to central banks at least 0:03:03.040 --> 0:03:05.720 in the near term. Fiscal policy can be an important tool, 0:03:05.720 --> 0:03:08.120 but it's going to take time. Even in the German case, 0:03:08.520 --> 0:03:10.600 monetary policy has to be the anchor, and that's the 0:03:10.600 --> 0:03:12.520 worry right now for a lot of paoples to whether 0:03:12.840 --> 0:03:15.160 that can actually work. The thing that Jackson home is 0:03:15.240 --> 0:03:19.200 Friday the challenges of monetary policy, the current dynamic globally, 0:03:19.240 --> 0:03:20.919 the issues we have in this global economy, that is 0:03:20.919 --> 0:03:23.480 the ultimate challenge for monety policy. Can they really address 0:03:23.520 --> 0:03:27.280 it with monetary policy? So maybe we have to define 0:03:27.320 --> 0:03:30.400 what we mean by work here, and so I do 0:03:30.480 --> 0:03:34.120 think monetary policy could take care of an inverted yield curve. 0:03:34.240 --> 0:03:36.960 I think that is within the control of monetary policy. 0:03:37.000 --> 0:03:39.080 Are we going to cut interest rates and have lower 0:03:39.120 --> 0:03:43.160 interest rates spur investment? That's much less clear. It's not 0:03:43.240 --> 0:03:45.880 clear that the problem there is the interest rate. It's 0:03:46.040 --> 0:03:49.920 the amount of uncertainty that's inhibiting CEOs and CFOs from 0:03:49.960 --> 0:03:52.800 making some of the decisions they would otherwise make. So 0:03:53.080 --> 0:03:55.560 I think monetary policy has a role. I think monetary 0:03:55.560 --> 0:03:59.600 policy in particular with an inverted yield curve that's starting 0:03:59.640 --> 0:04:02.120 to come out of that position on the assumption that 0:04:02.160 --> 0:04:05.720 monetary policy could work, has a role, but monterrey policy 0:04:05.720 --> 0:04:08.040 can't do it all. So don I mean coming out 0:04:08.120 --> 0:04:11.680 of or going into Jackson Hole on Friday. What time 0:04:11.720 --> 0:04:14.360 of language do you think we're gonna get from Chairman Pal. 0:04:14.400 --> 0:04:16.919 I think most of market participants are thinking about the 0:04:16.920 --> 0:04:20.719 next meeting will be basis points, perhaps fifty basis points, 0:04:20.720 --> 0:04:22.919 given some of the uncertainty that we've seen just in 0:04:22.920 --> 0:04:24.800 the last couple of weeks. I guess in the market place, 0:04:24.839 --> 0:04:27.280 what kind of language and body language more important do 0:04:27.279 --> 0:04:30.120 you think we're gonna get from Chairman Pal? So I 0:04:30.160 --> 0:04:32.640 think the market would love to see something that would, 0:04:33.279 --> 0:04:36.960 uh make a fifty basis point cut the right answer, 0:04:37.080 --> 0:04:38.880 But I don't think we're gonna get that. I don't 0:04:38.920 --> 0:04:42.760 think the FED wants to guide towards a fifty basis 0:04:42.800 --> 0:04:46.440 point cut here. That's an emergency move and we don't 0:04:46.440 --> 0:04:49.480 have the financial crisis right now that would justify that 0:04:49.560 --> 0:04:52.200 maybe in the future, but not right now. So I 0:04:52.240 --> 0:04:54.440 think they want to be vigilant, but I don't think 0:04:54.720 --> 0:04:56.719 the language is going to be a whatever it takes 0:04:57.120 --> 0:05:00.960 type of outcome here. Outside of Chairman how we haven't 0:05:01.000 --> 0:05:03.320 heard very much from the governors and the board around him. 0:05:03.680 --> 0:05:06.320 Don do you think there is a disagreement on the 0:05:06.360 --> 0:05:08.120 f WEBC that has been covering up over the last 0:05:08.120 --> 0:05:10.159 couple of weeks, we haven't heard much from the key 0:05:10.200 --> 0:05:12.479 players at the Federal Reserve. What do you think the 0:05:12.480 --> 0:05:16.840 reason is for that? So there has been disagreement, and 0:05:16.880 --> 0:05:20.520 we had two descents on the last vote. Usually the 0:05:20.600 --> 0:05:25.039 disagreement happens within the regions, So the regional Fed presidents 0:05:25.040 --> 0:05:27.960 who could say, in my district things look one way 0:05:28.040 --> 0:05:30.760 or another, would come in, fly in for the meeting 0:05:31.120 --> 0:05:34.120 and vote a certain way, maybe descent on. We got 0:05:34.160 --> 0:05:36.280 that from the Boston Fed President Eric rosen Gren, who 0:05:36.320 --> 0:05:39.200 incidentally will be speaking of Bloomberg later on the southfternoon, 0:05:39.240 --> 0:05:42.640 but carry on, dump plays right, Yeah, So that happens 0:05:43.040 --> 0:05:46.240 from time to time. Often the vote is unanimous, but 0:05:46.279 --> 0:05:49.239 not always, and so one or two descents is something 0:05:49.279 --> 0:05:51.320 that happens. But those descents usually come from the regional 0:05:51.360 --> 0:05:54.200 Fed folks, the group that all sit next to each 0:05:54.200 --> 0:05:57.480 other in Washington, d C. The Board of Governors very 0:05:57.560 --> 0:06:00.599 rarely descent and I think it's because the talk over 0:06:00.680 --> 0:06:04.359 some of their differences being in the same physical location. 0:06:04.400 --> 0:06:06.680 I do think that that matters and that lets the 0:06:06.760 --> 0:06:09.880 chair guide uh the committee. So I do think there 0:06:09.960 --> 0:06:12.240 is some uncertainty depending on whether you look at the 0:06:12.240 --> 0:06:16.320 economic indicators, the typical numbers like jobs and consumer spending, 0:06:16.360 --> 0:06:18.320 or whether you look at financial market indicators like the 0:06:18.400 --> 0:06:21.800 Yel curve, and that tension I think is what's driving 0:06:21.800 --> 0:06:24.360 some of this disagreement. So, Tom, where do you stand 0:06:24.480 --> 0:06:27.560 in terms of outlook for a recession in the next 0:06:27.680 --> 0:06:30.320 twelve to eighteen months in the US? Because is John 0:06:30.640 --> 0:06:32.400 let Off the show? I mean, you know, we look 0:06:32.560 --> 0:06:36.440 look at Europe weaker maybe perhaps then expected, China slowing. 0:06:36.440 --> 0:06:37.960 How do you kind of view the U s economy 0:06:38.040 --> 0:06:41.200 going into so with the Oel curve inverted, we thought 0:06:41.240 --> 0:06:42.880 of it like you're holding your breath. You could do 0:06:42.920 --> 0:06:46.559 this for a little while, and so you inverted curve, 0:06:47.200 --> 0:06:48.880 especially when we look at the three months to ten 0:06:48.920 --> 0:06:51.279 year versus the two year to ten year is telling 0:06:51.400 --> 0:06:53.800 us that there needs to be some policy action. The 0:06:53.800 --> 0:06:56.159 Fed should cut interest rates. But if they cut interest rates, 0:06:56.200 --> 0:06:58.400 we don't have to have a recession. So the fact 0:06:58.400 --> 0:07:00.000 that we're holding our breath here means we could come 0:07:00.080 --> 0:07:02.920 up for air. That's a higher chance over session. That's 0:07:02.920 --> 0:07:05.960 a little more dangerous than average. But I don't think 0:07:06.000 --> 0:07:08.360 recession is the base case, given that the consumer still 0:07:08.400 --> 0:07:09.960 looks to be in good Chiape. They don't great to 0:07:10.000 --> 0:07:12.760 catch up with you, Don Rismuller, their strategous research chief 0:07:12.760 --> 0:07:29.280 economists have a key week for the Federal Reserve. According 0:07:29.320 --> 0:07:31.960 to two people with direct knowledge of the matter, the 0:07:32.040 --> 0:07:35.160 German government is getting ready to act to shore up 0:07:35.200 --> 0:07:38.800 the economy by preparing a fiscal stimulus package that could 0:07:38.840 --> 0:07:43.400 be triggered by drum roll a deep recession, Class fistess 0:07:43.400 --> 0:07:48.000 and joining us now pantheon macroeconomics chief Eurozone economist. Class 0:07:48.080 --> 0:07:52.280 always love to get your insight. Why why why do 0:07:52.400 --> 0:07:55.000 we have to wait for a deep recession to do 0:07:55.120 --> 0:07:59.960 fiscal stimulus in Germany? Yeah, that's that's it is very German. 0:08:00.000 --> 0:08:02.760 I do think that what's happening now though, is that 0:08:03.000 --> 0:08:06.600 we're seeing kind of a sequence by which it's very 0:08:06.680 --> 0:08:09.160 like that Germany is in a texical recession. We don't 0:08:09.160 --> 0:08:10.800 know yet, but it's very like that's going to happen. 0:08:10.800 --> 0:08:14.640 And now then what we're seeing is is UM. It's 0:08:15.000 --> 0:08:18.920 slow movement towards UM, towards fiscal stimulus. I mean, the 0:08:18.920 --> 0:08:22.160 answer to your question is simply that the things that 0:08:22.320 --> 0:08:25.600 normally trigger fiscal stimulus in sort of a normal uh, 0:08:25.800 --> 0:08:28.120 sort of a normal economic context is the labor market. 0:08:28.120 --> 0:08:30.480 The labor market is like a ndicator. So if Germany 0:08:30.520 --> 0:08:33.280 is now in a technical recession and where growth has 0:08:33.280 --> 0:08:35.839 been slowing for since from the last for the last 0:08:35.880 --> 0:08:38.320 six and nine months, I mean, it takes it takes 0:08:38.360 --> 0:08:41.120 a while before the labor market starts to starts show 0:08:41.440 --> 0:08:44.360 show showing the fact of that. And this is exactly 0:08:44.400 --> 0:08:45.880 what we're probably going to see in the next six 0:08:45.920 --> 0:08:48.800 or twelve months. So that's when you'll see the fiscal 0:08:48.840 --> 0:08:50.839 stimulus kick in. But just to get the dates, I mean, 0:08:51.000 --> 0:08:54.120 what we're hearing here now is going to affect the 0:08:54.160 --> 0:08:58.280 two thousand and twenty budgets probably right, this is pretty 0:08:58.360 --> 0:09:00.960 much as quick as they can do it. I think so, 0:09:01.040 --> 0:09:02.840 class I agree with you, and I think many people 0:09:02.840 --> 0:09:05.240 were the optics of this are encouraging. The fact that 0:09:05.280 --> 0:09:09.000 the German government is even having the conversation is encouraging 0:09:09.040 --> 0:09:11.280 and perhaps build some optimism. But let's just be a 0:09:11.360 --> 0:09:12.839 little bit clear on what do you think this is 0:09:12.880 --> 0:09:16.599 contingent on at the moment? Are reporting and suggesting it 0:09:16.640 --> 0:09:19.360 will be triggered by deep recession? Are you saying it 0:09:19.360 --> 0:09:22.199 could be triggered by something a whole lot less severe 0:09:22.240 --> 0:09:25.240 than that. Yeah, I mean I don't I mean, I 0:09:25.800 --> 0:09:28.680 don't put a lot of emphasis on on this that 0:09:28.760 --> 0:09:32.319 atteitive deep recession. I mean, fact that matter is Germany 0:09:32.480 --> 0:09:35.000 has had zero growth into the middle of last year. 0:09:35.120 --> 0:09:37.600 It's probably the technical recession. Now we don't really know. 0:09:38.600 --> 0:09:41.040 The labor market is already starting to suffer a little 0:09:41.040 --> 0:09:43.439 bit and probably will suffer more going forward, and that 0:09:43.440 --> 0:09:46.440 will probably enough for Germany to do something. But just 0:09:46.600 --> 0:09:48.720 to put some numbers on this, one number that's been 0:09:48.720 --> 0:09:52.800 bandied around is the sort of billions or sixty of stimulus. 0:09:52.840 --> 0:09:54.880 We don't really know what that's supposed to do, but 0:09:55.040 --> 0:09:57.199 that's super sanity t P, which would mean that Germany 0:09:57.200 --> 0:10:00.560 would go from from a surplus to balanced by right. So, 0:10:00.679 --> 0:10:02.600 I mean, the numbers we've seen so far is still 0:10:02.920 --> 0:10:06.320 fairly modest in terms of sort of where we are now. 0:10:06.760 --> 0:10:09.240 So class just give us a sense some background of 0:10:09.320 --> 0:10:11.600 kind of what's been happening in the German economy over 0:10:11.640 --> 0:10:15.200 the last eighteen months in terms of manufacturing and the consumer. 0:10:15.280 --> 0:10:18.040 What's kind of tilting the German government to think about 0:10:18.080 --> 0:10:21.120 this type of stimulus. Well, but then then this is 0:10:21.160 --> 0:10:22.840 one of the issues for the German government because the 0:10:22.880 --> 0:10:25.320 domestic economy has actually held up all right, which is 0:10:25.360 --> 0:10:28.000 to say, the consumer has has been doing okay. The 0:10:28.040 --> 0:10:31.320 construction sector up until very recently has been doing okay, 0:10:31.400 --> 0:10:33.400 although I think that's rolling over now. But it's been 0:10:33.440 --> 0:10:37.520 all manufacturing and net experts and in some sense, if 0:10:37.559 --> 0:10:40.520 you are an expert oriented economy, and Germany is probably 0:10:40.679 --> 0:10:43.360 the world's most export oriented economy, and you get a 0:10:43.440 --> 0:10:46.920 hit to the expert for um and to to external 0:10:46.960 --> 0:10:51.760 demand while you're at full employment um and and so 0:10:51.840 --> 0:10:55.520 you so the government's ability to to come out quickly 0:10:55.840 --> 0:10:58.440 with with a fiscal stimulus program to to counteract that 0:10:58.640 --> 0:11:02.319 is not um um is limited a little bit. Also, 0:11:02.720 --> 0:11:04.920 if you look at a sort of economic orthodopcy in 0:11:04.960 --> 0:11:06.600 Germany is that you know, this is why a lot 0:11:06.600 --> 0:11:08.960 of German politicians have been telling as well, you know, 0:11:09.160 --> 0:11:10.600 there's not much we can do. We just have to 0:11:10.640 --> 0:11:13.640 write this out. Although again to to to this conversation 0:11:13.720 --> 0:11:16.280 we're having here, I do think that's changing. But yeah, 0:11:16.440 --> 0:11:19.840 net exports manufacturing are the two areas where Germany has 0:11:19.840 --> 0:11:23.719 really suffered in the last six and nine months. Solus. 0:11:23.800 --> 0:11:25.360 It just give us a sense of that fifty five 0:11:25.480 --> 0:11:29.280 billion dollar number two extent that that's somewhat accurate, just 0:11:29.440 --> 0:11:31.640 gives a sense of what you think that could do 0:11:31.960 --> 0:11:34.520 to the economy over the next couple of years, how 0:11:34.520 --> 0:11:37.960 helpful it could be, how stimulative it could be. Yeah, 0:11:37.960 --> 0:11:41.320 So the fifty five billion number that's banding around, I 0:11:41.320 --> 0:11:42.880 have to assume that's that's going to be sort of 0:11:42.880 --> 0:11:46.320 a standard changing stop gap in terms of sort of 0:11:46.400 --> 0:11:49.719 tax cards, things that that work immediately, right, because I 0:11:49.760 --> 0:11:51.559 think there are two stories here. There are things that 0:11:51.600 --> 0:11:53.640 Germany can do in the short run that that would 0:11:53.640 --> 0:11:56.439 work very quickly in terms of getting growth up um 0:11:56.480 --> 0:11:59.560 sort of that tax cards for the for the lows 0:11:59.600 --> 0:12:02.240 middle in come, perhaps an increase in social chance. Also, 0:12:02.280 --> 0:12:05.560 remember Germany has very strong automatic stabilizes that kicking if 0:12:05.640 --> 0:12:08.120 job job jobless clam starts to increase it, that will 0:12:08.120 --> 0:12:11.000 also shield the German economy a little bit. But that's 0:12:11.000 --> 0:12:12.600 not what we're really talking about. If you look at 0:12:12.640 --> 0:12:14.480 the story in general of the idea, is that Germany 0:12:14.520 --> 0:12:18.360 is supposed to, you know, do this multi year infrastructure 0:12:18.400 --> 0:12:21.439 spending in in its in its auto bonds or whatever. 0:12:21.440 --> 0:12:24.160 It's it's it's it's broadbands or like climate change or 0:12:24.240 --> 0:12:27.040 more defense. I mean, that's great, but I mean you're 0:12:27.080 --> 0:12:29.160 not gonna see me or any other years on FOECAST 0:12:29.200 --> 0:12:31.719 has moved the needle on on our economic forecast. Is 0:12:31.800 --> 0:12:34.400 that because that takes I mean that takes a long 0:12:34.440 --> 0:12:37.200 time to come through. So there are kind of two 0:12:37.240 --> 0:12:40.480 stories here. And one thing I'll say is obviously that 0:12:40.520 --> 0:12:42.520 the bund market is really trading this now, which I 0:12:42.559 --> 0:12:45.000 think is really fascinating in some sense given where budd 0:12:45.080 --> 0:12:47.720 deals are now. I think, you know, more fiscal talk 0:12:47.800 --> 0:12:51.880 can really unsettled that market. But you know, markets will 0:12:51.920 --> 0:12:55.040 be disappointed with whatever Germany does because markets now expect 0:12:55.520 --> 0:12:57.480 a lot. I think in terms of want a lot, 0:12:57.520 --> 0:12:59.880 there's a there's a normative narrative here that Germany really 0:13:00.120 --> 0:13:01.680 to do a lot, and I think that, well, it 0:13:01.760 --> 0:13:04.720 might be difficult for them to to to fulfill those expectations. 0:13:04.840 --> 0:13:06.880 Class we've got to talk about how you define success 0:13:06.880 --> 0:13:10.079 as well. Morgan Stanleys Russia's Shama running in the New 0:13:10.160 --> 0:13:13.000 York Times over the weekend a really interesting article about 0:13:13.200 --> 0:13:15.920 some of the challenges the global economy faces, including Germany, 0:13:16.200 --> 0:13:19.280 an economy a country that faces a shrinking labor force 0:13:19.360 --> 0:13:22.680 and Russia. Schama running the following the forty six countries 0:13:22.720 --> 0:13:25.120 around the world, including major pass like Japan, Russia, and 0:13:25.200 --> 0:13:29.320 China now have shrinking populations. And with that in mind, 0:13:29.360 --> 0:13:33.239 class whether we can just look at GDP figures, inflation 0:13:33.320 --> 0:13:36.240 figures and decide whether a country is failing or succeeding, 0:13:36.640 --> 0:13:39.839 whether we need to redefine the metrics that we use 0:13:39.920 --> 0:13:45.160 to define success and failure. Claus, does that resonate with you, No, hope, 0:13:45.160 --> 0:13:47.040 So I mean preach. I mean that this is this 0:13:47.120 --> 0:13:48.880 is the main story for me, and I think that 0:13:49.920 --> 0:13:52.120 there are kind of to two elements of this story. 0:13:52.160 --> 0:13:54.439 One is that that that element of the story, which 0:13:54.480 --> 0:13:57.360 I think is completely turned in in the Eurozone now, 0:13:57.440 --> 0:14:00.640 train growth is probably in the structural in a structural 0:14:00.679 --> 0:14:03.120 decline because the working age population is not it's not 0:14:03.240 --> 0:14:06.720 rising anymore. But you still have a central bank that 0:14:06.840 --> 0:14:09.000 is to shooing the same inflation targeted as it was 0:14:09.040 --> 0:14:11.200 ten fifteen years ago. This is the same thing in Japan. 0:14:11.320 --> 0:14:13.480 They're not reaching it, so therefore they reach for net 0:14:13.520 --> 0:14:15.400 more and more, negative interest rates more and more. QUI 0:14:15.760 --> 0:14:18.080 creates a lot of access liquidity flows out into the 0:14:18.080 --> 0:14:22.120 global economy and and and and that you know, and 0:14:22.160 --> 0:14:24.680 then now you have politicians in the US, especially Trump, 0:14:24.680 --> 0:14:27.760 you are very grumpy about trade death certain and trading balances. 0:14:28.560 --> 0:14:33.160 And oddly enough, we are now moving towards a situation 0:14:33.200 --> 0:14:35.440 where it seems like we're more likely to double down, right, 0:14:35.480 --> 0:14:37.320 We're more likely to double down with even more steams, 0:14:37.400 --> 0:14:40.200 even more fiscal stimulus or monitor steams in order to 0:14:40.200 --> 0:14:42.760 try to counterbalance this store. And I just think that, 0:14:43.360 --> 0:14:45.280 you know, I so I agree with that sentiment. I mean, 0:14:46.920 --> 0:14:49.280 it's not it's not going to be it's not clear 0:14:49.280 --> 0:14:53.080 to me where that you know, nominal growth of whatever 0:14:53.120 --> 0:14:54.920 we wanted to be five to six percent in the 0:14:54.920 --> 0:14:56.640 Euros I'm just going to come from. I mean, I 0:14:56.680 --> 0:14:58.760 don't see it anywhere, no matter what we do. And 0:14:58.760 --> 0:15:01.480 and so maybe that that's that's that's a that's a 0:15:01.520 --> 0:15:04.040 tricky world for markets to navigate. But I think the 0:15:04.080 --> 0:15:07.080 main story is that so far we're much more likely 0:15:07.160 --> 0:15:12.120 to get more stimulus than less stimulus, both fishal and monetary, 0:15:12.120 --> 0:15:14.600 because that's kind of like where we're where we're going. 0:15:14.840 --> 0:15:17.000 And Sharma is making that argument as well, that potentially 0:15:17.000 --> 0:15:20.080 this just leads to more fruitless stimulus campaigns in class. 0:15:20.080 --> 0:15:21.800 I guess my final question for you is how many 0:15:21.800 --> 0:15:24.640 more fruitless stimulus campaigns do we need to have to 0:15:24.680 --> 0:15:26.920 get some of these central banks to look away from 0:15:27.160 --> 0:15:33.720 dated metrics for whether they're succeeding or failing. Well, quite 0:15:33.760 --> 0:15:35.760 a lot, I mean, I think, so look at the HV. 0:15:35.880 --> 0:15:38.200 We're having a change of gardener. Obviously a drug is 0:15:38.240 --> 0:15:41.360 out and Madame mcgard is coming. I mean, we don't 0:15:41.400 --> 0:15:45.680 really know what she thinks about the different different things, 0:15:45.680 --> 0:15:47.480 but it's much more likely I think that we're going 0:15:47.520 --> 0:15:51.000 to get more of the same than less um and 0:15:51.000 --> 0:15:52.360 and all. Let me put it like this, if we're 0:15:52.360 --> 0:15:55.080 going to get less I mean, bond markets are sitting 0:15:55.120 --> 0:15:56.920 duck here, and then this is you know, in some 0:15:56.960 --> 0:15:59.000 sense markets have already made made up their mind and 0:15:59.080 --> 0:16:01.720 at the moment posting are following their lead. So you know, 0:16:01.840 --> 0:16:04.200 I think you know most the same line. He class, 0:16:04.200 --> 0:16:06.440 great to catch you with. This conversation will continue, and 0:16:06.440 --> 0:16:08.000 if we get more of the same, I imagine some 0:16:08.040 --> 0:16:12.120 of these arguments are going nowhere. Pantheon macro economists, chief 0:16:12.680 --> 0:16:28.400 Eurozone economists joining us from the UK. There so much 0:16:28.480 --> 0:16:31.040 to look forward to through the week, all of it 0:16:31.240 --> 0:16:34.040 really centered around the Federal Reserve and the US economy 0:16:34.120 --> 0:16:37.080 joining us to weigh in. Lanta rain FS Investments Chief 0:16:37.520 --> 0:16:40.000 US Economists, Good morning, chi Laura. Just walk me through 0:16:40.240 --> 0:16:43.920 what you're looking for this week. The minutes are really 0:16:43.920 --> 0:16:46.760 going to be the focus, and I think news from 0:16:46.920 --> 0:16:49.760 the rest of the developed world. We've had news overnight 0:16:49.800 --> 0:16:53.000 that Germany is considering a stimulus package. I think that 0:16:53.200 --> 0:16:55.400 we have to keep in mind the last several large 0:16:55.440 --> 0:16:58.040 moves that we've had in the US have come from 0:16:58.200 --> 0:17:01.080 down u S data point that we're really focused on 0:17:01.120 --> 0:17:04.320 this idea of a global slowdown, global market moves, and 0:17:04.359 --> 0:17:08.440 really pessimism in the global bond market. So, Lauren, let's 0:17:08.600 --> 0:17:11.040 focusing on Jackson Hole this week. Obviously, as you mentioned, 0:17:11.040 --> 0:17:13.600 the minutes will be critically important. What kind of tone 0:17:13.640 --> 0:17:16.359 do you think we're going to get from the Fed, 0:17:16.440 --> 0:17:20.040 in from Chairman Pal You know, I think it's going 0:17:20.080 --> 0:17:21.960 to be a tone that takes us back to a 0:17:22.080 --> 0:17:25.159 time before we had the tenure at close to one 0:17:25.200 --> 0:17:28.439 and a half percent, at the time when there was 0:17:28.560 --> 0:17:31.320 a lot less cohesion on the set about what the 0:17:31.320 --> 0:17:34.840 next great move should be. Remember, we had two dissenters 0:17:34.840 --> 0:17:37.040 at that meeting. In favor of not changing rates. So 0:17:37.720 --> 0:17:40.760 surely there will be a much more active discussion at 0:17:40.760 --> 0:17:44.119 that FOM meeting, with some participants thinking that the economy, 0:17:44.240 --> 0:17:48.160 domestic economy was strong enough to not move rates at all. 0:17:48.640 --> 0:17:51.840 I think what we're going to look at is a 0:17:51.960 --> 0:17:56.360 really um you know, this difference between reacting to the 0:17:56.440 --> 0:17:58.960 fundamentals of the US economy versus a lot of the 0:17:59.000 --> 0:18:01.800 concern that we're seeing to financial markets and volatility coming 0:18:01.800 --> 0:18:05.400 from abroad. On Friday, the headline the topic the theme 0:18:05.480 --> 0:18:09.199 of this year's Jackson host Symposium the challenges of Monetary policy. 0:18:09.200 --> 0:18:11.359 And I just wonder, Laura, whether that is the ultimate 0:18:11.400 --> 0:18:14.320 challenge of monetary policy right now, that these central banks 0:18:14.359 --> 0:18:16.080 don't really have the tools to address some of the 0:18:16.080 --> 0:18:19.639 economic challenges we have globally, and front and center that 0:18:19.720 --> 0:18:24.400 challenge being trade. I completely agree with you. I think 0:18:24.640 --> 0:18:27.960 I've long said that monetary policy gets both too much 0:18:28.000 --> 0:18:31.800 credit and too much blame. The reality is that some 0:18:31.880 --> 0:18:34.720 of the big problems these economies are having, like slowing 0:18:34.800 --> 0:18:38.760 labor force growth, low productivity, even the trade tensions that 0:18:38.800 --> 0:18:42.760 we're seeing rock equity market. The said can only really 0:18:42.800 --> 0:18:46.320 put a band aid on what is a very big, 0:18:46.600 --> 0:18:50.199 larger psychological break um, and the tools that they have 0:18:50.400 --> 0:18:53.119 simply are not going to be able to ease a 0:18:53.160 --> 0:18:55.399 lot of the bigger problems that we have. Really, the 0:18:55.480 --> 0:18:58.280 big concern is that over the long run, we're making 0:18:58.280 --> 0:19:03.679 a policy mistake by expandinging valuable ammunition with FED RAID 0:19:03.760 --> 0:19:07.199 cuts when really they're not going to impact what is 0:19:07.240 --> 0:19:11.560 causing the larger volatility and financial discomfort. So, Lara, do 0:19:11.560 --> 0:19:13.320 you expect I mean, you know, I think there's a 0:19:13.320 --> 0:19:15.720 growing concern that the U S E. Commuquad has generally 0:19:15.760 --> 0:19:19.119 been slowing obviously but generally very strong, certainly relative to 0:19:19.160 --> 0:19:21.600 what we're seeing in Europe, for example, or even a 0:19:21.640 --> 0:19:24.560 slowing growth in China. What odds do you kind of 0:19:24.600 --> 0:19:26.760 put it at a US recession in next twelve of 0:19:26.760 --> 0:19:30.480 the eighteen months. I am still in the camp that 0:19:30.600 --> 0:19:36.119 expects the US economy to slow potentially to uncomfortably low levels, 0:19:36.440 --> 0:19:39.400 but to avoid a recession, we may get one quarter 0:19:39.440 --> 0:19:42.679 of negative growth somewhere in the middle of but I 0:19:42.720 --> 0:19:45.320 think we're still looking at full your growth this year 0:19:45.320 --> 0:19:49.080 of two percent and next year maybe more like one percent. 0:19:49.640 --> 0:19:51.359 I think to get a recession, we're going to need 0:19:51.400 --> 0:19:54.000 a real event to happen. But you know, you can't 0:19:54.040 --> 0:19:56.919 fight gravity with the rest of the world slowing. And 0:19:57.000 --> 0:20:00.240 I don't know what the ark of Europe so down 0:20:00.240 --> 0:20:02.560 will be, but certainly the headlines and the data are 0:20:02.640 --> 0:20:06.440 looking worse than many of us had expected. So it's 0:20:06.480 --> 0:20:08.760 hard to fight that. Gravity is going to impact the 0:20:08.800 --> 0:20:13.760 US economy, and particularly these large caps stocks are going 0:20:13.760 --> 0:20:16.560 to be impacted because they're prong tens of purpose as international. 0:20:17.000 --> 0:20:19.280 So Laura, for the chairman this way, you at checks 0:20:19.280 --> 0:20:21.640 in Hole that speech on Friday, what do you think 0:20:21.680 --> 0:20:24.800 the challenge the objective should be for him going into 0:20:24.800 --> 0:20:28.919