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tv   The David Rubenstein Show Peer to Peer Conversations  Bloomberg  April 21, 2021 9:00pm-9:30pm EDT

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david: this is my kitchen table and also my filing system. over much of the past three decades i have been an investor. the highest calling of mankind, i often thought, was private equity. and then i started interviewing. i have learned from doing my interviews how leaders make it to the top. >> i asked him how much he wanted. he said 250 and i did no due diligence. david: how they stay there.
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you do not feel inadequate not because you are only the second wealthiest man in the world, is that right? a number of years ago i hired a young investment banker who previously worked for the government. his name was jay powell and he did a terrific job of my firm but he left to go back into public policy work. he has been chairman of the u.s. federal reserve board. he has to deal with the most important economic issues facing the country. let me begin by talking about the state of the economy. your public statements to date in recent interviews makes it sound like you feel the economy is in reasonable shape to go forward from here and you are expecting growth of 5%, 6% this year. is that a correct announcement of your views? >> generally, yes. i would say the economy at this point does seem to be at an inflection point. that makes sense with widespread vaccinations, strong physical policy.
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you see the economy opening, ridership on airplanes going up and people going back to restaurants. the march jobs report shows with their look like, close to one million jobs in one month. we are going into a period a faster growth and higher job creation and that is a good thing. there are still risks. i would say the main risk is that we will have another spike in cases, perhaps in one of the virus strains that may be more difficult to treat. we do not see that yet. we have cases moving up a bit but that is something we need to worry about and it will be wise to keep wearing masks and be socially distant for a little while ago. david: the annual deficit is $2.5 trillion to $3 trillion. is that a concern for the fed? >> over time and in the long run
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the budget is on an unsustainable path. the debt is growing reasonably longer than the economy and that is unsustainable over time. it is a different thing to say the current level of debt is unsustainable. the current level of debt isj very sustainable and there is no question to service an issue that debt for the foreseeable future. i would also say that as a nation we will have to eventually get back to a sustainable path. that is best done it a very good times when the economy is at will employment and taxes are rolling in. this is not the time to prioritize that concern but is important that i believe we will ultimately have to return to again when the economy is strong. david: you have previously said currently you do not expect the federal reserve to increase interest rates before the end of
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2022. is that correct? mr. powell: we expect to keep interest rates where they are today until three particular outcomes are achieved. the first is that the recovery in the labor market is effectively complete. the second is that inflation has reached 2%, not tapped the base but has reached sustainably, and the third is that inflation is on track to run moderately above 2% for some time. we are really focused on the progress of the economy toward those goals and not a particular timeframe. when we get those three boxes checks -- object that is when we will raise interest rates. until then, we will not. we write up projections in every quarter in the fomc meetings, we submit those and tabulate them and publish them.
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most members of the committee did not see raising interest rates until 2024, but that is not a committee forecast. it is not something we vote on or act on as a group. it is our own assessment, so there is a tendency of markets to focus too much on what we call the dot plot. david: based on what you know today you would not expect to increase interest rates before 2022, or you're not saying that yet. mr. powell: before 2022 that would be an issue. that will be highly unlikely. i do not talk about particular dates. i do not think there is any use in that. it really is outcome-based. david: last time the fed did increase interest rates it did so by a little bit, and then it started treating its balance sheet a bit. do you have any view on whether that is the right way to proceed when you interest rates? do you increase rates and shrink
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the balance sheet later or shrink the balance sheet and then increased interest rates? do you have any view on whether one policy is better? mr. powell: first we were buying assets and to gradually slowed the pace at which we were buying treasury and mortgage-backed securities. we held the balance constant for a while. after that we started raising interest rates. and we held the balance sheet constant. we do not sell bonds into the market, and when they mature we either reinvest them or allow them to run off. that is what we did last time. if you look at the sense of our guidance, we will reach the time at which we taper as it purchases when we have made substantial further progress toward our goal from last december when we announced that guidance. that would in all likelihood be well before the time we consider raising interest rates. we have not voted on that order
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but that is the sense of the guidance that it would work in that way. david: you are likely to follow the same policy of not selling into the market the bonds you have, but just let them mature and that is the way you shrink your balance sheet. mr. powell: these are questions that lie ahead of us. at the first thing we do is graduate who -- we have not decided to do that or not. we would not send the bonds into the marketplace. david: you mentioned inflation. the fed for quite some time as tried to get 2% inflation but has not been able to get 2% in
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our economy. why do you think it has been difficult to get inflation at to present the -- people attribute the quarter of a century of low inflation that we have had to a number of factors. one is globalization. it spread of technology, demographics and aging population. all of those lead to lower inflation. since the global financial crisis if you have seen central banks around the world really struggle to reach that goal and in some cases we are fighting a right deflation. the reason that is a difficult thing is that reduces the scope of central banks to react to the economy when it turns down,
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which can lead to weaker economic outcomes, lower inflation, so you can get into a cycle that is not a productive one. we want inflation to be at 2%, average 2% and we went to over die -- mr. powell: they need to be in the room with us as we make decisions about monetary policy. ♪
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david: let me ask you about the situation with respect to a couple of issues you have talked about, climate change, for example, or racial inequality. the fed is not historically been
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somebody focused on climate change, and you are focused on the unemployment rate but not under the statute, whether it is minority unemployment rate or white unemployment rate. how do you assess these issues not in your statute but are now important in determining how the economy is moving forward? mr. powell: there are two issues and similarities but both of them we see only through the lens of existing mandates. we have not gotten any new mandates. take climate change, for example. the reason we are focused on climate change is our job is to make sure financial institutions, banks, understand and are able to manage the significant risks that they take and the public will expect us to do that. climate change is another one of those risks. the large banks very much realize and if you talk to leaders of these financial institutions, they are focused on what climate change will mean
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for their business, their business model over time. it is within the scope of that mandate. it is similar with inequality. we have these persistent disparities, racial, gender, and other disparities and our economy and they hold the economy back. we all want an economy where everyone has the ability to contribute to and benefit from the prosperity that we have. our focus is on gaps that we face. we call them out, talk to them -- talk about them. we try to incorporate into our monetary policy framework the fact that full employment is a broad and inclusive goal, and we now realize that unemployment can go low for quite a long time without inflation being a problem, which will tend to help those groups. on that i would stress, we
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cannot be the primary policy organization that treats either climate change or inequality. we see it through the lens of our existing mandates, but there's -- those are very much issues for the elected part of the government. david: you see people living in tents, homeless people living in tents. your mandate is not to solve that problem necessarily, but is there anything you think the fed should be able to do or should be given more power to do to help people who are suffering in the pandemic? mr. powell: we are not seeking any new authority. we are not the agency that has the most direct authority. i happen to see it on virginia avenue. there have often been a couple of tense on this end of town where there is an open space, but now it is big, it is a lot of tense and a lot of people.
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it has to be because of the pandemic. it has grown a great deal. it strikes me every day as i go by him. how does that play into what the fed does? i think we need to keep those people in mind. we do not have tools that deal directly with them, but those are people, many of them were probably working before the pandemic hit, and they need to be in the room with us as we make decisions about monetary policy. we need to be thinking it is not just the headline in the aggregate. it is people in the margins of the economy. david: let's talk about syntax -- fintech. the revolution has changed banking and financial services. how does the fed to regulate some of these new companies that are not under the traditional rules of your regulation? are you worried about your inability to control some of these companies that might have an enormous impact on the
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economy? david: the key thing is that equal activities -- the same activity should be regulated the same weight no matter where it is. that is one thing. it needs to be regulated in a way that gives consumers and users of that service the protections they need, so they have to understand the risks. with the growth of the non-bank financial players, we have work to do to understand and deal with those challenges. in the meantime we have the legal authority we have over banks, some of the payment utilities, and we will use that, but we do not have authority over many other companies now very much engaged in the payments business and dealing with the public, and congress is looking at the question of whether there is enough there, the sort of regulation is really there. david: related to that would be
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cryptocurrency, not quite fit tech -- fintech. they have blossomed. are you worried about the impact of cryptocurrencies and terms of the economy and the ability of people to use these things for nefarious purposes? mr. powell: we think of them more as crypto assets, because what people call cryptocurrency, that they are vehicles for speculation. no one is using them for payments, for example, like the dollar. it is like gold. for thousands of years human beings have given gold a special value that it does not have from an industrial standpoint. bitcoin is more like that in the cryptocurrencies are like that. they are not being actively used as payments. david: i think you said recently
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the biggest problem you are worried about now is cyber, cyber attacks and so forth. can you elaborate what you are worried about it, and how does the fed protect itself? mr. powell: cyber is the new frontier. that is not a new insight. we spent a great deal of time and money making sure we are resilient, the bank spent a lot of time and money. as i said before, it is one of those things where you feel like you have never done enough. ♪
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david: let me ask you about the fomc. people probably do not know how
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it works but how many members are there of the fomc? mr. powell: all 12 reserve bank presidents and city governors, currently six, our participants. it is the federal open market committee and we meet eight times a year. we are doing it virtually, but i do it from this beautiful board room we have upstairs. david: and the supreme court when they have conferences among the members, the chief justice gives his view first and others give their views. how does it work at the fomc? does the chairman of the bird dashboard give your views and then others. -- others? mr. powell: it depends upon the issue. it is not in order of seniority or anything like that. people say let's say we will have a go around on the economy. people say i would like to go in the middle, the beginning, at the end. we make a list and had the list around. i will sometimes go first if i want to make a point.
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often i will do less and some up and say what i think the path for it is. it depends upon the situation. david: i always worry about secrecy. i assume you have somebody coming in and sweeping the room where the discussions are going to occur or when they are being done virtually you have the best cyber people in the world to make sure nothing leaks out. is that correct? mr. powell: that is correct. we realize we are an attractive target for hacking and cyber attacks. we have is a great deal of time and money and trying to make ourselves as safe as possible. we have very strict rules for fomc participants and their staff for handling of confidential materials. you never feel like you have done enough of it i am sure you feel the same way a business. we try very hard to be as robust against those penetrations as possible. david: you are the first person to be chairman of the fed who
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has not had a phd in economics. you have been trained in a lawyer. is that why you are better to speak in the kings english rather than economists, because you tend to speak in ways that people can understand. mr. powell: i think it is important to speak to the interested public in ways that they can understand and avoid jargon. large private institutions are really struggling to hold the faith and support of the public, and for the fed is terribly important we do engage with the public. it is essential to what we do is speak to the public and the public's elected representatives in congress a lot and to our democratic legitimacy through that. david: typically chairs of the fed will have a regular lunch with the treasury of the secretary. sometimes the president of the united states will have some regular contact. how are you meeting with this
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administration? mr. powell: the standard way and has happened has been this. there is a weekly breakfast or lunch between the secretary of the treasury and the fed chair and it rotates back and forth into each building. that is now a phone call. that is what i have been doing with secretary yellen. there has an irregular roughly monthly meeting with the head of the economic council. meetings are very infrequent and not on any sort of a schedule. i have not met with the president. david: have you met him before he was president? you must have met him at some point in his life or your life or have you not met him yet? mr. powell: i think i have shaken his hand but i've not really met him or talk to them. david: when you are running to
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fit in a pandemic are you doing it remotely from your own? i don't you are in the fed building now -- know you are in the federally now. have you been working for mom? mr. powell: we have a significant meeting on march 15 and that was the last meeting i did from this building. i went home after that and since that time i have was a work from home mama although lately i find myself coming in 2, 3, four days a week, more than i used to. i am not sure why that is. it was surprising how well our business and business model were able to adapt to doing work remotely. many organizations had that experience. we certainly did. david: you are coming infrequently because your wife is saying finally, time to get out of the house and go to the office more. mr. powell: there may be some of that involved. david: what have you learned as
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a member of the fed that you did not really know before that surprised you, perhaps, and what have you learned about the pandemic and the weight that it has infected the economy that might have been a lesson learned and how the economy operates in a pandemic? mr. powell: i am just about to have my ninth birthday at the fed so i have learned a lot in those nine years. you have to master specific economics around monetary policy and payments and regulation. there is a lot to learn. the first and most important thing about the pandemic was health care policy, which starts with things we did to shut down the economy. not weak, but that the government did in the private sector did to get the pandemic under control and then to get people to socially distance and
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get people vaccines. all of that is more important than anything we can do. the second most important thing was fiscal policy. 30 million households are suddenly without income. congress had to replace that. it works by stimulating aggregate demand, lowering interest rates. that would become important later but that was not what was needed. it was fiscal policy. it made the difference. we were third -- to provide comfort and support the economy when the expansion began and over the long run avoid longer damage to people's working lives and smaller businesses going out of business and things like that. those of the things we try to achieve. we have learned a lot about the
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way pandemics work, and we hope to no konw -- know no more about that because we hope to have no more pandemics. ♪
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emily: imagine the ability to cure genetic disease for generations to come, to inoculate the human race against the next covid-19 before it becomes a pandemic. or in a darker scenario, to choose the color of your baby's skin. dr. jennifer doudna pioneered a technology that may one day be able to do just that, one of the biggest scientific breakthroughs of our lifetimes. it is called crispr, a bacterial defense system that can edit genetic material. it already shows pro


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