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Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene

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Speaker 1: Jay Ley. 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. Dropping

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Speaker 1: by the studio is Chris Rupkey, m u f G

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Speaker 1: Union Bank, Chief Financial Economist and managing Director. Good morning

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Speaker 1: to Chris. Morning. So we're slowed down in China, implementing

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Speaker 1: lending quotes as commodities breaking down. The Federal Reserve does

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Speaker 1: not look like it's for turning right now? What do

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Speaker 1: you make of all of this put together? Well, I

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Speaker 1: was pretty happy last night, right, I mean, the Dow

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Speaker 1: was up six percent year to date, the max it

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Speaker 1: was a month ago was up eight and a half percent,

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Speaker 1: and so we climbed back. I was up in the

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Speaker 1: black again, up six percent here to date. It was

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Speaker 1: only eight and a half percent year to date. And

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Speaker 1: now what happened? The market went pear shape, had a

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Speaker 1: little wabi overnight. You have something to do with China.

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Speaker 1: As you say, I don't know how this happened, but

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Speaker 1: it's we're only down. I'm kind of used to the

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Speaker 1: new volatile. I don't want to make too much of

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Speaker 1: the staff moves. I want to have a look at

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Speaker 1: what is happening in China specifically, there is a deceleration

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Speaker 1: taking place. Is it made in China or made in America.

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Speaker 1: I think the tariffs are having an impact, and um,

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Speaker 1: you know we're not all there yet, right, I mean,

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Speaker 1: the the final two billion of tariffs has a ten

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Speaker 1: percent is a ten percent now January one, it goes to.

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Speaker 1: That's nine night and day different when we put the

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Speaker 1: tariffs up to. That's going to cause a major change

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Speaker 1: in some of these import export patterns. So you know,

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Speaker 1: the trade wars are is interesting from the U S

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Speaker 1: standpoint for a trade war and the I m f

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Speaker 1: S warning about it. But for a trade war like

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Speaker 1: ninety nine, you need trade volume to go down. But

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Speaker 1: imports and exports to China this year visa the US

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Speaker 1: are up eight nine percent. Yeah, so it's going the

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Speaker 1: wrong way. It should be following going up a percent.

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Speaker 1: I hate the nineteen twenties nineteen thirties comparison. Well, you

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Speaker 1: are the paras pretty bad? Neither were you, Chris. I'm

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Speaker 1: sure it was terrible looking at the history books, but

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Speaker 1: the comparisons just don't make sense at all to me,

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Speaker 1: at least, I look at the desderation in China and

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Speaker 1: I see signs of desperation. Now the Chinese implementing lending

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Speaker 1: quotas that we've learned in the last so now, large

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Speaker 1: banks will need to have a third of new corporate

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Speaker 1: loans to private companies. Small and medium banks will need

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Speaker 1: to have two thirds of new loans will have to

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Speaker 1: go on the corporate side, will have to go to

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Speaker 1: non state entities. At the moment, loans to nonstate corporates

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Speaker 1: currently less than a quarter of the total. These are

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Speaker 1: gonna have to be some big moves by Chinese banks

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Speaker 1: to get extra loans to private entities. That's a recipe

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Speaker 1: for trouble, isn't it. Yeah, it doesn't look great. I

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Speaker 1: mean it does. Part of me kind of says that,

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Speaker 1: you know, they're GDP numbers, they're interesting, rout interesting. Remember

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Speaker 1: back in two thousand and sixteen, we thought China's economy

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Speaker 1: was going down and they said, no, real GDP is

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Speaker 1: running six and a half percent, and that's our target

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Speaker 1: over the next five years. Now, at the worst, I

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Speaker 1: think I m F has six two, China growth slowing

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Speaker 1: from six and a half percent roughly to six point

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Speaker 1: two percent next year. Uh, that doesn't sound like it's

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Speaker 1: all that dramatic, right in in I mean going from

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Speaker 1: six and a half to six point two. The worry

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Speaker 1: is it's going to be much much worse, of course,

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Speaker 1: So we'll have to see what happens. You know, Trump

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Speaker 1: before the midterms was saying maybe he can get some agreements.

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Speaker 1: So that's the key, whether some of these tariffs can

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Speaker 1: be taken off the track they're on. The twenties and

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Speaker 1: the thirties, John was all upset about the twenties and

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Speaker 1: what was the worst year in the twenties and the thirties?

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Speaker 1: Seven The Yankees played seven four baseball, well understood to

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Speaker 1: be one of the best teams in the history of

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Speaker 1: all of sports. They went eighteen and four against the

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Speaker 1: Red Sox, who enjoyed last place. The Red Sox played

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Speaker 1: John what we call three thirty one ball. They won

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Speaker 1: fifty one games and lost a hundred and three games.

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Speaker 1: That was the worst year in the twenties, and that's

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Speaker 1: one of the causes of the Great Depression. It was

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Speaker 1: reminded me that in our last conversation is, well, Chris Rupki,

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Speaker 1: when you look at China, when you look at these dynamics,

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Speaker 1: I've noticed this week very quietly, John Burry, in all

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Speaker 1: the Washington headlines and all that was imports from China

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Speaker 1: into America. What are we exactly import from China into America?

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Speaker 1: Is that a Is that an internal dynamic of manufacturing

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Speaker 1: and services or is it is it something simpler than that? Yeah,

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Speaker 1: I mean it's a lot of consumer goods and it's

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Speaker 1: a lot of capital goods. So the capital goods are

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Speaker 1: going into the supply chain here. That's what It's never

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Speaker 1: made sense to me because I remember the trade wars

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Speaker 1: we had with Japan. You know, I'm at MFG Bank,

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Speaker 1: the trade wars that we had with Japan in in

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Speaker 1: the late eighties that it was night and day different. Right,

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Speaker 1: So we're cars coming from Toyota Honda to the US.

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Speaker 1: So it's kind of like US versus Japan. Now this

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Speaker 1: is trying to be like US against China the country,

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Speaker 1: but it's really US manufacturers. We're battling with ourselves. US

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Speaker 1: companies have done this. This is one of the most

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Speaker 1: important in such on the weekend when we're doing politics, seven,

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Speaker 1: and I get it all. You know, the news flows

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Speaker 1: when extraordinary, but what Mr Ruskie just said there's incredibly important.

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Speaker 1: We're fighting the emotional war of the Japanese trade battle

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Speaker 1: of years ago. It's not it's different this time. It

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Speaker 1: is different this time. But I will say I think

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Speaker 1: we've got to stop viewing the global economy through the

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Speaker 1: prism almost exclusively of US policy. You would say that trade,

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Speaker 1: monetary policy, fiscal policy. I would say that, look at

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Speaker 1: what is happening in China right now, that has nothing

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Speaker 1: to do with trade. One fifth, one fifth of China's

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Speaker 1: housing is empty. Let me say it again, one fifth

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Speaker 1: of China's housing is empty. This has nothing to do

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Speaker 1: with a trade war. They have a real problem of

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Speaker 1: over capacity. They have a real problem with decelerating growth

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Speaker 1: in the country. Everybody can agree on that. The thing

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Speaker 1: nobody can agree on is when the pain is going

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Speaker 1: to start, because they keep finding a way to put

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Speaker 1: this off, to put this off. And I think the

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Speaker 1: reason some people are worried this morning, because they wake

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Speaker 1: up this morning and see a government that's trying to

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Speaker 1: introduce lending quotes, is because they trying to play the

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Speaker 1: game again. They're trying to boost credit and keep the party,

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Speaker 1: keep the music going. There are serious problems in this

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Speaker 1: economy that have nothing to do with try disputes Chris. Yeah.

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Speaker 1: But yeah, I mean, but part of it is it's

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Speaker 1: still is very much when I was over there. Uh,

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Speaker 1: it's a developing nation. I mean it's one point four

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Speaker 1: billion people. Uh, the the amount of talk about income inequality.

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Speaker 1: We're talking about income inequality with Tom. I mean, income

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Speaker 1: inequality in China is unbelievable, right, I mean there's very

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Speaker 1: very few people. When when I was over there, I

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Speaker 1: didn't meet meet that many people who who owned a home, right,

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Speaker 1: I mean, they can't afford that. The incomes aren't there.

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Speaker 1: So it's a very complex society, and I think we

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Speaker 1: kind of generalize sometimes I don't. I mean there's still

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Speaker 1: people coming from the rural areas to the cities that

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Speaker 1: they're being It's very complicated. So I don't know how

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Speaker 1: much in trouble their economy is My offspring cash flows

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Speaker 1: living over there. He's got like three units, he bought

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Speaker 1: vet bill units. So what you say you've got, afterthought,

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Speaker 1: which is the youngest cash flow? Cash you squeezed four

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Speaker 1: years into five? That is beautiful college. You've named pretty

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Speaker 1: much every one of your kid name to him. I mean,

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Speaker 1: it's his middle name, but we don't use this formal

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Speaker 1: and we got lovely Chris. Thanks for dropping by, Chris

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Speaker 1: mufg Bank Chief Financial Economists, John, I want you to

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Speaker 1: bring in our next guest, truly esteemed here as a

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Speaker 1: president travels to UH to Paris in the commemoration of

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Speaker 1: the hundred anniversary of World War One. But I would

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Speaker 1: just say John that if I've read in all my

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Speaker 1: readings and all my interviews, there is forever a distance

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Speaker 1: of America from these great twentieth century wars. It's something

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Speaker 1: I know. You grew up in Covenedry with the blitz

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Speaker 1: of World War two and in Coventry, and yeah, they

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Speaker 1: totally flattened it a very very different looking city now,

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Speaker 1: but we should mention for American audience a manufacturing heart

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Speaker 1: of the United formally, um, not so much anymore, in

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Speaker 1: a very different looking city than what it looked like

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Speaker 1: before the war, That's for sure. I can see why

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Speaker 1: you've got me to introduce Stuart, because it's the longest

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Speaker 1: title I've ever read. Stuart Patricks, CFR, Senior Fellow in

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Speaker 1: Global Governance and director of the International Institutions and Global

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Speaker 1: Governance Program. There we go, Did I do? Okay? Yeah,

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Speaker 1: you did well. That that good morning to Stewart. Important

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Speaker 1: weekend for so many reasons. What are you looking for

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Speaker 1: this weekend? Well, what I'm looking for is um. Obviously,

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Speaker 1: there's going to be the gathering world leaders, including Donald Trump,

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Speaker 1: in Paris at the Arc de Trient on Sunday, the

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Speaker 1: eleventh hour of the eleventh day of the eleventh month,

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Speaker 1: basically commemorating armistst Day UM, the alleged war to end

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Speaker 1: all wars, where the President is obviously going to be

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Speaker 1: moralizing the more than a hundred thousand American troops that

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Speaker 1: died there, many fewer obviously than died in your own country. Uh,

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Speaker 1: more than seven hundred thousand. I believe Brits died huge proportion.

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Speaker 1: And uh. And and the memory and the residents and

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Speaker 1: the gravity of the of that conflict in instill in

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Speaker 1: the memory of of people who's who remember their parents

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Speaker 1: talking about it, etcetera. In Europe is huge. But it's

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Speaker 1: also a time to reflect on the fact that a

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Speaker 1: lot of the forces that were unleashed during the Second

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Speaker 1: World of first World War and its immediate aftermath are

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Speaker 1: really really have echoes in our current day and um

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Speaker 1: that's why President Emmanuel mccrawl is hosting what he calls

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Speaker 1: the Paris Peace Form during that time to try to

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Speaker 1: to counteract this the rising nationalism, rising authoritarianism and UH

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Speaker 1: and rising protectionism around the world and a really interesting

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Speaker 1: story with hegemonic power. Those two wars marked the decline

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Speaker 1: of British hegemonic power and the upringing of American hegemonic power.

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Speaker 1: From long, long time, we talked about what would happen

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Speaker 1: with American hedge many I don't think many people thought

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Speaker 1: that America with withdraw from its role voluntarily. Absolutely, it's

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Speaker 1: not what is happening right now. Absolutely. Colleague of mine,

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Speaker 1: Jim Lindsay, with another writer Evo Dalter, have just written

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Speaker 1: a book called The um Uh, The The The Empty

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Speaker 1: Throne of the American abdication of world leadership. And that's

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Speaker 1: that precisely what's happened. You know, Normally, when you have

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Speaker 1: these sort of power transitions, you have one power overtaking another,

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Speaker 1: sometimes defeating it in war, sometimes sort of graciously passing

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Speaker 1: the batons, as in a sense Britain did to the

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Speaker 1: United States. Here you have instead a country that still

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Speaker 1: is by all measures the most powerful in the world,

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Speaker 1: in a sense abdicating its role. And that's why the

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Speaker 1: very the Versailles that the Paris Peace Conference era is

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Speaker 1: so appropriate right now to think about, because that was

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Speaker 1: a time when the United States had a chance to

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Speaker 1: join the League of Nations that President Woodrow Wilson had

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Speaker 1: had created. But instead, in a sense, the United States

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Speaker 1: decided to absent itself in many ways during inter warriors,

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Speaker 1: from from any effort to try to have a machinery

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Speaker 1: to organize the piece. I see this trend in the

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Speaker 1: United Kingdom as well. Many people can identify with this

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Speaker 1: across various countries in Europe. Is this a consequence of

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Speaker 1: populism in America that many people in the electorate know what,

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Speaker 1: no longer want America to have this role on the

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Speaker 1: international stage. I think there's a huge amount of exhaustion.

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Speaker 1: I think when you look, I think the vast majority

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Speaker 1: of Americans remain internationals. There's a bunch of recent opinion

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Speaker 1: polling very comprehensive from the Chicago Council on Global Affairs,

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Speaker 1: that is that is U testified to that. However, I

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Speaker 1: think a lot of Americans, uh, think that the United

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Speaker 1: States has for a long time done more than its

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Speaker 1: fair share. And they also equate sort of the promotion

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Speaker 1: of democracy with an indignation building exercises around the world.

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Speaker 1: So the Americans are exhausted, and so there's a sense

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Speaker 1: that others, and Donald Trump has picked up in this,

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Speaker 1: that others are free riding on American American efforts. Stuart

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Speaker 1: Patrick where is with the Council on Foreign Relations Just

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Speaker 1: terrific spective out of Stanford and Oxford where he was

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Speaker 1: a Rhodes scholar, and of course his work, uh as

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Speaker 1: well on sovereignty has been important. There's been technology. I'll

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Speaker 1: go back to the American Civil War. We struggled with it.

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Speaker 1: They're certainly in World War One. John Keegan talks about

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Speaker 1: the stalemates of World War One, the technology of or

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Speaker 1: to just John, the advent of radar alone was or

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Speaker 1: or or for that matter, penicillin is being extraordinary within

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Speaker 1: all the synthesis of the consolant foreign relations. What do

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Speaker 1: we underestimate about the technology now is nation's clash? What's

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Speaker 1: the the present thing you're studying about our modern technology? Well,

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Speaker 1: it's a couple of things. So one of them is UM,

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Speaker 1: the the growth and the implications of the growth of

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Speaker 1: sort of lethal autonomous weapons systems. UM. We sp you

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Speaker 1: spoke about technological advance and and obviously and the impact

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Speaker 1: of that taking people by surprise, right, the exact lethality

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Speaker 1: during trench warfare, making any possible to have the sort

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Speaker 1: of wars of movement. But then, of course than the

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Speaker 1: invention of sort of cavalry in the sense of tanks

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Speaker 1: uh in in the Second World War, wars of movement, etcetera.

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Speaker 1: What we've really gotten into now is a degree of

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Speaker 1: sort of remote control and was video game warfare, in

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Speaker 1: which increasingly, as robotics gets more advanced, many of these

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Speaker 1: things are gonna be and already are you see it

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Speaker 1: with drone technology being outsourced to sort of in a

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Speaker 1: sense terminal jockeys in Nebraska for instance, being able to

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Speaker 1: that is too clinical and too surgical and avoids the

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Speaker 1: human condition absolutely absolutely well. First, in two ways. One

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Speaker 1: of them is it certainly UM creates a situation where

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Speaker 1: UM there are major hazards in terms of who's making

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Speaker 1: those lethal decisions. But it's going to become even more

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Speaker 1: of a problem. Uh. This distancing when uh, these weapons

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Speaker 1: systems are actually able to make those decisions on their own.

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Speaker 1: And more broadly, the artificial intelligence revolution is also another

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Speaker 1: it is it is creating huge problems for the future

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Speaker 1: of warfare because you have situations where, um, you know,

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Speaker 1: the the as it's been described that if that if

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Speaker 1: a country like China, which is competing all out to

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Speaker 1: try to dominate artificial intelligence, ends up getting only a

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Speaker 1: few months advantage, that could be the equivalent of having

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Speaker 1: an entire revolution in military affairs that the Unit States

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Speaker 1: falls behind. I'm gonna watch you with a very big question,

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Speaker 1: and I imagine you won't have a definitive answer, but

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Speaker 1: I do wander we witness thing and emerging cold war

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Speaker 1: between the United States and China. I think we are.

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Speaker 1: I don't think it's going to be necessarily a shooting war.

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Speaker 1: Um Uh. The China and the United States are definitely

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Speaker 1: in one of those sort of hegemonic transitions as they're

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Speaker 1: sometimes called in the academy. But basically, one power is

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Speaker 1: there's a rising power and then there's a power that's declining,

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Speaker 1: not not in absolute terms but in relative terms, And

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Speaker 1: the question is can they accommodate one another um unlike

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Speaker 1: the Cold There there's a few differences between the United

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Speaker 1: States and China, and the United States versus the old

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Speaker 1: Soviet Union. But one of the biggest ones is that

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Speaker 1: this is by and large not really an ideological contest.

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Speaker 1: There was, there was an absol you know. It's a

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Speaker 1: much more of a traditional great power contest, a little

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Speaker 1: bit more like you know, the Anglo Anglo German antagonism

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Speaker 1: a hundred years ago, right that led to the help

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Speaker 1: lead to the First World War. What you have, with

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Speaker 1: the respect to US and China's you don't really have,

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Speaker 1: you know, ex desire for territorial aggrandizement. Right with the

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Speaker 1: exception of you know, the South China Sea and a

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Speaker 1: few and and Taiwan, you don't really have a territorial dispute.

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Speaker 1: What you do have, um is uh is the Chinese

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Speaker 1: desire to dismantle the U S alliance system in in

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Speaker 1: Asia and get the United States to be much more

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Speaker 1: offshore than it is. But the good news is that

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Speaker 1: this is not going to be a you know, three

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Speaker 1: hundred and sixty degree effort to try to pick up

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Speaker 1: clients states around the world and try to win them

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Speaker 1: over to ideologies because the Chinese Communist Party, despite its name,

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Speaker 1: has one ideal gene that is making money to keep

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Speaker 1: its population happy. That was great, it was It was fantastic.

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Speaker 1: Can he come back? Yes? Can it before? I don't know,

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Speaker 1: we do, you know, we do this a lot. I

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Speaker 1: had an extremely wonderful interview the day of Normandy, the

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Speaker 1: day President Obama visited, Uh, Normandy with the name escapes

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Speaker 1: you right now. He's written a fabulous three volumes on

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Speaker 1: World War Two at Dawn's Last Light and in others.

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Speaker 1: Rick Akinson, Yes, Rick Atkinson and I talking about Normandy,

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Speaker 1: and this is what we try to do on surveillance,

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Speaker 1: John Tucker and John Farrew and I and pen Fox,

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Speaker 1: Francine Loqui. We're living this every day. Talk to people

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Speaker 1: that actually know what they're talking about. This morning was

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Speaker 1: Stuart Patrick, Fellow Global Governance and of the International Institutions

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Speaker 1: and a Global Governance program. There is also velocity to

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Speaker 1: the debate. Is it easy? As a media person, I

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Speaker 1: could say it's Goldman versus Morgan Stanley, which makes for

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Speaker 1: you know, it's fun and all that. But the basic

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Speaker 1: idea is the FED on a path to many rate

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Speaker 1: increases and then a crew that is said, and in

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Speaker 1: the case of Allen Zentner Morgan Stanley has said early

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Speaker 1: wait a minute, there will be a moment of data

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Speaker 1: dependency where the federal pause. We get an update on

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Speaker 1: this Friday with Ellen Zentner of economics at Morgan Stanley

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Speaker 1: as well to go into your weekend note as you

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Speaker 1: published from Monday, you're gonna reaffirm caution about the FEDS path. Yes,

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Speaker 1: so I think what we do know is they're definitely

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Speaker 1: going to hike some more. Um. But I'm glad that

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Speaker 1: you mentioned the data dependency because that is something that

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Speaker 1: Chaipal has been very clear on. Right. If anyone's been

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Speaker 1: data dependent, um, it's this FED. And they're going to

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Speaker 1: be even more data dependent than in the past. And

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Speaker 1: so what that means is that the shape of orowth

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Speaker 1: next year is going to matter greatly to how far

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Speaker 1: they go with rates, and especially as they moved towards

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Speaker 1: John Williams of the New York Fed, as you know,

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Speaker 1: talked about his third phase of monetary policymaking, which is

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Speaker 1: managing policy around neutral. So that's really true data dependency,

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Speaker 1: knowing as the data comes in. As as Rich Clarata,

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Speaker 1: the new Vice chair put it. Uh, the data, the

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Speaker 1: incoming data will tell them where neutral is. It moves around.

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Speaker 1: You manage policy around that two frontline monetary works there

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Speaker 1: in Williams in Clarada. That's not Chairman Powell. I want

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Speaker 1: to posit an idea and I want you to discuss it.

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Speaker 1: This is a chairman driven to take the crystal ballitis away.

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Speaker 1: I mean clearly that's the pattern. Where is that pattern

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Speaker 1: going six meetings out? So Chair Pal did make it

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Speaker 1: clear starting with Jackson Hole really that throwing out, throwing

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Speaker 1: rules based policy making out the window, even getting his

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Speaker 1: pal william M is on board with him, saying, look,

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Speaker 1: even though my name is on the law back Williams model,

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Speaker 1: I don't necessarily subscribe to it. So he's really been

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Speaker 1: pushing his weight around at the FED, trying to get

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Speaker 1: the hundreds of PhD economists at the FED to eat

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Speaker 1: some humble pie, so to speak, and say, look, there's

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Speaker 1: not a lot of precision um in the forecasting that

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Speaker 1: we do and we need to recognize that. And so

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Speaker 1: that fits in with that data dependency. Just letting the

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Speaker 1: data tell you rather than being on some clear path

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Speaker 1: now do find it? Uh So Pal I believe he's

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Speaker 1: been a really great communicator, and the market understands him

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Speaker 1: and reacts very well to his communications. He has made

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Speaker 1: one misstep, though, and that was when he said we

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Speaker 1: are far from neutral. Because if you give a speech

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Speaker 1: at Jackson Hole and say we don't know where our

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Speaker 1: star is, it's like guiding by the stars, and let's

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Speaker 1: be clear that there's not a lot of precision in

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Speaker 1: these things, then how do you know how far from

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Speaker 1: neutral you are? I think that's the only only communication

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Speaker 1: he's done where I would a he probably could have

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Speaker 1: framed it in a different way, and I think Clarida

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Speaker 1: did a good job on the back of that, saying, look,

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Speaker 1: it's just about the incoming day. Guided by the stars.

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Speaker 1: You reminded me of Contiki and they're trying to figure

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Speaker 1: out which I can't remember which way they went in

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Speaker 1: the Pacific, but they went west to east or east.

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Speaker 1: They got lost. They got lost. Okay, that's the big

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Speaker 1: risk out here is we're guided by the stars. Can't

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Speaker 1: we just be guided by jobs and wage growth in

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Speaker 1: like like the timber Lake School of Georgia and just

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Speaker 1: wait to see what the data is. Why can't we

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Speaker 1: do that? Well? That and I think that's what the

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Speaker 1: FED is going to do. But I mean, what you've

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Speaker 1: got is, uh, you know, based on our GDP tracking

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Speaker 1: in the fourth quarter two point eight percent, we're gonna

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Speaker 1: come in the three point one percent GDP growth this year.

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Speaker 1: That's right in the pocket of the Fed's expectation. You've

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Speaker 1: got growth in the first quarter of next year that's

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Speaker 1: going to be boosted by a record high tax refund season.

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Speaker 1: So that's certainly not gonna have something in the data

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Speaker 1: telling the FED that they need to stop or that

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Speaker 1: they are at at or have gone past control. They'll

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Speaker 1: hike in June as well, but we believe that by

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Speaker 1: the time they're going into that September meeting, the shape

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Speaker 1: of growth is going to matter a good deal and

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Speaker 1: GDP is going to be tracking low and most likely

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Speaker 1: much lower than potential, and that will tell them we

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Speaker 1: need to pause your calendar. Publishing in Forbes, one of

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Speaker 1: our great fiscal experts, he says, it's two miserable years

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Speaker 1: if we get an ellen Zentner g d P. What

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Speaker 1: does that do to our deficit vectors? And the answers

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Speaker 1: they worse, they get worser. Well, they're they're they're all

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Speaker 1: they're already worse, right, because tax cuts do not pay

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Speaker 1: for themselves, and so revenue is dropping at a time

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Speaker 1: when the economy is growing at its fastest pace. Uh.

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Speaker 1: And so when the economy slows, it only means definite

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Speaker 1: deficits get even worse. Uh. And so staring trillion dollar

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Speaker 1: deficits deficits in the face, it means don't count on

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Speaker 1: another round of stimulus anytime soon. And in fact, outside

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Speaker 1: of just automatic stabilizers that kick in whenever we go

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Speaker 1: into a downturn, there's not a whole else the fiscal

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Speaker 1: government can do. I would point out that John Taylor

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Speaker 1: out at Stanford makes a big deal about the efficacy

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Speaker 1: of automatic stabilizers as well. Ellen, if we look at

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Speaker 1: the p p I data today, you're too young to

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Speaker 1: remember when pp I was gospel. Everybody just stopped. If

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Speaker 1: you're looking, No, I'm looking at Ms. Zentner, you and

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Speaker 1: I remember a p p I crystal clear and then

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Speaker 1: it's drifted to look. I gotta go see a stars

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Speaker 1: porn this weekend. Please leave me on. I mean, I'm

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Speaker 1: getting major heat, and I'm culturally deficient because I haven't

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Speaker 1: seen Bradley Cooper Me Bradley Cooper Ellen, We've got p

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Speaker 1: p I. It's coming back. Should I care about business inflation?

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Speaker 1: Does it really matter like it mattered long ago and

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Speaker 1: far away? Uh, Well, it does matter because margins are

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Speaker 1: getting squeezed and put costs are rising, UM, tariffs are

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Speaker 1: going to worsen. That part of this is just from

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Speaker 1: natural organic tighten in the economy, and it's something that

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Speaker 1: tends to happen as you move later into the business cycle.

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Speaker 1: And interest rates are rising. Uh, and so businesses have

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Speaker 1: to uh, you know, they have a couple of choices.

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Speaker 1: When margins get squeezed. You can either uh invest more,

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Speaker 1: do some capital deepening that drives productivity. Productivity drives profits,

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Speaker 1: and it keeps your labor share of costs the same. Uh.

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Speaker 1: You can pass on the cost to the consumer, But

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Speaker 1: then you take the chance of dealing with the drop

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Speaker 1: in aggregate demand because prices have gone up. So you

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Speaker 1: take the hit on the top line or on margins

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00:24:36,960 --> 00:24:41,000
Speaker 1: or the dreaded third option is that you control labor costs,

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Speaker 1: which leads to softening in job growth, possibly even job shedding.

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00:24:46,640 --> 00:24:48,679
Speaker 1: Jobs were not at that point yet, but that's how

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Speaker 1: a cycle typically plays out. It's something that we need

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Speaker 1: to watch a sandor. Thank you so much with Morgan

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00:24:53,200 --> 00:24:59,120
Speaker 1: Stanley this morning and again caution three four five Federate

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00:25:12,840 --> 00:25:15,280
Speaker 1: the hundredth anniversary of World War One, we are honored

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00:25:15,280 --> 00:25:18,280
Speaker 1: to bring you the author of Presidents of War, the

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00:25:18,400 --> 00:25:21,280
Speaker 1: epic story from eighteen o seven to modred Times, the

448
00:25:21,440 --> 00:25:25,720
Speaker 1: historian Michael Bashlovt. Michael, it is a path from Edmund

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00:25:25,800 --> 00:25:30,120
Speaker 1: Randolph to the Senator from Alabama. It is the attorney

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00:25:30,200 --> 00:25:35,720
Speaker 1: general always fractious, and there's that delicate and historical independence

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00:25:35,880 --> 00:25:41,040
Speaker 1: of justice from six D Pennsylvania Avenue described that modern

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00:25:41,160 --> 00:25:46,080
Speaker 1: independence of the Justice department. Well, we've always assumed that

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00:25:46,200 --> 00:25:49,399
Speaker 1: even presidents who can be pretty partisan have attorneys general

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00:25:49,520 --> 00:25:53,400
Speaker 1: who are different from that, and there's a layer of separation.

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00:25:54,160 --> 00:25:56,240
Speaker 1: And I would tend to be pretty critical of the

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Speaker 1: new appointment of Matt Whittaker as the act the attorney general,

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00:26:01,040 --> 00:26:04,200
Speaker 1: because this is someone who has not only been a partisan.

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00:26:04,240 --> 00:26:07,960
Speaker 1: An attorney's general can set aside partisan tests. That's not

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00:26:08,119 --> 00:26:10,879
Speaker 1: as worrying, But this is someone who's coming in with

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Speaker 1: an attitude on the Mueller investigation, where he has written

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00:26:14,400 --> 00:26:16,720
Speaker 1: and said that he thinks of his illegitimate, should be

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00:26:16,840 --> 00:26:21,040
Speaker 1: defunded and essentially stopped, and very hard to escape the

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00:26:21,080 --> 00:26:24,240
Speaker 1: conclusion that the reason that he was put there is

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00:26:24,880 --> 00:26:29,040
Speaker 1: essentially shut down Mueller. And that's something that we don't

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Speaker 1: normally see in presidential history, and usually when presidents try,

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00:26:32,440 --> 00:26:34,840
Speaker 1: it doesn't end very well for you. If I speak

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00:26:34,920 --> 00:26:39,920
Speaker 1: to you or Doris Karen's goodwinner, James McPherson, the phrase

468
00:26:40,160 --> 00:26:43,280
Speaker 1: is so tried, and I speak as an amateur. Is

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00:26:43,359 --> 00:26:47,440
Speaker 1: this a constitutional crisis? Are we at that point? Or

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00:26:47,520 --> 00:26:51,240
Speaker 1: does that await us in the future. I think if

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00:26:51,520 --> 00:26:55,320
Speaker 1: if Whittaker as Attorney General shuts down Robert Mueller and

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00:26:55,440 --> 00:26:59,159
Speaker 1: we cannot see that report, and remember that Rudy Giuliani

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00:26:59,320 --> 00:27:02,840
Speaker 1: has talked out the possibility that President Trump would use

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00:27:02,920 --> 00:27:05,879
Speaker 1: executive privilege to make sure that all are some of

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00:27:06,440 --> 00:27:10,480
Speaker 1: whatever report Mueller submits is kept away from public eyes,

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00:27:11,000 --> 00:27:14,280
Speaker 1: I think that's going to initiate a constitutional crisis. And

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00:27:14,400 --> 00:27:17,280
Speaker 1: the other element of this is that you know it

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00:27:17,440 --> 00:27:19,600
Speaker 1: might then go to the Supreme Court. And you have

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00:27:19,720 --> 00:27:23,520
Speaker 1: a Supreme Court now where President Trump has appointed two

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00:27:23,560 --> 00:27:28,000
Speaker 1: of those justices, the fifth Brett Kavanaugh, fine man Man

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00:27:28,080 --> 00:27:31,680
Speaker 1: in many respects, but this is someone who by the

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00:27:31,840 --> 00:27:35,240
Speaker 1: time of his confirmation, got very close to this president

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00:27:35,280 --> 00:27:38,080
Speaker 1: in a way that you normally don't see what justices.

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00:27:38,200 --> 00:27:40,920
Speaker 1: So I think one question one would have to ask

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00:27:41,119 --> 00:27:43,639
Speaker 1: is if Brett Kavanaugh will feel that he's in a

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00:27:43,720 --> 00:27:47,960
Speaker 1: position to call this one way or another without considering

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00:27:48,000 --> 00:27:51,600
Speaker 1: whatever relationship he has had with President Trump and his people.

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00:27:52,840 --> 00:27:59,120
Speaker 1: Michael Beschloss, maybe to combine history and current events mentioned

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Speaker 1: immigration policy. I wonder if you could speak about immigration,

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00:28:03,920 --> 00:28:08,240
Speaker 1: refugees and the changes in national borders as a result

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00:28:08,720 --> 00:28:11,879
Speaker 1: of World War One and whether we have improved at

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00:28:11,960 --> 00:28:16,400
Speaker 1: all in dealing with these challenges. Yeah. Well, this has

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00:28:16,480 --> 00:28:18,480
Speaker 1: been an issue as as you know of him, that

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00:28:18,600 --> 00:28:22,520
Speaker 1: goes all the way through American history, immigration back and forth,

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00:28:23,200 --> 00:28:27,720
Speaker 1: and after World War One, we had huge changes in

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00:28:27,880 --> 00:28:31,399
Speaker 1: immigration policy in the nineteen twenties. Then it came up

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00:28:31,720 --> 00:28:34,520
Speaker 1: at the time of the fact this is this week,

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00:28:34,680 --> 00:28:38,800
Speaker 1: This is the anniversary, the eightieth anniversary of Crystal nine,

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00:28:39,080 --> 00:28:42,480
Speaker 1: the program against the Jews of Germany that led many

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00:28:42,520 --> 00:28:47,000
Speaker 1: of them to seek refuge in the Western hemisphere. At

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00:28:47,040 --> 00:28:49,200
Speaker 1: the same time, you know, it's hard to think of

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00:28:49,280 --> 00:28:52,400
Speaker 1: a time that a president has used this issue in

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00:28:52,480 --> 00:28:55,280
Speaker 1: a political way as President Trump did during the last

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00:28:55,800 --> 00:29:01,400
Speaker 1: weeks of the last campaign. Uh, it always creates controversy.

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00:29:02,120 --> 00:29:07,080
Speaker 1: Lyndon Johnson signed an immigration bill in nineteen that opened

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00:29:07,080 --> 00:29:09,240
Speaker 1: the doors to allow of the immigration that we've seen

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00:29:09,320 --> 00:29:13,520
Speaker 1: over the last half century. That was controversial, but not

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00:29:13,760 --> 00:29:15,760
Speaker 1: of the order that we have seen in recent years.

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00:29:17,080 --> 00:29:20,880
Speaker 1: Based on your reading of history and your analysis, do

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00:29:21,000 --> 00:29:24,560
Speaker 1: you believe that the factors that contributed to the First

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00:29:24,680 --> 00:29:28,400
Speaker 1: World War present today? I think they certainly are. And

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00:29:28,720 --> 00:29:33,280
Speaker 1: the biggest and most dangerous omen is you both. I know,

513
00:29:33,520 --> 00:29:36,160
Speaker 1: read The Guns of August by Barbara Tuckman, which talks

514
00:29:36,200 --> 00:29:39,080
Speaker 1: about how World War One came, and the big lesson

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00:29:39,120 --> 00:29:42,120
Speaker 1: of that book is that wars like this can start

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00:29:42,280 --> 00:29:45,520
Speaker 1: by accident, you know, by miscommunications and by accidents and

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00:29:45,640 --> 00:29:48,440
Speaker 1: so forth, by people who did not even intend to

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00:29:48,520 --> 00:29:51,160
Speaker 1: go to war. A lot of things are happening right

519
00:29:51,280 --> 00:29:55,320
Speaker 1: now that unless we've got wisdom and judgment from our leaders,

520
00:29:55,400 --> 00:29:58,360
Speaker 1: beginning with the President of the United States, this could

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00:29:58,400 --> 00:30:02,440
Speaker 1: happen again. And unfortunately, we're now operating in a world

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00:30:02,480 --> 00:30:05,040
Speaker 1: of nuclear weapons, which was not happening a century ago.

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00:30:05,640 --> 00:30:08,480
Speaker 1: Michael Besh Laws, we have this phrase progressive, which I

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00:30:08,600 --> 00:30:11,800
Speaker 1: believe is new talk for liberal. What are the liberals

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00:30:11,920 --> 00:30:14,920
Speaker 1: learn in this election? What are the liberals learn about

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00:30:15,000 --> 00:30:18,120
Speaker 1: the certitude of being out of power in being liberal?

527
00:30:18,600 --> 00:30:20,400
Speaker 1: And if you really want to win, you got to

528
00:30:20,480 --> 00:30:23,960
Speaker 1: move to the middle or any Scoop Jackson lessons made there,

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00:30:25,400 --> 00:30:27,520
Speaker 1: I don't think so. I mean, for instance, at the

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00:30:27,600 --> 00:30:31,520
Speaker 1: time that Bill Clinton ran in, I would say that

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00:30:31,760 --> 00:30:35,280
Speaker 1: the dominant number of Democrats felt this is a fairly

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00:30:35,360 --> 00:30:38,800
Speaker 1: conservative time and if Democrats want to win, they're going

533
00:30:38,880 --> 00:30:41,760
Speaker 1: to have to become what Clinton called new Democrats and

534
00:30:41,920 --> 00:30:44,760
Speaker 1: moved to the middle. I mean, Clinton was more centrist

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00:30:44,840 --> 00:30:47,880
Speaker 1: than any Democrat in years. Was before they began using

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00:30:47,960 --> 00:30:51,320
Speaker 1: the word progressive, and they really avoid it, as you

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00:30:51,520 --> 00:30:54,960
Speaker 1: well remember using the word liberal because it was an epithet.

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00:30:55,600 --> 00:30:57,520
Speaker 1: Now I would say say, there's going to be a

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00:30:57,600 --> 00:31:01,040
Speaker 1: controversy within the Democratic Party that will really see in

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00:31:01,120 --> 00:31:04,400
Speaker 1: the presidential primaries of two thousand twenty, which is and

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00:31:04,560 --> 00:31:06,200
Speaker 1: you know what it is. You know on one side,

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00:31:06,280 --> 00:31:10,760
Speaker 1: you'll have strong progressives say the only way you can

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00:31:10,800 --> 00:31:14,400
Speaker 1: win the presidency back and win congress fully back is

544
00:31:14,480 --> 00:31:18,480
Speaker 1: if you have strong views and you go hard left

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00:31:18,560 --> 00:31:20,960
Speaker 1: and you bring out your voters, and then the old

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00:31:21,480 --> 00:31:24,680
Speaker 1: new Democrat people who will say that's going to alienate

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00:31:24,720 --> 00:31:26,480
Speaker 1: a lot of people. You've got to move to the middle.

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00:31:26,520 --> 00:31:29,280
Speaker 1: That's where the votes are. What Richard Nixon used to say.

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00:31:29,880 --> 00:31:32,520
Speaker 1: I don't think within the Democratic Party either of those

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00:31:32,600 --> 00:31:35,800
Speaker 1: views is dominant. So we're probably going to see a

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00:31:35,840 --> 00:31:39,200
Speaker 1: battle Royal in less than two years. Thank you so much,

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00:31:39,240 --> 00:31:42,600
Speaker 1: Michael Beschlott's generous amount of time today. The book is

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00:31:42,680 --> 00:31:46,080
Speaker 1: Presidents of War, the epics story from eight seven and

554
00:31:46,160 --> 00:31:49,040
Speaker 1: modern times. And what's so cool about this book? Folks?

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00:31:49,080 --> 00:31:51,720
Speaker 1: It was brought out a number of months ago and

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00:31:51,840 --> 00:31:54,000
Speaker 1: it was important then, and with the news flow that

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00:31:54,120 --> 00:31:58,720
Speaker 1: we've been seeing, uh, it becomes important. The American historian

558
00:31:59,200 --> 00:32:04,800
Speaker 1: Tom Hanks says of Michael's book, once again, fasch Loss

559
00:32:04,960 --> 00:32:09,120
Speaker 1: captures our presidents in terms both historic and human as well.

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00:32:09,280 --> 00:32:18,680
Speaker 1: Presence of war. Can't say enough about it. Thanks for

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00:32:18,800 --> 00:32:23,160
Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to

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00:32:23,320 --> 00:32:29,040
Speaker 1: interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer.

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00:32:29,640 --> 00:32:32,920
Speaker 1: I'm on Twitter at Tom Keane Before the podcast, you

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00:32:33,000 --> 00:32:36,360
Speaker 1: can always catch us worldwide. I'm Bloomberg Radio