factors has likely played a role in slowing productivity growth, the extent to which they will continue to do so is an open question. does slow productivity growth if it persists in part a lower neutral interest rate? first, it implies the economy's usual weight -- rate of output growth when appointment is at its maximum, will be significantly slower than the purse -- post-world war ii -- average. slower economic growth implies businesses will see less need to expansion paired it implies families and individuals who feel the need to save more and then less because interest rates are the mechanism that bring supply savings and funds into balance. more saving and less investment

in play lower neutral straight. -- neutral interest rate. it is something that can be estimated in retrospect and as we have increasingly realized, it has probably been trending down for a while now. estimate of the longer run neutral rate come for instance, is one full percentage point lower than our estimate just three years ago. thinking what is this discussion of esoteric mean to me. if you are a borrower, it means although the interest rates you pay on your auto loan or mortgage or credit card will they willep higher, probably not increase dramatically. likewise, if you could inch

higher after a a while, probably not by a lot. from savers who want higher rates. fromnow beginning to hear buyers who want lower rates. stronglyemphasize enough that we are not trying to help one of those groups at the expense of the other. we focused very much on the dual mandate i keep mentioning. we all benefit from plentiful jobs and stable prices, whether we are savers or borrowers and many of us of course are both. economics and monetary policy are at best exact sciences. figuring out what the neutral interest rate is and setting the right path toward it is not like setting a thermostat at the house. cannot just set the

temperature at 68 degrees and walk away. because changes in monetary policy effect the economy with a long lag we must base our decisions on our best forecast of an uncertain future. we must continually reassess and adjust policies based on what we learned. that leads me to repeat what i said when i began. creatingal reserve was -- created more than a century governmentan era of reform to serve public interest. the structure established for the federal reserve back then intentionally insulates us from short-term political pressures so we can focus on what is best for the american economy in the longer run. i promise you, with sometimes in

theect information and evidence we have available, we will do just that by making the ast decisions we can objectively as we can. thank you. i would now welcome your questions. [applause] >> thank you and welcome all of you to this magnificent venue. it is my proud duty to convey the questions that you have composed, the idea of posing

questions that one is given from unidentified shadowy masters, seems to exemplify what the president-elect seems your orders do. [laughter] it is a great pleasure to be here and to meet you. talks over the past year, you identified inequality as among your major concerns guiding the fed. i wonder what might we look for as interested in and somewhat knowledgeable outsiders in fed actions that would reflect this about inequality. yellen: trends pertaining

to inequality are limited. in some important causes at least in my view and i think that of many economists, factors that have given rise to we see a growing differential in the wages earned by those who are more skilled with more education, and the incomes of those with less education. when we ask what forces were responsible for the technological change that has increased the demand for skill and -- disadvantaged those who have the ability to work with technology and globalization, those are two important factors and these are trends we cannot directly affect.

maximalning a employment, which is the goal assigned to us by congress, we make sure there are abundant job opportunities. it is evident that when there is a great deal of slack in the labor market as there was enough -- for the financial crisis for many years, that harms everyone, martin already -- minority groups can experience the most dramatic declines in their income and increases in their unemployment rates. economy generally recovers and unemployment comes down, those groups that normally have higher unemployment rates actually see the biggest declines in their unemployment rates and change in their

income. so maintaining a healthy economy will slow unemployment is toething that, relative labor market conditions, is something that greatly benefits minority groups and others less advantaged in the labor market. that is an important way in which we can help. reflecteds a concern in the demographics today, a great concern about the baby boom generation reaching grossment, with a deficiency in assets. it obviously will have an impact on future spending levels. an impact that will ripple through the society. how does that concern enter into

the kinds of decisions you and your colleagues have to make? how does it mediate through the world of monetary policy? yellen: the aging of the american population, the retirement of baby boomers is one of the most important trends that is already affecting our economy. which we already see the impact is that the rate of labor force participation and the population participating in the labor market has fallen expectedally and is because of demographics to continue declining. we are also seeing slow growth in the labor force, which is pushing down estimates of the rate at which the economy is

capable of growing over the medium and longer-term. my colleagues estimate a longer run normal real growth rate of is probably going to decline to slightly under 2%, low by historical standards. the aging of the population makes a great deal to patterns of spending and it is an important reason why we should expect the health care sector to be expanding, as retirees consume substantially more health care and other elements in the population. as you mentioned, retirement savings is of course an important issue and, regrettably, i think many

american families are not well prepared for retirement and will continue to be a disproportionate share of families heavily reliant on social security as their primary source of income. >> i am being overwhelmed here with learned questions that rest on facts and not in evidence. [laughter] bear with me a moment. out ad like to draw you little bit on an area of policy you may impact the world have to deal with. .t has to do with trade particularly, in a way that is probably not seem in recent elections in my lifetime, trade was a major campaign issue or

set of slogans. though you do not handle trade, you handle exchange rates that impact your world a lot. the dollar is very strong right now. it is very unprecedented. i am wondering, if the continuance of policies have the effect of forcing the dollar upward further, how does that ripple through in your world and what should we be looking for? the value of the dollar is an important influence on the economy. it is one of the factors that the magnitude of a country's trade deficit. does pay attention to when wee of the dollar

forecast the economy, though we do not in any sense target economy, our objective is, as i emphasized in my remarks, to try and achieve maximum employment and stability. we take it into account. one of the factors that influences the value of the dollar is diversion sues in interest rates across countries, which partly reflected different paths for monetary policy, and the underlying strength of one economy versus another. you referred to the substantial run-up we have seen in the dollar over the last couple of years. the u.s. economy has enjoyed a stronger and faster recovery than many of our trading

partners, advanced nations. of that is u.s. monetary policy has begun to tighten slightly and it is expected, as i mentioned, it will stay on a gradual half to rate increases. that expectation in the market of growing diversion sues between u.s. and foreign interest rates, plus the underlying strength of the economy, is something that has put upward pressure on the dollar. when the dollar strengthens, that tends to make u.s. goods less competitive, to diminish exports and make imports cheaper, raising imports. so net exports, exports and imports have been a drag for a couple of years now on the u.s. economy.

expect that drag to continue. in recent months, we have seen further appreciation of the dollar. in part, that likely reflects market expectations. growth will strengthen perhaps policies,ansionary reflected inbeen the dollar. so trade policies can directly impact a country's trade deficit and trade position, but there are other factors also that need to be taken into account. one contemplates the evolution of a country's trade deficit in the dollar is an important factor with economic growth here and abroad. >> let me ask you about another area of impact on rising rates and that would have to do with equities evaluations.

you made some statements in the i doyear expressing some, not think you were suggesting the equities were in a bubble. theere sensitive to that in bay area because we were fond of our bubbles and we love our tech sector. wonder whether the rising and raising rates, and equities, do you have any concern, what inld you be looking for terms of equity multiples, evaluation that you would begin to get worried enough about to have it influence policy? janet: i try not to do -- i try not to give investment in -- advice >> that is a pity. [laughter] chair yellen: values for asset prices are, unless i am very concerned about a real risk to

financial stability that asset prices might entail. regardmoment, i would financial stability, there .lways present to some extent i would regard them as moderate. one is to kick -- one indication would be growing leverage. growth.rapid credit growth butn credit not at a pace that would give me great concern about financial stability. thanks are strong and have a great deal more capital and the quiddity and the federal reserve engages in regular stress portfolios of major financial institutions to

make sure they could suffer a serious adverse shock and go on meeting the credit needs of our economy. i would really characterize financial stability risk as moderate. coming back to the stock market, the level of interest rates is one of the influence on asset valuations, generally including equity rices. we have had generally low interest rates. expecting, we have indicated our expectation is nextal increases over the several years. that type of expectation is embodied in longer-term interest rates in the market. that set of expectations about interest rates i believe is an

influence and partly explains why ratios are as high a they are. rates of return on stock are determined by market participants, partly relative to bonds. normal inrential is buthistorical sense, interest rates do matter. i think it is important investors take into account, i mentioned uncertainty. take the economy can twists and turns that are unexpected. movements in interest rates up notdown that are large and anticipated by the markets could affect value -- i had several interesting questions here about technology.

let me put them before you. once you like. here in a question light of the experience with guards itsw the fed own data from outside manipulation, and how real is the risk of manipulation data. then there is a question about decreased demand for paper money, how it might effect the fed. a similar question is, such as this interlocutor, you are quoted as saying, we are looking into it. is that a correct quote? oliver: i am not -- chair yellen: i am not positive

i said that are not. technology that is actually embodied whose core technology is incorporated in bitcoin. i do not regard myself as an expert on this but my is this is a technology that enables transactions in ownership of things to be taking care of formatically without a need a trusted central party to record transactions. so, it is a very important new technology, which could have implications for the way in which transactions are handled throughout the financial system. ofare looking at it in terms

its promise in terms of technologies we use ourselves and many financial institutions are looking at it. it could make a big difference to the way in which transactions are cleared and settled in the global economy. so you asked about cyber security and the security of our own systems. cyber security is a very prominent threat. we recognize that and we are ouring very hard to protect core systems, for example, other thatsystems that we have process trillions of dollars in transactions. we apply the highest security standards. and fight to stay ahead of the curve to the maximum extent

possible. >> have you had instances that have given you pause? chair yellen: we have never suffered a major breach. had sometes have incidents but we have never experienced anything that affected a core reserve system. we do what we can to ensure it stays that way. we are work closely with and keyl institutions utilities that operate in the payment system, to try to make sure the financial system as a cane is secure and that we address cyber security threats that could filter through the system. us. is a high priority for

was there another piece of that question that you also mentioned? >> i don't remember. chair yellen: i will quit there. >> cashless economy. chair yellen: we're not there yet. i believe the demand and use of cash continues to increase. but there are many important innovations taking place in this space. since tech innovations that i think are very exciting in terms resulting in faster, safer -- save for payments with the changelevel that could they use over time.

for our part in the federal reserve system, we are monitoring those very carefully. we want to make sure that useful and wealth -- enhancing innovations can take place and that we do not stifle them. we also want to make sure that consumers will protect. >> want to draw you out on thinking regulation. the banks came out of the 2008 meltdown with their reputations somewhat tainted. there is obviously concern about the adequacy of regulation oversight. i have a question here about quantitative easing and why so the banks remaining in their vault unspent, there is a question about if dodd-frank is dismantled, what sort of pressure with that put on the

fed and what sorts of functions with that assume. there is a general sense i think from several of these questions, a mistrust in the confidence and motives. we have had these scandals wells fargo and products, essentially fraudulent activities. i am wondering if you could talk a little bit about the fed's role in banking. are you facing greater challenges now? is it getting harder now than do you have the tools you need? we have greatly strengthened our supervision and regulation, the banking system in the aftermath of the financial crisis and put in place particularly high and demanding standards for the largest and most systemic institutions.

we have greatly increased the amount of capital, the quantity and quality of capital that we expect those institutions to hold. we have greatly increased the amount of liquidity that we expect them to hold. at which we have supervised them, in particular, every year, we inject the largest most systemic institutions to a detailed stress tests in which federal reserve analysts take their artfolios, and we spell out severely adverse scenario in which the economy will be hit by a sharp downturn, possibly with important prices like commercial

real estate prices or house falling substantially, developments that would impose losses on these institutions. we carefully evaluate what losses they would suffer and what their capital would be in the event such as severe shock. we insist, we reviewed their capital plans, and we insist they maintain enough capital to be able to serve the credit economy evenu.s. after such a severe shock. it is a very demanding exercise. we insist they be able to analyze the impact of the shocks that they have risk management

abilities that are up to the standards we should expect in their importance in the economy. we have been putting in place policies to deal with the too .ig to fail problem we would want to be the case that if a significant institution were to encounter difficulties, that institution could be resolved without u.s. taxpayers have to -- having to come in and provide funds. we have made significant progress. the largest institutions to prepare so-called living wills that would show if they want to encounter severe stress, how they could be resolved in bankruptcy or through a new orlene liquidation process incorporated in dodd-frank, and

having to prepare those living firms to really simplify and think more carefully about the way in which they are structured, how >> welcome to our viewers tuning in to what'd you miss live. janet yellen is live. let's get back in. yellen: a set of guidelines as we have strengthened supervision. we do have a safer and sounder financial system. there still are abuses. compliance with laws that we see an important financial institutions. you mentioned the customer abuses at wells fargo. we've seen institutions

penalized for violating u.s. sanctions, for violations of the bank secrecy act, for foreign exchange scandals. that imains conduct regard as unacceptable. we want to seeing definitely improved compliance and we are focused on that. >> i just wonder whether scale and do you ever look back at a time before the banks went national? do you ever think we might have erred creating these national giants? >> we were getting giant firms

prior to the financial crisis in the financial crisis probably cause there to be greater concentration in banking in some ways. i think that is an adverse developmental. it is something that was understandable given the strains. we still have a very large number of community banks that serve the needs of their communities and engage in innovative lending practices and understand their communities and bring a diverse set of banking services to make them available to consumers although we do have alsoer concentration we have many sources of diversity in terms of what is available to businesses and households. ,> there is a question here

less about you than about your and this is not a forward-looking question. this is an historical question. [laughter] how do you communicate? statutorily by code, by owner, by law? you are to be rigorously dependent that you have the same policy universe. do you communicate through code? [laughter] how do they make known their expectations and have you make known your response? a very long: tradition dating back many the fed chair and the treasury secretary regularly

meet and discuss the economy and a range of issues where we have common responsibilities. i'm not sure when this practice began but it is many decades old chair iuring my term as have had virtually a weekly breakfast or lunch with jack lew , who is treasury secretary. keepis is the way you abreast of what the administration's thinking is. he is the conduit for that? >> we share a common interest in the success of the u.s. economy and the administration, the ones that i have had any direct definitelywith have respected the independence of the fed. i have never had a situation where a member of the administration has tried in any

way to pressure me from any the stance of monetary policy. i think it is appropriate for me to explain to the public as i have tried to do today and do regularly, the logic behind monetary policy, how we see the economy, while he may have taken actions that we did and i would do that with the administration just as i would with the public. we would share information about economic development and our interpretation of those on financial regulation. we cooperate. independence is something that refers to monetary policy. chairs aury secretary

group called the financial stability oversight council which is a large group of regulators that are focused on potential threats to financial stability. we jointly represent the united states and many international forum. and sit next to one another routinely at meetings of groupings like the g-20 or g7. we share a responsibility for the economy and discuss it and make sure that we are exchanging information. >> a thoughtful question here that -- about uncertainties. news, the newshe files in the world of uncertainties and hectoring.

the wayg guesses as to things might be developing. moment.seem a turbulent the presidency beginning with a lot of ambiguity as far as policy. grexit, the european union. the environment out there, what are the trouble spots, what are the things that come to you and say that is something we have to track carefully question will be the top three or four things you want to keep a close eye on because it is point to affect your world in a major way? >> you listed many of the things we are focused on. although there are many uncertainties now, for example in our most recent statement of the federal open market committee, we described the risk

of the near-term outlook is generally balanced. .here are uncertainties my assessment at this point is some of the global uncertainties we focus on our a little bit less worrisome than they have been in recent years but of course we are very much focused on global growth, global growth we been relatively weak and carefully track developments in major parts of the global economy. china plays a very important role in chinese growth has been slowing. that is not an unexpected development. it is something we have long anticipated. china plays a very important role in the global economy.

developmentshose quite carefully. commodity markets can be a source of volatility and have economic impact. we have seen substantial fluctuations in energy and other commodity prices and we watch that carefully. economic policy does make a difference and we are at a point many economic policy changes are in consideration. of course we will closely follow what happens with economic policy and take any changes that occurred. we will factor those into the take account of their impact on what we need to do to achieve our objectives.

those are very important uncertainties. i had some questions here. we have some students in the audience. first, what advice you would give to recent college graduates in the world of business and public service. and another, it asks you if you go back in time and speak to yourself the beginning of your career what advice would you give yourself? of the condition opportunities women have the financial sector. have you any observations you want to share about particular challenges women face? >> with respect to recent college graduates, you're entering a very strong job market. opportunities i think are plentiful but you live in a

world where technology and skill needs for the labor market change over time. and alwaysarning updating one's skills, recognizing you may need to learn things in the future to have successful careers, that you are learning shouldn't end when you get your sheepskin. let's see. opportunities for women. i think opportunities for women have generally improved i will say that in many meetings i go to in the economics profession among college majors, women are underrepresented in

economics, business and finance. >> did you feel at times personally visit advantage by being a woman? >> i haven't felt personally disadvantaged by being a woman but there were relatively few women, for example when i is it was in graduate school over served on faculties. shown is thathas the absence or shortage of role models does have an impact on pursuing aerests in particular field and in that sense i think women are somewhat distant managed. that there aren relatively few college majors in economics. only 30% of econ majors in

college are women. that is surprising given the --m fields do not have been have an underrepresentation of women and mathematics doesn't have an underrepresentation of women. --the kinds of things women that doesn't seem to be what is going on. we are not certain what the causes are as this is certainly i would like to see changed over time. we are very focused on diversity of all sorts in the fed, in our hiring and in the work we do. we really want to see women and minorities succeed. >> that other question, what advice would you give yourself now if you were starting out? >> i got good advice.

i was pleased i majored in economics. i felt i had a good career. [laughter] i don't have a lot of regrets. >> fantastic. i think we're at the end of our session. thank you so much. i want to thank you for coming out. it is my duty to declare this session over. [applause] janet yellen: thank you. is what'd you miss. i'm scarlet fu. while janet yellen was speaking we did get results from netflix. joe and i are here to break that down.

the numbers are the streaming numbers. the domestic streaming net additions. the full out the estimates. 1.9 3 million added. in terms of international streaming ads for the fourth quarter 5.1 2 million. that seems really big. so much of whether netflix is going to have many years of growth ahead of that is if it can find traction internationally. we talked about that earlier. it has been finding success in brazil. just under 3.8 million estimates. that is something that investors have to be enthusiastic about thinking there is a lot of growth there. scarlet: we see the stock up in after-hours trading. the cash flow will be down $2

billion in 2017. we want to go back to janet yellen's comments and reflect on that. joe: let's bring in michael , joining us from california, bloomberg view columnist and the chief economic advisor -- we will start with you. what is your number one headline from what yellen just said? >> not a market mover but somewhat more dovish than i would have expected considering what is happening on the ground in the economy. joe: what struck you as dovish? ist did you hear that different or discordant? for a set herself up comment that we are very near the target of the federal

reserve including on inflation and yet when it came to what that implies for policy she stepped back. what i found interesting is she recognized the structural headwinds to the economy but then didn't imply what that means for the ineffectiveness excessive reliance on monetary policy. she set up for a somewhat more hawkish signal about policies. less data dependence. but she didn't go there. do you think she was keeping her options open? >> she was keeping her options open because they don't know what is going to happen. nothing has really changed since mid-december. the economy is performing at about the same level. nothing that would suggest the

economy has reversed course or gained steam. why say anything different? she didn'tiking is go out there and make any hawkish predictions but we are seeing a hawkish move in the bond market. yields are going up. some short-term traders feel whether she has put a floor under the idea of interest rate hikes. there is something going on there that i did not anticipate. >> part of that has to do with the 3% number. she signaled 3% as the neutral rate. that is higher than what some people believe. yesterday's move was excessive. we have some strong inflation numbers this morning. overi was just looking at 2.41 after a strong reversal. one of the big questions everyone wants to know, they

tried to pry it out of her, janet yellen is too smart to give away too many cards. she said she and trump share a common interest in the success of the u.s. economy. what is your protection for the dynamic between them? administrations have not typically intervene much. trump is the type to hold back his feeling. how do you think this is going to evolve? ? >> it is hard to tell. she stressed the independence of the central bank and the apolitical nature of the institution. is gave a strong signal this a political. i think she is hoping honestly for a transition away from excessive reliance on monetary policy to the engagement of the fiscal and critically structural

measures. that is what the fed needs. let's see whether she gets it or not. scarlet: i thought it was striking how carefully she tiptoed the idea of a stronger dollar. one of the questions was the stronger dollar. how does it little through your world? she made the usual comments about how strong the daughter -- dollar would make u.s. exports more competitive. what you would expect her to say in the situation. it is magnified because donald trump of the dollar is too strong. she made the obvious point that the fed's plan to continue raising interest rates, the dollar is going to get stronger and the effect of that in terms of economics is that it is a drag on exports. really put in terms of expected this football is he the said the fed is watching it because of its impact.

sensitive to remarks about the dollar, remarks about monetary policy because we have whoesident-elect in today's talks about things previous presidents have not talked about area >> we got these comments from trump about him feeling the dollar is too strong. we are used to these comments from other governments. you might hear something like that out of the finance ministry in japan. we are not used to hearing it from our own government outside .f policymakers they rarely talk about levels. is there anything wrong with the government breaking this tradition and trying to job on the currency one direction or the other? ? what you don't want to say something like that in the u.s. because you are the reserve currency. believer that a stronger dollar, which would result from not just policy

divergence but economic divergence, a stronger dollar is the main risk for the economy and markets in 2017. not only would it constitute a headwind to growth and earnings, protectionist tendencies. ,f this economy and this market if they are both to continue to do well and do even better we have to be careful. it doesn't mean we do anything different in the u.s.. other countries have to get their act together in terms of policy. >> thank you. you will be sticking with us. you going your latest to piece on the economic lessons from president obama's tenure in the white house. this is bloomberg. ♪

scarlet: netflix reported earnings. they have added 7.5 million new customers. topping estimates for domestic and international growth. you can see the stock shooting up more than 8% in after-hours trading. 5.1 2 million. estimate was the .8 7 million. joe: it is the story this quarter. it is super important for the stock. it really needs another lack of growth to support the stock price. the u.s. market is more mature. they have been in the market for several years. is from leg of growth revenue and cash flow from international markets.

they have put up strong subscriber numbers. that is what supports the story longer term. this is a company with $14 billion of long-term programming liabilities and it needs the growing subscriber base to support those payments. joe: it seems like investors think of netflix as a tech startup. puttingas they can keep subscriber numbers on the board everything else is secondary. >> it is. this is 2017. it is going to double profitability. reed hastings says 2017 is the year where we will deliver serious profits. street consensus is for a doubling of earnings. they have had to spend

heavily to get there. we plan to invest $6 billion on content. that is up for five billion. we are going up higher rates. is not going to be a problem? >> there is that huge programming liability that is out there that gets larger and larger every single quarter. have you pay for that and generate a return i signing up more subscribers? a lot of things have to work right here. they are actually working right at this point. >> whether they continue is the story to watch. sweeney, up better than 8%. scarlet: we will be turning to our politics team for more on friday's inauguration. have full coverage on tv and radio starting at 10:00 a.m.

in new york. this is bloomberg. ♪

joe: in a bloomberg view column out today, president obama's and nor miss economic accomplishments are tempered with the recognition of four gone opportunities. we're back with mohammed joining us from california. you say there are five key insights that we learned. let's start with number one. what is the first thing that you learned? the u.s. is no longer living just encyclical space economically but in structural space. ,nd had we realize that earlier the recovery that we got in the last eight years would have been

much deeper, much more meaningful and impacted many more people. >> you need a credible economic vision. because that there is no framework to support policy initiatives and business plans that you get by and from, other parts of the government. looking ahead, do you see a credible medium-term vision that is already in place? >> it is not an place. it is evolving. i think they have to bring it all together. and that is going to be critical because you have to give people a sense of direction. businesses give clarity on what comes up. this is quite a shift for us. we used to live encyclical spaces and think that the long-term is fine. joe: in addition to the fact

that we have a change of administration from obama to trump, we are also going from divided government to unified government which seems like a fundamental change. this is a new regime. how important will that be? unlike obama who is constantly clashing with congress. critical. if you look at the last six years there has been virtually no economic policymaking beyond the fed. dad is now behind us. hopefully we will get things done. policiest is welcoming by president trump. president obama --

[inaudible] scarlet: so we seem to have found some unity when it comes to domestic government but you need structure when it comes to structure. >> so there is the carrot and stick approach. it requires a better structure in the g 20. when that comes from the biggest economy in the world it is a big stick. our success depends in other countries getting their act together. it relates to the discussion we had on the dollar.

we need other countries to get their act together. joe: i want to follow up on that point. when you look around the world and see countries that need to get their act together the what are you referring to? who needs to do what? potentialis way below . it is also over reliant on monetary policy. germanyiscal room in and it has need for structural reforms. second would be japan, third would be china. you said the u.s. economy no longer lives in a cyclical space. his medicaid is with all of these economies? including china which faces its own structural headwinds. >> absolutely. are no longerues limited to the developing world.

they have become an issue for the developed world. we invested in the wrong growth model. we over relied on finance a decade ago and we have to figure out genuine engines of growth. joe: do you get the impression that policymakers are internalizing these things and prepared to do what it takes or is this just going to be more talk and back here with the same frustrations? >> the growth of the antiestablishment movement on both sides of the atlantic is making the establishment think more about these issues. come along way. live encyclical space. we were told that is not the case. advanced economies are not like the emerging world. joe: bloomberg view columnist

and the chief economic advisor. thank you for coming on. >> thank you. scarlet: donald trump's pick for treasury secretary steven mnuchin is scheduled to face off with cement democrats tomorrow. in his obtained remarks, he plans on defending his record as the owner of a mortgage lender accused of unfair lending practices during the financial crisis. more let's head to kevin on capitol hill. this was a scoop by bloomberg to get a copy of his prepared testimony before he speaks to the senate committee for his hearing. how much of his prepared testimony was spent defending its record? stephen is hearing the criticism coming from democrats, particularly about his time at one west bank and

he's looking to pretrade himself as someone who has fought to grow the economy and fought to save a bank as opposed to run it into the ground. the sources i'm talking with close to him indicate he is preparing for tomorrow's hearing shaping up to be a contentious one before the president-elect is set to be inaugurated. joe: i doubt whatever his testimony is, how he delivers it, it's going to change many minds on the democratic side of the aisle. what is their objective? do they want to undermine him? what is their game plan. >> i'm leaving a shadow hearing. called former employees at one west bank to testify before a handful of senators on the democratic side this afternoon. critique, ad was a

very articulate critique and perhaps a preview of what we are going to hear coming from democrats tomorrow at the hearing. behind the scene i spoke with in the democratic party who told me they are not bullish and being able to stop minutia from being confirmed. the math simply is not there. they are hoping to characterize him as someone who is out of touch with the middle class. >> that will be a theme tomorrow. another hearing taking place is the wilbur ross hearing. talk about how that is going. what expectations were in place heading into this? >> wilbur ross is facing tough questions from democrats. a key moment was his particular position on trade policy. he said he is pro-trade and a lot of democrats and even some

republicans trying to figure out where his worldview falls in line with president-elect donald trump. he continuously said he was opposed to the transpacific partnership. a lot of folks are actually in favor of tpp. they were grilling him earlier today on that particular issue. he seems to be a bit more in line with the business community and supportive of tpp than his boss. scarlet: thank you for the update. joe: staying on the theme of trade, the president-elect has pledged to renegotiate nafta to be more favorable to u.s. manufacturers or leave the 23-year-old pact. played a key figure in the creation of nafta.

>> frankly president-elect trump is right in saying we need a new paradigm for trade. i think he has that more right than not. he said i'm not against trade. i am for trade but i am for fair trade. so let's see how that plays out. we have to be careful because the world is interconnected. that is how we live and conduct our lives. you can start putting up barriers. supply chainsupt without having enormous negative ramifications and relationships. it will raise prices to the consumer if we do. it can be increased prices. it is one thing to say we are keeping jobs.

the consumer start seeing the sticker go out. both are good things. had you achieve the balance? that is the issue. this is not an easy case to make. some of the strain on manufacturing and all of these serious issues about middle-class incomes rising tide and all of that, income inequality, trade has been the poster child for that. there is a married of factors. we can't have real growth in this country. one of the good fortunes we had, we had sound policies but we had growth without inflation. if you don't keep those prices in order you're going to have inflation and that is not good for the american public. >> you mentioned fair trade. you were involved in nafta. are there areas of nafta that

should and could be reformed? >> the quick answer is yes. you are a lawyer and a business person yourself. any agreements after 20 years, it is not unusual to update them. the world has changed a lot. a very strong bipartisan consensus. it has been good for all three countries. i would argue strongly that the north american compact, the logistical ties we have with candidate to the north, next ago to the south are essential in this increasingly competitive globalized market. let's make nafta better and move forward with it. mclarty. was matt

scarlet: coming up, we switched gears. the company's first-quarter revenue. that is next. this is bloomberg. ♪

scarlet: profit was in line with the consensus. the company stock is up 60% over the past year. more than that with the u.s. rate hike and the yield curve positioning for further growth. joining me, the ceo of the company. great to see you. you are fairly optimistic because of growing balances and the prospect of higher rates. one thing we noticed is you

didn't raise your overall guidance. why not? >> we are a quarter inch of the year. we would see if it continued. clearly all the signs are good. >> all stocks have exploded higher. whatever the insurance since the election. how is the environment looked different for you pre-and post election? >> weep or dissipate with most other financials. we announced we would acquire scottrade. that will be a boost, which is interest rate sensitive. our basic business model is investing in trading. we now have a lot of trading activity as being driven by the president-elect himself. that has quite an effect. ,carlet: the average climbs

487,000. what are the early indications for this month or this quarter? top thein a position to posted of last year? >> i think we're at 500-8000 in january today. a trendsaw was really before the election and then after. trading levels were muted. investors were saying we have to wait to see what happens. ,he minute we had the results within minutes, our futures business skyrocketed. that evening people were trading where they could. >> that was an incredible nights. you mentioned the president-elect, send to be president himself is a driver of trading activity. when you think about retail seeing as this

president often does twitter about individual names, do you see that having an effect? >> absolutely. it is instantaneous. we have seen precisely that of facts. we saw 93% increase in trades over their preceding 15 day average. i guess it is to a fax. his predilection tweeting out individual names, sectors, even making an opinion on the u.s. dollar level is very unusual. investors can take positions on that and they do. do you have a sense on it those are short-term positions?

>> they are pretty short-term trades. we are not sure whether that affect is going to dissipate over time. ask me in a year. i think that will be somewhat usual and we will see a trend were that will be a spike. change outsideny of the ones he has tweeted about? is there any trend on that front? that were the stocks less fashionable. you saw more trading in different names. we actually think that the active passive trend, it might be a secular trend. well.ould do very >> as we have seen, a lot more activity driving a lot of the global market actions.

>> it is a small percentage. futures were up 24%. it is a tiny portion of overall client base. they drive a lot of activity. enormous increase in the number of trades because that was the match pair to trade. joe: is there a secular trend towards more macro futures, type stuff? things that happen, -- >> the world is becoming more global. news events driving trading happened beyond just our regular equities. you're going to see investors more to after-hours trading. the second attack is -- a fact

is, they like the instruments they can trade. whether it be oil or you name it. they said ok, that is a trend i want to play. scarlet: one thing you have remarked is that you expect the market to undergo a normalization and stop reacting so dramatically to every trump tweet. what does that mean for your company? >> we have seen an accelerated pace postelection. there is usually a little bit of a bull rally. there is a honeymoon. this got ahead of itself. saw,nterest rates that we it takes a long time to put those dollars into the ground. that will take some time. thank you for joining

us. coming up, netflix signed up a subscribers. of more on the big earnings report. this is bloomberg. ♪

scarlet: we just want to bring you an update on netflix results. shares are soaring in after-hours trading. it comes down to the addition of streaming customers. more than 7 million for the fourth quarter. that is really where the company delivered. the u.s. market is more mature. it onhey did also crush the domestic. 1.93 new domestic customers.

while the real exciting story is the international, they did pretty well beating expectations on domestic. scarlet: one thing we should add, netflix has a huge amount of money paid out or committed to original content. they plan to invest $6 billion on content in 2017. this is something people are going to watch for. joe: they are going to have to pay it back. , talking about we have all of these subscribers. we are going to turn them into real profits. real money coming especially in these international markets where they had invested so much. one more thing.

it quick promotional aspect. netflix will behold against conference call in five minutes. you can check it out on the bloomberg, it is a running blog on the netflix results. joe: coming up, what you need to know for tomorrow's trading day. this is bloomberg. ♪

scarlet: looking ahead to tomorrow. a full line of interviews from the world economic forum in davos. we will also be speaking with radel he and bill gates. joe: a huge line up. i will be looking at the ecb holding their first monetary policy of 2017. >> and the news conference that comes after from mario draghi. other things to watch, -- joe: that is all for what'

>> you are watching bloomberg technology. president obama has held his final news conference today as commander in chief, taking questions on russia to cuba to

the peace in the middle east. he said the moment may be passing for a two state solution. he also says it is in the world's interest to have a relationship with russia. the senate and armed services commission has approved james matters as secretary of defense. tom price testified at his confirmation process. he offered assurances the administration isn't planning a medicare overhaul. scott pruitt says climate change is real. issaid he disagreed that it a hoax created a china. wilbur ross says he is pro union at his hearing today. fights he is qualified to unfair trade. george h.w. bush remains hospitalized in houston.