WEBVTT - Bloomberg Surveillance TV: December 19, 2024 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.400 with Lisa Bromwitz and a Marie Hordern. Join us each 0:00:18.480 --> 0:00:21.360 day for insight from the best in markets, economics, and 0:00:21.400 --> 0:00:24.720 geopolitics from our global headquarters in New York City. We 0:00:24.760 --> 0:00:27.400 are live on Bloomberg Television weekday mornings from six to 0:00:27.480 --> 0:00:31.000 nine am Eastern. Subscribe to the podcast on Apple, Spotify 0:00:31.200 --> 0:00:33.479 or anywhere else you listen, and as always on the 0:00:33.479 --> 0:00:36.800 Bloomberg Terminal and the Bloomberg Business app. We begin this 0:00:36.880 --> 0:00:38.559 out with the S and P five hundred, coming off 0:00:38.600 --> 0:00:41.519 its biggest one day lost since August, the Fed delivering 0:00:41.520 --> 0:00:43.959 a twenty five basis point ray cup but dining bad 0:00:44.040 --> 0:00:47.960 expectations for cuts next year. Jim Bianco of Bianco Research writing, 0:00:48.000 --> 0:00:50.479 cutting rates and leaving the door open to more is 0:00:50.520 --> 0:00:54.600 inviting higher inflation expectations, and that is what the market 0:00:54.680 --> 0:00:57.040 is reacting to. Jim joins us now for more. Jim, 0:00:57.080 --> 0:00:59.440 We've got a lot to get through your early reaction 0:00:59.720 --> 0:01:01.160 to yesterday's news conference. 0:01:02.360 --> 0:01:03.160 You know, you have. 0:01:03.040 --> 0:01:05.440 To see it as a continuation of what we've seen 0:01:05.480 --> 0:01:08.600 since September when the Fed cut in September, we were 0:01:08.640 --> 0:01:10.880 at three point sixty on the ten yure note, and 0:01:11.000 --> 0:01:13.440 yields have been going higher and higher and higher. Chairman 0:01:13.440 --> 0:01:16.000 Paul has been asked about this and he's not answered 0:01:16.040 --> 0:01:18.160 the question. He said, they go up, they go down, 0:01:18.640 --> 0:01:22.120 and then he come to yesterday's meeting, which we're referring 0:01:22.120 --> 0:01:22.479 to as. 0:01:22.360 --> 0:01:24.360 A hawkish cut. Let's call it what it is. 0:01:24.560 --> 0:01:27.119 He made a very good case the raise rates yesterday, 0:01:27.360 --> 0:01:30.559 but instead they cut rates. And I think the market 0:01:30.600 --> 0:01:34.160 at every step has been worried about inflation and has 0:01:34.200 --> 0:01:37.800 been rejecting these moves by having yields go up and 0:01:37.920 --> 0:01:40.480 up on the long end of the curve. Why, because 0:01:40.480 --> 0:01:43.720 the economy is growing at its potential. We've got massive 0:01:43.720 --> 0:01:48.800 stimulus coming with the Trump administration. Monetary ease is unnecessary. 0:01:49.000 --> 0:01:52.360 All it's going to do is raise inflation expectations. So 0:01:52.520 --> 0:01:55.560 every time they can cut or talk about cutting, you 0:01:55.680 --> 0:01:57.240 see higher long term yields. 0:01:57.560 --> 0:02:00.560 Jim, what do you think the next move is no move? 0:02:00.840 --> 0:02:01.800 Is it a count a hike? 0:02:02.960 --> 0:02:05.640 I think the next move you're right, is, first of all, it. 0:02:05.680 --> 0:02:06.760 Should be no move. 0:02:06.880 --> 0:02:10.040 Even though Chairman Paul talked about a pause, meaning that 0:02:10.080 --> 0:02:12.880 there's going to be moves in the future, it probably 0:02:12.880 --> 0:02:16.200 should be a hike because if we're talking about where 0:02:16.200 --> 0:02:19.120 neutral is, where is the rate that does not, you know, 0:02:19.520 --> 0:02:22.880 restrain or stimulate the economy. You can make the case 0:02:22.960 --> 0:02:26.680 we arrived at it yesterday and that the amount of restraint, 0:02:26.720 --> 0:02:29.920 as Chairman Paul calls it, doesn't really exist. So therefore 0:02:30.000 --> 0:02:33.160 the next move should probably be a hike. But that's 0:02:33.200 --> 0:02:37.320 going to be intensely political. President Trump wants to fire 0:02:37.360 --> 0:02:40.680 poll President Trump would go crazy if he saw the 0:02:40.680 --> 0:02:44.200 FED raise rates, So they're trying to thread this needle 0:02:45.080 --> 0:02:48.120 from a political standpoint, in my opinion, and they're coming 0:02:48.240 --> 0:02:50.480 up with an answer that is satisfying nobody. 0:02:50.880 --> 0:02:52.480 Jim, do you have a really clear sense And I 0:02:52.480 --> 0:02:54.160 know that you just gave a reason for why the 0:02:54.200 --> 0:02:56.880 market responded the way that it did, But how much 0:02:56.880 --> 0:02:58.400 do you think it had to do with the idea 0:02:59.120 --> 0:03:02.000 that there is this conn about stickiness of inflation And 0:03:02.040 --> 0:03:04.520 how much is it the flipping and the flopping and 0:03:04.560 --> 0:03:07.760 the lack of direction and the lack of understanding what 0:03:07.960 --> 0:03:10.880 models are driving any further FED decisions. 0:03:12.080 --> 0:03:14.400 Oh, I think that you're right that it is a 0:03:14.440 --> 0:03:17.840 flipping and a flopping. We're not exactly sure where they 0:03:17.880 --> 0:03:20.560 are going. We remember in the summer, we got all 0:03:20.560 --> 0:03:23.880 worried about the unemployment rate. As you pointed out, that 0:03:24.040 --> 0:03:26.960 was the basis of the Jackson Hole speech. I happen 0:03:27.040 --> 0:03:28.880 to think that that was all driven by the some 0:03:29.120 --> 0:03:32.440 rule getting triggered, and that that scared the FED and 0:03:32.480 --> 0:03:35.160 that's what got us the fifty basis points. And right 0:03:35.200 --> 0:03:38.800 after that the labor market rebounded, and now we're back 0:03:38.840 --> 0:03:39.480 to inflation. 0:03:39.600 --> 0:03:41.640 So there is no real consensus. 0:03:42.120 --> 0:03:45.280 Add to that, as you've pointed out, there were potentially 0:03:45.400 --> 0:03:49.440 four dissenters at this meeting, although officially there's only been 0:03:49.480 --> 0:03:52.800 one because four of them listed their twenty twenty four 0:03:52.840 --> 0:03:54.200 dots is being unchanged. 0:03:54.600 --> 0:03:56.360 And this is a bed. 0:03:56.000 --> 0:03:59.640 That is probably deeply divided, that don't have a clear 0:04:00.120 --> 0:04:03.360 idea among themselves what they should be doing next. 0:04:03.560 --> 0:04:04.640 And when Chairman Pod. 0:04:04.560 --> 0:04:07.040 Goes out there and tries to tell us that here's 0:04:07.080 --> 0:04:10.840 the policy, there is no policy. There is just you know, 0:04:11.160 --> 0:04:14.360 kind of questions, and there's dissent all over the place, 0:04:14.440 --> 0:04:16.520 and that is showing up in the market. 0:04:17.520 --> 0:04:19.800 In some ways, the fedput has been taken away the 0:04:19.880 --> 0:04:22.600 comfort that at some point the default for this FED 0:04:22.800 --> 0:04:25.480 will be the recalibration to lower rates, because it seems 0:04:25.520 --> 0:04:28.359 like they're very close to that neutral rate. I just 0:04:28.440 --> 0:04:31.640 wonder going forward how much this is a FED that 0:04:31.720 --> 0:04:34.640 welcomes the weakness that we saw yesterday in the market, 0:04:34.680 --> 0:04:36.800 so it actually welcomes some of the sell off that 0:04:36.920 --> 0:04:39.799 takes a bit of the pockets of frosts down a notch. 0:04:41.000 --> 0:04:43.640 Oh. I think that they probably do welcome the idea 0:04:43.720 --> 0:04:47.479 that these frothy markets, especially in post election, especially in 0:04:47.520 --> 0:04:52.000 the more speculative markets like crypto, have been worrisome for 0:04:52.080 --> 0:04:53.960 them and they would like to see them pull down. 0:04:54.320 --> 0:04:56.680 But I don't think they like the idea that these 0:04:56.720 --> 0:04:59.720 frothiness is coming away because everybody's screaming they just made 0:04:59.720 --> 0:05:03.480 au and that's why the frothiness is coming away. But yes, 0:05:03.640 --> 0:05:06.279 I think that in the long run they would probably 0:05:06.360 --> 0:05:09.080 like that. But again, that puts them at odds with 0:05:09.400 --> 0:05:13.840 incoming President Trump because he values or he views his 0:05:14.640 --> 0:05:18.360 success of his administration by rising stock prices, and the 0:05:18.400 --> 0:05:20.400 FED is now probably saying, well, at least we got 0:05:20.400 --> 0:05:22.440 stock prices down and got some of the frost out 0:05:22.440 --> 0:05:23.039 of the market. 0:05:23.320 --> 0:05:25.880 So it's going to be a very tumultuous twenty twenty five. 0:05:25.920 --> 0:05:27.000 If we continue down. 0:05:26.880 --> 0:05:29.279 This path no doctor of Renmac said it. Immediately after 0:05:29.360 --> 0:05:31.679 the news conference yesterday, Jim nol Kim on the program 0:05:31.720 --> 0:05:34.400 and said, this FED is on a collision course with 0:05:34.440 --> 0:05:36.719 the incoming administration. Jim, how do you think that plays 0:05:36.720 --> 0:05:37.880 out through the next twelve months? 0:05:38.920 --> 0:05:41.320 Oh, I think it's it's going to play out, you know, 0:05:41.640 --> 0:05:44.960 not well at all, because I'm going to take Scott Bessett, 0:05:45.040 --> 0:05:48.920 the incoming Treasury Secretary, as his word that there's probably 0:05:48.920 --> 0:05:51.279 going to be a shadow FED. That is the idea 0:05:51.320 --> 0:05:55.440 that they're probably going to nominate Kevin Walsh. 0:05:55.200 --> 0:05:56.640 Early like this summer. 0:05:56.680 --> 0:05:58.520 So we're going to have a FED chairman, we're going 0:05:58.560 --> 0:06:01.040 to have a future FED chairman, and we're going to 0:06:01.080 --> 0:06:03.280 have two people to kind of listen to and that 0:06:03.400 --> 0:06:07.320 we'll add to the confusion as well. So this is 0:06:07.360 --> 0:06:09.520 not going to be something where they're just going to 0:06:09.520 --> 0:06:12.760 clash with the administration. It's going to be open warfare 0:06:12.839 --> 0:06:15.880 and we're going to have probably a potentially a future 0:06:16.160 --> 0:06:19.039 FED chairman to sit there and question what the current 0:06:19.040 --> 0:06:20.119 FED chairman is doing. 0:06:20.320 --> 0:06:20.560 Jim. 0:06:20.600 --> 0:06:22.479 That will not be music to the ears of people 0:06:22.520 --> 0:06:25.240 in Brazil to people in Japan, and by people I 0:06:25.279 --> 0:06:28.480 mean policymakers Dolly Yen right now briefly through one point 0:06:28.480 --> 0:06:32.160 fifty seven. In Brazil, they've got fiscal issues. These issues 0:06:32.200 --> 0:06:36.080 don't help them. In fact, high yields beget high yields. Jim, 0:06:36.160 --> 0:06:38.880 there are certain places in financial markets around the world 0:06:38.920 --> 0:06:42.120 where they feel really stretched. We had someone come on 0:06:42.120 --> 0:06:44.200 the program yesterday Jilly and Manuel have ever Core, a 0:06:44.200 --> 0:06:46.200 man you know well, and he talked about the peak 0:06:46.240 --> 0:06:49.120 in the US dollar being really important to financial markets. 0:06:49.160 --> 0:06:51.800 We've been asking the question how much oxygen is left 0:06:51.880 --> 0:06:53.200 up here for the US dollar? 0:06:53.360 --> 0:06:53.560 Jim? 0:06:53.600 --> 0:06:55.000 How much more stretch can this get? 0:06:56.160 --> 0:06:56.320 Oh? 0:06:56.360 --> 0:06:58.760 I You know, the one thing I've learned about currencies 0:06:58.880 --> 0:07:01.440 is they can go a lot further than people think. 0:07:01.880 --> 0:07:04.960 And as long as US rates continue higher on this 0:07:05.240 --> 0:07:08.120 back of that, the FED is not dealing with an 0:07:08.160 --> 0:07:12.040 inflation problem, or worse, fostering it by continuing to talk 0:07:12.040 --> 0:07:13.320 about cutting rates when. 0:07:13.160 --> 0:07:14.240 It's not necessary. 0:07:14.720 --> 0:07:17.400 Higher interest rates in the US will just continue to 0:07:17.520 --> 0:07:20.520 foster a higher dollar. Now, a higher dollar, you're right, 0:07:20.640 --> 0:07:24.440 means lower emerging market currencies, which means lower developed currencies 0:07:24.560 --> 0:07:25.960 like the end and puts. 0:07:25.760 --> 0:07:27.400 More and more pressure on them. 0:07:27.680 --> 0:07:31.400 And look at what's happening in the global economy X 0:07:31.440 --> 0:07:34.480 the US. You've got countries like Germany, You've got countries 0:07:34.560 --> 0:07:37.640 like China. You got countries like Japan that are already 0:07:37.640 --> 0:07:40.720 struggling right now. Germany might be in recession right now. 0:07:40.920 --> 0:07:43.760 Japan might be in recession right now. China might have 0:07:43.840 --> 0:07:46.320 some of the lowest growth that we've seen in forty years. 0:07:46.480 --> 0:07:50.440 The US is humming along great, But the problem is 0:07:50.440 --> 0:07:52.600 is that as the US hums along, it gets higher 0:07:52.680 --> 0:07:55.240 rates and sucks the dollar in higher. It puts the 0:07:55.280 --> 0:07:57.160 rest of the world under further pressure. 0:07:57.520 --> 0:08:00.000 Jim putting this all together, the rest of the world 0:08:00.000 --> 0:08:02.800 and further pressure the idea that a stronger dollar is 0:08:02.800 --> 0:08:06.360 probably going to inhibit exports from the US potentially the 0:08:06.400 --> 0:08:09.760 growth in certain areas. Did this meeting and the reaction 0:08:09.960 --> 0:08:12.280 to it by the Federal Reserve and buy the markets 0:08:12.840 --> 0:08:16.160 increase the chance of some sort of negative growth shock 0:08:16.240 --> 0:08:19.400 next year despite some of the incoming policies. 0:08:20.280 --> 0:08:20.720 It can. 0:08:21.160 --> 0:08:22.760 I mean, you know, if you go back and you 0:08:22.800 --> 0:08:26.360 look at recent history. Six years ago today was the 0:08:26.480 --> 0:08:29.040 day that Paul had another press conference where there was 0:08:29.080 --> 0:08:31.720 a very bad reaction in the market. That was when 0:08:31.720 --> 0:08:33.640 he announced QT and it was going to be like 0:08:33.679 --> 0:08:36.280 watching pain try, and the market thought it wasn't going 0:08:36.360 --> 0:08:38.520 to be like watching pain try, and it had a 0:08:38.640 --> 0:08:41.520 very toxic reaction to it. Two weeks later we got 0:08:41.520 --> 0:08:44.880 the poll pivot when he went to Atlanta and at 0:08:44.880 --> 0:08:47.800 the NABE conference and basically pulled a piece of paper 0:08:47.800 --> 0:08:50.320 out of his pocket and said, Okay, those policies announced 0:08:50.320 --> 0:08:52.640 two weeks ago, we're going to completely reverse them. So 0:08:52.760 --> 0:08:55.000 maybe we see something like that in the next couple 0:08:55.040 --> 0:08:58.040 of weeks out of him. It would be there's a 0:08:58.080 --> 0:09:01.199 precedent for it that he changes the policy. But if 0:09:01.200 --> 0:09:03.840 he doesn't change the policy, and they continue to talk 0:09:03.880 --> 0:09:06.600 about weakness, worry about the labor market, that they might 0:09:06.679 --> 0:09:09.160 have to cut rates even more next year in the 0:09:09.160 --> 0:09:12.680 face of just raising their inflation expectations, I think we're 0:09:12.679 --> 0:09:14.079 going to see a rocky ride. 0:09:13.880 --> 0:09:14.520 In the markets. 0:09:14.600 --> 0:09:16.959 Jim enjoyed it. Looking forward to covering this with you, 0:09:17.120 --> 0:09:20.160 Jimpianco Bianco Research, and Jim, thanks for everything. In twenty 0:09:20.200 --> 0:09:33.360 twenty four, Francis Donald of RBC writing there is no consensus, 0:09:33.600 --> 0:09:36.439 no conviction in this FMC, so trying to decipher their 0:09:36.480 --> 0:09:40.320 perspective slash bias as a whole is probably a fall's 0:09:40.480 --> 0:09:42.280 errand I'm pleased to say that Francis is with us 0:09:42.280 --> 0:09:44.040 around a table. Francis, good morning. 0:09:43.840 --> 0:09:44.400 Good morning. 0:09:44.800 --> 0:09:47.200 No consensus. Does that make it pretty tricky for the 0:09:47.240 --> 0:09:49.520 Chairman to offer any particular view for twenty. 0:09:49.320 --> 0:09:52.080 Five, very difficult to give his view of what will happen. 0:09:52.120 --> 0:09:54.920 But not only is there not consensus from the Fed 0:09:54.960 --> 0:09:57.480 about what is happening right now and what's going on, 0:09:57.760 --> 0:10:00.960 but where will we be in twelve months. No forecast 0:10:01.040 --> 0:10:03.440 or public or private knows where we're going to be 0:10:03.480 --> 0:10:06.040 in twelve months. We don't know what policies are coming through, 0:10:06.280 --> 0:10:09.400 their magnitudes they're timing, but we do know the direction 0:10:09.920 --> 0:10:12.200 of where things will go, and that is that incremental 0:10:12.240 --> 0:10:15.920 policies will be inflationary and probably drag on growth. And 0:10:15.960 --> 0:10:18.960 this is why I think is this is the problem 0:10:19.040 --> 0:10:21.880 for the Federal Reserve. It's not higher on inflation. The 0:10:21.920 --> 0:10:23.720 Fed is not afraid of high inflation. They know what 0:10:23.760 --> 0:10:25.920 to do. You hike rates or you keep them stable. 0:10:26.040 --> 0:10:26.800 They're not even. 0:10:26.640 --> 0:10:30.960 Afraid of weaker employment, you lower rates. What they're afraid 0:10:31.000 --> 0:10:35.480 of is a stagflationary environment. And if inflation heads upwards 0:10:35.800 --> 0:10:39.280 or is sticky for factors they cannot control supply side 0:10:39.400 --> 0:10:42.840 and the unemployment rate rises, or there's weakness underlying that 0:10:42.920 --> 0:10:45.319 labor market, maybe it doesn't show up in the unemployment rate. 0:10:45.559 --> 0:10:47.600 That is the big problem for the Federal Reserve heading 0:10:47.640 --> 0:10:48.679 into the next twelve month. 0:10:48.760 --> 0:10:51.680 What do they do if that environment did materialize? What's 0:10:51.679 --> 0:10:52.360 the approach to that? 0:10:52.600 --> 0:10:54.640 Well, they'll have to make some big decisions. So we 0:10:54.760 --> 0:10:57.560 heard from fedhair Powell. Hey, we did work heading back 0:10:57.559 --> 0:10:59.640 in twenty eighteen as to the type of inflation we 0:10:59.679 --> 0:11:03.079 should look through, giving themselves some optionality. But this is 0:11:03.120 --> 0:11:05.040 a FED that's going to have to ask itself questions 0:11:05.040 --> 0:11:08.600 over what type of inflation it does respond to supply 0:11:08.720 --> 0:11:12.960 side shocks, geopolitical fragility. These are not interstrate sensitive. So 0:11:13.000 --> 0:11:15.200 a Federal Reserve that talks a lot more about the 0:11:15.200 --> 0:11:17.520 type of inflation they would look through is one that 0:11:17.600 --> 0:11:19.560 might be airing on the growth side. For now, they 0:11:19.559 --> 0:11:21.440 don't have to make that choice because it's really the 0:11:21.480 --> 0:11:23.920 inflation side of the picture. As we just heard, The 0:11:23.960 --> 0:11:26.840 growth side looks on the surface at least to be well. 0:11:26.920 --> 0:11:29.040 I wouldn't be surprised if the FED is also paying 0:11:29.040 --> 0:11:32.400 attention to the unevenness that exists under this economy. We 0:11:32.440 --> 0:11:35.440 talk about K shape with income's high income folks really 0:11:35.480 --> 0:11:37.520 doing a lot better than low income folks shows up 0:11:37.520 --> 0:11:39.800 in that retail sales data. But there's also that K 0:11:39.960 --> 0:11:43.200 shape happening with manufacturing data and services data. This is 0:11:43.240 --> 0:11:46.760 not a simple economy. It's probably not a simple policy response. This, 0:11:46.800 --> 0:11:49.120 I think is underscoring some of that confusion we're hearing 0:11:49.160 --> 0:11:49.960 from the FED chair. 0:11:50.280 --> 0:11:53.480 It raises this question of what kind of goals they have. 0:11:53.920 --> 0:11:56.160 I don't have a clear sense of what the goals 0:11:56.240 --> 0:11:58.680 are in terms of how quickly to get inflation down 0:11:58.720 --> 0:12:01.760 to two percent, terms of how to weigh both the 0:12:01.760 --> 0:12:05.120 inflation reading and the unemployment reading, and what would trigger 0:12:05.160 --> 0:12:07.080 them to make a change. Did you have a clear 0:12:07.200 --> 0:12:07.719 sense of that. 0:12:07.840 --> 0:12:10.439 Well, from their sep or those dots, they say it's 0:12:10.440 --> 0:12:13.000 okay if we wait several years to get back to neutral. 0:12:13.040 --> 0:12:14.760 Okay if we wait several years to get back to 0:12:14.800 --> 0:12:17.520 two percent, And that seems to be okay by them. 0:12:17.840 --> 0:12:20.240 One of the challenges, I think is this unevenness that 0:12:20.280 --> 0:12:22.880 exists under the surface. That unemployment rate is going to 0:12:22.880 --> 0:12:26.640 stay mechanically lower even as the labor market softens. This 0:12:26.720 --> 0:12:30.079 is a demographics story. And if we see deportations on masks, 0:12:30.080 --> 0:12:32.760 that could also contribute to the unemployment rate looking a 0:12:32.760 --> 0:12:35.320 lot better than the health of the underlying labor market. 0:12:35.520 --> 0:12:37.000 So this is a FED that's going to have to 0:12:37.000 --> 0:12:41.000 look beyond its simple mandate price stability and low and 0:12:41.000 --> 0:12:44.000 stable on employment and start asking questions about whether they're 0:12:44.000 --> 0:12:46.760 targeting the right numbers or at least expanding the numbers 0:12:46.760 --> 0:12:49.080 that they're looking at in a more formal setting. 0:12:49.240 --> 0:12:52.680 Does it make you more nervous to own risk, to 0:12:52.800 --> 0:12:55.360 buy risk, to take risk at a time of this 0:12:55.520 --> 0:13:00.679 much uncertainty and a real confusion or at least disagreement 0:13:00.840 --> 0:13:04.040 above FED members, It will make anybody nervous to take risk. 0:13:04.080 --> 0:13:06.720 It will be more difficult for businesses to action on 0:13:06.800 --> 0:13:09.080 plans that they're going to take, or even for households 0:13:09.120 --> 0:13:12.080 to know what will interest rate policy look like moving forward. 0:13:12.280 --> 0:13:14.600 We're talking a lot about the market reaction and the 0:13:14.679 --> 0:13:16.840 idea that there you know, the market has moved to 0:13:16.960 --> 0:13:19.719 two or one cut for next year. That's fine, But 0:13:19.840 --> 0:13:23.080 how many business owners in the United States and globally 0:13:23.320 --> 0:13:26.680 incorporated a tenure above four percent, and we're incorporating the 0:13:26.720 --> 0:13:29.360 idea that actually rate hikes could become part of the conversation. 0:13:29.640 --> 0:13:32.280 I don't believe that this is part of America's planning, 0:13:32.559 --> 0:13:34.480 and more importantly, I don't think it's part of the 0:13:34.559 --> 0:13:37.400 globes plan because let's not forget this week, we have 0:13:37.640 --> 0:13:40.400 China yields collapsing, we have three out of seven g 0:13:40.520 --> 0:13:44.800 seven countries have governments that went through sizable periods of problems, 0:13:44.880 --> 0:13:47.600 and we have, as you know to John, really serious 0:13:47.640 --> 0:13:51.520 geopolitical fragility. This is not a global economy that can 0:13:51.559 --> 0:13:54.680 withstand for five percent rates the same way the US 0:13:54.800 --> 0:13:57.680 economy can. And while the FED will say we're focused 0:13:57.679 --> 0:14:00.560 on our own domestic economy, unfortunately the rest of the 0:14:00.559 --> 0:14:02.600 world is going to be receivers of that FED policy 0:14:02.640 --> 0:14:04.800 as well, and they are not in the same position 0:14:04.800 --> 0:14:06.040 as the American exceptionalists. 0:14:06.080 --> 0:14:08.280 So that in emerging markets yesterday, that's for sure, in 0:14:08.280 --> 0:14:10.120 foreign exchange in the m I'd love your thoughts on 0:14:10.160 --> 0:14:13.160 this whole debate around neutral. Head of this decision, Governor 0:14:13.200 --> 0:14:15.280 Waller came out and said we were some way off neutral. 0:14:15.280 --> 0:14:16.720 We could keep on kind of interest rates. 0:14:16.720 --> 0:14:18.920 I'm paraphrasing but that was the essence of a message 0:14:19.080 --> 0:14:21.400 from the governor. When do you think we are relative 0:14:21.440 --> 0:14:23.600 to neutral and where are they? Because I was pretty 0:14:23.600 --> 0:14:26.040 confused by some of the commentary in the news conference. 0:14:26.080 --> 0:14:28.480 Well, there's certainly this new concept of short term neutral 0:14:28.560 --> 0:14:31.320 versus long term neutral. So where we should be in 0:14:31.360 --> 0:14:33.040 the short term is different than where we should be 0:14:33.040 --> 0:14:35.280 in the long term. I think that's really being fueled 0:14:35.280 --> 0:14:39.920 by the surprisingly massive amount of fiscal spending we I 0:14:39.960 --> 0:14:43.320 think in the general consensus are downplaying just how impactful 0:14:43.640 --> 0:14:47.320 the most amount of spending per GDP that we have 0:14:47.320 --> 0:14:49.960 seen outside of a recession in American history, and this 0:14:50.160 --> 0:14:53.080 is massive, and it's distorting data. And when we talk 0:14:53.120 --> 0:14:56.760 about American exceptionalism, yes we have productivity and AI because 0:14:56.800 --> 0:14:58.720 what a lot of other countries could be growing at 0:14:58.720 --> 0:15:00.560 three percent if they were spending as much as the 0:15:00.640 --> 0:15:03.320 US was spending on the government side as well. So 0:15:03.400 --> 0:15:06.320 that's really distorting short term neutral. But there's a lot 0:15:06.360 --> 0:15:09.000 of concepts being thrown around. In my senses as I 0:15:09.040 --> 0:15:11.000 listen to this, this is a lot of trying to 0:15:11.040 --> 0:15:14.120 find reasons why they can stay on hold. This is 0:15:14.120 --> 0:15:16.240 a fed that wants to stay on hold until they 0:15:16.240 --> 0:15:17.800 get some sort of crack in the data in one 0:15:17.800 --> 0:15:19.960 direction or another, this is probably where they're going to stay. 0:15:20.000 --> 0:15:22.800 Francis is good to say. Always fantastic. Thank you, Francis 0:15:22.800 --> 0:15:23.000 don A. 0:15:33.440 --> 0:15:36.240 Welcome to our audience on Bloomberg Radio and bloomber Television worldwide. 0:15:36.240 --> 0:15:38.520 Mister secretary, thank you very much for being here with you. 0:15:38.880 --> 0:15:41.120 Many ways we could go here, but let's start with Syria. 0:15:41.280 --> 0:15:43.360 And you've described this moment as one of both promise 0:15:43.520 --> 0:15:44.080 and peril. 0:15:44.280 --> 0:15:44.680 That's right. 0:15:44.840 --> 0:15:47.280 You have what seems like a de facto government that 0:15:47.400 --> 0:15:49.840 is a designated terrorist group, and you've said that the 0:15:49.920 --> 0:15:53.600 US has spent in contact with HTS. What specifically have 0:15:53.680 --> 0:15:55.200 they said, I know there are other groups operating in 0:15:55.200 --> 0:15:57.000 the country as well. What have they said about how 0:15:57.040 --> 0:15:59.160 they might govern? If this is how it all shakes out. 0:16:00.080 --> 0:16:03.000 What we've heard them say is positive. The question is 0:16:03.000 --> 0:16:06.080 what are they actually going to do. We brought together 0:16:06.120 --> 0:16:08.640 with Jordan, countries from around the region last week. We 0:16:08.720 --> 0:16:13.160 had Turkey, we had Iraq, we had the Gulf States, Jordan, Egypt, 0:16:13.600 --> 0:16:18.200 European partners, and we came together to set expectations. What 0:16:18.320 --> 0:16:20.640 is the international community, what are the neighbors looking for 0:16:21.080 --> 0:16:24.000 as this transition takes place in Syria, and we all agreed, 0:16:24.120 --> 0:16:27.680 we want to see something that's inclusive, that's non sectarian, 0:16:28.040 --> 0:16:31.960 that respects minorities, women, that deals with any chemical weapons 0:16:32.000 --> 0:16:33.960 that may be remaining in Syria, that doesn't aly with 0:16:34.400 --> 0:16:36.880 ISIS or any of the terrorist groups that are there. 0:16:37.160 --> 0:16:38.880 And the reason that's so important is we want to 0:16:39.160 --> 0:16:41.720 make it clear to HTS and all of the emerging 0:16:41.760 --> 0:16:45.200 authorities that the recognition that they seek, the support that 0:16:45.240 --> 0:16:47.600 they seek and need from the international community, well, there's 0:16:47.600 --> 0:16:50.840 certain expectations that come along with that. And as I said, 0:16:50.960 --> 0:16:54.040 we've heard positive statements coming from mister Jilani, the leader 0:16:54.080 --> 0:16:57.080 of HDS, but what everyone is focused on is what's 0:16:57.120 --> 0:16:58.320 actually happening on the ground. 0:16:58.360 --> 0:16:59.000 What are they doing. 0:16:59.080 --> 0:17:02.240 Are they looking to build a transition in Syria that 0:17:02.240 --> 0:17:06.000 brings everyone in. If they do that, and if they 0:17:06.040 --> 0:17:08.800 meet some of these other tests that the international community 0:17:09.760 --> 0:17:11.960 is looking for them to meet, then I think you 0:17:12.000 --> 0:17:15.560 can see something very positive. And here's what it is. 0:17:15.880 --> 0:17:18.960 For the first time in decades, the people of Syria 0:17:19.040 --> 0:17:23.040 can go forward without a dictator, without a terrorist group 0:17:23.520 --> 0:17:28.520 dominating their lives, without one sect or one group running 0:17:28.520 --> 0:17:32.240 things at the exclusion of others and without foreign power 0:17:32.920 --> 0:17:35.960 calling all the shots. That's the opportunity, but it really 0:17:36.040 --> 0:17:40.080 requires HTS and other groups that are there to move 0:17:40.119 --> 0:17:41.640 forward in this inclusive way. 0:17:42.000 --> 0:17:43.760 You've said that the US wants to help, and I 0:17:43.760 --> 0:17:45.840 look at this country that has a lot of sanctions 0:17:45.880 --> 0:17:47.240 that are residual, A lot of sanctions have been in 0:17:47.320 --> 0:17:48.160 place for decades. 0:17:48.200 --> 0:17:48.719 On Syria. 0:17:49.160 --> 0:17:51.320 Senator Chris Murphy of Connecticut has called for a temporary 0:17:51.320 --> 0:17:54.359 suspension of sanctions. Is that something that you would be 0:17:54.359 --> 0:17:56.439 ammittable to and would that be effective and helping you 0:17:56.440 --> 0:17:58.639 have more engagement with what may be this new government. 0:17:58.640 --> 0:17:59.919 So we're looking at all the authorities we have. 0:18:00.040 --> 0:18:02.880 We're looking at all of the sanctions, not only our own. 0:18:02.880 --> 0:18:08.080 The United Nations has sanctions on HTS, it's leader. 0:18:08.520 --> 0:18:10.920 And I think what we need to see. 0:18:10.840 --> 0:18:17.400 Is actual concrete steps building an inclusive, non sectarian government, 0:18:17.400 --> 0:18:22.160 a transition eventually getting to an election. As we see 0:18:22.160 --> 0:18:25.280 these steps taken, then I think we'll be able to respond, 0:18:25.720 --> 0:18:28.199 others will be able to respond. That's what we'd like 0:18:28.240 --> 0:18:30.600 to do, But we need to see concrete action, not 0:18:30.720 --> 0:18:32.640 simply positive declarations. 0:18:32.880 --> 0:18:35.320 The EUS Chief Diplomat has said, she's sending a senior 0:18:35.400 --> 0:18:38.560 representative to Damascus to talk to this new group, talk 0:18:38.560 --> 0:18:40.840 to this government. Is that something that you would want 0:18:40.880 --> 0:18:42.840 to do, that you can do? Indeed, given the terrorist 0:18:42.880 --> 0:18:44.560 designation the sanctions there, we've. 0:18:44.400 --> 0:18:47.240 Actually been in direct contact with HTS on the ground. 0:18:47.960 --> 0:18:49.480