1 00:00:00,080 --> 00:00:12,640 Speaker 1: Ye, Welcome to the Bloomberg Surveillance Podcast and I'm Tom 2 00:00:12,720 --> 00:00:15,720 Speaker 1: Keane jay Ley. We bring you insight from the best 3 00:00:15,800 --> 00:00:21,240 Speaker 1: in economics, finance, investment and international relations. Find Bloomberg Surveillance 4 00:00:21,280 --> 00:00:25,720 Speaker 1: on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course 5 00:00:26,079 --> 00:00:29,440 Speaker 1: on the Bloomberg Johnny is now is she on WA 6 00:00:29,680 --> 00:00:32,720 Speaker 1: Labor Member of Parliament and Shadow Minister for the Department 7 00:00:32,760 --> 00:00:35,760 Speaker 1: of Business, Energy and Industrial Strategy. So thank you so 8 00:00:35,840 --> 00:00:39,080 Speaker 1: much for joining us. First of all, we'll Labor support 9 00:00:39,280 --> 00:00:42,040 Speaker 1: this deal if if it's I guess you know, if 10 00:00:42,040 --> 00:00:44,440 Speaker 1: the voters in January we're two months from from kind 11 00:00:44,440 --> 00:00:48,200 Speaker 1: of crash out. Is a prime minister playing with time. 12 00:00:48,640 --> 00:00:51,720 Speaker 1: The part minister is definitely playing with time for the 13 00:00:51,960 --> 00:00:55,440 Speaker 1: for the benefit of her internal party politics. As we've 14 00:00:55,480 --> 00:00:58,880 Speaker 1: seen last night, we are moving toward we're only fourteen 15 00:00:58,960 --> 00:01:02,720 Speaker 1: weeks away and possibly crushing out of the European Union, 16 00:01:02,880 --> 00:01:05,720 Speaker 1: and no deal Brexit is not acceptable to a cross 17 00:01:05,760 --> 00:01:09,160 Speaker 1: parliament of title to our country. So Labor has actually 18 00:01:09,200 --> 00:01:11,880 Speaker 1: been quite clear about what our tests are. We have 19 00:01:12,000 --> 00:01:15,600 Speaker 1: six tests. The current deal that goes so far from 20 00:01:15,680 --> 00:01:17,720 Speaker 1: meeting that if she can, she said that was the 21 00:01:17,720 --> 00:01:20,039 Speaker 1: only deal on the table now apparently she thinks she 22 00:01:20,040 --> 00:01:22,800 Speaker 1: can re negotiate one. If she I don't think it's possible. 23 00:01:22,880 --> 00:01:25,480 Speaker 1: If she can re negotiate one that meets our six tests, 24 00:01:25,680 --> 00:01:27,679 Speaker 1: then we will support it. But do you really think 25 00:01:27,680 --> 00:01:30,160 Speaker 1: she's playing from within her party now, because now she 26 00:01:30,160 --> 00:01:33,080 Speaker 1: she placated that cool, she's in charge for the next 27 00:01:33,080 --> 00:01:36,000 Speaker 1: twelve But she got through a hundred and yes she is. 28 00:01:36,040 --> 00:01:40,080 Speaker 1: But the hundred and seventeen, most of the most of 29 00:01:40,120 --> 00:01:42,400 Speaker 1: the backbenches in her part, those who aren't paid by 30 00:01:42,400 --> 00:01:45,440 Speaker 1: the party to deal, they many of them, in fact, 31 00:01:45,440 --> 00:01:48,120 Speaker 1: will vote toget and May. Some of those who voted 32 00:01:48,160 --> 00:01:50,480 Speaker 1: for to raise and May will vote against the deal 33 00:01:50,520 --> 00:01:53,440 Speaker 1: as well. Because she is she has there's a fundamental 34 00:01:53,560 --> 00:01:57,640 Speaker 1: fracture in the Conservative Party between those who want no 35 00:01:57,800 --> 00:02:02,240 Speaker 1: kind of customs union, no kind of customs hard Brexit 36 00:02:02,280 --> 00:02:04,280 Speaker 1: as they call it, and those many of them who 37 00:02:04,280 --> 00:02:08,040 Speaker 1: want continued economic engagement in integration with the Open Union, 38 00:02:08,080 --> 00:02:11,320 Speaker 1: because that's where a lot of our economy is supported by. 39 00:02:11,600 --> 00:02:16,000 Speaker 1: So that fundamental like break in that party cannot be 40 00:02:16,040 --> 00:02:18,679 Speaker 1: papered over in a couple of weeks. As the Prime 41 00:02:18,680 --> 00:02:21,440 Speaker 1: Minister stronger now than she was three days ago, I 42 00:02:21,440 --> 00:02:23,640 Speaker 1: think the Prime minute and personally, you know, I don't 43 00:02:23,840 --> 00:02:27,000 Speaker 1: whoever was needing the Conservative Party, it wouldn't make that 44 00:02:27,120 --> 00:02:29,760 Speaker 1: much difference because of these fundamental fractures. But I don't 45 00:02:29,800 --> 00:02:32,120 Speaker 1: think she's any stronger than than she was. She has 46 00:02:32,320 --> 00:02:36,239 Speaker 1: has shown that the significant hundred seventeen of her own 47 00:02:36,280 --> 00:02:40,280 Speaker 1: members voted against her can't challenge her again. They can't 48 00:02:40,360 --> 00:02:42,560 Speaker 1: challenge her. But remember she has to get a deal 49 00:02:42,639 --> 00:02:49,880 Speaker 1: through Parliament's right. It's labor and dup and and all 50 00:02:49,919 --> 00:02:55,280 Speaker 1: of you guys we supported. But this is the this 51 00:02:55,400 --> 00:02:59,720 Speaker 1: is definitely the Prime Minister's with real fundamental flaws because 52 00:02:59,760 --> 00:03:02,640 Speaker 1: it doesn't it doesn't say that we have a permanent 53 00:03:02,680 --> 00:03:06,400 Speaker 1: customs union, which means that Northern Ireland, Northern Island have 54 00:03:06,440 --> 00:03:10,040 Speaker 1: been a different position to the rest for the United Kingdom. 55 00:03:10,160 --> 00:03:12,960 Speaker 1: And that is just unacceptable in so many ways. And 56 00:03:12,960 --> 00:03:15,360 Speaker 1: it also, and this is really important for us and labor, 57 00:03:15,520 --> 00:03:19,840 Speaker 1: it doesn't guarantee continued workers rights and environmental protections. You know, 58 00:03:19,880 --> 00:03:22,280 Speaker 1: we love our landscape, we love our country side. We 59 00:03:22,320 --> 00:03:24,600 Speaker 1: want to and we you know, we want to avoid 60 00:03:25,200 --> 00:03:29,239 Speaker 1: litigate climate change. So these are fundamental problems with what 61 00:03:29,400 --> 00:03:31,080 Speaker 1: she's proposing and that's not going to change in the 62 00:03:31,080 --> 00:03:33,880 Speaker 1: next two weeks. I'd say there is there appetite in 63 00:03:33,919 --> 00:03:36,400 Speaker 1: the House of Commons for a second referendum. Is there 64 00:03:36,440 --> 00:03:40,040 Speaker 1: appetite in the House of Commons for fresh elections. There's 65 00:03:40,200 --> 00:03:43,440 Speaker 1: certainly appetite for first elections. And I'm sitting here with 66 00:03:43,560 --> 00:03:48,000 Speaker 1: you as an official spokesperson for the Official Majesty's official opposition, 67 00:03:48,160 --> 00:03:50,160 Speaker 1: and we want a general election because you know what, 68 00:03:50,280 --> 00:03:52,960 Speaker 1: actually enough I mean enough to push it through Parliament 69 00:03:53,080 --> 00:03:55,560 Speaker 1: is what I'm trying to do, what we gauge right now. 70 00:03:55,680 --> 00:03:58,600 Speaker 1: And obviously it's the DUP, the you know, the organized 71 00:03:58,720 --> 00:04:01,440 Speaker 1: MPs who are keeping this government in power, and they 72 00:04:01,480 --> 00:04:04,120 Speaker 1: have said that they won't vote, they won't vote for 73 00:04:04,160 --> 00:04:06,440 Speaker 1: a vote of no confidence, they won't vote against the 74 00:04:06,440 --> 00:04:09,440 Speaker 1: Prime Minister in a vote of no confidence, which means 75 00:04:09,520 --> 00:04:11,880 Speaker 1: that they would affect probably means that they would that 76 00:04:11,920 --> 00:04:15,680 Speaker 1: would win want But there's huge there's huge discontent in Parliament, 77 00:04:15,680 --> 00:04:18,159 Speaker 1: not just in the Labor Party, you know, but also 78 00:04:18,240 --> 00:04:21,160 Speaker 1: on their benches. And we just remember that we're talking 79 00:04:21,160 --> 00:04:23,760 Speaker 1: about Brexit here, but in the country, you know, in 80 00:04:23,839 --> 00:04:26,120 Speaker 1: my constituency, what people are talking about is that they 81 00:04:26,120 --> 00:04:28,279 Speaker 1: haven't not a wage rise in ten years. But they're 82 00:04:28,279 --> 00:04:30,800 Speaker 1: talking about is that, you know, public services were in 83 00:04:30,800 --> 00:04:34,680 Speaker 1: the wh're having a winter, winter health crisis, NHS crisis, 84 00:04:34,760 --> 00:04:37,839 Speaker 1: you know already, the policing, you know, crime is rising. 85 00:04:38,000 --> 00:04:40,160 Speaker 1: That's what people are talking about. It only it's a 86 00:04:40,160 --> 00:04:42,320 Speaker 1: general election that can change that, and that's why there 87 00:04:42,400 --> 00:04:45,280 Speaker 1: is real appetite for general action. But the numbers mean 88 00:04:45,560 --> 00:04:47,400 Speaker 1: that we can't be you know, we want to make 89 00:04:47,440 --> 00:04:48,840 Speaker 1: sure we want to push for that when they have 90 00:04:48,880 --> 00:04:52,080 Speaker 1: a chance of success is in a general election. Another distraction. 91 00:04:52,200 --> 00:04:55,080 Speaker 1: If you vote for this deal, whether you're convinced or not, 92 00:04:55,240 --> 00:04:57,479 Speaker 1: then you can actually get back to fixing the country, 93 00:04:57,520 --> 00:04:59,599 Speaker 1: fixing the NHS and dealing with the real things that 94 00:04:59,640 --> 00:05:02,039 Speaker 1: are in into the common people make a really good 95 00:05:02,040 --> 00:05:05,080 Speaker 1: point about, you know that that that we we don't 96 00:05:05,080 --> 00:05:07,920 Speaker 1: want to spend the next five years talking about Brexit. 97 00:05:08,080 --> 00:05:10,040 Speaker 1: But the fact is that the dealer's on the table 98 00:05:10,080 --> 00:05:13,279 Speaker 1: now will make my constituents worse off, you know, and 99 00:05:13,320 --> 00:05:17,200 Speaker 1: across the country we've seen that. The government's own analysis 100 00:05:17,440 --> 00:05:20,000 Speaker 1: says that GDP will be less than it would have 101 00:05:20,080 --> 00:05:22,400 Speaker 1: been with the kind of deal that we want. So 102 00:05:22,480 --> 00:05:24,719 Speaker 1: how are we going to go about fixing the NHS 103 00:05:25,040 --> 00:05:27,680 Speaker 1: or the other challenges when we have a deal which 104 00:05:27,720 --> 00:05:30,000 Speaker 1: is making us poorer and that for example, you know 105 00:05:30,120 --> 00:05:33,040 Speaker 1: the Northeast where I come from, we have Nissan making 106 00:05:33,160 --> 00:05:36,599 Speaker 1: you know, fantastic cars. It has an integrated supply change 107 00:05:36,800 --> 00:05:39,560 Speaker 1: it needs to have, it needs frictionalist trade. If we 108 00:05:39,640 --> 00:05:43,000 Speaker 1: see a general election, it should labor, you know, build 109 00:05:43,000 --> 00:05:45,080 Speaker 1: a platform saying actually, you know, we want to go 110 00:05:45,160 --> 00:05:47,599 Speaker 1: back to what it was, stay in the EU for 111 00:05:47,720 --> 00:05:50,719 Speaker 1: star you know, so when we you know, when we've 112 00:05:50,760 --> 00:05:53,719 Speaker 1: got this is it's truly right. Well, it's a really complete. 113 00:05:53,760 --> 00:05:54,919 Speaker 1: One of the things I want to make emphasis a 114 00:05:54,920 --> 00:05:57,120 Speaker 1: really complex situation. You can't have simple like will do 115 00:05:57,160 --> 00:06:01,880 Speaker 1: you know, simple responses and take time. But every day 116 00:06:01,960 --> 00:06:04,640 Speaker 1: by day everything is changing. So I'm not going to 117 00:06:04,720 --> 00:06:07,440 Speaker 1: say to you now what I'm sorry, I'm not gonna say, 118 00:06:07,480 --> 00:06:10,040 Speaker 1: you know what our manifesto would be when you know 119 00:06:10,120 --> 00:06:12,359 Speaker 1: we've got a general election. But what's clear, you know 120 00:06:12,400 --> 00:06:15,000 Speaker 1: with what we want out of a brexit, do you know, 121 00:06:15,120 --> 00:06:19,919 Speaker 1: which has continued strong economic integration with the European Union 122 00:06:19,960 --> 00:06:22,640 Speaker 1: and the protection for workers and environmental life, and that 123 00:06:22,760 --> 00:06:25,480 Speaker 1: was what we'll be seeking to another We've got six 124 00:06:25,520 --> 00:06:28,640 Speaker 1: hunch a thousand members and we will be reflecting what 125 00:06:28,839 --> 00:06:31,479 Speaker 1: they want to Well. Kean war thanks so much for 126 00:06:31,520 --> 00:06:34,240 Speaker 1: doing his labor. M P there of course in the 127 00:06:34,279 --> 00:06:39,880 Speaker 1: House of Commons right behind and joining us, oh Andre 128 00:06:40,080 --> 00:06:43,080 Speaker 1: with the Martin Center for European Studies. He is in Brussels, 129 00:06:43,480 --> 00:06:45,160 Speaker 1: um oh, and we spoke to you earlier and I 130 00:06:45,240 --> 00:06:47,599 Speaker 1: guess just through the morning, the Prime Minister is in 131 00:06:47,640 --> 00:06:52,200 Speaker 1: Brussels and she is looking for assurances. To me, all 132 00:06:52,240 --> 00:06:56,080 Speaker 1: of those assurances lead back to the Irish question. I 133 00:06:56,120 --> 00:07:00,040 Speaker 1: think our listeners understand the Irish question, the history of 134 00:07:00,200 --> 00:07:03,680 Speaker 1: the United Kingdom of Great Britain with Ireland and to 135 00:07:03,800 --> 00:07:06,919 Speaker 1: the north Northern Ireland. But what's it mean for Europe. 136 00:07:07,040 --> 00:07:12,080 Speaker 1: What is the Irish question for Brussels in Europe? Well, 137 00:07:12,120 --> 00:07:15,200 Speaker 1: I think, um, I think, what what your listeners have 138 00:07:15,280 --> 00:07:19,240 Speaker 1: to remember is that there's more than stake than just 139 00:07:19,520 --> 00:07:23,920 Speaker 1: you know, the Republic of Ireland, Northern Irish Board, for 140 00:07:24,120 --> 00:07:28,920 Speaker 1: Ireland and for the Irish question. At the European Union level, 141 00:07:29,280 --> 00:07:33,400 Speaker 1: it's about how the European Commation and the European Union 142 00:07:33,720 --> 00:07:37,480 Speaker 1: can show it's relevant and can show it's importance too. 143 00:07:37,560 --> 00:07:41,240 Speaker 1: Smaller members it's like Ireland. So it's not just about 144 00:07:41,560 --> 00:07:44,680 Speaker 1: the Irish border. The Irish border is just the issue 145 00:07:44,720 --> 00:07:49,480 Speaker 1: that arose that shows that tan show the European Union 146 00:07:49,520 --> 00:07:53,120 Speaker 1: how important it is for smaller members stay. It's also 147 00:07:53,280 --> 00:07:59,080 Speaker 1: very very very very important highlights that for Ireland. You know, 148 00:07:59,160 --> 00:08:02,880 Speaker 1: the support shown by the European Union over the last 149 00:08:02,960 --> 00:08:07,680 Speaker 1: two years has fundamentally changed the dynamics in terms of 150 00:08:07,720 --> 00:08:12,440 Speaker 1: how it approaches relations with London. I was thunderstruck by 151 00:08:12,480 --> 00:08:14,320 Speaker 1: a couple of the articles that I read in the 152 00:08:14,440 --> 00:08:17,320 Speaker 1: last few days in the Irish Times and in the 153 00:08:17,400 --> 00:08:21,360 Speaker 1: London papers about the members from Northern Ireland. Of course 154 00:08:21,360 --> 00:08:24,920 Speaker 1: with their leadership from Arlean's foster, she's appeared before on 155 00:08:25,080 --> 00:08:31,640 Speaker 1: Bloomberg surveillance and just a tangible worry or study that 156 00:08:31,760 --> 00:08:36,200 Speaker 1: we could return to the troubles. Is that feasible, Yeah, 157 00:08:36,240 --> 00:08:39,800 Speaker 1: I think it's it's it's a very real worry, particularly 158 00:08:40,400 --> 00:08:44,640 Speaker 1: in border communities where the border would be reinstated. If 159 00:08:44,679 --> 00:08:46,280 Speaker 1: I could put if I could put it like this, 160 00:08:46,480 --> 00:08:50,640 Speaker 1: for an Irish person, the reinstatement of the border north 161 00:08:50,679 --> 00:08:55,559 Speaker 1: and south, it would literally be like reinstating the border, 162 00:08:56,040 --> 00:09:00,480 Speaker 1: the Berlin Wall or the border between the Estonian, Latvia 163 00:09:00,559 --> 00:09:04,480 Speaker 1: or any of the eastern European countries. It's just a 164 00:09:04,600 --> 00:09:08,560 Speaker 1: very important symbol. The free border, or the soft border 165 00:09:08,600 --> 00:09:10,400 Speaker 1: as we like to call it now. It was a 166 00:09:10,480 --> 00:09:13,480 Speaker 1: symbol of peace and reconciliation. It was a symbol of 167 00:09:13,520 --> 00:09:18,160 Speaker 1: how Anglo Irish relations had progressed. And really to to 168 00:09:18,480 --> 00:09:22,320 Speaker 1: kind of reinstate the border would many people think, actually 169 00:09:22,320 --> 00:09:25,480 Speaker 1: be several step backwards, not just not just one step. 170 00:09:26,160 --> 00:09:29,120 Speaker 1: What can America and the Trump administration do? Is this 171 00:09:29,240 --> 00:09:32,240 Speaker 1: so discreet and separate, we stay over on our side 172 00:09:32,240 --> 00:09:35,520 Speaker 1: of the pond? Or could President Trump and as an administration, 173 00:09:35,840 --> 00:09:39,840 Speaker 1: can they add value? Absolutely they can add value. I 174 00:09:39,840 --> 00:09:44,240 Speaker 1: think your your listeners shouldn't forget that. One of the 175 00:09:44,240 --> 00:09:47,199 Speaker 1: the one of the reasons, one of the core reasons 176 00:09:47,240 --> 00:09:50,120 Speaker 1: why the peace process in Northern Ireland has has been 177 00:09:50,160 --> 00:09:55,080 Speaker 1: successful was the extensive involvement of the Clinton administration during 178 00:09:55,120 --> 00:09:59,280 Speaker 1: the ninety nineties. George Mitchell was the U s Special 179 00:09:59,320 --> 00:10:02,400 Speaker 1: in Vy to Northern Ireland for many years, so the 180 00:10:02,480 --> 00:10:06,520 Speaker 1: US could actually play a very important role. The US 181 00:10:06,600 --> 00:10:11,480 Speaker 1: as many historic economic and social linkage is not just 182 00:10:11,559 --> 00:10:14,840 Speaker 1: with Southern Ireland with Northern Ireland, but also of course 183 00:10:14,880 --> 00:10:17,840 Speaker 1: with the UK. Andre thank you so much for the 184 00:10:17,840 --> 00:10:21,839 Speaker 1: Martin Center for European Studies, greatly appreciated. Just terrific perspective 185 00:10:22,800 --> 00:10:29,320 Speaker 1: this morning. Well let's talk about on all of this, 186 00:10:29,480 --> 00:10:32,920 Speaker 1: and there's someone good to speak of is well, and 187 00:10:32,960 --> 00:10:35,959 Speaker 1: that is John Mills. He is well. I frame him 188 00:10:35,960 --> 00:10:40,440 Speaker 1: as a German rather British businessman and economists, but with 189 00:10:40,520 --> 00:10:45,199 Speaker 1: j M L and currently uh someone very much involved 190 00:10:45,840 --> 00:10:48,960 Speaker 1: in the idea of leave. John Mills, we are thrilled 191 00:10:49,000 --> 00:10:51,160 Speaker 1: to have you with us today and we've spoken to 192 00:10:51,200 --> 00:10:58,520 Speaker 1: you many times before. How did leave change yesterday? I'm 193 00:10:58,559 --> 00:11:01,319 Speaker 1: not short lived to change very much yesterday. I think 194 00:11:01,360 --> 00:11:03,679 Speaker 1: the road was a bit of a distraction, but it 195 00:11:03,800 --> 00:11:06,880 Speaker 1: left everybody pretty well where they were before. There's still 196 00:11:06,960 --> 00:11:10,640 Speaker 1: the same problems about getting the withdrawal agreement through. Nothing's 197 00:11:10,760 --> 00:11:14,360 Speaker 1: changed on the difficulties around the backstop. As you say, 198 00:11:14,400 --> 00:11:16,960 Speaker 1: the Prime Ministers in Brussels at the moment trying to 199 00:11:17,000 --> 00:11:20,760 Speaker 1: get assurances on the back stop in Northern Ireland. But 200 00:11:20,800 --> 00:11:25,040 Speaker 1: whether she'll get enough to satisfy the very large majority 201 00:11:25,080 --> 00:11:28,360 Speaker 1: of MPAs in Parliament who are very concerned about the 202 00:11:28,440 --> 00:11:31,000 Speaker 1: dual agreement I think remains to be seen. Gen mill 203 00:11:31,080 --> 00:11:33,640 Speaker 1: is one of the great common features of your thoughts 204 00:11:33,679 --> 00:11:36,920 Speaker 1: of the United Kingdom. And in speaking with Lord Skodolski 205 00:11:37,040 --> 00:11:41,720 Speaker 1: the other day, is everything focused on West Britain, on 206 00:11:41,880 --> 00:11:48,160 Speaker 1: Ireland in Northern Ireland. Explain what happens now to this 207 00:11:48,360 --> 00:11:50,840 Speaker 1: debate of Northern Ireland, and I want to go to 208 00:11:50,920 --> 00:11:54,319 Speaker 1: a broader debate than just the border. There's more going 209 00:11:54,360 --> 00:11:57,400 Speaker 1: on there than the backstop, and the border isn't there. 210 00:11:58,480 --> 00:12:00,720 Speaker 1: There is and that's just really because of all the 211 00:12:00,760 --> 00:12:03,079 Speaker 1: background there is to the troubles that were in Northern 212 00:12:03,080 --> 00:12:05,920 Speaker 1: Ireland in the nineteen seventies and nineteen eighties, which still 213 00:12:06,320 --> 00:12:09,600 Speaker 1: similar a little bit under the surface. And whereas normally 214 00:12:09,720 --> 00:12:13,720 Speaker 1: having a border would not be a huge problem, in 215 00:12:13,800 --> 00:12:16,840 Speaker 1: this particular case, it's got all sorts of political overtones. 216 00:12:17,120 --> 00:12:19,800 Speaker 1: Nobody wants to have a hard border there. That Subnash 217 00:12:19,840 --> 00:12:22,960 Speaker 1: don't want that, The Northernish don't want that, the British 218 00:12:22,960 --> 00:12:25,160 Speaker 1: don't want that. You doesn't want it. But we will 219 00:12:25,240 --> 00:12:27,719 Speaker 1: need to find some solution that will work without being 220 00:12:27,760 --> 00:12:30,520 Speaker 1: a hard border there. And I think technologically that ought 221 00:12:30,520 --> 00:12:33,079 Speaker 1: to be possible, but it's just a question of getting 222 00:12:33,080 --> 00:12:35,679 Speaker 1: everybody to agree to that. John the strategy of Labor 223 00:12:35,760 --> 00:12:38,720 Speaker 1: so far has been to let the Conservatives fight with themselves, 224 00:12:38,760 --> 00:12:40,160 Speaker 1: and to be honest with you, it's been a pretty 225 00:12:40,160 --> 00:12:42,240 Speaker 1: good strategy as well. John, What do you want to 226 00:12:42,280 --> 00:12:46,640 Speaker 1: see from the Labor Party over the coming months. Well, 227 00:12:47,080 --> 00:12:49,640 Speaker 1: my own personal view is that the best solution to 228 00:12:50,480 --> 00:12:52,559 Speaker 1: the difficulties we've got for the European Union will be 229 00:12:52,600 --> 00:12:55,240 Speaker 1: for us to have a Canada type free trade deal, 230 00:12:55,800 --> 00:12:58,400 Speaker 1: and my ideal would be for the Labor Party to 231 00:12:58,440 --> 00:13:02,000 Speaker 1: pivot towards Routie for that rather than anything else. I'm 232 00:13:02,000 --> 00:13:04,120 Speaker 1: not sure that's going to happen. I think the Labor 233 00:13:04,160 --> 00:13:05,960 Speaker 1: Party is going to try and bring down the government 234 00:13:06,120 --> 00:13:08,760 Speaker 1: with a vote of confidence, but I'm not sure that's 235 00:13:08,800 --> 00:13:13,199 Speaker 1: going to work. It may move towards supporting a second referendum. 236 00:13:13,440 --> 00:13:15,600 Speaker 1: All of that a course of faction which is fraught 237 00:13:15,600 --> 00:13:18,920 Speaker 1: with difficulties. The problem is the Labor Party is very split, 238 00:13:19,360 --> 00:13:22,120 Speaker 1: partly because although himps are very remain and so are 239 00:13:22,160 --> 00:13:25,199 Speaker 1: most of the Labor Party members, the people who elect 240 00:13:25,280 --> 00:13:28,720 Speaker 1: the Labor government, the large numbers of industrial people in 241 00:13:28,840 --> 00:13:32,120 Speaker 1: Wales and the midlands of the North, who depends who 242 00:13:32,200 --> 00:13:35,679 Speaker 1: Labor depends on for their support, and mostly voting Leave. Yeah, 243 00:13:35,960 --> 00:13:39,160 Speaker 1: it's true there are parts of the labor core constituencies 244 00:13:39,200 --> 00:13:41,640 Speaker 1: that did vote for Leave. John, I want your view 245 00:13:41,640 --> 00:13:43,760 Speaker 1: on something that's really important to the City of London. 246 00:13:43,760 --> 00:13:45,840 Speaker 1: There's many people that Tom and I will speak to 247 00:13:46,120 --> 00:13:48,160 Speaker 1: in the square mile in the City of London in 248 00:13:48,240 --> 00:13:51,960 Speaker 1: financial services who weren't so much worried about a hard Brexit. 249 00:13:52,000 --> 00:13:54,560 Speaker 1: They're perhaps more worried about the prospect of Jeremy Corbyn 250 00:13:54,600 --> 00:13:56,959 Speaker 1: becoming the prime Minister. John, can you speak to that 251 00:13:57,080 --> 00:14:01,680 Speaker 1: at all? Should we fear Jeremy corbyon um? I think 252 00:14:01,760 --> 00:14:04,400 Speaker 1: it's very easy to exaggerate the problems for the city 253 00:14:04,440 --> 00:14:08,160 Speaker 1: that Jeremy Corbyn uh toward the government that he's heading 254 00:14:08,240 --> 00:14:11,720 Speaker 1: up might might cause. I mean, I think in practice 255 00:14:11,800 --> 00:14:14,920 Speaker 1: the run for maneuver that the labor government would have 256 00:14:15,520 --> 00:14:19,400 Speaker 1: on constraining the city would would be fairly limited. And 257 00:14:19,640 --> 00:14:23,600 Speaker 1: the any labor government, any government, depends very heavily on 258 00:14:23,680 --> 00:14:26,440 Speaker 1: the success of the economy to make sure that its 259 00:14:26,440 --> 00:14:29,560 Speaker 1: support is retained. And I think to attack the city 260 00:14:29,560 --> 00:14:33,200 Speaker 1: in a major way and cause all sorts of economic 261 00:14:33,280 --> 00:14:35,920 Speaker 1: problems and reductions of income and so on, it's not 262 00:14:36,080 --> 00:14:40,720 Speaker 1: really in the labor parties playbook John the idea of leaving. 263 00:14:40,920 --> 00:14:44,560 Speaker 1: I witnessed this firsthand on the green at Westminster. Of 264 00:14:44,640 --> 00:14:50,160 Speaker 1: the geography of of leave. The elite of London aren't 265 00:14:50,200 --> 00:14:53,000 Speaker 1: spoken of enough. They say, they talk about remain. I 266 00:14:53,080 --> 00:14:58,480 Speaker 1: get that, and the global internationalists Zeitgeist and all. Did 267 00:14:58,560 --> 00:15:03,120 Speaker 1: they have a compromise point? Did do the remain people 268 00:15:03,200 --> 00:15:10,120 Speaker 1: have a distance they can travel to meet leave or not? Well, 269 00:15:10,280 --> 00:15:12,440 Speaker 1: I mean, I'm not sure there is. I mean in 270 00:15:12,480 --> 00:15:15,480 Speaker 1: the end that I think there's going to be a 271 00:15:15,560 --> 00:15:19,400 Speaker 1: choice between whether we stay in or rejoin the European 272 00:15:19,480 --> 00:15:22,040 Speaker 1: Union if it's after the twenty nine March, or whether 273 00:15:22,080 --> 00:15:25,360 Speaker 1: we have a free trade from outside. What's happened over 274 00:15:25,400 --> 00:15:28,480 Speaker 1: the last two years is that the result of the 275 00:15:28,640 --> 00:15:32,120 Speaker 1: election held in twenty seventeen was to have a Parliament 276 00:15:32,120 --> 00:15:36,080 Speaker 1: that was determined to stay very close to Europe, half 277 00:15:36,160 --> 00:15:39,480 Speaker 1: in the Single Market and half in the Customs Union. 278 00:15:39,880 --> 00:15:44,000 Speaker 1: And for very understandable reasons, the EU have hated that 279 00:15:44,120 --> 00:15:48,320 Speaker 1: because it affects the compromises the security and integrity of 280 00:15:48,400 --> 00:15:51,040 Speaker 1: the Single Market and Customs Union. And I think what 281 00:15:51,160 --> 00:15:53,160 Speaker 1: in the end may happen is that the British people 282 00:15:53,200 --> 00:15:55,040 Speaker 1: are just going to have to make a choice about 283 00:15:55,080 --> 00:15:58,040 Speaker 1: either being fully in or fully out, and we'll have 284 00:15:58,120 --> 00:16:00,800 Speaker 1: to see how that breaks over the next through Uh, 285 00:16:01,720 --> 00:16:05,120 Speaker 1: well weeks now, it's not even month. We'll jump find 286 00:16:05,120 --> 00:16:07,720 Speaker 1: a question for you. Can this Parliament pass a deal 287 00:16:07,840 --> 00:16:12,400 Speaker 1: before the under January? I would be very surprised if 288 00:16:12,400 --> 00:16:14,360 Speaker 1: it does. I think what's much more likely if they 289 00:16:14,440 --> 00:16:17,840 Speaker 1: do will come back sometime in January, will get voted down, 290 00:16:18,280 --> 00:16:20,960 Speaker 1: and then they'll be all sorts of options on the table, 291 00:16:21,000 --> 00:16:23,960 Speaker 1: whether we go for a Norwegian type deal, whether we 292 00:16:24,040 --> 00:16:30,080 Speaker 1: have a possibly pivoting towards the free trade deal, whether 293 00:16:30,160 --> 00:16:35,520 Speaker 1: we have another another referendum. I think there's all these 294 00:16:35,600 --> 00:16:38,360 Speaker 1: choices that would be built on the table, but whether 295 00:16:38,360 --> 00:16:40,480 Speaker 1: it's actually a majority for any of them, I think 296 00:16:40,480 --> 00:16:45,120 Speaker 1: it's very doubtful. Well we'll leave We're going to leave 297 00:16:45,160 --> 00:16:47,200 Speaker 1: it there, jam Mills, thank you so much with Jamil, 298 00:16:49,040 --> 00:16:51,120 Speaker 1: because we have such an important guest with us. He 299 00:16:51,240 --> 00:16:55,160 Speaker 1: is Steve Major of HSBC. Stephen Major has been just 300 00:16:55,400 --> 00:16:58,880 Speaker 1: absolute spot out and interest rates and with that has 301 00:16:58,920 --> 00:17:03,400 Speaker 1: been a real he knew what HSBC call Steve Major. 302 00:17:03,440 --> 00:17:05,600 Speaker 1: I think of your colleague Ben Laidler in New York 303 00:17:06,320 --> 00:17:10,640 Speaker 1: rather optimistic on equities from my last conversation David Bloom 304 00:17:10,680 --> 00:17:14,439 Speaker 1: with an outlier call and strong dollar is well in 305 00:17:14,480 --> 00:17:17,399 Speaker 1: the backdrop of this, Steve listening to Mr drag E 306 00:17:18,080 --> 00:17:22,080 Speaker 1: is how tempered this time is? How tempered this era 307 00:17:22,320 --> 00:17:26,359 Speaker 1: is to all of our listeners. What's the permanence of 308 00:17:26,400 --> 00:17:31,440 Speaker 1: this low interest rate world? Well? I guess this inflation. 309 00:17:32,160 --> 00:17:35,080 Speaker 1: And the first question that went to Mr Jock just 310 00:17:35,160 --> 00:17:39,840 Speaker 1: then was about the technicalities on the the investment program. 311 00:17:39,880 --> 00:17:42,760 Speaker 1: I dare say the next question might will be on inflation. 312 00:17:42,920 --> 00:17:46,000 Speaker 1: I mean someone's got to ask him, Yes, what what 313 00:17:46,200 --> 00:17:49,359 Speaker 1: happened to the vigor in the labor market that you 314 00:17:49,440 --> 00:17:53,440 Speaker 1: spoke of last time? Because I do remember it very clearly. 315 00:17:53,440 --> 00:17:57,320 Speaker 1: It's only the last meeting. People people were questioning whether 316 00:17:57,359 --> 00:17:59,800 Speaker 1: he was on his own it was. It was either 317 00:18:00,040 --> 00:18:02,320 Speaker 1: the last meeting or the one before Tom But as 318 00:18:02,359 --> 00:18:04,119 Speaker 1: the point, the point is he was talking about an 319 00:18:04,119 --> 00:18:08,879 Speaker 1: inflation that was coming through and vigger in the I 320 00:18:08,880 --> 00:18:12,520 Speaker 1: think it was vigger in the wage market. So where 321 00:18:12,600 --> 00:18:15,919 Speaker 1: is it that? That's the question. And I guess he 322 00:18:16,000 --> 00:18:19,080 Speaker 1: might regret saying that. I guess we will make mistakes. Well, 323 00:18:19,119 --> 00:18:23,720 Speaker 1: but it's it's a proxy, Steve for every single conversation. 324 00:18:23,800 --> 00:18:26,240 Speaker 1: If we can move on from Mr Dragging to the 325 00:18:26,320 --> 00:18:30,240 Speaker 1: challenges of my conversation with Vice Chairman Clarida, he stated 326 00:18:30,320 --> 00:18:34,440 Speaker 1: he saw reasonable growth in the United States. What our 327 00:18:34,440 --> 00:18:37,080 Speaker 1: listeners know is they've got a two C D if 328 00:18:37,119 --> 00:18:39,920 Speaker 1: they're lucky, or you know, they're looking at a bond 329 00:18:40,000 --> 00:18:45,239 Speaker 1: matrix at HSBC that's subdued. What is the permanence of 330 00:18:45,280 --> 00:18:49,600 Speaker 1: this era? Yeah, so um I touched on it with inflation, 331 00:18:49,680 --> 00:18:53,439 Speaker 1: but I guess the Vice chair at the FED is 332 00:18:53,480 --> 00:18:58,560 Speaker 1: familiar because of his previous job with the global output gaps, 333 00:18:58,560 --> 00:19:02,840 Speaker 1: global Phillips curve. And so if you put together the 334 00:19:02,880 --> 00:19:05,120 Speaker 1: economies of the rest of the world and combine them 335 00:19:05,119 --> 00:19:08,119 Speaker 1: with the US, it's quite clear that US yields of 336 00:19:08,200 --> 00:19:12,600 Speaker 1: two for bills quite high and and and that that's 337 00:19:12,640 --> 00:19:15,879 Speaker 1: the simple point. I think it's quite salient. Rather than 338 00:19:15,920 --> 00:19:19,280 Speaker 1: look at the US Phillips curve and the US unemployment 339 00:19:19,359 --> 00:19:22,280 Speaker 1: rate in the US pay rolls, etcetera, let's just go 340 00:19:22,400 --> 00:19:25,600 Speaker 1: more global, let's bring it all together. So what's happened 341 00:19:25,640 --> 00:19:29,120 Speaker 1: in two thousand and eighteen is that the US has 342 00:19:29,240 --> 00:19:33,480 Speaker 1: exported tightening of financial conditions to everybody else. Only in 343 00:19:33,520 --> 00:19:36,159 Speaker 1: the last two months, did it come back home in 344 00:19:36,240 --> 00:19:40,480 Speaker 1: the form of wider credit spreads, we co equities, collapsing 345 00:19:40,480 --> 00:19:45,399 Speaker 1: oil prices, and a you turn from the Fed chair? Okay, 346 00:19:45,440 --> 00:19:47,439 Speaker 1: are you turned from the Fed chair? And a modest 347 00:19:47,520 --> 00:19:50,840 Speaker 1: you turn from Mr Dragon looking at inflation risk to 348 00:19:50,920 --> 00:19:54,679 Speaker 1: the downside, I guess. And and then I want to 349 00:19:54,720 --> 00:19:58,000 Speaker 1: go back to the sharks that our American listeners could see. 350 00:19:58,359 --> 00:20:00,919 Speaker 1: And I've got to go to your valuable colleague, David 351 00:20:00,920 --> 00:20:05,159 Speaker 1: Bloom who I'm sorry, Steve, it's an outlier call of 352 00:20:05,200 --> 00:20:09,200 Speaker 1: a demonstrably stronger dollar. What are the events that get 353 00:20:09,240 --> 00:20:12,680 Speaker 1: you to that stronger dollar? Well, well, look he's been 354 00:20:12,760 --> 00:20:16,040 Speaker 1: right for most of the year, and yes, I guess 355 00:20:16,119 --> 00:20:18,159 Speaker 1: valuable it is quite a good description of him. I 356 00:20:18,160 --> 00:20:20,359 Speaker 1: can think of a few other words, some of them 357 00:20:20,440 --> 00:20:23,520 Speaker 1: less polite. But the thing is with David is that 358 00:20:23,600 --> 00:20:28,480 Speaker 1: he's he's strong on this conviction, but he's equally capable 359 00:20:28,560 --> 00:20:31,639 Speaker 1: of changing his mind. And that's the nature of spot 360 00:20:31,760 --> 00:20:35,520 Speaker 1: effects if the circumstances changed, since they will the few 361 00:20:35,800 --> 00:20:38,600 Speaker 1: I cannot front run the forecast, and I don't know 362 00:20:38,640 --> 00:20:40,879 Speaker 1: what the forecast might be in the future by definition, 363 00:20:41,280 --> 00:20:44,720 Speaker 1: but look, if the cyclical circumstances changed that he is 364 00:20:44,760 --> 00:20:47,840 Speaker 1: one of the factors that he would incorporate. David and 365 00:20:47,880 --> 00:20:50,840 Speaker 1: the team have been very good and also identifying structural 366 00:20:50,880 --> 00:20:53,840 Speaker 1: and political drivers to underpend the dollar, which has been 367 00:20:53,960 --> 00:20:56,760 Speaker 1: very much case this year. This year, you've had political, 368 00:20:56,880 --> 00:21:00,200 Speaker 1: structural and cyclical or driving the dollar higher. But you 369 00:21:00,240 --> 00:21:03,880 Speaker 1: could take the cyclical blank away if the Fed chokes 370 00:21:03,920 --> 00:21:06,280 Speaker 1: on the next rate hike, and then to look at 371 00:21:06,280 --> 00:21:09,280 Speaker 1: another tension point. And we can do this, folks, within 372 00:21:09,320 --> 00:21:13,360 Speaker 1: the matrix of Steve Major's fixed income world. It's one 373 00:21:13,359 --> 00:21:17,240 Speaker 1: of the immovable forces of this entertaining eight weeks or 374 00:21:17,320 --> 00:21:20,880 Speaker 1: make it frankly, twelve weeks has been the trade deficit 375 00:21:21,000 --> 00:21:25,040 Speaker 1: vector in the United States moving uh in a I 376 00:21:25,080 --> 00:21:29,320 Speaker 1: guess negative Trump direction. It's certainly not making the president happy. 377 00:21:29,359 --> 00:21:31,359 Speaker 1: And that gets me, Steve Major to my chart of 378 00:21:31,400 --> 00:21:34,760 Speaker 1: the year, which is twin deficits, which is, all of 379 00:21:34,840 --> 00:21:38,800 Speaker 1: a sudden, we've got fiscal deficit to GDP, trade deficit 380 00:21:38,880 --> 00:21:46,680 Speaker 1: to GDP moving towards the outlook. Is that possible? Yeah. 381 00:21:46,800 --> 00:21:50,399 Speaker 1: Before we started this conversation, the economic data that was 382 00:21:50,440 --> 00:21:54,840 Speaker 1: announced by one of your colleagues was on the the 383 00:21:54,840 --> 00:21:59,080 Speaker 1: the labor market and on the import prices, So import 384 00:21:59,119 --> 00:22:02,640 Speaker 1: prices of four and on the month. I guess that's 385 00:22:02,640 --> 00:22:06,400 Speaker 1: a function of energy and dollar whatever you say, So 386 00:22:06,680 --> 00:22:10,680 Speaker 1: look to answer the question rather than go around it. Um. 387 00:22:10,760 --> 00:22:13,840 Speaker 1: The twin deficit thing is is fascinating to me because 388 00:22:14,840 --> 00:22:16,840 Speaker 1: I'm sure you're aware of the fact that in a way, 389 00:22:16,880 --> 00:22:21,080 Speaker 1: the US needs to run a deficit if the rest 390 00:22:21,080 --> 00:22:24,560 Speaker 1: of the world's insurplus, and whether that's current account or not, 391 00:22:24,800 --> 00:22:28,119 Speaker 1: it's just basic accounting and economics. Unless we want to 392 00:22:28,240 --> 00:22:31,400 Speaker 1: export to the Moon or Mars, that's how it works. 393 00:22:31,400 --> 00:22:35,840 Speaker 1: So so the thing is is that pursuing a smaller deficit, 394 00:22:36,359 --> 00:22:39,359 Speaker 1: someone's going to have to pay either either the domestics 395 00:22:39,400 --> 00:22:43,160 Speaker 1: are going to have to save more or or or 396 00:22:43,359 --> 00:22:46,520 Speaker 1: you know, growth is going to be less foreign foreigners 397 00:22:46,560 --> 00:22:49,720 Speaker 1: are going to sponsor less of the US market. But 398 00:22:49,800 --> 00:22:54,720 Speaker 1: the interesting thing for me is that the budget deficit 399 00:22:54,880 --> 00:22:59,040 Speaker 1: has been going up very late in the cycle, um, 400 00:22:59,080 --> 00:23:02,080 Speaker 1: and this is not what you'd expect. So you've got 401 00:23:02,080 --> 00:23:04,200 Speaker 1: a kind of a crowding out, if I want to 402 00:23:04,320 --> 00:23:10,760 Speaker 1: use an old economic a very strange strange time. So 403 00:23:10,880 --> 00:23:13,600 Speaker 1: the economy is going well, but you've got no lack 404 00:23:13,680 --> 00:23:17,760 Speaker 1: of potential buyers for short dated assets at the current price. 405 00:23:17,800 --> 00:23:20,840 Speaker 1: The price is right, I tell everyone that's that's what's 406 00:23:20,880 --> 00:23:23,399 Speaker 1: being missed. That the other thing that you've got to 407 00:23:23,400 --> 00:23:25,280 Speaker 1: look at when you talk about these deficits, you've got 408 00:23:25,280 --> 00:23:27,280 Speaker 1: to subtract one deficit from the other. When it comes 409 00:23:27,320 --> 00:23:30,000 Speaker 1: to the bomb market, the current account deficit has to 410 00:23:30,040 --> 00:23:32,520 Speaker 1: be has to be funded somehow, right, so there has 411 00:23:32,560 --> 00:23:36,639 Speaker 1: to be equal and offsetting flow. But you've got to 412 00:23:36,680 --> 00:23:39,600 Speaker 1: remember that you can deduct that from the budget deficit. 413 00:23:40,480 --> 00:23:44,479 Speaker 1: So the budget deficit minus the current account is what 414 00:23:44,480 --> 00:23:46,960 Speaker 1: the domestics are going to buy. So if the US 415 00:23:47,080 --> 00:23:49,800 Speaker 1: runs a pick a coming account deficit, then then it 416 00:23:49,800 --> 00:23:52,760 Speaker 1: it is deducted from the budget. But that the way 417 00:23:52,800 --> 00:23:54,800 Speaker 1: I look at it is that there's no lack of 418 00:23:54,800 --> 00:23:59,240 Speaker 1: buyers here. And you're you're right to point out the 419 00:23:59,280 --> 00:24:03,560 Speaker 1: twin deficit. We can go back four decades and talk 420 00:24:03,600 --> 00:24:07,119 Speaker 1: about what was happening then, um in the time of 421 00:24:07,800 --> 00:24:11,400 Speaker 1: Steve just to go with your expertise away from full 422 00:24:11,440 --> 00:24:16,320 Speaker 1: faith in credit without question, the zeitgeist of debt right 423 00:24:16,359 --> 00:24:19,639 Speaker 1: now is this odd word leverage loans. Now, I'm going 424 00:24:19,680 --> 00:24:24,359 Speaker 1: to assume Steve Major is not encyclopedic on leveraged loans. 425 00:24:24,400 --> 00:24:28,919 Speaker 1: But you know there's always a vogue of worry, should 426 00:24:28,960 --> 00:24:34,280 Speaker 1: be we be worried about these odd vehicles leveraged loans. Okay, yeah, 427 00:24:34,560 --> 00:24:38,520 Speaker 1: So previous crises were related to a bunch of acronyms 428 00:24:39,040 --> 00:24:43,000 Speaker 1: in the credit markets CDs, c d O, cpdo etcetera, 429 00:24:43,080 --> 00:24:46,359 Speaker 1: cpdo squares. I think it was. So the point is 430 00:24:46,400 --> 00:24:50,040 Speaker 1: we now have different acronyms, that the risk is sitting 431 00:24:50,080 --> 00:24:53,840 Speaker 1: in different homes. So ten years ago banks will warehousing 432 00:24:53,880 --> 00:24:57,919 Speaker 1: credit risk that isn't happening now after the cleanup and regulation. 433 00:24:58,040 --> 00:25:01,320 Speaker 1: Banks do not hold large amounts inventry, so the risk 434 00:25:01,400 --> 00:25:04,439 Speaker 1: is somewhere now. It could be an asset managers or 435 00:25:04,520 --> 00:25:08,879 Speaker 1: insurance companies. Now the particular sector you're talking about is 436 00:25:08,920 --> 00:25:11,199 Speaker 1: one that might not need so much mark to market, 437 00:25:12,000 --> 00:25:14,359 Speaker 1: So that the interesting thing is we may not see 438 00:25:14,359 --> 00:25:18,680 Speaker 1: it immediately. See in banks, where we're we're we're we're 439 00:25:18,920 --> 00:25:21,800 Speaker 1: where we have to we have to mark in some 440 00:25:21,960 --> 00:25:26,720 Speaker 1: in some other cohorts of the financial markets, there's less 441 00:25:26,720 --> 00:25:30,480 Speaker 1: mark to market. So you're right, there's a risk out there. 442 00:25:30,520 --> 00:25:34,959 Speaker 1: It's had to have had to move somewhere. Um. I 443 00:25:35,000 --> 00:25:38,719 Speaker 1: think that the focus is going on to various aspects 444 00:25:38,720 --> 00:25:42,440 Speaker 1: of the credit markets after a period of extraordinary leverage. So, yes, 445 00:25:43,160 --> 00:25:46,000 Speaker 1: what is your call for the yield curve? We've we've 446 00:25:46,040 --> 00:25:49,680 Speaker 1: spent no time on the spread market, which is it's 447 00:25:50,160 --> 00:25:53,119 Speaker 1: it's been flattening when people have been calling for a steepening. 448 00:25:53,800 --> 00:25:57,560 Speaker 1: And to me, the steep in a trade people keep 449 00:25:57,640 --> 00:26:00,720 Speaker 1: trying to put on it's too early. So I think 450 00:26:00,760 --> 00:26:05,000 Speaker 1: it stays flat until we are sure the fen's gonna ease. Now, 451 00:26:05,119 --> 00:26:07,080 Speaker 1: they're not going to tell us they're gonna ease, but 452 00:26:07,119 --> 00:26:09,200 Speaker 1: they might tell us soon that they're going to pause 453 00:26:09,240 --> 00:26:12,320 Speaker 1: and have a think about it. Um that that that's 454 00:26:12,320 --> 00:26:14,800 Speaker 1: coming at some stage, and in fact, they probably even 455 00:26:14,800 --> 00:26:16,320 Speaker 1: can test that they're gonna pause. We've got to work 456 00:26:16,359 --> 00:26:18,640 Speaker 1: out for ourselves. But we've got in the yield curve. 457 00:26:18,720 --> 00:26:21,359 Speaker 1: It won't steepen until you can break over the other 458 00:26:21,400 --> 00:26:23,359 Speaker 1: side of the mountain. You can start to see what 459 00:26:23,480 --> 00:26:26,399 Speaker 1: you're coming down. I'm gonna I'm gonna go Matthew on 460 00:26:26,480 --> 00:26:30,080 Speaker 1: you here, uh major. But I think it's important is 461 00:26:30,119 --> 00:26:33,639 Speaker 1: the yield curve comes down. And this is folks, basis points, 462 00:26:33,640 --> 00:26:36,920 Speaker 1: which are hundreds of a percentage point. Let's say we're 463 00:26:36,960 --> 00:26:41,320 Speaker 1: at point five, oh or fifty basis points fort etcetera. 464 00:26:42,480 --> 00:26:46,879 Speaker 1: Is it a log rhythmic impulse or is it arithmetic? 465 00:26:47,000 --> 00:26:51,439 Speaker 1: And linear? Is the impulse to inversion to zero? And 466 00:26:51,480 --> 00:26:54,440 Speaker 1: then the negative two or negative five basis points whatever 467 00:26:55,240 --> 00:26:59,879 Speaker 1: doesn't have it's nonlinear, isn't it? It's nonlinear. It's not 468 00:27:00,359 --> 00:27:03,639 Speaker 1: explain that to our audience, because I believe I totally 469 00:27:03,640 --> 00:27:06,280 Speaker 1: agree with you. Now your your your look at a 470 00:27:06,320 --> 00:27:09,040 Speaker 1: basis point today and say it's worth ten cents. So 471 00:27:09,160 --> 00:27:11,520 Speaker 1: the fifty basis points on the tenure yeld you just 472 00:27:11,640 --> 00:27:15,159 Speaker 1: mentioned in your linear fashion as worth five percent of 473 00:27:15,200 --> 00:27:19,760 Speaker 1: total return um, not accounting for coupons and rolled out. 474 00:27:19,880 --> 00:27:23,040 Speaker 1: So look, that's a simple linear relationship. But the point 475 00:27:23,119 --> 00:27:26,440 Speaker 1: is the lower the yield goes, the more value there 476 00:27:26,520 --> 00:27:30,159 Speaker 1: is in each basis point. So it's it's it's nonlinear. 477 00:27:30,600 --> 00:27:32,840 Speaker 1: And the other thing is, with the yield curve flat, 478 00:27:33,240 --> 00:27:36,840 Speaker 1: you've got to think about hedging of derivative products and 479 00:27:36,920 --> 00:27:39,080 Speaker 1: mortgages and all these kind of things people would have 480 00:27:39,119 --> 00:27:43,679 Speaker 1: heard about convexity trades. So so that there's there's a 481 00:27:44,040 --> 00:27:49,359 Speaker 1: there's a potential for the curve to accelerate flatter and 482 00:27:49,440 --> 00:27:53,479 Speaker 1: invert we saw it flirt with inversion recently in certain 483 00:27:53,560 --> 00:27:56,440 Speaker 1: segments of the curve. So I don't think it's time 484 00:27:56,480 --> 00:27:58,159 Speaker 1: for the Stephen. I think we're a long way from that. 485 00:27:58,240 --> 00:28:00,520 Speaker 1: And as you've rctually pointed out, there is that there's 486 00:28:00,560 --> 00:28:04,480 Speaker 1: a risk that may not be brought through because it 487 00:28:04,880 --> 00:28:09,159 Speaker 1: is a non linear relationship. And I'm just doing it 488 00:28:09,200 --> 00:28:13,320 Speaker 1: in my head. I think about ten no, I think 489 00:28:13,359 --> 00:28:16,240 Speaker 1: it's so important and finally, um and it's something I 490 00:28:16,240 --> 00:28:19,520 Speaker 1: don't believe Mr Droggy talked about because it's it's so sensitive. 491 00:28:19,960 --> 00:28:22,560 Speaker 1: Is a chronic nature of negative interest rates? I mean, 492 00:28:22,560 --> 00:28:25,080 Speaker 1: we're back there. You and I had this conversation a 493 00:28:25,160 --> 00:28:28,359 Speaker 1: year ago, eighteen months ago, two years ago, and I'm sorry, 494 00:28:28,400 --> 00:28:31,680 Speaker 1: this is getting old, isn't it. Well. I get questions 495 00:28:31,680 --> 00:28:34,640 Speaker 1: from clients all the time talking about how damaging negative 496 00:28:34,720 --> 00:28:38,320 Speaker 1: rates are to the bank, affect that and everyone else. 497 00:28:38,360 --> 00:28:40,920 Speaker 1: I get that, but wishing for something to go away 498 00:28:41,040 --> 00:28:44,240 Speaker 1: isn't good enough. But there's more to it. Okay, Steve Major, 499 00:28:44,280 --> 00:28:46,280 Speaker 1: you have been more than generous with your time today. 500 00:28:46,320 --> 00:28:51,320 Speaker 1: Thank you so much. Stephen Major is with HSBC. Thanks 501 00:28:51,320 --> 00:28:55,600 Speaker 1: for listening to the Bloomberg Surveillance Podcast. Subscribe and listen 502 00:28:55,800 --> 00:29:01,160 Speaker 1: to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform 503 00:29:01,240 --> 00:29:05,560 Speaker 1: you prefer. I'm on Twitter at Tom Keene before the podcast. 504 00:29:05,600 --> 00:29:09,120 Speaker 1: You can always catch us worldwide. I'm Bloomberg Radio