WEBVTT - Surveillance: We're Off The Grid Now For Yields, Weinberg Says 0:00:02.600 --> 0:00:13.040 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane 0:00:13.480 --> 0:00:17.560 Jai Lely. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:33.160 Bloomberg dot Com, and of course on the Bloomberg. Our 0:00:33.159 --> 0:00:37.360 guest is so experienced and important that I think we 0:00:37.400 --> 0:00:39.640 need to go right to him. Carl Weinberg high frequency 0:00:39.680 --> 0:00:45.000 economics for years, on international economics and particularly debt workout. 0:00:45.680 --> 0:00:48.199 And just for John farre who was probably listening, he 0:00:48.280 --> 0:00:50.479 probably doesn't know that I studied to be as Zermatt 0:00:50.560 --> 0:00:53.559 mountain guide, did you years back in the days of 0:00:53.600 --> 0:00:57.720 my youth? He was, he you come out of Zoomatin, 0:00:57.720 --> 0:01:01.400 there's ferrale f you r l actually very sure, okay, 0:01:01.400 --> 0:01:04.880 excuse me. And I think he was above fury like 0:01:04.959 --> 0:01:08.679 he was really making a serious upon truck steg. I 0:01:08.720 --> 0:01:11.240 don't know what the climate. I'm sorry. How did you 0:01:11.280 --> 0:01:14.560 make your way from from being a mountain guide to 0:01:14.600 --> 0:01:17.240 where you are today? Well, I was employed full time 0:01:17.240 --> 0:01:19.920 at a government agency in Paris and I didn't really 0:01:19.920 --> 0:01:21.880 have much to do, so I had eight weeks of 0:01:22.000 --> 0:01:26.000 year paid vacations you know, so it was a good 0:01:26.000 --> 0:01:29.640 way to have you climbed. No no, no, no no. 0:01:29.680 --> 0:01:31.640 When they took out the ropes, that's when I decided 0:01:31.680 --> 0:01:33.520 I didn't want to be a mountain guide. The skies, 0:01:33.600 --> 0:01:36.520 the coupons, all that stuff that I was fine with. 0:01:36.600 --> 0:01:38.440 But when they brought out the ropes and they said climb, 0:01:38.520 --> 0:01:40.000 I said, no way. That's for some of my whole 0:01:40.040 --> 0:01:42.839 frameworks at Disney movie from like fifty five years ago 0:01:42.880 --> 0:01:45.400 that you know, we were riveted by his kids. I 0:01:45.400 --> 0:01:47.800 thought it was a Clint Eastwood movie from some time ago, 0:01:47.880 --> 0:01:50.320 the Iiger sanction. That's very inspiration. Yeah, that was it 0:01:50.520 --> 0:01:52.360 was as well. Let us get to the topic of 0:01:52.360 --> 0:01:54.880 the moment, which is your China note that you write 0:01:54.880 --> 0:01:57.680 a High frequencies what will your China note be for 0:01:57.720 --> 0:02:00.560 this week? How do you fold Hong Kong into your 0:02:00.640 --> 0:02:03.400 China calculus? So luckily we're going on vacation at High 0:02:03.440 --> 0:02:06.240 Frequency Economics, so there won't be a China note. But 0:02:06.360 --> 0:02:09.000 if I, if I were writing, you know, the the 0:02:09.120 --> 0:02:10.960 question for Hong Kong, and the way I like to 0:02:10.960 --> 0:02:13.080 think about it is what's going to happen six months 0:02:13.120 --> 0:02:15.200 or twelve months from now? Is there's still going to 0:02:15.240 --> 0:02:17.880 be in Hong Kong. And do we tell companies are 0:02:17.960 --> 0:02:22.399 clients who have business stakes in Hong Kong and businesses 0:02:22.400 --> 0:02:24.680 that depend on being in Hong Kong, did they stay 0:02:24.760 --> 0:02:26.760 or do they go? And I think that's really the 0:02:26.800 --> 0:02:29.280 core economic question right now. There's not a sign that 0:02:29.360 --> 0:02:32.920 anyone is leaving. And while some people are pessimistic on 0:02:32.960 --> 0:02:36.240 the latest developments, other people are saying that, well, you know, 0:02:36.360 --> 0:02:39.640 by becoming more violent, the protesters are isolating the middle 0:02:39.720 --> 0:02:42.480 class and that they lose traction therefore as a result 0:02:42.520 --> 0:02:45.800 of all that. So I'm looking for the longer term. 0:02:45.840 --> 0:02:48.640 My guess is that there's still with Hong Kong, that 0:02:48.720 --> 0:02:51.519 it will still be China's gateway to capital markets, it 0:02:51.520 --> 0:02:53.840 will still be the gateway for businesses both ways in 0:02:53.880 --> 0:02:57.400 and out of China, and that it's too important to foul. 0:02:57.800 --> 0:02:59.840 But I can't tell you what shape it's going to 0:02:59.880 --> 0:03:02.080 be and with the format of that settlement is going 0:03:02.120 --> 0:03:04.200 to be. But I'm confident that this isn't the end 0:03:04.200 --> 0:03:06.440 of Hong Kong. One thing that I'm struck by right 0:03:06.480 --> 0:03:09.120 now is it just adds to this growing feeling of 0:03:09.160 --> 0:03:12.639 worry in markets, both you know, stemming from China, setting 0:03:12.680 --> 0:03:15.560 from trade, stemming from just the global economic backdrop. With 0:03:15.639 --> 0:03:18.520 a growing number of economists saying that we are heading 0:03:18.560 --> 0:03:21.960 toward recession, I'm struggling to just sort of put this 0:03:22.160 --> 0:03:26.200 into that perspective. Have we reached a tipping point at 0:03:26.200 --> 0:03:29.360 which we are going to a downturn that central banks 0:03:29.680 --> 0:03:33.720 cannot prevent at this point? Well, working your question backwards, 0:03:33.760 --> 0:03:36.360 A right, central banks don't have enough tools to deal 0:03:36.440 --> 0:03:38.920 with a lot of economic adversity right now. I mean, 0:03:38.960 --> 0:03:41.680 the c B is tapped out, despite when Mario Drocki says, 0:03:41.720 --> 0:03:44.520 the bank in Japan is tapped out, despite what Kuroda 0:03:44.760 --> 0:03:47.640 tells you. Uh, the FED has some room to maneuver, 0:03:47.760 --> 0:03:51.000 and they're exercising it. But the problems that are facing 0:03:51.000 --> 0:03:55.240 the economy caused by uncertainty, caused by trade risk, caused 0:03:55.240 --> 0:03:58.320 by political risk, caused by i'll say a Trump risk, 0:03:58.680 --> 0:04:01.080 a right, caused by Italy risk. All right, these are 0:04:01.120 --> 0:04:04.120 not the things that monetary policy can fix. And it's 0:04:04.160 --> 0:04:07.280 a it's a hard fact that public policy may be 0:04:07.360 --> 0:04:10.240 able to soften a business cycle downturn, but it's never 0:04:10.280 --> 0:04:13.520 been able to actually prevent one. So if you say 0:04:13.560 --> 0:04:15.400 we have a twenty chance of a recession in the 0:04:15.440 --> 0:04:18.160 United States. That's probably true, all right, Is it going 0:04:18.200 --> 0:04:19.800 to be this year? I can't tell you that for sure. 0:04:19.880 --> 0:04:22.279 Kind of FED prevented, I don't think so. Okay, But 0:04:22.400 --> 0:04:24.960 yields in right now, we are in six basis points 0:04:24.960 --> 0:04:27.880 in the tenure right now, in only five basis points 0:04:28.240 --> 0:04:30.320 in the heart of the matter. And again, as I 0:04:30.360 --> 0:04:32.640 mentioned earlier, I put you in class with Paul degra 0:04:32.800 --> 0:04:36.960 Else and Charles White plots of Switzerland. It's saying, why 0:04:37.080 --> 0:04:40.360 can't we work this out? Do you look at the 0:04:40.400 --> 0:04:44.720 turmoil we're in now? Is simply nobody wants to clear markets, 0:04:44.960 --> 0:04:48.719 nobody wants to take the proverbial loss. Well, I think 0:04:48.760 --> 0:04:52.360 that right now investors are being reluctant, all right, to 0:04:52.560 --> 0:04:55.359 take on a lot of risk. They're putting their money 0:04:55.360 --> 0:04:58.039 into equities, I think, not because they want to take 0:04:58.080 --> 0:05:01.159 on risk, but because other e years of investment are 0:05:01.200 --> 0:05:05.040 not rewarding to them. Bonds have lower negative yields wherever 0:05:05.080 --> 0:05:07.920 you look. Cash has lower negative yields wherever they look. 0:05:07.960 --> 0:05:10.480 So moving into risky assets is not a choice, it's 0:05:10.600 --> 0:05:13.080 it's a necessity to get any positive rate of return. 0:05:13.480 --> 0:05:16.000 So I think that we're in a peculiar place, a 0:05:16.000 --> 0:05:18.200 place that I don't remember being in before in terms 0:05:18.200 --> 0:05:20.000 of global financial marks. How do you look at the 0:05:20.000 --> 0:05:23.360 inertial force of the chronic nature? That's e excuse me, 0:05:23.360 --> 0:05:27.800 that's Chicago physics talk. How do you look at the 0:05:27.839 --> 0:05:31.919 inertial force or the chronic nature of negative interest rates? 0:05:32.120 --> 0:05:34.680 Does it matter that it's been a long time we've 0:05:34.680 --> 0:05:37.320 been doing this? Well, I think the longer we go, 0:05:37.800 --> 0:05:40.880 the greater the risk of a systemic failure somewhere being 0:05:40.960 --> 0:05:44.160 caused by negative interest rates. Big pools of money can 0:05:44.279 --> 0:05:47.000 survive at negative interest rates, their cash flows go away. 0:05:47.040 --> 0:05:50.039 Banks can't make money lending at negative interest rates, and 0:05:50.080 --> 0:05:53.200 they make money anyway taking the positives deposits at negative 0:05:53.240 --> 0:05:55.240 interest rates, being paid to take money, and why take 0:05:55.279 --> 0:05:57.760 on the risk of lowering their rate and then lower 0:05:57.800 --> 0:06:00.400 their rate of return by making a loan. So there's 0:06:00.440 --> 0:06:03.160 a credit crunch inherent in this negative interest rate thing, 0:06:03.400 --> 0:06:05.960 and a credit crunch is a known economy killer. All right, 0:06:06.360 --> 0:06:09.080 Since I'm on with Tom Keane, I'm going to rip 0:06:09.080 --> 0:06:12.599 the script up because that's what we do. Right. I'm 0:06:12.839 --> 0:06:16.760 struggling to understand the flip side there's so much pessimism 0:06:16.839 --> 0:06:21.280 here and people are so ready for a downturn in 0:06:21.320 --> 0:06:24.799 the fact that central bankers don't have ammunition, that what's 0:06:24.880 --> 0:06:27.760 the risk that things are better than may seem, that 0:06:27.880 --> 0:06:30.960 things are actually pretty good, and that central banks are 0:06:31.000 --> 0:06:33.880 entering an easing cycle at a time when we don't 0:06:33.960 --> 0:06:35.760 need it and the economy is going to take off, 0:06:35.880 --> 0:06:38.920 We're finally going to see inflation. I mean, what's that risk? Well, 0:06:39.000 --> 0:06:42.200 I admire your optimism, but no one has ever said 0:06:42.240 --> 0:06:45.320 that before something. But I don't share this as someone 0:06:45.360 --> 0:06:47.560 who's having listened to you. I think I'm at least 0:06:47.560 --> 0:06:49.760 as pessimistic as you are. But what I learned in 0:06:49.800 --> 0:06:51.560 two thousand and eight is that you don't know what 0:06:51.680 --> 0:06:54.000 you don't know when you move off the grid. And 0:06:54.040 --> 0:06:56.560 we're off the grid right now. With negative YO curves 0:06:56.560 --> 0:06:58.720 in Europe, I mean, the German yo curb is negative 0:06:58.760 --> 0:07:00.640 all the way out the thirty year is the Dutch 0:07:00.720 --> 0:07:03.200 curve is not far behind that a right, the French 0:07:03.200 --> 0:07:05.880 curve is moving in that direction, even the pound sterling 0:07:05.960 --> 0:07:09.760 is moving that direction. I've never experienced negative interest rates 0:07:09.800 --> 0:07:12.560 like this, just as I never experienced falling house prices 0:07:12.880 --> 0:07:14.880 and I didn't even know the right questions. Even though 0:07:14.920 --> 0:07:17.400 we saw house prices falling in two thousand and eight, 0:07:17.480 --> 0:07:19.440 we didn't know the right questions to ask about, you know, 0:07:19.440 --> 0:07:22.360 what to take out the financial system. So I'm very 0:07:22.480 --> 0:07:26.360 nervous personally, more so than ever before, because negative yale 0:07:26.400 --> 0:07:28.960 curve in Germany after thirty years is so far off 0:07:29.040 --> 0:07:31.600 the grid. I don't know. I would note Lisa, with 0:07:31.720 --> 0:07:34.600 Deutsche Bank and other EU banks breaking down this morning, 0:07:34.720 --> 0:07:37.840 sort of touching on loads of July. Deutsche Bank is 0:07:37.880 --> 0:07:42.200 a thirteen percent from the enthusiasm of early July. Yeah, 0:07:42.200 --> 0:07:45.720 and Commerce Bank reaching a new record low as Milo. Yeah, 0:07:46.040 --> 0:07:49.200 Commerce Bank is tumbling right now. Uh, and really really 0:07:49.280 --> 0:07:52.320 kind of speaking to those incredibly negative yields in this 0:07:52.360 --> 0:07:54.600 feeling they're not going to get positive. But Carl, I 0:07:54.600 --> 0:07:57.400 mean what you said really really resonates with me. We're 0:07:57.400 --> 0:08:00.000 off the grid and we don't even know the questions 0:08:00.120 --> 0:08:03.200 to ask. How do we even get a framework for 0:08:03.240 --> 0:08:08.680 what to be asked? Is it? Well? You know, right now, 0:08:08.920 --> 0:08:13.520 right now, right now, if you're an investor, what are 0:08:13.520 --> 0:08:16.600 your choices? All right? Money? If you're an investor in Germany, 0:08:16.640 --> 0:08:18.760 money has no value. You have to pay people to 0:08:18.800 --> 0:08:21.239 take it off your hands. That's what negative interest rates means. 0:08:21.440 --> 0:08:23.440 So you don't want to hold cash, you don't want 0:08:23.440 --> 0:08:25.880 to hold bonds because the government doesn't need your stinking money. 0:08:25.920 --> 0:08:28.320 They're running a surplus, all right. Corporates don't need your 0:08:28.320 --> 0:08:30.880 stinking money because the ECB has driven their yield solo. 0:08:30.920 --> 0:08:33.600 They're sitting on piles of cash. So nobody needs your money. 0:08:33.600 --> 0:08:35.200 So what do you do with your money? So the 0:08:35.280 --> 0:08:38.520 outcomes from this our money goes into stocks, and you 0:08:38.559 --> 0:08:41.160 get a bubble in stocks that eventually bursts, maybe not 0:08:41.200 --> 0:08:43.280 tomorrow or the next day, but at some point. Or 0:08:43.520 --> 0:08:46.640 here's the scariest outcome of all that people who don't 0:08:46.679 --> 0:08:49.240 have use for money convert that money into things they 0:08:49.360 --> 0:08:51.960 do have use for goods and services. And if that 0:08:52.040 --> 0:08:54.960 happens faster than the economy can create those goods and services, 0:08:55.040 --> 0:08:57.840 you get an inflation. And everyone thinks in the textbook 0:08:57.880 --> 0:08:59.320 you know, it says you print the money and you 0:08:59.320 --> 0:09:01.800 get the inflation today. But you don't get the inflation today, 0:09:01.840 --> 0:09:03.800 you get the inflation tomorrow, with the next day or 0:09:03.840 --> 0:09:06.480 the day after. And maybe what's lurking behind all of 0:09:06.520 --> 0:09:08.960 this is money dies and loses all of its value. 0:09:09.360 --> 0:09:11.960 Is that we get a big surge of money into 0:09:11.960 --> 0:09:14.599 consumption and that's a problem. Carl Weinberg, thank you so 0:09:14.720 --> 0:09:30.959 much high Frequency Economics on this important day, Lisa Brandon Winson, 0:09:31.040 --> 0:09:34.400 Tim Keene right now, a really smart Bloomberg survey in 0:09:34.480 --> 0:09:38.440 recent months, Singapore the best airport in the world, then Haneda, 0:09:38.520 --> 0:09:43.600 Tokyo in Seon, Soul, Doha, and number five is Hong Kong. 0:09:43.840 --> 0:09:47.280 Or Ivan Man provides leadership for all of Bloomberg News 0:09:47.400 --> 0:09:50.280 in Hong Kong, and she has traveled out to the 0:09:50.320 --> 0:09:55.200 airport uh today, Ivan I noticed on Flight Aware all 0:09:55.280 --> 0:09:59.480 the domestic flights to China disappeared, some of the longer 0:09:59.520 --> 0:10:03.640 Internet sational flights still landing. What is the likelihood that 0:10:03.720 --> 0:10:08.440 Hong Kong's airport would open on your Tuesday morning, say 0:10:08.480 --> 0:10:13.080 about eight pm tonight New York time. It's hard to 0:10:13.080 --> 0:10:15.120 say so, but we have heard from the Hong Kong 0:10:15.160 --> 0:10:18.200 Authority at least earlier saying that they are hoping to 0:10:18.280 --> 0:10:21.800 resume those flights on Tuesday morning. But as of now, 0:10:21.840 --> 0:10:24.079 I'm looking at the screen right now, and in right 0:10:24.120 --> 0:10:27.320 red you see mostly, if not all, of the flights 0:10:27.360 --> 0:10:30.920 here today leaving Hong Kong have been canceled. The Hon 0:10:31.000 --> 0:10:33.560 Kong Airport Authority telling us they've never had to shut 0:10:33.600 --> 0:10:36.520 down the airport like this before. Unclear just how many 0:10:36.559 --> 0:10:41.760 flights have been impacted, But what we're seeing right now 0:10:41.840 --> 0:10:43.880 is that but the crowds are sitting out a little 0:10:43.920 --> 0:10:45.640 bit here are things have died down just a bit, 0:10:45.679 --> 0:10:47.720 but there's still about hundreds, I would say, have not 0:10:47.800 --> 0:10:50.840 thousands of people still sitting out on the arrival halls. 0:10:51.320 --> 0:10:54.080 No sign of police officers just yet. A lot of 0:10:54.160 --> 0:10:56.520 questions on whether they were going to use force stick 0:10:56.559 --> 0:10:59.600 throughout these crowds what we saw over the weekend. Evan, 0:11:00.040 --> 0:11:02.760 I guess this really highlights the big question at what 0:11:02.880 --> 0:11:06.600 point will the Hong Kong unrest bleed into the economy 0:11:06.920 --> 0:11:10.280 and cause a real problem with businesses moving out of 0:11:10.320 --> 0:11:13.880 the region. Are we seeing some sort of signs that 0:11:13.920 --> 0:11:17.160 this is a tipping point for businesses, that it is 0:11:17.200 --> 0:11:19.120 a sign that we're not going back to the way 0:11:19.120 --> 0:11:23.480 it was, Well, it's we haven't seen signs just yet. 0:11:23.520 --> 0:11:25.199 I think most people are still not seeing that the 0:11:25.240 --> 0:11:29.240 thread of capital outfloads, but businesses are certainly Really we've 0:11:29.280 --> 0:11:32.760 seen during these protests in the last ten straight weeks. Now, 0:11:33.280 --> 0:11:36.200 businesses are not opening, They're not opening their doors while 0:11:36.240 --> 0:11:39.120 therese protests are marching. And we even saw it today 0:11:39.160 --> 0:11:41.840 with Kathy Specific shares humbling to that ten year low 0:11:42.600 --> 0:11:45.800 after Beijing added pressure on these businesses as well. There 0:11:45.920 --> 0:11:49.440 was several staff members that turned out and showed up 0:11:49.440 --> 0:11:52.520 in some of these demonstrations. We've heard from sources telling 0:11:52.600 --> 0:11:55.880 us the Chinese Chinese state run company is engurging their 0:11:55.920 --> 0:12:00.480 employees not supply Kathy Pacific, whether for personal or business trips. 0:12:00.520 --> 0:12:03.800 So we are seeing Beijing adding one the more pressure 0:12:03.840 --> 0:12:08.360 to businesses who are supporting, if not tolerating with So 0:12:08.440 --> 0:12:11.160 it's the demonstrations we've seen. At what point do you 0:12:11.200 --> 0:12:14.320 expect Beijing to send in troops? I mean, this has 0:12:14.320 --> 0:12:16.760 sort of been the expectation that at some point the 0:12:16.800 --> 0:12:20.080 mainland will clamp down more seriously. Are we getting to 0:12:20.080 --> 0:12:25.080 that point at this point? We're not not yet. I 0:12:25.080 --> 0:12:27.280 mean we've we've heard from the Hong Kong macalais on 0:12:27.360 --> 0:12:30.440 office folkesmen there earlier at a press conference, and they 0:12:30.520 --> 0:12:33.240 ratted up the rhetoric at least right now, saying that 0:12:33.440 --> 0:12:36.960 these protesters are committing serious crimes that they're seeing signs 0:12:36.960 --> 0:12:40.720 of terrorism, but in terms of actually supporting police officers 0:12:40.720 --> 0:12:43.360 in Hong Kong or sending the p l A, we 0:12:43.440 --> 0:12:45.680 haven't seen that quite yet Hong Kong though, mind you 0:12:45.720 --> 0:12:48.319 today earlier this afternoon, showed off some of their new 0:12:48.679 --> 0:12:52.280 water cantons out there to the media, which we saw 0:12:52.280 --> 0:12:54.760 similar signs of that back and occupied Tway four teams. 0:12:54.760 --> 0:12:58.120 So perhaps they're preparing for further escalations town, you know, 0:12:58.360 --> 0:13:00.440 and I could make a joke about it and talk 0:13:00.520 --> 0:13:05.320 about Ivon Man's eight bedroom, twelve beeth house up Mount Nicholson, Uh, 0:13:05.360 --> 0:13:09.960 you know here in Hong Kong. But seriously, Von, what 0:13:10.040 --> 0:13:12.880 is what are you feeling on the streets and in 0:13:12.920 --> 0:13:16.199 the neighborhoods is people try to get on with their 0:13:16.280 --> 0:13:19.960 lives in Hong Kong away from the media. What is 0:13:20.000 --> 0:13:23.679 a tone you observe in Kowloon and in Hong Kong. 0:13:25.440 --> 0:13:27.960 It's interesting, John, because when you take a look at Internet, 0:13:28.080 --> 0:13:30.199 national media, and it seems like all we see is 0:13:30.520 --> 0:13:34.720 violent and and certain aspects you do see that there are, 0:13:34.760 --> 0:13:37.439 you know, extremes from both sides where we've seen both 0:13:37.480 --> 0:13:42.680 sides hardening their stands violence arresting protesters throwing petro bomb, 0:13:42.720 --> 0:13:45.720 do you have police find pure gas inside subway stations 0:13:45.760 --> 0:13:47.760 and whatnot. But if you take with the rest of 0:13:47.760 --> 0:13:52.040 of Hong Kong, relatively speaking, I would say there are 0:13:52.160 --> 0:13:54.160 areas that are still safe. I mean I have people 0:13:54.240 --> 0:13:56.680 from abroad asked me are you safe? And and for 0:13:56.720 --> 0:13:58.920 the most part we are. And but the one thing 0:13:58.960 --> 0:14:01.400 that people are worried about the impact on the economy. 0:14:01.440 --> 0:14:03.800 We had Caroline that you've executive speaking over the weekend 0:14:03.840 --> 0:14:07.560 saying the impact of these protests the economy could be 0:14:07.600 --> 0:14:11.880 worse and stars perhaps even a worse financial crisis. More 0:14:11.880 --> 0:14:14.480 imports today with our Evon man at the Hong Kong 0:14:14.600 --> 0:14:30.720 International Airport. Right now we look at international relations in 0:14:31.600 --> 0:14:35.720 I guess China, but through the prison of Washington. Jeffrey 0:14:35.720 --> 0:14:38.560 Wright joins us with eur Asia Group as we consider 0:14:38.720 --> 0:14:41.760 some of the China themes in Washington. Jeffrey, you've got 0:14:41.760 --> 0:14:44.960 a brilliant note on Huawei. This is the Chinese company 0:14:45.360 --> 0:14:48.600 with a big uproar about whether they should be in 0:14:48.640 --> 0:14:51.840 this country or that country you're doing business. Let me 0:14:51.920 --> 0:14:55.480 begin with the basics. Do the Republicans and Democrats on 0:14:55.600 --> 0:15:00.520 Capitol Hill do they agree about the president's approach to 0:15:00.600 --> 0:15:05.520 Huawei or there points of nuance. Uh, there are some 0:15:05.560 --> 0:15:07.480 points of nuance, but I think there's quite a lot 0:15:07.560 --> 0:15:10.640 of agreement on Capitol Hill that the person that's perhaps 0:15:10.640 --> 0:15:13.880 having second thoughts as Trump himself, who's more interested in 0:15:14.000 --> 0:15:17.840 trading Huawei away for something else. It looks like, well, 0:15:17.880 --> 0:15:20.280 what if we trade him away, what do we trade 0:15:20.320 --> 0:15:23.000 them too? I mean, you know, it's not like you know, 0:15:23.040 --> 0:15:26.800 your trade Oriental avenue for New York avenue and monopoly. 0:15:26.880 --> 0:15:29.760 I mean, what do we trade what do we trade 0:15:29.800 --> 0:15:34.200 them away to? Well, this opportunity may have passed over 0:15:34.200 --> 0:15:36.440 the last week or two as things have gotten worse, 0:15:36.480 --> 0:15:39.880 but I think if you go back to Osaka early June, 0:15:39.920 --> 0:15:44.720 Trump was interested in trading a Huawei settlement for trade 0:15:44.720 --> 0:15:47.360 concessions from the Chinese. I think maybe that ship has 0:15:47.400 --> 0:15:50.120 sailed at this point, but that was the hope. So 0:15:50.520 --> 0:15:52.600 here's one question that I have. Jeffrey just sort of 0:15:52.760 --> 0:15:56.119 speaking to this morning's big news as the Hong Kong protests, 0:15:56.120 --> 0:15:58.560 the fact that the airport was shut down, and I'm 0:15:58.600 --> 0:16:01.840 trying to understand how why Washington views all of this 0:16:02.040 --> 0:16:06.200 in light of the trade negotiations with China. With mainland China, 0:16:07.120 --> 0:16:12.160 how does that unrest factor in if at all? I 0:16:12.200 --> 0:16:15.760 think it's a pretty limited factor From the U S side. UH. 0:16:15.800 --> 0:16:18.200 There are certainly some people who would like to see 0:16:18.200 --> 0:16:21.240 the US more forcefully come out in favor of these 0:16:21.280 --> 0:16:23.520 protests in Hong Kong, but but Trump is not one 0:16:23.520 --> 0:16:26.400 of them. The way it becomes really interesting is what 0:16:26.440 --> 0:16:30.880 the Chinese perceive as US support for these protests, which 0:16:30.880 --> 0:16:33.400 makes them much more hesitant to deal with the US 0:16:33.560 --> 0:16:36.000 as they blame them in their state media for the 0:16:36.000 --> 0:16:38.680 protests in Hong Kong. But it really highlights the sort 0:16:38.680 --> 0:16:42.840 of growing fissures not only socially for China and jij 0:16:42.920 --> 0:16:46.440 and Ping trying to solidify his control UH and his reign, 0:16:46.880 --> 0:16:50.320 but also economically. We got data overnight showing that China's 0:16:50.360 --> 0:16:52.680 credit growth tumbled to the second lowest amount this year 0:16:53.360 --> 0:16:56.880 amid week demand, not because the Chinese government is cracking 0:16:56.920 --> 0:17:00.440 down necessarily on leverage anymore so much. How does that 0:17:00.560 --> 0:17:05.160 help or hurt negotiations? I think it makes them much 0:17:05.200 --> 0:17:08.240 harder or even two ways. One is that it's hard 0:17:08.359 --> 0:17:10.480 obviously for the Chinese, would be hard for them to 0:17:10.520 --> 0:17:12.280 do a deal with the US as they blame them 0:17:12.320 --> 0:17:15.720 for fomenting the protests in Hong Kong. The other way, though, 0:17:15.760 --> 0:17:18.760 is that it puts she on the defensive internally within 0:17:18.840 --> 0:17:21.320 the CCP, and so I think it makes it harder 0:17:22.200 --> 0:17:24.760 for him to pursue a trade deal. What is your 0:17:24.880 --> 0:17:29.040 update on his relationship with the Communist Party and particularly 0:17:29.560 --> 0:17:32.760 after the summer meetings on the beach there was East 0:17:32.880 --> 0:17:35.680 rather of Beijing. I mean, what is his power this 0:17:35.720 --> 0:17:39.840 morning as he confronts the images from Hong Kong. Well, 0:17:39.840 --> 0:17:42.600 I think gets It's hard to say with any certainty, 0:17:42.680 --> 0:17:46.880 but that what's going on in Hong Kong certainly makes 0:17:46.920 --> 0:17:50.199 it I think it puts his position uh in a 0:17:50.200 --> 0:17:52.399 little bit of trouble. I mean, not that he is 0:17:52.440 --> 0:17:55.399 in any imminent danger, but it would make selling an 0:17:55.440 --> 0:17:58.159 agreement with the Americans harder, which she already had issues 0:17:58.280 --> 0:18:01.919 with doing in April and May. So one thing I'm 0:18:01.920 --> 0:18:05.080 struggling to understand, especially as we confront this wall of 0:18:05.560 --> 0:18:09.000 pessimism this morning, this wall of worry, is just how 0:18:09.119 --> 0:18:13.159 much the trade tensions have already eaten into global growth. 0:18:13.280 --> 0:18:18.320 And I'm wondering what negotiators in Washington, d C. Look 0:18:18.400 --> 0:18:21.040 at in order to assess that and how much that's 0:18:21.080 --> 0:18:24.359 weighing on them as they do proceed with his negotiations. 0:18:25.680 --> 0:18:28.280 I think it's an interesting question. I think they're mandated 0:18:28.280 --> 0:18:31.000 from Trump is much narrower though. I think there are 0:18:31.040 --> 0:18:34.720 the trade negotiators themselves are focused on, you know, these 0:18:35.119 --> 0:18:38.439 issues between the US and China, which are actually, you know, 0:18:38.480 --> 0:18:42.840 relatively long standing, and I think they're their remit from 0:18:42.840 --> 0:18:45.639 Trump is to you know, work on the trade issues 0:18:45.680 --> 0:18:48.439 and let him worry about the economy. It's a I 0:18:48.440 --> 0:18:51.640 think those broader economic worries there something for the political 0:18:51.760 --> 0:18:55.600 leadership and not the trade negotiators themselves. But you know, 0:18:55.640 --> 0:18:57.440 I think Trump is going to be very sensitive to 0:18:57.480 --> 0:19:00.119 any sign that what he's doing with China head is 0:19:01.640 --> 0:19:03.919 has sort of slowed the economy in a way that 0:19:03.960 --> 0:19:06.840 could be dangerous for his free election. We're distracted by 0:19:06.880 --> 0:19:09.199 all sorts of things. If we're looking for Argentina to 0:19:09.240 --> 0:19:12.880 open up weaker pay so, all the protests in Hong Kong, 0:19:12.920 --> 0:19:15.640 the airport shut down. But you bring up Jeffrey right 0:19:15.680 --> 0:19:19.560 an incredibly important point, which is we're poised and waiting 0:19:20.280 --> 0:19:22.360 what is the next step we're going to see from 0:19:22.359 --> 0:19:27.000 the President of the United States. Uh, well, that the 0:19:27.080 --> 0:19:30.280 tariffs will go into effect on September one if nothing 0:19:30.400 --> 0:19:32.639 is done. But yeah, but what what are you looking 0:19:32.680 --> 0:19:34.879 for if he tweets out in the next forty eight hours. 0:19:35.200 --> 0:19:38.840 I mean, Lisa's glued to every presidential tweet. But Jeffrey, right, 0:19:38.880 --> 0:19:42.560 what are you looking for? I think you know what 0:19:42.680 --> 0:19:46.600 the most important two things. One is whether the meeting 0:19:46.640 --> 0:19:49.960 between negotiators in September is still going forward. If it 0:19:50.119 --> 0:19:52.040 if it gets canceled, they take us a very bad 0:19:52.040 --> 0:19:55.840 sign that the Chinese are are losing interest in this. Secondly, 0:19:55.960 --> 0:20:00.000 the the expiration of the general license for Huawei, which 0:20:00.000 --> 0:20:03.320 she is a week today. Uh. The way the US 0:20:03.480 --> 0:20:05.960 handles that is going to be uh, you know, pretty 0:20:06.000 --> 0:20:09.480 important for the future of the negotiations and how the 0:20:09.600 --> 0:20:12.960 Chinese see them as a negotiating partner. So, Jeffrey, I 0:20:13.040 --> 0:20:14.520 want to go back something that you said, which I 0:20:14.520 --> 0:20:17.919 found really interesting that negotiators don't really care about the 0:20:17.920 --> 0:20:21.640 economic followed or it's not really their mandate to consider it. 0:20:21.960 --> 0:20:25.000 So is that not even on the table for them? 0:20:25.040 --> 0:20:27.679 I mean, in other words, uh, you know, ultimately it 0:20:27.760 --> 0:20:32.440 just comes down to certain ideals and certain uh sort 0:20:32.480 --> 0:20:36.840 of perfect goals that President Trump has, but not necessarily 0:20:37.160 --> 0:20:41.600 what the fallout is. I think, you know, Trump is 0:20:41.720 --> 0:20:45.800 concerned about those things, uh to an extent, but his view, 0:20:45.880 --> 0:20:48.600 it seems to me, is that, uh, the US is 0:20:48.640 --> 0:20:51.600 in a stronger position visa via China, and so if 0:20:51.640 --> 0:20:55.440 he keeps pressing that advantage, then he'll eventually get uh 0:20:55.520 --> 0:20:57.400 something out of the Chinese that will make it all 0:20:57.520 --> 0:20:59.840 worth it. Uh. You know, you can you can say 0:20:59.880 --> 0:21:02.280 that that will work, and and that that's a bad 0:21:02.440 --> 0:21:05.600 theory that I think they look at the Chinese trade 0:21:05.640 --> 0:21:08.840 data and the uh the economy flowing there, and they 0:21:08.880 --> 0:21:11.520 see an advantage for the U s which you know, 0:21:11.600 --> 0:21:15.120 has an economy that's still relatively strong. So I think 0:21:15.160 --> 0:21:18.840 they're preoccupied with their advantage over the Chinese, and let's 0:21:18.880 --> 0:21:21.159 focus on what it's doing to the divisit monament is. 0:21:21.280 --> 0:21:23.679 Jeffrey thinks so much. Jeffrey right this morning with your 0:21:23.760 --> 0:21:34.040 rage group. One of the joys of trying to be 0:21:34.080 --> 0:21:36.160 so smart, you're bloomberg as I got a little bit 0:21:36.160 --> 0:21:40.080 of help this morning, among others, one Pablo spinetto George 0:21:40.160 --> 0:21:44.479 Lay and of course the wonderful Daniel Canceled helping US 0:21:44.960 --> 0:21:48.920 with Latin America. One of the energy a d r 0:21:49.000 --> 0:21:52.000 S priced to New York is down fifty that's an 0:21:52.000 --> 0:21:57.399