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

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Speaker 1: Jay Lee. We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg. Joining us,

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Speaker 1: NaN's continue the conversation on what was agreed or what

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Speaker 1: wasn't agreed of the weekend between the United States and

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Speaker 1: China is Marion Schneider, pet singer of Channam House, and

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Speaker 1: she joins us Now, Maryann, good morning to you. Good morning.

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Speaker 1: The President of the United States said that China has

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Speaker 1: agreed to reduce and removed tariffs on imported American made cars.

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Speaker 1: Beijing hasn't said this yet, hasn't confirmed it either. Marianne,

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Speaker 1: have you got an idea on what was actually agreed

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Speaker 1: over the weekend or are we going to get drip

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Speaker 1: fed this through the week Well, we haven't seen anything

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Speaker 1: official yet. And again both sides, the United States and China,

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Speaker 1: had statements come out of there to twenty summer and

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Speaker 1: decide meeting ask awards, but neither statement specifically mentioned those tariffs.

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Speaker 1: It's also quite interesting because you know, China had earlier

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Speaker 1: in the year Lord It's tariffs to fifteen percent, and

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Speaker 1: so the forty percent tariffs that Ruperty seeing are actually

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Speaker 1: more in the fact of the retaliation for your tariffs.

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Speaker 1: So the real question is that even if those tariffs

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Speaker 1: are reduced, are they going to be below fifteen percent

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Speaker 1: or about fifteen percent, which if they reminded about fifteen percent,

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Speaker 1: it's not really adding that much. That's a really, really

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Speaker 1: good point. And the other difference between the two statements

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Speaker 1: is one references ninety days and the other one doesn't.

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Speaker 1: Do you just assume there is a ninety day period

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Speaker 1: in which we've got to negotiate this now, Marianne Well,

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Speaker 1: I certainly think there is. I mean than Trump has

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Speaker 1: made it very clear that there is this tight deadline

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Speaker 1: and that there is also you know, pressure to get

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Speaker 1: quick wins. A real question though, is you know, can

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Speaker 1: that happen in ninety days, because it's not just about parents.

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Speaker 1: The real fundamental question is about issues around force, technology transfer,

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Speaker 1: intellectual property stuff, and that I think has a lot

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Speaker 1: more you know, long term implications, and it will take

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Speaker 1: longer than ninety days to come to a resolution on that.

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Speaker 1: So we could see a player up um. I think

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Speaker 1: as we're heading into new February of next year, Marian,

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Speaker 1: I'm sure it was beaten into you at the Fletcher

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Speaker 1: School that all the negotiations and diplomacy is about incentives.

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Speaker 1: I still don't understand the incentives for the Chinese to

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Speaker 1: be anything but patient and weigh out this impatient president.

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Speaker 1: Did you see anything that would change that assumption? We

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Speaker 1: not really mean. There's certainly not just the Chinese that

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Speaker 1: also utters are adopting this waited out strategy. But now

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Speaker 1: that the Chinese have this breathing space of ninety days,

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Speaker 1: ninety days is not a whole lot. And so you know,

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Speaker 1: they have said that they're gonna um really start talking

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Speaker 1: in the future, which is significant because the alternative could

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Speaker 1: have been a further escalation of this trade war. So

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Speaker 1: that is a positive stuff. But again, the real question

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Speaker 1: is what ultimately is the end game, And here it's

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Speaker 1: not quite clear what the Trump administration is ultimately trying

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Speaker 1: to achieve. Is it just about reducing the trade and

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Speaker 1: balance with China, or is it about these longer substantial

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Speaker 1: um concerns about Chinese practices are also addressing China's China

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Speaker 1: made in China five program, and that for the Chinese

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Speaker 1: really is not negotiable. So what can the Chinese offer

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Speaker 1: the United States to stop this from escalating once again

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Speaker 1: in ninety days time? Marianne, Well, again it is some

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Speaker 1: of those short winds that they can offer to redo,

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Speaker 1: mostly the United States UM trade and balance that they have.

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Speaker 1: And there the question is, you know, again the statement

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Speaker 1: is very weak in the sense of UM covering agricultural products,

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Speaker 1: energy and industrial cares, but there is no specific list

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Speaker 1: of what products those are. And also there is no

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Speaker 1: mention even though they're talking about substantial trade, what quality

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Speaker 1: and quantity we're talking about. So a lot of questions remain,

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Speaker 1: but again both sides have gotten some breathing space. Both

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Speaker 1: sides are also claiming this as a victory and compared

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Speaker 1: to alternatives of an escalating trade war, is a welcome step.

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Speaker 1: And now we just have to make sure that there

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Speaker 1: isn't the escalation again coming next year. Marian Thank you

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Speaker 1: so much. Mary Schneider Petsinger's your economics fellow at Chatham

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Speaker 1: House in London. It is always important with a terrific

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Speaker 1: communication of the FED to speak to the presidents, to

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Speaker 1: the governor, to the chairman rarely, and of course we

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Speaker 1: hear from Chairman Paul the Economic Club of New York.

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Speaker 1: And then there is the vice chairman, whether it is

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Speaker 1: Stanley Fisher, Alan Blinder, Allis Rivlin, the vice chairman has

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Speaker 1: a special place, including the newly minted vice Chairman, Richard

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Speaker 1: Clarata of Columbia University. Here is Vice Chairman Clarata this

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Speaker 1: morning on trade in terms of the outlook for the

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Speaker 1: US economy, obviously trades an important part. I don't think

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Speaker 1: we're going there. Obviously, trades are very important part of

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Speaker 1: the global economy right now. I think the US economy

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Speaker 1: is is in good shape, and we can talk about,

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Speaker 1: you know, risky scenarios, but I think the baseline outlooks

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Speaker 1: very solid. With within the trade is the idea of

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Speaker 1: exports and imports of America. How does FED policy link

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Speaker 1: into these political debates or do you feel it will

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Speaker 1: be in the future more removed and more sterile to

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Speaker 1: monetary policy. Well, I'm not going to get into the politics.

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Speaker 1: I think sure FED policies and very important in terms

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Speaker 1: of making sure that the U s economy achieves maximum

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Speaker 1: employment and stable inflation. And that's really a dual mandate

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Speaker 1: given to the FED by the Congress, and and we're

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Speaker 1: really focusing on what we need to do with our

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Speaker 1: tools to achieve that mandate. German pol focused in the

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Speaker 1: speech at the Economic Club of New York on financial stability?

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Speaker 1: Should that be a mandate of your Fed? Well, the

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Speaker 1: way that the way that I think about financial stability

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Speaker 1: is obviously it's obviously very important, and the FED has

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Speaker 1: an important role in supervision and regulation. And also if

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Speaker 1: we achieve, as we are price stability and full employment,

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Speaker 1: that itself will contribute to financial stability. So I think

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Speaker 1: that's the appropriate ballot. Do we need a new regime

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Speaker 1: at the FED that looks at the combination of real

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Speaker 1: economic growth and price change? Well, Tom, I think right

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Speaker 1: now the FED has a framework that's been in place

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Speaker 1: since two thousand and twelve, and I think it's serving

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Speaker 1: the FED well. That set a lot of age since

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Speaker 1: two thousand twelve. And one thing is, as I think

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Speaker 1: my colleague and friend John Williams emphasizes that we're in

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Speaker 1: a world of what we call the low our star,

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Speaker 1: low equilibrium riskless rates, and what that means is that

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Speaker 1: in a future downturn, there's less room for conventional monetary policy,

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Speaker 1: and what that means is that central banks need to

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Speaker 1: be just as worried about keeping inflation at target as

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Speaker 1: on going above the target. So I think our current

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Speaker 1: framework serves as well. That said, next year, as we've announced,

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Speaker 1: the fellow Reserve System, including the Reserve Banks, will be

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Speaker 1: doing an assessment and review of our existing framework, seeking

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Speaker 1: input from a wide range of of experts and stakeholders,

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Speaker 1: and we're going to try to get a sense about

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Speaker 1: ways we can perhaps refine our framework. The vice Chairman

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Speaker 1: of the Federals, f Richard clownd to that, speaking on

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Speaker 1: a Bloomboog surveillance a little bit out of you drop

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Speaker 1: him by after his trip to Buea Sundays, Argentina. Michael McKay,

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Speaker 1: international economics and Policy correspondent joining a some blom book

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Speaker 1: writing out here in New York. Monity, Mike, we take

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Speaker 1: a symmetrical approach to our inflation target. They've been saying

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Speaker 1: that for a while. Do they have any buy in

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Speaker 1: from the market, Um, it's hard to tell because we

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Speaker 1: haven't been above two percent. The real question is do

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Speaker 1: we have a practical application of that symmetrical policy if

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Speaker 1: they go above what they think is the neutral rate? Um,

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Speaker 1: how long do they go above and do they then uh,

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Speaker 1: come come back down? That's always the hard part is

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Speaker 1: to to start coming back down at what if you're

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Speaker 1: if you're going above neutral to keep inflation down and

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Speaker 1: inflation starts to fall, then do you start cutting rates

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Speaker 1: because inflation is falling? What's your metric? It hasn't really

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Speaker 1: been tried before. The conclusion of a lot of market

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Speaker 1: participants over the last week or so is the Federal

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Speaker 1: Reserve has dropped into a lower gear. This is a

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Speaker 1: go slow fete from now on. Would that be the

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Speaker 1: wrong conclusion, Mike, it would in a certain sense. I mean,

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Speaker 1: it makes logical sense to think that way. But here's

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Speaker 1: where we are. We came off zero. From zero to

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Speaker 1: where we are now, it was easy to say the

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Speaker 1: Fed's gonna raise rates. The Fed's gonna raise rates because

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Speaker 1: they were well below the neutral rate. They had unusually

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Speaker 1: low interest rates. So for the markets it was there

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Speaker 1: was no question. Now the Fed is very close to neutral.

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Speaker 1: They may want to be a little more restrictive for

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Speaker 1: a little while. Rich said that, you know, that was

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Speaker 1: a possibility, but they don't want to overshoot. They don't

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Speaker 1: want to send the economy into recession because rates are

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Speaker 1: too tight. So it becomes a month to month, data

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Speaker 1: point by data point, look at what's going on in

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Speaker 1: the economy. And if you look at what's going on

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Speaker 1: in the economy now, the Atlanta Fed GDP latest GP

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Speaker 1: numbers fallen back to two point six percent, So we've

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Speaker 1: gone for four percent to just over two. Uh. It

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Speaker 1: would make logical sense that they could slow down, particularly

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Speaker 1: if inflation doesn't pick up. But we aren't going to know.

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Speaker 1: They aren't going to go And that was the point

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Speaker 1: Vice Chairman Claren had tried to make to you, Tom.

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Speaker 1: They aren't gonna know until they get close to the

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Speaker 1: time to make the decision. It's called data dependency. How

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Speaker 1: far is the market on the dots from the present dots, Well,

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Speaker 1: if you like record far they narrowed. Uh, what's if

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Speaker 1: you look at what happened last year, they were pretty

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Speaker 1: much on where the market is. The market is already

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Speaker 1: pricing in much lower path for two thousand nineteen. You

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Speaker 1: have two things happening. Real rates are going up, but

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Speaker 1: inflation break evens are falling. One of those two things

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Speaker 1: is going to be correct. Either inflation is going to

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Speaker 1: slow or growth is going to be stronger, and so

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Speaker 1: U you know which one you bet on is what

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Speaker 1: tells you what's happening in the market. Just quickly, Mike

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Speaker 1: some scheduling issues that I want some insight from you on.

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Speaker 1: When do you think we can find out when the

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Speaker 1: Chairman's testimony to the Joint Economic Committee will be It

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Speaker 1: was schedule for Wednesday. I imagine that's going to be canceled.

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Speaker 1: I would imagine it will be postponed, and it's probably

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Speaker 1: at the moment the Joint Economic Committee and the FED

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Speaker 1: are probably negotiating about a second date. Scott Sumner, Michael

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Speaker 1: Betts were, but we had a collective Scott's somnar ahenominal

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Speaker 1: GDP targeting. Thank you Michael McKee for that brain freeze

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Speaker 1: earlier this morning. This is Bloomberg always important. Is free

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Speaker 1: of them is with Pantheon macro economics with a real

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Speaker 1: look to China as well. What is the symbolism free

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Speaker 1: of yuan at six point eight nine? It's in seven

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Speaker 1: big figures from a six point nine four or so?

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Speaker 1: Is that for real? Is that a market move? Is

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Speaker 1: that a managed move by China? Um? I don't see

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Speaker 1: it as a managed move. I think the trade tensions

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Speaker 1: have been weighing very heavily on on the currency, although

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Speaker 1: kind of pulling back from that a little bit, there

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Speaker 1: are serious fundamental reasons why we should have seen the

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Speaker 1: currency weakening over the course of this year. We have

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Speaker 1: a very divergent outlook for monetary policy from the PBOC

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Speaker 1: versus the FED. Allowing on from from your previous conversation there,

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Speaker 1: we do think that the Fed is is um is

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Speaker 1: likely to continue hiking rates And yeah, okay, they have,

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Speaker 1: they have clawed back some of that optionality, but what

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Speaker 1: they were talking about was a broad range there for

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Speaker 1: for the natural in creative interest, and that could mean

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Speaker 1: one hike or it could mean UM five hikes UM.

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Speaker 1: And and given that we've just managed to avoid the

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Speaker 1: tariff hike to in in January UM, the likelihood is

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Speaker 1: that the capacity is going to continue closing and tightening

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Speaker 1: in the US, so the FED is going to continue hiking.

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Speaker 1: And then on the odd opposite side of that, we

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Speaker 1: have the p v O c UM, which is doing

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Speaker 1: all it can without actually cutting rates UM to to

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Speaker 1: ease liquidity in and to bring about an easier monetary

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Speaker 1: UM monetary conditions. Um, and those two those two stances

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Speaker 1: are very divergent. So we we have kind of fundamental

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Speaker 1: reasons for the for the curency to be depreciating. But

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Speaker 1: the news over the weekend is obviously UM. It brought

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Speaker 1: us back from that, and John, the Secretary of Treasure,

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Speaker 1: I believe I don't see mb see maybe this is facts,

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Speaker 1: be as I can't keep track us to make sure

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Speaker 1: let me say it again, United States, to make sure

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Speaker 1: China not depreciating currency. Unbelievable. And the comments continue to

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Speaker 1: come in. I believe the Treasury Secretary is speaking to

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Speaker 1: a group of reporters at the moment outside just to

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Speaker 1: get your thoughts on where we are in ninety days,

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Speaker 1: what is your base case? Well, at the moment, I

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Speaker 1: have to of course, there are hurdles. There are a

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Speaker 1: big hurdles to be surmounted in terms of an actual

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Speaker 1: deal in reality, but in terms of something that they

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Speaker 1: could they could call a deal on both sides and

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Speaker 1: that would be acceptable to to the media. UM, I'd

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Speaker 1: say that that has to be within reach just because

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Speaker 1: of the political lay of the land that the Republicans

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Speaker 1: and will be looking forward to twenty and if they're

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Speaker 1: in marginal seats, they won't want to be spiking inflation

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Speaker 1: in the interim. And on the Chinese either, they said

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Speaker 1: that the growth situation, we don't see any signs yet

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Speaker 1: that growth is is stabilizing UM and therefore the Chinese

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Speaker 1: are not wanting to escalate matters any further either. So

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Speaker 1: in terms of the ninety days UM, I would expect

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Speaker 1: there to be something that is either labeled as a

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Speaker 1: deal or that or that we kicked this the further

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Speaker 1: tariff heights into the long grasp. But over the longer term,

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Speaker 1: we certainly have these two economies on a on a

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Speaker 1: collision course. Still, so in the short term, the move

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Speaker 1: music improves and I want to get a better idea

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Speaker 1: of the next policy. Leave that the Chinese try and

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Speaker 1: pull to help the domestic economy, what do they do

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Speaker 1: freer Well, the UM they can't really cut rates at

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Speaker 1: the moment, and at the moment what they've the inter

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Speaker 1: bank rates are sitting there at the bottom of the

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Speaker 1: of the corridor. They didn't really do anything during the PVOs.

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Speaker 1: He didn't really do anything during November in terms of injections,

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Speaker 1: but that because they've already achieved through QU three A

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Speaker 1: lengthening of mature eurities that are available in the in

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Speaker 1: the UM, in the inter bank market, through the open

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Speaker 1: market operations that they undertook, and through what was quite

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Speaker 1: a hefty cut in the reserve requirement ratio, and previously

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Speaker 1: that they've made in terms of of of of accepting

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Speaker 1: widening the acceptance of collateral in the medium term lending facilities.

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Speaker 1: So they've been actually easing since since Q two, really UM.

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Speaker 1: And and if you look at what is I'd say

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Speaker 1: that the earliest leading indicator of of of UM policy

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Speaker 1: or where we're going in terms of Chinese growth and

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Speaker 1: how that feeds through from the pbo C, the earliest

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Speaker 1: leading indicator is generally generally the church in short term

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Speaker 1: say um, we're going to leave it there free of beamish,

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Speaker 1: thank you so much. With Pantheon macro economics as well.

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Speaker 1: Each path is different. We're spending the next four days

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Speaker 1: to reconsider the path of George Herbert Walker bush I

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Speaker 1: looked at him at the second film of The Dragging

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Speaker 1: of the Young Pilot out of the Pacific Ocean at

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Speaker 1: midway watched that an entirety worth it seeing folks, I

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Speaker 1: should say an entirety. But each path is different. And

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Speaker 1: one of the great things about Alan Simpson of Wyoming

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Speaker 1: is his path was a little different. Pim he was

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Speaker 1: to be polite or ambunctious. He was troublemaker. He was

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Speaker 1: a troublemaker. He did not grow up with the advantages

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Speaker 1: of President Bush. And yet they served together, they battled together.

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Speaker 1: They had so much in common. And we're thrilled to

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Speaker 1: bring you this morning nationwide the Senator from Wyoming who

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Speaker 1: will only ever be Allen Simpson, Senator Simpson, your thoughts

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Speaker 1: on about me? And I tell you think that was funny,

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Speaker 1: didn't you? Well know? I love it? Anyway, a wave

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Speaker 1: of emotion. We knew what was coming. We all knew

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Speaker 1: it was coming. In fact, five years ago they called

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Speaker 1: me and said, you know, he's having trouble. We'd like

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Speaker 1: you to speak, and so on. It was very, very great,

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Speaker 1: great honor. But then he said that put the harps

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Speaker 1: back in the closet. You remember that one put the

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Speaker 1: harps back in the closet about six times during the

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Speaker 1: last five years. But Anna and I saw him this

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Speaker 1: summer in Kenny Bunkport. He couldn't walk, but he was

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Speaker 1: he was his charming self, and Ann said, he they're handsome,

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Speaker 1: how are you? And then he gets the big grand

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Speaker 1: I told him a couple of stories. I said, you're

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Speaker 1: deprived of good, rich stories here living in a cocoon.

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Speaker 1: Let me give you a couple. I did, and he

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Speaker 1: threw his head back. God he loved it. He we

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Speaker 1: we we had a wonderful time. We we fished together,

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Speaker 1: we hunted together, and traveled together. We legislated together. There

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Speaker 1: were so many times when I was bob to old

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Speaker 1: assistant to one of the great legislators, Bob Dole, And

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Speaker 1: don't forget Bob Dole, who had lost to him in

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Speaker 1: the primary, had one of the nicest relationships with with

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Speaker 1: Bush that I want to go. You guys are from

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Speaker 1: another time in place. Do you have an optimism in

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Speaker 1: this two thousand eighteen that we can migrate somewhere back

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Speaker 1: to the Simpson Doll Bush Grace. Well, we have to

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Speaker 1: unless unless the Congress wants to continue be just an

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Speaker 1: absolute laughing stock. I mean, you talk to people out

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Speaker 1: on the road. I mean, I live in Cody, whelming

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Speaker 1: but I'm not in a cave, and I travel a

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Speaker 1: great deal. And for God's sake, they bring up the names.

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Speaker 1: They know who they are, they name them Democrat and Republic.

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Speaker 1: And this guy's a jerk, this guy's a bubblehead. This

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Speaker 1: is one of the worst screwballs on earth, as if

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Speaker 1: they had no function or no brain. So you keep

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Speaker 1: doing what they're doing and laying little traps for each other.

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Speaker 1: That's the thing that is so absolute stupefying. Let's say,

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Speaker 1: let's see what we'll do with this. We can get

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Speaker 1: the president de Vito a bit, Oh, we'll get him,

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Speaker 1: won't get Oh, we'll do this, and that will be

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Speaker 1: a campaign slot when we did this guy the next time.

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Speaker 1: For God's sake, the earth is burning and they're just

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Speaker 1: trying to figure out how to you for each other.

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Speaker 1: All right, So continue doubt that path. What can we

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Speaker 1: take away do you believe from each individual person's memory

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Speaker 1: of President Bush to try to build just what you're describing. Well,

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Speaker 1: that flag will be down for about thirty days, and

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Speaker 1: it seems to me that during the time the flag

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Speaker 1: is down, people are going to say, in about a

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Speaker 1: week's what's the flag down for? There? Half my head? Well,

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Speaker 1: it was for George Bush. Well, yeah, Bush I heard

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Speaker 1: about him? What about him? Yea? He well, he did

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Speaker 1: some good things. He did some foreign policy things. Oh yeah,

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Speaker 1: what were they? And then he described we did some

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Speaker 1: domestic policy. Well, what were those clean air acts that

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Speaker 1: Americans for disabilit these? I mean, on and on it goes,

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Speaker 1: and they'll say, we wonder why I can't why can't

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Speaker 1: that happen now? And I say, because because nobody has

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Speaker 1: a degree of the country. First, the country, George said,

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Speaker 1: I nearly died for this country. I fought for this country.

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Speaker 1: I didn't fight for the Republicans. I didn't fight for

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Speaker 1: the Democrats. I fought for this country that I love.

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Speaker 1: Whatever happened to that, And that's a damn good question.

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Speaker 1: There was a report over the weekend that at what

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Speaker 1: one time President Bush was meeting with then the newly

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Speaker 1: elected Congressman Newt Gingrich, and the conversation apparently turned to

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Speaker 1: the differences between the newly elected congressman and then President Bush.

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Speaker 1: And President Bush responded when asked, what do you fear

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Speaker 1: about us? He said along the lines that he was

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Speaker 1: concerned that at times idealism in that moment, the specific

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Speaker 1: idealism of the Republicans, that idealism would sometimes get in

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Speaker 1: the way of the smooth running of government. Do you

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Speaker 1: hear that echo in President Bush as a memory? You know,

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Speaker 1: I could certainly ascribe to it. I do not know

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Speaker 1: of that visit, but that sounds just exactly like George.

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Speaker 1: That would be a great concern to him. He would

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Speaker 1: come away from that kind of meeting and he'd be

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Speaker 1: he'd be puzzled more than anything, because his relationships were

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Speaker 1: so deep in the House with Democrats Ross and Kowski, Montgomery,

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Speaker 1: I could name on and on, uh and and so

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Speaker 1: when stuff would hit the fan, George had and and

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Speaker 1: the new guys over there were trying to get him.

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Speaker 1: He had a core of people who said, no, you

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Speaker 1: ain't gonna get my pal George. He was over here

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Speaker 1: for a while. You know, we know him, we're here

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Speaker 1: in the house, and we loved him in respect to him,

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Speaker 1: and that worked for quite a while. And then when

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Speaker 1: that disappeariodmen, all his showments were gone. Uh. You know,

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Speaker 1: then the crumble very quickly. Senator, I must have your

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Speaker 1: thoughts with the heritage of Simpson Bulls and where the

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Speaker 1: fiscal policy is now, it is unimaginable to George Herbert

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Speaker 1: Walker Bush. I'm going to suggest it's unimaginable to Allen

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Speaker 1: Simpson for the next president, for the next Congress, what

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Speaker 1: is the urgency to address our fiscal policy. We'll go

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Speaker 1: give some kind of voodoo injection to the a ARP

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Speaker 1: because they don't give a damn for people under fifty.

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Speaker 1: It's a great, big group about thirty nine million Americans

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Speaker 1: bound together by airline discounts and RV discounts and rectile dysfunction.

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Speaker 1: They had their sole purposes to take care of people

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Speaker 1: over fifty. That means they don't care about their ground children.

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Speaker 1: And they were supposed to talk about the depth and

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Speaker 1: the death was sid well, hell, they don't know. The

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Speaker 1: difference between the debt and the deficit of the epicode

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Speaker 1: is every year the debt is on automatic pilot and

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Speaker 1: they've handed it to our grand children. You can't even

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Speaker 1: make so security systems solvent. You can't do something with

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Speaker 1: the unsustainable course of healthcare. This is absolute madness. We

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Speaker 1: must leave it there. Allan Simpson, thank you so much,

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Speaker 1: the Senator from Wyoming. As we begin to touch upon

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Speaker 1: the life of George Robert water Bush, thanks for listening

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Speaker 1: to the Bloomberg Surveillance podcast. Subscribe and listen to interviews

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Speaker 1: on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer.

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Speaker 1: I'm on Twitter at Tom Keane before the podcast. You

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Speaker 1: can always catch us worldwide. I'm Bloomberg Radio