Surveillance: We Can't Deal With China on Twitter, Hormats Says

Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot com, and of course, on the Bloomberg I want to bring hi Jim more now he's head of Investment Solutions at himphon. A great pleasure to have you here in the studio with us this morning than it has been thanking. Let's let me start with stuff. It's been a while. You're arguably the most important person and PIMCO, because of our listeners,

can't retire. That's that's it, David. I don't even interrupt, but let me make clear a it's been a while and you're the most important person of PIMCO. There you go, and we're gonna get into that in just a moment.

But let me let me start where we were, where we were with Matt Miller here just a moment ago, and if not talking about that the effects of that attack in specific, just the general sense of uncertainty that this UH leads to or continues here that we have these three attacks yesterday, there is a sense of instability and and and and a fractious Europe at this point. What is this study? Your outlook the events that we

saw yesterday? You know, you know our view was was re really expected to see more Volatilian markets going forward post election, And I think this plays into it. The geopolitical risk and in this system is very large, how various UH governments react to it, how populous is react to it, and um, what it does for growth, what it does for markets UH will unfold over the next

next few years. You look at market reaction, you also wonder if there's just something harder to quit ify there when you look at just optimism, investor optimism something like that when you have when you have events like this, maybe an effect that's harder to measure just based on market reaction. Sure, I mean, I think a lot of this is is yet to be determined in terms of

where it goes. But you know, we're coming off an era where with the FED being very accognative really pulling forward returns over time, which you know creates some potential issues going forward over the longer term for retirees and their ability to say for retirement is is comm indicating eighty three years old and then eighty five years old? Is our actual assumption, our our life expectancy rather at a nobody's ready, let's get to the basics. What's your

new assumption of actual return? That that number that we can use to model out your world of retirement. Well, if you look at where the the agg is now, you're talking about a U old of a little under two and a half percent for for bonds. In our view on stocks is maybe at two two and a half percent above that, So if you look at a

sixty forty portfolio, you're somewhere under four percent. And that really creates a long term problem when you've got systems that were designing the seventies and eighties in an error where eight percent returns were achieving. Eight percent returns are achievable, and yet I'm looking at a great bull market in another double digit year eleven percent for equities? Am I running on fumes actual? I mean, how do you balance

the gloom of the numbers you just gave us. With the reality of return, many people are seeing well, you know, Tom, I think you know, the reality is that people are gonna have to live save longer as they live longer. If you look at the demographic data, life expectancy goes up about one point five one point six years for every decade. When we last revisited social Security normal retirement

age in three, so thirty three years ago. Um, you know, life expectancy has gone up about five years since then. So you know, fundamentally it's time to rethink about system design and I'd call in the new administration to think about entitlement reform is a very important piece of the retirement puzzle. Puzzle you say, save longer as we as we live longer. Put that into the context of the central banking news that you mentioned here a few a

few moments ago. There has been a difficulty or a lack of willingness ability to save here in recent years, how are people grappling with that need to say more? Well, you know they have, they have been saving more. If you look at the savings data, it has gone up, which is which is in some sense a little bit counterintuitive considering we're a third of the way through the baby boom or hitting what we would normally think of his retirement years, so we still have another decade of

the baby boom retiring. Yet if you look at labor force participation for those over fifty five, it's creeping up. And um, what's really gonna happen is you're going to have people pushing out retirement a year or maybe two years. And in order to make that equation, I balance, but is it the issue? We've got to run the break here and come back. Not only are we gonna push out retirement a year or two, I'll give you that, but really, what we're gonna do a shift to part

time retirees out forever. I mean, I gotta cast it out back here. But girl wants me, he wants me part time right now. But I mean, is it going to be part time retirement America? I think that that's that's right. You're going to see more people taking on part time work. And what are normal notions of employment

and full employment really mean are going to change? You know, I get in debates with walking foils, our economist and economists on the street thinking about have we reached full employment. But look at the spread between the U six and the U three and it's still is stubborn. Well, him,

weren't with us with Pimco? Always good discussion on retirement when you and PIMCO and you go to all your meetings and you go to Washington, and that is there any mood of our worthy politicians to further incentivize our ability to suck money away? I haven't seen. I mean, the debates were deficient of this. Isn't that like priority one in your world? Provide incentives? Yeah? And in my

world it is. I think. I think the issue is we drastically need to increase savings rates in this country if people are expecting to retire at historical arms for retirement, and um, you know, the government's capied twin a rock and a hard place in terms of the need for some amount of control over budgets and people's desire to say, help me here with this. I tuck away more money. And you know I don't cheat, I don't do anything irresponsible.

The government gets paid eventually, right, eventually? Okay, then what's the debate? I mean, you know, if if I borrowed twenty bucks from David get to buy a martini. He may not get paid back. The government's gonna get paid right, Yeah, Kanos would say it's the rate of time preference. And I think one of the things you see in Washington is huge debates about the rate of time preference in

terms of what public policy should be. If if people are talking infrastructure increasing debts to fund growth, that's indicating, you know, effectively a higher discount rate than those folks who are basically worried about, you know, running much tighter fiscal standards than we've than we've seen, or or um that may be necessary. There is again talk of entitlement reform.

Is it anything more than lip service? You think? Are there any indications to you that we could have a Congress that now with majority of publican majority in both houses and a Republican present, we could get some movement on this. You know, a friend of mine, in response to something I wrote a few years ago about social security, had a one line quip and response which was that which gets deferred gets compounded, And and you know, I think that is is is a large problem in the process.

If you think about the incentives of those people in Washington who are in the debate. They have a two year window, a four year window or six year window when you're looking at problems they're going to manifest themselves

over decades. Uh. You know, people quote the Trustees report and saying that we essentially run out of money around two thousand thirty three, But it's actually worse than that because that money isn't segregated and the point where outflows exceed inflows is really going to happen to towards the back end of this incoming administration. What's the biggest concern for pension funds that you hear about. What are they

most worried about? Uh, it depends if you're if you're talking corporate pension plans who have been in a regime of having to really mark to market for the last decade, they're hoping interest rates go up to close that that

that deficit. If you're talking public plans, which by and large use a actual discount rate seven and a half or eight percent their crops, and the difficult problem they have is trying to get a seven and a half to eight percent return, and that I think is a very very large problem which is going to manifest itself more in the next decade in terms of the pressure puts on public satirefinance. Is a dividend growth equity a yield equivalent. I think a growth equity has some yield

component um to it. The the issue is understanding what drives the volatility I mean um over the long run. You know, solid dividends, solid growth in the final companies is a source of return and a source of income. However, um there's nothing bounding it to keep volatility in check.

And the other thing when you think about a pension plan with a demographic wave of running through it is you have an increasing draw on that plan, and so your ability to tolerate down drafts becomes more and more limited. If target the whole target concept, the marketed idea of target portfolios, is that something you can theoretically get behind or are they a marketing gimmick? Now I think there there's value to it. I think that the crux of

the difficulty is understanding the design. Are you designing on the four one K side? You know some sort of accumulation vehicle. Are you're actually thinking about a vehicle that that transfers to a position to limit risk sufficiently uh to bussition a retire you to actually have meaningful draw down without huge down draft risk. Fascinating. We could, I could go. You gotta show up more often. I will. I mean, you know, please Jim Moore with PIMCO on

our lack of retirement. I mean, David, I'm going to be sitting here forever. David Gura's back. Scarlett Fu is with us. She was a good it's a very very successful audition. We've done that that for David Gurrow, we think, and Tom Keene with you worldwide, stay with us. This is gloom. Why don't you bring in our steam gast Bible formats joins us now in the studio. He has

Vice Chier of Kissinger associate. It's great to have you here on the heels of a trip to China, and maybe we can return to what Michael Barr was talking about a few moments ago, that is the return of that underwater at drown, the Chinese returning it to the U. S what do you make of the incident itself? The Chinese saying that has been greatly overblown. It did take

on some import here over these last few days. I think the Chinese has been very wise in trying to lower tensions with the United States, particularly during this transition period. They don't want any big confrontational issues while the Trump team is assembling uh it's secretaries and its national security advisors and others, And I think that's probably right. They want to wait and see what Trump's policies are. They don't want to give them any pretext for taking a

very tough line against China, at least rhetorically. At this point. It's not an easy decision for China because there is strong nationalistic pressure in China to take tough action. But I think the wisdom of Chinese authorities is prevailing and they did the right thing. How many people told Bob Hormant's to get or not get a Twitter account? How many the table when Hormats considered entering the modern age from the quill Well I started a couple of years ago.

It's it's been very interesting all the twitters you get. You got a very good reaction from this from from the show, continued show, continuously good reactions and very good comments. So I always pay a lot of twitters when I and I love how you do real Bob Hormant's, we should tell China that we don't want the drone they stole back, hyphen let them keep it exclamation point. They didn't teach this the toughs, did they. No, I don't know where that came from. Came from the President elect

of the United States. I don't I know who said it, but I don't understand where the thought came from. It doesn't didn't seem to explain to our a political audience the ramifications of the words stole or the word let them keep it. Well. I would say that it would be very wise for President Electromp to say nothing about China at this point. He ought to form his team of advisors his cabinet, and they ought to develop a strategy visa of each China that makes sense in the

long term. We've got to deal with the Chinese, who may not like everything they do or say. But China is a major power, and you simply cannot deal with them through Twitter. To me, it is demeaning if they were to do the same thing to us. Would be very unhappy for us to treat China in the same way with twitters back and forth. Makes China, David, you can have the whole next block. That's why Prosadic Cornell is pretty good. Prosade a scathing piece and project syndicate

on China in the President elect over the weekend. You were just in China. How do they respond in your conversations to the President elect. Well, they're very puzzled at what his real policies are going to be. They've made a very clear point of saying they're not going to overreact at the moment. On the other hand, they see what he said and heard what he said during the campaign. He was going to find them a currency manipulator. He was going to go after them on a variety of

trade issues, and he dumping cases, countervailing duty cases. Uh, negative views on Chinese investment. Uh. There are issues with China, to be sure, but the way to deal with the Chinese is not to confront them overtly, particularly not through Twitter. It's to have serious conversations. He ought to wait, have

his experts meet with the Chinese experts. If he has views, if he has concerns, he has complaints, put them to the Chinese quietly, clearly, but quietly, and not on confrontation publicly. I don't think I've ever seen you wound up like that. You should tweet out today change your handle to the real Bob Hormetts. A few moments ago you were talking about what amounts to a good relationship between China US.

It doesn't take place on on Twitter. When you look at the team that Donald Trump has begun to assemble here with the Governor of Iowa Terry Branstead as the ambassador, what sense are you getting about policy from that? In other ways, we had the rhetoric on the campaign trail. From that we moved to policy. Are we getting a clear sense of the shape that that is going to take? Not really. I think Terry Brandstead is a good pick for ambassador. He knows chigin paying person shin Ping quite well.

He knows China well. Um, the new Secretary of State Killerson, I'm sure knows China well. But you really have to make policy towards China at the top. You need to have a strategy. It can't just be ad hoc individual decisions. And he needs to have a team of China experts.

I don't know who they are. If he has them, they need to sit down and spend some time thinking about not just what they say on a given day, but the implications of what they say over a couple of year period and what the long term relationship is. If they want to take a tough view on a on a set of issues, they ought to have a clear way of working out a solution with the Chinese.

Simply confronting the Chinese is not going to get anywhere because the Chinese have their own nationalistic pressures and they will hit back. It's not Burundi, this is China, this is the Middle Kingdom. This is a big country. We're gonna have to work with them because virtually nothing is going to happen internationally for the good, certainly unless the United States finds a way of working with China in a constructive fashion. Confrontation is not an answer to anything.

To be disruptive financially and disruptive politically and from a security point of view. How hard is it to maintain these two focuses, one of national security the other on economics for a government. Well, we've been able to do it reasonably well. The economic part of the relationship with China has evolved. I think China is somewhat more nationalistic

economically as are we. So we're gonna have to figure out a way of working with them By pulling out of t p P. We give China a lot of latitude to draw up the rules of trade, particularly in the Asia Pacific region. They really don't think, and a lot of our allies now don't think we have very much staying power in the region. From a political and national security point of view, we've had closer mill with

the called mill mill relations military to military relations. There are ways of working with the Chinese on South China see and other things, but it takes a lot of work and a lot of meetings at various levels over a period of time. Not one shot statements by the president day particulated by Twitter. You keep going back to that at Messador har Mats You're wonderful book The Price of Liberty, the first sentence, the final chapter. I love this.

Henry Kissinger has written that quote America's journey through international politics has been a triumph of faith over experience. What is Donald Trump's faith? Well, I don't know. At this point. He seems to think that he can take very tough lines against the Chinese and the Chinese will somehow do what he asked them for. Putin phil Yes, yes, but yes, it's it's seeming a much different view of Putin than he does of President hire Jim paying Um. He's he's

talking very negatively about China, very positively. So it's a bluster of say Theodore Roosevelt. But I'm not comparing him to President Roosevelt. But the your study of the diplomacy of bluster, which I think we can all agree, including Trump supporters, there's a lot of that here. How does that play in the modern age? It doesn't play very well.

I mean, if you want to be tough, then as as clearly does, then there's room for being tough, but you need to have a strategy behind it, and you need to have some kind of dialogue with the Chinese to assert your view and come up with the kind of answers that you want. And it cannot be they do everything we asked them to do. They're not in that mode anymore. They're not a weak country. They have

their own national interests. We have to figure out some way of of achieving our goals, but the Chinese have to get something out of the deal. It's not going to be a one sided thing. And he's got to think these things through before he he does them, because the consequences of a confrontation with China, between the US and China, but also for a lot of the other friends and allies in the region, that would be catastrophic. They don't want to be in the middle of a

confrontation between Beijing and Washington. We've we've seen the establishment of a regular dialogue between China the U S. The Strategic Economic Dialogue happening I think every two years, every every year, every year now changing location every every every year. UM. If that disappears, what is the form here for for conversations between these these twogether? We still presumably would have summit meetings between our two presidents periodically. We have APEC meetings.

China and the US are both members of APEX. There are other groups, UH, the S and need S. Reg Economic dialogue that you mentioned is a very useful vehicle. I think their ways of improving and I used to go to them on a regular basis. They're useful because they're a multitude of issues between the United States and China. We've made progress on environmental issues, as I say, on mill mill issues, military and military issues, there actually has

been some progress. There are other issues that we still need to make progress on intellectual property protection, trade, secrets, protection, a number of other things. And there are a number of geopolitical issues. They're going to be there a rising power. Traditionally, rising powers and existing powers have issues that need be resolved. So we're gonna have to get to it in a serious way. And and by say but when I say serious, I mean the leaders are gonna have to sit down

and try to work these things out. And Trump is gonna have to understand the Chinese a lot more than he does, and understand they have nationalistic pressures too. They may not be a democracy, but they have very strong public opinion and they have very strong national interests, as do we. The question is how do we work out in a national interests in a constructive way. In these last few minutes we have here, Let's turn to Europe.

The events we saw yesterday on the heels of the referenum in Italy, on the heels of the the referenum in the United Kingdom. Let's look ahead the two thousand seventeen in your sense of how that fractiousness continues, how it begins to prepare itself. What do you see happening these referend uh, the Ramsey referend on restructuring the Italian

Senate and bregs. It illustrate that in Europe they have the same sorts of nationalistic pressures, anti international pressures, economic zine of phobia, anti immigration pressures that a number of other countries do, including the United States. I think what's troublesome about Europe is the whole vision of the whole what they call European Project start out as a political

objective to pull Europe together politically and man economically. It's become much more technical now, and I think it has to be restored in a way that the irage European citizen understands it and benefits from it. It's gotten too technical, it's gotten away from the kind of popular support that it needs to sustain itself. Ambassador, thank you so much, Bob Horman. It's very generous of your time this morning. He's with Kissinger Associates, and of course, as a former

under Secretary of State for the President. President, maybe it's the last time we're to say that we're really getting Oh no, let we get into January. There. 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 at find your independent Advisor dot com. John Vale with us with Niko, as we look at uh Japan, but much more at the Trump reflation. We've had a number of interviews where we go, okay, the tenure yields at two point five seven, where does it behavioral change? And it maybe three and maybe two point nine and maybe three per three. I can't get a handle on it. For Japan negative rates up to seven years, the tenure

yield is point zero seven one. I think that's point one percent rounded up. Is there a tip point where yields go up, where things change in Japan due to the Trump reflation? Or are are yields so low and distorted you can't even say that, well, they are distorted. Their controlled. It's called yield curve control for a reason.

The Bank of Japan owns a great majority of these securities, and it can sort of control what the price is um, and they're controlling it right now and a little bit below yeah, zero point one percent and um, they don't have to buy too many securities right now to keep it there because people have had pretty low expectations for inflation going forward. But with this Trump reflation, there's definitely

a change in the mood there. The press conference last night for Corona after the Bank of Japan meeting, UH did indicate that he's UH tolerat, tolerating perhaps thoughts of increasing the target in the coming months. And we just had our quarterly meeting for our Global Investment Committee yesterday and we were very non consensus and predicting a twenty basis point hike in that target UH in the second quarter and another twenty basis points in the fourth quarter.

David Gurrow, from my hundredth birthday, that forty year bond you bought me in Japan since Mr Trump was elected, it's on sale. It's going from down. Even with all the distortions there, there is price erosion in Japan. You just gotta go out a lifetime to see it. How much has has the landscape changed for Japan since the election that we had here on the eighth of November has as the economic landscape changed markedly as a result

of the result of that election. Well, they were very worried before, and they really were not close to Trump, and it was looking kind of dicey for them for

a while. But the weakness the end and Abbey's very proactive stance and and flying here to meet him has really changed the mood a lot, and a lot of people are thinking that Trump is actually good for Japan, not only for security, and that you know, of course he's not going to and his and his generals and his cabinet are not going to give up the Japan security alliance. Um. And yes, the weekend has just really been a tremendous help to sentiment in Japan. So uh,

it's it's looking good for Japan right now. Remind us what what came out of that that period of introspection when the Bank of Japan was going to take stock of what they've done reevaluate policy. What changed as a result of that. Well, Um, they've been very very worried, as have all central banks, about some sort of taper tantrum, and they're also worried about what happens when they start to taper their et F purchases. I know Tom has not been a big fan of the e t F purchases.

It is a big it's very un orthodox policy. But we actually in our meeting yesterday expected uh the b o J to taper it's e t F purchases in the second quarter as well, and that's very non consensus. But we're very positive on the stock market. We expected to be up, you know, six or seven percent by next June. And the Bank of Japan just doesn't need to be buying e t s. I mean, originally it was buying e t s two increase risk appetite and to show confidence in the economy, and they just won't

need to do that. So there might be a big bit of a hiccup as that gets priced into the market. But we think that, yeah, the market can go up despite this tapering. Plus understand that the rational behind what is that sort of an outsider call at this point again, you mentioned looking at yield curve targeting and and and some changes to that here in the next few courts. What's led you to to make that forecast? What's just

optimism basically on the economy. We think the economy is going to do better than consensus, and that consensus is actually moving up as we speak. We think with the weaker yen and higher oil prices that the CPI will be definitely going up, not maybe to two very soon, but maybe by the end of the year it could be approaching that. And the Bank of Japan is just probably going to be a bit of under pressure too from the U. S. Treasury and other countries about not

letting the end get two weak. We still think it's gonna go to one twenty three by June um. But and even the Obbe administration doesn't want the end too weak. I mean, for instance, one reason why they sort of cooled off on their really super aggressive policy was that the end was so weak that UH voters were getting unhappy with the food price inflation. And so yes, it all makes sense that they start to calm down a bit. There's a range. I mean, what you said, this is

very quickly, it's one fifty feasible? Is that even feasible in the room If the two peaks twenty years ago, If the Fed keeps raising rates uh, you know quarterly going forward, and the Bank of Japan is super aggressive in its policy, yes, it's possible and I don't think anybody wants that to happen to even Japan. I don't think that so they should they should probably have to my pleasure down bringing Michael Dart, a chief economist and market strategy m k M Holdings, joining us now. Michael,

great to have you with us. Thanks so much for having me on. Let's start with the news of the day. As Tom was mentioned just a few moments ago, we have seen the markets doingmarkably well, a bit of resilience here in light of what we saw yesterday across Europe. What do you make of that? I used the word inured and that's perhaps, uh, not the word I should have used, and implies that we're sort of used to it,

and I don't. I don't mean to say that we have become used to attacks like the ones we saw yesterday.

But what do you think explains the resilience we've seen today? Well, it's always hard to to, you know, to know what is driving the market over you know, period of hours or for days, but I think in general it Since the US election result, there is optimism in the US that policies could change in a pro growth manner, probably mainly due to deregulation and maybe secondarily to corporate tax reform. And so the dollar has been rallying. Growth expectations have

been rising, business confidence has been rising. Um in Japan in the Euro Area are getting you know, weaker currencies as a as a consequence in those markets are after underperforming severely, are starting to bounce back over the course of the last few weeks. Michael, you're confident here that in making the soup of Trump and omics, the recipe has been figured out. In other words, you mentioned the tax reform profitt for tax cuts, tax reform, regulatory reform,

infrastructure spending. Do it Do we have a sense of what the right allocation ingredients is going to be here? And how worrisome is it to you if we don't get the balance right? Well, it's a great question. I mean, I think we know what the proposals are. Um, you know, but there's a bit of a wrinkle called the U. S Senate. So the legislation does have to clear the US Senate to become law, at least in a permanent fashion for tax cuts, and you know, we'll see what

can get through. The other wrinkle is the Federal Reserve, I mean Fed chair Yelling has essentially said, this is really not the proper time in the business cycle for a big demand side fiscal push, meaning anything that looks like it's going to expand the fiscal deficit and a significant way the FED would likely have to lean against with tighter monetary policy than would otherwise be the case. She's given this message on several occasions. I'm not sure

that Congress is hearing it. Michael, give us an update. I've seen more chit chat in the last ten days on David Laidler. Nut Vixel Vixell appeared on the show last week. Folks nut Vixel M two M three in our circulation of money in reserves? Where are we in the land of David Laidler? Okay, well, Tom's is my favorite subject. As you know that. Um, let's start with the let's start with some of the money supply data,

because it's a little confusing right now. So the monetary base in the US, which the FEED has direct control over, actually has been declining on a year to year basis. We're down almost double digits on on the base, and so in order to hold short term interest rates up, the FET is having to to do some liquidity draining, even though it does not yet have a policy of of shing. We call that in monetary vix alien theory,

that's called draining the swamp MR darkning, draining liquidity swamp um. Now, whether that's a problem for the business cycle really depends on, you know, the nature of the velocity of money. So one thing we're also observing is that other measures of money are doing okay, So M one, M two and the like. M two is rising nicely, yeah, and M M one is rising nicely. So if you look at the monetary base going back over a long long period of time essentially since we've had the said declines are

year to year are pretty rare. But the ones that have been problematic have also been associated with declines in the broader money stuck M one, M two and the like that it's not happening now. And critically, if you look at the credit markets and inflation expectations, we started off the year in a very very precarious setting and

that's really turned around. So that would fit with what I said about business confidence improving earlier, David to our audience globally, I don't give a damn what Michael Darter just talked about. I was just doing a job audition for Darter for Larry Cudlow. That's the only reason I did a David and said New Victoria, which I was pretty impressed with as well. Here, well, here we are at the end of two thousands sixteen, a few days

to go until two thousand seventeen. How how firmly set out is your outlook at this point in terms of all the unscer do we have here about what policy could look like in the new year. How difficult is it to assemble an outlook for the new year? Well, I think we need to start with the question of you know what is uh, you know, what is growth

potential in the US economy? And you know, that's simply the sum of the trend of productivity and working age population growth, and unfortunately over the last five or six

years it's been quite weak. Now there's a lot of optimism that that could turn around with different policy reforms, but you know, I'm not sure how much traction we're really going to get there, And so you know, over any extended period of time, your growth rate is really going to be determined by those real forces productivity in

working age population growth. The market seems very focused on the prospect prospects for corporate text reform and cuts and regulatory relief, not really paying much attention to trade protectionism, risks, clampdowns, and immigration. Those things would not help productive potential and economic efficiency. And so you know, one of the things that you know, that I've been concerned about, or at least that's in the back of my mind, is how this all settles out, um on a go forward basis.

So I think, unfortunately, we're still going to be looking at growth rates during the you know, the rest of this business cycle expansion that are low by historical standard, for no other reason because of demographics. Is this a

measured FED? I mean, if nominal GDP is going where you're saying, we see the Trump reflation including euro one h three seventy uh this morning, Michael Darda, if we reached escape velocity on nominal GDP and as the Trump reflation sustainable, well, you know, um, Tom, I think the FED is in a much better position now to raise rates several times next year than it was coming into this year last year in December when it raised rates

and signaled for more to come. You know, the dot plot was really totally out of kilter with the credit markets and inflation expectations. Now that's completely reversed course. So is that a measured FED. Yeah, I would say that's a measured FED. I mean they want to be able to lift short term interest rates, UH in a gradual fashion in the business cycle will dictate whether they're able to do so. But you know, we're still going to

be looking at at growth rates for all. Overall nominal growth that you know, by historical standards are are fairly low. So let's just work with some numbers. If growth potential is running at one to two, it's really been closer to one. But let's give ourselves from room one to two, and the feed is a two percent inflation target than three to four nominal is really, you know, all we

can look forward to on a sustained basis. And in that environment, long rates are going to be relatively low and the FET's not going to have a ton of room to make short term interest rates up, meaning that three or four percent levels are probably not going to be seen during this business segment. Thanks for listening to the Bloomberg Surveillance Podcast. Subscribe and listen to interviews on iTunes, SoundCloud, or whichever podcast platform you prefer. I'm out on Twitter

at Tom Keene. David Gura is at David Gura. Before the podcast, you can always catch us worldwide. I'm Bloomberg Radio. Who you put your trust in matters? 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