Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee.
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Speaker 1: top story this morning, China emphasizing de escalation. One quote
Speaker 1: from the Ministry of Commerce spokesperson. All it took to
Speaker 1: give equity futures a big lift, he said the following
Speaker 1: China has ample means for retaliation, but thinks the question
Speaker 1: that should be discussed now it's about removing the new
Speaker 1: tariffs to prevent escalation of the trade war. Here with
Speaker 1: us in New York. Andrew Holland Hoorst, City Chief US Economists.
Speaker 1: Good morning to Andrew. Let's just talk talk about that
Speaker 1: news at about three am Eastern which give SMP futures
Speaker 1: a rather big lift. How important is that approach from
Speaker 1: the Chinese? So it's certainly begun to be a risk
Speaker 1: positive development. But we've been down this path before. We've
Speaker 1: had cycles of escalation and de escalation, so I think
Speaker 1: you have to be a little bit careful here about
Speaker 1: have we really changed the long term trajectory in some way.
Speaker 1: But yeah, marginally good news. It did not look like
Speaker 1: we would have an off ramp last Friday, Monday at
Speaker 1: the G seven. Now this morning, this Thursday, it looks
Speaker 1: like maybe we have a little bit of an off ramp.
Speaker 1: Is that what they say is, I think both countries
Speaker 1: are trying to create some off ramps, some flexibility, some
Speaker 1: ability to actually get some kind of a deal done.
Speaker 1: And on the trade issue especially, there would seem to
Speaker 1: be a lot of potential for getting to a deal
Speaker 1: in the sense that you have the US that would
Speaker 1: like to sell things like soybeans and agricultural goods and
Speaker 1: liquid natural gas, and China that probably has demand to
Speaker 1: buy those things. So I think it, you know, cautiously
Speaker 1: optimistic about the latest development, but again it has a
Speaker 1: long term trajectory. The long term outlook really changed. I
Speaker 1: think you can't say that's changed substantially with this announcement
Speaker 1: this morning. To be with us this morning, you participate,
Speaker 1: welcomes a terrible there's a stereop dary gloom and go
Speaker 1: to cash. What are we three point six percent from
Speaker 1: a record high? I think it is something like X
Speaker 1: and yield. I mean what's great, John, Is it less
Speaker 1: hysteria than Tuesday or Wednesday. But the levels that were
Speaker 1: at are just extraordinary to see the optimism confirmed in
Speaker 1: the bond market this morning, that's for sure. Comes in
Speaker 1: another biasis point again, have you changed the city group
Speaker 1: the Excel spreadsheets? I mean, how do you tweak substantial
Speaker 1: Excel spreadsheets given the yield structure of the world. So,
Speaker 1: I remember about ten years ago we had a view
Speaker 1: that tenure yield should never go below three percent. You
Speaker 1: just thought, well, there's some potential growth or you know,
Speaker 1: can't be below one percent, and you get inflation that
Speaker 1: will be around two percent, So shouldn't the tenure yield
Speaker 1: be around three person then? And I think what has
Speaker 1: changed is, you know, some recognition of the idea that
Speaker 1: global growth may be slow for some time. Core inflation
Speaker 1: um and inflation broadly is not gotten back to targets.
Speaker 1: So that's giving these deals very low but very very
Speaker 1: low levels. Irving Fisher way back, is this just going
Speaker 1: to get down to a terminal value on inflation, a
Speaker 1: terminal value on interest rates, a terminal value on GDP growth.
Speaker 1: Flip that reciprocal and you get out to a thirty two,
Speaker 1: multiple market, all all of those things that you mentioned
Speaker 1: have been revised lower. I think that means exactly like
Speaker 1: you're saying, you're discount rate is now lower. That means
Speaker 1: you're going to support higher valuations for risk assets. So
Speaker 1: all of that makes sense. So too much math, Too
Speaker 1: much math for seven I four, But carry off and
Speaker 1: let's talk about the new sham. Wait a little bit
Speaker 1: late today we got another look at GDP, the trite dispute,
Speaker 1: the trite war, however you want to characterize it. When
Speaker 1: we get that second look at GDP, why do you
Speaker 1: expect to see it? If that's all so the headline
Speaker 1: number can come down a little bit. But I think
Speaker 1: what's important in that second quarter GDP is that we
Speaker 1: had very strong consumption, very weak investment. And that's been
Speaker 1: kind of the story of the U S economy in
Speaker 1: nineteen as we've gone to a scenario where all of
Speaker 1: our hopes for strong growth and continued growth at or
Speaker 1: above potential are are really right on the consumer and
Speaker 1: not on business fixed investment. UM. Now, I think it's
Speaker 1: an open question how much have trade concerns weighed into
Speaker 1: that weak investment story. UM, there's probably some of that
Speaker 1: they're Honestly, a lot of that is just the general
Speaker 1: weakness in manufacturing. You're seeing that globally. UM that probably
Speaker 1: would have been occurring with or without the trade tension,
Speaker 1: so not not as clear that it's coming through. This
Speaker 1: has been building for a long time. In fact, it
Speaker 1: predates the real ramp up in escalation between China and
Speaker 1: the United States has started last spring. It's a persistent overhang.
Speaker 1: Now it's persistent and the damage is being dump Beyond manufacturing.
Speaker 1: The story for much of the last year manufacturing radiogly
Speaker 1: services in the labor market resilient worldwide. In Germany, we're
Speaker 1: just starting to see some frenches in the labor market.
Speaker 1: Are we starting to see it spill out from manufacturing
Speaker 1: worldwide entry So we're not seeing that so much in
Speaker 1: the US yet. I think that is concerning that you're
Speaker 1: seeing it in Germany in the sense that in Europe
Speaker 1: you would expect to see this very delayed response from
Speaker 1: the labor market because you have a labor market that's
Speaker 1: much less fast to it adjust in the In the
Speaker 1: US you can have very fast adjustments in the labor market. Um,
Speaker 1: we've had manufacturing that's been weak, like you were saying
Speaker 1: for some time globally and in the US, we have
Speaker 1: seen some of the non manufacturing indicators move a bit lower.
Speaker 1: So I s M non manufacturing has come down now, Um,
Speaker 1: it's still at a high level, but the direction of
Speaker 1: travel is to a lower level. So we're not getting
Speaker 1: too concerned in the US. And the labor market still
Speaker 1: looks extremely strong in the US. Will get more information
Speaker 1: about that with the jobs report next week, but so
Speaker 1: far very low initial jobless claims and high payroll growth.
Speaker 1: In your micro analysis, are you seeing service sector inflation
Speaker 1: in the US come down to to uh goods producing disinflation?
Speaker 1: Any indication of that yet? So services inflation has actually
Speaker 1: been holding up relatively part of that rate. So you
Speaker 1: can argue whether that's good news or bad news for
Speaker 1: most people. So the cost of cost of house listeners
Speaker 1: would argue that exactly. Um, but but that that's right. Yeah,
Speaker 1: shelter in particular has been supporting the services inflation. I
Speaker 1: gotta get your thoughts on the Treasury secretary as well.
Speaker 1: Mr Manutrian speaking to Bloomberg an exclusive interview, talking up
Speaker 1: ultra long bomb issuance and talking down currency intervention. Let's
Speaker 1: just talk about the ultra loong bomb issuance. The first
Speaker 1: thing I did was going back to seen just a
Speaker 1: couple of years back, the last time we really discussed this,
Speaker 1: and the Treasury Borrowing Advisory Committee pushed back and they
Speaker 1: said the following, While an ultra long bond is most
Speaker 1: likely to be demanded by those with longer dated liabilities,
Speaker 1: the committee does not see in some strong or sustainable
Speaker 1: demand for maturity's beyond thirty years. Is the advice going
Speaker 1: to be any different this time around? I would think
Speaker 1: that that advice would be fairly stable. I really don't
Speaker 1: think we've changed the landscape significantly over you know, a
Speaker 1: couple of couple of year period. UM. It doesn't mean
Speaker 1: that the government can't go ahead and the treasure we
Speaker 1: can ignore that advice and come ahead. Do you think
Speaker 1: they will? But I would think that that advice is
Speaker 1: the same. Um. My best guess would be that this
Speaker 1: is something that's discussed and ultimately there takes a very
Speaker 1: long time, or they don't actually get to that long
Speaker 1: term issuance. UM. If you remember that, you know, when
Speaker 1: the Treasury rolled out floating rate notes, when the Treasury
Speaker 1: rolled out the tips program, um, these took multiple years
Speaker 1: before you actually got there. So you know, we're seeing
Speaker 1: yields move today and maybe that's a reflection of what
Speaker 1: could happened um sometime from now, but this is probably
Speaker 1: a long timeline led to some stateness last night, and
Speaker 1: then we flamed back down again. Did you see our goal, well,
Speaker 1: you were in makeup for radio. Did you see our
Speaker 1: gold segment with Andrew Holland? Now I miss that. In
Speaker 1: honor of his tenure at Berkeley, I should went out
Speaker 1: where Mr Dudley went as well is tenure at Berkeley.
Speaker 1: We killed on Barry ken Green's golden feathers nice twenty five.
Speaker 1: I'm doing the math twenty five years ago, twenty six
Speaker 1: years ago. I'm gold wedded. The conversation God the gold is,
Speaker 1: you know is Andrew correctly said you don't buy gold
Speaker 1: because it's low yield, but everything else is low yield
Speaker 1: now because all of a sudden gold is like an equivalent,
Speaker 1: the opportunity cost of holding gold a shifted. We've told
Speaker 1: about that many times on this shock. I know we
Speaker 1: gave a moment of silence for Edward Morrison City Group,
Speaker 1: and you know, come out of the analysis and I'm
Speaker 1: gonna get missed the most back on a problems have
Speaker 1: been a drag him on as well. He andrew right
Speaker 1: to call and thank you so much City Chief US economist.
Speaker 1: When you look at the yield space and you go,
Speaker 1: what is going on? Mitch Ramen with us with eraisor
Speaker 1: group to answer questions on this and Midge this is
Speaker 1: within a broader year. But I know we gotta do
Speaker 1: Brexit here in a moment. But as John Ferrell mentioned,
Speaker 1: the Chinese come out with what jan one sentence, just
Speaker 1: one hope we go. Midge. My arch question to you
Speaker 1: is all this China US stuff. Is it of an
Speaker 1: advantage to Europe? Actually, I think it's a to a
Speaker 1: to a big disadvantage Tom, because it creates a broader
Speaker 1: global context with a tremendous amount of uncertainty, which ultimately
Speaker 1: at the margin I think hurts hurts confidence in the EU.
Speaker 1: I mean there's also the big risk of the US
Speaker 1: EU trade war. In the short term. I think as
Speaker 1: we moved through the second half of the year, there's
Speaker 1: been a lot of uncertainty in Italy, although the government
Speaker 1: does seem to be coming together now. And of course
Speaker 1: the big, the big risk, which is the Brexit questions.
Speaker 1: I do think, you know, the economic cycle in Europe
Speaker 1: is not robust. Broader can turn about the state of
Speaker 1: the global economy, I think feeds into that in a
Speaker 1: negative way. So maybe let's talk about that and what
Speaker 1: the polity response in a place like Germany might be.
Speaker 1: Here in the United States, this narrative is building that
Speaker 1: the German government's about to do fiscal stimulus. What's the
Speaker 1: reality on the ground at the moment for you, Madge?
Speaker 1: I mean, I think, you know, when when we talk
Speaker 1: about fiscal stimulus in Germany, one has to think contextually
Speaker 1: about the debate in Germany over fiscal policy, the role
Speaker 1: of fiscal policy, and then of course think much more
Speaker 1: seriously about how robust that stimulus would likely to be,
Speaker 1: even if the government were to open up the spending
Speaker 1: taps a little bit. I don't think you're looking for
Speaker 1: you know, we're not. We're not looking to see anything substantializing.
Speaker 1: I think that's unlikely. If you think about the political
Speaker 1: context in Germany, it may be helpful a string of
Speaker 1: regional elections where there's social Democrats are set to perform
Speaker 1: extremely badly. The Christine Democrats in crisis to some degree,
Speaker 1: is the transition between Merkel and her successor a KK
Speaker 1: doesn't play well. I mean, that's not a context in
Speaker 1: which it's popular to make an argument about opening the
Speaker 1: first strings. And I think one does have to think
Speaker 1: politically and contextually about how robust any stimulus will be
Speaker 1: forthcoming out of Germany. I'd also say at the European level,
Speaker 1: you're not likely to really see any coordinated or aggregate
Speaker 1: response on the fiscal side. No, I don't mean to
Speaker 1: interrupt meent. I just think there's so much flow going
Speaker 1: on between European dynamics, all this distraction of Brexit and
Speaker 1: such in the real issues of China, US and frankly
Speaker 1: China and the rest of the world. How does your
Speaker 1: Eurasia group in international relations? How do you synthesize in
Speaker 1: where the bond market is? And John, I haven't even
Speaker 1: mentioned this this morning continued subtle dours strength as well.
Speaker 1: How do you fold that in? As I say, John,
Speaker 1: I think Tom rather that the international context I think
Speaker 1: is is certainly on the minds of policymakers in the EU,
Speaker 1: and it will certainly galvanize those in the euro where
Speaker 1: you're in particular, that are looking to Germany to move
Speaker 1: on the fiscal side. But I just I just think
Speaker 1: when one thing is contextually and politically about where Germany
Speaker 1: is at this moment, at this current juncture, meaningful stimulus
Speaker 1: that's likely to have a big impact on the economic cycle,
Speaker 1: I think that's still unlikely. So Mitch, let's talk about
Speaker 1: what happens at the EU level. We get someone new
Speaker 1: running the European Union Commission. At the moment, we have
Speaker 1: a Growth and Stability Pact and ultimately the goals of
Speaker 1: that for debt to GDP and budget deficits within three
Speaker 1: percent of GDP. Mitch, do we have to rethink some
Speaker 1: of those numbers and will they rethink some of those targets?
Speaker 1: So the vonder Lane Commission, I think will probably have
Speaker 1: a go up streamlining and simplifying the fiscal the fiscal rules.
Speaker 1: There's there's a whole set of crazy metrics. You know,
Speaker 1: you've talked about the debt and the nominal deficit. There's
Speaker 1: also a structural target, so accounting to the economic cycle,
Speaker 1: you know how much how much of government's actually cutting
Speaker 1: on the fiscal side when you when you can take
Speaker 1: off the impact of the economic cycle. There's also a
Speaker 1: debt to GDP reduction target, and it all gets it
Speaker 1: all gets very complicated. So I think there is a
Speaker 1: desire to streamline and simplify again. There will be opposition
Speaker 1: in Northern Europe, in Berlin, but certainly from other countries,
Speaker 1: the Netherlands, Finland to any suggestion that the rules should
Speaker 1: be um you know, should be made should be made easier,
Speaker 1: more lax, and there will be big opposition to that.
Speaker 1: But I do think the wonder Lane Commission will try
Speaker 1: made say to so much about any more questions. But
Speaker 1: we're at a time we'll get them out again. Here
Speaker 1: Jordan Rochester, just before we went to air this morning
Speaker 1: out of Namural, London, wrote this note and there was
Speaker 1: shimmer the Brexity thing. It's shimmering, shimmer of the tunnel shimmering.
Speaker 1: Shall I read you that first line In Jordan Rochester's
Speaker 1: latest poetry, Dickensian, the pound will inherently remain difficult to trade,
Speaker 1: but the latest moves by boris as galvanized opposition MP
Speaker 1: and there is a shimmer of light at the end
Speaker 1: of the tunnel. Nomura's Jordan Rochester joins us right now,
Speaker 1: good morning to Jordan, just explain a little bit more
Speaker 1: for us, where is the shimmer of light in the
Speaker 1: Brexit tunnel? Well with hey, you guys, we've been here before.
Speaker 1: So let's set this thing about Q one we had.
Speaker 1: You're stirring the pound at the highs or the pounds
Speaker 1: at the lows, and when you're at these historical lows,
Speaker 1: you gotta ask yourself what are the odds of a
Speaker 1: no deal brexit the high But the answers no, And
Speaker 1: we're already at fresh historical lows pretty much give will
Speaker 1: take now. And in Q one, MPs started to legislate,
Speaker 1: they started to block no deal, They forced Teresa May
Speaker 1: to extend Article fifty and the show went on and
Speaker 1: we know how that went. So I think they're going
Speaker 1: to try and do the same, and the market is
Speaker 1: going to try and use the same playbook. The pound's
Speaker 1: going to likely strengthen if opposition MPs next week legislate
Speaker 1: for no deal or the nuclear button, they go for
Speaker 1: a vote of no confidence and seek a temporary unity
Speaker 1: government and extend Article fifty. And guys, no matter what happens,
Speaker 1: at some point, there's going to be an election. And
Speaker 1: I think the market has priced that in such an
Speaker 1: extent now that the path of least resistance in the
Speaker 1: short term is that we have some sterling shorts that
Speaker 1: were put on over August reduced going forward and the
Speaker 1: pound goes slightly higher. What's the catalyst for that, the
Speaker 1: immediate catalyst that galvanizes some sterling short covering. Well, it's
Speaker 1: just this. If you're holding short starting positions right now,
Speaker 1: you'll actually quite fearful of something next week that throws
Speaker 1: a spanner into the works of the no deal Brexit pricing.
Speaker 1: So if you look at the bookmakers, they have no
Speaker 1: deal Brexit this year at fort probability. That's the highest
Speaker 1: it's basically being during this whole run up to Brexit.
Speaker 1: And if you have opposition MPs legislates extend narscal fifty
Speaker 1: or do that vote in a complement, that probability is
Speaker 1: going to go down. And the pound, guys, it really
Speaker 1: does track these odds. You're gonna see the pounds fly
Speaker 1: high on the back of that just moments ago. And
Speaker 1: you know it's like in in August day, it's like,
Speaker 1: so what except right now I think it's actually Germaine.
Speaker 1: These are all the places John Farrow's visited in Germany. Saxony,
Speaker 1: Brandenburg has Bavaria Baden Wurtemburg am I pronouncing that correctly,
Speaker 1: you going through the regional break and going down to
Speaker 1: regional breakdown. So they come out with CPI in Germany,
Speaker 1: and the answer is it came in a little sealthy.
Speaker 1: Do you assume it Nomura. That's gonna be what we're
Speaker 1: gonna see through the autumn is is disinflation nation to nation.
Speaker 1: I mean, we we've had a bit of fex depreciation,
Speaker 1: which helps you European CPI, but that wasn't enough. And
Speaker 1: the ECB is go do all of it all it can,
Speaker 1: but the options it has left really don't add much
Speaker 1: to inflation. Add to that, you've got globalization still going on.
Speaker 1: You've got tech impulse, you've got the sort of delivery's
Speaker 1: the Amazon economy, the digitalization of inflation. It's all dis
Speaker 1: inflation ryes. So these central banks are dealing with cyclical
Speaker 1: which is growth is going lower, which means inflation will
Speaker 1: be on the back burner and go lower as well.
Speaker 1: And then you've got this long term structural story about
Speaker 1: the rise of Asia, the rise of globalization, and in
Speaker 1: the future we'll be talking about the rise of Africa.
Speaker 1: So it's really hard in the Western world to think
Speaker 1: of high inflation expectations, and essentially we're all becoming like Japan.
Speaker 1: We just talk about market conditions in Europe right now.
Speaker 1: So much attention on the Italian tenure dropping below one
Speaker 1: percent in yesterday's session, and it continues to drive far
Speaker 1: away conditions with negatives like the investment grade euro denominated
Speaker 1: debt right now is all in negative. Right, the yield
Speaker 1: right now is south the twenty five basis points. Just
Speaker 1: pause for a moment. Imagine that your an investment grade
Speaker 1: corporate in Europe and you can borrow a less than
Speaker 1: twenty five basis points. Well, let's translate that a hundred
Speaker 1: dollars your interest costs precisely. I do. Okay, you did, fantastic.
Speaker 1: I could be on the real yield at some point,
Speaker 1: I mean, Jordan, can you imagine? That's the situation with
Speaker 1: financial conditions in Europe? Which makes me wonder incrementally. Additional
Speaker 1: easing is not going to address anything much at all.
Speaker 1: I just wonder whether they have to, because if they don't,
Speaker 1: financial conditions will titan Absolutely it would be things will
Speaker 1: be a lot harder for them to achieve their mandates.
Speaker 1: If they were to suddenly give up and throw in
Speaker 1: the towel. But you're right. We live in a world John,
Speaker 1: where because of negative yields and sixth income, for you
Speaker 1: to make money, you have to hope for capital appreciation
Speaker 1: in what typically is you know you buy You used
Speaker 1: to buy bonds for yield. Now it's capital appreciation. On
Speaker 1: the flip side, you now buy ecutive yield for these
Speaker 1: dividend yields because at least that's still positive. The real
Speaker 1: yields negative. It means that these these stories can't go
Speaker 1: on forever. At some point there has to be a
Speaker 1: reallocation out of these things. But we are as we're
Speaker 1: seeing the ECB is going to buy more bonds at
Speaker 1: some point. The FED in the future might do the
Speaker 1: same as well. So just like Japan, yes it seems
Speaker 1: a bit mad, but you've got these central banks, You've
Speaker 1: got this one big buyer out there consistently on the bid.
Speaker 1: It's just law of supply and demand. For Jordan. This
Speaker 1: is important for the foreign exchange conversation as well. Where's
Speaker 1: the positive yield? Where's the high yielder in G ten?
Speaker 1: Right now it's in the United States. How difficult is
Speaker 1: it to construct an argument that we're about to see
Speaker 1: dollar weakness. So the one thing that makes everybody in
Speaker 1: the long term point for dollar weakness is the double
Speaker 1: death tim which is the current account for the US
Speaker 1: and the budget of the government. It's really expanding in
Speaker 1: the negative world exactly. So over are a five year period,
Speaker 1: this always tends to work for the direction of the
Speaker 1: broader dollar. However, for the next year, we're dealing with
Speaker 1: global slowdown, recession risks. And in this environment, just like
Speaker 1: Mark Kearney's mentioned at the Jackson Whole Symposium, it still
Speaker 1: acts as the reserve currency of the world, and it
Speaker 1: still has a positive yield versus others. Then how does
Speaker 1: that play in the year we're hearing an interviews Jordan right,
Speaker 1: just did a lot of people played off euro what's
Speaker 1: the number of Europe call? We're currently short, Tom, it's
Speaker 1: a grind lower. I think we're about one oh nine
Speaker 1: in euro Why is it a grind? Why isn't it
Speaker 1: a bangalover? It's because European investors, with all the qui
Speaker 1: rounds we've had in over the years, they put a
Speaker 1: lot of money into emerging markets and with themself, we've
Speaker 1: we've been seeing and the uncertainty rising. Yes, there's a
Speaker 1: good argument to sell euroverse the dollar. But European investors
Speaker 1: have been bringing back their investments back home in size.
Speaker 1: So the basic balance, which is like it's all these
Speaker 1: flows combined for Europe, has really shut higher to a
Speaker 1: historical high in one regard. So that's why euros so boring.
Speaker 1: It's just a grind lower, very little. Volve, you're the
Speaker 1: most important question in the morning. Place Villa on Saturday?
Speaker 1: What are you looking for? Well, Villa has been doing
Speaker 1: better than expected. I was at the first game of
Speaker 1: the season. We were one nil up against Tottenham h
Speaker 1: and then we lost it and fold in the second half.
Speaker 1: Could be I mean what was harder for me? I
Speaker 1: was sat at the home end with the Tottenham fans,
Speaker 1: so I had to pretend when Villa got that one
Speaker 1: nail at the beginning, I had to pretend that I
Speaker 1: was very angry. Did you were certain? Tie? I mean,
Speaker 1: I mean, is it? It's the coolest thing to me,
Speaker 1: this relegation, Jordan's how's it different? You know, being in
Speaker 1: one league and then going up the next year Premiers?
Speaker 1: It like the same Sunday or Saturday at noises or
Speaker 1: is it different. It's really punishing for the club as
Speaker 1: a whole. So you get much less revenue from not
Speaker 1: not ticket sales, but from the TV rights, and you
Speaker 1: start to lose key players as well. So you'll have
Speaker 1: some players in their contracts. If they get demoted, they're gone,
Speaker 1: and we saw that last time around. So it takes
Speaker 1: a while to come back unless you get big investment
Speaker 1: from a new champ, which we did have, but it
Speaker 1: took a Jordan. We played Joe Elliott and def Leppard
Speaker 1: when Sheffield United steps on the field, would you play
Speaker 1: it as Osborne? There you go, Michael Bard. Do you
Speaker 1: see how encyclopedic they are around this. I'm a local
Speaker 1: boy the Midlands too, so Jordan and I the brothers
Speaker 1: of the change there see yeah, Jordan, thank you. We're
Speaker 1: really interesting with the shimmar of don't watch Peaky Blinders.
Speaker 1: I have no season coming out in October here, it's
Speaker 1: already out in the UK. What we are real London,
Speaker 1: It's brilliant. She is a senior vice president for Hurting
Speaker 1: Cats at Bloomberg. That means she's managing editor of Economics,
Speaker 1: one of our most challenging jobs. Margaret Collins joins US Now, Peggy,
Speaker 1: Matthew Brockett and Rich Miller writing up the latest jab
Speaker 1: bowing right now, What are you hearing from your reporters
Speaker 1: about the delicacies of the comments forward of presidents and governors?
Speaker 1: I mean, are they hanging on every word or do
Speaker 1: we just wait for September. We're absolutely hang on every word, Tom.
Speaker 1: I think the reporters here coming out of Jackson Hole
Speaker 1: last weekend, and then as you said, we've had a
Speaker 1: couple of the regional FED presidents speak this week. They're
Speaker 1: really trying to determine what the FED will do in September,
Speaker 1: but not even just September, in terms of how central
Speaker 1: bankers around the world, how much room do they really
Speaker 1: have to potentially stave off a recession and as Powell
Speaker 1: has to kind of keep the economic expansion at a
Speaker 1: record links in the US going when you have all
Speaker 1: of these headwinds and particularly the uncertainty around trade. Robert
Speaker 1: Kaplan and Mary Daily with Bloomberg here with Matthew Brockett
Speaker 1: and Rich Miller writing in the last couple of hours,
Speaker 1: give me a g d P update. I mean, there
Speaker 1: is the uh, Peggy recession watch, how does your recession
Speaker 1: meter look this morning in Washington, so we're waiting anxiously
Speaker 1: for the GDP figures to come in and about ten
Speaker 1: minutes around eight thirty, and the nuances is essentially what
Speaker 1: do we see. Do we see consumers which haven't been
Speaker 1: basically holding up this economy continue to do so, or
Speaker 1: do we see more signs that the uncertainty and the
Speaker 1: impact of the trade war is slowing down manufacturing and
Speaker 1: potentially dragging down growth. Let's talk about trade, shall we.
Speaker 1: Peggy in the latest comments from the Treasury Secretary catching
Speaker 1: up with Bloomberg exclusive interview with you guys in Washington,
Speaker 1: one line really stood out for me. We've talked about
Speaker 1: the ultra long debt. I want to talk about the currency.
Speaker 1: It's the quote no intention of intervention at this time,
Speaker 1: no dollar intervention dot dot dot for now. Peggy hardly
Speaker 1: rules it out, does it. That's right, Jonathan, that question
Speaker 1: mark is still swirling. You know, our colleagues, as who
Speaker 1: says lay emotion, had a great exclusive interview with the
Speaker 1: Treasury Secretary yesterday and she really kind of pinned him down,
Speaker 1: or tried to on this issue of currency intervention. Will
Speaker 1: the Treasury try to do that and basically as you said,
Speaker 1: left the question. He left the question up in the
Speaker 1: air and said, we don't have any intention of intervention
Speaker 1: at this time, but situations could change in this This
Speaker 1: is critical. I mean, John's question, I think is really apt. Folks.
Speaker 1: Do we have any sense in our reporting in Washington
Speaker 1: that the President or the Secretary of Treasury have any
Speaker 1: understanding of the history of unilateral intervention. Yes, And that's
Speaker 1: why this interview was so much more interesting because the
Speaker 1: quote that follows is the big one. In general, it's
Speaker 1: more optimal to do these things on a coordinated basis
Speaker 1: because of the size and scale of these currency markets.
Speaker 1: Not to do that, Peggy, they need to get other countries,
Speaker 1: other regions to come along with them, don't they They do,
Speaker 1: but they do. But also they need to get the
Speaker 1: FED support, potentially, because the Treasury holds about nine billion
Speaker 1: that it could use to try to impact the currency markets.
Speaker 1: But as you said, this is a giant, multi trillion
Speaker 1: dollar market. So traditionally in history, the FED has gone
Speaker 1: along and matched what the Treasury has done in a
Speaker 1: currency intervention, and that is a big question mark of
Speaker 1: whether or not they'd get the FEDS for Peggy. Thank
Speaker 1: you so much. Peggy Collins managing PEG economic efforts out
Speaker 1: of Washington. I like to say, this is the interview
Speaker 1: of the day. Maybe this is the interview of back
Speaker 1: to school, or even more so, maybe this is the
Speaker 1: interview of your future, kid's future, your grandchildren's future. Where
Speaker 1: gonna get to that technology with the Lauria Paul Romer
Speaker 1: in a moment. But I've got to go back. Everybody
Speaker 1: listening worldwide didn't check the box in December of last
Speaker 1: year like you did. She were Oscar Dela Renta. You
Speaker 1: got married the day you got the Nobel Prize in Stockholm.
Speaker 1: That is so cool. It was this was this Mrs
Speaker 1: Romer's idea or was this Mr Rohmer's idea? Well, she remembers,
Speaker 1: she's she's miss Webber. She's of course a claimed that
Speaker 1: this was actually my idea. I surprised her, um and uh,
Speaker 1: I wanted. I thought she would enjoy and appreciate the
Speaker 1: idea of a surprise wedding. So we had a wedding
Speaker 1: that we invited our family members too. But nobody in
Speaker 1: the family knew what was going to happen at that
Speaker 1: little slot that said family photo on on Nobel day,
Speaker 1: but it was perfect. They had to be dressed up anyway,
Speaker 1: so they just stopped at the church and then surprise,
Speaker 1: we're gonna get married. That's great. And there was no
Speaker 1: open bar. Listen, it was great. We had no toasts,
Speaker 1: no none of that stuff. That that completely It was
Speaker 1: just like a ceremony with the you know, the the
Speaker 1: priest and the church. And you know, it's a que
Speaker 1: way to do it. Enhanced productivity, which is of course
Speaker 1: your claim. We have so many things we could talk about,
Speaker 1: including some of the more controversial things you've done, But
Speaker 1: I get so much mail about our mystery of this
Speaker 1: overlay of technology. Let's start with the data. Are we
Speaker 1: underestimating the value or harm of technology in our statistics? Yeah?
Speaker 1: I think the most important lesson as I've lived through
Speaker 1: this economy and thought about technology is that every technology
Speaker 1: brings both good and bad, and we always focus on
Speaker 1: the good part, but there's always bad as well. So
Speaker 1: part of the role of government is to react to
Speaker 1: the new bad that emerges, to stop it from happening,
Speaker 1: and then we get the good parts of technology. But
Speaker 1: I think we've been slow to react on signs recently
Speaker 1: that there's react because it's skewed. The benefits are skewed
Speaker 1: to the elite. The elite control things. I mean, saida
Speaker 1: Warren wants, you know, another she's not alone, want coach
Speaker 1: to coach internet access. That seems to me almost the
Speaker 1: American way. Yeah, I think that the what we see
Speaker 1: are there's some things that are profitable but harmful to
Speaker 1: the society, and the concentrated interests that are capturing those
Speaker 1: profits want to continue in that vein. So we need
Speaker 1: to have a system that's strong enough to say, we
Speaker 1: don't care if you're making money on it, it's harmful
Speaker 1: for people, and we're going to stop it. Michael Mabusian
Speaker 1: wrote an incredibly important paper for Credit Suez. I'm gonna
Speaker 1: say pushing fifteen years ago, which is to the victors
Speaker 1: and the few victors they get all the gains, all
Speaker 1: the gains go to a few. They go to the Amazons,
Speaker 1: the apples, And it was plotted on a log y
Speaker 1: access log acts access for those you driving, don't drive
Speaker 1: off the road. All that means is straight lines become
Speaker 1: curve linear. It's it's an ugly shot. Are we getting there?
Speaker 1: Where the games go to so few and that has
Speaker 1: harmful effects. So one of the costs the harms associated
Speaker 1: with this these new digital technologies is they seem to
Speaker 1: have strengthened the returns to the biggest firms. They've created
Speaker 1: this winner take all environment, and that's also induced a
Speaker 1: more ruthless form of competition. Every firm feels like unless
Speaker 1: it becomes the winner, it'll just be crushed and disappear.
Speaker 1: So there's a ruthlessness about this pursuit of markets right now,
Speaker 1: did you tea I've taught mathick? Did you inflict micro
Speaker 1: on people? I did. I wasn't personally responsible for inflicting
Speaker 1: micro But the dynamics have changed. Is this Federal Reserve
Speaker 1: system using a micro structure that is dated and outmoded
Speaker 1: because the increasing in deec reseeing returns to scale now
Speaker 1: are so different? Well, I think, uh. I think the
Speaker 1: FED is the kind of the classic example of an
Speaker 1: organization that moves cautiously because they understand how close we
Speaker 1: always are two things starting to unravel, and so they
Speaker 1: are cautious. I think the thing they're really cautious about
Speaker 1: right now is the implications of an environment where lots
Speaker 1: of interest rates are negative and fear that if we
Speaker 1: get too close to in the U S at least
Speaker 1: in the world's reserve currency, we get too close to
Speaker 1: zero interest rates that we may trigger or set the
Speaker 1: conditions for another financial crisis, trigger a bubble, which then
Speaker 1: leads to crisis. So they're they're moving cautiously. And if
Speaker 1: we feel like we need some other way to stimulate
Speaker 1: the economy right now, we should be looking for new
Speaker 1: approaches on the fiscal side to do that, because monetary
Speaker 1: policy is really in a bind right now. Paul Roma,
Speaker 1: where us de laureate folks of New York universities are
Speaker 1: you literally down a hall from Spence and Sergeant and
Speaker 1: the rest of them. Yeah, that's a pretty cool we're
Speaker 1: enjoying Berkeley this morning when de Long and I con
Speaker 1: Green and the rest. Paul Romer, if you look at
Speaker 1: your expertise and our growthiness in our technology, and you
Speaker 1: dovetailed in to the frustration so many have about FED
Speaker 1: policy and its gains to the elite, How do we
Speaker 1: break apart from that given the modern age? Yeah, well,
Speaker 1: I think we've we've been inattentive and and frankly, it's
Speaker 1: it's me and my Chicago colleagues, my Chicago mentors. We've
Speaker 1: been inattentive to UH some trends that have been moving
Speaker 1: in a negative direction, that the market all by itself
Speaker 1: isn't solving everything. We were inattentive in particular to this
Speaker 1: growing UH gap between the wealthy and the poor. That
Speaker 1: the inequality has continued to increase, and if you look
Speaker 1: at surveys like this a puse survey out, people expect
Speaker 1: this will continue in the few ture. This is something
Speaker 1: that we could decide to change. There are countries that
Speaker 1: don't have as much inequality. We could change our policies
Speaker 1: to minimize that. It in colleague, but we have to
Speaker 1: focus on and take responsibility for it and said it
Speaker 1: as a as a goal. But I don't think I
Speaker 1: would blame the FED for that inequality. Are your students
Speaker 1: better because they have the advantage of an HP twelve
Speaker 1: C on their Apple iPhone? Or were we better when
Speaker 1: we had a cool ful iness or slide rule where
Speaker 1: we had to actually feel the logarithm I saw. I
Speaker 1: saw a news article recently about the abacus competition. Yeah
Speaker 1: when you can you do an abacus? I cannot? There
Speaker 1: you go. The Ebicus article was reverse polish notations that
Speaker 1: I think the other way Spence doesn't do that, okay,
Speaker 1: but to help us with abacus and the more visceral
Speaker 1: mathematics of our childhood versus the fanciness. Now, are we
Speaker 1: smarter now? I think that, Like my kids went to
Speaker 1: a Montessori school where you know, they had number rods,
Speaker 1: where they experienced the physical sense of number. I think
Speaker 1: physical interaction can be a good way to reinforce basic intuitions.
Speaker 1: But I think the main thing I would emphasize right
Speaker 1: now is we have to learn how to interact with
Speaker 1: other people. We have to learn how to get mad
Speaker 1: at them, how to kind of reconcile. So what would
Speaker 1: Taylor of Chicago say about this? You and Taylor? Did
Speaker 1: you go to Cubs games with Taylor? No? No, No,
Speaker 1: you should do that. But what would Taylors say about this? Well,
Speaker 1: you know, he would say that we're very responsive to
Speaker 1: the social cues we're picking up, but we're not. I
Speaker 1: think kids these days are spending so little time with
Speaker 1: face to face interaction. They don't understand their own responsiveness
Speaker 1: to these things. What should are We're running out of time,
Speaker 1: and I mean it's a great respect. Professor Ruhmer, what
Speaker 1: is your advice to our listeners worldwide about what to
Speaker 1: do with their kids and the technology you helped that.
Speaker 1: The problem here is it's hard to act unilaterally as
Speaker 1: as a parent. Jonathan heid Up Callague at an n
Speaker 1: y U and I've been talking about, is suppose each
Speaker 1: school system said here's a middle school where you can
Speaker 1: come to this middle school only if you, the kid
Speaker 1: and the parents promise that you're going to stay off
Speaker 1: of social media. So it's not just that your kids
Speaker 1: off social media, but everybody in the school is on
Speaker 1: social media. I think it would be great if there
Speaker 1: were that kind of option because I think kids need
Speaker 1: to have more of this face to face interaction before
Speaker 1: they go into cyber world. Well, never enough time, Paul Rober,
Speaker 1: thank you so much for being with this Lord of
Speaker 1: n y U and just so much to talk about.
Speaker 1: It's not the most. The most male I get is
Speaker 1: on the idea of of wages and wage growth. The
Speaker 1: next most I get us on this effective technology on
Speaker 1: our society. Paul of New York University, thanks for listening
Speaker 1: to the Bloomberg Surveillance podcast. Subscribe and listen to interviews
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Speaker 1: I'm on Twitter at Tom Keane before the podcast US.
Speaker 1: You can always catch us worldwide. I'm Bloomberg Radio