WEBVTT - David Malpass Talks Weak Yen

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. Okay, I'm gonna tell

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<v Speaker 1>a story here. He's gonna love this. So I'm at

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<v Speaker 1>Michael's like, this is like fifteen seventeen years ago. And

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<v Speaker 1>then you know, they're giving me an overpriced salad to

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<v Speaker 1>my third drink. And it's the art directors for my

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<v Speaker 1>book and they're like, Tom, we have to have an

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<v Speaker 1>inside sleeve one of your charts, one hundred and fourteen charts,

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<v Speaker 1>which chart would be like when you open the book,

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<v Speaker 1>you see it, you know, inside the book chet and

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<v Speaker 1>I make the decision, like over the olive on the Martini,

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<v Speaker 1>I said, it's got to be Malpass. Mail Passes at

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<v Speaker 1>bear Stearns. And out of all the people in the book,

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<v Speaker 1>and these are a heavyweight, Bill Dudley, the former Fed President,

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<v Speaker 1>Bob the New York Fed President, Malpass had the most

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<v Speaker 1>amazing chart, which was yen and yen and gold like

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<v Speaker 1>what Dennis Gartman did joining us now the former head

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<v Speaker 1>of the World Bank and iconic at bear Stearns, mister

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<v Speaker 1>David Milpass as well. I just looked at yen in

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<v Speaker 1>you and credit to Dennis Gartman as well. It's the

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<v Speaker 1>call of the decade week yen that we saw, whether

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<v Speaker 1>it's yen and gold or yen in whatever. How did

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<v Speaker 1>Japan turn around this train wreck?

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<v Speaker 2>Hi? Tom, you you can stabilize your currency by having

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<v Speaker 2>a good growth plan. So Japan's got to articulate that

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<v Speaker 2>they're not badly positioned in the world since people are

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<v Speaker 2>trying to diversify away from China, and Japan has a

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<v Speaker 2>lot of the things that people want, and so if

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<v Speaker 2>they can retool the economy, it can work.

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<v Speaker 1>It's an experiment of reflation, which is pretty you know,

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<v Speaker 1>you're in Colorado college and it's like, you know, it's

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<v Speaker 1>not even in the textbooks. Okay, it's an experiment in reflation,

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<v Speaker 1>and they want to pull that back. Can they find

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<v Speaker 1>a middle ground that works versus tripping into deflation again?

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<v Speaker 2>They can, but they need to really think about their

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<v Speaker 2>interest rates. You know, they're pushing up against the one

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<v Speaker 2>percent limit on the tap. It really doesn't doesn't work

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<v Speaker 2>to say you're going to limit your bond yield, but

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<v Speaker 2>you want your currency to stop weakening. So right now

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<v Speaker 2>they're intervening to try to tide that over. That can

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<v Speaker 2>work for a little while, but at some point you

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<v Speaker 2>have to say your interest rates are going to be

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<v Speaker 2>more similar to the rest of the world interest rate.

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<v Speaker 1>Paul wants to jump in one more question and yen.

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<v Speaker 1>What is your call on Japanese yen? I know you're

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<v Speaker 1>not doing FX and market economists, but do you see

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<v Speaker 1>a big figure strengthening in Japanese yen or more of

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<v Speaker 1>the same.

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<v Speaker 2>I think it could settle where it is now and

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<v Speaker 2>the world would accept that. And that is a little

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<v Speaker 2>bit what is going on. The world moves through currency

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<v Speaker 2>realignments and then tries to stabilize after that and reduce

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<v Speaker 2>the harm from that.

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<v Speaker 1>Oh, he's tanned and rested. I notice is left bank

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<v Speaker 1>and he's exactly hand and rested.

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<v Speaker 3>I know, I'm very impressed. David, we've seen come bringing

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<v Speaker 3>it back to the US. Here my entire career, we've

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<v Speaker 3>been talking about annual deficits in the national debt and

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<v Speaker 3>now we even have Jamie Diamond, David Solomon, and gold

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<v Speaker 3>and Sex talking about the national debt. We've even got

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<v Speaker 3>that silly thing downtown where they tally of a national

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<v Speaker 3>debt on a daily basis of everybody to see is

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<v Speaker 3>it time to care about that stuff? Like I'm sixty,

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<v Speaker 3>do I care.

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<v Speaker 2>I think absolutely it is time to care. It was

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<v Speaker 2>one thing when the US economy had a fifty percent

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<v Speaker 2>debt to GDP ratio, you could borrow that and not

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<v Speaker 2>really not really a tax the world's capital, or take

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<v Speaker 2>all of the world's capital. We're the biggest economy and

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<v Speaker 2>we're borrowing so much that it changes capital flows around

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<v Speaker 2>the world, and I think it's doing it in a

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<v Speaker 2>harmful way. It's the government gets the first DIBs on

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<v Speaker 2>all capital, and then if there's any leftover, big corporations

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<v Speaker 2>get it through the bond market. And if there's any leftover,

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<v Speaker 2>which there isn't really, small businesses can borrow to fund

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<v Speaker 2>their inventory, their working capital, and countries outside the US

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<v Speaker 2>have a little bit of capital at the end of

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<v Speaker 2>the line. That's not a workable system for the world.

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<v Speaker 2>So I think there has to be, both in the

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<v Speaker 2>US and in the world, an urgency that the US

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<v Speaker 2>government stopped growing at spending.

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<v Speaker 3>And this is a I guess a political issue, and

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<v Speaker 3>again in my lifetime, i've never seen the political will

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<v Speaker 3>to address it because it doesn't sound very popular.

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<v Speaker 2>That's that's right, and I think there's a big gap

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<v Speaker 2>in our law. You know, the debt limit law is misnamed.

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<v Speaker 2>It's really the debt increase law. So every couple of

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<v Speaker 2>years presidents both parties sign a law to increase the

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<v Speaker 2>debt limit. I've we have to replace it with something workable, strong,

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<v Speaker 2>and it has to hurt Washington, not hurt the people

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<v Speaker 2>of the country when we're when we have too much debt,

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<v Speaker 2>they shut the national parks rather than reducing the staff

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<v Speaker 2>hiring in DC, the swamp gets bigger.

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<v Speaker 1>World Bank. It's a swamp. Now, it worked in the swamp.

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<v Speaker 1>What you learned working in the swamp.

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<v Speaker 2>Uh, So in this Washington is a swamp. The parts,

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<v Speaker 2>all the parts work together to make Washington bigger and

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<v Speaker 2>more profitable. That's that's a risk. And the World Bank

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<v Speaker 2>is part of that. It's headquartered and uh and centered

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<v Speaker 2>in Washington. One thing I learned Tom was how hard

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<v Speaker 2>it is to get any other country to do the

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<v Speaker 2>right thing. It's just as hard outside the US as

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<v Speaker 2>in the US. So if you take Nigeria, why is

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<v Speaker 2>this oil rich country so poor? They've got a huge

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<v Speaker 2>extreme poverty rate. Why is that because the government takes

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<v Speaker 2>all the all the profits from oil and wastes it.

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<v Speaker 1>This is such a better Mail pass than the World

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<v Speaker 1>Bank and eight people standing around looking at every where.

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<v Speaker 1>David Mail passes public service to the nation in the

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<v Speaker 1>world with the World Bank and involved in politics as well.