WEBVTT - Surveillance: Fed Decision With Hatzius 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownwitz. Daily we bring you 0:00:13.320 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot Com, 0:00:23.920 --> 0:00:31.280 and of course on the Bloomberg terminal Longer going far Away. 0:00:31.280 --> 0:00:33.519 And Bill Dudley has been on fire recently as a 0:00:33.560 --> 0:00:37.000 former president of New York FED. There was Dudley uh 0:00:37.000 --> 0:00:40.920 and McKelvey at Goldben Sacks and had this guy out 0:00:40.920 --> 0:00:47.280 of Germany via Wisconsin, Madison and Oxford and I was like, uh, okay, 0:00:47.920 --> 0:00:50.760 and then he stopped the US market economy world with 0:00:50.840 --> 0:00:54.760 mortgage equity withdrawal. That's how he first came to my attention. 0:00:54.800 --> 0:00:57.960 Yea Nazis has gone on to Acclaim at Golden Sex, 0:00:58.080 --> 0:01:01.600 not only running economics but providing a view over investment 0:01:01.680 --> 0:01:05.000 research for the Acclaimed firm. And we're thrilled he could 0:01:05.080 --> 0:01:07.800 join us today in our studios. Yeah, and I want 0:01:07.800 --> 0:01:10.240 to go right to the time continuum OM investors really 0:01:10.240 --> 0:01:13.800 looking this is well. The X axis out for any 0:01:13.880 --> 0:01:17.600 FED chairman is always a challenge. What's the challenge for 0:01:17.680 --> 0:01:20.680 Chairman Powell right now is he looks out to two 0:01:20.720 --> 0:01:24.800 thousand twenty three. Well, I think there is a number 0:01:24.880 --> 0:01:28.640 of decisions that have to be made before that. When 0:01:28.640 --> 0:01:32.080 do they start to tap our QUEI they've said that 0:01:32.120 --> 0:01:35.760 they are not going to high grates until that process 0:01:35.880 --> 0:01:40.040 has has concluded or that is strongly implied it And 0:01:40.319 --> 0:01:43.600 that's also going to then determine what do you think 0:01:43.800 --> 0:01:46.880 when rates are going to start start rising at the moment, 0:01:46.920 --> 0:01:49.400 as you know, the dot plot is basically saying no 0:01:49.600 --> 0:01:52.280 hikes until the end of two thousand twenty three. But 0:01:52.360 --> 0:01:54.200 that's going to be on the table today and I 0:01:54.200 --> 0:01:56.320 think it's a close call. It's all the best guesses 0:01:56.440 --> 0:01:59.360 that they stick with what they said, with the message 0:01:59.400 --> 0:02:01.760 they're sending, but it could move forward. There's your b 0:02:01.800 --> 0:02:05.360 exlusive banner, folks, HOTSI has predicts boring meeting. Okay, forget 0:02:05.360 --> 0:02:07.960 about that. It's Latin, it's ex anti, it's ex post. 0:02:08.280 --> 0:02:11.359 After the fact, I'm Matt Besler with a really important question. 0:02:11.400 --> 0:02:13.679 Maybe he'll be in the press conference as well. Matt 0:02:13.720 --> 0:02:17.480 Bosler making very very clear that this is about the 0:02:17.520 --> 0:02:23.000 present base effect analysis versus the truly ex post inflation 0:02:23.200 --> 0:02:27.240 expectation game, which is it is this analysis of base 0:02:27.280 --> 0:02:31.440 effect dynamics or is it truly traditional FED analysis of 0:02:31.480 --> 0:02:37.680 inflation expectations? You mean, what what happens into the mystery 0:02:37.720 --> 0:02:39.600 of how we get out there to this in this 0:02:39.680 --> 0:02:42.480 new theory. I think that's going to be driven more 0:02:42.600 --> 0:02:46.240 by what you think about how type the labor market is, 0:02:46.440 --> 0:02:50.680 and really the traditional stuff, the neo charm. Inflation increases 0:02:50.760 --> 0:02:54.359 partly base effect, it's partly reopening effects, and of course 0:02:54.360 --> 0:02:59.480 it's these bottlenecks, which which which which Michael just talked about. Yeah, 0:02:59.520 --> 0:03:03.239 and before we get into just the granularity of inflation, 0:03:03.520 --> 0:03:06.639 I want to understand the granularity of tapering. People talk 0:03:06.680 --> 0:03:09.120 about it as though it's a monolith, and yet is it, 0:03:09.240 --> 0:03:12.359 as Michael Collins said, the FED getting to zero, getting 0:03:12.400 --> 0:03:15.440 to no bond purchases at all before they hike rates. 0:03:16.080 --> 0:03:19.280 That's our assumption. I mean, they haven't said that explicitly, 0:03:19.400 --> 0:03:22.280 but I would guess that they're going to get to 0:03:23.120 --> 0:03:26.560 zero and then there will be some time that will 0:03:26.600 --> 0:03:30.799 elapse before they start moving rates higher. And obviously that's 0:03:30.800 --> 0:03:35.200 going to depend on the data, but I would be 0:03:35.280 --> 0:03:38.880 surprised or not. Maybe shocked, but surprised if they were 0:03:38.960 --> 0:03:42.560 still planning to buy say twenty or forty billion dollars 0:03:42.600 --> 0:03:46.440 per month in perpetuity. It's not our expectations. So yeah, 0:03:46.680 --> 0:03:48.840 I guess I'm kind of struggling with the idea that 0:03:48.920 --> 0:03:51.400 they're buying the Federal Service buying more than a trillion 0:03:51.440 --> 0:03:54.720 dollars a year in its base case for continuing a 0:03:54.760 --> 0:03:57.320 monetary accommodation as it currently is laid out, it's it's 0:03:57.360 --> 0:04:02.440 balance she currently almost eight trillion dollars. It removes this accommodation. 0:04:02.720 --> 0:04:04.800 Do you really see that it's feasible for it to 0:04:04.840 --> 0:04:08.080 do so without disrupting financial markets in a way that 0:04:08.200 --> 0:04:12.160 stymies its effort to ever raise rates. I think there 0:04:12.160 --> 0:04:17.080 could certainly be some hiccups, especially if you're also seeing 0:04:17.120 --> 0:04:20.760 a slowdown in growth next year that's driven by the 0:04:20.839 --> 0:04:24.360 removal of some of the fiscal support. I do think 0:04:24.400 --> 0:04:27.400 that two thousand twenty two is going to be substantially 0:04:27.440 --> 0:04:30.640 slower on a fourth quarter to fourth quarter basis. We 0:04:30.680 --> 0:04:33.560 think basically two and a half percent after a real 0:04:33.640 --> 0:04:37.280 banner year of you know, seven point seven percent Q 0:04:37.440 --> 0:04:40.400 four to Q four in two thousand and twenty one, 0:04:40.760 --> 0:04:43.440 and So if that interacts with an environment in which 0:04:43.480 --> 0:04:46.919 the FED is is tapering bond purchases, you know, I 0:04:46.960 --> 0:04:49.440 think that could result in a in a growth scare. Yes, 0:04:49.640 --> 0:04:52.640 I do think we probably are going to have some 0:04:52.680 --> 0:04:55.039 nervousness in that environment. Well, let's talk a little bit 0:04:55.080 --> 0:04:57.440 more about some of the fiscal policies here, yeh, Because 0:04:57.480 --> 0:05:00.080 I mean, obviously there's a multi chillion dollar propos z 0:05:00.120 --> 0:05:02.320 all down at Washington sitting on someone's desk. It may 0:05:02.320 --> 0:05:04.440 not go anywhere, or it may end up being a 0:05:04.440 --> 0:05:07.120 lot smaller than, of course what the President proposed. But 0:05:07.160 --> 0:05:09.240 I'm wondering how much of that has to factor in 0:05:09.320 --> 0:05:11.720 right now to the glide path at the FIT is 0:05:11.720 --> 0:05:15.320 trying to chart out here. So I think the baseline 0:05:15.360 --> 0:05:18.760 should be that something gets past, maybe not the whole thing, 0:05:18.920 --> 0:05:23.080 but something large in terms of the headline number. But 0:05:23.160 --> 0:05:25.440 I think the key point is that this is a 0:05:25.560 --> 0:05:29.320 very different type of spending program relative to the American 0:05:29.320 --> 0:05:33.000 Rescue Plan Act that was very front loaded one point 0:05:33.120 --> 0:05:36.360 nine trillion dollars basically over a year or a little 0:05:36.360 --> 0:05:40.280 over a year, whereas this, uh, this this plan is 0:05:40.279 --> 0:05:42.799 going to be over ten years or whatever number you see. 0:05:43.200 --> 0:05:45.240 You have to divide them by ten and that's still 0:05:45.240 --> 0:05:48.400 going to me in a significant amount of fiscal drag 0:05:48.480 --> 0:05:51.080 in two thousand and twenty two. Right, that's a great point. 0:05:51.080 --> 0:05:52.760 It also means, of course, there's still got to be 0:05:52.839 --> 0:05:56.360 some additional treasury issuance. It does mean, of course there's 0:05:56.400 --> 0:05:59.400 a potential here for changes in tax policy as well. 0:05:59.480 --> 0:06:01.360 Yeahn how do you factor that in? I think that 0:06:01.800 --> 0:06:05.200 strengthens that point that it's not going to be as 0:06:05.279 --> 0:06:09.040 stimulative because, as you say, a significant part of the 0:06:09.120 --> 0:06:13.599 spending increase is going to be offset by tax increases. 0:06:14.080 --> 0:06:16.400 And you know, I think it would be somewhat simulative, 0:06:16.920 --> 0:06:19.320 but you know, much less so than the than the 0:06:19.360 --> 0:06:23.080 headline number, both because of the tenure horizon and because 0:06:23.120 --> 0:06:26.200 of the tax increases. I'm Bloomberg Radio and Bloomberg Television worldwide. 0:06:26.279 --> 0:06:29.760 Yeh us with us with Golden sex Or, chief economist 0:06:29.760 --> 0:06:32.480 and head of investment Research on this day before an 0:06:32.520 --> 0:06:35.960 important FED meeting. Young. Your your statistics there on the 0:06:36.000 --> 0:06:38.919 slowing of the American economy under three percent is really 0:06:38.960 --> 0:06:42.120 really important. I would suggest a huge body of Americans 0:06:42.320 --> 0:06:45.080 are not prepared for that. If we slow from a 0:06:45.120 --> 0:06:50.000 boom to a hot CEUs under three economy. We've never 0:06:50.200 --> 0:06:52.560 done that before. I mean, you and I remember the 0:06:52.800 --> 0:06:57.440 we've studied the fifties yearly fifties deflation. Do you anticipate 0:06:57.560 --> 0:07:01.279 such a shock there in GDP dynamics that we could 0:07:01.360 --> 0:07:05.800 get to a deflationary dynamic that Eisenhower new? I don't 0:07:05.920 --> 0:07:10.040 view it so negatively. I mean the right now, we're 0:07:10.080 --> 0:07:13.600 still a long ways away from full employment. There's still 0:07:13.640 --> 0:07:15.800 a lot of slack in the in the labor market. 0:07:16.200 --> 0:07:21.360 Despite the near term labor supply issues and strong growth 0:07:21.400 --> 0:07:23.520 this year is going to get to get us to 0:07:24.080 --> 0:07:27.160 something like full employment by two thousand and twenty two. 0:07:27.360 --> 0:07:30.920 At that point, you want to see slower growth because 0:07:30.960 --> 0:07:33.800 otherwise the economy is going to overheat. You do have 0:07:33.840 --> 0:07:38.320 to worry a lot more about persistent inflation, and ultimately 0:07:38.440 --> 0:07:40.880 that's not going to be a good environment. So I 0:07:40.880 --> 0:07:43.240 think you'll need to see a slowdown. I don't worry 0:07:43.240 --> 0:07:45.800 about deflation, but at the same time, I think the 0:07:45.840 --> 0:07:49.200 current inflation is probably largely transfer so much as a 0:07:49.280 --> 0:07:52.320 new economy in the overlay of technology on it. We 0:07:52.360 --> 0:07:57.200 partition it into goods dynamics inflation and service dynamic inflation. 0:07:57.600 --> 0:08:00.560 Parts the difference now is we look at a service 0:08:00.600 --> 0:08:04.840 sector dominant and goods producing as well, those inflation dynamics 0:08:04.880 --> 0:08:09.640 for our inflation expectations. Well, I think the surprise in 0:08:09.720 --> 0:08:12.480 two thousand and twenty one really has been on the 0:08:12.520 --> 0:08:17.120 good side. The acceleration and COVID sensitive sectors, that was 0:08:17.240 --> 0:08:20.720 very much expected. The base effects were very much expected. 0:08:21.080 --> 0:08:23.480 I think six months ago most economists would have been 0:08:23.480 --> 0:08:27.200 really surprised with the enormous surge in used car prices 0:08:27.240 --> 0:08:30.760 and other other durable goods like that, and that's really 0:08:30.800 --> 0:08:34.640 been been the key driver. They are outliers relative to 0:08:34.679 --> 0:08:39.840 the overall distribution of prices. Core PC is above three percent, 0:08:40.000 --> 0:08:42.840 probably will be above three percent for most of the 0:08:42.840 --> 0:08:46.080 rest of the year. But the if you if you 0:08:46.120 --> 0:08:49.640 look at trim mean measures or median measures that really 0:08:49.679 --> 0:08:53.800 capture more the distribution of prices, those are still pretty 0:08:53.800 --> 0:08:58.720 well behaved. So to me, that that screams uh, screams transitory. 0:08:58.840 --> 0:09:00.960 What about wages? That way just have been going up 0:09:01.000 --> 0:09:04.040 in particular sectors that have been more in demand, especially 0:09:04.120 --> 0:09:07.560 with the reopening husticky is that well, I think we've 0:09:07.559 --> 0:09:11.240 seen wage increases, especially at the bottom end of the 0:09:11.240 --> 0:09:15.640 pay scale leisure and hospitality in particular. I think the 0:09:16.440 --> 0:09:22.760 evidence suggests that the remaining COVID effects around fear of 0:09:22.840 --> 0:09:27.120 the pandemic, and maybe it's some childcare issues, but also 0:09:27.640 --> 0:09:32.640 the three dollar unemployment top up have weighed on labor supply. 0:09:33.440 --> 0:09:36.040 That's going to be true probably for a few months longer, 0:09:36.160 --> 0:09:38.240 but in the fall, I think we'll see a big 0:09:38.280 --> 0:09:41.240 increase in labor supply, and I think that's also probably 0:09:41.240 --> 0:09:44.520 going to lead to reduced wage increases in some of 0:09:44.520 --> 0:09:47.319 these sectors. Jhanna, we've got a headline at the FENS. J. 0:09:47.440 --> 0:09:51.120 Powell is planning to discuss the pandemic emergency lending program 0:09:51.120 --> 0:09:53.880 as well as the economic recovery at a House hearing 0:09:53.960 --> 0:09:57.280 on June twenty two. I am wondering about how concerned 0:09:57.320 --> 0:10:00.840 you are about the increasingly political nature of the Federal Reserve, 0:10:00.960 --> 0:10:02.760 not saying that they are political, but that they're getting 0:10:02.800 --> 0:10:06.720 increasing pressure to be political to finance the US debt 0:10:07.000 --> 0:10:10.360 and deficit, especially as the US plans to increase its 0:10:10.360 --> 0:10:15.840 deficit by so much. I think the there's always been 0:10:16.080 --> 0:10:21.800 political pressure and Congress congressional oversight, and you know, obviously 0:10:22.200 --> 0:10:25.320 jaw boning of Fed officials. I mean, if you go 0:10:25.400 --> 0:10:28.720 back to President Trump, there was a lot more overt 0:10:29.240 --> 0:10:32.680 pressure on the FED than than what we're seeing now. 0:10:32.720 --> 0:10:36.160 I think now we're more in a more normal historical 0:10:36.280 --> 0:10:40.960 environment where there was always, you know, always hearings like 0:10:41.040 --> 0:10:46.080 this and strong opinions expressed. But in the end, I 0:10:46.120 --> 0:10:49.640 think the FED is committed to the to the mandate, 0:10:49.679 --> 0:10:52.680 and the mandate obviously looks somewhat different now after the 0:10:53.440 --> 0:10:56.360 after the changes of last summer, but I don't think 0:10:56.400 --> 0:10:58.720 it's a dramatically different from where we've been over the 0:10:58.760 --> 0:11:01.360 long term. Well, but at least his point as well, though, 0:11:01.400 --> 0:11:03.160 it's sort of the shift in that mandate, or at 0:11:03.200 --> 0:11:05.320 least the tweaking of it, does sort of open the 0:11:05.360 --> 0:11:07.760 door for greater criticism here. As much as a fit 0:11:08.000 --> 0:11:10.920 will will, of course try to remain independent and preserve 0:11:11.200 --> 0:11:14.880 the perceptions of independence here, does the political landscape shift 0:11:15.000 --> 0:11:20.040 enough here, Yan or maybe that undermines some of the messaging. Look, 0:11:20.080 --> 0:11:24.079 I think the way that the mandate is being interpreted 0:11:24.480 --> 0:11:27.960 looks a little different. I think for for good reasons, 0:11:28.360 --> 0:11:31.320 it does make sense to try to average two percent. 0:11:31.480 --> 0:11:34.439 I don't think one point seven percent, which was the 0:11:34.480 --> 0:11:38.120 average before, is drammatically different from from two percent, So 0:11:38.160 --> 0:11:40.760 I don't think it's a it's a massive shift. But 0:11:41.160 --> 0:11:45.560 I do think that the changes that took place last 0:11:45.600 --> 0:11:50.120 summer at Jackson Hole, you know, do make sense. Is 0:11:50.200 --> 0:11:53.880 that going to be something that will you know, maybe 0:11:53.960 --> 0:11:58.600 raise more more questions, uh, and including questions from from 0:11:58.600 --> 0:12:03.320 policymakers on and electric officials. Probably, But I do think 0:12:03.360 --> 0:12:08.440 the the mandate is reasonably clear and we, you know, 0:12:08.559 --> 0:12:11.760 should over time find out more about exactly how it 0:12:11.800 --> 0:12:14.880 gets interpreted. NAIs, thank you for joining us today, greatly 0:12:14.920 --> 0:12:24.000 appreciate it. With Golden sex, very generous conversation here right now. 0:12:24.040 --> 0:12:27.360 We are absolutely honored to bring it from the Cannon Institute, 0:12:27.440 --> 0:12:31.640 their deputy director, William Palmerans in the United States of America. 0:12:31.760 --> 0:12:35.880 He is truly our expert on law in Russia, truly 0:12:35.920 --> 0:12:38.559 going back to Peter the Great in his important book 0:12:38.559 --> 0:12:41.920 of a few years ago. Professor Palmerence, thank you so 0:12:42.000 --> 0:12:44.680 much for joining us today. If you were to write 0:12:44.720 --> 0:12:49.000 a long telegram from Geneva today about this summit, what 0:12:49.120 --> 0:12:51.680 would you say or is there not enough to say? 0:12:51.920 --> 0:12:56.240 So it would be a Pomerans short telegram. I think 0:12:56.240 --> 0:12:59.040 it would be a very short telegram because we still 0:12:59.080 --> 0:13:01.800 need to see what actually the two leaders agree upon. 0:13:02.720 --> 0:13:07.400 We don't have any preliminary agreements, we have any preliminary agenda. 0:13:07.880 --> 0:13:10.880 So I think a lot will depend on the communication 0:13:10.960 --> 0:13:14.320 between the two leaders and what comes out of this meeting. UH. 0:13:14.400 --> 0:13:18.440 It is much heightened. It is recognized that the relations 0:13:18.480 --> 0:13:20.920 between the United States and Russia are at a low 0:13:20.960 --> 0:13:24.960 ebb um. But this is not the Cold War. I 0:13:25.040 --> 0:13:29.600 don't anticipate Mr Putin arriving like Mr Gobatrov and UH 0:13:29.840 --> 0:13:32.719 aving a surprise. I think it will be a business like, 0:13:32.960 --> 0:13:36.360 work in like meeting. UH. They'll agree to disagree on 0:13:36.400 --> 0:13:39.000 a lot of things, and they'll try to see where 0:13:39.040 --> 0:13:43.600 they can cooperate. Professor Primary, it's very importantly here and 0:13:43.679 --> 0:13:46.760 I think of the Soviet Union. How much of the 0:13:46.880 --> 0:13:52.520 Soviet Union tone or diplomacy is represented by Mr Putin 0:13:52.920 --> 0:13:56.640 or is Russia completely moved on from the legacy that 0:13:56.720 --> 0:14:01.480 you're expert in. I think that the deemer Putin does 0:14:01.559 --> 0:14:06.000 have certain Soviet tendencies. UH. In terms of international relations. 0:14:06.400 --> 0:14:10.319 He is not interested in joining the global order as 0:14:10.360 --> 0:14:14.840 it were. UH. He is interested in sovereignty and Russia's 0:14:14.880 --> 0:14:20.280 ability to x to UH, to a certain sovereignty in 0:14:20.480 --> 0:14:24.680 domestically and overseas. So I think that this is really 0:14:24.920 --> 0:14:29.520 the important aspect of Putin's foreign policy. UH. It's not 0:14:29.720 --> 0:14:33.600 overly ideological. UH. It is just to make sure that 0:14:33.800 --> 0:14:37.520 Russia is respected and has its sphere of influence. And 0:14:37.560 --> 0:14:41.000 this is not only a Soviet tendency. This goes back 0:14:41.440 --> 0:14:45.560 hundreds of years. William. Before this summit, a President Biden 0:14:45.600 --> 0:14:48.400 met with the allies and asked for their input about 0:14:48.480 --> 0:14:51.560 how to handle this meeting. I'm wondering how much is 0:14:51.600 --> 0:14:54.040 Biden talking to Vladimir Putin and how much is he 0:14:54.120 --> 0:14:57.240 talking to the allies in terms of supporting how they 0:14:57.280 --> 0:15:01.320 want their relationship with Russia to develop. I think coming 0:15:01.320 --> 0:15:05.000 out of the EU and the NATO summit, we have 0:15:05.160 --> 0:15:08.480 seen a resurgence in the role of the United States 0:15:08.480 --> 0:15:11.360 of the global leader, and its ability to talk and 0:15:11.400 --> 0:15:15.520 communicate with its allies. So I think that going into 0:15:15.560 --> 0:15:20.920 this UH the summit, UH, President Biden has listened to 0:15:20.960 --> 0:15:25.840 his allies. There were some important achievements UH out of 0:15:25.880 --> 0:15:29.000 the EU and NATO summits, both in terms of dealing 0:15:29.080 --> 0:15:32.440 with China and with dealing with Russia. And I think 0:15:32.600 --> 0:15:37.400 that one of the real victories forged Joseph Biden happened 0:15:37.400 --> 0:15:40.760 before the summit with Putin, and that is that he 0:15:40.920 --> 0:15:46.880 reasserted global leadership and reasserted the relationship and with with 0:15:46.880 --> 0:15:50.680 with our traditional allies. William we are expecting President Biden 0:15:50.720 --> 0:15:53.920 to arrive at this summit any minute, his motorcade on 0:15:53.960 --> 0:15:57.120 the way. There is a question though President Biden is 0:15:57.160 --> 0:16:02.560 toggling between a harder stance that domesticly is politically popular 0:16:02.760 --> 0:16:06.760 and then internationally is much more delicate. Given some of 0:16:06.800 --> 0:16:10.480 the trade relationships between Europe and Russia, and given the 0:16:10.560 --> 0:16:15.440 geographic proximity of those regions. How is President Biden toggling this? 0:16:15.600 --> 0:16:19.240 How much has the European view and frankly the US 0:16:19.440 --> 0:16:24.120 domestic political vision of Russia having a hardening line diverging 0:16:24.200 --> 0:16:29.320 at this point? I think leading up to the summit UH, 0:16:29.480 --> 0:16:37.160 President Biden has uh given Europe a tremendous victory in 0:16:37.200 --> 0:16:39.600 the sense that we have the United States is not 0:16:39.720 --> 0:16:43.000 going to sanction the owners of the North Stream to 0:16:43.200 --> 0:16:46.160 pipeline and that that is now going to most likely 0:16:46.240 --> 0:16:50.160 be completed. So in terms of listening to the United 0:16:50.240 --> 0:16:55.200 States and the European allies, I think President Biden has said, 0:16:55.640 --> 0:17:01.760 has demonstrated that he wants this relationship ship with our 0:17:01.800 --> 0:17:06.560 European allies, and he has decided that that is acceptable, 0:17:06.920 --> 0:17:10.000 even to the point of not fulfilling Congresses wishes to 0:17:10.240 --> 0:17:13.280 sanction owners of the North Stream two pipeline. So I 0:17:13.320 --> 0:17:18.000 think listening to European leaders, I think that they're trying 0:17:18.000 --> 0:17:22.040 to present the United Front. It's always difficult to unify 0:17:22.359 --> 0:17:26.680 Europe on foreign policy issues, but I think President Biden 0:17:26.720 --> 0:17:29.560 went a long way to healing the riffs that occurred 0:17:29.640 --> 0:17:33.080 during the Trump administration. Absolutely, And of course William though, 0:17:33.119 --> 0:17:35.359 I mean, we've been here before. We're actually watching on 0:17:35.480 --> 0:17:38.320 screen right now. I believe that is the motorcada of 0:17:38.560 --> 0:17:42.240 President Biden working its way through Geneva here, Uh Biden 0:17:42.320 --> 0:17:44.320 of Coors going into this meeting. But of course we've 0:17:44.359 --> 0:17:48.160 been here before, here with Trump, with Obama, with Bush. 0:17:48.200 --> 0:17:50.240 There's been a lot of attempts to sort of restart 0:17:50.280 --> 0:17:53.760 re kick off the relationship between the US and Russia. Here, 0:17:54.280 --> 0:17:57.080 is there any reason why outside observers looking at this 0:17:57.080 --> 0:17:59.879 should be more hopeful that this time around the outcome 0:18:00.080 --> 0:18:04.000 going to be different. In one word, now, um, I 0:18:04.040 --> 0:18:07.439 think President Putin has decided to go it alone in 0:18:07.560 --> 0:18:13.960 terms of international um for policy and geopolitical objectives. UH. 0:18:14.000 --> 0:18:16.080 So I think that there is not going to be 0:18:16.119 --> 0:18:21.040 a reset or anything like that. And Biden has asserted 0:18:21.480 --> 0:18:24.520 that he's not looking for a reset. UH. We are 0:18:24.600 --> 0:18:27.840 looking for ways to which to tone down the rhetoric. 0:18:28.640 --> 0:18:32.240 We are trying to identify areas where we can cooperate, 0:18:32.880 --> 0:18:35.119 which sounds like the reset. But I don't think his 0:18:35.200 --> 0:18:40.280 ambitious as a reset. I don't think that President Putin 0:18:40.800 --> 0:18:43.399 UH is going to change his political stripes and his 0:18:43.520 --> 0:18:47.560 geo political goals. UH. He has a go at alone strategy. 0:18:48.000 --> 0:18:54.600 He and he has asserted that both politically, geopolitically and UH. 0:18:54.680 --> 0:18:59.680 He has introduced various policies such as import substitution UH 0:18:59.720 --> 0:19:03.840 say acians UH, counter sanctions on food, on food, et cetera. 0:19:04.640 --> 0:19:08.200 That suggests that he's not interested in becoming part of 0:19:08.280 --> 0:19:12.439 the international global order. That Russia really believes that it 0:19:12.520 --> 0:19:16.480 needs to go it alone, and that is UM. That 0:19:16.680 --> 0:19:21.679 is the policy of the demur Putin. Well, let me 0:19:21.760 --> 0:19:24.280 reset here. Mr Palmeranson will come back to you in 0:19:24.280 --> 0:19:28.040 a moment. On radio and television. We we sat this morning. 0:19:28.040 --> 0:19:30.720 We welcome all of you worldwide and across this nation. 0:19:30.760 --> 0:19:34.680 William Palmerance with us with the Kennon Institute, their deputy director, 0:19:34.760 --> 0:19:37.880 absolutely honored that he could give us perspective here this 0:19:37.960 --> 0:19:42.240 morning on television the nineteenth century actually eighteenth century building, 0:19:42.320 --> 0:19:46.199 Villa Lagrange, where Mr Putin awaits the arrival of the 0:19:46.240 --> 0:19:50.280 President of the United States and rude. My major observation 0:19:50.400 --> 0:19:52.879 is the US motorcave was maybe going at a faster 0:19:52.960 --> 0:19:58.879 speed than the Russian motorc Yeah, Professor palmerans, Um, I 0:19:58.920 --> 0:20:02.160 think very important. Only here is what we've observed over 0:20:02.200 --> 0:20:05.400 the last number of days and many John Muirscheimer, Chicago. 0:20:05.560 --> 0:20:09.240 Richard has at the Council on Foreign Relations suggesting a 0:20:09.359 --> 0:20:14.159 NATO overreach. Did NATO reset in the last number of 0:20:14.280 --> 0:20:18.879 days their overreach of adding countries over the recent end 0:20:18.920 --> 0:20:22.200 of Cold War years? Was there a reset Tornato which 0:20:22.240 --> 0:20:26.200 could be in discussion today? Um, I don't think there's 0:20:26.200 --> 0:20:30.600 a reset to NATO. Obviously there is the addition in 0:20:30.640 --> 0:20:34.639 the communication of dealing with China, although there isn't really 0:20:35.000 --> 0:20:38.679 overwhelming agreement on how that should be done. So I 0:20:38.760 --> 0:20:42.679 don't think that we've had overreach uh in NATO. The 0:20:42.720 --> 0:20:45.439 second important reason why I don't think we have overreach 0:20:46.040 --> 0:20:51.120 is that President Biden yesterday issued a very strong statement 0:20:51.560 --> 0:20:56.960 that NATO is not going to have Ukraine joined it 0:20:57.000 --> 0:21:01.040 anytime soon. That Ukraine has to deal with it's domestic policies, 0:21:01.320 --> 0:21:03.840 it has to deal with corruption before it gets an 0:21:03.840 --> 0:21:07.800 action plan before it becomes a part of NATO, and 0:21:07.840 --> 0:21:12.000 that is an important objective of the deemer Putin. Putin 0:21:12.119 --> 0:21:15.320 does not want Ukraine to become a member of NATO. 0:21:15.560 --> 0:21:19.280 Uh and it appears now that Ukraine won't anytime soon 0:21:19.480 --> 0:21:23.880 become a member. So I don't see overreach. I see 0:21:23.920 --> 0:21:27.720 trying to deal with a post Cold War world. We're 0:21:27.760 --> 0:21:30.880 trying to play a bigger role. But I don't see 0:21:30.920 --> 0:21:33.960 that we're over that NATO is overreaching, And I think 0:21:33.960 --> 0:21:36.640 the best evidence of that is that it's going very 0:21:36.680 --> 0:21:40.760 slow in terms of inviting Ukraine to become a member. 0:21:40.880 --> 0:21:43.800 President Biden pulling up to Villa Grange and waiting here 0:21:43.800 --> 0:21:47.000 the Swiss authorities of waiting to greet the President of 0:21:47.040 --> 0:21:49.360 the United States, and I believe in side Mr Putin, 0:21:49.359 --> 0:21:52.000 and we'll get an image of the two leaders here 0:21:52.000 --> 0:21:54.720 in a number of minutes. William Pomer It's just so 0:21:54.800 --> 0:21:58.359 importantly to any of us is this word that the 0:21:58.400 --> 0:22:02.080 President of the United States you his autocrat. When we 0:22:02.119 --> 0:22:04.480 see that within the media, when we see that within 0:22:04.800 --> 0:22:09.080 international relations, how do you define the autocrat that Joseph 0:22:09.080 --> 0:22:13.480 Biden sees. I think that when we talk about an autocrat, 0:22:13.520 --> 0:22:16.840 and especially in the Russian sense, we deal with a 0:22:16.960 --> 0:22:22.320 leader who doesn't have to address uh domestic politics as 0:22:22.359 --> 0:22:26.520 a word, that Putin's word is the final word. Now, 0:22:26.560 --> 0:22:28.720 he has different issues that he has to deal with, 0:22:29.480 --> 0:22:33.760 but he doesn't have a legislature that is opposed to him. 0:22:33.800 --> 0:22:37.159 He doesn't have a judiciary that overrules him. Indeed, in 0:22:37.200 --> 0:22:42.640 the aftermath of all the constitutional amendments, this Putin has 0:22:42.680 --> 0:22:46.920 solidified his power. So when we talk about an autocrat, 0:22:47.320 --> 0:22:50.639 it's someone who doesn't have to really deal with the 0:22:51.840 --> 0:22:58.360 vicstitudes of politics. Power is is always in the hands 0:22:58.480 --> 0:23:03.200 of the autocrat, and in Russia's case, uh Putin's degrees, 0:23:03.359 --> 0:23:07.680 Putin's word can become law. So this is obviously very 0:23:07.720 --> 0:23:12.600 different from the American system of checks and balances and 0:23:12.800 --> 0:23:16.520 and separation of powers. But this is what the advantage 0:23:16.520 --> 0:23:20.239 of ladieber Putin is. He doesn't have to address Congress Uh, 0:23:20.359 --> 0:23:26.720 he doesn't have to address other consistencies. His word becomes law. 0:23:28.440 --> 0:23:30.960 William palmerans thank you this morning for joining us with 0:23:31.040 --> 0:23:34.320 the Kennon Institute. Just a spectacular brief there on this 0:23:34.400 --> 0:23:45.040 moment for Russia and the United States right now with 0:23:45.119 --> 0:23:47.840 global strategy off of this moment and certainly off the 0:23:47.840 --> 0:23:51.200 FED moment. This afternoon, we're thrilled that Brian Levin could 0:23:51.240 --> 0:23:55.480 join us. He's with Investco and their global market strategist. Brian, 0:23:55.560 --> 0:23:57.480 just a perfect day to speak to you as well. 0:23:57.880 --> 0:24:02.560 How does Investco reset it midyear? I don't know if 0:24:02.600 --> 0:24:05.240 we necessarily reset. I mean, I think the reality is 0:24:05.240 --> 0:24:08.240 it's an economy that's starting to move from recovery into 0:24:08.280 --> 0:24:12.080 an expansion phase. So from the large story, a better 0:24:12.200 --> 0:24:15.280 economic backdrop of FED that's on hold, it's still an 0:24:15.359 --> 0:24:18.320 environment that you want to favor stocks over bonds, you 0:24:18.359 --> 0:24:20.480 want to favor credit over treasuries. I think to the 0:24:20.520 --> 0:24:24.520 extent that you reset in an expansion phase is that 0:24:24.840 --> 0:24:27.040 you start to see more of the growth oriented parts 0:24:27.040 --> 0:24:30.040 of the market participate again. And so we had this 0:24:30.160 --> 0:24:33.840 pretty big value move, uh, from the fall of last 0:24:33.920 --> 0:24:35.800 year at the beginning of this year, and I think 0:24:35.800 --> 0:24:39.040 that continues in an improving economic backdrop, but you tend 0:24:39.080 --> 0:24:41.880 to see in the expansion phase your big growth stocks 0:24:41.960 --> 0:24:44.399 also start to perform quite well. Bryan, it will be 0:24:44.440 --> 0:24:47.160 a bigger surprise to markets today if the Fed does 0:24:47.200 --> 0:24:49.959 not bring forward their rate high expectations based on the 0:24:50.000 --> 0:24:56.879 dots to three, or if the Fed does. I think 0:24:56.920 --> 0:25:00.480 a bigger surprise to the market would be if they 0:25:00.520 --> 0:25:02.919