Transcripts For BLOOMBERG Bloomberg Markets Balance Of Power 20180227

Is it not possible that improved wages themselves can help lead to improved productivity, which can create a virtual cycle with wage growth over time . German powell yes and thats exactly what we hope is happening right now. Congressman so you are committed to keeping your foot off the brake . Chairman powell when im getting ready for this hearing i went back and read something you said in your very first year on the fomc committee. At the very first meeting one of the Bank President s rett Bank President s mentioned tighter labor markets and youve noted that you havent seen anything in the data yet to support that. It struck me as interesting because it got me to thinking about you three and you six and my frustration with both. And i think its been two and a half years since we hit the supposedly definition of a full employment, yet you three keeps dropping and the definition of full employment keeps chasing it. Dataont we just use wage to help define what full employment is . Chairman powell we use it as a factor to look at. But look, i think its important to see no that, for a long time there was a slack in the labor market. That argued for continuing to support lower unemployment. We have reached the point where the risks are twosided now and we need to take that into account because if we do get and theand the market economy does overheat, we dont see that now but if that does happen than we will have to raise rates faster and that raises the chances of a recession. And recessions tend to hit vulnerable populations the most. Thats what we are raising rates on a gradual path. There trying to balance risk of getting inflation up to 2 with the risk of the economy overheating. Congressman fair enough, mr. Chair. But i would observe that you only tapped the brakes at the expense of the people who have, over a long amount of time not received. The raise time of gentleman has expired. The chair recognizes the gentlelady from new york. You mr. Chairman, and thank you, mr. Powell. I just have a couple of quick questions that deal with sort of intheweeds policy. Id like to ask you about the federal open markets committee and their role in determining interest on excess reserves. In 2006 Congress Passed the , howevereally fact the the bill got amended, Federal Reserve, in determining those Interest Rates, it was left to the board of governors and not the entire federal open markets committee. We know this is a valuable tool, using the entire committee to determine Monetary Policy. My question is, would you support and initiative or legislation that would give the full role of determining what the excess reserve amount, to an, interest on access entire, expanded fmo seeing the Federal Reserve . Reserve . D the federal fmoc decides the iomr is only the at the top of the range. It wouldve been a reasonable decision for congress to do that. To supportloath changes for the Federal Reserve act because it opens up the act but this is a problem that we dont need to solve because there is no difference between the two things. Congresswoman so would you be supportive or not supportive of legislation that would allow the district president s to weigh in on that decision as well . And if not, why not . Chairman powell i dont think we are looking for legislation. Congresswoman we are looking for more stakeholders to be in the decision process. Powell the one that sets the federal funds rate, they make that decision with us under the law. If i thought was unfair or problem i would support a change but i dont really think it is a problem. It is less so than it would appear. Congresswoman it has been expressed by them that they would like to have input on that. I wanted to know a few would support that. The federal markets committee blackout. , how you feel about that and whether we could restore so we havey to that, an ability to find out what is going on during that 8x8 year when the committee is meeting, where we dont have an opportunity to hear from the stakeholders . Want to paul i would look at what you are proposing. Is whole idea of that period that we dont speak publicly to Market Participants or anybody about Monetary Policy during that period. That gives us a chance to keep our mouths shut for a while and go into a room and do our thinking, and then we come out and make an announcement. And then there is a day or two and people can give speeches and the kind of thing. Congresswoman do you think there would be anywhere in their, certain parts of the policies that would maybe be better off with more transparency on certain issues. Obviously, there are some that you would like to keep in the negotiating process, but others that we could at least know what was going to come out . Happy towell i be discuss this chairman powell i be happy i would be happy to discuss this with you offline. Congresswoman not to eliminate talk aboutt but to the issues that are not to be revealed during the blackout. Chairman i think im concerned if we take a step away from our public conversations, that is seen generally by us as a healthy thing. Congresswoman one other quick question on another topic. The wall street journal reported to Monetary Policy specialists will serve as your senior advisers. You may recall we passed legislation that provides for to have accessor to two senior advisers. Chairman powell, would you be willing to allow two senior add a more diverse set of perspectives to your deliberations . Rememberwell i do that legislation but the board has changed really, since the time ive been there. Every governor as one or two advisers, and we dont need legislation on that. Lady hasf the gentle expired. The chair now recognizes the gentleman from ohio, mr. Davidson. You, mr. Chairman, and chairman powell, for your testimony today. I have two followups to previous questions. Asked you about intervention in terms of selling assets, and a scenario where the yield curve may become inverted, whether Monetary Policy might be appropriate up to and including selling assets to prevent the yield curve inversion. Clarity, it yield curve inversions are generally seen as bad, why wouldnt intervention to prevent the yield curve inversion be seen as good . Yield powell in terms of curve inversions, i think the istory is what it is, but it really a history of times when the fed has gotten behind and has had to raise rates really fast. Thats not where we are right now. Most of the observers of this environment dont see that problem. If you look at projections of the likelihood of recession in the next year or so, they are very low. They are as low as they normally are. So i dont look at the current yield curve situation as a problem needing a solution. Ill going to the issue of selling assets, though. I like our current plan of mbs and treasury securities to roloff passively to roll off passively. Will be back to some kind of new normal within four years. I would let successfully announced and creative programs to just run their course. Congresswoman the chairman payments andoyr your answer was that there are constrained by commercial rates. So if things are available in i would notece, that an Interest Rate consists generally of two parts. One is time, value and money, and the others default risk. s dontumably, ioyr have a default risk. German powell i think the law is that we shouldnt pay interest on reserves that is greater than the general level of shortterm Interest Rates. Thosessman but shortterm Interest Rate, i guess i see perhaps a need for clarification on the law because those shortterm Interest Rates contained time value money risk but also default risk. A. L. Why are the real alternative for a Financial Institution in the market isnt a oneforone raid. Its going to make loans in the marketplace and they inherently yrve default risk that the io does not have. German powell we are using that tool to set shortterm Interest Rates for the public. And a lot of those will have a credit risk component. The shortterm Interest Rates dont have a big window, as which isrly repo secured by treasuries. Questions about to basic roles of the fed is a regulator and a Monetary Policy entity. Is that consistent with how you would see the structure of the fed . German powell yes. To understand internal operations, do you track budgets between the activities separately, able involving regulatory activity and people involved in Monetary Policy . German powell each Different Division does have different budgets and we look at them from a functional basis but it is intertwined, as a matter of fact. Indo call upon what we learn the supervisor regulatory and we get a lot of input. The board gets briefed on that all the time and it informs our Monetary Policy. So there is quite a lot of intertwining their. Its not a clean separation. Congressman but internally there is already some level of a separate budget for the activities involving regulators. My particular curiosity involves hr 4755, theould, Federal Reserve Regulatory Oversight act, and this would put the regulatory component of the Federal Reserve on appropriations, which would be to me a compromise position. Because you could propose putting the entire Federal Reserve on appropriations. The purpose would be to focus on the regulatory side so that all the standard Strings Attached to an executive agency that is engaged in rulemaking applied to the regulatory side of the Federal Reserve in the same way that others do. Enact thathat we can later in the year. My time has expired. Recognizes the gentleman from indiana, mr. Hollingsworth, and informs all members of vote is pending on the floor. The gentleman is recognized. Youressman i appreciate being here. Im looking forward to the ability to interact and work with you pursuing the feds stated goals. I want to ask a question i hear a lot about in district. As we see unemployment take lower and lower, one question i get a lot is, why arent we seeing more wage growth across the country, and what constrains wage growth that may be happening as we push down unemployment and whether the phillips curve is correct or whether it is kinked and what your views are . Powell there are two ways to think about it. For wages to go up we you need high productivity. We have very low productivity, averaging about. 5 per year. To aed to get that up point where it is sustainable. Maybe more relevant to your question, when you get this close to full employment you would think that there would be some tightness in the labor market, you would think wages would be getting up. We are going to be looking at that as one of many indicators of where the natural rate of unemployment is. I wouldnt say its great mystery but i would have expected to see more increases in wages and frankly i do expect to see more increases in wages in the next year or so. Congressman one of the fears the fed has put out is called the shadow labor market. There is a great number of people that isnt participating in the labor market, that might be tentative to come back in or lured back in. You still think that is the case, the higher wages are more opportunities might lead to more people getting into the workforce, or is there some decay in their still set their skill set if theyve been unemployed for a length of time . We have seen the Participation Rate go sideways now for four straight years. Gainis actually a big against a downward trend due to aging and other things. So i think weve seen some of that. Weve seen people either not leaving her coming back into the labor force as it has gotten tighter. How much more that can there be . I hope there is a lot more. Congressman we are still talking about working age individuals who are less likely to be looking for employment then they would be maybe 20 or 30 years ago. Democratic the demographic argument made that holding onto currently perforce participation is a gain that you would look at demographically. But it seems like working age population individuals are still emerging back into the workforce. Are you seeing any evidence about what the cause might be . Force powell Labor Participation by prime age workers is more than one full percentage point from where was before the crisis. There might be more slacker on wages. Ore slack it may be that those people, that some portion of those people can come back in. It may be that it is more structural. More structural. The only way to know is to find out so, with relatively low unemployment we are close to full employment now. We should be finding out whether we can keep these people, and get them back into the labor force. Read other ive comments that youve made and please dont let me misconstrue them, that there might be a tolerance to more and more tightening in the labor market and maybe run above historical average inflation to drive more drive more wage growth and get more people back into the workforce . I think we are in a process of discovering the natural rate. Chairman powell i think we are in a process of discovering as natural rate. As far inflation, we look at persistent deviations from our inflation targets, above and below target, as being undesirable. And then we will conduct a policy to move inflation back to targets. Congressman when you think about the economy today, when you think about Monetary Policy today and its future, what are you most worried about with regard to the economy . You mentioned productivity and Monetary Policy. right now the economy is in the best shape it has been in a while and that is true around the globe. Its great to see global growth. We have problems associated with strong growth and that is a great, great relief. My hope is that we can sustain that for as long as possible. I yield back, mr. Chairman. The time of the gentleman has expired. Id like to thank the witness for his testimony today. Without objection, all members have five legislative days within which to submit additional questions for the witness to the chair. Chairman powell, i would ask that you respond to this as soon as you are able. This hearing now stands adjourned. Jeb hensarling wrapping up his meeting of the Financial Services committee where chairman Jerome Powell of the fed just finished his testimony, talking about employment, inflation, the Balance Sheet level and also how to service u. S. Debt. One interesting thing he has talked about is that he expects the next two years to be good for the economy, estimating recession odds for the next year are very low. He also talked about servicing u. S. Debt, which will keep getting more expensive. A lot was being said about regulation, as well, german powell saying that the fed is taking a fresh look at the volcker rule. But david, this was a broad range of questions. Even some on immigration and what it would do to the economy of dreamers left the country. What had been headwinds are now tailwinds for the u. S. Economy. Lets bring in our colleague mike mckee done in washington, for more on what we just heard from jay powell. Mike, what stood out for you among this wideranging points that were made . Mike i think powell went into this trying not to lead the markets in any particular direction and maybe he didnt do as good a job as he wanted to, or maybe the markets just heard what they wanted to hear. But we leave the first day of the Humphrey Hawkins, the hearings formerly known as Humphrey Hawkins with the markets pricing in almost a fourth rate increase for the year, because powell was fairly strong and saying he thinks the economy is going to expand at a faster pace. Thats going to drive up inflation. He made no promises about rates. But just the implication was that the fed could easily change its forecast at the march meeting. Guidance get any more on where we stand with productivity, on whether the fed will have to react . Mike no. He did suggest that if you put more money into Business Investment you should get more productivity out of it, but he didnt put a timeframe on it and he didnt suggest that we are automatically going to see it. Actually, he avoided specifics on most of those questions, like a much more productivity we will get, how much more growth we will get, how much more inflation we will get. He just said we should get more of all of those. Thats what the markets focused on. David he also said more than once that he thought we may not be on a sustainable path when it comes to fiscal policy. That must resonate with people who are concerned about the deficit . Mike read into that which you want, because he did not tie it to tax cuts or additional spending the government is undertaking. He tied it to entitlement programs and what coming down the pike as baby boomers retire. He said many times you need to take account of the fiscal situation in the u. S. , and as you mentioned, that they need to get on a sustainable path. But a thought he might be more critical of the budget deficits that have just been created by the tax plan. He didnt do that. He steered clear of that, saying he didnt want to get into fiscal policy debate. Shery how about the federal when it comes to the volcker rule . Mike he suggested the volcker rule probably be changed and said the fed has been working to loosen restrictions on smaller banks, in particular. The doddfrank legislation was put together fairly quickly and powell said it makes sense to look at it and see where it is defective and where it isnt. So you can see the fed doing modifications. He said more will be coming, and things like the volcker rule are up to congress but he did think thats going to get changes as well. Shery mike, thank you. Michael mckee, bloombergs international and Foreign Policy correspondent in washington. David we want to welcome one of the lawmakers who was asking questions of mr. Powell, congressman james french hill. Was more confident in inflation and you and your questioning were more emphatic, calling it a fee that actually takes from the paychecks of americans. Did you come out of these hearings more confident that inflation will remain under control . Congressman hill growth is not incompatible with low inflation. This is one of the economic myths. I think the fed should stay andsed on stable prices, their 2 target is certainly adequate. Chairmanconfidence powell stay focused on that because inflation is the biggest thief for working people across the world. David as we create more goods and pay people more money, the thing that people will keep us from inflation is increased productivity. How confident are you that we will get that the greek of increased productivity. Lets be honest, over the last 20 years we havent had. Representative hill i agree, its one of the Biggest Challenges we have in one of the biggest economic challenges german powell is inheriting in his new job. At the features of the tax bill just passed are designed to drive investment and is chair powell just said, new investment will lead to higher productivity which will boost wage growth. That doesnt have to be inflationary very shery the tax cuts are being financed by more and more deficits. Weve heard chairman powell talk about how its going to become more expensive when it comes to servicing u. S. Debt. What did you take away from his comments . Hill hes going to stick with his longerterm plan of Balance Sheet normalization which will include raising shortterm rates in conjunction with what the market indicators are suggesting. And by doing that, he will do it operations,market by striking the fed Balance Sheet, but i think he has been clear in setting expectations for the market, and not ahead of his plan. Shery what about when it comes to regulation. When you ask them about the volcker rule, will the fed take an active role in easing it . Congressman hill the volcker hill is too vague and cant be administered by our banking regulators. They have come and testify to that. The bill that i introduced would call for harmonization of volker, set up the fed for interpreting that role. I think that will improve its application, i think will it improve it for the Capital Market systems and we are not harming normal trading or Capital Markets activities. So i appreciated the chance that he felt strongly that that was a good move, in his testimony. Jay powellhing came back to repeatedly was a. Ustainable fiscal path however you get there, we have a problem building up debt in this country, as you agree. How confident are you that we connect actually do something, because thus far we the american taxpayers havent seen much out of capitol hill to do with the deficit . Representative hill i agree with you completely. Two thirds of our budget is an voted on by congress. Its a mandatory spending program. There are driving instability for this country and if we are serious about fiscal accountability and longterm needs to, the congress modify our mandatory spending programs. Addressed. E ive urged the president to be a leader on it as well of members of congress, and thats what needs to be happening if thats what we want is an outcome. Congressman, thank you for joining us. Congressman french hill of arkansas, a member of the Financial Services committee. We continue to see stocks in the red, paring back from earlier losses. Julie hyman has more. To stock with rates, considering this is a rates driven news event, or rates driving news event, jay powells testimony. We a c we see a five basis point increase on the heels of his comments in the 10 year yield. The market is taking his comments about strengthening the to mean we could see more rate increases the here that are being priced in, perhaps more than three this year. Although, he also cautioned as usual that the fed is going to still continued to be measured. Interesting movement there. We have seen the Movement Ever since jay powell was named chairman of the fed. If you look at the timeline in the circle here, this is a two year treasury yield from when he was first nominated and the move started before then, to be fair, in september, but there was nothing slowing it down considerably since that point, despite market turbulence that we saw at the end of january and beginning of february. His testimony today didnt just affect what was going on the numerous market what was going on in the rates market. We sought in the u. S. Dollar. At one time today it was up the most in three weeks and now it is not at those levels but nonetheless its interesting because we have not always seen yields in the dollar rally together. We just looked at that chart of the twoyear which has been going up but that is not the case for the u. S. Dollar. So this reaction today is interesting. Lets bring it back around to stocks. We arey mentioned, seeing a selloff today as those rates have gone higher. As you might expect its being led by Interest Rates. Take a look at the bloomberg and we have some of those groups in what we have been watching. Real estate is one of the more interesting, going lower. Utilities are on that list. Financials are holding up about a quarter of 1 as they tend to benefit from higher rates. It is interesting because its fairly broadbased here, not just interestratesensitive. You have Consumer Staples and materials on the list, as investors figure out what the inflation picture looks at right now and what the rates picture is going to look like under jay powell. Shery julie hyman, thank you. David lets go to bloomberg first word headlines. President trumps eight hope hicks appeared before the House Intelligence Committee today. Hicksbehind closed doors as parf the committees russia probe. The Panel Investigating contacts between russia and the Trump Campaign. Hicks has already been questioned by special counsel Robert Mueller. United nations humanitarian envoys are ready to move into warravaged syria to provide food and medical evacuations but are waiting for a ceasefire to take effect. Swedens deputy ambassador to the u. S. Says it is time to focus on implementation. We are really concerned about reports of continued violence on the ground, so that only add to the importance of having immediate secession of hostilities. It is a 30day ceasefire that the resolution calls for, countrywide, and immediate. Given the situation on the ground, we cannot wait any longer. Mark that we can resolution approved by the Security Council failed to stop the carnage in the Eastern Region which has killed more than 500 people since last week. U. K. International trade ministers say britain must leave the Eu Customs Union to strike new trade deals after brexit. In a speech today in london, liam fox said keeping the status quo would force written to negotiate with one arm tied behind its back. He believes the u. K. Will leave it lose out on new trade partners is brussels continues to have a say in an external trade policy. , we wouldll take us be in a worse position than we are today it would be a complete sellout of Britains National interest and a betrayal of the voters in a referendum. The comments came a day after the british Opposition Leader Jeremy Corbyn endorsed a continuing customs act between the u. K. And European Union in order to prevent future tariffs. In moscow, people laid flowers that an improvised memorial or of assian opposition slain russian opposition member on the anniversary of his murder. Among those were members of u. S. And german delegations. Vladimirritic of putin, he was shot dead on the bridge overlooking the kremlin on february 27, 2015. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. Im mark crumpton. This is bloomberg. David President Trump has his eye asked on 2020 and his reelection can they renamed its manager today. He ran a social media efforts for President Trumps First Campaign. We welcome in josh green bloomberg businessweek. Josh, you know the First Campaign so well. Explain the role that brad paschal l played in the First Campaign. He was the digital guru. Unbeknownst to many people, he had a large and pretty sophisticated data center in san antonio, where he lives. He spent a lot of time cultivating his facebook audience for donations, figure out where to go, who to target, which clinton voters to target to suppress their votes. This wound up being very instrumental in the outcome of the election. Himself, parscale started with a very lowly job, was a freelance website developer who built the trump winery website but stuck around and prove his loyalty to the family. Much like hope hicks and others who are senior officials, he will now be tasked with getting trouble elected in 2020. Tensions there any focusing on the social media aspect of the campaign and the russian investigation. That is a lot of speculation, having to do with social media on the russian side. The House Intelligence Committee did call him him to testify about how the Trump Campaign use facebook and whether or not there was any tsllusion between russian bo who were very active in swing states in what the campaign itself was doing. So far as i know, there has been no proof of any collusion. We dont know if Robert Mueller has interviewed parscale or not. Certainly, that has been an thee that democrats in House Intelligence Committee have pushed to get more clarity of, whether there was any collusion. So far, i dont think there was proof that there was. Shery when it comes to facebook ads, we have this article in wired says that things spread cheaper and better if users just share them. Brad parscale reacted to that article on his twitter feed saying, i bet we were 200 times per her. We had costs that were pennies in some cases. That is why trump was the perfect candidate for facebook. Will we see a more heated rhetoric with parscale at the health . And parcel with any Trump Campaign manager campaign, we saw plenty of that in 2016. Parscale, his background is in marketing and he use the Marketing Tools and pulled them into a political context in a way the Clinton Campaign did not do as much of. When i was visiting with parscale in san antonio the month before the election, he was focused on building, through campaignearning, viral as that would induce people to give their information, make small dollar donations to the Trump Campaign, to buy a hat. By and large, they were successful with that effort. It seems likely to me that facebook will once again be at the center of the president ial campaign in 2020. Shery he has already put in a lot of efforts, has been raising money with the America First group for the president. He has been pretty instrumental, this has been one of the outside groups. Parscale never went into the white house and took a government job. He stayed on the outside with a 5013 c company trying to raise revenue for the trump reelected. I believe he is a contractor with the Republican National committee. He is somebody who has become a familiar figure ron washington, has breakfast every day in the trump hotel, someone who is known to be a trump insider. The trump people i talk to are not really surprised that parscale has wound up in this job, even though he had no involvement in politics before 2016. But of a remarkable story, on the inside, one that make sense. David picking up on that point, clearly he is a trump insider. They did a very effective job with social media, but doing a social Media Campaign in texas is different from doing a national campaign. People that do that typically have a lot of experience. Does he have the capability of running a fullscale campaign for president . We will see. He certainly ran the fullscale digital campaign. More and more, these are being built into outlets like facebook and twitter. For is especially true donald trump, who bragged about his following throughout the campaign, intensely interested in the metrics and what was moving, not moving. All of this was integrated into the Trump Campaign model. And help them find their pockets of support, direct the candidate himself to places like wisconsin, michigan, that most political expert didnt think could win. President ial campaigns generally are moving more in the and parscale,rump so it makes sense that he would be in charge of the reelect campaign in 2020. Shery josh, thank you. Joining us on the phone. Coming up, a power grab in china. We will talk to the Asian American Society President and kevin rudd about the implications of ending chinas president ial term limits. This is bloomberg. David this is Bloomberg Markets allens of power. Im david westin. Shery im shery ahn. Chinas thirtyyear experiment with time limits term limits are set to end. The party has suggested amending the constitution to allow she jinping to serve more than 25year terms. Considering he rules the party, that means two things. The constitution will be amended and xi could be president for life, much like massie dong. How will this reverberate around the globe . Lets bring in kevin rudd of the asia society and the former Prime Minister of australia. Thank you for coming into the studio. We have already seen his name alongside others in the constitution. Was this a surprise . She jinping would be pretty cool with having his name alongside those two. This is not a surprise for those of us that have been watching this closely. Xi jinping was going to be the most powerful leader since dung. It is clear he is probably the most powerful leader since mao. But this in trenches it formerly. This is big news within china itself. It does reach a convention that has been around since 1932 when china came out of the cultural revolution. Significant, not just for china itself the world at large. There are risks for the strategies, meaning that the gains outweigh the risks. Kevin lets look at it from the perspective of she jinping. Despite the fact that it is a oneparty state, the Chinese Communist party has a range of views within it and many of those views come from earlier periods of excessive concentration and political power. Nonetheless, his role of the can is, i am the guy that hold a show together for the longterm future, and by longterm, we mean through the 20 20s, barring a health episode. If President Trump is reelected, through 2024, on to the next president , 2028, even through to , maybe two more american president s before he clocks 80 years of age. Chinese political continuity from a strong central theer able to maintain Central Power of the Chinese Communist party while making chinas economy the largest in the world, and therefore a major global power. David he has five years left on his original term. That assumes this all goes forward, as it will. What does that change over the next five years, what policies are different over the next five years for china . Internal terms of the politics, what is significant is the grounds for internal political dissent are much reduced. That is within the Chinese Communist party itself. People will be secondguessing themselves now about what is the right answer to this question . I have been around politics for a long time to know that that can be a danger. He is a smart guy with more advisors. On economic policy, i have some question marks. The economic reform blueprint that xi jinping released in 2013, a big document, 60plus reforms. After five years, we have monitored through the asia society and other groups, and analysis that says they have only made progress in only one or two of these and host of them are still or sliding backwards. Control ofease the the party within chinese politics, does that then start to feed into the economics, and the economic model which has produced such sustained growth over the past 35 years . That is the question mark. David is there anything that would suggest this move with term limits would make it more likely to have performs . When he first came in, we heard about reforms. Congress, there was nothing about reforms, all about the party. All about inserting the party more into business, Companies Come into the economy. Is there any reason to believe that he will move to perform are doubling down on where he was headed . Think his first impulse is to maintain the political control of the party. Question, a good one, there are things that we should be alert to. Next week, when the National Peoples Congress Needs for its yearly meeting, we are likely to formally appointed Vice President of the country. He is beyond the age limit of 69 years old, so they have done Something Interesting and creative to keep him not on a Standing Committee of the bureau but an active position within the state. His job, as i understand, will be oversight of the chinese relationship with the u. S. , including economic dimensions. The second interesting piece of news is, watch this space for someone visiting washington. I know him well, many do. He has an mba from harvard university, very smart. I think likely to become vice premier with ultimate regulatory economic for chinas regulators, the central bank, peoples bank of china, exchange regulator, insurance regulator, and banking regulator. He is a pro market sort of guy. So you are going to have these promarket forces represented by and others in the system, but xi will still rule. Still in those ranks, we cannot really find an heir apparent for xi jinping. How concerned should we be that there is so much uncertainty on who follows xi jinping . Kevin i think what xi jinping body at largehe is on the run for the foreseeable future. Three big achievement for him personally. One is the incorporation of she thing thinking. Constitutionese while still serving as a political figure. That is virtually unprecedented. Number two, no nomination of a successor after his first fiveyear term. Number three, in case any of you missed the point, by the way, i just removed term limits on the job. The key message for all of us is that we now need to radically understand shes in thing xi jinpings worldview. One of my own Research Projects is on his worldview, how he views chinas future in the world economy, world security. He will be around for multiple iterations of future western leaders, arguably through the early 20 30s. I was at the occupied hong kong protest in 2014. People were not happy, students being me detained. How will hong kong leaders and the rest of the world have to handle china with one strong leader as xi jinping . Kevin xi jinping has made it plain that he intends to crack down on any excessive dissent in places like hong kong. Already begin to see this in terms of the measures taken by the hong kong authorities. We need to be very mindful of the trajectory hong kong is on longterm. I dont think the central leadership in beijing want to kill the goose that lays the golden egg by destroying the hong kong economy but when it comes to movements, as you mentioned, we have people currently serving prison sentences, xi jinping has made it plain where his colors are posted. What we also have to watch out for is where does xi jinpings policies on taiwan goes. That will be a new and emerging area for what i described as Regional Security challenge. David lets talk about the region and the globe. What does this mean for xi policies . Then you can be there for announcement sometimes and often on vix. Com you are really there are the conclusion. Sometimes you are, if you play it well, or if you played on lucky. Sometimes the conclusion does not meet the original expectation. Panthis is a huge continental, eurasian Infrastructure Development fund designed to rewrite infrastructure in 60 countries. Is imperative now in beijing it is not just something we have to dance around and be respectful of because this guy is in charge. He will be in charge for the longterm. One belt, one road will be a strategic framework and a program for action for the foreseeable future. There will be reactions to it countries on the ground. China does not have unlimited finance so no one should assume this will be an infinite bucket of money being poured into these projects either. But will it reshape part of the infrastructure region . I think so. Not necessarily in all negative directions which many planners think. No one else is providing the capital or infrastructure in pakistan at the moment. China is. David it is great to have you here. Kevin rudd, president of the asia society and former australian Prime Minister. Shery lets get a check on the major averages. We continue to see stocks in the red. Down 5. 4 , paring back those earlier losses we saw powells chairs jay speech on capitol hill. The s p is down. 5 . Keep an eye on banks and Interest Rates sensitive stocks like real estate. The nasdaq is down 6 . We continue to see yields going up. A 2. 7 while the 10year is passed 2. 9 . The hardest selling treasury right now is the five and sevenyear. Investors seeing more fed rate increases further out. We continue to see declines in stock markets although paring back from earlier losses. Live from new york, this is bloomberg. Shery this is Bloomberg Markets balance of power. Im shery ahn. David im david westin. It is time for stock of the hour, boeing. Shares are hitting a record high and thePresident Trump company reached a 3. 1 billion deal for new air force one jets. By the way, this is a discount, the president says. Abigail the white house talking about how this saves taxpayers 1. 4 billion because the original price tag was higher. It is not entirely clear, there is murkiness around the numbers but it stands out that boeing is higher on the day. Higher for a fourth day in a row, hitting his record high to some real positive news. This could also have been the savior for the modernized air force one program. President trump have been talking about terminating it altogether. So air force one lives on. Shery a third record closing in a row, so you there is more to it. Abigail it has to do with the return to revenue growth. Look at the Financial Analysis function in the bloomberg on boeing. In 2014, 2015, revenues were growing. At the end of 2016 and much of 2017, we stagnated, and we are now looking at growth again. Investors are liking the profit forecast also strong, doubledigit growth. They are focusing on a narrow body and widebody planes. One possible flaw could be the 777. Apparently they have had some issues, the backlog not as strong as the other planes. These record with highs, valuations are high but they seem to be executing. Seem to be willing to pay up for such strong execution. Shery abigail doolittle, thank you. Coming up, we will be bringing you live highlights from the Brookings Institution conversation with former fed chair janet yellen and then bernanke. David sign up for the balance of power newsletter on bloomberg. Com to get the latest on global politics. Live from new york, this is bloomberg. York, 11 000 in new and San Francisco and 7 00 in london. Welcome to Bloomberg Markets. Scarlett we are live in new york. Here are top stories. House to the new fed chairman takes the hot seat on capitol hill, saying he feels more optimistic about the economy. We speak with the top members of the house Financial Services , Jeb Hensarling and california democrat maxine waters. And a vent do it. Ben bernankejoins for a conversation at the Brookings Institution in washington. We will listen in. U. S. Markets closing in two hours time. Lets get a check on where stocks are trading with julie hyman. The new fed chair speaks and stocks decline. Is because we saw an increase in rates after jay powell gave his testimony, talked about the strengthening