THE BETTER.
>> JOINING ME RIGHT NOW FOX
BUSINESS EXCLUSIVE IS THE
FEDERAL RESERVE BANK OF DALLAS
PRESIDENT CEO FORMER GOLDMAN
SACHS IS VERY CHAIRMAN ROBERT
KAPLAN THANKS FOR BEING HERE.
>> GOOD TO TALK TO YOU MARIA.
>> I KNOW YOU WERE WITH JAY
POWELL ON WEDNESDAY IN DALLAS
WITH YOU, AND HE IS TALKING
ABOUT DEBT AND
UNSUSTAINABILITY U.S. FISCAL
PATH THIS IS HOW WORRIED ARE
YOU ABOUT DEBT?
>> WELL MY CONCERN AT THE
GOVERNMENT LEVEL IS INCREASING
DEBT TO GDP TAIL WIND RIGHT
NOW WE'VE GOT A BIG SPENDING
AGREEMENT THAT WAS MADE LAST
YEAR, WE HAVE A TAX REFORM TAX
LEGISLATION, ALL THAT
PROVIDING STIMULUS.
THE PROBLEM IS IN THE MEDIAN
LONGER TERM THAT TAILWIND CAN
TURN INTO A HEADWIND BECAUSE
WE ARE LIKELY GOING TO HAVE TO
MODERATE OUR DEBT GROWTH NOT
NECESSARILY A PROBLEM THIS
YEAR OR NEXT YEAR, BUT IN THE
NEXT SEVERAL YEARS, IF WE NEED
AS WE NEED TO MODERATE DEBT
GROWTH WE THINK WE PROBABLY
WILL COULD TURN INTO A
HEADWIND INTO FUTURE NOT
SOMETHING WE WANT TO LEAVE TO
OUR CHILDREN AND
GRANDCHILDREN.
>> ESPECIALLY AS WE WATCH
INTEREST RATES MOVE HIGHER,
COSTING US MORE TO HOLD THAT
DEBT, GOING TO BE A BILLION
RADARS A DAY ON INTEREST
HOLDING THAT DEBT SEEMS DEBT
DISRUPTION COULD IT CAUSE IS A
FUNCTION OF CONFIDENCE,
MARKETS INVESTORS HAVE
CONFIDENCE THAT WE WILL BE
ABLE TO HANDLE IT, IT WILL BE
OKAY BUT IF THEY DON'T AND FOR
SOME REASON THERE IS A TRIGGER
THAT STARTS GETTING MARKETS
WORRIED ABOUT DEBTED, THAT
COULD BE A DISRUPTION CAUSE A
DISRUPTION IN MARKETS
BASICALLY CYCLES DOWN A MUCH
BIGGER PROBLEM.
>> THE WORLD -- THE WORLD
RESERVE CURRENCY IS THE DOLLAR
IN TIMES OF STRESS, AND THIS
IS TRUE TODAY, PEOPLE IN TIMES
OF STRESS LOOK FOR SAFE ASSETS
LOOK AT 10-YEAR TREASURY LOOK
AT U.S. DOLLAR, I THINK THAT
IS GOING TO STILL BE THE CASE
FOR SOME EXTENDED PERIOD OF
TIME NOT SOMETHING TO RELY ON
COMPLETELY IF THE WORLD --
WORLD DOESN'T NEED TO STOP
BUYING U.S. DEBT NEEDS TO
LOWER ALLOCATION A BIT WE ARE
PAYING MORE FOR ZHEBT BE
MODERATING OUR DEBT GROWTH WE
ARE LOOKING AT MARKET DOWN 200
POINTS ON DOW JONES INDUSTRIAL
AVERAGE, ROBERT I WANT TOP ASK
ABOUT GROWTH BECAUSE YOU
REALLY WERE THE FIRST PERSON
IN MY VIEW, TO RAISE YOUR HAND
ABOUT A SLOWDOWN ON THE
HORIZON, YOU JOINED ME BACK IN
APRIL OF THIS YEAR.
HERE IS WHAT YOU SAID ABOUT
GROWTH IN THE COMING YEARS
LISTEN TO THIS.
>> IN THE NEAR-TERM, AS DALLAS
FED ESTIMATING U.S. GROWTH
2 1/22 3/4% 2018,
UNFORTUNATELY WE THINK GROWTH
WILL MODERATE NEXT YEAR, AND
WE THINK BY 2020 WE WILL BE
DOWN TO 1 3/4 TO 2%.
>> BY 2020.
>> 1 AND 3/QUARTERS SOUNDS SO
DIFFERENT THAN 4.2% GROWTH WE
SAW SECOND QUARTER OF THIS
YEAR DO YOU STAND BY THAT
ROBERT?
WILL YOU WALK US THROUGH IF SO
HOW WE GET THERE, WHAT IS THE
CATALYST?
>> YEAH, SO, BY THE WAY, THAT
WAS APRIL, AND AS I SAID HERE
TODAY I THINK GROWTH IN UNITED
STATES THIS YEAR IS GOING TO
BE CLOSER TO 3%.
SO I WAS ON THE LOW SIDE.
FOR 2018.
>> OKAY.
>> THINK HIGHER THAN WHAT I
SAID IN APRIL, THE ISSUE IS
WHICH WAS WHAT I SAID IN APRIL
STILL SAY TODAY WHAT I AM
CONSCIOUS OF IS PART OF THE
BUMP THIS YEAR WE THINK IS DUE
TO THIS FISCAL STIMULUS, THE
GOVERNMENT SPENDING.
THAT WE TALKED ABOUT.
NOT THE CORPORATE TAX REFORM
SO MUCH, AS THE INDIVIDUAL TAX
CUT FINANCED BY INCREASING
DEBT TO GDP GOING TO WANE INTO
'19 AND ARE 20, UNDER THAT
SLOWING WORKFORCE GROWTH
BECAUSE OF DEMOGRAPHICS AGING
DEBUTED NEWS PULLING MORE INTO
THE WORKFORCE HAVING A STRONG
ECONOMY I AM HOPEFUL THAT WILL
CONTINUE BUT THERE ARE LIMITS
TO THAT SO BIG I'M PONDRABLE
IS PRODUCTIVITY GROWTH IF WE
CAN GET A SURPRISE A BUMP UP
IN PRODUCTIVITY ARE GETTING WE
CAN GROW FASTER THAN WHAT I
SAID IN TALKING TO YOU BEFORE,
THE PROBLEM IS I THINK IT IS
DIFFICULT TO RELY ON THAT, I
THINK PRODUCTIVITY IS
IMPROVING FOR 70% OF THE
WORKFORCE AND CERTAINLY FOR
COMPANIES.
THE IN ISSUE THIS COUNTRY I
BELIEVE YOU HEARD ME SAY
BEFORE IF YOU HAVE A HIGH
SCHOOL EDUCATION OR LESS, YOU
ARE PROBABLY NOT SEEING
BENEFITS IN YOUR JOBS PROBABLY
GETTING RESTRUCTURED OR
ELIMINATED THE ISSUE BACK TO
WHERE WE STARTED UNLESS A
PRODUCTIVITY SURPRISE I AM
HOPING FOR THIS IS ONE
FORECAST I WOULD LIKE TO BE
WRONG ABOUT, UNLESS WE GET A
PRODUCTIVITY SURPRISE, I THINK
GROWTH NEXT YEAR AND IN 2020
WILL BE SOMEWHAT HE SLOWER MAN
WHAT WE ARE SEEING NOW.
>> SO IS THAT GOING TO HIT
EARNINGS, IS THAT GOING TO HIT
JUST GDP?
WHAT -- WHAT GETS IMPACTED BY
ONE AND THREE-QUARTERS% GDP IN
2020 OR END OF ARE '19.
>> BRING THIS TO WHAT I AM
SEALING NOW GETS MY ATTENTION
GLOBAL GROWTH DECELERATING I
TALKED TO YOU IN APRIL GLOBAL
GROWTH WAS SURPRISING TO THE
UPSIDE I THINK GOING INTO '19
PROBABLY GOING TO SUPPLY OF A
LITTLE BIT ON DOWNSIDE THE
RISKS GLOBALLY TO DOWNSIDE
BICH OF REASONS WHAT IS GOING
ON IN ITALY WHAT IS GOING ON
IN EUROPE, EMERGING MARKETS
STRESSES, ET CETERA.
THE OTHER THING I AM NOTICING
AND I AM A BUSINESSPERSON I
COME FROM THE BUSINESS WORLD I
LOOK AT HE CORPORATE EARNINGS
TALK TO 30 CEOS A MONTH WHAT I
AM SEEING IS PROFIT GROWTH
ESTIMATES OF PROFIT GROWTH ARE
SLOWING.
THAT IS TO BE EXPECTED WE HAD
A BOOST FROM TAX RELIEF LAST
YEAR, BUT EVEN WITH THAT I AM
SEEING INPUT COSTS GOING UP
TARIFFS UNCERTAINTY ABOUT
TARIFFS HAVING AN EFFECT SO
SOME COMPANIES CAN PASS ON
PRICE INCREASES SOME CAN'T.
IN A SLOWER A LITTLE BIT
SLOWER ECONOMY YOU MAY SEE
PROFIT MARGINS GET SQUEEZED I
THINK THAT IS WHAT YOU ARE