Leaks and Backstabbing Pushed Loyalty to Forefront, Carson Says

Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course on the Bloomberg Getting Rose joining us now in our Bloomberg eleven three oh studios. He's the editor of Foreign Affairs and the Peter G. Peterson Chair at the Council on Foreign Relations, and I hold Gideon's Bible here the latest issue of for Affairs magazine and Time.

What now Trump's next steps and let's let's take stock here Now four or five months into the presidency, do you have a clearer sense of what Trump's foreign policy prescriptions, what his what his foreign policy is given? Actually, no,

I don't think we do. Um. He came into office with a very strong agenda, with a lot of both contradictory but also somewhat radical proposals, and what has been notable has been backing off of many of those, but not all of them, but not putting in its place any kind of new framework that uh explains and justifies which parts of the campaign agenda he's kept in which

parts he hasn't. So right now, basically you just have a sort of mostly an inertial mishmash that is continuing on autopilot for general American foreign policy, with occasional reactions coming out of DC on particular events and issues. Let me ask you what we learned from from the speech that the President gave in Brussels when he was there

for the NATOS. Since then, Susan Glasser, who's at Political Magazine has written about how I think twenty five words were stricken from the speech that he ended up reading. Those were the ones in which he would have affirmed, uh, the importance of Article five part of NATO. What do we learned from that that speech in Brussels and what happened? I think we learned a couple of things, UH. One

is that the president really doesn't like NATO. Second that the responsible quote unquote adults in the administration don't necessarily get their way when it comes to the president's words. Whether it comes to actual policies is a different question. So one of the interesting things that happens, I mean, think about the question of the president's tweets, uh, and everyone's debating are the president's tweets official reflections of US policy?

Increasingly the president's tweets, everybody seems to agree are the president's tweets and not actual reflections of US policy. So figuring out at this point when the president is speaking as Donald J. Trump, and when he's speaking as the authoritative commander in chief of US forces, and uh, the expression of U S foreign policy is a really kind

of odd We don't know. So people, I would say, foreigners and most people should watch what the United States does and not listen to any of the words coming out of Washington, because it's not clear who at these these days is authoritatively speaking for the country. Kideon Rose, there are teen things up perfectly for me to read the latest tweet from the president now just a few minutes ago, writing well, as predicted, the Ninth Circuit did it again ruled against the travel band at such a

dangerous time in the history of our country. S C. Which stands for Supreme Court. I assume where do they stand with this trass should be South Carolina on the hills of rereading Clemson at the White House. Indeed, our national champions there on the south lawn of the White House. Getting what what? What changes now that we have this Ninth Circuit decision? How much closer are we to seeing

this case being argued before the Supreme Court? You know, you have to get a legal expert to talk about the specifics of the thing that The fact is, this whole thing is a bit of a joke in the sense that there wasn't actually a real problem. The solution was a fake solution, and it was driven by an agenda other than a rational policy making, which is why

it has been undermined in the courts. So what really should happen is they should get the entire point of this was supposedly a temporary band of which the period now is almost over, and there was no actual real problem with betting in the first place. So it's not clear to me that other than politics and stubbornness, that there's any reason for this to go any further whatsoever.

The question of immigration policy and protecting yourself from counter terrorism. UH, threats is a real and terrorist threats is a real and major issue. But the idea that that's actually what's going on in this discussion about travel band is silly. You've been complaining all morning. What do you want from Secretary Tillerson? Secretary Tillerson is a very interesting character. I mean, he's gonna go to CFR concept formulations is going to

greet him. You're gonna do a foreign affairs interview. We would love to interview. We we have standing offers to interview ton of people. We would love to it. What's your first question? You know, it's really hard to where what is okay? What is the grand strategy of the Trump administration? I don't think he'd answer that. UH. And Totson has not exactly been a large public voice in

American farm policy recently. UM. The what I've heard, however, is that indeed he has been working closely with Mattis and uh McMaster uh to to help guide things in ways that the people at State would feel are are responsible,

in which we should be very thankful for. So. I the question of what is actually going on inside the Trump farm policy and national security apparatus is a very interesting question that for all the reporting that goes on about the White House itself and the soap opera and the melodrama of all the key characters, there's very little reportage about the details of foreign policy making and how

decisions and strategic process actually plan. There's a really fascinating piece in New York Magazine this week by Jessica Pressler looking at Gary Cone, the chairman of the National Economic Council, and and she sort of looks at him as a long stay ending number two. He was the number two to to Lloyd Blank find at Goldman Saxon's with What the piece posits is why is he putting up with with all of this? And I wonder if you can

extrapolate that to to Rex Tillerson as well. I'm reminded of the statement that he gave on Friday about Cutter that was immediately reversed by the President in the Rose Garden at press conference shortly thereafter. Does this president want his cabinet secretaries to have any degree of autonomy? Do you think? Uh? The answer to that last question probably is no. I mean, if we all will y'all watch that meeting yesterday and it doesn't look like this is somebody a boss who wants to have a lot of

delegated authority to freelancing underlings who are Pierre players. This is more like a court than it is a cabinet um. With regard to what Tillerson's thinking, I don't know. I can't get inside Tillerson's head. I don't know the man, and it's not clear what the mindset he's bringing to diplomacy is. After an entire career spent in corporate management.

What Tillerson, sorry, what McMaster the General's McMaster and Mattis are thinking, and what many of the professionals around out of thinking is, Look, the United States is the leader of the world. We are running a very important set of policies globally on a whole bunch of areas, and we need to keep the ship on track. And they're basically spending their time trying to run the world and doing a decent job of it. Anthony from New Jersey emailed in and he said, you know, very succinctly, what's

going to happen next. We had Ambassador Burns with us yesterday, Nicholas Burns of Kennedy in here. Those guys aren't in a Republican government. Maybe guys like Has, guys like Ambassador Burns and such. What needs to happen to get the normal apparatus of our Republican foreign policy into the Republican Senate, Republican House, Republican White House. That's what Anthony from New Jersey wanted to know. I think that is a great question.

I didn't come up with it, Anthony from New Jersey, and I think I think that that is the kind of question that many of us are asking. UM. The it's easier to ask the question than to answer it, because what we've seen increasingly is that everything we thought we knew about US farm policy and government operations does not seem to apply in the short term, at least, whether that will be true over a medium term or

longer term. I cannot see how this is sustainable. I cannot see how what we've seen over the last few months goes on for too much longer, many more months longer, without something. We've been so incredibly lucky that there's been no actual crisis abroad. UM, we've posentially been stalled in the water. US farm policy is stalled in the water. UM, nothing bad has happened. No pirates have come along to attack us. No, uh, No giant whale has come to rock the boat. Uh. You didn't see the new Johnny

Depp movie. What will actually happen? You know? Every month that goes by, we're running out of time when we can expect our luck to hold with no crisis. Want to come back and talk about the new Foreign Affairs magazine And this is always controversial and very balanced. There's some different views across it. What now the President's next steps? Getting rose with this Foreign Affairs magazine? The new issue? What now Trump's next SIPs? How do you make an issue?

Is it like? Is it like a war? Is it like you know the bunker room there at the White House, it's like six you get in the room and screaming to each other for with the Tom King Grand strategy? When do we get that piece? And so we have to we have to two tracks. We have a daily website where we put out several pieces a day, and that's the constant production of stuff. That's like a lot of other organizations trying to add real value to contemporary

commentary on breaking events. We also have a bi monthly print issue which is sort of like the carriers of the battle Fleet and the sort of you deploy them on long deployments on major subjects. What we try and do is have a steady run of articles on regular important, big topics, but we also have a lead package each issue, and we try to shape that a couple of months out so what we think will be on the news

of the day. And so when we were putting this one together, we're putting it together in April, sending it to Bed in May to appear in June and July. The idea was that, Okay, after all the craziness of the first few months, it'll get It's gonna get commerce. So let's talk about actual policy stuff, right. So we had suggestions for foreign policy, suggestions for healthcare reform, suggestions

for tax reform, projection for economic policy internationally. The idea being that at some point there are some people who should go about trying to govern um. Whether that is actually in sync with what's happening in d C, you never know, but those discussions should be had no matter what you mentioned. Carriers and battleships right now, they're off North Korea at Moalstavidas told us from Fletcher one of your sponsors in Foreign Affairs magazine h the idea of

there's an a model off of North Korea. What is the Foreign affairs take on our risks in North Korea? So, uh, North Korea. Look at General Mattis said just the other day, that's the sort of probably the single most important or urgent immediate national security threat that people are focusing on, even more so than Russia and cyber stuff. Uh, it's dangerous. On the other hand, it's always kind of been dangerous. We've been having a Korea standoff for sixty years, So

I'm not as freaked as other people are. But that doesn't mean you don't have to handle this very carefully and very securely. Probably the thing to do that makes sense is not and this is something that Richard Hass says in his piece, is not assumed that you can solve the North Korea problem. We're not going to solve

the North Korea problem. So what you should be looking for is not some fundamental resolution to the issue, but some sort of interim agreement that can pause things, keep them from escalating further, and jolly things along and kick the can down the road. We've been doing that with North Korea for six decades, nobody has any better ideas. We should keep doing it now, and you want responsible adults managing that to make sure that it doesn't actually

erupt to escalate into a giant war. Yeah, that's a big part of Ambassador hass Is piece where to go from here? Rebooting American foreign policy at the front of the latest issue of Foreign aferous let me ask you about Russian hacking. You mentioned that just a moment to go. Bloomberg News reporting this morning that the hacking during the election much wider than was initially thought. Hackers hit systems

in a total of thirty nine states here. This is ostensibly the focus of the Senate Intelligence Committees investigation, and we heard from James Comey on this subject last week. Are we at risk of of of not seeing the forest through the trees, focusing too much here on the interpersonal conflict and not on this larger issue where we at risk of losing sight of the larger issue here, that being um, the cyber attacks that Russian made during

the during the campaign I think are absolutely correct. Um. So essentially there's a bunch of different issues here, all of which are worth talking about investigating. Discussing, addressing, and so forth, but which cannon should follow separate tracks. So whatever happened on the legal front or or the whatever is going on in the investigative front, that's issue. That's one set of issues. Whatever happened between the Trump campaign

and Russia's another issue. But what the Russians did and are continuing to do, and what they've they've done in other countries as well, is use cyber attacks and as part of a broader diplomatic UH and economic and UH political strategy for challenging American dominance and and overall turning various American policies they don't like. And so the this should be a major object of investigation and a major UH challenge to deal with, no matter who's in the

White House. And the fact that this has gotten somehow tied up in and suck connected to the partisan split going on in Washington, in which it shouldn't matter what party affiliation you have to just determine what your stance should be on our Russian cyber attack against American democracy.

And yet unfortunately it seems to be getting trapped in that as if the people who care about the Russia leaks and the Russian investigation are seemingly doing it for partisan reasons and the people on the other side are hosing them. Thank you so much for coming in. Oh, it's hugely valuable. Get here this you know, this is what the show is about. We do economics and the Fed and finance and investment, and we have to link it into the politics at the moment is well, Gideon Rose,

Thank you so much. Foreign Affairs at magazine. What now Trump's next steps? We are advantaged. Um Bromberg is doing a big deal in Germany today and we've got a lot of German news coming out, including important comments by their finance minister. It would be good to have a German expert in the house. That would not be John Tucker or Tom Keane, but David Gurri, Carston Brasilski with us,

with I n G. Germany. Uh, usually in Frankfurt, US Frankfort right in Berlin born, Berlin born, and good, wonderful day have you here. Let's start with something we usually don't ask. What I'm gonna ask it. Who's Mr Schreibler. How is Mr Schreibla the finance minister perceived by the German people a bit like Mr Bismarck back hundred hundred twenty years ago. I think he's the the iron He's not the iron lady. He's the iron man and the standing for a fiscal discipline and what the Germans called

the black zero, so more or less balanced budgets. What what did you hear last week? We were paying attention to Admirio Druggi was saying in Estonia after the rate decision last week? What changed in terms of language last week? What stood out to you? Obviously we are the other ones on they they cut down the the easing bias, so no not interstise, will no longer could no longer be even lower than is. And also the expected thing that the drug it changed the balance of the economic

out look to the balanced um. I think that that was the new thing as expected. Now the next steps will be will he gradually prepare a tapering announcement? What we're talking about personality here? What's the relationship like between

Mr Scheibler and Mr Drug? Is there much of one one of Whether there is, I would call it a professional relationship because mrs as you know, Mr Schi likes to to do some some e CB bashing once in a while out of out of public um created the ECB does not like it because the journe public is very critical about the ECB. UM. So I think it's a professional relationship. But I wonder whether it goes beyond that dovetail. For is, if you would what's going on with the e c B and what we expect to

see the FED due today? How cognizant is the the e c B of what the Fed is is doing or may do today tomorrow. I think what wasn't Tree share, the former SCB president who always talked about some some mutual brotherhood of central bankers. Um, Obviously they're watching what the FED is doing and and the impact on the currency. I think that that's what what's most interesting, because if the FED would not hike interest rates, if and if the ECB would continue going towards tapering, this argus in

favor of a stronger euro. But for the ECB, the Euro should not get too strong because otherwise it would on the mine exports. We have a deadline coming up here for for Greece on Friday, I gather another meeting on on on Friday. Have we seen Mr choy bliss offt in his tone at all when it comes to the situation in Greece. Has has that story changed markedly? No,

it has not. The only change is that hardly anyone is interested in what Chilable thinks about about the Greek because it will be muddling through, because I think we know that no one really is interested in the escalation of the situation, neither the Germans a couple of months before their own elections, nor the Greek um. So therefore we will get some muddling through and this will Morris

go off the RADA screen. I mentioned he's watching the the US two year What are you watching mostly these day? What were the indicators that you pay the most attention to As we have these ECB meetings, in the FED meeting of bo J meeting on the heels of the FED meeting later this week. Obviously it is bondy heels, it's it's ten year, it's it's two year year rates, and it's a bit of the exchange. And I think, especially when you look at the the U S situation,

it's also overshadowed by politics. When when I look at this, and I did this chart the other day, not only is there a yield of virgins between the negative two year in Germany and the US two year. But the first derivative, the widening divergence is tangible. That's always a symmetric. Is a divergence widening a bigger deal for the United

States or is it a bigger deal for Germany? It's a it's a it's a bigger deal for the for the U S because it are always argues in favor of of a stronger of a stronger US dollar um. But it's it's also distorted by by by the fact that you have so many institutional investors who actually have to invest in shorter short materiality droan paper. And this is not just the e c B. It's the explain that because because banks actually they they could deposit the

liquidity at the ECB at minds opened four. But if you look at where where one year or two year German bundyal standard is are a far lower, which means you have institutional investors which cannot dump their liquidity at the ECB, they have to buy that they are they are forced to buy German paper. And this is what what distorts the market. You can't tell me that is functional for the people of Germany. We talked to you know, Bill Gross of Janice um Henderson about this about the

financial repression. What is the financial repression of one third of Germany who are savers um there? It's each one because if if if you are a savor you don't get any any any interest rates any longer on your saving accounts, it's college you can't eat well there they still have enough to eat um, but maybe they won't have enough to eat in twenty or thirty years from now.

Plus the same as if when you look at the pension system in Germany, it's pay as you go, so it's also dependent on on the on the current interest rate. So it's it's not another start. This is an unfair question, but it's unfair Tuesday, right, Okay, what's the actual assumption of a German pension plan? Here? It was eight percent and maybe it's six percent for Illinois. We don't even know they're blowing up. Thanks the Bank of American zero heads for a great article that that. What's the actual

assumption of a German pension pl? I think, honestly, I think it's around four percent. Of course it's not as up to missus L and I, but it's between three and four percent. Wow, I've never heard that, David. What that means cf A level seven. Wait, there's Larry the Cat. We have a we have wired in here all sorts of videos and we just have a cat siding that is like the white smoke outside the chimney. The Prime Minister will make it. Okay, back on this. This is

really David. This is important because the lower the actual Taylor Riggs told me this, the lower the actuarial assumption, the more of cash you have to impute into your pension system. So Germany has got to put trillions, trillions, I say, into their system. Is that happening, Um, it's

not happening. What are people doing. People are investing in in bricks and modeling, so that this is this is why we have this construction housing boom in Germany because because people do invest in housing, whether it's the best investment for the future, it meant to be seen. Um. But of course your foot ride nominally you would have you would expect that people put in more cash. It's

not happening. I think I looked at the numbers. It's only two to three percent of the people actually say that they do this we focused on how the relationship between Manu macon and Uncle and Merkel, What that means for France, What does it mean for for Germany? Are we are we seeing a new political dawn in Germany as well as a result of that relationship? Is is the is the European project looking different now in light of the mccron victory from from a from a German perspective,

I think it is probably a lot. Will also depend on whether or not Mr Chidley will return in the next German government, because probably he's the one standing most on the breaks, much more than Mrs Merkel. Um the entire I think German media and public embraced Mr mccon when when when he came in. UM. I don't know whether they really know what they're embracing because if you if you ask the German majority, they would say, yes,

we are in favor of more European integration. If you ask them, are you in favor of of of a common Europe and of of a Eurozone finance minister, of a Eurozone budget, they would probably say no. UM. So therefore, the sentiment right now is very positive and they are embracing mccoon UM. But I think it will remain and we need more changes to receive what is needed, and that the Germans except that they have to give away something.

Ask you lastly about the comments that President Trump made while he was in Europe, perhaps a little bit lost in translation, talking about trade deficits when it comes to German automakers in the U S. Tariff's in the US, how big a deal is that in Germany? What he had to say about BMW, Mercedes, all of these companies that yes, manufactured cars and sell cars here in the US. In Germany, it is a big deal. I think this

is the biggest fear in in the German industry. It also in German politics that there's one single thing on which Mr Trump has been consistent over decades, and that is trade, and that is his his criticism about the

trade deficits UM. So, therefore, of course the Germans have started to realize that that factual arguments do not work, even telling the U. S. Administration that I think b M, BMW exports more cars um from the S to the outside world then than then the two largest American car manufacturers.

That apparently is an argument which does not fall fall well with the Yes Administration, Carson, great to see you, Thank you very much at car Yes, chief Economist Iron G. Germany joining us here in bloom leven three Studios in New York, brought you by Bank of America Mary Lynch with virtual reality Virtually everything will change, Discover opportunities in a transforming world VI of a mL dot Com slash VR,

Mary Lynch, Pierced Fenner and Smith Incorporated. Um. I really thought it was interesting yesterday, uh David, when CNN lined up the cabinet meeting at the White House in our next guest fair very well. He did not, you know, kiss the President's ring or get He was really classy and it was great about it was I'm gonna let you bring in our next guess, David, because you do

a lot more politics than I do. But besides fixing Detroit Tiger middle relief pitching, which he's working on in his spare time, our our next guest had a lot of bad things said about him a while back, and he's taken the high road. Not many people do that. In Washington. We have the sexually of housing urban development with us here in our Bloombergo eleven three O studios. That's Dr Ben Carson joining us here in New York. What brings you to New York. Let me start there

by asking you that question. First, I was ringing the bell at the New York and Celebration of National homeowners Let me ask you, first of all, just about that the importance of homeownership. We've been through the financial crisis, We've we've seen a lot of people lose their homes. Uh, the notion of home ownership has has changed. How do you see the importance of it today? Well, it is

the primary mechanism where by American families bill wealth. The average net worth of a homeowner in this country is two hundred thousand dollars and of a renter it's five thousand dollars. So hence you can understand the push several years ago for getting everybody into a home. But you're not doing anybody any favors. If you put them in home they can't afford, they lose their home, they lose

their credit, they lose their future opportunities. So we've we've learned from those things obviously, um and we have to teach people the correct mechanism for home ownership. One of the things we're doing at hud is loosening their restrictions on condominium uh financing, so that's frequently the first step into home ownership, and then teaching people the principles of building equity and moving to the next step rather than jumping too far ahead and then finding themselves in financial

difficulty for the rest of their lives. What have you learned here on these first few months on the job? They were speculation after the election, the perhaps surgeon gener all, you got this this position. Uh, it's all new. I imagine being in a government bureaucracy like like this one. What's most surprising to you that you've learned here over

these last few months. Well, you know that the principle of problem solving goes with you anywhere, and that's something that's always been something I'd like to do to solve problems. So I'm getting ample opportunity to do that. But also a lot of people tell me that it would be extraordinarily difficult to get cooperation, particularly from government workers who have been around for a long time, and that they were lazy and they didn't want to do any work.

I'm not finding that to be the case. Uh, I'm finding that as long as you're engaged with them. They're a part of the process. Everybody understands what the principles are. Uh, no problem. I've been dealing with a lot of governors and mayors. You know, a both parties. Doesn't matter what the party is, because the fact of the matter is what we're trying to do is is not a partisan thing. You know, in terms of getting people into safe, decent,

affordable housing. That's not a Republican or Democrats. Do you have empty offices in your building? I mean, are you getting your nominees through? What do you what do you? Are you screaming at the president? Well, you know there's been a combination of things that has resulted in us not having Uh. Okay, I'll go most of us. Come on, you're in surgery. Did you take Sy Schwartz? Did you do general surgery T book Sy Schwartz a million years ago? Okay,

I know I grew up with Sy Schwartz. Wonderful guy, Cy Schwartz. As principles of surgery, like forty seven editions. You know, in a surgeon's ward you need a team of twenty people around you. Right. The The good thing is we have a deep bench, so I'm able to get what I need while I'm searching for what I need, because what I've really wanted to do do is change head into a business model. So therefore we have with that.

We we've hired, We've hired a CEO. We're looking now diligently for an excellent CFO G and a c I OH so that we can tackle the material deficiencies in a holistic manner rather than just a pin prick here and there. You you what's great about you doing this job as you lived it as a kid in Detroit? You you lived the a side. Where's the common ground between Ben Carson and the Democrats in terms of getting us to a better housing stock in the country. Well

I helped. The common ground is recognition of the fact that it's not just about putting people under a roof. It's about developing people. It's about giving people an opportunity to climb up that ladder. Because for every person that we can help do that, it makes room for another that we can help. But it doesn't help if we have people sort of sessile sitting there. We've got to have a continual movement going on. If the President's budget proposal were to go through were to become law, the

HUT budget would be smaller. I know that you've you've criticized the Community Development Block Grant program as well, partially because in the abodministration did this too. It's hard to track results. How do we get better at doing that? And I think that's that's maybe a critique Tom, that's that's sort of a universal one. We need we need to do a better job of seeing what's working and

what's not. Without question, we need better metrics. You look at CDBG, I said, you know in my budget hearings that there have been some very excellent things that's happened to through that program, and particularly the fostering of public private partnerships, because the real money is not in the government, it's in the private sector, so you create win win situations. I'm all for that and for those principles, but also we have to remember what our primary goals are, and

those goals are providing affordable, decent housing for people. So CBDG program percent of the money goes to that purpose. That's not to say that the other things aren't good, but in a in a situation of fiscal restraint, you have to prioritize. Yesterday, a leading international relations expert, a former ambassador of this nation sat in the chair you're sitting in, Ben Carson, and he is someone that would be perfect for any Republican administration. This is an administration

based on loyalty, loyalty, loyalty. You're one of the few people that have been appointed by this administration where clearly that wasn't evident with the battle with you and the president during the campaign. What is the price of loyalty? What is the cost to Republicans into your administration with a litmus test of loyalty daily from this president? Well, and I think the whole loyalty argument has been blown out of proportion, uh, because there's been so many leaks

and so much backstamping. I think it has been pushed to the forefront where it really doesn't need to be. But anybody that you're working with, you expect some degree of loyalty. Now it depends on your definition of loyalty, you know. Uh, to me, that does not include doing wrong things for a person or accepting things that are dishonest. That's,

to me, is not loyalty. Don't be a stranger, David. David, Why don't you give our guests the appropriate correct exit towards I wanted to look at my toe when we're Secretary Ben Carson and Dr Ben Carson, the Secretary of Housing Urban Development joining us here in our Bloomberg eleven three studios in New York. Here, as he said during the belt the New York Stock Exchange, it this morning. Great to see you here in New York, and thanks for making the time to talk with us today. Hope

to talk to you again. This is Bloomber Surveillance on Bloomberg Radio, David Garret and Tom Keene in New York coast to coast and worldwide. This is Bloomberg joining us now in Washington. He's retired, which I doubt because he's solving the problems of the Philadelphia Phillies. On the side is one Charles Plaza, for years the president of the Philadelphia Fed, and of course his academics noted, particularly his work at the University of Rochester. Professor Plaza, wonderful to

have you back in. What's the difference in retirement now? If you leave the grind of the Fed? Are you better arrested? I hope so, because I wasn't always well arrested at the FED. But it's good to be with you, Tom, It's always it's always fun chatting with you. Let's get right to inflation. Many were worried about inflation. Their critics would call them inflation EASTA is the vectors migrating higher.

It's particularly migrating higher in the United Kingdom, a little bit of a pause here into the set of meetings for the end of the year. Which way is the plaster inflation vector right now? Well, that's an interesting question. I think it's it's a it's a challenge to forecast inflation. I think, as you well know, Tom, Um, the models that policymakers tend to use have relied heavily on the Phillips curve as a means of generating forecast of inflation.

That hasn't really worked very well for the last i don't know, thirty five years. Um. So I do think that my own view is that inflation right now I'm pretty happy with here. It is all the measures are clustering around two percent, give or take a few tents um, So they all are signaling the same thing at this point. Uh, you don't want to react too much to sort of month to month, uh numbers, But I think they're in pretty good place. I think that that where it's going

to end up remains a big question. People say, well, you guys who were against quantitative easy and we're worried about inflation. And I think the question remains of the jury remains out and sort of how all this will end up? How much have we strayed from orthodox and and folks to be clear here, Professor plaster is a recent FED president may not want to answer these questions, but we'll give it to college. Try Charles plas Or how far is that's the nice thing about being retired? Yes,

I know? How how far at the equals building are they from orthodox economics? Well, we the FED straight pretty far during the crisis, perhaps for good reason, and we could that's a kind of a question for another day.

But I think that, um, they are further than I would like to see them, because what I see is a FED part of perhaps because of the because of the crisis, the FED is now much more interventionist than it used to be, much more engaged in trying to manipulate asset prices of various kinds, interest rates on various maturities,

and asset classes. It's a very interventionist mentality at the FED and has been ever since the crisis, and I'm worried that that interventionist mentality is not going to go away. And that's troubling to me. Do you see it as an evolution? Are we are we at a new place and we're going to continue in that direction, Or amid the conversation about who might populate the FED next year the year after that, if we might get a more rules based FED, do you see that as a return

to a different kind of orthodoxy? Or we are we are? We are we going down a path that we're not going to turn back home. Well, it's it's hard. It's hard to know exactly. Certainly, it will depend in part upon who the new appointments to the Board of Governors and to the presidents happened to be in terms of

how they shape policy. Uh. And I think that certainly I would like to see people who either drifted more towards systematic policy or rules based policy less intervention is FED because I think what we've done, what the Fed's done, is set itself up for all sorts of credibility problems, communication problems, and and and expectations that they're just not going to be able to meet. So I'd like a little more humility at the FED. That's a quick question

just to bount communication. When the FED chair would come out and do a press conference, what were you doing at the time. How much attention to the do the FED presidents pay to to that event every other meeting? Um, I would continue, Well, I think usually it's the case after an f o MC meeting. Oftentimes presidents are back on airplanes or trains heading heading back home. That's part of it, so they may not be in a position

to hear it. But you have to understand that during the course of the meeting over the two days, uh, the chair has as a as a rule so to speak, or at least as a habit practicality, we'll talk a lot about what he or she was gonna say in terms of the opening remarks at the press conference. You don't always know what the questions are gonna be, but you kind of know the gist of what message is gonna be provided what is attention in that equals room

between freshwater and saltwater economics. We toss these phrases around, but if you get Marvin good friend from Pittsburgh, Pennsylvania, or Charles Plass or the late great Alan Meltzer, whoever. If you get guys like you in the room with the saltwater people, what happened brackish that's good or muddy as the case maybe no. Uh, you know I think that obviously, Tom. You know I've known Marvin for thirty years. Um, hey and I share a lot. I have a lot

in common. We think about monetary policy in similar ways, not always accurring, but we're very, very close. And so I think that right now, Uh, many of what you would describe as freshwater economists have been um, they're lacking in the EPO. Okay, let's do this. Let's come back with Charles plus. So we're gonna pick this theme up on freshwater economics. This is blue work. David Gerd and Tom Key in a few minutes right now with Charles plots Er, who long ago and far away did some

really first rate academics. Professor plots I want to get back to the FED in the future of the FED, but enlightened us on OURBC real business cycle theory. What is that? Well, Tom, real business cycle theory I actually coined the phrase back in nineteen eighty one or eight two. Excuse me, I thought it well. Other days I feel like it might have been at our age. You know, the memory sales begin to fade after a while. But uh, real business cycle theory it is a way of looking

at the economy. Um that rather than putting monetary policy at the center of all the things that matter for the economy. And so it says, look, lots of things happened to the economy, their shocks from all different sorts of sources. It doesn't all come from monetary policy, that

didn't all come from fiscal policy. And but real business cycle tried to do which will try to build a framework for thinking about how things other than policy play out in an economy, what kind of things change, whether impacts and oftentimes that Uh, we called it real because it wasn't monetary, and so we were looking for other sources of fluctuations, if you, because we couldn't understand what happens with policy unless you learn understand what happens without

those could converse in professor in oiler functions and I will I will mention the greatly respected economists Michael Woodward. UH is one example of the mathiness of modern economics. They've all been humbled over this financial crisis. Can the leaders of the next FED be more RBC like even

if they're not real business cycle economists. Well, I think that even today, among lots of academic macro economists who look at things, the real business cycle model still is kind of has now mainstream in the sense that it's at the core of lots of models now. So I think that certainly people like Marvin good Friend and UH are deeply steeped and understanding real business cycle models, understanding how they work, what they have to say, what they

don't have to say. So I would I would certainly hope that the fo MC and the FED in general. I think we need a little bit humility from the FED. Then, if we go to Kittling and Prescott in the work of Charles Plosser, there's an x axis as a time function, Mr Bullerd St. Louis would suggests we should not be slaves to the X axis and we should look for so called regimes change that sort of goes into a real world analysis, doesn't it. Well, somebody is trying to.

I think analyzing regime changes is very challenging and determined how you get there, why they're changing and understanding those things. So um but uh, Milton Freeman used to used to tell us that changes in tastes or preferences is the um Is it the last resort of an economist who doesn't understand what's really happening? Well, that would be me excuse with David up here? Thank you? Did you see that,

Ken Ken follow your technical director? Save that. That's a great moment where Charles Plasser really put me in my place. David saved me. Let me ask you a bit about how much power a person has to shape the Federal Reserve. So we could have a President Taylor, we could have a President Warsh. Given all the cacophony we hear from governors and presidents giving a lot of speeches to my ear at least ahead of these these FED meetings, how much just one person have to shape the direction of

the f OMC right now? Well, it's very hard. It's a it's a it's a it's a committee after all, and it functions in a committee. And that's actually a good thing because that means that lots of different views get to be presented. I think it's very important whether it be presidents or governors, that you have people who are smart enough and knowledgeable enough to present the as different views and to force the committee to confront different perspectives and come up with a with a with a

policy insight. So it's rarely, it's rarely one person, and in fact, I would prefer it not be the power of one person. That's why you have a committee. I'm very incurred. I don't know what the Trump administration's goal is for monetary policy yet they haven't said very much about it. I think the most recent names that are being discussed Marvin good Friend and Randy Quarrels Mr Jones, I don't know, um uh for me, are quite reassuring

that these are both solid people in their respective fields. Uh, very moderate in their views, not extremist one way or another. And so I'm very encouraged by what I see so far.

If these two individuals I just mentioned ultimately get nominated in the time we have left with you linked together from the world of Charles loss or interest rate dynamics with the diminution of the balance sheet, there are two different dynamics, are two different set of there's if you will yields up yields down first and second derivatives, and then this strange thing the balance sheet. How do you link the two together? Professor Oh, I think it's very hard.

As I mentioned earlier, Tom, I'm worried about sort of the interventionist view of the FED and how it its role of manipulating or changing or intervening in different asset prices and classes, and the balance sheet kind of plays into this. And right now the FED is busy trying to raise rates at the same time claiming it's trying to keep accommodation by having a big balance sheet. Well, which is it? Those are two very different policies. How

do we get calibrat and think about monetary policy. I'm really hoping that the FED will will very soon, as I tried to get the FED to do several years ago articulate its vision. But where we go to extract ourselves from all this? Where is policy headed heading to one kind of strategy or a different kind of strategy? What role is the balance sheet's gonna play? And what's

gonna be the relationship with setting short term rates? For this this this effort to you know, by a bunch of stuff, I got twenty Sewonds left its Coulchu lacoda killing it at Rochester right now? Did you get on that job. I'm sure he's doing just five. I'm sure he is, Professor Colchula Coota hopefully listening up at the University of Rochester and the Simon School, Charles plus or as a former head of Philadelphia. That was great, David, that was good. That's right special on RBC. That was

really really interesting. It is a wonderful time to speak to Stewart Blickman. Why would that be. We've been in a range on oil and uh, we're at the bottom of the range and we've stayed there for the last number of days. Stewart, I look at forty five six cents of barrel on West Texas intermediate, is or any indication we break the range lower? Or do you just

saying we're range bound? Good morning, Tom. I think we're probably a range bound, But my my inclination would be if we are going to break down, it's probably going to be a little bit higher from here. Um the uh. With that said, I don't expect a major move and crewed um in I think I think we say kind of marooned in this call at forty five dollar fifty five dollar range for a while. When you see supply headlines come across Bloomberg, do you really know regional or

country or global supply? I mean, is it? Is it something that's really countable? Well, there are some countries where it's difficult to estimate production, like China for example, is notoriously difficult to get get a handle on UM. But the International Energy Agency does a fairly good job with their oil market report, and so I think, you know, more so than the absolute numbers, I think I think they do a fairly good job of looking at the

trend lines. And you know, I do think that the markets are moving into balance, but it's it's going to take a while. I think this is a longer fuse, not a shorter one. Stewart, what do we learn about OPEX relevance after this last OPEC, meaning the continuation of that that production for there was so much speculation going into the first meeting, now many months ago about how relevant the cartel the organization was. Has it re established

its relevance somewhat? No? I think I think it's relevance is still open to question. David, I think that you know they they've effectively boxed themselves in by by, you know, assuming that a relatively small cut would be enough to bring US shale to its knees, and it just hasn't

worked out that way. Obviously, Um, most of the US oil community on shore has spent the better part of the last two years getting their act together and cutting costs, and the even they're now at a position where they can make money at forty five dollar oil, and I think it's going to take more significant cuts from OPEC to really push it a lot are um or else we're looking at at a at a continuation of this range.

I want to ask about the Paris Agreement. Obviously we're beginning to process what the landscape looks like now that the U s has withdrawn or intends to withdraw from from that that international deal. Do we have a sense of what it's going to mean for the global energy marketplace to not have the US be a party to that deal? Well, I think that, you know, the the the real import of the Paras Deal was, and again this was this was not a binding treaties, or actually

wasn't even a treaty to begin with. It was a non binding accord where they were talking about what kinds of cuts they would expect to make between But I think it takes a little bit of the wind out of the sales for renewable energy. But even if you look at at companies like Exxon Mobil for example, that do thirty year strategic planning ahead, UM, renewables are are an increasing piece of that mix. It's just not a

dominant piece of that mix. I think, you know, oil and natural gas particularly are still going to be you know, major fluences on energy consumption. Where's demand dynamics right now? Where are demand dynamics right now? I mean we go guests after guests. There seems to be a real distinction between people looking for good, ample demand that can support prices versus oops that ain't gonna be there. Which is it? Um,

I'm a little worried about demand. I don't I don't think that If you think about who are the drivers of energy demand, it's mostly emerging markets. And I think that, you know, if you look at global GDP estimates, they're not I mean they're they're up, but they're not they're not especially bullish. So I have a hard time seeing demand being the way out of this conundrument for oil. I think it's supply got us into this mess, and I think supply is gonna have to get us at

That's a really interesting way to put it. Which geography are you looking at most on the delta of supply? Is it not o Peck in particularly Russia? Is it Saud, East Saud, East Saudi? Which is it? It's definitely not opec UM, I think so. I think Opec has done about as much as they're going to be willing to do.

I mean, everyone's talking about how how compliance that um Opec has been with his last round of cuts, But keep in mind the amount that they actually asked to cut in the first place was just a fraction of what they've cut in previous cuts. UM non Opec is especially interesting in particular the us UM. The thing that I'm looking at the most right now is the degree to which the older legacy wells UM are accelerating their

decline rates. If those start to catch up with new wells and perhaps overtake them, then I think inventories are going to start to pull in. And if they don't, then I think inventories are gonna are going to arise. I was listening to the President speak a couple of

days ago. He was in Cincinnati talking about infrastructure during what the White House branded as Infrastructure weaken And something he brought up, as he has from time to time, is the building of these pipelines, the Dakota pipeline, a Keystone XL pipeline. Help me understand that the economic landscape to all of that, does it make economic sense for those pipelines to be built right now? And if in fact we do see them build, how's that going to

change the the the the energy economic landscape. Uh, there's definitely an economic rationale to have a lot of these pipelines built, in particular in the Permian basin, which is starting to get a little bit um congested because of the massive amounts of growth that have taken place there. Pipelines are not the only way to get the oil out of the producing areas and into the into the consumer areas. But you know, your alternatives like crewed by rail,

for example, are more expensive. So you know if crewde remains range bound. Uh, the mid streaming space where we're which is which is the companies that actually build and maintain these pipelines and operate them that to me is actually an attractive area to be in. It's one of the only areas in fact and energy that I'm bullish on right now. Sure, thank you so much for the news slow today. Greatly appreciate having you on a on oil.

Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keene. David Gura is at David Gura. Before the podcast, you can always catch us worldwide. I'm Bloomberg Radio Brunch you by Bank of America Mary Lynch. With virtual reality, virtually everything

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