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

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

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

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. Yeah.

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Speaker 1: The President meeting with Joan Claudianka, the European Union's president

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Speaker 1: today and saying that you should drop all to Harris

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Speaker 1: Barris and subsidies, with the block's trade chiefs set to

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Speaker 1: present him with proposals in that direction, and a crunch

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Speaker 1: meeting at the White House lates today and we're joined

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Speaker 1: by Morgan Stanley. Legend now is Stephen roach l University

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Speaker 1: professor joins us in New York. Good morning, professor. We

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Speaker 1: wait a minute. Richard Burner was a legend. H you.

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Speaker 1: I hired you, so I'm the father of a legion.

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Speaker 1: Okauyd there we go. There you got even slapped down

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Speaker 1: this morning, and profess, So, what's the minimum condition of

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Speaker 1: success from meeting like this today with the President of

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Speaker 1: the United States and the European Union president meeting together.

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Speaker 1: There's there's not much, Jonathan. The bar is pretty low.

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Speaker 1: You know, in the last twenty four hours, the presidents

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Speaker 1: said tariffs are great, and then he said he wants

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Speaker 1: to propose to eliminate all tariffs. So if they're so great,

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Speaker 1: why does he want to eliminate him? Uh, they're a

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Speaker 1: negotiating employ He's the master of the art of the

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Speaker 1: deal right now. The art of the deal is giving

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Speaker 1: US retaliation that requires subsidies by the US Congress to

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Speaker 1: deal with the retaliation being directed at US farmers. That

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Speaker 1: doesn't sound like such a great deal to me, but

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Speaker 1: you know, um, well, it remains to be seen where

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Speaker 1: where we're we're outn here. But but for a global,

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Speaker 1: interconnected world, competing not by countries but by through supply

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Speaker 1: chains and the distribution of value added um to multiple

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Speaker 1: platforms around the world, this is a confusing, perplexing, challenging

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Speaker 1: time with a lot of potential collateral damage along the way.

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Speaker 1: So we have the situation at the moment with tariffs

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Speaker 1: on automobiles and light trucks coming from Europe into the

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Speaker 1: United States face a huge tariff. Then there's just sort

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Speaker 1: of the basic l autos that were used to talking about,

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Speaker 1: where the Europeans slap on a much bigger tariff to

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Speaker 1: the United States slaps on. Can we get something done

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Speaker 1: where we remove those barriers to entry, we remove those

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Speaker 1: tariffs on watmobiles and light trucks. You know, it was

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Speaker 1: anything is possible, but you know it's is this the

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Speaker 1: way to get that done? Is the way to reduce tariffs? Uh,

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Speaker 1: to to threaten to raise them much higher than they

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Speaker 1: have been, and to disrupts the supply chains, which um

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Speaker 1: is the essence of the production platform for the for

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Speaker 1: this key industry. So uh, you know, anything as possible,

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Speaker 1: but I wouldn't bet that this is the right way

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Speaker 1: to get there. Do you just assume a g d

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Speaker 1: P markdown? I mean within all the fancy micro economist

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Speaker 1: Paul Krugman has been great about showing the different dynamics

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Speaker 1: here and the wedges in the you know, the geometry

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Speaker 1: of tariffs and taxes. The answer is GDP goes south right. Yeah, well,

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Speaker 1: uh uh, there's no question that um in my mind

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Speaker 1: that the global trade which has gone um you know

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Speaker 1: from twenty and of world GDP over the last fifteen

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Speaker 1: to twenty years has has been an engine of of

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Speaker 1: growth for developing and developed economies alike. Global trade has

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Speaker 1: been uh a flat uh. Since the crisis is a

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Speaker 1: share of of world GDP, and so that's made it

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Speaker 1: challenging to to get world GDP back to its earlier

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Speaker 1: pre crisis growth rate. Uh. And if global trade really

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Speaker 1: starts to unwind, then the headwind has become far more

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Speaker 1: severe and the GDP impacts will become more acute. As

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Speaker 1: you allude to dr Roach, I know you're huge on

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Speaker 1: on Twitter. We've got to respond. Have you respond rather

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Speaker 1: to a presidential tweet this five minutes ago? Every time

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Speaker 1: I see a weak politician asking to stop trade talks

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Speaker 1: or the use of terrorists to counter unfair tariffs, I

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Speaker 1: wonder what can they be thinking? Question Mark? Are we

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Speaker 1: just going to continue and let our farmers in country

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Speaker 1: get ripped off? Question Mark? Lost eight hundred seventeen billion

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Speaker 1: on trade last year. No weakness exclamation point. Well, you

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Speaker 1: know I'm a broken record on this time. The President

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Speaker 1: plucks out trade as if it occurs in a vacuum,

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Speaker 1: as if it's a result of the way other countries

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Speaker 1: treat us poorly. He doesn't get the fact the trade

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Speaker 1: is the mirror image of our need for surplus savings

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Speaker 1: from abroad that requires us to run balance of payments

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Speaker 1: and multilateral trade deficits last year with a hundred and

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Speaker 1: two countries. That connection has never been made in UM,

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Speaker 1: the president's mind or in the mind of his advisors,

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Speaker 1: which is even more shocking because presumably he hires UH

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Speaker 1: reasonably proficient UH policy advisors on the economic and international

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Speaker 1: finance front. Either they're afraid to talk to him or

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Speaker 1: they don't get it either which is or or both.

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Speaker 1: Very good, Steven Roach, thank you so much, greatly appreciate

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Speaker 1: what you know you were saying of time to Stephen.

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Speaker 1: Aaron's joining US now. Bloomberg News Banks reporter joins US

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Speaker 1: from Frankfurt. Stephen, here's the number, the weakest second quarter

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Speaker 1: and fixed income trading since the global financial crisis. The

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Speaker 1: five largest US investment banks saw total debt trading revenue

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Speaker 1: rise by six point seven over the same time span.

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Speaker 1: When does this stop, Steve, Well, if you believe the CEO,

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Speaker 1: it should stop in the next quarter. He said, he's confident,

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Speaker 1: very confident in fact UM that revenue in fixed income

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Speaker 1: trading will now begin to rise. Admittedly, it's a it's

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Speaker 1: actually a good comparative comparative for deutche Ban because six

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Speaker 1: fixed income trading was really weak last year in the

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Speaker 1: final TiO quarters of UM, so he's got a bit

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Speaker 1: of a comparative advantage there. But of course a lot

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Speaker 1: of it depends on where the cut the cuts have

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Speaker 1: taken place that there are executing in the bank right now.

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Speaker 1: So UM I think, well, we'll need to see him

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Speaker 1: wait for the next results. What is the catalyst that

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Speaker 1: drag us out of what has been a vicious cycle

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Speaker 1: over the last several years, A sound fulfilling vicious cycle

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Speaker 1: where Deutsche Bank have to cut the revenue folds, they

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Speaker 1: have to cut some more. Are we really breaking out

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Speaker 1: of that stage? Dotr back shortly hopes, and the CEO

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Speaker 1: of course most of all hopes they can break out

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Speaker 1: of the cycle. And yes, if they do, if Christian

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Speaker 1: Seving actually pulls off the feet of an increase in

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Speaker 1: fixing come trading next quarter and maybe the UH the

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Speaker 1: next quarter after that, UM, that could certainly be some

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Speaker 1: sort of catalyst UH. And of course, if he UM

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Speaker 1: reaches the financial targets he set for example UM cutting

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Speaker 1: or keeping adjust the cost below twenty three billion years

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Speaker 1: this year UM and reaching a return intentional equity of

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Speaker 1: over or four percent next year. Um, that would certainly

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Speaker 1: be be progress as well. One of the price bosts

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Speaker 1: today quite clearly was the advisory business doing quite well.

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Speaker 1: What did you think of that state? Um. They've been

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Speaker 1: telling us for a long time that the advisory business

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Speaker 1: is actually not doing so badly. UM. And they always

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Speaker 1: say it's it's a long pipeline, you know. UM. I

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Speaker 1: mean when you when you prepare a deal and a

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Speaker 1: lot of work goes into that. It's a relationship business, um.

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Speaker 1: And sometimes the revenue doesn't show up in the in

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Speaker 1: the income state and until maybe a year or even

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Speaker 1: two years later. UM. So it's it's good to see obviously, UM.

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Speaker 1: But it's actually the fruit of labor from maybe a

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Speaker 1: year or two ago. And now they're cutting corporate financed

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Speaker 1: in the US and Asia especially, UM. So we'll have

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Speaker 1: to see how that affects the pipeline now and that

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Speaker 1: won't happen, that won't be visible until maybe next year.

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Speaker 1: I mean, part of the reason they keep people, particularly

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Speaker 1: key employees of stock uh Price to book on JP

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Speaker 1: Morgan is one point seven. Price to book on Deutsche

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Speaker 1: Bank is point three. I mean, the disparity invaluations extraordinary.

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Speaker 1: Is this guy able to retain that top ten percent.

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Speaker 1: I'm going to call it eight thousand key employees. Ironically,

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Speaker 1: the price the book actually helps in a in a

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Speaker 1: weird in a weird way. Many people at a bank

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Speaker 1: are extremely unhappy about the share price for understandable reasons,

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Speaker 1: because you know, the pay depend on them. But since

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Speaker 1: they higher now and the price is so low their

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Speaker 1: pay packages, you know, they share um, they share options

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Speaker 1: are basically worthless, so many are sticking around and hoping

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Speaker 1: the share price will rewrite it. Yeah. Yeah, so you know,

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Speaker 1: in a weird way, again, it helps, but yeah, people

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Speaker 1: are extremely happy unhappy about it. Um and if they

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Speaker 1: have hands to go somewhere else and trade in their

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Speaker 1: share options for better ones in a different bank. I'm

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Speaker 1: pretty sure many people think about that. See quickly you're

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Speaker 1: from your vantage point balance. How London and New York

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Speaker 1: matter to Deutsche Bank Germany? Is it all about London?

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Speaker 1: Is New York and afterthought? Or do they have an

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Speaker 1: equal waiters? There some nuance there? I don't see, um,

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Speaker 1: I do think. I mean New York is extremely important,

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Speaker 1: London is still a bit closer and many of the

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Speaker 1: executives tend to be in London. More frequently. God Ritchie

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Speaker 1: who was really important how to the investment bank lives

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Speaker 1: in London. Um, so you know, it's hard to say.

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Speaker 1: Obviously soft factors and so on. Um, it's hard to compare.

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Speaker 1: I do think they're both really important. But the cuts,

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Speaker 1: I think they're more cuts currently talking place in the US,

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Speaker 1: so my senses, there's a bit of a shift away

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Speaker 1: from the US, but New York will will remain a

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Speaker 1: very important place for dutcha bank. Steve, thank you for

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Speaker 1: the briefly learned a lot there, Steve Aarons and Franford

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Speaker 1: with wisdom on Deutscheit. I think ViRGE with US out

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Speaker 1: of London. She knows American technology and of course has

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Speaker 1: brought that over to great acclaim uh in the United

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Speaker 1: Kingdom is well, you know, Eileen. It brings back all

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Speaker 1: the emotion in all the past and present and even

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Speaker 1: future of technology. Why are we still so riveted by space?

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Speaker 1: Is a last frontier? There's a great question. You're always

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Speaker 1: throwing me these curveballs. I love it. Um. I think

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Speaker 1: it is just this sort of uncharted territory because so

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Speaker 1: few people have tried to tackle it, and because of

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Speaker 1: the capital expenditure required in order to try and address it.

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Speaker 1: It's just been out of the reach of traditional innovators

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Speaker 1: or obviously any kind of startups because of what you

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Speaker 1: actually need to put together in order to get there.

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Speaker 1: I mean, within this is is government trying to do

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Speaker 1: its thing, and and and certainly they're assisting here, but

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Speaker 1: that John Pharaoh's really smart partition is in the Business

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Speaker 1: Week cover. This seems to be relatively easy and the

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Speaker 1: technology process over the traditional manufacturing processes is still steeped

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Speaker 1: in the old, isn't it. Yeah? And I think it's

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Speaker 1: as much as you said right before you kind of

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Speaker 1: came over to me, it is about the number of parts.

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Speaker 1: It's kind of put it down that way, and it is,

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Speaker 1: you know, trying to get a sort of a new

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Speaker 1: factory producing three cards a day, for example, has so

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Speaker 1: much at risk and so many potential points of failure

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Speaker 1: that I think that's doing things at scale is what

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Speaker 1: always sort of stimy is even the best entrepreneurs. I'm

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Speaker 1: just really enjoying Tom walking us through the launch. Where

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Speaker 1: are we at the moment? Second stage? Oh, it's a

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Speaker 1: bright red cone and they're gonna go out NASA showing

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Speaker 1: some animation. But we're at the second stage, which John

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Speaker 1: goes down to really the technology here of why the

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Speaker 1: US did so better than the Soviets. Eilan, you know

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Speaker 1: this from your engineering background. It's just about basic chemistry,

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Speaker 1: basic physics, basic metals. These beasts that Mr Musk is

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Speaker 1: putting up in the air, are they're way more sophisticated

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Speaker 1: than what they dealt with with a Saturn five launch

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Speaker 1: or aren't they? No? Absolutely, And I think you're also

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Speaker 1: seeing people like Jeff Bezos doing similar to work with rockets, right,

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Speaker 1: and they're starting to help compete with one another on

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Speaker 1: ego for that. But the technology has run a long way.

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Speaker 1: I think the bottom the sort of underlying physics hasn't

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Speaker 1: changed to your point earlier, Right, they have to think

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Speaker 1: about re entry, they have to think about what happens

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Speaker 1: in the upper rapmosphere um. But the methodologies and the

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Speaker 1: manufacturing or fabrication that they can use to put together

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Speaker 1: the end a stumble the components has come a long way. Well,

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Speaker 1: I don't mean this is no longer just about really

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Speaker 1: rich men trying to get into space. This is about

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Speaker 1: trying to create a business. What is the business The

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Speaker 1: SpaceX is ultimately meant to be and where is the

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Speaker 1: competition coming from. Yeah, I think actually the competition it

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Speaker 1: was probably one of the reasons it was probably easier

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Speaker 1: for Elon musk Is because it was such an open

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Speaker 1: field when the government, and I think when sort of

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Speaker 1: you saw defense spending come down for space um and

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Speaker 1: most of the commercial application then moved to satellites and

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Speaker 1: communication technology, that's when he saw an opportunity to kind

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Speaker 1: of go in there. Fortunately, he is heavily satitized by

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Speaker 1: the government still in the Defense Department. But I think

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Speaker 1: the commercial opportunities absolutely trying to figure out who wants

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Speaker 1: to have access to being able to launch and deploy

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Speaker 1: more sort of communication based satellites for GPS or any

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Speaker 1: other types of communication for private use. Eileen Burbage, thank

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Speaker 1: you so much for a briefly great to bring her

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Speaker 1: in with the technology side of all this. John Faroe

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Speaker 1: and John Norman, John Norman, JP Morgan had across asset

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Speaker 1: fundamental strategy joining us. Now, John, do we have a

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Speaker 1: currency war brewing? I don't think that's the main issue.

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Speaker 1: I think we definitely have a trade war, which is

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Speaker 1: intensifying the currency consequences, But the the main focus is

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Speaker 1: really trade when the president pushes back against the strong Goodalla,

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Speaker 1: what is that? I think it's a reflection of his

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Speaker 1: lack of understanding of the linkages amongst his policies. Is

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Speaker 1: very difficult to have tax cuts which are boosting growth

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Speaker 1: and have tariff policies which are pushing down e M

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Speaker 1: growth and not get a strong dollar. So it's it's

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Speaker 1: not obvious to me how he's going to square the circle.

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Speaker 1: If he wants a strong growth through tax cuts, he

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Speaker 1: also wants his very punitive terror policy, but he also

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Speaker 1: wants a weaker currency. January anywhere near inflection points in

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Speaker 1: selected pairs, like if I say yen one eleven oh

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Speaker 1: five or euro one? S are they in the vicinity

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Speaker 1: of JP Morgan important points? I think you're closer to

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Speaker 1: an inflection point, or I think you're actually tracing an

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Speaker 1: inflection point in the euro. I'm not sure we're tracing

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Speaker 1: one and a yen yet. I think for the Euro

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Speaker 1: a precondition for the Euro stabilizing and and maybe as

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Speaker 1: you hire into year end was that the day to

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Speaker 1: improve in Europe. And that's happening, and and the reason

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Speaker 1: that's important is because it will reignite the debate about

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Speaker 1: when the USA we should hike for the first time

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Speaker 1: next year. But yeah, and I feel like it's still

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Speaker 1: gonn a week and somewhat because we do have a

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Speaker 1: FED which is pretty minded to hike in September and

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Speaker 1: keep going after that. So I think, if you have

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Speaker 1: to choose, you know, one of these to be bottoming

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Speaker 1: versus the dollar, it's in the euro. You choose before

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Speaker 1: the end, John, I've got to do a surveillance correction,

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Speaker 1: John Farrow, I said the late great el Hard. I

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Speaker 1: was thinking late because he used to come in late.

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Speaker 1: But the first one and the I can't even I

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Speaker 1: did not even great, not for a moment, did I

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Speaker 1: actually think that's what you meant. I noticed it in

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Speaker 1: good old Marty Schenker said, Tom, you've got it. Has

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Speaker 1: this message? Now how messages? Thomas says, I'm still here.

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Speaker 1: I was talking about late into the office kind of

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Speaker 1: that got lost in surveilling. You gonna have to pick

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Speaker 1: this up, while says John, why don't you guys save

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Speaker 1: us with John Norman, John Tucker or me. After that one,

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Speaker 1: it's pretty much all down there. There's three Johns around it.

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Speaker 1: Say well, John Norman, um, let's get you back into

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Speaker 1: the conversation and let's talk about China. What is your

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Speaker 1: reading what is happening with the Chinese currency? Is this

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Speaker 1: the Chinese set of authorities that are just accepting, get

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Speaker 1: tolerating a weaker currency. Are they trying to engineer something?

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Speaker 1: What's happening, John? I think what they're trying to do

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Speaker 1: is stabilize the economy, which was slowing, and they're doing

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Speaker 1: that through monitor easing. And if you do that at

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Speaker 1: a time when the fet is tightening, you're more than

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Speaker 1: likely get a weaker currency. So even though the weaker

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Speaker 1: currency is not the first order objective, it's a consequence

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Speaker 1: of their monetary policy decisions. So I think this is

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Speaker 1: a pretty ordinary move. Um. I think the tough call

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Speaker 1: is deciding how much weakness they're willing to tolerate as

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Speaker 1: the easy monitor policy, because they're much more minded to

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Speaker 1: tolerate very modest weakness five percent brandum versus a number

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Speaker 1: of other emerging markets which seem to be much more

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Speaker 1: comfortable with ten moves. So I think this is going

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Speaker 1: to be kind of a low digit, low single digit

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Speaker 1: move for the for the year, and you've had most

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Speaker 1: of it already. But if they keep easy monitor policy

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Speaker 1: in the side keeps tightening. You know your biases that

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Speaker 1: the b is gonna edge lower, John, so far this

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Speaker 1: hasn't been that disruptive for global markets relative to what

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Speaker 1: we saw in the summer of fifteen, And why not?

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Speaker 1: Why is this different and you expected to stay this way?

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Speaker 1: I think some of the differences is that the the

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Speaker 1: economy overall is in a firmer position. In in China,

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Speaker 1: their newer growth sectors that have been offsetting an investment

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Speaker 1: slowed down, and I think they're also um has been

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Speaker 1: a recognition that China has a fourn exchange reserves to

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Speaker 1: control the speed at which the currency declines. So these

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Speaker 1: to me are reasons why you can have a low

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Speaker 1: volatility moved down in the Chinese currency going forward, rather

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Speaker 1: than the sort of higher volve, more disruptive, contagious type

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Speaker 1: move that we had in two thousands fifteen, John, how's

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Speaker 1: he am doing? If I look at a d X,

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Speaker 1: why the Pacific RIM Index X Japan? If I look

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Speaker 1: at your JP Morgan Spot Index of EM and all,

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Speaker 1: how's the m faring right now? It's fairly mixed. I

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Speaker 1: think there's clearly divide opening up between the Asian currencies,

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Speaker 1: many of which are making new all time lows every week,

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Speaker 1: and uh other currencies, particularly that in America, which are

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Speaker 1: more stable, and it simply reflects different countries specific drivers.

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Speaker 1: Mexico is looking a little more stable politically. That's why

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Speaker 1: the currency is farming. Asia is clearly in the line

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Speaker 1: of fire of the Trump administration. So I think if

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Speaker 1: you look at broad in disease that it can somewhat

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Speaker 1: mask the underlying stories that are a little more interesting.

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Speaker 1: There's that there's a whole lot of branciation play here.

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Speaker 1: This is really important. John. I agree with you where

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Speaker 1: you say ages in the line of fire, but my

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Speaker 1: news low tells me Europe's also in the line of fire.

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Speaker 1: Is Europe the new Asia in terms of trade upset?

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Speaker 1: I don't think quite yet, but more in terms of

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Speaker 1: magnitude than that. In terms of focus, it's clear that

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Speaker 1: the Trump administration has has labeled Europe of foe, but

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Speaker 1: it's not suggesting that it's going to pursue a scale

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Speaker 1: of terrorists on the order of what is pursuing with

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Speaker 1: with China. So maybe it's just early days and Trump

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Speaker 1: hasn't recognized all the things he could do with respect

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Speaker 1: to Europe yet, but it looks like China is a

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Speaker 1: is a primary enemy, and and and the main focus,

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Speaker 1: and Europe is a slide slide show. But you know,

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Speaker 1: there's no guarantees that that Europe can sort of leap

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Speaker 1: frog into the into the spotlight in the next couple

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Speaker 1: of months. John Norman, thank you so much, greatly appreciate that.

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Speaker 1: Right now, Pim Fox and Tom Keane with you this morning,

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Speaker 1: we have a spirited conversation with three kamar as you

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Speaker 1: look at the American economy. Three I'm putting out on Twitter.

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Speaker 1: You'll see it first on Bloomberg Radio. The separate lines

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Speaker 1: of service sector inflation, which every single listener knows is substantial,

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Speaker 1: think three point one percent, and it's essentially been there forever, uh,

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Speaker 1: a lot of inflation every year in service sector, and

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Speaker 1: then goods deflation, which has been pretty moldy going back,

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Speaker 1: you know, good good fifteen years. But with a new

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Speaker 1: leg up right now just below a zero percent statistic

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Speaker 1: negative zero point two three. With all that's going on,

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Speaker 1: are we going to finally see goods inflation, particularly because

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Speaker 1: of tariffs slash taxes. Yeah, that is the danger I

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Speaker 1: think eventually to both the inflation and to the bond eaves.

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Speaker 1: Tom shot, it may not happen within the next six

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Speaker 1: months because the global uncertainty is more likely to affect

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Speaker 1: total demand and then slow the pace of economic growth.

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Speaker 1: But if the tabs persist into twenty, then the higher

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Speaker 1: cost get passed on at the wholesale and at the

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Speaker 1: retail level, it passes on in the form of higher inflation.

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Speaker 1: And then you have also the bondies going up. That is,

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Speaker 1: then you have the true risk in tw of stag

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Speaker 1: inflation similar to what you and I remember from three

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Speaker 1: seventy four. You have a severe contraction in the economy

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Speaker 1: as well as prices going up. Then it was because

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Speaker 1: of a surge in global oil prices, and this time

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Speaker 1: it may be an artificial increase in prices coming out

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Speaker 1: of the trade sanctions. So what you say, Tom, is

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Speaker 1: a real danger in terms of good inflation for twenty

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Speaker 1: but I see the next few months as being relatively benign.

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Speaker 1: On that net, on that framework, we can break out

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Speaker 1: our whip inflation. Yeah, where I still have them somewhere

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Speaker 1: in the in the drawer at home. And you know three,

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Speaker 1: you know, I'm glad you used that term. Remember, you know,

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Speaker 1: casting your mind back into history, and I'm wondering if

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Speaker 1: you could just digress for just a second. And you know,

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Speaker 1: you used to work at the Trust Company of the West.

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Speaker 1: You went to Columbia University as well as Delhi University,

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Speaker 1: and now you've got your own firm, and I'm wondering

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Speaker 1: if you could just offer some insight or detail as

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Speaker 1: to what it was like to make that switch to

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Speaker 1: running your own shop and what you can offer to

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Speaker 1: people who may be thinking of doing the same thing

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Speaker 1: in their own specific discipline. Thank you, Pim. I'm happy

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Speaker 1: to do that. The first thing I think that helps

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Speaker 1: is to have a little bit of experience behind you,

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Speaker 1: so that you do not want to start out very fresh.

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Speaker 1: I did try some thirty five years ago to start

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Speaker 1: my own consulting that was on Latin American death in

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Speaker 1: the early eighties. The first year and a half was tough.

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Speaker 1: Going beyond that, once people found out that this was

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Speaker 1: a new area that the debt crisis was going to continue,

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Speaker 1: then the client team very quickly developed. The second time

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Speaker 1: around has been a lot easier. It has been easier

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Speaker 1: because another thirty five years have passed by. So the

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Speaker 1: advice that I would give is. First of all, make sure,

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Speaker 1: especially if you're younger than me, to have enough of

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Speaker 1: a bank balance to hold you through for a year

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Speaker 1: and a half to two years, even if you were

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Speaker 1: to go easy on your spending. Second, keep your roller

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Speaker 1: decks open, keep in terms of talking to different people

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Speaker 1: in the same area. And Third, I would say stay

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Speaker 1: very focused rather than say I'm going to be all

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Speaker 1: things to all possible clients. Decide where your strengths are,

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Speaker 1: focus on it, make sure that there is going to

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Speaker 1: be enough demand for those services, and stay focused in

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Speaker 1: that area. Those would be pim very much. Three or

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Speaker 1: four pieces of advice that I would pass on very useful.

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Speaker 1: I want to pick up on one thing you've said,

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Speaker 1: which is a new area. At the time it was

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Speaker 1: Latin American debt. Would cryptocurrencies be a new area? Should

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Speaker 1: people be looking for that new area now that I

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Speaker 1: think there's a significant difference. When in the early eighties,

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Speaker 1: when the debt crisis took place in Mexico passing on

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Speaker 1: to other countries, you knew that these countries eventually we're

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Speaker 1: going to come back to health, but you knew the

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Speaker 1: crisis was going to be for a long time. I

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Speaker 1: wouldn't put cryptocurrencies on the same plane, Pim. The reason is,

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Speaker 1: I think it is more comparable to the Dutch tulip

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Speaker 1: mania of sixteen thirty seven, that you just bid up

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Speaker 1: the price substantially until eventually the whole thing just drops out.

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Speaker 1: If that's the case, you may have a future in

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Speaker 1: looking at specific countries because as my old City Bank,

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Speaker 1: late chairman water Riston used to say, countries don't go bankrupt.

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Speaker 1: But that's not true of a cryptocurrency. And that's where

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Speaker 1: this job could come to an abrupt end if cryptocurrency

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Speaker 1: alone turns out to be the focus of the new consultant.

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Speaker 1: Come on, you mentioned sixty seven. Let's drive forward all

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Speaker 1: of fifty years to sixteen eighty and I use that

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Speaker 1: really one of the essays of the year. Katherine Rampa

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Speaker 1: on the Washington Post doing a nice clinic on mercantile

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Speaker 1: is um? Is that really all we're talking about, Kamal

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Speaker 1: is the president's nostalgia for a zero sum mathematics and

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Speaker 1: non marginale within economics where we're just bombarded ourselves. Back

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Speaker 1: to a discourse from free Revolutionary America. That's a good comparison, Tom,

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Speaker 1: because again, when you go back to mercantilism. It was

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Speaker 1: always a case of beggar thy neighbor policy because trade

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Speaker 1: was seen as a zero sum game. Your trade surplus

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Speaker 1: is my loss, so I have to have a trade

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Speaker 1: surplus and inflict a deficit on your country. That seems

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Speaker 1: to be again the very same principle that's being done.

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Speaker 1: Trade deficit is seen immediately as having been cheated out

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Speaker 1: by the trade partners. Um that is not going to work.

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Speaker 1: Mercantilism simply didn't work because it led to too many

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Speaker 1: trade conflicts. Mercantilism was again tried tom going even futured

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Speaker 1: into the future from sixteen eighty. It was tried in

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Speaker 1: nineteen thirties the Smooth Holly Tariff Act of June increased

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Speaker 1: tariffs in the United States. The objective was a good

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Speaker 1: one to try to protect American farmers, and but what

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Speaker 1: it turned out to you was to cause retaliation by

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Speaker 1: the trade partners, and very soon there was no victor.

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Speaker 1: And so my fear here is unless we change the attitude,

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Speaker 1: if we continue with the milk untilist policies currently, there

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Speaker 1: will be no no victors. And particularly the global recession

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Speaker 1: that people fear may become a reality. But sure, you

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Speaker 1: said earlier that the U S economy is basically self contained.

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Speaker 1: The US economy is self contained. But what happened, But

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Speaker 1: still you have a significant chunk of large companies them

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Speaker 1: SMP companies. You're talking about forty five to fifty of

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Speaker 1: earnings coming from abroad. That has a hit. So what

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Speaker 1: happens now is that even though exports are a small

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Speaker 1: part of the overall economy, for some corporations, they are

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Speaker 1: a big part of earnings. So eventually it then feeds

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Speaker 1: down in terms of reduce most employment, reduced hiding, and

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Speaker 1: then it shows up on in terms of the stock

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Speaker 1: market behavior, and then there is a fallout on the

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Speaker 1: overall economy. So you don't have it immediately as an

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Speaker 1: export GDP ratio measurement PIMP, but you have it when

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Speaker 1: you look at the secondary and tertiary effects of the changes.

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Speaker 1: This has been wonderful. Thank you so much for your

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Speaker 1: work with us here at Bloomberg Surveillance. Greatly appreciated. Street

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Speaker 1: Comar on the American economy. Thanks for listening to the

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

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00:29:44,800 --> 00:29:49,000
Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at

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Speaker 1: Tom Keane Before the podcast. You can always catch us worldwide.

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Speaker 1: I'm Bloomberg Radio