1 00:00:02,600 --> 00:00:13,160 Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. 2 00:00:13,240 --> 00:00:17,440 Speaker 1: Always with Michael McKee. Daily we bring you insight from 3 00:00:17,480 --> 00:00:22,279 Speaker 1: the best in economics, finance, investment, and international relations. Find 4 00:00:22,320 --> 00:00:27,240 Speaker 1: Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and of course, 5 00:00:27,760 --> 00:00:34,640 Speaker 1: on the Bloomberg So yet another terror attack, another lone 6 00:00:34,640 --> 00:00:38,440 Speaker 1: wolf coming out of nowhere. Donald Trump seized on the issue, tweeting, 7 00:00:38,880 --> 00:00:42,400 Speaker 1: when will we learn? It is only getting worse? But 8 00:00:42,520 --> 00:00:44,879 Speaker 1: what is it we could learn? What could we do? 9 00:00:45,159 --> 00:00:48,600 Speaker 1: Robert Hormace's vice chairman of Kissinger Associates, Good morning, Robert. 10 00:00:48,880 --> 00:00:51,600 Speaker 1: What is it that we don't know or we could 11 00:00:51,600 --> 00:00:55,120 Speaker 1: do in these situations? If anything, there are several things 12 00:00:55,160 --> 00:00:57,560 Speaker 1: I think we could do, one of which is we 13 00:00:57,640 --> 00:01:03,080 Speaker 1: need better intelligence within the United States and with our 14 00:01:03,240 --> 00:01:06,479 Speaker 1: friends and allies around the world. A lot more work 15 00:01:06,480 --> 00:01:08,200 Speaker 1: has to be done on this. New York City is 16 00:01:08,280 --> 00:01:11,480 Speaker 1: quite good at this, but not every entity is. We 17 00:01:11,520 --> 00:01:17,200 Speaker 1: need a stronger domestic police, intelligence capability and police for 18 00:01:17,480 --> 00:01:22,280 Speaker 1: enforcing of of the law and of of methods of 19 00:01:22,319 --> 00:01:25,600 Speaker 1: stopping these sorts of things. Many police forces are not 20 00:01:25,680 --> 00:01:29,080 Speaker 1: equipped uh in this country and abroad to deal with 21 00:01:29,120 --> 00:01:31,160 Speaker 1: these kind of issues, so a lot more work has 22 00:01:31,200 --> 00:01:33,840 Speaker 1: to be done domestically, and we have to do a 23 00:01:33,880 --> 00:01:36,880 Speaker 1: lot more with our friends and allies. This is a 24 00:01:37,040 --> 00:01:39,880 Speaker 1: kind of world war in the sense that it exists. 25 00:01:39,959 --> 00:01:43,320 Speaker 1: These problems exist in a multitude of countries. As we've seen. 26 00:01:43,360 --> 00:01:46,400 Speaker 1: It's not just France and Belgium, it's many other countries 27 00:01:46,440 --> 00:01:48,360 Speaker 1: as well. So we've got to work with our friends 28 00:01:48,360 --> 00:01:50,760 Speaker 1: and allies. But there are a number of things we 29 00:01:50,800 --> 00:01:53,040 Speaker 1: can do. And also, of course we have to go 30 00:01:53,120 --> 00:01:56,760 Speaker 1: after ISIS at its center, which is in Iraq and Syria. 31 00:01:56,840 --> 00:01:58,880 Speaker 1: But it's not just one thing. It's not just a 32 00:01:59,000 --> 00:02:02,400 Speaker 1: geographically containable thing, although we have to deal with the 33 00:02:02,440 --> 00:02:06,600 Speaker 1: geographic manifestations of it. But each city, each state, each 34 00:02:06,640 --> 00:02:11,000 Speaker 1: government needs to deal with stronger policing and stronger intelligence, 35 00:02:11,040 --> 00:02:15,640 Speaker 1: and that means using information technology better. ISIS uses information 36 00:02:15,680 --> 00:02:19,920 Speaker 1: technology to motivate, to recruit, to mobilize. We've got to 37 00:02:19,960 --> 00:02:23,600 Speaker 1: do a lot better at utilizing information technology to get 38 00:02:23,639 --> 00:02:27,760 Speaker 1: our message across and to under the orders of courts. 39 00:02:28,160 --> 00:02:32,120 Speaker 1: Courts have to supervise this to identify and follow conversations 40 00:02:32,160 --> 00:02:37,119 Speaker 1: among terrorist groups or expected anticipated terrorists, to to try 41 00:02:37,160 --> 00:02:39,760 Speaker 1: to prevent this. It won't be a hundred percent successful, 42 00:02:40,160 --> 00:02:42,120 Speaker 1: but we can do a lot better. We can't just 43 00:02:42,280 --> 00:02:44,119 Speaker 1: sit there and do nothing, and these are the kind 44 00:02:44,120 --> 00:02:47,480 Speaker 1: of things that would help substantially. Would it be easy 45 00:02:47,560 --> 00:02:51,480 Speaker 1: to put together a package of legal package to do 46 00:02:51,520 --> 00:02:53,720 Speaker 1: that at the federal level. The reason I asked that 47 00:02:53,960 --> 00:02:57,440 Speaker 1: is Evilucly, everybody thinks this is a terrible situation, but 48 00:02:57,560 --> 00:03:00,000 Speaker 1: remember after nine eleven, the struggles to get the Patriot 49 00:03:00,120 --> 00:03:04,560 Speaker 1: Act past and the ongoing struggles over what powers it 50 00:03:04,639 --> 00:03:08,120 Speaker 1: gave the federal government. Well, certainly there'll be a debate, 51 00:03:08,160 --> 00:03:10,440 Speaker 1: and there should be a debate. These are very tough issues, 52 00:03:10,480 --> 00:03:13,040 Speaker 1: and we need to protect our civil liberties in this country. 53 00:03:13,080 --> 00:03:15,920 Speaker 1: That's what we stand for. But there are various ways 54 00:03:16,040 --> 00:03:18,880 Speaker 1: of doing that, and I think if you have a 55 00:03:18,919 --> 00:03:23,360 Speaker 1: court system which oversees the process, we should be moving 56 00:03:23,520 --> 00:03:29,919 Speaker 1: towards a greater degree of government intervention through better intelligence collection, 57 00:03:30,360 --> 00:03:33,079 Speaker 1: through working with state and local governments. I think there 58 00:03:33,080 --> 00:03:35,600 Speaker 1: will be a debate, but in the end, we're dealing 59 00:03:35,640 --> 00:03:38,760 Speaker 1: with a very serious issue. This is a threat to 60 00:03:39,080 --> 00:03:42,200 Speaker 1: our societies, as a threat to the societies of our allies. 61 00:03:42,560 --> 00:03:46,560 Speaker 1: It's a threat to the lives of Americans, and Abraham 62 00:03:46,600 --> 00:03:51,280 Speaker 1: Lincoln during the Civil War temporarily suspended habeas corpus, particularly 63 00:03:51,320 --> 00:03:54,680 Speaker 1: the state of Maryland was a constitutional In the end 64 00:03:54,720 --> 00:03:57,400 Speaker 1: it was found not to be, but it was necessary 65 00:03:57,480 --> 00:03:59,800 Speaker 1: for the state of the of the country to survive. 66 00:04:00,200 --> 00:04:01,800 Speaker 1: And I do think we have to have a debate, 67 00:04:01,840 --> 00:04:04,000 Speaker 1: and I do think we have to get tougher and 68 00:04:04,240 --> 00:04:09,760 Speaker 1: deal with these intelligence issues utilizing modern technology much more aggressively, 69 00:04:10,040 --> 00:04:14,560 Speaker 1: again with court supervision, not just politicians doing whatever they 70 00:04:14,560 --> 00:04:17,760 Speaker 1: want to do with Kissinger associates, and of course it 71 00:04:17,800 --> 00:04:20,480 Speaker 1: is public service with a president and the State Department 72 00:04:20,520 --> 00:04:24,560 Speaker 1: of Secretary Clinton, Robert Hormets is with us. We're seeing 73 00:04:24,560 --> 00:04:28,880 Speaker 1: an urgency, Bob Hormets, as we stagger from terror event 74 00:04:29,160 --> 00:04:32,919 Speaker 1: to terror event, you have three times this morning with 75 00:04:33,000 --> 00:04:37,640 Speaker 1: your wonderful perspective, said that New York City does this differently. 76 00:04:38,240 --> 00:04:41,359 Speaker 1: Why is the air different in New York than in 77 00:04:41,480 --> 00:04:48,440 Speaker 1: other geographies in America and worldwide? Under the direction of 78 00:04:48,760 --> 00:04:53,280 Speaker 1: Mary Bloomberg and Police Commissioner Kelly, a group of set 79 00:04:53,360 --> 00:04:59,480 Speaker 1: up that was specifically aimed at improving intelligence capability, and 80 00:04:59,520 --> 00:05:03,040 Speaker 1: they draw drew on people who worked for the FBI, 81 00:05:03,160 --> 00:05:07,920 Speaker 1: the CIA, the Treasury, other institutions in Washington to help 82 00:05:07,960 --> 00:05:10,640 Speaker 1: do this is a very well developed group. They work 83 00:05:10,680 --> 00:05:13,760 Speaker 1: with groups in France, they work with the Israelis, they 84 00:05:13,800 --> 00:05:16,760 Speaker 1: work with a lot of others. They work through using 85 00:05:16,880 --> 00:05:21,360 Speaker 1: modern technology. They work through surveillance cameras. They work also 86 00:05:21,960 --> 00:05:26,400 Speaker 1: by having good relations with various communities, including the Muslim community. 87 00:05:26,440 --> 00:05:28,359 Speaker 1: There are a lot of Muslims on the police force 88 00:05:28,600 --> 00:05:30,840 Speaker 1: in New York. People forget that you need to work 89 00:05:30,920 --> 00:05:34,480 Speaker 1: with those communities to gain their confidence so that they 90 00:05:34,480 --> 00:05:38,359 Speaker 1: will provide you with information. The police Force, UH and 91 00:05:38,480 --> 00:05:42,320 Speaker 1: other authorities with information on things that they see. So 92 00:05:42,600 --> 00:05:46,800 Speaker 1: working with various communities, minority communities, the Muslims in particular, 93 00:05:46,800 --> 00:05:50,640 Speaker 1: but others as well, it helps to get intelligence. Europe 94 00:05:50,640 --> 00:05:52,760 Speaker 1: has not done this as well and needs to do 95 00:05:52,800 --> 00:05:54,920 Speaker 1: it better. New York can be a good model. It's 96 00:05:54,960 --> 00:05:57,640 Speaker 1: not perfect, but it is a very good models, the 97 00:05:57,680 --> 00:05:59,800 Speaker 1: best in the US and I think one of the 98 00:05:59,800 --> 00:06:02,680 Speaker 1: best in the world, perhaps with the Israelis and and 99 00:06:02,680 --> 00:06:05,520 Speaker 1: and the Paris police are also quite good at this 100 00:06:05,600 --> 00:06:09,400 Speaker 1: also are good models. To say that former Mayor Bloomberg 101 00:06:09,520 --> 00:06:12,320 Speaker 1: is the principal owner of Bloomberg LPs, owner of this 102 00:06:12,480 --> 00:06:14,839 Speaker 1: radio station, and he and Ray Kelly are good friends. 103 00:06:14,880 --> 00:06:16,719 Speaker 1: But I think they have really done a good job 104 00:06:16,720 --> 00:06:19,240 Speaker 1: and they could be helpful. And Juliani also did a 105 00:06:19,279 --> 00:06:21,960 Speaker 1: lot of work on this, so it's not a partisan thing. 106 00:06:22,000 --> 00:06:25,440 Speaker 1: It's something that they've understood. New York's threatened, but many 107 00:06:25,440 --> 00:06:28,240 Speaker 1: other cities, as we know Niece, Paris, about Brussels, and 108 00:06:28,279 --> 00:06:30,360 Speaker 1: many others are threatening if they need to do the same. 109 00:06:30,440 --> 00:06:34,520 Speaker 1: If Dr Kissingers talks about a new world order, part 110 00:06:34,520 --> 00:06:38,320 Speaker 1: of our next administration in a time of stagnant economic 111 00:06:38,400 --> 00:06:42,880 Speaker 1: growth is to jump start a new diplomacy. You were 112 00:06:42,920 --> 00:06:47,000 Speaker 1: just up a toughs celebrating the Fletcher School with a 113 00:06:47,000 --> 00:06:49,800 Speaker 1: lot of smart people on this. What can be our 114 00:06:49,839 --> 00:06:53,920 Speaker 1: new diplomacy To our listeners who are Trump supporters, Clinton 115 00:06:54,040 --> 00:06:57,520 Speaker 1: supporters are just playing worn out well, I think, and 116 00:06:57,880 --> 00:07:01,600 Speaker 1: I've as you've mentioned earlier, I've done a paper on 117 00:07:01,640 --> 00:07:04,839 Speaker 1: this for the Atlantic Council. The goal, in my judgment, 118 00:07:05,040 --> 00:07:11,280 Speaker 1: is to develop economic alliances, economic relationships that underpin our 119 00:07:11,440 --> 00:07:16,120 Speaker 1: geopolitical alliances both in Europe and UH and in Asia, 120 00:07:16,240 --> 00:07:19,200 Speaker 1: through t P P in Asia and through g t 121 00:07:19,360 --> 00:07:21,760 Speaker 1: I P in Europe. That they sound like acronyms and 122 00:07:21,800 --> 00:07:25,800 Speaker 1: their technical but the idea behind this is just what 123 00:07:25,920 --> 00:07:28,400 Speaker 1: Truman and Marshall did after World War Two, and that 124 00:07:28,520 --> 00:07:32,200 Speaker 1: is strength and our economic ties with these countries which 125 00:07:32,360 --> 00:07:36,080 Speaker 1: underpin our political and our geopolitical ties. And we need 126 00:07:36,160 --> 00:07:38,560 Speaker 1: to do this not just with our major allies and 127 00:07:38,640 --> 00:07:41,040 Speaker 1: friends in in the Pacific and in Europe, but we 128 00:07:41,080 --> 00:07:45,760 Speaker 1: need to work with pivotal countries like India, like Turkey, 129 00:07:45,960 --> 00:07:49,040 Speaker 1: like Indonesia. We have to get these countries on our side. 130 00:07:49,600 --> 00:07:52,080 Speaker 1: We've got to run run out of time. Robert Hormett's 131 00:07:52,080 --> 00:08:07,040 Speaker 1: of Kissinger Associates and now Richard hass of the Council 132 00:08:07,160 --> 00:08:12,320 Speaker 1: on Foreign Relations invessador has I heard last night Secretary 133 00:08:12,360 --> 00:08:16,640 Speaker 1: Clinton speak of a need for much greater intelligence. I 134 00:08:16,680 --> 00:08:20,720 Speaker 1: heard Mr Trump ask when will we learn somewhere in 135 00:08:20,760 --> 00:08:25,640 Speaker 1: the middle is a response to the terror of the 136 00:08:25,680 --> 00:08:29,560 Speaker 1: weekend or the terror of the week The pattern is here. 137 00:08:29,600 --> 00:08:33,120 Speaker 1: We all know that what is the has to do 138 00:08:33,559 --> 00:08:37,840 Speaker 1: in American policy? Well, the first thing to do, Thomas, 139 00:08:37,920 --> 00:08:40,040 Speaker 1: to begin with some realism in the sense that this 140 00:08:40,120 --> 00:08:42,400 Speaker 1: is now part of the world we're living in. Everyone 141 00:08:42,440 --> 00:08:45,200 Speaker 1: talks about eliminating terrorism and all that, but it's more 142 00:08:45,240 --> 00:08:48,120 Speaker 1: likely to be a long term problem that we we 143 00:08:48,240 --> 00:08:51,640 Speaker 1: deal with we at best, we we manage, we've got 144 00:08:51,640 --> 00:08:53,760 Speaker 1: to go after it. When we have targets, We've got 145 00:08:53,760 --> 00:08:57,160 Speaker 1: to make ourselves less vulnerable to it. I think a 146 00:08:57,200 --> 00:08:59,120 Speaker 1: big part of the dough is when you think about 147 00:08:59,160 --> 00:09:02,120 Speaker 1: ISIS and groups like it or not simply as organizations 148 00:09:02,160 --> 00:09:05,360 Speaker 1: which which constitute a physical target you can attack, or 149 00:09:05,400 --> 00:09:07,920 Speaker 1: you can try to track their communications and their plans. 150 00:09:08,480 --> 00:09:10,679 Speaker 1: I'm much more worried about it. There was an idea 151 00:09:10,840 --> 00:09:14,000 Speaker 1: or a movement or a network that inspire people presumably 152 00:09:14,040 --> 00:09:16,800 Speaker 1: like this, this guy who drove the truck in these 153 00:09:16,800 --> 00:09:19,680 Speaker 1: so people we've seen recently in the United States, and 154 00:09:19,760 --> 00:09:24,160 Speaker 1: that requires all sorts of contacts with cooperation with various 155 00:09:24,240 --> 00:09:27,760 Speaker 1: communities that are the places where recruits are going to 156 00:09:28,120 --> 00:09:31,320 Speaker 1: come from. So there's there's not a simple or single 157 00:09:31,400 --> 00:09:34,440 Speaker 1: quote unquote solution here. What you're really talking about is 158 00:09:34,520 --> 00:09:38,840 Speaker 1: dealing with this both offensively and defensively on multiple fronts 159 00:09:39,120 --> 00:09:42,040 Speaker 1: in the United States and around the world. Within this 160 00:09:42,520 --> 00:09:47,280 Speaker 1: is the primal scream are we safe? And what do 161 00:09:47,320 --> 00:09:49,560 Speaker 1: we do? How do you find a distinction at the 162 00:09:49,600 --> 00:09:55,199 Speaker 1: consolant foreign relations between your international relations in geo politics 163 00:09:55,760 --> 00:09:59,160 Speaker 1: and the idea of a lone Wolf. The short answer 164 00:09:59,280 --> 00:10:01,280 Speaker 1: is where, by and large, if you will, in the 165 00:10:01,320 --> 00:10:04,240 Speaker 1: macro sense, where we're relatively safe. If you look at 166 00:10:04,240 --> 00:10:06,480 Speaker 1: this moment in history compared to others, we're not facing 167 00:10:06,480 --> 00:10:09,480 Speaker 1: anything like say, the two world wars of the of 168 00:10:09,520 --> 00:10:13,000 Speaker 1: the twentieth century, and the overall numbers of people, thank god, 169 00:10:13,040 --> 00:10:15,839 Speaker 1: who have been killed by terrorists are still relatively small 170 00:10:15,840 --> 00:10:18,000 Speaker 1: if one compares it again to world wars or even 171 00:10:18,000 --> 00:10:20,880 Speaker 1: wars like Korea or Vietnam. On the other hand, in 172 00:10:20,880 --> 00:10:22,839 Speaker 1: the micro sense, we're not safe. And what I think 173 00:10:22,920 --> 00:10:26,080 Speaker 1: Niche shows or San Bernardina shows or anything shows is 174 00:10:26,120 --> 00:10:30,880 Speaker 1: that individuals armed with box cutters or trucks or weapons 175 00:10:31,040 --> 00:10:35,719 Speaker 1: can attack individuals, particularly were large numbers of people congregate, 176 00:10:36,120 --> 00:10:39,760 Speaker 1: be it a chopping, malls or holidays or super bowls, 177 00:10:40,320 --> 00:10:44,480 Speaker 1: you you name it. So that that's the reality. And 178 00:10:44,559 --> 00:10:46,880 Speaker 1: what we can simply do is is try to make 179 00:10:46,880 --> 00:10:51,360 Speaker 1: ourselves less vulnerable, particularly where large numbers congregate. In again, 180 00:10:51,400 --> 00:10:53,760 Speaker 1: and I think the whole large thrust has got to 181 00:10:53,840 --> 00:10:56,840 Speaker 1: be Can we try to slow the recruitment. Can we 182 00:10:56,880 --> 00:10:59,760 Speaker 1: try to discover those who have been radicalized and that 183 00:10:59,800 --> 00:11:02,880 Speaker 1: we're choirs. Probably more intrusive law enforcement, more of a 184 00:11:02,920 --> 00:11:07,040 Speaker 1: domestic issue, greater international cooperation, yes, and above all, but 185 00:11:07,120 --> 00:11:09,920 Speaker 1: we need a leaders of these communities which are producing 186 00:11:09,920 --> 00:11:12,600 Speaker 1: the recruits to delegitimize with these people doing and to 187 00:11:12,679 --> 00:11:17,880 Speaker 1: cooperate with the authorities. Do we have the legal framework 188 00:11:17,920 --> 00:11:20,880 Speaker 1: in place to accomplish what you're talking about? Or is 189 00:11:21,000 --> 00:11:23,640 Speaker 1: this another battle in Congress to get something like the 190 00:11:23,679 --> 00:11:28,520 Speaker 1: Patriot Act through? Certain authorities have expired. So what I'm 191 00:11:28,559 --> 00:11:31,640 Speaker 1: hoping this does that it's always dangerous to do to 192 00:11:31,640 --> 00:11:32,760 Speaker 1: say that. What I'm want to say is that it 193 00:11:32,800 --> 00:11:35,920 Speaker 1: tease up this debating in about what is the proper 194 00:11:35,960 --> 00:11:39,199 Speaker 1: balance where do we want the pendulum to go between 195 00:11:39,320 --> 00:11:43,040 Speaker 1: what you might call individual liberties and protections and collective 196 00:11:43,040 --> 00:11:46,400 Speaker 1: security and what degree of intrusiveness. So we want to 197 00:11:46,440 --> 00:11:49,720 Speaker 1: have about such things as a social media, about email, 198 00:11:49,960 --> 00:11:54,280 Speaker 1: about all other forms of communications. And my my guess 199 00:11:54,360 --> 00:11:56,719 Speaker 1: is that some of the authorities that we need have 200 00:11:56,760 --> 00:11:59,880 Speaker 1: been allowed to lapse. So my my own hope is 201 00:12:00,040 --> 00:12:04,400 Speaker 1: that the pendulum swing slightly emphasized the words slightly more 202 00:12:04,400 --> 00:12:07,160 Speaker 1: in the direction of collective security. But I don't want 203 00:12:07,200 --> 00:12:09,559 Speaker 1: to go remotely as far as some of the things 204 00:12:09,640 --> 00:12:12,800 Speaker 1: I'm hearing out there about giving people, religious tests and 205 00:12:12,840 --> 00:12:17,320 Speaker 1: so forth. I think that is counterproductive in the extreme. Well, 206 00:12:17,400 --> 00:12:19,760 Speaker 1: do you worry that we're in a climate now where 207 00:12:19,840 --> 00:12:22,120 Speaker 1: those things are things you would have dismissed out of 208 00:12:22,160 --> 00:12:26,520 Speaker 1: hand before, might get through the whole question of authoritarianism 209 00:12:26,600 --> 00:12:30,360 Speaker 1: coming up and people wanting a strong leader, wanting laws 210 00:12:30,400 --> 00:12:34,720 Speaker 1: suspended to take care of this issue make us feel safe. Look, 211 00:12:34,720 --> 00:12:37,840 Speaker 1: when people get frightened enough, whether it's because of runaway 212 00:12:37,880 --> 00:12:42,000 Speaker 1: inflation or because of security threats to their physical self, 213 00:12:42,640 --> 00:12:46,080 Speaker 1: they're they're more open to radical ideas. And it's again, 214 00:12:46,120 --> 00:12:48,640 Speaker 1: it's one of the reasons that I constantly urged that 215 00:12:48,720 --> 00:12:51,160 Speaker 1: we do certain things to keep the level of threat 216 00:12:51,160 --> 00:12:53,280 Speaker 1: and the level of vulnerability down. But but I take 217 00:12:53,360 --> 00:12:57,160 Speaker 1: your point, and if if the United States becomes if 218 00:12:57,160 --> 00:12:59,200 Speaker 1: you will, what Israel how to go through twenty years ago, 219 00:12:59,400 --> 00:13:01,640 Speaker 1: we're simply going to a movie theater or to a 220 00:13:01,679 --> 00:13:04,520 Speaker 1: supermarket becomes an active courage. Or if you remember what 221 00:13:04,720 --> 00:13:06,400 Speaker 1: was it twenty five years ago when there was the 222 00:13:06,440 --> 00:13:08,719 Speaker 1: sniper in Washington and simply filling up your car with 223 00:13:08,760 --> 00:13:12,080 Speaker 1: a tank of gas, it can uh have some courage 224 00:13:12,480 --> 00:13:15,120 Speaker 1: that affects our way alick and yeah, people can't do 225 00:13:15,280 --> 00:13:18,600 Speaker 1: normal things, then they are much more open to abnormal 226 00:13:18,760 --> 00:13:20,880 Speaker 1: or radical ideas. So we've got a guard against them. 227 00:13:20,920 --> 00:13:24,880 Speaker 1: If we assume that we're exhausted, I mean we stagger 228 00:13:24,960 --> 00:13:29,480 Speaker 1: as we did last night, from Orlando to Dallas to Nice. 229 00:13:29,760 --> 00:13:32,240 Speaker 1: Maybe the next place will be Brussels. Again, who knows, 230 00:13:32,400 --> 00:13:38,360 Speaker 1: or there's a scream Richard hass for good politicians to do, 231 00:13:38,360 --> 00:13:42,360 Speaker 1: do you have any confidence of democracy can do against 232 00:13:42,480 --> 00:13:45,440 Speaker 1: terror against a lone wolf? Well, again, in the in 233 00:13:45,520 --> 00:13:47,640 Speaker 1: the immediate sense, if it's in a lone wolf who 234 00:13:47,679 --> 00:13:53,120 Speaker 1: comes out without any history like Sydney, sure then you no, 235 00:13:53,200 --> 00:13:56,600 Speaker 1: we're going to be votable. In the specific, granular micro sense, 236 00:13:56,640 --> 00:13:58,840 Speaker 1: what we what we've got to do though, is trying 237 00:13:58,840 --> 00:14:02,840 Speaker 1: to reduce those in that again argues for surveillance and 238 00:14:02,840 --> 00:14:05,959 Speaker 1: and keeping open relationships with with critical leaders and in 239 00:14:06,440 --> 00:14:09,120 Speaker 1: selected communities. And we've got to think about how we 240 00:14:09,160 --> 00:14:11,920 Speaker 1: make our society more resilient. And they mean certainly what 241 00:14:12,240 --> 00:14:14,400 Speaker 1: we've changed the way what we do before we get 242 00:14:14,400 --> 00:14:16,680 Speaker 1: in an airplane. So one of the questions that needs 243 00:14:16,679 --> 00:14:18,440 Speaker 1: to be do we need to change the way we 244 00:14:18,480 --> 00:14:20,760 Speaker 1: act before we get on buses or trains? Do we 245 00:14:20,800 --> 00:14:22,840 Speaker 1: need to change the way we act before we enter 246 00:14:23,040 --> 00:14:26,440 Speaker 1: shopping malls or other places where large numbers congregated. The 247 00:14:26,480 --> 00:14:30,320 Speaker 1: answer maybe yes, even though it means a degree of inefficiency, 248 00:14:30,400 --> 00:14:33,240 Speaker 1: more time, discomfort, a certain laws of privacy when you 249 00:14:33,240 --> 00:14:36,000 Speaker 1: get searched, we maybe say we need to make this 250 00:14:36,120 --> 00:14:38,920 Speaker 1: trade off. So I think that's the kind of conversation 251 00:14:39,480 --> 00:14:42,040 Speaker 1: we as a society need to. Richard Hasks is with 252 00:14:42,160 --> 00:14:45,920 Speaker 1: us from the Council on Foreign Relations, and Richard, we've 253 00:14:45,920 --> 00:14:47,840 Speaker 1: been talking about what we can do and what we 254 00:14:47,840 --> 00:14:51,080 Speaker 1: can expect within the borders of this country. Is there 255 00:14:51,080 --> 00:14:53,920 Speaker 1: more that the United States and its allies can do? 256 00:14:54,560 --> 00:14:57,440 Speaker 1: And we getting to a point where people might say, 257 00:14:57,600 --> 00:15:02,040 Speaker 1: let's just go into ser and Iraq and wipe out 258 00:15:02,080 --> 00:15:04,720 Speaker 1: this caliphate. Well, if you look at what's happened over 259 00:15:04,760 --> 00:15:09,000 Speaker 1: the last few months, ISIS has been losing territory, and 260 00:15:09,400 --> 00:15:12,160 Speaker 1: what we're seeing is as they lose territory and Syrian Iraq, 261 00:15:12,440 --> 00:15:14,760 Speaker 1: rather than solving the problem, what they're doing is turning 262 00:15:14,800 --> 00:15:17,480 Speaker 1: to other techniques. The bombings in Saudi Arabia, the bombings 263 00:15:17,480 --> 00:15:20,360 Speaker 1: in Iraq, the bombings in Turkey. Now this in France, 264 00:15:20,400 --> 00:15:25,080 Speaker 1: either as sponsored actions by ISIS or simply inspired actions 265 00:15:25,080 --> 00:15:26,880 Speaker 1: so yes, we should do more in the Middle East 266 00:15:26,880 --> 00:15:29,640 Speaker 1: for lots of reasons, but we shouldn't kid ourselves that 267 00:15:29,680 --> 00:15:33,440 Speaker 1: we can quote unquote resolve or or or solve this 268 00:15:33,560 --> 00:15:37,560 Speaker 1: problem even if we were phenomenally successful in the region, 269 00:15:37,640 --> 00:15:39,320 Speaker 1: because even by the way, if we were to roll 270 00:15:39,360 --> 00:15:42,040 Speaker 1: back Isis in some of these places, it's not clear 271 00:15:42,120 --> 00:15:44,880 Speaker 1: what sort of authority would would would fill that vacuum. 272 00:15:44,880 --> 00:15:46,920 Speaker 1: It's not as though you've got a bunch of Jeffersonian 273 00:15:46,960 --> 00:15:50,360 Speaker 1: Democrats reading the Federalist papers in Arabic translation who are 274 00:15:50,360 --> 00:15:53,360 Speaker 1: simply waiting there in the wings. So again, we we've 275 00:15:53,400 --> 00:15:55,720 Speaker 1: got to understand that even if we were to be 276 00:15:55,760 --> 00:15:58,320 Speaker 1: somewhat more successful on the ground in the region, that's 277 00:15:58,360 --> 00:16:03,440 Speaker 1: not going to solve the soda. Richard, Thank you so much, 278 00:16:03,480 --> 00:16:06,600 Speaker 1: Ambassador hass As a President of the Council on Foreign Relations. 279 00:16:06,640 --> 00:16:11,480 Speaker 1: Again on a challenging day, after a most difficult evening. 280 00:16:21,640 --> 00:16:24,640 Speaker 1: This is Michael McKie at the rocking In Economic Summit 281 00:16:24,760 --> 00:16:28,200 Speaker 1: out in Victor, Idaho. Tom Keene is in the studio 282 00:16:28,280 --> 00:16:32,000 Speaker 1: in New York and Tom. The Tera attack obviously front 283 00:16:32,000 --> 00:16:35,880 Speaker 1: and center for everybody here, but central bank policy is 284 00:16:36,000 --> 00:16:39,080 Speaker 1: the main subject that most of the attendees have been 285 00:16:39,080 --> 00:16:42,120 Speaker 1: talking about the last couple of days. Without question, that 286 00:16:42,280 --> 00:16:44,040 Speaker 1: is the case, and I'll be honest, Mike, it is 287 00:16:44,040 --> 00:16:46,960 Speaker 1: a wonderful day to be in Victor, Idaho after what 288 00:16:47,000 --> 00:16:50,720 Speaker 1: we've witnessed here last night. We particularly thank Robert Hormet's 289 00:16:50,760 --> 00:16:53,040 Speaker 1: for his comments and for all of us in New 290 00:16:53,120 --> 00:16:56,640 Speaker 1: York at Bloomberg eleventh three oh particularly his comments about 291 00:16:56,680 --> 00:16:59,840 Speaker 1: the work done every day by the intelligence forces and 292 00:17:00,000 --> 00:17:04,359 Speaker 1: police officers in New York City. Onto economics, it is 293 00:17:04,400 --> 00:17:06,560 Speaker 1: a good time to speak with Marvin good friend of 294 00:17:06,600 --> 00:17:11,400 Speaker 1: Carnegie Melon, about our unusual economics. Marvin, as you walk 295 00:17:11,480 --> 00:17:13,960 Speaker 1: into your office at Carnegie Mellon, I've had the privilege 296 00:17:14,040 --> 00:17:16,159 Speaker 1: to speak out there for you and Alan Meltzer. And 297 00:17:16,320 --> 00:17:18,000 Speaker 1: you walk in and your desk is over to the 298 00:17:18,080 --> 00:17:21,200 Speaker 1: left with a Sydney Crosbie poster. Into the right is 299 00:17:21,240 --> 00:17:24,240 Speaker 1: a wonderful bookshelf with all of your books on it. 300 00:17:24,840 --> 00:17:29,000 Speaker 1: Negative interest rates and helicopter money are not in your textbooks, 301 00:17:29,000 --> 00:17:31,639 Speaker 1: are they? No? Not at all? But but you know 302 00:17:31,640 --> 00:17:34,320 Speaker 1: I have to do with them like glasses. What Olivia 303 00:17:34,359 --> 00:17:38,880 Speaker 1: Blanchard was on yesterday and he was heated, calling helicopter 304 00:17:38,960 --> 00:17:43,320 Speaker 1: money a scam is our desperation of stimulus in the 305 00:17:43,359 --> 00:17:46,960 Speaker 1: monetary space a scam. You know. Actually, I think that 306 00:17:47,920 --> 00:17:50,399 Speaker 1: the helicopter money issue, I think in the US is 307 00:17:50,480 --> 00:17:53,679 Speaker 1: probably behind us, because I think we really needed to 308 00:17:54,000 --> 00:17:56,399 Speaker 1: think about moving rates up after the labor report and 309 00:17:56,560 --> 00:17:58,600 Speaker 1: wage growth and so forth for the first time in 310 00:17:59,280 --> 00:18:02,680 Speaker 1: and about and say maybe eight years, ten years. I'm 311 00:18:02,680 --> 00:18:05,880 Speaker 1: worried about what we used to call wage price spiral. 312 00:18:06,200 --> 00:18:08,400 Speaker 1: Make it ahead of myself at this point, but I'm 313 00:18:08,440 --> 00:18:12,199 Speaker 1: I'm changing my perspective. Uh, let me ask you this. 314 00:18:12,600 --> 00:18:15,240 Speaker 1: We see a slight tick up in wages and a 315 00:18:15,280 --> 00:18:17,920 Speaker 1: slight tick up in prices, but no movement at all 316 00:18:18,280 --> 00:18:21,240 Speaker 1: in inflation expectations. Don't we have to see that before 317 00:18:21,240 --> 00:18:24,679 Speaker 1: you could get a wage price spiral because nobody's asking 318 00:18:25,080 --> 00:18:26,679 Speaker 1: it doesn't look like anybody is ready to ask for 319 00:18:26,680 --> 00:18:28,879 Speaker 1: a raise. Put it that way, Well, I mean, you 320 00:18:28,920 --> 00:18:31,720 Speaker 1: are seeing the wage growth numbers move up from you know, 321 00:18:32,320 --> 00:18:35,520 Speaker 1: the two percent range too closer to three percent range, 322 00:18:35,680 --> 00:18:38,000 Speaker 1: and we are near full employment in terms of our 323 00:18:38,080 --> 00:18:41,080 Speaker 1: labor market unemployment rate. The job growth numbers seem to 324 00:18:41,080 --> 00:18:44,639 Speaker 1: be averaging after a week number last months, and the 325 00:18:44,680 --> 00:18:46,800 Speaker 1: vicinity of a hundred and fifty thousand, and that's well 326 00:18:46,840 --> 00:18:49,080 Speaker 1: above what most people think is the estimate of the 327 00:18:49,560 --> 00:18:52,200 Speaker 1: break even point at which we know stabilize the labor force, 328 00:18:52,400 --> 00:18:54,040 Speaker 1: I think, and I might add that, you know, if 329 00:18:54,080 --> 00:18:56,159 Speaker 1: you go back to the sixties, you know, when we 330 00:18:56,200 --> 00:18:58,560 Speaker 1: had the beginnings of the so called Great Inflation, the 331 00:18:58,600 --> 00:19:01,240 Speaker 1: bond markets didn't get that. It's not that the bond 332 00:19:01,320 --> 00:19:04,320 Speaker 1: markets really are able to forecast these things before they happen. 333 00:19:04,480 --> 00:19:07,600 Speaker 1: There in general, I think they're lagging indicator. What happens 334 00:19:07,680 --> 00:19:10,280 Speaker 1: is after inflation starts to move, then the bond markets 335 00:19:10,280 --> 00:19:12,800 Speaker 1: get very nervous. But at the period like this, which 336 00:19:12,840 --> 00:19:14,840 Speaker 1: is more like the late sixties, where we haven't had 337 00:19:14,840 --> 00:19:17,920 Speaker 1: a concern about inflation, I wouldn't expect the bond markets 338 00:19:17,960 --> 00:19:21,480 Speaker 1: to show the expected inflation concern until after the inflation moves. 339 00:19:21,920 --> 00:19:24,159 Speaker 1: But we're not seeing it with the public, either in 340 00:19:24,240 --> 00:19:29,399 Speaker 1: the surveys, the Michigan survey or the New York Here's 341 00:19:29,400 --> 00:19:31,119 Speaker 1: the thing about it, I mean, and that was also 342 00:19:31,160 --> 00:19:33,480 Speaker 1: true in the late sixties. Um, you know, it's it 343 00:19:33,560 --> 00:19:35,520 Speaker 1: comes out of nowhere. And the reason it does is 344 00:19:35,560 --> 00:19:38,040 Speaker 1: because inflation, when it starts to move up, is like 345 00:19:38,080 --> 00:19:40,439 Speaker 1: a kind of an anarchy. It starts from the bottom up. 346 00:19:40,520 --> 00:19:43,119 Speaker 1: It doesn't start from the top down. Firms take matters 347 00:19:43,160 --> 00:19:45,640 Speaker 1: into their own hands. They become a little bit more 348 00:19:46,000 --> 00:19:49,280 Speaker 1: less resistant to wage pressures on the bottom, feeling that 349 00:19:49,320 --> 00:19:51,720 Speaker 1: they can push those off in higher prices. And this 350 00:19:51,800 --> 00:19:54,840 Speaker 1: happens literally bit by bit in the economy, and it 351 00:19:54,920 --> 00:19:56,960 Speaker 1: doesn't become obvious to the people who look at the 352 00:19:56,960 --> 00:19:59,520 Speaker 1: economy as a whole until after it begins to happen. 353 00:19:59,640 --> 00:20:02,520 Speaker 1: That's that thestory of how inflation breaks out after a 354 00:20:02,560 --> 00:20:06,720 Speaker 1: long period of quiescence. I I featured today professor good 355 00:20:06,800 --> 00:20:10,439 Speaker 1: friend c p I and Corse c p I, And 356 00:20:10,480 --> 00:20:13,399 Speaker 1: I'm sorry, course c p I is quadratic and it 357 00:20:13,600 --> 00:20:20,120 Speaker 1: overshoot above two. What's the level of overshoot that's acceptable? Well, 358 00:20:20,200 --> 00:20:22,760 Speaker 1: I think you put your finger on a tom In 359 00:20:22,840 --> 00:20:24,879 Speaker 1: my mind, the big question mark here is how the 360 00:20:24,920 --> 00:20:27,280 Speaker 1: seedtal reserve is going to react viause of it's two 361 00:20:27,320 --> 00:20:30,040 Speaker 1: per so called two percent inflation target. There's a quest. 362 00:20:30,080 --> 00:20:32,000 Speaker 1: There's been a big debate on on the inside, and 363 00:20:32,040 --> 00:20:34,320 Speaker 1: I suppose you you guys have talked about it as well. 364 00:20:34,480 --> 00:20:36,679 Speaker 1: You know, we've had a long period of undershooting the 365 00:20:36,680 --> 00:20:38,440 Speaker 1: two percent inflation target, And there are a lot of 366 00:20:38,440 --> 00:20:40,640 Speaker 1: people who are arguing that the FET should less inflation 367 00:20:40,680 --> 00:20:43,760 Speaker 1: move above the two percent inflation target for quite a while, 368 00:20:43,880 --> 00:20:45,919 Speaker 1: because there's a lot of what you want to do 369 00:20:46,000 --> 00:20:49,280 Speaker 1: after a long period is have inflation average at two percent. 370 00:20:49,400 --> 00:20:51,679 Speaker 1: The SET has not quite been clear about whether or 371 00:20:51,680 --> 00:20:54,000 Speaker 1: not that's its intention or whether it wants to regard 372 00:20:54,080 --> 00:20:56,040 Speaker 1: the two percent target is kind of an upper bound 373 00:20:56,080 --> 00:20:58,720 Speaker 1: that it's shooting for. And so that's what I think 374 00:20:58,800 --> 00:21:00,960 Speaker 1: is the big question market on till the FI settles 375 00:21:01,000 --> 00:21:04,920 Speaker 1: that I think this inflation question is is wide open quickly. 376 00:21:05,240 --> 00:21:08,880 Speaker 1: Professor good Friend, are you advocating a rate rise right 377 00:21:08,880 --> 00:21:12,280 Speaker 1: now at the next meeting? I would, I would accept it. 378 00:21:12,880 --> 00:21:16,320 Speaker 1: But I think certainly the interest rate pass should be well. 379 00:21:16,320 --> 00:21:18,959 Speaker 1: The Fed should resume it's increases, it's it's interest rate 380 00:21:18,960 --> 00:21:21,600 Speaker 1: increases by September. In my views, a quarter point is 381 00:21:21,640 --> 00:21:23,640 Speaker 1: not much to worry about. It's more important to put 382 00:21:23,680 --> 00:21:26,639 Speaker 1: on the table the fit resistance to higher inflation. We 383 00:21:26,720 --> 00:21:28,280 Speaker 1: need to get your back, well, we need to get 384 00:21:28,320 --> 00:21:30,280 Speaker 1: your back for a longer period. Marvin good from thank 385 00:21:30,280 --> 00:21:42,560 Speaker 1: you so much with Carnegie Mellon University to link you 386 00:21:42,600 --> 00:21:46,560 Speaker 1: in what banks are dealing with with the overall bond 387 00:21:46,640 --> 00:21:49,600 Speaker 1: market is one Jeffrey Rosenberg. He has been of immense 388 00:21:49,720 --> 00:21:53,239 Speaker 1: value to us in talking not only about something as 389 00:21:53,280 --> 00:21:57,280 Speaker 1: silly as a single point yield one point five in 390 00:21:57,320 --> 00:22:01,159 Speaker 1: the tenure, but the spread market and the dynamics of 391 00:22:01,240 --> 00:22:04,399 Speaker 1: his fixed income space. Good morning. Did I hear that 392 00:22:04,480 --> 00:22:06,639 Speaker 1: if you get a grand Banks forty eight for the summer, 393 00:22:06,640 --> 00:22:09,639 Speaker 1: you're gonna rent one out and tour Buzzards Bay. You're 394 00:22:09,680 --> 00:22:13,679 Speaker 1: gonna call the boat negative yields? It's funny. I do 395 00:22:13,800 --> 00:22:16,200 Speaker 1: need a boat name that's negative, you know, I mean, 396 00:22:16,240 --> 00:22:20,159 Speaker 1: I mean it's as Olivia Blanchard said yesterday. This is 397 00:22:20,240 --> 00:22:24,040 Speaker 1: perverse the mill you you're working in every day. Yeah, 398 00:22:24,280 --> 00:22:29,439 Speaker 1: there's something really interesting about what a negative yield means. 399 00:22:29,600 --> 00:22:32,879 Speaker 1: You know, there's a there's a fundamental idea in in 400 00:22:32,960 --> 00:22:36,960 Speaker 1: finance about what a positive interest rate means. What a 401 00:22:37,040 --> 00:22:41,040 Speaker 1: positive interest rate means is that a dollar today is 402 00:22:41,040 --> 00:22:45,600 Speaker 1: worth more than a dollar tomorrow. That's a pretty fundamental concept, right, 403 00:22:45,800 --> 00:22:48,560 Speaker 1: pretty simple. But if you have a negative interest rate, 404 00:22:48,840 --> 00:22:52,800 Speaker 1: the implication is that people say, or are implying when 405 00:22:52,840 --> 00:22:55,840 Speaker 1: they invest in things that have negative interest rates, that 406 00:22:55,920 --> 00:22:59,840 Speaker 1: a dollar tomorrow is worth more than a dollar today, 407 00:23:00,240 --> 00:23:03,639 Speaker 1: and that that's really through the looking glass kind of stuff. 408 00:23:03,680 --> 00:23:07,719 Speaker 1: And that's why financial markets have not liked policy intervention 409 00:23:07,760 --> 00:23:10,679 Speaker 1: that brings interest rates to negative. But Mike, what he 410 00:23:10,720 --> 00:23:13,439 Speaker 1: does there is link himself to Becker and Taylor at 411 00:23:13,520 --> 00:23:19,040 Speaker 1: Chicago and Schiller Yale, to the behavioral the emotion of 412 00:23:19,119 --> 00:23:22,719 Speaker 1: this math and finance. The question was raisedef here at 413 00:23:22,760 --> 00:23:27,120 Speaker 1: the Rocky Mountain Summit yesterday of why not just take 414 00:23:27,119 --> 00:23:31,960 Speaker 1: advantage of this opportunity the government sells more treasuries, Uh, 415 00:23:32,160 --> 00:23:35,040 Speaker 1: not just not the United States maybe, but other sovereigns 416 00:23:35,040 --> 00:23:38,760 Speaker 1: sells more of their sovereigns at a negative interest rate, 417 00:23:38,840 --> 00:23:42,240 Speaker 1: and just you know, basically pockets the money and bends 418 00:23:42,240 --> 00:23:46,160 Speaker 1: on infrastructure or something like that because there's no penalty 419 00:23:46,200 --> 00:23:48,760 Speaker 1: to them. You know, people are paying them. Yeah, and 420 00:23:48,760 --> 00:23:51,400 Speaker 1: and you know this is front and center, and we're 421 00:23:51,400 --> 00:23:54,960 Speaker 1: going to see this, uh later this month in Japan. 422 00:23:55,359 --> 00:23:58,639 Speaker 1: Japan is is sort of the preview of where every 423 00:23:58,640 --> 00:24:02,359 Speaker 1: other developed market economy is going. And that is exactly 424 00:24:02,400 --> 00:24:05,800 Speaker 1: the debate. Interest rates are negative. The b o J 425 00:24:06,080 --> 00:24:10,800 Speaker 1: is fully in the process of monetizing debt. Here's the problem. 426 00:24:10,880 --> 00:24:13,720 Speaker 1: The problem is that the issue isn't on how you 427 00:24:13,760 --> 00:24:17,360 Speaker 1: finance it. The issue is how does the stimulus that 428 00:24:17,440 --> 00:24:22,440 Speaker 1: governments can provide with this low cost or negative costing money, 429 00:24:22,520 --> 00:24:25,920 Speaker 1: how is that stimulus really functioning in the real economy. 430 00:24:25,960 --> 00:24:28,520 Speaker 1: And what Tom was talking about the behavioral aspect of 431 00:24:28,520 --> 00:24:31,200 Speaker 1: this stuff is that you have this little thing called 432 00:24:31,280 --> 00:24:35,400 Speaker 1: animal spirits. And sometimes when central banks are so aggressive 433 00:24:35,720 --> 00:24:38,800 Speaker 1: and are so telling the message that things are so 434 00:24:38,840 --> 00:24:41,040 Speaker 1: bad that we need to do things that no one 435 00:24:41,200 --> 00:24:44,560 Speaker 1: really knows what the consequences are, you get this cost 436 00:24:44,680 --> 00:24:48,199 Speaker 1: associated with those policy interventions. And the cost is it 437 00:24:48,320 --> 00:24:51,520 Speaker 1: damages confidence, It damages animal spirits. We saw this in 438 00:24:51,600 --> 00:24:55,240 Speaker 1: Japan in January nine when they announced the policy to 439 00:24:55,280 --> 00:24:57,480 Speaker 1: negative interest rates. It backfired. I want to get you 440 00:24:57,480 --> 00:25:00,400 Speaker 1: in trouble right now. One Laurence think you your day 441 00:25:00,920 --> 00:25:04,639 Speaker 1: make global headlines is a chief executive officer of a 442 00:25:04,680 --> 00:25:07,680 Speaker 1: small startup shop called black Rock and Mr Fink. Good morning, 443 00:25:07,760 --> 00:25:10,359 Speaker 1: Mr Fink, if you're listening to your to Young Rosenberg. 444 00:25:10,840 --> 00:25:14,320 Speaker 1: Mr Fink suggested that the equity markets were acting in 445 00:25:14,400 --> 00:25:17,240 Speaker 1: an odd manner. Would you like to brief our audience, 446 00:25:17,280 --> 00:25:20,520 Speaker 1: including Mr Fink, that this is a fixed income and 447 00:25:20,680 --> 00:25:23,639 Speaker 1: equity bubble, right now, well, you did say at the 448 00:25:23,680 --> 00:25:26,720 Speaker 1: beginning you were going to get me into trouble, so yes, 449 00:25:26,800 --> 00:25:30,760 Speaker 1: you are. Look the the the the issue here is 450 00:25:31,560 --> 00:25:37,520 Speaker 1: very much related to what Bernanke called the portfolio rebalanced channel. 451 00:25:39,160 --> 00:25:43,040 Speaker 1: This is explicit. He said, we're gonna make safe assets 452 00:25:43,119 --> 00:25:46,600 Speaker 1: like bonds yields very unattractive. That's what zero, that's what 453 00:25:46,680 --> 00:25:50,880 Speaker 1: negative means. And so you get everybody incentivized by these 454 00:25:50,920 --> 00:25:53,560 Speaker 1: policies to push out the but it hasn't. But come on, 455 00:25:53,640 --> 00:25:56,880 Speaker 1: it hasn't worked. It's sitting and it's sitting in perverseness 456 00:25:56,880 --> 00:25:59,760 Speaker 1: on balance sheets. It hasn't worked because the point of 457 00:25:59,800 --> 00:26:03,720 Speaker 1: it working was to stimulate through a wealth effect confidence. 458 00:26:03,800 --> 00:26:06,000 Speaker 1: The problem is that stimulating through a wealth of that 459 00:26:06,160 --> 00:26:11,800 Speaker 1: confidence has all sorts of unanticipated and under appreciated costs 460 00:26:11,880 --> 00:26:14,920 Speaker 1: to to that confidence. So it's it's it's it hasn't 461 00:26:14,960 --> 00:26:18,680 Speaker 1: delivered on the growth that was. But when we observe 462 00:26:18,760 --> 00:26:23,120 Speaker 1: this experiment, and if cojed people could say, it really 463 00:26:23,160 --> 00:26:26,280 Speaker 1: hasn't worked as an experiment, what is the outcome when 464 00:26:26,359 --> 00:26:30,159 Speaker 1: we unwind the experience? Can with a huge responsibilities that 465 00:26:30,280 --> 00:26:33,640 Speaker 1: Mr Diamond or Mr Corbett or Mr Fink, can they 466 00:26:33,760 --> 00:26:36,639 Speaker 1: unwind this with smooth glide pass or are there going 467 00:26:36,680 --> 00:26:40,760 Speaker 1: to be jump conditions that are really ugly you can't 468 00:26:40,800 --> 00:26:43,879 Speaker 1: really unworry. We don't know, well, we we don't know, 469 00:26:44,000 --> 00:26:46,320 Speaker 1: and because we don't know, no one's willing to take 470 00:26:46,440 --> 00:26:50,560 Speaker 1: the chance on unwinding it. And and that's exactly what 471 00:26:50,680 --> 00:26:54,440 Speaker 1: the Fed and in its communications this year is has evolved. 472 00:26:54,480 --> 00:26:57,280 Speaker 1: And that's what the post breggsit bond market is really 473 00:26:57,320 --> 00:27:00,400 Speaker 1: telling you. In terms of reaching historic low levels of rates. 474 00:27:00,440 --> 00:27:03,480 Speaker 1: What we've done is we've removed the notion that we're 475 00:27:03,520 --> 00:27:06,959 Speaker 1: going to normalize anytime soon. The Fed said that they 476 00:27:06,960 --> 00:27:09,320 Speaker 1: were going to raise four times this year. Now the 477 00:27:09,359 --> 00:27:12,960 Speaker 1: bond market barely prices them doing anything at all this year. 478 00:27:13,040 --> 00:27:15,560 Speaker 1: That's changing this notion of are we going to get 479 00:27:15,600 --> 00:27:17,639 Speaker 1: back to some kind of normal, are we going to 480 00:27:17,720 --> 00:27:20,960 Speaker 1: be able to unwind these unconventional monetary policies, or are 481 00:27:21,000 --> 00:27:23,280 Speaker 1: we going to have to go the next step? And 482 00:27:23,320 --> 00:27:25,159 Speaker 1: this is what Japan is dealing with. They're gonna have 483 00:27:25,200 --> 00:27:27,400 Speaker 1: to go to the next step. What is the next 484 00:27:27,440 --> 00:27:30,520 Speaker 1: step That the next step we've talked about on this 485 00:27:30,640 --> 00:27:37,080 Speaker 1: program before is variations of helicopter money, monetary policy financing 486 00:27:37,119 --> 00:27:40,880 Speaker 1: fiscal policy, fiscal and monetary policy coordinations. Thank you Olivia 487 00:27:40,960 --> 00:27:44,240 Speaker 1: blon Charge yesterday for calling helicopter money a scam that 488 00:27:44,320 --> 00:27:48,120 Speaker 1: will be part of the interesting dialect. Jeffrey Rosenberg too 489 00:27:48,119 --> 00:27:50,359 Speaker 1: short today, Thank you so much. He is with black 490 00:27:50,480 --> 00:27:52,920 Speaker 1: Rock and hopefully as badge at black Rock will work. 491 00:27:52,960 --> 00:27:58,320 Speaker 1: On Monday, we will see Jeff Rosenberg, strategist for black Rock. 492 00:28:00,720 --> 00:28:04,800 Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and 493 00:28:04,880 --> 00:28:10,280 Speaker 1: listen to interviews on iTunes, SoundCloud, or whichever podcast platform 494 00:28:10,359 --> 00:28:14,480 Speaker 1: you prefer. I'm on Twitter at Tom Keane. Michael McKee 495 00:28:14,520 --> 00:28:18,119 Speaker 1: is at Economy. Before the podcast, you can always catch 496 00:28:18,200 --> 00:28:20,760 Speaker 1: us worldwide. I'm Bloomberg Radio