Surveillance: Multilateralism Is A Better Way, Gurria Says

Joining us now, Jeff, good morning to you, and let's get to the news that just crossed the wires, shall we crossing the Bloomberg? That China's getting ready to cut imports terrorists on some goods from November. Is this a white flag? What is this? Well, they were already experiencing inflationary parishures. And one thing we've argued about these hereoffs is there not unlikely to have that big of an impact on demand or supply chains, but have a much

larger impact on inflationary pressures. So by cutting them, it's actually easing an inflationary environment which was exacerbated by swine flu and other domestic problems. What's been fascinating about the commodity market through so far. If I said to you, Jeff, that we were going to have a big trade dispute between the United States and China. If I said we'd have big concerns over emerging markets and a stronger dollar story emerged through and then said guess where commodities are,

would you have guests? Correctly, there one fly in the ointment. There really is the dollar, which is what put downward pressure on the metals complex. When we look at energy, it's a very different story. Oil is where it would be with or without the dollar. I like to say that oil causes the dollar, the dollar causes non energy. So the big difference here really is in the metal side, that copper sitting far lower than we would have expected.

Jeff Curry, Good morning from the Plaza Hotel. Jeff, I, I'm fascinated by the supply dynamic into the next Vienna meeting. I understand there's a marginal issue with this given country that given country, but what will be the supply elasticities that they confront in Vienna. Well, I think the big concern is does Saudi and the core OPEC have additional capacity to deal with the Iranian outage UM, they're making large scale investments. Right now, rig counts in Saudi Arabia

are up. The neutral zone has three hundred thousand barrels per day of additional capacity. Russia has two hundred. So yeah, right now it's a concerning issue. But as we look out forward six months and beyond UM, it becomes less of an issue. What is your target on print crude UM? We are seventy five at the end of this year. We think it will hover in that UM low eight high high seventy range. I think the key here is from an investment perspective, oils backward it it has a

ten percent carry. Even though that we're not bullish on prices, were bullish on owning oil because of that carry. Let's talk about that a little bit deeper. And if we can strip away the jog and Jeff, when you say the oil is banquidated, what do you mean by that and why is it significant? It means inventories are low, so spot prices sit above forward, so you buy forward

at a discount and roll up that curve. Think about it is like the interest rate on a bond um and in the current environment that dividend or whatever you want to call it for oil is paying ten fascinating and the president pushing back against pack Your thoughts on that, Jeff, because I'd love to hear what you think the willingness the president's questioning the willingness of OPEC to push back with more supply to meet high crude prices. Does the

ability exist before we actually actually question the willingness Jeff? Well, in terms of looking at the willingness, they pumped a lot of oil on this market back in August, and look what it did to Brent prices in Brent term structure. Um, they backed up, inventories, came back down on and oil prices went right back up. So clearly, um, they do have, at least in the immediate term, enough a capacity to start to keep you know, keep this market balance and

push it slightly into a curclus. I like to emphasize historically they never pushed this market into a surplus voluntarily. They did a little bit in August and then backed off. The big question is Tom asked, is you know what's their capacity coming from here? The highest we've ever seen Saudi hit was ten point six. They're producing ten point

but they're making investments. Jeff, you know, let me ask you the question, and you know you're one of the grades of petroleum economics and petroleum discourse in the world. When you hear the president lecture Saudi Arabia, how does a pro like you respond to that. I like to use the example of soybeans. What did we learn this summer? Um that the administration is willing to use all the tools at his disposal to be able to keep prices

of commodities um and a manageable range um. It was that Arip'll see a you know, obscure nineteen thirty depression era law that they were able to use to be able to subsidize farmers. I think what we learn from that is there's a willingness by this administration to do whatever it takes to keep prices in manageable. Okay, that's very nostalgic. I'm sitting in the palm court, John Ferrell word Conrad Hilton bailed out the hotel in about nine four.

That's all great. Let's move forward to can the President provide discourse on oil into to keep the price down. I don't have an interview Jeff Curry that believes he can succeed at that. When you get into five it starts to become an issue. But when you look out that you've got huge pipe capacity coming online in the Permian. You know that's the pipe to get the oil out of the Mid continent the US down to the Gulf

coast um coming online in September this year. So your wind of tightness really is between now and let's say third quarter of next year. John, John Permian, you can translate it is Texas. Thank you, Tom, thank you, thank you. I am just shocked by Tom's knowledge of the Planza Hotel in New York. I'm guessing you frequent this bar quite often. To this bar was redesigned about four or five years ago and designed beverage of my choice. At what did they redesign in terms of the beverage of

your price? Jeff Curry of Goldman Sacks. I now we've got to let you go to get back to the trading flaws of government downtown. So thank you very much for giving us your time this morning. Jeff Goldman Sacks Global ahead of Commodity's research and partner John Ferrell from our studios Queen Victoria Street in London, I'm Tom Keane at the Bloomberg Global Forum here in the palm court of the Fame Plaza Hotel. For important conversation and thinking forward,

we begin our coverage. Was someone important a day ago and ever more important right now, Werner Hoyer of Germany, President of the European Investment Bank, and we welcome in this morning. Is wonderful to speak to you. But my phrase, Mr Hoyer is a rip up the script, and I must rip up the script this morning. We saw the President speak yesterday at the United Nations, and I thought American media singled out the German UH Party for the quality,

the tone, the moments of laughter. Is the president spoke? Speak right now with your your domestic politics experience of Germany, about the German view of President Trump and of Chancellor A Miracle's government's view of President Trump. What is the distinctive characteristic to you? Well, I think I'm not alleged biased to talk about President Trump because I am representing the European Union from their years of experience in my

own country. We are a little bit puzzled, you know, the United States of America has always been the big example for Germans. The Americans were the ones who got out out of the misery and our own crimes of World War two and the Holocaust. So we owe a lot to America, not only for that, but also for help to shape happening us, to shape our constitution. Are

a real political, democratic life. So seeing America going in a completely different direction from what they taught us decades ago, this is irritating, but of course the American people must make their own choices. Bloomberg spoke to Actual vor this morning in Zurich and it came up as well, do you detect and again this goes to your abilities at

the European doesn't be like a pan European view. Do you detect that they look at President Trump in his sense of globalism, is a one awful moment for America? Or is there a new permanence here to America being less multi labal. Well, when I talk about America, I do not necessarily talk about President Trump. So I see that the prod them too is legitimized to take his

positions and represent the United States takes these positions. However, I am very encouraged what I see on issues like globalization, on issues like climate or so by American society, American industry by many states, the global Covenant of Mayors and all these developments which are very encouraging. So I don't give America lost. Let us turn to the European investment things tell us about the state of investment public in private in Europe. Is there a forward momentum or is

it going quarter to quarter. I'm very critical of that. I believe that Europe is behind an investment. There is a huge gap, in particular when it comes to innovation and when it comes to infrastructure, both new infrastructure Rhodes communication, energy, transmission parts rail in particular, but also when it comes

to to innovation. I think we we invest much too little, both industry and the states into the future of the of the European Union when it is right to speak used Jonathan Farr, joining from the City of Larning on investment in Europe, is actually quite fascinating that there is a reluctance from the Germans, who run a very balanced budget to invest in their own country in infrastructure. That

has been a case for a long long time. How do we address those issues, How do we convince the German government that is good for them and good for the continent as well. I think there is so far a lack of awareness how the bad situation of the

infrastructure in Germany hurts the future of the country. I believe that a rebalancing of the budget is possible without getting or without losing sight of the objective of balanced budgets, which is what the Germans have achieved that was a huge success and which they want to maintain, which I

perfectly understand. But I think it's doable by some reshifting in the budget and giving more attention to the quality and restoration and rehabilitation of infrastructure, just as well as to much more, much more innovation, research, technology, and the whole thing begins with education. Do you think it's possible that in ten years time we could look back on Chancellor Michael's leadership in Germany and actually view it as I squander a decade, Not at all. This lady has

achieved so much for Germany. It's reputation and it's competitiveness in the world that I think whatever happens to her in the next many years, she will really might be a remaining as one of the key leaders of Germany after World War Two. If you're just joining US worldwide Verner Hoyer with us. He's president of the European Investment Bank. Here at the Bloomberg Global Business Forum. UH in the thrilled that you're all with us coast to coast across America.

Mr Royer. When we look at at you mentioned the lag and infrastructure within UH Europe, most Americans would kill for Swiss trains or German trains or even the tube in London. I mean would be UH the state of it. And part of that is the logistics in what Mr Truche has always told me is the challenges of crossing borders. Is it going to be a more connected Europe? I mean ten and twenty years on from these historic moments, will it be an interconnected Europe? And air in rail

in our road we have already very much advanced. They're still improvements are possible in particularly in some parts of Europe, like Eastern Europe. We must invest more into Eastern Europe, there is, there is no question about that. But I'm I'm less concerned that we might not make enough progress. I'm concerned we might go back, We might make going to a recess or a regress, because what is happening presently, the longing for borders and border controls and everything that

is very, very difficult and dangerous for logistics. This is coming back, and I'm really surprised that this came back, and I'm really surprised that this is getting so much momentum. There's a history to all of this, and if I could just take Germany and Italy as one example, it's a new capitalism in Europe. We here interview, the interview, some people saying no, we don't want to be Anglo American, others saying we need to nudge towards a more Anglo

American capitalism. You sense a new capitalism in continental Europe. Where as it's steady as you goes well. I think as long as we remind ourselves that the social market economy was the recipe for progress, not only in Germany but practically in many parts of Europe, and wherever this

path was not taken, it didn't go so well. As long as we remember what we owe to the social market it kind of the balancing between the investments, the social dimensions and and the the private ownership, then we can still consider continue to make progress also in Europe, when in countries like Italy they feel constrained, and they feel constrained by rules that are said at the EU level,

often by unelected officials. What do you say to the Italian government right now, who are ultimately trying to bend the rules. In some people's minds, the rules currently as they stand is to limit the budget deficit to three percent of GDP and sure that your debt to GDP is moving in the right direction. Italy is trying to tear up the script. What's your message them today, Well, we have a new situation in Italy that's legitimate to to to explore your feels, more boundaries and more new paths.

On the other hand, Italy and and many other European countries were just about to implode because of the oversized deficit. They have been very successful in reducing that considerably over the last couple of years. Deviating from that path now, which was not prescribed by unelected officials, that was a political decision at that time by elected politicians, would be

big mistake. But do you think that the budget deficits in Europe have perhaps overstated and that the actual problem with an impotent central bank that just refused to act like other central banks for a long long time. Under Jean plautrichia All, the European Central Bank has done a marvelous job when going for the protection of the currency and the stability in Europe a couple of years ago

with a very clear position to do whatever it takes. However, this is a position that kind of be maintained forever as we continue the United States. When it comes to monetary policy, the United States is always a couple of years ahead, so we're not in the process of seeing that that zero right interest rates will will disappear very soon, hopefully gradually and without any any damage to the companies that need to to to adjust to slowly arising interest rates.

Werner Joyer, where this President of the European Investment Bank here at the Bloomberg Global Business Forum is We have many important speeches today, but this is a wonderful focus on the dynamics of Europe. The word of the moment Burner in every NBA program in America scale scale, scale, We're looking for scale, scale, scale. Europe has a complete

disinterpretation or reinterpretation that word from America. Are we going to see scale in corporate America's from mergers, combinations and transactions are we going to go out and buy revenue instead of build revenue across Europe. That could be and I think it would not be very helpful. I believe that we have to make sure that whatever we develop in the technological field and new and further develop will fit into a system, that is, that is in the

within the limits and constraints of competition law. And sometimes I missed that, and we see the little dimension in some some sectors where America is definitely leading. We admire that a lot, but this is on the long run not compatible with the rules of competition. I mean your your dissertation years ago theoretical approaches to the role of money as a capital property. This goes back to a huge theme in academics in America, which is monopoly businesses,

but also the strange word monopsony, which weakens labor. Europe has always been far more sensitive to that than America. How will that change in the coming years or does labor maintain power in Europe or do they does it fade away? I think it it maintains power because everybody, even among the employers, but in particular on the political side, are pretty much aware of the of the value of

having stable social label relations. And this has been achieved in Europe more or less over the last two decades. And I think everybody is interested in preserving that, but otherwise it might lead to disruptions which can be very detrimental. And John Farrell this was unique in two thousand, eight, nine ten, where Germany adapt their labor force far better to financial melt down than other countries, including the United States, and arguingly they started doing that a good ten years

before the financial crisis. Actually, here the reality Vernos, you know, is terrifically high unemployment in places like Spain, Italy, Greece. At the youth level, the picture is even more ugly. What's the solution to that? What's the remedy? What would you prescribe? At the moment, I believe we should overcome the division of labor where innovation modern technologies for the development of those takes place in the successful country of the north, and in the south we observe second rank

industries or something like that. We must bring innovation your technologies. We must bring climate change activities into the countries of the South which are so far trailing. We must overcome the division between innovation and uh and the development innovation and climate innovation and education. All this belongs together. We

need a much more holistic view. And when it comes to Spain, you can see how successful they have been over the last couple of years, and if they pursue that course also in the future with a sense for social balance, I think that Spain will be at par with Germany very soon. Vernon Horror, thank you so much. He's President of the European Investment Bank. Here at the Bloomberg Global Business Forum, Welcome to our audience from Bloomberg

Tell Vision as well as Bloomberg Radio. Because we are joined by Michael R. Bloomberg, former Mayor of the City of New York and of course the founder and majority shareholder of Bloomberg LP, the parent company of Bloomberg News. We call him our boss. He's also the founder of Bloomberg Philanthropies and is the U N Secretary General's Special Envoy for Climate Actions. That's a lot I can outrage if you named everything after yourself, really with me as

the Trump does that too. She write a book and called Bloomberg. Okay, so we're here at the second annual Blobal Business Form. Like what's changed since the first, in terms of global business. Is it better is it worse? Well, I would prefer that the world laughed with us then laughed at us. But yeah, things have changed. The tariff for is starting hard to see how it doesn't continue or even grow worse. Uh, didn't have happen. Wasn't there

a year ago? But I think the fundamental things of the public worrying about technology taking away their jobs, not understanding the environmental challenges we have. Uh, those kinds of things were there a year ago. They were there two or three years ago. They influenced the last presidential election. They'll influence this mid term election. They'll influence the election. As you suggest that we had climate, we have technology. But really what has changed to some of grates trade?

We saw that yesterday in the nations. A lot of talk about trade, a lot of restrictions, whether it's China, whether it's sanctioning as a RAN or whatever. How much are the Unitate's hurting itself? There's a new requorter. The ECB says, actually noted states will hurt the most right now.

I think the United States will get hurt. And you have to understand China is so big that anything you do to China has a minimal impact on the country and only on a long term basis, And an awful lot of people in China that don't buy American products. Is five hundred million people in China that is still haven't come out of poverty, and they're not affected by

any of this. Government social programs actually do better in down markets and downtimes because they don't get cut, whereas anything that you have in the private sector may go down in value and your pension fans puttings maybe less and because you have investments and they don't have that. So I think it is fundamentally different. It is very much, very worrisome, and regardless of whether you Republican or a Democrat, this is just a failure of our government and maybe

we should look in the mirror. It's a failure of ourselves to not demand more from our elected officials. And yet does the Trump adminstration to have a point when it comes to China. China has been restrictive in trade, they have. Everybody agrees that China has done a lot of things that aren't fair, and administrations going back, both Republican and Democrat, have not done anything about it. It's

not that Donald Trump is wrong and fighting it. It is the ways he's fighting it, because number one, it doesn't work. He puts people on the other side in a situation where they can't cave. They have their domestic and familihoods to worry about um. And the second thing is, uh, he's just going after the wrong things there are. We need to have access to their markets. We need to be able to go over and open companies and compete. We don't need to stop them from selling us products.

Quite the contrary. If they want to sell us products at a lower price than we can produce ourselves, our consumers benefit from that. But we've got to make sure that our workers don't get hurt by that, and they don't get hurt if you create other jobs and other markets for us to sell our goods into. And so if you block one thing, they're going to block the other. And no matter which where you work, you're gonna get hurt.

So how long can this go on? Particularly dispute with China before permanent changes are vague, Whether it's companies changing their supply lines or whether it's to them that are China reaching out to Asia and other trading partners and there'll be permanent damage. Well, companies are very flexible. They're already opening UH plants and offices and other countries that are outside of the American Chinese battle. UH, They're already

readjusting their pricing and how they manifest facture. The supply chains can change. Literally in the middle of the night, they send a message to the ship, go here rather than go there with the parts that you've got that we need him in a different plant. Um. It's much harder for us to change what you do when you annoy people, when you antagonize people, when you make enemies where it's hard to one day say they're bad and

the next day say they're good. Given the problems that we face, the challenges, let me put it that way, we face. Is it time for another business leader? I mean we have one in the White doest now. But you recently said that you were not going to decide about President la after the mid terms. I assume that as you have a business leader now. Donald Trump is a real estate promoter, and I don't know whether he's good or bad. He built a lot of real estate or owns a lot of real estate, a lot of

golf courses. Um, but he's not a businessman in the sense that he has run a big organization. How you work together, how you attract good people, how you adjudicate disagreements, um, how you deal with other companies, in this case other governments. And it shows and maybe Clinton and a little bit Bush they had some management experience. But you've got to understand that all of these the top jobs, these are

executive jobs. They're not about policy. We keep asking about policy, but policy is going to be set by advisors they bring in because nobody can be an expert on all of these things. The job is to manage, in Trump's case, for million people who work for the federal government, and that's not his expertise. Okay, many thanks to Michael R. Bloomberg coincidentally coming from the Bloomberg Clo Business Forum to have David Western there alongside Michael Bloomberg as we kick

off the Bloomberg Global Business Forum in New York. A speech with Prime Minister to reason may coming up a little bit later, and some debates still Overtrade. And as my points out, and I think most people agree, the problem is very much China and has been for a long long time, and it's been a consequence of the

utter failure of previous administrations to address the issue. I think the real debate still is the best line of attack to get the Chinese to do what's right and open up a whole lot quicker than a half big well. That seems to be the debate at the moment. As you say, it's been the debate for decades, but the

immediacy of it and the tone is radically changed. John Farrow in London and our Queen Victoria Street studios next to Mansion House, and I am Tom Keene, not at our World headquarters, but rather at the Plaza Hotel, the Bloomberg Global Business Forum, and is a decidedly special Bloomberg surveillance this morning, not only because of the event and the people involved. Of course, Prime Minister may speaking later among high points Madame Legarde as well, But what is

so fascinating is the news flow. And we need to become expert right now on one of those themes, which is the trade we've been talking about and with us on El Guria. He is, of course the fifth Secondary General of the Organization for Economic Cooperation and Development, and in this non cooperative world, it is the O e. C d buried on your website. You're wonderful informative website. Is an important video which Jack des Bugwaddy of Columbia University,

who has been has made a religion. Professor bug Waddy has made a religion about the value of growth in free trade. Is Bugwatty's world at risk? It is crucial that trade continues to drive growth. Typically, we had a rate of growth of trade which was doubled the rate of growth of the world GDP. That means the trade was driving the growth, you know, and that was Today the rate of growth of trade is below the rate

of growth of the world GDP. It it was flat for some time, it was very weak, and now it's still about three percent, whereas the rate of growth the expected rate of growth of the world's economies about three point seven. So, uh, you know, trade is not helping. And of course the trade wars, that trade tensions, that tarists, et cetera, clearly are not helping. You are one of the most important voices in the world on these matters. And it's not only that, but it's your economics and

understanding of Mexico. Just as one part of the trade debate, how its threat is NAFTA. When Richard has has a Canadian delegation up at CFR. I believe it was yesterday, and we may have a bilateral Mexico United States with Canada removed. I mean, these are tensions we've never witnessed. I was one of the negotiators of the original NAFTA, so it's your fault. And and I have to say it was born as a trilateral agreement, and it will be a trilateral agreement. We all benefit from having Canada,

Mexico and the United States in the mix. The three countries benefit, the region benefits were collectively more competitive, more productive. So it's a win wind wind proposition. Mr Secretary, let me bring in my colleague in London, John Farrell. Good morning John, Good morning to Song, Good morning to you, Angert.

Always great to get your inside. What do you do when one country doesn't play by the rules, and that one country just tremendously well for a significant period of time by not playing by the rules, and that one country is China, what do you do? What is happening now is that more and more China is becoming incorporated into all the big flows, not only of information and trade and finance, but also in terms of the disciplines.

For example, they were very active in the Steel over Capacity Global Forum that we created in the G twenty in order to deal with the substance of the steel over capacity, one of the origins of the very recent trade tensions, as you know, because that's what started, that's what sparked the whole thing, and China has been very active in their giving information and trying to see what we're going to be doing about dismantling some of the capacity.

So it's a very good example of how they're moving in. I think they are very convinced that it's it's the only way in which they are going to avoid further tensions like the ones we're teen today. Well, the sound convinced that's enough. Are you convinced? The problem with multilateralism as you can say anything about it. It's wonderful, it's great, but it's not fast. But it tends to stick better, the ownership is more diversified, and it tends it has

more staying power than when you go unilateral. So this is why we should persevere with multilateralism, but we also have to get it to function better because sometimes it's just too slow, and we persevere in this, just postponing and postponing the decision. But that's the problem. You have a political issue with the electorate if you're the leader of a respective country, and in this case, the example

is the United States. How do you convince the electorate that the multilateral approach of the last several decades that has yielded next to nothing to get Shotte to open up more aggressively and much more quickly, it's going to start yielding results in the near future. How do you convince the electorate of that. These are two different aspects of the same problem, but they're dealt with differently. They

have two different channels. One is the pressure that is exercised by one party on the other with the tariffs. But the only way in which we're going to reduce capacity is precisely through the negotiation in the global forum. Otherwise we're going to be seeing a revival of these tariff issues in the next five, ten, fifteen years. We have to deal with a substance with the underlying problem. Is there a permanence to a Trump lateral policy? Is there a permanence to my way or the highway? Is

the president defines his globalism. The question is whether it is a negotiating strategy or whether it is a permanent way of looking at the world. Why, because we built you know that this multilateral world over the last six years, and the US have been absolutely crucial in this building of this world that we have today, including institutions like the OE c D which were born around the you know, the the recovery of Europe UH and then UH have

gone around these convergence of policies. So we have to keep at it. We just have to keep proving multilateral is a better way. One final question, what's in the pixie dust in Paris? Is in Paris? Is that you have Catherine Man wanted from Brandeis University over to Paris, and now you have Laurence Boone I was so excited to see that she would take over. Is what is the what is the curia pixie dust? These brilliant economists to go to Paris has nothing to do with Paris?

Right The choice? Well, for to all the food is still good, or so they say. But then but then tom uh. The most important thing is all these crucial jobs are chosen exclusively by merit. And in both cases these two ladies have been fantastic. Of course Cathy left it to go to become a chief Economy City Bank. And now Laurens Boon what we stole her from ASA, and now she's going to be dedicating herself to a little bit more of uh, you know, of civil service again.

They'll always be Paris. Thank you so much, and Gloria greatly appreciated, of course, Fifth Secretary General of the Seed. Wonderful to you. That's on your go to your if you're just joining us Bloomberg Surveillance Worldwide from London and from New York at the Bloomberg Global Business Forum and with us Roger Ferguson Uh, Roger, I I look at the FED in the Challenge forward and if we go back to chair yelling and your introductions of chair yelling at the Economic Club of New York, it was about

labor slack. The mystery here are rising wages? You deal with this every day and t I a a teachers flat on their backs in terms of real wage compensation. Wages? Are wages are rising? And my mail says Tom, no, they're not. How does that dovetail in a gilded age? So one of two or three things that received. There are some pockets where this clearly labor shortage and wages are clearly risings. So one can think about truckers, for example, as an area of wages are clearly rising. So you've

got the scarce skill population. The second population you have are those where technology is changing and let's say, disrupting UH and increasing productivity, and I think their wages should be rising maybe a little more quickly than they are, but they haven't really risen very much. And the third group is i'd say the unskilled, where you know the

labor demand is not outstripping supply. And so what you've seen in this economy is it has many different labor markets and you put them all together and you end up getting relatively slow wage growth overall, some pockets hot or some colder Roger. It's Jonathan Farah here in London. Fantastic to hear your insight on a day where we

do get a Federal reserved decision. Let's pick up on that about how difficult it is to read the labor market and put it together with your assertion and other people's too, that the Federal Reserve is dying to engineer a soft landing. Just how difficult will that be? And it's there any historical comparison that you reflect on to say that it can be done. Um, one is optimistic that it can be done. The true reality is that

it's rarely been done. Uh. And I think this time they're dealing with a number of things that may make it even more difficult. One Tom's already alluded to, which is fiscal policies also quite stimulative. That's not gonna last forever, but we've had a major tax cut here last year

that's still playing through. The second I think that they're dealing with is there are some geopolitical uncertainties uh, though it yet has not yet become a major force in the U. S economy, the rising trade tensions some might call it maybe looming trade war may create some headwinds in the near future. And the third, obviously, is the state of financial markets themselves. UM valuations relatively high across

almost any asset class. And so I think, you know, this is going to be a very interesting and I would have to say relatively challenging charing trying to try to uh engineer the soft landing against all of that backdrop. Roger, it's interesting that whenever we hear from FED chair J. Powell, he reflected, and we've heard this a couple of times, he reflects on previous financial crisis and it reflects on previous economic downturns, and he says that over the last

couple of decades they haven't been caused by inflation. The most important aspect is to be handling the financial aspect a lot more effectively. Do you think that's where the focus is right now on the core of the f O m C to to really try and manage the potential for financial excess is to be just around the corner.

I think the FIT is trying to manage both right, because I recognize that they are also looking at an unemployment rate that is historically low, um, you know, measures that suggest very very little, if any slack left in the labor markets. Um. They're looking at an inflation picture that is starting to move to uh their two percent target, And so they've got to keep one eye firmly planted on the real economy because that is really the essence

of their dual mandate. But you're right, at the same time, they have to ask questions about how much debt has been built up in the system and is there a leverage that's somewhere, And so they have to be cautious about changing the FED funds rate and implications across the YO curve because of the possibility, not likelihood, the possibility of financial instability starting to emerge from their gradual movement of interest rates. We welcome all of you worldwide on

Bloomberg Surveillance from New York. Roger Ferguson with us, a former vice chairman of the Fellow Reserve and now senior vice president in charge of America's failure in retirement. You are at t I a A. It's your fault and that would be ARISA of nineteen seventy four has been a failure. What you live this every day at t I A A with teachers trying to assault it away, trying to get the retirement and as a nation we've failed. What are we gonna do to turn around the failure

of the defined contribution system? So let me um rephrase your question a little bit and describe what it is that we do. Um So, we at t I A A, teachers at Shots Annuity Association have been around for a hundred years. Uh for that hundred years we've meant creating retirement security and more broadly, financial security for literally millions

of Americans. We think we've got a model that actually has been working very very well UM and indeed UH our participants have retired safely and have a high degree of confident, but a huge body of America does not have the luxury of four or three B and the rest exactly right. So that takes me to the next point, which is, Okay, what can I say America learned from the successes of T I, A A over the last

hundred years, And I think there are a number of lessons. First, you have to have a good defined hybrid dB DC, defined contribution define benefit plan. The way we do that is we have individuals saving UH starting from their first day at work. But most importantly, they're saving towards getting guaranteed income for life in the form of an annuity. So the way we have created financial security in retirement has been by having people saved and then having the

option to annuitize. This is brilliant. It's the most important conversation I've had on retirement in two, three or four years. Roger Ferguson No. One in Washington is listening. How do we get a p h d. From Harvard to explain to a bunch of politicians that define contribution, the variability, take care of the lock in individualism of America. It's failed.

How do we get back to the retirement plan? It's a hybrid with what our parents knew well the actual There are some good news in Washington that there have been a number of bills that have been proposed and a gradually working the way through. So there's actually a

small group of Martin's listening closely. And the reason that they're listening is the point that you're making, Tom, which is that fight retirement security may well be one of, if not the defining political economy issues of the twenty first century. And so what I'm observing is retirement security or insecurity is rising, and mainly slowly on the legislative agenda through acts such as the uh VISA, R E s A Act and others. So I see the emerging of a of a real interest in this. Do we

get back to the success of the British system? I mean, John Ferrell's in London, living fat and happy. He's he's got his retirement slotted in. When he was twenty five years old in London, But can't we get best practices some other nations without being socialistic. Look, I think the reality is we're working hard to do that, and so society is looking for the models we recorgate. I hear that a pure DC plan hasn't worked, and so a bunch of us are saying, and it's now being heard,

you need a hybrid plan. But you have to recognize that it's going to take some time because we move dramatically from defined benefit divine contribution in the private sector and now trying to turn that ship is something that's gonna take some time. Do you look at the moment we're in in the report that I know you stayed out of politics. I give you great credit for that, But do you look at the moment that Washington's in right now? Is a one off? Or is there a

permanence to this anger within parts of America? Look, let's hope there's not a permanence to the anger. I think what we have to now understand is, well, what are the airline causes that's driving this? And I think one of the big underlying causes is the thing we just started talking about a little bit which is wage inequality. There's a sense that some folks are doing really well, particularly in the last ten years of recovery, and many

have been left behind. Uh And so I think we do need to rally around the observation that we have the emergence of two unequal societies and policies. Got to figure out how to bring those back together again, to overcome the resentment that some folks are feeling and recognize that the upper round that maybe you know, they have benefited um a lot more than maybe other thing they deserve.

Roger first, and thank you so much for your time today, the former vice Chairman of the Federal Reserve System, and of course with t I A. 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 Keane before the podcast. You can always catch us worldwide. I'm Bloomberg Radio.