WEBVTT - Surveillance Special: Views From The Ambrosetti Spring Workshop 0:00:09.880 --> 0:00:13.040 Welcome to the Bloomberg Surveillance Podcast and I'm Tom Keene 0:00:13.480 --> 0:00:16.960 Jay Ley. We bring you insight from the best in economics, finance, 0:00:17.040 --> 0:00:23.480 investment and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:34.120 Bloomberg dot Com and of course on the Bloomberg trans 0:00:34.280 --> 0:00:37.600 laquon Tom Keen and we are reporting on this economics 0:00:37.600 --> 0:00:40.920 as politics from these meetings on the shores of Lake Homa, 0:00:40.920 --> 0:00:44.080 and we welcome all of you worldwide today. What we 0:00:44.159 --> 0:00:47.360 know is there is a pin drop when Muhammad Hilarian 0:00:47.479 --> 0:00:50.680 speaks of game theory. The game theory right now has 0:00:50.720 --> 0:00:55.320 never been more complex between politics, economics, and indeed finance 0:00:55.400 --> 0:00:58.240 as well. Francine and I were up at five am 0:00:58.320 --> 0:01:01.320 having four pole espressos over the eight themes we would 0:01:01.320 --> 0:01:03.640 talk to Dr al Arian today. I want to go 0:01:03.680 --> 0:01:06.280 to Davos. Why why do you never go to Davos? 0:01:06.319 --> 0:01:08.600 Why do we never see you there? Because I preferred 0:01:08.640 --> 0:01:12.319 these small gathering honestly, Okay, fine. The theme of Davos 0:01:12.520 --> 0:01:15.840 was the European banking system has to clear themselves and 0:01:15.880 --> 0:01:19.120 they can't clear themselves because the negative interest rates. Was 0:01:19.200 --> 0:01:22.160 Ken Rogoff right, there'd be a point where negative interest 0:01:22.240 --> 0:01:26.280 rates would not be efficacious not I think Ben Bonankey 0:01:26.319 --> 0:01:29.280 as fall back warned us that when it comes to 0:01:29.640 --> 0:01:36.520 using unconventional policies for macroeconomical objectives, it's about benefits, costs 0:01:36.520 --> 0:01:40.319 and whisks. And the longer you persist the load of benefits, 0:01:40.319 --> 0:01:42.160 the hide the costs. Anywaysk and that's what we all did. 0:01:42.240 --> 0:01:43.840 I want to go to your wheelhouse, which is a 0:01:43.880 --> 0:01:47.520 binomial distribution of game theory and all that. The fact 0:01:47.640 --> 0:01:51.400 is negative interest rates. You've got clear outcomes early on, 0:01:52.040 --> 0:01:55.640 and then they become diffuse as the value of negative 0:01:55.640 --> 0:01:58.600 interest rates now far more diffuse. And what was X 0:01:58.720 --> 0:02:01.600 number of years ago in my in yes, for two reasons. 0:02:01.680 --> 0:02:06.400 One is that the transmission mechanism is stretched, if not exhausted. 0:02:06.800 --> 0:02:10.240 And the second reason is that we're now realizing that 0:02:10.360 --> 0:02:12.880 when you we're not negative industrants for a long time, 0:02:13.400 --> 0:02:16.280 you undercut the ability of the financial sector to provide 0:02:16.280 --> 0:02:20.480 credit and the financial sector to provide long term financial protection, 0:02:20.720 --> 0:02:23.600 which means the risk a version among households goes up. 0:02:23.760 --> 0:02:26.280 And that's what we're experiencing now. But he's realizing, our 0:02:26.320 --> 0:02:29.480 central banks realizing, yes, I mean Mario Drag at his 0:02:29.560 --> 0:02:32.120 last press conference actually mentioned it. And for this to 0:02:32.160 --> 0:02:34.840 come from the e c B is quite a change 0:02:34.880 --> 0:02:37.840 in terms of recognizing it's also about cost and benefits, 0:02:37.840 --> 0:02:40.480 not just the cost and risks, not just benefits. Given 0:02:40.480 --> 0:02:43.200 where we are, has an e c B actually lost 0:02:43.200 --> 0:02:46.520 the window to hyper normalize and is this supposing mistake? 0:02:47.120 --> 0:02:51.559 So I think that that that window has has closed tremendously. 0:02:52.000 --> 0:02:53.760 But I think what's key and the e c B 0:02:54.040 --> 0:02:56.360 and Mario Drag has been very good, it's to stress 0:02:56.520 --> 0:03:00.079 it's not about central banks, it's about the response of 0:03:00.400 --> 0:03:04.080 other policy makers with better tools. And he said, you know, 0:03:04.200 --> 0:03:06.760 you look at his press conference. The quarter of it 0:03:06.800 --> 0:03:09.440 is spent saying it's not about us. But he said 0:03:09.440 --> 0:03:11.800 it for five years and no one was listening, correct, 0:03:11.840 --> 0:03:15.080 And now it's become even more urgent. And if it 0:03:15.120 --> 0:03:17.920 doesn't you see, you're starting to see around the world 0:03:18.120 --> 0:03:21.000 is that central banks get pushed too hard and starts risking, 0:03:21.080 --> 0:03:23.959 risking their political independence. And that's a big issue. There's 0:03:24.000 --> 0:03:26.519 a growth problem in Germany, there's a growth problem in Italy. 0:03:27.000 --> 0:03:29.840 Does the ECB have the tools if it were to 0:03:29.880 --> 0:03:35.400 turn ugly to deal with it? Um no I mean, 0:03:35.440 --> 0:03:37.880 that's the most that the CP can do is buy 0:03:37.920 --> 0:03:40.840 some time. But I want you to keep the image 0:03:41.440 --> 0:03:45.040 of a patient that is hooked on paint killers and 0:03:45.080 --> 0:03:49.480 not dealing with their structural impediments. The more you get hooked, 0:03:49.640 --> 0:03:54.760 two things happen. You become addictive, addicted, and the side 0:03:54.760 --> 0:03:58.640 effects become worse and worse. So can that medication buy 0:03:58.640 --> 0:04:01.200 you some more relief, Yes, but it comes at quite 0:04:01.200 --> 0:04:05.080 a cost. What should be the approach of economics the 0:04:05.080 --> 0:04:09.040 theorists like you to defend Chairman of Powell. We had 0:04:09.160 --> 0:04:13.000 LBJ going after McChesney Martin over the need for inflation, 0:04:13.040 --> 0:04:16.400 after the assassination of JFK. Now we've got a new 0:04:16.440 --> 0:04:18.719 about it. This Kevin Walsh happens to be in the 0:04:18.800 --> 0:04:22.960 radar this week. How did the guys like you protect 0:04:23.160 --> 0:04:27.159 the banker Jerome Powell. We explain over and over again 0:04:27.480 --> 0:04:30.159 that central banks have gone out of their way to 0:04:30.320 --> 0:04:34.840 carry a policy burden that's way beyond their tools, and 0:04:34.880 --> 0:04:36.880 that this is not about central banks. I think that 0:04:36.920 --> 0:04:38.839 message has to be stressed over and over. How do 0:04:38.839 --> 0:04:41.320 you respond to the fact Marvin good Friend got buried 0:04:41.520 --> 0:04:44.000 within the process and now we will have Mr Kane, 0:04:44.000 --> 0:04:46.880 a businessman as a FED officer, how how do we 0:04:46.920 --> 0:04:50.200 explain that to the American public and to the financial elite. 0:04:50.360 --> 0:04:53.239 It's part of a bigger phenomenon where people have lost 0:04:53.279 --> 0:04:58.280 trust with expert opinion. People have lost trust with the 0:04:58.320 --> 0:05:01.520 profession of economics and death it is okay in the 0:05:01.600 --> 0:05:05.200 view of these people to appoint non economists to the 0:05:05.200 --> 0:05:08.480 economic position. It is a much border reflection. There was 0:05:08.640 --> 0:05:13.320 a significant trust deficit that has developed, particularly respected economics, 0:05:13.440 --> 0:05:17.839 economics party, responsible rights. There's a biplane coming in here. 0:05:17.880 --> 0:05:20.080 It looks like out of the nineteen thirties. I think 0:05:20.120 --> 0:05:24.040 that's an Oreo's coming up next. In the meantime, that's 0:05:24.080 --> 0:05:26.560 an important point to Mohammed, which will of course continue 0:05:26.560 --> 0:05:28.880 on Mohammed Hilarion in the lack of trust he is 0:05:28.920 --> 0:05:44.640 from Alliance and Boomberg's opinion, it is Fredo and in 0:05:44.800 --> 0:05:50.680 French that's where we are and where we are as 0:05:50.680 --> 0:05:53.320 with the strength of the O. E c D. Catherine 0:05:53.320 --> 0:05:56.280 Manner is our chief economists and now Laurent Spoon taking 0:05:56.279 --> 0:05:59.400 over for Dr man How is the first week spen 0:05:59.520 --> 0:06:01.680 in the first quarters? Bean and O E c D. 0:06:01.800 --> 0:06:04.719 It's a big change to go to an institution at large, 0:06:04.800 --> 0:06:07.960 and the first months change. It's a big, big change, 0:06:08.000 --> 0:06:10.880 both for me and for the global economy account. Look, 0:06:10.920 --> 0:06:14.799 I hope it's not correlated, but it hasn't seen deteriorating. 0:06:15.080 --> 0:06:18.240 We had a wonderful conversation number of days ago the 0:06:18.320 --> 0:06:22.360 leading economists about the inability of the I m F 0:06:22.480 --> 0:06:26.200 to get out front and gain the economy. That everything 0:06:26.320 --> 0:06:28.640 was a look back. The oas c D to me, 0:06:28.760 --> 0:06:32.080 really tries to look forward to what's going to happen 0:06:32.360 --> 0:06:35.679 as you look forward in the two thou nineteen, within 0:06:35.760 --> 0:06:39.359 your perspective two thousand twenty two, what do you see 0:06:39.360 --> 0:06:43.040 for global economic growth? So I think a big change 0:06:43.120 --> 0:06:46.839 in the major driver of global economic bowth, which is 0:06:46.920 --> 0:06:50.120 that the trade the penness that we have lived through 0:06:50.360 --> 0:06:54.760 and which has really lifted um not only all economies 0:06:54.800 --> 0:06:57.960 but the third of the planet out of poverty. That's 0:06:58.000 --> 0:07:02.800 going to change stratistically because of all the challenges to 0:07:03.080 --> 0:07:07.920 openess from politics and from the rising inequality which has 0:07:07.960 --> 0:07:11.440 taken place over the past two decades. And looking forward, 0:07:11.480 --> 0:07:18.120 there's another element which is digitalization, which combine with open economy, 0:07:18.320 --> 0:07:22.360 is actually revolution in the labor market. Let me just 0:07:22.400 --> 0:07:25.160 give you one number. If we look at the next 0:07:25.200 --> 0:07:29.520 ten years, fourteen percent of the jobs will disappear, thirty 0:07:29.560 --> 0:07:34.720 percent will change significantly. That's a revolution for everybody who's 0:07:34.760 --> 0:07:37.600 working today. Ums, it seems that there was a lot 0:07:37.640 --> 0:07:40.360 of pessimism right on the world economy. Not the markets 0:07:40.400 --> 0:07:43.320 are a little bit optimistic, then next week they may change. 0:07:43.360 --> 0:07:45.480 Does it all have to do with that consumption number 0:07:45.480 --> 0:07:47.720 in China? Is that the kind of end all be all? 0:07:48.680 --> 0:07:51.800 I think it's China has been contributed to a third 0:07:51.840 --> 0:07:55.120 of economic growth over the fact decades, so global growth 0:07:55.240 --> 0:07:57.720 or yes, that's a massive number. But when we look 0:07:57.760 --> 0:08:01.760 at the short term, like what you're into, the major 0:08:01.840 --> 0:08:05.840 swings coming from other emerging markets, like look at Turkey, 0:08:06.240 --> 0:08:10.120 it's been driving the change and the decline in the 0:08:10.240 --> 0:08:13.680 open goes to a very significant extent, much modern China. Actually, 0:08:14.000 --> 0:08:17.760 what would be your prescription to fix European growth? Germany 0:08:17.840 --> 0:08:22.000 is in a struggle. Italy is probably much worse. So, yes, 0:08:22.040 --> 0:08:26.400 it is in recission at the moment, and Germany is 0:08:26.680 --> 0:08:30.200 We project Germany to a wise point eight percent, which 0:08:30.320 --> 0:08:35.360 is weak by the standards. Leverage on Europe. We have 0:08:35.559 --> 0:08:38.920 a single market and we have a common currency. That's 0:08:39.000 --> 0:08:44.840 protecting Europe from all the fluctuation that that may happen. 0:08:45.120 --> 0:08:49.439 So first coordinate fiscal policy. Half of your up can 0:08:49.480 --> 0:08:54.800 actually do and should support the economic activity with public investment. 0:08:55.320 --> 0:08:57.439 If we want to be able to compete in two 0:08:57.480 --> 0:09:01.319 most digital world, we need did you it all infrastructure? 0:09:02.000 --> 0:09:04.440 There are many regions in Europe. It'specially in the north 0:09:04.480 --> 0:09:07.079 where your mobile phone we've just stop working. So that's 0:09:07.120 --> 0:09:10.679 the first thing. The civil needs reform, let business grow 0:09:10.800 --> 0:09:16.600 and flourish, cut through tape administration, that's super important. Where 0:09:16.640 --> 0:09:19.679 are we in this guilded age? The O E c 0:09:19.800 --> 0:09:23.760 D has been out front and inequality, genue, coefficient are 0:09:23.840 --> 0:09:27.560 kind of analysis. How guilded is the guilded age right now? 0:09:28.600 --> 0:09:31.160 Whether the true issue and that relates to the first 0:09:31.240 --> 0:09:34.120 question you asked me, which shows how prescient you are, 0:09:34.920 --> 0:09:40.679 is this hollowing out of the middle skilled workers. That's 0:09:40.720 --> 0:09:45.720 to a large extent what the reason of the resentment 0:09:45.840 --> 0:09:49.240 from the yellow jacket brings it to the populist boat 0:09:49.360 --> 0:09:51.679 everywhere on the planet you can think about, and this 0:09:51.800 --> 0:09:55.120 is going to worthen if we don't address it now 0:09:55.280 --> 0:09:58.640 through a distribution and to be able to redistribute. We 0:09:58.720 --> 0:10:01.840 need this common tax that the OECD is working the 0:10:01.840 --> 0:10:06.600 global comming flag and looking forward, we need to give 0:10:06.679 --> 0:10:11.600 access to more people to education, healthcare everywhere, and the 0:10:11.640 --> 0:10:15.440 G twenty is looking at this. So I've got hope. 0:10:17.280 --> 0:10:21.680 Most top Brexit with neur Real Rubini from Rubini Macro Associates. 0:10:21.679 --> 0:10:24.719 Of course he's their founder, a chief executive, Neurial. When 0:10:24.720 --> 0:10:28.240 you look at Brexit, the longer you delay it doesn't 0:10:28.240 --> 0:10:30.640 mean that actually Brexit could also not happen, or you'll 0:10:30.640 --> 0:10:32.520 get such a soft Brexit, which is kind of what 0:10:32.520 --> 0:10:35.400 the markets have in pressing in that it won't really 0:10:35.400 --> 0:10:38.000 have much of an impact. Well, one thing, I'm not 0:10:38.080 --> 0:10:40.320 for sure we're not going to have a hard Brexit 0:10:40.440 --> 0:10:42.400 because it's going to be not just a disaster for 0:10:42.440 --> 0:10:44.720 the UK but also for Europe. Europe is on the 0:10:44.800 --> 0:10:47.040 verge of a recession. The last thing they need is 0:10:47.040 --> 0:10:50.000 a market and a confidence shop coming from our brexit 0:10:50.240 --> 0:10:52.320 or whether the like it or not, and the Europeans 0:10:52.320 --> 0:10:55.240 will have to delay also the Brexit decision, whether it's 0:10:55.240 --> 0:10:57.600 to June or later, we don't know. Of course, the 0:10:57.720 --> 0:11:01.720 longer you delayed if it's beyond June, third, the UK 0:11:01.800 --> 0:11:04.800 will have to participate in new election. That means mpeas, 0:11:04.840 --> 0:11:07.760 it means commissioner, and therefore the chance and then eventually 0:11:07.760 --> 0:11:09.920 there is a change in government and there's gonna be 0:11:09.960 --> 0:11:12.600 a second referendum and you don't get Brexit at all 0:11:12.640 --> 0:11:15.840 becomes more likely. I still of the belief that probably 0:11:16.000 --> 0:11:18.840 we're gonna get Brexit, some variant of the current with 0:11:18.960 --> 0:11:22.760 all agreement might happen by June, rather than a reversal Brexit. 0:11:22.800 --> 0:11:24.719 But we're not going to get hart Brexit, and that's 0:11:24.760 --> 0:11:27.760 actually positive for the market. But you're scenarios a general 0:11:27.800 --> 0:11:30.440 election that could actually you could see scenario where Boris 0:11:30.520 --> 0:11:33.360 Johnson becomes, you know, the leader of Conservatives and and 0:11:33.440 --> 0:11:37.040 wins the election. Right, So what does that mean for Brexit? 0:11:37.120 --> 0:11:40.000 And what if the referendum is again fifty four forty 0:11:40.040 --> 0:11:43.160 six the other wise we have a third referendum. Well, 0:11:45.080 --> 0:11:47.520 as I said, I don't know whether we're gonna get 0:11:48.640 --> 0:11:51.800 soft Brexit rather reversal of Brexit. All those options are 0:11:51.800 --> 0:11:54.360 on the table. I think from an economic market point 0:11:54.360 --> 0:11:57.360 of view, avoiding heart Brexit is the most important thing. 0:11:57.800 --> 0:12:01.280 That's the first observation. Secondly, you know, once even when 0:12:01.360 --> 0:12:04.079 Boris Johnson becomes Prime Minister. I think it's a bit 0:12:04.080 --> 0:12:06.559 of a political opportunist at that point is going to 0:12:06.600 --> 0:12:08.400 want to do a deal with Europe rut and wanting 0:12:08.400 --> 0:12:11.080 our brexit you preventd to be our brexitter is not 0:12:11.320 --> 0:12:13.680 and so on. And the question is of course whether 0:12:13.720 --> 0:12:17.679 you're gonna go to European election with the UK or not. 0:12:18.200 --> 0:12:20.400 If it's with the UK, then the chances are that 0:12:20.640 --> 0:12:24.079 eventually have either general election or a friendum and then 0:12:24.080 --> 0:12:27.040 you can reverse that decision. Is it constructive to have 0:12:27.160 --> 0:12:30.440 the debate we're having between Governor Kearney and former Governor 0:12:30.440 --> 0:12:33.439 Irvin King They seems to be going back and forth 0:12:33.480 --> 0:12:36.959 on what what no deal means as well. Is that 0:12:37.080 --> 0:12:40.520 a constructive debate right now? Well? I don't think it's 0:12:40.520 --> 0:12:44.040 a constructive ate in the science that of course there 0:12:44.080 --> 0:12:46.000 is ann going debate about what's going to be the 0:12:46.040 --> 0:12:49.880 consequences of different types of Brexit. Most people believe that 0:12:49.960 --> 0:12:53.080 our Braxtit is going to be terrible for the United Kingdom. 0:12:53.720 --> 0:12:57.240 We're having a political noise. Having also alloys among former 0:12:57.559 --> 0:13:11.480 and current policymaker is not very factor or not it is. 0:13:11.600 --> 0:13:15.520 Jacob Frankel of JP Morgan Chase International their chairman, but 0:13:15.600 --> 0:13:20.199 that barely describes his accomplishments in economics. Lars Hanson in 0:13:20.360 --> 0:13:24.360 Chicago now the laureate is the David Rockefeller Professor, and 0:13:24.559 --> 0:13:28.800 long ago, a few years ago, the first David Rockefeller 0:13:28.880 --> 0:13:32.480 Professor at Chicago was one Jacob Frankel, and he joins 0:13:32.559 --> 0:13:35.600 us today not on foreign exchange dynamics and the rest 0:13:35.600 --> 0:13:39.160 of it, but the grace of how central banks should act. 0:13:39.440 --> 0:13:41.720 As we speak to you, as a former governor of 0:13:41.760 --> 0:13:45.200 the Bank of Israel, did any political leadership in Israel? 0:13:45.320 --> 0:13:50.680 Every wanna can Jacob Frankel, I'm sure that every day 0:13:50.760 --> 0:13:56.160 everywhere leaderships. Scott mess he hasn't. Well, they both appointed. 0:13:56.200 --> 0:14:01.520 He's that the central banks credibility he's so high today 0:14:01.600 --> 0:14:05.840 and has been the best protection of central central bank policies. 0:14:06.080 --> 0:14:11.200 And that's why, when everyone is still engaged with extinguishing 0:14:11.240 --> 0:14:15.040 the files of the crisis of today, central banks are 0:14:15.240 --> 0:14:18.640 enshrined in not only dealing with the files of yesterday, 0:14:18.880 --> 0:14:22.440 but also securing the stabilities that is so important for 0:14:22.560 --> 0:14:25.960 growth and developed the common theme here of Linden, Baines, 0:14:26.040 --> 0:14:28.880 Johnson and mc chesney Martin in the sixties as well. 0:14:29.360 --> 0:14:32.560 I need growth, I need inflation, I need the economy 0:14:32.640 --> 0:14:36.200 of pop That's exactly the language we would hear from 0:14:36.200 --> 0:14:40.240 President Trump. Why do politicians want that when there's so 0:14:40.280 --> 0:14:44.600 many smart guys like you around saying no, you can't 0:14:44.680 --> 0:14:48.520 have the punch ball seven ten years in a row. 0:14:49.080 --> 0:14:52.600 And indeed, the test of a good central banker is 0:14:52.640 --> 0:14:55.360 that he can take the punch ball away before the 0:14:55.440 --> 0:14:59.440 party gets going. It is indeed the inclination of politicians 0:14:59.760 --> 0:15:03.600 to have a short run benefit, but occasionally those short 0:15:03.680 --> 0:15:06.640 run benefits are coming at very high cost in the 0:15:06.680 --> 0:15:10.160 long run, and the best ways that central banks can 0:15:10.200 --> 0:15:15.920 contribute to growth is by lengthening the horizon, by securing 0:15:15.960 --> 0:15:19.080 stability in the financial system and in the price area. 0:15:19.240 --> 0:15:21.440 But when can they take the punch bowl away? It 0:15:21.440 --> 0:15:23.600 seems like this is, you know, the caral, but actually 0:15:23.600 --> 0:15:27.240 it's never coming because the economies ups and downs have 0:15:27.280 --> 0:15:29.680 we actually missed the window. And I'm especially thinking of 0:15:29.720 --> 0:15:32.120 the European Central Bank, where one of the key points 0:15:32.120 --> 0:15:34.640 that we've learned is that being the only game in 0:15:34.680 --> 0:15:38.080 town is a mixed blessing. In fact, it has become 0:15:38.400 --> 0:15:41.640 a curse. And since the crisis, the only game in 0:15:41.720 --> 0:15:45.120 town have been the central banks. They have been overburdened, 0:15:45.320 --> 0:15:48.120 and before long they looked around and says, hey, well 0:15:48.960 --> 0:15:52.240 where are my troops? They are gone. Governments need to 0:15:52.280 --> 0:15:55.440 wake up. It is time for not only fiscal policy 0:15:55.480 --> 0:15:58.920 but also what we call in the jargon structural policies, 0:15:58.960 --> 0:16:02.400 which in showed me in making the economy more flexible 0:16:02.760 --> 0:16:06.400 and contributing to productivity and growth. So yes, it's not 0:16:06.480 --> 0:16:09.280 an issue of flowering interest rates. Interest rates are as 0:16:09.320 --> 0:16:11.400 slow as they could ever be. But this is not 0:16:11.400 --> 0:16:14.800 going to get easier because actually politicians who have always 0:16:14.840 --> 0:16:17.840 want to be reelected, they also now realize that they 0:16:17.840 --> 0:16:20.200 have a populace to contend with. So the more they're 0:16:20.240 --> 0:16:23.160 tough on reforms, the more they lose their job quickly. 0:16:24.360 --> 0:16:27.040 This may be the case, but if I look, for 0:16:27.080 --> 0:16:32.120 example two examples, look at the head of Germany Shadow 0:16:32.840 --> 0:16:39.360 who did very very tough measures. He paid political price, 0:16:39.840 --> 0:16:44.760 and Germany was booming thereafter. Even in Israel when Prime 0:16:44.800 --> 0:16:49.360 Minister Nathaniel was at the time Minister of Finance, he 0:16:49.440 --> 0:16:53.960 did the tough policies, was very unpopular, paid political price, 0:16:54.080 --> 0:16:56.520 and the economy was booming. So I really think that 0:16:56.560 --> 0:16:59.320 at the end of the day, you need to be 0:16:59.360 --> 0:17:01.960 a state's men, and a statesman needs to ask not 0:17:02.120 --> 0:17:05.640 how am I re elected, but how can I improve 0:17:06.040 --> 0:17:08.240 the state of the economy if it is in the 0:17:08.240 --> 0:17:11.159 economics field. So the Israeli elections are a couple of 0:17:11.240 --> 0:17:13.960 days away. We cannot mention polls. We were discussing it 0:17:14.240 --> 0:17:17.720 last night. What are the nuances of the selections that 0:17:17.920 --> 0:17:25.520 markets don't understand? Well? The short answer is very technical one. 0:17:25.960 --> 0:17:31.200 There are many, many small parties that may not may 0:17:31.280 --> 0:17:34.480 not cross the threshold that is needed in order to enter. 0:17:34.600 --> 0:17:37.560 If they don't cross the threshold, the votes that went 0:17:37.680 --> 0:17:41.959 to them are gone. And therefore when you do public 0:17:42.000 --> 0:17:46.280 opinion polls, which you are not allowed now anymore, you 0:17:46.400 --> 0:17:48.639 have to take into account that many of the votes 0:17:48.680 --> 0:17:52.800 may be gone. So paradoxically, those parties that will not 0:17:52.920 --> 0:17:57.879 be elected into parliament, into our Nesset maybe those that 0:17:57.960 --> 0:18:02.880 will decide on the balance between the center right and 0:18:02.920 --> 0:18:06.240 the center left government. Going to the I m F 0:18:06.320 --> 0:18:08.960 meetings in Washington, I put out a fancy books and 0:18:09.040 --> 0:18:13.159 one of the Green book, which is unfinancial stability as well. 0:18:13.200 --> 0:18:18.280 What's the terrorist right now? J Frankel synthesizes all of 0:18:18.320 --> 0:18:21.800 the economics into that risk that's out on left tail. 0:18:22.480 --> 0:18:25.399 How how meluable is that right now? How flexible is it? 0:18:25.440 --> 0:18:28.919 My financial stability is key and that's the main lesson 0:18:29.359 --> 0:18:32.119 from the crisis, which we now commemorate, I will not 0:18:32.160 --> 0:18:36.320 say celebrate the tenth anniversary. Also, traditionally it was said 0:18:36.320 --> 0:18:39.640 that central banks need to focus on prices stability. We've 0:18:39.720 --> 0:18:43.040 learned that financial stability is as important and it is 0:18:43.080 --> 0:18:45.840 relevant today. And the reason is that the mall you 0:18:45.920 --> 0:18:48.800 push interest rates down, you have the illusion that you 0:18:48.880 --> 0:18:53.080 stimulate the economy, but you also make the financial system 0:18:53.359 --> 0:18:56.399 more vulnerable. People ask, where is the inflation you have 0:18:56.480 --> 0:18:58.679 printed and printed and printed that We don't see it 0:18:58.720 --> 0:19:01.879 in the CPI, in the Consuler price index, but you 0:19:01.960 --> 0:19:05.000 do see it in the financial markets. And if you 0:19:05.200 --> 0:19:10.439 financial markets are growing on soft land, they will be 0:19:10.640 --> 0:19:14.040 more fragile. That's why it is so important to strengthen 0:19:14.040 --> 0:19:18.679 the financial system. You know, the most important key test 0:19:18.920 --> 0:19:22.640 for a strong economy is the strength of its financial system, 0:19:22.760 --> 0:19:38.639 because that's the element that can derail a prosperity. We 0:19:38.760 --> 0:19:42.199 welcome all of you across America serious exempt Channel one 0:19:42.280 --> 0:19:46.760 nineteen and worldwide to this important discussion, and you just 0:19:46.840 --> 0:19:50.680 can't have a workshop or a two D three person 0:19:50.800 --> 0:19:54.440 elite Suminar in Italy without Luigis and gals. Here is 0:19:54.520 --> 0:19:59.720 without question the definitive link between Europe and America and 0:19:59.800 --> 0:20:02.879 a study of capitalism. Of course, at the bus School 0:20:03.119 --> 0:20:08.199 Chicago and as a child had an unbunco to Lemonada. 0:20:08.720 --> 0:20:11.800 I think, as a kid camera christs are going after 0:20:11.840 --> 0:20:16.280 the academics who don't understand the incentives of capitalism. You're 0:20:16.320 --> 0:20:20.120 the global expert. How are we doing in capitalism right 0:20:20.119 --> 0:20:23.880 now in America? Actually I was not running a lemonal state, 0:20:23.960 --> 0:20:26.200 but I was a bike mechanic as a small kid, 0:20:26.240 --> 0:20:29.000 so I don't understand some of these things. I think 0:20:29.080 --> 0:20:34.040 that the system in the United States is doing UH 0:20:34.160 --> 0:20:38.320 in this moment better than Europe. Europe is a very 0:20:38.400 --> 0:20:42.320 soft from an economic point of view, I think, particularly Germany. 0:20:42.640 --> 0:20:45.720 And the thing that we mean to be understand, understand 0:20:45.760 --> 0:20:49.359 understood is mean to understand is whether this is just 0:20:49.400 --> 0:20:52.679 a technical factor or is just a China demand that 0:20:52.800 --> 0:20:57.960 is soft. And as a result, the entire chain UH 0:20:58.680 --> 0:21:01.320 Germany and then explaining to Italy and the rest of 0:21:01.359 --> 0:21:04.120 Europe is softer. One of the great things about these 0:21:04.119 --> 0:21:08.600 international conferences is nobody talks about healthcare because everybody's sort 0:21:08.640 --> 0:21:10.879 of got a healthcare system they're happy with, is a 0:21:10.920 --> 0:21:14.600 general statement, except the United States. Right now in the 0:21:14.680 --> 0:21:18.280 United States is ever growing piece of pie going to healthcare. 0:21:18.640 --> 0:21:21.920 Are we struggling with our wage growth because so much 0:21:21.920 --> 0:21:26.600 of it's going to healthcare instead of going to our pockets? Absolutely, 0:21:26.720 --> 0:21:30.440 I remember that. I in my two thousand and twelve book, 0:21:30.440 --> 0:21:34.080 I have a picture showing what people bring home and 0:21:34.280 --> 0:21:37.639 what they're paid, and there is a big difference. And 0:21:38.080 --> 0:21:42.359 this big difference is mostly due to healthcare cost. And 0:21:42.760 --> 0:21:46.200 so walk as in the United States don't don't see 0:21:47.040 --> 0:21:49.879 the benefits of growth because this growth goes into the 0:21:49.920 --> 0:21:53.879 pockets of the healthcare industry as a as a whole. 0:21:54.160 --> 0:21:57.920 So I think that we need a see us reforming 0:21:57.960 --> 0:22:01.560 healthcare too, would use the cost and and actually make 0:22:01.600 --> 0:22:05.480 it more efficient. People in Italy live much longer than 0:22:05.520 --> 0:22:07.679 the United States. And part of it, of course is 0:22:07.680 --> 0:22:09.879 a good wine and good olive oil. But part of 0:22:09.920 --> 0:22:13.720 it is that these more generalized healthcare than than in 0:22:13.720 --> 0:22:17.280 the United States. Well, well, let's go to Gary Becker 0:22:17.320 --> 0:22:19.480 than the giant, the late Gary Becker, the lore of 0:22:19.560 --> 0:22:23.320 the Giant of Chicago, what I'll call social economics. Steve 0:22:23.359 --> 0:22:26.639 Lovett doing free economics as well. We're all looking for 0:22:26.680 --> 0:22:30.520 a solution to this instead of the painful water torture 0:22:30.600 --> 0:22:33.639 quarter after quarter, year after year as well. Do you 0:22:33.680 --> 0:22:36.679 see a solution out there or do we just stagger 0:22:36.800 --> 0:22:40.560 on into this new decade? You mean a solution to 0:22:40.600 --> 0:22:43.760 the healthcare, as to the healthcare and to our happiness 0:22:43.840 --> 0:22:47.400 with our jobs. We're a fully employed America, but essentially 0:22:47.400 --> 0:22:51.159 everybody is miserable. I don't think everybody's miserable, but the 0:22:51.240 --> 0:22:54.800 vast majority is miserable. And the reason is very simple. 0:22:54.840 --> 0:22:58.880 If you look at the median wage in the United States, 0:22:58.960 --> 0:23:01.040 especially for male war because it's not gonna happ in 0:23:01.080 --> 0:23:05.320 forty years. So they're miserable because they're not making a 0:23:05.520 --> 0:23:08.240 higher wage. And one of the reasons, as we're discussing, 0:23:08.280 --> 0:23:10.919 part of it is eaten by healthcare. And part of 0:23:10.920 --> 0:23:15.440 it is that I think competition as push wages less 0:23:16.000 --> 0:23:18.320 app than in the past, and so maybe we should 0:23:18.400 --> 0:23:23.159 promote this. Uh. We are discussing earlier about the employment report, 0:23:23.240 --> 0:23:27.320 but part of the issue is why wages are so 0:23:27.320 --> 0:23:32.679 soft in a moment that employment is so full. I 0:23:32.720 --> 0:23:35.840 think that that it's it's a puzzle and we should 0:23:35.880 --> 0:23:39.160 try to fix that. Let's been wonderful. Love to see 0:23:39.160 --> 0:23:41.119 you in New York, in London and thrilled to have 0:23:41.200 --> 0:23:55.160 you heard. You know if you have in Italy. We'll 0:23:55.200 --> 0:23:57.879 touch on Brexit here and we can do that, uh 0:23:57.920 --> 0:24:00.719 with the Baron of gat like Lording Neil joins us 0:24:00.720 --> 0:24:04.359 now Jim O'Neal of Golden Seccesset Management and so many others, 0:24:04.400 --> 0:24:08.760 including his public service to the Conservative governments of his 0:24:09.040 --> 0:24:13.840 United Kingdom. Where is Getley? It is a suburb of Manchester. 0:24:14.760 --> 0:24:18.400 Some people who are listening hopefully in the States may 0:24:18.440 --> 0:24:21.760 have origins there. It's a actually known as the center 0:24:21.800 --> 0:24:25.240 of the universe. It's the center of the universe. It's 0:24:25.280 --> 0:24:29.480 where it's where the cotton industry started from. Is Getley 0:24:30.359 --> 0:24:33.920 is is a suburb about five miles so it's where 0:24:33.960 --> 0:24:37.880 I was raised as a is Getley attached to Brexit? 0:24:38.000 --> 0:24:41.199 Like it seems everyone within a hundred feet Parliament is 0:24:41.920 --> 0:24:46.800 is Getley attached to the comedy at Parliament? No? No? Uh? 0:24:47.680 --> 0:24:52.000 And what what is uh? The so many fascinating social 0:24:52.520 --> 0:24:54.719 angles of it. Yes, you know a lot a lot 0:24:54.760 --> 0:24:57.800