1 00:00:00,040 --> 00:00:02,600 Speaker 1: Who you put your trust in matters. Investors have put 2 00:00:02,680 --> 00:00:07,000 Speaker 1: their trust and independent registered investment advisors to the two 3 00:00:07,040 --> 00:00:10,680 Speaker 1: and four trillion dollars. Why learn more at find your 4 00:00:10,760 --> 00:00:26,360 Speaker 1: Independent Advisor dot com. Welcome to the Bloomberg Surveillance Podcast. 5 00:00:26,760 --> 00:00:30,480 Speaker 1: I'm Tom Keene with David Gura. Daily we bring you 6 00:00:30,520 --> 00:00:35,560 Speaker 1: insight from the best in economics, finance, investment, and international relations. 7 00:00:35,960 --> 00:00:40,559 Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot com, and 8 00:00:40,640 --> 00:00:47,960 Speaker 1: of course, on the Bloomberg. A few minutes ago, present 9 00:00:48,040 --> 00:00:50,680 Speaker 1: Elect Donald Trump saying in a statement he intends to 10 00:00:50,680 --> 00:00:54,080 Speaker 1: nominate Rex Tillerson, the chairman and CEO of x On Mobile, 11 00:00:54,080 --> 00:00:56,440 Speaker 1: to be Secretary of State, saying he was quote one 12 00:00:56,480 --> 00:01:00,200 Speaker 1: of the most accomplished business leaders and international dealmakers in 13 00:01:00,240 --> 00:01:01,880 Speaker 1: the world. And here from some perspective on that is 14 00:01:01,920 --> 00:01:04,880 Speaker 1: Gideon Rose. He's the editor of Foreign Affairs magazine. Peter G. Peterson, 15 00:01:04,959 --> 00:01:07,640 Speaker 1: Chair at the Council on Forimulations, getting good to see 16 00:01:07,680 --> 00:01:10,880 Speaker 1: you good. Let's start with that with this nomination, this 17 00:01:11,040 --> 00:01:13,280 Speaker 1: pick to be Secretary of State. I was thinking ahead 18 00:01:13,319 --> 00:01:15,920 Speaker 1: to what these confirmation hearings will look like and what 19 00:01:15,959 --> 00:01:17,520 Speaker 1: will be discussed, and it strikes me that for the 20 00:01:17,560 --> 00:01:19,440 Speaker 1: first time in a long while, they're going to center 21 00:01:19,480 --> 00:01:23,480 Speaker 1: on business much more probably than the candidate's vision for 22 00:01:23,480 --> 00:01:27,040 Speaker 1: foreign policy. Um, well, it'll I think it's the relation 23 00:01:27,080 --> 00:01:29,680 Speaker 1: between those two which is the question for Tillerson is 24 00:01:30,040 --> 00:01:35,000 Speaker 1: he has extraordinary business experience and extraordinarily extraordinary skill, How 25 00:01:35,040 --> 00:01:38,000 Speaker 1: does that apply to foreign policy? And and what is 26 00:01:38,040 --> 00:01:40,640 Speaker 1: the carryover? Is there a difference between what you do 27 00:01:40,720 --> 00:01:43,440 Speaker 1: as head of Exxon and a difference in what you 28 00:01:43,480 --> 00:01:45,680 Speaker 1: do is Secretary of State, and how does that play in? 29 00:01:45,720 --> 00:01:47,240 Speaker 1: And of course the Russia angle is going to be 30 00:01:47,240 --> 00:01:49,280 Speaker 1: a major topic of concern. Let's pull on some of 31 00:01:49,280 --> 00:01:51,840 Speaker 1: those threads there and first look at the similarities, so 32 00:01:51,880 --> 00:01:54,000 Speaker 1: much as there are some between running a big multinational 33 00:01:54,000 --> 00:01:56,960 Speaker 1: company like this and the State Department. We know of 34 00:01:57,040 --> 00:02:00,520 Speaker 1: the bureaucracy of Washington, how byzantine the State Apartment is, 35 00:02:00,560 --> 00:02:03,040 Speaker 1: like many other agencies in Washington. How much of a 36 00:02:03,080 --> 00:02:06,240 Speaker 1: deficit will that be to come into running an organization 37 00:02:06,320 --> 00:02:09,240 Speaker 1: having no familiarity with that, with that bureaucracy. Well, on 38 00:02:09,280 --> 00:02:12,480 Speaker 1: the one hand, running any kind of large organization like 39 00:02:12,520 --> 00:02:14,720 Speaker 1: that and doing it successfully has a lot of experience 40 00:02:14,760 --> 00:02:17,360 Speaker 1: that can carry over, and so that's really good compared 41 00:02:17,400 --> 00:02:20,120 Speaker 1: to a person taking over who hasn't managed anything. On 42 00:02:20,160 --> 00:02:22,480 Speaker 1: the other hand, the restrictions on what you can do 43 00:02:22,840 --> 00:02:26,359 Speaker 1: running a government department as opposed and running an independent 44 00:02:26,400 --> 00:02:28,919 Speaker 1: foreign service as opposed to running a company in which 45 00:02:28,960 --> 00:02:31,560 Speaker 1: you are the CEO, UH, you can do a lot less. 46 00:02:31,600 --> 00:02:34,120 Speaker 1: And I think that even President elect Trump is going 47 00:02:34,200 --> 00:02:36,520 Speaker 1: to find that, which is that just because your president 48 00:02:36,560 --> 00:02:39,560 Speaker 1: doesn't mean you're the CEO of the entire country and 49 00:02:39,560 --> 00:02:41,360 Speaker 1: you get to order everybody in the government to do 50 00:02:41,400 --> 00:02:44,680 Speaker 1: what you want. And we just don't know how the 51 00:02:44,760 --> 00:02:48,480 Speaker 1: independent institutions of the Foreign Service, the armed forces, the 52 00:02:48,520 --> 00:02:51,440 Speaker 1: civil service, how all how the Trump administration is going 53 00:02:51,440 --> 00:02:54,639 Speaker 1: to react if those parts of the permanent government and 54 00:02:54,800 --> 00:02:58,040 Speaker 1: Congress have somewhat different views on policy. Let's look to 55 00:02:58,360 --> 00:03:01,400 Speaker 1: history as a guide here. How important is this relationship 56 00:03:01,440 --> 00:03:05,239 Speaker 1: between a president and UH and his secretary of state. It's, 57 00:03:05,360 --> 00:03:07,880 Speaker 1: first of all, the answer is with all cabinet appointments, 58 00:03:07,880 --> 00:03:10,080 Speaker 1: in all relationships, it all depends on the president. Because 59 00:03:10,080 --> 00:03:14,520 Speaker 1: the president is the ultimate decision maker and gets the 60 00:03:14,520 --> 00:03:17,320 Speaker 1: the deputies that he wants and runs things the way 61 00:03:17,400 --> 00:03:19,640 Speaker 1: he wants to run them. So the secretary of State 62 00:03:19,680 --> 00:03:22,720 Speaker 1: relationship is obviously a crucial and important one. But one 63 00:03:22,720 --> 00:03:24,520 Speaker 1: of the big things in this administration, I think they 64 00:03:24,520 --> 00:03:26,400 Speaker 1: we're all going to be looking for is to see 65 00:03:26,400 --> 00:03:28,880 Speaker 1: what the relationship between the White House and the NSC 66 00:03:29,000 --> 00:03:32,200 Speaker 1: on the one hand, and the various cabinet departments is. 67 00:03:32,240 --> 00:03:35,160 Speaker 1: We've had a concentration of power in the executive in 68 00:03:35,320 --> 00:03:38,400 Speaker 1: and in the White House in recent years. Will that 69 00:03:38,560 --> 00:03:42,000 Speaker 1: change in this situation? Will people like Tillerson or General 70 00:03:42,040 --> 00:03:46,480 Speaker 1: Maddest or Stevution or other people have more autonomy and 71 00:03:46,520 --> 00:03:48,800 Speaker 1: power than they have had recently? Because right now the 72 00:03:48,800 --> 00:03:51,840 Speaker 1: White House itself seems to be staffed up less and 73 00:03:51,960 --> 00:03:55,880 Speaker 1: less impressively than the departments. What is this this decision 74 00:03:55,880 --> 00:03:58,800 Speaker 1: telegraphed to you about the foreign policy priorities of this 75 00:03:58,960 --> 00:04:02,360 Speaker 1: incoming administration. You mentioned Rex Tillerson's ties to Russia. We've 76 00:04:02,400 --> 00:04:04,600 Speaker 1: seen the photograph of him and Vladimir Putina that he's 77 00:04:04,640 --> 00:04:07,560 Speaker 1: received this award from the head of of Russia. He's 78 00:04:07,600 --> 00:04:09,960 Speaker 1: done a lot of business there. Does it give you 79 00:04:10,000 --> 00:04:12,360 Speaker 1: the sense here that this administration will be, if not 80 00:04:12,400 --> 00:04:15,640 Speaker 1: fully focused, heavily focused on the relationship with Russia on 81 00:04:15,720 --> 00:04:18,280 Speaker 1: day one? Well, it does suggest that there's gonna be 82 00:04:18,320 --> 00:04:20,719 Speaker 1: a change in the relationship to Russia. And it also 83 00:04:20,760 --> 00:04:23,920 Speaker 1: suggests that deal making and business skill is something this 84 00:04:24,160 --> 00:04:27,480 Speaker 1: new president elect takes very seriously. The question is how 85 00:04:27,520 --> 00:04:30,159 Speaker 1: does that play into existing American farm policy and in 86 00:04:30,240 --> 00:04:33,200 Speaker 1: Russia in particular. You haven't just been about deal making 87 00:04:33,200 --> 00:04:35,599 Speaker 1: with Russia, You've been criticizing them, you've been opposing them. 88 00:04:35,960 --> 00:04:38,159 Speaker 1: And how is that going to play out? And we 89 00:04:38,320 --> 00:04:40,840 Speaker 1: just again don't know yet. And as the sen some 90 00:04:40,839 --> 00:04:43,680 Speaker 1: senators have already said they're going to question this. Um. 91 00:04:43,720 --> 00:04:46,080 Speaker 1: I think he'll get through ultimately. But how this plays 92 00:04:46,120 --> 00:04:48,560 Speaker 1: in even to the story about Russian hacking into the election, 93 00:04:48,920 --> 00:04:51,880 Speaker 1: there's an odd Russia angle to all this that nobody 94 00:04:51,920 --> 00:04:54,360 Speaker 1: really knows yet how far it goes. Giving Rosa with 95 00:04:54,440 --> 00:04:57,240 Speaker 1: his Foreign Affairs magazine, I have the new issue in 96 00:04:57,279 --> 00:05:01,200 Speaker 1: front of me on eight pages. I can't say enough 97 00:05:01,240 --> 00:05:04,919 Speaker 1: about it. For the price of one of David Gura's 98 00:05:05,000 --> 00:05:08,360 Speaker 1: artisanal martiniz over in Brooklyn, you can have a year 99 00:05:08,400 --> 00:05:12,599 Speaker 1: long subscription and it will make all wiser. I read 100 00:05:12,640 --> 00:05:16,520 Speaker 1: it cover to cover this issue. Tim Geitner on lessons 101 00:05:16,600 --> 00:05:22,160 Speaker 1: learned from the Crisis. Robin Niblet of Chatham House on liberalism, 102 00:05:22,200 --> 00:05:26,520 Speaker 1: and there is a spectacular article from Catherine Newman and 103 00:05:26,640 --> 00:05:30,960 Speaker 1: Hello Winston on us manufacturing the little shatter all of 104 00:05:31,000 --> 00:05:35,400 Speaker 1: your preconceived conceptions that are like mine wrong, Gideon, the 105 00:05:35,480 --> 00:05:39,600 Speaker 1: institutional mix here, the testing, the uncertainty. I hear in 106 00:05:39,640 --> 00:05:44,200 Speaker 1: your voice there, I guess you don't work in a vacuum. 107 00:05:44,520 --> 00:05:48,159 Speaker 1: Who does a Secretary of State turn to in Washington 108 00:05:48,520 --> 00:05:51,360 Speaker 1: besides the Council on Foreign Relations and to read Foreign 109 00:05:51,360 --> 00:05:55,320 Speaker 1: Affairs magazine to get wiser faster? Is there a bureaucracy 110 00:05:55,360 --> 00:05:57,520 Speaker 1: to help him? So this is a great question, Tom, 111 00:05:57,520 --> 00:05:59,440 Speaker 1: because of course there is a major bureaucracy. You have 112 00:05:59,480 --> 00:06:04,480 Speaker 1: an intelligent community that is professionally charged with keeping tabs 113 00:06:04,520 --> 00:06:06,919 Speaker 1: on the world and providing accurate information. You have a 114 00:06:06,920 --> 00:06:09,760 Speaker 1: foreign service, you have a uniform military, uh, you have 115 00:06:09,800 --> 00:06:14,080 Speaker 1: a civil service. And those people are all really superb professionals. 116 00:06:14,080 --> 00:06:16,919 Speaker 1: By and large, we often derived them as bureaucrats, but 117 00:06:17,040 --> 00:06:20,280 Speaker 1: the fact is they're often very serious, competent professionals who 118 00:06:20,360 --> 00:06:23,479 Speaker 1: work very hard behind the scenes to to get things right. 119 00:06:23,560 --> 00:06:26,000 Speaker 1: And one of the things that people are worrying about 120 00:06:26,080 --> 00:06:29,839 Speaker 1: or are looking at with concern is the new the 121 00:06:29,880 --> 00:06:35,960 Speaker 1: transition at least apparent lack of connect with the professional staff, 122 00:06:36,040 --> 00:06:39,360 Speaker 1: as it were, of the government, as evidenced by uh, 123 00:06:39,400 --> 00:06:42,680 Speaker 1: not just the President Alex not getting the intelligence briefings, 124 00:06:42,680 --> 00:06:46,240 Speaker 1: but also dissing the concerns of the intelligence community when 125 00:06:46,279 --> 00:06:48,240 Speaker 1: it comes to things like the Russian hackings. So the 126 00:06:48,240 --> 00:06:50,480 Speaker 1: professionals who you would think would be the people you're 127 00:06:50,480 --> 00:06:52,760 Speaker 1: gonna rely on for your staff right now are a 128 00:06:52,800 --> 00:06:55,440 Speaker 1: little bit concerned how uh they're going to fare in 129 00:06:55,480 --> 00:06:58,520 Speaker 1: the new administration. If I look up diplomacy in the 130 00:06:58,600 --> 00:07:00,840 Speaker 1: in Thesaurius, I don't think that deal making would be 131 00:07:01,440 --> 00:07:03,640 Speaker 1: a word there next to it. Are we right to 132 00:07:03,720 --> 00:07:07,040 Speaker 1: use these interchangeably? Is deal making the same as diplomacy? 133 00:07:07,120 --> 00:07:09,440 Speaker 1: Dealmaking is not the same as diplomacy. But it's not 134 00:07:09,480 --> 00:07:12,880 Speaker 1: true that dealmaking isn't a part of diplomacy. It often 135 00:07:12,960 --> 00:07:15,840 Speaker 1: can be. The question is what kinds of deals with 136 00:07:15,920 --> 00:07:19,520 Speaker 1: whom and what the overall strategy guiding them? So right now, 137 00:07:19,560 --> 00:07:21,880 Speaker 1: so one of the things that we're not clear about. 138 00:07:21,880 --> 00:07:24,920 Speaker 1: People don't like uncertainty, and for good reason, right uh. 139 00:07:25,160 --> 00:07:29,200 Speaker 1: The the things like the call with Taiwan and the 140 00:07:29,320 --> 00:07:33,520 Speaker 1: question of is our China policy going to be overturned 141 00:07:33,520 --> 00:07:35,680 Speaker 1: I mean, the US China relationship is the single most 142 00:07:35,680 --> 00:07:38,320 Speaker 1: important relationship in the world over the next generation. It 143 00:07:38,360 --> 00:07:41,400 Speaker 1: could bring untold prosperity to both countries. It could also 144 00:07:41,440 --> 00:07:45,440 Speaker 1: bring conflict and economic disaster for the world. So messing 145 00:07:45,440 --> 00:07:49,320 Speaker 1: around with that and not even knowing people, not knowing 146 00:07:49,400 --> 00:07:52,240 Speaker 1: how much the new administration is messing around with that 147 00:07:52,600 --> 00:07:55,480 Speaker 1: is kind of an uncertain trumpet at this point. I look, 148 00:07:55,560 --> 00:07:59,120 Speaker 1: I look to a natural security, national security and natural security, 149 00:07:59,280 --> 00:08:02,080 Speaker 1: the issue of client change. You have Rex Taylerson, who 150 00:08:02,080 --> 00:08:04,400 Speaker 1: has been somewhat ahead out front of that, more so 151 00:08:04,480 --> 00:08:06,840 Speaker 1: than perhaps that the President elect has been. How big 152 00:08:06,840 --> 00:08:08,280 Speaker 1: an issue is this going to be for the State 153 00:08:08,280 --> 00:08:11,320 Speaker 1: Department going forward holding to that agreement that was agreed 154 00:08:11,360 --> 00:08:13,240 Speaker 1: to in Paris a few months ago. I don't think 155 00:08:13,320 --> 00:08:15,640 Speaker 1: this is necessarily going to be just a State department issue. 156 00:08:15,640 --> 00:08:16,800 Speaker 1: I mean, if you have a head of the e 157 00:08:16,880 --> 00:08:19,680 Speaker 1: p A who might have different views than to Tilson, 158 00:08:19,720 --> 00:08:24,040 Speaker 1: and and even the President elect has had different views 159 00:08:24,040 --> 00:08:26,240 Speaker 1: on the subject on the campaign trail versus what his 160 00:08:26,280 --> 00:08:29,840 Speaker 1: businesses have said when they're actually uh coming up against 161 00:08:29,840 --> 00:08:34,000 Speaker 1: things like rising seas. So we just don't know. Gideon, 162 00:08:34,040 --> 00:08:37,320 Speaker 1: Thank you so much. Gideon rose Um so much to 163 00:08:37,360 --> 00:08:41,040 Speaker 1: do with foreign affairs at magazine Out of Order, the 164 00:08:41,120 --> 00:08:45,160 Speaker 1: future of the international UH system. It is their issue 165 00:08:45,240 --> 00:08:47,439 Speaker 1: just out. I really can't say enough about the previous 166 00:08:47,440 --> 00:09:03,960 Speaker 1: issue on populism as well. We're fortunate to be joined 167 00:09:04,000 --> 00:09:06,440 Speaker 1: by Barry ike and Green, Professor of Economics and Political 168 00:09:06,480 --> 00:09:09,319 Speaker 1: Science at UC Berkeley, currently a Distinguished visitor at the 169 00:09:09,360 --> 00:09:12,959 Speaker 1: American Academy in Berlin. Shortly after the show today, he'll 170 00:09:12,960 --> 00:09:15,160 Speaker 1: be delivering a lecture on the populist turn in American 171 00:09:15,200 --> 00:09:18,640 Speaker 1: politics implications for Europe. That lecture arranged by the American 172 00:09:18,640 --> 00:09:22,680 Speaker 1: Academy in Berlin and the Champeter Seminar at Humboldt University. Barry, 173 00:09:22,720 --> 00:09:25,800 Speaker 1: I can be great to have you with us. Hi, David, Hi, Tom. 174 00:09:25,840 --> 00:09:27,280 Speaker 1: We were a few weeks ago. Tom and I were 175 00:09:27,280 --> 00:09:30,440 Speaker 1: in the audiences that Christine Legard gave a speech here 176 00:09:31,280 --> 00:09:35,079 Speaker 1: at Bloomberg. She talked about people talking about D globalization. 177 00:09:35,640 --> 00:09:38,480 Speaker 1: She was worried about the prospects for D globalization. Who 178 00:09:38,520 --> 00:09:41,920 Speaker 1: in this day and age is making the case for globalization. 179 00:09:43,200 --> 00:09:48,559 Speaker 1: I don't think that globalization really has UH business advocates, 180 00:09:48,559 --> 00:09:53,040 Speaker 1: political advocates hyperglobalization at least of the sort that we 181 00:09:53,160 --> 00:09:57,760 Speaker 1: experienced prior to the financial crisis. What we're I think 182 00:09:57,800 --> 00:10:00,800 Speaker 1: settling into as a new normal in terms of globalization, 183 00:10:00,880 --> 00:10:04,040 Speaker 1: or that would be the best outcome we can hope for. UM. 184 00:10:04,080 --> 00:10:08,679 Speaker 1: We had hyperglobalization where credeing financial clothes across borders for 185 00:10:08,840 --> 00:10:13,480 Speaker 1: growing faster than the global economy, but that was driven 186 00:10:13,520 --> 00:10:16,439 Speaker 1: by China, a story that's over. That was driven by 187 00:10:16,559 --> 00:10:20,400 Speaker 1: global supply chains. A story that's over that was driven 188 00:10:20,440 --> 00:10:24,760 Speaker 1: by financial deregulation, which is over. So I think settling 189 00:10:24,760 --> 00:10:29,600 Speaker 1: into a new equilibrium where UM, trade, financial clothes, and 190 00:10:29,840 --> 00:10:32,600 Speaker 1: the global economy are all growing at about the same 191 00:10:32,720 --> 00:10:39,839 Speaker 1: rate together is a better situation than UH having create 192 00:10:39,960 --> 00:10:44,400 Speaker 1: trade and international finance outstripped the real economy. We see 193 00:10:44,400 --> 00:10:48,559 Speaker 1: the tendency here toward looking inward, maybe to rejecting a 194 00:10:48,600 --> 00:10:50,800 Speaker 1: lot of the multilateralism that we've seen over these last 195 00:10:50,840 --> 00:10:54,319 Speaker 1: few years. You've looked at at history, you talk about equilibrium. 196 00:10:54,360 --> 00:10:56,960 Speaker 1: How cyclical is this? Do you do you expect a 197 00:10:57,080 --> 00:11:01,400 Speaker 1: period of inwardism followed by then a more multilateral view 198 00:11:01,400 --> 00:11:04,360 Speaker 1: of the world Again, I think we will suffer through 199 00:11:04,400 --> 00:11:09,400 Speaker 1: a period of um looking inward if policymakers do not 200 00:11:09,559 --> 00:11:13,120 Speaker 1: do a better job at getting economic growth going. So 201 00:11:13,200 --> 00:11:17,760 Speaker 1: I think UM, faster growth heals a lot of wounds 202 00:11:17,800 --> 00:11:22,120 Speaker 1: economically and politically, and and and more successful economic growth 203 00:11:22,120 --> 00:11:27,000 Speaker 1: could lay the basis for a little bit more enthusiasm 204 00:11:27,000 --> 00:11:30,800 Speaker 1: and support for the multilateral system. So that's assuming a 205 00:11:30,840 --> 00:11:34,199 Speaker 1: positive outcome. It would be nice if it happened. Barry, 206 00:11:34,360 --> 00:11:37,479 Speaker 1: help us here with the core I can green knowledge, 207 00:11:37,480 --> 00:11:41,600 Speaker 1: which is our exorbitant privilege. I love chapter four of 208 00:11:41,640 --> 00:11:45,360 Speaker 1: one of your great short books, Global Imbalances and Lessons 209 00:11:45,360 --> 00:11:49,920 Speaker 1: of Breton Woods Sterling's Past Dollars Future that was written 210 00:11:49,960 --> 00:11:53,400 Speaker 1: a few years ago. Do you just maintain, within all 211 00:11:53,440 --> 00:11:57,679 Speaker 1: of our international relations and the president elects daily dynamics, 212 00:11:58,040 --> 00:12:03,240 Speaker 1: that the dollar will be our orbitant privilege? The um 213 00:12:03,480 --> 00:12:07,120 Speaker 1: great advantage Mr Crump has is the same one John 214 00:12:07,200 --> 00:12:10,719 Speaker 1: Connolly had when he said it's our currency, it's your 215 00:12:10,800 --> 00:12:15,000 Speaker 1: problem in that there are not viable alternatives to the dollar. 216 00:12:15,320 --> 00:12:20,720 Speaker 1: So even if there is more uncertainty and instability in 217 00:12:20,760 --> 00:12:25,079 Speaker 1: the United States, there's really nowhere to UH to flee 218 00:12:25,120 --> 00:12:28,600 Speaker 1: to UH for the moment. Over time, the Europeans might 219 00:12:28,679 --> 00:12:31,400 Speaker 1: get their act together, the Chinese might get their act together. 220 00:12:31,440 --> 00:12:33,680 Speaker 1: But I think for the time. For the time being, 221 00:12:33,679 --> 00:12:36,040 Speaker 1: it's all about the dollar. Some would say your most 222 00:12:36,040 --> 00:12:41,560 Speaker 1: wistful book is the European economies. Buried in the middle 223 00:12:41,600 --> 00:12:45,440 Speaker 1: of it is towards the Golden Age. Nobody right now 224 00:12:45,480 --> 00:12:48,400 Speaker 1: berries looking for the Golden Age in Europe. We're doing 225 00:12:48,440 --> 00:12:52,320 Speaker 1: a ten for one reverse split on unit credit another bank. 226 00:12:52,760 --> 00:12:55,680 Speaker 1: You know that's been around since you began teaching at Berkeley. 227 00:12:55,840 --> 00:12:59,320 Speaker 1: It's going down the tubes. Uh the unrest that we've 228 00:12:59,320 --> 00:13:02,160 Speaker 1: been talking about with you through the morning. Where is 229 00:13:02,200 --> 00:13:04,439 Speaker 1: the Golden Age? It's out there somewhere. I know it's 230 00:13:04,480 --> 00:13:09,120 Speaker 1: about growth. Is it really about technological progress? I think 231 00:13:09,160 --> 00:13:13,040 Speaker 1: it's partly about technological progress. So Europe's Golden Age was 232 00:13:13,880 --> 00:13:16,680 Speaker 1: supported by the fact that Europe was starting out behind 233 00:13:17,000 --> 00:13:20,959 Speaker 1: and it could import technology from the United States and 234 00:13:21,160 --> 00:13:24,959 Speaker 1: in the third quarter of the twentieth century, and even 235 00:13:25,040 --> 00:13:28,520 Speaker 1: after that, it was partly a matter of political solidarity. 236 00:13:28,679 --> 00:13:33,120 Speaker 1: So Europeans were able to pull together in part because 237 00:13:33,200 --> 00:13:37,079 Speaker 1: of the Cold War and uh UM wanting to keep 238 00:13:37,120 --> 00:13:41,959 Speaker 1: the Soviets out as it were. I I think now 239 00:13:42,000 --> 00:13:47,720 Speaker 1: there are both technological headwinds and political headwinds that Um 240 00:13:47,840 --> 00:13:52,199 Speaker 1: the Europeans would have to surmount that they're unlikely to surmount. 241 00:13:52,520 --> 00:13:57,160 Speaker 1: Um so um. Another golden age is not in the cards. 242 00:13:57,880 --> 00:14:00,839 Speaker 1: We've we've watched this low and slow global growth, and 243 00:14:01,120 --> 00:14:05,120 Speaker 1: we've seen here the fracturing of a big international trade deal. 244 00:14:05,679 --> 00:14:08,120 Speaker 1: Talk if you would, about the relationship between the two things. 245 00:14:08,120 --> 00:14:09,600 Speaker 1: In other words, is it possible to have an uptick 246 00:14:09,640 --> 00:14:11,679 Speaker 1: and global growth here if we don't have the kind 247 00:14:11,720 --> 00:14:15,560 Speaker 1: of robust trading that might lead to it. I I 248 00:14:15,600 --> 00:14:18,840 Speaker 1: think the robust trading system would be a consequence of 249 00:14:19,600 --> 00:14:22,840 Speaker 1: better economic growth. There'd be more support for openness as 250 00:14:23,240 --> 00:14:26,160 Speaker 1: we were talking about a moment ago, rather than being 251 00:14:26,200 --> 00:14:31,000 Speaker 1: the engine of UH faster growth. So I think the engine, 252 00:14:31,000 --> 00:14:35,160 Speaker 1: you know, has to be started at home through UH 253 00:14:35,240 --> 00:14:38,160 Speaker 1: fixing the financial system in Europe, through a better balance 254 00:14:38,160 --> 00:14:42,240 Speaker 1: of monitoring fiscal policies, and the trade growth will follow. 255 00:14:42,800 --> 00:14:45,600 Speaker 1: One of the great moments of my career Bloomberg Folks 256 00:14:45,680 --> 00:14:49,200 Speaker 1: was enjoying seeing Professor Iken Green battle in Singapore a 257 00:14:49,240 --> 00:14:53,040 Speaker 1: million years ago? Were there worthy emerging market central bank 258 00:14:53,120 --> 00:14:57,280 Speaker 1: chief over the future of India. Let me cut to 259 00:14:57,320 --> 00:14:59,560 Speaker 1: the chase. Mr Ike and Green got the debate right, 260 00:15:00,040 --> 00:15:03,040 Speaker 1: got any the other guy didn't. David gerrom My book 261 00:15:03,040 --> 00:15:06,320 Speaker 1: of the Year, Ken Rogoff, The Curse of Cash. It's 262 00:15:06,320 --> 00:15:09,000 Speaker 1: a brave book. It's kind of a very Green would 263 00:15:09,000 --> 00:15:11,920 Speaker 1: have written. And then it talks about cash. He hedges it, 264 00:15:12,400 --> 00:15:15,720 Speaker 1: he shows the weaknesses of his argument. He brings otmar Issing, 265 00:15:16,120 --> 00:15:19,560 Speaker 1: the acclaimed German economists into it on page four. And 266 00:15:19,600 --> 00:15:21,880 Speaker 1: then there's the thing on negative rates. But you know, 267 00:15:21,920 --> 00:15:25,160 Speaker 1: we talked to Professor Rogoff even he didn't expect what's 268 00:15:25,160 --> 00:15:27,800 Speaker 1: occurred in India, right, and we've we've seen a real 269 00:15:27,840 --> 00:15:30,240 Speaker 1: political backlash there. And Barry, I can Green, I wonder 270 00:15:30,280 --> 00:15:33,040 Speaker 1: what you make of this of a of of Ken 271 00:15:33,080 --> 00:15:35,600 Speaker 1: Rogoff's argument and be sort of how it's played out, 272 00:15:35,640 --> 00:15:38,720 Speaker 1: not exactly how Ken Rogoff prescribed it to take place 273 00:15:38,880 --> 00:15:41,480 Speaker 1: in India here over the last couple of weeks. Yeah, 274 00:15:41,520 --> 00:15:45,240 Speaker 1: I think there's a lot of um distance between Ken's 275 00:15:45,680 --> 00:15:50,320 Speaker 1: careful book and the not so careful policies that they've 276 00:15:50,360 --> 00:15:53,640 Speaker 1: adopted now in India. As I understand it, the argument 277 00:15:53,720 --> 00:15:58,160 Speaker 1: for doing that kind of monetary reform and doing away 278 00:15:58,280 --> 00:16:03,840 Speaker 1: with big bank bills is to crack down on money 279 00:16:03,920 --> 00:16:09,240 Speaker 1: launderers and drug traffickers and other people who uh use 280 00:16:09,360 --> 00:16:12,880 Speaker 1: hundred dollar bills and five hundred euro notes. What they've 281 00:16:12,920 --> 00:16:16,240 Speaker 1: done in India is removed so many banknotes as to 282 00:16:16,280 --> 00:16:20,960 Speaker 1: create hardship for shopkeepers and and and poor people without 283 00:16:21,040 --> 00:16:23,880 Speaker 1: making other provision for them. These are people who are 284 00:16:23,960 --> 00:16:29,600 Speaker 1: under banked, not necessarily because they're avading taxes, but simply 285 00:16:29,640 --> 00:16:31,960 Speaker 1: because they're under banked. And I think that's where the 286 00:16:32,720 --> 00:16:36,720 Speaker 1: backlash comes from, the that the measure was poorly targeted. 287 00:16:37,440 --> 00:16:39,640 Speaker 1: Let's take a step back and talk about reform more broadly. 288 00:16:39,680 --> 00:16:41,880 Speaker 1: Can talk about that as one facet of reform. You're 289 00:16:41,960 --> 00:16:46,600 Speaker 1: you're speaking on reform in Europe populism in Europe today? 290 00:16:46,800 --> 00:16:48,520 Speaker 1: Where do things need to head? As you see when 291 00:16:48,520 --> 00:16:51,080 Speaker 1: it comes to the banking regulation in Europe. But we 292 00:16:51,080 --> 00:16:54,200 Speaker 1: we've heard the cries for the removal of the the 293 00:16:54,240 --> 00:16:57,520 Speaker 1: revision of Dodd Franca in the US. What's the future 294 00:16:57,600 --> 00:17:00,480 Speaker 1: of regulation here in the year two thousand seventeen. Well, 295 00:17:00,520 --> 00:17:03,040 Speaker 1: in Europe, I think they have a problem with the 296 00:17:03,080 --> 00:17:06,960 Speaker 1: new resolution regime where they make it very hard to 297 00:17:07,680 --> 00:17:11,280 Speaker 1: uh and check public funds into bad banks and under 298 00:17:11,280 --> 00:17:15,200 Speaker 1: capitalized banks. And that's part of the reason why progress 299 00:17:15,280 --> 00:17:19,520 Speaker 1: in resolving the Italian banking problem has been so slow 300 00:17:20,160 --> 00:17:24,800 Speaker 1: in in the US case, it would obviously be reckless 301 00:17:24,840 --> 00:17:28,320 Speaker 1: to remove Dodd Frank before you had other ideas about 302 00:17:29,840 --> 00:17:32,840 Speaker 1: a substitute for it. So to go back to pre 303 00:17:33,520 --> 00:17:37,919 Speaker 1: two and seven bank regulation um would not be a 304 00:17:37,960 --> 00:17:44,760 Speaker 1: solution obviously to any of the unintended consequences of Dodd Frank. 305 00:17:44,880 --> 00:17:50,280 Speaker 1: So it's easy for populists to object to measures in 306 00:17:50,359 --> 00:17:55,119 Speaker 1: place and to criticize Dodd Frank. It's much harder to 307 00:17:55,640 --> 00:17:57,920 Speaker 1: see what they're going to put in its place, and 308 00:17:57,920 --> 00:18:00,880 Speaker 1: where we're waiting to find out. I wonder what you've 309 00:18:00,920 --> 00:18:04,400 Speaker 1: heard in the conversation, the ongoing conversation about the prospects 310 00:18:04,440 --> 00:18:07,800 Speaker 1: for an infrastructure spending package here in the United States, 311 00:18:08,119 --> 00:18:10,400 Speaker 1: how that could be most effective, if in fact there 312 00:18:10,440 --> 00:18:12,960 Speaker 1: there is one, and whether you are cheered by the 313 00:18:12,960 --> 00:18:15,439 Speaker 1: fact that what's being promoted here it seems as a 314 00:18:15,480 --> 00:18:18,880 Speaker 1: sort of public private partnership model. Well, I think what 315 00:18:18,920 --> 00:18:23,479 Speaker 1: we um want to see is UH infrastructure spending that 316 00:18:23,520 --> 00:18:28,800 Speaker 1: actually increases the productivity of the economy, not wide elephants, 317 00:18:28,880 --> 00:18:34,560 Speaker 1: but but productive productive investment UH infrastructure projects. We don't 318 00:18:34,600 --> 00:18:38,240 Speaker 1: have any evidence that that's what we're we're going to 319 00:18:38,359 --> 00:18:43,399 Speaker 1: see going forward. The real question is whether UH infrastructure 320 00:18:44,119 --> 00:18:49,680 Speaker 1: projects go to the UH states of the president's friends 321 00:18:49,800 --> 00:18:54,560 Speaker 1: and political allies, or or or or or business partners, 322 00:18:55,359 --> 00:18:59,080 Speaker 1: or whether they really go to enhance the productivity and 323 00:18:59,080 --> 00:19:02,920 Speaker 1: efficiency of the economy with dollars strength. Professor I con Green, 324 00:19:03,040 --> 00:19:06,840 Speaker 1: how close are we to the strong dollar policies of 325 00:19:06,960 --> 00:19:10,240 Speaker 1: late nineties into two thousand two or to the Plaza 326 00:19:10,280 --> 00:19:15,320 Speaker 1: Accord world of a lifetime ago. I think we're very 327 00:19:15,440 --> 00:19:18,680 Speaker 1: very where. We're a galaxy away from the Plaza Accord. 328 00:19:18,840 --> 00:19:24,080 Speaker 1: We're not going to get that kind of agreement internationally, 329 00:19:24,359 --> 00:19:29,520 Speaker 1: especially given the diplomatic and geo political tensions that are 330 00:19:29,560 --> 00:19:33,320 Speaker 1: are are coming down the road. I don't think it's 331 00:19:33,720 --> 00:19:39,600 Speaker 1: this administration's policy to support or maintain a strong dollar, 332 00:19:39,680 --> 00:19:45,119 Speaker 1: but that's what they're getting, obviously from the expectation of 333 00:19:45,880 --> 00:19:51,159 Speaker 1: increased deficit spending. I would add to the UH what 334 00:19:51,280 --> 00:19:54,520 Speaker 1: you asked, Tom, that those of us who worry about 335 00:19:54,560 --> 00:19:57,560 Speaker 1: protectionism have more reason to worry given the strength of 336 00:19:57,640 --> 00:19:59,960 Speaker 1: the dollar. Well, thank you so much, Barry. I agree 337 00:20:00,160 --> 00:20:05,280 Speaker 1: this morning from our studios in Berlin, David Geren, Tom King, worldwide, 338 00:20:06,119 --> 00:20:18,240 Speaker 1: this is Bloomberg, who you put your trust in matters. 339 00:20:18,400 --> 00:20:23,040 Speaker 1: Investors have put their trust in independent registered investment advisors 340 00:20:23,320 --> 00:20:26,120 Speaker 1: to the two and of four trillion dollars. Why they 341 00:20:26,119 --> 00:20:29,439 Speaker 1: see their roles to serve, not sell. That's why Charles 342 00:20:29,440 --> 00:20:33,919 Speaker 1: Schwab is committed to the success over seven thousand independent 343 00:20:33,960 --> 00:20:39,760 Speaker 1: financial advisors who passionately dedicate themselves to helping people achieve 344 00:20:40,080 --> 00:20:44,919 Speaker 1: their financial goals. Learn more at find your Independent Advisor 345 00:20:45,359 --> 00:20:54,280 Speaker 1: dot com. We now turn to what do you actually 346 00:20:54,359 --> 00:20:59,200 Speaker 1: do in banking? Joining us buying Fortress Diamond at the 347 00:20:59,240 --> 00:21:05,520 Speaker 1: absolute Autumn David Harrow, he of Chicago, he of Harris Associates. David, 348 00:21:05,800 --> 00:21:10,840 Speaker 1: once again congratulations with being out front on ownership of 349 00:21:10,920 --> 00:21:13,879 Speaker 1: banking shares and it has been a test of Harris 350 00:21:14,000 --> 00:21:18,240 Speaker 1: Associates and your patients. Do you celebrate this morning the 351 00:21:18,320 --> 00:21:23,240 Speaker 1: restructure of UniCredit? What does it mean for your portfolio? UM? 352 00:21:23,320 --> 00:21:25,840 Speaker 1: First of all, we never celebrate in this business. Tom, 353 00:21:25,880 --> 00:21:30,399 Speaker 1: you should know that UM. The Unit Credit news is 354 00:21:30,520 --> 00:21:35,440 Speaker 1: good because it shows that some proactivity is finally occurring 355 00:21:35,520 --> 00:21:38,720 Speaker 1: in Italy. Uh it is their biggest bank. We do 356 00:21:38,800 --> 00:21:41,399 Speaker 1: have an Italian bank, but our Italian bank doesn't have 357 00:21:41,520 --> 00:21:45,200 Speaker 1: any of the issues that that un Credit has. UM 358 00:21:45,320 --> 00:21:47,800 Speaker 1: un Credit has been selling some assets, which is good. 359 00:21:47,800 --> 00:21:51,800 Speaker 1: They're raising capital, which is good. They're really fortifying themselves. 360 00:21:51,840 --> 00:21:55,439 Speaker 1: And if they could get this Montepeche d siana um 361 00:21:55,640 --> 00:21:59,600 Speaker 1: situation six and get to ntail situation six, they'll be 362 00:21:59,640 --> 00:22:03,080 Speaker 1: on their way. But our view was a lot of 363 00:22:03,080 --> 00:22:07,120 Speaker 1: these European banking shares were just selling to low prices. 364 00:22:07,200 --> 00:22:10,960 Speaker 1: They were overly reflecting um, the bad news that's in 365 00:22:11,000 --> 00:22:13,439 Speaker 1: Europe and not reflecting some of the positive things that 366 00:22:13,480 --> 00:22:15,840 Speaker 1: were happening. And so we we thought it was an 367 00:22:15,840 --> 00:22:19,679 Speaker 1: opportunity and it took a while for the shares to 368 00:22:19,720 --> 00:22:22,280 Speaker 1: perk up, but they're finally doing. So Now, what are 369 00:22:22,359 --> 00:22:24,480 Speaker 1: what are some of those positive things that are happening 370 00:22:24,480 --> 00:22:26,800 Speaker 1: in Europe? When you we hear we do hear the 371 00:22:26,800 --> 00:22:29,240 Speaker 1: bad news more often than the good. Well, yeah, first 372 00:22:29,240 --> 00:22:33,439 Speaker 1: of all, you have the plateau of slowing growth. Growth 373 00:22:33,440 --> 00:22:35,960 Speaker 1: seems to be picking up a little bit. Second of all, 374 00:22:36,040 --> 00:22:41,840 Speaker 1: you have loan losses have actually declined pretty much across Europe, 375 00:22:41,880 --> 00:22:44,720 Speaker 1: and it's been kind of a source of profit in 376 00:22:44,720 --> 00:22:48,800 Speaker 1: a way because you're just seeing higher quality credit than 377 00:22:48,840 --> 00:22:52,680 Speaker 1: what you have seen in Europe. You're actually seeing some 378 00:22:52,800 --> 00:22:56,800 Speaker 1: credit growth in the low single digits, and you're seeing 379 00:22:56,840 --> 00:23:00,320 Speaker 1: banks proactively cut fees. So at the beginning of the year, 380 00:23:00,359 --> 00:23:03,440 Speaker 1: when everyone was fearing at these low negative rates with 381 00:23:03,680 --> 00:23:07,840 Speaker 1: smash earnings of banks, we haven't seen bank earnings be smashed. 382 00:23:07,880 --> 00:23:11,320 Speaker 1: In fact, we've seen some stability or growing. David, I 383 00:23:11,359 --> 00:23:13,479 Speaker 1: gotta I gotta make some money back because I keep 384 00:23:13,600 --> 00:23:17,560 Speaker 1: losing embedding against the packers, Uh, David Hero, Should I 385 00:23:17,560 --> 00:23:21,960 Speaker 1: be acquiring European bank shares this morning? I think they still. 386 00:23:22,000 --> 00:23:25,359 Speaker 1: I think there's certain certain banks. Again, as you know, Tom, 387 00:23:25,359 --> 00:23:29,800 Speaker 1: we're really stock selective, company selective, and I think certain 388 00:23:29,960 --> 00:23:32,440 Speaker 1: of the high quality banks that are still selling out 389 00:23:32,440 --> 00:23:36,320 Speaker 1: attractive valuations, being p parabond as I saw paul O 390 00:23:36,520 --> 00:23:41,840 Speaker 1: Lloyd's credit suits. These are things which still offer very 391 00:23:41,960 --> 00:23:46,400 Speaker 1: very good value all for their Each individual UH company 392 00:23:46,440 --> 00:23:49,720 Speaker 1: has its own reasons, really, but they're selling that low prices, 393 00:23:49,760 --> 00:23:52,280 Speaker 1: and I believe almost in every one of those cases 394 00:23:52,320 --> 00:23:54,879 Speaker 1: I mentioned, you're going to continue to see earnings growth. 395 00:23:56,040 --> 00:23:59,639 Speaker 1: Can you attribute the political stability that we're seeing, I mean, 396 00:24:00,240 --> 00:24:02,080 Speaker 1: are looking back at that referendum, and it seems now 397 00:24:02,119 --> 00:24:03,880 Speaker 1: that you do have at leasy say taking more proactive 398 00:24:03,880 --> 00:24:06,600 Speaker 1: approach here too, to these banks. Can you attribute that 399 00:24:06,640 --> 00:24:08,760 Speaker 1: to the referendum and we got the news yesterday that 400 00:24:08,800 --> 00:24:10,960 Speaker 1: pure Color Pedant will stay on as the finance minister 401 00:24:11,080 --> 00:24:13,280 Speaker 1: in that country. Are you convinced we're going to have 402 00:24:13,280 --> 00:24:15,480 Speaker 1: a stable enough environment there to get these reforms done 403 00:24:15,520 --> 00:24:18,040 Speaker 1: here in the near to medium term. Well, I think 404 00:24:18,080 --> 00:24:21,400 Speaker 1: there's just really a strong motivation to get these reforms done. 405 00:24:21,400 --> 00:24:24,320 Speaker 1: And one of the most important things is in these 406 00:24:24,440 --> 00:24:31,320 Speaker 1: MTLs is the collateral and enabling the creditors to make 407 00:24:31,359 --> 00:24:36,240 Speaker 1: a call on the collateral. In Italy this process takes seven, eight, nine, ten, 408 00:24:36,400 --> 00:24:39,520 Speaker 1: eleven years, and everywhere else in the world it takes 409 00:24:39,600 --> 00:24:43,480 Speaker 1: one or two years, and that puts that causes those 410 00:24:43,600 --> 00:24:49,280 Speaker 1: npls to be worth a lower price maybe cents on 411 00:24:49,359 --> 00:24:52,680 Speaker 1: the dollar verse thirty or forty. And they're working on this. 412 00:24:52,680 --> 00:24:55,879 Speaker 1: This this is known, this is a known issue that 413 00:24:56,000 --> 00:25:01,359 Speaker 1: they have to accelerate um the resolution in process in Italy. 414 00:25:01,400 --> 00:25:04,960 Speaker 1: And this step alone would be very meaningful because because 415 00:25:05,000 --> 00:25:09,680 Speaker 1: it would almost increase the price of these mplsh the 416 00:25:09,680 --> 00:25:11,520 Speaker 1: ones that are selling at twenty cents on the dollar 417 00:25:11,600 --> 00:25:14,080 Speaker 1: to thirty thirty five, in some cases forty cents on 418 00:25:14,119 --> 00:25:16,439 Speaker 1: the dollar. And there is a ready market for you 419 00:25:16,480 --> 00:25:20,800 Speaker 1: see um various financial firms in there buying these npls. 420 00:25:21,040 --> 00:25:24,280 Speaker 1: We know that the banking secretory is so overbanked in Italy. 421 00:25:24,320 --> 00:25:27,480 Speaker 1: How do you position yourself, you know, given there's likely 422 00:25:27,520 --> 00:25:29,240 Speaker 1: to be some some mergers here in the in the 423 00:25:29,240 --> 00:25:32,199 Speaker 1: near term. Yeah, this is one of the bits of 424 00:25:32,240 --> 00:25:34,760 Speaker 1: good news. Spain did this a couple of years ago 425 00:25:34,880 --> 00:25:38,000 Speaker 1: very successfully, and they basically told all these co op 426 00:25:38,080 --> 00:25:41,200 Speaker 1: banks the game is over. This is you have to 427 00:25:41,240 --> 00:25:43,160 Speaker 1: be a for profit entity and if you can't make 428 00:25:43,200 --> 00:25:45,239 Speaker 1: money and race capital, you're out of business or you're 429 00:25:45,280 --> 00:25:48,639 Speaker 1: emerging with someone else. Now finally they're doing this in Italy. 430 00:25:49,400 --> 00:25:52,439 Speaker 1: Germany also needs for this to happen. The landa spank 431 00:25:52,520 --> 00:25:55,199 Speaker 1: and these are these regional banks that are kind of 432 00:25:55,240 --> 00:25:58,760 Speaker 1: stayed owned entities that just don't exist to make profits. 433 00:25:58,840 --> 00:26:01,560 Speaker 1: So they're they're lacks on credit, they chart, they give 434 00:26:01,600 --> 00:26:06,280 Speaker 1: too much interest and their non economic hurting the companies 435 00:26:06,320 --> 00:26:09,399 Speaker 1: like Deutsche Bank, which can't compete well, Italy is ahead 436 00:26:09,440 --> 00:26:12,600 Speaker 1: of is actually ahead of Germany and trying to get 437 00:26:12,600 --> 00:26:15,920 Speaker 1: these co op banks merged. Uh and he kept up 438 00:26:16,040 --> 00:26:19,800 Speaker 1: with his David Harrow International investment, particularly of a more 439 00:26:19,880 --> 00:26:23,320 Speaker 1: large cap variety. David Harrow, help me here. I'm on 440 00:26:23,359 --> 00:26:27,120 Speaker 1: the couch. It's December seven. I gotta reallocate my four 441 00:26:27,160 --> 00:26:31,160 Speaker 1: oh one K. What is the Harrow attractiveness of US 442 00:26:31,359 --> 00:26:36,840 Speaker 1: multinationals versus international big cap Yeah, I think you still 443 00:26:36,880 --> 00:26:42,719 Speaker 1: see a little better value in non US multinationals. Uh. Certainly, 444 00:26:42,720 --> 00:26:46,280 Speaker 1: there are certain sectors that the US I think offers 445 00:26:46,400 --> 00:26:48,760 Speaker 1: very good value. And if you look at the US 446 00:26:48,840 --> 00:26:52,840 Speaker 1: financials as as just one example, and maybe even some 447 00:26:52,920 --> 00:26:57,160 Speaker 1: of the U S industrial names I think are looking attractive. 448 00:26:58,240 --> 00:27:02,920 Speaker 1: What you've really seen are than a geographical bifurcation. You've 449 00:27:02,920 --> 00:27:07,000 Speaker 1: seen industry sectors, because for about two thirds of the year, 450 00:27:07,520 --> 00:27:10,119 Speaker 1: you've just had the wave of money going into what 451 00:27:10,280 --> 00:27:14,439 Speaker 1: was viewed as safe and safety. Uh, in sectors like 452 00:27:14,520 --> 00:27:19,800 Speaker 1: industrials and consumer discretionary financials were ignored. And I think 453 00:27:19,840 --> 00:27:22,000 Speaker 1: these are the sectors that are finally starting to perk 454 00:27:22,080 --> 00:27:25,439 Speaker 1: up a little bit. The valuation differential differentials or just 455 00:27:25,520 --> 00:27:29,959 Speaker 1: way too high, and and economic growth is not falling 456 00:27:29,960 --> 00:27:33,800 Speaker 1: off a cliff as their valuations would have suggested. In fact, 457 00:27:33,880 --> 00:27:35,760 Speaker 1: one could even argue that we're starting to see in 458 00:27:35,880 --> 00:27:40,879 Speaker 1: acceleration and global GDP growth. So this is where you 459 00:27:40,920 --> 00:27:46,000 Speaker 1: really want to be in these economic sensitive names and financials, industrials, 460 00:27:46,000 --> 00:27:49,720 Speaker 1: consumer discretionary and um, you know these some of the 461 00:27:49,720 --> 00:27:52,960 Speaker 1: other areas like utilities and some of the healthcare names, 462 00:27:53,000 --> 00:27:57,439 Speaker 1: consumer staples. Still you're paying too much for the stability 463 00:27:57,520 --> 00:27:59,640 Speaker 1: that you get in these things. So I think that's 464 00:27:59,640 --> 00:28:04,600 Speaker 1: we're investors should look in the economic sensitivity area, whether 465 00:28:04,760 --> 00:28:09,440 Speaker 1: it's US or international European. This is where opportunity allies. 466 00:28:09,920 --> 00:28:12,000 Speaker 1: When you look at things on a sector by sector basis, 467 00:28:12,000 --> 00:28:13,679 Speaker 1: do you do you subscribe to the belief here that 468 00:28:13,720 --> 00:28:16,359 Speaker 1: we are seeing a so called Trump rally or was 469 00:28:16,400 --> 00:28:19,480 Speaker 1: that rotation under way well before the election? You know, 470 00:28:19,680 --> 00:28:22,120 Speaker 1: it actually did start a little bit before the election. 471 00:28:22,359 --> 00:28:25,120 Speaker 1: And I think you could go back to post brakesit 472 00:28:25,160 --> 00:28:27,760 Speaker 1: you had a huge Brexit shock, and then two or 473 00:28:27,800 --> 00:28:30,360 Speaker 1: three weeks after that you started to see some return 474 00:28:30,440 --> 00:28:34,480 Speaker 1: to normalcy in markets. Uh and and unless of this 475 00:28:34,880 --> 00:28:39,960 Speaker 1: knee jerk rapid response. And so you saw finally maybe 476 00:28:40,040 --> 00:28:44,680 Speaker 1: in August and September even October a little bit of 477 00:28:44,720 --> 00:28:48,680 Speaker 1: what I would call a leveling out of these valuation differentials, 478 00:28:48,720 --> 00:28:52,520 Speaker 1: and then when the election came, it just started to 479 00:28:52,560 --> 00:28:54,760 Speaker 1: accelerate and I think we're probably in the third or 480 00:28:54,760 --> 00:28:59,520 Speaker 1: fourth ending. They're still given evaluation differentials. This is the key. 481 00:28:59,760 --> 00:29:03,280 Speaker 1: Look at the prices you're paying for businesses, and if 482 00:29:03,360 --> 00:29:06,800 Speaker 1: something like Daimler is UH eight or nine times earnings 483 00:29:06,800 --> 00:29:09,920 Speaker 1: and something like Uni levers eighteen or nineteen times earnings, 484 00:29:10,200 --> 00:29:13,920 Speaker 1: when you see these big gaps between companies that actually 485 00:29:13,960 --> 00:29:18,080 Speaker 1: grow at not such dissimilar rates, there's an opportunity to 486 00:29:18,120 --> 00:29:20,960 Speaker 1: be had. Do you see the market becoming more earnings 487 00:29:21,000 --> 00:29:25,240 Speaker 1: driven here in the near term? Absolutely? I think this 488 00:29:25,240 --> 00:29:31,880 Speaker 1: this macro obsession which investors have had is perhaps starting 489 00:29:31,920 --> 00:29:35,000 Speaker 1: to wane off. And evidence of that would be what 490 00:29:35,200 --> 00:29:40,240 Speaker 1: happened post the Italian referendum, when it wasn't necessarily good 491 00:29:40,240 --> 00:29:42,320 Speaker 1: news for the markets, and you really saw a very 492 00:29:42,360 --> 00:29:47,120 Speaker 1: little reaction. And so maybe investors are beginning to realize 493 00:29:47,600 --> 00:29:52,560 Speaker 1: that these macro and global political events do not matter 494 00:29:52,600 --> 00:29:55,520 Speaker 1: as much as a company's ability to grow their earnings 495 00:29:55,520 --> 00:29:59,960 Speaker 1: and cash flow streams and what they do with them. Yeah, 496 00:30:00,080 --> 00:30:02,719 Speaker 1: but I would actually prefer at the bottom up value inmester. 497 00:30:02,880 --> 00:30:05,160 Speaker 1: I want them to be obsessed with macro because it 498 00:30:05,160 --> 00:30:08,720 Speaker 1: gives us opportunity. David, one final question. It's been a 499 00:30:08,880 --> 00:30:12,600 Speaker 1: challenging year for so many people in investment. What's your 500 00:30:12,720 --> 00:30:15,800 Speaker 1: enthusiasm for the ownership of equities in the next year. 501 00:30:17,240 --> 00:30:20,600 Speaker 1: It's pretty high, Um, not as high as it was 502 00:30:20,640 --> 00:30:24,760 Speaker 1: six months ago, just because valuation moved. Yeah, we've moved. 503 00:30:24,840 --> 00:30:28,680 Speaker 1: But I still think, especially at much rather being equities 504 00:30:28,760 --> 00:30:32,480 Speaker 1: and growing earning streams with good yields than in bonds, 505 00:30:32,520 --> 00:30:34,920 Speaker 1: which are the prices of bonds are going to go down. 506 00:30:35,600 --> 00:30:39,520 Speaker 1: David Packers super Bowl bound. I don't believe so. Tom. 507 00:30:39,520 --> 00:30:41,360 Speaker 1: I would love to sit here and tell you yes, 508 00:30:41,440 --> 00:30:43,600 Speaker 1: but I have to be honest. I still think our 509 00:30:43,680 --> 00:30:46,880 Speaker 1: defense is suspect. I'm really happy to see Aaron Rodgers 510 00:30:46,880 --> 00:30:49,080 Speaker 1: coming out of his funk. I mean, the last couple 511 00:30:49,120 --> 00:30:51,920 Speaker 1: of games, he looked really good. But the defense is 512 00:30:52,000 --> 00:30:54,680 Speaker 1: just two week Okay, talker, be sure that goes out 513 00:30:54,720 --> 00:30:59,400 Speaker 1: on Bloomberg. Attribute that to Packer Packers shareholder, Packers shareholder. 514 00:31:00,080 --> 00:31:01,880 Speaker 1: He's just you know, if we're interviewing somebody up at 515 00:31:01,880 --> 00:31:05,600 Speaker 1: Bloomberg Boston, we wouldn't be having this conversation. They'd be 516 00:31:05,680 --> 00:31:09,720 Speaker 1: like all Tom Brady, David Harrow, Harris Associates in Chicago, 517 00:31:09,760 --> 00:31:13,880 Speaker 1: and of course the gentleman from Wisconsin, David, I have 518 00:31:13,960 --> 00:31:19,840 Speaker 1: been remiss. Dal Jones year to date thirteen point six percent, 519 00:31:21,080 --> 00:31:25,720 Speaker 1: SMP five double John Tucker double digit. I say ten 520 00:31:25,800 --> 00:31:28,360 Speaker 1: point four percent. I have to update the four. Oh, 521 00:31:29,680 --> 00:31:32,080 Speaker 1: I'm just I'm in the triple leverage all cash fun 522 00:31:32,120 --> 00:31:36,680 Speaker 1: I'm getting killed. NASA up eight point one percent. Nasdack 523 00:31:36,720 --> 00:31:44,000 Speaker 1: compositive because it's not the retirement next year, thank you. 524 00:31:44,080 --> 00:31:46,720 Speaker 1: The only retirement plan I have is a surveillance cactus 525 00:31:47,120 --> 00:31:57,400 Speaker 1: casket castus like cactus. Yeah, the bright orange cast. Thank you. 526 00:31:57,760 --> 00:32:13,040 Speaker 1: There we are, David, here by the coastline, with a 527 00:32:13,080 --> 00:32:16,520 Speaker 1: smell of salt air in the midtown air. John Tucker 528 00:32:16,600 --> 00:32:20,080 Speaker 1: is going to be cold like Thursdays, like like a 529 00:32:20,400 --> 00:32:26,040 Speaker 1: Boston would say, wicked cold. You have no idea how one. 530 00:32:26,760 --> 00:32:30,120 Speaker 1: He is frozen by the Tucker House. Not safe enough 531 00:32:30,120 --> 00:32:32,400 Speaker 1: to skate on just yet. But yeah, let's get there. 532 00:32:33,200 --> 00:32:36,920 Speaker 1: Speaking of skating, that takes us to freshwater economics. A 533 00:32:36,960 --> 00:32:40,800 Speaker 1: breath of freshwater economics just wandered in the room. Charles 534 00:32:40,800 --> 00:32:45,240 Speaker 1: Plaster is the esteem former president of the Philadelphia Fed, 535 00:32:45,880 --> 00:32:49,720 Speaker 1: which carries its own historical baggage with it. But far 536 00:32:49,800 --> 00:32:54,720 Speaker 1: more importantly, Professor Plaster out of Rochester is known as 537 00:32:54,760 --> 00:32:58,360 Speaker 1: someone who has looked at the saltwater milieu of the 538 00:32:58,400 --> 00:33:04,000 Speaker 1: east in the certitude of Chicago to the west, the 539 00:33:04,640 --> 00:33:10,760 Speaker 1: economics the Bractish economics to the west to note Rochester, 540 00:33:11,040 --> 00:33:15,640 Speaker 1: Virginia and other freshwater climbs. Professor Plaster joins us, Now, 541 00:33:15,720 --> 00:33:19,120 Speaker 1: are we heading towards a freshwater fed? Is that really? 542 00:33:19,240 --> 00:33:22,400 Speaker 1: Is it? That's an interesting question, and that after the 543 00:33:22,440 --> 00:33:26,320 Speaker 1: death of the Phillips curve, the lack of inflation, finally 544 00:33:26,360 --> 00:33:29,360 Speaker 1: we're going to get our Trump reflation. Is it a 545 00:33:29,440 --> 00:33:32,800 Speaker 1: freshwater moment in economics? It's an interesting way to put 546 00:33:32,840 --> 00:33:35,720 Speaker 1: it down. But I think not so much. I mean, 547 00:33:36,040 --> 00:33:41,240 Speaker 1: the UM I think freshwater has so called freshwater economics, 548 00:33:41,240 --> 00:33:43,480 Speaker 1: has a lot of good things that need that needs 549 00:33:43,520 --> 00:33:45,720 Speaker 1: to be implemented at the FED. But the you know, 550 00:33:45,760 --> 00:33:49,200 Speaker 1: but the economics is the staff mostly the FED and 551 00:33:49,200 --> 00:33:54,040 Speaker 1: and and they are decidedly UM a big institution, and 552 00:33:54,080 --> 00:33:56,960 Speaker 1: they're only going to change very slow. Within that is 553 00:33:57,000 --> 00:34:01,640 Speaker 1: where the I S curve is. What is your perspective 554 00:34:02,360 --> 00:34:06,320 Speaker 1: of where the real economy is represented by that ancient 555 00:34:06,440 --> 00:34:11,239 Speaker 1: simple model? Well, uh, I S curve is is the 556 00:34:11,280 --> 00:34:14,120 Speaker 1: wrong way to think about economic but that's why everybody doesn't. 557 00:34:14,560 --> 00:34:16,759 Speaker 1: I knew you were going to say that, but the 558 00:34:16,800 --> 00:34:20,160 Speaker 1: fact is, that's how business gets done. O MG. The 559 00:34:20,239 --> 00:34:25,279 Speaker 1: I S curve is terrible. Do something that's modern economics right. Unfortunately, 560 00:34:25,480 --> 00:34:29,040 Speaker 1: modern economics has been heavily influenced by Kenjian models and 561 00:34:29,160 --> 00:34:32,920 Speaker 1: versions that somehow the whole world is driven by demand 562 00:34:33,719 --> 00:34:38,600 Speaker 1: and and it's very difficult to get macro economists in general, 563 00:34:38,640 --> 00:34:43,240 Speaker 1: but certainly the FED to think outside of that demand 564 00:34:43,520 --> 00:34:46,719 Speaker 1: view of the world. And I think it's been illustrated 565 00:34:46,760 --> 00:34:50,040 Speaker 1: pretty clearly over the crisis and recession that there's a 566 00:34:50,080 --> 00:34:52,920 Speaker 1: lot more going on here than just lack of demand. 567 00:34:53,360 --> 00:34:56,160 Speaker 1: And I think that, um uh, you know as well 568 00:34:56,200 --> 00:34:57,960 Speaker 1: as I do. Tom. I'm I'm an old I'm not 569 00:34:58,040 --> 00:35:00,959 Speaker 1: an old, I am old, but a real business cycle guy. 570 00:35:00,960 --> 00:35:02,359 Speaker 1: And I think if you look at a lot of 571 00:35:02,360 --> 00:35:05,480 Speaker 1: what's happened, it's about productivity, which is really what the 572 00:35:05,520 --> 00:35:08,400 Speaker 1: supply side really is all about. What is most concerning 573 00:35:08,400 --> 00:35:10,200 Speaker 1: to you right now when you look at the health 574 00:35:10,239 --> 00:35:13,600 Speaker 1: of the U. S economy, Well, I think it's productivity 575 00:35:13,920 --> 00:35:16,040 Speaker 1: that is the big concern. I mean, if you think 576 00:35:16,040 --> 00:35:18,959 Speaker 1: of why growth is slow, it's about productivity. And none 577 00:35:18,960 --> 00:35:22,239 Speaker 1: of our macroeconomic models, generally speaking, not just at the 578 00:35:22,280 --> 00:35:26,360 Speaker 1: FABIT elsewhere, none of them have a mechanism very easily 579 00:35:26,400 --> 00:35:30,080 Speaker 1: to build in what happens to productivity why productivity moves 580 00:35:30,080 --> 00:35:32,279 Speaker 1: as it does. So if you think, like I do, 581 00:35:32,360 --> 00:35:35,160 Speaker 1: that much of the productivity slow down is at least 582 00:35:35,239 --> 00:35:38,720 Speaker 1: or at least partially attributable to sort of a massive 583 00:35:39,400 --> 00:35:41,759 Speaker 1: shift in sort of the regulatory state, if you will, 584 00:35:42,239 --> 00:35:44,719 Speaker 1: If you think that has an impact on productivity, the 585 00:35:44,800 --> 00:35:48,600 Speaker 1: FEDS models never were capable of building that effect in 586 00:35:48,960 --> 00:35:51,080 Speaker 1: because they're so focused on the demand side of the 587 00:35:51,120 --> 00:35:55,480 Speaker 1: economy that there's no mechanisms for how a productivity might evolve. 588 00:35:55,600 --> 00:35:57,880 Speaker 1: When you bring up the weight of the regulatory and 589 00:35:58,000 --> 00:36:00,239 Speaker 1: environment looking ahead here to what might have been in 590 00:36:00,400 --> 00:36:03,200 Speaker 1: two thousand seventeen two th eighteen with regard to regulation, 591 00:36:04,000 --> 00:36:06,279 Speaker 1: do you see that es potentially changing productivity? We just 592 00:36:06,320 --> 00:36:08,480 Speaker 1: not know enough about what could what could jump started 593 00:36:09,000 --> 00:36:10,880 Speaker 1: in the new year. Well, I think we don't know 594 00:36:11,040 --> 00:36:12,880 Speaker 1: enough at this point. I do think that there are 595 00:36:12,880 --> 00:36:15,680 Speaker 1: two things obviously that that have been stress and that 596 00:36:15,880 --> 00:36:19,480 Speaker 1: is a fiscal policy which would be sort of traditional 597 00:36:19,719 --> 00:36:23,960 Speaker 1: KNESI and stimulus, which is to stimulate demand, and fiscal 598 00:36:24,040 --> 00:36:27,800 Speaker 1: policy actions that would focus on enhancing productivity in various ways. 599 00:36:28,160 --> 00:36:31,640 Speaker 1: Those are very different types of policies, and the question 600 00:36:31,760 --> 00:36:35,160 Speaker 1: is what will we get? Can I go wonk right now? 601 00:36:36,000 --> 00:36:38,240 Speaker 1: I mean, I've got to do this. Kittling and Prescott 602 00:36:38,280 --> 00:36:41,720 Speaker 1: two thousand and four Nobel Prize winners, many arguably suggested 603 00:36:41,760 --> 00:36:44,840 Speaker 1: Plaster should have been added to that name. Professor Plaster. 604 00:36:45,120 --> 00:36:48,480 Speaker 1: When you look at business cycle theory, the modern bringing 605 00:36:48,480 --> 00:36:51,600 Speaker 1: in the supply side into demand dynamics, and all the 606 00:36:51,640 --> 00:36:56,480 Speaker 1: Kittling and Prescott did is labor in that model cans 607 00:36:56,560 --> 00:37:01,080 Speaker 1: put labor front and center in the depression? Can business 608 00:37:01,120 --> 00:37:05,759 Speaker 1: cycle theory help us understand labor dynamics that leads to 609 00:37:05,840 --> 00:37:10,040 Speaker 1: wage increase? Sure? Sure, sure it can, and many and 610 00:37:10,320 --> 00:37:13,319 Speaker 1: some of those models there is labor now, models of 611 00:37:13,400 --> 00:37:18,000 Speaker 1: labor behavior and labor supply in particular are uh complicated. 612 00:37:18,400 --> 00:37:21,080 Speaker 1: They things that we don't understand about some of that. 613 00:37:21,160 --> 00:37:24,160 Speaker 1: But nonetheless the models can can do that. We're wanted 614 00:37:24,200 --> 00:37:26,880 Speaker 1: to bring a Charles Plaster, the former president of the 615 00:37:26,880 --> 00:37:32,560 Speaker 1: Philadelphia Fed, professor plus or there was pushing ten years ago. 616 00:37:32,680 --> 00:37:35,719 Speaker 1: I can't believe I'm saying that a fabulous moment at 617 00:37:35,719 --> 00:37:38,799 Speaker 1: the Dallas fed in honor of John B. Taylor of 618 00:37:38,840 --> 00:37:42,319 Speaker 1: Stanford University. A bunch of worthies like yourself got together, 619 00:37:42,360 --> 00:37:46,840 Speaker 1: including Bennett McCollum of Carnegie Mellon, Lawrence Cristiano at a 620 00:37:46,880 --> 00:37:51,160 Speaker 1: wonderful paper, Rules and Discretion in the simplicity all these 621 00:37:51,160 --> 00:37:55,600 Speaker 1: other fancy titles about real time data and Botton premiums, 622 00:37:55,600 --> 00:37:59,800 Speaker 1: just rules and Discretion for our global audience, explain the 623 00:38:00,040 --> 00:38:05,640 Speaker 1: bait in the heat around it of rules indiscretion? How 624 00:38:05,680 --> 00:38:11,960 Speaker 1: long have I got? No? The debate is pretty actually 625 00:38:12,000 --> 00:38:14,359 Speaker 1: pretty simple, and the debate is a very old one 626 00:38:14,520 --> 00:38:18,360 Speaker 1: goes back to UM assignments back in the nineteen thirties, 627 00:38:18,400 --> 00:38:21,000 Speaker 1: and the question is is it better for policy makers 628 00:38:21,040 --> 00:38:25,319 Speaker 1: to behave in a systematic rule like manner or is 629 00:38:25,360 --> 00:38:28,800 Speaker 1: it better for them to behave with discretion, which essentially 630 00:38:28,840 --> 00:38:32,680 Speaker 1: means to make the choices they have at the time 631 00:38:33,200 --> 00:38:35,080 Speaker 1: and try to do the best thing at the right time, 632 00:38:35,120 --> 00:38:37,279 Speaker 1: which is the way that you it's usually put. And 633 00:38:37,320 --> 00:38:40,840 Speaker 1: the problem with that is that UM for most economists 634 00:38:40,840 --> 00:38:43,920 Speaker 1: and many economists, that debate was settled a long time ago, 635 00:38:44,360 --> 00:38:47,880 Speaker 1: and and partly by uh Kitlin Prescott. As you were 636 00:38:47,880 --> 00:38:51,960 Speaker 1: talking about, but Mike, Mike, I was testifying actually with 637 00:38:52,040 --> 00:38:56,239 Speaker 1: John Taylor just last week. UM and UM. I think 638 00:38:56,239 --> 00:39:00,960 Speaker 1: the problem is is that policymakers like discretion and it's 639 00:39:01,000 --> 00:39:04,080 Speaker 1: hard for them to give that discretion up because they said, well, 640 00:39:04,080 --> 00:39:05,520 Speaker 1: we need to be able to do the right thing 641 00:39:05,560 --> 00:39:08,799 Speaker 1: at the right time. But that also at discretion also 642 00:39:08,840 --> 00:39:10,560 Speaker 1: means they could do the wrong thing at the wrong time, 643 00:39:11,520 --> 00:39:13,600 Speaker 1: the wrong thing at the right time, and so you 644 00:39:13,800 --> 00:39:18,200 Speaker 1: increase volatility and uncertainty about the path of policy with discretion, 645 00:39:18,719 --> 00:39:21,839 Speaker 1: and that's the problem. Charles Poster, what does this say 646 00:39:22,040 --> 00:39:26,239 Speaker 1: about the relationship between the Fed Reserve UH and lawmakers 647 00:39:26,239 --> 00:39:29,680 Speaker 1: on Capitol Hill? There are those on Capitol Hill pushing 648 00:39:29,680 --> 00:39:31,960 Speaker 1: for more rules based approach from the Fed. Can anything 649 00:39:32,040 --> 00:39:35,520 Speaker 1: be done to make that relationship better between the Fed 650 00:39:35,560 --> 00:39:39,520 Speaker 1: and Congress? To make that relationship better? Well, I'm terribly 651 00:39:39,560 --> 00:39:44,399 Speaker 1: worried that the direction that some proposals for reform are 652 00:39:44,400 --> 00:39:47,400 Speaker 1: actually going to result in making the FED more political 653 00:39:48,800 --> 00:39:51,840 Speaker 1: rather than more accountable. So I stressed it it's important 654 00:39:51,840 --> 00:39:54,879 Speaker 1: for the FED to be accountable, but that the path 655 00:39:54,960 --> 00:39:58,279 Speaker 1: to that isn't through making it more political, And I'm 656 00:39:58,360 --> 00:40:02,880 Speaker 1: terribly worried about making sure that whatever Congress does, it 657 00:40:02,920 --> 00:40:07,320 Speaker 1: gets that balance right. So the FED already works with rules. 658 00:40:07,480 --> 00:40:09,480 Speaker 1: They could be a lot more transparent about what they 659 00:40:09,520 --> 00:40:12,760 Speaker 1: do do with rules, and and they could head awful 660 00:40:12,800 --> 00:40:14,920 Speaker 1: out of this debate. But I do think there ought 661 00:40:14,960 --> 00:40:17,200 Speaker 1: to be pressure on the FED to be more rule like. 662 00:40:17,880 --> 00:40:21,520 Speaker 1: Do you think that the regional presidents speak too much, 663 00:40:21,520 --> 00:40:23,560 Speaker 1: that there is too little unanimity, that that the FED 664 00:40:23,600 --> 00:40:26,120 Speaker 1: could do better by having a more unified voice. I 665 00:40:26,160 --> 00:40:29,800 Speaker 1: recall for seeing you with the FEDS one anniversary conference 666 00:40:29,800 --> 00:40:32,319 Speaker 1: at the Philadelphia FED a few years ago. Now, you 667 00:40:32,360 --> 00:40:34,040 Speaker 1: gave a speech, and you met with reporters afterward and 668 00:40:34,040 --> 00:40:37,040 Speaker 1: gave some comments. FED presidents do talk a lot. Does 669 00:40:37,080 --> 00:40:39,920 Speaker 1: that somehow dilute the message of the the the the 670 00:40:39,960 --> 00:40:42,360 Speaker 1: importance perhaps of the Federal Reserve When you have so 671 00:40:42,360 --> 00:40:44,439 Speaker 1: many different people speaking about what the FED is doing. 672 00:40:45,080 --> 00:40:47,839 Speaker 1: I wouldn't mind the Federals are becoming less important, actually so, 673 00:40:48,040 --> 00:40:49,960 Speaker 1: But no, I think that I think that's no, I 674 00:40:49,960 --> 00:40:52,000 Speaker 1: don't agree with that. I think, in fact, that it's 675 00:40:52,040 --> 00:40:54,319 Speaker 1: important that the presidents speak. I actually think would be 676 00:40:54,320 --> 00:40:57,640 Speaker 1: better if the governor spoke more often expressing their view. 677 00:40:58,000 --> 00:41:02,160 Speaker 1: I mean at the FED we eat striving for consensus. 678 00:41:02,200 --> 00:41:04,960 Speaker 1: Everybody agrees, and what that does is lead to poor 679 00:41:05,000 --> 00:41:08,399 Speaker 1: communications because people don't know what the debates I think 680 00:41:09,239 --> 00:41:10,719 Speaker 1: and the other. The other thing it is it leads 681 00:41:10,719 --> 00:41:13,960 Speaker 1: to group think, and you want to not have group 682 00:41:14,000 --> 00:41:16,239 Speaker 1: think at the fit and the only way to get 683 00:41:16,280 --> 00:41:20,840 Speaker 1: that is to have people sharing ideas, different ideas to 684 00:41:21,040 --> 00:41:24,640 Speaker 1: keep the debate lively and honest. How do policymakers deal 685 00:41:24,719 --> 00:41:27,799 Speaker 1: with potentiality? I think of the conversations we've been having 686 00:41:27,800 --> 00:41:31,880 Speaker 1: here about the prospects for infrastructure reform, our infrastructure spending, 687 00:41:31,880 --> 00:41:35,880 Speaker 1: tax reform, tax cuts. Uh, we're going into a meeting 688 00:41:35,880 --> 00:41:38,799 Speaker 1: here today and tomorrow. How are they processing what could 689 00:41:38,880 --> 00:41:41,799 Speaker 1: happen here with a Trump administration in the new year. 690 00:41:41,840 --> 00:41:43,439 Speaker 1: Are they thinking about that or they have to sort 691 00:41:43,440 --> 00:41:45,000 Speaker 1: of think in the vacuum of the Equos building and 692 00:41:45,400 --> 00:41:48,200 Speaker 1: not give thought to what any potential implications on the 693 00:41:48,200 --> 00:41:50,440 Speaker 1: economy might be from from laws like those. Well, I 694 00:41:50,480 --> 00:41:52,520 Speaker 1: think they clearly do have to give it some thoughts, 695 00:41:52,520 --> 00:41:53,960 Speaker 1: and they will give it some thoughts, And they don't 696 00:41:54,160 --> 00:41:55,919 Speaker 1: know any more than you and I do about what's 697 00:41:55,960 --> 00:41:59,279 Speaker 1: likely to transpire from Congress. And I think I made 698 00:41:59,320 --> 00:42:02,520 Speaker 1: the point earlier about whether the fiscal decisions made by 699 00:42:02,520 --> 00:42:07,560 Speaker 1: Congress focus on enhancing productivity versus just stimulating aggregate demand 700 00:42:07,640 --> 00:42:10,280 Speaker 1: in sort of a Kenzie and naive in kind of sense. 701 00:42:10,560 --> 00:42:12,600 Speaker 1: And I think it's the effect on the economy is 702 00:42:12,600 --> 00:42:15,719 Speaker 1: going to be much about which of those paths end 703 00:42:15,800 --> 00:42:17,759 Speaker 1: up being taken, and we just don't know for sure yet. 704 00:42:17,920 --> 00:42:23,400 Speaker 1: Is the Taylor rule still useful in policy? If you 705 00:42:23,440 --> 00:42:25,920 Speaker 1: were sitting here with Rick Michigan, who's got a different 706 00:42:26,000 --> 00:42:29,200 Speaker 1: view than Charles Plaster, could the two of you agree 707 00:42:29,640 --> 00:42:33,680 Speaker 1: that there is efficacy to the Taylor rule? Absolutely? I 708 00:42:33,680 --> 00:42:36,120 Speaker 1: think Rick and I would would agree wholeheartedly on some 709 00:42:36,200 --> 00:42:38,520 Speaker 1: of that. I mean, I think I think the there's 710 00:42:38,560 --> 00:42:41,880 Speaker 1: a difference between saying, you know, we're going to follow 711 00:42:41,880 --> 00:42:47,800 Speaker 1: the Tailor rule lavishly or what value are rules for policymaking? 712 00:42:48,880 --> 00:42:51,000 Speaker 1: And I think Rick Michigan would say this and I 713 00:42:51,040 --> 00:42:53,279 Speaker 1: have known each other for forty years and he would 714 00:42:53,320 --> 00:42:55,640 Speaker 1: probably say some of the same things. I'd be saying, 715 00:42:55,680 --> 00:42:59,160 Speaker 1: there is value to rule like behavior. Now we can 716 00:42:59,160 --> 00:43:01,040 Speaker 1: get down the weeds and talk about the details of that, 717 00:43:01,160 --> 00:43:03,680 Speaker 1: but I think we would agree on that. Are we 718 00:43:03,760 --> 00:43:07,760 Speaker 1: are we at full employment now? From from Charles Ploster standpoint. 719 00:43:07,800 --> 00:43:10,000 Speaker 1: When you look at the labor market right now, are 720 00:43:10,000 --> 00:43:14,239 Speaker 1: you satisfied with where things are? From the statistical point 721 00:43:14,280 --> 00:43:16,640 Speaker 1: of view, It's hard to argue we're not pretty darn 722 00:43:16,680 --> 00:43:23,200 Speaker 1: close to full now. That doesn't necessarily say that we 723 00:43:23,239 --> 00:43:25,239 Speaker 1: ought to be satisfied with that, or they're not other 724 00:43:25,280 --> 00:43:27,120 Speaker 1: things that can be done, or why is the labor 725 00:43:27,160 --> 00:43:30,960 Speaker 1: force participation rate so low? Why isn't it higher? But 726 00:43:31,040 --> 00:43:33,359 Speaker 1: those are not things monetary policy can do anything about 727 00:43:33,520 --> 00:43:35,600 Speaker 1: very quickly. I talked to Gary Showing the other day 728 00:43:35,600 --> 00:43:39,240 Speaker 1: about good and bad inflation? Can we have a good 729 00:43:39,560 --> 00:43:45,719 Speaker 1: inflation with a Trump reflation? I don't see any inflation 730 00:43:45,880 --> 00:43:50,839 Speaker 1: as being necessarily good. End of story. Paul Bulker once said, 731 00:43:50,840 --> 00:43:53,280 Speaker 1: why do you guys have a two percent inflation target? 732 00:43:53,360 --> 00:43:57,000 Speaker 1: Why not? Why not zero? Remember I remember it, well, 733 00:43:57,640 --> 00:44:00,040 Speaker 1: this has been fabulous, folks. This is we don't do 734 00:44:00,200 --> 00:44:02,680 Speaker 1: this too often. That was a wonk fest with Professor 735 00:44:03,280 --> 00:44:07,720 Speaker 1: plus or send me emails, etcetera. David Gura, John Tucker 736 00:44:08,400 --> 00:44:11,440 Speaker 1: on Kidling and Prescott and all the other theory, Rick 737 00:44:11,520 --> 00:44:14,840 Speaker 1: Michigan and John V. Taylor that we spoken. This was 738 00:44:14,960 --> 00:44:18,319 Speaker 1: really a specially Professor plus or thank you. Thank you 739 00:44:18,440 --> 00:44:21,200 Speaker 1: so much, Charles Plaster as a former president of the 740 00:44:21,239 --> 00:44:33,360 Speaker 1: Philadelphia uh FED. Thanks for listening to the Bloomberg Surveillance podcast. 741 00:44:33,719 --> 00:44:38,840 Speaker 1: Subscribe and listen to interviews on iTunes, SoundCloud, or whichever 742 00:44:38,960 --> 00:44:43,359 Speaker 1: podcast platform you prefer. I'm out on Twitter at Tom Keene. 743 00:44:43,480 --> 00:44:47,279 Speaker 1: David Gura is at David Gura. Before the podcast, you 744 00:44:47,320 --> 00:45:03,480 Speaker 1: can always catch us worldwide. I'm Bloomberg Radio. Who you 745 00:45:03,520 --> 00:45:06,280 Speaker 1: put your trust in matters? Investors have put their trust 746 00:45:06,640 --> 00:45:10,560 Speaker 1: and independent registered investment advisors to the two and four 747 00:45:10,600 --> 00:45:15,600 Speaker 1: trillion dollars. Why Learn more at find your Independent Advisor 748 00:45:15,640 --> 00:45:16,640 Speaker 1: dot com