1 00:00:00,120 --> 00:00:02,920 Speaker 1: Brought you by Bank of America, Mary Lynch. Investing in 2 00:00:03,000 --> 00:00:07,840 Speaker 1: local communities, economies and a sustainable future. That's the power 3 00:00:08,080 --> 00:00:12,360 Speaker 1: of global connections, Mary Lynch, Pierce Fenner, and Smith Incorporated 4 00:00:12,760 --> 00:00:27,400 Speaker 1: Member s I p C. Welcome to the Bloomberg Surveillance Podcast. 5 00:00:27,800 --> 00:00:31,520 Speaker 1: I'm Tom Keene with David Gura. Daily we bring you 6 00:00:31,560 --> 00:00:36,600 Speaker 1: insight from the best in economics, finance, investment, and international relations. 7 00:00:37,000 --> 00:00:41,600 Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and 8 00:00:41,680 --> 00:00:51,000 Speaker 1: of course on the Bloomberg. We begin with immigration and trade. 9 00:00:51,080 --> 00:00:53,479 Speaker 1: Edward Aldenis and Archwartz, senior fellow at the Council on 10 00:00:53,560 --> 00:00:56,080 Speaker 1: Form Relations and the author of Failure to Adjust How 11 00:00:56,120 --> 00:00:58,600 Speaker 1: Americans got left behind in the global Commune. He joins 12 00:00:58,640 --> 00:01:00,800 Speaker 1: us now in our Bloomberg eleven three studios in New York. 13 00:01:00,800 --> 00:01:02,760 Speaker 1: Great to have you get here with us, Good to 14 00:01:02,760 --> 00:01:06,080 Speaker 1: be with you. We continue to await a revised version 15 00:01:06,080 --> 00:01:08,360 Speaker 1: of this travel band, as it's come to be called, 16 00:01:08,400 --> 00:01:10,360 Speaker 1: from from the White House. And of course, with the 17 00:01:10,360 --> 00:01:12,600 Speaker 1: first generation of that, we had all of the legal 18 00:01:12,640 --> 00:01:14,720 Speaker 1: back and forth that followed. What are you expecting to 19 00:01:14,720 --> 00:01:17,600 Speaker 1: see from the White House? Is there a way that 20 00:01:17,640 --> 00:01:20,280 Speaker 1: they could put this out that could allay or quiet 21 00:01:20,280 --> 00:01:22,920 Speaker 1: down the conversation that's happening in the courts. It may 22 00:01:22,920 --> 00:01:25,040 Speaker 1: not quiet down the public conversation, but I think it 23 00:01:25,080 --> 00:01:27,080 Speaker 1: will probably pass muster in the court. So what we're 24 00:01:27,080 --> 00:01:30,000 Speaker 1: looking at is a much more refined version of of 25 00:01:30,000 --> 00:01:33,840 Speaker 1: of their of their first travel band. So I think 26 00:01:33,880 --> 00:01:35,840 Speaker 1: what we're gonna see, we're gonna see the elimination of Iraq, 27 00:01:35,959 --> 00:01:37,760 Speaker 1: which is interesting. I think that's a concern from the 28 00:01:37,760 --> 00:01:40,600 Speaker 1: Defense Department that Iraqis who have helped American forces in 29 00:01:40,600 --> 00:01:43,319 Speaker 1: Iraqi's translators. You can't leave them out to dry. So 30 00:01:43,319 --> 00:01:45,200 Speaker 1: I think we're gonna see that it's only going to 31 00:01:45,360 --> 00:01:48,760 Speaker 1: apply going forward, So existing visa holders are not going 32 00:01:48,840 --> 00:01:52,320 Speaker 1: to have their visas revoked. We saw sixty thousand people 33 00:01:52,360 --> 00:01:54,240 Speaker 1: from the seven countries have their visas row. I think 34 00:01:54,360 --> 00:01:56,440 Speaker 1: that's gone now. It's going to be clear that Green 35 00:01:56,480 --> 00:01:58,600 Speaker 1: card holders aren't affected. I think at the end of 36 00:01:58,600 --> 00:02:00,640 Speaker 1: the day this will pass muster in courts. Doesn't mean 37 00:02:00,680 --> 00:02:02,520 Speaker 1: it's a good idea. I still think it's a bad idea, 38 00:02:02,800 --> 00:02:05,160 Speaker 1: but I think it will be crafted so that it 39 00:02:05,280 --> 00:02:07,960 Speaker 1: that it can hold up this time. Listening to the speech, 40 00:02:07,960 --> 00:02:10,600 Speaker 1: at the President delivered last week in Congress. He laid 41 00:02:10,600 --> 00:02:13,600 Speaker 1: out an economic case for doing this, for having more enforcement, 42 00:02:14,200 --> 00:02:17,720 Speaker 1: for having immigration reform. Perhaps how grounded in fact is 43 00:02:17,760 --> 00:02:20,720 Speaker 1: that that this could make an economic difference um implementing 44 00:02:20,760 --> 00:02:21,959 Speaker 1: a band like the one that we're talking, Well, I 45 00:02:21,960 --> 00:02:24,320 Speaker 1: think the economic cases exactly the opposite. I mean, we've 46 00:02:24,360 --> 00:02:28,000 Speaker 1: seen a significant decline in travel bookings to the United States. 47 00:02:28,000 --> 00:02:31,560 Speaker 1: So tourism is our largest services export, hundreds of billions 48 00:02:31,560 --> 00:02:33,119 Speaker 1: of dollars every year. And people come to the United 49 00:02:33,120 --> 00:02:35,760 Speaker 1: States to go to Disney World and stay in hotels 50 00:02:35,800 --> 00:02:37,640 Speaker 1: and go to the beaches. So we're already seeing a 51 00:02:37,720 --> 00:02:40,560 Speaker 1: decline there. The universities are going to be hit. We've seen, 52 00:02:40,919 --> 00:02:44,519 Speaker 1: you know, falling international applications to American universities. Interestingly, they're 53 00:02:44,560 --> 00:02:48,160 Speaker 1: soaring in Canada. University of Toronto, applications from a broadwactly 54 00:02:48,200 --> 00:02:51,040 Speaker 1: from Americans have almost doubled. So we are seeing real 55 00:02:51,120 --> 00:02:54,320 Speaker 1: world economic impacts that are gonna be damaging to the 56 00:02:54,360 --> 00:02:57,360 Speaker 1: United States, not just these seven countries. It's the signal 57 00:02:57,760 --> 00:03:00,000 Speaker 1: that it sends the rest of the world about America 58 00:03:00,000 --> 00:03:03,680 Speaker 1: because welcoming to foreigners. Ron Ruhar had her first column 59 00:03:03,680 --> 00:03:05,480 Speaker 1: in the Financial Times over the weekend, and she she 60 00:03:05,600 --> 00:03:07,679 Speaker 1: focused on these issues, and something that stood out to 61 00:03:07,720 --> 00:03:10,520 Speaker 1: me was she thinks that, you know, we we should 62 00:03:10,560 --> 00:03:13,839 Speaker 1: be having a conversation about economic nationalism. That's being sidetracked 63 00:03:13,840 --> 00:03:16,399 Speaker 1: by all of the conversation about who who are letting 64 00:03:16,440 --> 00:03:18,760 Speaker 1: in who were not because of where they're coming from, 65 00:03:18,760 --> 00:03:21,040 Speaker 1: religious reasons, what what have you do you agree with that? 66 00:03:21,280 --> 00:03:23,200 Speaker 1: Is there a proper debate to be had here about 67 00:03:23,639 --> 00:03:27,320 Speaker 1: economic nationalism and and and the role of protectionism in 68 00:03:27,320 --> 00:03:29,200 Speaker 1: the economy right now? Well, I think there is a 69 00:03:29,240 --> 00:03:32,240 Speaker 1: proper debate about economic nationalism, and that's how to bring 70 00:03:32,360 --> 00:03:34,960 Speaker 1: more of the benefits to the of the global economy 71 00:03:35,000 --> 00:03:37,760 Speaker 1: to more Americans, which is really the focus of the 72 00:03:37,760 --> 00:03:39,320 Speaker 1: work I did in my book. I think, you know, 73 00:03:39,320 --> 00:03:41,400 Speaker 1: a lot Americans have done very well in the international economy, 74 00:03:41,440 --> 00:03:44,040 Speaker 1: a lot have not, and and we haven't thought enough 75 00:03:44,200 --> 00:03:46,240 Speaker 1: about how to help those people either to make sure 76 00:03:46,560 --> 00:03:48,920 Speaker 1: that they're getting jobs that are connected to the global economy. 77 00:03:48,960 --> 00:03:51,120 Speaker 1: That's what state and local governments are out there fighting for. 78 00:03:51,280 --> 00:03:55,360 Speaker 1: They haven't had support from the federal government export promotion, 79 00:03:55,480 --> 00:03:59,080 Speaker 1: attracting investment. I think they're are legitimate questions about our 80 00:03:59,120 --> 00:04:01,920 Speaker 1: corporate taxes, tom and weather encourages investment. Those are the 81 00:04:02,040 --> 00:04:05,400 Speaker 1: right economic nationalist conversations to be having. So let then 82 00:04:05,480 --> 00:04:08,480 Speaker 1: let me talk about something as geez, we need help. 83 00:04:09,240 --> 00:04:13,560 Speaker 1: Is the Export Import Bank? You devote five chapters to it, right, 84 00:04:14,680 --> 00:04:17,200 Speaker 1: help me? Let's start with the politics, Am I right? 85 00:04:17,600 --> 00:04:22,400 Speaker 1: Democrats like Republicans don't which which is right? Yeah, it's true, 86 00:04:22,400 --> 00:04:25,960 Speaker 1: but bizarre, right you? Yeah? I mean I probably not 87 00:04:26,000 --> 00:04:28,800 Speaker 1: five chapters, maybe five pages. But but but I find 88 00:04:28,800 --> 00:04:32,440 Speaker 1: the debate over the Export Import Bank really quite nonsensical 89 00:04:32,480 --> 00:04:36,960 Speaker 1: because here's an agency that is helping the exports of 90 00:04:37,000 --> 00:04:39,719 Speaker 1: a lot of Americans, biggest companies that bowings in the catacists, 91 00:04:39,760 --> 00:04:41,919 Speaker 1: but also a lot of small, medium sized enterprises. The 92 00:04:41,960 --> 00:04:44,800 Speaker 1: US is an export underperformer. We don't sell nearly as 93 00:04:44,880 --> 00:04:46,320 Speaker 1: much to the rest of the world's we ought to 94 00:04:46,400 --> 00:04:48,680 Speaker 1: exit bank doesn't cost the taxpayers and nickel, it helps 95 00:04:48,760 --> 00:04:51,880 Speaker 1: we just said Jay Ireland on ge Africa. He's been 96 00:04:51,880 --> 00:04:54,919 Speaker 1: with g since before Jack, Well, did you know David 97 00:04:54,960 --> 00:04:58,240 Speaker 1: Gurry went to St. Lawrence, home of the most gorgeous 98 00:04:58,279 --> 00:05:01,279 Speaker 1: ice rink in the world. I say that with r 99 00:05:01,279 --> 00:05:04,640 Speaker 1: I t s fabulous new Policines Center. I mean come on, St. 100 00:05:04,720 --> 00:05:07,599 Speaker 1: Lawrence has the best ice rink. They drag Jay Ireland 101 00:05:07,680 --> 00:05:10,440 Speaker 1: out of it. He works at GE for years. He 102 00:05:10,480 --> 00:05:14,200 Speaker 1: doesn't need help with an export import bank to sell 103 00:05:14,279 --> 00:05:17,039 Speaker 1: gees stuff abroad. Well, I mean a lot of the 104 00:05:17,040 --> 00:05:20,360 Speaker 1: places that GE sells to are are our places where 105 00:05:20,360 --> 00:05:23,000 Speaker 1: it's hard to get bank financing. These are developing countries. 106 00:05:23,240 --> 00:05:26,520 Speaker 1: They're buying big power. Another what the bank does it 107 00:05:26,680 --> 00:05:31,200 Speaker 1: is it's sexually guarantees bank loans for exports to these countries. 108 00:05:31,240 --> 00:05:33,920 Speaker 1: In theory, there's an element of exposure for the federal government. 109 00:05:34,000 --> 00:05:36,200 Speaker 1: In reality, since it was set up in the ninet thirties, 110 00:05:36,240 --> 00:05:38,960 Speaker 1: it's never lost a dime for the taxpayers. The United 111 00:05:39,000 --> 00:05:42,000 Speaker 1: States does a fraction of this sort of export support 112 00:05:42,040 --> 00:05:45,800 Speaker 1: that Japan or Canada or China, or France or Germany do. 113 00:05:45,960 --> 00:05:49,000 Speaker 1: We're way behind. The Republicans oddly have said, well, this 114 00:05:49,080 --> 00:05:51,479 Speaker 1: is a sort of corporate welfare. It's not an appropriate 115 00:05:51,560 --> 00:05:53,680 Speaker 1: role for the government. And and that's the kind of 116 00:05:53,680 --> 00:05:57,159 Speaker 1: thinking on the Republican side that is so confusing. On 117 00:05:57,200 --> 00:05:59,680 Speaker 1: the one hand, they say their pro business, they want 118 00:05:59,680 --> 00:06:01,640 Speaker 1: to sick see in the international market, and yet they're 119 00:06:01,680 --> 00:06:05,839 Speaker 1: weakening an agency, the federal government that is helping states 120 00:06:05,880 --> 00:06:07,720 Speaker 1: do that at no cost attacks payers, and it has 121 00:06:07,800 --> 00:06:09,800 Speaker 1: never made any sense to me at all. Peter Navarre 122 00:06:09,880 --> 00:06:11,760 Speaker 1: has a piece in The Journalist Morning drawn from his 123 00:06:11,760 --> 00:06:13,960 Speaker 1: speech he gave a few days ago, UH, and he 124 00:06:14,000 --> 00:06:16,360 Speaker 1: asked the question do trade deficits matter? He's looking at 125 00:06:16,360 --> 00:06:20,280 Speaker 1: the relationship here between growth and net exports. I'll put 126 00:06:20,279 --> 00:06:22,359 Speaker 1: the question to you, do they matter? He makes the 127 00:06:22,360 --> 00:06:26,239 Speaker 1: case here that a lot of economists, a lot of people, UH, 128 00:06:26,279 --> 00:06:28,880 Speaker 1: on the coast of elites, wouldn't wouldn't agree with that, 129 00:06:28,880 --> 00:06:30,920 Speaker 1: that that it doesn't matter. He says it does a 130 00:06:31,000 --> 00:06:33,159 Speaker 1: salient point. Yeah, I actually do think they matter. I 131 00:06:33,200 --> 00:06:34,920 Speaker 1: had to had a big round table meeting about a 132 00:06:35,000 --> 00:06:36,720 Speaker 1: year ago the Council on Foreign Relations on the record, 133 00:06:36,760 --> 00:06:40,400 Speaker 1: asking exactly that question. Their divisions won't surprise you. There 134 00:06:40,440 --> 00:06:42,600 Speaker 1: are you know, libertarian economists, my friends from the Cato 135 00:06:42,600 --> 00:06:44,760 Speaker 1: Institute say, this whole bunch of free stuff coming our way. 136 00:06:44,760 --> 00:06:46,880 Speaker 1: What are we worried about? No? I think it does matter. 137 00:06:46,920 --> 00:06:49,960 Speaker 1: I think manufacturing matters. I think most international trade is 138 00:06:50,000 --> 00:06:52,440 Speaker 1: goods trade. I think running a big trade deficit is 139 00:06:52,480 --> 00:06:55,400 Speaker 1: not a good idea. But there's there's a big leap 140 00:06:55,480 --> 00:06:57,440 Speaker 1: from that to saying we ought to try to target 141 00:06:57,560 --> 00:07:00,560 Speaker 1: this through trade negotiations. So most of what effect trade 142 00:07:00,960 --> 00:07:03,360 Speaker 1: has nothing to do with what we negotiating our trade agreements, 143 00:07:03,400 --> 00:07:05,440 Speaker 1: has to do with the value of the dollar, low 144 00:07:05,560 --> 00:07:08,720 Speaker 1: savings in the United States. Um, these are things that 145 00:07:08,800 --> 00:07:12,480 Speaker 1: trade agreements don't get at. So yes, it's important, But 146 00:07:12,560 --> 00:07:15,320 Speaker 1: the remedies that Navarro is talking about, I think are 147 00:07:15,320 --> 00:07:17,720 Speaker 1: going to be destructive. But let's let's take this micro 148 00:07:17,840 --> 00:07:21,960 Speaker 1: We like to talk about sixty feet Okay, Groves City, 149 00:07:22,080 --> 00:07:25,920 Speaker 1: I think Pennsylvania. Good morning, Groves in Pennsylvania. G I 150 00:07:26,280 --> 00:07:30,600 Speaker 1: think ge transportation. The five G E B two two 151 00:07:30,840 --> 00:07:35,480 Speaker 1: a C drilling motor offshore features eleven hundred fifty horsepower 152 00:07:35,800 --> 00:07:39,440 Speaker 1: eight under killer watts. I have this like drills my teeth. 153 00:07:39,560 --> 00:07:42,200 Speaker 1: I don't know what. What I don't get is there's 154 00:07:42,200 --> 00:07:45,080 Speaker 1: a hunk of metal and you can't tell me this 155 00:07:45,200 --> 00:07:49,080 Speaker 1: was made out of the corporate headquarters of people made this, 156 00:07:49,680 --> 00:07:54,280 Speaker 1: and we don't want to advance that abroad. Yeah, I mean, 157 00:07:54,360 --> 00:07:56,480 Speaker 1: I mean, I think we should actually do think making 158 00:07:56,520 --> 00:07:59,600 Speaker 1: stuff in the United States matters. But there is you know, 159 00:07:59,600 --> 00:08:02,640 Speaker 1: there's it a bit of confusion in this administration. This 160 00:08:02,760 --> 00:08:06,560 Speaker 1: is not your father's global economy. Right. We don't just 161 00:08:07,080 --> 00:08:09,720 Speaker 1: make stuff here and sell it elsewhere and buy stuff 162 00:08:09,720 --> 00:08:12,960 Speaker 1: that's made elsewhere. We have these things called global supply chains. 163 00:08:13,080 --> 00:08:15,240 Speaker 1: So I don't I don't know exactly what's in that drill, 164 00:08:15,280 --> 00:08:17,120 Speaker 1: but I'll guarantee you there are a whole bunch of 165 00:08:17,200 --> 00:08:20,680 Speaker 1: imported parts that go into assembling that drill. And you 166 00:08:20,760 --> 00:08:23,800 Speaker 1: start to put big tariffs and other import taxes, you're 167 00:08:23,800 --> 00:08:28,240 Speaker 1: actually going to weaken the competitiveness of GEZ operations. Not 168 00:08:28,280 --> 00:08:31,360 Speaker 1: only does it have a single shaft extension with HUBB, 169 00:08:31,920 --> 00:08:43,200 Speaker 1: but it's pressure sensor verifies your ventilation. Wow, Grove City, Pennsylvania, 170 00:08:43,280 --> 00:08:47,439 Speaker 1: Michael Barr, Where's Where's Grove City, Pennsylvania? I mean Williams 171 00:08:47,440 --> 00:08:51,760 Speaker 1: Sport is the center of Pennsylvania. You get that, Pennsylvania. 172 00:08:52,760 --> 00:08:59,120 Speaker 1: Did you have any idea We're gonna look at this 173 00:08:59,520 --> 00:09:03,319 Speaker 1: because we do all this esoteric bladder on Bloomberg surveillance. 174 00:09:04,040 --> 00:09:08,920 Speaker 1: This machine takes a lot of different companies to build, right, Yeah. 175 00:09:08,960 --> 00:09:10,920 Speaker 1: And you know the thing about it is that that 176 00:09:11,000 --> 00:09:15,080 Speaker 1: when you're building machinery with that kind of sophistication, it's 177 00:09:15,120 --> 00:09:18,320 Speaker 1: also it's a key to innovation, which is where at 178 00:09:18,320 --> 00:09:20,680 Speaker 1: the end of the day, we lead as an economy. 179 00:09:21,000 --> 00:09:23,000 Speaker 1: And so you know that the argument from Lily she 180 00:09:23,120 --> 00:09:25,120 Speaker 1: and Gary Pozzano at the Harvard Business School, if you 181 00:09:25,160 --> 00:09:27,040 Speaker 1: want to be a leader in innovation, you've got to 182 00:09:27,160 --> 00:09:29,760 Speaker 1: make stuff. So this notion that we can have everything 183 00:09:29,760 --> 00:09:31,680 Speaker 1: made abroad and we can still be the innovation leader, 184 00:09:31,720 --> 00:09:34,000 Speaker 1: I don't buy that. But again it gets into question 185 00:09:34,160 --> 00:09:36,000 Speaker 1: what are the best policies for ensuring that we make 186 00:09:36,160 --> 00:09:39,360 Speaker 1: Here's what's important. Jeff M. L Does was worried about 187 00:09:39,400 --> 00:09:45,480 Speaker 1: water ingress. Intake louvers to protect from water ingress. That's 188 00:09:45,480 --> 00:09:47,400 Speaker 1: sort of like the cocktail land this weekend, and the 189 00:09:47,440 --> 00:09:51,480 Speaker 1: ice cubes as well. With Ted Alden on trade with 190 00:09:51,559 --> 00:09:56,760 Speaker 1: a consopt formulations, let us back up. We want trade, 191 00:09:57,600 --> 00:10:01,679 Speaker 1: we want exports. We learned two hundred years ago, three 192 00:10:01,760 --> 00:10:06,040 Speaker 1: hundred years ago that there was a unique trust in trade. 193 00:10:06,600 --> 00:10:09,840 Speaker 1: Has a trust been shattered? Is the trust that came 194 00:10:09,840 --> 00:10:13,600 Speaker 1: out of a mercantile theory onto something new and modern 195 00:10:13,920 --> 00:10:17,320 Speaker 1: hasn't been shattered? I mean, I hope not um. But 196 00:10:17,440 --> 00:10:19,520 Speaker 1: you know, we are clearly at the end of this 197 00:10:19,679 --> 00:10:24,600 Speaker 1: long and extraordinarily successful period of trade liberalization. Really, you know, 198 00:10:24,640 --> 00:10:28,240 Speaker 1: going back to the reciprocal Trade Acts under President Roosevelt, 199 00:10:28,559 --> 00:10:31,240 Speaker 1: but very aggressively since the end of the Second World War. 200 00:10:31,679 --> 00:10:34,960 Speaker 1: And it was a system basically in which countries agreed 201 00:10:35,000 --> 00:10:37,559 Speaker 1: to make a trade if you lower your imports, teriffs 202 00:10:37,559 --> 00:10:40,280 Speaker 1: and other barriers the stuff that we make well our exports, 203 00:10:40,520 --> 00:10:42,680 Speaker 1: then we will do the same in return. So it 204 00:10:42,720 --> 00:10:45,559 Speaker 1: was it was strange. It was sort of using mercantilism, 205 00:10:45,800 --> 00:10:48,400 Speaker 1: you know, each country wanting to expand its exports for 206 00:10:48,440 --> 00:10:51,080 Speaker 1: the purpose of freeing trade. That was what the gas 207 00:10:51,080 --> 00:10:53,080 Speaker 1: system was about. That's what the creation of the w 208 00:10:53,160 --> 00:10:57,360 Speaker 1: t O was about. It was extraordinarily successful, perhaps the 209 00:10:57,360 --> 00:11:01,480 Speaker 1: most successful set of global rules in any area in 210 00:11:01,480 --> 00:11:04,480 Speaker 1: in in human existence. But we may well be at 211 00:11:04,480 --> 00:11:06,800 Speaker 1: the end of that. Do you have any confidence that 212 00:11:06,840 --> 00:11:11,760 Speaker 1: the people that are harmed by globalization can be helped? 213 00:11:12,360 --> 00:11:16,120 Speaker 1: Is there any policy prescription you've seen that helps textile 214 00:11:16,160 --> 00:11:20,800 Speaker 1: workers in the Carolinas well, you know, in their place 215 00:11:21,000 --> 00:11:22,920 Speaker 1: all the time? Not necessarily, right, I mean, if a 216 00:11:22,960 --> 00:11:26,440 Speaker 1: small town loses its factory, it's hard to come up 217 00:11:26,480 --> 00:11:29,360 Speaker 1: with a replacement. But there are a heck of a 218 00:11:29,360 --> 00:11:31,200 Speaker 1: lot of things that we could have been doing and 219 00:11:31,200 --> 00:11:34,320 Speaker 1: should have been doing that would have made a difference. 220 00:11:34,360 --> 00:11:37,559 Speaker 1: I think for younger folks, there's no question that retraining 221 00:11:37,600 --> 00:11:40,000 Speaker 1: can make a big difference. The Europeans do that far 222 00:11:40,080 --> 00:11:42,800 Speaker 1: better than we do here in the United States. For 223 00:11:42,880 --> 00:11:45,360 Speaker 1: older individuals, you might just need to top up their 224 00:11:45,360 --> 00:11:47,280 Speaker 1: wages if they have to go take a lower wage 225 00:11:47,400 --> 00:11:49,680 Speaker 1: job through wage inshirts. That may be a way to 226 00:11:49,720 --> 00:11:52,280 Speaker 1: do it. Sometimes you'll have to help people retire early. 227 00:11:52,320 --> 00:11:56,400 Speaker 1: There's just no other way to do it. Um helping 228 00:11:56,480 --> 00:11:59,080 Speaker 1: people move to where the jobs are, and and that's 229 00:11:59,080 --> 00:12:01,960 Speaker 1: more complicated then you'd think, right, because often their houses 230 00:12:02,000 --> 00:12:04,640 Speaker 1: have lost their value. The places they're moving too are 231 00:12:04,640 --> 00:12:07,240 Speaker 1: more expensive, So there are no easy fixes. But the 232 00:12:07,280 --> 00:12:10,320 Speaker 1: truth is we never really tried very hard as a country. 233 00:12:10,360 --> 00:12:12,440 Speaker 1: We essentially let people sink or swim on their own. 234 00:12:12,840 --> 00:12:14,800 Speaker 1: Something you hear from the President and from his complement 235 00:12:14,840 --> 00:12:17,400 Speaker 1: of trade advisors is this will be no problem, will 236 00:12:17,400 --> 00:12:19,560 Speaker 1: negotiate a lot of bilateral trade deals. Even saw that 237 00:12:19,600 --> 00:12:22,120 Speaker 1: from that Peter Navarro piece deposits that we can get 238 00:12:22,120 --> 00:12:24,880 Speaker 1: a bilateral deal with Mexico in a very short amount 239 00:12:24,920 --> 00:12:28,360 Speaker 1: of time. Prince a very rosy picture of that. How 240 00:12:28,400 --> 00:12:30,959 Speaker 1: difficult is it going to be? To combat together, to 241 00:12:31,160 --> 00:12:34,079 Speaker 1: tow so together this patchwork quilted by lateral deals. Oh, 242 00:12:34,080 --> 00:12:36,560 Speaker 1: I think it will be extraordinarily difficult. These deals take 243 00:12:36,760 --> 00:12:39,880 Speaker 1: years to negotiate. Um, you know the advantage of the 244 00:12:39,960 --> 00:12:42,160 Speaker 1: larger deals that regional deals like t P P or 245 00:12:42,200 --> 00:12:44,160 Speaker 1: the t TIP in Europe, you just get more bang 246 00:12:44,200 --> 00:12:45,960 Speaker 1: for your buck. Right, You've got I mean t PP 247 00:12:46,160 --> 00:12:49,120 Speaker 1: wast of the global economy, so that you know, it's 248 00:12:49,160 --> 00:12:52,680 Speaker 1: a hard negotiation. Took eight plus years, but you get 249 00:12:52,720 --> 00:12:55,679 Speaker 1: all of those UH countries involved in one fell. So 250 00:12:55,920 --> 00:12:57,840 Speaker 1: you do it bilateral so much hard as piece by piece. 251 00:12:57,920 --> 00:13:00,440 Speaker 1: Also for companies, that doesn't work nearly as well, because 252 00:13:00,440 --> 00:13:04,280 Speaker 1: you've got this patchwork quilt of rules. Right, every every 253 00:13:04,320 --> 00:13:06,880 Speaker 1: deal has got its own particular rules on which products qualify, 254 00:13:06,960 --> 00:13:09,160 Speaker 1: how much local content they have to have, etcetera. If 255 00:13:09,200 --> 00:13:11,760 Speaker 1: you've got a whole spaghetti bowl of these things, it's 256 00:13:11,800 --> 00:13:13,480 Speaker 1: not nearly as valuable for the comps. A lot of 257 00:13:13,520 --> 00:13:15,720 Speaker 1: companies aren't even gonna bother to trade under the terms 258 00:13:15,760 --> 00:13:18,480 Speaker 1: of these biladders. They're just going to accept whatever the 259 00:13:18,720 --> 00:13:22,200 Speaker 1: what we call the MFN tariff is the globally negotiator. 260 00:13:22,400 --> 00:13:25,080 Speaker 1: It is easier for paperwork so no, this is a 261 00:13:25,080 --> 00:13:27,160 Speaker 1: bad idea. It's always been a bad idea. Quickly hear 262 00:13:27,200 --> 00:13:29,480 Speaker 1: that National People's Congress kicking off in Beijing. We heard 263 00:13:29,520 --> 00:13:33,120 Speaker 1: from the premier more good words about the Chinese Trade deal, 264 00:13:33,120 --> 00:13:36,480 Speaker 1: that multilateral real trade like sixteen this is the ourccept, 265 00:13:36,559 --> 00:13:39,079 Speaker 1: the Regional Conference of Economic more. In light of what's 266 00:13:39,080 --> 00:13:41,000 Speaker 1: happened here, I think it probably will. I think a 267 00:13:41,000 --> 00:13:43,240 Speaker 1: lot of the countries that that we're looking to the 268 00:13:43,280 --> 00:13:46,000 Speaker 1: United States through the Transmitific Partnership will say, well, this 269 00:13:46,080 --> 00:13:49,240 Speaker 1: is a second best um. But but you know, again, 270 00:13:49,280 --> 00:13:52,360 Speaker 1: those negotiations have been moving slowly. They're focused pretty much 271 00:13:52,400 --> 00:13:54,640 Speaker 1: solely on tariffs. One of the things about the TPP 272 00:13:54,800 --> 00:13:57,640 Speaker 1: that was so beneficial you had rules for emerging industries, 273 00:13:57,760 --> 00:13:59,640 Speaker 1: Like one of the big winners under the t p 274 00:13:59,640 --> 00:14:04,439 Speaker 1: P would have been US digital companies, you know, IBM, Google, Facebook, Intel, 275 00:14:04,480 --> 00:14:07,240 Speaker 1: all the companies operating in the digital space. You had 276 00:14:07,280 --> 00:14:09,959 Speaker 1: these these excellent digital rules under t p which we're 277 00:14:09,960 --> 00:14:14,600 Speaker 1: now throwing out the window. We're going back years in 278 00:14:14,600 --> 00:14:17,320 Speaker 1: the negotiation of trade arrangements by killing that deal just 279 00:14:17,360 --> 00:14:19,760 Speaker 1: didn't make a lot of sense, even from a Donald 280 00:14:19,800 --> 00:14:23,560 Speaker 1: Trump perspective. Ted Alden the book is failure to adjust 281 00:14:23,560 --> 00:14:26,960 Speaker 1: how Americans got left behind in the global economy. It 282 00:14:27,080 --> 00:14:31,640 Speaker 1: is dense, highly readable, a real treatise on where we 283 00:14:31,720 --> 00:14:48,600 Speaker 1: are on our exports and imports. David, we should mention 284 00:14:48,680 --> 00:14:51,360 Speaker 1: that uh, our next guest works with Mr Hooper over 285 00:14:51,400 --> 00:14:55,080 Speaker 1: at Deutsche Bank Economics and would be most inappropriate to 286 00:14:55,160 --> 00:14:57,920 Speaker 1: speak about the matters at his bank, or for that matter, 287 00:14:58,000 --> 00:14:59,920 Speaker 1: at the FBI, and we will steer clear of that, 288 00:15:00,000 --> 00:15:01,920 Speaker 1: of course. Toward Sin Slock joins us now Chief International 289 00:15:01,920 --> 00:15:05,000 Speaker 1: Economy's Statutsche Bank. And we were focused so much on 290 00:15:05,040 --> 00:15:07,480 Speaker 1: the speech that Janet Yellen gave in Chicago on Friday, 291 00:15:07,520 --> 00:15:11,360 Speaker 1: but thirty minutes before she commenced speaking there, her deputy, 292 00:15:11,400 --> 00:15:13,520 Speaker 1: her vice chair stand Fisher, was speaking here in New York. 293 00:15:13,520 --> 00:15:15,240 Speaker 1: You were in the room. Indeed, there was commentary about 294 00:15:15,360 --> 00:15:18,000 Speaker 1: a paper that you co authored, I believe the Deutsche 295 00:15:18,000 --> 00:15:20,000 Speaker 1: banker Peter Hooper co authored, and you were commenting on 296 00:15:20,280 --> 00:15:22,360 Speaker 1: give us us of what what the vice chair had 297 00:15:22,400 --> 00:15:24,520 Speaker 1: to say at that event, as we were focused so 298 00:15:24,600 --> 00:15:26,600 Speaker 1: much on what the chair was saying in Chicago. So 299 00:15:26,640 --> 00:15:29,240 Speaker 1: the most interesting thing about what stain Fisher was saying 300 00:15:29,440 --> 00:15:32,240 Speaker 1: was that he basically said he articulated the words that 301 00:15:32,320 --> 00:15:35,400 Speaker 1: have been unspoken for a while namally that he literally 302 00:15:35,800 --> 00:15:39,200 Speaker 1: pronounced it. We have had no bad data since the election. 303 00:15:40,000 --> 00:15:43,040 Speaker 1: That's a quite an analysis of the US economy because 304 00:15:43,040 --> 00:15:45,440 Speaker 1: it tells you that the the view is that they 305 00:15:45,720 --> 00:15:49,400 Speaker 1: even absent whatever is coming on infrastructure, even aten whatever 306 00:15:49,520 --> 00:15:52,200 Speaker 1: is coming on defense spending, lower corporate taxes, lower household 307 00:15:52,240 --> 00:15:55,600 Speaker 1: Texas tax repatriation, the FED has the view now that 308 00:15:55,640 --> 00:15:58,520 Speaker 1: the US economy is accelerating and getting better, and that's 309 00:15:58,520 --> 00:16:00,120 Speaker 1: why they are keen on telling us that they will 310 00:16:00,120 --> 00:16:02,400 Speaker 1: be hiking here much. So when you look at motivations 311 00:16:02,440 --> 00:16:04,680 Speaker 1: for this pivot that we saw last week is that it, 312 00:16:04,720 --> 00:16:07,760 Speaker 1: in other words, is the absence of anything big. The 313 00:16:07,800 --> 00:16:10,080 Speaker 1: reason why we saw these FED policymakers saying what they 314 00:16:10,080 --> 00:16:12,680 Speaker 1: said last week. It remains a real mystery why they 315 00:16:12,760 --> 00:16:15,240 Speaker 1: changed their view so much over the last two weeks. 316 00:16:15,320 --> 00:16:17,560 Speaker 1: I mean, the traditional economics textbook will show you a 317 00:16:17,560 --> 00:16:19,880 Speaker 1: tailor rule where the FED reaction will be a function 318 00:16:19,880 --> 00:16:22,840 Speaker 1: of whatever happens to the unemployment rate, whatever happens to inflation, 319 00:16:23,200 --> 00:16:25,560 Speaker 1: and we basically didn't get any news on those two 320 00:16:25,600 --> 00:16:27,760 Speaker 1: fronts that changed anything for the last two weeks. And 321 00:16:27,800 --> 00:16:31,400 Speaker 1: nevertheless they went out in an almost orchestrated fashion. Even 322 00:16:31,440 --> 00:16:34,800 Speaker 1: Lele Brainard at how gave a speech where she has 323 00:16:34,840 --> 00:16:36,560 Speaker 1: been usually one of the more dobbage ones, and now 324 00:16:36,640 --> 00:16:39,240 Speaker 1: she was incredibly hawkish, saying that it's probably a good 325 00:16:39,240 --> 00:16:41,200 Speaker 1: idea to go here and much so it's a very 326 00:16:41,280 --> 00:16:44,400 Speaker 1: very strong signal. But it still remains somewhat puzzling where 327 00:16:44,480 --> 00:16:47,320 Speaker 1: they got this change in their mindset from let's go 328 00:16:47,360 --> 00:16:49,680 Speaker 1: to that Brainerd speech that was delivered to a day 329 00:16:49,720 --> 00:16:52,400 Speaker 1: or two before the FED chair spoken in Chicago. I 330 00:16:52,480 --> 00:16:54,560 Speaker 1: was struck by what she had to say about how 331 00:16:54,560 --> 00:16:58,920 Speaker 1: the US economy fits into the sort of international macro economy, 332 00:16:58,960 --> 00:17:01,680 Speaker 1: what's the what's the role here of global events and 333 00:17:01,680 --> 00:17:04,000 Speaker 1: what the feeds thinking right now? Yeah, I think that they. 334 00:17:04,760 --> 00:17:06,800 Speaker 1: For a long time, the fit has basically been looking 335 00:17:06,840 --> 00:17:09,919 Speaker 1: at the rest of the world with some degree of 336 00:17:09,960 --> 00:17:12,560 Speaker 1: being scared and some degrees of relief once in a while, 337 00:17:12,600 --> 00:17:15,119 Speaker 1: in particularly Europe of course, but also Asia, and I 338 00:17:15,160 --> 00:17:18,080 Speaker 1: think that they She described this as well, if the 339 00:17:18,080 --> 00:17:20,480 Speaker 1: rest of the world comes with a shock that hits 340 00:17:20,520 --> 00:17:22,920 Speaker 1: the U s shows the dollar goes up a lot 341 00:17:22,920 --> 00:17:25,640 Speaker 1: like a different two thousand fourteen to fifteen. It could 342 00:17:25,640 --> 00:17:28,159 Speaker 1: be events elsewhere on the political front. We need to 343 00:17:28,200 --> 00:17:30,280 Speaker 1: take that into account. But I think she's trying to say, 344 00:17:30,320 --> 00:17:32,280 Speaker 1: and I think most of them was trying to say 345 00:17:32,320 --> 00:17:35,520 Speaker 1: now that these things are really not at the moment 346 00:17:35,840 --> 00:17:38,000 Speaker 1: a big worry. So that's why we feel good about things. 347 00:17:38,600 --> 00:17:41,200 Speaker 1: Helped me with one of your great expertise is which 348 00:17:41,240 --> 00:17:45,080 Speaker 1: is analysis of the United States housing market. I mean, 349 00:17:45,119 --> 00:17:47,400 Speaker 1: I know it's a smaller part of the economy now, 350 00:17:47,480 --> 00:17:50,840 Speaker 1: but when you look at the housing market can help Janet. 351 00:17:50,880 --> 00:17:54,920 Speaker 1: You'll engage the vector of rate rises. Well. The problem 352 00:17:55,000 --> 00:17:58,040 Speaker 1: for the FIT and for anyone that's analyzing the housing 353 00:17:58,040 --> 00:17:59,960 Speaker 1: market is that house price have gone up so much 354 00:18:00,560 --> 00:18:02,679 Speaker 1: that we are so late in the cycle in the 355 00:18:02,720 --> 00:18:05,359 Speaker 1: sense that home price has become very unaffordable. So you're 356 00:18:05,359 --> 00:18:08,240 Speaker 1: start asking the question, where can that extra growth come 357 00:18:08,280 --> 00:18:10,480 Speaker 1: from in housing? If you already have an asset that's 358 00:18:10,480 --> 00:18:13,200 Speaker 1: extremely expensive for the average American, and if that's the case, 359 00:18:13,440 --> 00:18:15,920 Speaker 1: and if you're betting on a lot of acceleration GDP growth, 360 00:18:16,160 --> 00:18:18,120 Speaker 1: I think it's very unlikely to come from housing because 361 00:18:18,119 --> 00:18:20,240 Speaker 1: there's already at such a high price. Then take that 362 00:18:20,480 --> 00:18:23,760 Speaker 1: over to autos, where we've been cranking out eighteen million, 363 00:18:23,880 --> 00:18:27,280 Speaker 1: seventeen whatever million. I mean again, these are mature industries 364 00:18:27,359 --> 00:18:30,359 Speaker 1: right absolutely, And this is why normally I don't like 365 00:18:30,440 --> 00:18:33,120 Speaker 1: the phrase that the expansion is getting old. But what's 366 00:18:33,160 --> 00:18:35,440 Speaker 1: critical to understand about an expansion that's been running for 367 00:18:35,600 --> 00:18:38,600 Speaker 1: seven eight nine years is to understand that you get 368 00:18:38,800 --> 00:18:41,600 Speaker 1: in autos is the great example, from a production level 369 00:18:41,600 --> 00:18:43,680 Speaker 1: in autos that was around eight nine million in two 370 00:18:43,680 --> 00:18:46,160 Speaker 1: thousand nine to now, as you say, seventeen eighteen million. 371 00:18:46,359 --> 00:18:48,240 Speaker 1: So you can't squeeze much more growth out of that. 372 00:18:48,240 --> 00:18:49,840 Speaker 1: There's a limit to how many cars we can have 373 00:18:49,880 --> 00:18:51,760 Speaker 1: in the garage all of us on average, we already 374 00:18:51,760 --> 00:18:54,360 Speaker 1: have more than two cars per household. So in that sense, 375 00:18:54,400 --> 00:18:56,560 Speaker 1: you asked the question how can we get more growth 376 00:18:56,560 --> 00:18:57,919 Speaker 1: out of the auto sect? That how can we make 377 00:18:57,960 --> 00:19:01,320 Speaker 1: more growth out of the housing market? And with that 378 00:19:01,400 --> 00:19:04,200 Speaker 1: backdrop you really get from a macro perspective to ask 379 00:19:04,240 --> 00:19:06,320 Speaker 1: the fundamental question whereas growth can't you come from? We 380 00:19:06,400 --> 00:19:08,840 Speaker 1: have plucked the lowest hanging fruit when it comes to 381 00:19:08,880 --> 00:19:10,639 Speaker 1: the growth outlook for the US. How good does this 382 00:19:10,640 --> 00:19:12,840 Speaker 1: week's jobs report have to do? Or how how bad 383 00:19:12,880 --> 00:19:14,399 Speaker 1: does it have to be? This sort of derail what 384 00:19:14,440 --> 00:19:17,280 Speaker 1: we've we've seen outlined here over the last week or so. 385 00:19:17,280 --> 00:19:19,000 Speaker 1: So that's of course a very important question. And I 386 00:19:19,040 --> 00:19:21,359 Speaker 1: discussed double clients literally all the time at the moment, 387 00:19:21,400 --> 00:19:23,560 Speaker 1: because if we get a hundred thousand, will that be 388 00:19:23,680 --> 00:19:25,240 Speaker 1: enough for the FIT to say, WHOA wait a minute, 389 00:19:25,280 --> 00:19:27,720 Speaker 1: and then maybe there is the biggest lowdown. The FIT 390 00:19:27,800 --> 00:19:30,680 Speaker 1: must feel quite confident that we will not get a 391 00:19:30,840 --> 00:19:32,840 Speaker 1: drop And I think they also on the weights front. 392 00:19:32,920 --> 00:19:34,879 Speaker 1: Last month we did get a small drop down in 393 00:19:34,920 --> 00:19:37,359 Speaker 1: average val learnings. That's likely would be reversed because that's 394 00:19:37,359 --> 00:19:39,800 Speaker 1: what's course of some special things going on in wages 395 00:19:39,800 --> 00:19:42,040 Speaker 1: and financial services. But the bottom line is, I think 396 00:19:42,040 --> 00:19:44,240 Speaker 1: for them, if we get way, if we get wage 397 00:19:44,280 --> 00:19:45,919 Speaker 1: growth in the range of two and a half to 398 00:19:45,920 --> 00:19:47,800 Speaker 1: two point eight on average val learnings, and if we 399 00:19:47,800 --> 00:19:49,879 Speaker 1: get employment growth of hundred and fifty to two hundred, 400 00:19:50,080 --> 00:19:52,359 Speaker 1: I think that they will feel much more confident about 401 00:19:52,359 --> 00:19:54,320 Speaker 1: going in Michigan. You're gonna come back after the break. 402 00:19:54,359 --> 00:19:56,040 Speaker 1: We'll talk about the ECB in about what's going on 403 00:19:56,119 --> 00:19:57,840 Speaker 1: in China. But a few more questions here about the FED. 404 00:19:57,880 --> 00:19:59,800 Speaker 1: You've written a lot about personnel, and there's a lot 405 00:19:59,840 --> 00:20:02,680 Speaker 1: of curiosity about what a Donald Trump Federal Reserve is 406 00:20:02,720 --> 00:20:04,679 Speaker 1: going to to look like, and we talk about that 407 00:20:04,720 --> 00:20:06,919 Speaker 1: and sort of broad strokes. But when you look at 408 00:20:06,960 --> 00:20:09,600 Speaker 1: the actual personalities, whether that's John Taylor, Glen Hubbard, who 409 00:20:09,680 --> 00:20:11,840 Speaker 1: Tom talked to on TV just a little while ago, 410 00:20:11,960 --> 00:20:14,080 Speaker 1: who do you see as as a front runner for 411 00:20:14,080 --> 00:20:16,080 Speaker 1: those big jobs and how does he or she stand 412 00:20:16,119 --> 00:20:18,760 Speaker 1: to to reshape this institution these next few years. Well, 413 00:20:18,800 --> 00:20:22,000 Speaker 1: we tried to categorize it into the traditional colled Old 414 00:20:22,000 --> 00:20:26,840 Speaker 1: school PSD economics candidates and then and non economy is candidates. 415 00:20:26,960 --> 00:20:30,159 Speaker 1: And the list of PSD economic candidates of course includes 416 00:20:30,280 --> 00:20:31,960 Speaker 1: some of the names you mentioned that John Taylor can 417 00:20:31,960 --> 00:20:35,439 Speaker 1: hover to, others also John Cochrane in Chicago. But on 418 00:20:35,520 --> 00:20:39,040 Speaker 1: the non PSD candidate, of course, the number one is 419 00:20:39,119 --> 00:20:41,720 Speaker 1: of course Kevin Walsh and others that have been standing 420 00:20:41,720 --> 00:20:45,280 Speaker 1: out as people who have extremely strong experience in financial markets, 421 00:20:45,320 --> 00:20:47,600 Speaker 1: who understands the comedy very well. He was on the 422 00:20:47,720 --> 00:20:49,840 Speaker 1: film c for five years. So who will it be 423 00:20:50,160 --> 00:20:52,439 Speaker 1: It remains highly uncertain. But what I can tell you 424 00:20:52,560 --> 00:20:54,680 Speaker 1: is one very important thing is that if visit a dove, 425 00:20:55,119 --> 00:20:57,080 Speaker 1: then of course short race will stay low, but the 426 00:20:57,160 --> 00:20:58,720 Speaker 1: risk is that long race will go up and for 427 00:20:58,760 --> 00:21:01,359 Speaker 1: the youkud will steephen because to the market might say, wow, 428 00:21:01,640 --> 00:21:03,680 Speaker 1: inflation is not going to overshoot, and therefore we should 429 00:21:03,680 --> 00:21:05,960 Speaker 1: be steepening the elcure. Whereas if it's a hawk, then 430 00:21:06,000 --> 00:21:08,280 Speaker 1: short rates might go up and then market might say, well, gee, 431 00:21:09,000 --> 00:21:10,800 Speaker 1: rates are being high prematurely, and therefore you could get 432 00:21:10,800 --> 00:21:13,800 Speaker 1: a flattening. So therefore, for rates investors this is extremely 433 00:21:13,840 --> 00:21:16,000 Speaker 1: important who it is, because if it's a dove, you 434 00:21:16,040 --> 00:21:18,040 Speaker 1: will have a steepeners. If it's a hawk, you will 435 00:21:18,080 --> 00:21:20,119 Speaker 1: have a flattening. But the fact is we've had neither 436 00:21:20,200 --> 00:21:23,760 Speaker 1: in the last four days of FED frenzy. How far 437 00:21:23,920 --> 00:21:29,080 Speaker 1: out the curve can the FED actually affect? So the 438 00:21:29,160 --> 00:21:33,040 Speaker 1: academic literature would say very little, but too well the well, 439 00:21:33,080 --> 00:21:36,760 Speaker 1: the answer is that well, most people will probably argue 440 00:21:36,760 --> 00:21:38,560 Speaker 1: that tenure rates even our function of what the fit 441 00:21:38,640 --> 00:21:41,720 Speaker 1: stands is today, which is a little bit peculiar, because 442 00:21:41,760 --> 00:21:43,359 Speaker 1: the tenure rates should not be a function of what 443 00:21:43,359 --> 00:21:44,800 Speaker 1: the fit does today. That should be a function of 444 00:21:44,800 --> 00:21:47,000 Speaker 1: what you think will happen in ten years time. But nevertheless, 445 00:21:47,040 --> 00:21:49,320 Speaker 1: the premium montenure rates moves around a lot with fit 446 00:21:49,359 --> 00:21:52,159 Speaker 1: communication and also moves around to the topic will discuss 447 00:21:52,200 --> 00:21:54,159 Speaker 1: next name the easy be negative interest rates and the 448 00:21:54,160 --> 00:21:56,080 Speaker 1: flow of money that continues to come to the U 449 00:21:56,200 --> 00:21:58,439 Speaker 1: S that's holding us rates. What's your dollar care right now? 450 00:21:58,480 --> 00:22:01,080 Speaker 1: As a shop, so we have the euro dollar going 451 00:22:01,080 --> 00:22:03,399 Speaker 1: down in the FO dollar appreciating simply from the logic 452 00:22:03,560 --> 00:22:05,560 Speaker 1: that if interest rates go up first in the US 453 00:22:05,640 --> 00:22:07,320 Speaker 1: and they stay on hold the your area for the 454 00:22:07,359 --> 00:22:09,719 Speaker 1: foreseeable future, that should make the doll a my tray 455 00:22:10,040 --> 00:22:11,879 Speaker 1: out here with the Ellen rusk, where are we like, 456 00:22:12,160 --> 00:22:15,040 Speaker 1: we're not at eighties cents or seventy cents? So they 457 00:22:15,160 --> 00:22:19,800 Speaker 1: poecast is by then this for your dollar to go 458 00:22:19,880 --> 00:22:23,920 Speaker 1: down towards one towards one towards paratority. Okay, Well, person's 459 00:22:23,960 --> 00:22:26,160 Speaker 1: luck with us a lot to talk about. Will fold 460 00:22:26,240 --> 00:22:28,680 Speaker 1: us over into a broader view of Jennet Yell and 461 00:22:28,760 --> 00:22:32,720 Speaker 1: a central banker to the world. What are you expecting? 462 00:22:32,720 --> 00:22:35,680 Speaker 1: How how find a needle does he have to thread? 463 00:22:35,720 --> 00:22:39,159 Speaker 1: On Thursday? Well, the backdrop in some in a headline 464 00:22:39,160 --> 00:22:41,560 Speaker 1: at least it is easy that economics is good, politics 465 00:22:41,640 --> 00:22:44,240 Speaker 1: is bad. And how do you go into a meeting 466 00:22:44,280 --> 00:22:47,119 Speaker 1: and put those two things up on the scale. The 467 00:22:47,240 --> 00:22:49,160 Speaker 1: challenge for them is that economic data has been coming 468 00:22:49,200 --> 00:22:52,320 Speaker 1: in better than what they had expected and what the 469 00:22:52,359 --> 00:22:56,720 Speaker 1: market had expected. So how do they tiptoe around the 470 00:22:56,840 --> 00:23:01,680 Speaker 1: issue of up trending inflation and better p m I s, 471 00:23:01,880 --> 00:23:04,920 Speaker 1: better employment data not quite a strong up trading wages 472 00:23:05,000 --> 00:23:10,120 Speaker 1: quite yet, but we still think that there are various options, 473 00:23:10,320 --> 00:23:13,040 Speaker 1: but they're most likely in my view, is that they 474 00:23:13,080 --> 00:23:15,760 Speaker 1: will probably stick to very close to the message that 475 00:23:15,840 --> 00:23:18,320 Speaker 1: had last time, which is not quite weight and see, 476 00:23:18,560 --> 00:23:21,000 Speaker 1: but wait and see with some recognition of the data 477 00:23:21,040 --> 00:23:23,840 Speaker 1: actually being better. We got a budget from the UK 478 00:23:23,960 --> 00:23:25,760 Speaker 1: this week as well, Philip him, him and the Chancellor 479 00:23:25,800 --> 00:23:28,399 Speaker 1: speaking about that over the weekend. What do you expect 480 00:23:28,400 --> 00:23:31,760 Speaker 1: to see there? Uh? And and again Brexit is the 481 00:23:31,760 --> 00:23:33,639 Speaker 1: backdrop of course for for all of this. How does 482 00:23:33,680 --> 00:23:36,000 Speaker 1: how does he go about preparing and and putting forward 483 00:23:36,000 --> 00:23:38,840 Speaker 1: a budget with the uncertainty that you know, who knows 484 00:23:38,880 --> 00:23:41,639 Speaker 1: what will happen when indeed Article fifty is triggered. Oh absolutely, 485 00:23:41,640 --> 00:23:43,520 Speaker 1: an Article fifty is supposed to be triggered here and 486 00:23:43,640 --> 00:23:47,000 Speaker 1: much and we get all the problems with how do 487 00:23:47,040 --> 00:23:50,360 Speaker 1: you get the mix of politics getting into the cocktail 488 00:23:50,400 --> 00:23:53,200 Speaker 1: with economics, and this for policy makers, including fiscal policy 489 00:23:53,200 --> 00:23:55,479 Speaker 1: and therefore also the UK budget that's coming. How do 490 00:23:55,560 --> 00:23:59,480 Speaker 1: you take into account what the political scenario is and 491 00:23:59,480 --> 00:24:01,640 Speaker 1: and they have forced to come up with a political 492 00:24:01,640 --> 00:24:03,760 Speaker 1: scenario that has an outcome for the economy, which is 493 00:24:03,760 --> 00:24:05,879 Speaker 1: why that will be associated with some growth rates that 494 00:24:05,840 --> 00:24:07,679 Speaker 1: they will have to reveal about where we're going. And 495 00:24:07,720 --> 00:24:10,240 Speaker 1: that's just really really difficult. I mean, the past economics 496 00:24:10,280 --> 00:24:13,600 Speaker 1: textbook does not give you any model that tells you 497 00:24:13,920 --> 00:24:16,159 Speaker 1: what politics should be in your right hand side and 498 00:24:16,200 --> 00:24:18,800 Speaker 1: your equation exactly where I wanted to go. Is the 499 00:24:18,880 --> 00:24:21,200 Speaker 1: model building that we're doing right now. If we're getting 500 00:24:21,240 --> 00:24:23,600 Speaker 1: a regime change, if we're getting a FED that's moving, 501 00:24:24,080 --> 00:24:27,639 Speaker 1: Vice Chairman Fisher goes ultra accommodative. He's admitted to me 502 00:24:27,720 --> 00:24:32,560 Speaker 1: that we're going accommodative restrictives of a mile away. Do 503 00:24:32,640 --> 00:24:36,560 Speaker 1: the models work now, and particularly the interest rate part 504 00:24:36,760 --> 00:24:40,520 Speaker 1: of our economic models, it's still a fiction, isn't it. 505 00:24:41,200 --> 00:24:43,040 Speaker 1: I Mean the main challenge for the models is that 506 00:24:43,080 --> 00:24:45,920 Speaker 1: they predict the future based on the history, and it 507 00:24:46,000 --> 00:24:47,880 Speaker 1: is history particularly useful as a guide for the future. 508 00:24:47,960 --> 00:24:50,159 Speaker 1: When would you have such a dramatic change in the 509 00:24:50,240 --> 00:24:53,040 Speaker 1: underlying institutions and risks to the upside in terms of 510 00:24:53,080 --> 00:24:55,640 Speaker 1: fiscal spending in the US. When you have dramatic change 511 00:24:55,720 --> 00:24:59,000 Speaker 1: to the institutions, zarms of political risks in the your 512 00:24:59,040 --> 00:25:01,640 Speaker 1: area with elections and the lands France and Germany, then 513 00:25:02,400 --> 00:25:04,879 Speaker 1: it's just really difficult to use the past to predict that, 514 00:25:04,920 --> 00:25:08,280 Speaker 1: in particularly given the record that the posters had with 515 00:25:08,320 --> 00:25:10,520 Speaker 1: Brexit was not predicted very well and Trump was not 516 00:25:10,600 --> 00:25:12,960 Speaker 1: predicted very well. So we have all been humbled quite 517 00:25:13,040 --> 00:25:16,400 Speaker 1: dramatically in terms of how to use this. What's normal 518 00:25:16,640 --> 00:25:19,320 Speaker 1: for a FED funds target rate? We've heard three percent 519 00:25:19,440 --> 00:25:22,440 Speaker 1: this morning as one guest, So they FIT itself has 520 00:25:22,440 --> 00:25:24,600 Speaker 1: the long dot in the dot chart, as you know, 521 00:25:24,680 --> 00:25:27,080 Speaker 1: and that's just below three percent. So one very simple 522 00:25:27,119 --> 00:25:29,119 Speaker 1: answer is the Fat answers your question by saying the 523 00:25:29,160 --> 00:25:31,560 Speaker 1: fat funds rate will peak at three. That's the terminal 524 00:25:31,560 --> 00:25:34,840 Speaker 1: fat funds rate. They have been revising that down essentially 525 00:25:34,880 --> 00:25:37,320 Speaker 1: from four to three over the last several years. So 526 00:25:37,359 --> 00:25:40,320 Speaker 1: even the FIT, all the PSDs that work at the 527 00:25:40,359 --> 00:25:42,520 Speaker 1: feder of the surapboard and also the whole FAT system 528 00:25:42,720 --> 00:25:45,560 Speaker 1: have been revising dramatically down their views on where we 529 00:25:45,600 --> 00:25:48,080 Speaker 1: are going. And David Torsten Slack because he always does. 530 00:25:48,119 --> 00:25:50,480 Speaker 1: He's so brilliant. Is giving me my chart for tomorrow. 531 00:25:51,040 --> 00:25:54,520 Speaker 1: I'm going to do a dot chart charts for the 532 00:25:54,720 --> 00:25:59,199 Speaker 1: weekend reading of the migration of the market beat. The 533 00:25:59,240 --> 00:26:02,320 Speaker 1: dot scope, cicely is Dr Slack said to three percent. 534 00:26:03,119 --> 00:26:06,800 Speaker 1: The extrapolation of the market beat now is in the 535 00:26:06,880 --> 00:26:12,879 Speaker 1: vicinity of two point one maybe two point two. Longer term, 536 00:26:12,920 --> 00:26:16,680 Speaker 1: I know what's longer term. Yeah, longer term is when 537 00:26:16,680 --> 00:26:20,400 Speaker 1: there's no more slim in my house, something like that. 538 00:26:21,000 --> 00:26:22,840 Speaker 1: Let me close by asking about China. We were talking 539 00:26:22,840 --> 00:26:25,920 Speaker 1: about this with Michael McDonough, our chief economist at Bloomberg Intelligence, 540 00:26:25,920 --> 00:26:28,879 Speaker 1: that the National People's Congress kicking off last night. How 541 00:26:28,920 --> 00:26:30,879 Speaker 1: closely are you you watching this? We talked about the 542 00:26:30,880 --> 00:26:33,960 Speaker 1: interplay of politics and economics here, uh, you know, with 543 00:26:33,960 --> 00:26:36,639 Speaker 1: with with with presidency here up for I don't know, 544 00:26:36,720 --> 00:26:39,080 Speaker 1: re elections right and re anointment. I suppose a little 545 00:26:39,119 --> 00:26:41,280 Speaker 1: later this year. It seems like there it's kind of 546 00:26:41,320 --> 00:26:44,119 Speaker 1: the inverse. You see a more cautious government, uh, and 547 00:26:44,119 --> 00:26:47,120 Speaker 1: maybe more cautious economic policy going into into that later 548 00:26:47,119 --> 00:26:49,479 Speaker 1: this year. If you look at the Leaky Quing Index, 549 00:26:49,480 --> 00:26:52,200 Speaker 1: which you can find on your Bloomberg screen that basically 550 00:26:52,240 --> 00:26:55,240 Speaker 1: shows quite a solid move up because that index includes 551 00:26:55,359 --> 00:26:58,040 Speaker 1: data that's measured closer to the source. So this means 552 00:26:58,080 --> 00:27:00,000 Speaker 1: that this means data that we have a little bit 553 00:27:00,080 --> 00:27:03,159 Speaker 1: higher confidence in the general GDP and that backdrop of 554 00:27:03,200 --> 00:27:05,320 Speaker 1: the economy actually doing read to do well is in 555 00:27:05,359 --> 00:27:08,560 Speaker 1: some sense making the NPC slightly easier politically because that 556 00:27:08,640 --> 00:27:10,320 Speaker 1: means that they could focus a little bit long, more 557 00:27:10,359 --> 00:27:12,360 Speaker 1: long run issues. And as usual, China has three main 558 00:27:12,400 --> 00:27:14,800 Speaker 1: issues that we are listening very carefully to. What's coming 559 00:27:14,800 --> 00:27:16,960 Speaker 1: out dam me on the currency, what's coming out on 560 00:27:17,000 --> 00:27:19,879 Speaker 1: the housing market, and what's coming out on opening up 561 00:27:19,920 --> 00:27:23,080 Speaker 1: more on structural reforms and stayed on enterprises and basically 562 00:27:23,119 --> 00:27:25,320 Speaker 1: allowing a Chinese economy to be more and more exposed 563 00:27:25,320 --> 00:27:28,880 Speaker 1: to competition both domestically and externally. So we're watching very 564 00:27:28,880 --> 00:27:31,680 Speaker 1: carefully and we are certainly very much aware that the 565 00:27:31,840 --> 00:27:34,760 Speaker 1: any polity changes will be coming this week, and that's 566 00:27:34,760 --> 00:27:36,800 Speaker 1: why that's so important in what he had to say 567 00:27:36,800 --> 00:27:40,040 Speaker 1: about opening up new housing land for housing invasion in Shanghai, 568 00:27:40,040 --> 00:27:41,919 Speaker 1: So we'll continue to follow that for sure. Thank you. 569 00:27:41,960 --> 00:27:45,000 Speaker 1: How about land for housing and I'll take it and 570 00:27:45,280 --> 00:27:47,280 Speaker 1: take carve out a little plot in the park for me. 571 00:27:48,880 --> 00:28:00,320 Speaker 1: Thank you so much. He is with Deutsche Bank, brought 572 00:28:00,400 --> 00:28:03,960 Speaker 1: you by Bank of America. Mary Lynch dedicated to bringing 573 00:28:04,040 --> 00:28:07,720 Speaker 1: our clients insights and solutions to meet the challenges of 574 00:28:07,760 --> 00:28:12,280 Speaker 1: a transforming world. That's the power of global connections. Mary Lynch, 575 00:28:12,440 --> 00:28:20,800 Speaker 1: Pierce Federan Smith Incorporated Member s I PC. Mark Chandler 576 00:28:21,200 --> 00:28:23,320 Speaker 1: joins us. Now, Mark, what does the Brown brothers Herman 577 00:28:23,440 --> 00:28:28,159 Speaker 1: call on us? Dollar? Do we see a lift o 578 00:28:28,320 --> 00:28:29,960 Speaker 1: the medium term? I still bullish, but you know, we 579 00:28:30,000 --> 00:28:32,800 Speaker 1: did have a setback on Friday to buy the rumor. 580 00:28:32,920 --> 00:28:35,280 Speaker 1: Saw the fact that as Yelling became the eleventh set 581 00:28:35,320 --> 00:28:39,120 Speaker 1: official that spoke last week and at Penadam, I believe 582 00:28:39,480 --> 00:28:44,280 Speaker 1: supported the idea of a rate hike next week. Is 583 00:28:44,360 --> 00:28:47,560 Speaker 1: the ratehike one and done? Or do you fold in 584 00:28:47,680 --> 00:28:53,240 Speaker 1: a series of rate hikes within the three Yeah? Sure, 585 00:28:53,280 --> 00:28:55,160 Speaker 1: we're thinking that the fs going to go three times 586 00:28:55,200 --> 00:28:59,120 Speaker 1: this year. I think that very small, like nuanced change 587 00:28:59,280 --> 00:29:02,560 Speaker 1: in the way Yelling described how a comedy of the 588 00:29:02,640 --> 00:29:05,600 Speaker 1: fet is, and this I think helps illustrate how people 589 00:29:05,680 --> 00:29:07,920 Speaker 1: like me sort of go over to the speeches with 590 00:29:08,040 --> 00:29:10,760 Speaker 1: a fine tooth comb. She changed her assessment of how 591 00:29:11,280 --> 00:29:14,040 Speaker 1: of how a comedy of policy is from being modestly 592 00:29:14,720 --> 00:29:19,040 Speaker 1: to being moderately accommodative. And this basically means that while 593 00:29:19,120 --> 00:29:22,680 Speaker 1: fetters stayed the same, inflation has gone up. Growth on 594 00:29:22,760 --> 00:29:25,080 Speaker 1: a trend basis seems to have strength and it became 595 00:29:25,120 --> 00:29:27,960 Speaker 1: more solid, and so the accommodation then it has become 596 00:29:28,040 --> 00:29:30,440 Speaker 1: more than it was previously, which is why the Fed 597 00:29:30,560 --> 00:29:33,640 Speaker 1: seems still committed to removing more of that accommodation, so 598 00:29:33,760 --> 00:29:36,120 Speaker 1: a hike, and I think that the market's view is 599 00:29:36,200 --> 00:29:39,640 Speaker 1: that the timing of the move went from June or 600 00:29:40,080 --> 00:29:43,480 Speaker 1: May back to March, but that's not really changing the 601 00:29:43,600 --> 00:29:46,560 Speaker 1: odds so much of a third hike this year. Two 602 00:29:46,640 --> 00:29:49,479 Speaker 1: highs completely priced in the market went last week from 603 00:29:49,520 --> 00:29:52,200 Speaker 1: about a one in four chance of a third hike 604 00:29:52,240 --> 00:29:54,040 Speaker 1: to one in three chance. And we think there's still 605 00:29:54,120 --> 00:29:58,720 Speaker 1: scooped then for the market discount somewhat quicker pace of 606 00:29:58,840 --> 00:30:01,440 Speaker 1: Fed hikes. So important is the history When Janet Yellen 607 00:30:01,480 --> 00:30:03,800 Speaker 1: delivers a speech like this and justifies what the Fed's 608 00:30:03,800 --> 00:30:06,120 Speaker 1: done here over these last few years, How important is 609 00:30:06,160 --> 00:30:07,520 Speaker 1: that to you when you're going through with a fine 610 00:30:07,560 --> 00:30:11,080 Speaker 1: tooth comb. That's so much her collection of her recollection 611 00:30:11,120 --> 00:30:13,280 Speaker 1: of history. It's really more the forward guide than she 612 00:30:13,360 --> 00:30:15,720 Speaker 1: gives and that's where the importance is that that this 613 00:30:15,880 --> 00:30:19,360 Speaker 1: is not this is not the set feel is more 614 00:30:19,400 --> 00:30:22,560 Speaker 1: constant and inflation will be rising, and that the Fed's 615 00:30:22,960 --> 00:30:26,360 Speaker 1: mandates full employment, price ability are at hand. David Gurrow 616 00:30:26,440 --> 00:30:28,480 Speaker 1: with Tom Keene in New York. This is Bloomberg Surveillance 617 00:30:28,520 --> 00:30:30,680 Speaker 1: on Bloomberg Rady. We're joined by Mark Chandler. Let me 618 00:30:30,720 --> 00:30:34,360 Speaker 1: ask you about a quotation here from our new Commerce secretary. 619 00:30:34,400 --> 00:30:36,320 Speaker 1: We have Wilbur Ross saying the pay so has fallen 620 00:30:36,360 --> 00:30:38,040 Speaker 1: a lot, mainly because of the fear of what will 621 00:30:38,080 --> 00:30:41,320 Speaker 1: happen with NAFTA quote. I believe that if we and 622 00:30:41,400 --> 00:30:43,920 Speaker 1: the Mexicans make a very sensible trade agreement, the Mexican 623 00:30:43,960 --> 00:30:47,400 Speaker 1: pay so will recover quite a lot. What do you 624 00:30:47,440 --> 00:30:48,640 Speaker 1: make of what he had to say there and what's 625 00:30:48,640 --> 00:30:50,680 Speaker 1: the likelihood there we could see recovery here in the 626 00:30:50,720 --> 00:30:53,560 Speaker 1: not too distant future. Well, I think that's really the 627 00:30:53,640 --> 00:30:56,920 Speaker 1: story is. Since the since basically the middle of January, 628 00:30:57,400 --> 00:31:00,280 Speaker 1: the Mexican past so, despite the Trump administration in stort 629 00:31:00,280 --> 00:31:03,080 Speaker 1: of beating up on it during the campaign and afterwards, 630 00:31:03,120 --> 00:31:05,600 Speaker 1: the Mexican pasto is actually one of the strongest currencies 631 00:31:05,680 --> 00:31:08,760 Speaker 1: this year since the middle of January. A couple of reasons. 632 00:31:08,800 --> 00:31:11,200 Speaker 1: I think. One is I think that people recognize that 633 00:31:11,240 --> 00:31:14,600 Speaker 1: a lot of what UH Chump the candidates said was 634 00:31:14,680 --> 00:31:18,680 Speaker 1: bluster and his new team that surrounding himself by aren't 635 00:31:18,760 --> 00:31:22,479 Speaker 1: quite as hostile towards Mexico, so toned down rhetoric. Secondly, 636 00:31:22,600 --> 00:31:25,600 Speaker 1: Mexico changed UH the way that the interview in the 637 00:31:25,680 --> 00:31:28,960 Speaker 1: form exchange market, adopting a more Brazilian approach, which is 638 00:31:29,160 --> 00:31:32,760 Speaker 1: involved swaps rather than draining reserves. And the third thing 639 00:31:32,840 --> 00:31:35,160 Speaker 1: I think we saw was Ross's comments, which gave us 640 00:31:35,200 --> 00:31:39,040 Speaker 1: this last push down below the state level. So I 641 00:31:39,080 --> 00:31:42,320 Speaker 1: think the Mexican pasto is has recovered quite a bit 642 00:31:43,280 --> 00:31:46,000 Speaker 1: in the past two months, and I think that the 643 00:31:46,520 --> 00:31:49,560 Speaker 1: change rhetoric helps, but it still doesn't solve the complete problem, 644 00:31:49,920 --> 00:31:52,160 Speaker 1: and that is people think that Mexico is one of 645 00:31:52,200 --> 00:31:55,400 Speaker 1: the countries that are that the re exporting from the 646 00:31:55,520 --> 00:31:58,000 Speaker 1: US back to Mexico is important, the trade deficit with 647 00:31:58,040 --> 00:32:02,360 Speaker 1: Mexico is important, and there's still the animosity towards Mexico, 648 00:32:02,440 --> 00:32:06,600 Speaker 1: whether it's the UH, whether it's the wall, whether it's trade. Uh. 649 00:32:07,160 --> 00:32:09,280 Speaker 1: It still seems to me that if the Trump administration 650 00:32:09,360 --> 00:32:13,080 Speaker 1: is looking for a quick or easy victory, uh success, 651 00:32:13,400 --> 00:32:16,480 Speaker 1: I think Mexico seems like a likely target. Wilbur Ross 652 00:32:16,720 --> 00:32:19,720 Speaker 1: now confirmed, Stephen Manuchan confirmed as well in the Treasury Department. 653 00:32:20,360 --> 00:32:22,320 Speaker 1: Do you expect to hear more about the dollar from 654 00:32:22,400 --> 00:32:24,719 Speaker 1: from these officials? Of course, we heard such dissonance from 655 00:32:24,800 --> 00:32:27,080 Speaker 1: them and the president over these last few months. Do 656 00:32:27,160 --> 00:32:29,120 Speaker 1: you think that this administration is clearer now and it's 657 00:32:29,160 --> 00:32:32,800 Speaker 1: in its a sense of how it's going to approach currency? Well, 658 00:32:32,800 --> 00:32:34,160 Speaker 1: I think that it does help that a lot of 659 00:32:34,200 --> 00:32:37,680 Speaker 1: these people have been have to you know, have been confirmed. 660 00:32:38,280 --> 00:32:40,720 Speaker 1: His economic team is falling into place, and I think 661 00:32:40,760 --> 00:32:42,960 Speaker 1: that helps. I think that also a recognition. I think 662 00:32:42,960 --> 00:32:45,360 Speaker 1: we want to see this more coming from the upcoming 663 00:32:45,440 --> 00:32:50,720 Speaker 1: G twenty meetings, reminding the US administration of their international obligations, 664 00:32:50,800 --> 00:32:53,960 Speaker 1: and if the US begins really talking to dollar down. 665 00:32:54,040 --> 00:32:56,400 Speaker 1: And I think that up until now it's been sporadic, 666 00:32:56,520 --> 00:32:59,000 Speaker 1: it hasn't been a sustained campaign. Most of it took 667 00:32:59,040 --> 00:33:02,640 Speaker 1: place in confirmation inherings. But I think if it is renewed, 668 00:33:03,480 --> 00:33:05,760 Speaker 1: I think that the ferries, of course, that other countries 669 00:33:05,800 --> 00:33:07,560 Speaker 1: to go down the same path. And I think that 670 00:33:07,640 --> 00:33:09,400 Speaker 1: once I sort of think of it as an arms 671 00:33:09,440 --> 00:33:12,720 Speaker 1: control agreement, we could have a battle over Coco real 672 00:33:12,800 --> 00:33:15,480 Speaker 1: currency war. But I think that the G seven G 673 00:33:15,880 --> 00:33:18,520 Speaker 1: s let's not do this so definite. Start of see 674 00:33:18,560 --> 00:33:21,640 Speaker 1: it as an arms control agreement, and if the US 675 00:33:21,680 --> 00:33:24,040 Speaker 1: administration violates it, I think it opens the door to 676 00:33:24,160 --> 00:33:27,560 Speaker 1: other violations. Well that's very wise. Let me ask you 677 00:33:27,680 --> 00:33:32,080 Speaker 1: the difficult question then, on the operational outcomes of your theory. 678 00:33:32,520 --> 00:33:36,520 Speaker 1: If this administration does what it says it wants to do, 679 00:33:37,920 --> 00:33:41,080 Speaker 1: what are the institutional processes that we will see to 680 00:33:41,200 --> 00:33:45,280 Speaker 1: the market vigilante step in, to large institutions step in, 681 00:33:46,080 --> 00:33:49,000 Speaker 1: or does the can the Trump administration act in the 682 00:33:49,080 --> 00:33:52,720 Speaker 1: unilateral way? Well, I've said out of all the things 683 00:33:52,800 --> 00:33:55,360 Speaker 1: that you know, I think analysts and economists may differ 684 00:33:55,440 --> 00:33:58,960 Speaker 1: on exactly what order they place in the top five 685 00:33:59,160 --> 00:34:01,840 Speaker 1: to say ten actors that influence a foreign exchange market. 686 00:34:02,440 --> 00:34:04,520 Speaker 1: The reason why people can differ, but I don't think 687 00:34:04,560 --> 00:34:06,760 Speaker 1: that you'd find many people who would put wishes of 688 00:34:06,840 --> 00:34:09,879 Speaker 1: policymakers in the top several, you know, the top most 689 00:34:09,920 --> 00:34:13,000 Speaker 1: salient factors. What this means then is the best thing then, 690 00:34:13,000 --> 00:34:14,719 Speaker 1: And that's what I'm advising our client to do, is 691 00:34:14,800 --> 00:34:17,120 Speaker 1: rather than focus on what it's said, let's focus on 692 00:34:17,200 --> 00:34:19,279 Speaker 1: the policy what has done. And I think that the 693 00:34:19,600 --> 00:34:24,600 Speaker 1: prospect of fiscal stimulus and monetary tightening is a powerful 694 00:34:25,040 --> 00:34:28,080 Speaker 1: cocktail for currency. The challenge that I think is in 695 00:34:28,120 --> 00:34:29,960 Speaker 1: the short run, that is the next couple of months, 696 00:34:30,000 --> 00:34:32,839 Speaker 1: it's still going to be mostly about monetary policy, very 697 00:34:32,880 --> 00:34:35,880 Speaker 1: little on fiscal policies, likely before at least the summer. 698 00:34:35,960 --> 00:34:38,600 Speaker 1: And by that I mean three elements of fiscal policy, 699 00:34:39,160 --> 00:34:44,680 Speaker 1: the tax reform, the the infrastructure spending, and the deregulation 700 00:34:45,080 --> 00:34:47,400 Speaker 1: right now, which seems to me that the deregulation is 701 00:34:47,480 --> 00:34:51,160 Speaker 1: being pursued through the executive orders and through the discretion 702 00:34:51,239 --> 00:34:54,600 Speaker 1: that the government has, but the other two are are 703 00:34:54,719 --> 00:34:57,600 Speaker 1: not really in the in play yet can be later. 704 00:34:57,800 --> 00:35:00,520 Speaker 1: So that leaves monetary policy. And if what we have 705 00:35:00,600 --> 00:35:03,759 Speaker 1: been talking about the market moving shifting the timing of 706 00:35:03,800 --> 00:35:07,200 Speaker 1: the FED hike from say May or June back into March, 707 00:35:08,600 --> 00:35:10,799 Speaker 1: help us with this other meeting coming up this week, 708 00:35:10,840 --> 00:35:13,439 Speaker 1: This other central bank meeting coming up on Thursday. Of course, 709 00:35:13,480 --> 00:35:15,640 Speaker 1: the FED meeting next week for two days in Washington, 710 00:35:15,719 --> 00:35:17,520 Speaker 1: d C. But give us a sense of how your 711 00:35:17,520 --> 00:35:20,080 Speaker 1: position and going into that meeting. The ECB meeting that 712 00:35:20,440 --> 00:35:23,879 Speaker 1: we'll hear from Marrow Druggy afterward on Thursday morning. Yeah. 713 00:35:23,880 --> 00:35:26,279 Speaker 1: So the ECB meeting, and there's two major central banks 714 00:35:26,360 --> 00:35:27,839 Speaker 1: meeting this week. The e CV is one of them. 715 00:35:27,880 --> 00:35:30,200 Speaker 1: They Reserve Bank of Australia is the other. I think 716 00:35:30,239 --> 00:35:32,560 Speaker 1: most people are going into the meeting not expecting any 717 00:35:32,600 --> 00:35:36,080 Speaker 1: policy change, any any rhetoric change. However, there is a 718 00:35:36,160 --> 00:35:39,040 Speaker 1: possibility that some analysts are talking about, and that is 719 00:35:39,080 --> 00:35:41,400 Speaker 1: in the forward guidance that the e c V gives 720 00:35:42,040 --> 00:35:43,759 Speaker 1: right now. They're saying, and they even saying this for 721 00:35:43,760 --> 00:35:46,319 Speaker 1: the last several months, is it ratually means where they 722 00:35:46,360 --> 00:35:50,000 Speaker 1: are or lower well beyond when the asset purchased a 723 00:35:50,040 --> 00:35:53,760 Speaker 1: program as the QUI ends. And because inflation the Eurozone 724 00:35:53,840 --> 00:35:56,760 Speaker 1: is picking up. Germany inflations, for example, now is already 725 00:35:56,880 --> 00:36:01,120 Speaker 1: north of two some people think that the ECB is 726 00:36:01,200 --> 00:36:03,960 Speaker 1: ready now to change its by as its sort of 727 00:36:04,000 --> 00:36:06,640 Speaker 1: its risk assessment on its forward guidance. I think it's 728 00:36:06,640 --> 00:36:09,400 Speaker 1: a little bit early. And here's why the headline inflation 729 00:36:09,480 --> 00:36:13,040 Speaker 1: is moving up. Core inflation is not core inflation. Our 730 00:36:13,160 --> 00:36:15,320 Speaker 1: measure of core inflation x food and energy, that's what 731 00:36:15,400 --> 00:36:18,080 Speaker 1: the e c B uses, and that boden at zero 732 00:36:18,200 --> 00:36:21,520 Speaker 1: point six and despite the more than doubling of the 733 00:36:21,560 --> 00:36:24,439 Speaker 1: pace of headline inflation, the core rate is at zero 734 00:36:24,560 --> 00:36:26,600 Speaker 1: point nine percent, and that's where it's been stuck really 735 00:36:26,640 --> 00:36:28,759 Speaker 1: for a couple of months. So I think that the 736 00:36:28,880 --> 00:36:32,480 Speaker 1: ECB is going to view headline inflation, not core inflation, 737 00:36:32,680 --> 00:36:36,400 Speaker 1: and that because of the base effect, headline inflation is 738 00:36:36,480 --> 00:36:39,520 Speaker 1: likely to We're very close to a peak and headline inflation, 739 00:36:39,800 --> 00:36:42,600 Speaker 1: if not this month, maybe next month. But with the 740 00:36:43,120 --> 00:36:44,960 Speaker 1: this is really the rise of energy prices and that 741 00:36:44,960 --> 00:36:47,440 Speaker 1: will fall out of it being fading from from the 742 00:36:47,480 --> 00:36:50,960 Speaker 1: base effect. So we're really looking at a little bit 743 00:36:51,000 --> 00:36:53,600 Speaker 1: early for the ECB to change it's it's guidance, but 744 00:36:53,640 --> 00:36:56,080 Speaker 1: it could change it maybe a later and second quarter. 745 00:36:56,400 --> 00:36:58,600 Speaker 1: Well Mark, thank you so much. Mark, Channel look with 746 00:36:58,680 --> 00:37:13,920 Speaker 1: Brown Brothers hereman without question or Interview of the day. 747 00:37:13,960 --> 00:37:18,279 Speaker 1: Olivia Blonchard at the Pierson Institute, Professor, Good morning, UM. 748 00:37:18,840 --> 00:37:22,000 Speaker 1: I'd like to touch first on productivity in your recent writings, 749 00:37:22,040 --> 00:37:24,600 Speaker 1: and I think if I can do it more simplistically 750 00:37:24,680 --> 00:37:29,080 Speaker 1: than you do in your Wonderful macroeconomics textbook, Let's think 751 00:37:29,280 --> 00:37:34,600 Speaker 1: horse in cart is a bad economy the horse which 752 00:37:34,719 --> 00:37:38,800 Speaker 1: leads to weak, tepid, lousy productivity. Or is it the 753 00:37:38,840 --> 00:37:45,759 Speaker 1: other way around, that lower productivity leads to a bad economy. Yeah, 754 00:37:45,960 --> 00:37:47,759 Speaker 1: good way, good way to put it. I think it 755 00:37:47,840 --> 00:37:50,080 Speaker 1: goes both ways. But in this case it looks like 756 00:37:50,280 --> 00:37:55,480 Speaker 1: the main factor is really just to stow down in productivity. 757 00:37:56,239 --> 00:37:59,319 Speaker 1: If it was just coincidental with the crisis, we can't 758 00:37:59,360 --> 00:38:02,120 Speaker 1: think that the crisis for the source of it, Cobby 759 00:38:02,239 --> 00:38:05,000 Speaker 1: has something to do with it, but started before it 760 00:38:06,080 --> 00:38:09,200 Speaker 1: it continues. So my sense is we can take the 761 00:38:09,480 --> 00:38:14,520 Speaker 1: decreasing productivity gowth as as a causal factor and many 762 00:38:14,560 --> 00:38:17,320 Speaker 1: affect the econy very much as argued in the tissue 763 00:38:17,760 --> 00:38:21,839 Speaker 1: you're referred to. Fall into this the argument that many 764 00:38:21,920 --> 00:38:24,200 Speaker 1: make there were in a period of secular stagnation, Lawrence 765 00:38:24,200 --> 00:38:26,920 Speaker 1: some reason among others making that that argument here, does 766 00:38:27,000 --> 00:38:30,160 Speaker 1: this revise sort of your sense of that No, I 767 00:38:30,239 --> 00:38:34,360 Speaker 1: mean again, the discussion, but the secure stagnation has always 768 00:38:34,400 --> 00:38:37,319 Speaker 1: been a bit fuzzy. If it means that we're going 769 00:38:37,400 --> 00:38:40,239 Speaker 1: to have lower goalth in the future, that indeed, all 770 00:38:40,320 --> 00:38:43,120 Speaker 1: the indications we have at this point is productivity goal 771 00:38:43,440 --> 00:38:46,160 Speaker 1: is lower and we have no reason to think it's 772 00:38:46,200 --> 00:38:49,600 Speaker 1: going to go up well. At the same time, my 773 00:38:49,760 --> 00:38:53,920 Speaker 1: sense is this forecast of productivity goalf are extremely uncertain 774 00:38:54,560 --> 00:38:57,760 Speaker 1: and very often have a decade or flow productivity goalth 775 00:38:57,920 --> 00:39:00,680 Speaker 1: that the next one is good and times to come 776 00:39:00,840 --> 00:39:04,279 Speaker 1: is exposed. Going to find some explanation for it, We're 777 00:39:04,280 --> 00:39:07,000 Speaker 1: not very good. But if we have to make an assumption, 778 00:39:07,480 --> 00:39:10,799 Speaker 1: make a base forecast, it doesn't look very good, which 779 00:39:10,880 --> 00:39:14,600 Speaker 1: means yes, in that sense, maybe not seculous tegnation, but 780 00:39:14,760 --> 00:39:18,239 Speaker 1: something not not not far from it. You're right that 781 00:39:18,280 --> 00:39:21,239 Speaker 1: people are adjusting to a less bright future. Give us 782 00:39:21,280 --> 00:39:23,560 Speaker 1: a sense of what that future looks like and and 783 00:39:23,920 --> 00:39:28,040 Speaker 1: sort of how long that adjustment process is going to be. Well, 784 00:39:28,040 --> 00:39:30,720 Speaker 1: I mean, you know, we used to have free focus 785 00:39:30,880 --> 00:39:33,600 Speaker 1: and growth and think it was normal. We now over 786 00:39:33,680 --> 00:39:36,239 Speaker 1: the years and in top in the recent past, as 787 00:39:36,280 --> 00:39:38,839 Speaker 1: we got out of the of the crisis, we thought 788 00:39:38,880 --> 00:39:41,440 Speaker 1: we would go back to the old trend. We never did. 789 00:39:41,960 --> 00:39:44,719 Speaker 1: And now the first guess is we're going to be 790 00:39:44,840 --> 00:39:49,440 Speaker 1: going at something like to two percent for the forcible future. 791 00:39:50,040 --> 00:39:52,839 Speaker 1: Now this is they abstract. People don't think in those terms. 792 00:39:52,920 --> 00:39:55,440 Speaker 1: But what this means is for firms kind of sales 793 00:39:55,520 --> 00:40:00,480 Speaker 1: prospects have been revised down. For consumers, income prospects hobby 794 00:40:00,560 --> 00:40:03,040 Speaker 1: have been revised on. You don't expect to make to 795 00:40:03,160 --> 00:40:06,080 Speaker 1: see your income go up as much as you used to. 796 00:40:06,680 --> 00:40:08,840 Speaker 1: So when you have news like this, then for a 797 00:40:08,960 --> 00:40:12,360 Speaker 1: while you're going to cut consumption, you're going to cut investment, 798 00:40:13,000 --> 00:40:15,200 Speaker 1: and as a result, you're going to get what can 799 00:40:15,280 --> 00:40:19,480 Speaker 1: be called a Canjian recession or a Canjian stump. In 800 00:40:19,680 --> 00:40:22,759 Speaker 1: response to these to his news, and my sense is 801 00:40:22,840 --> 00:40:25,319 Speaker 1: that that's what has happened over the last two years. 802 00:40:26,160 --> 00:40:28,080 Speaker 1: The professor will in Charte and we'll talk about this. 803 00:40:28,239 --> 00:40:31,160 Speaker 1: I'll be speaking with the professor and television. Here in 804 00:40:31,280 --> 00:40:35,960 Speaker 1: a bit buried in your seventh edition on page is 805 00:40:36,000 --> 00:40:39,120 Speaker 1: the sobering reality of your I M F tenure, First 806 00:40:39,239 --> 00:40:44,040 Speaker 1: lessons for macroeconomics after the crisis? What is the first 807 00:40:44,160 --> 00:40:47,040 Speaker 1: lesson for the president? What is the first lesson for 808 00:40:47,200 --> 00:40:50,640 Speaker 1: his good economic advisors that they need to take away? 809 00:40:52,440 --> 00:40:55,360 Speaker 1: I think for the president, you should think hard about 810 00:40:55,680 --> 00:40:58,000 Speaker 1: the fact that we had a financial crisis and that 811 00:40:58,920 --> 00:41:01,800 Speaker 1: stop fighting. Not in a solution to all poems, but 812 00:41:02,400 --> 00:41:07,080 Speaker 1: it would be unwise to a lax regulation. He should 813 00:41:07,480 --> 00:41:10,240 Speaker 1: think harder about how to use systol posts you White, 814 00:41:11,280 --> 00:41:14,279 Speaker 1: I think there is a case for some infrastructure. There 815 00:41:14,440 --> 00:41:17,480 Speaker 1: is no case for a stacausis at this point, and 816 00:41:17,600 --> 00:41:21,160 Speaker 1: he should uncourage the said and let the said think 817 00:41:21,239 --> 00:41:25,640 Speaker 1: about these alternatives tools that the said has used over 818 00:41:25,719 --> 00:41:30,120 Speaker 1: the last ten years. These are pressures tools. If things 819 00:41:30,200 --> 00:41:33,640 Speaker 1: go wrong, there are some temptations to reduce the scope 820 00:41:33,680 --> 00:41:35,840 Speaker 1: of the set to use those tools, to elimimate some 821 00:41:35,960 --> 00:41:39,239 Speaker 1: of those tools, that would be a mistake. Let me 822 00:41:39,320 --> 00:41:41,080 Speaker 1: just end by asking you hear about a speech that 823 00:41:41,120 --> 00:41:42,880 Speaker 1: Peter and Vanno just gave while we were on the air. 824 00:41:42,920 --> 00:41:46,160 Speaker 1: He was addressing the National Association for Business Economics. He 825 00:41:46,239 --> 00:41:49,000 Speaker 1: talked about trade and he spoke about the relationship between 826 00:41:49,080 --> 00:41:52,800 Speaker 1: growth and net exports. Here the question. He posted that 827 00:41:52,920 --> 00:41:54,960 Speaker 1: speech and indeed in the Wall Street Journal this morning, 828 00:41:55,280 --> 00:41:58,799 Speaker 1: do trade deficits matter? Help us understand that relationship their 829 00:41:58,840 --> 00:42:04,120 Speaker 1: net exports and growth They you know, both are as 830 00:42:04,200 --> 00:42:06,720 Speaker 1: we call them in our jargon on the genuus viable. 831 00:42:06,840 --> 00:42:09,680 Speaker 1: So it depends very much where it comes from. I mean, 832 00:42:09,760 --> 00:42:13,160 Speaker 1: you can have you can have very strong growth which 833 00:42:13,239 --> 00:42:15,560 Speaker 1: is going to lead you to have large imports and 834 00:42:15,640 --> 00:42:17,799 Speaker 1: then you're going to have trade deficits. But in this case, 835 00:42:17,920 --> 00:42:20,600 Speaker 1: the trade deficits of a result of high goal and 836 00:42:20,800 --> 00:42:23,120 Speaker 1: that's good. But it could be that suddainly, you can't 837 00:42:23,120 --> 00:42:25,839 Speaker 1: sell anything because your your stuff is not very good, 838 00:42:26,200 --> 00:42:28,800 Speaker 1: in which case there's a decrease in fine demand and 839 00:42:28,880 --> 00:42:31,640 Speaker 1: it kills both. Right, in all these cases we see 840 00:42:31,719 --> 00:42:35,480 Speaker 1: so the fact you know there's no general coalition, it 841 00:42:35,560 --> 00:42:38,280 Speaker 1: can go one way, it can go the other. Sometimes 842 00:42:38,360 --> 00:42:40,560 Speaker 1: the trade deficity is good news, or at least is 843 00:42:40,560 --> 00:42:43,520 Speaker 1: the indication of good news. Sometimes it's the indication of 844 00:42:43,600 --> 00:42:47,080 Speaker 1: bad news that you need to do something to competitive less. Uh, 845 00:42:47,840 --> 00:42:51,799 Speaker 1: there's no general evaluation between the two. Do you finally, sir, 846 00:42:51,920 --> 00:42:55,360 Speaker 1: do you here within the writings and the speak of 847 00:42:55,440 --> 00:43:00,120 Speaker 1: the Administration of Mercantile zero sum mentality, do we is 848 00:43:00,160 --> 00:43:04,399 Speaker 1: going back to something from previous centuries? It they ought 849 00:43:04,480 --> 00:43:07,200 Speaker 1: to know as we know of the administration yourself on 850 00:43:07,320 --> 00:43:11,560 Speaker 1: a could hear uh set of thought? People with different views, 851 00:43:12,360 --> 00:43:14,920 Speaker 1: the obsession with trade deficits they have to go with 852 00:43:15,320 --> 00:43:19,600 Speaker 1: bilactural trade deficits seems to meet to be wrong. Let's 853 00:43:19,600 --> 00:43:22,120 Speaker 1: see that they're Olivia Blanchard. I will continue with Professor 854 00:43:22,200 --> 00:43:26,160 Speaker 1: Blanchard on Bloomberg Television worldwide. Professor blon Chart of the 855 00:43:26,200 --> 00:43:37,320 Speaker 1: Peterson Institute, Thanks for listening to the Bloomberg Surveillance Podcast. 856 00:43:37,719 --> 00:43:42,800 Speaker 1: Subscribe and listen to interviews on iTunes, SoundCloud, or whichever 857 00:43:42,960 --> 00:43:47,359 Speaker 1: podcast platform you prefer. I'm out on Twitter at Tom Keene. 858 00:43:47,480 --> 00:43:51,239 Speaker 1: David Gura is at David Gura. Before the podcast, you 859 00:43:51,320 --> 00:44:00,320 Speaker 1: can always catch us worldwide. I'm Bloomberg Radio m H 860 00:44:07,120 --> 00:44:10,600 Speaker 1: brought you by Bank of America Mary Lynch. Dedicated to 861 00:44:10,719 --> 00:44:14,600 Speaker 1: bringing our clients insights and solutions to meet the challenges 862 00:44:14,760 --> 00:44:18,440 Speaker 1: of a transforming world. That's the power of global connections. 863 00:44:18,840 --> 00:44:23,360 Speaker 1: Mary Lynch, Pierce, Fenner and Smith Incorporated Member s I 864 00:44:23,520 --> 00:44:23,800 Speaker 1: p C.