Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene
Speaker 1: Jay Leye. We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg here
Speaker 1: in New York and Police. To say Droomatis MetLife Investment Management,
Speaker 1: chief market strategist, through it looks like the new battleground.
Speaker 1: We've seen it coming for a while. It's an incremental
Speaker 1: step in what could be something much more severe. The
Speaker 1: market though fairly relaxed in the face of this. What's
Speaker 1: your view, Well, I mean I think it's it's because
Speaker 1: it's just another front. Uh, you know, it's not really
Speaker 1: adding to anything, because the big ones really are, you know,
Speaker 1: what happens with China, and as long as China trade
Speaker 1: can used to progress, everything else is a little bit
Speaker 1: of a side show. So we were worried about NAFTA
Speaker 1: because the direct impacts on the us UM and so
Speaker 1: that kind of got negotiated, even though it's still kind
Speaker 1: of ongoing. If we get a deal with China, it's
Speaker 1: gonna pardon the punt Trump. Everything else just in terms
Speaker 1: of the European equity market. This morning, folk taking a
Speaker 1: lot of this and it's stride as well. Surely Europe
Speaker 1: does it have the ability and willingness to respond to
Speaker 1: a propose trade war if that's what we do end
Speaker 1: up with. And I'm not saying that's my base case
Speaker 1: or anybody's at this point, but let's assume we do.
Speaker 1: Does Europe have the ability and willing this to respond
Speaker 1: to that? In the same vein the Chinese do uh?
Speaker 1: You know, my guests would be they don't, uh, simply
Speaker 1: because China's you know, kind of going much more on
Speaker 1: on a partner to partner basis with US. Um. You know,
Speaker 1: they're a very large part of our economy. We're a
Speaker 1: very large part of theirs. I think with Europe they
Speaker 1: have a lot more to lose. And and you know,
Speaker 1: it's probably not a coincidence that the U S is
Speaker 1: choosing this moment. What about the American economy right now?
Speaker 1: If we look at the American economy, if I look
Speaker 1: at the development of g d P, we migrate down.
Speaker 1: We've got maybe a first quarter that's ugly, some people
Speaker 1: even saying below one percent. But you've been resilient at
Speaker 1: a two point five two point six percent run right,
Speaker 1: how do you get there? While you get there with
Speaker 1: the US consumer um, and you get there by the
Speaker 1: fact that, you know, things that people have been worrying about,
Speaker 1: for example, trade, housing, et cetera, have all actually been
Speaker 1: very minor net drags on growth or even net ads. Uh.
Speaker 1: You know, I'm gonna give a shout out to my
Speaker 1: good friend Neil Datta. He's been talking about the kind
Speaker 1: of the the the rebound and housing activity, um, and
Speaker 1: that being very unusual for late cycle as well. So um,
Speaker 1: you know, once again it suggests like productivity and margins. Uh.
Speaker 1: If this is late cycle, this is the oddest late
Speaker 1: cycle we've ever seen. You and Neil Datta, and I'm
Speaker 1: glad you mentioned him. There's a gloomy day, John Farrow.
Speaker 1: They'll be like a gloomy statistic out or whatever. And
Speaker 1: basically you guys come out and go, yes, it's a
Speaker 1: gloomy statistic. But is the butt under consumption? Is the
Speaker 1: butt under investment? Is that that net exports will improve
Speaker 1: away from this trade. I think the butt is is
Speaker 1: that you know, for for a lot of this data,
Speaker 1: we've been seeing that there's a reason why it's behaving
Speaker 1: the way it is in that time frame. We don't
Speaker 1: want to always put a rosy outlook on things. And
Speaker 1: if you look at the last consumer confidence data, for example,
Speaker 1: it was it was really bad. Uh, but it was
Speaker 1: really bad at a high level, so it was coming
Speaker 1: down directionally. It's going badly. Um, but on a level basis,
Speaker 1: it's still extraordinarily high, and we have to keep that
Speaker 1: in perspective rather than just assuming that every slight downturn
Speaker 1: in the data is a negative. And John, that about
Speaker 1: describes the market stock market as well. It's on a
Speaker 1: level basis. You know what where we're on Swiss stocks,
Speaker 1: the s M I John, I'm sure you know that.
Speaker 1: I don't know it. The Swiss stock is changing in
Speaker 1: Swiss Frank's all just a brief question on the U
Speaker 1: S economy. Is the United States ever in recent history
Speaker 1: imported a recession? Uh, It's it's quite difficult to do. Actually,
Speaker 1: if you half of US GDP is not just the consumer,
Speaker 1: but consumer spending on services, alright, so going to the doctor,
Speaker 1: getting the haircut, buying the cup of coffee in the morning. Um.
Speaker 1: When you see very bad recessions in the US. It's
Speaker 1: when that's spending on services turns negative, right, and it
Speaker 1: doesn't have to turn negative by a lot because it's
Speaker 1: half of US g d P. But the flip side
Speaker 1: of that, though, is is very difficult to drive the
Speaker 1: US into a recession from overseas. This is really smart.
Speaker 1: I mean, I mean it's a really important observation. Well,
Speaker 1: can we continue the conversation? Yeah, continued, Please talking. I
Speaker 1: just thought you'd want an example of service sectors spending
Speaker 1: that comes out of nowhere. Vet Bill got sick and
Speaker 1: I had to go to the veterinarian yesterday. Do you
Speaker 1: know that my veterinarian, I don't even make I go
Speaker 1: to the I make it right out to the Horseman School.
Speaker 1: You just you just make the check right out to
Speaker 1: some prep school in New York City. How much was
Speaker 1: the bell for those many minutes? It's like, you know,
Speaker 1: it's like going to the high fancy law firm or something.
Speaker 1: Are you saying that you're keeping the United States insulated
Speaker 1: from the weakness about single handedly kept Drew Madison service
Speaker 1: series positive? An important question and something important to explore,
Speaker 1: because I just wonder to what degree we should be
Speaker 1: obsessing over the weakness abroad if you are exclusively based
Speaker 1: here in the United States. Good question. So what you
Speaker 1: want to watch out for is transmission mechanism through the
Speaker 1: US markets, particularly the equip markets. Uh. And this is
Speaker 1: where the trade war has actually been pronounced. Right. People
Speaker 1: worry about the trade war. Stock prices go down. CEOs
Speaker 1: look at their stock prices going down and think to themselves,
Speaker 1: I can't have my stock, frice go down. I need
Speaker 1: to figure out a way to kind of encourage people
Speaker 1: to believe that my stock is better than everyone else's stock. Um.
Speaker 1: So when the problem occurs is when they look at
Speaker 1: that and they say, I know, I'm gonna cut jobs
Speaker 1: or cut investments in order to kind of make sure
Speaker 1: that my numbers look good. Um And if you have
Speaker 1: enough people doing that at the same time, you end
Speaker 1: up talking your way into a recession. I think that's
Speaker 1: what you have to worry about. Dreamt of grit to
Speaker 1: catch you out with you Mental life investment manage market
Speaker 1: strategist on Europe. The perspective they put the chances of
Speaker 1: a tray to a tomp, the chances we should say
Speaker 1: in Washington lots going on. We'll get to that in
Speaker 1: a moment with Henrietta Treys on immigration the shocks that
Speaker 1: we saw yesterday. Whatever your politics, let us digress to
Speaker 1: a conversation that was different at twelve noon yesterday than
Speaker 1: it is now at eight oh two Wall Street time.
Speaker 1: Henritta Treys is the Veta Partners. She spent a lot
Speaker 1: of time really focused on the border, and that discussion
Speaker 1: changed yesterday. Henrietta, how did you respond to is the
Speaker 1: languages of the moment a purge of homeland security. I
Speaker 1: think it's incredibly important and underappreciated right now. The purge
Speaker 1: at homeland security is exclusively to do with the US
Speaker 1: Mexico border, which of course is about immigration. But my
Speaker 1: concern and investors concern is that cargo and freight is
Speaker 1: being seriously tripped up at the border, um to the
Speaker 1: point now where I understand from manufacturers they are running
Speaker 1: out of inventory of the supply chains that they depend
Speaker 1: on from Mexico. UM. So I think that the shipping
Speaker 1: and the issue of that is the most important now.
Speaker 1: I mean, we're we're going to speak with Senator Grassley here.
Speaker 1: He's making the rounds today. But what can Capitol He'll
Speaker 1: do to amend a just a suage. What can Capital
Speaker 1: Will do to amend these announcements of yesterday. Honestly, I
Speaker 1: don't think there's very much they can do. When I
Speaker 1: speak with Ways and Means, senior counsel on the trade committees,
Speaker 1: what they tell me is they can't move the U. S. M.
Speaker 1: C A, They can't alleviate concerns that the President has
Speaker 1: with saying NAFTA. They can't move anything legislatively. While this
Speaker 1: border crisis is happening, and as we head into Holy
Speaker 1: Week next week, it's expected to be compounded well within
Speaker 1: the border crisis. I want to go to one single
Speaker 1: sentence in the Washington Post today, which is the idea
Speaker 1: of substantial quote unquote Central American families lined up at
Speaker 1: the border, which is clearly the emotion of the President
Speaker 1: of the United States, and I understand how that gets
Speaker 1: in the way of normal trade at El Paso, etcetera.
Speaker 1: Is that going to go away or is there a
Speaker 1: permanence to the accountable number of people at the border
Speaker 1: who want in. I don't think this is going to
Speaker 1: go away, and I think it's gonna get worse our
Speaker 1: So I was speaking with some folks down on the
Speaker 1: border yesterday and they tell me that the administration is
Speaker 1: looking to bring in federal agents from every single sector
Speaker 1: and agency that's available outside of narcotics and terrorism. So
Speaker 1: that means more federal agents at the southern border, which
Speaker 1: is creating these tremendous backlogs, and um really vetting really
Speaker 1: thoroughly the request for asylum whether or not you know,
Speaker 1: people when they are saying I can't go back home,
Speaker 1: it's too dangerous for me. The federal government, the Trump
Speaker 1: administration at least, is going to try to really do
Speaker 1: some due diligence and understand whether or not that threat
Speaker 1: is real. And so that's going to be more time consuming,
Speaker 1: more folks are going to be vetted in a more
Speaker 1: aggressive manner, and this will likely not end at least
Speaker 1: for the next month, is my expectation. So, Henrietta, let's
Speaker 1: talk about the economic reality of all of this. Typically
Speaker 1: we think of the United States, it's rather insulated from
Speaker 1: international trade issues, but that southern border is important. When
Speaker 1: does the reality of that start to bite? I think
Speaker 1: it's I think it's starting literally as we speak, so
Speaker 1: the drivers that are bringing goods to and from Mexico
Speaker 1: to various plants. You know, it's so integrated. We've been
Speaker 1: dealing with NAFTA since and these businesses don't have you know,
Speaker 1: big warehouses with with caches of whatever, you know, widget
Speaker 1: they need to import or put into their car assembly.
Speaker 1: So they rely on this constant flow of traffic between
Speaker 1: the US and Mexico, and it's roughly one and a
Speaker 1: half billion dollars per day, and so tie up at
Speaker 1: the cargo side of you know, two hours is meaningfully
Speaker 1: impactaful because, uh, the driver can't make his next shipment,
Speaker 1: he can't run on time. And speaking with the manufacturers
Speaker 1: associations yesterday, the expectation is that the manufacturing plants are
Speaker 1: going to have to cut entire lines of production because
Speaker 1: they don't have certain components to plug into whatever their
Speaker 1: final product is. It's what degree if it's old, does
Speaker 1: this issue these issues fold into the hold off of
Speaker 1: U S m C I At the moment, it's a
Speaker 1: hundred percent hold up. That's That's exactly what Ways and
Speaker 1: Means was saying yesterday. Even well intentioned Democrats who want
Speaker 1: to push the U S M c A forward can't
Speaker 1: get their members to have a conversation about, say, you know,
Speaker 1: labor standards down in Mexico or environmental regulatory oversight UH
Speaker 1: or enforcement for that matter, because all they can talk
Speaker 1: about is the crisis at the southern border that is
Speaker 1: growing by the hour. What do we want from the
Speaker 1: Mexican government? I mean, I assume President Trump has a
Speaker 1: very clear, boisterous Trumpian statement on what he wants. What
Speaker 1: does business want from the Mexican government to assist us
Speaker 1: out of this quagmire? I think what I've noticed is
Speaker 1: that they are looking for, um, the Mexican government to
Speaker 1: take this vote on labor enforcement, which they're planning to do,
Speaker 1: I believe this week, if I'm not mistaken, UM, and
Speaker 1: then quickly give some deliverables to the Democrats on Capitol
Speaker 1: Hill who are looking not just to see passage of
Speaker 1: legislation about labor enforcement, UM, but actual action from Mexico.
Speaker 1: So for the business community, whose number one priority is
Speaker 1: just making sure that NAFTA has maintained, you know, forget
Speaker 1: about US China or the new EU tariffs or any
Speaker 1: of the overarching trade issues. This is just about as you,
Speaker 1: as you mentioned a minute ago, how important it is
Speaker 1: how integrated our our Mexico and U S supply chains are.
Speaker 1: They have to have this open so for I think
Speaker 1: businesses right now they want the backlog cleared up at
Speaker 1: the border about physical imports, but mostly they want to
Speaker 1: protect NAFTA. Is Steven Miller aware of Henrietta Treys conversation?
Speaker 1: Is he aware of the trade issues? Or do you
Speaker 1: just look at the White House and I guess he's
Speaker 1: our Director of Immigration as being uniquely fixed on the
Speaker 1: social issues. I consider U s tr Bob Lifeiser to
Speaker 1: be the one who's principally focused on all these trade
Speaker 1: issues and this complicates his life dramatically. Um But I
Speaker 1: think Stephen Miller is much more in the camp of immigration,
Speaker 1: and when you look at President Trump and what his
Speaker 1: priorities are heading into an election, I think it's very
Speaker 1: clear that he's more focused on immigration than trade. Very Miller, well,
Speaker 1: he than the trade dynamics wrapped around these political emotions.
Speaker 1: Henry the trades with Veta Partners. They get us up
Speaker 1: to speed on the next twenty four hours, looking forward
Speaker 1: to catching up right now with Laura Rose and a
Speaker 1: senior economists at Macro Policy Perspectives. Laura, great to have
Speaker 1: you with us on the program. Let's just begin with
Speaker 1: the next twenty four hours what are you looking for
Speaker 1: from cp I that print in twenty four hours time
Speaker 1: and Fed minutes to come up a little bit light.
Speaker 1: So Hi, Jonathan, great to talk to you too. So, um,
Speaker 1: we think we're in a soft patch for core inflation,
Speaker 1: and we think tomorrow's report will confirm that we're looking
Speaker 1: for only a point one percent month on month game
Speaker 1: in core cp I and for the annual rate to
Speaker 1: actually decline from two point one to two. And now
Speaker 1: remember the Fed's target is specified in terms of core
Speaker 1: PC inflation. This is c p I, which is generally
Speaker 1: a little bit higher. So this actually implies core PC
Speaker 1: inflation is moderating close to one point seven percent, probably
Speaker 1: by the end of this year. So we're moving away
Speaker 1: from target. Lord, you've got a very important paragraph and
Speaker 1: it really goes to your work with Juliet BMP Perry
Speaker 1: over the years, and that is technology imputing disinflation and deflation.
Speaker 1: John mentioned this earlier on recessage from abroad. Are we
Speaker 1: just are we seeing a disinflation because of all this
Speaker 1: modern technology that's overlaid on our everyday lives. Absolutely. Um.
Speaker 1: So the way we think about it is that technology
Speaker 1: plays a peek a boo role in depressing inflation. It
Speaker 1: doesn't show up every month. It rotates from component to component,
Speaker 1: but it is a trend. And the trend is that
Speaker 1: we have a lot of innovations faster internet, you know,
Speaker 1: mobile devices, cloud computing, along with the growth of digital content,
Speaker 1: electronic marketplaces, the sharing economy. All of these things put
Speaker 1: downward pressure on prices. What do they do to GDP?
Speaker 1: But the money question here is how many tents of
Speaker 1: a percentage point is not seen in GDP because all
Speaker 1: of this wonderment. I mean, that's that's a fair argument.
Speaker 1: You know, some people have looked closely at whether you know,
Speaker 1: there are measurement issues and in estimating productivity growth that
Speaker 1: they actually have found that that doesn't explain a whole lot.
Speaker 1: So this is something that is depressing inflation. But uh,
Speaker 1: in terms of a measurement issue, there isn't strong evidence
Speaker 1: that that explains low predictives. Do you buy this gen
Speaker 1: Do you buy this idea that all this technology overlays
Speaker 1: not in GDP? I think there's a massive argument behind that, Tom,
Speaker 1: and I think a lot of people are making it. Laura.
Speaker 1: Another argument I want to sort of get through with
Speaker 1: you is a distinction between pc and CPI. What is
Speaker 1: the clear distinction between the two gages of inflation. Well,
Speaker 1: they're they're different measures, they're conceptually different. PCE covers a
Speaker 1: wider set of prices. It covers public sector goods and
Speaker 1: services that are bought and purchased on behalf of individuals.
Speaker 1: Those aren't included in in CPI, and in fact it's
Speaker 1: the public sector purchases that we're seeing a lot of
Speaker 1: disinflation in. And healthcare is one example. So the government
Speaker 1: is a key setter, price setter in the market for healthcare.
Speaker 1: It has rising obligations associated with an aging population. Um
Speaker 1: it sets prices again at the Medicare and Medicaid expenditures
Speaker 1: are about of the total healthcare market, so it's pricing
Speaker 1: decisions affect other prices and it's incentivized to set those
Speaker 1: prices low. So that's a source of inflation repression that
Speaker 1: we're seeing more in TC and c p I. But
Speaker 1: it's quite important. It's one factor that is keeping the
Speaker 1: inflation environment very muted and Laura. For a lot of
Speaker 1: people who might have accidentally stumbled across Blomberg Radio not
Speaker 1: intending to listen to Financial news this morning, their reality
Speaker 1: and what they live just in terms of inflation is
Speaker 1: not what they hear when they listen to programs like this.
Speaker 1: We say that inflation is low, it's below target. That's
Speaker 1: not the America, that's not the Europe that some people
Speaker 1: are living. That's true. I mean again, this is the
Speaker 1: average basket for the average you know individual in the US.
Speaker 1: It's not reflective of individual experiences in specific areas. So
Speaker 1: you know, one example of that is is rental how
Speaker 1: you know, apartment rents, which have been rising so much
Speaker 1: and I think a lot of people feel that burden.
Speaker 1: We actually see that as slowing somewhat um So rent
Speaker 1: growth has been very strong over the course of this expansion.
Speaker 1: It has added to inflation shin when the unemployment rate
Speaker 1: was really high, so it kind of accounts for some
Speaker 1: missing inflation. Now we think that's starting to moderate. Well,
Speaker 1: provide clarity here for our audience. What is the inflation
Speaker 1: rate blending services and goods right now? Where does macro
Speaker 1: policy put that? So we expect overall core so that
Speaker 1: strips out food and energy. We think we're going to
Speaker 1: moderate to two percent on a year on your basis,
Speaker 1: and we see that over the course of the next
Speaker 1: two years moderating slightly below that one nine or one eight.
Speaker 1: So prices are rising on a year on your basis
Speaker 1: a little bit under two percent, which is the FEDS mandate.
Speaker 1: La Rossa, thank you so much. Perspectives and John, that
Speaker 1: goes right to Mr Dragging tomorrow if you have the
Speaker 1: same conversation in Europe. I mean, where do you put
Speaker 1: that run rate for year? What? One point four? I
Speaker 1: am ready looking forward to that news conference tomorrow. There
Speaker 1: is an election today, well know not some of the
Speaker 1: primaries are the small elections of the United Kingdom, Newport,
Speaker 1: South of Wales and all that, or maybe elections in
Speaker 1: the United States, but a genormous, an important election in Israel,
Speaker 1: of course, involving Mr Yahoo. We have the perfect guest
Speaker 1: to provide perspective, not one, but two tours of duty.
Speaker 1: Is Ambassador of the United States to Israel, Martin Indick
Speaker 1: joins us, of course with the Counsul on Foreign Relations,
Speaker 1: and he distinguished fellow Martin. Within the news reporting there
Speaker 1: is discussion of the election, some focused, less focus. What
Speaker 1: is the single salient point you would make about this
Speaker 1: moment for Israel? Tom Well, the moment itself is one
Speaker 1: in which Israel it's strong, enjoys strong relationships with the
Speaker 1: major powers, not just its traditional the States, but China
Speaker 1: and Russia and India, and emerging relationships with the our world.
Speaker 1: So things are pretty good for Israel at the moment.
Speaker 1: And of course the Netanya has a strong backing of Trump.
Speaker 1: So the moment is really about Netanyahu himself and whether
Speaker 1: the people of Israel decide that they've had enough of
Speaker 1: him after ten continuous years of rule and corruption charges
Speaker 1: against him and a sense of a kind of royalty
Speaker 1: ruling Israel, whether they're ready for a change or whether
Speaker 1: they want to stick with the secure Netanyahu. Who is
Speaker 1: the other side, who is the alternative vote for the
Speaker 1: people of Israel this day? The leader of the opposing
Speaker 1: forces is Benny Gantz. He's former Israeli Army chief of staff,
Speaker 1: and he has around him three other two other chiefs
Speaker 1: of staff, Gabishkenazi and bog and uh your Lapid, who
Speaker 1: is quite an attractive former anchor like yourself, Tom, but
Speaker 1: has become quite a fixture on the political scene as
Speaker 1: a centrist. So it's really a centrist, security oriented alternative
Speaker 1: that's being presented. What what's the mood of the people.
Speaker 1: I mean with the election going. I don't want to
Speaker 1: get into any polling data or that, but is Israel
Speaker 1: completely focused on this election or is it just another
Speaker 1: cycle with Mr Netya, who alway Israeli has take their elections.
Speaker 1: Very big turnout could be inspected. It's always has been
Speaker 1: up in the in the in the high sixties seventy turnout,
Speaker 1: which is which is huge compared to the United States.
Speaker 1: It's a it's a raucous rambaptuous elections seen now over there.
Speaker 1: Uh and and I think that that The other element
Speaker 1: that's important to remember is that there are many parties
Speaker 1: I think something like twenty seven parties contesting this. This
Speaker 1: is a proportional representation election in which the percentage votes
Speaker 1: that you get determined the number of seats that you get.
Speaker 1: So whoever wins, whether it's Gans or Orton, they're going
Speaker 1: to have to cobble together a coalition with smaller parties
Speaker 1: that are really boutique parties for the religious, for for
Speaker 1: the right wing, for the center left. Is Mr Neyaho
Speaker 1: a centrist who has been forced to the right or
Speaker 1: is he comfortable with the boutique parties of the far
Speaker 1: right in Israel. He I would say he's a center
Speaker 1: right person himself in terms of his preferences and personality.
Speaker 1: But he is above all a survivalist and a very
Speaker 1: good one at that, and that has led him in
Speaker 1: the in the recent past to form a coalition government
Speaker 1: of the right and extreme him right and religious parties,
Speaker 1: and that has proved to be a stable government for
Speaker 1: him at last go around. And so I think that
Speaker 1: will be his preference again, even though it does push
Speaker 1: him towards positions to the more extreme than he would
Speaker 1: otherwise establish. If you're just joining us, Martin Indeck, with
Speaker 1: us with the Council on Foreign Relations, and of course
Speaker 1: to UH tours as Ambassador of the United States to
Speaker 1: Israel as well, Ambassador Indeck, I must take time on
Speaker 1: the Golden Heights. There are the photographs of the heights,
Speaker 1: the plateau looking down in the Sea of Galilee. I
Speaker 1: think for so many Americans removed from ninety seven and
Speaker 1: the other wars of the region, it's like, Okay, go
Speaker 1: on heights. Explain to our audience the importance of the
Speaker 1: Golden Heights and why President Trump's announcement was so critical. Well,
Speaker 1: you're right, they are the heights, and they do look
Speaker 1: down on on Israel's northern valleys, and as a result,
Speaker 1: there is an inbuilt sense of concern about what would
Speaker 1: happen if the Syrians controlled those heights again as they
Speaker 1: did before nineteen sixty seven, when Israel occupied them in
Speaker 1: a defensive war. The the fact of the matter is, however,
Speaker 1: that five Israeli prime ministers, including Prime Minister Netanyahu, have
Speaker 1: offered to withdraw fully from the Gallen Heights two the
Speaker 1: Valleys in order to achieve peace with Syria, and that
Speaker 1: the negotiations that took place in ninety nineties which I
Speaker 1: was involved in, lad lead to basic agreement on that
Speaker 1: in which the Syrian army would not move beyond Damascus,
Speaker 1: which is on the other side of the ns and
Speaker 1: therefore it was possible to establish the military zones much
Speaker 1: like you have in the Sinai that have secured the
Speaker 1: piece between Israel and Egypt of more than four decades now.
Speaker 1: So you know, it's not impossible to work out security arrangements,
Speaker 1: but it's certainly impossible today when you you have such
Speaker 1: chaos in Syria and the Iranians pushing their militias to
Speaker 1: move to the Assyrian side of the goal on heights.
Speaker 1: Nobody was ever suggesting that Israel should withdraw at this point,
Speaker 1: but to recognize Israel's sovereignty there was to do something
Speaker 1: else that I think is very damaging for the United States,
Speaker 1: which is to undermine a basic principle of international relations,
Speaker 1: that is the inadmissibility of the acquisition of territory by force.
Speaker 1: If we go down that road, Putin's acquisition of Crimea
Speaker 1: becomes legitimate. Esping, China's acquisition of becomes legitimate. Stami Saying's
Speaker 1: invasion of Kuwait becomes legitimate. And so I think that's
Speaker 1: the danger in what Trump did here, Ambassador A delicate question.
Speaker 1: If the State Department has changed to be polite, whether
Speaker 1: it's Tillerson or Pompeio, whatever the phrases, do you have
Speaker 1: an optimism that over the years, over the administration, our
Speaker 1: administration's plural I should say that we can get our
Speaker 1: State Department in our diplomacy back to the time of
Speaker 1: Martin Index or even back to the time of Henry Kissinger. Yes,
Speaker 1: I think so, but it's going to be difficult. Pompeio
Speaker 1: came in after the havoc that Tillerson wrought particularly at
Speaker 1: the highest levels of the professional feign service UH and
Speaker 1: has not yet been able to re establish the corpus
Speaker 1: that that was operating the bureaque bureaucratic side of the
Speaker 1: State Department for so many years. They are very professional
Speaker 1: people that have been treated badly treated as if they
Speaker 1: were not professional civil servants. UM the top echelons that
Speaker 1: are normally peopled by the professional bureaucrats no longer those
Speaker 1: positions are simply not filled at the moment, and if
Speaker 1: this continues, you've also got large numbers of women and
Speaker 1: people of color who are no longer seeking those positions,
Speaker 1: and so the diversity that used to be there is
Speaker 1: starting to slip away as well. So I'm very worried
Speaker 1: about it. I think pomp Peio has good intentions, but
Speaker 1: given the way that overall there's an attitude coming out
Speaker 1: of the White House disdained for the civil servants, of
Speaker 1: a sense that they're part of some deep state that's
Speaker 1: opposed to President Trump and his policies, I think is
Speaker 1: really making it difficult. And I think it's a mistake
Speaker 1: to view the civil service that way, and I think
Speaker 1: that the United States will be worse off not just
Speaker 1: in foreign policy, but more generally because of this UH
Speaker 1: sustained attitude. Ambassador honored to have you with the stay
Speaker 1: of elections in Israel. Martin Indeck of the Council on
Speaker 1: Foreign Relations of former Ambassador of the United States to Israel.
Speaker 1: Sarah McGregor with US now with Bloomberg News Economics. A
Speaker 1: lot of critics in the last number of days, Sarah,
Speaker 1: over this i m F process, But the fact is
Speaker 1: they're usually the best tools they can, aren't they. I mean,
Speaker 1: they have to take the information that they're getting on
Speaker 1: the ground from from the countries. And I think it
Speaker 1: is pretty significant. This cut that we're seeing today the
Speaker 1: third time the i m F has downgraded its global
Speaker 1: outlook in the past six months, and it talks about
Speaker 1: these downside risks. And overnight we saw the US threatened
Speaker 1: to put tariffs more tariffs on the EU and one
Speaker 1: of the downside risks that sees is this trade war.
Speaker 1: And so you can imagine that as of today, already
Speaker 1: we can see that the forecast is looking even gloomier
Speaker 1: than what they may have seen when they, you know,
Speaker 1: compiled this report they submed out to net exports. I
Speaker 1: guess trade volume in world trade growth, folks, the equation
Speaker 1: why will C plus I plus G and on the
Speaker 1: back end is net exports. Is this I MF meeting
Speaker 1: Sarah going to be all about trade dynamic or could
Speaker 1: they actually talk about business as usual? Absolutely? I think
Speaker 1: trade will be right up there high on the agenda.
Speaker 1: It's clear that the Trump administration is keen on continuing
Speaker 1: continuing to use these terraces as a tool of its
Speaker 1: trade policy, and now it seems to be opening up
Speaker 1: even wider this front against Europe. It's allies that hasn't
Speaker 1: resolved the steel terraces with Mexico and Canada, which means
Speaker 1: the new NAFTA isn't passed. And I think that countries
Speaker 1: are really getting agitated, you know, score and trading partners
Speaker 1: about what this is going to mean for them, Sarah.
Speaker 1: One of the top headlines on the Bloomberg terminal here
Speaker 1: that really caught my eyes that the I m F
Speaker 1: cuts its twenty nineteen global outlook to the lowest since
Speaker 1: the financial crisis, so about ten years. Does the level
Speaker 1: of its outlook reduction surprise you at all? As as
Speaker 1: a headline, it does seem surprising, right, But I think um,
Speaker 1: you know, the one sort of silver ligning that they
Speaker 1: seem to emphasize actually in the report is that they
Speaker 1: actually see things potentially improving in the second half of
Speaker 1: next year, and a lot of that's attributed to this
Speaker 1: um rate hYP pause that the FED has taken in
Speaker 1: some of the other central banks, you know, the stimulus
Speaker 1: and the measures they are taking. But of course there's
Speaker 1: no guarantee that the Fed's gonna, um, you know, keep
Speaker 1: this policy on hold. It's sort of indicated right now,
Speaker 1: that's what it's looking at. But um, you know, there's
Speaker 1: really a lot of balls in the air with this forecast. Well,
Speaker 1: I like what Sarah and her team wrote up here,
Speaker 1: the idea of blaming Europe. I mean, it's McGregor rudeness there.
Speaker 1: But can I note Paul that not only are we
Speaker 1: blaming Europe for the markdown, but we actually raised China
Speaker 1: growth a tenth of a percent. Yeah, that's interesting. It's
Speaker 1: you know, we thought we saw some green shoots, tom
Speaker 1: and bamboo, let's let's be correct over the last couple
Speaker 1: of months, and I think that might be including some
Speaker 1: fiscal stimulus and and so on and so forth. So Sarah,
Speaker 1: I mean, is there too early to call. I mean,
Speaker 1: what is the kind of the view on China here again?
Speaker 1: Is it? Is it best just to kind of call
Speaker 1: it a stabilization from the I M S perspective? Well, absolutely,
Speaker 1: it's interesting because just I think even a few weeks
Speaker 1: or months ago, I think there was quite a pessimistic
Speaker 1: view about China and now they've had some good manufacturing
Speaker 1: data and again it's small, but you know, notable boost
Speaker 1: to their forecast. Well, we should note that the I
Speaker 1: M S actually cut the US forecast again for nineteen
Speaker 1: you know, again, this is sort of an idea of
Speaker 1: the leverage that China might try and take from these
Speaker 1: trade talks to at a pivotal moment with the U
Speaker 1: S showing look, we're maybe a little bit stronger than
Speaker 1: you guys think we are right now. Yeah, I think
Speaker 1: that's pretty that that's a key point because we go
Speaker 1: into these trade negotiations, one of the questions always is
Speaker 1: is which side needs it more? And I think one
Speaker 1: of the narratives on the you know, the China needs
Speaker 1: it more was boy, their count their economy really is slowing,
Speaker 1: and that the last second they can afford is another
Speaker 1: round of terror from the US, but this data suggests
Speaker 1: that they might be in a better position. Absolutely, Again
Speaker 1: it's small that that I MF did cut by a
Speaker 1: tenth but percentage point the China's forecast. But again it's
Speaker 1: just a bit of an outlook. You know, if you've
Speaker 1: compared that, let's say, with even Europe, where Germany, Italy,
Speaker 1: France the forecasts had again with pretty big fundamental problems
Speaker 1: um identified there, you know, China doesn't look so bad
Speaker 1: right now, does it. Sara McGregor, thank you so much.
Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and
Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast
Speaker 1: platform you prefer. I'm on Twitter at Tom Keane before
Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg Radio.