WEBVTT - Surveillance: U.S. Midterms Eve With Jared Bernstein 0:00:09.840 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Ley. 0:00:13.960 --> 0:00:17.560 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 --> 0:00:27.319 Bloomberg dot Com, and of course, on the Bloomberg. The 0:00:27.360 --> 0:00:30.200 week begins with harm Band Halts on Bloomberg Surveillance, any 0:00:30.240 --> 0:00:33.800 Credit Bank chief US Economists, Good morning to hum the 0:00:33.880 --> 0:00:37.639 trade happy talk ending as quickly as it started. How 0:00:37.640 --> 0:00:39.720 do you get any clarity on the direction of travel 0:00:39.720 --> 0:00:41.840 gun into the G twenty this month? No, we don't, 0:00:42.080 --> 0:00:45.400 and has been a constant feature of US China trade 0:00:45.400 --> 0:00:49.479 negotiations that we usually we frequently had positive news that 0:00:49.520 --> 0:00:51.720 we're being shot down a few days later, a few 0:00:51.720 --> 0:00:54.880 hours later by another member of the administration. So I mean, 0:00:54.920 --> 0:00:58.000 really it was not too surprising that this happens. I mean, 0:00:58.000 --> 0:00:59.560 it's always the timing that you never know. And the 0:00:59.600 --> 0:01:02.280 market still seems to be gotten on the wrong foot 0:01:02.280 --> 0:01:05.920 of that. So but but again, the the only the 0:01:05.959 --> 0:01:08.479 only announcement that we could believe. Then if we see 0:01:08.480 --> 0:01:10.640 the two presidents showing up in front of the camera 0:01:10.760 --> 0:01:14.480 was with as signed piece of of of of a contract. 0:01:14.600 --> 0:01:17.200 Is this back and forth, this apparent contradiction a feature 0:01:17.200 --> 0:01:20.120 of the negotiations or a buck well, it has been 0:01:20.120 --> 0:01:22.160 a constant feature, and I think it is the bark 0:01:22.200 --> 0:01:24.560 even so, I mean, on the you can say it 0:01:24.640 --> 0:01:28.280 is one of these negotiation tactics of the art of 0:01:28.319 --> 0:01:30.600 the deal, you know, as I said, good cop, bad 0:01:30.640 --> 0:01:33.920 cop type of thing, so that the end of the day, 0:01:33.959 --> 0:01:37.640 but the president can eventually be the good cup when 0:01:37.640 --> 0:01:42.000 he talks to the Chinese. But you cannot help that. 0:01:42.080 --> 0:01:46.640 There is also the lack of communication within the administration itself, 0:01:46.680 --> 0:01:50.200 so that there's not quite an agreement within the senior 0:01:50.240 --> 0:01:54.400 officials of how to interpret the latest moves and developments. 0:01:55.040 --> 0:01:58.520 The backgroupd to all of this is global deceleration for 0:01:58.560 --> 0:02:00.920 the global economy. The United State doesn't appear to be 0:02:00.960 --> 0:02:03.880 a feature of that thing. Will it be? Yes, it 0:02:03.920 --> 0:02:05.760 will be. And I mean it's pretty easy to explain 0:02:05.840 --> 0:02:08.560 why the US has not been a feature of that deceleration. 0:02:08.960 --> 0:02:12.400 I've been just trying to calculate a cyclically adjusted measure 0:02:12.520 --> 0:02:14.480 of the fiscal deficit. So if you look at the 0:02:14.480 --> 0:02:18.520 output gap and you look at the unemployment gap in 0:02:18.560 --> 0:02:21.600 his his historical correlations would have suggested that we should 0:02:21.680 --> 0:02:24.760 have a balanced budget at this point. Instead, we're almost 0:02:24.840 --> 0:02:28.800 running a four percent four percent of GDP deficit. This gap, 0:02:29.440 --> 0:02:32.239 which is a four percentage point deficit, is the largest 0:02:32.280 --> 0:02:34.520 that we see since the mid sixties when we had 0:02:34.520 --> 0:02:37.200 that Kennedy text Cards to Vietnam War, also when the 0:02:37.280 --> 0:02:40.040 unemployment rate was three point seven percent. So it's it's 0:02:40.120 --> 0:02:42.280 very easy to explain. It's just a question when the 0:02:42.320 --> 0:02:45.280 stimulus fates the impact of a similar fate. I think 0:02:45.280 --> 0:02:47.919 it's we've seen peak grows right now heading into slower 0:02:47.960 --> 0:02:50.680 grows next year. Were the huge news flow over the weekend, 0:02:50.760 --> 0:02:52.440 I read a number of things, John. One of the 0:02:52.440 --> 0:02:55.400 things I read was the chancel of the chequer, Hammond 0:02:55.480 --> 0:02:57.920 and austerity, and there's a whole different twist on that 0:02:57.960 --> 0:03:00.639 in Europe and particularly in the United Kingdom. Of harm 0:03:00.720 --> 0:03:03.760 is that the surprise of this election and into the 0:03:03.800 --> 0:03:08.560 presidential campaign is we'll have a discussion of austerity into 0:03:08.600 --> 0:03:11.840 two thousand twenty and far more into two thousand twenty 0:03:11.919 --> 0:03:14.440 one and two thousand. I can't believe I'm saying two 0:03:14.480 --> 0:03:18.200 thousand twenty two, John, I didn't. That's a long ways 0:03:18.200 --> 0:03:21.640 away coming around. It's coming around, coming around. Are we 0:03:21.639 --> 0:03:26.040 going to have an American austerity discussion? No, No, I 0:03:26.080 --> 0:03:30.960 think we should have, and I mean austerity sounds sounds harsh, 0:03:31.000 --> 0:03:35.520 but but again, we we are having a economy running 0:03:35.600 --> 0:03:38.680 at at full capacity. Um. And as he said that 0:03:38.800 --> 0:03:40.760 the deficit should be much better, maybe you should even 0:03:40.840 --> 0:03:43.600 run a surplus. But really the talk right now is, um, 0:03:43.840 --> 0:03:48.600 if Republicans should keep the majority in Congress in both chambers. Um, 0:03:48.680 --> 0:03:51.160 there maybe talk about another tax cut, right, I mean, 0:03:51.320 --> 0:03:54.000 maybe there was just an election campaign, but they're they're 0:03:54.040 --> 0:03:56.400 talking about more tax cuts. And then there is a 0:03:56.440 --> 0:03:59.280 talk about if if, if Democrats win the House, about 0:03:59.320 --> 0:04:02.040 an infrastructure project. I mean, I honestly think that neither 0:04:02.080 --> 0:04:04.480 of that will happen, but the debate is going in 0:04:04.520 --> 0:04:06.960 the direction of even more stimulus. I want to continue 0:04:07.000 --> 0:04:09.360 the conversation on the midterms of just a moment, let's 0:04:09.360 --> 0:04:11.960 talk about the budget deficit just quickly. You mentioned this 0:04:12.000 --> 0:04:15.680 comparison to the nineteen sixties at four percent GDP. Just 0:04:15.680 --> 0:04:17.719 looking at the budget deficit over the last ten years, 0:04:17.800 --> 0:04:20.240 it's pretty clear that we have hit that level before 0:04:20.279 --> 0:04:23.359 and multiple times. And stay there. What's the nineteen sixties 0:04:23.360 --> 0:04:25.680 comparison really about harm. Just explain that a little bit more. 0:04:26.440 --> 0:04:30.080 The comparison is about is cyclically adjusted deficits, So where 0:04:30.080 --> 0:04:35.000 the deficit should be given the state of the economy, 0:04:35.080 --> 0:04:37.839 and where the deficit actually is right, So that is 0:04:37.839 --> 0:04:40.800 the stimulus over and above what is needed by the economy, 0:04:40.800 --> 0:04:42.960 if you want, right and this is right now the 0:04:42.960 --> 0:04:45.400 biggest that we have seen since the Thank you. It's 0:04:45.400 --> 0:04:47.800 not it's not the absolute deficit, to be clear, It's 0:04:47.839 --> 0:04:49.800 just important to clarify that point. Harm, Thank you, And 0:04:49.880 --> 0:04:51.880 let's talk about the mid terms. Then what is your 0:04:51.920 --> 0:04:55.080 base case. Where the base case has to be that 0:04:55.080 --> 0:04:58.400 that we see a split Congress, that the Democrats take 0:04:58.440 --> 0:05:01.160 the House. But I would like to emphasize, and I 0:05:01.720 --> 0:05:04.440 wouldn't be surprised if Tom talks about Monte Carlo stimulations 0:05:04.480 --> 0:05:09.719 a bit later, um that there is a strong um 0:05:09.800 --> 0:05:14.000 or non non negligible chance that Republicans actually do keep 0:05:14.040 --> 0:05:16.880 the House, because simply if you just look at jerrymandering 0:05:16.920 --> 0:05:19.960 and all this, I do think that the Democrats need 0:05:19.960 --> 0:05:22.480 to win the popular vote in the House elections by 0:05:22.480 --> 0:05:25.480 more than five percentage points. And right now, if you 0:05:25.520 --> 0:05:27.760 look at the latest polls, the advantage is somewhere between 0:05:27.800 --> 0:05:29.880 seven and eight. So we are once again in the 0:05:29.960 --> 0:05:33.479 surrounding area area where where there is a chance that 0:05:33.520 --> 0:05:35.440 Republicans keep the House. But again, if I have to 0:05:35.480 --> 0:05:38.240 pick a side, I would not bet against the polls 0:05:38.480 --> 0:05:40.680 that Democrats win it. But again we should also not 0:05:40.720 --> 0:05:43.480 underestimate the chance that Republicans keep everything. Well, a lot 0:05:43.480 --> 0:05:46.479 of people tom are worried about the scenario that the 0:05:46.560 --> 0:05:54.279 political surprise materialize. It. Two things surprised people, not just 0:05:54.320 --> 0:05:56.839 the outcome, but the outcome of the outcome. And it 0:05:56.880 --> 0:06:00.880 wasn't just the President Trump was just the President Trump one. 0:06:01.040 --> 0:06:03.880 It was that what people expected to happen if President 0:06:03.920 --> 0:06:06.719 Trump one did not happen. The economy didn't roll over, 0:06:06.839 --> 0:06:10.680 markets didn't roll over something the York Times. So let's 0:06:10.680 --> 0:06:13.800 talk about the expected outcome and the outcome of the outcome. 0:06:14.080 --> 0:06:17.480 Can we just challenge the idea of what happens if 0:06:17.520 --> 0:06:20.279 the base case materials can't And you're the German here 0:06:20.880 --> 0:06:25.960 is he younger can't he's on, So we should forecast 0:06:26.000 --> 0:06:29.240 our forecast. My teacher and psychology said, you can't get 0:06:29.240 --> 0:06:32.160 a CE and I got a quality D when I 0:06:32.240 --> 0:06:35.880 studied car'd the outcome of the outcome go Yeah, and 0:06:35.880 --> 0:06:38.240 again we should forecast or forecast mistake, right, is that 0:06:38.279 --> 0:06:47.960 basically what you're asking. Um. My view is that the 0:06:48.080 --> 0:06:52.360 economy ultimately takes over, and and that is as we 0:06:52.440 --> 0:06:54.520 talked earlier, that we see a grow slow down. I 0:06:54.560 --> 0:06:57.839 think that is the dominating topic of two thousand nineteen. Yes, 0:06:57.839 --> 0:07:01.039 there will be noise, maybe mentioned in all days, but 0:07:01.160 --> 0:07:04.560 by the economy is stronger than political John's good question. 0:07:04.680 --> 0:07:06.480 Let me give you the outcome of the outcome of 0:07:06.560 --> 0:07:10.040 the outcome, which is, if we get a bondle slowdown, 0:07:10.560 --> 0:07:14.560 does it take the gains of the outcome outcome from 0:07:14.600 --> 0:07:18.320 the guilded of the guilded age? Is the new slowdown 0:07:18.720 --> 0:07:22.000 really going to affect the broad middle class? Like when 0:07:22.120 --> 0:07:24.760 things go up, the guilded age makes it, but when 0:07:24.800 --> 0:07:27.640 things go down the outcome of the outcomes I'm going 0:07:27.680 --> 0:07:29.800 to the fourth power here now, the outcome of the 0:07:29.840 --> 0:07:33.200 outcome is a middle class gets hammered. Yes, that's usually 0:07:33.280 --> 0:07:38.800 the case, just enough that he answered ham fun helps 0:07:38.840 --> 0:07:40.960 do I guess from any credit? What a week ahead 0:07:40.960 --> 0:07:43.360 we got coming up? It's exciting, I said, I said 0:07:43.400 --> 0:07:47.120 to afterthoughts. She's so excited about the elections. I said, yeah, 0:07:47.120 --> 0:07:50.520 I'll get the elections and FED meeting, and it's just 0:07:50.840 --> 0:07:53.440 it's one of those magical weeks where it's just crazy. 0:07:53.640 --> 0:07:56.560 Is it fancy saying that this isn't your normal midterm 0:07:56.560 --> 0:07:59.600 election and it's got a kind of middle prominential vibe 0:07:59.640 --> 0:08:03.200 to it. I have the clearest memory of the evening 0:08:03.240 --> 0:08:07.480 in and the only media that was on when we 0:08:07.560 --> 0:08:10.560 figured it out with CBS and Dan Rather. Everybody else 0:08:10.560 --> 0:08:12.800 had gone back to programming, and it came out of 0:08:12.920 --> 0:08:15.680 essentially came out of nowhere. Is it like ninety four? 0:08:15.720 --> 0:08:18.720 You know, you don't know till Wednesday? But the answers, Yes, 0:08:19.000 --> 0:08:22.400 it's just and with all the cultural events and the 0:08:22.400 --> 0:08:26.960 two president's campaigning, it's really John, it's really exciting. Do 0:08:26.960 --> 0:08:28.920 you think this is because the president has just generated 0:08:28.920 --> 0:08:31.480 a whole lot more interested in politics? Yes? I think, 0:08:31.560 --> 0:08:34.800 you know, whatever anybody's politics. Yes, it is centered uh, 0:08:35.000 --> 0:08:38.920 uniquely around this unique president, There's no question about that. 0:08:39.000 --> 0:08:42.240 But just it was fun. This weekend reading, Harm mentioned 0:08:42.240 --> 0:08:45.240 the Monte Carlo that was Nate Silver INVE eight with 0:08:45.360 --> 0:08:51.760 a brilliant mathematical dissertation in English about independence. Each district 0:08:51.760 --> 0:08:56.200 does not independent statistically, there's some correlations which leads to 0:08:56.240 --> 0:08:58.720 should we go to the fifth power and outcome of 0:08:58.760 --> 0:09:02.040 the outcome of the outcome of you. Welcome. Luckily we've 0:09:02.080 --> 0:09:04.439 run out of time. Great to have harm hat and 0:09:04.480 --> 0:09:06.400 holds of any credit with us. This Monday morning, as 0:09:06.400 --> 0:09:11.199 we kick off a great week for you, We're in 0:09:11.240 --> 0:09:14.240 the Bloomberg Interactive Broker studios in New York and now 0:09:14.360 --> 0:09:17.480 joining us from Tehran. And this is incredibly timely with 0:09:17.520 --> 0:09:22.160 headlines a bit ago the United States Treasury says the 0:09:22.280 --> 0:09:27.120 US fully reimposes sanctions on Iran. The Treasury says, over 0:09:27.240 --> 0:09:31.600 seven persons under Iranian sanctions and joining us someone who 0:09:31.640 --> 0:09:35.440 has given us incredible service in Tehran, Golner Mountivolity, joins 0:09:35.520 --> 0:09:40.680 us right now. What will be the immediate reaction, Goldner 0:09:40.880 --> 0:09:44.600 in your Tehran to this new round of U S sanctions. 0:09:46.160 --> 0:09:49.240 I think people have known obviously since May that this 0:09:49.400 --> 0:09:53.319 was coming, and the timings and the wind down periods 0:09:53.360 --> 0:09:56.719 were announced in advance. So I think it's just been 0:09:56.840 --> 0:09:59.840 kind of this sort of creeping the sense that you know, 0:10:00.160 --> 0:10:02.760 this is something that was just going to happen, that 0:10:02.840 --> 0:10:05.680 they couldn't do. The Iranians themselves or the government couldn't 0:10:05.679 --> 0:10:09.839 do very much about um. You know, it's the sense 0:10:09.880 --> 0:10:14.560 of inevitability about the fact that these sanctions came into 0:10:14.640 --> 0:10:19.000 effect overnight. But of course people are very worried, they're fearful. 0:10:19.160 --> 0:10:22.839 There's a sense of resignation and exhaustion as well, because 0:10:22.880 --> 0:10:24.959 they've been here before and they thought they had a 0:10:25.000 --> 0:10:29.120 nuclear deal that had resolved the situation, and clearly it's 0:10:29.280 --> 0:10:31.839 it's you know, it's kind of gone backwards again for them. 0:10:32.559 --> 0:10:36.200 So many people have images or stereotypes of Persia and 0:10:36.240 --> 0:10:39.480 then around and then the newer around as well. Tehran 0:10:39.640 --> 0:10:43.880 is over fourteen million people. What does it actually do 0:10:44.400 --> 0:10:50.400 to business? Well, you know, here I speak to a 0:10:50.480 --> 0:10:53.440 lot of people in the private sector and people running 0:10:53.520 --> 0:10:58.680 small businesses, small to medium sized businesses, and something like this, 0:10:59.040 --> 0:11:04.400 does you know, tremendous or tremendous damished psychologically? You know, 0:11:04.520 --> 0:11:08.880 we know that the economy hates uncertainty and hates a 0:11:09.000 --> 0:11:11.880 sense of having no idea what's what's happening, what's going 0:11:11.920 --> 0:11:14.280 to happen from one day to the next. And when 0:11:14.280 --> 0:11:17.360 the currency here fluctuates as it has been doing over 0:11:17.400 --> 0:11:20.600 the past six months, in these kind of huge moves. 0:11:21.200 --> 0:11:23.960 Then from literally from one day to the next day, 0:11:24.080 --> 0:11:25.960 you don't know what you can do. You don't know 0:11:25.960 --> 0:11:28.040 whether you're combine and seeing. You don't know whether your 0:11:28.080 --> 0:11:30.200 supply is going to be able to sell you anything. 0:11:30.600 --> 0:11:32.920 You don't know whether you can keep your employees on 0:11:33.200 --> 0:11:35.600 for the next month. You know, there are small businesses 0:11:35.640 --> 0:11:39.080 here who haven't paid employees for months, or at least 0:11:39.120 --> 0:11:41.040 for the past three months. I know of at least 0:11:41.040 --> 0:11:44.000 one or two like that. These are small businesses. And 0:11:44.040 --> 0:11:47.320 the other thing is here the SMI community actually really 0:11:47.840 --> 0:11:51.160 needed the nuclear deal because in Europe a lot of 0:11:51.160 --> 0:11:53.760 the businesses that can work where they are are also 0:11:54.000 --> 0:11:56.760 s mmes because they don't need those huge levels of 0:11:56.840 --> 0:12:00.920 capital that the big you know, upper tier big international 0:12:01.040 --> 0:12:04.560 banks can't you know, still still can't get involved with 0:12:04.640 --> 0:12:07.840 in Iran. So that area is really going to be hurt. 0:12:08.080 --> 0:12:11.760 And you know, that sector is really important for graduates here. 0:12:12.240 --> 0:12:15.320 You know, Iran produces a huge amount of university graduate 0:12:15.679 --> 0:12:18.440 most of the women. So you know, it's it's a 0:12:18.480 --> 0:12:21.360 sad story, particularly for the middle class here. There is 0:12:21.400 --> 0:12:24.040 the stereotype of Tehran and Iran that doesn't quite meet 0:12:24.040 --> 0:12:28.200 the reality, specifically the education of the society, and got up, 0:12:28.280 --> 0:12:31.280 you talk up and bring up the issue of opportunities. 0:12:31.920 --> 0:12:34.000 Let's just talk about the Joint Comprehensive Plan of Action 0:12:34.000 --> 0:12:37.120 because it was a multilateral accord and the President and 0:12:37.160 --> 0:12:41.120 this Treasury has reimposed sanctions on Iran unilaterally. Does that 0:12:41.160 --> 0:12:43.400 make it different this time around? Or is the reality 0:12:43.440 --> 0:12:46.280 still the same on the ground. I actually think it 0:12:46.360 --> 0:12:48.800 makes I think it makes a big difference. I think 0:12:48.800 --> 0:12:52.080 if there's one area that many Iranians have taken comfort in, 0:12:52.360 --> 0:12:55.360 it's the fact that this is something that the United 0:12:55.400 --> 0:12:59.800 States has made an independence This is an independent decision, 0:13:00.040 --> 0:13:02.160 he said, You mean the latterly that's been made by 0:13:02.160 --> 0:13:04.960 the United States. They haven't had the Europeans on their side. 0:13:05.280 --> 0:13:07.840 Quite the opposite, the unit the the Europeans we know 0:13:08.160 --> 0:13:11.480 are still scrambling to try and get this special purpose 0:13:11.600 --> 0:13:15.320 vehicle fixed for Iran. And also China and Russia have 0:13:15.440 --> 0:13:18.120 spoken out and criticized the sanctions that we've had. These 0:13:18.120 --> 0:13:21.840 countries managed to get waivers out of the US Treasury, 0:13:21.920 --> 0:13:25.000 and I think that actually has a huge effect um 0:13:25.080 --> 0:13:29.480 to you know, psychologically, to some extent on on people. 0:13:29.559 --> 0:13:33.200 But the fact is in practical terms, the US dollar 0:13:33.400 --> 0:13:37.120 here is a man is a major gauge of confidence 0:13:37.200 --> 0:13:41.640 of people spending power. UM and and you know, the 0:13:41.679 --> 0:13:44.560 price of the dollar here has has skyrocketed over the 0:13:44.600 --> 0:13:48.880 past six months and that has a real tangible impact 0:13:48.960 --> 0:13:53.320 on people's day to day lives. It really cuts their 0:13:53.440 --> 0:13:57.520 spending power. And it's happened, you know, with speed. But 0:13:58.360 --> 0:14:01.439 you know, there is this sense that the United States 0:14:01.520 --> 0:14:07.160 is isolated in this decision that it's made and that 0:14:07.520 --> 0:14:11.000 you know, even Rahaney capitalized on this this morning when 0:14:11.040 --> 0:14:14.120 he said, we've managed to bring the European Europeans on 0:14:14.160 --> 0:14:17.839 that side on our side, and that's a huge him over. 0:14:18.679 --> 0:14:23.520 Thank you so much from Tehran? Did I you green 0:14:23.600 --> 0:14:26.960 with us as we consider the American economy and other 0:14:27.000 --> 0:14:31.400 things global as well? Megan, Uh, when do you get 0:14:31.400 --> 0:14:34.760 a better framework of what Q four is? You have 0:14:34.800 --> 0:14:36.400 to wait till the end of the quarter. Can you 0:14:36.440 --> 0:14:41.160 begin to really tell here? Well, you can start to 0:14:41.200 --> 0:14:44.080 see signals in the data early on, UM. I would 0:14:44.160 --> 0:14:46.840 ignore all the kind of now casts at this stage 0:14:46.880 --> 0:14:49.600 though it's just you early in the quarter. But for example, 0:14:49.720 --> 0:14:53.160 things like you know, new foreign orders are coming through 0:14:53.520 --> 0:14:56.120 much weaker in the I s m th redata, and 0:14:56.120 --> 0:14:58.720 that's just maybe trade it's starting to bay, so that's 0:14:58.760 --> 0:15:03.000 giving us some indie ocation things like slightly stronger wage growth, 0:15:03.000 --> 0:15:06.480 though partly you know, a base effect issue that's suggesting 0:15:06.520 --> 0:15:09.160 we're going to continue to get kind of incremental wage 0:15:09.280 --> 0:15:13.760 growth and and therefore an incremental acceleration of inflation. That 0:15:13.800 --> 0:15:15.960 helps give us a picture. But to really have a 0:15:15.960 --> 0:15:17.720 sense of kind of what the number is going to 0:15:17.800 --> 0:15:19.880 come in at for Q four, you've got to wait 0:15:19.920 --> 0:15:21.680 until a bit later in the quarter, like and what's 0:15:21.680 --> 0:15:24.320 the danger that the US economy stants to run hot? 0:15:26.840 --> 0:15:29.160 So I think it's actually pretty low. Um. You know, 0:15:29.280 --> 0:15:31.600 normally at this late stage in the business cycle, if 0:15:31.680 --> 0:15:34.040 you had the kind of fiscal stimulus that we've had 0:15:34.080 --> 0:15:37.320 in the US, you would expect the economy to overheat. 0:15:37.400 --> 0:15:39.480 But if you're looking at the data, the soft data 0:15:40.040 --> 0:15:44.200 all absolutely upork, so that suggests maybe the economy is overheating. 0:15:44.440 --> 0:15:47.200 If you look at the hard data, however, it's pretty 0:15:47.240 --> 0:15:51.600 decidedly lackluster. So things like retail sales, new bank loans, um, 0:15:51.800 --> 0:15:55.640 real wage growth even there, they're all looking pretty weak, 0:15:55.720 --> 0:15:58.920 and so that suggests there aren't actually any indicators in 0:15:59.000 --> 0:16:01.520 the hard data that we're about to overheat. So I 0:16:01.560 --> 0:16:03.560 think this business cycle is a bit different, just because 0:16:03.600 --> 0:16:05.840 it's a lot longer, because we've had so much central 0:16:05.840 --> 0:16:09.040 bank intervention. Um. So, you know, I would agree we're 0:16:09.040 --> 0:16:10.840 in the late stage as a business cycle, but we're 0:16:10.880 --> 0:16:13.840 not going to see the late stage surge in inflation 0:16:14.000 --> 0:16:16.640 or the overheating um for a while. I don't think 0:16:16.680 --> 0:16:18.360 so any reason to believe that the Federal Reserve is 0:16:18.360 --> 0:16:20.600 going to change course in terms of pace of right 0:16:20.680 --> 0:16:25.480 hikes anytime soon. Magan, No, I don't think so. Um. 0:16:25.520 --> 0:16:27.080 You know, I think a lot of investors of the 0:16:27.160 --> 0:16:29.440 teament the set turned a bit more hawkish when J. 0:16:29.600 --> 0:16:31.880 Pale came out that he thought we were still pretty 0:16:31.880 --> 0:16:33.840 far away from the neutral rate, and that's suggested we 0:16:33.840 --> 0:16:35.680 could hike a lot more. I think that's already baked 0:16:35.680 --> 0:16:39.120 into the assumptions. Um. I do think that the set 0:16:39.160 --> 0:16:42.880 is constrained, however, no matter what happens with the ten 0:16:42.960 --> 0:16:47.200 year yields. So if the yield curve flattens, which I expect, actually, 0:16:47.280 --> 0:16:50.000 then the set's gonna feel really constrained in its hikes 0:16:50.200 --> 0:16:52.520 because it doesn't want to invert the yield curve. If 0:16:52.520 --> 0:16:55.680 the yield deepens and the tenure pops up as some 0:16:55.760 --> 0:16:58.840 people expect, then that actually has the tenure is a 0:16:58.840 --> 0:17:01.640 heavyweighting and most fine anential conditions in the season. I 0:17:01.720 --> 0:17:03.320 think that's wrong. I think we should learn how to 0:17:03.320 --> 0:17:05.640 construct them better. But in the meantime, the FED will 0:17:05.640 --> 0:17:09.520 see that financial conditions are tightening significant quently and they'll 0:17:09.520 --> 0:17:12.400 be constrained then too. So either way, the FED has 0:17:12.400 --> 0:17:14.879 a pretty gradual path seek in and I think that 0:17:15.160 --> 0:17:17.879 you know, this suggests they're going to continue along that well, 0:17:18.040 --> 0:17:23.720 Mega Green, what is the the future of investment that 0:17:23.800 --> 0:17:27.560 you see? One of the themes last week was really 0:17:27.600 --> 0:17:31.840 beginning to analyze use of cash share buybacks, cash versus 0:17:32.000 --> 0:17:36.639 actually spending it on tangible things. I don't even know 0:17:36.640 --> 0:17:38.600 how that works in the service sector. But are we 0:17:38.640 --> 0:17:43.520 seeing investment? We're not really. We started to see some 0:17:43.640 --> 0:17:47.159 investment and it came through and capex spending at the 0:17:47.240 --> 0:17:49.920 turn of the year off the back of the tax bill, 0:17:50.040 --> 0:17:53.040 so some firms were incentivized spring forward some of their 0:17:53.080 --> 0:17:56.480 capex spending um and then we saw that stop. And 0:17:56.840 --> 0:18:00.000 you know, when I speak to FED regional presidents who 0:18:00.040 --> 0:18:01.880 spend all their time going out and talking to firms 0:18:01.920 --> 0:18:05.040 and their regions. Um, they'll say that companies are telling 0:18:05.080 --> 0:18:07.560 them that they were thinking about investing, but actually all 0:18:07.560 --> 0:18:10.480 of this uncertainty around trade is made them decide, but 0:18:10.560 --> 0:18:12.600 they're just going to delay and differ. So I think 0:18:12.680 --> 0:18:16.119 unfortunately trade it kind of offset the benefits of the 0:18:16.160 --> 0:18:18.719 tax bill in terms of investment. So we're not seeing 0:18:18.840 --> 0:18:22.120 much indication that we're getting this kind of surgeon investment 0:18:22.200 --> 0:18:25.119 that lots of people were hoping for. Yeah, John, I 0:18:25.119 --> 0:18:28.520 think this is just critical. It's really like new administration 0:18:28.600 --> 0:18:31.560 new thing. The administration is very bullish on a supplied 0:18:31.600 --> 0:18:35.439 side response to the fiscal stimulus. They believe that you 0:18:35.440 --> 0:18:39.320 can get really strong output growth without the accompanying inflation 0:18:39.359 --> 0:18:41.199 that some people might expect to come with it. And 0:18:41.200 --> 0:18:43.040 they expect that because they think that a lot of 0:18:43.080 --> 0:18:46.760 this fiscal stimulus is going to go into investment, and 0:18:47.000 --> 0:18:48.520 if it doesn't happen, Tom, they're going to get a 0:18:48.560 --> 0:18:53.080 very different economy than the one day they expect. It's 0:18:53.119 --> 0:18:55.359 just there and it's it's that moving. Megan, do you 0:18:55.440 --> 0:19:01.040 have a statistic for Q four and Q one GDP? Yeah, so, 0:19:01.119 --> 0:19:03.399 I you know Q three US three point five. I 0:19:03.400 --> 0:19:06.240 think three percent growth and Q four would be fantastic. 0:19:06.480 --> 0:19:08.199 I think it might come in a bit lower than that, 0:19:08.359 --> 0:19:11.560 and I think similar So the best is behind us. 0:19:11.600 --> 0:19:14.440 I think UM close to the physical stimulus that we've 0:19:14.440 --> 0:19:16.320 had coming down the line hit in the first three 0:19:16.400 --> 0:19:19.000 quarters of this year, and we'll peter out until the 0:19:19.080 --> 0:19:21.040 end of next year. And then the real question is 0:19:21.359 --> 0:19:23.800 what is going to happen in terms of physical stimulus 0:19:23.880 --> 0:19:26.040 UM from then on? Are we going to hit thecial 0:19:26.080 --> 0:19:28.040 cliff or will the government re up? And that would 0:19:28.080 --> 0:19:31.040 depend entirely on the midterm election. Meggie Green with this thrill, 0:19:31.080 --> 0:19:36.840 she's with this with manual life. Jared Bernstein, who was 0:19:36.920 --> 0:19:40.280 Economic councilor to Vice President Biden, but far more than that, 0:19:40.880 --> 0:19:43.800 the liberal in Washington that conservatives were forced to read 0:19:43.840 --> 0:19:49.000 at gunpoint over decades, on our job dynamics, Jared, I 0:19:49.040 --> 0:19:51.760 wanted to ask you a question I asked earlier this morning, 0:19:52.400 --> 0:19:56.160 which is, if we have a make America Great against surge, 0:19:57.040 --> 0:19:59.919 and we all understand that those gains went to the 0:20:00.040 --> 0:20:04.240 guilded of the Gilded Age, if we get a slow down, 0:20:05.400 --> 0:20:09.280 do the disadvantages of a slowdown come from those that 0:20:09.320 --> 0:20:12.600 are gilded or is it asymmetric where they come from 0:20:12.600 --> 0:20:17.440 the broad middle class? Which is it? At least over 0:20:17.480 --> 0:20:20.399 the last few decades, it's been pretty asymmetric, and that 0:20:20.640 --> 0:20:23.479 the folks at the very top of the scale, in 0:20:23.600 --> 0:20:26.880 part because their fortunes don't rise and fall as much 0:20:27.280 --> 0:20:30.720 on the job market, have been pretty insulated from the 0:20:30.800 --> 0:20:34.320 upsidegrounds of the business cycle. Middle and lower income folks 0:20:34.320 --> 0:20:38.080 have benefited disproportionately from the very low unemployment rates we've had, 0:20:38.080 --> 0:20:40.880 So if that reverted will take the hit. What would 0:20:41.040 --> 0:20:45.720 Vice President Biden do? You worked with a gentleman, he 0:20:45.760 --> 0:20:47.840 would be there in twenty four hours to go to 0:20:47.920 --> 0:20:51.360 a campaign. He's being quiet for all the Biden reasons. 0:20:51.359 --> 0:20:54.040 I get that, But what would he say right now 0:20:54.080 --> 0:20:59.800 in terms of the final message democrats need. I think 0:21:00.080 --> 0:21:02.560 he would say is that, you really know, one of 0:21:02.600 --> 0:21:04.639 his themes has always been Who's got your back? And 0:21:04.680 --> 0:21:06.520 he's really looked at that from the perspective of the 0:21:06.520 --> 0:21:09.399 middle class, from the perspective of working people from union 0:21:09.840 --> 0:21:13.040 and I really think I believe he feels that today's government, 0:21:13.200 --> 0:21:17.040 particularly the Conservative majority, simply doesn't have the backs of 0:21:17.160 --> 0:21:21.160 middle and lower class, working class folks. And he'd think 0:21:21.200 --> 0:21:25.359 about policies that would steer more of the growth their way. 0:21:26.000 --> 0:21:30.800 Jared Burns Bernstein, just to broaden the conversation, maybe just 0:21:30.880 --> 0:21:34.280 taken the economies of Asia if you don't mind, Do 0:21:34.359 --> 0:21:39.680 you have any thoughts as to who's got the back 0:21:40.040 --> 0:21:49.679 of the major economies of Asia, and I'm thinking Australia, Singapore, Malaysia, Indonesia. 0:21:49.720 --> 0:21:52.720 Did they still feel that the United States has their back? 0:21:54.520 --> 0:21:56.840 I would suspect that they don't, or at least that 0:21:56.920 --> 0:22:00.720 the American administration, the Trump administration to than have their back. 0:22:00.760 --> 0:22:03.439 I mean, this is not exactly breaking news, but this 0:22:03.480 --> 0:22:07.400 is one of the most protectionist administrations we've seem I 0:22:07.440 --> 0:22:10.359 think what they would probably look at it, and it 0:22:10.600 --> 0:22:14.639 is the fact that global trade flows remain strong, and 0:22:15.200 --> 0:22:18.920 in fact, if anything, the US trade deficit has gotten 0:22:18.920 --> 0:22:22.280 worse because our dollars strong on a relative growth rates 0:22:22.280 --> 0:22:24.760