1 00:00:09,840 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jai Ley. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:28,360 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg John, 5 00:00:28,360 --> 00:00:31,240 Speaker 1: why don't we get started here from Washington? These meetings 6 00:00:31,280 --> 00:00:35,360 Speaker 1: of the International Monetary Fund, the World Bank, and also 7 00:00:35,440 --> 00:00:39,280 Speaker 1: the i i F, which is the gathering of global bankers. 8 00:00:39,720 --> 00:00:42,280 Speaker 1: And we start strong with Katherine Man this hour of 9 00:00:42,360 --> 00:00:45,479 Speaker 1: City Group, their chief economists and of course definitive and 10 00:00:45,560 --> 00:00:49,200 Speaker 1: international economics. Catherain, let me give you an open question 11 00:00:49,280 --> 00:00:52,559 Speaker 1: to start. If you line up your essay for Monday, 12 00:00:53,520 --> 00:00:59,279 Speaker 1: what is the theme you're grabbing onto among these three meetings. Well, 13 00:00:59,280 --> 00:01:01,440 Speaker 1: I think you've some differences and views that you get 14 00:01:01,480 --> 00:01:04,280 Speaker 1: when going to these three meetings. Um, the bankers are 15 00:01:04,319 --> 00:01:07,759 Speaker 1: talking about what's going on in the markets. Uh, there's 16 00:01:07,760 --> 00:01:10,360 Speaker 1: just a bit of a puzzlement, for example, between what 17 00:01:10,440 --> 00:01:13,920 Speaker 1: the bond market is telling us projecting pretty much a 18 00:01:13,959 --> 00:01:16,240 Speaker 1: sorry state for for the rest of the year into 19 00:01:16,920 --> 00:01:19,320 Speaker 1: On the other hand, equities look pretty good, as you say, 20 00:01:19,480 --> 00:01:23,000 Speaker 1: very very close to highs and so they're telling very 21 00:01:23,280 --> 00:01:26,880 Speaker 1: markets themselves are telling very different stories about So that's 22 00:01:26,920 --> 00:01:29,840 Speaker 1: what's happening over at i F. On the other hand, 23 00:01:29,920 --> 00:01:33,119 Speaker 1: over at the i m F, there's much more balanced 24 00:01:33,120 --> 00:01:38,080 Speaker 1: discussion about monetary policy and fiscal policy, the emphasis on 25 00:01:38,120 --> 00:01:42,200 Speaker 1: fiscal policy having to complement the monetary policy accommodation that's 26 00:01:42,200 --> 00:01:44,600 Speaker 1: been in place for some time now. So so you're 27 00:01:44,720 --> 00:01:47,640 Speaker 1: you know, we've got a more more macro view over 28 00:01:47,680 --> 00:01:49,800 Speaker 1: at the i m F and a more finance view 29 00:01:49,840 --> 00:01:52,640 Speaker 1: over at the ii F. And that makes sense. How 30 00:01:52,680 --> 00:01:55,760 Speaker 1: does courage they should talk to each other? Thought if 31 00:01:55,760 --> 00:01:57,440 Speaker 1: they talk to more to each other, that would be 32 00:01:57,480 --> 00:01:59,840 Speaker 1: impossible as one as it the Ronald Reagan Building in 33 00:01:59,880 --> 00:02:03,279 Speaker 1: the other equidistant past the White House on the other side, 34 00:02:03,360 --> 00:02:06,680 Speaker 1: Catherine Man, there's a monetary and fiscal solution, but all 35 00:02:06,720 --> 00:02:10,560 Speaker 1: of that runs around currency dynamics, and is John knows 36 00:02:10,600 --> 00:02:13,359 Speaker 1: two well, the one euro, the one euro that's out 37 00:02:13,400 --> 00:02:16,080 Speaker 1: there is the euro. It's threats still is that even 38 00:02:16,160 --> 00:02:19,639 Speaker 1: part of the discussion. What do you mean the sort 39 00:02:19,680 --> 00:02:22,920 Speaker 1: of the threat? Does the one year old concept, I 40 00:02:22,919 --> 00:02:26,880 Speaker 1: mean London's breaking up, London saying goodbye. Yeah, but but 41 00:02:27,160 --> 00:02:29,400 Speaker 1: London isn't part of the euro So I mean that 42 00:02:29,800 --> 00:02:32,240 Speaker 1: that that never was. You know, we didn't have a 43 00:02:32,240 --> 00:02:34,760 Speaker 1: dessorved divorce there because there wasn't a marriage there. So 44 00:02:34,960 --> 00:02:39,160 Speaker 1: that's that's that So um, I think that the anybody 45 00:02:39,200 --> 00:02:41,400 Speaker 1: who's betting on a breakup of the Euro is making 46 00:02:41,400 --> 00:02:44,639 Speaker 1: a really bad debt um. If anything, the euro Area 47 00:02:44,720 --> 00:02:49,240 Speaker 1: is moving towards a better understanding, uh and consolidation of 48 00:02:49,280 --> 00:02:52,640 Speaker 1: the policies. I think you hear more voices, consistent voices 49 00:02:53,200 --> 00:02:57,960 Speaker 1: within Europe about monetary policy stance, but also about fiscal 50 00:02:58,280 --> 00:03:01,080 Speaker 1: um so uh, you know, I'd say, if anything, this 51 00:03:01,160 --> 00:03:04,600 Speaker 1: is this period of time is very positive for the 52 00:03:04,600 --> 00:03:07,919 Speaker 1: euro ever currency and for the europe as an area. 53 00:03:08,560 --> 00:03:10,280 Speaker 1: They need to they need to get it together and 54 00:03:10,320 --> 00:03:14,840 Speaker 1: actually produce the fiscal side of things. Structural policies are 55 00:03:14,880 --> 00:03:17,320 Speaker 1: part of fiscal policy, and that's talked about for a 56 00:03:17,400 --> 00:03:20,120 Speaker 1: long time as well. But I think that I do 57 00:03:20,240 --> 00:03:23,320 Speaker 1: have a sense that that there's more, um, there's more 58 00:03:23,360 --> 00:03:25,000 Speaker 1: sense than you know, we're going to get this done. 59 00:03:25,160 --> 00:03:26,920 Speaker 1: When I talked to the Europeans, they say, yeah, we're 60 00:03:26,919 --> 00:03:28,960 Speaker 1: going to get this done. So let's talk about what 61 00:03:29,080 --> 00:03:31,440 Speaker 1: is harmon in the European economy. Right now, arguably the 62 00:03:31,480 --> 00:03:34,480 Speaker 1: trade dispute between the Chinese and the United States. And Katherine, 63 00:03:34,480 --> 00:03:37,240 Speaker 1: i'd love your insight on the GDP print we had 64 00:03:37,240 --> 00:03:40,920 Speaker 1: from China overnight. The slowest growth since the nineteen nineties, 65 00:03:40,960 --> 00:03:43,080 Speaker 1: that's the headline, but it's still six percent, and six 66 00:03:43,120 --> 00:03:46,000 Speaker 1: percent by any standard coming off a bigger and bigger 67 00:03:46,000 --> 00:03:49,200 Speaker 1: base is pretty impressive when you look below the service, 68 00:03:49,280 --> 00:03:51,760 Speaker 1: beneath the surface. At the moment, Katherine, the composition of 69 00:03:51,840 --> 00:03:54,640 Speaker 1: that GDP figure, is there anything to be concerned about, 70 00:03:54,640 --> 00:03:57,320 Speaker 1: anything to be encouraged by in the Chinese economy at 71 00:03:57,320 --> 00:04:00,560 Speaker 1: the moment? Well, I think you're doing the exactly the 72 00:04:00,640 --> 00:04:03,280 Speaker 1: right thing. I mean, increasingly, GDP is not telling us 73 00:04:03,320 --> 00:04:05,600 Speaker 1: the things we need to know about an economy. And 74 00:04:05,600 --> 00:04:08,360 Speaker 1: that's not just true in the case of the China 75 00:04:08,520 --> 00:04:11,080 Speaker 1: China data, but more broadly, looking at all of the 76 00:04:11,120 --> 00:04:14,600 Speaker 1: economies these days. Uh, you know, they've got very different 77 00:04:15,080 --> 00:04:18,799 Speaker 1: things happening on the domestic side, consumption and investment relative 78 00:04:18,880 --> 00:04:21,440 Speaker 1: to trade, and we're seeing that play out for China 79 00:04:21,520 --> 00:04:26,120 Speaker 1: as well. Uh, consumption and industrial production are still pretty good. 80 00:04:26,440 --> 00:04:29,240 Speaker 1: Fixed investment, the Rhodes Bridges houses that sort of thing 81 00:04:29,600 --> 00:04:32,040 Speaker 1: that's weaker and of course trade is weaker. So it's 82 00:04:32,080 --> 00:04:36,279 Speaker 1: really important to to decompose GDP into components and look 83 00:04:36,279 --> 00:04:39,760 Speaker 1: at each one of them individually. The consumption UM is 84 00:04:39,760 --> 00:04:43,679 Speaker 1: a key ingredient to the transition in the Chinese economy 85 00:04:43,720 --> 00:04:48,640 Speaker 1: away from the export lead and and heavy investment lead strategy. Uh. 86 00:04:48,680 --> 00:04:51,440 Speaker 1: It's been a very challenging UM thing for them to 87 00:04:51,520 --> 00:04:54,559 Speaker 1: do to make this adjustment, to make this transition towards 88 00:04:54,720 --> 00:04:57,760 Speaker 1: consumer based economy. UM. It's a tough time to do 89 00:04:57,800 --> 00:05:01,520 Speaker 1: it now because of concerns about employment, employment security and 90 00:05:01,560 --> 00:05:07,039 Speaker 1: precautionary household savings. Is a challenge for policy effectiveness. But 91 00:05:07,560 --> 00:05:10,120 Speaker 1: you know, I think they're moving. They're moving in that direction, 92 00:05:10,279 --> 00:05:12,360 Speaker 1: and we see it in the data. Consumption as a 93 00:05:12,400 --> 00:05:14,920 Speaker 1: share of GDP is higher. Looking at the data, though, Catherine, 94 00:05:14,920 --> 00:05:17,080 Speaker 1: the trade surplus is higher. As one that's higher because 95 00:05:17,080 --> 00:05:19,200 Speaker 1: the important numbers are rolling Golf. I think it's a 96 00:05:19,200 --> 00:05:21,279 Speaker 1: worry at this point that the policy response so far 97 00:05:21,320 --> 00:05:24,000 Speaker 1: from the Chinese has been very limited, very gradual, and 98 00:05:24,120 --> 00:05:26,279 Speaker 1: very targeted, and the spill over to the rest of 99 00:05:26,279 --> 00:05:29,120 Speaker 1: the world has been equally very limited. How do you 100 00:05:29,120 --> 00:05:33,000 Speaker 1: think the policy response evolves in the coming months? Well, 101 00:05:33,240 --> 00:05:36,960 Speaker 1: so they're one should you know, one would like to 102 00:05:37,040 --> 00:05:40,479 Speaker 1: have a gradual policy response of what you're trying to 103 00:05:40,520 --> 00:05:43,920 Speaker 1: do is gradually wean the economy off of excess debt, 104 00:05:43,960 --> 00:05:47,160 Speaker 1: and of course financial stability and financial leverage is still 105 00:05:47,200 --> 00:05:51,320 Speaker 1: a concern internally in China, so you have to move gradually. Um, 106 00:05:51,360 --> 00:05:53,160 Speaker 1: it would be nice if they had a little bit 107 00:05:53,160 --> 00:05:58,000 Speaker 1: more effective consumption policies because, as I say, precautionary household 108 00:05:58,000 --> 00:06:01,720 Speaker 1: savings tends to make consumer based policy is less effective 109 00:06:01,800 --> 00:06:04,960 Speaker 1: in terms of less traction, lower multipliers. Uh So a 110 00:06:05,040 --> 00:06:08,040 Speaker 1: little bit more on that side I think would be warranted. 111 00:06:08,279 --> 00:06:10,880 Speaker 1: They have a number of other possibilities up their sleeve 112 00:06:11,000 --> 00:06:14,800 Speaker 1: that are more targeted against something like fashion or clunkers. 113 00:06:14,839 --> 00:06:18,120 Speaker 1: So um, you know they're they're kind of following the 114 00:06:18,200 --> 00:06:21,320 Speaker 1: right path. Um. Now with imports being down, you know 115 00:06:21,400 --> 00:06:23,440 Speaker 1: that's partly because exports are down as well. You know, 116 00:06:23,560 --> 00:06:25,640 Speaker 1: keep in mind that as a center piece of the 117 00:06:25,680 --> 00:06:28,880 Speaker 1: global value chain. Uh, you know, if your exports are 118 00:06:29,480 --> 00:06:33,080 Speaker 1: are being targeted and have have have tariffs on them, 119 00:06:33,240 --> 00:06:36,000 Speaker 1: then you know your exports are going to be reduced, 120 00:06:36,000 --> 00:06:38,040 Speaker 1: and so your imports go down as well. And also 121 00:06:38,480 --> 00:06:42,039 Speaker 1: some of the movement away from China as the center 122 00:06:42,120 --> 00:06:45,080 Speaker 1: part of the g VCS and global value chains moving 123 00:06:45,440 --> 00:06:47,960 Speaker 1: to other countries in the face of the tariff that 124 00:06:48,000 --> 00:06:51,640 Speaker 1: also is going to lead to a stumptual reduction in 125 00:06:51,400 --> 00:06:54,440 Speaker 1: the imports. This has been wonderful kather Man, thank you 126 00:06:54,480 --> 00:06:59,000 Speaker 1: so much for surveillance this morning. Catherman is the chief Economist. 127 00:06:59,480 --> 00:07:16,160 Speaker 1: It's suit a group. This is a joy, John. This 128 00:07:16,200 --> 00:07:19,280 Speaker 1: is Jacob Frankel. He has been a wonderful supporter of 129 00:07:19,280 --> 00:07:22,840 Speaker 1: Bloomberg on the Economy in Bloomberg Surveillance. He's chairman of 130 00:07:22,920 --> 00:07:27,200 Speaker 1: JP Morgan Chase International. But far more he has an 131 00:07:27,240 --> 00:07:30,640 Speaker 1: experience and a residence that many can talk about, but 132 00:07:30,760 --> 00:07:33,440 Speaker 1: few do. And I want to take a pause here 133 00:07:33,760 --> 00:07:38,880 Speaker 1: and review that with Dr Frankel, long ago and far away. 134 00:07:39,200 --> 00:07:42,520 Speaker 1: You know, amongst your thirty four consecutive meetings here in Washington, 135 00:07:43,160 --> 00:07:48,600 Speaker 1: there was August of nineteen one you took public service 136 00:07:48,720 --> 00:07:54,560 Speaker 1: in Israel is Bank of Governor with inflation of and 137 00:07:54,640 --> 00:07:59,440 Speaker 1: it wasn't just copying Paul Woker's playbook. You single handedly 138 00:07:59,600 --> 00:08:04,160 Speaker 1: brought down israel inflation. And many would suggest, including the 139 00:08:04,240 --> 00:08:07,760 Speaker 1: five prime ministers you serve for your single handedly saved 140 00:08:07,800 --> 00:08:12,680 Speaker 1: the economy. What was the distinction of lowering inflation long 141 00:08:12,680 --> 00:08:19,400 Speaker 1: ago and far away? A very clear compass. When you 142 00:08:19,440 --> 00:08:22,200 Speaker 1: do policy, you don't have to ask what do I 143 00:08:22,280 --> 00:08:24,960 Speaker 1: do now and what do I do tomorrow? But the 144 00:08:25,000 --> 00:08:28,760 Speaker 1: first question is where do I want to end my journey? 145 00:08:28,920 --> 00:08:34,840 Speaker 1: And the determination was to end the journey with stable 146 00:08:35,320 --> 00:08:39,880 Speaker 1: prices now. But this was part of a broader strategy. 147 00:08:39,920 --> 00:08:43,040 Speaker 1: This was a year in which there was a huge, 148 00:08:43,559 --> 00:08:47,760 Speaker 1: massive influx of immigrants from the former Soviet Union to 149 00:08:47,840 --> 00:08:51,560 Speaker 1: the Israeli economy. They needed to be absorbed. The way 150 00:08:51,679 --> 00:08:55,880 Speaker 1: you you absorb them created a choice. Should they be 151 00:08:55,960 --> 00:08:59,440 Speaker 1: absorbed by the public sector, which will be bloated, or 152 00:08:59,480 --> 00:09:02,880 Speaker 1: in the market place. Well, they just escaped a system 153 00:09:02,880 --> 00:09:06,080 Speaker 1: where the public sector betrayed, and therefore it had to 154 00:09:06,080 --> 00:09:08,680 Speaker 1: be in the marketplace. But how do you create a 155 00:09:08,720 --> 00:09:11,160 Speaker 1: market when you do not have yet a market? You 156 00:09:11,280 --> 00:09:14,800 Speaker 1: need to have a price stability. You needed to open 157 00:09:15,080 --> 00:09:20,480 Speaker 1: the market to international competition and to bring capital to 158 00:09:20,559 --> 00:09:23,400 Speaker 1: the country. So it was part of a comprehensive strategy. 159 00:09:23,440 --> 00:09:26,200 Speaker 1: And what is so important here is the exaggerates shark 160 00:09:26,320 --> 00:09:30,280 Speaker 1: of the Russian immigrants to Israel. Bring it forward two 161 00:09:30,320 --> 00:09:33,640 Speaker 1: thousand twenty and two thousand twenty one, where there's this 162 00:09:33,960 --> 00:09:39,440 Speaker 1: desperate cry to reflate. What is the Francal formula with 163 00:09:39,520 --> 00:09:44,120 Speaker 1: your experience of how you reflate a global system given 164 00:09:44,200 --> 00:09:48,319 Speaker 1: these riffs, these sharks that we have. While to stabilize 165 00:09:48,360 --> 00:09:54,760 Speaker 1: the economy, you needed to have combination of monetary tightness 166 00:09:54,880 --> 00:09:59,600 Speaker 1: together with fiscal policy and structural policy, those policies that 167 00:09:59,640 --> 00:10:04,200 Speaker 1: we move of distortions and create productivity. The opposite is 168 00:10:04,240 --> 00:10:09,080 Speaker 1: also the same. Namely, you cannot reflect just by looking 169 00:10:09,400 --> 00:10:13,800 Speaker 1: at one policy instrument. It is the problem of the 170 00:10:13,920 --> 00:10:17,960 Speaker 1: last decade has been that monetary policy has been the 171 00:10:18,000 --> 00:10:20,640 Speaker 1: only game in town, and we are paying the price 172 00:10:20,679 --> 00:10:23,920 Speaker 1: for it. Now. The system is completely out of balance. 173 00:10:24,200 --> 00:10:29,960 Speaker 1: Instrustrates are much too low relatively to the need of 174 00:10:30,080 --> 00:10:34,760 Speaker 1: the long run economy. The keeping interest rates low for 175 00:10:34,920 --> 00:10:39,600 Speaker 1: too long create distortions. It creates incentives to take too 176 00:10:39,720 --> 00:10:43,400 Speaker 1: much risk, It creates incentives to take too much leverage, 177 00:10:43,600 --> 00:10:48,520 Speaker 1: It creates incentives to bloat the financial markets at the 178 00:10:48,559 --> 00:10:52,280 Speaker 1: expense of the economy. But then, what is the institution 179 00:10:52,559 --> 00:10:55,960 Speaker 1: or the will of a nation to get off the 180 00:10:56,080 --> 00:11:00,000 Speaker 1: opio of negative interest rates? I mean, you focused Lander, George, 181 00:11:00,000 --> 00:11:04,160 Speaker 1: your bank many others are saying, enough, it was an experiment. Here, 182 00:11:04,200 --> 00:11:09,200 Speaker 1: we are now chronic in our experiment. What's the execution 183 00:11:09,240 --> 00:11:13,640 Speaker 1: noble institution that will write the ship again? First of all, 184 00:11:13,800 --> 00:11:19,280 Speaker 1: the compass the There is a different rule in medicine 185 00:11:19,640 --> 00:11:23,000 Speaker 1: when you are in the emergency room and when you 186 00:11:23,040 --> 00:11:26,560 Speaker 1: are in the rehabilitation center. In the emergency room, you 187 00:11:26,640 --> 00:11:30,280 Speaker 1: take measures that you know our designed to save the patient. 188 00:11:30,800 --> 00:11:33,600 Speaker 1: You are aware of the fact that they are not sustainable, 189 00:11:34,240 --> 00:11:37,640 Speaker 1: and therefore you know already at the beginning that there 190 00:11:37,720 --> 00:11:41,800 Speaker 1: must be a path to move this patient to the 191 00:11:41,800 --> 00:11:45,440 Speaker 1: rehabilitation center. This was the story of two oh eight, 192 00:11:45,559 --> 00:11:49,880 Speaker 1: two oh nine. The world was in an emergency room. 193 00:11:49,960 --> 00:11:53,440 Speaker 1: We needed to have easy monetary policy, we needed to 194 00:11:53,480 --> 00:11:57,400 Speaker 1: have low interest rates. And now a decade after, we 195 00:11:57,480 --> 00:12:00,360 Speaker 1: are still there, and therefore we need to how do 196 00:12:00,440 --> 00:12:03,640 Speaker 1: we mobilize other policies. Do you know what the best 197 00:12:03,640 --> 00:12:07,640 Speaker 1: part of this interview was we didn't mention Brexit. Jacob Frankel, 198 00:12:07,960 --> 00:12:10,720 Speaker 1: thank you so much. He is the chairman of JP 199 00:12:10,880 --> 00:12:27,800 Speaker 1: Morgan Chase International. There are a lot of people that 200 00:12:27,920 --> 00:12:29,920 Speaker 1: think the DUP won't come round to this in the 201 00:12:29,920 --> 00:12:32,439 Speaker 1: next twenty four hours. That's their view, what we get 202 00:12:32,559 --> 00:12:35,320 Speaker 1: enough vote is coming from say labor to help support 203 00:12:35,360 --> 00:12:38,000 Speaker 1: the Prime minister? Unclear? A man that can help us out. 204 00:12:38,000 --> 00:12:39,840 Speaker 1: Employees to say, join us on the phone from London. 205 00:12:39,920 --> 00:12:42,920 Speaker 1: Now which Tambert Rahman you're as your group managing director 206 00:12:43,280 --> 00:12:45,080 Speaker 1: for Europe. Mr Tubbert, great to have you with us 207 00:12:45,080 --> 00:12:47,040 Speaker 1: on the program. Let's talk about it, the path to 208 00:12:47,240 --> 00:12:50,280 Speaker 1: three twenty. Let's crunch the numbers. How does the Prime 209 00:12:50,320 --> 00:12:55,880 Speaker 1: Minister get there? It's very difficult, it's looking quite challenging. 210 00:12:55,920 --> 00:12:59,320 Speaker 1: I think the key issue for us is that the 211 00:12:59,440 --> 00:13:04,120 Speaker 1: duth he at the moment, remains unconvinced and opposed to 212 00:13:04,200 --> 00:13:06,520 Speaker 1: the deal. And as long as that remains the case, 213 00:13:07,040 --> 00:13:10,120 Speaker 1: we estimate that Boris Johnson needs at least fifteen to 214 00:13:10,360 --> 00:13:14,920 Speaker 1: twenty labor MPs to help deliver the deal. Interestingly, that 215 00:13:15,000 --> 00:13:17,880 Speaker 1: Boris Johnson told his cabinet that as long as the 216 00:13:17,960 --> 00:13:20,360 Speaker 1: DUP was on board, they could expect a majority of 217 00:13:20,520 --> 00:13:23,920 Speaker 1: plus one. If you then subtract the DUP from that equation, 218 00:13:23,920 --> 00:13:26,720 Speaker 1: it basically raises the number of MPs Boris needs to 219 00:13:26,720 --> 00:13:29,360 Speaker 1: deliver the deal to around twenty. So he needs fifteen 220 00:13:29,800 --> 00:13:31,439 Speaker 1: labor MPs at the moment. I don't think he's got 221 00:13:31,440 --> 00:13:33,280 Speaker 1: that numbers, So I think we're looking at narrow defeat. 222 00:13:33,880 --> 00:13:37,200 Speaker 1: Were assuming the European Research Group votes with the Prime Minister, 223 00:13:37,240 --> 00:13:41,240 Speaker 1: that the Conservatives vote as an entire block. I think 224 00:13:41,240 --> 00:13:43,200 Speaker 1: the e r G. Look, none of these blocks in 225 00:13:43,240 --> 00:13:45,360 Speaker 1: Parliament is homogeneous. I think we have to say that 226 00:13:45,400 --> 00:13:47,200 Speaker 1: the DUP is not, the e r G is not, 227 00:13:47,280 --> 00:13:49,720 Speaker 1: the Labor Party is not. These are There are many 228 00:13:49,760 --> 00:13:53,560 Speaker 1: competing pressures on individual MPs. The e r G and 229 00:13:53,640 --> 00:13:57,120 Speaker 1: the d UP was suspected to have very close links, 230 00:13:57,160 --> 00:13:59,840 Speaker 1: so we thought depending on the the way the d 231 00:14:00,040 --> 00:14:03,600 Speaker 1: P votes, that could in turn trigger mass exodus from 232 00:14:03,600 --> 00:14:07,080 Speaker 1: the Actually what's happening is some of the Conservatives are saying, 233 00:14:07,080 --> 00:14:08,640 Speaker 1: we don't care what the DUP is doing, We're still 234 00:14:08,679 --> 00:14:11,120 Speaker 1: going to vote for the deal. Others are conflicted and 235 00:14:11,160 --> 00:14:15,720 Speaker 1: they are thinking about prioritizing unionism over Brexit. So there's 236 00:14:15,720 --> 00:14:17,559 Speaker 1: a lot of sleepless nights for MP's a lot of 237 00:14:17,600 --> 00:14:20,440 Speaker 1: competing pressures. I don't think the r G will vote 238 00:14:20,480 --> 00:14:23,200 Speaker 1: as a coherent block. Okay, well, there's going to be 239 00:14:23,200 --> 00:14:25,120 Speaker 1: all the dynamics and I love how you guys go 240 00:14:25,240 --> 00:14:29,040 Speaker 1: through the alphabet soup of parties and and and all that. 241 00:14:29,720 --> 00:14:32,000 Speaker 1: Are we just simply getting to a good old all 242 00:14:32,040 --> 00:14:36,640 Speaker 1: American election. I mean, when in doubt vote right, Yeah, 243 00:14:36,640 --> 00:14:38,600 Speaker 1: I think Tom, I think that's got to be the 244 00:14:38,600 --> 00:14:41,360 Speaker 1: base case, Tom, I I do think he's going to 245 00:14:41,520 --> 00:14:44,920 Speaker 1: lose narrowly. You'll know that. That then means the ben 246 00:14:44,920 --> 00:14:48,800 Speaker 1: Act kicked in this legislation passed by rebel MP's in Parliament. 247 00:14:49,000 --> 00:14:52,120 Speaker 1: Boris will have to request an extension for three months. 248 00:14:52,560 --> 00:14:55,760 Speaker 1: I think that extension will be granted by the European Union. 249 00:14:55,760 --> 00:14:58,000 Speaker 1: They don't want to be blamed for no deal, and 250 00:14:58,080 --> 00:15:00,520 Speaker 1: that will then create space for an early gener re election. 251 00:15:00,560 --> 00:15:02,840 Speaker 1: I think. I think that's indeed where this is heading. Well, 252 00:15:02,880 --> 00:15:04,800 Speaker 1: what does your raise your group see within the polling? 253 00:15:04,840 --> 00:15:07,880 Speaker 1: I mean, to me, John Ferrell, the major change here 254 00:15:07,920 --> 00:15:11,200 Speaker 1: has been everyone sort of agrees that Mr Johnson has 255 00:15:11,200 --> 00:15:13,280 Speaker 1: got the win behind him and he's actually doing better. 256 00:15:13,560 --> 00:15:15,840 Speaker 1: Is how that is? How that relative to the chaos 257 00:15:15,840 --> 00:15:17,360 Speaker 1: of the last couple of months and much tabby You've 258 00:15:17,400 --> 00:15:19,680 Speaker 1: got to say that Jeremy Corbyn, the leader of the 259 00:15:19,680 --> 00:15:22,880 Speaker 1: opposition party, has really struggled to make any progress after 260 00:15:23,480 --> 00:15:25,880 Speaker 1: the last month or so, despite the losses that the 261 00:15:25,880 --> 00:15:29,240 Speaker 1: Prime Minister has racked up I agree, I agree Labor. 262 00:15:29,280 --> 00:15:32,040 Speaker 1: I think Labor's problem is if a Corbin problem. Frankly, 263 00:15:32,200 --> 00:15:34,160 Speaker 1: many on his own side don't even want him in 264 00:15:34,240 --> 00:15:36,800 Speaker 1: number ten. I mean, there's a lot of concern about 265 00:15:36,880 --> 00:15:39,640 Speaker 1: what a Corbin type we're do in number ten if 266 00:15:39,680 --> 00:15:42,240 Speaker 1: you've got the reigns of power. But the Liberal Democrats 267 00:15:42,240 --> 00:15:45,760 Speaker 1: have also been suffering. Joe Swinton, their leader, has committed 268 00:15:45,800 --> 00:15:49,480 Speaker 1: the party to revoking the decision that's lost them a 269 00:15:49,480 --> 00:15:52,720 Speaker 1: lot of support. And actually what we're seeing is a 270 00:15:52,800 --> 00:15:56,200 Speaker 1: lack of appetite now both within Labor and within the 271 00:15:56,240 --> 00:15:58,560 Speaker 1: Liberal Democrats to face an early election because it looks 272 00:15:58,600 --> 00:16:01,480 Speaker 1: likely that that Bor may be able to deliver a majority. 273 00:16:01,520 --> 00:16:04,120 Speaker 1: They're getting scared. They're getting Colpete, which time up in 274 00:16:04,160 --> 00:16:06,280 Speaker 1: taught and conditioned over the last three years, time and 275 00:16:06,320 --> 00:16:09,800 Speaker 1: time and again always to stress test and question every 276 00:16:09,840 --> 00:16:12,600 Speaker 1: widely hawd assumption and then the market at the moment 277 00:16:12,600 --> 00:16:15,400 Speaker 1: and widely how the assumption is that the downside in 278 00:16:15,480 --> 00:16:19,200 Speaker 1: Sterling is limited after Saturday's vote, if that vote is 279 00:16:19,240 --> 00:16:22,040 Speaker 1: a loss for the Prime Minister because hard Brexit is 280 00:16:22,080 --> 00:16:26,360 Speaker 1: now off the table, talk to me about how confident 281 00:16:26,400 --> 00:16:29,000 Speaker 1: you are that heart Brexit is actually off the table, 282 00:16:29,040 --> 00:16:31,920 Speaker 1: that we've put that story to bed now, So I 283 00:16:31,920 --> 00:16:33,960 Speaker 1: think we need to clarify our terms. I think when 284 00:16:33,960 --> 00:16:35,760 Speaker 1: you say hard Breakxit, what we mean is a no 285 00:16:35,880 --> 00:16:38,840 Speaker 1: deal Brexit, UK crashing out of the European Union with 286 00:16:38,920 --> 00:16:41,840 Speaker 1: no agreement in place. OK. I think that remains a risk. 287 00:16:41,880 --> 00:16:45,960 Speaker 1: If Boris's deal does not go through Parliament, then he 288 00:16:46,040 --> 00:16:48,760 Speaker 1: will be forced to request an extension for three months. 289 00:16:48,800 --> 00:16:51,040 Speaker 1: That means at the end of those three months there 290 00:16:51,120 --> 00:16:54,000 Speaker 1: is another risk of a cliff edge. Now Parliament may 291 00:16:54,080 --> 00:16:58,440 Speaker 1: mobilize again. They may force the government into requesting another extension. 292 00:16:58,440 --> 00:17:00,400 Speaker 1: At that point, maybe Europe won't have the but tight 293 00:17:00,680 --> 00:17:03,880 Speaker 1: to extend again if there's a general election. It looked 294 00:17:03,920 --> 00:17:06,280 Speaker 1: good for Boris right now, but after he's not delivered 295 00:17:06,280 --> 00:17:09,240 Speaker 1: Brexit and in an extension, his numbers may start to drop. 296 00:17:09,320 --> 00:17:12,359 Speaker 1: He may be in a minority government, maybe with Farage's party. 297 00:17:12,680 --> 00:17:16,160 Speaker 1: All of these variables, these uncertainties, mean the no deal 298 00:17:16,280 --> 00:17:19,639 Speaker 1: risk remains on the table. In three months time, the 299 00:17:19,720 --> 00:17:21,560 Speaker 1: number may have come down, but it's still remained. The 300 00:17:21,640 --> 00:17:26,439 Speaker 1: risk means you have a visceral relationship with all of 301 00:17:26,480 --> 00:17:30,600 Speaker 1: the standure. Of course, with Pakistan. But as you look 302 00:17:30,640 --> 00:17:34,040 Speaker 1: at what's going on in Turkey and Syria, the tradition 303 00:17:34,800 --> 00:17:37,000 Speaker 1: was of a Turkey to look to the West, to 304 00:17:37,160 --> 00:17:39,800 Speaker 1: the EU, to the e C. And there has been 305 00:17:39,920 --> 00:17:42,280 Speaker 1: changes of that over the year. Do you sense over 306 00:17:42,320 --> 00:17:44,040 Speaker 1: the years, I should say, do you sense with the 307 00:17:44,119 --> 00:17:48,960 Speaker 1: latest battles for Mr. Rwan that he's given up looking 308 00:17:49,000 --> 00:17:53,200 Speaker 1: to Europe, He's given up looking to the West. I think, Tom, 309 00:17:53,200 --> 00:17:57,480 Speaker 1: this is this is again about Dan's domestic standing. I 310 00:17:57,520 --> 00:18:01,000 Speaker 1: think Dan is in a difficult situation to eistically. His 311 00:18:01,200 --> 00:18:05,199 Speaker 1: power is ebbing, his control of the party ebbing, and 312 00:18:05,240 --> 00:18:08,640 Speaker 1: that's forcing him, I think, to seek ways in which 313 00:18:08,640 --> 00:18:12,840 Speaker 1: he can consolidate his power. Of course, adventures in the 314 00:18:12,880 --> 00:18:17,680 Speaker 1: foreign policy sphere are one example, you know, very unorthodox 315 00:18:17,760 --> 00:18:21,040 Speaker 1: economic policy is another example. I think there's a risk 316 00:18:21,080 --> 00:18:24,480 Speaker 1: that he becomes much more erratic, that we're seeing some 317 00:18:24,600 --> 00:18:26,920 Speaker 1: of that. I think there's a that continues and her 318 00:18:27,040 --> 00:18:30,520 Speaker 1: as he tries to consolidate his base domestically. Is there 319 00:18:30,560 --> 00:18:35,880 Speaker 1: within Turkey a coloresced secular opposition. Do they have an 320 00:18:36,040 --> 00:18:40,600 Speaker 1: organism organized opposition to Mr Erdwan in a more pro 321 00:18:40,800 --> 00:18:44,800 Speaker 1: Islamic party? No, I mean I think there are there are, 322 00:18:44,800 --> 00:18:48,760 Speaker 1: of course opposition parties. I think the problem is they're incoherent, 323 00:18:48,800 --> 00:18:53,560 Speaker 1: they're unorganized, and frankly, through the centralization of power that 324 00:18:53,720 --> 00:18:57,520 Speaker 1: Rowan is implemented over the course of his decade in power, 325 00:18:57,640 --> 00:19:00,639 Speaker 1: I mean it becomes very, very hard for the opposition 326 00:19:00,640 --> 00:19:03,240 Speaker 1: to gain any oxygen, and gain any traction, and gain 327 00:19:03,240 --> 00:19:05,359 Speaker 1: any momentum. And I think that's we're seeing some of 328 00:19:05,400 --> 00:19:08,800 Speaker 1: the manifestations of those of those problems. Now which time 329 00:19:08,840 --> 00:19:10,600 Speaker 1: a great to catch out with you this one, Mr 330 00:19:10,640 --> 00:19:25,720 Speaker 1: town Iram, and you raise your great managing director John 331 00:19:25,720 --> 00:19:29,000 Speaker 1: the sleeper Here is the I I f not across town, 332 00:19:29,040 --> 00:19:33,200 Speaker 1: but across the Northwest district where the bankers are gathered 333 00:19:33,720 --> 00:19:37,840 Speaker 1: to listen and review all that's going on. We've got 334 00:19:37,840 --> 00:19:40,200 Speaker 1: a guest who is perfect for this story, looking forward 335 00:19:40,240 --> 00:19:41,760 Speaker 1: to all of that coming up. And we do have 336 00:19:41,760 --> 00:19:43,840 Speaker 1: a perfect guest for this morning's news flow, Tost and 337 00:19:43,840 --> 00:19:47,000 Speaker 1: Slock joining a Storche Bank Securities chief economists. Tost and, 338 00:19:47,040 --> 00:19:49,440 Speaker 1: let's start with the immediate news flow. There was hope 339 00:19:49,480 --> 00:19:51,280 Speaker 1: at the start of this year that we would have 340 00:19:51,320 --> 00:19:53,439 Speaker 1: a rebound and recovery in the global economy in the 341 00:19:53,480 --> 00:19:56,440 Speaker 1: second half of the year, now we're hoping for a 342 00:19:56,680 --> 00:19:59,399 Speaker 1: series of bottoming out. Just some data that shows that 343 00:19:59,400 --> 00:20:02,159 Speaker 1: we're bottomed in gown. And do you see that in 344 00:20:02,200 --> 00:20:04,800 Speaker 1: the Chinese GDP day to this morning, Toston, it comes 345 00:20:04,840 --> 00:20:08,199 Speaker 1: through a six percent for GDP, the lowest since the 346 00:20:08,240 --> 00:20:13,680 Speaker 1: early nineteen nineties. Just a slight downside surprise. What's your take, Toston? No, 347 00:20:14,000 --> 00:20:15,800 Speaker 1: I mean, the trade war continues to weigh on the 348 00:20:15,800 --> 00:20:18,239 Speaker 1: global economy. The trade war has been weighing on the 349 00:20:18,320 --> 00:20:20,920 Speaker 1: US economy. Capex has been going down, Center has been 350 00:20:20,920 --> 00:20:23,439 Speaker 1: going down. The trade war has weighed particularly hard on 351 00:20:23,520 --> 00:20:26,240 Speaker 1: Japan and Europe. And unfortunately the data to the shows 352 00:20:26,240 --> 00:20:28,040 Speaker 1: that the trade war was also beginning to weigh now 353 00:20:28,080 --> 00:20:30,680 Speaker 1: more on the Chinese economy. So the key issue, of course, 354 00:20:30,720 --> 00:20:32,359 Speaker 1: and this will also be the issue for the Islands 355 00:20:32,440 --> 00:20:35,399 Speaker 1: meetings naming what is the outlook for the trade war? 356 00:20:35,520 --> 00:20:37,600 Speaker 1: And if this risk is it going away? Is a 357 00:20:37,680 --> 00:20:40,400 Speaker 1: phase one deal? Is it a deal? Is this risk 358 00:20:40,520 --> 00:20:45,639 Speaker 1: going to lower fears in corporate America, corporate Europe, corporate Asia, 359 00:20:45,880 --> 00:20:48,199 Speaker 1: because this continues to be the main issue, name the 360 00:20:48,240 --> 00:20:50,879 Speaker 1: trade war. It doesn't look like where we're stand right 361 00:20:50,880 --> 00:20:52,960 Speaker 1: now that we are bottoming out we'll tosten. We've got 362 00:20:52,960 --> 00:20:54,720 Speaker 1: to ask a follow up question because before we get 363 00:20:54,760 --> 00:20:56,520 Speaker 1: into the trade war, we've got to have the discussion 364 00:20:56,560 --> 00:20:58,520 Speaker 1: to what degree the slowdown in China is actually a 365 00:20:58,520 --> 00:21:01,240 Speaker 1: product of the trade tension, and to what extent it 366 00:21:01,320 --> 00:21:03,800 Speaker 1: is a product of domestic forces really taken a hold 367 00:21:03,800 --> 00:21:07,840 Speaker 1: of the economy. Which one is it? So in our 368 00:21:07,880 --> 00:21:09,840 Speaker 1: of you, I mean, the trade war has certainly played 369 00:21:09,840 --> 00:21:13,639 Speaker 1: an important role, but the Chinese economy has done actually 370 00:21:13,720 --> 00:21:17,439 Speaker 1: surprisingly well even in the despite the trade war. We 371 00:21:17,520 --> 00:21:20,680 Speaker 1: have had up on to this point, relatively solid numbers 372 00:21:20,680 --> 00:21:22,879 Speaker 1: on the domestic front. But that's what we're seeing in 373 00:21:22,880 --> 00:21:25,040 Speaker 1: the data to day that maybe some of the issues 374 00:21:25,040 --> 00:21:26,640 Speaker 1: in the exports text and maybe some of the issues 375 00:21:26,640 --> 00:21:29,600 Speaker 1: on the trade war is indeed spreading to the domestic sectors. 376 00:21:29,640 --> 00:21:31,840 Speaker 1: So that's why the fear one can have is that 377 00:21:32,720 --> 00:21:35,840 Speaker 1: if we just don't quite yet any signs of bottoming, 378 00:21:35,960 --> 00:21:38,440 Speaker 1: we just see still quite a number of reasons to 379 00:21:38,480 --> 00:21:41,760 Speaker 1: be worried, even outside the trade wall. But the global outlook, 380 00:21:41,960 --> 00:21:43,399 Speaker 1: it does make sense that the I m F we 381 00:21:43,480 --> 00:21:46,360 Speaker 1: are did downgrade growth the way that they did. Touristen 382 00:21:46,920 --> 00:21:50,680 Speaker 1: give us the guideline, the timeline rather of tariffs. Where 383 00:21:50,720 --> 00:21:54,000 Speaker 1: are we on the on the tariff continuum? Is there 384 00:21:54,080 --> 00:21:57,399 Speaker 1: more to come or could you say they're in place now? 385 00:21:58,359 --> 00:22:00,760 Speaker 1: So this is a really important question because if the 386 00:22:00,840 --> 00:22:03,920 Speaker 1: real issue at the moment is how our corporates thinking 387 00:22:03,960 --> 00:22:06,439 Speaker 1: about this terrifts bag, how corporates around the world thing 388 00:22:06,520 --> 00:22:09,800 Speaker 1: about this uncertainty. We have now still yet a deadline 389 00:22:09,840 --> 00:22:12,840 Speaker 1: with European automagas in November, the fiftings. We still have 390 00:22:13,040 --> 00:22:15,119 Speaker 1: to have some certainty about what's going to happen with 391 00:22:15,240 --> 00:22:17,720 Speaker 1: US terris and descent, but fiftings and we also have 392 00:22:17,760 --> 00:22:20,479 Speaker 1: now talked about the delisting of Chinese companies and all 393 00:22:20,520 --> 00:22:22,920 Speaker 1: these other issues that continue to be here, and also 394 00:22:23,000 --> 00:22:25,879 Speaker 1: the other issues about well will terrifts go away? Is 395 00:22:25,880 --> 00:22:29,280 Speaker 1: that a precondition for their Phase one deal? I mean, honestly, 396 00:22:29,320 --> 00:22:31,560 Speaker 1: it looks more like all these things with the trade 397 00:22:31,560 --> 00:22:34,480 Speaker 1: wall is if anything is actually escalating rather de escalating, 398 00:22:34,480 --> 00:22:36,159 Speaker 1: because a lot of things that need to go away 399 00:22:36,400 --> 00:22:38,800 Speaker 1: for things to start to get better. If he's just 400 00:22:38,880 --> 00:22:40,960 Speaker 1: joining us, Turst and slack with us, here's the Deutsche 401 00:22:41,040 --> 00:22:44,280 Speaker 1: Bank with Peter Hooper and David focus Lando we're thrilling 402 00:22:44,320 --> 00:22:47,080 Speaker 1: could join us today. Is you know touristing within the 403 00:22:47,160 --> 00:22:50,560 Speaker 1: three books that the I m F publishers, there's always 404 00:22:50,640 --> 00:22:55,800 Speaker 1: that one chapter following rates rising risks. This looks like 405 00:22:55,880 --> 00:22:59,159 Speaker 1: Deutsche Bank could have written this for the I m F. 406 00:22:59,359 --> 00:23:03,000 Speaker 1: It is folks land out one on one exactly how 407 00:23:03,080 --> 00:23:08,080 Speaker 1: critical right now is the effect of these pernicious falling 408 00:23:08,240 --> 00:23:12,360 Speaker 1: rates on our banking system and on our social system 409 00:23:12,400 --> 00:23:16,000 Speaker 1: as well. So this is absolutely critical for investors at 410 00:23:16,000 --> 00:23:18,480 Speaker 1: the moment because think about it, for the last ten years, 411 00:23:18,880 --> 00:23:21,560 Speaker 1: it has actually been relatively simple. When the risk free 412 00:23:21,640 --> 00:23:23,720 Speaker 1: rate goes down, meaning when they fit funds rate or 413 00:23:23,800 --> 00:23:25,679 Speaker 1: ten year rates in the US goes down, all you 414 00:23:25,720 --> 00:23:27,959 Speaker 1: had to do was to go and hunt some yields 415 00:23:27,960 --> 00:23:30,680 Speaker 1: and go and basically move further out of risk spectrum. 416 00:23:30,760 --> 00:23:32,840 Speaker 1: This worked very well for the last ten years and 417 00:23:32,880 --> 00:23:35,359 Speaker 1: for the quant models. If you ran regressions for the 418 00:23:35,400 --> 00:23:38,000 Speaker 1: last ten years, if you did any principal component analysis 419 00:23:38,040 --> 00:23:39,639 Speaker 1: for the last ten years, you would have come to 420 00:23:39,680 --> 00:23:42,560 Speaker 1: the conclusion that lower risk free rates, hey, then I 421 00:23:42,560 --> 00:23:44,359 Speaker 1: should just go and buy some more risk. But the 422 00:23:44,440 --> 00:23:47,040 Speaker 1: critical thing today is that if the risk free rate 423 00:23:47,119 --> 00:23:49,560 Speaker 1: goes down for the wrong reason, namely because we're having 424 00:23:49,600 --> 00:23:52,000 Speaker 1: avery session, well then you should no longer do what 425 00:23:52,080 --> 00:23:54,320 Speaker 1: those quant models would have predicted for the last ten years, 426 00:23:54,320 --> 00:23:56,720 Speaker 1: because in that situation then you should begin to worry 427 00:23:56,720 --> 00:23:58,720 Speaker 1: about well, then if we do have a recession, then 428 00:23:58,760 --> 00:24:01,840 Speaker 1: you will see corporate all rates, you will see earnings 429 00:24:01,840 --> 00:24:03,719 Speaker 1: begins to slow, and in that environment you don't want 430 00:24:03,720 --> 00:24:06,200 Speaker 1: to have any risky assets. So it either it really 431 00:24:06,280 --> 00:24:09,240 Speaker 1: is a very critical receime shift risk we're talking about 432 00:24:09,280 --> 00:24:11,800 Speaker 1: here in terms of our risk free rate going down, 433 00:24:12,320 --> 00:24:14,520 Speaker 1: and it's just an innocent thing, or is there actually 434 00:24:14,520 --> 00:24:17,600 Speaker 1: a real risk of having a recession. To the president 435 00:24:17,600 --> 00:24:19,159 Speaker 1: of the e c B, Marrio Drug, he's got one 436 00:24:19,160 --> 00:24:21,480 Speaker 1: more meeting left, he used to say, and he set 437 00:24:21,480 --> 00:24:23,280 Speaker 1: it time and time again for rates to be higher 438 00:24:23,280 --> 00:24:25,560 Speaker 1: in the future, they need to be lower. Now. Rates 439 00:24:25,600 --> 00:24:27,840 Speaker 1: have been negative at the ECB since the summer of 440 00:24:29,160 --> 00:24:32,359 Speaker 1: How important is it that actually they've been negative for 441 00:24:32,440 --> 00:24:34,320 Speaker 1: too long? I want to talk about the timing care. 442 00:24:34,359 --> 00:24:36,400 Speaker 1: There's an argument, I think, to say that just over 443 00:24:36,440 --> 00:24:39,280 Speaker 1: a short period of time you can have that short, short, 444 00:24:39,320 --> 00:24:42,160 Speaker 1: sharp shock of having negative rates, and maybe that's productive. 445 00:24:42,560 --> 00:24:44,960 Speaker 1: But is there an opposite argument that says, basically that 446 00:24:45,000 --> 00:24:47,639 Speaker 1: the longer you have negative rates the harder it is 447 00:24:47,680 --> 00:24:51,560 Speaker 1: to make the argument that they are actually helping, absolutely, Jonathan, 448 00:24:51,600 --> 00:24:53,879 Speaker 1: because look at Japan, who had had weak growth and 449 00:24:53,920 --> 00:24:56,240 Speaker 1: they had also now negative rate for a while. And Europe, 450 00:24:56,280 --> 00:25:00,160 Speaker 1: of course the sentiment consequences of negative rates. Honest, it's 451 00:25:00,160 --> 00:25:03,520 Speaker 1: a central bank in any country's citizenss the economic outook 452 00:25:03,640 --> 00:25:05,159 Speaker 1: is not really that great. I mean, if you're a 453 00:25:05,200 --> 00:25:07,639 Speaker 1: corporate should do then say well, great, let me go 454 00:25:07,640 --> 00:25:09,960 Speaker 1: out and invest a lot in new factories and hiring 455 00:25:10,000 --> 00:25:11,760 Speaker 1: a lot of people. Isn't there a risk that the 456 00:25:11,840 --> 00:25:15,439 Speaker 1: sentiment effect, which is exactly what we're seeing most important 457 00:25:15,480 --> 00:25:17,440 Speaker 1: in Europe but also in Japan, that the sentiment risk 458 00:25:17,520 --> 00:25:21,360 Speaker 1: really becomes ingrained, It becomes very deeply entrenched in how 459 00:25:21,640 --> 00:25:24,080 Speaker 1: businesses and corporates think about the outlook. And this is 460 00:25:24,080 --> 00:25:27,400 Speaker 1: the real fear here that this negative interest rates and 461 00:25:27,480 --> 00:25:30,160 Speaker 1: the situation in Europe has now lasted for basically five years. 462 00:25:30,720 --> 00:25:32,960 Speaker 1: Is this just temporary? Five years is a really long 463 00:25:32,960 --> 00:25:34,919 Speaker 1: time that we've been in this situation, and that's the 464 00:25:35,000 --> 00:25:36,879 Speaker 1: risk that many are now beginning to say, well, this 465 00:25:36,920 --> 00:25:39,920 Speaker 1: could last potentially a lot longer. Tosting just touched on 466 00:25:39,920 --> 00:25:41,639 Speaker 1: the economic theory, just to wrap this up. And I 467 00:25:41,640 --> 00:25:43,480 Speaker 1: know we can get very much deep in the weights 468 00:25:43,480 --> 00:25:45,560 Speaker 1: on this, but the time value of money as a concept, 469 00:25:45,600 --> 00:25:47,920 Speaker 1: the euro now is worth more than a euro in 470 00:25:47,960 --> 00:25:50,480 Speaker 1: the future, and just that idea meant that we should 471 00:25:50,480 --> 00:25:53,440 Speaker 1: be paid interest when we lend money to someone. Are 472 00:25:53,440 --> 00:25:57,320 Speaker 1: we turning an age old economic concept on its head? 473 00:25:57,800 --> 00:26:00,800 Speaker 1: And if we're now saying that a euro now is 474 00:26:00,840 --> 00:26:03,080 Speaker 1: worth less than a euro in the future, aren't we 475 00:26:03,160 --> 00:26:07,000 Speaker 1: basically saying deflation is coming? Isn't that the only way 476 00:26:07,000 --> 00:26:12,440 Speaker 1: to rationalize negative rights? Absolutely, that's exactly how it's rationalized. 477 00:26:12,480 --> 00:26:15,119 Speaker 1: I mean another interpretation, of course is to ask, well, 478 00:26:15,160 --> 00:26:17,680 Speaker 1: why is it that the long rates are so low? Well, 479 00:26:17,800 --> 00:26:20,439 Speaker 1: one reason for that is also global quei, and it 480 00:26:20,520 --> 00:26:22,679 Speaker 1: is opposed the forward guidance from central banks that have 481 00:26:22,800 --> 00:26:25,480 Speaker 1: tried to push a long races down. So the term premium, 482 00:26:25,880 --> 00:26:29,080 Speaker 1: meaning the composition you get for buying duration, has now 483 00:26:29,119 --> 00:26:31,800 Speaker 1: been pushed down so much, and there's a huge academic 484 00:26:31,840 --> 00:26:33,840 Speaker 1: debate and it markets a big debate about why is 485 00:26:33,840 --> 00:26:36,879 Speaker 1: this happening? And the central banks signaling all the debbishness 486 00:26:37,000 --> 00:26:39,200 Speaker 1: that we are witnessing at the moment from all these 487 00:26:39,200 --> 00:26:41,200 Speaker 1: central banks, both in the G three but also in 488 00:26:41,240 --> 00:26:45,160 Speaker 1: many inverting markets, that devilishness is certainly weighing very very 489 00:26:45,160 --> 00:26:47,520 Speaker 1: heavily on the outlook for a long rates and that 490 00:26:47,640 --> 00:26:49,680 Speaker 1: is exactly also to your point on it, and also 491 00:26:49,760 --> 00:26:52,600 Speaker 1: therefore beginning to weigh on well, if I have to 492 00:26:52,600 --> 00:26:55,080 Speaker 1: get used to low or negative interest rates even for 493 00:26:55,119 --> 00:26:57,679 Speaker 1: a lot longer, well, then that also begins to have 494 00:26:57,840 --> 00:27:01,240 Speaker 1: I mean, many people in ecity really getting a headache. 495 00:27:01,240 --> 00:27:03,399 Speaker 1: And finance goeses over this issue because it really is 496 00:27:03,440 --> 00:27:05,520 Speaker 1: turning the whole world upside down. Toolson has cribed a 497 00:27:05,520 --> 00:27:07,560 Speaker 1: cat shop and didn't get your thoughts. The academic debate 498 00:27:07,640 --> 00:27:10,760 Speaker 1: righteous on doutsche Banks chief economist here in New York 499 00:27:24,920 --> 00:27:27,840 Speaker 1: in Washington here, we're thrilled to have in our studios 500 00:27:27,920 --> 00:27:30,399 Speaker 1: during these meetings John Hugh Deck, who is one of 501 00:27:30,480 --> 00:27:33,840 Speaker 1: the toughest, most interesting remits at Brookings. He is a 502 00:27:33,840 --> 00:27:38,680 Speaker 1: head of Government Studies, their senior fellow of Governance Studies. 503 00:27:39,320 --> 00:27:40,960 Speaker 1: That it Brooks John thrilled to have you in the 504 00:27:41,000 --> 00:27:44,639 Speaker 1: studio today. Here's the question that's come up three times 505 00:27:44,640 --> 00:27:48,520 Speaker 1: in my my quick trip down here. What do Republican 506 00:27:48,800 --> 00:27:53,200 Speaker 1: legislators do when they have a view, they have an opinion, 507 00:27:53,840 --> 00:27:58,520 Speaker 1: but it's so diametrically opposite of their constituents. It seems 508 00:27:58,560 --> 00:28:01,720 Speaker 1: to be a huge dilom right now. It's a huge dilemma. 509 00:28:01,800 --> 00:28:04,520 Speaker 1: There are so many Republicans who right now are looking 510 00:28:04,520 --> 00:28:07,600 Speaker 1: at this president and looking at this president's behavior and 511 00:28:07,640 --> 00:28:09,960 Speaker 1: saying to themselves, if a Democrat were doing this, I 512 00:28:10,000 --> 00:28:13,880 Speaker 1: would be screaming for impeachment. But my supporters back home, 513 00:28:13,920 --> 00:28:17,200 Speaker 1: A lot of my supporters back home still support this president. 514 00:28:17,320 --> 00:28:21,640 Speaker 1: And so because their elections are tied, they're supporting the president. 515 00:28:21,840 --> 00:28:24,240 Speaker 1: You are a student of history. That's part of your 516 00:28:24,320 --> 00:28:28,760 Speaker 1: charm here of the Connecticut and Vanderbilt and my simple question, 517 00:28:28,800 --> 00:28:31,040 Speaker 1: and you know I was into this, to be honest, 518 00:28:31,080 --> 00:28:33,280 Speaker 1: I was flat on my back and my parents family 519 00:28:33,359 --> 00:28:37,560 Speaker 1: room watching Watergate addictively a million years ago. Was it 520 00:28:37,640 --> 00:28:41,160 Speaker 1: the same conundrum in Watergate? I would suggest it was 521 00:28:41,280 --> 00:28:44,480 Speaker 1: different then. It was a bit different now. It's important 522 00:28:44,520 --> 00:28:48,480 Speaker 1: to remember that as the impeachment inquiry was happening during Watergate, 523 00:28:48,960 --> 00:28:51,040 Speaker 1: there were a lot of Republicans who stuck by the 524 00:28:51,080 --> 00:28:56,280 Speaker 1: president continuously until the bombshell tapes dropped. In this case, 525 00:28:56,320 --> 00:28:58,720 Speaker 1: we don't have tapes. We have the president and the 526 00:28:58,760 --> 00:29:02,040 Speaker 1: White House Chief of staff doing what the Watergate tapes 527 00:29:02,160 --> 00:29:06,000 Speaker 1: did for us to admit and show us that there 528 00:29:06,000 --> 00:29:09,880 Speaker 1: has been criminal activity and abuses of power, but the differences. 529 00:29:10,280 --> 00:29:12,920 Speaker 1: In nineteen seventy four, Barry Goldwater went to the White 530 00:29:12,920 --> 00:29:15,120 Speaker 1: House and said, Mr President, we don't have the most 531 00:29:15,280 --> 00:29:19,160 Speaker 1: accountable Yeah, accountable. We don't have the votes to keep 532 00:29:19,240 --> 00:29:21,479 Speaker 1: you in office. But no Republican is going to do 533 00:29:21,520 --> 00:29:24,760 Speaker 1: that this year. Okay, that's the great history lesson. Let's 534 00:29:24,800 --> 00:29:26,960 Speaker 1: slam it to the president. President, and this is our 535 00:29:27,000 --> 00:29:31,160 Speaker 1: governance that we believe any official has right to representation 536 00:29:31,840 --> 00:29:34,360 Speaker 1: within the governance and the rights that the president have 537 00:29:35,280 --> 00:29:38,680 Speaker 1: has Does he getting the right advice? Is to the 538 00:29:38,680 --> 00:29:41,760 Speaker 1: phrase which is easy to say in our dress here 539 00:29:41,800 --> 00:29:45,600 Speaker 1: at Bloomberg, is he properly lawyered up? The President is 540 00:29:45,600 --> 00:29:48,040 Speaker 1: getting terrible advice, or if he's getting good advice, he's 541 00:29:48,040 --> 00:29:50,520 Speaker 1: not listening to any of it. What we see right 542 00:29:50,520 --> 00:29:53,240 Speaker 1: now is Rudy Giuliani, who is a half wit of 543 00:29:53,240 --> 00:29:57,760 Speaker 1: a lawyer, giving him only advice that is serving his 544 00:29:57,840 --> 00:30:01,360 Speaker 1: own personal interests, and the advisors around him in the 545 00:30:01,360 --> 00:30:04,200 Speaker 1: White House have to be telling him something different than 546 00:30:04,240 --> 00:30:06,920 Speaker 1: he's doing. No lawyer in this town maybe except for 547 00:30:07,000 --> 00:30:11,120 Speaker 1: Rudy Giuliani would tell the President that his current effort 548 00:30:11,440 --> 00:30:15,720 Speaker 1: is an effective one and a meaningful one. How do you, in, folks, 549 00:30:15,800 --> 00:30:18,040 Speaker 1: I say this, just you know, I'll be honest. I 550 00:30:18,080 --> 00:30:22,120 Speaker 1: was sitting in a in a lovely little emporium with 551 00:30:22,160 --> 00:30:27,280 Speaker 1: the beverage of my choice, watching Washing, Thank you, Watching Washington, 552 00:30:28,080 --> 00:30:30,840 Speaker 1: Watch Washington. You have to see it to believe it. 553 00:30:30,880 --> 00:30:34,680 Speaker 1: To my audience internationally and a coast to coast, you 554 00:30:34,720 --> 00:30:37,680 Speaker 1: have to be here to observe it. John Hohodeck, you 555 00:30:37,800 --> 00:30:40,959 Speaker 1: live this every day. What do you presume the coming 556 00:30:41,480 --> 00:30:44,280 Speaker 1: taste and weeks look like? You know, the coming days 557 00:30:44,280 --> 00:30:46,240 Speaker 1: and weeks I think are going to look a lot 558 00:30:46,360 --> 00:30:48,720 Speaker 1: like what we've seen over the past couple of weeks. 559 00:30:48,720 --> 00:30:52,080 Speaker 1: And that is the House bringing in witnesses, escalating this 560 00:30:52,200 --> 00:30:57,040 Speaker 1: impeachment inquiry, gathering additional evidence that supports the idea that 561 00:30:57,080 --> 00:30:59,920 Speaker 1: the president has abused his powers and has committed the 562 00:31:00,040 --> 00:31:03,480 Speaker 1: types of actions that are impeachable. All the while the 563 00:31:03,560 --> 00:31:06,520 Speaker 1: president is going to continue to spin out of control. 564 00:31:06,640 --> 00:31:09,560 Speaker 1: He's not responding to this in a well way. He's 565 00:31:09,560 --> 00:31:12,480 Speaker 1: not responding to this in a politically rational way. He's 566 00:31:12,600 --> 00:31:17,880 Speaker 1: he's literally losing it very quickly. Here why I want 567 00:31:17,920 --> 00:31:20,320 Speaker 1: the House vote on this? I mean, what what is 568 00:31:20,360 --> 00:31:24,320 Speaker 1: the easy, digestible Friday morning answer to why the House 569 00:31:24,360 --> 00:31:27,000 Speaker 1: won't affect this process forward? Are they just waiting for 570 00:31:27,080 --> 00:31:29,880 Speaker 1: more evidence? They're waiting for more evidence. There's there's two 571 00:31:29,960 --> 00:31:32,440 Speaker 1: votes right. One is the actual impeachment vote, which will 572 00:31:32,480 --> 00:31:35,200 Speaker 1: come after a series of witnesses. But this demand that 573 00:31:35,280 --> 00:31:38,920 Speaker 1: the House of vote to officially open an impeachment inquiry 574 00:31:39,040 --> 00:31:41,680 Speaker 1: will offer the Democrats no benefit. It's not as if 575 00:31:41,720 --> 00:31:44,320 Speaker 1: the White House is going to start complying with subpoenas. 576 00:31:44,320 --> 00:31:48,520 Speaker 1: If Pelosi announces this vote, She's not the political amateur 577 00:31:48,600 --> 00:31:50,960 Speaker 1: that the president is, and she knows how this plays out. 578 00:31:51,320 --> 00:31:53,720 Speaker 1: Very good too. Short of visit, thank you so much. 579 00:31:53,720 --> 00:31:57,720 Speaker 1: You've senior fellow government studies. If Brookie's really steeped into 580 00:31:57,800 --> 00:32:02,000 Speaker 1: the dynamics within the city of what affects the nation. 581 00:32:03,880 --> 00:32:08,120 Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and 582 00:32:08,160 --> 00:32:13,480 Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast 583 00:32:13,520 --> 00:32:17,760 Speaker 1: platform you prefer. I'm on Twitter at Tom Keane Before 584 00:32:17,800 --> 00:32:21,640 Speaker 1: the podcast, you can always catch us worldwide. I'm Bloomberg 585 00:32:21,720 --> 00:32:22,000 Speaker 1: Radio