1 00:00:00,080 --> 00:00:12,960 Speaker 1: Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jay Ley. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,480 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:34,559 Speaker 1: Bloomberg dot com, and of course, on the Bloomberg Douglas 5 00:00:34,560 --> 00:00:38,520 Speaker 1: Cast with Sea Breeze. Now on caution in the market, Doug, 6 00:00:38,520 --> 00:00:41,000 Speaker 1: where are you in your training right now? Are you 7 00:00:41,000 --> 00:00:44,440 Speaker 1: you know, dooming bloom short? Are you doing something different now? 8 00:00:44,479 --> 00:00:47,120 Speaker 1: I'm doing something different. I'm still carrying a small, knit, 9 00:00:47,200 --> 00:00:50,200 Speaker 1: long exposure with a plan. Tom and John too short 10 00:00:50,240 --> 00:00:54,160 Speaker 1: strengths as the SMP rises to what I believe to 11 00:00:54,520 --> 00:00:56,360 Speaker 1: be the top end of the range, which is, you know, 12 00:00:56,400 --> 00:01:01,880 Speaker 1: another fifty SMP points or so. Look, my forward looking 13 00:01:01,880 --> 00:01:05,600 Speaker 1: concerns are plentiful. Trade war is the message of the 14 00:01:05,640 --> 00:01:07,720 Speaker 1: bond market, as well as the message of the bank 15 00:01:07,840 --> 00:01:12,000 Speaker 1: stock market, the rising ambiguity of global economic growth, the 16 00:01:12,080 --> 00:01:17,760 Speaker 1: possible repudiation of the so called synchronized global economic recovery UM, 17 00:01:17,840 --> 00:01:22,600 Speaker 1: the rising geopolitical risk, particularly in Europe with the immigration 18 00:01:22,640 --> 00:01:27,000 Speaker 1: issues dividing the EU and splintering some of the entrenched parties, 19 00:01:27,000 --> 00:01:30,800 Speaker 1: and also most importantly, the possibility of policy mistakes at 20 00:01:30,800 --> 00:01:34,240 Speaker 1: both the White House and said as the latter what 21 00:01:34,240 --> 00:01:36,280 Speaker 1: what what I want to talk about is the wall 22 00:01:36,319 --> 00:01:38,880 Speaker 1: of dooming gloom literature that's out right now. The world's 23 00:01:38,880 --> 00:01:40,920 Speaker 1: coming to it end. You read it like I read it. 24 00:01:40,959 --> 00:01:42,840 Speaker 1: We both try to ignore it as we try to 25 00:01:42,880 --> 00:01:46,440 Speaker 1: think about what we're gonna do with investment. My major 26 00:01:46,600 --> 00:01:51,720 Speaker 1: thesis is corporations adapt like a Boeing doing a JV 27 00:01:51,920 --> 00:01:55,160 Speaker 1: with you know, a dominant manufacturer in Brazil. Do you 28 00:01:55,240 --> 00:02:00,760 Speaker 1: still see corporations adapting to the different economic and finance 29 00:02:00,800 --> 00:02:04,640 Speaker 1: its out there? Are they adapting in a constructive way? 30 00:02:04,800 --> 00:02:10,919 Speaker 1: I think they're adapting. UM, But UM policy remains foremost 31 00:02:11,000 --> 00:02:14,200 Speaker 1: in my concern on the front front burner. You know, 32 00:02:14,320 --> 00:02:19,600 Speaker 1: history has proven that one trade parish gets another than another. 33 00:02:19,680 --> 00:02:22,079 Speaker 1: Until you get a full blown trade war, no one 34 00:02:22,120 --> 00:02:25,359 Speaker 1: ever wins. In the consumer seems to always get screwed. 35 00:02:26,160 --> 00:02:28,880 Speaker 1: Currency wars offered lead to trade wars and vice versa, 36 00:02:28,919 --> 00:02:32,200 Speaker 1: which in turn can devolve into hot wars. So that 37 00:02:32,280 --> 00:02:37,919 Speaker 1: cooperation which you described maybe UM in my view, rather 38 00:02:38,000 --> 00:02:41,680 Speaker 1: short lived. UM. I told you in the past, and 39 00:02:41,680 --> 00:02:44,040 Speaker 1: I've told John and Pin in the past that that 40 00:02:44,160 --> 00:02:47,360 Speaker 1: I approach each day asking three important questions. As it 41 00:02:47,440 --> 00:02:52,320 Speaker 1: relates to your example of boeing, we live in a paperless, 42 00:02:52,320 --> 00:02:55,400 Speaker 1: in cloudy world. Are investors and citizens as safe as 43 00:02:55,400 --> 00:02:59,280 Speaker 1: the markets assume we are? And my answer is no. Secondly, 44 00:02:59,440 --> 00:03:02,280 Speaker 1: we're in a lab and interconnected world. Is it even 45 00:03:02,320 --> 00:03:06,120 Speaker 1: possible for America to be an oasis of prosperity in 46 00:03:06,160 --> 00:03:08,480 Speaker 1: the driver or a vengeon of global economic growth? And 47 00:03:08,520 --> 00:03:11,160 Speaker 1: I don't believe so. And finally, most important, as it 48 00:03:11,200 --> 00:03:14,959 Speaker 1: relates to Trump in the administration with the G eight 49 00:03:15,360 --> 00:03:18,239 Speaker 1: political coordination at an all time low, getting back to 50 00:03:18,280 --> 00:03:21,520 Speaker 1: what Kaplan was talking about in the last segment, how 51 00:03:21,639 --> 00:03:24,040 Speaker 1: slow and the nept will the reaction be if the 52 00:03:24,080 --> 00:03:26,080 Speaker 1: wheels do come off? And what does it mean for 53 00:03:26,160 --> 00:03:29,880 Speaker 1: global trade and economic growth? Doug is something that the 54 00:03:29,919 --> 00:03:32,520 Speaker 1: United States economy could be insulated from. And I'm just 55 00:03:32,520 --> 00:03:35,680 Speaker 1: wondering if you become more defensive, just in terms of 56 00:03:35,680 --> 00:03:39,200 Speaker 1: your investments, what is the most the optimal way of 57 00:03:39,280 --> 00:03:42,360 Speaker 1: being defensive? And can you keep along on the SMP 58 00:03:42,520 --> 00:03:45,080 Speaker 1: five given that over the last couple of months it 59 00:03:45,160 --> 00:03:48,760 Speaker 1: has been somewhat resilient. Yeah, I understand, but we're to 60 00:03:48,880 --> 00:03:53,560 Speaker 1: me we're in this vortex of uncertainty and certainly in 61 00:03:53,640 --> 00:03:58,600 Speaker 1: a new regime of volatility. Um Monetary policy around the 62 00:03:58,600 --> 00:04:02,800 Speaker 1: world has suppressed volatility, and that's that's changing. We're gonna 63 00:04:02,880 --> 00:04:05,400 Speaker 1: soon see the end of UH. The E C B 64 00:04:05,560 --> 00:04:08,360 Speaker 1: S QUI by your end with with it being cut 65 00:04:08,400 --> 00:04:11,120 Speaker 1: half in half and three months. This is a really 66 00:04:11,200 --> 00:04:13,960 Speaker 1: big deal, John, as liquidity becomes a train both here 67 00:04:14,000 --> 00:04:17,440 Speaker 1: and over there. So I think the summarize last year, 68 00:04:17,640 --> 00:04:21,000 Speaker 1: two thousand seventeen was a year of hope in which 69 00:04:21,120 --> 00:04:25,960 Speaker 1: the SMPS index valuation experienced almost a three handle valuation 70 00:04:26,040 --> 00:04:30,440 Speaker 1: increase and basically Wall Street triumph over Main Street. And 71 00:04:30,520 --> 00:04:32,400 Speaker 1: this year is a year of reality in which we're 72 00:04:32,400 --> 00:04:37,240 Speaker 1: seeing contraction, compression and multiples. Main Street is triumphing over 73 00:04:37,279 --> 00:04:40,840 Speaker 1: Wall Street. It's what happens, you know. Charlie Munger had 74 00:04:40,880 --> 00:04:43,560 Speaker 1: a great quote. He says, it's not supposed to be easy. 75 00:04:43,640 --> 00:04:46,680 Speaker 1: Anyone who finds it easiest stupid. And I think a 76 00:04:46,720 --> 00:04:51,040 Speaker 1: lot of people that are looking UH and saying there's 77 00:04:51,080 --> 00:04:54,480 Speaker 1: an absence of uncertainty are really applying first level thinking 78 00:04:54,480 --> 00:04:57,440 Speaker 1: and not second level thinking. Where this Douglas cast of 79 00:04:57,520 --> 00:05:00,680 Speaker 1: Sea Breeze with a short term perspective most of us 80 00:05:00,920 --> 00:05:03,159 Speaker 1: and are you know in our lives we're not trading 81 00:05:03,279 --> 00:05:07,080 Speaker 1: or positioning? Is maybe Mr Casses, but it's always interesting 82 00:05:07,120 --> 00:05:09,240 Speaker 1: to get the whims out there. Doug, what is your 83 00:05:09,279 --> 00:05:15,599 Speaker 1: interpretation of the media event Fox Disney Comcast? How do 84 00:05:15,640 --> 00:05:19,320 Speaker 1: you interpret that? How do you screen that? Well? I 85 00:05:19,360 --> 00:05:23,279 Speaker 1: have two exposures. I've been shot at Disney, UM, but 86 00:05:23,440 --> 00:05:28,080 Speaker 1: not because of that event, um, not because the possible 87 00:05:28,520 --> 00:05:31,440 Speaker 1: acquisition of Fox by Disney. I have been shot Disney 88 00:05:31,480 --> 00:05:36,760 Speaker 1: because I thought that the company's secular growth rate was 89 00:05:37,000 --> 00:05:43,039 Speaker 1: probably half of the eight percent historical rate when Wall 90 00:05:43,080 --> 00:05:46,400 Speaker 1: Street consensus was still looking from the mid teens sort 91 00:05:46,440 --> 00:05:51,480 Speaker 1: of annual growth. UM. And I'm long Comcast, and I 92 00:05:51,520 --> 00:05:55,040 Speaker 1: bought it after Comcasts fell from about forty three to 93 00:05:55,160 --> 00:05:58,920 Speaker 1: thirty one on the basis that Roberts has you know, 94 00:05:59,000 --> 00:06:01,640 Speaker 1: who has all of his family's net worth and comcurse. 95 00:06:01,880 --> 00:06:05,520 Speaker 1: Comcast is not going to totally shoot himself in the foot. Yeah, 96 00:06:05,560 --> 00:06:07,640 Speaker 1: but if he goes out, Doug, what's so interesting here 97 00:06:08,000 --> 00:06:10,120 Speaker 1: on a net present value? And folks, I hate to 98 00:06:10,160 --> 00:06:11,960 Speaker 1: say this, but Cast is really good at moving the 99 00:06:12,040 --> 00:06:14,880 Speaker 1: numbers around. He'll never admit including the red Sox one 100 00:06:14,920 --> 00:06:18,119 Speaker 1: game ahead of the Yankees. But Doug, what I would 101 00:06:18,120 --> 00:06:22,520 Speaker 1: point out here is the private equity slash sovereign wealth 102 00:06:22,720 --> 00:06:27,920 Speaker 1: plug that Mr Roberts may get is essentially free money, 103 00:06:28,120 --> 00:06:30,880 Speaker 1: isn't it. Yes, it is. I mean it's like a 104 00:06:30,920 --> 00:06:34,159 Speaker 1: plug in, John, This is really important in the Newtonian 105 00:06:34,200 --> 00:06:38,240 Speaker 1: mechanics of this game. It's like a slug or plug 106 00:06:38,320 --> 00:06:42,240 Speaker 1: in of just cash, right, Doug. Yes, And I do 107 00:06:42,320 --> 00:06:46,719 Speaker 1: think that the that the incremental free cash flow whether 108 00:06:46,880 --> 00:06:53,239 Speaker 1: Comcast or Disney gets Fox is enough that Um, while 109 00:06:53,680 --> 00:06:58,520 Speaker 1: the near term UH debt to enterprise value that they're 110 00:06:58,560 --> 00:07:01,400 Speaker 1: paying is large, it will be paid off in a 111 00:07:01,480 --> 00:07:05,120 Speaker 1: reasonably short time. And remember Roberts is using he's not 112 00:07:05,200 --> 00:07:08,560 Speaker 1: using a forever perspective like Warren Buffet, but he's you know, 113 00:07:08,600 --> 00:07:12,720 Speaker 1: he's thinking intermediate John, He's not day trading Fox exactly. 114 00:07:12,760 --> 00:07:15,320 Speaker 1: But John, what's so important here is Mr Roberts may 115 00:07:15,400 --> 00:07:20,240 Speaker 1: have forever money, which is what sovereign wealth funds are like. Yeah, maybe, 116 00:07:20,280 --> 00:07:23,520 Speaker 1: but the short term date traders so to speak, or 117 00:07:23,520 --> 00:07:25,520 Speaker 1: the investors in the stock right now. Every time this 118 00:07:25,600 --> 00:07:30,720 Speaker 1: deal looks less likely, um, Comcast rallies. What does that say? 119 00:07:31,120 --> 00:07:33,880 Speaker 1: I don't think that I, as as I said before, John, 120 00:07:33,920 --> 00:07:36,160 Speaker 1: I don't think they're robbers. Is going to shoot himself 121 00:07:36,160 --> 00:07:38,280 Speaker 1: on the foot and pay a ridiculous price. I think 122 00:07:38,320 --> 00:07:41,880 Speaker 1: that that Comcast ends up with Sky, Disney ends up 123 00:07:41,880 --> 00:07:45,480 Speaker 1: with Fox, Comcast shares trade back up to the high thirties, 124 00:07:46,120 --> 00:07:53,080 Speaker 1: and Comcast initiates, reinitiates, UM re establishes it's buy back program. 125 00:07:53,280 --> 00:07:56,440 Speaker 1: So that's why I'm in Comcast. That's spout out quite clearly, 126 00:07:56,440 --> 00:07:58,600 Speaker 1: Thank you, Dusk. And just going forward, you see more 127 00:07:58,720 --> 00:08:01,560 Speaker 1: companies like what we're seeing in media at the moment, 128 00:08:01,640 --> 00:08:03,400 Speaker 1: leverage the balance sheet. And do you think now is 129 00:08:03,400 --> 00:08:06,840 Speaker 1: a good time to do that? Yeah? I think they were, John. 130 00:08:06,880 --> 00:08:10,400 Speaker 1: There are two industries that have to be rationalized, the 131 00:08:10,480 --> 00:08:14,520 Speaker 1: media business and the consumer package good business. And you 132 00:08:14,600 --> 00:08:18,360 Speaker 1: see it in Nelson Pell's going after Procter and Gamble. 133 00:08:18,880 --> 00:08:22,760 Speaker 1: You see it in Dan Loebe uh and others attracted 134 00:08:22,800 --> 00:08:25,360 Speaker 1: to Campbell Soup, which I mentioned in the past to 135 00:08:25,480 --> 00:08:29,480 Speaker 1: Tom as one of my holdings. UM and UM. All 136 00:08:29,520 --> 00:08:33,400 Speaker 1: these businesses have to be rationalized. Uh. You need synergies, 137 00:08:33,440 --> 00:08:36,800 Speaker 1: you need cut in cuts in the fixed cost structure 138 00:08:37,320 --> 00:08:40,920 Speaker 1: in order to survive the secular change in the case 139 00:08:40,960 --> 00:08:43,360 Speaker 1: of media, you know what the changes are the court cutting. 140 00:08:43,360 --> 00:08:46,920 Speaker 1: In the case of consumer package goods, Um, it's just 141 00:08:47,520 --> 00:08:52,000 Speaker 1: moved towards healthy products and generic competition and Amazon. You 142 00:08:52,120 --> 00:08:54,480 Speaker 1: dug out one final question, and you've always been very 143 00:08:54,520 --> 00:08:57,200 Speaker 1: collegial about the battle of you know, the struggle of 144 00:08:57,240 --> 00:09:00,400 Speaker 1: making and losing money. Mr Einhor in The Great Fun 145 00:09:00,800 --> 00:09:03,319 Speaker 1: Investors really had a tough goal of it. Is it 146 00:09:03,480 --> 00:09:06,679 Speaker 1: just simply non diversification, you know, like on a c 147 00:09:06,920 --> 00:09:10,839 Speaker 1: F a kind of chat, most hedge funds are just underdiversified. 148 00:09:13,280 --> 00:09:17,640 Speaker 1: I think, Um, yes, I think that's partially the case. UM. 149 00:09:17,679 --> 00:09:23,959 Speaker 1: But in in a world tom of suppressed volatility UM, 150 00:09:24,559 --> 00:09:29,920 Speaker 1: in which you're being paid management or thereabouts of the 151 00:09:29,960 --> 00:09:35,400 Speaker 1: profit in order to deliver alpha, there's a need, there's 152 00:09:35,440 --> 00:09:39,120 Speaker 1: a need to be non diversified and concentrated making your 153 00:09:39,160 --> 00:09:44,120 Speaker 1: best bets. I'm very fond and friendly with David Einharn 154 00:09:44,280 --> 00:09:48,000 Speaker 1: and I have the absolute most respect for him as 155 00:09:48,040 --> 00:09:51,160 Speaker 1: an investment manager and as a poker player. I am 156 00:09:51,200 --> 00:09:54,040 Speaker 1: both as well, and I think he's currently in the 157 00:09:54,080 --> 00:09:57,040 Speaker 1: World Series of Poker in Las Vegas participating. You can 158 00:09:57,040 --> 00:10:01,319 Speaker 1: watch it on ESPN live tonight. UM and um you 159 00:10:01,360 --> 00:10:04,360 Speaker 1: know he plays the odds. He's very, very smart, and 160 00:10:04,440 --> 00:10:08,680 Speaker 1: I'm totally confident, even though he faced the performance problems 161 00:10:08,720 --> 00:10:13,120 Speaker 1: which we get redemption problems, that he will be a survival, 162 00:10:13,320 --> 00:10:17,240 Speaker 1: as will Um, as will the others that have faced pressure, 163 00:10:17,320 --> 00:10:19,720 Speaker 1: like Acman Duck Cast. Thank you so much for a 164 00:10:19,720 --> 00:10:23,080 Speaker 1: Thursday brief and greatly appreciated. Doug Cast, of course always 165 00:10:23,120 --> 00:10:40,360 Speaker 1: supporting the dreaded Yankees. A major shout out to all 166 00:10:40,400 --> 00:10:43,680 Speaker 1: of you the huge response we got two days ago 167 00:10:43,880 --> 00:10:46,480 Speaker 1: in our interview with Russell Shorto and his new book 168 00:10:46,520 --> 00:10:50,559 Speaker 1: Revolution Song on six people in the Revolutionary Ward, including 169 00:10:50,640 --> 00:10:54,199 Speaker 1: Mr Washington, and also with Gordon would of Brown University. 170 00:10:54,240 --> 00:10:56,960 Speaker 1: That was a real special moment, and we thank you 171 00:10:57,000 --> 00:10:59,599 Speaker 1: for your comments. We drive that conversation forward now with 172 00:10:59,720 --> 00:11:02,440 Speaker 1: Robert Kaplan with my book of the Summer, the Return 173 00:11:02,440 --> 00:11:06,800 Speaker 1: of Marco Polo's World, Thin Gorgeous twelve or so essays 174 00:11:07,160 --> 00:11:10,360 Speaker 1: that will make you brighter about the cacophony we're living in. 175 00:11:10,679 --> 00:11:13,440 Speaker 1: And Robert Camplan. I want to dovetail these two books together. 176 00:11:13,880 --> 00:11:18,920 Speaker 1: There's the moment in Shorto's book where Washington meets Lafayette. 177 00:11:19,200 --> 00:11:21,720 Speaker 1: I had no idea for starters at Lafayette was twenty 178 00:11:21,800 --> 00:11:25,040 Speaker 1: years old went or twenty three rather when they met, 179 00:11:25,600 --> 00:11:29,720 Speaker 1: and we forget about the relationship of the United States 180 00:11:29,760 --> 00:11:32,839 Speaker 1: with England and France. Now that's away from what you've 181 00:11:32,880 --> 00:11:36,200 Speaker 1: been doing recently. But the president's gonna vault over to 182 00:11:36,360 --> 00:11:39,800 Speaker 1: John Farrell's United Kingdom. How's he going to be greeted 183 00:11:40,000 --> 00:11:44,720 Speaker 1: or critically, how should he be greeted by the British Normally, 184 00:11:45,200 --> 00:11:48,640 Speaker 1: uh an American president going to the United Kingdom would 185 00:11:48,640 --> 00:11:51,400 Speaker 1: be greeted as an ally, as a tried and true, 186 00:11:51,480 --> 00:11:55,680 Speaker 1: trusted ally, going back to the late nineteenth century, because 187 00:11:55,960 --> 00:11:58,920 Speaker 1: it was when the British Navy went downhill that weet 188 00:11:59,000 --> 00:12:02,760 Speaker 1: Britain slowly started to hand off global responsibilities to the 189 00:12:02,840 --> 00:12:08,080 Speaker 1: United States. So there's no greater historical relationship united by 190 00:12:08,240 --> 00:12:10,840 Speaker 1: language culture in the world. But now we're in a 191 00:12:10,880 --> 00:12:13,760 Speaker 1: different world, where in a world where the American president 192 00:12:14,000 --> 00:12:21,280 Speaker 1: has rhetorically disdained Britain and other European allies, and where 193 00:12:21,320 --> 00:12:26,160 Speaker 1: Britain is completely um you know, you know, is completely 194 00:12:26,200 --> 00:12:29,920 Speaker 1: absorbed with its own nightmare over leaving the European Union. 195 00:12:30,400 --> 00:12:32,840 Speaker 1: So this is not going to be a meeting or 196 00:12:32,880 --> 00:12:35,040 Speaker 1: this is not going to be a greeting in a 197 00:12:35,200 --> 00:12:39,720 Speaker 1: in it that makes any sense. Historically, going back about 198 00:12:39,760 --> 00:12:42,800 Speaker 1: a hundred and thirty years, it was in Prime Minster 199 00:12:42,840 --> 00:12:45,040 Speaker 1: Main one of the first, if not the first, to 200 00:12:45,040 --> 00:12:47,240 Speaker 1: to visit the White House. Um. I believe she was, 201 00:12:47,920 --> 00:12:52,520 Speaker 1: and I believe that she and world leaders all over, 202 00:12:52,640 --> 00:12:58,280 Speaker 1: particularly the Chinese, find whereas we may find Trump vulgar 203 00:12:58,600 --> 00:13:02,720 Speaker 1: and and in every a distasteful for leaders who have 204 00:13:02,880 --> 00:13:04,840 Speaker 1: to do world leaders who have to deal with an 205 00:13:04,880 --> 00:13:09,359 Speaker 1: American president, they don't know how to process him, particularly 206 00:13:09,400 --> 00:13:12,840 Speaker 1: the Chinese. Uh, you know, how how to analyze him, 207 00:13:12,920 --> 00:13:16,360 Speaker 1: how to predict him, which is something that world leaders 208 00:13:16,400 --> 00:13:19,640 Speaker 1: do with each other all the time because they're all 209 00:13:19,760 --> 00:13:23,520 Speaker 1: members of the same elite who have been to similar schools, 210 00:13:23,720 --> 00:13:28,640 Speaker 1: have achieved what they have through normal meritocracy. And so when, 211 00:13:28,720 --> 00:13:32,079 Speaker 1: for instance, of Trump says to Uh, Trump says to 212 00:13:32,200 --> 00:13:35,240 Speaker 1: shijin Ping, let's be friends, will make will make a 213 00:13:35,280 --> 00:13:38,320 Speaker 1: deal on the basis of friendship, the Chinese don't know 214 00:13:38,360 --> 00:13:41,720 Speaker 1: how to process that. In their culture, friends don't make deals. 215 00:13:41,720 --> 00:13:44,920 Speaker 1: You make deals with based on your personal interests that 216 00:13:45,040 --> 00:13:48,440 Speaker 1: intersect with another powers personal interest that has nothing to 217 00:13:48,480 --> 00:13:50,880 Speaker 1: do with friendship. But just in terms of the politics. 218 00:13:50,880 --> 00:13:53,559 Speaker 1: They sort of couz a friendship with the global elites. 219 00:13:53,640 --> 00:13:56,600 Speaker 1: Isn't that part of the problem. Well, that's part of 220 00:13:56,600 --> 00:13:59,280 Speaker 1: the problem, but it's nothing new. If you go back 221 00:13:59,320 --> 00:14:03,440 Speaker 1: to the early nineteenth century, the late eighteenth century, you 222 00:14:03,480 --> 00:14:07,640 Speaker 1: look at Metternick, Tallyron Castle, Reay. All of these people 223 00:14:07,720 --> 00:14:10,560 Speaker 1: represented different powers, but they were all members of the 224 00:14:10,600 --> 00:14:14,520 Speaker 1: same elite. In the early modern world, before the modern world, 225 00:14:14,559 --> 00:14:18,160 Speaker 1: which is the world between the Renaissance and the Industrial Revolution, 226 00:14:18,640 --> 00:14:22,480 Speaker 1: everyone was related to each other through royal families, so 227 00:14:22,720 --> 00:14:26,200 Speaker 1: you know, everyone had some relationship to Queen Victoria. So 228 00:14:26,560 --> 00:14:30,120 Speaker 1: so they're the global elite was even more into what 229 00:14:30,160 --> 00:14:31,760 Speaker 1: I'm trying to do. It just got a better understanding 230 00:14:31,760 --> 00:14:34,080 Speaker 1: of the Prime minister's relationship with the president given the 231 00:14:34,080 --> 00:14:36,920 Speaker 1: fact that they given the fact that the Prime Minister 232 00:14:37,080 --> 00:14:39,720 Speaker 1: was the first leader from the West to go into 233 00:14:40,000 --> 00:14:42,360 Speaker 1: the wine house, I don't think it helps her, not 234 00:14:42,800 --> 00:14:46,160 Speaker 1: because he has no loyalty to anything or anybody. Everything 235 00:14:46,240 --> 00:14:49,360 Speaker 1: is a zero sum. Everything is a zero sum issue 236 00:14:49,400 --> 00:14:51,120 Speaker 1: for him. One of the things that changed your Robert 237 00:14:51,200 --> 00:14:54,640 Speaker 1: kaplan is it was Tillerson and now it's POMPEII. Here's 238 00:14:54,640 --> 00:14:57,120 Speaker 1: the first of his class at West Point. I guess 239 00:14:57,160 --> 00:15:00,480 Speaker 1: he's getting high marks from everybody just to rebuild State. 240 00:15:00,600 --> 00:15:05,920 Speaker 1: How's he doing? And will Pompeo make a difference in Helsinki? Uh? Yeah. 241 00:15:06,040 --> 00:15:09,320 Speaker 1: First of all, Pompeo was treated with the suspicion at 242 00:15:09,360 --> 00:15:12,600 Speaker 1: the CIA, but got high marks when he left because 243 00:15:12,600 --> 00:15:15,640 Speaker 1: he has a history of caring for the agency. He leads, 244 00:15:16,040 --> 00:15:20,120 Speaker 1: you know, listening to advice. Uh So, Pompeo left the CIA, 245 00:15:20,360 --> 00:15:23,720 Speaker 1: you know, with a very high reputation and and it's state. 246 00:15:23,840 --> 00:15:27,360 Speaker 1: He's seen as much better than Tillerson. Um so that 247 00:15:27,480 --> 00:15:31,080 Speaker 1: Pompel himself is an improvement over the beginning of the 248 00:15:31,080 --> 00:15:36,120 Speaker 1: Trump administration. But it always comes back to the president decides. 249 00:15:36,320 --> 00:15:40,080 Speaker 1: That's the American system. If the president has an instinct 250 00:15:40,160 --> 00:15:43,400 Speaker 1: for something, the secretary of State has to go with that. 251 00:15:43,720 --> 00:15:47,200 Speaker 1: Because the secretary of State is not like the Secretary 252 00:15:47,240 --> 00:15:50,560 Speaker 1: of Defense. The secretary of Defense has a lot of equities. 253 00:15:50,600 --> 00:15:53,160 Speaker 1: He can have a bad relationship with the White House 254 00:15:53,160 --> 00:15:56,200 Speaker 1: and still be a successful secretary of Defense. It's not 255 00:15:56,280 --> 00:15:58,720 Speaker 1: true at Foggy Bottom. Let's forget the main thing with 256 00:15:58,760 --> 00:16:02,040 Speaker 1: primus to make and the speculation about whether he'll be 257 00:16:02,120 --> 00:16:04,280 Speaker 1: well received or not and get away from that and 258 00:16:04,320 --> 00:16:08,640 Speaker 1: get to the meeting with President Putin. Now, traditionally, as 259 00:16:08,680 --> 00:16:11,160 Speaker 1: you know, when two heads of state meet, it is 260 00:16:11,200 --> 00:16:14,760 Speaker 1: incredibly orchestrated. What they're going to talk about has already 261 00:16:14,800 --> 00:16:16,840 Speaker 1: been decided, The outcome of the meeting has already been 262 00:16:16,840 --> 00:16:19,680 Speaker 1: decided before they have the meeting. We now have reports 263 00:16:19,680 --> 00:16:22,200 Speaker 1: suggesting that we could have in a room just the 264 00:16:22,200 --> 00:16:25,640 Speaker 1: President of the United States and the Russian president and 265 00:16:25,720 --> 00:16:31,080 Speaker 1: nobody else. How unpresidented is this, um, it's unprecedented. Keep 266 00:16:31,080 --> 00:16:35,040 Speaker 1: in mind that Putin is always well prepared, well staffed 267 00:16:35,080 --> 00:16:37,840 Speaker 1: for every meeting he has. C e o s who 268 00:16:37,840 --> 00:16:39,840 Speaker 1: have met with him say they have never met a 269 00:16:39,920 --> 00:16:44,720 Speaker 1: more prepared, impressive person. Whatever the issue you're going to 270 00:16:44,840 --> 00:16:47,120 Speaker 1: talk to him about, he studied it for at least 271 00:16:47,160 --> 00:16:49,760 Speaker 1: a half an hour before meeting with you. All right, 272 00:16:49,800 --> 00:16:52,520 Speaker 1: So Putin is going to come prepare. The question is 273 00:16:52,560 --> 00:16:56,240 Speaker 1: will Trump based on experience, He's not. He's not going 274 00:16:56,320 --> 00:16:59,640 Speaker 1: to be nearly as prepared. And there's a context problem. 275 00:16:59,840 --> 00:17:03,400 Speaker 1: The context is it's fine to have a cordial meeting 276 00:17:03,680 --> 00:17:06,840 Speaker 1: with your adversary, provided your clothes, with your allies. What 277 00:17:06,880 --> 00:17:10,040 Speaker 1: are we going to give away if the president slips up. 278 00:17:10,080 --> 00:17:11,600 Speaker 1: I think we had a good idea of what he 279 00:17:11,640 --> 00:17:14,600 Speaker 1: gives away with North Korea? What do we give away 280 00:17:14,720 --> 00:17:18,800 Speaker 1: with Mr? Putin? At this point, I can't see anything 281 00:17:19,240 --> 00:17:23,240 Speaker 1: because the Russians have interfered to a greater or lesser 282 00:17:23,320 --> 00:17:29,960 Speaker 1: extent in our electoral process allegedly. Um and um you 283 00:17:30,000 --> 00:17:34,679 Speaker 1: know Ukraine, Uh, Syria, Crimea. You know it's it. It 284 00:17:34,960 --> 00:17:37,359 Speaker 1: were in a weak position. We don't have much to 285 00:17:37,400 --> 00:17:40,240 Speaker 1: give away at this point in the time we got left. 286 00:17:40,320 --> 00:17:43,640 Speaker 1: I'm sending four or five books to a student who 287 00:17:43,680 --> 00:17:47,000 Speaker 1: will do international relations at New York University, and it's 288 00:17:47,160 --> 00:17:50,119 Speaker 1: the usual nine, Power and Independence. I threw in in 289 00:17:50,160 --> 00:17:53,320 Speaker 1: a week moment, I threw in a Kaplan book as well. 290 00:17:53,600 --> 00:17:56,760 Speaker 1: Uh into this, I did William Easterly's Great White White 291 00:17:56,880 --> 00:18:00,480 Speaker 1: you know Bill Easterly's classic. Blah blah blah. What's the 292 00:18:00,560 --> 00:18:04,960 Speaker 1: book right now? Are our listeners should get that? You 293 00:18:05,000 --> 00:18:08,359 Speaker 1: just say, is so immediate? What's the book right now? 294 00:18:08,680 --> 00:18:11,040 Speaker 1: Where Robert Cappens has just shut up and read this? 295 00:18:11,840 --> 00:18:15,000 Speaker 1: I said, talking about my own books. Your other people's boss, 296 00:18:15,000 --> 00:18:17,159 Speaker 1: all right, I want to know what's out there that 297 00:18:17,240 --> 00:18:21,960 Speaker 1: needs to be read right now? Um. Henry Kissinger's first book, 298 00:18:22,040 --> 00:18:25,920 Speaker 1: written when he was twenty six years old, A World Restored. 299 00:18:26,320 --> 00:18:29,679 Speaker 1: Fascinating because I've read Diplomacy. Yeah, this is when it 300 00:18:29,840 --> 00:18:33,879 Speaker 1: was a young Kissinger, absolutely brilliant with twenty six with 301 00:18:33,960 --> 00:18:37,600 Speaker 1: the mind of a seventy year old who has no assistance, 302 00:18:37,760 --> 00:18:40,320 Speaker 1: nobody editing him. He does it all in his you know, 303 00:18:40,400 --> 00:18:44,280 Speaker 1: in his dorm room or so. No, that's why it's 304 00:18:44,440 --> 00:18:48,800 Speaker 1: urgent um. And what it's about is how elites from 305 00:18:48,840 --> 00:18:54,080 Speaker 1: different European countries constructed a world order at the end 306 00:18:54,119 --> 00:18:57,679 Speaker 1: of the Napoleonic Wars. And the lessons it teaches about 307 00:18:57,720 --> 00:19:02,680 Speaker 1: conservatism real is him are timeless. This is fast. I mean, 308 00:19:02,720 --> 00:19:04,240 Speaker 1: I mean my book of the Year a couple years 309 00:19:04,280 --> 00:19:07,600 Speaker 1: ago is his on world Order or whatever those essues. Um. 310 00:19:08,960 --> 00:19:11,320 Speaker 1: The thing, this is where you get the real young 311 00:19:11,560 --> 00:19:15,520 Speaker 1: brilliant twenty years without handlers, without handling. This is kissing 312 00:19:15,520 --> 00:19:21,160 Speaker 1: your without handlers, without editors, et cetera. Fascinating. That's great, Jeoffrey. 313 00:19:21,240 --> 00:19:22,760 Speaker 1: I have to read that. Yeah, I want to see 314 00:19:22,800 --> 00:19:26,479 Speaker 1: Tom Kane without handlers. Right. I fall apart, I mean 315 00:19:26,520 --> 00:19:30,119 Speaker 1: I completely fall apart. What do I do? What we asking? 316 00:19:30,200 --> 00:19:33,639 Speaker 1: When the show began, Baby wipes, don't don't want it 317 00:19:33,760 --> 00:19:37,560 Speaker 1: was you know you the turret that we're in. I 318 00:19:37,640 --> 00:19:40,160 Speaker 1: wanted the desk clings. Just Robert Captain, have you seen 319 00:19:40,240 --> 00:19:42,399 Speaker 1: this side at Tom King? Does he not show this 320 00:19:42,480 --> 00:19:44,520 Speaker 1: on Saving? I think it happens when he comes into 321 00:19:44,920 --> 00:19:49,320 Speaker 1: They use Q tips on TV? Is that Robert Capping? 322 00:19:49,600 --> 00:19:53,399 Speaker 1: Thank you so much. Just wonderful book, The Return of 323 00:19:53,440 --> 00:19:56,760 Speaker 1: Marco Polo's World. Really can't say enough about it. Eight 324 00:19:56,760 --> 00:19:59,879 Speaker 1: twelve essays, including too fresh and new ones on the 325 00:20:00,119 --> 00:20:04,760 Speaker 1: ever changing relationship of China and across Eurasia as well, 326 00:20:04,840 --> 00:20:17,880 Speaker 1: Mr capitants with Ian Bremer at the Eurasia Group. Right 327 00:20:17,880 --> 00:20:20,520 Speaker 1: now as we talked to Robert Caplan moments ago with 328 00:20:20,640 --> 00:20:23,399 Speaker 1: Euraise your group, this is a joy to revisit where 329 00:20:23,440 --> 00:20:27,399 Speaker 1: we are with Ben Steele with a Council on Foreign Relations. 330 00:20:27,720 --> 00:20:30,840 Speaker 1: He's their director of International Economics, which means he he 331 00:20:30,880 --> 00:20:32,960 Speaker 1: tells me what to do when I do panels there, 332 00:20:33,520 --> 00:20:37,280 Speaker 1: uh and and and stuff. And right now the panel 333 00:20:37,320 --> 00:20:40,040 Speaker 1: that would be great with the President traveling to Europe 334 00:20:40,880 --> 00:20:43,680 Speaker 1: is the idea of a new martial plan to your 335 00:20:43,720 --> 00:20:47,040 Speaker 1: wonderful book, The Martial Plan Dawn of a Cold War. 336 00:20:47,640 --> 00:20:49,919 Speaker 1: If we needed a martial plan right now. Would this 337 00:20:50,000 --> 00:20:53,480 Speaker 1: president have done it? No, I would go further than 338 00:20:53,560 --> 00:20:56,040 Speaker 1: just looking at the money. Tom. It's not just that 339 00:20:56,160 --> 00:20:59,800 Speaker 1: this president wouldn't play Santa Claus, which is probably how 340 00:20:59,800 --> 00:21:02,639 Speaker 1: he's thinks about the Marshal Plant, but so many of 341 00:21:02,720 --> 00:21:06,000 Speaker 1: the institutions that we take for granted today as pillars 342 00:21:06,040 --> 00:21:08,879 Speaker 1: of the post war liberal order. For example, the World 343 00:21:08,880 --> 00:21:13,760 Speaker 1: Trade Organization UM created seven as as an accompaniment to 344 00:21:13,800 --> 00:21:17,760 Speaker 1: the Marshall Plan. The European Union and NATO were direct 345 00:21:17,920 --> 00:21:22,280 Speaker 1: offshoots of the Marshall Planet's It's actually inconceivable that we 346 00:21:22,320 --> 00:21:25,000 Speaker 1: could have an EU and NATO today without the Marsha 347 00:21:25,080 --> 00:21:29,480 Speaker 1: with within. This is his desire for the Europeans to 348 00:21:29,520 --> 00:21:32,120 Speaker 1: put up their fair share. I saw a bar chart 349 00:21:32,160 --> 00:21:34,679 Speaker 1: that clearly shows most of them are not. How do 350 00:21:34,720 --> 00:21:38,120 Speaker 1: you respond to that? Is a president onto something? Well wait, wait, 351 00:21:38,160 --> 00:21:41,199 Speaker 1: without question, I mean we've we've been pressuring the the 352 00:21:41,240 --> 00:21:45,080 Speaker 1: Europeans from for many years to to boost their UM 353 00:21:45,160 --> 00:21:50,159 Speaker 1: commitments on defense spending. This certainly preceded this president and 354 00:21:50,200 --> 00:21:52,840 Speaker 1: he's right to highlight it, but the way he does 355 00:21:52,880 --> 00:21:56,960 Speaker 1: it is is dangerous because the so called Article five 356 00:21:57,320 --> 00:22:01,640 Speaker 1: security guarantees Um. That so we are extending to our 357 00:22:01,720 --> 00:22:06,240 Speaker 1: NATO allies in Europe are are critical to the effective 358 00:22:06,240 --> 00:22:08,720 Speaker 1: functioning of that alliance, and you should not be undermining. 359 00:22:08,760 --> 00:22:10,840 Speaker 1: But as you, as you point out, Bend, I mean 360 00:22:10,880 --> 00:22:13,040 Speaker 1: we should. Let's maybe not refer to as the Marshall 361 00:22:13,040 --> 00:22:15,159 Speaker 1: Plan just for this conversation and refer to to what 362 00:22:15,200 --> 00:22:17,560 Speaker 1: it was called. It was the European Recovery Plan. It 363 00:22:17,600 --> 00:22:19,879 Speaker 1: was because Europe was on its knees. Um. Europe is 364 00:22:19,920 --> 00:22:22,800 Speaker 1: not on its knees. But to your point, they haven't 365 00:22:22,800 --> 00:22:25,600 Speaker 1: been spending enough on on military spending. So what is 366 00:22:25,600 --> 00:22:28,160 Speaker 1: the right approach to get them to do that? Well, 367 00:22:29,160 --> 00:22:33,560 Speaker 1: it's a it's both a combination of of friendly cajoling 368 00:22:34,200 --> 00:22:38,640 Speaker 1: Um and making clear to the Europeans that their own 369 00:22:38,720 --> 00:22:44,320 Speaker 1: security is at stake here. With Russia clearly UM ratcheting 370 00:22:44,520 --> 00:22:49,320 Speaker 1: up its aggressive actions on NATO's borders, particularly in in 371 00:22:49,320 --> 00:22:52,960 Speaker 1: in the Baltics. UM. I think this can be done 372 00:22:53,200 --> 00:22:57,560 Speaker 1: without undermining the cohesion of the of the alliance. I 373 00:22:57,600 --> 00:23:00,440 Speaker 1: think right now President Trump is really playing being into 374 00:23:00,480 --> 00:23:02,920 Speaker 1: Putin's hands by doing that, so certainly up my job 375 00:23:02,960 --> 00:23:04,680 Speaker 1: to take a position on this. So this is really 376 00:23:04,720 --> 00:23:07,080 Speaker 1: just a question. But The approach that he's taken right 377 00:23:07,080 --> 00:23:09,440 Speaker 1: now is basically saying just that you've taken the Knights 378 00:23:09,640 --> 00:23:12,880 Speaker 1: guarantee for grants it. You haven't spent enough on the military. 379 00:23:12,920 --> 00:23:15,480 Speaker 1: You know that we will um, and therefore you've taken 380 00:23:15,520 --> 00:23:19,119 Speaker 1: the whole institution for granted. UM. Have they? I know? 381 00:23:19,240 --> 00:23:22,600 Speaker 1: I don't think that would be fair. The Article five 382 00:23:22,680 --> 00:23:27,600 Speaker 1: security mutual security guarantees have only been invoked once in 383 00:23:27,640 --> 00:23:31,240 Speaker 1: the Alliance's history, and that was after September eleventh, two 384 00:23:31,240 --> 00:23:34,920 Speaker 1: thousand and one, when this country was attacked in America's 385 00:23:35,119 --> 00:23:40,560 Speaker 1: allies invoked Article five to support US, and they did 386 00:23:40,800 --> 00:23:44,080 Speaker 1: in Afghanistan, so they did step up. It would be 387 00:23:44,160 --> 00:23:47,920 Speaker 1: wrong to see them as free riders. They haven't been 388 00:23:48,280 --> 00:23:52,240 Speaker 1: on trade, have they been? No. If you look at 389 00:23:52,600 --> 00:23:56,600 Speaker 1: raps broadly in the developed world, Canada, the EU, the 390 00:23:56,720 --> 00:24:01,280 Speaker 1: United States, UM, um, they're they're roughly equivalent um. President 391 00:24:01,320 --> 00:24:07,119 Speaker 1: Trump rightly emphasizes that um auto tarraps in the United 392 00:24:07,240 --> 00:24:09,520 Speaker 1: United States for cars coming into the United States are 393 00:24:09,520 --> 00:24:12,440 Speaker 1: considerably lower than those in the EU, But he doesn't 394 00:24:12,520 --> 00:24:15,359 Speaker 1: like to talk about our own taraups on trucks, which 395 00:24:15,359 --> 00:24:18,639 Speaker 1: are massively higher than those which back I believe to 396 00:24:18,680 --> 00:24:23,160 Speaker 1: the Chicken texts exactly. So we're talking about tax there 397 00:24:23,160 --> 00:24:25,760 Speaker 1: and he doesn't want to negotiate that. So there are 398 00:24:25,800 --> 00:24:29,359 Speaker 1: there are good grounds by all means to for revisiting 399 00:24:29,600 --> 00:24:32,080 Speaker 1: these things, and that could have been part of the 400 00:24:32,440 --> 00:24:36,359 Speaker 1: productive discussion on a transatlantic trade treaty. We've been still 401 00:24:36,400 --> 00:24:38,639 Speaker 1: with us with the Council on Foreign Relations. Of course, 402 00:24:38,680 --> 00:24:42,200 Speaker 1: we celebrate the Marshall Plan. It's made a huge splash 403 00:24:42,320 --> 00:24:46,960 Speaker 1: in a timely splash looking back and six and seven 404 00:24:47,440 --> 00:24:50,040 Speaker 1: you've got another book, The Battle of Bretton Woods, would 405 00:24:50,080 --> 00:24:54,520 Speaker 1: basically won every award out there about the history of 406 00:24:54,600 --> 00:24:58,600 Speaker 1: how we piece together modern central banking? Is our central 407 00:24:58,600 --> 00:25:03,000 Speaker 1: banking independent at risk? Lawrence Cudlow had a tweet out 408 00:25:03,040 --> 00:25:07,600 Speaker 1: the other day, not directly talking about rates, but linking 409 00:25:07,680 --> 00:25:12,000 Speaker 1: inflation to jobs. There was why I I tweeted out 410 00:25:12,000 --> 00:25:15,600 Speaker 1: and others there was the first selvo. Is our independence 411 00:25:16,000 --> 00:25:19,080 Speaker 1: of a central bank at risk? Look, some of Larry 412 00:25:19,119 --> 00:25:23,760 Speaker 1: Cudlo's comments were unusual and crossed a traditional line or 413 00:25:23,760 --> 00:25:30,320 Speaker 1: the administration typically did yes, did not comment on monetary affairs. 414 00:25:30,640 --> 00:25:34,280 Speaker 1: Having said that, um, Larry is in some some sense 415 00:25:34,320 --> 00:25:37,000 Speaker 1: pushing on an open door. What he's referring to his 416 00:25:37,119 --> 00:25:44,240 Speaker 1: growing support among monetary economists for what's called nominal GDP targeting, 417 00:25:44,680 --> 00:25:52,399 Speaker 1: that is, effectively targeting nominal demand rather than inflation UM 418 00:25:52,440 --> 00:25:56,440 Speaker 1: as a way of stabilizing the the economy. So that's 419 00:25:56,480 --> 00:26:00,960 Speaker 1: that's not really a radical direction and cheese pushing things. 420 00:26:01,000 --> 00:26:03,439 Speaker 1: I would not be surprised to see the Fed moving 421 00:26:03,440 --> 00:26:05,879 Speaker 1: in that direction. You see more pressure coming down on 422 00:26:05,920 --> 00:26:08,040 Speaker 1: the Federal Reserve though. I mean, one thing this administration 423 00:26:08,040 --> 00:26:11,840 Speaker 1: has done brilliantly is nominate really good people to the 424 00:26:11,880 --> 00:26:15,320 Speaker 1: f O m C and stare well away from getting 425 00:26:15,320 --> 00:26:19,000 Speaker 1: involved in monastery policy. And if you look at Trump's 426 00:26:19,000 --> 00:26:23,120 Speaker 1: appointment so far, UM, there's no evidence that he's trying 427 00:26:23,160 --> 00:26:26,520 Speaker 1: to steer rates in one direction or another. What he 428 00:26:26,600 --> 00:26:30,440 Speaker 1: has done, UM looking at the composition of the FOMC 429 00:26:30,640 --> 00:26:35,560 Speaker 1: now is put more of a deregulatory bias um into 430 00:26:35,600 --> 00:26:39,720 Speaker 1: the organization that was expected and of course is very 431 00:26:39,760 --> 00:26:43,160 Speaker 1: welcome in the industry. Do you buy the nominal GDP store. 432 00:26:43,200 --> 00:26:46,320 Speaker 1: I'm thinking of Scott Sumner at Bentley University and George Mason. 433 00:26:46,640 --> 00:26:49,360 Speaker 1: I mean, the fact is Janet Yellen and Chair Powell 434 00:26:49,640 --> 00:26:53,200 Speaker 1: and maybe even Richard Clarens by Chairman. They're not thinking 435 00:26:53,359 --> 00:26:57,119 Speaker 1: in that top line animal spirit term, are they? You know? 436 00:26:57,359 --> 00:27:01,000 Speaker 1: I think there's a there's great logic behind U n 437 00:27:01,080 --> 00:27:04,320 Speaker 1: g DP targeting. One could argue that if we had 438 00:27:04,440 --> 00:27:08,880 Speaker 1: pursued a policy along those lines in two thousand nine, UM, 439 00:27:09,359 --> 00:27:12,800 Speaker 1: we would have loosened policy earlier, which was clearly called for. 440 00:27:12,960 --> 00:27:16,040 Speaker 1: My big concern about it, Tom, is that I think 441 00:27:16,080 --> 00:27:19,280 Speaker 1: the support on the left for n g DP targeting 442 00:27:19,359 --> 00:27:22,840 Speaker 1: is very soft. UM. That is, there's no inherent bias 443 00:27:22,880 --> 00:27:26,760 Speaker 1: in n g T n g DP targeting towards loosening policy. 444 00:27:27,080 --> 00:27:29,639 Speaker 1: Often it can tell you to tighten policy when an 445 00:27:29,680 --> 00:27:34,000 Speaker 1: inflation to symmetric. It's yeah, exactly. And I think the 446 00:27:34,480 --> 00:27:38,399 Speaker 1: moment an n g DP framework tells you to start 447 00:27:38,480 --> 00:27:42,880 Speaker 1: tightening UH policy, the left will abandon support for it. 448 00:27:43,240 --> 00:27:46,720 Speaker 1: And so you know, I'm not convinced it has legs. Bestil, 449 00:27:46,800 --> 00:27:49,680 Speaker 1: thank you so much for stopping by. And July Thursday, 450 00:27:49,680 --> 00:27:52,320 Speaker 1: the book The Marshall Plan Dawn of the Cold War 451 00:27:52,440 --> 00:27:54,280 Speaker 1: for those of you who trying to find the tapestry 452 00:27:54,280 --> 00:27:57,320 Speaker 1: from World War Two forward, and of course with General Marshall, 453 00:27:57,359 --> 00:27:59,960 Speaker 1: you can do no better than the Marshall Plan. Ben's 454 00:28:00,040 --> 00:28:17,879 Speaker 1: Steals with the council on for relations. We need to 455 00:28:17,920 --> 00:28:22,360 Speaker 1: talk tomorrow's jobs report. We usually start the two, three 456 00:28:22,440 --> 00:28:25,840 Speaker 1: or four days ahead. I've mentioned at once. Diane Swack 457 00:28:26,320 --> 00:28:30,920 Speaker 1: solves the problem. Grant Thornton looking for another solid month 458 00:28:30,920 --> 00:28:34,800 Speaker 1: of employment. Diane, the run rate on non farm payrolls 459 00:28:35,640 --> 00:28:39,960 Speaker 1: is a hundred and nineties some thousand. It's not supposed 460 00:28:39,960 --> 00:28:43,600 Speaker 1: to be. It's supposed to be like a hundred and twenty, right, Well, 461 00:28:43,640 --> 00:28:46,520 Speaker 1: it's given our demographics. Yes, and that higher run rate 462 00:28:46,600 --> 00:28:49,640 Speaker 1: is also what's been pushing unemployment rate down and continue 463 00:28:49,680 --> 00:28:52,080 Speaker 1: to see it new lows. So the good news is 464 00:28:52,120 --> 00:28:54,240 Speaker 1: the more we have that higher run rate, the more 465 00:28:54,240 --> 00:28:57,040 Speaker 1: we have hopes of re engaging those on the sidelines, 466 00:28:57,440 --> 00:29:01,040 Speaker 1: which we really do have. Um will still on the sidelines, 467 00:29:01,080 --> 00:29:02,760 Speaker 1: and we really want to bring them back in from 468 00:29:02,800 --> 00:29:05,480 Speaker 1: the workwork like we did in the late nineties. Diane, 469 00:29:05,520 --> 00:29:07,280 Speaker 1: I get the only thing I get more mail on 470 00:29:07,560 --> 00:29:10,680 Speaker 1: than this is the Chicago Cubs this year. Other than that, 471 00:29:11,520 --> 00:29:15,280 Speaker 1: it's people go. People like you say we're fully employed, 472 00:29:16,120 --> 00:29:19,960 Speaker 1: and I get so much mail that says Diane swanks 473 00:29:20,000 --> 00:29:23,240 Speaker 1: out of her mind. We see that in our neighborhood, 474 00:29:23,760 --> 00:29:27,280 Speaker 1: which is about full employment my comments on I get 475 00:29:27,320 --> 00:29:29,880 Speaker 1: it on Twitter two and I understand it. I understand 476 00:29:29,920 --> 00:29:32,719 Speaker 1: what it means that it's not the same three percent 477 00:29:32,880 --> 00:29:35,640 Speaker 1: we saw back in April of two thousand. In terms 478 00:29:35,640 --> 00:29:38,520 Speaker 1: of the unemployment rate, we do have more primate adults 479 00:29:38,560 --> 00:29:41,800 Speaker 1: who are not engaged, people whose skills have eroded long 480 00:29:41,920 --> 00:29:44,960 Speaker 1: term unemployment has left them on the sidelines. And we 481 00:29:45,040 --> 00:29:47,800 Speaker 1: also have some very deep crisis use that we have 482 00:29:47,960 --> 00:29:52,160 Speaker 1: to address the opioid crisis we didn't have that we 483 00:29:52,200 --> 00:29:55,560 Speaker 1: do today, where people literally in their prime age. Much 484 00:29:55,560 --> 00:29:59,360 Speaker 1: of the reduction in particularly men participating in labor hood 485 00:29:59,360 --> 00:30:02,040 Speaker 1: force that means twenty five to fifty four year olds, 486 00:30:02,200 --> 00:30:04,880 Speaker 1: is because they're addicted to drugs, not just prescription drugs 487 00:30:04,920 --> 00:30:07,960 Speaker 1: but also now non prescription drugs. And these are really 488 00:30:08,080 --> 00:30:10,959 Speaker 1: big hurdles that we have to overcome and re engage 489 00:30:10,960 --> 00:30:13,840 Speaker 1: those people. And frankly, there's no magic wand to do it. 490 00:30:14,600 --> 00:30:17,480 Speaker 1: Diane Swank, I'm gonna ask you to just go into 491 00:30:17,480 --> 00:30:19,600 Speaker 1: the future a little bit, and if you were to 492 00:30:19,640 --> 00:30:22,880 Speaker 1: look back at this time, let's say, a year from now, 493 00:30:22,920 --> 00:30:24,600 Speaker 1: are we going to be saying that this is as 494 00:30:24,640 --> 00:30:28,320 Speaker 1: good as it gets. Well, that depends I hate to 495 00:30:28,360 --> 00:30:30,400 Speaker 1: say that as an economist, but it depends on what 496 00:30:30,440 --> 00:30:32,680 Speaker 1: we do with trade. We could have this expansion, make 497 00:30:32,720 --> 00:30:34,960 Speaker 1: it to be the longest expansion of the post World 498 00:30:34,960 --> 00:30:38,320 Speaker 1: War to era and surpass that of the nineties by 499 00:30:38,400 --> 00:30:42,040 Speaker 1: making it into summer of nine if we avoid a 500 00:30:42,160 --> 00:30:45,000 Speaker 1: major trade war. That's not where we're going at the minute, 501 00:30:45,040 --> 00:30:47,800 Speaker 1: but we could late. We could you know, back things 502 00:30:47,840 --> 00:30:50,520 Speaker 1: off a bit and avoid a major trade war and 503 00:30:50,560 --> 00:30:53,560 Speaker 1: get some longevity. That's what we need, is we need 504 00:30:53,560 --> 00:30:57,040 Speaker 1: to pace ourselves in this expansion, because the longer the 505 00:30:57,080 --> 00:30:59,680 Speaker 1: expansion is, it's like fine wine, it gets better with time. 506 00:30:59,720 --> 00:31:02,720 Speaker 1: We more of a chance of actually bringing back those 507 00:31:02,720 --> 00:31:05,400 Speaker 1: workers who have been left on the sideline that you've 508 00:31:05,440 --> 00:31:12,040 Speaker 1: heard of Knesian theory. That's the Mogen David Um Diane. 509 00:31:12,400 --> 00:31:15,720 Speaker 1: Let's let's just rather than the hope, let's just UH 510 00:31:16,200 --> 00:31:19,280 Speaker 1: sort of play out the scenario that there is a 511 00:31:19,280 --> 00:31:23,360 Speaker 1: trade war, that the Chinese and the United States failed 512 00:31:23,400 --> 00:31:27,560 Speaker 1: to reach some kind of consensus, or if they do, 513 00:31:27,760 --> 00:31:32,520 Speaker 1: it is UH in a way obscured by price increases 514 00:31:32,560 --> 00:31:35,960 Speaker 1: that are already filtering into the economy. What's your best 515 00:31:35,960 --> 00:31:39,800 Speaker 1: case scenario? There? Best case scenarios that we get what 516 00:31:39,840 --> 00:31:42,880 Speaker 1: we call growth recession, and that is that growth slows. 517 00:31:42,920 --> 00:31:45,200 Speaker 1: It continues, but it slows, and it fails to bring 518 00:31:45,280 --> 00:31:48,040 Speaker 1: down the unemployment rate further and may even allow the 519 00:31:48,080 --> 00:31:50,800 Speaker 1: unemployment rate to rise again. At the growth recession where 520 00:31:50,800 --> 00:31:53,280 Speaker 1: you have growth but the unemployment, it's not enough growth 521 00:31:53,360 --> 00:31:56,400 Speaker 1: to accommodate those people coming into the labor force and 522 00:31:56,400 --> 00:31:59,000 Speaker 1: that still need jobs. The other issues, of course, that 523 00:31:59,080 --> 00:32:01,480 Speaker 1: would derail some of the wage gains. And you do have, 524 00:32:01,680 --> 00:32:05,560 Speaker 1: of course higher prices tied to tariffs, tariffs or taxes 525 00:32:05,840 --> 00:32:08,360 Speaker 1: and their higher prices, and we're already seeing them come through. 526 00:32:08,720 --> 00:32:11,040 Speaker 1: The inflation is already beginning to come through. In these 527 00:32:11,120 --> 00:32:14,760 Speaker 1: facts have been much larger than many people expected. Uneven 528 00:32:15,160 --> 00:32:18,600 Speaker 1: marginal tariffs, and that's because relating the business cycle, we 529 00:32:18,680 --> 00:32:22,680 Speaker 1: don't have all that excess capacity. Wounds had to absorb 530 00:32:22,720 --> 00:32:25,440 Speaker 1: these kinds of shocks without it being passed immediately. And 531 00:32:25,600 --> 00:32:29,560 Speaker 1: the consumers. What is your twelve months forward g d P. 532 00:32:29,800 --> 00:32:33,040 Speaker 1: We've got a broad range from all the different voices 533 00:32:33,080 --> 00:32:37,280 Speaker 1: we speak to. Are you more cautious? I'm cautious, UM 534 00:32:37,320 --> 00:32:41,840 Speaker 1: cautiously optimistic that will stay close to two in terms 535 00:32:41,840 --> 00:32:45,040 Speaker 1: of our growth potential I'm afraid of though, even without 536 00:32:45,080 --> 00:32:47,160 Speaker 1: a trade war, we're set up for what's called a 537 00:32:47,200 --> 00:32:50,920 Speaker 1: fiscal cliff in the third quarter of ten because of 538 00:32:50,960 --> 00:32:53,520 Speaker 1: the way our government has decided to spend a lot 539 00:32:53,520 --> 00:32:55,880 Speaker 1: of money today where it all ends in the end 540 00:32:55,880 --> 00:32:59,680 Speaker 1: of the third quarter of ten, which would precipitate itself 541 00:33:00,000 --> 00:33:03,440 Speaker 1: with recession at the end of And believe me, we've 542 00:33:03,480 --> 00:33:06,760 Speaker 1: seen recessions in election years before. Our government isn't that 543 00:33:06,840 --> 00:33:09,080 Speaker 1: smart when it comes to figuring these pies out. And 544 00:33:09,120 --> 00:33:11,240 Speaker 1: then in to your point buried in the News Soul 545 00:33:11,320 --> 00:33:15,680 Speaker 1: last week because the CBO report, which was sobering greeting 546 00:33:15,720 --> 00:33:19,080 Speaker 1: you said the last swak with Grant Thor and he's 547 00:33:19,200 --> 00:33:22,160 Speaker 1: always good. She gives us such value, particularly on FED Day. 548 00:33:22,640 --> 00:33:24,600 Speaker 1: We're thrilled to have her on the Scarlet Food and 549 00:33:24,600 --> 00:33:33,280 Speaker 1: her FED coverage to give her perspective as well. Thanks 550 00:33:33,320 --> 00:33:37,560 Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen 551 00:33:37,800 --> 00:33:43,120 Speaker 1: to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform 552 00:33:43,240 --> 00:33:47,520 Speaker 1: you prefer. I'm on Twitter at Tom Keane Before the podcast, 553 00:33:47,600 --> 00:33:51,080 Speaker 1: you can always catch us worldwide. I'm Bloomberg Radio