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Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jaily.

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Speaker 1: We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Carl

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Speaker 1: Weinberg joins us now to reframe the growth debate this morning. Carl,

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Speaker 1: do you do you take the entire high frequency economics

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Speaker 1: view and ratchett it down? Where are you now for

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Speaker 1: global growth? In US growth? Well? US growth, We think

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Speaker 1: the U. S economy is doing well enough and domestic

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Speaker 1: demand to outweigh the slow down in world trade, the

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Speaker 1: contraction of world trade that we're actually seeing some numbers. Well,

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Speaker 1: we're talking about world trade being down about half a

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Speaker 1: percent year over year world global exports and that's only

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Speaker 1: happened five times before in the last fifty years. So

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Speaker 1: it's a notable event. US GDP growth around two point

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Speaker 1: to two point three percent, largely driven by domestic demand

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Speaker 1: with exports being weak. Europe dead flat right now, but

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Speaker 1: on the decelerating what's your global number? I was stunned

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Speaker 1: to Davos how people are some of them are framing

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Speaker 1: under three percent global real economic growth, folks, that is unusual,

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Speaker 1: to say the least. Yeah, the the I m F

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Speaker 1: has I think two point nine, and that's a big markdown,

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Speaker 1: but they have a boom going right back up in

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Speaker 1: the next forecast period in right back up to three

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Speaker 1: point three three point four percent, which is still a

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Speaker 1: low number, but not as terrifying as two point nine.

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Speaker 1: And of course what I say is when I every

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Speaker 1: time I read an I m F forecast for an

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Speaker 1: economic recovery, I say to myself, you know, on a

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Speaker 1: basis of what you know, what's going to drive the

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Speaker 1: world economy back? And it's not going to be monetary policy,

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Speaker 1: it's not going to be fiscal policy, So I guess

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Speaker 1: it's just going to be animal spirits. And of course

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Speaker 1: missing from Davos was any explanation at all for the

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Speaker 1: decline in world trade. None. So if you can't tell

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Speaker 1: me why it's happening, and I can't tell you why

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Speaker 1: it's happening, how can you tell me that it's over?

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Speaker 1: So I'm on the gloomy side tom for the world. Well,

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Speaker 1: let's talk about how frati the recovery actually has. Then,

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Speaker 1: column whether something like what we see at the moment.

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Speaker 1: Plank in China can really knock us off course. Well,

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Speaker 1: if it turns into a big thing, it could knock

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Speaker 1: us off course. But when I listened to to Lisa

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Speaker 1: run down her argument, I have to say to her,

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Speaker 1: you know, you know, I don't know you. I don't

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Speaker 1: know anything about this disease. Nobody does. Nobody knows the

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Speaker 1: extent to it, nobody knows how far it's going to go.

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Speaker 1: So we can't happen if it got to be really serious.

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Speaker 1: All right, Or let's look at the changes in uh

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Speaker 1: and that the government has introduced. Okay, so they've extended

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Speaker 1: the holiday period now to February second, so they've shut

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Speaker 1: down the friday after a ten day holiday break where

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Speaker 1: very few people were going to come back to work anyhow,

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Speaker 1: and where a lot of firms weren't going to reopen anyhow,

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Speaker 1: and then a weekend, so we really don't have a

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Speaker 1: big dent to production. And of course, what we've learned

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Speaker 1: in the past is when we have disasters and things

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Speaker 1: like this, not only does the economy snap back quickly

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Speaker 1: in the subsequent quarters, but the loss of output is

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Speaker 1: less than you expect because a lot of the economy

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Speaker 1: continues to to to act, to be active even though

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Speaker 1: people are at work. We make utilities, we buy food,

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Speaker 1: you know, the trains still run, and so forth. In

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Speaker 1: this case, the trains may not run, but the point

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Speaker 1: being that the hit may be smaller than the market

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Speaker 1: is currently pricing in. I say maybe, because maybe tomorrow

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Speaker 1: will have some serious medicine that says, this is the

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Speaker 1: scariest thing since what were you talking about before tom

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Speaker 1: flu epidemic. Maybe we'll get something, but for the moment,

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Speaker 1: we just don't know the extent of it. So I

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Speaker 1: like Lisa's hypothesis that says that people were ready to

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Speaker 1: take profits anyhow this catalyzes it. But I can't make

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Speaker 1: myself jump into the camp that says this is the

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Speaker 1: end of world trade. Now China gets locked down for

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Speaker 1: a month, that's a different story. That's a big hit

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Speaker 1: to the to anyone's sitting around this table saying this

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Speaker 1: is the end of world trade. I think you, folks,

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Speaker 1: is going the right thing. No one around this table

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Speaker 1: is going to pretend to be a doctor over the

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Speaker 1: next several months or for however long this place out.

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Speaker 1: What you focus on is the potential disruption to cities

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Speaker 1: and the measures that the Chinese will take to stop

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Speaker 1: this epidemic from spreading, and what we see so far

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Speaker 1: a major cities effectively shutting down, banning travel. We see

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Speaker 1: holidays being extended, and she pointed out quite rightly, it's

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Speaker 1: the traditional time of the year. Whether that happens anywhere,

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Speaker 1: it might just go on for a little bit longer.

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Speaker 1: Walk us through our audience what they should be focused

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Speaker 1: on in the coming weeks. Not pretending to be a doctor,

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Speaker 1: but looking at the economics of all of this. So

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Speaker 1: let's be an economy. So Wuhan is a city of

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Speaker 1: eleven million people. It's bigger than New York. It's bigger

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Speaker 1: than London, it's bigger than Paris, it's bigger than pretty

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Speaker 1: much any other city except for others in China. But

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Speaker 1: in a country of one point for a billion people,

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Speaker 1: all right, it is a piece of a much larger puzzle, right,

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Speaker 1: Shanghai is a bigger deal. But they're not shutting down,

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Speaker 1: although there are sporadic reports of some companies are not

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Speaker 1: coming back to work. So with Wuhan by itself in Hubei,

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Speaker 1: which is sixty million people, roughly the population of France,

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Speaker 1: still within a one point four billion person econ me,

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Speaker 1: it will make a dent. But will it derail the

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Speaker 1: economy and throw it into a recession. I don't think so.

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Speaker 1: In two thousand three, the stars outbreak caused the estimated

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Speaker 1: decline in the GDP of China about one percent in

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Speaker 1: the one quarter. In one quarter, one percent to cline

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Speaker 1: in GDP, and then it got back the next quarter.

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Speaker 1: If you look at the four quarters from the fourth

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Speaker 1: quarter of two thousand into the third quarter of two

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Speaker 1: thousand and three, there's no discernible deviation of the pattern

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Speaker 1: of GDP from what the season will suggest. To be clear,

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Speaker 1: eight hundred people died. More than that, it was much

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Speaker 1: more virulent than what we are currently experiencing. Of course,

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Speaker 1: we don't know how this is going to involve. If

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Speaker 1: it transpires in the same way, do you think that

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Speaker 1: it could materially throw the global economic recovery? Of course,

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Speaker 1: I'll just be you know, very crass about it. Eight

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Speaker 1: hundred deaths, all right, is not going to throw the

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Speaker 1: world economy off course, all right. It's it's a tragedy

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Speaker 1: for the people involved. But at the end of the day,

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Speaker 1: and I'm not a doctor, I don't play one onto

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Speaker 1: v but you look like it's not how many people die,

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Speaker 1: it's the measures the Chinese take to stop people from

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Speaker 1: dying and shutting down Wuhan is an exceptional and it

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Speaker 1: sounds brutal in the economist perspective. That's what the focus is,

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Speaker 1: right and my focus is that Juhan is a big city,

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Speaker 1: but in the scope of all of China and all

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Speaker 1: of the world, I don't think it's enough to throw

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Speaker 1: the train off the track. Carl Ainberg, thank you so much.

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Speaker 1: With high frequency economics, and you know, Drew Armstrong was

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Speaker 1: just brilliant this morning. With Max Neeson as well. We

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Speaker 1: have trying to bring you perspective on the virus in Wuhan.

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Speaker 1: We've had some wonderful comments from China. China this morning

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Speaker 1: for a news standpoint really shut down with the holidays

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Speaker 1: and all that. So we've gone global Withdrew Armstrong and

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Speaker 1: Macneeson and right now from Geneva, Switzerland are single best

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Speaker 1: World health organization. Expert Tom Millier joins us UH this morning.

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Speaker 1: What are they doing at the World Health Organization today?

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Speaker 1: Not only in Geneva, Tom, it's spread out across their world.

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Speaker 1: What's there to do list in the Geneva Afternoon. Well, Um,

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Speaker 1: the head of the w h OH right now is

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Speaker 1: actually in China and Wuhan at ground zero, UH, meeting

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Speaker 1: with people and uh, I mean showing that she's Uh.

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Speaker 1: This is the top of the agenda right now. The

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Speaker 1: biggest thing is collecting data to be able to map

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Speaker 1: out the spread of the epidemic. What they really need

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Speaker 1: is data not just on when the cases were reported,

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Speaker 1: but data on when the symptoms, the onset of the

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Speaker 1: symptoms started. Uh. And they need more complete data because

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Speaker 1: any change in the number of reported cases or the

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Speaker 1: number of deaths change changes the mortality. Right, do we

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Speaker 1: know do we know the virology of the virus? My experiences,

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Speaker 1: the mutate et cetera. And it's really hard to actually

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Speaker 1: know what you're talking about. Do we have a handle

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Speaker 1: on what the actual virus is? Not exactly there. That's

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Speaker 1: what they're still trying to do because I in order

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Speaker 1: to make any sort of treatment for the virus, they

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Speaker 1: need to understand it more better. Thomas, there's also a

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Speaker 1: question about the reaction in China. One of the most

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Speaker 1: alarming reports that really got up markets in jitters was

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Speaker 1: this idea that China doesn't have enough equipment. Isn't necessarily

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Speaker 1: separating out patients with the coronavirus from other patients in

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Speaker 1: hospitals just because they don't have the space. How effective

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Speaker 1: has the containment process been in China, you know, regardless

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Speaker 1: of the quarantine that's keeping an entire city in their homes. Yeah. Well,

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Speaker 1: there's a lot of criticism about the policy because it

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Speaker 1: could be that it just is too late. Uh. And

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Speaker 1: I mean it's such a draconian policy, uh, keeping fifty

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Speaker 1: million people in the in their places, uh, that it's

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Speaker 1: raising a lot of issue. I mean, there's a lot

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Speaker 1: of issues there. Um. So far they well China is

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Speaker 1: trying to actually build new hospitals as we speak in Wuhan, uh.

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Speaker 1: And so it's really a game of catch up, and

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Speaker 1: and they don't have the facilities that they that they

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Speaker 1: ideally would have at the moment. Thomas, you know better

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Speaker 1: than we do about the w h O. And there

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Speaker 1: is some criticism of the World Health Organization at the

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Speaker 1: moment and their reluctance to declare what we're seeing playing

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Speaker 1: out at China and worldwide at the moment as a

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Speaker 1: public health emergency of international concern. Thomas whole are they're

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Speaker 1: holding off one and two? What would happen if they

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Speaker 1: do make that declaration this week? Well, it's they've said

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Speaker 1: that they might decide. I mean, when they delayed making

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Speaker 1: the decision, they said that they'd probably meet again within

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Speaker 1: the next ten days. The thing is, it's a really

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Speaker 1: political process. The w h O deal better with the

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Speaker 1: scientific side of things, And what they're scared of is

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Speaker 1: that countries, if they declare it UH an international public

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Speaker 1: health emergency, that some countries might enact barriers to travel

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Speaker 1: and trade that are more stringent than necessary. Right now,

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Speaker 1: I'm wondering about the efficacy of other countries response to

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Speaker 1: this virus. In other words, is there any evidence that

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Speaker 1: the spread of it to a number of different nations

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Speaker 1: around the world is actually causing inter country spreading person

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Speaker 1: to person, not within China, but say in Vietnam or

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Speaker 1: so in Korea. Yeah, so far, the evidence is really limited.

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Speaker 1: Of of of the thirty some cases that have been UH,

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Speaker 1: the thirty UH cases reported abroad, almost all of those

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Speaker 1: were actually people who had been in Wuhan, and so

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Speaker 1: so far there really isn't evidence that it's really going

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Speaker 1: person to person outside of China, Tom, Thank you so much.

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Speaker 1: Tom Aline with Bloomberg News in Geneva, Switzerland, with his

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Speaker 1: true focus on the world health organization right now joining

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Speaker 1: us with Society General Kitchus joins us on these strong

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Speaker 1: correlations of the market. Kit, I'm observing that how correlated

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Speaker 1: is this move off a Chinese disease, Chinese virus? It

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Speaker 1: feels pretty correlated. It felt this morning as if it

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Speaker 1: was just a single story stalks down. Um. Yeah, say

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Speaker 1: favoring currency is strong, anything trade China sensitive or oil sensitive?

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Speaker 1: Um week equities moving in the same way. Well, we'll

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Speaker 1: see what happens when your equity market really gets going

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Speaker 1: in Casha this afternoon. But it feels as if it's

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Speaker 1: a knee joke reaction that's not correcting at the moment.

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Speaker 1: Within that the bond market, where we're back to October.

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Speaker 1: Lowe's John you'll know better than me on this in

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Speaker 1: terms of spread dynamics as well. Is there an opportunity

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Speaker 1: in bonds because you've made if you believe in low

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Speaker 1: interest rates, you've made so much of a year's move

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Speaker 1: in a matter of days and weeks. I mean, how

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Speaker 1: do you adjust tactically to the celebration of a year's move.

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Speaker 1: You you remain bullish, but you don't go and invest

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Speaker 1: your entire life savings right in them. Right, there's get Look,

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Speaker 1: I think we'll get ten your note. You are to

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Speaker 1: back down to UM certainly the other side of one

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Speaker 1: and a half percent at some point at the back

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Speaker 1: end of this year. But um, you know, then if

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Speaker 1: you think that we're going to move from you know,

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Speaker 1: it's from I don't know, you know, one on a

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Speaker 1: quarter to one and three quarters instead of one and

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Speaker 1: three quarters to two, then then you know we've got

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Speaker 1: another leg down. But we've done half to move and

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Speaker 1: that's probably the way to think about it. But but

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Speaker 1: it will take evidence in the United States that um,

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Speaker 1: that the economy is is feeling this. Otherwise, you know,

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Speaker 1: we're going to see money continue to go looking for

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Speaker 1: certainly lower rates, lower yields in the sort of in

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Speaker 1: some of some of the markets in the Far East,

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Speaker 1: because growth is going to be definitely impacted. We can

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Speaker 1: speculate how much this might affect the US, but the

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Speaker 1: Chinese economy is going to it's going to feel this

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Speaker 1: for a while. And I think it also probably puts

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Speaker 1: paid to hopes of some people that you might get

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Speaker 1: German government tending yields back in the positive territory or

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Speaker 1: anything like that, that we're going to be stuck in

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Speaker 1: negative territory for months. Let's talk about it, kid, because

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Speaker 1: this is important. The recovery that we have seen very young,

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Speaker 1: very fragile, and we see it in the EFO out

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Speaker 1: of Germany today. German business confidence really not terrific. Just

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Speaker 1: how fragile is that recovery in Europe and is it

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Speaker 1: vulnerable to be knocked off course? But what you see

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Speaker 1: playing gat in China right now? Kid? Yeah, yes, I mean,

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Speaker 1: you know, again at the bare minimum, and we're going

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Speaker 1: to lose a certain amount of time. You know, it

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Speaker 1: could be a short period of time and then things

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Speaker 1: get more respect to normal and the Chinese are more

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Speaker 1: likely to ease monetary policy, more likely East fiscal policy

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Speaker 1: on the back of this over time. But um, the

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Speaker 1: momentum was just trying to shift back towards Germany, getting

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Speaker 1: away from the hits from trade, from Chinese weakness, from

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Speaker 1: from the auto downturn, and from the from the diesel

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Speaker 1: scandal and all of those things. Was trying to feed

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Speaker 1: themselves through the system. It's just going to take longer

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Speaker 1: to get out of that now, and I think that's

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Speaker 1: um that that puts a dampener on on everything. KIT.

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Speaker 1: It's also this whole transpiring of the coronavirus and its

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Speaker 1: spread is putting a damper on the whole weaker dollar story.

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Speaker 1: And we're seeing the dollar the strongest since December ninth,

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Speaker 1: three straight days of strengthening emerging market currencies having a

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Speaker 1: bigger three day decline since November. How much does this

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Speaker 1: potentially torpedo the consensus bet heading into the emerging market

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Speaker 1: currencies would finally would perform in a significant way this year. UM.

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Speaker 1: We we've been nervous about the outlook for emerging market

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Speaker 1: currencies this year because we've got a a federatively gloomy

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Speaker 1: view about how the year is going to progress for

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Speaker 1: the U S economy. Emerging markets to get money really

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Speaker 1: flowing into them need a combination of of of yields

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Speaker 1: seeking so low rate environment plus a kind of the

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Speaker 1: US economy that does okay, it grows something like a

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Speaker 1: consensus at one point eight percent this year. UM. This

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Speaker 1: this sort of ups the anti on the USPS and

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Speaker 1: otherwise emerging markets are going to have a really rough time.

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Speaker 1: If the U. S economy looks as if it's growing

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Speaker 1: significantly more slowly than that as well, as you know,

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Speaker 1: that'll offset any of this kind of flow in. So

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Speaker 1: I think I mean, to me, the jury was out

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Speaker 1: in the sense of the market was taking an optimistic

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Speaker 1: view of the global economic outlook this and that was

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Speaker 1: feeding into a bit of relief free m But I

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Speaker 1: think that's in trouble now. Kids who are boom bust

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Speaker 1: debate at doubles that we are in John and I

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Speaker 1: of course drive us forward in the coming days and

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Speaker 1: weeks here as well into what we see this morning,

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Speaker 1: a two or three percent equity correction yields or they

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Speaker 1: are two yearield one point four four seven zero. Can

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Speaker 1: you hedge now? Is it is it efficacious to sit

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Speaker 1: around a pro room and actually structure hedges where you

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Speaker 1: either take in a premium or you pay out for

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Speaker 1: the cost of doing the hedge. Um. Yes, it seems

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Speaker 1: to me wise to take to take some hedges at

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Speaker 1: this point because risk assets might be correcting today, but

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Speaker 1: they're still pretty pretty expensive. Um. And you know, and

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Speaker 1: in a sense, I mean the part that the high

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Speaker 1: correlations mean that you know, the kind of that the

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Speaker 1: hedge is become almost simpler in the sense that someone's

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Speaker 1: gonna show me what clever hedging looks like in this environment.

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Speaker 1: But I would certainly want to have bonds in my

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Speaker 1: portfolio for this, for this risk, for the same job

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Speaker 1: to one government debton interest rate exposure. UM, I wouldn't

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Speaker 1: want a currency portfolio that had no Japanese yeen in it,

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Speaker 1: even if I've been very frustrated for the whole of

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Speaker 1: January so far, you know, I would want to continue

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Speaker 1: to have those things because um. And at the end

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Speaker 1: of the day, though, you know, the reason that we've

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Speaker 1: kind of feel as if the cycle is less less

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Speaker 1: significant is that the answer to everything is to ease

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Speaker 1: monetary policy even further, and that gets equacy market to

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Speaker 1: stabilize spreads. The stabilize gets defaults and heart of the

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Speaker 1: manager at really low rate, and so we stretched the

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Speaker 1: cycle out, and so the danger then comes back into

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Speaker 1: the danger in those valuations directly and indirectly. John, that

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Speaker 1: was the theme we heard. It is just so easy

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Speaker 1: to cut rates, you know, it's it to be Trumpian,

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Speaker 1: and to cut it gets harder when you start to

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Speaker 1: run out of space, that's for sure. And the ECP

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Speaker 1: has run out of space. Let's talk about Italy, shall

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Speaker 1: we kit ten year Italian bond yields down eighteen basis

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Speaker 1: points and the Euro doing nothing? Why? Um, what the Euro?

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Speaker 1: Once upon a time, Once upon the same we had

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Speaker 1: models where we put BTP bunts breads into into the

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Speaker 1: Euro and so it would have it high. I don't

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Speaker 1: think that that works when the heart of the Euro

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Speaker 1: is that it's much more trade sensitive in the United States,

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Speaker 1: much more. It's more China sensitive the United States. So

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Speaker 1: it's bad news here. So we're we're weighing these two

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Speaker 1: things against each other. Of you know, a piece of

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Speaker 1: news from the Far East that definitely is euro dollar

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Speaker 1: negative against piece of domestic news in Italy that that

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Speaker 1: at least in terms of the bond market reaction is

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Speaker 1: Euro positive. And look at the thirteen basis point falling

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Speaker 1: Greek yields, by the way, as they have a rerating.

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Speaker 1: So um, and those two outweigh each other. So you

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Speaker 1: you you trade, you trade European politics at the momentum

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Speaker 1: in the bond market. Um. And that's that's where that's

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Speaker 1: where you do. In the I think in the currency market,

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Speaker 1: you are short the Euro against again or short the

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Speaker 1: Euro against the Swiss Frank but not you don't you

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Speaker 1: don't know, you don't buy it. I'm fred kid, you

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Speaker 1: thank you so much, greatly appreciate it. With society in general.

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Speaker 1: Why don't you bring it? You know, do you want

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Speaker 1: to get football out of the way first thing? We

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Speaker 1: should probably do that first in work. I imagine that's

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Speaker 1: what he's fired up about. In Shepherds Pantheon macro Economics,

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Speaker 1: founder of Chief Economist, also of Newcastle. I can tell

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Speaker 1: you bre exclusive on this program couple of months back

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Speaker 1: that Ian gave up his season ticket to his beloved

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Speaker 1: Newcastle United, and the latest news coming out of the

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Speaker 1: Wall Street Journal over the weekend that the Saudis are

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Speaker 1: interested in buying his beloved Newcastle United. First reaction in

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Speaker 1: Shepherds and Please, my first direction is out of the

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Speaker 1: frying kind into the fire. Really, you know, we're gonna

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Speaker 1: potentially exchange one terrible owner for another which is backed

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Speaker 1: by a man of shall we say, questionable character. So

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Speaker 1: I'm not thrilled, you know, thrilled. There's a character to this, folks.

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Speaker 1: For American audience, Newcastle, it's it's fun to watch. I

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Speaker 1: don't know what I'm talking not east of the country.

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Speaker 1: Why are they different. Saint James's part is just this

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Speaker 1: phenomenal stadium with this incredible fans, like a Wrigley Field thing.

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Speaker 1: But Ncass United have been a yo yo club over

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Speaker 1: the last ten years or so, and I'm sure em

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Speaker 1: would echo that they dropped down a leave they come

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Speaker 1: back up. But the fans have always filled out the

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Speaker 1: stadium no matter what. In the nineties, almost won the

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Speaker 1: league a couple of times, I think second place in

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Speaker 1: a premiership in the late nineties e and but until

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Speaker 1: this year, as you say, something changed, people like yourself said,

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Speaker 1: we've had enough about people didn't renew the season tickets.

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Speaker 1: They've just had enough of this appalling ownership. So everyone

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Speaker 1: has been rooting for a chain. Just just if you'd

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Speaker 1: given us a list of potential owners, you know I

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Speaker 1: have been some probably wouldn't have been top of the list.

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Speaker 1: It definitely wouldn't have been top of the list. I

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Speaker 1: do have to wonder on a daylight today, I'm sure

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Speaker 1: that that football is getting you excited, but I also

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Speaker 1: think I'm looking right now at the NASDAC and it's

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Speaker 1: poised for its biggest daily decline if it continues nearly

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Speaker 1: down two percent of the year, and we were talking

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Speaker 1: about a one percent decline on Friday. Our economic it's

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Speaker 1: interesting you more than football today or do you feel

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Speaker 1: like today the sort of scare that's going on with

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Speaker 1: the coronavirus doesn't affect the economics complex to the degree

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Speaker 1: that people seem to be implying by the price action. Yeah,

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Speaker 1: I mean this to me is a combination of a

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Speaker 1: fear based sell off and also an excuse to take

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Speaker 1: profits after the run that we've had in the markets

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Speaker 1: over the last few months. So you know, if the

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Speaker 1: market had been flat for the last three months, I

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Speaker 1: suspect the sell off will be rather smaller on the

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Speaker 1: back of the virus story. But you know, we've had

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Speaker 1: a big run up, so this is an opportunity to

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Speaker 1: to take come at, detect and profits and and regroup.

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Speaker 1: So this is not an economic story at all. I

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Speaker 1: mean from an economic perspectives, you know, the US actually

403
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Speaker 1: have just upgraded my US forecasts. I'm I'm feeling a

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Speaker 1: bit more cheerful about substantially appord right where you wanted

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Speaker 1: to go. And of course this ties in whether your

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Speaker 1: colleague free of Beamish as well reframe the Pantheon growth

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Speaker 1: forecast for the United States and then free as work

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Speaker 1: for China. What's your statistic now for the United States. Yeah, well,

409
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Speaker 1: so you know, I've just moved up my number for

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Speaker 1: this year to two percent from one and a half,

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Speaker 1: which which might not sound like a huge increase, but

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Speaker 1: actually two percent is not far off the growth rate

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Speaker 1: that we've seen in the post crash era. We've been

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Speaker 1: a little bit stronger than that, so that you know,

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Speaker 1: I've got some discounting and some hit from the trade war,

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Speaker 1: but most of it I think has been absorbed. And

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Speaker 1: then to your point about you know, a phrase's view

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Speaker 1: about China, you know, eventually we are going to see

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Speaker 1: a turnaround there. You know, you can see it in

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Speaker 1: the p m I s and obviously we get the

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Speaker 1: next manufacturing p m I is out of China later

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Speaker 1: this week. They're certainly not going down anymore. The cash

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Speaker 1: in the unofficial p m I from China shot up

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Speaker 1: in the last few months. We need to see that

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Speaker 1: coming through in the hard data, that's for sure. But

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Speaker 1: you know, you can't look at those China numbers now

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Speaker 1: and say that things are still going down and eventually

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Speaker 1: that that ought to be transmitting to some extent to

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Speaker 1: the rest of the world as well, including the US,

430
00:22:49,359 --> 00:22:51,120
Speaker 1: even though of course, you know, the tariffs are getting

431
00:22:51,160 --> 00:22:53,960
Speaker 1: the way they're they're a barrier to prevent that prevents

432
00:22:54,240 --> 00:22:57,520
Speaker 1: full transmission of China's incipient upturning into the US, but

433
00:22:57,640 --> 00:23:00,359
Speaker 1: they don't, they don't completely stop it. So you know,

434
00:23:00,400 --> 00:23:02,199
Speaker 1: I do think we're probably at the low now for

435
00:23:02,240 --> 00:23:04,480
Speaker 1: the US Business surveyor the I S M and the

436
00:23:04,480 --> 00:23:06,479
Speaker 1: p M I which have been terrible, but I think

437
00:23:06,520 --> 00:23:08,840
Speaker 1: we're probably at the low. And my guess is that

438
00:23:08,880 --> 00:23:10,760
Speaker 1: the consumer is going to keep chugging on and the

439
00:23:10,800 --> 00:23:13,960
Speaker 1: housing markets looking pretty great, so I put my numbers higher.

440
00:23:13,960 --> 00:23:17,200
Speaker 1: And what that means ultimately is that the labor market

441
00:23:17,280 --> 00:23:19,879
Speaker 1: probably continues to tighten. And I'm kind of looking at

442
00:23:19,960 --> 00:23:23,040
Speaker 1: unemployment getting towards three percent by the end of the year,

443
00:23:23,080 --> 00:23:26,040
Speaker 1: which in a normally that would have the FED raising rates,

444
00:23:26,119 --> 00:23:29,560
Speaker 1: but let's narrow that, you say, in the vicinity of

445
00:23:29,680 --> 00:23:33,720
Speaker 1: three point zero percent, Yeah, by the end of the year, Yeah, yeah,

446
00:23:34,119 --> 00:23:37,800
Speaker 1: which would be the lowest mid Well yeah, I'm going

447
00:23:37,880 --> 00:23:40,159
Speaker 1: to say. Got back to Eisenharg J and I literally

448
00:23:40,200 --> 00:23:44,400
Speaker 1: can't frame that the FED is consistently underestimated how low

449
00:23:44,440 --> 00:23:49,080
Speaker 1: and unemployment could go without inflation or wages accelerating considerably,

450
00:23:49,640 --> 00:23:52,040
Speaker 1: and in if you point out the reaction function has shifted,

451
00:23:52,160 --> 00:23:54,159
Speaker 1: we could see a test of a two handle and

452
00:23:54,200 --> 00:23:57,960
Speaker 1: a FED that doesn't even bludge. Well certainly not this year,

453
00:23:58,000 --> 00:23:59,360
Speaker 1: that's for sure. I mean, I think what they would

454
00:23:59,400 --> 00:24:01,600
Speaker 1: like to do is is just carry on the way

455
00:24:01,600 --> 00:24:03,199
Speaker 1: they're said up now, which is to say we need

456
00:24:03,240 --> 00:24:05,840
Speaker 1: a material change in the outlook to do anything, and

457
00:24:05,840 --> 00:24:08,159
Speaker 1: then go away, you know, from from June and come

458
00:24:08,200 --> 00:24:10,520
Speaker 1: back in December. But my point is that they might

459
00:24:10,560 --> 00:24:13,040
Speaker 1: come back in December after the election, which they don't

460
00:24:13,040 --> 00:24:14,919
Speaker 1: want to be involved in, come back after the election

461
00:24:14,960 --> 00:24:17,560
Speaker 1: and say, well, hey, actually three percent unemployment. You know

462
00:24:17,600 --> 00:24:20,760
Speaker 1: that that's nobody's idea of sustainable, especially if it still

463
00:24:20,760 --> 00:24:23,679
Speaker 1: looks like it might go even further down, which you know,

464
00:24:23,760 --> 00:24:26,280
Speaker 1: three months ago look very unlikely because the business surveys

465
00:24:26,440 --> 00:24:29,440
Speaker 1: all the employment numbers that weakened substantially in the surveys,

466
00:24:29,800 --> 00:24:31,959
Speaker 1: and the hard day to haven't followed, and so it

467
00:24:31,960 --> 00:24:33,960
Speaker 1: looks to me like business is kind of I don't

468
00:24:33,960 --> 00:24:36,320
Speaker 1: know that they overestimated how bad the hit was going

469
00:24:36,359 --> 00:24:38,640
Speaker 1: to be, and actually they all growth to me, maybe

470
00:24:38,640 --> 00:24:42,200
Speaker 1: you can hang around one, in which case an employment

471
00:24:42,240 --> 00:24:45,920
Speaker 1: will go down. Your optimistic view of the U S

472
00:24:45,960 --> 00:24:48,600
Speaker 1: economy as a direct odds of what we're seeing today

473
00:24:48,600 --> 00:24:50,679
Speaker 1: in the bond market, with yield curve flattening to the

474
00:24:50,720 --> 00:24:54,000
Speaker 1: most the narrowest of the year, and you're seeing yields

475
00:24:54,040 --> 00:24:57,360
Speaker 1: steadily lower. What is the market getting wrong that you're

476
00:24:57,400 --> 00:25:00,480
Speaker 1: getting right? Oh? You know, I don't think the market

477
00:25:00,480 --> 00:25:02,119
Speaker 1: got anything wrong today. You know this this is a

478
00:25:02,160 --> 00:25:04,520
Speaker 1: fair sell off inequities, and that money's got to go somewhere,

479
00:25:04,520 --> 00:25:06,520
Speaker 1: so you know, it just always goes into treasuries in

480
00:25:06,520 --> 00:25:09,800
Speaker 1: this environment. We simply don't know how bad this coronavirus

481
00:25:09,800 --> 00:25:12,199
Speaker 1: thing is going to be. My my, my gut feeling,

482
00:25:12,280 --> 00:25:14,840
Speaker 1: my my guests, I mean, you know, I'm not an epidemiologist,

483
00:25:14,920 --> 00:25:17,080
Speaker 1: but my guess from what I've been reading is that

484
00:25:17,119 --> 00:25:19,119
Speaker 1: actually this isn't going to be as as bad as

485
00:25:19,160 --> 00:25:22,560
Speaker 1: stars was back fifteen years ago or so um, and

486
00:25:22,600 --> 00:25:25,359
Speaker 1: that we're going to see a substantial rebound in stocks

487
00:25:25,400 --> 00:25:27,240
Speaker 1: within the next couple of weeks, and that, of course,

488
00:25:27,280 --> 00:25:29,480
Speaker 1: I think we'll then drive treasury eels back up again.

489
00:25:29,880 --> 00:25:31,280
Speaker 1: If I thought heels were going to stay down here

490
00:25:31,280 --> 00:25:32,520
Speaker 1: and it was going to be a much worse thing

491
00:25:32,560 --> 00:25:35,359
Speaker 1: than to be a different story. But I'm pretty optimistic.

492
00:25:35,960 --> 00:25:38,919
Speaker 1: What does the investment dynamic look like? You know, Johnny,

493
00:25:38,960 --> 00:25:42,280
Speaker 1: I I think back to Davos and it really wasn't

494
00:25:42,320 --> 00:25:46,720
Speaker 1: discussed all that much. Ian Shepherdson, you know, Okay, there's

495
00:25:46,720 --> 00:25:52,840
Speaker 1: a pickup. Does investment pick up? Yeah? Well, some of

496
00:25:52,880 --> 00:25:55,400
Speaker 1: it does. Um. You know, the residential component I think

497
00:25:55,720 --> 00:25:57,920
Speaker 1: is going to grow double digit um. You know, for

498
00:25:57,920 --> 00:26:00,840
Speaker 1: for a while. It's the business component that's that's likely

499
00:26:00,880 --> 00:26:02,960
Speaker 1: to continue to be the drag. But I think that

500
00:26:02,880 --> 00:26:05,000
Speaker 1: the real point here is that it's not anything like

501
00:26:05,080 --> 00:26:07,359
Speaker 1: as big a drag as it looked like it was

502
00:26:07,400 --> 00:26:09,040
Speaker 1: going to be a few months ago. So again, like

503
00:26:09,119 --> 00:26:10,920
Speaker 1: the peril numbers have been posed in the surveys have

504
00:26:11,000 --> 00:26:14,440
Speaker 1: suggested so so of the Capex orders numbers, they're not great.

505
00:26:14,680 --> 00:26:16,320
Speaker 1: You know, let's be clear, they're not great. But the

506
00:26:16,359 --> 00:26:18,400
Speaker 1: surveys back in the fall, we're telling us we should

507
00:26:18,440 --> 00:26:21,880
Speaker 1: expect the mouthdown and that just really hasn't happened. So,

508
00:26:22,080 --> 00:26:24,399
Speaker 1: you know, from a from a market perspective, you had

509
00:26:24,400 --> 00:26:27,200
Speaker 1: these bad things that haven't happened. You've had the FED

510
00:26:27,400 --> 00:26:29,760
Speaker 1: easing rates, You've got the FED buying sixty billion of

511
00:26:29,760 --> 00:26:33,080
Speaker 1: treasury bills every month through until the second quarter of

512
00:26:33,119 --> 00:26:35,840
Speaker 1: the earliest UM. That's a lot of liquidity and a

513
00:26:35,840 --> 00:26:39,080
Speaker 1: lot of relatively good news on the macro front. So

514
00:26:39,280 --> 00:26:41,080
Speaker 1: you know, as I said, once the once there's some

515
00:26:41,160 --> 00:26:44,639
Speaker 1: clarity on the coronavirus story, I think the market rebounds substantially.

516
00:26:44,840 --> 00:26:47,359
Speaker 1: I don't really see it peaking until the middle of

517
00:26:47,400 --> 00:26:49,200
Speaker 1: the year, at which point I think the FED will

518
00:26:49,240 --> 00:26:52,399
Speaker 1: probably stop their build purchases. In Shepherdson, thank you so

519
00:26:52,440 --> 00:26:56,240
Speaker 1: much for being with us in Shepherdson Pantheon macroeconomics founder

520
00:26:56,359 --> 00:27:10,760
Speaker 1: and she's economist. Right now into Iowa into the start

521
00:27:10,760 --> 00:27:12,639
Speaker 1: of the political season, it's good to speak to the

522
00:27:12,720 --> 00:27:16,080
Speaker 1: gentleman that was a former economic advisor to Vice President

523
00:27:16,119 --> 00:27:20,080
Speaker 1: by Jared Bernstein is someone the conservatives read to get

524
00:27:20,080 --> 00:27:24,520
Speaker 1: an authoritative view, a more balanced view on liberal and

525
00:27:24,640 --> 00:27:28,040
Speaker 1: conservative economics, and of course he is on the edge

526
00:27:28,040 --> 00:27:33,360
Speaker 1: of legendary in UH Washington, Jared, what I find so interesting,

527
00:27:33,359 --> 00:27:36,320
Speaker 1: and this was a huge topic in Davos, is can

528
00:27:36,359 --> 00:27:39,959
Speaker 1: the Democrats move to the middle. Do you perceive there

529
00:27:39,960 --> 00:27:44,359
Speaker 1: will be a shift at some point where Democratic party

530
00:27:44,440 --> 00:27:50,199
Speaker 1: economics moves over to the middle. I think that the

531
00:27:50,240 --> 00:27:53,760
Speaker 1: middle itself has moved. But if you grant that, then

532
00:27:53,880 --> 00:27:56,399
Speaker 1: I think the answer is yes. I think the middle

533
00:27:56,480 --> 00:27:59,680
Speaker 1: today is not the same middle it was even ten

534
00:28:00,040 --> 00:28:05,200
Speaker 1: years ago. Mainstream Democrats like Joe Biden or Hillary Clinton, Uh,

535
00:28:05,240 --> 00:28:09,200
Speaker 1: you know, Amy klobaschar Pete Boudha judge, they feel differently

536
00:28:09,240 --> 00:28:14,640
Speaker 1: about things like trade agreements, fiscal policy, UH, inequality, debt,

537
00:28:14,720 --> 00:28:19,040
Speaker 1: and deficits than they did uh ten or years ago. However,

538
00:28:19,359 --> 00:28:22,200
Speaker 1: the difference between them and the and the more UH

539
00:28:22,640 --> 00:28:25,320
Speaker 1: liberal branch is that they believe it's going to take

540
00:28:25,400 --> 00:28:29,480
Speaker 1: incremental policies to get there. You can't leap frog, you

541
00:28:29,520 --> 00:28:32,600
Speaker 1: know the reality. I think it's where they're coming from. So, Jared,

542
00:28:32,600 --> 00:28:35,199
Speaker 1: how do you think the Democrats, whoever the candidate is,

543
00:28:35,280 --> 00:28:41,040
Speaker 1: will run against the Trump economy? That is a super

544
00:28:41,480 --> 00:28:44,400
Speaker 1: big challenge, and the Trump economy will unquestionably be a

545
00:28:44,480 --> 00:28:47,920
Speaker 1: tale when who are the president? Uh, they'll run against

546
00:28:48,000 --> 00:28:52,720
Speaker 1: it by pointing out that the Trump economy, UH, its

547
00:28:52,760 --> 00:28:56,440
Speaker 1: benefits are highly unequally distributed. Uh. There are people in

548
00:28:56,560 --> 00:28:59,440
Speaker 1: places who've been left behind. Even now, in our record

549
00:28:59,560 --> 00:29:03,280
Speaker 1: longest mansion. Of course, the manufacturing sector and blue collar

550
00:29:03,320 --> 00:29:06,760
Speaker 1: workers there in folks Trump said he would directly help

551
00:29:06,840 --> 00:29:10,720
Speaker 1: has has really performed quite badly, in no small part

552
00:29:11,000 --> 00:29:12,959
Speaker 1: as a function of the trade war, which has Trump's

553
00:29:13,000 --> 00:29:15,240
Speaker 1: fingerprints all over it. So we'll make a big distinction

554
00:29:15,320 --> 00:29:21,200
Speaker 1: between macro and micro. So, speaking of that trade deal,

555
00:29:21,280 --> 00:29:23,680
Speaker 1: the Phase one trade deals, you know sent you in

556
00:29:23,680 --> 00:29:27,320
Speaker 1: our rear view mirror here. Given given us some perspective here,

557
00:29:27,360 --> 00:29:30,920
Speaker 1: how would you view and characterize the Phase one trade deal.

558
00:29:32,800 --> 00:29:36,040
Speaker 1: I thought it was a big nothing burger, pretty undercooked

559
00:29:36,040 --> 00:29:41,920
Speaker 1: one at that. I don't really believe that the the

560
00:29:42,280 --> 00:29:45,600
Speaker 1: that the Chinese is going to comply in terms of

561
00:29:45,640 --> 00:29:49,600
Speaker 1: what it's going to purchase. I think the enforcement mechanisms

562
00:29:49,640 --> 00:29:52,760
Speaker 1: are very clugy and complex. The fact that they did

563
00:29:52,800 --> 00:29:56,520
Speaker 1: nothing on currency, uh, seems like a big strike against it.

564
00:29:56,720 --> 00:29:58,880
Speaker 1: So I just don't think there's much there. And I

565
00:29:58,920 --> 00:30:01,840
Speaker 1: suspect that reality wolf like then and I think market

566
00:30:01,960 --> 00:30:05,000
Speaker 1: have have been partially reflected that as well. Jared, you've

567
00:30:05,000 --> 00:30:07,360
Speaker 1: stayed away from the politics. You've always written just a

568
00:30:07,400 --> 00:30:10,600
Speaker 1: straight economics and it's it's an economics with great respect

569
00:30:10,680 --> 00:30:13,960
Speaker 1: for labor and for what I'm gonna call the tradition

570
00:30:14,000 --> 00:30:17,800
Speaker 1: of democratic politics. The Atlantic has been on fire, and

571
00:30:17,840 --> 00:30:20,640
Speaker 1: they had a wonderful article a few days ago on

572
00:30:20,720 --> 00:30:23,720
Speaker 1: the educated elite of the Democratic Party and they've left

573
00:30:23,800 --> 00:30:27,320
Speaker 1: touch with how they're gonna get elected across a broad America.

574
00:30:27,680 --> 00:30:32,960
Speaker 1: And then Derrick Thompson writing in The Atlantic boomers have socialism?

575
00:30:33,040 --> 00:30:36,600
Speaker 1: Why not millennials. This is a really really interesting article

576
00:30:37,400 --> 00:30:39,760
Speaker 1: on the left. I say, this is great respect heared.

577
00:30:40,320 --> 00:30:44,120
Speaker 1: Can the Democratic Party get comfortable with the senator from Vermont?

578
00:30:46,760 --> 00:30:49,920
Speaker 1: You know, it's a great question. And I was a

579
00:30:49,960 --> 00:30:53,000
Speaker 1: friend of mine was pointing out just how well Bernie

580
00:30:53,000 --> 00:30:57,560
Speaker 1: Sanders did in He won fifty percent in Iowa, he

581
00:30:57,560 --> 00:31:01,080
Speaker 1: won six in New Hampshire. Obviously that's the next door

582
00:31:01,080 --> 00:31:05,560
Speaker 1: neighbor of his um. He's actually not uh posting those

583
00:31:05,640 --> 00:31:08,680
Speaker 1: kinds of numbers now. But it's a bigger field, so

584
00:31:08,760 --> 00:31:12,520
Speaker 1: I think it's an open question. My kind of working

585
00:31:12,640 --> 00:31:16,720
Speaker 1: hypothesis is that one of the problems a lot of Democrats,

586
00:31:16,800 --> 00:31:19,120
Speaker 1: especially the folks you're talking about, faces that we live

587
00:31:19,160 --> 00:31:22,600
Speaker 1: on Twitter and the Twitter verse is just a non

588
00:31:22,880 --> 00:31:26,920
Speaker 1: real kind of atmosphere where I think where democratic politics are.

589
00:31:26,960 --> 00:31:30,520
Speaker 1: I think the country even primary voters are more moderate

590
00:31:30,640 --> 00:31:34,640
Speaker 1: than you get if you just hung around social media.

591
00:31:34,880 --> 00:31:38,680
Speaker 1: So are they moderate to the point where when Elizabeth

592
00:31:38,720 --> 00:31:41,920
Speaker 1: Sanders or Bernie Sanders talks about Elizabeth Warren and Bernie

593
00:31:41,960 --> 00:31:45,960
Speaker 1: Sanders talks about, uh, you know, kind of universal healthcare

594
00:31:46,040 --> 00:31:48,560
Speaker 1: medicare for all, I mean, did they do you think

595
00:31:48,560 --> 00:31:50,680
Speaker 1: the electric is really ready for that? And maybe the

596
00:31:50,680 --> 00:31:55,280
Speaker 1: economics of that. I think the electorate is ready for

597
00:31:55,360 --> 00:31:58,160
Speaker 1: that and ready for universal coverage. I think the difference

598
00:31:58,280 --> 00:32:01,480
Speaker 1: is how fast the electorate us to go there. So

599
00:32:01,600 --> 00:32:03,440
Speaker 1: people get spooked when you tell them they're going to

600
00:32:03,560 --> 00:32:07,680
Speaker 1: lose their employer coverage, and yet people really like the

601
00:32:07,720 --> 00:32:11,120
Speaker 1: idea of universal coverage and a much broader government role.

602
00:32:11,480 --> 00:32:14,440
Speaker 1: So I think where uh, some of the more moderate

603
00:32:14,480 --> 00:32:17,600
Speaker 1: paths resonate more at least with me, is not in

604
00:32:17,840 --> 00:32:20,360
Speaker 1: where they're ultimately going, but in the speed in which

605
00:32:20,400 --> 00:32:23,440
Speaker 1: they get to get there. I'm not sure that even

606
00:32:23,440 --> 00:32:26,600
Speaker 1: the Democratic electorate, even the primer, believe you can leap

607
00:32:26,680 --> 00:32:29,000
Speaker 1: fraud from where we are to a system that's very

608
00:32:29,040 --> 00:32:31,880
Speaker 1: different quickly, and that a more incremental approach may be

609
00:32:32,000 --> 00:32:35,160
Speaker 1: more realistic. Jared Bernstein, thank you so much. Thrilled to

610
00:32:35,200 --> 00:32:38,160
Speaker 1: have him on today, Mr Bernstein, of course writing off

611
00:32:38,160 --> 00:32:40,240
Speaker 1: and you see him in the Washington Post, particularly writing

612
00:32:40,320 --> 00:32:43,040
Speaker 1: up with Dean Baker, Senior Fellow at the Center for

613
00:32:43,080 --> 00:32:47,240
Speaker 1: Budget and Policy Administration. Of course, working with Vice President

614
00:32:47,240 --> 00:32:52,120
Speaker 1: Biden a number of years. They go Thanks for listening

615
00:32:52,160 --> 00:32:56,720
Speaker 1: to the Bloomberg Surveillance podcast. Subscribe and listen to interviews

616
00:32:56,760 --> 00:33:01,360
Speaker 1: on Apple Podcasts, SoundCloud, or which for a podcast platform

617
00:33:01,480 --> 00:33:05,760
Speaker 1: you prefer. I'm on Twitter at Tom Keane before the podcast.

618
00:33:05,800 --> 00:33:09,320
Speaker 1: You can always catch us worldwide. I'm Bloomberg Radio