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Speaker 1: Ye. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene

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Speaker 1: Jay Lee. We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg for me,

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Speaker 1: front and center. How do you handicap so many of

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Speaker 1: these big political issues? The headline coming from the team

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Speaker 1: over at black Rock and Russ Coast Trick, as follows,

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Speaker 1: The biggest risks are the hardest to quantify, trade friction, Brexit,

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Speaker 1: and US twenty elections. Black Rocks, Russ Coast Rick joining

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Speaker 1: me around the table right now, can monitor RUSS Good morning.

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Speaker 1: What do you do with that? That's your line? What

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Speaker 1: on earth do you do with it? I think all

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Speaker 1: you can do is try to think about the link

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Speaker 1: from the policy to what it may mean in the

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Speaker 1: real account. I mean, and some of these is too

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Speaker 1: far out. We can't really handicap that thousand twenty election.

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Speaker 1: The trade we're dealing with in real time, and what

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Speaker 1: we do know is that you've probably put the manufacturing

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Speaker 1: sector in a mode recession. Thankfully, so far, that has

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Speaker 1: not leaked over to the households sector, which is why

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Speaker 1: I think the economy is in decent shape. CNBC reporting

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Speaker 1: in the last twenty four hours those talks will commence,

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Speaker 1: I believe October tenth, going into October eleventh. Rus. How

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Speaker 1: hopeful are you the president talking up the prospect of

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Speaker 1: a deal. It's getting closer, forever closer. I think at

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Speaker 1: this point, you know, most investors will be happy with

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Speaker 1: a true snodded deal. You know. The reality is a

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Speaker 1: lot of these issues, particularly around technology, intellectual property, state sponsorship,

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Speaker 1: These go to the core of the Chinese financial model.

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Speaker 1: I don't think many people expect a long lasting deal.

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Speaker 1: What people would like to see is a d escalation

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Speaker 1: of the tension, perhaps a rollback of some of the

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Speaker 1: recent tariffs, and that this just goes to simmer for

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Speaker 1: a while and it is off of the boil. Another

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Speaker 1: company that would love to see that, and it's micro

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Speaker 1: On the chip maker, releasing garnings and the forecast for

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Speaker 1: profit really not good at all. The forecast for profit

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Speaker 1: damaged by the trade tension. That the stock down by

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Speaker 1: five point eight six percent in early trade in this morning.

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Speaker 1: The damage is being done. Whether you look at the

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Speaker 1: Micron profit forecast whether you look at the economic confidence

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Speaker 1: in Europe this morning for the euro Zone a four

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Speaker 1: year low. Is that what you just continue to see

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Speaker 1: as well rust in the not too distant future, just

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Speaker 1: a drip feed of more negative economic data. Jean, I

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Speaker 1: think you you expressed exactly in the right way. Some

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Speaker 1: damage has already been down. And even if you you

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Speaker 1: get a temporary truce, you know, if you're a CEO,

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Speaker 1: you're a CFO, you're thinking about your next large cap

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Speaker 1: on investment, You're think about where to build a factory.

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Speaker 1: Even if you have a temporary cessation of the friction,

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Speaker 1: it is very hard to have a lot of confidence

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Speaker 1: about that next decision, which means a lot of this

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Speaker 1: is getting put off. We've had a lot of volatility

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Speaker 1: in between, but to your point, stocks have done nothing

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Speaker 1: for eighteen months for us to have a high conviction

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Speaker 1: call at the moment in this market, I think the

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Speaker 1: high conviction call is there are segments of the market,

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Speaker 1: and I think technology has been one the US household set.

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Speaker 1: There's another where you've seen companies be able to generate,

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Speaker 1: you know, phenomenal cash flow growth, maintain very high margins

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Speaker 1: despite all the uncertainty. So we're looking for those fast rivers.

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Speaker 1: We've been raising our weighting technology, We've been raising our

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Speaker 1: way to US consumer names because we do think up

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Speaker 1: that we're not going to see a recession and these

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Speaker 1: names can continue to grow even with the uncertainty. What

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Speaker 1: do you hear from people. One of the great affinities

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Speaker 1: of US costUS your first rate academics, and you actually

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Speaker 1: go out and talk to a lot of people as well.

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Speaker 1: If we're very rangebone right now, what's the mood on

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Speaker 1: which way we range is, particularly in the equity markets.

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Speaker 1: Is it just an assumption that we're waiting for news

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Speaker 1: and then we break higher. I think most people probably,

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Speaker 1: you know, when you speak to individual investors, you speak

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Speaker 1: to advisors, they're nervous, and if anything, I think the

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Speaker 1: break higher would be the surprise. People were worried about trade,

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Speaker 1: they're worried about Briggs, that they're worried about US politics again,

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Speaker 1: all these things that are very hard to quantify, and

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Speaker 1: everyone still has a very fresh memory of not only

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Speaker 1: two thousand and eight, of last December. You know that

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Speaker 1: very sharp, abrupt, near near bear market in stocks has

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Speaker 1: left people nervous about these quick flash crashes that can

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Speaker 1: take stocks down and rust an economy that's at still

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Speaker 1: speed are caught up with pincome. In the last twenty

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Speaker 1: four hours, you just put out that cyclical outlook going

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Speaker 1: into they're looking for one percent GDP growth in the

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Speaker 1: United States. In are we prepared for one percent GDP

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Speaker 1: growth in America? I think we would be a bit

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Speaker 1: more constructive if you have one percent growth, and I

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Speaker 1: do think you're going to have some more volatility in

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Speaker 1: stocks because the earnings estimates for two thousand, twenty ten

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Speaker 1: percent growth are gonna be very hard to hit. Any

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Speaker 1: one percent real GDP environment, we'd be a bit more constructive.

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Speaker 1: I think you're decelerating towards trend, maybe a bit below,

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Speaker 1: but to my mind, that's still closer to two than

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Speaker 1: to one percent. Link your world with nominal GDP. If

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Speaker 1: we get a dampening or stability but sub pardominal GDP,

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Speaker 1: how does it fold into revenues then down the statement

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Speaker 1: to earnings. It means that your revenue growth the aggregate

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Speaker 1: is constrained. And this goes back to my point about

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Speaker 1: fast rivers a cash flow. I think it does mean

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Speaker 1: that investors like that just account who you know, this

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Speaker 1: is what the the the dynamic has been really for

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Speaker 1: the whole post crisis environment. You don't have that tailwind

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Speaker 1: a faster nominal GDP growth. So the question is which

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Speaker 1: companies are in segments of the market that can generate

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Speaker 1: top line growth in raise margins, and those are the

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Speaker 1: companies that can command that premium on their multiple Where

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Speaker 1: do you find them? What's sancta I'd say you find

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Speaker 1: them in technology. You find them in software, you find

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Speaker 1: them in segments of the consumer. You know, segment. We're

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Speaker 1: talking about a lot of gloom and doom. One thing

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Speaker 1: it's worth bringing up is that a household sector is

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Speaker 1: in decent shape. You've got healthy growth and disposable income.

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Speaker 1: You've got healthy growth and disposable income among parts of

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Speaker 1: the household sector that have the greatest propensity to spend,

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Speaker 1: savings is up. Disposable income relative to dead is up.

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Speaker 1: You know, if you don't have something blow up on trade.

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Speaker 1: Our view as the household sector is in good shape

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Speaker 1: right now. Jonathan Golobert Credit Swaste has got a decent

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Speaker 1: take on this as well. The culprit at the moment

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Speaker 1: that everyone is blaming for decelerating GDP is quite clearly

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Speaker 1: the trade tension, and this is a quote that came

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Speaker 1: from the team at Credit Swiss yesterday. By contrast, the

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Speaker 1: data shows that eighteen stimulus driven above trend economy is

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Speaker 1: now mean reverting, weaken non recessionary economic should limit stock

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Speaker 1: returns until the data shows sign to bottoming. So I

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Speaker 1: guess that the one trillion dollar question is when do

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Speaker 1: we start to see signs of bottoming in this decellaring,

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Speaker 1: de sturating data worldwide. Rus So, I actually think there

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Speaker 1: is an answer to that, and my guess is that

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Speaker 1: you will start to see some stabilization in early two

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Speaker 1: thousand twenty. And the reason I say that is one

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Speaker 1: thing that has gone right and why stocks have had

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Speaker 1: you know, what has still a relatively good year is

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Speaker 1: that central banks pivoted early in the year. And when

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Speaker 1: you think about that lag between monetary accommodation of the

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Speaker 1: real economy, it's six to nine months. So that tells

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Speaker 1: me as we get to the end of the year,

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Speaker 1: we should start to see some signs of stabilization. Very

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Speaker 1: good Risk Coasters, Thank you so much. Thanks briefing as well.

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Speaker 1: Always interesting as we talked to Global Wall Street. When

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Speaker 1: a major bank makes major changes, it has been a

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Speaker 1: train wrecord well as far ago. There's no other way

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Speaker 1: to put it. And within all that is the history

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Speaker 1: of the bank John Farrell Crocker National, first Interstate Bank

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Speaker 1: of North America, first Security, meeting with Northwest, and finally

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Speaker 1: pulling in from the Deep South, the venerable Wacovia Bank.

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Speaker 1: And you distill it all into what John Stump rod.

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Speaker 1: I was on stage with Mr Stump days weeks before

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Speaker 1: he was shown the door, and it has been basically,

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Speaker 1: I'm going to say what four years of chaos? Three

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Speaker 1: years of chaos him slam was the follow up act

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Speaker 1: when you went over to Wells Fargo. Did you sit

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Speaker 1: in the stage coach over in third Avenue? I haven't

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Speaker 1: seen the stitch coach. Is that how you get to

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Speaker 1: work in the morning? That's how they used to get

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Speaker 1: to work. It is a venerable name. Boy, is it troubled?

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Speaker 1: Glimpo finance reporter Shanali Bassett dropping by the studio to

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Speaker 1: catch out with us. Wells Farco does indeed have a

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Speaker 1: new CEO? Talked to me about the new man at

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Speaker 1: the top, Shinale. It's crazy. Charlie Sharp has only been

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Speaker 1: at the top of Bank of New York Melon for

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Speaker 1: about two years, and now he's making his next big

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Speaker 1: move to Wells Fargo. Much harder story to clean up. Uh,

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Speaker 1: you know a point that we had made earlier. Interestingly,

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Speaker 1: he's had a lot of experience with the regulators also,

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Speaker 1: I mean, he was one of the bank CEOs that

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Speaker 1: was down in Washington earlier this year. Um, and so

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Speaker 1: he's going to be a very interesting choice to see

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Speaker 1: how he how he deals with the rest of the

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Speaker 1: regulatory issues. To clean a pact, it's a long list.

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Speaker 1: What's it the top? Well, my goodness. Well, first of all,

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Speaker 1: maybe the Fed's asset cap Wells Fargo cannot grow because

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Speaker 1: the Feds said it cannot after so many issues that

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Speaker 1: it had in terms of the fake account scandal. So

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Speaker 1: told me about what he has to do that they

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Speaker 1: can get that lifted, to get that lifted, to make sure.

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Speaker 1: So remember Wells Fargo, this is an outsider for the

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Speaker 1: first time running the bank, John Stump, Tim Sloan. We

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Speaker 1: had people who and even Alan Parker, the General Council,

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Speaker 1: who was a lawyer by training, but still you know,

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Speaker 1: seen as part of the inside of the bank. To

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Speaker 1: clean up a culture is a difficult thing to prove

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Speaker 1: that you can do. And so Charles Sharf may bring

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Speaker 1: in more people, right, that's one big thing he might do.

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Speaker 1: And then he also has to show that he can

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Speaker 1: turn around how fundamentally the bank behaves and how it

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Speaker 1: treats customers. The legacy of this and this goes back

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Speaker 1: to Sandy Wells. Saw him on with Marie the other day.

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Speaker 1: Is good to see Mr wild out And about is

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Speaker 1: James Diamond was thrown out to bank one off of

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Speaker 1: commercial credit. He had a assistance and one of them

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Speaker 1: was the young young intern who is now going to

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Speaker 1: take over Wells Fargo. And along the way this guy

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Speaker 1: ran am I correct, he ran retail for James Diamond

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Speaker 1: a chase and I think they did pretty well. Is

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Speaker 1: he gonna JP morganize Wells Fargo? I mean that's certainly

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Speaker 1: a thing to think, right, Well, well, what's the board think?

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Speaker 1: What's the board think? Well? Remember Wells Fargo on like

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Speaker 1: JP Morgan, Wells Fargo is primarily a consumer bank. So

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Speaker 1: when you say JP Morgan, you also think about sales

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Speaker 1: and trading and invest in banking and all of these

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Speaker 1: other things. I think, and it's Wells Fargo does have

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Speaker 1: all of that, but primarily cleaning up the consumer businesses

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Speaker 1: is what he's going to have to do. So JP

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Speaker 1: morganized JP Morgan is the new financial supermarket, right, it's

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Speaker 1: the it's it's everything to everybody. So making it that

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Speaker 1: is not really the game here, it's cleaning it up psychologically.

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Speaker 1: Where is the center of wells Fargo? I mean we

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Speaker 1: you know, the heritage of this John is a pony

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Speaker 1: Express in the stage courch which they rand with going

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Speaker 1: from St. Louis West, you know, chased by Indians. I mean,

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Speaker 1: you know, it's part of the fabric of our history

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Speaker 1: as well as Fargo is a huge deal, the Pony Express. Yeah,

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Speaker 1: but you know, some of its mythology and some of

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Speaker 1: it's actually accurate. But but Shannale, we're psychologically I mean

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Speaker 1: JP Morgan New York Park Avenue, Yeah, you're asking. Well.

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Speaker 1: Well as Fargo is based in San Francisco, right, so

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Speaker 1: it's a San Francisco bank, remember after Wacovia. Also they

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Speaker 1: have deep roots in the South as well, and so

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Speaker 1: again not like JP Morgan, which has this huge global

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Speaker 1: expansion plan, this is America's bank, right, and what he

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Speaker 1: has to deal with is mortgages. To Americans across the country. Right,

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Speaker 1: that's a very different thing from where he was just

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Speaker 1: at Bank of New York, Melon, which is it's it's custody,

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Speaker 1: it's clearing services. It's really much more plumbing of the

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Speaker 1: financial system. Let's go bank to the beginning of this conversation,

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Speaker 1: the cap on their ability to grow, their ability to

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Speaker 1: remove that cap and then grow. Let's pretend the captadn't exists.

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Speaker 1: How easy would it be to get this company grunning again? Well,

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Speaker 1: I mean it's really it's not easy, right, not easy.

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Speaker 1: It's definitely a catch up game. Here. You have the

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Speaker 1: biggest growing faster, JP Morgan, Goldman Sacks, Goldman Sacks getting

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Speaker 1: into Wells Fargo's businesses with the consumer, and so how

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Speaker 1: do you catch up to that when you do have

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Speaker 1: all these regulatory problems? I'm not sure. Does he clean house?

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Speaker 1: You know, I know it's really possible twenty or thirty people?

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Speaker 1: Does he bring him from B and Y Melon? Or

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Speaker 1: does he what's he doing? Or can I tell you something?

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Speaker 1: Let alone by Melon? What about JP Morgan? Is he

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Speaker 1: going to go back to his old shop and say, hey,

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Speaker 1: I need you guys to help me here. Shelly bassk.

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Speaker 1: Thank you so much, correspondent John, that's a bit of

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Speaker 1: news doesn't shake. So she goes she's breaking and just

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Speaker 1: scrunning around the news room. Yeah, all that. Lindsay Newman

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Speaker 1: is in London with Chatham House US and America's Program

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Speaker 1: Senior Research Fellow. When she was at Yale a few

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Speaker 1: years ago there was partisan divide of the nineteenth century.

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Speaker 1: Where were doing it right now? And she brilliantly captures

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Speaker 1: it this morning in a note on all we've observed

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Speaker 1: in Washington as well. I lead with that Lindsay an

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Speaker 1: hour and a half ago with our Kevin Siilli and

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Speaker 1: that I'm fascinated how the Senate Republicans, led by McConnell

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Speaker 1: of Kentucky, how they actually adapt to fact an opinion,

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Speaker 1: given this modern partisan did divide, What will you look

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Speaker 1: for from Senator McConnell. Well, first of all, thank you

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Speaker 1: for having me on. And it's very kind of you

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Speaker 1: to say it was just a few years ago I

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Speaker 1: was at Yale, But thank you, thank you very much. Um. So,

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Speaker 1: you know, right now we've seen the whist Whistleblow report

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Speaker 1: as well as the TRANSPAP. We're getting a more complete

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Speaker 1: picture of sort of the background of what will likely

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Speaker 1: form the basis of this formal impeachment inquiry that Pelosi

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Speaker 1: has authorized as of Tuesday. UM. Interesting the overnight a

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Speaker 1: lot of Senate Republicans were saying they hadn't had yet

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Speaker 1: had time to read the repair the whistleblower report. UM.

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Speaker 1: But what we're looking for is and you know, so

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Speaker 1: far they're all just saying at most that it's troubling. UM.

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Speaker 1: But as sort of we've seen pulling around public appetite

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Speaker 1: shifting perhaps up about to the highest levels UM during

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Speaker 1: the presidency towards impeachment. Will this prospect of an impeachment

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Speaker 1: inquiry going forward not just through the House but to

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Speaker 1: the Senate UM, and all the details that are propped

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Speaker 1: going to come out right before election? UM? In fact,

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Speaker 1: will that push them to have a more tempered view

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Speaker 1: and pull back some of that unmitigated support that they

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Speaker 1: continued to give trumpet this I was thunderstruck yesterday by

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Speaker 1: the difference between Lieutenant Mueller, who served heroically in the

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Speaker 1: his leadership was acclaimed as a frontline lieutenant in Vietnam,

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Speaker 1: and the way he was treated by Republicans versus the

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Speaker 1: Vice Admiral Yesterday you know, with his leadership across any

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Speaker 1: number of duties, with the Seals, where the Republicans are

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Speaker 1: almost at the point where they can't posture the postures

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Speaker 1: of the last three years. Have they run out of

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Speaker 1: gas with this impeachment process or do you look for

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Speaker 1: them to coalesce and defend their president. You know, it's

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Speaker 1: certainly going to be a bit of mix of both. Um,

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Speaker 1: there will certainly be those who continue to support President Trump.

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Speaker 1: But right now the information that's come out, between the

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Speaker 1: Whistleblow Report and the transcript there everybody is sort of

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Speaker 1: trying to digest this information. Um, what's what's what is

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Speaker 1: you know, troubling to take the Republican word here? Is

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Speaker 1: that the whistle Blow report, you know you're hearing, are

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Speaker 1: we going to find a smoking gun? And and this

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Speaker 1: is all just living linguistics and language. But what it

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Speaker 1: does provide, first and foremost is a roadmap. And in particular,

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Speaker 1: it's a roadmap that includes details that are already corroborated

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Speaker 1: by the transcript, not the least of which is information

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Speaker 1: around you know, encouraging further investigation into crowds, right, encouraging

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Speaker 1: this further investigation into Biden encouraging working with Giuliani and

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Speaker 1: and the Attorney General bar all of which we we

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Speaker 1: saw in in fact, in the transcript of the White

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Speaker 1: House ultimately released. Lindsay, are we dealing with any legal

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Speaker 1: issues here or purely political issues? Question? Really? Smart? Well,

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Speaker 1: that that is an excellent question. And when we when

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Speaker 1: we talk about impeachment, you know, we all have to

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Speaker 1: remember impeachable offenses are treason, bribery, and the high crimes

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Speaker 1: and misdemeanors. And President Gerald Ford so family famously said

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Speaker 1: high crimes and misdemeanors are just really whatever the House

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Speaker 1: of Representatives of the day thinks that they are. But

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Speaker 1: what we we're talking about with high crimes and misdemeanors,

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Speaker 1: and I think that's where um, the Democrats House Democrats

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Speaker 1: are going to be focusing their attention as we're talking

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Speaker 1: about a abuse of trust, abuse of office, unbecoming conduct

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Speaker 1: um And there's that's quite a large bucket. The founding

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Speaker 1: fathers of the Constitution intended it to be quite a

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Speaker 1: large bucket that official presidential and particular behavior could could

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Speaker 1: be captured by Lindsay, these are actually reactions, of course,

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Speaker 1: that the Democrats have been throwing at the president since

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Speaker 1: really since day one, there is a concern among money

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Speaker 1: that they've spent so much political capital in doing so

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Speaker 1: that they're going to struggle to bring the public along

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Speaker 1: this time around. How do you think that's going to

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Speaker 1: play out? So they're two key stories. The first is

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Speaker 1: the public sentiment one, which is the one that you're

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Speaker 1: alluding to and I mentioned earlier, which we're starting to

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Speaker 1: see is very very prepliminary. But polling that's been done

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Speaker 1: since Pelose you meet her announcement has suggested that public

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Speaker 1: sentiment is inching towards impeachment. Now there does seem to

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Speaker 1: be the second part of the story still partisan divide. Right,

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Speaker 1: it's still very low amongst Republicans, something you know in

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Speaker 1: the just single high single digits into the low double

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Speaker 1: digits um. But the partisan divide issue is key because

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Speaker 1: Democrats want to move quickly on this, because they don't

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Speaker 1: want this dragging through taking up all of the attention

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Speaker 1: um because ultimately, you know, some of the potential um

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Speaker 1: individuals who are gonna lose us from this, or anybody

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Speaker 1: whose name is not Biden and Warren who are front

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Speaker 1: running the Democratic side right now, because the attention moves

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Speaker 1: away from healthcare, it moves away from uh, immigration and

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Speaker 1: gun control and all these issues that the you know,

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Speaker 1: the vibrant Democratic field is dealing is you know, is

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Speaker 1: raising and just get focused on impeachment. Obviously Biden um

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Speaker 1: is coming out very strongly to address these issues. And

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Speaker 1: then Warren, who's you know, who's surging in the polls.

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Speaker 1: Let me be republican for a moment. Is a constructive

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Speaker 1: plan here to just delay in a collegial way. I mean,

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Speaker 1: it takes a process and is the best not weapon,

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Speaker 1: but best strategy of the president's supporters to just stress

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Speaker 1: things out by a day here, a week here, a

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Speaker 1: weekend there. It's a good question, Tom, but I don't

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Speaker 1: know how they do that. If Democrats seem to think

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Speaker 1: they already have a majority in the House and that's

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Speaker 1: what they need to pass this along to the Senate.

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Speaker 1: So they'll just need a majority um one day once

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Speaker 1: they dropped the article of impeachment, and so that will

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Speaker 1: so Republican delay tactics, Um, whatever it may be, it's

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Speaker 1: still going to land in the Senate. Well, no, I'm sorry,

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Speaker 1: I mean Lindsey, Tom does this. He stamps all out

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Speaker 1: with the guests, and then they don't completely Thank you

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Speaker 1: so much. We look forward to seeing you in London

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Speaker 1: with shadow House. Uh this morning, I'm looking at the

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Speaker 1: it might have been a vital conclusion. It was. I'm sorry,

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Speaker 1: it's Friday, give me a break. I'm focused on arsenal

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Speaker 1: menu Monday. Why don't you bring in the woman who

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Speaker 1: writes beautifully terst notes for Rabbo Bank. She has fantastic

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Speaker 1: to read. Name is Jane Foley, Rubber Bank ahead of

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Speaker 1: foreign exchange strategy. Do you wanting to us out of London? Jane,

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Speaker 1: great to have you with us. Let's just talk about

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Speaker 1: Michael Saunders, shall we the hawk at the Bank of

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Speaker 1: England turning very dovish your thoughts well, indeed he used

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Speaker 1: to be a hawk and this is why perhaps his

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Speaker 1: case comments are really even more devish tone than if

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Speaker 1: any any of the other members of the Bank of

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Speaker 1: England were to say this now of course what he

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Speaker 1: is or what the Bank of England official guidance have said.

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Speaker 1: And and this has printed even just a few weeks ago.

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Speaker 1: In the last policy meeting, was even on a on

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Speaker 1: a on a smooth brexit, even if a deal was done, well,

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Speaker 1: we could see an interest rate hike, and that would

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Speaker 1: be because there would be an unleashing of demand. And

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Speaker 1: what Saunders this saying is that global growth or softwa

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Speaker 1: global growth is actually opening up, but he says a

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Speaker 1: modest amount of spare capacity, So he is basically saying

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Speaker 1: that the headwinds to growth probably mean that even on

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Speaker 1: a smooth and Brexit now we would probably see an

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Speaker 1: interest rate cut. Another money market, of course, had already

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Speaker 1: been pricing that in, but his comments did reinforce that move,

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Speaker 1: so the market began to think, well, perhaps we will

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Speaker 1: see the interest rate cut by maybe the middle of

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Speaker 1: next year. Jane, what are your thoughts on that economic

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Speaker 1: argument that we had a supply side problem for the

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Speaker 1: last three years. That was the basic argument of the

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Speaker 1: Bank of England that the rate of acceleration, the rate

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Speaker 1: of where we limit out in the United Kingdom, has

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Speaker 1: come lower, and therefore you don't need much demand to

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Speaker 1: bump up against supply constraints. Therefore rates need to go

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Speaker 1: up a little bit. That used to be the argument, Jane,

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Speaker 1: what's changed. What's changed is of course really Germany and

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Speaker 1: the global economy. I mean, if we look back to

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Speaker 1: the year of the referendum twenty sixteen, and if we

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Speaker 1: go into seventeen, what we saw in seventeen was the

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Speaker 1: backdrop in the Eurozone being far better than expected, the

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Speaker 1: political outcomes and saying the French election that were better

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Speaker 1: than expected, that we didn't have this rise of populism

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Speaker 1: that many people have assumed. The growth data almost from

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Speaker 1: the first to January were coming in much better than

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Speaker 1: the spected. So, if you like, the better the better

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Speaker 1: backdrop in the US, and particularly with respect to growth,

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Speaker 1: was was protecting the UK economy. It was it was

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Speaker 1: given allowing all boats to rise, if if you like.

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Speaker 1: And now of course we have the opposite. We've got

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Speaker 1: the German industrial sceptor in recession markets talking about the

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Speaker 1: German economy that potentially being close to fall in into recession.

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Speaker 1: Peer my data across the Eurozone they've been falling low

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Speaker 1: enough for almost two years. So that is not a

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Speaker 1: very pretty backdop and that of course comes against the

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Speaker 1: bigger global backdop or slow down in China, slow and

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Speaker 1: global growth. And and therefore, can you get the UK

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Speaker 1: economy to self sustaining if you like, behave in a

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Speaker 1: way that we need an interest rate hike when all

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Speaker 1: of these global headwinds the wrong direct. Jane Woods. So

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Speaker 1: scary about your research is you'll always have a chart

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Speaker 1: where you can extrapolate it worldwide. You do that with

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Speaker 1: New Zealand. You have a spectacular chart wondering if quantitative

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Speaker 1: easing in New Zealand needs to house price inflation. Let's

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Speaker 1: take that globally and it goes right into the repo

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Speaker 1: debate here in the United States. Does Jane flow folly

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Speaker 1: in The team at Rabble Bank figured out that a

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Speaker 1: Quei expansion actually reflates an economy. Can can you state that? Well,

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Speaker 1: you know, this is interesting because I think you can

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Speaker 1: definitely see signs of this. I mean, of course they

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Speaker 1: have a news contitutes in New Zealand yet, but they

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Speaker 1: have got very low interest rates for the New Zealand economy.

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Speaker 1: And this is the same, of course, for for all

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Speaker 1: developed economies. And you can look at you can look

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Speaker 1: at um various parts of the globe. Look at Germany,

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Speaker 1: you can look at parts of Canada, you can at

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Speaker 1: New Zealand, Australia, you can look at Sweden, um and

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Speaker 1: all of these countries London have inflated house prices and

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Speaker 1: this of course is something which many central bankers have denied.

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Speaker 1: Central bankers exactly, they're all saying no, and you're saying,

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Speaker 1: wait a minute, well, you know some of the smaller

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Speaker 1: central bankers haven't denied it. This is interesting if you

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Speaker 1: got up to Scandinavia, if you look at Sweden when

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Speaker 1: they do talk about this more openly, they are concerned

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Speaker 1: about the impact of house prices. And it's not Hans

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Speaker 1: passes per Sae. It's basically when people chase young people

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Speaker 1: who haven't had a house before, if they chase house

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Speaker 1: prices higher, they end up with an awful lot of

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Speaker 1: household debt. And of course this is a real concern.

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Speaker 1: If this begins tip over, that's the real concern. And

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Speaker 1: also it's inequality, and of course we are here in

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Speaker 1: an awful lot more about in equality of asset prices

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Speaker 1: go higher, of course, not the and not the not

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Speaker 1: the people say, there are so many aspects of this.

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Speaker 1: And I think now if we go into another round

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Speaker 1: of contenta using from maybe cuentral banks like New Zealand

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Speaker 1: or Australia where they haven't used it before, perhaps they're

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Speaker 1: more aware of these potentials. I mean, this is brilliant

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Speaker 1: and John ross Cast which you mentioned this today. In

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Speaker 1: his Travels with Black Rock, he says the Chase Field

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Speaker 1: now is the story. Being in a news conference with

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Speaker 1: Governor Carne and he was asked about the housing bubble

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Speaker 1: and the United Kingdom, and it was in London where

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Speaker 1: things were really blowing up. It was in and around

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Speaker 1: that's when you have the four bedrooms in Kensington, I

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Speaker 1: wish and Jane, and you might remember this line as well.

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Speaker 1: Governor Carney turned around and I remember being in the

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Speaker 1: room and he said, we don't set monetary policy for

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Speaker 1: inside the circle line. And essentially what he was saying

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Speaker 1: is that if there was a problem, he's in London

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Speaker 1: and it wasn't their problem. And Jane, these are the

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Speaker 1: kind of things that I actually hear from monetary policymakers

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Speaker 1: sometimes that they focused on the broader story and these

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Speaker 1: pockets of risk taking that they don't think a systemic

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Speaker 1: They just assume it's not their problem. Jane, what do

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Speaker 1: you make of that approach? Well, I think really what

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Speaker 1: we know about monetary policy and whether or not there's

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Speaker 1: is contituvising or interestrate policy, is that it is a

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Speaker 1: blunt tool. And if you use a blunt tool then

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Speaker 1: you are I'm will like you to have you know,

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Speaker 1: these decide effects. So we have seen in some countries,

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Speaker 1: Australia being one of them, Canada another one where they

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Speaker 1: have used macro potential measures and these was perhaps to

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Speaker 1: control some of the side effects of the quantity of

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Speaker 1: these and so for instance, it was in Canada they

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Speaker 1: were making it so that it was more difficult to

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Speaker 1: get a big mortgage and this is really the effect

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Speaker 1: of maco potential in other countries too, So there was

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Speaker 1: a side effect in so far as wealth or as

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Speaker 1: the paces rather were expanded, people were chasing those house

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Speaker 1: prices higher and then it was like, well, actually you

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Speaker 1: can't have the mortgage, so you cannot chase the house

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Speaker 1: price higher. And that was designed to give some control

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Speaker 1: over the pace of acceleration of house places. But ultimately,

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Speaker 1: again we do have to turn our attention back to

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Speaker 1: governments and what does government policy going to do to

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Speaker 1: try and contain some of these side effects of monetary

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Speaker 1: policy or indeed in in in countries such as Germany

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Speaker 1: or countries such as New Zealand Australia, what is the

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Speaker 1: government going to do to be able to fine tune

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Speaker 1: the stimulus to where we need it without relying much

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Speaker 1: on the on the on the very on the tools

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Speaker 1: of monetary policy. Um, you're very blood Jane. Great to

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Speaker 1: catch up with you. Jane Fluddy really fourful staff for

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Speaker 1: Rather Bankhead of Effect Strategy. Thanks for listening to the

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Speaker 1: Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,

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00:27:15,040 --> 00:27:19,240
Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at

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Speaker 1: Tom Keene before the podcast. You can always catch us worldwide.

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Speaker 1: I'm Bloomberg Radio