Surveillance: Too Much Talk Can Lower Transparency, Taylor Says

of course, on the Bloomberg. At the end of two thousand sixteen, a good time to look back on the year that was, and I had to two thousand seventeen. And we begin today with EM and A joining us now as Peter Taky's co head of M and A at City Group, and great to have you with us here in New York. Let's let's start with how you measure the health of the M and A marketplace. We'll look back on two thousand sixteen. How was it and how do you assess how good it was? We had

a we had a very strong um. It wasn't as it wasn't as strong as twenty fifteen, which was which was a record. But we're down about from that level roughly, UM, but it's still second best, second best M M and A year since the financial crisis? What was leading it on sort of sector by by sector basis? Where did you see the most growth, the most movement. We saw an awful lot of movement in technology, awful lot of

movement in the industrial space. It was a relatively a relatively light year for industrial M and A in and we saw a bounce back on that, and so those two sectors saw significant increases. We saw a little bit less in the way of telecoms, for instance, in a little bit less relative to pharma than we had in in the prior year. What what is driving it at this point? Is it complimentarity, is it? Is it something else?

How are these companies coming together? I think I think and and Tom Keene made this point a little earlier this morning. I think the focus now is much more on on strategic combinations and what I would call intelligent dealmaking. UM, it's a it's a challenging world environment, it's a risky world environment. In that environment, I think the investors have become more discerning as to what types of transactions really

makes sense. There was a period of time from sort of eleven to halfway through fifteen, where pretty much em Andy any M and A activity was greeted with applause from the investor community. And that has definitely become what I would call it's returned to the norm in terms of in terms of the types of responsiveness that the investors have, and they've become more thoughtful about what's a good deal and what's not a good deal. How are your clients, How are people who are weighing mergers dealing

with the uncertainty? I think about how in the I P O space there's been a tendency here here to sort of stop and wait, perhaps wait out whatever uncertainty there there is. Are you seeing that in the M and A space as well? What are clients saying to you?

I think I think that the there's going to be a bit of a pause perhaps, uh in certain sectors that are gonna be potentially very impacted by UM, by their new administration and some of the changes that have been at least vocalized H An example is healthcare UM. I think there's there's been enough noise around the Affordable Care Act that that we might see a bit of a pause within that space as as companies try to

figure out what the policies really are. UM, there has been an awful lot of talk, but not an awful lot of of really concrete policy making. And of course that's still is subject to a congressional process, which is which is difficult to day. How much does does regulation tend to change from from term to term? You have staff appointments in the Justice Department, for instance, you have people who are our career public servants. Do do the do the metrics by which they gauge judge these deals

change every four years? That's a good question. UM. I don't think the metrics change. I think there can definitely be UM leanings in terms of the way that the way a particular administration or a particular a particular official interprets that data. We have definitely seen in the last couple of years, UM. Which is interesting, is it it certainly wasn't necessarily representative of the full eight years of

the prior administration. UM. We've seen in the last couple of years that there has been a more hawkish tone coming out of the regulators in terms of their reaction to transactions. UM. Whether or not that will change dramatically or whether it will change slowly. I think it's difficult to It's difficult to call, but I would argue that there's likely to be changed, and I think we're going to see an environment which, again, UM, I can only

respond to what our president elects commentary has been. There seems to be a bias towards towards a slightly looser regulatory environment. And what if you heard from him about deal making? It talks. He talks about that deal making a lot. It sort of in sort of grand terms, in large terms, but with your kind of deal making. Was there a lot of rhetoric about it, a lot of clarity about what his policy positions would be. The

answer is not much. UM. I think I think we've heard some things from from the President elect that definitely will affect deal making. UM. Stimulus spending UM makes It makes a difference to how economy, how companies feel about the broad economic environment. Regulation makes a difference as to their optimism or lack of optimism around whether deals get done. And taxation can make a significant difference in terms of both the cost of capital and UH and the ability

to pullut. What do clients do amid the political noise that follows the announcement of these these big deals. I think if the big agribusiness deals, for instance, and Christmas, that's what I'm doing today. There you go, That's what what client is doing here. But how do they filter that out? How do your clients pay much attention to sort of that or is the focus much more here

on on the regulatory side? Do you mean, how how are the companies reacting to exactly the political noise or political Yeah, well, I think I think a company, uh, particularly we're talking about large companies that are affected by the political environment. They're not blind to it and uh, and they need to be thoughtful about a political reaction and whether or not that can make a difference to

the rest of their business. But I would argue that that most of that thinking goes in prior to the announcement of the transaction, um as opposed to the follow through hopefully should be the execution around a well thought out strategy that was developed prior to the announcement of the transaction. Let me mind the global nous of your title,

your head of co heead of Global Deals. We we've heard so much from our colleage Jeff McCracken and others about Chinese interest in getting into mergers and acquisitions around the world. What's been motivating that? What motivates China's interest here to to merge with companies outside Well, I think there's I think there's a couple of things. Um. The Chinese have definitely been much more aggressive about about deal making on a cross border basis. UM. I think that's

driven by a desire to access technology. It's a driven by a desire to access commodities. UH, it's a driven in some cases by a desire potentially to offshore capital. UM. I think those motivations, they can be difficult to discern. The fact is that in certain in certain sensitive areas, I think the Chinese companies, in particularly state owned companies, have started to hit some roadblocks in terms of their

ability to execute on that strategy. And therefore there's perhaps some more some more caution around around the level of activity. Peter teg with us, we've been talking about the cards you are dealt. Does a guy like you care about interest rates or is that just the myth that that there's so much money slashing around that on a day to day basis combination people are actually immune to interest rate dynamics. I I think the short answer is we're

not paying much attention to it right now. Now I've been I've been doing this for long enough to certainly have seen environments where it mattered a great deal. But I would say we're nowhere near that. We're nowhere near that. Right this week we've been modeling well. One one I think it's Craig Bishop with o RBC Capital Markets made very clear nothing happened till the ten year prince three percent. He says, that's sort of a huge emotional hurdle or

nowhere near that. Yeah, I'm not sure I'm prepared to put a number on it, but I I certainly would tell you that a twenty five basis point rise in rates, or for that matter of fifty basis point right or seventy basis point rise, I would actually argue that that arise indicates optimism, and optimism might be a good thing. David Garrl please make a note to Mr Carbett, who I'm sure listening, that we did not put a number

on industrates this morning. It was very good off. Uh. You know when when you look at uh just sort of the we hear a lot about mergers in the energy space. Is that going to be a ripe sector for opportunity in two thousand seventeen. Do you think it's a good question the the energy sector M. We've looked at two different types of when we think about the energy sector. I think we need to bifurcated. I think there's the upstream space, which tends to be the very

what people think of when they think about energy. There has been a huge amount of activity in the midstream space, the infrastructure around energy um, which has has really been quite constant over the last the last several years, particularly around the master limited partnership sector. But on the upstream side, UH, the volatility in the underlying crude price has made it

very difficult to cross the trade um. When buyers and sellers disagree or at least have a lack of congruity in terms of what the outlook for the crude prices, it can be quite difficult to get those two buy those two sides too to come together on price. I was talking Peter about synergy and paradigm because you really represent the antithesis of this M and a jargon malarkey it's out there, you stud I mean, first of all, we just heard in our New York weather report it's

cold in New York. Might I point out we have a guy, we have a guy in here from Ithaca, New York, a guy in here from Clinton, New York, and a guy in here from Rochester. These New York City people, Peter, they have no clue cold can get it? Hamilton's College nothing, They have no clue. What they just you know, in Clinton, New York, there's there's winter, late winter in the fourth of July. And that's all there is.

There's to it. You spoke at Hamilton College at while back, and I mean I mean as seriously, and that you represent an M and A. We just go out talk to the client. No financial energy engineering, none of the bladder of M and A. You learn that tending bar in London. What did you learn tending bar in London that you drag over to Corbett's M and A shop? I think, I'm I think tending bar in London is a good lesson both in work ethic and in talking

to people, um and listening. That's what you do as a bar tender, presides figure out whether to use olives or lemon. Right, Well, yeah, and the bar I worked in that no one was ordering anything that had olives or lemons, And let me ask you about bearing them. You probably want to talk to any any companies in specific. Let's let let let me introduce the latest news here about Yahoo and Verizon. Just ask you how companies approach

something like that. When you when you're mid deal and you have a big eventuality like that, how how did the parties to that deal broke or some sort of agreement or figure out what to do next. Here we have a Verizon dealing with the fact that Yahoo announced a one billion uses. Information was compromised back in two thousand and thirteen. So I imagine the impulse at this point is to find out why it took so long for for a company to find that out. But how

do companies reevaluate a deal like that mid stream? Obviously there's gonna be uh, there's gonna be a deep dive done in terms of in terms of the substance of it. What's what are the facts? Um? What are the fact mean for the relative value? What is to the contractual agreement?

Tell you that you have to do um, it's it's it's going to be entirely facts and circumstances specific but obviously a whole lot of people are gonna be working very very hard to to try to turn a and unexpected and undesirable fact pattern and translate that into the realities of a transaction that's already out there. UH. The discount rate at which the present value of an investment's future cash flow equals the cost of investment when the I are are of an investment is greater than the

required return Peter Tag makes a paycheck. That's the definition off the Bloomberg. Is Mr Trump gonna raise I r are for Global Wall Street? For Global Wall Street, I guess there's a question about what is what is Mr Trump going to do? UH? In terms of the overall the overall economy? I think a combination of stimulus, a little less regulation and UH and lower tax rates certainly, certainly to the extent that all three of those can argue, can arguably be a net benefit to our clients. One

would hope that that translates through to net benefits. To make this more sophisticated and to get you into a bigger set of troubles At Citigroup, Villain Bowder in his economic team believes in lower terminal values. Trump is pushing against that with a reflation. Are you managing for this year, next year, five years out based on Bowder's lower terminal

values or can you see truly a paradigm shift. I'm talking against myself here, a paradigm shift towards a higher I R R well UH reflation UM and the extent to which that translates through, certainly in the near term to UH, to higher growth and a higher top line is is a net positive. Of course, inflation eventually catches

up to you and it starts moving through costs as well. UM. Ultimately, I think terminal values are a function of what do you see your discount rate at and a lower tax rate, for example, is got to be agree with you with the one off of a tax rate and the structural change, But you just nailed it. Guys like you in Industrial America work in a nominal rate space. They sort of like inflation. Unlike everybody listening to this program, it's got

a uh frankly dealing in inflation adjusted space. I think as I say, I think inflation aff inflation eventually gets to both the costs and the top line UM. I think how that translates to value is going to be specific to an industry. You know, whether we're talking about technology or whether we're talking about the old rust belt economy, it's a different ends. This has been great, Peter take Thank you so much. It's three below in the Hamilton

College right now. Thank you so much. Jeffrey Rosenberg is out of Carnegie. Melody brings a serious quat chop to the whole idea of strategy. Jeffrey, let me give you the Friday open question. What will you write about for consumption Monday morning. Well, the consumption outlook is being bolstered Tom by rising wages. The most important driver of consumption is real income growth. Then what you've seen is wage inflation accelerating faster than inflation, and so that's the fundamental

support for the consumption outlook. The fundamental chart I had earlier this week was a ten year yield with a Trump reflection. And we go on two sixty. Now I get that there are three vectors, Jeffrey Rosenberg. One is okay, this is great, and then we roll over to where we were before in some way or it's a jump condition, and we level out here or were we jump as we have and then we build upon this out our

year or two. Where are you? Where's black Rock? Well, you know we're more in the optimistic camp that we can build on this, and it's a outlook in two thousand and seventeen for rising rates. That doesn't mean that it's going to go in one direction. I don't mean a boy band reference there. Uh sorry, it's a Friday, Um, Jeffrey, you're absolutely perfect. Oh I've heard it. How many times? Have I heard it at home? Five times? I think

I mean what I meant to say. That doesn't It doesn't mean it's going to go in a straight line upward. There's gonna be uh pullbacks, and most importantly, you know there's there's some challenges. Tom. The most important thing you said in the opening where all those currencies are related to China, the Asian currency declines that you're talking about are really because the Chinese currente's declining. It's it's one of the downside risks. We have to to consider the

front page of the Wall Street Journal this morning. I think everybody knows the story. But when we have an optimistic outlook, as we do for two thousand seventeen, we we it's not saying it's going to go in a straight line, and that the risks aren't going to show up. That can push yields lower if some of these concerns come back, But overall, the growth outlook is is going

to be pushing rates higher. We think in seventeen if it feels like ancient history now, but if we go back to January and February, all the trouble that we saw with China and its reserves and the currency that subside as we moved on to Brexit in the U s president presidential election, all of that. But what is your outlook for the Chinese currency going forward in the new year. Could we have a reprisal of what we

saw almost a year ago today? Well, you know, I don't have to forecast it, um, we're saying it right now. If you look at some of what's going on in terms of the inner bank lending rates, the Hong Kong overnight rates, what's going on in just in terms of the currency levels itself, you see a very similar pattern

to the pressures that we saw a year ago. I don't think there's nearly the same degree of focus on it because we're focused on the growth story and there's two ways of kind of interpret interpreting the currency moves. One is, excuse me, from the positive side of the growth and this is dollar strength as opposed to Chinese weakness. Remember last year it was about commodity prices and credit concerns, and you don't have those concerns at the same time.

Right our commodity story is much more stable, uh to positive. So one of the things that's easing some of the concerns from a macro perspective is maybe this is us growth lead and therefore that can be overwhelming or more

positive to the negative side. Seth masters at Bernstein, Jeff Rosenberg gave a beautiful dissertation this more earning of the conflict between higher yields, meaning a yield pick up, and you can extrapolate it over to equities versus price decline, which will be to our advantage in the first quarter of next year. Are we advantaged by rising yields overcoming price decline or will we be disadvantaged? Well, I think

it goes back to what I was saying before. There's there's there's sort of good increases in interest rates, and then there can be bad increases in interest rates. And clearly as we see the equity market reaction to the to the shock upward in in an interest rates. This is from the good perspective because it's driven by growth

and inflationary expectations. One of the ways in which we see that in the bond market is the breakdown between increases and interest rates, between inflation expectations and increases in interest rates from what are called real interest rating races. Real interesting great increases can be bad in the sense that they tighten financial conditions. They put a lot of pressure on currencies. Inflationary increases. Now, we've gotta be careful here, Tom,

because we're talking about a good form of inflation. When inflation expectations are going from deflationary concerns to inflationary concerns. That's where I think we are in the first quarter. If we get too far ahead in terms of inflation, that will be something that we will have to worry about it. That's not in our outlook for the first part of two seventeen. Really for most of two seventeen, this is reflationary outlook, where reflation is good for the economy,

it's good for financial markets. What did you make of of of Yllen's commentary on the potential for for fiscal She did speak about fiscal stimulus, if only briefly. She was asked about and she said that she's of her colleagues, noted her colleagues noted at the at the meeting, what did you make what she had to say, Well, she's in a very difficult position, and the SET has put itself in a very difficult position by having moved to

a greater form of transparency. This is something unique, and it's going to be the first time that the FED finds itself in a position of publicly writing down its forecast for economic growth in an environment where fiscal policy is taking the mantle of leadership. This is about what kind of expectations do we have on the impact of these fiscal policies on our growth outook. The most remarkable thing about the FMC meeting in December is that they

basically said there was no impact. If you look at the SEP statement of Economic projections with regards to economic forecast, virtually no change out for the long run. That is a remarkable statement. It will be very hard if this really big and important fundamental fiscal reform package that the incoming administration is talking about comes to pass, they're going to have to adjust those growth forecasts. So I think that's going to be the focal point of the markets throughout. Agree.

But Jeffrey, by definition this is an ex post institution. There's no way they can get out in front of legislation. I don't see that in any of our history. They can't get out in front of the legislation. But once the legislation is out, and it's going to be out early, right, this isn't the two thousand, eighteen or nineteen program. This is the first year new administration economic program. There's going to have to be some kind of The markets are

telling you that. Private economies, they're telling you that, and so they're going to have to opine on. It's going to put them in an awkward position because it's going to be public and it's going to be transparent this time around. But nevertheless it's affecting the growth outlook. Obviously, today in December, it's too speculative, it's too uncertain. We don't know. That's fine, but at some point we are going to know. It's going to be in the legislative language.

So we're going to have to have more clarity as to what we think it's impact is from our Central Bank on the prospects for growth and therefore for the path of monetary policy. Jeffrey Rosenberg with US black Rock. As we look at the linkages of strategies here, Jeffrey, are we correlated? What I've noticed sort of in the pulsing last three four days X Yellen is some things are correlated and then two hours later they drift away and other things come to bear. What do you see

on the Bloomberg screen. Yeah, it is actually one of our themes in our black Rock investment outlook that the correlations that we've expected to see both across debt versus equity, across em and currencies e M and commodities, a lot of those correlations have displayed less certainty, less reliability than than we've we've come to expect. I think on the big one for investors portfolios, which is which is debt and equity. We we've seen this a number of times.

This is when particularly bonds are going much higher, and the fear that's driving them higher is not the most recent move, not not the post election move. We saw this earlier in September when rate moves were happening, and it was causing some concern on equities. Bonds are going down and stocks are going down at the same time. We've seen a couple of episodes. Obviously two thirteen s taper tantrum was it was a big example of that, and this example of how putting portfolios together of stocks

and bonds. As we transition away from quantitative easing, it gets more challenging. I mean, you say, we're transitioning away from quantitative easing, are we? Oh? Absolutely, And it's important to take the global perspective rate increase. Oh no, no, no, Tom, it's not about the rate increases. Look at what the Bank of Japan did. Look at what the e c B signaled in terms of moving ever so slightly. I agree, it's it's it's a bond geek here. So you know,

we're looking at the at the very small moves. But yet if you go back to the Bank of Japan, it wasn't small. They abandoned negative interest rate policy, they recognized the limits to monetary policy. In the e c B s case, they down shifted the size. Yes, they extended the timing, but they down shifted the size. And in the FEDS case in the US. Something for two thousand seventeen that's going to get back on the radar screen is what do they do about the size of

the balance sheet? And that's going to be a big market story in two seventeen. We've kind of ignored the reinvestment policy, but they said, once we get on with increasing rates, and what they told us yesterday or two days ago was we're going to be increasing the pace to three hikes a year. Now people are gonna start asking, well, you told us once you get on with normalization. The next phase is going to be normalization. Normalization is about

moving even further away from quantitative easy. Jeffrey, you've written about the potential populism. I asked you about how Janet Yellen and her colleagues are wrestling with the prospects of

an infrastructure spending package. Did she miss an opportunity do you think at the news conference this week to talk about what could be a huge white here on the economy when you look at the potential for for tariffs, for instance, Well, it's not clear that the news conference discussing the monetary policy decision of the FOMC is the right form for that Now, interestingly, which is went on the calendar is on Monday, She's going to be getting

a commencement speech, So it may be that the commencement speeches the avenue through which she decides to address some of these bigger issues. Now, the topic at the commencement speech is not the infrastructure and the fiscal stimulats, but rather its jobs. So it's not clear that will necessarily be the title, but but that may be a better forum for a more expansive discussion on some of those issues. How is your your positioning changed here? I won't say

since the meeting, but surrounding the meeting? What what? What changes have you made here over the last week or so since the FMC met. Well, well, clearly, uh, this has been a big shift regards to the performance of interest rates along the maturity spectrum. The market going into the meeting, ourselves going into the meeting did not expect this communication. Now some may say it's an accidental communication, but it's the communication nevertheless, through the dots plot signaling

three hikes rather than two hikes. So so the front end of the curve certainly is being born the brunt of that what of the curve is the perfect path for banking. I can't figure it out. Do they want to hide? Do they want to a much higher tenure yielding a peg two year? Do they want what's the perfect path? So so so the path for banking is one in which interest rates are rising. The curve is steepening, but the pace of the increase in interest rates is not so large as to bring about a whole other

set of concerns. The concerns about, hey, we're moving too far too fast. This is negative for growth, it's negative for the stock market, it's negative for global growth because of its impact on the dollar. And you bring about some concerns again around financial conditions tightening. Jeffrey Rosenberg, you have been absolutely perfect. Thank you so much. Jeff Rosenberg with Black, thank you. Guys have a good who you

put your trust in matters. Investors have put their trust in independent registered investment advisors to the two and of four trillion dollars. Why they see their roles to serve, not sell. That's why Charles Schwab is committed to the success 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. One of the great supporters of Bloombergunny Economy and Bloomberg Save Allence has been John Taylor, Stanford University. Uh. He is without question one of our great macro economists. Of course on rules and discretion. He has immense authority and leans towards tilts towards the advantages of rules, including his rule or the amendments of his rule, the Taylor Rule. David Gurry goes without saying that Mr Taylor's name is mentioned often across

the Bloomberg pat pipe has in the last number of days. Uh, Professor Taylor. Wonderful to speak to you again. It's been way, way too long, Um, John Taylor. Your name is out there. It is always out there when we speak of chairman, vice chairman, governors of our Central Bank, the Federal Reserve System. Have you spoken with Mr Trump's transition team about their economics and if you've spoken directly with the President elect about a future job in Washington. There's always, as you saying,

by the way, great to be back, Tom. There's always rumors about what's going on. And I've been interested in this subject for so long. I really want to see a ways which the FED can you improve get back to policies that I think work better in the past. That's what I'm talking about. And I think there's a there's a lot going on with policy. I'm positive about the possibility of tax reform, regulatory form, and there's last week I testified and the Congress about possibility of monetary reform.

So it's it's it's good at this point, and I think I just want to keep talking about that. Have you testified at the Trump Tower or by telephone the Trump Tower it was? Now I'm talking about testimony and the House Financial Services Committee of the Monterrey Policy Committee, which is a public for anybody to listen and including

people in the transition. Dr Taylor please comment on the news that Lawrence Cudlow, formerly with bear Stearns and for years visible and see NBC, that Larry Cudlow would be a chairman of the President's Council of Economic Advisors. I believe we go back to mc chesney Martin when there was a a c E A had as a non PhD. Is that a debate worth having or is Mr Cudlow qualified? Well?

Larry has been so outspoken in and good about taxtually form and regulatory re form, you know, good market based policies, and I think that's important to have someone like Larry. They're doing it so there's different ways for people to be qualified for things. But I think that's a really important aspect that he's he's been out there, he's he's got these strong principles and uh and you'll hear about

those if he takes that job. I think Professor Taylor there, Tom was was saying he doesn't want to trade the palm trees for the potomac earlier and answer to your question, he did that with courage during and after nine eleven and deserved arrest out west. There you go, John Taylor, You know, I talking about Larry Cutler here. I wonder if if you could give us some sense of how he might shape that role if he does get the position. I think a lot of us know the term Council

of Economic Advisors, have some familiarity with it. But what what power does that body within the White House have to shape economic policy? Well, first of all, it's it's in the law. Women Act created it, three member council, and it's had influenced in different ways over the years in Green Spain was the chair for a while, or the Burns was a chair for a while, and it's it's continued. There's more economists now in Washington there and there was back when it was set up in but

it's still very important. It is important for it to have a good objective economic advice. It's not wedded to a particular whether it's labor or business. It's really talking about the good reasons to have a good economic policy. So it is important and the president listens. You mentioned that testimony that you gave before the Subcommittee on Monetary Policy and Trade for the Committee on Financial Services at the House. What what does a more transparent FED look

like to you? We can talk about your rule and rules based fed FED reserve here in a minute, but how more transparent should this FED get? What would that transparency look like? Well, the main thing is for them to outline their strategy. Sometimes it's called rule, but strategy is a better word for setting the policy instrument the interest rate. They do some of that internally. They simulate and talk about policy rules, including the tailor rule, but

others as well. So the main thing is to be transparent about that and that's really what some of the legislation is asking to do. It. The FEDS job to choose the strategy independent agency. But it is Professor and pleased to tell you that the acclaimed tailor function on the Bloomberg Professional Service now has an adjustment for policy inertia, which is row times of previous federate plus one minus

row times John Taylor's Taylor estimate. This involves one, two, three, four, five, six, seven, plug ins wandering over to a Phelpsie and the RU minus unemployment on the right side of the equation. Professor Taylor will be holding him pop quiz in our next segment, David Gern Tom Keane with us John Taylor of Stanford University.

Professor Taylor, I know David wants to get back to current events, but first I look at where we are, where Chare Yelling is, where Governor Carney is, and we fold into the world of John Taylor what we saw from the late Thomas Shelling of Harvard and Maryland. I go back to the Strategy of Conflict nineteen sixty Tom Shelling and the idea within his early part of that classic enforcement communication in strategic moves. Now the Taylor rule

and monetary theory. Isn't the courage at Tom shelling head thinking about nuclear war. But when I look at enforcement communication in strategic moves, what can we learn on rules and discretion from UH Tom Shelling We can learn so much about the commitment and about the predictability and so you say what you're gonna do and follow through. Those are very important lessons for monetary policymakers. It helps monetary policy work more effectively. So I think it's important. It's

I look Professor Taylor at UH. The theories that are out there now, and I would suggest from the media and from all of our listeners were almost exhausted by too much messaging is part of a shift away from discretion towards the tailor FED rules less communication. I think, what's the advantage of us having a strategy a rule. You don't have to keep talking about it all the

time people begin to understand it. When Paul Wolker was at the FED, he would go to the Jackson Old meetings and wouldn't have to say much at all because people kind of knew the policy. So I think you're right, Tom, there's now there's so much talk it actually can reduce transparency, Professor Taylor. The phone rings at the top of Hoover Tower. It is one Donald Trump calling from what I assume is a guilded phone on the floor of Trump Tower

here in New York. He should ask me. John Shauvin has made sure that Professor Taylor will pick up a gilded phone. There you go in Stanford Palla Alto. He's got your number, he says, Professor Taylor. We have some office space for you in the Equals Building. We'd like you to sit at the head of the table. What do you say this kind of you know again, just answering Tom and you a little bit. What's important to me is a good monetary policy, and so I write

about it, I talked about it. And there's always rumors like this and always questions like this. But you know, seriously, we have opportunities now I think that we hadn't had before for some of the reforms that would avoid some of the very serious problems we had in the Great Recession and slow recovery. And that's what I want to be focused on. Really. Well, if that's the case, let's

go there. Have you advised the transition team or the President elect on appropriate names to be these governors, these empty seats of governors all of us. Professor Taylor can agree, that is most unfortunate. Yeah, I think they're going to go ahead and uh fill these positions, a lot of oak positions that have occurred because of the difficulty of confirmation in agreement. I hope that we get past that. I think there's a sort of reform on personnel and

how the White House is going to work. But it's very important to do that. And uh, you know, the principles of Monterrey policy are are there. It's it's not science, but it's pretty well understood. Professor Taylor. I just want to tell you people are listening. Coast to Coast. Rachel from Lafya, Indiana emails in and says Professor Taylor is not telling you anything about his future. I just want you to know they're listening. Nick Coast to Coast, Professor

David rules, rules based policy. That's what I'm saying. Talk about the path forward for reform here. You've testified, as you said on Capitol Hill. People are talking more about this. Do you see this as being at all collaborative between Fed policymakers and and Congress In other words, Would it be more palatable these reforms if there were if there were more of a dialogue, more conversation between the Fed and Capitol him. Absolutely, it's very important, and previous reforms

were that way. Actually, it's not uncommon for the Fed to be resistant at the beginning, but then to say this makes sense and then work with the legislative language as something works. So I'm hopeful that will happen. I think it's it's a very important part of how these things get done. How have you amended and this is Fisher, Phelps and Taylor all combined together, ages ago, How do

you amend Professor Taylor? Sticky wages and sticky prices? After our great distortion in the financial repression we've all enjoyed? Is the stickiness of those two important things? Is your interpretation of it changed? I think those kinds of rigidities, if you like, or institutional features are there. They change, and you know you've got prices set on The Internet goes very quickly. But but it's actually there's some commonalities.

I just did a paper for this new Handbook of Macroeconomics that chased the development of these ideas, and they're hanging together quite well. Are they modified with the change in technology, But it's pretty remarkable how long they've been. They've been going long, stained power. So if I go to your to keep the shameless plug going, Professor Taylor, if I go to your Economics one blog and folks, I just sent out a World Cup in the Battle of Ideas Bruno Meyer, Harold James, and Jean Pierre Londe,

which is a fabulous book. We interviewed Professor brune Meyer. Uh, Professor Taylor of Princeton on that that's a school in New Jersey. By the way, professor, but here you're flogging a two volume book. Now tell us about your new handbook of Macroeconomics. Well, it's great, there's lots of pages, is a total of step having seventy two contributors. It's really the state of thinking on macroeconomics. Uh, it's heavy

going for lots of people. Are you're gonna warn about the map, that's for sure, But you know it's people like Ed Prescott and Larce Hansen and Marcus Brunemeyer for that matter, who have contributed a lot of time and effort to put forth what their view is of things that I think people be surprised. It's you know, there's been work going on before the crisis, since the crisis, and it's it's progress, real progress. We'll get it out. Thank you so much, Professor Taylor. Thank you so much

for not answering our questions today. Taylor teaches, he teaches at Stanford University, and Frankie teaches all of us as well. I particularly enjoyed his comments on Mr Cudlum. I think that's sort of in the weekend sitgeist. If you would, 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 on Bloomberg Radio. Who you Put your Trust in matters Investors have put their trust and independent registered investment advisors to the two and four trillion dollars. Why Learn more at find your Independent Advisor dot com.