1 00:00:00,040 --> 00:00:02,600 Speaker 1: Who you put your trust in matters. Investors have put 2 00:00:02,680 --> 00:00:07,000 Speaker 1: their trust and independent registered investment advisors to the two 3 00:00:07,280 --> 00:00:11,360 Speaker 1: four trillion dollars. Why Learn more at find your Independent 4 00:00:11,400 --> 00:00:26,960 Speaker 1: Advisor dot com. Welcome to the Bloomberg Surveillance Podcast. I'm 5 00:00:27,040 --> 00:00:30,920 Speaker 1: Tom Keene with David Gura. Daily we bring you insight 6 00:00:31,000 --> 00:00:35,560 Speaker 1: from the best in economics, finance, investment, and international relations. 7 00:00:35,960 --> 00:00:40,559 Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot com, and 8 00:00:40,640 --> 00:00:48,239 Speaker 1: of course, on the Bloomberg. Donald Trump's and victory triggered 9 00:00:48,479 --> 00:00:51,559 Speaker 1: a sell off in global bonds and emerging market assets 10 00:00:51,600 --> 00:00:53,880 Speaker 1: while the dollar rose. Now we're seeing some of those 11 00:00:54,160 --> 00:00:57,680 Speaker 1: post election moves scale back as investors assess whether they're 12 00:00:57,720 --> 00:01:00,960 Speaker 1: overreacting the Trump's victory. For more, we're very pleased to 13 00:01:00,960 --> 00:01:04,320 Speaker 1: welcome Alex Salmon. He is the former First Minister of Scotland. 14 00:01:04,480 --> 00:01:08,520 Speaker 1: Good morning, Holger's meeting. Chief economist at Barenberg also joins us. 15 00:01:09,240 --> 00:01:12,160 Speaker 1: Thank you for joining us. Let me start off with you, right, 16 00:01:12,600 --> 00:01:16,160 Speaker 1: What does it Donald trump victory mean to you? Is 17 00:01:16,200 --> 00:01:20,240 Speaker 1: this the end of austerity? Is this actually inequality? How 18 00:01:20,280 --> 00:01:22,720 Speaker 1: do you explain it? Because if you can explain it, 19 00:01:22,720 --> 00:01:24,560 Speaker 1: it means that he has a clear mandate to do 20 00:01:24,720 --> 00:01:29,000 Speaker 1: what exactly. Well, I don't think Hamdy knowes. I mean, obviously, 21 00:01:29,040 --> 00:01:34,760 Speaker 1: the campaign rhetoric employed by the Donald is very frightening 22 00:01:34,800 --> 00:01:38,120 Speaker 1: to lots of people, to Mexican, to Muslims, perhaps to 23 00:01:38,200 --> 00:01:41,440 Speaker 1: gaze to minorities, and you see some of that reaction. 24 00:01:41,560 --> 00:01:44,959 Speaker 1: It's not just disappointment, there's fear in that reaction. And 25 00:01:45,000 --> 00:01:48,760 Speaker 1: more international terms, then, I think it's a balance between 26 00:01:49,320 --> 00:01:53,480 Speaker 1: an expansionally domestic policy in the economy, but also the 27 00:01:53,560 --> 00:01:58,240 Speaker 1: threat of protectionism, which an international affairs and trade. Now, 28 00:01:58,280 --> 00:02:00,760 Speaker 1: I mean the few things which are absolutely hastan laws 29 00:02:00,760 --> 00:02:05,280 Speaker 1: and economics, but one of them is protectionism makes everybody poorer. 30 00:02:05,520 --> 00:02:07,960 Speaker 1: The less international trade you have, the less freedom of 31 00:02:08,000 --> 00:02:11,000 Speaker 1: trade you have, the more the more poor people. Yet 32 00:02:11,040 --> 00:02:13,679 Speaker 1: this is where the world is going. Well, there's a 33 00:02:13,720 --> 00:02:16,320 Speaker 1: lot of protections forces. I mean, it's it's one of 34 00:02:16,360 --> 00:02:19,640 Speaker 1: the natural populist instincts, and it's usually the job of 35 00:02:19,680 --> 00:02:23,000 Speaker 1: politicians to resist that populist instinct for the greater good. 36 00:02:23,960 --> 00:02:28,519 Speaker 1: But so you've got the balance between an expansionary policy 37 00:02:28,560 --> 00:02:31,920 Speaker 1: to restore the broken infrastructure of the of the United 38 00:02:31,960 --> 00:02:35,680 Speaker 1: States in the one hand, but the looming threat of protectionism, 39 00:02:35,680 --> 00:02:42,000 Speaker 1: which certainly will absolutely make everybody poorer, including the dispossessed, 40 00:02:42,000 --> 00:02:45,280 Speaker 1: the disappointed of the United States who Donald Trump was 41 00:02:45,280 --> 00:02:47,480 Speaker 1: meant to be appealing to. Now it's helped me here 42 00:02:47,720 --> 00:02:51,440 Speaker 1: with my observation that London has barely been affected by Brexit. 43 00:02:51,720 --> 00:02:55,120 Speaker 1: How is brexit the initial days here, the initial weeks, 44 00:02:55,120 --> 00:02:58,160 Speaker 1: How has it affected Scotland. Well that there hasn't been 45 00:02:58,520 --> 00:03:01,160 Speaker 1: a dramatic effect, but of course know that's one in London. 46 00:03:01,280 --> 00:03:03,960 Speaker 1: So it's about like jumping off the post Office talent 47 00:03:04,040 --> 00:03:06,440 Speaker 1: and halfway down saying well, we're all right so far 48 00:03:07,200 --> 00:03:09,560 Speaker 1: at the ground jet. There hasn't been a Brexit in Scotland. 49 00:03:09,560 --> 00:03:11,920 Speaker 1: It would be jumping off the scott Monument in Edinburgh, 50 00:03:12,120 --> 00:03:14,520 Speaker 1: being halfway down and saying we're all right so far. 51 00:03:14,600 --> 00:03:18,040 Speaker 1: So we don't know. I mean. The difficulty I think 52 00:03:18,520 --> 00:03:21,200 Speaker 1: it's looming in the economy is there's a growing realization 53 00:03:21,480 --> 00:03:25,919 Speaker 1: that the UK government doesn't know either, and the indicatetion 54 00:03:26,280 --> 00:03:30,359 Speaker 1: no clear strategy will affect real economic and fancy. That 55 00:03:30,480 --> 00:03:32,480 Speaker 1: sets us up for our next segment on Brexit. But 56 00:03:32,560 --> 00:03:35,400 Speaker 1: really today to me is almost currency dynamics. Yeah, it's 57 00:03:35,400 --> 00:03:38,480 Speaker 1: currency dynamics. It's also again to access point you know 58 00:03:38,520 --> 00:03:41,240 Speaker 1: about protectionism. If you're in Europe and whole ground, I 59 00:03:41,240 --> 00:03:43,760 Speaker 1: know you've held the view the German jew for for 60 00:03:43,920 --> 00:03:47,160 Speaker 1: quite some time. Right an angler miracle has been the 61 00:03:47,200 --> 00:03:50,920 Speaker 1: beacon of stability for eleven years. How does she fight 62 00:03:51,320 --> 00:03:54,720 Speaker 1: this current wave of populism which brings a lot of 63 00:03:54,720 --> 00:03:56,560 Speaker 1: things with it. How we cope with immigration, how we 64 00:03:56,600 --> 00:03:59,080 Speaker 1: cope with trade deals, how we cope with open borders. 65 00:03:59,560 --> 00:04:01,960 Speaker 1: First of all, life fully agree with what we just heard. 66 00:04:02,000 --> 00:04:05,840 Speaker 1: Protectionism is the real risk here. So far, policymakers around 67 00:04:05,880 --> 00:04:08,360 Speaker 1: the Western world have held the line we have not 68 00:04:08,480 --> 00:04:10,640 Speaker 1: had an increase in protectionism yet, but now with the 69 00:04:10,720 --> 00:04:14,000 Speaker 1: Brexit move vote and Donald Trump, there is a risk 70 00:04:14,080 --> 00:04:18,080 Speaker 1: of protectionism writhing. The German position is very clear. Germany 71 00:04:18,160 --> 00:04:21,680 Speaker 1: did the hard labor market reforms ten twelve years ago. 72 00:04:22,040 --> 00:04:24,839 Speaker 1: As a result, it has record employment, It has a 73 00:04:24,880 --> 00:04:28,640 Speaker 1: strong domestic situation, and as a result, populists in Germany 74 00:04:28,640 --> 00:04:31,880 Speaker 1: are at around fifteen fourteen percent. They are not close 75 00:04:31,960 --> 00:04:34,320 Speaker 1: to anywhere where they are in the UK or the US, 76 00:04:34,400 --> 00:04:37,480 Speaker 1: but very I mean very you know, clearly, we spoke 77 00:04:37,520 --> 00:04:40,279 Speaker 1: to a couple of the Trump advisors David now Pass, Mr. 78 00:04:40,360 --> 00:04:43,760 Speaker 1: Navarro and Peter Navarro was very clear he believes that 79 00:04:43,880 --> 00:04:46,120 Speaker 1: any country with a surplus, and he mentioned Germany, he 80 00:04:46,120 --> 00:04:48,839 Speaker 1: talked about China, any country with a surplus is cheating 81 00:04:48,880 --> 00:04:53,760 Speaker 1: America in trade deals. That is just wrong. Economics period, 82 00:04:54,000 --> 00:04:59,080 Speaker 1: simply wrong. Any sort of second year student of economics 83 00:04:59,160 --> 00:05:02,359 Speaker 1: or first year student of economics food, No, that is wrong. 84 00:05:02,400 --> 00:05:03,880 Speaker 1: If you look at the German date of what you 85 00:05:03,920 --> 00:05:07,400 Speaker 1: see is dependents are rising four percent, government spending is 86 00:05:07,480 --> 00:05:10,719 Speaker 1: rising four percent year over, Your private consumption is fairly strong. 87 00:05:11,080 --> 00:05:15,520 Speaker 1: You cannot simply accuse the Germans of underspending. Alright, we 88 00:05:15,600 --> 00:05:18,719 Speaker 1: have Sirry Alex, And it was some time of Alex 89 00:05:18,760 --> 00:05:21,400 Speaker 1: pulled that thought because we're just getting the former French 90 00:05:21,480 --> 00:05:24,599 Speaker 1: finance minster, Emmanuel mccoon, who has just said he's running 91 00:05:24,880 --> 00:05:27,680 Speaker 1: for president. I was seeing life pictures from Bob Tom. 92 00:05:27,760 --> 00:05:30,200 Speaker 1: This is north of Paris. I think it's about forty 93 00:05:30,240 --> 00:05:33,200 Speaker 1: five minutes from Paris. We had covered him extensively. When 94 00:05:33,200 --> 00:05:38,200 Speaker 1: he's talking about reforms again, remember there's a presidential election. Um, 95 00:05:38,240 --> 00:05:40,400 Speaker 1: I'm losing my voice town, but there's a presidential election 96 00:05:40,440 --> 00:05:43,080 Speaker 1: in France next year. The markets need to decide whether 97 00:05:43,080 --> 00:05:46,920 Speaker 1: they believe the polls. There is certainly someone from the 98 00:05:46,960 --> 00:05:50,680 Speaker 1: far right is Mahin Lupin, who is much more palatable 99 00:05:50,760 --> 00:05:54,280 Speaker 1: than her father ever was. But with anti Europe stands, 100 00:05:54,320 --> 00:05:58,200 Speaker 1: antimmigration stands. Macon is not from that camp. He's very young, 101 00:05:58,200 --> 00:06:02,200 Speaker 1: he's about thirty nine. He answer, it's a crowded field 102 00:06:02,520 --> 00:06:04,800 Speaker 1: of where mccorn wants to be. Right, he's a socialist. 103 00:06:04,800 --> 00:06:06,440 Speaker 1: So if you look at the left of talk field. 104 00:06:06,560 --> 00:06:08,400 Speaker 1: Let's rip up the script right now. We see this 105 00:06:08,520 --> 00:06:11,360 Speaker 1: this important moment for France. Alex Samon, you've seen this 106 00:06:11,480 --> 00:06:15,440 Speaker 1: before and it's almost a new populism. Did Mr Trump 107 00:06:15,520 --> 00:06:19,320 Speaker 1: and frankly other elections, did they change the traditional calculus 108 00:06:19,360 --> 00:06:23,760 Speaker 1: of voting across Europe. Well, I think it'd be be 109 00:06:23,880 --> 00:06:27,880 Speaker 1: very adventurous after Brexit and after Trump to state that 110 00:06:28,560 --> 00:06:30,680 Speaker 1: Marie La Penn is not going to have a chance 111 00:06:30,680 --> 00:06:33,640 Speaker 1: of winning the Fence presidential election. However, you would say 112 00:06:33,640 --> 00:06:36,799 Speaker 1: that the electoral system in France can of mitigates against 113 00:06:36,800 --> 00:06:39,400 Speaker 1: it because they have a knockout system which goes to runoff. 114 00:06:39,600 --> 00:06:41,760 Speaker 1: And I was you couldn't, for example, when a presidential 115 00:06:41,800 --> 00:06:45,000 Speaker 1: election of France without winning the popular vote like Mr 116 00:06:45,040 --> 00:06:47,960 Speaker 1: Trump did. I could also say that, you know, scott 117 00:06:48,040 --> 00:06:50,880 Speaker 1: was quite interesting here that Scotland is a country where 118 00:06:50,960 --> 00:06:55,080 Speaker 1: the insubject party, the SMP, the one who's become dominant. 119 00:06:55,279 --> 00:06:58,960 Speaker 1: It's actually very progressive party in both in towns of 120 00:06:58,960 --> 00:07:01,880 Speaker 1: international trade but in terms of domestic politics. So it's 121 00:07:01,880 --> 00:07:05,200 Speaker 1: not a given that parties which are against the establishment 122 00:07:05,320 --> 00:07:09,000 Speaker 1: have to be protectionists in terms of attitude the world 123 00:07:09,200 --> 00:07:13,520 Speaker 1: or for that matter, device you had your referendum, settled 124 00:07:13,520 --> 00:07:16,040 Speaker 1: it well last year. Yeah, I mean looks since it 125 00:07:16,040 --> 00:07:18,920 Speaker 1: was two years ago. But since then the SMP has 126 00:07:18,960 --> 00:07:23,040 Speaker 1: won fifty six out of fifty nine Westminster seats in 127 00:07:23,160 --> 00:07:26,040 Speaker 1: the in the in the elections, and the SMP have 128 00:07:26,120 --> 00:07:30,240 Speaker 1: been domestical. Yeah. I just like to emphasize one point. 129 00:07:30,400 --> 00:07:32,960 Speaker 1: If we look at France, we find that among the 130 00:07:33,000 --> 00:07:36,440 Speaker 1: most popular politicians in that country on the center right 131 00:07:36,800 --> 00:07:40,800 Speaker 1: up reformer for your reformer on the center left, Macon 132 00:07:41,240 --> 00:07:44,320 Speaker 1: Vales an economic reformer. So while there's a lot of 133 00:07:44,320 --> 00:07:46,920 Speaker 1: talk about lupendent, there is a tail risk. The really 134 00:07:46,920 --> 00:07:50,720 Speaker 1: interesting thing in France is reformers are reformed. Do you 135 00:07:50,720 --> 00:07:53,680 Speaker 1: mean a more Anglo Saxon model, I mean a more 136 00:07:53,720 --> 00:07:59,480 Speaker 1: Anglo Merker reforms and stability. Can I can I steal 137 00:07:59,480 --> 00:08:02,680 Speaker 1: the phrase you can tell with royalty, so you have 138 00:08:02,760 --> 00:08:05,200 Speaker 1: to pay a premium to Holger every time you use it. 139 00:08:05,200 --> 00:08:07,920 Speaker 1: I think we're also seeing life pictures of Mahin Lupin, 140 00:08:07,960 --> 00:08:10,520 Speaker 1: who's actually rebranding her movement and doesn't want to be 141 00:08:10,560 --> 00:08:12,800 Speaker 1: called Mahein Lupin anymore. She wants to be called Mahein 142 00:08:12,920 --> 00:08:15,480 Speaker 1: the problem Holgar and then I'll ask Alex the same thing. 143 00:08:15,520 --> 00:08:18,200 Speaker 1: She's opening her headquarters in Paris. Their tom is that 144 00:08:18,240 --> 00:08:22,280 Speaker 1: all has been around forever, right, He's been in politics 145 00:08:22,280 --> 00:08:25,080 Speaker 1: for what sixty years, and so if you see a 146 00:08:25,160 --> 00:08:28,880 Speaker 1: wave of people wanting something new, then he's a favorite currently. 147 00:08:28,920 --> 00:08:31,160 Speaker 1: But he may not be the right person. Well, actually 148 00:08:31,160 --> 00:08:33,320 Speaker 1: he would be because he when he was Prime minister, 149 00:08:33,440 --> 00:08:36,439 Speaker 1: he was the one who actually instituted reformed and then 150 00:08:36,440 --> 00:08:38,800 Speaker 1: it was his president she Raq who did not back 151 00:08:38,880 --> 00:08:41,320 Speaker 1: him up against street protests. But so risk the record 152 00:08:41,440 --> 00:08:43,880 Speaker 1: is that he actually wants to perceivee it, wants to 153 00:08:43,880 --> 00:08:47,120 Speaker 1: do reformed and if president he would That's a reasonable point. 154 00:08:47,200 --> 00:08:50,920 Speaker 1: But remember and it's the supports that in France, by definition, 155 00:08:50,920 --> 00:08:53,800 Speaker 1: you come up against the strongest candidate because of the 156 00:08:53,880 --> 00:08:59,480 Speaker 1: knockout system, Lepine will face the strongest alternative candidate argument 157 00:08:59,480 --> 00:09:01,679 Speaker 1: that doesn't up and then the United States, right. I mean, 158 00:09:01,840 --> 00:09:03,439 Speaker 1: it reminds me of two thousand and two. I was 159 00:09:03,480 --> 00:09:07,320 Speaker 1: covering the French elections. Then Tom and her father Jean 160 00:09:07,320 --> 00:09:09,640 Speaker 1: marche Lupin you know, came out of nowhere to that 161 00:09:09,720 --> 00:09:25,880 Speaker 1: second round of the presidential elections. Always driving the conversation 162 00:09:26,000 --> 00:09:30,360 Speaker 1: in international relations with that question. The gentleman who invented 163 00:09:30,360 --> 00:09:33,680 Speaker 1: it out of the Washington consensus, Joseph and I of 164 00:09:33,679 --> 00:09:37,240 Speaker 1: course at the Harvard Kennedy School. His power and interdependence 165 00:09:37,400 --> 00:09:40,880 Speaker 1: is the iconic text, professor, and I wonderful to have 166 00:09:40,960 --> 00:09:47,480 Speaker 1: you with us. How do you define Trump foreign policy? Well, Tom, 167 00:09:47,480 --> 00:09:51,360 Speaker 1: it's early. We don't know based on the campaign which 168 00:09:51,360 --> 00:09:54,959 Speaker 1: of the contradictory statements is going to be operational. But 169 00:09:55,480 --> 00:10:00,040 Speaker 1: I would say on security policy he's more likely to 170 00:10:00,120 --> 00:10:04,079 Speaker 1: day on course. On trade policy, I think you can 171 00:10:04,120 --> 00:10:07,400 Speaker 1: have radical changes the end of TPP and t tipped 172 00:10:07,440 --> 00:10:11,040 Speaker 1: and stuff forth. So a mixed bag and still unconnectable. 173 00:10:11,800 --> 00:10:14,680 Speaker 1: The backdrop from your wonderful monograph of a year ago, 174 00:10:14,800 --> 00:10:17,520 Speaker 1: your smaller size book, which is which I claimed was 175 00:10:17,520 --> 00:10:21,040 Speaker 1: a must read, and your reaffirmation and project syndicate the 176 00:10:21,080 --> 00:10:24,240 Speaker 1: other day is on your optimism on the nation. Let's 177 00:10:24,240 --> 00:10:26,600 Speaker 1: go to the quote I called my morning must read 178 00:10:26,720 --> 00:10:30,040 Speaker 1: for this morning, This from Professor uh Ni and it's 179 00:10:30,040 --> 00:10:35,680 Speaker 1: real simple. We oscillate between triumphalism and declinism. The US 180 00:10:35,800 --> 00:10:39,200 Speaker 1: is not in decline. Finally, Professor and I goes on 181 00:10:39,280 --> 00:10:42,840 Speaker 1: to say, there is Russia a country in decline. Mr 182 00:10:42,840 --> 00:10:46,560 Speaker 1: Trump is correct to avoid the complete isolation of Russia, 183 00:10:46,920 --> 00:10:50,440 Speaker 1: with which we have overlapping interests. No one would could 184 00:10:50,440 --> 00:10:53,760 Speaker 1: gain from a Cold war, Professor and I. How should 185 00:10:53,840 --> 00:11:01,120 Speaker 1: Mr Trump uh discuss, act and behave with Mr Putin? Well, 186 00:11:01,640 --> 00:11:05,040 Speaker 1: he's got a double task. One is, he doesn't want 187 00:11:05,120 --> 00:11:08,920 Speaker 1: to undercut the sanctions which tell Putin that you can't 188 00:11:08,920 --> 00:11:13,720 Speaker 1: steal yourr neighbor's territory by force, as he did with Ukraine. 189 00:11:14,600 --> 00:11:16,840 Speaker 1: On the other hand, we do have business to do 190 00:11:16,960 --> 00:11:23,400 Speaker 1: with the Russians, Iran, Afghanistan, North Korea, the Arctic. There 191 00:11:23,400 --> 00:11:25,679 Speaker 1: are lots of things where we and and of course 192 00:11:25,679 --> 00:11:28,079 Speaker 1: Syria in the Middle East, lots of things where we 193 00:11:28,120 --> 00:11:30,640 Speaker 1: have to do business. So he's got to have a 194 00:11:30,679 --> 00:11:34,240 Speaker 1: business like relationship, which is of course what he prides 195 00:11:34,320 --> 00:11:37,840 Speaker 1: himself in, but at the same time not not let 196 00:11:38,120 --> 00:11:44,520 Speaker 1: pouting off the hook in regard to his aggression against Ukraine. Professor, 197 00:11:44,600 --> 00:11:48,000 Speaker 1: I love what you wrote. Forget soft power, the US 198 00:11:48,160 --> 00:11:51,080 Speaker 1: risks losing hard power, right, I mean, if they're retrenching, 199 00:11:51,120 --> 00:11:53,840 Speaker 1: if they're becoming much more inward looking. You could also 200 00:11:53,880 --> 00:11:57,080 Speaker 1: see the Chinese uh, you know, forcing the rest of 201 00:11:57,120 --> 00:12:00,120 Speaker 1: the world to adopt the reminbi as a reserve and 202 00:12:00,240 --> 00:12:03,800 Speaker 1: s do you think there's a real possibility that four 203 00:12:03,840 --> 00:12:10,280 Speaker 1: years from now the US loses real power. I doubt 204 00:12:10,320 --> 00:12:12,240 Speaker 1: that you're going to see that rendom b is the 205 00:12:12,360 --> 00:12:17,000 Speaker 1: reserve currency. You have to have deep and flexible capital 206 00:12:17,080 --> 00:12:21,000 Speaker 1: markets and a real rule of law before a currency 207 00:12:21,120 --> 00:12:25,040 Speaker 1: becomes a dominant reserve currency. China is a long way 208 00:12:25,040 --> 00:12:29,240 Speaker 1: from that, uh. And in terms of hard military power, 209 00:12:29,360 --> 00:12:31,840 Speaker 1: Trump has said that he is going to invest in 210 00:12:31,840 --> 00:12:35,800 Speaker 1: that area. So I think we're actually likely to lose 211 00:12:35,880 --> 00:12:39,040 Speaker 1: more in the terms of soft power people who want 212 00:12:39,040 --> 00:12:41,880 Speaker 1: to follow our values because of the rhetoric we're using. 213 00:12:42,360 --> 00:12:44,120 Speaker 1: A right, doubt, we're going to lose a lot in 214 00:12:44,320 --> 00:12:49,160 Speaker 1: hard power, either economic or military capability. Right, Professor, what 215 00:12:49,240 --> 00:12:52,320 Speaker 1: are your values are the values under this presidency going 216 00:12:52,320 --> 00:12:53,800 Speaker 1: to be the same as they were ten years ago. 217 00:12:54,400 --> 00:13:00,640 Speaker 1: I I believe in democracy. I believe in tallers towards 218 00:13:00,679 --> 00:13:05,760 Speaker 1: people as certain openness, and those are issues which have 219 00:13:05,880 --> 00:13:10,800 Speaker 1: been questioned in UH in the campaign. I hope that 220 00:13:10,800 --> 00:13:13,600 Speaker 1: that the President elect is going to reaffirm them, as 221 00:13:13,640 --> 00:13:16,920 Speaker 1: many people have urged him to do. Professor, Now you 222 00:13:16,960 --> 00:13:20,600 Speaker 1: have a chapter in your classic book Coping with Interdependence. 223 00:13:20,960 --> 00:13:24,600 Speaker 1: Help us here with President Trump and how he needs 224 00:13:24,640 --> 00:13:28,160 Speaker 1: to cope with a new Westphalian world, how he needs 225 00:13:28,200 --> 00:13:31,480 Speaker 1: to quote, UH, cope with his Fred Zacharias says, a 226 00:13:31,559 --> 00:13:35,920 Speaker 1: hub and spoke system, there's a new calculus here. How 227 00:13:35,960 --> 00:13:41,199 Speaker 1: does a president cope with that? Well? Well, UH, for 228 00:13:41,440 --> 00:13:45,760 Speaker 1: seventy years since Harry Truman's day, the United States is 229 00:13:45,800 --> 00:13:50,840 Speaker 1: not a system of alliances which has provided stability and security. 230 00:13:50,920 --> 00:13:54,720 Speaker 1: And every market requires a political framework of security for 231 00:13:54,840 --> 00:13:59,199 Speaker 1: itself for it to flourish. And if Trump undercuts those 232 00:13:59,240 --> 00:14:03,000 Speaker 1: alliances is then you're going to see the spillover into 233 00:14:03,120 --> 00:14:07,960 Speaker 1: the UH prospects for markets and growth. I think if 234 00:14:08,000 --> 00:14:12,520 Speaker 1: you look at his initial statements since the last week's election, UH, 235 00:14:12,559 --> 00:14:16,440 Speaker 1: he's tended to be reaffirming on those alliances. He complains 236 00:14:16,480 --> 00:14:19,440 Speaker 1: about NATO not paying enough for its own defense, but 237 00:14:19,520 --> 00:14:23,240 Speaker 1: so did previous presidents, and he has at least so 238 00:14:23,280 --> 00:14:28,000 Speaker 1: far authorized the view that we will defend the NATO partners. 239 00:14:28,560 --> 00:14:30,840 Speaker 1: This is what we love about Bloomberg surveillance. Joseph and 240 00:14:30,880 --> 00:14:33,920 Speaker 1: I with us UH and also joining US today Jim O'Neill, 241 00:14:34,000 --> 00:14:36,080 Speaker 1: of course, with his service to Goldman Saxon, then to 242 00:14:36,160 --> 00:14:39,080 Speaker 1: the United Kingdom. Mr O'Neil, you're here, professor and I 243 00:14:39,160 --> 00:14:42,640 Speaker 1: they're talking about interdependence and the new calculus. Help you 244 00:14:42,720 --> 00:14:45,760 Speaker 1: here with how the United Kingdom fits into a new 245 00:14:45,800 --> 00:14:49,480 Speaker 1: Trump foreign policy. So Higil Farage, I believe is stepping 246 00:14:49,520 --> 00:14:51,400 Speaker 1: in on this debate. It's great to be on the 247 00:14:51,480 --> 00:14:55,680 Speaker 1: same UH session as A as somebody like Jokes had 248 00:14:55,720 --> 00:14:58,200 Speaker 1: the pleasure of trusting him about the big world in 249 00:14:58,240 --> 00:15:00,800 Speaker 1: the PASTA. I find the line thinking that this is 250 00:15:00,840 --> 00:15:03,800 Speaker 1: just the whole chump development is a further step on 251 00:15:04,320 --> 00:15:08,480 Speaker 1: the path to an increasingly complex world and a couple 252 00:15:08,480 --> 00:15:11,520 Speaker 1: of other things that for the UK, and I think 253 00:15:11,520 --> 00:15:14,760 Speaker 1: you've seen the Chancellor articulated reasonably well that we just 254 00:15:14,800 --> 00:15:18,360 Speaker 1: had the so called economic con functional dialogue with China 255 00:15:18,840 --> 00:15:21,040 Speaker 1: and He was pretty clear because he was quiz directly 256 00:15:21,040 --> 00:15:22,960 Speaker 1: about that. As the you know, the number one finance 257 00:15:22,960 --> 00:15:26,360 Speaker 1: guy in this country, we have to We're a very small, 258 00:15:26,400 --> 00:15:29,880 Speaker 1: open country and especially post Brexit, we have to have 259 00:15:30,400 --> 00:15:33,240 Speaker 1: as good relationships with the US as we can, but 260 00:15:33,320 --> 00:15:35,840 Speaker 1: we have to be probably even more on the front 261 00:15:35,840 --> 00:15:39,360 Speaker 1: foot with some of these newer guys like China. Is 262 00:15:39,360 --> 00:15:43,360 Speaker 1: an agel forage help with that conversation or is he 263 00:15:43,440 --> 00:15:47,480 Speaker 1: an abstraction? You know that that is something for the 264 00:15:47,920 --> 00:15:50,920 Speaker 1: tactics of the policy makers to focus on what it 265 00:15:51,040 --> 00:15:53,840 Speaker 1: what is really important for the underlying and long term 266 00:15:53,840 --> 00:15:56,840 Speaker 1: health of the UK. We need to be on the 267 00:15:56,880 --> 00:16:00,160 Speaker 1: front foot with the likes of a China, despite some 268 00:16:00,240 --> 00:16:04,840 Speaker 1: of the obvious challenges that creates, because we we need 269 00:16:04,880 --> 00:16:08,440 Speaker 1: to be in the center of global trade flows more 270 00:16:09,000 --> 00:16:11,480 Speaker 1: than we have successfully been in the past, and we 271 00:16:11,560 --> 00:16:14,200 Speaker 1: have to remain in the sense of global capital flows 272 00:16:14,520 --> 00:16:17,920 Speaker 1: and whilst that raises some challenges for us, as we 273 00:16:18,000 --> 00:16:21,080 Speaker 1: saw in things, I was involved in the policy. We 274 00:16:21,080 --> 00:16:25,280 Speaker 1: were one of the earliest participants in the Asian Infrastructure Bank. 275 00:16:25,360 --> 00:16:27,760 Speaker 1: I was there for the signing. We have to do 276 00:16:28,320 --> 00:16:31,000 Speaker 1: like no other It doesn'ntagonizing or playing tough guy with 277 00:16:31,160 --> 00:16:33,520 Speaker 1: China work. Listen, I'll go back to what I said 278 00:16:33,520 --> 00:16:35,440 Speaker 1: about the dollar. I remember all this stuff in the 279 00:16:35,440 --> 00:16:38,960 Speaker 1: early eighties about beating up on Japan, and you know 280 00:16:39,600 --> 00:16:50,920 Speaker 1: it never really happened. Who you put your trust in matters. 281 00:16:51,040 --> 00:16:55,720 Speaker 1: Investors have put their trust in independent registered investment advisors 282 00:16:56,000 --> 00:16:59,000 Speaker 1: to the tune of four trillion dollars. Why they see 283 00:16:59,000 --> 00:17:02,520 Speaker 1: their rules to serve, not sell, That's right. Charles Schwab 284 00:17:02,640 --> 00:17:07,160 Speaker 1: is committed to the success over seven thousand independent financial 285 00:17:07,160 --> 00:17:12,960 Speaker 1: advisors who passionately dedicate themselves to helping people achieve their 286 00:17:12,960 --> 00:17:25,760 Speaker 1: financial goals. Learn more and find your independent advisor dot com. 287 00:17:25,880 --> 00:17:27,960 Speaker 1: Let me bring in now, Charles wide Plots, Professor of 288 00:17:27,960 --> 00:17:32,000 Speaker 1: International Economics the Graduate Institute of International Development Studies in Geneva, 289 00:17:32,040 --> 00:17:34,680 Speaker 1: on a day when President Obama is speaking about democracy 290 00:17:35,040 --> 00:17:38,159 Speaker 1: in Athens, preparing to head to Germany after that to 291 00:17:38,200 --> 00:17:41,440 Speaker 1: meet with the Chancellor of Germany, Angela Merkel. Let's start 292 00:17:41,480 --> 00:17:44,240 Speaker 1: in France. We're reaching you in France today, Professor white Plots. 293 00:17:44,359 --> 00:17:48,240 Speaker 1: Emmanuel Macrons declaring his candidacy in France this morning. What 294 00:17:48,280 --> 00:17:51,120 Speaker 1: does that say to you about what's going on in France? Indeed, 295 00:17:51,160 --> 00:17:54,960 Speaker 1: what's going on in Europe him declaring his candidacy. Well, 296 00:17:55,280 --> 00:17:58,119 Speaker 1: generally in Europe, as you know, there is also a 297 00:17:58,160 --> 00:18:04,000 Speaker 1: Trump like phenomenon happening. All sorts of strange populist are 298 00:18:04,359 --> 00:18:09,040 Speaker 1: climbing in public opinion polls. Next month we have a 299 00:18:09,160 --> 00:18:12,760 Speaker 1: referendum in Italy that can turn ugly, and then next 300 00:18:12,840 --> 00:18:16,600 Speaker 1: year we have an acceence in France. So there's plenty 301 00:18:16,640 --> 00:18:20,520 Speaker 1: to worry about. Cho's why plots. It's wonderful to speak 302 00:18:20,600 --> 00:18:24,359 Speaker 1: to you today. We sparked with Paul Degar yesterday, and 303 00:18:24,480 --> 00:18:26,960 Speaker 1: so much of this is about clearing the markets and 304 00:18:27,000 --> 00:18:31,639 Speaker 1: how your Europe is behind. What is the urgency of 305 00:18:31,760 --> 00:18:35,399 Speaker 1: Europe clearing their markets to move forward to get to 306 00:18:35,640 --> 00:18:41,520 Speaker 1: us like growth. Well, the problem with Europe is that 307 00:18:41,640 --> 00:18:44,680 Speaker 1: it's a large number of countries and everyone as its 308 00:18:44,720 --> 00:18:50,520 Speaker 1: share of trouble. So today President Obama is in Greece, 309 00:18:50,560 --> 00:18:54,800 Speaker 1: which is a very very troubled country. Interestingly, he's been 310 00:18:54,840 --> 00:18:58,919 Speaker 1: calling for that restructuring public that restructuring in Greece is 311 00:18:59,000 --> 00:19:02,520 Speaker 1: absolutely right, but the others don't want. And his next 312 00:19:02,520 --> 00:19:08,800 Speaker 1: trip to Germany he might raise the issue with Chancellor Miracle. 313 00:19:09,160 --> 00:19:12,479 Speaker 1: He will be told no way so that's one issue. 314 00:19:13,520 --> 00:19:16,240 Speaker 1: But you know, if you think about my own country, friends, 315 00:19:17,600 --> 00:19:21,000 Speaker 1: the labor market is pretty much in a mess. The 316 00:19:21,119 --> 00:19:25,240 Speaker 1: government is huge, uh and has been running a deficits 317 00:19:25,280 --> 00:19:31,120 Speaker 1: since nineteen seventies three. Uh. So the list of things 318 00:19:31,160 --> 00:19:33,320 Speaker 1: that have to be done in every country is pretty 319 00:19:33,320 --> 00:19:37,959 Speaker 1: well known. What's missing is the politician's readiness to do that. 320 00:19:38,520 --> 00:19:41,119 Speaker 1: And I think when they watch what's happening in the US, 321 00:19:41,880 --> 00:19:44,280 Speaker 1: they are even less willing to tackle any of the 322 00:19:44,400 --> 00:19:47,239 Speaker 1: real issues. How are they hearing what President Obama has 323 00:19:47,280 --> 00:19:49,280 Speaker 1: to say on this trip and light of what happened 324 00:19:49,280 --> 00:19:52,119 Speaker 1: here in the US last week, how is his message 325 00:19:52,119 --> 00:19:56,680 Speaker 1: being interpreted? Do you think, well, it's a goodbye message. 326 00:19:56,960 --> 00:20:00,720 Speaker 1: People in Europe like the Obama way more and the Americans, 327 00:20:00,800 --> 00:20:05,359 Speaker 1: I think, uh, And they are sad to see him go, 328 00:20:05,560 --> 00:20:10,439 Speaker 1: and they are sad to see him being replaced by Trump. Uh. 329 00:20:10,560 --> 00:20:13,360 Speaker 1: They are very worried about that, by the way. Uh. 330 00:20:14,160 --> 00:20:17,440 Speaker 1: But but you know, when he goes and makes a 331 00:20:17,600 --> 00:20:21,960 Speaker 1: great species about democracy and all of that, that's viewtiful. 332 00:20:22,080 --> 00:20:25,399 Speaker 1: But everybody knows that. Everybody knows that democracy is are 333 00:20:25,520 --> 00:20:28,800 Speaker 1: very complex things to make work. And at the time 334 00:20:29,040 --> 00:20:34,359 Speaker 1: when the population in Europe pretty much like in the US, 335 00:20:34,400 --> 00:20:38,800 Speaker 1: A significant segment of the population is really upset about 336 00:20:39,280 --> 00:20:41,600 Speaker 1: what has been there a lot for the last twenty 337 00:20:41,680 --> 00:20:46,600 Speaker 1: or thirty years. It's very, very, very hard to think 338 00:20:46,640 --> 00:20:49,680 Speaker 1: about good outcomes. Charles White plots with us, of course 339 00:20:49,720 --> 00:20:51,879 Speaker 1: he is. He's joining his by phone from from France. 340 00:20:51,920 --> 00:20:54,520 Speaker 1: It's great to have you with us again here. Let's 341 00:20:54,560 --> 00:20:56,639 Speaker 1: talk a little bit about productivity. We're focused here on 342 00:20:56,680 --> 00:20:58,959 Speaker 1: manufacturing in the US. When you look at it more broadly, 343 00:20:59,000 --> 00:21:01,359 Speaker 1: when you look at the state manufacturing globally, what do 344 00:21:01,400 --> 00:21:06,080 Speaker 1: you see. Well, we we had a major slowdown in 345 00:21:06,119 --> 00:21:11,879 Speaker 1: productivity for the last twenty years. Uh. One reason is 346 00:21:11,960 --> 00:21:16,920 Speaker 1: that industries shrinking and services are increasing, and services are 347 00:21:17,040 --> 00:21:22,760 Speaker 1: typically low productivity gains or zero productivity gains. So this 348 00:21:22,960 --> 00:21:27,800 Speaker 1: shifting production in production pattern through the developed world these 349 00:21:28,160 --> 00:21:32,520 Speaker 1: is a major source of low productivity gains. Is it 350 00:21:32,520 --> 00:21:35,439 Speaker 1: because there's too much money slashing around? Is it just 351 00:21:36,400 --> 00:21:40,160 Speaker 1: we're paying the price of capital deepening of just over investment. 352 00:21:42,680 --> 00:21:46,040 Speaker 1: I don't think there has been over investment quite to 353 00:21:46,119 --> 00:21:49,480 Speaker 1: the country. Since the crisis in two thousand and eight, 354 00:21:49,920 --> 00:21:55,119 Speaker 1: investment has been extremely low, extremely depressed. Had many discussions 355 00:21:55,160 --> 00:21:59,920 Speaker 1: about why. I tend to believe that the poor over 356 00:22:00,080 --> 00:22:03,600 Speaker 1: old growth pattern in the developed country as discouraged firms 357 00:22:03,600 --> 00:22:08,680 Speaker 1: from from investing, and that's weighing on productivity gains. You 358 00:22:08,680 --> 00:22:11,680 Speaker 1: you're right when you when you look at the complement 359 00:22:11,760 --> 00:22:13,439 Speaker 1: of what the e c B is considering when it 360 00:22:13,480 --> 00:22:16,560 Speaker 1: meets at the beginning of December, how heavily does productivity 361 00:22:16,560 --> 00:22:20,400 Speaker 1: way When they're looking at the data, I don't think 362 00:22:20,400 --> 00:22:24,119 Speaker 1: they are very worried about that. They maybe they shoot, 363 00:22:25,200 --> 00:22:27,639 Speaker 1: but I think they are. They are very worried that 364 00:22:27,760 --> 00:22:32,760 Speaker 1: inflation is stuck uh, not far from zero and has 365 00:22:32,800 --> 00:22:37,560 Speaker 1: been there for the last three years. Uh. And therefore 366 00:22:37,680 --> 00:22:43,000 Speaker 1: and they want to keep growth, but that's not happening easily. 367 00:22:43,440 --> 00:22:45,760 Speaker 1: It chose White Plots and with a shout out to 368 00:22:45,880 --> 00:22:51,040 Speaker 1: John the Sylvia of of Wells Fargo with your work, 369 00:22:51,160 --> 00:22:57,400 Speaker 1: Professor white Plots on labor mobility. As we have economic slowdown, disinflation, 370 00:22:58,280 --> 00:23:03,280 Speaker 1: we become rigid as a society. How critical is that idea, 371 00:23:03,400 --> 00:23:06,160 Speaker 1: that dream of moving to a new place, How does 372 00:23:06,200 --> 00:23:12,720 Speaker 1: that fold into European and for that better US economics. Well, uh, 373 00:23:13,160 --> 00:23:16,760 Speaker 1: we we have in most European countries very rigid markets. 374 00:23:16,840 --> 00:23:19,840 Speaker 1: So It's not only that people don't move from one 375 00:23:19,880 --> 00:23:24,000 Speaker 1: country to another, they don't even move within their own countries, 376 00:23:24,080 --> 00:23:27,320 Speaker 1: or they move much less than the US worker is 377 00:23:27,440 --> 00:23:31,800 Speaker 1: used to to move. So that's that's been that's been 378 00:23:31,880 --> 00:23:38,080 Speaker 1: known for for decades before we stopped the monetary union. UH, 379 00:23:38,119 --> 00:23:41,639 Speaker 1: And it was clear that this was one of the 380 00:23:41,720 --> 00:23:47,640 Speaker 1: drawbacks of having a common currency. UM. But to me, 381 00:23:47,840 --> 00:23:50,720 Speaker 1: that's that's not the most important issue. To me, the 382 00:23:50,760 --> 00:23:54,320 Speaker 1: most important issue is that many in many countries, labor 383 00:23:54,359 --> 00:23:58,879 Speaker 1: markets are frozen. It's hard to fire people, so firms 384 00:23:58,920 --> 00:24:02,960 Speaker 1: don't hire. Uh. They are in some countries minimum wages 385 00:24:03,000 --> 00:24:07,960 Speaker 1: are very high, so they are discouraging employment of the 386 00:24:08,040 --> 00:24:14,560 Speaker 1: non qualified workers. UH. Dismissals are very difficult, very costly, 387 00:24:14,640 --> 00:24:17,600 Speaker 1: and legally uncertain, and so and so forth. So we 388 00:24:18,440 --> 00:24:22,639 Speaker 1: the problem really is at the national level that this 389 00:24:22,840 --> 00:24:26,400 Speaker 1: labor markets just not function and and we generate their 390 00:24:26,680 --> 00:24:29,159 Speaker 1: machinery to create an employment. I don't know if you 391 00:24:29,240 --> 00:24:31,960 Speaker 1: thought about this, but if we get Trump inflation, if 392 00:24:31,960 --> 00:24:36,240 Speaker 1: we get some forms stimulus and reflation within the United States, 393 00:24:36,240 --> 00:24:39,879 Speaker 1: do we just presume economic growth that raises wages? Is 394 00:24:39,880 --> 00:24:43,440 Speaker 1: there the real riskier stag wage inflation where we've got 395 00:24:43,480 --> 00:24:48,240 Speaker 1: inflation with no real rage increase. Well as you know that. 396 00:24:48,440 --> 00:24:53,000 Speaker 1: The mystery is why inflation wage inflation is not higher 397 00:24:53,440 --> 00:24:57,120 Speaker 1: in the US, given that the unemployment rate is very low. 398 00:24:57,200 --> 00:25:02,520 Speaker 1: The continuous debates about why it is the case. I 399 00:25:02,600 --> 00:25:06,960 Speaker 1: think the silver lining of Trump is that if he 400 00:25:07,040 --> 00:25:12,440 Speaker 1: does it, he might UH in pomp up government spending 401 00:25:12,600 --> 00:25:16,560 Speaker 1: on infrastructure, increase the deficit. That would be good news 402 00:25:16,600 --> 00:25:19,560 Speaker 1: for the world over because it would mean more growth 403 00:25:19,600 --> 00:25:23,800 Speaker 1: in the US, return of inflation in the US. We 404 00:25:23,880 --> 00:25:28,000 Speaker 1: all need to see some inflation from the zero levels 405 00:25:28,080 --> 00:25:30,720 Speaker 1: we have had, so that there is a little bit 406 00:25:30,760 --> 00:25:34,080 Speaker 1: of silver lining out there, depending on what the next 407 00:25:34,080 --> 00:25:37,560 Speaker 1: president will do or not to. Let's we talk about 408 00:25:37,680 --> 00:25:40,960 Speaker 1: a pause here in the US among policymakers as they 409 00:25:40,960 --> 00:25:43,919 Speaker 1: wait to see what kind of infrastructure package a president 410 00:25:43,960 --> 00:25:45,840 Speaker 1: elect Donald Trump will be able to get through the 411 00:25:45,880 --> 00:25:48,960 Speaker 1: Congress and how that might affect monetary policy. How do 412 00:25:49,000 --> 00:25:51,080 Speaker 1: you how do you see that playing out in Europe 413 00:25:51,160 --> 00:25:55,040 Speaker 1: a similar short of wait and see approach. Yeah, everybody 414 00:25:55,200 --> 00:26:00,399 Speaker 1: is UH is mesmerized by the political situation Asian in 415 00:26:00,440 --> 00:26:04,560 Speaker 1: the US, A great number of economies at least had 416 00:26:04,600 --> 00:26:08,280 Speaker 1: been calling for the US to pump up public investment 417 00:26:08,359 --> 00:26:12,520 Speaker 1: in infrastructure, but as we know, Obama had exactly zero 418 00:26:12,640 --> 00:26:17,359 Speaker 1: chance of passing that through Congress. I am not sure 419 00:26:19,200 --> 00:26:22,359 Speaker 1: that Trump will be able to do much better with 420 00:26:22,560 --> 00:26:26,080 Speaker 1: his Congress, but I certainly wish him good luck. You 421 00:26:26,119 --> 00:26:28,840 Speaker 1: mentioned this a moment ago, our colleague Tracy Alloway, tweeting 422 00:26:28,880 --> 00:26:32,959 Speaker 1: out a timetable from JP Morgan here of what electoral 423 00:26:33,000 --> 00:26:35,680 Speaker 1: events we will have here in two thousand seventeen in Europe, 424 00:26:35,680 --> 00:26:38,080 Speaker 1: branching from primaries and France to the Italian referendum, to 425 00:26:38,119 --> 00:26:41,560 Speaker 1: an Austrian presidential election, a German presidential election, in general 426 00:26:41,640 --> 00:26:45,560 Speaker 1: elections in the Netherlands. It's a busy year two thousand seventeen. 427 00:26:46,840 --> 00:26:49,920 Speaker 1: What does Europe look like after that year is done? 428 00:26:50,920 --> 00:26:57,479 Speaker 1: Oh god, that's a scary question. It's likely that the 429 00:26:57,520 --> 00:27:05,000 Speaker 1: Australians real elect Natzi president. That wouldn't be the first time. 430 00:27:05,119 --> 00:27:09,960 Speaker 1: They already did it fifteen or twenty years ago. Uh So, 431 00:27:10,040 --> 00:27:13,639 Speaker 1: that's one thing. In the Netherlands there is a very 432 00:27:13,760 --> 00:27:20,120 Speaker 1: virulent far right, reasonably racist party which is going up 433 00:27:20,119 --> 00:27:24,880 Speaker 1: and up and up in a in a Germany. Well, 434 00:27:24,960 --> 00:27:30,280 Speaker 1: maybe miracle will still be the miracles. Chancellor. She has 435 00:27:30,320 --> 00:27:34,520 Speaker 1: been and win it. Uh and in Germany as in France, 436 00:27:34,600 --> 00:27:37,080 Speaker 1: as you may know, there is a serious challenge from 437 00:27:37,119 --> 00:27:41,960 Speaker 1: the far right Marian Lepin. I personally don't believe she 438 00:27:42,040 --> 00:27:45,960 Speaker 1: has any chance, but I also believed from had zero chance, 439 00:27:46,000 --> 00:27:50,359 Speaker 1: so I wouldn't bet on it. Yeah, well, yeah, you 440 00:27:50,440 --> 00:27:53,679 Speaker 1: have a lot of company in that. Thank you so 441 00:27:53,760 --> 00:28:08,680 Speaker 1: much with the Graduate Institute, Geneva. David our next guest, 442 00:28:08,720 --> 00:28:11,640 Speaker 1: and thrilled these on because we we have not been 443 00:28:11,680 --> 00:28:15,840 Speaker 1: good about commodities. We are in the surveillance commodity time 444 00:28:15,880 --> 00:28:19,399 Speaker 1: out share amid the blur that you described, Tom, we 445 00:28:19,440 --> 00:28:21,840 Speaker 1: have not talked enough about oil and other commodities. As 446 00:28:21,840 --> 00:28:23,760 Speaker 1: you say, I'm pleased to bring in Dane Davis now 447 00:28:23,760 --> 00:28:26,199 Speaker 1: he's a commodities analyst at Barclays. Is I look at 448 00:28:26,200 --> 00:28:30,159 Speaker 1: oil here? Brent sven W T forty dang. Great to 449 00:28:30,200 --> 00:28:32,280 Speaker 1: have you with us, glad to be here. Let's start 450 00:28:32,320 --> 00:28:34,800 Speaker 1: with with the big question here. We we've seen what's 451 00:28:34,800 --> 00:28:37,119 Speaker 1: happened in the equities market since Donald Trump was elected. 452 00:28:37,119 --> 00:28:39,360 Speaker 1: What have we seen in the commodity space broadly? What 453 00:28:39,440 --> 00:28:41,520 Speaker 1: kind of moves have we seen? Well, to put it 454 00:28:41,600 --> 00:28:45,560 Speaker 1: quite shortly, Donald Trump through his election has made medals 455 00:28:45,560 --> 00:28:49,400 Speaker 1: great again. Uh. And I'm being cheeky here, but tom 456 00:28:49,400 --> 00:28:52,680 Speaker 1: It says that, yeah. No, but what we've seen is 457 00:28:52,720 --> 00:28:56,760 Speaker 1: a massive rally across the entire complex and medals um 458 00:28:57,200 --> 00:28:59,760 Speaker 1: and it's it's it's wide ranging. It's not just iron 459 00:29:00,120 --> 00:29:03,400 Speaker 1: or it's steel, it's copper, it's sinc and the like. 460 00:29:03,560 --> 00:29:07,720 Speaker 1: Now this rally has started appear out recently, but since 461 00:29:07,760 --> 00:29:10,600 Speaker 1: It's election, there's just been a massive increase in the 462 00:29:10,600 --> 00:29:13,800 Speaker 1: metals complex. Looking at the timing here, what do you 463 00:29:13,800 --> 00:29:15,920 Speaker 1: what do you make of it? How how closely can 464 00:29:15,960 --> 00:29:19,280 Speaker 1: you tie these two things together? Obviously investors placing a 465 00:29:19,320 --> 00:29:21,800 Speaker 1: big bet here on the fact that Donald Trump has 466 00:29:21,840 --> 00:29:24,320 Speaker 1: said he wants to get an infrastructure built through through 467 00:29:24,320 --> 00:29:26,920 Speaker 1: Congress that could have an effect on metals prices. Uh, 468 00:29:26,960 --> 00:29:29,480 Speaker 1: do you draw the correlation that closely? Well? I think 469 00:29:29,520 --> 00:29:31,400 Speaker 1: when it comes to commodities, you have to be careful 470 00:29:31,440 --> 00:29:35,440 Speaker 1: of disentangling causal relationships, right. I think it's very easy 471 00:29:35,560 --> 00:29:37,400 Speaker 1: for me to come on here and say, yep, Donald Trump, 472 00:29:37,480 --> 00:29:40,000 Speaker 1: it's all him. But in actuality, I think a closer 473 00:29:40,040 --> 00:29:42,440 Speaker 1: look at the data and the price movement shows that 474 00:29:42,520 --> 00:29:45,640 Speaker 1: the prices for the metals complex in particular, they were 475 00:29:45,760 --> 00:29:49,160 Speaker 1: rallying before the election of Donald Trump. Now that tells me, 476 00:29:49,320 --> 00:29:51,440 Speaker 1: given that very few people thought he was able to win, 477 00:29:51,560 --> 00:29:53,720 Speaker 1: it's not a Donald Trump thing. What I think is 478 00:29:53,720 --> 00:29:55,200 Speaker 1: going on here is I think that this is a 479 00:29:55,280 --> 00:29:58,440 Speaker 1: China story. Uh so, the Chinese economy has actually coming 480 00:29:58,520 --> 00:30:01,320 Speaker 1: quite strongly in twenty sixteen. I think that's leading to 481 00:30:01,360 --> 00:30:04,200 Speaker 1: a rallying commodities. Dane. I've got a copper chart which 482 00:30:04,200 --> 00:30:06,920 Speaker 1: shows a rally and really it's through two thousand sixteen 483 00:30:07,040 --> 00:30:10,360 Speaker 1: range bounded and up we go with the recent news. 484 00:30:10,360 --> 00:30:12,720 Speaker 1: Oh that's great, I'll put out the copper chart folks 485 00:30:12,760 --> 00:30:16,640 Speaker 1: on Twitter under be surveillance. But is it a breakout 486 00:30:16,880 --> 00:30:19,840 Speaker 1: of what is a five year old bear market? I 487 00:30:19,880 --> 00:30:23,280 Speaker 1: don't see it technically, is it? We don't know yet. 488 00:30:23,640 --> 00:30:27,760 Speaker 1: Coppers are really interesting in the you identified something. I 489 00:30:27,760 --> 00:30:31,120 Speaker 1: think that's quite important. The other medals were rallying earlier 490 00:30:31,160 --> 00:30:33,520 Speaker 1: into this year, yet copper was lagging. And if you 491 00:30:33,600 --> 00:30:37,200 Speaker 1: believe the doctor Copper thesis, whereas copper is the best 492 00:30:37,240 --> 00:30:40,240 Speaker 1: tracker for the macro economy, that tells you something. That 493 00:30:40,280 --> 00:30:43,640 Speaker 1: tells you that we had a global economy that was 494 00:30:43,680 --> 00:30:46,040 Speaker 1: still stuck in mediocre growth, and we had a Chinese 495 00:30:46,040 --> 00:30:49,000 Speaker 1: economy that was returning to growth and it was growing, 496 00:30:49,040 --> 00:30:51,600 Speaker 1: but yet the market wasn't really certain about it. I 497 00:30:51,600 --> 00:30:54,000 Speaker 1: think as we go forward, I would say fall the 498 00:30:54,040 --> 00:30:56,920 Speaker 1: copper price among all of the medals, because that's going 499 00:30:56,960 --> 00:30:59,920 Speaker 1: to tell you what's going on. The Chinese property mark. 500 00:31:00,040 --> 00:31:03,400 Speaker 1: It has been reheated. That is what's triggered the iron 501 00:31:03,440 --> 00:31:05,640 Speaker 1: ore rise. It triggered the steel rise, and now it's 502 00:31:05,680 --> 00:31:08,720 Speaker 1: trying to trigger the other medals to increase. If that 503 00:31:08,800 --> 00:31:12,760 Speaker 1: property market, though, shows signs of slowing down, we could 504 00:31:12,760 --> 00:31:15,760 Speaker 1: be back where we were at the beginning of this year. Uh. 505 00:31:15,840 --> 00:31:19,800 Speaker 1: It's it's a rally built on very tenuous grounds. Agreed. 506 00:31:19,840 --> 00:31:21,680 Speaker 1: I strongly agree with that. And I just you know, 507 00:31:22,000 --> 00:31:24,920 Speaker 1: I just want to frame through the Barclays lens and 508 00:31:25,000 --> 00:31:27,880 Speaker 1: all the different people you've got telling you what to do, 509 00:31:28,240 --> 00:31:31,760 Speaker 1: you are not calling this a commodity breakout. I want 510 00:31:31,760 --> 00:31:34,880 Speaker 1: to be clear on that. Yeah, I think that's absolutely clear. 511 00:31:34,920 --> 00:31:37,600 Speaker 1: I think that there's still a lot that we haven't 512 00:31:37,640 --> 00:31:40,000 Speaker 1: yet determined. I think the property market within China, I 513 00:31:40,000 --> 00:31:43,320 Speaker 1: think that's number one. Number two returning to Trump is 514 00:31:43,720 --> 00:31:47,360 Speaker 1: you know, there's a lot of hype about his infrastructure plans. 515 00:31:47,760 --> 00:31:51,640 Speaker 1: We don't yet know what those infrastructure plans will be. Moreover, 516 00:31:52,000 --> 00:31:54,120 Speaker 1: the market is focusing I think on the good things 517 00:31:54,120 --> 00:31:56,720 Speaker 1: about the Trump's plan, but less on the bad things 518 00:31:56,720 --> 00:32:00,680 Speaker 1: are the less desirable things. For example, if Trump threatends 519 00:32:00,720 --> 00:32:03,200 Speaker 1: the global trade order, that's going to have knock on 520 00:32:03,280 --> 00:32:06,440 Speaker 1: effects in the world's largest market for metals consumption, China. 521 00:32:06,560 --> 00:32:08,880 Speaker 1: I mean, you can imagine a trade war would have 522 00:32:09,600 --> 00:32:12,640 Speaker 1: terrible effects onto the Chinese economy, could also affect other 523 00:32:12,640 --> 00:32:15,840 Speaker 1: emerging markets such as Mexico and Brazil. So whereas we 524 00:32:15,960 --> 00:32:19,040 Speaker 1: might see a gain in metals consumption in the US, 525 00:32:19,800 --> 00:32:22,080 Speaker 1: we could see a fall in other markets, and you 526 00:32:22,120 --> 00:32:24,040 Speaker 1: could actually have a net decline. Now that's not what 527 00:32:24,040 --> 00:32:26,520 Speaker 1: we're calling for, but that's a possibility and something to 528 00:32:26,600 --> 00:32:29,240 Speaker 1: keep in mind as we cut through the euphoria that 529 00:32:29,280 --> 00:32:32,200 Speaker 1: we've been seeing. Dan Davis in the latest Barkley's Commodity 530 00:32:32,240 --> 00:32:34,760 Speaker 1: to You, you describe that tension very well. I let 531 00:32:34,840 --> 00:32:37,280 Speaker 1: Tom use his standard caveat here about respecting the copyright 532 00:32:37,280 --> 00:32:38,920 Speaker 1: of the gas, but check check out the note if 533 00:32:39,080 --> 00:32:41,440 Speaker 1: if you can seek it out from from Barkleys. You 534 00:32:41,560 --> 00:32:45,479 Speaker 1: mentioned that the Chinese property market, what does what does 535 00:32:45,600 --> 00:32:47,720 Speaker 1: Chinese policy look like right now when it comes to 536 00:32:47,760 --> 00:32:51,600 Speaker 1: economic stimulus, great questions, So I think it's important to 537 00:32:51,640 --> 00:32:55,440 Speaker 1: go back to there are very real concerns of a 538 00:32:55,520 --> 00:32:58,000 Speaker 1: hard landing. I talked to a lot of clients that 539 00:32:58,040 --> 00:33:01,800 Speaker 1: were concerned that the Chinese ECON would actually go negative. 540 00:33:02,440 --> 00:33:05,320 Speaker 1: We were in a very different environment. Automobile production was 541 00:33:05,360 --> 00:33:08,200 Speaker 1: down in the first nine months of the year. The 542 00:33:08,240 --> 00:33:10,719 Speaker 1: real estate market was showing severe signs of weakness. Than 543 00:33:10,760 --> 00:33:13,600 Speaker 1: what the Chinese did in the very beginning this year 544 00:33:13,800 --> 00:33:17,720 Speaker 1: is uh. They played a song with the familiar tune. 545 00:33:17,760 --> 00:33:21,240 Speaker 1: They essentially loosen up their credit bubble. Uh. They loosen 546 00:33:21,320 --> 00:33:24,200 Speaker 1: up credit standards, loaning standards, and they allowed people to 547 00:33:24,280 --> 00:33:27,400 Speaker 1: invest and buy homes. Now, this had the very positive 548 00:33:27,400 --> 00:33:30,600 Speaker 1: effect in the short term of twenty sixteen of boosting 549 00:33:30,840 --> 00:33:34,480 Speaker 1: construction UM. But as we start to look into the foreword, 550 00:33:35,200 --> 00:33:37,440 Speaker 1: there's a real question here of how many times can 551 00:33:37,480 --> 00:33:39,920 Speaker 1: you stimulate your way to growth, how many times can 552 00:33:39,960 --> 00:33:42,600 Speaker 1: you reheat the property market. I think it's likely that 553 00:33:42,640 --> 00:33:45,400 Speaker 1: it cools as we go into seventeen and eighteen and moreover, 554 00:33:45,880 --> 00:33:49,680 Speaker 1: I think that there's the very hard limit of demography. 555 00:33:49,720 --> 00:33:52,720 Speaker 1: You know, the Chinese population is aging, a lot of 556 00:33:52,720 --> 00:33:54,720 Speaker 1: the growth is already behind it in terms of its 557 00:33:54,760 --> 00:33:57,640 Speaker 1: population bubble, So that puts another heartlement on the property market. 558 00:33:57,760 --> 00:34:00,600 Speaker 1: And I'm looking at trade figures here, trade figures for October, 559 00:34:00,680 --> 00:34:03,880 Speaker 1: Chinese trade figures, and they look disappointing to me. How 560 00:34:03,960 --> 00:34:06,480 Speaker 1: much of a red flag is that for you? I 561 00:34:06,520 --> 00:34:09,000 Speaker 1: think you need more than one data point to make 562 00:34:09,040 --> 00:34:11,840 Speaker 1: a trend. Uh. The weakness in October, I think it 563 00:34:11,920 --> 00:34:14,759 Speaker 1: is concerning, but it's not yet concerning enough, and it's 564 00:34:14,760 --> 00:34:18,560 Speaker 1: not yet confirmed by more trade data points to be 565 00:34:18,640 --> 00:34:21,360 Speaker 1: a worrying trend. But I think it is something that 566 00:34:21,400 --> 00:34:24,680 Speaker 1: goes back to my key thesis here is let's hold up. 567 00:34:24,719 --> 00:34:27,040 Speaker 1: You know, we've seen this massive rally and copper going 568 00:34:27,080 --> 00:34:30,359 Speaker 1: from two o eight to two fifty. Uh, let's just 569 00:34:30,480 --> 00:34:33,160 Speaker 1: recheck fundamentals, look at what the data is actually telling 570 00:34:33,280 --> 00:34:36,080 Speaker 1: us and not what you know, we might think may 571 00:34:36,120 --> 00:34:40,799 Speaker 1: happen in the future. Help me with the esoterics. You know, 572 00:34:40,840 --> 00:34:43,480 Speaker 1: I've spent too much money in London? Can I make 573 00:34:43,520 --> 00:34:46,719 Speaker 1: it back in Zinc? I mean, we don't talk enough 574 00:34:46,760 --> 00:34:53,000 Speaker 1: on this show, David Grafinitely there's a reason for that, 575 00:34:53,600 --> 00:34:56,400 Speaker 1: you know. I think that's that is a very esoteric question, 576 00:34:56,480 --> 00:34:59,319 Speaker 1: and here would be my answer to you. I think 577 00:34:59,320 --> 00:35:01,719 Speaker 1: that we're are a new air of commodities, and so 578 00:35:01,760 --> 00:35:05,240 Speaker 1: when you look at something like copper or zinc or nickel, 579 00:35:05,320 --> 00:35:09,720 Speaker 1: or that it's no longer the rising China lifts all boats. 580 00:35:09,760 --> 00:35:12,480 Speaker 1: I think that the price outlook for various commodities inc 581 00:35:12,480 --> 00:35:16,480 Speaker 1: concluded copper included iron ore will be increasingly determined by 582 00:35:16,600 --> 00:35:21,400 Speaker 1: supply fundamentals. UH. Look for those markets which have very 583 00:35:21,440 --> 00:35:25,160 Speaker 1: tight supply fundamentals, which are facing problems and getting production 584 00:35:25,200 --> 00:35:28,480 Speaker 1: into into the market, which are facing the threat of 585 00:35:28,560 --> 00:35:31,640 Speaker 1: resource nationalism. Those commodities, I think are going to be 586 00:35:31,680 --> 00:35:34,719 Speaker 1: your best chance going forward. The other commodities though that 587 00:35:34,800 --> 00:35:38,840 Speaker 1: have new supply coming online in fifteen sixteen, new supply 588 00:35:38,920 --> 00:35:40,759 Speaker 1: coming online in the future, iron ore, I think it's 589 00:35:40,760 --> 00:35:43,359 Speaker 1: a good example of this. I think those commodities are 590 00:35:43,400 --> 00:35:48,000 Speaker 1: the most pressure as we move forward. I want to 591 00:35:48,040 --> 00:35:50,040 Speaker 1: get to oil here in just a minute, but maybe 592 00:35:50,080 --> 00:35:52,799 Speaker 1: one more more question here about about metals. What are 593 00:35:52,800 --> 00:35:55,560 Speaker 1: we seeing in terms of disruption when it comes to 594 00:35:55,680 --> 00:35:59,880 Speaker 1: demand for copper. I know that there were strikes Indonesia 595 00:36:00,000 --> 00:36:02,920 Speaker 1: and and labor disputes improve these things having effect on 596 00:36:02,960 --> 00:36:04,960 Speaker 1: the price of copper where they pretty at the margins. 597 00:36:05,440 --> 00:36:07,640 Speaker 1: I think they do have a psychological effect on the 598 00:36:07,640 --> 00:36:10,919 Speaker 1: price of copper. So you're right, we've been having it's 599 00:36:10,920 --> 00:36:12,719 Speaker 1: been a quiet ear so far. But then in this 600 00:36:12,800 --> 00:36:15,120 Speaker 1: third quarter, going into the fourth quarter of the disruption 601 00:36:15,200 --> 00:36:18,319 Speaker 1: started to suddenly tick up. There were storms in Australia 602 00:36:18,400 --> 00:36:21,480 Speaker 1: that knocked out several copper mines. There were labor disputes 603 00:36:21,520 --> 00:36:24,960 Speaker 1: in Indonesia at the Grassburg mine. Uh, there's been issues 604 00:36:25,000 --> 00:36:28,120 Speaker 1: with the Philippines and there they have a very new 605 00:36:28,160 --> 00:36:32,040 Speaker 1: regulatory climate. So there's been more disruptions to production and 606 00:36:32,120 --> 00:36:35,399 Speaker 1: copper and other metals. But I think that doesn't really 607 00:36:35,440 --> 00:36:39,120 Speaker 1: necessarily affect the balances today. I think that does, though, 608 00:36:39,280 --> 00:36:44,040 Speaker 1: give you a psychological argument for higher prices. Whether or 609 00:36:44,080 --> 00:36:47,000 Speaker 1: not it actually is impacted the true balances, it's hard 610 00:36:47,040 --> 00:36:48,920 Speaker 1: to determine, but I think it does give you know, 611 00:36:49,000 --> 00:36:53,000 Speaker 1: a market boost. Dane Davis with his fundamentals and the 612 00:36:53,040 --> 00:36:55,680 Speaker 1: medals and the courses work with Michael Cohen and others 613 00:36:55,680 --> 00:36:58,920 Speaker 1: at Barclays on oil as well. Dane Davis with us 614 00:36:58,920 --> 00:37:02,200 Speaker 1: with Barclays, and you know, we're lucky folks, and that 615 00:37:02,320 --> 00:37:10,279 Speaker 1: Dane Davis. Well, he like deals in the land of rebar, copper, palladium. 616 00:37:10,400 --> 00:37:14,120 Speaker 1: Down the hall is Michael Cohen or in Russell, Mr 617 00:37:14,200 --> 00:37:18,640 Speaker 1: and Mahesh they look at oil. Help us here, Dane. 618 00:37:18,760 --> 00:37:21,839 Speaker 1: And this is within the microeconomics and commodities. I mean, 619 00:37:21,880 --> 00:37:24,680 Speaker 1: like aluminium is aluminum and it's totally different. There's fewer 620 00:37:24,680 --> 00:37:29,040 Speaker 1: bearers to entry, et cetera than copper. What's your interpretation 621 00:37:29,120 --> 00:37:32,560 Speaker 1: of oil microeconomics right now? Is it a whole new 622 00:37:32,680 --> 00:37:36,760 Speaker 1: terrain because of US fracking where the rules of guys 623 00:37:36,800 --> 00:37:40,520 Speaker 1: like you use are forever changed. Well, I think the 624 00:37:40,560 --> 00:37:42,720 Speaker 1: way to address this is to look at the supply 625 00:37:42,880 --> 00:37:46,759 Speaker 1: side and let's do some comparisons here. Let's talk about oil, 626 00:37:46,800 --> 00:37:50,560 Speaker 1: and let's talk about natural gas and copper. For copper, 627 00:37:50,640 --> 00:37:53,480 Speaker 1: we haven't really had any revolutions in the production of 628 00:37:53,520 --> 00:37:56,560 Speaker 1: copper mining since the nineteen eighties. Uh in the nine 629 00:37:56,760 --> 00:38:00,200 Speaker 1: eighties they create a new process using various as. It's 630 00:38:00,239 --> 00:38:03,719 Speaker 1: where they could extract copper from deposits that were previously 631 00:38:03,760 --> 00:38:07,359 Speaker 1: on an economical But since then, really, if you want 632 00:38:07,360 --> 00:38:09,680 Speaker 1: to get copper today, it's the same way you got 633 00:38:09,719 --> 00:38:12,879 Speaker 1: copper ten years ago, twenty years ago, thirty years ago. 634 00:38:13,520 --> 00:38:16,840 Speaker 1: You dig a massive pit in the ground and you 635 00:38:16,840 --> 00:38:19,640 Speaker 1: you just mine it out. Now, when we talk about 636 00:38:19,719 --> 00:38:22,319 Speaker 1: natural gas or if we talk about oil, we've seen 637 00:38:22,360 --> 00:38:25,480 Speaker 1: massive revolutions on the supply side for both of those commodities. 638 00:38:25,800 --> 00:38:27,960 Speaker 1: And so when I think when you look at prices 639 00:38:28,040 --> 00:38:31,440 Speaker 1: today and you look at trying to understand price action, 640 00:38:31,680 --> 00:38:33,520 Speaker 1: I think it's important to understand we're in a new 641 00:38:33,600 --> 00:38:36,400 Speaker 1: world with say natural gas production. You know, I'm from Ohio, 642 00:38:36,520 --> 00:38:41,960 Speaker 1: Northeast Ohio, and I've witnessed firsthand the the revolution that 643 00:38:42,000 --> 00:38:46,520 Speaker 1: we've seen thanks to shale gas technologies and the transformation 644 00:38:46,560 --> 00:38:49,640 Speaker 1: of the Ohio and Pennsylvania economies. I thought you were 645 00:38:49,640 --> 00:38:53,040 Speaker 1: gonna say the Cleveland Indians. No, no, no. You know, 646 00:38:53,160 --> 00:38:56,120 Speaker 1: my father's actually a Yankees fans, so I uh no, No, 647 00:38:56,239 --> 00:38:59,040 Speaker 1: we're Yankees fans in the David's household. So he needs 648 00:38:59,120 --> 00:39:02,800 Speaker 1: he needs to protect he does, he does. No. But 649 00:39:02,800 --> 00:39:05,000 Speaker 1: but in oil it's the same thing too. I mean, 650 00:39:05,120 --> 00:39:07,239 Speaker 1: if you go back to two thousand and seven and 651 00:39:07,320 --> 00:39:10,760 Speaker 1: two thousand and eight, there were the concerns of peak oil, 652 00:39:11,040 --> 00:39:13,720 Speaker 1: and that which was once a fringe theory, was seriously 653 00:39:13,760 --> 00:39:16,920 Speaker 1: being discussed in the mainstream. And then we've had the 654 00:39:16,920 --> 00:39:20,120 Speaker 1: tight oil in the US revolutionized the market. So when 655 00:39:20,120 --> 00:39:22,880 Speaker 1: we look at the microeconomics of commodities, whether it's oil, 656 00:39:23,160 --> 00:39:25,920 Speaker 1: natural gas, copper, or some of the metals, it's important 657 00:39:25,960 --> 00:39:28,080 Speaker 1: to keep in mind, how are these commodities brought to 658 00:39:28,120 --> 00:39:31,600 Speaker 1: the market and have there been any technological innovations and 659 00:39:31,640 --> 00:39:34,279 Speaker 1: bringing those commodities to the market. Dan Davis, I'm looking 660 00:39:34,320 --> 00:39:37,839 Speaker 1: at Brent your forty two a barrel. Let's look at 661 00:39:37,880 --> 00:39:39,920 Speaker 1: that through the prism of this meeting taking place in 662 00:39:40,040 --> 00:39:43,040 Speaker 1: Vienna at the end of the month. Is optimism based 663 00:39:43,040 --> 00:39:46,520 Speaker 1: into that price or pessimism? Well, I you know, I 664 00:39:46,520 --> 00:39:49,239 Speaker 1: think when it comes to OPEC, I think the key 665 00:39:49,360 --> 00:39:53,520 Speaker 1: thing here is that you have to separate rhetoric from reality. 666 00:39:53,719 --> 00:39:57,160 Speaker 1: And you know, there's two questions here, one whether or 667 00:39:57,200 --> 00:39:59,920 Speaker 1: not OPE comes to an agreement, and then the second 668 00:40:00,080 --> 00:40:02,520 Speaker 1: question is are they actually able to carry through any 669 00:40:02,520 --> 00:40:05,319 Speaker 1: agreements that they reach? Right, So, we are in a 670 00:40:05,360 --> 00:40:07,319 Speaker 1: new world. Going back to what I just said with 671 00:40:07,360 --> 00:40:10,560 Speaker 1: regards to oil supply, It's no longer the situation that 672 00:40:10,600 --> 00:40:14,880 Speaker 1: we found ourselves uh in the nineteen seventies or nineteen eighties. 673 00:40:14,920 --> 00:40:17,480 Speaker 1: There's new ways to get oil to the market. And 674 00:40:17,480 --> 00:40:19,600 Speaker 1: there's new areas where we get oil to the market. 675 00:40:20,200 --> 00:40:23,399 Speaker 1: And so when you have an economics going back to microeconomics, 676 00:40:23,400 --> 00:40:26,800 Speaker 1: when you have an organization of cartel which consoles supply, 677 00:40:27,320 --> 00:40:30,480 Speaker 1: they already have a difficult time and you know, rashing 678 00:40:30,560 --> 00:40:33,400 Speaker 1: supply among the different producers, they're strong incentives to cheat. 679 00:40:33,920 --> 00:40:36,080 Speaker 1: But when you have a market, when that cartel has 680 00:40:36,120 --> 00:40:39,200 Speaker 1: a declining share of overall input, the incentive has become 681 00:40:39,239 --> 00:40:41,200 Speaker 1: that much more stronger. So I think the real question is, 682 00:40:41,239 --> 00:40:43,359 Speaker 1: and not not to avoid your question, is are they 683 00:40:43,400 --> 00:40:46,440 Speaker 1: able to enforce any agreements that they come to. Didn 684 00:40:46,560 --> 00:40:49,040 Speaker 1: One last question on a revisit of the arch call, 685 00:40:49,400 --> 00:40:52,319 Speaker 1: which is the China commodity boom, the boom of the 686 00:40:52,400 --> 00:40:55,520 Speaker 1: last x number of years. Are we back on the 687 00:40:55,520 --> 00:40:58,600 Speaker 1: track of what has been well over a half century 688 00:40:59,200 --> 00:41:04,960 Speaker 1: of just general commodity deflation due to technological progress and 689 00:41:05,080 --> 00:41:10,440 Speaker 1: due to improve processes worldwide. Are we back to the normal? Well, 690 00:41:10,480 --> 00:41:12,440 Speaker 1: I'm gonna sound like an economist here and give it 691 00:41:12,520 --> 00:41:16,640 Speaker 1: classic economist answer. It depends, It depends. It depends on 692 00:41:16,640 --> 00:41:20,520 Speaker 1: the commodity. Uh. Look, I think for something like UH 693 00:41:20,920 --> 00:41:24,680 Speaker 1: copper or zinc or that where the supply side is constrained. 694 00:41:25,080 --> 00:41:28,560 Speaker 1: I think that you you you might not see strong deflation, 695 00:41:29,080 --> 00:41:32,399 Speaker 1: but for other commodities where we've seen technological revolutions, you might. 696 00:41:32,840 --> 00:41:35,239 Speaker 1: And I think to the demand outlook for commodities are 697 00:41:35,320 --> 00:41:38,080 Speaker 1: very different. If you take aluminium copper. I was just 698 00:41:38,200 --> 00:41:41,640 Speaker 1: in London for Luman Week. The outlook for aluminium is 699 00:41:41,840 --> 00:41:44,880 Speaker 1: very very bright. Uh, there's this substitution effect that you 700 00:41:45,040 --> 00:41:48,600 Speaker 1: were using aluminium and vehicles were using aluminum, and our 701 00:41:48,640 --> 00:41:51,160 Speaker 1: iPhones and our you know, our laptops in the like. 702 00:41:51,480 --> 00:41:54,839 Speaker 1: So the demand growth there looks to be pretty strong. Copper, surprisingly, 703 00:41:54,880 --> 00:41:58,480 Speaker 1: despite being the macro metal, the demand outlook isn't that great. 704 00:41:58,480 --> 00:42:00,480 Speaker 1: It's you're looking at one point five to two percent 705 00:42:00,560 --> 00:42:03,560 Speaker 1: growth annually per year. So it all depends on, you know, 706 00:42:03,840 --> 00:42:06,440 Speaker 1: the particulars of each commodity. I think that's the message. 707 00:42:06,800 --> 00:42:10,520 Speaker 1: Look at each commodity on its own, don't view it 708 00:42:10,520 --> 00:42:13,680 Speaker 1: as an asset. Classic Dane Davis thinking so much with Barclays. 709 00:42:13,719 --> 00:42:24,799 Speaker 1: Thank you. Thanks for listening to the Bloomberg Surveillance podcast. 710 00:42:25,160 --> 00:42:30,280 Speaker 1: Subscribe and listen to interviews on iTunes, SoundCloud, or whichever 711 00:42:30,400 --> 00:42:34,480 Speaker 1: podcast platform you prefer. I'm out on Twitter at Tom 712 00:42:34,560 --> 00:42:38,480 Speaker 1: Keene David Gura is at David Gura. Before the podcast, 713 00:42:38,640 --> 00:42:54,719 Speaker 1: you can always catch us worldwide. I'm Bloomberg Radio. Who 714 00:42:54,840 --> 00:42:57,359 Speaker 1: you put your trust in matters? Investors have put their 715 00:42:57,400 --> 00:43:01,560 Speaker 1: trust and independent registered investor and advisors to the two 716 00:43:01,560 --> 00:43:05,239 Speaker 1: and four trillion dollars. Why Learn more at find your 717 00:43:05,280 --> 00:43:08,080 Speaker 1: Independent Advisor dot com