WEBVTT - Bill Poole on Brexit: EU's Regulatory Burden Will Remain(Audio)

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<v Speaker 1>The Brexit vote coverage on Bloomberg Radio. So as Charlie

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<v Speaker 1>Apologist so ably reported, it does look like the vote

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<v Speaker 1>to Remain in the EU has edged out Breggs that

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<v Speaker 1>we will not know for hours, but this is the latest.

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<v Speaker 1>And when you have Nigel Farage, who has been such

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<v Speaker 1>allowed and important voice urging voters to say no to

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<v Speaker 1>the EU, if he says it looks like Remain has won,

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<v Speaker 1>it seems like a very powerful indicator to all of

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<v Speaker 1>us who are listening and watching. So if the EU

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<v Speaker 1>is not going to see the exit of the UK,

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<v Speaker 1>what does it mean for the global economy? What does

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<v Speaker 1>it mean for the US economy? And in fact, what

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<v Speaker 1>does it mean for global central banks. We're gonna put

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<v Speaker 1>all this to Bill Pool. He is a former president

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<v Speaker 1>of the Federal Reserve Bank of St. Louis, senior fellow

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<v Speaker 1>at the Cato Institute. Joining us now, Bill, welcome back,

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<v Speaker 1>Thank you, Kathleen. So what's your immediate reaction to this

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<v Speaker 1>or my reaction is? Uh, First of all, it looks

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<v Speaker 1>like Remain winds. I follow the betting odds and they

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<v Speaker 1>have now gone to twelve to one for Remain. Uh.

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<v Speaker 1>You mentioned it looks like it's going to be a

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<v Speaker 1>fifty two split. Percentage wise, it's a fairly healthy margin.

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<v Speaker 1>I think it's good that it's not just eking out

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<v Speaker 1>a bear a bear wind. It appears that the UH.

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<v Speaker 1>One of the results is going to be that the

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<v Speaker 1>the EU is going to have to respond to the

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<v Speaker 1>fervor with which the Leave campaign proceeded in the UK.

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<v Speaker 1>A lot of people in the UK are set up

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<v Speaker 1>with the regulatory burden that comes from the EU. UH.

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<v Speaker 1>It's important to understand that the EU has UH used

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<v Speaker 1>this very nice sounding word, they want to harmonize regulations,

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<v Speaker 1>but a lot of what that is about is that

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<v Speaker 1>the French want to saddle other countries with the same

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<v Speaker 1>unsatisfactory labor market rules. For example, the Hollan government and France,

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<v Speaker 1>elected as a socialist government, has been backtracking to a

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<v Speaker 1>degree that backtracking has led to labor disputes in France,

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<v Speaker 1>been some strikes recently. So I think there's going to

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<v Speaker 1>be should be some soul searching here and the UK

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<v Speaker 1>needs to come forward with a very positive program of

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<v Speaker 1>reform for the U. For the EU, it's becoming a scleric.

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<v Speaker 1>Growth rates are low, unemployment hangs high, and most of

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<v Speaker 1>the EU reforms are really needed, and that's what the

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<v Speaker 1>UH leave people. UH, we're saying that we're fed up

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<v Speaker 1>with this bill Pool. I wondered if you could talk

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<v Speaker 1>a little bit about demographics, not only when it comes

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<v Speaker 1>to the United Kingdom, but to the European Union at large,

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<v Speaker 1>because as part of the U govn whole results, they

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<v Speaker 1>are saying that people under the age of twenty four,

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<v Speaker 1>we're three to one for remaining in the European Union,

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<v Speaker 1>while those over the age of fifty voted to leave.

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<v Speaker 1>That's not going to change after the results are in

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<v Speaker 1>tomorrow morning, is it. No, that's not going to change. Um. Actually,

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<v Speaker 1>because as the older people are gradually dying off the

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<v Speaker 1>fraction of the population that remembers and was governed by

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<v Speaker 1>the UK before it joined the EU. UH, that population

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<v Speaker 1>is declining, UH as people age and die. So I

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<v Speaker 1>would guess that the allegiance to the EU among the

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<v Speaker 1>voting public in the UK will rise, but that's not

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<v Speaker 1>going to satisfy a lot of the underlying concerns. And

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<v Speaker 1>I would guess also that as the younger people UH

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<v Speaker 1>achieve more responsibility various places in their career. UH. For

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<v Speaker 1>actually senior positions in businesses large and small. They will

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<v Speaker 1>see the burden that is imposed by the EU and

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<v Speaker 1>they will uh gravitate towards an appreciation of what the

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<v Speaker 1>leaf position was all about. So we'll see how that

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<v Speaker 1>plays that. I just have to ask you, Bill uh,

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<v Speaker 1>Janet Yellen, Fed chair. Actually other central bankheads have said

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<v Speaker 1>they're really waiting to see what happens with the breggsit vote.

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<v Speaker 1>Looks like the Braviin vote maybe prevailing at the very least.

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<v Speaker 1>Do we say, now, well, Janet Yellen, you said you

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<v Speaker 1>better watch out because it might buy financial market volatility

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<v Speaker 1>that could tighten financial conditions, hold off on an interest

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<v Speaker 1>rate increase, and said she was very specific. It had

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<v Speaker 1>a big influence at the last meeting. Is opened the

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<v Speaker 1>door wider to a rate hike for Janet Yellen and

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<v Speaker 1>the Fed. I suppose. But one of the things that's

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<v Speaker 1>rather surprising about this look, when was this election scheduled

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<v Speaker 1>over a year ago, wasn't it? So why is it

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<v Speaker 1>just now the Janet Yelle on feder Reserve is becoming

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<v Speaker 1>concerned and using that as a reason to um delay

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<v Speaker 1>consideration of a rate hike. Uh. It seems to me

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<v Speaker 1>that's uncertainty has been out there for at least a year.

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<v Speaker 1>It's getting We've gotten closer to it. Isn't the Fed

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<v Speaker 1>supposed to look ahead? Well? I think maybe they're worried

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<v Speaker 1>about the financial market impact and being more because I

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<v Speaker 1>don't think people took it seriously that would happen, And

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<v Speaker 1>when they did, for a while the FED said, WHOA,

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<v Speaker 1>that's maybe the horse of a different color. The polling

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<v Speaker 1>results and the betting results have for quite some months

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<v Speaker 1>indicated that leave was a had had some probability put

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<v Speaker 1>on it. That's not a recent development. That didn't just happen.

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<v Speaker 1>Bill pull Just to inform you, the unemployment rate in

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<v Speaker 1>the United Kingdom right now is about five five percent,

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<v Speaker 1>and the pound sterling is strengthening against the euro, up

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<v Speaker 1>more than half a percent of more than eight tenths

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<v Speaker 1>of a percent against the US dollar. UH the en weakening,

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<v Speaker 1>the Swiss frank weakening. Will any of this change? Mark

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<v Speaker 1>Karney ahead of the Bank of England's position on interest rates.

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<v Speaker 1>There was an interesting chart I think it was in

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<v Speaker 1>the Wall Street Journal this morning showing per capita GDP

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<v Speaker 1>in the UK relative to UH some I guess it's

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<v Speaker 1>France in Germany and the UK has been pulling out ahead.

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<v Speaker 1>The UK has been pulling out ahead. The economy has

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<v Speaker 1>been performing better. That's not to say that it's great,

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<v Speaker 1>but it has been performing better. And I think that

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<v Speaker 1>if if this UH, if this leave campaign leads to

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<v Speaker 1>leaves the UK to promote more structural reform, more pro market,

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<v Speaker 1>pro growth reform, that's going to speed up growth and

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<v Speaker 1>it will justify require indeed, interest rate increases and UH

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<v Speaker 1>forthcoming incoming quarters. Now. Of course, a lot of people

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<v Speaker 1>talked about Mark Arney. Mark Arne, excuse me us, the

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<v Speaker 1>governor of Head the Bank of England, has been pounding

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<v Speaker 1>the table about how damage has already done to the

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<v Speaker 1>UK economy. UH Is that insufficient to slow down an

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<v Speaker 1>interest rate increase for the BOE the Bank of England.

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<v Speaker 1>The damage already done? I think that's pretty small. There's

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<v Speaker 1>been some uncertainty. I don't see any evidence of huge disruption, um,

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<v Speaker 1>you know, significant investment projects on hold, etcetera, etcetera. I

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<v Speaker 1>think that he's probably overstating damage already done and that

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<v Speaker 1>will disappear from the equation pretty quickly. Thank you very

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<v Speaker 1>much for joining us. Bill Pool is former president of

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<v Speaker 1>the Federal Reserve Bank of St. Louis. He is a

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<v Speaker 1>senior Fellow at the Cato Institute. Continuing coverage right here

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<v Speaker 1>on Bloomberg on the Brexit boat. The polls are closed

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<v Speaker 1>in the United Kingdom to determine whether the country will

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<v Speaker 1>remain in the European Union or will leave. This is

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<v Speaker 1>Bloomberg Radio