WEBVTT - Surveillance: China & Fed With Beschloss 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene, along 0:00:09.240 --> 0:00:13.080 with Jonathan Ferrell and Lisa A. Brawnowitz Jailey. We bring 0:00:13.119 --> 0:00:17.159 you insight from the best and economics, finance, investment, and 0:00:17.280 --> 0:00:22.440 international relations. To find Bloomberg Surveillance on Apple Podcast, sun Cloud, 0:00:22.840 --> 0:00:26.280 Bloomberg dot Com and of course on the Bloomberg terminal. 0:00:29.960 --> 0:00:33.440 This is a really important conversation. Is typically done at Davos. 0:00:33.880 --> 0:00:36.040 It has maybe done at Jackson Hole. It has done 0:00:36.080 --> 0:00:39.760 at world meetings where she holds holds court with profound 0:00:39.760 --> 0:00:44.360 and original prospectives perspective, I should say on Central Asia, 0:00:44.680 --> 0:00:49.240 Sonny Beschlov is the rock Creek, the chief executive officer. Yes, 0:00:49.400 --> 0:00:53.200 very good on investment, expert on natural gas, but also 0:00:53.320 --> 0:00:56.680 expert on her Iran and all of Central Asia. And 0:00:56.760 --> 0:00:59.680 it is in crisis. It's best laws. Thank you so 0:00:59.720 --> 0:01:02.400 much for joining us today. You know, back to the 0:01:02.520 --> 0:01:09.720 nineteen fifties, the Iran Pakistan India gas pipeline. You've lived 0:01:09.760 --> 0:01:13.560 it at the Kaibra pass uh in West Pakistan. The 0:01:13.680 --> 0:01:16.040 romance of the British, the Great Game and all that 0:01:16.080 --> 0:01:20.039 other malarkey. Is China going to come in and take 0:01:20.120 --> 0:01:25.320 over the vacuum of the Iran Pakistan India pipeline is 0:01:25.360 --> 0:01:29.800 the US exits um Uh. You always go straight to 0:01:30.000 --> 0:01:33.480 the to the point of the matter. And it is 0:01:33.480 --> 0:01:37.120 really interesting as you set up studied these natural gas 0:01:37.160 --> 0:01:40.640 pipelines going through all the way in Asia but also 0:01:40.640 --> 0:01:44.840 in Europe. And no question that your politics is always 0:01:44.880 --> 0:01:48.520 more important than the physical aspect of these things. China 0:01:48.800 --> 0:01:53.160 is seeing avoid you know, we saw the Russians losing Afghanistan. 0:01:53.240 --> 0:01:57.480 We saw us pulling out as we speak. And no 0:01:57.640 --> 0:02:02.440 question that the Chinese are seeing big void um and uh. 0:02:02.480 --> 0:02:05.000 And they will take advantage because they will need a 0:02:05.040 --> 0:02:08.440 lot of energy to continue their growth and they know 0:02:08.560 --> 0:02:12.200 that natural is part of that solution to their coal problems. 0:02:12.360 --> 0:02:16.760 Our core memory here is cobalt in Africa. How the 0:02:16.880 --> 0:02:19.919 Chinese came in and worked out long term contracts on 0:02:20.120 --> 0:02:24.600 obscure minerals. How will they work with the Taliban? Will 0:02:24.639 --> 0:02:28.440 it be the same method long term contracts with some 0:02:28.680 --> 0:02:31.480 things on the back end that maybe we'll give them 0:02:31.480 --> 0:02:36.280 an advantage you know. Um again, I'm not an expert 0:02:36.360 --> 0:02:40.200 on on working with the Taliban, but um, I think 0:02:40.240 --> 0:02:44.840 what we're seeing this time around is that the economic 0:02:45.280 --> 0:02:48.920 um thinking on the Taliban side is not something that 0:02:49.040 --> 0:02:51.160 is clear at this the rest of the world. They 0:02:51.160 --> 0:02:53.800 are not a group that worked closely with the World Bank, 0:02:54.320 --> 0:02:58.160 or with multilateral institutions, or with eight organizations, so we 0:02:58.240 --> 0:03:00.960 have no idea how they will really behave when it 0:03:01.000 --> 0:03:05.760 comes to having international agreements, if any, and to sticking 0:03:05.760 --> 0:03:09.399 to it. So those I would not really um think 0:03:09.440 --> 0:03:13.240 about relying on. I think the question is where does 0:03:13.280 --> 0:03:15.680 the pipeline go. It doesn't have to go to Afghanistan. 0:03:15.919 --> 0:03:18.600 In the meantime, as Fanny. As Fanny, we are looking 0:03:18.680 --> 0:03:21.320 at a Jackson Hole that has a very big effect 0:03:21.360 --> 0:03:24.680 potentially at least on the international community, at least the 0:03:24.720 --> 0:03:29.280 international community that does fall within the international banking world. 0:03:29.360 --> 0:03:32.040 There is a question of whether any kind of taper 0:03:32.080 --> 0:03:36.360 announcement would affect the international community, arguably more than even 0:03:36.400 --> 0:03:38.640 domestic markets in the United States. What do you think 0:03:39.280 --> 0:03:42.640 You're so right, Lisa. I think the whole international point 0:03:42.840 --> 0:03:47.320 of Jackson Hall has been a little bit diminished in 0:03:47.400 --> 0:03:49.720 the last few weeks and people have not been talking 0:03:49.760 --> 0:03:52.080 about it. I think a lot of people are disappointed 0:03:52.160 --> 0:03:53.800 not to be there in person and for it to 0:03:53.840 --> 0:03:57.240 be virtual. But um, I mean my own thinking is 0:03:57.320 --> 0:04:00.520 that UM is that tapering is not going to start 0:04:01.240 --> 0:04:04.800 in um UM in this meeting, and I don't think 0:04:04.840 --> 0:04:08.480 that that j PAL is going to UM go there 0:04:08.880 --> 0:04:11.800 at this meeting. Is more likely in November December. But 0:04:11.880 --> 0:04:16.640 no question, the conversations that usually take UH take part 0:04:16.800 --> 0:04:21.040 in Jackson Hall at the margins are going to be 0:04:21.200 --> 0:04:23.560 the ones that will decide in terms of how the 0:04:23.600 --> 0:04:26.640 central bankers are communicating with each other, not just to 0:04:26.720 --> 0:04:29.080 the rest of the world. And those are the ones 0:04:29.160 --> 0:04:32.280 that I would watch for. And again I don't think 0:04:32.320 --> 0:04:35.279 that they will be talking about it too much about 0:04:35.520 --> 0:04:39.359 us papering at this particular meeting this Friday. Okay, so 0:04:39.440 --> 0:04:42.719 let's say you're correct, and if that does follow that timeline, 0:04:42.760 --> 0:04:47.160 what are the grammifications for emerging markets for asset prices 0:04:47.360 --> 0:04:51.760 following a slowdown in these bond purchases UM. So as 0:04:51.800 --> 0:04:54.680 we've seen a number of emerging markets have been already 0:04:54.760 --> 0:04:58.200 starting to increase their own interest rates. We've seen that 0:04:58.320 --> 0:05:01.680 happen over the la as few months, and we've seen 0:05:01.720 --> 0:05:06.159 actually some more tightening in emerging markets again as the 0:05:06.279 --> 0:05:09.679 usual sort of course of things. UM. The emerging markets 0:05:09.720 --> 0:05:12.600 that have a lot of US denominated. They that and 0:05:12.640 --> 0:05:15.760 do not have a lot of exports that our U 0:05:15.839 --> 0:05:18.960 S data base will be the ones to get get 0:05:18.960 --> 0:05:23.000 into difficulty. I think, given the way tapering will happen, 0:05:23.320 --> 0:05:28.839 which is probably incredibly gradually and not sudden, probably the 0:05:28.920 --> 0:05:32.080 impact on emerging markets will be something that is slower. 0:05:33.040 --> 0:05:36.479 The third job of the FED, which is stability of 0:05:36.880 --> 0:05:39.200 the global economy. The U S economy of course, but 0:05:39.240 --> 0:05:42.479 also the global economy, will not be something that j 0:05:42.640 --> 0:05:45.719 POW will be forgetting to consider. We've been having a 0:05:45.760 --> 0:05:49.119 lot of conversations about moral hazard. What is the level 0:05:49.120 --> 0:05:51.840 and the risk right now of moral hazard if we 0:05:51.960 --> 0:05:54.640 don't do something, if we don't taper as quickly as 0:05:54.680 --> 0:05:59.400 we should. I think the big problem if we don't 0:06:00.000 --> 0:06:03.159 start papering, whether it you know it is in October 0:06:03.240 --> 0:06:06.880 or November or December, more likely November December time, is 0:06:06.960 --> 0:06:11.320 the pressure of inflation again, UH are thinking that Rock Creek, 0:06:11.360 --> 0:06:14.719 and my thinking is that the supply chain problems are 0:06:15.200 --> 0:06:19.320 so huge, so overwhelming number one and all the other 0:06:19.360 --> 0:06:22.240 things that are going on in UM in terms of 0:06:22.680 --> 0:06:27.520 COVID related problems in various economies, that they are the one. 0:06:28.040 --> 0:06:31.760 They are the things that are governing price increases much 0:06:31.839 --> 0:06:37.240 more than typical inflationary pressures. So the issue really at 0:06:37.320 --> 0:06:41.159 hand is whether we get we are too late to move. 0:06:41.880 --> 0:06:46.080 But in general inflation is a slow process. If we 0:06:46.120 --> 0:06:49.279 see take off, I think Jay Powell and its colleagues 0:06:49.320 --> 0:06:52.159 at the Federal Reserves have lots of tools to catch 0:06:52.240 --> 0:06:54.799 up quickly if they need to. So not so worried 0:06:54.800 --> 0:06:58.520 about moral hazard. Thank you so much, greatly appreciate it. 0:06:58.520 --> 0:07:06.880 With the Rock Creek this morning, what we're supposed to 0:07:06.920 --> 0:07:09.320 do is dutifully come out right now and talk about 0:07:09.360 --> 0:07:13.320 price up, yield down or price down, yield up, talk 0:07:13.440 --> 0:07:17.080 full faith and credit. I g HW yield bonds with 0:07:17.120 --> 0:07:20.480 Bob Michael. He's been a JP Morgan for four hundred 0:07:20.560 --> 0:07:23.120 years and joins us this morning, thrilled that he could 0:07:23.200 --> 0:07:26.040 join us, Bob. But we're gonna spend some serious time 0:07:26.080 --> 0:07:29.880 here on the great unspoken, and you nail it in 0:07:29.960 --> 0:07:34.960 your research note. Stephanie Kelton at Stony Brook has changed 0:07:35.000 --> 0:07:38.480 the world. She came out with modern monetary theory. We 0:07:38.560 --> 0:07:42.200 are in an MMT experiment of some type as well, 0:07:42.760 --> 0:07:45.720 and the financial media is not talking about this enough 0:07:46.040 --> 0:07:48.800 because everybody sort of wishes the theory would go away, 0:07:48.880 --> 0:07:52.080 which is unfair to something that's had such an impact. 0:07:52.320 --> 0:07:58.000 Are you a believer in MMT more and Tom, It's 0:07:58.040 --> 0:08:01.760 hard not to be a belief. It seems like the 0:08:01.920 --> 0:08:05.480 go to policy response now in a crisis where the 0:08:05.600 --> 0:08:08.920 role of governments is to borrow large amount of debts 0:08:09.000 --> 0:08:12.840 and deploy it through fiscal stimulus and try to shortcut 0:08:12.960 --> 0:08:15.960 two recovery, and the role of central banks is to 0:08:16.000 --> 0:08:19.240 print lots of money and buy that debt and ensure 0:08:19.320 --> 0:08:22.600 that the cost of the recovery is affordable. I think 0:08:22.640 --> 0:08:26.320 it's worked. It's hard to see where any pain has 0:08:26.360 --> 0:08:29.680 been created or where there will be problems down the road. 0:08:29.720 --> 0:08:32.760 I think we all sense that there's got to be something. 0:08:33.120 --> 0:08:35.760 What I'd like to see how the Jackson hold is 0:08:35.800 --> 0:08:38.960 for the central bankers to say this is an emergency 0:08:39.040 --> 0:08:43.199 policy response. This isn't a normal part of our tool kit. 0:08:43.640 --> 0:08:47.320 They need to draw the line somewhere here. And I'm 0:08:47.320 --> 0:08:49.880 not surely said I think this is really important with 0:08:50.000 --> 0:08:53.520 no criticism of people like Claudia sam and Stephanie Kilt 0:08:53.520 --> 0:08:56.160 and I'm not even criticizing their cats and they have 0:08:56.280 --> 0:08:59.400 cats at home. It's very evident on Twitter that they do. 0:09:00.080 --> 0:09:05.600 So nobody has an exit strategy from our pandemic MMT well, 0:09:05.640 --> 0:09:07.520 and no one has a sense of exactly what the 0:09:07.559 --> 0:09:10.960 consequences will be either, Bob, we talk about the potential 0:09:11.120 --> 0:09:13.600 of some digital deal interious to use the same word 0:09:13.640 --> 0:09:17.439 from the day before at ramifications of from the MMT 0:09:17.640 --> 0:09:20.160 types of policies that you talk about, Yet we're not 0:09:20.200 --> 0:09:22.800 seeing them. Yields are not going up. Inflation to the 0:09:22.840 --> 0:09:25.640 extent that it is going up is recognized as passing 0:09:25.720 --> 0:09:28.280 and somewhat decelerating. So when are we going to see 0:09:28.320 --> 0:09:34.240 the negative ramifications from MMT like policies. Well, we're at 0:09:34.320 --> 0:09:38.000 an interesting point right now with Chair Pal and the 0:09:38.040 --> 0:09:41.960 FED in the crosshairs of what's going on in Washington, 0:09:42.360 --> 0:09:44.599 and he's got Jackson Hole in the September f O 0:09:44.760 --> 0:09:48.160 MC meeting to start backing out of this. But right 0:09:48.160 --> 0:09:52.680 now we're well past the crisis, and the recovery is underway, 0:09:52.840 --> 0:09:56.320 and we're recovering a lot of lost jobs, and we're 0:09:56.320 --> 0:09:59.120 going to close the output gap by the end of 0:09:59.160 --> 0:10:04.439 this year. And if m m T continues with half 0:10:04.440 --> 0:10:08.439 a trillion in an infrastructure bill and three and a 0:10:08.440 --> 0:10:11.960 half trillion in various forms of stimulus, and the FED 0:10:12.080 --> 0:10:15.280 continues to print money and buy debt. I think there's 0:10:15.320 --> 0:10:18.199 a moral hazard there where you're looking at the FED 0:10:18.640 --> 0:10:22.240 underwriting a lot of government policies. So I think it's 0:10:22.240 --> 0:10:25.319 a very good time for the FED to assert its independence, 0:10:25.600 --> 0:10:28.480 draw line in the sand, and say that they're bringing 0:10:28.520 --> 0:10:31.880 these things to an end. Now when, though, and what 0:10:32.000 --> 0:10:34.960 commentary do you need to hear to get them to 0:10:35.080 --> 0:10:38.920 do that, is that inflation goes from transitory to worrying. 0:10:40.920 --> 0:10:43.760 I think that's part of it. I think right now 0:10:43.880 --> 0:10:48.600 they can point to substantial further progress hasn't been made 0:10:48.800 --> 0:10:50.800 on a lot of the things that they look at. 0:10:51.240 --> 0:10:54.840 When when they look at where policy rates are, um, 0:10:55.080 --> 0:10:57.800 they don't need to be at zero for a lot longer, 0:10:57.840 --> 0:11:01.000 they don't need the hundred and twenty billion in in 0:11:01.360 --> 0:11:04.560 large scale asset purchases every month. They can move to 0:11:04.640 --> 0:11:07.520 something that's more normal. I step back and I look 0:11:07.559 --> 0:11:10.440 at where things are, and if this had been a 0:11:10.480 --> 0:11:14.960 normal cycle, say going back I don't know, forty years ago, 0:11:15.400 --> 0:11:18.440 maybe even fifteen or so years ago, at this point 0:11:18.440 --> 0:11:20.559 in the cycle, I'd expect the FED funds rate to 0:11:20.600 --> 0:11:24.520 be two around a zero real held, and I'd expect 0:11:24.520 --> 0:11:27.640 the ten year treasury to be around three about a 0:11:27.720 --> 0:11:30.840 one real heeld. So the fact that we're not there 0:11:31.000 --> 0:11:33.640 tells you the amount of distortion that the central banks 0:11:33.640 --> 0:11:36.880 are creating. Bob. But if the FED were to say 0:11:37.000 --> 0:11:39.800 at the Jackson Hole meeting they're planning to start tapering 0:11:39.800 --> 0:11:44.040 their bond purchases September, November, December at some point in 0:11:44.040 --> 0:11:46.640 the near future, I'd indicated it would be faster than expected. 0:11:46.679 --> 0:11:51.240 What would be the market response, Well, I think the 0:11:51.280 --> 0:11:55.680 market response would be a gradual rise in rates. And 0:11:55.920 --> 0:11:59.480 I know there's some debate out there about whether FED 0:11:59.559 --> 0:12:02.960 taper leads to a rise in rates or not. I 0:12:03.000 --> 0:12:06.600 don't get that at all. Let me tell you if 0:12:06.640 --> 0:12:11.559 if bond prices are the very definition of asset price inflation, 0:12:11.960 --> 0:12:17.000 you've got a central bank printing unlimited amounts of its 0:12:17.040 --> 0:12:21.240 own money and going in and buying a specific asset class. 0:12:21.720 --> 0:12:24.400 If that's not how you inflate the price of an 0:12:24.440 --> 0:12:28.040 asset class, how do you you look at the negative 0:12:28.120 --> 0:12:32.160 one percent real yield on ten year treasuries. I think 0:12:32.160 --> 0:12:34.839 the first stop is to get to something that looks 0:12:34.880 --> 0:12:40.520 around a zero percent and and we'll get there, we're 0:12:40.520 --> 0:12:42.960 gonna run out of time. But how do you affect 0:12:44.000 --> 0:12:47.640 a hundred basis point move in the real yield? Do 0:12:47.679 --> 0:12:49.960 you do it off phenomenal or do you do it 0:12:50.000 --> 0:12:54.400 with the help of inflation expectations. I think you do 0:12:54.480 --> 0:12:58.600 it with the combination of both, but mostly with nominal yields, 0:12:58.960 --> 0:13:02.880 mostly with the realization that you don't have the eight 0:13:02.920 --> 0:13:06.040 hundred pound gorilla of the Fed sitting on the bond market. 0:13:06.360 --> 0:13:09.760 And maybe other central banks will start to dial down, uh, 0:13:09.840 --> 0:13:12.640 their large scale Pharaoh Pharaoll right now is writing on 0:13:12.679 --> 0:13:15.240 manuscript brought on meditation. Bob, It's going to be a 0:13:15.280 --> 0:13:18.480 really important book. Uh, you know, I think Barnes and 0:13:18.559 --> 0:13:21.080 Noble is like waiting with boxes and boxes of it. 0:13:21.400 --> 0:13:25.280 You gotta do a book, Bob michael on MMT. That 0:13:25.320 --> 0:13:27.680 would be That would be just wonderful. It would really 0:13:27.679 --> 0:13:30.720 work with JP Morgan Asset Management, they've been on fire 0:13:37.200 --> 0:13:41.479 marksany sifting through all the cross winds. Here Moody's analytics 0:13:41.520 --> 0:13:45.840 chief economist, a well renowned and well respected economists who 0:13:45.920 --> 0:13:49.720 has been often cited for being accurate in a time 0:13:49.760 --> 0:13:51.960 of such great uncertainty. Mark, thank you so much for 0:13:52.000 --> 0:13:54.839 being with us. We start to look out to September 0:13:55.000 --> 0:13:58.280 to October to November. Regardless of what the Fed does, 0:13:58.440 --> 0:14:01.319 how can you characterize the men behind this labor market 0:14:01.400 --> 0:14:05.400 right now? Good? Very good recording lots of jobs, created 0:14:05.400 --> 0:14:08.280 almost a million jobs in July. That's on top of 0:14:08.280 --> 0:14:10.400 a million jobs in June. I don't think we can 0:14:10.440 --> 0:14:13.040 sustain that pace. But if you told me the economy 0:14:13.080 --> 0:14:15.280 creates a half million jobs per month on average over 0:14:15.280 --> 0:14:18.640 the next twelve eighteen months, that'll bring unemployment back in 0:14:18.920 --> 0:14:21.560 close to full employment, something kind of in the mid 0:14:21.600 --> 0:14:25.520 three percent range by likely twenty three. That sounds about 0:14:25.600 --> 0:14:27.960 right to me. So it's good, all right, So everyone 0:14:28.200 --> 0:14:31.200 agrees that it's good, and the degree which it is great, 0:14:31.320 --> 0:14:33.040 or the degree to which we've got a tightness in 0:14:33.040 --> 0:14:35.400 a late labor market that perhaps isn't recognize, is up 0:14:35.400 --> 0:14:38.280 for debate. However, there is also a question of the 0:14:38.360 --> 0:14:41.000 enhanced unemployment benefits what the role off will do. Will 0:14:41.040 --> 0:14:43.280 it allow more people are sort of push them back 0:14:43.560 --> 0:14:46.120 into the labor market, or will it simply reduce the 0:14:46.160 --> 0:14:49.200 buying power of consumers that see uh, some of their 0:14:49.240 --> 0:14:51.920 income depleted. This is a great uncertainty. Where do you 0:14:51.960 --> 0:14:56.360 weigh in on that. Well, I around the debate over 0:14:56.840 --> 0:15:00.360 whether the supplemental unemployment insurance that's the three dollar extra 0:15:00.520 --> 0:15:03.320 per week that folks are getting in about half the 0:15:03.360 --> 0:15:06.560 states UH, that was part of the American Rescue Plan. UH. 0:15:07.160 --> 0:15:09.840 I don't think that that had a major impact on 0:15:10.200 --> 0:15:12.200 the willingness of people to go to work. I think 0:15:12.240 --> 0:15:14.600 that's probably on the list of reasons. But it's towards 0:15:14.680 --> 0:15:16.920 the bottom of the list of reasons. And we got 0:15:16.960 --> 0:15:19.480 some data points regarding that late last week we got 0:15:19.560 --> 0:15:23.000 state employment data for July and you could see in July, 0:15:23.320 --> 0:15:27.400 and you know, you had half the states UH eliminate 0:15:27.480 --> 0:15:31.000 that the supplemental insurance benefit. In July, there was no 0:15:32.160 --> 0:15:34.800 effect an employment in those states compared to states that 0:15:35.720 --> 0:15:38.560 kept the unemployment insurance. So so, you know, a lot 0:15:38.560 --> 0:15:40.640 of data points to calm the script still being written. 0:15:40.680 --> 0:15:42.840 We'll see and I expect we'll see some impact, but 0:15:42.880 --> 0:15:45.240 it's really on the margin. And Mark, in the depths 0:15:45.240 --> 0:15:48.360 of oh eight oh nine, you were the reigning optimist. 0:15:48.480 --> 0:15:50.960 You were the one everybody tried it out to say, 0:15:51.000 --> 0:15:53.360 you know what, folks, we're going to recover from this. 0:15:53.760 --> 0:15:57.640 It took some time, but folks, Mark Zandi absolutely nailed 0:15:58.040 --> 0:16:02.760 the economic recovery of twelve and on. You have a 0:16:02.760 --> 0:16:07.080 heated note mark Sandy saying, would everybody calm down by 0:16:07.120 --> 0:16:12.200 the overheating effects of this trillions of dollars of stimulus? 0:16:12.600 --> 0:16:18.080 Why should I be calm about overheating? Well, the first 0:16:18.080 --> 0:16:19.280 thing I'd say is there's a lot still a lot 0:16:19.280 --> 0:16:21.480 of slack in the economy, Tom, I mean, the unemployment 0:16:21.560 --> 0:16:24.760 rate is still five point four percent full employments, something 0:16:24.760 --> 0:16:27.160 in the mid threes, maybe even the low threes. We 0:16:27.240 --> 0:16:29.840 still have millions of people who stepped out of the 0:16:29.880 --> 0:16:33.200 workforce during the pandemic, who aren't even counted as unemployed. 0:16:33.280 --> 0:16:35.120 So you know, we got a long way to go. 0:16:35.360 --> 0:16:37.240 I you know, we're head in the right direction. We're 0:16:37.280 --> 0:16:39.880 creating lots of jobs, and we got pretty deep holed 0:16:39.960 --> 0:16:42.760 dig out of and this support we're talking about now 0:16:42.840 --> 0:16:45.320 that you know something, some flavor of the build Back 0:16:45.400 --> 0:16:49.120 Better agenda the present by uh you know, unveiled earlier 0:16:49.200 --> 0:16:54.360 this year, that doesn't really kick in until four and 0:16:54.360 --> 0:16:56.560 and to do a degree that you know, I don't 0:16:56.560 --> 0:16:59.720 really think that is an inflationary issue nothing. I quickly 0:16:59.760 --> 0:17:02.720 point it out. There's a lot of aspects of the 0:17:02.800 --> 0:17:06.000 plan that address inflation. So, for example, a big part 0:17:06.000 --> 0:17:08.600 of the plan is to increase housing supply, and we 0:17:08.640 --> 0:17:11.359 all know there's a very severe shortage of affordable housing 0:17:11.400 --> 0:17:14.280 and that's driving up rents and rank growth is the 0:17:14.640 --> 0:17:18.160 single most important aspect of in so you know that 0:17:18.240 --> 0:17:21.000 will go a long way to addressing that particular aspect. 0:17:21.640 --> 0:17:24.640 Mark there was a folk crew of years ago called Stubbs, 0:17:24.680 --> 0:17:27.440 Blinder and Zandy. They were outstanding. I loved what they 0:17:27.480 --> 0:17:32.160 did that by coffee houses all through eastern Pennsylvania. David 0:17:32.280 --> 0:17:35.639 Stubbs over in London with JP Morgan is just brilliant 0:17:36.000 --> 0:17:41.800 on the technological overlay in our underestimation of productivity. You've 0:17:41.840 --> 0:17:44.440 studied this with the former vice chairman of the FED. 0:17:44.960 --> 0:17:48.480 How do you take in the technology overlay right now 0:17:48.920 --> 0:17:51.000 and what it will do to wage growth? Do we 0:17:51.280 --> 0:17:56.240 grossly worry about wage growth where we should not? Yeah, 0:17:56.320 --> 0:17:58.840 I'm not. That's a great point. You know, wage growth 0:17:59.040 --> 0:18:01.439 has held up admirable well during the pandemic, and I 0:18:01.440 --> 0:18:03.680 do expect it to continue to accelerate as the labor 0:18:03.680 --> 0:18:06.600 market continues to improve unemployee comes in. But I'm not 0:18:07.520 --> 0:18:10.720 I'm not concerned that this is inflationary because productivity growth 0:18:10.920 --> 0:18:14.040 is also accelerated. Now, part of that is you know, 0:18:15.560 --> 0:18:18.320 cyclical related to the pandemic measurement issues, all that kind 0:18:18.359 --> 0:18:21.199 of stuff. But abstracting from all that, looking through the noise, 0:18:21.280 --> 0:18:25.080 it feels like productivity growth underlying productivity growth that's accelerating. 0:18:25.480 --> 0:18:28.760 And there's many reasons for that. One is, I think technology. 0:18:28.880 --> 0:18:30.600 You know, there's a lot of technologies out there that's 0:18:30.680 --> 0:18:33.919 just taking time for businesses to incorporate, incorporate into their 0:18:33.920 --> 0:18:35.960 business practices. But I think they are and I think 0:18:35.960 --> 0:18:39.439 we are seeing productivity improvement. That if that is the case, 0:18:39.960 --> 0:18:42.000 then that you know, that's a win win, right. That's 0:18:42.000 --> 0:18:45.040 a win for businesses because they can you know, pay 0:18:45.119 --> 0:18:48.159 higher wages and still maintain their earnings. Is obviously a 0:18:48.200 --> 0:18:51.280 win for workers as you know, it's a reason to 0:18:51.320 --> 0:18:54.639 be more feel more confident about our long term fiscal 0:18:54.680 --> 0:18:57.840 situation because it means more tax revenue. You know, there's 0:18:57.440 --> 0:19:01.160 an endless reasons for optimis and if in fact, protectival 0:19:01.200 --> 0:19:04.560 growth is accelerated, I you know, you know, hard to know, 0:19:04.760 --> 0:19:09.480 but it feels like Tom that product productivity growth is improving. 0:19:10.320 --> 0:19:12.119 Mark though, on that note, you mentioned that We may 0:19:12.160 --> 0:19:16.080 not get some of this fiscal stimulus until twenty three, 0:19:16.200 --> 0:19:18.960 but by then, what is the argument that it's too late, 0:19:19.000 --> 0:19:24.240 Maybe the economy won't need it. Well, the UH support 0:19:24.240 --> 0:19:26.600 we're talking about now, the fiscal package, the build back 0:19:26.640 --> 0:19:29.160 better gender, is not about short term growth. It's about 0:19:29.200 --> 0:19:32.240 long term growth. It's about lifting long term growth, lifting 0:19:32.240 --> 0:19:36.399 productivity growth because of better public infrastructure. Everything from roads 0:19:36.440 --> 0:19:40.240 to broadband is about lifting labor force participation in labor 0:19:40.280 --> 0:19:43.760 force growth. That's you know, if I give lower income, 0:19:43.840 --> 0:19:47.760 lower middle income households support for childcare and elder care 0:19:47.880 --> 0:19:50.239 and paid family leave, that's going to make it more 0:19:50.320 --> 0:19:51.879 likely that they can go to work. Right now, they 0:19:51.920 --> 0:19:54.520 can't get a lot of low income households, particularly women 0:19:55.160 --> 0:19:57.119 in low income households, can't go to work because they 0:19:57.119 --> 0:19:59.600 can't pay for childcare. And this is helping free them 0:19:59.640 --> 0:20:01.159 up so they and go to work. So this is 0:20:01.160 --> 0:20:03.840 about long term economic growth, and it's also about making 0:20:03.880 --> 0:20:07.640 sure that the benefits of the increasing long term economic 0:20:07.680 --> 0:20:11.080 growth a crew to lower and middle income households EF 0:20:11.119 --> 0:20:13.480 folks have been left behind in our economy over the 0:20:13.520 --> 0:20:17.720 past three four decades, UH Mark, this has been wonderful. 0:20:17.720 --> 0:20:20.320 Marks Andy, thank you so much, greatly appreciated. With Moody's 0:20:20.320 --> 0:20:31.320 analytics there with a decidedly optimistic cast. When you are 0:20:31.359 --> 0:20:33.960 on the train between Boston and New York, you look 0:20:34.000 --> 0:20:38.480 across the water at the secrets of the General Dynamics Company. 0:20:38.680 --> 0:20:44.240 Arguably Phee Novakovic has resurrected General Dynamics into what it 0:20:44.400 --> 0:20:47.800 used to be and what it is moving forward. This 0:20:47.880 --> 0:20:51.280 is a really important interview with David Rubinstein, of course, 0:20:51.359 --> 0:20:56.400 peer to peer conversations, David, she just basically rescued General Dynamics. 0:20:56.600 --> 0:21:00.480 There's no no beating around the bush. What is the 0:21:00.520 --> 0:21:05.600 Novakovic method. Well, she's very tough, she's very smart. Um, 0:21:05.640 --> 0:21:07.840 she knows the defense industry quite well. She had worked 0:21:07.840 --> 0:21:10.280 with the Pentagon for quite some time and she write 0:21:10.320 --> 0:21:13.560 omb was overseeing the defense BUDG difference sometime when she 0:21:13.640 --> 0:21:16.480 took over in two thousand thirteen. The previous year General 0:21:16.520 --> 0:21:19.840 Dynamics had lost about six or seven hundred million dollars 0:21:20.240 --> 0:21:22.040 and so she turned it around and now the stock 0:21:22.119 --> 0:21:25.159 is up about a d since she's been the CEO. 0:21:25.320 --> 0:21:28.800 So a very good turnaround story. It's a good turnaround story. 0:21:28.840 --> 0:21:31.160 But as you well know, it Carlile. This is so 0:21:31.240 --> 0:21:35.520 much a contract by contract boomer bus business as well. 0:21:36.119 --> 0:21:40.880 Is she mackenzie did into a different kind of company 0:21:41.080 --> 0:21:43.439 or is it the same defense contract or that you 0:21:43.520 --> 0:21:47.920 and I used to stare at across the bay in Grutten. Well, 0:21:47.920 --> 0:21:50.440 it's a little different. And that many defense companies today 0:21:50.440 --> 0:21:52.920 are making a lot of money on I T or 0:21:52.960 --> 0:21:56.240 electronic related things or things relating to cyber and that's 0:21:56.280 --> 0:21:59.040 an important part of what General Dynamics is doing as well. 0:21:59.400 --> 0:22:01.960 But the bread and butter of General Dynamics has long 0:22:02.040 --> 0:22:06.560 been tanks and submarines, and they are very very good 0:22:06.560 --> 0:22:08.640 at that. They also owned golf Stream, and golf Stream 0:22:08.640 --> 0:22:11.439 has been extremely profitable in recent years. Well it is. 0:22:11.600 --> 0:22:13.440 You know, I decided not to go for the gulf 0:22:13.440 --> 0:22:15.640 Stream seven hundred, David. I just thought it was too 0:22:15.640 --> 0:22:19.159 extravagant for what we're doing at surveillance. Francine wanted to 0:22:19.200 --> 0:22:21.879 go there. Tell us about golf Stream. Is it a 0:22:21.880 --> 0:22:26.520 bolt on business or is it early part of her vision? Well, 0:22:26.520 --> 0:22:29.640 when they bought it from uh TED Enforcement many years ago, 0:22:29.760 --> 0:22:33.679 it was seen as uh unclear what this mission was 0:22:34.320 --> 0:22:37.760 because it really wasn't a defense part of of General Dynamics. 0:22:37.760 --> 0:22:41.600 It's not a defense uh industry uh kind of company. 0:22:41.840 --> 0:22:45.520 Kind of company, but in recent years General Dynamics has 0:22:45.640 --> 0:22:47.760 really turned around golf stream to the point where it's 0:22:47.760 --> 0:22:50.600 clearly the in my view of the elite of of 0:22:50.640 --> 0:22:53.359 the business jet business in the United States. And they 0:22:53.359 --> 0:22:55.760 have done quite well in their G six fifties, there 0:22:55.840 --> 0:22:58.320 G seven hundreds and so forth, so it's a very 0:22:58.440 --> 0:23:02.120 very profitable business for them now. Mr Rubinstein. It's incredible 0:23:02.160 --> 0:23:05.119 the timing of this interview as well, just given the 0:23:05.160 --> 0:23:09.720 events in Afghanistan. Any insight that you can glean from 0:23:09.760 --> 0:23:13.000 that interview just after the Taliban took over cobble and well, 0:23:13.200 --> 0:23:18.480 where we think about the future of defense spending, Well, 0:23:18.480 --> 0:23:22.439 there's always a thought in Washington and when presidents of 0:23:22.440 --> 0:23:25.240 the United States are Democrats and the Congress is Democratic, 0:23:25.480 --> 0:23:27.960 probably defense spending will go down. But I think the 0:23:28.000 --> 0:23:31.159 events in Afghanistan will probably make it more likely defense 0:23:31.200 --> 0:23:34.359