>> what investors need to differentiate between is first, where are we in the cycle, second, what is the direction in the economy. >> people are vaccinated and they are still not ready to go and do things the way they did before. >> what we see for most of the year is quite a bit of anxiety about potential inflation. >> we are looking for a slowing rate of equity gains. there are definitely some storm clouds we are concerned about. >> the fed's objective right now is managing expectations, and they are doing a great job with that. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone.

a simulcast, bloomberg radio, bloomberg television. really boring monday, less boring tuesday and wednesday, and i'll of a sudden, thursday is interesting -- and all of a sudden, thursday is interesting for $6 trillion reasons. the "new york times" coming out with the line item on a $6 trillion statement for fiscal 2022. jonathan: president biden will propose a $6 trillion budget on friday that would take the u.s. to its highest sustained levels of federal spending since world war ii, while running deficits above $1.3 trillion throughout the next decade. tom: it is our modern monetary theory. we are going to be diving in this throughout the morning. huge news as we reframe the situation of the united states. sandwiched between them, the central bank of china adjusting the tone on a stronger yuan.

the plumbing of the global system seems to be working this morning. tom: china coming -- jonathan: china coming out, addressing things pretty quickly with the exchange rate the topped out a year ago today. we will not use the exchange rate to offset the commodity price rise. we will not use the exchange rate to boost exports either. that is the china side of the story. i want to go to the bond market in america. we are talking about $1 trillion plus deficits through the next decade. we are talking about the federal reserve pulling back on its asset purchase program. and here we are looking at the 10 year at 1.6045%, which i understand is a change from where we were because we were aggressively lower, but over the last decade, 1.6 045 sets percent -- on .6045% -- 1.6045% is exceptionally low on the 10 year yield. tom: we dive into this within

our economics, our finance, investment. we get french hill from arkansas with us in this hour. i wonder what he will think about $6 trillion. the solution of jon's observation on interest rates and elizabeth warren's statements yesterday to fancy bankers, the qualities of this nation are exceptional. lisa: that is why there is this increased spending president biden is proposing. i do want to just say that, building on the point you were just talking about, jim reed of deutsche bank came out and asked when does that matter, when debt doesn't matter anymore. you see an increasing debt to gdp ratio around the world, and yields coming down. greek yields now the lowest relative to german yields going back to 2008, despite the increase there. everywhere you look, you see this phenomenon, which raises the question of whether this can persist or whether this is just a blip before we start to go to in a regime. tom: we are not doing

microeconomics here at 8:00 a.m., but there's got to be an end result in leakages, usually personified in the foreign exchange market. jonathan: pretty much every cycle has been the same. every recovery, we add more debt. debt to gdp continues to rise. every recovery, the fed funds rate is that much lower. every recovery, our tolerance for higher interest rates is diminished. for a developed market like the united states, that is still true. what's got to change this belief that somehow treasuries are treated differently, not like a developed market sovereign, that we start to get worried about repayment, credit risk, and clearly at 1.60 45% -- at 1.6045%, that is not it. lisa: they have been buying up a lot of the new issuance. if they step away, will there be the buyers to pick it up? to your point, does that change the scenario because it is the biggest, deepest market?

or do we see the same trend we sign the japanese bond market? tom: the markets actually move here. mr. biden, certainly the report in "new york times," you do get a spike in futures. the 126th year of the dow jones industrial average, green on the screen. jonathan: we will celebrate that next year. [laughter] we do creep a little but higher, back through 1.60% at 1.6045%. tom: our booking team, they've all got crystal balls and sage going in the aisles here. they are just magical about getting us to the right guest at the right time. in the current -- enda curran on the pboc, and maria tadeo, i was almost in tears. peter tchir of academy securities, why aren't yields

moving given are fiscal numbers? peter: the fed continues to buy debt, so that is offsetting it. companies are net sellers of equity to buy debt. i think no one really believes that we are either going to get the fiscal stimulus that will extend because that bipartisan feeling is gone, and quite frankly, no one seems to believe that inflation is going to be anything but transitory. right now, the market hasn't seen inflation and so long that they are downplaying the potential. jonathan: i don't think the number one question has changed that much. how self-limiting what a treasury market selloff? peter: i think it would be very limiting. when people want to talk about taper tantrum's, you see much different positioning. all you have to do is look at some of the etf's. tlt come along dated treasuries. they have all had significant outflows, so the market is much

more prepared for a tapering type event. if the fed needed to, they have things like operation twist they can pulled out -- they can pull out. it is going to be a struggle, and nothing is going to gap a lot higher. jonathan: you think we could see a cycle hi. you can envision a cycle high of 2% on the 10 year? peter: i think ultimately we will push up to 2.25 percent, two point 5%, once this inflation story becomes embedded. i am a little suspicious about what china was saying today, for example. i do believe they are working on a shift towards the domestic economy. so there's also to the inflation stories out there away from the commodity rise that people aren't talking about, and will for start -- and will start focusing on this summer. lisa: what does this mean for investing? the idea that there is this idea to the treasury selloff that

could happen, and yet we have priced to for hex and -- priced to perfection when you look at certain sections of equity markets. where are you seeing value? peter: i think we are going to see supply chain's shift. there's going to be a real push to help build up our 5g and anything on that tech side. look for infrastructure spending and data mastic focus. i think you are going to see a push to bring back a lot more health care. medicines, pharmaceuticals. that can't be all sourced from china given the level of friction and competition, so we are going to see that brought around. that is going to sustain supply chains, change where things are made. i think that is the real opportunity, figuring out this push towards sustainability, bringing back some of these industries. that is where the real opportunity is going to be. tom: the full faith and credit space is not so much yield come but the price.

there is somebody betting on this paper. you mentioned the government and the u.s. government in it as well. do they consider that the foreigners will walk away, and all of a sudden the price will drift down, and yield will drift up? peter: i think we are ok on that. even when we are stepping away, which is becoming more likely because we have the worst real yield, but you can actually earn more on an average inflation bases in japan right now, probably even in germany, which seems bizarre given they have lower negative yields than us. that real yield i think goes away, but it is so much support from corporate pension plans, from pension plans in general, from retirees. i don't see it getting out of control. people are to position for it to get out of control. finally, the fed has a lot of tools it can bring out if it starts seeing that risk. so i think if we see -- so i think we could see yields go higher, but it is relatively

gradual and it is not going to be an impediment for stock markets either. jonathan: pete, get to hear from you, sir. peter tchir, academy securities head of macro strategy. the bank of england was talking earlier, and said negative rates are relative if the recovery is delayed. can you believe that there are still central banks talking up the usefulness, the efficacy of negative interest rate? tom: we are still talking about it, but we've got a little bit of a pull back on german 10 year yield. but i think the jury is still out on negative interest rates. we've got more to see there. when is the ecb meeting? i lost track of it. jonathan: june 10. tom: that is a huge deal. they've got to recalibrate for a lesser negative interest rate right now. lisa: this raised the question earlier when you said that each cycle, we go lower with the yield, take on more debt. if you are at zero, where do you go?

this is actually a serious problem in terms of what ammunition does the federal reserve, does the bank of england have in the next crisis. jonathan: yields did rise in the last 10 minutes or so is that story dropped, by about three basis points on the tenure now, back through 1.60%. the lead paragraph, and i will repeat it, president biden will propose a $6 trillion budget on friday that would take the u.s. to its highest sustained levels of federal spending since world war ii while running deficits above $1 trillion for the next decade. you remember the people that were going on and on about the budget deficit through $1 trillion in what it would mean for this bond market, that things would start to crack, is this it? tom: it is important. i don't know what draft he has of the budget over at "the new york times," but it is a detailed story. 117% total debt 10 years out. that number is on the edge of japan. jonathan: coming up next, ken

leon, cfra director of equity research. we are -0.0 8%. yields up three basis points to 1.645 on tens. on radio, on tv, this is "bloomberg surveillance." ♪ ritika: with the first word news, i'm ritika gupta. president biden woke reportedly propose a $6 trillion budget friday that would take united states to its highest sustained levels of federal spending since world war ii whilst running deficits above $1.3 trillion throughout the next decade. "the new york times" reporting that the plan calls for the government to spend $6 trillion in the 2022 fiscal year, and potential spending to rise to $8.2 trillion in 2021.

the u.k. health secretary matt hancock told parliament today the spread of the variant first identified in india has the potential to throw a wrench into plans. he said he "desperately wants to reopen the country, but can only do if it is safe." considering removing a controversial ingredient from the roundup weed killer after a judge presented a proposal to resolve current claims that the weed killer causes cancer. it is part of a bigger agreement to resolve roundups lawsuits in the u.s. following positions -- following acquisitions by monsanto. exxon mobil's ceo dealt a stunning defeat by a tiny activist investor. they promised to diversify bound oil -- diversified beyond oil.

the company has shed more than 100 when i bill -- more than $125 billion in market value during his tenure. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this is bloomberg. ♪

>> esther -- mr. dimon, how

much did jp morgan collect from overdraft fees in 2020? >> i think your numbers are incorrect. i want to point out, we did not overdraft -- >> can you just answer my question? >> we did not overdraft at the fed account, and at any request -- >> i'm sorry, mr. dimon. will you commit right now to refunding the money you took from consumers during the pandemic? >> no. jonathan: it's enough to give you a headache, doesn't it -- headache, isn't it? it goes on for hours, too. what is your take on it? tom: afterthought nailed me, and i got a refund from jamie dimon. jonathan: if you gave jp morgan a call and said can you have that money back, you would get it back. just how it works. tom: don't let afterthought know that. jonathan: let's get to the

market. equity futures down four. tom: all of a sudden, it is an interesting day. jonathan: it always frustrates me there are politicians in washington just believe the electorate are little bit stupid. it just drives me insane that we need to hold everyone's hands. you can get on the phone. i used to do this when i was a kid, when i would overdraw as a student. i used to go into the bank and ask for the overdraft fee. lisa: how often did that happen? jonathan: a lot. [laughter] jonathan: a lot. anyway my yields up to 1.6096%. euro-dollar, $1.2195. tom: explain the 10 year yield move here. ken leon is taking notes. jonathan: we had a piece from "the new york times" about the size of the budget in washington, the budget that often doesn't get passed. but the idea of having deficits of $1 trillion for the next

decade. tom: ken leon provides massive guidance to us, the cfra director of equity research, but he has historical reach on our financial system that is just wonderful. we are thrilled he would join us this morning. this is about culture and failure. hsbc came in 40 years ago. they were going to do retail banking in america. what is so interesting to me is the 10 branches they are selling to cathay bank of los angeles. this was a bank that was built from nothing out of chinatown in l.a. you go past the hsbc branch, turn onto alpine, there's cathay bank, growing every day, and it is because president of cathay general, they deal every day with the people. what did hsbc get wrong on the culture of acting in america? ken: thanks for having me, and tom, this train left a long time

ago. hsbc, first of all, this is a global bank. they've got one point $4 trillion in wealth management assets. they are strong in asia, positioned strong in u.k., and north america just doesn't matter. with the news today, even if you took out hsbc, could have been citigroup? the difference is hsbc sold in the consumer bank their credit card business years ago. citi did not. citi is only in three or four states in the u.s., but it is formidable. it is one of the top five banks. hsbc, i think this is a move just to go to where their strengths are, and it is not a u.s. market. tom: i look at at&t jettisoning warner bros.. it is about culture versus strategy. cathay bank out in chinatown in l.a., they are building a

smaller bank. very centric, china/asian model. what is the metric for jamie dimon to make this go? what is the culture model for big banking five years out in america? ken: particularly for jp morgan versus other u.s. banks, it has sizable presence in the capital market, so it is a quasi-investment bank. that culture permeates the bank, but they are also a world leader in terms of consumer stability to get a hold of technology, fintech, and harmonize with your brick-and-mortar bank branches and financial centers to delight the customer. there's no disruptors coming into the market, including goldman sachs, so you've got to be on your best game. i think for jp morgan and bank of america, they really execute well in the consumer area. jonathan: what did you make of the story would put out this

week on square may be getting into business banking? ken: square really has two principal businesses. it is a high-growth tech company. one is payment processing. the other is cash. it is just leveraging to gain share, whether it is from the banks or other established players. there are savvy players here. it is not like jp morgan or these aren't investing. they are investing billions in technology. so i would say it is a sign of where we are going, and for those banks that are not investing or don't have the capital size, it can be tough to compete. that is probably where square is going to gain share. lisa: what if we start to see the big u.s. banks acquire some of these fintech names? ken: they've already made investments in venture capital.

we haven't seen anything related to sizable multibillion-dollar acquisitions. but it is like jane fraser, the ceo of citigroup, former mckenzie. james gorman, former mckenzie. they have to say, what do we need in our bank to really compete? if it is technology, we will go out and acquire. it is going to happen, especially if they don't have hundreds of thousands in software that offers to make this work. jonathan: ken leon, thank you. hsbc could not get the scale, and it's couldn't -- and they just couldn't invest in the quality either. not good. tom: i think you've got a really unique perspective on this. to me, it is across the causeway from our offices. how is the hsbc perception? jonathan: the product in the u.s. is not good enough. in the u.k., it is pretty decent. i know a number of people who

have hsbc bank accounts. if you select to fill out the form, it is very cumbersome. just not good. tom: i can't say enough about what we are learning coming out of this pandemic about corporate culture and its importance over strategy. jonathan: on what front? tom: like at&t, down in flames with warner bros.. whether that goes down to discovery, amazon buying mgm and all of that, this cultural overlay among all of the finance, the investment, all of the mckenzie talk, as you call it. i think the cultural overlay like cathay bank in l.a. is a huge deal, and i should point out citizen bank of providence. jonathan: enjoy the mckenzie talk, don't you, lisa? quite often. synergies. what is the other word we like? lisa: efficiency's. tom: we are innovating ourselves toward execution. lisa: what does that mean?

tom: it is a dramatic shift. jonathan: that is a world-class mba. that will cost you $200,000. tom: we have synergy towards our new paradigm. jonathan: this is bloomberg. ♪

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jonathan: from new york for our audience worldwide, this is "bloomberg surveillance" live on tv and radio. seconds away from economic data in america. 4189 on the s&p 500. there is your data. on time this week. michael: we are hoping we continue to get that kind of speed out of the government. durable goods orders down 1.3%. update disappointment because they were expected to be up .8%. the prior month revised to 1%. still a decline in durable goods orders. ex transport up a better-than-expected. it looks like this is cars, probably. car production shut down. capital goods orders

non-defense, this is the one we watch because it suggests where business spending is going. 2.3% gain for the month of april. better than the 1% expected and better than the 1% we got in march. good news on business spending as companies start to come back from the pandemic. jobless claims, this is fun. we almost made it below 400,000. 406,000, a drop from 444,000 the prior week. we are at our post-pandemic low by a lost. remember when we were around one million? we are getting back down into the area we used to be. a much more normal look. gdp in at 6.4%, .1% less that in the initial print. i am looking to see where the change is. it looks like personal consumption went up 11.3%.

the former was 10.7%. it looks like it was probably in another area of that. just looking quickly, i do not have the profits numbers yet. jonathan: i will run through the price action. yields up almost four basis points. in the equity market we stayed negative at 4189 on the s&p 500. tk, that is the right kind of job -- of downside surprise on jobless claims. tom: it will go into what we see with the gdp when michael mckee breaks it down. personal consumption booming. can you correlate an elegant claims chart in the path of claims to a better place to the unemployment rate or the gdp? do they link together? michael: they link together in the broadest sense but remember gdp is first quarter, whereas we

are looking now at what is going on going forward. that is what people will be concerned about. the fact that we are seeing the jobless numbers drop as much as they are will feed into what the fed is thinking about in the labor market, which feeds into what the markets are thinking about the fed. durable goods orders suggest strength. when you have a lot more orders you may need more people so it may link together. lisa: tomorrow we will be getting personal spending data as well as key pce figures. are these much more important given where the fed is at than the unemployment figures that has been noisy? michael: we will watch those numbers to see, and terms of personal spending, because we want to know what the services component of spending was. we know people spend a lot more on goods. are they starting to spend more on services? you can back some of that out of the gdp numbers.

this will be the first month of gdp. we do not have that information. we get the pce price index. we see what kind of inflation we are getting, whether it matches the kind we saw with the cpi last week. tom: the 10 year yield, 1.61%. very different from the 1.57 we saw two hours ago with the news flow we have. david kelly joins us, jp morgan asset management. his beloved liverpool finishing strong, third in the premier league. certainly doing better than the tots. you know there is the yellow card and the red card. you look at your catholic upbringing. all of the b's and c's you earned. you do a midyear review and you of a pink a-plus tone to the midyear economy. david: these results will, if

anything, improve that. we saw inventories fell even more in the first quarter than initially reported. that means you get a big inventory bounce the second quarter along with everything else, and obviously seeing unemployment claims down towards 400,000. a lot of improvement. i like seeing the growth in capital goods orders. investment spending strong. this is an economy that is growing in terms of momentum. it does pose the question wire interest rates not higher given how strong the economy is. jonathan: why aren't they? david: it is somewhat mysterious. it seems like the fixed income markets believe the very dovish tone coming out of the federal reserve. i do not know they should believe the federal reserve. i think when the data change, particular when you get higher inflation numbers and provided the economy continues to recover through the fourth quarter, i

think the fed is going to change its tune. it will taper earlier than expected. it will raise short-term rates. i think we will see higher long-term interest rates by the end of the year. it is surprising we've not seen more. jonathan: you've set you think they raise interest rates sooner than most people expect. when is that? david: first of all, i think they will start tapering bond purchases at the start of next year or the end of this year. i think they want to raise the federal funds rate at the end of 2022 or the january meeting of 2023. right now, they do not think they will raise the short-term federal funds rate until 2024. the economy is going to be fully healed by early next year, and it does not justify rates at close to zero. lisa: how much does the fed policy hinge on what type of

spending plan the u.s. government decides to pass? the idea that we are looking at under this new budget reported by the new york times, the total debt held by the public would rise to 170% the size of the economy. that is what tom was talking about. can the fed start to talk about borrowing that much more money in the near term? david: they better. we need to figure out how do we finance that at normal interest rates. as long as you keep interest rates close to zero you are everything in capital markets. you feed good businesses but you allow bad businesses to stay alive. you allow speculation to run rampant. it is important the federal reserve normalizes. if that means the government has to be more picky about what it spends money on, that is a good thing. i do not think the federal reserve should be discouraged by the debt, they are encouraging the growth of debt by keeping rates so low. lisa: what are normal rates?

we've been talking before that rates are lower and lower. the more debt you incur, the slower growth is. the natural path of interest rates should be lower for the u.s. government just based on the slower growth trajectory. why is that not the case? david: i do not think it should be the case. it has been called by the federal reserve. that starting liquidity does not stimulate aggregate demand. that is a big reason the last expansion was so slow. what is a normal level of interest rates? it has to be a positive long-term real interest rate. if you lend money in the long run you should get a positive return after inflation. if you borrow money it should be because you expect to invest in something that will generate a positive return after inflation. if you do not have an economy operating that way, you have an economy heading in the wrong

direction. positive real rates, 10-year treasury yield above the rate of inflation which even by the fed measures close to 3% year-over-year. tom: i want to take your jp morgan work and dovetail it with your work at putnam. that is in the sum of the david kelly analysis, are you worried about the bloom of -- the gl oom of junk conditions given what we are doing, or do you see a smoothness where investors can say this will work out, we will get to the other side of the bridge. david: i do not lose much sleep because i think it will take a long time for any crisis to unfold. i do not believe in modern monetary theory. i think it is nonsense. if you run a big budget deficit, and it actually helps the economy, then this level of debt

will cause the economy to blow up. modern monetary theory only work if it fails to achieve any improvement in human welfare. it is a bad idea. you have to fight against normal interest rates. if you set interest rates again the normal level, the economy will operate at the optimal level. jonathan: david kelly. your equity market turning higher, up two points on the s&p 500. equity futures almost in a positive territory. it is the right kind of downside surprise on jobless claims. 406,000 against an estimate of 425,000 in a previous rate of 444,000. tom: i had an entry point about three hours ago and i missed it again. by the dip. have any of you seen any adjustment in the tone of the grateful market of by the dip? jonathan: note. -- nope. do you want me to elaborate?

tom: is radio. you have to elaborate. lisa: you saw the russell outperform, people trying to go back into the idea of a cyclical story. jonathan: i had such a great time with you both this morning. honestly. fantastic. brilliant coverage. lisa: is he serious? i am serious. jonathan: had a great time. tom: this is what we do. we have a staff of three people helping us get through the show. we do not know at 5:00 or 6:00 what the news will be at 9:00. jonathan: i am happier than at 6:00 when it starts. alongside tom keene and my good friend and colleague, lisa abramowicz. i'm jonathan ferro. [laughter] yields on tens, 1.6096.

alongside tom keene a lisa abramowicz, i'm jonathan ferro. counting you down on the opening bell, we will continue to do that on tv with myself and radio with tom keene. this is "bloomberg surveillance." >> everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. --ritika: with the first word news, i'm ritika gupta. president biden will reportedly propose a budget on friday it would take the united states to its highest levels of federal spending since world war ii while running deficits of above $1.3 trillion throughout the next decade. the new york times is reporting bidens plan calls for the federal government to spend $6 billion in the 2022 fiscal year and for the total spending to rise to $8.2 trillion by 2031. the bided administration is taking steps to prevent ransomware hacks like the one that affected the colonial

pipeline early this month. -- requiring pipeline operations to conduct cyber security assessments and report any incidents to federal officials. companies could face penalties starting at $7,000 a day if they do not comply. boris johnson is hitting back after his former strategist said he was unfit to lead the country. while visiting a hospital, boris johnson said some of his comments bore no relation to reality. johnson refused to comment when asked about the assertion that johnson said he would rather let the bodies piled high than order a third lockdown for stop more legal troubles for amazon. bloomberg has learned attorneys for massachusetts and amazon have turned the list of officials looking at the retail giant for potential antitrust violations. that list had included several states and the federal trade commission. amazon is used of using its market power to crush rivals.

global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries i am ritika gupta. this is bloomberg. ♪

>> we are definitely concerned about taking off enhanced unemployment benefits too soon.

every state will act on its own and economic conditions differ across states. it has helped people get through the primary, get through that -- get through the coppery -- get through the recovery, get through the crisis to the other side. it has been one of the more important parts in addition to the vaccine. tom: jared bernstein of the white house. after what we've seen from the new york times, stunning article on the budget view over the next decade of the bided administration -- of the biden administration. much more. david westin at balance of power i am sure will put this front and center. we get lucky with the german from arkansas to talks about six joined -- with the gentleman from arkansas. congressman hill, i want you to -- forget about modern monetary theory. give me the modern french hill theory about how all americans

adapt to 117% total debt of gdp 10 years out. can we do this? rep. hill: tom, lisa, good to be with you. we have not seen this since the end of world war ii when america was 50% of global gdp and debt over gdp was a result of fighting and winning a world war. now we have embedded deficits for all of the out years from our social safety net systems and by government growing as a percentage of gdp. i do not believe it is sustainable. my biggest concerns of the potential for creating inflation , going back to hot inflation expectations. the value of the dollar connected to that, and the ability of servicing that debt as interest rates inevitably rise from their historically below zero level today.

tom: other than winning in 2022, what is the appropriate republican response to the budget as proposed? i do not mean the fiscal budget. what is a cogent gop response? rep. hill: starting in 2010 to 2019, before the pandemic, the budget for discretionary spending was essentially flat. it declined in real terms. congress has the ability to control discretionary spending and better reform our mandatory spending programs like medicare and social security. we need to come back to reality after the pandemic, focus our spending, target our spending, reform our mandatory spending programs. as a house republican, not expand the role of government in our daily lives, which this budget does in spades. lisa: there is a question about useful spending and the idea

that if you spend you generate more growth. we saw that from the 1990's. we have seen this over time. if you borrow you can generate a more positive future. what is the distinction between good spending and bad spending? rep. hill: i think there is a rational level of spending too much, too fast on too many things that are not rational spending. you look at the 1990's. president bush and president clinton had modest tax increases. you also had the peace dividend as the soviet union unraveled and it allowed president clinton to work with congress to balance the budget. they did that through will perform, including -- they did that through reform including mandatory spending programs. it is reform those programs, look at ways to build our country. when it comes to infrastructure that would be a rational spending of public money. that needs to be done in a

targeted way with a focus on things that are in need of repair and reform. lisa: inflation has been an interesting debate and that was one of the biggest arguments against running the deficit this deeply. a lot of people are worried about inflation. it has become a polarizing debate in washington. how much inflation are you looking at that will be too much ? are you looking at specific thresholds that will create a problem for the economy? rep. hill: we have sharp increases in commodity prices. chairman powell hopes these are transitory. other members of the open market committee like president kaplan are concerned that if this gets out of hand we will get into a 1970's inflation expectation situation, where instead of trying to cut costs and improve productivity and businesses, we just raise prices and suggest that up and down the supply chain.

if we invent that we are in trouble on inflation. if we do not, it is transitory. tom: one of your charms is you have fairly close elections, unlike other people in congress. 55% to 47% last go around. republicans will win in 2022, a lot of experts tell us. you are the kind of district that is critical for them to sustain themselves in victory. what you need to do to get your district to take a more conservative stance? how do you sell that to america? rep. hill: i think americans are so rational. we operate off the kitchen table , around our companies with our employees, and it is about using math and rationality. we think borrowing money at the rate the biden administration is proposing and expanding government is not a shared value by most american families. i think it is targeting budget priorities.

that is what we need to be focusing on. tom: thank you so much. french hill from the second district of arkansas. we catch congressman hill unawares. he has not seen the new york times article. we should make that clear. all of my training is fiscal matters do not matter in the voting booth. you wonder if this time is different? lisa: are people going to worry about the deficit? are they going to worry about the deficit or childcare? will they worry about the programs joe biden is proposing to finance? will they worry about potential inflationary pressures? this is the debate, and there is a question going forward to congressman french hill's point about the idea of higher servicing costs. debt servicing costs have gone down in tandem with the lower rates, even as the u.s. has incurred more debt. when does that paradigm change? david kelly saying it should change sooner.

more debt mean slower growth which means lower yield. tom: i revisit schilling's call on low inflation rates in many economists have pointed out the inflationistas have got it wrong. the biden budget as reported back to gdp estimates which are more conservative and cautious than the trump boom statistics we got, over 3%. lisa: that is what we've been hearing from people on the show, we will revert more to a mean, 1.8% gdp growth rather than the 3% or 5%. the question is demographics are tough. we are getting to be a more aging population. we have bigger programs to finance. how do you generate that inflation? tom: is just great. lisa just kills it. we will --

lisa: you cannot deny this. tom: we are -- we are getting older. governor raimondo will never age. this is bloomberg. good morning. ♪

jonathan: from new york city for our audience worldwide, good morning, good morning. 30 minutes away from the opening bell with equity futures just about turning positive.

the countdown to the open starts right now. >> everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. ♪ jonathan: we begin with the big issue. another fed official talks about talking about it. >> tapering. >> tapering. >> thinking about thinking about tapering. >> will be sitting with that all year. >> they are afraid of creating a 2013 incident. >> the fed is managing expectations. >> the market is starting to think of the fact that in 2022 there'll be less liquidity. >> the fed speak really reinforce that. >>