WEBVTT - Surveillance: Easing Policy Is Not Free, Fed's George Says 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Ley. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.640 Bloomberg dot Com, and of course on the Bloomberg Your 0:00:27.680 --> 0:00:29.600 main the event of the week, really, Chairman pab will 0:00:29.600 --> 0:00:31.720 be speaking in Jackson Hole. Ready please to say that 0:00:31.760 --> 0:00:34.159 here in New York, right here, right now. Dana Peterson 0:00:34.240 --> 0:00:37.920 joins US Cities Global Economists. Good morning to Dana, Good morning, 0:00:37.920 --> 0:00:39.839 how are you. Let's talk about what you've seen in 0:00:39.840 --> 0:00:41.919 the FED minutes and what you expect from Chairman pal 0:00:42.040 --> 0:00:44.240 on Friday. Just walk us through it. Sure, I mean 0:00:44.360 --> 0:00:46.440 the FED minutes are a little bit dated, but I 0:00:46.440 --> 0:00:49.480 think what's important is that the Fed was again very 0:00:49.479 --> 0:00:53.040 clear about what the reasons from why they cut interest rates. 0:00:53.240 --> 0:00:58.000 Three things. Number one, inflation persistently missing there to present 0:00:58.080 --> 0:01:01.280 target and concerns about making sure that they achieve that 0:01:01.320 --> 0:01:04.759 target over the next two years. Number two, a lot 0:01:04.800 --> 0:01:08.920 of concern about the global economy um reflected in financial markets. 0:01:09.440 --> 0:01:13.840 And number three uncertainty. Uncertainty brought about by the trade 0:01:13.840 --> 0:01:16.559 wars between the US and the rest of the world. 0:01:17.000 --> 0:01:19.360 And so with those three things, the FED said, yes, 0:01:19.440 --> 0:01:23.360 we're implementing this insurance cut, and this is a mid 0:01:23.400 --> 0:01:27.160 cycle adjustment. Um, what is the FED looking at? I 0:01:27.280 --> 0:01:29.880 see six things. On the one hand, the Fed's looking 0:01:29.920 --> 0:01:34.000 at the real economy, growth, inflation, and the labor market. 0:01:34.319 --> 0:01:37.000 On the other hand, the FED is looking at financial conditions, 0:01:37.360 --> 0:01:41.280 the external environment, and the generalized degree of uncertainty. And 0:01:41.319 --> 0:01:43.559 so with those things, at least three of the six 0:01:43.920 --> 0:01:47.600 are signaling red signals right now, right, I love the 0:01:47.640 --> 0:01:49.920 idea of of six things. It's sort of like throw 0:01:49.920 --> 0:01:51.840 a dart, which one is going to actually be the 0:01:51.920 --> 0:01:54.920 most important to look at it any given moment. So, DNA, 0:01:54.920 --> 0:01:56.280 I want you to weigh in on the on the 0:01:56.320 --> 0:01:58.920 sort of hypothetical that John and I were talking about. 0:01:58.960 --> 0:02:02.480 Let's say the FED cuts rates by seventy five basis 0:02:02.480 --> 0:02:05.520 points in September, totally surprises everybody. I'm not saying this 0:02:05.600 --> 0:02:07.840 is likely possible whatever, They're not going to do this, 0:02:07.880 --> 0:02:10.960 but let's just say they do. Will that steep in 0:02:11.000 --> 0:02:14.720 the yield curve? Will that prompt a further rally in stocks, 0:02:15.000 --> 0:02:19.519 or will that send shock and fear through markets? Well, 0:02:19.560 --> 0:02:21.799 I'm gonna be the two handed economists a little bit here. 0:02:22.800 --> 0:02:28.160 I wouldn't expect well, first of all, I mean, first 0:02:28.160 --> 0:02:30.920 of all, we probably would be among those analysts lined 0:02:31.000 --> 0:02:33.280 up outside of your window saying, hey, the FED just 0:02:33.600 --> 0:02:38.520 wasted you know, a lot of precious UM monetary policy space. UM. 0:02:38.520 --> 0:02:41.239 But the thing is that you have these these these 0:02:41.280 --> 0:02:44.919 two different uh things that are weighing on the yield curve. 0:02:44.960 --> 0:02:47.919 At the short end, yes, markets are expecting the FED 0:02:48.000 --> 0:02:51.600 are believing that the FED should go seventy basis points. 0:02:52.040 --> 0:02:54.280 At the other end of the curve, you have a 0:02:54.320 --> 0:02:58.160 lot of pressure because their concerns about the equity market. Um, 0:02:58.160 --> 0:03:00.400 we're looking at earnings for the I can have of 0:03:00.440 --> 0:03:03.639 this year. They're going to be downgraded considerably, And so 0:03:03.760 --> 0:03:06.520 you have this flight to quality. That's great the US. 0:03:06.560 --> 0:03:09.640 The scene is quality. UM. But with all those things, 0:03:09.639 --> 0:03:13.960 the FED kit possibly really affect everything. UM. The FED 0:03:14.000 --> 0:03:16.280 has the most control over the shorter end of the curve. 0:03:16.720 --> 0:03:20.000 And certainly if the FED does implement all of this, 0:03:20.320 --> 0:03:22.840 you still have them trade wars and everyone's thinking that 0:03:22.840 --> 0:03:27.320 the FED can offset the negative effects of policies in Washington. 0:03:28.200 --> 0:03:29.800 Just to build on Lisa's question. I think it's an 0:03:29.800 --> 0:03:31.919 important one. Typically, what you would expect is the curve 0:03:32.000 --> 0:03:35.240 to bull steep in the front end yields to drop aggressively, 0:03:35.520 --> 0:03:38.240 and the longer end maybe even pick up. What we've 0:03:38.280 --> 0:03:41.600 seen though in places like Europe, in Japan, and increasingly 0:03:41.640 --> 0:03:43.440 maybe even here in the United States, is when we 0:03:43.480 --> 0:03:46.600 start to think about easing, where the short rate goes, 0:03:46.880 --> 0:03:49.480 that just bleeds across the curve and the whole curve 0:03:49.880 --> 0:03:52.880 just becomes a whole lot shallower. Do you see any 0:03:52.920 --> 0:03:58.560 reason to believe why cutting aggressively will actually boost growth expectations, 0:03:58.680 --> 0:04:02.080 boost inflation expect titians to the extent that people won't 0:04:02.120 --> 0:04:04.440 just take that view on short rates and say, you 0:04:04.480 --> 0:04:06.160 know what, I just think we're going to be low 0:04:06.240 --> 0:04:08.440 for a whole lot longer. I'm going to drop the 0:04:08.440 --> 0:04:11.880 whole curve down flatter, flatter, flatter, and just beat the 0:04:11.880 --> 0:04:15.000 whole thing even lower. Your sentiments are exactly what our 0:04:15.120 --> 0:04:19.320 rate strategist have been saying that if the FED goes 0:04:19.560 --> 0:04:22.080 goes hard in terms of cutting interest rates, that we 0:04:22.080 --> 0:04:23.760 were not going to see the stepening of the YO 0:04:23.839 --> 0:04:26.960 curve because everyone globally is going to expect low for longer, 0:04:27.040 --> 0:04:32.720 lower growth rates, potentially lower inflation, lower interest rates both 0:04:32.760 --> 0:04:35.760 nominal and real. And so we're not going to see 0:04:35.760 --> 0:04:38.080 this stepening. And that's the challenge for the FED. What 0:04:38.160 --> 0:04:42.039 does the FED do in this environment. Let's say we 0:04:42.120 --> 0:04:44.120 do get a trade deal, let's say the US and 0:04:44.240 --> 0:04:48.200 Chin to make progress. Does that materially change the outlook? 0:04:48.200 --> 0:04:50.120 And the reason why I'm asking this is because Stephen 0:04:50.160 --> 0:04:53.160 Major of HSBC, who has gotten the rates picture correct, 0:04:53.279 --> 0:04:55.200 he's been sort of the lone voice getting it right 0:04:55.279 --> 0:04:58.000 year after year. He came out and said, not even 0:04:58.040 --> 0:05:00.160 that would be enough to cause yields to go up 0:05:00.200 --> 0:05:04.400 at this point. It's deeper than that. Would you agree, Well, 0:05:04.720 --> 0:05:07.679 we would say this that even if there is a deal, 0:05:08.320 --> 0:05:10.839 it's uncertain what this deal might look like. It's probably 0:05:10.880 --> 0:05:12.720 going to be an ear of a deal. But the 0:05:12.800 --> 0:05:15.760 damage has already been done globally as well as in 0:05:15.920 --> 0:05:18.680 u as. We've already seen businesses pull back, They've retrenched 0:05:18.839 --> 0:05:25.800 with respect to investment um, Factory activity has collapsed. People. Uh, 0:05:25.920 --> 0:05:28.080 you know, with the trade deals, or rather with the 0:05:28.120 --> 0:05:31.560 trade wars. We have businesses that are losing clients. You 0:05:31.640 --> 0:05:35.279 can't reverse all of that and the damage has already 0:05:35.320 --> 0:05:39.159 been done, and you would need a very significant trade 0:05:39.200 --> 0:05:43.719 deal and some reorientation that would benefit the global economy 0:05:43.880 --> 0:05:46.960 from trade command on a bright spot, just a little one, 0:05:47.040 --> 0:05:49.240 just a little glimmer of hope, But that wasn't helpful 0:05:49.279 --> 0:05:54.840 to you. In Germany incredibly incredibly important manufacturing sector, we'll 0:05:54.839 --> 0:05:56.800 all agree with that, much more important for Germany than 0:05:56.839 --> 0:06:00.200 say the United States. And yet still the service actor 0:06:00.320 --> 0:06:02.400 is okay. Can't the United States take a little bit 0:06:02.440 --> 0:06:04.320 of confidence from that that in Germany they have a 0:06:04.440 --> 0:06:08.200 terrible manufacturing situation right now and services is still holding up. 0:06:08.240 --> 0:06:10.760 If that's the case, isn't that pretty encouraging for the 0:06:10.839 --> 0:06:15.160 United States? Well, I think as an economist anything that 0:06:15.160 --> 0:06:17.280 that certainly is encouraging. And it's actually a story we're 0:06:17.320 --> 0:06:20.039 seeing around the world, including in the US, where manufacturing 0:06:20.080 --> 0:06:23.599 is tanking, um reflecting the fact that China has been 0:06:23.960 --> 0:06:26.520 weakening for some time, even before the trade wars, and 0:06:26.560 --> 0:06:29.400 then you have the trade wars layered on. But the 0:06:29.440 --> 0:06:32.760 services sector has been doing well, and also consumers are 0:06:32.760 --> 0:06:36.480 still spending, and so there are some bright spots regionally, 0:06:36.600 --> 0:06:40.040 domestically and among a number of economies. But you cannot 0:06:40.080 --> 0:06:43.440 ignore the fact that trade globally has collapsed. Even in 0:06:43.440 --> 0:06:46.760 the US exports plus imports, when you add them together, 0:06:47.279 --> 0:06:50.760 growth rates have dropped to zero. Danna was great to 0:06:50.760 --> 0:06:52.960 cant shop with you. Really thoughtful stuff has always Danna 0:06:52.960 --> 0:07:10.320 Peterson Cities Global Economists. Great to have you with me, Lisa, 0:07:10.360 --> 0:07:12.160 and great to have Lisa with us on a big 0:07:12.240 --> 0:07:16.120 day for central banking as the Annual Symposium and Jackson Hole, 0:07:16.200 --> 0:07:18.840 Wyoming kicks off with the Federal Reserve, the House Fed 0:07:18.880 --> 0:07:21.800 President in the Kansas City Chief. Of course, as that 0:07:21.920 --> 0:07:24.000 George kicks things off for us. She caught up with 0:07:24.000 --> 0:07:26.400 Michael McKee a little bit earlier on. Here's what she 0:07:26.480 --> 0:07:29.520 had to say about the outlook for monetary policy. Take 0:07:29.520 --> 0:07:32.480 a listen. I think where rates are right now relative 0:07:32.560 --> 0:07:36.800 to the unemployment rate and inflation suggest we're at a 0:07:36.920 --> 0:07:39.520 sort of equilibrium right now, and I'd be happy to 0:07:39.600 --> 0:07:44.240 leave rates here absent seeing either some weakness or some strengthening, 0:07:44.360 --> 0:07:46.560 some kind of upside risk that would cause me to 0:07:46.600 --> 0:07:49.200 think rates should be somewhere else Where would you put 0:07:50.080 --> 0:07:53.480 the neutral rate right now relative to where you are? 0:07:53.880 --> 0:07:57.960 Are you tight? Are you loose? Accommodative? How do you 0:07:58.000 --> 0:08:02.200 see it? So I would policy to be at neutral 0:08:02.400 --> 0:08:05.320 or even accommodated with this last rate cut. If you 0:08:05.320 --> 0:08:09.120 think about where real interest rates are relative to the 0:08:09.200 --> 0:08:11.400 rate of inflation and where the FED funds rate is, 0:08:11.600 --> 0:08:15.800 we're operating close to zero with real rates. I can't 0:08:15.840 --> 0:08:18.920 believe that that is tight in any sense for the 0:08:18.960 --> 0:08:21.560 economy right now. Would you push back against the argument 0:08:21.600 --> 0:08:23.960 then that the December rate increase was a mistake on 0:08:24.000 --> 0:08:27.800 the FEDS part. So, I think in my public speeches, 0:08:27.880 --> 0:08:31.040 my view was we were beginning to see mounting downside 0:08:31.120 --> 0:08:35.920 risk at that time, and that those were beginning to 0:08:36.000 --> 0:08:39.000 have some concern about the outlook. Give influenced my outlook 0:08:39.000 --> 0:08:42.720 in terms of flattening a path of policy at that point. 0:08:43.200 --> 0:08:46.400 But I think, as we've judged over the last two quarters, 0:08:46.480 --> 0:08:50.280 the economy has continued to grow, and I don't think 0:08:50.320 --> 0:08:52.920 I think the economy has absorbed that so well. If 0:08:52.920 --> 0:08:57.199 you're not ready to put more accommodation into the economy 0:08:57.240 --> 0:08:59.840 but you don't want to pre commit, uh, would you 0:08:59.880 --> 0:09:02.480 be able to say that you would definitely dissent on 0:09:02.520 --> 0:09:05.480 a fifty basis point cut like the markets are calling for. 0:09:06.800 --> 0:09:08.800 I don't see a case for a fifty basis point 0:09:08.880 --> 0:09:13.360 cut today. But again I'm mindful in these decisions. You're 0:09:13.400 --> 0:09:16.040 making judgments about how you read the data up until 0:09:16.080 --> 0:09:19.000 the time of the meeting, And importantly for me, I 0:09:19.120 --> 0:09:22.080 use that meeting to listen to my colleagues to hear 0:09:22.160 --> 0:09:25.560 what their arguments are, how they wait some of those risks. 0:09:25.600 --> 0:09:28.600 So it's always difficult for me to prejudge where I 0:09:28.640 --> 0:09:31.440 will come out until I get into that meeting. Do 0:09:31.440 --> 0:09:34.480 you think markets are looking at the economy rationally these days? 0:09:34.880 --> 0:09:36.800 I don't know. I'm not in the markets to know 0:09:37.640 --> 0:09:41.280 what those judgments are. I think markets see how the 0:09:41.320 --> 0:09:44.920 rest of the world is slowing. I think uncertainty never 0:09:45.000 --> 0:09:48.880 plays well UM in the market, So I understand why 0:09:49.040 --> 0:09:52.920 you see fear and uncertainty right now. That isn't the 0:09:52.920 --> 0:09:56.679 metric though that UM. I feel we have to focus 0:09:56.679 --> 0:09:59.559 on We have a clear mandate and I think a 0:09:59.760 --> 0:10:02.360 law term view that we have to stay focused on. 0:10:02.760 --> 0:10:06.520 Agriculture is big in your district. Farmers have complained that 0:10:06.840 --> 0:10:10.680 with the trade wars, they can't sell. Prices have gone down, 0:10:10.760 --> 0:10:13.680 yet at the same time, the administration is using the 0:10:13.760 --> 0:10:17.280 extra taxes were all paying in tariffs to compensate the farmers. 0:10:17.640 --> 0:10:21.199 So are they bad badly off or are they making 0:10:21.200 --> 0:10:23.720 it through okay because of these payments. What's the real 0:10:23.760 --> 0:10:26.679 story with it? So farmers began to experience a real 0:10:26.800 --> 0:10:30.880 hit to their incomes going back before the tariffs, commodity 0:10:30.920 --> 0:10:35.200 prices for grains came off. So we're now into a 0:10:35.280 --> 0:10:39.520 fifth year of low farm incomes. That certainly stresses that sector, 0:10:40.440 --> 0:10:44.400 but by and large those farmers are not leveraged as 0:10:44.400 --> 0:10:48.120 they may have been in past cycles. Um they would 0:10:48.240 --> 0:10:51.840 much prefer having outlets for their product as opposed to 0:10:51.920 --> 0:10:54.120 subsidies coming in for that. So I don't think it's 0:10:54.160 --> 0:10:58.240 an even substitution for them, But I think they're going 0:10:58.280 --> 0:11:01.320 to continue to struggle until all the price of their 0:11:01.360 --> 0:11:05.400 commodity moves up. I know you would tell me that 0:11:05.440 --> 0:11:07.800 the FED is not influenced by politics. You go into 0:11:07.840 --> 0:11:10.000 the room and you put all that aside, you don't listen. 0:11:10.840 --> 0:11:15.800 But it's every day now, is it tiresome? So I'll 0:11:15.800 --> 0:11:18.360 tell you have to be focused on what your job is, 0:11:18.800 --> 0:11:22.439 and you have to understand that an institution like the FED, 0:11:23.520 --> 0:11:26.640 as many other aspects of our government, is built around 0:11:26.720 --> 0:11:30.320 checks and balances. So I have the ability to think 0:11:30.360 --> 0:11:35.240 about with complete accountability to Congress for our mandate, being 0:11:35.280 --> 0:11:39.160 transparent about my own views, to focus on what serves 0:11:39.480 --> 0:11:42.000 the American public best, and I think what serves them 0:11:42.040 --> 0:11:46.120 best is for the committee to remain focused on how 0:11:46.120 --> 0:11:50.400 do we achieve maximum employment and stable prices for the public. 0:11:50.960 --> 0:11:54.280 And I feel good that that's where the committee is focused. 0:11:54.720 --> 0:11:59.040 The Kansas City Fed presidents to George that dissenting against 0:11:59.080 --> 0:12:02.240 that right the of July, speaking to Bloomberg's Michael McKee added, 0:12:02.360 --> 0:12:18.120 Jackson Home, Wyoming. As we kick off that annual symposium 0:12:18.120 --> 0:12:20.800 at the G seven, we finally have a load of 0:12:20.800 --> 0:12:23.280 politicians getting together and try and sort out some problems. 0:12:23.320 --> 0:12:24.959 And I'm really pleased to say that joining us here 0:12:25.120 --> 0:12:28.240 in New York Bob Hormat's Kissinger vice chair, Bob, I 0:12:28.280 --> 0:12:30.760 had no idea. Sometimes I have to apologize that we 0:12:30.840 --> 0:12:33.840 get too familiar with fantastic guests, and then a piece 0:12:33.880 --> 0:12:36.360 of paper crosses my desk and I find out that 0:12:36.440 --> 0:12:38.920 you've been the U S Schrper, the presidential planner and 0:12:39.040 --> 0:12:42.880 NoteTaker in eight G seven summits, going all the way 0:12:42.880 --> 0:12:47.559 back to Bob. That's incredible. Yes, I started out in 0:12:47.720 --> 0:12:51.880 romboulle a Um nineteen seventy five and France when we 0:12:51.880 --> 0:12:56.520 were just coming out of the crisis that was caused 0:12:56.520 --> 0:13:00.080 by the oil price increases of nineteen seventy three. The 0:13:00.080 --> 0:13:02.559 world was trying to figure out how to get back 0:13:02.640 --> 0:13:05.680 on a on a growth trajectory without triggering a lot 0:13:05.679 --> 0:13:09.240 of inflation. And you know, we had the President United States, 0:13:09.320 --> 0:13:12.439 of President of France, Chancel of Germany, premises of Japan 0:13:12.480 --> 0:13:17.480 and others. They're working together, and the notion of a 0:13:17.640 --> 0:13:20.600 collective effort by the G seven to deal with the 0:13:20.679 --> 0:13:24.040 problems was really palpable. They were all really on the 0:13:24.080 --> 0:13:27.200 same track. Now in contrast and the meeting we're going 0:13:27.240 --> 0:13:31.320 to have in ba Ritz on there's division within the 0:13:31.400 --> 0:13:36.160 G seven, intense division, with the US threatening tariffs on automobiles, 0:13:36.200 --> 0:13:39.760 which will affect Germany and Japan. They're already tariffs on 0:13:40.000 --> 0:13:45.240 aluminum and steal uh. And the sentence of American leadership 0:13:45.720 --> 0:13:49.800 of the global economic order, constructive leadership that was so 0:13:50.360 --> 0:13:53.160 palpable then when we had President Ford, who was our 0:13:53.200 --> 0:13:57.480 president now is not there at all. In divisions could 0:13:57.559 --> 0:14:02.200 make this a more negative environment uh than a positive one, 0:14:02.360 --> 0:14:05.719 and undermined confidence that would be harmful. You've touched on 0:14:05.760 --> 0:14:09.400 the changes initially, let's explore them further. Typically, the interpretation 0:14:09.440 --> 0:14:11.520 of perception from the outside looking again is that these 0:14:11.559 --> 0:14:15.040 were very scripted events. Diplomats behind the scenes got together. 0:14:15.360 --> 0:14:18.800 They basically scripted all the bilaterals, and the outcome was 0:14:18.840 --> 0:14:22.920 almost predetermined before the G seven happens. Sometimes, but was 0:14:22.960 --> 0:14:25.480 that the case? Was that actually what happens, and just 0:14:25.520 --> 0:14:28.200 how unscripted is it now compared to back then? That's 0:14:28.240 --> 0:14:30.479 hair fright. I mean, there was a lot of scripting, 0:14:30.560 --> 0:14:34.480 in part because the officials who were working on this, 0:14:34.600 --> 0:14:36.920 and I was the American official, there were French, German, 0:14:37.080 --> 0:14:41.000 Japanese and others. We had a general idea what our 0:14:41.040 --> 0:14:44.040 heads of state wanted. We had a general idea of 0:14:44.080 --> 0:14:47.320 how the countries, the major economies and furniture powers should 0:14:47.320 --> 0:14:51.120 work together to deal with the problem and we move 0:14:51.240 --> 0:14:55.000 things ahead. But the final deal, the final arrangements, were 0:14:55.040 --> 0:14:57.720 not just what was in the communicate, although that was important, 0:14:58.080 --> 0:15:00.920 but in the minds and in the part pics and 0:15:01.000 --> 0:15:04.800 in the uh future pursuits of the leaders that they 0:15:04.840 --> 0:15:07.120 were going to work together and stay in touch with 0:15:07.160 --> 0:15:09.360 one another and try to get out of this together 0:15:09.960 --> 0:15:12.240 and so therefore it was not just the words but 0:15:12.320 --> 0:15:17.840 the general cooperative attitude um of the leaders, and we 0:15:17.880 --> 0:15:21.400 don't have that now. The last G seven we had 0:15:21.440 --> 0:15:24.600 a big discussion over communicate language. The U S didn't 0:15:24.600 --> 0:15:29.080 want language, any protectionist language. And we know these leaders 0:15:29.200 --> 0:15:32.280 are at odds on everything. Britain's having its own problems 0:15:32.280 --> 0:15:34.920 that the Prime Minister is really not going to be 0:15:34.960 --> 0:15:39.560 focused on G seven issues UH and calla Merkel German 0:15:39.760 --> 0:15:43.040 Chancellor is now going to be sort of in her 0:15:43.240 --> 0:15:46.200 and the end of her period of time as Chancellor. 0:15:46.640 --> 0:15:49.160 Macron is working very hard and really does have a 0:15:49.160 --> 0:15:53.880 strong leadership view, but has a lot of pressures internally. UH. 0:15:53.920 --> 0:15:57.560 Premister Abe has played a very constructive role in moving 0:15:57.600 --> 0:16:00.280 things ahead in in Asia, but now he has got 0:16:00.280 --> 0:16:02.520 a yen that's rising. He's not happy with that at 0:16:02.520 --> 0:16:05.720 the time he wants to put on UH consumption tax. 0:16:06.040 --> 0:16:08.600 And of course the United States, which really doesn't know 0:16:08.600 --> 0:16:11.040 whether there wants to be the leader of the motor 0:16:11.160 --> 0:16:16.120 lateral liberal economic order or in America first, which is 0:16:16.200 --> 0:16:20.000 protectionists and is disruptive of that order. And others think 0:16:20.040 --> 0:16:22.320 the United States is moving in the latter direction. Which 0:16:22.320 --> 0:16:24.520 means it's hardly going to be the leader of a 0:16:24.560 --> 0:16:27.920 constructive G seven process. Just about a minute here, I'm 0:16:27.920 --> 0:16:32.880 wondering from your perspective, we're talking a lot about monetary policy, 0:16:33.120 --> 0:16:36.720 but how the focus really is shifting to fiscal stimulus. 0:16:36.760 --> 0:16:38.920 From your point of view, what is the one thing 0:16:39.280 --> 0:16:44.000 that fiscal policymakers could do that could help the economy. Well, 0:16:44.040 --> 0:16:48.000 I think the policies that could really help the economy 0:16:48.000 --> 0:16:53.240 are not so much additional government stimulus of the kind 0:16:53.560 --> 0:16:56.960 we had in two thousand and eight, for instance, uh 0:16:57.000 --> 0:17:00.480 and some countries already have big budget deficits in probably 0:17:00.520 --> 0:17:02.120 are not gonna be able to do that. The US, 0:17:02.200 --> 0:17:05.440 I think, would just be adding to debt, probably not 0:17:05.640 --> 0:17:10.240 boosting the economy. I think the restoring some sense of 0:17:10.280 --> 0:17:14.600 confidence in the outlook, dealing with the levels of uncertainty 0:17:15.280 --> 0:17:19.000 that have arisen as a result of trade wars, as 0:17:19.040 --> 0:17:22.119 a result of the potential threat of a of of 0:17:22.200 --> 0:17:25.840 currency competition or currency wars. If the leaders could move 0:17:25.880 --> 0:17:29.800 ahead in a constructive way to reduce trade and investment 0:17:29.840 --> 0:17:35.000 tensions and avoid threats of new tariffs, and reduce the 0:17:35.040 --> 0:17:38.399 tariffs that have been imposed, particularly by the United States, 0:17:38.480 --> 0:17:41.240 of late that would help, and of course a resolution 0:17:41.320 --> 0:17:43.840 of the Briggs that issue would would help as well. 0:17:44.520 --> 0:17:47.359 But it's always great inside and we get it so often. 0:17:47.720 --> 0:17:50.240 I should not complain about EA and I shouldn't be 0:17:50.240 --> 0:17:52.800 complacent about it. Bob Homas, great to see you, as 0:17:53.600 --> 0:17:55.440 great to have you with us the Kissing Device chair 0:17:55.480 --> 0:18:09.359 then joining us ahead of the G seven. This is 0:18:09.400 --> 0:18:12.520 a treat here. We uh are good friend Brian Weezer. 0:18:12.560 --> 0:18:15.760 He's a Group M president for business intelligence. He's been 0:18:15.760 --> 0:18:20.879 covering the media, uh, internet, technology space, advertising space for 0:18:21.119 --> 0:18:24.240 years from all sides and uh and we've got him 0:18:24.240 --> 0:18:26.080 here this morning. Brian, thanks so much for joining us 0:18:26.119 --> 0:18:28.199 on the phone. Um, you know, I think I'd like 0:18:28.240 --> 0:18:30.280 to start with the deal that you and I and 0:18:30.560 --> 0:18:33.159 every other media investor has been kind of waiting for 0:18:33.359 --> 0:18:37.960 seemingly for years, which is this Viacom CBS merger. Looks 0:18:37.960 --> 0:18:41.679 like they're getting back together. What does this mean for 0:18:41.920 --> 0:18:45.239 your side of the street, Madison Avenue advertisers? Do they 0:18:45.240 --> 0:18:48.800 even care? Well? Yeah, first all, thanks for having me on. 0:18:50.040 --> 0:18:53.560 I do think that they care because it does uh 0:18:54.320 --> 0:18:57.959 concentrate a little more inventory, which in this context is 0:18:58.040 --> 0:19:01.679 probably a good thing on balance, it things like, you know, 0:19:01.880 --> 0:19:06.080 via Colm has a product called has a number of 0:19:06.119 --> 0:19:09.360 what they call advantage of products UM, and being able 0:19:09.400 --> 0:19:12.520 to apply those across CBS inventory. Being able to run 0:19:12.520 --> 0:19:16.320 a campaign across the combined CBS by a com inventory together, 0:19:16.359 --> 0:19:22.280 which is hopefully something that happens, is probably an incrementally 0:19:22.320 --> 0:19:25.159 good thing. It's not a game changer by any stretch, 0:19:25.440 --> 0:19:28.320 but that's positive. It's and at the same time, the 0:19:28.680 --> 0:19:34.359 concentration of of ad inventory doesn't meaningly alter the dynamics 0:19:34.400 --> 0:19:37.640 conterms of who has what power in the industry. CBS 0:19:37.680 --> 0:19:40.080 was already one of the first prices you would go 0:19:40.160 --> 0:19:43.800 to spend money because of the broadcast network. Via Colm 0:19:43.840 --> 0:19:47.400 was already important because um, you know, they could sell 0:19:47.440 --> 0:19:50.399 a lot of inventory cheaply. UM. I think the bigger 0:19:51.000 --> 0:19:55.239 implications are sort of what comes next, Like do they 0:19:55.320 --> 0:19:59.040 keep Simon and Schuster and then or not? And then 0:19:59.040 --> 0:20:01.879 do they sell it and get some uh have some 0:20:02.000 --> 0:20:06.000 capital to do something else? It's interesting, Um, do they 0:20:06.920 --> 0:20:12.359 double down on their studio um and then at the 0:20:12.400 --> 0:20:16.040 same time double down on what CBS all accesses or 0:20:16.080 --> 0:20:20.440 do they try to become this arms merchant of content 0:20:21.440 --> 0:20:24.080 uh and try to replicate what Warner Brothers was, which 0:20:24.119 --> 0:20:30.280 is to say, every company second davorite supplier of content. Um. 0:20:30.320 --> 0:20:32.320 I don't know that they can do both, by the way, 0:20:32.760 --> 0:20:35.120 but but the implications of the industry will follow from 0:20:35.200 --> 0:20:37.240 what they choose to do once they figure out what 0:20:37.280 --> 0:20:40.679 they're going to do. Brian, I find it so interesting 0:20:41.080 --> 0:20:45.160 this transformation that's been going on from cable to online 0:20:45.200 --> 0:20:48.879 and digital and streaming, and as an advertiser as to 0:20:48.920 --> 0:20:53.200 try to try to understand how to best reach consumers. 0:20:53.240 --> 0:20:58.080 And I'm wondering, from your perspective, which platform is the 0:20:58.200 --> 0:21:04.240 further along in term of uh creating an advertising platform 0:21:04.400 --> 0:21:10.000 that is really accessible and effective with consumers. Oh, I 0:21:10.040 --> 0:21:13.160 mean the oldest, one of the older ones, that broadcast 0:21:13.160 --> 0:21:17.680 television is probably still that thing. And it is. Oh yeah, 0:21:17.760 --> 0:21:22.360 I mean the reach of broadcast TV is still in parallel. Um. 0:21:22.440 --> 0:21:26.240 Nothing comes close. And on top of that, the um, 0:21:26.760 --> 0:21:29.360 you know, the impact of cites on emotion, the pairing 0:21:29.520 --> 0:21:34.560 of the content brand with an advertiser's brand. I mean, 0:21:34.600 --> 0:21:37.919 you know it's no mistake that you know, a more 0:21:38.080 --> 0:21:40.639 most extreme example, I could point to something like Apple, 0:21:40.800 --> 0:21:45.000 the advertiser last at check the almost only advertised on 0:21:45.080 --> 0:21:49.520 broadcast TV and outdoor billboards, right, and which which computer 0:21:49.600 --> 0:21:55.280 company has a brand left? Right? The Apple? Yep, exactly. 0:21:56.080 --> 0:21:59.040 So I mean, so, Brian, you think about it here. Um, 0:21:59.119 --> 0:22:01.040 one of the things that inst this is that Viacom 0:22:01.040 --> 0:22:02.440 had that. I thought it was pretty interesting and it 0:22:02.480 --> 0:22:04.280 doesn't get a lot of play. When we think about streaming, 0:22:04.280 --> 0:22:08.160 we think about Netflix, all the subscription driven uh streaming 0:22:08.160 --> 0:22:11.359 services again like Netflix or Hulu. But Viacom bought this 0:22:11.359 --> 0:22:13.760 company called Pluto TV and it's I think it's what 0:22:13.760 --> 0:22:16.840 it's called advertising streaming video on demand. Tell us about 0:22:16.920 --> 0:22:19.359 kind of that market, and do you think that's a 0:22:19.440 --> 0:22:24.639 growing viable market for the entertainment sector. Yeah, I mean, 0:22:24.680 --> 0:22:27.720 I wouldn't think of it as anything particularly different. It's 0:22:27.720 --> 0:22:32.560 just a bunch of video inventory that's supported. In fact, 0:22:32.720 --> 0:22:38.000 I often find myself watching Bloomberg on Pluto when whatever reason. 0:22:38.080 --> 0:22:42.200 Thank you for that. Well, right now, it's funny. I'm 0:22:42.560 --> 0:22:49.120 streaming the Bloomberg on my Overexfinity, the Comcast service, and 0:22:49.280 --> 0:22:51.680 if that was down for some reason my password wasn't 0:22:51.680 --> 0:22:53.320 working or whatever, I can go and watch it on 0:22:53.359 --> 0:22:57.800 Pluto for free. Now Viacom has some inventory there, so 0:22:57.840 --> 0:23:02.240 they're just running ads on programming that comes from Bloomberg 0:23:02.400 --> 0:23:05.680 in that case, and there's a couple of hundred other channels, 0:23:05.800 --> 0:23:09.200 many of which also run on traditional TV. So I 0:23:09.200 --> 0:23:12.840 wouldn't think of it as necessarily anything overly different. It's 0:23:12.880 --> 0:23:16.119 just primium video inventor. One thing. I'm wondering though, when 0:23:16.160 --> 0:23:18.760 you talk about cable TV and how that still is 0:23:18.760 --> 0:23:21.399 the best distribution network in terms of power and reach. 0:23:21.960 --> 0:23:24.720 I'm wondering, though, if the time has changed, the sort 0:23:24.760 --> 0:23:28.720 of thirty second spot, whether you're seeing it compressed, how 0:23:28.840 --> 0:23:33.159 is that sort of evolving. Yeah, I mean in a 0:23:33.240 --> 0:23:39.800 traditional TV format, Uh, it really hasn't changed much at all. Um. 0:23:40.040 --> 0:23:43.360 That said, I think that there's this idea that you 0:23:43.400 --> 0:23:47.600 should be able to create video assets for digital environments 0:23:47.640 --> 0:23:50.959 where maybe inside of a new speed and thirties second 0:23:51.119 --> 0:23:54.360 add just won't work. You need assets that can be 0:23:54.600 --> 0:23:58.280