The Fed is concerned about deflation with made clear. Will be removing accommodation to try to get control.
But I know they'll try to achieve a soft landing and some skill and some luck. We'll have a very big year for the
U.S. economy in terms of the job market this time of year. That of course is Treasury Secretary Janet Yellen talking to us
at the very end of the week after those IMF and World Bank meetings in Washington to go through what the secretary had to
say to us. We welcome now Steve Rattner who's chairman and CEO of Willow Advisors which invest of personal and philanthropic
funds of Michael Bloomberg the founder and majority owner of our parent company. So thank you so much for being back on Wall
Street week. Let's start with what we just heard from Janet Yellen. With some luck and some skill we can get to what they
call a soft landing. It's that thing has replaced Goldilocks I guess. And what we say every single day here you square
something up for me. How strong is the consumer. How strong is the household balance sheet. Is that enough to get us through
the tightening. We're looking at the consumer and the household balance sheets are so exceptionally strong. There's still over
two trillion dollars I believe at last count so-called excess savings above historic trends in the hands of households roughly
half for stimulus and other kinds of government assistance and roughly half from money they couldn't spend during a pandemic.
And that will that will certainly forestall a recession for good. While I'm not at all in the camp of those who think that a
recession is likely this year or probably even the second half a first half rather of next year.
But at some point it becomes anybody's guess whether we'll get through this without a recession. Well anybody's guess. But at
square one thing for us you could Steve. We have a lot of cars. We surveyed 72 economists here at Bloomberg that say after two
years out or so it looks like there really is a significant not not certain but it's giving a chance. We also had Bank of
America survey fund managers who say that's really a big concern of theirs.
Why are they worried about it. Because this really has Larry Summers just pointed out
repeatedly on your show and elsewhere. History is not on the side of a soft landing. There's really no precedent for bringing
an economy this overheated with inflation and whether it's transitory permanent or whatever running at this rate down to
anything that looks like 2 percent without there being a recession it will require the skill of of the most experienced
pilot in the world to achieve that kind of a soft that kind of a soft landing. You have to really cool off demand. You have to
unfortunately raise the unemployment rate gets some slack into the labor market. And that's a level of precision that economics
is sort of a science but it's not that kind of a science. So obviously the Fed has in its mandate price stability. And so
it's sort of its primary responsibility of addressing the inflation that people are concerned about. At the same time it's
not necessary all alone. There are other things that we've done. One thing other things I asked Janet Yellen the treasury
secretary about was why there weren't other things such as relieving some of the tariffs that so-called Trump tariffs. This
is what she said about that. I think gas prices peaked and is now come down some from their
peak. We're working very diligently on supply chain issues to get our ports working better. We're re-examining carefully or
trade strategy with respect to China and I think it's worth considering. We certainly want to do what we
can to address inflation. So worth considering is always what she said Steve. I'm sure you
saw that is to report that came out this week that said if you took away those so-called Trump tariffs it would reduce
inflation which is one point three percent and that would not necessarily lead to a recession. So why aren't we doing it.
Because their politics involved in all these kinds of things I shouldn't even demean media by saying politics. There are
multiple considerations involved in all these things. We have a complicated bill. I don't I'm not here to say they shouldn't
eliminate the terrorists. I think probably they should. But we do have a complicated relationship with China. There are many
issues on the table. Maybe they weren't put in place in the most thoughtful way but we do have a trade issue with China. So you
could make an argument. But look the administration is also doing things that actually increase the inflation problem. I
think Larry has also pointed out on the show but certainly other people have pointed out that extending the moratorium on student
debt repayments however meritorious and humane that may be another read for other reasons does simply increase demand and
therefore increases inflation as well. So there are always multiple multiple considerations that all these decisions. But
look fundamentally everything that Secretary Yellen said is very much at the margin. The core of the problem is that we have an
overheated economy. The Fed went way too far. The fiscal policy went way too far. We're talking about trillions of dollars of
excess fiscal policy trillions of dollars of excess monetary stimulus
squeezing a few terrorists here. There is not going to make up for the mistakes that have been made so far.
Stephen one of the things that Secretary Yellen has talked about is making some changes in the entire international system by
which we control the global economy so-called Bretton Woods that both the agreements and the institutions. I asked her whether
she really want to make some fundamental changes or whether as more tweaking around the edges. This is part of what she said.
The world has changed in various significant ways and I think that does require a rethink of the organization and some of the
specific mandates that we give the IMF the World Bank and the WTO.
So Steve how fundamentally should we be looking at these institutions. It is a very different world not least because we
have China now close second inclusive and create increasing and perhaps taking over United States in terms of the down position
of the world. And it has a very different way of regulate its economy. Do we need to take a fresh look at things like the IMF.
Sure it would be great. We were talking about what almost seventy five IBEX almost exactly seventy five years I guess. So
this friend was since all this was put in place. And so for example the IMF was created in part to help stabilize exchange
rates and what everybody thought was going to be a fixed exchange rate world. Well in August of 1971 all that changed and
we're actually seeing a completely different exchange rate environment. And so there's absolutely no question that we take
another look whether it's a deep restructuring or a sudden change not more modest changes in both those organizations. We
would be a good thing. I'm just not sure where you rank that in the list of priorities. Two things we have to deal with and the
likelihood of getting international cooperation especially from the Chinese some kind of dramatic rethinking of those two
organizations. But she's obviously you can argue with her logic in her points on that. You know I want to pick about the
likelihood of getting it done that you just mentioned because it's also a different world than it was afterward to at least
what I read about the ISIS was really in a very dominant position globally and could really not perhaps have its way but
really had a large influence. It would be a very different matter today in part because of Chinese you suggest. But in
general it's a more evenly distributed world. Oh you're completely right about that. I should have said that myself but
if you go back to Bretton Woods essentially Britain was kind of. Well we're not exactly China but Britain was trying to maintain
its preeminence in the world financial order and have if not a seat at the head of the table at least right next to the head of
the table. But it had no ability to actually enforce that or implement
that. And so amidst tortuous negotiations led by Harry DAX. Right.
We eventually basically said it's going to be our way or the highway and we got our way. You're absolutely right. We can't do
that with respect to China or a number of other players in this world. And so it would have to be a far more consensual and
therefore more difficult and therefore more improbable negotiation. Also Bretton Woods was essentially it was like the
old phrase don't let a crisis go to waste. We had to do something at the end of World War Two in terms of how the
international monetary and economic order would work. There's not quite that same pressure today. So this I think most people
look at as a nice to have not a must have and that also makes it a lot harder to get it done and that the same crises. But we
have different crises now because we have some autocracies up against some democracies.
Sure sure. And a lot of what's going on in the world is a test of different forms of government and which one would prevail.
The Soviets were very difficult to predict and Woods and Ventura I think opted out of a bunch of the stuff. Kennedy very
reluctantly forgot my history isn't quite that good. But it was difficult even than that. And you can imagine what it would be
like today with the Chinese. So yeah all that makes it fairly and probably if I was the secretary. I think the list of issues
that we are facing this would not be one that would be at the top.