A Central Bank Inflation Issue Is Looming, Kasman Says

for for global growth. We were oh, I thought you were gonna start bitcointka, Well, fair enough, We'll go, oh yeah, two blocks, you can wind our way to that baby enough fair enough. Uh. We were focused on what the

im from the World Bank concluded. We're saying last week while Tom was in Wahington, d C. How's your forecast changed, if at all, and what's your out look here as we as we had two So we've been upbeat and we've been basically looking for a transition as we moved through the middle of this year from an economy that was getting some benefits from just fading the drags that hit us in two thousand fourteen and emerging markets in the commodity space to one where we have a more

organic business led recovery is behavior combines with supportive financial conditions, sentiment rising and starts to be synchronized across the world. And the good news is that's exactly what we see happening. I think the big news in the last few months is a pick up in business spending. The capex story is looking good, and the breath of that I think

carrying across the world. There's a tempering force I think from China, which we do think is slowing into the second half of the year, but I don't think it's gonna hurt things too badly. Uh And I think the outlook looks bright and I think it's helped, of course by the fact that at this stage we don't have a central bank inflation issue, but that is looming. I think labor markets keep tightening. I think we do have a problem that markets are very complacent about where central

banks have to go. But the good news is I don't think that's a story for the next two or three months. I think it is a story as we look out for the next twelve eighteen months. Fair to say, a theme of those annual meetings with global inflation, low inflation globally, and I wonder sort of how unique it is in each part of the world. Is there is

there something unifying the low inflation that we're seeing. Well, I think there's a structural set of stories here around globalization, around the idea that UM technology is helping keep prices low. But I think there's a business cycle story that's working here. I think you can see it in the pipeline, you can see it in the commodity markets. Uh. You can also see the labor market tightening continuing here. So I think the balance here is that we're in a low

inflation world. We've been in a low inflation world really for two decades right now, at least in the advanced economies UM. But I do think the arrow is pointing modestly higher here, and it's pointing modestly higher of course in a world and with central bank policies are still super accommodative, and that's the tension here. The saving grace would be if we get the business spending pick up provide a productivity boost, and I think there is a

bit of that happening. I just wouldn't count on that so much to to offset the natural dynamics of what we have, which is a strong demand picture with still pretty weak supply picture around it. What's holding that back domestically as you see it or as you you think

about what might be beholding it back? Of course, Kevin Hassets from the Council of Economic Advisor suggesting that UH tax reform would be the thing that would catalyze a big change there, laying out his case that you know, corporate tax reform would would change a whole lot, including the situation for a lot of people here in the US. How much of a catalyst do you think that would be? What would it take to to get that soft data, to move the hard data to to get that optimism

to translate to companies spending more or hiring more. Well, I think we are seeing companies spending more. I think the hiring picture has been good and will continue to be good. So I think the question is what can we do to catalyze an improvement in an underlying productivity perhaps labor supply as well. I think if we had good reform on the tax front, I think we could generate some of that. I think sometimes people overestimate the benefits of that from the supply side relative to the

demand side influence. And that's I think the problem here is we have an economy operating in full employment right now. So I think you have to be careful here and not to push too much on the demand side and focus more on supply side evidence. I think in the tax reform debate here we've shifted from a Republican plan that you know, a year ago looked like very heavily on reform and now is shifting much more towards talking

basically about tax cuts. Brice Casman with JP Morgan, David Kerran time Keene said, good morning to all of you across Yankees America. What a great games. Actually watched too much. I love this five o'clock start. It's a great and beautiful thing, like, oh look the seventh inning. I could watch it, don't you agree? Oh yeah. When I was a kid, we used to have day games in the World Series, and uh, these ideas of starting the games

at eight and going on to midnight or one. I mean I remember veda pencon of the Cincinnati where and so it was one of my heroes, I believe against Tony Quebec in the New York Yankees, and you could actually watch it as a kid. How novel and I idea which goes you know, which frankly goes into the work week that we're in right now. We so someone have two America's. We have an America working seventy yards a week and we got an America working twenty two

point four hours a week. That's not healthy, is it? No? What? What what you're saying? I think is what's not healthy here, primarily is we have a labor force where we still have underutilized resources in some places which don't look easy to access in an economy in which we were they always there back to seventeen seventies six. Is that always been the case or is it really unique this time around. I'm not familiar with the data for the eighteenth century,

but I do back. I'm sure I'm sure if we had my care he would be able to pine on that. But I do think something that has happened in the last ten to teen years, which is pretty important, is how low the participation rate has become. Some of that

is the demographics. It's people like us Tom who are getting older and leaving the workforce, But the participation rate of prime age mails has gone down in a way which I think is unfortunately, uh, you know, partly reflecting the forces of disruptions in the economy, people on disability, things like that, which structurally is not not a good thing for the economy. David, here's an email from l from New Jersey leaving the workforce good idea. I mentioned

China a few moments ago. We had to kick off of this Party Congress a few hours ago. What are you listening for? Is all of this as this plays out invasion? We had the opening speech from the Chinese premier. What are you gonna be listening for when it comes to policy? What are you gonna look for signs of how changes to policy, continuation to policy is going to

be telegraphed. Well, I think we have to look at the Party Congress as being more long term oriented in terms of what kind of policy initiatives were in here. So it is important to get a sense as we read through the speeches where the priorities are shifting. But I think it's a mistake to think we're gonna find out anything about what's going to happen in the next six to twelve months, that's gonna play out in a

slower process. Our basic call here is that we're not looking to see the Party Congress change the direction China is on, at least in the shorter term, and we do think that direction is towards some modest slowing um, not one that is very disruptive for the globe economy, but one. As I said earlier, temper is a little bit this very buoyant picture we see across Europe and the America's right. Now come back here just a moment,

but let's set the table for the next block. I imagine trade is is still a huge issue in that part of the world. We see the number countries there are trying to continue with tpp sans the the US. How large does that loom the conversations about Chinese to

the Chinese economy? Well, I think for China, trade is a pretty darn important part of their growth strategy, and I think they see an opportunity here with the US pulling out a t p P to become more integrated with the region, would become more integrated with the world. I think TPP is a bit of a lost opportunity for US. I think it's much smaller in scope than the risks we have if we start to tear up NAFTA or we begin to engage in more protectionist measures.

As I say earlier to Tom, I think it's very important to realize there are problems in trade, and we should be working to try to fix them. But we should be trying to work to fix them by opening up China, not by closing down the United States to trade. Were Bruce Kasmin of JP moregan talking of any number of topics. Sometimes in our break, folks, we get these great ideas. We're going to talk about Yankees astros, but

we'll try to get back here to adult material. Uh. Trade, Are imports different now than imports of ten or twenty or thirty years ago? In the granular data, what you guys are claimed on is the makeup of imports different? Um? Well, I think what you're seeing is is generally greater integration and goods with the continued penetration into US consumers spending on the imports side. That's a trend that's been in place,

and I don't think it's it's really shifted. I think we are seeing a slow but steady grind towards having some greater integration and services trade, and that to me is actually if we wanted to think sort of forward, if looking five ten years and want to talk about where there's an opportunity for you know, boosting the supply side, boosting growth, it's opening up trade in services, which, by the way, t p P would have started that process

with regard to the US and the Asian economies. That's still probably an under underutilized part of what the global global integration story is about. It's moved forward, and I think we have more integration in terms of people doing things in the services area, but it's still I think, got a long way potentially to go. Are we going to do t p P without calling it TPP because that has to do with President Obama? I mean basically, are we gonna have the same ballet with put a

different stick, of different label on it. I'd certainly be in favor of that, But I don't see the political process going in that direction. You know, you maybe maybe there's something there I'm not seeing, but I'm I'm worried about about things going more more negatively on a whole bunch of fronts on trade here. I think that's one of the big risks in the in the global outlook

right now. Our college Jennifer Jacobs yesterday at the Joint Press conference at the White House has the President about the search for a new FED chair, and he confirmed we've got these five front runners. He's meeting with Jenny Gellen a bit later this week to talk to her about her future, and so we'll find out soon. I guess before that trip to to Asia here in a few weeks time, who's going to be sitting at the head of the table in the Echoes building. What's what

are you watching is these these interviews take place. How much difference do you think it would be to have a Kevin Warsh in that chair or a John Taylor in that chair in terms of the policy that's laid out now, the path that we're on. How much can one person I'll be one person heading up the FMC

make a difference at this point. So I think the first thing to say is that, leaving aside the issue of hawkish and devish, it's good to see that the five names that are there will look like people who who would be generally speaking qualified to do the job. That's something we couldn't have counted on thinking about the process two or three months ago. So then the question you're asking, which is important is how much does the

chair matter? And I think, uh, the chair is always going to be given authority at the FED to have leadership. But the chair has to get that leadership partly by working to form consensus on the committee. So if you would think about it, and I don't really want to

project the stance that individuals will take. If you think about somebody coming in who would want to jerk the FED into a more uh you know, significant different direction, the Committee would pull them back inherently because the power of the chair comes from the committee. They don't have that by law. Uh So I think I think the chair matters. I think you have people who would be on the morehawkers side and perhaps on the more dovish side,

people who have different attitudes about balance sheet. But I think it's hard to see a new FED chair come in and really change the direction the committee, certainly over the over the near term. Does the vice chair matter just as much that we we're losing or we've lost stand Fishery is the vice chair of the of the Federal Reserve. Huge shoes to feel suffice to say, how important is that role? Are we paying enough attention to

the replacement of him going forward? Well, usually the vice chair is is to some degree chosen by the chair, or at least the chair has an important influence on it.

So one of the interesting questions is whether or not, as we have four seats that are going to get filled at the Federal Reserve Board, to what degree is the chair shows that and then the other members connected to the chair in some way or do we have different So if we have someone who's chosen completely independently of the chair, then I think you have less connectivity and potentially less power for the vice chair by them

by themselves. But I do think it's important to think about out four seats and the chair being the most important by far. But the idea that you can have a broader shift in terms of FED policy if you change all four people in a certain in a certain direction. It's hard to do that find four people who will who will all shift in the same direction, But certainly it matters that we have that many seats open right now. Christ Casmin, thank you so much. With Bloomberg Surveillance, television

and radio this morning. Uh we oh, oh, we didn't get to bitcoin too bad. David Garrow wanted to bring in our extinguished guest. Some cheers erupted in some corners of the Capitol yesterday when a Republican Senator, Lamar Alexander announced he that forged a deal with his Democratic counterpart, Patty Murray of Washington State on healthcare. Uh, there was some cheers. As I mentioned, there was some who were

not in favor of this bipartisan piece of legislation. Among the Mark Palker, the congressman from the sixth District in North Carolina. He's the head of the Republican Study Committee. We've talked to him from time to time. Good to happen with us here, Congress. Let me just start with your reaction. You can explain more fully how you feel about this piece of legislation that these two senators have crafted. It seems like they've created the fix the President said

he was looking for. Why are you not in favor of what they've come up with? Well, I I think anytime. First of all, going back to what Lamar Alexander said yesterday, that he was encouraged by an increasingly potential group that was supported. Let's just watch it in speech, and this is csrs have been a mess from day one, uh two thousand sixteen. The House sued and it was ruled to certainly illegal, and I don't know that it does anything long term to be able to resolve some of

the things that we're seeing. When it comes to the increased previous What are your constituents in Burlington and Mevin throughout the six district say to you about these csrs. He's constant reduction subsidies. I imagine a lot of them depend on them. And what we have here is a president doing away with them, kicking the can over to Congress, and it's gonna take some time to figure all this out. I know that you'd rather see them go away entirely,

see this law changed completely. But there's got to be people who talk to you who are worried about what it means for their coverage. I would be remiss if I didn't say that that there is some concern trying to find that balance. There's always a challenge. Just two days ago, I heard from a gentleman who had received a letter from Blue Cross at Blue Shield here in North Carolina. He is a cancer survivor. He's mortgaged his house, second mortgage. His premiums are getting ready to jump fifteen

hundred to three thousand dollars. So so it's it's it's those folks as well that we have to represent. And that's not even talking about Remember former President Clinton talked about what it does to the small businesses and uh those that's a component this as well, as long as these mandates continue to reduce the growth in some of these areas, specifically here in North Carolina. I mean asked

about the role insurance companies should be playing here. I've noticed a change in tone on the part of the President toward insurance companies. Back in February, he invited a lot of big CEOs over to the White House. He praised them for the work are doing. Now he's talked an awful lot about the degree to which the government has been propping up their stock prices. That's one thing that that he's mentioned about them. What role do you

want to see insurance companies playing here going forward? Well, I know this under Obamacare, people are hurting, but insurance companies are not. And I want to be careful before we sent a president that we're literally writing checks out of Congress to these insurance company's. Whether you want to call it a bill out or anything else as a subsidy, that's that's a that's a crucial concern that should be um long term. Where does this stop? What happens if

we start doing this to other companies? Are or are there entities? And I think that's one of the reasons that many Republicans and others in the House have such an issue with it. Just joining us Congressman Mark Walter Walker rather the Republican of the Piedmont of North Carolina. Uh, Congressman, you are the fabric of the Piedmont. Your father was a minister, you're a Baptist minister, and you have a campaign approach. It is absolutely original for concern pervatives in America.

How do you adapt and adjust to the certitude of non religious conservatives, particularly the more conservative types. You've pushed against that sort to year after year after year of your public service. Where's the humility among conservatives today? Well, it's it's dissipated. To be frankly with frank with you, that that is something that that we are continuing to call for that unless there are certain relationships built on trust that we're never going to resolve some of these issues.

We see the rhetoric even continue to grow. One of the things that I'm most proud of is is a great relationship with the Chancellor of North Carolina A and T. I'm privileged to represent the largest historical Black college university in the country. In fact, we launched a paid internships

for HBCU students. That's important to UH my family's even personal but my wife being a two time graduate of one of the hbc used this is something that we've got to be able to continue to work on because the condescension that we see from some circles where do your right or left does not allow us to really bring solutions, but it only creates more divisions. Let me ask you lastly here in the time we have with you.

Know you're busy about the the opioid crisis. To aur you embarked on a couple of days ago, a two day two or throughout your district. I know you went to Elon University for roundtable. You went to an alcohol and drug abuse treatment center. What did folks there say to you about what role they think the federal government should play? Of course we've watched here as Congressman Tom Marino, you're colleague in the Capital, has stepped away from from

consideration to be the drugs are as it's called. What did they say about the role the federal government should play incurving this crisis. Well, obviously, any time you're dealing with some of the local even state agencies, funding is always the concern. Our job is to make sure that every dollar from taxpayers that we receive that we're being good stewards. But but it's different than talking with people who are working in this area. As a people literally

walking to the journey of addiction. I wish more of us are more people would get out there and see some of the heartache of the last six years. We've gone from seventeen thousand deaths to over sixty thousand deaths last year. This is an epidemic proportion. We've got to be working on on prevention, We've got to be working

with people who are walking through. But we've also got to make sure long term, what is it that we do to be able to to offer these people an opportunity to get back on track to fulfill as a person of faith, the very path I feel like God's created for Mark Walker great to speak me. That's Congress

in Mark Walker, the sixth district in North Carolina. Let me bring in our our our next guest, and David will have more intelligent converse questions than I will end to Kenny uh to be direct as a former Prime Minister of the courageous people of Ireland, who is anybody knows? In the Wall Street Rack were the first people to really say we gotta be adult, We've got to take responsibility for this tobacco of two thousands, seven two eight. We can talk about the financial aspect. Did you know?

And I went back, David, I looked at some of Gordon Brown's comments of oh seven oh eight, did you know there's a thing called Brexit? Now? I don't know if you're aware of that, but there it is. And I'm sure we'll get into that. But I've got a far more important question and a Kenny with us. And when I was a kid, we would watch Wide World of Sports and we were transfixed by Irish football. You you are knee deep in this with Mayo. Is it Mayo?

What do you think of the National Football League in America? When the sport you play in Ireland is so tough and so visceral. How do you perceive American football. Well, first of all, Irish football we call it Gaelic football because you have the association football, which which in ordinary man's language of soccer, but the the the Gaili football is played to the highest level on a county basis. It's an amateur sport. The fitness level are extraordinary, as

are the skill levels, um. And it's it becomes really you know, a passionate existence based on the parishes, on

the teams and other local communities. And then when they play for the county, they go to all Ireland level and compete at a very very high and if somebody scores a touchdown or whatever, they're not doing all the fancy dance stuff they're they're Obviously we've had American football teams over in Ireland in the last number of years, Georgia Tech and Boston College, Author Dame and the Navy professional teams like that I understand, and they've they've created

a great excitement and energy. I mean, the team numbers are huge as distinct from sting from Gaelic teams um. But obviously the teams that did come to Ireland, you know, but a sense of great excitement and energy for the period there, and they were followed by twenty five Americans, which was good for the hospitality sector. We gotta make news for Boston one of six one FM, and of course or serious exem in a small town called salthen Who gets a bigger turnout Notre Dame or Boston College.

Um well, I think when the when when we tried to get the two of them together as often as we could because they created a sense of um of unprecedented passion in Ireland. Listen, both colleges, both colleges have have have huge following, a huge Irish I asked for don't ask me the numbers. I couldn't give you. An he sounds like a politician, David Sabers from from the fighting. I all right, well, let's segue to something lighter here,

that being the combate over Brexit. And we've certainly heard the degree to which those debates have soured, some David Davids saying that there was a deadlock when last they met in Brussels. How are you observing all of this unfold from where you said? Where do you think things are headed? Well you know what happened. Obviously, euroskeptics in Britain. Prime Minister Cameron said if I win the election, um, I give you a referendum. That happened. The referendum was

lost and he resigned. Was a non binding referenum. So Trusa May was lettered as as Prime Minister and she gets on with a small majority, finding it difficult, has another election, loses that majority is now propped up by the Democratic Union's party from Northern Ireland. This is a

very complicated matter. So so what's going on now is the process before the big talks, and the process is triggered by the Prime Minster having within the Article Article and the letter wanting to leave that's due to take place in March. So Michel Barnier is the lead negotiator on behalf of the European Union and he wants three things dealt with before they get downto real business. Those three things are one, what is the cost that Britain

must pay for leaving the European Union club? Secondly, what are the rights guaranteed of European citizens living in Britain and British citizens living in Europe? And thirdly, what are you going to do about the question of the only land border within the European Union after Britain has left, and that's through Northern Ireland, which rights are now guaranteed under a separate and independent Good Friday Agreement which happened twenty years ago, and that has to be preserved at

all costs and will be preserved at all costs. These are complicated matters about some that people didn't ever think about. But they've got to deal with those three to a

sufficient progress level before they start talking about trade. What does it mean if this goes through, if we see the UK leave the European Union, what does it mean for we, say, a fisherman in Ireland who wants to sell his wares to UH to Europe saying might customarily stop in the UK the way well, fishing is a complicated issue, more so than most because for Britain to leave fully most of the quotas are caught in British waters. It would suit Britain to have a hard bridge and

just leave in the morning. But the negotiations on fishing have been developed over fifty years and they're like layers of a fruit. You just can't to dismantle them. Like that. But what it means at the moment, the European Union is the market of five million people and Britain is a very important part of that. And it is part of the single market you can move capital, goods, services and people. It is part of the customs union where

you have external tariffs but not only internally. Now that Britain wants to leave those two things and still have the same response, and that's the problem. You see, there's no reason why Britain couldn't be a global power within the current European Union, which is evolving and which started out as a peace process, the most successful on the planet, but which it has to move along with his own agenda.

So it's it's a real problem here. And until you get past those first three base points, you don't ever get to where you're going to talk about about real trade. And if that continues, politicians are going to have to make a decision otherwise you end up in a catastrophic situation where there's a heart breaks on the border. Mr Prime Minister is black Wine, I hope I'm pronouncing that right. There was a bombing in nineteen seventy for horrific bombing.

What do you envision is the best outcome for Ireland in the United Kingdom at that border of Black Wine. What do you envision in sixteen looking like. Well, if you drive from Dublin to Belfast, now you drive through black line. There is no border, and that's operated since the Good Friday Agreement, and that's what we intend to keep. If you brought back what you call a hard border,

customs posts and all of that, what would happen. You'd bring back sectarianism, and you would have you'd have untold trouble. And we're not going back there. There were three thousand people bombed, murdered and maimed in that period. America was a great help to Ireland when President Clinton sent over George Mitchell and after five years worth, the Good Friday Agreement was signed. It's an internationally binding agreement, lodged in the United Nations, accepted by America, by Europe, by Great

Britain and by Ireland. So that's sacrosanct and putting a hard border on the top of that would be absolutely catastrophic and it won't happen. This is a political problem and for those who were advocating, you know that we should leave this is a matter that should have been considered far more carefully in the run up of the referendum. But it's a real it's a real issue, and it's going to require a unique situation and a unique solution, and there were fewer own who can tell you what

that is. David jump in here with the I have like eight questions and speech you and I have to go to Dublin to continue this conversation with the Prime minister. But David jump in with your observation. You've got a different direction here from my last question. That is, we've seen that the Prime Minister of Greece travel to Washington to meet with the President United States, and I want to ask you just what it's like to be the leader of a country meeting with the leader of another country.

We hear a lot about the relationship that one leader develops with with another in such a short time frame. How do you get a sense of who the other leader is? How do you develop warmth, developer relationship. Polities is all as about people who governments, about making decisions. The Greek prime minister is right. I was actually one of the first prime ministers to have the opportunity to meet President Trump in the White House. Um, it's the

office that you talk about in the importance of it. Obviously, you know, the President of the United States the most powerful office on the planet, but it's it's one that doesn't carry all of the authority that people might imagine. The President has responsibility over, you know, foreign affairs, foreign matters, foreign policy, the Pentagon, and so on. But when you look for money, you've got to deal with the Congress

and the houses of the Houses of Parliament. So your American Constitution, the American courts, the American political system all have distinct functions and the impact in one way or the other on the presidency. But I think it's very important for Europe to be over in America very often and America to be in Europe very often to understand

the mechanics of this. Europe and America were always very close allies, the Marshall Plan, World War Two, all of these things, the rebuilding of a peace process in Europe, which has now lasted for sixty years. There is no reason why we shouldn't be able to continue this. In the interests of the common humanagement, as we share, we'd like to continue this conversation and to Kenney. Thank you so much. He as a former Prime Minister of Ireland.

Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or which over podcast platform you prefer. I'm on Twitter at Tom Keene, David Gura is at David Gura. Before the podcast, you could always catch US World one. I'm Bloomberg Radio