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Speaker 1: Hello, and welcome to Stephanomics, the podcast that brings the

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Speaker 1: global economy to you. This time last year, Stephanomics celebrated

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Speaker 1: the new year by asking some of Bloomberg's best and

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Speaker 1: brightest what we could expect the next twelve months to bring,

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Speaker 1: and we all completely failed to see what was coming.

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Speaker 1: I'm not going to let that put me off another attempt,

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Speaker 1: but I have taken the precaution of broadening the net

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Speaker 1: a bit. Hopefully this lot will be even better and

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Speaker 1: even brighter. We really do have a lot of firepower

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Speaker 1: gathered on this zoom call today here in London, Bloomberg

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Speaker 1: TVs pre eminent interviewer and correspondent at large, Francine Lacroix.

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Speaker 1: We also have Business Week's senior economic correspondent and columnist

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Speaker 1: Peter Ky, sitting in New York and dining in from Washington,

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Speaker 1: tom Orlick, well known to this podcast as Bloomberg's chief economist. Finally,

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Speaker 1: we have Sharon Chen. She's now in London, having just

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Speaker 1: joined Bloomberg Green, but until recently she was sitting in

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Speaker 1: the hot seat in China as Bloomberg's Beijing bureau chief.

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Speaker 1: Welcome to everyone, and thank you so much. For being here,

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Speaker 1: And I've already said we spent most of talking about

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Speaker 1: something that was barely on anyone's radar at the end

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Speaker 1: of the coronavirus. This is about looking ahead, not looking back.

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Speaker 1: But very briefly, I wanted to start by asking each

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Speaker 1: of you what the most memorable moment of was. I

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Speaker 1: guess in a year that professional and personal got far

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Speaker 1: too close together at times, it's hard to tell the difference,

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Speaker 1: but I was I guess I'm talking professionally here, Peter

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Speaker 1: Coy your most memorable moment, Well, Stephanie, you already said

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Speaker 1: that the coronavirus was the shark that took us all

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Speaker 1: by surprise. But my my biggest shark really was what

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Speaker 1: came after that, which was in the United States when

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Speaker 1: mask wearing, which scientists and doctors agree can help prevent

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Speaker 1: the spread of the coronavirus, became a political statement, and

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Speaker 1: not wearing a mask became a political statement where people

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Speaker 1: who sided with Donald Trump felt that wearing a mask

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Speaker 1: would somehow a slap in the President's face, and this

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Speaker 1: had incalculable consequences for the health of the American people

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Speaker 1: as well as the health of the US economy. So

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Speaker 1: many lives could have been saved, and so many dollars

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Speaker 1: of GDP could have been saved if only people had

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Speaker 1: socially distanced and worn masks religiously, I should say. On

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Speaker 1: on the positive, I think probably my surprise was just

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Speaker 1: how quickly governments stepped in with fiscal support for economies,

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Speaker 1: at least around the industrial countries, and the extent to

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Speaker 1: which it did cushion the blow for so many households.

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Speaker 1: We had a much smaller for hit on incomes by

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Speaker 1: and large, with some important exceptions, than the hit the

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Speaker 1: straightforward hit to the economy. So I guess that's the

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Speaker 1: slightly more positive side of the government response, which we

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Speaker 1: did actually see in the U S too, So that's

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Speaker 1: a glass half fall. Sharon said, the credit virus was

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Speaker 1: the obvious, It was made a lot of twenty memorable.

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Speaker 1: But what was the most distinctive moment for you? Yeah,

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Speaker 1: I mean for me, the moment that really stands out

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Speaker 1: was the day they locked down Wuhan. I mean it

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Speaker 1: was just incredible, like we had never experienced anything like that.

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Speaker 1: We couldn't really understand what was happening, that they would

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Speaker 1: just lockdown an entire city of millions of people, and

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Speaker 1: then they they extended that to the whole of Hubei,

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Speaker 1: which was more than fifty million people, and it was

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Speaker 1: just so difficult to comprehend what was happening. And that

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Speaker 1: was the moment it really hit home that you know,

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Speaker 1: this was serious and it was going to be the

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Speaker 1: major news story UM for the entire year. But other

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Speaker 1: than that, I mean, I think the most surprising thing

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Speaker 1: that happened was just recently in September, China coming out

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Speaker 1: and saying that, you know, they want to achieve net

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Speaker 1: zero carbon emissions by six it's the world's biggest carbon emitter.

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Speaker 1: And leading up to President Jijumping's announcement at the u

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Speaker 1: N you know, we had been getting a lot of

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Speaker 1: signals that China was prioritizing economic growth over its climate

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Speaker 1: commitments UM and since then we've seen UM eight out

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Speaker 1: of the ten major economies, biggest economies in the world

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Speaker 1: say they want to go to net zero as well.

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Speaker 1: You're right, that was a big, a big positive shot

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Speaker 1: we had in in in the autumn. Francine Loquax, I

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Speaker 1: think the you know it surprised me is actually after

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Speaker 1: ups and downs, is the fact that we believe Europe

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Speaker 1: is now forced for good. You know, if you think

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Speaker 1: back to late there was really possible political populism in Europe,

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Speaker 1: and if you take it to the which is really

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Speaker 1: hard hit by the COVID, you know, crisis, and you know,

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Speaker 1: you could also say really botch the pandemic response. It

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Speaker 1: now has more destined coronavirus of coronavirus in the UK.

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Speaker 1: It just feels a lot closer to Europe. But then

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Speaker 1: it did a your go back in twenty nineteen. I

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Speaker 1: don't know if you remember, but you know we had

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Speaker 1: then Mr Selvini saying that he felt closer to Moscow

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Speaker 1: than Brussels. And the majority of Italians now believe that

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Speaker 1: Europe will saved them because of the funds from the

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Speaker 1: recovery fund. Of course they still have to allocate the

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Speaker 1: money and to see whether it uses them wisely. But overall,

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Speaker 1: it was this European union unity in the face of Brexit,

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Speaker 1: in the face of COVID that I think I'll remember

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Speaker 1: for and despite these ups and downs, it showed that

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Speaker 1: actually Europe really does come together usually in times of crisis.

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Speaker 1: Just recently I had a headline jump out of me

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Speaker 1: a column by Ferdinando Giuliano and of Bloomberg that Italians

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Speaker 1: are starting to like the Germans UM, and that's probably

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Speaker 1: not also not a headline we would have expected to

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Speaker 1: see twelve months ago. Tom Wallick, so I wanted to

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Speaker 1: pick up on Peter's pessimism. UM, the failure of mask

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Speaker 1: wearing in the United States was really striking. I think

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Speaker 1: the failure of global coordination around the response to the

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Speaker 1: coronavirus crisis was also really striking. If there was ever

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Speaker 1: a moment for the global community to come together around

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Speaker 1: a medical response and an economic response, surely this was it, UM,

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Speaker 1: and that coordination has just really been notable by its absence. UM. Indeed,

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Speaker 1: if we think about the world's most important relationship, the

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Speaker 1: relationship between China and the United States, actually, over the

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Speaker 1: course of the COVID crisis, it's got markedly worse. One

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Speaker 1: thing that stuck out to me there was a moment

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Speaker 1: over the summer where there was a coordinated series of

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Speaker 1: speeches by senior US officials. We had Pompeo, the Secretary

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Speaker 1: of State, um Bar, the Attorney General, O'Brien, the National

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Speaker 1: Security Advisor, all coming out and in a coordinated way

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Speaker 1: taking a really aggressive swing at China and framing the

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Speaker 1: U S. China relations and ship not just as a

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Speaker 1: relationship of economic competition, but almost as a kind of

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Speaker 1: an existential struggle between democracy and a single party state,

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Speaker 1: between capitalism and a state dominated economy. Um And. I

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Speaker 1: find that really striking because until now, UM, those two

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Speaker 1: things have been kind of compartmentalized. Right. There's been a

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Speaker 1: view that even though there are some very important differences

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Speaker 1: between the US and the West and the and China

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Speaker 1: in terms of how society is organized, we can still

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Speaker 1: cooperate in terms of trade. Perhaps we can cooperate on

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Speaker 1: things like climate change. Um. And over the course of

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Speaker 1: the COVID year that seemed to change. And I think

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Speaker 1: it's going to be really interesting to see with the

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Speaker 1: Biden administration coming in how they manage tensions across that

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Speaker 1: broader range of subjects. Sharon turn you you mentioned that

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Speaker 1: the lockdown and Whan. I remember we've spoken to a

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Speaker 1: couple of times when you were engaging this year, once

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Speaker 1: when you had just returned from Wuhan and you were

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Speaker 1: going through quarantine having started at the center of this pandemic.

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Speaker 1: We look at China now, the rest of the world

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Speaker 1: looks at it and sees it coming out of this

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Speaker 1: pandemic apparently almost unscathed. It's the only large economy that

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Speaker 1: will grow this year, and the government, if anything, seems strengthened.

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Speaker 1: When you were in China, is that what it felt

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Speaker 1: like on the inside too, or has the system perhaps

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Speaker 1: been shaken in ways that we can't see. Yeah, I

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Speaker 1: mean I think that's generally right. When I left in October,

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Speaker 1: I mean, everything was back to normal, like hot pot

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Speaker 1: restaurants will packed, people eating, you know, sharing communal food, travel,

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Speaker 1: domestic travel was back in full swing. You know, it

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Speaker 1: really felt like life had returned to normal. And it

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Speaker 1: was even more stark when I landed in London and

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Speaker 1: it was like going back in time to the worst

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Speaker 1: of the pandemic in China. So I think in that sense,

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Speaker 1: you know, the economy really had has kind of gotten

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Speaker 1: back to where it was just in the day to

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Speaker 1: day kind of experience. And also, I think you're right

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Speaker 1: that the way the government handled the pandemic and then

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Speaker 1: how other governments outside China handled the pandemic really validated

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Speaker 1: the Chinese model for a lot of people inside China.

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Speaker 1: But I think that there are a lot of things

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Speaker 1: below the surface that have shaken the system. You know,

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Speaker 1: just like in every other country, the pandemic exacerbated in equality.

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Speaker 1: Millions of microworkers lost their jobs, those in the service

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Speaker 1: sector were hit extremely badly. I mean, that's the main

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Speaker 1: problem the government faces now is supporting those groups of people,

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Speaker 1: and in China that's on a massive scale. Um And

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Speaker 1: we also see how it's become more internationally isolated because

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Speaker 1: of the fallout from the pandemic, and all of that

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Speaker 1: is also going to affect the economy and people who

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Speaker 1: are dependent on exports and outside markets. Tom We've we've

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Speaker 1: got a lot of China expertise on this program. Rightly,

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Speaker 1: so because you lived many years in Beijing. Two looking ahead,

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Speaker 1: do you think one is the year when China could

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Speaker 1: solidate the games it's made in the last twelve months

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Speaker 1: from handling the virus so effectively. So so, China is

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Speaker 1: the only big economy which is going to grow this year.

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Speaker 1: We think they'll expand around two percent. Next year, we

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Speaker 1: think they'll grow around eight percent. So it's a kind

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Speaker 1: of it's an irony of the COVID crisis that a

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Speaker 1: problem which started in China in Wuhan as as Sharon

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Speaker 1: mentions is actually going to end with China closing the

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Speaker 1: gap in terms of g d P, in terms of

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Speaker 1: economic capacity with the United States. I was actually just

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Speaker 1: reading a big book about Putin and Putin's rule in Russia,

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Speaker 1: and one of the points the author makes was that

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Speaker 1: Putin was emboldened by the what he saw is the

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Speaker 1: failure of the United States in response to Hurricane Katrie

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Speaker 1: and how they didn't get ahead of that problem, and

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Speaker 1: that this really shook Putin's view of America. He thought,

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Speaker 1: God goodness, these guys, they're not any better than we

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Speaker 1: are dealing with problems. And so maybe I can play

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Speaker 1: a bit of a bigger role on the global stage.

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Speaker 1: And I wonder if we're going to see some of

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Speaker 1: that following the COVID crisis as well. China is going

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Speaker 1: to come out of this economically stronger, but they're also

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Speaker 1: going to come out of it emboldened with a sort

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Speaker 1: of stronger belief in the relative strength of their own model.

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Speaker 1: And how do you think China is viewing the Biden administration?

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Speaker 1: I mean, is this is it? Is it the end

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Speaker 1: of trade wars? I don't think so. Um, if we

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Speaker 1: go back to two thousand and one. That moment when

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Speaker 1: China joined the World Trade Organization. Part of the reason

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Speaker 1: why there was scope for kind of win win cooperation.

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Speaker 1: We give you a little bit, you give us a

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Speaker 1: little bit, and everyone's better off is big because China

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Speaker 1: was just so far behind in terms of the size

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Speaker 1: of its economy and the capacity of its economy. And

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Speaker 1: what we've seen in the last twenty years is that,

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Speaker 1: partly as a result of that w t O entry,

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Speaker 1: China has just accelerated up the global GDP rankings and

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Speaker 1: they're now you know, the US can feel their sort

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Speaker 1: of hot breath on their back. The kind of the

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Speaker 1: competition is real, it's visceral, and we've seen US public

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Speaker 1: opinion and global public opinion move very decisively against China.

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Speaker 1: And I think what that means is that the room

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Speaker 1: for maneuver for the Biden administration as they think about

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Speaker 1: ways to reset the relationship with China is just pretty limited.

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Speaker 1: Piece of coal. It's it's terrifying how long you've been

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Speaker 1: reporting on the global economy in the U s. Economy

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Speaker 1: for Business Week, more than thirty years. But if you

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Speaker 1: think of all the administrations you've seen come and go

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Speaker 1: looking at who's been announced for the Biden cabinet. Another

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Speaker 1: key positions we know he's inherited and incredibly difficult terrain.

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Speaker 1: How do you think the incoming president elect Biden is

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Speaker 1: hoping to spend his first hundred days and what do

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Speaker 1: you think could upset those plans? Of course, the tradition

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Speaker 1: of the first one hundred days is that at a

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Speaker 1: time when a new administration wants to hit the ground

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Speaker 1: running notch some early winds, establish its ability to get

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Speaker 1: things done, impressed people, and then maybe build on that.

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Speaker 1: And that's exactly what Biden has in mind. So he's

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Speaker 1: gonna first tackle the course the pandemic job number one.

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Speaker 1: He wants to encourage people to wear masks for the

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Speaker 1: first one days. He wants to have one hundred million

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Speaker 1: vaccines distributed in the first one hundred days. He wants

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Speaker 1: to rejoin the World Health Organization, which he can do unilaterally.

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Speaker 1: Beyond that, he's looking to rejoin the Paris Climate Accord,

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Speaker 1: which again he can do without anybody's permission. Re send

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Speaker 1: some of the rules blocking traveler immigration from Muslim majority nations,

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Speaker 1: again something within his power. Deal with some of the

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Speaker 1: asylum rules on the Mexican border. Uh. These are all

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Speaker 1: things that he can and will do early on and

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Speaker 1: maybe establish a new tone for the administration. Other things

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Speaker 1: are going to be much harder for him to do.

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Speaker 1: For example, we're barely struggling now to accomplish a new

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Speaker 1: coronavirus relief program. It's unlikely that a new Congress is

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Speaker 1: going to want to immediately give him another one. And

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Speaker 1: then we get into some of the real, uh, difficult issues,

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Speaker 1: like well, he wants to raise taxes on the rich,

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Speaker 1: he wants to raise the corporate income tax, he wants

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Speaker 1: a gigantic green investment program two trillion dollars. So he's

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Speaker 1: got his work cut out for him. So when we

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Speaker 1: think about foreign policy, you know, we've tended to say

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Speaker 1: it's a return to normalcy when it comes to the

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Speaker 1: US and the rest of the world. And Tony Lincoln,

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Speaker 1: the incoming Secretary of State, is very well known to

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Speaker 1: people and the rest of the world. But what surprises

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Speaker 1: do you think the rest of the world should look

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Speaker 1: out for. I mean, is this really going to be

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Speaker 1: back to the Obama Clinton type foreign policy or something different.

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Speaker 1: I think some of the personnel does go back to

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Speaker 1: Clinton in Obama, but the world has changed, and the

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Speaker 1: biggest changes the U S relationship with China, which other

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Speaker 1: people here on this call no more than I do.

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Speaker 1: But what I can say is that anybody who thinks

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Speaker 1: that relations with China going to clear right up now

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Speaker 1: that there's a new president are in for a big disappointment.

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Speaker 1: I mean, Tony Blincoln, the Secretary of State, Jake Sullivan

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Speaker 1: as National Security Advisor, have been fairly hawkish on China,

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Speaker 1: for up on the South China Sea, freedom of navigation operations,

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Speaker 1: of anything, the US will be prosecuting more of those

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Speaker 1: human rights as another example where Trump has pretty much

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Speaker 1: given the Chinese a pass on human rights, and yet

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Speaker 1: the US will under Blincoln, Sullivan and Biden of course,

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Speaker 1: will be pushing on Hong Kong as well as the

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Speaker 1: weakers in Western China. I think that there's there's going

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Speaker 1: to be a lot of stress in that relationship. We

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Speaker 1: spend a lot of time on China. We should, we

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Speaker 1: should get back to Europe. With Francine Loquix. Overall, you

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Speaker 1: spend a big chunk of most of your days talking

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Speaker 1: to senior business leaders and policymakers. What do you think

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Speaker 1: that the European elite if we can say that is

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Speaker 1: focused on For one, I mean there's a lot of

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Speaker 1: obviously a lot of countries that are still in renewed lockdown.

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Speaker 1: Do you think they are managing to lift their eyes

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Speaker 1: up from that or they just too caught up with

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Speaker 1: the COVID crisis still well stuff, And I feel like

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Speaker 1: they try and look up, and then every time they

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Speaker 1: try and look up, there's either you know, another lockdown

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Speaker 1: or some kind of stuff and start scenario. So they're

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Speaker 1: very focused on the recovery. There are probably two main

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Speaker 1: risks to Europe, you know, and to the outlaw forced

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Speaker 1: there's this path in the second wave of the pandemic

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Speaker 1: unclear to be honest for me where it goes, because

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Speaker 1: if you look at the effect of the rollout of

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Speaker 1: the vaccine, you know, I wouldn't underestimate the challenges of

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Speaker 1: delivering this to large waves of the population. And I

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Speaker 1: also would point to the fact that we still don't

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Speaker 1: know whether you can still pass it on. Even if

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Speaker 1: you get the vaccine on, then the recovery fund, I

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Speaker 1: think there's a real questions amongst newsmakers and chief executive

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Speaker 1: about where the money goes. So we have big words,

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Speaker 1: big ideas in Europe, the Deal and climate change. Marcal

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Speaker 1: also lately calling for this health union. But actually leaders

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Speaker 1: know that they need to be more aggressive in cutting

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Speaker 1: greenhouse gas emissions over the next decade. That's sure been stamped,

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Speaker 1: but for chief executives, they want to know where where

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Speaker 1: are these projects, where the money goes, and so what

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Speaker 1: they're worried about is that you have project but actually

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Speaker 1: the money gets squandered like it has in the past.

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Speaker 1: So I think the next six months is really make

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Speaker 1: or break. And the other thing very quickly solvency. And

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Speaker 1: Mario Druggi was talking about that is that if if

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Speaker 1: you know government programs run out one who do you

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Speaker 1: say for companies? And are you saving the wrong companies

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Speaker 1: that actually shouldn't be saved because of this huge transformation

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Speaker 1: of the economy. Well, and something that Mario Drugging when

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Speaker 1: he was ahead of the European Central Bank you ushould

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Speaker 1: talk about a lot was needing to have fiscal support

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Speaker 1: along with the monetary fiscal action. We did, as you

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Speaker 1: said at the start, we did see that this year

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Speaker 1: maybe with this Biggieu Recovery fund, we start to see

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Speaker 1: deeper collaboration risk sharing on the fiscal front among European economies.

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Speaker 1: What's going to determine whether that really happens over the

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Speaker 1: next year or so, that whether that grows or whether

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Speaker 1: it ends up being just a one off. So I

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Speaker 1: think the first six months of the Europe would probably

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Speaker 1: be a reckoning for Europe. A lot will the and

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Speaker 1: on how economy is fare next year, whether the solvency

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Speaker 1: crisis takes hold and then gives way to populous leaders

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Speaker 1: in Europe. If you look at the political dimension in Europe,

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Speaker 1: it should never be underestimated, especially when you're talking about Europe,

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Speaker 1: you know, coming more together. It's unclear where we land

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Speaker 1: post pandemic, so we have to really, you know, think

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Speaker 1: about that and not be too optimistic. Will probably have

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Speaker 1: an adjustment, We may have some unwinding of some of

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Speaker 1: the policies. But if you're you're optimist and you look

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Speaker 1: at the past and actually Europe does not really have

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Speaker 1: any undoing progress on the integration front apart from Brexit,

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Speaker 1: so you could be optimistic that you know, they're not

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Speaker 1: going to undo what they've done so far. Tom if

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Speaker 1: we step back from this and think about where the

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Speaker 1: where the world has headed economically in one I know

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Speaker 1: that your team has been pulling together. It's it's forecasts.

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Speaker 1: Briefly tell us what you're expecting, and I guess also

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Speaker 1: highlight what you think could go go right or wrong.

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Speaker 1: We're expecting growth for the global economy around five percent

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Speaker 1: next year, so pretty impressive rebound. It's not quite a

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Speaker 1: v UM, but it's substantial. It's a substantial portion of

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Speaker 1: the upswing of the v Within that, of course, drilling

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Speaker 1: into the country detail, people talk about comorbidity is making

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Speaker 1: the COVID virus more serious for individuals. There are also

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Speaker 1: some co morbidity ease that make the economic impact more

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Speaker 1: serious for different countries. UM Peter sort of already suggested it.

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Speaker 1: But there's the trust deficit in the United States, which

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Speaker 1: stymied the public health response and is going to deepen

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Speaker 1: the crisis and slow the recovery. UM In the UK

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Speaker 1: Brexit now approaching its end game. That combination of the

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Speaker 1: Brexit hit and the virus hit is going to be

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Speaker 1: a problem for the United Kingdom, and then in countries

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Speaker 1: like Italy with very high debt levels. Again some additional

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Speaker 1: burdens which are going to mean the recovery from the

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Speaker 1: COVID hit is lower than it otherwise would be. But

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Speaker 1: I wonder whether will be surprised by the speed of

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Speaker 1: the bounce back. In many economies, there is such a

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Speaker 1: maybe I'm just speaking personally, but this is such a

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Speaker 1: great desire to go back to normal and maybe even

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Speaker 1: double up on holidays and other things that one has

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Speaker 1: not been able to do. Um. There is a view

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Speaker 1: that says that that kind of bounce back could produce inflation.

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Speaker 1: What do you think? So, we see wide output gaps

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Speaker 1: as far as the I can see. And when you've

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Speaker 1: got a wide output gap, you've got resources which are

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Speaker 1: not being used, You've got people who wants lots of

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Speaker 1: spare capacity and um, and so you don't have inflation. UM.

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Speaker 1: So inflation is not in our view, It's not in

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Speaker 1: our two view, but that doesn't mean it isn't a risk.

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Speaker 1: We've got some powerful forces at work. We've got deglobalization,

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Speaker 1: which means that those cheap Chinese or Vietnamese imports which

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Speaker 1: have been dragging on prices and denting workers capacity to

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Speaker 1: negotiate for more money in the West. Um, that sort

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Speaker 1: of drag on inflation is going to be reduced. UM.

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Speaker 1: We've got more progressive politicians running for office and being

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Speaker 1: elected to office, potentially with policies like pushing up the

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Speaker 1: minimum wage, and perhaps, as you suggest, Stephanie, the economy

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Speaker 1: could just come roaring back more quickly than anyone imagines. Um,

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Speaker 1: So inflation is not in our forecast for two as

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Speaker 1: a substantial risk, Um, we might be wrong. If it

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Speaker 1: does come back, that's going to put central banks in

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Speaker 1: a very very difficult position there in this extraordinary spot

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Speaker 1: where they're essentially printing money to finance fiscal stimulus, and

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Speaker 1: they can do that because inflation is entirely subdued. As

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Speaker 1: soon as inflation starts to come back, they're going to

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Speaker 1: be in a very difficult position trying to balance and

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Speaker 1: find an impossible balance between their inflation fighting mandate and

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Speaker 1: their financial stability mandate. Well, Francine, I can exclusively revealed

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Speaker 1: that the head of the European Central Bank has a

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Speaker 1: serious soft spot for you. When Christine Legarde was head

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Speaker 1: of the IMF, still I was I saw her for

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Speaker 1: something else and I mentioned I was going to Bloomberg,

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Speaker 1: and she pulled. She sort of paused with this this

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Speaker 1: sort of look in her eye of joy, saying ah,

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Speaker 1: we're Francine loquise um. So you there's probably around the

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Speaker 1: globe before I think the best part of you know,

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Speaker 1: like two decades. It's definitely definitely gets a certain look

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Speaker 1: in her eyes when she thinks of you. But it

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Speaker 1: also results thankfully for Bloomberg and lots of great interviews,

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Speaker 1: and you had several with her this year. She's got

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Speaker 1: a big review of monetary policy coming, which got delayed

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Speaker 1: from it's going to be in the summer of twenty one.

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Speaker 1: We did have in the autumn of the Federal Reserves

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Speaker 1: review of monetary policy, which did make a difference, did

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Speaker 1: say that policy was going to be different over the

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Speaker 1: next few years in an effort to get inflation higher.

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Speaker 1: Do you think the European Central banks new framework could

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Speaker 1: make that kind of difference. I think I think it

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Speaker 1: could actually, And we've heard that from her, although it's

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Speaker 1: too seems to say, and we've heard it also from

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Speaker 1: Ali Rend. I love what Ali Ren said. He gave

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Speaker 1: a speech I think two or three weeks ago which

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Speaker 1: was very simple and powerful. He said why is the

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Speaker 1: strategy review so important? And he basically answered it by saying, well,

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Speaker 1: the simple answer is changed, especially the change in the

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Speaker 1: operating environment of monetary policy, and we sometimes forget when

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Speaker 1: we do this day and day out thinking about inflation,

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Speaker 1: how the world has changed right in the current environment

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Speaker 1: of low rates, negative demand sharks. The problem is, you know,

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Speaker 1: it could be but it could be quite rare that

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Speaker 1: it's too high inflation. It's at least more remote, and

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Speaker 1: so the problem is low inflation that's more relevant. And

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Speaker 1: so how do you ensure that inflation expectations will not

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Speaker 1: forever stay anchored at you know, too lower level. So

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Speaker 1: if you ask it through that prism, which is quite

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Speaker 1: quite simple but powerful, you can see something change at

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Speaker 1: the ECB next year. We should say, those are the

433
00:25:10,520 --> 00:25:13,240
Speaker 1: America listening who don't necessarily know who Ali Went is.

434
00:25:13,240 --> 00:25:15,280
Speaker 1: He's the governor of the Bank of Finland but was

435
00:25:15,320 --> 00:25:19,119
Speaker 1: also a senior official European Commission for a while. And

436
00:25:19,280 --> 00:25:22,159
Speaker 1: we journalss like him because he gives very engaging interviews

437
00:25:22,600 --> 00:25:25,479
Speaker 1: and a great football player, and he's of course he's

438
00:25:25,480 --> 00:25:28,280
Speaker 1: a great football paper where why wouldn't you be, um,

439
00:25:28,440 --> 00:25:31,000
Speaker 1: Sharon Chen, you your new job is working with this

440
00:25:31,440 --> 00:25:36,679
Speaker 1: new group Green and new publication within Bloomberg. How do

441
00:25:36,760 --> 00:25:41,560
Speaker 1: you think all the talk that we've had about climate

442
00:25:41,640 --> 00:25:46,480
Speaker 1: change and people some now really truly realizing the seriousness

443
00:25:46,520 --> 00:25:48,800
Speaker 1: of this challenge. How do you think that will play

444
00:25:48,800 --> 00:25:52,199
Speaker 1: out in one Yeah, I mean this year really, you know,

445
00:25:52,280 --> 00:25:55,600
Speaker 1: we have seen a lot of global momentum um to

446
00:25:56,119 --> 00:25:59,240
Speaker 1: where it's setting net zero targets and carbon neutrality goals.

447
00:25:59,760 --> 00:26:01,600
Speaker 1: But like you say, I mean it's very hard to

448
00:26:01,600 --> 00:26:04,000
Speaker 1: tell because these are such long term targets, these kind

449
00:26:04,000 --> 00:26:08,400
Speaker 1: of lofty ambitions. The UN just held the Climate Ambition

450
00:26:08,440 --> 00:26:11,280
Speaker 1: Summit last weekend and the idea was that everyone had

451
00:26:11,280 --> 00:26:13,760
Speaker 1: to come and make new pledgures, and it was really

452
00:26:13,840 --> 00:26:18,520
Speaker 1: quite disappointing and kind of underscored. How you know, these big, ambitious,

453
00:26:19,040 --> 00:26:21,560
Speaker 1: nine sounding targets need to be backed up by a

454
00:26:21,680 --> 00:26:26,520
Speaker 1: shorter term, actionable goals. Um. But you know, I think

455
00:26:26,640 --> 00:26:31,199
Speaker 1: the entire global economy is shifting, is going through this

456
00:26:31,400 --> 00:26:34,480
Speaker 1: energy transition. And if you look at China for example,

457
00:26:34,640 --> 00:26:37,600
Speaker 1: I mean it's not just seeking to be net zero

458
00:26:38,080 --> 00:26:40,879
Speaker 1: for purely altruistic reasons. I mean it knows that if

459
00:26:40,920 --> 00:26:44,480
Speaker 1: it can dominate these new renewable energy industries, that will

460
00:26:44,520 --> 00:26:48,040
Speaker 1: really put the economy ahead of others. And I think

461
00:26:48,400 --> 00:26:51,919
Speaker 1: um other leaders also see that, and I think we

462
00:26:52,000 --> 00:26:55,680
Speaker 1: will continue moving in that direction. The big question is

463
00:26:55,720 --> 00:26:58,479
Speaker 1: whether we can do it fast enough. We're already at

464
00:26:58,520 --> 00:27:01,959
Speaker 1: one point to degree celsius warming from pre industrial levels,

465
00:27:02,320 --> 00:27:05,920
Speaker 1: and the Paris Agreement the ideal would be to keep

466
00:27:05,960 --> 00:27:08,960
Speaker 1: it to one point five um, you know, and we're

467
00:27:09,080 --> 00:27:18,919
Speaker 1: just not really untracted to that right now. We've all

468
00:27:18,960 --> 00:27:20,960
Speaker 1: obviously been on a very steep learning curve when it

469
00:27:21,000 --> 00:27:24,920
Speaker 1: comes to pandemics and coronavirus is this year. I suspect

470
00:27:24,960 --> 00:27:26,840
Speaker 1: we're going to be now on a very steep learning

471
00:27:26,840 --> 00:27:30,400
Speaker 1: curve when it comes to green technologies and the challenges

472
00:27:30,840 --> 00:27:33,960
Speaker 1: of moving to net zero. Now that you're sitting in

473
00:27:34,040 --> 00:27:37,480
Speaker 1: green what what are we going to be talking about

474
00:27:37,480 --> 00:27:39,800
Speaker 1: in a year or two is time? But we've never

475
00:27:39,800 --> 00:27:42,880
Speaker 1: heard of today. Are there any left field technologies out

476
00:27:42,880 --> 00:27:44,800
Speaker 1: there that you think are actually going to end up

477
00:27:44,800 --> 00:27:48,480
Speaker 1: being a big part of the conversation? Yeah, I mean,

478
00:27:48,520 --> 00:27:51,680
Speaker 1: I think hydrogen is the mean next thing that and

479
00:27:51,880 --> 00:27:55,000
Speaker 1: related to hydrogen ammonia which can be used to store

480
00:27:55,040 --> 00:27:57,399
Speaker 1: and transport the hydrogen. But I mean it's not a

481
00:27:57,440 --> 00:27:59,840
Speaker 1: new technology. It's been around for a very long time.

482
00:28:00,080 --> 00:28:03,359
Speaker 1: But it seems, you know, a lot of major economies

483
00:28:03,359 --> 00:28:05,640
Speaker 1: are going to rely a lot on it to meet

484
00:28:05,640 --> 00:28:09,080
Speaker 1: the unnet zero targets. And we have air Bus trying

485
00:28:09,119 --> 00:28:13,040
Speaker 1: to develop the first hydrogen plane UM, which could really

486
00:28:13,080 --> 00:28:17,119
Speaker 1: be a game changer in terms of removing those emissions,

487
00:28:17,440 --> 00:28:19,520
Speaker 1: which are probably going to be one of the hardest

488
00:28:19,560 --> 00:28:22,719
Speaker 1: to remove as long as people keep traveling. But you know,

489
00:28:22,760 --> 00:28:27,440
Speaker 1: turning the hydrogen will require reinventing a lot of industries,

490
00:28:27,480 --> 00:28:31,440
Speaker 1: the airline industry, shipping UM over the way a lot

491
00:28:31,560 --> 00:28:34,760
Speaker 1: of economies function now. But I think that that would

492
00:28:34,760 --> 00:28:38,680
Speaker 1: be a major focus. How Peter, you started by talking

493
00:28:38,720 --> 00:28:42,800
Speaker 1: about how you were surprised that wearing a mask became

494
00:28:42,840 --> 00:28:47,480
Speaker 1: a partisan issue. UM in the US. Actually, the environment

495
00:28:47,600 --> 00:28:51,040
Speaker 1: was not so partisan five or ten years ago. Now

496
00:28:51,120 --> 00:28:54,800
Speaker 1: it does seem to be deeply divided along party lines.

497
00:28:54,840 --> 00:28:56,920
Speaker 1: Do you think that the new president can do anything

498
00:28:56,920 --> 00:28:59,600
Speaker 1: to change that or just have all the wildfire's done

499
00:28:59,640 --> 00:29:01,760
Speaker 1: something to change that? First of all, I really agree

500
00:29:01,800 --> 00:29:04,760
Speaker 1: with you that environment was not always such a partisan issue.

501
00:29:04,800 --> 00:29:08,160
Speaker 1: Teddy Roosevelt, who started the National Parks was a Republican.

502
00:29:08,640 --> 00:29:13,480
Speaker 1: Dwight Eisenhower. UM. Richard Nixon actually started the Environmental Protection

503
00:29:13,520 --> 00:29:17,080
Speaker 1: Agency and signed the Clean Air and Clean Water Acts.

504
00:29:17,560 --> 00:29:19,760
Speaker 1: So there's a long tradition of the green in the

505
00:29:19,800 --> 00:29:23,440
Speaker 1: Republican Party, but under Trump in particular, that's faded away.

506
00:29:23,480 --> 00:29:28,440
Speaker 1: Trump portrayed as a contest of environment versus labor. So

507
00:29:28,560 --> 00:29:31,480
Speaker 1: now Biden is trying to turn that around by saying

508
00:29:31,480 --> 00:29:35,239
Speaker 1: we can do both. In fact, he says, when he

509
00:29:35,280 --> 00:29:39,000
Speaker 1: thinks about the green and climate change, he thinks about

510
00:29:39,080 --> 00:29:43,880
Speaker 1: creating jobs. Now that's a challenge too, because it's not

511
00:29:44,000 --> 00:29:48,480
Speaker 1: always as simple as he might say. Um, there are

512
00:29:48,480 --> 00:29:51,800
Speaker 1: people who would argue economists that trying to hit two

513
00:29:51,800 --> 00:29:55,480
Speaker 1: birds with one stone, that is, create jobs and reduce

514
00:29:55,640 --> 00:30:00,480
Speaker 1: greenhouse gas emissions could end up, you know, missing both birds. Uh.

515
00:30:00,560 --> 00:30:03,080
Speaker 1: You know that you want to focus on pick one

516
00:30:03,160 --> 00:30:07,080
Speaker 1: gold and choose the target that choose the tool that

517
00:30:07,160 --> 00:30:10,400
Speaker 1: is best suited to that target. Uh. And he has

518
00:30:10,600 --> 00:30:13,800
Speaker 1: splits already within his coalition. For example, Biden is not

519
00:30:13,880 --> 00:30:18,440
Speaker 1: opposed to all hydraulic fracturing fracking. He's also not opposed

520
00:30:18,480 --> 00:30:21,760
Speaker 1: to all coal mining, and many, of course the environmentalists

521
00:30:21,760 --> 00:30:26,160
Speaker 1: and his UH coalition are. And I just don't know

522
00:30:26,200 --> 00:30:32,160
Speaker 1: if the American public are ready for a strong, meaningful

523
00:30:32,440 --> 00:30:36,840
Speaker 1: attack on climate change. The Washington Post Kaiser Family Foundation

524
00:30:36,880 --> 00:30:39,480
Speaker 1: did a survey last year they found. Yeah, sure, three

525
00:30:39,520 --> 00:30:43,040
Speaker 1: quarters of Americans considered climate change a crisis, but fewer

526
00:30:43,080 --> 00:30:45,959
Speaker 1: than half. We're willing to pay a two dollar monthly

527
00:30:46,040 --> 00:30:49,240
Speaker 1: tax on their electricity bills in the name of climate progress,

528
00:30:49,240 --> 00:30:52,000
Speaker 1: and only a third we're in favor of raising the

529
00:30:52,040 --> 00:30:54,480
Speaker 1: federal gasolene tax by ten cents a goalon. These are

530
00:30:54,880 --> 00:31:00,080
Speaker 1: fairly minor measures in the context of global greenhouse gas emissions,

531
00:31:00,120 --> 00:31:03,719
Speaker 1: and yet Biden has a big job ahead of him

532
00:31:03,720 --> 00:31:06,520
Speaker 1: trying to pull the American public along to think about

533
00:31:06,520 --> 00:31:10,719
Speaker 1: it that way. Okay, we've talked too long about too

534
00:31:10,800 --> 00:31:12,880
Speaker 1: many things. I did start with some of the things

535
00:31:12,960 --> 00:31:16,720
Speaker 1: that had caught us by surprise this year. Um, what

536
00:31:16,880 --> 00:31:20,480
Speaker 1: do you think would be what do you think would

537
00:31:20,480 --> 00:31:25,200
Speaker 1: be the wild cards or the potential big surprises for one?

538
00:31:25,360 --> 00:31:28,360
Speaker 1: Tom Mullock. So, as you say, Stephanie, we were caught

539
00:31:28,400 --> 00:31:33,800
Speaker 1: by surprise by the Hollywood movie scenario of a tiny

540
00:31:33,880 --> 00:31:38,160
Speaker 1: virus laying the world economy waste. Um. So I've done

541
00:31:38,200 --> 00:31:41,719
Speaker 1: some extensive research on the outlook for one, based on

542
00:31:42,680 --> 00:31:46,800
Speaker 1: disaster movies from the late nineties, nineties and early two thousands.

543
00:31:47,280 --> 00:31:49,480
Speaker 1: So the team is going to be modeling the macro

544
00:31:49,680 --> 00:31:54,200
Speaker 1: impact of freak weather events causing a second ice age,

545
00:31:54,920 --> 00:31:59,240
Speaker 1: a huge meteor heading towards Earth, and potentially a giant

546
00:31:59,280 --> 00:32:03,520
Speaker 1: lizard heading from Japan towards the US coast. We're going

547
00:32:03,560 --> 00:32:05,680
Speaker 1: to try and put a GDP number on each of those.

548
00:32:06,360 --> 00:32:11,840
Speaker 1: Don't forget shar Tonado. That's not that's not calculable. I'm afraid,

549
00:32:11,880 --> 00:32:16,640
Speaker 1: Peter um so UM. But more seriously, I mean, and

550
00:32:16,680 --> 00:32:20,120
Speaker 1: this I think is actually more central scenario than a risk. UM.

551
00:32:20,320 --> 00:32:24,920
Speaker 1: I just worry that the Biden administration is going to underwhelm.

552
00:32:24,960 --> 00:32:28,760
Speaker 1: If we look at the composition of the Biden administration, UM,

553
00:32:28,840 --> 00:32:31,800
Speaker 1: it's a lot of people who have a lot of

554
00:32:31,840 --> 00:32:37,720
Speaker 1: experience from time in the Obama administration. UM. But perhaps

555
00:32:37,760 --> 00:32:41,000
Speaker 1: because of that experience, more of a kind of tendency

556
00:32:41,040 --> 00:32:43,360
Speaker 1: to look for the center, to look for a place

557
00:32:43,400 --> 00:32:47,440
Speaker 1: of kind of moderation and compromise. UM. So my concern,

558
00:32:47,560 --> 00:32:51,920
Speaker 1: for one, and looking further forwards, is that the Biden

559
00:32:51,960 --> 00:32:59,200
Speaker 1: administration underwhelms and by doing so kind of inadvertently confirms

560
00:32:59,240 --> 00:33:03,080
Speaker 1: the big argument in which the Trump administration and other

561
00:33:03,120 --> 00:33:06,480
Speaker 1: sort of populists around the world have been making, which

562
00:33:06,560 --> 00:33:11,000
Speaker 1: is that government doesn't work. In government console the big problems,

563
00:33:12,000 --> 00:33:15,280
Speaker 1: piece of coy. You know, you asked for a wild card.

564
00:33:15,360 --> 00:33:18,160
Speaker 1: So this is not necessarily a mainstream prediction. But going

565
00:33:18,200 --> 00:33:21,600
Speaker 1: back to what Tom and Bloomberg Economics is saying, we're

566
00:33:21,640 --> 00:33:26,720
Speaker 1: not expecting outbreak of inflation in the US, but let's

567
00:33:26,720 --> 00:33:29,080
Speaker 1: just say there is. Let's say there's a few months

568
00:33:29,160 --> 00:33:32,640
Speaker 1: where the CPI year of a year does go above two.

569
00:33:33,320 --> 00:33:37,160
Speaker 1: Now that's actually what's supposed to happen. The Fed wants

570
00:33:37,280 --> 00:33:40,840
Speaker 1: that to happen on paper anyway. They said that they

571
00:33:41,080 --> 00:33:43,560
Speaker 1: need to make up for periods of undershooting on the

572
00:33:43,600 --> 00:33:47,840
Speaker 1: target by overshooting for some period of time. But my prediction,

573
00:33:48,640 --> 00:33:51,600
Speaker 1: or I should say my wild card, is if that happens,

574
00:33:52,200 --> 00:33:54,760
Speaker 1: there's going to be an outbreak of cold sweat and

575
00:33:54,800 --> 00:33:57,280
Speaker 1: the foreheads of the members of the Federal Open Market

576
00:33:57,320 --> 00:34:01,080
Speaker 1: Committee people are going to panic that inflation is getting

577
00:34:01,080 --> 00:34:05,240
Speaker 1: out of control, and despite their best of intentions, despite

578
00:34:05,280 --> 00:34:07,680
Speaker 1: all their promises about it letting inflation go of two

579
00:34:08,040 --> 00:34:12,359
Speaker 1: above two, they're gonna start throttling back on monetary stimulus

580
00:34:12,719 --> 00:34:15,160
Speaker 1: and trying to make sure that the inflation doesn't get

581
00:34:15,160 --> 00:34:21,080
Speaker 1: out of control again. Francie loquix, your wild card. I'm

582
00:34:21,120 --> 00:34:23,600
Speaker 1: so happy I don't have Tom's job and actually forecasting

583
00:34:24,080 --> 00:34:27,440
Speaker 1: what will happen in I would probably just look at

584
00:34:27,480 --> 00:34:29,920
Speaker 1: the markets, because the markets are on a terror for

585
00:34:29,960 --> 00:34:31,560
Speaker 1: the moment, and something could happen. You can have a

586
00:34:31,560 --> 00:34:34,080
Speaker 1: bubble bursting. And then this morning I was actually reading

587
00:34:34,080 --> 00:34:36,960
Speaker 1: a note in Standard Chargers looking at the potential market

588
00:34:36,960 --> 00:34:41,200
Speaker 1: surprises for now. They say that they're unlikely, but potential surprises.

589
00:34:41,440 --> 00:34:43,640
Speaker 1: And I think they had like five, maybe eight. But

590
00:34:43,680 --> 00:34:45,839
Speaker 1: they had Democrats winning control of the Senate. They had

591
00:34:45,840 --> 00:34:49,799
Speaker 1: a US China dictance driving Juan rally to six verses

592
00:34:49,840 --> 00:34:52,320
Speaker 1: of dollar. They had oil crashing at twenty dollars comparel,

593
00:34:52,480 --> 00:34:54,960
Speaker 1: which I thought was quite interesting because of opaque rupture.

594
00:34:55,000 --> 00:34:57,560
Speaker 1: And then they also had Biden resigning in favor of

595
00:34:57,640 --> 00:35:02,120
Speaker 1: Vice President Kamala Harrick. That's great. So we've got we've

596
00:35:02,160 --> 00:35:04,200
Speaker 1: got about four or five things to worry about for

597
00:35:04,239 --> 00:35:06,920
Speaker 1: the price of one from you. That's that's typically efficient.

598
00:35:06,920 --> 00:35:09,040
Speaker 1: You see on the brooding television, you just pack so

599
00:35:09,120 --> 00:35:11,799
Speaker 1: much into into thirty seconds. You can't stick with just one.

600
00:35:12,320 --> 00:35:17,040
Speaker 1: Um sarentur um. I think the biggest wild card for

601
00:35:17,080 --> 00:35:19,680
Speaker 1: me is what happens with the US China. I mean

602
00:35:19,920 --> 00:35:23,319
Speaker 1: you know, I think for the Chinese government, the one

603
00:35:23,320 --> 00:35:26,600
Speaker 1: outside of having a Biden administration is that it's back

604
00:35:26,640 --> 00:35:30,200
Speaker 1: to kind of more predictable politics, you know, more predictable

605
00:35:30,400 --> 00:35:36,080
Speaker 1: counterpart or or um, yeah, sparring partner because things which

606
00:35:36,120 --> 00:35:39,759
Speaker 1: just so erratic under Trump. But you know the downside

607
00:35:39,760 --> 00:35:42,759
Speaker 1: of that for them is that obviously, you know, a

608
00:35:42,760 --> 00:35:46,360
Speaker 1: Biden administration can be along most strategic um and also

609
00:35:46,880 --> 00:35:50,960
Speaker 1: con strengthened alliances with other Western countries and find ways

610
00:35:51,040 --> 00:35:55,480
Speaker 1: to you know, inflict pain. And you know, the biggest

611
00:35:55,480 --> 00:36:00,200
Speaker 1: wild card, of course, is that something actually happens military early,

612
00:36:00,280 --> 00:36:03,560
Speaker 1: either in the South China See or with Taiwan, which

613
00:36:03,600 --> 00:36:06,399
Speaker 1: will likely be I think the place where things could

614
00:36:06,520 --> 00:36:10,800
Speaker 1: escalate um the most. And you know, I think before

615
00:36:11,239 --> 00:36:14,560
Speaker 1: this year I also thought it was a very remote possibility.

616
00:36:14,640 --> 00:36:17,080
Speaker 1: But we've seen that a lot of things can escalate

617
00:36:17,200 --> 00:36:19,880
Speaker 1: very quickly, and I seem to remember thinking about the

618
00:36:19,880 --> 00:36:22,680
Speaker 1: first China SEE at this time a year ago. One

619
00:36:22,719 --> 00:36:27,160
Speaker 1: of these years, it's surely going to produce something frightening.

620
00:36:27,600 --> 00:36:30,040
Speaker 1: I'm thrilled at fact that we've not talked about Brexit

621
00:36:30,239 --> 00:36:32,520
Speaker 1: in all this time, so I guess I'd have to

622
00:36:32,560 --> 00:36:34,920
Speaker 1: also throw in a wild card for the end of

623
00:36:34,920 --> 00:36:37,640
Speaker 1: the United Kingdom. I think that the politics of of

624
00:36:37,719 --> 00:36:42,799
Speaker 1: Brexit as this now plays out, after whatever arrangement we

625
00:36:42,840 --> 00:36:46,880
Speaker 1: get with Europe or non arrangement, I think that the

626
00:36:47,239 --> 00:36:52,279
Speaker 1: debate could shift remarkably quickly to Scotland's desire to leave,

627
00:36:52,400 --> 00:36:55,719
Speaker 1: and potentially even Northern Ireland leaving the United Kingdom as well.

628
00:36:55,760 --> 00:36:57,719
Speaker 1: Maybe something we'll be talking about in a year's time.

629
00:36:58,160 --> 00:37:01,319
Speaker 1: Thank you so much to all of you. This has

630
00:37:01,400 --> 00:37:05,600
Speaker 1: been wonderful, Just a treat to have all of you together.

631
00:37:05,800 --> 00:37:09,359
Speaker 1: Regardless of whether we turn out to be right, no

632
00:37:09,360 --> 00:37:13,080
Speaker 1: one remember, they will only remember the great conversation. Francine Lui,

633
00:37:13,280 --> 00:37:16,600
Speaker 1: Peter Coy, Sharon Chen and Tom Orlick. Thank you very much.

634
00:37:17,200 --> 00:37:29,799
Speaker 1: Thank you. That was the year ahead with Stephanomics. We'll

635
00:37:29,840 --> 00:37:33,240
Speaker 1: be back with more very soon. In the meantime, remember

636
00:37:33,280 --> 00:37:35,840
Speaker 1: you can always find us on the Bloomberg Terminal, website,

637
00:37:35,920 --> 00:37:39,239
Speaker 1: app or wherever you get your podcast. This episode was

638
00:37:39,280 --> 00:37:42,880
Speaker 1: produced as usual by Magnus Hendrickson, with special thanks to

639
00:37:42,960 --> 00:37:46,160
Speaker 1: all of our expert correspondence and to the executive producer

640
00:37:46,160 --> 00:37:50,160
Speaker 1: of Stephanomics, Lucy Meekin the head of Bloomberg podcast is

641
00:37:50,200 --> 00:38:00,640
Speaker 1: Francesca Levy Happy new three,