WEBVTT - Roach: The Fed is more reactive and not proactive 0:00:03.080 --> 0:00:06.880 This is Bloomberg Surveillance. And some of the European market 0:00:07.000 --> 0:00:09.559 brexited a huge deal, and when that sort of U 0:00:09.600 --> 0:00:11.800 sud Peter moved, you would see a rally. And you're 0:00:12.080 --> 0:00:14.720 a lot of the fluid dynamic things that has made 0:00:14.760 --> 0:00:19.560 the American economy so successful aren't working quite as well anymore. 0:00:19.640 --> 0:00:22.520 Growth is not great, but it's certainly running above potential 0:00:22.600 --> 0:00:24.960 right now. So I think the last thing it's economy 0:00:25.000 --> 0:00:28.160 needs is for the Fed cut rates. Bloomberg Surveillance your 0:00:28.200 --> 0:00:31.840 link to the world of economics, finance, and investment on 0:00:31.960 --> 0:00:36.320 Bloomberg Radio. Good morning, It is seven am on Wall Street. 0:00:36.360 --> 0:00:39.200 It is six am in St. Louis, where St. Louis 0:00:39.200 --> 0:00:42.479 Fed President Jim Bullard has solved the mystery of the 0:00:42.520 --> 0:00:48.440 FEDS missing dots. Breaking news now from the St. Louis Fed. St. 0:00:48.479 --> 0:00:52.840 Louis Fed President Jim Bullard did not submit dots long 0:00:52.960 --> 0:00:55.680 range dots to the FED dot plot because the Fed 0:00:56.440 --> 0:01:01.280 Bank is changing the way it forecasts the economy. A 0:01:01.680 --> 0:01:07.399 very interesting change in Fed orthodoxy. Uh. He is switching 0:01:07.440 --> 0:01:10.160 to a regime based outlook, and we'll talk about that 0:01:10.720 --> 0:01:13.880 in just a moment. A quick check of the markets 0:01:14.440 --> 0:01:18.800 US features are lower, SMP features down by four, down 0:01:18.800 --> 0:01:23.720 features by seventeen, NAZZAC features by four. European markets higher, 0:01:24.000 --> 0:01:28.400 the tragic murder of British MP Joe Cox has suspended 0:01:28.440 --> 0:01:31.959 campaigning on the Brexit and at the moment that has 0:01:32.000 --> 0:01:35.319 the footsy higher by seventy three points, the pound trading 0:01:35.400 --> 0:01:40.399 higher one forty two forty six. The stock six is 0:01:40.560 --> 0:01:42.399 up by four. Here in the US, the tenure note 0:01:42.440 --> 0:01:46.160 yield one point six one point one for the five year, 0:01:46.240 --> 0:01:50.240 the two year sixty nine basis points. The German tenure 0:01:50.280 --> 0:01:54.000 note yield has turned just barely positive this morning. So 0:01:54.600 --> 0:01:57.080 here's where we are with the St. Louis Fed and 0:01:57.120 --> 0:01:59.960 the mystery of the dot plot and an interesting challenge 0:02:00.120 --> 0:02:02.800 to the way the Fed does business. The dot pod, 0:02:02.840 --> 0:02:05.320 of course, compiles Fed officials views of where the funds 0:02:05.400 --> 0:02:09.920 rate will be given their individual economic forecasts. On Wednesday, 0:02:10.280 --> 0:02:13.040 the dot pod that came out showed one policymaker suggesting 0:02:13.400 --> 0:02:15.760 one rate move this year, then nothing in two thousand, 0:02:15.840 --> 0:02:18.720 seventeen or eighteen, give no value at all for the 0:02:18.760 --> 0:02:20.840 long run rate. Where the FED funds will be when 0:02:20.840 --> 0:02:23.839 they stop raising turned out to be St. Louis Fed 0:02:23.880 --> 0:02:27.120 President Jim Bullard, generally seen as a centrist on policy, 0:02:27.200 --> 0:02:31.200 somewhat of a rebel ud orthodoxy. In a statement just out, 0:02:31.560 --> 0:02:34.119 Bullard announcing the St. Louis FED is changing the way 0:02:34.280 --> 0:02:38.680 it forecasts the economy and therefore rates. Instead of a 0:02:38.720 --> 0:02:43.120 converging outlook, where the forecast changes based on expected movements 0:02:43.120 --> 0:02:46.400 in growth, unemployment, and inflation, the bank is now using 0:02:46.440 --> 0:02:49.680 what they call a regime based method. This assumes that 0:02:50.160 --> 0:02:55.040 current conditions will persist in a regime with components changing little, 0:02:55.440 --> 0:02:58.560 and that implies a certain FED policy rate. If the 0:02:58.720 --> 0:03:02.480 regime changes, the outlook for rates would change, but a 0:03:02.600 --> 0:03:05.800 change in the regime isn't forecastable, so Bullet is no 0:03:05.840 --> 0:03:09.959 longer providing a rates forecast beyond the one basis point move. 0:03:10.040 --> 0:03:13.440 He says, the current regime calls for here's a quote. 0:03:13.840 --> 0:03:16.720 Of course, the situation can and will change in the future, 0:03:16.720 --> 0:03:20.079 but exactly how it is difficult to predict. Therefore, the 0:03:20.120 --> 0:03:22.680 best we can do today is forecast the current regime 0:03:22.720 --> 0:03:28.080 will persist and set policy appropriately for this regime. We're 0:03:28.440 --> 0:03:30.400 backing off the idea. He says that we have a 0:03:30.440 --> 0:03:35.080 dogmatic certainty about where the US economy is well Mike, 0:03:35.120 --> 0:03:37.760 this is a huge deal to me, and you go 0:03:37.920 --> 0:03:40.800 right to the right idea, which is regime. I don't 0:03:40.840 --> 0:03:45.000 want to conflate this, Mike, with the raging debate over 0:03:45.080 --> 0:03:49.520 to America's This is about timing and about moving along 0:03:49.560 --> 0:03:53.240 the X axis and moving from a certain regime to 0:03:53.280 --> 0:03:57.800 the jump condition either way of a new regime. It's 0:03:57.920 --> 0:04:02.520 not the same as discussing whether the macroeconomics is Steve 0:04:02.640 --> 0:04:06.520 roach er James Boyard should be a one analysis of 0:04:06.560 --> 0:04:09.800 a one modal America or whether it should be bimodal 0:04:09.880 --> 0:04:13.080 or trimodal, etcetera. So I don't want to conflate this. 0:04:13.480 --> 0:04:15.320 I would say some of the debates we've heard from 0:04:15.360 --> 0:04:19.000 Alan Krueger. No, this doesn't have anything to do with 0:04:19.120 --> 0:04:24.120 current conditions beyond adapting those conditions into a forecast. But 0:04:24.279 --> 0:04:27.680 Steve roach is with us, and you have been looking 0:04:27.720 --> 0:04:31.559 through uh, this is ten page paper from Jim Bode. 0:04:31.560 --> 0:04:35.440 You've been looking through this, Steve as a long time forecaster. 0:04:35.600 --> 0:04:39.640 What do you think, well, Mike, and I mean, I'm 0:04:39.680 --> 0:04:41.680 a fast reader, but you know it takes me more 0:04:41.760 --> 0:04:48.960 that UM absorb this. Um. You know, the idea though 0:04:49.000 --> 0:04:53.159 of discreet regime changes where you sort of cruise along 0:04:53.400 --> 0:04:56.440 for a you know, seemingly indefinite period of time and 0:04:56.440 --> 0:04:59.000 then paw, you pull the switch and you jump to 0:04:59.080 --> 0:05:04.479 another trajectory. Um, you know it's possible, but I think 0:05:04.480 --> 0:05:10.200 the likelihood of that is is low. Um. You know, 0:05:10.279 --> 0:05:13.800 I'm I'm clearly sensitive to the notion that we've been 0:05:13.880 --> 0:05:19.400 locked in a a really difficult economic scenario now for 0:05:19.440 --> 0:05:23.760 the last uh seven years, and the inertia of that 0:05:23.800 --> 0:05:27.640 scenario is hard to crack in terms of growth uh 0:05:27.680 --> 0:05:31.400 and inflation so on, you know, on on that point, 0:05:31.920 --> 0:05:35.520 you know, sort of extrapolation and auto aggressive world uh 0:05:35.760 --> 0:05:38.760 makes makes some sense, But in terms of framing the 0:05:38.880 --> 0:05:43.120 longer term outlook, I'm a little less confident that this 0:05:43.520 --> 0:05:48.360 regime switching model it provides the you know, the magic 0:05:49.160 --> 0:05:52.720 uh breakthrough to forecasting that we've all been looking for. Well, 0:05:52.760 --> 0:05:55.159 it almost seems and I know that you're at the 0:05:55.320 --> 0:05:57.599 disadvantage because you haven't had just to absorb it. And 0:05:57.640 --> 0:06:01.080 I've been struggling to get through all this with everything 0:06:01.080 --> 0:06:04.280 else I'm doing. Uh. He seems to be saying, there 0:06:04.360 --> 0:06:07.200 isn't a magic bullet, There isn't a magic way to 0:06:07.320 --> 0:06:10.479 make a forecast that what we have seen is a 0:06:10.600 --> 0:06:15.160 very persistent steady state. And under that steady state, you 0:06:15.240 --> 0:06:19.039 can make a forecast for a rate, but you don't 0:06:19.080 --> 0:06:21.440 know when that's going to change. So why would you 0:06:21.520 --> 0:06:26.159 do a dot plot that assumes a change out there? Well, 0:06:26.200 --> 0:06:29.599 you know because I'll tell you why. Uh, And that 0:06:29.760 --> 0:06:34.880 is because we know that UM monetary policy operates with 0:06:34.920 --> 0:06:39.479 a lag. So when policymakers make a change, they're making 0:06:39.520 --> 0:06:43.680 a change that will affect the economy of the future, 0:06:43.760 --> 0:06:49.720 not the economy of the past. And under this particular model, uh, 0:06:50.520 --> 0:06:54.160 the assumption that has made is that the policy the 0:06:54.400 --> 0:07:00.560 economy of the past uh persists and that what what 0:07:00.680 --> 0:07:02.600 it does, I think is it sets the FED up 0:07:03.000 --> 0:07:07.840 to be reactive as opposed to proactive. Uh. And uh. 0:07:08.120 --> 0:07:12.960 You know, if if things UH do for unexpected reasons 0:07:13.080 --> 0:07:16.840 change quickly, the FED will then find itself uncomfortably behind 0:07:16.840 --> 0:07:19.480 the curve. But haven't we at this point, to this 0:07:19.560 --> 0:07:23.360 point seen a FED that is totally reactive. They haven't 0:07:23.400 --> 0:07:27.160 been proactive at all. Yeah, this would make I think 0:07:27.160 --> 0:07:33.120 this would make them even um actually more more reactive, 0:07:33.160 --> 0:07:36.760 because again they would they would only move on the 0:07:36.800 --> 0:07:41.160 basis of concrete evidence of a regime change, and that 0:07:41.360 --> 0:07:44.560 is usually based on backward looking dat as opposed to 0:07:44.640 --> 0:07:48.160 forward looking data. But Bullard argues that's what they have 0:07:48.240 --> 0:07:52.559 been telling people they're doing, that they are dated dependent. Well, 0:07:52.600 --> 0:07:56.400 you know again, what is not clear to me, and 0:07:56.400 --> 0:08:00.880 I haven't read this um carefully enough to really render 0:08:00.880 --> 0:08:03.320 a judgment, is what is the evidence they're going to 0:08:03.560 --> 0:08:07.800 use to determine if the regime is actually shifting? And 0:08:08.000 --> 0:08:09.880 the other idea here and I go to Rick Michigan 0:08:09.880 --> 0:08:13.320 of Colombia and his wonderful textbook which is heavily weighted 0:08:13.360 --> 0:08:15.520 towards Okay, what are you gonna do with this when 0:08:15.520 --> 0:08:19.400 you apply to policy. Is there any central bank out 0:08:19.440 --> 0:08:22.840 there that you can think of who is doing anything 0:08:22.880 --> 0:08:27.120 but working on a timeline of making linear forecasts out 0:08:27.280 --> 0:08:30.080 in terms of time and looking at the short and 0:08:30.200 --> 0:08:34.320 maybe the medium or a gu estimate of a long term. 0:08:34.760 --> 0:08:37.520 Or are we going to have a central bank which 0:08:37.559 --> 0:08:40.800 says here is where we are, this is our regime, 0:08:41.480 --> 0:08:44.600 and then out the X axis we'll find a new 0:08:44.679 --> 0:08:47.880 regime at some point. I mean, that's to me essentially 0:08:48.160 --> 0:08:51.480 what Mr Bullets saying has changing the X axis if 0:08:51.520 --> 0:08:56.440 he if he can make a convincing case that's a 0:08:56.600 --> 0:09:00.199 twelve months out from now, we're moving from regime one 0:09:00.320 --> 0:09:02.679 to regime too, and here are five reasons why, and 0:09:02.720 --> 0:09:05.319 we're going to frame policy with that in mind. Then 0:09:05.360 --> 0:09:07.840 I give them all the credit in the world. But 0:09:08.240 --> 0:09:11.120 it's not clear to me in in a casual read 0:09:11.120 --> 0:09:13.920 of this paper that that's pretty much what they're laying out. 0:09:14.000 --> 0:09:17.200 It seems to me to be um, you know, a 0:09:17.240 --> 0:09:21.079 framework that says the regime remains in place until we're 0:09:21.120 --> 0:09:26.440 convinced otherwise, and that transition from one regime to another 0:09:26.679 --> 0:09:30.079 is tricking. And critically mike both of these analyzes on 0:09:30.200 --> 0:09:34.319 the X axis the timeline, folks, work from an ex 0:09:34.400 --> 0:09:40.280 post analysis, and institution has to observe the present. Am 0:09:40.280 --> 0:09:42.480 I don't am I speaking at a turner dr roach. 0:09:42.520 --> 0:09:44.160 I don't want to throw a piece of chalk at me. 0:09:45.160 --> 0:09:48.960 But it's an ex post analysis. Under both a conventional 0:09:49.040 --> 0:09:53.680 dot plot timeline or a regime jump condition condition X 0:09:53.720 --> 0:09:57.920 axis look low inflation, which is, you know, the dominant 0:09:57.960 --> 0:10:01.200 feature of the current regime. Give central banks, you know, 0:10:01.280 --> 0:10:05.880 the luxury to fiddle around with uh contemplating one regime 0:10:06.040 --> 0:10:11.800 or another once inflation or if inflation begins to bump 0:10:11.880 --> 0:10:16.120 up against this um you know, a threshold that that 0:10:16.200 --> 0:10:18.880 makes them more then they don't have the luxury anymore, 0:10:18.920 --> 0:10:21.720 and they have to be much more nimble, uh in 0:10:22.200 --> 0:10:26.080 deciding what the operative scenario is. So I'd like to 0:10:26.080 --> 0:10:28.720 know more and and maybe it's in this paper or 0:10:28.760 --> 0:10:32.640 maybe there's you know, UMU further follow up work that 0:10:32.679 --> 0:10:35.480 needs to be done about how they analyze the shift 0:10:35.559 --> 0:10:38.160 from one scenario to another. I mean, we've all been 0:10:38.160 --> 0:10:41.200 doing scenario. Now let's come back. Stephen Roach with as 0:10:41.320 --> 0:10:45.800 Yale University and Mike McKee with Jim Bullard's new paper 0:10:45.920 --> 0:10:52.640 on regime change. This morning. This our Surveillance brought to 0:10:52.640 --> 0:10:55.440 you by Monkisco Volvo is at Montcisco Volvo dot com. 0:10:55.480 --> 0:10:59.040 Here's Michael Barr with the latest world at National Headlines. Mike, Tom, 0:10:59.080 --> 0:11:01.079 thank you very much of you. It's continued to come 0:11:01.120 --> 0:11:04.079 in for a British lawmaker who was shot and stabbed 0:11:04.080 --> 0:11:08.079 to death yesterday ahead of next week's Brexit referendum. Labor 0:11:08.120 --> 0:11:11.080 lawmaker Joe Cox, who was forty one, was a strong 0:11:11.120 --> 0:11:15.000 advocate of Britain remaining in the EU, campaigning on both 0:11:15.080 --> 0:11:18.400 sides of the Brexit issue have been suspended for a 0:11:18.480 --> 0:11:21.360 second day today. Bernie Sanders says he will work with 0:11:21.440 --> 0:11:24.720 Hillary Clinton to defeat Donald Trump at the fall presidential election. 0:11:25.120 --> 0:11:27.760 Sanders spoke during a live stream address from his home 0:11:27.800 --> 0:11:31.720 in Vermont last night. Analysis has begun of the only 0:11:31.760 --> 0:11:35.320 so called black box recovered thus far from an egypt 0:11:35.360 --> 0:11:38.800 airplane that crashed in the Mediterranean Sea last month, killing 0:11:38.800 --> 0:11:41.760 all sixty six people on board. Global News twenty four 0:11:41.760 --> 0:11:45.000 hours a day, powered by our twenty four hundred journalists 0:11:45.000 --> 0:11:47.520 more than a hundred fifty news bureaus around the world. 0:11:47.600 --> 0:11:50.640 On Michael bar to Michael, thanks so much. Oil with 0:11:50.679 --> 0:11:54.079 a bid today forty seven even on West Texas Burnt 0:11:54.080 --> 0:11:59.920 Crew Golden Sacks calling for lower oil prices over an 0:12:00.240 --> 0:12:07.560 Bloomberg Surveillance. Bloomberg Surveillance is brought to you by your 0:12:07.600 --> 0:12:09.960 Try State BMW Center's visit to online at Tri State 0:12:10.000 --> 0:12:12.520 BMW dot com. At BMW they only make one thing, 0:12:12.600 --> 0:12:24.640 the ultimate Driving Michigan Bloombo Business News twenty four hours 0:12:24.640 --> 0:12:28.000 a day at Bloomberg dot Com, the Radio plus mobile app, 0:12:28.080 --> 0:12:31.520 and on your radio. This is a Bloomberg business Flash, 0:12:31.840 --> 0:12:34.760 and good morning. This Bloomberg Business Flash being brought to 0:12:34.760 --> 0:12:37.360 you by Brooks Brothers big event. There's semi annual sail 0:12:37.440 --> 0:12:40.840 going on nowth through June. 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Ninety seven O four. 0:13:15.840 --> 0:13:19.920 Apple violated the design patents of a Chinese divy device maker. 0:13:20.240 --> 0:13:22.840 They may have to halt sales of their latest iPhones 0:13:22.920 --> 0:13:28.240 in Beijing's according to the city's Intellectual Property authority handing 0:13:28.280 --> 0:13:31.360 the U S company. It's latest sent back into Pivotal 0:13:31.520 --> 0:13:33.960 market and we check the markets for you every fifteen 0:13:33.960 --> 0:13:38.080 minutes during the trading day right here on Bloomberg Radio. 0:13:38.520 --> 0:13:42.439 And back to UH Michael and Tom. Good morning, Good morning, 0:13:42.480 --> 0:13:46.839 John Tucker. Great to hear from you, Bloomberg Surveillance. Of 0:13:46.920 --> 0:13:50.199 course you're brought by Investco looking for investment views investcos 0:13:50.640 --> 0:13:54.880 high conviction portfolio managers. Just to click away, go to 0:13:54.960 --> 0:13:58.800 investco dot com, slash us to subscribe to the investco 0:13:58.880 --> 0:14:03.160 blog and follow at investco US on Twitter, at I 0:14:03.360 --> 0:14:07.880 n V s CEO and investo US. Do that on Twitter. 0:14:08.480 --> 0:14:10.960 Stephen wrote with me in a great fortune if Steve 0:14:11.040 --> 0:14:15.000 Roach here as Jim Bullard releases a very important thought 0:14:15.080 --> 0:14:19.360 provoking paper and Steve, you and I touched on this 0:14:19.600 --> 0:14:23.520 an hour and a half ago. Here's the key sentence. 0:14:23.960 --> 0:14:26.320 They've got a benchmark out of a number of years 0:14:26.320 --> 0:14:30.160 out that they're trying to get to. This is Bullard quote. 0:14:30.480 --> 0:14:34.600 If the committee moved at a pace of basis points 0:14:34.640 --> 0:14:39.040 per year, it would take fourteen years to reach their 0:14:39.160 --> 0:14:43.280 terminal value. And the idea here is a protest against measured. 0:14:43.400 --> 0:14:50.000 Let's back up, did measured work? It hasn't yet, Tom 0:14:50.200 --> 0:14:53.280 and Um, you know, I think to me, you know 0:14:53.400 --> 0:14:59.200 that's the lesson of the pre crisis period where the fan, 0:14:59.280 --> 0:15:02.480 if you might remember, member started um with a one 0:15:02.520 --> 0:15:06.000 percent federal funds rate after the equity bubble burst, and 0:15:06.040 --> 0:15:11.000 in these measured um moves of basis points a shot, 0:15:11.520 --> 0:15:14.360 I think there were seventeen or eighteen of them. Uh, 0:15:14.360 --> 0:15:17.680 they finally got the funds rate up to five and 0:15:17.680 --> 0:15:23.400 a half percent. But then during that period of measured normalization, 0:15:24.080 --> 0:15:29.320 the biggest bubbles and distortions in US economic history built up. 0:15:29.360 --> 0:15:33.480 And when the bubbles burst, Uh, they they brought the 0:15:33.680 --> 0:15:37.720 unbalanced US economy closer to the ABYSS than ever. So 0:15:38.480 --> 0:15:41.640 if if that's what's you know at stake here and 0:15:41.680 --> 0:15:45.080 what um Bullard and his colleagues are offering, that the 0:15:45.120 --> 0:15:50.440 Fed would be inclined, inclined to be more aggressive in 0:15:50.520 --> 0:15:55.080 shifting policy immediately to quote a new regime than I 0:15:55.120 --> 0:15:58.160 would be in favor of that. What's missing for me, 0:15:58.280 --> 0:16:02.240 and again in a very casual to this paper, is 0:16:02.240 --> 0:16:06.320 is an understanding of what they're thinking about and how 0:16:06.360 --> 0:16:10.680 to determine in going from regime to regime. I totally 0:16:10.680 --> 0:16:13.280 agree with that, and and to use the languages of 0:16:13.360 --> 0:16:17.680 rules and discretion even with a regime change where we're 0:16:17.720 --> 0:16:21.280 maybe going back to it. Arthur Burns central banking of 0:16:21.320 --> 0:16:25.320 a little more abruptness, the basic idea here is you 0:16:25.360 --> 0:16:30.200 still have to have rules to affect the end of 0:16:30.240 --> 0:16:34.440 the given regime as you guess out to the new regime, 0:16:35.240 --> 0:16:38.600 you gotta have rules. I think the most important thing, though, 0:16:38.640 --> 0:16:41.720 is you have to have discipline. Uh you could you 0:16:41.760 --> 0:16:45.440 could call that rules um to to really stick with 0:16:47.200 --> 0:16:50.760 a strong view are irrespective of the political blowback that 0:16:50.880 --> 0:16:58.080 comes when you are making um seemingly unpopular adjustments, uh, 0:16:58.320 --> 0:17:03.240 vulgar if we look back on history, is really unique 0:17:03.280 --> 0:17:07.679 in in in his willingness to take on the politically 0:17:07.800 --> 0:17:12.760 correct response to the central banking. Others have just been 0:17:12.880 --> 0:17:16.760 very reluctant to um to buck the tide. But he 0:17:16.840 --> 0:17:21.120 did it within a time of excess is a time 0:17:21.160 --> 0:17:24.920 of excess inflation, the time of excess money illusion and 0:17:25.800 --> 0:17:29.320 Titanic nominal GDP. But there were howls of protests. I'm 0:17:29.480 --> 0:17:32.479 working at the FED. Then the FED was encircled and 0:17:32.520 --> 0:17:36.159 blockaded by farmers who had driven their fancy tractors in 0:17:36.200 --> 0:17:38.680 from the Midwest. Congress wanted his scalp, even though he 0:17:38.720 --> 0:17:42.840 didn't have much hair. Uh. He was hugely unpopular in 0:17:42.920 --> 0:17:46.000 many quarters. But yet he knew there was an interest 0:17:46.080 --> 0:17:50.080 rate that would be required much higher than anybody thought 0:17:50.280 --> 0:17:53.000 himself included his squeeze inflation out of this in today, 0:17:53.080 --> 0:17:56.600 Janet Yelling would be encircled by howls of uh the 0:17:56.720 --> 0:18:01.040 affluent in their Mercedes. Ben's right, Well, it's you know, 0:18:01.640 --> 0:18:06.040 independent central banking is very important. You need leaders at 0:18:06.040 --> 0:18:11.240 a central bank. We're willing to take on the body politics. Mike. 0:18:11.280 --> 0:18:15.000 Further thoughts from you as you break worldwide This story 0:18:15.040 --> 0:18:18.399 of James Bullard with an important new paper, Mike, what 0:18:18.400 --> 0:18:20.600 do you see with us? We mentioned the idea takes 0:18:20.600 --> 0:18:24.960 fourteen years to get a measured path up to wherever 0:18:24.960 --> 0:18:30.000 they're heading. Depends, in Jim Bullard's words, and whether the 0:18:30.040 --> 0:18:33.520 regime changes or not. One of the interesting things he 0:18:33.640 --> 0:18:37.560 raised questions He raises Steve is as a risk to 0:18:38.480 --> 0:18:43.520 his regime forecast inflation. He is betting that the Phillips 0:18:43.560 --> 0:18:47.800 curve relationship has broken down and that if it comes 0:18:47.880 --> 0:18:54.320 back that can obviously change things. Leaving aside whether it 0:18:54.320 --> 0:18:57.200 works for Jim Bullard or not, does the Phillips curve 0:18:57.320 --> 0:19:01.080 still work for Steve Roach? He note the bullet notes 0:19:01.160 --> 0:19:07.720 that we've got four unemployment and no inflation. Yeah, it's 0:19:07.880 --> 0:19:09.520 a question is whether or not the four point seven 0:19:09.560 --> 0:19:14.080 percent really accurately gauges the supply demand balance in the 0:19:14.160 --> 0:19:17.280 labor market. Um You know, I do think that that's 0:19:17.320 --> 0:19:22.880 a important question, Mike, in that um uh. Inflation remains 0:19:23.040 --> 0:19:27.960 quiescent around the world, and yet in central banks around 0:19:28.000 --> 0:19:31.400 the world are absolutely convinced that the single most important 0:19:31.400 --> 0:19:36.239 thing they need to do is inflation targeting. What this 0:19:36.320 --> 0:19:38.960 paper I did pick up, you know, one phrase in 0:19:39.000 --> 0:19:42.359 this paper. It says, this approach presented here has little 0:19:42.440 --> 0:19:46.960 to say about asset price bubble risk. And that's the 0:19:47.000 --> 0:19:51.000 flip side of what happens when you have easy money 0:19:51.040 --> 0:19:53.879 on inflation less world. And so this is a big 0:19:54.440 --> 0:19:57.200 issue that needs to be addressing. Thank you so much. 0:19:57.280 --> 0:19:59.920 We are out of time with Dr Roach. You know, 0:20:00.119 --> 0:20:07.040 University futures turn around negative five Bloomberg Surveillance brought to 0:20:07.040 --> 0:20:09.120 you by Ancient Block and Ancient named the best accounting 0:20:09.119 --> 0:20:10.920 firm in North America for the sixth year in a 0:20:11.040 --> 0:20:20.320 row by hedgema dot com.