1 00:00:09,720 --> 00:00:12,880 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene with 2 00:00:13,560 --> 00:00:16,520 Speaker 1: David Gura. Daily we bring you insight from the best 3 00:00:16,560 --> 00:00:22,279 Speaker 1: of economics, finance, investment, and international relations. Find Bloomberg Surveillance 4 00:00:22,320 --> 00:00:27,000 Speaker 1: on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course, 5 00:00:27,320 --> 00:00:33,760 Speaker 1: on the Bloomberg Pleasure you have. Abby Joseph Cohen with 6 00:00:33,840 --> 00:00:35,680 Speaker 1: us is our first guest this morning, longtime president of 7 00:00:35,720 --> 00:00:37,800 Speaker 1: the Global Markets Institute at Coleman Sack. She's now an 8 00:00:37,800 --> 00:00:42,440 Speaker 1: advisory director their senior investment portfolio strategist at Goldman Sachs. Abby, 9 00:00:42,520 --> 00:00:44,159 Speaker 1: let me start by asking you said, what it will 10 00:00:44,200 --> 00:00:46,919 Speaker 1: mean in your estimation to have somebody with not an 11 00:00:46,920 --> 00:00:50,000 Speaker 1: academic background, not a PhD in economics, but a market's background, 12 00:00:50,080 --> 00:00:52,680 Speaker 1: somebody who spent a decade plus at the Carlisle Group 13 00:00:52,880 --> 00:00:55,200 Speaker 1: doing private equity in the chair at the FED. If 14 00:00:55,240 --> 00:00:59,240 Speaker 1: that's who we get named this afternoon. Ah, good morning. UM. 15 00:00:59,280 --> 00:01:02,960 Speaker 1: Clearly everyone is now expecting that your own Powell will 16 00:01:03,000 --> 00:01:05,280 Speaker 1: be named. And as you point out, he is not 17 00:01:05,400 --> 00:01:08,600 Speaker 1: an economist. UM, and so I think much of the 18 00:01:08,640 --> 00:01:11,840 Speaker 1: answer to your question depends upon the rest of the 19 00:01:11,880 --> 00:01:15,280 Speaker 1: makeup of the board. Um. This is an f O 20 00:01:15,440 --> 00:01:19,119 Speaker 1: m C, which has empty places at the table, and 21 00:01:19,200 --> 00:01:22,440 Speaker 1: I think that the President um will likely take advantage 22 00:01:22,440 --> 00:01:25,920 Speaker 1: of this opportunity to fill not just the chairmanship but 23 00:01:26,080 --> 00:01:29,280 Speaker 1: also some of these other spots. I would say, however, 24 00:01:29,480 --> 00:01:33,120 Speaker 1: the following we are clearly at an important point of 25 00:01:33,200 --> 00:01:36,560 Speaker 1: structural change in the US economy. I think this helps 26 00:01:36,560 --> 00:01:39,479 Speaker 1: account for the weakness that we've seen in terms of 27 00:01:39,520 --> 00:01:43,360 Speaker 1: slow growth and employment. It accounts for some of the 28 00:01:43,400 --> 00:01:46,240 Speaker 1: weakness that we're seeing in capex and so on. And 29 00:01:46,240 --> 00:01:49,440 Speaker 1: when you have big structural changes in the economy as 30 00:01:49,480 --> 00:01:53,880 Speaker 1: we shift increasingly from manufacturing to service. I would feel 31 00:01:53,920 --> 00:01:57,040 Speaker 1: a little bit more comfortable, um if we had an 32 00:01:57,040 --> 00:02:01,120 Speaker 1: economist either in that seat or if he surrounded by 33 00:02:01,160 --> 00:02:04,000 Speaker 1: other economists to whom he listens. Assuming it is in 34 00:02:04,040 --> 00:02:07,240 Speaker 1: fact a Jerome Powell who selected, the message that we're 35 00:02:07,240 --> 00:02:09,200 Speaker 1: getting is this is a pick that's going to give 36 00:02:09,280 --> 00:02:12,080 Speaker 1: us continuity. He's somebody who is voted with or gotten 37 00:02:12,080 --> 00:02:14,720 Speaker 1: behind the current FED chair Jenne Yellen. In light of that, 38 00:02:14,760 --> 00:02:16,920 Speaker 1: does that give you any more comfort with regard to 39 00:02:16,919 --> 00:02:18,360 Speaker 1: what you're saying there, that we're going to have somebody 40 00:02:18,360 --> 00:02:22,239 Speaker 1: who at least knows what path we're on at this point. Yes, 41 00:02:22,280 --> 00:02:24,440 Speaker 1: it does. If you take a look at the way 42 00:02:24,919 --> 00:02:27,480 Speaker 1: Governor Powell has voted on the f O m C. 43 00:02:27,760 --> 00:02:32,079 Speaker 1: Clearly there has been consensus that Jane Ellen has built 44 00:02:32,200 --> 00:02:36,280 Speaker 1: and he has participated in that. Also his public statements, 45 00:02:36,400 --> 00:02:39,679 Speaker 1: I think have been very supportive by and large of 46 00:02:39,720 --> 00:02:45,440 Speaker 1: this gradualistic approach to a very slow tightening of monetary policy. 47 00:02:45,720 --> 00:02:50,120 Speaker 1: And so from that standpoint one can expect continuity. The question, 48 00:02:50,200 --> 00:02:53,000 Speaker 1: I think then becomes who will sit in those other 49 00:02:53,080 --> 00:02:56,040 Speaker 1: seats that need to be filled and will some of 50 00:02:56,080 --> 00:02:59,320 Speaker 1: these people perhaps not be part of this consensus. I mean, 51 00:02:59,320 --> 00:03:01,240 Speaker 1: thank you so much for joining us so early in 52 00:03:01,240 --> 00:03:03,399 Speaker 1: the morning on this historic day. I should point out, 53 00:03:03,400 --> 00:03:06,720 Speaker 1: folks at Abbey, Joseph Cohen would be on anyone's shortlist 54 00:03:06,800 --> 00:03:11,079 Speaker 1: for governor, vice chairman or frankly chair as well, with 55 00:03:11,200 --> 00:03:14,920 Speaker 1: across the tapestry of her experience over the years, not 56 00:03:14,960 --> 00:03:17,720 Speaker 1: only at Golden Sex but at the Fed. Which gets 57 00:03:17,720 --> 00:03:21,840 Speaker 1: me Abbey to how a non PhD economist sits in 58 00:03:21,880 --> 00:03:23,680 Speaker 1: that office. You go in the building and you go 59 00:03:23,720 --> 00:03:25,760 Speaker 1: to the right and he's in the office of the chairman. 60 00:03:26,280 --> 00:03:29,760 Speaker 1: How will he relate day to day with the Abbey 61 00:03:29,880 --> 00:03:34,760 Speaker 1: Joseph Cohen's of the FED, the hundreds of PhD economists 62 00:03:34,800 --> 00:03:39,440 Speaker 1: grinding out the grinding work. How will he do that? Tom? 63 00:03:39,480 --> 00:03:42,880 Speaker 1: That's a wonderful question, and the answers that we have 64 00:03:43,080 --> 00:03:47,000 Speaker 1: thus far seemed to be that he will work well. UM. 65 00:03:47,080 --> 00:03:50,000 Speaker 1: I have not spoken I agree with that, um, But 66 00:03:50,120 --> 00:03:53,360 Speaker 1: I have heard from people who are in fact doing 67 00:03:53,400 --> 00:03:56,720 Speaker 1: that hard work at the FED, those highly qualified people 68 00:03:56,880 --> 00:03:59,840 Speaker 1: who don't always get the forecast right, but they've been 69 00:04:00,000 --> 00:04:03,800 Speaker 1: pretty close and their analysis of what's happening is very good. 70 00:04:04,080 --> 00:04:07,120 Speaker 1: There appears to be a good relationship right now, not 71 00:04:07,280 --> 00:04:09,880 Speaker 1: just with Jerome Powell, but with the other members of 72 00:04:09,920 --> 00:04:12,360 Speaker 1: the board as well, and I certainly hope that that 73 00:04:12,440 --> 00:04:15,760 Speaker 1: will continue. What's the one book j Powell has to 74 00:04:15,800 --> 00:04:17,520 Speaker 1: read now? Does he have to go back and read 75 00:04:18,080 --> 00:04:20,760 Speaker 1: Mackie of the nineteenth century? Does he need to read 76 00:04:20,800 --> 00:04:24,160 Speaker 1: Bernanke or Anna Schwartz on the Depression? Does he need 77 00:04:24,200 --> 00:04:29,120 Speaker 1: to read Clarina Gertler on DSG dynamics? From What's the 78 00:04:29,200 --> 00:04:32,680 Speaker 1: thing he needs? What's happy? Joseph Cohen saying, J Powell 79 00:04:32,760 --> 00:04:35,839 Speaker 1: read this and read it now? What is it? I 80 00:04:35,880 --> 00:04:39,240 Speaker 1: wish I had a simple answer for you clearly we 81 00:04:39,240 --> 00:04:43,320 Speaker 1: were fortunate that Ben bernankey and expert on the Great Depression, 82 00:04:43,520 --> 00:04:46,960 Speaker 1: was in place during the financial crisis. Janet Yellen, who 83 00:04:47,000 --> 00:04:50,479 Speaker 1: I am personally disappointed will not be asked to continue, 84 00:04:50,880 --> 00:04:53,760 Speaker 1: is an expert on labor markets, something that is in 85 00:04:54,279 --> 00:04:57,640 Speaker 1: desperate need that expertise right now. I think what which 86 00:04:57,640 --> 00:05:01,080 Speaker 1: your own Powell will need is information and knowledge and 87 00:05:01,200 --> 00:05:05,520 Speaker 1: understanding about what happens when there are big structural changes 88 00:05:05,880 --> 00:05:09,960 Speaker 1: in an economy. And perhaps that book hasn't been written yet, 89 00:05:10,200 --> 00:05:13,920 Speaker 1: but if we're looking for something way back in history, um, 90 00:05:13,960 --> 00:05:16,600 Speaker 1: I would be looking um at something I hate to 91 00:05:16,640 --> 00:05:20,080 Speaker 1: say it like Schumpeter um, which I may not I 92 00:05:20,120 --> 00:05:24,120 Speaker 1: may not agree with in terms of his policy prescriptions, 93 00:05:24,160 --> 00:05:26,880 Speaker 1: but he does talk about what happens when they are 94 00:05:27,080 --> 00:05:31,200 Speaker 1: major upheavals in an economy. The other the other thing 95 00:05:31,240 --> 00:05:34,279 Speaker 1: we need to keep in mind is that monetary policy 96 00:05:34,680 --> 00:05:38,400 Speaker 1: is just one oar on this boat is fiscal policy. 97 00:05:38,720 --> 00:05:41,159 Speaker 1: The fiscal will get to a minute. I'm gonna put 98 00:05:41,160 --> 00:05:46,080 Speaker 1: out abby on social that Thomas mccrawl one volume on Schumpeter, 99 00:05:46,400 --> 00:05:49,279 Speaker 1: which is my book of the year a million years ago, 100 00:05:49,360 --> 00:05:52,920 Speaker 1: David Gura it is, that's brilliant that abbey. Joseph Cohen 101 00:05:53,000 --> 00:05:55,839 Speaker 1: just brought up the giant shumpter and we do creative 102 00:05:55,880 --> 00:06:00,240 Speaker 1: destruction every day here on the we do and just 103 00:06:00,320 --> 00:06:03,560 Speaker 1: a coffee. Let me ask you about the role of 104 00:06:03,720 --> 00:06:05,640 Speaker 1: or the import of the FED at this point. What 105 00:06:05,760 --> 00:06:07,960 Speaker 1: role is it playing in the U S economy and 106 00:06:07,960 --> 00:06:10,600 Speaker 1: the global economy? What what kind of FED here is? 107 00:06:10,600 --> 00:06:13,080 Speaker 1: Is j Powell again if he's picked win to inherit, 108 00:06:14,440 --> 00:06:19,000 Speaker 1: the SAID was absolutely essential. It was the main player 109 00:06:19,360 --> 00:06:21,920 Speaker 1: for such a long time as we try to emerge 110 00:06:22,160 --> 00:06:25,200 Speaker 1: from the financial crisis. And right now I think what 111 00:06:25,279 --> 00:06:27,159 Speaker 1: the SAID needs to do and some of the other 112 00:06:27,279 --> 00:06:30,719 Speaker 1: central banks will be behind us in terms of time 113 00:06:31,279 --> 00:06:35,160 Speaker 1: UM will be to gradually remove some of that extra 114 00:06:35,200 --> 00:06:38,920 Speaker 1: stimulus that has been applied, either through interest rate policy 115 00:06:39,279 --> 00:06:41,560 Speaker 1: or through the use of the balance sheet. And I 116 00:06:41,600 --> 00:06:44,560 Speaker 1: think as steady as you go policy is important. We 117 00:06:44,680 --> 00:06:47,480 Speaker 1: also have to keep in mind that it's time for 118 00:06:47,720 --> 00:06:50,919 Speaker 1: fiscal policy to step up. And it's not just a 119 00:06:51,000 --> 00:06:54,520 Speaker 1: question of the big numbers, how much is the government spending, 120 00:06:54,880 --> 00:06:57,080 Speaker 1: what is the size of the deficit, but what are 121 00:06:57,120 --> 00:07:00,919 Speaker 1: we spending the money on. My work would suggest that 122 00:07:01,080 --> 00:07:04,640 Speaker 1: one of the things that has led to this disappointingly 123 00:07:05,279 --> 00:07:10,000 Speaker 1: slow growth in the economy even before the financial crisis, 124 00:07:10,400 --> 00:07:13,960 Speaker 1: is inadequate long term investment, and the long term investment 125 00:07:14,000 --> 00:07:17,360 Speaker 1: it's not just CAPEX, it's R and D, which has 126 00:07:17,600 --> 00:07:20,480 Speaker 1: shrunk from four and a half percent of GDP down 127 00:07:20,480 --> 00:07:23,680 Speaker 1: to two and a half percent. And also critically our 128 00:07:24,000 --> 00:07:27,840 Speaker 1: investment in our people through education and our in this 129 00:07:28,120 --> 00:07:32,720 Speaker 1: investment in our communities through infrastructure. Um, we have seen 130 00:07:33,560 --> 00:07:37,160 Speaker 1: the deterioration of so much of our physical plant that 131 00:07:37,200 --> 00:07:39,360 Speaker 1: really has to be addressed. I don't care, ab I 132 00:07:39,400 --> 00:07:41,400 Speaker 1: got one question, and it's the only one that matters. 133 00:07:41,440 --> 00:07:44,600 Speaker 1: I know you're on the advisory committee to Cornell University, 134 00:07:44,600 --> 00:07:47,120 Speaker 1: a small school and upstate New York, but I need 135 00:07:47,160 --> 00:07:51,200 Speaker 1: to ask you, within your advisory capacity to Major League Baseball, 136 00:07:51,640 --> 00:07:55,080 Speaker 1: can you get World Series games to start earlier at night? 137 00:07:55,520 --> 00:07:59,440 Speaker 1: Can you actually make that happen? Well, you see the problem, 138 00:07:59,480 --> 00:08:03,320 Speaker 1: Tom is the games the series were so good everybody 139 00:08:03,360 --> 00:08:06,000 Speaker 1: wanted to stay up and watch. And I think that 140 00:08:06,040 --> 00:08:07,880 Speaker 1: those of us on the East Coast have to be 141 00:08:08,120 --> 00:08:13,160 Speaker 1: more thoughtful of those people. She could be a fed 142 00:08:13,280 --> 00:08:16,160 Speaker 1: chair old Abbe. Joseph Corne, thank you for ripping up 143 00:08:16,160 --> 00:08:20,120 Speaker 1: your schedule to be this morning greatly, greatly appreciate that. 144 00:08:20,200 --> 00:08:22,160 Speaker 1: I really mean that data. I mean, Abbey has such 145 00:08:22,200 --> 00:08:24,240 Speaker 1: an interesting and a lot of people don't know this 146 00:08:24,880 --> 00:08:28,560 Speaker 1: hugely quantitative gift. You know, you see it in the 147 00:08:28,560 --> 00:08:30,440 Speaker 1: cf A journal and all that kind of thing. But 148 00:08:30,760 --> 00:08:34,600 Speaker 1: she's got a whole skill set that's away from maybe 149 00:08:34,679 --> 00:08:37,240 Speaker 1: you know, cherry yelling and the others to speak. I'm 150 00:08:37,280 --> 00:08:39,880 Speaker 1: just trying to sell her as a governors. There are 151 00:08:39,960 --> 00:08:42,160 Speaker 1: some vacancies, but you remember speaking with her and she 152 00:08:42,160 --> 00:08:44,040 Speaker 1: stepped down from that position as the president of Global 153 00:08:44,040 --> 00:08:47,720 Speaker 1: Markets Institute. Abbey Joseph Coh senior investment portfolio strategist at 154 00:08:47,760 --> 00:08:51,560 Speaker 1: Goldman Sachs Cornell alumna. She'd hockey fan as well, right 155 00:08:52,679 --> 00:08:57,280 Speaker 1: Blees Washington Capitals. She's just you know, I didn't bring 156 00:08:57,280 --> 00:09:00,560 Speaker 1: it up because she's so distressed about that skin, and 157 00:09:00,760 --> 00:09:03,400 Speaker 1: you know, this is like their last year to get 158 00:09:03,440 --> 00:09:05,920 Speaker 1: it done, and I figured she'd never come back on 159 00:09:06,080 --> 00:09:20,920 Speaker 1: if I brought up the cabin done. Let me get 160 00:09:20,960 --> 00:09:22,480 Speaker 1: into the forecast a little bit here as we get 161 00:09:22,480 --> 00:09:24,680 Speaker 1: those headlines as well. The BUC inflation at two point 162 00:09:24,720 --> 00:09:26,760 Speaker 1: four percent in two thousand and eighteen, two point two 163 00:09:26,760 --> 00:09:29,400 Speaker 1: percent in two thousand nineteen, the Bank seas at GDP 164 00:09:29,559 --> 00:09:32,320 Speaker 1: rising one point six percent next year, one point seven 165 00:09:32,320 --> 00:09:37,080 Speaker 1: percent in two thousand twenty, and on on on inflation. 166 00:09:37,080 --> 00:09:40,200 Speaker 1: On the labor market, the Bank is cutting its unemployment forecast, 167 00:09:40,240 --> 00:09:43,000 Speaker 1: saying slack in the labor market in the UK is limited. 168 00:09:43,280 --> 00:09:45,240 Speaker 1: In the Bank's words, Yeah, there's that slack word. We 169 00:09:45,280 --> 00:09:48,200 Speaker 1: associate that, of course, we sure yelling. One of the 170 00:09:48,200 --> 00:09:51,640 Speaker 1: things I would suggest here, uh, David, is we all 171 00:09:51,679 --> 00:09:53,800 Speaker 1: see too much of each other versus our families. I 172 00:09:53,800 --> 00:09:56,160 Speaker 1: mean I see more biscuit than I do of of 173 00:09:56,280 --> 00:09:59,360 Speaker 1: John Tucker. How is biscuit? Oh she's great. I left 174 00:09:59,400 --> 00:10:04,320 Speaker 1: with this morning. Uh, some little biscuit treats British biscuits 175 00:10:04,320 --> 00:10:08,680 Speaker 1: for bank. Very good. Well, you know, so we see 176 00:10:08,679 --> 00:10:11,280 Speaker 1: each other, and I have the clearest memory, David, A 177 00:10:11,400 --> 00:10:15,479 Speaker 1: Francie laquis stopping me dead my tracks with the observation 178 00:10:15,920 --> 00:10:19,840 Speaker 1: of negative wage growth in the United Kingdom. I know 179 00:10:19,960 --> 00:10:25,120 Speaker 1: of no history I've ever read Bernanke, Timberlake, Anna Schwartz, Meltzer, 180 00:10:25,640 --> 00:10:30,240 Speaker 1: all of them. How do you raise rates in negative 181 00:10:30,400 --> 00:10:35,360 Speaker 1: rage growth? Politically? I find that unique or untested, to 182 00:10:35,400 --> 00:10:36,800 Speaker 1: say the least. Now we're going to get into this 183 00:10:36,840 --> 00:10:38,880 Speaker 1: with our guest Tom. But I mean a very basic 184 00:10:38,920 --> 00:10:40,840 Speaker 1: but important question here is why the Bank of England 185 00:10:40,880 --> 00:10:44,079 Speaker 1: did this now? And and let's let's dig into that 186 00:10:44,120 --> 00:10:45,840 Speaker 1: little bit here with David blanche Flower, of course, he said, 187 00:10:45,840 --> 00:10:49,000 Speaker 1: professor of economics at Dartmouth College up in Hanover, New Hampshire. 188 00:10:49,040 --> 00:10:51,040 Speaker 1: Of course with some experience advising the Bank of England 189 00:10:51,040 --> 00:10:53,240 Speaker 1: in the past as well. Danny Blanchflow, great to have 190 00:10:53,240 --> 00:10:55,000 Speaker 1: you with us here, and let me start with that question. 191 00:10:55,080 --> 00:10:57,839 Speaker 1: I know that you were a skeptical love or not, Uh, 192 00:10:58,120 --> 00:10:59,640 Speaker 1: you didn't think that the Bank of England had raised 193 00:10:59,679 --> 00:11:02,240 Speaker 1: rates state. Let's just first of all look at the 194 00:11:02,320 --> 00:11:04,680 Speaker 1: question stuff. What's the rational that they're giving for doing it? 195 00:11:04,679 --> 00:11:08,040 Speaker 1: Why would the Bank of England do this today? Um? Well, 196 00:11:08,559 --> 00:11:11,400 Speaker 1: the answer is that they guess, and it's only a guess. 197 00:11:11,400 --> 00:11:14,280 Speaker 1: There's no data, there's no equation, that no model. They 198 00:11:14,360 --> 00:11:18,400 Speaker 1: guess that the output potential of the economy has fallen 199 00:11:18,520 --> 00:11:20,800 Speaker 1: because it's going to generate lots of wage growth. But 200 00:11:20,880 --> 00:11:22,960 Speaker 1: as they've been saying, there's lots of wage growth coming 201 00:11:23,200 --> 00:11:25,840 Speaker 1: in the last sixteen forecasts and they haven't actually been 202 00:11:25,920 --> 00:11:29,760 Speaker 1: any um real wages are falling, retail sales are falling. 203 00:11:30,120 --> 00:11:36,640 Speaker 1: Growth is basically awful anemic um, and every forecast is 204 00:11:36,640 --> 00:11:40,040 Speaker 1: it's going to get worse. So basically they've done it 205 00:11:40,120 --> 00:11:42,320 Speaker 1: on I think on the fact that they think that 206 00:11:42,640 --> 00:11:46,839 Speaker 1: inflation is quite high but inflation set to fall. So 207 00:11:46,880 --> 00:11:49,880 Speaker 1: I would actually trust the decision of the two dissenters, 208 00:11:50,480 --> 00:11:53,920 Speaker 1: Ramsden and cun Lift, who actually have been attending MPC 209 00:11:54,120 --> 00:11:56,439 Speaker 1: meetings since at least two thousand six they were the 210 00:11:56,480 --> 00:11:59,120 Speaker 1: Treasury representative. They used to come to all the NPC 211 00:11:59,240 --> 00:12:01,280 Speaker 1: meetings that I used to go to in two thousand 212 00:12:01,360 --> 00:12:03,560 Speaker 1: six to nine, and they I think are the most 213 00:12:03,640 --> 00:12:08,000 Speaker 1: experienced data watches and they voted against So I think 214 00:12:08,000 --> 00:12:10,600 Speaker 1: this is a hugely mistaken decision. On bloom Book TV 215 00:12:10,679 --> 00:12:13,720 Speaker 1: five minutes ago they asked me, Um, what's the prospect 216 00:12:13,760 --> 00:12:16,240 Speaker 1: in the next twelve months of that decision will be reversed? 217 00:12:16,240 --> 00:12:18,000 Speaker 1: Will it be? And I said yes, I mean this 218 00:12:18,080 --> 00:12:20,720 Speaker 1: hearkens back David and your expert at the history of this, 219 00:12:20,840 --> 00:12:22,559 Speaker 1: And I do want to point out I don't know 220 00:12:22,600 --> 00:12:25,080 Speaker 1: if you're aware of this, Professor Blanche Flower, but Michael 221 00:12:25,080 --> 00:12:28,080 Speaker 1: ponded Barclays agrees with you. I thought, coming from a 222 00:12:28,160 --> 00:12:32,080 Speaker 1: major London house, he was stunning today on the risk 223 00:12:32,120 --> 00:12:35,920 Speaker 1: of the policy missed decision. Here the Japanese did this 224 00:12:36,120 --> 00:12:40,560 Speaker 1: under certain different circumstances. A decade or two ago review 225 00:12:40,679 --> 00:12:43,880 Speaker 1: with US, the ramifications when Japan, when the Bank of 226 00:12:43,920 --> 00:12:48,960 Speaker 1: Japan had to reverse that had profound residents with Japan 227 00:12:49,040 --> 00:12:52,559 Speaker 1: and frankly worldwide. Well, I agree with that, Tom. It 228 00:12:52,600 --> 00:12:55,000 Speaker 1: didn't look at the anemic growth. But there's more recent 229 00:12:55,040 --> 00:12:58,160 Speaker 1: examples of that. I think the best example actually, it's 230 00:12:58,200 --> 00:13:01,320 Speaker 1: the two thousand eleven right is by the ECB. They 231 00:13:01,360 --> 00:13:05,040 Speaker 1: did it twice, and the Swedish Central Bank raise rates too, 232 00:13:05,160 --> 00:13:09,079 Speaker 1: and in all three cases Japan, ECB and Sweden they 233 00:13:09,160 --> 00:13:12,560 Speaker 1: end up having to go to negative rates. Um So 234 00:13:12,640 --> 00:13:14,600 Speaker 1: I think this looks hugely miss. I mean, look at 235 00:13:14,600 --> 00:13:16,800 Speaker 1: look at what's going on in the uncertainty in the 236 00:13:16,880 --> 00:13:21,040 Speaker 1: UK economy about Brexit. I mean, yesterday a government that's 237 00:13:21,040 --> 00:13:25,880 Speaker 1: a minority government loses its defense minister through some sex scandal. 238 00:13:26,320 --> 00:13:28,200 Speaker 1: Um So this is so this is a government that 239 00:13:28,240 --> 00:13:31,480 Speaker 1: really has no credible sort of fiscal strategy. I mean, 240 00:13:31,520 --> 00:13:34,120 Speaker 1: what happens if the economy flows? We have confidence that 241 00:13:34,200 --> 00:13:36,760 Speaker 1: a government could respond to it. We're going to see 242 00:13:36,760 --> 00:13:41,000 Speaker 1: a forecast coming soon, and the forecasting organization has basically 243 00:13:41,080 --> 00:13:43,400 Speaker 1: said that they're going to have to slash forecast. Okay, 244 00:13:43,440 --> 00:13:45,400 Speaker 1: you're a Dartmouth I mean you only teacher like two 245 00:13:45,440 --> 00:13:50,079 Speaker 1: hours a week, but you're a Dmatical you're a sabbatical 246 00:13:50,200 --> 00:13:55,120 Speaker 1: Yeah well, John Tucker, John, you're unsabbatical too, right. Yeah, okay, 247 00:13:55,160 --> 00:13:58,600 Speaker 1: welcome professor Blanchflower. You're teaching up at Dartmouth. How do 248 00:13:58,600 --> 00:14:00,840 Speaker 1: you respond to the wise guy in the room raises 249 00:14:00,880 --> 00:14:03,120 Speaker 1: is in and says he's just trying to raise rates 250 00:14:03,160 --> 00:14:07,440 Speaker 1: to get ready for the next economic slowdown. I love 251 00:14:07,520 --> 00:14:09,839 Speaker 1: that argument. So here's the deal. You're trying to get 252 00:14:09,880 --> 00:14:12,920 Speaker 1: ready for the next economic slowdown, and you raise rates, 253 00:14:12,920 --> 00:14:17,480 Speaker 1: and you cause its excellent, Um that that doesn't make 254 00:14:17,520 --> 00:14:20,680 Speaker 1: any sense at all. Um, you raise, you raise rates, 255 00:14:20,680 --> 00:14:24,360 Speaker 1: it slows the economy, and an already slowing economy. I mean, 256 00:14:24,480 --> 00:14:27,920 Speaker 1: let's get real. People are hurting, their real wages are falling, 257 00:14:28,040 --> 00:14:30,080 Speaker 1: and now you're going to raise the cost of mortgages. 258 00:14:30,120 --> 00:14:33,160 Speaker 1: Remember in the UK many more people are on variable 259 00:14:33,160 --> 00:14:36,000 Speaker 1: and rate mortgages of precaution than they are in the US. 260 00:14:36,040 --> 00:14:40,360 Speaker 1: So this immediately raises people's costs. This raises the cost 261 00:14:40,440 --> 00:14:44,600 Speaker 1: of borrowing to firms, and it lowers dividends. So the 262 00:14:44,680 --> 00:14:48,160 Speaker 1: effect of this rate rising and already slowing economy is 263 00:14:48,200 --> 00:14:53,120 Speaker 1: to slow the economy more. Oh okay, great plan. So 264 00:14:53,200 --> 00:14:56,600 Speaker 1: you're going to raise rates to avoid a recession that 265 00:14:56,640 --> 00:15:01,080 Speaker 1: you cause. Oh excellent. What are you going to be listening? 266 00:15:01,320 --> 00:15:03,120 Speaker 1: What you could be listening for today? When we hear 267 00:15:03,160 --> 00:15:05,520 Speaker 1: from Mark Carnegan, we're gonna be carring his comments live 268 00:15:05,720 --> 00:15:08,120 Speaker 1: in party when they begin about there, what do you 269 00:15:08,160 --> 00:15:10,320 Speaker 1: want to hear from the governor? Well, I want to 270 00:15:10,360 --> 00:15:13,760 Speaker 1: hear explain to us the actually show us any data, 271 00:15:14,320 --> 00:15:16,520 Speaker 1: any data other than I'm not going to buy the 272 00:15:16,600 --> 00:15:19,200 Speaker 1: made up stuff about the capacity in the economy because 273 00:15:19,200 --> 00:15:21,880 Speaker 1: there's no data for that. There's non equations, there's no nothing. 274 00:15:22,000 --> 00:15:24,080 Speaker 1: So I'm not gonna I'm not going to buy guesses. 275 00:15:24,640 --> 00:15:27,720 Speaker 1: Tell me anything that tells you that the economy is 276 00:15:27,760 --> 00:15:31,320 Speaker 1: overheating and that this generates a rate rise and that 277 00:15:31,480 --> 00:15:34,040 Speaker 1: inflation is not going to plummet like a stone. And 278 00:15:34,120 --> 00:15:37,800 Speaker 1: I suspect that the press corps will ask those questions, 279 00:15:37,960 --> 00:15:42,920 Speaker 1: especially from the descent from the most experienced monetary policy makers, 280 00:15:43,040 --> 00:15:45,280 Speaker 1: who say this is a mistake, So I think he's 281 00:15:45,280 --> 00:15:47,000 Speaker 1: going to have a bit of a tough time. Yeah, 282 00:15:47,040 --> 00:15:49,560 Speaker 1: you signaled it, and yes you probably should go along 283 00:15:49,600 --> 00:15:52,400 Speaker 1: with it because you signaled it. But this looks like 284 00:15:52,440 --> 00:15:55,720 Speaker 1: an error, doesn't it. Governor very quickly here, we're gonna 285 00:15:55,720 --> 00:15:57,600 Speaker 1: come back with you. But you mentioned it, Sir David Ramston. 286 00:15:57,640 --> 00:15:59,560 Speaker 1: You mentioned to Sir John cunlaf as well as we 287 00:15:59,600 --> 00:16:01,800 Speaker 1: talk about personnel here in the US, help us understand 288 00:16:01,840 --> 00:16:04,080 Speaker 1: the role that those two gentlemen play on on this committee, 289 00:16:04,120 --> 00:16:08,320 Speaker 1: this boarder in London, right, So they in the difference 290 00:16:08,360 --> 00:16:11,720 Speaker 1: between the MPC and the m C is that every 291 00:16:11,800 --> 00:16:16,080 Speaker 1: meeting a representative of the Treasury gets to sit into 292 00:16:16,080 --> 00:16:19,920 Speaker 1: that meeting, doesn't get to vote, but oftentimes we would 293 00:16:19,920 --> 00:16:23,720 Speaker 1: have a conversation with them, um, So they have experienced 294 00:16:23,720 --> 00:16:25,960 Speaker 1: sitting in those meetings and there would have been a 295 00:16:26,080 --> 00:16:29,480 Speaker 1: Treasury representative at this meeting. And now in the last 296 00:16:30,280 --> 00:16:33,360 Speaker 1: recently David Ramsden's to Dave Ramsden got appointed as a 297 00:16:33,440 --> 00:16:37,880 Speaker 1: Deputy Governor and John Cunliff too, they were both representatives 298 00:16:37,880 --> 00:16:40,880 Speaker 1: of the Treasury um. But there's a kind of obvious 299 00:16:40,920 --> 00:16:44,080 Speaker 1: connection here. But I would just refer to them as 300 00:16:44,120 --> 00:16:48,080 Speaker 1: the most experienced people on that committee. They've been going 301 00:16:48,120 --> 00:16:49,880 Speaker 1: there for a decade and I've just seen what they 302 00:16:49,880 --> 00:16:52,640 Speaker 1: said and it's consistent with I said. These members felt 303 00:16:52,680 --> 00:16:56,000 Speaker 1: that there was insufficient evidence so far that domestic costs 304 00:16:56,040 --> 00:17:01,400 Speaker 1: in particular wage would pick up in like reports Center prediction. Unfortunately, 305 00:17:01,440 --> 00:17:03,240 Speaker 1: we have to come back. We're gonna come back with 306 00:17:03,280 --> 00:17:06,080 Speaker 1: Professor blanch Flower has lots to talk about here with 307 00:17:06,160 --> 00:17:09,520 Speaker 1: Denny blanch for of course of Hanover and Dartmouth College 308 00:17:09,720 --> 00:17:11,680 Speaker 1: where it's right now, David blanche Flower. And one of 309 00:17:11,680 --> 00:17:13,920 Speaker 1: the things you don't know, folks is that in the 310 00:17:14,000 --> 00:17:17,160 Speaker 1: depths of the ugliness of the British economy in two 311 00:17:17,200 --> 00:17:20,240 Speaker 1: thousand seven eight blanche Flower had a wedding for one 312 00:17:20,280 --> 00:17:23,879 Speaker 1: of his daughters in England which single handedly moved the 313 00:17:23,880 --> 00:17:29,680 Speaker 1: needle on United Kingdom g d P. I am, it's 314 00:17:29,720 --> 00:17:32,320 Speaker 1: just you know, I believe Gordon Browner is somebody. Thank 315 00:17:32,320 --> 00:17:34,440 Speaker 1: you on the behalf of the chancel of the exchequer. 316 00:17:34,560 --> 00:17:37,960 Speaker 1: Thank you so much. David. You speak for eight Whales 317 00:17:38,040 --> 00:17:41,240 Speaker 1: and you speak as well for in England and a 318 00:17:41,840 --> 00:17:45,359 Speaker 1: Scotland and Wales outside of what David gurn I know 319 00:17:46,000 --> 00:17:48,920 Speaker 1: in three zip codes in uh postal codes or whatever. 320 00:17:49,000 --> 00:17:54,240 Speaker 1: In London. How's the rest of the United Kingdom doing well? 321 00:17:54,280 --> 00:17:56,760 Speaker 1: They're not doing well at all. I mean, I think 322 00:17:56,800 --> 00:18:00,440 Speaker 1: if you look back, the Brexit vote is instructive um. 323 00:18:00,480 --> 00:18:03,879 Speaker 1: The places that if you like, had industrial decline, the 324 00:18:03,920 --> 00:18:07,439 Speaker 1: old cold towns, the old seaside towns, the ones in 325 00:18:07,480 --> 00:18:10,960 Speaker 1: a sense that have been left behind, voted for Brexit 326 00:18:11,040 --> 00:18:14,000 Speaker 1: from lack of hope of interest. Is that the MPC 327 00:18:14,320 --> 00:18:17,840 Speaker 1: in fact consists entirely of people who live in London 328 00:18:17,880 --> 00:18:22,120 Speaker 1: and the Southeast, no representation from Scotland, Ireland or Wales. 329 00:18:22,680 --> 00:18:25,359 Speaker 1: And I think the reality of a booming London, are 330 00:18:25,400 --> 00:18:29,919 Speaker 1: booming Southeast booming housing markets is very different from what 331 00:18:30,000 --> 00:18:34,920 Speaker 1: happens in South Endmarctly calls Huddersfield leaves um and that's 332 00:18:34,960 --> 00:18:37,119 Speaker 1: one of the great divides. And in some sense the 333 00:18:37,119 --> 00:18:40,440 Speaker 1: problem is that you rely on monetary policy and one 334 00:18:40,520 --> 00:18:43,119 Speaker 1: size does not fit all. The rates are too high 335 00:18:43,680 --> 00:18:46,919 Speaker 1: u in to the north and too low for the south. 336 00:18:47,440 --> 00:18:49,679 Speaker 1: So I think the reality is I think you certainly 337 00:18:49,760 --> 00:18:52,879 Speaker 1: might argue that members of the FOMC and members of 338 00:18:52,920 --> 00:18:56,800 Speaker 1: the MPC don't really get to see and understand what's 339 00:18:56,840 --> 00:18:59,840 Speaker 1: happening in the heartland. UM And I think that's sort 340 00:18:59,840 --> 00:19:03,040 Speaker 1: of it's a really big reality. Um and it certainly 341 00:19:03,040 --> 00:19:05,720 Speaker 1: doesn't seem that the economy in the North of Wales 342 00:19:05,840 --> 00:19:10,679 Speaker 1: or elsewhere are booming and are going to warrant a 343 00:19:10,840 --> 00:19:14,080 Speaker 1: rate rise. So I think we're seeing these two worlds, 344 00:19:14,480 --> 00:19:16,719 Speaker 1: the world of the left behind who stood up and 345 00:19:16,720 --> 00:19:19,960 Speaker 1: said enough is enough, and the world of the elites 346 00:19:20,000 --> 00:19:23,000 Speaker 1: who seemed who seemed to think that the world is 347 00:19:23,040 --> 00:19:25,840 Speaker 1: based upon what happens in there three zip codes. Then 348 00:19:26,000 --> 00:19:27,720 Speaker 1: let me we're having some fun with definitions today. We 349 00:19:27,760 --> 00:19:29,359 Speaker 1: had at Ross Castridge on the show and I asked 350 00:19:29,400 --> 00:19:32,840 Speaker 1: him what quality means. We had we had Michael Panton, 351 00:19:32,880 --> 00:19:34,800 Speaker 1: We asked him what transitory means. Let me ask you 352 00:19:34,840 --> 00:19:37,800 Speaker 1: about gradual. Is there a uniform definition of gradual when 353 00:19:37,800 --> 00:19:39,919 Speaker 1: we hear it from central bankers, be they at the 354 00:19:39,920 --> 00:19:42,520 Speaker 1: Bank of England or the Federaliserve. What does gradual meaning 355 00:19:42,520 --> 00:19:45,439 Speaker 1: the context of rieh. I think that's a really great question. 356 00:19:45,480 --> 00:19:48,480 Speaker 1: The answer is they don't know. I mean, the reality 357 00:19:48,560 --> 00:19:51,920 Speaker 1: is there is no solid economics to tell you the 358 00:19:52,000 --> 00:19:57,320 Speaker 1: path out of u a monetary policy at the zero 359 00:19:57,400 --> 00:20:00,680 Speaker 1: lower bound. I mean, think in the UK case. I mean, 360 00:20:00,680 --> 00:20:03,359 Speaker 1: we have absolutely no idea what Brexit will look like. 361 00:20:03,440 --> 00:20:07,040 Speaker 1: Over the last two days, the UK Parliament has actually 362 00:20:07,080 --> 00:20:10,640 Speaker 1: been arguing about whether the government would release fifty odd 363 00:20:10,680 --> 00:20:14,040 Speaker 1: studies that it had done about the impact of Brexit 364 00:20:14,160 --> 00:20:17,080 Speaker 1: on industry, and so the Parliament voted to do it. 365 00:20:17,119 --> 00:20:19,600 Speaker 1: The government didn't want to release it, and the Speaker 366 00:20:19,640 --> 00:20:21,320 Speaker 1: of the House that if the government doesn't do it 367 00:20:21,359 --> 00:20:24,400 Speaker 1: that the government will be held in contempt of parliament. 368 00:20:24,800 --> 00:20:28,880 Speaker 1: So it's hard to know what impacts of Brexit will be. 369 00:20:29,200 --> 00:20:33,000 Speaker 1: It's basically saying we're not going to raise rates anytime soon. 370 00:20:33,400 --> 00:20:36,439 Speaker 1: We know that it needs stimulus, but there's huge amount 371 00:20:36,440 --> 00:20:39,080 Speaker 1: of uncertainty and J. Powell in the US is in 372 00:20:39,119 --> 00:20:41,720 Speaker 1: that position to there is no economic to tell you 373 00:20:42,080 --> 00:20:44,359 Speaker 1: how to withdraw stimulus, and the risk are all to 374 00:20:44,440 --> 00:20:47,720 Speaker 1: the downside. That's what it means. The last means not 375 00:20:47,880 --> 00:20:50,639 Speaker 1: see there you go. With two minutes left, let me 376 00:20:50,680 --> 00:20:52,479 Speaker 1: ask you about J. Powe in the feather that he 377 00:20:52,520 --> 00:20:55,679 Speaker 1: presumably will inherit in the tools that are left in 378 00:20:55,720 --> 00:20:58,040 Speaker 1: his talk, and how depleted are those reserves when you 379 00:20:58,080 --> 00:21:00,359 Speaker 1: when you look at the what policies and what tools 380 00:21:00,400 --> 00:21:02,879 Speaker 1: he has at his disposal. Are there many fewer than 381 00:21:02,880 --> 00:21:06,000 Speaker 1: there were for his predecessor? Well? Absolutely, I mean the 382 00:21:06,040 --> 00:21:09,680 Speaker 1: reality is that we've had rates held so low because 383 00:21:09,720 --> 00:21:13,160 Speaker 1: fiscal policy has been overly tied. If you look back 384 00:21:13,160 --> 00:21:14,920 Speaker 1: to two thousand and eight, I mean, I look back 385 00:21:14,920 --> 00:21:18,320 Speaker 1: at the decision I distended on in July two thousand 386 00:21:18,359 --> 00:21:21,679 Speaker 1: and seven, which raised rates to five and three quarters percent. 387 00:21:22,080 --> 00:21:23,880 Speaker 1: So when the shot came along, you could cut from 388 00:21:23,920 --> 00:21:27,439 Speaker 1: five and three quarters essentially to zero. Well, now, with 389 00:21:27,600 --> 00:21:30,760 Speaker 1: rates at one or in the UK case, a half um, 390 00:21:31,040 --> 00:21:34,440 Speaker 1: it's pretty difficult to really do very much. So that's 391 00:21:34,480 --> 00:21:37,440 Speaker 1: the problem. The tool kit is relatively limited, and you're 392 00:21:37,480 --> 00:21:39,879 Speaker 1: sitting with these huge amounts of assets on your balance 393 00:21:39,960 --> 00:21:44,560 Speaker 1: sheet and a recession is due just in thirty seconds. Professor, 394 00:21:44,840 --> 00:21:48,480 Speaker 1: Does the US risk a British risk with one rate 395 00:21:48,560 --> 00:21:53,919 Speaker 1: increase December? Well, I think it's at the moment we 396 00:21:53,960 --> 00:21:56,359 Speaker 1: should wait and see what's going. I think that, I 397 00:21:56,400 --> 00:21:58,840 Speaker 1: mean that we'll see where there's another rate increase. But 398 00:21:59,160 --> 00:22:02,040 Speaker 1: my suspicion is that, I mean, the UK economy looks 399 00:22:02,119 --> 00:22:04,879 Speaker 1: much worse than the US one. The US appears to 400 00:22:04,920 --> 00:22:07,199 Speaker 1: have been able to withstand these rate rises, but I 401 00:22:07,200 --> 00:22:10,399 Speaker 1: think the UK is much weaker. Growth is much weaker 402 00:22:10,440 --> 00:22:13,280 Speaker 1: than in the US. We've seen three percent in the US. 403 00:22:13,400 --> 00:22:16,720 Speaker 1: In the UK, Okay, this has been fabious David. But 404 00:22:16,920 --> 00:22:18,440 Speaker 1: for honor to have you with us, of course, with 405 00:22:18,520 --> 00:22:21,440 Speaker 1: the service to the fellow reserve system and more importantly 406 00:22:21,480 --> 00:22:23,840 Speaker 1: the Bank of England as well. He is a Runner 407 00:22:23,880 --> 00:22:39,959 Speaker 1: professor of economics at Dartmouth College. Right now, John Bitcoin, Oh, 408 00:22:40,080 --> 00:22:43,440 Speaker 1: I mean? John Bilton joins us from JP Morgan. It says, 409 00:22:43,640 --> 00:22:46,680 Speaker 1: I'm sorry, David, my eyes were saving trouble. That says, 410 00:22:46,720 --> 00:22:50,880 Speaker 1: don't ask him about Mr Diamond or bitcoin as well. 411 00:22:50,960 --> 00:22:54,879 Speaker 1: That's from his public relations people. John Bilton joins us 412 00:22:54,880 --> 00:22:58,400 Speaker 1: from JP Morgansset Management in London. It's always a joy 413 00:22:58,440 --> 00:23:01,159 Speaker 1: to have you here. Is it chemistry? Major? We have 414 00:23:01,320 --> 00:23:03,879 Speaker 1: just it warms the heart to go like, what is 415 00:23:03,920 --> 00:23:08,560 Speaker 1: the product of water and pental ethnoid under acidic conditions? 416 00:23:08,760 --> 00:23:14,080 Speaker 1: How did chemistry prepare you for finance? Investment in economics? Well, 417 00:23:14,119 --> 00:23:17,200 Speaker 1: you know, it's um It's a quantitative subject. It's one 418 00:23:17,240 --> 00:23:19,960 Speaker 1: that requires a lot of detailed analysis. But frankly it's 419 00:23:20,000 --> 00:23:21,720 Speaker 1: one which I left behind when I was twenty two, 420 00:23:22,760 --> 00:23:26,600 Speaker 1: right which which with a view to moving into the 421 00:23:26,680 --> 00:23:29,560 Speaker 1: financial markets. And you know what, I don't really remember 422 00:23:29,640 --> 00:23:32,199 Speaker 1: much of that undergraduate degree beyond being taught how to 423 00:23:32,280 --> 00:23:35,960 Speaker 1: use statistics and analysis and meaningful the rigor state. I 424 00:23:36,000 --> 00:23:39,200 Speaker 1: was in the same boat with microbiology and biology. The 425 00:23:39,200 --> 00:23:41,520 Speaker 1: The answer, David grew before you pick this up is 426 00:23:41,640 --> 00:23:45,760 Speaker 1: a ethanoic acid and pentanyl b butt and al and water. 427 00:23:46,280 --> 00:23:52,440 Speaker 1: See ethnoic ascid comma two equivalents or pentanyl comma two equivalence. David, 428 00:23:52,480 --> 00:23:54,320 Speaker 1: you got an answer for that, Wait for the quiz 429 00:23:54,359 --> 00:23:57,280 Speaker 1: results to come into Gentle, I'm trying to get wikipedia 430 00:23:57,320 --> 00:24:01,679 Speaker 1: r its worry we ask you. I've got about what 431 00:24:01,680 --> 00:24:03,359 Speaker 1: we heard yesterday from the Federal Reserve. Of course, this 432 00:24:03,400 --> 00:24:06,479 Speaker 1: normalization prices getting underway. We have it well telegraphed from 433 00:24:06,480 --> 00:24:07,959 Speaker 1: the Fed. What that's going to to look like from 434 00:24:08,000 --> 00:24:10,719 Speaker 1: a market's perspective, How are you preparing for that? In 435 00:24:10,720 --> 00:24:12,679 Speaker 1: other words, it's been telegraphed, Well, what is it going 436 00:24:12,720 --> 00:24:14,040 Speaker 1: to mean? What's the effect going to be on the 437 00:24:14,080 --> 00:24:17,720 Speaker 1: markets in terms of the Federal reserves. So one of 438 00:24:17,720 --> 00:24:19,280 Speaker 1: the things that I think you've got to take a 439 00:24:19,320 --> 00:24:21,600 Speaker 1: step back on is recognized this as a long journey. 440 00:24:21,920 --> 00:24:24,320 Speaker 1: You know, the Federal Reserve want to normalize rates, not 441 00:24:24,359 --> 00:24:27,200 Speaker 1: because they've got some level that they have in mind 442 00:24:27,240 --> 00:24:29,760 Speaker 1: that's appropriate. Of course they have models for that, but 443 00:24:29,960 --> 00:24:33,520 Speaker 1: they want to remove what has been emergency stimulus that 444 00:24:33,600 --> 00:24:36,359 Speaker 1: has been there to bring the economy out of a 445 00:24:36,359 --> 00:24:40,320 Speaker 1: period of very sluggish growth and disinflationary risk. Now, of course, 446 00:24:40,680 --> 00:24:43,919 Speaker 1: the world is now growing in a synchronous fashion. Trade 447 00:24:43,960 --> 00:24:47,000 Speaker 1: data is picking up, employment data is demonstrating a labor 448 00:24:47,040 --> 00:24:50,199 Speaker 1: market which is pretty close to its sort of natural 449 00:24:50,560 --> 00:24:54,560 Speaker 1: full level in many places, the US, the UK, Japan, etcetera. 450 00:24:54,920 --> 00:24:58,040 Speaker 1: And so I think normalizing policy does two things. Number one, 451 00:24:58,320 --> 00:25:01,919 Speaker 1: it puts a focus back on that goal of price stability, 452 00:25:01,960 --> 00:25:04,760 Speaker 1: and number two, more importantly, it avoids the risk of 453 00:25:04,840 --> 00:25:08,000 Speaker 1: asset bubbles. And I think that that's where we are 454 00:25:08,080 --> 00:25:11,200 Speaker 1: seeing the FED home in on. They want stability, They 455 00:25:11,240 --> 00:25:14,600 Speaker 1: want this period of economic growth not only in the 456 00:25:14,640 --> 00:25:17,560 Speaker 1: US but around the globe to continue at a modest 457 00:25:17,600 --> 00:25:20,440 Speaker 1: and controllable pace. That's their endgame, that's their goal. Do 458 00:25:20,440 --> 00:25:22,640 Speaker 1: you see any indications of bubbles at this point when 459 00:25:22,640 --> 00:25:25,200 Speaker 1: you look out a price assets, Are there any signs 460 00:25:25,200 --> 00:25:26,600 Speaker 1: that give you piles or give you concerning to this 461 00:25:26,720 --> 00:25:29,800 Speaker 1: point when we look at the environment today, I mean, 462 00:25:29,920 --> 00:25:33,000 Speaker 1: we have to recognize we're late in the economic cycle. 463 00:25:33,560 --> 00:25:36,600 Speaker 1: This has been a long expansion the US. We see 464 00:25:36,640 --> 00:25:39,359 Speaker 1: a long term trend growth rate from our long term 465 00:25:39,440 --> 00:25:42,640 Speaker 1: capital market assumptions around one and three quarter percent. We're 466 00:25:42,640 --> 00:25:45,200 Speaker 1: clearly clubbing a little above that at the moment. That's 467 00:25:45,240 --> 00:25:48,280 Speaker 1: completely reasonable. But I think what we've got to ultimately 468 00:25:48,320 --> 00:25:51,760 Speaker 1: recognize is that it's unlikely the U s economy surprises 469 00:25:52,119 --> 00:25:54,280 Speaker 1: in terms of its level of growth. We can certainly 470 00:25:54,280 --> 00:25:57,760 Speaker 1: put surprise in its duration of growth, and so to 471 00:25:57,880 --> 00:26:01,160 Speaker 1: our mind at the moment, asset markets pricing for a 472 00:26:01,200 --> 00:26:04,160 Speaker 1: long and steady expansion, helped along by the Federal Reserve, 473 00:26:04,200 --> 00:26:07,200 Speaker 1: which I'm built in. So much of this is the 474 00:26:07,280 --> 00:26:12,400 Speaker 1: sausage making of intellectual output. First, Chasmin and Michael Faroli 475 00:26:12,440 --> 00:26:15,800 Speaker 1: do economics, and you've got to come over and synthesize 476 00:26:15,840 --> 00:26:20,760 Speaker 1: it and apply it to large money, institutional wealth management money, 477 00:26:20,760 --> 00:26:23,960 Speaker 1: and all the rest of it. How do you synthesize 478 00:26:24,240 --> 00:26:30,160 Speaker 1: one point four percent US potential GDP? Politically? You can't 479 00:26:30,200 --> 00:26:33,200 Speaker 1: do it. Actually, you can't do it. I mean, that's 480 00:26:33,200 --> 00:26:35,520 Speaker 1: a number none of us can get our hands around, 481 00:26:35,560 --> 00:26:37,919 Speaker 1: isn't it well, I think you've got to start with 482 00:26:37,920 --> 00:26:39,720 Speaker 1: your building blocks and you've got to recognize where the 483 00:26:39,800 --> 00:26:42,080 Speaker 1: risks are. We end up in our umbar. In mind, 484 00:26:42,160 --> 00:26:44,199 Speaker 1: this is from our long term capital market assumption, So 485 00:26:44,240 --> 00:26:46,320 Speaker 1: this is looking out tent to shoot in years one 486 00:26:46,320 --> 00:26:49,480 Speaker 1: and three quarter percentage points, and we synthesize that from 487 00:26:49,480 --> 00:26:51,879 Speaker 1: a labor component, the u S actually has a reasonable 488 00:26:51,960 --> 00:26:55,040 Speaker 1: labor force growth compared to other developed markets, and that 489 00:26:55,080 --> 00:26:57,440 Speaker 1: gives it a better outcome than the rest of the 490 00:26:57,480 --> 00:26:59,879 Speaker 1: developed markets, which grow on average around one and a 491 00:27:00,000 --> 00:27:02,680 Speaker 1: half percent in our models over the next tent of 492 00:27:02,760 --> 00:27:05,920 Speaker 1: fifteen years. But there's also a upside risk that can 493 00:27:05,960 --> 00:27:08,680 Speaker 1: come from productivity. But it's a risk. We've seen better 494 00:27:08,760 --> 00:27:11,199 Speaker 1: data coming out recently, but of course there's both a 495 00:27:11,240 --> 00:27:15,119 Speaker 1: structural and sick local element to productivity. So on our 496 00:27:15,160 --> 00:27:19,360 Speaker 1: base case one actually gets you a reasonable run rate 497 00:27:19,400 --> 00:27:21,240 Speaker 1: of growth, but there are upside risk because of what 498 00:27:21,400 --> 00:27:24,320 Speaker 1: is downside risk? Then what is your JP Morgan asset 499 00:27:24,400 --> 00:27:31,399 Speaker 1: management actual assumption obnomenal typeline in inflation adjusted return. For 500 00:27:31,560 --> 00:27:35,400 Speaker 1: some adult wanting to figure out retirement or institutional placement 501 00:27:35,440 --> 00:27:38,879 Speaker 1: of money, numbers are coming down. Single digit numbers are 502 00:27:39,359 --> 00:27:43,720 Speaker 1: where are absolutely please do so. We estimate in nominal 503 00:27:43,840 --> 00:27:49,359 Speaker 1: terms that a sixty forty global equity and aggregate bond portfolio, 504 00:27:49,440 --> 00:27:51,879 Speaker 1: so very classic balanced portfolio, is going to give you 505 00:27:52,040 --> 00:27:54,440 Speaker 1: around five and a quarter percent. Let's put that in context. 506 00:27:55,040 --> 00:27:57,639 Speaker 1: Let's put it in context. The last fifty years on average, 507 00:27:57,680 --> 00:28:00,800 Speaker 1: it's been seven point since the actual Christ it's been 508 00:28:00,800 --> 00:28:03,879 Speaker 1: eleven point two. The fact of the matter is, if 509 00:28:03,920 --> 00:28:07,439 Speaker 1: we look forward, there is a relatively late cycle market, 510 00:28:07,680 --> 00:28:12,280 Speaker 1: full valuations, reasonably wide margins. There is a cyclical drag 511 00:28:12,680 --> 00:28:14,720 Speaker 1: on long term retake because of where we are today. 512 00:28:14,800 --> 00:28:17,040 Speaker 1: What you just heard their folks in the last twenty 513 00:28:17,080 --> 00:28:20,600 Speaker 1: five seconds from Mr Bilton is a single most important 514 00:28:20,680 --> 00:28:23,840 Speaker 1: thing in October and November and December that you're gonna 515 00:28:23,840 --> 00:28:26,600 Speaker 1: hear on anything I have to do. Let's review that again. 516 00:28:26,640 --> 00:28:29,760 Speaker 1: It's so important. We had just almost eight percent run 517 00:28:29,840 --> 00:28:33,320 Speaker 1: ray to return. That's right. We had the blowout bubble 518 00:28:33,440 --> 00:28:35,880 Speaker 1: or whatever of what we've all lived, which is what's 519 00:28:35,880 --> 00:28:40,080 Speaker 1: the number again, eleven seven point eleven point two percent. 520 00:28:40,640 --> 00:28:43,720 Speaker 1: And because we're going to regress off the cyclical structure, 521 00:28:44,120 --> 00:28:47,480 Speaker 1: we're going to a five to six percent top line 522 00:28:47,520 --> 00:28:51,680 Speaker 1: return on a blended portfolio. But before we get to 523 00:28:52,000 --> 00:28:54,280 Speaker 1: do about this, let's look at the facts. Let's break 524 00:28:54,280 --> 00:28:56,240 Speaker 1: it down. One of the things that I think is 525 00:28:56,280 --> 00:28:58,760 Speaker 1: a positive out of the numbers today is that we're 526 00:28:58,800 --> 00:29:03,800 Speaker 1: seeing upside from productivity technologies for the first time since 527 00:29:03,840 --> 00:29:07,480 Speaker 1: the financial crisis, really beginning to see the slowing of 528 00:29:07,520 --> 00:29:11,320 Speaker 1: that decline. But more importantly, the equilibrium level of returns 529 00:29:11,560 --> 00:29:14,360 Speaker 1: we reckon on US equities is around about seven and 530 00:29:14,400 --> 00:29:17,640 Speaker 1: a half percent. So the expense of them and the 531 00:29:17,680 --> 00:29:20,680 Speaker 1: margin contribution today is taking around two d basis points 532 00:29:20,720 --> 00:29:23,760 Speaker 1: on average out of the returns that you'll get average 533 00:29:23,800 --> 00:29:26,360 Speaker 1: each year over the next tent of fifteen years. So 534 00:29:26,640 --> 00:29:29,120 Speaker 1: if you're prepared to be a little bit more active, 535 00:29:29,160 --> 00:29:32,720 Speaker 1: to find different sources of risk premia, to think about diversification, 536 00:29:33,040 --> 00:29:36,400 Speaker 1: there are means of making back that gap. So this 537 00:29:36,480 --> 00:29:38,440 Speaker 1: is not a message that you know what five and 538 00:29:38,440 --> 00:29:40,320 Speaker 1: a quarter percent, You've got to live with it, move on. 539 00:29:40,400 --> 00:29:42,400 Speaker 1: This is a message that you know what you can 540 00:29:42,440 --> 00:29:43,960 Speaker 1: do it. You've got to work a bit harder, you've 541 00:29:43,960 --> 00:29:46,440 Speaker 1: got to be a bit more inventive and active. But 542 00:29:46,600 --> 00:29:48,760 Speaker 1: there are games to be had. David didn't work. I'm 543 00:29:48,760 --> 00:29:52,560 Speaker 1: and depressed. Let me ask you Lastly, here get your 544 00:29:52,560 --> 00:29:55,640 Speaker 1: perspective being based in London and traveling a lot of 545 00:29:55,680 --> 00:29:57,480 Speaker 1: how much uncertainly there is surrounding a break that of 546 00:29:57,520 --> 00:29:59,200 Speaker 1: course be fore the news tourism, but in terms of 547 00:29:59,200 --> 00:30:02,800 Speaker 1: the uncertainty that effects that your positioning, is it getting worrise, 548 00:30:02,880 --> 00:30:05,400 Speaker 1: is it getting it all clearer? Your your sense of 549 00:30:05,400 --> 00:30:06,920 Speaker 1: your perspective on the uncertainty of break that and the 550 00:30:06,960 --> 00:30:10,160 Speaker 1: effect it's having on markets right now it's Look, it's uncertainty. 551 00:30:10,280 --> 00:30:14,200 Speaker 1: Markets don't like uncertainty, and we've got to you know, 552 00:30:14,680 --> 00:30:17,280 Speaker 1: this was sort of brought up in in Mark Arney's 553 00:30:17,320 --> 00:30:20,320 Speaker 1: discussion this morning. You know, he didn't talk that much 554 00:30:20,560 --> 00:30:23,160 Speaker 1: in fact about about the pound. You know, he talks 555 00:30:23,160 --> 00:30:25,080 Speaker 1: a bit about inflation, a bit about the past through 556 00:30:25,080 --> 00:30:27,640 Speaker 1: and the trade uncertainty from Brexit, the fact that it's 557 00:30:27,680 --> 00:30:31,000 Speaker 1: having an effect on business confidence, business investment, and until 558 00:30:31,080 --> 00:30:34,640 Speaker 1: we have a clearer picture that's likely to persist. Now, 559 00:30:35,040 --> 00:30:37,520 Speaker 1: whichever side of the fence one comes down on, the 560 00:30:37,560 --> 00:30:40,200 Speaker 1: fact of the matter is that this is a negotiation 561 00:30:40,280 --> 00:30:44,000 Speaker 1: between a block of twenty seven sovereign nations and one 562 00:30:44,320 --> 00:30:46,720 Speaker 1: sovereign nation on the other side, and that is you know, 563 00:30:46,760 --> 00:30:48,719 Speaker 1: it's a very difficult thing to do. The UK has 564 00:30:48,760 --> 00:30:51,640 Speaker 1: been in the European Union for forty three years. Unpicking 565 00:30:51,640 --> 00:30:56,040 Speaker 1: and remaking those ties is a difficult process, even if 566 00:30:56,040 --> 00:30:58,400 Speaker 1: we're dispassionate about the economics. And I don't think that 567 00:30:58,400 --> 00:31:01,840 Speaker 1: that uncertainty will go. I don't want to get you 568 00:31:01,840 --> 00:31:03,800 Speaker 1: in trouble with Mr Diamond, but do you have bitcoin 569 00:31:03,880 --> 00:31:09,840 Speaker 1: in your portfolios? Very good morning, Mr Diamond, Thank you 570 00:31:09,880 --> 00:31:13,120 Speaker 1: for listening. John Bilton with his JP Morgan Asset Management 571 00:31:13,320 --> 00:31:18,160 Speaker 1: head of Bitcoin Strategy kidding a multi asset strategy as well, 572 00:31:18,280 --> 00:31:21,080 Speaker 1: of course the uproar over Mr Diamond's comments on bitcoining. 573 00:31:21,400 --> 00:31:24,880 Speaker 1: I get a lot of mail out of David following mail. 574 00:31:25,440 --> 00:31:28,080 Speaker 1: You know there's some real you know, you know they're 575 00:31:28,120 --> 00:31:30,880 Speaker 1: not given the love to Mr Diamond over the bitcoin 576 00:31:31,440 --> 00:31:35,440 Speaker 1: troops take issue as b bitcoing continues to do a 577 00:31:35,520 --> 00:31:51,320 Speaker 1: moon show. We digress on an exceptional news flow day 578 00:31:51,400 --> 00:31:54,560 Speaker 1: and no doubt to touch upon our present history making 579 00:31:55,320 --> 00:31:57,880 Speaker 1: in the United States. Was someone that I've interviewed over 580 00:31:57,920 --> 00:32:03,240 Speaker 1: the years who defines history. Uh. He is the historian 581 00:32:03,440 --> 00:32:07,200 Speaker 1: in America that the other historians read. He's studied under 582 00:32:07,280 --> 00:32:10,960 Speaker 1: Mr Balan at Harvard A few years ago. His work 583 00:32:11,000 --> 00:32:16,120 Speaker 1: on Benjamin Franklin is truly definitive in his David, his 584 00:32:16,120 --> 00:32:21,400 Speaker 1: his adjustment of our attitudes about the American Revolution has 585 00:32:21,440 --> 00:32:25,120 Speaker 1: been absolutely profound. I believe he is a professor emeritus 586 00:32:25,200 --> 00:32:27,960 Speaker 1: David at Brown University is indeed, and I won't tick 587 00:32:27,960 --> 00:32:29,360 Speaker 1: through all the prizes he's one, but I will say 588 00:32:29,360 --> 00:32:31,640 Speaker 1: they include the Pulitzer Prize and the Bankroft Prize as well. 589 00:32:31,680 --> 00:32:34,320 Speaker 1: Gordon Wood joins us now. He's the Alpha Way University Professor, 590 00:32:34,360 --> 00:32:37,120 Speaker 1: Professor of History Emeritus at Brown University, author of the 591 00:32:37,120 --> 00:32:39,920 Speaker 1: new book Friends Divided, John Adams and Thomas Jefferson, and 592 00:32:39,960 --> 00:32:43,480 Speaker 1: a pleasure to speak with him here on this Thursday morning. Professor, 593 00:32:43,480 --> 00:32:46,000 Speaker 1: would let me start by asking you about John Adams. 594 00:32:46,040 --> 00:32:48,400 Speaker 1: You focus on these two presidents in particular. We know 595 00:32:48,480 --> 00:32:49,840 Speaker 1: an awful lot, as you point out in the book 596 00:32:49,840 --> 00:32:52,400 Speaker 1: about Thomas Jefferson. He's the subject of a lot of conversation, 597 00:32:52,440 --> 00:32:55,120 Speaker 1: a lot of interest here nationally in the year two 598 00:32:55,120 --> 00:32:57,360 Speaker 1: thousand and seventeen. Why is it that we care so 599 00:32:57,480 --> 00:32:59,280 Speaker 1: less at least when you look at quantity of books 600 00:32:59,280 --> 00:33:01,800 Speaker 1: written about John Adams? Why do we care so much 601 00:33:01,880 --> 00:33:05,360 Speaker 1: less about him than Mr Jefferson. Well, he he was 602 00:33:05,480 --> 00:33:09,120 Speaker 1: much too much a realist, and he said things that 603 00:33:09,200 --> 00:33:13,600 Speaker 1: we just find unacceptable. He didn't believe all men are 604 00:33:13,640 --> 00:33:17,880 Speaker 1: created equal. For example, he didn't believe that America was exceptional. 605 00:33:18,000 --> 00:33:22,200 Speaker 1: We were just as sinful, just as corrupt as other nations. 606 00:33:22,200 --> 00:33:26,520 Speaker 1: So he takes on our our myths, dreams of what 607 00:33:26,560 --> 00:33:29,080 Speaker 1: we ought to be or what we think we are, 608 00:33:29,120 --> 00:33:31,920 Speaker 1: and for that reason he can't really be in that 609 00:33:32,640 --> 00:33:35,000 Speaker 1: in that same league as as Jefferson. You look at 610 00:33:35,080 --> 00:33:37,040 Speaker 1: these two in binary How did they get to know 611 00:33:37,120 --> 00:33:39,600 Speaker 1: each other? How different were they when they were first 612 00:33:39,720 --> 00:33:42,680 Speaker 1: united here working on this project of America. Well, they 613 00:33:42,680 --> 00:33:45,800 Speaker 1: met in the Continental Congress, in the second Continental Congress, 614 00:33:46,000 --> 00:33:49,400 Speaker 1: Jefferson missed the first one, uh. And they were both radicals, 615 00:33:49,480 --> 00:33:52,160 Speaker 1: that is, they both were eager for independence, and so 616 00:33:52,240 --> 00:33:56,520 Speaker 1: that brought them together. And they collaborated nicely, uh, with 617 00:33:56,520 --> 00:34:00,200 Speaker 1: with Adams doing most of the speaking and Jefferson, Um, 618 00:34:00,600 --> 00:34:02,760 Speaker 1: he was good in in small groups, but he was 619 00:34:02,800 --> 00:34:05,920 Speaker 1: not in orator. But they bonded over that over the 620 00:34:06,360 --> 00:34:10,359 Speaker 1: over the revolution that certainly made made them gave him 621 00:34:10,440 --> 00:34:13,840 Speaker 1: a common cause. How different was the background of experience 622 00:34:13,880 --> 00:34:16,880 Speaker 1: that Mr Adams coming from Braintree in Massachusetts, Thomas Jefferson, 623 00:34:16,920 --> 00:34:19,840 Speaker 1: coming of course from the Commonwealth of Virginia. When they 624 00:34:19,920 --> 00:34:21,719 Speaker 1: met at that Continental Congress, how much did they have 625 00:34:21,760 --> 00:34:23,960 Speaker 1: in common? How common was the experience and they had? 626 00:34:24,040 --> 00:34:26,839 Speaker 1: They had very little in common except for that uh 627 00:34:27,320 --> 00:34:31,040 Speaker 1: that that belief in independence. They were came from very 628 00:34:31,040 --> 00:34:37,200 Speaker 1: different backgrounds. Jefferson was a rich, slaveholding aristocrat who took 629 00:34:37,239 --> 00:34:41,839 Speaker 1: his status for granted. Uh Adams, by contrast, came from 630 00:34:41,840 --> 00:34:46,400 Speaker 1: a middling background and his position was due almost solely 631 00:34:46,440 --> 00:34:49,480 Speaker 1: to merit. He really worked hard, and as an attorney, 632 00:34:50,200 --> 00:34:54,680 Speaker 1: Jefferson really inherited wealth from his father, and then more 633 00:34:54,760 --> 00:34:57,239 Speaker 1: slave more land from his father in law. So they 634 00:34:57,280 --> 00:35:00,719 Speaker 1: came from very different backgrounds. If you just joining us, 635 00:35:00,800 --> 00:35:03,880 Speaker 1: Gordon would with us the historian of Brown, which for 636 00:35:03,920 --> 00:35:07,240 Speaker 1: those in the racket means no other introduction is necessary. 637 00:35:07,600 --> 00:35:09,960 Speaker 1: The other day, run Cher now darkened the door with 638 00:35:10,080 --> 00:35:12,719 Speaker 1: his effort on Grant. And of course many would say 639 00:35:12,719 --> 00:35:16,880 Speaker 1: that Mr Churnow changed American history with his Alexander Hamilton's 640 00:35:16,920 --> 00:35:19,840 Speaker 1: He says, whenever I read would the dean of eighteenth 641 00:35:19,880 --> 00:35:23,759 Speaker 1: century American historians, I feel I am I love this 642 00:35:24,040 --> 00:35:28,359 Speaker 1: absorbing wisdom at the feet of the master. What did 643 00:35:28,400 --> 00:35:32,640 Speaker 1: you think professor would in the John Adams TV treatment 644 00:35:33,520 --> 00:35:36,360 Speaker 1: when the set when the eighteenth century slammed into me, 645 00:35:36,640 --> 00:35:40,280 Speaker 1: and that was the smallpox vaccination I think Laura Lenny 646 00:35:40,320 --> 00:35:43,520 Speaker 1: was about. I can't remember, but it's the atoms in 647 00:35:43,719 --> 00:35:47,560 Speaker 1: their way out front with smallpox vaccination, and it just 648 00:35:47,719 --> 00:35:51,920 Speaker 1: hit me over the head. The eighteenth century. We delude 649 00:35:51,920 --> 00:35:56,799 Speaker 1: ourselves to thinking we're like them, don't We're not exactly. 650 00:35:56,880 --> 00:36:00,680 Speaker 1: I think we have to take ld Hartley. He was 651 00:36:00,719 --> 00:36:05,040 Speaker 1: a British novelist who said in an opening of his book, 652 00:36:05,360 --> 00:36:09,680 Speaker 1: uh said, the past is a foreign country. They do 653 00:36:09,800 --> 00:36:12,760 Speaker 1: things differently there. That should be the maxim of every 654 00:36:13,640 --> 00:36:16,520 Speaker 1: historian or every student of history, because you have to 655 00:36:16,520 --> 00:36:19,279 Speaker 1: start with the presumption that they're not just like us. 656 00:36:19,600 --> 00:36:22,760 Speaker 1: Otherwise you end up getting very confused about their behavior. 657 00:36:23,200 --> 00:36:26,280 Speaker 1: How much have you detected a change in appetite for history? 658 00:36:26,320 --> 00:36:27,960 Speaker 1: Tom brings up Hamilton. Of course, that we've seen the 659 00:36:28,000 --> 00:36:31,080 Speaker 1: excitement surrounding the Broadway musical and all of that. When 660 00:36:31,120 --> 00:36:33,480 Speaker 1: you talk to students in Providence today, when you when 661 00:36:33,520 --> 00:36:35,960 Speaker 1: you travel the country, when you're selling books like like 662 00:36:36,040 --> 00:36:38,239 Speaker 1: the one that we mentioned, your friends divided. Is there 663 00:36:38,280 --> 00:36:42,440 Speaker 1: a greater appetite for learning about American history? There's an 664 00:36:42,480 --> 00:36:46,279 Speaker 1: age difference. There's certainly people say over fifty seem much 665 00:36:46,280 --> 00:36:50,359 Speaker 1: more interested in history, including people who retired, who who 666 00:36:50,400 --> 00:36:54,400 Speaker 1: were attorneys or physicians, and they suddenly find an interest 667 00:36:54,440 --> 00:36:56,759 Speaker 1: in history that they didn't have or I didn't have 668 00:36:56,840 --> 00:36:59,799 Speaker 1: time for earlier. I'm not sure that young people are 669 00:37:00,080 --> 00:37:03,160 Speaker 1: much interested in history as they used to be, but 670 00:37:03,280 --> 00:37:08,000 Speaker 1: maybe that's just a fact of of you. The past 671 00:37:08,120 --> 00:37:11,200 Speaker 1: isn't very interesting to young people, but it certainly does 672 00:37:11,320 --> 00:37:16,240 Speaker 1: become interesting for people after after sir, that's because you're retired. 673 00:37:16,280 --> 00:37:22,360 Speaker 1: On cheerfault. There is at Mount Verdon, professor, would a 674 00:37:23,640 --> 00:37:27,400 Speaker 1: sculpture a bust of George Washington? Who done that? I 675 00:37:27,520 --> 00:37:31,200 Speaker 1: find absolutely remarkable. It's like he's just staring at and 676 00:37:31,239 --> 00:37:34,759 Speaker 1: everybody says it's the only thing that really looks like 677 00:37:34,840 --> 00:37:41,760 Speaker 1: George Washington. What did President Washington think of his friends? Divided? Well. 678 00:37:41,800 --> 00:37:47,040 Speaker 1: I think he he admired Jefferson up to the point 679 00:37:47,120 --> 00:37:51,440 Speaker 1: where Jefferson was his Secretary of State, and he found 680 00:37:51,560 --> 00:37:56,040 Speaker 1: him disingenuous and not as the fourth right as he 681 00:37:56,080 --> 00:38:00,000 Speaker 1: would have thought. Uh. And there is a break between 682 00:38:00,120 --> 00:38:04,680 Speaker 1: Jefferson and Washington. Washington's attitude towards Adams, I think was 683 00:38:04,760 --> 00:38:07,120 Speaker 1: a little bit cuizzical. He couldn't quite figure him out. 684 00:38:07,480 --> 00:38:11,920 Speaker 1: Adams was his vice president, but he never really was 685 00:38:11,960 --> 00:38:15,120 Speaker 1: close to him. He didn't consultant, he didn't get involved 686 00:38:15,120 --> 00:38:17,759 Speaker 1: in it. He must have regarded Adams as a little 687 00:38:17,800 --> 00:38:20,720 Speaker 1: bit of an odd, odd duck. I would suggest David 688 00:38:20,719 --> 00:38:23,040 Speaker 1: Gurr that we need to drag Gordon Wood back for 689 00:38:23,080 --> 00:38:26,840 Speaker 1: another segment to possibly speak on his next book, A 690 00:38:26,960 --> 00:38:30,680 Speaker 1: Nation Divided, Uh talking about the United States of America 691 00:38:30,719 --> 00:38:34,000 Speaker 1: at this time Gordon wood with us a Brown University. 692 00:38:34,080 --> 00:38:37,799 Speaker 1: I can't say enough about the extent of the scholarship 693 00:38:37,880 --> 00:38:42,120 Speaker 1: run sure now Joseph Ellis Um, John Eacham, and Colin 694 00:38:42,160 --> 00:38:45,600 Speaker 1: Woodward do justice on the back of Friends Divided. But 695 00:38:45,960 --> 00:38:50,800 Speaker 1: all you need to know is absolutely definitive on our myths, 696 00:38:51,040 --> 00:38:54,400 Speaker 1: in our misperceptions of another time. We continue with Gordon 697 00:38:54,480 --> 00:38:57,800 Speaker 1: would Uh. As I've said before, the historians, a historian 698 00:38:58,280 --> 00:39:02,719 Speaker 1: just expert on our restructuring in our minds of the 699 00:39:02,840 --> 00:39:07,279 Speaker 1: colonies in the period of the revolution. We celebrate Friends Divided, 700 00:39:07,840 --> 00:39:11,120 Speaker 1: John Adams and Thomas Jefferson, which with anyone with an 701 00:39:11,120 --> 00:39:14,279 Speaker 1: affection for our foundering fathers goes to the top of 702 00:39:14,280 --> 00:39:18,280 Speaker 1: the page. Um, you wonderfully have professor would in here 703 00:39:18,880 --> 00:39:22,880 Speaker 1: a beautiful moment on Thomas Payne, and I bring it 704 00:39:22,960 --> 00:39:25,719 Speaker 1: to our modern politics as we look at the Age 705 00:39:25,719 --> 00:39:30,040 Speaker 1: of Reason of two thousand and seventeen. Is Adam said, 706 00:39:30,760 --> 00:39:35,120 Speaker 1: pain such a mongrel between pig and puppy. That's nice language. 707 00:39:35,360 --> 00:39:37,920 Speaker 1: And then you talk about Adam saying the po I 708 00:39:37,960 --> 00:39:40,400 Speaker 1: love this, David. This is the word you used about 709 00:39:40,440 --> 00:39:47,040 Speaker 1: me yesterday. The poltroonery of mankind? What does yes, what 710 00:39:47,160 --> 00:39:52,239 Speaker 1: does Gordon would think of the Poltroonery of two thousand seventeen, 711 00:39:53,040 --> 00:39:58,000 Speaker 1: where I think that Adams would certainly say I expected it. 712 00:39:58,400 --> 00:40:00,239 Speaker 1: This is what he You know, he thought of our 713 00:40:00,280 --> 00:40:03,839 Speaker 1: elections would become so partisan, so corrupt, that we would 714 00:40:03,920 --> 00:40:07,319 Speaker 1: have to eventually have a hereditary president. And the hereditary 715 00:40:07,600 --> 00:40:10,560 Speaker 1: said it, we have to go to English route because 716 00:40:10,600 --> 00:40:14,280 Speaker 1: we certainly couldn't continue along this night. So he would 717 00:40:14,360 --> 00:40:17,560 Speaker 1: he would be uh, he would not be surprised by 718 00:40:17,600 --> 00:40:20,000 Speaker 1: what has happened to our politics. He would have said, 719 00:40:20,040 --> 00:40:22,480 Speaker 1: I told you so. But you know one thing that 720 00:40:22,520 --> 00:40:24,600 Speaker 1: these two guys had in common was their hatred of 721 00:40:24,640 --> 00:40:28,759 Speaker 1: Alexander Hamilton's uh, which is I think probably more of 722 00:40:28,800 --> 00:40:32,200 Speaker 1: a bonding that they had than their support for the revolution. 723 00:40:32,680 --> 00:40:36,200 Speaker 1: They really both of them hated Hamilton's and that that 724 00:40:36,320 --> 00:40:39,760 Speaker 1: gave them something in common. Take us to the presidential 725 00:40:39,760 --> 00:40:42,680 Speaker 1: election of eighteen hundred. What that means for for their 726 00:40:42,680 --> 00:40:45,400 Speaker 1: friendships and how was it that one Benjamin Rush was 727 00:40:45,440 --> 00:40:48,480 Speaker 1: able to bring these two back together after after Jefferson 728 00:40:48,480 --> 00:40:51,640 Speaker 1: defeated Adams. Well, that was one of the most scurrilous 729 00:40:51,800 --> 00:40:54,879 Speaker 1: elections in American history, certainly much worse than anything we've 730 00:40:54,920 --> 00:40:59,080 Speaker 1: experienced in recent times. And they were they themselves did 731 00:40:59,080 --> 00:41:02,600 Speaker 1: not campaign uh in those days. They stay simply stated 732 00:41:02,680 --> 00:41:05,879 Speaker 1: at their homes in Monticello and then Quincy, and and 733 00:41:05,960 --> 00:41:10,840 Speaker 1: their followers, however, attacked each each of the candidates with 734 00:41:10,880 --> 00:41:16,080 Speaker 1: the viciousness that we would find appalling even today. Uh. 735 00:41:16,360 --> 00:41:20,120 Speaker 1: And Adams was humiliated by the defeat. He just expected 736 00:41:20,160 --> 00:41:23,920 Speaker 1: to be the continued to be elected the way Washington 737 00:41:24,000 --> 00:41:27,160 Speaker 1: had to two terms, and so he refused to attend 738 00:41:28,040 --> 00:41:33,319 Speaker 1: Jefferson's inauguration. He's the only president who did that. That is, 739 00:41:33,560 --> 00:41:36,520 Speaker 1: he left on an early four o'clock four a m. Stage, 740 00:41:36,880 --> 00:41:40,719 Speaker 1: so he could miss the Jefferson's inauguration. And he's the 741 00:41:40,719 --> 00:41:43,600 Speaker 1: only president as far as I know, who's ever done 742 00:41:43,600 --> 00:41:47,560 Speaker 1: that and not attended the inauguration of his successor. Now, 743 00:41:47,600 --> 00:41:49,879 Speaker 1: it was very difficult for for for them to get 744 00:41:49,920 --> 00:41:53,400 Speaker 1: back together, but Rush worked at it, and Adams's passions 745 00:41:53,440 --> 00:41:58,200 Speaker 1: had subsided by we're talking twelve years later, eighteen twelve. Uh, 746 00:41:58,239 --> 00:42:01,680 Speaker 1: And and Rush worked at it for months to bring 747 00:42:01,719 --> 00:42:07,440 Speaker 1: the two men back together. And Uh, finally there the remembrance, 748 00:42:07,480 --> 00:42:11,080 Speaker 1: the memories they had of their closeness in seventeen seventy 749 00:42:11,120 --> 00:42:13,840 Speaker 1: six and then again in the seventeen eighties, as ministers 750 00:42:13,840 --> 00:42:17,560 Speaker 1: abrought that, they recollected that. And they were old men 751 00:42:17,920 --> 00:42:21,880 Speaker 1: at both were tired and andy, and they came back together. 752 00:42:21,960 --> 00:42:25,239 Speaker 1: And over the next fourteen years they exchanged exchanged a 753 00:42:25,440 --> 00:42:29,040 Speaker 1: hundred fifty eight letters, with Adams writing three times as 754 00:42:29,040 --> 00:42:34,000 Speaker 1: many as as Jefferson, do you have wisdom on impeachment? 755 00:42:34,160 --> 00:42:38,440 Speaker 1: We had a wonderful conversation with cass Sunstein, who folks, 756 00:42:38,480 --> 00:42:42,799 Speaker 1: has out a wonderful small book on the impeachment, not 757 00:42:43,239 --> 00:42:45,920 Speaker 1: of what we think of in the modern day, but 758 00:42:46,000 --> 00:42:49,640 Speaker 1: the his historical path from the time of Gordon Wood. 759 00:42:49,960 --> 00:42:54,680 Speaker 1: How did they do impeachment within the reach and study 760 00:42:54,719 --> 00:42:58,600 Speaker 1: of your work, professor would well? Actually Adams Uh, in 761 00:42:58,719 --> 00:43:03,480 Speaker 1: seventeen seventy four, Uh, the people in Massachusetts were very 762 00:43:03,560 --> 00:43:07,040 Speaker 1: upset with the judges and with the coercive acts that 763 00:43:07,080 --> 00:43:10,799 Speaker 1: have been passed by parliament. And and so he's the 764 00:43:10,840 --> 00:43:14,800 Speaker 1: one who who investigates impeachment, comes up with the idea 765 00:43:14,840 --> 00:43:17,920 Speaker 1: of impeaching these judges. And no one in the colony 766 00:43:17,960 --> 00:43:20,360 Speaker 1: had heard of the idea of teachment. It was something 767 00:43:20,360 --> 00:43:25,520 Speaker 1: that was buried in the English past. Uh. And they 768 00:43:25,719 --> 00:43:29,319 Speaker 1: implement that impeachment in seventeen seventy four, and it gets 769 00:43:29,360 --> 00:43:33,520 Speaker 1: written into as you know, into the constitution. Uh. It's 770 00:43:33,520 --> 00:43:38,880 Speaker 1: a political, quasi political, essentially political means of removing a 771 00:43:39,000 --> 00:43:45,320 Speaker 1: high officer. And Uh, as you know, to to presidents 772 00:43:45,320 --> 00:43:48,799 Speaker 1: have been impeached, that is accused, but no president has 773 00:43:48,880 --> 00:43:52,640 Speaker 1: been convicted. It's very difficult. You need two thirds of 774 00:43:52,640 --> 00:43:55,480 Speaker 1: the Senate and that's not easy to get. Reading your book, 775 00:43:55,480 --> 00:43:57,680 Speaker 1: I look for indications that we could have the kind 776 00:43:57,719 --> 00:44:00,600 Speaker 1: of comedy or friendship among political rivals that we had 777 00:44:00,760 --> 00:44:02,920 Speaker 1: back then. Is it your sense that that is, if 778 00:44:02,920 --> 00:44:05,440 Speaker 1: not impossible more difficult today as we approached the two 779 00:44:06,480 --> 00:44:09,000 Speaker 1: fifth anniversary the founding of this country. That perhaps what 780 00:44:09,120 --> 00:44:12,200 Speaker 1: united Adams and Jefferson was the fact that this was 781 00:44:12,200 --> 00:44:14,360 Speaker 1: a nascent nation at that point, that they were invested 782 00:44:14,360 --> 00:44:16,600 Speaker 1: in what America was going to be. Is it harder 783 00:44:16,600 --> 00:44:18,560 Speaker 1: to have that kind of bipartisan friendship here in the 784 00:44:18,640 --> 00:44:21,160 Speaker 1: year two thousand? See right now we're living through it 785 00:44:21,719 --> 00:44:26,839 Speaker 1: a very extreme partisan period, and it's difficult because of 786 00:44:26,880 --> 00:44:30,880 Speaker 1: the electoral system, UH, First past the Post. We we 787 00:44:31,000 --> 00:44:33,560 Speaker 1: really need more than two parties, but we can't really 788 00:44:33,880 --> 00:44:37,839 Speaker 1: because we such a big diverse country, two parties can't 789 00:44:37,880 --> 00:44:41,040 Speaker 1: really embody all of the different interests. It would be 790 00:44:41,120 --> 00:44:43,279 Speaker 1: much better if we had a multi party system where 791 00:44:43,320 --> 00:44:47,520 Speaker 1: we could have coalitions as the Europeans do, and you 792 00:44:47,560 --> 00:44:50,840 Speaker 1: work out compromises that way. It's very, very difficult for 793 00:44:50,960 --> 00:44:53,520 Speaker 1: us to go together. You finish your book where James 794 00:44:53,600 --> 00:44:56,520 Speaker 1: McGregor Burns did so well in Vineyard of Liberty, where 795 00:44:56,520 --> 00:45:00,160 Speaker 1: they're passing on in July fourth explaining the atmosphere or 796 00:45:00,520 --> 00:45:02,800 Speaker 1: on that summer day, and I believe it was eighteen 797 00:45:03,320 --> 00:45:07,560 Speaker 1: eighteen twenty six, on a July four when Adams and Jefferson, 798 00:45:08,000 --> 00:45:12,600 Speaker 1: UH died. What was that almost mythology of that single 799 00:45:12,719 --> 00:45:16,200 Speaker 1: historic day. Of course, we're very ill and knew they 800 00:45:16,200 --> 00:45:18,920 Speaker 1: were dying, and of course there was a certain amount 801 00:45:19,400 --> 00:45:23,520 Speaker 1: of managing. Jefferson has asked his doctor, is it the 802 00:45:23,600 --> 00:45:27,160 Speaker 1: fourth yet? And the doctor says no, it's still July three, 803 00:45:27,239 --> 00:45:31,160 Speaker 1: And so Jefferson hangs on because he knows the significance 804 00:45:31,200 --> 00:45:34,400 Speaker 1: of this. This was the Jewbilee, the fiftie, the fiftieth 805 00:45:34,400 --> 00:45:38,560 Speaker 1: anniversary of the Declaration of Independence. So uh. And of 806 00:45:38,600 --> 00:45:41,359 Speaker 1: course they didn't know the other was what the health 807 00:45:41,400 --> 00:45:44,640 Speaker 1: of the other was. Adams, when he he's near death, 808 00:45:44,840 --> 00:45:48,000 Speaker 1: he one of his last words, presumably we we've been 809 00:45:48,040 --> 00:45:51,719 Speaker 1: told this that he says, well, Jefferson still survives. Well. 810 00:45:51,719 --> 00:45:55,960 Speaker 1: Actor Jefferson had died five hours earlier. But but Adams 811 00:45:56,320 --> 00:45:59,399 Speaker 1: in some larger sense, in a figuredip sense, of course, 812 00:45:59,480 --> 00:46:03,160 Speaker 1: Jefferson get sube in a way that Adams have thought. 813 00:46:03,760 --> 00:46:06,879 Speaker 1: Jefferson is celebrated in a way that Adams has never 814 00:46:06,920 --> 00:46:09,640 Speaker 1: been celebrated. Professor, thank you so much. We hope your 815 00:46:09,719 --> 00:46:13,799 Speaker 1: next book is on two thousand seventeen and modern politics. 816 00:46:13,840 --> 00:46:17,920 Speaker 1: Gordon would of Brown University. The new book is Friends Divided. 817 00:46:26,520 --> 00:46:30,680 Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast, Subscribe and 818 00:46:30,719 --> 00:46:36,120 Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast 819 00:46:36,160 --> 00:46:39,680 Speaker 1: platform you prefer. I'm on Twitter at Tom Keene. David 820 00:46:39,760 --> 00:46:43,880 Speaker 1: Gura is at David Gura. Before the podcast, you can 821 00:46:43,960 --> 00:46:47,040 Speaker 1: always catch us worldwide. I'm Bloomberg Radio