Surveillance: Eurasia Group's Top Risks of 2017

Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot com, and of course on the Bloomberg I'm at the offices of Ian Bremer's you raise your group as we look at top risks for two thousand seventeen. Dr Bremer joining US and now joining us from Jamaica. Lawrence Summers, he has Elliott Professor at Harvard University and of course the president emeritus of Harvard and a former Secretary of the Treasury.

Professor Summer is wonderful to have you with us. This will be a new presidency, it will be a new Capital Hill. What is your chief concern, your chief observation as we are seventeen days from an inauguration of President Trump, I think it's a moment of extraordinary uncertainty to an extent that markets seem not to appreciate there are prospects that things could work out well, at least for some interviews.

But there are enormous risks to the global economy, enormous risks to the global economy from possible US protectionist measures, enormous risks to the global economy from experimentation in the world where basic pillars of American farm policy are up for grabs, enormous risks to the American economy from a very administration is going to take a very different approach

to American society than has been a traditional Uh. This is probably the largest transition ideologically and in terms of substantive policy that we've seen in the United States in the last three quarters of a century. And those kinds of transitions have to be given the central role of the United States in the global system matters of enormous uncertainty, and I don't think that's fully recognized by markets. Okay, fair, I want to go to the market, which is the

litmus paper the system. You know, within your academics of foreign exchange analysis goes from Robert Mundell onto Jacob Frankel, onto Kenneth Rogoff and onto the modern age to our markets and do our political system underestimate the risks of

a truly strong dollar policy. I think there are risks because you have a development that is unprecedented in terms of dollar fluctuations, which is the possibility of major policy change in the fiscal area, not in terms of budget deficits, but in terms of the tax burden and subsidy on

exports city imports. Remember the advocates, advocates of the tax reform proposal that the House has put forward and in some ways the President elect has endorsed with the Order Sudjustment assert that the reason will work out well is that it will lead to appreciation of the dollar. Well, that's got huge consequences if it happens rapidly for the financial architecture, for anyone who's a holder of dollar securities, for anyone who's a gator denominated in dollars, for the

translation of profits back into UH dollars. And I just think that the financial consequences have not been fully thought through. And if there comes to be a person that that's got a real chance of happening, I think the risks are enormous. Okay, this is very important to synthesize this. Dr Bremer is the important paper highly criticized by Professor

Summers and others from Peter Navarro and Wilbur Ross. The new Secretary of Commerce, can you fold the caution and uh, not hatred, but the distrust of China of Professor navarre

Row into what Trump economics and politics will be. Well, there's no question that Trump comes into this office um with a feeling that the most important bilateral relationship in the world, that between the United States and China, is not only not being well managed, but fundamentally this country is taking advantage of the United States and it needs

to be It needs a hard response. And that's happening exactly at the time when j and Ping won't take any uncertainty because he's leading into his own political cycle. Larry's point at the beginning is the right one, right, which is from we started our firm. We talked about global political risks. It was emerging markets, you know, it was the Middle East. Then the financial crisis hits. You've

got the Eurozone in two thousand seventeen. Leading this document is the United States America is driving global political risk and uncertainty, and that is not reflected in the markets right now, but it is a fundamental sea change with anything we've seen over the past few decades. It's this transition which matters so much for the rest of the world. With Professor Summers, let's bring in Guy Johnson in London. Guy,

good morning, Professor Summers. Um how how possible is it that in a few years time we are talking about the fact that the United States has gone through a productivity revolution. Donald Trump talks about repatriating money back to the United States. How does that money get invested into productive capacity? He talks about learning the tax rate. How does that extra money get get get reinvested into productivity.

How do we make that work? Because if that would be to that were to happen, how much would that actually sort of lean into the kind of product of it? To the protectionist story that you're talking about. I don't think that gets at the drups of our difficulties. The vast majority of the companies who have large overseas cash also have substantial amounts of domestic cash, and so they had attractive investment opportunity these in new capital they would

be making them out of that domestic cash. The reality is that cast that's brought home, will will be used to pay dividends, to payback shareholders, to buy back shares, to engage in mergers and acquisitions, to re arrange the financial chess board. Not true invest in large amounts of new capital. It is a shimmer to suppose that, uh, there will be large increases in capital investment as a

consequence of that repatriation. We've done the experiment before, funny ambiguously during the Bush administration, the people who had been advocates of the policy, the Republican economists who had supported it, did honest work afterwards that evaluated it and found that it produced very little uh in uh the way of new investment. So this is this is potentially the worst

of all worlds. Large flows of capital back into the United States, large adjustments of the dollar because of the border tax stuff, but relatively little stimulus to uh new investment. That's why I think it's quite dangerous. And I just want to say one other thing. Uh, there are different levels of economic US economic disagreements, and economists like me and like Alan Blinder have disagreements with economists like uh Glenn Glenn Harvard. At a further kind of level, their

party felt stine at a further reclined level. They are the people who produced the proposals that, when Ronald Reagan ran on them, were called voodoo economics. The Navarro or Lost paper is well beyond voodoo economics. The logic of it, the arguments made are so far out of the mainstream of any kind of responsible economic thinking that they're the economic equivalent of creationism UM or the economic UH, the economic equivalent of the denial of UH of of evolution.

Makes the people who like the people who who say that they doubt global warming looks like entirely responsible scientists. So this paper is to be a guide to US economic policy, and I'm not at a well shure that will be UH in practice. I think cooler and more rational heads made may well prevail. But the kind of thinking that is implicit in UH that paper goes beyond any set of doctrine that has been taken off any administration in my lifetime. From Jamaica, we greatly appreciate Laurence

Somers for joining US. It is the top risk for two thousand seventeen. David Gurr and I enjoying the good coffee of Eurasia Group here in the historic Flat Iron district. We can't we're not allowed to give away the address and name Bremer security risk Ian Bremer with us and joining us now to brief Dr Bremer's Nora Rebini of New York University and noriel I read Carmen Reinhardt carefully this weekend, and she said, the massive distinction of dollar

strength now is when we had previous dollar strains. Just as one example, we had Japan end with six percent GDP or even three percent GDP. We're getting dollar strength now with many other countries economic growth flat on the back. It's a different dollar strength this time, isn't it. It is a different dollar strength. Unfortunately, there's going to be a divergence within US monetary policy and the rest of the world. E c B BO j BO, e b

B are gonna follow easy monetary policy. The FED is gonna tighten more so because now the fiscal steamulus by the Trump administration in the economy close to full employment is going to lead to a pickup in inflation and that strengthening of the dollar. Unfortunately, it's gonna then damage the US economy. Trump says that they saved one thousand jobs in Indiana. But this current appreciation of the dollar five percents is the election is gonna cut five hundred

times and jobs in manufacturing in the United States. And the risk is that then this inconsistent combination of physical and monetary policy and strengthening of the dollar is going to lead to more protection is, more antiglobalization, and more by clash against migration. We saw it even during the regular years, where the fiscal steamers tight money, the dollar strength, and and where these unquote voluntary export restrictions on steel and alto against Japan today is much worse than it

was then. Therefore that this is the inconsistent sense of micro policy lead to more protection is and more of a backlash against globalization. You both have written about the end of Pax American and neurial you on projects indicate recently and in the report that we're talking about today, Uh, is the end of it inevitable? Here? And and sort of what's the timetable for it? Is it already in progress? The erosion of that, I think it's been coming for

a long time. I mean, you know, frankly, the United States did a lot of damage to itself with the wars in Iraq and Afghanistan. It's willingness to be the global sheriff eroted dramatically. As a consequence of that um, Certainly, Trump's election also drives a spike into two other areas of critical global leadership for the United States, one being its willingness to be the global trade architect the trans

Pacific partnership of worse now dead. Also its willingness to project global values, which is the antithesis of what Trump's America's First is. It's no more US exceptionalism. But even if Hillary Clinton had been elected, if you look at the rise of China, if you look at the willingness of the Russians to undermine the U S from a security perspective, look at the weakness of Europe, look at the implosion of the Middle East, you recognize that the end of paxim ar Kana was coming over time. Just

that trump selection suddenly means it's happening now. What interested me here? And you nailed this. I remember talking to you pre it will be my thirteen Davos, and I remember way back you and I sitting in a modest bar having a beverage of our choice for you talking about the crisis to come. You nailed it, but maybe you didn't get the amplitude right either. I didn't get

the amplitude right either. Do you have a gauge of the amplitude of what's coming in two thousand and seventeen, the size of movements that you would forecast, or is there just that much uncertainty? I think there's a huge amount uncertainty as we understood that is uncertain about the economic policy, domestic, international and foreign policy of Trump. There are a huge amount of uncertainty in Europe. I worried

that is a slow motion train wreck. I worried that Leapan is going to come to power in France, that these Shinquestele movement is going to come to power in Italy. This could be the beginning of the end of Europe and the Eurozone. At the time where Russia is becoming more aggressive in Syria, in Ukraine, in the Balkans, in the Baltics. Therefore, if the US gives up on the NATO and its allies in Europe, that's going to be an opening for puttings Russia. And there are concerns about,

of course, what's gonna happen with China. The rise of China.

It needs to do reform is not doing them because there is political transformation, and there are security issues in Asia from North Korea to Taiwan to Japan, and add the territory issues at the time where the US might say I'm giving up also on my premises in Asia, let alone in the Middle East, where if you give up on our allies and we're following a policy of igneerge independence, then the country between Shia e On and Sunny and his allies Sunny in the Middle East is

going to become even worse. So those are the kind of been certainly as we're facing in the next few years. Nor beany Thank you so much, greatly appreciate looking forward to seeing you at the World Economics. At that modest bar, perhaps we could go for like an hour with being an hour, so we could do like an eight hour show. YEA, well, I mean it's the New Years. It is the New Year, and we're here, and did you survive the New Year? Yeah?

I didn't. You know, if I come through it more exhausted than I started to come back to work to get arrest, I mean, it would be the truth about it. Who you put your trust in matters. Investors have put their trust in independent registered investment advisors to the tune of four trillion dollars. Why they see their roles to serve, not sell. That's why Charles Schwab is committed to the success of over seven thousand independent financial advisors who passionately

dedicate themselves to helping people achieve their financial goals. Learn more and find your independent advisor dot com. Slotic Parton joins us now he's Global Managing Partner McKinsey and come before, we're Asia Chairman McKenzie as well as we continue to talk about some of the risks outlined in Top Risks two thousand seventeen from Eurasia Group and Don Burn. Great to see you here for having there's a there's a line in this report Eurasia Group saying we're gonna see

near term chaos that comes from an absent superpower. How how good his sense do we have of what that near term chaos would look like. I think part of the challenge with chaos as we don't right about where it is. But I um I think that part of the issue is that is as your the Eurasia Group and laid out there are these ten big factors that are out there. Any one of them is significant. I think how they all kind of work together is another issue. So it's hard to fathom what it might be, but

it could be bad. I'm a little more optimistic in a sense that I think we we could see some significant growth in the US economy like we haven't seen before UM, and that I think as business leaders we just you have to just you can't freeze, you have to keep moving UM. But it is a more fragile world, and there there does seem to be I think as Ian has said a sort of a withdrawing of the

U S superpower, which makes the world less stable. UM. What chiefly will be driving that growth domestically, do you think? I think it's the you know, I think tax reform, I think deregulation. I think there's going to be in a very aggressive approach to making it easier to do business. At least that's what the retric is. I think the

infrastructure investment UM. You know, if with tax reform and just being able to bring some of that two trillion dollars from overseas back, that's a pretty significant stimulus UM and doesn't take all these things are difficult to make happen. But I think that's not as difficult as what does Mackenzie's research on the value or efficacy of incentives or policy redirection of all that money coming back from abroad.

Do you just bring it back and trust Tim Cook to spend it correctly or does he need to be incentivized to make that path from investment to jobs work. I think that that um. I think it's important for countries, even as big as the United States, to have a bit of a of an industrial policy. If I might even say that sounds very countercultural to say, I don't mean picking winners, but saying there are some areas that we really want to get in and invest behind because

there are opportunities. I think in tech that's being the case. I so I think incentives in a sense on the tax side, to make it easier for people to do things deregulation, I would be very nervous about picking winners. You must do X, Y and Z with the money.

I think that that would make me nervous. We get CEO's get enough direction as it is from markets, and I'd be nervous about, frankly, doing anything other than simplifying tax and UH and on the regulatory side of things, and putting a spotlight on opportunities getting researched and you know, business and and and a sort of the ecosystem working that can be useful. But more than that, I'd be nervous because I don't think it will last. It's not sustainable.

We'll come back. But in just about thirty seconds here the geographic divide between Washington Silicon Valleys or so, but it seems like it's much larger through this last administration on one before it. Are you optimistic that there's going to be a better conversation between Silicon Valley and Washington. Um, I am optimistic. But maybe another thing I might say is,

in some ways, I don't think it matters. I think the Silicon Valleys kind of said, we don't frankly give a good goddamn about what you guys are doing doing our thing type of the thing. It's like it's a different world. And so I think they'd been able to

operate in that environment. It's not to say that government policy tacks and centives and so forth one affected, but they're kind of it's almost independent in terms of how they do things right now Don Barton with Us with Mackenzie, which barely describes the research capability of those at don Barton the heard of cats that he manages every day at Mackenzie, including Richard Dobbs, James Man, you and many others.

You stopped me in my tracks last year with Poorer than your parents, just starting with a photograph on the cover of the Young Last from the Plymouth Charger. I couldn't afford at the time, and it was the most nostalgic yet smartest research piece I saw last year. Help us with your observation when Richard dropped Dobbs dropped this on your desk, What did dom Barton think of the idea that our kids are poorer than our parents? Well,

it was shocking to see. It was something I think we people have been feeling or worrying when you see the populaces and so forth. But as you said, to see that in so many countries. It's not one country, it's in nine countries where it is actually worse. The last ten years have been worse, and it's in looking

ahead it's even worse. And this is this is I think it was shocking just to see this The specificity of it, the breadth of it across many, many countries, and I think it it fits right in with what we're seeing again, as I said, with populism so deftail that if you would force I think of Roland Friars new research on this as well out of out of Stanford, looking again at this, at this very same issue, we've

seen a global reach of populism. How disparate is it when you look for threads of continuity among what we've seen in the US and Europe and around the world. I think there there are variations, but only in terms of how bad it is. I mean, I think one of the other elements of that work that that Richard and James did was looking at the nature of work as well, and that's changed. So you see the gig economy. This is where I wanted to go to, the gig economy.

Alan Krueger and the work that he's doing at Princeton and Professor Krueger has been a great I've been very kind, I should say, to come on on job's Day and other days were Bloomberg surveillance. Most of our audience listening to this after putting up with their kids over the holiday. I think the gig economy is a bunch of hotwash. I'm sorry forget about the high end academics of Bartner Krueger.

We're going You've got to be kidding me. How do we get back to the full time benefit laden perspective that we were advantaged by and grew up with. I mean, I agree, and I think about it for not only job security but training. You think about this world that's moving faster and faster at the half life of a skill. Well, this speaks David to history sist to Lawrence Summers and Blanchard histories. So so it's a you know, I think one one in Spain of the economy around independent workers.

And you know, some people want to do that. Most people have to do it because they don't have the job. And what I worry most about is the safety net, and particularly safety net around training. Who who's going to help these people stay current as the world was faster Because in my view, by the way, it's not trade that's dislocating jobs, that that's been the whipping boy for a while. For a while, it's going to be technology.

And you know, ultimately I think technology is good, but you have to be able to retrain and who's going to do that? And that's that's that's where I you know, the forces, if we don't do something about it, are going to get worse, I think before they get better.

I'll bring it back to Silicon Valley. We were watching as Saffra Cats and Tim Cook and others walked into Trump Towers, sat around that conference table and met with the present elect and so much of the focus when you when you think about Silicon Valley and the relationship between Silicon Valley watching is centered on privacy and security issues.

But I think it's fair to say work is going to be a big issue here and and the nation the world is going to have to reckon with the fact that technology has made it possible for many these jobs to go away. What type of burden does that place on silicon value? Will the president try to place on on silicon value? Well, I think that um, you know that that Silicon Valley companies are going to have

to be much more aware of it. Earlier on in the show This Morning with with Tom Ian mentioned what Randall Stevenson had been doing at A T and T in terms of taking ownership for training people as they move ahead, spending a lot of money to do it. He could have just laid people off and rehired people. He said, it's a commitment we have to make. I think we're gonna have to see more of that corporate switcher taking that ownership, because if you just let those

people go, you're gonna have a revolution. It was one actually Silicon Valley Entrepreneur did very well. It wrote a piece that talked about the pitchforks are coming. I can't remember his name right now, but literally be careful because with this amount of dislocation, without anywhere for people to go, it could get very ugly, and we can't just flop it off on the government. But that's an inflammatory statement, and I'll be shocked. I'll be true, David. We've heard

a lot of inflammatory statements this morning. The pitchforks are coming. What does the gilded aristocracy, the plutocracy do? What can be the reaction besides me the next Charles Dickens novel, that's no. Well, I think we all have to step back and say what are we what can we each do? And I think there are a lot of things we can do as corporates. I think there are things around

said the training side of things. Being involved in the educational institutes, we're seeing some I think inklings of what may come in different parts of the world. Singapore with their skills labs that are putting in place, they're putting in giving every singapore In over the age of getting a five Singaporean dollar in education budget doesn't seem like a lot, but it's the notion of we've got to

take care of people. Um, you're seeing this in Australia, trying to help understand what are the future jobs going to be? How do we rethink what different educational institutes, corporates do business as people need to You can't just assume that's going to happen if if we don't get involved to try and play a role in that, we will suffer the consequences that that's because I think it's moving too quickly and and so I think there has to be more of a sense of collective ownership and

an investment. Let me ask you about China, drawing upon your experience as that from your Asia Chairman of of mckenzy. We have this Nineteenth Party Congress coming up in China. In this Seriratia Group report, a lot of detail about the pressures that places on the president of China. Now, what's your sense of how reforms are going there? And we talk about the pitchforks are coming, to the rise of populism, the wealth disparity here in the US, how

does the Chinese governments have countered that as well in China? Well, I think I think the Chinese government for decades now has been focused on economic growth. And I would argue I don't think they say it exactly this way, but

the focus is there on middle class growth. It's strange for communist countries that it's it's ensuring actually to Tom's point, that there you will see your children will have a better life, and that is fundamental and if you can keep that going, you're going to have the confidence that you need from the people to be able to move forward. So I think that reform will continue. There's and it

is continuing. I think that the challenges there's been a very big shift on this anti corruption side, which in a strange way, I think has actually slowed reform down in the state enterprises because everyone's afraid to make the big change if you need to. But they'll get through it. There those guys are so long term on this as long as they but they will be watching that middle class growth and if it starts going the other way,

then that's problem. Time. Every administration steals like theft Golden Sex. It's all the press, but come on, they all steal guys from Mackensey, men and women from young the young Turks of Mackensey. They disappear off to Washington. Are you seeing a loss or do you predict a loss of Mackensey talent to this administration or does Donald Trump just not give a hoot about Don Barton's world. I don't no. I think I think we we we are seeing some

of that, and I think it's not just McKinsey. It's a broader group BCG, other Goldman as you said, other organizations. I think there's a there are a lot of business people that are in involved in NEST that are looking for people to help with the analytics, with perspectives, with longer term views of where things were, how things work. So I think we're already seeing it and we're going to see more of it, and we're supportive of that. I think it's a good it's a good thing to do.

Imagine you're welcome some back from the administration as well, And what do they bring to the to the company having that government experience. What does it does it mean for a company like you know, I'm a big believer and that Joe and I have called it the trisector

athlete leader, That you're a very good business leader. Someone said experience in the public sector and the social sector, a very good public sector leaders, someone who's had good experience in the other two sectors, and on on and so I think, first you just get that because I think that the I'm not saying that business is easier, but I'm saying there are less variables or stakeholders that you have to try and deal with. UM. I think

than when you're in government, in in in a major role. UM. And I think that right away changes your mindset, UM in thinking about the breadth of what you have to do, how you get things done, UM is I think more complicated. So you bring those those kind of I could call it technical skills that are really useful as opposed to you know, so and so down Barton. Thank you so much, David Gore and Tom Keane from your Aisier group. UM. I think everyone Tom King, David Gurrow. We are thrilled

you with us to begin two thousand seventeen. Our team put together a really interesting, David fabulous morning for us to kick off the year. Larry Summers, Nor Rabini, Ian Bremer our host here at your Aisier group, you know the historic flat iron building in New York. We just heard from Don Barton and Mackenzie and we'll get to the equity markets in a moment with the uh Douglas cast is well, what were your thoughts over the the interregnum that we took off and that we were apart on.

I was able to step away from the news if only did you tweet off Mr Trump? There were livings on my tweets. I did read I did read his. There's a feature on the Bloominger that sends the tweets that he does to your email. So he's following through that and he's at with some this morning. You're talking about Obamacare and also General Motors, another company being called out by the President. My basic yeah, my basic take

is we're seventeen days away. It's just suddenly incredible. I thought that more upon us than it was President giving a speech. I believe next week a farewell addressively broadcast in primetime. We have been dealing the morning with what has become front and center for the markets, which is our politics and our international relations. As you know, we do finance, we do investment, we do economics, and the distal that is people. Actually you have to put money

at risk. He has written for decades thoughtful notes. Douglas Cast is one of those people that even if you don't agree with him, you're required to read them. Doug Cast joins us this morning by telephone. It is a Spectrum Enterprise phone line, Spectrum Enterprise nationwide fiber based network and I T Infrastructure solutions. Duck Cast. David Kerr, Girl was thinking over the holiday. I was thinking over the holiday. You were short. How painful was the holiday for the

short one? Douglas Cast? Well, as I told you when I was on about a month ago, David and Tom, Um, I do like I I showed stocks, but I'm very tight in my UH loss and UH price discipline and that that keeps me alive. I'm not actually market neutral right now. Um. You know, seventeen days to inauguration, but more importantly thirty days to pictures and catchers. Um, so

it depends upon your perspective. In my perspective is six six blocks of Marrow lago with my office is well the perspective here of politics and folding it into the equity market for our listeners who are away from the Cassie and not day trading. But the more short term perspective. What does a long term investor do if I'm going to readjust my four oh one case this morning? What is it? Doug cast wisdom on what I should do? I think Larry Summers in the previous segment, wasn't he

something put it well? At first? Of all? Those interviews were great also with Dr brener Um he said he stated very laconically that quote uncertainty, the uncertainty premium should rise close quotes. And I think that's when you know when I construct my surprise list in December of every year for the following year. Um uh, that is uh

really the central theme that I'm employing. I think every year when you do a surprise list is one dominant theme in the dominant theme, of course, is a new presidency. Give us a sense here how you put together that list this year. It's it's probably improbable as you put it. You mentioned it for a second to frame my concept um, I think that annual forecast on Wall Street, at least to me, are mostly an exercise in what Howard Marks calls first level thinking. Marks rights that what's clear to

the broad consensus of investors is almost always wrong. First, most people don't understand the process to which something comes to have outstanding money making potential. And second, the very coalescing of popular opinion behind an investment tends to eliminate its profit potential. So quite frankly, anyone with a clean shirt and a ten percent forecasted rise in the SMP

is invited uh and inhabits the business media airways. Of course, not bloomberg um, but we we We tend David to term experts people whose credentials consist of mostly being consistently and wildly wrong about the so called spheres of expertise. At the same time, they display the stunning lack of self doubt and humility about their failures. My Grandma co Fax used to tell me, and she was a very wise and successful investors used to use the words often wrong,

but never in doubt. So we live in this kind of inauthentic investment world. Yet people perceive to be telling the truth are often shunned by the consensus. And um, so I approached my annual surprise list more unconventionally and outside of the ambulop envelope. And you just said, I call them probable improbables. These are These are basically overlays and overlays the term and embedding where the arts of a particular wager are higher than they should. And that's

how I construct my my vision of surprises. David, I would not that Mr Cass, it's Mr Marks. This is where we're supposed to step in in quote Graccho Marks. But far more importantly, we should quote Richard Marks, the great songwriter. And I think it's sort of like the right here Waiting where we're sitting in January. Right here waiting is Richard Mark said his classic. Perhaps I should be quoting Graucho more and saying, who wants to be a member of a short club that happed me as

a member. So that would be true to David Jumping, I'm you're surprised lest number three is no more at real. Donald Trump that the President life might be compelled to do away with his active use of Twitter. As I just mentioned a few moments ago, we saw two new tweets out this morning, one of which is calling out a company by name walk us to how big a risk that is for for an investor like you? Are? You?

Are you waking up? As I assume these these executives are with some trepidation that they might be called out by the President elect here in the early morning hours on Twitter. Yeah. I think my surprise, Davis, that is that the security advises of the Trump administration will basically tell him to cease and assist, Yeah, and close his

Twitter account. And I'm pretty acting that Twitter declines. The shares declined by about the day that is announced, and then you have this this failed operating strategy at the company. There was another management departure, I believe the head of the Chinese a subsidiary of Twitter, and you're gonna get increased in patience on the part of the initial founders and investors. And my surprises that Twitter has sold ten dollars and twelve dollars to take under UH in two

thousand and seventeen. So no more jumping the start the shark, David from. No more tweets like the one we had been over the weekend or the several that we got this morning, David Kerr coming up, Roger and Rogers. And there's a lot of things you can't talk about. I mean, every nation is different on an exiting head of their sentence. He left in August, of course, from that job is Governor of the Bank of India. It's amazing. Each nation is different on how they treat this about what you

can talk about but you can't. India is pretty pretty strict about it. But no doubt it will be a good conversation. The Dow up a hundred and thirty seven points, and we welcome Bloomberg Radio worldwide, Bloomberg Television worldwide and in India. Good morning with us. Now is Robin Rogen. You know him from the Boost School and from Chicago. He's appeared with us so many times. I've done panels with Professor Rogen in Davos at the meetings of the

World Economic Forum. But in the recent years he has been with the Central Bank of his India. He has now left that position and is greatly restricted in what he can speak of about India. Let me frame it, uh rago if I can about the continued great distortion you more than anyone wrote about this in your classic book fault Lines. The great distortion is still in place. Ken Rogoff spoke about it in his book The Curse of Cash. When do we exit our great bond market distortion? Well,

I think we're in the process of exiting. I think with the federal reserves seeing limited room for continued accommodation and starting to raise interest rates, I think you will see the pressure on other central banks also come off as much as it has been over the last few years to continue accommodation. So my guess is we're in

the process of exit. How fast it will be will depend, to some extent on conditions in the United States, what policies the new administration brings, how comfortable the Federal Reserve feels with those policies, and whether it feels it needs to move faster or slower, depending on what what actually the administration proposes and how quickly it will come in. It seems to me that as one pressure comes off, another pressure comes on. Here. We heard the rhetoric about

politics and the Federal Reserve here during the campaign. We're certainly seeing what's happening on Capitol Hill, a new round of Senators and Congress and being sworn in today many of them help bent here on changing the relationship between Congress and the Fed Reserve. How does this bank deal with that new politicization. I think it's a it's a very important issue, and it's it's there across the world.

Because central banks have been the only game in town for the last few years, they've also acquired a sense of political power that certainly creates apprehension amongst the political establishment. Uh,

and of course they would like to control that power. Unfortunately, it is coming at a point when increasingly central bank independence will become important as perhaps inflationary pressures rise and central banks are asked to do the normal thing, which is control inflation, for which we've spent many, many years getting an apparatus which ensures the independence, insures they can raise rates at the time that is needed without feeling

somehow constrained by political pressures. So it does these pressures come at a time when Uh, it is really a

very delicate situation for central banks, very delicate. Indeed, the backdrop to this, of course, is the possibility that we could see policy changes, tax reform, a big infrastructure spending package for instance, it seems to me that the FED isn't real damned if you do, damned if you don't position when it comes to to raising grads here that potentially could be blamed for doing the wrong thing whichever

way they go. Absolutely, and given the as you said, the political situation, this is a time they have to tread very carefully. But I have no doubt that given the tradition they have established, the FED will do what it thinks is right rather than cater to political opinion. Professor. And again this wraps around the top risks of two thousand seventeen from Eurisia Group, and of course Ian Bremer and his team focus on China. We spocus Secretary Summers

this morning about dollar strength. If we look at the research from Robert Mundel and out of Chicago Jacob Frankel of years ago, the researcher can Rogoff, Well, we can look at the academics of it. You've had to live the reality of currency dynamics. Do you have a concern over a strong dollar in this two thousand seventeen Well, I think a strong dollar is natural. Of course, one piece of Ken Rogoff's research says that it's very hard for anybody to predict the exchange the exchange rate over

any sustained period of time. Uh, the expectation is the dollar will remain strong, and that certainly is consistent with the Federal Reserve being first out of the box and normalizing policy That will help other countries in the sense of reducing pressure on them to adopt increasingly aggressive policies. For the US, it could be a head wind to growth because uh, you know of the obvious effects on

exports and imports. But that said, I think with the kind of fiscal packages that are being thought off or talked about, it may be that it it does more in neutralizing rather than in in substantially reducing growth. A big focus here of this present elect is on manufacturing, bringing jobs back to the US in sourcing. Some call it here. How difficult is that path forward going to

be for Donald Trump? We've seen him meet with the Carrier company at its furnst factory in Indiana's deal with companies on an individual basis here, How how how difficult is it going to be to focus so exclusively on manufacturing? Right? Well, um, you know, the the the data on manufacturing suggests that over the last thirty years, the US has steadily lost jobs. However, the extent of manufacturing in the United States, the share

of GDP has remained relatively constant. So what's happening is not that the US is losing a tremendous number of jobs to competition elsewhere. Clearly, factories are down, but new factories are opening up in different areas, for example in high tech. The bottom line, however, is that the loss of jobs is not so much because the US is uncomparative in manufacturing, but because technology is replacing jobs, many of them in the high tech industry. Again, because we're

manufacturing in a in a smarter way here. So in that sense, you know you're really working against the tide of history when you say we're going to bring back jobs. Are you going to also stand in the way of automation, which is probably more important in terms of reducing jobs. And let me just say, this very fine report by Ian Bremer's group has one sentence which which worried me, and it was a sentence which said something like the US,

many people in the US haven't benefited from trade. I think that's the line that's going around, which is tremendously dangerous both for the United States and the world. Any in the United States has benefited from trade as a consumer. Just look at the prices at Walmart, at Target, and so on. You wouldn't have those prices if you didn't have imposed from other countries. Professor, in the time that we've got left to you, I must ask you about

the International Monetary Fund. Madame Legard enjoys the second term, even after her legal challenges in France. Your name has been shortlisted somewhere down the road to provide leadership to the i m F. Is that an appealing idea to Rock and Roger? Well, first, we do have a number of years of Madame Legard's term, so it's it's a hypothetical question where we're going to hypothetics. Hypothetical Tuesday go

with me? I think they. I think the important question for anybody who takes over the i m F is how to provide leadership in a world where, as Ian Bremer's group puts it, uh, there is no country willing to take on the mantle of global hegemon as the United States used to. When everybody is backing off, it's very hard to do a job as as a multi lateral institution, which is right, Miss Leguard is doing well, professor, thank you so much, Rock and roging with the Boost

School in Chicago. We thank Bloomberg Television for being with us today, David, You and I with final thoughts here. What I love about the Eurasia Group, the geopolitical recession top risks is the brevity of it. This is a Ian Bremer's always rushed. He's always moving on with Willis Sparks and the others, moving on to the next project. And there's a breath of directness to this, which which is great. Leading with America, Yeah, leading with America, Independent America.

The biggest risk here last year was Chancellor Mercle there go and Chancellor mercle making appearance in this piece of armor. Money to this photo that our colleague Francine Lockwet tweeted out of Merkele with francois Land, Barack Obama, all of these other leaders who have lost their jobs. There is Mercle alone in the mix looking up. So she faces a series of challenges just in terms of her own

political leadership within Germany this year. And that's number four or here on the risks, as you say, a fascinating report twenty five pages and well worth reading. 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. Who you put your trust in? Matters?

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