Latest / Trumponomics / Does This Crazy Stock Market Mean Trouble for the U.S. Economy?

Transcript

Does This Crazy Stock Market Mean Trouble for the U.S. Economy? · Trumponomics

• 0:00
  Speaker 1: It's been a wild ride for investors in the US
• 0:03
  Speaker 1: stock market these past couple of months. First it plummeted
• 0:06
  Speaker 1: in February over fears of rising interest rates. Then President
• 0:10
  Speaker 1: Trump gave investors even more heartburned by threatening China with
• 0:14
  Speaker 1: a trade war and attacking Amazon over its deal with
• 0:17
  Speaker 1: the postal Service. Yet, for all the chaos on Wall Street,
• 0:21
  Speaker 1: Main Street seems to be doing fine. So is the
• 0:24
  Speaker 1: stock market signaling trouble for the economy or will this
• 0:28
  Speaker 1: storm blow over? Welcome to Benchmark. I'm Scott Landman, economics
• 0:41
  Speaker 1: editor with Bloomberg News in Washington, And I'm Daniel Moss,
• 0:45
  Speaker 1: economics editor and Roger at Bloomberg View in New York. So, Dan,
• 0:50
  Speaker 1: how many times have you been in this situation? You're
• 0:53
  Speaker 1: talking with a new acquaintance at a cocktail party. You
• 0:56
  Speaker 1: tell them that you write about the economy, and the
• 0:58
  Speaker 1: first questions they ask are, so, what's going on with
• 1:02
  Speaker 1: the market lately? And what should I do with my money? Well,
• 1:05
  Speaker 1: the first part happens a lot. I generally quickly respond
• 1:09
  Speaker 1: by saying, which market do you mean? Do you mean
• 1:12
  Speaker 1: the stock market? They give me a blank look. I say, well,
• 1:15
  Speaker 1: you could have been talking about bonds or f f X.
• 1:18
  Speaker 1: The mere fact that the market is shorthand for stocks
• 1:21
  Speaker 1: actually says a lot. And it's usually that they think
• 1:25
  Speaker 1: that the market is the economy, that the stock market
• 1:28
  Speaker 1: is basically the economy. If you cover the economy, well
• 1:30
  Speaker 1: you must be covering the stock market, right then, Yes,
• 1:33
  Speaker 1: to break it down and then describe how the market
• 1:37
  Speaker 1: on a day to day basis, let alone an hourly basis,
• 1:41
  Speaker 1: does not necessarily reflect the broader macro economy. Well, by
• 1:46
  Speaker 1: that time eyes that were rolling have well and truly
• 1:49
  Speaker 1: rolled out the cocktail party. Well, anyway, there are some
• 1:54
  Speaker 1: ways that the stock market is the economy. There's some
• 1:56
  Speaker 1: ways that it's not. And today we're going to talk
• 1:58
  Speaker 1: about that a little. As these two worlds collide on Benchmark.
• 2:03
  Speaker 1: Let's bring in our guest. Jim Paulson is chief investment
• 2:06
  Speaker 1: strategist at the Loose Old Group, an independent financial research
• 2:09
  Speaker 1: firm in Minneapolis. He also previously worked for twenty years
• 2:13
  Speaker 1: at Wells Capital Management, part of Wales Fargo, and is
• 2:17
  Speaker 1: a trained economist. Jim, thanks for joining us on Benchmark.
• 2:20
  Speaker 1: Thanks for Scott, Jim. What sets you apart from a
• 2:24
  Speaker 1: lot of people who talk about the markets ups and downs.
• 2:27
  Speaker 1: Is that you come to it with an economics background.
• 2:31
  Speaker 1: You have a doctorate in economics. How does this training
• 2:34
  Speaker 1: in this field color your approach to analysis and commentary
• 2:38
  Speaker 1: on the stock market? Well, I think it always has
• 2:41
  Speaker 1: probably more of a you know, a ten or twenty
• 2:45
  Speaker 1: feet few more times than not than a bottom up
• 2:47
  Speaker 1: company view. Probably always have had that till But I
• 2:52
  Speaker 1: would say a couple of the biggest things is an
• 2:55
  Speaker 1: appreciation of the workings of capitalism, not only driving the economy,
• 3:01
  Speaker 1: but also the markets and and and truly more maybe
• 3:05
  Speaker 1: an appreciation for it's individuals that make it home and
• 3:10
  Speaker 1: and it's truly greet and fear and animal spirits or
• 3:13
  Speaker 1: the lack thereof and and you can say those terms,
• 3:17
  Speaker 1: but in reality and the management of money, they often
• 3:21
  Speaker 1: become extremely important. We can get lost in all the
• 3:25
  Speaker 1: minutia of of FED meetings or or quantitative formulas for
• 3:31
  Speaker 1: this or that, But at the end of the day,
• 3:34
  Speaker 1: it really the most important thing, and a lot of
• 3:36
  Speaker 1: the time is where is the psyche of the players?
• 3:39
  Speaker 1: Are they more tilted at the moment towards fear and
• 3:43
  Speaker 1: that's affecting how they're behaving. Both economically and in the markets,
• 3:47
  Speaker 1: or are they more fearful of missing out? Are they're
• 3:52
  Speaker 1: driven more by greed? And I think that's a something
• 3:56
  Speaker 1: you get after studying economics a lot of things. But
• 4:00
  Speaker 1: I think one thing is left in me and has
• 4:02
  Speaker 1: maybe been reinforced in my day to day experiences. Is
• 4:05
  Speaker 1: it really is about the human element. We try to
• 4:09
  Speaker 1: make economics of science, but at the end of the day,
• 4:11
  Speaker 1: it's still an art. You're also not in New York
• 4:15
  Speaker 1: or another major financial sense. You're in Minneapolis, not a
• 4:19
  Speaker 1: knock on Minneapolis. It does give you a different perspective.
• 4:22
  Speaker 1: I also wonder whether your studies at Iowa State, as
• 4:26
  Speaker 1: opposed to say, Harvard, Princeton, Stanford, give you some special
• 4:32
  Speaker 1: insight as well. You know, I'm not sure because I
• 4:35
  Speaker 1: never had the alternative experience. I guess to directly compare
• 4:39
  Speaker 1: the two, I think at the end of the day,
• 4:42
  Speaker 1: it's probably both an advantage in a detriment to grow
• 4:45
  Speaker 1: up and be educated in the Middle West as opposed
• 4:49
  Speaker 1: to the East Coast. I think it's good and bad
• 4:50
  Speaker 1: about it. If there is one thing that I guess,
• 4:54
  Speaker 1: I think I guess a couple of things, but technology,
• 4:57
  Speaker 1: I'm fairly, I'm as connected as an anyone that sits
• 5:00
  Speaker 1: right in Manhattan every day. It's because much to people
• 5:03
  Speaker 1: in New York or Boston or l A that I
• 5:05
  Speaker 1: do here and in the Midwest, and there's certainly isn't
• 5:10
  Speaker 1: a lack of ability to look at things as much
• 5:12
  Speaker 1: as anyone anyone else anywhere else. But I do think
• 5:16
  Speaker 1: what it does, more than anything is give you a
• 5:18
  Speaker 1: different track to managing money. You have maybe a high
• 5:23
  Speaker 1: proportion of the individuals involved in this industry that follow
• 5:26
  Speaker 1: a very similar track, and to some extent, coming from
• 5:30
  Speaker 1: a completely different track to get where we are, maybe
• 5:34
  Speaker 1: brings a completely different perspective to how you do things,
• 5:38
  Speaker 1: rather than just learning what everyone else did and copying
• 5:41
  Speaker 1: it along the way. And I think there's some truth
• 5:44
  Speaker 1: in that. But as I say, that can be a
• 5:46
  Speaker 1: great thing. Creativity and a unique path can be very profitable,
• 5:50
  Speaker 1: but it can also sometimes run you right off a
• 5:53
  Speaker 1: cliff when you're doing it your own way, so to speak.
• 5:56
  Speaker 1: So again it's a it's an advantage and a detriment.
• 5:59
  Speaker 1: But I do think maybe the different path to get
• 6:01
  Speaker 1: what we all do every day certainly makes me look
• 6:04
  Speaker 1: at things differently. Whenever we have these kinds of big
• 6:08
  Speaker 1: swings in the stock market. Some people come out and say,
• 6:11
  Speaker 1: you know, the stock market is not the economy. The
• 6:13
  Speaker 1: economy is just fine, but it's really a bit more
• 6:16
  Speaker 1: complicated than that, right, Can you explain. Well, I've always
• 6:20
  Speaker 1: been of the been of the view that there's always
• 6:23
  Speaker 1: been widespread contention between Main Street and Wall Street. It's
• 6:27
  Speaker 1: a common media darling to write about that conflict, and
• 6:32
  Speaker 1: I think it exists because over time, I believe both
• 6:35
  Speaker 1: Main and Wall do just fine over over time, they
• 6:38
  Speaker 1: just rarely do find together. It is typically the case
• 6:43
  Speaker 1: that when it's really awful oftentimes on Main Street, it's
• 6:47
  Speaker 1: great on Wall and when it gets good on Main
• 6:50
  Speaker 1: and often gets more difficult on Wall Street. For example,
• 6:53
  Speaker 1: if you go back to the absolute best returns on
• 6:57
  Speaker 1: Wall Street have come end, the unemployment rate has been
• 7:01
  Speaker 1: in the highest quartile over the post war history. I
• 7:05
  Speaker 1: think returns as much as fift per annum when the
• 7:08
  Speaker 1: unemployment rates in the upper quartile and the worst returns
• 7:11
  Speaker 1: on in the stock market, and when you have the
• 7:14
  Speaker 1: lowest quartile unemployment rates. There is a truism that Wall
• 7:19
  Speaker 1: Street likes slack on me. Slack on me and allows
• 7:23
  Speaker 1: you to grow the economy without any negative consequence for
• 7:27
  Speaker 1: the financial assets, meaning interest rates can be loved. That's right,
• 7:31
  Speaker 1: meaning growth without any cause. You don't raise cost you
• 7:35
  Speaker 1: don't increase inflation which challenge valuations, you don't have any
• 7:38
  Speaker 1: need to raise rates. But once, once you reach full employment,
• 7:42
  Speaker 1: once you get to a positive output gap, then growth
• 7:47
  Speaker 1: has negative connotations as well as positive ones for both
• 7:50
  Speaker 1: stocks and bonds. So at any given moment, what often
• 7:55
  Speaker 1: seems like only one is participating. I mean, in two
• 7:58
  Speaker 1: thousand nine, when the stock mark it was roaring in
• 8:00
  Speaker 1: the second half of the year, we had some of
• 8:02
  Speaker 1: the highest unemployment rates post war history, and there was
• 8:06
  Speaker 1: widespread impression for years in the early in this recovery
• 8:10
  Speaker 1: that only Wall Street was really benefiting, no one on
• 8:13
  Speaker 1: me was. Whereas today Main Street looks about as good
• 8:17
  Speaker 1: as it ever has. We've got full employment, regular job creation,
• 8:22
  Speaker 1: good income growth, good profit growth, high confidence levels. And
• 8:27
  Speaker 1: and yet Wall Street has been struggling more of late
• 8:30
  Speaker 1: with the need to reset interest rates higher, with lowering
• 8:33
  Speaker 1: price earnings multiples, with dealing with higher inflation risk, with
• 8:37
  Speaker 1: dealing with the tightening feder reserve. And I don't think
• 8:41
  Speaker 1: that's uncommon at all. So over time they're both going
• 8:44
  Speaker 1: to benefit from GDP going higher, but often it's not
• 8:49
  Speaker 1: at the same time. Well, if things are so great
• 8:52
  Speaker 1: on main Street, Jim, this didn't just happen overnight, how
• 8:55
  Speaker 1: do you reconcile that with this support ought for populism
• 9:02
  Speaker 1: and for draining the swamp and breaking Washington, how do
• 9:06
  Speaker 1: you reconcile dissatisfaction with the status quo when status quo
• 9:10
  Speaker 1: was treating people pretty good late. Well, but I think
• 9:14
  Speaker 1: it wasn't long before that. You know, really, confidence levels
• 9:19
  Speaker 1: among consumers, among businesses, among investors really remained average or
• 9:24
  Speaker 1: below average by post war standards, really until after the
• 9:28
  Speaker 1: election in two thousand and sixteen. And if you look
• 9:32
  Speaker 1: at real median incomes until really two thousand fifteen at
• 9:36
  Speaker 1: the earliest, maybe even two thousand sixteen real median incomes,
• 9:40
  Speaker 1: that is the income of the of Main Street, if
• 9:43
  Speaker 1: you will, we're falling during most years of this recovery.
• 9:47
  Speaker 1: So I would argue that it really wasn't until the
• 9:49
  Speaker 1: last couple of years that Main Street finally started to
• 9:53
  Speaker 1: pick up. You go back prior to the election. I'm
• 9:55
  Speaker 1: not sure the exact number, but you know, we had
• 9:57
  Speaker 1: an unemployment rate that was still probably close to six percent,
• 10:02
  Speaker 1: and we had sort of hit and miss job reports
• 10:04
  Speaker 1: and low confidence. And my point is I don't I
• 10:07
  Speaker 1: don't necessarily believe at all that the election of President
• 10:10
  Speaker 1: donlaland Trump led to everything good on main I think
• 10:14
  Speaker 1: Maine was, by coincidence, almost finally starting to pick up
• 10:19
  Speaker 1: and return to some semblance of post war normal just
• 10:22
  Speaker 1: prior to the election, and I think there was great
• 10:25
  Speaker 1: dissatisfaction with what went down. The idea of an economy
• 10:29
  Speaker 1: growing at a ridiculously slow two sort of real stall
• 10:33
  Speaker 1: speed growth rate, but the inability to really lower the
• 10:37
  Speaker 1: effective unemployment rate, leaving very low confidence amongst most private
• 10:42
  Speaker 1: players and really high degrees of fear that we were
• 10:45
  Speaker 1: just this close to the second coming of the Great Depression.
• 10:48
  Speaker 1: I think there was dissatisfaction in that. One of the
• 10:51
  Speaker 1: criticisms that I have of the way we handled the
• 10:55
  Speaker 1: o A crisis was I felt like every leader in
• 10:58
  Speaker 1: this country put all their energies into treating fundamentals, restoring
• 11:05
  Speaker 1: an income flow or improving a balance sheet, but they
• 11:08
  Speaker 1: lost focus of what is equally or maybe more important,
• 11:11
  Speaker 1: and that is treating confidence and indeed, in my book,
• 11:14
  Speaker 1: they destroyed confidence. The President, Treasury, had the Federal Reserve Chairman,
• 11:22
  Speaker 1: UH and public officials and government chronically and constantly went
• 11:26
  Speaker 1: to the microphone and told the American public, you better
• 11:29
  Speaker 1: be prepared because we're this close to the second coming
• 11:31
  Speaker 1: of the Great Depression. Their actions, the bizarre actions of
• 11:36
  Speaker 1: doing things like cash for clunkers and tarp on a
• 11:39
  Speaker 1: major way, giving banks that didn't even need capital capital
• 11:42
  Speaker 1: they were forced to take could practicing quantitative easy and
• 11:46
  Speaker 1: never before seeing approach. All of these screened that our
• 11:50
  Speaker 1: leaders were scared to death and they were doing frantically
• 11:53
  Speaker 1: anything they could to save the world. And I think
• 11:56
  Speaker 1: it put private players, businesses, consumers, and fasts into the
• 12:00
  Speaker 1: fetal position and chronically led to a very poor, growing economy.
• 12:06
  Speaker 1: I think it's finally broke just prior to Trump getting elected,
• 12:11
  Speaker 1: in part because the rest of the world adopted an
• 12:14
  Speaker 1: easing policy consistent across the globe and the whole global
• 12:17
  Speaker 1: economy synchronized. In part because it had been long enough
• 12:21
  Speaker 1: that fear finally started to erode. But my point was,
• 12:25
  Speaker 1: I think it was people were tired of the fear
• 12:28
  Speaker 1: based and sort of disappointing outsized recovery, and I think
• 12:33
  Speaker 1: that led to a change at the highest level of
• 12:35
  Speaker 1: leadership in the country. So now we do have a
• 12:40
  Speaker 1: fair amount of confidence back on mainstreat The unemployment rate
• 12:43
  Speaker 1: is at the lowest since two thousand. Most measures of
• 12:47
  Speaker 1: the economy show that things are in pretty good shape.
• 12:50
  Speaker 1: And yet we've been having these pretty crazy swings in
• 12:54
  Speaker 1: the stock market. And you know what we want to
• 12:58
  Speaker 1: know is what does that say about the direction of
• 13:02
  Speaker 1: Main Street. You were talking earlier about how they don't
• 13:05
  Speaker 1: necessarily move in sync with each other. Is this change
• 13:09
  Speaker 1: in the behavior on Wall Street? Uh, something that tells
• 13:14
  Speaker 1: us about the future coming from Main Street? Well, ultimately,
• 13:18
  Speaker 1: what hurts Wall will hurt Main and Wall is dealing with.
• 13:22
  Speaker 1: There was a great gig on Wall for quite a while.
• 13:25
  Speaker 1: You could grow the economy and never have any inflation
• 13:28
  Speaker 1: or cost increases in your business, never have to raise rates.
• 13:32
  Speaker 1: And if that's the case, you can you can keep
• 13:35
  Speaker 1: pushing the valuation in the stock market higher and higher.
• 13:38
  Speaker 1: There's nothing to bring it down. But suddenly, when the
• 13:41
  Speaker 1: world recovery synchronized and everyone started growing together. And this
• 13:46
  Speaker 1: came at a time when the US had returned to
• 13:48
  Speaker 1: full employment. It now has negative fallout in the form
• 13:53
  Speaker 1: of rising cost and rising inflation, which we're definitely seeing,
• 13:57
  Speaker 1: and that is necessitating the new eat for the Fed
• 14:00
  Speaker 1: to reset short rates and for bond vigilantes to reset
• 14:03
  Speaker 1: longer yields, and that is necessitating that we lower the
• 14:07
  Speaker 1: valuation of stocks as well. This here, to me, is
• 14:11
  Speaker 1: about the stock and bond market's both adjusting to a
• 14:16
  Speaker 1: new character in the economy where you are no longer
• 14:18
  Speaker 1: in a two percent growing economy with two percent inflation
• 14:22
  Speaker 1: and two percent yields. We're probably in a two and
• 14:25
  Speaker 1: a half growing economy, maybe two and three quarters that's
• 14:28
  Speaker 1: synchronized with the globe, and inflation is probably moving to three.
• 14:32
  Speaker 1: Wages are moving to three and a half, and that
• 14:35
  Speaker 1: means the tenure yield is probably headed to three and
• 14:37
  Speaker 1: a half as well, and that necessitates that you can't
• 14:41
  Speaker 1: trade the stock market over twenty times earnings anymore. You're
• 14:45
  Speaker 1: probably going to have to bring it down into the teens,
• 14:48
  Speaker 1: maybe seventeen times earnings to find a sustainable valuation that
• 14:52
  Speaker 1: can withstand an economy with three percent inflation. So I
• 14:57
  Speaker 1: think this is an adjustment for financial assets to the
• 15:00
  Speaker 1: new reality, and we might be able to do that
• 15:03
  Speaker 1: successfully and the economy and the stock market can continue on.
• 15:08
  Speaker 1: Or if inflation and indust rate pressures proved to be
• 15:11
  Speaker 1: more advanced and they have to both move higher than
• 15:16
  Speaker 1: maybe it could be the beginning of the end for
• 15:18
  Speaker 1: both the ball market and the recovery. Jim. As flawed
• 15:22
  Speaker 1: as this economic expansion has been, it's been running for
• 15:26
  Speaker 1: a while now. It's on track to become the longest ever.
• 15:31
  Speaker 1: Are you seeing any signs in your daily interactions that
• 15:36
  Speaker 1: things are starting to whine, things might be coming off
• 15:40
  Speaker 1: the boil, that the end could be inside. Yeah, Well,
• 15:44
  Speaker 1: this is a very calendar as you say, it's it's
• 15:46
  Speaker 1: a calendar old recovery and it's going to be the
• 15:48
  Speaker 1: oldest then. But it's in many ways character young. You know,
• 15:54
  Speaker 1: there's just such an odd recovery growing so slowly, never
• 15:58
  Speaker 1: generating any real and of baalistic behaviors. No one really.
• 16:02
  Speaker 1: We didn't have any major lending or borrowing cycle. We've
• 16:05
  Speaker 1: never had a massive nationwide housing cycle. We've never had
• 16:08
  Speaker 1: a major capital spending a cycle. We've yet to have
• 16:13
  Speaker 1: a significant tightening by policy officials. We have just started
• 16:17
  Speaker 1: a period of excessive or or strong confidence in many
• 16:22
  Speaker 1: ways the economy to me, you know, by character standards,
• 16:26
  Speaker 1: you know, might be in year three or four rather
• 16:29
  Speaker 1: than in year nine. The problem I see is the
• 16:31
  Speaker 1: financial markets look a lot older than the recovery does.
• 16:36
  Speaker 1: I don't see. To me, what is the primary cause
• 16:39
  Speaker 1: of recession is confidence. Too much confidence. Confidence leads you
• 16:44
  Speaker 1: and me to undertake overly, aggressive, risky, out over our
• 16:49
  Speaker 1: skis types of behaviors, whether that be in our economics
• 16:52
  Speaker 1: or whether it be in the markets, our our own financials.
• 16:56
  Speaker 1: And it is those excesses then then must be purged
• 16:59
  Speaker 1: with the recession. Those are hard to find today because
• 17:02
  Speaker 1: we've never had enough confidence in this recovery to do
• 17:06
  Speaker 1: stupid things. Um, we might be starting that process, but
• 17:10
  Speaker 1: we're just probably starting. The problem I have and what
• 17:13
  Speaker 1: keeps me awake at night when we think about this
• 17:16
  Speaker 1: recovery is that this recovery has been so odd and
• 17:21
  Speaker 1: to get go. It is truly an outlier recovery of
• 17:24
  Speaker 1: the post war era. It grew slower than any other
• 17:27
  Speaker 1: by a wide margin. It did it without virtually no
• 17:31
  Speaker 1: productivity whatsoever, no debt usage. I could go on and on.
• 17:35
  Speaker 1: He certainly have totally altered the financial industry's approach from
• 17:40
  Speaker 1: what it used to be. That if we had such
• 17:43
  Speaker 1: an odd recovery, could we have an odd thing that
• 17:47
  Speaker 1: causes the next recession? That is, could the traditional things
• 17:50
  Speaker 1: that you and I monitor for recession risk not really
• 17:54
  Speaker 1: be worthwhile in this recovery. Maybe it's something entirely different
• 17:59
  Speaker 1: that's going to bring this next recession, if only because
• 18:01
  Speaker 1: the recovery has been so odd and unconventional. I don't
• 18:05
  Speaker 1: know what to do with that, but it scares me
• 18:08
  Speaker 1: if a surprising recession came out of left field tomorrow,
• 18:12
  Speaker 1: would it really be that surprising given how surprising and
• 18:15
  Speaker 1: odd this whole recover's been. Speaking of which, Jim, two
• 18:19
  Speaker 1: things come to mind when you talk about this. We've
• 18:22
  Speaker 1: had a fiscal stimulus in the form of a major
• 18:26
  Speaker 1: tax cut law as well as a budget law passed
• 18:31
  Speaker 1: by Congress have the effect of effectively boosting spending, boosting
• 18:35
  Speaker 1: stimulus in the economy at a time when the economy
• 18:38
  Speaker 1: is relatively strong. On top of that, we're in the
• 18:41
  Speaker 1: middle of all sorts of trade threats and counter threats
• 18:45
  Speaker 1: over tariffs fifty billion here, hundred billion here, hundred billion there.
• 18:50
  Speaker 1: Maybe you start talking about real money. How much do
• 18:54
  Speaker 1: those kinds of policy issues loom in your mind when
• 18:57
  Speaker 1: you think about these kinds of recession risks that might
• 19:00
  Speaker 1: not normally be on the radar. The first one quite
• 19:04
  Speaker 1: a bit, the second one not much. In other words,
• 19:07
  Speaker 1: I thought, passing a major fiscal stimulative package this late
• 19:12
  Speaker 1: and an economic recovery that had already returned to full employment,
• 19:15
  Speaker 1: that was already dealing with rising cost pressures to some degree,
• 19:19
  Speaker 1: and that was already facing a FED that was starting
• 19:22
  Speaker 1: to tighten, it was just ridiculous. I I just think
• 19:24
  Speaker 1: it's indefensible, beyond anything but politics. It makes no sense
• 19:29
  Speaker 1: to bring a huge stimulative package to an economy which
• 19:33
  Speaker 1: really doesn't need stimulus, and indeed, one policy leg the
• 19:36
  Speaker 1: FED is already trying to reduce it. To me, if
• 19:40
  Speaker 1: it is successful in the sense of actually stimulating, all
• 19:44
  Speaker 1: it will do will hasten the coming of the next
• 19:47
  Speaker 1: recession because it will speed up inflation and cost push,
• 19:51
  Speaker 1: and it will speed up the need for the FED
• 19:53
  Speaker 1: and bond vigilance to tighten, and will speed up the
• 19:56
  Speaker 1: inversion of the yield curve and ultimately bring the next
• 19:59
  Speaker 1: recession quicker. That one I don't understand. I'm less worried
• 20:04
  Speaker 1: about the trade issues. UM sure. I mean, if you
• 20:08
  Speaker 1: take trade wars to limit, it's a horrible thing. We
• 20:11
  Speaker 1: we've experienced of that, We've certainly seen historically. UM But
• 20:16
  Speaker 1: I think the odds of that are low. And I
• 20:19
  Speaker 1: concur that for the last years, we allowed all these
• 20:25
  Speaker 1: little no name countries around the world to cheat and
• 20:27
  Speaker 1: pillar as it regards international economic rules, because we wanted
• 20:31
  Speaker 1: them to learn about capitalism and get their economies up
• 20:35
  Speaker 1: and running on a fully self functioning capitalist way, and
• 20:39
  Speaker 1: so we allowed them to set their currencies at ridiculously
• 20:42
  Speaker 1: low levels. We allowed them to treat their employees like
• 20:45
  Speaker 1: slave with no cost of labor. In essence, we allow
• 20:48
  Speaker 1: them to pollute their riverbeds and and their air without
• 20:52
  Speaker 1: any need to take account of those externalities. And then
• 20:56
  Speaker 1: we allow them to very unfairly compete with US and
• 20:59
  Speaker 1: other develop up countries. That was fine, because we did
• 21:02
  Speaker 1: a wonderful thing. We built a brand new economic world
• 21:05
  Speaker 1: that didn't exist thirty years ago, that has young demographics
• 21:08
  Speaker 1: and a lot faster growth rate profile than us old
• 21:12
  Speaker 1: fogies in the developed world will have. We need them
• 21:16
  Speaker 1: in the future to subsidize our our slower growth rate
• 21:20
  Speaker 1: going forward. If it took thirty years to build them out,
• 21:23
  Speaker 1: it's worth it. But it's time now to do a
• 21:26
  Speaker 1: bait and switch on these little new name emerging economies
• 21:29
  Speaker 1: and say, look, that's great now, but now it's time
• 21:32
  Speaker 1: to play by fair rules. And we need to everyone
• 21:36
  Speaker 1: played by the same rules across the globe, and we
• 21:38
  Speaker 1: need to start enforcing it. I'm not sure that the
• 21:41
  Speaker 1: Trump approach is the best approach, the blunt force, in
• 21:44
  Speaker 1: your face approach, but you know what, it's going to
• 21:47
  Speaker 1: have to be done one way or the other over
• 21:49
  Speaker 1: the next ten to twenty years, because ultimately, for the
• 21:52
  Speaker 1: world to work economically, we need for the developed world
• 21:56
  Speaker 1: slower growing, demographically challenged economies to become trade surplus countries
• 22:02
  Speaker 1: and for the fast growing, emerging demographically charged countries to
• 22:07
  Speaker 1: become trade deficit countries. And ultimately that's going to require
• 22:10
  Speaker 1: fair rules for trade. So I think, in some regard
• 22:15
  Speaker 1: as risky as it isn't the short term, it's maybe
• 22:17
  Speaker 1: a very good result longer term, Jim, what happens when
• 22:21
  Speaker 1: some of those little known name countries actually have to
• 22:26
  Speaker 1: confront demographic challenges of their own well, and that will
• 22:31
  Speaker 1: certainly occur. I mean, the poster child for the emerging story,
• 22:36
  Speaker 1: China has worse demographics than most of the developed world,
• 22:41
  Speaker 1: and they're going to face that they have been able
• 22:43
  Speaker 1: to grow at the pace they've grown primarily because they
• 22:47
  Speaker 1: had effective effectively, they had so many unemployed resources are
• 22:52
  Speaker 1: under utilized resources that they could grow very rapidly with
• 22:55
  Speaker 1: the existing population base. Once those are employed, their underlying
• 23:00
  Speaker 1: demographic situation population grows is really miserable. So I think
• 23:04
  Speaker 1: they're going to fall out of a leadership role in
• 23:06
  Speaker 1: the economic story. I don't think they're going to crash
• 23:09
  Speaker 1: and burn, but I don't think they're going to be
• 23:11
  Speaker 1: the leader. I think that's going to be taken up
• 23:13
  Speaker 1: by other countries within the emerging world that have better
• 23:18
  Speaker 1: underlying demographics that they can fall back to for sustainable growth.
• 23:22
  Speaker 1: But I do think that the developed world. Power in
• 23:27
  Speaker 1: the world goes where economics is and and ultimately all
• 23:31
  Speaker 1: forms of power, whether that be political or military or
• 23:34
  Speaker 1: anything else, follows where economics power goes, and and the
• 23:38
  Speaker 1: U s and the developed world is losing that slowly,
• 23:41
  Speaker 1: and it's going to be picked up more by comerging world.
• 23:44
  Speaker 1: Countries over the next fifty years, and I don't think
• 23:46
  Speaker 1: that's going to be reversed, and rather than fight it,
• 23:49
  Speaker 1: I think we need to embrace it and make sure
• 23:51
  Speaker 1: that we still have a voice at the table, both
• 23:55
  Speaker 1: politically as well as just economically. Um in that, in
• 23:59
  Speaker 1: that or in New World Order. Well, Jim, I don't
• 24:02
  Speaker 1: think we were planning to get into one of our
• 24:04
  Speaker 1: discussions of global demographics and economics on this episode, but
• 24:08
  Speaker 1: I'm glad we were able to have it. So thank
• 24:10
  Speaker 1: you so much for joining us today, do you you bet?
• 24:12
  Speaker 1: Thanks for having me appreciate it. Benchmark will be back
• 24:18
  Speaker 1: next week. Until then, you can find us on the
• 24:21
  Speaker 1: Bloomberg terminal, Bloomberg dot com, our Bloomberg app, and podcast
• 24:24
  Speaker 1: destinations such as Apple Podcast, Spotify, or wherever you listen.
• 24:29
  Speaker 1: Please also take the time to review the show on iTunes.
• 24:32
  Speaker 1: When people post reviews, it helps others discover the podcast.
• 24:36
  Speaker 1: You can also check us out on Twitter, follow me
• 24:39
  Speaker 1: at stott Landman Dan You're at Moss Underscore Echo, and
• 24:44
  Speaker 1: Jim's firm is at at l e U T h
• 24:47
  Speaker 1: O l D Group. Benchmark is produced by Topor Foreheads,
• 24:51
  Speaker 1: the head of Bloomberg podcasts is Francesca Levy. Thanks for listening,
• 24:55
  Speaker 1: See you next time. My Pat the my spo.