1 00:00:00,080 --> 00:00:02,920 Speaker 1: Brought you by Bank of America, Mary Lynch. Investing in 2 00:00:03,000 --> 00:00:07,840 Speaker 1: local communities, economies and a sustainable future. That's the power 3 00:00:08,080 --> 00:00:12,360 Speaker 1: of global connections. Mary Lynch, Pierce Fenner and Smith Incorporated 4 00:00:12,760 --> 00:00:26,400 Speaker 1: Member s I p C. Welcome to the Bloomberg Surveillance Podcast. 5 00:00:26,440 --> 00:00:29,920 Speaker 1: I'm Tom Keene with David Gura. Daily we bring you 6 00:00:29,960 --> 00:00:34,800 Speaker 1: insight from the best of economics, finance, investment, and international relations. 7 00:00:35,240 --> 00:00:40,760 Speaker 1: Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com, 8 00:00:40,800 --> 00:00:47,839 Speaker 1: and of course, on the Bloomberg. John Norman is the 9 00:00:47,840 --> 00:00:50,040 Speaker 1: head of Fact and Commodities and International Rates Research at 10 00:00:50,080 --> 00:00:52,360 Speaker 1: JP Morgan joins us from our studios in London. John, 11 00:00:52,400 --> 00:00:55,120 Speaker 1: great to speak with you once again. Let me start 12 00:00:55,120 --> 00:00:58,360 Speaker 1: by asking about the fallout from the effects of the 13 00:00:58,400 --> 00:01:00,720 Speaker 1: election in France last weekend. When you look at currencies, 14 00:01:00,720 --> 00:01:02,160 Speaker 1: when you look look at the f X space and 15 00:01:02,240 --> 00:01:04,560 Speaker 1: you're particularly on the heels of that, what kind of 16 00:01:04,600 --> 00:01:06,559 Speaker 1: a role has it played here over the last five days. 17 00:01:07,520 --> 00:01:10,240 Speaker 1: So I think, um, the second round vote didn't have 18 00:01:10,280 --> 00:01:12,200 Speaker 1: much of an impact on currencies because it was sort 19 00:01:12,200 --> 00:01:14,840 Speaker 1: of a done deal after first round elections that background 20 00:01:14,840 --> 00:01:17,000 Speaker 1: would be the president. So you did see a move 21 00:01:17,080 --> 00:01:19,679 Speaker 1: up between first round and second round. It doesn't surprise 22 00:01:19,680 --> 00:01:21,680 Speaker 1: me that second round didn't really deliver any And you 23 00:01:21,720 --> 00:01:24,479 Speaker 1: follow through when you look at at Washington and all 24 00:01:24,520 --> 00:01:27,120 Speaker 1: that's happening. There very little happening on the Hill with 25 00:01:27,160 --> 00:01:29,399 Speaker 1: regard to policy, very little happening with tax reform, very 26 00:01:29,400 --> 00:01:31,920 Speaker 1: little happening with healthcare reform. And when you look at 27 00:01:31,920 --> 00:01:34,639 Speaker 1: the legislative calendar, it's very compressed. There, I think thirty 28 00:01:34,640 --> 00:01:38,360 Speaker 1: plus days left for Congress to do something. What effect 29 00:01:38,400 --> 00:01:40,400 Speaker 1: is that going to have? Do you think what sort 30 00:01:40,400 --> 00:01:42,560 Speaker 1: of likelihood are you pricing in there for for some 31 00:01:42,600 --> 00:01:45,880 Speaker 1: sort of tax reform package or or or or healthcare 32 00:01:45,880 --> 00:01:49,680 Speaker 1: reform package. So I put very low likelihood on on 33 00:01:49,680 --> 00:01:51,960 Speaker 1: both of these. I just think they're they're complicated issues, 34 00:01:52,000 --> 00:01:54,360 Speaker 1: and you have essentially a divided government and that the 35 00:01:54,360 --> 00:01:57,000 Speaker 1: Republican Party is is not a cohesive block, and there's 36 00:01:57,560 --> 00:02:00,640 Speaker 1: uh not a similar view on these policy is used 37 00:02:00,640 --> 00:02:04,600 Speaker 1: between the White House and and Congress. So where our 38 00:02:04,640 --> 00:02:07,760 Speaker 1: forecast has been changed at all as a function of 39 00:02:07,800 --> 00:02:10,760 Speaker 1: the fiscal promises and um and some of these ambitions, 40 00:02:11,360 --> 00:02:12,639 Speaker 1: But at the same time, you know, the bar is 41 00:02:12,639 --> 00:02:15,000 Speaker 1: pretty low if if anything does happen on the fiscal side. 42 00:02:15,360 --> 00:02:17,960 Speaker 1: It comes at a time and the economy is at 43 00:02:18,000 --> 00:02:19,840 Speaker 1: full employment in our minds, and that just gives more 44 00:02:19,840 --> 00:02:21,880 Speaker 1: of an upward bias towards rates and and and to 45 00:02:21,919 --> 00:02:24,480 Speaker 1: the dollar. Has your outlook for action and Wahington changed 46 00:02:24,680 --> 00:02:26,560 Speaker 1: at all with all of the distractions, with the latest 47 00:02:26,560 --> 00:02:29,320 Speaker 1: news here about the the FBI director, have have you 48 00:02:29,400 --> 00:02:31,400 Speaker 1: changed anything when it comes to your forecast? No, no, 49 00:02:31,520 --> 00:02:33,800 Speaker 1: we haven't, because actually we we started out quite skeptical 50 00:02:33,840 --> 00:02:36,200 Speaker 1: that this administration would achieve much on the on the 51 00:02:36,200 --> 00:02:38,680 Speaker 1: economic policy side. And that's the view we've had essentially 52 00:02:38,720 --> 00:02:40,760 Speaker 1: since the election because we we just never really thought 53 00:02:40,800 --> 00:02:43,280 Speaker 1: of Trump as a Republican and we sort of acknowledged 54 00:02:43,320 --> 00:02:47,040 Speaker 1: that the Republican Party itself is isn't very cohesive between 55 00:02:47,040 --> 00:02:50,080 Speaker 1: the various camps. So other people may be downgrading their 56 00:02:50,120 --> 00:02:53,880 Speaker 1: expectations given all of the distractions that have emerged under 57 00:02:53,880 --> 00:02:57,079 Speaker 1: this new administration, But we started out quite skeptical several 58 00:02:57,120 --> 00:02:59,600 Speaker 1: months ago. You have in your your latest note here 59 00:02:59,600 --> 00:03:01,359 Speaker 1: that May is living up to its reputation as a 60 00:03:01,480 --> 00:03:04,519 Speaker 1: as a graveyard for high beta effects. Why why is 61 00:03:04,560 --> 00:03:07,080 Speaker 1: that the case? Why is May always a dog of 62 00:03:07,080 --> 00:03:11,119 Speaker 1: a month. People will tell you it's because clients don't 63 00:03:11,160 --> 00:03:13,400 Speaker 1: like to hold positions into the summer. I don't think 64 00:03:13,400 --> 00:03:16,240 Speaker 1: there's any empirical proof of that. The only empirical proof 65 00:03:16,280 --> 00:03:19,520 Speaker 1: is that there's some um tendency of markets to sell off, 66 00:03:19,520 --> 00:03:22,320 Speaker 1: whether it's equities or high occurrencies in in May. And 67 00:03:22,360 --> 00:03:25,680 Speaker 1: that's kind of repeating itself. Help me with the commodity 68 00:03:25,720 --> 00:03:27,720 Speaker 1: space right now. I mentioned gold at the top. Let's 69 00:03:27,760 --> 00:03:30,640 Speaker 1: move move passcal to other commodities, and a number of 70 00:03:30,639 --> 00:03:32,280 Speaker 1: guests we've talked to over the last week you've told 71 00:03:32,320 --> 00:03:34,760 Speaker 1: us that the big motivators here is still what's going 72 00:03:34,760 --> 00:03:37,240 Speaker 1: on in China. When you look at commodities in particular, 73 00:03:37,280 --> 00:03:39,720 Speaker 1: what do you see as as a driving force. So 74 00:03:39,760 --> 00:03:42,800 Speaker 1: there's two and they affect sectors in different ways. So 75 00:03:43,400 --> 00:03:46,440 Speaker 1: China and the credit tightening that that economy is experiencing 76 00:03:46,520 --> 00:03:48,680 Speaker 1: right now is is the number one driver of the 77 00:03:48,720 --> 00:03:53,320 Speaker 1: base medals, whereas expectations around this OPEC summit on the 78 00:03:53,400 --> 00:03:55,640 Speaker 1: number one driver of oils. So I think you can 79 00:03:55,720 --> 00:03:59,680 Speaker 1: have diversions between those two sectors of a commodity index 80 00:03:59,680 --> 00:04:03,000 Speaker 1: depending whether you think um OPEC is gonna tighten and 81 00:04:03,000 --> 00:04:05,200 Speaker 1: and how much longer you believe this, this credit crunch 82 00:04:05,240 --> 00:04:07,280 Speaker 1: of China is going to persist. Do you think that 83 00:04:07,320 --> 00:04:09,240 Speaker 1: there will be a continuation of that of that agreement? 84 00:04:09,240 --> 00:04:10,880 Speaker 1: I wonder sort of what your your outlook is with 85 00:04:10,960 --> 00:04:12,720 Speaker 1: the future of OPEC. I remember a few months back 86 00:04:12,720 --> 00:04:15,240 Speaker 1: we were debating the efficacy of where the importance of 87 00:04:15,320 --> 00:04:18,960 Speaker 1: continued importance of OPEC going forward. Has it re established 88 00:04:19,040 --> 00:04:22,000 Speaker 1: that with this production freeze. I think it's gonna be 89 00:04:22,080 --> 00:04:27,360 Speaker 1: rolled simply because the the budgetary incentives that created consensus 90 00:04:27,360 --> 00:04:29,960 Speaker 1: around uh AN agreement last November is still in place, 91 00:04:30,080 --> 00:04:33,880 Speaker 1: meaning countries just can't um generate sufficient revenue if if 92 00:04:33,880 --> 00:04:36,800 Speaker 1: oil is below fifty dollars a barrel, and and that 93 00:04:36,880 --> 00:04:38,400 Speaker 1: to me is the number one reason to think that 94 00:04:38,440 --> 00:04:41,600 Speaker 1: this deal will be extended. It's right to be skeptical 95 00:04:41,600 --> 00:04:44,159 Speaker 1: about the longevity of a deal because history suggests that 96 00:04:44,240 --> 00:04:47,920 Speaker 1: these accords only restrained production for a year and a 97 00:04:48,000 --> 00:04:50,200 Speaker 1: half two years. But at the same time, we're still 98 00:04:50,400 --> 00:04:53,120 Speaker 1: early in this process. The first accord was only five 99 00:04:53,160 --> 00:04:55,320 Speaker 1: months ago, so I don't think it's now is the 100 00:04:55,320 --> 00:04:57,440 Speaker 1: time to be skeptical. I'd be much more skeptical around 101 00:04:57,440 --> 00:04:58,839 Speaker 1: the turn of the year. John I think my co 102 00:04:58,920 --> 00:05:01,760 Speaker 1: host has ambled into this video. There with you, Tom Keane, 103 00:05:02,520 --> 00:05:04,360 Speaker 1: on the tail end of your trip to London, tail 104 00:05:04,480 --> 00:05:08,240 Speaker 1: en finishing up, we'll see what Girl Fair will be 105 00:05:08,279 --> 00:05:12,000 Speaker 1: in New York on Monday. Really looking forward to that. Uh, David, 106 00:05:12,080 --> 00:05:14,839 Speaker 1: we welcome all of you worldwide our studios in London. 107 00:05:15,400 --> 00:05:18,719 Speaker 1: I drove by, David our new building. It is really 108 00:05:18,720 --> 00:05:23,279 Speaker 1: getting occupyancy or whatever the world we're getting like close, 109 00:05:23,320 --> 00:05:26,760 Speaker 1: it's just gorgeous over by Mansion House. Went by that 110 00:05:26,839 --> 00:05:31,200 Speaker 1: in the surveillance limo last night, Globerg Surveillance Worldwide in London, 111 00:05:31,240 --> 00:05:33,799 Speaker 1: in New York where this John Norman of JP Morgan 112 00:05:33,839 --> 00:05:37,040 Speaker 1: at the time that we've got left with you, John, 113 00:05:37,080 --> 00:05:39,240 Speaker 1: I I really want to talk about the spirit of 114 00:05:39,240 --> 00:05:42,400 Speaker 1: this London. I was really struck yesterday by Governor Kearney 115 00:05:42,480 --> 00:05:44,839 Speaker 1: doing as he's supposed to do as a public of Well, 116 00:05:44,880 --> 00:05:48,480 Speaker 1: you know, we may see a slowdown. I see cranes 117 00:05:48,880 --> 00:05:52,040 Speaker 1: still all over London. It's you know, it's it's a 118 00:05:52,040 --> 00:05:55,400 Speaker 1: different kind of it's a construction project in New York City. 119 00:05:55,560 --> 00:05:58,000 Speaker 1: I don't know if you've enjoyed crosstown traffic in New 120 00:05:58,040 --> 00:06:02,159 Speaker 1: York City recently that's the sport. Is there still a 121 00:06:02,200 --> 00:06:06,719 Speaker 1: boom going on in London? There's a building boom in London? 122 00:06:07,920 --> 00:06:10,400 Speaker 1: First time on radio. Get closer to the mic comes right, 123 00:06:10,400 --> 00:06:13,240 Speaker 1: I'm here, okay, up against the mic. So there's there's 124 00:06:13,240 --> 00:06:16,719 Speaker 1: a building boom in place. Unclear that it's excessive relative 125 00:06:16,760 --> 00:06:19,800 Speaker 1: to the demand, because most of the analysis suggests that 126 00:06:19,839 --> 00:06:23,040 Speaker 1: the UK needs to generate about two households a year 127 00:06:23,640 --> 00:06:25,960 Speaker 1: or two hundred thousand new homes a year to keep 128 00:06:26,000 --> 00:06:28,239 Speaker 1: up with demand. I don't know. They wouldn't look around London, 129 00:06:28,279 --> 00:06:31,280 Speaker 1: you'd say that this is excessive. What kind of sterling 130 00:06:31,640 --> 00:06:33,240 Speaker 1: do we want? Or I guess I'd almost look at 131 00:06:33,240 --> 00:06:35,040 Speaker 1: euro sterling and that I guess there's a there's a 132 00:06:35,080 --> 00:06:38,679 Speaker 1: euro optimal for Germany, there's a euro optimal for France. 133 00:06:38,880 --> 00:06:42,919 Speaker 1: What is the sterling optimal for the United Kingdom? I 134 00:06:42,920 --> 00:06:45,040 Speaker 1: think it would be a rate that's actually lower than 135 00:06:45,080 --> 00:06:48,120 Speaker 1: it is now because the UK still runs let's put 136 00:06:48,120 --> 00:06:50,440 Speaker 1: it ten percent lower, because the UK still runs a 137 00:06:50,440 --> 00:06:54,880 Speaker 1: decent uh external deficit versus the rest of the world, 138 00:06:54,880 --> 00:06:57,360 Speaker 1: and it's going through a very challenging growth period until 139 00:06:57,360 --> 00:07:00,400 Speaker 1: there's some clarity around Brexit. So as the as Brexit 140 00:07:00,440 --> 00:07:03,200 Speaker 1: debate hangs over the economy. I think it justifies a 141 00:07:03,640 --> 00:07:06,760 Speaker 1: weaker currency. Actually, you know, I was asking Tommy yesterday 142 00:07:06,760 --> 00:07:08,560 Speaker 1: the degree to which as he walked around he saw 143 00:07:08,680 --> 00:07:11,120 Speaker 1: signs of this snap election which is coming up on 144 00:07:11,240 --> 00:07:12,840 Speaker 1: June the eighth, and and I think tom you said 145 00:07:12,880 --> 00:07:14,640 Speaker 1: that you were surprised at how little it was being 146 00:07:14,640 --> 00:07:17,560 Speaker 1: talked about her A few signs you saw, John Norman, 147 00:07:18,240 --> 00:07:19,920 Speaker 1: is this playing a big role going forward? Is this 148 00:07:20,000 --> 00:07:21,560 Speaker 1: kind of being seen as a as a done deal 149 00:07:21,560 --> 00:07:23,960 Speaker 1: of formality or or do you expect there to be Uh? 150 00:07:24,000 --> 00:07:25,200 Speaker 1: Do you expect this to take up more of the 151 00:07:25,200 --> 00:07:28,320 Speaker 1: conversation here as we approached that day. So I think 152 00:07:28,360 --> 00:07:32,600 Speaker 1: because um, this there were some expectations that a snap 153 00:07:32,600 --> 00:07:34,760 Speaker 1: election would be would be called, it's not. It's not 154 00:07:34,920 --> 00:07:38,240 Speaker 1: entirely a surprise, um. And also the main issue which 155 00:07:38,280 --> 00:07:39,880 Speaker 1: is being debated whether or not she will have a 156 00:07:40,040 --> 00:07:43,280 Speaker 1: May will have a stronger mandate and this will allow 157 00:07:43,320 --> 00:07:47,280 Speaker 1: her to negotiate incredibly with with the Europeans. That issue 158 00:07:47,360 --> 00:07:49,240 Speaker 1: is one that's going to play out over the course 159 00:07:49,280 --> 00:07:53,880 Speaker 1: of several years. So it may be an important victory 160 00:07:53,920 --> 00:07:56,280 Speaker 1: for her, but the macro results wouldn't be known for years. 161 00:07:56,280 --> 00:07:59,040 Speaker 1: That's why I don't think this is a significant market issue. 162 00:07:59,240 --> 00:08:03,000 Speaker 1: One final question, it is quiet out there, How do 163 00:08:03,080 --> 00:08:07,080 Speaker 1: you avoid losing money and FFX when it's quiet? Do 164 00:08:07,160 --> 00:08:10,000 Speaker 1: you just go away? No? I think you need to 165 00:08:10,040 --> 00:08:13,880 Speaker 1: avoid being highly exposed to carry, which is the same 166 00:08:14,640 --> 00:08:17,160 Speaker 1: explain that to our non carry audience. So the ideas 167 00:08:17,200 --> 00:08:19,720 Speaker 1: that when volatility is very low, generally investors like to 168 00:08:19,760 --> 00:08:22,560 Speaker 1: earn yield because they feel like there's very little that 169 00:08:22,600 --> 00:08:27,040 Speaker 1: couldn't you get into the exactly and since Paul has 170 00:08:27,080 --> 00:08:29,400 Speaker 1: been reverting, this is just one of the few, you know, 171 00:08:29,480 --> 00:08:33,880 Speaker 1: persistent UH patterns that we see in financial markets. Uh. 172 00:08:33,960 --> 00:08:35,800 Speaker 1: It's only a question of time before vall goes higher 173 00:08:35,800 --> 00:08:38,120 Speaker 1: and how your currencies go down. We'll play carry on 174 00:08:38,200 --> 00:08:40,679 Speaker 1: my wayward son as we got the hour as well 175 00:08:40,720 --> 00:08:43,680 Speaker 1: for John Norman. We need a little Kansas here in London. 176 00:08:43,760 --> 00:08:46,440 Speaker 1: John Norman, thank you so much. With Foreign Exchange with 177 00:08:46,559 --> 00:08:50,280 Speaker 1: JP Morgan, we particularly appreciate Mr Norman's attendance on the 178 00:08:50,920 --> 00:08:54,439 Speaker 1: Gura Keene tour. He was in New York recently. He 179 00:08:54,760 --> 00:08:57,600 Speaker 1: could have said he could have said no, David, but 180 00:08:57,679 --> 00:08:59,800 Speaker 1: he didn't know. He showed up, which is a good 181 00:08:59,800 --> 00:09:03,720 Speaker 1: thing very powerful with Roger Boodle. Mr Boodle will be 182 00:09:03,720 --> 00:09:09,080 Speaker 1: coming up as well. Should we be grandstanding and showboating today? David? Uh, 183 00:09:09,120 --> 00:09:12,960 Speaker 1: that is that joking with with why you went before 184 00:09:12,960 --> 00:09:15,080 Speaker 1: the show. You have some showboating going on in that 185 00:09:15,120 --> 00:09:17,760 Speaker 1: interview with with Lester Holt yesterday at President Trump saying 186 00:09:17,840 --> 00:09:21,160 Speaker 1: how former FBI director was doing too much of that. Uh. 187 00:09:21,360 --> 00:09:23,960 Speaker 1: Some critics saying that's the podfoll and the kettle black. Well, look, 188 00:09:24,000 --> 00:09:26,520 Speaker 1: well we'll look for some headlines off that. I believe 189 00:09:26,600 --> 00:09:29,560 Speaker 1: Mr Holton, NBC are giving it to today's show treatment. 190 00:09:29,720 --> 00:09:32,120 Speaker 1: This would be something new here in the coming minutes. 191 00:09:44,960 --> 00:09:47,840 Speaker 1: David Garay in New York, Tom Keene in London, and Tom, 192 00:09:47,880 --> 00:09:49,680 Speaker 1: I know that one of our favorite guests has joined 193 00:09:49,679 --> 00:09:53,760 Speaker 1: you there in the studios in our London bureau. Absolutely, 194 00:09:53,800 --> 00:09:56,280 Speaker 1: this is a joy. Roger Boodle and I want to 195 00:09:56,320 --> 00:09:58,600 Speaker 1: spend some time here because people go, okay, Roger Bootle, 196 00:09:58,600 --> 00:10:00,719 Speaker 1: we know he's gonna say, etcetera. Of him. He is 197 00:10:00,760 --> 00:10:04,319 Speaker 1: one of the most twisted paths in the United Kingdom economics, 198 00:10:04,320 --> 00:10:07,959 Speaker 1: with some real academic abilities out of Oxford his work 199 00:10:08,040 --> 00:10:11,600 Speaker 1: for years at HSBC and a lot of people would 200 00:10:11,600 --> 00:10:14,080 Speaker 1: have retired out and done whatever Roger Buddle does his 201 00:10:14,160 --> 00:10:17,920 Speaker 1: free time. He didn't. He went out and formed Capital Economics. 202 00:10:18,120 --> 00:10:23,040 Speaker 1: They won the exceptionally prestigious Wolfson Prize, a huge deal 203 00:10:23,080 --> 00:10:25,920 Speaker 1: when Capital Economics won that, and has moved on to 204 00:10:26,000 --> 00:10:30,320 Speaker 1: advising various and sundry conservative governments. Mr buddele joins us. 205 00:10:30,360 --> 00:10:33,560 Speaker 1: Now some of you may read his opinion as it 206 00:10:33,720 --> 00:10:37,720 Speaker 1: is in the Telegraph. How conservative is Prime Minister May? 207 00:10:37,840 --> 00:10:41,320 Speaker 1: What of the twenty eight flavors of conservative is the 208 00:10:41,360 --> 00:10:44,880 Speaker 1: prime Minister? Well, of course we didn't know. I think 209 00:10:44,920 --> 00:10:49,800 Speaker 1: the signs are she's not very conservative and interestingly she's 210 00:10:49,840 --> 00:10:54,240 Speaker 1: not pushing conservatism in her attempt to appeal to people 211 00:10:54,280 --> 00:10:57,520 Speaker 1: across the spectrum. The voters across the spectrum in Britain, 212 00:10:57,920 --> 00:11:00,160 Speaker 1: you know, she's much more popular than her p t 213 00:11:00,720 --> 00:11:03,920 Speaker 1: and the whole, the whole offer seems to be vote 214 00:11:03,960 --> 00:11:06,559 Speaker 1: for me, I'm Theresa May, not vote for me, I'm 215 00:11:06,559 --> 00:11:09,120 Speaker 1: a conservative prime minister. Well vote for me and Theresa 216 00:11:09,200 --> 00:11:11,120 Speaker 1: May and maybe the titles are done. In certain course 217 00:11:11,240 --> 00:11:16,600 Speaker 1: we saw that within the French election is well separate 218 00:11:16,679 --> 00:11:20,360 Speaker 1: out the Tory Party right now a year in what 219 00:11:20,640 --> 00:11:22,960 Speaker 1: almost a year on from from Brexit, isn't it. We 220 00:11:23,000 --> 00:11:26,360 Speaker 1: come up on one year anniversary. Yeah. Well, the Conservative 221 00:11:26,360 --> 00:11:28,520 Speaker 1: Party is split on a number of different issues. Of course, 222 00:11:28,520 --> 00:11:31,800 Speaker 1: it has been split on Brexit because large numbers of 223 00:11:31,840 --> 00:11:36,320 Speaker 1: Conservative MPs did not want the Brexit vote. Conservatives in 224 00:11:36,320 --> 00:11:40,400 Speaker 1: the country were pretty much not united, but overwhelmingly in 225 00:11:40,480 --> 00:11:44,040 Speaker 1: favor of Brexit. I think the real chasm in the 226 00:11:44,040 --> 00:11:46,640 Speaker 1: Conservative Party but it is between those people who would 227 00:11:46,800 --> 00:11:50,480 Speaker 1: describe themselves as essentially Thatcher Right also continue with the 228 00:11:50,559 --> 00:11:54,840 Speaker 1: legacy of Mrs Thatcher go further indeed on the one hand, 229 00:11:54,880 --> 00:11:57,800 Speaker 1: and on the other people who are more centrists. They 230 00:11:57,800 --> 00:12:01,360 Speaker 1: call themselves one nation tour is from Disraeli in the 231 00:12:01,440 --> 00:12:06,440 Speaker 1: nineteenth century, but more communitarian, less competition, less keen on 232 00:12:06,480 --> 00:12:10,040 Speaker 1: lower taxes. They probably rogers lost in translation because the 233 00:12:10,080 --> 00:12:12,640 Speaker 1: only thing David gern I know about Disraeli is we 234 00:12:12,679 --> 00:12:16,880 Speaker 1: love Disraeli gears a creaman air Clapton a few years ago. 235 00:12:16,960 --> 00:12:19,760 Speaker 1: David Gerrow jump in here, please, Roger, let me ask 236 00:12:19,760 --> 00:12:23,280 Speaker 1: you about post partisanship. The fact that we've seen in 237 00:12:23,360 --> 00:12:27,360 Speaker 1: France a winner who is from a new nascent political party. 238 00:12:27,800 --> 00:12:29,280 Speaker 1: Here in the US, it seems like the role of 239 00:12:29,320 --> 00:12:31,439 Speaker 1: party is being diminished as we look at the composition 240 00:12:31,440 --> 00:12:33,839 Speaker 1: of the House of Representatives, all the factions within the 241 00:12:33,880 --> 00:12:36,800 Speaker 1: Republican Party, and from what you're saying about Theresa May 242 00:12:37,000 --> 00:12:39,840 Speaker 1: in the Conservatives, there are we moving beyond party sort 243 00:12:39,840 --> 00:12:42,000 Speaker 1: of more globally than than just here in the US. 244 00:12:42,679 --> 00:12:45,480 Speaker 1: I think we probably are. And it's about time too. 245 00:12:46,000 --> 00:12:48,360 Speaker 1: And lots of people are bemoaning all this and saying 246 00:12:48,400 --> 00:12:51,680 Speaker 1: it's a shows some sort of crisis and democracy. I'd 247 00:12:51,760 --> 00:12:54,960 Speaker 1: rather think it shows the opposite. Actually, it's really pretty 248 00:12:55,000 --> 00:12:58,840 Speaker 1: healthy that we're seeing people coming from outside the conventional 249 00:12:58,880 --> 00:13:03,600 Speaker 1: party system and bending the rules, bending all the categories, 250 00:13:04,160 --> 00:13:06,800 Speaker 1: appealing directly to the people. Now, of course, it may 251 00:13:06,840 --> 00:13:10,120 Speaker 1: well be that there's going to be some pronounced disillusion, 252 00:13:10,760 --> 00:13:12,800 Speaker 1: either in the States or in France or Britain or 253 00:13:12,800 --> 00:13:15,360 Speaker 1: whatever with this new category of leader. I think that's 254 00:13:15,400 --> 00:13:17,079 Speaker 1: quite possible, and then we'll have to see how the 255 00:13:17,120 --> 00:13:19,240 Speaker 1: system reacts. But at the moment, I think this is 256 00:13:19,280 --> 00:13:22,120 Speaker 1: really pretty good. What role is the w T are 257 00:13:22,120 --> 00:13:25,160 Speaker 1: going to play here? In two thousand seventeen two eighteen, 258 00:13:25,200 --> 00:13:27,080 Speaker 1: I spoke with the Secretary of Commerce here in the US, 259 00:13:27,120 --> 00:13:28,960 Speaker 1: will Be Ross and it sounds like he has some 260 00:13:29,800 --> 00:13:32,440 Speaker 1: disdain for or disagreement with how it's run or how 261 00:13:32,440 --> 00:13:35,840 Speaker 1: it has been run. He wants there to be more enforcement, etcetera, etcetera. 262 00:13:35,880 --> 00:13:38,000 Speaker 1: And imagine you're dealing with the same issues there in 263 00:13:38,040 --> 00:13:39,720 Speaker 1: the UK. Is it going to take on a different shape? 264 00:13:39,720 --> 00:13:42,440 Speaker 1: Do you think? Well? I hope so, because if Britain 265 00:13:42,480 --> 00:13:45,160 Speaker 1: doesn't get a deal with the EU, and I think 266 00:13:45,200 --> 00:13:48,320 Speaker 1: there's a fair chance that that will happen, then it 267 00:13:48,360 --> 00:13:51,360 Speaker 1: will be relying on the w t O. And the 268 00:13:51,520 --> 00:13:54,240 Speaker 1: w t O has been a pretty moribund organization, sleepy 269 00:13:54,320 --> 00:13:56,440 Speaker 1: for quite some time. A lot of people in Britain 270 00:13:56,679 --> 00:13:59,520 Speaker 1: in the NO hope that Britain is going to reinvigorate it. 271 00:14:00,000 --> 00:14:01,760 Speaker 1: All that may well happen, but actually Britain is going 272 00:14:01,800 --> 00:14:05,880 Speaker 1: to be dependent on it, so it's pretty important. Well, 273 00:14:05,880 --> 00:14:08,440 Speaker 1: then let's let's do this quickly and then come back 274 00:14:08,880 --> 00:14:12,760 Speaker 1: Roger if we we could. If Britain quote unquote doesn't 275 00:14:12,760 --> 00:14:16,280 Speaker 1: get a deal, does the price of pol Roge champagne 276 00:14:16,320 --> 00:14:20,920 Speaker 1: go up? I don't know, and no one knows, because 277 00:14:20,960 --> 00:14:25,240 Speaker 1: we don't know whether we're going to impose tariffs on Polar, Roger, 278 00:14:25,400 --> 00:14:28,400 Speaker 1: Champagne and indeed everything else. This is they preticularly weren't 279 00:14:31,200 --> 00:14:33,400 Speaker 1: some inteller the duty free sharping. By the way, it's 280 00:14:33,440 --> 00:14:36,520 Speaker 1: something much better than that champagne, which is English sparkling wine. 281 00:14:36,520 --> 00:14:39,000 Speaker 1: I can recommend you should have it much better. When 282 00:14:39,120 --> 00:14:42,560 Speaker 1: all sorts of blind tasting competitions. That the big question 283 00:14:42,600 --> 00:14:45,680 Speaker 1: for Britain is going to be should we impose tariffs 284 00:14:45,920 --> 00:14:49,240 Speaker 1: or should we not? E you have its own decision, 285 00:14:49,280 --> 00:14:51,000 Speaker 1: but for us this is a tricky one. And don't 286 00:14:51,040 --> 00:14:54,440 Speaker 1: forget under w t O rules, whatever decision we make, 287 00:14:54,520 --> 00:14:57,000 Speaker 1: we've got to apply across the board to all countries. 288 00:14:57,680 --> 00:15:01,200 Speaker 1: Churchill just rolled over in Westminster at your boot shots 289 00:15:01,240 --> 00:15:04,520 Speaker 1: at Paul Roje. That's what I know. Uh, Paul j 290 00:15:04,800 --> 00:15:08,880 Speaker 1: that was when was his favorite champagne. To say the least, 291 00:15:08,880 --> 00:15:12,880 Speaker 1: we will continue. It's your wine tour on Bloomberg Surveillance 292 00:15:12,880 --> 00:15:15,440 Speaker 1: in New York and London with Roger Brutele. Stay with us. 293 00:15:15,480 --> 00:15:20,440 Speaker 1: This is Bloomberg with us in our London studios. Roger Bootle, 294 00:15:20,560 --> 00:15:24,200 Speaker 1: who has a terrific and eclectic experience in economics and 295 00:15:24,240 --> 00:15:29,360 Speaker 1: political analysis. David Grern, New York. I'm Tom King in London. Roger, 296 00:15:29,400 --> 00:15:33,040 Speaker 1: you studied at Oxford and I believe John Hicks was 297 00:15:33,160 --> 00:15:36,720 Speaker 1: the hero of so many at one time and place. 298 00:15:36,880 --> 00:15:40,320 Speaker 1: Do the Hicksie and models still work? Or is our 299 00:15:40,360 --> 00:15:47,320 Speaker 1: financial in fixed income mess and crisis and odd nominal 300 00:15:47,400 --> 00:15:50,320 Speaker 1: in real yields so much so that I s l 301 00:15:50,480 --> 00:15:54,480 Speaker 1: M doesn't work anymore. Well, the Pixian model is still told. 302 00:15:54,560 --> 00:15:56,720 Speaker 1: And I think that's pretty incredible. He said about me, 303 00:15:56,760 --> 00:16:00,920 Speaker 1: by the way, for a time so I knew him. Um, incredible, 304 00:16:01,080 --> 00:16:04,680 Speaker 1: written in nine seven. I think it's always had some 305 00:16:04,720 --> 00:16:08,120 Speaker 1: pretty big gaps in it. Quite frankly, I'm a kinesie, 306 00:16:08,160 --> 00:16:11,800 Speaker 1: and through and through I think, especially at times of 307 00:16:12,000 --> 00:16:16,160 Speaker 1: real crisis, you can't get away from the psychology that 308 00:16:16,800 --> 00:16:18,960 Speaker 1: Cane has placed so much emphasis on. Now, of course, 309 00:16:19,000 --> 00:16:21,720 Speaker 1: we are gradually getting away from the financial crisis. Now 310 00:16:21,720 --> 00:16:24,920 Speaker 1: we're moving back towards normal times. I think in that 311 00:16:25,040 --> 00:16:28,920 Speaker 1: sort of environment, something like the Hixean framework will again 312 00:16:29,000 --> 00:16:31,680 Speaker 1: be relevant. What are those normal times going to to 313 00:16:31,760 --> 00:16:34,880 Speaker 1: look like? It's our sense of normalcy of all that 314 00:16:34,920 --> 00:16:37,560 Speaker 1: we've bet will be older, exactly as our sense of 315 00:16:37,560 --> 00:16:40,160 Speaker 1: normalcy changed as a result of that crisis. Well, I 316 00:16:40,160 --> 00:16:43,760 Speaker 1: think that's got to be true. Um, I think we'll 317 00:16:43,760 --> 00:16:48,600 Speaker 1: probably get back to something like three interest rates. Of course, 318 00:16:48,600 --> 00:16:51,480 Speaker 1: that's a lot lower than was normal before. I doubt 319 00:16:51,520 --> 00:16:54,200 Speaker 1: whether we'll get back to four or five, which people 320 00:16:54,640 --> 00:16:57,240 Speaker 1: used to think was normal. I suspect for a very 321 00:16:57,280 --> 00:16:59,200 Speaker 1: long time you could never be sure about these things. 322 00:16:59,200 --> 00:17:01,600 Speaker 1: Of course, you really can never be sure. And the 323 00:17:01,640 --> 00:17:05,000 Speaker 1: onset of this era of very very low interest rates 324 00:17:05,040 --> 00:17:07,119 Speaker 1: came as a massive surprise to people. And I think 325 00:17:07,160 --> 00:17:10,000 Speaker 1: we've all got to be prepared for the unexpected. But 326 00:17:10,240 --> 00:17:12,320 Speaker 1: I would be surprised if we get much about three. 327 00:17:12,800 --> 00:17:16,520 Speaker 1: We love different guests and different views, and David, we've 328 00:17:16,520 --> 00:17:19,560 Speaker 1: done that today. We had Professor Steve Keane of Kingston 329 00:17:20,000 --> 00:17:23,960 Speaker 1: yesterday who tilts towards disequilibrium, and a bit of a 330 00:17:24,000 --> 00:17:28,719 Speaker 1: Marxist tidge to him as well. Roger, help us with 331 00:17:28,760 --> 00:17:32,640 Speaker 1: a certitude that we get to equilibrium or is Lord 332 00:17:32,680 --> 00:17:36,159 Speaker 1: the sigh of lse or Steve Keane would say, I'm sorry, 333 00:17:36,320 --> 00:17:39,720 Speaker 1: it is a world of disequilibrium? Can or can we 334 00:17:39,760 --> 00:17:45,080 Speaker 1: have both? Well? I think equilibrium is an important concept 335 00:17:45,080 --> 00:17:48,320 Speaker 1: for economists to use when thinking about a framework, but 336 00:17:48,440 --> 00:17:53,120 Speaker 1: the world never an equilibrium, correctly and most assuredly not. Now. 337 00:17:53,520 --> 00:17:56,080 Speaker 1: It's a truism. People always saying, oh, I've never known 338 00:17:56,119 --> 00:17:58,600 Speaker 1: the world quite so uncertain. It's always been uncertain, actually, 339 00:17:59,560 --> 00:18:02,360 Speaker 1: but I'm tempted to say it's more uncertain now. It's 340 00:18:02,400 --> 00:18:05,760 Speaker 1: really interesting. You've got the emergence from the financial crisis 341 00:18:05,760 --> 00:18:10,160 Speaker 1: and the beginnings of the move towards higher interest rates coinciding, 342 00:18:10,160 --> 00:18:13,440 Speaker 1: I think, with the onset of a new European crisis 343 00:18:13,520 --> 00:18:15,840 Speaker 1: coming over the next year or two, and then of 344 00:18:15,880 --> 00:18:18,520 Speaker 1: course the development of robotics and AI coming along on 345 00:18:18,560 --> 00:18:20,760 Speaker 1: the supply side. The next five or ten years are 346 00:18:20,760 --> 00:18:25,840 Speaker 1: going to be uh disequilibrium on steroids. Roger Boudle, thank 347 00:18:25,880 --> 00:18:28,360 Speaker 1: you so much. Forward your next work in the Telegraph, 348 00:18:28,400 --> 00:18:31,479 Speaker 1: Honor debut um here. Really, I tell you, David, it's 349 00:18:31,520 --> 00:18:34,520 Speaker 1: just great to go from Steve Keen to John Norman 350 00:18:34,560 --> 00:18:37,520 Speaker 1: of JP Morgan to Roger Boudle. It mixes it up, 351 00:18:37,560 --> 00:18:40,720 Speaker 1: to say the least. Yeah. Absolutely. What's your takeaway from 352 00:18:40,720 --> 00:18:43,919 Speaker 1: this trip? Tom? You're asking ally about curry last night. 353 00:18:43,960 --> 00:18:45,439 Speaker 1: We don't have to talk about food, but to do 354 00:18:45,480 --> 00:18:47,320 Speaker 1: it in five things you need to know. But the 355 00:18:47,359 --> 00:18:50,679 Speaker 1: answer is, I'm sorry, London's London. I don't for a 356 00:18:50,840 --> 00:18:53,760 Speaker 1: minute by this, OMG, we're gonna lose all these jobs 357 00:18:54,040 --> 00:18:56,600 Speaker 1: to Europe. I just don't buy it. I could be wrong. 358 00:18:57,040 --> 00:18:59,119 Speaker 1: I mean, we could talk another hour to Roger Boudle 359 00:18:59,720 --> 00:19:03,040 Speaker 1: about at it. But I'm sorry. I just it's amazing 360 00:19:03,119 --> 00:19:06,120 Speaker 1: to be on the streets of Paris and the differential 361 00:19:06,160 --> 00:19:09,879 Speaker 1: there from the streets of London. You can't talk about it. 362 00:19:09,880 --> 00:19:12,199 Speaker 1: It's our video. You just gotta feel it. There's a 363 00:19:12,280 --> 00:19:16,840 Speaker 1: huge Anglo American structure is sharply different than what we 364 00:19:16,960 --> 00:19:20,959 Speaker 1: see in the theology of Europe, and it's running real privilege. 365 00:19:20,960 --> 00:19:24,840 Speaker 1: As I've said, folks, we're thanking people all through the week, 366 00:19:30,520 --> 00:19:34,040 Speaker 1: brought you by Bank of America. Mary Lynch, dedicated to 367 00:19:34,119 --> 00:19:38,000 Speaker 1: bringing our clients insights and solutions to meet the challenges 368 00:19:38,160 --> 00:19:41,879 Speaker 1: of a transforming world. That's the power of global connections. 369 00:19:42,240 --> 00:19:46,760 Speaker 1: Mary Lynch, Pierce, Fenner and Smith Incorporated Member s I 370 00:19:46,920 --> 00:19:55,080 Speaker 1: p C. There's something new from Bloomberg. It's called Lens. 371 00:19:55,640 --> 00:19:59,240 Speaker 1: Starting right now, you can use the Bloomberg iosapp off 372 00:19:59,240 --> 00:20:03,200 Speaker 1: your iPhone or or iPad, or our new Google Chrome 373 00:20:03,280 --> 00:20:07,760 Speaker 1: extension to read any news story on any website, scan it, 374 00:20:08,240 --> 00:20:11,240 Speaker 1: and then instantly you see the news stories relevant market 375 00:20:11,320 --> 00:20:15,480 Speaker 1: data from Bloomberg. In addition, see all the bios of 376 00:20:15,480 --> 00:20:19,080 Speaker 1: the key people mentioned in the story. It's called lens, 377 00:20:19,400 --> 00:20:21,960 Speaker 1: and it is just that, a lens into the people 378 00:20:22,400 --> 00:20:26,240 Speaker 1: and the data of any story you may be reading. Again. 379 00:20:26,520 --> 00:20:29,640 Speaker 1: Lens brings you the power of Bloomberg's news and data. 380 00:20:30,000 --> 00:20:33,200 Speaker 1: Download or io s app or search for the Bloomberg 381 00:20:33,240 --> 00:20:37,120 Speaker 1: extension at the Chrome Store to try lens out. Learn 382 00:20:37,160 --> 00:20:44,320 Speaker 1: more at bloomberg dot com slash Lens. Tom wrapping up 383 00:20:44,320 --> 00:20:46,800 Speaker 1: a trip to France and to the UK he was 384 00:20:46,840 --> 00:20:48,879 Speaker 1: there for the elections on Sunday, headed back to New 385 00:20:48,960 --> 00:20:51,680 Speaker 1: York after today's A show and Tom a real treat 386 00:20:51,680 --> 00:20:54,000 Speaker 1: here to have a guest by serendipity, says Randall Crossner, 387 00:20:54,080 --> 00:20:56,879 Speaker 1: the Norman Robbins Professor of Economics at the University of Chicago, 388 00:20:56,920 --> 00:20:59,880 Speaker 1: who joins us this morning. Help us understand how you're 389 00:21:00,040 --> 00:21:02,879 Speaker 1: you in this debate within watchers of the Federal Reserve 390 00:21:03,119 --> 00:21:05,800 Speaker 1: participants in the Fed Reserve about the balance sheet, how 391 00:21:05,840 --> 00:21:07,400 Speaker 1: the Fed is going to be able to do this 392 00:21:07,800 --> 00:21:14,399 Speaker 1: uh in tandem with raising rates. So it is the 393 00:21:14,480 --> 00:21:16,800 Speaker 1: four and a half trillion dollar question, because that's roughly 394 00:21:16,840 --> 00:21:19,240 Speaker 1: the size of the balance sheets, will be able to 395 00:21:19,280 --> 00:21:21,920 Speaker 1: do this in a way that doesn't cause the disruption 396 00:21:21,960 --> 00:21:24,840 Speaker 1: of the markets. I'm very heartened that they have already 397 00:21:24,880 --> 00:21:27,560 Speaker 1: started to discuss this and put it into the minutes 398 00:21:27,600 --> 00:21:32,199 Speaker 1: from the previous the previous meeting. And what's good is 399 00:21:32,240 --> 00:21:36,320 Speaker 1: that starting the discussion has not caused a disruption. A 400 00:21:36,320 --> 00:21:39,159 Speaker 1: few years ago when Ben Bernanke started the discussion about 401 00:21:39,160 --> 00:21:42,280 Speaker 1: the so called taper that they would slowly reduce the 402 00:21:42,320 --> 00:21:45,760 Speaker 1: amount of asset purchases, that caused a lot of tumult 403 00:21:45,760 --> 00:21:48,280 Speaker 1: in the markets. So far, this hasn't, and I think 404 00:21:48,280 --> 00:21:52,320 Speaker 1: that's that's a positive step. Give us your sense here 405 00:21:52,359 --> 00:21:54,159 Speaker 1: of of of what the change in personnel on the 406 00:21:54,160 --> 00:21:57,560 Speaker 1: Federal Reserve is going to mean for policy, and he'd 407 00:21:57,560 --> 00:21:59,680 Speaker 1: be seen a Randy Quarrel's name floated as as a 408 00:21:59,680 --> 00:22:01,959 Speaker 1: potential a vice chair. I think that's been made official 409 00:22:02,359 --> 00:22:03,960 Speaker 1: as of yet. But we're beginning to see sort of 410 00:22:03,960 --> 00:22:07,440 Speaker 1: a changeover and who's going to comprise this board of governors. 411 00:22:07,440 --> 00:22:09,560 Speaker 1: How powerful a change is that going to be? Sort 412 00:22:09,560 --> 00:22:11,320 Speaker 1: of what direction do you see the FED heading in here? 413 00:22:11,359 --> 00:22:16,119 Speaker 1: Randy Well, Um, certainly, as you said, we have not 414 00:22:16,440 --> 00:22:18,400 Speaker 1: We don't have a lot of clarity about the potential 415 00:22:18,480 --> 00:22:21,040 Speaker 1: changes in the board because within the next year, the 416 00:22:21,080 --> 00:22:25,000 Speaker 1: president potentially could replace the majority of the board, including 417 00:22:25,000 --> 00:22:28,880 Speaker 1: the chair and the vice chair, or of course very powerful, 418 00:22:29,320 --> 00:22:32,960 Speaker 1: very powerful figures in making monetary policy. So until we 419 00:22:33,000 --> 00:22:35,320 Speaker 1: have greater clarity for that, it's it's hard to say 420 00:22:35,640 --> 00:22:38,600 Speaker 1: um at whether there would be radical change or not. 421 00:22:39,119 --> 00:22:41,919 Speaker 1: If he were to keep Janet yelling on, and he 422 00:22:42,000 --> 00:22:45,679 Speaker 1: has said positive things about about Jenney Hillen, then obviously 423 00:22:45,680 --> 00:22:47,960 Speaker 1: I think would be a lot of continuity and you'll 424 00:22:47,960 --> 00:22:50,600 Speaker 1: get the sort of process that we were describing before 425 00:22:51,000 --> 00:22:54,159 Speaker 1: about the slow reduction of the balance sheet, of very 426 00:22:54,160 --> 00:22:56,760 Speaker 1: gradual reduction of the balance sheet and a gradual increase 427 00:22:56,760 --> 00:23:00,080 Speaker 1: in interest rates. That could change with a different and 428 00:23:00,160 --> 00:23:03,760 Speaker 1: share but we really don't know that yet. We've had 429 00:23:03,760 --> 00:23:06,240 Speaker 1: a lot of conversations about how the regulatory landscape in 430 00:23:06,320 --> 00:23:09,520 Speaker 1: Washington may or may not change with this new with 431 00:23:09,600 --> 00:23:12,040 Speaker 1: this new president. How much of those changes could rest 432 00:23:12,080 --> 00:23:14,560 Speaker 1: with the Federal Reserve. How much power does the federals 433 00:23:14,720 --> 00:23:18,600 Speaker 1: have to shape how how the financial services industry is regulated. 434 00:23:20,359 --> 00:23:23,600 Speaker 1: But FED certainly has a lot of power, not independent 435 00:23:23,600 --> 00:23:26,640 Speaker 1: power because there are other financial regulators that they work 436 00:23:26,640 --> 00:23:31,160 Speaker 1: in concert with, but it can be a very powerful 437 00:23:31,240 --> 00:23:36,240 Speaker 1: voice for regulatory reform and regulatory change. So there's certain 438 00:23:36,240 --> 00:23:38,920 Speaker 1: things that are set by Congress and the Dodd Frank Act, 439 00:23:38,960 --> 00:23:41,080 Speaker 1: and and so the FED as well as the other 440 00:23:41,080 --> 00:23:44,679 Speaker 1: regulators must follow those, but the actual implementation of that 441 00:23:45,400 --> 00:23:48,800 Speaker 1: is largely up to the Fed and the other regulators. 442 00:23:48,800 --> 00:23:51,760 Speaker 1: So there could certainly be be a change. And my 443 00:23:52,040 --> 00:23:56,000 Speaker 1: hunches that if Randy Corals were to be nominated and confirmed, 444 00:23:56,040 --> 00:23:58,399 Speaker 1: that there would be some changes when it comes to 445 00:23:58,560 --> 00:24:00,679 Speaker 1: how this Federal Reserve processes, what may or may not 446 00:24:00,800 --> 00:24:03,320 Speaker 1: happen in Washington, d C. Whether or not we get 447 00:24:03,320 --> 00:24:05,480 Speaker 1: a big fiscal spending package, whether or not we get 448 00:24:05,520 --> 00:24:08,080 Speaker 1: tax or for him, how would you counsel they proceed? 449 00:24:08,119 --> 00:24:11,239 Speaker 1: How difficult is it to forecast and plan with so 450 00:24:11,280 --> 00:24:14,479 Speaker 1: many unknown, so many variables when it comes to policy 451 00:24:14,480 --> 00:24:19,640 Speaker 1: in Washington. No, it's always very simple. No, it's certainly not. 452 00:24:20,240 --> 00:24:22,880 Speaker 1: This is it's always challenging. So it's I mean, there's 453 00:24:22,880 --> 00:24:26,000 Speaker 1: been a lot of emphasis on how uncertain the particular 454 00:24:26,000 --> 00:24:29,320 Speaker 1: policy environment is, but it's always an uncertain, falicy environment. 455 00:24:29,359 --> 00:24:31,400 Speaker 1: We never actually know whether it will be shocks coming 456 00:24:31,400 --> 00:24:33,840 Speaker 1: in where there could be some some changes that there 457 00:24:33,840 --> 00:24:38,080 Speaker 1: have been discussion of some fundamental changes, but those who 458 00:24:38,160 --> 00:24:41,720 Speaker 1: probably have an impact over time rather than all immediate 459 00:24:42,240 --> 00:24:46,359 Speaker 1: and so I think the FED wisely is looking into 460 00:24:46,440 --> 00:24:49,760 Speaker 1: alternative scenarios, but sort of they're they're kind of the 461 00:24:49,800 --> 00:24:51,960 Speaker 1: main scenario that they're looking at as kind of the 462 00:24:52,000 --> 00:24:56,520 Speaker 1: status quo for at least the short term, and then 463 00:24:56,560 --> 00:24:59,359 Speaker 1: looking at possibilities for bigger changes in the intermediate to 464 00:24:59,400 --> 00:25:02,560 Speaker 1: longer term. Bobbin's professor of economics, former Governor of the 465 00:25:02,520 --> 00:25:05,719 Speaker 1: Federals assistant Randy Cross joining us on the Spectrum Enterprize 466 00:25:05,720 --> 00:25:07,840 Speaker 1: phone line from Italy this morning. Randy, thank you very 467 00:25:07,920 --> 00:25:23,200 Speaker 1: much for the time. Okay, this is a joy. We're 468 00:25:23,200 --> 00:25:27,560 Speaker 1: gonna massively rip up the script. Jeff Robinson is with 469 00:25:27,680 --> 00:25:31,760 Speaker 1: us who is expert on accounting and funny money. He 470 00:25:31,840 --> 00:25:34,080 Speaker 1: works for a small startup bank, the Union Bank of 471 00:25:34,119 --> 00:25:39,160 Speaker 1: Switzerland UBS here in London, and he's done some work 472 00:25:39,200 --> 00:25:41,840 Speaker 1: with his colleague Eric Sheridan, who has been better than 473 00:25:41,920 --> 00:25:45,560 Speaker 1: good on Snapchat. There's been a wide range of failure 474 00:25:46,040 --> 00:25:49,200 Speaker 1: over the debaccle known as Snapchat. Mr Sheridan has avoided 475 00:25:49,760 --> 00:25:54,000 Speaker 1: the mindfuls to say, uh the least when you look 476 00:25:54,440 --> 00:25:59,160 Speaker 1: at a fang stock, there's a lot of intangibles there. 477 00:25:59,240 --> 00:26:03,639 Speaker 1: There's not ricks, there's that mortars. Do you trust the 478 00:26:03,760 --> 00:26:07,600 Speaker 1: accounting is described on the balance sheet, whether it's the 479 00:26:07,680 --> 00:26:11,240 Speaker 1: genormous success of alphabet or it's the struggles of a 480 00:26:11,320 --> 00:26:15,480 Speaker 1: nascent snapchet Um. From a personal perspective, I guess I 481 00:26:15,520 --> 00:26:18,360 Speaker 1: don't trust anything unless I understand it and I can 482 00:26:18,400 --> 00:26:21,720 Speaker 1: dive into the numbers. So problem with accounting is a 483 00:26:21,760 --> 00:26:24,560 Speaker 1: lot of the numbers need work on. So you might 484 00:26:24,600 --> 00:26:28,159 Speaker 1: disclose non gap metrics. Gap metrics you look at PP 485 00:26:28,240 --> 00:26:30,719 Speaker 1: and intangibles on the balance sheet that you know roughly 486 00:26:30,840 --> 00:26:33,800 Speaker 1: thirty five percent of the intangible value of a company 487 00:26:34,119 --> 00:26:35,840 Speaker 1: will appear on the balance sheet. The rest of it 488 00:26:35,920 --> 00:26:38,000 Speaker 1: is kind of been there in the ether. So I 489 00:26:38,040 --> 00:26:40,440 Speaker 1: think if you take numbers that are reported on pure 490 00:26:40,480 --> 00:26:43,720 Speaker 1: face value at some stage, and I don't think it's 491 00:26:43,720 --> 00:26:46,080 Speaker 1: that far down the timeline, you're gonna get your fingers burns. 492 00:26:46,920 --> 00:26:50,800 Speaker 1: Within there is the ether. I love that phrase, the 493 00:26:51,440 --> 00:26:55,600 Speaker 1: ether that Silicon Valley plays by a different rule book, 494 00:26:55,640 --> 00:26:58,679 Speaker 1: And I don't mean that turn Feather Bloomberg name sixty 495 00:26:58,680 --> 00:27:01,960 Speaker 1: good morning, out and California early morning, I should say 496 00:27:02,000 --> 00:27:05,399 Speaker 1: out in California. But is there a different rule book 497 00:27:05,920 --> 00:27:10,320 Speaker 1: for these modern tech companies and their rights offerings and 498 00:27:10,359 --> 00:27:14,840 Speaker 1: all the funny shareholder camp that they're doing. Um from 499 00:27:14,880 --> 00:27:17,720 Speaker 1: a chemic perspective, there's this one rule book and that's 500 00:27:17,720 --> 00:27:20,080 Speaker 1: the US gap. And you know U S gap has 501 00:27:20,080 --> 00:27:23,199 Speaker 1: evolved over the years to become more conceptually driven. But 502 00:27:23,240 --> 00:27:26,520 Speaker 1: when you've got non metrics out there where you can 503 00:27:26,560 --> 00:27:28,879 Speaker 1: report what the accounts required to report, and then you 504 00:27:28,920 --> 00:27:32,919 Speaker 1: can report your take on certain metrics, and those metrics 505 00:27:33,000 --> 00:27:35,000 Speaker 1: don't have a huge amount of regulation around them. Yeah, 506 00:27:35,040 --> 00:27:37,560 Speaker 1: there was a separate playbook to it to run against. 507 00:27:37,880 --> 00:27:41,160 Speaker 1: And you're looking at the tech companies, particularly stock based comp. 508 00:27:41,600 --> 00:27:43,840 Speaker 1: You know, if you're excluding stock based comp from your 509 00:27:43,920 --> 00:27:47,000 Speaker 1: your numbers, you're excluding in my opinion salaries, So of 510 00:27:47,040 --> 00:27:49,640 Speaker 1: course your numbers are gonna look great. Let's just big 511 00:27:49,680 --> 00:27:52,600 Speaker 1: go back to legislation here will full circle. Time's ripped 512 00:27:52,640 --> 00:27:53,920 Speaker 1: up the script. Let me try to paste it back 513 00:27:53,960 --> 00:27:56,439 Speaker 1: to paste it back together. Here. There's been so much 514 00:27:56,480 --> 00:28:00,639 Speaker 1: talk about a repatriation tax holiday. How do you guarantee 515 00:28:01,040 --> 00:28:04,000 Speaker 1: the best efficacy of that if you implement one? How 516 00:28:04,000 --> 00:28:06,040 Speaker 1: do you how do you try to engineer it as 517 00:28:06,080 --> 00:28:08,880 Speaker 1: such so that that money is going to be spent 518 00:28:08,920 --> 00:28:11,880 Speaker 1: on capex that's going to go to something worthwhile. Yeah, 519 00:28:11,880 --> 00:28:13,959 Speaker 1: that's a great question, because you know, the fear is 520 00:28:13,960 --> 00:28:16,560 Speaker 1: is that we repatriate this cash and it gets dividended 521 00:28:16,560 --> 00:28:19,080 Speaker 1: out by backs happen and you know, we're not creating 522 00:28:19,160 --> 00:28:22,240 Speaker 1: us jobs and it's not getting reinfasted back into the business. 523 00:28:22,240 --> 00:28:25,000 Speaker 1: And you kind of you can benchmark this against the 524 00:28:25,680 --> 00:28:28,879 Speaker 1: effort in two thousand and four where retrospectively when they 525 00:28:28,880 --> 00:28:32,800 Speaker 1: had that tax repaturation holiday, Um, it didn't move the 526 00:28:32,840 --> 00:28:36,080 Speaker 1: needle really on job creation and investments. So if it 527 00:28:36,119 --> 00:28:38,240 Speaker 1: were me and I was running the country and I 528 00:28:38,280 --> 00:28:42,360 Speaker 1: was looking at the legislation behind cash repaturation, there would 529 00:28:42,400 --> 00:28:45,080 Speaker 1: be some man some mandated rules in there that would 530 00:28:45,080 --> 00:28:49,560 Speaker 1: require a certain elements of that cash to go back 531 00:28:49,560 --> 00:28:51,680 Speaker 1: into the business. Because what's Apple going to do with 532 00:28:52,520 --> 00:28:55,960 Speaker 1: eighty seven billion of cash that has overseas when it's generating? 533 00:28:56,080 --> 00:28:58,920 Speaker 1: Would you in trouble this morning with General Council? What's 534 00:28:58,960 --> 00:29:01,240 Speaker 1: Apple going to do? What's Apple going to what they're 535 00:29:01,240 --> 00:29:03,920 Speaker 1: gonna buy? Come on, it's only Friday. It's only Friday. 536 00:29:04,600 --> 00:29:07,800 Speaker 1: I don't know what they're going to buy. They they 537 00:29:07,200 --> 00:29:09,959 Speaker 1: they have the ability to go out there and do 538 00:29:10,120 --> 00:29:14,920 Speaker 1: fairly significant acquisitions, and I think from evaluation perspective, you know, 539 00:29:15,240 --> 00:29:17,000 Speaker 1: the problem is we're getting all of that cash, is 540 00:29:17,080 --> 00:29:19,960 Speaker 1: that there's a risk that you do silly stuff and 541 00:29:20,040 --> 00:29:22,320 Speaker 1: if you're not generating a return excess of the cost 542 00:29:22,360 --> 00:29:25,720 Speaker 1: of that capital, you're destroying shareholder worth. So, you know 543 00:29:26,000 --> 00:29:28,040 Speaker 1: M and A, you know this is something that's in 544 00:29:28,040 --> 00:29:30,080 Speaker 1: our thought process. You know, the problem with M and 545 00:29:30,160 --> 00:29:33,920 Speaker 1: A analysis is that it's very focused on EPs accretion 546 00:29:33,960 --> 00:29:36,520 Speaker 1: and a stable credit rating. Your EPs goes up, your 547 00:29:36,520 --> 00:29:39,440 Speaker 1: credit remains stable. You know, these deals get stamped as 548 00:29:39,440 --> 00:29:42,160 Speaker 1: being good deals. Now you've definitely got to look at 549 00:29:42,200 --> 00:29:44,560 Speaker 1: the return behind those deals and how long it takes 550 00:29:44,600 --> 00:29:46,880 Speaker 1: you actually to get a return that's an excess of 551 00:29:46,920 --> 00:29:49,560 Speaker 1: that cost of capital. So the cash repatuation, I think 552 00:29:49,600 --> 00:29:51,600 Speaker 1: it's a phenomenally interesting thing. I think it's one of 553 00:29:51,640 --> 00:29:55,000 Speaker 1: the few things that there is agreement on in terms 554 00:29:55,000 --> 00:29:58,840 Speaker 1: of getting this through the passage of Congress. Jeff prospect 555 00:29:58,920 --> 00:30:00,440 Speaker 1: one of this from London. Let me have here quickly 556 00:30:00,440 --> 00:30:01,840 Speaker 1: here in the limited time that we had left, how 557 00:30:01,880 --> 00:30:03,680 Speaker 1: similar the situation is in the U S when it 558 00:30:03,680 --> 00:30:05,720 Speaker 1: comes to corporate tax reform to what we heard talked 559 00:30:05,720 --> 00:30:09,760 Speaker 1: about and indeed anticipate in France. Uh and Manuel Markin 560 00:30:09,800 --> 00:30:12,560 Speaker 1: has said that he wants to implement new corporate tax reform. 561 00:30:12,600 --> 00:30:14,600 Speaker 1: Do you think the process is going to play out similarly? 562 00:30:14,600 --> 00:30:17,240 Speaker 1: How difficult do you think it's going to be there? Um? 563 00:30:17,280 --> 00:30:20,320 Speaker 1: I think tax reforms difficult across the board. I mean 564 00:30:20,800 --> 00:30:23,080 Speaker 1: French tax You know, there's a history that goes all 565 00:30:23,080 --> 00:30:26,360 Speaker 1: the way back to Napoleon. When you're trying to unwind 566 00:30:26,440 --> 00:30:29,200 Speaker 1: those rules with that level of detail, it's going to 567 00:30:29,320 --> 00:30:32,080 Speaker 1: take time. It's complicated. There's a difference between tax reform 568 00:30:32,120 --> 00:30:34,840 Speaker 1: and tax cuts. Tax cuts are roughly you know, they're 569 00:30:34,840 --> 00:30:38,560 Speaker 1: straightforward there that they're they're politicized, they can be reversed. 570 00:30:38,640 --> 00:30:42,240 Speaker 1: Tax reform a semplification of the tax code. Ultimately, you 571 00:30:42,280 --> 00:30:44,880 Speaker 1: could argue is you can have a lower tax rate 572 00:30:44,880 --> 00:30:48,160 Speaker 1: with a simplified tax code that actually garners more revenue 573 00:30:48,200 --> 00:30:54,120 Speaker 1: for the country. Wonderful. Jeff Robinson, that's our painting watching 574 00:30:54,160 --> 00:30:59,000 Speaker 1: paint draws Friday. Double declining balance, You don't even do 575 00:30:59,320 --> 00:31:03,040 Speaker 1: they still do double declining balance? Yeah, the state state 576 00:31:03,280 --> 00:31:07,800 Speaker 1: is part of the tax code. Double declining. Oh, listen 577 00:31:07,840 --> 00:31:10,479 Speaker 1: to you. I made that up right now, but right 578 00:31:13,520 --> 00:31:15,720 Speaker 1: when you're when you're in when you're in New York, 579 00:31:15,720 --> 00:31:18,280 Speaker 1: be sure you don't talk to Jeff Robinson. Thank you 580 00:31:18,360 --> 00:31:22,280 Speaker 1: so much on a county. Can't wait to do this again. 581 00:31:22,520 --> 00:31:26,440 Speaker 1: Futures negative four now futures negative twenty four. This is 582 00:31:26,440 --> 00:31:43,400 Speaker 1: Bloomberg from London, from New York. Wilbur Ross has been 583 00:31:43,440 --> 00:31:46,320 Speaker 1: an awfully good friend of Bloomberg surveillance. We have spoken 584 00:31:46,320 --> 00:31:49,320 Speaker 1: to him many times. Of course, he is a financier, 585 00:31:49,800 --> 00:31:53,000 Speaker 1: he is a tycoon, almost in a nineteen cents. He 586 00:31:53,040 --> 00:31:56,960 Speaker 1: has been hugely generous to his Yale University. And I 587 00:31:57,040 --> 00:32:01,200 Speaker 1: must say, David Girl, Mr Ross was way early in 588 00:32:01,280 --> 00:32:04,440 Speaker 1: support of Mr Trump. He was absolutely a Wilbur Ross 589 00:32:04,480 --> 00:32:06,920 Speaker 1: the Secretary of Commerce announcing last night a new agreement 590 00:32:06,960 --> 00:32:09,720 Speaker 1: with China to promote market access for American natural gas, 591 00:32:09,760 --> 00:32:13,120 Speaker 1: financial services and beef that the Secretaries that it is 592 00:32:13,120 --> 00:32:15,320 Speaker 1: part of a broader effort here to begin reshaping that 593 00:32:15,400 --> 00:32:19,400 Speaker 1: trade relationship with the two world's largest economies. That let's 594 00:32:19,400 --> 00:32:21,600 Speaker 1: go now to Wilbur Ross in conversation with our colleagues 595 00:32:21,600 --> 00:32:24,440 Speaker 1: on Bloomberg day Break, America's I want to go into 596 00:32:24,480 --> 00:32:26,280 Speaker 1: the substance of the deal, but before that, take me 597 00:32:26,320 --> 00:32:29,160 Speaker 1: to the process because I've been around some trade deals 598 00:32:29,160 --> 00:32:31,720 Speaker 1: they tend to take a long time, and this is 599 00:32:31,840 --> 00:32:34,160 Speaker 1: really pretty fast. At the same time, you didn't have 600 00:32:34,200 --> 00:32:36,480 Speaker 1: a special trade representative who did this deal? Did you 601 00:32:36,520 --> 00:32:41,240 Speaker 1: do it personally? Well? I did, and Stephen Manuton, the 602 00:32:41,280 --> 00:32:46,320 Speaker 1: Treasury Secretary, where the coheads of the economic dialogue, But 603 00:32:46,480 --> 00:32:48,920 Speaker 1: really a lot of the work was done by Wendy 604 00:32:49,040 --> 00:32:52,880 Speaker 1: term Moto, my chief of staff. So into the substance 605 00:32:52,920 --> 00:32:55,080 Speaker 1: of the deal, we know that it covers a wide 606 00:32:55,200 --> 00:32:57,560 Speaker 1: range of topics, as I say, from liquid natural gas 607 00:32:57,640 --> 00:33:00,800 Speaker 1: to beef to financial services. At the same time, if 608 00:33:00,800 --> 00:33:03,719 Speaker 1: you're take these all together, how material are they in 609 00:33:03,840 --> 00:33:07,600 Speaker 1: terms of the trade deficit with China right now? Well, 610 00:33:07,640 --> 00:33:11,680 Speaker 1: I think they're material in three regards. The first regard is, 611 00:33:11,720 --> 00:33:15,880 Speaker 1: as you pointed out in your introduction, trade arrangements are 612 00:33:15,920 --> 00:33:20,680 Speaker 1: normally denominated in multiple years. This one, this first set 613 00:33:21,080 --> 00:33:24,680 Speaker 1: has been denominated in tens of days, so there's a 614 00:33:24,760 --> 00:33:29,360 Speaker 1: huge difference in how rapidly we got something done. Second, 615 00:33:29,840 --> 00:33:35,640 Speaker 1: these are quite specific transactions with quite specific dates. Essentially 616 00:33:35,680 --> 00:33:38,960 Speaker 1: all of these things are scheduled to start on July 617 00:33:39,160 --> 00:33:43,280 Speaker 1: six in the world of trade, July sixteenth, is a 618 00:33:43,360 --> 00:33:46,520 Speaker 1: wink and a blink, and I think that's important. For 619 00:33:46,640 --> 00:33:49,520 Speaker 1: the third reason, we have a lot more issues to 620 00:33:49,640 --> 00:33:54,120 Speaker 1: deal with with the People's Republic of China, and I 621 00:33:54,280 --> 00:33:59,680 Speaker 1: believe that the fact that we got these longstanding aggravations 622 00:34:00,120 --> 00:34:04,680 Speaker 1: did the way so quickly augurs well for the relationship 623 00:34:04,760 --> 00:34:08,840 Speaker 1: pattern going forward. But we have many, many more issues, 624 00:34:08,920 --> 00:34:12,520 Speaker 1: and so the next task will be figuring out a 625 00:34:12,640 --> 00:34:17,520 Speaker 1: one year plan and then with some data points in between, 626 00:34:17,680 --> 00:34:21,200 Speaker 1: some deliverables in between, and then once we get through 627 00:34:21,239 --> 00:34:24,840 Speaker 1: the one year plan with success, then let's work into 628 00:34:25,080 --> 00:34:28,000 Speaker 1: a longer term plan. So give us a peek into 629 00:34:28,040 --> 00:34:30,440 Speaker 1: that one year plan. And should we expect a series 630 00:34:30,480 --> 00:34:32,600 Speaker 1: of these sorts of deals coming out over the next 631 00:34:32,680 --> 00:34:36,000 Speaker 1: year or is it different approach? Well, we hope to 632 00:34:36,080 --> 00:34:40,160 Speaker 1: have deliverables. I think one of the historic problems with 633 00:34:40,280 --> 00:34:43,920 Speaker 1: trade is that it's become a kind of long term 634 00:34:44,000 --> 00:34:49,640 Speaker 1: debating society rather than something that was results oriented. Both 635 00:34:49,680 --> 00:34:54,520 Speaker 1: the Chinese government and we have become very results oriented, 636 00:34:55,000 --> 00:34:57,279 Speaker 1: and if we can keep that going, we'll get a 637 00:34:57,320 --> 00:35:00,760 Speaker 1: lot done well. As you suggest sir, things you addressed 638 00:35:00,760 --> 00:35:02,279 Speaker 1: in this one are things that have been simmering for 639 00:35:02,360 --> 00:35:05,800 Speaker 1: some time and now you've resolved them, it appears what's 640 00:35:05,920 --> 00:35:09,920 Speaker 1: next on your list? Well, as you know it's even 641 00:35:09,960 --> 00:35:13,000 Speaker 1: when I was in the private sector, wasn't my habit 642 00:35:13,480 --> 00:35:17,200 Speaker 1: to speculate on what comes next? A much more comfortable 643 00:35:17,480 --> 00:35:21,719 Speaker 1: announcing things as we actually accomplished them, And I think 644 00:35:21,800 --> 00:35:24,600 Speaker 1: between now and the end of the year we will 645 00:35:24,640 --> 00:35:29,359 Speaker 1: hopefully have more announcements about actual accomplishments. So to give 646 00:35:29,360 --> 00:35:30,920 Speaker 1: you a sen sense, and I know you don't like 647 00:35:30,920 --> 00:35:32,480 Speaker 1: to say what's gonna come next, I have to ask 648 00:35:32,520 --> 00:35:34,719 Speaker 1: you what comes next? No, nonetheless, but give us some 649 00:35:34,760 --> 00:35:36,759 Speaker 1: sense of the scope and the magnitude of what you 650 00:35:36,800 --> 00:35:39,040 Speaker 1: hope to accomplish over that one year period of time 651 00:35:39,080 --> 00:35:42,120 Speaker 1: that you just said is your plan, Well, there are 652 00:35:42,160 --> 00:35:45,560 Speaker 1: all kinds of sectors that have not yet been addressed. 653 00:35:45,640 --> 00:35:48,879 Speaker 1: So the methodology that will use as the same one 654 00:35:49,000 --> 00:35:52,719 Speaker 1: we did here. The Chinese submitted their wish list, we 655 00:35:52,840 --> 00:35:57,160 Speaker 1: submitted our wish list. We decided which of those items 656 00:35:57,239 --> 00:36:00,440 Speaker 1: from the two lists were achievable with in a very 657 00:36:00,560 --> 00:36:04,600 Speaker 1: finite period of time. That's what we focused on. So 658 00:36:04,680 --> 00:36:07,560 Speaker 1: now the question is what time frame do we put 659 00:36:07,880 --> 00:36:11,120 Speaker 1: on the issues that we didn't yet address, And so 660 00:36:11,239 --> 00:36:14,840 Speaker 1: those talks will begin probably over the weekend. So the 661 00:36:14,880 --> 00:36:16,920 Speaker 1: skeptic secretary are gonna say, look, you've got a three 662 00:36:17,520 --> 00:36:20,439 Speaker 1: seven billion dollar trade devastated with China exporting more beef 663 00:36:20,480 --> 00:36:22,919 Speaker 1: and allergy isn't going to close the gap. So what's 664 00:36:22,920 --> 00:36:26,399 Speaker 1: going to be on the agenda that will Well, it's 665 00:36:26,400 --> 00:36:30,399 Speaker 1: a whole variety of things. But the gap is not 666 00:36:30,600 --> 00:36:34,080 Speaker 1: just a gap. The gap is made up of hundreds 667 00:36:34,080 --> 00:36:37,840 Speaker 1: and hundreds of different little items, and therefore there's not 668 00:36:37,920 --> 00:36:41,640 Speaker 1: going to be one silver bullet that suddenly tricks takes 669 00:36:41,640 --> 00:36:45,960 Speaker 1: our trade deficit from the three hundred billion to zero. 670 00:36:46,239 --> 00:36:48,239 Speaker 1: That's not the way it's gonna work. Are you trying 671 00:36:48,239 --> 00:36:51,920 Speaker 1: to get it to zero? Secretary? No, We'll get it 672 00:36:51,960 --> 00:36:54,920 Speaker 1: as far as we can. But the important thing is, 673 00:36:55,440 --> 00:36:58,560 Speaker 1: as we accomplished here, we want to do it by 674 00:36:58,719 --> 00:37:04,840 Speaker 1: increasing total trade and by increasing the ability of our 675 00:37:04,960 --> 00:37:09,120 Speaker 1: companies to export. That's the a number one objective because 676 00:37:09,120 --> 00:37:13,719 Speaker 1: that's what will create more jobs here. Number two is 677 00:37:13,760 --> 00:37:17,520 Speaker 1: the trade deficit itself, and that's the way we want 678 00:37:17,520 --> 00:37:21,040 Speaker 1: to help solve that is with the beef. Beef, as 679 00:37:21,120 --> 00:37:23,280 Speaker 1: you know, is a two and a half billion dollar 680 00:37:23,760 --> 00:37:28,440 Speaker 1: market that we've been effectively precluded from your guess is 681 00:37:28,480 --> 00:37:31,359 Speaker 1: as good as mine as to what market share will get. 682 00:37:31,840 --> 00:37:36,440 Speaker 1: But symbolically, beef has been a big, big irritant for 683 00:37:36,560 --> 00:37:41,200 Speaker 1: the agricultural community here because that fussing around has been 684 00:37:41,239 --> 00:37:44,560 Speaker 1: going on for way more than a decade. Secretary Ross, 685 00:37:44,600 --> 00:37:47,520 Speaker 1: the objective of your administration has been stated as quite 686 00:37:47,520 --> 00:37:51,239 Speaker 1: clear as to make trade fairer. The agreements with China, though, 687 00:37:51,480 --> 00:37:53,640 Speaker 1: are meant to be win win agreements. And I pick 688 00:37:53,640 --> 00:37:55,640 Speaker 1: out a sector like the autos, and I wonder how 689 00:37:55,680 --> 00:37:58,759 Speaker 1: you guys can come to a win win arrangement when 690 00:37:58,800 --> 00:38:01,200 Speaker 1: at the moment it's win win for China and lose 691 00:38:01,239 --> 00:38:03,880 Speaker 1: lose for the United States. Give me an idea of 692 00:38:03,920 --> 00:38:05,920 Speaker 1: how you can approach that situation that is a win 693 00:38:05,960 --> 00:38:10,520 Speaker 1: win for both countries. Well, you can't take things in isolation. 694 00:38:10,640 --> 00:38:13,920 Speaker 1: But the fact is that none of our trade deficit 695 00:38:14,080 --> 00:38:18,719 Speaker 1: comes from China exporting automobiles to the US. There's an 696 00:38:18,719 --> 00:38:22,360 Speaker 1: issue about the parts coming in and parts coming in 697 00:38:22,480 --> 00:38:27,440 Speaker 1: from elsewhere through NAFTA and through other loopholes, but the 698 00:38:27,600 --> 00:38:31,520 Speaker 1: Chinese do not actually sell cars here, so that's not 699 00:38:31,800 --> 00:38:36,120 Speaker 1: the problem. Where our car deficit comes is much more 700 00:38:36,280 --> 00:38:40,640 Speaker 1: with Europe, with Japan, and with South Korea. We want 701 00:38:40,640 --> 00:38:43,360 Speaker 1: to welcome once again our Bloomberg TV and Radio and 702 00:38:43,600 --> 00:38:47,040 Speaker 1: we're speaking with Secretary of Commerce Wolber Ross now Mr 703 00:38:47,080 --> 00:38:52,400 Speaker 1: Secretary Um with respect to China specifically, does this indicate 704 00:38:52,440 --> 00:38:56,000 Speaker 1: a different approach which essentially takes off the table the 705 00:38:56,040 --> 00:39:02,640 Speaker 1: current manipulation question, Well, the currency manipulation question for the 706 00:39:02,719 --> 00:39:07,839 Speaker 1: moment at least has been resolved. Currency manipulation is the 707 00:39:07,880 --> 00:39:12,319 Speaker 1: function of the Treasury Department, not Commerce, and Congress has 708 00:39:12,400 --> 00:39:17,880 Speaker 1: laid out very specific criteria as to what constitutes currency 709 00:39:17,960 --> 00:39:22,919 Speaker 1: manipulation and what does not. The Chinese, by that definition, 710 00:39:23,040 --> 00:39:27,440 Speaker 1: are not currency manipulators at this point in time, and 711 00:39:27,560 --> 00:39:32,520 Speaker 1: that's why Secretary Minuchin issued the order that he did. Now, 712 00:39:32,560 --> 00:39:36,560 Speaker 1: that can change over time, but the more important thing 713 00:39:36,760 --> 00:39:39,840 Speaker 1: is bring How do we bring jobs back, how do 714 00:39:39,880 --> 00:39:43,640 Speaker 1: we make the gross domestic product grow faster, and how 715 00:39:43,640 --> 00:39:47,320 Speaker 1: do we reduce the trade deficits. So there are myriad 716 00:39:47,400 --> 00:39:50,399 Speaker 1: ways of trying to do that. A lot will be 717 00:39:50,440 --> 00:39:53,880 Speaker 1: in goods, some will be in services. And we started 718 00:39:53,920 --> 00:39:58,320 Speaker 1: on that here with the credit cards. The US credit 719 00:39:58,360 --> 00:40:02,520 Speaker 1: card companies had effectively been boxed out of China. All 720 00:40:02,600 --> 00:40:06,800 Speaker 1: the electronic payment systems. People had been now we've gotten 721 00:40:06,800 --> 00:40:11,560 Speaker 1: that pretty well fixed. US financial service firms had not 722 00:40:11,680 --> 00:40:16,280 Speaker 1: been licensed to underwrite bonds or to clear bonds. Now 723 00:40:16,320 --> 00:40:21,239 Speaker 1: that's getting fixed. So in addition to agriculture, in addition 724 00:40:21,400 --> 00:40:25,800 Speaker 1: to natural gas, we also began in the services sector. 725 00:40:26,160 --> 00:40:28,480 Speaker 1: But there's a lot more to do their, particularly the 726 00:40:28,520 --> 00:40:32,680 Speaker 1: digital economy, and a lot of other both financial and 727 00:40:32,800 --> 00:40:36,920 Speaker 1: non financial services. Services, as you know, or become a 728 00:40:37,000 --> 00:40:40,840 Speaker 1: huge part of our economy and a huge part of 729 00:40:40,880 --> 00:40:44,719 Speaker 1: our international commerce, which is actually you now made a 730 00:40:44,760 --> 00:40:48,719 Speaker 1: specific step forward with China. Does that free you up 731 00:40:48,719 --> 00:40:51,640 Speaker 1: a bit to move on NAFTA and particularly respect to Mexico. 732 00:40:51,719 --> 00:40:53,640 Speaker 1: Last time you and I spoke, we talked about when 733 00:40:53,680 --> 00:40:56,000 Speaker 1: you would get moving with NAFTA. What does that timetable 734 00:40:56,040 --> 00:40:59,360 Speaker 1: look like. Well, I'm hoping it will be quite imminent. 735 00:40:59,520 --> 00:41:03,400 Speaker 1: As you might have noticed, the Senate yesterday finally confirmed 736 00:41:03,440 --> 00:41:08,120 Speaker 1: my friend Bob Lightheiser as the United States Trade Representative. 737 00:41:08,640 --> 00:41:11,960 Speaker 1: Some people in the Congress had been very reluctant to 738 00:41:12,120 --> 00:41:16,040 Speaker 1: grant us the provisions of the ninety day Letter until 739 00:41:16,120 --> 00:41:19,759 Speaker 1: we had a Senate confirmed US trade drop. Well, he 740 00:41:19,800 --> 00:41:23,040 Speaker 1: was confirmed last night. I believe he'll be sworn in 741 00:41:23,120 --> 00:41:26,000 Speaker 1: on Monday. And I expect he and I will be 742 00:41:26,040 --> 00:41:29,319 Speaker 1: making the rounds of Capitol Hill early part of next week. 743 00:41:29,560 --> 00:41:31,480 Speaker 1: I did notice that confirmation. I was going to ask 744 00:41:31,480 --> 00:41:32,880 Speaker 1: you with that because I know that you've worked with 745 00:41:32,960 --> 00:41:35,040 Speaker 1: him before, I know that you're close. Is that going 746 00:41:35,080 --> 00:41:36,640 Speaker 1: to pick up the pace as a practical manner, because 747 00:41:36,840 --> 00:41:38,880 Speaker 1: we know Mr Lighthouser has a bit of experience in 748 00:41:38,920 --> 00:41:43,080 Speaker 1: negotiating trade yet trade deals, well, Lighthouse is a wonderful 749 00:41:43,120 --> 00:41:46,960 Speaker 1: addition to the US trade rep position and to the 750 00:41:47,040 --> 00:41:52,520 Speaker 1: overall effort to adhere to the President's agenda and fix 751 00:41:52,560 --> 00:41:56,640 Speaker 1: our trade problems. So so finally, Mr Secretary, I'm gonna 752 00:41:56,640 --> 00:41:58,800 Speaker 1: ask you something that may be a bit outside your jurisdiction, 753 00:41:58,840 --> 00:42:00,200 Speaker 1: but you know about it, you care about at it. 754 00:42:00,440 --> 00:42:03,400 Speaker 1: And that is a report now that that your colleague 755 00:42:03,640 --> 00:42:06,840 Speaker 1: Steve Manuch in the Secretary Treasury is urging regulators to 756 00:42:06,840 --> 00:42:08,520 Speaker 1: take a look at the vocal rule and how they 757 00:42:08,600 --> 00:42:12,120 Speaker 1: might amend that way that's being enforced. Is that essential 758 00:42:12,200 --> 00:42:16,200 Speaker 1: to the deregulatory effort with respects of financial services? Well, 759 00:42:16,239 --> 00:42:20,640 Speaker 1: I think you ought to address Secretary manuchtion on that topic. 760 00:42:21,160 --> 00:42:23,960 Speaker 1: I think that there are some things about the vocal 761 00:42:24,040 --> 00:42:28,240 Speaker 1: rule that probably should be changed, but I'm very busy 762 00:42:28,400 --> 00:42:31,880 Speaker 1: with what is within my jurisdiction. I'm not gonna go 763 00:42:32,000 --> 00:42:44,240 Speaker 1: poaching on other people's Thanks for listening to the Bloomberg 764 00:42:44,280 --> 00:42:50,640 Speaker 1: Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, 765 00:42:50,960 --> 00:42:54,759 Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at 766 00:42:54,840 --> 00:42:59,520 Speaker 1: Tom Keene David Gura? Is that David Gura? Before the podcast, 767 00:42:59,800 --> 00:43:14,200 Speaker 1: you could always catch us worldwide. I'm Bloomberg Radio, brought 768 00:43:14,239 --> 00:43:17,880 Speaker 1: you by Bank of America Mary Lynch, dedicated to bringing 769 00:43:17,880 --> 00:43:21,640 Speaker 1: our clients insights and solutions to meet the challenges of 770 00:43:21,640 --> 00:43:26,640 Speaker 1: a transforming world. That's the power of global connections. Mary Lynch, Pierce, 771 00:43:26,760 --> 00:43:30,600 Speaker 1: Fenner and Smith Incorporated Member s I p C.