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Criticism From All Sides, As Fed Signals More Cuts · Bloomberg Intelligence

0:02
Speaker 1: Welcome to the Bloomberg Penel Podcast. I'm Paul swing you
0:05
Speaker 1: along with my co host Lisa Brahma Waits. Each day
0:07
Speaker 1: we bring you the most noteworthy and useful interviews for
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Speaker 1: you and your money. Whether at the grocery store or
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Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple
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Speaker 1: podcast or wherever you listen to podcasts, as well as
0:17
Speaker 1: at Bloomberg dot com. Carrika Donna, chief US economist for
0:25
Speaker 1: Bloomberg Economics, to stay with us. We are ten seconds
0:28
Speaker 1: away from when we expect to get j. Powell's speech,
0:32
Speaker 1: at least the release of the text that he is
0:34
Speaker 1: delivering to Jackson Hole uh and currently it is out.
0:39
Speaker 1: He is saying that the economy is in a favorable place,
0:41
Speaker 1: although it does face significant risks, so trying to thread
0:46
Speaker 1: that needle, highlighting the need for the Fed to be
0:49
Speaker 1: on high lord while also remaining confident in the US economy.
0:53
Speaker 1: He said, we are carefully watching developments as we assess
0:56
Speaker 1: their implications for the u S outlook in the path
0:58
Speaker 1: of monetary policy. Interestingly, he said, well, monetary policy is
1:02
Speaker 1: a powerful tool that works to support consumer spending, business investment,
1:05
Speaker 1: in public confidence. It cannot provide a settled rule book
1:10
Speaker 1: for international trade. Matt Bosler is over in Jackson Hole
1:14
Speaker 1: joining US now. Matt Bosler covers the economy and the
1:17
Speaker 1: Matt Bosler is over in Jackson Hole, joining US now.
1:21
Speaker 1: Matt Bosler covers the economy and the FED for US
1:24
Speaker 1: at Bloomberg News. So, Matt, what stood out to you
1:27
Speaker 1: most from the text of FED chair J Powell speech? Yes?
1:31
Speaker 1: So the really the main takeaway from j. Powell speech
1:34
Speaker 1: today and Jackson Hole, UM is he's talking about the
1:38
Speaker 1: outlook for policy over the next you know, a few
1:41
Speaker 1: weeks and months. And he says that the three weeks
1:44
Speaker 1: since our July MC meeting have been eventful, beginning with
1:48
Speaker 1: the announcement of new tariffs on imports from China. He
1:51
Speaker 1: talks about the global slowdown in some of the negative
1:54
Speaker 1: data that we've gotten out of Germany and China lately.
1:57
Speaker 1: H plus geopolitical events like the rising risk of a
2:00
Speaker 1: are Brexit and tensions in Hong Kong, the dissolution of
2:03
Speaker 1: the Italian government. So you put all these things together
2:06
Speaker 1: and I think it indicates that, um, you know, just
2:09
Speaker 1: since the July of form C meeting, UH, they have
2:11
Speaker 1: a lot of new things on their plate to consider,
2:14
Speaker 1: and probably all of those things, uh, you know, point
2:17
Speaker 1: toward further easing later this year. So, Matt, it's interesting
2:22
Speaker 1: the do you think the chairman pals he really has
2:26
Speaker 1: to throwd the needle here, doesn't he because he's got
2:28
Speaker 1: lots of cross currents ahead of them, as does the
2:30
Speaker 1: FED Reserve overall. Yeah, that's exactly right. So I mean,
2:33
Speaker 1: of course, the flip side of this story, which Powell
2:35
Speaker 1: also refers to in his speeches, that you know, the
2:38
Speaker 1: U S data have been pretty strong and we haven't
2:40
Speaker 1: really seen much deterioration in the US economic data yet
2:44
Speaker 1: outside of UM you know, a few key admittedly sectors
2:47
Speaker 1: like business investment and what's going on in manufacturing. But
2:51
Speaker 1: of course you have to balance that with UM, you know,
2:53
Speaker 1: the low unemployment rates, the strong labor market data, UM,
2:57
Speaker 1: and this conviction that inflation is still going to go
3:00
Speaker 1: back up to their two percent target and so UM. Certainly,
3:03
Speaker 1: all of the Fed speak and what we saw in
3:05
Speaker 1: the minutes on Wednesday indicated that this is still a
3:08
Speaker 1: very split committee on the need for easing at this point.
3:12
Speaker 1: And so J. Powell's job is really to try to
3:14
Speaker 1: you know, convey the message while keeping the committee together.
3:18
Speaker 1: So right now we are looking at bond yields heading
3:22
Speaker 1: lower does appear to be perceived as a dobish uh
3:26
Speaker 1: FED speech, And Dave Wilson Blobrick Socks editor here in
3:29
Speaker 1: our Bloomberg eleven three oh studios, let's just get a
3:32
Speaker 1: sense of the read through right now of market reaction,
3:35
Speaker 1: because this has been perceived again as J. Powell in
3:39
Speaker 1: some ways confirming the market view that even though things
3:43
Speaker 1: look pretty good, they are willing to act in face
3:46
Speaker 1: in the face of uncertainty, which if you think about it,
3:49
Speaker 1: considering the China, you know, put up those seventy five
3:52
Speaker 1: billion dollars of retaliatory tarroriffts, that's exactly what you would
3:56
Speaker 1: want to hear. I mean, they start kicking in next week.
4:00
Speaker 1: You know, we'll see more of them out of December.
4:03
Speaker 1: So that's you know, a more direct sort of concern.
4:06
Speaker 1: And and you know, the Fed has a lot on
4:08
Speaker 1: its plate, so the idea that you know, they're going
4:11
Speaker 1: to move further if they need to sustain you know,
4:14
Speaker 1: the economic expansion, I mean, that's that's just really what
4:18
Speaker 1: people would want to hear at this point. I mean
4:20
Speaker 1: I'm watching the auto stocks as an example, because they
4:22
Speaker 1: took a hit, uh, right after the China move, and
4:27
Speaker 1: you know, we're seeing those losses being trimmed. I mean,
4:30
Speaker 1: Ford in general motors down less than one percent at
4:32
Speaker 1: this point. So you know, I mean there's sort of
4:35
Speaker 1: a good uh, sort of the litmus test, you might say,
4:38
Speaker 1: if only because you know the automakers relatively sensitive to
4:41
Speaker 1: what's going on with interest rates, and that's where the
4:43
Speaker 1: FED pops in. So Carl, Carl, Rico, Donna Bloomer Economic
4:46
Speaker 1: still with us. Carl, what are your thoughts were your
4:47
Speaker 1: initial kind of read through here? Well, I think Matt
4:49
Speaker 1: Bosler hit the nail on the head in terms of
4:51
Speaker 1: pulling out the key operative line of that speech. The
4:55
Speaker 1: three weeks since the last FO m C meeting have
4:57
Speaker 1: been eventful, uh. And that is a chair pal saying
5:01
Speaker 1: basically what we had placed into the profile on July
5:06
Speaker 1: thirty one, that we can rip up that script. Uh.
5:08
Speaker 1: And we're now looking at a different course, which obviously
5:11
Speaker 1: is going to be a more devish course here. So
5:13
Speaker 1: the FED was looking at one or two cuts now
5:16
Speaker 1: I think this is a pal's way of signaling maybe
5:18
Speaker 1: a little bit more and just one final thought there.
5:21
Speaker 1: President Trump earlier this morning tweeted, now the Fed can
5:24
Speaker 1: show their stuff. Uh, this is not the type of
5:27
Speaker 1: speech that President Trump wanted, where he would presumably want
5:30
Speaker 1: a much more aggressive FED. So this is this is devish,
5:33
Speaker 1: but not nearly as devish is what the President wants.
5:35
Speaker 1: So I will certainly be keeping an eye on the
5:37
Speaker 1: foot on his Twitter feed and potential dissatisfaction or maybe
5:41
Speaker 1: if it's not coming from the Fed, then he's going
5:42
Speaker 1: to get it on the tariff front exactly. Carlock Down,
5:45
Speaker 1: Bloomberg Economics, thanks so much for joining us for your thoughts.
5:48
Speaker 1: Right now, we want to turn to Kathleen Hayes. Kathleen's
5:50
Speaker 1: a global policy and economics editor for Bloomberg News. Kathleen
5:54
Speaker 1: loved to get your initial thoughts here on the commentary
5:58
Speaker 1: from FED chairman Pale. They're still open to rate cuts. Uh,
6:03
Speaker 1: no clear sign that they're going to walk through all though.
6:06
Speaker 1: Jim Bullard prison St. Louis said said earlier today that
6:11
Speaker 1: he does see the need for more cuts, and I
6:13
Speaker 1: think that's a somewhat different tone than we heard from
6:15
Speaker 1: him just a couple of weeks ago. So clearly there
6:18
Speaker 1: are some. In fact, I think he specifically mentioned the
6:20
Speaker 1: yold curve. Uh. And of course in UH, that's that
6:23
Speaker 1: key part of j. Pale's speech where he talked about
6:27
Speaker 1: the three weeks. That's one of the things he mentioned,
6:29
Speaker 1: of course, is markets and market volatility and and and
6:32
Speaker 1: and everyone knows third to your bond fell below two
6:34
Speaker 1: percent for the first time ever. Right, it's back above. Nevertheless,
6:37
Speaker 1: I think it's also important that there's another line where
6:40
Speaker 1: he says, because he's talking about three phases of Monterrey policy.
6:45
Speaker 1: Phase one was several years of bringing inflation down. Phase
6:48
Speaker 1: two keeping rates very low, but then you had financial successes.
6:51
Speaker 1: Phase three, since the Great Recession, getting back on track,
6:55
Speaker 1: trying to keep it going. But then at some point
6:56
Speaker 1: in this final section he throws in, I'll pair of
7:00
Speaker 1: but you know, now we're trying to visit policy in
7:02
Speaker 1: the middle of the trade war. You know, this really
7:05
Speaker 1: muddies the water so much it makes it much more difficult.
7:07
Speaker 1: He talks about having to look down the road. Here
7:10
Speaker 1: we are now, but we have to look over the
7:12
Speaker 1: next year. Seems to me that if I'm gonna say, gosh,
7:16
Speaker 1: you asked Kathleen one one way or the other. Do
7:18
Speaker 1: you think he's four right cuts or not. I think
7:20
Speaker 1: he may be gently on the side of those, saying,
7:23
Speaker 1: you know, maybe one more isn't such a bad idea.
7:26
Speaker 1: You know what, man, I just wanna get a funal
7:28
Speaker 1: thought for you. We know you have to run. You've
7:30
Speaker 1: got a lot on your plate there. I'm curious about
7:34
Speaker 1: what your take is on how j Powell addressed trade.
7:38
Speaker 1: This has been a key issue. He acknowledged this has
7:41
Speaker 1: been a key driver in this slowdown, but also said
7:45
Speaker 1: that monetary policy basically implying it's an imperfect tool to
7:48
Speaker 1: address it. So what's your take on that? Kathleen nailed it.
7:52
Speaker 1: I mean, there's a big portion in Jay's speech where
7:54
Speaker 1: he talks about just the fact that, you know, the
7:57
Speaker 1: models that they've been using to make monetary policy for
7:59
Speaker 1: the last you know, thirty or forty years or so
8:01
Speaker 1: don't really have some variable for trade developments in them, right,
8:05
Speaker 1: So in that sense, this is just not something they're
8:07
Speaker 1: used to dealing with. Um. One interesting thing I also
8:10
Speaker 1: wanted to flag from the speech that kind of gets
8:12
Speaker 1: to this is Paul also talked about how, along with
8:16
Speaker 1: July's rate cut, the shifts in the anticipated path of policy. Um,
8:20
Speaker 1: you know, over the remainder of the year, have eased
8:22
Speaker 1: financial conditions, and he says that helps explain why the
8:25
Speaker 1: outlook for inflation and employment remains largely favorable. So he's
8:29
Speaker 1: kind of hinting that, you know, not only the July
8:31
Speaker 1: rate cut, but also what is price in the markets
8:34
Speaker 1: for beyond is a big reason why the outlook um
8:37
Speaker 1: is still favorable in their minds. And so I think
8:39
Speaker 1: that potentially constitutes another hint that, um, you know, if
8:43
Speaker 1: you thought that they had to follow through on the
8:45
Speaker 1: promise of a July rate cut, um, that kind of
8:48
Speaker 1: thinking may still be you know, top of mind for
8:51
Speaker 1: them going forward over the next couple of weeks and months.
8:55
Speaker 1: Matt Boso, thank you so much for joining us. Matt
8:57
Speaker 1: from Bloomberg News giving us his thoughts on Chairman House
9:00
Speaker 1: comments from this morning. Dave Wilson, looking at the you know,
9:04
Speaker 1: the markets here kind of they came back a little bit.
9:06
Speaker 1: We have the SMP down five, NaSTA Act down about
9:08
Speaker 1: twenty five doll down six, so coming back a little bit,
9:11
Speaker 1: so proceed perhaps a little bit dubbish coming out of
9:14
Speaker 1: the Fed, but still you've kind of got that ying
9:16
Speaker 1: and Yang of the Fed and monetary policy. But trade
9:19
Speaker 1: on the other hand, right, you know you still do
9:22
Speaker 1: no question and uh, you know, as much as bringing
9:27
Speaker 1: down interest rates, we'd probably counter that to some extent.
9:31
Speaker 1: I mean, we won't know how much and whether it's
9:33
Speaker 1: really going to be effective for some time. You know,
9:36
Speaker 1: especially as you know the Chinese tariffs ramp up. You
9:40
Speaker 1: know it's going to be even more that the Central
9:42
Speaker 1: Bank may or may not decide to offset in terms
9:46
Speaker 1: of where they go with monetary policy. So when you
9:49
Speaker 1: put it all together, it's not like, I mean, the
9:54
Speaker 1: playing field has really changed all that much from where
9:57
Speaker 1: we've been for the last few week. Eggs with you know,
10:01
Speaker 1: people anticipating that rates are going to come down multiple
10:04
Speaker 1: times and soon. I want to bring in Bob Eisenbie's
10:08
Speaker 1: he's vice chair and chief Monetary economistic Cumberland Advisors, and
10:12
Speaker 1: also he is the former director of research at the
10:14
Speaker 1: Atlanta Fed. We're talking about j. Powell's speech, So with
10:18
Speaker 1: us is Kathleen Hayes as well as Dave Wilson. Bob,
10:21
Speaker 1: I want to get your sense of this speech right
10:24
Speaker 1: now is being perceived by markets, is indicating a greater
10:27
Speaker 1: willingness on the part of the FED to cut interest
10:29
Speaker 1: rates some looking right now about two point four cuts
10:33
Speaker 1: now being priced into the market by year end. Do
10:36
Speaker 1: you think this is a correct reading of J. Powell's words, Well,
10:40
Speaker 1: I hope it's not a correct reading, because I think
10:44
Speaker 1: that's not really the appropriate path. And one of the
10:47
Speaker 1: things I found sort of interesting is when you looked
10:50
Speaker 1: at the minutes of the last MC meeting, in fact,
10:54
Speaker 1: the staff had marked up growth projections in the near
10:57
Speaker 1: term and also barked up the inflation rejections, and you
11:00
Speaker 1: put that together with the kind of rhetoric we heard
11:04
Speaker 1: from the interviews with several of the Reserve Bank presidents
11:07
Speaker 1: who were sort of saying, now is not h German
11:11
Speaker 1: Pollock has a real difficult path ahead dealing with this
11:16
Speaker 1: mix of views on his committee. And uh, I'm I'm
11:20
Speaker 1: concerned that. Um, when you try to deal with uncertainty
11:25
Speaker 1: using policy, I don't know if any models that say
11:29
Speaker 1: that policy changes can deal with uncertainty. It can deal
11:32
Speaker 1: with risk, but it can't deal with uncertainty because uncertainty
11:36
Speaker 1: means we don't know what's going to happen. So it's
11:40
Speaker 1: hard to take out an insurance policy when you don't
11:43
Speaker 1: know what's going to happen. So, Kathleen Hayes want to
11:45
Speaker 1: bring you back. I mean, are you surprised that to
11:47
Speaker 1: the extent that the chairman Pal seems to be recognizing,
11:52
Speaker 1: you know, kind of what is a persistent, if not growing,
11:55
Speaker 1: global trade concerns. I'm not at least bit surprised. I
11:58
Speaker 1: don't see how he could avoid it. And I would
12:00
Speaker 1: like to throw into the mix something very interesting that
12:02
Speaker 1: Carmen Reinhardt, Harvard University professor UM said UM last night
12:07
Speaker 1: on our USA Asia shows when I interviewed her that
12:09
Speaker 1: she thinks, I said, what about this concern about recession
12:12
Speaker 1: and should have said be preemptive. She said, she thinks
12:14
Speaker 1: people are downplaying, um, the potential of shocks, and she
12:17
Speaker 1: specifically mentioned what's going on in Hong Kong. I said,
12:20
Speaker 1: but how would that cause a shock, you know, with
12:23
Speaker 1: Hong Kong losing brown as a financial center, with the
12:25
Speaker 1: Chinese government like Russian aggressively And she said, well, whatever
12:29
Speaker 1: that happened, She said, you know, shocks don't always happen
12:31
Speaker 1: with a bank. They can happen with a whimper. But
12:32
Speaker 1: there's also bregsit we have seen all the global slowdown.
12:35
Speaker 1: I totally get if I had, if I was on
12:37
Speaker 1: the committee. I don't know how to vote because I
12:39
Speaker 1: know exactly what what Bob saying, I know what Erica
12:41
Speaker 1: Rosenbrand say esther George. The whole question is, you know,
12:46
Speaker 1: can you wait? And I think actually one of the
12:48
Speaker 1: reasons that people like Erik rosen Gren want to wait
12:50
Speaker 1: is because the funds, right, it's barely over two percent
12:52
Speaker 1: if they do kiwie, so you've got a tenure. Note
12:55
Speaker 1: what one point six percent is. Eric said in that
12:57
Speaker 1: interview Monday, you know that you don't have too much
12:59
Speaker 1: to do buying bonds to push down long term race
13:01
Speaker 1: throaty so low right, and you can't race But he
13:04
Speaker 1: didn't say that exactly, but that's what I think is
13:06
Speaker 1: part of the reason for people to say, let's don't
13:08
Speaker 1: go yet. Well, Bob, then I want to just pivot
13:11
Speaker 1: back to you and your points, basically saying that the
13:14
Speaker 1: FED is not it would not be appropriate for them
13:17
Speaker 1: to cut raids given the fact that inflation is starting
13:18
Speaker 1: to pick up, in growth is strong. I'm just wondering
13:21
Speaker 1: what is the risk of overheating here? Because a lot
13:24
Speaker 1: of people say that it is still pretty small, while
13:28
Speaker 1: the chances of a FED error that causes the market
13:32
Speaker 1: tank and thus send it it's closer to recession is
13:35
Speaker 1: much greater. Where do you weigh in on that, Well,
13:38
Speaker 1: two things. First of all, agree with the points that
13:40
Speaker 1: Kathleen has made, and most expansions and become because of
13:46
Speaker 1: some sort of a shock, uh. And I don't see
13:49
Speaker 1: a FED holding off as being sort of a contributory
13:53
Speaker 1: shock that might essentially be one of those events that
13:57
Speaker 1: would lead to a recession. So I don't see policy
14:01
Speaker 1: and a policy mistake playing into that role. At this point.
14:05
Speaker 1: We've got trade, We've got all these other factors that
14:08
Speaker 1: are going on, which I think, frankly are a bit
14:11
Speaker 1: overblown when it comes to the importance of trade to
14:15
Speaker 1: our economy relative to what's going on on the domestic side.
14:19
Speaker 1: So uh, you know, I think that if they were
14:23
Speaker 1: to make a cut, all that's gonna do is sort
14:25
Speaker 1: of call for more cuts down the road, and it's
14:29
Speaker 1: going to put them on a path where they're going
14:30
Speaker 1: to use up all their ammunition. And I think that's
14:33
Speaker 1: sort of the view that Eric rosen Grin and some
14:36
Speaker 1: of the other people around They don't want to sort
14:38
Speaker 1: of preemptively lose control of their tools. So Dave Wilson
14:43
Speaker 1: just looking at the markets here, the SMP kind of
14:45
Speaker 1: you know, software again down about ten, the down down fifty.
14:48
Speaker 1: It looks like the markets just you know a little
14:50
Speaker 1: bit again unsure about the the ultimate path of the
14:54
Speaker 1: Federal Reserve here not you know, taking you know, a
14:57
Speaker 1: particularly hawkish Ordeavors view. It has that look to it.
15:01
Speaker 1: And you know, at the same time, and you have
15:03
Speaker 1: so many issues in the back robbing, cluding the ones
15:05
Speaker 1: that were alluded to. Uh so you put it all together,
15:09
Speaker 1: and you know, we're kind of looking ahead and trying
15:13
Speaker 1: to kind of get a feel for, you know, how
15:15
Speaker 1: things shake out in terms of monetary policy, and you know,
15:18
Speaker 1: it is not quite as clear cut as a lot
15:22
Speaker 1: of people would like it to be at this point,
15:24
Speaker 1: given the focus that there has been on bringing down
15:27
Speaker 1: interest rates. Kathleen, Kathleen and his can you just give
15:30
Speaker 1: us a sense of what the mood is like in
15:33
Speaker 1: Jackson Hole. Well, it's hard to sum it all up,
15:38
Speaker 1: but I think everybody is really concerned about where the
15:44
Speaker 1: world is and where it's going. And one of the
15:46
Speaker 1: things I keep asking people about uh, in interviews or
15:50
Speaker 1: just talking is what's going on? None of the bondyles
15:53
Speaker 1: we get more every day, right, UM, you know this
15:56
Speaker 1: big dropping rate very interesting. This is maybe a little
15:59
Speaker 1: bit nerdy, but maybe Bob Bison bis will appreciate this. UM.
16:02
Speaker 1: John Liskey, who's the former number two at the I
16:05
Speaker 1: m F and you know, was that JP Morgan as
16:07
Speaker 1: our GP economist for years, etcetera. UM said. Stanford Institute
16:11
Speaker 1: for Economic Research came out with a speech this week.
16:13
Speaker 1: I was seeking a research piece arguing that because of technology,
16:18
Speaker 1: that inflation is even not higher than we've think, but
16:21
Speaker 1: much lower than we think. And if that's the case,
16:23
Speaker 1: real interest rates are higher, and so in that context,
16:26
Speaker 1: maybe lower yields makes sense. Jacob Frankel, jepen Borg and
16:30
Speaker 1: Chase International, former head of the Banking Israel, etcetera. UM
16:34
Speaker 1: is concerned. He thinks negative yield are a bad sign.
16:36
Speaker 1: He thinks they kind of blunt the transmission of easy
16:39
Speaker 1: policies through the financial system because it's hard for banks
16:41
Speaker 1: to pass it on. So there's definitely concern here and people,
16:45
Speaker 1: I think a lot of people feel to like, you
16:47
Speaker 1: know what, the FED isn't doesn't have any better idea
16:50
Speaker 1: than anybody else of where we are and where to
16:53
Speaker 1: go next. They're just going to do the best they
16:54
Speaker 1: can and hope it works. Kathleen Hayes, thank you so
16:58
Speaker 1: much for joining us. Kathleen's Glow Policy and economics editor
17:02
Speaker 1: for Bloomberg News and Bloomberg Television. Bob, just want to
17:05
Speaker 1: get one more thought from you. I mean, it's clear
17:07
Speaker 1: that Chairman Pal and the Fed are are concerned about
17:10
Speaker 1: global trade, but boy, we've got some weak numbers out
17:13
Speaker 1: of Germany earlier this week. Um, that's got to be
17:16
Speaker 1: an issue. Well, it is. It's a big issue for
17:20
Speaker 1: Germany and for Europe as a whole, because they're going
17:24
Speaker 1: to be really suffering as we see the Chinese reimposing
17:28
Speaker 1: some of the tariffs, particularly on autos. When you consider
17:31
Speaker 1: how much of the German autos are made here in
17:33
Speaker 1: the United States, which would ultimately be exported to China.
17:37
Speaker 1: So you know they're deeply entwined across the whole global
17:42
Speaker 1: environment and that it's not without consequences when you have
17:48
Speaker 1: these kinds of trade wars going on and it turns
17:51
Speaker 1: out there not so easy to win. Bobyes, and Bye's
17:53
Speaker 1: Vice chair in chief Monetary Economistic Cumberland Advisers, as well
17:57
Speaker 1: as the former director of research at the Atlanta FAD.
17:59
Speaker 1: Thank you so much for being with us. Dave Wilson,
18:01
Speaker 1: Libric Stocks Editor, thank you so much also for joining
18:04
Speaker 1: us and giving us the view from the market's desk,
18:06
Speaker 1: and we will be getting more from you. Well. Lisa
18:29
Speaker 1: and I've been waiting for President Trump to tweet his
18:32
Speaker 1: thoughts of FED Chairman Pal's comments this morning, and here
18:36
Speaker 1: we have them. Uh from Donald President Donald Trump's tweeting
18:40
Speaker 1: quote as usual, the FED did nothing all caps. It
18:43
Speaker 1: is incredible that they can speak without knowing or asking
18:46
Speaker 1: what I am doing, which will be announced shortly. We
18:48
Speaker 1: have a very strong dollar and a very week FED.
18:51
Speaker 1: I will work brilliantly with both, and the US will
18:53
Speaker 1: do great. Second tweet, My only question is who is
18:57
Speaker 1: our bigger enemy? J Pal or Rman? She so certainly
19:02
Speaker 1: provocative tweets President Trump expressing his um I think not
19:10
Speaker 1: lack of support is probably the safe way to say
19:12
Speaker 1: it for kind of what he's seeing out of the
19:13
Speaker 1: Federal Reserve. But Paul, you raised a really interesting question,
19:16
Speaker 1: which is, yes, there's a J. Powell aspect, but Chairman
19:19
Speaker 1: Gee Juan Ping of China. How does he view this saying, wait,
19:23
Speaker 1: hold on a second, I'm your enemy. So let's bring
19:26
Speaker 1: in Christopher Balding. He's associate professor at Fulbright University of Vietnam,
19:29
Speaker 1: a Bloomberg opinion columnist, spent a decade in Beijing. Uh,
19:34
Speaker 1: and I'm just trying to figure out. I think that
19:37
Speaker 1: Paul raises a really good question here. Is this going
19:39
Speaker 1: to be surprising to Jijun Ping that he's being publicly
19:43
Speaker 1: sort of flogged as an enemy. I don't think it's
19:46
Speaker 1: going to come as that big of a surprise. Despite
19:49
Speaker 1: all of the polite words that Trump uses in public
19:52
Speaker 1: and on Twitter about Chairman She, Chairman She understands very
19:56
Speaker 1: clearly how he's being treated in the in the conflict
19:59
Speaker 1: between them. So I don't think he gives a lot
20:01
Speaker 1: of weight to those polite words, and I don't think
20:03
Speaker 1: it's going to surprise him. Uh. This type of criticism interesting.
20:07
Speaker 1: One of j Pal thinks being put in the same
20:09
Speaker 1: company as Chairman She. But we'll get to that later. Um.
20:13
Speaker 1: So Christopher, let's talk about the real hard news today
20:16
Speaker 1: on the trade front, which is China announcing retaliatory tariffs
20:21
Speaker 1: on another seventy five billion dollars of US goods. What
20:24
Speaker 1: is your view of kind of this move. I think
20:27
Speaker 1: it's largely a semi irrelevant move in the sense that
20:31
Speaker 1: China this year has actually actively moved to constrict imports
20:37
Speaker 1: from a wide variety of countries, not just the United States.
20:40
Speaker 1: We see this, We see this especially with with Asian
20:43
Speaker 1: trading partners in Australia, and this is large This largely
20:47
Speaker 1: comes from various types of non tariff barriers or just
20:49
Speaker 1: orders to buy domestic Chinese production. Um, So I don't
20:53
Speaker 1: think it's going to have nearly that significant and impact.
20:58
Speaker 1: I'm trying to figure out the actual supply chain rejiggering
21:02
Speaker 1: looks like. And I think it's really telling that you
21:04
Speaker 1: went from Beijing to Vietnam to Vietnam and a lot
21:07
Speaker 1: of people have been looking to Vietnam is sort of
21:09
Speaker 1: the logical successor to China when it comes to supply
21:13
Speaker 1: chains and producing goods for foreign factories. I'm just wondering
21:18
Speaker 1: what are some of the obstacles that you're seeing on
21:20
Speaker 1: the ground there for Vietnam becoming sort of, uh, the
21:24
Speaker 1: next place to go. I mean, it has been for
21:26
Speaker 1: a while and it's it's kind of running out of people, right. Well,
21:30
Speaker 1: it's not that they're running out of people, but it's
21:32
Speaker 1: that in Vietnam only about thirty percent of the country
21:35
Speaker 1: is in urban areas. It's still a very rural area,
21:39
Speaker 1: very rural country. Um. And then the other factor that
21:42
Speaker 1: you hear a lot of in Vietnam is that while
21:45
Speaker 1: China may build infrastructure and expect it to be filled
21:48
Speaker 1: up to capacity in twenty years, in Vietnam they operated
21:52
Speaker 1: much more just in time infrastructure type of models. So
21:54
Speaker 1: a lot of the infrastructure at Vietnam is largely uh,
21:58
Speaker 1: you know, maybe near capacity or something like that. And
22:02
Speaker 1: so you know, whether it's electricity or roads or ports, um,
22:06
Speaker 1: a lot of those just don't have a lot of
22:08
Speaker 1: you know, significant additional capacity. And so that's something that
22:12
Speaker 1: they're running up against. And I can tell you firsthand
22:15
Speaker 1: that they are absolutely working to ease especially electricity UH
22:20
Speaker 1: capacities and road capacities. But those types of problems don't
22:25
Speaker 1: get solved overnight. So Chris Beck in May you said
22:28
Speaker 1: that Vietnam now is like China twenty years ago. Do
22:32
Speaker 1: you still think that's the case. I absolutely think that's
22:35
Speaker 1: the case. And you know, the scale and scope and
22:38
Speaker 1: and speed of construction that you see to improve those
22:42
Speaker 1: those levels of infrastructure UM are are are really amazing
22:46
Speaker 1: in in Vietnam. UM. But again, you know, they they
22:50
Speaker 1: it's it's such that you just don't solve those problems overnight,
22:53
Speaker 1: and there's a very different um political decision making process
22:57
Speaker 1: in Vietnam. UM. They don't have just the the the
23:00
Speaker 1: scope of industry that they can just pull off the
23:03
Speaker 1: shelf for lack of a better term, and start building
23:05
Speaker 1: that infrastructure the way that it's there's such that history
23:08
Speaker 1: in China. Chris, I'm wondering what we can glean about
23:11
Speaker 1: China's negotiating tactics from the terraffs the retaliatory tariffs that
23:16
Speaker 1: they said they were going to impose this morning. You
23:17
Speaker 1: said they weren't that big of a surprise. Certainly not
23:20
Speaker 1: I mean, you're not seeing a massive sell off in response,
23:23
Speaker 1: but but certainly some weakness. I'm just wondering, you know,
23:26
Speaker 1: does this sort of indicate that j and Ping is
23:29
Speaker 1: really hunkering down for the long haul, perhaps more than
23:32
Speaker 1: people had previously expected, or does it indicate you know,
23:36
Speaker 1: just uh that you know, he wants to save face politically,
23:41
Speaker 1: I think, you know, I think President Trump had it
23:43
Speaker 1: right during one of his tweets where he said that
23:45
Speaker 1: you know, UM, he's expecting this to go through UM.
23:49
Speaker 1: And I think that is more and more that they're
23:52
Speaker 1: playing a game of chicken, and both sides have taken
23:54
Speaker 1: you know, the U s side is effectively saying, you know,
23:57
Speaker 1: we're going to wait out and expect material concessions on
24:00
Speaker 1: economic policy, and China has said, you know, we're not
24:04
Speaker 1: changing anything about fundamentally about our economic policy, and we're
24:07
Speaker 1: gonna wait you out and UH and be all in
24:10
Speaker 1: on Biden. So Chris, I guess the question for you
24:14
Speaker 1: know a lot of folks here is give us a
24:17
Speaker 1: sense of kind of how you think the position is,
24:19
Speaker 1: the strength, the relative strength within China four chairman she
24:23
Speaker 1: can he play the long game? Can he waited out?
24:25
Speaker 1: We know he's I guess a leader for life or
24:28
Speaker 1: something along those lines, But can he in fact played
24:31
Speaker 1: that long game? I think he can because you know,
24:34
Speaker 1: you're seeing you're seeing an increase of authoritarianism, You're seeing
24:39
Speaker 1: increased UH nationalism. UM, whether it's how the mainland appears
24:43
Speaker 1: to be responding to the issues in Hong Kong. UM.
24:47
Speaker 1: You've heard talk about some of the potential provocations UM
24:51
Speaker 1: in the South China Sea or in Taiwan. UM. This shouldn't, however,
24:55
Speaker 1: be taken to imply that there's a significant economic growth.
24:59
Speaker 1: Just about the only thing that seems to be growing
25:01
Speaker 1: in China is steel and real estate. Uh can. The
25:04
Speaker 1: consumer sector is very weak. Car sales, telephone sales are
25:08
Speaker 1: are dropping. Um. So in the economic realm, there's a
25:12
Speaker 1: lot of weakness, but politically he's still he still seems
25:15
Speaker 1: to be relatively strong. Christopher Balding, thank you so much
25:19
Speaker 1: for being with us. Christopher Balding as Associate professor at
25:21
Speaker 1: Fulbright University of Vietnam. He is also a Bloomberg Opinion calumnist.
25:26
Speaker 1: He is joining us from Washington, d C. Thanks for
25:30
Speaker 1: listening to the Bloomberg P and L podcast. You can
25:33
Speaker 1: subscribe and listen to interviews at Apple Podcasts or whatever
25:35
Speaker 1: podcast platform you prefer. I'm Paul Sweeney. I'm on Twitter
25:38
Speaker 1: at pt Sweeney. I'm Lisa A. Bram Woyds. I'm on
25:41
Speaker 1: Twitter at Lisa Bramwoits one before the podcast, you can
25:44
Speaker 1: always catch us worldwide. I'm Bloomberg Radio