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Speaker 1: Broadcasting live to New York Bloomber to Washington d C

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Speaker 1: Bloomber to Boston Bloomberg dwelve on to San Francisco, Bluemberg

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Speaker 1: to the Country Series Exam Channel one nineteen and around

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Speaker 1: the globe the Bluemberg Radio must happened Bloomberg dot Com.

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Speaker 1: This is Bloomberg Surveillance. Good morning. It is say thirty

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Speaker 1: on Wall Street at Michael McKee along with Tom Keene.

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Speaker 1: Our economic indicators are brought to you by Commonwealth Financial Network.

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Speaker 1: When it's time to change the conversation, talk with a

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Speaker 1: broker dealer r I A that's ready to listen called

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Speaker 1: six six six two three six three eight, or visit

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Speaker 1: Commonwealth dot com to learn more. No numbers today. Interestingly enough,

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Speaker 1: quiet quiet day. We get some mortgage delinquency reports later

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Speaker 1: on and the monthly budget statement this afternoon. But of

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Speaker 1: course that's gonna be ah. It's the April number, so

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Speaker 1: it is obviously going to reflect all the taxes you paid,

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Speaker 1: so untell you necessarily a whole lot. But this whole

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Speaker 1: question of Macy's is an interesting one, Tom, and he

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Speaker 1: gets the question. I asked, pudhum Goyle, I'm gonna put

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Speaker 1: it to Kevin Harris, he's a director of economics North

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Speaker 1: American Economics for Rubini Global Economics. Uh, we see Macy's

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Speaker 1: cutting their forecast, and I'm looking at some of the

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Speaker 1: numbers that UM that that put Ham gave me in

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Speaker 1: terms on in terms of the numbers for department stores

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Speaker 1: and things like that, and I'm wondering if if we've

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Speaker 1: we've got a Macy's problem, a problem for CEO Terry Londren,

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Speaker 1: or if if Janet Yellen has an issue with growth

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Speaker 1: slowing down significantly, are are consumers backing off now? Or

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Speaker 1: is this maybe just one stores issue with the you know,

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Speaker 1: bricks and clicks versus the bricks and mortar versus online.

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Speaker 1: When UM the GDP number four first quarter came out,

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Speaker 1: you saw it was fairly week and one of the

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Speaker 1: week components was consumer spending UM And in fact, to

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Speaker 1: make it just a little worse, the pattern of spending

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Speaker 1: through the first quarter was weakness into the end of

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Speaker 1: the quarter, which means the second quarter is going to

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Speaker 1: get off to a slow start as well. So it's

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Speaker 1: not just a mazy everybody's having a little trouble right now.

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Speaker 1: What is is this a a one off. I mean

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Speaker 1: we saw we've seen problems with the first quarter before.

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Speaker 1: Or is the economy significantly slowing. There's a reading that

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Speaker 1: the economy which slow. We had a bit of a

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Speaker 1: financial shock in the summer of last year, we had

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Speaker 1: another one in the first quarter of this year. Those dissipated,

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Speaker 1: but the impact on the real economy takes time to

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Speaker 1: wash through, and it's likely that we'll see a somewhat

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Speaker 1: slower pace of growth this year than last year. Uh,

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Speaker 1: not just for that reason, but because we have been

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Speaker 1: growing a little bit above trend and as the output

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Speaker 1: gaps unarras, you're just going to see slightly slower growth.

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Speaker 1: We expect slower employment growth this year. We expect slower

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Speaker 1: g ep growth. But the financial shock didn't help, and

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Speaker 1: it's another reason to expect, at least in the first

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Speaker 1: half of the year that we're going to have to

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Speaker 1: struggle a little bit. Your shop, Kevin is acclaimed for

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Speaker 1: que one, Que two, que three, Que four. I'm not

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Speaker 1: going to pretend to say it is. Dr Rubini. Does

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Speaker 1: you have a fascinating review of a helicopter money? Is

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Speaker 1: helicopter money nothing more than a que extension? Well, there's

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Speaker 1: a special feature to it. Um. In Milton Friedman's version

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Speaker 1: of it, you just sprinkled money on consumers and they

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Speaker 1: spend it. But that's not a practical approach. That was

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Speaker 1: more of him just explaining a view of how monetary

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Speaker 1: policy would work. In reality. What you would do is

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Speaker 1: um the government would spend the money and the central

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Speaker 1: bank would simply absorb the debt and promise never to

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Speaker 1: roll it back out to the public, essentially make the

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Speaker 1: debt go away. That's the most effective way of approaching

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Speaker 1: what we call helicopter money. UM. If you can't get

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Speaker 1: the government to spend the money, it doesn't work because

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Speaker 1: we really don't have a mechanism for sprinkling money out

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Speaker 1: of helicopters. You have to get the government to spend

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Speaker 1: the money. And if the public realizes they're never going

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Speaker 1: to have to pay it back, then their motive to

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Speaker 1: save a little bit of money today because they might

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Speaker 1: have to pay more taxes tomorrow that goes away, so

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Speaker 1: the whole thing has more effect. Um. A lot of

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Speaker 1: people have encouraged helicopter money, but you have to get

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Speaker 1: it right. The central bank has to let the public

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Speaker 1: know that they're never going to have to pay that

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Speaker 1: money back in taxes and the government actually has to

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Speaker 1: spend the money. It's fascinating to me, Mike, exactly what

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Speaker 1: what Kevin just said. They're selling the public that you

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Speaker 1: can spend it. Yeah, I don't personally don't buy from

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Speaker 1: Anut Shapiro University of Michigan is brilliant on this. Well,

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Speaker 1: it's a it's an ongoing issue for um, for the

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Speaker 1: politicians who want to dodge the idea of of adding

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Speaker 1: fiscal stimulus into the economy. Uh. And the FED has

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Speaker 1: been doing it in a way. But you know, the

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Speaker 1: FED buying up all these treasuries doesn't mean um, that

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Speaker 1: they're actually Kevin going to necessarily ever um, you know,

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Speaker 1: force the government to pay the full faith and credit.

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Speaker 1: I mean they could just sell them back UM, which

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Speaker 1: you know, in a way is at least a temporary

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Speaker 1: form of helicopter money. Well, you need to look at

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Speaker 1: the effectiveness of what you're doing and the costs. I

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Speaker 1: agree that the FED temporarily absorbs some of the deficit.

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Speaker 1: UM that reduces the need to tax the public or

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Speaker 1: to take money away from the public in the form

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Speaker 1: of uh on purchases. So to an extent, what the

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Speaker 1: FED is doing approaches helicopter money. But if you want

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Speaker 1: the full if you want as much stimulus as you

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Speaker 1: can get, then you have to do the full package.

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Speaker 1: You have to say the government spends and the Fed

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Speaker 1: make sure the public never pays the price for the spending.

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Speaker 1: We're gonna come back and talk about this. I mean, Kevin,

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Speaker 1: I guess how do you mandate helicopter money? Is it

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Speaker 1: before Congress? Uh? Congress would need to be in on

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Speaker 1: the deal. They need to agree to spend money. And

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Speaker 1: you mentioned our paper. Our paper is a response to

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Speaker 1: an awful lot of interest. There was a helicopter money.

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Speaker 1: It was not a suggestion that it was actually going

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Speaker 1: to happen because in the United States, certainly, Uh, we

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Speaker 1: have a budget deal that extends past the election. Nothing's

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Speaker 1: gonna happen to change that. Kevin, let's come back. This

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Speaker 1: is an important conversation. Kevin Harris with US Bloomberg Surveillance.

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Speaker 1: This hour surveillance brought you by Volvo Cars, White Planes.

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Speaker 1: Visit Volvo Cars, White Planes dot com. Here's Michael Barr

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Speaker 1: with the latest news Headlands. Mike, Tom, thank you very much.

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Speaker 1: Vice President Joe Biden says he is confident that Hillary

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Speaker 1: Clinton will be the Democratic nominee and the next president

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Speaker 1: of the US. Biden today on ABC's Good Morning America,

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Speaker 1: says Donald Trump should be taken seriously, but the constant

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Speaker 1: attack coming from Republicans signed the sort of victoryol that's

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Speaker 1: poured out, I don't think that's gonna wear well over

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Speaker 1: the next several months. Bernie Sanders. One yesterday is Democratic

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Speaker 1: primary in West Virginia, but only net had five more

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Speaker 1: delicate to over Clinton. Donald Trump says he has narrowed

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Speaker 1: his list of potential running mates to just five or six.

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Speaker 1: Trump now with the clear field one Republican primaries in

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Speaker 1: West Virginia and in Nebraska. Experts say no matter who

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Speaker 1: is elected to the White House in November, the next

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Speaker 1: president will probably face a recession. The chief Economists for

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Speaker 1: North America at the Conference Board in New York says,

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Speaker 1: if the next president is not going to have a recession,

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Speaker 1: it will be a US record eighty three month expansion

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Speaker 1: is the fourth longest in more than a hundred fifty years.

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Speaker 1: At least forty five people have been killed today in

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Speaker 1: an attack and mostly she ied neighborhood in Baghdad. The

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Speaker 1: Islamic state group is claiming responsibility Global News twenty four

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Speaker 1: hours a day, powered by our twenty four hundred journalists.

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Speaker 1: I'm Michael bar Bye, Tom, Thank you Michael. Time now

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Speaker 1: for the land Rover Participitate Bloomberg NBC Sports Update. Here's

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Speaker 1: John Stesham. Thanks my quiet night for the Mets. Bats

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Speaker 1: managed just five singles and when Trace Thompson had a

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Speaker 1: pinchion home run bottom the night, thy dolf ansel robles.

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Speaker 1: The Dodgers won three two Yankees. Meanwhile, suddenly he's going

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Speaker 1: a bunch of runs ten seven over Kansas City despite

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Speaker 1: a patchwork lineup without Alex Rodriguez, Jacoby Ellsbury and marked

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Speaker 1: to Shara Yanks able to overcome the heroics of the

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Speaker 1: Royals Lorenzo Kane, who homer three times. The Royals, the

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Speaker 1: defending world champs, have lost eleven of fourteen. When the

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Speaker 1: Yankees four and one on this homestand the Spurs were

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Speaker 1: forty three and one at home, but they've now lost

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Speaker 1: two straight to Oklahoma City. The thunder rallied late one

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Speaker 1: game five ninety five ninety one, and if you have

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Speaker 1: their first lead of the series, they go home up

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Speaker 1: three to two. There were some late calls that seemed

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Speaker 1: to go against San Antonio, but they also got out

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Speaker 1: rebounded by eighteen LaMarcus all been shot just six of

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Speaker 1: twenty one. Steph Curry repeats his NBA m v P

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Speaker 1: He's the first to win it unanimously. Seventh time in

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Speaker 1: eight years the NHL's best regular season team will not

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Speaker 1: win the Stanley Cup. Washington, after a rallying from three

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Speaker 1: nothing down to forest overtime, lost four three at Pittsburgh,

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Speaker 1: the eighth time in nine series between the two where

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Speaker 1: the Penguins have knocked out the Caps, who still have

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Speaker 1: only twice been to the conference finals, never with alexo Etchkin.

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Speaker 1: So the East Finals will be Pittsburgh against Tampa Bay.

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Speaker 1: With the Bloomberg NBC Sports update, I'm John Stage John.

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Speaker 1: That was a nice way, and then I just thought

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Speaker 1: that was very strong. Does this mean, Mike, there hope

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Speaker 1: for the Red Sox if the Penguins win like this?

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Speaker 1: The Red Sox have actually one World Series, which you

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Speaker 1: can't say about the Capital of What's interesting, folks, Mike

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Speaker 1: Sullivan is the coach of the Penguins. He took over

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Speaker 1: in an ugly moment, I believe in January. Can he

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Speaker 1: be Coach of the Year because he didn't coach for

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Speaker 1: a year. The real question was in the NBA with

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Speaker 1: the Golden State Warriors, because you know the coach was

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Speaker 1: out for the first half of the year, he got

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Speaker 1: credit for all the wins. Are That's the way the

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Speaker 1: rules are. Features negative three, Features negative thirty seven. Michael

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Speaker 1: McKee and Tom King Coast to Coast in Pittsburgh in

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Speaker 1: San Francisco. The sports rempart brought to you by land

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Speaker 1: Rover Parcipity. The spring sales event is happening now. Visit

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Speaker 1: Landrover Parcipiti dot com, Landrover above and beyond Global business

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Speaker 1: news twenty four hours a day, if Bloomberg dot com,

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Speaker 1: the radio plus mobile app and on your radio. This

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Speaker 1: is a Bloomberg Business Flash and I'm Karen Moscow. Macy's

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Speaker 1: is down almost eight percent. It's sounds seven point eight

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Speaker 1: percent this morning, the largest US department store company, cutting

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Speaker 1: its profit forecast for the year and posted first quarter

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Speaker 1: revenue that miss analysts estimates as slow mall traffic hert sales.

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Speaker 1: Two other stocks moving lower this morning Stables, which is

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Speaker 1: down more than fifteen percent, in Office Depot, which is

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Speaker 1: dropping thirty four percent after a federal judge blocked the

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Speaker 1: combination of the two largest office suppliers, saying it would

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Speaker 1: create an unrivaled giant. European equities are lower this morning,

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Speaker 1: falling for the first time in three days. Is earnings

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Speaker 1: from banks cast a shadow over stock markets and US

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Speaker 1: stock index futures are lower as well. SNP even A

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Speaker 1: futures down two points, now A many futures down thirty

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Speaker 1: six and NASDAC E many futures down two and a

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Speaker 1: half dacks in Germany's down six tenths percent. Ten. Your

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Speaker 1: treasury up to thirty seconds, the yield one point seven

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Speaker 1: five percent. NIMEX crude oil up a tenth of upper

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Speaker 1: center six cents to forty four seventy three. A barrel

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Speaker 1: comes gold up one point one per cent, or fourteen

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Speaker 1: dollars ten cents at twelve seventy eight ninety ounce, the

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Speaker 1: euro another fourteen ten, the yen one oh eight point

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Speaker 1: seven six And as a Bloomberg Business flash, Tom and

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Speaker 1: Mike Karen thank you so much. It is eight on

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Speaker 1: Wall Street. The following is from Bloomberg View, opinions and

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Speaker 1: commentary from Bloomberg columnists. McCardell columnist for Bloomberg View. Donald

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Speaker 1: Trump recently floated the notion that the U should borrow

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Speaker 1: freely because you can always make creditors take a haircut

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Speaker 1: of the economy crashes. I'm not going to explain why

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Speaker 1: this is crazy, because so many others already have, but

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Speaker 1: it Owes strates a big home home with his candidacy,

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Speaker 1: the notion that Trump will be a good president because

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Speaker 1: he's a good businessman. Unfortunately, the skills needed for one

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Speaker 1: don't really translate very well to the other. Trump's basically

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Speaker 1: imagining something like a structured negotiation under the threat of bankruptcy.

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Speaker 1: It's a false analogy. Even if the biggest company operates

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Speaker 1: in a world withard lots of other sources of stability

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Speaker 1: for troubled firms, Banks that can lend, courts that can referee,

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Speaker 1: governments that can step in would help. There are no

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Speaker 1: external stabilizers for the federal government to fall back on,

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Speaker 1: because instability here would gut the very institutions like the

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Speaker 1: I m F that we'd want to show us up.

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Speaker 1: So approaching our government debt using the lessons learned as

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Speaker 1: CEO of an over leverage real estate operation wouldn't be

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Speaker 1: canny business it would be catastrophic. The list of such

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Speaker 1: mistake and parallels goes on and on. We can't analogize

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Speaker 1: national trade accounts to a firm's profit and loss statement.

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Speaker 1: Don't treat nuclear armed nations the way you would have vendor.

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Speaker 1: There's no way to fire a demote congressman as you

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Speaker 1: might recalcitrant subordinates, which may be why the history of

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Speaker 1: successful businessmen and national politics is actually pretty unimpressive. I'm

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Speaker 1: Megan McCardell. For more of you, please go to bloomed

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Speaker 1: dot com or view go on the Bloomberg terminal. This

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Speaker 1: has been Bloomberg View and bloom Review commentaries. Can we

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Speaker 1: hear in hourly weekdays on Bloomberg Radio. We welcome all

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Speaker 1: of you worldwide, coast to coast Bloomberg Boston, Bloomberger eleventh

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Speaker 1: Free O, New York FM, Washington, Baltimore, the Bay Area,

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Speaker 1: all of you on Serious the next M Channel one.

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Speaker 1: Kevin Harris with US director of Helicopter Money Rubini Global Economics.

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Speaker 1: We've been talking about a store and Kevin, great report.

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Speaker 1: I'm thunderstruck by your chart which shows all the benefit

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Speaker 1: goes to the United States, a little bit to Japan.

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Speaker 1: And that's about where it ends. Why does helicopter money

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Speaker 1: benefit the US as compared to every other nation? You

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Speaker 1: need to have UM an output gap that you can explain.

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Speaker 1: This is not in perpetuity. You can't get this sort

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Speaker 1: of response to helicopter money every time time. You do

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Speaker 1: it only when you have a substantial output gap. The

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Speaker 1: US does, we believe Japan does. After that, you start

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Speaker 1: running out of countries that have large output gaps and

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Speaker 1: that also have the credibility to do this UM. You'll

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Speaker 1: notice that Greece should fare pretty well at the far

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Speaker 1: end of the chart. Greece would get a pretty good

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Speaker 1: lift from an increasing government consumption, and that's because their

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Speaker 1: economy has been beaten down so far that they have

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Speaker 1: a huge output gap. That's what you need. You need

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Speaker 1: an economy that's running below potential by a substantial amount.

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Speaker 1: Then you increase demand by government spending. You give an

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Speaker 1: extra list to fit government spending by promising the public

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Speaker 1: will never have to pay for it, and then you

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Speaker 1: get this response. Most countries can't do that. Greece has

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Speaker 1: basically an output canyon UM ahead of them. UH. You

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Speaker 1: break down the list of countries by GDP rather than

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Speaker 1: political union. So Um, you you've seen some advantages to

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Speaker 1: specific countries in the Eurozone. I just want to pass

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Speaker 1: along uh this tom Um. The ECB Governing Council member

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Speaker 1: from Austria, Il Nevatny, said today that helicopter money is

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Speaker 1: a fantasy debate that only creates fear and it is

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Speaker 1: not doable in the European Union. And I want to

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Speaker 1: pick up on the creates fear part, Kevin, because there's

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Speaker 1: also talk among some within the central banking world that

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Speaker 1: negative interest rates do the same thing that if you

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Speaker 1: use these kinds of extraordinary measures, its signals to people

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Speaker 1: that there is something really wrong out there, and then

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Speaker 1: they pull back from spending. If the public does not

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Speaker 1: already realize that there's something wrong, then that risk might

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Speaker 1: be substantial. If the public is already convinced that something

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Speaker 1: is wrong, then show of them that you realize that

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Speaker 1: as well probably won't change the outcome very much. You

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Speaker 1: should should understand that Mr Nowawtney is among the more

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Speaker 1: conservative members of the c D. He would be opposed

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Speaker 1: to this on principle. His analysis might be good, it

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Speaker 1: might be bad, but his starting point is that aggressive

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Speaker 1: policy action is probably not good Um. That said, in

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Speaker 1: some places, the European Union being a very good example,

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Speaker 1: policy coordination is very hard, and policy coordination is absolutely necessary.

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Speaker 1: For the approach to helicopter money that we've described. You

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Speaker 1: have to get lawmakers willing to spend, a central bank

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Speaker 1: willing to finance at the same time in the same

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Speaker 1: amount for the same reason. Well, just because the time.

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Speaker 1: What run rate of g d P would we need

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Speaker 1: to see to affect the Washington debate to get this

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Speaker 1: theory restarted, My answers are nowhere near there. No, Well

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Speaker 1: I don't think so. Um, the US has an output

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Speaker 1: gap that could be exploited, but the US is also

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Speaker 1: growing better than most of the developed world. Uh. The

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Speaker 1: debate over physical policy is so deeply embedded in the

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Speaker 1: two parties that they have to be looking at huge

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Speaker 1: electoral losses if they don't do something before the debates

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Speaker 1: like that, it changed much. I think I am not

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Speaker 1: a political analyst, but that the record suggests this is

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Speaker 1: not going to happen. Um. You there is a view

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Speaker 1: in science and in economic policy that the way you

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Speaker 1: make policy progresses for the old guys to die, you

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Speaker 1: have to let the old ideas simply go away. And

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Speaker 1: have a new generation that's not already married to the

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Speaker 1: old ideas. Helicopter money is a new idea in practice,

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Speaker 1: even though it's been around since making when we get

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Speaker 1: new politicians, we might get new policies, but the likelihood

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Speaker 1: of getting new policies with the people we currently have

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Speaker 1: is considerably Uh. It's it's low enough that I wouldn't

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Speaker 1: expect helicopter mony in the United States. I wouldn't expect

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Speaker 1: it either. And also at this point, we don't have

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Speaker 1: Most people don't have a short term recession in their forecast.

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Speaker 1: But there's a story out on Bluebird Politics today that says,

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Speaker 1: the next president is going to face a recession. How

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Speaker 1: soon do you see a downturn happening? And I asked

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Speaker 1: that in the context of when it does, what's the

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Speaker 1: FED going to be able to do by that time? UM,

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Speaker 1: Forecasting recession is sort of a muck schame. UM. Nobody

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Speaker 1: ever gets it right. The idea that the next president

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Speaker 1: will face a recession's credible in the sense of the

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Speaker 1: next don't have to get through at least four years,

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Speaker 1: and with about odds of a recession in any given year,

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Speaker 1: that stacks up over a four year period um, But

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Speaker 1: there's nothing specific that says that our recession has to

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Speaker 1: happen at a particular time. Recent recessions have been the

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Speaker 1: result of financial shocks. Uh. There is a history of

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Speaker 1: central bank error causing recession. UM. Central banks around the

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Speaker 1: world are currently doing everything they can to maintain growth,

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Speaker 1: so a likely outcome is continued anemic growth rather than

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Speaker 1: recession or rapid expansion, with central banks trying to engineer

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Speaker 1: rapid expansion but failing. They're putting a floor under growth.

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Speaker 1: But that's the best they can do. So on the

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Speaker 1: next part of the question, what ammunitions of it had

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Speaker 1: if we do fall under recession, and there are among

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Speaker 1: policies they've already tried. There are two things they can do. UH.

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Speaker 1: They use for guidance to say we're not going to

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Speaker 1: high rates for a very long time, and they buy

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Speaker 1: assets and expand their portfolio. Neither of those is as

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Speaker 1: effective as cutting rates from say a four pc nominal

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Speaker 1: level end of the ero. That's a lot of juice

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Speaker 1: for the economy. Promising not to high grates when you're

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Speaker 1: near hero doesn't much less. We've got just thirty seconds left,

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Speaker 1: Kevin Paul on Twitter, absolutely disturbing conversation on helicopter money.

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Speaker 1: Damn those savers living within their means? What portion of

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Speaker 1: this discussion is about convincing people to spend money? All

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Speaker 1: of it? Thank you. That's great, Kevin, Thank you. Really

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Speaker 1: important conversation, Kevin Harris with us. Look for this at

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Speaker 1: a podcast that'll be out at Apple iTunes here in

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Speaker 1: a bit, and we'll get it out in social and

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Speaker 1: oh that we've got a huge response to this conversation, Mike.

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Speaker 1: Helicopter money is the last desperate act for the failed

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Speaker 1: Kanesie in economics as well. I just love your responses, folks,

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Speaker 1: pro con left right, We don't care. We just need

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Speaker 1: your love. It's Bloomberg surveilance.