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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Ley.

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

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

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. Right now,

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Speaker 1: Ellen Zenter with us Morgan Stanley. Ellen, We've got a

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Speaker 1: lot of focus on the American labor economy, but I

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Speaker 1: want to get your call because you've been so good

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Speaker 1: about lower g d P. If you take the consumer

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Speaker 1: and x them out, was this is zero percent economy

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Speaker 1: in the last ninety days. No, not a zero percent economy,

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Speaker 1: but I mean it's clear that the consumer has been

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Speaker 1: propping up the economy, which is good because it's of

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Speaker 1: our economy. But you know, economists always like better balanced growth.

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Speaker 1: We wish the growth wasn't just being sure them by

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Speaker 1: to say the consumer and housing um And I think

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Speaker 1: we will get better balanced growth next year. But that's

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Speaker 1: going to hinge importantly on whether trade policy is less

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Speaker 1: uncertain and global growth is a bit stronger. And I

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Speaker 1: know those are two big ifs, but if you give that, yeah,

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Speaker 1: two big is. But if you get that then it's

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Speaker 1: better balanced growth next year, even though slower growth compared

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Speaker 1: with this year. So I wanted to be clear this

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Speaker 1: tug of war between consumption and business investment. You expect

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Speaker 1: to see business investment improved before consumption tracks. Yeah, that's

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Speaker 1: what we're expecting. Um. If it doesn't, then you would

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Speaker 1: be talking about recession. We're just not seeing that in

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Speaker 1: in the of the indicators, and certainly not any of

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Speaker 1: the leading indicators. You know, if if businesses crack and

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Speaker 1: start laying off workers, and it doesn't matter how healthy

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Speaker 1: the consumer is, they'll stop spending. UM. But if you

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Speaker 1: get better tone on trade, then you know, you have

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Speaker 1: to ask yourself what happens following manufacturing slowdowns that don't

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Speaker 1: lead to recession? And you can see the at the

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Speaker 1: I s M starts bottoming and then starts to move up.

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Speaker 1: My guess is probably later this year into Q one,

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Speaker 1: we'll see that it formed a bottom and started turning

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Speaker 1: back up. And so that's a nice thing. But what

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Speaker 1: what happens in environment where doesn't lead to recession, but

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Speaker 1: you still got this undercurrent of incredible uncertainty? Will eventually

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Speaker 1: investor UH firms have to invest in replacement capital? Just

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Speaker 1: to support even domestic demand. And so you get at

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Speaker 1: least some modicum of business investment UH, and so that's

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Speaker 1: positive rather than declining investment as we've had this year.

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Speaker 1: And then how difficult would it be to get a

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Speaker 1: clean rate on this payroll support in forty minutes? It'll

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Speaker 1: be near impossible, UH, just because we know how many

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Speaker 1: GM strike UH workers were on strike official report came

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Speaker 1: out forty six thousand. But how many downstream manufacturers furloughed

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Speaker 1: workers UM or in an idled UH their their productions

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Speaker 1: for those weeks of October that the strike UH harried on. UM.

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Speaker 1: You know what we do as forecasters. As you've got

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Speaker 1: a model, UM, you forecast payrolls for that month. There's

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Speaker 1: nothing that suggests payrolls were very soft over the month.

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Speaker 1: And then on the back end of that, you shave

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Speaker 1: off the number that you think would be associated with

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Speaker 1: the GM strike. And that's how we come up with

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Speaker 1: our number of around ninety thousand for private payrolls. You

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Speaker 1: add the strikes back into that, UH, and you've got

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Speaker 1: something around a hundred and fifty private payrolls. Nothing really

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Speaker 1: pointed to a deterioration in labor growth consumers still very

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Speaker 1: upbeat about the labor market. In October. Initial jobless claims

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Speaker 1: would suggest that the knock on effects from the GM

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Speaker 1: strike we're not that large. I mean the striker the

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Speaker 1: striking workers cannot file jobless claims, but other workers that

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Speaker 1: are affected can and jobless claims were still extraordinarily low

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Speaker 1: during the survey week. So that's why there's nothing fundamental

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Speaker 1: there that says is a horrible labor market. You're just

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Speaker 1: gonna have an ugly looking number because of GM. And

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Speaker 1: I'm glad that chair Pal addressed it in his Q

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Speaker 1: and A uh this week. Um, he doesn't see he

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Speaker 1: would not have seen the full employment report, but he

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Speaker 1: would have seen the manufacturing segment of it because they

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Speaker 1: have to have that to put out the Federal Reserve

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Speaker 1: Industrial Production Report. Ellen, I'm wondering about hourly earnings. The

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Speaker 1: expectation on the survey is three percent uh, and that's

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Speaker 1: up from two point nine percent, and the prior reading

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Speaker 1: average hourly earnings expected to be higher as well. What

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Speaker 1: do you take away from that? What do you need

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Speaker 1: to see to sustain the strength in the consumer? Yeah,

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Speaker 1: highly so, so it is it is um. Uh. You

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Speaker 1: know how many jobs are we creating our way? Is

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Speaker 1: wage growth holding up? Uh? What kind of financial market

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Speaker 1: income are we getting? The top income quentile represents of

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Speaker 1: all consumer spending and they can at time spend out

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Speaker 1: of that increased wealth. But labor market income is the

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Speaker 1: overall over our waching driver. And you've got slower job

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Speaker 1: growth and wage gains that aren't picking up materially. And

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Speaker 1: so we've had, uh, you know, we've got I wouldn't

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Speaker 1: call it weak, um, but less of a firm backdrop

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Speaker 1: for consumer spending just from labor market income. And that's

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Speaker 1: one reason why we expect spending to be slower going

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Speaker 1: into compared with with this year. But that's not saying

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Speaker 1: anything terrible, right, We've got about two point six percent

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Speaker 1: growth and consumer spending this year. That's incredible, and mostly

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Speaker 1: from lower interest rates. Next year, you don't drop it

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Speaker 1: interest rates further, but you still maintain that support. But

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Speaker 1: job growth continues to slow, and so that does mean

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Speaker 1: less support for consumer spending. We're expecting around two percent

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Speaker 1: consumer spending growth and if we get that is very

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Speaker 1: unlikely that we get a recession. Well, let's turn to

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Speaker 1: the FEDOM what it means for the Federal Reserve. There's

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Speaker 1: a debate at the moment, Allen As. I'm sure you

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Speaker 1: know that the benchmark, for further reason is now a

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Speaker 1: material reassess of the outlook at the FED. That's the

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Speaker 1: benchmark for another cod if you've got an idea of

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Speaker 1: what the material reassessment of the outlook actually is. Yeah,

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Speaker 1: when I think about it, I just think about, well, well,

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Speaker 1: what are the positive things that that chair pal and

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Speaker 1: if I keep pointing to jobs, jobs, jobs, consumer, consumer,

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Speaker 1: consumer and UH and the two are linked, right, So

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Speaker 1: you gotta watch initial jobless claims as that trend. So

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Speaker 1: that's four week moving average, so we're not looking at

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Speaker 1: natural disaster effects, we're not looking at holiday effects. When

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Speaker 1: that starts trending higher, you could pretty much put a

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Speaker 1: time stamp on how much longer UH the expansion will last.

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Speaker 1: And so that's that's something that they certainly would be

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Speaker 1: watching closely. The number of things. And what's so important

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Speaker 1: here is everybody trots out the jobs claims is a

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Speaker 1: is an optimistic thing. To five percent of my mail

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Speaker 1: doesn't agree with the vector of jobless claims. A huge

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Speaker 1: part of America, it feels there under employed. Good morning

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Speaker 1: David blanche Flower at Dartmouth or they feel that they're

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Speaker 1: not participating in all this good news at one G

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Speaker 1: d P. I mean today's jobs report, is it really

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Speaker 1: a picture of America? Yeah, I think it's a picture

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Speaker 1: of America because the job's report, if you look into

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Speaker 1: the unemployment uh numbers you've got, you've still got a

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Speaker 1: high amount of folks that are underemployed. You've got some

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Speaker 1: better unemployment rate numbers uh that are that are partly

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Speaker 1: reflecting simply people leaving the labor market. Um. But I

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Speaker 1: would caution here that when you look at a lot

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Speaker 1: of those metrics under employment metrics, they're no worse today

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Speaker 1: uh than they have been in prior expansions. Uh. In fact,

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Speaker 1: they're back at at lows before the financial crisis. And

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Speaker 1: so they're always going to be underemployed, they're always going

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Speaker 1: to be part time for economic reasons, they're always going

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Speaker 1: to be discouraged workers. But I don't find that they're

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Speaker 1: particularly higher much higher amounts than we have had in

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Speaker 1: the in the past. But to pick up on Time's point, Alan,

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Speaker 1: we have seen delinquencies and defaults picking up with credit

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Speaker 1: card receivables auto loans. People talking about a two tier

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Speaker 1: economy with the lower income Americans falling behind UH and

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Speaker 1: increasingly have to access credit. How much does that matter

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Speaker 1: for the overall economy? And it certainly matters on the

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Speaker 1: specific level. But from an economic perspective, so I think,

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Speaker 1: so there's a socio economic UH story to tell here,

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Speaker 1: and there's an overall economic story to tell here. We

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Speaker 1: always want the consumers to participate across the board, across

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Speaker 1: income groups, and one of the best ways to do

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Speaker 1: that is a very strong labor market. As you know,

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Speaker 1: we can see when we look at delinquencies. And what

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Speaker 1: I would UH say is that if you if you

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Speaker 1: strip out subprime UH from the rest of UM UH

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Speaker 1: credit UH, you can see that that is the area

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Speaker 1: that's driving up credit card delinquencies at driving up auto delinquencies. Now,

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Speaker 1: that is what we should be seeing at this late

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Speaker 1: stage of an expansion. You always see credit dynamics or

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Speaker 1: credit deterioration turn up in the low income subprime groups first,

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Speaker 1: and then it spreads out to more credit products and

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Speaker 1: then marches up the income chain. So to me, this

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Speaker 1: is something natural that we should be seeing now. Now

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Speaker 1: from a socio economic standpoint now, it's terrible. It's terrible.

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Speaker 1: If you look at rents and healthcare as a share

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Speaker 1: of overall income, it's an increasing burden series burden for

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Speaker 1: low income groups UM and that just continues to add

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Speaker 1: to income inequality in the US and is much more

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Speaker 1: long term and long lasting issue than just what are

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Speaker 1: they going to do over this cycle. This has been

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Speaker 1: wonderful Allen Saner, thank you so much again. Chief of

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Speaker 1: Coloms Stanley is well this morning. Why don't you bring

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Speaker 1: in our steam guest series. He helped us a lot

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Speaker 1: on said happy to say Jeff Rosenberg joined us now

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Speaker 1: blank Financial Senior portfolio manager. Money to Jeff, morning, your

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Speaker 1: first tight place. That's a strong report, and you know

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Speaker 1: this is you're talking about thirty one under it on

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Speaker 1: the SMP. This is this is all about, you know

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Speaker 1: what we'll get a little bit later this morning in

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Speaker 1: terms of I s M, but it's about really pushing

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Speaker 1: back hard against this recession risk that had been on

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Speaker 1: the top line. We'll see what happens at at ten am.

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Speaker 1: Market expectations are for that to also rebound, and you're

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Speaker 1: going to have a story coming out of today which is,

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Speaker 1: you know, good news on the trade. Uh, you know

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Speaker 1: the Fed, yes, there may be done cutting rates, but

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Speaker 1: they did what they needed to do, and the economy

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Speaker 1: is showing signs that it doesn't need as much support,

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Speaker 1: you know, and that's a pretty good story. The president

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Speaker 1: needs to job own a need for a rate cut

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Speaker 1: or certainly gross accommodation. And let's say politically, Jeff Rosenberg,

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Speaker 1: that goes to one point nine g d P with

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Speaker 1: this better than good report, can black rocket? Can you

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Speaker 1: model a higher GDP statistic forward? Not not hugely? You know,

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Speaker 1: we're we're basically yet trend. And and the issue is,

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Speaker 1: and again it goes back to that I S M figure,

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Speaker 1: is that you know, the consumer side of the economy

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Speaker 1: has not been affected. And what the Job's report today

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Speaker 1: is about is a stronger than expected report really eases

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Speaker 1: the concern. And the concern has been will this trade uncertainty,

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Speaker 1: will the manufacturing uncertainty, the decline in in the business

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Speaker 1: side spill over in the form of decreased hiring that

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Speaker 1: eventually shows up in consumers that seems to certainly be

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Speaker 1: diminished as as a risk. And and so you know

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Speaker 1: that's a that's a that's strengthening the outlook for the

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Speaker 1: ability to avoid recession. That doesn't necessarily get you back

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Speaker 1: up to the three percent level because the investment side,

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Speaker 1: the business side, there's been a drag. Jeff, you and

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Speaker 1: I talked about this in FED day and again thank

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Speaker 1: you to you and black Rock for your contribution. While

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Speaker 1: we saw the press conference, and you and I talked

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Speaker 1: about one indicator, which is a three month tenures spread.

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Speaker 1: It's come in a little bit in the gloom of

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Speaker 1: the last couple of days. Andrew holl And Horset City Group,

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Speaker 1: I think had the same tone you have, which was

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Speaker 1: where whatever series Global Wall Street looks at, we're right

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Speaker 1: now at a tipping point, almost on a knife edge,

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Speaker 1: a constructive knife edge. We really don't know which way

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Speaker 1: this is gonna tip. Do you agree with that idea? Yeah, exactly.

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Speaker 1: And and just to to frame it, you know, what's

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Speaker 1: going on is there is an elevated risk of recession

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Speaker 1: coming mainly from you heard you heard Powell. You know

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Speaker 1: layout the reasons global growth slowing, trade uncertainty, US manufacturing,

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Speaker 1: and business confidence declining. And and that is in contrast

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Speaker 1: to the strength you know, today's payroll report, the revisions.

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Speaker 1: This is about the strength of the consumer, the strength

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Speaker 1: of the labor markets. And so when you see these

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Speaker 1: increases in recession risk recession risks, which way does it go?

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Speaker 1: Most of the time it goes back to expansion, But

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Speaker 1: one out of four times it turns into recession. And

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Speaker 1: so that's been the concern. I think today it's going

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Speaker 1: to be about easing some of that concerns UH and

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Speaker 1: risk on fields to the market. Jeff Rozenberg of Black Rock,

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Speaker 1: I'm looking right now, I'm wondering if this strength is

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Speaker 1: enough to make this not just a noisy, dismissable report,

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Speaker 1: but something very significant showing ongoing strength, ongoing bringing of

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Speaker 1: workers into the labor force. Well, well, you know, particularly

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Speaker 1: with the revisions, which which gets you back up to

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Speaker 1: the faster than the most recent pace. You know, certainly

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Speaker 1: there was a lot of noise around the strike and

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Speaker 1: as Jonathan's leading was saying, there's gonna be a lot

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Speaker 1: of kind of apologies for the week report today. Now

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Speaker 1: it's more a little bit of head scratching of maybe

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Speaker 1: it's not weakening as much as we thought, and a

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Speaker 1: lot of these concerns are are less likely to show up.

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Speaker 1: You know, it's it's a high frequency report. So you

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Speaker 1: know what, we'll move on to the next data release here,

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Speaker 1: but there's certainly a trend here with the pivot at

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Speaker 1: the beginning of the month. On trade is really the

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Speaker 1: critical issue here, that's the source of the recession risk.

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Speaker 1: Now we can debate whether or not that's going to

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Speaker 1: be for the long run a permanent state of trade uncertainty.

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Speaker 1: You can't really argue that is the case. But you know,

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Speaker 1: the market's focus on what's right in front of their faces,

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Speaker 1: and what's right in front of their faces is some

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Speaker 1: good data, some easing on the trade front, and all

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Speaker 1: of that is supportive of of of a good economic backdrop.

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Speaker 1: Does this mean your interview with Mr Cudlow is an

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Speaker 1: hour long? Now? Unfortunately he be about fifteen minutes because

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Speaker 1: he's gonna want to talk this morning. Jeff, this is

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Speaker 1: why it's so so difficult right now for market participants.

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Speaker 1: You know that famous line there's two types of forecasters,

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Speaker 1: those that a wrong and those that don't know. They

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Speaker 1: don't know, And Jeff, I just wonder if we all

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Speaker 1: don't know what's going to happen with the trade story,

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Speaker 1: how can we make a market cool when it's so

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Speaker 1: so crucial to developments into next year. Well, yeah, you

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Speaker 1: have to recognize the uniqueness of the of the trade

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Speaker 1: risk in that it is inherently political, which means nobody knows,

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Speaker 1: there's no distribution, you can't really predict it. So you

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Speaker 1: have to build in the uncertainty into your portfolio allocation,

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Speaker 1: your process. That's what we do. Uh. And then you

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Speaker 1: just have to be able to react to the change

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Speaker 1: in the environment. And that's what's going on in the markets.

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Speaker 1: That's why October basically is back up across markets, is

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Speaker 1: because they're reacting to the change and and and the

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Speaker 1: market will be highly reactive if there's a change to

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Speaker 1: the negative, much as we've seen in the pattern on

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Speaker 1: the trade negotiations. They're hot, they're cold. You can't really

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Speaker 1: predict it, but it's certainly is the driver right now

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Speaker 1: moving markets. Jeff, before we let you go, just a

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Speaker 1: word on the markets in the bond market right now,

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Speaker 1: where's the team at black Rock really focused? So we're

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Speaker 1: focused on this, this recession risk notion and and and

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Speaker 1: how do you build portfolio is in that kind of environment,

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Speaker 1: and it's about resilience. You can't deny that there is

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Speaker 1: a late cycle aspect to our markets. There is a

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Speaker 1: heightened sense of recession risk again today. Yes, high frequency

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Speaker 1: that's going to take some of those risks down. But

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Speaker 1: the stance of where we are in the bond markets,

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Speaker 1: as Tom was asking before, you know, it's on a

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Speaker 1: nice edge. And so when you're in that kind of

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Speaker 1: environment bond investors, you know, we we have to play defense.

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Speaker 1: That's our job in the portfolios. So that's what we're concentrated. Jeff,

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Speaker 1: thanks so much, greatly appreciate your effort with US. Is

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Speaker 1: on FEDS Day, FED Day with Jeffrey Rosenberger Black Rock

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Speaker 1: in here today on a better than good jobs report.

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Speaker 1: We are right now, just moments away Jonathan Faraoll Tom

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Speaker 1: Keene sitting down with Richard Clarada, vice Chairman of the

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Speaker 1: Federal Reserve. They will be breaking down this strong jobs numbers,

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Speaker 1: getting a look at what that means for the FED

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Speaker 1: going forward. Right now, John Farrell, Tom Keene joining us

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Speaker 1: now from Bloomberg Television and Radio exclusive interview. I'm pleased

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Speaker 1: to welcome to the show. Richard Clarenda Federal is a

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Speaker 1: vice chairman and my surveillance radio co host. Tom Keene

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Speaker 1: making his debut on this set as well. Good morning, Jens.

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Speaker 1: It's good to see you, and it's a change. This

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Speaker 1: is different than you and I expected two hours ago.

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Speaker 1: It's a solid JOLS report that we thought we might

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Speaker 1: have to make some excuses for maybe sixty minutes ago.

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Speaker 1: It comes out a lot better and I think it

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Speaker 1: would be great here. Maybe i'll take a broader chech

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Speaker 1: with a vice chairman, and I know there's lots coming

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Speaker 1: off of Michael McKee's first question at the FED press

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Speaker 1: conference the other day. Vice chairman, thank you again for

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Speaker 1: joining us or at Bloomberg. I want to go back

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Speaker 1: to a word identified with the vice chairman of the FED,

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Speaker 1: and that is solid. We just had a more than

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Speaker 1: solid jobs report. The President of the United States tweeting

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Speaker 1: out about it a few days ago, he tweets out,

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Speaker 1: maybe we need lower rates to find for us as

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Speaker 1: a starter. What is the new solid that you see

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Speaker 1: into next year. Well, this was certainly a very solid

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Speaker 1: labor market report. As we sat in our statement, you know,

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Speaker 1: we have ongoing growth in the economy. We have inflation

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Speaker 1: near our objectives, so the economy is in a very

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Speaker 1: good place. You know, growth is as we've characterized growth

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Speaker 1: as moderate, right Now, the global economy has been slowing

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Speaker 1: and that and that's a factor, but the U. S

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Speaker 1: economy is very resilient. Uh and the and these are

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Speaker 1: good numbers. Both the GDP number and the labor market

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Speaker 1: number surprised a bit on the upside, So that's a

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Speaker 1: good thing. And those numbers, those g d P numbers,

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Speaker 1: are they politically acceptable to this nation? Is great for

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Speaker 1: economists like you to talk about one point nine as

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Speaker 1: a center tendency, but is that politically well, I'm not

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Speaker 1: going to get into the politics tom our job at

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Speaker 1: the FED. We have a dual mandate maximum employment, price stability.

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Speaker 1: We've made some adjustments in our policy right we think

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Speaker 1: they are and will continue to give significant support to

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Speaker 1: the economy. And we're we're we're a favorable outlook for

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Speaker 1: the economy. Let's talk about the outlook, the balance of

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Speaker 1: risks around the outlook right now, how would you describe

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Speaker 1: the balance of risk around that outlook? Rich Well, John,

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Speaker 1: I would say for most of the year, the balance

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Speaker 1: of risk had probably been tilted a little bit to

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Speaker 1: the downside, not so much because of the US, but

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Speaker 1: we're part of the global economy. We've got a global slowdown,

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Speaker 1: there are some pretty powerful global disinflationary pressures, and as

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Speaker 1: we said in July, uh in, in September, and this week,

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Speaker 1: we felt it was appropriate to make some adjustment in

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Speaker 1: our policy to provide some insurance or cushion against really

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Speaker 1: sort of a softening global economy. You know, you saw

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Speaker 1: that at the IMF a week or so ago, downgrading

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Speaker 1: the global outlook. So we think the economy is in

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Speaker 1: a good place. We think monetary policies and the balance

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Speaker 1: of risk that still tilted to the downside, I would

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Speaker 1: say somewhat Yeah. Looking at the economic assessment of the

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Speaker 1: Federals of Shaman, we're trying to understand what a material

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Speaker 1: reassessment of the outlook would be to reach that benchmark

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Speaker 1: for another move. Can you give us some clamority on that.

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Speaker 1: What is a material reassessment of the outlook? How much

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Speaker 1: data does one need to make that assess? Well, first

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Speaker 1: of all, let's remember what is the baseline outlook. The

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Speaker 1: baseline outlook is for ongoing continued growth, a very solid

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Speaker 1: labor market, and inflation near our objective. Obviously, if we

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Speaker 1: saw accumulating evidence that we were missing on employment, we

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Speaker 1: were missing on inflation, and we were missing on the

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Speaker 1: growth needed to suspain full employment and price stability, then

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Speaker 1: we would have to factor that in. We will be

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Speaker 1: data dependent, but we're saying our baseline outlook now is

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Speaker 1: policies in a good place. The next meeting is a

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Speaker 1: live meeting. Every meeting is alive. We're just trying to

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Speaker 1: figure out what the next meeting actually is. Do you

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Speaker 1: need a month of data to take another look at this?

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Speaker 1: Do you need three months of data to take another

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Speaker 1: look at this? How long does one need? Well, well, Jonathan,

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Speaker 1: we meet eight times a year, and as we indicated,

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Speaker 1: as we did back in October, we need to we can.

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Speaker 1: We have had meetings in between. So yeah, we're just

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Speaker 1: take the data as it comes in. The data comes in.

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Speaker 1: But the fact is there's an arch debate about two.

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Speaker 1: America's David blanche Flower up at Darkness talks about the underemployed.

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Speaker 1: It's fine, day of models, it's fine to speak is

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Speaker 1: a public voice as you are now, Professor Clarata. But

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Speaker 1: the truth of the matter is there's two. America's chairman

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Speaker 1: Powell is addressing this with a more social mandate from

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Speaker 1: the Fed. How do you address in the next year

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Speaker 1: two America's one employed fully employed and the other really struggling. Well, Tom,

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Speaker 1: let me talk about that, because I think Chair Pale

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Speaker 1: has has very effectively conveyed what we at the FED believe.

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Speaker 1: You know, we have basically one instrument, which is to

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Speaker 1: raise or lower the policy rate. So obviously it's a

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Speaker 1: very complex economy. But what we do know, and we've

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Speaker 1: had these FED listened to events. We've had fourteen FED

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Speaker 1: listened events this year, and what we've heard from those

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Speaker 1: events is the substantial, robust benefits of having a fully

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Speaker 1: employed economy, the wage gains at the lower end of

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Speaker 1: the income distribution opportunity. Now, Congress has given us a

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Speaker 1: dual mandate max employment and price stability. We have the

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Speaker 1: privilege not to be presiding over time when we're close

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Speaker 1: to full employment, and we think there's a real benefit

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Speaker 1: to keeping the economy there. So that's the way we're

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Speaker 1: focused on it. But let's talk about that Joe mandate.

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Speaker 1: So what de Great do you think the f X

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Speaker 1: channel at the moment is hampering your ability to hit it? Well?

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Speaker 1: Foreign exchange rates obviously go up and down for a

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Speaker 1: lot of reasons, and I'm not going to say too

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Speaker 1: much more about it than that as as a fed

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Speaker 1: uhanning and let me finesse it just a little bit.

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Speaker 1: Then I don't want the policy for scription. I just

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Speaker 1: want an assessment. Really, to what degree, to what extent

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Speaker 1: do you think the fex channel is it currently stands,

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Speaker 1: is curtaining your ability to hit your inflation? So I

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Speaker 1: would not I would not say that that's an impediment

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Speaker 1: to our hitting our inflation target. We had a news

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Speaker 1: story out here yesterday, a legitimate reported news story on

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Speaker 1: the Chinese response where they demand tariffs be lowered. Can

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Speaker 1: you afform Professor Clarret of Columbia University teaching econ one

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Speaker 1: oh one, who pays tariffs? Help us with this? Right now?

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Speaker 1: Let's slow down. Here's this arch issue. My chart of

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Speaker 1: the year is customs collections out three, four or five

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Speaker 1: standard deviations. Inform all of us, including the president watching

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Speaker 1: right now, who pays for these tariffs? Well, Tom, I'm

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Speaker 1: not going to get into trade policy one number two.

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Speaker 1: That's a very complex issue. It involves the incidents of

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Speaker 1: the tariff, it evolves profit margins, it involves exchange rates.

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Speaker 1: I have not looked into it, and I have nothing

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Speaker 1: for you on that what we have them in the

428
00:23:29,920 --> 00:23:31,959
Speaker 1: U S economy quite clearly. Playing into all of this

429
00:23:32,040 --> 00:23:34,719
Speaker 1: is a tug of wall between the resilient consumer and

430
00:23:34,840 --> 00:23:37,919
Speaker 1: weak business investment. When you look at at the moment,

431
00:23:38,200 --> 00:23:40,840
Speaker 1: is it your round like that you think business investment

432
00:23:40,920 --> 00:23:43,359
Speaker 1: picks up before we see a crack in the consumer

433
00:23:43,560 --> 00:23:44,800
Speaker 1: or is it the other way around? How should I

434
00:23:44,800 --> 00:23:46,720
Speaker 1: think about that? First of all, John, we don't see

435
00:23:46,760 --> 00:23:48,840
Speaker 1: a crack in the consumer. I've said publicly in some

436
00:23:48,920 --> 00:23:51,960
Speaker 1: recent speeches that in my professional career, which goes back

437
00:23:52,040 --> 00:23:54,440
Speaker 1: more than thirty years, in the aggregate, the U. S.

438
00:23:54,480 --> 00:23:58,120
Speaker 1: Consumer has never been in better shape. Saving trade as high. Uh,

439
00:23:58,200 --> 00:24:01,000
Speaker 1: there's been deleveraging, income gain are strong. So we don't

440
00:24:01,040 --> 00:24:03,680
Speaker 1: see the consumer cracking. There has been a slowdown in

441
00:24:03,720 --> 00:24:06,480
Speaker 1: a weakening and business investment. That's a complex issue and

442
00:24:06,520 --> 00:24:08,879
Speaker 1: I think it involves a global slow down and some

443
00:24:09,000 --> 00:24:13,000
Speaker 1: other factors um and that's why one of the reasons

444
00:24:13,040 --> 00:24:15,800
Speaker 1: why that that we decided in July to provide some

445
00:24:16,200 --> 00:24:19,119
Speaker 1: modestly more accommodative policy in some sense to try to

446
00:24:19,160 --> 00:24:21,760
Speaker 1: offset some of those headwines. We have seen a rebound

447
00:24:21,760 --> 00:24:25,119
Speaker 1: in housing, so the housing sector is now contributing to

448
00:24:25,280 --> 00:24:27,560
Speaker 1: growth for the first time in about six quarters, and

449
00:24:27,560 --> 00:24:29,560
Speaker 1: so you have to look at the whole picture. I think, John,

450
00:24:29,800 --> 00:24:32,360
Speaker 1: what is a hawkish cut? That was the phrase two

451
00:24:32,440 --> 00:24:36,680
Speaker 1: days ago. Could you enlighten us? We cut interest rates,

452
00:24:36,880 --> 00:24:39,600
Speaker 1: but there's a hawkish tone to that. Well, we get

453
00:24:40,040 --> 00:24:42,800
Speaker 1: a language of hawkish cut, Thomas. You know, I spent

454
00:24:43,160 --> 00:24:45,160
Speaker 1: decades as a FED watcher, and if I were still

455
00:24:45,160 --> 00:24:47,119
Speaker 1: a FED watcher, I would be commenting on that. I

456
00:24:47,480 --> 00:24:49,280
Speaker 1: can just tell you what we did do. We provided

457
00:24:49,280 --> 00:24:52,439
Speaker 1: additional accommodation at the meeting, and we indicated then and

458
00:24:52,480 --> 00:24:54,840
Speaker 1: I'll say again, we think that monetary policy is now

459
00:24:54,880 --> 00:24:58,080
Speaker 1: in a good place will benefit from that additional accommodation

460
00:24:58,119 --> 00:25:03,040
Speaker 1: and the timeline that you get from consecutive rate cuts, Well,

461
00:25:03,400 --> 00:25:06,879
Speaker 1: Milton Friedman taught us that monetary policy operates with the lag.

462
00:25:06,960 --> 00:25:09,600
Speaker 1: We just put these adjustments in policy in place, and

463
00:25:09,640 --> 00:25:12,320
Speaker 1: so we would expect to see that begin to impact

464
00:25:12,320 --> 00:25:14,919
Speaker 1: the economy. Uh. You know, beginning in the fourth quarter

465
00:25:15,040 --> 00:25:18,560
Speaker 1: and and into next year. Generally interest sensitive sectors are

466
00:25:18,560 --> 00:25:22,919
Speaker 1: going to benefit. Durable goods uh. In UH in particular,

467
00:25:23,119 --> 00:25:25,399
Speaker 1: you'll take Rich and the type of others at the

468
00:25:25,400 --> 00:25:27,520
Speaker 1: Federals of US being that announced the protection is worth

469
00:25:27,560 --> 00:25:29,320
Speaker 1: a pound of fuel. That was the argument when we

470
00:25:29,320 --> 00:25:30,760
Speaker 1: were in and around two and a half percent of

471
00:25:30,800 --> 00:25:34,040
Speaker 1: the FED funds. Right now we've dropped seventy five basis points.

472
00:25:34,280 --> 00:25:36,240
Speaker 1: Do you still make the very same argument or do

473
00:25:36,280 --> 00:25:39,199
Speaker 1: you have a different calculation to make well again, we

474
00:25:39,280 --> 00:25:42,760
Speaker 1: provided accommodation precisely because we saw some of these headwinds

475
00:25:42,800 --> 00:25:45,959
Speaker 1: and we thought that account recalibration of policy was appropriate.

476
00:25:46,359 --> 00:25:49,520
Speaker 1: And as Chair Pal indicated in all restate, I think

477
00:25:49,600 --> 00:25:51,879
Speaker 1: and we think monetary policy is in a good place.

478
00:25:52,080 --> 00:25:54,439
Speaker 1: Whether it's the excellence of Stanley Fisher, and I think

479
00:25:54,480 --> 00:25:57,080
Speaker 1: a lot of people watching Vice Chairman Fisher said, who

480
00:25:57,160 --> 00:25:59,520
Speaker 1: is that guy? The same thing with you? They don't

481
00:25:59,520 --> 00:26:04,800
Speaker 1: know the youre clarative of dynamic stochastic general equilibrium. It's

482
00:26:04,800 --> 00:26:07,160
Speaker 1: probably just as well a lot of people would say that.

483
00:26:07,480 --> 00:26:09,320
Speaker 1: The I m F did a meeting in Vienna two

484
00:26:09,400 --> 00:26:12,439
Speaker 1: weeks ago where they talked about your work in this

485
00:26:12,600 --> 00:26:17,359
Speaker 1: new phase of fiscal space, dovetailing fiscal policy, and do

486
00:26:17,440 --> 00:26:19,920
Speaker 1: you agree with the central bankers at its time now

487
00:26:20,240 --> 00:26:23,400
Speaker 1: on a global basis and even on an American basis,

488
00:26:23,720 --> 00:26:27,200
Speaker 1: to find a fiscal relief to all the burden put

489
00:26:27,600 --> 00:26:30,800
Speaker 1: on monetary officials. You know, Tom, I really don't want

490
00:26:30,800 --> 00:26:34,520
Speaker 1: to get into fiscal policy other than to say that, um,

491
00:26:34,560 --> 00:26:37,440
Speaker 1: that's really a decision in our case for the Congress

492
00:26:37,640 --> 00:26:39,919
Speaker 1: and the President. The way we conduct policy at the

493
00:26:39,920 --> 00:26:42,520
Speaker 1: FED as we take fiscal policy as an input into

494
00:26:42,560 --> 00:26:45,160
Speaker 1: our outlook. And I'll just leave it. Leave it at that,

495
00:26:45,560 --> 00:26:50,200
Speaker 1: we engineered a self landing the economy right now. First

496
00:26:50,240 --> 00:26:52,320
Speaker 1: of all, that the growth in the economy and the

497
00:26:52,359 --> 00:26:54,959
Speaker 1: prosperity of the economy is due to hard working you know,

498
00:26:55,280 --> 00:26:59,280
Speaker 1: indivisuals and companies, and so that's really the source of

499
00:26:59,440 --> 00:27:03,200
Speaker 1: the strength of the economy right now. Again, I would

500
00:27:03,240 --> 00:27:05,840
Speaker 1: characterize the economy is operating, you know, in the range

501
00:27:05,840 --> 00:27:08,200
Speaker 1: of trend growth. There's a range of estimates of train growth.

502
00:27:08,200 --> 00:27:10,399
Speaker 1: What we do know is that unemployment rates near fifty

503
00:27:10,480 --> 00:27:14,120
Speaker 1: year low. Let me also say that there's we saw

504
00:27:14,160 --> 00:27:17,120
Speaker 1: a good indication on wages in this report. They're picking up.

505
00:27:17,440 --> 00:27:19,800
Speaker 1: I don't see we as a FED don't see wage

506
00:27:19,840 --> 00:27:22,520
Speaker 1: inflation as a source of concern. It's not showing up

507
00:27:22,520 --> 00:27:25,000
Speaker 1: an excessive price inflation. And let me say one more thing.

508
00:27:25,680 --> 00:27:28,639
Speaker 1: The share of income going to labor has increased in

509
00:27:28,680 --> 00:27:31,239
Speaker 1: the last several years plus three years or so by

510
00:27:31,240 --> 00:27:34,560
Speaker 1: about two percentage points. That's not getting enough attention as

511
00:27:34,600 --> 00:27:38,000
Speaker 1: it deserves. And so as this economy expands and prospers,

512
00:27:38,040 --> 00:27:40,520
Speaker 1: we do see those gains going to labor and I

513
00:27:40,560 --> 00:27:43,000
Speaker 1: think that you know, that's a positive development right now

514
00:27:43,000 --> 00:27:45,199
Speaker 1: in the range of train growth that was already of response.

515
00:27:45,400 --> 00:27:46,800
Speaker 1: What is the range of train growth and what do

516
00:27:46,800 --> 00:27:49,159
Speaker 1: you think train growth is? Well, you know, we we

517
00:27:49,200 --> 00:27:52,440
Speaker 1: have a summary of economic projections at the at the

518
00:27:52,480 --> 00:27:54,639
Speaker 1: FED that we released four times a year. There's a

519
00:27:54,760 --> 00:27:57,080
Speaker 1: range of views on that. I think the current median

520
00:27:57,720 --> 00:28:00,440
Speaker 1: of the group is one point seven at one point

521
00:28:00,480 --> 00:28:03,080
Speaker 1: eight percent. Suffice to say, I'm more optimistic on trained

522
00:28:03,080 --> 00:28:05,640
Speaker 1: growth than the media. Why would you put it, Well,

523
00:28:05,680 --> 00:28:07,760
Speaker 1: there's a customer at least among the governors of not

524
00:28:07,880 --> 00:28:09,760
Speaker 1: revealing our dots. But let me just say, I'm more

525
00:28:09,800 --> 00:28:11,639
Speaker 1: optimistic than the media. And do you think they can

526
00:28:11,680 --> 00:28:15,080
Speaker 1: get back to those levels? Well, productivity is a function

527
00:28:15,080 --> 00:28:18,679
Speaker 1: of not only innovation, but capital investment and skills in

528
00:28:18,720 --> 00:28:21,080
Speaker 1: the labor force. But I have said an I continue

529
00:28:21,119 --> 00:28:23,879
Speaker 1: to believe. I think that we've seen a bottoming. We

530
00:28:23,920 --> 00:28:26,200
Speaker 1: had a really slow stretch of productivity growth through about

531
00:28:26,200 --> 00:28:28,200
Speaker 1: a decade, and I think it bottomed out about three

532
00:28:28,280 --> 00:28:30,680
Speaker 1: years ago, and I think that is a positive. Does

533
00:28:30,680 --> 00:28:34,439
Speaker 1: the economy lead productivity or does productivity lead the economy?

534
00:28:34,680 --> 00:28:40,880
Speaker 1: You know that's the sixty two or two next year. Okay,

535
00:28:41,120 --> 00:28:42,960
Speaker 1: let me ask you, this mid cycle is all the

536
00:28:43,040 --> 00:28:45,320
Speaker 1: vogue I mentioned Hawkers cutting. You wouldn't give me an

537
00:28:45,320 --> 00:28:48,680
Speaker 1: honest answer on that. Give us a the British short term,

538
00:28:48,720 --> 00:28:52,800
Speaker 1: medium term, long term? What in God's name is mid cycle?

539
00:28:53,160 --> 00:28:56,840
Speaker 1: What is that signal to our viewers and listeners worldwide? Well,

540
00:28:58,600 --> 00:29:01,240
Speaker 1: let me focus on what late saw CCLE is late

541
00:29:01,320 --> 00:29:04,600
Speaker 1: cycle as you think a recession probability is elevated. All right,

542
00:29:04,760 --> 00:29:07,400
Speaker 1: so you're not We're not late. We're not late cycle.

543
00:29:07,480 --> 00:29:10,000
Speaker 1: Let's just say we're not late. It's the mid nineties

544
00:29:10,120 --> 00:29:13,800
Speaker 1: parallel to what we're experiencing now. A good comparison? Is

545
00:29:13,840 --> 00:29:18,600
Speaker 1: that useful? I think no parallel is perfect. Circumstances always differ.

546
00:29:18,720 --> 00:29:22,480
Speaker 1: But I myself, in several comments, including in interviews on

547
00:29:22,560 --> 00:29:25,320
Speaker 1: this station and speeches, have made reference to the to

548
00:29:25,400 --> 00:29:29,000
Speaker 1: the episodes because what they illustrate is that one will

549
00:29:29,400 --> 00:29:32,960
Speaker 1: one Central Banks under the leadership of Vulkeran Greenspan. Once

550
00:29:33,000 --> 00:29:35,920
Speaker 1: you achieve price stability, it does give the central bank

551
00:29:36,320 --> 00:29:39,440
Speaker 1: more ability to be nimble within a business cycle to

552
00:29:39,560 --> 00:29:42,560
Speaker 1: adjust and recalibate rates. And we saw that under Chair

553
00:29:42,600 --> 00:29:45,959
Speaker 1: Greenspan in the nineties. Uh and I think in retrospect

554
00:29:46,000 --> 00:29:48,480
Speaker 1: that was a decade longer expansion and that was certainly

555
00:29:48,520 --> 00:29:51,760
Speaker 1: a positive support for that well said, But we are

556
00:29:51,800 --> 00:29:56,440
Speaker 1: now near the zero bound, worried about Japanification, worried about

557
00:29:56,520 --> 00:30:00,360
Speaker 1: Jon Moens that uh, JP Morgan talk in about a

558
00:30:00,440 --> 00:30:03,040
Speaker 1: vector of the ten year you'll down give us some

559
00:30:03,080 --> 00:30:06,560
Speaker 1: comfort that that dynamics in the nineties can work here

560
00:30:06,680 --> 00:30:10,280
Speaker 1: so close to the zero bound. That's a very good point, Tom,

561
00:30:10,280 --> 00:30:12,000
Speaker 1: and that is a difference from the nineties, and that

562
00:30:12,200 --> 00:30:14,360
Speaker 1: rates were starting from a higher level then you know,

563
00:30:14,440 --> 00:30:16,840
Speaker 1: we we made the decision as a committee in July,

564
00:30:16,960 --> 00:30:20,880
Speaker 1: September and October, understanding where rates are now, where the

565
00:30:20,880 --> 00:30:24,320
Speaker 1: economy is, that it was appropriate to provide this accommodation.

566
00:30:24,480 --> 00:30:27,240
Speaker 1: My my good friend and colleague John Williams at the

567
00:30:27,240 --> 00:30:29,960
Speaker 1: New York Fed had done some very important work on

568
00:30:30,040 --> 00:30:33,440
Speaker 1: thinking about how to do monetary policy near the zero bound.

569
00:30:33,440 --> 00:30:35,800
Speaker 1: And what I've said many times in my professional career

570
00:30:35,840 --> 00:30:38,560
Speaker 1: going back twenty five years. Is policy has to be

571
00:30:38,640 --> 00:30:41,640
Speaker 1: forward looking because of the long and variable lags. If

572
00:30:41,680 --> 00:30:45,160
Speaker 1: you have an opportunity to adjust policy to offset shocks,

573
00:30:45,200 --> 00:30:47,280
Speaker 1: you should take that advantage of that. And that's what

574
00:30:47,360 --> 00:30:51,200
Speaker 1: I think we've done. What's the trade off the rich, Well,

575
00:30:51,240 --> 00:30:54,120
Speaker 1: the trade off is monetary policy is more art than science.

576
00:30:54,120 --> 00:30:57,800
Speaker 1: It requires judgment, It requires a humble understanding that our

577
00:30:57,840 --> 00:31:00,720
Speaker 1: models aren't perfect. Um. I you have to put all

578
00:31:00,720 --> 00:31:03,320
Speaker 1: of that into the mix. But again, just let me

579
00:31:03,360 --> 00:31:05,440
Speaker 1: say I'm very happy with where we are now with

580
00:31:05,520 --> 00:31:08,200
Speaker 1: the stands. Amne, you sound pretty optimistic about the U.

581
00:31:08,200 --> 00:31:10,000
Speaker 1: S economy. I've got to say that's my psycho end

582
00:31:10,000 --> 00:31:14,440
Speaker 1: of FUS fifteen minutes of this interview. I am an

583
00:31:14,480 --> 00:31:16,280
Speaker 1: opt My mother and father raised me to be an

584
00:31:16,320 --> 00:31:19,200
Speaker 1: optimist objective that objectively, the economy is in a good place.

585
00:31:19,400 --> 00:31:22,200
Speaker 1: This is the longest this is the longest economic expansion

586
00:31:22,200 --> 00:31:25,600
Speaker 1: in US history, going back to the eighteen fifties. Unemployment

587
00:31:25,600 --> 00:31:28,480
Speaker 1: at a fifty year log, inflation near target, and our

588
00:31:28,520 --> 00:31:30,680
Speaker 1: focus at the FED is solely to put in place

589
00:31:30,720 --> 00:31:32,880
Speaker 1: policies that helped to keep us part of it in

590
00:31:33,680 --> 00:31:36,840
Speaker 1: the clarative charm is you're from Illinois. You've got a

591
00:31:36,840 --> 00:31:40,480
Speaker 1: different few hubbards from Florida. Claratas of Illinois many others.

592
00:31:40,600 --> 00:31:43,000
Speaker 1: Is a wonderful geography to our and were and we're

593
00:31:43,000 --> 00:31:45,520
Speaker 1: both the sons of public school teachers. Well, okay, we'll

594
00:31:45,520 --> 00:31:47,000
Speaker 1: go with that as well. Good morning to all the

595
00:31:47,040 --> 00:31:50,040
Speaker 1: teachers there. But I'm going to say this right now,

596
00:31:50,400 --> 00:31:52,640
Speaker 1: there's a different view in the Midwest. Right now, it's

597
00:31:52,640 --> 00:31:55,360
Speaker 1: a Midwest flat on its back because of these tariffs

598
00:31:55,360 --> 00:31:58,240
Speaker 1: and agriculture. It's a Midwest flat on its back from

599
00:31:58,240 --> 00:32:01,720
Speaker 1: manufacturing euro Upe to mystic. As John mentions, you mentioned

600
00:32:01,760 --> 00:32:05,280
Speaker 1: the words solid, but it's only solid to a part

601
00:32:05,360 --> 00:32:09,000
Speaker 1: of America. How can authorities and the Fed drag the

602
00:32:09,080 --> 00:32:12,480
Speaker 1: rest of America somewhat flat on their back into a

603
00:32:12,520 --> 00:32:15,640
Speaker 1: better America? Thoma's a good point. As I mentioned a

604
00:32:15,680 --> 00:32:20,440
Speaker 1: moment moment ago, the Federal Reserve essentially has one policy instrument,

605
00:32:20,720 --> 00:32:23,280
Speaker 1: which is to raise or lower the policy rate. It's

606
00:32:23,320 --> 00:32:26,720
Speaker 1: a big economy, three million people, fifty states, UH, and

607
00:32:26,760 --> 00:32:29,400
Speaker 1: there are a lot of dynamics at play. UH. And

608
00:32:29,440 --> 00:32:31,960
Speaker 1: we're humble in the ability of our tools to really

609
00:32:32,000 --> 00:32:36,400
Speaker 1: focus on the overall aggregate um economy. I'm obviously cognizant

610
00:32:36,440 --> 00:32:39,880
Speaker 1: of those concerns and those challenges, but we're just trying

611
00:32:39,920 --> 00:32:41,920
Speaker 1: to stick and do what we can to contribute to

612
00:32:42,760 --> 00:32:45,160
Speaker 1: where the economy is right now, let's explore the optimism

613
00:32:45,240 --> 00:32:47,040
Speaker 1: just a little bit further. What is it about the

614
00:32:47,040 --> 00:32:50,000
Speaker 1: current economy that differs from the middle of this year

615
00:32:50,240 --> 00:32:52,960
Speaker 1: when the right cutting cycle the adjustment actually started. What

616
00:32:53,080 --> 00:32:55,040
Speaker 1: you take more confidence in now that you didn't see

617
00:32:55,560 --> 00:32:57,760
Speaker 1: this year? Well, what I would say, Johnathan, we've done

618
00:32:57,760 --> 00:33:00,600
Speaker 1: the adjustment. I I would be less oftenistic about the

619
00:33:00,640 --> 00:33:03,040
Speaker 1: economy if we had not made those seventy five basis

620
00:33:03,400 --> 00:33:06,480
Speaker 1: point adjustments. And so I think the optimism is a

621
00:33:06,560 --> 00:33:10,280
Speaker 1: context of where policy is relative to relative to the headwinds,

622
00:33:10,320 --> 00:33:12,600
Speaker 1: and I think I think that's been born out. Some

623
00:33:12,640 --> 00:33:15,320
Speaker 1: folks were talking about the consumer is going to turn over,

624
00:33:15,640 --> 00:33:18,440
Speaker 1: or you know, the labor market. I mean, going into today,

625
00:33:18,480 --> 00:33:22,000
Speaker 1: how many UH speculations did we see of a terrible

626
00:33:22,040 --> 00:33:25,719
Speaker 1: labor market report? So that third quarter data came in

627
00:33:26,000 --> 00:33:29,480
Speaker 1: as on you know, on the upside surprise, and I

628
00:33:30,000 --> 00:33:33,040
Speaker 1: and I think you factoring in what the adjustments we've

629
00:33:33,040 --> 00:33:35,400
Speaker 1: made in policy is a is an important part is

630
00:33:35,440 --> 00:33:37,800
Speaker 1: this confidence in the economy that will in the policy setting.

631
00:33:38,920 --> 00:33:42,360
Speaker 1: The hard data on the economy is the economy is resilient.

632
00:33:42,440 --> 00:33:45,239
Speaker 1: Our baseline and I think shared by many others as

633
00:33:45,240 --> 00:33:48,240
Speaker 1: the economy will continue to be resilient, certainly compared to

634
00:33:48,280 --> 00:33:51,719
Speaker 1: the situation that you see in Europe and another uh

635
00:33:52,440 --> 00:33:54,880
Speaker 1: other countries. I mean it's a it's a global challenge

636
00:33:54,880 --> 00:33:57,400
Speaker 1: as well. We kid about Chairman Paulos Central Bank or

637
00:33:57,440 --> 00:34:00,600
Speaker 1: the world. Let me have you be vice chairman Bankers

638
00:34:00,600 --> 00:34:04,600
Speaker 1: to the world right now. The United States must lead

639
00:34:04,800 --> 00:34:08,040
Speaker 1: with a solid banking system, Bernanky, one oh one. The

640
00:34:08,120 --> 00:34:13,719
Speaker 1: United States must lead with a productive productivity differential. Is

641
00:34:13,760 --> 00:34:16,640
Speaker 1: that at risk right now with a political turmoil The

642
00:34:16,680 --> 00:34:19,480
Speaker 1: headline of the paper of the New York Times today

643
00:34:19,640 --> 00:34:22,120
Speaker 1: bringing me back to Watergate of the seven piess as

644
00:34:22,160 --> 00:34:25,960
Speaker 1: well within the stew that we're in, what's the leadership

645
00:34:26,040 --> 00:34:29,240
Speaker 1: the FED can provide to get us the two thousand

646
00:34:29,280 --> 00:34:32,600
Speaker 1: twenty and again, we have a time, we have a

647
00:34:32,719 --> 00:34:36,480
Speaker 1: very clear specific mandate from Congress. We don't get into politics.

648
00:34:36,840 --> 00:34:38,719
Speaker 1: We have we have our tools, and we're trying to

649
00:34:38,800 --> 00:34:41,360
Speaker 1: use the tools to keep the economy um in a

650
00:34:41,480 --> 00:34:43,160
Speaker 1: very good place and I'll just leave it at that.

651
00:34:43,520 --> 00:34:46,080
Speaker 1: You find it gets more difficult to adjust monitoring policy

652
00:34:46,080 --> 00:34:50,960
Speaker 1: and narrowette right sauce lower broad It is a factor

653
00:34:51,000 --> 00:34:53,120
Speaker 1: that you have to consider. We're part of the US

654
00:34:53,160 --> 00:34:55,719
Speaker 1: as part of a global capital market. Capital flows in

655
00:34:55,760 --> 00:34:58,279
Speaker 1: and out of countries. When rates are lows of rates

656
00:34:58,280 --> 00:35:00,960
Speaker 1: are low abroad, capital flow is into the US. That

657
00:35:01,000 --> 00:35:04,800
Speaker 1: has implications for financial conditions. Uh in in the US,

658
00:35:04,880 --> 00:35:07,600
Speaker 1: and rates are lower abroad for a reason, and they're

659
00:35:07,640 --> 00:35:10,959
Speaker 1: lower abroad because growth is disappointing, and that also has

660
00:35:11,000 --> 00:35:13,320
Speaker 1: an impact on the US. I'm gonna I'm gonna go

661
00:35:13,360 --> 00:35:16,200
Speaker 1: to leadership again. We spoke Boomberg Surveillance spoke to Berry

662
00:35:16,360 --> 00:35:20,080
Speaker 1: Icon Green of Berkeley the other day is archbook Globalizing Capital.

663
00:35:20,480 --> 00:35:23,759
Speaker 1: What does the globalizing message our central bank can do

664
00:35:24,320 --> 00:35:28,040
Speaker 1: to provide leadership to Coronto La guard Carney, but more

665
00:35:28,120 --> 00:35:31,800
Speaker 1: importantly emerging market bankers as well. What is the to

666
00:35:32,080 --> 00:35:36,320
Speaker 1: do list globally for this central bank? Well that that

667
00:35:37,120 --> 00:35:39,880
Speaker 1: that's an ambitious question. I think what we're focused on

668
00:35:40,000 --> 00:35:42,440
Speaker 1: is obviously the dollars a very important part of the

669
00:35:42,440 --> 00:35:45,040
Speaker 1: global financial system, and I think the most important thing

670
00:35:45,080 --> 00:35:49,040
Speaker 1: that we can do is to keep keep price stability

671
00:35:49,080 --> 00:35:51,440
Speaker 1: as an important part of our of our goals and

672
00:35:51,480 --> 00:35:54,719
Speaker 1: achievements UM And certainly we can go back to the

673
00:35:54,760 --> 00:35:57,680
Speaker 1: nineteen seventies, the US was not providing leadership with high

674
00:35:57,680 --> 00:36:04,440
Speaker 1: involved in place, and we gonna important here and this

675
00:36:04,480 --> 00:36:06,920
Speaker 1: is really important, folks. As we speak to Richard Claire,

676
00:36:06,960 --> 00:36:10,000
Speaker 1: to the vice chairman of the Federal Reserve System, there's

677
00:36:10,120 --> 00:36:12,440
Speaker 1: John as you and I cover every day, this path

678
00:36:12,680 --> 00:36:16,560
Speaker 1: over decades. Marty Feldstein, the late Martin Feldstein telling me

679
00:36:16,640 --> 00:36:20,799
Speaker 1: two decades ago about this persistence in Japan, and then

680
00:36:20,800 --> 00:36:24,000
Speaker 1: it comes over to Europe and now the fear not

681
00:36:24,200 --> 00:36:26,399
Speaker 1: here as it comes over to us. We talk about

682
00:36:26,400 --> 00:36:29,319
Speaker 1: current market helps. Why they say some Q eight I

683
00:36:29,360 --> 00:36:31,480
Speaker 1: get so many paper around this table that either scream

684
00:36:31,520 --> 00:36:33,680
Speaker 1: it's que and then they scream it's no qui. Why

685
00:36:33,719 --> 00:36:36,200
Speaker 1: is this no qwik, Well, it's not que, John, this

686
00:36:36,239 --> 00:36:40,000
Speaker 1: is really central banking one oh one. Historically, central banks,

687
00:36:40,040 --> 00:36:43,040
Speaker 1: well before the Qui era, grew their balance sheets with

688
00:36:43,120 --> 00:36:46,680
Speaker 1: purchases of short dated treasury bills because there's an in

689
00:36:47,000 --> 00:36:50,200
Speaker 1: as economies grow and prosper, there's an increase in demand

690
00:36:50,200 --> 00:36:52,680
Speaker 1: for central bank liabilities, and the central banks did not

691
00:36:52,840 --> 00:36:56,440
Speaker 1: organically grow their balance sheet. That would create a liquidity problem.

692
00:36:56,520 --> 00:36:59,440
Speaker 1: So this is not qui QWI was really targeting the

693
00:36:59,480 --> 00:37:02,520
Speaker 1: long end the yeld curve, tenure treasuries, thirty year mortgages

694
00:37:02,560 --> 00:37:05,720
Speaker 1: were basically just buying tea bills right now and adding

695
00:37:05,760 --> 00:37:08,400
Speaker 1: liquidity to the financial system. So it's not cure. You

696
00:37:08,480 --> 00:37:12,239
Speaker 1: confident you can continue buying tea bills reach your objective

697
00:37:12,520 --> 00:37:15,319
Speaker 1: without coming down further out the curve. Can you do

698
00:37:15,320 --> 00:37:18,319
Speaker 1: it all three tea bills? That's what we said we

699
00:37:18,320 --> 00:37:20,520
Speaker 1: we we believe that we can do it through T bills.

700
00:37:20,560 --> 00:37:23,400
Speaker 1: We've indicated in the announcement we made in October eleven

701
00:37:23,520 --> 00:37:27,400
Speaker 1: that we will be adding T bills to our portfolio

702
00:37:27,480 --> 00:37:30,080
Speaker 1: at least through the middle of next year, and we're

703
00:37:30,080 --> 00:37:32,400
Speaker 1: confident that that's the right right course. Well, at the

704
00:37:32,440 --> 00:37:34,520
Speaker 1: New York Fed, John Williams and the team, they have

705
00:37:34,600 --> 00:37:36,719
Speaker 1: to manage this on a daily basis. I know you

706
00:37:36,840 --> 00:37:39,160
Speaker 1: said you don't want to talk about the fiscal dynamics

707
00:37:39,160 --> 00:37:41,799
Speaker 1: of that, but do you have a different set of

708
00:37:41,920 --> 00:37:45,440
Speaker 1: challenges with a nine hundred billion plus deficit and the

709
00:37:45,560 --> 00:37:48,439
Speaker 1: vector of that deficit as you manage the T bill

710
00:37:48,480 --> 00:37:51,839
Speaker 1: and further out repo market. Tom, I don't think it's

711
00:37:51,840 --> 00:37:54,279
Speaker 1: a challenge, is just obviously something that we have to

712
00:37:54,360 --> 00:37:58,040
Speaker 1: factor UH in, and under John's leadership, you know, we're

713
00:37:58,320 --> 00:38:01,520
Speaker 1: certainly on top of that. Richard Clamored a special thanks

714
00:38:01,560 --> 00:38:03,640
Speaker 1: to the Federal Reserve Vice Chairman. Is good to see

715
00:38:03,640 --> 00:38:05,759
Speaker 1: you again. It's going to see rich Thank you very much.

716
00:38:20,000 --> 00:38:22,359
Speaker 1: The conversation continues on this program. I'm pleased to say

717
00:38:22,400 --> 00:38:24,239
Speaker 1: that from the White House. For the view on the

718
00:38:24,320 --> 00:38:26,440
Speaker 1: job report from the White House, I'm pleased to say

719
00:38:26,480 --> 00:38:30,120
Speaker 1: Larry Caudlow joins US National Economic Council Director. Good morning

720
00:38:30,160 --> 00:38:33,359
Speaker 1: to Larry, Bryan Javan. Thank you. It was a much

721
00:38:33,400 --> 00:38:37,879
Speaker 1: better jobs report than people expected. Your assessment, please, well, look,

722
00:38:38,320 --> 00:38:41,080
Speaker 1: it was much better, and when you do the accounting

723
00:38:41,120 --> 00:38:44,120
Speaker 1: across the board, you gotta look under the hood. Actually

724
00:38:44,560 --> 00:38:48,640
Speaker 1: it was a three hundred and three thousand increase in

725
00:38:48,760 --> 00:38:51,880
Speaker 1: non farm Paerill jobs. If you go through this, you

726
00:38:52,000 --> 00:38:55,840
Speaker 1: start with your base case unadjusted a hundred thousand. But

727
00:38:55,840 --> 00:38:58,920
Speaker 1: but but but the prior to months were revised up

728
00:38:59,160 --> 00:39:02,319
Speaker 1: ninety five a thousand, So that gets you to two

729
00:39:02,320 --> 00:39:06,520
Speaker 1: twenty three. Adjust for the GM that's sixty add that

730
00:39:06,600 --> 00:39:09,719
Speaker 1: back and add the UH. The census takers back your

731
00:39:09,880 --> 00:39:13,799
Speaker 1: three hundred and three thousand. It's a remarkable number, and

732
00:39:13,920 --> 00:39:16,319
Speaker 1: I want to say it kind of confirms you and

733
00:39:16,320 --> 00:39:19,560
Speaker 1: I have spoken about this in recent months. The huge

734
00:39:19,600 --> 00:39:23,879
Speaker 1: strength in the household survey, which add another big month

735
00:39:23,920 --> 00:39:26,960
Speaker 1: two hundred forty one thousand, that often is a leading

736
00:39:27,040 --> 00:39:30,319
Speaker 1: indicator for the payroll survey. That's what we're seeing. The

737
00:39:30,440 --> 00:39:34,160
Speaker 1: labor markets in the economy fundamentally are a lot stronger

738
00:39:34,200 --> 00:39:36,840
Speaker 1: than people think. Here's another one for you that I

739
00:39:36,920 --> 00:39:39,640
Speaker 1: want to get out two hundred and thirty five. I

740
00:39:39,680 --> 00:39:44,640
Speaker 1: beg your pardon. Three hundred and twenty five thousand. Increase

741
00:39:44,800 --> 00:39:48,520
Speaker 1: in the labor force three hundred twenty five thousand. Now

742
00:39:48,600 --> 00:39:51,359
Speaker 1: that's been in a steady uptrend, and it tells us

743
00:39:51,719 --> 00:39:54,040
Speaker 1: you've got a lot of people coming out of the woodwork.

744
00:39:54,239 --> 00:39:58,000
Speaker 1: They're returning back to the labor force, probably attracted by

745
00:39:58,080 --> 00:40:02,040
Speaker 1: good wages. You know the nons provisor reproduction wage increase

746
00:40:02,320 --> 00:40:05,239
Speaker 1: twelve months three and a half percent. That's better than

747
00:40:05,280 --> 00:40:09,640
Speaker 1: their managers who were running about three. So these numbers

748
00:40:09,680 --> 00:40:13,200
Speaker 1: are across the board virtually a blowout number, I think,

749
00:40:13,280 --> 00:40:17,080
Speaker 1: quite unexpected. Don't write off the economy just yet. I'll

750
00:40:17,120 --> 00:40:19,719
Speaker 1: tell you it's got a lot of fundamental strength. Really

751
00:40:19,719 --> 00:40:21,640
Speaker 1: really thinks some Lowry and most people would agree with you.

752
00:40:21,640 --> 00:40:23,879
Speaker 1: We get the ice manufacturing to run about six minutes,

753
00:40:23,920 --> 00:40:25,479
Speaker 1: so maybe and I, you and I could talk about

754
00:40:25,520 --> 00:40:28,000
Speaker 1: that in just a moment. Let's talk about trade reports

755
00:40:28,000 --> 00:40:32,000
Speaker 1: of a cool happening today between US and Chinese trade negotiates. Lowry,

756
00:40:32,000 --> 00:40:33,400
Speaker 1: could you tell us a little bit more about what

757
00:40:33,440 --> 00:40:37,200
Speaker 1: you'll be discussing on that's cool? Uh, Look at our

758
00:40:37,280 --> 00:40:43,680
Speaker 1: lead negotiators, Treasure Secretary Manution, Trade Ambassador Laiheiser. Are they

759
00:40:43,719 --> 00:40:46,360
Speaker 1: made at this point? They may be talking as you

760
00:40:46,400 --> 00:40:48,640
Speaker 1: and I are talking. In any event, they're talking with

761
00:40:48,760 --> 00:40:52,759
Speaker 1: Vice Premier Leu China. The trade talks are going very well.

762
00:40:52,800 --> 00:40:56,040
Speaker 1: If you look carefully at the comments coming out of

763
00:40:56,080 --> 00:41:00,760
Speaker 1: the official organs, the Financial Ministry, the r In Ministry,

764
00:41:01,120 --> 00:41:05,560
Speaker 1: the Commerce Ministry in China, they're all very upbeat, very positive,

765
00:41:05,880 --> 00:41:09,080
Speaker 1: the very productive talks. You know. Um, I can't go

766
00:41:09,120 --> 00:41:12,080
Speaker 1: into deep details, obviously, but but I can't say this.

767
00:41:13,080 --> 00:41:17,880
Speaker 1: The chapter on agriculture is virtually completed. That's not only

768
00:41:17,920 --> 00:41:22,480
Speaker 1: the forty to fifty uh billion dollar increase in agriculture

769
00:41:22,560 --> 00:41:27,560
Speaker 1: purchases but also market openings, lower non tariff barriers, very

770
00:41:27,680 --> 00:41:32,960
Speaker 1: very important. The Financial Services Chapter is virtually completed. That

771
00:41:33,080 --> 00:41:38,720
Speaker 1: will provide a hundred percent ownership for American banks, security firms,

772
00:41:38,760 --> 00:41:43,480
Speaker 1: insurance firms operating in China. UH. The Currency Chapter is

773
00:41:43,600 --> 00:41:50,080
Speaker 1: virtually completed. That will provide for currency stability with obviously

774
00:41:50,120 --> 00:41:56,319
Speaker 1: safeguards against manipulation. The Intellectual Property Chapter, we've come a

775
00:41:56,320 --> 00:41:59,560
Speaker 1: long way on that. I don't think it's been completed.

776
00:41:59,760 --> 00:42:02,960
Speaker 1: It's still under discussion, but we've made very good progress.

777
00:42:03,640 --> 00:42:06,240
Speaker 1: The deal is not completed. The deal is not done.

778
00:42:06,480 --> 00:42:09,359
Speaker 1: There are issues to go on enforcement that's gonna be

779
00:42:09,520 --> 00:42:15,279
Speaker 1: very very important. There will be issues on forced technology transfer,

780
00:42:15,920 --> 00:42:19,319
Speaker 1: very very important. Those may slip into Phase two, but

781
00:42:19,480 --> 00:42:21,600
Speaker 1: I will tell you we've come a long way. President

782
00:42:21,600 --> 00:42:26,840
Speaker 1: Trump himself has indicated a desire to complete this phase

783
00:42:26,920 --> 00:42:31,680
Speaker 1: one deal. President She has indicated likewise. As you know

784
00:42:32,080 --> 00:42:35,160
Speaker 1: from your own reporting, there's been there's now a new

785
00:42:35,200 --> 00:42:37,960
Speaker 1: search for a new venue where the two leaders can

786
00:42:38,000 --> 00:42:41,719
Speaker 1: meet because the Chilean thing, the APEX thing fell through

787
00:42:41,760 --> 00:42:45,840
Speaker 1: at Santiago, So we'll see. But again, it is not completed.

788
00:42:45,880 --> 00:42:49,919
Speaker 1: I'd be perfectly honest about that. But enormous progress, very

789
00:42:49,960 --> 00:42:53,600
Speaker 1: constructive talks which are continuing today. Let me the mid

790
00:42:53,719 --> 00:42:55,759
Speaker 1: music is much better over the last two months. No

791
00:42:55,800 --> 00:42:58,040
Speaker 1: one would deny that. Just want me through the specifics though.

792
00:42:58,320 --> 00:43:00,719
Speaker 1: What is holding us back in Phase will, what's left

793
00:43:00,760 --> 00:43:03,640
Speaker 1: to be agreed, what's holding you back? I can't be

794
00:43:03,800 --> 00:43:08,080
Speaker 1: too specific, as you might imagine. Uh, I'm gonna let

795
00:43:08,080 --> 00:43:11,560
Speaker 1: our brilliant negotiators do their billity negotiating. But as I

796
00:43:11,600 --> 00:43:15,040
Speaker 1: said before, I went through the different chapters. Agriculture chapter

797
00:43:15,160 --> 00:43:19,239
Speaker 1: looks good, Financial services looks good, currency looks good. Intellectual

798
00:43:19,280 --> 00:43:24,200
Speaker 1: property theft much improved, Okay, still much more work to

799
00:43:24,239 --> 00:43:28,680
Speaker 1: do on forced tech transfer uh and UM enforcement is

800
00:43:28,800 --> 00:43:32,040
Speaker 1: very very important, very very important, and that's where they'll

801
00:43:32,040 --> 00:43:35,160
Speaker 1: be working on. So I don't want to go any

802
00:43:35,200 --> 00:43:39,000
Speaker 1: further below that surface. All I'll say is we've come

803
00:43:39,080 --> 00:43:42,600
Speaker 1: further than we were last May when we thought we

804
00:43:42,680 --> 00:43:47,000
Speaker 1: you know, had of the deal. UM. President Trump himself,

805
00:43:47,040 --> 00:43:52,160
Speaker 1: I believe yesterday suggested that Phase one would be perhaps

806
00:43:53,520 --> 00:43:56,960
Speaker 1: of what we hope ultimately to get done. But the

807
00:43:57,040 --> 00:44:01,480
Speaker 1: outlook for Phase one is very positive right now, and

808
00:44:01,560 --> 00:44:04,120
Speaker 1: you can see it again. I encourage people. I know

809
00:44:04,200 --> 00:44:07,359
Speaker 1: there's a lot of reporting that goes on, picking up

810
00:44:07,360 --> 00:44:10,279
Speaker 1: snippets here and there. I myself just like to look

811
00:44:10,320 --> 00:44:13,959
Speaker 1: at the official statements from the key Chinese ministries. Those

812
00:44:13,960 --> 00:44:18,000
Speaker 1: statements are very positive. Jonathan Threa, December tariff hikes still

813
00:44:18,000 --> 00:44:21,640
Speaker 1: on the table. Larry Well, they're still on the table

814
00:44:22,320 --> 00:44:27,279
Speaker 1: until this Phase one deal is completed or or worst case,

815
00:44:27,320 --> 00:44:30,200
Speaker 1: not completed. I don't want to speculate. That's up to

816
00:44:30,239 --> 00:44:34,319
Speaker 1: President Trump how he's going to handle that. But the

817
00:44:34,360 --> 00:44:38,879
Speaker 1: President has hinted that depending on the process of Phase one,

818
00:44:39,239 --> 00:44:42,279
Speaker 1: he may be willing, I say, may be willing to

819
00:44:42,400 --> 00:44:45,440
Speaker 1: take a look at those tariffs. As you know, we

820
00:44:45,560 --> 00:44:49,360
Speaker 1: suspended some other tariffs as a good will gesture and

821
00:44:49,400 --> 00:44:52,759
Speaker 1: a negotiating gesture. I think that's also the good So

822
00:44:52,840 --> 00:44:54,839
Speaker 1: I don't want to speculate on how it will work

823
00:44:54,840 --> 00:44:58,440
Speaker 1: in December fift or later. That's all a part of

824
00:44:58,480 --> 00:45:01,480
Speaker 1: these negotiations that are ongoing. I don't want to speculate either.

825
00:45:01,600 --> 00:45:03,520
Speaker 1: I just want to understand what the concessions are that

826
00:45:03,560 --> 00:45:06,600
Speaker 1: the US administration want from the Chinese for that December

827
00:45:06,719 --> 00:45:11,120
Speaker 1: terrifying to go away. What are the specifics? Well, again,

828
00:45:11,200 --> 00:45:13,880
Speaker 1: I can't repeat the laundry list As I say, the

829
00:45:13,960 --> 00:45:18,759
Speaker 1: chapters I mentioned before all going very very well. But

830
00:45:18,760 --> 00:45:20,960
Speaker 1: there must be something specific, Larry, that they haven't followed

831
00:45:21,000 --> 00:45:24,280
Speaker 1: through on to make the threat of December terrifyings go away.

832
00:45:24,400 --> 00:45:28,319
Speaker 1: What is it? I can't talk that way. I can't

833
00:45:28,360 --> 00:45:32,560
Speaker 1: go that into that kind of depth. Um. After today's

834
00:45:32,880 --> 00:45:40,080
Speaker 1: discussions between Minutian Liehiser and Device Premier, Um, perhaps the

835
00:45:40,120 --> 00:45:43,440
Speaker 1: Secretary or the ambassador may wish to reveal that or not.

836
00:45:43,640 --> 00:45:46,640
Speaker 1: It's not my role to do that. Remember, of course

837
00:45:47,160 --> 00:45:50,720
Speaker 1: you have these teleconference meetings. They go on for quite

838
00:45:50,760 --> 00:45:55,480
Speaker 1: some time. The deputies have been meeting. But of course, Um,

839
00:45:55,520 --> 00:45:58,760
Speaker 1: all of our trade group, the so called Principles Trade Group,

840
00:45:58,800 --> 00:46:02,160
Speaker 1: of which I'm a member, we will report to President Trump,

841
00:46:02,200 --> 00:46:04,680
Speaker 1: and President Trump is going to make those final decisions.

842
00:46:04,680 --> 00:46:07,080
Speaker 1: The President makes the final call. We expect he always will.

843
00:46:07,160 --> 00:46:09,880
Speaker 1: We've reported this week that's some of the thornier issues

844
00:46:09,960 --> 00:46:12,720
Speaker 1: to be down with in safe Phase two, the Chinese

845
00:46:12,800 --> 00:46:15,319
Speaker 1: just one. But John, Larry, are you confident Nate will?

846
00:46:15,360 --> 00:46:18,799
Speaker 1: And what gives you that confidence? Um? I didn't, you know.

847
00:46:19,040 --> 00:46:21,160
Speaker 1: I don't want to speculate on that job than to

848
00:46:21,239 --> 00:46:25,560
Speaker 1: be honest, because the way I look at it. The

849
00:46:25,600 --> 00:46:29,040
Speaker 1: fact that we're in this Phase one is itself a

850
00:46:29,120 --> 00:46:33,360
Speaker 1: big breakthrough, and to some extent that was a concession

851
00:46:33,880 --> 00:46:38,919
Speaker 1: by President Trump. Rather than go for the entire which

852
00:46:38,920 --> 00:46:42,120
Speaker 1: you might say a grand slam home run, better to

853
00:46:42,160 --> 00:46:46,600
Speaker 1: look at it in segments, in phases. That was change

854
00:46:46,680 --> 00:46:49,680
Speaker 1: and the president's thinking a couple of weeks ago. It

855
00:46:49,800 --> 00:46:54,680
Speaker 1: was recommended to him by the Trade Principles Group, and

856
00:46:54,800 --> 00:46:58,960
Speaker 1: it came from successful negotiations when the Chinese were here

857
00:46:59,000 --> 00:47:02,240
Speaker 1: a couple of weeks ago. My view on these things

858
00:47:02,920 --> 00:47:07,040
Speaker 1: is not to try to predict long term. My view

859
00:47:07,160 --> 00:47:10,160
Speaker 1: is let's stay right here and now and look at

860
00:47:10,200 --> 00:47:12,840
Speaker 1: what's in front of this on the Phase one agenda,

861
00:47:12,920 --> 00:47:15,440
Speaker 1: which I have done my best to outline to you,

862
00:47:15,920 --> 00:47:18,560
Speaker 1: I don't want to speculate on the long run. I

863
00:47:18,600 --> 00:47:23,960
Speaker 1: think look negotiations. If you ever been involved with him,

864
00:47:24,000 --> 00:47:28,919
Speaker 1: good things beget other good things, or vice versa, bad

865
00:47:28,960 --> 00:47:31,759
Speaker 1: things beget other bad things. The way I see it

866
00:47:31,880 --> 00:47:34,279
Speaker 1: and my I'm doing my best to report this to

867
00:47:34,320 --> 00:47:38,680
Speaker 1: you without divulging too much. But the as the mood

868
00:47:38,800 --> 00:47:43,920
Speaker 1: music is good, the negotiations are going well. You see

869
00:47:44,160 --> 00:47:46,400
Speaker 1: here here's the thought. Let me give you one additional

870
00:47:46,440 --> 00:47:53,240
Speaker 1: thought the official statements from China. I know I mentioned

871
00:47:53,239 --> 00:47:56,440
Speaker 1: this a second ago. Let me repeat this in the past,

872
00:47:57,320 --> 00:47:59,759
Speaker 1: in the past, going back, I mean, I've been here

873
00:47:59,800 --> 00:48:04,320
Speaker 1: on two years doing this NonStop. Many times we had

874
00:48:05,480 --> 00:48:10,200
Speaker 1: a more optimistic view, but then we would get statements

875
00:48:10,200 --> 00:48:15,200
Speaker 1: and commentaries from officials in the key Chinese ministries that

876
00:48:15,400 --> 00:48:21,279
Speaker 1: suggested not so much optimism this time around regarding Phase one.

877
00:48:22,080 --> 00:48:27,520
Speaker 1: Please note how optimistic the Commerce Ministry, the Foreign Ministry,

878
00:48:27,600 --> 00:48:33,000
Speaker 1: the Finance Ministry, and their leaders, how optimistic, how positive,

879
00:48:33,000 --> 00:48:36,239
Speaker 1: the constructive they have been. I use that as a

880
00:48:36,320 --> 00:48:39,480
Speaker 1: leading indicator. Jonathan, So, I don't want to get ahead

881
00:48:39,480 --> 00:48:42,319
Speaker 1: of this story. I don't want to predict. All I'm

882
00:48:42,360 --> 00:48:45,600
Speaker 1: saying is the Phase one talks which are here right

883
00:48:45,640 --> 00:48:49,400
Speaker 1: before us, and which represented a change in the entire

884
00:48:49,480 --> 00:48:54,880
Speaker 1: framework of negotiations. Those talks are not complete, but they

885
00:48:54,920 --> 00:48:57,360
Speaker 1: are going well. Let's talk about leading indicators. The I

886
00:48:57,600 --> 00:49:00,799
Speaker 1: M just down forty eight point three downside surprise sub

887
00:49:00,880 --> 00:49:03,839
Speaker 1: fifty pretty much every industry to halve out of eight

888
00:49:03,840 --> 00:49:07,680
Speaker 1: team reporting contraction in October, Larry, can you see how

889
00:49:07,760 --> 00:49:09,960
Speaker 1: this tension between the United States and SHAW starting to

890
00:49:10,000 --> 00:49:14,719
Speaker 1: bleed into the manufacturing segment? Of the US economy. Well, look,

891
00:49:14,800 --> 00:49:18,720
Speaker 1: I think there have been in fact impacts my own views.

892
00:49:18,760 --> 00:49:21,439
Speaker 1: I think you know that the impact on the US

893
00:49:21,480 --> 00:49:24,560
Speaker 1: economy has been minimal. The impact on the Chinese economy

894
00:49:24,560 --> 00:49:27,280
Speaker 1: has been much much greater for a variety of reasons,

895
00:49:27,880 --> 00:49:32,120
Speaker 1: um perhaps four times as much. Look on the manufacturing

896
00:49:32,160 --> 00:49:35,680
Speaker 1: members the market, I s M was a better number

897
00:49:35,680 --> 00:49:39,319
Speaker 1: than this I s m UH. Today's jobs report, by

898
00:49:39,360 --> 00:49:42,279
Speaker 1: the way, when you adjust for GM, actually showed a

899
00:49:42,360 --> 00:49:45,839
Speaker 1: twenty four thousand increase in manufacturing jobs. That's the best

900
00:49:45,880 --> 00:49:50,040
Speaker 1: number we've had in quite a while. One of our problems, though, Jonathan,

901
00:49:50,440 --> 00:49:56,360
Speaker 1: is a European recession. We export a huge volume of

902
00:49:56,480 --> 00:50:01,279
Speaker 1: manufacturing related sales to Europe, and Europe, as you know,

903
00:50:01,520 --> 00:50:05,480
Speaker 1: is virtually intercessions completely flat. That has hurt us a lot.

904
00:50:06,000 --> 00:50:10,719
Speaker 1: So that and of course, as we've discussed the headwinds

905
00:50:11,120 --> 00:50:18,000
Speaker 1: from severe, severe monetary tightening, particularly last year, I think

906
00:50:18,040 --> 00:50:23,840
Speaker 1: I've hurt that sector. Now, monetary policy fortunately has finally

907
00:50:23,880 --> 00:50:27,320
Speaker 1: turned around. It's moving in the right direction. The target

908
00:50:27,400 --> 00:50:29,319
Speaker 1: rate has come down to what one and a half

909
00:50:29,360 --> 00:50:33,480
Speaker 1: three quarters, The YEO curve is normalizing, the balance sheet

910
00:50:33,480 --> 00:50:37,320
Speaker 1: and the monetary base are expanding. So those are pluses.

911
00:50:37,400 --> 00:50:42,359
Speaker 1: So we've gone from extreme tightness to a somewhat more

912
00:50:42,360 --> 00:50:46,200
Speaker 1: accommodated position. That's good. That's gonna help. Manufacturing is gonna

913
00:50:46,200 --> 00:50:51,000
Speaker 1: help everything. Um, the European story is a dragon manufacturing.

914
00:50:51,360 --> 00:50:55,320
Speaker 1: But my hope here and again these jobs and numbers.

915
00:50:55,320 --> 00:50:59,480
Speaker 1: It's three hundred and three thousand blowout jobs number today.

916
00:50:59,800 --> 00:51:02,440
Speaker 1: I think our economy is stronger under the surface, and

917
00:51:02,480 --> 00:51:06,080
Speaker 1: folks think ye. I think business investment is going to

918
00:51:06,200 --> 00:51:09,799
Speaker 1: be on the way back. I think on trade where

919
00:51:09,800 --> 00:51:14,640
Speaker 1: there is uncertainty, I grant your point. Um, China looks better.

920
00:51:14,800 --> 00:51:17,960
Speaker 1: U S m c A still looks good. Reports from

921
00:51:18,000 --> 00:51:22,120
Speaker 1: Capitol Hill are very good on U. S m c A, UM,

922
00:51:22,160 --> 00:51:27,000
Speaker 1: Canada and Mexico obviously our gigantic markets for our manufacturing,

923
00:51:27,080 --> 00:51:29,839
Speaker 1: exports and so forth, so that's going to be very

924
00:51:29,840 --> 00:51:33,560
Speaker 1: helpful as well. So let's see, let's play this thing,

925
00:51:33,680 --> 00:51:36,200
Speaker 1: you know, day to time, month at the time, and

926
00:51:36,239 --> 00:51:38,240
Speaker 1: so forth, lotry. Most people would say that the European

927
00:51:38,239 --> 00:51:40,359
Speaker 1: economy is slowing down because of what has happened in China,

928
00:51:40,400 --> 00:51:41,800
Speaker 1: and what has happened in China is because of the

929
00:51:41,840 --> 00:51:44,279
Speaker 1: tension between the United States and the Chinese but you

930
00:51:44,320 --> 00:51:45,640
Speaker 1: and I could go back and forth from that, I'm

931
00:51:45,680 --> 00:51:47,200
Speaker 1: sure for a long long time. Do you want to

932
00:51:47,200 --> 00:51:48,879
Speaker 1: deal with a little bit of business with you? Fear

933
00:51:48,960 --> 00:51:52,719
Speaker 1: Christman per Show and that's a merger this week. Per

934
00:51:52,800 --> 00:51:57,560
Speaker 1: Show is owned twelve owned by Don Fang, a Chinese

935
00:51:57,680 --> 00:52:00,080
Speaker 1: motor corporation. I'm just wondering, is the United States the

936
00:52:00,080 --> 00:52:03,759
Speaker 1: your administrations taking a look at that deal? Uh? Not yet,

937
00:52:03,920 --> 00:52:06,879
Speaker 1: I can report not yet. We will obviously look at

938
00:52:06,880 --> 00:52:10,439
Speaker 1: it very very carefully, but not yet. What's the president set?

939
00:52:11,800 --> 00:52:15,000
Speaker 1: President has not commented on that deal. You think, Larry,

940
00:52:15,040 --> 00:52:17,560
Speaker 1: it's worth having a look because of a sensitivity around

941
00:52:17,600 --> 00:52:19,719
Speaker 1: Shanee's own companies. This would be one of the big

942
00:52:19,800 --> 00:52:24,239
Speaker 1: Detroit car companies in the United States, owned essentially by

943
00:52:24,360 --> 00:52:27,240
Speaker 1: Chinese Mode of Corporation because of its ownership of Puja.

944
00:52:29,000 --> 00:52:32,560
Speaker 1: We'll take your carefuital look at it. Look, m we

945
00:52:32,640 --> 00:52:37,919
Speaker 1: want to do business around the world, providing that it's

946
00:52:38,160 --> 00:52:41,239
Speaker 1: to our benefit, the United States benefit. I mean, I

947
00:52:41,280 --> 00:52:44,359
Speaker 1: presume the other country too. But President Trump is here

948
00:52:44,360 --> 00:52:47,480
Speaker 1: to defend the American economy and the American workforce, so

949
00:52:47,840 --> 00:52:51,000
Speaker 1: we're not afraid of do in business with their national companies.

950
00:52:51,080 --> 00:52:55,400
Speaker 1: Lord knows. With respect to the Chinese story, we obviously

951
00:52:55,520 --> 00:52:59,400
Speaker 1: are alert and on guard. We have to make sure

952
00:53:00,239 --> 00:53:05,080
Speaker 1: that whatever China business developments occur do not occur to

953
00:53:05,160 --> 00:53:08,719
Speaker 1: the detriment of our not only our economy, but our

954
00:53:08,760 --> 00:53:13,879
Speaker 1: own national security. Hence the idea of having sensitivities. As

955
00:53:13,920 --> 00:53:17,360
Speaker 1: you know, we have export controls, we have an entity list,

956
00:53:18,000 --> 00:53:22,560
Speaker 1: and now this automobile deal probably won't be part of

957
00:53:22,560 --> 00:53:25,640
Speaker 1: that entity list. I don't think that would qualify, but

958
00:53:25,760 --> 00:53:28,800
Speaker 1: I don't want to speculate that's a Commerce Department decision.

959
00:53:29,040 --> 00:53:31,840
Speaker 1: Secretary Ross himself will be looking at that, so I

960
00:53:31,840 --> 00:53:33,960
Speaker 1: don't want to go too far. So I'm just saying

961
00:53:34,560 --> 00:53:39,000
Speaker 1: we will welcome a good deal. We hope it gets

962
00:53:39,040 --> 00:53:44,319
Speaker 1: more production in the United States, more production in the

963
00:53:44,400 --> 00:53:49,959
Speaker 1: United States, more factories and workers and employment in the US,

964
00:53:50,080 --> 00:53:52,879
Speaker 1: and with respect to the Chinese angle, we will take

965
00:53:52,920 --> 00:53:55,879
Speaker 1: a very careful look at it. Larry, it's almost great

966
00:53:55,920 --> 00:53:57,640
Speaker 1: to catch up. You appreciate your time today and you've

967
00:53:57,640 --> 00:53:59,400
Speaker 1: got a busy one over the White House with the

968
00:53:59,440 --> 00:54:02,200
Speaker 1: tri tulks going with the Chinese. Your National Economic Council

969
00:54:02,320 --> 00:54:05,279
Speaker 1: Director that Larry Caudlock joining us from the White House.

970
00:54:05,840 --> 00:54:10,080
Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and

971
00:54:10,120 --> 00:54:15,440
Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast

972
00:54:15,520 --> 00:54:19,720
Speaker 1: platform you prefer. I'm on Twitter at Tom Keene before

973
00:54:19,760 --> 00:54:23,600
Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg

974
00:54:23,680 --> 00:54:24,000
Speaker 1: Radio