WEBVTT - The Fed Will Remain the Fed, Bandholz Says 0:00:00.080 --> 0:00:13.040 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:13.480 --> 0:00:17.560 Jay Leye. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:32.680 Bloomberg dot Com, and of course on the Bloomberg for 0:00:32.720 --> 0:00:35.080 the Federal Reserve, then the White House announcing plans to 0:00:35.120 --> 0:00:38.400 nominate Pimco's Rich Clarada as the vice chair of the 0:00:38.440 --> 0:00:41.080 Federal Reserve, and filling the final piece in the feeds 0:00:41.159 --> 0:00:44.760 three most powerful spots Yelling Fisher and Dudley Outs and 0:00:44.880 --> 0:00:48.800 pal Clarada Williams In After all the concerns and conversations 0:00:48.800 --> 0:00:51.960 about the changes the new administration would make to the 0:00:52.040 --> 0:00:55.160 US Central Bank, the new Fed looks a whole lot 0:00:55.240 --> 0:00:58.720 like the old Fed. Arm band holds any credit chief 0:00:58.800 --> 0:01:01.280 US economists Joy and just Now and Harm It was 0:01:01.320 --> 0:01:04.000 a concern about a year ago about what this Federal 0:01:04.000 --> 0:01:06.720 Reserve would look like, and you'd have to say, not 0:01:06.800 --> 0:01:09.600 much change. Yeah, I totally agree. I think it's we 0:01:09.640 --> 0:01:14.920 have seen pretty pretty good choices. There has been a 0:01:15.000 --> 0:01:16.840 year ago there was a concern that the whole FET 0:01:16.880 --> 0:01:21.479 maybe totally revemped. After after several comments from the administration. UM. 0:01:21.600 --> 0:01:23.400 Then the next concern was we have a new FET 0:01:23.480 --> 0:01:26.160 chair who lacks this formal economics degree. But I think 0:01:26.480 --> 0:01:30.279 these concerns have been addressed by adding two very strong, 0:01:30.600 --> 0:01:33.560 you know, vice chairs with with John Williams and Rich Clarada. 0:01:33.760 --> 0:01:35.560 So I think this new inner circle of the FAT 0:01:35.800 --> 0:01:39.320 um is a pretty solid group. They're fine choices, not 0:01:39.400 --> 0:01:42.240 quite the heavyweights of Janet Yellen and Stanley Fisher, but 0:01:42.280 --> 0:01:45.039 really fine choices. And it's testament to the institution, isn't 0:01:45.040 --> 0:01:48.440 it that this administration has taken these picks so seriously 0:01:48.480 --> 0:01:51.360 harm there's already quite good picks. I I totally, I 0:01:51.400 --> 0:01:53.560 totally agree, yes, and and and the market, I mean, 0:01:53.560 --> 0:01:55.960 there was not much market reaction yesterday to Rich Clarada's 0:01:56.040 --> 0:02:00.600 um intended to the intended nomination of Rich Clara, I 0:02:00.640 --> 0:02:03.400 don't think it has formally happened yet, but um, I mean, 0:02:03.440 --> 0:02:05.280 first of all, he was he was a front runner 0:02:05.280 --> 0:02:07.080 for the position for some time. He was rumored to 0:02:07.080 --> 0:02:09.320 be the front runner. But but yeah, as I said, also, 0:02:10.120 --> 0:02:13.400 over the last several months, the market has the notion 0:02:13.440 --> 0:02:15.959 in the market has settled that that the FAT will 0:02:16.000 --> 0:02:18.120 remain the fat and will continue to do what it 0:02:18.160 --> 0:02:21.440 did under the previous leadership. So harm no policy shift, 0:02:21.600 --> 0:02:24.200 at least not imminently. As the Federal Reserve, the old 0:02:24.240 --> 0:02:26.320 guard hands it over to the new guard. Has the 0:02:26.360 --> 0:02:29.720 reaction function of this Federal Reserve with these new names? 0:02:29.760 --> 0:02:32.080 Has that shifted in any way, shape or form as 0:02:32.080 --> 0:02:34.840 far as you're concerned, Um, well, the reaction function has 0:02:34.880 --> 0:02:37.080 shifted it a little bit over the last several years, 0:02:37.120 --> 0:02:40.560 I would say, most importantly, because there's a view that 0:02:40.600 --> 0:02:45.080 the equilibrium exchange rate, the infamous sorry equilibrium interest rate, 0:02:45.200 --> 0:02:48.960 the the R star is lower, right, that that change 0:02:49.000 --> 0:02:52.400 has happened over the last several years. John Williams was 0:02:52.720 --> 0:02:56.280 one of the main architects, intellectual architects behind that shift, 0:02:56.440 --> 0:02:59.640 and Rich Clarata he totally agrees with that view, So 0:02:59.760 --> 0:03:03.239 that very helpful to There's no additional change on top 0:03:03.280 --> 0:03:05.079 of the change that we've seen over the last several years, 0:03:05.080 --> 0:03:08.600 So that means more consistently steady as she goes lower 0:03:08.760 --> 0:03:11.600 long term interest rates. Are you prepared for the central 0:03:11.600 --> 0:03:14.640 bank independence to be tested? That was another remainting question 0:03:14.720 --> 0:03:18.480 coming into this new administration, and bear in mind it 0:03:18.520 --> 0:03:20.680 wasn't so long ago we were really talking about radical 0:03:20.760 --> 0:03:23.720 changes to the Federal Reserve, and so far these are 0:03:23.760 --> 0:03:26.920 really quite consensual kind of replacements for the for the 0:03:26.960 --> 0:03:29.120 spots that were available on the Federal Reserve. But do 0:03:29.240 --> 0:03:32.680 you see at some point the independence of this institution 0:03:32.720 --> 0:03:37.880 being tested? No? I well, you should never say never, 0:03:38.000 --> 0:03:39.760 but but I think it was a big lip mus 0:03:39.840 --> 0:03:42.280 test how this reshuffling off the Federal with all these 0:03:42.320 --> 0:03:45.320 empty seats will play out. And I think we should, 0:03:45.360 --> 0:03:48.920 everybody should be encouraged by by these picks, and I 0:03:48.960 --> 0:03:52.120 think it's a testament to the independence, to the strong 0:03:52.160 --> 0:03:56.280 institution that the fad is we will determine the certitude 0:03:56.280 --> 0:03:59.600 of three or four rateex whether it becomes three, becomes four, 0:04:00.040 --> 0:04:02.680 they become five, which very few people are talking about, 0:04:03.160 --> 0:04:06.040 or they cut back from four to three, etcetera, etcetera. 0:04:06.600 --> 0:04:09.440 What what's the thing the distinction that will make that 0:04:09.560 --> 0:04:14.119 decision happen. Well, I think it's a usual suspect. Big 0:04:14.200 --> 0:04:17.480 drops in the stock market on the negative side, would 0:04:17.720 --> 0:04:19.920 you know, would mean tighter financial conditions, and the FAT 0:04:20.000 --> 0:04:21.760 has in the past reacted and I think the new 0:04:21.839 --> 0:04:23.760 leadership will do the same, so that would mean less 0:04:23.880 --> 0:04:29.080 rate hikes. Um much slower growth than anticipated, meaning even 0:04:29.120 --> 0:04:32.600 an even smaller multiplier from all the fiscal stimulus. May 0:04:32.640 --> 0:04:35.120 also mean that we're ending up with two or three 0:04:35.200 --> 0:04:39.000 rather than three or four. And on the upside um 0:04:39.000 --> 0:04:43.320 maybe and overshoot on the inflation side may bring us 0:04:43.320 --> 0:04:47.400 to four or five. That's said, I think the threshold 0:04:47.480 --> 0:04:50.760 to change the outlook for three or four hikes on 0:04:50.800 --> 0:04:53.240 both sides, on the upside and on the downside is 0:04:53.279 --> 0:04:55.839 pretty high. And and and frankly, I mean, while I 0:04:55.880 --> 0:04:58.240 have four rate hikes in our forecast for this year, 0:04:58.839 --> 0:05:00.839 eyes have a very hard time to see the FED 0:05:00.880 --> 0:05:04.560 going to five almost Okay, it's it's it's very hard 0:05:04.560 --> 0:05:07.080 to imagine this scenario where the FED would go five types. 0:05:07.200 --> 0:05:09.479 I just brought that up for conversation on Tuesday. But 0:05:09.560 --> 0:05:14.120 the basic the basic idea here as does that marginal second, 0:05:14.320 --> 0:05:17.880 then third, then fourth rate hike did they begin to 0:05:17.920 --> 0:05:22.000 really impinge on business process? Or is it all overwhelmed 0:05:22.000 --> 0:05:27.239 by Make America Great again? G d P. Well, certainly 0:05:27.279 --> 0:05:31.040 the there has been talking about the libel rate right 0:05:31.040 --> 0:05:33.440 which which which has gone up. My people say this 0:05:33.480 --> 0:05:36.440 is the equivalent of another rate hike. But overall, I 0:05:36.440 --> 0:05:38.440 think that what the FAT is looking at. How the 0:05:38.480 --> 0:05:41.120 FAT sees things is they raise rates and then they 0:05:41.160 --> 0:05:44.640 look at how financial conditions change, because that is how 0:05:44.760 --> 0:05:47.960 short term monetary policy affect the real economy, right, and 0:05:48.000 --> 0:05:50.480 that is through credit spreaders, longer term interest rates, maybe 0:05:50.480 --> 0:05:54.120 the exchange rate, maybe stalks, and that is all relatively easy. 0:05:54.360 --> 0:05:56.680 What did you make it this weight from yesterday from 0:05:56.720 --> 0:06:01.480 the President on foreign exchange restaurant China playing the characters 0:06:01.480 --> 0:06:04.320 as the us ks rising interest rates not acceptable? What 0:06:04.400 --> 0:06:06.000 did you make of that harm? Who was the aimed at? 0:06:06.040 --> 0:06:11.960 Who's the audience? Um? Um? Serious question. I'm wondering whether 0:06:12.000 --> 0:06:15.000 it's aimed at the Federal reserve, the effects market, or 0:06:15.279 --> 0:06:18.720 putting the effects market unnoticed A dollar? No, I think 0:06:18.880 --> 0:06:21.000 I think the audience is always the same, right, it's 0:06:21.320 --> 0:06:24.440 the people he's addressing with the president's addressing with most 0:06:24.480 --> 0:06:27.080 of his tweets. I mean, on a serious note, we 0:06:27.200 --> 0:06:31.400 know that China is not manipulating its currency I don't 0:06:31.400 --> 0:06:33.480 want to say at all anymore, but much less than 0:06:33.480 --> 0:06:37.440 it did and the latest PBOC actions over the last year, 0:06:37.520 --> 0:06:40.440 so it was actually to prevent a weakening of its 0:06:40.480 --> 0:06:42.600 own currency, you know. So that and if you look 0:06:42.600 --> 0:06:44.800 at the Chinese overall current account balance, Yeah they have 0:06:44.800 --> 0:06:47.560 a surplus, but it's not huge. So bottom line is 0:06:47.720 --> 0:06:51.440 the Chinese currency is not that much um out of 0:06:51.480 --> 0:06:53.720 think um with with where it should be. So I 0:06:54.040 --> 0:06:57.040 think it's totally misplaced. And I think it also it 0:06:57.279 --> 0:07:01.279 doesn't disservice to him to the Fisher line of argumentation 0:07:01.760 --> 0:07:04.800 from the administration, because the focus should not be on 0:07:04.960 --> 0:07:08.440 exchange rates or anything monetary, if you want, it should 0:07:08.440 --> 0:07:13.160 be on this non terrible barriers to trade, including intellectual property. Right, 0:07:13.440 --> 0:07:15.240 I think that should be the focus. I think it's 0:07:15.280 --> 0:07:19.080 a legitimate concern um. But now bringing back to exchange 0:07:19.160 --> 0:07:21.360 rate or something, I think it's a totally wrong direction. 0:07:21.480 --> 0:07:25.000 Ar Binals, thank you so much, greatly appreciate it this morning. 0:07:39.000 --> 0:07:40.960 You've heard me say it before, I'll say it again. 0:07:41.000 --> 0:07:43.160 It is a price of to Martinis for an annual 0:07:43.200 --> 0:07:47.600 prescription subscription. And it is Foreign Affairs Magazine. The font 0:07:47.720 --> 0:07:51.160 is large for those site impaired like myself, but far 0:07:51.240 --> 0:07:55.360 more importantly, it is smart, smart, smart, well timed. Here 0:07:55.760 --> 0:07:59.560 is democracy dying? A global report. We are advantage by 0:07:59.600 --> 0:08:02.040 having Get and Rose with us of Foreign Affairs Magazine. 0:08:02.240 --> 0:08:05.720 Why that cover why is democracy dying? Because right now 0:08:05.760 --> 0:08:09.280 there clearly is a resurgence of authoritarianism in lots of 0:08:09.320 --> 0:08:15.800 parts of the world China, Uh, Saudi Arabia, elsewhere. And 0:08:15.840 --> 0:08:19.280 there are also lots of problems in the major advanced 0:08:19.320 --> 0:08:23.880 industrial democracies in Europe, in America. And so we did 0:08:23.960 --> 0:08:26.360 a survey essentially of just how bad things are, and 0:08:26.400 --> 0:08:29.080 the answer is pretty darn bad. There's no question this 0:08:29.200 --> 0:08:32.080 is the worst period for democracy in decades. UH. And 0:08:32.160 --> 0:08:36.760 people disagree, Legitimate serious scholars and analysts of all stripes 0:08:37.040 --> 0:08:39.560 disagree about whether this is sort of a permanent shift 0:08:39.600 --> 0:08:42.559 against democracy down the road, or whether it's something that's 0:08:42.559 --> 0:08:45.319 just a temporary lull before things can right themselves and 0:08:45.360 --> 0:08:48.520 get back on track. It's a global report, Elizabeth, Economy 0:08:48.520 --> 0:08:51.000 in China, You've got a wonderful chapter on the Crown 0:08:51.040 --> 0:08:55.160 Princess charm offensive with Saudi Arabian such which chapter sticks 0:08:55.160 --> 0:08:58.240 out to Gideon rose Um. You know, there's a Uh, 0:08:58.960 --> 0:09:01.760 I'm really worried about out what's happening in Eastern Europe 0:09:01.800 --> 0:09:05.520 because I don't understand and hungary, and and and and 0:09:05.600 --> 0:09:11.800 not just hungry, basically countries that should be embracing their 0:09:11.840 --> 0:09:14.680 new European identity and the virtues of being part of 0:09:14.720 --> 0:09:18.360 the eu UH and the opportunity they've been given, like 0:09:18.400 --> 0:09:20.400 Poland have sort of and even the ones like Poland 0:09:20.440 --> 0:09:24.079 that have made their best foot forward in the new 0:09:24.160 --> 0:09:29.200 situation are rejecting the transplant to the modernity in the West, 0:09:29.280 --> 0:09:32.559 taking things they want and leaving the rest behind and 0:09:32.559 --> 0:09:35.000 and not moving forward in the way that we thought 0:09:35.600 --> 0:09:39.760 liberal democracy and international cooperation should work, and so that 0:09:39.880 --> 0:09:43.080 scares me. But but basically, you know, the optimistic side 0:09:43.120 --> 0:09:45.480 of things, we have a whole package on Crisper and 0:09:45.640 --> 0:09:49.560 gene editing with Bill Gates and Jennifer DOWDNA who might 0:09:49.600 --> 0:09:52.120 win a Nobel Prize for this down the road, and others. 0:09:52.280 --> 0:09:55.560 And although there are dangers and worries about regulation, they're 0:09:55.640 --> 0:10:00.280 also upsides of the wonderful advances in medical technolog gy 0:10:00.640 --> 0:10:04.760 and agricultural technology they're gonna happen. And so while all 0:10:04.800 --> 0:10:09.319 this political turbulence is swirling around us um, there's also 0:10:09.440 --> 0:10:12.319 this world of science and technology and development that's going 0:10:12.440 --> 0:10:14.880 on as well. And so the challenge right now is 0:10:14.920 --> 0:10:19.120 how to keep your intellectual and practical and financial grounding 0:10:19.559 --> 0:10:23.440 in what the Chinese called interesting times. So giddon, let 0:10:23.440 --> 0:10:25.800 me just be clear about something. Do you think democracy 0:10:25.880 --> 0:10:28.520 is dying or you were just unhappy with the outcomes 0:10:28.520 --> 0:10:31.680 of democracy? No, the the it's not just a question 0:10:31.720 --> 0:10:33.839 of the outcomes. What you're seeing in places like the 0:10:33.920 --> 0:10:37.520 United States right now are classic signs of what we 0:10:37.600 --> 0:10:43.120 call democratic regression. Centralization of power in the executive, politicization 0:10:43.200 --> 0:10:46.920 of the judiciary, using it to go after your political opponents. Um. 0:10:46.960 --> 0:10:50.760 Attacks on an independent media, not because of what they 0:10:51.440 --> 0:10:53.440 the factual truth what they say, but because of the 0:10:53.480 --> 0:10:57.840 political valence of it. UM. Things like that use of 0:10:57.880 --> 0:11:00.960 public office for private games. These are very common in 0:11:01.000 --> 0:11:03.960 a lot of places around the world. For Zakaria has 0:11:04.000 --> 0:11:06.920 called them illiberal democracies. Um. We just didn't think that 0:11:07.040 --> 0:11:09.600 was gonna be true in places like the United States. 0:11:09.720 --> 0:11:11.959 And what you see right now is a Latin American 0:11:12.000 --> 0:11:14.480 friend put it to me. UM. The sad thing about 0:11:14.520 --> 0:11:18.560 this is we've seen this movie before, just never in English. UM. 0:11:18.679 --> 0:11:20.800 And so the real question now is is this a 0:11:20.840 --> 0:11:24.240 temporary regression or is it going to go back to 0:11:24.640 --> 0:11:27.400 uh two normal? Are Are things going to get better 0:11:27.520 --> 0:11:29.959 when people realize just how low they've gotten well. Getting 0:11:29.960 --> 0:11:33.960 there all valiant, valid concerns, but they are outcomes of democracy. 0:11:33.960 --> 0:11:35.880 And I assume that the next time is an election, 0:11:35.960 --> 0:11:38.480 that the electorate gets the chance to put it right 0:11:38.480 --> 0:11:42.840 if they want to. We hope, hope. Isn't that democracy? Yes? 0:11:42.880 --> 0:11:45.920 And that is in fact exactly right. And the real 0:11:46.000 --> 0:11:50.520 question now is will we get through? Then? For three 0:11:50.600 --> 0:11:52.720 United States, there's an absolutely no question in my mind 0:11:52.720 --> 0:11:55.000 that the major question is will you get through the 0:11:55.040 --> 0:11:59.719 next seven months in which the legal and political processes 0:11:59.800 --> 0:12:04.040 of democratic institutions are allowed to take their natural course? 0:12:04.280 --> 0:12:05.959 And I think they will, and I think in the 0:12:06.000 --> 0:12:09.079 long one will sort of like, uh, basically say ha 0:12:09.200 --> 0:12:11.280 ha ha ha, who are you about that? But but 0:12:11.480 --> 0:12:13.439 we'll know that in seven months, because there's a real 0:12:13.520 --> 0:12:16.439 chance you could have a domestic constitutional crisis or an 0:12:16.440 --> 0:12:22.599 international security crisis specifically designed simply to derail the otherwise 0:12:22.880 --> 0:12:25.920 legitimate playing out of those institutional processes. And that's what 0:12:26.000 --> 0:12:28.040 scares me the most. You start with the optimism of 0:12:28.200 --> 0:12:33.120 Walter Russell Meade, how American democracy fails its way to success. 0:12:33.160 --> 0:12:35.839 It's a wonderful issue. I really can't say enough about 0:12:35.880 --> 0:12:40.520 foreign affairs. Is democracy dying Gideon Rose with this today 0:12:40.559 --> 0:12:43.679 with a wonderful set of essays, including on China. The 0:12:43.760 --> 0:12:58.200 must rad on China Neil Shearing. These are the capital economics, 0:12:58.240 --> 0:13:03.400 looking at the economics of um and their interdependencies, the 0:13:03.480 --> 0:13:08.600 interdependencies of a Chinese US tip for tat, what's it 0:13:08.720 --> 0:13:12.640 mean to Indonesia, What's it mean for the Czech Republic. 0:13:14.640 --> 0:13:16.960 That's a that's a key question that we need to 0:13:17.120 --> 0:13:20.000 think about, because what happened in the global economy over 0:13:20.000 --> 0:13:21.959 the past twenty years has been that China has become 0:13:22.000 --> 0:13:25.439 this manufacturing hub with spokes spreading out all over East 0:13:25.440 --> 0:13:28.600 Asia and all the way into Europe. Even so, if 0:13:28.640 --> 0:13:30.920 there's a straight spat between the U S and China, 0:13:31.240 --> 0:13:33.719 that's going to trickle down through supply chains and hit 0:13:33.760 --> 0:13:38.319 other em so particularly Taiwan, also Korea, mainly in East Asia, 0:13:38.360 --> 0:13:40.360 but as you say, it goes but beyond that as well, 0:13:41.360 --> 0:13:44.200 looking at the the story within China at the moment, Neil, 0:13:44.440 --> 0:13:46.880 the economy seems to be this tug of war between 0:13:47.280 --> 0:13:49.760 the old economy and the new economy. And you see 0:13:49.760 --> 0:13:52.679 that in the data this morning, retail sales versus say, 0:13:52.760 --> 0:13:55.880 industrial production. How are they managing that transition from the 0:13:55.920 --> 0:13:58.040 old engines of growth to the new engines of growth. Neil, 0:13:59.280 --> 0:14:01.319 it's a difficult transition, and it's one that's going to 0:14:01.400 --> 0:14:04.800 take place over a matter of years, in decades, rather 0:14:04.840 --> 0:14:07.120 than months and quarters. I think what we see in 0:14:07.120 --> 0:14:09.280 the data today, I mean, you take the official data 0:14:09.320 --> 0:14:12.840 at face value, the economy is remarkably stable. Actually, in 0:14:12.920 --> 0:14:15.160 our view, the economy is already slowing. We have our 0:14:15.200 --> 0:14:18.439 own activity proxy that puts growth at about four point 0:14:18.520 --> 0:14:21.200 eight percent, not six point eight percent. Four point eight percent, 0:14:21.680 --> 0:14:25.000 so substantially lower than than the official data, and it's 0:14:25.000 --> 0:14:27.520 on a declining trend. And a part of that is 0:14:27.560 --> 0:14:31.080 industrial weakness, the effect of pollution controls that were put 0:14:31.160 --> 0:14:33.680 in place over the winter. But as also, as you say, 0:14:33.680 --> 0:14:36.920 there's more fundamental weakness in fixed investment that reflects that 0:14:37.320 --> 0:14:39.560 the deeper transition that needs to happen over the next 0:14:39.560 --> 0:14:41.680 decade or so. And Neil on the on the triple 0:14:41.800 --> 0:14:44.800 R rate at the Chinese Central Bank, the reserve requirement 0:14:44.920 --> 0:14:48.520 ratio a full one percentage point one hundred basis point 0:14:48.520 --> 0:14:51.360 cut to that this morning, Nol. What are they trying 0:14:51.400 --> 0:14:54.160 to address with that kind of action, and how are 0:14:54.200 --> 0:14:57.320 they easy in that transition by doing it, I think 0:14:57.320 --> 0:14:59.440 there's several things that are trying to do here. They're 0:14:59.440 --> 0:15:02.160 paying a very for called balancing game, balancing out the 0:15:02.480 --> 0:15:05.840 Chinese People's Bank. On the one hand, they've put one 0:15:05.840 --> 0:15:09.440 eye on the currency defens tightening. They're they're raising that 0:15:09.920 --> 0:15:11.480 one of the policy rates will be at one that 0:15:11.520 --> 0:15:15.920 doesn't necessarily have any impact on on monetary conditions. On 0:15:15.960 --> 0:15:19.400 the other hand, they have a kind of one eye 0:15:19.440 --> 0:15:21.360 on the fact that credit conditions in the real economy 0:15:21.360 --> 0:15:25.240 of tightening, and that's what this reserve ratio cut this 0:15:25.280 --> 0:15:28.160 morning is aimed at trying to ease back on some 0:15:28.240 --> 0:15:31.640 of the um ease credit conditions in the real economy, 0:15:31.640 --> 0:15:33.920 trying and get some of those engines of growth going again. 0:15:34.080 --> 0:15:37.520 So this is it's percolating, uh, certainly in the last 0:15:37.600 --> 0:15:41.080 oh five six eight weeks, which is about slow down. 0:15:41.160 --> 0:15:43.760 I mean, I guess we had nascent boom and a 0:15:43.880 --> 0:15:46.600 pretty good, you know, better than good global economy. Is 0:15:46.600 --> 0:15:49.600 the is the shock of the world economic outlookout today 0:15:49.600 --> 0:15:51.840 by the IMF going to be a little bit of 0:15:52.400 --> 0:15:56.160 that recession or gloom or depression, but just slow down 0:15:56.640 --> 0:15:59.640 in the too good to be true global economy. I 0:15:59.680 --> 0:16:01.640 think that's right. I mean, I've been in this game 0:16:01.680 --> 0:16:05.360 for long enough now that when you get almost unanimity 0:16:05.520 --> 0:16:07.720 amongst economists at the turn of the year that we 0:16:07.720 --> 0:16:10.360 were in the synchronized global upswing, you knew it was 0:16:10.360 --> 0:16:12.560 too good to be true. And to my mind that 0:16:12.680 --> 0:16:16.640 signaled that the peak of growth in this cycle. Um now, 0:16:16.800 --> 0:16:19.600 I think that's un even at this stage, as I say, 0:16:19.640 --> 0:16:21.360 growth in the e M world at least the extent 0:16:21.400 --> 0:16:23.120 that's been a slow down that's been led by China, 0:16:23.680 --> 0:16:25.880 and growth elsewhere in lastin America still seems to be 0:16:25.960 --> 0:16:28.760 picking up, for example. The real shock in all of 0:16:28.760 --> 0:16:31.000 this is that the European economy seems to have lost 0:16:31.000 --> 0:16:34.000 some steam over the last couple of months or so. 0:16:34.240 --> 0:16:35.800 And that was the part of the world that was 0:16:35.880 --> 0:16:39.880 much earlier in the growth recovery. Wouldn't be that much 0:16:39.920 --> 0:16:41.640 for shocks here. The U s loan right now, but 0:16:41.760 --> 0:16:44.240 Europe slowing right now, I think is a surprise. And 0:16:44.240 --> 0:16:47.920 and Jian Ferrell, Ambrose, Evans Pritchard and the Telegraph for 0:16:48.000 --> 0:16:52.400 the very cogent essay were the our word and Germany 0:16:52.520 --> 0:16:57.880 recession not predicting it now predicting it is, Neil says, Uh, 0:16:58.040 --> 0:17:02.240 some of the precursors are there real slowdown in Europe 0:17:02.320 --> 0:17:04.119 and the backdrop to all of this, Neil at the 0:17:04.160 --> 0:17:08.359 moment is trade concerns, tension between China and the United States, 0:17:08.359 --> 0:17:12.000 and the President injecting some concern around the effects market 0:17:12.040 --> 0:17:14.440 as well. Not the first time he's done it, referring 0:17:14.480 --> 0:17:18.960 to China and Russia is playing the devaluation game. The 0:17:19.040 --> 0:17:22.359 Treasury Secretary Steve Manuch in an interview with CNBC earlier 0:17:22.359 --> 0:17:24.840 this morning, saying that the president's currency comment was a 0:17:24.840 --> 0:17:28.840 warning shot to Russia and China. What's your read on that, Neil, 0:17:28.880 --> 0:17:31.720 And how difficult is it to read what the ornament 0:17:31.760 --> 0:17:33.760 policy of this White House is When just a couple 0:17:33.760 --> 0:17:36.199 of days ago the Treasury said that China was not 0:17:36.240 --> 0:17:38.560 a currency manipulator, then a couple of days later the 0:17:38.560 --> 0:17:42.960 President says they are, well, exactly, It's extremely difficult and 0:17:43.000 --> 0:17:45.840 it's extremely difficult for market practitioners to to get their 0:17:45.840 --> 0:17:47.760 head around what's going on. I think there's a particular 0:17:47.840 --> 0:17:50.600 irony in the case of singling out Russia because, of 0:17:50.640 --> 0:17:54.560 course the reason the ruble has weakened um the devaluation 0:17:54.680 --> 0:17:57.320 that the President talks about that is because the US 0:17:57.359 --> 0:18:00.280 has plays sanctions on the country to Actually, this is 0:18:00.320 --> 0:18:03.560 not about the Moscow intervening in the phone exchange market. 0:18:03.600 --> 0:18:05.720 This is about the effect of sanctions and then the 0:18:05.720 --> 0:18:08.159 impact that's something the currency. But look at the Treasury 0:18:08.160 --> 0:18:10.600 report that came out earlier at the back end of 0:18:10.720 --> 0:18:12.320 last week. I think actually it was a bit more 0:18:12.359 --> 0:18:15.160 timid than than certainly I had expected, and some people 0:18:15.160 --> 0:18:17.359 in the market had expected. They could have made a 0:18:17.359 --> 0:18:21.880 plausible case for singling out countries like for Thailand, Taiwan, 0:18:22.040 --> 0:18:24.879 and they stepped back a bit from doing that. What 0:18:25.000 --> 0:18:28.520 do you say about a headline from Mr Manuian's interview, 0:18:28.560 --> 0:18:33.560 Trump only considers re entering t p P on better terms. 0:18:34.080 --> 0:18:37.320 Why should any Asian e m that you look at 0:18:37.520 --> 0:18:42.480 Neil go to the United States quote unquote and better terms. 0:18:42.480 --> 0:18:46.000 I find it illogical. It's the short point is it 0:18:46.040 --> 0:18:49.840 won't and that won't happen. Now, there might be some 0:18:50.520 --> 0:18:54.320 cosmetic changes that can be um that can be made 0:18:54.520 --> 0:18:58.080 to coax the US back in as it were, But 0:18:58.160 --> 0:18:59.960 I think what's happened in the U S at least 0:19:00.000 --> 0:19:02.520 for the US part at least, is that this realization 0:19:02.600 --> 0:19:05.600 actually the TPP, the bedrock of the TPP, that's kind 0:19:05.600 --> 0:19:09.160 of ideals. The idea of the TPV was to kind 0:19:09.160 --> 0:19:12.560 of almost form a ball walk against China in trade terms, 0:19:12.600 --> 0:19:15.800 you know, get get allied countries like Japan career and 0:19:15.840 --> 0:19:19.880 the Pacific nations on board put pressed back against China. 0:19:19.920 --> 0:19:22.480 I think only now has there been a gradual realization 0:19:22.520 --> 0:19:25.480 that that that was the aim, and hence that perhaps 0:19:25.560 --> 0:19:28.840 the reappraisal in Washington. So is this a stick for 0:19:28.880 --> 0:19:32.399 the Chinese, that the threat of joining TPP, if it 0:19:32.480 --> 0:19:34.919 is a threat, Neil, could it be and could it 0:19:34.960 --> 0:19:37.280 be a stick to say to the Chinese, look, playball, 0:19:37.359 --> 0:19:39.920 give us a better deal, or we're going to revisit 0:19:39.960 --> 0:19:45.400 t p P and put a strong foot foothold in 0:19:45.440 --> 0:19:49.080 that region economically speaking, It could be. I mean, I 0:19:49.080 --> 0:19:50.960 think that the US has other ways in which it 0:19:51.040 --> 0:19:54.080 can push back and will continue to push back the 0:19:54.200 --> 0:19:56.320 use of Section three or one, the US Section two 0:19:56.359 --> 0:19:59.560 to three that your national defense arguments. I think that 0:19:59.680 --> 0:20:02.320 there's as a wide range despite the fact that Congress 0:20:02.320 --> 0:20:07.439 has at least call into the constitution um responsibility for 0:20:07.840 --> 0:20:10.840 regulating commerce with foreign partners, there's a wide range of 0:20:10.840 --> 0:20:12.760 powers the president control upon So I don't think it 0:20:12.800 --> 0:20:16.040 necessarily needs to Washington needs to fall back on the 0:20:16.080 --> 0:20:18.840 threat of t p P. But it's certainly everything's going 0:20:18.840 --> 0:20:20.440 into the mix now. And I think at the moment 0:20:20.480 --> 0:20:22.360 that the big question is is just a photo war 0:20:22.440 --> 0:20:24.239 that we're seeing At the moment, all we've seen as 0:20:24.240 --> 0:20:26.720 a list of tarists potential tarists, nothing is actually really 0:20:26.800 --> 0:20:30.320 changed or will both sides follow through? And if they do, 0:20:30.640 --> 0:20:34.040 then game. But but the news just very quickly, or 0:20:34.080 --> 0:20:37.480 the news out of their Chinese technology company, that's not 0:20:37.600 --> 0:20:41.200 a phony war. A US company can't deal with this 0:20:41.359 --> 0:20:46.119 tech savvy telecom company out of China anywhere in the world. 0:20:46.160 --> 0:20:50.640 I believe that's what I read. It's not obviously that 0:20:50.640 --> 0:20:54.280 that has ramifications for that that that company and in 0:20:54.359 --> 0:20:58.360 any company that deals with it. But in a macroeconomic sense, 0:20:58.400 --> 0:21:00.760 when you're dealing with the two large the enemies in 0:21:00.800 --> 0:21:05.200 the world, commerce between trades between those countries totaling hundreds 0:21:05.200 --> 0:21:08.000 of billions of dollars each year, that is a drop 0:21:08.040 --> 0:21:11.159 in the ocean. So it's to my mind, it's do 0:21:11.240 --> 0:21:13.639 we see you if we start to see taris on 0:21:13.640 --> 0:21:16.320 a hundred fifty billion dollars worth of Chinese exports to 0:21:16.359 --> 0:21:19.800 the US. They're not so much bigger deal, no sharing 0:21:19.960 --> 0:21:37.359 capfull economics, chief Emerging markets economists. What a joy this is. 0:21:37.359 --> 0:21:39.520 You have Tim O'Brien with us doing all of our 0:21:39.520 --> 0:21:42.480 good work at Bloomberg View, Bloomber Gadfly, with a lot 0:21:42.480 --> 0:21:46.119 of good announcements coming up as they move forward. Uh 0:21:46.160 --> 0:21:49.280 at Bloomberg, Tim O'Brien, now for a lengthy discussion and 0:21:49.320 --> 0:21:52.160 many themes, and yes, we'll do all this stuff going 0:21:52.160 --> 0:21:56.720 on with Washington, Timm. It is tax day. President Trump 0:21:57.040 --> 0:22:01.680 short tweets today employment is up, taxes down, Enjoy, talks 0:22:01.720 --> 0:22:04.399 about Mr Abe, talks about Mr Brown and the border. 0:22:04.440 --> 0:22:07.680 Governor Brown and the border. So many people are seeing 0:22:07.680 --> 0:22:11.160 the benefits of the tax cut bill. Everyone is talking. 0:22:11.760 --> 0:22:15.040 Really nice to see. Do we know yet, Tim O'Brien, 0:22:15.560 --> 0:22:20.040 how many Americans have their taxes go up do a 0:22:20.119 --> 0:22:23.560 year from now? I I think there's still a long 0:22:23.720 --> 0:22:25.639 lag time in a lot of this, you know. I 0:22:25.640 --> 0:22:28.080 think one of the tricky things now with assessing any 0:22:28.080 --> 0:22:30.800