WEBVTT - Surveillance: ECB Restarts Quantitative Easing 0:00:02.600 --> 0:00:13.040 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane 0:00:13.480 --> 0:00:17.560 jay Ley. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:28.400 Bloomberg dot Com and of course on the Bloomberg. Well, 0:00:28.440 --> 0:00:30.680 I think the focus should be today as on rights. 0:00:30.680 --> 0:00:32.599 How low are they going to take rights? Do they 0:00:32.640 --> 0:00:35.440 introduced tearing? And how will the markets respond to the 0:00:35.479 --> 0:00:38.479 prospect of much lower interest rates at the c B. 0:00:38.760 --> 0:00:40.519 We've got the right guest to get the start at 0:00:40.520 --> 0:00:43.640 all that you bring in, Joyce Chang. But John the 0:00:43.760 --> 0:00:46.479 zero hedge chart last night, which I made up years ago. 0:00:46.560 --> 0:00:49.919 What I've forgotten about b double A corporates, the kind 0:00:49.920 --> 0:00:51.880 of stuff you follow on the real yield see it 0:00:52.159 --> 0:00:57.640 one PM Friday's Bloomberg Television Less the SMP dividend we 0:00:57.760 --> 0:01:02.200 are over two standard d creations low and how those 0:01:02.280 --> 0:01:07.360 rates have come in versus a stock dividend so usual time, 0:01:07.600 --> 0:01:10.640 these are the bottom of the investment great stack. There 0:01:10.640 --> 0:01:11.920 the credits that you're looking at, and a lot of 0:01:11.959 --> 0:01:14.039 people have been worried about them because there's been a huge, 0:01:14.200 --> 0:01:16.720 huge amount of debt that's been issued by some of 0:01:16.760 --> 0:01:19.160 those companies, but actually they've held up pretty well through 0:01:20.880 --> 0:01:23.640 the dynamics here into this dragon. Can I say this 0:01:23.720 --> 0:01:26.160 is the biggest ECB meeting ever? I think I can say. 0:01:26.240 --> 0:01:27.560 I think you can say it's the biggest one so 0:01:27.600 --> 0:01:29.640 far this year. I don't think you can say it's 0:01:29.640 --> 0:01:31.200 the biggest ever, but I think it's the biggest so far. 0:01:32.959 --> 0:01:35.600 Joyce chaying with us now. JP Morgan Securities Global Research 0:01:35.640 --> 0:01:37.480 Chair Joyce is great to see you. Let's talk about 0:01:37.520 --> 0:01:40.280 the base case just quickly. We survey the economist here 0:01:40.280 --> 0:01:44.360 at Bloomberg. Of them expect hui. The median forecast seems 0:01:44.360 --> 0:01:46.440 to be to drop the depot rate from negative forty 0:01:46.440 --> 0:01:49.200 to negative fifty and maybe you go again in December. 0:01:49.480 --> 0:01:51.360 What are the team at JP Morgan looking for? So 0:01:51.400 --> 0:01:53.800 we are looking for ten basis points, so we agree 0:01:53.880 --> 0:01:56.480 with where the market it is right now. I mean 0:01:56.480 --> 0:01:59.240 more importantly, what we're looking at is what's the forward guidance. 0:01:59.240 --> 0:02:01.360 Are they really going to push out the communication to 0:02:01.680 --> 0:02:04.960 the end of before they would actually um and and 0:02:05.000 --> 0:02:07.640 be ready to move sooner if they needed to um 0:02:07.840 --> 0:02:10.720 you know, bring rates down further. And it's the tearing 0:02:10.760 --> 0:02:13.080 debate what that means for the banks. I mean, how 0:02:13.120 --> 0:02:16.760 will this impact bank income and bank profitability? So we 0:02:16.800 --> 0:02:19.120 think it's ten basis points. We think it's thirty billion 0:02:19.440 --> 0:02:22.760 euros on the QUI for another nine months right now. 0:02:22.760 --> 0:02:24.760 I think there is some space where the market could 0:02:24.800 --> 0:02:27.280 be disappointed. But you know, it's a transition period, so 0:02:27.520 --> 0:02:31.320 I don't think you can necessarily you move as aggressively 0:02:31.440 --> 0:02:34.120 at this point as what the markets may be expecting 0:02:34.160 --> 0:02:36.919 from some corners. I've spoken to money market participants who 0:02:36.960 --> 0:02:40.240 believe the key element of today's package is what happens 0:02:40.240 --> 0:02:42.520 with tearing now. The ECB in the official that are 0:02:42.520 --> 0:02:44.280 out there seemed to be focused on QI, but for 0:02:44.360 --> 0:02:47.640 market participants, in the speak that I speak to the 0:02:47.639 --> 0:02:50.840 bank income, the bank profitability, and is there a way 0:02:50.880 --> 0:02:53.200 basically not to penalize the bank so much for a 0:02:53.240 --> 0:02:55.080 negative interest rate? So I think the market will look 0:02:55.120 --> 0:02:57.120 at that and they look at the language. I'm tearing. 0:02:57.480 --> 0:03:01.000 It's over the Boston Red Sox because having a bad morning. 0:03:01.280 --> 0:03:04.320 Good morning with the red socks, you're always having a 0:03:04.360 --> 0:03:07.359 bad morning. Great year last year, yeah, okay, it was 0:03:07.400 --> 0:03:10.240 a good six months. I still can't believe we won 0:03:10.919 --> 0:03:14.800 I'm gonna I've just spoken before Kean Abohussin to me, 0:03:14.919 --> 0:03:18.080 he's your most important person at JP Morgan, your European 0:03:18.080 --> 0:03:23.520 bank analyst has to synthesize this for commercial banking in Europe. 0:03:24.280 --> 0:03:28.760 This meeting can't be good for the profitability of European banks, 0:03:28.800 --> 0:03:31.400 can it? Well? I think those are the longer term questions, 0:03:31.400 --> 0:03:33.080 and we've been getting a lot of these types of 0:03:33.080 --> 0:03:35.080 relative value questions. How are you looking at the health 0:03:35.080 --> 0:03:38.240 of US banks versus European banks? So that's why the 0:03:38.280 --> 0:03:41.160 cheering is really where the focus is from many of 0:03:41.160 --> 0:03:43.560 the market participants to really take a look at bank income. 0:03:43.600 --> 0:03:45.880 How's bankin come going to be impacted? Joyce the thing 0:03:45.960 --> 0:03:47.960 I struggle with today for the banks in Europe and 0:03:48.360 --> 0:03:50.320 for me, as for many people I know. Listen to 0:03:50.320 --> 0:03:52.480 this program, you'll be looking at s x seven E, 0:03:52.640 --> 0:03:55.320 which is the euro banks on the Bloomberg terminal, how 0:03:55.320 --> 0:03:57.440 they respond to the package that gets delivered today. If 0:03:57.440 --> 0:04:00.240 we do indeed get the full package in the short term, 0:04:00.280 --> 0:04:02.560 I can see how tearing helps, but it won't be 0:04:02.600 --> 0:04:05.080 too long before people start to think about hang on 0:04:05.120 --> 0:04:07.240 a minute, you start to offset the pain a little 0:04:07.240 --> 0:04:09.839 bit for some of these banks. But with tearing, you've 0:04:09.880 --> 0:04:12.800 just opened up a whole new range of possibilities for 0:04:12.880 --> 0:04:14.800 how low interest rates of the e c B can 0:04:14.880 --> 0:04:17.520 go very quickly. We could be talking about negative suffer 0:04:17.640 --> 0:04:20.360 is seventy five basis points, then negative one percent. We 0:04:20.440 --> 0:04:22.640 won't care about tearing in that context, will just be 0:04:22.680 --> 0:04:24.880 looking at a rate that is going lower and lower 0:04:24.880 --> 0:04:27.440 at the e c B. How important is it to 0:04:27.560 --> 0:04:29.479 grapple with that issue right now? How can you have 0:04:29.520 --> 0:04:31.520 any conviction on what Eurozone banks will be of the 0:04:31.600 --> 0:04:35.320 direction of travel ultimately is lower interest rates? No? I 0:04:35.400 --> 0:04:38.400 think that is absolutely Um. You know the case. Everybody 0:04:38.440 --> 0:04:41.280 is looking at six now of our euro index as 0:04:41.279 --> 0:04:44.800 a negative yield on it, and um a debate on 0:04:44.880 --> 0:04:47.440 whether the U s could go to zero interest rates 0:04:47.440 --> 0:04:49.760 eventually the China goes to zero interest rates. Nobody sees 0:04:49.800 --> 0:04:51.720 you coming out of this very quickly. And I think 0:04:51.760 --> 0:04:53.880 the discussion is going to turn to growth in Europe, 0:04:53.880 --> 0:04:56.560 not just the bank profitability, but are we seeing your 0:04:56.640 --> 0:05:00.360 technical recession? Joyce, I mean, everybody here's kind of nancy 0:05:00.400 --> 0:05:02.840 mathematical knowledge of this. I love what Gina smile like 0:05:02.880 --> 0:05:04.760 digging in the New York Times today with the upside 0:05:04.760 --> 0:05:07.800 down headline for a world turned upside down by negative 0:05:07.880 --> 0:05:12.200 rates on our listeners are listening to John Faro talk 0:05:12.240 --> 0:05:16.360 about what John negatives? Did you say, Well, potentially, I'm 0:05:16.400 --> 0:05:18.640 just looking at Switzerland at the moment they have tearing. 0:05:18.760 --> 0:05:21.560 That's what rights are, Okay, So we get the German tenure. 0:05:21.720 --> 0:05:24.479 Excuse me, the German two year to a negative one percent. 0:05:25.839 --> 0:05:29.720 That's not healthy, is it? It's not healthy? And I 0:05:29.720 --> 0:05:32.320 think you're going to see debates go on all the 0:05:32.320 --> 0:05:34.440 central banks. People will look at Swiss National Bank, what 0:05:34.480 --> 0:05:36.280 are they going to do? You see six out of 0:05:36.320 --> 0:05:38.880 seventeen expecting a rate cut, But is that going to 0:05:38.920 --> 0:05:42.159 actually move more aggressively as well? But there's also going 0:05:42.200 --> 0:05:44.160 to be you look at what PBOC is doing, look 0:05:44.200 --> 0:05:46.159 at what Brazil is doing. I mean we've got twenty 0:05:46.160 --> 0:05:48.920 out of twenty two central banks that are easing right now. 0:05:49.240 --> 0:05:53.839 So you do have synchronized but into John and below 0:05:54.000 --> 0:05:58.320 the zero bound, it's not I think for money market 0:05:58.360 --> 0:06:00.880 bight sessments today they hope that if DCB moves, they 0:06:00.920 --> 0:06:02.800 only go by ten basis points. No one wants to 0:06:02.800 --> 0:06:04.760 sing more than that. A lot of people are starting 0:06:04.800 --> 0:06:06.920 to think about this concept, Joyce, of the reversal rate 0:06:06.920 --> 0:06:08.560 and I would love for you to speak to that 0:06:08.600 --> 0:06:10.760 for us. Are we at the point in Europe right 0:06:10.839 --> 0:06:15.120 now where rate cuts are viewed by market participants as 0:06:15.240 --> 0:06:19.200 negative that could lead to potentially tie to financial conditions, 0:06:19.200 --> 0:06:22.719 to have adverse reactions by market participants and therefore negative 0:06:22.760 --> 0:06:26.320 responses never negative reactions in the broader economy. Well, we 0:06:26.360 --> 0:06:28.640 agree that ten basis points is really what the market 0:06:28.720 --> 0:06:30.800 is expecting to If you did something more aggressive, that 0:06:30.880 --> 0:06:32.760 might send a very different signal. I think what the 0:06:32.800 --> 0:06:34.520 market is really looking for is as you have these 0:06:34.600 --> 0:06:36.760 leadership changes come in your are you going to see 0:06:36.800 --> 0:06:42.000 more focused on fiscal policy? Um and um affected Madame 0:06:42.040 --> 0:06:45.360 Regard trots in and says we need more fiscal policy. 0:06:45.480 --> 0:06:48.680 That's the easy part. Then you have to affect more 0:06:48.760 --> 0:06:52.119 fiscal policy. Well, you need to see what happens around 0:06:52.160 --> 0:06:54.840 Germany on that debate. That's really the key. And I 0:06:55.200 --> 0:06:57.520 think you know the question one has is whether the 0:06:57.560 --> 0:07:00.960 growth numbers are going to come back. We're looking at 0:07:00.960 --> 0:07:03.080 p m i's now that are at two thousand and 0:07:03.120 --> 0:07:07.000 twelve levels on manufacturing, so there's a lot more concern 0:07:07.520 --> 0:07:09.640 on the growth. Are we this morning, are we at 0:07:09.640 --> 0:07:13.120 a point of what Mr Diamond would call macro prudential 0:07:13.240 --> 0:07:16.600 risks or John Lipsky I think the former US force 0:07:16.640 --> 0:07:18.280 at the I M F. Are we at a point 0:07:18.760 --> 0:07:22.160 where Mr drog has to look at the broader, summed 0:07:22.440 --> 0:07:26.840 risks and discrete risks of each European story. I don't 0:07:26.880 --> 0:07:28.880 think that we're at this point yet. I mean, we're 0:07:28.920 --> 0:07:32.040 not at a point where we did the Eurozone crisis 0:07:32.040 --> 0:07:34.280 at all, but we are at a real inflection point 0:07:34.360 --> 0:07:37.800 about the effectiveness of the policy tools, how many policy 0:07:37.840 --> 0:07:40.240 tools are remaining, and where are we at this late 0:07:40.280 --> 0:07:42.600 cycle on the growth outlook? And I think that the 0:07:42.600 --> 0:07:45.680 focus will go back to the growth outlook. And you 0:07:45.680 --> 0:07:48.120 know we have now a number of major economies going 0:07:48.160 --> 0:07:50.360 into recession where the US, even at one and a 0:07:50.400 --> 0:07:53.240 half percent grow than the three quarters is the best 0:07:53.240 --> 0:07:57.280 growth outlook in the developed world. Thank you to all 0:07:57.320 --> 0:08:00.000 your team for particularly with Jan Lewis. Would they really 0:08:00.080 --> 0:08:03.960 the essay of the summer in our world of economics, 0:08:04.000 --> 0:08:22.400 finance and invested. You have Alberto Gallo on the phone. 0:08:22.480 --> 0:08:26.640 It's important to go to Mr gall Alberto, good morning 0:08:26.760 --> 0:08:29.400 and thank you again to our economics team in Frankford 0:08:29.440 --> 0:08:33.719 for their support in this. Alberto, this is absolutely historic, 0:08:34.000 --> 0:08:38.959 absolutely original. Is this Jean Claude Triche's e c B. 0:08:39.840 --> 0:08:44.840 I think that what we're seeing here is a complete 0:08:46.200 --> 0:08:50.120 resignation to the fact that UM by dvs NG and 0:08:50.200 --> 0:08:52.880 negative rates are going to stay with us forever, for 0:08:52.920 --> 0:08:56.360 a very very long time. UM the twenty billion a 0:08:56.440 --> 0:09:00.320 month is UM an open ended after purchase program, so 0:09:01.120 --> 0:09:05.360 UM it is essentially the Quey infinity world that we wear. 0:09:05.679 --> 0:09:10.680 I agree, yeah, Alberto, this is so important, the physics 0:09:10.679 --> 0:09:14.680 of bio draggy, the mathematical physics that you're uh, you know, 0:09:14.800 --> 0:09:17.200 I think of others in Europe that that have have 0:09:17.360 --> 0:09:23.280 led on this. It's original territory, without question. Does your 0:09:23.400 --> 0:09:27.040 fixed income world and the knock on of other asset 0:09:27.120 --> 0:09:32.600 classes and the incentives to business, do they move along 0:09:32.800 --> 0:09:36.920 with full faith and credit reaction. Does the market stay 0:09:36.960 --> 0:09:42.320 LinkedIn correlated together or do you suggest instabilities off this 0:09:42.480 --> 0:09:47.400 new drug policy. The good scenario is governments will follow 0:09:47.480 --> 0:09:51.560 up and do some spending, particularly Germany and France because 0:09:51.720 --> 0:09:54.800 now they can essentially get paid to borrow. If you 0:09:54.880 --> 0:09:58.760 think about you know, Germany thirty year is at minus 0:09:58.880 --> 0:10:02.319 point zero seven, so they're they're they're getting seven basis 0:10:02.360 --> 0:10:05.600 points and the ten yere is at minus sixty three, 0:10:05.679 --> 0:10:11.760 so they're getting paid point six um point to borrow 0:10:11.760 --> 0:10:15.160 with a tenure horizon. If governments don't follow up and 0:10:15.200 --> 0:10:19.000 don't do spending, and you have the risk of creating 0:10:19.040 --> 0:10:23.720 a Japan type economy where people hold cash because populations 0:10:23.800 --> 0:10:28.800 in Europe are aging and Dave Moore, if returns are lower, well, well, 0:10:28.800 --> 0:10:30.880 well said. I want to bring Paul Sweeney in here. 0:10:30.880 --> 0:10:33.880 But one more question before Mr Sweeney wanders in, and 0:10:34.360 --> 0:10:37.680 that's what do the Germans think of that? How does 0:10:37.800 --> 0:10:41.240 axel Weber respond to this? I know Jens Vibin's and 0:10:41.280 --> 0:10:44.840 the cross airs right now. I stood with otmar Issing 0:10:45.000 --> 0:10:49.080 in the nascent ECB building, the old one years ago 0:10:49.679 --> 0:10:53.240 and there was a Germanic feel. Is that gone? I 0:10:53.280 --> 0:10:56.920 think the issue is for Germany there, you know, there 0:10:56.920 --> 0:11:00.440 there's a there's a long debate on spending, and we've 0:11:00.520 --> 0:11:04.520 seen improvements on um on the debate with a discussion 0:11:04.559 --> 0:11:09.120 around exiting the black deuro, the black deer deficit, and 0:11:09.200 --> 0:11:12.280 also a green stimulus, a bit similar to you know, 0:11:12.280 --> 0:11:15.880 the green stimulus that's been discussed in the US UM. 0:11:15.960 --> 0:11:19.479 The question that is when and how this would be implemented, 0:11:19.559 --> 0:11:23.160 because the government still keeps these things as a put option, 0:11:23.400 --> 0:11:26.520 not for for people. In Germany. Generally we have seen 0:11:26.600 --> 0:11:30.319 higher savings rates because when you say returns going down, 0:11:31.240 --> 0:11:33.920 then you know you you have you have a pension 0:11:33.960 --> 0:11:36.440 that's uh that you have to fund and you start 0:11:36.480 --> 0:11:40.400 seeking How big a defeat was this today for the Germans? 0:11:40.400 --> 0:11:43.800 I mean, how miserable is Axels that were listening tomorrow 0:11:43.880 --> 0:11:48.640 dragg and reading the headlines on as Bloomberg. I think 0:11:48.679 --> 0:11:52.400 Germany is better off because they have negative yields, they 0:11:52.480 --> 0:11:56.160 fund more cheaply. And let's not forget that Germany is 0:11:56.160 --> 0:12:00.800 the biggest beneficiary from a lower euro. Um we estimated 0:12:00.880 --> 0:12:04.680 that the Eurozone benefits everyone. You know, there's more economies 0:12:04.679 --> 0:12:08.079 of scale, people can go across borders, and companies can 0:12:08.120 --> 0:12:11.520 invest more freely. But Germany has taken over a third 0:12:11.559 --> 0:12:15.440 of the advantages of the pond of the benefits because 0:12:15.880 --> 0:12:18.480 they have the biggest benefits from having a lower euro 0:12:18.559 --> 0:12:22.640 because of experts. Um of their experts are in an economy. 0:12:22.720 --> 0:12:25.000 So I think Germans are you know, they pretend to complain, 0:12:25.080 --> 0:12:28.199 but they're pretty happy about what a very low euro 0:12:28.320 --> 0:12:31.120 Alberta gallo with us a headline from Mr Drag, the 0:12:31.160 --> 0:12:34.960 ECB will carry out strategic review under leguard. We're gonna 0:12:35.000 --> 0:12:37.480 have a strategic review and let Paul Sweeney run it 0:12:37.520 --> 0:12:39.520 for is Paul, why don't you jump in here? Was 0:12:39.640 --> 0:12:42.199 futures up eight in the euro one oh nine fifty 0:12:42.280 --> 0:12:46.040 six dollars stronger, Alberta. How surprised were you, if at all, 0:12:46.120 --> 0:12:50.080 about Mr drag characterization of the actual meeting itself that 0:12:50.160 --> 0:12:53.160 there was so much support for easing that no vote 0:12:53.160 --> 0:12:59.280 was needed. My personal interpretation, I we spoke about it 0:12:59.320 --> 0:13:02.920 earlier this morning. Thing is that the dissent that was 0:13:03.440 --> 0:13:06.280 flagged by some easy B members in the past few 0:13:06.320 --> 0:13:09.680 days was actually a way to lower market expectations and 0:13:09.880 --> 0:13:13.760 allow the easy bit to surprise with less. Market expectations 0:13:13.840 --> 0:13:16.960 were very high. Some people expected forty billion a month 0:13:17.440 --> 0:13:20.840 and there's just not enough pounds to buy um. But 0:13:21.400 --> 0:13:24.280 what they are doing with twenty billion for a very 0:13:24.320 --> 0:13:27.600 long time, you know, twenty billion forever, let's call it 0:13:27.679 --> 0:13:32.360 is essentially trying to anchor the cost of spending for governments, 0:13:32.480 --> 0:13:34.920 trying to anchor the long end of the treasury cur 0:13:35.040 --> 0:13:37.079 in German, in France and Italy so that governments can 0:13:37.120 --> 0:13:41.560 spend more. So I think that drug has Drug has 0:13:41.559 --> 0:13:45.160 always been able to master consensus, and I think in 0:13:45.200 --> 0:13:49.719 the end the compromise is UM to to UM to 0:13:49.760 --> 0:13:52.640 reduce the volatility of funding costs for governments and then 0:13:53.080 --> 0:13:56.000 try to stimulate governments to spend, which is what the 0:13:56.040 --> 0:14:00.480 next president. The next president's job will be connect Monty 0:14:00.520 --> 0:14:03.560 policy to fiscal policy. So let's let's go there. What 0:14:03.800 --> 0:14:06.680 kind of tools are in the toolbox does the ECB 0:14:06.760 --> 0:14:14.760 president have to incent governments to spend? Not many, but 0:14:15.880 --> 0:14:20.120 the not many direct tools, but with the right instruments, 0:14:20.400 --> 0:14:23.120 you can have a combination similar to what Tarp did 0:14:23.120 --> 0:14:24.920 in the US. You can have a combination of loose 0:14:25.000 --> 0:14:30.520 monetary policy with positive fisical policy. Europe is taking like 0:14:30.560 --> 0:14:33.280 a decade to get there because obviously there's a lot 0:14:33.320 --> 0:14:37.520 of moving parts. But for example, the European Union could 0:14:37.560 --> 0:14:42.680 increase its budget. They there could be green bonds or 0:14:43.640 --> 0:14:47.680 European Investment Bank e i B bonds that fund infrastructure 0:14:47.800 --> 0:14:50.560 and that are that are bought by the ECB as 0:14:50.600 --> 0:14:52.760 part of the program. So this is for example, one 0:14:52.800 --> 0:14:55.280 of the options on the table. I think next year 0:14:55.360 --> 0:14:59.240 we'll have the Monetary Policy Review, which lasts several months, 0:14:59.280 --> 0:15:02.200 and we may see more ideas like this which target 0:15:02.320 --> 0:15:05.360 more the real economy rather than just buying bonds in 0:15:05.400 --> 0:15:09.200 the financial market. Yeah, Calumny skeptical here on cutting rates 0:15:09.200 --> 0:15:12.440 and buying twenty billion dollars or twenty billion euros of bonds. 0:15:12.480 --> 0:15:14.600 It's gonna come down to fiscal stimulus at some point. 0:15:14.680 --> 0:15:18.000 Yet we heard from the Germans recently that there still 0:15:18.040 --> 0:15:21.600 is no political support for that. So is there is 0:15:21.640 --> 0:15:24.560 there some catalysts out there that you think certain governments 0:15:24.640 --> 0:15:27.880 need to see or feel before they can really make 0:15:27.960 --> 0:15:35.400 that big fundamental shift. Unfortunately, in the core European countries 0:15:35.600 --> 0:15:39.760 where economic fundamentals are still better, I think the catalysts 0:15:39.800 --> 0:15:43.760 that they're waiting for our negative events. For example, if 0:15:43.800 --> 0:15:46.840 you had a recession next year, or if you were 0:15:46.840 --> 0:15:48.840 close to zero growth, which is which is in the 0:15:48.840 --> 0:15:52.560 base case, or if the US imposes card tariffs, or 0:15:52.600 --> 0:15:55.480 if there's a heart Brexit, then I'm sure you would 0:15:55.520 --> 0:15:58.040 see a German spending plan coming up. So at the moment, 0:15:58.080 --> 0:16:00.080 it is a put option rather than a product. The 0:16:00.280 --> 0:16:02.720 plant the risk with this is that it may be 0:16:02.960 --> 0:16:05.120 too little, too late, So I think there needs to 0:16:05.120 --> 0:16:08.040 be a productive plan. Albertagalo, thank you so much. With 0:16:08.120 --> 0:16:27.000 Algebras just a superb, superb perspective. This morning, we're looking 0:16:27.000 --> 0:16:29.960 at Frankford and Mario drag I did the back of 0:16:30.000 --> 0:16:33.760 the bow tie calculation off their forecast for next year, 0:16:33.920 --> 0:16:37.600 added up animal spirits, top line g d P in 0:16:37.640 --> 0:16:40.840 Europe would be a vast two point two percent. That 0:16:40.920 --> 0:16:44.480 does not get it done. To cut the ambiguity of 0:16:44.520 --> 0:16:48.040 that is Marcus Ashworth. He's with Bloomberg Opinion and Rights 0:16:48.600 --> 0:16:54.600 exceptionally trenchant essays on the ambiguities of whatever the theme is. Okay, Marcus, 0:16:54.640 --> 0:16:59.160 here's the ambiguity. Mario Draggy affects what he will. We 0:16:59.280 --> 0:17:05.080 get a low rate environment which accommodates business and sustains business. 0:17:05.119 --> 0:17:08.280 And the other side of the coin is Mario Draggy 0:17:08.480 --> 0:17:13.119 develops a low rate forever strategy which breaks the back 0:17:13.240 --> 0:17:17.600 of confidence in business. Revenue goes down. How do you 0:17:17.680 --> 0:17:21.200 cut that over the next twenty four months for European 0:17:21.240 --> 0:17:24.200 and United Kingdom business? I mean, which way does it cut? 0:17:24.800 --> 0:17:27.199 It's it's fiscal policy. We all know that in the 0:17:27.280 --> 0:17:29.760 sense that he's creating the you know, he's thinking he's 0:17:29.760 --> 0:17:33.920 best keeping this plate spinning. Um, he's open ended quei. 0:17:34.160 --> 0:17:37.359 I mean, it's the perfect weapon to keep the Euro 0:17:37.480 --> 0:17:40.199 in check. If you know, the set does get more 0:17:40.200 --> 0:17:43.639 aggressive on rate carts and all the US economy dips, 0:17:43.640 --> 0:17:45.240 that will push the Euro up and it will kill 0:17:45.240 --> 0:17:48.119 off any any hope that Europe has of getting out 0:17:48.160 --> 0:17:51.800 this manufacturing recession, which it's clearly you know, put pointed 0:17:51.880 --> 0:17:55.760 right at so and he's done a broadbrush stuff. He's 0:17:55.840 --> 0:17:59.800 kept everyone on board. Super skillful, ill maestro. He hands 0:17:59.800 --> 0:18:02.040 out of the guard with the perfect bat on pass. 0:18:02.359 --> 0:18:04.439 She's got the ability to cut rates more, she's got 0:18:04.440 --> 0:18:09.280 the ability to increase qui. She's doing ability to widen 0:18:09.320 --> 0:18:11.919 out what type of qui that being much more generous 0:18:11.960 --> 0:18:14.560 the banks with these cheap loans called tel traits. It's 0:18:14.600 --> 0:18:18.480 a it's a complete package. And look, they've emphasized ever 0:18:18.560 --> 0:18:20.960 more more aggressively that it needs to be matched with 0:18:21.040 --> 0:18:24.280 fiscal policy. That's what the god allegedly skilled, skillfull ability 0:18:24.320 --> 0:18:28.240 to coordinate with the your E leaders, and that's what's 0:18:28.320 --> 0:18:32.000 needed to break that obvious the E coostomy. As you 0:18:32.000 --> 0:18:35.000 mentioned it, it's a drill dilemma. You know, you cut rates, 0:18:35.280 --> 0:18:36.960 but all it's goning is you're digging at the whole 0:18:36.960 --> 0:18:39.679 ever deeper, and that's actually going to be detrimental to 0:18:39.680 --> 0:18:42.840 the economy. Even they're not extremely careful. It's interesting. Markets. 0:18:43.040 --> 0:18:44.960 Just give us a sense of magnitude of the twenty 0:18:45.000 --> 0:18:47.720 billion euros in terms of the bond buying. Just give 0:18:47.760 --> 0:18:51.040 us a sense of enough not enough. Just we're just 0:18:51.119 --> 0:18:54.560 kind of showing a little bit of show. Yeah, that's 0:18:54.560 --> 0:18:57.600 exactly right. It's doing it in the twenty billion is 0:18:57.600 --> 0:19:00.320 perhaps less than someone expected, but at least it is happening. 0:19:00.359 --> 0:19:02.199 It's back on the agenda they said at the end 0:19:02.200 --> 0:19:04.600 of last year. This was it. No more bond buying. 0:19:04.880 --> 0:19:07.720 We're calling a hole to KWI. The backstone won't start 0:19:07.720 --> 0:19:10.240 from the number one with the back ten months later. Therefore, 0:19:10.280 --> 0:19:13.399 redoing this to anybody and is quite modest. But the 0:19:13.440 --> 0:19:15.760 point is is that clear the clear the market is 0:19:16.200 --> 0:19:18.080 prepared to go to forty or fifty. Didn't know it 0:19:18.160 --> 0:19:21.280 and coming The Chief Economists pointed out that to have 0:19:21.400 --> 0:19:23.480 the same impact on GDPs ahead, but their omittial or 0:19:23.560 --> 0:19:27.000 of qui they could could do hundred billions. Now that's 0:19:27.080 --> 0:19:29.439 that's in the future. He's leaving that ability to look guard. 0:19:29.680 --> 0:19:34.280 He's setting out all the smogest boarder of options to 0:19:34.280 --> 0:19:37.639 pick up on. Have you seen a Vectors study If 0:19:37.680 --> 0:19:40.399 they do twenty gazillion a month, I guess is the 0:19:40.520 --> 0:19:43.639 number when it runs dry? I mean there's got to 0:19:43.680 --> 0:19:46.040 be a point out there in a Vector's study one year, 0:19:46.040 --> 0:19:48.679 two years, three years, five years out where there's nothing 0:19:48.680 --> 0:19:51.359 more to buy. They have to start buying apple shares. Yeah, 0:19:52.320 --> 0:19:55.440 like the like the Spiss National Bank sextually did. Look, 0:19:55.640 --> 0:19:58.240 they can buy bank bonds, they can buy green bonds, 0:19:58.240 --> 0:20:00.959 that can buy the phones. How long for bonds they 0:20:00.960 --> 0:20:02.320 can keep on buying? I mean this the point is 0:20:02.320 --> 0:20:05.240 they've matched open end QUEI with the rate cycle. Now 0:20:05.280 --> 0:20:07.359 there's none of this nonsense about you know, six months 0:20:07.359 --> 0:20:11.199 forward or year forward. It's it's forever until until just 0:20:11.280 --> 0:20:13.320 before they actually start hiking rates. So the point is 0:20:13.320 --> 0:20:16.200 that they give themselves flexibility and they can alter their 0:20:16.200 --> 0:20:19.600 limits to increase it from thirty of any one issue 0:20:19.680 --> 0:20:22.760 or anyone country, and they can widen out what they buy. Paul, 0:20:22.880 --> 0:20:25.160 was this some point? Was this in the textbooks at Duke. 0:20:25.320 --> 0:20:26.960 This is not this is not what I learned in 0:20:27.000 --> 0:20:29.000 business school. And Marcus, I mean it seems like, you know, 0:20:29.119 --> 0:20:31.080 the ECB maybe going the way of Japan. I'm not 0:20:31.119 --> 0:20:33.600 sure that's where Mario dragging wants to take. Well, look 0:20:33.640 --> 0:20:37.520 how the curves flattened, and you've seen banks sell off 0:20:37.600 --> 0:20:40.160 quite sharply because of that. Were now we could argue 0:20:40.200 --> 0:20:44.240 that the reality of negative rates the first time another 0:20:44.320 --> 0:20:47.640 rate cup for um three years has happened, that that 0:20:47.640 --> 0:20:50.320 that's shocked the banks a bit. But it's the curve flattening, 0:20:50.560 --> 0:20:52.840 and that means they're that it's just smichest gonna get squeezed, 0:20:53.040 --> 0:20:54.800 which is what what actually told me. Your point was 0:20:54.840 --> 0:20:56.920 initially is that this is the this is the dichotomy 0:20:57.000 --> 0:20:59.040 is it's are you going to write on this today 0:20:59.119 --> 0:21:02.320 or are you like home from window. I'm prepping as 0:21:02.359 --> 0:21:04.720 we speak. Very good, Marcus Asher, thank you so much, 0:21:04.800 --> 0:21:07.440 very valuable. Really, I can't say enough about he cuts 0:21:07.480 --> 0:21:23.080 the ambiguities or whatever the issue is. Paul Sween, you 0:21:23.080 --> 0:21:25.520 give me the schedule. Here is it eight o'clock tonight 0:21:25.520 --> 0:21:27.720 when I need to watch Red Sucks baseball. I think 0:21:27.760 --> 0:21:30.000 that's exactly when you want to tune in. But first 0:21:30.040 --> 0:21:33.600 seven thirty with Kevin si really, Kevin Cereuli. Let's go 0:21:33.640 --> 0:21:36.560 to Mr Sireli now in in Houston, Kevin just because 0:21:36.600 --> 0:21:39.240 the time, I want to cut to the chase Biden 0:21:39.520 --> 0:21:42.960 and Warren. What does the Vice president need to accomplish 0:21:43.440 --> 0:21:47.119 against the senator from Massachusetts. He needs to try to 0:21:47.160 --> 0:21:50.199 stop her momentum. And that's why you've seen these pre 0:21:50.280 --> 0:21:53.639 debate attacks coming from the Biden campaign. With regards to 0:21:53.680 --> 0:21:56.639 Senator Elizabeth Warren. You've got Ed Rundell, the former governor 0:21:56.680 --> 0:21:59.320 of Pennsylvania, out in an op ed in the Washington 0:21:59.480 --> 0:22:02.679 Post calling her a hypocrite with regards to how she 0:22:02.760 --> 0:22:06.000 has fundraised. But candidly, when I talked to supporters of 0:22:06.000 --> 0:22:09.119 Senator Elizabeth Warren, they would love to have that debate 0:22:09.240 --> 0:22:11.359 every day of the week. They feel that that just 0:22:11.440 --> 0:22:16.680 offers them an opportunity to provide a contrast between Biden's 0:22:16.720 --> 0:22:21.240 more centrist approach to economics versus Elizabeth Warren's. But look 0:22:21.359 --> 0:22:24.160 for a breakout moment from one of the other candidates, 0:22:24.160 --> 0:22:27.680