WEBVTT - The Great Posen/Ryding Debate 0:00:00.200 --> 0:00:04.040 Brunch you by Bank of America Mary Lynch with virtual reality, 0:00:04.320 --> 0:00:09.719 Virtually everything will change. Discover opportunities in a transforming world. 0:00:10.160 --> 0:00:14.440 VI of a mL dot Com slash VR, Mary Lynch, 0:00:14.520 --> 0:00:29.240 Pierced Fenner and Smith Incorporated. Welcome to the Bloomberg Surveillance Podcast. 0:00:29.280 --> 0:00:32.760 I'm Tom Keene with David Gura. Daily we bring you 0:00:32.840 --> 0:00:37.640 insight from the best of economics, finance, investment, and international relations. 0:00:38.120 --> 0:00:43.640 Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com, 0:00:43.640 --> 0:00:50.159 and of course on the Bloomberg. We like to do 0:00:50.320 --> 0:00:53.880 history with David Folcus Landau of Deutsche Bank. Francie Kwan, London. 0:00:53.880 --> 0:00:56.560 I'm Tom keenan New York. Let's get right to it morning. 0:00:56.600 --> 0:00:59.840 Mustard b Virto Gallo and Algebrath writing up a Bloomberg 0:00:59.880 --> 0:01:02.440 View column. And this is on the Great Minsky of 0:01:02.520 --> 0:01:06.600 Washington University St. Louis and Columbia. We may be approaching 0:01:06.720 --> 0:01:10.480 a second Minsky moment. By keeping races at record low levels, 0:01:10.480 --> 0:01:12.920 central banks have made it easier for inefficient firms to 0:01:12.959 --> 0:01:16.160 survive as an a rising tide that lifts all boats. 0:01:16.280 --> 0:01:19.920 Last week, Cherry Yellen said a financial crisis is unlikely 0:01:19.959 --> 0:01:24.640 to happen, and David Folkarts Landau's lifetime if he were alive, 0:01:24.840 --> 0:01:27.600 If Minsky was alive, Minsky would be shaking his head. 0:01:27.680 --> 0:01:31.400 Shaking his head in London. Is David Folkard's Landau. This 0:01:31.480 --> 0:01:35.679 speaks to shocks to instabilities out there is sovereign debt, 0:01:35.880 --> 0:01:38.880 the growing debt, the size of the debt. Is that 0:01:38.959 --> 0:01:45.399 a possibility to be an instability. It's that combined with 0:01:45.600 --> 0:01:47.960 the liquidity overhanged us in the system. I mean, you 0:01:48.000 --> 0:01:50.480 have to look at that together. Uh, there's no doubt 0:01:50.520 --> 0:01:53.520 I think at this point to say that we cannot 0:01:53.520 --> 0:01:56.680 foresee if the financial crisis doing our lifetime strikes me 0:01:56.720 --> 0:02:00.280 as not having learned the lessons of the last thirty 0:02:00.320 --> 0:02:02.080 years as long as I've been in this profession, that's 0:02:02.080 --> 0:02:04.520 been the crisis every eight years, starting at eighty two 0:02:04.520 --> 0:02:06.440 and let Him Dead crisis, and on and on and on, 0:02:06.840 --> 0:02:10.359 Tequila crisis, Asian crisis, and two thousand one and two 0:02:10.360 --> 0:02:13.120 thousand seven, so and none of those, none of those 0:02:13.240 --> 0:02:16.600 we had ever anticipated. All we can't quite see our 0:02:16.639 --> 0:02:18.760 way through how a crisis might happen. And so I 0:02:18.760 --> 0:02:21.239 think that leads me to be quite cautious about where 0:02:21.240 --> 0:02:24.639 we are right now. We've got a twelve trillion central 0:02:24.639 --> 0:02:28.680 bank overheaded liquidity, we have almost a forty to forty 0:02:29.600 --> 0:02:34.800 increase in the government debt outstanding of the major countries. Um. 0:02:34.880 --> 0:02:39.000 So yeah, and and we have become very very used 0:02:39.000 --> 0:02:44.160 to the calming influence of quee uh and so to 0:02:44.280 --> 0:02:47.760 think that there's no no hidden dangers lurking in the 0:02:47.880 --> 0:02:50.359 system as rates go up, I think it is is 0:02:50.400 --> 0:02:53.560 fulati who's the adult in the room that can actually 0:02:53.760 --> 0:02:55.920 get us away from the dangers or preempt the dangers 0:02:56.000 --> 0:02:59.280 that you're just mentioning. It is the FED. I believe 0:02:59.360 --> 0:03:02.240 that the FED will lead the way with a gradual 0:03:02.919 --> 0:03:07.239 rate increase, with very careful communications and with a very 0:03:07.240 --> 0:03:10.200 good understanding of the risk and how the system work. 0:03:10.240 --> 0:03:12.959 When I think of the current fedboard with yelling and 0:03:13.520 --> 0:03:17.160 people like stand Fisher, um, there's little they do not 0:03:17.320 --> 0:03:20.960 understand about this. Yes, but I think it is important 0:03:21.000 --> 0:03:24.480 to recognize that the rates, including at the short end 0:03:24.520 --> 0:03:26.840 but also at the long end, at a historical low, 0:03:27.360 --> 0:03:29.600 and they and they're completely out of whack. If you 0:03:29.639 --> 0:03:33.440 look at the numbers in the UK, for instance, the 0:03:33.600 --> 0:03:37.000 UK ten years ago at the last increase and you 0:03:37.080 --> 0:03:39.960 look at the constellation now of unemployment rates information and 0:03:40.040 --> 0:03:43.520 so they're much they're much more calling for an increase 0:03:43.640 --> 0:03:46.600 in in rate increases now years ago. Yeah, we're not 0:03:46.680 --> 0:03:49.000 doing it. We got to leave it there, David focused Land, 0:03:49.040 --> 0:03:50.960 are generous with your time to thank you so much. 0:03:51.000 --> 0:04:04.320 Look forward to seeing you in New York. Um, we 0:04:04.400 --> 0:04:06.880 are exceptionally lucky in the next half hour to have 0:04:07.000 --> 0:04:10.040 with us John writing of our d Q Economics, he 0:04:10.160 --> 0:04:13.960 has defined the debate since the financial crisis began with 0:04:14.120 --> 0:04:17.919 sharp analysis of central bank policy in the American economy. 0:04:18.360 --> 0:04:20.880 In a special treat this morning, to have with us 0:04:21.040 --> 0:04:24.480 Adam Posen, the head of the Peterson Institute, his public 0:04:24.560 --> 0:04:28.479 service to the Bank of England, and arguably with Richard Clarida, 0:04:28.600 --> 0:04:32.280 are two experts on the relationship of Germany to the 0:04:32.440 --> 0:04:35.040 United States. Adam posing let me begin with you with 0:04:35.120 --> 0:04:38.359 this g twenty meeting. How will President Trump be greeted 0:04:38.480 --> 0:04:42.760 by this Germany you've studied for decades. Thank you for 0:04:42.839 --> 0:04:45.600 having me on tom And in terms of Germany, we 0:04:45.680 --> 0:04:47.960 saw the big signal already a couple of days ago. 0:04:48.440 --> 0:04:52.479 Chancellor Merkel in Hall he campaign and speech materials officially 0:04:52.560 --> 0:04:55.640 stopped preferring to the United States as a friend. Now 0:04:55.760 --> 0:04:58.720 that sounds pretty penny anti. But for Merkel, who's a 0:04:58.760 --> 0:05:04.400 confirmed Atlantis, who's an internationalist, and for Germany especially, that's 0:05:04.400 --> 0:05:07.680 a big shift. So there's gonna be wariness. There isn't 0:05:07.720 --> 0:05:10.799 going to be confrontation. Maybe we have a generational shift 0:05:10.880 --> 0:05:13.520 out opposing with a funeral for a helmet call. Last week, 0:05:13.600 --> 0:05:17.080 I was quite taken by Bill Clinton's comments as well. 0:05:17.320 --> 0:05:19.840 How will Mr Trump be greeted? Do you just assume 0:05:19.920 --> 0:05:23.560 there will be protests honest travels across the continent of Europe. 0:05:25.040 --> 0:05:28.040 I think the Bill Clinton speech was wonderful in this case, 0:05:28.279 --> 0:05:31.360 and it obviously is falling on deaf ears both in 0:05:31.480 --> 0:05:34.960 Washington and Hamburg. Um. I think there will be protests. 0:05:34.960 --> 0:05:38.559 They're always protests at eachwenties these days. But Mr Trump, 0:05:38.600 --> 0:05:41.840 particularly on climate change, it'll get worse. So John writing 0:05:41.880 --> 0:05:43.920 with this, you know, Johnny's wonderful to have you here. 0:05:44.040 --> 0:05:46.680 The tenth anniversary of the financial crisis. We're beginning our 0:05:47.320 --> 0:05:50.440 coverage of that. You know, you notice coordinated chit chat 0:05:50.600 --> 0:05:54.240 last week. Is banks coordinated? Their forward guidance is a 0:05:54.320 --> 0:05:57.680 monetary policy of Europe and the United States in sync 0:05:58.000 --> 0:06:00.320 or do you still look at them as separate beasts. Well, 0:06:00.440 --> 0:06:03.000 I don't think it was coordinated in the sense that 0:06:03.080 --> 0:06:06.880 there was any agreement to coordinate, but the message is clear, 0:06:06.920 --> 0:06:12.960 and I think that you're previous guest exactly the Dodge 0:06:13.000 --> 0:06:18.280 Banks Econmers was right. There's this large central bank overhang. Um, 0:06:18.520 --> 0:06:22.279 there are potential financial risks building, and it's a theme 0:06:22.800 --> 0:06:26.080 that all at least a lot of the central bank, 0:06:26.120 --> 0:06:29.719 particularly Bank of England d CB and of course leading 0:06:30.400 --> 0:06:35.000 the FED is on because there are risks building. You 0:06:35.160 --> 0:06:39.480 had a headline story today about problems in Norway's housing market. 0:06:39.520 --> 0:06:42.640 I mean that's maybe maybe a small thing there. There's Venezuela, 0:06:42.720 --> 0:06:45.640 there's Argentina issuing a hundred a year bond, as if 0:06:46.160 --> 0:06:50.120 we hadn't seen Argentina default with a few times within 0:06:50.200 --> 0:06:53.480 the last couple of decades. So, um, I think there 0:06:53.600 --> 0:06:56.440 is a feeling that central banks need to get on 0:06:56.520 --> 0:07:00.600 with the balance sheet and start reducing the size of 0:07:01.520 --> 0:07:05.720 debtness health Yeah, Adam, do do you worry about the 0:07:05.800 --> 0:07:10.280 central bank policies and policy mistakes red scene? I think, unfortunately, 0:07:10.360 --> 0:07:13.240 everything your guests just said, and most of what focused 0:07:13.280 --> 0:07:16.960 land out said is totally wrong. Um, the FED is 0:07:17.000 --> 0:07:19.400 going to continue tightening for a bit. The ECB and 0:07:19.480 --> 0:07:21.280 Bank of England came out of the b I S 0:07:21.360 --> 0:07:25.560 meeting saying talking tough, but they're not gonna do it. Um, 0:07:25.880 --> 0:07:27.720 then there's no reason for them to talk. At the 0:07:27.920 --> 0:07:30.440 Bank of England, there's an argument on the macro prudential 0:07:30.560 --> 0:07:34.560 side that there's huge imbalances in terms of savings and 0:07:35.080 --> 0:07:39.520 UH real estate and credit in the UK specifically, but 0:07:39.680 --> 0:07:42.680 that's what the macro prow the Financial Policy Committee supposed 0:07:42.680 --> 0:07:44.720 to deal with, so interest rates don't have to do it. 0:07:45.560 --> 0:07:49.520 And given the inflation and other problems in the UK, 0:07:49.760 --> 0:07:52.680 I think they'll be reluctant to move ECB even more so. 0:07:53.320 --> 0:07:56.600 Voidman is talking because he's running for ECB president, not 0:07:56.760 --> 0:08:00.520 because there's no need for policy change. UH. FED is 0:08:00.520 --> 0:08:03.680 also going to basically wimp out, probably starting next spring. 0:08:04.160 --> 0:08:06.720 And finally, all this talk about I saw folkas landa 0:08:06.800 --> 0:08:09.760 you tweeted was talking about the pain or your guests 0:08:09.840 --> 0:08:13.640 just talked about Argentina. Let's get real. Argentina may be 0:08:13.720 --> 0:08:15.960 a very foolish thing to buy a hundred year bond in, 0:08:16.480 --> 0:08:19.720 but it's not gonna affect anybody if anything happens in Argentina. 0:08:20.880 --> 0:08:23.560 Al right, John needs the right of reply because posing 0:08:23.960 --> 0:08:28.040 John Toles says you're completely wrong, Well, time will tell 0:08:28.320 --> 0:08:33.199 and uh as focused and everybody. People fail to anticipate 0:08:33.280 --> 0:08:37.280 the next financial crisis, and they come along every so often, 0:08:37.880 --> 0:08:39.640 he said, every eight years. I don't know that there's 0:08:39.679 --> 0:08:43.920 necessarily that rhythmic cycle to it, but nevertheless, we do 0:08:44.200 --> 0:08:48.880 have a habit of ignoring the lessons of the previous crisis. 0:08:49.080 --> 0:08:52.880 And here we are coming upon the tenth anniversary of 0:08:53.000 --> 0:08:57.240 the worst financial crisis since the Great Depression. Um. But 0:08:57.400 --> 0:08:59.720 it's the wrong lesson, guys. I mean, it's not about 0:08:59.840 --> 0:09:03.400 mon terry policy tightness. It's about financial supervision laxity and 0:09:03.520 --> 0:09:07.439 regulatory laxity. And in the data, David David's assertion about 0:09:07.480 --> 0:09:09.120 the every eight years, which I agree with you is 0:09:09.120 --> 0:09:11.679 a little too rhythmic, is misleading. If you go to 0:09:11.760 --> 0:09:13.880 the run Art Rogue offer the i m F data set, 0:09:14.360 --> 0:09:18.520 there's negative auto correlation of financial crisis. Look at Japan, Canada, Sweden. 0:09:18.840 --> 0:09:21.160 Once you've had a financial crisis, you usually don't have 0:09:21.280 --> 0:09:23.520 one for decades. Look at the US after the thirties. 0:09:23.679 --> 0:09:28.000 But so I think people are chasing ghosts. I would 0:09:28.000 --> 0:09:30.400 just saying, but the problem with macroprudential is it's an 0:09:30.520 --> 0:09:32.599 unused tool in it's not even clear what the tool is. 0:09:32.679 --> 0:09:35.719 I remember being in an Atlanta FED conference and the 0:09:35.920 --> 0:09:39.240 former tragedy of Secretary Paul Rubens said the reality of 0:09:39.320 --> 0:09:43.839 macropudential policy is that there is no reality. Um so 0:09:44.160 --> 0:09:49.000 again it's about monitoring, trying to pick up the vibrations. 0:09:49.080 --> 0:09:52.520 But you have all this liquidity in the system, and 0:09:52.720 --> 0:09:57.600 that does encourage mistake. Let's go to this liquidity doesn't 0:09:57.640 --> 0:10:00.040 do anything. That's the whole point of the last in 0:10:00.200 --> 0:10:04.199 years we're dealing here with with wonderful economic theory for 0:10:04.280 --> 0:10:06.120 a Wednesday, let me get back control of this. Is 0:10:06.160 --> 0:10:08.760 Adam Posing steals the shows he's been known to do. 0:10:09.040 --> 0:10:13.520 Adam Posing is about Duley Garber and dfl versus a 0:10:13.600 --> 0:10:16.559 lot of people like you that really disagree with flow 0:10:16.840 --> 0:10:19.679 analysis has to do folks with stock and flow, and 0:10:19.720 --> 0:10:21.680 we're not gonna get into it. What I want to say, 0:10:21.720 --> 0:10:25.240 Adam Posing is the overlay that John writing in dfl 0:10:25.400 --> 0:10:29.120 C is an odd fixed income market. Do you have 0:10:29.280 --> 0:10:34.720 confidence at central banks can find a stable trajectory from 0:10:35.240 --> 0:10:38.000 where interest rates are now, both on a nominal and 0:10:38.040 --> 0:10:42.280 a real basis, as I fell to things, Tom, and 0:10:42.320 --> 0:10:46.079 I'm sorry to be over stepping with the stuff. The 0:10:46.480 --> 0:10:51.120 first first thing is, uh that in the short term forecast, 0:10:51.160 --> 0:10:54.560 and that was where I was primarily different distinguishing from David, 0:10:54.600 --> 0:10:56.679 and that I just don't think they're going to do 0:10:56.880 --> 0:11:00.160 very much. But in the second point, if things prove 0:11:00.240 --> 0:11:03.839 unstable because of it'll be because of real reasons, like 0:11:03.960 --> 0:11:07.000 the collapse of productivity growth in the UK or the 0:11:07.120 --> 0:11:09.560 collapse of wage growth in the U S and many 0:11:09.640 --> 0:11:12.920 other countries. That is what will destabilize things. It's not 0:11:13.000 --> 0:11:15.880 going to be central banks tightening. The central is just followers. 0:11:16.080 --> 0:11:21.079 Do you see wage growth occurring and will we observe that? 0:11:21.320 --> 0:11:25.000 Friday and the Job's Report interview after your interview, I 0:11:25.040 --> 0:11:30.480 don't see people talking about appropriate wage growth for politicians 0:11:30.640 --> 0:11:35.120 or central bank heads. Mm hmm. Well again it's sort 0:11:35.160 --> 0:11:37.760 of stock and flow. I mean, on a rate basis, 0:11:37.960 --> 0:11:41.120 there's a legitimate case to be made. I thought, I 0:11:41.400 --> 0:11:43.720 don't think it's open and shot, but there's a legitimate 0:11:43.760 --> 0:11:45.840 case to be made that wages are finally picking up 0:11:45.840 --> 0:11:48.559 a bit in the US almost in line with a 0:11:48.720 --> 0:11:52.720 very flat Philips curve, and so unemployment is gonna stop falling, 0:11:52.800 --> 0:11:56.319 wages will go up a small amount. That's the flow basis. 0:11:56.520 --> 0:11:59.360 The stock is. Remember that the wage growth in the 0:11:59.520 --> 0:12:02.360 US and number of other countries with exceptions like Germany 0:12:02.960 --> 0:12:06.360 UM has been very poor for over a decade, and 0:12:06.559 --> 0:12:09.200 so if you're going to catch up, then it's a problem. 0:12:10.280 --> 0:12:13.440 But but on the subject, But on the suguct wage growth. 0:12:13.520 --> 0:12:17.240 Productivity growth in the US has been very poor for 0:12:17.320 --> 0:12:20.920 the last ten years, and our analysis suggests the primary 0:12:20.960 --> 0:12:25.760 reason for that is inadequate capital spending UM. And so 0:12:26.160 --> 0:12:28.719 wage growth isn't out of line at all with what 0:12:28.920 --> 0:12:31.840 the economy is producing. And now if we have wage 0:12:32.000 --> 0:12:36.240 increases ahead of productivity gains, that's going to continue to 0:12:36.280 --> 0:12:40.000 squeeze profits and undermine the capital spending story. So my 0:12:40.200 --> 0:12:43.800 concern isn't that wage growth is too low. My concern 0:12:43.960 --> 0:12:46.600 is productivity growth is too low, which is the real 0:12:46.840 --> 0:12:51.319 underlying reason behind the poor wage gains. Yeah, except the 0:12:51.400 --> 0:12:53.720 two things. First is the profit rate has been going 0:12:53.840 --> 0:12:56.200 up for years, so the idea that profits are being 0:12:56.240 --> 0:12:59.240 squeezed is wrong. So you're right, the wage growth in 0:12:59.320 --> 0:13:01.800 US has been lead some productivity, so we don't expect 0:13:01.880 --> 0:13:04.560 big wage growth. And he since wage growth is continued, 0:13:04.600 --> 0:13:07.240 productivity has been lousy. You're right, so we shouldn't expect 0:13:07.280 --> 0:13:10.080 big wage growth, but there's still been additional profits going up. 0:13:10.440 --> 0:13:13.080 And the second thing is it's not just the investment cycle. 0:13:13.240 --> 0:13:15.720 The causality runs the other way. The reason people aren't 0:13:15.760 --> 0:13:18.800 investing because they don't see the productivity growth. What I 0:13:18.920 --> 0:13:20.880 love about this is the two of you are lightening 0:13:21.040 --> 0:13:24.000 up on emails. Thank you for the many responses in here. 0:13:24.080 --> 0:13:28.600 Here's partial score folks writing seven pos in five. We'll 0:13:28.640 --> 0:13:30.760 see if we can come back and have dr post 0:13:31.120 --> 0:13:33.640 better time here. Well, we'll see. You know it's great. 0:13:33.720 --> 0:13:36.679 This is what we love about Bloomberg Surveillance, A debate 0:13:36.800 --> 0:13:47.240 that's out there. Brunt you by Bank of America, Mary Lynch. 0:13:47.520 --> 0:13:53.000 With virtual reality, virtually everything will change. Discover opportunities in 0:13:53.080 --> 0:13:57.640 a transforming world via a mL dot Com slash VR, 0:13:58.520 --> 0:14:07.360 Mary Lynch, Pierced Fenteran Smith Incorporated. Let's bring in Mega Green. 0:14:07.440 --> 0:14:09.760 Let's get right to it this morning. Mega Green is 0:14:09.800 --> 0:14:13.040 with manual life, looking at not only the international economy, 0:14:13.120 --> 0:14:16.920 but maybe focus here more in the US economy as well, 0:14:17.760 --> 0:14:22.920 which corner, Megan, good morning, is cherry yelling painted into 0:14:23.960 --> 0:14:27.160 within the many themes of domestic economics. How has she 0:14:27.280 --> 0:14:29.960 painted herself into a corner? Is it about wage growth? 0:14:32.160 --> 0:14:34.200 I don't think it is about wage growth. I think 0:14:34.280 --> 0:14:37.000 right now actually a lot of about instlation UM. And 0:14:37.080 --> 0:14:39.240 I'll be interested to see what comes out in the 0:14:39.320 --> 0:14:43.760 minutes later today on the effllency discussion around inflation, because 0:14:43.840 --> 0:14:46.760 it it has been pretty paltry recently that says they're 0:14:46.800 --> 0:14:49.840 looking through it but um, but maybe they shouldn't be UM. 0:14:49.920 --> 0:14:52.800 So we'll learn more about their discussions around that. And 0:14:53.120 --> 0:14:55.640 I do think that is driving a lot. I do 0:14:55.760 --> 0:14:57.880 think that the fat is painted into a corner though 0:14:58.200 --> 0:15:00.720 I'm not not cherry yelling spec aglieve. But the set 0:15:00.880 --> 0:15:03.160 is um in terms of starting to shrink their balance 0:15:03.200 --> 0:15:08.000 sheet before Terry Ellen's term is up next year early 0:15:08.120 --> 0:15:10.160 next year. So I do you think that they will 0:15:10.200 --> 0:15:12.320 probably get that process started because they would like it 0:15:12.400 --> 0:15:16.280 to be automatic and transparent UM and already running by 0:15:16.320 --> 0:15:19.680 the time that she leaves, so that it can't be reversed. Yeah, 0:15:20.200 --> 0:15:23.280 And within all of this, how critical is the jobs report? 0:15:23.360 --> 0:15:25.200 This Friday, and I don't mean the unemployment rate, I 0:15:25.240 --> 0:15:27.960 mean just the whole thing, and also the wage dynamics 0:15:28.000 --> 0:15:30.720 as well for someone like you, is it or does 0:15:30.760 --> 0:15:35.200 it really matter for July UM. I always think that 0:15:35.600 --> 0:15:38.880 you know, each individual jobs reports one data point UM, 0:15:39.040 --> 0:15:41.880 so it's not worth obsessing over UM. But I would 0:15:41.920 --> 0:15:44.640 say that the trend going into this job's report is 0:15:45.120 --> 0:15:48.560 all age growth UM, which which in theory, if we 0:15:48.640 --> 0:15:51.080 had strong wage growth, it would feed into inflation data 0:15:51.120 --> 0:15:53.400 and the set would be hitting its dual mandate UM. 0:15:54.120 --> 0:15:56.600 And it's not now because even though unemployment is a low, 0:15:56.680 --> 0:15:59.080 inflation is looking pretty bad. And I just don't see 0:15:59.080 --> 0:16:01.600 any reason to fact that we will see stronger wage 0:16:01.640 --> 0:16:04.680 growth this time around. UM. Everything you had a single 0:16:04.800 --> 0:16:07.160 data point of good wage growth, you know, analysts will 0:16:07.160 --> 0:16:09.600 all say, well, now, finally a wage growth coming in 0:16:09.720 --> 0:16:12.280 because the labor market is so tight UM, and it 0:16:12.400 --> 0:16:15.680 never lasts, and UM, we're gonna back to continue. So 0:16:15.760 --> 0:16:17.880 I think will continue to be pretty bad wage growth. 0:16:18.040 --> 0:16:20.480 Most of our jobs being added in really low wage, 0:16:21.040 --> 0:16:24.320 low our sectors. And that's partly because what we consume 0:16:24.400 --> 0:16:27.560 now these these mostly services which tend to be low wage, 0:16:27.680 --> 0:16:31.680 low hour um jobs and also because we have such 0:16:31.840 --> 0:16:34.600 a glut of cheap labor globally, So these are big 0:16:34.800 --> 0:16:37.960 kind of global drivers UM that aren't going to change 0:16:38.040 --> 0:16:41.000 month to months. Megan Green coourse with that manual Life 0:16:41.040 --> 0:16:43.600 based in Boston, and Megan, let me ask you about 0:16:44.000 --> 0:16:46.040 what we could learn today from the Federal Reserve from 0:16:46.040 --> 0:16:48.800 their last meeting. Now, I guess three weeks ago about 0:16:48.840 --> 0:16:50.960 the balance sheet, we were talking with John Riding at 0:16:50.960 --> 0:16:53.280 the top of the show about timing. Is there more 0:16:53.320 --> 0:16:54.760 to it than that? What can we learn about, say, 0:16:54.800 --> 0:16:58.560 their their composition of the unwined So I think we 0:16:58.640 --> 0:17:00.720 know a bunch of details now, all that the caps, 0:17:00.760 --> 0:17:03.000 for example, how they plan to make it as transparent 0:17:03.040 --> 0:17:05.240 and automatic as possible. I really do think timing is 0:17:05.320 --> 0:17:07.040 the key thing we can learn about the balance sheet, 0:17:07.080 --> 0:17:10.520 specifically this afternoon, UM, but I think there are a 0:17:10.600 --> 0:17:13.000 few other key things to look at. I mentioned earlier, 0:17:13.600 --> 0:17:16.280 you know, the discussion around how they're really looking at inflation, 0:17:16.760 --> 0:17:20.480 but also financial stability, which they haven't really talked about publicly, 0:17:20.600 --> 0:17:23.040 but they've got to be concerned about given that, you know, 0:17:23.200 --> 0:17:26.480 US equities just continue to score even though policy isn't 0:17:26.520 --> 0:17:29.199 coming through. Economic growth isn't coming through to back it up. 0:17:29.320 --> 0:17:31.600 So there should be a big question about our our 0:17:31.640 --> 0:17:33.600 evaluation is going to catch up with the markets or 0:17:33.640 --> 0:17:36.520 is there gonna inc on our surveillance feed. Right now, 0:17:36.600 --> 0:17:39.080 the President of the United States walking across the tarmac, 0:17:39.160 --> 0:17:42.680 David Gura, this is his second big trip. Mrs Trump 0:17:43.160 --> 0:17:45.720 with him as well as they go to Air Force 0:17:45.840 --> 0:17:49.040 one m the entourage, I would say measured, maybe a 0:17:49.080 --> 0:17:52.199 lot of people on board right now. The President goes 0:17:52.320 --> 0:17:54.400 up the stairs. They don't they don't have a walkway 0:17:54.480 --> 0:17:56.880 like we do. They get the stair to the yeah, 0:17:57.040 --> 0:17:59.879 to the Gulf Stream. It's easier, easier entry for us 0:18:00.200 --> 0:18:03.200 into that into that plane. But he's off to ward 0:18:03.240 --> 0:18:05.520 cycle speaking for tomorrow for the Gulf Stream. We just 0:18:05.600 --> 0:18:08.480 got one of the little plastic step things over at 0:18:08.520 --> 0:18:12.600 cost highly portable. President waving. Now the traditional wave is 0:18:12.600 --> 0:18:14.320 it begin what's sort of it's a sort of wave. 0:18:14.400 --> 0:18:16.200 There's a wave, there's more of a wave by the 0:18:16.680 --> 0:18:19.600 brother there there we go. Now the third wave. We 0:18:19.720 --> 0:18:23.200 got the presidential wave and you know, speaking to France 0:18:23.240 --> 0:18:25.080 and the choir, Matt Miller with coverage of the G 0:18:25.240 --> 0:18:28.879 twenty meetings. In the meeting with Mr Prutin scheduled. I 0:18:28.960 --> 0:18:31.400 believe I could say that it'll be interesting to see 0:18:31.520 --> 0:18:33.760 a little he's got to be focused on North Korea. 0:18:34.200 --> 0:18:36.040 Megan on on the issue of the G twenty. Do 0:18:36.119 --> 0:18:38.119 we expect much to be discussed or to come out 0:18:38.119 --> 0:18:40.359 of this centering on economics? Is this going to be 0:18:40.440 --> 0:18:43.639 squarely about geopolitics and less so about the economic picture? 0:18:44.640 --> 0:18:46.720 So I think that's right. I think the focus will 0:18:46.720 --> 0:18:49.359 be on geopolitics. We might get something out on trade, 0:18:49.560 --> 0:18:52.120 which is you know, regularly a focus of these twenty 0:18:52.160 --> 0:18:55.800 meetings these days, UM, but I think classics will probably 0:18:55.800 --> 0:18:59.360 overshadow at Let me ask you a bit about sort 0:18:59.400 --> 0:19:01.520 of what we're seeing it comes to the consumer in 0:19:01.560 --> 0:19:04.959 the US. Has the picture of the US consumer improved 0:19:05.000 --> 0:19:06.920 at all? What are the indications you're looking at to 0:19:07.040 --> 0:19:10.919 see how the consumers doing so? All of the confidence 0:19:11.040 --> 0:19:14.399 data for the consumer looks fantastic and has much great 0:19:14.640 --> 0:19:18.600 UM since before the election. But you know, particularly UM 0:19:18.720 --> 0:19:20.440 at the end of last year the beginning of this year, 0:19:20.440 --> 0:19:24.600 and we've seen the consumer UM confidence measures sore UM. 0:19:24.720 --> 0:19:28.920 The problem is that there's little UM indication of how 0:19:29.040 --> 0:19:31.680 much consumers are actually going to spend what we've found 0:19:32.240 --> 0:19:35.000 generally is that incomes tend to affect consumer spending more 0:19:35.040 --> 0:19:38.320 than just pure confidence. And so the soft data, all 0:19:38.400 --> 0:19:40.280 the confidence data, looks great. If you look at the 0:19:40.320 --> 0:19:44.240 hard data, so retail sales, new car registrations, it looks 0:19:44.320 --> 0:19:48.600 decidedly less good. Um, new car registrations looked really awful 0:19:48.760 --> 0:19:50.400 at the end of the first quarter of this year. 0:19:50.840 --> 0:19:52.960 They've since come back a little bit, but but they're 0:19:53.000 --> 0:19:56.359 not looking great. Retail sales have just been bumbling along 0:19:56.480 --> 0:19:59.600 in positive territory um but nothing to write home about. 0:19:59.600 --> 0:20:02.600 And of course the consumer drives every recovery in the 0:20:02.720 --> 0:20:05.200 US has done since, you know, in our modern history. 0:20:05.320 --> 0:20:07.080 So the consumer is a thing to be looking at 0:20:07.480 --> 0:20:10.240 in its recovery. But there's little evidence that the confidence 0:20:10.320 --> 0:20:14.240 is really translating into marketsumer spending. But within this is 0:20:14.359 --> 0:20:19.080 just the simple core idea of where the economy is. 0:20:19.440 --> 0:20:23.159 Have we reached escape velocity or do we struggle now 0:20:23.240 --> 0:20:27.080 in America between an okay quarter allows e quarter, an 0:20:27.119 --> 0:20:30.040 okay quarter allows e quarter? In that do you do 0:20:30.240 --> 0:20:32.920 within the micro data and as you say, some of 0:20:32.960 --> 0:20:36.960 it's optimistic, can you say we've reached an escape velocity 0:20:37.320 --> 0:20:41.280 to some form of consistency, so I don't think. So 0:20:41.480 --> 0:20:44.880 we're growing above our potential GDP growth, so that's pretty good. 0:20:44.920 --> 0:20:47.440 Our potential GDP growth is around one and a half percent, 0:20:47.560 --> 0:20:51.040 and we're around two percent. Okay, but is that eurosclerosis? 0:20:51.119 --> 0:20:56.520 Did you just define eurosclerosis um to someund degree to 0:20:56.640 --> 0:21:00.080 percent isn't enough to address the issues that have as 0:21:00.119 --> 0:21:03.760 in for example UM. But among the developed countries percent 0:21:03.840 --> 0:21:06.720 growth is actually pretty good. So we're having an escape 0:21:06.800 --> 0:21:09.280 velocity in the sense that we're gonna go ahead now 0:21:11.520 --> 0:21:14.640 as the administration would like and expects. I don't think. 0:21:14.680 --> 0:21:16.920 I think fundamentally the US is a two percent economy, 0:21:16.960 --> 0:21:19.359 but again it's better than our potential GDP growth, so 0:21:19.480 --> 0:21:22.320 that's not terrible. Back in greening with us from a 0:21:22.359 --> 0:21:24.720 many lifetime, I'm looking here at our Jennifer Jacobs tweeting 0:21:24.720 --> 0:21:27.440 about who is accompanying the president on that trip, Milannia. 0:21:27.480 --> 0:21:29.240 As you said, his his wife, the first lady, will 0:21:29.240 --> 0:21:32.000 be there, Gary Khne going with him as well, and 0:21:33.400 --> 0:21:36.199 as well Mrs Michael Barr. You're supposed to tell us 0:21:36.240 --> 0:21:40.160 when the president Trump's and particularly when they're important. These 0:21:40.280 --> 0:21:44.120 set of Trump of of tweet Trump treats are he's 0:21:44.160 --> 0:21:46.600 gonna getting ready to leave for Poland and we just 0:21:46.840 --> 0:21:50.720 so I'm getting the airplane. David Gura, the United States 0:21:50.840 --> 0:21:52.840 made some of the worst trade deals in world history. 0:21:52.840 --> 0:21:56.080 Why should we continue these deals with countries that do 0:21:56.240 --> 0:21:58.800 not help us? And then this one's more important. I'm 0:21:58.840 --> 0:22:01.000 sure Michael Barr is gonna go. This is more detailed. 0:22:01.040 --> 0:22:05.159 Trade between China and North Korea were almost in the 0:22:05.240 --> 0:22:07.920 fourth quarter. So much for China working with US. Wow, 0:22:08.640 --> 0:22:10.560 but we had to give it a trial. He continues 0:22:10.640 --> 0:22:12.399 there with with that tweet, I'll point out what I 0:22:12.440 --> 0:22:14.560 said with Adam posting just a few moments ago. The 0:22:14.800 --> 0:22:18.800 marl Lago summit took place just I think three months ago, 0:22:18.880 --> 0:22:21.080 maybe three months ago. And then Terry Brandstad the form 0:22:21.080 --> 0:22:22.919 of Governor Vaowa has been on the ground in Beijing 0:22:23.000 --> 0:22:26.320 as the US ambassador to China for just six days. 0:22:26.600 --> 0:22:31.119 Uh so a particularly important it's the important tweet from 0:22:31.119 --> 0:22:34.400 the present there about the relationship between the US and China. 0:22:34.400 --> 0:22:36.480 And or thanks to Megan Green, Megan Green, the chief 0:22:36.480 --> 0:22:38.360 economists that manual life joining us on our phone lines. 0:22:50.400 --> 0:22:54.359 This is truly one of our most popular guests. Luis 0:22:54.400 --> 0:22:58.479