WEBVTT - Trust in Government Has Imploded, Edelman Says 0:00:00.080 --> 0:00:13.040 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:13.480 --> 0:00:17.560 Jay Leye. 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 --> 0:00:28.160 Bloomberg dot Com, and of course on the Bloomberg. Yeah. 0:00:33.920 --> 0:00:37.120 Of course. The World Economic Forum underway in Devo, Switzerland. 0:00:37.320 --> 0:00:39.680 We'll be bringing you interviews from the event all week 0:00:39.760 --> 0:00:43.120 with Tom Keane live from Davos. This morning, the Bloomberg 0:00:43.200 --> 0:00:45.519 Editor in Chief John michaels Waite sat down at the 0:00:45.560 --> 0:00:48.080 event for an interview with the new CEO of Uber, 0:00:48.479 --> 0:00:50.920 dar Across Rashahi. Let's take a listen to what he 0:00:50.960 --> 0:00:53.319 had to say in that conversation. Right now, you are 0:00:53.520 --> 0:00:57.080 close to six months into the job, and I wondered 0:00:57.120 --> 0:00:59.480 what you saw in terms of the year ahead of 0:00:59.560 --> 0:01:02.840 Uber as your biggest challenge. What's the thing that you 0:01:02.880 --> 0:01:06.800 think about most when it comes to two. We uh, 0:01:06.840 --> 0:01:10.160 We definitely have our share of challenges at Uber. Uh 0:01:10.200 --> 0:01:13.000 and for me, where I want to get to Uber 0:01:13.080 --> 0:01:15.560 two of the year head is is a year of normalcy. 0:01:16.160 --> 0:01:18.680 You know, two thousand seventeen was I think we'll go 0:01:18.720 --> 0:01:22.280 down as one of the most difficult years for any 0:01:22.360 --> 0:01:24.039 company out there. And I have to and I have 0:01:24.120 --> 0:01:28.160 to give credit to the Uber team and the employees there. 0:01:28.280 --> 0:01:32.280 It is a group of true believers who believe in 0:01:32.280 --> 0:01:35.080 our mission, who believe in mobility as a service being 0:01:35.120 --> 0:01:40.959 available to consumers everywhere UH at a reasonable cost. And 0:01:41.800 --> 0:01:45.640 what my job in two thousand eighteen is too is 0:01:45.640 --> 0:01:49.080 to get rid of the distractions and get the company 0:01:49.120 --> 0:01:52.440 back to business, get the company back to normalcy. There's 0:01:52.440 --> 0:01:55.000 a lot that we've done in the past six months 0:01:55.000 --> 0:01:58.640 as far as bringing the new investors, driving a new 0:01:58.680 --> 0:02:02.840 culture and norms where doing the right thing period comes first, 0:02:03.600 --> 0:02:05.800 bringing a new management team, etcetera. There's a lot that 0:02:05.840 --> 0:02:09.320 we've gotten done. But this is a company that knows 0:02:09.360 --> 0:02:13.040 how to execute this is a service. Mobility as a 0:02:13.120 --> 0:02:17.000 services something that's universal that's needed in the world. And 0:02:17.040 --> 0:02:18.600 I want and I just want to get back to 0:02:18.639 --> 0:02:21.280 doing this. And you said true believe, true believers, not 0:02:21.400 --> 0:02:24.520 normally true believers are the last possible people where it's 0:02:24.639 --> 0:02:27.400 you're able to change a culture. Can you explain a 0:02:27.400 --> 0:02:30.280 bit about that. Well, I think that they are. They 0:02:30.440 --> 0:02:36.520 understand that UM mobility is a service, bringing the cost 0:02:36.639 --> 0:02:41.720 of transportation down UH, making transportation services available to anyone 0:02:41.760 --> 0:02:45.280 and everyone on a local basis, and partnering with cities 0:02:45.320 --> 0:02:50.680 to be a solution to traffic, to pollution, etcetera. That 0:02:50.880 --> 0:02:54.080 is a mission that they all believe in UH, and 0:02:54.560 --> 0:02:57.799 I think that they having seen what happened in two 0:02:57.800 --> 0:03:00.960 thousand seventeen to some extent, the crisis, enormous crisis that 0:03:01.000 --> 0:03:04.560 the company has gone through, is a benefit because everybody 0:03:04.600 --> 0:03:07.200 at the company knows now that we need to change, 0:03:07.200 --> 0:03:08.960 that we need to break with the past as far 0:03:09.000 --> 0:03:11.240 as the way the company was run. We need to 0:03:11.280 --> 0:03:15.720 go from growth in any cost to responsible growth and 0:03:15.720 --> 0:03:19.639 and growth in partnership with other players out there. That's clear. 0:03:20.160 --> 0:03:23.400 But now I've got to kind of get the company 0:03:23.600 --> 0:03:27.519 down to the normalcy of execution of building great technology, 0:03:27.760 --> 0:03:29.359 and I think we're going to get there. It's still 0:03:29.400 --> 0:03:32.280 some tough sledding early on, but I absolutely think we're 0:03:32.280 --> 0:03:34.360 going to get there. When you talk about execution is 0:03:34.440 --> 0:03:36.480 profits one of the things you want to get. I 0:03:36.520 --> 0:03:39.960 think you lost four billion dollars last year by the 0:03:40.040 --> 0:03:44.040 standards of profits will health. So at some point we 0:03:44.080 --> 0:03:46.880 absolutely have to become profitable, and that's part of the picture. 0:03:46.920 --> 0:03:47.960 You have a good do you have a kind of 0:03:48.000 --> 0:03:49.960 goal for that? Do you think you should be profitable 0:03:49.960 --> 0:03:56.720 by two by? Uh? This is the business itself. You 0:03:56.760 --> 0:03:59.560 want to come back a bit closer. Yeah, listen up 0:04:00.000 --> 0:04:03.280 of I don't want to name a specific year, but 0:04:03.520 --> 0:04:07.040 this is a business that UM, the core business, the 0:04:07.120 --> 0:04:11.640 ride sharing business, can be profitable within three years. We 0:04:11.680 --> 0:04:14.840 will continue to make very bad investments in building out 0:04:14.880 --> 0:04:18.400 autonomy because we think that's a terrific opportunity, UH, for 0:04:18.640 --> 0:04:23.400 building out new technologies such as Uber elevate, where near 0:04:23.600 --> 0:04:28.120 term profitability is not a is not a goal, but 0:04:28.240 --> 0:04:30.719 long term growth is. So we will look to balance 0:04:30.760 --> 0:04:33.880 near term profitability. But as a company, we will always 0:04:33.880 --> 0:04:36.040 be a company that makes big boat beats and takes 0:04:36.080 --> 0:04:38.360 big risks. To what extent there do you think that 0:04:38.440 --> 0:04:41.680 drive to become profitable fights against a little bit of 0:04:41.720 --> 0:04:44.800 this culture change if you want to make you talked 0:04:44.839 --> 0:04:47.880 about making money but not at all costs. Do those 0:04:47.880 --> 0:04:52.960 two things? Well? I don't think that profitability and culture 0:04:53.040 --> 0:04:56.960 are their issue. And it's UM the company in the 0:04:57.080 --> 0:05:01.840 past was willing to make tradeoffs as it related to 0:05:02.520 --> 0:05:06.440 how it did business. UH, and I think was was 0:05:06.440 --> 0:05:10.720 was guilty of hubris, was guilty of of thinking that 0:05:10.760 --> 0:05:14.240 they knew better than others. And and I think that 0:05:14.320 --> 0:05:19.840 what we know now clearly is that breakneck growth can 0:05:20.080 --> 0:05:26.200 hide uh cultural issues. UH, that there are no excuses 0:05:26.279 --> 0:05:29.320 for not doing the right thing, and that you do 0:05:29.440 --> 0:05:32.520 have to make trade offs. And and as a management team, 0:05:32.560 --> 0:05:35.840 we're specifically talking about those tradeoffs that you have to make. 0:05:36.520 --> 0:05:38.719 We have to be a little more patient sometimes because 0:05:38.880 --> 0:05:43.320 working with government, regulators, etcetera sometimes takes longer. But in 0:05:43.440 --> 0:05:46.480 the end you build a more lasting business. Uh. And 0:05:46.600 --> 0:05:50.839 so we maybe what we went through was necessary, but 0:05:50.960 --> 0:05:54.839 we're here. We can control our actions from this moment onwards. 0:05:55.360 --> 0:05:59.640 And and I think everyone at uber from this moment 0:06:00.080 --> 0:06:02.440 words wants to build a great company, not only in 0:06:02.520 --> 0:06:04.640 terms of growth, but in terms of the kind of 0:06:04.680 --> 0:06:07.360 company anyone would want to work at. Can I ask 0:06:07.400 --> 0:06:08.800 you one thing which you have got to sort of 0:06:08.800 --> 0:06:12.159 hangover from last year, which is the all the all 0:06:12.200 --> 0:06:15.520 the regulatory problems and particularly all the all the cases 0:06:15.560 --> 0:06:18.400 against you. I think there are six criminal probes or 0:06:18.400 --> 0:06:21.160 whatever going on, But wisers are lining up outside to 0:06:21.279 --> 0:06:24.360 which which one, Which one do you sort of think? 0:06:24.400 --> 0:06:28.880 Which one do you fear most I suppose different things. Listen, 0:06:28.920 --> 0:06:31.919 I think I think that all of them are serious issues, 0:06:32.000 --> 0:06:35.520 and and my responses that we're going to be transparent 0:06:35.520 --> 0:06:38.120 and we're gonna we're going to take responsibility for our 0:06:38.160 --> 0:06:43.200 actions in the past. Um. I do think that the uh, 0:06:43.240 --> 0:06:47.520 there are certain circumstances where uh there was smoke but 0:06:47.600 --> 0:06:50.760 no fire. Uh. And I think as a company, we 0:06:50.839 --> 0:06:53.960 have to defend ourselves and and and work with the 0:06:54.160 --> 0:06:56.960 kind of the appropriate frameworks. And my goal is just 0:06:57.040 --> 0:06:58.760 to get beyond the stuff. Some of these things like 0:06:58.800 --> 0:07:01.560 pricing policies show they go right to the heart of 0:07:01.600 --> 0:07:04.120 what Hooper is or Am I wrong about that? Yeah? 0:07:04.160 --> 0:07:06.120 I think they do. But but I think that there's 0:07:06.160 --> 0:07:09.880 a way of of being smart but transparent at the 0:07:09.880 --> 0:07:12.200 same time. Uh. And that's where we've got to take 0:07:12.200 --> 0:07:14.800 the company. Take me through governments. When when you talk 0:07:14.840 --> 0:07:18.800 to governments privately, do they talk any differently than they 0:07:18.840 --> 0:07:24.320 do publicly? Governments governments, Um, I think that they are 0:07:24.360 --> 0:07:29.880 honestly a bit relieved with how we are engaging with 0:07:29.960 --> 0:07:32.200 them because I think I think that the engagement is 0:07:32.600 --> 0:07:35.720 now real. I think they feel like, uh, we're out there, 0:07:35.920 --> 0:07:39.720 We're we're genuine because we've learned our lessons of the past. Uh. 0:07:39.760 --> 0:07:43.200 And and I do think that we can take, for example, 0:07:43.280 --> 0:07:46.840 the data that we have in terms of traffic and 0:07:46.920 --> 0:07:51.480 in terms of movement of our drivers and riders, and 0:07:51.520 --> 0:07:55.200 we can use that data to partner up with cities, uh, 0:07:55.240 --> 0:07:58.680 in order to solve congestion issues, because congestion doesn't help 0:07:58.720 --> 0:08:02.679 anyone to waste enormous amounts of time for consumers, UH, 0:08:03.040 --> 0:08:05.800 it hurts the environment. UH. And I think that we 0:08:05.840 --> 0:08:08.480 are aligned with cities, for example, to partner with them 0:08:08.480 --> 0:08:11.480 in a fundamental way to solve these problems. And I 0:08:11.520 --> 0:08:15.360 do think that when these are conversations that a number 0:08:15.400 --> 0:08:18.160 of regulators and cities have wanted to have with us 0:08:18.680 --> 0:08:22.200 for for many years, and I think we are really 0:08:22.240 --> 0:08:26.520 engaging with them at a depth UH that that I 0:08:26.560 --> 0:08:29.960 think is going to create a real win win going forward. 0:08:30.000 --> 0:08:33.360 Do you think you were too confrontational on this before? Yeah? 0:08:33.400 --> 0:08:37.520 I do. That was the Uber CEO Dara cost Rochelle. 0:08:37.559 --> 0:08:39.959 He's sitting down with Bloomberg's editor in chief John Michael 0:08:39.960 --> 0:08:43.720 Thwaite at a conversation in the Bloomberg Year Ahead Forum 0:08:43.720 --> 0:08:47.200 at the World Economic Forum underway in Davos, Switzerland. Tom 0:08:47.240 --> 0:08:50.360 he used those words breakneck growth, and breakneck growth can 0:08:50.440 --> 0:08:53.559 hide cultural issues, it can also exacerbate them as well 0:08:53.600 --> 0:08:56.959 without significant discipline coming down from leadership. And what we 0:08:57.040 --> 0:09:00.079 found in Travis Kallinik is that leadership that's discipline and 0:09:00.480 --> 0:09:02.440 was certainly absent. The question is whether down at Coast 0:09:02.480 --> 0:09:05.280 Roschale he can really turn around what is a massive 0:09:05.440 --> 0:09:09.280 tanker of a company. Well, it's a secondary tone here, 0:09:09.400 --> 0:09:14.080 but it is tangible that social media and frankly the 0:09:14.160 --> 0:09:19.280 modern Silicon Valley tech will be a changed tone, a 0:09:19.440 --> 0:09:22.360 changed culture over the next two to five years. Ken 0:09:22.440 --> 0:09:27.800 Rogoff today was heated with David Rubinstein about the death 0:09:27.960 --> 0:09:31.959 of unicorn companies and particularly the extrapolation of their value 0:09:32.640 --> 0:09:36.760 based off small, tangible transactions in private markets and and 0:09:36.800 --> 0:09:38.640 none of them tell them have really come public in 0:09:38.679 --> 0:09:40.760 a significant way. Was still waiting for at BMBA, was 0:09:40.800 --> 0:09:43.160 still waiting for ru but to make that move. David 0:09:43.240 --> 0:09:46.480 Rubinstein was really heated about not that they've you know, 0:09:46.640 --> 0:09:50.040 proverbally jumped the shark, but that there's just a change 0:09:50.440 --> 0:09:53.440 in tone that you witnessed there. With the interview with 0:09:53.640 --> 0:10:10.040 Mr Michael Swaite, to get to our guest. I want 0:10:10.160 --> 0:10:14.439 John Pharaoh to review sort of his take on Europe, 0:10:14.960 --> 0:10:19.600 Italy and politics. John Mr drag is a meeting tomorrow. 0:10:20.080 --> 0:10:22.600 Does he meant does he care about the March fourth 0:10:22.640 --> 0:10:25.199 elections in Italy? I think he does, but I think 0:10:25.200 --> 0:10:27.080 he's less worried than he otherwise was. I think we 0:10:27.120 --> 0:10:29.240 came through the French election last year unscathed, and I 0:10:29.240 --> 0:10:31.400 think we came through that election unscathed because there was 0:10:31.440 --> 0:10:34.440 a realization that in many of these countries, leaving the 0:10:34.480 --> 0:10:37.720 monetary Union, even if you are anti Europe, leaving the 0:10:37.840 --> 0:10:40.760 monetary Union is something the electorate will not go for. 0:10:40.840 --> 0:10:43.840 And I hear less about that in Italy than maybe 0:10:43.920 --> 0:10:45.959 we would have heard a couple of years ago. So 0:10:46.000 --> 0:10:48.480 I'd say President Draggy, less worried about the politics, may 0:10:48.480 --> 0:10:50.960 be much more worried, and it's a high class problem 0:10:50.960 --> 0:10:52.640 to have. I think, in his words, much more worried 0:10:52.679 --> 0:10:55.360 about this uptick and growth and maybe inflation around the corner, 0:10:55.559 --> 0:10:57.960 and how he's going to move monetary policy without shaking 0:10:58.000 --> 0:11:01.680 this market reviews Mr Drug this morning at my panel 0:11:01.720 --> 0:11:05.160 and now joining us Paul sheared Uh at SMP Global. 0:11:05.200 --> 0:11:07.959 They're Vice chairman and truly one of our claimed experts 0:11:08.000 --> 0:11:11.959 on Japan. But to move away from Japan, Paul to Europe. 0:11:12.000 --> 0:11:14.880 The surprise of our panel are better than good Europe 0:11:15.200 --> 0:11:20.120 and even laggered Italy puts it out and does better. Yeah, Tom, 0:11:20.120 --> 0:11:22.720 it's great to be with you here in Davos. Um Europe, 0:11:22.760 --> 0:11:26.000 I think is is two distinct stories which obviously sort 0:11:26.000 --> 0:11:28.520 of intersect. But one is the more cyclical what's happening 0:11:28.559 --> 0:11:31.199 in terms of the economic expansion, and that's a pretty 0:11:31.200 --> 0:11:34.040 good story. But um, the other story, of course is 0:11:34.120 --> 0:11:37.160 the whole set of issues, not just around Brexit, but 0:11:37.240 --> 0:11:40.600 around the whole architecture of the Eurozone and the architecture 0:11:40.600 --> 0:11:43.520 of the European Union. That's a conversation that's playing out 0:11:43.559 --> 0:11:46.480 in slow emotion, but I think that's really going to 0:11:46.520 --> 0:11:50.440 be a big potential story for two thousand and eighteen. Again, 0:11:50.520 --> 0:11:53.040 I don't know how closely the audience is following this, 0:11:53.120 --> 0:11:55.920 but um, you know, the President of the European Commission 0:11:56.480 --> 0:11:58.760 has been coming up with reports and that there's a 0:11:58.760 --> 0:12:01.600 whole kind of political dialog which is going to take place, 0:12:02.160 --> 0:12:06.480 particularly after this third major election. The election in Italy 0:12:06.600 --> 0:12:08.679 is out of the way, in early March Pool. Anyone 0:12:08.720 --> 0:12:11.360 who's anyone on the international stage needs to be or 0:12:11.400 --> 0:12:14.120 wants to be around President Emmanuel Macron. It seems to 0:12:14.160 --> 0:12:16.640 give them some kind of pr positive pr just being 0:12:16.679 --> 0:12:20.360 next to this guy. He wants more European integration, he 0:12:20.400 --> 0:12:24.200 wants a separate Eurozone finance budget. He wants a separate 0:12:24.200 --> 0:12:27.840 europe Zone finance minister. Does Chancellor Angela Merkel have the 0:12:27.840 --> 0:12:30.679 political capital at home to drive through the vision or 0:12:30.679 --> 0:12:33.720 at least help Emmanuel Macron drive through his vision for 0:12:33.840 --> 0:12:37.719 a more integrated Europe. Well, we'll have to see how 0:12:37.760 --> 0:12:40.880 the coalition talks, you know, finally play out. But the 0:12:41.000 --> 0:12:44.440 encouraging thing there is that, you know, the coalition between 0:12:44.920 --> 0:12:47.640 Bengo Mercle's party at the CDU. But then on the 0:12:47.679 --> 0:12:50.959 other side of the table, of course, is Martin Schortz 0:12:50.960 --> 0:12:53.800 and the SDP. Martin Schortz having descended in from the 0:12:53.880 --> 0:12:56.800 European Parliament where he'd been speaker and a very strong 0:12:56.880 --> 0:13:00.800 advocate of more europe Um. I in that sense, the 0:13:00.880 --> 0:13:04.920 Ducks are potentially lining up here. Um, it's not just Makron, 0:13:05.000 --> 0:13:08.120 it's as I mentioned, the Commission, the European Council UH 0:13:08.200 --> 0:13:10.160 and if the Germans come on board, and if we 0:13:10.200 --> 0:13:13.280 don't get some kind of uh something from left field 0:13:13.559 --> 0:13:16.400 politically in the in the attendant election. You know, if this, 0:13:16.520 --> 0:13:19.320 if it's not going to happen now it being moves 0:13:19.360 --> 0:13:23.320 towards greater integration, particularly as the Europeans, but it completing 0:13:23.640 --> 0:13:27.079 the economic and monetary union, had how to understand when 0:13:27.080 --> 0:13:29.440 it would have actually happened? Well shared where this folks 0:13:29.640 --> 0:13:32.920 SMP Global uh this morning their vice chairman and of 0:13:32.960 --> 0:13:35.640 course and acclaimed economists with decades in Japan. I want 0:13:35.640 --> 0:13:38.160 to get to Japan in a bit, Paul. But right 0:13:38.200 --> 0:13:41.960 now something really really quite important, and that is the 0:13:42.040 --> 0:13:45.120 i m F study yesterday and Maurice Hobbs felt you 0:13:45.280 --> 0:13:51.280 claimed academic made clear they're looking at short term optimism. 0:13:51.280 --> 0:13:54.200 Explain for audience the millier you live in, which is 0:13:54.800 --> 0:13:59.040 the short term, the medium term whatever that is, and 0:13:59.120 --> 0:14:04.679 the long term I m F was short term opposite optimism. 0:14:04.720 --> 0:14:07.400 There was a big butt, there wasn't there. Well. I 0:14:07.480 --> 0:14:09.840 suspect that the I m F for being good economists, 0:14:09.880 --> 0:14:12.680 which is not to get too absorbed by the short 0:14:12.800 --> 0:14:15.560 term cyclical movements which the markets tend to focus on 0:14:15.600 --> 0:14:18.400 more and you know, wherever you look, whether it's the US, 0:14:18.440 --> 0:14:21.400 whether it's Japan, whether it's Europe we just discussed, or 0:14:21.440 --> 0:14:25.000 whether it's China with the challenges that they have. Um, 0:14:25.120 --> 0:14:28.640 you know, there are underlying structural issues in these economies. 0:14:28.640 --> 0:14:31.520 So the you know, the expansions that we've had since 0:14:31.560 --> 0:14:34.280 the financial crisis to a large extent that you have 0:14:34.400 --> 0:14:37.560 been you know, credit to the central banks in particular 0:14:37.600 --> 0:14:41.520 the policy authorities. But you know, a cyclical expansion driven 0:14:41.520 --> 0:14:47.000 my monetary policy doesn't cure the underlying structural challenges in 0:14:47.160 --> 0:14:50.280 the economies. And I think the you mentioned Japan, it's 0:14:50.320 --> 0:14:52.000 been a long time there that one of the big 0:14:52.080 --> 0:14:54.920 lessons from Japan of the ninety nineties is that when 0:14:55.000 --> 0:14:57.680 you have deep structural problems, in that case it was 0:14:57.720 --> 0:15:00.400 in the banking system, um, you know, you do have 0:15:00.480 --> 0:15:04.400 to tackle them head on, don't rely on signical expansion 0:15:04.440 --> 0:15:06.320 to somehow bail you out. And as I would with 0:15:06.400 --> 0:15:08.480 Robert Phelbin and Morgan Stanley and John I want to 0:15:08.520 --> 0:15:10.640 dive into the Japan discussion here just because it's such 0:15:10.640 --> 0:15:14.600 a treaty of Paul Sherd with us. The Emperor, I 0:15:14.600 --> 0:15:19.920 guess abdicates is the proper phrase that signals a generational change. 0:15:20.240 --> 0:15:23.880 Is that over played or is it really a generational change? 0:15:23.920 --> 0:15:27.880 Time has moved on in deflationary Japan, hasn't it. Well? 0:15:28.080 --> 0:15:29.880 You know, I used to is tom the the analogy 0:15:29.920 --> 0:15:31.920 of of a of a duck on a pond. We 0:15:31.960 --> 0:15:35.080 all talked about the lost decades in Japan, But you 0:15:35.120 --> 0:15:37.080 know that is misleading in the sense that there's been 0:15:37.120 --> 0:15:40.200 tremendous change beneath the surface. The duck on the pond, 0:15:40.480 --> 0:15:42.400 before you know it has moved right across the pond. 0:15:42.440 --> 0:15:45.800 Because it's you know, paddling frenetically under the surface. You 0:15:45.840 --> 0:15:49.120 don't really see that. So it is a significant event. Um. 0:15:49.600 --> 0:15:52.520 You know, I think the fact that you know, he 0:15:52.640 --> 0:15:55.520 stepped down and handed over the reins, you know, is 0:15:55.560 --> 0:15:58.520 a change to the normal practice in Japan. So it's 0:15:58.600 --> 0:16:01.040 it's it's a sign of Japanese breaking with some of 0:16:01.080 --> 0:16:04.320 the traditions, the cultural traditions, which are deeply held um 0:16:04.440 --> 0:16:07.360 and doing something a little bit different. Paul, you mentioned 0:16:07.360 --> 0:16:10.080 demographics front and center. The elephant in the room in 0:16:10.160 --> 0:16:13.280 Japan is demographics, and I wonder why we still have 0:16:13.320 --> 0:16:17.880 this structural issue in Japan, which is an older population 0:16:18.120 --> 0:16:21.320 you've heard the stats. More geriatric diapers sold in Japan 0:16:21.760 --> 0:16:25.600 than baby diapers. That's how dire the situation is as 0:16:25.800 --> 0:16:28.160 as far as the demographic situation is concerned. Yet the 0:16:28.200 --> 0:16:31.280 Bank of Japan is sat there involved in trying to 0:16:31.360 --> 0:16:34.760 stimulate demand through lower interest rates and an expansion of 0:16:34.760 --> 0:16:38.320 its balance sheet. That doesn't make sense when the issues 0:16:38.320 --> 0:16:42.000 are structure. The issues are demographics. You can't print people. 0:16:42.320 --> 0:16:46.080 So what is the bo J trying to address here? Well, 0:16:46.120 --> 0:16:49.280 I would make a distinction John, between the sort of 0:16:49.320 --> 0:16:51.480 the supply side of the economy of the structural side, 0:16:51.520 --> 0:16:54.440 which is really one of the important drivers is demographics. 0:16:54.440 --> 0:16:58.960 Obviously that leads into GDP growth from the question of 0:16:59.080 --> 0:17:02.680 macro economy or demand management, and that's really the job 0:17:02.720 --> 0:17:05.560 of the central bank. So I would sort of argue 0:17:05.600 --> 0:17:09.080 that the two issues are a little bit orthogonal. Sorry 0:17:09.119 --> 0:17:15.520 to be um used some jargon there, but not in Switzerland. Yeah, 0:17:15.520 --> 0:17:19.439 he's given thumbs up, okay, And in the sense that 0:17:19.480 --> 0:17:21.400 what the Bank of Japan has focused on is saying 0:17:21.400 --> 0:17:23.639 that we want to get the rate of inflation to 0:17:24.040 --> 0:17:27.560 two percent. That's our job, keeping the un the economy 0:17:27.600 --> 0:17:32.000 at full employment. What real potential growth level, growth rate 0:17:32.119 --> 0:17:34.840 is associated with that being at full employment and having 0:17:34.880 --> 0:17:37.880 low stable inflation. Is this is a sort of separate question. Now, 0:17:37.920 --> 0:17:40.639 what I just said is standard economic analysis, but it 0:17:40.760 --> 0:17:42.960 is been it has been contested, and in fact the 0:17:43.000 --> 0:17:47.119 prior governor, Governor Shirakawa um his view of the world was, 0:17:47.760 --> 0:17:51.920 as you intimated, perhaps the demographics drive deflation and there's 0:17:51.920 --> 0:17:55.399 nothing much monetary policy can do about it. Governor Groda 0:17:55.400 --> 0:17:58.520 obviously has taken a different view, right, Johnny, just to jargon, 0:17:58.600 --> 0:18:00.320 I want you to get one more question. You're John 0:18:00.400 --> 0:18:02.879 with a doctor shared, but we do do a jargon 0:18:02.920 --> 0:18:08.480 alert here. Orthogonal, John is a perpendicular philosophy, sort of 0:18:08.560 --> 0:18:11.200 like looking at the New England patriots and comparing them 0:18:11.240 --> 0:18:16.120 to Milan that that would be certainly, Paul, My final 0:18:16.200 --> 0:18:17.600 question to you in the in the short period of 0:18:17.600 --> 0:18:19.320 time that we do have is whether what the Bank 0:18:19.320 --> 0:18:21.360 of Japan is doing is the right thing to do. 0:18:21.720 --> 0:18:25.600 Whether we should have this obsession with inflation targets when 0:18:25.640 --> 0:18:28.360 GDP per capita in Japan is so strong, when by 0:18:28.359 --> 0:18:32.880 all metrics we're pretty much a full employment Why do this? Um? 0:18:33.160 --> 0:18:36.359 Big question? A short answer is that I do think 0:18:36.400 --> 0:18:38.040 they're doing the right thing. I do think there's too 0:18:38.119 --> 0:18:42.080 much obsession about decimal points in inflation targeting, and I 0:18:42.119 --> 0:18:45.520 do think that central banks uh a little bit too isolated. 0:18:45.560 --> 0:18:47.840 I think we should be looking at demand management being 0:18:47.840 --> 0:18:51.200 the joint responsibility of the monetary and the fiscal authorities. 0:18:51.440 --> 0:18:53.680 But having said all of that, I'm a great supporter 0:18:53.760 --> 0:18:55.919 of what Governor Coroda has done. I have to be 0:18:56.040 --> 0:18:58.119 for consistency because I was a great critic of the 0:18:58.119 --> 0:19:01.160 previous regimes of the Bank. Jo Bullshit has been great 0:19:01.160 --> 0:19:03.240 to catch up with you, very insightful on on Europe 0:19:03.240 --> 0:19:07.280 and Japan. SMP Chief Global Economists and Executive Vice President. 0:19:07.359 --> 0:19:10.080 Joining Tom Kenney, Davis Switz into myself Jonathan Faraoh here 0:19:10.119 --> 0:19:23.239 in New York, we now have an important conversation an 0:19:23.280 --> 0:19:27.240 individual who frequently advises banks, investment banks, accounting firms, hedge funds, 0:19:27.520 --> 0:19:31.520 and other major financial players on fiscal policy, the federal 0:19:31.600 --> 0:19:36.800 budget and developments of the likely deliberations in Washington, d C. 0:19:37.000 --> 0:19:40.800 He literally wrote the book on the budget. The Guide 0:19:40.880 --> 0:19:44.479 to the Federal Budget is Stan Collinder the corpus MSL 0:19:44.560 --> 0:19:47.159 Group join us now, Stan is great to have you 0:19:47.200 --> 0:19:49.760 with us. My question as a bridge. A guest in 0:19:49.960 --> 0:19:52.159 your great country is why do we still do this 0:19:52.280 --> 0:19:57.280 in the United States of America? Still do budgets studio 0:19:57.359 --> 0:20:00.439 government shutdowns, still do debt ceiling debate. I mean, this 0:20:00.440 --> 0:20:03.000 isn't kinda way anytime soon as it stand. No. In 0:20:03.040 --> 0:20:04.720 fact that not only is it not going away, but 0:20:04.760 --> 0:20:06.600 I wrote an article in Forbes over the weekend that 0:20:06.680 --> 0:20:09.760 said that, uh, these are now the new normal, that 0:20:09.880 --> 0:20:12.439 is shutdowns. You're likely to see them more because and 0:20:12.520 --> 0:20:16.919 more often simply because all the sides on on no 0:20:16.960 --> 0:20:18.840 one sees any downside to it. They see it the 0:20:18.880 --> 0:20:22.920 way is showing their respective constituencies base voters that it's 0:20:22.920 --> 0:20:28.200 good for them. Stan John McCain, when he was less sick, 0:20:28.480 --> 0:20:32.760 wrote an important essay begging for us to get back 0:20:32.760 --> 0:20:35.560 to the budget process of our You, the budget process 0:20:35.600 --> 0:20:38.800 that you helped invent. Why just a question I've had 0:20:38.840 --> 0:20:42.359 three times in Davos. Why can't we get back to 0:20:42.640 --> 0:20:47.680 a normal process. Comm It's real simple. They don't want to. 0:20:48.520 --> 0:20:51.800 It's not that it's not doable. Um, it certainly is. 0:20:51.840 --> 0:20:55.440 But the most most members of Congress, Republicans and Democrats, 0:20:55.440 --> 0:20:58.639 but mostly Republicans, see the budget process is something to 0:20:58.680 --> 0:21:01.800 be used for their own device is rather than UH 0:21:02.760 --> 0:21:06.240 as a as a basic function of the government. So shutdowns, 0:21:06.359 --> 0:21:10.560 debt ceiling debacles, uh, you know, fiscal cliffs are things 0:21:10.600 --> 0:21:14.040 you've got to expect simply because they act as campaign rallies. 0:21:14.320 --> 0:21:15.959 I think of how many members are going to go 0:21:16.040 --> 0:21:18.680 members of the Houses and are going to go home 0:21:18.680 --> 0:21:20.560 this weekend to their constituents and say, look what I 0:21:20.600 --> 0:21:23.080 was willing to do for you, And so these things 0:21:23.160 --> 0:21:27.720 act as reelection events rather than as good government. Well, 0:21:27.880 --> 0:21:31.000 and into a conversation I had with Jane Harman, the 0:21:31.080 --> 0:21:35.399 former at Liberal and Democrat congresswoman from California, but someone 0:21:35.720 --> 0:21:39.080 who's been a hawk on defense and very knowledgeable about 0:21:39.080 --> 0:21:42.679 how your capitol runs. What do the Democrats need to 0:21:42.720 --> 0:21:45.879 do to respond? Do they go to the middle maybe 0:21:45.880 --> 0:21:48.480 where Mr Schumer is or do they need to stay 0:21:48.480 --> 0:21:52.400 out on the progressive left of our budget debate? Well, 0:21:52.480 --> 0:21:55.320 going to the middle doesn't seem like it's Look, let's 0:21:55.320 --> 0:21:58.359 think about the ultimate goal here for both sides, Republicans 0:21:58.400 --> 0:22:02.520 and Democrats. That's re election and perhaps increasing your numbers 0:22:02.520 --> 0:22:05.080 at the next election. Good legislating is not the plan 0:22:05.720 --> 0:22:08.840 and is not their goal under those circumstances going towards 0:22:08.840 --> 0:22:12.520 the middle is not going to satisfy on the Democratic side. Certainly, 0:22:13.600 --> 0:22:15.840 the rapidness of the voters who are trying to get 0:22:15.880 --> 0:22:18.320 back at Trump. I mean, they're they're looking at this 0:22:18.760 --> 0:22:21.320 as a re election fight, part of a re election fight, 0:22:21.400 --> 0:22:26.080 residents as something keeping the government the lights opens. So um, 0:22:26.119 --> 0:22:29.000 I think what the What the Democratic leadership would tell you, 0:22:29.720 --> 0:22:33.280 what groups like Indivisible and Resistance and things like that 0:22:33.560 --> 0:22:36.400 would tell you, is we're going to resist the Republicans 0:22:36.440 --> 0:22:38.600 at all times because it increases the motivation of our 0:22:38.680 --> 0:22:40.280 voters to get out and vote, and that's how we 0:22:40.320 --> 0:22:43.400 win in November two thousand eighteen. So stand this kind 0:22:43.400 --> 0:22:48.399 of feeds into shutdown politics. Death sailing politics is very, 0:22:48.520 --> 0:22:53.200 very different. There are real consequences in that situation. How 0:22:53.200 --> 0:22:55.200 does this bleed out, if at all, to the death 0:22:55.240 --> 0:22:57.600 sailing debate that were sets confront really in the next 0:22:57.640 --> 0:23:00.480