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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee.

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Speaker 1: We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg. Pleased

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Speaker 1: to say that joining us on the phone is Steven Stanley,

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Speaker 1: Amherst p Upont Chief Economists Stephen. Good morning. Too great

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Speaker 1: to have you with us on the program. Good morning,

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Speaker 1: big question for a lot of our audience whether this

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Speaker 1: is an insurance rate cut that is about to come

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Speaker 1: down from Chairman Poll or the beginning of a rate

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Speaker 1: cunning cycle. Stephen, what are your talent clients right now? Well,

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Speaker 1: I mean, obviously that depends on how the economy progresses,

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Speaker 1: but I would say, you know, in my view, it's

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Speaker 1: more of an insurance cut. I think the economy has

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Speaker 1: proven um to be in considerably better shape today than

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Speaker 1: than we saw it at the uh previous meeting in June,

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Speaker 1: when the Fed essentially decided that they were gonna need

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Speaker 1: to um to invoke cut in in July. So UM,

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Speaker 1: you know, I I think it's premature to talk about

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Speaker 1: whether there's going to be you know, maybe one or

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Speaker 1: two more, But I certainly don't envision this being a

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Speaker 1: long series of cuts, as you would expect if the

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Speaker 1: economy we're falling into recession. Saying, what is the GDP

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Speaker 1: growth right now and what is a tip point where

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Speaker 1: Chairman Powell would continue to cut rates. Where where's the

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Speaker 1: Steve Stanley statistic on the run rate of the economy

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Speaker 1: right now? Well, the first half of the year we

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Speaker 1: average two point six. I think that's a pretty good

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Speaker 1: um metric of where we are now. I expect growth

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Speaker 1: in the second half of the year to be pretty similar,

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Speaker 1: with the consumer continuing to lead the way. Um. You know,

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Speaker 1: in terms of where the tipping point is for Charman Pale,

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Speaker 1: it's hard to say because from what I can tell

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Speaker 1: that they're not really paying a lot of attention to

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Speaker 1: growth there. Looking Steve, this is the art of the matter.

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Speaker 1: I want to make clear, folks, Steve Stanley's when every

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Speaker 1: award there is in g d P four casting you're

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Speaker 1: the two six. Let's say you massively are wrong, so

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Speaker 1: it's only two point three. At what level would Steve

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Speaker 1: Standling cut interest rates? Well, you know, everybody thinks the

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Speaker 1: trend is around two percent. I'm not sure why if

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Speaker 1: it should be cutting rates when growth is above trend

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Speaker 1: at this point. So, Stephen, how does he manage that

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Speaker 1: message in the news conference today? What's the strategy for communication?

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Speaker 1: I imagine they spent the last couple of days thinking

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Speaker 1: about how to deliver what they need to say in

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Speaker 1: this news conference. Given that it's pretty limited the material

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Speaker 1: they have. They just have the statement and the news conference.

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Speaker 1: How do they manage the message today? Yeah, I think

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Speaker 1: it's gonna be really tricky. Um. I think explaining the

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Speaker 1: rate cut is maybe the easier part, and Powell did

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Speaker 1: that in July. He cited three things. He cited downside

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Speaker 1: risks around trade uncertainty, decided weakness in the global economy,

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Speaker 1: and he cited the fact that inflation is below modestly

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Speaker 1: below target. I think for me, the trickier thing is

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Speaker 1: going to be the forward guidance, and that's really what

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Speaker 1: people are focused on. Um. The problem the FED has

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Speaker 1: is that it it professed to be data dependent in June,

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Speaker 1: and it really wasn't. We learned after the fact when

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Speaker 1: we got the minutes, it defended more or less decided

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Speaker 1: that they were going to cut in July as of

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Speaker 1: the June meeting, And so how does the FED communicate

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Speaker 1: if they want to truly be data dependent going forward,

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Speaker 1: how do they communicate that now? You know, no, no,

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Speaker 1: we really mean at this time. Um, they certainly can't

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Speaker 1: use the same language they used in June. So, Stephen,

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Speaker 1: typically we'd have the summary of economic projections at a

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Speaker 1: meeting with a news conference. Now we have a news

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Speaker 1: conference at every meeting, and in some meetings we don't

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Speaker 1: have a summary of economic projections. So no new forecasts,

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Speaker 1: no new dot plot. Is that an advantage or a

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Speaker 1: disadvantage for the chairman today? Um? I mean, I guess

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Speaker 1: it's a mild disadvantage. But I think that you know,

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Speaker 1: it looks like a very wise move to invoke press

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Speaker 1: conferences at the end of every meeting, which um, Charon

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Speaker 1: Powell did for the beginning of this year. I mean,

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Speaker 1: it gives them more flexibility. Remember there was all the

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Speaker 1: talk in the prior regime that they could only cut

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Speaker 1: or hike at meeting is where there was a press conference. Well,

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Speaker 1: you know, it turns out July is the in the

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Speaker 1: feeds of mind, the proper time to be easing. And

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Speaker 1: and if if we were still in the old mode,

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Speaker 1: there wouldn't even be a press conference today. So, um,

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Speaker 1: you know, and think it turns out to be a

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Speaker 1: good thing that that the FED is having press conferences

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Speaker 1: after every meeting, and you know that should give him

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Speaker 1: plenty of of room to explain what the FED is doing.

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Speaker 1: I just think it's going to be a tricky message

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Speaker 1: to deliver. Well, Stephen, let's talk about what the FETE

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Speaker 1: is doing. You signed the three reasons to ease monetary policy.

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Speaker 1: I imagine he might repeat them in the news conference today.

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Speaker 1: Something he totally failed at was responding to a question

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Speaker 1: from our very own colleague, Michael McKee as to how

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Speaker 1: easy a monetary policy will have given the challenges we

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Speaker 1: have currently. How do lower rates help in this environment? Stephen, Well,

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Speaker 1: I think that's a good question, and if I were

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Speaker 1: chair and power, I'd be doing everything I could to

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Speaker 1: avoid that question, because, um, the reality is the main

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Speaker 1: thing that's holding the economy back right now. And again,

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Speaker 1: we are growing above trends, so it's not like the

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Speaker 1: economy's week, But the main thing that's holding it back

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Speaker 1: is uncertainty around trade policy, and there's literally nothing the

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Speaker 1: FED can do to resolve that we're talking about this

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Speaker 1: early this morning, Steve Stanley, If the if consumption is

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Speaker 1: a plug, like it's pretty immovable. Consumer just delivers what

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Speaker 1: they deliver. What are we asking of investment in this

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Speaker 1: country to jump start what? I guess President Trump and

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Speaker 1: others want. What? What? What are we are we asking

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Speaker 1: for a doubling of investment in the company at the margin? Well,

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Speaker 1: I don't think you need a huge amount in terms

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Speaker 1: of investment. I mean, look, we're at a point in

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Speaker 1: the cycle. The unemployment rate is near fifty year lows.

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Speaker 1: It's not like we need the economy to be growing

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Speaker 1: tremendously above trend. Now, if you're the president and you're

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Speaker 1: less than eighteen months from reelection, of course you want

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Speaker 1: the economy to be growing as fast as it can

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Speaker 1: and and that's you know, that's that's I think that

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Speaker 1: the sentiment behind his rhetoric. But if you're the Fed,

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Speaker 1: you're just looking for growth that kind of keeps things going.

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Speaker 1: I think they are somewhat concerned about the fact that

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Speaker 1: inflation has been running a little below target this year,

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Speaker 1: but that feels like it's um even if it's not

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Speaker 1: um transitory, as Pal said in May. But then bernig

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Speaker 1: Don in June. It does feel very structural, and I'm

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Speaker 1: not sure that there's a whole lot that I can

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Speaker 1: do about that either. Um, But you know, I don't

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Speaker 1: know that we need to be goosing the economy right now.

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Speaker 1: I think the economy is fine. Stanley, thank you so much.

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Speaker 1: The great unspoken of so much of our politics and

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Speaker 1: almost the FED is trade. Like, what will Chairman Policy

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Speaker 1: say today? Is the head of the FED supposed to

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Speaker 1: address a trade wark? Yeah? I think he has to

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Speaker 1: address he has to talk about the risks are around

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Speaker 1: the outlook. I thought what I found really striking the debates,

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Speaker 1: not just the ones last night and the ones we

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Speaker 1: are set together again the previous round two barely any

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Speaker 1: mention of what is happening with China. I mean, you're

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Speaker 1: in Detroit should be the story. Court Democrats will vote Democrat.

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Speaker 1: I get that, But if you want to win the election,

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Speaker 1: start talking about the economy. And if you have one

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Speaker 1: person that says you're losing your jobs and you're losing

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Speaker 1: your jobs because of China, and then another set of

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Speaker 1: individuals not even referencing what's happening, only one person is

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Speaker 1: winning that debate. Because I mean one person is having it, Meredith,

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Speaker 1: something with us with your Asia group on this topic. Meredith,

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Speaker 1: it's so important that the easy answers it's about agriculture,

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Speaker 1: and I guess it will be addressed in the president

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Speaker 1: front and center with farmers. But it's more than just agriculture,

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Speaker 1: isn't it. It certainly is what this is. This is

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Speaker 1: really not about tariffs. It's really not about trade. At

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Speaker 1: the heart of this, Tom is this is really the

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Speaker 1: economic competition between two markedly different models and which are

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Speaker 1: for years were now at more of a tipping point

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Speaker 1: because the China state backed capitalist model is, in the

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Speaker 1: views of Washington policymakers, on the verge of being able

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Speaker 1: to overtake the United States in some of the key

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Speaker 1: technology growth sectors of the future. And that's really what

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Speaker 1: is driving not just a trade confrontation, but the broader

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Speaker 1: US China technology war that we see playing out, most

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Speaker 1: notably with Huawei. A series of governments just believe that

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Speaker 1: China was going to look increasingly like the United States

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Speaker 1: and the rest of the Western world as years progressed.

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Speaker 1: A lot of people fell head over heels for that president.

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Speaker 1: She speech over in Davos, a couple of years ago

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Speaker 1: rather foolishly. I think now we face what you say

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Speaker 1: as a tipping point, and I just wonder how this

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Speaker 1: rolls over. Is it something that just continues now the

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Speaker 1: way it is at the moment, this tension year after

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Speaker 1: year after year for a couple of decades, or do

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Speaker 1: something break? How do you frame that for clients at

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Speaker 1: the moment, Meredith, My sense this is going to be

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Speaker 1: more of a a long term struggle than something that

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Speaker 1: is necessarily going to break it. And look, we we

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Speaker 1: need to go back to how Washington and Beijing work

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Speaker 1: together in prior decades. There's this raging debate within Washington

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Speaker 1: right now that the engagement policy of prior administrations, both

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Speaker 1: Republican and democratic, failed, and I think that's ultimately wrong.

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Speaker 1: It was useful at that time, and as a former U. S. Diplomat,

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Speaker 1: I was at the table when we were pressing Beijing

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Speaker 1: that they needed to make economic reforms that a couple

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Speaker 1: of years later they would eventually make. They would get there,

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Speaker 1: They were listening, but it was always in their own

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Speaker 1: time frame, and it was always the kind of reforms

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Speaker 1: that would still allow state China state capitalist model to

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Speaker 1: be uniquely Chinese and not Western and that's really where

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Speaker 1: we are right now moving forward all the singles that

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Speaker 1: we're watching as that engagement debate seems to be changing

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Speaker 1: in Washington. That is confirmed for Beijing that Washington can't

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Speaker 1: live with China under Shijin Ping being China, and that

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Speaker 1: as such, Hiju and Ping is not no longer looking

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Speaker 1: to reform China's models, so that is more amenable to

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Speaker 1: President Trump's America, but looking to do what he can

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Speaker 1: to preserve the economic structures that he's put in place

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Speaker 1: that he thinks is uniquely positioned to see China's economy

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Speaker 1: transition um and while retaining its unique characteristics. So perhaps

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Speaker 1: fortunately for President g the conversation at the moment is

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Speaker 1: will you sell product to Huawei and will you buy

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Speaker 1: some agricultural products from our farmers in the United States.

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Speaker 1: It seems to me that we've drifted away from some

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Speaker 1: of the core issues at the moment. Meredith, can we

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Speaker 1: get back to the core issues again? I think that

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Speaker 1: we would. We need to get back to those core issues.

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Speaker 1: But right now Washington Beijing are they're having more surface

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Speaker 1: level conversations, and even today the talks in Shanghai they

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Speaker 1: wrapped early. That tells you that they are not getting

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Speaker 1: to those core issues, and in fact that the levels

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Speaker 1: of if not trust, then at least sort of mutual

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Speaker 1: understanding of where the both sides are that's really sort

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Speaker 1: of broken down. We need to get back to that

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Speaker 1: in order to make substantial progress. You say, terrorists don't

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Speaker 1: matter a lot of people. You know, they'll go okay, great,

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Speaker 1: except it does if they are if they are a

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Speaker 1: tax on imports and attacks on Americans. Who's winning the

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Speaker 1: tariff war? Right now? What's what's the partial score? Well,

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Speaker 1: it is tariffs do matter, Tom, But in eur Asia

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Speaker 1: groups of view, it's not necessarily the tariffs that are

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Speaker 1: going to have the ultimate lasting impact. It's the export controls,

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Speaker 1: it's the investment restrictions, it's the attacks on each other's

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Speaker 1: economic models that is going to cause the long term destabilization.

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Speaker 1: Just for a minute here, I know Dr Bremer doesn't

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Speaker 1: want you to do this, but let's go short term.

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Speaker 1: Is it China one US zero right now? On tariffs?

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Speaker 1: Who's winning? Well, Americans are certainly paying those tariffs, but

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Speaker 1: China's own growth is markedly slowing. Six You know, what

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Speaker 1: are we John in the us splitting here between Steve

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Speaker 1: Stanley's two point six and shriek Camars comparison when start

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Speaker 1: looking at growth that way between China and the United States. Yeah,

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Speaker 1: you're right, even slowing growth is not bad growth in China. Correct. Yeah,

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Speaker 1: I would agree with that, but I would look at

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Speaker 1: what's happening in China at the moment, and I think

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Speaker 1: it's I think it would be a mistake to sit

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Speaker 1: here and say that the United States is under more pressure,

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Speaker 1: the president is under more pressure because there's an election

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Speaker 1: next year. We always seem to make that mistake and

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Speaker 1: boil it down to electoral politics. Meredith, and I'd like

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Speaker 1: you to give us a little bit more clarity as

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Speaker 1: just to how much pressure President she is under right now.

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Speaker 1: Not to get this wrong, because there are some people

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Speaker 1: that think perhaps he's overstepped in the last couple of years,

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Speaker 1: Perhaps he's take had been a little bit too bold

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Speaker 1: with made in China, and this is the blowback from

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Speaker 1: that previously. What are your thoughts on that, Absolutely he

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Speaker 1: is under increased pressure. And I say this as the

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Speaker 1: Chinese Communist Party leadership are preparing to go to their

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Speaker 1: annual summer retreat, where I'm sure that she's in Ping

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Speaker 1: will be in listening mode, not just on the US

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Speaker 1: China trade confrontation, but on the blowback with b R I.

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Speaker 1: We've seen him scale back that program slightly and look

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Speaker 1: to tweak it to address the criticisms there. Also what's

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Speaker 1: happening in Hong Kong. We have an upcoming presidential election

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Speaker 1: in Taiwan that could move that island further away from

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Speaker 1: from Beijing's grasp. So he's got a lot of pressure

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Speaker 1: coming at him. But what's key here is that there

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Speaker 1: is no one that could possibly replace shijin Ping. Now

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Speaker 1: he has neutralized any potential successors, and so all the

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Speaker 1: power is still rest with him. His position is still

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Speaker 1: relatively strong. Regardless what do you see in the Mandarin press?

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Speaker 1: What do you see when your great gifts is to

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Speaker 1: be able to read all this in real time? What

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Speaker 1: are they actually writing? I love when you ask me

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Speaker 1: this question Every time, Tom I would say that there

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Speaker 1: is a market shift away from what kind of reforms

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Speaker 1: might be necessary to reach a deal, and more so

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Speaker 1: to what can we do to shore up our own

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Speaker 1: unique state capitalist system to wave off onward pressure coming

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Speaker 1: from Washington. So they are managing the tension coming from Washington.

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Speaker 1: They're not looking to of any problems. Is it a

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Speaker 1: vacuum for Europe right now? I mean, can they slip

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Speaker 1: right in here and become more dominant to those important

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Speaker 1: Chinese view questions? I certain I think China will be

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Speaker 1: looking to replace some of its relationships with Washington with Europe,

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Speaker 1: Latin America, other key key economies. But those same concerns

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Speaker 1: about Chinese industrial policies, investment practices, they're in European capitals

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Speaker 1: to to a somewhat of a lesser extent, they would

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Speaker 1: prefer a different approach than that taken by President Trump,

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Speaker 1: but they do share those concerns. One final question, Should

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Speaker 1: John and I do a road trip to Hong Kong

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Speaker 1: and in November, you know, just get out in front

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Speaker 1: of the big changes. I'd love to see you guys

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Speaker 1: in Hong Kong and November. That's good. Should come back

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Speaker 1: you plan in the next couple of months. I'm working

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Speaker 1: on it. Yeah, you know, there's a lot going on

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Speaker 1: there pretty ahead of right strategy for t DC securities.

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Speaker 1: Do you want to us now as we count you

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Speaker 1: down to that fat decision prayer, just begin with what

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Speaker 1: you're looking for? In several last time, I uh, John,

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Speaker 1: thanks thanks for having me on tom UM. So we

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Speaker 1: are looking for the twenty five based point of cut

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Speaker 1: that is pretty much baked in the cake, I would argue,

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Speaker 1: I think all the focus is going to be on

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Speaker 1: forward guidance and really what the what the thresholders for

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Speaker 1: the next yeas you know, does does data need to

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Speaker 1: get worse for the FAT two ease again or are

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Speaker 1: they still going to continue to add insurance cuts? So

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Speaker 1: I think that's really going to be the focus. There's

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Speaker 1: also some talk around this fifty based point cut. I

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Speaker 1: think it's very hard to message that because if they

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Speaker 1: go fifty and talk about going more than the market

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Speaker 1: might say, you know, what does the FED know that

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Speaker 1: we don't know? If they don't go fifty, they can

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Speaker 1: go twenty five, and I think keep that optionality out there.

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Speaker 1: The other thing that the treasury market and I think

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Speaker 1: overall markets will look at, will be on the balance sheet.

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Speaker 1: So remember the balance sheet is supposed to or or

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Speaker 1: rather balance sheet run off. Balance sheet runoff is slated

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Speaker 1: to end in st member. But you know, it's hard

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Speaker 1: for the Fed too, I think, communicate that they're actually

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Speaker 1: easing on the rate front, but they continue to tighten

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Speaker 1: on the balance sheet front, so they might end that.

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Speaker 1: I think that's pretty bullish for treasuries because now it

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Speaker 1: implies that the FED is going to be buying as

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Speaker 1: much as you know, twenty billion off treasuries in the

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Speaker 1: open market. So it's not QUEI, but it will look

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Speaker 1: like a little bit uh, you know, like a small

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Speaker 1: que So just to jump in just quickly on this

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Speaker 1: issue because you're not aliged Banks America. JP Morgan also

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Speaker 1: thinks that we could get an end to balance sheet

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Speaker 1: roll off early, but it's only a couple of months early.

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Speaker 1: Why is that material? So it's not so material in

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Speaker 1: terms of of the total amount of reserve drainage, but

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Speaker 1: where it is material is that the FED will be

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Speaker 1: potentially buying as much as twenty billions. I think what

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Speaker 1: the market doesn't quite appreciate is that because rates have fallen,

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Speaker 1: mortgage runoff is running fairly high, so it's about fifteen

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Speaker 1: to twenty billion a month now. The FED is probably

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Speaker 1: going to continue to let mortgages run off, but they're

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Speaker 1: going to replace mortgages with treasuries. So for the first time,

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Speaker 1: keew We ended the FED will mean the open market

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Speaker 1: buying treasuries, and you know it's it's not a couple

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Speaker 1: of billion. They'll be buying twenty billion a month, So

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Speaker 1: that's going to add you know, download pressure on r

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Speaker 1: Is any of this in fabosi? I mean you and

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Speaker 1: I we rounded through six seven, eight hundred pages of fabosi.

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Speaker 1: People like you, Preya, you just sort of glibally say,

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Speaker 1: you know, twenty billion, this twenty billion that what is

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Speaker 1: the outcome of this original policy? Yeah? I think the

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Speaker 1: outcome of the original QUEI was to take duration discouvers.

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Speaker 1: This is about just keeping policy unchanged and allowing the

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Speaker 1: FED to ultimately return to a all treasury portfolio. But

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Speaker 1: it is a new martial buyer in town. So you know,

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Speaker 1: I think with all this talk about deficits, you know,

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Speaker 1: arging to rise, when you've got another buyer, John, is

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Speaker 1: there any positive Swiss yield? The answer is no. I mean, Prea,

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Speaker 1: the price of this is disincentivizing normal processes in finance.

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Speaker 1: How do we get to how do we get back

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Speaker 1: to normal processes? Well, I think we're redefining normal right.

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Speaker 1: If if our star, which I think the FED was

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Speaker 1: hoping was close to fifty base points to one percent.

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Speaker 1: What if it's actually zero in the US, and so

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Speaker 1: what if we were actually tighter monetary policy. You know,

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Speaker 1: as much as we'd like to blame this on the

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Speaker 1: trade boar, maybe the FED should not have raised rates

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Speaker 1: as much as it did. So now as they're taking

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Speaker 1: it out, I know they're going to pictures as insurance cuts,

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Speaker 1: but I think it's possible that policy was restrictive. So

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Speaker 1: now if they take that back and Our Star actually

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Speaker 1: goes down, is that going to be stimulative. I'm actually

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Speaker 1: very skeptical that insurance cuts work. I think we're in

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Speaker 1: the starting phase of a slowdown. I'm not sure twenty

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Speaker 1: five or even fifty base points do a whole lot

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Speaker 1: because financially conditions are pretty easy. So I think the

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Speaker 1: FACT will pitch this as insurance and then they'll have

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Speaker 1: to continue to do more because I just don't know

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Speaker 1: any of the global uncertainties going away. You know, the

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Speaker 1: in Portland organ every time someone mentions Our Star, they

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Speaker 1: have a drinking game where you have a shot of

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Speaker 1: blend coffee. You have drunk you can't. You have coffee.

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Speaker 1: They don't, they don't, you know, they don't just a

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Speaker 1: caffeinated blend cost sounds like a really weird drinking every

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Speaker 1: time it came out of San Francisco. That's a city

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Speaker 1: sellth Is it Starbucks coffee? No, no one drinks star

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Speaker 1: Wars coffee. They're everywhere but blend coffee. Okay, what's the

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Speaker 1: relevance of this? It's our start? I mean, where's where's

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Speaker 1: our start? Now? Yeah? Yeah, yeah, where's our start? Nobody knows?

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Speaker 1: Thank you, very easy. You'll only know in hindsight. You

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Speaker 1: know that, oh, maybe we were above our star. Such

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Speaker 1: a nebulous concept. Well, pray have they found out that

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Speaker 1: they were above it? You know? I don't know. I

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Speaker 1: think we just won't know. Um. I think the FED

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Speaker 1: so far doesn't. I mean, it's clearly the President things

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Speaker 1: that we were much above our start. I think the

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Speaker 1: Fed is attributing this, not so much too than having

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Speaker 1: tightened too much, but more than you know, new uncertainties

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Speaker 1: have come in and there's inflation. We don't know if

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Speaker 1: the philipsco exists, how flat is it? Maybe it's a

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Speaker 1: straight line, the horizontal line. So there's so many unknowns

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Speaker 1: that I'm almost hoping that they don't rely too much

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Speaker 1: on our star and instead communicates a different reaction function.

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Speaker 1: We have a very different which is why I think,

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Speaker 1: you know Bill Dudley's comments, that's the old guard. We're

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Speaker 1: in a new fair interest knew different reaction function where

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Speaker 1: they want to be more aggressive is Gairman Paul and

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Speaker 1: the old guard, No, I would argue he Clarada Williams.

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Speaker 1: I think that's the new guard that they just don't

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Speaker 1: want to go back to the zero low a bound.

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Speaker 1: So rather than waiting for data to suggest that they

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Speaker 1: need to ease, let's go early. What's the cost of

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Speaker 1: going early, Well, inflation, But actually inflation is running so

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Speaker 1: low that that's not a problem. I'm a little nervous

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Speaker 1: around financial stability. I think that's been swept away a

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Speaker 1: little bit. So you'll get a couple of descents with

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Speaker 1: people who think that or maybe we shouldn't be that.

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Speaker 1: You know that preventions better than cure, but there is

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Speaker 1: some unintended consequences of easing when you don't need to ease.

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Speaker 1: So you'll get the few descents, But I think the

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Speaker 1: core of the committee is in the camp said let's ease.

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Speaker 1: The cost of of that prevention is not that high.

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Speaker 1: We've had a range of people warning about easy monetary policy.

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Speaker 1: Morgan's down eas Russia's Shama in the New York Times,

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Speaker 1: Scott Minor of Guggenheim talking about the same thing, your reference,

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Speaker 1: the New York Fed President, the former New York Fed President,

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Speaker 1: Bill Dudley running for Bloomberg Opinion, all warning about easy

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Speaker 1: monetary policy and what it could mean for financial stability

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Speaker 1: and markets down the road. Well, let's talk about markets. Priyer,

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Speaker 1: Germany came out with a ten year bund auction this morning,

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Speaker 1: a yield a negative zero point for one percent below

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Speaker 1: the depot rate in Europe. Morgan Stanley have this argument,

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Speaker 1: and it goes as follows. And Andrew Sheets, Mike Wilson

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Speaker 1: and others have really been driving it forward. If you

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Speaker 1: believe the easing would work, the commodity complex would be rallying.

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Speaker 1: If you believe the easy in would work, you would

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Speaker 1: expect inflation expectations to pick up materially. If you believe

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Speaker 1: the easing would work worldwide, you'd expect ten year thirty

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Speaker 1: year yields to start to drift higher. So let me

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Speaker 1: ask you this prayer. If we get a rate cut,

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Speaker 1: if we get several right cuts, if we get a

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Speaker 1: c B easing, do you just see the whole curve

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Speaker 1: being pulled down or can we get some statements, can

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Speaker 1: we get the long end to start to pick up

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Speaker 1: a bit? I think if it's just the monetary policy

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Speaker 1: side that's easying, I don't think you get that stepening.

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Speaker 1: And particularly if the fact keeps calling this insurance cuts.

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Speaker 1: If we're going back to zero, we're doing que you know,

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Speaker 1: forget about any asset bubble risk around here. I think

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Speaker 1: then you can get that stepening. If you get any

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Speaker 1: fiscal easing, you can get that steepening. But you know,

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Speaker 1: monetary policy can only go that far. So if we're

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Speaker 1: just talking about a few rate cuts, I think you

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Speaker 1: don't get that steepening eel curve. And I completely hear you.

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Speaker 1: I think the market saying these insurance cuts don't work,

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Speaker 1: and the first is going to have a tough time

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Speaker 1: if the data doesn't pick up to say that this

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Speaker 1: is just a few cuts that we're putting into it.

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Speaker 1: Thank you so much, Thanks pressure to the securities. Right now,

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Speaker 1: we're gonna dash to uh Detroit. Kevin Surreali is in

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Speaker 1: Detroit at the Fox Theater where they're having a Democratic debate.

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Speaker 1: Kevin an open question what's the difference between these debates

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Speaker 1: versus the previous debates. I think it's getting more serious,

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Speaker 1: and I think you're starting to see that in terms

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Speaker 1: of the candidates last night, uh and, and really the

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Speaker 1: contrast that was drawn. You know, I just spoke with

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Speaker 1: Tom Chairman of the Democratic National Committee, Tom Perez, uh and,

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Speaker 1: and he made that case as well. You know, in

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Speaker 1: the spin room, you know, the issues of whether or

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Speaker 1: not at the nomineque can be for Medicare for all

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Speaker 1: or not and unite the party was the talk of

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Speaker 1: the spin room. But Chairman Perez made the point that look, ultimately,

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Speaker 1: they're going to have to have differences of opinion in

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Speaker 1: the party regardless of who the nominee is. But I

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Speaker 1: said this earlier on Bloomberg TV with you Tom, but

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Speaker 1: I think it it's worth repeating in the sense that

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Speaker 1: Senator Elizabeth Warren, Senator Bernie Sanders, in terms of the

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Speaker 1: policy arguments, they are setting the parameters of the debate,

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Speaker 1: and every other candidate is reacting to what their plans are.

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Speaker 1: Uh and, and they're on the other candidates are on defense. Kevin,

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Speaker 1: I've got to watch you about the format. A lot

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Speaker 1: of people are frustrated with this format. Why can't they

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Speaker 1: just put the tear one candidates on one night and

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Speaker 1: the Tier two, three, and four on another night. We

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Speaker 1: want to see all of the main all of the

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Speaker 1: front runners together on one night. What are they doing?

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Speaker 1: Biden and Warren? Yeah, you know, look, it's such a

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Speaker 1: fair question, John I asked it to to Chairman Perez.

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Speaker 1: They're thinking was when the Republicans had this issue in

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Speaker 1: the twenty sixteen cycle, they had the main stage debate

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Speaker 1: and then the Kittie table debate, and they were criticized

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Speaker 1: for not giving you know, the lower tier candidates enough

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Speaker 1: of a shot, enough of a chance, so they tried

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Speaker 1: to take the opposite approach. Become the fall, the requirements

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Speaker 1: to qualifying for a debate become more difficult of a

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Speaker 1: threshold to reach, and you're gonna start to see pressure

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Speaker 1: and the field dwindled down. Kevin, what's the money game

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Speaker 1: right now? I mean I saw a poll that Mr

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Speaker 1: Biden is very nicely ahead of the others, etcetera, etcetera.

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Speaker 1: But within the pros that you spend all your time with,

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Speaker 1: what's the dynamic right now? They're commenting on, Well, I

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Speaker 1: mean that's why some of these lower to your candidates.

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Speaker 1: To Jonathan's point it's so important is because we always

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Speaker 1: talk about a viral campaign and having that viral moment.

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Speaker 1: All that viral campaign leads to is an opportunity to

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Speaker 1: fundraise and to raise big bucks. And so if you're

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Speaker 1: better Overorke, you know, you might have had a big

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Speaker 1: start and gotten some a couple of million bucks in

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Speaker 1: the bank when you launched on Vanity Fair. But you know,

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Speaker 1: you know that those those campaigns and the burn rate

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Speaker 1: of those campaigns that someone put it to me yesterday,

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Speaker 1: that's that becomes very difficult to say what happens tonight. Biden, Kamala,

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Speaker 1: Biden Booker, Is Biden formidable? Is Biden a formidable front runner? Uh,

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Speaker 1: there's pressure approached Biden's approach to step out and be

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Speaker 1: a gross He's actually prepared to have a fun time.

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Speaker 1: Because I found it unbelievable, Kevin that he turned around

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Speaker 1: down to the debate and affected me. The reporting was

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Speaker 1: that he wasn't prepared for people to go after him exactly,

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Speaker 1: and he said, I mean you've seen this in terms

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Speaker 1: of like last last cycle or last debate in Miami.

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Speaker 1: He didn't even go into the spin room. He hadn't

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Speaker 1: even even criticized for not even going and giving interviews.

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Speaker 1: And now you've started to see that the campaign is

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Speaker 1: putting him out more. Look for that, Look for how

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Speaker 1: he clashes and with Harris. But also look, and I

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Speaker 1: say this that bears repeating, Look to see how he

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Speaker 1: draws an ideological contrast with the candidates not on the stage,

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Speaker 1: Elizabeth Warren and Bernie Sanders. How cool is the Fox Theater.

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Speaker 1: It's the one jewel that wasn't torn down. It's awesome.

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Speaker 1: Elvis Presley performed there. You know Motown Rita Franklin. I'm

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Speaker 1: actually standing outside of the Parks and Wreck Diner at

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Speaker 1: Grand River Avenue. It's like this famous diner. Some have

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Speaker 1: more coffee and full day ahead. It's really coughing up

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Speaker 1: for the Fox Theater. Thanks for listening to the Bloomberg

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Speaker 1: Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,

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00:27:16,240 --> 00:27:20,440
Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at

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Speaker 1: Tom Keane before the podcast. You can always catch us worldwide.

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Speaker 1: I'm Bloomberg Radio