Current Job Growth Unlikely to Continue, Gross Says

of course, on the Bloomberg. In the last twenty four hours, Lauren Adler and Matt Feeler over Brookings say fifteen million people will go off the rolls. Do you agree. I

don't think it's gonna be fifteen million people. If you look at those who are enrolled in the Medicaid expansion, or a lot of them were actually eligible before Obamacare passed, a lot of them could obtain private coverage, especially if you repeal the Obamacare regulation regulations, which will cause premiums to plummet for the vast majority of people in the exchanges. That is people. Why the bill that Paul Ryan and the Republican leaders in the House have put forward is

so inadequate. It does not repeal those regulations. Those regulations are destabilizing in the market. They're going to toss forty three thousand Tennessee residents out of their coverage that next year, leaving them with nothing. These are people with cancer and expensive conditions. Obamacare is in crisis right now, and they are not repealing the parts that are causing that crept.

Within your note, you take Eastern Tennessee and folks, what's so important about this is the granularity of Cannon's work. You take Eastern Tennessee and you expand it to the nation. The Congressional Budget Office has to do the same thing. Can you explain to me why we have to rush before CBO scores or estimates the cost. Well, what's happening is that the Republican leadership is trying to manipulate its own members. They're trying to get them to commit to

a bill before they know how much it costs. Look, the Republican leadership, they have estimates of how much this is gonna cost. I've spoken with staffers to the leadership who said, you know, we've consulted with CBO, We've consulted with OMB, We've consulted with actuaries at at multiple firms. They have numbers, but they're not sharing them, and that tells us that the numbers are not gonna look good. The rank and filer are not gonna like those numbers.

So while are they asking them to commit to the bill before seeing the numbers, it's because they want to. They want to rope them in and make it harder for them to UH to reject this bill after the numbers come out. Kevin Surreally spoke with Senator Paul of Kentucky a few days ago. I think he's a libertarian, but he's not a Michael Cannon libertarian. What is the distinction between Senator Paul's outrage and your academic and careful work. Well,

I think, for one thing, Senator Paul has to get reelected. UH. But but he and I share a lot of critiques of this law, of this of this legislation UH and and the biggest one is that it is not repeal. It preserves for the federal government all the powers that Obamacare gave to the federal government over the private health insurance market, including all the provisions that are destabilizing insurance, not just in the in Eastern Tennessee for those forty

three thousand residents who are gonna lose all coverage. But across the country, there are a thousand counties with only one carrier left in the Obamacare exchange, and three million people are subject to losing their insurance if just one carrier leaves. Okay, So, Michaile, you're extremely extremely critical of this GOP alternative. They must realize that there are a lot of critics out there. What would you do in

their shoes to make it a little bit better. I wouldn't want to make it just a little bit better. It needs to get a lot better. So what I would do with three things. One, push for full repeal, including the regulations that this law doesn't even try to This legislation doesn't even try to repeal. Uh. Second, deal with the that will cause premiums to fall for the

vast majority of people affected. Second, you want to give states the flexibility to spend their medicaid funds so that they can target those funds toward the truly needy, including people with pre existing conditions who are currently in the exchanges and would lose their cover. So you're taking care of those folks, But The most important thing, perhaps is that you need to bring down healthcare prices. This legislation

doesn't do that. It takes the Obamacare approach, which is throw more government subsidies at unaffordable care rather than make healthcare more affordable. And the way you bring healthcare prices down so that fewer patients are vulnerable is by giving consumers the money that employers and government now control. They'll bring those prices down. The way you do that is

by expanding health savings accounts. Okay, what are the chances of them changing and doing something that you've just mentioned. There must be people in the Trump administration that are looking at it and that are trying to figure out the best approach and the best way to deal with it. Who does President Trump listen to. Well, what what's gonna make the difference is whether conservatives in the House tell the leadership, we're just not going to vote for this.

If they tell the leadership, we're not going to vote for this, and the leadership has to make changes. And a number of House conservatives already went to the White House yesterday they spoke with President Trump about making changes to this law, moving into more in the direction that I've mentioned in the direction of expanding health savings accounts.

Hopefully they will get rid of the tax, the subsidies, the entitlement spending that that this legislation would retain from Obamacare, the the government subsidies for private health insurance companies h and replace that with expanded health savings. You might help me here with a question that came up three times yesterday. Francine Laquise coming to you from London? What's wrong with Francine's medical coverage? I had three people yesterday say to me,

why can't we do it like Canada? Why can't we do it like England? Why can't we do it like blah blah blah? What's wrong with Francine laquise medical coverage? All sorts of things. For one thing, it's not very responsive to the patients because the patient is not the one controlling the money. Uh. There are some pretty um horrific examples of government rationeting in those systems. I'm not going to say that no one benefits from those systems.

Of course they do, or else these governments would have gotten rid of them. But they do not deliver the sorts of innovations that the United States delivers in terms of new medical technologies, nor the sorts of innovations that really no system delivers in terms of driving down the price of healthcare, making it more convenient and more affordable for everyone. Only markets are able to do that. We see that in certain corners of the healthcare. We don't

see it anywhere in Canada or the UK. I pay taxes, I pay a lot of taxes, but then my insurance is free, Tom, right, it's funding. This is the problem with my health care. It's not you have to fund it and people have to be clea exact that you have to pay a certain percentage of your annual income for everyone to be protected. Francine to help me here. I know it's Mr laquas birthday and it's a deeply

emotional weekend at the Lak house right now. Help Michael Cannon here, Dr Laka, are you getting okay coverage for your offspring in England or do you have to fly to Boston or New York to get a pediatric visit with your kids? Alright, Michael, for the record, we're all healthy, Tom for the moment, so long may that be and that makes everyone's life a lot easier. But Michael we This is the point, and Tom has hit it on the head, is that we may have certain concerns about

our systems here in Europe. But is it because people for the fact that you don't want to give free healthcare to everyone in the US? Is that because there's a US mentality that you kill what you eat and so people don't want to pay to look out for their neighbors. Or is it really the concern that Tom was pointing to that you need specialist help and that would not be covered if you have basic health care

for everyone. The reason I want to get the government out of healthcare because I want fewer people to fall through the cracks of our health care sector. I want to use innovations to fill in those cracks, to make health care better, to make the price of healthcare fall so that more people can afford medical care themselves. And the rest of us are wealthier, so we're better able to help those who can't help themselves. And in the United States, you know, I'm I'm I'm a critic of

you as health care sector. But one of the things that we do in the United States better than any other nation is we develop new medical technologies, new drugs, new treatments, and those help fill in the cracks not just in our health care sector, but in the UK and in Canada and in UH, in all sorts of third world nations. So so that's an important part of

this puzzle. And other nations are not are not stepping up, are not delivering them sots of innovation joining us now, Villain Bowder, Global Chief Economists at City, great to have you here in our Bloomberg eleven three oh at studios. Let's start with it with your outlook, your forecast for growth and for inflation. We had adjusted forecasts from the o e c D at the beginning of the week. We heard from Mario Dragging, the president of the e c B yesterday as well. How much adjustment of you made.

Where does your forecast stand right now? For growth? City suppiccial forecast is for two point this year. It's supposed to one post six last year. I think you're probably going to be UH on the up side of that a bit so in the sort of low to mid two, which is an approved it over last year, and be of course UH significantly faster the potential up with growth, so output gap they will be closing. But ever, a

full employment is will be hitting it. Mario Dragg yesterday saying there is not a sense of urgency and monetary policy anywhere. What did you make of what he had to say yesterday, Yes, about the data, but just also about the monetary policy environment. Well, he had to balance two different objectives. Right First, it's clear that even underlying inflation rising in ura now, let alone headline inflation, it's a really hit two um, it becomes very difficult to

argue that continued super loose multi policy makes sense. At the same time, he doesn't want to stop doing qui tomorrow or raise rates the day after tomorrow. So he had to throw a bone to the two tonics, which was big enough for them to let him get on doing sixty billion of worth of asset purchases until the end of the year and probably only slow tapering after that. Can I just jump into the conversation, David Gray, if I said throw a bone at the two toonics, I

would be thrown off of what we're radio. Continue the the the elephant of the room yesterday, of course, so was politics. How big an elephant we're looking at here? How long is the trunk? How bigger the tasks when wh when you look at the French election coming up before that, of course the Dutch election next week. Yeah, the Dust election of course is not systemically important. Something you're not following. I wouldn't do anything radical without permission

from the big neighbor to the east. Um. But yes, it clearly would would be a huge event if the so called Freedom Party, the Dutch right being populists, were to be part of the next government. They may be the largest party, even that's not clear. They won't get in all likelihood even the vote. The Dutch have a strictly proportional lower house, so no party has ever had

a majority. If our the government with part of a coalition. Um, if you're part of a coalition, you won't be able to have a referendum because I have to change the referendum law to have a referendum the EU. So I think it's all going to end up most likely with another centers that coalition, without the hard hats, without the populist but more obstructionist in your's own decision making and

the new decision making. Um. Because even the establishment parties that have taken on the rhetoric and so the substance of the policies of the populists. How worried are you at this point about the commentary we're hearing about fears about the the integrity of of of the Euros on what might happen here if the election goes a certain way. In France. We heard from Mario Dragging yesterday the euro

is irrevocable. Um, are you concerned about the the the the continued cohesion of the European Union in the short run, I'm not particularly worried. Clearly, m during uh this year and next drag you will still be around as head of right. Here's no, he's going to be around the first October nineteen, So I don't start really worrying until we get to early nineteen and people start talking about

his his successor now. Um, it is true that there could be UH much closer disaster if France elected the PEN. I think still very unlike, though less unlikely than it was before Mr Field first implodeed and now he's reploading somewhat. And Uh then of course Italy, where where's the breakup of the Democratic Party, the leading party of government. Um, we are likely to see an election which could result

in the majority for enter your enter youth parties. Even then, remember this, a majority for a pen even upon presidency, does not mean that France leaves. You don't know to you, because not everybody who votes for the PENN also wants to and the same in Italy, although the popular opinion

is turning quite sharply against you memberships. I'm most worried about Italy, but the real trouble vote stat I think until the dousand nineteen, you know, not that I would have a beverage of my choice at the Vault bar at the Waldorf Story in Amsterdam, but it's it's possibly something i'd consider. Help me, and I'm sorry. The Dutch are always out front under the sort of like David Mike my amateur takers. They're sort of like California. The

Dutch are like California. Help me here with where we are, seriously, Professor Powder, with neo fascism and the neo the things we don't want to talk about as we come up on these historic elections. What's your measurement of potential fascist

tendencies in Europe? I think it's it's clear that UH much of the political UH populist move months have key elements both in language, and it is post policies of fascism, right, the call for strong leaders um, extreme nationalism, nativism, looking down on others, um, seeing the nation as humiliated by the elite, by the establishment, looking for strong preferably mucho leaders, racism, Um. It's it's all there, um, and it is I think

extremely worrying. Last time Europe began to flood with fascism in the niteyen thirties, they couldn't stop. And I hope partly because we went through that, and I think that even Europeans are capable of learning right that they will pull back and not uh take the last step towards having an actual the fact of fascist regime in empower in a significant European nation. But it is something that we have to be ware of as a risk. Yes,

we looked at him. What happened in the UK is something that told us perhaps what might happen here in the U s. As you look ahead to the Dutch election next week, is is there any sort of indicative value to it? Um? Is the way that that election turns out going to tell us anything about what's going to happen in France? Indeed, what might happen in Italy. Not not really, it's a it's very country specific. Builders. The leader of the Dutch Populists is in a way

an establishment politician. He's been around in politics for nineteen years, first as a member of the traditional Conservatives and then the last ten years or so as leader of his own party, and if I should say, the only member of his own party, which is a bit unique, I think that he his um, you know, anti immigrant, especially in the Moroccan rhetoric is so vitriolic. Zoe fishes his

anti Islam rhetoric. Let's close down all the mosque, all the mosques, let's ban the Quran is so extreme that even many other populists in Europe do want to have

anything to do with him. What an honor to speak to Johan Luxury Shore yesterday and Busters Chops about seventeenth century France economics and mercantilism, and now to rip you apart as well on seventeenth century Dutch mercantile is um as well explained to our audience what the Dutch and the French wrought a number of hundreds of years ago about mercantile is um. What is it? Well, the Dutch

were not really mercantilist. They were merchants, right. They didn't believe it imports or a bad thing, and that exports a measure of virtue. So, uh, they affect created a trading empire that for the size of the country, which I think at two and a half people at a time, despite almost a Portuguese standards. So I think the Dutch did trade ride inch basically the precursor of Navarro. Yeah, well, the precursor of Professor Navarro. Now our audience knows that

Mr Navarro is advising as president. What is the element of trump navarro economics that hearkens back to the seventeenth century, The statement that, uh, they believe that you help a country by restricting imports. One of the oldest insights dates nty six about Learner trade is that a tariff on imports is equivalent to attacks on exports. They both stick trade, right, So when you go after imports, give or take um a small period of adjustment, you will be hurting exports

as much as you heart imports. You'll be hurting trade, and the world and your country will be worse off. Of course, the Games fell trade very unfairly distributed attend is an issue, but that's a domestic political issue that has to be addressed by taxation of public spending, not by protection is m David jump into this academic treatise, folks. I'm gonna put out learners symmetry theorem with the major thank you to jug Dis Bugwadi of Columbia University for

driving it. For see about it right. We're scoring points about her. He may come back. Can you come back next week on the Dutch Dutch elections in America? Wherever you are in the planet, we need you. We're honored to have you back on the Dutch elections. But David, pick up the seminar here from the there's no math in this. The Learners symmetry theorem very good. We're hearing so much debate about this border adjusted tax. I note that in your fiscal projections you're you're not factoring that

in Why why is that? And how likely are we to see a tax reform without a border just vod just tax is simply a switch of Edith value out of tax with just doesn't have a profit tax from a tax base. The Texas exports and exempts imports to one of the taxes imports and exacts exports, and there's parva facia. Looks like a great way to stimulate exports and heard imports, and that's how certainly the importing next

putting industries have faced it. It's also likely to be viewed the rest of the world as a hostile act. But learning symmetry implies that this will be neutral. That basically, the tax inclusive relative price of imports uh no bill go up, but the tax exclusive reurprisive imports to exports will go down and nothing real will be affected. It may take a while, but that's the story. Um uh. The world doesn't believe this, and so it is very, very contentious. So far, there is no sign that Mr

Trump has brought it effectly compleatably be too complicated. The one reason I think that mayopic politicians like this out from benefiting exports and hooting imports is that it would be a short run revenue win for for the US because imports the exports. So if you switch taxation from exposure imports, you're getting a win for about if corporate tax rate in the new regime about point six of GDP annually. Of course, she's the US is a data

country externally right you expected. The present value of future exports has to be greater. The personality inputs a long run revenue negative, but politicians don't do the long run. It feeling better. Great to see here, global chief economists. We'll come back next week if we can. It's symmetry brought you by Bank of America. Mary Lynch. Dedicated to bringing our clients insights and solutions to meet the challenges of a transforming world. That's the power of global connections.

Mary Lynch, Pierce Federan Smith Incorporated, Member s I p C. Job's Day, Jim Blast and Bill Gross to be along, but always on jobs. Today we try to corral the professor from Princeton. Alan Krueger joins as a former Chairman of the President's Council of Economic Advisors. Like a magnet. Alan Krueger goes where nineties six thousand were screaming just a few days ago. Barcelona, Spain. Is the city still

lit up over this football match, the greatest game. Supposedly had a little trouble checking into my hotel room because people store are flocking to the city. You know, I just extraordinan folster. I thinking of the Telegraph for great coverage on something I don't understand. Paris anger Man taking it on the nose. They add up the two games, David Cura. They do one game and then they do

another added up in Barcelona with a great victory. What's gonna be the great victory here for Cherry Yellen Alan Krueger is a wage growth. It's gonna perfectly time where her rate rises. Well, yeah, so far, I think she's shown um remarkable perception in reading the economy, and we are seeing inflation moved to the two percent target. Unemployment rate I think is pretty close to full employment. So the next, uh, next step would be wage growth approaching

three or a bit higher. You know, we haven't talked enough on this show about immigration policy, what the President has proposed, at least in broad strokes, and what that could mean for the labor market. Have you and others begun to think about that issue in particular here that if we see more people asked to or forced to leave this country, if we see more restrictions placed on immigration, if we see Alan Krueger a merit based system, how

that could affect the contours of the US labor market. Well, I think the proposal to build a wall and to restrict immigration to the US is kind of productive for our economy, and you know we're going to face a worker shortage. Look at our demographics. Um, we want to raise our growth rate. I don't think the way to do it is by by restricting immigration. I think the impact of immigration on wages is actually not all that great. The studies have found that immigration doesn't have much of

an effect on wages of natives and immigrants. Common they create demand. You know, it's not only an issue of supply. They also uh by by goods and services. So I think the economy will shrink if we have a sharp change in our immigration policy. How surprised were you by by all of the commentary last week from from FED policy makers. I wonder if if if we're any closer to getting some unanimity here on the tabled our star on that neutral rate, are we seeing more cohesion among

FED policymakers. I think so, you know, I think that the stars are aligning for for the FED, and that the economy has been improving it about the rate that they've been expecting the last year or two. Ellen helped me here with the Great Debate which is are we fully employed? I mean, you've been in the absolute crucible. Did you ever sit on a couch in the Oval office with your legs up on the couch taking taking a selfie like we've seen with the Trump administration. You

never did that, right? No, Okay, I just wanted to clear that up on a Friday before the jobs report. Are we fully employed? I think you know, we are still affected by the Great Recession. And I think there are two major developments in the economy over the last ten years. One was the Great Recession, and then the other is the Baby boom heading retirement age and labor force has been tranking for both of those reasons, but mainly I think because of the aging of the population.

And I think those who left the labor force because of the Great Recession is going to be very to bring them back. Do you know where the neutral rate is for the interest rates for the Fed? The target rate? How many rate rises gets us to gets us to neutrality? Yeah? Uh, you know, I'm going to plead that I'm not a monetary content. There you go. I don't know. I think that for the next year at the economy's kind of got momentum and maybe next year and a half and

after that, I'm not sure. The question is kind of how many rate increases school we have by then? Professor Krueger, you were in the crucible of Obamacare. When the critics of Obamacare speak, how do you respond? I'm not saying you directly developed it, but you certainly were within the debate. How do you respond after watching the sausage get made? Well? You know, I think, uh, the Affordable Care Act has

changed our country. I think for the better. I think, uh, it means something different to be an American When we have universal health insurance, it's the same as Social Security out and having twenty million plus additional Americans have health insurance coverage, I think is a major achievement. There's certainly parts of the Affordable Care Act that I think could have been designed better. Um, but I think it needs to scalpel rather than a meat cleaverer in terms of

trying to improve it. What makes this such a difficult issue to deal with? I was talking with the head of an insurance company yesterday who said that politics often Trump's thoughtful policy when it comes to healthcare. There was a lot of criticism of the Affordable Care Act that Democrats pushed it through very quickly. Of course, that was a nine month process. Here we're seeing this happened over the course of a matter of days. Why the reluctance to to take one's time with this, to try to

get it right, to try to get as right as possible. Right, Well, it didn't seem so fast when it was happening in two thousand nine. It's felt like, especially in the Senate side U that Senator Baucus had been reaching out quite a bit to try to get bipartisan support. But health insurance health care is a very complicated issue. It's almost

one fifth of the u US economy. Uh, whenever you have taxes and transfers, it's complicated when you can uh change incentives in the health care system which affect life and death decisions. You know, obviously it's going to be controversial and should take time to make sure, uh that we move in the right directions. Well, what can we learn from the way this process is unfolding about how

tax reform might unfold on Capitol Hill? I'm curious for your perspective here, as an academic economist goes into government watches this legislative process unfold what you make of it, what you make of how this proceeds well. One lesson I learned is that as an academic, we shouldn't let the best be the enemy of the good. And if the political process is moving generally in the right direction, even if it's not what we consider to be optimal,

I think we should view that as success. And I think as as academics, we tend to think of what's the ideal, what's the optimal, and not compromised from that. And in a political environment, you have to have to make compromises. So that that's one lesson that I took away. Another is our corporate tax system is awful. There's so many things we can do to improve it, even if

it's not ideally, will be steps in the right direction. Um. But the politics are extremely complicated because you have so many interest roots involved that um, I think it'll take quite a while. Alan you have the advantage at Princeton of one of our national treasures. Conservatives and liberals alike read everything of a Reinehardt writes on healthcare, and he

you know, he's predicted the collapse of Obamacare, etcetera. When when you sit with a Reinhardt in Lincoln Krueger what I'm gonna call reality economics with Reinhardt's just grizzled incentives within the medical care system, what is the best outcome short of what is anathema to Americans, which is a national health care system. You know. I think the exchanges are a step in the right direction. The exchanges were not controversial before they were put in place at the

national level. States like Utah we're moving towards exchanges prior to the Affordable Care Act. So I think that there are areas where we can have concessus and in the exchanges you can pool risk, you can help uh, entrepreneurs, individuals get the advantage of group rates, also the advantage of kind of group bargaining more transparency. So I think that there are some steps like that where there should be universal support. Want just move back to the jobs

report that we're going to get today. Just looking data? Oh that, uh, look at the data what we've gotten. More broadly, it seems like the soft data has been so strong. There's so much sentiment that's good in the economy here in the US and indeed many in many parts of of the of the world. When does the soft data begin to intersect with the with the hard data. When are we can to see the sentiment influencing a

pickup and hiring? Do you think I think that, UM, the key question is what impact doesn't have on consumer spending, consumption as well as investment, but mostly for the U. S economy. Consumption and UH confidence can increase, but if it doesn't translate into people taking more risk um UH spending more taking chances, then I don't think it's gonna

lead to a particularly faster pace of growth. Help me here with something that we've talked about before, which is some of the experiments going on, and one of them in your wheelhouse, Professor, has been the rise in the minimum wage. What is your recent observation on what cities have done. I'm going to suggest leading the way to a higher minimum wage. What what's the Kruger up observation

of these many experiments. Well, we're in a situation much like where we were twenty years ago when the federal minimum wage lagged behind, and the states and the cities have UH moved ahead of the federal government, and so far, I don't think we're seeing the adverse I don't think we're seeing adverse effects. Of it um. I do worry about a minimum wage of fifteen dollars at the federal level. On the other hand, I think seven dollars in twenty

five cents an hour is nearer historical low. Donald Trump said during the campaign that he supported that ten dollar federal minimum wage. I haven't heard him say anything about it since then. I hope when he has the Labor Secretary that he delivers on that promise that seems to me like the reasonable compromise at the national level, and then the cities and states can go above that if

if the conditions weren't in those areas. Now generous of you to be with us from Barcelona, Spain this morning, Alan Krueger, just be sure, professor that if you're in a bar you love, you love Barcelona football and enjoy the topics. The best outcome on this job, say Allen Kruger. With us with Princeton University and and joining us now in Bloomberg Radio, Bloomberg Television worldwide. When William Gross of Janice Capital, Bill, I want to get to the bond

market in a moment. But you wrote a scathing note I thought yesterday on Mr Trump and Trump economics. I mean, it's morning in America. Who takes credit for this job's report? President Obama, President Trump or Bill Gross Well, if it was a bad report, Trump would certainly dismiss it. But since it's a good report as part of his administration, I'll take credit for it. But you know, to to think that these types of numbers two hundred forty thousand jobs created will continue, it is a bit of a

stretch to my way of thinking. Uh, the economy itself is only growing at one point two percent according to the Atlanta Now forecast, and then that follows a paltry two percent that quarter before, So economic growth itself is not gangbusters. The jobs appear to be here, and wages are moving ahead decently, so all of those are good

for the future. But we shall see it. It's a situation where productivity determines growth, and uh, propos yet to put forth plans for productivity help us here with the managing of money and linking it into our day to day lives. Do we assume a federal reserve that is going to be in some form one or two or three and done, or do you look at this as a measured green span like move of a many set arising interest rates. Yeah, I think it's a mini set. I think the FED or any central bank has to

be careful in terms of where they move to. You know, the FED has a a target called our star, which is the neutral real rate of interest or the neutral real FED funds rate, and you know it's assumed with two percent inflation that that would be zero on a real basis or two percent nominally. So the FED at the moment appears to be headed to two percent nominally. But it's a difficult type of calculation. No one really knows what the neutral rate of interest is in this

new normal type of economy. Tom I I characterize what Trump would hope for as the old usual, you know, three to four percent economic growth versus two percent in the Obama administration, the new normal. If we can't get to the old usual, then certainly our star and the neutral rate of interest has to be a little bit lower than what would be assumed under a Trump assumption bill.

Gross Mario drag You, the President of the ECB, speaking yesterday, said there's not sense of urgency in monetary policy in light of what we saw today with these jobs numbers. In light of what we heard from FED policy makers last week. Do you disagree with them? Do you think we are seeing a new sense of urgency among policy makers at least in the US. Well, certainly in the US, you know, we've we've seen them hikes. We're gonna see

some more. Um. You know, we've been helped in the United States, certainly by the e c B in terms of their quantitative sing about eight billion a month that we've helped, been helped by the B O J, you know, to the tune of the same amount. And without those two central banks buying their particular bonds and having those UH funds flow back into the United States and ended treasuries that I would think treasures would be much higher.

So what drug he does is important. He did talk, you know, very neutral e back and forth as a two handed economist, would you know in the past few days. And it's hard to know exactly when he begins to taper, but when the taper comes from UH, from drug and I was assume it would come before carona Um, then the bull market in certainly in those countries you know, can can come to an end, and perhaps in the United States as well. I've said two point six percent

target for the Treasury. We're not there yet, but if that succeeded, I would think it would be because, you know, dragging in, because corona are moving away from their own particular maneuvers. Bloomberg Radio, Bloomberg Television worldwide, throwed you where this worldwide? This morning? A quick day to check here, futures up nine before the report. We're now futures up twelve. The Dow advances up, putting futures near one, not quite there.

Yields are higher. Bill Gross having a lousy morning yields up, price down. But David, it does begin to show the bounce. Here is now we moved to March fifteenth. Bill Gross, you referred to Janet Yellen is a modern day Goldilocks yesterday in your note. And I've been reading that story with my daughter, So let me torture the metaphor a little bit here. At the end of that story, Goldilocks escapes, she escapes with their life, and the bears get their porridge.

How does all this end? Do you think? Well? It depends on your time frame. I I think in the long run it ends badly because central banks have created credit at an enormous rate. Let's go back to seventy one one trillion dollars worth a credit, and now we have sixty trillion dollars with a credit. That's an enormous growth rate of ten or eleven or twelve percent, same

thing in China, or or even more. And so when you create credit, and when you create credit at four times as much as you create one unit of GDP, then ultimately the situation can't last. It doesn't mean it has to crash, doesn't speak to arm again, but it does suggest that economy slowdown once credit creation can no longer be sustained. And I think ultimately that's where we're here, and Bill, this is important. Let's tell you, let's expand out the timeline. Here is clearly you would like to

do this morning. We've got rising rates, we have a new regime, thank you Jim Bullard, where the feed is finally going to act. We have massive transit lant divergences. Forget about the politics in Korea. The reality is you suggest the great distortion of low rates and low real

rates will continue. How do our institutions get us back to normal if you've got financial repression going out many years, Well, I think it's very difficult, and that's what the FED has to measure in terms of walking the proverbial fine line. You know, when when an economy is highly levered, as the US is and the rest of the world is, then the Goldilocks metaphor where you can't be too hot or too cold, as Janet Yelling is doing, it comes

into play. If interest rates are too high, like they were at five and a quarter percent under the Bernankee FED way back when, then subprimes and other housing related vehicles come crashing down, as well as related leverage related types of vehicles. If they're too cold, as you mentioned, Tom, they're too low, if they're financially repressed, then institutions like insurance companies, banks, pension funds and the like, you can't really survive and pay for the liabilities that they've assumed.

We're seeing that in Puerto Rico, we're seeing that in Illinois, we're seeing that in many spots in the United States. And so not too hot, not too cold. It's a very fine line, and it suggests to me that they can't really raise rates too high or else, um, you know, something happens. Bill Gross, thank you so much for joining us into all of you on Bloomberg Television worldwide for joining us. This job's day here at twenty minutes to the hour, David Gerin to I'm keen with Bill Gross

at Jannis. Let's get right to it with Mr Gross. Bill, it used to be an easier business. There were no Greek letters. You had a Monroe trader on your desk, and you're worried about convexity, You're worried about duration, and I believe you worried about making money, getting the coupon, making total return. I'm going to suggest within your Janis folio right now, it's about not losing money. Tell our audience how to not lose money when rates go up

and price goes down. Well, it's a simple solution. It doesn't say how much money you will make, which would be scant because you're you're flushing into money market funds. What's you know, yield one per cent or less. But the key to not losing money in a bare bond market when interest rates rise and the duration becomes a factor to the downside, is you lower your duration or

you even go negative duration. You know, most total return funds, most bond funds to actually follow what's called the Barkley's aggregate index, which has a duration of about five and

a half years and an average maturity of seven. And so that the key to not watching those bond prices decline is to not own them and to have a duration year or a or a negative So critically, right now, Bill, if I go to the Bloomberg Barclays Lehman Brothers Gross Index, whatever you want to call the index to the permutations of thirty years. If I go to the Bloomberg Barclays index, I want to buy shorter maturity. But where do I buy it? You've got a preponderance of British Columbia paper.

Where in the world, you know, it sounds like Waldo. Where in the world, Bill, is the value in short duration paper? Well, I think there's in value in Argentina. You know, Argentina has some problems in terms of inflation, and Argentina has some recent problems in terms of default or not defaulting. But there are ninety day bills, so to speak, yield too to two and a half to three percent. It's a premium of a hundred basis points. That are a hundred and fifty basis points or some more.

So you know, you go to some you know, hopefully safe emerging market countries. If you're willing to take that risk. You also go to a twelve to eighteen month time frame. In terms of corporate bonds, double B, triple B, the minus types of bonds which yield one point eight one point nine two, and those formed the base of a Janison constrained portfolio upon which we layer derivatives that put on some more yield. David, you're gonna go out and

by Argentina paper this weekend. Yes, Phil Gross, is there anything that would draw you to Europe? I was struck by what Mario Draggy said yesterday about the irrevocability of the Euro. I wonder what you made of that comment, in particular, if there's anything that's attractive across the Atlantic. Well,

I don't. I don't think so. You know, to my way of thinking, the negative yields in Germany, which partly reflects the breakup or the potential breakup of the EU or the e z uh and Germany leaving and moving to a mark as opposed to a euro. There's a little bit of a safety premium there. But you know, when you buy a five your German OBOL at minus fifty basis points, I can ensure you you're not gonna

make any money. So you know, the German tenure Bund at the forty five basis points, that's the same type of situation. So instead of buying them, you want to short them. You want to take advantage of higher yields and um. Shorting the German market and shorting the other markets within your land is really a key to total return in an unconstrained type of portfolio building. The time that we have left and we could talk bond talk all day, but I think the nation is certainly riveted

on what we're seeing in Washington. What is your prescription for stability in Washington? I was talking with our Matthew Winkler the other day about the success of your California. California University had a governmental system that was able to come out of it and do better than good is witnessed within their bond market. What is the thing that to trump, President Trump, and why should you can learn

from the recovery of your California. Well, that innovation is the key to uh to growth and productivity going forward. California is famous for that. It's not the only state, but the Silicon Valley and the areas we have here down south in terms of Irvine and U see I are key to UH to growth. California has been a

key to growth for a long time. UM. So to learn from California is to innovate, is to invest is to expect that productivity instead of a half a percent, will rise to one and a half to two percent. But it takes careful planning on the part of the private sector h and careful planning. In terms of investment going forward, we haven't seen investment from the private sector. And you know, the mystery behind that would probably take

five to ten minutes of discussion. But to my way of thinking, um, you know, unless the California models adopted, than productivity at a half a percent, than labor growth at a half of per cent equals one to one and a half percent real growth. And that's not the solution for the Trump administration bill gross is it easier to ignore the animal spirits endemic to Washington? Right now? From Newport Beach? Have they made their way across I

forty all the way to California? How do you ignore all the enthusiasm, all the excitement that we're seeing in Washington. If it's not based on something that you think is going to lead to much progress. Yeah, I think it does help to be on the West Coast. It's helped for a long time, thirty forty fifty years of my experience to be out here as opposed to back in the bars. Uh, you know, just off of Wall Street.

I think, um, I think to know that. You know, there's a lot of hype, there's a lot of hope. There always isn't a beginning administration in terms of policies that will lead to growth. We're talking about regulatory policies and lack of them, the diminishing of them, and the Trump administration. We're talking about lower taxes, we're talking about infrastructure. All of those things. You know, maybe positives in the short term, but in a long term, it really depends

on getting companies to invest. And yes, as Trump tried to do that by talking to individual companies and bringing labor back into the United States as opposed to outside, I think so, but that still doesn't speak to investment in plant equipment as opposed to investment in labor, and that's the key going forward. I don't think he's addressed that problem as of yet. Let's hope the presidents listening here. He did just tweet out something as citing a Bloomberg

News article about the Job's report. If he's not listening to the program right now, But what would you say to him if you were one of those executives invited into the Oval Office, into the Roosevelt Room to to talk to him. But what would you tell him about the economy right now and what he should be doing well? I would tell him that that in addition to capital, that the labor is a quite important component um the

labor situation in terms of UM universal income. And here's a stretch of a idea that's five fifteen years out. But um labor has been displaced by technology, will continue to be displaced by technology. It's fine to have better jobs and better training and to to make humans into robots, so to speak. But ultimately universal income in some form of fashion is coming not just to Denmark, not just to Sweden, but to the United States. And I'd say

politicians and the United States have to prepare for it. Bill. One final question this morning. I assume President Trump or maybe even Secretary Monution are listening advise them on the US dollar. That's the president's worst nightmare. Do we get a brutal move in the dollar or can it be a measured and manageable dollar strength? Well, I think it's been measured so far, tom It. It can't go too

much further um for two reasons. Basically, a stronger dollar basically hurts US exports, and a stronger dollar, you know, hurts emerging market countries that have taken out a lot

of debt in dollar denominated terms. And so if the dollar UH in terms of the d X Y went from you know, a hundred two to a hundred and five six, seven, eight, then the situation becomes not critical, but becomes dicey in terms of the ability of emerging markets to repay over the long term and the ability of US corporations to become competitive in terms of their exports.

So you've got to watch the dollar, and that means ultimately that the Fed can't raise interest rates too high or else the strong dollar will will do the reverse in terms of its negatives as opposed to positives, explaining they are the second and third order movements of certitude of the first order condition, Bill Gross, thank you so much with Jana's capital, I guess is the message from Bill Gross David Gurra is the maximum durations about two

weeks page everybody's wantin it is so it is so hard, folks, for those of you that have never enjoyed, uh, watching price go down within bond portfolios. I hate to report that this does occasionally occur. It is an immovable force,

David when it starts. Street recap what we heard here this morning in terms of why not again we had this big beat, the thousand, the change in non farm payrolls in February, and the unemployment right here at four point seven percent, wage growth, paying such close attention to that average hourly earnings the survey was point three percent. Came in at point two percent, so slightly lower but still inline, I think with expectations very good. Thanks for

listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on iTunes, SoundCloud, or whichever podcast platform you prefer. I'm out on Twitter at Tom Keene, David Gura is at David Gura. Before the podcast, you can always catch us worldwide. I'm Bloomberg Radio, brought you by Bank of America. Mary Lynch dedicated to bringing our clients insights and solutions to meet the challenges of a transforming world. That's the

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