Speaker 1: Ye, Welcome to the Bloomberg Surveillance podcast. I'm Tom Keane
Speaker 1: jay Ley. We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg We're
Speaker 1: watching em Currencies somewhat stable here, but as Hanky would
Speaker 1: lecture at Johns Hopkins, they are log quadratic. Uh to
Speaker 1: say the least, let me bring him in him without
Speaker 1: further ado. After public service with President Reagan and with
Speaker 1: some serious counsel to the Baltic States, Stephen Hanky has
Speaker 1: done at all teaching at the Colorado School of Minds
Speaker 1: at Berkeley and holding corn and I really mean this,
Speaker 1: folks in applied economics at Johns Hopkins. Professor Hanky owns
Speaker 1: when currencies unravel, and we welcome him now to Bloomberg Surveillance. Steves,
Speaker 1: thank you so much for taking time with us today.
Speaker 1: First of all, his contagion clicked in, well, it's certainly
Speaker 1: clicked in last night. The half big currencies are becoming
Speaker 1: more big by the day. We had the paso down
Speaker 1: twelve percent against the greenback. Turkey's LARDN three Indian Route
Speaker 1: PI record low against the us D, h Indonesian Rupe
Speaker 1: a three year low, and the list goes on and on,
Speaker 1: and I think Tom and Pim the key question or
Speaker 1: is what's what's going on? And I think people are
Speaker 1: just missing the boat here. The FED is tight, tight, tight.
Speaker 1: And if we look at Milton Friedman and look at
Speaker 1: our cues are quantities, we have broad money is growing
Speaker 1: at a very modest pace four point seven percent year
Speaker 1: over year measured on him for Center for Financial Stability
Speaker 1: in New York UH. Then if we look at Bob
Speaker 1: Mundell's TS prices, the most important price in the world
Speaker 1: as a dollar euro rate, and it's at one sixteen now.
Speaker 1: That's that's under my comfort zone of one forty. It's tight.
Speaker 1: It's tight. The dollar is very strong. Gold is hovering
Speaker 1: around the low end of my comfort zone, which is
Speaker 1: about twelve an ounce. It's about twelve twelve now, So
Speaker 1: we we have a very tight FED. That is strong
Speaker 1: dollar putting massive pressure on the emerging market countries UH
Speaker 1: and their half big currencies. So that's that's the over
Speaker 1: all seen and it's not going to get any better.
Speaker 1: And and it looks like the more the emerging market
Speaker 1: currencies collapse, there there is an increased probability that will
Speaker 1: will have some blowback in the big major markets. Professor Hanky,
Speaker 1: is there something intrinsic about the value of the US
Speaker 1: dollar that investors have missed over the last six to
Speaker 1: twelve months. I don't think there's anything intrinsic. I think
Speaker 1: you just have to follow Bob Mundel and look at prices.
Speaker 1: And there are two big prices uh to look at,
Speaker 1: and that's a dollar er rate in gold and then
Speaker 1: and then beyond that you've got a lot of commodities.
Speaker 1: I mean, all the base medals are done. Part of
Speaker 1: the tightness, by the way, China is extremely tight now.
Speaker 1: The big engine for growth in the world economy that
Speaker 1: the last ten to twenty years has been China. And
Speaker 1: if you look at the trend rate of growth and
Speaker 1: the money supply since too COS and three in China,
Speaker 1: the trend rate six for m TOO that's their broad
Speaker 1: money major it's only growing at nine percent now. The
Speaker 1: trend rate of growth for credit to their private sector
Speaker 1: in China has been sixteen percent also and it's only
Speaker 1: growing at nine now. And I think President g is
Speaker 1: hit the panic button. They they've they've trying to unwind
Speaker 1: the squeeze that they've put on and rescue things, but
Speaker 1: it might be too little, too late. China is very
Speaker 1: tight right now. So you've got the two the two
Speaker 1: big elephants in the room said, the central bank in
Speaker 1: China are very tight, and that's putting pressure on all
Speaker 1: these half baked currencies and and half half bag countries.
Speaker 1: Quite frankly, just come and glued. These carry trades unwind
Speaker 1: very fast under these conditions. All right, So let's say
Speaker 1: that Professor Stephen Hanky gets a call from the Central
Speaker 1: Bank of Turkey. What does he say? Okay, here's here's
Speaker 1: what's going on in Turkey. Uh. The inflation rate now
Speaker 1: is I measure it very accurately, is a hundred and
Speaker 1: one percent on an annual basis. The official rates fifteen
Speaker 1: point eight five percent. So you have massive negative real
Speaker 1: yields and the carry trade in Winding and Turkey. The
Speaker 1: crisis will continue for a long time, as it's done
Speaker 1: by the way in ninety four and two thousand and today.
Speaker 1: The only way to stop this nightmare in Turkey is
Speaker 1: to make the lira as good as gold, make it
Speaker 1: a clone of gold. And you do that with a
Speaker 1: currency board system. You fix the liras exchange uh and
Speaker 1: make it freely convertable at a fixed rate with gold,
Speaker 1: and you backed the lira a dent with gold reserves.
Speaker 1: So the la literally is good as good as gold.
Speaker 1: I think a thing I would stop the ham racking there,
Speaker 1: Steve Stephen Hankey, with this focus of the Johns Hopkins University,
Speaker 1: were thrilled to bring him to you today. Steve, there's
Speaker 1: the mathematics of being log linear, a straight line on
Speaker 1: a percent change. Why access and then things get ugly
Speaker 1: and they curve, and then we go to the acclaimed
Speaker 1: world of Professor Hanky, which is hyperbolas, which focuses at
Speaker 1: moonshot think wheelbarrows of cash in Germany in World War Two.
Speaker 1: Are any of these e M currencies on the edge
Speaker 1: of hanky hyperbola? No, I don't think so, Tom, because
Speaker 1: to get to those points, they're they're very rare. They're
Speaker 1: they've actually only been fifty eight in the world history
Speaker 1: that have gone to that hyperbola point and hit hyper
Speaker 1: inflation where yes, inflation rates per month. And we have
Speaker 1: one now, of course Venezezuela I'm major with high frequency
Speaker 1: data that I'm plaction rate every day and it's running
Speaker 1: sixty two thousand percent year every year, and the monthly
Speaker 1: rate is a hundred seventy two. So this has been
Speaker 1: going on since November of two thousand and sixteen. So
Speaker 1: it hit, it hit your your point, Tom, and and
Speaker 1: it's the only one that steve. What's the prescription here
Speaker 1: for the I m F. I mean, you're one of
Speaker 1: the giants in this racket, with the late Michael Moosa,
Speaker 1: the late Rudy dorn Bush, Ken rogoff in the others
Speaker 1: in the angst it's out there at Global Wall Street.
Speaker 1: Is the institutions, particularly I m F can't come to
Speaker 1: the rescue this time because of the new size of
Speaker 1: em markets. Is that a valid worry or can leguard
Speaker 1: get it done? I don't think size is the problem.
Speaker 1: I think the I m F is just has wrong
Speaker 1: headed thinking. I mean you look, for example, even at Venezezuela,
Speaker 1: we just talked about the inflation. Right, you can measure
Speaker 1: hyper inflations, and you can measure them very accurately. You
Speaker 1: can't forecast the course or duration Tom of a of
Speaker 1: a hyper inflation and the i m F just keeps
Speaker 1: putting these inflation forecast out for Venezezuela. They they're a joke,
Speaker 1: complete complete revelation of the incompetence of the I m F.
Speaker 1: They say inflation is going to be a million percent
Speaker 1: by the end of the year in Venezuela. And of
Speaker 1: course the press, like good stenographers, just repeat this nonsense.
Speaker 1: I mean, you cannot forecast hyper inflation period, that's the
Speaker 1: end of the story. You can measure it very very accurately,
Speaker 1: can't forecast it. So the solution on these exchange rate regimes,
Speaker 1: they're done in Argentina. Now Macree called the I m
Speaker 1: F fireman in and and it's been a complete disaster.
Speaker 1: Everything has collapsed since the I m F has come down.
Speaker 1: And mac Cree doesn't realize. I don't know why he
Speaker 1: called the i m F because in two thousand and one,
Speaker 1: remember we had the I m F suspending the program
Speaker 1: to UH Argentina and this was Kohler was the manager
Speaker 1: director then and and and I am at basically double
Speaker 1: crossed Argentina and the complete meltdown during the crisis and
Speaker 1: the huge bank runds in November of two thousand one.
Speaker 1: I m F. We're gonna run out of time. I
Speaker 1: gotta cut Steve hank you off, which is you gotta
Speaker 1: talk about the Brazilian I do. But we're gonna We're
Speaker 1: gonna come. We're gonna get Steve Hankey on as much
Speaker 1: as we can through this interesting e M time again.
Speaker 1: He is at Johns Hopkins University. President Donald Trump, of course,
Speaker 1: sitting down for an exclusive Oval Office interview with Bloomberg,
Speaker 1: and the President covered a variety of topics, including the
Speaker 1: Russia probe, as well as trade policy and when it
Speaker 1: comes to the trade talks with the European Union, the
Speaker 1: President said that the European unions offered to scrap tariffs
Speaker 1: on US made automobiles is not enough. It's not good enough, no,
Speaker 1: because they do a lot more auto business than we
Speaker 1: will ever do. In other words, well, first of all,
Speaker 1: it's not just tariffs. They also barriers up to our cars.
Speaker 1: They have they'll take the barriers down and they'll charge
Speaker 1: us no text. But it's not good enough because they
Speaker 1: will always sell more cars. Their cars, their habits, their
Speaker 1: consumer habits are to buying their cars, not to buying
Speaker 1: our cars. In response, the European Commission President Jean Claude
Speaker 1: Junker said that the European Union will retaliate if President
Speaker 1: Trump raises tariffs on europe Pan autos, and that is
Speaker 1: a good time to bring in a gentleman who had
Speaker 1: a conversation with the president yesterday. Under the earl portrait
Speaker 1: of Andrew Jackson, painted in eighteen thirty five at the
Speaker 1: Resolute Desk are John Michael Fait in conversation with the President. John,
Speaker 1: what was the energy like in the room away from
Speaker 1: the formal portraits, in the important comments and the president?
Speaker 1: What was the backstory as you entered the Oval Office. Well,
Speaker 1: there's a lot of energy, almost of the March energy
Speaker 1: is there is with you and Pim, but it's it's
Speaker 1: Trump is I think the main thing which comes through
Speaker 1: the President of the moment is that he is someone
Speaker 1: who's in a sense of doubling down on Donald Trump.
Speaker 1: You know, he is not Other people may look at
Speaker 1: what's happening in the Oval Office and think he's got
Speaker 1: problems with the mid terms, he's got problems with Mueller.
Speaker 1: He's got people resigning from his internal kind of a
Speaker 1: set of advisors. From his point of view, it's almost
Speaker 1: the opposite. He gives himself a grade A plus. He
Speaker 1: claims he has the best happened. As ever, he's forging
Speaker 1: ahead on everything. You know, he's just persuaded Mexico to
Speaker 1: do well, and Canada's next. And as you said in
Speaker 1: the clip, you know he's now moving on to the
Speaker 1: w g O and Europe. And actually, I think you
Speaker 1: know there is a like all these people, many politicians
Speaker 1: trying to spin you things, think Trump genuinely believed that
Speaker 1: he's achieving these things. And the better or worst, that
Speaker 1: is the world we live in. If we were to
Speaker 1: write a Bloomberg quick take or something you helped invent
Speaker 1: the fourteen page wonder in the Economist magazine, what what
Speaker 1: we say would be the response of Europe, the response
Speaker 1: of China, of Canada, of Mexico to all of his trade,
Speaker 1: not hysteria, but just trade discourse. Do they just does
Speaker 1: turn to the president and say no, Well, it's interesting
Speaker 1: you talk to business people and there is one bit
Speaker 1: of business people where most business people want him to
Speaker 1: succeed a bit um. So for instance with China, you
Speaker 1: talk to most European business people and they will say
Speaker 1: it is it would be wonderful if Donald Trump could
Speaker 1: get China to open up. Um, and you might also
Speaker 1: talk to American and European people who say it would
Speaker 1: be very good if there were a fewer trade barriers
Speaker 1: between American Europe. But and this is a very big
Speaker 1: butt at the very least, he's playing with fire with
Speaker 1: these things, because most people would still say the w
Speaker 1: t O is incredibly useful and having a multilateral forum
Speaker 1: increases the amount of free trade all the way around
Speaker 1: the world, generally to the benefit of America as well.
Speaker 1: Um And obviously nobody wants the trans Atlantic trade war,
Speaker 1: and the Chinese for the moment showing every sign of
Speaker 1: wanting to match Donald Trump tariff for tariff, So it
Speaker 1: is a slightly more nuanced picture than that either he
Speaker 1: would present all for that matter, his foes and a
Speaker 1: lot of business people, I think quietly under their breath,
Speaker 1: were condemning the trade war whilst desperately hoping that he succeeds,
Speaker 1: especially with the Chinese. John michaels Wade, I want to say,
Speaker 1: leave it to an Englishman to teach us about our
Speaker 1: own role in history in the United States. Sometimes it
Speaker 1: takes someone from the outside to have a clear perspective.
Speaker 1: You've interviewed many world leaders, do you view Donald Trump
Speaker 1: is different? But yes, he is entirely different. Um. I
Speaker 1: think there are many world leaders who will try tom
Speaker 1: who will try to sort of spin things or try
Speaker 1: to say they're doing better. You know, Donald Trump gives
Speaker 1: more impression of being a He's a sort of train
Speaker 1: heading in every direction at once, and even when he's
Speaker 1: trying to restrain himself, he finds it very difficult, and
Speaker 1: some cases he kind obloviates and goes past things. In
Speaker 1: other cases he just says what he thinks. And I
Speaker 1: think that is the better or worth again to keep
Speaker 1: part of his appeal to people, because I think to
Speaker 1: his base he's someone who tries to say how he
Speaker 1: sees it, and that is that is worth something to him.
Speaker 1: And I think to any extent that he tried to
Speaker 1: bottle it up. Um, he's changed on that. If you
Speaker 1: want an example of one area though, where he has
Speaker 1: become slightly more disciplined, but you can see it in
Speaker 1: his eyes that he's straining at it. It's the fed
Speaker 1: I think he has sort of accepted, after a degree
Speaker 1: of annoyance about the fact that he can't control the
Speaker 1: Federal Reserve. He's now accepted that that's probably a good thing.
Speaker 1: That is good that presidents can't do that, and he
Speaker 1: was polite about j Powell, but you can sense even
Speaker 1: then he wants to be able to run it. John
Speaker 1: Michael Twaitt with us, John, I want to switch gears here,
Speaker 1: and of course we're looking for an exclusive and lengthy
Speaker 1: long read from John Michael Twayton Company Monday. So I
Speaker 1: was thinking of Alexis to Tokeville when I was thinking
Speaker 1: of having an Englishman talk about America. That would be
Speaker 1: very good and I often have to I often have
Speaker 1: to endure Tom Keene talking about prisons. I think, no, no,
Speaker 1: we're going to Britain right now, and I know we've
Speaker 1: got a long read feature coming out five thousand words
Speaker 1: on Monday. Theresa made dancing her way across Africa. But
Speaker 1: except for that, John, we need a Britain update. Would
Speaker 1: you explain to me what the incentive is for anybody
Speaker 1: in Europe to put up with your Brexit debate? What's
Speaker 1: what's there incentive even to become engaged in this domestic
Speaker 1: foolishness of your United Kingdom. Well, you've actually you're actually
Speaker 1: asking the key question, because what is happening at the
Speaker 1: moment as the Europeans have just let it be, There's
Speaker 1: there's a slight sign over the past kind of ten
Speaker 1: days that the Europeans have moved a bit. Macrons begun
Speaker 1: to say, look, it's a bit silly if Britain just
Speaker 1: crashes out of this thing. Um. It's already pretty clear
Speaker 1: that most of the burden of Brexit will be carried
Speaker 1: by Britain, but it isn't. It's also not entirely in
Speaker 1: Europe's interest. In France's Britain's neighbor. A lot of its
Speaker 1: trade comes through France. It's not in France's interest to
Speaker 1: have a complete sort of disaster on his on his doorstep.
Speaker 1: So from business people, from politicians a bit there's at
Speaker 1: least slightly more willingness to come in. But you are
Speaker 1: basically right that what has happened is that from the
Speaker 1: British point of view, every day is dominated by Brexit
Speaker 1: headlines and what it means, and this it means. He
Speaker 1: will visit the people who run France or Germany or
Speaker 1: Italy and it's something they think about once every two
Speaker 1: months because they've been very happy leaving this with Michelle Barnier,
Speaker 1: who is the European Commissions negotiator. Michael's way, it's like
Speaker 1: a digital Maven. I'm watching Theresa May to her second
Speaker 1: dance off the Independent video. Why don't we have that video?
Speaker 1: I mean, thanks to the Independent for giving me background
Speaker 1: briefing for it is an amazing video. I don't think
Speaker 1: even I tried to work out that maybe some people
Speaker 1: may feel sympathy for Theresa John does the Have we
Speaker 1: lost the perspective that the balance of power in Europe
Speaker 1: has changed and will change because of the exit from
Speaker 1: the European Union. Yes, I think what is happening is
Speaker 1: that there are two. If we've had a somewhat Anglo
Speaker 1: anglocentric conversation said, I think there's any harm in saying
Speaker 1: this is I think from an Anglo centric point of view.
Speaker 1: People used to talk a bit vaguely about an Anglo
Speaker 1: sphere where obviously America is the predominant partner and Britain
Speaker 1: plays the secondary role. But together they're probably greater than
Speaker 1: the some of their parts. That has always helped America
Speaker 1: having somebody else who's willing to stick up for roughly
Speaker 1: the same things. But firstly, the agenda which they're both
Speaker 1: pushing things like generally free trade, opening up things. Well,
Speaker 1: that is no longer the priority of Donald Trump. Certainly. Secondly,
Speaker 1: you've got America withdrawing from some areas of the world,
Speaker 1: not wanting to do things. And thirdly, who've got Britain
Speaker 1: coming out of its main forum to influence people, which
Speaker 1: was the European Union. And so I think from the
Speaker 1: point of view of that Anglo message, which is to
Speaker 1: want to build out too big, I think there has
Speaker 1: been a retreat. And it matters enormously that if you
Speaker 1: talk to American politicians, the most valuable thing about Britain
Speaker 1: was that it was the kind of friendly to American
Speaker 1: voice inside the U. I have to leave their gn Michaels,
Speaker 1: thank you so much. Congratulations on the many themes of
Speaker 1: your conversation with the President of the United States. Right
Speaker 1: now we speak with CBS is Margaret Brennan, who has
Speaker 1: a spirited face and Nation Sunday morning. Of course you'll
Speaker 1: hear it on Bloomberg Radio Sunday two PM. I mean
Speaker 1: that speaks to the noise of this August Margaret in
Speaker 1: Washington to see Christia Friedland so abruptly exit to try
Speaker 1: to get this discussion at done. It's not a boring August,
Speaker 1: is it. No. I don't think there is such a
Speaker 1: thing as a boring August with the Trump administration um
Speaker 1: and certainly this push to get a deal by today,
Speaker 1: by Friday, so that they can move forward with presenting
Speaker 1: to Congress some kind of proposal to overhaul NAFTA is
Speaker 1: something that many, like the president son in law Jard Kushner,
Speaker 1: are really pushing for. The hope is that it would
Speaker 1: lift from the political pressure both from Mexico ahead of
Speaker 1: their inauguration of their new president and ahead of those
Speaker 1: upcoming elections in Canada in twenty nineteen. It's not clear
Speaker 1: if they can win that gamble. There's so many themes
Speaker 1: to talk about, Margaret, including what we're going to see
Speaker 1: in an hour in fifty five minutes on Capitol Hill
Speaker 1: with the Senator from Arizona. But to stay on trade.
Speaker 1: You have an experience of these negotiations, and I would
Speaker 1: suggest it's an experience of complexity. Does this administration do complexity? Uh?
Speaker 1: They do in the sense that there is a number
Speaker 1: of people within the administration with varying different views as
Speaker 1: to how all of this should end up. But it
Speaker 1: seems like fundamentally on this issue of NAFTA UM, it
Speaker 1: comes back to some of the very basics that have
Speaker 1: always stuck the relationship, including, you know, coming to some
Speaker 1: kind of compromise with Canada over how their dairy farmers
Speaker 1: policies are are protected UM up there, and as well
Speaker 1: as this dispute mechanism that continues to be a sticking
Speaker 1: point within the administration. It does appear that the President
Speaker 1: has made a push, with the urging of his son
Speaker 1: in law, Jared Kushner, to get the U. S. Trade
Speaker 1: Representative to make some move to make compromise possible on NAFTA. UH.
Speaker 1: The question, of course, is will the Canadians get on
Speaker 1: board with what Mexico and the US have agreed to
Speaker 1: at this point, Margaret, President Donald Trump has definitely boasted
Speaker 1: of the performance of not only the U. S. Stock
Speaker 1: market but the US economy. Do you get the sense
Speaker 1: from talking to your sources in Washington that the political
Speaker 1: establishment also feels that level of enthusiasm for American economic
Speaker 1: power visa VI these trade negotiations. They have enthusiasm about
Speaker 1: the economic power, but they've got great anxiety that all
Speaker 1: of that could start being damaged or dissipate, particularly towards
Speaker 1: the end of September as some of those retaliatory tariffs
Speaker 1: start to bite in the heartland. Um, And there's really
Speaker 1: no you know, even though you see these glimmers of
Speaker 1: hope with say Europe or Canada and Mexico on potential
Speaker 1: trade negotiations or even deals, the Chinese are such a
Speaker 1: different group of negotiators and really I'm not hearing any
Speaker 1: momentum on that front. And that is the trade dispute
Speaker 1: that really could bite, And so there is anxiety around that.
Speaker 1: There's this urge among Republicans to say, get something done
Speaker 1: on trade where we can stand behind you, uh, you know,
Speaker 1: uh and stand with you against China. But so far, um,
Speaker 1: there's very little hope. And you heard that from the
Speaker 1: President just this week, blaming China for what he says
Speaker 1: is diplomacy faltering with North Korea. Margaret tell us about
Speaker 1: Face the Nation Sunday mornings. We'll be tracking and continuing
Speaker 1: to report on these services here in Washington for Senator
Speaker 1: John McCain, and we will be speaking to former Secretary
Speaker 1: of State and former Senator John Kerry this Sunday, who's
Speaker 1: got a brand new book out. He spent a lot
Speaker 1: of time with John McCain, even though the two of
Speaker 1: them were opposite sides of the aisle and had very
Speaker 1: different perspectives. You know, John Carey rocketed to fame as
Speaker 1: a war protester, John McCain a prisoner of that war,
Speaker 1: and the two found common cause in the nineties to say,
Speaker 1: let's make peace, let's help find uh those missing in
Speaker 1: action and use that toe hole to establish diplomatic relations
Speaker 1: between the US and Vietnam. It's really an extraordinary story,
Speaker 1: and and Terry tells us about that. Michael Brennan, thank
Speaker 1: you so much. Of course, you can see Face a
Speaker 1: Nation on CBS. Do that Sunday morning. You can listen
Speaker 1: to Face the Nation Bloomberg Radio Sunday two PM in
Speaker 1: New York, Washington, d C. And now Bloomberg one or
Speaker 1: six one Boston, Newburyport. Face the Nation this Sunday at
Speaker 1: two I'm Bloomberg Radio. We digress And if you go
Speaker 1: to the Point Sky website Brian Kelly's invention, you will
Speaker 1: find it a wonderfully eclectic set of articles. Mike or
Speaker 1: Not is out moments ago with an article on how
Speaker 1: they figure out what the flight path will be for
Speaker 1: you when you go over oceans, just as that is
Speaker 1: one idea of the richness of this. Joining us here
Speaker 1: on a Labor Day weekend as we all traveled. Julian
Speaker 1: Hell who was with the points uh Guy website, Julian,
Speaker 1: just congratulations on what your website does in terms of
Speaker 1: eclectic travel. But I've got one arch question, when does
Speaker 1: this all end? There's been articles that JP Morgan is
Speaker 1: overwhelmed by the success of their sapphire program. I'm sure
Speaker 1: there's others like JP Morgan because we're all doing this,
Speaker 1: we're all reading you guys, we're all trying to be
Speaker 1: as smart about the use of the miles. Do you
Speaker 1: guys feel like this is something where at some point
Speaker 1: the banks are just gonna say no. You know, it's
Speaker 1: a It's a good question because collecting travel rewards, especially
Speaker 1: through credit cards, is a bigger business than ever, and
Speaker 1: consumers are more educated than ever. Just last quarter, Chase
Speaker 1: actually had over three hundred million dollars in unanticipated redemptions
Speaker 1: by customers were using their points wiser than they otherwise expected.
Speaker 1: So obviously it's partly part of the economic cycle in
Speaker 1: general right now. We're at the height of it, and
Speaker 1: credit card companies are doing great overall. Whether that will
Speaker 1: change when things turn down, it is a possibility. But
Speaker 1: on the other hand, consumers are just into travel, they're
Speaker 1: into loyalty points. We certainly don't see the interests decreasing
Speaker 1: anytime soon. Julian, how many miles a year do you fly?
Speaker 1: I personally fly over a hundred thousand miles a year. Uh,
Speaker 1: And that's actually a small compared to some of my
Speaker 1: colleagues at the Points Guy. Some of them fly over
Speaker 1: two hundred thousand miles a year. And I have to
Speaker 1: tell you it is a lot of time on a plane,
Speaker 1: but a lot of times that we are flying up front,
Speaker 1: if you will, because we're reviewing business class in first
Speaker 1: class cabins, it is a different experience. It's when you're
Speaker 1: flying up front. The the upfront cabins, while economy in
Speaker 1: the back has been worse than than the size, seat
Speaker 1: sizes are smaller than ever. Upfront, the story is very
Speaker 1: different where airlines are now competing for customers based on
Speaker 1: luxury and comfort. So flying in business or first especially internationally,
Speaker 1: is a whole different experience than it was even five
Speaker 1: years ago. All right, Well, help Tom get all the
Speaker 1: business class that he deserves. What kind of cards should
Speaker 1: he be using and does he have to use more
Speaker 1: than one card? Ideally he should be using more than
Speaker 1: one card. And that's because to maximize your frequent flyer
Speaker 1: points and miles, you want to be using a card
Speaker 1: that earns bonus points on specific categories and then pick
Speaker 1: that the right card out of your wallets, depending on
Speaker 1: where you are. So if you've got saying but none
Speaker 1: of the cards actually pay for tuition for tuition, it's
Speaker 1: a little trickier. We do actually have a few stories
Speaker 1: on the points go on how to maximize points when
Speaker 1: you're paying for tuition, So Tom, you know, we you
Speaker 1: can check those out. But when you're at a restaurant,
Speaker 1: you want to make sure you use a card that's
Speaker 1: getting bonus points, and restaurants you're shopping groceries, you want
Speaker 1: to use the groceries card. Let's get back to one
Speaker 1: of the news items of the moment, which is everybody
Speaker 1: wants to do longer flights, which to me screams top
Speaker 1: of the market. And whether it's Sydney to New York
Speaker 1: or you know, you can name the long distance flight
Speaker 1: did the airlines have the responsibility to not over expand
Speaker 1: now like they've done in every other cycle before. That
Speaker 1: is the question, because every other cycle, as you said,
Speaker 1: the airlines have gone too far, too many flights, too
Speaker 1: many seats, and it ends up being an oversupply and
Speaker 1: non enomb Deman. Qantas is talking about this uh new
Speaker 1: possible flight from Sydney to London, which would be over
Speaker 1: ten thousand miles, the longest non stop in the world
Speaker 1: if could happened now, the aircraft currently don't exist to
Speaker 1: do that distance call detailed already right here, small detail,
Speaker 1: but Airbus and Bowing are both working on versions of
Speaker 1: their aircraft that could do it. Qantas in particular has
Speaker 1: has this idea that they're going to do these ultra
Speaker 1: long haul routes in an effort to when business. They
Speaker 1: think they have the business model for it. It is.
Speaker 1: It's a lot of resources into these very long haul
Speaker 1: flights and whether it works is yet to me. I
Speaker 1: noticed Pam American, I think just took out Chicago Shanghai.
Speaker 1: You know they've got three or four choices, yes, but
Speaker 1: they took one of them. Julian low cost carriers like
Speaker 1: Norwegian Wow, tell us about the way, tell us about
Speaker 1: low cost carriers, because I've had several people tell me
Speaker 1: it works, and it works really well. You know, if
Speaker 1: you from a passenger perspective, as long as you know
Speaker 1: what you are getting into that when you book a
Speaker 1: ticket on a low cost carrier, the ticket price is
Speaker 1: not necessarily the end of the story. It may be
Speaker 1: a very low price on the actual air fare, but
Speaker 1: you've got to be aware that you may get charged extra,
Speaker 1: not just for bags, but but certainly for meals, even
Speaker 1: on international flights. Yeah, but okay, but we're talking like
Speaker 1: three d bucks. The fly from continental Europe to l A.
Speaker 1: It is amazing and it's it's low. The airfares right
Speaker 1: now have are lower than they ever have been, especially
Speaker 1: to Europe, even transcon from New York to l A.
Speaker 1: When Jet Blue came in with Mint, their Mint products,
Speaker 1: they drove the prices down, even of the first class experience.
Speaker 1: So it is a great time from a consumer standpoint
Speaker 1: to fly. There is uh, there are clouds on the horizon.
Speaker 1: With the price of oil being higher now than it's
Speaker 1: been over the last few years, that's gonna put a
Speaker 1: pinch on some of these revenues. Sorry, some of these
Speaker 1: expects is for the airline. I want to see what happened.
Speaker 1: I want to circle back finally here, uh Julian to
Speaker 1: the success that Chase has had. Do the other banks
Speaker 1: want to be like Chase? Or are they learning from
Speaker 1: Chase that they really don't want to go there because
Speaker 1: of the huge expense of redemption. You know, It's it's
Speaker 1: a little bit of a mixed bag because Chase, of course,
Speaker 1: with its Chase Fire Reserve product that was extraordinarily popular
Speaker 1: when it first came out, and they've had really good
Speaker 1: retentions on that card, was a direct competitor to American Express,
Speaker 1: who had their own Platinum card, which was a high
Speaker 1: tier travel benefits card. So and and as a result
Speaker 1: of American Express has felt the need to improve their
Speaker 1: Platinum card. So there certainly is competition there. On the
Speaker 1: other hand, where's Wells Fargo is an example. Yeah, Wells
Speaker 1: Fargo just came out with a new propel Amex card,
Speaker 1: but it's aimed at a very different segment of the market.
Speaker 1: It's a no annual fee card. So the credit card
Speaker 1: issuers have had to improve their products to compete. But
Speaker 1: they're aiming for different segments of the market. This has
Speaker 1: been wonderful. Julian and Kill thank you so much, greatly
Speaker 1: appreciate it. With Brian Kelly over at the Points Guy website.
Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and
Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast
Speaker 1: platform you prefer. I'm on Twitter at Tom Keane before
Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg Radio.