WEBVTT - Bloomberg Surveillance TV: August 26th, 2025 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.680 --> 0:00:15.480 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.520 --> 0:00:18.720 with Lisa Bromwitz and Amrie Hortern. Join us each day 0:00:18.760 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.960 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.319 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:35.880 Terminal and the Bloomberg Business App. 0:00:36.200 --> 0:00:39.440 I'm joined now by someone who intimately understands the FED 0:00:39.560 --> 0:00:41.919 was there for ten years and most recently was the 0:00:41.920 --> 0:00:43.839 FED Vice chair under J. 0:00:44.040 --> 0:00:45.320 Powell, who is still. 0:00:45.000 --> 0:00:47.560 Now the chair, and that's of course Lale Brainerd. Lale, 0:00:47.560 --> 0:00:50.360 thank you so much for joining us this morning. As 0:00:50.400 --> 0:00:54.800 we see this standoff between President Trump and Governor Cook, 0:00:55.200 --> 0:00:57.000 we have yet to hear from the FED itself. 0:00:57.080 --> 0:00:58.960 What kind of response do you think we can expect 0:00:58.960 --> 0:00:59.680 from the institution? 0:01:00.480 --> 0:01:04.000 Well, I think the Federal Reserve is an incredibly difficult 0:01:04.000 --> 0:01:06.600 position here. But you have to remember this is not 0:01:07.240 --> 0:01:12.800 about an individual governor. This is really an unprecedented attack 0:01:13.080 --> 0:01:16.920 on the independence of the Federal Reserve as an institution. 0:01:17.560 --> 0:01:22.240 There is nobody in the Federal Open Markets Committee, the 0:01:22.720 --> 0:01:27.080 Monetary Policy Setting Committee that can't be thinking well, what 0:01:27.560 --> 0:01:31.240 does this mean for me? And so any member of 0:01:31.319 --> 0:01:34.960 the board presumably is going to worry that they too 0:01:35.040 --> 0:01:39.080 could be subject to this kind of political pressure, and 0:01:39.160 --> 0:01:44.760 that fundamentally undermines the institutional independence of the Fed, which 0:01:44.880 --> 0:01:51.200 means higher inflation, potentially less credibility, even higher long term 0:01:51.240 --> 0:01:53.080 interest rates bad for the economy. 0:01:53.320 --> 0:01:56.360 Do you think this can actually impact how members are 0:01:56.400 --> 0:01:57.880 thinking about monetary policy? 0:01:58.520 --> 0:02:03.320 Well, I just think the implication if any member of 0:02:03.360 --> 0:02:07.080 that board could come under this kind of political pressure 0:02:07.160 --> 0:02:09.840 from the White House, and of course we saw that 0:02:09.919 --> 0:02:13.880 kind of pressure on the chair earlier this year. I 0:02:13.919 --> 0:02:19.280 think that does really put a higher premium on whether 0:02:19.320 --> 0:02:21.679 they're going to be willing to speak their minds to 0:02:21.680 --> 0:02:24.920 to sent on key votes if necessary. I think it 0:02:24.960 --> 0:02:27.600 really does create unprecedented risks. 0:02:27.760 --> 0:02:31.960 The President's letter talked about this mortgage allegation fraud in 0:02:31.960 --> 0:02:35.120 the mortgage world for Governor Cook, what if she was 0:02:35.280 --> 0:02:36.600 charged or convicted? 0:02:37.520 --> 0:02:40.920 Well, I think what is important here is due process 0:02:41.160 --> 0:02:44.880 and undertaking a real investigation and having the facts on 0:02:44.919 --> 0:02:51.720 the table, and the ability for her to defend herself legally. 0:02:52.240 --> 0:02:56.160 None of that has taken place here. The White House 0:02:56.160 --> 0:02:59.880 has preempted the process, and so that is why it's 0:03:00.120 --> 0:03:04.800 really unprecedented. It's very, very threatening to the very independence 0:03:05.760 --> 0:03:09.560 of the Federal Reserve, and it should cause concerns, I think, 0:03:09.720 --> 0:03:15.360 among investors and more broadly about that fundamental underpinning of 0:03:15.400 --> 0:03:18.239 our strong economy and our strong financial markets. 0:03:18.320 --> 0:03:21.640 Given this is just about one individual, does the Fed 0:03:21.800 --> 0:03:23.880 come out and say something or do they need to 0:03:23.919 --> 0:03:26.359 wait until that due process takes place. 0:03:26.880 --> 0:03:30.280 So the Federal Reserve as an institution is all about 0:03:30.360 --> 0:03:34.680 due process, and there have been individuals who have had 0:03:34.720 --> 0:03:40.360 investigations previously. There's a good process for doing that. That's 0:03:40.400 --> 0:03:43.880 not what's taking place here. This is really about trying 0:03:43.920 --> 0:03:48.920 to overturn the majority of the Board of Governors, long 0:03:49.000 --> 0:03:53.360 before any of these governor's terms are up, by threatening 0:03:53.400 --> 0:03:59.600 them with these kinds of investigations and firing without real 0:03:59.680 --> 0:04:04.920 due process and cause. And again, the Federal reserves independence 0:04:05.000 --> 0:04:08.160 really is at stake here, and that means that monetary 0:04:08.240 --> 0:04:14.320 policy will increasingly be overshadowed by concerns that there's political interference, 0:04:14.440 --> 0:04:17.839 whether or not that is actually the case if you 0:04:17.920 --> 0:04:21.520 think about it. J Powell opened the door for an 0:04:21.520 --> 0:04:26.040 interest rate cut in September very clearly. That's exactly what 0:04:26.120 --> 0:04:30.200 the president wants, so monetary policy is actually moving his way. 0:04:31.200 --> 0:04:35.760 And yet this is a very very aggressive attack on 0:04:35.880 --> 0:04:40.440 the Federal Reserve when monetary policy is doing exactly what 0:04:40.560 --> 0:04:41.680 he's been calling for. 0:04:42.000 --> 0:04:44.320 That speech the Fed Chair gave a Jackson holl just 0:04:44.400 --> 0:04:47.480 on Fridays, very different from how he sounded J Powell 0:04:47.640 --> 0:04:50.960 four weeks ago. Do you think the speech was political? 0:04:51.600 --> 0:04:54.720 Well, I think that the Chair was very careful in 0:04:54.839 --> 0:04:58.839 laying out that the balance of risks had shifted. He 0:04:59.000 --> 0:05:03.520 pointed specific to the possibility that the labor market is 0:05:03.600 --> 0:05:09.320 weakening faster than the members of the FLMC had believed 0:05:09.440 --> 0:05:12.720 in their last meeting because of the revisions to three 0:05:12.760 --> 0:05:16.400 months worth of hiring data, and so he laid out 0:05:16.440 --> 0:05:19.560 a very I think strong case based on data and 0:05:19.600 --> 0:05:23.000 the facts, why they were now potentially going to be 0:05:23.040 --> 0:05:27.359 more attentive to that labor market weakening, while acknowledging that 0:05:27.440 --> 0:05:30.120 inflation is still likely to go up because of the 0:05:30.200 --> 0:05:32.120 very high tariffs that have been put in place. 0:05:32.720 --> 0:05:36.080 Knowing the data and knowing all the personnel that are 0:05:36.120 --> 0:05:38.960 going to get together at the next FED meeting September seventeenth, 0:05:39.000 --> 0:05:41.200 do you expect them all to walk through that door 0:05:41.320 --> 0:05:43.640 that the FED chair opened up for a cut. 0:05:44.040 --> 0:05:46.840 Well, I don't know if all members of the FMC 0:05:47.040 --> 0:05:49.600 will be in the same place, and of course what 0:05:49.640 --> 0:05:52.480 we should hope for is a really good debate and 0:05:52.560 --> 0:05:56.640 an airing of differing views. But I do think that 0:05:56.839 --> 0:06:01.560 barring something really surprising in the upcoming employment print and 0:06:01.839 --> 0:06:06.960 CPI print, it's more likely than not that they will 0:06:07.080 --> 0:06:10.000 vote for a twenty five basis point reduction in the 0:06:10.040 --> 0:06:10.880 federal funds rate. 0:06:11.040 --> 0:06:13.600 Do you think there's a bias to the labor market 0:06:13.680 --> 0:06:14.640 in this federal reserve? 0:06:15.600 --> 0:06:17.960 So up until this point, I think what we've heard 0:06:18.120 --> 0:06:22.039 is a lot of discussion about the potential risks to inflation. 0:06:22.160 --> 0:06:26.120 Inflation is still high. It is between two and a 0:06:26.200 --> 0:06:29.280 half and three percent, and while this time last year 0:06:29.320 --> 0:06:31.680 it was going in the right direction moving down to 0:06:31.720 --> 0:06:35.400 the two percent target, this year is actually moving up. 0:06:35.440 --> 0:06:38.000 So we have heard a lot of attention to inflation, 0:06:38.960 --> 0:06:44.200 appropriately so, but the Chair acknowledged that they are balancing risks, 0:06:44.320 --> 0:06:48.800 risks of higher inflation risks of lower employment, and that 0:06:48.960 --> 0:06:52.400 is exactly what you expect from tariffs, a stagflationary shock. 0:06:52.680 --> 0:06:54.560 When he was talking about tariff's he said that it's 0:06:54.600 --> 0:06:57.320 not going to come all at once. The impact is 0:06:57.320 --> 0:07:00.520 the fedcher basically signaling to the market and to us 0:07:00.600 --> 0:07:03.640 to just look through any potential hot CPI prints that 0:07:03.720 --> 0:07:06.240 come out between now in the next twelve months. 0:07:06.680 --> 0:07:12.400 So my interpretation of that discussion is simply to acknowledge 0:07:12.440 --> 0:07:17.440 that when the labor market starts to turn down, unemployment 0:07:17.520 --> 0:07:21.400 often doesn't gently move up, and the Federal Reserve doesn't 0:07:21.440 --> 0:07:24.840 have a lot of time to react. Unemployment often jumps higher. 0:07:25.400 --> 0:07:29.680 Whereas because the tariffs have changed a number of times 0:07:29.760 --> 0:07:33.480 and still do not seem to be settled, because businesses 0:07:33.480 --> 0:07:36.480 were so good at getting inventories in ahead of time, 0:07:36.960 --> 0:07:40.720 because consumers did a lot of advanced purchases, those tariffs 0:07:40.760 --> 0:07:43.480 are working their way into prices more slowly. So I 0:07:43.480 --> 0:07:47.520 think it was just an acknowledgement of different potential timing 0:07:47.960 --> 0:07:50.040 on the two legs of the dual mandate. 0:07:50.200 --> 0:07:52.680 It felt like Chair Powell was coming around to how 0:07:52.720 --> 0:07:55.360 Governor Waller thinks, or maybe how Governor Bowman thinks. And 0:07:55.360 --> 0:07:57.960 I want to end on those two individuals their names 0:07:57.960 --> 0:07:59.520 potentially to be the next FED chair. 0:08:00.000 --> 0:08:02.080 Their scenario. People are talking about that. 0:08:01.920 --> 0:08:06.360 All the presidents' terms need to be renewed in February. 0:08:06.440 --> 0:08:08.800 Would you see a situation or risk at the FED 0:08:08.920 --> 0:08:13.080 Board when next multiple presidents at the bidding of the 0:08:13.120 --> 0:08:14.960 President of the United States. 0:08:14.760 --> 0:08:19.080 Well, I think that is exactly the risk that we 0:08:19.280 --> 0:08:24.640 are seeing play out right now. So by moving preemptively 0:08:24.800 --> 0:08:29.720 to remove a governor from the Federal Reserve without going 0:08:29.760 --> 0:08:34.120 through the process, without there being any clear evidence, the 0:08:34.760 --> 0:08:39.120 President essentially is moving to shift the majority of the 0:08:39.160 --> 0:08:43.120 Board of Governors well before what was contemplated in terms 0:08:43.240 --> 0:08:46.880 of the institutional structure in their terms. And that opens 0:08:46.920 --> 0:08:50.800 the door when renewals of all of the Reserve Bank 0:08:50.840 --> 0:08:56.000 presents come up in February, to again take very unprecedented 0:08:56.120 --> 0:08:59.680 actions and potentially not renew some of them in order 0:08:59.760 --> 0:09:05.000 to shift the overall voting majority on the FMC. That 0:09:05.360 --> 0:09:09.480 is an unprecedented attack on the independence of the Federal 0:09:09.520 --> 0:09:13.560 Reserve and it should really concern us about their ability 0:09:13.559 --> 0:09:19.080 to continue to be credible in fighting inflation and keeping 0:09:19.559 --> 0:09:21.800 our economy on a strong course. 0:09:21.640 --> 0:09:22.320 Which is quickly. 0:09:22.360 --> 0:09:25.160 You know, Governor Bowman and Waller, do you think they 0:09:25.160 --> 0:09:27.400 would be up for that kind of level of revamping. 0:09:28.000 --> 0:09:31.600 So this is really not about individual members of the 0:09:31.640 --> 0:09:36.720 board or the FMC. This is really about whether political 0:09:36.760 --> 0:09:41.000 pressure will continue to be exerted on all members of 0:09:41.080 --> 0:09:44.040 the FLMC in a way that puts them in jeopardy 0:09:44.480 --> 0:09:49.520 and potentially makes them less willing to share their views 0:09:49.559 --> 0:09:53.199 about the economy and appropriate monetary policy with the public 0:09:53.640 --> 0:09:58.200 and also to vote their mind on monetary policy decisions. 0:09:58.360 --> 0:10:00.960 That is what is at stake here, and I think 0:10:01.000 --> 0:10:02.319 it's very concerning. 0:10:03.040 --> 0:10:06.559 Stay with us. More Bloomberg surveillance coming up after this. 0:10:15.840 --> 0:10:18.040 Joining us now to extend the conversation, the former New 0:10:18.120 --> 0:10:21.280 York Fed President Bill Dudley. Bill, welcome to the program. 0:10:21.360 --> 0:10:25.000 Extensive experience the Federal Reserve inside that institution. How do 0:10:25.040 --> 0:10:27.400 you think they'll be responding to this this morning? 0:10:28.640 --> 0:10:31.000 They're going to be very unhappy because this is a 0:10:31.000 --> 0:10:33.880 real assault on the Federal reserves independence. And as we know, 0:10:34.360 --> 0:10:38.440 central banks independence is really important for good economic outcomes. 0:10:38.679 --> 0:10:40.960 There's been a reason why we've been moving in the 0:10:41.000 --> 0:10:44.960 direction of greater central bank independence over the least four decades. 0:10:45.000 --> 0:10:48.080 Across the world because central banks that have independence in 0:10:48.120 --> 0:10:51.000 terms of how they conduct monetary policy to achieve the 0:10:51.040 --> 0:10:54.679 objectives set for them by Congress and the administration do 0:10:54.720 --> 0:10:57.480 a better job in controlling inflation and keeping the economy 0:10:57.520 --> 0:10:58.439 on a stable path. 0:10:58.760 --> 0:10:59.959 So this is assault on that. 0:11:00.320 --> 0:11:02.360 And I'm sorry of surprised that the markets are so 0:11:02.559 --> 0:11:03.480 relaxed about this. 0:11:03.960 --> 0:11:04.120 Now. 0:11:04.160 --> 0:11:06.200 Maybe that's because we don't know where this is going 0:11:06.240 --> 0:11:09.320 to go. We don't know whether Lisa Cook is going 0:11:09.360 --> 0:11:12.040 to be able to stay in office. It certainly looks 0:11:12.120 --> 0:11:15.000 like the barf to getting her out is quite high, 0:11:15.040 --> 0:11:19.360 because it doesn't seem that the for cause would extend 0:11:19.400 --> 0:11:23.360 to the allegations against her. But she certainly a very 0:11:23.400 --> 0:11:25.319 minimum deserves her day in court. 0:11:25.679 --> 0:11:28.400 Well, Bill, it seems like that is the system that 0:11:28.520 --> 0:11:32.079 is emerging, that we're understanding the contours of FED independence 0:11:32.480 --> 0:11:35.200 from the courts. Be it the most recent ruling that 0:11:35.280 --> 0:11:39.480 said other independent agencies could have their heads fired by Trump, 0:11:39.559 --> 0:11:43.280 but not necessarily the FED without cause. This maybe defining 0:11:43.360 --> 0:11:45.840 having the courts define what causes. If you have a 0:11:45.840 --> 0:11:48.920 system where it's not encoded in law but instead is 0:11:49.000 --> 0:11:51.720 being interpreted by the courts, what does that say about 0:11:51.720 --> 0:11:55.040 the fragility or the stability of FED independence. 0:11:55.000 --> 0:11:56.760 Well, it sort of has to be interpreted by the 0:11:56.800 --> 0:12:00.080 course because this is there's no precedence for this. We 0:12:00.080 --> 0:12:02.200 don't really know what the law is until the courts 0:12:02.240 --> 0:12:05.720 actually rule on it. So the courts have to decide 0:12:06.520 --> 0:12:10.480 what's the law intended to do. I think most people 0:12:10.520 --> 0:12:13.520 think that, you know, what Lisa Cook did does not 0:12:14.040 --> 0:12:18.480 represent four clause dismissal from her governorship. But it's up 0:12:18.520 --> 0:12:20.360 for the courts to adjudicate that. 0:12:20.920 --> 0:12:22.960 So, Bill, if we're in a scenario where it seems 0:12:23.000 --> 0:12:24.440 like we might be that this is a FED that 0:12:24.480 --> 0:12:27.400 wants to start to ease policy that it wants to cut, 0:12:27.440 --> 0:12:29.640 but because of all these proceedings in the background, you 0:12:29.720 --> 0:12:32.520 get some real tension on the long end of the curve. 0:12:33.000 --> 0:12:35.000 What would the FED do in that case that it 0:12:35.040 --> 0:12:37.560 wants to cut, it wants to ease, but the markets 0:12:37.600 --> 0:12:38.360 do something different. 0:12:39.440 --> 0:12:41.280 Well, I think the Federal do what it thinks is 0:12:41.320 --> 0:12:45.040 appropriate to achieve its subjectives on employment and inflation and 0:12:45.080 --> 0:12:48.320 policy certainly signals that his jackson will remarks that he's 0:12:48.360 --> 0:12:50.920 worried about the downside risk to the labor market more 0:12:50.920 --> 0:12:53.520 than he's worried about the upside risk to inflation, and 0:12:53.559 --> 0:12:56.760 so his view that Manterrey policy is currently restrictive. He 0:12:56.880 --> 0:12:59.160 basically set a signal that is highly likely the Fed 0:12:59.240 --> 0:13:00.840 is going to cut rais and September. And I don't 0:13:00.840 --> 0:13:03.920 think this changes any of that. What it does change 0:13:04.000 --> 0:13:06.920 is down the road when the Federal Reserve acts. When 0:13:06.920 --> 0:13:09.520 the Federal Reserve, if they cut rates at subsequent times, 0:13:09.559 --> 0:13:11.560 is that because they think that's the appropriate thing to 0:13:11.600 --> 0:13:14.520 do for the economy, or because it's because they're under 0:13:14.520 --> 0:13:17.920 pressure from the Trump administration. Putting a lot of pressure 0:13:17.960 --> 0:13:21.160 on a central bank is in my mind, somewhat counterproductive 0:13:21.400 --> 0:13:24.360 because it basically causes people to start to wander is 0:13:24.400 --> 0:13:27.200 a central bank doing what is appropriate to achieve its 0:13:27.240 --> 0:13:30.640 objectives or is it caving into pressure from the administration. 0:13:30.920 --> 0:13:33.360 Well, you've got great contacts. Do you sense that shift 0:13:33.400 --> 0:13:34.760 is already underway? 0:13:35.720 --> 0:13:38.080 No, I don't think so. I think there is a 0:13:38.240 --> 0:13:41.080 case to cut rates in September. I'm not sure I 0:13:41.080 --> 0:13:44.040 would be in that camp. I'm not as convinced that 0:13:44.080 --> 0:13:47.920 monetary policy actually is restrictive today, and I am more 0:13:47.960 --> 0:13:51.040 worried that the rise in inflation caused by the path 0:13:51.080 --> 0:13:54.200 through of the tariffs. Will you could be end up 0:13:54.240 --> 0:13:58.240 being more persistent than Paul does. But that's a reasonable 0:13:58.280 --> 0:14:02.040 point of disagreement. I think that if the Fed cuts 0:14:02.080 --> 0:14:05.400 rates in September is not a big event. The market 0:14:05.600 --> 0:14:09.040 certainly anticipates rate cuts over the next year. They expect 0:14:09.040 --> 0:14:11.200 the Fed eventually to cut race back down to what 0:14:11.240 --> 0:14:13.440 they view as sort of a neutral a federal fund 0:14:13.520 --> 0:14:15.640 rate of around three to three and a half percent. 0:14:15.559 --> 0:14:18.360 Go out of interest. Why are you more concerned about inflation? 0:14:18.440 --> 0:14:20.920 In very simple terms, the Fed share has basically come 0:14:20.920 --> 0:14:23.120 out and said he's not worried about upside risk to 0:14:23.120 --> 0:14:25.920 inflation because of the downside risk to employment. 0:14:25.960 --> 0:14:28.160 What makes you more concerned, Well. 0:14:28.000 --> 0:14:31.080 Four years of being above your inflation to objective, and 0:14:31.480 --> 0:14:34.680 every year you're above your inflation objective, that increases the 0:14:34.760 --> 0:14:38.040 risk that people start to view this is the steady state, 0:14:38.640 --> 0:14:41.680 and then that starts to flow into wage settlements, and 0:14:41.720 --> 0:14:43.680 then it becomes very difficult to get rid of the 0:14:43.680 --> 0:14:46.080 inflation that's been embedded in the system at that point. 0:14:47.280 --> 0:14:50.880 Stay with us. More Bloomberg surveillance coming up after. 0:14:50.640 --> 0:15:01.120 This significant escalation. 0:15:01.240 --> 0:15:03.600 When it comes to the President and this standoff with 0:15:03.720 --> 0:15:08.560 Governor Lisa Cook. This really stems from FHAFA director Bill 0:15:08.640 --> 0:15:11.760 Poulti talking about the fact that they think she committed 0:15:11.880 --> 0:15:12.600 mortgage fraud. 0:15:12.680 --> 0:15:13.880 These are allegations. 0:15:13.880 --> 0:15:16.160 The President down has letter last night Jonathan saying the 0:15:16.200 --> 0:15:18.640 American people must be able to have full confidence in 0:15:18.680 --> 0:15:21.840 the honesty of the members entrusted in setting policy and 0:15:21.920 --> 0:15:23.440 overseeing the Federal Reserve. 0:15:23.720 --> 0:15:24.920 We're now joined by. 0:15:24.760 --> 0:15:27.720 Scott Linscombe of the Cato Institute. He works on general 0:15:27.760 --> 0:15:31.000 economics and trade. Scott, thank you so much for joining 0:15:31.040 --> 0:15:34.440 us this morning. Just your reaction to this headline overnight. 0:15:36.040 --> 0:15:39.800 I'm can't say I'm surprised given the run up and 0:15:39.920 --> 0:15:44.040 some of the statements from the Trump administration already. But look, 0:15:44.080 --> 0:15:47.640 that doesn't mean that this isn't a significant move. You know, 0:15:47.720 --> 0:15:53.240 the independence of the FED is extremely important for US 0:15:53.320 --> 0:15:58.080 monetary policy in the US economy. We you, Cato and elsewhere, 0:15:58.120 --> 0:16:01.760 have always been concerned about isization of the FED. But 0:16:01.840 --> 0:16:04.240 this is now going in the wrong direction, right. It 0:16:04.360 --> 0:16:09.960 is pushing us more towards politicized monetary policy, and quite frankly, 0:16:10.680 --> 0:16:13.800 you know, it's not something that appears justified by the 0:16:13.920 --> 0:16:17.040 numbers in terms of absolutely necessitating some. 0:16:16.960 --> 0:16:17.680 Sort of rape cup. 0:16:17.720 --> 0:16:21.080 When you look at core CPI still above three flash 0:16:21.120 --> 0:16:25.560 pm I last week showing significant price pressures. The idea 0:16:25.680 --> 0:16:28.960 that you know, this is just a Racalca Trent FED 0:16:29.200 --> 0:16:34.040 fighting the president's whims our needs is not really held 0:16:34.080 --> 0:16:34.640 up in the data. 0:16:35.880 --> 0:16:38.000 Does the market actually believe it yet? 0:16:38.040 --> 0:16:40.680 How do you see this playing out, this fight between 0:16:40.800 --> 0:16:42.840 Governor Cook and the President of the United States. 0:16:43.680 --> 0:16:47.080 Yeah, I mean, I think some of the calmness in 0:16:47.120 --> 0:16:50.320 the market probably stems from the fact that it's not 0:16:50.440 --> 0:16:53.800 one hundred percent clear that they can do this Cook 0:16:54.120 --> 0:16:56.960 and her legal team saying they're going to fight it. 0:16:57.080 --> 0:16:59.880 In that, you know, it appears to be I think 0:17:00.080 --> 0:17:02.160 giving some people some thoughts that, you know, maybe the 0:17:02.440 --> 0:17:06.040 independence of the FED still intact. But that being said, look, 0:17:06.720 --> 0:17:10.000 this Trump is a persistent guy. We know this, and 0:17:10.640 --> 0:17:13.040 I don't think we should be too confident that this 0:17:13.240 --> 0:17:16.680 is this is going away anytime soon. Regardless of how 0:17:16.800 --> 0:17:19.360 this particular spat turns out. 0:17:20.640 --> 0:17:22.560 Whether it's the FED, whether it's trade. 0:17:22.560 --> 0:17:24.800 We like to see the President United States put his 0:17:24.880 --> 0:17:25.720 thumb on the scale. 0:17:25.920 --> 0:17:29.200 He takes an interventionist approach. You wrote about that this. 0:17:29.119 --> 0:17:32.480 Week in the Washington Post when it comes to Intel. 0:17:32.760 --> 0:17:35.720 What kind of president do you see Trumps setting for 0:17:35.880 --> 0:17:37.240 future administrations. 0:17:38.400 --> 0:17:41.000 It's a lot of troubling precedent. I mean, beyond the 0:17:41.040 --> 0:17:44.080 pressuring the Fed. Now, you know, you have the state 0:17:44.320 --> 0:17:50.159 taking big stakes in private companies like Intel, not during 0:17:50.800 --> 0:17:54.560 a great recession or wartime, but in peacetime and doing 0:17:54.600 --> 0:17:59.400 it clear under a pretty clear pressure and coercion from 0:17:59.440 --> 0:18:02.240 the overall office. Of course, you have all the import 0:18:02.320 --> 0:18:07.760 substitution in tariffs and uncertainty and trade deals, which is 0:18:07.800 --> 0:18:11.600 also all executive power as well. You know, it makes 0:18:11.640 --> 0:18:13.720 you wonder where the heck Congress is all in this, 0:18:14.119 --> 0:18:18.440 But it also makes you think what the next president's 0:18:18.480 --> 0:18:18.920 going to. 0:18:18.840 --> 0:18:19.399 Be able to do. 0:18:19.480 --> 0:18:24.000 You know, Bernie Sanders was cheering Trump's Intel move, and 0:18:24.040 --> 0:18:27.040 you could very well have a Democratic president that picks 0:18:27.160 --> 0:18:31.680 up these very same precedents and pushes even further into 0:18:31.960 --> 0:18:35.800 an interventionist executive branch acting unilaterally, and that's of course 0:18:36.119 --> 0:18:39.240 going to raise serious issues, serious problems for the health 0:18:39.280 --> 0:18:40.240 of the US economy. 0:18:41.320 --> 0:18:44.359 Well, the President also said he would be interested in 0:18:44.440 --> 0:18:48.280 maybe striking more deals like this. Are there companies that 0:18:48.320 --> 0:18:51.360 you're looking at that potentially we can see a similar 0:18:51.400 --> 0:18:52.840 approach from this White House. 0:18:53.720 --> 0:18:55.480 Yeah, you know, as I wrote in the post, if 0:18:55.640 --> 0:18:58.840 any company that's taken subsidies from the US government and 0:18:58.960 --> 0:19:02.439 happens to be located in a strategic industry by the 0:19:02.480 --> 0:19:08.119 executive branches, definition should be a little bit concerned. The 0:19:08.119 --> 0:19:12.399 fact is that we now have national security investigations in 0:19:12.440 --> 0:19:15.320 the trade space on a whole lot of products, not 0:19:15.720 --> 0:19:17.919 just chips and steel and aluminum. 0:19:17.920 --> 0:19:18.400 In others. 0:19:18.600 --> 0:19:22.040 We've already seen a golden share for US steel. We've 0:19:22.080 --> 0:19:25.760 already seen investments in MP materials, which is in the 0:19:25.840 --> 0:19:28.919 rare earth space. So I think there's no question that 0:19:29.600 --> 0:19:33.000 companies that have some sort of dealings with the US 0:19:33.160 --> 0:19:37.800 government in these strategic industries may be the nets to 0:19:37.800 --> 0:19:40.040 get a call from the Oval Office. 0:19:40.600 --> 0:19:43.399 Trump has talked about building the US Sovereign Wealth Fund. 0:19:43.520 --> 0:19:45.520 Is that what all of this is leading towards? 0:19:46.440 --> 0:19:46.680 Well? 0:19:46.680 --> 0:19:49.920 Any C Director Kevin Hassett basically said as much yesterday 0:19:50.000 --> 0:19:53.240 that they're using a lot of the industrial policy that 0:19:53.320 --> 0:19:56.880 was implemented during the Biden years through the Inflation Reduction Act, 0:19:56.880 --> 0:20:00.400 the Chips Act, the Infrastructure Bill, and some other exiscuative 0:20:00.440 --> 0:20:04.440 authorities to basically reverse engineer a Sovereign Wealth Fund, which 0:20:04.480 --> 0:20:08.040 Trump is long wanted. And this, again, I think is 0:20:09.400 --> 0:20:12.600 a concern for companies that have taken some of these, 0:20:12.720 --> 0:20:16.000 you know, ups of trillions of dollars in government subsidies. 0:20:16.520 --> 0:20:18.800 But it's also I think, you know, a cautionary tale 0:20:18.840 --> 0:20:23.280 about US industrial policy generally. Now, this stuff maybe starts targeted, 0:20:23.320 --> 0:20:25.960 but tends to have a way to spiral out of control. 0:20:27.160 --> 0:20:29.480 Scott, I just want to end on another truth last 0:20:29.560 --> 0:20:31.920 night from the President, not getting as much attention what's 0:20:31.960 --> 0:20:33.879 going on at the Federal Reserve, he said he's going 0:20:33.920 --> 0:20:36.400 to stand up to countries that attack US tech because 0:20:36.400 --> 0:20:37.840 of things like digital services. 0:20:38.160 --> 0:20:40.240 What does this mean for the European Union. 0:20:40.080 --> 0:20:42.439 Given the fact that the President has already struck a 0:20:42.480 --> 0:20:43.280 trade deal. 0:20:43.040 --> 0:20:46.639 With them, Well, I think it should tell the European Union, 0:20:46.840 --> 0:20:51.520 Japan and anybody else that these trade deals that they 0:20:52.359 --> 0:20:56.720 signed over the last couple of months are never really finished. 0:20:57.240 --> 0:20:59.720 You know, digital services taxes were supposed to be an 0:20:59.760 --> 0:21:05.080 issue you in the EU negotiations. The Europeans resisted any changes. 0:21:05.880 --> 0:21:09.760 They signed this big deal, which most people saw as 0:21:09.800 --> 0:21:13.320 a pretty huge cave by the Europeans. And here we 0:21:13.400 --> 0:21:15.320 are just a couple of weeks later and Trump's asking 0:21:15.359 --> 0:21:18.199 for more. So, you know, for those who think, especially 0:21:18.240 --> 0:21:21.120 in the market, who think these trade deals have settled 0:21:21.119 --> 0:21:24.639 down the tariff space, well think again. 0:21:25.840 --> 0:21:29.360 Stay with us multil impax surveillance coming up after this, 0:21:38.359 --> 0:21:41.320 John Guess around a table, Tolston smock of Apollo Toaston, 0:21:41.359 --> 0:21:44.240 good monic, Morning morning. Your reaction to this one. 0:21:44.680 --> 0:21:48.040 Well, obviously the market reaction here is a little bit 0:21:48.080 --> 0:21:50.840 surprising in the sense that the stock market is basically 0:21:50.880 --> 0:21:53.240 now want changed, at least before we opened. By what 0:21:53.280 --> 0:21:56.280 you're seeing in the long end is certainly somewhat worries 0:21:56.320 --> 0:21:58.800 on the Yulcovist evening telling you that the market is 0:21:58.840 --> 0:22:01.760 expecting that ray cuts are coming, because this seems to 0:22:01.800 --> 0:22:04.320 be at least more likely given recent discussions including j. 0:22:04.400 --> 0:22:06.720 Powell on Friday, but also that the long end has 0:22:06.760 --> 0:22:10.080 moved higher. It's obviously equivalent to beginning to think about 0:22:10.080 --> 0:22:12.360 that maybe there is a risk that inflation is going 0:22:12.359 --> 0:22:14.840 to be a problem for a longer period than what 0:22:14.920 --> 0:22:17.560 people thought just a few days ago. The conclusion from 0:22:17.640 --> 0:22:21.840 a broader perspective is obviously a discussion around well, maybe 0:22:22.040 --> 0:22:23.680 we should just begin to think about when we say 0:22:23.760 --> 0:22:26.000 rates are higher for longer, then maybe it's long rates 0:22:26.040 --> 0:22:28.200 that will be higher for longer, not only for fiscal reasons, 0:22:28.480 --> 0:22:31.360 but also now because of this emerging debate, not only 0:22:31.359 --> 0:22:34.080 because of what Powell said last Friday in Jackson Hole 0:22:34.280 --> 0:22:37.040