Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along
Speaker 1: with Jonathan Farrell and Lisa A. Bramowitz. Join us each
Speaker 1: day for insight from the best and economics, geopolitics, financing
Speaker 1: and investment. Subscribe to Bloomberg Surveillance on demand on Apple,
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Speaker 1: Joining us now from our offices in London, John Ferrell, John,
Speaker 1: your accent has changed this week. It's worse than normal.
Speaker 1: Just to be Claire. I am funded in dollars Tom
Speaker 1: for the tenth time, and that's where I pay taxes
Speaker 1: as well. I want to clear that up. And for
Speaker 1: the second point, I'll mate Tom the chancel. I was
Speaker 1: only here to warm up the seat for Peter Roppenheimer,
Speaker 1: a common Sacks, the chief Glove Electritly strategist. Peter knows
Speaker 1: that anyway, Petty, you're a popular man this year. And
Speaker 1: good afternoon to year slash, good morning. I guess European equities,
Speaker 1: that's what it's all about. It's front season. When you
Speaker 1: go around doing these conferences, do they buy the hype
Speaker 1: in Europe after hearing it for the tenth time in
Speaker 1: the last ten years. Very slowly, people are warming up
Speaker 1: to it and it's been a long time coming. I
Speaker 1: know that. But performance attracts investors, and we've seen, you know,
Speaker 1: thirty percent rebound in the European market since October, at
Speaker 1: least in dollar terms, and that is starting to energize
Speaker 1: a bit of interest in the region, and it reflects
Speaker 1: the big shift we've seen towards value again, something we
Speaker 1: haven't seen now for more than a decade. So clearly
Speaker 1: we've priced that recession. We've priced in stagnation stagnation, and
Speaker 1: investors are focused on the difference between the two. I
Speaker 1: get all that, but now we need to talk about
Speaker 1: the difference between stagnation and real recovery and expansion. And
Speaker 1: that's been a theme for us this week. When do
Speaker 1: we start to focus on the fact that there is
Speaker 1: no growth in Europe is just an absence of a
Speaker 1: recession and what we've seen so far is a bit
Speaker 1: of a squeeze and relief rally and perhaps nothing else. Well,
Speaker 1: I think we need to put it in context here.
Speaker 1: We think that the loloibal economy is in a relatively
Speaker 1: good shape, and we expect to see a soft landing
Speaker 1: in the US, but we also now expect to see
Speaker 1: a relatively soft landing in Europe. The falls and gas
Speaker 1: prices have helped to pick up in China as well.
Speaker 1: But the absence of recession, as you say, doesn't mean
Speaker 1: we're yet into a strong recovery cycle. And I think
Speaker 1: the rebound that we've seen in risk assets in the
Speaker 1: last couple of months is overstating the potential from here.
Speaker 1: At the index level, We've got flat returns in the
Speaker 1: US this year, slightly positive returns in Europe, so we
Speaker 1: prefer Europe. We think most of the action is going
Speaker 1: to be below the surface of the index. Let's talk
Speaker 1: about those opportunities banks have ripped in Europe. They're up
Speaker 1: about fifty from the July lows. I picked out a
Speaker 1: minor because I know you like some of those names
Speaker 1: as well, Rio since October's up something like these are
Speaker 1: huge monster moves. And credit to you, guys, because you've
Speaker 1: got on board this bank's trade in Europe at a
Speaker 1: time where I was sitting there thinking, you've got to
Speaker 1: be kidding me. We're gonna get great hikes from the
Speaker 1: E c B. It's going to crush the economy and
Speaker 1: peripheral spreads are gonna blow out all over again. Why
Speaker 1: has that trade worked and why do you think it
Speaker 1: will continue to work? Well? I think there are three things.
Speaker 1: First of all, the recession that people feared six months
Speaker 1: ago is not happening. There was a point where the
Speaker 1: market was pricing in quite a big downturn in the
Speaker 1: European economy. The expectations there are adjusting pretty quickly. We
Speaker 1: actually have points six percent GDP growth across the Eurozone
Speaker 1: this this year, so the economy is growing, not shrinking.
Speaker 1: That helps a lot. Second, of all, the rise and
Speaker 1: interest rates we're seeing is material given where we've been
Speaker 1: where they came from. Remember, you know, just a year
Speaker 1: and a half ago, all government debt in the world
Speaker 1: had a negative yield. Now that doesn't exist. European rates
Speaker 1: were negative, now they're positive. The leverage to that in
Speaker 1: terms of net interest margins is the real game changer.
Speaker 1: And bear in mind that corporate balance sheets are reasonably healthy,
Speaker 1: so low losses and the risk of the big downturn
Speaker 1: hitting bang is just evaporating. And the third, factories they
Speaker 1: were just really cheap and they remain pretty cheap. They're
Speaker 1: cheaper now when you look at the multiple relative to
Speaker 1: the market than they were even during the sovereign debt
Speaker 1: crist We started this conversation by you talking about how
Speaker 1: challenge the index level is. We've talked about that a
Speaker 1: lot in Europe. The absence of tech in Europe as
Speaker 1: a big waiting in the overall index was seen as
Speaker 1: a weakness for a long long time. Is that a
Speaker 1: strength this year? Because I'm looking at the year to
Speaker 1: day performance of some of these tech names, Leasa, We're
Speaker 1: just going through them, those tech names in the US,
Speaker 1: despite everyone's saying it's game over, they're flying here today.
Speaker 1: Is the absence of big tech in the index in
Speaker 1: Europe a weakness or strength? Structurally, it's a weakness because
Speaker 1: there is going to be more growth in the tech sector.
Speaker 1: It's going to remain the most important driver of growth
Speaker 1: I think for the next decade. The constituents are likely
Speaker 1: to change over time. That's always been true of technology
Speaker 1: in the past. You'll get new innovations which will generate
Speaker 1: higher return and so I think it is a problem
Speaker 1: in a way that Europe doesn't have many big tech names.
Speaker 1: But of course the recent rally we've seen in tech
Speaker 1: is partly because of this rally again in bond yields,
Speaker 1: interest rates coming down because of fears of inflation moderating,
Speaker 1: and that's helped the longer duration parts of the market.
Speaker 1: I think really the whole concept of being in growth
Speaker 1: or value, which is really driving the markets over last decade,
Speaker 1: is not really the story anymore. I think you need
Speaker 1: to have a much more eclectic mix, including deep value
Speaker 1: areas like commodities and banks, but also companies that can
Speaker 1: sustain stable margins and earnings, and some of that will
Speaker 1: be in the tech sector as well. Europe does have
Speaker 1: many of these, maybe not specifically in technology, but our
Speaker 1: group of what we call the Granolas, the ten really,
Speaker 1: which you've talked about before, super size companies in Europe,
Speaker 1: which mainly in areas like consumer staples, luxury, healthcare, and
Speaker 1: some technology. These companies are about a quarter of the index,
Speaker 1: and they're still growing because they're generating stable margins and
Speaker 1: very strong cash flews, and I think they will continue
Speaker 1: to do well. I've got time for one more. It's
Speaker 1: interesting to me that the market always seems to dictate
Speaker 1: the stories we talk about. Price shapes sentiment. You know that,
Speaker 1: and the headlines often come about from where the market
Speaker 1: is on any given week. And clearly we've rallied year
Speaker 1: today in Europe, and clearly we've rallied over the last
Speaker 1: couple of months, and clearly we've priced out of recession.
Speaker 1: And clearly off the back of that, the conversation and
Speaker 1: the tone of the conversation has changed. Being here in
Speaker 1: London this week, you can't escape the fact there is
Speaker 1: still a war in Europe, and for many reasons, based
Speaker 1: on what's happened over the last month or so, there
Speaker 1: are reasons to sit here and say that war has
Speaker 1: the real potential of escalating again. I understand we've escaped
Speaker 1: what could have been a much much more brutal winter
Speaker 1: on the continent. I'm just wandering this down and I'm
Speaker 1: going to have this conversation with and read a center
Speaker 1: of Energy Aspects in about forty minutes. How long before
Speaker 1: we start worry think about next winter in Europe and
Speaker 1: what is actually happening in Ukraine. I think you make
Speaker 1: a very good point. Part of the optimism that we've
Speaker 1: been seeing priced in is based on the collapse and
Speaker 1: gas prices. That reflects really two things a very mild winter,
Speaker 1: which we can't assume we'll be repeated next year, and
Speaker 1: also a very weak Chinese economy that allowed and enabled
Speaker 1: European governments to to to find other sources of gas supplies.
Speaker 1: And as China recovers and Europe needs to re stock
Speaker 1: its gas supplies are probably higher prices, that issue will
Speaker 1: come back. And that's a game where we're slightly more
Speaker 1: tempered in our optimism about the pace of the recovery
Speaker 1: at the index level over the course of this year,
Speaker 1: not just in Europe but across extras overall. Peter, this
Speaker 1: was great. We're gonna make it up to Manchester this
Speaker 1: evening to watch Arsenal mad cities that happening, But you're
Speaker 1: going to t t Case trying to make it happen
Speaker 1: for us. When she speaks the fixed thing come world
Speaker 1: just simply stops. It is the heritage of society general.
Speaker 1: They own the high ground of French math and derivative science.
Speaker 1: Sobrato ra Jappa joins us this morning. Sobrata help me.
Speaker 1: Let's go sack gen derivatives right now, which is calculus,
Speaker 1: which is rates of change. What's the rate of change?
Speaker 1: Story in the bonds space this January as we see
Speaker 1: a bull equity market, so the biggest rate of change
Speaker 1: was at the end of the year. Coming into this year,
Speaker 1: we haven't really seen bonds move meaningfully higher or lower
Speaker 1: from around the three and a half percent level in
Speaker 1: tenure yields. So for the most part, we seem to
Speaker 1: be kind of stuck here. Um. You know, part of
Speaker 1: the reason is because fundamentally bonds look rich relative to fundamentals,
Speaker 1: and then you have a story where there's just a
Speaker 1: tremendous amount of demand for bonds. You get the auction
Speaker 1: stats for this week, we saw a very very strong demand, uh,
Speaker 1: you know, from bonds from a variety of investors. So
Speaker 1: the cash that's in the sidelines is being put to
Speaker 1: work in the bond market. I totally agree, and we've
Speaker 1: spent a lot of time this week folks on issuance ideas.
Speaker 1: If there's a shortage of bonds, that's what Sir John
Speaker 1: Templeton would have said years ago, what happens to yield
Speaker 1: over the space of this year. I don't think that
Speaker 1: there's a shortage of bonds. There's going to be a
Speaker 1: decent amount of issuance coming from you know, corporate, corporate
Speaker 1: bond world. We're seeing a lot of issuance in treasuries.
Speaker 1: If anything, our called going into the spring time frame
Speaker 1: was that the treasury will increase it's it's coopon issuance
Speaker 1: sizes because deficits are continuing stress. I mean that, of course,
Speaker 1: we'll have to wait and see because of the of
Speaker 1: the dead ceiling, but broadly speaking, I think that's a
Speaker 1: there's a there's a decent amount of supply coming into bonds,
Speaker 1: not just in the in the US and the corporate bond,
Speaker 1: but also in Europe in the first first quarter. So
Speaker 1: there's a lot of bonds that out there to be bought. Uh.
Speaker 1: And that's why we were expecting perhaps a modest you know,
Speaker 1: modestly higher yields for the market to be able to
Speaker 1: take down the additional supply. But that's not the case.
Speaker 1: It's just tremendous amount of demand and people are willing
Speaker 1: to lop up bonds tenny years around three and a
Speaker 1: half percent about her how long all this last? This rally,
Speaker 1: this optimism that you see preventing every asset class. You know,
Speaker 1: the data for the most part has been mixed, but
Speaker 1: but on the positive side, you look at the data
Speaker 1: from from yesterday that we got for the fourth quarter GDP,
Speaker 1: there's a decent amount of momentum going into into the
Speaker 1: fourth quarter, um, you know, and you're looking at an
Speaker 1: employment picture that's still extraordinarily strong, even though you're getting
Speaker 1: a lot of news about layoffs in the tech sector. Uh.
Speaker 1: You know, look at initial jobless claims yesterday, it was
Speaker 1: very very low. That it tends to be very good
Speaker 1: leading indicator of the jobs market. So this sort of environment,
Speaker 1: the market is actually, in my view, underpricing the risk
Speaker 1: of heights for this year. We're looking at perhaps two
Speaker 1: heights being priced in for the first half of the year,
Speaker 1: and then it cut being priced in as early as
Speaker 1: July or September of this year, which you know, that
Speaker 1: sort of trajectory doesn't make any sense in an environment
Speaker 1: where inflation is expected to remain high and sticky. I mean,
Speaker 1: look at what happened in Japan. I mean, we saw
Speaker 1: you know, an outside sprint, uh, you know, relative to
Speaker 1: consensus on on on inflation. So there's always a possibility that,
Speaker 1: you know, we do get those sort of volatile inflation prints,
Speaker 1: and the market has to respond and the Fed has
Speaker 1: to respond in like as well, So what's the read
Speaker 1: through to market? So what kind of disruption and will
Speaker 1: there be if the Fed surprises to the upside, perhaps
Speaker 1: on a fifty basis point rate hike next week, but
Speaker 1: does indicate that they're going to go further than a
Speaker 1: lot of people are currently pricing in. How disruptive is it?
Speaker 1: It will be destructive. That's why I think that they are.
Speaker 1: The Fed typically tends to stick with the market pricing.
Speaker 1: If the market is not fully priced, they'll find ways
Speaker 1: to communicate the fact that they're going to be delivering
Speaker 1: more than what the markets pricing in and then the
Speaker 1: market will adjust. Um. But broadly speaking, I think that
Speaker 1: you know, twenty five basis point a hike, uh and
Speaker 1: at next week's meeting makes sense, and then you know
Speaker 1: another twenty five basis points in subsequent meetings. But I
Speaker 1: just don't see them stopping or pausing anytime. So, like
Speaker 1: the Bank of Canada suggested they will at this week's meeting.
Speaker 1: So then how does the dollar play into this because
Speaker 1: that might be actually a very different story than what
Speaker 1: people are pricing in there. Yeah, I mean I think
Speaker 1: the dollars come off. It's it's very lofty levels. Um.
Speaker 1: Broadly speaking, you're looking at the dollar versus say, the euro.
Speaker 1: H you look at the ECB. The CBS poised to
Speaker 1: high rates for the remainder of the year. Our economists
Speaker 1: are expecting that the ECB will raise its its deposit
Speaker 1: rates up to three point seven five. The markets underpricing
Speaker 1: that level as well. So broadly speaking, at least versus
Speaker 1: the the Euro, I think that the dollar could come
Speaker 1: under a little bit of pressure. The Bank of Japan
Speaker 1: as well is starting to adjust. It's it's it's y
Speaker 1: c C. So I think that you know, dollars definitely pete.
Speaker 1: I don't see a precipitous decline, but but a gradual
Speaker 1: decline as other central banks catch up on the policy front.
Speaker 1: So Brata, thank you so much, Sobrata Rajapa with us,
Speaker 1: with society in general. This is a joy because it
Speaker 1: is the heritage of what Neil saw Us did at
Speaker 1: Credit Sweeze. He is Ray Ferris, their chief economists joining us,
Speaker 1: and he and I are on the same page that
Speaker 1: everybody inflation adjusts. And Mr Harrison, I go, maybe not
Speaker 1: nominal GDP matters. What does the global credit suits outlook
Speaker 1: on the dynamic of nominal GDP with disinflation in place. Well,
Speaker 1: that's absolutely right. The key thing I think for corporate profitabity,
Speaker 1: the outlook for earnings is really nominal money and nominal
Speaker 1: GDP growth. After a boom in two thousand and late
Speaker 1: two thousand, early two THOWO is now slowing a lot.
Speaker 1: That's the disinflation process. So what that means is that
Speaker 1: at the top line, revenue growth is going to come down.
Speaker 1: We're already seeing that there's a good link between nominal
Speaker 1: GDP growth, swings and margins. Margins are going to come
Speaker 1: down and we're seeing that. And although we think that
Speaker 1: there will be consumption growth in two thousand three, that
Speaker 1: consumption growth, especially in the good sector, is going to
Speaker 1: be very very weak. So slowing revenues, squeezed margins, and
Speaker 1: not a whole lot of volume growth. Sitting in that
Speaker 1: chair this week have been a number of people modeling
Speaker 1: out some form of reaction function, trajectory, whatever you wanna
Speaker 1: call it, down to a level of disinflation that I
Speaker 1: think with shocker listeners, shocker viewers, some even modeling under
Speaker 1: three percent is an inflation picture for the United States.
Speaker 1: Are central bankers prepared to have their minds change when
Speaker 1: the facts change. Oh, the Fed's already moving. I mean
Speaker 1: you can see that the FED that this shift from
Speaker 1: fifties to five. And I suppose recently the comments out
Speaker 1: of UM Leo branderd suggests that the FED is beginning
Speaker 1: to kind of adjust to the fact that the economy
Speaker 1: is weakened and that it views itself as being in
Speaker 1: restrictive territory and at some point it's gonna pause. That's
Speaker 1: the right thing to do. UM. What they're not ready
Speaker 1: to do because of the level of inflation. It might
Speaker 1: just identify this, I think nicely. There's the month on
Speaker 1: month stuff, which looks pretty good, but then there's the
Speaker 1: fact that what the public cares about is the year
Speaker 1: on year numbers, and those things are still high. So
Speaker 1: the FED is going to have something of an asymmetric
Speaker 1: biased toward hawkishness until it can get those year on
Speaker 1: year numbers down safe territory and I think that's below
Speaker 1: three percent. So you mentioned Leo Brainard. Let's go there.
Speaker 1: Some people, including city groups Andrew hollin Horst, saying that
Speaker 1: if she does take the job with the White House,
Speaker 1: this could actually increase the hawkish tilt of the Federal
Speaker 1: Reserve that she was actually more of a moderating voice, saying,
Speaker 1: maybe the risks are a little bit more balanced. Do
Speaker 1: you agree, Well, maybe, or you know, I think there's
Speaker 1: probably some extent to which she's also been a trial balloon,
Speaker 1: you know. And this FED seems to me, in their
Speaker 1: communication strategy, to have been much more coordinated, um and
Speaker 1: and sort of game planned than say Feds of three
Speaker 1: or four or five years ago, when it was really
Speaker 1: just a talking shop in public. When it comes to
Speaker 1: the actual economic data. How much of people overlooking the
Speaker 1: Chinese coming online, the fact that China ended zero COVID
Speaker 1: and we're going to get some sort of boost with
Speaker 1: the consumer spending that perhaps could also juice and for
Speaker 1: commodities and for other goods exactly. We just wrote about this,
Speaker 1: and we think that at the global level, the impact
Speaker 1: this year is going to be pretty modest, at about
Speaker 1: zero point two percent of global GDP. Most of that
Speaker 1: is going to be focused outside of China. Most of
Speaker 1: that's going to be focused in Asia countries like Thailand
Speaker 1: and Singapore. The Philippines are gonna benefit as the Chinese
Speaker 1: begin to travel abroad again. UM. In Europe, maybe a
Speaker 1: small boost one and a half, sorry, zero point one
Speaker 1: to zero the United States, very small. The key thing
Speaker 1: is going to be the impact on energy prices, and
Speaker 1: this is one of the reasons why the FED at
Speaker 1: this stage, even with a succession a pretty good month
Speaker 1: on months, can't take for granted victory. If for whatever reason,
Speaker 1: the Chinese managed to drive up boil price as well
Speaker 1: above a hundred dollars a barrowable headline, inflation is going
Speaker 1: to return to being something of a problem. But you're not.
Speaker 1: You're under playing your knowledge base here. You own the
Speaker 1: Pacific room for credits suites for years and years and years.
Speaker 1: Nobody's hit raffles barre like you about on line is
Speaker 1: the bottom line is you're suggesting Brent crude with Pacific
Speaker 1: rim oil demand coming back, are you suggesting it could
Speaker 1: pop above a hundred and find new levels up at one?
Speaker 1: That's not our forecast set. Our forecast set is, you know,
Speaker 1: kind of around ninety where about where we are right now.
Speaker 1: What I'm saying is that it's been very, very difficult
Speaker 1: to predict. We have to recognize that the energy markets
Speaker 1: are very tight. You know, we're not getting as much
Speaker 1: of a response out of the United States in the
Speaker 1: shale patch, OPEC is sort of back in control. So
Speaker 1: you know is if I were the Fed, I'm sitting
Speaker 1: there is there a chance that for despite all my forecasting,
Speaker 1: that oil surprises to the top side and that really
Speaker 1: damages my inflation outlook, Yeah, there's a chance. So I
Speaker 1: can't take that risk. Again with your history of the
Speaker 1: Pacific RIM, do you just model out yield curve control
Speaker 1: goes away and we get yen stronger, back to where
Speaker 1: we knew it. I think that's right, but only after
Speaker 1: the new governor comes in. It was going to till
Speaker 1: the So we need to get the new governor in
Speaker 1: April and then we need a policy review, and then
Speaker 1: probably in June will take away your curve control. But
Speaker 1: note that JAB the b o J has a new
Speaker 1: facility that allows it to lend banks against j g
Speaker 1: B s at sub market yields. So it's created a
Speaker 1: facility that will allow it to manage the process of TENUA.
Speaker 1: It's almost like sterile it's almost like sterilized currency moves.
Speaker 1: They set up a sidecar move correct, almost like a
Speaker 1: sterilized yield curt control. So they it's the one place
Speaker 1: that wants inflation. You know, so externally the I M
Speaker 1: F may be excited about Japanese inflation, wells with the Japanese,
Speaker 1: except in the opposite direction they want it. Great, Farris,
Speaker 1: thank you so much. With Curtis Sez, we are going
Speaker 1: to stop right now. We can do this. With Richard Hass,
Speaker 1: it was my book of the summer, book of the year.
Speaker 1: I can't remember right now, but his book on how
Speaker 1: to figure out the New Western Civilization one oh one
Speaker 1: the world was so important. And he comes back with
Speaker 1: the jewel. It is the Bill of Obligations, but far more, Lisa,
Speaker 1: this goes back and this is corny but unbelievably tangible.
Speaker 1: Right now, a Scout is trustworthy, loyal, helpful, friendly, courteous, kind, obedient, cheerful.
Speaker 1: I memorize this once, thrifty, brave, clean, and Reverend Richard
Speaker 1: Hass takes us back to another time and primarily screams
Speaker 1: for some civility within our fractured American society. Congratulation on
Speaker 1: the ten habits of good citizens. Thank you, sir, it's
Speaker 1: so interesting you quote the Scouts oath. The Scouts are
Speaker 1: one of the very few organizations in America. Girl, Scouts
Speaker 1: and boy Scouts that actually teach civics, they actually are
Speaker 1: invested in the fabric of the society. It changed me.
Speaker 1: It is that the whole legal scout thing long time
Speaker 1: ago and and all that. How did we get here?
Speaker 1: How did our society get to where you had to
Speaker 1: write a piercing a hundred and fifty pages on America?
Speaker 1: Get your act together? A couple of reasons. One is
Speaker 1: we don't teach our story. The fact that we don't
Speaker 1: uh teach Civics in many schools. If we do teach it,
Speaker 1: it's an adequate. You can graduate from virtually any college
Speaker 1: or university nowt toime. And if you navigate your course
Speaker 1: distribution right, you'll never study physics civics. You won't understand
Speaker 1: the fact the basis physics for that. I sorry about that.
Speaker 1: Uh So there's that. I think media and social media
Speaker 1: has contributed to it. Increasingly people go into their own
Speaker 1: ecosystem or ecosystem, whichever you want to call it. They
Speaker 1: go for things to confirm their biases. Social media is
Speaker 1: much more about social than news, but this is increasing
Speaker 1: where people get not their information but their misinformation. I
Speaker 1: think there's I think people have also become more skeptical
Speaker 1: of government. You know, things you talk about on this show,
Speaker 1: the failure to manage the economy, well, things like the
Speaker 1: wars in Iraq and Afghanistan. It's created a sense of
Speaker 1: populism in this country for any number of reasons. There's
Speaker 1: been backsliding here. And by the way, it's not unique here.
Speaker 1: We see it in Brazil, we see it in Mexico,
Speaker 1: we see it in parts of Europe. I think democracies
Speaker 1: are under pressure. We just never thought it would happen
Speaker 1: here where the world's oldest democracy. Where the where the case?
Speaker 1: Jeff Sex screamed about this out of Columbia ten years ago,
Speaker 1: even twelve fifteen years ago, talking about the fractured American
Speaker 1: education system. What's the best practice model out there worldwide
Speaker 1: that we can learn from to begin at the margin
Speaker 1: to improve our social education process. We have some good examples. Yeah,
Speaker 1: we still have the best higher education in the country,
Speaker 1: in the world. I would say the problem is, again
Speaker 1: we don't require certain things. We offer the model. I
Speaker 1: would not put that at the at the pin at
Speaker 1: the pinnacle. But now the people line up around the
Speaker 1: world to go to American universities. The problem as universities
Speaker 1: let people off their campus without requiring to do certain things. Finland,
Speaker 1: for example, has just recently started an experiment for high
Speaker 1: school kids. You want to go through elementary school, high school,
Speaker 1: you have to become what's called literate and information. They
Speaker 1: teach you how to navigate, Uh, this this world of information, misinformation?
Speaker 1: What's the fact? What's what's what's something else? What's an opinion? Days?
Speaker 1: By the way past that interesting enough, One state in
Speaker 1: the fifty states has that rule, that law. New Jersey
Speaker 1: just passed it the other week. Every New Jersey high
Speaker 1: school graduate is going to have experienced information literacy. Well,
Speaker 1: you wrote this book. There is more than one page,
Speaker 1: but you hated us this card which had the ethos
Speaker 1: that you are trying to And how much is this
Speaker 1: really an indictment of the moment that we're in in
Speaker 1: terms of people's attention span, ability to focus? In other words,
Speaker 1: do you see any progress in the places that you're
Speaker 1: basically saying for civics that could actually salvage what you're
Speaker 1: hoping for? I see, I see the potential for progress
Speaker 1: almost every group I speak to, And in some ways
Speaker 1: the reason I wrote this book. People know there's something wrong.
Speaker 1: Americans get it. Look at the polls there. They've lost
Speaker 1: confidence in the future. People know there's something There's a
Speaker 1: lot of interested in teaching civics. People know that something's
Speaker 1: going seriously wrong in Washington, that they're alienated from the government.
Speaker 1: So I think the potential for reformers there. The question
Speaker 1: is whether we can get sufficient involvement. The fact in
Speaker 1: the recent midterm elections, given all the stakes, less than
Speaker 1: half the eligible voters voted. That's something wrong. We've got it.
Speaker 1: We've got to get people more informed and more involved.
Speaker 1: How does this really dovetail. It's the US positioned internationally
Speaker 1: as someone who has been in the diplomatic world for
Speaker 1: your entire career, and considering the fact that the rest
Speaker 1: of the world sees the dysfunction in Washington and reacts
Speaker 1: to it. The Chinese like nothing more than to show
Speaker 1: pictures of things like January six on their television and
Speaker 1: go see the quote unquote democracy is the same as anarchy,
Speaker 1: so that the authoritarians love it makes it very hard
Speaker 1: for us to say, emulate us, but we don't look
Speaker 1: very good. More important, in some ways, it makes it
Speaker 1: very hard for our allies to trust us. They see
Speaker 1: the discontinuities that have come into a into American politics.
Speaker 1: They no longer have the assumptions of reliability, and I
Speaker 1: think our foes for the same reason, I'm much more
Speaker 1: willing to challenge us because they're not sure we're going
Speaker 1: to be there. On radio, on television, Richard hass with
Speaker 1: us as we celebrate his new book, The Bill of Obligations.
Speaker 1: Can't say enough about it, A hundred and fifty pages
Speaker 1: here and now we're gonna migrate to Richard hass oscar
Speaker 1: analyst expert on movies there. I was watching I call
Speaker 1: it The Banshees, the Irish movie that's up now for
Speaker 1: and I thought of you. They're looking across the harbor
Speaker 1: at the war going on in Ireland you lived. Did
Speaker 1: you see that movie and wanted to bring back about
Speaker 1: the Irish tension that is and will always still be there.
Speaker 1: I did not say it. You have to see it. Yeah, yeah,
Speaker 1: but I'm kind of I've been kind of busy, Tom.
Speaker 1: But but two things. One is that a lot of
Speaker 1: those issues, not so much the Ireland English, but the
Speaker 1: problems in Northern Ireland breaks it. One of the many
Speaker 1: consequences of bregsit it has reintroduced friction into Northern Ireland.
Speaker 1: Northern Ireland went through two terrible decades, three terrible tacks
Speaker 1: of the Troubles. I don't think now it's inconceivable that
Speaker 1: could we could see some sort of reintroduction. Clearly we're
Speaker 1: seeing greater friction uh there. And by the way, it's
Speaker 1: given what we're talking about this morning, it's a warning
Speaker 1: for this country. I'm not worried about a new civil war.
Speaker 1: I am worried about an American version of the Troubles
Speaker 1: where we have politically inspired violence around the country. It
Speaker 1: is not inconceivable. No one should think the January six
Speaker 1: is a one off, like you've got a big business
Speaker 1: audience on this show. Businesses besides thinking about E. S,
Speaker 1: G and D e I, businesses ought to be thinking
Speaker 1: what can they do to promote American democracy? They have
Speaker 1: an enormous stake in the rule of law. Just real quick,
Speaker 1: care before we let you go. You were talking about
Speaker 1: social media, the involvement there. There is a push to
Speaker 1: band TikTok in part because of the Chinese ownership. Do
Speaker 1: you think that restricting social media is the answer. It's
Speaker 1: part of the answer where we have to restrict We
Speaker 1: have to regulate what are the responsibilities of the carriers?
Speaker 1: Are they publishers? Are they simply pipelines? I think that.
Speaker 1: But more important is probably to make the people who
Speaker 1: go to social media more discerning what how do how
Speaker 1: do we make them understand the limits of social media? Again,
Speaker 1: I want people to be citizens, to be critical consumers
Speaker 1: of information. Reagan called Ronald Reagan called for patriotism, but
Speaker 1: first he called for informed patriotism. What we need to
Speaker 1: do is make sure we are critical consumers of this
Speaker 1: information suit that we're all living in. Richard Oas, thank
Speaker 1: you so much in congratulations. And I don't like to
Speaker 1: cover the covers like a refluence sweater thing with the
Speaker 1: American flag on it, torn away. And what I would
Speaker 1: really emphasize to our international audience, the Bill of Obligations
Speaker 1: is not just in American book. It is an international
Speaker 1: book about learning the civics that we all know. And
Speaker 1: I love that Glaus is your democracy is more than
Speaker 1: procedures and laws and ethical ideal Lisa. That sums it up.
Speaker 1: Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify and
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Speaker 1: on the Bloomberg Terminal. Thanks for listening. I'm Tom Keane,
Speaker 1: and this is Bloomberg