Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2: Welcome to the Maren Dogs Money Market Rap.
Speaker 1: What'll we talk about the biggest moves in muggets this
Speaker 1: week and what is draving them. I'm Maren Sum's, a
Speaker 1: web editor at large for the Bloomberg UK Wealth.
Speaker 3: And I'm joined stepping Seniors Report and author of the
Speaker 3: money This Old News Later.
Speaker 1: Don't I John Marcus Belly moved this week. We should
Speaker 1: bother what's going on?
Speaker 3: See you next week.
Speaker 1: The thing is that actually, Marcus happened moved quite a lot.
Speaker 1: It's just that there's not that much that we can
Speaker 1: add to the fact that they have moved quite a lot,
Speaker 1: right up, down, all over the place.
Speaker 2: And the only way you could really.
Speaker 1: Say something sensible about this is if you had the
Speaker 1: faintest idea how long this new war in the Middle
Speaker 1: East would go on for and we just don't.
Speaker 3: Yeah, And that is specifically the point, because the length
Speaker 3: of the war means the length that oil prices are elevated,
Speaker 3: and that then has the knock cooin effect of is
Speaker 3: inflation going to be actually significantly higher than everyone had
Speaker 3: thought up until a bit two weeks ago, and therefore
Speaker 3: the interest rate is higher. So it's a big deal.
Speaker 3: It's got a lot of big potential coinsequences. Unless you've
Speaker 3: litterally got across the wall, then there's no what you say,
Speaker 3: what those consequences are going.
Speaker 1: So we can have relentless conversations about how many days
Speaker 1: worth of oil reserves every economy has, about who is
Speaker 1: the most reliant on oil from the Middle East, career
Speaker 1: in Japan by the way, and which markets therefore we
Speaker 1: should suffer the most over the long term as a
Speaker 1: result of the war dragging out or not dragging out.
Speaker 1: But in the end, it comes down to what we
Speaker 1: have absolutely no idea, and we will find out in
Speaker 1: the fullness of time. But I suppose what we can
Speaker 1: talk about is the way in which this war and
Speaker 1: the immediate energy crunch that it has resulted in shows
Speaker 1: us the vulnerability in developed economies in general. I know
Speaker 1: you've written this week about the vulnerability and inheritance the
Speaker 1: UK economy, and it just reminds us that we're in
Speaker 1: a global economy that is fractured and that makes every
Speaker 1: problem about supply.
Speaker 3: Yeah, I think that's a really good way to put it.
Speaker 3: I mean, we've seen this. I mean, I guess this
Speaker 3: has been coming for quite a while and people have
Speaker 3: been worried about the fracture on the supply chains. Obviously,
Speaker 3: COVID made it very obvious how vulnerable we are and
Speaker 3: how reliant we are, but unfortunately the UK we haven't
Speaker 3: really done it and about that and the energy specifically
Speaker 3: obviously is a big issue. But as Simon French podcast
Speaker 3: regular from Paner Laborom, please go back.
Speaker 2: And listen to the podcast leader with him recently on MMT.
Speaker 3: Yes, very interesting in particular now very timely at the moment.
Speaker 3: But the thing Simon put a piece this morning called
Speaker 3: rash Pack Britain. It kind of inspired title really, and
Speaker 3: what you're saying is that the big thing behind the
Speaker 3: UK's productivity puzzle, as in the fact that we don't
Speaker 3: seem to be getting more out of what we're doing,
Speaker 3: is that it's not actually a puzzle at all. It's
Speaker 3: very clear what the problem is and it's because we've
Speaker 3: been rationing the supply of three big important inputs and
Speaker 3: that's energy, land and capital, so everything's more expensive than
Speaker 3: it should be. Most of this arises from yeah, you
Speaker 3: could call it well meaning I think stupid is a
Speaker 3: better word meaning yeah, yeah, exactly. It is not a
Speaker 3: good excuse for being stupid and mean.
Speaker 2: Disappears after it's been explained to you a certain number of.
Speaker 3: Times, exactly. So the fact that we've kind of cut
Speaker 3: off various sources of energy to ourselves, the fact that
Speaker 3: you can't you know, build a house or anything else
Speaker 3: in the country without you know, jumping through millions of hoops,
Speaker 3: and the fact that we've kind of sabitized our own
Speaker 3: capital market bike getting ready tax breaks for investing locally
Speaker 3: and keeping them for investing wherever the hell you want
Speaker 3: hasn't helped any of this. And so Simon's point is, well,
Speaker 3: most of these things are actually reversible. You know, if
Speaker 3: you had a sensible government and power, then you could
Speaker 3: change all these things. And it's not the current government's fault.
Speaker 3: The current government has compounded it with even dafter policies
Speaker 3: and later or the rest of it. But you know
Speaker 3: this this all happened under you know, the previous kind
Speaker 3: of like the Tory government and even going back before that.
Speaker 3: So I guess the only way that it does change
Speaker 3: is that voters start to wake up to and demand change.
Speaker 3: I mean, the North Sea oil is a good example.
Speaker 3: Rachel Reeves seems to be kind of thinking about maybe
Speaker 3: reducing the ridiculous tax rate on not soil exploration, but
Speaker 3: we're still not there yet. Just do it, Yeah, that's straightforward.
Speaker 2: Well it's interesting.
Speaker 1: I mean they said, didn't it today earlier this week
Speaker 1: that they're working on looking.
Speaker 2: At way you how can it be?
Speaker 1: How can it be? Don't need to look at ways too,
Speaker 1: You can just cut that tax, so take that tax away.
Speaker 1: Sometimes they forget they're actually in power.
Speaker 3: I think yeah, I think they do incasingly. They all
Speaker 3: seem to not realize that this is actually their job now.
Speaker 2: I mean, there was there was something on the radio
Speaker 2: this morning.
Speaker 1: I can't even remember it was about, but I was
Speaker 1: listening to some ministro or the other and the interviewer
Speaker 1: said to him, well, are you going to do this
Speaker 1: particular thing?
Speaker 2: And yes, no in parliamentary time allowing.
Speaker 1: And I'm like, you're the government may give a parliamentary
Speaker 1: time and this is.
Speaker 2: Another one of those things you want to do it?
Speaker 2: Want to just do that?
Speaker 3: Yeah, And you can see why people get frustrated. I
Speaker 3: mean that was a good I mean it's a daft example,
Speaker 3: and they wouldn't draw attention in different times if it
Speaker 3: wasn't for the fact it's such a big metaphor for
Speaker 3: what's going on with our governance right now, which is
Speaker 3: that a looad. The MP's was picture taking part in
Speaker 3: some strictly come dancing things was just kind of meant
Speaker 3: to emphasis to be focused on exercise is good for you?
Speaker 2: Good at dancing?
Speaker 3: I'm sure, really bad, but there's an element of fedal
Speaker 3: in whale room bonds that's very oh well, And it's
Speaker 3: just regardless of whether it was actually a perfectly reasonable
Speaker 3: and sensible use of parliamentary time, there's.
Speaker 2: Really important stuff going on and we'd like you to
Speaker 2: do that, not dancing exactly. There's a time for dancing.
Speaker 2: There's a time for doing Yeah, listen, this will come back.
Speaker 3: That's good, that's catchy. Do you know it?
Speaker 2: Well, yeah, we'll put it in a marketing.
Speaker 1: This brings us back to a podcast that we did
Speaker 1: with Callum Pickering while do you remember this about a
Speaker 1: year ago, and he had a paper calder does the
Speaker 1: UK like the energy for productivity quote? And the chart
Speaker 1: was just so startling because at the time and even now,
Speaker 1: lots of people believe that the UK's productivity problem started
Speaker 1: in two thousand and seven, two thousand and eight. So
Speaker 1: after the GFC and his work and his charts are
Speaker 1: so clearly, their productivity started to fall at the same
Speaker 1: time as the UK's electricity supplies started to decline, and
Speaker 1: that was in two thousand and five, two thousand and six,
Speaker 1: early two thousand and six. So with the fall and
Speaker 1: supply of energy came the general flatlining of our productivity.
Speaker 3: I meant that might be the most important chart as
Speaker 3: this millennium. Yeah, because I remember your most important chart
Speaker 3: in the world just to be the Bank of England
Speaker 3: forecast of what would happen in the interestreets went by
Speaker 3: a competent Well you always that.
Speaker 1: Three thousand years chart of just showing them, you know,
Speaker 1: being more ridiculously their relative to three thousand years worth
Speaker 1: of history. And then I went through a phase of saying, well,
Speaker 1: the most important charts in the world is now the
Speaker 1: one where it begins to tick up. Because we've got
Speaker 1: used to the idea of what happens when interest rates
Speaker 1: are below zero or zero. We now understand the consequences
Speaker 1: that we don't understand is a constant answers of rates
Speaker 1: ticking up very sharply and moving into a new forty
Speaker 1: year interest rate cycle where they will be consistently higher
Speaker 1: than they've been in the past. And interestingly, you know,
Speaker 1: I thought that would happen really quickly. I thought the
Speaker 1: consequences of that shift in the interest rate environment would
Speaker 1: be seen in a year eighteen months or so, But
Speaker 1: actually it's taken a lot longer. But we're seeing it
Speaker 1: now right And we're seeing it, for example, the private
Speaker 1: credit market. Lots of our colleagues will have written about that,
Speaker 1: but you're saying fund after fund after fund, saying saying
Speaker 1: pretty quite a lot of nostris in there as the
Speaker 1: private credit environment begins to see default write down, many collapses, etc.
Speaker 2: So that's in there.
Speaker 1: And as Edward Chancellor, another regular on the podcast, as
Speaker 1: You Ways, says, you know, super their interest rates, they
Speaker 1: get into all the cracks, and you don't know what
Speaker 1: the consequences are going to be until quite a lot later.
Speaker 1: And I think we are beginning to see some of
Speaker 1: those consequences. And going back to neither of us knowing
Speaker 1: what an earth is going to happen with this war,
Speaker 1: One thing we do know is that even if it
Speaker 1: stops very quickly, it will still show up a little
Speaker 1: bit in CPI still make a difference to the easing cycles.
Speaker 2: And the assumption that.
Speaker 1: The next raatee move in the UK will be down
Speaker 1: is pretty much already done for, isn't it.
Speaker 3: So I think the assumption that was going to be
Speaker 3: two cuts. I think that there's still assumption in the
Speaker 3: market that will one this year. But I mean that
Speaker 3: could change, that.
Speaker 2: Could change, and there is not the real riskure staflation.
Speaker 3: Yeah, I mean stag flesh and that would be an
Speaker 3: eight me govern that would already bottline stag fleition in
Speaker 3: the UK.
Speaker 2: Well, we're stagnating.
Speaker 1: It's pretty clear if you get to the point where
Speaker 1: we're muttering about, isn't it moreveless that GDP growth is
Speaker 1: going to be one point one percent? I mean this
Speaker 1: is not exciting to me. One point one percent is
Speaker 1: very very bad. And in terms of GDP ahead, well
Speaker 1: we all know where that goes.
Speaker 2: So you know this is not good.
Speaker 1: The UK is stagnating and it doesn't take much to
Speaker 1: shift is stagnating economy with an energy crisis into taculation,
Speaker 1: and that is what we are, stagnating, stagnating economy with
Speaker 1: an energy crisis.
Speaker 2: Oh this is fun.
Speaker 3: Yeah, I think one of the leaders was saying recently
Speaker 3: that were to glue me. I'm not sure what else you.
Speaker 2: Can be a challenge and this podcast optimistically.
Speaker 3: Hope you Christmas.
Speaker 2: All right, that's it.
Speaker 3: I'm going a whold of this podcast.
Speaker 1: That's really all we can say for now, because, as
Speaker 1: I say, there's much volatility in markets, there's a lot
Speaker 1: of emotion and markets. There's a lot going on with
Speaker 1: both energy and with the whole AI conversation. We've had
Speaker 1: over and over, lots to think about, lots to talk about.
Speaker 1: Don't forget that we both write newsletters trying to analyze
Speaker 1: some of these issues, and hopefully things have become clearer
Speaker 1: over the next week.
Speaker 3: So thank you, John, Thanks.
Speaker 2: Mal thanks for listening to this week's Merin Dogs Money.
Speaker 1: If you like us show, rate, review, and subscribe wherever
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Speaker 1: or comments to Merrin Money at Bloomberg dot net. You
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Speaker 1: John is really going for it on Twitter at the moment,
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Speaker 1: I'm at Marinas w and John is John underscore stepic
Speaker 1: This episode was hosed by me.
Speaker 2: Maris said where is produced by some Asadi and Moses
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