WEBVTT - Surveillance: Protectionism Will Make Us Poor, Salmond Says 0:00:00.040 --> 0:00:02.600 Who you put your trust in matters. Investors have put 0:00:02.680 --> 0:00:07.000 their trust and independent registered investment advisors to the two 0:00:07.280 --> 0:00:11.360 four trillion dollars. Why Learn more at find your Independent 0:00:11.400 --> 0:00:26.960 Advisor dot com. Welcome to the Bloomberg Surveillance Podcast. I'm 0:00:27.040 --> 0:00:30.920 Tom Keene with David Gura. Daily we bring you insight 0:00:31.000 --> 0:00:35.560 from the best in economics, finance, investment, and international relations. 0:00:35.960 --> 0:00:40.559 Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot com, and 0:00:40.640 --> 0:00:48.239 of course, on the Bloomberg. Donald Trump's and victory triggered 0:00:48.479 --> 0:00:51.559 a sell off in global bonds and emerging market assets 0:00:51.600 --> 0:00:53.880 while the dollar rose. Now we're seeing some of those 0:00:54.160 --> 0:00:57.680 post election moves scale back as investors assess whether they're 0:00:57.720 --> 0:01:00.960 overreacting the Trump's victory. For more, we're very pleased to 0:01:00.960 --> 0:01:04.320 welcome Alex Salmon. He is the former First Minister of Scotland. 0:01:04.480 --> 0:01:08.520 Good morning, Holger's meeting. Chief economist at Barenberg also joins us. 0:01:09.240 --> 0:01:12.160 Thank you for joining us. Let me start off with you, right, 0:01:12.600 --> 0:01:16.160 What does it Donald trump victory mean to you? Is 0:01:16.200 --> 0:01:20.240 this the end of austerity? Is this actually inequality? How 0:01:20.280 --> 0:01:22.720 do you explain it? Because if you can explain it, 0:01:22.720 --> 0:01:24.560 it means that he has a clear mandate to do 0:01:24.720 --> 0:01:29.000 what exactly. Well, I don't think Hamdy knowes. I mean, obviously, 0:01:29.040 --> 0:01:34.760 the campaign rhetoric employed by the Donald is very frightening 0:01:34.800 --> 0:01:38.120 to lots of people, to Mexican, to Muslims, perhaps to 0:01:38.200 --> 0:01:41.440 gaze to minorities, and you see some of that reaction. 0:01:41.560 --> 0:01:44.959 It's not just disappointment, there's fear in that reaction. And 0:01:45.000 --> 0:01:48.760 more international terms, then, I think it's a balance between 0:01:49.320 --> 0:01:53.480 an expansionally domestic policy in the economy, but also the 0:01:53.560 --> 0:01:58.240 threat of protectionism, which an international affairs and trade. Now, 0:01:58.280 --> 0:02:00.760 I mean the few things which are absolutely hastan laws 0:02:00.760 --> 0:02:05.280 and economics, but one of them is protectionism makes everybody poorer. 0:02:05.520 --> 0:02:07.960 The less international trade you have, the less freedom of 0:02:08.000 --> 0:02:11.000 trade you have, the more the more poor people. Yet 0:02:11.040 --> 0:02:13.679 this is where the world is going. Well, there's a 0:02:13.720 --> 0:02:16.320 lot of protections forces. I mean, it's it's one of 0:02:16.360 --> 0:02:19.640 the natural populist instincts, and it's usually the job of 0:02:19.680 --> 0:02:23.000 politicians to resist that populist instinct for the greater good. 0:02:23.960 --> 0:02:28.519 But so you've got the balance between an expansionary policy 0:02:28.560 --> 0:02:31.920 to restore the broken infrastructure of the of the United 0:02:31.960 --> 0:02:35.680 States in the one hand, but the looming threat of protectionism, 0:02:35.680 --> 0:02:42.000 which certainly will absolutely make everybody poorer, including the dispossessed, 0:02:42.000 --> 0:02:45.280 the disappointed of the United States who Donald Trump was 0:02:45.280 --> 0:02:47.480 meant to be appealing to. Now it's helped me here 0:02:47.720 --> 0:02:51.440 with my observation that London has barely been affected by Brexit. 0:02:51.720 --> 0:02:55.120 How is brexit the initial days here, the initial weeks, 0:02:55.120 --> 0:02:58.160 How has it affected Scotland. Well that there hasn't been 0:02:58.520 --> 0:03:01.160 a dramatic effect, but of course know that's one in London. 0:03:01.280 --> 0:03:03.960 So it's about like jumping off the post Office talent 0:03:04.040 --> 0:03:06.440 and halfway down saying well, we're all right so far 0:03:07.200 --> 0:03:09.560 at the ground jet. There hasn't been a Brexit in Scotland. 0:03:09.560 --> 0:03:11.920 It would be jumping off the scott Monument in Edinburgh, 0:03:12.120 --> 0:03:14.520 being halfway down and saying we're all right so far. 0:03:14.600 --> 0:03:18.040 So we don't know. I mean. The difficulty I think 0:03:18.520 --> 0:03:21.200 it's looming in the economy is there's a growing realization 0:03:21.480 --> 0:03:25.919 that the UK government doesn't know either, and the indicatetion 0:03:26.280 --> 0:03:30.359 no clear strategy will affect real economic and fancy. That 0:03:30.480 --> 0:03:32.480 sets us up for our next segment on Brexit. But 0:03:32.560 --> 0:03:35.400 really today to me is almost currency dynamics. Yeah, it's 0:03:35.400 --> 0:03:38.480 currency dynamics. It's also again to access point you know 0:03:38.520 --> 0:03:41.240 about protectionism. If you're in Europe and whole ground, I 0:03:41.240 --> 0:03:43.760 know you've held the view the German jew for for 0:03:43.920 --> 0:03:47.160 quite some time. Right an angler miracle has been the 0:03:47.200 --> 0:03:50.920 beacon of stability for eleven years. How does she fight 0:03:51.320 --> 0:03:54.720 this current wave of populism which brings a lot of 0:03:54.720 --> 0:03:56.560 things with it. How we cope with immigration, how we 0:03:56.600 --> 0:03:59.080 cope with trade deals, how we cope with open borders. 0:03:59.560 --> 0:04:01.960 First of all, life fully agree with what we just heard. 0:04:02.000 --> 0:04:05.840 Protectionism is the real risk here. So far, policymakers around 0:04:05.880 --> 0:04:08.360 the Western world have held the line we have not 0:04:08.480 --> 0:04:10.640 had an increase in protectionism yet, but now with the 0:04:10.720 --> 0:04:14.000 Brexit move vote and Donald Trump, there is a risk 0:04:14.080 --> 0:04:18.080 of protectionism writhing. The German position is very clear. Germany 0:04:18.160 --> 0:04:21.680 did the hard labor market reforms ten twelve years ago. 0:04:22.040 --> 0:04:24.839 As a result, it has record employment, It has a 0:04:24.880 --> 0:04:28.640 strong domestic situation, and as a result, populists in Germany 0:04:28.640 --> 0:04:31.880 are at around fifteen fourteen percent. They are not close 0:04:31.960 --> 0:04:34.320 to anywhere where they are in the UK or the US, 0:04:34.400 --> 0:04:37.480 but very I mean very you know, clearly, we spoke 0:04:37.520 --> 0:04:40.279 to a couple of the Trump advisors David now Pass, Mr. 0:04:40.360 --> 0:04:43.760 Navarro and Peter Navarro was very clear he believes that 0:04:43.880 --> 0:04:46.120 any country with a surplus, and he mentioned Germany, he 0:04:46.120 --> 0:04:48.839 talked about China, any country with a surplus is cheating 0:04:48.880 --> 0:04:53.760 America in trade deals. That is just wrong. Economics period, 0:04:54.000 --> 0:04:59.080 simply wrong. Any sort of second year student of economics 0:04:59.160 --> 0:05:02.359 or first year student of economics food, No, that is wrong. 0:05:02.400 --> 0:05:03.880 If you look at the German date of what you 0:05:03.920 --> 0:05:07.400 see is dependents are rising four percent, government spending is 0:05:07.480 --> 0:05:10.719 rising four percent year over, Your private consumption is fairly strong. 0:05:11.080 --> 0:05:15.520 You cannot simply accuse the Germans of underspending. Alright, we 0:05:15.600 --> 0:05:18.719 have Sirry Alex, And it was some time of Alex 0:05:18.760 --> 0:05:21.400 pulled that thought because we're just getting the former French 0:05:21.480 --> 0:05:24.599 finance minster, Emmanuel mccoon, who has just said he's running 0:05:24.880 --> 0:05:27.680 for president. I was seeing life pictures from Bob Tom. 0:05:27.760 --> 0:05:30.200 This is north of Paris. I think it's about forty 0:05:30.240 --> 0:05:33.200 five minutes from Paris. We had covered him extensively. When 0:05:33.200 --> 0:05:38.200 he's talking about reforms again, remember there's a presidential election. Um, 0:05:38.240 --> 0:05:40.400 I'm losing my voice town, but there's a presidential election 0:05:40.440 --> 0:05:43.080 in France next year. The markets need to decide whether 0:05:43.080 --> 0:05:46.920 they believe the polls. There is certainly someone from the 0:05:46.960 --> 0:05:50.680 far right is Mahin Lupin, who is much more palatable 0:05:50.760 --> 0:05:54.280 than her father ever was. But with anti Europe stands, 0:05:54.320 --> 0:05:58.200 antimmigration stands. Macon is not from that camp. He's very young, 0:05:58.200 --> 0:06:02.200 he's about thirty nine. He answer, it's a crowded field 0:06:02.520 --> 0:06:04.800 of where mccorn wants to be. Right, he's a socialist. 0:06:04.800 --> 0:06:06.440 So if you look at the left of talk field. 0:06:06.560 --> 0:06:08.400 Let's rip up the script right now. We see this 0:06:08.520 --> 0:06:11.360 this important moment for France. Alex Samon, you've seen this 0:06:11.480 --> 0:06:15.440 before and it's almost a new populism. Did Mr Trump 0:06:15.520 --> 0:06:19.320 and frankly other elections, did they change the traditional calculus 0:06:19.360 --> 0:06:23.760 of voting across Europe. Well, I think it'd be be 0:06:23.880 --> 0:06:27.880 very adventurous after Brexit and after Trump to state that 0:06:28.560 --> 0:06:30.680 Marie La Penn is not going to have a chance 0:06:30.680 --> 0:06:33.640 of winning the Fence presidential election. However, you would say 0:06:33.640 --> 0:06:36.799 that the electoral system in France can of mitigates against 0:06:36.800 --> 0:06:39.400 it because they have a knockout system which goes to runoff. 0:06:39.600 --> 0:06:41.760 And I was you couldn't, for example, when a presidential 0:06:41.800 --> 0:06:45.000 election of France without winning the popular vote like Mr 0:06:45.040 --> 0:06:47.960 Trump did. I could also say that, you know, scott 0:06:48.040 --> 0:06:50.880 was quite interesting here that Scotland is a country where 0:06:50.960 --> 0:06:55.080 the insubject party, the SMP, the one who's become dominant. 0:06:55.279 --> 0:06:58.960 It's actually very progressive party in both in towns of 0:06:58.960 --> 0:07:01.880 international trade but in terms of domestic politics. So it's 0:07:01.880 --> 0:07:05.200 not a given that parties which are against the establishment 0:07:05.320 --> 0:07:09.000 have to be protectionists in terms of attitude the world 0:07:09.200 --> 0:07:13.520 or for that matter, device you had your referendum, settled 0:07:13.520 --> 0:07:16.040 it well last year. Yeah, I mean looks since it 0:07:16.040 --> 0:07:18.920 was two years ago. But since then the SMP has 0:07:18.960 --> 0:07:23.040 won fifty six out of fifty nine Westminster seats in 0:07:23.160 --> 0:07:26.040 the in the in the elections, and the SMP have 0:07:26.120 --> 0:07:30.240 been domestical. Yeah. I just like to emphasize one point. 0:07:30.400 --> 0:07:32.960 If we look at France, we find that among the 0:07:33.000 --> 0:07:36.440 most popular politicians in that country on the center right 0:07:36.800 --> 0:07:40.800 up reformer for your reformer on the center left, Macon 0:07:41.240 --> 0:07:44.320 Vales an economic reformer. So while there's a lot of 0:07:44.320 --> 0:07:46.920 talk about lupendent, there is a tail risk. The really 0:07:46.920 --> 0:07:50.720 interesting thing in France is reformers are reformed. Do you 0:07:50.720 --> 0:07:53.680 mean a more Anglo Saxon model, I mean a more 0:07:53.720 --> 0:07:59.480 Anglo Merker reforms and stability. Can I can I steal 0:07:59.480 --> 0:08:02.680 the phrase you can tell with royalty, so you have 0:08:02.760 --> 0:08:05.200 to pay a premium to Holger every time you use it. 0:08:05.200 --> 0:08:07.920 I think we're also seeing life pictures of Mahin Lupin, 0:08:07.960 --> 0:08:10.520 who's actually rebranding her movement and doesn't want to be 0:08:10.560 --> 0:08:12.800 called Mahein Lupin anymore. She wants to be called Mahein 0:08:12.920 --> 0:08:15.480 the problem Holgar and then I'll ask Alex the same thing. 0:08:15.520 --> 0:08:18.200 She's opening her headquarters in Paris. Their tom is that 0:08:18.240 --> 0:08:22.280 all has been around forever, right, He's been in politics 0:08:22.280 --> 0:08:25.080 for what sixty years, and so if you see a 0:08:25.160 --> 0:08:28.880 wave of people wanting something new, then he's a favorite currently. 0:08:28.920 --> 0:08:31.160 But he may not be the right person. Well, actually 0:08:31.160 --> 0:08:33.320 he would be because he when he was Prime minister, 0:08:33.440 --> 0:08:36.439 he was the one who actually instituted reformed and then 0:08:36.440 --> 0:08:38.800 it was his president she Raq who did not back 0:08:38.880 --> 0:08:41.320 him up against street protests. But so risk the record 0:08:41.440 --> 0:08:43.880 is that he actually wants to perceivee it, wants to 0:08:43.880 --> 0:08:47.120 do reformed and if president he would That's a reasonable point. 0:08:47.200 --> 0:08:50.920 But remember and it's the supports that in France, by definition, 0:08:50.920 --> 0:08:53.800 you come up against the strongest candidate because of the 0:08:53.880 --> 0:08:59.480 knockout system, Lepine will face the strongest alternative candidate argument 0:08:59.480 --> 0:09:01.679 that doesn't up and then the United States, right. I mean, 0:09:01.840 --> 0:09:03.439 it reminds me of two thousand and two. I was 0:09:03.480 --> 0:09:07.320 covering the French elections. Then Tom and her father Jean 0:09:07.320 --> 0:09:09.640 marche Lupin you know, came out of nowhere to that 0:09:09.720 --> 0:09:25.880 second round of the presidential elections. Always driving the conversation 0:09:26.000 --> 0:09:30.360 in international relations with that question. The gentleman who invented 0:09:30.360 --> 0:09:33.680 it out of the Washington consensus, Joseph and I of 0:09:33.679 --> 0:09:37.240 course at the Harvard Kennedy School. His power and interdependence 0:09:37.400 --> 0:09:40.880 is the iconic text, professor, and I wonderful to have 0:09:40.960 --> 0:09:47.480 you with us. How do you define Trump foreign policy? Well, Tom, 0:09:47.480 --> 0:09:51.360 it's early. We don't know based on the campaign which 0:09:51.360 --> 0:09:54.959 of the contradictory statements is going to be operational. But 0:09:55.480 --> 0:10:00.040 I would say on security policy he's more likely to 0:10:00.120 --> 0:10:04.079 day on course. On trade policy, I think you can 0:10:04.120 --> 0:10:07.400 have radical changes the end of TPP and t tipped 0:10:07.440 --> 0:10:11.040 and stuff forth. So a mixed bag and still unconnectable. 0:10:11.800 --> 0:10:14.680 The backdrop from your wonderful monograph of a year ago, 0:10:14.800 --> 0:10:17.520 your smaller size book, which is which I claimed was 0:10:17.520 --> 0:10:21.040 a must read, and your reaffirmation and project syndicate the 0:10:21.080 --> 0:10:24.240 other day is on your optimism on the nation. Let's 0:10:24.240 --> 0:10:26.600 go to the quote I called my morning must read 0:10:26.720 --> 0:10:30.040 for this morning, This from Professor uh Ni and it's 0:10:30.040 --> 0:10:35.680 real simple. We oscillate between triumphalism and declinism. The US 0:10:35.800 --> 0:10:39.200 is not in decline. Finally, Professor and I goes on 0:10:39.280 --> 0:10:42.840 to say, there is Russia a country in decline. Mr 0:10:42.840 --> 0:10:46.560 Trump is correct to avoid the complete isolation of Russia, 0:10:46.920 --> 0:10:50.440 with which we have overlapping interests. No one would could 0:10:50.440 --> 0:10:53.760 gain from a Cold war, Professor and I. How should 0:10:53.840 --> 0:11:01.120 Mr Trump uh discuss, act and behave with Mr Putin? Well, 0:11:01.640 --> 0:11:05.040 he's got a double task. One is, he doesn't want 0:11:05.120 --> 0:11:08.920 to undercut the sanctions which tell Putin that you can't 0:11:08.920 --> 0:11:13.720 steal yourr neighbor's territory by force, as he did with Ukraine. 0:11:14.600 --> 0:11:16.840 On the other hand, we do have business to do 0:11:16.960 --> 0:11:23.400 with the Russians, Iran, Afghanistan, North Korea, the Arctic. There 0:11:23.400 --> 0:11:25.679 are lots of things where we and and of course 0:11:25.679 --> 0:11:28.079 Syria in the Middle East, lots of things where we 0:11:28.120 --> 0:11:30.640 have to do business. So he's got to have a 0:11:30.679 --> 0:11:34.240 business like relationship, which is of course what he prides 0:11:34.320 --> 0:11:37.840 himself in, but at the same time not not let 0:11:38.120 --> 0:11:44.520 pouting off the hook in regard to his aggression against Ukraine. Professor, 0:11:44.600 --> 0:11:48.000 I love what you wrote. Forget soft power, the US 0:11:48.160 --> 0:11:51.080 risks losing hard power, right, I mean, if they're retrenching, 0:11:51.120 --> 0:11:53.840 if they're becoming much more inward looking. You could also 0:11:53.880 --> 0:11:57.080 see the Chinese uh, you know, forcing the rest of 0:11:57.120 --> 0:12:00.120 the world to adopt the reminbi as a reserve and 0:12:00.240 --> 0:12:03.800 s do you think there's a real possibility that four 0:12:03.840 --> 0:12:10.280 years from now the US loses real power. I doubt 0:12:10.320 --> 0:12:12.240 that you're going to see that rendom b is the 0:12:12.360 --> 0:12:17.000 reserve currency. You have to have deep and flexible capital 0:12:17.080 --> 0:12:21.000 markets and a real rule of law before a currency 0:12:21.120 --> 0:12:25.040 becomes a dominant reserve currency. China is a long way 0:12:25.040 --> 0:12:29.240 from that, uh. And in terms of hard military power, 0:12:29.360 --> 0:12:31.840 Trump has said that he is going to invest in 0:12:31.840 --> 0:12:35.800 that area. So I think we're actually likely to lose 0:12:35.880 --> 0:12:39.040 more in the terms of soft power people who want 0:12:39.040 --> 0:12:41.880 to follow our values because of the rhetoric we're using. 0:12:42.360 --> 0:12:44.120 A right, doubt, we're going to lose a lot in 0:12:44.320 --> 0:12:49.160 hard power, either economic or military capability. Right, Professor, what 0:12:49.240 --> 0:12:52.320 are your values are the values under this presidency going 0:12:52.320 --> 0:12:53.800 to be the same as they were ten years ago. 0:12:54.400 --> 0:13:00.640 I I believe in democracy. I believe in tallers towards 0:13:00.679 --> 0:13:05.760 people as certain openness, and those are issues which have 0:13:05.880 --> 0:13:10.800 been questioned in UH in the campaign. I hope that 0:13:10.800 --> 0:13:13.600 that the President elect is going to reaffirm them, as 0:13:13.640 --> 0:13:16.920 many people have urged him to do. Professor, Now you 0:13:16.960 --> 0:13:20.600 have a chapter in your classic book Coping with Interdependence. 0:13:20.960 --> 0:13:24.600 Help us here with President Trump and how he needs 0:13:24.640 --> 0:13:28.160 to cope with a new Westphalian world, how he needs 0:13:28.200 --> 0:13:31.480 to quote, UH, cope with his Fred Zacharias says, a 0:13:31.559 --> 0:13:35.920 hub and spoke system, there's a new calculus here. How 0:13:35.960 --> 0:13:41.199 does a president cope with that? Well? Well, UH, for 0:13:41.440 --> 0:13:45.760 seventy years since Harry Truman's day, the United States is 0:13:45.800 --> 0:13:50.840 not a system of alliances which has provided stability and security. 0:13:50.920 --> 0:13:54.720 And every market requires a political framework of security for 0:13:54.840 --> 0:13:59.199 itself for it to flourish. And if Trump undercuts those 0:13:59.240 --> 0:14:03.000 alliances is then you're going to see the spillover into 0:14:03.120 --> 0:14:07.960 the UH prospects for markets and growth. I think if 0:14:08.000 --> 0:14:12.520 you look at his initial statements since the last week's election, UH, 0:14:12.559 --> 0:14:16.440 he's tended to be reaffirming on those alliances. He complains 0:14:16.480 --> 0:14:19.440 about NATO not paying enough for its own defense, but 0:14:19.520 --> 0:14:23.240 so did previous presidents, and he has at least so 0:14:23.280 --> 0:14:28.000 far authorized the view that we will defend the NATO partners. 0:14:28.560 --> 0:14:30.840 This is what we love about Bloomberg surveillance. Joseph and 0:14:30.880 --> 0:14:33.920 I with us UH and also joining US today Jim O'Neill, 0:14:34.000 --> 0:14:36.080 of course, with his service to Goldman Saxon, then to 0:14:36.160 --> 0:14:39.080 the United Kingdom. Mr O'Neil, you're here, professor and I 0:14:39.160 --> 0:14:42.640 they're talking about interdependence and the new calculus. Help you 0:14:42.720 --> 0:14:45.760 here with how the United Kingdom fits into a new 0:14:45.800 --> 0:14:49.480 Trump foreign policy. So Higil Farage, I believe is stepping 0:14:49.520 --> 0:14:51.400 in on this debate. It's great to be on the 0:14:51.480 --> 0:14:55.680 same UH session as A as somebody like Jokes had 0:14:55.720 --> 0:14:58.200 the pleasure of trusting him about the big world in 0:14:58.240 --> 0:15:00.800 the PASTA. I find the line thinking that this is 0:15:00.840 --> 0:15:03.800 just the whole chump development is a further step on 0:15:04.320 --> 0:15:08.480 the path to an increasingly complex world and a couple 0:15:08.480 --> 0:15:11.520 of other things that for the UK, and I think 0:15:11.520 --> 0:15:14.760 you've seen the Chancellor articulated reasonably well that we just 0:15:14.800 --> 0:15:18.360 had the so called economic con functional dialogue with China 0:15:18.840 --> 0:15:21.040 and He was pretty clear because he was quiz directly 0:15:21.040 --> 0:15:22.960 about that. As the you know, the number one finance 0:15:22.960 --> 0:15:26.360 guy in this country, we have to We're a very small, 0:15:26.400 --> 0:15:29.880 open country and especially post Brexit, we have to have 0:15:30.400 --> 0:15:33.240 as good relationships with the US as we can, but 0:15:33.320 --> 0:15:35.840 we have to be probably even more on the front 0:15:35.840 --> 0:15:39.360 foot with some of these newer guys like China. Is 0:15:39.360 --> 0:15:43.360 an agel forage help with that conversation or is he 0:15:43.440 --> 0:15:47.480 an abstraction? You know that that is something for the 0:15:47.920 --> 0:15:50.920 tactics of the policy makers to focus on what it 0:15:51.040 --> 0:15:53.840 what is really important for the underlying and long term 0:15:53.840 --> 0:15:56.840 health of the UK. We need to be on the 0:15:56.880 --> 0:16:00.160 front foot with the likes of a China, despite some 0:16:00.240 --> 0:16:04.840 of the obvious challenges that creates, because we we need 0:16:04.880 --> 0:16:08.440 to be in the center of global trade flows more 0:16:09.000 --> 0:16:11.480 than we have successfully been in the past, and we 0:16:11.560 --> 0:16:14.200 have to remain in the sense of global capital flows 0:16:14.520 --> 0:16:17.920 and whilst that raises some challenges for us, as we 0:16:18.000 --> 0:16:21.080 saw in things, I was involved in the policy. We 0:16:21.080 --> 0:16:25.280 were one of the earliest participants in the Asian Infrastructure Bank. 0:16:25.360 --> 0:16:27.760 I was there for the signing. We have to do 0:16:28.320 --> 0:16:31.000 like no other It doesn'ntagonizing or playing tough guy with 0:16:31.160 --> 0:16:33.520 China work. Listen, I'll go back to what I said 0:16:33.520 --> 0:16:35.440 about the dollar. I remember all this stuff in the 0:16:35.440 --> 0:16:38.960 early eighties about beating up on Japan, and you know 0:16:39.600 --> 0:16:50.920 it never really happened. Who you put your trust in matters. 0:16:51.040 --> 0:16:55.720 Investors have put their trust in independent registered investment advisors 0:16:56.000 --> 0:16:59.000 to the tune of four trillion dollars. Why they see 0:16:59.000 --> 0:17:02.520 their rules to serve, not sell, That's right. Charles Schwab 0:17:02.640 --> 0:17:07.160 is committed to the success over seven thousand independent financial 0:17:07.160 --> 0:17:12.960 advisors who passionately dedicate themselves to helping people achieve their 0:17:12.960 --> 0:17:25.760 financial goals. Learn more and find your independent advisor dot com. 0:17:25.880 --> 0:17:27.960 Let me bring in now, Charles wide Plots, Professor of 0:17:27.960 --> 0:17:32.000 International Economics the Graduate Institute of International Development Studies in Geneva, 0:17:32.040 --> 0:17:34.680 on a day when President Obama is speaking about democracy 0:17:35.040 --> 0:17:38.159 in Athens, preparing to head to Germany after that to 0:17:38.200 --> 0:17:41.440 meet with the Chancellor of Germany, Angela Merkel. Let's start 0:17:41.480 --> 0:17:44.240 in France. We're reaching you in France today, Professor white Plots. 0:17:44.359 --> 0:17:48.240 Emmanuel Macrons declaring his candidacy in France this morning. What 0:17:48.280 --> 0:17:51.120 does that say to you about what's going on in France? Indeed, 0:17:51.160 --> 0:17:54.960 what's going on in Europe him declaring his candidacy. Well, 0:17:55.280 --> 0:17:58.119 generally in Europe, as you know, there is also a 0:17:58.160 --> 0:18:04.000 Trump like phenomenon happening. All sorts of strange populist are 0:18:04.359 --> 0:18:09.040 climbing in public opinion polls. Next month we have a 0:18:09.160 --> 0:18:12.760 referendum in Italy that can turn ugly, and then next 0:18:12.840 --> 0:18:16.600 year we have an acceence in France. So there's plenty 0:18:16.640 --> 0:18:20.520 to worry about. Cho's why plots. It's wonderful to speak 0:18:20.600 --> 0:18:24.359 to you today. We sparked with Paul Degar yesterday, and 0:18:24.480 --> 0:18:26.960 so much of this is about clearing the markets and 0:18:27.000 --> 0:18:31.639 how your Europe is behind. What is the urgency of 0:18:31.760 --> 0:18:35.399 Europe clearing their markets to move forward to get to 0:18:35.640 --> 0:18:41.520 us like growth. Well, the problem with Europe is that 0:18:41.640 --> 0:18:44.680 it's a large number of countries and everyone as its 0:18:44.720 --> 0:18:50.520 share of trouble. So today President Obama is in Greece, 0:18:50.560 --> 0:18:54.800 which is a very very troubled country. Interestingly, he's been 0:18:54.840 --> 0:18:58.919 calling for that restructuring public that restructuring in Greece is 0:18:59.000 --> 0:19:02.520 absolutely right, but the others don't want. And his next 0:19:02.520 --> 0:19:08.800 trip to Germany he might raise the issue with Chancellor Miracle. 0:19:09.160 --> 0:19:12.479 He will be told no way so that's one issue. 0:19:13.520 --> 0:19:16.240 But you know, if you think about my own country, friends, 0:19:17.600 --> 0:19:21.000 the labor market is pretty much in a mess. The 0:19:21.119 --> 0:19:25.240 government is huge, uh and has been running a deficits 0:19:25.280 --> 0:19:31.120 since nineteen seventies three. Uh. So the list of things 0:19:31.160 --> 0:19:33.320 that have to be done in every country is pretty 0:19:33.320 --> 0:19:37.959 well known. What's missing is the politician's readiness to do that. 0:19:38.520 --> 0:19:41.119 And I think when they watch what's happening in the US, 0:19:41.880 --> 0:19:44.280 they are even less willing to tackle any of the 0:19:44.400 --> 0:19:47.239 real issues. How are they hearing what President Obama has 0:19:47.280 --> 0:19:49.280 to say on this trip and light of what happened 0:19:49.280 --> 0:19:52.119 here in the US last week, how is his message 0:19:52.119 --> 0:19:56.680 being interpreted? Do you think, well, it's a goodbye message. 0:19:56.960 --> 0:20:00.720 People in Europe like the Obama way more and the Americans, 0:20:00.800 --> 0:20:05.359 I think, uh, And they are sad to see him go, 0:20:05.560 --> 0:20:10.439 and they are sad to see him being replaced by Trump. Uh. 0:20:10.560 --> 0:20:13.360 They are very worried about that, by the way. Uh. 0:20:14.160 --> 0:20:17.440 But but you know, when he goes and makes a 0:20:17.600 --> 0:20:21.960 great species about democracy and all of that, that's viewtiful. 0:20:22.080 --> 0:20:25.399 But everybody knows that. Everybody knows that democracy is are 0:20:25.520 --> 0:20:28.800 very complex things to make work. And at the time 0:20:29.040 --> 0:20:34.359 when the population in Europe pretty much like in the US, 0:20:34.400 --> 0:20:38.800 A significant segment of the population is really upset about 0:20:39.280 --> 0:20:41.600 what has been there a lot for the last twenty 0:20:41.680 --> 0:20:46.600 or thirty years. It's very, very, very hard to think 0:20:46.640 --> 0:20:49.680 about good outcomes. Charles White plots with us, of course 0:20:49.720 --> 0:20:51.879 he is. He's joining his by phone from from France. 0:20:51.920 --> 0:20:54.520 It's great to have you with us again here. Let's 0:20:54.560 --> 0:20:56.639 talk a little bit about productivity. We're focused here on 0:20:56.680 --> 0:20:58.959 manufacturing in the US. When you look at it more broadly, 0:20:59.000 --> 0:21:01.359 when you look at the state manufacturing globally, what do 0:21:01.400 --> 0:21:06.080 you see. Well, we we had a major slowdown in 0:21:06.119 --> 0:21:11.879 productivity for the last twenty years. Uh. One reason is 0:21:11.960 --> 0:21:16.920 that industries shrinking and services are increasing, and services are 0:21:17.040 --> 0:21:22.760 typically low productivity gains or zero productivity gains. So this 0:21:22.960 --> 0:21:27.800 shifting production in production pattern through the developed world these 0:21:28.160 --> 0:21:32.520 is a major source of low productivity gains. Is it 0:21:32.520 --> 0:21:35.439 because there's too much money slashing around? Is it just 0:21:36.400 --> 0:21:40.160 we're paying the price of capital deepening of just over investment. 0:21:42.680 --> 0:21:46.040 I don't think there has been over investment quite to 0:21:46.119 --> 0:21:49.480 the country. Since the crisis in two thousand and eight, 0:21:49.920 --> 0:21:55.119 investment has been extremely low, extremely depressed. Had many discussions 0:21:55.160 --> 0:21:59.920 about why. I tend to believe that the poor over 0:22:00.080 --> 0:22:03.600 old growth pattern in the developed country as discouraged firms 0:22:03.600 --> 0:22:08.680 from from investing, and that's weighing on productivity gains. You 0:22:08.680 --> 0:22:11.680 you're right when you when you look at the complement 0:22:11.760 --> 0:22:13.439 of what the e c B is considering when it 0:22:13.480 --> 0:22:16.560 meets at the beginning of December, how heavily does productivity 0:22:16.560 --> 0:22:20.400 way When they're looking at the data, I don't think 0:22:20.400 --> 0:22:24.119 they are very worried about that. They maybe they shoot, 0:22:25.200 --> 0:22:27.639 but I think they are. They are very worried that 0:22:27.760 --> 0:22:32.760 inflation is stuck uh, not far from zero and has 0:22:32.800 --> 0:22:37.560 been there for the last three years. Uh. And therefore 0:22:37.680 --> 0:22:43.000 and they want to keep growth, but that's not happening easily. 0:22:43.440 --> 0:22:45.760 It chose White Plots and with a shout out to 0:22:45.880 --> 0:22:51.040 John the Sylvia of of Wells Fargo with your work, 0:22:51.160 --> 0:22:57.400 Professor white Plots on labor mobility. As we have economic slowdown, disinflation, 0:22:58.280 --> 0:23:03.280 we become rigid as a society. How critical is that idea, 0:23:03.400 --> 0:23:06.160 that dream of moving to a new place, How does 0:23:06.200 --> 0:23:12.720 that fold into European and for that better US economics. Well, uh, 0:23:13.160 --> 0:23:16.760 we we have in most European countries very rigid markets. 0:23:16.840 --> 0:23:19.840 So It's not only that people don't move from one 0:23:19.880 --> 0:23:24.000 country to another, they don't even move within their own countries, 0:23:24.080 --> 0:23:27.320 or they move much less than the US worker is 0:23:27.440 --> 0:23:31.800 used to to move. So that's that's been that's been 0:23:31.880 --> 0:23:38.080 known for for decades before we stopped the monetary union. UH, 0:23:38.119 --> 0:23:41.639 And it was clear that this was one of the 0:23:41.720 --> 0:23:47.640 drawbacks of having a common currency. UM. But to me, 0:23:47.840 --> 0:23:50.720 that's that's not the most important issue. To me, the 0:23:50.760 --> 0:23:54.320 most important issue is that many in many countries, labor 0:23:54.359 --> 0:23:58.879 markets are frozen. It's hard to fire people, so firms 0:23:58.920 --> 0:24:02.960 don't hire. Uh. They are in some countries minimum wages 0:24:03.000 --> 0:24:07.960 are very high, so they are discouraging employment of the 0:24:08.040 --> 0:24:14.560 non qualified workers. UH. Dismissals are very difficult, very costly, 0:24:14.640 --> 0:24:17.600 and legally uncertain, and so and so forth. So we 0:24:18.440 --> 0:24:22.639 the problem really is at the national level that this 0:24:22.840 --> 0:24:26.400 labor markets just not function and and we generate their 0:24:26.680 --> 0:24:29.159 machinery to create an employment. I don't know if you 0:24:29.240 --> 0:24:31.960 thought about this, but if we get Trump inflation, if 0:24:31.960 --> 0:24:36.240 we get some forms stimulus and reflation within the United States, 0:24:36.240 --> 0:24:39.879 do we just presume economic growth that raises wages? Is 0:24:39.880 --> 0:24:43.440 there the real riskier stag wage inflation where we've got 0:24:43.480 --> 0:24:48.240 inflation with no real rage increase. Well as you know that. 0:24:48.440 --> 0:24:53.000 The mystery is why inflation wage inflation is not higher 0:24:53.440 --> 0:24:57.120 in the US, given that the unemployment rate is very low. 0:24:57.200 --> 0:25:02.520 The continuous debates about why it is the case. I 0:25:02.600 --> 0:25:06.960 think the silver lining of Trump is that if he 0:25:07.040 --> 0:25:12.440 does it, he might UH in pomp up government spending 0:25:12.600 --> 0:25:16.560