Speaker 1: Ye. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene
Speaker 1: Jay Lee. We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg for me,
Speaker 1: front and center. How do you handicap so many of
Speaker 1: these big political issues? The headline coming from the team
Speaker 1: over at black Rock and Russ Coast Trick, as follows,
Speaker 1: The biggest risks are the hardest to quantify, trade friction, Brexit,
Speaker 1: and US twenty elections. Black Rocks, Russ Coast Rick joining
Speaker 1: me around the table right now, can monitor RUSS Good morning.
Speaker 1: What do you do with that? That's your line? What
Speaker 1: on earth do you do with it? I think all
Speaker 1: you can do is try to think about the link
Speaker 1: from the policy to what it may mean in the
Speaker 1: real account. I mean, and some of these is too
Speaker 1: far out. We can't really handicap that thousand twenty election.
Speaker 1: The trade we're dealing with in real time, and what
Speaker 1: we do know is that you've probably put the manufacturing
Speaker 1: sector in a mode recession. Thankfully, so far, that has
Speaker 1: not leaked over to the households sector, which is why
Speaker 1: I think the economy is in decent shape. CNBC reporting
Speaker 1: in the last twenty four hours those talks will commence,
Speaker 1: I believe October tenth, going into October eleventh. Rus. How
Speaker 1: hopeful are you the president talking up the prospect of
Speaker 1: a deal. It's getting closer, forever closer. I think at
Speaker 1: this point, you know, most investors will be happy with
Speaker 1: a true snodded deal. You know. The reality is a
Speaker 1: lot of these issues, particularly around technology, intellectual property, state sponsorship,
Speaker 1: These go to the core of the Chinese financial model.
Speaker 1: I don't think many people expect a long lasting deal.
Speaker 1: What people would like to see is a d escalation
Speaker 1: of the tension, perhaps a rollback of some of the
Speaker 1: recent tariffs, and that this just goes to simmer for
Speaker 1: a while and it is off of the boil. Another
Speaker 1: company that would love to see that, and it's micro
Speaker 1: On the chip maker, releasing garnings and the forecast for
Speaker 1: profit really not good at all. The forecast for profit
Speaker 1: damaged by the trade tension. That the stock down by
Speaker 1: five point eight six percent in early trade in this morning.
Speaker 1: The damage is being done. Whether you look at the
Speaker 1: Micron profit forecast whether you look at the economic confidence
Speaker 1: in Europe this morning for the euro Zone a four
Speaker 1: year low. Is that what you just continue to see
Speaker 1: as well rust in the not too distant future, just
Speaker 1: a drip feed of more negative economic data. Jean, I
Speaker 1: think you you expressed exactly in the right way. Some
Speaker 1: damage has already been down. And even if you you
Speaker 1: get a temporary truce, you know, if you're a CEO,
Speaker 1: you're a CFO, you're thinking about your next large cap
Speaker 1: on investment, You're think about where to build a factory.
Speaker 1: Even if you have a temporary cessation of the friction,
Speaker 1: it is very hard to have a lot of confidence
Speaker 1: about that next decision, which means a lot of this
Speaker 1: is getting put off. We've had a lot of volatility
Speaker 1: in between, but to your point, stocks have done nothing
Speaker 1: for eighteen months for us to have a high conviction
Speaker 1: call at the moment in this market, I think the
Speaker 1: high conviction call is there are segments of the market,
Speaker 1: and I think technology has been one the US household set.
Speaker 1: There's another where you've seen companies be able to generate,
Speaker 1: you know, phenomenal cash flow growth, maintain very high margins
Speaker 1: despite all the uncertainty. So we're looking for those fast rivers.
Speaker 1: We've been raising our weighting technology, We've been raising our
Speaker 1: way to US consumer names because we do think up
Speaker 1: that we're not going to see a recession and these
Speaker 1: names can continue to grow even with the uncertainty. What
Speaker 1: do you hear from people. One of the great affinities
Speaker 1: of US costUS your first rate academics, and you actually
Speaker 1: go out and talk to a lot of people as well.
Speaker 1: If we're very rangebone right now, what's the mood on
Speaker 1: which way we range is, particularly in the equity markets.
Speaker 1: Is it just an assumption that we're waiting for news
Speaker 1: and then we break higher. I think most people probably,
Speaker 1: you know, when you speak to individual investors, you speak
Speaker 1: to advisors, they're nervous, and if anything, I think the
Speaker 1: break higher would be the surprise. People were worried about trade,
Speaker 1: they're worried about Briggs, that they're worried about US politics again,
Speaker 1: all these things that are very hard to quantify, and
Speaker 1: everyone still has a very fresh memory of not only
Speaker 1: two thousand and eight, of last December. You know that
Speaker 1: very sharp, abrupt, near near bear market in stocks has
Speaker 1: left people nervous about these quick flash crashes that can
Speaker 1: take stocks down and rust an economy that's at still
Speaker 1: speed are caught up with pincome. In the last twenty
Speaker 1: four hours, you just put out that cyclical outlook going
Speaker 1: into they're looking for one percent GDP growth in the
Speaker 1: United States. In are we prepared for one percent GDP
Speaker 1: growth in America? I think we would be a bit
Speaker 1: more constructive if you have one percent growth, and I
Speaker 1: do think you're going to have some more volatility in
Speaker 1: stocks because the earnings estimates for two thousand, twenty ten
Speaker 1: percent growth are gonna be very hard to hit. Any
Speaker 1: one percent real GDP environment, we'd be a bit more constructive.
Speaker 1: I think you're decelerating towards trend, maybe a bit below,
Speaker 1: but to my mind, that's still closer to two than
Speaker 1: to one percent. Link your world with nominal GDP. If
Speaker 1: we get a dampening or stability but sub pardominal GDP,
Speaker 1: how does it fold into revenues then down the statement
Speaker 1: to earnings. It means that your revenue growth the aggregate
Speaker 1: is constrained. And this goes back to my point about
Speaker 1: fast rivers a cash flow. I think it does mean
Speaker 1: that investors like that just account who you know, this
Speaker 1: is what the the the dynamic has been really for
Speaker 1: the whole post crisis environment. You don't have that tailwind
Speaker 1: a faster nominal GDP growth. So the question is which
Speaker 1: companies are in segments of the market that can generate
Speaker 1: top line growth in raise margins, and those are the
Speaker 1: companies that can command that premium on their multiple Where
Speaker 1: do you find them? What's sancta I'd say you find
Speaker 1: them in technology. You find them in software, you find
Speaker 1: them in segments of the consumer. You know, segment. We're
Speaker 1: talking about a lot of gloom and doom. One thing
Speaker 1: it's worth bringing up is that a household sector is
Speaker 1: in decent shape. You've got healthy growth and disposable income.
Speaker 1: You've got healthy growth and disposable income among parts of
Speaker 1: the household sector that have the greatest propensity to spend,
Speaker 1: savings is up. Disposable income relative to dead is up.
Speaker 1: You know, if you don't have something blow up on trade.
Speaker 1: Our view as the household sector is in good shape
Speaker 1: right now. Jonathan Golobert Credit Swaste has got a decent
Speaker 1: take on this as well. The culprit at the moment
Speaker 1: that everyone is blaming for decelerating GDP is quite clearly
Speaker 1: the trade tension, and this is a quote that came
Speaker 1: from the team at Credit Swiss yesterday. By contrast, the
Speaker 1: data shows that eighteen stimulus driven above trend economy is
Speaker 1: now mean reverting, weaken non recessionary economic should limit stock
Speaker 1: returns until the data shows sign to bottoming. So I
Speaker 1: guess that the one trillion dollar question is when do
Speaker 1: we start to see signs of bottoming in this decellaring,
Speaker 1: de sturating data worldwide. Rus So, I actually think there
Speaker 1: is an answer to that, and my guess is that
Speaker 1: you will start to see some stabilization in early two
Speaker 1: thousand twenty. And the reason I say that is one
Speaker 1: thing that has gone right and why stocks have had
Speaker 1: you know, what has still a relatively good year is
Speaker 1: that central banks pivoted early in the year. And when
Speaker 1: you think about that lag between monetary accommodation of the
Speaker 1: real economy, it's six to nine months. So that tells
Speaker 1: me as we get to the end of the year,
Speaker 1: we should start to see some signs of stabilization. Very
Speaker 1: good Risk Coasters, Thank you so much. Thanks briefing as well.
Speaker 1: Always interesting as we talked to Global Wall Street. When
Speaker 1: a major bank makes major changes, it has been a
Speaker 1: train wrecord well as far ago. There's no other way
Speaker 1: to put it. And within all that is the history
Speaker 1: of the bank John Farrell Crocker National, first Interstate Bank
Speaker 1: of North America, first Security, meeting with Northwest, and finally
Speaker 1: pulling in from the Deep South, the venerable Wacovia Bank.
Speaker 1: And you distill it all into what John Stump rod.
Speaker 1: I was on stage with Mr Stump days weeks before
Speaker 1: he was shown the door, and it has been basically,
Speaker 1: I'm going to say what four years of chaos? Three
Speaker 1: years of chaos him slam was the follow up act
Speaker 1: when you went over to Wells Fargo. Did you sit
Speaker 1: in the stage coach over in third Avenue? I haven't
Speaker 1: seen the stitch coach. Is that how you get to
Speaker 1: work in the morning? That's how they used to get
Speaker 1: to work. It is a venerable name. Boy, is it troubled?
Speaker 1: Glimpo finance reporter Shanali Bassett dropping by the studio to
Speaker 1: catch out with us. Wells Farco does indeed have a
Speaker 1: new CEO? Talked to me about the new man at
Speaker 1: the top, Shinale. It's crazy. Charlie Sharp has only been
Speaker 1: at the top of Bank of New York Melon for
Speaker 1: about two years, and now he's making his next big
Speaker 1: move to Wells Fargo. Much harder story to clean up. Uh,
Speaker 1: you know a point that we had made earlier. Interestingly,
Speaker 1: he's had a lot of experience with the regulators also,
Speaker 1: I mean, he was one of the bank CEOs that
Speaker 1: was down in Washington earlier this year. Um, and so
Speaker 1: he's going to be a very interesting choice to see
Speaker 1: how he how he deals with the rest of the
Speaker 1: regulatory issues. To clean a pact, it's a long list.
Speaker 1: What's it the top? Well, my goodness. Well, first of all,
Speaker 1: maybe the Fed's asset cap Wells Fargo cannot grow because
Speaker 1: the Feds said it cannot after so many issues that
Speaker 1: it had in terms of the fake account scandal. So
Speaker 1: told me about what he has to do that they
Speaker 1: can get that lifted, to get that lifted, to make sure.
Speaker 1: So remember Wells Fargo, this is an outsider for the
Speaker 1: first time running the bank, John Stump, Tim Sloan. We
Speaker 1: had people who and even Alan Parker, the General Council,
Speaker 1: who was a lawyer by training, but still you know,
Speaker 1: seen as part of the inside of the bank. To
Speaker 1: clean up a culture is a difficult thing to prove
Speaker 1: that you can do. And so Charles Sharf may bring
Speaker 1: in more people, right, that's one big thing he might do.
Speaker 1: And then he also has to show that he can
Speaker 1: turn around how fundamentally the bank behaves and how it
Speaker 1: treats customers. The legacy of this and this goes back
Speaker 1: to Sandy Wells. Saw him on with Marie the other day.
Speaker 1: Is good to see Mr wild out And about is
Speaker 1: James Diamond was thrown out to bank one off of
Speaker 1: commercial credit. He had a assistance and one of them
Speaker 1: was the young young intern who is now going to
Speaker 1: take over Wells Fargo. And along the way this guy
Speaker 1: ran am I correct, he ran retail for James Diamond
Speaker 1: a chase and I think they did pretty well. Is
Speaker 1: he gonna JP morganize Wells Fargo? I mean that's certainly
Speaker 1: a thing to think, right, Well, well, what's the board think?
Speaker 1: What's the board think? Well? Remember Wells Fargo on like
Speaker 1: JP Morgan, Wells Fargo is primarily a consumer bank. So
Speaker 1: when you say JP Morgan, you also think about sales
Speaker 1: and trading and invest in banking and all of these
Speaker 1: other things. I think, and it's Wells Fargo does have
Speaker 1: all of that, but primarily cleaning up the consumer businesses
Speaker 1: is what he's going to have to do. So JP
Speaker 1: morganized JP Morgan is the new financial supermarket, right, it's
Speaker 1: the it's it's everything to everybody. So making it that
Speaker 1: is not really the game here, it's cleaning it up psychologically.
Speaker 1: Where is the center of wells Fargo? I mean we
Speaker 1: you know, the heritage of this John is a pony
Speaker 1: Express in the stage courch which they rand with going
Speaker 1: from St. Louis West, you know, chased by Indians. I mean,
Speaker 1: you know, it's part of the fabric of our history
Speaker 1: as well as Fargo is a huge deal, the Pony Express. Yeah,
Speaker 1: but you know, some of its mythology and some of
Speaker 1: it's actually accurate. But but Shannale, we're psychologically I mean
Speaker 1: JP Morgan New York Park Avenue, Yeah, you're asking. Well.
Speaker 1: Well as Fargo is based in San Francisco, right, so
Speaker 1: it's a San Francisco bank, remember after Wacovia. Also they
Speaker 1: have deep roots in the South as well, and so
Speaker 1: again not like JP Morgan, which has this huge global
Speaker 1: expansion plan, this is America's bank, right, and what he
Speaker 1: has to deal with is mortgages. To Americans across the country. Right,
Speaker 1: that's a very different thing from where he was just
Speaker 1: at Bank of New York, Melon, which is it's it's custody,
Speaker 1: it's clearing services. It's really much more plumbing of the
Speaker 1: financial system. Let's go bank to the beginning of this conversation,
Speaker 1: the cap on their ability to grow, their ability to
Speaker 1: remove that cap and then grow. Let's pretend the captadn't exists.
Speaker 1: How easy would it be to get this company grunning again? Well,
Speaker 1: I mean it's really it's not easy, right, not easy.
Speaker 1: It's definitely a catch up game. Here. You have the
Speaker 1: biggest growing faster, JP Morgan, Goldman Sacks, Goldman Sacks getting
Speaker 1: into Wells Fargo's businesses with the consumer, and so how
Speaker 1: do you catch up to that when you do have
Speaker 1: all these regulatory problems? I'm not sure. Does he clean house?
Speaker 1: You know, I know it's really possible twenty or thirty people?
Speaker 1: Does he bring him from B and Y Melon? Or
Speaker 1: does he what's he doing? Or can I tell you something?
Speaker 1: Let alone by Melon? What about JP Morgan? Is he
Speaker 1: going to go back to his old shop and say, hey,
Speaker 1: I need you guys to help me here. Shelly bassk.
Speaker 1: Thank you so much, correspondent John, that's a bit of
Speaker 1: news doesn't shake. So she goes she's breaking and just
Speaker 1: scrunning around the news room. Yeah, all that. Lindsay Newman
Speaker 1: is in London with Chatham House US and America's Program
Speaker 1: Senior Research Fellow. When she was at Yale a few
Speaker 1: years ago there was partisan divide of the nineteenth century.
Speaker 1: Where were doing it right now? And she brilliantly captures
Speaker 1: it this morning in a note on all we've observed
Speaker 1: in Washington as well. I lead with that Lindsay an
Speaker 1: hour and a half ago with our Kevin Siilli and
Speaker 1: that I'm fascinated how the Senate Republicans, led by McConnell
Speaker 1: of Kentucky, how they actually adapt to fact an opinion,
Speaker 1: given this modern partisan did divide, What will you look
Speaker 1: for from Senator McConnell. Well, first of all, thank you
Speaker 1: for having me on. And it's very kind of you
Speaker 1: to say it was just a few years ago I
Speaker 1: was at Yale, But thank you, thank you very much. Um. So,
Speaker 1: you know, right now we've seen the whist Whistleblow report
Speaker 1: as well as the TRANSPAP. We're getting a more complete
Speaker 1: picture of sort of the background of what will likely
Speaker 1: form the basis of this formal impeachment inquiry that Pelosi
Speaker 1: has authorized as of Tuesday. UM. Interesting the overnight a
Speaker 1: lot of Senate Republicans were saying they hadn't had yet
Speaker 1: had time to read the repair the whistleblower report. UM.
Speaker 1: But what we're looking for is and you know, so
Speaker 1: far they're all just saying at most that it's troubling. UM.
Speaker 1: But as sort of we've seen pulling around public appetite
Speaker 1: shifting perhaps up about to the highest levels UM during
Speaker 1: the presidency towards impeachment. Will this prospect of an impeachment
Speaker 1: inquiry going forward not just through the House but to
Speaker 1: the Senate UM, and all the details that are propped
Speaker 1: going to come out right before election? UM? In fact,
Speaker 1: will that push them to have a more tempered view
Speaker 1: and pull back some of that unmitigated support that they
Speaker 1: continued to give trumpet this I was thunderstruck yesterday by
Speaker 1: the difference between Lieutenant Mueller, who served heroically in the
Speaker 1: his leadership was acclaimed as a frontline lieutenant in Vietnam,
Speaker 1: and the way he was treated by Republicans versus the
Speaker 1: Vice Admiral Yesterday you know, with his leadership across any
Speaker 1: number of duties, with the Seals, where the Republicans are
Speaker 1: almost at the point where they can't posture the postures
Speaker 1: of the last three years. Have they run out of
Speaker 1: gas with this impeachment process or do you look for
Speaker 1: them to coalesce and defend their president. You know, it's
Speaker 1: certainly going to be a bit of mix of both. Um,
Speaker 1: there will certainly be those who continue to support President Trump.
Speaker 1: But right now the information that's come out, between the
Speaker 1: Whistleblow Report and the transcript there everybody is sort of
Speaker 1: trying to digest this information. Um, what's what's what is
Speaker 1: you know, troubling to take the Republican word here? Is
Speaker 1: that the whistle Blow report, you know you're hearing, are
Speaker 1: we going to find a smoking gun? And and this
Speaker 1: is all just living linguistics and language. But what it
Speaker 1: does provide, first and foremost is a roadmap. And in particular,
Speaker 1: it's a roadmap that includes details that are already corroborated
Speaker 1: by the transcript, not the least of which is information
Speaker 1: around you know, encouraging further investigation into crowds, right, encouraging
Speaker 1: this further investigation into Biden encouraging working with Giuliani and
Speaker 1: and the Attorney General bar all of which we we
Speaker 1: saw in in fact, in the transcript of the White
Speaker 1: House ultimately released. Lindsay, are we dealing with any legal
Speaker 1: issues here or purely political issues? Question? Really? Smart? Well,
Speaker 1: that that is an excellent question. And when we when
Speaker 1: we talk about impeachment, you know, we all have to
Speaker 1: remember impeachable offenses are treason, bribery, and the high crimes
Speaker 1: and misdemeanors. And President Gerald Ford so family famously said
Speaker 1: high crimes and misdemeanors are just really whatever the House
Speaker 1: of Representatives of the day thinks that they are. But
Speaker 1: what we we're talking about with high crimes and misdemeanors,
Speaker 1: and I think that's where um, the Democrats House Democrats
Speaker 1: are going to be focusing their attention as we're talking
Speaker 1: about a abuse of trust, abuse of office, unbecoming conduct
Speaker 1: um And there's that's quite a large bucket. The founding
Speaker 1: fathers of the Constitution intended it to be quite a
Speaker 1: large bucket that official presidential and particular behavior could could
Speaker 1: be captured by Lindsay, these are actually reactions, of course,
Speaker 1: that the Democrats have been throwing at the president since
Speaker 1: really since day one, there is a concern among money
Speaker 1: that they've spent so much political capital in doing so
Speaker 1: that they're going to struggle to bring the public along
Speaker 1: this time around. How do you think that's going to
Speaker 1: play out? So they're two key stories. The first is
Speaker 1: the public sentiment one, which is the one that you're
Speaker 1: alluding to and I mentioned earlier, which we're starting to
Speaker 1: see is very very prepliminary. But polling that's been done
Speaker 1: since Pelose you meet her announcement has suggested that public
Speaker 1: sentiment is inching towards impeachment. Now there does seem to
Speaker 1: be the second part of the story still partisan divide. Right,
Speaker 1: it's still very low amongst Republicans, something you know in
Speaker 1: the just single high single digits into the low double
Speaker 1: digits um. But the partisan divide issue is key because
Speaker 1: Democrats want to move quickly on this, because they don't
Speaker 1: want this dragging through taking up all of the attention
Speaker 1: um because ultimately, you know, some of the potential um
Speaker 1: individuals who are gonna lose us from this, or anybody
Speaker 1: whose name is not Biden and Warren who are front
Speaker 1: running the Democratic side right now, because the attention moves
Speaker 1: away from healthcare, it moves away from uh, immigration and
Speaker 1: gun control and all these issues that the you know,
Speaker 1: the vibrant Democratic field is dealing is you know, is
Speaker 1: raising and just get focused on impeachment. Obviously Biden um
Speaker 1: is coming out very strongly to address these issues. And
Speaker 1: then Warren, who's you know, who's surging in the polls.
Speaker 1: Let me be republican for a moment. Is a constructive
Speaker 1: plan here to just delay in a collegial way. I mean,
Speaker 1: it takes a process and is the best not weapon,
Speaker 1: but best strategy of the president's supporters to just stress
Speaker 1: things out by a day here, a week here, a
Speaker 1: weekend there. It's a good question, Tom, but I don't
Speaker 1: know how they do that. If Democrats seem to think
Speaker 1: they already have a majority in the House and that's
Speaker 1: what they need to pass this along to the Senate.
Speaker 1: So they'll just need a majority um one day once
Speaker 1: they dropped the article of impeachment, and so that will
Speaker 1: so Republican delay tactics, Um, whatever it may be, it's
Speaker 1: still going to land in the Senate. Well, no, I'm sorry,
Speaker 1: I mean Lindsey, Tom does this. He stamps all out
Speaker 1: with the guests, and then they don't completely Thank you
Speaker 1: so much. We look forward to seeing you in London
Speaker 1: with shadow House. Uh this morning, I'm looking at the
Speaker 1: it might have been a vital conclusion. It was. I'm sorry,
Speaker 1: it's Friday, give me a break. I'm focused on arsenal
Speaker 1: menu Monday. Why don't you bring in the woman who
Speaker 1: writes beautifully terst notes for Rabbo Bank. She has fantastic
Speaker 1: to read. Name is Jane Foley, Rubber Bank ahead of
Speaker 1: foreign exchange strategy. Do you wanting to us out of London? Jane,
Speaker 1: great to have you with us. Let's just talk about
Speaker 1: Michael Saunders, shall we the hawk at the Bank of
Speaker 1: England turning very dovish your thoughts well, indeed he used
Speaker 1: to be a hawk and this is why perhaps his
Speaker 1: case comments are really even more devish tone than if
Speaker 1: any any of the other members of the Bank of
Speaker 1: England were to say this now of course what he
Speaker 1: is or what the Bank of England official guidance have said.
Speaker 1: And and this has printed even just a few weeks ago.
Speaker 1: In the last policy meeting, was even on a on
Speaker 1: a on a smooth brexit, even if a deal was done, well,
Speaker 1: we could see an interest rate hike, and that would
Speaker 1: be because there would be an unleashing of demand. And
Speaker 1: what Saunders this saying is that global growth or softwa
Speaker 1: global growth is actually opening up, but he says a
Speaker 1: modest amount of spare capacity, So he is basically saying
Speaker 1: that the headwinds to growth probably mean that even on
Speaker 1: a smooth and Brexit now we would probably see an
Speaker 1: interest rate cut. Another money market, of course, had already
Speaker 1: been pricing that in, but his comments did reinforce that move,
Speaker 1: so the market began to think, well, perhaps we will
Speaker 1: see the interest rate cut by maybe the middle of
Speaker 1: next year. Jane, what are your thoughts on that economic
Speaker 1: argument that we had a supply side problem for the
Speaker 1: last three years. That was the basic argument of the
Speaker 1: Bank of England that the rate of acceleration, the rate
Speaker 1: of where we limit out in the United Kingdom, has
Speaker 1: come lower, and therefore you don't need much demand to
Speaker 1: bump up against supply constraints. Therefore rates need to go
Speaker 1: up a little bit. That used to be the argument, Jane,
Speaker 1: what's changed. What's changed is of course really Germany and
Speaker 1: the global economy. I mean, if we look back to
Speaker 1: the year of the referendum twenty sixteen, and if we
Speaker 1: go into seventeen, what we saw in seventeen was the
Speaker 1: backdrop in the Eurozone being far better than expected, the
Speaker 1: political outcomes and saying the French election that were better
Speaker 1: than expected, that we didn't have this rise of populism
Speaker 1: that many people have assumed. The growth data almost from
Speaker 1: the first to January were coming in much better than
Speaker 1: the spected. So, if you like, the better the better
Speaker 1: backdrop in the US, and particularly with respect to growth,
Speaker 1: was was protecting the UK economy. It was it was
Speaker 1: given allowing all boats to rise, if if you like.
Speaker 1: And now of course we have the opposite. We've got
Speaker 1: the German industrial sceptor in recession markets talking about the
Speaker 1: German economy that potentially being close to fall in into recession.
Speaker 1: Peer my data across the Eurozone they've been falling low
Speaker 1: enough for almost two years. So that is not a
Speaker 1: very pretty backdop and that of course comes against the
Speaker 1: bigger global backdop or slow down in China, slow and
Speaker 1: global growth. And and therefore, can you get the UK
Speaker 1: economy to self sustaining if you like, behave in a
Speaker 1: way that we need an interest rate hike when all
Speaker 1: of these global headwinds the wrong direct. Jane Woods. So
Speaker 1: scary about your research is you'll always have a chart
Speaker 1: where you can extrapolate it worldwide. You do that with
Speaker 1: New Zealand. You have a spectacular chart wondering if quantitative
Speaker 1: easing in New Zealand needs to house price inflation. Let's
Speaker 1: take that globally and it goes right into the repo
Speaker 1: debate here in the United States. Does Jane flow folly
Speaker 1: in The team at Rabble Bank figured out that a
Speaker 1: Quei expansion actually reflates an economy. Can can you state that? Well,
Speaker 1: you know, this is interesting because I think you can
Speaker 1: definitely see signs of this. I mean, of course they
Speaker 1: have a news contitutes in New Zealand yet, but they
Speaker 1: have got very low interest rates for the New Zealand economy.
Speaker 1: And this is the same, of course, for for all
Speaker 1: developed economies. And you can look at you can look
Speaker 1: at um various parts of the globe. Look at Germany,
Speaker 1: you can look at parts of Canada, you can at
Speaker 1: New Zealand, Australia, you can look at Sweden, um and
Speaker 1: all of these countries London have inflated house prices and
Speaker 1: this of course is something which many central bankers have denied.
Speaker 1: Central bankers exactly, they're all saying no, and you're saying,
Speaker 1: wait a minute, well, you know some of the smaller
Speaker 1: central bankers haven't denied it. This is interesting if you
Speaker 1: got up to Scandinavia, if you look at Sweden when
Speaker 1: they do talk about this more openly, they are concerned
Speaker 1: about the impact of house prices. And it's not Hans
Speaker 1: passes per Sae. It's basically when people chase young people
Speaker 1: who haven't had a house before, if they chase house
Speaker 1: prices higher, they end up with an awful lot of
Speaker 1: household debt. And of course this is a real concern.
Speaker 1: If this begins tip over, that's the real concern. And
Speaker 1: also it's inequality, and of course we are here in
Speaker 1: an awful lot more about in equality of asset prices
Speaker 1: go higher, of course, not the and not the not
Speaker 1: the people say, there are so many aspects of this.
Speaker 1: And I think now if we go into another round
Speaker 1: of contenta using from maybe cuentral banks like New Zealand
Speaker 1: or Australia where they haven't used it before, perhaps they're
Speaker 1: more aware of these potentials. I mean, this is brilliant
Speaker 1: and John ross Cast which you mentioned this today. In
Speaker 1: his Travels with Black Rock, he says the Chase Field
Speaker 1: now is the story. Being in a news conference with
Speaker 1: Governor Carne and he was asked about the housing bubble
Speaker 1: and the United Kingdom, and it was in London where
Speaker 1: things were really blowing up. It was in and around
Speaker 1: that's when you have the four bedrooms in Kensington, I
Speaker 1: wish and Jane, and you might remember this line as well.
Speaker 1: Governor Carney turned around and I remember being in the
Speaker 1: room and he said, we don't set monetary policy for
Speaker 1: inside the circle line. And essentially what he was saying
Speaker 1: is that if there was a problem, he's in London
Speaker 1: and it wasn't their problem. And Jane, these are the
Speaker 1: kind of things that I actually hear from monetary policymakers
Speaker 1: sometimes that they focused on the broader story and these
Speaker 1: pockets of risk taking that they don't think a systemic
Speaker 1: They just assume it's not their problem. Jane, what do
Speaker 1: you make of that approach? Well, I think really what
Speaker 1: we know about monetary policy and whether or not there's
Speaker 1: is contituvising or interestrate policy, is that it is a
Speaker 1: blunt tool. And if you use a blunt tool then
Speaker 1: you are I'm will like you to have you know,
Speaker 1: these decide effects. So we have seen in some countries,
Speaker 1: Australia being one of them, Canada another one where they
Speaker 1: have used macro potential measures and these was perhaps to
Speaker 1: control some of the side effects of the quantity of
Speaker 1: these and so for instance, it was in Canada they
Speaker 1: were making it so that it was more difficult to
Speaker 1: get a big mortgage and this is really the effect
Speaker 1: of maco potential in other countries too, So there was
Speaker 1: a side effect in so far as wealth or as
Speaker 1: the paces rather were expanded, people were chasing those house
Speaker 1: prices higher and then it was like, well, actually you
Speaker 1: can't have the mortgage, so you cannot chase the house
Speaker 1: price higher. And that was designed to give some control
Speaker 1: over the pace of acceleration of house places. But ultimately,
Speaker 1: again we do have to turn our attention back to
Speaker 1: governments and what does government policy going to do to
Speaker 1: try and contain some of these side effects of monetary
Speaker 1: policy or indeed in in in countries such as Germany
Speaker 1: or countries such as New Zealand Australia, what is the
Speaker 1: government going to do to be able to fine tune
Speaker 1: the stimulus to where we need it without relying much
Speaker 1: on the on the on the very on the tools
Speaker 1: of monetary policy. Um, you're very blood Jane. Great to
Speaker 1: catch up with you. Jane Fluddy really fourful staff for
Speaker 1: Rather Bankhead of Effect Strategy. Thanks for listening to the
Speaker 1: Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,
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Speaker 1: Tom Keene before the podcast. You can always catch us worldwide.
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