Speaker 1: Good morning. It's Tuesday, the third of October in London.
Speaker 1: This is the Bloomberg Daybreak EUROP podcast. I'm Stephen Carroll.
Speaker 1: Coming up today reports a key part of HS two
Speaker 1: is about to be scrapped, throw Rishi Sunak's pre election
Speaker 1: narrative off track.
Speaker 2: And I'm Caroline Hipkett at the Conservative Party conference here
Speaker 2: in Manchester with the latest on that decision and the
Speaker 2: divisions that it's creating in the party.
Speaker 1: Plus is there anything AI can't do? Jp Morgan's CEO
Speaker 1: tells Bloomberg artificial intelligence could lead to a three and
Speaker 1: a half day working week. Let's start with a roundup
Speaker 1: of our top stories. The Prime Minister is facing backlash
Speaker 1: from his Conservative Party, businesses and Northern leaders over a
Speaker 1: possible announcement to scrap part of the flagship infrastructure project
Speaker 1: HS two. Their speculation announcement could come as soon as
Speaker 1: today to ditch the northern leg of the one hundred
Speaker 1: billion pound high speed rail project. The decision now threatens
Speaker 1: to overshadow the whole Conservative Party conference. Toy West Midlands
Speaker 1: Mayor Andy Street made his view clear, but Joyce very stark.
Speaker 3: Either of the rumors say go on, cancel Newston cancel
Speaker 3: to Manchester, but you will be turning your back on
Speaker 3: an opportunity to level up a once in a generation opportunity.
Speaker 3: You will indeed be damaging our international reputation as a place.
Speaker 4: To invest or.
Speaker 3: The alternative is to work with us, engage with us, fully,
Speaker 3: embrace the private sector. Hear out what they could do
Speaker 3: to find a way that we can still build this
Speaker 3: national piece of infrastructure in a way in which we
Speaker 3: can afford and at a cost which we're all comfortable with.
Speaker 1: Despite those pleas from Andy Streets, reports suggests that if
Speaker 1: a decision is made to ditch the project, it could
Speaker 1: feature in the Prime Minister's speech to the conference tomorrow.
Speaker 1: Back of England policymaker Catherine Mann says interest rates have
Speaker 1: only just reached restrictive territory. Speaking at an event hosted
Speaker 1: by red Burn Atlantic and Rothschild, Man disparage the Central
Speaker 1: Bank's forecasts, saying quote they've been telling a story fundamentally
Speaker 1: different from the ones I consider likely. Catherine Mann is
Speaker 1: widely viewed as the boees most hookish rate setter, but
Speaker 1: was outvoted last month when she backed continuing increasing rates
Speaker 1: to stamp out sticky inflation. Louretta Master says the Federal
Speaker 1: Reserve will probably need to raise rates once more this year.
Speaker 1: Speaking to business leaders, the Bank of Cleveland president said
Speaker 1: the final decision will depend on how the US economy
Speaker 1: evolves in the coming months.
Speaker 5: At this point, I suspect we may well need to
Speaker 5: raise the Fed Fund rate once more this year, and
Speaker 5: then hold it there for some time as we accumulate
Speaker 5: more information on economic developments and assess the effects of
Speaker 5: the tightening at financial conditions that has already occurred.
Speaker 1: Mester's comments come as several of the central Bank's policymakers
Speaker 1: have weighed in with their views on the future rate path.
Speaker 1: Federal Reserve Vice Chair for Supervision Michael Barr says the
Speaker 1: US Central Bank is likely at or very near a
Speaker 1: level that's sufficiently restrictive that echoes charge their own palace,
Speaker 1: message that officials can proceed carefully on whether to hike again.
Speaker 1: This weekend's temporary US government funding bill may have averted
Speaker 1: a shutdown, but it also left out something many wanted,
Speaker 1: six billion dollars for Ukraine. Bloomberg understands President Biden is
Speaker 1: now planning to call allies to discuss the ongoing war.
Speaker 1: At Baxter Reports.
Speaker 6: The President says he wants to assure the Allies that
Speaker 6: the US support will continue. You cannot, under any circumstances
Speaker 6: allow America's support for Ukraine to be interrupted.
Speaker 4: Too many lives of stake, too many children, too many people.
Speaker 6: A call with Allies could happen as early as today,
Speaker 6: and the White House says it will announce an additional
Speaker 6: aid package for Ukraine soon. I'm at Baxter Bloomberg Radio.
Speaker 1: The Republican Matt Gates has officially moved to out the
Speaker 1: Speaker of the US House, Kevin McCarry. The Florida congressman
Speaker 1: cited McCarthy's weekend embrace of a bipartisan deal to avert
Speaker 1: a government shutdown as provocation for the mutiny. The move
Speaker 1: tees up a high stakes vote which could dramatically shift
Speaker 1: the balance of power in Washington. McCarthy must call a
Speaker 1: vote within two legislative days, and Gates would only need
Speaker 1: the support of a handful of ultra conservative colleagues to
Speaker 1: overthrow McCarthy if Democrats support them. The JP Morgan CEO
Speaker 1: Jamie Diamond says artificial intelligence is already being used by
Speaker 1: thousands of employees at his bank. In an exclusive interview
Speaker 1: with Bloomberg, Diamond thinks that AI is likely to make
Speaker 1: dramatic improvements in workers' quality of life, even if it
Speaker 1: eliminates some jobs.
Speaker 7: Technologies always replace jobs. Your children will live to one
Speaker 7: hundred and not have cancer because of technology, and literally
Speaker 7: they'll probably be working three and a half days a week.
Speaker 7: So technology has done unbelievable things from mankind. But you know,
Speaker 7: planes crash, pharmacies getting misused. There are negatives. This one
Speaker 7: one of the biggest negative of my view is AI
Speaker 7: being used by bad people to do bad things. You
Speaker 7: know the fact, and I do think you know, eventually
Speaker 7: have legal guardrails around. It's kind of hard to do
Speaker 7: because it's new, but it will add a huge value.
Speaker 1: Diamond has previously said the technology can be used to
Speaker 1: help the bank develop new products and improve productivity. And
Speaker 1: if you want to hear that interview with the JP
Speaker 1: Morgan CEO, you can find it on the Bloomberg Talks podcast,
Speaker 1: all our most important conversations in one place. Jamie Diamond's
Speaker 1: comments around a three and a half day work week
Speaker 1: getting a lot of attention, but we're thinking about a
Speaker 1: very different three and a half days and that's the
Speaker 1: Conservative Party conference. We heard yesterday from the Chancellor there's
Speaker 1: no money for tax cuts despite clamoring for the likes
Speaker 1: of former Prime Minister Liz Truss. But the future of
Speaker 1: the HS two rail project taking up a lot of
Speaker 1: attention at the conference. That reports the Prime Minister could
Speaker 1: scrap the leg from Birmingham to Manchester as soon as today.
Speaker 1: Let's talk about what's in store at the conference today.
Speaker 1: Carolyn Hepger is in Manchester and she joins us now
Speaker 1: from the conference. Good morning to you, Caroline. So still
Speaker 1: no formal announcement over HS two. But are those the
Speaker 1: three biggest letters, well, two letters in a number that
Speaker 1: everyone's talking about in Manchester.
Speaker 2: It certainly is one of them. Look is worse than
Speaker 2: scrapping the line to Manchester for high speed rail? It's indecision.
Speaker 2: Michie Sunac has refused to say whether to build the
Speaker 2: line to Manchester where we are at conference or not.
Speaker 2: Perhaps he's waiting for his big speech, but that's not
Speaker 2: until tomorrow. So that leaves the rumor mill and pretty
Speaker 2: much every conversation with ministers asking for an answer. It
Speaker 2: worries Conservatives about sunak's ability to make tough decisions toys
Speaker 2: remember some twenty points behind the Labor polls. It has
Speaker 2: hugely angered Northern mayors, including the Conservative leader Andy Street
Speaker 2: that you heard just earlier you'll be turning your back
Speaker 2: on an opportunity to level up once in a generation.
Speaker 2: It'll damage the UK's international reputation his view. The Chancellor
Speaker 2: in his big speech yesterday, though, did talk about the
Speaker 2: reasoning behind this. You know, why does it cost ten
Speaker 2: times more to build rail infrastructure in the UK than
Speaker 2: it does in France, the Labor mayor of Manchester telling
Speaker 2: us here on Bloomberg Radio yesterday, that's a question for
Speaker 2: the government. He said that the Conservative Party can't avoid
Speaker 2: responsibility for the cost overrun. So HS two really does
Speaker 2: definitely threaten to derail the message for long term decision
Speaker 2: making for a brighter future. That's the slogan here at
Speaker 2: the Conservative Party conference.
Speaker 1: Yeah, that moved to insert long term into that slogan.
Speaker 1: Very interesting as well as we think about the long
Speaker 1: road to the next election as well. Lots of talk
Speaker 1: too at the conference Caroline yesterday about tax cuts. Did
Speaker 1: the Chancellor manage to put speculation or hope that there
Speaker 1: could be tax cuts on the way to bed on
Speaker 1: his speech.
Speaker 2: Stephen, the short answer is no. He talked about wanting
Speaker 2: a lot of tax cuts, but his speech yesterday was
Speaker 2: noted for its sobriety and the length which was pretty short.
Speaker 2: The main thing that he talked about is the IFS
Speaker 2: Institute for Fiscal Studies, a influential think tank in the UK.
Speaker 2: He said that the IFS said last week we are
Speaker 2: moving definitively to a higher tax economy. They are wrong.
Speaker 2: That was the line that got a big reaction to
Speaker 2: the fairly sedate crowd for the Chancellor yesterday at the UK,
Speaker 2: having said that is already seeing the highest tax levels
Speaker 2: in around sixty years. Also in that speech, the Chancellor
Speaker 2: talked about this being an elemental choice between sound money
Speaker 2: the Conservatives or running out of money the Labor Party.
Speaker 2: We have to be honest about taxes is what the
Speaker 2: Chancellor was saying. So his main points were quite small,
Speaker 2: really cutting increases in the civil service leading to savings
Speaker 2: of a billion pounds, increasing productivity in the UK, which
Speaker 2: really is a huge long term issue that takes investment
Speaker 2: that doesn't seem available, and performing the welfare state to
Speaker 2: get more people back to work. But again critics would
Speaker 2: say that ignores part of the problem, which is an
Speaker 2: increasingly unwell workforce. So those were the sort of key
Speaker 2: lines that came out of the Chances of speech yesterday
Speaker 2: talked about taking on the declinists. But Liz Truss's speech,
Speaker 2: in contrast, got a packed crowd queuing around the block
Speaker 2: nearly a year after her disaster's mini budget. She gave
Speaker 2: no TV or radio interviews, no, just that big speech,
Speaker 2: but she talked about cutting corporation tax, building half a
Speaker 2: million new homes, and resuming fracking in order to cut
Speaker 2: energy bills. She talked about we want to stop taxing
Speaker 2: things and banning things. I mean, she got a really
Speaker 2: rapturous welcome, even though her policies are more to the
Speaker 2: right of the Sunac Hunt government right now, and you know,
Speaker 2: the government's line, one former minister for example, saying to
Speaker 2: us it is what it is. It is a side show,
Speaker 2: literally that. So that's the sort of a view against
Speaker 2: Liz trust But you know she does now have quite
Speaker 2: a number of MP's backing her growth plan.
Speaker 1: Yeah, that'd be fascinating to watch the dynamics playing out
Speaker 1: among Conservative Party big wigs. I suppose our supercorded a
Speaker 1: phrase Carlin Hepger at the Conservative Party conference at Manchester.
Speaker 1: Thank you very much. I wanted to bring you some
Speaker 1: more of our interview at the JP Morgan CEO Jamie Diamond.
Speaker 1: Next you talked about the state of the US economy,
Speaker 1: why he thinks rates could go to seven percent, but
Speaker 1: his comments and artificial intelligence and its impact on the
Speaker 1: workforce having an impact too. Been speaking to Emily Chang.
Speaker 4: Technologies always replaced jobs.
Speaker 7: Your children will live to one hundred and not have
Speaker 7: cancer because of technology, and literally they'll probably be working three.
Speaker 4: And a half days a week.
Speaker 7: So technology has done unbelievable things from mankind. But you know,
Speaker 7: planes crash, pharmacies get misused. There are negatives. This is
Speaker 7: one of the biggest negative of my view, is AI
Speaker 7: being used by bad people to do bad things. Think
Speaker 7: of cyber You know, Henry Kischenerho talks about warfare, but
Speaker 7: you know the fact.
Speaker 4: And I do think you know, eventually have legal guard
Speaker 4: with around.
Speaker 7: It's kind of hard to do because it's new, but
Speaker 7: it will add a huge value.
Speaker 4: And you know, for JP Morgan, if it replaces.
Speaker 7: Jobs, and we hope to redeploy people like at First Republic.
Speaker 7: You know, we've offered jobs to like ninety percent of
Speaker 7: the people they accepted.
Speaker 4: But we also you know, we've told them as we
Speaker 4: some of those.
Speaker 7: Jobs are transitory, but we hire thirty thousand people a year,
Speaker 7: so we expect to be able to get them a
Speaker 7: job somewhere local and a different brandch or a different
Speaker 7: function if we can do that. So and we'll be
Speaker 7: doing that with any dislocation that takes place as a result.
Speaker 8: AI, I want the Jamie Dimon forecast on the broader economy.
Speaker 8: First it was hurricanes and then it was storm clouds
Speaker 8: in your annual letter what's the weather now receipt?
Speaker 7: You guys have consistently got this wrong. Okay, I'm not
Speaker 7: giving a forecast. I'm trying to I blame myself, Okay.
Speaker 7: The US has been very strong for a while, no surprise.
Speaker 7: Five trillion dollars was pump pumped in fiscally, you know,
Speaker 7: three trillion or four trillion of QI, and now that's
Speaker 7: being reversed. The consumer is still in good shape. There's
Speaker 7: still spending money. There's still have more money than pre COVID.
Speaker 7: It's spending down home prize has gone for fifteen years,
Speaker 7: ASCID prizes are gone for fifteen years. They're in pretty
Speaker 7: good shape. And then the people are talking about deterioration.
Speaker 7: Credit is not to tearing credit card all time highs,
Speaker 7: not inflation adjusted or GDP adjusted or income adjusted, And
Speaker 7: yeah it's deterrians. We think there's normalizing and corporate credit
Speaker 7: has been quite good. So you have a strong economy.
Speaker 7: That's the here now, and all the data is a
Speaker 7: little distorted because of COVID and things like that. When
Speaker 7: you ask the question about a forecast, and I don't
Speaker 7: make forecasts, I look out there and say, what are
Speaker 7: the range of.
Speaker 8: Outcomes from hurricane to storm clouds?
Speaker 7: No, I put several storm clouds, I said. When I
Speaker 7: said hurricane, I was correcting. Soon said the storm clouds dissipate.
Speaker 7: I said, no, that one may be a hurricane. We
Speaker 7: don't know what it is. Here's what they are. There're
Speaker 7: two of them that are different than other things. So
Speaker 7: we always have you know, I don't worry about the weather,
Speaker 7: and I honestly, I spend a lot of time guessing
Speaker 7: about the economy, and that to me is.
Speaker 4: The sun her rainier. I don't worry about that.
Speaker 7: We run the company to serve clients through thick and thin.
Speaker 7: That's what we do, to serve governments to you know,
Speaker 7: satisfy our regulators.
Speaker 4: And that that's all weather.
Speaker 7: But there are two things which are extraordinary today which
Speaker 7: may have different outcomes. And think of them as storm clouds.
Speaker 7: We don't know if they're going to hit, when they're
Speaker 7: going to hit, what they're going to do, Okay, so
Speaker 7: I'm not predicting that, but I'll tell you what I
Speaker 7: worry about. So one is the fiscal money being spent
Speaker 7: is so big, largest in peacetime ever in America and
Speaker 7: kind of around the world, with already very high deficits
Speaker 7: and QT we've never had, so I know some people
Speaker 7: think QT will be uneventful.
Speaker 4: I'm not so sure.
Speaker 7: At a minimum, I expect volatile markets and then you've
Speaker 7: got and then all the long term fiscal things are
Speaker 7: kind of inflationary. You know, oil prices, certain commodity prices,
Speaker 7: the green economy, you know, the restruction of trade, you
Speaker 7: name it. I see it's add inflation, not subtracting inflation.
Speaker 7: So I don't think inflationary will be that, you know,
Speaker 7: keep on going down. It may not, and therefore rates
Speaker 7: may go higher. But the biggest dorm claus geopolitical, it's Ukraine,
Speaker 7: the humanitarian crisis. You know, it's a war not far
Speaker 7: from here. It's along six hundred miles, five hundred thousand
Speaker 7: people killed. It's nuclear blackmail. It's going to affect old
Speaker 7: global relationships in America and China trade alliances. We don't
Speaker 7: know how it's going to start either. So I just
Speaker 7: put those two things. Is I keep a close eye on.
Speaker 7: And then how it affects the economy is different. And
Speaker 7: what I've been talking about that is I just.
Speaker 4: Tell you be prepared for higher rates and slower te percent.
Speaker 8: Are we really going there?
Speaker 4: And I don't know.
Speaker 7: When I said five percent, they said are we going there? Yes,
Speaker 7: it's possible, you know, so I when I talk to
Speaker 7: my board, I say, yeah, can.
Speaker 4: It go to seven percent?
Speaker 7: The answers yes, are the factors that would drive it,
Speaker 7: you know, higher than you know where it is today?
Speaker 7: You know four A four six or four semnob aout
Speaker 7: ten year bond. Now, yes, is supply and demand could
Speaker 7: push I yes, I'm just saying be prepared for it.
Speaker 7: And then the worst case is stacklation, you know, high
Speaker 7: race because you have a booming economy and there's a
Speaker 7: lot of competition for capital.
Speaker 4: It's not the same thing as dagflation.
Speaker 8: What are what are the ripple effects of the stress
Speaker 8: of that seven percent rates on business, on your growth?
Speaker 7: Well, I'm not worried about japing Morgan shaping world. You know,
Speaker 7: we are prepared. We can handle seven percent. We can
Speaker 7: handle two percent again, Yeah, we can.
Speaker 4: Handle that too.
Speaker 7: I mean that's I mean, that's risk management is not
Speaker 7: the same thing as guests in the future, when risk
Speaker 7: managers look at the range of potential outcomes and being
Speaker 7: able to say yourself, we can handle this, we can
Speaker 7: handle this.
Speaker 4: Weever we expect it, and we can handle it in between.
Speaker 7: You know, if you bet your company and you know
Speaker 7: one outcome, So I think all companies do that. You know,
Speaker 7: every company's got different exposures. You know, input prices and
Speaker 7: output prices. You know, some interst rates don't matter it.
Speaker 7: Some it's the price of mozzarella. So what's your business?
Speaker 7: Your business is different. So, but I think we don't
Speaker 7: know the effect of these things in the economy. So
Speaker 7: they may we may have a soft landing, we may
Speaker 7: have a mild recession, may have a harder recession. Obviously
Speaker 7: there are potential bid outcomes. You know, the worst would
Speaker 7: be economically is staflation, where you have low growth, high
Speaker 7: interest rates, and obviously if that happens, you're going to see,
Speaker 7: you know, a lot of people struggling.
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