Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene
Speaker 1: Jay Ley. We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg. Dropping
Speaker 1: by the studio is Chris Rupkey, m u f G
Speaker 1: Union Bank, Chief Financial Economist and managing Director. Good morning
Speaker 1: to Chris. Morning. So we're slowed down in China, implementing
Speaker 1: lending quotes as commodities breaking down. The Federal Reserve does
Speaker 1: not look like it's for turning right now? What do
Speaker 1: you make of all of this put together? Well, I
Speaker 1: was pretty happy last night, right, I mean, the Dow
Speaker 1: was up six percent year to date, the max it
Speaker 1: was a month ago was up eight and a half percent,
Speaker 1: and so we climbed back. I was up in the
Speaker 1: black again, up six percent here to date. It was
Speaker 1: only eight and a half percent year to date. And
Speaker 1: now what happened? The market went pear shape, had a
Speaker 1: little wabi overnight. You have something to do with China.
Speaker 1: As you say, I don't know how this happened, but
Speaker 1: it's we're only down. I'm kind of used to the
Speaker 1: new volatile. I don't want to make too much of
Speaker 1: the staff moves. I want to have a look at
Speaker 1: what is happening in China specifically, there is a deceleration
Speaker 1: taking place. Is it made in China or made in America.
Speaker 1: I think the tariffs are having an impact, and um,
Speaker 1: you know we're not all there yet, right, I mean,
Speaker 1: the the final two billion of tariffs has a ten
Speaker 1: percent is a ten percent now January one, it goes to.
Speaker 1: That's nine night and day different when we put the
Speaker 1: tariffs up to. That's going to cause a major change
Speaker 1: in some of these import export patterns. So you know,
Speaker 1: the trade wars are is interesting from the U S
Speaker 1: standpoint for a trade war and the I m f
Speaker 1: S warning about it. But for a trade war like
Speaker 1: ninety nine, you need trade volume to go down. But
Speaker 1: imports and exports to China this year visa the US
Speaker 1: are up eight nine percent. Yeah, so it's going the
Speaker 1: wrong way. It should be following going up a percent.
Speaker 1: I hate the nineteen twenties nineteen thirties comparison. Well, you
Speaker 1: are the paras pretty bad? Neither were you, Chris. I'm
Speaker 1: sure it was terrible looking at the history books, but
Speaker 1: the comparisons just don't make sense at all to me,
Speaker 1: at least, I look at the desderation in China and
Speaker 1: I see signs of desperation. Now the Chinese implementing lending
Speaker 1: quotas that we've learned in the last so now, large
Speaker 1: banks will need to have a third of new corporate
Speaker 1: loans to private companies. Small and medium banks will need
Speaker 1: to have two thirds of new loans will have to
Speaker 1: go on the corporate side, will have to go to
Speaker 1: non state entities. At the moment, loans to nonstate corporates
Speaker 1: currently less than a quarter of the total. These are
Speaker 1: gonna have to be some big moves by Chinese banks
Speaker 1: to get extra loans to private entities. That's a recipe
Speaker 1: for trouble, isn't it. Yeah, it doesn't look great. I
Speaker 1: mean it does. Part of me kind of says that,
Speaker 1: you know, they're GDP numbers, they're interesting, rout interesting. Remember
Speaker 1: back in two thousand and sixteen, we thought China's economy
Speaker 1: was going down and they said, no, real GDP is
Speaker 1: running six and a half percent, and that's our target
Speaker 1: over the next five years. Now, at the worst, I
Speaker 1: think I m F has six two, China growth slowing
Speaker 1: from six and a half percent roughly to six point
Speaker 1: two percent next year. Uh, that doesn't sound like it's
Speaker 1: all that dramatic, right in in I mean going from
Speaker 1: six and a half to six point two. The worry
Speaker 1: is it's going to be much much worse, of course,
Speaker 1: So we'll have to see what happens. You know, Trump
Speaker 1: before the midterms was saying maybe he can get some agreements.
Speaker 1: So that's the key, whether some of these tariffs can
Speaker 1: be taken off the track they're on. The twenties and
Speaker 1: the thirties, John was all upset about the twenties and
Speaker 1: what was the worst year in the twenties and the thirties?
Speaker 1: Seven The Yankees played seven four baseball, well understood to
Speaker 1: be one of the best teams in the history of
Speaker 1: all of sports. They went eighteen and four against the
Speaker 1: Red Sox, who enjoyed last place. The Red Sox played
Speaker 1: John what we call three thirty one ball. They won
Speaker 1: fifty one games and lost a hundred and three games.
Speaker 1: That was the worst year in the twenties, and that's
Speaker 1: one of the causes of the Great Depression. It was
Speaker 1: reminded me that in our last conversation is, well, Chris Rupki,
Speaker 1: when you look at China, when you look at these dynamics,
Speaker 1: I've noticed this week very quietly, John Burry, in all
Speaker 1: the Washington headlines and all that was imports from China
Speaker 1: into America. What are we exactly import from China into America?
Speaker 1: Is that a Is that an internal dynamic of manufacturing
Speaker 1: and services or is it is it something simpler than that? Yeah,
Speaker 1: I mean it's a lot of consumer goods and it's
Speaker 1: a lot of capital goods. So the capital goods are
Speaker 1: going into the supply chain here. That's what It's never
Speaker 1: made sense to me because I remember the trade wars
Speaker 1: we had with Japan. You know, I'm at MFG Bank,
Speaker 1: the trade wars that we had with Japan in in
Speaker 1: the late eighties that it was night and day different. Right,
Speaker 1: So we're cars coming from Toyota Honda to the US.
Speaker 1: So it's kind of like US versus Japan. Now this
Speaker 1: is trying to be like US against China the country,
Speaker 1: but it's really US manufacturers. We're battling with ourselves. US
Speaker 1: companies have done this. This is one of the most
Speaker 1: important in such on the weekend when we're doing politics, seven,
Speaker 1: and I get it all. You know, the news flows
Speaker 1: when extraordinary, but what Mr Ruskie just said there's incredibly important.
Speaker 1: We're fighting the emotional war of the Japanese trade battle
Speaker 1: of years ago. It's not it's different this time. It
Speaker 1: is different this time. But I will say I think
Speaker 1: we've got to stop viewing the global economy through the
Speaker 1: prism almost exclusively of US policy. You would say that trade,
Speaker 1: monetary policy, fiscal policy. I would say that, look at
Speaker 1: what is happening in China right now, that has nothing
Speaker 1: to do with trade. One fifth, one fifth of China's
Speaker 1: housing is empty. Let me say it again, one fifth
Speaker 1: of China's housing is empty. This has nothing to do
Speaker 1: with a trade war. They have a real problem of
Speaker 1: over capacity. They have a real problem with decelerating growth
Speaker 1: in the country. Everybody can agree on that. The thing
Speaker 1: nobody can agree on is when the pain is going
Speaker 1: to start, because they keep finding a way to put
Speaker 1: this off, to put this off. And I think the
Speaker 1: reason some people are worried this morning, because they wake
Speaker 1: up this morning and see a government that's trying to
Speaker 1: introduce lending quotes, is because they trying to play the
Speaker 1: game again. They're trying to boost credit and keep the party,
Speaker 1: keep the music going. There are serious problems in this
Speaker 1: economy that have nothing to do with try disputes Chris. Yeah.
Speaker 1: But yeah, I mean, but part of it is it's
Speaker 1: still is very much when I was over there. Uh,
Speaker 1: it's a developing nation. I mean it's one point four
Speaker 1: billion people. Uh, the the amount of talk about income inequality.
Speaker 1: We're talking about income inequality with Tom. I mean, income
Speaker 1: inequality in China is unbelievable, right, I mean there's very
Speaker 1: very few people. When when I was over there, I
Speaker 1: didn't meet meet that many people who who owned a home, right,
Speaker 1: I mean, they can't afford that. The incomes aren't there.
Speaker 1: So it's a very complex society, and I think we
Speaker 1: kind of generalize sometimes I don't. I mean there's still
Speaker 1: people coming from the rural areas to the cities that
Speaker 1: they're being It's very complicated. So I don't know how
Speaker 1: much in trouble their economy is My offspring cash flows
Speaker 1: living over there. He's got like three units, he bought
Speaker 1: vet bill units. So what you say you've got, afterthought,
Speaker 1: which is the youngest cash flow? Cash you squeezed four
Speaker 1: years into five? That is beautiful college. You've named pretty
Speaker 1: much every one of your kid name to him. I mean,
Speaker 1: it's his middle name, but we don't use this formal
Speaker 1: and we got lovely Chris. Thanks for dropping by, Chris
Speaker 1: mufg Bank Chief Financial Economists, John, I want you to
Speaker 1: bring in our next guest, truly esteemed here as a
Speaker 1: president travels to UH to Paris in the commemoration of
Speaker 1: the hundred anniversary of World War One. But I would
Speaker 1: just say John that if I've read in all my
Speaker 1: readings and all my interviews, there is forever a distance
Speaker 1: of America from these great twentieth century wars. It's something
Speaker 1: I know. You grew up in Covenedry with the blitz
Speaker 1: of World War two and in Coventry, and yeah, they
Speaker 1: totally flattened it a very very different looking city now,
Speaker 1: but we should mention for American audience a manufacturing heart
Speaker 1: of the United formally, um, not so much anymore, in
Speaker 1: a very different looking city than what it looked like
Speaker 1: before the war, That's for sure. I can see why
Speaker 1: you've got me to introduce Stuart, because it's the longest
Speaker 1: title I've ever read. Stuart Patricks, CFR, Senior Fellow in
Speaker 1: Global Governance and director of the International Institutions and Global
Speaker 1: Governance Program. There we go, Did I do? Okay? Yeah,
Speaker 1: you did well. That that good morning to Stewart. Important
Speaker 1: weekend for so many reasons. What are you looking for
Speaker 1: this weekend? Well, what I'm looking for is um. Obviously,
Speaker 1: there's going to be the gathering world leaders, including Donald Trump,
Speaker 1: in Paris at the Arc de Trient on Sunday, the
Speaker 1: eleventh hour of the eleventh day of the eleventh month,
Speaker 1: basically commemorating armistst Day UM, the alleged war to end
Speaker 1: all wars, where the President is obviously going to be
Speaker 1: moralizing the more than a hundred thousand American troops that
Speaker 1: died there, many fewer obviously than died in your own country. Uh,
Speaker 1: more than seven hundred thousand. I believe Brits died huge proportion.
Speaker 1: And uh. And and the memory and the residents and
Speaker 1: the gravity of the of that conflict in instill in
Speaker 1: the memory of of people who's who remember their parents
Speaker 1: talking about it, etcetera. In Europe is huge. But it's
Speaker 1: also a time to reflect on the fact that a
Speaker 1: lot of the forces that were unleashed during the Second
Speaker 1: World of first World War and its immediate aftermath are
Speaker 1: really really have echoes in our current day and um
Speaker 1: that's why President Emmanuel mccrawl is hosting what he calls
Speaker 1: the Paris Peace Form during that time to try to
Speaker 1: to counteract this the rising nationalism, rising authoritarianism and UH
Speaker 1: and rising protectionism around the world and a really interesting
Speaker 1: story with hegemonic power. Those two wars marked the decline
Speaker 1: of British hegemonic power and the upringing of American hegemonic power.
Speaker 1: From long, long time, we talked about what would happen
Speaker 1: with American hedge many I don't think many people thought
Speaker 1: that America with withdraw from its role voluntarily. Absolutely, it's
Speaker 1: not what is happening right now. Absolutely. Colleague of mine,
Speaker 1: Jim Lindsay, with another writer Evo Dalter, have just written
Speaker 1: a book called The um Uh, The The The Empty
Speaker 1: Throne of the American abdication of world leadership. And that's
Speaker 1: that precisely what's happened. You know, Normally, when you have
Speaker 1: these sort of power transitions, you have one power overtaking another,
Speaker 1: sometimes defeating it in war, sometimes sort of graciously passing
Speaker 1: the batons, as in a sense Britain did to the
Speaker 1: United States. Here you have instead a country that still
Speaker 1: is by all measures the most powerful in the world,
Speaker 1: in a sense abdicating its role. And that's why the
Speaker 1: very the Versailles that the Paris Peace Conference era is
Speaker 1: so appropriate right now to think about, because that was
Speaker 1: a time when the United States had a chance to
Speaker 1: join the League of Nations that President Woodrow Wilson had
Speaker 1: had created. But instead, in a sense, the United States
Speaker 1: decided to absent itself in many ways during inter warriors,
Speaker 1: from from any effort to try to have a machinery
Speaker 1: to organize the piece. I see this trend in the
Speaker 1: United Kingdom as well. Many people can identify with this
Speaker 1: across various countries in Europe. Is this a consequence of
Speaker 1: populism in America that many people in the electorate know what,
Speaker 1: no longer want America to have this role on the
Speaker 1: international stage. I think there's a huge amount of exhaustion.
Speaker 1: I think when you look, I think the vast majority
Speaker 1: of Americans remain internationals. There's a bunch of recent opinion
Speaker 1: polling very comprehensive from the Chicago Council on Global Affairs,
Speaker 1: that is that is U testified to that. However, I
Speaker 1: think a lot of Americans, uh, think that the United
Speaker 1: States has for a long time done more than its
Speaker 1: fair share. And they also equate sort of the promotion
Speaker 1: of democracy with an indignation building exercises around the world.
Speaker 1: So the Americans are exhausted, and so there's a sense
Speaker 1: that others, and Donald Trump has picked up in this,
Speaker 1: that others are free riding on American American efforts. Stuart
Speaker 1: Patrick where is with the Council on Foreign Relations Just
Speaker 1: terrific spective out of Stanford and Oxford where he was
Speaker 1: a Rhodes scholar, and of course his work, uh as
Speaker 1: well on sovereignty has been important. There's been technology. I'll
Speaker 1: go back to the American Civil War. We struggled with it.
Speaker 1: They're certainly in World War One. John Keegan talks about
Speaker 1: the stalemates of World War One, the technology of or
Speaker 1: to just John, the advent of radar alone was or
Speaker 1: or or for that matter, penicillin is being extraordinary within
Speaker 1: all the synthesis of the consolant foreign relations. What do
Speaker 1: we underestimate about the technology now is nation's clash? What's
Speaker 1: the the present thing you're studying about our modern technology? Well,
Speaker 1: it's a couple of things. So one of them is UM,
Speaker 1: the the growth and the implications of the growth of
Speaker 1: sort of lethal autonomous weapons systems. UM. We sp you
Speaker 1: spoke about technological advance and and obviously and the impact
Speaker 1: of that taking people by surprise, right, the exact lethality
Speaker 1: during trench warfare, making any possible to have the sort
Speaker 1: of wars of movement. But then, of course than the
Speaker 1: invention of sort of cavalry in the sense of tanks
Speaker 1: uh in in the Second World War, wars of movement, etcetera.
Speaker 1: What we've really gotten into now is a degree of
Speaker 1: sort of remote control and was video game warfare, in
Speaker 1: which increasingly, as robotics gets more advanced, many of these
Speaker 1: things are gonna be and already are you see it
Speaker 1: with drone technology being outsourced to sort of in a
Speaker 1: sense terminal jockeys in Nebraska for instance, being able to
Speaker 1: that is too clinical and too surgical and avoids the
Speaker 1: human condition absolutely absolutely well. First, in two ways. One
Speaker 1: of them is it certainly UM creates a situation where
Speaker 1: UM there are major hazards in terms of who's making
Speaker 1: those lethal decisions. But it's going to become even more
Speaker 1: of a problem. Uh. This distancing when uh, these weapons
Speaker 1: systems are actually able to make those decisions on their own.
Speaker 1: And more broadly, the artificial intelligence revolution is also another
Speaker 1: it is it is creating huge problems for the future
Speaker 1: of warfare because you have situations where, um, you know,
Speaker 1: the the as it's been described that if that if
Speaker 1: a country like China, which is competing all out to
Speaker 1: try to dominate artificial intelligence, ends up getting only a
Speaker 1: few months advantage, that could be the equivalent of having
Speaker 1: an entire revolution in military affairs that the Unit States
Speaker 1: falls behind. I'm gonna watch you with a very big question,
Speaker 1: and I imagine you won't have a definitive answer, but
Speaker 1: I do wander we witness thing and emerging cold war
Speaker 1: between the United States and China. I think we are.
Speaker 1: I don't think it's going to be necessarily a shooting war.
Speaker 1: Um Uh. The China and the United States are definitely
Speaker 1: in one of those sort of hegemonic transitions as they're
Speaker 1: sometimes called in the academy. But basically, one power is
Speaker 1: there's a rising power and then there's a power that's declining,
Speaker 1: not not in absolute terms but in relative terms, And
Speaker 1: the question is can they accommodate one another um unlike
Speaker 1: the Cold There there's a few differences between the United
Speaker 1: States and China, and the United States versus the old
Speaker 1: Soviet Union. But one of the biggest ones is that
Speaker 1: this is by and large not really an ideological contest.
Speaker 1: There was, there was an absol you know. It's a
Speaker 1: much more of a traditional great power contest, a little
Speaker 1: bit more like you know, the Anglo Anglo German antagonism
Speaker 1: a hundred years ago, right that led to the help
Speaker 1: lead to the First World War. What you have, with
Speaker 1: the respect to US and China's you don't really have,
Speaker 1: you know, ex desire for territorial aggrandizement. Right with the
Speaker 1: exception of you know, the South China Sea and a
Speaker 1: few and and Taiwan, you don't really have a territorial dispute.
Speaker 1: What you do have, um is uh is the Chinese
Speaker 1: desire to dismantle the U S alliance system in in
Speaker 1: Asia and get the United States to be much more
Speaker 1: offshore than it is. But the good news is that
Speaker 1: this is not going to be a you know, three
Speaker 1: hundred and sixty degree effort to try to pick up
Speaker 1: clients states around the world and try to win them
Speaker 1: over to ideologies because the Chinese Communist Party, despite its name,
Speaker 1: has one ideal gene that is making money to keep
Speaker 1: its population happy. That was great, it was It was fantastic.
Speaker 1: Can he come back? Yes? Can it before? I don't know,
Speaker 1: we do, you know, we do this a lot. I
Speaker 1: had an extremely wonderful interview the day of Normandy, the
Speaker 1: day President Obama visited, Uh, Normandy with the name escapes
Speaker 1: you right now. He's written a fabulous three volumes on
Speaker 1: World War Two at Dawn's Last Light and in others.
Speaker 1: Rick Akinson, Yes, Rick Atkinson and I talking about Normandy,
Speaker 1: and this is what we try to do on surveillance,
Speaker 1: John Tucker and John Farrew and I and pen Fox,
Speaker 1: Francine Loqui. We're living this every day. Talk to people
Speaker 1: that actually know what they're talking about. This morning was
Speaker 1: Stuart Patrick, Fellow Global Governance and of the International Institutions
Speaker 1: and a Global Governance program. There is also velocity to
Speaker 1: the debate. Is it easy? As a media person, I
Speaker 1: could say it's Goldman versus Morgan Stanley, which makes for
Speaker 1: you know, it's fun and all that. But the basic
Speaker 1: idea is the FED on a path to many rate
Speaker 1: increases and then a crew that is said, and in
Speaker 1: the case of Allen Zentner Morgan Stanley has said early
Speaker 1: wait a minute, there will be a moment of data
Speaker 1: dependency where the federal pause. We get an update on
Speaker 1: this Friday with Ellen Zentner of economics at Morgan Stanley
Speaker 1: as well to go into your weekend note as you
Speaker 1: published from Monday, you're gonna reaffirm caution about the FEDS path. Yes,
Speaker 1: so I think what we do know is they're definitely
Speaker 1: going to hike some more. Um. But I'm glad that
Speaker 1: you mentioned the data dependency because that is something that
Speaker 1: Chaipal has been very clear on. Right. If anyone's been
Speaker 1: data dependent, um, it's this FED. And they're going to
Speaker 1: be even more data dependent than in the past. And
Speaker 1: so what that means is that the shape of orowth
Speaker 1: next year is going to matter greatly to how far
Speaker 1: they go with rates, and especially as they moved towards
Speaker 1: John Williams of the New York Fed, as you know,
Speaker 1: talked about his third phase of monetary policymaking, which is
Speaker 1: managing policy around neutral. So that's really true data dependency,
Speaker 1: knowing as the data comes in. As as Rich Clarata,
Speaker 1: the new Vice chair put it. Uh, the data, the
Speaker 1: incoming data will tell them where neutral is. It moves around.
Speaker 1: You manage policy around that two frontline monetary works there
Speaker 1: in Williams in Clarada. That's not Chairman Powell. I want
Speaker 1: to posit an idea and I want you to discuss it.
Speaker 1: This is a chairman driven to take the crystal ballitis away.
Speaker 1: I mean clearly that's the pattern. Where is that pattern
Speaker 1: going six meetings out? So Chair Pal did make it
Speaker 1: clear starting with Jackson Hole really that throwing out, throwing
Speaker 1: rules based policy making out the window, even getting his
Speaker 1: pal william M is on board with him, saying, look,
Speaker 1: even though my name is on the law back Williams model,
Speaker 1: I don't necessarily subscribe to it. So he's really been
Speaker 1: pushing his weight around at the FED, trying to get
Speaker 1: the hundreds of PhD economists at the FED to eat
Speaker 1: some humble pie, so to speak, and say, look, there's
Speaker 1: not a lot of precision um in the forecasting that
Speaker 1: we do and we need to recognize that. And so
Speaker 1: that fits in with that data dependency. Just letting the
Speaker 1: data tell you rather than being on some clear path
Speaker 1: now do find it? Uh So Pal I believe he's
Speaker 1: been a really great communicator, and the market understands him
Speaker 1: and reacts very well to his communications. He has made
Speaker 1: one misstep, though, and that was when he said we
Speaker 1: are far from neutral. Because if you give a speech
Speaker 1: at Jackson Hole and say we don't know where our
Speaker 1: star is, it's like guiding by the stars, and let's
Speaker 1: be clear that there's not a lot of precision in
Speaker 1: these things, then how do you know how far from
Speaker 1: neutral you are? I think that's the only only communication
Speaker 1: he's done where I would a he probably could have
Speaker 1: framed it in a different way, and I think Clarida
Speaker 1: did a good job on the back of that, saying, look,
Speaker 1: it's just about the incoming day. Guided by the stars.
Speaker 1: You reminded me of Contiki and they're trying to figure
Speaker 1: out which I can't remember which way they went in
Speaker 1: the Pacific, but they went west to east or east.
Speaker 1: They got lost. They got lost. Okay, that's the big
Speaker 1: risk out here is we're guided by the stars. Can't
Speaker 1: we just be guided by jobs and wage growth in
Speaker 1: like like the timber Lake School of Georgia and just
Speaker 1: wait to see what the data is. Why can't we
Speaker 1: do that? Well? That and I think that's what the
Speaker 1: FED is going to do. But I mean, what you've
Speaker 1: got is, uh, you know, based on our GDP tracking
Speaker 1: in the fourth quarter two point eight percent, we're gonna
Speaker 1: come in the three point one percent GDP growth this year.
Speaker 1: That's right in the pocket of the Fed's expectation. You've
Speaker 1: got growth in the first quarter of next year that's
Speaker 1: going to be boosted by a record high tax refund season.
Speaker 1: So that's certainly not gonna have something in the data
Speaker 1: telling the FED that they need to stop or that
Speaker 1: they are at at or have gone past control. They'll
Speaker 1: hike in June as well, but we believe that by
Speaker 1: the time they're going into that September meeting, the shape
Speaker 1: of growth is going to matter a good deal and
Speaker 1: GDP is going to be tracking low and most likely
Speaker 1: much lower than potential, and that will tell them we
Speaker 1: need to pause your calendar. Publishing in Forbes, one of
Speaker 1: our great fiscal experts, he says, it's two miserable years
Speaker 1: if we get an ellen Zentner g d P. What
Speaker 1: does that do to our deficit vectors? And the answers
Speaker 1: they worse, they get worser. Well, they're they're they're all
Speaker 1: they're already worse, right, because tax cuts do not pay
Speaker 1: for themselves, and so revenue is dropping at a time
Speaker 1: when the economy is growing at its fastest pace. Uh.
Speaker 1: And so when the economy slows, it only means definite
Speaker 1: deficits get even worse. Uh. And so staring trillion dollar
Speaker 1: deficits deficits in the face, it means don't count on
Speaker 1: another round of stimulus anytime soon. And in fact, outside
Speaker 1: of just automatic stabilizers that kick in whenever we go
Speaker 1: into a downturn, there's not a whole else the fiscal
Speaker 1: government can do. I would point out that John Taylor
Speaker 1: out at Stanford makes a big deal about the efficacy
Speaker 1: of automatic stabilizers as well. Ellen, if we look at
Speaker 1: the p p I data today, you're too young to
Speaker 1: remember when pp I was gospel. Everybody just stopped. If
Speaker 1: you're looking, No, I'm looking at Ms. Zentner, you and
Speaker 1: I remember a p p I crystal clear and then
Speaker 1: it's drifted to look. I gotta go see a stars
Speaker 1: porn this weekend. Please leave me on. I mean, I'm
Speaker 1: getting major heat, and I'm culturally deficient because I haven't
Speaker 1: seen Bradley Cooper Me Bradley Cooper Ellen, We've got p
Speaker 1: p I. It's coming back. Should I care about business inflation?
Speaker 1: Does it really matter like it mattered long ago and
Speaker 1: far away? Uh, Well, it does matter because margins are
Speaker 1: getting squeezed and put costs are rising, UM, tariffs are
Speaker 1: going to worsen. That part of this is just from
Speaker 1: natural organic tighten in the economy, and it's something that
Speaker 1: tends to happen as you move later into the business cycle.
Speaker 1: And interest rates are rising. Uh, and so businesses have
Speaker 1: to uh, you know, they have a couple of choices.
Speaker 1: When margins get squeezed. You can either uh invest more,
Speaker 1: do some capital deepening that drives productivity. Productivity drives profits,
Speaker 1: and it keeps your labor share of costs the same. Uh.
Speaker 1: You can pass on the cost to the consumer, But
Speaker 1: then you take the chance of dealing with the drop
Speaker 1: in aggregate demand because prices have gone up. So you
Speaker 1: take the hit on the top line or on margins
Speaker 1: or the dreaded third option is that you control labor costs,
Speaker 1: which leads to softening in job growth, possibly even job shedding.
Speaker 1: Jobs were not at that point yet, but that's how
Speaker 1: a cycle typically plays out. It's something that we need
Speaker 1: to watch a sandor. Thank you so much with Morgan
Speaker 1: Stanley this morning and again caution three four five Federate
Speaker 1: the hundredth anniversary of World War One, we are honored
Speaker 1: to bring you the author of Presidents of War, the
Speaker 1: epic story from eighteen o seven to modred Times, the
Speaker 1: historian Michael Bashlovt. Michael, it is a path from Edmund
Speaker 1: Randolph to the Senator from Alabama. It is the attorney
Speaker 1: general always fractious, and there's that delicate and historical independence
Speaker 1: of justice from six D Pennsylvania Avenue described that modern
Speaker 1: independence of the Justice department. Well, we've always assumed that
Speaker 1: even presidents who can be pretty partisan have attorneys general
Speaker 1: who are different from that, and there's a layer of separation.
Speaker 1: And I would tend to be pretty critical of the
Speaker 1: new appointment of Matt Whittaker as the act the attorney general,
Speaker 1: because this is someone who has not only been a partisan.
Speaker 1: An attorney's general can set aside partisan tests. That's not
Speaker 1: as worrying, But this is someone who's coming in with
Speaker 1: an attitude on the Mueller investigation, where he has written
Speaker 1: and said that he thinks of his illegitimate, should be
Speaker 1: defunded and essentially stopped, and very hard to escape the
Speaker 1: conclusion that the reason that he was put there is
Speaker 1: essentially shut down Mueller. And that's something that we don't
Speaker 1: normally see in presidential history, and usually when presidents try,
Speaker 1: it doesn't end very well for you. If I speak
Speaker 1: to you or Doris Karen's goodwinner, James McPherson, the phrase
Speaker 1: is so tried, and I speak as an amateur. Is
Speaker 1: this a constitutional crisis? Are we at that point? Or
Speaker 1: does that await us in the future. I think if
Speaker 1: if Whittaker as Attorney General shuts down Robert Mueller and
Speaker 1: we cannot see that report, and remember that Rudy Giuliani
Speaker 1: has talked out the possibility that President Trump would use
Speaker 1: executive privilege to make sure that all are some of
Speaker 1: whatever report Mueller submits is kept away from public eyes,
Speaker 1: I think that's going to initiate a constitutional crisis. And
Speaker 1: the other element of this is that you know it
Speaker 1: might then go to the Supreme Court. And you have
Speaker 1: a Supreme Court now where President Trump has appointed two
Speaker 1: of those justices, the fifth Brett Kavanaugh, fine man Man
Speaker 1: in many respects, but this is someone who by the
Speaker 1: time of his confirmation, got very close to this president
Speaker 1: in a way that you normally don't see what justices.
Speaker 1: So I think one question one would have to ask
Speaker 1: is if Brett Kavanaugh will feel that he's in a
Speaker 1: position to call this one way or another without considering
Speaker 1: whatever relationship he has had with President Trump and his people.
Speaker 1: Michael Beschloss, maybe to combine history and current events mentioned
Speaker 1: immigration policy. I wonder if you could speak about immigration,
Speaker 1: refugees and the changes in national borders as a result
Speaker 1: of World War One and whether we have improved at
Speaker 1: all in dealing with these challenges. Yeah. Well, this has
Speaker 1: been an issue as as you know of him, that
Speaker 1: goes all the way through American history, immigration back and forth,
Speaker 1: and after World War One, we had huge changes in
Speaker 1: immigration policy in the nineteen twenties. Then it came up
Speaker 1: at the time of the fact this is this week,
Speaker 1: This is the anniversary, the eightieth anniversary of Crystal nine,
Speaker 1: the program against the Jews of Germany that led many
Speaker 1: of them to seek refuge in the Western hemisphere. At
Speaker 1: the same time, you know, it's hard to think of
Speaker 1: a time that a president has used this issue in
Speaker 1: a political way as President Trump did during the last
Speaker 1: weeks of the last campaign. Uh, it always creates controversy.
Speaker 1: Lyndon Johnson signed an immigration bill in nineteen that opened
Speaker 1: the doors to allow of the immigration that we've seen
Speaker 1: over the last half century. That was controversial, but not
Speaker 1: of the order that we have seen in recent years.
Speaker 1: Based on your reading of history and your analysis, do
Speaker 1: you believe that the factors that contributed to the First
Speaker 1: World War present today? I think they certainly are. And
Speaker 1: the biggest and most dangerous omen is you both. I know,
Speaker 1: read The Guns of August by Barbara Tuckman, which talks
Speaker 1: about how World War One came, and the big lesson
Speaker 1: of that book is that wars like this can start
Speaker 1: by accident, you know, by miscommunications and by accidents and
Speaker 1: so forth, by people who did not even intend to
Speaker 1: go to war. A lot of things are happening right
Speaker 1: now that unless we've got wisdom and judgment from our leaders,
Speaker 1: beginning with the President of the United States, this could
Speaker 1: happen again. And unfortunately, we're now operating in a world
Speaker 1: of nuclear weapons, which was not happening a century ago.
Speaker 1: Michael Besh Laws, we have this phrase progressive, which I
Speaker 1: believe is new talk for liberal. What are the liberals
Speaker 1: learn in this election? What are the liberals learn about
Speaker 1: the certitude of being out of power in being liberal?
Speaker 1: And if you really want to win, you got to
Speaker 1: move to the middle or any Scoop Jackson lessons made there,
Speaker 1: I don't think so. I mean, for instance, at the
Speaker 1: time that Bill Clinton ran in, I would say that
Speaker 1: the dominant number of Democrats felt this is a fairly
Speaker 1: conservative time and if Democrats want to win, they're going
Speaker 1: to have to become what Clinton called new Democrats and
Speaker 1: moved to the middle. I mean, Clinton was more centrist
Speaker 1: than any Democrat in years. Was before they began using
Speaker 1: the word progressive, and they really avoid it, as you
Speaker 1: well remember using the word liberal because it was an epithet.
Speaker 1: Now I would say say, there's going to be a
Speaker 1: controversy within the Democratic Party that will really see in
Speaker 1: the presidential primaries of two thousand twenty, which is and
Speaker 1: you know what it is. You know on one side,
Speaker 1: you'll have strong progressives say the only way you can
Speaker 1: win the presidency back and win congress fully back is
Speaker 1: if you have strong views and you go hard left
Speaker 1: and you bring out your voters, and then the old
Speaker 1: new Democrat people who will say that's going to alienate
Speaker 1: a lot of people. You've got to move to the middle.
Speaker 1: That's where the votes are. What Richard Nixon used to say.
Speaker 1: I don't think within the Democratic Party either of those
Speaker 1: views is dominant. So we're probably going to see a
Speaker 1: battle Royal in less than two years. Thank you so much,
Speaker 1: Michael Beschlott's generous amount of time today. The book is
Speaker 1: Presidents of War, the epics story from eight seven and
Speaker 1: modern times. And what's so cool about this book? Folks?
Speaker 1: It was brought out a number of months ago and
Speaker 1: it was important then, and with the news flow that
Speaker 1: we've been seeing, uh, it becomes important. The American historian
Speaker 1: Tom Hanks says of Michael's book, once again, fasch Loss
Speaker 1: captures our presidents in terms both historic and human as well.
Speaker 1: Presence of war. Can't say enough about it. Thanks for
Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to
Speaker 1: interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer.
Speaker 1: I'm on Twitter at Tom Keane Before the podcast, you
Speaker 1: can always catch us worldwide. I'm Bloomberg Radio