1 00:00:09,880 --> 00:00:13,040 Speaker 1: Welcome to the Bloomberg Surveillance Podcast and I'm Tom Keene 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jai Ley. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,480 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,520 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Say 5 00:00:27,520 --> 00:00:30,240 Speaker 1: what you will. But there was a moment where Prince 6 00:00:30,400 --> 00:00:33,199 Speaker 1: Charles in the United Kingdom showed the flag. It was 7 00:00:33,200 --> 00:00:37,440 Speaker 1: twenty three years ago as the Britannia slipped out of 8 00:00:37,479 --> 00:00:40,400 Speaker 1: the harbor of Hong Kong and into the Pacific Ocean. 9 00:00:40,920 --> 00:00:45,839 Speaker 1: This after Christopher Patton said very simply that key phrase 10 00:00:46,200 --> 00:00:50,320 Speaker 1: that we knew at the time, again twenty three years ago, Uh, 11 00:00:50,360 --> 00:00:53,479 Speaker 1: the idea of moving on. I'll get the phrase for 12 00:00:53,520 --> 00:00:56,080 Speaker 1: you in a moment. We are honored that on this 13 00:00:56,240 --> 00:00:59,920 Speaker 1: important day for Hong Kong, Lord Patton can join us. 14 00:01:00,320 --> 00:01:04,560 Speaker 1: Lord Patton, Who do you blame for this moment? It 15 00:01:04,640 --> 00:01:08,280 Speaker 1: was to wait at least fifty years we didn't get there. 16 00:01:08,800 --> 00:01:13,399 Speaker 1: Who do you blame? Chi Jin Ping? Chi Jinping is 17 00:01:13,720 --> 00:01:17,880 Speaker 1: a new sort of Chinese dictator. Well, when I say new, 18 00:01:18,360 --> 00:01:22,480 Speaker 1: different from his immediate predecessors. Um certainly is in the 19 00:01:22,560 --> 00:01:27,280 Speaker 1: nineteen nineties and since nineteen while they have been far 20 00:01:27,400 --> 00:01:32,639 Speaker 1: from open in Wong or in China, on the whole, 21 00:01:33,400 --> 00:01:36,720 Speaker 1: Chinese leaders kept to their agreement on one country two 22 00:01:36,800 --> 00:01:39,400 Speaker 1: systems that Hong Kong could continue with a high degree 23 00:01:39,440 --> 00:01:42,600 Speaker 1: of autonomy with its own freedoms. What we've seen with 24 00:01:42,760 --> 00:01:47,920 Speaker 1: Jijijijiinping is a determination to strengthen the party's hold over everything. 25 00:01:48,280 --> 00:01:51,440 Speaker 1: He's been throwing China's weight around in a way which 26 00:01:51,480 --> 00:01:55,040 Speaker 1: is in a danger to all democracies around the world, 27 00:01:55,520 --> 00:01:57,760 Speaker 1: and I think he needs to be called out. And 28 00:01:57,840 --> 00:02:02,240 Speaker 1: he's taken advantage of this coronavirus, which of course has 29 00:02:02,280 --> 00:02:04,680 Speaker 1: been more difficult to deal with the way it was 30 00:02:04,960 --> 00:02:08,880 Speaker 1: covered up in the initially by secretive communist officials. He's 31 00:02:08,880 --> 00:02:11,480 Speaker 1: trying to take advantage of that. Not only in Hong Kong, 32 00:02:11,800 --> 00:02:16,720 Speaker 1: but there are incursions by Chinese troops into India. They've 33 00:02:16,760 --> 00:02:20,919 Speaker 1: been throwing their weight around in around Taiwan. They've been 34 00:02:20,960 --> 00:02:24,280 Speaker 1: throwing their weight around in the South China Sea, despite 35 00:02:24,280 --> 00:02:27,800 Speaker 1: the promises they made to President Obama. So this is 36 00:02:27,840 --> 00:02:31,160 Speaker 1: down to shijin Ping, who is terrified of having to 37 00:02:31,240 --> 00:02:34,680 Speaker 1: deliver in Hong Kong. The promises that people were made 38 00:02:34,720 --> 00:02:37,160 Speaker 1: that they could live under the rule of law. In 39 00:02:37,240 --> 00:02:42,840 Speaker 1: relatively we see this, Lord Patton on a week where 40 00:02:42,880 --> 00:02:46,720 Speaker 1: Stanley hodis, there are the merchants of Hong Kong going 41 00:02:46,760 --> 00:02:51,000 Speaker 1: back centuries. How would you suggest the business leaders of 42 00:02:51,120 --> 00:02:54,240 Speaker 1: Hong Kong will react to this? What would be the 43 00:02:54,280 --> 00:02:59,840 Speaker 1: best patent path? Well, I want to say this very clear. 44 00:03:01,080 --> 00:03:04,480 Speaker 1: When I was Governor of Hong Kong, and there was 45 00:03:04,560 --> 00:03:08,280 Speaker 1: great support from the American Chamber of Commerce, from the 46 00:03:08,360 --> 00:03:10,720 Speaker 1: United States in general for what we were trying to 47 00:03:10,760 --> 00:03:14,880 Speaker 1: secure in Hong Kong. And even though I had worries 48 00:03:14,919 --> 00:03:18,919 Speaker 1: about China, as we've all did, worries about a communist system, 49 00:03:18,960 --> 00:03:23,040 Speaker 1: not about Chinese people, but about about communism. And I 50 00:03:23,120 --> 00:03:27,400 Speaker 1: used to lobby every year Congress to give their China 51 00:03:27,480 --> 00:03:32,760 Speaker 1: Most Favored Nation status verdictively open trade, although then outside 52 00:03:32,800 --> 00:03:35,200 Speaker 1: the w t O rules. And I used to also 53 00:03:35,360 --> 00:03:38,960 Speaker 1: argue that whatever happened, we shouldn't danger the well being 54 00:03:39,600 --> 00:03:43,000 Speaker 1: in Hong Kong. And that's still my my feeling. I 55 00:03:43,040 --> 00:03:47,160 Speaker 1: think that what should happen, I hope I am following 56 00:03:47,240 --> 00:03:53,880 Speaker 1: President the Secretary of States Pompeo's understandable reaction is that 57 00:03:53,960 --> 00:03:59,480 Speaker 1: we should form together countries which will make a Hong 58 00:03:59,560 --> 00:04:04,040 Speaker 1: Kong will make China pay for what it's doing in home. 59 00:04:04,760 --> 00:04:06,920 Speaker 1: And I hope that we will stand up for Hong 60 00:04:07,000 --> 00:04:11,080 Speaker 1: Kong as over five hundred political leaders and church leaders 61 00:04:11,080 --> 00:04:13,560 Speaker 1: and others around the world have already done. I hope 62 00:04:13,560 --> 00:04:17,320 Speaker 1: will together and I hope that business will welcome that, 63 00:04:17,360 --> 00:04:20,000 Speaker 1: because there's no question at all that if you undermine 64 00:04:20,040 --> 00:04:22,520 Speaker 1: the rule of law in Hong Kong, then you start 65 00:04:22,600 --> 00:04:26,839 Speaker 1: to make Hong Kong a less important financial hub in Asia. 66 00:04:27,520 --> 00:04:31,200 Speaker 1: It's already responsible for maybe two thirds or more of 67 00:04:31,240 --> 00:04:35,360 Speaker 1: the direct investment which goes into an out of China. 68 00:04:35,800 --> 00:04:38,360 Speaker 1: And I just think that a lot of people will 69 00:04:39,160 --> 00:04:43,200 Speaker 1: but running their businesses from Hong Kong or about recruiting 70 00:04:43,240 --> 00:04:46,039 Speaker 1: people to work in Hong Kong. So I hope business 71 00:04:46,040 --> 00:04:52,279 Speaker 1: will put without without too nervousness, and fairly to China 72 00:04:52,600 --> 00:04:57,360 Speaker 1: what they actually think. Um, Chris Patton, good morning from 73 00:04:57,360 --> 00:04:59,479 Speaker 1: London as well as Francene, So are you saying that 74 00:04:59,520 --> 00:05:03,400 Speaker 1: actually the steps taken by the US so far could 75 00:05:03,400 --> 00:05:06,200 Speaker 1: could actually backfire and just hurt businesses and people that 76 00:05:06,320 --> 00:05:09,840 Speaker 1: have already been through a lot in the law. Let 77 00:05:09,880 --> 00:05:13,159 Speaker 1: me be absolutely clear about this and what President, what 78 00:05:13,600 --> 00:05:16,360 Speaker 1: Secretary of State said, and what I imagine the President 79 00:05:16,400 --> 00:05:20,159 Speaker 1: will saying course is pretty accurate. I mean he's he's 80 00:05:20,200 --> 00:05:25,120 Speaker 1: defined described what everybody is saying. That this is coach 81 00:05:25,160 --> 00:05:28,680 Speaker 1: and horse bol of law in Hong Kong and through 82 00:05:28,720 --> 00:05:32,680 Speaker 1: the promises made to Hong Kong of one country, two systems, 83 00:05:32,760 --> 00:05:37,080 Speaker 1: and that throws out overboard. And I'm very pleased that 84 00:05:37,160 --> 00:05:40,919 Speaker 1: the Secretary of State made that. And so you can't 85 00:05:41,120 --> 00:05:44,320 Speaker 1: argue that what's happened leaves Hong Kong with a high 86 00:05:44,400 --> 00:05:47,839 Speaker 1: degree of autonomy. It doesn't. But what I hope is 87 00:05:47,880 --> 00:05:52,000 Speaker 1: that the American legislature, that Senator and Congress won't move 88 00:05:52,040 --> 00:05:55,200 Speaker 1: on from that and impose some sort of sanctions on 89 00:05:55,360 --> 00:06:00,440 Speaker 1: Hong Kong if you want to impose sanctions on China time, 90 00:06:00,560 --> 00:06:04,239 Speaker 1: but please don't heard Hong Kong at the moment, because 91 00:06:04,240 --> 00:06:07,279 Speaker 1: it's been heard badly enough by what China has done. 92 00:06:08,400 --> 00:06:11,200 Speaker 1: So we would you not say that that the UK 93 00:06:11,600 --> 00:06:13,960 Speaker 1: and the U should actually treat Hong Kong right now 94 00:06:14,120 --> 00:06:18,039 Speaker 1: as a rest of China. I hope that we will 95 00:06:18,080 --> 00:06:22,360 Speaker 1: still try to work to restore some degree of autonomy, 96 00:06:22,560 --> 00:06:25,359 Speaker 1: a greater degree of autonomy in Hong Kong, and that 97 00:06:25,440 --> 00:06:28,719 Speaker 1: we will make China understand that there is a price 98 00:06:28,800 --> 00:06:31,720 Speaker 1: to be paid for what it's been doing, not just 99 00:06:31,839 --> 00:06:35,720 Speaker 1: in Hong Kong, but elsewhere too. There is next month 100 00:06:35,800 --> 00:06:38,960 Speaker 1: or upcoming meeting of the G seven, and I've argued 101 00:06:39,160 --> 00:06:42,560 Speaker 1: that and should make sure that Hong Kong is on 102 00:06:42,600 --> 00:06:46,400 Speaker 1: the agenda there, and that President Trump, who I think 103 00:06:46,400 --> 00:06:48,680 Speaker 1: will be in the chair at that meeting, and others 104 00:06:49,920 --> 00:06:54,320 Speaker 1: together a common position on Hong Kong and on China. 105 00:06:54,640 --> 00:06:58,359 Speaker 1: We all have the same interests, whether commercial or otherwise, 106 00:06:58,400 --> 00:07:02,279 Speaker 1: in relation to China. Where you look at the annual 107 00:07:02,320 --> 00:07:08,720 Speaker 1: reports of the international Chambers of commerce in Beijing, Japanese, American, European, 108 00:07:09,000 --> 00:07:11,600 Speaker 1: they all do the same thing. They all make the 109 00:07:11,640 --> 00:07:15,320 Speaker 1: same complaints about the way that China does business. And 110 00:07:15,400 --> 00:07:18,200 Speaker 1: what we need to do is not work separately in 111 00:07:18,280 --> 00:07:21,600 Speaker 1: relations to China. We need to have a common position 112 00:07:22,000 --> 00:07:28,840 Speaker 1: that will terrify China's picking us off one of the 113 00:07:28,880 --> 00:07:32,480 Speaker 1: Lord Patton, your comment from twenty three years ago, your 114 00:07:32,560 --> 00:07:37,360 Speaker 1: historic single sentence, I have relinquished the administration of this government. 115 00:07:37,800 --> 00:07:42,000 Speaker 1: God saved the Queen. Pattent, What is your advice this 116 00:07:42,080 --> 00:07:45,440 Speaker 1: morning to the Secretary of State of the United States, 117 00:07:45,800 --> 00:07:51,880 Speaker 1: As you call for an allied response, a developed, developed 118 00:07:51,920 --> 00:07:56,400 Speaker 1: economy response. What would be your counsel to Mr Pompeio. 119 00:07:57,800 --> 00:08:00,320 Speaker 1: My counsel to Mr Pompey would be first of all, 120 00:08:00,400 --> 00:08:02,680 Speaker 1: to thank him for the interest he has taken in 121 00:08:03,080 --> 00:08:07,280 Speaker 1: Hong Kong, which I think is widely, widely and enthusiastically 122 00:08:07,320 --> 00:08:11,360 Speaker 1: accepted in Hong Kong. He's not interfering in Hong Kong. 123 00:08:11,600 --> 00:08:15,720 Speaker 1: He's expressing the sentiments of the democratic politician about the 124 00:08:15,880 --> 00:08:21,640 Speaker 1: possible fate of a what was UH community under the 125 00:08:21,720 --> 00:08:24,920 Speaker 1: rule of law. So I thank him for that. And 126 00:08:25,120 --> 00:08:27,560 Speaker 1: the Chinese don't understand that the problems in Hong Kong 127 00:08:27,720 --> 00:08:30,760 Speaker 1: because of them, not because from people from outside. But 128 00:08:30,800 --> 00:08:34,880 Speaker 1: I would also ask him to remember that liberal democracies 129 00:08:34,920 --> 00:08:37,440 Speaker 1: around the world, and I mean the word liberal not 130 00:08:37,520 --> 00:08:40,199 Speaker 1: in a particularly American sense, but in the classical sense. 131 00:08:40,280 --> 00:08:44,480 Speaker 1: Open societies around the world are always strongest when they 132 00:08:44,520 --> 00:08:47,600 Speaker 1: worked together. The world did so well for fifty or 133 00:08:47,640 --> 00:08:54,120 Speaker 1: sixty years because under American leadership, Europe, Japan, Canada, Australia, 134 00:08:54,520 --> 00:08:58,040 Speaker 1: United States, all of us worked together under American leadership. 135 00:08:58,600 --> 00:09:01,480 Speaker 1: And I hope that that's what this administration or a 136 00:09:01,600 --> 00:09:07,720 Speaker 1: future administration will do. Because oh, that China is an 137 00:09:07,840 --> 00:09:10,120 Speaker 1: enemy to us. Now, I'm sorry to say that, but 138 00:09:10,200 --> 00:09:13,720 Speaker 1: that's how it behaves not Chinese people that the Chinese 139 00:09:13,720 --> 00:09:17,560 Speaker 1: Communist Party loo patnant. You started off by saying that, 140 00:09:17,800 --> 00:09:20,160 Speaker 1: you know, President she is going to beyond what any 141 00:09:20,160 --> 00:09:22,040 Speaker 1: other leader has done so far, and you called him 142 00:09:22,040 --> 00:09:25,600 Speaker 1: a dictator. Why do you think he feels emboldened enough 143 00:09:25,640 --> 00:09:29,560 Speaker 1: to do that now when when predecessors hadn't. But he 144 00:09:29,640 --> 00:09:34,480 Speaker 1: feels emboldened to do it. But first of all because 145 00:09:34,640 --> 00:09:37,440 Speaker 1: he reckons that the rest of the world, and it's true, 146 00:09:38,240 --> 00:09:43,040 Speaker 1: are very preoccupied with with fighting the pandemic, which got 147 00:09:43,080 --> 00:09:46,360 Speaker 1: as bad as it has been, partly because of the 148 00:09:46,400 --> 00:09:49,920 Speaker 1: secrecy and mendacity of the Communist Party in the early 149 00:09:50,000 --> 00:09:53,319 Speaker 1: stages when they're very brave Chinese doctors would find that 150 00:09:53,400 --> 00:09:56,320 Speaker 1: blow the whistle on what was happening in Wuhan. But 151 00:09:56,400 --> 00:09:58,800 Speaker 1: I also think that he's probably under a great deal 152 00:09:58,840 --> 00:10:04,400 Speaker 1: more pressure and reacting with some nervousness because, first of all, 153 00:10:05,000 --> 00:10:09,520 Speaker 1: is the party of the way the pandemic was handled. 154 00:10:09,920 --> 00:10:13,120 Speaker 1: And I think it's also true that the impact on 155 00:10:13,160 --> 00:10:17,439 Speaker 1: the economy in China is going to see unemployment rising 156 00:10:17,600 --> 00:10:21,760 Speaker 1: and all sorts of economic and social tensions are related 157 00:10:21,800 --> 00:10:23,960 Speaker 1: to that, and what I think he is trying to 158 00:10:24,000 --> 00:10:27,880 Speaker 1: do is to whip up as much nationalist sentiment as possible, 159 00:10:28,240 --> 00:10:31,760 Speaker 1: claiming that everything that's going wrong is because of black hands, 160 00:10:31,840 --> 00:10:35,240 Speaker 1: because of the United States, because of the outside world. 161 00:10:36,320 --> 00:10:39,800 Speaker 1: I wanted to deflect attention from the fact that the 162 00:10:39,840 --> 00:10:43,920 Speaker 1: real problem is how the Chinese Communist Party behaved, and 163 00:10:44,120 --> 00:10:48,240 Speaker 1: China and communist parties are always ultimately the same. They're 164 00:10:48,280 --> 00:10:54,079 Speaker 1: brutal and their liars should should how should you deal 165 00:10:54,120 --> 00:10:55,760 Speaker 1: with them? So we were from Anglomroke. I mean, it's 166 00:10:55,760 --> 00:11:00,199 Speaker 1: pretty big accusations that you're saying. If if you get 167 00:11:00,240 --> 00:11:02,880 Speaker 1: Europe and how what Angela Merkel was saying. She she 168 00:11:02,920 --> 00:11:06,160 Speaker 1: seems to intimate that actually the EU should should get 169 00:11:06,200 --> 00:11:10,000 Speaker 1: closer to to China because of economic ties. Would that 170 00:11:10,080 --> 00:11:13,520 Speaker 1: be a mistake? I think I can't believe she actually 171 00:11:13,559 --> 00:11:15,520 Speaker 1: said that. I think it would be a terrible mistake. 172 00:11:15,840 --> 00:11:18,480 Speaker 1: What we should try to do is to make sure 173 00:11:18,559 --> 00:11:23,480 Speaker 1: that China behaves by the rules, that China keeps the 174 00:11:24,120 --> 00:11:26,520 Speaker 1: agreements it makes, which he doesn't do at the moment. 175 00:11:27,000 --> 00:11:30,160 Speaker 1: I don't believe in cutting off all ties with but 176 00:11:30,240 --> 00:11:33,040 Speaker 1: I do believe in standing up to China when it 177 00:11:33,120 --> 00:11:35,920 Speaker 1: breaks its word to it to us and it does over. 178 00:11:38,040 --> 00:11:40,479 Speaker 1: But we will need to have some sort of relationship 179 00:11:40,559 --> 00:11:44,600 Speaker 1: with China if we're going to deal with future pandemics, 180 00:11:44,640 --> 00:11:47,760 Speaker 1: and in the years ahead, for example, there are going 181 00:11:47,800 --> 00:11:52,520 Speaker 1: to be big problems about anti microbial resistance, given not 182 00:11:52,720 --> 00:11:57,160 Speaker 1: least that of the antibiotics in the world are made 183 00:11:57,240 --> 00:11:59,400 Speaker 1: in China, So we will need to have some sort 184 00:11:59,440 --> 00:12:03,560 Speaker 1: of agreement. Will need to find agreements, which they on 185 00:12:03,640 --> 00:12:06,280 Speaker 1: the environment, we need to do that on trade. But 186 00:12:06,400 --> 00:12:08,880 Speaker 1: when they break them, when they kind of bully, as 187 00:12:08,920 --> 00:12:11,760 Speaker 1: they've been doing recently in Australia, and as they've done 188 00:12:11,760 --> 00:12:14,240 Speaker 1: in Sweden, as they've done in Norway and elsewhere, we 189 00:12:14,360 --> 00:12:17,200 Speaker 1: need to step up to them. These new wolf borrior 190 00:12:17,320 --> 00:12:20,480 Speaker 1: diplomats who give a bad name need to be told 191 00:12:20,480 --> 00:12:26,640 Speaker 1: to get out of place. Chris Patton, how do we 192 00:12:26,720 --> 00:12:29,800 Speaker 1: find a new show and lay? I mean after Mao, 193 00:12:30,559 --> 00:12:34,160 Speaker 1: a gentleman came along who allowed for a handshake with 194 00:12:34,280 --> 00:12:38,480 Speaker 1: Richard Nixon. If China is in search of a way 195 00:12:38,520 --> 00:12:43,400 Speaker 1: to calm things down, can you identify that person or 196 00:12:43,440 --> 00:12:49,040 Speaker 1: can you identify the process within their totalitarian regime or 197 00:12:49,080 --> 00:12:52,439 Speaker 1: you get to the next show and lay now. I 198 00:12:53,000 --> 00:12:55,559 Speaker 1: can't and nobody from the outside can. What you can 199 00:12:55,600 --> 00:13:00,800 Speaker 1: depend on is it even it looks completely united against 200 00:13:00,800 --> 00:13:02,680 Speaker 1: the world. You can depend on the fact that there's 201 00:13:02,760 --> 00:13:06,920 Speaker 1: politics going on in there like nobody's business. But you know, 202 00:13:07,360 --> 00:13:10,000 Speaker 1: how did how do you manage to express a country 203 00:13:10,120 --> 00:13:13,840 Speaker 1: view in China? If when you do so, your or 204 00:13:13,920 --> 00:13:16,800 Speaker 1: does disappear straight away? I noticed that in the vote 205 00:13:16,840 --> 00:13:20,640 Speaker 1: in the in the rubber stamp parliament today there was 206 00:13:20,720 --> 00:13:26,000 Speaker 1: one dissenting vote on the Hong Kong resolution and six 207 00:13:26,800 --> 00:13:30,320 Speaker 1: I think who who abstained? I imagine that they're already 208 00:13:31,000 --> 00:13:34,480 Speaker 1: in re education camps and learning the right things to do. 209 00:13:34,840 --> 00:13:37,920 Speaker 1: So it's very difficult to be a dissident in China, 210 00:13:38,360 --> 00:13:43,880 Speaker 1: and this president Ji jinpingalist dictator has don't forget and 211 00:13:44,120 --> 00:13:48,840 Speaker 1: closed down any dissident activity that he's seen. Um he's 212 00:13:48,920 --> 00:13:51,960 Speaker 1: locked up human rights lawyers, one or two people who 213 00:13:51,960 --> 00:13:55,600 Speaker 1: were critical of him, UM the way he handled the 214 00:13:55,640 --> 00:14:00,679 Speaker 1: coronavirus have simply disappeared. And those who tried to on 215 00:14:00,720 --> 00:14:03,640 Speaker 1: the social media try to set out what was happening, 216 00:14:03,840 --> 00:14:06,640 Speaker 1: they've been closed down. This is this is not some 217 00:14:07,200 --> 00:14:09,920 Speaker 1: it's done a good Guy, and he is intent on 218 00:14:10,080 --> 00:14:13,840 Speaker 1: sending his Ministry of State Security into Hong Kong, which 219 00:14:13,880 --> 00:14:17,240 Speaker 1: is the sort of equivalent of the Chinese KGB. And 220 00:14:17,240 --> 00:14:19,800 Speaker 1: they're not being sent to Hong Kong in order to 221 00:14:19,800 --> 00:14:25,760 Speaker 1: sell dim Sum. Actually try to shut up anybody who 222 00:14:25,760 --> 00:14:33,200 Speaker 1: objects to what China lord pattern. Across from Alexandra House 223 00:14:33,520 --> 00:14:37,200 Speaker 1: and down from the Mandarin Hotel and Central Square are 224 00:14:37,240 --> 00:14:41,000 Speaker 1: the offices of the JP Morgan Company. I want you 225 00:14:41,040 --> 00:14:45,560 Speaker 1: to advise American banking right now on what their approach 226 00:14:45,560 --> 00:14:49,640 Speaker 1: should be after this historic day. How should James Diamond 227 00:14:49,680 --> 00:14:55,080 Speaker 1: and others sustain and project in Hong Kong. Well, I 228 00:14:55,120 --> 00:14:57,880 Speaker 1: think they should be a very cautious, which I imagine 229 00:14:57,920 --> 00:15:00,200 Speaker 1: they will be. I hope they went pull out of 230 00:15:00,280 --> 00:15:03,520 Speaker 1: Hong Kong. What's actually been happening as China has been 231 00:15:03,560 --> 00:15:06,720 Speaker 1: trying to tighten its grip on Hong Kong. What's been 232 00:15:06,760 --> 00:15:10,560 Speaker 1: happening is unfortunately quite a lot of I think, particularly 233 00:15:10,600 --> 00:15:14,440 Speaker 1: younger executives, who have been wanting to move elsewhere. But 234 00:15:14,560 --> 00:15:17,280 Speaker 1: I'm good, delight, I'm pleased that the main banks and 235 00:15:17,320 --> 00:15:19,880 Speaker 1: others are still there in Hong Kong, and I hope 236 00:15:19,880 --> 00:15:23,000 Speaker 1: that they will continue to support the American Chamber of 237 00:15:23,040 --> 00:15:26,680 Speaker 1: Commerce and the American Chamber of Commerce will continue to 238 00:15:26,720 --> 00:15:29,600 Speaker 1: stand up for the rule book, will continue to stand 239 00:15:29,680 --> 00:15:32,560 Speaker 1: up of law, will continue to stand up for all 240 00:15:32,640 --> 00:15:36,400 Speaker 1: those things which have helped Hong Kong and American business 241 00:15:36,400 --> 00:15:39,320 Speaker 1: in Hong Kong, an American business around the world to 242 00:15:39,520 --> 00:15:43,880 Speaker 1: prosper because American business is so successful, because it's helped 243 00:15:43,880 --> 00:15:48,400 Speaker 1: to create an environment markets can operate in a fair 244 00:15:48,440 --> 00:15:51,000 Speaker 1: on a fair basis, and I think that's the way 245 00:15:51,040 --> 00:15:55,360 Speaker 1: that the best banks have behaved, not occasionally without without 246 00:15:55,400 --> 00:15:57,640 Speaker 1: getting things wrong. But we won't go back over all 247 00:15:57,680 --> 00:16:00,040 Speaker 1: that there's still better than an alternative. I can in 248 00:16:00,160 --> 00:16:03,680 Speaker 1: gole Chris Patton, thanks so much for joining us. We'll 249 00:16:03,720 --> 00:16:05,360 Speaker 1: have to get you back on also to address some 250 00:16:05,400 --> 00:16:08,000 Speaker 1: of the issues out there on the South China Sea 251 00:16:08,040 --> 00:16:10,720 Speaker 1: and whether that's where the first confersation between the US 252 00:16:10,760 --> 00:16:13,640 Speaker 1: and China will actually happen. Christopher Patton, their former governor 253 00:16:13,920 --> 00:16:19,120 Speaker 1: of Hong Kong. Let's start the program this morning show 254 00:16:19,160 --> 00:16:22,080 Speaker 1: where we can do that with Evan Brown of UVSS Management. 255 00:16:22,080 --> 00:16:24,360 Speaker 1: Evan Fancaster to catch up with you, sir. Let's just 256 00:16:24,360 --> 00:16:25,760 Speaker 1: start with a question that I think is on a 257 00:16:25,760 --> 00:16:28,120 Speaker 1: lot of people's minds at the moment, it is clear 258 00:16:28,440 --> 00:16:31,480 Speaker 1: that the relationship between China and the United States is 259 00:16:31,520 --> 00:16:34,800 Speaker 1: breaking down again. What's less clear is why this market 260 00:16:34,840 --> 00:16:37,160 Speaker 1: is not picking up on it outside of the hank saying, 261 00:16:37,280 --> 00:16:39,920 Speaker 1: outside of the Chinese currency, what's your read on things 262 00:16:40,000 --> 00:16:42,280 Speaker 1: right now? Evan, Yeah, I think I think the market 263 00:16:42,480 --> 00:16:47,640 Speaker 1: is taking a lot of these broader issues on Hong Kong, 264 00:16:48,240 --> 00:16:53,480 Speaker 1: on technology, on capital flows and separating them from trade. 265 00:16:53,880 --> 00:16:57,760 Speaker 1: They see the Hong Kong issues as more as more 266 00:16:57,800 --> 00:17:01,640 Speaker 1: regional and drawn out and view from the over rightly 267 00:17:01,720 --> 00:17:04,399 Speaker 1: or wrongly, the view from the overall market is that 268 00:17:04,440 --> 00:17:07,760 Speaker 1: as long as this Phase one trade deal stays in place, 269 00:17:08,280 --> 00:17:11,560 Speaker 1: then it's not so much a global market issue. And 270 00:17:11,600 --> 00:17:15,240 Speaker 1: I think, uh it was actually on that on that point. 271 00:17:15,760 --> 00:17:19,520 Speaker 1: Very interesting that on Friday the U S Trade Representative 272 00:17:19,600 --> 00:17:22,720 Speaker 1: and U S Department of Agriculture coming out with a 273 00:17:22,800 --> 00:17:27,520 Speaker 1: joint statement and saying that the trade the trade agreement 274 00:17:27,680 --> 00:17:30,760 Speaker 1: is still going well, and if even in the context 275 00:17:30,760 --> 00:17:34,480 Speaker 1: of obviously China purchasing a lot fewer agricultural goods than 276 00:17:34,720 --> 00:17:37,760 Speaker 1: than was agreed, and so the administrations are really trying 277 00:17:37,800 --> 00:17:41,520 Speaker 1: to separate trade from technology in Hong Kong and the lake. 278 00:17:41,960 --> 00:17:44,840 Speaker 1: And as long as that happens, I think the market 279 00:17:44,840 --> 00:17:47,960 Speaker 1: will be able to to hold that. Yeahvin, let me 280 00:17:48,000 --> 00:17:51,919 Speaker 1: ask a sixty question your multi asset. Where is the 281 00:17:52,000 --> 00:17:55,960 Speaker 1: gain right now in the multi of multi asset? Which 282 00:17:56,040 --> 00:17:59,720 Speaker 1: part is where I can be comfortable being if a 283 00:17:59,760 --> 00:18:01,680 Speaker 1: man actually trying to make a gain over the next 284 00:18:01,680 --> 00:18:05,240 Speaker 1: twelve months. Yeah, so I think, um, Well, if you're 285 00:18:05,240 --> 00:18:08,760 Speaker 1: really trying to make a gain, I think it's uh, 286 00:18:09,040 --> 00:18:12,199 Speaker 1: it's buying some of the laggards here, buying some of 287 00:18:12,200 --> 00:18:15,560 Speaker 1: the things where we're seeing a genuine policy change and 288 00:18:15,600 --> 00:18:18,360 Speaker 1: where they're deep valuations. So I was starting in Europe 289 00:18:18,400 --> 00:18:21,320 Speaker 1: right We everyone's hated European banks forever, but I do 290 00:18:21,440 --> 00:18:25,919 Speaker 1: think we are seeing some meaningful, meaningful policy changes happening 291 00:18:25,920 --> 00:18:29,840 Speaker 1: out of Europe with with the recovery plan announced yesterday. 292 00:18:29,880 --> 00:18:31,679 Speaker 1: Obviously we know this is going to take time to 293 00:18:31,720 --> 00:18:35,639 Speaker 1: get agreed upon, but the direction of travel is is clear, 294 00:18:35,760 --> 00:18:39,320 Speaker 1: and the signals for Merkel from Germany, the leader of 295 00:18:39,359 --> 00:18:43,240 Speaker 1: the facto leader of Europe going forward towards a fiscal 296 00:18:43,359 --> 00:18:46,359 Speaker 1: union is really important. So I could see some rerating there. 297 00:18:46,600 --> 00:18:50,920 Speaker 1: And also people should start paying attention to Japan massive 298 00:18:51,000 --> 00:18:54,960 Speaker 1: fiscal stimulus coming out of Japan right now. Um, and uh, 299 00:18:55,119 --> 00:18:57,680 Speaker 1: you know, if we're looking at monetary and fiscal combination 300 00:18:57,800 --> 00:19:00,639 Speaker 1: and the power that that that can create for an economy, 301 00:19:00,840 --> 00:19:03,359 Speaker 1: we're not finally getting it from Japan. We've had it 302 00:19:03,359 --> 00:19:06,320 Speaker 1: on the monetary side, but not this strong on the 303 00:19:06,400 --> 00:19:10,159 Speaker 1: fiscal side. So, um, the deep value opportunities there to 304 00:19:10,240 --> 00:19:12,240 Speaker 1: pick up. Evan, I want to pick up on what 305 00:19:12,280 --> 00:19:15,280 Speaker 1: you were talking about, the e use fiscal response that 306 00:19:15,320 --> 00:19:19,320 Speaker 1: we saw proposed not yet past, still facing some resistance, 307 00:19:19,320 --> 00:19:22,200 Speaker 1: probably from the frugal four. You wrote that the distribution 308 00:19:22,320 --> 00:19:24,800 Speaker 1: of risks right now for Europe are poised to the 309 00:19:24,920 --> 00:19:28,560 Speaker 1: upside from being to the downside earlier. Where do you 310 00:19:28,600 --> 00:19:32,080 Speaker 1: see this not priced into risk assets in Europe? The 311 00:19:32,119 --> 00:19:35,520 Speaker 1: idea that the EU proposal will get past in its 312 00:19:35,600 --> 00:19:38,720 Speaker 1: current form and will bleed into the region. Yeah, so 313 00:19:38,800 --> 00:19:41,440 Speaker 1: all right, And and and in terms of the distribution 314 00:19:41,440 --> 00:19:43,960 Speaker 1: of risk, I mean, I'll tell you I was concerned 315 00:19:44,000 --> 00:19:48,000 Speaker 1: myself about about Europe when that German court ruled against 316 00:19:48,040 --> 00:19:50,360 Speaker 1: against the e c B. And and I think it's 317 00:19:50,359 --> 00:19:52,560 Speaker 1: scared Mercle too. And I think that's why we're seeing 318 00:19:52,560 --> 00:19:55,640 Speaker 1: this change on the fiscal side. But I think where 319 00:19:55,640 --> 00:19:59,920 Speaker 1: it's it's not so much price. UH is European Bank 320 00:20:00,359 --> 00:20:03,520 Speaker 1: that's definitely one of them. Italian equity is extremely cheap. 321 00:20:03,560 --> 00:20:05,879 Speaker 1: But I really think this is going to go a 322 00:20:05,920 --> 00:20:09,960 Speaker 1: long way in people looking at the at the fiscal 323 00:20:10,000 --> 00:20:13,480 Speaker 1: trajectory of Italy. Obviously it's ugly, but just the signal 324 00:20:13,520 --> 00:20:16,120 Speaker 1: that Europe is moving the direction saying we have your back. 325 00:20:16,160 --> 00:20:19,240 Speaker 1: And to be honest, these frugal floor um, you know 326 00:20:19,240 --> 00:20:22,119 Speaker 1: they're putting up a fight, but honestly they don't have 327 00:20:22,160 --> 00:20:24,960 Speaker 1: that much leverage when you have the four main leading 328 00:20:25,040 --> 00:20:28,679 Speaker 1: countries of Europe, uh, you know, Germany, France, Italy, Spain 329 00:20:29,119 --> 00:20:32,439 Speaker 1: behind this and UH and and so I think that 330 00:20:32,640 --> 00:20:36,000 Speaker 1: their their their power in in driving or slowing down. 331 00:20:36,040 --> 00:20:40,639 Speaker 1: This debate is probably exaggerated. Evan. You'll have to forgive me. 332 00:20:40,680 --> 00:20:42,520 Speaker 1: Maybe I'm a glass half empty kind of guy, in 333 00:20:42,560 --> 00:20:45,440 Speaker 1: which case I'm sorry. But Tom, how long have we 334 00:20:45,520 --> 00:20:47,800 Speaker 1: been talking about this? And maybe I've just been conditioned 335 00:20:47,840 --> 00:20:50,520 Speaker 1: by much of the last ten years. There are still holdouts. 336 00:20:50,760 --> 00:20:54,720 Speaker 1: Let's even say that they capitulate the Netherlands, Australia, Austria 337 00:20:54,840 --> 00:20:57,080 Speaker 1: come along with this whole plan. You've still got to 338 00:20:57,119 --> 00:21:00,680 Speaker 1: wait until early next year for that capital to be deployed. 339 00:21:01,080 --> 00:21:03,480 Speaker 1: Just think about that. Every month matters. Right now, we're 340 00:21:03,520 --> 00:21:05,919 Speaker 1: sitting here in the United States arguing about whether d 341 00:21:06,040 --> 00:21:08,720 Speaker 1: C whites a month or two. Europe, even if it 342 00:21:08,760 --> 00:21:11,119 Speaker 1: gets his act together, won't be able to deploy this 343 00:21:11,280 --> 00:21:14,679 Speaker 1: until the start of next year. There's no question to 344 00:21:14,760 --> 00:21:18,520 Speaker 1: the timeline here, folks, is really really, really quite something. Heaven. 345 00:21:18,560 --> 00:21:20,920 Speaker 1: One of your thoughts on that, how fast can Europe move? 346 00:21:22,280 --> 00:21:26,199 Speaker 1: Not fast? Unfortunately, nothing, Nothing is easy in Europe, and 347 00:21:26,240 --> 00:21:29,440 Speaker 1: that's why you know, we crucially are going to rely 348 00:21:29,520 --> 00:21:31,880 Speaker 1: on the e c B to form a bridge over 349 00:21:31,920 --> 00:21:34,400 Speaker 1: the course of this time before we can really get 350 00:21:34,440 --> 00:21:36,840 Speaker 1: things going. I think I think that's why we're not 351 00:21:36,880 --> 00:21:40,320 Speaker 1: necessarily saying jump all in on on European equities in 352 00:21:40,600 --> 00:21:43,560 Speaker 1: European assets right now, because it's you're not going to 353 00:21:43,640 --> 00:21:45,920 Speaker 1: see the speed that you're seeing in Japan right now. 354 00:21:45,920 --> 00:21:48,000 Speaker 1: I mean, we are nervous about the the US not 355 00:21:48,080 --> 00:21:51,480 Speaker 1: acting quickly enough. At least in Europe, you have some 356 00:21:51,600 --> 00:21:55,720 Speaker 1: better automatic stabilizers in the background than you do, say 357 00:21:55,720 --> 00:21:57,920 Speaker 1: in the in the US or perhaps some other regions. 358 00:21:58,200 --> 00:22:01,919 Speaker 1: But the burden will definitely at Lee, Uh depend on 359 00:22:01,960 --> 00:22:05,399 Speaker 1: the ECB ramping up its QE program and finding ways 360 00:22:05,440 --> 00:22:10,320 Speaker 1: around these ongoing core challenges from U coming out of Germany. Ivan, 361 00:22:10,359 --> 00:22:12,160 Speaker 1: I love it. Nothing is easy in Europe. I will 362 00:22:12,160 --> 00:22:14,440 Speaker 1: say nothing is particularly easy in the US right now 363 00:22:14,440 --> 00:22:16,720 Speaker 1: when it comes to reopening the economy, and that's been 364 00:22:17,000 --> 00:22:20,520 Speaker 1: one of the driving issues that it's been pushing stocks higher. 365 00:22:20,840 --> 00:22:24,280 Speaker 1: How complicated is it when we talk about reopening at 366 00:22:24,280 --> 00:22:26,640 Speaker 1: a time when people still don't know that much about 367 00:22:26,640 --> 00:22:30,160 Speaker 1: the virus, the path, the spread. Where are you looking 368 00:22:30,200 --> 00:22:33,439 Speaker 1: to find value amid this sort of risk on tilt 369 00:22:33,680 --> 00:22:38,240 Speaker 1: with reopening still very much unproven. It's it's really tricky, Lisa. 370 00:22:38,359 --> 00:22:41,720 Speaker 1: I mean we we have the same kind of uncertainty 371 00:22:41,840 --> 00:22:45,240 Speaker 1: that that everyone does. I think, Um, you know, we're 372 00:22:45,280 --> 00:22:49,840 Speaker 1: we're obviously looking at all the high frequency data that 373 00:22:49,840 --> 00:22:53,399 Speaker 1: that Google and Apple and others are providing showing activity 374 00:22:53,640 --> 00:22:57,760 Speaker 1: of gradually picking up. I think the market is liking that. 375 00:22:57,800 --> 00:23:00,800 Speaker 1: They like to see things getting less add but clearly 376 00:23:00,840 --> 00:23:04,520 Speaker 1: on a year over year basis, overall levels of activity 377 00:23:04,960 --> 00:23:09,240 Speaker 1: are still quite quite depressed. So we're tracking it. We're 378 00:23:09,280 --> 00:23:12,919 Speaker 1: not trying to make big predictions about it. So clearly 379 00:23:12,920 --> 00:23:15,920 Speaker 1: we're seeing some improvement right here, it could stall out 380 00:23:15,960 --> 00:23:19,399 Speaker 1: because reopening or not, it comes down to whether people 381 00:23:19,400 --> 00:23:22,600 Speaker 1: feel comfortable, do they feel safegoing out um and I 382 00:23:22,640 --> 00:23:25,320 Speaker 1: think that's that psychological barrier is going to take a 383 00:23:25,320 --> 00:23:27,600 Speaker 1: while to get through, and that's why it's so crucial 384 00:23:28,080 --> 00:23:31,959 Speaker 1: that we get a new fiscal plan coming through so 385 00:23:32,040 --> 00:23:35,040 Speaker 1: that you know, as the private sector has this caution. 386 00:23:35,080 --> 00:23:37,359 Speaker 1: The private sector always has caution after a recession, but 387 00:23:37,480 --> 00:23:41,080 Speaker 1: especially dealing with an uncertain virus that you're going to 388 00:23:41,200 --> 00:23:43,359 Speaker 1: need to see on the fiscal side, you know, consumers 389 00:23:43,359 --> 00:23:47,800 Speaker 1: made whole businesses, uh, you know, continued lenning and support 390 00:23:47,880 --> 00:23:50,480 Speaker 1: there and and most importantly, I think at state and 391 00:23:50,520 --> 00:23:52,359 Speaker 1: local governments which have been on the front line of 392 00:23:52,359 --> 00:23:54,520 Speaker 1: this crisis. Evan, great to catch up with you. So 393 00:23:54,600 --> 00:23:57,000 Speaker 1: we've got to continue that European conversation at a light 394 00:23:57,040 --> 00:24:03,640 Speaker 1: to day Evan Brown, that of UBS asset management. It's 395 00:24:03,680 --> 00:24:06,119 Speaker 1: really going to be interesting to see how Mr Pompeo 396 00:24:06,280 --> 00:24:10,040 Speaker 1: and the President adapt and adjust to the reality that 397 00:24:10,200 --> 00:24:13,400 Speaker 1: two thousand forty seven is here. There have been many 398 00:24:13,440 --> 00:24:16,399 Speaker 1: good thinkers on this over the years. One of the 399 00:24:16,400 --> 00:24:19,480 Speaker 1: greats has been Jonathan Fenby of T S Lombard. He's 400 00:24:19,480 --> 00:24:22,960 Speaker 1: put out not one but a series of books on China, 401 00:24:23,000 --> 00:24:25,520 Speaker 1: and one of them, of course, was a wonderful monograph, 402 00:24:25,960 --> 00:24:32,240 Speaker 1: fabulous book. Will China Dominate the Century? Jonathan Fenby? Will 403 00:24:32,320 --> 00:24:38,199 Speaker 1: Beijing dominate Hong Kong? Well, politically, that is certainly the 404 00:24:38,240 --> 00:24:44,000 Speaker 1: way we're going. Uh. The the decision to put national 405 00:24:44,040 --> 00:24:47,760 Speaker 1: security legislation through the National People's Congress, which was approved 406 00:24:48,359 --> 00:24:53,520 Speaker 1: today in Beijing, that shows that Beijing is going to 407 00:24:53,560 --> 00:24:58,600 Speaker 1: take political control I think in Hong Kong, delegating some 408 00:24:59,040 --> 00:25:02,880 Speaker 1: activity to the local government, but definitely the national interest 409 00:25:03,560 --> 00:25:07,719 Speaker 1: now predominates. Jonathan, has to be an objective, and for 410 00:25:07,800 --> 00:25:10,000 Speaker 1: much of the last several decades, the objective was to 411 00:25:10,000 --> 00:25:12,560 Speaker 1: try and shape and influence the behavior of the Chinese 412 00:25:12,600 --> 00:25:17,800 Speaker 1: Communist Party. What's the objective now in Washington? The objective 413 00:25:17,960 --> 00:25:21,119 Speaker 1: in Washington now, I think is to accept you growing 414 00:25:21,200 --> 00:25:29,720 Speaker 1: friction with China and to try to move business away 415 00:25:29,760 --> 00:25:36,040 Speaker 1: from China, to undermine that economic political link which was 416 00:25:36,040 --> 00:25:38,800 Speaker 1: built up after Dengshaw things opening up at the end 417 00:25:38,800 --> 00:25:42,600 Speaker 1: of the nineteen seventies. Uh. And this is actually, to 418 00:25:42,680 --> 00:25:46,280 Speaker 1: my mind, reflected in China, where you've got this growing 419 00:25:46,320 --> 00:25:52,280 Speaker 1: emphasis on self reliance on absorbing pressure from the United States, 420 00:25:52,359 --> 00:25:55,359 Speaker 1: And as you were saying just a few moments ago, 421 00:25:55,840 --> 00:25:59,320 Speaker 1: the whole question now, I think, is how Trump moves 422 00:25:59,640 --> 00:26:04,440 Speaker 1: on the ass of what might Pompeo gave us last 423 00:26:04,560 --> 00:26:09,040 Speaker 1: night on saying Hong Kong no longer have the high 424 00:26:09,040 --> 00:26:13,000 Speaker 1: degree of autonomy on which the relationship was based. Alright, 425 00:26:13,000 --> 00:26:15,560 Speaker 1: So Jonathan, let's talk about next steps. There is talk 426 00:26:15,640 --> 00:26:19,720 Speaker 1: about the US provoking Hong Kong's special trading status, and 427 00:26:19,720 --> 00:26:22,760 Speaker 1: we're even hearing some leaders of the protest movement over 428 00:26:22,800 --> 00:26:25,960 Speaker 1: in Hong Kong support this measure. But experts say that 429 00:26:26,000 --> 00:26:28,200 Speaker 1: this will actually hurt Hong Kong and the US far 430 00:26:28,280 --> 00:26:32,119 Speaker 1: more than China. What's the thinking there, Yes, it's likely 431 00:26:32,160 --> 00:26:35,520 Speaker 1: to hit Hong Kong more because, of course, Hong Kong's 432 00:26:35,560 --> 00:26:41,040 Speaker 1: special position between the mainland of China and the rest 433 00:26:41,040 --> 00:26:44,880 Speaker 1: of the world and particularly the United States, depends on 434 00:26:44,960 --> 00:26:49,159 Speaker 1: that special status. If that is removed, if Hong Kong 435 00:26:49,359 --> 00:26:53,119 Speaker 1: is subject to the same conditions as the rest of China, 436 00:26:53,520 --> 00:26:58,159 Speaker 1: then Hong Kong will suffer and question mark will be 437 00:26:58,240 --> 00:27:03,640 Speaker 1: raised over the whole American relationship with Hong Kong. So 438 00:27:03,960 --> 00:27:07,560 Speaker 1: this is this is playing for some quite big stakes, 439 00:27:07,920 --> 00:27:09,920 Speaker 1: and Jonathan, quite clearly one of those big stakes of 440 00:27:10,000 --> 00:27:13,080 Speaker 1: the commercial relationships that China and the Communist Party has 441 00:27:13,359 --> 00:27:16,000 Speaker 1: with a continent in Europe. Europe has tried to sit 442 00:27:16,040 --> 00:27:18,399 Speaker 1: on the fence through all of this for much of 443 00:27:18,440 --> 00:27:20,639 Speaker 1: the last several years. Jonathan, in your mind, if we 444 00:27:20,640 --> 00:27:22,960 Speaker 1: approached that moment, that inflection point where Europe can no 445 00:27:23,040 --> 00:27:26,600 Speaker 1: longer sit on the fence and try and play both sides, yes, 446 00:27:26,680 --> 00:27:31,360 Speaker 1: so we're moving towards that, and the coronavirus crisis has 447 00:27:31,520 --> 00:27:35,760 Speaker 1: has pushed in that direction. You're getting European governments having 448 00:27:35,840 --> 00:27:39,800 Speaker 1: second thoughts about world wag for instance, including here in 449 00:27:39,840 --> 00:27:43,240 Speaker 1: the in the UK, and I think you know there 450 00:27:43,359 --> 00:27:46,440 Speaker 1: is It will take a long time in Europe, as 451 00:27:46,480 --> 00:27:50,399 Speaker 1: things always do, but there is a feeling that we 452 00:27:50,440 --> 00:27:54,960 Speaker 1: need Europe needs to reevaluate the relationship with China. This 453 00:27:55,040 --> 00:27:59,040 Speaker 1: hasn't been made easier by the reluctance in Europe to 454 00:27:59,320 --> 00:28:02,479 Speaker 1: get on board ord with Donald Trump. Europe doesn't know 455 00:28:02,600 --> 00:28:05,440 Speaker 1: where the Trump administration is going and doesn't want to 456 00:28:05,440 --> 00:28:10,520 Speaker 1: be in thrall to the Trump policies. But I think 457 00:28:10,560 --> 00:28:12,960 Speaker 1: there's a growing feeling in Europe that they need to 458 00:28:13,000 --> 00:28:16,520 Speaker 1: reevaluate the relationship with Beijing. There's a growing fear as 459 00:28:16,520 --> 00:28:19,480 Speaker 1: well that what we're seeing is a more assertive dictator, 460 00:28:19,520 --> 00:28:23,320 Speaker 1: a more assertive Chinese leader in the last several weeks, Jonathan, 461 00:28:23,320 --> 00:28:25,679 Speaker 1: what is happening on the border with India that you 462 00:28:25,760 --> 00:28:28,919 Speaker 1: have some transparency, some clarity, some details on because sitting 463 00:28:28,920 --> 00:28:30,479 Speaker 1: here in New York, it's hard to get the right 464 00:28:30,520 --> 00:28:33,280 Speaker 1: perspective on what is happening with China, not just in 465 00:28:33,320 --> 00:28:37,040 Speaker 1: Hong Kong, but elsewhere to well, that's part of China. 466 00:28:37,160 --> 00:28:40,280 Speaker 1: There's a whole series of things happening at the moment um. 467 00:28:41,360 --> 00:28:45,440 Speaker 1: The South China see for instance, Taiwan, Hong Kong, and 468 00:28:45,840 --> 00:28:49,360 Speaker 1: the Indian border fits into that, and China, I think, 469 00:28:49,480 --> 00:28:56,120 Speaker 1: is going to press its border frontier claims there as 470 00:28:56,200 --> 00:29:00,280 Speaker 1: well as elsewhere. So we're getting China operating on quite 471 00:29:00,280 --> 00:29:04,720 Speaker 1: a number of fronts at the moment, and nobody quite 472 00:29:04,760 --> 00:29:07,239 Speaker 1: knows how to deal with that, it seems. And all 473 00:29:07,360 --> 00:29:11,920 Speaker 1: this is linked in with I think the overall desire 474 00:29:12,080 --> 00:29:16,520 Speaker 1: to to use the Tompion phrase, make China great again. 475 00:29:17,080 --> 00:29:20,680 Speaker 1: Jonathan Fanby One final question. I began my discussion with 476 00:29:20,760 --> 00:29:24,560 Speaker 1: Lord Patton this morning talking about the Governor and Prince 477 00:29:24,680 --> 00:29:27,800 Speaker 1: Charles looking back at Hong Kong as they went out 478 00:29:27,840 --> 00:29:34,280 Speaker 1: into the Pacific Ocean. In that assumes a British response 479 00:29:34,440 --> 00:29:37,640 Speaker 1: to this moment, how would you suggest or how would 480 00:29:37,640 --> 00:29:42,760 Speaker 1: you recommend that Prime Minister Johnson respond to what we 481 00:29:42,840 --> 00:29:49,760 Speaker 1: see between Washington and Beijing. Well, Um, the UK relationship 482 00:29:50,160 --> 00:29:54,880 Speaker 1: with China over Hong Kong has always been a pretty 483 00:29:54,880 --> 00:30:00,400 Speaker 1: difficult one to define in British terms, because as Britain 484 00:30:00,520 --> 00:30:05,440 Speaker 1: still wants to go on trading with China, but Britain 485 00:30:05,520 --> 00:30:09,680 Speaker 1: now has to decide whether it stands by the Joint 486 00:30:09,720 --> 00:30:12,800 Speaker 1: Declaration and the position which it thought it was in 487 00:30:12,920 --> 00:30:19,000 Speaker 1: as a result of Hanover agreements, and it has to 488 00:30:19,080 --> 00:30:23,760 Speaker 1: define it's a much more clearly its own position there. 489 00:30:24,200 --> 00:30:27,320 Speaker 1: But I don't think that Britain should have any illusions 490 00:30:27,440 --> 00:30:31,720 Speaker 1: about how much weight it bears in the present relationship. 491 00:30:31,920 --> 00:30:35,120 Speaker 1: I don't think anyone thinks we make it seven. Jonathan 492 00:30:35,120 --> 00:30:37,719 Speaker 1: Fenby of T. S. Lombard great to catch up with you. 493 00:30:41,640 --> 00:30:45,440 Speaker 1: It is our simulcast on television in radio Lisa Brownowitz, 494 00:30:45,920 --> 00:30:49,400 Speaker 1: Jonathan Farrell and myself in his time where you just 495 00:30:49,680 --> 00:30:54,840 Speaker 1: stop and speak to Americans confronting this policy head on. 496 00:30:54,840 --> 00:30:58,880 Speaker 1: One of them is Jeoffrey Arkamoto out of Pomona in 497 00:30:59,000 --> 00:31:02,720 Speaker 1: computer science and at Georgetown as well, and he has 498 00:31:02,800 --> 00:31:06,720 Speaker 1: taken the position for President Trump of first Deputy Managing 499 00:31:06,760 --> 00:31:10,840 Speaker 1: Director at the International Monetary Fund. Mr Akamoto, wonderful to 500 00:31:10,880 --> 00:31:13,600 Speaker 1: have you on. I must speak, is Eric Martin addressed 501 00:31:13,640 --> 00:31:17,520 Speaker 1: in his article on you last week. The very different 502 00:31:17,680 --> 00:31:21,720 Speaker 1: skill set you bring versus the heritage of the position 503 00:31:21,880 --> 00:31:25,840 Speaker 1: for America, and that is people with Wall Street experience 504 00:31:25,920 --> 00:31:29,520 Speaker 1: like John Lipsky, or maybe it's people with the right 505 00:31:29,680 --> 00:31:34,240 Speaker 1: pedigree of economics like your predecessor David Lipton. You are 506 00:31:34,360 --> 00:31:37,920 Speaker 1: going to be different. In what way? Will you be different? 507 00:31:38,400 --> 00:31:43,800 Speaker 1: Is the first Deputy Managing Director representing the interests of America. Well, thanks, Tom, 508 00:31:43,800 --> 00:31:45,600 Speaker 1: it's great to be here this morning, and I'm enjoying 509 00:31:45,640 --> 00:31:48,480 Speaker 1: the new format. Uh. Look, I think it's no surprise 510 00:31:48,560 --> 00:31:50,280 Speaker 1: that I or no shock that I do come with 511 00:31:50,280 --> 00:31:53,120 Speaker 1: a different set of skills in a different background. Um, 512 00:31:53,120 --> 00:31:55,000 Speaker 1: it's just it starts from the position that I have 513 00:31:55,120 --> 00:31:57,520 Speaker 1: a lot of respect for my predecessors and knowing John 514 00:31:57,600 --> 00:32:01,800 Speaker 1: and and having immense respect and kinship with with David Lipton, 515 00:32:02,080 --> 00:32:04,640 Speaker 1: who I still talk with. UM. But look, I think 516 00:32:04,720 --> 00:32:06,520 Speaker 1: you know what we need now is is somebody who's 517 00:32:06,560 --> 00:32:08,880 Speaker 1: going to be trying to bring the world together on 518 00:32:08,920 --> 00:32:13,040 Speaker 1: these critical issues. We didn't anticipate a pandemic before I 519 00:32:13,120 --> 00:32:15,800 Speaker 1: started in this role. We're here now, and I think 520 00:32:15,840 --> 00:32:18,520 Speaker 1: since I've arrived, we've been moving quickly to try and 521 00:32:18,800 --> 00:32:22,920 Speaker 1: build relationships across institutions in the multilateral framework and also 522 00:32:23,000 --> 00:32:26,760 Speaker 1: bilaterally with our key countries and partners. That's what's going 523 00:32:26,800 --> 00:32:30,000 Speaker 1: to be effective in not only responding to the health 524 00:32:30,000 --> 00:32:31,800 Speaker 1: side of this, but also on the economics, which for 525 00:32:31,880 --> 00:32:34,719 Speaker 1: some countries is just as important or even more important. Right, 526 00:32:35,320 --> 00:32:38,480 Speaker 1: So much of this you mentioned bilaterally is the new 527 00:32:38,840 --> 00:32:43,840 Speaker 1: non multilateral relationship of President Trump to the world. You're 528 00:32:43,880 --> 00:32:50,520 Speaker 1: representing essentially an administration that is decidedly not multilateral. MS 529 00:32:50,520 --> 00:32:54,480 Speaker 1: Gore Gave has pushed against that aggressively. How does the 530 00:32:54,560 --> 00:32:59,600 Speaker 1: United States address on multilateral institution if it doesn't believe 531 00:32:59,640 --> 00:33:02,200 Speaker 1: in the underlying theory? You know, I think you know 532 00:33:02,360 --> 00:33:05,400 Speaker 1: what the US wants as an effective multilateral framework, And 533 00:33:05,560 --> 00:33:08,280 Speaker 1: certainly that's something that I worked on quite a bit 534 00:33:08,320 --> 00:33:10,640 Speaker 1: when I was in the in the U. S administration. 535 00:33:10,800 --> 00:33:12,920 Speaker 1: I'm very proud to be in the current slot that 536 00:33:12,920 --> 00:33:15,320 Speaker 1: I'm in now, which is trying to nit this up 537 00:33:15,720 --> 00:33:19,200 Speaker 1: better and to make our programming more effective. This is 538 00:33:19,240 --> 00:33:21,360 Speaker 1: a this is a huge challenge. One thing that we've 539 00:33:21,400 --> 00:33:23,720 Speaker 1: had to deal with as as I think we all 540 00:33:23,760 --> 00:33:26,960 Speaker 1: have in this crisis is moved with incredible speed. Uh. 541 00:33:27,000 --> 00:33:29,280 Speaker 1: So we were talking a bit about markets and and 542 00:33:29,400 --> 00:33:32,000 Speaker 1: UH and market reactions, but but really some of the 543 00:33:32,040 --> 00:33:34,840 Speaker 1: optimism in the market is reflected in the fact that 544 00:33:34,920 --> 00:33:38,120 Speaker 1: you know, institutions like ours have moved with incredible speed 545 00:33:38,320 --> 00:33:42,280 Speaker 1: uh and at an incredible scale that's unprecedent in our history. 546 00:33:42,440 --> 00:33:45,000 Speaker 1: Well in our history, Jeffrey. The history of the International 547 00:33:45,040 --> 00:33:48,800 Speaker 1: Monetary Fund is simple. They are there really as a 548 00:33:48,840 --> 00:33:53,360 Speaker 1: crisis policymaker of last resort and usually offer what are 549 00:33:53,400 --> 00:33:58,080 Speaker 1: considered not draconian but very strict terms to any country 550 00:33:58,080 --> 00:34:01,480 Speaker 1: that is in in real need. Right now, a lot 551 00:34:01,520 --> 00:34:04,360 Speaker 1: of countries don't want to deal with the former I 552 00:34:04,600 --> 00:34:08,239 Speaker 1: m F regime. Can you recommend to the managing director 553 00:34:08,560 --> 00:34:11,680 Speaker 1: that this needs to be a kindler, kinder and general 554 00:34:12,040 --> 00:34:15,480 Speaker 1: I m F. I think the conversation Crystaline and I 555 00:34:15,480 --> 00:34:17,279 Speaker 1: have been having with countries as this is not your 556 00:34:17,280 --> 00:34:20,560 Speaker 1: father's or even your grandfather's I m F. We are 557 00:34:20,840 --> 00:34:23,080 Speaker 1: approaching the world in the in the context of this 558 00:34:23,160 --> 00:34:25,440 Speaker 1: pandemic in a new way. A lot of that you 559 00:34:25,480 --> 00:34:28,680 Speaker 1: can see, and how we are provisioning our facilities for 560 00:34:29,440 --> 00:34:31,799 Speaker 1: for emergency finance at this point in time, which is, 561 00:34:32,120 --> 00:34:35,520 Speaker 1: you know, we're telling countries very We're very frank, spend 562 00:34:35,520 --> 00:34:37,399 Speaker 1: what you have to at this point, but please keep 563 00:34:37,400 --> 00:34:39,560 Speaker 1: the receipts. And we're gonna be holding countries accountable on 564 00:34:39,600 --> 00:34:41,840 Speaker 1: the back end for this, but we're not second guessing 565 00:34:41,840 --> 00:34:43,560 Speaker 1: some of the decisions they have to make in terms 566 00:34:43,600 --> 00:34:47,200 Speaker 1: of spending on critical health priorities and social safety nets. 567 00:34:47,520 --> 00:34:49,520 Speaker 1: I spoke to David mel Pass of the World Bank 568 00:34:49,560 --> 00:34:52,359 Speaker 1: about this question, but that was before we dragged two 569 00:34:52,400 --> 00:34:56,560 Speaker 1: thousand forty seven into two thousand twenty. How will you 570 00:34:56,600 --> 00:35:00,239 Speaker 1: advise the managing director and maybe over the phone owner 571 00:35:00,280 --> 00:35:02,480 Speaker 1: a walk down to the hay Adams, how will you 572 00:35:02,520 --> 00:35:06,640 Speaker 1: advise the Trump administration to deal with this issue of 573 00:35:06,680 --> 00:35:09,680 Speaker 1: Hong Kong. You know, I think my role in this, 574 00:35:09,760 --> 00:35:11,600 Speaker 1: and I think our institution's role in this is not 575 00:35:11,680 --> 00:35:14,919 Speaker 1: to involve too much in the geopolitics. What we're looking 576 00:35:14,920 --> 00:35:17,080 Speaker 1: at this from is from an economic perspective. And one 577 00:35:17,120 --> 00:35:19,319 Speaker 1: thing that is for certain is Hong Kong is an 578 00:35:19,360 --> 00:35:24,319 Speaker 1: incredibly important financial and commercial trading hub, not just to 579 00:35:24,360 --> 00:35:27,439 Speaker 1: the world, but also to China and to the United States. 580 00:35:27,520 --> 00:35:30,960 Speaker 1: That's underpinned by a you know, a series of policies 581 00:35:31,000 --> 00:35:32,920 Speaker 1: that have been built up over time, whether it's credible 582 00:35:32,920 --> 00:35:37,080 Speaker 1: monetary authority, a well regulated banking sector, uh, you know, 583 00:35:37,239 --> 00:35:39,759 Speaker 1: a strong reserve position. These are the kinds of things 584 00:35:39,800 --> 00:35:41,720 Speaker 1: that we'll be looking at when we see about where 585 00:35:41,760 --> 00:35:45,160 Speaker 1: where Hong Kong is headed from here. And clearly the 586 00:35:45,239 --> 00:35:47,440 Speaker 1: outlook for Hong Kong, well it's a little a little 587 00:35:47,520 --> 00:35:49,680 Speaker 1: unclear at this point or too early to judge given 588 00:35:49,719 --> 00:35:53,360 Speaker 1: recent developments, is relevant in terms of the global economic outlook. 589 00:35:53,920 --> 00:35:55,400 Speaker 1: One of the things we know, and this is for 590 00:35:55,440 --> 00:36:00,799 Speaker 1: our radio listeners nationwide and also television as well, Mr Okamoto, 591 00:36:01,280 --> 00:36:03,600 Speaker 1: we come to a point where we say, when's the 592 00:36:03,680 --> 00:36:06,759 Speaker 1: next cash call on the United States? How do you 593 00:36:06,800 --> 00:36:09,759 Speaker 1: observe the fiscal structure of the I M F right now? 594 00:36:10,160 --> 00:36:12,480 Speaker 1: And well, you need to go to President Trump into 595 00:36:12,520 --> 00:36:17,200 Speaker 1: the Capitol Hill looking for more resources. You know. It's 596 00:36:17,239 --> 00:36:19,960 Speaker 1: a it's a it's an interesting perspective. I think one 597 00:36:20,000 --> 00:36:22,160 Speaker 1: way we look at it is is a little bit different, 598 00:36:22,160 --> 00:36:24,759 Speaker 1: which is we're entering into this crisis better resource than 599 00:36:24,800 --> 00:36:27,920 Speaker 1: we have in any prior crisis, and so we're we 600 00:36:28,000 --> 00:36:30,920 Speaker 1: have a trillion dollars in financial firepower that you know, 601 00:36:30,960 --> 00:36:34,240 Speaker 1: we are ready and able to deploy. That's being deployed 602 00:36:34,239 --> 00:36:38,160 Speaker 1: in real time today right now. Given the even the 603 00:36:38,360 --> 00:36:40,880 Speaker 1: some of the more pessimistic projections that we have, we 604 00:36:40,960 --> 00:36:43,799 Speaker 1: think we have the sufficient resources that we need to 605 00:36:43,840 --> 00:36:47,160 Speaker 1: carry out our our role in this Obviously, we we are, 606 00:36:47,200 --> 00:36:50,160 Speaker 1: we are. We are um encouraged by the good amount 607 00:36:50,200 --> 00:36:53,360 Speaker 1: of international cooperation that's come behind some of our recent 608 00:36:53,400 --> 00:36:57,719 Speaker 1: requests for resources, for example, fundraising campaigns to help some 609 00:36:57,800 --> 00:37:00,800 Speaker 1: of our poorest countries which have gone met. So that's 610 00:37:00,840 --> 00:37:02,680 Speaker 1: that's a good thing, and that bodes well for any 611 00:37:02,680 --> 00:37:06,120 Speaker 1: future needs we may have. Jeffrey, one final question, if 612 00:37:06,160 --> 00:37:08,200 Speaker 1: I may, and this goes back to the heritage of 613 00:37:08,239 --> 00:37:10,960 Speaker 1: the United States, and with our economic counselors at the 614 00:37:11,000 --> 00:37:13,239 Speaker 1: I M F now ge to GOP and F there, 615 00:37:13,320 --> 00:37:15,560 Speaker 1: but I'll go back to the time of Kenneth Rogoff 616 00:37:15,640 --> 00:37:18,680 Speaker 1: of Harvard and of course to the great Rudy dorn 617 00:37:18,719 --> 00:37:21,800 Speaker 1: Bush of m I. T. Long ago and far away. 618 00:37:22,120 --> 00:37:26,480 Speaker 1: The fundamental difference right now in these crises plural is 619 00:37:26,560 --> 00:37:30,080 Speaker 1: we have much more of a floating rate regime versus 620 00:37:30,080 --> 00:37:32,440 Speaker 1: the fixed nature that we had in the fifties and 621 00:37:32,480 --> 00:37:37,120 Speaker 1: the sixties. Give us your opinion of dollars strength or 622 00:37:37,200 --> 00:37:42,400 Speaker 1: dollar weakness, which is most efficacious for America, you know. 623 00:37:42,480 --> 00:37:44,920 Speaker 1: I I'll let the President and UH and UH and 624 00:37:44,960 --> 00:37:46,839 Speaker 1: the Treasure Sectory speak on where they think the dollars 625 00:37:46,840 --> 00:37:48,719 Speaker 1: should be at any given point in time. I think 626 00:37:48,719 --> 00:37:51,239 Speaker 1: what's important here is that the Fed is doing all 627 00:37:51,280 --> 00:37:54,279 Speaker 1: that it can to support of financial markets, both through 628 00:37:54,280 --> 00:37:57,520 Speaker 1: monetary policy and through some of its financing operations that 629 00:37:57,560 --> 00:38:00,120 Speaker 1: are there are forthcoming jointly with the Treasury Department. And 630 00:38:00,600 --> 00:38:04,680 Speaker 1: this is obviously we enter into this world, as you said, 631 00:38:04,719 --> 00:38:08,120 Speaker 1: with flexible exchange rates. That allows flexible exchange rates to 632 00:38:08,239 --> 00:38:11,560 Speaker 1: be part of the buffers that help, you know, countries 633 00:38:11,600 --> 00:38:14,680 Speaker 1: weather this. For some countries, this is the first time 634 00:38:14,719 --> 00:38:17,120 Speaker 1: they're having to use some of these tools. And so 635 00:38:17,160 --> 00:38:20,480 Speaker 1: that's where our advice, paired with ours as you put 636 00:38:20,480 --> 00:38:23,719 Speaker 1: in these icons of the I M F. Historic expertise 637 00:38:23,800 --> 00:38:26,840 Speaker 1: and UH and a wealth of knowledge gets deployed on 638 00:38:26,880 --> 00:38:30,080 Speaker 1: the ground to help countries in real time. Mr Acomona, 639 00:38:30,120 --> 00:38:32,760 Speaker 1: thank you so much for joining us today. Both Jonathan 640 00:38:32,880 --> 00:38:35,239 Speaker 1: Lees and I look forward to seeing you at the 641 00:38:35,320 --> 00:38:38,719 Speaker 1: next actual I MF meetings, whether it's the Spring meetings 642 00:38:38,840 --> 00:38:41,879 Speaker 1: or the annual meeting. We look forward to that as well. 643 00:38:42,120 --> 00:38:46,359 Speaker 1: Jeffrey Akamoto Folks, the first Deputy Managing Director of the 644 00:38:46,440 --> 00:38:52,600 Speaker 1: I m F on radio and television, A must listen 645 00:38:52,680 --> 00:38:55,160 Speaker 1: for Global Wall Street right now. Cheery Viceman is just 646 00:38:55,280 --> 00:38:59,320 Speaker 1: really a most remarkable strategist because he's not he's Vasser 647 00:38:59,360 --> 00:39:04,520 Speaker 1: and Harvard Economics, acutely sharp on emerging markets and international 648 00:39:04,560 --> 00:39:08,919 Speaker 1: economics and pulling that into a strategy for Australia's Macquarie Bank. 649 00:39:08,960 --> 00:39:11,640 Speaker 1: And we're thrilled he could join us this morning. I've 650 00:39:11,640 --> 00:39:13,760 Speaker 1: got to go right to the dollar and the dollar 651 00:39:13,840 --> 00:39:17,120 Speaker 1: dynamics theory. The President, I think you wanted week dollar 652 00:39:17,400 --> 00:39:20,040 Speaker 1: and now I think you want strong dollar. What dollar 653 00:39:20,120 --> 00:39:23,960 Speaker 1: are you predicting? Yeah? So so this is interesting, and 654 00:39:24,000 --> 00:39:26,239 Speaker 1: I should say before that, good morning to all of you. 655 00:39:26,480 --> 00:39:29,360 Speaker 1: Um this fine morning. I I we know we have 656 00:39:29,719 --> 00:39:32,440 Speaker 1: a view of the dollar that sees it actually weakening 657 00:39:33,000 --> 00:39:36,440 Speaker 1: versus the euro and sterling. Uh subwhat at least going 658 00:39:36,440 --> 00:39:39,040 Speaker 1: into the back half of this year. Whether it's what 659 00:39:39,080 --> 00:39:42,319 Speaker 1: Trump wants or not, I think is not what's relevant here, 660 00:39:42,360 --> 00:39:44,640 Speaker 1: although uh, you know, what what Trump is doing is 661 00:39:44,640 --> 00:39:46,480 Speaker 1: going to have some say over what the dollar does, 662 00:39:47,280 --> 00:39:51,040 Speaker 1: and and particularly the election in our view, because we 663 00:39:51,080 --> 00:39:52,600 Speaker 1: think that one of the issuests that market is not 664 00:39:52,680 --> 00:39:55,600 Speaker 1: fackered in recently are the risk around the US election. 665 00:39:56,160 --> 00:39:58,320 Speaker 1: And I'm not speaking so much about the presidential election, 666 00:39:58,400 --> 00:40:01,640 Speaker 1: but of course if the Senate goes democratic, I think 667 00:40:01,640 --> 00:40:04,640 Speaker 1: that the situation with regard to taxes could change in 668 00:40:04,640 --> 00:40:08,680 Speaker 1: the US. We could see a shift away from US equities. 669 00:40:08,680 --> 00:40:13,319 Speaker 1: It's the prevailing winds shift towards higher statutory corporate tax 670 00:40:13,440 --> 00:40:16,279 Speaker 1: rates or wealth taxes or capital gains taxes. And if 671 00:40:16,320 --> 00:40:18,560 Speaker 1: that were to happen, we could see the dollar start 672 00:40:18,560 --> 00:40:21,480 Speaker 1: to weaken against some of the majors as as all 673 00:40:21,520 --> 00:40:24,759 Speaker 1: occases around the world, simply start to move away from 674 00:40:24,800 --> 00:40:26,879 Speaker 1: the US equity. So that's clearly one thing that could 675 00:40:26,920 --> 00:40:30,560 Speaker 1: take the dollar a bit lower relative to the to 676 00:40:30,640 --> 00:40:33,600 Speaker 1: the Euros potentially, and that's certainly something that's tied us 677 00:40:33,800 --> 00:40:36,560 Speaker 1: uh political risk. But that's out there that I think 678 00:40:36,600 --> 00:40:38,960 Speaker 1: the market is not taking too much account up right now, 679 00:40:39,800 --> 00:40:42,040 Speaker 1: I think the rest are mild. However, right, I mean, 680 00:40:42,080 --> 00:40:44,120 Speaker 1: even if we were to get something like this, there's 681 00:40:44,120 --> 00:40:47,359 Speaker 1: still some issues prevailing at the downside, and the euro 682 00:40:48,640 --> 00:40:51,879 Speaker 1: dollar we can not that much against euro and sterlings 683 00:40:51,920 --> 00:40:54,760 Speaker 1: the backup and Sarah, you touched on the Trinyon dollar question. 684 00:40:54,960 --> 00:40:58,279 Speaker 1: In the FX market, what's the driver? What's the dominant driver? 685 00:40:58,400 --> 00:41:01,880 Speaker 1: Is it right differentials? Is it policy? Is it fiscal policy? 686 00:41:01,960 --> 00:41:04,279 Speaker 1: Which one is it at the moment for you, Terry, well, 687 00:41:04,280 --> 00:41:06,560 Speaker 1: you know, I think it's more rate differentials. At this point. 688 00:41:07,120 --> 00:41:10,680 Speaker 1: It's been very difficult for the market to to make 689 00:41:11,440 --> 00:41:16,080 Speaker 1: um distinctions between fiscal policy across countries. Let's say, when 690 00:41:16,080 --> 00:41:19,080 Speaker 1: we're talking about trillions of dollars of spending and loan 691 00:41:19,120 --> 00:41:22,120 Speaker 1: guarantees in other ways in which fiscal authorities is going 692 00:41:22,160 --> 00:41:25,080 Speaker 1: to try to influence the economy. It's very very difficult 693 00:41:25,120 --> 00:41:28,040 Speaker 1: to I think, in my mind for traders unitfax traction 694 00:41:28,160 --> 00:41:30,600 Speaker 1: say okay, well that country is stimulating more and that 695 00:41:30,640 --> 00:41:33,759 Speaker 1: country stimulating less. It all turns into a mismash at 696 00:41:33,760 --> 00:41:36,240 Speaker 1: some point, especially in so far as you're not getting 697 00:41:36,320 --> 00:41:40,160 Speaker 1: very much guidance, uh with regard to when all of 698 00:41:40,200 --> 00:41:43,640 Speaker 1: these policies will will be ending. I will say this, however, 699 00:41:44,080 --> 00:41:47,080 Speaker 1: to the extent that fiscal policy is not just stimulatively 700 00:41:47,560 --> 00:41:50,360 Speaker 1: but has other effects as well, it could be important. 701 00:41:50,360 --> 00:41:54,040 Speaker 1: And I'll bring up here the case of the the 702 00:41:54,040 --> 00:41:58,640 Speaker 1: Pandemic Emergency Relief Fund that the EU is thinking about 703 00:41:59,000 --> 00:42:01,080 Speaker 1: um going full it with AU as you guys know, 704 00:42:01,440 --> 00:42:05,759 Speaker 1: about seven fifty billion euros all told in grants and loans. 705 00:42:05,800 --> 00:42:08,680 Speaker 1: That's obviously going to be to some extent stimulatory. But 706 00:42:08,719 --> 00:42:10,719 Speaker 1: I think the extent is going to help the Euro 707 00:42:11,320 --> 00:42:14,040 Speaker 1: in the back half of this year. It's not because stimulatory, 708 00:42:14,080 --> 00:42:16,440 Speaker 1: but because it speaks one of the most important medium 709 00:42:16,520 --> 00:42:19,600 Speaker 1: term risk and longer term grow which is the existential 710 00:42:19,680 --> 00:42:22,080 Speaker 1: risk of an ultimate Euro break up. As we see 711 00:42:22,120 --> 00:42:26,160 Speaker 1: more EU unity. Because of this fiscal stimulus, it could 712 00:42:26,160 --> 00:42:28,160 Speaker 1: help the Euro. But that's a special case. I think 713 00:42:28,160 --> 00:42:31,360 Speaker 1: in most instances, fiscal policy, at least the magnitude of 714 00:42:31,360 --> 00:42:33,600 Speaker 1: it is not that important, and it will be things 715 00:42:33,600 --> 00:42:36,520 Speaker 1: like rate differentials that drive these currencies. All right, Terry, 716 00:42:36,600 --> 00:42:39,120 Speaker 1: let's talk about rate differentials in an era of yield 717 00:42:39,160 --> 00:42:42,000 Speaker 1: curve control. John and Tom have been talking about this extensively. 718 00:42:42,040 --> 00:42:45,600 Speaker 1: We've heard from FED officials This is clearly something they're considering. 719 00:42:45,880 --> 00:42:49,040 Speaker 1: If the Federal Reserve does peg the yield curve at 720 00:42:49,080 --> 00:42:52,400 Speaker 1: a certain place, if it commits to buying enough treasuries 721 00:42:52,440 --> 00:42:54,799 Speaker 1: to keep it there, what does that mean in terms 722 00:42:54,880 --> 00:42:57,279 Speaker 1: of currencies. Does it dampen all the volatility? Does it 723 00:42:57,320 --> 00:43:00,200 Speaker 1: give a lift to the dollar? I think I think 724 00:43:00,239 --> 00:43:02,600 Speaker 1: it's going to dampen volatility. I don't think it's necessarily 725 00:43:02,640 --> 00:43:05,560 Speaker 1: going to give a list um. And of course this 726 00:43:05,640 --> 00:43:08,799 Speaker 1: is all we all have to consider this in relative terms, Right, 727 00:43:09,239 --> 00:43:12,319 Speaker 1: is yield curve control better or worse for the dollar? 728 00:43:12,360 --> 00:43:15,040 Speaker 1: And say the alternative strategy that that might have pursued, 729 00:43:15,360 --> 00:43:17,360 Speaker 1: Let's say in an alternative universe, which was to go 730 00:43:17,440 --> 00:43:20,759 Speaker 1: to say, negative rates. Uh, let's put it this way. 731 00:43:20,800 --> 00:43:22,600 Speaker 1: I think if the fit did go to negative rates, 732 00:43:22,640 --> 00:43:24,680 Speaker 1: it would be much worse for the dollars than if 733 00:43:24,680 --> 00:43:26,759 Speaker 1: it were to do yield curve control. The problem with 734 00:43:26,800 --> 00:43:29,120 Speaker 1: yelker control is that it's a very very tricky thing, 735 00:43:29,160 --> 00:43:31,399 Speaker 1: of course, because if you were to peg let's say, 736 00:43:31,800 --> 00:43:33,799 Speaker 1: the three year yield of the five year yield to 737 00:43:33,800 --> 00:43:36,840 Speaker 1: a specific level, you would have to issue policy got 738 00:43:36,680 --> 00:43:39,799 Speaker 1: in respect of the short term the overnight rate, which 739 00:43:39,840 --> 00:43:43,319 Speaker 1: is consistent to where you are pegging the three year 740 00:43:43,400 --> 00:43:45,360 Speaker 1: yield or the five year yield. If you make a 741 00:43:45,400 --> 00:43:49,200 Speaker 1: mistake in that regard, you may have the market choose 742 00:43:49,280 --> 00:43:52,920 Speaker 1: to either buy um three year paper or five year 743 00:43:52,960 --> 00:43:55,680 Speaker 1: paper aggressively or sell it, in which case the said 744 00:43:55,680 --> 00:43:57,799 Speaker 1: would lose control of its balance sheet. If it were 745 00:43:57,840 --> 00:44:00,480 Speaker 1: to do that, I need to lose call of its 746 00:44:00,480 --> 00:44:03,680 Speaker 1: balance sheet, because it's the yield in a long place. 747 00:44:04,080 --> 00:44:06,120 Speaker 1: Then I think you would have a problem for the dollars. 748 00:44:06,360 --> 00:44:08,280 Speaker 1: But let's assume for now that the set is pretty 749 00:44:08,280 --> 00:44:10,960 Speaker 1: wise and savvy about this, and that when it takes 750 00:44:10,960 --> 00:44:13,080 Speaker 1: a three year yield or the five year yield, you 751 00:44:13,120 --> 00:44:15,239 Speaker 1: will do it in a mary that's consistent with the level. 752 00:44:15,239 --> 00:44:19,640 Speaker 1: It's consistent with the forward guiding position, in which case 753 00:44:20,160 --> 00:44:23,160 Speaker 1: mclary w us on Tom Kane's favorite subject, Terry. This 754 00:44:23,239 --> 00:44:26,799 Speaker 1: drives Tom Keane totally insane. But I wonder whether it 755 00:44:26,800 --> 00:44:29,040 Speaker 1: sounds more dramatic than actually is, because if they do 756 00:44:29,120 --> 00:44:31,719 Speaker 1: go forward with what Williams and Clara have talked about 757 00:44:31,719 --> 00:44:33,920 Speaker 1: in the last couple of weeks, all they're basically saying 758 00:44:34,040 --> 00:44:37,000 Speaker 1: is that yield curve control is the following. It is 759 00:44:37,040 --> 00:44:40,400 Speaker 1: a compliment to forward guidance and date contingent forward guidance. 760 00:44:40,440 --> 00:44:41,960 Speaker 1: And basically they're just going to turn around and say 761 00:44:42,040 --> 00:44:44,439 Speaker 1: for the next two or three years, say we'll sit 762 00:44:44,520 --> 00:44:48,080 Speaker 1: on yields out to five years, three years, whatever it 763 00:44:48,160 --> 00:44:50,479 Speaker 1: might be, in line with the forward guidance. And guess 764 00:44:50,480 --> 00:44:52,560 Speaker 1: what the market is already there, Terry, The market is 765 00:44:52,600 --> 00:44:55,200 Speaker 1: in line at the front end into the belly with 766 00:44:55,360 --> 00:44:57,640 Speaker 1: the FED funds rate already. So hasn't the market already 767 00:44:57,640 --> 00:44:59,959 Speaker 1: done this work, Terry? Isn't the Fed just basically saying 768 00:45:00,280 --> 00:45:03,120 Speaker 1: case the cap. So I agree with Richard Clara und 769 00:45:03,239 --> 00:45:06,520 Speaker 1: percent that Yelker control is complimentary and it has to 770 00:45:06,520 --> 00:45:09,439 Speaker 1: be done as a compliment to Ford guidance. But there's 771 00:45:09,440 --> 00:45:11,400 Speaker 1: the rub, right, if they were to make a mistake, 772 00:45:12,320 --> 00:45:15,800 Speaker 1: or maybe the market misinterprets them as as as issuing 773 00:45:15,960 --> 00:45:18,120 Speaker 1: a a forward guidance which is not consistent with the 774 00:45:18,200 --> 00:45:21,120 Speaker 1: yield at which they're pegging the three or five year 775 00:45:21,160 --> 00:45:23,440 Speaker 1: bond or the ten year bond, then you have a problem. 776 00:45:23,760 --> 00:45:25,520 Speaker 1: You have to thread the needle a little bit here, right. 777 00:45:25,560 --> 00:45:29,040 Speaker 1: You have to make sure that the forward guidance that 778 00:45:29,120 --> 00:45:32,680 Speaker 1: can issue is specific enough. The market always interpreted to 779 00:45:32,719 --> 00:45:38,560 Speaker 1: be consistent with that you're that you're in gendering promote here. 780 00:45:39,280 --> 00:45:41,239 Speaker 1: That's important, I think. But like I said earlier, I 781 00:45:41,280 --> 00:45:44,160 Speaker 1: think the sad IS is savvy about this. The fact 782 00:45:44,239 --> 00:45:47,239 Speaker 1: that the people like Richard Clara are speaking about you 783 00:45:47,680 --> 00:45:51,359 Speaker 1: controlling terms a compliment with Ford guidance and consisting four 784 00:45:51,400 --> 00:45:55,080 Speaker 1: GUIDs suggesting me that it won't be a problem. Certainly 785 00:45:55,080 --> 00:45:58,160 Speaker 1: not the forward. Sorry, Weiman McQuary on the license with 786 00:45:58,200 --> 00:46:02,120 Speaker 1: the Federals f Thanks for listening to the Bloomberg Surveillance podcast. 787 00:46:02,480 --> 00:46:07,520 Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or 788 00:46:07,600 --> 00:46:11,920 Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom 789 00:46:12,000 --> 00:46:15,879 Speaker 1: Keene before the podcast. You can always catch us worldwide. 790 00:46:16,320 --> 00:46:17,440 Speaker 1: I'm Bloomberg Radio