WEBVTT - Surveillance: This Fed Is Data Dependent, Zentner Says 0:00:00.080 --> 0:00:12.960 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:13.480 --> 0:00:17.560 Jay Ley. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:33.880 Bloomberg dot Com, and of course, on the Bloomberg. Dropping 0:00:33.960 --> 0:00:36.120 by the studio is Chris Rupkey, m u f G 0:00:36.520 --> 0:00:40.160 Union Bank, Chief Financial Economist and managing Director. Good morning 0:00:40.240 --> 0:00:43.360 to Chris. Morning. So we're slowed down in China, implementing 0:00:43.440 --> 0:00:47.080 lending quotes as commodities breaking down. The Federal Reserve does 0:00:47.120 --> 0:00:49.199 not look like it's for turning right now? What do 0:00:49.240 --> 0:00:51.720 you make of all of this put together? Well, I 0:00:51.760 --> 0:00:54.400 was pretty happy last night, right, I mean, the Dow 0:00:54.640 --> 0:00:57.360 was up six percent year to date, the max it 0:00:57.600 --> 0:00:59.960 was a month ago was up eight and a half percent, 0:01:00.000 --> 0:01:03.600 and so we climbed back. I was up in the 0:01:03.640 --> 0:01:06.880 black again, up six percent here to date. It was 0:01:06.920 --> 0:01:09.720 only eight and a half percent year to date. And 0:01:09.800 --> 0:01:13.240 now what happened? The market went pear shape, had a 0:01:13.280 --> 0:01:15.520 little wabi overnight. You have something to do with China. 0:01:15.640 --> 0:01:18.680 As you say, I don't know how this happened, but 0:01:18.720 --> 0:01:21.440 it's we're only down. I'm kind of used to the 0:01:21.480 --> 0:01:23.120 new volatile. I don't want to make too much of 0:01:23.200 --> 0:01:25.040 the staff moves. I want to have a look at 0:01:25.040 --> 0:01:28.200 what is happening in China specifically, there is a deceleration 0:01:28.319 --> 0:01:31.600 taking place. Is it made in China or made in America. 0:01:34.040 --> 0:01:40.360 I think the tariffs are having an impact, and um, 0:01:40.400 --> 0:01:42.600 you know we're not all there yet, right, I mean, 0:01:42.680 --> 0:01:46.440 the the final two billion of tariffs has a ten 0:01:46.600 --> 0:01:50.360 percent is a ten percent now January one, it goes to. 0:01:51.600 --> 0:01:55.280 That's nine night and day different when we put the 0:01:55.280 --> 0:01:59.000 tariffs up to. That's going to cause a major change 0:01:59.720 --> 0:02:03.520 in some of these import export patterns. So you know, 0:02:03.560 --> 0:02:05.720 the trade wars are is interesting from the U S 0:02:05.720 --> 0:02:08.359 standpoint for a trade war and the I m f 0:02:08.440 --> 0:02:11.000 S warning about it. But for a trade war like 0:02:11.200 --> 0:02:15.880 ninety nine, you need trade volume to go down. But 0:02:16.120 --> 0:02:20.360 imports and exports to China this year visa the US 0:02:20.480 --> 0:02:23.160 are up eight nine percent. Yeah, so it's going the 0:02:23.160 --> 0:02:27.120 wrong way. It should be following going up a percent. 0:02:27.280 --> 0:02:30.360 I hate the nineteen twenties nineteen thirties comparison. Well, you 0:02:30.400 --> 0:02:33.280 are the paras pretty bad? Neither were you, Chris. I'm 0:02:33.320 --> 0:02:35.760 sure it was terrible looking at the history books, but 0:02:35.800 --> 0:02:39.040 the comparisons just don't make sense at all to me, 0:02:39.080 --> 0:02:41.160 at least, I look at the desderation in China and 0:02:41.160 --> 0:02:44.880 I see signs of desperation. Now the Chinese implementing lending 0:02:44.960 --> 0:02:47.960 quotas that we've learned in the last so now, large 0:02:48.000 --> 0:02:50.400 banks will need to have a third of new corporate 0:02:50.440 --> 0:02:53.160 loans to private companies. Small and medium banks will need 0:02:53.240 --> 0:02:56.480 to have two thirds of new loans will have to 0:02:56.520 --> 0:02:58.520 go on the corporate side, will have to go to 0:02:58.639 --> 0:03:02.120 non state entities. At the moment, loans to nonstate corporates 0:03:02.440 --> 0:03:05.040 currently less than a quarter of the total. These are 0:03:05.040 --> 0:03:07.520 gonna have to be some big moves by Chinese banks 0:03:07.720 --> 0:03:11.880 to get extra loans to private entities. That's a recipe 0:03:11.919 --> 0:03:14.720 for trouble, isn't it. Yeah, it doesn't look great. I 0:03:14.760 --> 0:03:17.760 mean it does. Part of me kind of says that, 0:03:17.919 --> 0:03:22.160 you know, they're GDP numbers, they're interesting, rout interesting. Remember 0:03:22.240 --> 0:03:25.880 back in two thousand and sixteen, we thought China's economy 0:03:26.040 --> 0:03:29.880 was going down and they said, no, real GDP is 0:03:29.919 --> 0:03:32.120 running six and a half percent, and that's our target 0:03:32.400 --> 0:03:35.360 over the next five years. Now, at the worst, I 0:03:35.440 --> 0:03:39.400 think I m F has six two, China growth slowing 0:03:39.440 --> 0:03:41.960 from six and a half percent roughly to six point 0:03:42.040 --> 0:03:46.119 two percent next year. Uh, that doesn't sound like it's 0:03:46.160 --> 0:03:50.360 all that dramatic, right in in I mean going from 0:03:50.360 --> 0:03:52.640 six and a half to six point two. The worry 0:03:52.760 --> 0:03:54.680 is it's going to be much much worse, of course, 0:03:54.720 --> 0:03:57.360 So we'll have to see what happens. You know, Trump 0:03:57.400 --> 0:04:01.640 before the midterms was saying maybe he can get some agreements. 0:04:01.640 --> 0:04:05.440 So that's the key, whether some of these tariffs can 0:04:05.440 --> 0:04:08.000 be taken off the track they're on. The twenties and 0:04:08.000 --> 0:04:10.640 the thirties, John was all upset about the twenties and 0:04:10.840 --> 0:04:14.920 what was the worst year in the twenties and the thirties? 0:04:14.960 --> 0:04:20.800 Seven The Yankees played seven four baseball, well understood to 0:04:20.800 --> 0:04:22.480 be one of the best teams in the history of 0:04:22.520 --> 0:04:26.080 all of sports. They went eighteen and four against the 0:04:26.120 --> 0:04:29.839 Red Sox, who enjoyed last place. The Red Sox played 0:04:29.880 --> 0:04:33.120 John what we call three thirty one ball. They won 0:04:33.200 --> 0:04:36.320 fifty one games and lost a hundred and three games. 0:04:36.800 --> 0:04:38.680 That was the worst year in the twenties, and that's 0:04:38.760 --> 0:04:41.200 one of the causes of the Great Depression. It was 0:04:44.279 --> 0:04:48.520 reminded me that in our last conversation is, well, Chris Rupki, 0:04:48.600 --> 0:04:50.719 when you look at China, when you look at these dynamics, 0:04:51.200 --> 0:04:53.880 I've noticed this week very quietly, John Burry, in all 0:04:53.880 --> 0:04:58.560 the Washington headlines and all that was imports from China 0:04:59.480 --> 0:05:05.800 into America. What are we exactly import from China into America? 0:05:06.080 --> 0:05:09.680 Is that a Is that an internal dynamic of manufacturing 0:05:09.760 --> 0:05:13.320 and services or is it is it something simpler than that? Yeah, 0:05:13.360 --> 0:05:15.480 I mean it's a lot of consumer goods and it's 0:05:15.520 --> 0:05:18.640 a lot of capital goods. So the capital goods are 0:05:18.720 --> 0:05:22.200 going into the supply chain here. That's what It's never 0:05:22.240 --> 0:05:24.640 made sense to me because I remember the trade wars 0:05:24.680 --> 0:05:27.839 we had with Japan. You know, I'm at MFG Bank, 0:05:28.120 --> 0:05:31.120 the trade wars that we had with Japan in in 0:05:31.240 --> 0:05:33.760 the late eighties that it was night and day different. Right, 0:05:34.120 --> 0:05:38.920 So we're cars coming from Toyota Honda to the US. 0:05:39.000 --> 0:05:42.320 So it's kind of like US versus Japan. Now this 0:05:42.520 --> 0:05:45.680 is trying to be like US against China the country, 0:05:45.720 --> 0:05:50.320 but it's really US manufacturers. We're battling with ourselves. US 0:05:50.400 --> 0:05:52.240 companies have done this. This is one of the most 0:05:52.320 --> 0:05:55.880 important in such on the weekend when we're doing politics, seven, 0:05:55.920 --> 0:05:57.880 and I get it all. You know, the news flows 0:05:57.880 --> 0:06:02.560 when extraordinary, but what Mr Ruskie just said there's incredibly important. 0:06:02.960 --> 0:06:06.840 We're fighting the emotional war of the Japanese trade battle 0:06:06.920 --> 0:06:10.520 of years ago. It's not it's different this time. It 0:06:10.600 --> 0:06:12.440 is different this time. But I will say I think 0:06:12.480 --> 0:06:14.440 we've got to stop viewing the global economy through the 0:06:14.480 --> 0:06:18.520 prism almost exclusively of US policy. You would say that trade, 0:06:18.920 --> 0:06:24.320 monetary policy, fiscal policy. I would say that, look at 0:06:24.360 --> 0:06:26.760 what is happening in China right now, that has nothing 0:06:26.800 --> 0:06:31.320 to do with trade. One fifth, one fifth of China's 0:06:31.360 --> 0:06:35.960 housing is empty. Let me say it again, one fifth 0:06:36.440 --> 0:06:40.480 of China's housing is empty. This has nothing to do 0:06:40.680 --> 0:06:43.560 with a trade war. They have a real problem of 0:06:43.720 --> 0:06:48.279 over capacity. They have a real problem with decelerating growth 0:06:48.360 --> 0:06:51.960 in the country. Everybody can agree on that. The thing 0:06:52.080 --> 0:06:53.680 nobody can agree on is when the pain is going 0:06:53.720 --> 0:06:56.160 to start, because they keep finding a way to put 0:06:56.240 --> 0:06:58.360 this off, to put this off. And I think the 0:06:58.400 --> 0:07:00.560 reason some people are worried this morning, because they wake 0:07:00.640 --> 0:07:02.360 up this morning and see a government that's trying to 0:07:02.400 --> 0:07:05.000 introduce lending quotes, is because they trying to play the 0:07:05.040 --> 0:07:08.520 game again. They're trying to boost credit and keep the party, 0:07:08.600 --> 0:07:10.880 keep the music going. There are serious problems in this 0:07:10.960 --> 0:07:14.320 economy that have nothing to do with try disputes Chris. Yeah. 0:07:14.360 --> 0:07:17.320 But yeah, I mean, but part of it is it's 0:07:17.320 --> 0:07:20.080 still is very much when I was over there. Uh, 0:07:20.280 --> 0:07:23.120 it's a developing nation. I mean it's one point four 0:07:23.240 --> 0:07:27.920 billion people. Uh, the the amount of talk about income inequality. 0:07:27.960 --> 0:07:31.120 We're talking about income inequality with Tom. I mean, income 0:07:31.520 --> 0:07:35.440 inequality in China is unbelievable, right, I mean there's very 0:07:35.600 --> 0:07:38.280 very few people. When when I was over there, I 0:07:38.400 --> 0:07:42.440 didn't meet meet that many people who who owned a home, right, 0:07:42.480 --> 0:07:44.520 I mean, they can't afford that. The incomes aren't there. 0:07:44.600 --> 0:07:48.680 So it's a very complex society, and I think we 0:07:48.840 --> 0:07:52.760 kind of generalize sometimes I don't. I mean there's still 0:07:52.840 --> 0:07:55.360 people coming from the rural areas to the cities that 0:07:55.440 --> 0:08:00.680 they're being It's very complicated. So I don't know how 0:08:00.880 --> 0:08:05.400 much in trouble their economy is My offspring cash flows 0:08:05.480 --> 0:08:08.240 living over there. He's got like three units, he bought 0:08:08.320 --> 0:08:11.280 vet bill units. So what you say you've got, afterthought, 0:08:11.320 --> 0:08:15.040 which is the youngest cash flow? Cash you squeezed four 0:08:15.120 --> 0:08:18.320 years into five? That is beautiful college. You've named pretty 0:08:18.400 --> 0:08:20.200 much every one of your kid name to him. I mean, 0:08:20.280 --> 0:08:22.080 it's his middle name, but we don't use this formal 0:08:22.120 --> 0:08:24.760 and we got lovely Chris. Thanks for dropping by, Chris 0:08:25.320 --> 0:08:42.480 mufg Bank Chief Financial Economists, John, I want you to 0:08:42.559 --> 0:08:45.679 bring in our next guest, truly esteemed here as a 0:08:45.760 --> 0:08:50.800 president travels to UH to Paris in the commemoration of 0:08:50.840 --> 0:08:53.440 the hundred anniversary of World War One. But I would 0:08:53.440 --> 0:08:55.679 just say John that if I've read in all my 0:08:55.800 --> 0:08:59.920 readings and all my interviews, there is forever a distance 0:09:00.120 --> 0:09:03.720 of America from these great twentieth century wars. It's something 0:09:04.120 --> 0:09:06.000 I know. You grew up in Covenedry with the blitz 0:09:06.080 --> 0:09:10.280 of World War two and in Coventry, and yeah, they 0:09:10.360 --> 0:09:13.000 totally flattened it a very very different looking city now, 0:09:13.160 --> 0:09:17.040 but we should mention for American audience a manufacturing heart 0:09:17.280 --> 0:09:20.439 of the United formally, um, not so much anymore, in 0:09:20.520 --> 0:09:22.920 a very different looking city than what it looked like 0:09:23.000 --> 0:09:24.880 before the war, That's for sure. I can see why 0:09:24.920 --> 0:09:27.080 you've got me to introduce Stuart, because it's the longest 0:09:27.120 --> 0:09:30.120 title I've ever read. Stuart Patricks, CFR, Senior Fellow in 0:09:30.160 --> 0:09:33.200 Global Governance and director of the International Institutions and Global 0:09:33.240 --> 0:09:36.000 Governance Program. There we go, Did I do? Okay? Yeah, 0:09:36.160 --> 0:09:38.720 you did well. That that good morning to Stewart. Important 0:09:38.760 --> 0:09:41.360 weekend for so many reasons. What are you looking for 0:09:41.480 --> 0:09:45.320 this weekend? Well, what I'm looking for is um. Obviously, 0:09:45.400 --> 0:09:49.440 there's going to be the gathering world leaders, including Donald Trump, 0:09:49.640 --> 0:09:52.559 in Paris at the Arc de Trient on Sunday, the 0:09:52.600 --> 0:09:54.960 eleventh hour of the eleventh day of the eleventh month, 0:09:55.040 --> 0:09:58.960 basically commemorating armistst Day UM, the alleged war to end 0:09:59.040 --> 0:10:01.719 all wars, where the President is obviously going to be 0:10:01.800 --> 0:10:04.400 moralizing the more than a hundred thousand American troops that 0:10:04.480 --> 0:10:08.120 died there, many fewer obviously than died in your own country. Uh, 0:10:08.480 --> 0:10:12.760 more than seven hundred thousand. I believe Brits died huge proportion. 0:10:12.960 --> 0:10:15.360 And uh. And and the memory and the residents and 0:10:15.480 --> 0:10:19.480 the gravity of the of that conflict in instill in 0:10:19.720 --> 0:10:23.320 the memory of of people who's who remember their parents 0:10:23.440 --> 0:10:26.760 talking about it, etcetera. In Europe is huge. But it's 0:10:26.800 --> 0:10:28.839 also a time to reflect on the fact that a 0:10:28.920 --> 0:10:31.880 lot of the forces that were unleashed during the Second 0:10:31.920 --> 0:10:34.600 World of first World War and its immediate aftermath are 0:10:34.840 --> 0:10:37.720 really really have echoes in our current day and um 0:10:38.120 --> 0:10:41.360 that's why President Emmanuel mccrawl is hosting what he calls 0:10:41.400 --> 0:10:43.599 the Paris Peace Form during that time to try to 0:10:44.000 --> 0:10:48.320 to counteract this the rising nationalism, rising authoritarianism and UH 0:10:48.400 --> 0:10:51.120 and rising protectionism around the world and a really interesting 0:10:51.320 --> 0:10:55.559 story with hegemonic power. Those two wars marked the decline 0:10:55.600 --> 0:10:59.760 of British hegemonic power and the upringing of American hegemonic power. 0:10:59.840 --> 0:11:01.760 From long, long time, we talked about what would happen 0:11:02.120 --> 0:11:04.320 with American hedge many I don't think many people thought 0:11:04.920 --> 0:11:09.800 that America with withdraw from its role voluntarily. Absolutely, it's 0:11:09.880 --> 0:11:13.000 not what is happening right now. Absolutely. Colleague of mine, 0:11:13.240 --> 0:11:16.720 Jim Lindsay, with another writer Evo Dalter, have just written 0:11:16.760 --> 0:11:20.240 a book called The um Uh, The The The Empty 0:11:20.320 --> 0:11:23.199 Throne of the American abdication of world leadership. And that's 0:11:23.200 --> 0:11:25.319 that precisely what's happened. You know, Normally, when you have 0:11:25.480 --> 0:11:29.080 these sort of power transitions, you have one power overtaking another, 0:11:29.200 --> 0:11:32.000 sometimes defeating it in war, sometimes sort of graciously passing 0:11:32.040 --> 0:11:34.040 the batons, as in a sense Britain did to the 0:11:34.160 --> 0:11:38.120 United States. Here you have instead a country that still 0:11:38.320 --> 0:11:40.760 is by all measures the most powerful in the world, 0:11:40.880 --> 0:11:43.480 in a sense abdicating its role. And that's why the 0:11:44.120 --> 0:11:48.079 very the Versailles that the Paris Peace Conference era is 0:11:48.200 --> 0:11:51.880 so appropriate right now to think about, because that was 0:11:51.920 --> 0:11:54.160 a time when the United States had a chance to 0:11:54.320 --> 0:11:57.280 join the League of Nations that President Woodrow Wilson had 0:11:57.440 --> 0:12:00.520 had created. But instead, in a sense, the United States 0:12:00.600 --> 0:12:03.920 decided to absent itself in many ways during inter warriors, 0:12:04.080 --> 0:12:07.440 from from any effort to try to have a machinery 0:12:07.520 --> 0:12:09.599 to organize the piece. I see this trend in the 0:12:09.679 --> 0:12:12.599 United Kingdom as well. Many people can identify with this 0:12:12.640 --> 0:12:15.160 across various countries in Europe. Is this a consequence of 0:12:15.240 --> 0:12:19.040 populism in America that many people in the electorate know what, 0:12:19.240 --> 0:12:21.679 no longer want America to have this role on the 0:12:21.760 --> 0:12:24.560 international stage. I think there's a huge amount of exhaustion. 0:12:24.559 --> 0:12:26.520 I think when you look, I think the vast majority 0:12:26.559 --> 0:12:30.280 of Americans remain internationals. There's a bunch of recent opinion 0:12:30.360 --> 0:12:33.400 polling very comprehensive from the Chicago Council on Global Affairs, 0:12:33.440 --> 0:12:36.719 that is that is U testified to that. However, I 0:12:36.800 --> 0:12:39.320 think a lot of Americans, uh, think that the United 0:12:39.320 --> 0:12:41.360 States has for a long time done more than its 0:12:41.440 --> 0:12:44.079 fair share. And they also equate sort of the promotion 0:12:44.120 --> 0:12:48.080 of democracy with an indignation building exercises around the world. 0:12:48.120 --> 0:12:51.080 So the Americans are exhausted, and so there's a sense 0:12:51.160 --> 0:12:53.360 that others, and Donald Trump has picked up in this, 0:12:53.480 --> 0:12:56.800 that others are free riding on American American efforts. Stuart 0:12:56.840 --> 0:12:59.240 Patrick where is with the Council on Foreign Relations Just 0:12:59.440 --> 0:13:02.679 terrific spective out of Stanford and Oxford where he was 0:13:02.720 --> 0:13:06.120 a Rhodes scholar, and of course his work, uh as 0:13:06.160 --> 0:13:10.880 well on sovereignty has been important. There's been technology. I'll 0:13:10.880 --> 0:13:13.400 go back to the American Civil War. We struggled with it. 0:13:13.520 --> 0:13:17.160 They're certainly in World War One. John Keegan talks about 0:13:17.200 --> 0:13:21.000 the stalemates of World War One, the technology of or 0:13:21.080 --> 0:13:24.400 to just John, the advent of radar alone was or 0:13:24.640 --> 0:13:28.600 or or for that matter, penicillin is being extraordinary within 0:13:28.720 --> 0:13:31.599 all the synthesis of the consolant foreign relations. What do 0:13:31.720 --> 0:13:37.360 we underestimate about the technology now is nation's clash? What's 0:13:37.440 --> 0:13:41.600 the the present thing you're studying about our modern technology? Well, 0:13:41.640 --> 0:13:43.480 it's a couple of things. So one of them is UM, 0:13:43.880 --> 0:13:47.120 the the growth and the implications of the growth of 0:13:47.200 --> 0:13:51.040 sort of lethal autonomous weapons systems. UM. We sp you 0:13:51.080 --> 0:13:54.720 spoke about technological advance and and obviously and the impact 0:13:54.800 --> 0:13:58.000 of that taking people by surprise, right, the exact lethality 0:13:58.160 --> 0:14:01.000 during trench warfare, making any possible to have the sort 0:14:01.000 --> 0:14:03.319 of wars of movement. But then, of course than the 0:14:03.400 --> 0:14:06.400 invention of sort of cavalry in the sense of tanks 0:14:06.840 --> 0:14:09.240 uh in in the Second World War, wars of movement, etcetera. 0:14:09.320 --> 0:14:12.079 What we've really gotten into now is a degree of 0:14:12.160 --> 0:14:15.439 sort of remote control and was video game warfare, in 0:14:15.559 --> 0:14:19.800 which increasingly, as robotics gets more advanced, many of these 0:14:19.840 --> 0:14:21.920 things are gonna be and already are you see it 0:14:21.960 --> 0:14:24.680 with drone technology being outsourced to sort of in a 0:14:24.760 --> 0:14:29.280 sense terminal jockeys in Nebraska for instance, being able to 0:14:30.440 --> 0:14:33.720 that is too clinical and too surgical and avoids the 0:14:33.880 --> 0:14:38.640 human condition absolutely absolutely well. First, in two ways. One 0:14:38.680 --> 0:14:41.760 of them is it certainly UM creates a situation where 0:14:42.200 --> 0:14:45.800 UM there are major hazards in terms of who's making 0:14:45.880 --> 0:14:48.360 those lethal decisions. But it's going to become even more 0:14:48.640 --> 0:14:52.840 of a problem. Uh. This distancing when uh, these weapons 0:14:52.840 --> 0:14:55.080 systems are actually able to make those decisions on their own. 0:14:55.400 --> 0:14:59.280 And more broadly, the artificial intelligence revolution is also another 0:15:00.040 --> 0:15:03.920 it is it is creating huge problems for the future 0:15:03.920 --> 0:15:07.560 of warfare because you have situations where, um, you know, 0:15:07.680 --> 0:15:11.600 the the as it's been described that if that if 0:15:11.600 --> 0:15:15.480 a country like China, which is competing all out to 0:15:15.560 --> 0:15:18.400 try to dominate artificial intelligence, ends up getting only a 0:15:18.480 --> 0:15:21.440 few months advantage, that could be the equivalent of having 0:15:21.480 --> 0:15:23.960 an entire revolution in military affairs that the Unit States 0:15:24.000 --> 0:15:26.000 falls behind. I'm gonna watch you with a very big question, 0:15:26.480 --> 0:15:29.400 and I imagine you won't have a definitive answer, but 0:15:29.480 --> 0:15:32.600 I do wander we witness thing and emerging cold war 0:15:32.720 --> 0:15:35.280 between the United States and China. I think we are. 0:15:35.320 --> 0:15:37.760 I don't think it's going to be necessarily a shooting war. 0:15:38.000 --> 0:15:41.680 Um Uh. The China and the United States are definitely 0:15:41.840 --> 0:15:44.720 in one of those sort of hegemonic transitions as they're 0:15:44.760 --> 0:15:47.400 sometimes called in the academy. But basically, one power is 0:15:47.800 --> 0:15:50.800 there's a rising power and then there's a power that's declining, 0:15:50.840 --> 0:15:53.240 not not in absolute terms but in relative terms, And 0:15:53.280 --> 0:15:57.240 the question is can they accommodate one another um unlike 0:15:57.760 --> 0:16:00.000 the Cold There there's a few differences between the United 0:16:00.080 --> 0:16:02.080 States and China, and the United States versus the old 0:16:02.120 --> 0:16:03.760 Soviet Union. But one of the biggest ones is that 0:16:04.080 --> 0:16:07.240 this is by and large not really an ideological contest. 0:16:08.040 --> 0:16:10.760 There was, there was an absol you know. It's a 0:16:10.880 --> 0:16:13.920 much more of a traditional great power contest, a little 0:16:13.920 --> 0:16:16.760 bit more like you know, the Anglo Anglo German antagonism 0:16:16.880 --> 0:16:19.280 a hundred years ago, right that led to the help 0:16:19.520 --> 0:16:21.120 lead to the First World War. What you have, with 0:16:21.240 --> 0:16:23.520 the respect to US and China's you don't really have, 0:16:24.160 --> 0:16:28.200 you know, ex desire for territorial aggrandizement. Right with the 0:16:28.240 --> 0:16:30.320 exception of you know, the South China Sea and a 0:16:30.400 --> 0:16:33.800 few and and Taiwan, you don't really have a territorial dispute. 0:16:34.040 --> 0:16:37.840 What you do have, um is uh is the Chinese 0:16:37.920 --> 0:16:41.640 desire to dismantle the U S alliance system in in 0:16:41.800 --> 0:16:44.240 Asia and get the United States to be much more 0:16:44.360 --> 0:16:46.920 offshore than it is. But the good news is that 0:16:47.320 --> 0:16:49.680 this is not going to be a you know, three 0:16:49.760 --> 0:16:52.520 hundred and sixty degree effort to try to pick up 0:16:52.640 --> 0:16:55.080 clients states around the world and try to win them 0:16:55.080 --> 0:16:59.120 over to ideologies because the Chinese Communist Party, despite its name, 0:16:59.160 --> 0:17:01.640 has one ideal gene that is making money to keep 0:17:01.760 --> 0:17:06.160 its population happy. That was great, it was It was fantastic. 0:17:06.400 --> 0:17:09.639 Can he come back? Yes? Can it before? I don't know, 0:17:09.720 --> 0:17:11.159 we do, you know, we do this a lot. I 0:17:11.240 --> 0:17:15.119 had an extremely wonderful interview the day of Normandy, the 0:17:15.200 --> 0:17:21.480 day President Obama visited, Uh, Normandy with the name escapes 0:17:21.520 --> 0:17:23.960 you right now. He's written a fabulous three volumes on 0:17:24.080 --> 0:17:27.040 World War Two at Dawn's Last Light and in others. 0:17:28.119 --> 0:17:31.240 Rick Akinson, Yes, Rick Atkinson and I talking about Normandy, 0:17:31.920 --> 0:17:34.080 and this is what we try to do on surveillance, 0:17:34.160 --> 0:17:36.440 John Tucker and John Farrew and I and pen Fox, 0:17:37.080 --> 0:17:39.720 Francine Loqui. We're living this every day. Talk to people 0:17:39.760 --> 0:17:42.720 that actually know what they're talking about. This morning was 0:17:43.440 --> 0:17:48.160 Stuart Patrick, Fellow Global Governance and of the International Institutions 0:17:48.640 --> 0:18:05.399 and a Global Governance program. There is also velocity to 0:18:05.480 --> 0:18:08.280 the debate. Is it easy? As a media person, I 0:18:08.359 --> 0:18:11.080 could say it's Goldman versus Morgan Stanley, which makes for 0:18:11.600 --> 0:18:13.960 you know, it's fun and all that. But the basic 0:18:14.119 --> 0:18:17.840 idea is the FED on a path to many rate 0:18:17.960 --> 0:18:21.159 increases and then a crew that is said, and in 0:18:21.280 --> 0:18:24.320 the case of Allen Zentner Morgan Stanley has said early 0:18:24.680 --> 0:18:27.280 wait a minute, there will be a moment of data 0:18:27.359 --> 0:18:30.359 dependency where the federal pause. We get an update on 0:18:30.480 --> 0:18:33.960 this Friday with Ellen Zentner of economics at Morgan Stanley 0:18:34.160 --> 0:18:36.280 as well to go into your weekend note as you 0:18:36.400 --> 0:18:41.320 published from Monday, you're gonna reaffirm caution about the FEDS path. Yes, 0:18:41.400 --> 0:18:43.639 so I think what we do know is they're definitely 0:18:43.680 --> 0:18:46.000 going to hike some more. Um. But I'm glad that 0:18:46.040 --> 0:18:49.159 you mentioned the data dependency because that is something that 0:18:49.280 --> 0:18:52.320 Chaipal has been very clear on. Right. If anyone's been 0:18:52.400 --> 0:18:55.119 data dependent, um, it's this FED. And they're going to 0:18:55.160 --> 0:18:57.560 be even more data dependent than in the past. And 0:18:57.640 --> 0:19:00.200 so what that means is that the shape of orowth 0:19:00.280 --> 0:19:03.120 next year is going to matter greatly to how far 0:19:03.240 --> 0:19:06.000 they go with rates, and especially as they moved towards 0:19:06.640 --> 0:19:08.440 John Williams of the New York Fed, as you know, 0:19:08.560 --> 0:19:11.440 talked about his third phase of monetary policymaking, which is 0:19:11.480 --> 0:19:16.480 managing policy around neutral. So that's really true data dependency, 0:19:16.960 --> 0:19:20.399 knowing as the data comes in. As as Rich Clarata, 0:19:20.480 --> 0:19:23.080 the new Vice chair put it. Uh, the data, the 0:19:23.119 --> 0:19:26.600 incoming data will tell them where neutral is. It moves around. 0:19:26.640 --> 0:19:30.960 You manage policy around that two frontline monetary works there 0:19:31.000 --> 0:19:35.440 in Williams in Clarada. That's not Chairman Powell. I want 0:19:35.480 --> 0:19:38.159 to posit an idea and I want you to discuss it. 0:19:38.720 --> 0:19:43.199 This is a chairman driven to take the crystal ballitis away. 0:19:44.280 --> 0:19:47.959 I mean clearly that's the pattern. Where is that pattern 0:19:48.080 --> 0:19:52.040 going six meetings out? So Chair Pal did make it 0:19:52.119 --> 0:19:56.000 clear starting with Jackson Hole really that throwing out, throwing 0:19:56.080 --> 0:19:59.240 rules based policy making out the window, even getting his 0:19:59.359 --> 0:20:02.040 pal william M is on board with him, saying, look, 0:20:02.080 --> 0:20:04.440 even though my name is on the law back Williams model, 0:20:04.480 --> 0:20:07.280 I don't necessarily subscribe to it. So he's really been 0:20:07.359 --> 0:20:10.200 pushing his weight around at the FED, trying to get 0:20:10.480 --> 0:20:14.560 the hundreds of PhD economists at the FED to eat 0:20:14.600 --> 0:20:17.760 some humble pie, so to speak, and say, look, there's 0:20:17.800 --> 0:20:20.600 not a lot of precision um in the forecasting that 0:20:20.720 --> 0:20:22.600 we do and we need to recognize that. And so 0:20:23.160 --> 0:20:26.440 that fits in with that data dependency. Just letting the 0:20:26.560 --> 0:20:30.040 data tell you rather than being on some clear path 0:20:30.440 --> 0:20:33.920 now do find it? Uh So Pal I believe he's 0:20:33.960 --> 0:20:37.040 been a really great communicator, and the market understands him 0:20:37.160 --> 0:20:40.400 and reacts very well to his communications. He has made 0:20:40.520 --> 0:20:43.520 one misstep, though, and that was when he said we 0:20:43.640 --> 0:20:46.399 are far from neutral. Because if you give a speech 0:20:46.400 --> 0:20:48.840 at Jackson Hole and say we don't know where our 0:20:48.920 --> 0:20:51.200 star is, it's like guiding by the stars, and let's 0:20:51.200 --> 0:20:52.960 be clear that there's not a lot of precision in 0:20:53.040 --> 0:20:55.479 these things, then how do you know how far from 0:20:55.560 --> 0:20:58.679 neutral you are? I think that's the only only communication 0:20:58.800 --> 0:21:01.240 he's done where I would a he probably could have 0:21:01.320 --> 0:21:03.400 framed it in a different way, and I think Clarida 0:21:03.440 --> 0:21:05.720 did a good job on the back of that, saying, look, 0:21:05.760 --> 0:21:08.280 it's just about the incoming day. Guided by the stars. 0:21:08.359 --> 0:21:10.520 You reminded me of Contiki and they're trying to figure 0:21:10.520 --> 0:21:12.320 out which I can't remember which way they went in 0:21:12.359 --> 0:21:14.640 the Pacific, but they went west to east or east. 0:21:14.680 --> 0:21:17.720 They got lost. They got lost. Okay, that's the big 0:21:17.840 --> 0:21:21.200 risk out here is we're guided by the stars. Can't 0:21:21.240 --> 0:21:25.280 we just be guided by jobs and wage growth in 0:21:25.440 --> 0:21:28.080 like like the timber Lake School of Georgia and just 0:21:28.400 --> 0:21:30.720 wait to see what the data is. Why can't we 0:21:30.800 --> 0:21:32.720 do that? Well? That and I think that's what the 0:21:32.800 --> 0:21:34.520 FED is going to do. But I mean, what you've 0:21:34.560 --> 0:21:37.240 got is, uh, you know, based on our GDP tracking 0:21:37.320 --> 0:21:39.880 in the fourth quarter two point eight percent, we're gonna 0:21:39.920 --> 0:21:42.399 come in the three point one percent GDP growth this year. 0:21:42.480 --> 0:21:45.160 That's right in the pocket of the Fed's expectation. You've 0:21:45.240 --> 0:21:47.479 got growth in the first quarter of next year that's 0:21:47.520 --> 0:21:50.359 going to be boosted by a record high tax refund season. 0:21:50.760 --> 0:21:52.800 So that's certainly not gonna have something in the data 0:21:52.880 --> 0:21:54.920 telling the FED that they need to stop or that 0:21:55.040 --> 0:21:58.440 they are at at or have gone past control. They'll 0:21:58.520 --> 0:22:00.800 hike in June as well, but we believe that by 0:22:00.840 --> 0:22:03.639 the time they're going into that September meeting, the shape 0:22:03.680 --> 0:22:05.200 of growth is going to matter a good deal and 0:22:05.280 --> 0:22:09.080 GDP is going to be tracking low and most likely 0:22:09.560 --> 0:22:13.159 much lower than potential, and that will tell them we 0:22:13.280 --> 0:22:15.960 need to pause your calendar. Publishing in Forbes, one of 0:22:16.040 --> 0:22:18.920 our great fiscal experts, he says, it's two miserable years 0:22:19.240 --> 0:22:22.440 if we get an ellen Zentner g d P. What 0:22:22.640 --> 0:22:26.680