Vested Chief Economist Milton Ezrati on U.S. trade negotiations with China, former White House chief economic adviser Gary Cohn’s comments about U.S.-China trade talks, Minnesota resident’s tax concerns and New York City’s mounting budget concerns.
Milton Ezrati: NYC At Risk For Bankruptcy?
Q4 hedge fund letters, conference, scoops etc
Transcript
Joining us right now is vested chief economist Milton Ezrati. Milton good to have you on the program. Thanks so much for joining us. Pleasure. We've seen the Chinese economy see a real impact from this uncertainty over a U.S. China deal. What are you expecting here.
Well I think the Chinese are going to get to sign a deal. Their economy has suffered tremendously not just from the terrace. There's a natural slowdown it's not the developing economy it was a lot of industry is leaving China not just because to avoid the terrorists but also they're leaving because the wages there have gone up more than in neighboring countries Vietnam Cambodia Indonesia. So China is this has come at a bad point for China. They have to make a deal. They need us more than we need them.
And the last thing China wants is unrest in the streets or at Steve.
That's right. The whole deal with the communist regime is they deliver the goods. So you put up with the regime's suppression. As long as you have the freedom to get rich and now we know China's been faking their economic statistics or rather inflating them maybe they're getting that college scandal bug in them. But anyway nobody believes those numbers anymore and they've got to deliver and they haven't been able to deliver.
I think it's noteworthy in this respect on China if you go back to 2008 the recession of oh wait the whole globe was in recession. The Chinese don't have much of a social safety net. They laid people off and literally there were party members.
It's amazing how China does the GDP. They would have the goal. This is the goal for the GDP and they tell local governments own government spending crazy way we do GDP of government spends that counts plus GDP. So they tell these local governments spend to make sure we reach that 8 percent target 9 percent target whatever it was. So it was really since 2008 especially a false boom. It's not from free market forces at work. It's directed from the top. That's why you have this massive borrowing from China to try to inflate those GDP numbers.
It's fascinating. What about the U.S. How do you see the economy here.
I think the U.S. economy is slowing now but I don't think it's going to be a lasting thing. I actually think it will pick up in the second half of the year and the consumer spent a little ahead of income growth last year. He and She are pulling in their horns. That's the first quarter of this year maybe into the spring. Capital spending which had done very well in 17 18 slowed in the last part of last year. It's beginning to pick up already. Housing seems to have stabilized it was off. So I think we'll see stronger growth in the second half of the year.
But it depends on a China deal.
Yes it depends on the China deal.
Were you surprised that Gary Cohn said that the U.S. was desperate for a deal. I mean to me that interview seemed somewhat personal. He was hitting Navarro some of his former colleagues at the White House which is a little surprising to me. I don't know if he was settling scores or if he actually believes that we're desperate for a deal.
I think he believes we're getting a good deal. I don't know what motivates the man. And I don't think I ever will.
Let me ask you about tax concerns Minnesota residents are reportedly buying muni bonds to reduce their tax burden. The state has the fourth highest state income tax rate in the U.S. that was at nine point eighty five percent. Adding to turbo tax. So Milton it's not just the Northeast that's dealing with the fallout of high rates you're seeing a massive exodus and some of the high tech states in the U.S.
Well it is I mean this deal has effectively turned the public and if they don't like the taxes now they have no reprieve except to either leave or go to their state capital and say stop this. Those are their only options. They used to be able to effectively socialize the taxes by spreading it out to the rest of the country. That's gone now. New York is suffering that. That's another problem for the city of New York state and obviously all the high tech stuff you do think.
Albany in New York City. Gracie Mansion realize how precarious New York's position is especially in this city. I'm old enough to remember the mid 1970s. Are we going to have a.
Need to go bankrupt. Yes.
Can the eurozone leave. Yes just asking. That's right. The state arranged a bill pay alone for the city effectively cut the credit cards in half and it could happen again. I don't think it's going to happen if and until we have a recession. But the city this is the best of times for New York City. Unemployment is low. The market remains relatively buoyant everything is right for the city and it's still running a deficit. They call it a gap. It's a deficit of almost 4 billion dollars.
Governor Cuomo understands what's going on in the state because of the budget because the revenue shortfall that's really putting a squeeze on the state's budget to build then and then when you see 25000 jobs that were heading to New York City from Amazon just disappear overnight because of some 20 something Congresswoman who doesn't understand how the unemployment rates even calculated that that sent shivers through the spines of politicians whether they're right or left.
Well I think I think Cuomo and I think he realizes back's against the wall. I can answer for de Blasio. What is he going to do.
What is Governor Cuomo going to do. Well his back is up against the wall and you've got all of this you know uncertainty and concern over taxes will he actually lower taxes.
Oh I don't think he's going to lower taxes. I think his first move is to try to cut spending.
And maybe do more deals with technology companies. Google is huge huge employer in New York City and growing. They're just not going to publicize any kind of deals that they make with these corporations and say keep it on that and keep it on the queue. Keep it on the cutey. We're not going to make some big marketing's splash with it. Otherwise you know who will be tweeting about it tweeting idiocy which I know where we're going to talk about with Karl Rove. Yeah out with a good op ed in The New Deal was racist. That's her. That was her latest thing down south by southwest. I will talk about that.
Milton thank you so much. Good to have you on the program this morning.
