1 00:00:00,120 --> 00:00:02,920 Speaker 1: Brought you by Bank of America, Mary Lynch. Investing in 2 00:00:03,000 --> 00:00:07,840 Speaker 1: local communities, economies and a sustainable future. That's a power 3 00:00:08,080 --> 00:00:12,360 Speaker 1: of global connections. Mary Lynch, Pierce Fenner and Smith Incorporated 4 00:00:12,760 --> 00:00:27,400 Speaker 1: Member s I p C. Welcome to the Bloomberg Surveillance Podcast. 5 00:00:27,840 --> 00:00:31,520 Speaker 1: I'm Tom Keene with David Gura. Daily we bring you 6 00:00:31,560 --> 00:00:36,600 Speaker 1: insight from the best in economics, finance, investment and international relations. 7 00:00:37,000 --> 00:00:41,600 Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com and 8 00:00:41,680 --> 00:00:49,599 Speaker 1: of course on the Bloomberg. The Prime Minister Theresa May 9 00:00:49,680 --> 00:00:53,120 Speaker 1: is about to trigger on SCO fifty UM. We have 10 00:00:53,280 --> 00:00:55,360 Speaker 1: polling that suggests the more than half of the British 11 00:00:55,400 --> 00:00:59,080 Speaker 1: population support her the belief that she is doing a 12 00:00:59,160 --> 00:01:02,280 Speaker 1: good job. Are You're not worried that from your point 13 00:01:02,360 --> 00:01:05,319 Speaker 1: of view, at least the train has now left the station. Yeah, 14 00:01:05,640 --> 00:01:09,640 Speaker 1: of course we're very anxious about this, but the truth 15 00:01:09,760 --> 00:01:12,040 Speaker 1: is that we haven't yet seen what the real terms 16 00:01:12,080 --> 00:01:15,119 Speaker 1: of our departure are. We don't really know yet what 17 00:01:15,160 --> 00:01:18,800 Speaker 1: breggsit means. We have taken the decision of the past 18 00:01:18,840 --> 00:01:20,720 Speaker 1: few months, which wasn't clear by the way at the 19 00:01:20,760 --> 00:01:23,040 Speaker 1: time of the Brexit vote, that we're going to leave 20 00:01:23,080 --> 00:01:26,120 Speaker 1: the Single Market, the Customs Union. About two thirds of 21 00:01:26,120 --> 00:01:30,560 Speaker 1: our trade will now the arrangements will have to be renegotiated. Actually, 22 00:01:30,560 --> 00:01:34,000 Speaker 1: the amount of immigration weakness stop is probably around of 23 00:01:34,040 --> 00:01:35,959 Speaker 1: the total. We will have control over. Most of that 24 00:01:36,000 --> 00:01:40,360 Speaker 1: immigration is not really immigration that's going to impact the 25 00:01:40,400 --> 00:01:43,880 Speaker 1: people of the country. So, um, you know, yes, of course, 26 00:01:44,680 --> 00:01:46,440 Speaker 1: what the government wants to say is the trains left 27 00:01:46,440 --> 00:01:48,880 Speaker 1: the station. There's no way it's ever gonna be derailed. 28 00:01:48,880 --> 00:01:50,960 Speaker 1: We've just got to go ahead. But my view is 29 00:01:51,000 --> 00:01:55,720 Speaker 1: that once people see the pain gain ratio in reality, 30 00:01:55,800 --> 00:01:58,920 Speaker 1: not claim and counterclaim, but facts, then I think they 31 00:01:58,960 --> 00:02:00,680 Speaker 1: may well change their mind. You think facts are going 32 00:02:00,720 --> 00:02:02,920 Speaker 1: to change people's minds. This was an emotional decision in 33 00:02:02,920 --> 00:02:05,520 Speaker 1: many ways by the British people. Yeah, that's a very 34 00:02:05,520 --> 00:02:10,079 Speaker 1: good point. I think, Um, you're right, the emotions with 35 00:02:10,200 --> 00:02:13,520 Speaker 1: a very strong part of it. But you know, if people, 36 00:02:13,560 --> 00:02:16,320 Speaker 1: for example, I think the government is so obsessed with 37 00:02:16,360 --> 00:02:19,920 Speaker 1: Brexit that it so dominates everything they're not dealing with 38 00:02:19,919 --> 00:02:25,120 Speaker 1: our healthcare problems, are unemployment problems, social care, rising crime, 39 00:02:25,680 --> 00:02:27,520 Speaker 1: then I think people will start to say, we'll hang 40 00:02:27,520 --> 00:02:29,400 Speaker 1: on a minute, Actually we want a government focused on 41 00:02:29,400 --> 00:02:33,080 Speaker 1: those things, Mr Prime Minister, good morning. I was quite 42 00:02:33,120 --> 00:02:36,160 Speaker 1: taken by the emotion of your speech and your bluntness 43 00:02:36,240 --> 00:02:40,799 Speaker 1: and directness. Our global audience knows the Labor Party of Blair, 44 00:02:40,960 --> 00:02:44,600 Speaker 1: of Gordon Brown, of Alistair Darling, etcetera. And now it's 45 00:02:44,680 --> 00:02:48,960 Speaker 1: become a jumble. Who did you speak for today? You 46 00:02:49,000 --> 00:02:53,119 Speaker 1: didn't speak for today's Labor Party, did you? And well, 47 00:02:53,280 --> 00:02:57,280 Speaker 1: parts of it probably, but not its leadership. No. But 48 00:02:57,400 --> 00:03:00,799 Speaker 1: I think you see this thing we Brexit is part 49 00:03:00,800 --> 00:03:03,799 Speaker 1: of a much, much bigger debate. It's really about globalization. 50 00:03:04,040 --> 00:03:06,160 Speaker 1: It's about what I would call the open minded approach 51 00:03:06,200 --> 00:03:09,160 Speaker 1: the world versus the closed minded. Now, the reality is 52 00:03:09,680 --> 00:03:13,799 Speaker 1: that that distinction goes across traditional boundaries of left and right, 53 00:03:14,280 --> 00:03:17,480 Speaker 1: and so you know, I think in a way what 54 00:03:17,600 --> 00:03:21,119 Speaker 1: I was articulating was a feeling in a sense that 55 00:03:21,440 --> 00:03:24,200 Speaker 1: some people in the Conservative Party will agree with people 56 00:03:24,200 --> 00:03:26,880 Speaker 1: with the Liberal Democrats and some people in Labor. It's 57 00:03:26,919 --> 00:03:30,079 Speaker 1: not really a sort of partisan position, but I think 58 00:03:30,080 --> 00:03:32,720 Speaker 1: it's a position that has a lot of support, particularly 59 00:03:32,760 --> 00:03:35,840 Speaker 1: amongst younger people. What is the what is the middle 60 00:03:35,920 --> 00:03:40,360 Speaker 1: ground that Prime Minister may must move to identify the 61 00:03:40,520 --> 00:03:45,040 Speaker 1: compromises or the most important compromises that you would suggest 62 00:03:45,080 --> 00:03:49,280 Speaker 1: the Prime Minister should make. I think the key thing 63 00:03:49,560 --> 00:03:52,680 Speaker 1: is that we retain the ability to trade in an 64 00:03:52,720 --> 00:03:57,200 Speaker 1: easy way with our main trading partners, and we certainly 65 00:03:57,560 --> 00:04:02,040 Speaker 1: maintain close links around issues like the security, the environment 66 00:04:02,120 --> 00:04:05,480 Speaker 1: and so on. The problem, though, and this is the problem, 67 00:04:05,560 --> 00:04:07,360 Speaker 1: to be fair to the Prime Minister, she faces and 68 00:04:07,400 --> 00:04:09,640 Speaker 1: she's you know, this is not an easy task, and 69 00:04:09,680 --> 00:04:12,680 Speaker 1: I'm at one level deeply sympathetic to her about it. 70 00:04:13,120 --> 00:04:16,640 Speaker 1: But the problem is there are no easy ways of 71 00:04:16,800 --> 00:04:21,039 Speaker 1: maintaining all those links whilst doing what the people on 72 00:04:21,120 --> 00:04:24,000 Speaker 1: the right who are really driving this agenda, the far 73 00:04:24,160 --> 00:04:28,880 Speaker 1: right want. So if, for example, you don't want people 74 00:04:28,920 --> 00:04:31,960 Speaker 1: from Europe to come here, or you want big restrictions 75 00:04:32,000 --> 00:04:35,159 Speaker 1: on them, it's very hard to reconcile that with membership 76 00:04:35,160 --> 00:04:36,960 Speaker 1: of the Single Market, you see what I mean. So 77 00:04:37,279 --> 00:04:39,479 Speaker 1: I think the problem is I can say what I 78 00:04:39,520 --> 00:04:43,320 Speaker 1: think she should do from the perspective of what would 79 00:04:43,320 --> 00:04:44,880 Speaker 1: be in the interests of the country, but I'm not 80 00:04:44,920 --> 00:04:48,279 Speaker 1: sure it's negotiable given the red lines she set herself. 81 00:04:48,680 --> 00:04:51,400 Speaker 1: How does change get affected here. I'm curious to see 82 00:04:51,440 --> 00:04:55,239 Speaker 1: how you think the mechanism will work Parliamentarians have largely 83 00:04:55,279 --> 00:04:57,760 Speaker 1: back to the Prime Minister. They have made it very 84 00:04:57,800 --> 00:05:00,720 Speaker 1: clear that they feel whether or not they think she's 85 00:05:00,760 --> 00:05:03,000 Speaker 1: on the right course, that they will back her. Well, 86 00:05:03,000 --> 00:05:04,680 Speaker 1: the House of Laws, are you arguing that the House 87 00:05:04,680 --> 00:05:07,159 Speaker 1: of Lords to step in? Are you calling for another referendum? 88 00:05:07,200 --> 00:05:11,080 Speaker 1: You've argued against kind of governing by referendum in the past. 89 00:05:11,440 --> 00:05:13,480 Speaker 1: What exactly are you arguing for in here in terms 90 00:05:13,480 --> 00:05:16,000 Speaker 1: of the process. Yes, this is a really important point 91 00:05:17,240 --> 00:05:21,920 Speaker 1: right now. There is no way that the many millions 92 00:05:21,960 --> 00:05:25,400 Speaker 1: of people who feel that this decision is wrong, and 93 00:05:25,400 --> 00:05:28,279 Speaker 1: who particularly now think we are going down the route 94 00:05:28,279 --> 00:05:31,800 Speaker 1: of Briggs at any cost, right, there is no way 95 00:05:31,800 --> 00:05:34,279 Speaker 1: they can articulate their feelings. So what I'm saying is 96 00:05:34,320 --> 00:05:38,320 Speaker 1: all these different groups in different political parties who are 97 00:05:39,240 --> 00:05:41,960 Speaker 1: agitating around this issue has saying, come on, let's actually 98 00:05:41,960 --> 00:05:44,919 Speaker 1: think what we're doing here, that we've got to combine together. 99 00:05:45,080 --> 00:05:48,599 Speaker 1: And then frankly, members of Parliament who at the moment 100 00:05:48,680 --> 00:05:50,720 Speaker 1: feel okay, this is just going to happen, and so 101 00:05:50,760 --> 00:05:54,040 Speaker 1: what's the point of me speaking out against it. You've 102 00:05:54,080 --> 00:05:59,240 Speaker 1: got to give them the strength, the courage, the protection 103 00:05:59,279 --> 00:06:01,360 Speaker 1: if you liked to be able to say we'll hang on. 104 00:06:01,480 --> 00:06:04,960 Speaker 1: My constituents are now saying to me we need certain 105 00:06:05,000 --> 00:06:07,560 Speaker 1: guarantees about this, or my constituents, and I was saying 106 00:06:07,560 --> 00:06:09,800 Speaker 1: to me, we don't like the way this is turning out. 107 00:06:09,839 --> 00:06:12,080 Speaker 1: Are you suggesting that coless around you? Are you the 108 00:06:12,160 --> 00:06:15,160 Speaker 1: right person for this? And if if you're not, who is? Well? 109 00:06:15,200 --> 00:06:16,640 Speaker 1: I don't know that you. I don't think you need 110 00:06:16,680 --> 00:06:19,080 Speaker 1: a person. I think you need a movement. I think 111 00:06:19,160 --> 00:06:20,840 Speaker 1: you need I mean, the one advantage is going to 112 00:06:20,880 --> 00:06:23,320 Speaker 1: start this well, I think there are lots of people 113 00:06:23,320 --> 00:06:26,120 Speaker 1: already starting it. The question is really how you coordinate it. 114 00:06:26,160 --> 00:06:28,839 Speaker 1: And that's for the different leaders of the different groups 115 00:06:28,880 --> 00:06:31,480 Speaker 1: to come together and different people in different political parties 116 00:06:31,520 --> 00:06:33,920 Speaker 1: to come together. But it's not you know, one advantage 117 00:06:33,920 --> 00:06:37,360 Speaker 1: of today's politics is that it does change fast. So 118 00:06:37,839 --> 00:06:40,240 Speaker 1: I just think, you know, right now we need to 119 00:06:40,279 --> 00:06:44,000 Speaker 1: be making the arguments, getting out to people the facts, 120 00:06:44,080 --> 00:06:47,839 Speaker 1: and then tracking very carefully this negotiation. Remember we haven't 121 00:06:47,920 --> 00:06:51,640 Speaker 1: yet begun the process of negotiation, so we don't know 122 00:06:51,720 --> 00:06:54,559 Speaker 1: what terms were being offered. Once we know, we've surely 123 00:06:54,600 --> 00:06:56,039 Speaker 1: got a right to say we like it or we 124 00:06:56,080 --> 00:06:59,960 Speaker 1: don't like it. Prime Minister on this show, the other day, 125 00:07:00,080 --> 00:07:03,520 Speaker 1: Deutscher Bank suggested that we would see a substantially weaker 126 00:07:03,640 --> 00:07:07,279 Speaker 1: pound sterling, that we would see a depreciation in pound 127 00:07:07,320 --> 00:07:10,960 Speaker 1: sterling given Brexit and given the path of the United 128 00:07:11,080 --> 00:07:15,520 Speaker 1: Kingdom economy. How much depreciation in sterling can all of 129 00:07:15,560 --> 00:07:20,320 Speaker 1: the United Kingdom take? Well, that is a very good question, 130 00:07:20,400 --> 00:07:24,400 Speaker 1: and it goes directly to what I'm saying, because you know, 131 00:07:24,920 --> 00:07:29,240 Speaker 1: I don't think people expected this who voted for Brexit 132 00:07:29,280 --> 00:07:32,720 Speaker 1: really expected a large fall in sterling. I don't think 133 00:07:32,760 --> 00:07:37,920 Speaker 1: they quite appreciated this was the financial markets future, you know, 134 00:07:38,040 --> 00:07:41,760 Speaker 1: and prediction as it were, that as to the course 135 00:07:41,760 --> 00:07:45,640 Speaker 1: of the British economy, and already some of the important 136 00:07:45,640 --> 00:07:47,760 Speaker 1: food stuffs and the things that people rely on the 137 00:07:47,760 --> 00:07:49,920 Speaker 1: shops has started to go up, so our inflation rate 138 00:07:50,000 --> 00:07:53,600 Speaker 1: is going up. That's a classic example of where as 139 00:07:53,640 --> 00:07:57,080 Speaker 1: the pain of this becomes clear, people are going to say, okay, 140 00:07:57,120 --> 00:08:00,320 Speaker 1: so let's go back and ask why we really did this. 141 00:08:01,000 --> 00:08:04,000 Speaker 1: And I think when you do that, you go back 142 00:08:04,040 --> 00:08:09,040 Speaker 1: to certain things and certain problems that when you analyze it, 143 00:08:09,160 --> 00:08:12,600 Speaker 1: Brexit isn't really going to affect those things. So this 144 00:08:12,680 --> 00:08:15,040 Speaker 1: is this is a very good example of what exactly 145 00:08:15,040 --> 00:08:18,200 Speaker 1: what I'm saying, Mr, Mr Prime Minister. I have to 146 00:08:18,200 --> 00:08:20,320 Speaker 1: ask a delicate question and it has to do with 147 00:08:20,400 --> 00:08:24,440 Speaker 1: the firestorm in Washington. At this time it is presumed 148 00:08:24,440 --> 00:08:27,720 Speaker 1: that the President will visit Prime Minister May. Should he 149 00:08:27,760 --> 00:08:31,560 Speaker 1: be allowed to speak and to enter Westminster Hall at 150 00:08:31,560 --> 00:08:36,679 Speaker 1: your House of Commons. Well, whether he enters Westminster Hall 151 00:08:36,679 --> 00:08:39,640 Speaker 1: and addresses does the Parliament that's a matter for Parliament 152 00:08:39,679 --> 00:08:41,840 Speaker 1: and I won't comment on it, but of course he 153 00:08:41,880 --> 00:08:47,400 Speaker 1: will come here and look, whatever the situation is, Um, 154 00:08:47,440 --> 00:08:52,080 Speaker 1: the British American relationship is important. I certainly am not 155 00:08:52,160 --> 00:08:56,360 Speaker 1: criticizing the Prime Minister for reaching out to President Trump. 156 00:08:56,480 --> 00:09:00,480 Speaker 1: It's important that she builds a strong relationship and and 157 00:09:00,520 --> 00:09:03,760 Speaker 1: frankly right now I've got enough in my hands without 158 00:09:04,080 --> 00:09:08,800 Speaker 1: entering into your political debate. But the final question we 159 00:09:08,840 --> 00:09:11,680 Speaker 1: sit here in the City of London. How should, how 160 00:09:11,840 --> 00:09:15,800 Speaker 1: can should the financial services sector to be protected in 161 00:09:15,840 --> 00:09:18,600 Speaker 1: this whole process? And again the debate in the last 162 00:09:18,600 --> 00:09:21,679 Speaker 1: few days about Vuxhall and its future um and what 163 00:09:21,760 --> 00:09:23,640 Speaker 1: could happen there and the deal that was given to 164 00:09:23,720 --> 00:09:27,120 Speaker 1: this end hap, how can individual parts of the British 165 00:09:27,120 --> 00:09:32,120 Speaker 1: economy be protected? Should individual parts be protected or should 166 00:09:32,120 --> 00:09:34,000 Speaker 1: actually be a level playing field. Well, I think for 167 00:09:34,040 --> 00:09:36,360 Speaker 1: the financial sector is such a huge part of our economy, 168 00:09:36,360 --> 00:09:39,040 Speaker 1: we've got to make sure the arrangements and satisfactory. But 169 00:09:39,080 --> 00:09:41,040 Speaker 1: you see there again, I think it's hard to do that. 170 00:09:41,800 --> 00:09:44,679 Speaker 1: You know, you you can move to sort of equivalence arrangements, 171 00:09:44,720 --> 00:09:47,440 Speaker 1: but that doesn't really deal with the problems the financial 172 00:09:47,480 --> 00:09:52,600 Speaker 1: sector has. And again my worry is that that the 173 00:09:52,640 --> 00:09:57,480 Speaker 1: financial sector, unless it's given some fairly clear guarantees, soon 174 00:09:57,559 --> 00:10:00,840 Speaker 1: will start to make decisions in a mounts of what 175 00:10:01,160 --> 00:10:05,000 Speaker 1: the final outcome is of the negotiation. So we have 176 00:10:05,080 --> 00:10:19,200 Speaker 1: to see. Joining us now is Howard Ward. He's chief 177 00:10:19,240 --> 00:10:22,440 Speaker 1: investment officer of Growth Equities at Cabilly Funds. And let 178 00:10:22,440 --> 00:10:23,920 Speaker 1: me just pick up by talking a little bit about 179 00:10:23,920 --> 00:10:26,160 Speaker 1: growth with you, Howard. Uh you said the longer term 180 00:10:26,160 --> 00:10:28,319 Speaker 1: outlook for growth has brightened in a recent I know 181 00:10:28,440 --> 00:10:30,840 Speaker 1: what's your what's your outlook? We still hear talk of 182 00:10:30,840 --> 00:10:33,280 Speaker 1: of reaching four percent growth? Any likelihood of that happening 183 00:10:33,280 --> 00:10:37,079 Speaker 1: as you see it, Um, David, I think four percent 184 00:10:37,240 --> 00:10:39,120 Speaker 1: is going to be a stretch. And this just gets 185 00:10:39,160 --> 00:10:43,040 Speaker 1: back to the the mathematics of growth, which is a 186 00:10:43,120 --> 00:10:47,480 Speaker 1: function of the productivity per worker and productivity growth is 187 00:10:47,520 --> 00:10:51,760 Speaker 1: an emoic right now. And the growth in the labor force, UH, 188 00:10:51,840 --> 00:10:56,319 Speaker 1: so we can growth in the labor force is about one. UM. 189 00:10:56,360 --> 00:10:58,760 Speaker 1: You can have people working longer hours, that's not gonna 190 00:10:58,760 --> 00:11:02,040 Speaker 1: get you very far. So when you combine UH anemic 191 00:11:02,040 --> 00:11:06,360 Speaker 1: productivity growth with a very slow growth labor force, getting 192 00:11:06,360 --> 00:11:09,560 Speaker 1: to four is a stretch. Frankly, David, getting to three 193 00:11:10,000 --> 00:11:11,520 Speaker 1: for more than a couple of quoters is going to 194 00:11:11,559 --> 00:11:13,320 Speaker 1: be a stretch. What did you hear from the feder 195 00:11:13,400 --> 00:11:15,600 Speaker 1: Jennet Yellen this week when she was testifying on Capitol 196 00:11:15,640 --> 00:11:18,120 Speaker 1: How much is the economy she wants to see mirror 197 00:11:18,160 --> 00:11:21,400 Speaker 1: what we're seeing in the U. S economy right now. Well, 198 00:11:21,440 --> 00:11:24,440 Speaker 1: that's a really good question. UM. I happen to have 199 00:11:24,480 --> 00:11:29,400 Speaker 1: tremendous respect for Janet Yellen. I think the Federal Reserve Board, however, 200 00:11:29,480 --> 00:11:31,840 Speaker 1: has a history of being late to the game when 201 00:11:31,840 --> 00:11:38,400 Speaker 1: it comes to UH executing monetary policy. And if you'll recall, um, 202 00:11:38,480 --> 00:11:40,800 Speaker 1: we went into two thousand and sixteen with the Fed 203 00:11:40,880 --> 00:11:44,200 Speaker 1: telegraphing four interest rate hikes. They did one and that 204 00:11:44,280 --> 00:11:47,400 Speaker 1: was in December. The previous year, they did one that 205 00:11:47,480 --> 00:11:51,000 Speaker 1: was in December and during the course of two thousand 206 00:11:51,000 --> 00:11:54,199 Speaker 1: and sixteen. Following that two thousand and fifteen increase in 207 00:11:54,240 --> 00:11:57,319 Speaker 1: the rates, we hit a record low on tenure traceries 208 00:11:57,360 --> 00:12:01,000 Speaker 1: of about one thirty five last summer. Part of that 209 00:12:01,040 --> 00:12:03,440 Speaker 1: had to do with, of course, the voting the Brexit vote, 210 00:12:03,440 --> 00:12:07,800 Speaker 1: which created a downward shift in interest rates. But um, 211 00:12:07,840 --> 00:12:10,760 Speaker 1: I think the FED talking about raising rates three times 212 00:12:10,760 --> 00:12:14,680 Speaker 1: this year is way optimistic. We've raised races twice in 213 00:12:14,679 --> 00:12:16,440 Speaker 1: the last ten years. Are we're gonna do it three 214 00:12:16,440 --> 00:12:19,360 Speaker 1: times this year? I don't think so. Not when the 215 00:12:19,400 --> 00:12:23,360 Speaker 1: personal consumption expenditure deflators one point seven percent year over year. 216 00:12:23,600 --> 00:12:25,920 Speaker 1: The Fed's target is two percent, It's not there yet. 217 00:12:26,200 --> 00:12:28,320 Speaker 1: We're looking at GDP growth this year of two to 218 00:12:28,360 --> 00:12:31,280 Speaker 1: two and a half percent, certainly not a runaway economy. 219 00:12:31,320 --> 00:12:33,720 Speaker 1: We're looking at corporate profit growth, it's going to be 220 00:12:33,840 --> 00:12:37,319 Speaker 1: single digits. I think at best and retail sales and 221 00:12:37,360 --> 00:12:39,080 Speaker 1: think you're gonna be flagging. I think a lot of 222 00:12:39,120 --> 00:12:41,560 Speaker 1: the economic data is about to roll over. I think 223 00:12:41,559 --> 00:12:44,360 Speaker 1: the January data was helped by seasonal adjustments, which will 224 00:12:44,400 --> 00:12:46,920 Speaker 1: not be so kind over the next couple of months. 225 00:12:46,920 --> 00:12:50,840 Speaker 1: So I'm concerned the FED is setting policy based on 226 00:12:50,920 --> 00:12:54,080 Speaker 1: lagging and coincident indicators, and they're not focusing enough on 227 00:12:54,720 --> 00:12:58,120 Speaker 1: the hundred hundred plus basis point increase and interest rates, 228 00:12:58,200 --> 00:13:01,880 Speaker 1: the eight basis point increase in mortgage rates, the seven 229 00:13:01,920 --> 00:13:05,480 Speaker 1: percent increase in the dollar, the thirty increase in fuel 230 00:13:05,520 --> 00:13:07,640 Speaker 1: prices over the last twelve months. We got to come 231 00:13:07,640 --> 00:13:09,280 Speaker 1: back and talk about that, because that was a real 232 00:13:09,280 --> 00:13:12,960 Speaker 1: backstory to the conversation yesterday with a vice chairman, David 233 00:13:12,960 --> 00:13:17,760 Speaker 1: gurn talking David together together. We missed to we went 234 00:13:17,760 --> 00:13:20,440 Speaker 1: to the Trump Hotel just to make an appearance. We'll 235 00:13:20,440 --> 00:13:23,400 Speaker 1: save that for another time. Howard, what you're talking about 236 00:13:23,880 --> 00:13:28,000 Speaker 1: is the markets, I guess, helping the fread to a 237 00:13:28,080 --> 00:13:33,400 Speaker 1: more restrictive policy. How many rate increases is the equivalency 238 00:13:33,520 --> 00:13:36,000 Speaker 1: of all that you just said. Is Stanley Fisher and 239 00:13:36,040 --> 00:13:40,360 Speaker 1: Jenny Ellen been given the next rate increase by market adjustment. 240 00:13:40,600 --> 00:13:43,079 Speaker 1: I think that there's a lot of momentum towards the 241 00:13:43,440 --> 00:13:46,960 Speaker 1: next rate increase, and again that's based on the current data, 242 00:13:47,480 --> 00:13:50,640 Speaker 1: which I believe is about to roll over um. And 243 00:13:50,679 --> 00:13:53,000 Speaker 1: even if you look at oil prices right now, technically 244 00:13:53,080 --> 00:13:55,040 Speaker 1: they're looking a little top heavy, as if maybe they're 245 00:13:55,120 --> 00:13:57,080 Speaker 1: rolling over. When you look at interest rates, we had 246 00:13:57,480 --> 00:14:01,120 Speaker 1: we hit to sixty in mid December, we're under We're 247 00:14:01,120 --> 00:14:03,760 Speaker 1: close to to forty now. Maybe rates are rolling over. 248 00:14:04,080 --> 00:14:07,440 Speaker 1: I think that, um, that the FED is late, and 249 00:14:07,520 --> 00:14:10,360 Speaker 1: I think that they need to be more focused on 250 00:14:10,760 --> 00:14:13,560 Speaker 1: the tightening and financial conditions. What I didn't mention is 251 00:14:14,280 --> 00:14:17,520 Speaker 1: banks are becoming more restrictive in their lending policies, and 252 00:14:17,559 --> 00:14:21,520 Speaker 1: that's a factor. Um. The tremendous policy uncertainty coming up 253 00:14:21,600 --> 00:14:24,200 Speaker 1: coming from the Trump administration is another thing that they 254 00:14:24,200 --> 00:14:27,400 Speaker 1: should be thinking about. Trade is already being hurt. I believe, 255 00:14:27,400 --> 00:14:30,360 Speaker 1: even though there's been no trade changes yet in policy, 256 00:14:30,680 --> 00:14:34,040 Speaker 1: that's coming and it's already causing some changes in behavior, 257 00:14:34,160 --> 00:14:37,960 Speaker 1: not for the better, I might add. So Um, I 258 00:14:38,000 --> 00:14:41,200 Speaker 1: think that that that the FED is being overly influenced 259 00:14:41,240 --> 00:14:43,960 Speaker 1: by the data that's hot off the press and by 260 00:14:43,960 --> 00:14:46,240 Speaker 1: the market, and I think they need to take a 261 00:14:46,280 --> 00:14:49,720 Speaker 1: step back and take in the whole of the U. 262 00:14:49,800 --> 00:14:53,040 Speaker 1: S economy. We really don't have an inflation problem. We're 263 00:14:53,080 --> 00:14:56,080 Speaker 1: still below the Fed's target. We don't have runaway growth. 264 00:14:56,600 --> 00:14:58,960 Speaker 1: We do have wage increases, which I know they're focused 265 00:14:59,000 --> 00:15:01,880 Speaker 1: on because y'allon is a labor economist help help the 266 00:15:01,960 --> 00:15:04,800 Speaker 1: dumbest person listening or doing this. That would be me 267 00:15:05,280 --> 00:15:09,400 Speaker 1: horse and cart. Is the Fed the cart or the horse? 268 00:15:10,040 --> 00:15:14,600 Speaker 1: About the wage dynamic, either nominal wage growth or rising 269 00:15:14,760 --> 00:15:18,480 Speaker 1: inflation real wage growth? Who gets to be the horse? 270 00:15:19,440 --> 00:15:22,000 Speaker 1: That's a good question. I'm not sure I even know 271 00:15:22,080 --> 00:15:24,960 Speaker 1: the answer to that. I think that's really important because 272 00:15:24,960 --> 00:15:29,320 Speaker 1: the books that Professor Ward is correct. Professor or Finds 273 00:15:29,360 --> 00:15:32,680 Speaker 1: would say, we don't know the answer to that. Yeah, 274 00:15:31,840 --> 00:15:35,640 Speaker 1: that's that's tough. It happens, but we're not sure exactly 275 00:15:35,640 --> 00:15:39,160 Speaker 1: how it's transmitted. So but we do know that there 276 00:15:39,200 --> 00:15:41,680 Speaker 1: is upward pressure run wages. We do know the unemployment 277 00:15:41,760 --> 00:15:46,359 Speaker 1: rates as low as it's been in quite They gotta wait, yeah, 278 00:15:46,560 --> 00:15:48,920 Speaker 1: isn't that I mean, you're the money pro here, They 279 00:15:48,960 --> 00:15:52,520 Speaker 1: gotta wait. Yeah. I think if the Fed, for example, comments, 280 00:15:52,560 --> 00:15:57,720 Speaker 1: I think, um was it rosen coos right? I think 281 00:15:57,720 --> 00:16:00,360 Speaker 1: he suggested this week that they, oh he he's at 282 00:16:00,440 --> 00:16:05,120 Speaker 1: least three increases this year. I think that's completely um crazy. 283 00:16:05,280 --> 00:16:08,240 Speaker 1: On this Friday, whether it was Lulu Kaiser and Frank 284 00:16:08,280 --> 00:16:12,200 Speaker 1: cap Yellow, Lulu Kaiser and Howard Ward, nothing's changed from 285 00:16:12,240 --> 00:16:15,000 Speaker 1: talking to Lu a million years ago. The Central Bank 286 00:16:15,320 --> 00:16:20,400 Speaker 1: has to wait, Yes, am I right? Yeah, I think 287 00:16:20,440 --> 00:16:22,960 Speaker 1: that the Central Bank should not be so anxious to 288 00:16:23,080 --> 00:16:27,000 Speaker 1: normalize rates. I think it's uh, it's time to take 289 00:16:27,000 --> 00:16:30,800 Speaker 1: a time out and and let's see what happens. Okay, 290 00:16:31,160 --> 00:16:34,040 Speaker 1: particularly with the new administration, we have Howard Ward with us, 291 00:16:34,200 --> 00:16:38,120 Speaker 1: truly one of the world's great multinational large cap investors, 292 00:16:38,160 --> 00:16:40,440 Speaker 1: and just a perfect time to speak to him about 293 00:16:40,480 --> 00:16:43,160 Speaker 1: the mating of Craft and Unilever. Of course, we're not 294 00:16:43,240 --> 00:16:47,320 Speaker 1: there yet with a mating the proposal turned down by Unilever. Howard. 295 00:16:47,520 --> 00:16:52,160 Speaker 1: Compare and contrast. You know, a hundred billion in market cap, 296 00:16:52,160 --> 00:16:55,520 Speaker 1: a hundred and six billion market cap revenue fifty nine billion. 297 00:16:56,200 --> 00:17:00,240 Speaker 1: Craft is a lot smaller company billion. But to me, 298 00:17:00,280 --> 00:17:03,720 Speaker 1: it's about profitability. Craft I got a thirty cents on 299 00:17:03,800 --> 00:17:07,440 Speaker 1: the dollar ibada margin and Unilever a lot more diffuse. 300 00:17:07,480 --> 00:17:10,639 Speaker 1: I've got an eighteen cents dollar. What what is this about? 301 00:17:10,680 --> 00:17:14,640 Speaker 1: Is it about the synergy game? You made two dinosaurs, mate, 302 00:17:14,640 --> 00:17:17,399 Speaker 1: you don't own either stock and you just do synergies 303 00:17:17,440 --> 00:17:20,800 Speaker 1: to affect a better margin. Yeah, Tom, I think scale 304 00:17:20,920 --> 00:17:23,679 Speaker 1: is ever more important in this world, and uh, you know, 305 00:17:23,800 --> 00:17:26,760 Speaker 1: perhaps they want to take advantage of these low rates 306 00:17:26,760 --> 00:17:29,679 Speaker 1: while we have them, perhaps want to take advantage of 307 00:17:29,720 --> 00:17:32,320 Speaker 1: the sell off and the pound sterling in the wake 308 00:17:32,400 --> 00:17:36,000 Speaker 1: of Brexit. Uh. We are looking at a group of stocks, 309 00:17:36,040 --> 00:17:40,119 Speaker 1: the sector of stocks consumer package good stocks, which are 310 00:17:40,280 --> 00:17:43,520 Speaker 1: really selling at the highest multiples they've ever sold at. Uh. 311 00:17:43,600 --> 00:17:48,320 Speaker 1: You're paying about twenty times forward earnings for Unilever, where 312 00:17:48,359 --> 00:17:51,360 Speaker 1: you have top line growth of low single digits. That's 313 00:17:51,400 --> 00:17:54,160 Speaker 1: pretty fully priced. The EBITDA multiple on the price today 314 00:17:54,200 --> 00:17:58,040 Speaker 1: would be about thirteen times forward. But uh uh, these 315 00:17:58,080 --> 00:18:01,040 Speaker 1: are not bargain basement prices. But rates are so low 316 00:18:01,359 --> 00:18:04,879 Speaker 1: and you're not earning anything on cash, so maybe maybe 317 00:18:04,880 --> 00:18:07,399 Speaker 1: it does make a sense, make some sense to to 318 00:18:07,520 --> 00:18:11,080 Speaker 1: combine and and cut costs exactly to cut costs. This 319 00:18:11,119 --> 00:18:14,040 Speaker 1: is something Sir Martin Sorrel talked about, the cannonel of 320 00:18:14,160 --> 00:18:19,000 Speaker 1: expense reduction in low nominal GDP as you mentioned on 321 00:18:19,040 --> 00:18:22,200 Speaker 1: the break very small revenue growth which we've seen across 322 00:18:22,320 --> 00:18:25,960 Speaker 1: name Nestle's yesterday with the same idea forty two thou 323 00:18:26,200 --> 00:18:29,719 Speaker 1: employees at Craft Hinds a hundred and seventy one thousand 324 00:18:29,920 --> 00:18:33,160 Speaker 1: Unilever was just at a body count. Gives them lots 325 00:18:33,160 --> 00:18:35,639 Speaker 1: of room to do the dreaded synergy work. Do you 326 00:18:35,680 --> 00:18:40,240 Speaker 1: and Mario Gabelli like synergy deals? Do they work out? Well? 327 00:18:40,720 --> 00:18:44,560 Speaker 1: You know, I think like with most acquisitions. Um, the 328 00:18:44,600 --> 00:18:47,879 Speaker 1: report card on that is mixed. Um. So often what 329 00:18:47,960 --> 00:18:51,520 Speaker 1: happens when companies, when large companies combine, so often there 330 00:18:51,520 --> 00:18:56,920 Speaker 1: are cultural issues which sometimes hinder the advancement of revenues 331 00:18:56,960 --> 00:18:59,480 Speaker 1: and profits, and things don't work out the way they 332 00:18:59,560 --> 00:19:02,600 Speaker 1: originally hoped. But uh, but of course that's not always 333 00:19:02,600 --> 00:19:05,520 Speaker 1: the case. And these are good operators And a little 334 00:19:05,520 --> 00:19:08,440 Speaker 1: bit perplexed though, Tom, because the braziliance that control Craft 335 00:19:08,480 --> 00:19:11,959 Speaker 1: Times were on the news wires yesterday being quoted as 336 00:19:12,000 --> 00:19:15,600 Speaker 1: saying they were no longer going to pursue another consumer 337 00:19:15,720 --> 00:19:21,040 Speaker 1: packaged good acquisition. So perhaps that story was not Maybe 338 00:19:21,080 --> 00:19:24,080 Speaker 1: that was fake news. Do you think that was fake news? 339 00:19:24,359 --> 00:19:29,480 Speaker 1: As alternative facts? A press conference, we'll call it now. 340 00:19:29,600 --> 00:19:31,560 Speaker 1: Reading from the statement here from Craft Times, has Craft 341 00:19:31,560 --> 00:19:33,720 Speaker 1: confirms that's made a comprehensive proposal to you to lever 342 00:19:33,960 --> 00:19:36,119 Speaker 1: about combining the two groups to create a leading consumer 343 00:19:36,119 --> 00:19:38,399 Speaker 1: goods company with a mission of long term growth and 344 00:19:38,440 --> 00:19:41,640 Speaker 1: sustainable living. What does that last phrase mean to you there? 345 00:19:41,920 --> 00:19:44,600 Speaker 1: Howard long term growth and sustains. Got Howard word going, 346 00:19:44,600 --> 00:19:47,320 Speaker 1: He's over here. It's a mission, Howard. This is you know, 347 00:19:47,400 --> 00:19:50,879 Speaker 1: these this is craft Time's you know leavers. These are 348 00:19:50,920 --> 00:19:53,760 Speaker 1: companies that tend to grow in line with nominal GDP. 349 00:19:54,160 --> 00:19:58,400 Speaker 1: So you know, growth is a relative measure and um, 350 00:19:58,440 --> 00:20:00,960 Speaker 1: you know, and again in a slow growth world, if 351 00:20:00,960 --> 00:20:05,679 Speaker 1: you are trying to advance the ball and uh, you 352 00:20:05,720 --> 00:20:10,200 Speaker 1: have a currency that's cheap and you're concerned about rising 353 00:20:10,240 --> 00:20:14,200 Speaker 1: inflation and the erosion of purchasing power, you know, maybe 354 00:20:14,240 --> 00:20:16,040 Speaker 1: this is the kind of investment. But but this is 355 00:20:16,080 --> 00:20:18,760 Speaker 1: not There's there's no cheap deal here. But is this 356 00:20:18,880 --> 00:20:22,440 Speaker 1: the price of the great distortion? Bill Gross talks about 357 00:20:22,440 --> 00:20:26,840 Speaker 1: financial repression and the oddity of where yields are the 358 00:20:26,920 --> 00:20:30,800 Speaker 1: prices is big dinosaurs are afford they have to mate, right, 359 00:20:30,880 --> 00:20:34,640 Speaker 1: So Tom, you know, what do companies do with their 360 00:20:34,680 --> 00:20:39,439 Speaker 1: cash flow? Dividends shared by backs? Acquisitions or investment in 361 00:20:39,480 --> 00:20:42,040 Speaker 1: this case looks like acquisition and then cut. The only 362 00:20:42,040 --> 00:20:43,920 Speaker 1: way this really is gonna make sense, I think is 363 00:20:44,440 --> 00:20:48,879 Speaker 1: to do to take the knife to the costs and uh, 364 00:20:50,000 --> 00:20:51,760 Speaker 1: and and do that. I think that you know, they 365 00:20:51,840 --> 00:20:53,560 Speaker 1: may be very they're good at that. What can I say, 366 00:20:53,560 --> 00:20:56,760 Speaker 1: they're very good operators. I mean I agree with that. 367 00:20:57,080 --> 00:20:59,919 Speaker 1: But does sir Martin Sorels come in about this is 368 00:21:00,000 --> 00:21:02,640 Speaker 1: the culture of the moment. Does this is just within 369 00:21:02,680 --> 00:21:05,919 Speaker 1: your investment for view this forever? Sir Martin sorrow has 370 00:21:05,960 --> 00:21:08,760 Speaker 1: been doing this for twenty thirty years. Yeah, but but 371 00:21:08,880 --> 00:21:13,399 Speaker 1: is this forever? The cost cutting? Is the mantra given 372 00:21:13,480 --> 00:21:17,679 Speaker 1: tepid nominal GDP, Yeah, I mean this is what companies 373 00:21:17,720 --> 00:21:19,840 Speaker 1: due To create growth when the growth has not easily 374 00:21:19,880 --> 00:21:23,760 Speaker 1: had invent growth almost you have to acquire and you 375 00:21:23,800 --> 00:21:26,600 Speaker 1: know you've got to go to the alchemist and do it. 376 00:21:27,000 --> 00:21:29,520 Speaker 1: Thank you you've been an alchemist today. And thank you 377 00:21:29,560 --> 00:21:32,360 Speaker 1: so much, Howard war Driving for forward the fake news 378 00:21:32,400 --> 00:21:35,680 Speaker 1: a Bloomberg surveillance with Gabelly Funds. I made it, Howard, 379 00:21:35,880 --> 00:21:46,040 Speaker 1: Thank you so much. Brought you by Bank of America. 380 00:21:46,119 --> 00:21:50,360 Speaker 1: Mary Lynch dedicated to bringing our clients insights and solutions 381 00:21:50,680 --> 00:21:53,960 Speaker 1: to meet the challenges of a transforming world. That's the 382 00:21:54,040 --> 00:21:59,159 Speaker 1: power of global connections. Mary Lynch, Pierce Federan Smith Incorporated 383 00:21:59,320 --> 00:22:06,760 Speaker 1: Member s I p Z. David, What a week and 384 00:22:06,800 --> 00:22:09,280 Speaker 1: it is wonderful on a Friday to speak to our 385 00:22:09,280 --> 00:22:11,320 Speaker 1: next guest, Yeah, Barry I can Green. Of course, the 386 00:22:11,440 --> 00:22:13,720 Speaker 1: party professor of economics and political Science that you see 387 00:22:13,880 --> 00:22:16,560 Speaker 1: at Berkeley Teaching, of course, Brad de Long on introduction 388 00:22:16,560 --> 00:22:19,880 Speaker 1: to economic history at this semester's joining us from Germany, 389 00:22:19,880 --> 00:22:22,520 Speaker 1: of all places. Today. He wrote a great piece for 390 00:22:22,560 --> 00:22:24,400 Speaker 1: Bloom Review just a couple of days ago, called don't 391 00:22:24,440 --> 00:22:27,160 Speaker 1: sell the Euro short, It's here to stay, and let's 392 00:22:27,160 --> 00:22:29,480 Speaker 1: start there if we could, a professor, I can Green, 393 00:22:29,840 --> 00:22:31,800 Speaker 1: give us a sense of this sentiment there in Europe. 394 00:22:31,840 --> 00:22:33,760 Speaker 1: So much of your column, so much of your peace 395 00:22:33,760 --> 00:22:36,360 Speaker 1: for Bloom Review, centers on this notion that we could 396 00:22:36,359 --> 00:22:39,280 Speaker 1: see a dissolution of changes to the Euro. What does 397 00:22:39,320 --> 00:22:41,560 Speaker 1: sentiments say when you're there in Germany or people talking 398 00:22:41,600 --> 00:22:44,840 Speaker 1: about that. There is a lot of chatter in in 399 00:22:45,160 --> 00:22:48,719 Speaker 1: not only in Germany, but in Italy, where I was previously, 400 00:22:48,960 --> 00:22:53,880 Speaker 1: about whether there is an easy way for Southern European 401 00:22:53,880 --> 00:22:56,879 Speaker 1: countries to back out of the Euro. So there's chatter 402 00:22:57,000 --> 00:23:02,080 Speaker 1: from France about a duel change rate. There's chatter from 403 00:23:02,200 --> 00:23:05,720 Speaker 1: Italy about whether a new lira and the Euro could 404 00:23:05,760 --> 00:23:09,800 Speaker 1: circulate side by side. So I read these as speculations 405 00:23:09,880 --> 00:23:15,359 Speaker 1: about whether the mother of all financial crises problem that 406 00:23:15,600 --> 00:23:19,360 Speaker 1: would develop if a country announced the intention of withdrawing 407 00:23:19,400 --> 00:23:21,919 Speaker 1: the Euro could be finessed. And my view continues to 408 00:23:21,960 --> 00:23:24,600 Speaker 1: be no. You write that skeptics have been predicting the 409 00:23:24,640 --> 00:23:28,719 Speaker 1: demise of the Euro continuously since its creation. Is this 410 00:23:28,800 --> 00:23:30,840 Speaker 1: time at all different or do you see this as 411 00:23:30,880 --> 00:23:33,280 Speaker 1: part of that continuum of people predicting it and not 412 00:23:33,359 --> 00:23:37,760 Speaker 1: coming to pass. I think it'll it'll be another episode 413 00:23:37,800 --> 00:23:40,840 Speaker 1: like the previous episodes in the end. But the worrisome 414 00:23:40,880 --> 00:23:45,719 Speaker 1: development is that public support for the Euro is declining 415 00:23:45,960 --> 00:23:49,680 Speaker 1: in countries like Italy. I don't think Mrs Lapin in 416 00:23:50,680 --> 00:23:55,840 Speaker 1: Madame Lapin in France is the major problem here because 417 00:23:55,960 --> 00:23:59,879 Speaker 1: of the scenario in which the other mainstream parties coalists 418 00:24:00,440 --> 00:24:04,639 Speaker 1: against her in the second round. But it's really public support, uh, 419 00:24:04,880 --> 00:24:08,600 Speaker 1: that is the constraint and the worry. And in places 420 00:24:08,680 --> 00:24:12,240 Speaker 1: like Italy you see that beginning to dissipate. There isn't 421 00:24:12,240 --> 00:24:15,040 Speaker 1: a treasury, of course, our European treasury. It seems like 422 00:24:15,080 --> 00:24:17,560 Speaker 1: this project is a bit in code, a bit incomplete. 423 00:24:18,240 --> 00:24:19,960 Speaker 1: Do do do you ever anticipate we will see the 424 00:24:20,000 --> 00:24:23,359 Speaker 1: euro fully realized, Eurozone fully realized? Or or are we 425 00:24:23,359 --> 00:24:27,280 Speaker 1: always looking back here and not looking forward. It depends 426 00:24:27,320 --> 00:24:29,800 Speaker 1: how long we live. UM, I don't think it will 427 00:24:29,840 --> 00:24:35,080 Speaker 1: be fully realized anytime soon. Monetary union needs banking union, 428 00:24:35,280 --> 00:24:40,080 Speaker 1: fiscal union and political political union to really function smoothly 429 00:24:40,160 --> 00:24:43,760 Speaker 1: as as it does to a first approximation. In the 430 00:24:43,840 --> 00:24:48,760 Speaker 1: United States, they're moving pretty rapidly now to banking union 431 00:24:49,000 --> 00:24:53,400 Speaker 1: after twenty years, twenty five years after Mastricht, where they 432 00:24:53,600 --> 00:24:56,520 Speaker 1: did not yet want to go down the banking union road. 433 00:24:56,680 --> 00:25:00,400 Speaker 1: So twenty five years and they've achieved one of three 434 00:25:00,960 --> 00:25:05,159 Speaker 1: unnecessary steps. It'll take who knows twenty five more years 435 00:25:05,200 --> 00:25:09,639 Speaker 1: to get the fiscal union and something resembling the political union, 436 00:25:09,760 --> 00:25:12,280 Speaker 1: you know that, Professor, Good morning. I want to talk 437 00:25:12,320 --> 00:25:14,720 Speaker 1: about Vice Chairman Fisher and the FED here in our 438 00:25:14,760 --> 00:25:17,399 Speaker 1: next section, but to keep it to Europe now. We 439 00:25:17,480 --> 00:25:20,679 Speaker 1: had the privilege of a conversation with Prime Minister Blair 440 00:25:20,720 --> 00:25:24,120 Speaker 1: this morning and I dovetailed into the conversation. Deutsche Bank 441 00:25:24,160 --> 00:25:28,560 Speaker 1: an HSPCs call for a dramatically weaker Sterling to move 442 00:25:28,600 --> 00:25:32,240 Speaker 1: from one forty down to with Deutsche Bank calling one 443 00:25:32,240 --> 00:25:36,480 Speaker 1: oh five one away given political upheaval. What happens to 444 00:25:36,600 --> 00:25:41,560 Speaker 1: a nation, a developed economy nation not a Banana Republic 445 00:25:41,960 --> 00:25:46,919 Speaker 1: when they enjoy that much devaluation. I'm not sure enjoy 446 00:25:47,359 --> 00:25:51,800 Speaker 1: would be the right word. But there's already a lot 447 00:25:51,840 --> 00:25:54,560 Speaker 1: of complaining about how the price of Marmote has gone 448 00:25:54,600 --> 00:25:59,480 Speaker 1: up as a result of Sterling's decline. The cost of 449 00:25:59,520 --> 00:26:03,159 Speaker 1: living goes up. Uh, those vacations in the South of 450 00:26:03,359 --> 00:26:08,760 Speaker 1: Spain become more expensive. That's what currency fluctuations do. There's 451 00:26:08,800 --> 00:26:12,639 Speaker 1: still the bigger worry about what happens to the service 452 00:26:12,720 --> 00:26:15,000 Speaker 1: sector in in in the UK, what happens to the 453 00:26:15,080 --> 00:26:21,080 Speaker 1: city um And I'm not optimistic given Sterling's decline has 454 00:26:21,119 --> 00:26:25,040 Speaker 1: been one of the factors that has prevented the realization 455 00:26:25,280 --> 00:26:28,560 Speaker 1: of a big economic slowdown, of a major recession in 456 00:26:28,600 --> 00:26:31,840 Speaker 1: the UK, but I think that eventually will be the 457 00:26:32,040 --> 00:26:34,720 Speaker 1: unavoidable fallout of Brexit. One of the things that the 458 00:26:34,880 --> 00:26:37,080 Speaker 1: Prime Minister Blair said in that interview today was that 459 00:26:37,320 --> 00:26:40,439 Speaker 1: ahead of that vote, people weren't aware that Sterling might 460 00:26:40,640 --> 00:26:43,840 Speaker 1: or would decline in the way that it did. When 461 00:26:43,840 --> 00:26:45,479 Speaker 1: you look back at what was predicted and what has 462 00:26:45,520 --> 00:26:49,120 Speaker 1: come to pass here, how right were those who were 463 00:26:49,119 --> 00:26:54,200 Speaker 1: predicting what was going to happen. There's a furious debate 464 00:26:54,240 --> 00:26:56,040 Speaker 1: about that in the UK at the moment. Did the 465 00:26:56,080 --> 00:26:58,480 Speaker 1: experts get it right? Did they get it wrong? Well, 466 00:26:58,520 --> 00:27:02,320 Speaker 1: as usual, the experts out at half right. I think 467 00:27:02,359 --> 00:27:07,480 Speaker 1: the experts were, including me, were expecting a weaker sterling 468 00:27:07,560 --> 00:27:10,399 Speaker 1: and a weaker UK economy. So we've gotten the first 469 00:27:11,000 --> 00:27:15,359 Speaker 1: so far and we're waiting on the second. Um I 470 00:27:15,400 --> 00:27:18,680 Speaker 1: had been predicting a weaker UK economy. I'm going to 471 00:27:18,800 --> 00:27:22,000 Speaker 1: be keep predicting it as as it were until I'm right. 472 00:27:22,960 --> 00:27:24,840 Speaker 1: We're heading into it. We've had the G twenty, We're 473 00:27:24,840 --> 00:27:26,840 Speaker 1: heading into a weekend with the Munich Security Conference, and 474 00:27:26,880 --> 00:27:29,840 Speaker 1: it strikes me that there still is interesting at least 475 00:27:29,840 --> 00:27:32,159 Speaker 1: in Europe and sort of a cohesion in the spirit 476 00:27:32,160 --> 00:27:36,159 Speaker 1: of security. Unity for security. Is that what's going to 477 00:27:36,200 --> 00:27:37,960 Speaker 1: preserve the euro in the near term. Do you think 478 00:27:38,040 --> 00:27:39,600 Speaker 1: that that sense that we were, that they're all in 479 00:27:39,600 --> 00:27:44,440 Speaker 1: it together. I think that's a major factor. Think back 480 00:27:44,480 --> 00:27:47,199 Speaker 1: to the creation of the European Community. It was all 481 00:27:47,240 --> 00:27:53,200 Speaker 1: about security. It was all about making Europe's safe from 482 00:27:53,600 --> 00:27:57,080 Speaker 1: internal warfare and from external threats, you know, keeping the 483 00:27:57,080 --> 00:28:01,040 Speaker 1: Germans down, keeping the Soviets out, keeping the Americans in. 484 00:28:02,080 --> 00:28:04,960 Speaker 1: That's what people said about NATO, But they also said 485 00:28:05,000 --> 00:28:08,520 Speaker 1: it about the European community. I think it is viewed 486 00:28:08,560 --> 00:28:12,920 Speaker 1: as even more important in Europe now that the United 487 00:28:12,960 --> 00:28:16,720 Speaker 1: States is no longer a reliable ally. I mean this 488 00:28:16,800 --> 00:28:21,080 Speaker 1: goes back to your book, The European Economy since. What 489 00:28:21,280 --> 00:28:23,679 Speaker 1: is if you were to rewrite that book today. I 490 00:28:23,720 --> 00:28:27,040 Speaker 1: can't believe, Barry, it's eight years old already. It seems 491 00:28:27,080 --> 00:28:29,720 Speaker 1: like it came out yesterday. If you were to rewrite 492 00:28:29,720 --> 00:28:33,440 Speaker 1: that today, what about the European Economy since two thousand 493 00:28:33,400 --> 00:28:38,320 Speaker 1: and sixteen. I mean, we're living in history right now. 494 00:28:38,840 --> 00:28:43,040 Speaker 1: What will that volume look like in five years? One 495 00:28:43,080 --> 00:28:45,680 Speaker 1: of the themes of that volume was how Europe had 496 00:28:45,720 --> 00:28:50,720 Speaker 1: a set of institutions and social arrangements, strong trade union, 497 00:28:50,800 --> 00:28:54,920 Speaker 1: the sen employers associations that would work together with government, 498 00:28:55,040 --> 00:29:02,040 Speaker 1: that could deliver uh reasonable economic growth but also equitable growth, 499 00:29:02,520 --> 00:29:06,800 Speaker 1: and that was an advantage that the European economies needed 500 00:29:06,840 --> 00:29:11,360 Speaker 1: to build on. Those institutions are now under tremendous strain. 501 00:29:11,760 --> 00:29:14,320 Speaker 1: So if I were to write a second edition of 502 00:29:14,360 --> 00:29:16,320 Speaker 1: that book, I would have to wait and see whether 503 00:29:17,360 --> 00:29:22,240 Speaker 1: European societies succeed in updating those institutions for the century, 504 00:29:22,720 --> 00:29:26,760 Speaker 1: or whether they disintegrate. We've been remarkably free this week 505 00:29:26,800 --> 00:29:29,600 Speaker 1: of discussion on China. Barry, give us an update on 506 00:29:29,640 --> 00:29:33,200 Speaker 1: the U. S. China relationship. You had a book a 507 00:29:33,280 --> 00:29:35,720 Speaker 1: year or two ago. Were you retorted privilege? I believe 508 00:29:35,720 --> 00:29:38,760 Speaker 1: it was you were adamant that China would not dominate? 509 00:29:39,040 --> 00:29:42,520 Speaker 1: Do you still hold that to be true? China has 510 00:29:42,560 --> 00:29:45,480 Speaker 1: plenty on its own plate. So if you think about 511 00:29:45,680 --> 00:29:49,880 Speaker 1: currency competition between the dollar and the renman B, people 512 00:29:49,880 --> 00:29:54,000 Speaker 1: are now realizing that they're both financial reasons and political 513 00:29:54,080 --> 00:29:57,280 Speaker 1: reasons why the renmand b has a long way to go, 514 00:29:58,240 --> 00:30:02,480 Speaker 1: has to run for decades before it becomes meaningful rival 515 00:30:02,880 --> 00:30:04,959 Speaker 1: to the dollar in the international spirit. And I think 516 00:30:05,040 --> 00:30:08,120 Speaker 1: similarly the in terms of the Chinese economy and China's 517 00:30:08,640 --> 00:30:13,480 Speaker 1: geo political ambitions, that they have financial imbalances, they have 518 00:30:14,200 --> 00:30:19,200 Speaker 1: gradually decelerating economy. They have plenty on their plate domestically 519 00:30:19,360 --> 00:30:22,760 Speaker 1: that will hamper them a bit at least in the 520 00:30:22,760 --> 00:30:25,520 Speaker 1: international sphere. David I put out on Twitter three or 521 00:30:25,560 --> 00:30:27,920 Speaker 1: four books of Barry ike ingreens that should keep everybody 522 00:30:27,960 --> 00:30:32,920 Speaker 1: there there. The Royalty, the royalty check I got. It's 523 00:30:33,040 --> 00:30:36,000 Speaker 1: enough to put a kid through sanffort. I can agreed 524 00:30:36,040 --> 00:30:38,520 Speaker 1: with us the party Professor Economics and Political Science, that 525 00:30:38,880 --> 00:30:41,000 Speaker 1: you see Berkeley joining us in the Spectum Enterprise, Fundline 526 00:30:41,000 --> 00:30:45,240 Speaker 1: Spectrum Enterprise, nationwide fiber based network and I T infrastructure solutions. 527 00:30:45,240 --> 00:30:46,560 Speaker 1: I don't know if you had a chance, the professor, 528 00:30:46,560 --> 00:30:48,840 Speaker 1: I can green to see Tom's interview yesterday with Vice 529 00:30:48,880 --> 00:30:51,840 Speaker 1: Chairman Stanley Fisher. What struck me? Struck Carl Ricka Donna, 530 00:30:51,840 --> 00:30:53,960 Speaker 1: our chief US economists at well as well as how 531 00:30:54,440 --> 00:30:56,440 Speaker 1: uh confident he was, how proud he was of the 532 00:30:56,440 --> 00:30:58,280 Speaker 1: calls that FED had made, especially when it comes to 533 00:30:58,280 --> 00:31:01,280 Speaker 1: wage growth. He said that it started happening. It's not 534 00:31:01,320 --> 00:31:03,120 Speaker 1: far off from what the FED thought it it would 535 00:31:03,200 --> 00:31:05,080 Speaker 1: be give us a sense of of how the FED 536 00:31:05,160 --> 00:31:09,080 Speaker 1: is maybe regarding itself visa via that interview yesterday. Well, 537 00:31:09,120 --> 00:31:13,560 Speaker 1: I think that's right. The stead is getting inflation up 538 00:31:13,560 --> 00:31:17,560 Speaker 1: to target, and uh, if we have productivity growth, that 539 00:31:17,600 --> 00:31:22,120 Speaker 1: means wages have to rise faster than headline inflations. So 540 00:31:22,200 --> 00:31:24,560 Speaker 1: all of that is of a piece and I think 541 00:31:24,640 --> 00:31:29,040 Speaker 1: the FED is on track. They're a major danger. Tom 542 00:31:29,080 --> 00:31:31,840 Speaker 1: alluded to that before the break is is the dollar 543 00:31:32,640 --> 00:31:35,480 Speaker 1: um It may be up by seven percent or so 544 00:31:35,560 --> 00:31:38,400 Speaker 1: since the election, but there is a scenario where it 545 00:31:38,520 --> 00:31:40,760 Speaker 1: rises a whole lot more as a result of the 546 00:31:40,760 --> 00:31:44,360 Speaker 1: policies yet to come. A question about how the FED 547 00:31:44,440 --> 00:31:47,080 Speaker 1: views the economy right now is how the economy is? 548 00:31:47,080 --> 00:31:49,080 Speaker 1: In other words, is the economy we're seeing in the 549 00:31:49,160 --> 00:31:51,520 Speaker 1: US close to in line with what the FED wants 550 00:31:51,560 --> 00:31:56,200 Speaker 1: to see? Yeah, I think they're they're pretty much on target. 551 00:31:56,240 --> 00:31:59,280 Speaker 1: They think we're not too far from full employment. They 552 00:31:59,280 --> 00:32:04,200 Speaker 1: don't believe that the participation rate is gonna come zooming 553 00:32:04,240 --> 00:32:09,400 Speaker 1: back to level. They be inflation about where it belongs. 554 00:32:09,480 --> 00:32:12,240 Speaker 1: So I I think they're pretty happy with where we're now, 555 00:32:12,280 --> 00:32:16,360 Speaker 1: and they're pretty alarmed about where we could go in 556 00:32:16,360 --> 00:32:19,400 Speaker 1: the future. Do you do joint lectures with bread DeLong? 557 00:32:19,800 --> 00:32:22,520 Speaker 1: They actually and I know you're barely on speaking terms, 558 00:32:22,560 --> 00:32:25,800 Speaker 1: but do you do you both get in a room together? 559 00:32:27,200 --> 00:32:30,960 Speaker 1: We have been known to getting together, but it's more 560 00:32:31,480 --> 00:32:34,800 Speaker 1: uh socratic, if you will. Typically, one of us will 561 00:32:35,400 --> 00:32:37,360 Speaker 1: standing in the front and the other one will sit 562 00:32:37,400 --> 00:32:40,640 Speaker 1: in the back, and then we'll address questions to one 563 00:32:40,680 --> 00:32:43,840 Speaker 1: and from the back of the lecture. I'm in row 564 00:32:43,960 --> 00:32:46,720 Speaker 1: fourteen and I nodded off asleep because I was drinking 565 00:32:46,720 --> 00:32:49,120 Speaker 1: all night, And so you wake me up, and then 566 00:32:49,480 --> 00:32:51,920 Speaker 1: I ask you were bred along this question? And I 567 00:32:51,920 --> 00:32:55,880 Speaker 1: think it's important given all that you know, can markets 568 00:32:56,280 --> 00:33:01,480 Speaker 1: just in preclude rate increases if the dollar goes up, 569 00:33:01,520 --> 00:33:04,240 Speaker 1: if interst rates moved, if the slope of the yield 570 00:33:04,240 --> 00:33:08,640 Speaker 1: curve changes this that the other thing. Does that help 571 00:33:08,680 --> 00:33:11,600 Speaker 1: a FED not raise rates or do they just ignore 572 00:33:11,640 --> 00:33:15,400 Speaker 1: all that? They do? Not ignore it. So if the 573 00:33:15,440 --> 00:33:18,840 Speaker 1: dollar really zooms up at this point because it's being 574 00:33:18,880 --> 00:33:23,000 Speaker 1: pushed up by the change in the monetary fiscal policy mix, 575 00:33:23,560 --> 00:33:26,600 Speaker 1: It's being pushed up by the adoption of a border 576 00:33:26,640 --> 00:33:31,440 Speaker 1: adjustment tax, it's being pushed up by new import restrictions 577 00:33:31,520 --> 00:33:36,440 Speaker 1: that Mr Trump imposes on on Mexico and Shana, much 578 00:33:36,680 --> 00:33:40,920 Speaker 1: stronger dollar could be a significant headwind to growth, and 579 00:33:41,000 --> 00:33:43,760 Speaker 1: the FED could stop in its tracks, or at least 580 00:33:43,840 --> 00:33:48,360 Speaker 1: it could end up raising rates considerably fewer than the 581 00:33:48,440 --> 00:33:52,240 Speaker 1: three times that the markets are now counting on. How 582 00:33:52,320 --> 00:33:55,640 Speaker 1: much uncertainty is allayed by having Stephen Manuchin in the 583 00:33:55,720 --> 00:33:58,160 Speaker 1: job of Treasury Secretary. Right now, we have the G 584 00:33:58,240 --> 00:34:02,200 Speaker 1: twenty meeting underway in Europe as as we speak, and 585 00:34:02,240 --> 00:34:05,320 Speaker 1: I know that there's been some worry among G twenty members. 586 00:34:05,360 --> 00:34:08,560 Speaker 1: They haven't had a figureheaded person to air grievance? Is 587 00:34:08,560 --> 00:34:10,600 Speaker 1: with here in the U S well, he's been absent. 588 00:34:10,640 --> 00:34:12,240 Speaker 1: How big a deal is it to have him in place? 589 00:34:13,560 --> 00:34:15,160 Speaker 1: Sure would be nice to be a fly on the 590 00:34:15,200 --> 00:34:18,320 Speaker 1: wall for those UH discussions. I think what everybody is 591 00:34:18,360 --> 00:34:22,239 Speaker 1: going to ask the Treasury Secretary is who does Mr 592 00:34:22,320 --> 00:34:27,200 Speaker 1: Crump really listen to on economic policy? Does he listened 593 00:34:27,280 --> 00:34:31,480 Speaker 1: to Gary Cohne, Does he listen to Peter Navarro? Which 594 00:34:32,080 --> 00:34:34,719 Speaker 1: set of advice? Given that he's going to be confronted 595 00:34:34,760 --> 00:34:39,920 Speaker 1: by different kinds of recommendations coming from very different kinds 596 00:34:40,000 --> 00:34:43,600 Speaker 1: of economists, who is he going to respond to? We 597 00:34:44,280 --> 00:34:47,640 Speaker 1: outsiders at this point, The markets at this point have 598 00:34:48,040 --> 00:34:52,080 Speaker 1: absolutely no idea. Barr Green, thank you so much, generous 599 00:34:52,080 --> 00:34:54,480 Speaker 1: of you to be with us the last number of weeks. 600 00:34:54,520 --> 00:34:57,520 Speaker 1: He as a professor at the University of California, Berkeley. 601 00:34:57,560 --> 00:35:01,400 Speaker 1: If you want one accessible book of the many accessible books, 602 00:35:01,400 --> 00:35:04,120 Speaker 1: the professor Ike Green, folks, it was my book. I 603 00:35:04,120 --> 00:35:05,440 Speaker 1: believe it was a book of the year. It may 604 00:35:05,440 --> 00:35:07,839 Speaker 1: have been Book of this summer a couple of years ago. 605 00:35:08,040 --> 00:35:12,440 Speaker 1: Exorbitant privilege is short, sharp and focus. Can't say enough 606 00:35:12,480 --> 00:35:16,400 Speaker 1: about it, But he is just always writing. Wonderful to 607 00:35:16,480 --> 00:35:33,239 Speaker 1: have him out a dollar and international economics. Let me 608 00:35:33,239 --> 00:35:37,080 Speaker 1: get your attention the University of Pennsylvania in an adult 609 00:35:37,200 --> 00:35:41,360 Speaker 1: study cause. The Munich Security Conference the best think tank 610 00:35:41,440 --> 00:35:45,320 Speaker 1: conference that's high words. It's where everybody in the racket 611 00:35:45,320 --> 00:35:50,160 Speaker 1: gets together, including James Stevitis of the Fletcher School Toughs 612 00:35:50,239 --> 00:35:53,680 Speaker 1: University here on really a meeting and mating of all 613 00:35:53,960 --> 00:35:57,680 Speaker 1: international relations. Admiral, we could talk to you this morning 614 00:35:57,719 --> 00:36:01,600 Speaker 1: for an extended press conference. We could go and go 615 00:36:02,200 --> 00:36:05,839 Speaker 1: and go we will who should keep going? We will 616 00:36:05,840 --> 00:36:09,239 Speaker 1: not do that. Let me start first with this conference. 617 00:36:09,280 --> 00:36:14,359 Speaker 1: What do you try to accomplish in Munich. I think 618 00:36:14,400 --> 00:36:17,120 Speaker 1: it is ear listeners, many of whom are in the 619 00:36:17,160 --> 00:36:19,920 Speaker 1: financial world will relate to it. If I called it 620 00:36:19,960 --> 00:36:24,640 Speaker 1: the Davos of security. It brings together everybody who is 621 00:36:24,680 --> 00:36:27,200 Speaker 1: focused on global security, and I think people want to 622 00:36:27,200 --> 00:36:29,360 Speaker 1: get three things out of it, just like the Davos, 623 00:36:29,360 --> 00:36:32,080 Speaker 1: which you know quite well, Tom. They want to network, 624 00:36:32,080 --> 00:36:35,719 Speaker 1: They want to connect with other decision makers, so foreign ministers, 625 00:36:35,760 --> 00:36:40,040 Speaker 1: ministers of defense, heads of state. Secondly, uh, everybody here 626 00:36:40,239 --> 00:36:44,640 Speaker 1: wants to move their message and agenda from Russia and 627 00:36:44,880 --> 00:36:47,719 Speaker 1: China to the United States and the European Union in 628 00:36:47,840 --> 00:36:50,759 Speaker 1: public settings. And then thirdly, you want to listen. You 629 00:36:50,760 --> 00:36:53,640 Speaker 1: want to hear what others are saying, particularly those with 630 00:36:53,680 --> 00:36:56,400 Speaker 1: whom you disagree. So it's a very robust setting for 631 00:36:56,440 --> 00:36:58,480 Speaker 1: all three of those. David wants to dive into that. 632 00:36:58,560 --> 00:37:01,080 Speaker 1: Let me ask you one question. We are noting earlier 633 00:37:01,560 --> 00:37:05,600 Speaker 1: the terrorist attack in Pakistan and then hours later another 634 00:37:05,680 --> 00:37:10,440 Speaker 1: substantial attack in Baghdad. We we we in the media, 635 00:37:10,560 --> 00:37:14,480 Speaker 1: are guilty of not covering these terror attacks while we 636 00:37:14,520 --> 00:37:17,840 Speaker 1: look at horrific events, say in Paris, or London or 637 00:37:17,840 --> 00:37:21,200 Speaker 1: where you know, wherever in America, full front and center. 638 00:37:21,680 --> 00:37:24,880 Speaker 1: How do we balance that? What is your counsel to 639 00:37:25,200 --> 00:37:30,719 Speaker 1: us paying more attention to third world terror? I think 640 00:37:30,760 --> 00:37:32,600 Speaker 1: the way to do it best time is to put 641 00:37:32,600 --> 00:37:36,160 Speaker 1: it in a global context. And you mentioned the Paris 642 00:37:36,320 --> 00:37:40,440 Speaker 1: terror attacks last Christmas. Almost at the same moment, a 643 00:37:40,520 --> 00:37:44,319 Speaker 1: marketplace in Lebanon blew up, killing even more people than 644 00:37:44,360 --> 00:37:47,600 Speaker 1: died in Paris. Um So those two events need to 645 00:37:47,600 --> 00:37:51,120 Speaker 1: be covered side by side, not in isolation, and described 646 00:37:51,160 --> 00:37:53,160 Speaker 1: for what they are. In the case of the two 647 00:37:53,200 --> 00:37:57,440 Speaker 1: I just mentioned Islamic state activity, So taking things that 648 00:37:57,480 --> 00:38:00,320 Speaker 1: are happening in, if you will, smaller media market, but 649 00:38:00,440 --> 00:38:03,280 Speaker 1: putting them in the global context is something the media 650 00:38:03,360 --> 00:38:07,960 Speaker 1: can do very effectively. You had the Defense Secretary in 651 00:38:08,000 --> 00:38:10,800 Speaker 1: Brussels over the weekend. Uh the G twenty meeting was 652 00:38:10,840 --> 00:38:13,279 Speaker 1: underway this week. Then there's the Munich Security Conference, as 653 00:38:13,280 --> 00:38:16,040 Speaker 1: you just mentioned, taking place this weekend. The Vice President 654 00:38:16,040 --> 00:38:18,520 Speaker 1: just boarding his plane at Joint Bass Andrews to head 655 00:38:18,560 --> 00:38:20,960 Speaker 1: over to Munich for that. This is a real debut 656 00:38:21,120 --> 00:38:24,479 Speaker 1: for the Trump administration on the international stage this week. 657 00:38:24,480 --> 00:38:26,560 Speaker 1: What are you expecting to hear from the Vice President 658 00:38:26,560 --> 00:38:30,200 Speaker 1: in Munich when he speaks. I'll tell you what I'm 659 00:38:30,200 --> 00:38:32,360 Speaker 1: hoping to hear, and I suspect I will hear is 660 00:38:32,400 --> 00:38:35,680 Speaker 1: first of all, that there will be continued to support Tornado, 661 00:38:35,800 --> 00:38:39,720 Speaker 1: that it's not obsolete, as the President said at one point, 662 00:38:39,719 --> 00:38:42,960 Speaker 1: but in fact it's very important, which the President also 663 00:38:43,040 --> 00:38:45,960 Speaker 1: said at another time. So hopefully the Vice President will 664 00:38:46,000 --> 00:38:48,880 Speaker 1: clarify that it's the former and not the ladder. Secondly, 665 00:38:48,960 --> 00:38:51,399 Speaker 1: he will put heat on the Europeans to raise their 666 00:38:51,440 --> 00:38:54,600 Speaker 1: defense spending to the two percent of GDP goal, and 667 00:38:54,680 --> 00:38:57,799 Speaker 1: that's a good thing. And thirdly, the Vice President, who's 668 00:38:57,800 --> 00:39:01,440 Speaker 1: a very steady personality. I think will be endeavoring to 669 00:39:01,480 --> 00:39:06,120 Speaker 1: show people, uh, that kind of balance and purpose um 670 00:39:06,160 --> 00:39:09,360 Speaker 1: and perhaps counterweights some of what's coming out of Washington 671 00:39:09,440 --> 00:39:12,080 Speaker 1: itself these days. Unfortunately. What did you make of the 672 00:39:12,120 --> 00:39:15,279 Speaker 1: speech the Defense Secretary Maddus delivered in Brussels? He spoke 673 00:39:15,320 --> 00:39:18,520 Speaker 1: about that two percent threshold you were talking about there? 674 00:39:18,600 --> 00:39:20,960 Speaker 1: Was it? Was it a forceful speech? Was it a 675 00:39:21,000 --> 00:39:24,000 Speaker 1: speech that might take some allies off guard? Uh? What 676 00:39:24,040 --> 00:39:25,440 Speaker 1: did you make of what he had to say and 677 00:39:25,480 --> 00:39:27,719 Speaker 1: how he said it? I think it. I think it 678 00:39:27,880 --> 00:39:32,040 Speaker 1: was the speech everyone expected. General Maddis as a former 679 00:39:32,239 --> 00:39:36,719 Speaker 1: senior NATO official, he has great sympathy, empathy and understanding 680 00:39:36,760 --> 00:39:39,360 Speaker 1: of the organization. But he did put the allies on 681 00:39:39,480 --> 00:39:43,160 Speaker 1: notice that, uh, if the United States does not see 682 00:39:43,160 --> 00:39:46,400 Speaker 1: arise in European defense spending, they'll be less commitment to 683 00:39:46,440 --> 00:39:50,560 Speaker 1: the alliance. I interpreted that as a fewer forward deployments, 684 00:39:50,560 --> 00:39:53,600 Speaker 1: potentially pulling more troops out of Europe. I think the 685 00:39:53,600 --> 00:39:55,960 Speaker 1: Europeans will wake up to that and realize they need 686 00:39:55,960 --> 00:39:59,160 Speaker 1: to move out. Help me with the subtleties of getting 687 00:39:59,200 --> 00:40:03,120 Speaker 1: to this week. We observed the Prime Minister of Japan 688 00:40:03,280 --> 00:40:06,759 Speaker 1: and the President at the Winter White House dealing with 689 00:40:06,800 --> 00:40:11,520 Speaker 1: a Korean missile launch right on Q how attention, how 690 00:40:11,600 --> 00:40:16,280 Speaker 1: awhere are we of any Russian actions into the weekend? 691 00:40:16,600 --> 00:40:20,160 Speaker 1: Do they want to force the dialogue given the disarray 692 00:40:20,400 --> 00:40:25,280 Speaker 1: in Washington, Tom, I don't think so in the case 693 00:40:25,360 --> 00:40:29,879 Speaker 1: of this particular conference. The Munich Security Conference has historically, 694 00:40:29,920 --> 00:40:33,960 Speaker 1: and this is my twelve fifteenth time here perhaps has 695 00:40:34,040 --> 00:40:37,000 Speaker 1: historically been a place where the Russians want to come 696 00:40:37,120 --> 00:40:39,920 Speaker 1: and lay out their case. We often see Foreign Minister 697 00:40:40,080 --> 00:40:45,000 Speaker 1: Lavrov here, who's an excellent English speaker, laying out Russian position. 698 00:40:45,120 --> 00:40:47,720 Speaker 1: So I think this is a weekend where you won't 699 00:40:47,760 --> 00:40:51,200 Speaker 1: see Russian provocation. But let's say that there's been plenty 700 00:40:51,200 --> 00:40:53,000 Speaker 1: of it in the lead up to this. It's kind 701 00:40:53,000 --> 00:40:56,040 Speaker 1: of overhanging the conference, but I don't think you'll see 702 00:40:56,080 --> 00:40:59,560 Speaker 1: it this particular weekend. Tom James davidis of the tough 703 00:41:00,040 --> 00:41:04,359 Speaker 1: of Tufts University and their Fletcher School. Admiral Stevitas, let 704 00:41:04,440 --> 00:41:06,560 Speaker 1: me read a tweet to you. I know you've been 705 00:41:06,600 --> 00:41:11,000 Speaker 1: waiting for this from the President General Keith Kellogg, who 706 00:41:11,080 --> 00:41:14,000 Speaker 1: I have known for a long time, is very much 707 00:41:14,040 --> 00:41:18,680 Speaker 1: in play for n s A. As our three others. 708 00:41:18,880 --> 00:41:21,839 Speaker 1: With great respect to Admiral, have you been contacted by 709 00:41:21,840 --> 00:41:27,240 Speaker 1: the White House. I have not been contacted directly. I've 710 00:41:27,280 --> 00:41:30,560 Speaker 1: received some low level inquiries, and I've made it clear 711 00:41:30,680 --> 00:41:35,160 Speaker 1: that I am quite content continuing outside the government at 712 00:41:35,160 --> 00:41:37,360 Speaker 1: this point. And Tom, you know, all continue to do 713 00:41:37,400 --> 00:41:40,480 Speaker 1: a lot of commentary. As a former NATO Supremeli commander, 714 00:41:40,480 --> 00:41:43,279 Speaker 1: I'm available to give advice and so forth. But I 715 00:41:43,320 --> 00:41:45,120 Speaker 1: don't know where they go from here. I think they 716 00:41:45,120 --> 00:41:49,320 Speaker 1: were very disappointed when Vice to Admiral Bob Harward chose 717 00:41:49,360 --> 00:41:53,879 Speaker 1: not to come into government citing personal reasons. And uh, 718 00:41:54,120 --> 00:41:56,560 Speaker 1: the only other name I've heard consistently is that of 719 00:41:56,600 --> 00:42:00,400 Speaker 1: General Dave Petraeus. But I think that's problematic because General 720 00:42:00,480 --> 00:42:03,560 Speaker 1: Petreus was convicted of lying, and so you kind of 721 00:42:03,600 --> 00:42:05,919 Speaker 1: fire someone for lying and then you bring someone else 722 00:42:05,960 --> 00:42:09,800 Speaker 1: in with It's a kind of hard sell within your experience. 723 00:42:10,600 --> 00:42:13,640 Speaker 1: And given the turmoil, does an n s A leader 724 00:42:14,560 --> 00:42:17,600 Speaker 1: demand that they bring in their own people or do 725 00:42:17,680 --> 00:42:23,120 Speaker 1: they slot in with existing and newer personnel selected by 726 00:42:23,280 --> 00:42:26,480 Speaker 1: oh say Mr Bannon or for that matter, the President. 727 00:42:28,000 --> 00:42:32,080 Speaker 1: I think at this point, given the level of controversy 728 00:42:32,160 --> 00:42:36,120 Speaker 1: and turmoil, a new National Security Advisor would be well 729 00:42:36,160 --> 00:42:39,560 Speaker 1: advised to go into it saying I need to bring 730 00:42:39,600 --> 00:42:42,640 Speaker 1: in my team people that I know, that I can trust, 731 00:42:42,680 --> 00:42:46,920 Speaker 1: that I have built relationships with. Now that's not every spot, 732 00:42:47,120 --> 00:42:50,360 Speaker 1: but it's certainly a group of at least a dozen 733 00:42:50,480 --> 00:42:53,239 Speaker 1: or so who would sit as stride the National Security 734 00:42:53,280 --> 00:42:56,640 Speaker 1: Council staff. I think going in just by yourself as 735 00:42:56,640 --> 00:42:59,319 Speaker 1: a firefighter surrounded by would appear to be a lot 736 00:42:59,360 --> 00:43:01,560 Speaker 1: of ideologue at this point would be a mistake for 737 00:43:01,600 --> 00:43:04,000 Speaker 1: almost anybody. Know. I've heard ahead of that meeting with 738 00:43:04,040 --> 00:43:06,400 Speaker 1: Prime Minister net and Yahoo that General Michael Flynn had 739 00:43:06,440 --> 00:43:08,680 Speaker 1: done a lot of the groundwork before that that meeting 740 00:43:08,719 --> 00:43:10,320 Speaker 1: in Washington, d C. Imagine he'd done a lot of 741 00:43:10,400 --> 00:43:13,719 Speaker 1: legwork ahead of the Munich Security conference as well. How 742 00:43:13,760 --> 00:43:16,160 Speaker 1: big a void is that for this administration not having 743 00:43:16,160 --> 00:43:19,279 Speaker 1: a permanent head, permanent national security advisor in place going 744 00:43:19,280 --> 00:43:21,040 Speaker 1: into a big form like the one that you're at 745 00:43:21,040 --> 00:43:25,279 Speaker 1: in Munich, Oh, it's a huge void, and historically the 746 00:43:25,360 --> 00:43:30,439 Speaker 1: National Security Advisor comes to this event looms very large. Um. 747 00:43:30,480 --> 00:43:34,840 Speaker 1: It's also worth remembering that the Deputy National Security Advisor, 748 00:43:34,920 --> 00:43:40,480 Speaker 1: Kati McFarland, was not elevated when General Flynn was fired, 749 00:43:40,800 --> 00:43:43,120 Speaker 1: but instead they reached down to the chief of staff. 750 00:43:43,239 --> 00:43:47,040 Speaker 1: That really undercuts her authority and influence. And there have 751 00:43:47,080 --> 00:43:50,120 Speaker 1: been media reports that she's leaving. She says the President 752 00:43:50,160 --> 00:43:53,839 Speaker 1: said she could stay. Um, I think she's problematic in 753 00:43:53,840 --> 00:43:57,120 Speaker 1: that regard, so really know and steering the ship from 754 00:43:57,120 --> 00:43:59,480 Speaker 1: the White House in terms of national security, and at 755 00:43:59,480 --> 00:44:02,520 Speaker 1: a meeting like this that that absence has felt. That's 756 00:44:02,520 --> 00:44:05,080 Speaker 1: the last question to hear about the press conference yesterday, 757 00:44:05,480 --> 00:44:07,800 Speaker 1: he did touch upon The President did touch upon foreign policy, 758 00:44:07,880 --> 00:44:10,839 Speaker 1: talked about how eager he was to uh have a 759 00:44:10,840 --> 00:44:13,839 Speaker 1: massive rebuilding of the United States military. He said, they 760 00:44:13,840 --> 00:44:17,000 Speaker 1: don't have the right equipment. It's old. I wonder just 761 00:44:17,520 --> 00:44:19,560 Speaker 1: about the veracity of that when you look at how 762 00:44:19,680 --> 00:44:22,400 Speaker 1: well equipped the U. S Military is right now. Is 763 00:44:22,400 --> 00:44:24,480 Speaker 1: there credence to what he said yesterday? If that's a 764 00:44:25,360 --> 00:44:29,560 Speaker 1: keystone policy point for him, is it rooted in in truth? 765 00:44:29,840 --> 00:44:34,200 Speaker 1: Is this a military that is not equipped properly? This 766 00:44:34,280 --> 00:44:38,440 Speaker 1: is a military that currently received six hundred billion dollars 767 00:44:38,480 --> 00:44:42,040 Speaker 1: a year in spending for defense, and we are well 768 00:44:42,080 --> 00:44:44,920 Speaker 1: equipped in a lot of areas. Um, there are some 769 00:44:45,040 --> 00:44:48,800 Speaker 1: areas where the inventory, the platforms, the ships, and the planes, 770 00:44:49,000 --> 00:44:52,400 Speaker 1: some of the ground vehicles are aging, and many have 771 00:44:52,480 --> 00:44:55,919 Speaker 1: been through tough combat over ten years in Iraq in Afghanistan, 772 00:44:56,239 --> 00:44:59,200 Speaker 1: so I would say there's some level of rebuilding to do, 773 00:44:59,360 --> 00:45:02,480 Speaker 1: but no one should doubt the capability of US military, 774 00:45:02,560 --> 00:45:05,440 Speaker 1: which is a quantum weep ahead of any other competitor 775 00:45:05,480 --> 00:45:07,560 Speaker 1: in the world. All right, thanks very much, Adam James 776 00:45:07,560 --> 00:45:09,560 Speaker 1: to read us there, Dina the Fletcher School of Law 777 00:45:09,560 --> 00:45:19,600 Speaker 1: and Diplomacy, Tough University. Thanks for listening to the Bloomberg 778 00:45:19,600 --> 00:45:25,080 Speaker 1: Surveillance podcast. Subscribe and listen to interviews on iTunes, SoundCloud, 779 00:45:25,520 --> 00:45:29,760 Speaker 1: or whichever podcast platform you prefer. I'm out on Twitter 780 00:45:29,840 --> 00:45:33,640 Speaker 1: at Tom Keene. David Gura is at David Gura. Before 781 00:45:33,640 --> 00:45:38,040 Speaker 1: the podcast, you can always catch us worldwide. I'm Bloomberg Radio, 782 00:45:50,520 --> 00:45:54,000 Speaker 1: brought you by Bank of America. Mary Lynch. Dedicated to 783 00:45:54,120 --> 00:45:58,000 Speaker 1: bringing our clients insights and solutions to meet the challenges 784 00:45:58,120 --> 00:46:02,200 Speaker 1: of a transforming world. That's the power of global connections. 785 00:46:02,239 --> 00:46:06,759 Speaker 1: Mary Lynch, Pierce, Fenner and Smith Incorporated, Member s I 786 00:46:06,920 --> 00:46:07,200 Speaker 1: p C.