WEBVTT - Surveillance: Boris Johnson Resigns 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.200 --> 0:00:13.200 with Jonathan Ferroll and Lisa Brownwitz. Daily we bring you 0:00:13.280 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.799 Find Bloomberg Surveillance on Apple Podcast, SoundCloud, Bloomberg dot Com, 0:00:23.920 --> 0:00:30.800 and of course, on the Bloomberg Terminal. Adam Posen should 0:00:30.840 --> 0:00:33.479 always be with us in Washington. He's president of the 0:00:33.520 --> 0:00:38.360 Peterson Institute, former Bank of England Policy Committee member, and 0:00:38.640 --> 0:00:42.839 with the Peterson Institute has provided terrific economic leadership and 0:00:42.920 --> 0:00:46.519 right now timely Brexit leadership as well. He had a 0:00:46.560 --> 0:00:49.320 root canal done at the Royal College of Surgeons recently 0:00:49.320 --> 0:00:52.760 with the Peterson Institute and gave an important speech. You 0:00:53.000 --> 0:00:57.160 spoke what Prime Minister Johnson wants to do, which is 0:00:57.200 --> 0:01:00.840 making a global Britain. How much damage as Prime Minister 0:01:01.280 --> 0:01:04.959 caused and the effort of the United Kingdom to move forward. 0:01:05.360 --> 0:01:08.319 Thanks for having me, Tom, and this president excuse me, 0:01:08.360 --> 0:01:11.760 this prime minister who thinks he's a president, has caused 0:01:11.840 --> 0:01:16.680 untold damage the Brexit situation by doing brinksmanship with the 0:01:16.680 --> 0:01:21.600 EU over Northern Ireland was huge. Undermines trust and undermine 0:01:21.680 --> 0:01:25.480 certainty for investment. It shows how damaging Brexit is that 0:01:25.800 --> 0:01:28.040 on the one hand, Northern Ireland is doing better than 0:01:28.080 --> 0:01:31.120 the rest of the UK because of the non implementation. 0:01:31.520 --> 0:01:35.119 And even as crazy Briggs and Minister Rhese Moggs said, 0:01:35.160 --> 0:01:37.920 I can't fully implement brexitause it will just make inflation 0:01:37.959 --> 0:01:42.039 go higher. Can the parliamentary system, the present structure, survive 0:01:42.400 --> 0:01:47.200 modern news flow, modern acuity, the speed of information today? 0:01:47.480 --> 0:01:49.400 It seems I make a joke about the wars of 0:01:49.440 --> 0:01:52.640 the Roses. This is not funny. Lancasters in New York. 0:01:53.080 --> 0:01:55.920 York has had time to breathe. Yeah, this glorious summer 0:01:56.080 --> 0:01:58.480 of the Son of York is already coming to an end. 0:01:58.760 --> 0:02:02.040 And as Jonathan was just saying, you've got turnover and 0:02:02.080 --> 0:02:05.560 prime ministers so repeatedly fast. But it's not just there, right, 0:02:05.600 --> 0:02:08.480 I mean, we have politicians disliked on both parties in 0:02:08.520 --> 0:02:11.280 the US. We have in France mccron go from a 0:02:11.360 --> 0:02:14.880 win to a few weeks later a complete setback in parliament. 0:02:15.160 --> 0:02:19.799 We have a genuine like the seventies crisis of democracy. 0:02:19.840 --> 0:02:22.120 There was a famous report Tom, You're two young, but 0:02:22.240 --> 0:02:25.119 Sam Huntington and others wrote for the Trial Atteral Commission 0:02:25.160 --> 0:02:31.320 back in the seventy three about the crisis. You're just 0:02:31.440 --> 0:02:36.440 killing me. You're clashing with me. I'm gonna save you both. 0:02:36.480 --> 0:02:40.000 You don't clash anymore. On the policy front. On fiscal policy, 0:02:40.120 --> 0:02:42.480 there's a mechanism to deal with this. Yeah, you understand 0:02:42.480 --> 0:02:44.600 the perspective here. There will be a new leader of 0:02:44.639 --> 0:02:46.600 the party, there will be a new Prime minister, there 0:02:46.600 --> 0:02:48.960 will be immense pressure to call for an election. I 0:02:48.960 --> 0:02:50.919 have no idea if that's going to happen. What we 0:02:50.960 --> 0:02:52.840 need to work out from the fiscal side is what 0:02:52.919 --> 0:02:56.160 is the optimal fiscal policy right now to address the 0:02:56.160 --> 0:02:59.079 problems we have in this economic problems that are not 0:02:59.200 --> 0:03:01.760 just unique to the UK, that's similar to Europe and 0:03:01.919 --> 0:03:04.520 in the United States as well. I can't work out 0:03:04.560 --> 0:03:07.640 what that policy setting should actually look like, what we 0:03:07.639 --> 0:03:12.200 should be asking from the next government. It's a tough situation, Johnathan. 0:03:12.200 --> 0:03:14.920 You're absolutely right. In the UK, because it's shrunk itself 0:03:14.960 --> 0:03:18.560 through Brexit, it's more vulnerable to being an echo chamber 0:03:18.600 --> 0:03:21.600 for shocks. So, as I argued last month, when the 0:03:21.600 --> 0:03:25.240 inflation hits the same as everybody else gets the inflation, 0:03:25.680 --> 0:03:28.600 it resonates more and amplifies more in rattling around in 0:03:28.639 --> 0:03:30.840 the UK because you've got a more limited labor market 0:03:30.880 --> 0:03:33.680 because they've shut out the EU workers. You've got less 0:03:33.680 --> 0:03:37.120 inputs and more expense to get inputs because of the 0:03:37.120 --> 0:03:40.640 Brexit red tape as well as the pricing. So what 0:03:40.800 --> 0:03:42.920 you need is a fiscal policy that simply has to 0:03:42.960 --> 0:03:45.960 accept that that's the reality. And the biggest thing that 0:03:46.000 --> 0:03:50.280 they can do is keep the fiscal balance on the 0:03:50.360 --> 0:03:53.040 right track. Because they are small now and you can 0:03:53.080 --> 0:03:55.080 see the pressure on the pound. It may have popped 0:03:55.160 --> 0:03:59.520 up a little with the prospect of Boris Johnson's departure, 0:04:00.080 --> 0:04:02.400 but in the end they're not gonna They have to 0:04:02.440 --> 0:04:05.920 avoid overheating more than anybody else of this size. The 0:04:05.960 --> 0:04:08.400 Governor County I remember bringing up a few years ago 0:04:08.440 --> 0:04:10.240 he said the speed limit of the UK the British 0:04:10.280 --> 0:04:14.680 economy has changed that once you become supply constraint, and 0:04:14.720 --> 0:04:17.960 perhaps permanently so, then you start to bump against this 0:04:18.080 --> 0:04:21.640 inflation problem, perhaps more often than not. And I wonder 0:04:21.640 --> 0:04:24.520 whether we've broken into perhaps a new regime that's going 0:04:24.560 --> 0:04:26.640 to stick around. And I'm just wondering how you're thinking 0:04:26.640 --> 0:04:28.760 about that dynamic and whether that's unique to the UK 0:04:28.880 --> 0:04:31.039 or is that a problem we all share. No, I 0:04:31.080 --> 0:04:33.720 think it's more unique to the UK. More unique isn't 0:04:33.720 --> 0:04:36.120 a real word, but anyway, I think it's primarily UK 0:04:36.800 --> 0:04:39.159 and not US or Europe. I think people are making 0:04:39.160 --> 0:04:41.560 a mistake if they think we're in a new inflation regime. 0:04:41.839 --> 0:04:44.200 In general, I think we're going to fall back, but 0:04:44.360 --> 0:04:47.600 in the UK you've fallen back towards the seventies, so 0:04:47.640 --> 0:04:50.000 it is a new regime and they have to worry more. 0:04:50.040 --> 0:04:52.640 I've been saying this since Brexit. The Bank of England 0:04:52.680 --> 0:04:54.360 and we're seeing it now has to keep one eye 0:04:54.360 --> 0:04:57.359 on the pound, one eye on inflation expectations in a 0:04:57.440 --> 0:05:00.120 way that they didn't before. I want to coach up 0:05:00.160 --> 0:05:02.839 here under the real ad imposing theme of the last 0:05:02.880 --> 0:05:05.200 couple of years. And no one has captured this more 0:05:05.240 --> 0:05:07.839 than you. Olivier Blanchard had the courage at the I 0:05:07.960 --> 0:05:11.400 M F. Stiglet's to begin to consider four percent inflation 0:05:11.839 --> 0:05:14.400 is a goose out of the great financial crisis. You 0:05:14.600 --> 0:05:17.360 carry that forward to say the new two percent is 0:05:17.360 --> 0:05:20.400 three percent, And I see an entire world and entire 0:05:20.520 --> 0:05:24.440 zeiteguys catching up with that. Imposing refresh that. Right now, 0:05:24.560 --> 0:05:26.760 does your own Powell have to go to three percent 0:05:27.160 --> 0:05:30.200 or institutionally does he have to stick with two percent? 0:05:30.760 --> 0:05:33.200 In name, he's going to have to stick with two percent. Tom. 0:05:33.440 --> 0:05:35.520 What I had been hoping was we would have a 0:05:35.560 --> 0:05:37.960 little bit of inflation and that would allow them to 0:05:38.000 --> 0:05:40.840 opportunistically say, Okay, we're above three. We're not going to 0:05:40.920 --> 0:05:44.240 go all the way down the two. Given the credibility concerns, 0:05:44.279 --> 0:05:46.840 which I think are overdone but for the moment are real. 0:05:47.520 --> 0:05:49.560 They're not gonna be able to say that. They probably 0:05:49.560 --> 0:05:52.320 can't say that until the next strategic review, which is 0:05:52.320 --> 0:05:58.480 what What they can do, however, is what's likely to happen, 0:05:58.520 --> 0:06:01.200 which is they're going to bring inflation and down it. 0:06:01.279 --> 0:06:04.799 Maybe second quarter of twenty three and maybe third quarter 0:06:04.839 --> 0:06:06.960 of twenty three. They'll get it down, so it starting 0:06:06.960 --> 0:06:09.240 with a three handle, and there may be a recession 0:06:09.279 --> 0:06:11.760 that goes with it, and at that point they're not 0:06:11.760 --> 0:06:13.719 going to ease up before then. That they'll ease up 0:06:13.760 --> 0:06:15.800 then and it will be de facto looking like three 0:06:15.960 --> 0:06:18.160 for Global Wall Street. And I've got to be very careful, 0:06:18.160 --> 0:06:20.400 your folks. We have a cardinal surveillance rule We do 0:06:20.480 --> 0:06:22.919 not do differential equations with the White House in the 0:06:22.920 --> 0:06:26.799 background ever. All but the math here is really important. 0:06:26.800 --> 0:06:30.560 We're it's a nine percent inflation. It's highly non linear, 0:06:30.839 --> 0:06:35.000 highly non smooth to bring it down. Which inflation point 0:06:35.080 --> 0:06:37.920 matters to you right now? Is it getting to five percent? 0:06:38.360 --> 0:06:40.560 Is it making that first tick down or do we 0:06:40.560 --> 0:06:43.119 have to wait, wait, wait to get down to three 0:06:43.160 --> 0:06:46.159 percent to get any sense of market calm. No. I 0:06:46.200 --> 0:06:48.919 think once you're on five and it's clearly trend below 0:06:48.960 --> 0:06:51.680 five and it's clearly trending down, you should have the 0:06:51.720 --> 0:06:54.719 market calm. And you're already seeing the calm frankly in 0:06:54.720 --> 0:06:58.479 the long bond um. Not calm about the recession, but 0:06:58.560 --> 0:07:02.200 calm about inflation in the forwards. That's what you're seeing. 0:07:02.400 --> 0:07:05.800 And so I think they just have to The big issue, 0:07:06.040 --> 0:07:09.200 which goes to my colleague Blanchard and Summers, is how 0:07:09.279 --> 0:07:11.120 much wage inflation is there going to be? The big 0:07:11.160 --> 0:07:13.840 difference right now is not that we all got that 0:07:14.000 --> 0:07:16.880 right in Peterson that the inflation was gonna be much higher, 0:07:17.280 --> 0:07:19.800 and Larry and Olivier did their job great and did 0:07:19.840 --> 0:07:22.840 that Um. But the issue is how costly it is 0:07:23.000 --> 0:07:25.240 to bring it down how high the terminal rate has 0:07:25.280 --> 0:07:28.120 to be. And I still take the under versus Larry 0:07:28.120 --> 0:07:30.880 and Olivier because I think the wage inflation is going 0:07:30.920 --> 0:07:33.680 to tail off now. If it turns out unit labor 0:07:33.720 --> 0:07:36.560 costs are still going up, you know, in a few months, 0:07:37.000 --> 0:07:39.640 rather than starting to trend down, then Olivia and Larry 0:07:39.640 --> 0:07:41.840 are probably right, in which case we're going to see 0:07:42.520 --> 0:07:45.160 real You're gonna have to have positive real rates. They 0:07:45.240 --> 0:07:46.760 still hope we don't have to go all the way 0:07:46.800 --> 0:07:49.280 there the payrolls tomorrow, let's talk about the incoming danks 0:07:49.400 --> 0:07:52.000 rather than last several months. What we have said is 0:07:52.040 --> 0:07:55.560 decent gangs on the payrolls front. Unemployment has actually still 0:07:55.880 --> 0:07:58.680 coming down even as we've achieved that, and white just 0:07:58.760 --> 0:08:03.120 haven't accelerates it. Some paper sitting cab might say, maybe 0:08:03.120 --> 0:08:05.560 this labor market is not as tight as we perhaps 0:08:05.600 --> 0:08:07.560 thought it was. What would your take me from just 0:08:07.600 --> 0:08:09.440 looking at data the last couple of months. Well, to 0:08:09.480 --> 0:08:11.679 be honest, just looking at the data, das and it's 0:08:11.680 --> 0:08:14.480 it's screwy data. I mean, what we've got is the 0:08:14.560 --> 0:08:17.600 labor market numbers, which generally have been the most reliable 0:08:17.680 --> 0:08:20.400 data for the US or any major economy. You rely 0:08:20.480 --> 0:08:22.640 on your labor market numbers and tell you what's going on, 0:08:23.040 --> 0:08:25.880 and they've been really completely out of whack because remember 0:08:25.920 --> 0:08:28.760 we had at least on paper contraction in the first quarter, 0:08:29.280 --> 0:08:32.800 and yet we see these incredible labor market numbers. So 0:08:32.840 --> 0:08:36.360 we see vacancy ratios too, meaning number of jobs available 0:08:36.360 --> 0:08:39.800 to job seekers at levels we've never seen before. We 0:08:39.880 --> 0:08:42.120 have a new paper, as it happens, coming up from Peterson, 0:08:42.160 --> 0:08:44.240 from Blanchard and Summer's looking at this. It will be 0:08:44.240 --> 0:08:47.800 out probably next week um and they basically say, you've 0:08:47.800 --> 0:08:50.600 got to take this seriously. Labor market is genuinely very tight. 0:08:51.280 --> 0:08:53.640 I'm more of the persuasion. You look at the numbers. 0:08:53.640 --> 0:08:56.959 If they don't make sense, there's something wrong with the numbers. 0:08:56.960 --> 0:08:59.080 So if you're a policy make for again, how would 0:08:59.080 --> 0:09:01.200 you interpret the account information? What would you look at 0:09:01.280 --> 0:09:04.080 We've had from Chaman Pal who's looked at things like 0:09:04.160 --> 0:09:08.560 consumer expectations on inflation, and you, Mitch, that's new to 0:09:08.640 --> 0:09:10.839 all of us. That's a little thing in a day 0:09:10.880 --> 0:09:12.760 to point that we kind of use the pad attention to. 0:09:13.160 --> 0:09:15.520 And that's the difference between fifty basis points and Steff 0:09:15.720 --> 0:09:18.240 I think I think that focusing on that one data 0:09:18.280 --> 0:09:21.120 point and using that to explain the vers fifty, I 0:09:21.120 --> 0:09:23.959 think it was a mistake in communication. Frankly, I think 0:09:23.960 --> 0:09:25.959 what they've got to be focused on are two things. 0:09:26.320 --> 0:09:28.520 They've got to be focused on, trends and unit labor 0:09:28.600 --> 0:09:32.959 cross meaning productivity wages net of productivity. And the second 0:09:33.000 --> 0:09:36.240 thing they've got to be looking at is the longer 0:09:36.320 --> 0:09:39.640 term expectations in the bond market. Both of those are 0:09:39.760 --> 0:09:44.200 looking flattish to down very quickly. Here we have an 0:09:44.240 --> 0:09:49.080 experiment underway behind us, a central bank or Secretary of Treasury. 0:09:49.160 --> 0:09:54.720 How's the yellowing experiment going. I think her signature issue, 0:09:54.880 --> 0:09:59.120 which is the International corporate tax deal is was the 0:09:59.200 --> 0:10:02.160 right priority for her and for this country. I think 0:10:02.240 --> 0:10:03.959 she did a good job of getting as far as 0:10:03.960 --> 0:10:06.680 it has gone, but now somehow you have to get 0:10:06.679 --> 0:10:10.840 the Senate to buy it. I think the American rescue 0:10:10.880 --> 0:10:14.720 package was too big and too short a time, but 0:10:15.200 --> 0:10:21.680 that was for ordained. I don't I don't talk about individuals. 0:10:21.920 --> 0:10:25.520 I don't even individuals I respect greatly, or because individuals 0:10:26.040 --> 0:10:29.280 ask me every day. I ask you that someone's going 0:10:30.600 --> 0:10:32.200 It's like Trump, They're gonna have to drag him out, 0:10:32.240 --> 0:10:35.480 kicking into it, tims like Trump and we can we 0:10:35.520 --> 0:10:37.760 clip that just like that out for the rest of 0:10:37.760 --> 0:10:40.080 this day. I just wonder at him and just briefly, 0:10:40.400 --> 0:10:44.320 would you even call the American rescue plan the yelling experiment? No, 0:10:44.679 --> 0:10:47.439 it was, it was. That was exactly my point. I'm 0:10:47.440 --> 0:10:50.439 sorry I didn't get it out. Really, it was Pelosi 0:10:50.440 --> 0:10:53.280 and humor with Biden's acceptance that that was the plan. 0:10:54.320 --> 0:10:57.000 It whether or not I have no idea what went 0:10:57.040 --> 0:10:59.320 on in the White House and Treasury and the decision. 0:10:59.720 --> 0:11:02.439 But the biggest issue was once that plan was clear, 0:11:02.840 --> 0:11:04.640 it falls on the feed. The feed should have been 0:11:04.640 --> 0:11:07.760 tightening and worrying more and forecasting more inflation once that plan. 0:11:08.120 --> 0:11:11.000 This has been a wonderful kind of the Institute. Adam, 0:11:11.040 --> 0:11:20.080 thank you. We need to drive for the conversation on 0:11:20.320 --> 0:11:24.079 the nation. We do so with Briandese's National Economic Council Director, 0:11:24.280 --> 0:11:26.880 of course, working for years with Gene Sperling. And what 0:11:27.000 --> 0:11:28.920 is most important here and part of the act of 0:11:28.920 --> 0:11:31.320 Bloomberg surveillance and what we did with Bloomberg on the 0:11:31.360 --> 0:11:35.600 economy is microeconomics matters. There's too many people out there 0:11:35.600 --> 0:11:39.480 blathering the big picture without the foundations under it. Mr 0:11:39.559 --> 0:11:44.720 d snows some Middlebury one economics micro economics matters. I 0:11:44.720 --> 0:11:48.240 would suggest the price theory is going in your direction. 0:11:48.520 --> 0:11:53.280 There's little indications that maybe the pain is over. Not 0:11:53.440 --> 0:11:57.280 all clear, but you can you say there's some constructive 0:11:57.320 --> 0:12:00.199 elements out there that you see, we'll look to start. 0:12:00.200 --> 0:12:03.960 Prices are unacceptably high, we are also seeing some moderation, 0:12:04.120 --> 0:12:07.200 and that moderation is important. You've seen it in core 0:12:07.720 --> 0:12:11.479 PCE that that that the metric that the Fed traditionally 0:12:11.720 --> 0:12:15.200 relies on moderation over the last three months, particularly compared 0:12:15.240 --> 0:12:18.520 to the prior and as you mentioned, we're seeing for 0:12:18.679 --> 0:12:21.520 the typical American consumer a little bit of relief at 0:12:21.520 --> 0:12:23.840 the gas pump, prices down to about four seventy five, 0:12:24.600 --> 0:12:28.080 down from you know, down more than five cents. But 0:12:28.640 --> 0:12:32.320 let's be let's be clear, they're still unacceptably I we've 0:12:32.320 --> 0:12:34.040 got a long way to go, and so we've got 0:12:34.120 --> 0:12:36.160 to keep our head down and keep a focus on 0:12:36.559 --> 0:12:40.000 bringing prices down while not giving up all the economic 0:12:40.040 --> 0:12:42.560 gains that we've made. One of our wonderful guests, Jim Bion, 0:12:42.600 --> 0:12:46.400 Uncle of Chicago, or a whip inflation now button on 0:12:46.440 --> 0:12:49.800 the show the other day, you people have avoided the 0:12:49.840 --> 0:12:53.160 idiocy of the early nineties seventies. But with that, the 0:12:53.200 --> 0:12:57.120 president has to provide a morale boost two people hammered 0:12:57.120 --> 0:12:59.840 by inflation. How do you do that. It's not just 0:12:59.880 --> 0:13:01.760 a morale boost, and we have to act, and we 0:13:01.800 --> 0:13:05.240 have to show action on bath of the American people. 0:13:05.240 --> 0:13:07.559 And that's exactly what the president is doing. He's saying, 0:13:07.640 --> 0:13:10.280 bringing prices down is his trap priority, and every day 0:13:10.320 --> 0:13:13.520 he's focused on practical things that he can do. So 0:13:13.559 --> 0:13:16.600 the release of oil from the Strategic Petroleum Reserve sounds 0:13:16.760 --> 0:13:19.400 esoteric to people, but you know, oil market analysts you've 0:13:19.400 --> 0:13:21.640 had on this show will say it was single handedly responsible. 0:13:21.679 --> 0:13:25.120 From keeping keeping oil prices going higher, moving to work 0:13:25.120 --> 0:13:28.120 with the refineries to try to keep refinery capacity online, 0:13:28.559 --> 0:13:31.640 that is important. It makes a difference, and as we're seeing, 0:13:31.640 --> 0:13:33.880 we're starting to see a little bit of that moderation 0:13:33.920 --> 0:13:36.160 at the pump. The President is saying, let's do more, 0:13:36.240 --> 0:13:38.640 Let's do everything we possibly can. He called for a 0:13:38.640 --> 0:13:41.120 temporary holiday for the gas tax. That's not going to 0:13:41.200 --> 0:13:43.160 solve every issue. That would make a little bit of 0:13:43.160 --> 0:13:45.640 difference as well. So you need a president who's going 0:13:45.679 --> 0:13:48.000 to keep at it and who's going to communicate clear 0:13:48.040 --> 0:13:50.800 to the American people that we are making progress, that 0:13:50.880 --> 0:13:54.160 we have made enormous economic progress, but that he's not satisfied, 0:13:54.160 --> 0:13:55.960 and we're gonna stay at it. You know, satisfied either. 0:13:55.960 --> 0:13:58.319 But you've talked about a high aggult. You've talked about 0:13:58.320 --> 0:14:01.360 defending the world lived for Lauder and that we had 0:14:01.400 --> 0:14:04.199 to stand firm. What did you mean by that, Well, 0:14:04.240 --> 0:14:07.959 let's be very clear, that's a concept that Republicans and 0:14:08.000 --> 0:14:12.000 Democrats have embraced four years and it's about democracy. It's 0:14:12.040 --> 0:14:15.120 about the democracy and the democratic tradition that grew out 0:14:15.160 --> 0:14:18.080 of World War Two, and it has served our national 0:14:18.120 --> 0:14:21.120 security interests, in economic interests well. And standing up for 0:14:21.160 --> 0:14:24.120 democracy is something that this president feels strongly about. And 0:14:24.160 --> 0:14:26.600 so we are going to fight to bring prices down, 0:14:26.640 --> 0:14:29.120 We're going to fight to get increased oil supply on 0:14:29.160 --> 0:14:31.440 the market. But what we're not going to do is 0:14:31.440 --> 0:14:33.320 to suggest that the only way to do that is 0:14:33.360 --> 0:14:35.680 to actually step away from the Ukrainian people, to step 0:14:35.720 --> 0:14:38.280 away from fighting for democracy and everything that that if 0:14:38.280 --> 0:14:40.960 standing up for democracy is tritty paramount, and you've quite 0:14:40.960 --> 0:14:44.640 clearly just suggested, it is, why is this administration considering 0:14:45.000 --> 0:14:48.200 removing tariffs on the Chinese Communist Party, which is anything 0:14:48.280 --> 0:14:52.040 but a democracy, and it's also a government that you've 0:14:52.040 --> 0:14:55.800 accused of genocide. Why is that a consideration and how 0:14:55.800 --> 0:14:58.360 does that reconcile with this view that this is about 0:14:58.360 --> 0:15:02.240 standing up for democracy. Our economic policy should be about 0:15:02.440 --> 0:15:08.000 promoting economic security for American workers, American businesses, American families, 0:15:08.200 --> 0:15:10.440 and so we have to look at everything through that lens. 0:15:10.720 --> 0:15:14.040 In the prior administration, they took an approach to escalating 0:15:14.320 --> 0:15:17.280 trade tensions and a trade war with China that ultimately 0:15:17.280 --> 0:15:20.720 what didn't serve the perfect that purpose, didn't help our 0:15:20.760 --> 0:15:23.560 farmers and our ranchers, didn't help many sectors of the economy. 0:15:23.920 --> 0:15:26.880 So President Biden came into office committed to the proposition 0:15:26.920 --> 0:15:28.840 that we need to get tough on China. There are 0:15:28.880 --> 0:15:31.920 places where we need to be tougher and clearer about 0:15:31.960 --> 0:15:35.880 their non market practices, about their human rights abuses, but 0:15:35.920 --> 0:15:37.680 we also need to be smarter about how to do 0:15:37.720 --> 0:15:39.960 this as well. Why is that smarter? And let's got 0:15:39.960 --> 0:15:42.040 back to the question again and let things out. Clearly, 0:15:42.920 --> 0:15:46.600 you've accused the Chinese Communist Party of genocide. You're saying 0:15:46.760 --> 0:15:50.200 that what is paramount here is defending democracy and the 0:15:50.320 --> 0:15:54.200 defending the liberal world order is more important than the 0:15:54.240 --> 0:15:56.880 pain that people fail at the pump, and ultimately this 0:15:56.960 --> 0:16:01.640 administration is considering removing town riffs. I wasn't convinced by 0:16:01.640 --> 0:16:03.360 the last dounce, so I don't think many of us 0:16:03.360 --> 0:16:06.520 will either. This is an awkward moment, I know, but 0:16:06.560 --> 0:16:09.000 I really need to understand from you what makes sense 0:16:09.040 --> 0:16:13.320 for this administration to consider removing tariffs on a country 0:16:13.680 --> 0:16:16.400 that you're accusing of genocide. First of all, I want 0:16:16.400 --> 0:16:19.400 to be you, you miscaraschist. My positions are want to 0:16:19.400 --> 0:16:22.320 clarify faced bringing prices down for American people as the 0:16:22.360 --> 0:16:25.240 President's top priority. He's focused on it every day, and 0:16:25.360 --> 0:16:28.080 it's because he understands the pain that people are feeling 0:16:28.280 --> 0:16:30.560 at the gas plump and around the kitchen table. At 0:16:30.600 --> 0:16:33.160 the same time, he does not believe that the way 0:16:33.200 --> 0:16:34.960 to do that would be to step back from our 0:16:35.000 --> 0:16:38.840 democratic values or to step back from protecting UH the 0:16:38.920 --> 0:16:42.480 Ukrainians against the invasion from Vladimir Putin. He does not 0:16:42.560 --> 0:16:46.520 believe that that is an acceptable or an appropriate choice. So, 0:16:46.800 --> 0:16:50.240 given that our focus is on how can we actually 0:16:50.240 --> 0:16:53.720 advance the ball And you're seeing the President in action 0:16:53.840 --> 0:16:56.360 right now doing that. The actions that he's taken around 0:16:56.400 --> 0:16:59.200 oil supply, the actions that he has taken around refineries, 0:16:59.200 --> 0:17:01.640 the actions that he has calling for around tax productions, 0:17:02.000 --> 0:17:03.720 they all would make a difference, and they make a 0:17:03.760 --> 0:17:05.840 difference for American family. Let's sit on Chinese just for 0:17:05.920 --> 0:17:08.080 one final question and try and focus on policy. And 0:17:08.080 --> 0:17:10.960 I appreciate you follow up as let's talk about what 0:17:11.040 --> 0:17:13.239 you can do, because what we understand is that you're 0:17:13.280 --> 0:17:15.840 looking to remove some tariffs on certain goods, but perhaps 0:17:15.960 --> 0:17:18.720 double down the effort elsewhere. Can you give me a 0:17:18.720 --> 0:17:20.800 deeper understanding of where the current thinking of this White 0:17:20.800 --> 0:17:23.800 House is and the direction of travel for policy, Well, 0:17:23.840 --> 0:17:26.000 there's no question that if you look at what the 0:17:26.080 --> 0:17:29.880 Chinese economy and the non market practices that the Chinese 0:17:30.280 --> 0:17:33.920 uh the Chinese leadership are undertaking, that there are sectors 0:17:33.920 --> 0:17:37.560 of the economy where they are engaged in on acceptable activities, 0:17:37.720 --> 0:17:41.440 and that those are present a strategic risk to our 0:17:41.480 --> 0:17:44.119 economy and our national security. And so those are the 0:17:44.160 --> 0:17:47.320 places where we need to focus on using all of 0:17:47.320 --> 0:17:49.840 the tools at our disposal. Tariffs are one tool but 0:17:49.880 --> 0:17:52.040 we have other tools as well to make sure that 0:17:52.080 --> 0:17:55.080 we are protecting key sectors of the American economy and 0:17:55.119 --> 0:17:58.160 that we are holding to account for those. You look 0:17:58.160 --> 0:18:00.639 at something like semi conductors, which we've talked about before 0:18:00.880 --> 0:18:03.439 and which is incredibly salient. We of course need to 0:18:03.480 --> 0:18:06.560 act here in the United States to invest in building 0:18:06.600 --> 0:18:09.120 our own domestic resilience, but we also have to take 0:18:09.160 --> 0:18:11.679 seriously that some of the actions that China are taking 0:18:12.119 --> 0:18:15.359 expose us more deeply, and we need to counter those. 0:18:15.680 --> 0:18:18.080 Brande's wanted for to catch up the director of the 0:18:18.160 --> 0:18:25.800 National Economic Council. We need to talk about this market, 0:18:25.960 --> 0:18:27.920 and we can do that with the LEFIA. Door Wada, 0:18:27.960 --> 0:18:31.359 the managing director of Rock Creep Group A Lefia. Can 0:18:31.400 --> 0:18:34.520 we start here the Everything pain portfolio. I mean, it's 0:18:34.520 --> 0:18:38.440 anything working this year. I mean you talked about uncertainty 0:18:38.520 --> 0:18:41.480 polit on the political front just as much in the markets, right. 0:18:41.480 --> 0:18:43.719 I mean, there's three themes that everyone's talking about, and 0:18:43.720 --> 0:18:45.760 it used to be short term themes. Now it's going 0:18:45.840 --> 0:18:47.960 to affect the portfolio for the next two, three or 0:18:47.960 --> 0:18:52.000 four years. Right, slowing global economy, monetary tightening and inflation, 0:18:52.280 --> 0:18:54.520 and the impact from the Ukraine Russia War. Nothing has 0:18:54.520 --> 0:18:57.240 been resolved there, We're still in the same oil hundred 0:18:57.280 --> 0:19:02.199 dollars hundred and five? Does matter? You and a Shani 0:19:02.240 --> 0:19:05.160 are too young to remember seventy nine and the glory 0:19:05.160 --> 0:19:08.960 of the bond bear market. Then you people advise on 0:19:09.200 --> 0:19:12.960 quiet money. You have never seen bond losses like this. 0:19:13.760 --> 0:19:18.960 How does quiet money recover in bonds price up, yield down? 0:19:19.160 --> 0:19:21.879 What is the actual mechanism to do that? Well, you know, 0:19:21.880 --> 0:19:24.119 it's very interesting, and so thank you for calling me 0:19:24.160 --> 0:19:26.040 so young. First of all, I appreciate that. I don't 0:19:26.040 --> 0:19:29.000 know if some of my colleagues will be flattered. I 0:19:29.000 --> 0:19:30.600 think a lot of us can remember some of the 0:19:30.600 --> 0:19:32.640 pain points in the markets though, And I think one 0:19:32.640 --> 0:19:35.000 of the interesting things about the fixed income markets today 0:19:35.080 --> 0:19:38.399 is we're very looking, very very closely at where is 0:19:38.440 --> 0:19:40.840 the ten uere yield going to go? What time line 0:19:40.880 --> 0:19:42.600 do we have, and how do we start to manage 0:19:42.640 --> 0:19:46.920 our fixed in You're engaging very institutionally of full faith 0:19:46.960 --> 0:19:50.720 and credit. Yes, for now, we haven't started to see 0:19:50.720 --> 0:19:53.480 a ton of signs of distress, but there are a 0:19:53.480 --> 0:19:55.639 lot of indicies that we're looking at, a lot of metrics. 0:19:55.680 --> 0:19:58.040 We're looking at to see if the corporate bond market 0:19:58.040 --> 0:20:00.480 is starting to crap? Would you describe in we've taken 0:20:00.520 --> 0:20:05.119 out the wides of like about five fifty through those levels. 0:20:05.200 --> 0:20:07.639 That was enough for this Federal reserve back then to pivot. Clearly, 0:20:07.640 --> 0:20:11.520 different world, different inflation level. How do you judge what 0:20:11.720 --> 0:20:15.480 is stressful this time compared to what was stressful then? Yeah? Well, 0:20:15.520 --> 0:20:17.119 you know, we have the benefit of investing in a 0:20:17.119 --> 0:20:19.960 lot of debt financing types of strategies, right, so we're 0:20:20.000 --> 0:20:22.360 looking to see what is the underwriting, has it loosened? 0:20:22.520 --> 0:20:24.399 We're looking to see where will the cracks be. We're 0:20:24.400 --> 0:20:26.639 looking at the high yield market, I mean spreads up 0:20:26.640 --> 0:20:29.080 wide and over five hundred basis points right in the 0:20:29.160 --> 0:20:31.280 last few months. We're looking to see where the relative 0:20:31.280 --> 0:20:33.560 opportunities and are you getting paid for that risk? There's 0:20:33.560 --> 0:20:35.640 going to be risk in the market, right but defaults 0:20:35.640 --> 0:20:38.320 would have to double if we wanted to see a 0:20:38.440 --> 0:20:40.439 huge loss in our high yield portfolio. So is it 0:20:40.480 --> 0:20:42.160 the right time to start stepping in. I'm not saying 0:20:42.160 --> 0:20:44.080 we're doing anything right now. I think it's a wait 0:20:44.080 --> 0:20:46.199 and see moment, and I think we're gonna have to 0:20:46.200 --> 0:20:49.240