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

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Speaker 1: Jay Leye. 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 for

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Speaker 1: the Federal Reserve, then the White House announcing plans to

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Speaker 1: nominate Pimco's Rich Clarada as the vice chair of the

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Speaker 1: Federal Reserve, and filling the final piece in the feeds

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Speaker 1: three most powerful spots Yelling Fisher and Dudley Outs and

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Speaker 1: pal Clarada Williams In After all the concerns and conversations

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Speaker 1: about the changes the new administration would make to the

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Speaker 1: US Central Bank, the new Fed looks a whole lot

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Speaker 1: like the old Fed. Arm band holds any credit chief

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Speaker 1: US economists Joy and just Now and Harm It was

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Speaker 1: a concern about a year ago about what this Federal

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Speaker 1: Reserve would look like, and you'd have to say, not

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Speaker 1: much change. Yeah, I totally agree. I think it's we

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Speaker 1: have seen pretty pretty good choices. There has been a

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Speaker 1: year ago there was a concern that the whole FET

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Speaker 1: maybe totally revemped. After after several comments from the administration. UM.

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Speaker 1: Then the next concern was we have a new FET

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Speaker 1: chair who lacks this formal economics degree. But I think

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Speaker 1: these concerns have been addressed by adding two very strong,

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Speaker 1: you know, vice chairs with with John Williams and Rich Clarada.

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Speaker 1: So I think this new inner circle of the FAT

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Speaker 1: um is a pretty solid group. They're fine choices, not

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Speaker 1: quite the heavyweights of Janet Yellen and Stanley Fisher, but

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Speaker 1: really fine choices. And it's testament to the institution, isn't

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Speaker 1: it that this administration has taken these picks so seriously

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Speaker 1: harm there's already quite good picks. I I totally, I

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Speaker 1: totally agree, yes, and and and the market, I mean,

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Speaker 1: there was not much market reaction yesterday to Rich Clarada's

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Speaker 1: um intended to the intended nomination of Rich Clara, I

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Speaker 1: don't think it has formally happened yet, but um, I mean,

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Speaker 1: first of all, he was he was a front runner

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Speaker 1: for the position for some time. He was rumored to

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Speaker 1: be the front runner. But but yeah, as I said, also,

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Speaker 1: over the last several months, the market has the notion

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Speaker 1: in the market has settled that that the FAT will

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Speaker 1: remain the fat and will continue to do what it

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Speaker 1: did under the previous leadership. So harm no policy shift,

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Speaker 1: at least not imminently. As the Federal Reserve, the old

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Speaker 1: guard hands it over to the new guard. Has the

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Speaker 1: reaction function of this Federal Reserve with these new names?

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Speaker 1: Has that shifted in any way, shape or form as

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Speaker 1: far as you're concerned, Um, well, the reaction function has

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Speaker 1: shifted it a little bit over the last several years,

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Speaker 1: I would say, most importantly, because there's a view that

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Speaker 1: the equilibrium exchange rate, the infamous sorry equilibrium interest rate,

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Speaker 1: the the R star is lower, right, that that change

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Speaker 1: has happened over the last several years. John Williams was

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Speaker 1: one of the main architects, intellectual architects behind that shift,

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Speaker 1: and Rich Clarata he totally agrees with that view, So

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Speaker 1: that very helpful to There's no additional change on top

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Speaker 1: of the change that we've seen over the last several years,

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Speaker 1: So that means more consistently steady as she goes lower

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Speaker 1: long term interest rates. Are you prepared for the central

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Speaker 1: bank independence to be tested? That was another remainting question

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Speaker 1: coming into this new administration, and bear in mind it

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Speaker 1: wasn't so long ago we were really talking about radical

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Speaker 1: changes to the Federal Reserve, and so far these are

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Speaker 1: really quite consensual kind of replacements for the for the

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Speaker 1: spots that were available on the Federal Reserve. But do

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Speaker 1: you see at some point the independence of this institution

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Speaker 1: being tested? No? I well, you should never say never,

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Speaker 1: but but I think it was a big lip mus

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Speaker 1: test how this reshuffling off the Federal with all these

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Speaker 1: empty seats will play out. And I think we should,

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Speaker 1: everybody should be encouraged by by these picks, and I

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Speaker 1: think it's a testament to the independence, to the strong

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Speaker 1: institution that the fad is we will determine the certitude

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Speaker 1: of three or four rateex whether it becomes three, becomes four,

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Speaker 1: they become five, which very few people are talking about,

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Speaker 1: or they cut back from four to three, etcetera, etcetera.

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Speaker 1: What what's the thing the distinction that will make that

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Speaker 1: decision happen. Well, I think it's a usual suspect. Big

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Speaker 1: drops in the stock market on the negative side, would

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Speaker 1: you know, would mean tighter financial conditions, and the FAT

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Speaker 1: has in the past reacted and I think the new

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Speaker 1: leadership will do the same, so that would mean less

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Speaker 1: rate hikes. Um much slower growth than anticipated, meaning even

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Speaker 1: an even smaller multiplier from all the fiscal stimulus. May

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Speaker 1: also mean that we're ending up with two or three

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Speaker 1: rather than three or four. And on the upside um

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Speaker 1: maybe and overshoot on the inflation side may bring us

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Speaker 1: to four or five. That's said, I think the threshold

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Speaker 1: to change the outlook for three or four hikes on

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Speaker 1: both sides, on the upside and on the downside is

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Speaker 1: pretty high. And and and frankly, I mean, while I

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Speaker 1: have four rate hikes in our forecast for this year,

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Speaker 1: eyes have a very hard time to see the FED

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Speaker 1: going to five almost Okay, it's it's it's very hard

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Speaker 1: to imagine this scenario where the FED would go five types.

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Speaker 1: I just brought that up for conversation on Tuesday. But

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Speaker 1: the basic the basic idea here as does that marginal second,

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Speaker 1: then third, then fourth rate hike did they begin to

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Speaker 1: really impinge on business process? Or is it all overwhelmed

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Speaker 1: by Make America Great again? G d P. Well, certainly

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Speaker 1: the there has been talking about the libel rate right

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Speaker 1: which which which has gone up. My people say this

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Speaker 1: is the equivalent of another rate hike. But overall, I

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Speaker 1: think that what the FAT is looking at. How the

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Speaker 1: FAT sees things is they raise rates and then they

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Speaker 1: look at how financial conditions change, because that is how

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Speaker 1: short term monetary policy affect the real economy, right, and

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Speaker 1: that is through credit spreaders, longer term interest rates, maybe

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Speaker 1: the exchange rate, maybe stalks, and that is all relatively easy.

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Speaker 1: What did you make it this weight from yesterday from

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Speaker 1: the President on foreign exchange restaurant China playing the characters

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Speaker 1: as the us ks rising interest rates not acceptable? What

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Speaker 1: did you make of that harm? Who was the aimed at?

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Speaker 1: Who's the audience? Um? Um? Serious question. I'm wondering whether

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Speaker 1: it's aimed at the Federal reserve, the effects market, or

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Speaker 1: putting the effects market unnoticed A dollar? No, I think

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Speaker 1: I think the audience is always the same, right, it's

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Speaker 1: the people he's addressing with the president's addressing with most

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Speaker 1: of his tweets. I mean, on a serious note, we

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Speaker 1: know that China is not manipulating its currency I don't

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Speaker 1: want to say at all anymore, but much less than

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Speaker 1: it did and the latest PBOC actions over the last year,

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Speaker 1: so it was actually to prevent a weakening of its

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Speaker 1: own currency, you know. So that and if you look

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Speaker 1: at the Chinese overall current account balance, Yeah they have

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Speaker 1: a surplus, but it's not huge. So bottom line is

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Speaker 1: the Chinese currency is not that much um out of

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Speaker 1: think um with with where it should be. So I

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Speaker 1: think it's totally misplaced. And I think it also it

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Speaker 1: doesn't disservice to him to the Fisher line of argumentation

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Speaker 1: from the administration, because the focus should not be on

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Speaker 1: exchange rates or anything monetary, if you want, it should

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Speaker 1: be on this non terrible barriers to trade, including intellectual property. Right,

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Speaker 1: I think that should be the focus. I think it's

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Speaker 1: a legitimate concern um. But now bringing back to exchange

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Speaker 1: rate or something, I think it's a totally wrong direction.

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Speaker 1: Ar Binals, thank you so much, greatly appreciate it this morning.

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Speaker 1: You've heard me say it before, I'll say it again.

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Speaker 1: It is a price of to Martinis for an annual

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Speaker 1: prescription subscription. And it is Foreign Affairs Magazine. The font

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Speaker 1: is large for those site impaired like myself, but far

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Speaker 1: more importantly, it is smart, smart, smart, well timed. Here

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Speaker 1: is democracy dying? A global report. We are advantage by

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Speaker 1: having Get and Rose with us of Foreign Affairs Magazine.

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Speaker 1: Why that cover why is democracy dying? Because right now

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Speaker 1: there clearly is a resurgence of authoritarianism in lots of

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Speaker 1: parts of the world China, Uh, Saudi Arabia, elsewhere. And

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Speaker 1: there are also lots of problems in the major advanced

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Speaker 1: industrial democracies in Europe, in America. And so we did

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Speaker 1: a survey essentially of just how bad things are, and

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Speaker 1: the answer is pretty darn bad. There's no question this

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Speaker 1: is the worst period for democracy in decades. UH. And

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Speaker 1: people disagree, Legitimate serious scholars and analysts of all stripes

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Speaker 1: disagree about whether this is sort of a permanent shift

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Speaker 1: against democracy down the road, or whether it's something that's

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Speaker 1: just a temporary lull before things can right themselves and

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Speaker 1: get back on track. It's a global report, Elizabeth, Economy

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Speaker 1: in China, You've got a wonderful chapter on the Crown

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Speaker 1: Princess charm offensive with Saudi Arabian such which chapter sticks

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Speaker 1: out to Gideon rose Um. You know, there's a Uh,

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Speaker 1: I'm really worried about out what's happening in Eastern Europe

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Speaker 1: because I don't understand and hungary, and and and and

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Speaker 1: not just hungry, basically countries that should be embracing their

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Speaker 1: new European identity and the virtues of being part of

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Speaker 1: the eu UH and the opportunity they've been given, like

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Speaker 1: Poland have sort of and even the ones like Poland

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Speaker 1: that have made their best foot forward in the new

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Speaker 1: situation are rejecting the transplant to the modernity in the West,

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Speaker 1: taking things they want and leaving the rest behind and

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Speaker 1: and not moving forward in the way that we thought

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Speaker 1: liberal democracy and international cooperation should work, and so that

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Speaker 1: scares me. But but basically, you know, the optimistic side

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Speaker 1: of things, we have a whole package on Crisper and

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Speaker 1: gene editing with Bill Gates and Jennifer DOWDNA who might

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Speaker 1: win a Nobel Prize for this down the road, and others.

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Speaker 1: And although there are dangers and worries about regulation, they're

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Speaker 1: also upsides of the wonderful advances in medical technolog gy

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Speaker 1: and agricultural technology they're gonna happen. And so while all

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Speaker 1: this political turbulence is swirling around us um, there's also

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Speaker 1: this world of science and technology and development that's going

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Speaker 1: on as well. And so the challenge right now is

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Speaker 1: how to keep your intellectual and practical and financial grounding

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Speaker 1: in what the Chinese called interesting times. So giddon, let

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Speaker 1: me just be clear about something. Do you think democracy

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Speaker 1: is dying or you were just unhappy with the outcomes

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Speaker 1: of democracy? No, the the it's not just a question

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Speaker 1: of the outcomes. What you're seeing in places like the

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Speaker 1: United States right now are classic signs of what we

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Speaker 1: call democratic regression. Centralization of power in the executive, politicization

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Speaker 1: of the judiciary, using it to go after your political opponents. Um.

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Speaker 1: Attacks on an independent media, not because of what they

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Speaker 1: the factual truth what they say, but because of the

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Speaker 1: political valence of it. UM. Things like that use of

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Speaker 1: public office for private games. These are very common in

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Speaker 1: a lot of places around the world. For Zakaria has

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Speaker 1: called them illiberal democracies. Um. We just didn't think that

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Speaker 1: was gonna be true in places like the United States.

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Speaker 1: And what you see right now is a Latin American

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Speaker 1: friend put it to me. UM. The sad thing about

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Speaker 1: this is we've seen this movie before, just never in English. UM.

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Speaker 1: And so the real question now is is this a

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Speaker 1: temporary regression or is it going to go back to

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Speaker 1: uh two normal? Are Are things going to get better

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Speaker 1: when people realize just how low they've gotten well. Getting

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Speaker 1: there all valiant, valid concerns, but they are outcomes of democracy.

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Speaker 1: And I assume that the next time is an election,

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Speaker 1: that the electorate gets the chance to put it right

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Speaker 1: if they want to. We hope, hope. Isn't that democracy? Yes?

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Speaker 1: And that is in fact exactly right. And the real

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Speaker 1: question now is will we get through? Then? For three

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Speaker 1: United States, there's an absolutely no question in my mind

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Speaker 1: that the major question is will you get through the

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Speaker 1: next seven months in which the legal and political processes

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Speaker 1: of democratic institutions are allowed to take their natural course?

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Speaker 1: And I think they will, and I think in the

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Speaker 1: long one will sort of like, uh, basically say ha

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Speaker 1: ha ha ha, who are you about that? But but

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Speaker 1: we'll know that in seven months, because there's a real

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Speaker 1: chance you could have a domestic constitutional crisis or an

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Speaker 1: international security crisis specifically designed simply to derail the otherwise

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Speaker 1: legitimate playing out of those institutional processes. And that's what

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Speaker 1: scares me the most. You start with the optimism of

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Speaker 1: Walter Russell Meade, how American democracy fails its way to success.

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Speaker 1: It's a wonderful issue. I really can't say enough about

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Speaker 1: foreign affairs. Is democracy dying Gideon Rose with this today

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Speaker 1: with a wonderful set of essays, including on China. The

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Speaker 1: must rad on China Neil Shearing. These are the capital economics,

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Speaker 1: looking at the economics of um and their interdependencies, the

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Speaker 1: interdependencies of a Chinese US tip for tat, what's it

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Speaker 1: mean to Indonesia, What's it mean for the Czech Republic.

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Speaker 1: That's a that's a key question that we need to

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Speaker 1: think about, because what happened in the global economy over

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Speaker 1: the past twenty years has been that China has become

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Speaker 1: this manufacturing hub with spokes spreading out all over East

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Speaker 1: Asia and all the way into Europe. Even so, if

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Speaker 1: there's a straight spat between the U S and China,

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Speaker 1: that's going to trickle down through supply chains and hit

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Speaker 1: other em so particularly Taiwan, also Korea, mainly in East Asia,

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Speaker 1: but as you say, it goes but beyond that as well,

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Speaker 1: looking at the the story within China at the moment, Neil,

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Speaker 1: the economy seems to be this tug of war between

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Speaker 1: the old economy and the new economy. And you see

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Speaker 1: that in the data this morning, retail sales versus say,

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Speaker 1: industrial production. How are they managing that transition from the

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Speaker 1: old engines of growth to the new engines of growth. Neil,

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Speaker 1: it's a difficult transition, and it's one that's going to

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Speaker 1: take place over a matter of years, in decades, rather

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Speaker 1: than months and quarters. I think what we see in

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Speaker 1: the data today, I mean, you take the official data

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Speaker 1: at face value, the economy is remarkably stable. Actually, in

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Speaker 1: our view, the economy is already slowing. We have our

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Speaker 1: own activity proxy that puts growth at about four point

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Speaker 1: eight percent, not six point eight percent. Four point eight percent,

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Speaker 1: so substantially lower than than the official data, and it's

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Speaker 1: on a declining trend. And a part of that is

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Speaker 1: industrial weakness, the effect of pollution controls that were put

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Speaker 1: in place over the winter. But as also, as you say,

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Speaker 1: there's more fundamental weakness in fixed investment that reflects that

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Speaker 1: the deeper transition that needs to happen over the next

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Speaker 1: decade or so. And Neil on the on the triple

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Speaker 1: R rate at the Chinese Central Bank, the reserve requirement

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Speaker 1: ratio a full one percentage point one hundred basis point

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Speaker 1: cut to that this morning, Nol. What are they trying

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Speaker 1: to address with that kind of action, and how are

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Speaker 1: they easy in that transition by doing it, I think

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Speaker 1: there's several things that are trying to do here. They're

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Speaker 1: paying a very for called balancing game, balancing out the

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Speaker 1: Chinese People's Bank. On the one hand, they've put one

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Speaker 1: eye on the currency defens tightening. They're they're raising that

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Speaker 1: one of the policy rates will be at one that

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Speaker 1: doesn't necessarily have any impact on on monetary conditions. On

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Speaker 1: the other hand, they have a kind of one eye

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Speaker 1: on the fact that credit conditions in the real economy

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Speaker 1: of tightening, and that's what this reserve ratio cut this

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Speaker 1: morning is aimed at trying to ease back on some

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Speaker 1: of the um ease credit conditions in the real economy,

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Speaker 1: trying and get some of those engines of growth going again.

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Speaker 1: So this is it's percolating, uh, certainly in the last

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Speaker 1: oh five six eight weeks, which is about slow down.

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Speaker 1: I mean, I guess we had nascent boom and a

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Speaker 1: pretty good, you know, better than good global economy. Is

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Speaker 1: the is the shock of the world economic outlookout today

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Speaker 1: by the IMF going to be a little bit of

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Speaker 1: that recession or gloom or depression, but just slow down

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Speaker 1: in the too good to be true global economy. I

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Speaker 1: think that's right. I mean, I've been in this game

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Speaker 1: for long enough now that when you get almost unanimity

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Speaker 1: amongst economists at the turn of the year that we

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Speaker 1: were in the synchronized global upswing, you knew it was

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Speaker 1: too good to be true. And to my mind that

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Speaker 1: signaled that the peak of growth in this cycle. Um now,

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Speaker 1: I think that's un even at this stage, as I say,

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Speaker 1: growth in the e M world at least the extent

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Speaker 1: that's been a slow down that's been led by China,

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Speaker 1: and growth elsewhere in lastin America still seems to be

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Speaker 1: picking up, for example. The real shock in all of

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Speaker 1: this is that the European economy seems to have lost

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Speaker 1: some steam over the last couple of months or so.

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Speaker 1: And that was the part of the world that was

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Speaker 1: much earlier in the growth recovery. Wouldn't be that much

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Speaker 1: for shocks here. The U s loan right now, but

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Speaker 1: Europe slowing right now, I think is a surprise. And

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Speaker 1: and Jian Ferrell, Ambrose, Evans Pritchard and the Telegraph for

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Speaker 1: the very cogent essay were the our word and Germany

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Speaker 1: recession not predicting it now predicting it is, Neil says, Uh,

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Speaker 1: some of the precursors are there real slowdown in Europe

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Speaker 1: and the backdrop to all of this, Neil at the

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Speaker 1: moment is trade concerns, tension between China and the United States,

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Speaker 1: and the President injecting some concern around the effects market

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Speaker 1: as well. Not the first time he's done it, referring

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Speaker 1: to China and Russia is playing the devaluation game. The

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Speaker 1: Treasury Secretary Steve Manuch in an interview with CNBC earlier

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Speaker 1: this morning, saying that the president's currency comment was a

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Speaker 1: warning shot to Russia and China. What's your read on that, Neil,

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Speaker 1: And how difficult is it to read what the ornament

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Speaker 1: policy of this White House is When just a couple

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Speaker 1: of days ago the Treasury said that China was not

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Speaker 1: a currency manipulator, then a couple of days later the

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Speaker 1: President says they are, well, exactly, It's extremely difficult and

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Speaker 1: it's extremely difficult for market practitioners to to get their

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Speaker 1: head around what's going on. I think there's a particular

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Speaker 1: irony in the case of singling out Russia because, of

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Speaker 1: course the reason the ruble has weakened um the devaluation

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Speaker 1: that the President talks about that is because the US

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Speaker 1: has plays sanctions on the country to Actually, this is

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Speaker 1: not about the Moscow intervening in the phone exchange market.

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Speaker 1: This is about the effect of sanctions and then the

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Speaker 1: impact that's something the currency. But look at the Treasury

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Speaker 1: report that came out earlier at the back end of

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Speaker 1: last week. I think actually it was a bit more

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Speaker 1: timid than than certainly I had expected, and some people

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Speaker 1: in the market had expected. They could have made a

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Speaker 1: plausible case for singling out countries like for Thailand, Taiwan,

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Speaker 1: and they stepped back a bit from doing that. What

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Speaker 1: do you say about a headline from Mr Manuian's interview,

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Speaker 1: Trump only considers re entering t p P on better terms.

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Speaker 1: Why should any Asian e m that you look at

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Speaker 1: Neil go to the United States quote unquote and better terms.

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Speaker 1: I find it illogical. It's the short point is it

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Speaker 1: won't and that won't happen. Now, there might be some

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Speaker 1: cosmetic changes that can be um that can be made

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Speaker 1: to coax the US back in as it were, But

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Speaker 1: I think what's happened in the U S at least

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Speaker 1: for the US part at least, is that this realization

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Speaker 1: actually the TPP, the bedrock of the TPP, that's kind

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Speaker 1: of ideals. The idea of the TPV was to kind

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Speaker 1: of almost form a ball walk against China in trade terms,

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Speaker 1: you know, get get allied countries like Japan career and

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Speaker 1: the Pacific nations on board put pressed back against China.

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Speaker 1: I think only now has there been a gradual realization

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Speaker 1: that that that was the aim, and hence that perhaps

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Speaker 1: the reappraisal in Washington. So is this a stick for

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Speaker 1: the Chinese, that the threat of joining TPP, if it

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Speaker 1: is a threat, Neil, could it be and could it

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Speaker 1: be a stick to say to the Chinese, look, playball,

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Speaker 1: give us a better deal, or we're going to revisit

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Speaker 1: t p P and put a strong foot foothold in

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Speaker 1: that region economically speaking, It could be. I mean, I

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Speaker 1: think that the US has other ways in which it

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Speaker 1: can push back and will continue to push back the

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Speaker 1: use of Section three or one, the US Section two

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Speaker 1: to three that your national defense arguments. I think that

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Speaker 1: there's as a wide range despite the fact that Congress

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Speaker 1: has at least call into the constitution um responsibility for

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Speaker 1: regulating commerce with foreign partners, there's a wide range of

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Speaker 1: powers the president control upon So I don't think it

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Speaker 1: necessarily needs to Washington needs to fall back on the

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Speaker 1: threat of t p P. But it's certainly everything's going

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Speaker 1: into the mix now. And I think at the moment

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Speaker 1: that the big question is is just a photo war

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Speaker 1: that we're seeing At the moment, all we've seen as

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Speaker 1: a list of tarists potential tarists, nothing is actually really

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Speaker 1: changed or will both sides follow through? And if they do,

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Speaker 1: then game. But but the news just very quickly, or

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Speaker 1: the news out of their Chinese technology company, that's not

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Speaker 1: a phony war. A US company can't deal with this

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Speaker 1: tech savvy telecom company out of China anywhere in the world.

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Speaker 1: I believe that's what I read. It's not obviously that

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Speaker 1: that has ramifications for that that that company and in

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Speaker 1: any company that deals with it. But in a macroeconomic sense,

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Speaker 1: when you're dealing with the two large the enemies in

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Speaker 1: the world, commerce between trades between those countries totaling hundreds

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Speaker 1: of billions of dollars each year, that is a drop

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Speaker 1: in the ocean. So it's to my mind, it's do

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Speaker 1: we see you if we start to see taris on

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Speaker 1: a hundred fifty billion dollars worth of Chinese exports to

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Speaker 1: the US. They're not so much bigger deal, no sharing

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Speaker 1: capfull economics, chief Emerging markets economists. What a joy this is.

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Speaker 1: You have Tim O'Brien with us doing all of our

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Speaker 1: good work at Bloomberg View, Bloomber Gadfly, with a lot

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Speaker 1: of good announcements coming up as they move forward. Uh

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Speaker 1: at Bloomberg, Tim O'Brien, now for a lengthy discussion and

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Speaker 1: many themes, and yes, we'll do all this stuff going

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Speaker 1: on with Washington, Timm. It is tax day. President Trump

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Speaker 1: short tweets today employment is up, taxes down, Enjoy, talks

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Speaker 1: about Mr Abe, talks about Mr Brown and the border.

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Speaker 1: Governor Brown and the border. So many people are seeing

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Speaker 1: the benefits of the tax cut bill. Everyone is talking.

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Speaker 1: Really nice to see. Do we know yet, Tim O'Brien,

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Speaker 1: how many Americans have their taxes go up do a

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Speaker 1: year from now? I I think there's still a long

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Speaker 1: lag time in a lot of this, you know. I

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Speaker 1: think one of the tricky things now with assessing any

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Speaker 1: of this macro stuff is, to a certain extent, President

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Speaker 1: Trump is laying claim to a job market that that

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Speaker 1: preceded him, that was already healing before he came into office,

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Speaker 1: So I think he needs a couple more years in

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Speaker 1: office before he can lay full claim uh to to

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Speaker 1: a rebound or to order a Trump effect on the

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Speaker 1: job market. But certainly, at least what we're seeing already

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Speaker 1: in the data on tax cuts is a big portion

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Speaker 1: of it right now is accruing to stock buybacks. It's

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Speaker 1: not going into I think two key things that are

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Speaker 1: a publicans need to sell at the mid terms, which

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Speaker 1: is long term wage growth from middle income workers and

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Speaker 1: real investments and plant equipment like corporations. When when we

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Speaker 1: look at this and you know, I give credit, I'll

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Speaker 1: say to the New York Times and the graphics of

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Speaker 1: the number of people that would benefit from a tax cut,

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Speaker 1: everybody's taking a collective victory lap on it. It seems

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Speaker 1: like right now, do you in in the study, particularly

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Speaker 1: Bloomer get Flight in in the think tanks in Washington,

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Speaker 1: do we know when those benefits end the text cut? Obviously,

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Speaker 1: there's gonna be a good feeling for a bunch of

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Speaker 1: hitters full disclosure, including myself, for twelve months, But when

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Speaker 1: when does it? When's the benefit? When's the free lunch?

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Speaker 1: There is no free lunch. So there it is. There

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Speaker 1: is never a free lunch where the math ultimately on

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Speaker 1: this isn't complicated. At the end of the day, it

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Speaker 1: says the government collect enough revenue to balance its books

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Speaker 1: and just pay its bills. And I think, you know,

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Speaker 1: we've recently had a big Sea Do study out that

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Speaker 1: the deficits gonna hit one trillion dollars. What do we

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Speaker 1: do when that? When that rolls around, what happens to

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Speaker 1: the bond market when that rolls around? What's going to

433
00:24:11,720 --> 00:24:14,520
Speaker 1: happen to inflation rates? When that rolls around? There's a

434
00:24:14,560 --> 00:24:18,399
Speaker 1: certain amount of I think concern here that this tax

435
00:24:18,520 --> 00:24:23,239
Speaker 1: cut is gonna have a nice effervescent champagne like now

436
00:24:23,560 --> 00:24:26,800
Speaker 1: term pop and and everybody's gonna have a hangover later.

437
00:24:27,000 --> 00:24:29,520
Speaker 1: And the CBO report buried you last week, and all

438
00:24:29,560 --> 00:24:31,920
Speaker 1: the news that you follow so much with with your

439
00:24:32,040 --> 00:24:35,480
Speaker 1: classic book, Trump Nation, and all that you went through

440
00:24:36,160 --> 00:24:39,159
Speaker 1: off of that book. How is that book aged in

441
00:24:39,160 --> 00:24:41,760
Speaker 1: the last year when you go back and look at

442
00:24:42,640 --> 00:24:45,680
Speaker 1: the citizen Trump versus what we've seen, how is the

443
00:24:45,720 --> 00:24:49,760
Speaker 1: book aged? I you know, I think the book. One

444
00:24:49,760 --> 00:24:52,840
Speaker 1: of the magical things about President Trump is that he

445
00:24:53,000 --> 00:24:59,280
Speaker 1: is uh predictable in his unpredictable nous. And he really

446
00:24:59,320 --> 00:25:02,040
Speaker 1: hasn't changed much since he was about twenty. You know,

447
00:25:02,080 --> 00:25:04,479
Speaker 1: he really is who he is. He is who you

448
00:25:04,520 --> 00:25:07,840
Speaker 1: see the thing. He's a survivor. You can really understand

449
00:25:07,960 --> 00:25:12,119
Speaker 1: him to two lenses, either self preservation or self aggrandizement.

450
00:25:12,480 --> 00:25:15,840
Speaker 1: That really hasn't changed for a very long time. My

451
00:25:15,920 --> 00:25:19,919
Speaker 1: book came out in two thousand and five. Um, I

452
00:25:19,960 --> 00:25:21,679
Speaker 1: think the portrait of him that that is in that

453
00:25:21,720 --> 00:25:26,320
Speaker 1: book is pretty accurate. Within that is the phrase it's

454
00:25:26,320 --> 00:25:29,000
Speaker 1: in the zeitgeist right now that you know, person A,

455
00:25:29,080 --> 00:25:31,880
Speaker 1: person B, person C is going to have their day

456
00:25:31,880 --> 00:25:34,720
Speaker 1: at quarter Justice is going to be had, and all

457
00:25:34,760 --> 00:25:37,119
Speaker 1: the focus now again is on kimber Wood, who's one

458
00:25:37,119 --> 00:25:39,760
Speaker 1: of our federal judges. Ald Motto is the one that

459
00:25:39,800 --> 00:25:42,840
Speaker 1: recommended her uh to President Reagan, to the bench, and

460
00:25:43,040 --> 00:25:45,720
Speaker 1: kimber Wood, for me, will forever be younger. And she's,

461
00:25:45,800 --> 00:25:49,560
Speaker 1: you know, a senior judge now out of Connecticut College,

462
00:25:49,560 --> 00:25:53,399
Speaker 1: out of Harvard Law, with some notorious cases along the way.

463
00:25:53,680 --> 00:25:58,280
Speaker 1: She really took charge yesterday in that room. I think people,

464
00:25:58,800 --> 00:26:01,800
Speaker 1: the sophisticates seemed to be surprised by that as well,

465
00:26:02,119 --> 00:26:04,040
Speaker 1: right she had two things she had to look at,

466
00:26:04,160 --> 00:26:08,639
Speaker 1: which was both the White House and UH. Michael Cohen's

467
00:26:08,720 --> 00:26:11,919
Speaker 1: lawyers said that the documents that the FBA got FBI

468
00:26:12,000 --> 00:26:16,360
Speaker 1: got when they rated Mr Cohn's office he's Trump's personal attorney,

469
00:26:17,000 --> 00:26:20,560
Speaker 1: should be subject to a review before prosecutors could do

470
00:26:20,600 --> 00:26:24,480
Speaker 1: anything with them. Uh. That's an interesting issue, because prosecutors

471
00:26:24,480 --> 00:26:28,080
Speaker 1: didn't go into Cohn's office Uh through a subpoena. They

472
00:26:28,119 --> 00:26:30,400
Speaker 1: issued a search warrant and went in there and took

473
00:26:30,400 --> 00:26:33,080
Speaker 1: the documents they wanted because they believed they may not

474
00:26:33,240 --> 00:26:36,520
Speaker 1: get them otherwise. Uh. And they asked a court for

475
00:26:36,600 --> 00:26:39,000
Speaker 1: the right to do that, which meant the court believed

476
00:26:39,040 --> 00:26:41,000
Speaker 1: they had good reason to go in there. Kimball Wood

477
00:26:41,040 --> 00:26:44,399
Speaker 1: had to say, okay, ex post facto, are does the

478
00:26:44,480 --> 00:26:47,399
Speaker 1: court need to look at this again and intercede? And

479
00:26:47,720 --> 00:26:50,800
Speaker 1: what she said was prosecutors can go ahead and take

480
00:26:50,840 --> 00:26:54,560
Speaker 1: a look at these, but she's considering putting a special

481
00:26:54,600 --> 00:26:58,359
Speaker 1: master in who will review the documents on behalf of

482
00:26:58,400 --> 00:27:01,040
Speaker 1: both sides to make sure the processes fair. The second

483
00:27:01,080 --> 00:27:03,960
Speaker 1: and I think seminal thing that happened, of course, is

484
00:27:04,000 --> 00:27:07,000
Speaker 1: that Um, she said that the White House couldn't intervene.

485
00:27:07,720 --> 00:27:11,600
Speaker 1: You're thrust in all this is the media is focused

486
00:27:11,600 --> 00:27:16,240
Speaker 1: on the sensationalism. We saw that with the camera horde

487
00:27:16,320 --> 00:27:18,840
Speaker 1: yesterday at the court. If that's not the case, what

488
00:27:19,000 --> 00:27:22,520
Speaker 1: is Tim O'Brien focused on, Well, I think, you know,

489
00:27:22,840 --> 00:27:25,000
Speaker 1: on our best days, we should say focused on the

490
00:27:25,000 --> 00:27:27,880
Speaker 1: fact pattern. I think there's a lot of wish fulfillment

491
00:27:28,600 --> 00:27:32,440
Speaker 1: um on both sides, a partisan wish fulfillment around how

492
00:27:32,440 --> 00:27:35,040
Speaker 1: Trump has looked at and covered and I think particularly

493
00:27:35,400 --> 00:27:38,879
Speaker 1: when it pertains that the Mueller investigation, Trump's critics, I

494
00:27:38,920 --> 00:27:41,840
Speaker 1: think are prone to see every break in the case

495
00:27:42,320 --> 00:27:48,480
Speaker 1: as the the final moments, right and and and Trump

496
00:27:48,560 --> 00:27:51,199
Speaker 1: supporters will see every moment of the Muller investigation as

497
00:27:51,440 --> 00:27:55,080
Speaker 1: prosecutorial overreach. I think all we need to do on

498
00:27:55,119 --> 00:27:57,040
Speaker 1: a day to day basis is hugh to the facts.

499
00:27:57,080 --> 00:27:59,439
Speaker 1: I think, you know, I wrote recently around some of

500
00:27:59,440 --> 00:28:02,560
Speaker 1: the writing about Michael Cohen certainly had this notion that

501
00:28:02,880 --> 00:28:05,760
Speaker 1: he was the man in the Trump organization making most

502
00:28:05,800 --> 00:28:08,520
Speaker 1: of the legal decisions and with knowledge of every single

503
00:28:08,600 --> 00:28:11,040
Speaker 1: deal Trump has done, that could get him in trouble

504
00:28:11,040 --> 00:28:13,480
Speaker 1: with Mueller. And that's just not the case. You know,

505
00:28:13,600 --> 00:28:16,600
Speaker 1: mccoon was a hanger on. He certainly is presents a

506
00:28:16,680 --> 00:28:19,600
Speaker 1: vulnerability to Trump, and he knows about a lot of deals.

507
00:28:20,000 --> 00:28:22,160
Speaker 1: But there were other people in the Trump organization where

508
00:28:22,160 --> 00:28:24,240
Speaker 1: they're much longer who no more. Would we have had

509
00:28:24,240 --> 00:28:26,879
Speaker 1: the events yesterday in front of Judge Wood if we

510
00:28:26,920 --> 00:28:32,080
Speaker 1: didn't have a president tweeting so much, that's a great question, Tom.

511
00:28:32,119 --> 00:28:34,000
Speaker 1: I think it's independent of the tweets. I think we

512
00:28:34,000 --> 00:28:35,719
Speaker 1: would have had this in front of in front of

513
00:28:35,720 --> 00:28:41,200
Speaker 1: Wood because the president's personal attorney appears who have engaged

514
00:28:41,240 --> 00:28:44,360
Speaker 1: in a number of frauds, that prosecutors are interesting in probing,

515
00:28:44,680 --> 00:28:47,640
Speaker 1: interested in probing. I think that stands apart from the meats.

516
00:28:47,680 --> 00:28:50,880
Speaker 1: But there's no question also that going back to the

517
00:28:51,040 --> 00:28:56,560
Speaker 1: to the election, the president incentive the judiciary. I think

518
00:28:56,600 --> 00:28:58,640
Speaker 1: to look closely at his actions because he took on

519
00:28:58,800 --> 00:29:02,600
Speaker 1: judges and and he routinely criticized the courts. Tell us

520
00:29:02,640 --> 00:29:05,360
Speaker 1: about the prosecutors. I read about Mr Kazami. I believe

521
00:29:05,400 --> 00:29:08,320
Speaker 1: it is with an SEC background, and do you remember

522
00:29:08,400 --> 00:29:10,800
Speaker 1: him from from the O eight crisis. Yeah? Yeah, And

523
00:29:10,960 --> 00:29:14,360
Speaker 1: these guys are are grizzled, grizzled. I mean, it's it's

524
00:29:14,400 --> 00:29:17,800
Speaker 1: in the FBI book the threat matrix as well. The

525
00:29:18,040 --> 00:29:25,480
Speaker 1: Southern District is a really serious set of prosecutors using

526
00:29:25,520 --> 00:29:28,640
Speaker 1: that word very narrowly, aren't they And and they're highly

527
00:29:28,680 --> 00:29:33,080
Speaker 1: independent and they meaning that they don't see themselves as

528
00:29:33,120 --> 00:29:36,480
Speaker 1: having to take guidance from the Justice Department in Washington.

529
00:29:36,520 --> 00:29:38,400
Speaker 1: How do they get away with it because they're in

530
00:29:38,760 --> 00:29:41,600
Speaker 1: the financial capital of the world. They believe they bring

531
00:29:41,600 --> 00:29:44,360
Speaker 1: an extra layer of financialists and they're allowed to and

532
00:29:44,400 --> 00:29:46,320
Speaker 1: they're allowed to. It's you know, we know this immediate.

533
00:29:46,360 --> 00:29:49,640
Speaker 1: There's always these Washington bureaus that are very independent from

534
00:29:49,640 --> 00:29:52,840
Speaker 1: the mother ships for the same you didn't know about

535
00:29:52,880 --> 00:29:55,040
Speaker 1: that the other thing in the Southern District cause I

536
00:29:55,080 --> 00:29:56,800
Speaker 1: had a little bit of personal experience in here because

537
00:29:56,840 --> 00:30:01,720
Speaker 1: Kazami and some of the other people they're worked for

538
00:30:02,240 --> 00:30:05,400
Speaker 1: Mary Joe White when she ran the U. S. Attorney's

539
00:30:05,400 --> 00:30:08,240
Speaker 1: Office for the Southern District, and Mary Joe White represented

540
00:30:08,280 --> 00:30:12,600
Speaker 1: me in my litigation with with Trump and um Mark

541
00:30:12,640 --> 00:30:16,440
Speaker 1: Casswitz represented Trump at the time, and Mary Joe and

542
00:30:16,480 --> 00:30:20,239
Speaker 1: her team completely stripped the bark off these folks. And

543
00:30:20,280 --> 00:30:22,120
Speaker 1: I think it's in part because they come out of

544
00:30:22,120 --> 00:30:25,600
Speaker 1: that strong Southern District tradition. Are we going into a

545
00:30:25,720 --> 00:30:29,520
Speaker 1: stripping of the bark Yes stage here Yes discussed that

546
00:30:30,160 --> 00:30:34,280
Speaker 1: seconds Trump has not appointed a new head of his

547
00:30:34,320 --> 00:30:36,840
Speaker 1: own legal team, so he's at sea legally, and he

548
00:30:36,960 --> 00:30:42,360
Speaker 1: is surrounded by the most well healed and talented group

549
00:30:42,360 --> 00:30:45,960
Speaker 1: of federal prosecutors under Bob Muller that's ever taken a

550
00:30:46,000 --> 00:30:48,360
Speaker 1: look at the White House. And he's now got another

551
00:30:48,360 --> 00:30:51,200
Speaker 1: foot in New York which he can't control in any way,

552
00:30:51,240 --> 00:30:54,840
Speaker 1: with the Southern district he's got. It's a princer. This

553
00:30:54,880 --> 00:30:57,640
Speaker 1: is gonna be wonderful. Tim O'Brien able to be with

554
00:30:57,720 --> 00:30:59,560
Speaker 1: us today for a generous amount of time. When you

555
00:30:59,600 --> 00:31:02,719
Speaker 1: come back, pim Fox and really dive into this and

556
00:31:02,760 --> 00:31:05,360
Speaker 1: also not look forward maybe to Tim O'Brien's thoughts on

557
00:31:05,400 --> 00:31:07,520
Speaker 1: the new media as well as he is part of

558
00:31:07,560 --> 00:31:11,320
Speaker 1: that with Bloomberg View, to Bloomberg cad Fly and Bloomberg Opinion.

559
00:31:18,160 --> 00:31:22,360
Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and

560
00:31:22,440 --> 00:31:27,760
Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast

561
00:31:27,800 --> 00:31:32,040
Speaker 1: platform you prefer. I'm on Twitter at Tom Keane Before

562
00:31:32,040 --> 00:31:35,880
Speaker 1: the podcast, you can always catch us worldwide. I'm Bloomberg

563
00:31:36,000 --> 00:31:36,280
Speaker 1: Radio