Surveillance: Powell is Not Massive Regime Change, Wieting Says

It's Chairman Powell, who took over, of course from Janet Yellen this month, speaking before the House Financial Services Committee tomorrow, then the Senate Banking Committee two days later in what's known as the Humphrey Hawkins Testimony, the first time since Powell was sworn in that we as market observers and you as market participants, get a chance to pass every single word from the new Chairman of the Federal Reserve, Johnny Us to discusses. Steve Ye City Private Bank Global

Chief strategisticly joined us here in New York City. Good morning and happy Monday to you, Steve. Happy Monday. Did they exist on a note? Maybe they exist today it is let's get let's get up to Spain on what to expect Tuesday through to Thursday. What are we looking for from Shaman Pal Steve Well I think it's what we can't anticipate that's interesting. You know, we have the policy report to Congress, we have the new projections, we've

had the last Fed minutes. If there is any nuance as to how the Chairman can talk to us about viewing the outlook differently, you know, to a certain extent, they feel more confident about the course that they are on. But how much more confident does it make them actually think about changing the policy view to one that's a little bit more robust. How do they want to fight inflation?

To what extent? Are they really playing the old game, which is pushing down inflation at every time we see a chance to do it, or are we just satisfied to see it rise to the two and a half percent range? You know that they say is constitutes at least short term price stability. States to what extent should they be trying to find inflation at this point? Well, I think that most prudently, we have to care about

what the next downturn will look like. And it's not to say that there's one immediately on the horizon, but if you are essentially avoiding any financial excesses, and you really think about what unwinding financial access is does to the future economic outlook and the inflation rate, then you don't want to have to fight a deep deflation later on in an economic downturn. So that's why you know this modest, mild policy snugging that we're doing here, which

is really way below the standards of past cycles. It's half a historic tightening cycle. You know, it still matters to do this when inflation is low. And again we can talk about how the December CPI print was half a percent. I don't think we're going to see every single month is going to be, you know, annualizing at

four and a half percent. I think one thing that a lot of paper of trying to get their heads around is how different sham and pound might be to form a chair yelling how do you expect to spread to widen? Is it going to narrow? How do we recon style the difference? Because right now I think overwhelmingly the consensus of the amount of people that I speak to is typically this is yelling two point out, that's

Jerome Powell. It's not the way you see things, or do you see things differently well compared to the discussion um perhaps John Taylor or Kevin Walsh, you know, some of the people who were brought up in the process of vetting a new FED chair. Uh. You know, we did have policy comments from Jerome Pool in the past.

You know, we've had him articulate the Fed's view of the economy and how monetary policy should unfold in the past, and so we wanted to understand, you know, to what extent that reflects respect for Yelling's views or is really going to break new ground going forward. But I certainly feel a lot more comfortable when I did at the time of the appointment that we are not having a massive regime change in policy making here. The fact is

in is correct me from wrong Stephen John Wood? Um, the fact is we don't know j. Powell's monetary beliefs. We really haven't heard enough yet, have we. Well, look, we do have some specific monetary policy speeches. Maybe this is not what he spent his life wanting to do, perhaps, but we have seen like you know what that let me just jump in. I'm with Tom. This was the

fight the quiet governor on the FED board. Yes, we've got a couple of speeches, but his whole modus operande was just to go out there and not annoy anyone. He was a follower of whoever was leading. He was not out there as the leader on the FED boar board making big speeches that would disrupt the flow of

decision making, like say lele brain it. This guy was just the quiet governor of the president then, right, So you know we are all of the view, particularly after seeing minutes after seeing the policy report to Congress, you know that this is a FED that is right now steering in the same direction as the yell and Fed. And that's what can get interesting about this. If there's something that we don't know about the whole policy approach here now. Uh, certainly each chairman will have the deal

with challenges in their own particular way. There might be some underlying philosophy, uh that we don't know yet, and whether any of that will come out in this testimony will be quite interesting. But that's what's what makes this interesting. This is a first you know, Humphrey Hawkins round for a new FED share and you're gotta should be all over it. How do we establish what the power put

looks like. We've had the Greenspan put and Andy put, the yell and put three bond managers speaking to me on Friday, trying to work out whether we have a power put? Do we have a power put? Absolutely critical to sort of understand that in the sense that you know, what is their reaction function? How protective of this economic expansion do they want to be right now? And look, I think if you were taking a look from the outside, you would say the US economy has been head being

fully towards its potential. There we're showing signs of compensation gains that are accelerating, but from such a low level and after such a deep downturn almost a decade ago, that we ought to let this run. Some one of your charms, Steve Whiting, is you actually pay attention to what corporations do. I mean, like what they say? What are they saying right now? Is you look confidence called the late uh John Farrow, the late Richard Yamaron of

Bloomberg was expert at this. Just listen to what people say and do. What are they saying besides giving token thousand dollar raises to the troops and blathering about all the money they're gonna save is a gross stub off the text cut act. There's an underlying sense of optimism. If you just take a look at the various survey measures and you take a look. Okay, there are lots of cautious comments, as always, all the qualifiers that are

needed for legal reasons around these things. But you take a look at any of these business confidence measures and you don't see something that is out of line. You know what you'll hear with earnings reports that they think times will be strong for two thousand eighteen and two thousand nineteen small businesses, large businesses, and the economy has not really stepped up to that level of confidence yet.

But you know this again, as as you said on the television, there's probably someplace for it to meet in the middle, because some of these readings on confidence are way off the charts. Steve Winning, it's going to have you with us the City Private Bankalect Chief Strategy. The medium term was such an interesting concept, Carston Rescue with us with I n G. Right, Now, what's the medium term to you? It's like a European phrase. Nobody in America is looking at the the medium term. It's the

a C B term, isn't it. It's a mont policy prodstability, a medium term. I was just thinking about on China in journey. We have Mrs Merkel, she's already heading off for the for the fourth term. Already is pretty much Chinese. The medium term, John is trying to get the Boston Red Socks the fourth of July. It is that, right, that's the medium term. We're gonna go and watch a game this this summer. I'm looking forward to that. Should I get you to the short term? The short term?

What we're focusing on this week in Europe, the Italian election this weekend. Custom Breziski of of iron G used to help me work out what was going on in Greece on almost a daily basis when I was back in London, and now you've got to work out what's going on in Italy. Now it's an uncertain election in the minds of so many people. We had Italian bonds are pretty well bid and yields are lower by a

considerable amount. Today we're coming again by about four or five basis points ahead of an at Tangan election that maybe brings someone that a number of years ago was incredibly anti European, anti euro into the into the mix. Carston, Should I be worried about this weekend? Because it doesn't see many people are I think you shouldn't. There are a couple of factors, and the Italian system is so

complex and complicated. You know that they party reformed their electorate system um a strange combination between when when it takes at all and proportionate electorate system. But it simply means there will be no single party getting the absolute majority. So we're gonna we're gonna get some kind of a

coalition at best. So let's be clear here for investors, what was a problem to many political analysts is that things can't get done in Italy is actually a benefit to the investor base because it doesn't matter who gets in, they won't get things done exactly. I think that right now is a benefit. Plus, there is no single party

actually going for Italy leaving the year zone anymore. That is the fear that we had last year or a couple of years ago, to even this five Star Movement party actually is not arguing in favor of Italy leaving the year zone anymore. But part of the dynamic here of everyone including myself, being calmer about Italy is they're generating some form of economic growth. Is you look hardston

country to country. Can you state that the United States of Europe has a better little g that the economic growth nation the nation is actually stable and stained and buoyant. It is, although when you look at Italy, Italy is still one of the legards and Italy is benefiting from the Eurozone cycle, but it's still legging behind. And I think that that is. You know, on the one it's positive for Italy right now because also as soon as you have a job, you're not voting against the EU anymore.

So this also means there is less support for for anti euro parties in Italy, but at the same time, it doesn't mean that Italy is off the hook. Custom how fragile is this recovery across the continent? A huge amount of optimism around it. I'm just wondering how fragile actually is um. You know, I agree with you being a bit pessimistic, but I think it's not so fragile because it really it is broadening across sectors. We do have the export sector, which which is fine and which

can even even digest as stronger era. We have investment picking up on the back of the ECB. The e c B is not going to change its policies anytime soon. We have consumption going on, so it's not so fragile. The perception of the e c B changing its policies may well changed quite radically. There's a really interesting piece in the Financial Times over the weekend. I'm sure many of our listeners read it. It was lunch with Jens

Vitemin of the Bundesbank, Lunch with the ens vironment. In the minds of many people, it's Videman running for president of the e c B. Now of YenS Vidman the one individual that many people suspect, suspect disagreed with Mario Dragi over the whatever it takes speech, the one individual on the ECB Government Council that did that. If that individual then becomes the president of the e c B, what are we meant to think of that? Um? I think Vidman is extremely good and also playing his role.

Let's also be honest, he's not as dogmatic as his predecessors were, like Mr Weber or Mr Jurgen Stark Um, So he's going to play his role. Even if he was to become the ECB president, I think he would then also immediately shift ats and and will become more pro European. But let's not forget he would only take off at the end of two thousand nineteen. Where they go to lunch the McDonald's by liverplaces. Forgot I forgot in the name of the restaurant, but it was in Frankfort.

It was in Frankfurt. You should read the pace. It was quite interesting. The shortest lunch I've ever had in Frankfort was two and a half hours, really the shortest. Why did you go for lunch? I used to go there all the time. I usually struggle the plates to find a place to eat in Francs. That's true. No, that's very true, folks, that John's custom once is so difficult to find a place to eat in Frankfort because Germans are not into eating. So this is the this

is they don't want to go out. This this is why we need Italy in the years ago. That would be true. I want to look at the polarity here and you can do that on the Bloomberg, Folks. The unemployment rate of Germany's five point four The unemployment rate of Italy is in the vicinity of eleven percent. At the end of the day. That's the tension. I mean, we have the same tension in the States, but it's just different. Isn't attention will go on? I think that's

the whole thing. When you look at it again, I think it's at least not the big risk in the short term, not not for markets, but Italy economically, in economic policy wise, is an issue because we will get this discussion on whether Italy will be allowed to invest and to spend more. And when you look at it, a hundred per ratio, I think minus or two percent deficit ratio. So Italy will again bring this this very sensitive issue back on the table in Europe. Can we

invest more? Can we have higher deficits to increase investment and spending? Well? Is it Macron's Europe or or Marco's Europe? And who gets on the green line? Um, it will be both. The interesting thing is that Mrs Merkel again is is renewing herself again? Um? So she she does yesterday. Ums she come up with whether take a couple of new posts, new young politicians coming up there? Um it will be a combination, will be in mccron mercal Europe.

How is Mr Trump perceived now Europe? We've had very little of this analysis in the United States because they're so focused on domestic Trump and issues. But has there been a shift and now the president is perceived across your Europe? Honestly, no, I think if you really want to score high in media or with clients, you do

some Trump bashing always always falls well in Europe. I think there is there, there are, and that's fascinating now now Here in the United States of America, the Trump bashing seems to play well with the mainstream media, the left wing media outlets. With investors. They don't care where you stand politically. Ultimately, they want to make money cast And now you use the word investors want to hear that.

Why do investors want to hear that? Why do they want politically charged retric Because I think in in in Europe you see that this um divide between the US and Europe, as between economic policies between the US and in Europe is um um. So many people also investors. When you talk to continental European investors right now, they

feel remind of economics. One of the themes that we have here, Carson, before let you go, is the idea of huge fiscal policy non austerity in the United States, which will lead to a diminished lower net export statistic. What did you learn about export import dynamics amid EU austerity? Did the trade dynamic actually assist the domestic economy? It does um in two ways actually extra euro so it really we see that all countries are benefiting from the weaker year that we had so far, it leads act

one of the main beneficiaries. Italy is exporting more in absolute terms than friends does um and at the same time, at the same time, we also do see that the trade within the years on countries is improving. To repeat that again, that's so important Italy. What do you mean by apps in the units traits volume, volume volume. It's exporting law than France. I would even though theever you hear is fabulous, I would have never guessed at John Farrell, but I didn't have that. I thought, do you know

that what tipped the needle? There was a Gucci store? Is that you? Is that you? I suspect they're not for you, but I imagine it might be. It might be your going to see me in the fur line Colin don't even start the twins wants me to try out sis. We've got to say thanks to Couston and then we can talk about the bill at the end of a month. For you, he is the Senator from Cincinnati. Rob Portman will always be from his Cincinnati, but now, of course his representation of all of his state of

Ohio without question of vice presidential candidate and consideration. But he said, I need to stay in a Republican Senate. The Senator joins us here in our New York studios. You're in Cincinnati, Senator Portman, March second, five miles south of Michigan and Holland, Ohio. There will be a meeting of the friends of the n r A. Right now you're in the crosshairs of the n r A. You've been a big uh. They've given you a lot of money within the close contest of Ohio. You, Senator Governor

Scott and Florida, everyone has to adjust. How will Rob Portman adjust to what we've seen in Florida. Well, we have I need to look at this in a very broadway. Let's let's face it. Um in Florida. To talk about the tragedy there uh so many missed signals unbelievable this morning hearing about more so was avoidable in the sense Tom that had law enforcement have been doing their job. You know, this particular young man would not have been in that position even the FBI was involved. So it

wasn't it wasn't just local law enforcement. But the broader issues include mental health and we have people falling between the tracks, as you know, I do a lot of work in that area, and opioids, which is related with regard to background checks. We need to tighten them up. I am. I am actually sponsoring legislation to do that. I think Congress is likely to move towards something that says people who shouldn't get a gun need to be stopped through that process. And it's not happening now, partly

because the information is not coming in. Senator, you represent the cultural divide of this debate, the toughest parts of Cleveland, the tough parts of Cincinnati, and yet the fabric of hunting America and Ohio once again provides that tapestry of America. How does this nation come to grips with the toughest parts of Cleveland and the fields of western Ohio. Yeah, well, you know, in in Ohio there are a lot of

people feel very strong about the Second Amendment. I believe it's it's a right that we can preserve and at the same time find that balance with regard to background checks, let we go things like bump stocks, with regard to things where to look at the age. So I think there are things that that can and should be done. I will say that with regard to downtown Cleveland, because you mentioned that, downtown Cincinnati and downtown Columbus and so on,

there is a lot of gun violence. It doesn't get nearly the exposure that these horrific school shootings get, but it's happening every day, and it tends to be as you know of. It probably is with a handgun, and it tends to be with drugs and crime related to gangs. I mean, that's that's primarily what I hear from law enforcement, and that's an issue that you know. Again, I spent a lot of time on this issue in terms of the drug side of it, which is driving a lot

of this. We have to get to the bottom of all these things because unless you do that, you will continue to see this this violence perpetrated, and it's it is the biggest issue in terms of gun violence is the gangs and usually drug related and turf battles and so on. So when we focus on things like stopping this drug pandemic that has now hit my state, it

does have an effect as well. Senator Holp, the guest of this country, understand how preserving the Second Amendment is compatible with allowing the sale of our a R fifteens to the general public. I'm sorry t help me understand, as a guest of this country, how preserving that amendment is compatible with allowing the sales of a R fifteens to member of the general public. Well, I think I think there are people who own those weapons would say

it's it is compatible. But what I'm saying is there's a balance here, and so I all I can say is, um, you know, I think Congress ought to look at that issue. We had to look at the issue of of age, because at eighteen you can purchase a rifle, whereas it twenty one you can purchase a handgun. So there are there are things that can should be done. I think there you will see some of that. The bump stock issue is related to that. But the response I often

here in this country is always more guns. More guns is the solution that you need more guns. Ultimately, the teachers now need to have guns that's an argument some people pursuing. When is the answer not more guns? You know, I didn't give that answer this morning, but I will say we need to harden our schools, There's no question about it. And again, looking at the tragic situation in Florida, UM, you know that that school, you know, should have had

the ability to protect those students better. So that is part of the answer as well. In the time that we have left an update from Rob Portman and the President's initiatives or lack of initiatives to help you with the opioid crisis in Ohio, you and the woman from New Hampshire have provided national leadership on this. You're not getting help from the White House yet, are you. Well.

We we have the presidents on legislation recently, for instance, to UM provide funding for additional UH monitors and screeners for fentin al coming into this country, and he has supported UM additional funding for prevention education as well as treatment and recovery in our budget bill that just passed. As you know, Tom, we got unprecedented amounts of funding for that purpose, three billion dollars this year and three

billion next year. We are now working on additional legislator and to the Conference Addiction Recovery Act that I've co authored to ensure that funding is properly spent. In other words, we wanted to go to evidence space programs. I left one a couple of days ago in Ohio. That's very promising of some federal money. Uh, you know that that I support. It went into this project. It then helped

to leverage a lot of private sector funding. And it is an emergency room where people that overdose are going to come to and there's the treatment center right there. The people would come to this emergence room in the last month and three people have gone into treatment. That's a key because that gap between getting someone into an emergency room saving their lives to this miracle drug, an

arcan that reduces the reverses the effects of overdoses. Then people go back home, they don't get the help they need. So this is one of the things we should do. Center Apartment, thank you for the visit. We look forward to speaking again in our Washington studios. Rob Apartment from Ohio. It is a book that would be wildly anticipated at any moment. Ben Steele, of course smart writing for the consul in Foreign Relations, The Martial Plan dawn of the

Cold War, but it has become particularly timely. Is all of each and every political persuasion. Look at the process of diplomacy, the process of the projection of the United States of America in two thousand eighteen. We revisit the starvation of Europe in nine. If you need a brief on this, all you need to know is Audrey Hepburn barely made it out of the Netherlands in this starvation. Ben Steel congratulation on a huge effect of the Martial Plan.

Your book tell us about how bad it was in Europe when George Marshall and President Truman stepped in the New York Times, Tom referred to Europe as unquote, the dark Continent. In the early years after the war, things were truly savage. It wasn't just the physical destruction of the war. All the complex economic relations that we take for granted today between country and city, between businesses and consumers,

between monetary authorities and the general public. Everything had broken down, and um, you know, there was a real desire among the populists for for big change, big changes in economic policy. We saw that in Britain with nationalization and the Communist parties,

particularly in Italy and Flance, were getting very powerful. My window of George Marshall, who full disclosure, folks were severed in the keen household of General Marshall is from Edward Larabe and his magnificent book of thirty years ago on the various and sundry General's helping FDR. There's a scene in the Larabie book where Marshall decides the best way to help FDR is to be visible, but really out of the way until called upon. How did he go from that general in the war to a Secretary of

State saying, let's go. This is This is martial at its at his best, tom Um. In the year before he became Secretary of State in nineteen forty six, he had planned to go into retirement and perhaps write his memoirs. He had been offered up to half a million dollars to to write his memoirs. You know that's a fortune in today's money, but he turned it down. With President Truman came to him and said, I want you to go to China uh and tried to find a way

to make peace between the nationalists and the communists. That mission was a failure, Tom but he learned a lot from it, and when he became Secretary of State in nineteen forty seven, and when he saw that there was no prospect for getting a cooperative agreement going forward on Germany with the Soviets, he came home from Moscow in April of nineteen forty seven and said, the pay is sinking. While the doctors deliberate, we can no longer wait for the Soviets to come around. We have to fix this

problem ourselves. Within the book is a different media, and without question, the center tendency of that study is Walter Lippmann. I'm going to suggest, Ben Steele, that a lot of our listening audience today doesn't know who Walter Lippmann is. Who is he? And is there a proxy in two thousand and eighteen America? You know there probably isn't today. Tom and Walter Lippman was an extremely influential journalist in the in the nineteen forties of the administration took him

extremely seriously. George Kennon, who was the father of the new early Cold War policy of containment containing the Soviet Union,

had long running disputes with with Lippmann. Um he was extremely influential and There's no doubt that he did push UH policy in the Truman administration in various directions throughout those early Cold War years, well within that and I guess this jumps of forward, folks, Ben Steel and with your expertise on modern diplomacy, Could the Martial Plan occur in today's media, Maelstrom, You know, I don't think so,

tom Um. You know, one of the most remarkable legacies of the Martial Plan is the endless desire to repeat it. In the past five years alone, we've had proposals for martial plans in Ukraine, in Greece and Southern Europe and North Africa and Ghazin most recently UH in Syria, but

nothing like it has ever taken hold. I should emphasize that we spent over two billion dollars tom on reconstruction aid in the Rock and Afghanistan, and that's about more than we spent in the totality of martial aid in current dollars, and we have so little to show for it. And that's really because one of the great successes of the Martial One was also providing physical security for Europe

in the form of NATO, which we helped create. One of the big things we do here is try to throw books at younger people and say shut up and read it. And the Martial Plan Dawn of the Cold War is official, certified headbanger here weighing. It's some foreign in pages and it's a really an easy read of the time. How would you frame this to an intern

at the Council on Foreign Relations? They've got seventy books. Uh, you know, Foreign Affairs Magazine is going to come out with another fifteen books this next issue that they have to read. How do you say to a young kids, shut up and read the Marshall Plan. What's the lesson year for young kids and international relations? I think young people today, Tom, are extremely interested in current affairs. They're certainly interested in politics in the United States now, which is,

you know, a very unusual and an historical perspective. Um. And one of the things that comes across very clear early in this story, Tom, is that the early Cold War conflict between the United States and the Soviet Union was fun fundamentally about geography and not about ideology. It wasn't about Marxism versus capitalism. Stalin is trying to push territorial claims in the Iran and Turkey in N's trying to push into Western Germany and cement his buffer zone

in eastern Europe. And really, Tom, that's the root of the conflict between the United States and Russia today in Europe. Russia is extremely concerned about the eastward expansion of NATO and the European Union, and we have grossly underestimated Russia's reaction. Well, this has been written up in your Foreign Affairs magazine. JEMR. Scheimer of the University of Chicago has made very clear

that we underestimate this Eastern thrust. Was the martial plan with the planes historically flying into Berlin and all that Berlin Blockaden, that was that considered an Eastern th used by Stalin. Well, it's important to recognize, Tom, that Stalin in fact implemented the Berlin blockade to strangle Germany in fundamentally as a way to convince the Americans not to leave Berlin, although he very much would have liked that, but to stop trying to create a Western German state.

He was extremely concerned about the threat of a democratic, capitalist Western Germany effectively under American control. He considered that a security threat to his new offer zone in Eastern Europe and to bring Marshall Plan forward. And you touch on this in your final chapter, the echoes of the Marshall Plan on is our multilateralism in our collegiality, is it just exhausted because on a calculus basis, we got

to the best marginal effect of everyone being together. Did we just finally wear out that forty year trend that we had of GAT and the rest of it? I think you may have hit the crux of the problem, uh, tom In In the early post war years from ninety the United States created all of the major institutions of what we now call the post war liberal order, the United Nations, the i m F, the World Bank, NATO, the predecessor organizations to the European Union, and the World

Trade Organization. Uh. These things were all created in this short span of four years after the Second World War, and I think we've taken them to for grant it

perhaps too long. And now, of course we've got a transactional president who likes to do deals and thinks that he can do better deals, he can do better for the United States than the w t O and and NATO, and wants to renegotiate all these things, and I think what he's perhaps losing is the enormous influence we've had in the world, from our song power, from our ability to project values that we're seeing as being universally attractive. Ben Steel, thank you so much the Marshall Plan. Dawn

of the Cold Word. Can't say enough about it, and the photos are extraordinary, and it is hugely appropriate that the final photo of the book is of at an hour of Germany. Ben Steel, with the constant fortulations the must read The Marshall Plan. 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.