WEBVTT - The Stephanomics Global Preview for 2022 0:00:06.040 --> 0:00:08.959 Hello, and welcome to Stephonomics. And today we're bringing the 0:00:09.000 --> 0:00:12.840 world of two to you our traditional look ahead to 0:00:12.880 --> 0:00:15.600 the big themes and questions coming down the track over 0:00:15.600 --> 0:00:18.799 the next twelve months, with a carefully selected panel of 0:00:18.840 --> 0:00:21.480 wise men and women who were kind enough to make 0:00:21.520 --> 0:00:25.720 Stephanomics part of their Christmas plans. We have Nancy Cook 0:00:25.920 --> 0:00:28.960 dialing in from Washington, d C, where she covers economic 0:00:29.000 --> 0:00:32.080 policy for Bloomberg as part of the White House Press Corps. 0:00:32.479 --> 0:00:35.800 Also normally in d C, but currently holidaying in Cornwall 0:00:35.800 --> 0:00:39.800 in England. There's Bloomberg's chief economist, Tom Marlick, and from 0:00:39.800 --> 0:00:44.360 New York, Aaron Rutkoff, who runs all things green at Bloomberg, 0:00:44.479 --> 0:00:47.640 among other things. Also from London, and delighted to say, 0:00:47.920 --> 0:00:51.479 we have Muktaba Rahman, the Europe Managing director of the 0:00:51.479 --> 0:00:55.400 Eurasia Research Group. He's new to Stephonomics, I think, but 0:00:55.560 --> 0:00:58.200 definitely not new to Bloomberg and probably known by many 0:00:58.240 --> 0:01:00.760 people listening as a great source of wisdom on what's 0:01:00.760 --> 0:01:04.480 happening behind the scenes in Europe. So thank you everyone 0:01:04.600 --> 0:01:09.039 and welcome. This is all about looking ahead, not looking back, 0:01:09.160 --> 0:01:12.360 but I can't resist very briefly asking you what the 0:01:12.440 --> 0:01:17.400 most memorable moment of one was for you. Nancy, I 0:01:17.440 --> 0:01:19.880 think that it was first when President Biden came into 0:01:19.920 --> 0:01:23.880 office and just started wearing a mask everywhere and and 0:01:23.920 --> 0:01:27.080 really just you know, visually and in terms of his behavior, 0:01:27.160 --> 0:01:33.039 was taking coronavirus much more seriously than President trumpad Aaron, 0:01:33.240 --> 0:01:36.000 what was it for you? Well, I had the chance 0:01:36.040 --> 0:01:38.679 to go to COP twenty six and after such a 0:01:38.720 --> 0:01:42.000 long build up, to return to United Nations Climate talks, 0:01:42.400 --> 0:01:44.880 actually seeing people all in one place and I'll gather 0:01:44.959 --> 0:01:47.360 together in addressing climate change after the kind of in 0:01:47.360 --> 0:01:49.560 the middle of the long shadow of the pandemic. Did 0:01:49.680 --> 0:01:51.640 did leave quite a quite an impression on me, even 0:01:51.640 --> 0:01:53.680 though the outcome of it may not have lived up 0:01:53.680 --> 0:01:55.720 to some people's expectations of what might have come after 0:01:55.760 --> 0:01:58.000 such a long week. Well, so we will probably be 0:01:58.000 --> 0:02:00.160 getting into that with you a bit later, but tom 0:02:00.160 --> 0:02:04.200 alt So for me, Stephanie, it was that moment in 0:02:04.440 --> 0:02:10.080 March where the US top diplomat Anthony Blincoln sat down 0:02:10.080 --> 0:02:13.959 with China's top diplomat Yang Jeacher, and it was meant 0:02:14.000 --> 0:02:16.639 to be a meeting that got the U. S. China 0:02:16.800 --> 0:02:20.400 relationship back on track after the tumult and the trade 0:02:20.400 --> 0:02:24.720 wars of the Trump years. But that's not quite what happened. 0:02:25.400 --> 0:02:29.280 Yang Jia Cher used the opportunity to deliver a forty 0:02:29.280 --> 0:02:34.680 five minute protocol breaching Harangue, saying the US had no 0:02:34.919 --> 0:02:38.560 standing to speak for the world and no moral authority 0:02:38.919 --> 0:02:44.480 to criticize China over Shinjiang, Taiwan, Hong Kong, cyber espionage 0:02:44.600 --> 0:02:47.040 or anything else. And for me, that was a kind 0:02:47.040 --> 0:02:51.480 of a critical moment, a kind of watershed moment in geopolitics, 0:02:52.200 --> 0:02:55.440 where China said, you know what, We're not second place, 0:02:55.639 --> 0:02:58.040 We're not the disciple. We're not going to listen to 0:02:58.080 --> 0:03:00.240 you anymore. We're going to go on go on our 0:03:00.240 --> 0:03:04.560 own path. I remember us having a conversation immediately afterwards. 0:03:04.600 --> 0:03:06.800 It was definitely one where it helped to be fluent 0:03:06.880 --> 0:03:10.240 in Mandarin to get the true implications of that, but 0:03:10.280 --> 0:03:12.920 it was it was quite a moment. Muktaba Ravan, what 0:03:12.960 --> 0:03:15.280 did What are you going to most remember from one, 0:03:16.320 --> 0:03:19.359 without doubt the outcome of the German elections. I think 0:03:19.400 --> 0:03:22.240 we spent most of the year looking at the differences 0:03:22.280 --> 0:03:26.400 between arm In Lachette and Marcus Zoda and we've ended 0:03:26.440 --> 0:03:30.160 up with Olaf Schultz, former finance minister, in partnership with 0:03:30.200 --> 0:03:32.280 the Greens and the Liberal Democrats, which was I think 0:03:32.280 --> 0:03:35.600 a complete surprise. A government that looks as though they're 0:03:35.600 --> 0:03:37.200 going to do big things in Germany and big things 0:03:37.200 --> 0:03:41.480 in Europe. It is interesting. I interviewed Olaf Schultz earlier 0:03:41.480 --> 0:03:44.560 in the summer and asked him, why are you even bothering, 0:03:44.680 --> 0:03:46.480 you know, looking at the polls, why are you even 0:03:46.560 --> 0:03:49.440 bothering to be in this election and carry on the campaigning? 0:03:49.480 --> 0:03:51.200 And he said, well, you know, people with if they 0:03:51.200 --> 0:03:53.560 could choose me and not just the party, they would 0:03:53.600 --> 0:03:55.440 want me as chancellor. And I still think I can 0:03:55.480 --> 0:03:58.320 do that. And of course he was right and I 0:03:58.360 --> 0:04:01.800 was wrong to be to be negative. And let's let's 0:04:01.880 --> 0:04:04.320 kick off with you Tom Alick. Just thinking a bit 0:04:04.360 --> 0:04:10.080 about the economy and oh Macron, because that's put paid 0:04:10.120 --> 0:04:13.920 to a lot of people's expectations very early, already in 0:04:14.000 --> 0:04:16.839 two or before it's even started. So should we be 0:04:16.920 --> 0:04:19.240 throwing away all of our forecasts for the next year 0:04:19.320 --> 0:04:23.680 thanks to the spread of that variant. So if we 0:04:23.720 --> 0:04:29.039 were having this conversation in December, Stephanie, nobody would have 0:04:29.080 --> 0:04:32.679 said a virus creeping out of a wohan wet market 0:04:32.960 --> 0:04:36.159 will trigger the biggest global downturn since the Great Depression. 0:04:37.440 --> 0:04:40.520 And if we were having this conversation in December twenty twenty, 0:04:40.560 --> 0:04:42.760 I don't think anyone would have said that the US 0:04:42.800 --> 0:04:48.279 would be ending with inflation close to seven. So clearly 0:04:48.800 --> 0:04:53.120 COVID has made the already murky crystal ball of economic 0:04:53.160 --> 0:04:56.560 forecasting even murkier. And we should be a bit humble 0:04:56.960 --> 0:05:01.719 about our predictions. We're always humble, obviously, some more than others. 0:05:02.080 --> 0:05:06.839 Um said that said, with a macron, I think clearly 0:05:06.880 --> 0:05:10.560 it's going to be a bump. Um. We're already seeing 0:05:10.600 --> 0:05:13.880 that we've just pulled together on now casts for growth 0:05:13.920 --> 0:05:17.400 at the end of one. They're coming down more or 0:05:17.480 --> 0:05:21.440 less across the board. As a macron triggers more caution 0:05:21.640 --> 0:05:25.800 from consumers and businesses and governments. But I think it's 0:05:25.800 --> 0:05:27.359 going to be a bump. I don't think it's going 0:05:27.400 --> 0:05:31.680 to derail the recovery. Firstly, whilst O macrons seems to 0:05:31.720 --> 0:05:35.200 be more contagious than other variants, it doesn't so far 0:05:35.240 --> 0:05:38.840 appear to be more deadly. Secondly, the world is just 0:05:38.920 --> 0:05:42.520 getting smarter at dealing with COVID, and you see each 0:05:42.560 --> 0:05:47.120 successive wave is having a smaller impact on the economy. 0:05:47.240 --> 0:05:49.919 And I guess just to stick with the macroeconomics for 0:05:49.920 --> 0:05:53.040 a minute, the other sort of dramatic thing that happened 0:05:53.040 --> 0:05:56.320 in December, apart from the the rise of O Macron, 0:05:56.480 --> 0:05:59.599 was this shift from the US Central Bank the Federal Reserve, 0:06:00.560 --> 0:06:04.200 where it really came round to saying inflations now enemy 0:06:04.279 --> 0:06:07.640 number one for the US economy. And as we know, 0:06:07.680 --> 0:06:10.039 there's been many critics, including Larry Summers, who we heard 0:06:10.040 --> 0:06:13.240 from in last week's episode, who think it's about time 0:06:13.560 --> 0:06:16.120 that the Federal Reserve stopped using the word transitory when 0:06:16.160 --> 0:06:18.840 it comes to inflation. But we are now looking at 0:06:19.680 --> 0:06:24.560 several rate increases, are quite significant tightening of monetary policy 0:06:25.480 --> 0:06:28.000 for two at a time when we know a lot 0:06:28.040 --> 0:06:30.560 of that emergency fiscal support for the U s economy 0:06:30.640 --> 0:06:33.520 is also going to be drying up. Tom, you talk 0:06:33.560 --> 0:06:36.440 about what we don't expect twelve months out. Is it 0:06:36.480 --> 0:06:39.200 conceivable that we might be talking about a coming recession 0:06:39.320 --> 0:06:42.920 in twelve months time? What are the risks? Well, I'm 0:06:42.920 --> 0:06:45.080 not sure it's going to be a recession. The US 0:06:45.200 --> 0:06:49.160 recovery still has further to run. The US households are 0:06:49.200 --> 0:06:52.560 still sitting on a bunch of pandemic savings which they 0:06:52.600 --> 0:06:55.600 need to spend. At the same time, the beginning of 0:06:55.680 --> 0:06:58.960 the FED tightening cycle and what looks like potentially a 0:06:59.120 --> 0:07:02.960 rather hurried tightening cycle, does come with some pretty significant 0:07:03.040 --> 0:07:07.320 risks attached. First, as you mentioned, Stephanie, the FED will 0:07:07.360 --> 0:07:11.600 be raising interest rates at almost exactly the moment when 0:07:11.760 --> 0:07:15.520 US fiscal policy starts to run out of umph. Will 0:07:15.560 --> 0:07:18.320 hear more about this from Nancy, I'm sure, but from 0:07:18.400 --> 0:07:22.160 what I can see, the opposition of Senator Joe Mansion 0:07:22.600 --> 0:07:27.480 has dealt a death blow to Biden's Build Back Better agenda. Second, 0:07:27.920 --> 0:07:30.240 the FED is going to be tightening at a moment 0:07:30.320 --> 0:07:34.800 when US equity markets and US property prices are pretty 0:07:34.840 --> 0:07:40.440 close to bubble territory, and that's potentially a toxic combination. Thirdly, 0:07:40.960 --> 0:07:45.360 already in one we've seen some emerging markets getting into trouble, 0:07:45.720 --> 0:07:50.480 especially Turkey, a reflection of the shall we say, idiosyncratic 0:07:50.760 --> 0:07:54.840 approach to policymaking from President Urduan. For the rest of 0:07:54.880 --> 0:07:58.480 the emerging market universe, the start of the FED tightening 0:07:58.520 --> 0:08:00.920 cycle is going to be a challenge movement. We're going 0:08:00.920 --> 0:08:07.080 to see capital outflows, falling currencies, weaker markets, and a 0:08:07.240 --> 0:08:10.960 challenge to growth at exactly the moment when the spread 0:08:11.080 --> 0:08:14.560 of the omicron variant means they need more rather than 0:08:14.680 --> 0:08:20.360 lass support. And Nancy, we mentioned President Biden's fiscal woes 0:08:20.520 --> 0:08:24.240 or fiscal congressional woes with his fiscal package, that this 0:08:24.280 --> 0:08:26.040 is actually in asking you this question, we have to 0:08:26.080 --> 0:08:30.240 come clean that we're actually recording this just before Christmas Eve. 0:08:30.560 --> 0:08:33.200 So it's the worst possible time to be asking you 0:08:33.240 --> 0:08:36.320 what's going to happen to the great Build Back Better 0:08:36.360 --> 0:08:38.839 or agenda because we still have this big tax and 0:08:38.920 --> 0:08:42.120 spending package that we don't know the fate of you. 0:08:42.640 --> 0:08:45.440 By the time this comes out just around New Year's 0:08:45.640 --> 0:08:49.400 do you think President Biden will have passed or be 0:08:49.480 --> 0:08:53.360 about to pass those important tax changes and spending increases. 0:08:53.920 --> 0:08:56.440 I don't think so. I think that as Senator Mansion 0:08:56.559 --> 0:09:00.000 made his position very clear in a Fox News program 0:09:00.040 --> 0:09:02.960 that he was going to oppose it. Uh, there was 0:09:03.000 --> 0:09:05.559 a lot of animosity between himself and the White House 0:09:05.559 --> 0:09:08.559 earlier this week, and and you know, people at the 0:09:08.600 --> 0:09:11.200 Senate will go home to celebrate the holidays, just like 0:09:11.240 --> 0:09:13.280 a lot of other people, and so we will not 0:09:13.360 --> 0:09:16.240 see resolution by New Year's and I would argue we 0:09:16.280 --> 0:09:19.920 probably won't even see resolution by mid January. UM. It's 0:09:19.920 --> 0:09:22.360 a huge disappointment to the White House because they had 0:09:22.400 --> 0:09:27.559 really planned in two on having the president's domestic economic 0:09:27.600 --> 0:09:30.440 agenda sort of in the bag and done so they 0:09:30.480 --> 0:09:33.280 could move on to some other policy things like their 0:09:33.360 --> 0:09:36.800 China policy or some other foreign policy questions, and then 0:09:36.840 --> 0:09:40.400 also just implementing and selling the economic package, and so 0:09:40.520 --> 0:09:43.440 this just really prolongs that. And there were also a 0:09:43.520 --> 0:09:46.880 number of policy changes in there that were very important 0:09:46.920 --> 0:09:49.480 to the progressive wing of the party. And so now 0:09:49.559 --> 0:09:53.480 you have a riff between Senator Joe Mansion, the key 0:09:53.559 --> 0:09:56.480 you know, fiftieth senator who President Biden needs in support, 0:09:56.520 --> 0:09:59.800 but also with the progressives who feel like these are 0:09:59.800 --> 0:10:01.920 the things that they wanted and this was the legacy 0:10:01.960 --> 0:10:05.520 that they wanted Democrats to to really show in voters, 0:10:05.640 --> 0:10:07.760 and it seems like that is slipping away from the 0:10:07.760 --> 0:10:12.120 Biden administration. If presidents don't manage to pass particularly early 0:10:12.160 --> 0:10:14.480 in their administration when they're supposed to have a bit 0:10:14.480 --> 0:10:18.640 more ability to do stuff, usually if they don't pass 0:10:18.720 --> 0:10:22.480 kind of signature legislation. They tend to be relying on 0:10:22.520 --> 0:10:25.960 the economy for whatever support they have in the polls. 0:10:27.200 --> 0:10:31.080 We've got sort of pretty strong economic recovery at the moment, 0:10:31.480 --> 0:10:34.560 but it is coming with this higher inflation, but wages 0:10:34.600 --> 0:10:36.560 at the lower end of the pace Kale are going up. 0:10:37.160 --> 0:10:38.800 Is it going to do him good as we go 0:10:38.880 --> 0:10:41.480 through the year. It doesn't. It doesn't feel like that 0:10:41.480 --> 0:10:46.360 that that relatively positive picture is doing the administration much good. 0:10:46.880 --> 0:10:49.760 It isn't. And we have seen Paul after a political 0:10:49.800 --> 0:10:53.200 poll and it's really fascinating showing that the majority of 0:10:53.200 --> 0:10:57.800 Americans feel like they do not feel optimistic about the economy. 0:10:57.840 --> 0:11:00.720 There was a fascinating ABC News Washing and Post poll 0:11:00.760 --> 0:11:05.439 in November that showed seventy of Americans rathe the economy negatively. 0:11:05.600 --> 0:11:07.680 Despite what you said, which is that the data is 0:11:07.720 --> 0:11:11.240 actually pretty mixed. Um. But what White House people and 0:11:11.320 --> 0:11:14.000 economists and pundance that I talked to really believe is 0:11:14.040 --> 0:11:17.600 that the overhang of inflation and just the uncertainty caused 0:11:17.600 --> 0:11:22.080 by COVID and the virus is coloring people's perception entirely. 0:11:22.679 --> 0:11:25.320 And it's just the sense that people having to pay 0:11:25.360 --> 0:11:29.320 more for groceries and gas. Um, you know, rent, if 0:11:29.320 --> 0:11:32.199 they're renting their apartment or their house, that is really 0:11:32.240 --> 0:11:36.640 coloring you know, everyone's perception, even people who are middle 0:11:36.679 --> 0:11:39.720 income or higher income, who are not as affected by 0:11:39.800 --> 0:11:42.280 an increase in the price of milk, for instance. But 0:11:42.360 --> 0:11:44.920 it's just really sort of psychological at this point, and 0:11:44.960 --> 0:11:55.920 it's it is really affecting the president's approval numbers. Well, Aaron. 0:11:56.960 --> 0:11:58.400 One of the other things that was supposed to be 0:11:58.440 --> 0:12:00.720 the great distinguishing feature of this of anustration was its 0:12:00.760 --> 0:12:02.319 record on the climate. It was gonna be he was 0:12:02.320 --> 0:12:06.040 going to be the greenest president ever. Um. You mentioned 0:12:06.160 --> 0:12:10.120 Cop twenty six in Glasgow. One of the disappointments there 0:12:10.240 --> 0:12:14.280 arguably was that the US was not able to bring 0:12:14.320 --> 0:12:17.679 a dramatic new commitment, or not one that seemed to 0:12:17.720 --> 0:12:21.600 be very dramatic to to outsiders. If if the president 0:12:21.640 --> 0:12:25.920 can't pass these big tax and spending plans, um, what 0:12:26.040 --> 0:12:29.880 chance does he have of being truly transformational on the environment. 0:12:30.679 --> 0:12:34.480 Yet it's very tough. I mean, he and entered office, 0:12:34.920 --> 0:12:37.760 everyone knew he would rejoin the Paris Agreement, the idea 0:12:37.800 --> 0:12:40.199 that the United States would set a net zero target 0:12:40.240 --> 0:12:43.160 at mid century like so many other large nations have, 0:12:43.280 --> 0:12:47.160 was established. Um, what Biden really wanted to arrive at 0:12:47.200 --> 0:12:50.560 cop able to show and what he now with mansioned 0:12:50.559 --> 0:12:53.720 statement on the billback better plan seems really in doubt. 0:12:53.880 --> 0:12:57.559 It's his ability to move the needle on American emissions 0:12:57.720 --> 0:13:01.280 between now and you know, the plan us to reduce 0:13:01.320 --> 0:13:04.360 emissions by half over the two thousand five levels by 0:13:04.360 --> 0:13:07.720 the end of this decade, and without passing legislation, it's 0:13:07.760 --> 0:13:10.640 going to be really hard to do those things. There 0:13:10.800 --> 0:13:15.280 was money in the spending plan for things like ev infrastructure, 0:13:15.720 --> 0:13:18.240 subsidies for consumers who are putting solar panels on their roofs, 0:13:18.240 --> 0:13:21.720 are adopting electric cars, incentives for people to build for 0:13:21.720 --> 0:13:24.200 a company to build more renewable energy. None of those 0:13:24.200 --> 0:13:27.680 things can really effectively be done without passing legislation. You 0:13:27.720 --> 0:13:29.960 can't you can't do it with executive action. One of 0:13:29.960 --> 0:13:33.200 the really interesting things about watching this debate play out 0:13:33.240 --> 0:13:35.000 in Washington is that it's one of the first times 0:13:35.040 --> 0:13:38.560 we've been able to see climate modelers, so professors who 0:13:38.920 --> 0:13:43.120 apply you know, real world computer modeling. We're analyzing legislation 0:13:43.200 --> 0:13:45.400 in real time as it was changed, and being able 0:13:45.400 --> 0:13:47.760 to analyze what it would do to emissions UM and 0:13:48.080 --> 0:13:49.880 by the end of the process there were still a 0:13:49.960 --> 0:13:52.760 huge ability to drive emissions down with the legislation as 0:13:52.760 --> 0:13:55.000 it stood. But without that, I don't think it can 0:13:55.000 --> 0:13:59.320 be replaced by by anything um in executive action. Since 0:13:59.320 --> 0:14:01.719 we're looking ahead, I mean that the there is another COP. 0:14:01.800 --> 0:14:06.760 There's another big meeting in Egypt later in twenty two. 0:14:06.880 --> 0:14:09.240 If what you say is true is the is there 0:14:09.240 --> 0:14:12.120 going to be a great loss of momentum at least 0:14:12.200 --> 0:14:15.560 coming from the US. Well, you know, one of the 0:14:15.559 --> 0:14:17.520 things we saw at this COP that is a sign 0:14:17.559 --> 0:14:21.040 of some some optimism for COP twenty seven in Egypt 0:14:21.400 --> 0:14:24.480 is that the U. S. And China, which are agreeing 0:14:24.520 --> 0:14:26.920 on so little right now and there's so little cooperation 0:14:26.960 --> 0:14:31.040 between them, did make a bilateral agreement to cooperate on 0:14:31.080 --> 0:14:33.800 some key things like methane emissions. So there will be 0:14:33.840 --> 0:14:35.520 things to check in on at COP twenty seven that 0:14:35.560 --> 0:14:38.440 will be really interesting. That said, I don't think you 0:14:38.440 --> 0:14:41.440 can expect to see more action than we saw at 0:14:41.480 --> 0:14:43.760 COP twenty six, which probably sounds a little disappointing. COP 0:14:43.760 --> 0:14:46.240 twenty six was sort of in this five year post 0:14:46.280 --> 0:14:50.200 Paris model where a lot, not just the big emitters 0:14:50.240 --> 0:14:52.080 like the U, S and China, but the whole world 0:14:52.160 --> 0:14:54.720 was supposed to do a stock taking. Um, it's not 0:14:54.760 --> 0:14:57.040 that COP twenty seven won't be interesting, but I think 0:14:57.720 --> 0:14:59.960 the chances of it exceeding what we saw a copped 0:15:00.000 --> 0:15:01.960 and sex are actually quite quite low. So I think 0:15:02.000 --> 0:15:04.600 that is a bit of a downer heading into the 0:15:04.640 --> 0:15:07.360 next year if you're looking for big action on climate 0:15:08.080 --> 0:15:10.320 Moxamma ram And I mean if we cross the Atlantic, 0:15:10.640 --> 0:15:14.440 we've been talking about the interplay between politics and the 0:15:14.480 --> 0:15:17.400 economy in the US and how that may play out 0:15:17.640 --> 0:15:21.080 next year. I mean, how is the recovery playing out 0:15:21.160 --> 0:15:24.200 for governments in Europe? Has has O Macron sent everyone 0:15:24.240 --> 0:15:27.160 back to square one on that? I mean, it definitely 0:15:27.200 --> 0:15:30.400 comes at a very difficult political moment for Europe and 0:15:30.440 --> 0:15:34.120 for the EU, because you've got major transitions that are 0:15:34.240 --> 0:15:37.320 likely next year. And I'm I'm thinking about France and 0:15:37.360 --> 0:15:40.400 Italy in particular, or they've just happened here, I'm thinking 0:15:40.440 --> 0:15:42.960 about Germany. I mean, there is a risk that the 0:15:42.960 --> 0:15:45.840 incoming government in Berlin wobbles a little bit because there 0:15:45.880 --> 0:15:48.920 is a perception that Ola Schultz has been to lax 0:15:49.000 --> 0:15:51.480 on restrictions, and some of the surge that way now 0:15:51.560 --> 0:15:55.040 seeing is because his government hasn't leaned into the challenges 0:15:55.040 --> 0:15:58.600 aggressively as they needed to. I'd argue on Micron is 0:15:58.640 --> 0:16:00.800 probably the single biggest unknown for the outcome of the 0:16:00.800 --> 0:16:04.400 French election. Macron has his election on the tenth and 0:16:04.440 --> 0:16:07.880 twenty fourth of April next year, and you know, as 0:16:07.960 --> 0:16:10.360 as as things stand, I think because of that election, 0:16:10.960 --> 0:16:14.200 he's ruled against the kind of draconian social restrictions we're 0:16:14.200 --> 0:16:17.520 seeing in countries like Denmark and the Netherlands and probably 0:16:17.560 --> 0:16:20.600 in the UK, because he thinks they will probably test 0:16:20.640 --> 0:16:24.440 the nation's patients and puncture. The economic recovery. France is 0:16:24.480 --> 0:16:27.240 looking at six or seven percent growth this year, so 0:16:27.280 --> 0:16:30.520 he's he's making a big gamble that boosters on the 0:16:30.600 --> 0:16:34.560 vaccination side and tightening of the health pass will allow 0:16:34.680 --> 0:16:37.640 France to weather what would otherwise be a sixth wave. 0:16:38.600 --> 0:16:40.840 If the gamble fails, I think he may forfeit his 0:16:40.920 --> 0:16:44.760 claim to have steered France through the pandemic reasonably well. 0:16:45.520 --> 0:16:48.640 I would say that people around Macron believe actually there 0:16:48.720 --> 0:16:50.960 is a resurgence of the pandemic. It could play quite 0:16:51.040 --> 0:16:54.320 well for him because his ratings typically tend to rise 0:16:54.760 --> 0:16:57.600 into into in times of acute health crisis. But I 0:16:57.600 --> 0:16:59.960 think the big point is it has unknown and unpredicted 0:17:00.640 --> 0:17:03.640 impact on a very consequential race in the European Union 0:17:03.640 --> 0:17:05.800 next year. Well, we'll come back to you on the 0:17:05.880 --> 0:17:07.879 on the more on the on the European politics in 0:17:07.920 --> 0:17:10.760 a minute, But Tom, we should get back to China 0:17:11.240 --> 0:17:14.280 because it was such a big feature of discussions last 0:17:14.320 --> 0:17:16.960 year when you we were talking about the FED at 0:17:17.000 --> 0:17:20.760 the beginning raising rates. It's certainly the first time I 0:17:20.760 --> 0:17:23.960 can remember that we're going into a year where the 0:17:24.080 --> 0:17:27.639 US Central Bank is expected to be raising interest rates, 0:17:27.640 --> 0:17:30.320 but China is actually not going to be slavishly following 0:17:30.320 --> 0:17:31.960 the FED. It's going to be doing its own thing, 0:17:32.080 --> 0:17:36.320 cutting rates to support its economy. That is a moment 0:17:36.359 --> 0:17:38.520 in itself, isn't it, Tom? But I guess we should 0:17:38.520 --> 0:17:41.800 also worry about two of the largest economies in the 0:17:41.840 --> 0:17:44.320 world slowing down at the same time. So I think 0:17:44.359 --> 0:17:47.280 there's a couple of things going on their staff. The first, 0:17:47.320 --> 0:17:50.600 as you know, is that the FED and the PUC 0:17:51.240 --> 0:17:54.680 are very likely going to be moving in opposite directions 0:17:54.720 --> 0:18:01.520 in two and that in itself is already pretty remark cable. Historically, 0:18:02.080 --> 0:18:05.600 because China's currency, the rem and B, was tied to 0:18:05.680 --> 0:18:09.040 the dollar, the People's Bank of China had to follow 0:18:09.280 --> 0:18:12.719 the FED. It didn't matter what economic conditions were like 0:18:12.880 --> 0:18:16.399 in China. If the FED hiked, the PBOC had to 0:18:16.440 --> 0:18:19.600 follow them, and if the FED cut, the PBOC had 0:18:19.640 --> 0:18:25.800 to follow them. Now, after a decade of careful, painstaking reforms, 0:18:26.160 --> 0:18:30.000 the remin b is much closer to a free floating currency, 0:18:30.200 --> 0:18:33.720 and that's given China's central bank a new degree of 0:18:33.800 --> 0:18:38.159 freedom on how it manages monetary policy, and we already 0:18:38.200 --> 0:18:41.520 see them using it. The second important implication of the 0:18:41.560 --> 0:18:47.840 PBOC loosening is what it says about China's current economic condition. 0:18:48.800 --> 0:18:52.960 In the third quarter of one we saw China grind 0:18:53.080 --> 0:18:57.040 to a halt, a reflection of the ever grand property 0:18:57.160 --> 0:19:01.960 slump of the government's zero COVID strategy and all that 0:19:02.000 --> 0:19:07.520 means for lockdowns and of energy shortages. And in two 0:19:08.000 --> 0:19:11.160 two of those problems, the property slump and the zero 0:19:11.240 --> 0:19:15.720 COVID strategy are going to be there with China still. 0:19:16.480 --> 0:19:19.800 What that means is that the PBOC is very likely 0:19:20.040 --> 0:19:23.119 going to need to loosen further, and they're going to 0:19:23.160 --> 0:19:26.280 be pretty grateful that those years of reform on the 0:19:26.320 --> 0:19:29.439 exchange rate have brought them the freedom to move in 0:19:29.440 --> 0:19:33.480 a different direction from a tightening fed. You've just you've 0:19:33.480 --> 0:19:36.200 added in another question market with something to worry about. 0:19:36.280 --> 0:19:38.760 For the for the strength of the of the global economy. 0:19:38.760 --> 0:19:41.639 In in two we seem to be adding them up. 0:19:42.359 --> 0:19:44.919 Aaron Rakoff, you will have a better sense of this 0:19:44.960 --> 0:19:47.880 than anyone. I always feel there's a bit of a 0:19:48.520 --> 0:19:52.800 sort of disconnect in discussions around China and climate because 0:19:52.840 --> 0:19:54.639 on the one hand, we sort of, you know, they 0:19:54.680 --> 0:19:59.080 didn't the leaderships, senior leadership, didn't come to COP twenty six, 0:19:59.600 --> 0:20:04.240 the the commitments on the sort of global stage seem 0:20:04.520 --> 0:20:08.360 a bit um week compared to some countries. But then 0:20:08.560 --> 0:20:10.959 I talked to China experts who say, no, they're the 0:20:10.960 --> 0:20:15.120 country that has done most to really embed climate commitments 0:20:15.200 --> 0:20:18.320 in their development strategy, at least on paper, and it's 0:20:18.320 --> 0:20:21.320 going to fundamentally change the direction of the economy in 0:20:21.359 --> 0:20:24.680 the next few years. So so what's right, I mean, 0:20:24.720 --> 0:20:28.840 should we take um China more or less seriously on 0:20:28.880 --> 0:20:32.640 the climate? Well, I mean, you can look at China's 0:20:32.720 --> 0:20:36.040 current emissions and it's really the lynch pain for the 0:20:36.040 --> 0:20:39.600 whole world. In a lot of ways. The Chinese emissions 0:20:39.720 --> 0:20:42.879 right now are about the equivalent of the next for 0:20:43.200 --> 0:20:48.320 largest emitters nation states combined um and within China, you 0:20:48.359 --> 0:20:51.200 can look at some of the biggest emitting companies, many 0:20:51.280 --> 0:20:54.159 which are state controlled or heavily state influenced, and the 0:20:54.200 --> 0:20:57.240 emissions of those companies will be as large as some 0:20:57.440 --> 0:21:01.800 very significant you know, like individual Europeans and Chinese steelmaker 0:21:01.840 --> 0:21:04.280 will have the same size emissions. But there's also a 0:21:04.320 --> 0:21:07.120 lot of signs for optimism there. I mean, unlike Joe 0:21:07.160 --> 0:21:10.359 Biden's struggles in the United States, the Chinese government does 0:21:10.440 --> 0:21:13.000 have a large voice in terms of what it's a 0:21:13.200 --> 0:21:16.800 huge omitting companies do. There's not a need to pass legislation. 0:21:17.160 --> 0:21:21.760 China is enormous consumer and driver of the renewable energy transition. 0:21:21.960 --> 0:21:25.360 Whether you're looking at things like the installed wind capacity 0:21:25.400 --> 0:21:27.280 that will be added in two so much of that 0:21:27.280 --> 0:21:29.600 will be in China. The same thing with a new 0:21:29.640 --> 0:21:32.080 solar capacity will be arriving in China. And even at 0:21:32.080 --> 0:21:33.919 the end of this year, we saw China cross a 0:21:33.960 --> 0:21:37.560 threshold where one in five vehicle sold was an electric vehicle. 0:21:37.920 --> 0:21:42.200 So there really are signs for optimism there. Uh, it's 0:21:42.200 --> 0:21:44.239 like everything else though, I guess a bit of a 0:21:44.280 --> 0:21:47.000 mixed bag. And I think Tom also mentioned the sort 0:21:47.000 --> 0:21:52.400 of the energy shortages and ectricity problems in China last year. 0:21:52.760 --> 0:21:54.520 I did see there was an article in The Economist 0:21:54.560 --> 0:21:57.159 actually that was claiming that this two was going to 0:21:57.240 --> 0:22:01.919 be a real reality check moment for the world's climate ambitions, 0:22:01.960 --> 0:22:05.280 because we saw last year when push comes to shove, 0:22:05.480 --> 0:22:06.800 or in the case of the UK, you know, the 0:22:06.800 --> 0:22:12.000 wind fails to blow, um, we immediately crank up you know, 0:22:12.080 --> 0:22:14.440 the dirtiest power stations again, or in the case of 0:22:14.520 --> 0:22:17.399 China and India, we crank up coal output because energy 0:22:17.440 --> 0:22:21.600 prices are soaring, and that and those carbon neutral options, 0:22:21.600 --> 0:22:24.280 those green options that we like to think we have, 0:22:24.560 --> 0:22:28.200 are actually not quite there yet. Do we have a 0:22:28.200 --> 0:22:32.399 another disconnect there between our our great green ambitions and 0:22:32.400 --> 0:22:35.600 where the world actually is now. I think that's right. 0:22:35.680 --> 0:22:39.280 If the expectation is that renewable energy could step in 0:22:39.359 --> 0:22:42.680 the place of very volatible fossil energy markets and just 0:22:43.600 --> 0:22:47.159 you know, be a stabilizing force when the price of 0:22:47.640 --> 0:22:51.119 natural gas or oil or call was shooting up, I 0:22:51.119 --> 0:22:53.760 think that that is premature. On the other hand, I 0:22:53.800 --> 0:22:56.679 think there's a certain degree of the transition that is 0:22:57.080 --> 0:22:58.800