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Speaker 1: Global business news twenty four hours a day at Bloomberg

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Speaker 1: This is a Bloomberg Business Flash and I'm camera in Moscow.

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Speaker 1: I h s agreeing to acquire market and to deal

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Speaker 1: that values that combine firms and more than thirteen billion dollars.

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Speaker 1: Starboard Hotels and Resorts worldwide, accepting an improved bid from

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Speaker 1: Marriott International valued at thirteen point six billion, and topping

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Speaker 1: an offer from a group of investors led by China's

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Speaker 1: and Bang Insurance Group. US stock index futures are higher

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Speaker 1: this morning. SNP eveny futures up two points, now eveny

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Speaker 1: futures up twenty and NASDAC eveny futures up six. The

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Speaker 1: Nacks in Germany's up six tenths per set ten, Your

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Speaker 1: Treasury down to thirday seconds, the yet one point eight

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Speaker 1: eight percent no make screwed oil down one or forty

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Speaker 1: seven cents at thirty nineties seven of barrel called Mike

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Speaker 1: scold on half per cent or six dollars ten cents

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Speaker 1: at T announced the Euro and dollar twelve seventy eight

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Speaker 1: the end one eleven point five zero and Sherwin Williams,

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Speaker 1: the largest US paid retailer, said it agreed to buy

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Speaker 1: rival val Spar for about nine point three billion dollars

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Speaker 1: in cash to become the world's biggest codings baker. Val

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Speaker 1: Spar shares are up almost twenty seven percent this morning.

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Speaker 1: That's a Bloomberg business flash. Tom and Mike Karen, thanks

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Speaker 1: so much. We need an update, a brief summary and

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Speaker 1: a view forward from Benjamin Emmons. Ben Emmons with Leader Capital,

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Speaker 1: has written a number of thoughtful books dovetailing our past, present,

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Speaker 1: in future. The word to jour out of three days

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Speaker 1: of Central Bank folly is overshoot. Um. I'm gonna put

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Speaker 1: out on social Ken Rogoff's magisterial uh I m F

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Speaker 1: discussion on Rudy dorn Bush and this key phrase overshoot,

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Speaker 1: and I'll put that out folks. It's like it's an

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Speaker 1: academic paper that is truly I must read this from

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Speaker 1: a good fourteen years ago overshoot cp I is all

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Speaker 1: of a sudden coming up, and we're talking about overshoot first,

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Speaker 1: the fine overshoot and what it means for Jennet Yellen. Yeah,

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Speaker 1: good morning, Tom, Mike, thanks for having me here. Um. Indeed,

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Speaker 1: overshooting is that inflation goes above the target for a

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Speaker 1: period of time. Now, both Yellen and Drunk he said

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Speaker 1: that during the press Conference's that this is kind of

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Speaker 1: the symmetric definition of inflation targeting. You let inflation temporarily

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Speaker 1: overshoots and temporary on the shoot ultimately get to the target.

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Speaker 1: But overshooting is where we may head towards. So now,

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Speaker 1: if all the stimulus and negative rates really starts to

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Speaker 1: pay off and the energy market rebounces, we may get

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Speaker 1: to a period at some point of overshooting instead of

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Speaker 1: this four years that we've been in now on the shooting,

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Speaker 1: that's kind of the situation in it. How do we overshoot?

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Speaker 1: I mean, what what works in what they have done?

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Speaker 1: Bloomberg story out this morning points out that UH bank

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Speaker 1: balance sheets, they're not in Europe, they're not lending. The

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Speaker 1: amount of money that's being deposited at the central bank

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Speaker 1: instead of being forced out by negative rates is rising yeah,

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Speaker 1: and that's true that that that that's still that mechanism

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Speaker 1: doesn't completely work. So I guess what overshooting happens is

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Speaker 1: that if it happens, because we're still not there yet,

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Speaker 1: but it seems that inflation is picking up a bit

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Speaker 1: that people are looking at this UM. It's clearly going

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Speaker 1: to be driven by energy, as in if the oil

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Speaker 1: price will rebound further, that's certainly will help to having

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Speaker 1: fishing rise faster UM. But when it comes to credit creation,

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Speaker 1: as you mentioned, that's still a very slow progress. Don't

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Speaker 1: they try to do this with these new measures in

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Speaker 1: Europe UM, And it's yet to be seen if that

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Speaker 1: actually picks up at least some more aggregate demands and

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Speaker 1: thereby more employment, because that would be really the way

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Speaker 1: to see inflation more materially rising. We may have experiencing

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Speaker 1: this in the US a little bit now, as in

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Speaker 1: you know, wages are slowly rising. Employment is better that

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Speaker 1: inflation is rising for that reason. In Europe they would

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Speaker 1: have to get it still from the energy component of

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Speaker 1: that as to see a quicker quicker move. So I

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Speaker 1: think overshooting we're not just there yet. I think on

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Speaker 1: the as you mentioned, on the credit side, it was

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Speaker 1: still some way to go there before you can actually

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Speaker 1: make that a real reason for for inflation overshooting. Here

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Speaker 1: in the US, we're seeing um the core rate leave inflation,

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Speaker 1: leave energy out of it, start to rise. We're not

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Speaker 1: seeing that in Europe yet. Is that coming or are

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Speaker 1: they still so dependent on energy uh as a component

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Speaker 1: of their price in there? I threw, I think that's true.

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Speaker 1: I think that that's the energy component is significant in

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Speaker 1: Europe um and and therefore it will take some time

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Speaker 1: for for the cool ray to come up quicker. This way,

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Speaker 1: we have some art of factors here that drives are

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Speaker 1: core rate higher. The only notable development there was that

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Speaker 1: the no core good inflation is picking up. That's a

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Speaker 1: sign of economic strength. So that we have to see

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Speaker 1: in Europe do to see core rising um. So I

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Speaker 1: think in Europe it's all about headline inflation as an

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Speaker 1: energy recovers A bit that's all to me about the

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Speaker 1: cup doesn't target it doesn't target core inflation, but headline inflation.

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Speaker 1: UM that we will see some climb out of the

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Speaker 1: negative territory that they're in at the moment. You know.

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Speaker 1: I look at the idea that the comedy almost overshoot.

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Speaker 1: To be clear here, even the inflation easts don't say

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Speaker 1: it's a return to Walter Heller like nine sixties inflation.

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Speaker 1: Do you have a level where overshoot becomes problematic? Can

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Speaker 1: you give us? I don't give me the time, Never

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Speaker 1: give time and date. Then give me the level where

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Speaker 1: overshoots a problem. It's not two point three, right, it's

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Speaker 1: not two point three. Indeed, that's it's much more like three.

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Speaker 1: Let's say one to two percent over the target. To

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Speaker 1: make that, Mike, I think that's a key distinction is

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Speaker 1: the the inflation warriors are parsing tenth of a percent.

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Speaker 1: Mr Emmons is not doing that. No, it's more of it.

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Speaker 1: What I mentioned is, yeah, that's a time. So it's

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Speaker 1: interesting to see that the average time is about one

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Speaker 1: year for overshooting the last and then then inflation apparently

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Speaker 1: comes back to the target again or below, whereas an

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Speaker 1: undershooting takes a lot longer. It seems to be more

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Speaker 1: like two and a half years. So um, I think

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Speaker 1: overshooting indeed is problematic when you indeed, when you are

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Speaker 1: one of the the two over the targets. Did you notice, Mike,

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Speaker 1: the uh? The Mr. Emmons research paper has no dots

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Speaker 1: on it. It's dot plot free free free that well.

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Speaker 1: So I thought of the three questions that that may

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Speaker 1: influence central banking from here is that the dot plot

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Speaker 1: plays a bit of a less role there. It's more

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Speaker 1: about what is the level of nominal rates, which the

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Speaker 1: floral nominal rates? What you know, what time is inflation

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Speaker 1: allowed to overshoot him by how much much? And this

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Speaker 1: helicopter money term that seems to be resurfacing, is that

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Speaker 1: really the new next big thing sort of dot blot

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Speaker 1: is relevant, but it's become a bit of a background story.

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Speaker 1: I think these three questions I opposed during the press

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Speaker 1: conference of the ECB recently are actually really relevant because

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Speaker 1: if if we are going to a situation where nominal

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Speaker 1: rates can go a lot more negative than people realize.

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Speaker 1: In addition, the central banks are contemplating a version of

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Speaker 1: helicopter money, which really extreme measure, we're in a we're

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Speaker 1: really in a different direction, and all that to try

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Speaker 1: to have inflation rather overshoot than on the shoot. And

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Speaker 1: that's the that's the idea behind that. UM. I thought

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Speaker 1: I was interesting that that drug was definitely open to

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Speaker 1: this idea of helicopter money. Thought it was very notable.

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Speaker 1: Take take us back ten years ago the deflation speech

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Speaker 1: of of Bernanky when you started mentioned quantity vision as

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Speaker 1: a measure, but that ultimately materialized. Now quantitied vision is

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Speaker 1: the norm. We're all we used to. Quantity vision is

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Speaker 1: not so extreme anymore. And if today you have central

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Speaker 1: bankers like drug indicating well, helicopter money is something we

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Speaker 1: you know, we haven't discussed, but you know at least

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Speaker 1: it's something that they find interesting. That that means that

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Speaker 1: at some point that may become and also a measure

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Speaker 1: they may use. Not the form of that is to

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Speaker 1: be seen, we don't know that yet, but but that

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Speaker 1: that's debated. That's a that's a notable point. Markets will

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Speaker 1: will pay attention to. It is clearly obviously how far

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Speaker 1: out can you look and have any kind of confidence

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Speaker 1: in your view of what what is going to happen?

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Speaker 1: Given all this, So I think what we'll see is

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Speaker 1: that um central banks will still go through somewhat more

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Speaker 1: extreme measures to ensure that we're getting sustainable inflation and

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Speaker 1: not end up in deflation for a long period. So

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Speaker 1: I think which is not out of this era of

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Speaker 1: unconventional measures and creative ways of trying to stimulate economic

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Speaker 1: activity really because we're dealing with the leveraging, and the

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Speaker 1: leveraging is it comes in waves. And each time did

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Speaker 1: his waves happened like what happened in January, it was

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Speaker 1: a form of the leveraging um. Central banks have to

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Speaker 1: step in to try to upset that. So I think

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Speaker 1: that's what we're still in for until we are actually

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Speaker 1: out of this this beat protracted slumping. There's a lot

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Speaker 1: of debate about it, like we're a secular signation and

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Speaker 1: we never can really get out of his Okay, but

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Speaker 1: what you've just described and might now that I think

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Speaker 1: about it, it's all the great work we did last week.

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Speaker 1: Thank you team for that. What we're doing is we're

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Speaker 1: back to an analysis of nominal GDP and nominal rates

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Speaker 1: because what we're saying is inflations up, so what real

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Speaker 1: growth is down? So we're back to premanqu almost correct,

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Speaker 1: am I right? Yeah? I think you're right about that.

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Speaker 1: We're back to the nominal GDP. I need a pipe.

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Speaker 1: I gotta look like could I look like Arthur brees Man? Yeah,

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Speaker 1: you don't want to. So, yeah, we're back to nominal

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Speaker 1: GDP because that ultimately drives, you know everything really, you know,

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Speaker 1: returns and everything. So if nominal GDP, like you mentioned

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Speaker 1: once the other day that that GDP and nominal GP

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Speaker 1: in the UK two point seven percent really low, showed

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Speaker 1: it like three three and three and a half, it's

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Speaker 1: really we want to go back to five cent nominal GDP.

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Speaker 1: So that's all about nominal GP. Ben Emmons, thank you

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Speaker 1: so much, Lena Capital helping us out this morning. Michael,

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Speaker 1: the reason I'm a little thunderstruck is I got up

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Speaker 1: at midnight trying to understand Scarlet Food's bracket. I mean,

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Speaker 1: folks who usually every year have somebody from Bloomberg LPN

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Speaker 1: to talk about their geniosity. This year among our nineteen

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Speaker 1: thousand employees, we're gonna have to bring in one s

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Speaker 1: Food if she gets through the final eight. Here, she's

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Speaker 1: killing it on the TV newser She's just killing it.

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Speaker 1: She's in first place on the edge of geniosity. It's

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Speaker 1: just I don't know how she does it. Were you

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Speaker 1: advising her? Uh No, I had not seen her bracket

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Speaker 1: is it's out there on TV newsro as well. Scarlet

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Speaker 1: Food just tolling it. Yeah, we didn't mention my bracket,

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Speaker 1: which well, We're not going to do. That is the

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Speaker 1: imponderable and unmentionable More another hour of Bloomberg's surveillance