1 00:00:00,080 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,600 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,440 --> 00:00:18,400 Speaker 2: with Lisa Bromwitz and a Marie Hordern. Join us each 4 00:00:18,480 --> 00:00:21,360 Speaker 2: day for insight from the best in markets, economics, and 5 00:00:21,400 --> 00:00:24,720 Speaker 2: geopolitics from our global headquarters in New York City. We 6 00:00:24,760 --> 00:00:27,400 Speaker 2: are live on Bloomberg Television weekday mornings from six to 7 00:00:27,480 --> 00:00:31,000 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify 8 00:00:31,200 --> 00:00:33,479 Speaker 2: or anywhere else you listen, and as always on the 9 00:00:33,479 --> 00:00:36,800 Speaker 2: Bloomberg Terminal and the Bloomberg Business app. We begin this 10 00:00:36,880 --> 00:00:38,559 Speaker 2: out with the S and P five hundred, coming off 11 00:00:38,600 --> 00:00:41,519 Speaker 2: its biggest one day lost since August, the Fed delivering 12 00:00:41,520 --> 00:00:43,959 Speaker 2: a twenty five basis point ray cup but dining bad 13 00:00:44,040 --> 00:00:47,960 Speaker 2: expectations for cuts next year. Jim Bianco of Bianco Research writing, 14 00:00:48,000 --> 00:00:50,479 Speaker 2: cutting rates and leaving the door open to more is 15 00:00:50,520 --> 00:00:54,600 Speaker 2: inviting higher inflation expectations, and that is what the market 16 00:00:54,680 --> 00:00:57,040 Speaker 2: is reacting to. Jim joins us now for more. Jim, 17 00:00:57,080 --> 00:00:59,440 Speaker 2: We've got a lot to get through your early reaction 18 00:00:59,720 --> 00:01:01,160 Speaker 2: to yesterday's news conference. 19 00:01:02,360 --> 00:01:03,160 Speaker 3: You know, you have. 20 00:01:03,040 --> 00:01:05,440 Speaker 4: To see it as a continuation of what we've seen 21 00:01:05,480 --> 00:01:08,600 Speaker 4: since September when the Fed cut in September, we were 22 00:01:08,640 --> 00:01:10,880 Speaker 4: at three point sixty on the ten yure note, and 23 00:01:11,000 --> 00:01:13,440 Speaker 4: yields have been going higher and higher and higher. Chairman 24 00:01:13,440 --> 00:01:16,000 Speaker 4: Paul has been asked about this and he's not answered 25 00:01:16,040 --> 00:01:18,160 Speaker 4: the question. He said, they go up, they go down, 26 00:01:18,640 --> 00:01:22,120 Speaker 4: and then he come to yesterday's meeting, which we're referring 27 00:01:22,120 --> 00:01:22,479 Speaker 4: to as. 28 00:01:22,360 --> 00:01:24,360 Speaker 3: A hawkish cut. Let's call it what it is. 29 00:01:24,560 --> 00:01:27,119 Speaker 4: He made a very good case the raise rates yesterday, 30 00:01:27,360 --> 00:01:30,559 Speaker 4: but instead they cut rates. And I think the market 31 00:01:30,600 --> 00:01:34,160 Speaker 4: at every step has been worried about inflation and has 32 00:01:34,200 --> 00:01:37,800 Speaker 4: been rejecting these moves by having yields go up and 33 00:01:37,920 --> 00:01:40,480 Speaker 4: up on the long end of the curve. Why, because 34 00:01:40,480 --> 00:01:43,720 Speaker 4: the economy is growing at its potential. We've got massive 35 00:01:43,720 --> 00:01:48,800 Speaker 4: stimulus coming with the Trump administration. Monetary ease is unnecessary. 36 00:01:49,000 --> 00:01:52,360 Speaker 4: All it's going to do is raise inflation expectations. So 37 00:01:52,520 --> 00:01:55,560 Speaker 4: every time they can cut or talk about cutting, you 38 00:01:55,680 --> 00:01:57,240 Speaker 4: see higher long term yields. 39 00:01:57,560 --> 00:02:00,560 Speaker 2: Jim, what do you think the next move is no move? 40 00:02:00,840 --> 00:02:01,800 Speaker 2: Is it a count a hike? 41 00:02:02,960 --> 00:02:05,640 Speaker 4: I think the next move you're right, is, first of all, it. 42 00:02:05,680 --> 00:02:06,760 Speaker 3: Should be no move. 43 00:02:06,880 --> 00:02:10,040 Speaker 4: Even though Chairman Paul talked about a pause, meaning that 44 00:02:10,080 --> 00:02:12,880 Speaker 4: there's going to be moves in the future, it probably 45 00:02:12,880 --> 00:02:16,200 Speaker 4: should be a hike because if we're talking about where 46 00:02:16,200 --> 00:02:19,120 Speaker 4: neutral is, where is the rate that does not, you know, 47 00:02:19,520 --> 00:02:22,880 Speaker 4: restrain or stimulate the economy. You can make the case 48 00:02:22,960 --> 00:02:26,680 Speaker 4: we arrived at it yesterday and that the amount of restraint, 49 00:02:26,720 --> 00:02:29,920 Speaker 4: as Chairman Paul calls it, doesn't really exist. So therefore 50 00:02:30,000 --> 00:02:33,160 Speaker 4: the next move should probably be a hike. But that's 51 00:02:33,200 --> 00:02:37,320 Speaker 4: going to be intensely political. President Trump wants to fire 52 00:02:37,360 --> 00:02:40,680 Speaker 4: poll President Trump would go crazy if he saw the 53 00:02:40,680 --> 00:02:44,200 Speaker 4: FED raise rates, So they're trying to thread this needle 54 00:02:45,080 --> 00:02:48,120 Speaker 4: from a political standpoint, in my opinion, and they're coming 55 00:02:48,240 --> 00:02:50,480 Speaker 4: up with an answer that is satisfying nobody. 56 00:02:50,880 --> 00:02:52,480 Speaker 5: Jim, do you have a really clear sense And I 57 00:02:52,480 --> 00:02:54,160 Speaker 5: know that you just gave a reason for why the 58 00:02:54,200 --> 00:02:56,880 Speaker 5: market responded the way that it did, But how much 59 00:02:56,880 --> 00:02:58,400 Speaker 5: do you think it had to do with the idea 60 00:02:59,120 --> 00:03:02,000 Speaker 5: that there is this conn about stickiness of inflation And 61 00:03:02,040 --> 00:03:04,520 Speaker 5: how much is it the flipping and the flopping and 62 00:03:04,560 --> 00:03:07,760 Speaker 5: the lack of direction and the lack of understanding what 63 00:03:07,960 --> 00:03:10,880 Speaker 5: models are driving any further FED decisions. 64 00:03:12,080 --> 00:03:14,400 Speaker 4: Oh, I think that you're right that it is a 65 00:03:14,440 --> 00:03:17,840 Speaker 4: flipping and a flopping. We're not exactly sure where they 66 00:03:17,880 --> 00:03:20,560 Speaker 4: are going. We remember in the summer, we got all 67 00:03:20,560 --> 00:03:23,880 Speaker 4: worried about the unemployment rate. As you pointed out, that 68 00:03:24,040 --> 00:03:26,960 Speaker 4: was the basis of the Jackson Hole speech. I happen 69 00:03:27,040 --> 00:03:28,880 Speaker 4: to think that that was all driven by the some 70 00:03:29,120 --> 00:03:32,440 Speaker 4: rule getting triggered, and that that scared the FED and 71 00:03:32,480 --> 00:03:35,160 Speaker 4: that's what got us the fifty basis points. And right 72 00:03:35,200 --> 00:03:38,800 Speaker 4: after that the labor market rebounded, and now we're back 73 00:03:38,840 --> 00:03:39,480 Speaker 4: to inflation. 74 00:03:39,600 --> 00:03:41,640 Speaker 3: So there is no real consensus. 75 00:03:42,120 --> 00:03:45,280 Speaker 4: Add to that, as you've pointed out, there were potentially 76 00:03:45,400 --> 00:03:49,440 Speaker 4: four dissenters at this meeting, although officially there's only been 77 00:03:49,480 --> 00:03:52,800 Speaker 4: one because four of them listed their twenty twenty four 78 00:03:52,840 --> 00:03:54,200 Speaker 4: dots is being unchanged. 79 00:03:54,600 --> 00:03:56,360 Speaker 3: And this is a bed. 80 00:03:56,000 --> 00:03:59,640 Speaker 4: That is probably deeply divided, that don't have a clear 81 00:04:00,120 --> 00:04:03,360 Speaker 4: idea among themselves what they should be doing next. 82 00:04:03,560 --> 00:04:04,640 Speaker 3: And when Chairman Pod. 83 00:04:04,560 --> 00:04:07,040 Speaker 4: Goes out there and tries to tell us that here's 84 00:04:07,080 --> 00:04:10,840 Speaker 4: the policy, there is no policy. There is just you know, 85 00:04:11,160 --> 00:04:14,360 Speaker 4: kind of questions, and there's dissent all over the place, 86 00:04:14,440 --> 00:04:16,520 Speaker 4: and that is showing up in the market. 87 00:04:17,520 --> 00:04:19,800 Speaker 5: In some ways, the fedput has been taken away the 88 00:04:19,880 --> 00:04:22,600 Speaker 5: comfort that at some point the default for this FED 89 00:04:22,800 --> 00:04:25,480 Speaker 5: will be the recalibration to lower rates, because it seems 90 00:04:25,520 --> 00:04:28,359 Speaker 5: like they're very close to that neutral rate. I just 91 00:04:28,440 --> 00:04:31,640 Speaker 5: wonder going forward how much this is a FED that 92 00:04:31,720 --> 00:04:34,640 Speaker 5: welcomes the weakness that we saw yesterday in the market, 93 00:04:34,680 --> 00:04:36,800 Speaker 5: so it actually welcomes some of the sell off that 94 00:04:36,920 --> 00:04:39,799 Speaker 5: takes a bit of the pockets of frosts down a notch. 95 00:04:41,000 --> 00:04:43,640 Speaker 4: Oh. I think that they probably do welcome the idea 96 00:04:43,720 --> 00:04:47,479 Speaker 4: that these frothy markets, especially in post election, especially in 97 00:04:47,520 --> 00:04:52,000 Speaker 4: the more speculative markets like crypto, have been worrisome for 98 00:04:52,080 --> 00:04:53,960 Speaker 4: them and they would like to see them pull down. 99 00:04:54,320 --> 00:04:56,680 Speaker 4: But I don't think they like the idea that these 100 00:04:56,720 --> 00:04:59,720 Speaker 4: frothiness is coming away because everybody's screaming they just made 101 00:04:59,720 --> 00:05:03,480 Speaker 4: au and that's why the frothiness is coming away. But yes, 102 00:05:03,640 --> 00:05:06,279 Speaker 4: I think that in the long run they would probably 103 00:05:06,360 --> 00:05:09,080 Speaker 4: like that. But again, that puts them at odds with 104 00:05:09,400 --> 00:05:13,840 Speaker 4: incoming President Trump because he values or he views his 105 00:05:14,640 --> 00:05:18,360 Speaker 4: success of his administration by rising stock prices, and the 106 00:05:18,400 --> 00:05:20,400 Speaker 4: FED is now probably saying, well, at least we got 107 00:05:20,400 --> 00:05:22,440 Speaker 4: stock prices down and got some of the frost out 108 00:05:22,440 --> 00:05:23,039 Speaker 4: of the market. 109 00:05:23,320 --> 00:05:25,880 Speaker 3: So it's going to be a very tumultuous twenty twenty five. 110 00:05:25,920 --> 00:05:27,000 Speaker 3: If we continue down. 111 00:05:26,880 --> 00:05:29,279 Speaker 2: This path no doctor of Renmac said it. Immediately after 112 00:05:29,360 --> 00:05:31,679 Speaker 2: the news conference yesterday, Jim nol Kim on the program 113 00:05:31,720 --> 00:05:34,400 Speaker 2: and said, this FED is on a collision course with 114 00:05:34,440 --> 00:05:36,719 Speaker 2: the incoming administration. Jim, how do you think that plays 115 00:05:36,720 --> 00:05:37,880 Speaker 2: out through the next twelve months? 116 00:05:38,920 --> 00:05:41,320 Speaker 4: Oh, I think it's it's going to play out, you know, 117 00:05:41,640 --> 00:05:44,960 Speaker 4: not well at all, because I'm going to take Scott Bessett, 118 00:05:45,040 --> 00:05:48,920 Speaker 4: the incoming Treasury Secretary, as his word that there's probably 119 00:05:48,920 --> 00:05:51,279 Speaker 4: going to be a shadow FED. That is the idea 120 00:05:51,320 --> 00:05:55,440 Speaker 4: that they're probably going to nominate Kevin Walsh. 121 00:05:55,200 --> 00:05:56,640 Speaker 3: Early like this summer. 122 00:05:56,680 --> 00:05:58,520 Speaker 4: So we're going to have a FED chairman, we're going 123 00:05:58,560 --> 00:06:01,040 Speaker 4: to have a future FED chairman, and we're going to 124 00:06:01,080 --> 00:06:03,280 Speaker 4: have two people to kind of listen to and that 125 00:06:03,400 --> 00:06:07,320 Speaker 4: we'll add to the confusion as well. So this is 126 00:06:07,360 --> 00:06:09,520 Speaker 4: not going to be something where they're just going to 127 00:06:09,520 --> 00:06:12,760 Speaker 4: clash with the administration. It's going to be open warfare 128 00:06:12,839 --> 00:06:15,880 Speaker 4: and we're going to have probably a potentially a future 129 00:06:16,160 --> 00:06:19,039 Speaker 4: FED chairman to sit there and question what the current 130 00:06:19,040 --> 00:06:20,119 Speaker 4: FED chairman is doing. 131 00:06:20,320 --> 00:06:20,560 Speaker 6: Jim. 132 00:06:20,600 --> 00:06:22,479 Speaker 2: That will not be music to the ears of people 133 00:06:22,520 --> 00:06:25,240 Speaker 2: in Brazil to people in Japan, and by people I 134 00:06:25,279 --> 00:06:28,480 Speaker 2: mean policymakers Dolly Yen right now briefly through one point 135 00:06:28,480 --> 00:06:32,160 Speaker 2: fifty seven. In Brazil, they've got fiscal issues. These issues 136 00:06:32,200 --> 00:06:36,080 Speaker 2: don't help them. In fact, high yields beget high yields. Jim, 137 00:06:36,160 --> 00:06:38,880 Speaker 2: there are certain places in financial markets around the world 138 00:06:38,920 --> 00:06:42,120 Speaker 2: where they feel really stretched. We had someone come on 139 00:06:42,120 --> 00:06:44,200 Speaker 2: the program yesterday Jilly and Manuel have ever Core, a 140 00:06:44,200 --> 00:06:46,200 Speaker 2: man you know well, and he talked about the peak 141 00:06:46,240 --> 00:06:49,120 Speaker 2: in the US dollar being really important to financial markets. 142 00:06:49,160 --> 00:06:51,800 Speaker 2: We've been asking the question how much oxygen is left 143 00:06:51,880 --> 00:06:53,200 Speaker 2: up here for the US dollar? 144 00:06:53,360 --> 00:06:53,560 Speaker 6: Jim? 145 00:06:53,600 --> 00:06:55,000 Speaker 2: How much more stretch can this get? 146 00:06:56,160 --> 00:06:56,320 Speaker 6: Oh? 147 00:06:56,360 --> 00:06:58,760 Speaker 4: I You know, the one thing I've learned about currencies 148 00:06:58,880 --> 00:07:01,440 Speaker 4: is they can go a lot further than people think. 149 00:07:01,880 --> 00:07:04,960 Speaker 4: And as long as US rates continue higher on this 150 00:07:05,240 --> 00:07:08,120 Speaker 4: back of that, the FED is not dealing with an 151 00:07:08,160 --> 00:07:12,040 Speaker 4: inflation problem, or worse, fostering it by continuing to talk 152 00:07:12,040 --> 00:07:13,320 Speaker 4: about cutting rates when. 153 00:07:13,160 --> 00:07:14,240 Speaker 3: It's not necessary. 154 00:07:14,720 --> 00:07:17,400 Speaker 4: Higher interest rates in the US will just continue to 155 00:07:17,520 --> 00:07:20,520 Speaker 4: foster a higher dollar. Now, a higher dollar, you're right, 156 00:07:20,640 --> 00:07:24,440 Speaker 4: means lower emerging market currencies, which means lower developed currencies 157 00:07:24,560 --> 00:07:25,960 Speaker 4: like the end and puts. 158 00:07:25,760 --> 00:07:27,400 Speaker 3: More and more pressure on them. 159 00:07:27,680 --> 00:07:31,400 Speaker 4: And look at what's happening in the global economy X 160 00:07:31,440 --> 00:07:34,480 Speaker 4: the US. You've got countries like Germany, You've got countries 161 00:07:34,560 --> 00:07:37,640 Speaker 4: like China. You got countries like Japan that are already 162 00:07:37,640 --> 00:07:40,720 Speaker 4: struggling right now. Germany might be in recession right now. 163 00:07:40,920 --> 00:07:43,760 Speaker 4: Japan might be in recession right now. China might have 164 00:07:43,840 --> 00:07:46,320 Speaker 4: some of the lowest growth that we've seen in forty years. 165 00:07:46,480 --> 00:07:50,440 Speaker 4: The US is humming along great, But the problem is 166 00:07:50,440 --> 00:07:52,600 Speaker 4: is that as the US hums along, it gets higher 167 00:07:52,680 --> 00:07:55,240 Speaker 4: rates and sucks the dollar in higher. It puts the 168 00:07:55,280 --> 00:07:57,160 Speaker 4: rest of the world under further pressure. 169 00:07:57,520 --> 00:08:00,000 Speaker 5: Jim putting this all together, the rest of the world 170 00:08:00,000 --> 00:08:02,800 Speaker 5: and further pressure the idea that a stronger dollar is 171 00:08:02,800 --> 00:08:06,360 Speaker 5: probably going to inhibit exports from the US potentially the 172 00:08:06,400 --> 00:08:09,760 Speaker 5: growth in certain areas. Did this meeting and the reaction 173 00:08:09,960 --> 00:08:12,280 Speaker 5: to it by the Federal Reserve and buy the markets 174 00:08:12,840 --> 00:08:16,160 Speaker 5: increase the chance of some sort of negative growth shock 175 00:08:16,240 --> 00:08:19,400 Speaker 5: next year despite some of the incoming policies. 176 00:08:20,280 --> 00:08:20,720 Speaker 3: It can. 177 00:08:21,160 --> 00:08:22,760 Speaker 4: I mean, you know, if you go back and you 178 00:08:22,800 --> 00:08:26,360 Speaker 4: look at recent history. Six years ago today was the 179 00:08:26,480 --> 00:08:29,040 Speaker 4: day that Paul had another press conference where there was 180 00:08:29,080 --> 00:08:31,720 Speaker 4: a very bad reaction in the market. That was when 181 00:08:31,720 --> 00:08:33,640 Speaker 4: he announced QT and it was going to be like 182 00:08:33,679 --> 00:08:36,280 Speaker 4: watching pain try, and the market thought it wasn't going 183 00:08:36,360 --> 00:08:38,520 Speaker 4: to be like watching pain try, and it had a 184 00:08:38,640 --> 00:08:41,520 Speaker 4: very toxic reaction to it. Two weeks later we got 185 00:08:41,520 --> 00:08:44,880 Speaker 4: the poll pivot when he went to Atlanta and at 186 00:08:44,880 --> 00:08:47,800 Speaker 4: the NABE conference and basically pulled a piece of paper 187 00:08:47,800 --> 00:08:50,320 Speaker 4: out of his pocket and said, Okay, those policies announced 188 00:08:50,320 --> 00:08:52,640 Speaker 4: two weeks ago, we're going to completely reverse them. So 189 00:08:52,760 --> 00:08:55,000 Speaker 4: maybe we see something like that in the next couple 190 00:08:55,040 --> 00:08:58,040 Speaker 4: of weeks out of him. It would be there's a 191 00:08:58,080 --> 00:09:01,199 Speaker 4: precedent for it that he changes the policy. But if 192 00:09:01,200 --> 00:09:03,840 Speaker 4: he doesn't change the policy, and they continue to talk 193 00:09:03,880 --> 00:09:06,600 Speaker 4: about weakness, worry about the labor market, that they might 194 00:09:06,679 --> 00:09:09,160 Speaker 4: have to cut rates even more next year in the 195 00:09:09,160 --> 00:09:12,680 Speaker 4: face of just raising their inflation expectations, I think we're 196 00:09:12,679 --> 00:09:14,079 Speaker 4: going to see a rocky ride. 197 00:09:13,880 --> 00:09:14,520 Speaker 3: In the markets. 198 00:09:14,600 --> 00:09:16,959 Speaker 2: Jim enjoyed it. Looking forward to covering this with you, 199 00:09:17,120 --> 00:09:20,160 Speaker 2: Jimpianco Bianco Research, and Jim, thanks for everything. In twenty 200 00:09:20,200 --> 00:09:33,360 Speaker 2: twenty four, Francis Donald of RBC writing there is no consensus, 201 00:09:33,600 --> 00:09:36,439 Speaker 2: no conviction in this FMC, so trying to decipher their 202 00:09:36,480 --> 00:09:40,320 Speaker 2: perspective slash bias as a whole is probably a fall's 203 00:09:40,480 --> 00:09:42,280 Speaker 2: errand I'm pleased to say that Francis is with us 204 00:09:42,280 --> 00:09:44,040 Speaker 2: around a table. Francis, good morning. 205 00:09:43,840 --> 00:09:44,400 Speaker 7: Good morning. 206 00:09:44,800 --> 00:09:47,200 Speaker 2: No consensus. Does that make it pretty tricky for the 207 00:09:47,240 --> 00:09:49,520 Speaker 2: Chairman to offer any particular view for twenty. 208 00:09:49,320 --> 00:09:52,080 Speaker 7: Five, very difficult to give his view of what will happen. 209 00:09:52,120 --> 00:09:54,920 Speaker 7: But not only is there not consensus from the Fed 210 00:09:54,960 --> 00:09:57,480 Speaker 7: about what is happening right now and what's going on, 211 00:09:57,760 --> 00:10:00,960 Speaker 7: but where will we be in twelve months. No forecast 212 00:10:01,040 --> 00:10:03,440 Speaker 7: or public or private knows where we're going to be 213 00:10:03,480 --> 00:10:06,040 Speaker 7: in twelve months. We don't know what policies are coming through, 214 00:10:06,280 --> 00:10:09,400 Speaker 7: their magnitudes they're timing, but we do know the direction 215 00:10:09,920 --> 00:10:12,200 Speaker 7: of where things will go, and that is that incremental 216 00:10:12,240 --> 00:10:15,920 Speaker 7: policies will be inflationary and probably drag on growth. And 217 00:10:15,960 --> 00:10:18,960 Speaker 7: this is why I think is this is the problem 218 00:10:19,040 --> 00:10:21,880 Speaker 7: for the Federal Reserve. It's not higher on inflation. The 219 00:10:21,920 --> 00:10:23,720 Speaker 7: Fed is not afraid of high inflation. They know what 220 00:10:23,760 --> 00:10:25,920 Speaker 7: to do. You hike rates or you keep them stable. 221 00:10:26,040 --> 00:10:26,800 Speaker 6: They're not even. 222 00:10:26,640 --> 00:10:30,960 Speaker 7: Afraid of weaker employment, you lower rates. What they're afraid 223 00:10:31,000 --> 00:10:35,480 Speaker 7: of is a stagflationary environment. And if inflation heads upwards 224 00:10:35,800 --> 00:10:39,280 Speaker 7: or is sticky for factors they cannot control supply side 225 00:10:39,400 --> 00:10:42,840 Speaker 7: and the unemployment rate rises, or there's weakness underlying that 226 00:10:42,920 --> 00:10:45,319 Speaker 7: labor market, maybe it doesn't show up in the unemployment rate. 227 00:10:45,559 --> 00:10:47,600 Speaker 7: That is the big problem for the Federal Reserve heading 228 00:10:47,640 --> 00:10:48,679 Speaker 7: into the next twelve month. 229 00:10:48,760 --> 00:10:51,680 Speaker 2: What do they do if that environment did materialize? What's 230 00:10:51,679 --> 00:10:52,360 Speaker 2: the approach to that? 231 00:10:52,600 --> 00:10:54,640 Speaker 7: Well, they'll have to make some big decisions. So we 232 00:10:54,760 --> 00:10:57,560 Speaker 7: heard from fedhair Powell. Hey, we did work heading back 233 00:10:57,559 --> 00:10:59,640 Speaker 7: in twenty eighteen as to the type of inflation we 234 00:10:59,679 --> 00:11:03,079 Speaker 7: should look through, giving themselves some optionality. But this is 235 00:11:03,120 --> 00:11:05,040 Speaker 7: a FED that's going to have to ask itself questions 236 00:11:05,040 --> 00:11:08,600 Speaker 7: over what type of inflation it does respond to supply 237 00:11:08,720 --> 00:11:12,960 Speaker 7: side shocks, geopolitical fragility. These are not interstrate sensitive. So 238 00:11:13,000 --> 00:11:15,200 Speaker 7: a Federal Reserve that talks a lot more about the 239 00:11:15,200 --> 00:11:17,520 Speaker 7: type of inflation they would look through is one that 240 00:11:17,600 --> 00:11:19,560 Speaker 7: might be airing on the growth side. For now, they 241 00:11:19,559 --> 00:11:21,440 Speaker 7: don't have to make that choice because it's really the 242 00:11:21,480 --> 00:11:23,920 Speaker 7: inflation side of the picture. As we just heard, The 243 00:11:23,960 --> 00:11:26,840 Speaker 7: growth side looks on the surface at least to be well. 244 00:11:26,920 --> 00:11:29,040 Speaker 7: I wouldn't be surprised if the FED is also paying 245 00:11:29,040 --> 00:11:32,400 Speaker 7: attention to the unevenness that exists under this economy. We 246 00:11:32,440 --> 00:11:35,440 Speaker 7: talk about K shape with income's high income folks really 247 00:11:35,480 --> 00:11:37,520 Speaker 7: doing a lot better than low income folks shows up 248 00:11:37,520 --> 00:11:39,800 Speaker 7: in that retail sales data. But there's also that K 249 00:11:39,960 --> 00:11:43,200 Speaker 7: shape happening with manufacturing data and services data. This is 250 00:11:43,240 --> 00:11:46,760 Speaker 7: not a simple economy. It's probably not a simple policy response. This, 251 00:11:46,800 --> 00:11:49,120 Speaker 7: I think is underscoring some of that confusion we're hearing 252 00:11:49,160 --> 00:11:49,960 Speaker 7: from the FED chair. 253 00:11:50,280 --> 00:11:53,480 Speaker 5: It raises this question of what kind of goals they have. 254 00:11:53,920 --> 00:11:56,160 Speaker 5: I don't have a clear sense of what the goals 255 00:11:56,240 --> 00:11:58,680 Speaker 5: are in terms of how quickly to get inflation down 256 00:11:58,720 --> 00:12:01,760 Speaker 5: to two percent, terms of how to weigh both the 257 00:12:01,760 --> 00:12:05,120 Speaker 5: inflation reading and the unemployment reading, and what would trigger 258 00:12:05,160 --> 00:12:07,080 Speaker 5: them to make a change. Did you have a clear 259 00:12:07,200 --> 00:12:07,719 Speaker 5: sense of that. 260 00:12:07,840 --> 00:12:10,439 Speaker 7: Well, from their sep or those dots, they say it's 261 00:12:10,440 --> 00:12:13,000 Speaker 7: okay if we wait several years to get back to neutral. 262 00:12:13,040 --> 00:12:14,760 Speaker 7: Okay if we wait several years to get back to 263 00:12:14,800 --> 00:12:17,520 Speaker 7: two percent, And that seems to be okay by them. 264 00:12:17,840 --> 00:12:20,240 Speaker 7: One of the challenges, I think is this unevenness that 265 00:12:20,280 --> 00:12:22,880 Speaker 7: exists under the surface. That unemployment rate is going to 266 00:12:22,880 --> 00:12:26,640 Speaker 7: stay mechanically lower even as the labor market softens. This 267 00:12:26,720 --> 00:12:30,079 Speaker 7: is a demographics story. And if we see deportations on masks, 268 00:12:30,080 --> 00:12:32,760 Speaker 7: that could also contribute to the unemployment rate looking a 269 00:12:32,760 --> 00:12:35,320 Speaker 7: lot better than the health of the underlying labor market. 270 00:12:35,520 --> 00:12:37,000 Speaker 7: So this is a FED that's going to have to 271 00:12:37,000 --> 00:12:41,000 Speaker 7: look beyond its simple mandate price stability and low and 272 00:12:41,000 --> 00:12:44,000 Speaker 7: stable on employment and start asking questions about whether they're 273 00:12:44,000 --> 00:12:46,760 Speaker 7: targeting the right numbers or at least expanding the numbers 274 00:12:46,760 --> 00:12:49,080 Speaker 7: that they're looking at in a more formal setting. 275 00:12:49,240 --> 00:12:52,680 Speaker 5: Does it make you more nervous to own risk, to 276 00:12:52,800 --> 00:12:55,360 Speaker 5: buy risk, to take risk at a time of this 277 00:12:55,520 --> 00:13:00,679 Speaker 5: much uncertainty and a real confusion or at least disagreement 278 00:13:00,840 --> 00:13:04,040 Speaker 5: above FED members, It will make anybody nervous to take risk. 279 00:13:04,080 --> 00:13:06,720 Speaker 7: It will be more difficult for businesses to action on 280 00:13:06,800 --> 00:13:09,080 Speaker 7: plans that they're going to take, or even for households 281 00:13:09,120 --> 00:13:12,080 Speaker 7: to know what will interest rate policy look like moving forward. 282 00:13:12,280 --> 00:13:14,600 Speaker 7: We're talking a lot about the market reaction and the 283 00:13:14,679 --> 00:13:16,840 Speaker 7: idea that there you know, the market has moved to 284 00:13:16,960 --> 00:13:19,719 Speaker 7: two or one cut for next year. That's fine, But 285 00:13:19,840 --> 00:13:23,080 Speaker 7: how many business owners in the United States and globally 286 00:13:23,320 --> 00:13:26,680 Speaker 7: incorporated a tenure above four percent, and we're incorporating the 287 00:13:26,720 --> 00:13:29,360 Speaker 7: idea that actually rate hikes could become part of the conversation. 288 00:13:29,640 --> 00:13:32,280 Speaker 7: I don't believe that this is part of America's planning, 289 00:13:32,559 --> 00:13:34,480 Speaker 7: and more importantly, I don't think it's part of the 290 00:13:34,559 --> 00:13:37,400 Speaker 7: globes plan because let's not forget this week, we have 291 00:13:37,640 --> 00:13:40,400 Speaker 7: China yields collapsing, we have three out of seven g 292 00:13:40,520 --> 00:13:44,800 Speaker 7: seven countries have governments that went through sizable periods of problems, 293 00:13:44,880 --> 00:13:47,600 Speaker 7: and we have, as you know to John, really serious 294 00:13:47,640 --> 00:13:51,520 Speaker 7: geopolitical fragility. This is not a global economy that can 295 00:13:51,559 --> 00:13:54,680 Speaker 7: withstand for five percent rates the same way the US 296 00:13:54,800 --> 00:13:57,680 Speaker 7: economy can. And while the FED will say we're focused 297 00:13:57,679 --> 00:14:00,560 Speaker 7: on our own domestic economy, unfortunately the rest of the 298 00:14:00,559 --> 00:14:02,600 Speaker 7: world is going to be receivers of that FED policy 299 00:14:02,640 --> 00:14:04,800 Speaker 7: as well, and they are not in the same position 300 00:14:04,800 --> 00:14:06,040 Speaker 7: as the American exceptionalists. 301 00:14:06,080 --> 00:14:08,280 Speaker 2: So that in emerging markets yesterday, that's for sure, in 302 00:14:08,280 --> 00:14:10,120 Speaker 2: foreign exchange in the m I'd love your thoughts on 303 00:14:10,160 --> 00:14:13,160 Speaker 2: this whole debate around neutral. Head of this decision, Governor 304 00:14:13,200 --> 00:14:15,280 Speaker 2: Waller came out and said we were some way off neutral. 305 00:14:15,280 --> 00:14:16,720 Speaker 6: We could keep on kind of interest rates. 306 00:14:16,720 --> 00:14:18,920 Speaker 2: I'm paraphrasing but that was the essence of a message 307 00:14:19,080 --> 00:14:21,400 Speaker 2: from the governor. When do you think we are relative 308 00:14:21,440 --> 00:14:23,600 Speaker 2: to neutral and where are they? Because I was pretty 309 00:14:23,600 --> 00:14:26,040 Speaker 2: confused by some of the commentary in the news conference. 310 00:14:26,080 --> 00:14:28,480 Speaker 7: Well, there's certainly this new concept of short term neutral 311 00:14:28,560 --> 00:14:31,320 Speaker 7: versus long term neutral. So where we should be in 312 00:14:31,360 --> 00:14:33,040 Speaker 7: the short term is different than where we should be 313 00:14:33,040 --> 00:14:35,280 Speaker 7: in the long term. I think that's really being fueled 314 00:14:35,280 --> 00:14:39,920 Speaker 7: by the surprisingly massive amount of fiscal spending we I 315 00:14:39,960 --> 00:14:43,320 Speaker 7: think in the general consensus are downplaying just how impactful 316 00:14:43,640 --> 00:14:47,320 Speaker 7: the most amount of spending per GDP that we have 317 00:14:47,320 --> 00:14:49,960 Speaker 7: seen outside of a recession in American history, and this 318 00:14:50,160 --> 00:14:53,080 Speaker 7: is massive, and it's distorting data. And when we talk 319 00:14:53,120 --> 00:14:56,760 Speaker 7: about American exceptionalism, yes we have productivity and AI because 320 00:14:56,800 --> 00:14:58,720 Speaker 7: what a lot of other countries could be growing at 321 00:14:58,720 --> 00:15:00,560 Speaker 7: three percent if they were spending as much as the 322 00:15:00,640 --> 00:15:03,320 Speaker 7: US was spending on the government side as well. So 323 00:15:03,400 --> 00:15:06,320 Speaker 7: that's really distorting short term neutral. But there's a lot 324 00:15:06,360 --> 00:15:09,000 Speaker 7: of concepts being thrown around. In my senses as I 325 00:15:09,040 --> 00:15:11,000 Speaker 7: listen to this, this is a lot of trying to 326 00:15:11,040 --> 00:15:14,120 Speaker 7: find reasons why they can stay on hold. This is 327 00:15:14,120 --> 00:15:16,240 Speaker 7: a fed that wants to stay on hold until they 328 00:15:16,240 --> 00:15:17,800 Speaker 7: get some sort of crack in the data in one 329 00:15:17,800 --> 00:15:19,960 Speaker 7: direction or another, this is probably where they're going to stay. 330 00:15:20,000 --> 00:15:22,800 Speaker 2: Francis is good to say. Always fantastic. Thank you, Francis 331 00:15:22,800 --> 00:15:23,000 Speaker 2: don A. 332 00:15:33,440 --> 00:15:36,240 Speaker 1: Welcome to our audience on Bloomberg Radio and bloomber Television worldwide. 333 00:15:36,240 --> 00:15:38,520 Speaker 1: Mister secretary, thank you very much for being here with you. 334 00:15:38,880 --> 00:15:41,120 Speaker 1: Many ways we could go here, but let's start with Syria. 335 00:15:41,280 --> 00:15:43,360 Speaker 1: And you've described this moment as one of both promise 336 00:15:43,520 --> 00:15:44,080 Speaker 1: and peril. 337 00:15:44,280 --> 00:15:44,680 Speaker 6: That's right. 338 00:15:44,840 --> 00:15:47,280 Speaker 1: You have what seems like a de facto government that 339 00:15:47,400 --> 00:15:49,840 Speaker 1: is a designated terrorist group, and you've said that the 340 00:15:49,920 --> 00:15:53,600 Speaker 1: US has spent in contact with HTS. What specifically have 341 00:15:53,680 --> 00:15:55,200 Speaker 1: they said, I know there are other groups operating in 342 00:15:55,200 --> 00:15:57,000 Speaker 1: the country as well. What have they said about how 343 00:15:57,040 --> 00:15:59,160 Speaker 1: they might govern? If this is how it all shakes out. 344 00:16:00,080 --> 00:16:03,000 Speaker 8: What we've heard them say is positive. The question is 345 00:16:03,000 --> 00:16:06,080 Speaker 8: what are they actually going to do. We brought together 346 00:16:06,120 --> 00:16:08,640 Speaker 8: with Jordan, countries from around the region last week. We 347 00:16:08,720 --> 00:16:13,160 Speaker 8: had Turkey, we had Iraq, we had the Gulf States, Jordan, Egypt, 348 00:16:13,600 --> 00:16:18,200 Speaker 8: European partners, and we came together to set expectations. What 349 00:16:18,320 --> 00:16:20,640 Speaker 8: is the international community, what are the neighbors looking for 350 00:16:21,080 --> 00:16:24,000 Speaker 8: as this transition takes place in Syria, and we all agreed, 351 00:16:24,120 --> 00:16:27,680 Speaker 8: we want to see something that's inclusive, that's non sectarian, 352 00:16:28,040 --> 00:16:31,960 Speaker 8: that respects minorities, women, that deals with any chemical weapons 353 00:16:32,000 --> 00:16:33,960 Speaker 8: that may be remaining in Syria, that doesn't aly with 354 00:16:34,400 --> 00:16:36,880 Speaker 8: ISIS or any of the terrorist groups that are there. 355 00:16:37,160 --> 00:16:38,880 Speaker 8: And the reason that's so important is we want to 356 00:16:39,160 --> 00:16:41,720 Speaker 8: make it clear to HTS and all of the emerging 357 00:16:41,760 --> 00:16:45,200 Speaker 8: authorities that the recognition that they seek, the support that 358 00:16:45,240 --> 00:16:47,600 Speaker 8: they seek and need from the international community, well, there's 359 00:16:47,600 --> 00:16:50,840 Speaker 8: certain expectations that come along with that. And as I said, 360 00:16:50,960 --> 00:16:54,040 Speaker 8: we've heard positive statements coming from mister Jilani, the leader 361 00:16:54,080 --> 00:16:57,080 Speaker 8: of HDS, but what everyone is focused on is what's 362 00:16:57,120 --> 00:16:58,320 Speaker 8: actually happening on the ground. 363 00:16:58,360 --> 00:16:59,000 Speaker 6: What are they doing. 364 00:16:59,080 --> 00:17:02,240 Speaker 8: Are they looking to build a transition in Syria that 365 00:17:02,240 --> 00:17:06,000 Speaker 8: brings everyone in. If they do that, and if they 366 00:17:06,040 --> 00:17:08,800 Speaker 8: meet some of these other tests that the international community 367 00:17:09,760 --> 00:17:11,960 Speaker 8: is looking for them to meet, then I think you 368 00:17:12,000 --> 00:17:15,560 Speaker 8: can see something very positive. And here's what it is. 369 00:17:15,880 --> 00:17:18,960 Speaker 8: For the first time in decades, the people of Syria 370 00:17:19,040 --> 00:17:23,040 Speaker 8: can go forward without a dictator, without a terrorist group 371 00:17:23,520 --> 00:17:28,520 Speaker 8: dominating their lives, without one sect or one group running 372 00:17:28,520 --> 00:17:32,240 Speaker 8: things at the exclusion of others and without foreign power 373 00:17:32,920 --> 00:17:35,960 Speaker 8: calling all the shots. That's the opportunity, but it really 374 00:17:36,040 --> 00:17:40,080 Speaker 8: requires HTS and other groups that are there to move 375 00:17:40,119 --> 00:17:41,640 Speaker 8: forward in this inclusive way. 376 00:17:42,000 --> 00:17:43,760 Speaker 1: You've said that the US wants to help, and I 377 00:17:43,760 --> 00:17:45,840 Speaker 1: look at this country that has a lot of sanctions 378 00:17:45,880 --> 00:17:47,240 Speaker 1: that are residual, A lot of sanctions have been in 379 00:17:47,320 --> 00:17:48,160 Speaker 1: place for decades. 380 00:17:48,200 --> 00:17:48,719 Speaker 6: On Syria. 381 00:17:49,160 --> 00:17:51,320 Speaker 1: Senator Chris Murphy of Connecticut has called for a temporary 382 00:17:51,320 --> 00:17:54,359 Speaker 1: suspension of sanctions. Is that something that you would be 383 00:17:54,359 --> 00:17:56,439 Speaker 1: ammittable to and would that be effective and helping you 384 00:17:56,440 --> 00:17:58,639 Speaker 1: have more engagement with what may be this new government. 385 00:17:58,640 --> 00:17:59,919 Speaker 6: So we're looking at all the authorities we have. 386 00:18:00,040 --> 00:18:02,880 Speaker 8: We're looking at all of the sanctions, not only our own. 387 00:18:02,880 --> 00:18:08,080 Speaker 8: The United Nations has sanctions on HTS, it's leader. 388 00:18:08,520 --> 00:18:10,920 Speaker 6: And I think what we need to see. 389 00:18:10,840 --> 00:18:17,400 Speaker 8: Is actual concrete steps building an inclusive, non sectarian government, 390 00:18:17,400 --> 00:18:22,160 Speaker 8: a transition eventually getting to an election. As we see 391 00:18:22,160 --> 00:18:25,280 Speaker 8: these steps taken, then I think we'll be able to respond, 392 00:18:25,720 --> 00:18:28,199 Speaker 8: others will be able to respond. That's what we'd like 393 00:18:28,240 --> 00:18:30,600 Speaker 8: to do, But we need to see concrete action, not 394 00:18:30,720 --> 00:18:32,640 Speaker 8: simply positive declarations. 395 00:18:32,880 --> 00:18:35,320 Speaker 1: The EUS Chief Diplomat has said, she's sending a senior 396 00:18:35,400 --> 00:18:38,560 Speaker 1: representative to Damascus to talk to this new group, talk 397 00:18:38,560 --> 00:18:40,840 Speaker 1: to this government. Is that something that you would want 398 00:18:40,880 --> 00:18:42,840 Speaker 1: to do, that you can do? Indeed, given the terrorist 399 00:18:42,880 --> 00:18:44,560 Speaker 1: designation the sanctions there, we've. 400 00:18:44,400 --> 00:18:47,240 Speaker 8: Actually been in direct contact with HTS on the ground. 401 00:18:47,960 --> 00:18:49,480 Speaker 8: I can just tell you we've been in direct contact. 402 00:18:49,680 --> 00:18:51,560 Speaker 8: And we're also looking at getting people on the ground 403 00:18:51,600 --> 00:18:53,720 Speaker 8: in Syria. I think it's important to have direct communication. 404 00:18:53,760 --> 00:18:56,520 Speaker 8: It's important to speak as clearly as possible, to listen, 405 00:18:56,920 --> 00:19:00,520 Speaker 8: to make sure that we understand as best we can where. 406 00:19:00,320 --> 00:19:03,160 Speaker 6: They're going and where they want to go. So we'll 407 00:19:03,200 --> 00:19:04,920 Speaker 6: be looking at pursuing that in the coming days. 408 00:19:05,200 --> 00:19:06,960 Speaker 1: Pull back and ask another question about the region. And 409 00:19:07,000 --> 00:19:08,880 Speaker 1: there's been a lot of speculation that a ceasefire deal 410 00:19:08,920 --> 00:19:12,000 Speaker 1: could come together. When President Biden spoke about the deal 411 00:19:12,040 --> 00:19:14,720 Speaker 1: between Israel and Hesbella, and he was asked at the end, 412 00:19:14,760 --> 00:19:16,520 Speaker 1: do you think you can get a ceasefire deal by 413 00:19:16,520 --> 00:19:17,359 Speaker 1: the end of your tenure? 414 00:19:18,000 --> 00:19:19,080 Speaker 6: So he's hoping and praying. 415 00:19:20,080 --> 00:19:22,879 Speaker 1: Is there anything that's happened that gives more grounds for 416 00:19:22,960 --> 00:19:24,200 Speaker 1: hope and prayer going forward? 417 00:19:24,280 --> 00:19:24,440 Speaker 6: Here? 418 00:19:24,600 --> 00:19:29,639 Speaker 8: There is and the reality is we should logically be 419 00:19:29,720 --> 00:19:32,719 Speaker 8: able to get this. And I say that with all 420 00:19:32,760 --> 00:19:35,960 Speaker 8: the caution that comes with that statement, because you know, 421 00:19:36,040 --> 00:19:38,840 Speaker 8: we've been very close before, and we've had these Lucy 422 00:19:38,880 --> 00:19:41,359 Speaker 8: in the football moments where you're just ready to kick 423 00:19:41,400 --> 00:19:44,720 Speaker 8: the football and Lucy pulls it away. But what's changed 424 00:19:44,800 --> 00:19:47,560 Speaker 8: is this, Hamas knows that the cavalryes are not coming 425 00:19:47,600 --> 00:19:49,760 Speaker 8: to the rescue. For months and months and months, it 426 00:19:49,800 --> 00:19:52,560 Speaker 8: hoped it would get a wider war with Hezbollah, with Iran, 427 00:19:53,000 --> 00:19:56,480 Speaker 8: with Iranian aligned groups coming in and creating more problems 428 00:19:56,480 --> 00:20:00,280 Speaker 8: from Israel on more fronts and helping Hamas endor Now, no, 429 00:20:00,359 --> 00:20:02,800 Speaker 8: that's not happening. They know it's not happening because of 430 00:20:02,840 --> 00:20:06,320 Speaker 8: the very important work that was done with us and 431 00:20:06,359 --> 00:20:09,879 Speaker 8: with others dealing with the unprecedented Iranian attacks on Israel, 432 00:20:10,359 --> 00:20:15,120 Speaker 8: dealing with Heswelah. So I think that's concentrated minds among 433 00:20:15,200 --> 00:20:15,879 Speaker 8: Hamas on the. 434 00:20:15,920 --> 00:20:17,320 Speaker 6: Need to complete the steal. 435 00:20:17,400 --> 00:20:21,040 Speaker 8: Having said that, you know, it's always incredibly fraud and 436 00:20:21,080 --> 00:20:24,119 Speaker 8: it's very hard to get decisions made, it's hard to communicate, 437 00:20:25,040 --> 00:20:28,719 Speaker 8: and for all of those reasons, even as close as 438 00:20:28,720 --> 00:20:30,920 Speaker 8: it is, you know it can still move in the 439 00:20:31,200 --> 00:20:31,760 Speaker 8: other direction. 440 00:20:31,840 --> 00:20:33,440 Speaker 6: But we have we've all been. 441 00:20:33,480 --> 00:20:36,359 Speaker 8: We've all been fanning out, working with all of the 442 00:20:36,400 --> 00:20:38,320 Speaker 8: different partners who can make a difference and who may 443 00:20:38,359 --> 00:20:42,800 Speaker 8: have some leverage with communications with Hamas, whether it's Cutter, 444 00:20:43,280 --> 00:20:45,080 Speaker 8: whether it's Egypt, whether it's Turkey. 445 00:20:44,800 --> 00:20:46,760 Speaker 6: Where I was just last week. 446 00:20:48,640 --> 00:20:53,040 Speaker 8: The fundamental question right now is is Hamas finally prepared 447 00:20:53,080 --> 00:20:56,879 Speaker 8: to say yes? And if it does, we get the 448 00:20:56,880 --> 00:20:59,359 Speaker 8: hostages back, we get a cease fire, we get an 449 00:20:59,400 --> 00:21:03,359 Speaker 8: immediate dramatic improvement in the lives of Palestinian children, women 450 00:21:03,400 --> 00:21:05,920 Speaker 8: and men who've been caught in this horrible crossfire since 451 00:21:05,920 --> 00:21:07,560 Speaker 8: October seventh, off a masses making. 452 00:21:09,160 --> 00:21:11,280 Speaker 6: If they really purport to care. 453 00:21:11,160 --> 00:21:14,399 Speaker 8: About the Palestinian people, they will say yes and do it. 454 00:21:14,440 --> 00:21:14,640 Speaker 6: Now. 455 00:21:15,160 --> 00:21:17,000 Speaker 1: Let me ask you about that horrible crossfire, and it's 456 00:21:17,040 --> 00:21:19,080 Speaker 1: something that you've written about in a recent essay for 457 00:21:19,080 --> 00:21:22,600 Speaker 1: Foreign Affair, is the fact that millions have been displaced, 458 00:21:22,960 --> 00:21:25,640 Speaker 1: tens of thousands have been killed. Gaza has been kind 459 00:21:25,640 --> 00:21:29,320 Speaker 1: of reduced to rubble. You've made twelve trips to the region. 460 00:21:29,960 --> 00:21:32,719 Speaker 1: How much regret do you have that kind of sustained 461 00:21:32,840 --> 00:21:35,600 Speaker 1: level of humanitarian aid hasn't made it into Gaza over 462 00:21:35,640 --> 00:21:36,560 Speaker 1: the course of this conflict. 463 00:21:36,840 --> 00:21:37,680 Speaker 6: You know, from day one. 464 00:21:38,240 --> 00:21:41,639 Speaker 8: We've tried to do several things going back to October seventh. 465 00:21:41,680 --> 00:21:44,280 Speaker 8: First to stand resolute with there's real to try to 466 00:21:44,320 --> 00:21:47,520 Speaker 8: make sure that October seventh would never happen again. Second, 467 00:21:47,520 --> 00:21:51,200 Speaker 8: to prevent this war from going wider, because if that happened, 468 00:21:51,240 --> 00:21:53,080 Speaker 8: if other fronts opened up, whether it was with Iran, 469 00:21:53,119 --> 00:21:56,440 Speaker 8: whether it was with Hezbollah, these other groups, more death, 470 00:21:56,520 --> 00:22:00,000 Speaker 8: more destruction, and it would probably prolong what was going on, 471 00:22:00,080 --> 00:22:00,840 Speaker 8: not in Gaza. 472 00:22:00,920 --> 00:22:03,920 Speaker 6: And three to do whatever we could to make sure. 473 00:22:03,760 --> 00:22:06,240 Speaker 8: That people in Gaza were getting the assistance they need, 474 00:22:06,280 --> 00:22:08,959 Speaker 8: We're getting the protections they need, and we have been 475 00:22:09,000 --> 00:22:11,919 Speaker 8: on this virtually every single day, and we've seen moments 476 00:22:11,920 --> 00:22:14,639 Speaker 8: when more assistance was getting through. Then we've seen moments 477 00:22:14,640 --> 00:22:18,040 Speaker 8: where where it's ebbed and flowed. But this has a 478 00:22:18,080 --> 00:22:22,160 Speaker 8: dramatic effect on the lives and livelihoods of people in Gaza. 479 00:22:22,800 --> 00:22:26,240 Speaker 8: The last week or ten days there has been a 480 00:22:26,240 --> 00:22:28,480 Speaker 8: noticeable improvement, but we've seen that before and then we've 481 00:22:28,480 --> 00:22:32,840 Speaker 8: seen it fall off. The best way to finally deal 482 00:22:32,880 --> 00:22:34,040 Speaker 8: with the needs of the people would be down in 483 00:22:34,080 --> 00:22:36,400 Speaker 8: the conflict, would be to get the ceasefire, to get 484 00:22:36,400 --> 00:22:39,119 Speaker 8: the hostages home. That's the best play because you have 485 00:22:39,200 --> 00:22:44,000 Speaker 8: an environment that is unique. You have a population that's 486 00:22:44,000 --> 00:22:46,280 Speaker 8: trapped in Gaza, it doesn't have anywhere to go. In 487 00:22:46,320 --> 00:22:49,600 Speaker 8: most other conflicts, people they can become refugees. That's not 488 00:22:49,640 --> 00:22:51,320 Speaker 8: a good thing, but it's better than being caught in 489 00:22:51,320 --> 00:22:52,880 Speaker 8: the middle of a hot war. 490 00:22:53,400 --> 00:22:55,800 Speaker 6: And also you have an enemy in the case of Amas, that's. 491 00:22:55,640 --> 00:23:00,119 Speaker 8: Fully enmeshed with the civilian population living in and underbuildings, 492 00:23:00,359 --> 00:23:02,159 Speaker 8: apartment buildings. 493 00:23:01,520 --> 00:23:03,159 Speaker 6: Schools, mosques, hospitals. 494 00:23:03,520 --> 00:23:07,560 Speaker 8: That doesn't obviate at all the responsibility that Israel has 495 00:23:08,200 --> 00:23:11,200 Speaker 8: to try to ensure that assistance gets to people who 496 00:23:11,200 --> 00:23:15,240 Speaker 8: need it and that people are protected as best possible, 497 00:23:15,280 --> 00:23:18,760 Speaker 8: and we've been pushing on that every single day. We've 498 00:23:18,800 --> 00:23:22,480 Speaker 8: also seen what's possible if there's real sustained focus on this. 499 00:23:22,760 --> 00:23:25,840 Speaker 8: There was a polio vaccination campaign to make sure that 500 00:23:26,119 --> 00:23:28,720 Speaker 8: little children in Gaza got these vaccines, and it was 501 00:23:28,840 --> 00:23:33,080 Speaker 8: very successful until there's an end of the conflict. What 502 00:23:33,080 --> 00:23:35,199 Speaker 8: we've been trying to impress upon the Israelis is the 503 00:23:35,240 --> 00:23:38,399 Speaker 8: need to bring that same focus in a sustained way 504 00:23:38,680 --> 00:23:40,320 Speaker 8: on getting assistance to people who need it. 505 00:23:40,840 --> 00:23:43,119 Speaker 1: Ask your last question just about the transition that's underway, 506 00:23:43,160 --> 00:23:44,800 Speaker 1: and you've said of this new administration, you want to 507 00:23:44,800 --> 00:23:47,080 Speaker 1: pass the baton to them so they can get off 508 00:23:47,119 --> 00:23:49,479 Speaker 1: and running. Forgive me, but it does seem like they 509 00:23:49,480 --> 00:23:52,280 Speaker 1: are off and running. You had President Electrump meeting in 510 00:23:52,320 --> 00:23:55,840 Speaker 1: France with President Zelensky, President Matcron, He's met with Prime 511 00:23:55,840 --> 00:23:58,520 Speaker 1: Minister Trudeau in Florida. His destiny to be the Special 512 00:23:58,560 --> 00:24:00,760 Speaker 1: Onboard in the Middle East has been in the region 513 00:24:00,760 --> 00:24:04,000 Speaker 1: as well. Does that complicate the work that you are doing, 514 00:24:04,640 --> 00:24:09,040 Speaker 1: having that sort of separate voice, separate foreign policy for 515 00:24:09,119 --> 00:24:10,919 Speaker 1: lack of a better word, in the region while you're 516 00:24:10,920 --> 00:24:11,680 Speaker 1: trying to do your work. 517 00:24:13,000 --> 00:24:15,359 Speaker 8: There's one president of time, one administration at a time. 518 00:24:15,640 --> 00:24:18,240 Speaker 8: But we're in very close contact with the incoming administration. 519 00:24:19,080 --> 00:24:20,840 Speaker 1: I spent a couple of hours feld novel though, and 520 00:24:20,880 --> 00:24:22,359 Speaker 1: we used to talk about the logan actions. It does 521 00:24:22,400 --> 00:24:23,639 Speaker 1: feel like these are different circumstances. 522 00:24:23,680 --> 00:24:24,800 Speaker 6: Look, I think there are few things. I think there 523 00:24:24,800 --> 00:24:25,560 Speaker 6: are a few things going on. 524 00:24:25,680 --> 00:24:27,720 Speaker 8: First, as I said, we've been in very close contact 525 00:24:27,720 --> 00:24:30,680 Speaker 8: with the incoming administration. I've spent a lot of time 526 00:24:30,720 --> 00:24:35,280 Speaker 8: with Senat Rubio and Jake Salton, the National Security Advisor, 527 00:24:35,440 --> 00:24:38,879 Speaker 8: with Mike Waltz, his successor. We've had very good not 528 00:24:38,920 --> 00:24:41,400 Speaker 8: only conversations, but we're trying to make sure that we're 529 00:24:41,400 --> 00:24:44,120 Speaker 8: as coordinated as possible so that they know what we're 530 00:24:44,160 --> 00:24:45,879 Speaker 8: looking at doing in the remaining time that we have. 531 00:24:46,440 --> 00:24:48,240 Speaker 8: I want to be able to hand off to the 532 00:24:48,280 --> 00:24:52,000 Speaker 8: incoming administration the best possible hand to play in all 533 00:24:52,040 --> 00:24:54,960 Speaker 8: of these areas, in all of these challenges, because the 534 00:24:55,000 --> 00:24:57,320 Speaker 8: world doesn't stop just because we're in a political transition. 535 00:24:57,800 --> 00:25:00,560 Speaker 8: It's also normal that countries around the world want to 536 00:25:00,600 --> 00:25:03,159 Speaker 8: hear from the incoming administration. They want to know what 537 00:25:03,200 --> 00:25:05,840 Speaker 8: they can expect and so they can get ready for that. 538 00:25:06,200 --> 00:25:08,920 Speaker 8: As long as we're communicating closely, which we are, and 539 00:25:09,040 --> 00:25:11,160 Speaker 8: as long as we're working to again try to make 540 00:25:11,160 --> 00:25:13,920 Speaker 8: this handoff as effective as possible so that they can 541 00:25:14,080 --> 00:25:16,640 Speaker 8: get moving on the run because there's really no time 542 00:25:16,680 --> 00:25:19,600 Speaker 8: to wait. Then I think that's a good thing and 543 00:25:19,640 --> 00:25:22,040 Speaker 8: look on the Middle East, just to stick with that quickly. 544 00:25:23,119 --> 00:25:25,960 Speaker 8: We've been working very hard to make sure that as 545 00:25:26,000 --> 00:25:28,760 Speaker 8: best we can we put in we actually start to 546 00:25:28,760 --> 00:25:31,560 Speaker 8: implement plans for a better future for the regent or 547 00:25:31,880 --> 00:25:33,760 Speaker 8: if we don't have time to fully do that, to 548 00:25:33,760 --> 00:25:36,080 Speaker 8: be able to hand them off not just getting the 549 00:25:36,080 --> 00:25:38,680 Speaker 8: hostage and cease fire deal, but having a clear plan 550 00:25:38,760 --> 00:25:41,320 Speaker 8: for what follows, a day after plan for Gaza so 551 00:25:41,359 --> 00:25:43,919 Speaker 8: that there's no vacuum that Hamas can refill, that Israel 552 00:25:43,960 --> 00:25:48,200 Speaker 8: can pull out, and you can have Gaza stand up 553 00:25:48,640 --> 00:25:55,479 Speaker 8: for its people. Administration, Security reconstruction, we have done an 554 00:25:55,480 --> 00:25:59,280 Speaker 8: extraordinary amount of work carrying through what President Trump started 555 00:25:59,320 --> 00:26:02,080 Speaker 8: with the Abraham Boards to get a normalization between Israel 556 00:26:02,080 --> 00:26:04,240 Speaker 8: and Saudi Arabia, which would be the biggest game changer 557 00:26:04,240 --> 00:26:07,120 Speaker 8: in the region. And those plans are there and are 558 00:26:07,119 --> 00:26:09,040 Speaker 8: in place and ready to go if we get an 559 00:26:09,080 --> 00:26:11,320 Speaker 8: end to Gaza a conflict there. We've done a lot 560 00:26:11,359 --> 00:26:13,680 Speaker 8: of work on what a pathway to Palestinian state would 561 00:26:13,720 --> 00:26:16,040 Speaker 8: look like. When people are ready for that conversation, they're 562 00:26:16,080 --> 00:26:17,960 Speaker 8: not now. At some point they're going to have to be. 563 00:26:18,440 --> 00:26:20,800 Speaker 8: All of that is ready to be handed over to 564 00:26:20,960 --> 00:26:23,200 Speaker 8: the new administration, and hopefully they'll carry the. 565 00:26:23,119 --> 00:26:24,320 Speaker 6: Ball forward very quickly. 566 00:26:24,320 --> 00:26:26,560 Speaker 1: Before I let you go, you mentioned that normalization deal. 567 00:26:26,600 --> 00:26:28,440 Speaker 1: It was something this administration invested a lot in before 568 00:26:28,480 --> 00:26:30,600 Speaker 1: October seventh. Clear that the conversations has been going on, 569 00:26:30,920 --> 00:26:33,000 Speaker 1: there has been reporting that we're close to a breakthrough 570 00:26:33,000 --> 00:26:35,800 Speaker 1: there is there. Can you shed any lightn serve where 571 00:26:35,800 --> 00:26:37,040 Speaker 1: those conversations stand today. 572 00:26:37,400 --> 00:26:39,359 Speaker 6: So one of the things I look. 573 00:26:39,280 --> 00:26:43,840 Speaker 8: Back on is on October tenth, a year ago, I 574 00:26:43,840 --> 00:26:45,919 Speaker 8: was supposed to go to Saudi Arabia and to Israel 575 00:26:45,960 --> 00:26:48,800 Speaker 8: to work on the Palestinian component of this normalization deal. 576 00:26:48,800 --> 00:26:50,840 Speaker 6: And of course that trip didn't happen because of October seven. 577 00:26:51,400 --> 00:26:55,960 Speaker 8: But even with Gaza, we've continued these conversations. We've continued 578 00:26:56,000 --> 00:26:59,080 Speaker 8: this work, and in terms of the agreements that are 579 00:26:59,080 --> 00:27:00,919 Speaker 8: needed between the United States in Saudi. 580 00:27:00,640 --> 00:27:03,520 Speaker 6: Arabia, they're pretty much ready to go. 581 00:27:04,640 --> 00:27:07,680 Speaker 8: And that would then trigger the normalization between Israel and 582 00:27:07,960 --> 00:27:11,040 Speaker 8: Saudi Arabia. But two things are required to actually get 583 00:27:11,040 --> 00:27:13,560 Speaker 8: that done. One is an end to the conflict in Gaza, 584 00:27:13,920 --> 00:27:16,800 Speaker 8: and two is having a credible pathway toward a Palestinian state. 585 00:27:17,400 --> 00:27:19,520 Speaker 8: As I said, all of the work's been done, and 586 00:27:20,000 --> 00:27:22,800 Speaker 8: hopefully we'll get to that end of conflict in Gaza. 587 00:27:23,840 --> 00:27:27,080 Speaker 8: They'll have to engage the conversation on the answering the 588 00:27:27,080 --> 00:27:30,000 Speaker 8: Palestinian question, but the work is there, and if that happens, 589 00:27:30,800 --> 00:27:32,000 Speaker 8: this transforms the region. 590 00:27:33,200 --> 00:27:36,840 Speaker 6: You have Israel that's integrated in the region, there's. 591 00:27:36,680 --> 00:27:39,040 Speaker 8: A common security architecture to deal with Iran. We saw 592 00:27:39,080 --> 00:27:42,840 Speaker 8: that something we put together embryonically. When Iran attacked Israel 593 00:27:42,880 --> 00:27:45,919 Speaker 8: in an unprecedented way direct attack, we not only for 594 00:27:45,960 --> 00:27:48,760 Speaker 8: the first time participated in Israel's active defense, we brought 595 00:27:48,800 --> 00:27:51,880 Speaker 8: other countries, including countries in the region, into that defense. 596 00:27:52,240 --> 00:27:54,080 Speaker 6: So you can see what's possible in the future. 597 00:27:54,560 --> 00:27:57,160 Speaker 8: But it requires an end to the conflict in Gaza, 598 00:27:57,200 --> 00:27:59,680 Speaker 8: and it requires moving forward on the Palestinians. 599 00:28:00,000 --> 00:28:01,680 Speaker 1: As your secretary, thank you very much. That's a Anthony 600 00:28:01,680 --> 00:28:03,040 Speaker 1: Blnkoln Secretary stage. 601 00:28:03,240 --> 00:28:06,760 Speaker 2: This is the Bloomberg Surveillance Podcast, bringing you the best 602 00:28:06,840 --> 00:28:10,400 Speaker 2: in markets, economics, angiopolitics. You can watch the show live 603 00:28:10,480 --> 00:28:13,480 Speaker 2: on Bloomberg TV weekday mornings from six am to nine 604 00:28:13,520 --> 00:28:17,240 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 605 00:28:17,280 --> 00:28:19,880 Speaker 2: anywhere else you listen, and as always, on the Bloomberg 606 00:28:19,960 --> 00:28:21,840 Speaker 2: Terminal and the Bloomberg Business app.