1 00:00:00,080 --> 00:00:12,960 Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jay Leye. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:31,520 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg here 5 00:00:31,520 --> 00:00:35,040 Speaker 1: in New York and Police. To say Droomatis MetLife Investment Management, 6 00:00:35,120 --> 00:00:39,080 Speaker 1: chief market strategist, through it looks like the new battleground. 7 00:00:39,159 --> 00:00:41,480 Speaker 1: We've seen it coming for a while. It's an incremental 8 00:00:41,600 --> 00:00:44,559 Speaker 1: step in what could be something much more severe. The 9 00:00:44,640 --> 00:00:47,120 Speaker 1: market though fairly relaxed in the face of this. What's 10 00:00:47,159 --> 00:00:51,040 Speaker 1: your view, Well, I mean I think it's it's because 11 00:00:51,080 --> 00:00:53,960 Speaker 1: it's just another front. Uh, you know, it's not really 12 00:00:54,000 --> 00:00:57,319 Speaker 1: adding to anything, because the big ones really are, you know, 13 00:00:57,560 --> 00:00:59,760 Speaker 1: what happens with China, and as long as China trade 14 00:00:59,800 --> 00:01:02,640 Speaker 1: can used to progress, everything else is a little bit 15 00:01:02,640 --> 00:01:04,479 Speaker 1: of a side show. So we were worried about NAFTA 16 00:01:04,520 --> 00:01:07,640 Speaker 1: because the direct impacts on the us UM and so 17 00:01:07,720 --> 00:01:10,240 Speaker 1: that kind of got negotiated, even though it's still kind 18 00:01:10,240 --> 00:01:13,520 Speaker 1: of ongoing. If we get a deal with China, it's 19 00:01:13,520 --> 00:01:17,560 Speaker 1: gonna pardon the punt Trump. Everything else just in terms 20 00:01:17,600 --> 00:01:20,160 Speaker 1: of the European equity market. This morning, folk taking a 21 00:01:20,160 --> 00:01:22,520 Speaker 1: lot of this and it's stride as well. Surely Europe 22 00:01:22,800 --> 00:01:24,880 Speaker 1: does it have the ability and willingness to respond to 23 00:01:25,240 --> 00:01:27,840 Speaker 1: a propose trade war if that's what we do end 24 00:01:27,920 --> 00:01:29,840 Speaker 1: up with. And I'm not saying that's my base case 25 00:01:29,920 --> 00:01:32,760 Speaker 1: or anybody's at this point, but let's assume we do. 26 00:01:32,760 --> 00:01:34,960 Speaker 1: Does Europe have the ability and willing this to respond 27 00:01:34,959 --> 00:01:37,559 Speaker 1: to that? In the same vein the Chinese do uh? 28 00:01:37,600 --> 00:01:40,760 Speaker 1: You know, my guests would be they don't, uh, simply 29 00:01:40,800 --> 00:01:44,399 Speaker 1: because China's you know, kind of going much more on 30 00:01:44,400 --> 00:01:47,000 Speaker 1: on a partner to partner basis with US. Um. You know, 31 00:01:47,080 --> 00:01:49,040 Speaker 1: they're a very large part of our economy. We're a 32 00:01:49,120 --> 00:01:52,520 Speaker 1: very large part of theirs. I think with Europe they 33 00:01:52,560 --> 00:01:54,240 Speaker 1: have a lot more to lose. And and you know, 34 00:01:54,320 --> 00:01:56,200 Speaker 1: it's probably not a coincidence that the U S is 35 00:01:56,280 --> 00:01:59,760 Speaker 1: choosing this moment. What about the American economy right now? 36 00:02:00,040 --> 00:02:01,920 Speaker 1: If we look at the American economy, if I look 37 00:02:01,960 --> 00:02:05,760 Speaker 1: at the development of g d P, we migrate down. 38 00:02:05,800 --> 00:02:08,280 Speaker 1: We've got maybe a first quarter that's ugly, some people 39 00:02:08,320 --> 00:02:11,720 Speaker 1: even saying below one percent. But you've been resilient at 40 00:02:11,720 --> 00:02:14,000 Speaker 1: a two point five two point six percent run right, 41 00:02:14,200 --> 00:02:16,760 Speaker 1: how do you get there? While you get there with 42 00:02:16,800 --> 00:02:19,600 Speaker 1: the US consumer um, and you get there by the 43 00:02:19,600 --> 00:02:21,800 Speaker 1: fact that, you know, things that people have been worrying about, 44 00:02:21,880 --> 00:02:25,240 Speaker 1: for example, trade, housing, et cetera, have all actually been 45 00:02:25,400 --> 00:02:30,240 Speaker 1: very minor net drags on growth or even net ads. Uh. 46 00:02:30,280 --> 00:02:31,519 Speaker 1: You know, I'm gonna give a shout out to my 47 00:02:31,560 --> 00:02:33,840 Speaker 1: good friend Neil Datta. He's been talking about the kind 48 00:02:33,840 --> 00:02:37,120 Speaker 1: of the the the rebound and housing activity, um, and 49 00:02:37,200 --> 00:02:40,600 Speaker 1: that being very unusual for late cycle as well. So um, 50 00:02:40,639 --> 00:02:44,200 Speaker 1: you know, once again it suggests like productivity and margins. Uh. 51 00:02:44,240 --> 00:02:46,280 Speaker 1: If this is late cycle, this is the oddest late 52 00:02:46,320 --> 00:02:48,639 Speaker 1: cycle we've ever seen. You and Neil Datta, and I'm 53 00:02:48,680 --> 00:02:52,040 Speaker 1: glad you mentioned him. There's a gloomy day, John Farrow. 54 00:02:52,080 --> 00:02:55,200 Speaker 1: They'll be like a gloomy statistic out or whatever. And 55 00:02:55,240 --> 00:02:57,200 Speaker 1: basically you guys come out and go, yes, it's a 56 00:02:57,200 --> 00:03:01,320 Speaker 1: gloomy statistic. But is the butt under consumption? Is the 57 00:03:01,360 --> 00:03:04,760 Speaker 1: butt under investment? Is that that net exports will improve 58 00:03:04,800 --> 00:03:07,799 Speaker 1: away from this trade. I think the butt is is 59 00:03:07,840 --> 00:03:09,640 Speaker 1: that you know, for for a lot of this data, 60 00:03:09,680 --> 00:03:11,920 Speaker 1: we've been seeing that there's a reason why it's behaving 61 00:03:11,919 --> 00:03:14,600 Speaker 1: the way it is in that time frame. We don't 62 00:03:14,639 --> 00:03:17,040 Speaker 1: want to always put a rosy outlook on things. And 63 00:03:17,080 --> 00:03:19,840 Speaker 1: if you look at the last consumer confidence data, for example, 64 00:03:19,880 --> 00:03:23,240 Speaker 1: it was it was really bad. Uh, but it was 65 00:03:23,280 --> 00:03:26,040 Speaker 1: really bad at a high level, so it was coming 66 00:03:26,080 --> 00:03:30,119 Speaker 1: down directionally. It's going badly. Um, but on a level basis, 67 00:03:30,360 --> 00:03:32,480 Speaker 1: it's still extraordinarily high, and we have to keep that 68 00:03:32,560 --> 00:03:35,960 Speaker 1: in perspective rather than just assuming that every slight downturn 69 00:03:36,040 --> 00:03:38,800 Speaker 1: in the data is a negative. And John, that about 70 00:03:38,800 --> 00:03:41,560 Speaker 1: describes the market stock market as well. It's on a 71 00:03:41,720 --> 00:03:44,440 Speaker 1: level basis. You know what where we're on Swiss stocks, 72 00:03:44,800 --> 00:03:47,040 Speaker 1: the s M I John, I'm sure you know that. 73 00:03:47,160 --> 00:03:49,360 Speaker 1: I don't know it. The Swiss stock is changing in 74 00:03:49,400 --> 00:03:53,840 Speaker 1: Swiss Frank's all just a brief question on the U 75 00:03:53,880 --> 00:03:56,640 Speaker 1: S economy. Is the United States ever in recent history 76 00:03:56,720 --> 00:04:01,880 Speaker 1: imported a recession? Uh, It's it's quite difficult to do. Actually, 77 00:04:01,920 --> 00:04:05,560 Speaker 1: if you half of US GDP is not just the consumer, 78 00:04:05,600 --> 00:04:10,440 Speaker 1: but consumer spending on services, alright, so going to the doctor, 79 00:04:11,120 --> 00:04:15,880 Speaker 1: getting the haircut, buying the cup of coffee in the morning. Um. 80 00:04:15,960 --> 00:04:18,960 Speaker 1: When you see very bad recessions in the US. It's 81 00:04:19,000 --> 00:04:22,240 Speaker 1: when that's spending on services turns negative, right, and it 82 00:04:22,279 --> 00:04:24,280 Speaker 1: doesn't have to turn negative by a lot because it's 83 00:04:24,320 --> 00:04:27,120 Speaker 1: half of US g d P. But the flip side 84 00:04:27,120 --> 00:04:28,920 Speaker 1: of that, though, is is very difficult to drive the 85 00:04:29,000 --> 00:04:32,839 Speaker 1: US into a recession from overseas. This is really smart. 86 00:04:33,080 --> 00:04:36,120 Speaker 1: I mean, I mean it's a really important observation. Well, 87 00:04:36,120 --> 00:04:43,080 Speaker 1: can we continue the conversation? Yeah, continued, Please talking. I 88 00:04:43,160 --> 00:04:46,960 Speaker 1: just thought you'd want an example of service sectors spending 89 00:04:47,839 --> 00:04:53,039 Speaker 1: that comes out of nowhere. Vet Bill got sick and 90 00:04:53,040 --> 00:04:54,880 Speaker 1: I had to go to the veterinarian yesterday. Do you 91 00:04:54,920 --> 00:04:56,919 Speaker 1: know that my veterinarian, I don't even make I go 92 00:04:57,000 --> 00:04:59,600 Speaker 1: to the I make it right out to the Horseman School. 93 00:05:00,320 --> 00:05:02,120 Speaker 1: You just you just make the check right out to 94 00:05:02,200 --> 00:05:05,480 Speaker 1: some prep school in New York City. How much was 95 00:05:05,520 --> 00:05:10,080 Speaker 1: the bell for those many minutes? It's like, you know, 96 00:05:10,200 --> 00:05:12,880 Speaker 1: it's like going to the high fancy law firm or something. 97 00:05:12,880 --> 00:05:16,200 Speaker 1: Are you saying that you're keeping the United States insulated 98 00:05:16,240 --> 00:05:19,679 Speaker 1: from the weakness about single handedly kept Drew Madison service 99 00:05:19,720 --> 00:05:24,400 Speaker 1: series positive? An important question and something important to explore, 100 00:05:24,440 --> 00:05:26,920 Speaker 1: because I just wonder to what degree we should be 101 00:05:27,240 --> 00:05:30,359 Speaker 1: obsessing over the weakness abroad if you are exclusively based 102 00:05:30,360 --> 00:05:33,200 Speaker 1: here in the United States. Good question. So what you 103 00:05:33,240 --> 00:05:37,159 Speaker 1: want to watch out for is transmission mechanism through the 104 00:05:37,279 --> 00:05:41,000 Speaker 1: US markets, particularly the equip markets. Uh. And this is 105 00:05:41,040 --> 00:05:44,239 Speaker 1: where the trade war has actually been pronounced. Right. People 106 00:05:44,440 --> 00:05:48,839 Speaker 1: worry about the trade war. Stock prices go down. CEOs 107 00:05:48,839 --> 00:05:51,160 Speaker 1: look at their stock prices going down and think to themselves, 108 00:05:51,240 --> 00:05:52,840 Speaker 1: I can't have my stock, frice go down. I need 109 00:05:52,880 --> 00:05:55,240 Speaker 1: to figure out a way to kind of encourage people 110 00:05:55,279 --> 00:05:58,560 Speaker 1: to believe that my stock is better than everyone else's stock. Um. 111 00:05:58,880 --> 00:06:02,480 Speaker 1: So when the problem occurs is when they look at 112 00:06:02,480 --> 00:06:04,880 Speaker 1: that and they say, I know, I'm gonna cut jobs 113 00:06:04,920 --> 00:06:07,000 Speaker 1: or cut investments in order to kind of make sure 114 00:06:07,080 --> 00:06:10,400 Speaker 1: that my numbers look good. Um And if you have 115 00:06:10,520 --> 00:06:13,000 Speaker 1: enough people doing that at the same time, you end 116 00:06:13,080 --> 00:06:15,000 Speaker 1: up talking your way into a recession. I think that's 117 00:06:15,040 --> 00:06:17,120 Speaker 1: what you have to worry about. Dreamt of grit to 118 00:06:17,160 --> 00:06:20,159 Speaker 1: catch you out with you Mental life investment manage market 119 00:06:20,200 --> 00:06:24,760 Speaker 1: strategist on Europe. The perspective they put the chances of 120 00:06:24,760 --> 00:06:40,280 Speaker 1: a tray to a tomp, the chances we should say 121 00:06:42,800 --> 00:06:45,120 Speaker 1: in Washington lots going on. We'll get to that in 122 00:06:45,120 --> 00:06:48,520 Speaker 1: a moment with Henrietta Treys on immigration the shocks that 123 00:06:48,600 --> 00:06:52,560 Speaker 1: we saw yesterday. Whatever your politics, let us digress to 124 00:06:52,640 --> 00:06:56,320 Speaker 1: a conversation that was different at twelve noon yesterday than 125 00:06:56,360 --> 00:06:59,000 Speaker 1: it is now at eight oh two Wall Street time. 126 00:06:59,040 --> 00:07:02,120 Speaker 1: Henritta Treys is the Veta Partners. She spent a lot 127 00:07:02,160 --> 00:07:06,360 Speaker 1: of time really focused on the border, and that discussion 128 00:07:06,480 --> 00:07:10,040 Speaker 1: changed yesterday. Henrietta, how did you respond to is the 129 00:07:10,160 --> 00:07:14,760 Speaker 1: languages of the moment a purge of homeland security. I 130 00:07:15,360 --> 00:07:19,920 Speaker 1: think it's incredibly important and underappreciated right now. The purge 131 00:07:19,920 --> 00:07:23,440 Speaker 1: at homeland security is exclusively to do with the US 132 00:07:23,520 --> 00:07:27,440 Speaker 1: Mexico border, which of course is about immigration. But my 133 00:07:27,640 --> 00:07:31,640 Speaker 1: concern and investors concern is that cargo and freight is 134 00:07:31,680 --> 00:07:34,800 Speaker 1: being seriously tripped up at the border, um to the 135 00:07:34,840 --> 00:07:38,400 Speaker 1: point now where I understand from manufacturers they are running 136 00:07:38,400 --> 00:07:42,400 Speaker 1: out of inventory of the supply chains that they depend 137 00:07:42,440 --> 00:07:46,679 Speaker 1: on from Mexico. UM. So I think that the shipping 138 00:07:46,760 --> 00:07:49,200 Speaker 1: and the issue of that is the most important now. 139 00:07:49,400 --> 00:07:51,720 Speaker 1: I mean, we're we're going to speak with Senator Grassley here. 140 00:07:51,880 --> 00:07:54,960 Speaker 1: He's making the rounds today. But what can Capitol He'll 141 00:07:55,080 --> 00:07:59,800 Speaker 1: do to amend a just a suage. What can Capital 142 00:08:00,000 --> 00:08:05,680 Speaker 1: Will do to amend these announcements of yesterday. Honestly, I 143 00:08:05,720 --> 00:08:07,760 Speaker 1: don't think there's very much they can do. When I 144 00:08:07,800 --> 00:08:11,800 Speaker 1: speak with Ways and Means, senior counsel on the trade committees, 145 00:08:11,800 --> 00:08:14,320 Speaker 1: what they tell me is they can't move the U. S. M. 146 00:08:14,400 --> 00:08:17,520 Speaker 1: C A, They can't alleviate concerns that the President has 147 00:08:17,760 --> 00:08:21,960 Speaker 1: with saying NAFTA. They can't move anything legislatively. While this 148 00:08:22,120 --> 00:08:25,200 Speaker 1: border crisis is happening, and as we head into Holy 149 00:08:25,200 --> 00:08:28,320 Speaker 1: Week next week, it's expected to be compounded well within 150 00:08:28,360 --> 00:08:30,520 Speaker 1: the border crisis. I want to go to one single 151 00:08:30,560 --> 00:08:33,840 Speaker 1: sentence in the Washington Post today, which is the idea 152 00:08:34,000 --> 00:08:38,520 Speaker 1: of substantial quote unquote Central American families lined up at 153 00:08:38,559 --> 00:08:41,480 Speaker 1: the border, which is clearly the emotion of the President 154 00:08:41,520 --> 00:08:43,960 Speaker 1: of the United States, and I understand how that gets 155 00:08:43,960 --> 00:08:47,000 Speaker 1: in the way of normal trade at El Paso, etcetera. 156 00:08:47,400 --> 00:08:49,600 Speaker 1: Is that going to go away or is there a 157 00:08:49,679 --> 00:08:54,120 Speaker 1: permanence to the accountable number of people at the border 158 00:08:54,400 --> 00:08:57,360 Speaker 1: who want in. I don't think this is going to 159 00:08:57,440 --> 00:08:59,880 Speaker 1: go away, and I think it's gonna get worse our 160 00:09:00,040 --> 00:09:01,800 Speaker 1: So I was speaking with some folks down on the 161 00:09:01,800 --> 00:09:05,240 Speaker 1: border yesterday and they tell me that the administration is 162 00:09:05,280 --> 00:09:09,240 Speaker 1: looking to bring in federal agents from every single sector 163 00:09:09,360 --> 00:09:14,200 Speaker 1: and agency that's available outside of narcotics and terrorism. So 164 00:09:14,320 --> 00:09:17,679 Speaker 1: that means more federal agents at the southern border, which 165 00:09:17,840 --> 00:09:23,480 Speaker 1: is creating these tremendous backlogs, and um really vetting really 166 00:09:23,559 --> 00:09:28,000 Speaker 1: thoroughly the request for asylum whether or not you know, 167 00:09:28,080 --> 00:09:30,360 Speaker 1: people when they are saying I can't go back home, 168 00:09:30,360 --> 00:09:33,320 Speaker 1: it's too dangerous for me. The federal government, the Trump 169 00:09:33,320 --> 00:09:35,520 Speaker 1: administration at least, is going to try to really do 170 00:09:35,640 --> 00:09:38,600 Speaker 1: some due diligence and understand whether or not that threat 171 00:09:38,679 --> 00:09:41,680 Speaker 1: is real. And so that's going to be more time consuming, 172 00:09:41,720 --> 00:09:43,439 Speaker 1: more folks are going to be vetted in a more 173 00:09:43,480 --> 00:09:46,839 Speaker 1: aggressive manner, and this will likely not end at least 174 00:09:46,880 --> 00:09:49,600 Speaker 1: for the next month, is my expectation. So, Henrietta, let's 175 00:09:49,640 --> 00:09:52,280 Speaker 1: talk about the economic reality of all of this. Typically 176 00:09:52,280 --> 00:09:54,560 Speaker 1: we think of the United States, it's rather insulated from 177 00:09:54,840 --> 00:09:57,880 Speaker 1: international trade issues, but that southern border is important. When 178 00:09:57,880 --> 00:10:00,600 Speaker 1: does the reality of that start to bite? I think 179 00:10:00,600 --> 00:10:03,240 Speaker 1: it's I think it's starting literally as we speak, so 180 00:10:03,600 --> 00:10:07,280 Speaker 1: the drivers that are bringing goods to and from Mexico 181 00:10:07,360 --> 00:10:09,520 Speaker 1: to various plants. You know, it's so integrated. We've been 182 00:10:09,520 --> 00:10:13,640 Speaker 1: dealing with NAFTA since and these businesses don't have you know, 183 00:10:13,720 --> 00:10:17,600 Speaker 1: big warehouses with with caches of whatever, you know, widget 184 00:10:17,600 --> 00:10:20,640 Speaker 1: they need to import or put into their car assembly. 185 00:10:21,000 --> 00:10:24,160 Speaker 1: So they rely on this constant flow of traffic between 186 00:10:24,200 --> 00:10:27,040 Speaker 1: the US and Mexico, and it's roughly one and a 187 00:10:27,080 --> 00:10:30,679 Speaker 1: half billion dollars per day, and so tie up at 188 00:10:30,720 --> 00:10:34,120 Speaker 1: the cargo side of you know, two hours is meaningfully 189 00:10:34,160 --> 00:10:37,679 Speaker 1: impactaful because, uh, the driver can't make his next shipment, 190 00:10:37,760 --> 00:10:40,439 Speaker 1: he can't run on time. And speaking with the manufacturers 191 00:10:40,440 --> 00:10:44,200 Speaker 1: associations yesterday, the expectation is that the manufacturing plants are 192 00:10:44,240 --> 00:10:46,920 Speaker 1: going to have to cut entire lines of production because 193 00:10:46,920 --> 00:10:50,600 Speaker 1: they don't have certain components to plug into whatever their 194 00:10:50,600 --> 00:10:53,000 Speaker 1: final product is. It's what degree if it's old, does 195 00:10:53,040 --> 00:10:55,640 Speaker 1: this issue these issues fold into the hold off of 196 00:10:55,760 --> 00:10:58,000 Speaker 1: U S m C I At the moment, it's a 197 00:10:58,120 --> 00:11:02,040 Speaker 1: hundred percent hold up. That's That's exactly what Ways and 198 00:11:02,080 --> 00:11:05,920 Speaker 1: Means was saying yesterday. Even well intentioned Democrats who want 199 00:11:05,920 --> 00:11:08,000 Speaker 1: to push the U S M c A forward can't 200 00:11:08,040 --> 00:11:10,760 Speaker 1: get their members to have a conversation about, say, you know, 201 00:11:10,840 --> 00:11:15,240 Speaker 1: labor standards down in Mexico or environmental regulatory oversight UH 202 00:11:15,440 --> 00:11:17,800 Speaker 1: or enforcement for that matter, because all they can talk 203 00:11:17,840 --> 00:11:20,000 Speaker 1: about is the crisis at the southern border that is 204 00:11:20,040 --> 00:11:23,320 Speaker 1: growing by the hour. What do we want from the 205 00:11:23,360 --> 00:11:26,760 Speaker 1: Mexican government? I mean, I assume President Trump has a 206 00:11:26,880 --> 00:11:30,720 Speaker 1: very clear, boisterous Trumpian statement on what he wants. What 207 00:11:30,800 --> 00:11:35,120 Speaker 1: does business want from the Mexican government to assist us 208 00:11:35,160 --> 00:11:38,720 Speaker 1: out of this quagmire? I think what I've noticed is 209 00:11:38,760 --> 00:11:42,200 Speaker 1: that they are looking for, um, the Mexican government to 210 00:11:42,760 --> 00:11:46,120 Speaker 1: take this vote on labor enforcement, which they're planning to do, 211 00:11:46,400 --> 00:11:49,360 Speaker 1: I believe this week, if I'm not mistaken, UM, and 212 00:11:49,400 --> 00:11:54,000 Speaker 1: then quickly give some deliverables to the Democrats on Capitol 213 00:11:54,080 --> 00:11:56,600 Speaker 1: Hill who are looking not just to see passage of 214 00:11:56,720 --> 00:12:01,480 Speaker 1: legislation about labor enforcement, UM, but actual action from Mexico. 215 00:12:01,600 --> 00:12:04,719 Speaker 1: So for the business community, whose number one priority is 216 00:12:04,760 --> 00:12:07,280 Speaker 1: just making sure that NAFTA has maintained, you know, forget 217 00:12:07,320 --> 00:12:10,400 Speaker 1: about US China or the new EU tariffs or any 218 00:12:10,440 --> 00:12:13,679 Speaker 1: of the overarching trade issues. This is just about as you, 219 00:12:13,880 --> 00:12:16,160 Speaker 1: as you mentioned a minute ago, how important it is 220 00:12:16,200 --> 00:12:19,680 Speaker 1: how integrated our our Mexico and U S supply chains are. 221 00:12:19,920 --> 00:12:22,959 Speaker 1: They have to have this open so for I think 222 00:12:23,000 --> 00:12:26,880 Speaker 1: businesses right now they want the backlog cleared up at 223 00:12:26,880 --> 00:12:29,600 Speaker 1: the border about physical imports, but mostly they want to 224 00:12:29,720 --> 00:12:34,760 Speaker 1: protect NAFTA. Is Steven Miller aware of Henrietta Treys conversation? 225 00:12:35,160 --> 00:12:37,960 Speaker 1: Is he aware of the trade issues? Or do you 226 00:12:38,040 --> 00:12:40,680 Speaker 1: just look at the White House and I guess he's 227 00:12:40,679 --> 00:12:44,400 Speaker 1: our Director of Immigration as being uniquely fixed on the 228 00:12:44,480 --> 00:12:49,520 Speaker 1: social issues. I consider U s tr Bob Lifeiser to 229 00:12:49,520 --> 00:12:51,880 Speaker 1: be the one who's principally focused on all these trade 230 00:12:51,920 --> 00:12:55,520 Speaker 1: issues and this complicates his life dramatically. Um But I 231 00:12:55,520 --> 00:12:58,240 Speaker 1: think Stephen Miller is much more in the camp of immigration, 232 00:12:58,360 --> 00:13:00,079 Speaker 1: and when you look at President Trump and what his 233 00:13:00,200 --> 00:13:03,320 Speaker 1: priorities are heading into an election, I think it's very 234 00:13:03,320 --> 00:13:08,520 Speaker 1: clear that he's more focused on immigration than trade. Very Miller, well, 235 00:13:08,600 --> 00:13:14,839 Speaker 1: he than the trade dynamics wrapped around these political emotions. 236 00:13:14,840 --> 00:13:31,679 Speaker 1: Henry the trades with Veta Partners. They get us up 237 00:13:31,679 --> 00:13:33,600 Speaker 1: to speed on the next twenty four hours, looking forward 238 00:13:33,640 --> 00:13:35,480 Speaker 1: to catching up right now with Laura Rose and a 239 00:13:35,600 --> 00:13:39,040 Speaker 1: senior economists at Macro Policy Perspectives. Laura, great to have 240 00:13:39,080 --> 00:13:40,839 Speaker 1: you with us on the program. Let's just begin with 241 00:13:40,880 --> 00:13:42,480 Speaker 1: the next twenty four hours what are you looking for 242 00:13:42,600 --> 00:13:44,960 Speaker 1: from cp I that print in twenty four hours time 243 00:13:45,200 --> 00:13:47,000 Speaker 1: and Fed minutes to come up a little bit light. 244 00:13:47,040 --> 00:13:51,440 Speaker 1: So Hi, Jonathan, great to talk to you too. So, um, 245 00:13:51,480 --> 00:13:54,479 Speaker 1: we think we're in a soft patch for core inflation, 246 00:13:54,600 --> 00:13:57,240 Speaker 1: and we think tomorrow's report will confirm that we're looking 247 00:13:57,280 --> 00:13:59,920 Speaker 1: for only a point one percent month on month game 248 00:14:00,400 --> 00:14:02,600 Speaker 1: in core cp I and for the annual rate to 249 00:14:02,640 --> 00:14:06,600 Speaker 1: actually decline from two point one to two. And now 250 00:14:06,679 --> 00:14:10,200 Speaker 1: remember the Fed's target is specified in terms of core 251 00:14:10,320 --> 00:14:13,319 Speaker 1: PC inflation. This is c p I, which is generally 252 00:14:13,360 --> 00:14:16,880 Speaker 1: a little bit higher. So this actually implies core PC 253 00:14:17,120 --> 00:14:21,600 Speaker 1: inflation is moderating close to one point seven percent, probably 254 00:14:21,640 --> 00:14:24,080 Speaker 1: by the end of this year. So we're moving away 255 00:14:24,080 --> 00:14:27,040 Speaker 1: from target. Lord, you've got a very important paragraph and 256 00:14:27,040 --> 00:14:29,240 Speaker 1: it really goes to your work with Juliet BMP Perry 257 00:14:29,960 --> 00:14:34,280 Speaker 1: over the years, and that is technology imputing disinflation and deflation. 258 00:14:34,360 --> 00:14:38,560 Speaker 1: John mentioned this earlier on recessage from abroad. Are we 259 00:14:38,640 --> 00:14:42,040 Speaker 1: just are we seeing a disinflation because of all this 260 00:14:42,240 --> 00:14:47,640 Speaker 1: modern technology that's overlaid on our everyday lives. Absolutely. Um. 261 00:14:47,680 --> 00:14:50,600 Speaker 1: So the way we think about it is that technology 262 00:14:50,640 --> 00:14:54,200 Speaker 1: plays a peek a boo role in depressing inflation. It 263 00:14:54,240 --> 00:14:59,080 Speaker 1: doesn't show up every month. It rotates from component to component, 264 00:14:59,360 --> 00:15:02,120 Speaker 1: but it is a trend. And the trend is that 265 00:15:02,200 --> 00:15:06,200 Speaker 1: we have a lot of innovations faster internet, you know, 266 00:15:06,280 --> 00:15:10,960 Speaker 1: mobile devices, cloud computing, along with the growth of digital content, 267 00:15:11,080 --> 00:15:15,680 Speaker 1: electronic marketplaces, the sharing economy. All of these things put 268 00:15:15,760 --> 00:15:18,400 Speaker 1: downward pressure on prices. What do they do to GDP? 269 00:15:19,000 --> 00:15:21,000 Speaker 1: But the money question here is how many tents of 270 00:15:21,000 --> 00:15:24,400 Speaker 1: a percentage point is not seen in GDP because all 271 00:15:24,440 --> 00:15:28,000 Speaker 1: of this wonderment. I mean, that's that's a fair argument. 272 00:15:28,080 --> 00:15:31,040 Speaker 1: You know, some people have looked closely at whether you know, 273 00:15:31,080 --> 00:15:35,080 Speaker 1: there are measurement issues and in estimating productivity growth that 274 00:15:35,120 --> 00:15:37,920 Speaker 1: they actually have found that that doesn't explain a whole lot. 275 00:15:38,440 --> 00:15:42,160 Speaker 1: So this is something that is depressing inflation. But uh, 276 00:15:42,280 --> 00:15:45,280 Speaker 1: in terms of a measurement issue, there isn't strong evidence 277 00:15:45,320 --> 00:15:48,840 Speaker 1: that that explains low predictives. Do you buy this gen 278 00:15:49,200 --> 00:15:51,640 Speaker 1: Do you buy this idea that all this technology overlays 279 00:15:51,680 --> 00:15:55,680 Speaker 1: not in GDP? I think there's a massive argument behind that, Tom, 280 00:15:55,720 --> 00:15:57,840 Speaker 1: and I think a lot of people are making it. Laura. 281 00:15:57,880 --> 00:15:59,640 Speaker 1: Another argument I want to sort of get through with 282 00:15:59,680 --> 00:16:03,840 Speaker 1: you is a distinction between pc and CPI. What is 283 00:16:03,840 --> 00:16:07,320 Speaker 1: the clear distinction between the two gages of inflation. Well, 284 00:16:07,360 --> 00:16:11,760 Speaker 1: they're they're different measures, they're conceptually different. PCE covers a 285 00:16:11,800 --> 00:16:16,760 Speaker 1: wider set of prices. It covers public sector goods and 286 00:16:16,840 --> 00:16:20,720 Speaker 1: services that are bought and purchased on behalf of individuals. 287 00:16:20,800 --> 00:16:24,320 Speaker 1: Those aren't included in in CPI, and in fact it's 288 00:16:24,360 --> 00:16:28,000 Speaker 1: the public sector purchases that we're seeing a lot of 289 00:16:28,040 --> 00:16:32,800 Speaker 1: disinflation in. And healthcare is one example. So the government 290 00:16:33,240 --> 00:16:36,360 Speaker 1: is a key setter, price setter in the market for healthcare. 291 00:16:36,880 --> 00:16:42,280 Speaker 1: It has rising obligations associated with an aging population. Um 292 00:16:42,360 --> 00:16:46,600 Speaker 1: it sets prices again at the Medicare and Medicaid expenditures 293 00:16:46,600 --> 00:16:52,040 Speaker 1: are about of the total healthcare market, so it's pricing 294 00:16:52,040 --> 00:16:55,760 Speaker 1: decisions affect other prices and it's incentivized to set those 295 00:16:55,800 --> 00:16:59,720 Speaker 1: prices low. So that's a source of inflation repression that 296 00:16:59,800 --> 00:17:03,280 Speaker 1: we're seeing more in TC and c p I. But 297 00:17:03,360 --> 00:17:06,240 Speaker 1: it's quite important. It's one factor that is keeping the 298 00:17:06,240 --> 00:17:09,119 Speaker 1: inflation environment very muted and Laura. For a lot of 299 00:17:09,160 --> 00:17:12,280 Speaker 1: people who might have accidentally stumbled across Blomberg Radio not 300 00:17:12,320 --> 00:17:15,560 Speaker 1: intending to listen to Financial news this morning, their reality 301 00:17:15,600 --> 00:17:18,840 Speaker 1: and what they live just in terms of inflation is 302 00:17:18,840 --> 00:17:21,640 Speaker 1: not what they hear when they listen to programs like this. 303 00:17:22,119 --> 00:17:25,000 Speaker 1: We say that inflation is low, it's below target. That's 304 00:17:25,000 --> 00:17:27,639 Speaker 1: not the America, that's not the Europe that some people 305 00:17:27,640 --> 00:17:31,080 Speaker 1: are living. That's true. I mean again, this is the 306 00:17:31,200 --> 00:17:35,359 Speaker 1: average basket for the average you know individual in the US. 307 00:17:35,440 --> 00:17:41,160 Speaker 1: It's not reflective of individual experiences in specific areas. So 308 00:17:41,520 --> 00:17:44,200 Speaker 1: you know, one example of that is is rental how 309 00:17:44,359 --> 00:17:47,600 Speaker 1: you know, apartment rents, which have been rising so much 310 00:17:47,640 --> 00:17:50,200 Speaker 1: and I think a lot of people feel that burden. 311 00:17:50,800 --> 00:17:54,560 Speaker 1: We actually see that as slowing somewhat um So rent 312 00:17:54,680 --> 00:17:58,199 Speaker 1: growth has been very strong over the course of this expansion. 313 00:17:58,280 --> 00:18:01,840 Speaker 1: It has added to inflation shin when the unemployment rate 314 00:18:01,920 --> 00:18:04,679 Speaker 1: was really high, so it kind of accounts for some 315 00:18:04,800 --> 00:18:08,600 Speaker 1: missing inflation. Now we think that's starting to moderate. Well, 316 00:18:09,080 --> 00:18:12,040 Speaker 1: provide clarity here for our audience. What is the inflation 317 00:18:12,160 --> 00:18:15,240 Speaker 1: rate blending services and goods right now? Where does macro 318 00:18:15,320 --> 00:18:20,159 Speaker 1: policy put that? So we expect overall core so that 319 00:18:20,320 --> 00:18:22,560 Speaker 1: strips out food and energy. We think we're going to 320 00:18:22,680 --> 00:18:26,280 Speaker 1: moderate to two percent on a year on your basis, 321 00:18:26,280 --> 00:18:28,600 Speaker 1: and we see that over the course of the next 322 00:18:28,600 --> 00:18:33,880 Speaker 1: two years moderating slightly below that one nine or one eight. 323 00:18:34,000 --> 00:18:36,880 Speaker 1: So prices are rising on a year on your basis 324 00:18:36,920 --> 00:18:40,160 Speaker 1: a little bit under two percent, which is the FEDS mandate. 325 00:18:40,320 --> 00:18:43,359 Speaker 1: La Rossa, thank you so much. Perspectives and John, that 326 00:18:43,480 --> 00:18:45,879 Speaker 1: goes right to Mr Dragging tomorrow if you have the 327 00:18:45,880 --> 00:18:48,120 Speaker 1: same conversation in Europe. I mean, where do you put 328 00:18:48,119 --> 00:18:50,800 Speaker 1: that run rate for year? What? One point four? I 329 00:18:50,840 --> 00:19:05,080 Speaker 1: am ready looking forward to that news conference tomorrow. There 330 00:19:05,160 --> 00:19:08,040 Speaker 1: is an election today, well know not some of the 331 00:19:08,040 --> 00:19:11,400 Speaker 1: primaries are the small elections of the United Kingdom, Newport, 332 00:19:11,480 --> 00:19:15,159 Speaker 1: South of Wales and all that, or maybe elections in 333 00:19:15,200 --> 00:19:19,920 Speaker 1: the United States, but a genormous, an important election in Israel, 334 00:19:19,960 --> 00:19:23,960 Speaker 1: of course, involving Mr Yahoo. We have the perfect guest 335 00:19:24,040 --> 00:19:26,800 Speaker 1: to provide perspective, not one, but two tours of duty. 336 00:19:27,240 --> 00:19:30,560 Speaker 1: Is Ambassador of the United States to Israel, Martin Indick 337 00:19:30,640 --> 00:19:33,000 Speaker 1: joins us, of course with the Counsul on Foreign Relations, 338 00:19:33,400 --> 00:19:37,000 Speaker 1: and he distinguished fellow Martin. Within the news reporting there 339 00:19:37,080 --> 00:19:40,240 Speaker 1: is discussion of the election, some focused, less focus. What 340 00:19:40,400 --> 00:19:43,680 Speaker 1: is the single salient point you would make about this 341 00:19:43,840 --> 00:19:50,720 Speaker 1: moment for Israel? Tom Well, the moment itself is one 342 00:19:50,760 --> 00:19:56,600 Speaker 1: in which Israel it's strong, enjoys strong relationships with the 343 00:19:56,680 --> 00:20:00,920 Speaker 1: major powers, not just its traditional the States, but China 344 00:20:01,640 --> 00:20:06,960 Speaker 1: and Russia and India, and emerging relationships with the our world. 345 00:20:07,040 --> 00:20:10,040 Speaker 1: So things are pretty good for Israel at the moment. 346 00:20:10,080 --> 00:20:12,840 Speaker 1: And of course the Netanya has a strong backing of Trump. 347 00:20:12,960 --> 00:20:17,280 Speaker 1: So the moment is really about Netanyahu himself and whether 348 00:20:17,359 --> 00:20:20,679 Speaker 1: the people of Israel decide that they've had enough of 349 00:20:20,800 --> 00:20:25,640 Speaker 1: him after ten continuous years of rule and corruption charges 350 00:20:25,800 --> 00:20:29,960 Speaker 1: against him and a sense of a kind of royalty 351 00:20:30,080 --> 00:20:33,800 Speaker 1: ruling Israel, whether they're ready for a change or whether 352 00:20:33,840 --> 00:20:39,639 Speaker 1: they want to stick with the secure Netanyahu. Who is 353 00:20:39,720 --> 00:20:42,840 Speaker 1: the other side, who is the alternative vote for the 354 00:20:42,880 --> 00:20:47,640 Speaker 1: people of Israel this day? The leader of the opposing 355 00:20:48,680 --> 00:20:54,879 Speaker 1: forces is Benny Gantz. He's former Israeli Army chief of staff, 356 00:20:55,280 --> 00:21:00,520 Speaker 1: and he has around him three other two other chiefs 357 00:21:00,520 --> 00:21:07,040 Speaker 1: of staff, Gabishkenazi and bog and uh your Lapid, who 358 00:21:07,080 --> 00:21:10,879 Speaker 1: is quite an attractive former anchor like yourself, Tom, but 359 00:21:11,359 --> 00:21:13,639 Speaker 1: has become quite a fixture on the political scene as 360 00:21:13,640 --> 00:21:19,280 Speaker 1: a centrist. So it's really a centrist, security oriented alternative 361 00:21:19,400 --> 00:21:21,879 Speaker 1: that's being presented. What what's the mood of the people. 362 00:21:21,920 --> 00:21:23,760 Speaker 1: I mean with the election going. I don't want to 363 00:21:23,760 --> 00:21:27,199 Speaker 1: get into any polling data or that, but is Israel 364 00:21:27,280 --> 00:21:30,600 Speaker 1: completely focused on this election or is it just another 365 00:21:30,640 --> 00:21:34,920 Speaker 1: cycle with Mr Netya, who alway Israeli has take their elections. 366 00:21:35,000 --> 00:21:40,200 Speaker 1: Very big turnout could be inspected. It's always has been 367 00:21:40,280 --> 00:21:43,920 Speaker 1: up in the in the in the high sixties seventy turnout, 368 00:21:43,960 --> 00:21:47,040 Speaker 1: which is which is huge compared to the United States. 369 00:21:47,800 --> 00:21:53,600 Speaker 1: It's a it's a raucous rambaptuous elections seen now over there. 370 00:21:54,200 --> 00:21:57,920 Speaker 1: Uh and and I think that that The other element 371 00:21:58,000 --> 00:22:01,119 Speaker 1: that's important to remember is that there are many parties 372 00:22:01,119 --> 00:22:04,040 Speaker 1: I think something like twenty seven parties contesting this. This 373 00:22:04,200 --> 00:22:10,160 Speaker 1: is a proportional representation election in which the percentage votes 374 00:22:10,200 --> 00:22:13,080 Speaker 1: that you get determined the number of seats that you get. 375 00:22:13,160 --> 00:22:17,320 Speaker 1: So whoever wins, whether it's Gans or Orton, they're going 376 00:22:17,359 --> 00:22:20,680 Speaker 1: to have to cobble together a coalition with smaller parties 377 00:22:21,119 --> 00:22:25,200 Speaker 1: that are really boutique parties for the religious, for for 378 00:22:25,840 --> 00:22:30,919 Speaker 1: the right wing, for the center left. Is Mr Neyaho 379 00:22:30,960 --> 00:22:34,080 Speaker 1: a centrist who has been forced to the right or 380 00:22:34,160 --> 00:22:37,000 Speaker 1: is he comfortable with the boutique parties of the far 381 00:22:37,119 --> 00:22:42,320 Speaker 1: right in Israel. He I would say he's a center 382 00:22:42,480 --> 00:22:47,200 Speaker 1: right person himself in terms of his preferences and personality. 383 00:22:47,800 --> 00:22:51,080 Speaker 1: But he is above all a survivalist and a very 384 00:22:51,119 --> 00:22:54,719 Speaker 1: good one at that, and that has led him in 385 00:22:54,760 --> 00:22:58,600 Speaker 1: the in the recent past to form a coalition government 386 00:22:58,680 --> 00:23:01,720 Speaker 1: of the right and extreme him right and religious parties, 387 00:23:02,280 --> 00:23:05,560 Speaker 1: and that has proved to be a stable government for 388 00:23:05,640 --> 00:23:08,679 Speaker 1: him at last go around. And so I think that 389 00:23:08,800 --> 00:23:12,399 Speaker 1: will be his preference again, even though it does push 390 00:23:12,480 --> 00:23:16,040 Speaker 1: him towards positions to the more extreme than he would 391 00:23:16,080 --> 00:23:18,840 Speaker 1: otherwise establish. If you're just joining us, Martin Indeck, with 392 00:23:18,920 --> 00:23:21,240 Speaker 1: us with the Council on Foreign Relations, and of course 393 00:23:21,280 --> 00:23:25,480 Speaker 1: to UH tours as Ambassador of the United States to 394 00:23:25,560 --> 00:23:30,399 Speaker 1: Israel as well, Ambassador Indeck, I must take time on 395 00:23:30,480 --> 00:23:33,159 Speaker 1: the Golden Heights. There are the photographs of the heights, 396 00:23:33,160 --> 00:23:36,399 Speaker 1: the plateau looking down in the Sea of Galilee. I 397 00:23:36,440 --> 00:23:39,720 Speaker 1: think for so many Americans removed from ninety seven and 398 00:23:40,119 --> 00:23:43,119 Speaker 1: the other wars of the region, it's like, Okay, go 399 00:23:43,320 --> 00:23:46,479 Speaker 1: on heights. Explain to our audience the importance of the 400 00:23:46,520 --> 00:23:52,000 Speaker 1: Golden Heights and why President Trump's announcement was so critical. Well, 401 00:23:52,480 --> 00:23:54,880 Speaker 1: you're right, they are the heights, and they do look 402 00:23:54,920 --> 00:24:01,080 Speaker 1: down on on Israel's northern valleys, and as a result, 403 00:24:01,119 --> 00:24:05,000 Speaker 1: there is an inbuilt sense of concern about what would 404 00:24:05,000 --> 00:24:09,160 Speaker 1: happen if the Syrians controlled those heights again as they 405 00:24:09,200 --> 00:24:14,040 Speaker 1: did before nineteen sixty seven, when Israel occupied them in 406 00:24:14,040 --> 00:24:19,920 Speaker 1: a defensive war. The the fact of the matter is, however, 407 00:24:20,560 --> 00:24:25,720 Speaker 1: that five Israeli prime ministers, including Prime Minister Netanyahu, have 408 00:24:25,960 --> 00:24:32,480 Speaker 1: offered to withdraw fully from the Gallen Heights two the 409 00:24:32,640 --> 00:24:36,199 Speaker 1: Valleys in order to achieve peace with Syria, and that 410 00:24:36,920 --> 00:24:39,439 Speaker 1: the negotiations that took place in ninety nineties which I 411 00:24:39,480 --> 00:24:43,040 Speaker 1: was involved in, lad lead to basic agreement on that 412 00:24:43,800 --> 00:24:47,600 Speaker 1: in which the Syrian army would not move beyond Damascus, 413 00:24:47,600 --> 00:24:50,359 Speaker 1: which is on the other side of the ns and 414 00:24:50,440 --> 00:24:54,000 Speaker 1: therefore it was possible to establish the military zones much 415 00:24:54,040 --> 00:24:56,960 Speaker 1: like you have in the Sinai that have secured the 416 00:24:57,000 --> 00:25:01,600 Speaker 1: piece between Israel and Egypt of more than four decades now. 417 00:25:01,960 --> 00:25:05,800 Speaker 1: So you know, it's not impossible to work out security arrangements, 418 00:25:05,840 --> 00:25:10,000 Speaker 1: but it's certainly impossible today when you you have such 419 00:25:10,119 --> 00:25:13,919 Speaker 1: chaos in Syria and the Iranians pushing their militias to 420 00:25:14,000 --> 00:25:17,000 Speaker 1: move to the Assyrian side of the goal on heights. 421 00:25:17,240 --> 00:25:21,200 Speaker 1: Nobody was ever suggesting that Israel should withdraw at this point, 422 00:25:21,520 --> 00:25:25,439 Speaker 1: but to recognize Israel's sovereignty there was to do something 423 00:25:25,480 --> 00:25:29,760 Speaker 1: else that I think is very damaging for the United States, 424 00:25:29,880 --> 00:25:34,560 Speaker 1: which is to undermine a basic principle of international relations, 425 00:25:35,200 --> 00:25:39,840 Speaker 1: that is the inadmissibility of the acquisition of territory by force. 426 00:25:39,920 --> 00:25:44,320 Speaker 1: If we go down that road, Putin's acquisition of Crimea 427 00:25:44,640 --> 00:25:51,080 Speaker 1: becomes legitimate. Esping, China's acquisition of becomes legitimate. Stami Saying's 428 00:25:51,119 --> 00:25:54,680 Speaker 1: invasion of Kuwait becomes legitimate. And so I think that's 429 00:25:54,720 --> 00:25:58,840 Speaker 1: the danger in what Trump did here, Ambassador A delicate question. 430 00:25:59,320 --> 00:26:02,359 Speaker 1: If the State Department has changed to be polite, whether 431 00:26:02,400 --> 00:26:05,760 Speaker 1: it's Tillerson or Pompeio, whatever the phrases, do you have 432 00:26:05,800 --> 00:26:10,920 Speaker 1: an optimism that over the years, over the administration, our 433 00:26:11,240 --> 00:26:15,720 Speaker 1: administration's plural I should say that we can get our 434 00:26:15,800 --> 00:26:19,439 Speaker 1: State Department in our diplomacy back to the time of 435 00:26:19,480 --> 00:26:25,359 Speaker 1: Martin Index or even back to the time of Henry Kissinger. Yes, 436 00:26:25,520 --> 00:26:28,960 Speaker 1: I think so, but it's going to be difficult. Pompeio 437 00:26:29,119 --> 00:26:33,000 Speaker 1: came in after the havoc that Tillerson wrought particularly at 438 00:26:33,000 --> 00:26:36,840 Speaker 1: the highest levels of the professional feign service UH and 439 00:26:37,000 --> 00:26:41,720 Speaker 1: has not yet been able to re establish the corpus 440 00:26:41,720 --> 00:26:46,280 Speaker 1: that that was operating the bureaque bureaucratic side of the 441 00:26:46,280 --> 00:26:49,800 Speaker 1: State Department for so many years. They are very professional 442 00:26:50,000 --> 00:26:54,040 Speaker 1: people that have been treated badly treated as if they 443 00:26:54,040 --> 00:26:59,800 Speaker 1: were not professional civil servants. UM the top echelons that 444 00:26:59,840 --> 00:27:05,640 Speaker 1: are normally peopled by the professional bureaucrats no longer those 445 00:27:05,680 --> 00:27:09,160 Speaker 1: positions are simply not filled at the moment, and if 446 00:27:09,200 --> 00:27:13,760 Speaker 1: this continues, you've also got large numbers of women and 447 00:27:13,880 --> 00:27:17,679 Speaker 1: people of color who are no longer seeking those positions, 448 00:27:18,600 --> 00:27:21,879 Speaker 1: and so the diversity that used to be there is 449 00:27:21,920 --> 00:27:24,280 Speaker 1: starting to slip away as well. So I'm very worried 450 00:27:24,320 --> 00:27:28,280 Speaker 1: about it. I think pomp Peio has good intentions, but 451 00:27:29,040 --> 00:27:32,239 Speaker 1: given the way that overall there's an attitude coming out 452 00:27:32,280 --> 00:27:36,480 Speaker 1: of the White House disdained for the civil servants, of 453 00:27:36,520 --> 00:27:39,440 Speaker 1: a sense that they're part of some deep state that's 454 00:27:39,440 --> 00:27:43,399 Speaker 1: opposed to President Trump and his policies, I think is 455 00:27:43,440 --> 00:27:46,320 Speaker 1: really making it difficult. And I think it's a mistake 456 00:27:46,400 --> 00:27:49,880 Speaker 1: to view the civil service that way, and I think 457 00:27:49,880 --> 00:27:52,880 Speaker 1: that the United States will be worse off not just 458 00:27:52,960 --> 00:27:56,120 Speaker 1: in foreign policy, but more generally because of this UH 459 00:27:56,560 --> 00:27:59,760 Speaker 1: sustained attitude. Ambassador honored to have you with the stay 460 00:27:59,760 --> 00:28:02,720 Speaker 1: of elections in Israel. Martin Indeck of the Council on 461 00:28:02,760 --> 00:28:07,280 Speaker 1: Foreign Relations of former Ambassador of the United States to Israel. 462 00:28:22,800 --> 00:28:26,760 Speaker 1: Sarah McGregor with US now with Bloomberg News Economics. A 463 00:28:26,760 --> 00:28:28,879 Speaker 1: lot of critics in the last number of days, Sarah, 464 00:28:28,920 --> 00:28:31,080 Speaker 1: over this i m F process, But the fact is 465 00:28:31,480 --> 00:28:34,360 Speaker 1: they're usually the best tools they can, aren't they. I mean, 466 00:28:34,400 --> 00:28:36,280 Speaker 1: they have to take the information that they're getting on 467 00:28:36,320 --> 00:28:38,120 Speaker 1: the ground from from the countries. And I think it 468 00:28:38,200 --> 00:28:40,520 Speaker 1: is pretty significant. This cut that we're seeing today the 469 00:28:40,560 --> 00:28:43,000 Speaker 1: third time the i m F has downgraded its global 470 00:28:43,040 --> 00:28:45,560 Speaker 1: outlook in the past six months, and it talks about 471 00:28:45,600 --> 00:28:48,040 Speaker 1: these downside risks. And overnight we saw the US threatened 472 00:28:48,040 --> 00:28:50,640 Speaker 1: to put tariffs more tariffs on the EU and one 473 00:28:50,640 --> 00:28:52,960 Speaker 1: of the downside risks that sees is this trade war. 474 00:28:53,040 --> 00:28:55,480 Speaker 1: And so you can imagine that as of today, already 475 00:28:55,520 --> 00:28:57,800 Speaker 1: we can see that the forecast is looking even gloomier 476 00:28:57,840 --> 00:29:00,240 Speaker 1: than what they may have seen when they, you know, 477 00:29:00,360 --> 00:29:04,200 Speaker 1: compiled this report they submed out to net exports. I 478 00:29:04,200 --> 00:29:09,320 Speaker 1: guess trade volume in world trade growth, folks, the equation 479 00:29:09,320 --> 00:29:11,240 Speaker 1: why will C plus I plus G and on the 480 00:29:11,280 --> 00:29:14,240 Speaker 1: back end is net exports. Is this I MF meeting 481 00:29:14,320 --> 00:29:17,000 Speaker 1: Sarah going to be all about trade dynamic or could 482 00:29:17,000 --> 00:29:21,320 Speaker 1: they actually talk about business as usual? Absolutely? I think 483 00:29:21,360 --> 00:29:23,360 Speaker 1: trade will be right up there high on the agenda. 484 00:29:23,400 --> 00:29:26,720 Speaker 1: It's clear that the Trump administration is keen on continuing 485 00:29:26,960 --> 00:29:29,400 Speaker 1: continuing to use these terraces as a tool of its 486 00:29:29,400 --> 00:29:31,479 Speaker 1: trade policy, and now it seems to be opening up 487 00:29:31,840 --> 00:29:35,200 Speaker 1: even wider this front against Europe. It's allies that hasn't 488 00:29:35,200 --> 00:29:37,600 Speaker 1: resolved the steel terraces with Mexico and Canada, which means 489 00:29:37,600 --> 00:29:40,200 Speaker 1: the new NAFTA isn't passed. And I think that countries 490 00:29:40,240 --> 00:29:42,640 Speaker 1: are really getting agitated, you know, score and trading partners 491 00:29:42,640 --> 00:29:45,160 Speaker 1: about what this is going to mean for them, Sarah. 492 00:29:45,160 --> 00:29:47,080 Speaker 1: One of the top headlines on the Bloomberg terminal here 493 00:29:47,160 --> 00:29:48,800 Speaker 1: that really caught my eyes that the I m F 494 00:29:48,800 --> 00:29:52,040 Speaker 1: cuts its twenty nineteen global outlook to the lowest since 495 00:29:52,160 --> 00:29:55,680 Speaker 1: the financial crisis, so about ten years. Does the level 496 00:29:55,760 --> 00:30:01,440 Speaker 1: of its outlook reduction surprise you at all? As as 497 00:30:01,440 --> 00:30:04,320 Speaker 1: a headline, it does seem surprising, right, But I think um, 498 00:30:04,360 --> 00:30:06,360 Speaker 1: you know, the one sort of silver ligning that they 499 00:30:06,360 --> 00:30:08,840 Speaker 1: seem to emphasize actually in the report is that they 500 00:30:08,840 --> 00:30:12,120 Speaker 1: actually see things potentially improving in the second half of 501 00:30:12,240 --> 00:30:14,520 Speaker 1: next year, and a lot of that's attributed to this 502 00:30:14,920 --> 00:30:17,200 Speaker 1: um rate hYP pause that the FED has taken in 503 00:30:17,200 --> 00:30:19,240 Speaker 1: some of the other central banks, you know, the stimulus 504 00:30:19,280 --> 00:30:21,600 Speaker 1: and the measures they are taking. But of course there's 505 00:30:21,640 --> 00:30:24,240 Speaker 1: no guarantee that the Fed's gonna, um, you know, keep 506 00:30:24,280 --> 00:30:26,560 Speaker 1: this policy on hold. It's sort of indicated right now, 507 00:30:26,640 --> 00:30:29,040 Speaker 1: that's what it's looking at. But um, you know, there's 508 00:30:29,160 --> 00:30:31,440 Speaker 1: really a lot of balls in the air with this forecast. Well, 509 00:30:31,480 --> 00:30:33,239 Speaker 1: I like what Sarah and her team wrote up here, 510 00:30:33,320 --> 00:30:37,680 Speaker 1: the idea of blaming Europe. I mean, it's McGregor rudeness there. 511 00:30:37,880 --> 00:30:39,800 Speaker 1: But can I note Paul that not only are we 512 00:30:39,840 --> 00:30:42,800 Speaker 1: blaming Europe for the markdown, but we actually raised China 513 00:30:42,840 --> 00:30:45,680 Speaker 1: growth a tenth of a percent. Yeah, that's interesting. It's 514 00:30:45,880 --> 00:30:49,000 Speaker 1: you know, we thought we saw some green shoots, tom 515 00:30:49,000 --> 00:30:53,560 Speaker 1: and bamboo, let's let's be correct over the last couple 516 00:30:53,600 --> 00:30:55,640 Speaker 1: of months, and I think that might be including some 517 00:30:55,680 --> 00:30:58,920 Speaker 1: fiscal stimulus and and so on and so forth. So Sarah, 518 00:30:58,960 --> 00:31:01,200 Speaker 1: I mean, is there too early to call. I mean, 519 00:31:01,200 --> 00:31:03,280 Speaker 1: what is the kind of the view on China here again? 520 00:31:03,360 --> 00:31:04,959 Speaker 1: Is it? Is it best just to kind of call 521 00:31:05,000 --> 00:31:09,840 Speaker 1: it a stabilization from the I M S perspective? Well, absolutely, 522 00:31:10,160 --> 00:31:12,720 Speaker 1: it's interesting because just I think even a few weeks 523 00:31:12,800 --> 00:31:15,800 Speaker 1: or months ago, I think there was quite a pessimistic 524 00:31:15,840 --> 00:31:18,160 Speaker 1: view about China and now they've had some good manufacturing 525 00:31:18,240 --> 00:31:21,760 Speaker 1: data and again it's small, but you know, notable boost 526 00:31:21,800 --> 00:31:24,720 Speaker 1: to their forecast. Well, we should note that the I 527 00:31:24,840 --> 00:31:27,800 Speaker 1: M S actually cut the US forecast again for nineteen 528 00:31:28,200 --> 00:31:30,000 Speaker 1: you know, again, this is sort of an idea of 529 00:31:30,040 --> 00:31:32,240 Speaker 1: the leverage that China might try and take from these 530 00:31:32,280 --> 00:31:34,200 Speaker 1: trade talks to at a pivotal moment with the U 531 00:31:34,280 --> 00:31:36,880 Speaker 1: S showing look, we're maybe a little bit stronger than 532 00:31:36,920 --> 00:31:39,400 Speaker 1: you guys think we are right now. Yeah, I think 533 00:31:39,400 --> 00:31:41,240 Speaker 1: that's pretty that that's a key point because we go 534 00:31:41,280 --> 00:31:44,720 Speaker 1: into these trade negotiations, one of the questions always is 535 00:31:44,720 --> 00:31:47,239 Speaker 1: is which side needs it more? And I think one 536 00:31:47,280 --> 00:31:50,440 Speaker 1: of the narratives on the you know, the China needs 537 00:31:50,440 --> 00:31:53,560 Speaker 1: it more was boy, their count their economy really is slowing, 538 00:31:54,080 --> 00:31:56,840 Speaker 1: and that the last second they can afford is another 539 00:31:56,920 --> 00:31:59,480 Speaker 1: round of terror from the US, but this data suggests 540 00:31:59,520 --> 00:32:03,600 Speaker 1: that they might be in a better position. Absolutely, Again 541 00:32:03,600 --> 00:32:06,960 Speaker 1: it's small that that I MF did cut by a 542 00:32:06,960 --> 00:32:11,000 Speaker 1: tenth but percentage point the China's forecast. But again it's 543 00:32:11,040 --> 00:32:13,239 Speaker 1: just a bit of an outlook. You know, if you've 544 00:32:13,280 --> 00:32:16,360 Speaker 1: compared that, let's say, with even Europe, where Germany, Italy, 545 00:32:16,400 --> 00:32:20,160 Speaker 1: France the forecasts had again with pretty big fundamental problems 546 00:32:20,320 --> 00:32:23,560 Speaker 1: um identified there, you know, China doesn't look so bad 547 00:32:23,640 --> 00:32:26,120 Speaker 1: right now, does it. Sara McGregor, thank you so much. 548 00:32:28,160 --> 00:32:32,360 Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and 549 00:32:32,440 --> 00:32:37,760 Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast 550 00:32:37,800 --> 00:32:42,040 Speaker 1: platform you prefer. I'm on Twitter at Tom Keane before 551 00:32:42,080 --> 00:32:46,280 Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg Radio.