SINCE 2007, SENDING A POTENTIAL
ALARM FOR RECESSION.
REAGAN ECONOMIST ART LAFFER.
TYPICALLY ON AVERAGE THE STOCK
MARKET PEAKS 18 MONTHS AFTER
INVERSION.
ECONOMY PEAKS 22 MONTHS AFTER
INVERY.
NOT NECESSARILY RECESSION AFTER
THE CORNER.
SOME ARE SAYING NOT NECESSARILY
WILL BE RECESSION AT ALL THIS
TIME?
>> I DON'T SEE ANY REASON FOR
RECESSION RIGHT NOW UNLESS
SOMETHING IN THE FUTURE THAT
DEVELOPS QUITE MATERIAL LIKE A
TRADE WAR OR SOMETHING LIKE
THAT.
RIGHT NOW, I DON'T SEE ANY
CHANGE IN POLICIES.
THE TAX BILL IS WORKING NICELY.
MONETARY POLICY A LITTLE SLOW
CATCHING UP.
THEY SHOULD DROP THE RATE
COUPLE, HALF A PERCENT OR SO IF
YOU LOOK AT ALL OF THIS.
LET ME SAY, TRADE ISSUES ARE
EXTREMELY IMPORTANT TO THE
MARKET, AND MARKET IS EXTREMELY
IMPORTANT TO THE FUTURE OF THE
ECONOMY.
JUST THE DROP WE'VE SEEN FROM
THE PEAK TO RIGHT NOW, CHARLES
IS A LOSS IN U.S. WEALTH OF
ABOUT $1.7 TRILLION.
WHICH IS A HUGE AMOUNT OF MONEY.
IT PUTS INTO PERSPECTIVE ALL OF,
THAT IS ONLY 30 BILLION.
WE LOST 1.7 TRILLION IN WEALTH
BECAUSE OF I BELIEVE FEAR ABOUT
THE TRADING MARKET, WHAT IS
GOING ON IN CHINA.
SO WHEN I LOOK AT THIS WORLD, I
DON'T THINK WE'RE IN A
RECESSION.
I DON'T THINK WE'RE GOING INTO
ONE BUT IF THE TRADE THING WERE
TO COME AROUND TO BE FOOD, I
THINK WE COULD PULL OUT OF THIS
VERY QUICKLY.
CONNELL: ARE YOU SAYING
30 BILLION JUSTIFIES
$1.7 TRILLION IN LOSSES?
>> WELL THAT IS WHAT THE NUMBERS
ARE.
EXTRA 10% ON 300 BILLION IN
TRADE WITH CHINA.
UNLESS I DID MY MATH WRONG.
CHARLES: THAT IS THAT A
LEGITIMATE FEAR, CORRELATION
THOUGH?
>> I THINK ABOUT 1 1/2 TRILLION.
CHARLES: RIGHT IS.
I LOOK AT WILSHIRE 5000 EVERY
DAY.
I DO THE MATH MYSELF.
I'M SAY SOMETHING THAT
LEGITIMATE CORRELATION, ART?
SHOULD IT BE DOWN THAT MUCH OR
IS THIS AN OVERREACTION?
>> I DON'T KNOW DEPENDS WHAT
HAPPENS IN THE THE FUTURE WITH
THE TRADE DEAL.
IF THE TRADE DEAL COMES THROUGH
IT IS WAY OVERREACTING.
IF THE TRADE DEAL DOESN'T COME
THROUGH AND THERE IS TRADE WAR,
MAY BE OVERREACTING.
YOU LOOK WHAT HAPPENED WITH THE
SMOOT-HAWLEY.
I DON'T MEAN TO TALK ABOUT
SMOOT-HAWLEY.
THE MARKET FELL 90%.
WHEN I WAS IN WHITE HOUSE 1970
TO 1972, DEVALUATION OF DOLLAR,
10% IMPORT SURCHARGE, JOB
DEVELOPMENT CREDIT, EXCLUDED
FOREIGN AID, WE HAD
PROTECTIONIST ADMINISTRATION,
THE STOCK MARKET FELL BY 50%.
WHEN YOU LOOK AT IT HISTORICALLY
TRADE HAS A HUGE, HUGE NET
EFFECT, WAY BEYOND WHAT YOU
WOULD EXPECT GIVEN THE SIZE OF
HOW MUCH TRADE THERE IS.
IT IS REALLY VERY IMPORTANT TO
MARKETS.
ONE OF YOUR PREVIOUS GUESTS
SAID, IT HAS BEEN A LONG TIME
FOR THE BOOM TO OCCUR, THAT IS
NOT WHAT CAUSES RECESSIONS.
RECESSIONS ARE CAUSED BY POLICY
ACTIONS.
THEY CAN OCCUR IN TAXES, OCCUR
IN SPENDING.
OCCUR IN REGULATIONS.
THEY CAN INCUR BECAUSE OF TRADE
POLICY.
THAT IS ONLY THING I SEE WE HAVE
A BIG ISSUE ABOUT RIGHT NOW.
WE'RE WITH CHINA.
I WOULD LOVE TO SEE A GREAT FREE
TRADE DEAL DONE WITH CHINA THAT
WOULD BOOST THE MARKET BY WELL
OVER 5,000 POINT, THIS MORNING
WE WERE GREETED WITH REALLY POOR
ECONOMIC DATA OUT OF GERMANY,
POOR ECONOMIC DATA OUT OF CHINA.
SO-CALLED GLOBAL RECESSION.
THAT IS NOT PLAYING A ROLE AT
ALL?
EVERY TIME WE GET NUMBERS OUT OF
CHINA, IT SENT OUR BOND YIELDS
DIVING LOWER AS MONEY CONTINUES
TO COME FROM AROUND THE WORLD,
POURING INTO OUR 10-YEAR BOND,
WHICH MIGHT BE SKEWING
HISTORICAL REFERENCE THAT WE
USE.
MAYBE THIS TIME IS SOMEWHAT
DIFFERENT.
WE'VE NEVER BEEN IN A WORLD,
ART, WITH $17 TRILLION WITH A T,
OF NEGATIVE YIELDING RATES AND
ALL THESE GLOBAL ECONOMIES GOING
DOWN AT SAME TIME EXCEPT
AMERICA.
>> THE REST OF THE WORLD IS IN
RECESSION, THEY'RE IN VERY BAD
SHAPE.
THAT DOES IMPACT US, CHARLES.
YOU'RE COMPLETELY CORRECT.
WE'VE BEEN FIGHTING AGAINST IT
BECAUSE WE'VE BEEN DOING VERY
GOOD POLICIES WHILE THEY HAVE
NOT BEEN DOING GOOD POLICIES.
WHY WE ARE PERFORMING WELL AND
THEY ARE NOT PERFORMING WELL.
THEY ARE DRAG US DOWN, THEY ARE
DRAG US DOWN WITH INTEREST
RATES.
WHEN YOU HAVE NEGATIVE INTEREST
RATE YIELDS AROUND THE WORLD,
HOW CAN U.S. YIELDS BE HIGHER
THAN REST OF THE WORLD.
OUR POLICIES MADE US VERY
RESILIENT.
CHARLES: ART, THANK YOU VERY
MUCH.
WE ALWAYS BRING YOU IN.
>> CHARLES, YOU'RE GREAT.
IT IS MY BIRTHDAY TODAY.
DIDN'T WISH ME HAPPY BIRTHDAY.
>> LOOK AMAZING FOR 38.
>> I'M GOING INTO MY 80th
YEAR.
CAN YOU BELIEVE IT.
CHARLES: YOU'RE FOR REAL.
YOU'RE A GREAT GUEST.
