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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene with

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Speaker 1: David Gura. Daily we bring you insight from the best

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Speaker 1: of economics, finance, investment, and international relations. Find Bloomberg Surveillance

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Speaker 1: on Apple Podcasts, SoundCloud, Bloomberg dot com, and of course

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Speaker 1: on the Bloomberg Jim Glassman head economists for commercial Banking

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Speaker 1: at JP Morgan Chase, and we've reached him on our

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Speaker 1: phone line's gym. Great to speak with you. As always,

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Speaker 1: Let's start with the broad question here. What you're looking

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Speaker 1: for in in today's neber? Has this report different from

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Speaker 1: the last one? Probably not too different. And I think I,

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Speaker 1: like you guys have been saying, I don't think it's

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Speaker 1: the entreil of these reports anymore. That matter. It's the

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Speaker 1: message that is telling us about the economy. And I

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Speaker 1: think what is telling us is we're doing pretty good.

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Speaker 1: We still that the fact that we can have these

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Speaker 1: kind of this kind of job growth with an economy

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Speaker 1: that in theory is close to full employment tells you

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Speaker 1: where these people coming from. It must be that we're

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Speaker 1: still not really at our full capacity. So to me,

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Speaker 1: the most important message that we're getting from the job

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Speaker 1: market is that we still got a room to run here.

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Speaker 1: And that's a very positive story for the equity market

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Speaker 1: and even for the FED. I mean, it tells you,

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Speaker 1: it tells you the pet needs to slowly normalized interest rates.

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Speaker 1: But thanksly, there's no big rush. Where are we in

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Speaker 1: the business cycle as you see it when you when

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Speaker 1: you look at the economic data, when you look at

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Speaker 1: the markets, where do you think we are? I think

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Speaker 1: we're probably at the top of the ninth inning. But

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Speaker 1: and I say that because I think I think we

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Speaker 1: need another year or so this kind of growth to

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Speaker 1: pull everybody back into the job market. That has is

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Speaker 1: still a lot of young people, are still about a

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Speaker 1: million and a half people that dropped out that are

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Speaker 1: coming back, and all those part timers. But I think

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Speaker 1: the more important point is the game is not over

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Speaker 1: it at the ninth inning. I think this is going

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Speaker 1: to go extra innings. And the reason I say that

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Speaker 1: is we don't the inflation problems like we didn't normally

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Speaker 1: make you think about end the cycle, and we don't

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Speaker 1: see financial accesses that make you think about new problems brewing.

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Speaker 1: So I think we've got a very good chance of

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Speaker 1: going extra innings. I don't think there's anything many of

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Speaker 1: us could look at and say this is a problem,

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Speaker 1: and this is gonna throw us off course. Do let

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Speaker 1: me ask you about those young people you you mentioned here.

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Speaker 1: When you look at wage growth which is still lagging,

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Speaker 1: what's the role that those young people are playing. Do

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Speaker 1: you think that they're principally responsible here for dragging down

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Speaker 1: wage growth? You know, I don't, but I think the

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Speaker 1: I think the sense you get about what's true unemployment

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Speaker 1: is kind of an approximate idea about how far the

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Speaker 1: economy is from full capacity. I think maybe at the

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Speaker 1: part time the involuntary part time guys probably put more

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Speaker 1: pressure on wages. But I think the problem is everybody

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Speaker 1: has is we're taking the official unoplumber rate at face value,

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Speaker 1: and we're assuming four and a half percent, and we're

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Speaker 1: assuming full employment is four and a half to five.

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Speaker 1: I think that's maybe what's off course. I think personally,

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Speaker 1: when you look at a metric of unemployment that's on

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Speaker 1: an apple to apple similar to what we're used to

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Speaker 1: looking at, we made me more like five and a

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Speaker 1: half percent, and we're beginning to argue, we're beginning to

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Speaker 1: debate is the full employment level closer to four percent. Well,

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Speaker 1: if that were true, you you would say, Okay, the

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Speaker 1: labor market is doing fine, but I wouldn't describe it

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Speaker 1: as overly tight. So honestly, I think wages are doing

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Speaker 1: a little better. They're running a little above inflation. Uh,

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Speaker 1: that's a little bit of than the band. But I

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Speaker 1: wouldn't describe I doesn't, it doesn't. I don't find this

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Speaker 1: to be a mystery yet that despite the good sense

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Speaker 1: of tone of the job market, we're not seeing big

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Speaker 1: acceleration and wain wages because businesses have to manage things,

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Speaker 1: you know why, they keep them competitive. They're not going

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Speaker 1: to go crazy. Jim last one with us from JP

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Speaker 1: Morgan as we begin our job day coverage, David Gern,

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Speaker 1: Tom Keith thrilled your with us, uh nationwide, Jim blast

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Speaker 1: And why are there twenty thou people lined up to

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Speaker 1: work at Amazon? I've gotten tons of mail on this.

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Speaker 1: I get the whole economist full employed idea. But then

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Speaker 1: why are twenty thou people lined up to pack cardboard

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Speaker 1: box is for Amazon? Yeah? I think it's I'm be

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Speaker 1: telling you we're not really as tight as people might think.

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Speaker 1: And uh, you know, part of the problem is there's

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Speaker 1: a lot of disruption going on because of the Amazon phenomenon.

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Speaker 1: So maybe people are saying this is the future. I'm

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Speaker 1: you know, they're they're trying to shift gears a little

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Speaker 1: bit and take advantage of what they think is coming.

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Speaker 1: But it probably is a testimony to the disruption that's

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Speaker 1: coming to the whole retail sector also from what you

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Speaker 1: see going on with Amazon. Let me ask you just

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Speaker 1: on a sector by sector basis what you're watching. Looking

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Speaker 1: at your note here about auto sales, what we saw

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Speaker 1: auto sales here, a little bit of disappointment over these

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Speaker 1: last couple of days. How's that playing out in terms

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Speaker 1: of what sectors are hiring at this point? Jim, You know,

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Speaker 1: I think the auto industry was the first one out

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Speaker 1: because credit tight credit really made it. It was a

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Speaker 1: nightmare for the auto industry. When the economy opened up

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Speaker 1: and credit began to flow, the auto industry was the

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Speaker 1: first one out. And so I think what we're what

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Speaker 1: we're seeing is that we're sort of the fact that

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Speaker 1: car sales are kind of stay mobilizing now and we

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Speaker 1: don't know how much of the uber phenomenon was driving

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Speaker 1: sales last year, but I think, uh, it's telling you

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Speaker 1: that the economy is becoming more mature. We're starting to

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Speaker 1: see It's it's really hard when you look around. We're saying,

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Speaker 1: a lot of every industry is picking up jobs. So

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Speaker 1: we're still looking at a picture of a tide that's

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Speaker 1: rising and it's helping everybody. Obviously the tech sector where

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Speaker 1: everybody wants to be young kids anyway. Uh, that's the hardest.

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Speaker 1: But the truth is healthcare, tech, financial services, information, business services,

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Speaker 1: those are all the areas. And it doesn't look to

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Speaker 1: me yet yet, like anyone who's dominating, just looks to

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Speaker 1: me like the kind of thing you normally see when

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Speaker 1: we're in a generally recovering economy. So it still looks

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Speaker 1: a lot like a recovery story. Is there consensus about

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Speaker 1: how many jobs we need to be adding month after

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Speaker 1: month to keep that unemployment rate from from rising. Is

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Speaker 1: that something that's a more art than science. Uh, it's

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Speaker 1: a little bit of both. The fact is, if you

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Speaker 1: look at the working age population, that's the easiest thing

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Speaker 1: you can do. Look at the population between sixteen years

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Speaker 1: of age and let's call it seventy or sixty or six, Well,

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Speaker 1: it's real clear. The growth of the working age population

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Speaker 1: has slowed down from about two per per per month

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Speaker 1: about a decade ago to about seventy five per months.

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Speaker 1: So that that's why all of us say we think

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Speaker 1: the steady state growth and jobs needs to be about.

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Speaker 1: Anything about that will tend to bring unemployment down. The

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Speaker 1: problem is there's still a lot of guys that dropped out,

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Speaker 1: so that there's a lot of guys who got pushed

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Speaker 1: out during the recession. So they're slowly coming back, and

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Speaker 1: so you can have a period here with a labor

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Speaker 1: force can grow faster than that seventy five tho just

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Speaker 1: because we're still recovery from the damage from the recession.

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Speaker 1: But in defense of a president job bowing in the

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Speaker 1: last hour about three g d P Carl Ricka Donna

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Speaker 1: covered with that with US surveillance, Jim Glass and seventy

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Speaker 1: five thousand per month non farm payrolls is totally unacceptable

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Speaker 1: to both Democrats, both Republicans are the governor of West

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Speaker 1: Virginia who's both because our benchmarks are coming from the

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Speaker 1: old days. Those those those benchmarks we used to have

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Speaker 1: are obsolete, and I think politicians haven't yet figured this

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Speaker 1: out because they keep talking about getting America back to work.

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Speaker 1: But the truth is most of US economists think America

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Speaker 1: is getting back to work, and we're pretty much back

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Speaker 1: to work. Here's the problem. There's like, in the last

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Speaker 1: ten years, twenty million people that the people who were

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Speaker 1: fifty five years of age and older, that population has

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Speaker 1: increased like twenty million. The young people millennials are up

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Speaker 1: two and a half a million, forty year olds down

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Speaker 1: about a million and a half. So really what's going

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Speaker 1: on here is the population because we're aging, We got

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Speaker 1: more and more people going into retirement. So we have

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Speaker 1: to change our idea. This is not the same labor

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Speaker 1: market that we've been living with for the last several decades.

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Speaker 1: Jim Lastman with us that Jim Glassman, the head economists

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Speaker 1: for commercial banking at JP Morgan Chase, on this job

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Speaker 1: to day here in the US. Just take you through

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Speaker 1: what we expect for the rest of the day. Of course,

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Speaker 1: those numbers come out from the Labor Department eight thirty

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Speaker 1: Wall Street time. Alan Krueger is going to join us

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Speaker 1: as well this morning of Princeton University. We're also going

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Speaker 1: to speak with Bill gross of course, if Janice Henderson

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Speaker 1: once those numbers come out, get his reaction to those,

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Speaker 1: and then we're gonna hear from Gary Khne, Gary Coon,

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Speaker 1: the head of the National Economic Council, so tremendous, a

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Speaker 1: great perspective throughout the morning on Jobs Day. And then

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Speaker 1: of course, as I mentioned, we're following this story out

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Speaker 1: of Washington as well, centering on Robert Mueller, the Special

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Speaker 1: Council going to a grand jury in Washington, d C.

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Speaker 1: For help with his investigation. Squarely though our focused on

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Speaker 1: the job's number, can we say, Sherman, let's see. We'll

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Speaker 1: see how our colleagues address up this boarding. But a

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Speaker 1: lot of speculation, as you allude to there, about who

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Speaker 1: might be the next chairman. Muhammad Hillarian is in Paris.

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Speaker 1: Dr Hillarian, good morning. In the back of your wonderful book,

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Speaker 1: the only game in town. You have the power of

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Speaker 1: scenario analysis. What are the scenarios cheer Yelling has to

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Speaker 1: come up with? Is she and Governor Kearney and others

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Speaker 1: battle the hard data of disinflation? What Connie and Yelling

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Speaker 1: have very different issues, and thank you Tom for having

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Speaker 1: me on for Yelling, is the flattening of the Phillips

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Speaker 1: curve in other In other words, why is it that

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Speaker 1: wages and inflation have not responded to what has been

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Speaker 1: very impressive job creation. Connie is in a different position.

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Speaker 1: He's worried about something else. He's worried about stag inflation.

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Speaker 1: That is a slow economy, but high inflation. So both

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Speaker 1: central banks are facing pretty unprecedented situations and their instruments

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Speaker 1: are simply not giving them enough information right now to

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Speaker 1: provide them with the confidence they need on the policy front.

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Speaker 1: What more could could policymakers be doing in Washington? Right? No,

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Speaker 1: I'm curious what you're gonna be looking for the day,

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Speaker 1: of course, But beyond that, what would you like to

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Speaker 1: see Washington doing more of? So what I'd like to see,

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Speaker 1: and I'm not the only one, is a handoff, handoff

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Speaker 1: from excessive reliance on central brank to a more comprehensive

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Speaker 1: policy response that acts on demand, supply, and debt. The

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Speaker 1: longer we wait for his handoff, the greater the risk

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Speaker 1: of collateral damage from relying just on moncrey policy. And

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Speaker 1: that's true not just for the US, is also true

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Speaker 1: for the ECB, the Bank of Japan. Both of them

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Speaker 1: also faced the same dilemma. What happens there? Did somebody

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Speaker 1: drop the baton halfway down Pennsylvania that was supposed to

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Speaker 1: have happened, wasn't it? So two thousand and ten happened

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Speaker 1: the tea party. Then you've got the polarization of Congress,

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Speaker 1: and then you've got a certain amount of all hazard

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Speaker 1: reliance on central banks. You saw that in Europe as well.

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Speaker 1: DJ Larian Richard Claire has sent me along a paper

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Speaker 1: Pedrodocostic Business Inside has written it up as well. Yasir

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Speaker 1: Abdi and Steven Deneger over at the i M F

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Speaker 1: you Health Court at the i MM for years, they

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Speaker 1: have a fabulous paper on technology and the effect of

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Speaker 1: labor and they go into routinization, they go into how

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Speaker 1: technology has changed everything we do and also offshoring is

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Speaker 1: Cherry Yell and Governor Karney is all of our angst

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Speaker 1: about jobs. Are we being overwhelmed by the new technology? Yes,

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Speaker 1: but partly so let me explain there certainly is a

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Speaker 1: structural and secular component to it, and that is understanding

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Speaker 1: that technology is changing the way we do things. How

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Speaker 1: is changing because of technology, and we don't yet fully

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Speaker 1: understand that. But that is a structural and seculation. That's

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Speaker 1: also a good or cyclical issue, which is we've had

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Speaker 1: deficient aggregate demand and we've let potential output come down

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Speaker 1: through policy in action. And it's important to make that

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Speaker 1: distinction because you can do a lot on the second one,

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Speaker 1: but it requires that other policy makers get into the

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Speaker 1: game and get off the sideline. The President has been

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Speaker 1: opinion a recently, but he's in West Virginia, his territory,

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Speaker 1: last night talking about infrastructure. With those kind of programs,

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Speaker 1: move the needle on potential g d P or do

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Speaker 1: we just give up and get used to two point

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Speaker 1: whatever percent run rate? There would be a tragedy if

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Speaker 1: we gave up. We can move the needle. We can

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Speaker 1: certainly move it towards three percent through the trifecta of infrastructure,

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Speaker 1: pro growth, tax reform, and the regulations. So these are

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Speaker 1: three things that the President has spoken about, and that

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Speaker 1: let's not forget. President Obama also had infrastructure program. President

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Speaker 1: Obama also was looking for tax reform. Um in a

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Speaker 1: in a perfect world, you'd go beyond that and you

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Speaker 1: deal with labor retooling and re training, you would deal

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Speaker 1: with the education system, you would deal elements that talk

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Speaker 1: to productivity. But no, Tom, we shouldn't just sit there

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Speaker 1: we we can get it back towards three percent, but

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Speaker 1: it requires Congress to step up to its economic governance.

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Speaker 1: We're talking to you from Paris. Let me ask you

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Speaker 1: just the degree to which excitement in the global economy

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Speaker 1: has shifted to Europe from from the U S. What

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Speaker 1: are we seeing in the context of the global economy

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Speaker 1: in Europe today? How has that changed? A lot? More optimism.

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Speaker 1: I'm very struck by the optimism that one hears here. Um,

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Speaker 1: euro gloom has given way to your optimism. It helped

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Speaker 1: by the latest GDP number. It's helped by the election

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Speaker 1: of Marcon So there's a sense here of optimism. Um.

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Speaker 1: I think that the economics tells you that it's not

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Speaker 1: enough to move the soft data. With sort of soft

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Speaker 1: data move in the US in a major way a

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Speaker 1: few months ago, but that didn't translate to the heart data.

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Speaker 1: So it's important that more be done. But the big difference,

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Speaker 1: David is there's a lot more optimism. Are you coming

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Speaker 1: to us from the cafe have la ground cafe? I know,

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Speaker 1: but I'm talking to you. I'm talking to you from

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Speaker 1: the Bloomberg offices, and as usual, they are beautiful offices

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Speaker 1: in a wonderful locations. My first time here, and I

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Speaker 1: think I'll try to visit more often. I know you

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Speaker 1: should visit moreover, In fact, we should visit with you.

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Speaker 1: I would suggest calling all the twins that we David

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Speaker 1: Goer and I do a road trip with Dr Hillary

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Speaker 1: into the Paris office. I'm thinking the last week of

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Speaker 1: a Nosspember because it's across the street from the opera

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Speaker 1: and the opera season stomps Um in September, so lets

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Speaker 1: it would in September. We'll get that. We'll do that

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Speaker 1: in September and you can pick the opera and well

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Speaker 1: I'll attend. Dr Larin, thank you so much from my

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Speaker 1: offices and studios in Paris. Friends greatly appreciated this morning.

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Speaker 1: Of course writing for bloom Review and Dr Larian affiliated

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Speaker 1: with Alan others. Really can't say enough about his book.

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Speaker 1: It was my book of the summer. I don't know

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Speaker 1: when it was the only game in town. Central Banks

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Speaker 1: instability as well, really really precious chapter on game theory

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Speaker 1: from Doctor Larium as well. For our cover to jobs.

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Speaker 1: Stay continues now with Alan Kruegers, Professor of Public Polace

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Speaker 1: and Economics at Princeton, former Chairman of the Council of

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Speaker 1: Economic Advisors under President Obama here with us in our

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Speaker 1: Bloomberg eleven three of studios in New York. Great to

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Speaker 1: see again. As always, let's start just by a going

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Speaker 1: macro if we could that we had the latest read

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Speaker 1: on GDP a few days ago. Can we draw a

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Speaker 1: line between that and what you think we're going to

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Speaker 1: see today. I think they are part of the same picture.

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Speaker 1: You know, it looks to me like the economy is

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Speaker 1: continuing at the same pace it has for the last

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Speaker 1: few years. Uh, there's been no change in policy, so

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Speaker 1: I'm not sure why we would expect to see much

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Speaker 1: change in economic performance. UM. So I think we're still

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Speaker 1: at about two underlying growth. Job growth is faster than

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Speaker 1: labor force growth. That should pull down the unemployment. UM.

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Speaker 1: I've been a little bit disappointed that we haven't seen

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Speaker 1: more wage growth. Uh. Inflation is but a little bit surprising,

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Speaker 1: but I suspect that those are sort of short term

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Speaker 1: phenomenon and we'll get back on track closer to percent inflation.

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Speaker 1: When when you look at all that this this administration

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Speaker 1: could be doing, that this Congress could be doing if

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Speaker 1: its prioritization is is the watchword in Washington. I think

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Speaker 1: is as we've seen the debate over healthcare unfold, and

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Speaker 1: now there's a question of what we're going to see

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Speaker 1: when it comes to tax from when it comes to

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Speaker 1: the labor economy, and what policies they could implement there,

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Speaker 1: what would be most effective. What if you were still

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Speaker 1: in the White House counseling the president, would you advise

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Speaker 1: him to do. My advice would be to tear up

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Speaker 1: the proposal that they endorsed on immigration reform a couple

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Speaker 1: of days earlier. Um that would be number one. And

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Speaker 1: if you just look at the Congressional Budget Office report

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Speaker 1: on the bipartisan bill that passed the Senate that would

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Speaker 1: have increased immigration to the US legal immigration, that concluded

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Speaker 1: GDP growth would be faster, income growth would be faster,

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Speaker 1: productivity growth would be higher, We'd have more innovation, we

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Speaker 1: create more companies if we reformed our immigration system in

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Speaker 1: that direction. So that would be point number one on

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Speaker 1: the labor market. Uh. I like their plans on infrastructure.

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Speaker 1: I'd like to see them spell them out more detail.

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Speaker 1: I'd like to see them have a strategy to congress

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Speaker 1: past them. But I think that's an area where there

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Speaker 1: is widespread agreement that the US needs more investment that

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Speaker 1: will help labor, that will help businesses, that will help

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Speaker 1: the economy down the road. Alan, you're cited in my

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Speaker 1: paper to jour, I've I've been quoted folks already saying

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Speaker 1: Olivia Blanchard's effort in Naples, Italy this summer was just

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Speaker 1: brilliant and out of the I m f we get

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Speaker 1: a working paper where you're sited. David Carter, I believe

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Speaker 1: cited is well, which basically says routinization and offshoring have

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Speaker 1: changed the American labor economy. Is technology the killer? Is

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Speaker 1: technology a job's killer? Or can we say it's still

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Speaker 1: adds vailue or is there just two America's Well, I

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Speaker 1: think it's more in the too America vein. It's not

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Speaker 1: a job's killer in the sense we've seen UH reasonable

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Speaker 1: job growth over the last twenty five years. The problem

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Speaker 1: is the nature of the jobs. The problem is that

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Speaker 1: jobs in the middle have been disappearing while they've been

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Speaker 1: growing at the top and the bottom. Uh. The problem

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Speaker 1: is that we're seeing fewer long term employment relationships for

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Speaker 1: seeing more workers move into self employment, more gig employment,

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Speaker 1: workers left without a safety net or labor laws are

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Speaker 1: not really set up for big independent workforce. UM. But

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Speaker 1: technology has brought lots of benefits to the US economy

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Speaker 1: and to consumers as well. UM. And ultimately we need

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Speaker 1: technology to raise productivity, growth, raised living standards, improve life expectancy,

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Speaker 1: and so on. So I think we need a better

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Speaker 1: strategy for adjusting in the face of the computer information

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Speaker 1: technology that's been developing. We'll come back here with you

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Speaker 1: in just just a minute, but let me ask you

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Speaker 1: a quick question about immigration. And you mentioned the speech

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Speaker 1: to the President gave, the legislation he embraced this week.

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Speaker 1: What does it seem like a conversation about him ration?

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Speaker 1: It's gotten harder and harder to have in this country. Well,

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Speaker 1: it's very polarizing, and UM. I was um disappointed by

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Speaker 1: the White House's position on um immigration this week because

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Speaker 1: to inject immigration reform in the middle of tax reform,

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Speaker 1: infrastructure and just doing the basics of government. In fact,

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Speaker 1: I think the Trump administration would be well served and

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Speaker 1: I think they'll discover pretty soon they should just focus

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Speaker 1: on getting Congress to do the basics, pass a budget,

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Speaker 1: raised a debt limit, do so without drama. That's in

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Speaker 1: the best interest of the American people and injecting um

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Speaker 1: an immigration bilt which is not going to pass, really

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Speaker 1: just done for political reasons. I think it's quite unfortunate

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Speaker 1: because all it does in the end is divided the

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Speaker 1: American people. David Greer right now, four minutes, thirty eight seconds,

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Speaker 1: precious time with Alan Hooder. Alan great, too great to

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Speaker 1: see once again we were chatting during the break here.

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Speaker 1: But work you're doing on on music now, I think

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Speaker 1: this is this is fascinating and your your interests are

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Speaker 1: very to as we know, what are you doing exactly

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Speaker 1: when it comes to the music industry, what are you

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Speaker 1: looking at? Well? A long time ago I was invited

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Speaker 1: to be the keynote speaker at the poll Star Concert

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Speaker 1: convention and that got me involved in studying the music industry. So,

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Speaker 1: together with a group of other economists, I've started the

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Speaker 1: Music Industry Research Association. We're holding a conference at u

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Speaker 1: c l A next week on Thursday and Friday, August

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Speaker 1: tenth and eleven, UH and we have a really interesting

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Speaker 1: program where people are presenting papers on copyright protection and

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Speaker 1: our our copyright laws appropriate given the change in technology

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Speaker 1: that we've seen on how streaming is changing the music

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Speaker 1: industry on live live events. UM, I'm giving a paper

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Speaker 1: on the backgrounds of musicians. We were talking before about inequality.

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Speaker 1: Music historically has been a route for people who came

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Speaker 1: from underprivileged backgrounds to be able to move up. Is

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Speaker 1: that still the case, um? And the short answers, yes,

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Speaker 1: it doesn't look like it's changed all that much. If

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Speaker 1: I compare the backgrounds of UH superstar musicians and c

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Speaker 1: e O s that musicians come from more disadvantaged backgrounds. Um.

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Speaker 1: But interestingly, if you look at who's successful over time

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Speaker 1: in the music industry, it tends to be those who

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Speaker 1: are more middle class or more upper middle class. Even so,

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Speaker 1: there's something about staying power which seems to be connected

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Speaker 1: to the background. Have the technologists figured out the people

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Speaker 1: have to get paid that. Granted, there's a revolution and

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Speaker 1: we all have to sort out contracts and both sides

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Speaker 1: of a contract, but have they figured out over ten

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Speaker 1: difficult years that just as an example, through as CAP B,

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Speaker 1: M I and c SEC, it's songwriters just possibly may

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Speaker 1: have to pay the rent um. Slowly they're figuring this out,

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Speaker 1: and I think this is an existential threat to the

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Speaker 1: music industry as we know it, and it's not just

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Speaker 1: the technologists, it's also our laws which were developed for

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Speaker 1: a time of Stephen Stephen Foster. So uh, we are seeing, uh,

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Speaker 1: for the first time in several years, revenue rise for

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Speaker 1: recorded music because of streaming. More and more people are

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Speaker 1: signing up for the subscription services, not only in the

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Speaker 1: US but around the world. China's rapidly seeing growth and

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Speaker 1: starting to protect intellectual property for music, which I think

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Speaker 1: is a very positive development. But we're a long way

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Speaker 1: from having a sustainable, stable business model in the music industry,

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Speaker 1: and that's part of the reason for forming this association.

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Speaker 1: What does does economic mobility and mobility generally within music

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Speaker 1: tell you more broadly about economic mobility in the US today, Well,

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Speaker 1: it's awfully hard to make it to um. Yeah, I'll

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Speaker 1: tell you something. David I gave a speech at the

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Speaker 1: Rock and Roll Hall of Fame about how the whole

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Speaker 1: economy is becoming like the music industry winner take all

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Speaker 1: superstar economy, and in music, the top one percent are

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Speaker 1: responsible for about half of the income. In the economy

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Speaker 1: as a whole, the top one percent makes of the

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Speaker 1: income um and the rest of the economy has kind

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Speaker 1: of been mirroring the music industry in terms of the UH,

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Speaker 1: the incomes UH and the rewards from the economy going

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Speaker 1: so much to the top. So I think that's that's

431
00:23:08,400 --> 00:23:09,720
Speaker 1: a danger, and I think we can learn from the

432
00:23:09,800 --> 00:23:12,000
Speaker 1: music industry about why that's been happening. And I think

433
00:23:12,000 --> 00:23:14,280
Speaker 1: it is related to the technology that there's been kind

434
00:23:14,280 --> 00:23:17,359
Speaker 1: of a flight to quality and you and that topper

435
00:23:17,480 --> 00:23:20,439
Speaker 1: are generating much more attention than everyone else. And Professor Kruge,

436
00:23:20,560 --> 00:23:23,000
Speaker 1: thank you so much. You've been I'm Professor of Economics

437
00:23:23,000 --> 00:23:27,000
Speaker 1: and Public Affairs, Priston University. Just a real pleasure, to

438
00:23:27,000 --> 00:23:40,240
Speaker 1: an honor to have them with us on this Job's Day.

439
00:23:41,359 --> 00:23:44,760
Speaker 1: We welcome on Bloomberg Radio, Bloomberg Television worldwide. We wait

440
00:23:44,800 --> 00:23:48,040
Speaker 1: for the Gary Khne interview. Certainly will get positive spin

441
00:23:48,320 --> 00:23:51,080
Speaker 1: from Mr Crone to David Weston and John Farrell. Will

442
00:23:51,080 --> 00:23:53,680
Speaker 1: look for that later, but right now joining us William

443
00:23:53,680 --> 00:23:56,640
Speaker 1: Gross of Janice Anderson, as we look at it better

444
00:23:56,680 --> 00:24:00,000
Speaker 1: than good job's report, Bill a little bit of enthusisa

445
00:24:00,119 --> 00:24:03,480
Speaker 1: as in wage growth, is it a wage growth that

446
00:24:03,680 --> 00:24:08,680
Speaker 1: is enough to change chair Yellings dialogue into the September meeting?

447
00:24:10,840 --> 00:24:13,000
Speaker 1: Well maybe not, Tom, I mean it's point three as

448
00:24:13,040 --> 00:24:16,000
Speaker 1: opposed to point to but the y O y as

449
00:24:16,040 --> 00:24:19,960
Speaker 1: we call it as two point five percent and didn't change. So, UM,

450
00:24:20,000 --> 00:24:22,800
Speaker 1: you know, obviously that's a positive, but not much. Jobs

451
00:24:22,840 --> 00:24:25,320
Speaker 1: about two hundred thousand, as you mentioned, is more than

452
00:24:26,080 --> 00:24:28,600
Speaker 1: expected during this point in time in the cycle. So

453
00:24:28,680 --> 00:24:32,159
Speaker 1: it's a you know, it's a rather strong economic report,

454
00:24:32,160 --> 00:24:35,280
Speaker 1: but I don't think it moves markets much. Um. You know,

455
00:24:35,359 --> 00:24:38,920
Speaker 1: job growth to me doesn't seem to be stimulating economic

456
00:24:38,960 --> 00:24:43,160
Speaker 1: growth and consumer spending like it has in prior cycles. Wages,

457
00:24:43,240 --> 00:24:45,679
Speaker 1: as we talked about, our sort of anemic and the

458
00:24:45,760 --> 00:24:49,240
Speaker 1: mystery surrounding the participation rate sort of places havoc with that,

459
00:24:49,440 --> 00:24:52,840
Speaker 1: and UH, I think what seems most important out of

460
00:24:53,040 --> 00:24:57,160
Speaker 1: policy rates in the US and globally are core inflation rates,

461
00:24:57,200 --> 00:25:00,520
Speaker 1: which as you know, i've declined for one point five

462
00:25:00,600 --> 00:25:04,920
Speaker 1: percent in the US UH from one point eight point

463
00:25:05,000 --> 00:25:08,760
Speaker 1: three percent over the last few months. Um. You know,

464
00:25:08,960 --> 00:25:10,760
Speaker 1: I think until we see a lift back to two

465
00:25:10,760 --> 00:25:13,640
Speaker 1: percent in terms of the core inflation rate to fit,

466
00:25:14,480 --> 00:25:18,160
Speaker 1: UH probably rgins quantitative tightening but won't raise short term

467
00:25:18,240 --> 00:25:20,639
Speaker 1: rates this year. And we saw that with Governor Carney

468
00:25:20,680 --> 00:25:23,280
Speaker 1: in a different calculus yesterday, Bill and the jobs reporting.

469
00:25:23,280 --> 00:25:25,280
Speaker 1: I know David Gura wants to jump in here with

470
00:25:25,400 --> 00:25:28,240
Speaker 1: questions on labor is well, I know that if Janice

471
00:25:28,280 --> 00:25:31,680
Speaker 1: Henderson held a job's fair today, two thousand people would

472
00:25:31,680 --> 00:25:35,040
Speaker 1: show up. How can you have a good labor economy

473
00:25:35,560 --> 00:25:39,119
Speaker 1: and have twenty thousand plus people show up to to

474
00:25:39,400 --> 00:25:43,240
Speaker 1: uh put stuff in boxes for Amazon? It's almost is

475
00:25:43,280 --> 00:25:48,080
Speaker 1: if we have two separate labor economies. Well, I think

476
00:25:48,119 --> 00:25:50,680
Speaker 1: we do. We talked about the participation rate, at least

477
00:25:50,680 --> 00:25:54,320
Speaker 1: we've mentioned it, and it's significantly lower than what it was.

478
00:25:54,400 --> 00:25:58,600
Speaker 1: And that's the mystery to all central bankers. Um To

479
00:25:58,760 --> 00:26:01,560
Speaker 1: my way of thinking, it's the demographically related, it's a

480
00:26:01,600 --> 00:26:06,679
Speaker 1: structural problem. It suggests that you know, boomers are getting

481
00:26:06,720 --> 00:26:10,280
Speaker 1: older and older, and that they're training for new tech

482
00:26:10,440 --> 00:26:16,679
Speaker 1: jobs is insignificant, and therefore they don't participate in the economy.

483
00:26:16,960 --> 00:26:20,320
Speaker 1: Doesn't mean they can't come back in, but to my

484
00:26:20,400 --> 00:26:24,120
Speaker 1: way of thinking, absent significant job training that they come

485
00:26:24,160 --> 00:26:27,840
Speaker 1: back into those, um, you know, lower pain jobs that

486
00:26:27,920 --> 00:26:32,120
Speaker 1: perhaps Amazon are providing. Bill, there's a groundhog day, ned

487
00:26:32,200 --> 00:26:35,200
Speaker 1: Ryerson asked Quality two jobs day. Over these last few months,

488
00:26:35,240 --> 00:26:38,199
Speaker 1: the economy seems fine, fairly normal. What's changed since the

489
00:26:38,240 --> 00:26:40,639
Speaker 1: last jobs report to you? When you look at the U.

490
00:26:40,720 --> 00:26:46,520
Speaker 1: S economy, UM, not much, you know. We we we've

491
00:26:46,520 --> 00:26:50,720
Speaker 1: seen inflation stay low and maybe take a little bit lower,

492
00:26:50,760 --> 00:26:54,480
Speaker 1: which I think is significant. We've seen strong earnings growths

493
00:26:54,520 --> 00:26:58,439
Speaker 1: in terms of corporations and that's propelled the stock market.

494
00:26:58,480 --> 00:27:02,600
Speaker 1: And we see continuing UH participation by central banks, not

495
00:27:02,720 --> 00:27:05,800
Speaker 1: by the Fed, but by central banks up to a

496
00:27:05,920 --> 00:27:08,399
Speaker 1: trillion dollars annually by the e c B and the

497
00:27:08,400 --> 00:27:11,960
Speaker 1: b O J. And so to my way of thinking, yes,

498
00:27:12,000 --> 00:27:15,720
Speaker 1: the U. S economy is important, but the Eurland economy

499
00:27:15,800 --> 00:27:18,360
Speaker 1: is more important in terms of their inflation rate, their

500
00:27:18,359 --> 00:27:20,679
Speaker 1: growth rate, and what the ECB plans to do in

501
00:27:20,760 --> 00:27:24,639
Speaker 1: terms of timing UH in terms of their quantitative easy procedures.

502
00:27:24,720 --> 00:27:27,560
Speaker 1: It's really the money at the checks that are being

503
00:27:27,600 --> 00:27:29,600
Speaker 1: written and had been written for the past five to

504
00:27:29,720 --> 00:27:32,840
Speaker 1: six years that are important in terms of financial markets.

505
00:27:32,880 --> 00:27:36,359
Speaker 1: And once that stops to move in at the same pace,

506
00:27:36,440 --> 00:27:38,560
Speaker 1: then I think we're going to begin to see some change.

507
00:27:38,600 --> 00:27:42,040
Speaker 1: But until then, onward and upward. We have seen the

508
00:27:42,119 --> 00:27:44,680
Speaker 1: US President here a touting the strength of the stock

509
00:27:44,720 --> 00:27:48,080
Speaker 1: market right and left, commenting on doubt little earlier this

510
00:27:48,119 --> 00:27:50,800
Speaker 1: week on Twitter and in speeches. How much credit can

511
00:27:50,840 --> 00:27:55,200
Speaker 1: he claim for how the market is doing today? Oh,

512
00:27:55,240 --> 00:27:57,840
Speaker 1: I don't think much. You know. Let's let's talk about

513
00:27:57,880 --> 00:28:00,919
Speaker 1: regulation and deregulation, and I think there is where he

514
00:28:00,960 --> 00:28:04,800
Speaker 1: can claim at least some minor progress. It's only been

515
00:28:04,880 --> 00:28:08,280
Speaker 1: six months, but to the extent that the regulations have

516
00:28:08,440 --> 00:28:11,439
Speaker 1: been cut, and they have been cut significantly. I'm not

517
00:28:11,480 --> 00:28:16,040
Speaker 1: sure exactly where and how they apply in each particular state,

518
00:28:16,119 --> 00:28:21,760
Speaker 1: but the regulations and deregulations, I think I've been the

519
00:28:21,840 --> 00:28:24,439
Speaker 1: main boost that hasn't certainly been from many of his

520
00:28:24,520 --> 00:28:27,480
Speaker 1: policies they have been enacted yet. Bill. I thought your

521
00:28:27,600 --> 00:28:32,919
Speaker 1: essay for Janice Henderson recently Curveball was absolutely superb. And

522
00:28:32,960 --> 00:28:36,840
Speaker 1: you brought up a concept that Stanley Fisher lad with

523
00:28:37,080 --> 00:28:40,080
Speaker 1: at the Economic Club of New York well over eighteen

524
00:28:40,120 --> 00:28:43,760
Speaker 1: months ago, and that is we miss proportional change and

525
00:28:43,840 --> 00:28:47,400
Speaker 1: that short term interest rates are set really, really low,

526
00:28:48,000 --> 00:28:51,600
Speaker 1: and even if they come up a bit, that's a

527
00:28:51,760 --> 00:28:56,200
Speaker 1: huge proportional or percentage change in the movement of short

528
00:28:56,320 --> 00:29:00,360
Speaker 1: rates is at a risk of instability for central bankers

529
00:29:00,640 --> 00:29:05,400
Speaker 1: in the coming months ahead. Yeah, I think it is Tom.

530
00:29:05,440 --> 00:29:08,480
Speaker 1: You know, it's a difficult concept to define, and typically

531
00:29:09,160 --> 00:29:13,560
Speaker 1: central bankers have looked at changes in FED interest rates

532
00:29:13,680 --> 00:29:17,959
Speaker 1: or short term interest rates in terms of their absolute magnitude. Um,

533
00:29:18,200 --> 00:29:21,200
Speaker 1: you know, prior cycles have raised the FED funds by

534
00:29:21,200 --> 00:29:24,200
Speaker 1: three four racist points in some cases more going back

535
00:29:24,240 --> 00:29:27,480
Speaker 1: to eighty one. But proportionately, you know, since you start

536
00:29:27,560 --> 00:29:30,680
Speaker 1: so low, you know, your double and maybe even quadruple

537
00:29:30,920 --> 00:29:33,600
Speaker 1: at you know, at a two percent level in terms

538
00:29:33,640 --> 00:29:36,400
Speaker 1: of FED funds, and that has a significant impact. Why

539
00:29:36,800 --> 00:29:39,720
Speaker 1: you know, common sense basically says that if you're paying

540
00:29:39,760 --> 00:29:44,880
Speaker 1: a certain interest rate cover or margin and that margin

541
00:29:45,120 --> 00:29:49,200
Speaker 1: quadruples over the next few years, then that's a significant

542
00:29:50,080 --> 00:29:54,040
Speaker 1: problem for interst rate coverage and for corporate profits or

543
00:29:54,040 --> 00:29:58,000
Speaker 1: even individual stability. Well, the Governor Karney faced yesterday, and

544
00:29:58,080 --> 00:30:01,360
Speaker 1: let's fold this right into the Bloomberg New conversation with

545
00:30:01,400 --> 00:30:06,440
Speaker 1: Alan Greenspan of a few days ago. It's almost not stagflation,

546
00:30:06,520 --> 00:30:09,680
Speaker 1: as Chairman Greenspan put it, but a new kind of

547
00:30:09,800 --> 00:30:14,160
Speaker 1: stag in a new kind of flation. What kind are

548
00:30:14,240 --> 00:30:19,840
Speaker 1: they bill? Gross? Well, I, um, you know, I've listened

549
00:30:19,880 --> 00:30:22,840
Speaker 1: to uh Chairman Greenspan over the last few days. My

550
00:30:22,920 --> 00:30:26,880
Speaker 1: interpretation you know, he's suggesting that there's a bubble, there's

551
00:30:26,920 --> 00:30:29,880
Speaker 1: a bubble in interest rates, and the bubble has to

552
00:30:29,920 --> 00:30:33,240
Speaker 1: do with real interest rates, which are exceedingly low as

553
00:30:33,240 --> 00:30:35,640
Speaker 1: our nominal rates. But it's real interest rates that are

554
00:30:35,640 --> 00:30:38,000
Speaker 1: a problem. I would agree with them, um, and I

555
00:30:38,040 --> 00:30:41,200
Speaker 1: would say that these real interest rates low as they are,

556
00:30:41,600 --> 00:30:46,120
Speaker 1: you know, ultimately, ultimately, which is the key create inflation,

557
00:30:46,920 --> 00:30:50,880
Speaker 1: which is the inflation part of it. Um. The stag

558
00:30:51,200 --> 00:30:55,840
Speaker 1: has to do with productivity and productivity as we've always

559
00:30:55,880 --> 00:30:58,960
Speaker 1: been flatlining for the last five years. And unless we

560
00:30:59,000 --> 00:31:03,280
Speaker 1: can have a higher productivity level and combination with perhaps

561
00:31:03,360 --> 00:31:06,200
Speaker 1: a higher inflation rate over the next six to twelve

562
00:31:06,200 --> 00:31:10,560
Speaker 1: months than we have, you know, the stagflation where productivity

563
00:31:10,680 --> 00:31:13,240
Speaker 1: is low. As a thanks to two or three percent Bill,

564
00:31:13,240 --> 00:31:15,040
Speaker 1: We're gonna come back with Bill Gross and countin you.

565
00:31:15,080 --> 00:31:17,800
Speaker 1: Thank you, Bloomberg Television for being with us. We wait

566
00:31:17,840 --> 00:31:20,760
Speaker 1: for the day where the President tweets about Bill Gross.

567
00:31:20,800 --> 00:31:24,400
Speaker 1: Here's the president, excellent jobs number just released, and I've

568
00:31:24,440 --> 00:31:28,479
Speaker 1: only just begun. I have only just begun. Many jobs

569
00:31:28,520 --> 00:31:34,200
Speaker 1: stifling that many jobs stifling regulations continue to fall. Movement

570
00:31:34,440 --> 00:31:39,280
Speaker 1: back to the USA exclamation point. Bill Gross can a

571
00:31:39,440 --> 00:31:47,000
Speaker 1: president affect the job's economy and the jobs report, well,

572
00:31:47,880 --> 00:31:51,160
Speaker 1: you know, perhaps long term. You know, we've talked Tom

573
00:31:51,200 --> 00:31:54,800
Speaker 1: in the past about what President Trump is trying to

574
00:31:54,840 --> 00:31:58,760
Speaker 1: do in terms of individual corporations, and we've talked about

575
00:31:58,880 --> 00:32:02,800
Speaker 1: individual states and trying to bring jobs to those particular states.

576
00:32:02,800 --> 00:32:06,600
Speaker 1: So you know, I think a president can affect, uh,

577
00:32:06,680 --> 00:32:10,280
Speaker 1: those areas to some extent, but really, uh, you know,

578
00:32:10,440 --> 00:32:12,640
Speaker 1: job growth, to my way of thinking, is a functional

579
00:32:12,640 --> 00:32:17,280
Speaker 1: longer term structural factors such as demographics and the expected

580
00:32:17,320 --> 00:32:20,920
Speaker 1: return on capital, and those are things that I don't

581
00:32:20,920 --> 00:32:25,720
Speaker 1: think Trump ever studied about in uh in his master's thesis.

582
00:32:26,800 --> 00:32:29,080
Speaker 1: I heard that you heard that you could get that

583
00:32:29,520 --> 00:32:34,080
Speaker 1: grossying sarcasm there on Bloomberg Radio Worldwide. Bill, we are

584
00:32:34,160 --> 00:32:37,040
Speaker 1: ten years on into this financial crisis. It's an honor

585
00:32:37,120 --> 00:32:40,360
Speaker 1: to have you with us every job's day, and here

586
00:32:40,360 --> 00:32:43,000
Speaker 1: we are ten years on. You have been the clarion

587
00:32:43,120 --> 00:32:48,560
Speaker 1: voice on financial repression. Let's revisit that right now. Do

588
00:32:48,680 --> 00:32:53,760
Speaker 1: you assume that our enjoyment of low yield after any

589
00:32:53,840 --> 00:32:57,760
Speaker 1: kind of inflation will be called financial repression for years?

590
00:33:00,200 --> 00:33:02,800
Speaker 1: I think? So, you know, that's we've forgotten about Rogoff

591
00:33:02,880 --> 00:33:05,480
Speaker 1: and Reinhardt, right, that's about seven or eight years ago

592
00:33:05,520 --> 00:33:10,480
Speaker 1: when they sort of reinvented the thesis. But this has

593
00:33:10,520 --> 00:33:15,280
Speaker 1: been occurring for centuries. That financial repression for a long time, occurred,

594
00:33:15,480 --> 00:33:19,360
Speaker 1: you know, between the nineteen forties and actually up until

595
00:33:19,440 --> 00:33:22,760
Speaker 1: Vulgar in nineteen seventy nine, where central banks and the

596
00:33:22,800 --> 00:33:26,880
Speaker 1: FED repressed short term interest rates relative to inflation. So

597
00:33:27,280 --> 00:33:29,840
Speaker 1: financial repression has been with us. I think it will

598
00:33:29,840 --> 00:33:31,960
Speaker 1: continue to be with us. It has to do with

599
00:33:32,080 --> 00:33:36,960
Speaker 1: the neutral rate of interest, which is an amazing topic

600
00:33:37,400 --> 00:33:40,800
Speaker 1: of interest by central bankers everywhere, and to the extent

601
00:33:40,920 --> 00:33:43,880
Speaker 1: that the neutral rate of interest is far far lower

602
00:33:43,920 --> 00:33:46,600
Speaker 1: than what it was, and and FED officials think it's

603
00:33:46,600 --> 00:33:49,960
Speaker 1: below zero percent in real terms by the way, Um,

604
00:33:50,200 --> 00:33:54,280
Speaker 1: then financial repression will continue to exist. It basically means

605
00:33:54,280 --> 00:33:59,120
Speaker 1: that savers can't earn anything close to the rate of inflation,

606
00:33:59,240 --> 00:34:04,760
Speaker 1: let alone something for productivity growth and real growth. So um, yes,

607
00:34:04,840 --> 00:34:07,520
Speaker 1: And I think it's a negative. You've mentioned how I

608
00:34:07,680 --> 00:34:11,800
Speaker 1: talked about how it's a negative for financial institutions, business

609
00:34:11,840 --> 00:34:15,080
Speaker 1: models like consurance companies, pension funds, and even banks. And

610
00:34:15,719 --> 00:34:18,839
Speaker 1: one of these days, one of these years, perhaps, uh,

611
00:34:18,960 --> 00:34:21,400
Speaker 1: the economy is going to pay the price for financial

612
00:34:21,400 --> 00:34:24,600
Speaker 1: repression as opposed to reaping the rewards. Bill, tell us

613
00:34:24,640 --> 00:34:26,640
Speaker 1: what you see when you look at the yield curve? Now,

614
00:34:26,640 --> 00:34:29,600
Speaker 1: we were speculating yesterday as Governor Carney spoke in London

615
00:34:29,920 --> 00:34:32,000
Speaker 1: about the degree to which he's paying attention to to

616
00:34:32,040 --> 00:34:33,640
Speaker 1: the yield curve. There, what do you see when you

617
00:34:33,640 --> 00:34:37,600
Speaker 1: look at him? Well, I see it, Uh, you know,

618
00:34:37,640 --> 00:34:42,960
Speaker 1: a fairly normal yield curve. It has been flattening obviously

619
00:34:43,000 --> 00:34:46,080
Speaker 1: over the past three or four years, depending upon how

620
00:34:46,120 --> 00:34:48,960
Speaker 1: you measure it, whether it's two tens or two thirties

621
00:34:49,080 --> 00:34:53,279
Speaker 1: or even bills to UH to ten year treasures, there's

622
00:34:53,320 --> 00:34:57,400
Speaker 1: been a significant flattening. Um. The question becomes as a

623
00:34:57,520 --> 00:35:01,239
Speaker 1: rosen uh, as I wrote in my Investment Outlook of

624
00:35:01,239 --> 00:35:03,239
Speaker 1: a month ago, as to how flat it can go

625
00:35:03,440 --> 00:35:08,200
Speaker 1: before recession is threatened. And again, I think because of

626
00:35:08,239 --> 00:35:12,120
Speaker 1: the leverage inherent in the US economy and globally, that

627
00:35:12,239 --> 00:35:16,040
Speaker 1: you can't really flatten occurred much more or else the

628
00:35:16,239 --> 00:35:20,640
Speaker 1: danger for recession increases. Bill, I want to rip up

629
00:35:20,640 --> 00:35:22,960
Speaker 1: the script. A lot of people don't know, Bill, that

630
00:35:23,000 --> 00:35:26,240
Speaker 1: you've written very thoughtful, very matthew articles for the cf

631
00:35:26,320 --> 00:35:31,000
Speaker 1: A Institute we see another hedge fund today go down

632
00:35:31,000 --> 00:35:34,080
Speaker 1: in flames. This is the esteemed Andy Hall, with a

633
00:35:34,120 --> 00:35:38,800
Speaker 1: great track record in oil, oil strategy, oil trading of course,

634
00:35:39,280 --> 00:35:42,560
Speaker 1: iconic at City Group years ago. And Bill, this goes

635
00:35:42,680 --> 00:35:47,120
Speaker 1: into again making big bets and getting something wrong. You've

636
00:35:47,120 --> 00:35:50,320
Speaker 1: had the humility any number of times of being humbled

637
00:35:50,360 --> 00:35:53,480
Speaker 1: by the markets. What is it about hedge funds and

638
00:35:53,640 --> 00:35:57,560
Speaker 1: concentrated bets? When are we going to learn the value

639
00:35:57,719 --> 00:36:02,399
Speaker 1: of a good level of diversification versus betty knowing at

640
00:36:02,480 --> 00:36:07,960
Speaker 1: some point you're gonna be wrong, wrong, wrong, big. Well.

641
00:36:08,000 --> 00:36:11,000
Speaker 1: I think in many cases markets do and individuals do

642
00:36:11,120 --> 00:36:14,200
Speaker 1: know the value of diversification, and certainly even pension funds

643
00:36:14,239 --> 00:36:19,200
Speaker 1: in terms of that mix. But hedge funds, almost by

644
00:36:19,239 --> 00:36:23,080
Speaker 1: their nature, are leveraged players. And to the extent that

645
00:36:23,200 --> 00:36:25,640
Speaker 1: leverage is injected into a market, whether it's a bet

646
00:36:25,640 --> 00:36:27,960
Speaker 1: on gold or whether it's a bet on oil one

647
00:36:28,000 --> 00:36:32,000
Speaker 1: way or the other, then there's a significant potential I

648
00:36:32,040 --> 00:36:35,719
Speaker 1: guess for damage and destruction. I used to when I

649
00:36:35,719 --> 00:36:37,759
Speaker 1: play blackjack, Tom, I used to play black jack, and

650
00:36:37,760 --> 00:36:40,040
Speaker 1: I used to be a lot called Gambler's Ruin. And yes,

651
00:36:40,120 --> 00:36:45,279
Speaker 1: you couldn't bet you couldn't bet more than one fiftieth

652
00:36:45,400 --> 00:36:48,400
Speaker 1: of the stake of the chips on your table. You know,

653
00:36:48,520 --> 00:36:52,960
Speaker 1: before you're being threatened by what they call gamblers ruin,

654
00:36:53,040 --> 00:36:55,560
Speaker 1: which is a restraint of bad luck. Well, this is

655
00:36:55,600 --> 00:36:57,600
Speaker 1: so important, folks, that we have the honor of Ed

656
00:36:57,680 --> 00:37:00,600
Speaker 1: Thorpe of Massachusetts Institute of Technology. You in with Barry

657
00:37:01,000 --> 00:37:03,719
Speaker 1: Les recently, and I've interviewed at Thorpe and Bill you

658
00:37:03,760 --> 00:37:06,560
Speaker 1: and I've read at Thorpe cover to cover almost as

659
00:37:06,760 --> 00:37:10,799
Speaker 1: religion to our listeners who don't have the sophistication of

660
00:37:10,840 --> 00:37:14,480
Speaker 1: Andy Hall or Bill Grocer, John Tucker. The basic idea

661
00:37:14,640 --> 00:37:20,160
Speaker 1: here of diversification, How do you do that ten years

662
00:37:20,160 --> 00:37:23,560
Speaker 1: on from this financial crisis, with the odd fixed income

663
00:37:23,600 --> 00:37:29,120
Speaker 1: market that we have, How does Bill Gross diversify? Well,

664
00:37:29,480 --> 00:37:34,520
Speaker 1: you diversified carefully, and you diversified Tom with a sense

665
00:37:34,600 --> 00:37:40,759
Speaker 1: of trades. Carried trades, trades that supposedly yield um. You know,

666
00:37:40,800 --> 00:37:43,520
Speaker 1: a positive number, whether it be a spread, or whether

667
00:37:43,560 --> 00:37:46,839
Speaker 1: it be an interest rate tenure treasury at two point

668
00:37:46,880 --> 00:37:50,520
Speaker 1: two five or whatever. You do it very carefully because

669
00:37:50,640 --> 00:37:55,360
Speaker 1: all carried trades, all interest rates, spreads and risk premiums

670
00:37:55,360 --> 00:37:59,520
Speaker 1: are compressed and so you have to take that into consideration,

671
00:37:59,560 --> 00:38:02,279
Speaker 1: and too, pality. You can't just talk about stocks and

672
00:38:02,480 --> 00:38:06,600
Speaker 1: bonds because stocks and bonds are both artificially elevated. And

673
00:38:06,640 --> 00:38:09,600
Speaker 1: so what you do the the essence of the short

674
00:38:09,600 --> 00:38:12,960
Speaker 1: answer to your question, Thomas, you you begin to raise

675
00:38:13,320 --> 00:38:17,480
Speaker 1: much more cash because gat cash is the ultimate cushion.

676
00:38:17,960 --> 00:38:20,520
Speaker 1: I guess in terms of the risk of market. Is

677
00:38:20,520 --> 00:38:24,359
Speaker 1: your Mexican trade tired? You've been arbitraging Mexican yields here

678
00:38:24,400 --> 00:38:27,640
Speaker 1: and there and everywhere. Have we've seen enough of an

679
00:38:27,680 --> 00:38:30,239
Speaker 1: e m in a Mexico move where you've got to

680
00:38:30,239 --> 00:38:34,640
Speaker 1: go find something else to do with your marginal cash? Yeah?

681
00:38:34,680 --> 00:38:37,680
Speaker 1: I think so. I was in uh, you know, Mexican

682
00:38:38,320 --> 00:38:41,719
Speaker 1: linkers so to speak, tips, Mexican tips, and you know

683
00:38:41,760 --> 00:38:44,680
Speaker 1: they yield three and a half percent real. Um, you know,

684
00:38:44,680 --> 00:38:47,759
Speaker 1: I got out of those about a month ago. But um,

685
00:38:48,000 --> 00:38:51,160
Speaker 1: you know, Mexico still is a very undervalued pay so

686
00:38:51,800 --> 00:38:55,480
Speaker 1: especially in real terms, and especially when you compare to

687
00:38:55,560 --> 00:38:59,560
Speaker 1: the you know, the Big MAC index which the economist runs. Um,

688
00:38:59,719 --> 00:39:02,080
Speaker 1: you know, their big max are very very cheap, like

689
00:39:02,160 --> 00:39:07,000
Speaker 1: two and a half bucks versus states, and so ultimately

690
00:39:07,040 --> 00:39:09,200
Speaker 1: the pace at the pace, so the Mexican Paso has

691
00:39:09,200 --> 00:39:11,840
Speaker 1: a way to go in terms of strengthening relative to

692
00:39:11,880 --> 00:39:15,480
Speaker 1: the dollar. And that's the biggest bet I've met in Mexico.

693
00:39:15,640 --> 00:39:19,160
Speaker 1: What would be your counsel for Republicans in Washington to

694
00:39:19,320 --> 00:39:22,600
Speaker 1: jump start after what they've been through. What's your advice

695
00:39:22,680 --> 00:39:26,319
Speaker 1: to senators to representatives up for re election in two

696
00:39:26,360 --> 00:39:29,680
Speaker 1: thousand eighteen. They got a rebuild, they got a restructure.

697
00:39:29,719 --> 00:39:37,319
Speaker 1: What's the bill grows prescription to get Washington to assist America. Well,

698
00:39:37,360 --> 00:39:41,680
Speaker 1: my prescription is more of a populist as opposed to

699
00:39:41,880 --> 00:39:47,360
Speaker 1: corporate type of prescription. That's not the Republican mantra, unfortunately.

700
00:39:47,480 --> 00:39:50,520
Speaker 1: But my wave of the future Tom and that's five

701
00:39:50,600 --> 00:39:52,880
Speaker 1: or ten years out, and it depends on the next president,

702
00:39:52,880 --> 00:39:55,680
Speaker 1: of course, But my wave of the future continues to

703
00:39:55,719 --> 00:40:01,520
Speaker 1: believe that populism and that universal income, uh, universal benefits

704
00:40:01,560 --> 00:40:04,920
Speaker 1: are really the wave of the future because, uh, you know,

705
00:40:05,040 --> 00:40:09,560
Speaker 1: people are being replaced by technology and by robotization, and

706
00:40:09,600 --> 00:40:12,719
Speaker 1: to the extent that they can't find jobs, they need help.

707
00:40:12,760 --> 00:40:15,320
Speaker 1: And I think one of the biggest problems with government

708
00:40:15,400 --> 00:40:19,600
Speaker 1: is that, yes they've embraced technology, and yes corporations have

709
00:40:19,680 --> 00:40:23,680
Speaker 1: run that way, but but governments have failed to take

710
00:40:23,719 --> 00:40:26,480
Speaker 1: care of people that have been displaced by them. And

711
00:40:26,600 --> 00:40:28,600
Speaker 1: so that's what I would say to Republicans, get a

712
00:40:28,600 --> 00:40:31,560
Speaker 1: little more democratic. Bill Gross, thank you so much, and

713
00:40:31,640 --> 00:40:33,799
Speaker 1: may you speak to David Gura for a lengthy time.

714
00:40:33,920 --> 00:40:38,320
Speaker 1: It's times. It's a conversation, ly, Bill Gross. He's an

715
00:40:38,360 --> 00:40:40,440
Speaker 1: agent for Colin Kaepernick because he tries to find the

716
00:40:40,560 --> 00:40:56,040
Speaker 1: job in the NFL as well. Right now to our

717
00:40:56,160 --> 00:40:59,319
Speaker 1: David Weston and John Ferry. Here's David. No one in

718
00:40:59,360 --> 00:41:02,160
Speaker 1: the country were focused on than Gary Khane, director of

719
00:41:02,200 --> 00:41:05,160
Speaker 1: the President's National Economic Council. Gary joins us now from

720
00:41:05,160 --> 00:41:08,440
Speaker 1: the White House. Welcome back to the program. Thanks David,

721
00:41:08,440 --> 00:41:10,239
Speaker 1: thanks for having me. Okay, So Gary gives us as

722
00:41:10,239 --> 00:41:12,279
Speaker 1: we've already heard from the President in a tweet. He

723
00:41:12,280 --> 00:41:14,560
Speaker 1: thinks there's are really good numbers, although there's more to come.

724
00:41:14,800 --> 00:41:17,000
Speaker 1: Give us your sense and the presidents for that matter,

725
00:41:17,040 --> 00:41:19,160
Speaker 1: about how you look at these numbers, and specifically the

726
00:41:19,239 --> 00:41:22,680
Speaker 1: number of jobs added, the participation rate, and the wage growth.

727
00:41:23,560 --> 00:41:27,720
Speaker 1: So look, David, the President's completely right. These are good numbers.

728
00:41:28,320 --> 00:41:32,840
Speaker 1: Two nine thousand non farm payroll jobs, unemployment rate down

729
00:41:32,880 --> 00:41:35,879
Speaker 1: to four point three percent, down to a sixteen year low.

730
00:41:36,480 --> 00:41:40,319
Speaker 1: We're bringing Americans back into the workforce, and that's what

731
00:41:40,400 --> 00:41:42,440
Speaker 1: the presidents set out to do, and that's what the

732
00:41:42,440 --> 00:41:45,879
Speaker 1: President is doing. That is our objective, and we've done

733
00:41:45,920 --> 00:41:49,920
Speaker 1: that without our major policy initiatives being able to take place.

734
00:41:50,120 --> 00:41:54,440
Speaker 1: Number one policy initiative to deregulate the US environment. We

735
00:41:54,600 --> 00:41:59,720
Speaker 1: still haven't gotten most of our nominees through the regulatory process.

736
00:41:59,840 --> 00:42:02,240
Speaker 1: We out a couple through yesterday in a big package

737
00:42:02,239 --> 00:42:04,440
Speaker 1: of nominees that went through. We got some of our

738
00:42:04,520 --> 00:42:07,040
Speaker 1: CFTC members through. We didn't get our firm members through.

739
00:42:07,120 --> 00:42:09,400
Speaker 1: We didn't get other members through. When we get those

740
00:42:09,440 --> 00:42:13,240
Speaker 1: members through, we're gonna be able to continue deregulating markets

741
00:42:13,280 --> 00:42:16,680
Speaker 1: and the environment so we can can continue to invest

742
00:42:16,760 --> 00:42:20,200
Speaker 1: capital in the United States and can continue to create great,

743
00:42:20,320 --> 00:42:23,359
Speaker 1: high paying jobs in America. This is all about not

744
00:42:23,440 --> 00:42:26,200
Speaker 1: only growing the economy, but growing the economy so we

745
00:42:26,239 --> 00:42:29,000
Speaker 1: can create great, high paying jobs for Americans and bring

746
00:42:29,040 --> 00:42:31,520
Speaker 1: more and more people back to the workforce. That's what

747
00:42:31,560 --> 00:42:33,920
Speaker 1: the President's committed to do. That's what I'm committed to do.

748
00:42:34,000 --> 00:42:36,240
Speaker 1: So let's talk about those high paying jobs. Because wage

749
00:42:36,239 --> 00:42:38,080
Speaker 1: growth is up about two and a half percent year

750
00:42:38,160 --> 00:42:41,520
Speaker 1: over year. A lot of commons still find that rather tepid,

751
00:42:41,800 --> 00:42:44,359
Speaker 1: and it's good, but it's not good enough. How do

752
00:42:44,400 --> 00:42:48,640
Speaker 1: you explain this phenomenon where we have really a robust employment,

753
00:42:48,719 --> 00:42:51,320
Speaker 1: some people think full employment, and yet we're not seeing

754
00:42:51,360 --> 00:42:54,879
Speaker 1: the wage growth. So it is on the twelve month

755
00:42:55,000 --> 00:42:56,839
Speaker 1: or two and a half, the one month was three

756
00:42:56,880 --> 00:42:59,680
Speaker 1: tents of a percent, So the one month is annualizing

757
00:42:59,760 --> 00:43:01,759
Speaker 1: high higer than the twelve months, which is which is

758
00:43:01,800 --> 00:43:05,120
Speaker 1: interesting news to us. We spend time this morning discussing

759
00:43:05,239 --> 00:43:08,000
Speaker 1: what that means. If that's a new trend, we would

760
00:43:08,000 --> 00:43:10,840
Speaker 1: obviously like to see some wage inflation in the system.

761
00:43:11,120 --> 00:43:14,880
Speaker 1: Wage inflation means that we're putting more income in consumers pockets.

762
00:43:15,080 --> 00:43:17,440
Speaker 1: When consumers have more income, and then we lower their

763
00:43:17,480 --> 00:43:19,840
Speaker 1: tax rates on top of that, they'll have more money

764
00:43:19,880 --> 00:43:23,120
Speaker 1: to spend, driving more and more economic growth. So that's

765
00:43:23,160 --> 00:43:25,920
Speaker 1: really what we want to see. We need to create

766
00:43:26,120 --> 00:43:28,560
Speaker 1: the jobs. We need to create the jobs by getting

767
00:43:28,680 --> 00:43:32,200
Speaker 1: rid of the regulation that's bogging down industry. We need

768
00:43:32,239 --> 00:43:35,360
Speaker 1: to reform the tax code so we can incentivize companies

769
00:43:35,400 --> 00:43:37,879
Speaker 1: to invest in America. That's what we're trying to do.

770
00:43:38,040 --> 00:43:40,840
Speaker 1: We're totally committed to doing it, and we're we feel

771
00:43:40,880 --> 00:43:42,840
Speaker 1: confident that we can get that done between now and

772
00:43:42,920 --> 00:43:45,480
Speaker 1: the end of the year. Gary, you've inherited an economy

773
00:43:45,480 --> 00:43:48,879
Speaker 1: where the headline numbers for the labor market look really

774
00:43:48,960 --> 00:43:51,320
Speaker 1: quite solid, and they point towards a tight labor market,

775
00:43:51,360 --> 00:43:53,120
Speaker 1: and we haven't seen the wage growth we thought we

776
00:43:53,160 --> 00:43:55,280
Speaker 1: would get over the previous few years, and it's starting

777
00:43:55,320 --> 00:43:57,680
Speaker 1: to creep in. But I just wonder whether you think

778
00:43:57,719 --> 00:43:59,719
Speaker 1: there's a lot more specapacity, a lot more slack in

779
00:43:59,760 --> 00:44:02,240
Speaker 1: the lay up a market than the headline numbers suggest.

780
00:44:03,800 --> 00:44:05,880
Speaker 1: I think there is some slack in the labor market.

781
00:44:05,920 --> 00:44:08,360
Speaker 1: I think we can get the participation rate higher. I

782
00:44:08,400 --> 00:44:11,479
Speaker 1: think we can bring more Americans back to work by

783
00:44:11,640 --> 00:44:14,840
Speaker 1: creating the jobs and creating incentives and make it easier

784
00:44:14,880 --> 00:44:17,440
Speaker 1: for small and medium sized businesses to grow, make it

785
00:44:17,440 --> 00:44:21,080
Speaker 1: easier for businesses to start by making credit available, by

786
00:44:21,080 --> 00:44:23,680
Speaker 1: getting rid of regulation. We do think that there is

787
00:44:23,840 --> 00:44:26,560
Speaker 1: much more potential to bring people back into the labor force.

788
00:44:26,600 --> 00:44:28,520
Speaker 1: And Gared, do you think those issues You've pointed out

789
00:44:28,560 --> 00:44:31,040
Speaker 1: some structural issues, but you think really predominantly the issues

790
00:44:31,040 --> 00:44:35,719
Speaker 1: are quite cyclical. Uh, you know, we argue that that

791
00:44:35,840 --> 00:44:38,799
Speaker 1: all the time, what we're committed on right now is

792
00:44:38,840 --> 00:44:42,360
Speaker 1: to create the best possible jobs environment that we can create.

793
00:44:42,719 --> 00:44:45,880
Speaker 1: And we know, we really do know that when people

794
00:44:45,960 --> 00:44:48,840
Speaker 1: think about investing capital, and investing capital is what you

795
00:44:48,880 --> 00:44:51,360
Speaker 1: need to grow in economy, people look at a couple

796
00:44:51,360 --> 00:44:55,200
Speaker 1: of fundamental factors. Regulation and taxes are two of the

797
00:44:55,280 --> 00:44:58,200
Speaker 1: main driving factors they look at, and those are two

798
00:44:58,239 --> 00:45:00,839
Speaker 1: factors that we are spending an forrmous amount of time

799
00:45:00,840 --> 00:45:03,880
Speaker 1: and making better for anyone that wants to invest capital

800
00:45:03,920 --> 00:45:06,799
Speaker 1: in the United States. Garrett, you raised the taxes. We've

801
00:45:06,800 --> 00:45:09,239
Speaker 1: talked to you before about the plan. You came out

802
00:45:09,400 --> 00:45:11,719
Speaker 1: with the Group of Six as it's called, with an

803
00:45:11,719 --> 00:45:13,719
Speaker 1: outline of a plan. Where are you on that plan?

804
00:45:13,760 --> 00:45:16,480
Speaker 1: When are we going to see the specific legislative language?

805
00:45:17,480 --> 00:45:19,799
Speaker 1: So as you're right, the Group of Six continues to meet.

806
00:45:19,880 --> 00:45:23,919
Speaker 1: We put out a notice last week that shows how

807
00:45:23,960 --> 00:45:26,919
Speaker 1: well coordinated the six of us are, how we all

808
00:45:26,960 --> 00:45:30,279
Speaker 1: agree on the skeleton of the tax plan. We're now

809
00:45:30,440 --> 00:45:33,880
Speaker 1: working quite actively with the House Ways and Means Committee

810
00:45:33,880 --> 00:45:36,919
Speaker 1: and the Finance Committee in the Senate to actually get

811
00:45:36,960 --> 00:45:40,680
Speaker 1: some muscle structure on the skeleton to really drive tax

812
00:45:40,719 --> 00:45:42,719
Speaker 1: reform to where where we have to drive it. We're

813
00:45:42,719 --> 00:45:46,200
Speaker 1: gonna continuously meet over August and hopefully be able to

814
00:45:46,280 --> 00:45:49,600
Speaker 1: deliver a comprehensive tax bill early in the fall. Is

815
00:45:49,640 --> 00:45:53,120
Speaker 1: that September it's early, and that's early in the fall,

816
00:45:53,120 --> 00:45:54,799
Speaker 1: but there's a lot of other dates that are early

817
00:45:54,800 --> 00:45:57,040
Speaker 1: in the fall as well. And how confident you are

818
00:45:57,080 --> 00:45:59,279
Speaker 1: you at this point, given all the difficulties that have

819
00:45:59,360 --> 00:46:01,600
Speaker 1: been occurred ring up in Congress, that you've abibly get

820
00:46:01,640 --> 00:46:03,719
Speaker 1: this through this year, as you said before, is really

821
00:46:03,760 --> 00:46:07,880
Speaker 1: your goal. Look, I think the members of Congress understand

822
00:46:07,920 --> 00:46:11,480
Speaker 1: how important tax reform is. And if we're really going

823
00:46:11,560 --> 00:46:14,839
Speaker 1: to drive the economy and drive economic growth and get

824
00:46:14,880 --> 00:46:18,239
Speaker 1: from the muddling two percent to three percent, then we

825
00:46:18,320 --> 00:46:21,719
Speaker 1: have to do something structural to the US economy. The

826
00:46:21,760 --> 00:46:23,479
Speaker 1: structural things we have to do, and I've talked about

827
00:46:23,480 --> 00:46:26,000
Speaker 1: red reform, so I'll talk about taxes. We really have

828
00:46:26,160 --> 00:46:30,640
Speaker 1: to change our tax rate. We cannot be substantially higher

829
00:46:30,640 --> 00:46:32,719
Speaker 1: than the O E c D average tax rate out

830
00:46:32,719 --> 00:46:35,040
Speaker 1: there at a thirty five percent tax rate against a

831
00:46:35,080 --> 00:46:38,320
Speaker 1: tree O E c D average tax rate, you know,

832
00:46:39,000 --> 00:46:41,560
Speaker 1: percent higher taxes than the O E c D average

833
00:46:41,680 --> 00:46:44,839
Speaker 1: just does not make us competitive. We've got to get

834
00:46:44,880 --> 00:46:47,000
Speaker 1: in line with the rest of the world. We've got

835
00:46:47,040 --> 00:46:50,560
Speaker 1: to entice capital to be invested in the United States. Gary,

836
00:46:50,600 --> 00:46:52,320
Speaker 1: we caught up with Muhammeddalarian, a man of course that

837
00:46:52,400 --> 00:46:54,320
Speaker 1: you know well, and he talked about the much needed

838
00:46:54,320 --> 00:46:56,880
Speaker 1: handoff from monetary policy to to fiscal Do you think

839
00:46:56,920 --> 00:46:59,000
Speaker 1: we've relied too much on monetery policy in a country

840
00:46:59,000 --> 00:47:01,719
Speaker 1: a lot of the United States too long? Look, I

841
00:47:01,719 --> 00:47:03,759
Speaker 1: don't think this is a US issue. I think the

842
00:47:03,760 --> 00:47:06,840
Speaker 1: globe has been dealing with the whole monetary fiscal policy

843
00:47:06,880 --> 00:47:10,360
Speaker 1: issue since the two thousand and eight financial crisis. Central

844
00:47:10,360 --> 00:47:12,560
Speaker 1: banks did what they were supposed to do. But we

845
00:47:12,640 --> 00:47:15,480
Speaker 1: do have to transition the economy and in the system

846
00:47:15,560 --> 00:47:18,120
Speaker 1: to a more normalized system. And does that require a

847
00:47:18,160 --> 00:47:20,680
Speaker 1: handoff from monetary policy to fiscal Gary, is that way

848
00:47:20,719 --> 00:47:23,960
Speaker 1: you guys can help? Yeah, we can help. We can

849
00:47:24,000 --> 00:47:26,960
Speaker 1: help by removing barriers. We can help by making it

850
00:47:27,000 --> 00:47:30,319
Speaker 1: easier for capital flow into the United States. We can

851
00:47:30,360 --> 00:47:33,600
Speaker 1: get a more competitive tax system here, we can remove

852
00:47:33,760 --> 00:47:36,520
Speaker 1: regulation that stops capital from coming into the United States.

853
00:47:36,680 --> 00:47:39,040
Speaker 1: That's exactly what we're trying to do. Gary. As you

854
00:47:39,080 --> 00:47:40,600
Speaker 1: go back to your office there in the White House,

855
00:47:40,640 --> 00:47:42,960
Speaker 1: behind that behind you right now? What is will be

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Speaker 1: your number one priority? And today are you more confident

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Speaker 1: in achieving that or less than the day you walked in. David,

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Speaker 1: my number one priority for him now to the end

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Speaker 1: of the year is taxes. My second priority is taxes,

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Speaker 1: and if you're confused, my third priority is taxes. Gary

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Speaker 1: the U s National Economic Council with Director John Pharaoh

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Speaker 1: and David Weston in conversation from the White House Lawn

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Speaker 1: with Mr Kohn of the National Economic Council as well.

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Speaker 1: To summarize here, a great week. Thanks to all of

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Speaker 1: our team for their sport, particularly an exhaustive, exhausted team,

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Speaker 1: I should say in Washington, which has just really done

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Speaker 1: a a great job. For special thanks to Kevin Surreally,

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Speaker 1: our our chief Washington correspondent. Thanks for listening to the

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Speaker 1: Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,

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Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at

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Speaker 1: Tom Keene. David Gura is at David Gura. Before the podcast,

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Speaker 1: you can always catch us worldwide. I'm Bloomberg Radio s