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Speaker 1: Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane

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Speaker 1: jay Ley. We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Pretty

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Speaker 1: must for joining me. Now, take the securities had a

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Speaker 1: global interest rate strategy here in New York for now?

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Speaker 1: Is that like the crack in the conviction with j

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Speaker 1: Pal at the moment? Hi, John, Yes, I think power

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Speaker 1: is trying to retain optionality, is trying to retain flexibility.

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Speaker 1: There are a lot of uncertainties out there. You know,

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Speaker 1: We've had the tax cuts, so you've had this new

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Speaker 1: term boost to growth. We really don't know if that's

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Speaker 1: going to affect long term growth. We also don't know

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Speaker 1: how the whole trade war thing is going to play out.

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Speaker 1: So I think what we're hearing from Chair Powell is

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Speaker 1: for now, so the next couple of hikes. But you know,

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Speaker 1: I was struck by the fact that he is not

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Speaker 1: pushing the theme of a higher our star or a

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Speaker 1: higher neutral rate. He actually brought up the neutral rate

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Speaker 1: a bunch of times, but he's saying there's a lot

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Speaker 1: of uncertainty. Second point, he's not pushing the idea that

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Speaker 1: I think is embedded in the dot plot that the

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Speaker 1: FED is going to go above neutral. I think that

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Speaker 1: is I would say the single biggest risk factor, uh

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Speaker 1: for the equity market is the fact that if the

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Speaker 1: FED does go above neutral, they're going away from the

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Speaker 1: narrative of of normalization to actually tightening. But chap Owl

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Speaker 1: is not really pushing on these themes. So that's why, uh,

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Speaker 1: you know, I would say the rates market is essentially

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Speaker 1: priced for that outcome. Um. But but I think that's

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Speaker 1: he's really trying to, uh, to keep up all his options.

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Speaker 1: Let's explore this concept of the neutral right though, What

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Speaker 1: is the neutral right? How close are we to it?

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Speaker 1: So you know, if if you look at the dot plot,

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Speaker 1: it's anywhere from two and a half to about three

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Speaker 1: and a quarter percent, we really don't know. It's it's immeasurable.

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Speaker 1: I think what drives the neutral rate is essentially long

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Speaker 1: term growth. So what drives long term growth, it's it's

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Speaker 1: labor force participation and its productivity. Now neither have moved,

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Speaker 1: and I think this is the big puzzle in economics

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Speaker 1: why are these factors not moving? And so if they're

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Speaker 1: not moving, then our star is actually much lower. So

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Speaker 1: I think you know it's it's a it's a big

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Speaker 1: issue for the rates market. They are plug ins. A.

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Speaker 1: Can we make the plug ins given the new lower

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Speaker 1: terminal rate which is a mystery? Right? And B can

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Speaker 1: we make the plugins given central bank balance sheet dynamics

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Speaker 1: which are a mystery. We have two major mysteries. I

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Speaker 1: cannot not say that we do. I think the balance

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Speaker 1: sheet one is the one that most people think that

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Speaker 1: the FED can continue to run the balance sheet down.

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Speaker 1: I actually think that the equilivalent level of reserves is

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Speaker 1: much higher than what it was pre crisis, and so

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Speaker 1: at some point next year, the FED is going to

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Speaker 1: have to deal with the fact that banking reserves will

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Speaker 1: become a binding constraint, so they'll have to stop balance

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Speaker 1: sheet run off. At the same time, if they've hiked

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Speaker 1: a couple of times and we'll let's say two and

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Speaker 1: a half three on the first rate, I think they'll

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Speaker 1: have to stop the hiking cycle. This is really important.

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Speaker 1: Back up again and say what's going to happen in

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Speaker 1: a year with a balance sheet choice at given bank reserves.

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Speaker 1: That's advanced. Mumbo jumbo. Explain it in English. So what's

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Speaker 1: happening is as the FED lets the portfolio run off,

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Speaker 1: access reserves in the banking system do decline. Now, if

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Speaker 1: you look at pre crisis, access reserves in the banking

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Speaker 1: system was zero. So I think a lot of people

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Speaker 1: believe that the FED has a long way to go.

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Speaker 1: Access reserves at about two trillion. If you look at

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Speaker 1: the primary Dealers survey um in May, they actually asked

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Speaker 1: primary dealers what is the equidible level of reserves, and

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Speaker 1: primary dealers about five billion. I think it's closer to

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Speaker 1: potentially one and a half trillion. So you've got three

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Speaker 1: four billion of reserves that can drain, and then at

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Speaker 1: some point banks are going to demand these Where do

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Speaker 1: they drain? To the swamp in Washington? Where do they

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Speaker 1: So it's an accounting entity, that's a fair point. It's

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Speaker 1: so as the FED lets the portfolio run off, so

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Speaker 1: they let these treasuries mature, it's an accounting entity. They

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Speaker 1: essentially reduced the level of results. Do you know I've

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Speaker 1: never passed John an exam on debits and credits? You know?

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Speaker 1: I I When she says an accounting entity. I'm like,

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Speaker 1: I'm like the ultimate D plus student. How did you

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Speaker 1: pass the cf A? It was a miracle clouds. I

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Speaker 1: went to the Rigs School of c f A training.

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Speaker 1: It was the clouds parted. I mean, I just barely

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Speaker 1: and you slipped someone a few hundred dollar bills? No, no,

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Speaker 1: I did not. But but the bottle of the eighteen

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Speaker 1: year bottle of Scotch. It was a Saturday in July

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Speaker 1: in Charlottesville, Virginia, and I expressed that Johnny Walker Blue Down,

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Speaker 1: there was this a dark knight on the in the

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Speaker 1: seven sties. Yeah, it was. It was gonna imagine seventies,

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Speaker 1: you know. But seriously, you know this is really advanced.

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Speaker 1: This is a really grown up discussion with Priam, Mr

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Speaker 1: john and it's about the mysteries of these flows. And

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Speaker 1: even the smartest people Johnny have no clue what's going

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Speaker 1: to happen over the next eighteen months. They can guess. Yeah,

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Speaker 1: I want your guests on how the fed response of

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Speaker 1: this yield curve inverts lights this year. So I think

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Speaker 1: it it depends on how it inverts. If it inverts

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Speaker 1: at this level, I think the market is going to

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Speaker 1: have to price cuts in twenty or twenty one. I

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Speaker 1: think that will absolutely terrify the fair because then the

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Speaker 1: FED is going to say, well, the market's pricing in

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Speaker 1: a policy mistake, and it's not if the Fed is

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Speaker 1: going above neutral, which is why I say, if it

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Speaker 1: inverts that, you know, three and a half percent, then

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Speaker 1: the FED is going to say, yes, we did go

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Speaker 1: above neutral, so therefore we have to ease. But I

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Speaker 1: think an inversion or even flattening here, I think is

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Speaker 1: going to worry the FED. Now. I do think that

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Speaker 1: they're trying to push back a little bit here. They're saying, look,

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Speaker 1: the curve is flat because of the long end. But

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Speaker 1: you know, in our analysis, we actually find that the

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Speaker 1: curve is very fair. If we are heading into the

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Speaker 1: neutral rate, the market is saying stopped right here. I

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Speaker 1: find it really interesting the white people view the yield

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Speaker 1: curve and come to different conclusions. I think some people

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Speaker 1: look at it and think about whether it's a symptom

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Speaker 1: of something that's happening with the business cycle, and then

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Speaker 1: others look at it and think, what are the consequences

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Speaker 1: of a inverted yield curve flat yield curve? Regardless of

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Speaker 1: whether it's a symptom of anything, because there will be

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Speaker 1: consequences for maturity transformation, just credit formature, um, there will

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Speaker 1: be consequences for how people at risk and what happens

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Speaker 1: to risk sinking capital. Aren't they the bigger concerns prayer

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Speaker 1: there are? And so this the sole cause and effect

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Speaker 1: issue is key. I would argue, you know, right now

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Speaker 1: the market is essentially priced, or the or the rates market,

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Speaker 1: or the yield curve is pricing in this lead cycle

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Speaker 1: behavior at some point of the curve does become flat.

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Speaker 1: I actually think it has broader implications across the discasses

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Speaker 1: as well as maturity transformation. You know, if you can

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Speaker 1: buy two your notes at to sixty, why take on

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Speaker 1: more risk in any other product? You know, when cash

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Speaker 1: has yield, that's pretty attractive. You know, there's your trade warheage.

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Speaker 1: Essentially you don't need to sell any stocks. You can

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Speaker 1: just buy some front end treasuries. So I think that's

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Speaker 1: where the flat cove does matter. So I would say,

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Speaker 1: right now, what it's signaling is FEDS about to end

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Speaker 1: the hiking cycle. And this is where the inversion becomes

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Speaker 1: scary because if the fens is no, no, actually we're

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Speaker 1: going to hike until three and a half as you

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Speaker 1: and voted cove, which I think will actually be self

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Speaker 1: limiting because that's going to spook the ful no idea

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Speaker 1: what you said strategies. Let's talk to the congressman from

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Speaker 1: Corning glass Works, Corning, New York where they make all

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Speaker 1: that miracle glass. It's in our cell phones. Tom Reid

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Speaker 1: is from the District, New York, which is under the

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Speaker 1: Finger Lakes of New York State, and of course he

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Speaker 1: is a former mayor of Corning and we welcome him today.

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Speaker 1: Tom read Corning glass Works has gone through like fifteen

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Speaker 1: lives since Stu Bend Glass. How is glass Works doing

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Speaker 1: up in Corning. You know, they're doing really very well

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Speaker 1: right now. They always have an uncanny ability to yes,

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Speaker 1: look over the horizon and develop the next product that

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Speaker 1: becomes a huge driver for them. And you know the

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Speaker 1: guerrilla glass and the fiber out They're doing very well

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Speaker 1: and they've got more opportunities coming down to five part.

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Speaker 1: It's amazing compared to that photographic company up northwest, up

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Speaker 1: in Rochester that's had some challenges over the years. Tom,

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Speaker 1: I've got to go to the business that's usual right now.

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Speaker 1: You were a Democratic district. You are now a Republican district,

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Speaker 1: and you're caught in the middle of all the emotions

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Speaker 1: of the president and of course at double negatives and

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Speaker 1: all that. What do you hear from your constituents and

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Speaker 1: what are you gonna do in the next couple of days.

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Speaker 1: Is you listen to your Republican president. Well, you know

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Speaker 1: obviously that the president has done very well and are

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Speaker 1: part of New York States, that he did very well

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Speaker 1: in our district in the last election. And I'll say

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Speaker 1: the sense I get as I go around, as the

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Speaker 1: silent majority is standing firm with him because they appreciate

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Speaker 1: the disruptive approach that he's bringing to Washington, d c.

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Speaker 1: Into putting American interests first and everything he does in

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Speaker 1: regards to trade, new policy, foreign policies. And from my perspective,

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Speaker 1: it's resonating still with people back home. Then this is

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Speaker 1: critical lot of horseheads high school. Your father served the

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Speaker 1: nation in the army. He was, I believe, in Korea

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Speaker 1: up against a communistant at the time, Soviet threat. How

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Speaker 1: do you take your constituents uh support of the president

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Speaker 1: and dovetail with what we saw in Helsinki. I think

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Speaker 1: everyone worldwide wants to know what does his court constituency

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Speaker 1: do with what happened in Helsinki. You know, I, you know,

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Speaker 1: as I've always said that if there's an issue I

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Speaker 1: disagree with the President on, I will express that, and

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Speaker 1: most of the time I do it privately. But on

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Speaker 1: this issue I disagree. I think with the President in

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Speaker 1: regards to the Russian relationship. Russia is an enemy, is

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Speaker 1: an adversary, but even with your adversaries and your enemies,

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Speaker 1: and this is what I do appreciate about the president

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Speaker 1: do in Helsinki is reach out to your enemies and

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Speaker 1: see is there a common interest where we can align

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Speaker 1: to address issues like North Korea, like Iran, like Syria,

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Speaker 1: and the Middle East immigration catastrophe that's coming as a

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Speaker 1: result of that destabilization. And so from my perspective, that

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Speaker 1: type of approach to Russia is the more appropriate approach.

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Speaker 1: And I think you know, the President as heart is

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Speaker 1: trying to do that, but obviously that was not comfortable

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Speaker 1: with the agreeing with him in regards to the embracing

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Speaker 1: Russia as a true ally and a true front that

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Speaker 1: they are not. And Tom, I don't think you were

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Speaker 1: alone Jonathan here and I just want to jump in

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Speaker 1: and focus the conversation now on the trade side of

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Speaker 1: the story. I think many people agree with you that

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Speaker 1: they're happy that someone has come along trying to break

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Speaker 1: up the status quo and take a new approach to

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Speaker 1: get some different outcomes. I'm just wondering what kind of

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Speaker 1: outcomes you're hoping for here, Tom, Yeah, what we're looking

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Speaker 1: for it's just an equitable thing field, a fair plain

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Speaker 1: field upon which we can trade on the world marketplace.

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Speaker 1: So you start with our our family friends, so to speak,

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Speaker 1: Canada and Sick though, and you look at a deal

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Speaker 1: that hasn't been negotiated in decades and renegotiated modernized. So

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Speaker 1: there's issues of digital commerce, there's issues of access to

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Speaker 1: their dairy markets in regards to Canada in particular, and

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Speaker 1: I think at the end of the day we will

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Speaker 1: be able to work that out because we are so

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Speaker 1: aligned and we're such a close friendship with Canada Mexico,

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Speaker 1: and all we're looking for when we go onto the

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Speaker 1: world stage outside of Canada Mexico is when we take

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Speaker 1: on China, that we all recognize the unfair trade practices

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Speaker 1: that China engages in. And when I say we am

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Speaker 1: talking about all the countries of the world to send

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Speaker 1: the message to China. You can't steal our intellectual property,

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Speaker 1: you can't require the investment standards of just having Chinese

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Speaker 1: ownership and businesses. They're you're hollowing out countries. You're taking

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Speaker 1: away countries ability to compete fairly, and that's that's to me,

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Speaker 1: is what we're ultimately looking for in this trade So

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Speaker 1: but I think it would be quite easy on the

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Speaker 1: international stage to build there are the coalition to really

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Speaker 1: address what is happening with the Chinese. But unfortunately the

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Speaker 1: President has trying to do everything all at once. Do

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Speaker 1: you think trying to do everything all at one to

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Speaker 1: run the risk of isolating allies when perhaps there is

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Speaker 1: a better option to go at China try to get

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Speaker 1: them to address these trade issues. But do that and

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Speaker 1: do that alone and get your allies on board. You know,

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Speaker 1: I appreciate that, but that has been tried for decades

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Speaker 1: and kind of that slowgo grow, glacial type of approach

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Speaker 1: to trade policy. What the President has done doing is

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Speaker 1: sending the message the trade policy of yesterday has come

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Speaker 1: to an end. From America's perspective, we're going to disrupt it.

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Speaker 1: And when you when you do that, clearly now your

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Speaker 1: adversaries in those relationships understand that you mean a different game,

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Speaker 1: You mean a different side of business that you're going

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Speaker 1: to bring to the table. So that's what I think

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Speaker 1: is going on here. You have terroriffs affected less works. No,

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Speaker 1: I mean, obviously any type of trade war is gonna

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Speaker 1: impact you know, they have obviously a world stage they

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Speaker 1: operate on them. But then also are agricultural communities, so

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Speaker 1: we're all sensitive to it. But at the end of

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Speaker 1: the day, the message I send to my to the

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Speaker 1: trading partners to stay at the table, negotiate these things out.

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Speaker 1: Stay at the table, don't walk away if you if

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Speaker 1: you think you're gonna walk away, you're only going to

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Speaker 1: prolong this dispute. Stay at the table and negotiate this through. Well,

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Speaker 1: we're gonna negotiate it through. But do we need to

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Speaker 1: do it bilateral and so adversarial or can we find

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Speaker 1: a more multilateral path? I mean, essentially, Congress and reader,

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Speaker 1: we back to the nineteen thirties. Smooth, Hollie, Well, I

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Speaker 1: think you know we're not to to the nineteen thirties.

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Speaker 1: And my humble opinion, we all recognize we're on the

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Speaker 1: world stage. The world consumers was outside of America's borders.

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Speaker 1: So what I think to see is, you know, we

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Speaker 1: we can do bilaterally, can do multilateral. But the bottom

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Speaker 1: line is we will negotiate like you saw with South Korea,

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Speaker 1: for example, in regards to modern Night and some of

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Speaker 1: the provisions there to make it a little fairer for

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Speaker 1: American interests. You know, you stay at the table, will

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Speaker 1: work this out, the bilateral, multilateral. I think there's an

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Speaker 1: appetite to get this taken care of. Tom last question,

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Speaker 1: big tax package passed by the Republican Party in Congress,

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Speaker 1: and there are some people concerned that the trade push

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Speaker 1: could be the doing of the stimulus that we could

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Speaker 1: get for the US economy. Do you see that offsetting

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Speaker 1: the tax story? Now? You know, I don't see that.

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Speaker 1: In regards to the numbers that we're seeing, the economic

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Speaker 1: growth numbers, the job growth numbers, the confidence, the consumer

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Speaker 1: confidence numbers, those are all good indicators that you know,

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Speaker 1: this type of short term disruptive anxiety and fear I

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Speaker 1: don't see having a long term impact on the economic

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Speaker 1: growth trajectory of America. And from that perspective, I think

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Speaker 1: we're in a position that you just continue this growth

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Speaker 1: and keep writing it up. Tom Read, thank you so much,

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Speaker 1: greatly appreciated that he is with the twenty three district

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Speaker 1: Republican in Upstate New York. This is just under the

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Speaker 1: finger Lakes as well, Tom Reid on a number of topics.

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Speaker 1: Right now, let's switch gears and go to a steam

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Speaker 1: gentleman who has never had a Schmitz in his life.

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Speaker 1: That with be Randall Krasner on finance in our central

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Speaker 1: banking as well. Randy, All, my radar is up. Everybody's

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Speaker 1: telling me it's boring, boring, predictable, boring, boring. And you

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Speaker 1: know that's when you get your tail deviation. That's when

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Speaker 1: you get your three standard deviation. Shock. Are we there?

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Speaker 1: I don't think we're quite there, but I think you're

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Speaker 1: exactly right. It's only when you don't expect it that

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Speaker 1: it hits. I mean, think back to early February. Everything

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Speaker 1: was the smoothest, this the simplest, the easiest, and suddenly

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Speaker 1: a new piece of data came out and the markets

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Speaker 1: were in tumult for for a few weeks. Randy, I

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Speaker 1: want to give a shout out. You can use their

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Speaker 1: research work at BOOST Schools Chicago. Deutsche Bank I think

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Speaker 1: has done beautiful Peter Hooper like work on the dynamics

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Speaker 1: of the yield curve and central bank balance sheets. His

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Speaker 1: the uniqueness of q E and then to QT his

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Speaker 1: given us a wrong picture or snapshot of that twos

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Speaker 1: tend spread dynamic. Well, I don't necessarily think wrong, but

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Speaker 1: I do think we have to be open to these

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Speaker 1: These data are not the same as what we typically

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Speaker 1: have had and so and the circumstances are different, and

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Speaker 1: so to just say, oh, well, in the past, you

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Speaker 1: know this flatness always meant recession. I think we have

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Speaker 1: to be open to the possibility that it doesn't because

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Speaker 1: of all these other interventions. Do you think there are

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Speaker 1: consequences though, that come about from an inverted yield curve,

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Speaker 1: for instance, maturity transformation, What happens with credit in the economy,

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Speaker 1: what happens in terms of seeking capital just flooding to

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Speaker 1: the front end of treasuries. Do you have those concerns? Randig? Well, well,

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Speaker 1: clearly people are not getting compensated for waiting thirty years

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Speaker 1: rather than waiting overnight. I mean the difference between overnight

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Speaker 1: rates and tenure rates in the US is you know,

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Speaker 1: less than much less in a percentage point, that's not

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Speaker 1: much much compensation for that. So obviously they're not given

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Speaker 1: incentives to to wait, and that can have consequences as

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Speaker 1: exactly as you said, for where money flowing in different

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Speaker 1: ways than would be typical with a more steep yield curve.

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Speaker 1: So regardless of what the reasons are for the flatness

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Speaker 1: or perhaps the inversion later this year, you'd have to think, Randy,

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Speaker 1: there are consequences that come about from that that the

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Speaker 1: Federal Reserve should be taken now to solve. Well, again,

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Speaker 1: it actually gets back to what's driving the flatness. So

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Speaker 1: is the flatness being driven because people expect the economy

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Speaker 1: to be going down in the future, or is it

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Speaker 1: because they expect so little inflation have so little worry

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Speaker 1: about the upside to inflation. I think it's more the ladder,

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Speaker 1: and in that case then the yield curve isn't necessarily

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Speaker 1: telling you such a negative story. But it's hard to

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Speaker 1: know now, you know, it's always easy exposed to say, oh, well, no,

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Speaker 1: of course it was because things were going over the cliff.

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Speaker 1: But it is true that the inflation expectations are pretty low.

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Speaker 1: And the expectations of inflation spike seemed to be very low.

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Speaker 1: I think they're probably a little bit too low for

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Speaker 1: my taste. Finally, Wednesday Math with Randall Krasner. Randy, there's

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Speaker 1: the idea of linear fed raises rates step by step,

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Speaker 1: inch by quarter point inch, and the fact is quadratic,

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Speaker 1: which is an exponential function, Folks. The fact is is

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Speaker 1: we raise rates more, you begin to get more profound,

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Speaker 1: more quadratic effects. Do you know where that moment is

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Speaker 1: or is that something that you feel your way towards.

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Speaker 1: It's something that you definitely feel your way towards. Our

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Speaker 1: models are not very good at sort of pointing out

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Speaker 1: those inflection points. They're pointing out those turning points. Most models,

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Speaker 1: even if they have some nonlinear elements. As you're you're describing,

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Speaker 1: and it tends to be very very smooth. This is

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Speaker 1: one of the reasons why the FETE is wanted to

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Speaker 1: go at such a gradual pace so that they have

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Speaker 1: time to figure out if something's going wrong. And I

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Speaker 1: think they've been pretty successful at me so far. What

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Speaker 1: you just heard there from Professor Krauser, Folks is profound.

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Speaker 1: You have to go along the path and monitor what

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Speaker 1: happens because of the danger if you get it wrong,

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Speaker 1: as you it up towards a neutral rate and even

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Speaker 1: a restrictive policy, not that we've had that in a

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Speaker 1: zillion years. Randall Crosser, thank you so much. With the

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Speaker 1: University of Chicago, they're both school and of course a

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Speaker 1: former governor. The putters are Terry Haynes joins us now

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Speaker 1: with abcre I s I and we will digress from policy.

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Speaker 1: Here was someone qualified to speak of the double negative?

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Speaker 1: He is out of Oberlin, which is a school that

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Speaker 1: takes immense pride and it's English curriculum. Just to get

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Speaker 1: through I'm serious, folks, the core gut English one twenty

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Speaker 1: three introduction is Shakespeare is a thing of legend it Oberlin.

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Speaker 1: Did you take introduction to Shakespeare? Terry Haynes, I did not, Tom.

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Speaker 1: I was a what they called then government and now

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Speaker 1: politics and religion, major double major. Well, the religion of

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Speaker 1: the double negative has come front and center and the

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Speaker 1: rhetoric of Washington with your years of experience down there,

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Speaker 1: what's the follow on from what we observed yesterday? Is

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Speaker 1: it a one off event that drifts away into the

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Speaker 1: August heat, or does it have any permanent substance to

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Speaker 1: Republicans in Washington. Well, I think it does. You know

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Speaker 1: the uh, Yeah, there are plenty of times the Congressional

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Speaker 1: Democrats didn't agree with President Obama. The Congress's uh, in

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Speaker 1: the same majority as the president, always find themselves in

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Speaker 1: these sorts of pickles. I think the the immediate fall

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Speaker 1: out of interest to markets, though, is that I think

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Speaker 1: Republicans are going to feel a little bit free or

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Speaker 1: about trying to challenge and again when necessary and guide

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Speaker 1: when necessary, the the policy of the United States government

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Speaker 1: on things that are either directly related such as Russian

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Speaker 1: sanctions and the like, uh, or weapons sales and things

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Speaker 1: that are indirect uh. And and that includes trade because

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Speaker 1: I think the what I've been saying for about a

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Speaker 1: month now, and I continue to see signs of it

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Speaker 1: this week, is that Congress is thinking about starting to

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Speaker 1: take back some of its trade related powers that had

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Speaker 1: longer US Okay, that's important. How will they do that?

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Speaker 1: Particularly butt of stuff as the clock to the mid terms,

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Speaker 1: can they take how do they take power back from

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Speaker 1: the executive branch? Well, it's in in uh. The stuff

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Speaker 1: is never easy, but in the been a technical sense,

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Speaker 1: it's easy. The what you have is a situation where

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Speaker 1: you know, the Congress patitutionally has the tariff power. It

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Speaker 1: has given some to the president for national security purposes,

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Speaker 1: for you know the three oh the three oh one,

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Speaker 1: the purposes that are now being used for intellectual property. Uh.

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Speaker 1: What is what is the merger as a proposal is

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Speaker 1: the idea that Congress has to pass the DRINT resolution

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Speaker 1: to approve the use of the president's use of trade powers,

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Speaker 1: tariff powers on national security on matters related to national security.

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Speaker 1: And there was a fairly meaningless resolution that came out

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Speaker 1: of the Senate last week. But there are signs from

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Speaker 1: particularly from the heads of the trade committees, Senator Hatch

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Speaker 1: and the Senate Congress, from Brady in the House, uh,

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Speaker 1: that they're thinking about pushing that. And uh so you

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Speaker 1: know this is clearly meant as a warning to the administrator.

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Speaker 1: And and so Congress can pass the statute to do

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Speaker 1: your direct question. Congress can pass a law and actually

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Speaker 1: tuck it into the spending bills, tuck it into a

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Speaker 1: bunch of different places and essentially dare the president de

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Speaker 1: vito and over that, which I probably wouldn't do with

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Speaker 1: the news flow and I'm not talking just about the

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Speaker 1: upper over hell Sinki and all that. I'm talking about

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Speaker 1: the trip, know, you know, England, Helsinki. But even before that,

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Speaker 1: who's got the upper hand in the to the election

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Speaker 1: discourse Republican legislators or a Republican president. Who's got the

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Speaker 1: upper hand right now? I say the I say the

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Speaker 1: legislators in no small part because the legislators are up

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Speaker 1: for re election, and the legislators will calibrate, uh, their

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Speaker 1: own responses. I mean, they're their own political calculus will

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Speaker 1: in many cases different from the presidents. These are all

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Speaker 1: these are all local elections. Give an aspect to which

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Speaker 1: this is gonna be a referendum on the president, but

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Speaker 1: that's that's usually not the dominant aspect. What we spoke

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Speaker 1: to Tom Reade district in our Corning, New York Corning

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Speaker 1: Blasters talked to him this morning and he said just

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Speaker 1: what you said, which is, yeah, it's like there and

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Speaker 1: he doesn't agree with the president on what's happened the

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Speaker 1: last few days. And then there's this huge but you know,

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Speaker 1: we're going to continue with this hugely pop or policies

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Speaker 1: within the Republicans. Congressman Reid said the Republicans silent majority.

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Speaker 1: They haven't wavered, have they? No? I think they haven't.

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Speaker 1: And and uh, Congressman Reid, who is a very smart

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Speaker 1: member and a very smart politician, I think makes it

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Speaker 1: an important point here. The way I would put it

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Speaker 1: is that the Republican Congress and President Trump have always

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Speaker 1: been in a coalition government. When they agree on on

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Speaker 1: pursuing big things together as they did on tax they

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Speaker 1: can be very effective. But when they disagree on things,

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Speaker 1: which they do quite often, those things aren't gonna gain traction.

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Speaker 1: And you know, you have seen a lack of cohesion

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Speaker 1: on lots of lots and lots of difference issues from

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Speaker 1: from spending issues to uh uh, to immigration and a

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Speaker 1: bunch of other things. So you know they you know that.

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Speaker 1: You know you're not putting words in Congressmen Reid's mouth,

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Speaker 1: but you know these are people that don't think they're

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Speaker 1: being let around U those at all. They think they're

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Speaker 1: you know, it's their agenda as much as the President.

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Speaker 1: Terry Haynes with I s I with us right now

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Speaker 1: expert on policy. If the Republicans keep the House, and

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Speaker 1: I don't know what the polling is right now, but

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Speaker 1: let's suggest that would be a modest surprise. What's the

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Speaker 1: first Wednesday of November big policy prescription for a Republican Trump,

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Speaker 1: a revitalized Republican House and assumed Republican Senate. What's the

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Speaker 1: next big thing after they win the election? Today? Let

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Speaker 1: me let me do a sentence to set up today.

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Speaker 1: I think the likeliest and we're a long way away,

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Speaker 1: as you know, from the election, but today I think

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Speaker 1: the likeliest outcome is that Republicans pick up seats in

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Speaker 1: the Senate. It's a very favorable environment for them. They're

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Speaker 1: mostly Democratic seats up the House. I think they scrape

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Speaker 1: out a win, but they probably lose some seats, and

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Speaker 1: they already have a very small majority. So I think

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Speaker 1: what you've got in November UH is a is a

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Speaker 1: tiny Republican majority. But you know, even if there's a

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Speaker 1: Democratic majority, it's tiny. What you're gonna have is a

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Speaker 1: largely muddled uh ability to do things in Washington was

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Speaker 1: such a was such a small majority. And what you're

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Speaker 1: gonna see, I think, is an emphasis on the second

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Speaker 1: tier issues that went nowhere this year, and that includes

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Speaker 1: things like infrastructure, things that can be guaranteed to get

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Speaker 1: some some bipartisan buy in things that are will be

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Speaker 1: very popular across the base. Uh, and I think that's

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Speaker 1: where they pivot to Terry. Thank you so much for

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Speaker 1: the briefing, very informative with all that's goin on as

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Speaker 1: nice to walk away there for a moment place from

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Speaker 1: I would not not I cannot, John, did you study

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Speaker 1: double negative? It's a school. Thanks for listening to the

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Speaker 1: Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,

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Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at

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Speaker 1: Tom Keene before the podcast. You can always catch us worldwide.

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Speaker 1: I'm Bloomberg Radio