1
00:00:00,080 --> 00:00:12,640
Speaker 1: Yeah, Welcome to the Bloomberg Surveillance podcast and I'm Tom

2
00:00:12,720 --> 00:00:15,720
Speaker 1: Keane jay Ley. We bring you insight from the best

3
00:00:15,800 --> 00:00:21,280
Speaker 1: in economics, finance, investment, and international relations. Find Bloomberg Surveillance

4
00:00:21,280 --> 00:00:25,720
Speaker 1: on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course,

5
00:00:26,079 --> 00:00:33,599
Speaker 1: on the Bloomberg John, I guess here in New York City,

6
00:00:33,640 --> 00:00:36,519
Speaker 1: I'm ready place to say, is no real Rebeti Rebetti

7
00:00:36,560 --> 00:00:39,640
Speaker 1: macrob Associates chairman and n y U Stunt School of

8
00:00:39,680 --> 00:00:43,040
Speaker 1: Business professor. No real good morning to you, sir, Good

9
00:00:43,040 --> 00:00:45,440
Speaker 1: morning Donathan. Instead of a bunch of fancy n y

10
00:00:45,520 --> 00:00:48,800
Speaker 1: U economics, I want to talk about somebody listening to

11
00:00:48,840 --> 00:00:53,080
Speaker 1: this in Iowa or Oklahoma, or maybe it's lumber up

12
00:00:53,080 --> 00:00:56,279
Speaker 1: in Montana or Washington State, John, somewhere, you know, like

13
00:00:56,360 --> 00:01:00,360
Speaker 1: dairy in Wisconsin. Whatever. We got this mumbo joe umboard

14
00:01:00,360 --> 00:01:03,680
Speaker 1: trade stuff, and it's everybody in suits and ties and

15
00:01:03,760 --> 00:01:07,119
Speaker 1: fancy white shirts like you're wearing. Forget about it. What

16
00:01:07,280 --> 00:01:13,480
Speaker 1: does that tariff mean for producers in services and goods?

17
00:01:14,360 --> 00:01:17,080
Speaker 1: Not in three zip codes in New York, not in

18
00:01:17,200 --> 00:01:20,199
Speaker 1: two zip codes in Washington. Well, it means two things.

19
00:01:20,319 --> 00:01:24,160
Speaker 1: One is that any farmers selling soybeans or other products

20
00:01:24,200 --> 00:01:27,240
Speaker 1: to China is going to face now massive tariffs, and

21
00:01:27,280 --> 00:01:30,560
Speaker 1: therefore they're starting to hurt and complain and too as

22
00:01:30,560 --> 00:01:32,520
Speaker 1: a consumer, think of it. If you impose it tw

23
00:01:34,040 --> 00:01:37,760
Speaker 1: tariff on five hundred billions of inputs from China, that's

24
00:01:37,959 --> 00:01:41,600
Speaker 1: like tax of a hundred and twenty five billion dollar

25
00:01:41,760 --> 00:01:45,280
Speaker 1: a year on the US consumer. It's a massive tax

26
00:01:45,319 --> 00:01:49,040
Speaker 1: increase hundred and twenty five billion. So it hurts the consumer,

27
00:01:49,640 --> 00:01:52,840
Speaker 1: it hurts the producer, and it makes the US economy

28
00:01:52,920 --> 00:01:56,600
Speaker 1: works off. It's a disaster. When the President sends China's

29
00:01:56,600 --> 00:01:59,760
Speaker 1: paying that tax, is that a campaign message? Do you

30
00:01:59,840 --> 00:02:04,360
Speaker 1: think the cons directly directly? Do you think the consumers

31
00:02:04,400 --> 00:02:08,320
Speaker 1: understand that they are the individuals paying this Well, he's

32
00:02:08,360 --> 00:02:10,560
Speaker 1: saying China is paying the tax in the same way

33
00:02:10,600 --> 00:02:12,880
Speaker 1: we say that Max is going to pay for the wall.

34
00:02:13,120 --> 00:02:17,120
Speaker 1: That's nonsense, because once you impose the tax, what's gonna

35
00:02:17,160 --> 00:02:19,880
Speaker 1: happen is that the price of imported goods from China

36
00:02:19,919 --> 00:02:23,359
Speaker 1: the United States is gonna go up, mostly by the

37
00:02:23,400 --> 00:02:26,320
Speaker 1: amount of the tax. Now could go out by less

38
00:02:26,760 --> 00:02:28,880
Speaker 1: than the amount of the tax if the Chinese cut

39
00:02:29,040 --> 00:02:31,480
Speaker 1: down the dollar price of their goods and there will

40
00:02:31,520 --> 00:02:34,080
Speaker 1: be some impact of that, but most of the impact

41
00:02:34,160 --> 00:02:37,320
Speaker 1: of a tariff is imposed on importers. There is the

42
00:02:37,440 --> 00:02:39,800
Speaker 1: U S consumers as simple as that is a hundred

43
00:02:39,800 --> 00:02:43,519
Speaker 1: and twenty five billion dollars tax on the US consumer,

44
00:02:43,639 --> 00:02:46,240
Speaker 1: on the U S assholes. And it's the most regressive

45
00:02:46,600 --> 00:02:50,120
Speaker 1: tax of all because those consumer goods about from China

46
00:02:50,160 --> 00:02:52,120
Speaker 1: that you buy wal match that are cheap goods that

47
00:02:52,120 --> 00:02:54,760
Speaker 1: allow you to have per capita income rising and your

48
00:02:54,800 --> 00:02:57,760
Speaker 1: present power. So is there a regressive tax or not

49
00:02:57,840 --> 00:03:00,560
Speaker 1: only is the tax, but the regress sime tax is

50
00:03:00,560 --> 00:03:04,720
Speaker 1: the most exective tax of all. Translate this for John

51
00:03:04,760 --> 00:03:07,480
Speaker 1: Pharaoh of the Midlands. Is the Midlands? Is that work

52
00:03:09,000 --> 00:03:13,120
Speaker 1: is the lake country that's further north, that's over, that's

53
00:03:13,120 --> 00:03:15,799
Speaker 1: my lake superior. But but if you look at the

54
00:03:15,840 --> 00:03:17,919
Speaker 1: Middlands of England, you go back to the corn laws.

55
00:03:18,600 --> 00:03:24,000
Speaker 1: Is President Trump dragging the corn laws of England Pharaoh's

56
00:03:24,000 --> 00:03:27,880
Speaker 1: great great grandfather? Are you dragging the corn laws into

57
00:03:27,919 --> 00:03:30,959
Speaker 1: the twenty one century? Is that all we're doing effectively

58
00:03:31,000 --> 00:03:34,040
Speaker 1: is the same thing? Is protection? Is that protection is

59
00:03:34,120 --> 00:03:38,080
Speaker 1: might benefit and the margin some producers in the import

60
00:03:38,160 --> 00:03:42,280
Speaker 1: computing sectors. But that's a very small number of people,

61
00:03:42,560 --> 00:03:46,040
Speaker 1: but it hurts all consumers. So the same workers as

62
00:03:46,040 --> 00:03:50,040
Speaker 1: consumers are worse off. And anyone was in an export

63
00:03:50,040 --> 00:03:53,360
Speaker 1: producing business, their jobs, that income, their profits are gonna

64
00:03:53,400 --> 00:03:57,560
Speaker 1: go down. So you're making worse off consumers and exporters

65
00:03:57,600 --> 00:04:02,000
Speaker 1: for the benefit of a very small number of essentially producers.

66
00:04:02,000 --> 00:04:04,080
Speaker 1: And that would be like Lord Ferrell back in the

67
00:04:04,120 --> 00:04:07,640
Speaker 1: seventeenth century. John there wasn't a Lord Frown. He was

68
00:04:07,640 --> 00:04:11,080
Speaker 1: probably insistily. The cost are huge, you know. Like you know,

69
00:04:11,120 --> 00:04:14,480
Speaker 1: a few years ago we imposed the taxes on tires

70
00:04:14,560 --> 00:04:18,760
Speaker 1: imported by China. Was estimated that the cost for every

71
00:04:18,839 --> 00:04:21,480
Speaker 1: job that was saved in the tarry industry West was

72
00:04:21,520 --> 00:04:23,680
Speaker 1: a million dollar. I mean, you can just give a

73
00:04:23,680 --> 00:04:26,800
Speaker 1: substitut to those workers and not impose the tax on

74
00:04:26,839 --> 00:04:30,080
Speaker 1: all the consumers. So it's a tax that is totally distory.

75
00:04:30,360 --> 00:04:33,960
Speaker 1: A final question, it's an important one. The Chinese behavior

76
00:04:34,000 --> 00:04:37,600
Speaker 1: hasn't changed towards trade. It needs to change. That's an overwhelm.

77
00:04:37,600 --> 00:04:40,520
Speaker 1: We can census among economists that it needs to change.

78
00:04:40,839 --> 00:04:43,599
Speaker 1: The objective of this administration is to get the Chinese

79
00:04:43,600 --> 00:04:45,720
Speaker 1: to change. You're saying this is the wrong way. What's

80
00:04:45,720 --> 00:04:48,240
Speaker 1: the right way. Well, it's the wrong way because they're

81
00:04:48,279 --> 00:04:51,000
Speaker 1: going to retaliate. They cannot lose face. You want to

82
00:04:51,040 --> 00:04:53,760
Speaker 1: control the rise of the power of China, the right

83
00:04:53,800 --> 00:04:56,719
Speaker 1: way is to do it the multilaterally, not just alone,

84
00:04:56,760 --> 00:04:59,919
Speaker 1: but with Europe, Japan in others way of complained about China,

85
00:05:00,360 --> 00:05:02,880
Speaker 1: and do it in a way that you start negotiation

86
00:05:02,960 --> 00:05:06,680
Speaker 1: and you put pressure of them. If you start unilateral tariffs,

87
00:05:06,680 --> 00:05:09,000
Speaker 1: they're gonna retaliate, and yes, they will live to a

88
00:05:09,040 --> 00:05:13,240
Speaker 1: much ate on goods, but they can impose massive restrictions

89
00:05:13,240 --> 00:05:16,160
Speaker 1: on hundreds of billions of dollars of foreign direct investment

90
00:05:16,200 --> 00:05:19,560
Speaker 1: by Apple GM and hundreds of business they've done business

91
00:05:19,680 --> 00:05:22,520
Speaker 1: in China, so they're gonna hurt. They lend their currents

92
00:05:22,560 --> 00:05:25,040
Speaker 1: in a weekend by eight percent, and they could even

93
00:05:25,120 --> 00:05:28,960
Speaker 1: eventually have the corruption of dumping US treasury. So that

94
00:05:29,120 --> 00:05:31,520
Speaker 1: a wide variety of options, and they take the long

95
00:05:31,600 --> 00:05:34,360
Speaker 1: term view. They don't have election in three months, so

96
00:05:34,400 --> 00:05:36,520
Speaker 1: they can wait and play it out over the next

97
00:05:36,560 --> 00:05:39,839
Speaker 1: two decades. Our nuclearruption is the joy of having you

98
00:05:39,960 --> 00:05:43,080
Speaker 1: hear from Milan. And of course, with John Ferrell's love

99
00:05:43,160 --> 00:05:46,160
Speaker 1: for a Simolan, we go out to segment with the

100
00:05:46,279 --> 00:05:52,200
Speaker 1: A Simon fight, So you are not realists, not gonna

101
00:05:52,200 --> 00:05:59,880
Speaker 1: come back now interest of her life. That's beautiful, Thank

102
00:05:59,880 --> 00:06:02,800
Speaker 1: you tell King full of months of pain, this makes

103
00:06:02,880 --> 00:06:21,080
Speaker 1: up for it. I appreciate that we're gonna do a

104
00:06:21,120 --> 00:06:25,080
Speaker 1: more learned view here on the financial system that the

105
00:06:25,200 --> 00:06:28,320
Speaker 1: U S confronts right now in emerging market Stephanie Siegel

106
00:06:28,680 --> 00:06:31,560
Speaker 1: out of Chapel Hill and the Johns Hopkins University School

107
00:06:31,560 --> 00:06:36,080
Speaker 1: of Advanced International Studies, does this looking sort of broader

108
00:06:36,120 --> 00:06:38,520
Speaker 1: and deeper where Rubini is looking at more of the

109
00:06:38,560 --> 00:06:42,400
Speaker 1: crisis dynamics and the actual political dynamics. How about just

110
00:06:42,680 --> 00:06:46,839
Speaker 1: where are we in finance, Stephanie. Good morning Stephanie Siegal

111
00:06:47,000 --> 00:06:51,320
Speaker 1: and I love your idea of first best responses. Do

112
00:06:51,440 --> 00:06:55,040
Speaker 1: they need the International Monetary Fund to make first best

113
00:06:55,160 --> 00:07:00,880
Speaker 1: response or is there a new em responsibility? Well, first off,

114
00:07:00,880 --> 00:07:03,880
Speaker 1: good morning, it's nice to be with you. UM. I

115
00:07:03,920 --> 00:07:06,200
Speaker 1: think the point of the piece I think that you

116
00:07:06,240 --> 00:07:11,040
Speaker 1: were referring to was to differentiate between countries that are

117
00:07:11,040 --> 00:07:16,560
Speaker 1: facing just fundamental economic vulnerabilities and um, those countries that

118
00:07:16,600 --> 00:07:19,200
Speaker 1: could potentially get swept up in a broader e M

119
00:07:19,280 --> 00:07:23,360
Speaker 1: contagion and the first best response that I was referring

120
00:07:23,400 --> 00:07:27,920
Speaker 1: to was first off just stronger, more fundamental policies that

121
00:07:27,960 --> 00:07:31,960
Speaker 1: address some of the economic imbalances. But then also recognizing

122
00:07:32,000 --> 00:07:34,840
Speaker 1: that we're going into a period of vulnerability for e

123
00:07:35,040 --> 00:07:38,240
Speaker 1: m s. We're going into a period of um of

124
00:07:38,360 --> 00:07:42,040
Speaker 1: interest rate hikes and dollar strengthening, and that leaves EMS

125
00:07:42,120 --> 00:07:45,200
Speaker 1: more vulnerable. Um. And so if you're in a world

126
00:07:45,240 --> 00:07:48,600
Speaker 1: where financing for those em starts to dry up, UM,

127
00:07:48,760 --> 00:07:51,960
Speaker 1: what are the options that those countries have? And but

128
00:07:52,680 --> 00:07:56,560
Speaker 1: nique unique here? Dr seagells the idea of dollarization. That's

129
00:07:56,600 --> 00:07:58,960
Speaker 1: a new word, and that I'm sure we had it

130
00:08:00,080 --> 00:08:02,400
Speaker 1: eight we had it in two thousand seven. But am

131
00:08:02,440 --> 00:08:06,280
Speaker 1: I right that the dollarization, the dollar denominated effect of

132
00:08:06,320 --> 00:08:11,560
Speaker 1: all this debt on EM is dramatically different this time? Um?

133
00:08:11,600 --> 00:08:14,040
Speaker 1: I don't know if I would say that it's dramatically different.

134
00:08:14,120 --> 00:08:16,440
Speaker 1: So what is different this time? So we've had a

135
00:08:16,520 --> 00:08:21,160
Speaker 1: decade of very low global interest rates UM that has

136
00:08:21,240 --> 00:08:24,920
Speaker 1: actually encouraged a great deal of borrowing, including from non

137
00:08:24,960 --> 00:08:29,280
Speaker 1: financial corporates, and a lot of that emerging market borrowing

138
00:08:29,320 --> 00:08:33,280
Speaker 1: by those corporates has been in foreign currency, in dollars.

139
00:08:33,960 --> 00:08:36,760
Speaker 1: So as the dollar is strengthening, it becomes that much

140
00:08:36,800 --> 00:08:39,600
Speaker 1: harder for those e m s to repay those debts.

141
00:08:40,240 --> 00:08:43,000
Speaker 1: And that's that's part of the phenomenon right now that's

142
00:08:43,080 --> 00:08:45,760
Speaker 1: driving some of the broader e M weakness Apart from

143
00:08:45,800 --> 00:08:48,880
Speaker 1: just the pure fundamentals. Stephanie, what's the dominant channel for

144
00:08:48,920 --> 00:08:53,679
Speaker 1: contagion UM? That is an excellent question. I mean, I

145
00:08:53,720 --> 00:08:55,880
Speaker 1: think you would first look at what are the real

146
00:08:56,040 --> 00:08:59,800
Speaker 1: economic linkages between some of the vulnerable em so, thinking

147
00:09:00,080 --> 00:09:03,880
Speaker 1: in terms of of just pure trade and those trade linkages,

148
00:09:03,920 --> 00:09:06,439
Speaker 1: I think most people think that the e m s

149
00:09:06,480 --> 00:09:09,360
Speaker 1: that are under the most stressed right now, that they're

150
00:09:09,760 --> 00:09:13,040
Speaker 1: economic linkages to the rest of the world are are manageable.

151
00:09:13,679 --> 00:09:16,600
Speaker 1: And so then you look to financial linkages that are

152
00:09:16,640 --> 00:09:20,280
Speaker 1: their banks and other investors that have exposure to the

153
00:09:20,559 --> 00:09:22,719
Speaker 1: those e M s UM, and I think a lot

154
00:09:22,760 --> 00:09:26,320
Speaker 1: of people feel like those UM exposures are also manageable,

155
00:09:26,480 --> 00:09:29,960
Speaker 1: in part because of the cleanup that took place after

156
00:09:30,080 --> 00:09:34,440
Speaker 1: the global financial crisis. UM. The third area, and this

157
00:09:34,520 --> 00:09:37,600
Speaker 1: is kind of the unknown right now, is just the

158
00:09:37,640 --> 00:09:42,480
Speaker 1: broader risk sentiment UM and how investors feel about the

159
00:09:42,520 --> 00:09:46,160
Speaker 1: overall environment. And I think that's where you start to

160
00:09:46,200 --> 00:09:49,360
Speaker 1: get into UM. What are what are some of the

161
00:09:49,440 --> 00:09:52,120
Speaker 1: unknowns right now? And and first and foremost in a

162
00:09:52,120 --> 00:09:54,560
Speaker 1: lot of people's mind is where does this trade war

163
00:09:54,600 --> 00:09:58,439
Speaker 1: between the US and China UM end up? And are

164
00:09:58,480 --> 00:10:01,680
Speaker 1: we looking at something that would potentially be resolved quickly

165
00:10:01,920 --> 00:10:03,800
Speaker 1: or are we looking at something that could be much

166
00:10:03,840 --> 00:10:08,880
Speaker 1: more protracted and have much broader impacts UM beyond just

167
00:10:08,960 --> 00:10:11,600
Speaker 1: the US and China, Stephanie. Investors look at those three

168
00:10:11,640 --> 00:10:13,559
Speaker 1: things that you just described. They look at those three

169
00:10:13,600 --> 00:10:16,559
Speaker 1: things and they conclude that the United States will be unaffected,

170
00:10:16,760 --> 00:10:19,199
Speaker 1: it will be insulated. Is that your conclusion as well?

171
00:10:19,280 --> 00:10:22,880
Speaker 1: Or do you look at it differently? Um? I look

172
00:10:22,920 --> 00:10:25,839
Speaker 1: at it differently in the sense that I think if

173
00:10:25,880 --> 00:10:29,560
Speaker 1: this is kind of a near term phenomenon it um

174
00:10:29,600 --> 00:10:33,160
Speaker 1: it is certainly manageable. And in particular, if the US

175
00:10:33,400 --> 00:10:36,680
Speaker 1: knows what it is that it's asking of China and

176
00:10:36,800 --> 00:10:41,199
Speaker 1: they can actually enter into a negotiation where each side

177
00:10:41,200 --> 00:10:44,480
Speaker 1: can make some progress, then then you're looking at a

178
00:10:44,559 --> 00:10:47,960
Speaker 1: quicker resolution. I think where people get concerned, and I

179
00:10:48,080 --> 00:10:50,400
Speaker 1: agree with this is if we're looking at a much

180
00:10:50,440 --> 00:10:56,079
Speaker 1: broader trend toward um deliberalization and deglobalization, and what does

181
00:10:56,120 --> 00:10:59,679
Speaker 1: that mean for the global outlook. Um, And there I

182
00:10:59,720 --> 00:11:02,319
Speaker 1: think the much bleaker story. And what's so interesting year

183
00:11:02,480 --> 00:11:04,880
Speaker 1: is the overlay which we heard a little bit from

184
00:11:04,960 --> 00:11:07,400
Speaker 1: Lawrence Cudlow yesterday at the Economic Club of New York,

185
00:11:07,400 --> 00:11:09,839
Speaker 1: and we heard it a lot Stephanie Siegel from Nora

186
00:11:10,040 --> 00:11:14,840
Speaker 1: Robini an hour ago, is the overlay of US fiscal policy.

187
00:11:15,240 --> 00:11:18,600
Speaker 1: We talked about Chairman Powell is central Banker to the world.

188
00:11:19,440 --> 00:11:23,080
Speaker 1: Is our fiscal deficit the fiscal impulse to the e

189
00:11:23,240 --> 00:11:28,000
Speaker 1: M world? Right? And so you're are you kind of

190
00:11:28,040 --> 00:11:31,679
Speaker 1: asking what the implications are for our Absolutely at one

191
00:11:31,720 --> 00:11:34,400
Speaker 1: point three one point for chronic deficit, we get some

192
00:11:34,480 --> 00:11:36,280
Speaker 1: form of slowdown, we go out to one eight two

193
00:11:36,320 --> 00:11:39,600
Speaker 1: trillion deficit. How does that affect Ecuador? How does that

194
00:11:39,640 --> 00:11:43,960
Speaker 1: affect Indonesia? Yeah, and I think there's um. There are

195
00:11:44,000 --> 00:11:47,439
Speaker 1: a couple of channels. Again. I think one this immediate

196
00:11:47,480 --> 00:11:50,319
Speaker 1: fiscal impulse that we're seeing the fact that growth is

197
00:11:50,400 --> 00:11:52,360
Speaker 1: much higher in the US as a result of this

198
00:11:52,440 --> 00:11:55,640
Speaker 1: fiscal stimulus. UM. On the one hand, because of those

199
00:11:55,679 --> 00:11:59,920
Speaker 1: real linkages, that's actually positive for the global economy, except

200
00:12:00,320 --> 00:12:03,679
Speaker 1: it also presents a very large financing need. And so

201
00:12:03,840 --> 00:12:06,640
Speaker 1: in this environment where you've got higher interest rates in

202
00:12:06,640 --> 00:12:11,000
Speaker 1: the US and dollar strength and an additional financing need.

203
00:12:11,120 --> 00:12:14,120
Speaker 1: Are we the United States then pulling financing away from

204
00:12:14,120 --> 00:12:16,679
Speaker 1: the rest of the world. UM, So that poses a

205
00:12:16,800 --> 00:12:20,200
Speaker 1: risk to e M S and then a risk two

206
00:12:20,200 --> 00:12:22,760
Speaker 1: E M S UM and to ourselves. Frankly, is what

207
00:12:22,920 --> 00:12:25,880
Speaker 1: happens after this kind of sugar high of fiscal stimulus

208
00:12:25,880 --> 00:12:28,720
Speaker 1: wears off, And that I think is a concern for everybody.

209
00:12:28,760 --> 00:12:31,040
Speaker 1: It's definitely the first concern. It's a concern that the

210
00:12:31,120 --> 00:12:34,000
Speaker 1: Central Bank Governor of India race several months ago that

211
00:12:34,120 --> 00:12:36,360
Speaker 1: the Treasury together with the ballet sheet roll off at

212
00:12:36,400 --> 00:12:38,760
Speaker 1: the FED, which just going to suck up dollar liquidity

213
00:12:38,800 --> 00:12:43,360
Speaker 1: from e M. Is that playing out already? That I

214
00:12:43,400 --> 00:12:45,400
Speaker 1: think is hard to tell. I mean, we we have

215
00:12:45,600 --> 00:12:51,160
Speaker 1: already seen UM outflows from EMS UM in UH in

216
00:12:51,200 --> 00:12:53,280
Speaker 1: the first half of the year. So I think you

217
00:12:53,280 --> 00:12:55,720
Speaker 1: know there are a couple of drivers behind that. Is

218
00:12:55,960 --> 00:12:59,640
Speaker 1: UM increased demand from the United States and specifically for

219
00:13:00,080 --> 00:13:03,680
Speaker 1: US treasuries UM. Is that is that a factor playing

220
00:13:03,720 --> 00:13:06,559
Speaker 1: into it? I think? So it's definitely great to cant

221
00:13:06,559 --> 00:13:10,120
Speaker 1: shout with you, C S I S Deputy Director and

222
00:13:10,400 --> 00:13:23,360
Speaker 1: senior fellow. So let's talk to Jane Furley joining US

223
00:13:23,360 --> 00:13:26,719
Speaker 1: sound of the Global Capital of FEORIG Exchange in London. Rabbabanks,

224
00:13:26,760 --> 00:13:30,079
Speaker 1: Senior currency analyst, Jane, let's get to the big debate.

225
00:13:30,120 --> 00:13:32,559
Speaker 1: It's the US dollar debate and an unloved rally through

226
00:13:32,559 --> 00:13:37,040
Speaker 1: the front half of this year. What's your base case now, Jane, Well,

227
00:13:37,080 --> 00:13:39,760
Speaker 1: we still think that you'd be better off holding long dollars.

228
00:13:39,760 --> 00:13:42,120
Speaker 1: I mean, I think what we've probably seen is some

229
00:13:42,200 --> 00:13:44,319
Speaker 1: position adjustment. And let you mentioned that rally in the

230
00:13:44,360 --> 00:13:46,320
Speaker 1: dollar has gone a long way, but there has been

231
00:13:46,640 --> 00:13:49,079
Speaker 1: I know it shift perhaps and some of the factors

232
00:13:49,080 --> 00:13:51,320
Speaker 1: that the market is talking about a shift perhaps and

233
00:13:51,760 --> 00:13:55,080
Speaker 1: in concerns about where US growth is going to go

234
00:13:55,120 --> 00:13:58,439
Speaker 1: on the back of a trade excuse me, trade wars,

235
00:13:58,960 --> 00:14:01,680
Speaker 1: a new debate back growth potentially been hit there, and

236
00:14:01,720 --> 00:14:06,280
Speaker 1: also some concerns about that flowing or capped inflation potential.

237
00:14:06,720 --> 00:14:09,240
Speaker 1: Also in the US, we had softer data on that

238
00:14:09,320 --> 00:14:12,640
Speaker 1: front last week, So I think this is profit taking.

239
00:14:12,880 --> 00:14:15,400
Speaker 1: I still think that emerging markets are going to be

240
00:14:15,520 --> 00:14:18,520
Speaker 1: vulnerable in the wake of the pressure on China, and

241
00:14:19,000 --> 00:14:22,120
Speaker 1: I do think that the long dollar positions will win through.

242
00:14:22,120 --> 00:14:23,800
Speaker 1: But I do think right now we are seeing some

243
00:14:23,840 --> 00:14:26,680
Speaker 1: position adjustment. What do you think, Jane, right now is

244
00:14:26,680 --> 00:14:29,760
Speaker 1: the dominant concern for e m f X the dominant

245
00:14:29,800 --> 00:14:31,720
Speaker 1: concern and where is it coming from? Most people on

246
00:14:31,760 --> 00:14:34,360
Speaker 1: the morning light this morning might point to trade. Kit

247
00:14:34,520 --> 00:14:38,360
Speaker 1: Jukes is calling the trade situation Washington water torch. Just

248
00:14:38,400 --> 00:14:41,320
Speaker 1: this drip drip of tariff news together with FED hikes.

249
00:14:41,320 --> 00:14:44,520
Speaker 1: What do you look at. Well, I think this has

250
00:14:44,520 --> 00:14:46,360
Speaker 1: been the theme all year, But I think what's different.

251
00:14:46,400 --> 00:14:48,440
Speaker 1: There's the emphasis. If you go back to the beginning

252
00:14:48,440 --> 00:14:50,440
Speaker 1: of the year, though there was a lot of optimism

253
00:14:50,440 --> 00:14:54,040
Speaker 1: that the trade situation would brush over, that the it

254
00:14:54,080 --> 00:14:56,320
Speaker 1: would be a short run thing, there would be a compromise,

255
00:14:56,400 --> 00:14:58,800
Speaker 1: and by now we've more or less a forgotten about it.

256
00:14:58,800 --> 00:15:01,400
Speaker 1: But I think right now, you know, many more commentators

257
00:15:01,480 --> 00:15:04,160
Speaker 1: are coming to recognize that this can really be a

258
00:15:04,280 --> 00:15:07,520
Speaker 1: drawn out process. And I think that's the change, that's

259
00:15:07,560 --> 00:15:09,840
Speaker 1: what's really getting under the market skin. And I think

260
00:15:10,040 --> 00:15:12,800
Speaker 1: if we look to emerging markets, well, they are obviously

261
00:15:12,800 --> 00:15:16,280
Speaker 1: in the front line of a full away in market confidence.

262
00:15:16,280 --> 00:15:19,640
Speaker 1: And we've seen a capital outflow from the emerging markets

263
00:15:19,680 --> 00:15:22,920
Speaker 1: really from the beginning of the at least since the spring.

264
00:15:23,320 --> 00:15:25,840
Speaker 1: But it wasn't until maybe the summer that this became

265
00:15:25,880 --> 00:15:29,600
Speaker 1: a much broader effect, that this began to really rattle

266
00:15:29,760 --> 00:15:32,360
Speaker 1: a confidence in a much bigger way. But I do

267
00:15:32,560 --> 00:15:35,360
Speaker 1: think that that the trade ward thing is is very

268
00:15:35,440 --> 00:15:37,440
Speaker 1: much in the front line. We just don't know how

269
00:15:37,520 --> 00:15:39,240
Speaker 1: much it's going to slow Chinese guys. We don't know

270
00:15:39,240 --> 00:15:41,640
Speaker 1: how much it's going to knock onto other economies. I

271
00:15:41,760 --> 00:15:46,120
Speaker 1: just looked at the eurindollar volatility surface and it's fairly symmetrical.

272
00:15:46,200 --> 00:15:48,560
Speaker 1: There doesn't seem to be or one way bet. Where

273
00:15:48,800 --> 00:15:51,320
Speaker 1: is the one way bet that you can play against

274
00:15:51,520 --> 00:15:56,720
Speaker 1: right now? Is it weak yen and you push against that? Well? No,

275
00:15:56,880 --> 00:15:58,640
Speaker 1: I think I think the end is as a really

276
00:15:58,640 --> 00:16:01,240
Speaker 1: confusing one at easter. You know, if you're looking in

277
00:16:01,280 --> 00:16:04,000
Speaker 1: on the phone exchange market this year, because you've seen

278
00:16:04,000 --> 00:16:06,440
Speaker 1: this sell off in emerging markets this year, and many

279
00:16:06,440 --> 00:16:08,360
Speaker 1: people might be forgiven for thinking, well that means of

280
00:16:08,440 --> 00:16:10,840
Speaker 1: cause the year and it's the safe haven currency, Well

281
00:16:11,080 --> 00:16:13,280
Speaker 1: in that case it should be really quite strong. But

282
00:16:13,520 --> 00:16:16,800
Speaker 1: I think what's happened is that the markets looked at

283
00:16:16,840 --> 00:16:19,560
Speaker 1: the higher interest rates coming up we're coming through from

284
00:16:19,600 --> 00:16:21,760
Speaker 1: the Federal Reserve. It's looking at the strong growth story

285
00:16:21,760 --> 00:16:25,560
Speaker 1: in the US, and actually, you know, many Japanese investors,

286
00:16:26,360 --> 00:16:29,600
Speaker 1: particularly perhaps I thought, well, actually I think I'd rather

287
00:16:29,640 --> 00:16:31,960
Speaker 1: put my money in the dollar, pick up a little

288
00:16:31,960 --> 00:16:35,480
Speaker 1: bit of yield. And therefore you've seen the years it's

289
00:16:35,560 --> 00:16:38,160
Speaker 1: not as as as strong as as many people might

290
00:16:38,240 --> 00:16:41,400
Speaker 1: have expected, given the sell off an emerging market, So

291
00:16:41,480 --> 00:16:44,200
Speaker 1: interest rate differentials really coming through. I think the days

292
00:16:44,240 --> 00:16:47,080
Speaker 1: when the end really benefits is when we have some

293
00:16:47,200 --> 00:16:51,120
Speaker 1: sort of shock, some sort of unforeseen bad news, and

294
00:16:51,160 --> 00:16:53,240
Speaker 1: we have this knee jerk back into the end. But

295
00:16:53,280 --> 00:16:55,840
Speaker 1: as long as the interest rate of differentials are seen

296
00:16:55,920 --> 00:16:57,920
Speaker 1: to be boosting the dollar, I think it's going to

297
00:16:58,000 --> 00:17:01,440
Speaker 1: be difficult for um to see the end pick up

298
00:17:01,480 --> 00:17:03,760
Speaker 1: too much ground against the US dollar. Well, Jane of right,

299
00:17:03,800 --> 00:17:06,040
Speaker 1: differential as a plan into the dollar en cross, Why

300
00:17:06,080 --> 00:17:08,440
Speaker 1: is it not playing into the euro dollar cross? Because

301
00:17:08,480 --> 00:17:10,760
Speaker 1: your dollars at to one seventeen. What's it doing up

302
00:17:10,800 --> 00:17:15,760
Speaker 1: there with rate differentials heavily skewed in the dollars favor? Well,

303
00:17:15,840 --> 00:17:18,080
Speaker 1: you're right. I mean again, if we look back into

304
00:17:18,320 --> 00:17:21,320
Speaker 1: maybe the middle of August, we had you know, lows

305
00:17:21,720 --> 00:17:25,119
Speaker 1: round about one thirteen, and suddenly we're back in in

306
00:17:25,119 --> 00:17:28,000
Speaker 1: in in the Euro's favor again. I think there is

307
00:17:28,040 --> 00:17:30,040
Speaker 1: some position adjustment here. I think the sell off in

308
00:17:30,359 --> 00:17:34,160
Speaker 1: the Euro was probably a little bit too fast through

309
00:17:34,200 --> 00:17:36,760
Speaker 1: the first couple of weeks of August. But I do

310
00:17:36,960 --> 00:17:39,240
Speaker 1: think that when you have a scenario whether you used

311
00:17:39,240 --> 00:17:42,640
Speaker 1: to be has signaled really quite clearly that it's got

312
00:17:42,680 --> 00:17:45,680
Speaker 1: no intention of hiking interest rates, at least to someone

313
00:17:45,920 --> 00:17:48,240
Speaker 1: of next year. When you've got budget issues for for

314
00:17:48,320 --> 00:17:50,359
Speaker 1: Italy two, I think that you might look vulnerable at

315
00:17:50,359 --> 00:17:54,800
Speaker 1: these levels. What is the number one question your clients

316
00:17:54,840 --> 00:17:59,760
Speaker 1: are asking you right now? The number one question from

317
00:18:00,080 --> 00:18:03,480
Speaker 1: UK customers, Irish customers are still very much about Brexit,

318
00:18:03,600 --> 00:18:05,480
Speaker 1: and this of course has been the same situation for

319
00:18:05,960 --> 00:18:11,600
Speaker 1: two years. It's still a huge issue for Sterling. It is, well,

320
00:18:11,640 --> 00:18:13,400
Speaker 1: you know, should we be buying sterling now is there

321
00:18:13,400 --> 00:18:14,840
Speaker 1: going to be a deal? Or should we be saying

322
00:18:14,840 --> 00:18:17,080
Speaker 1: spelling is there going to be no deal? It's obviously

323
00:18:17,160 --> 00:18:19,920
Speaker 1: very very difficult to change that question. But yeah, John

324
00:18:20,040 --> 00:18:22,879
Speaker 1: Jane has two goldfish and her desk ones called even

325
00:18:22,920 --> 00:18:25,080
Speaker 1: you know, there's cold remains, it's just sitting on the fence.

326
00:18:25,119 --> 00:18:31,119
Speaker 1: It just goes just and there's a cold boris Again

327
00:18:31,200 --> 00:18:34,760
Speaker 1: you said those in the UK ask about Brexit. Does

328
00:18:34,800 --> 00:18:40,480
Speaker 1: anyone outside the UK ever ask about Brexit? There? Yes

329
00:18:40,680 --> 00:18:43,000
Speaker 1: is the answer. Yes, Perhaps were not the same sort

330
00:18:43,040 --> 00:18:44,960
Speaker 1: of intensity, but you know that there's a lot of

331
00:18:45,080 --> 00:18:47,640
Speaker 1: There's perhaps three different options that many investors have had.

332
00:18:47,640 --> 00:18:49,920
Speaker 1: They could buy Sterling, they corself early, or they could

333
00:18:49,920 --> 00:18:52,040
Speaker 1: just remain on the sidelines, and I do suspect that

334
00:18:52,480 --> 00:18:55,440
Speaker 1: many investors, if they had the option, have stayed out

335
00:18:55,440 --> 00:18:57,560
Speaker 1: of it. For those that don't have the option, what's

336
00:18:57,560 --> 00:19:01,040
Speaker 1: your advice to them, I think they need to try

337
00:19:01,080 --> 00:19:04,399
Speaker 1: to extremely carefully and clearly. We've seen studying recover some

338
00:19:04,480 --> 00:19:06,160
Speaker 1: ground over the last week and say there's a little

339
00:19:06,200 --> 00:19:09,040
Speaker 1: bit more optimism that November could come through. But I

340
00:19:09,040 --> 00:19:11,760
Speaker 1: think the focus needs to be on the UK government.

341
00:19:12,160 --> 00:19:15,480
Speaker 1: If there is no consensus within the UK government, there's

342
00:19:15,480 --> 00:19:17,080
Speaker 1: got to be a question mark as to whether or

343
00:19:17,119 --> 00:19:20,000
Speaker 1: not a trade deal is going to get through. There

344
00:19:20,080 --> 00:19:22,680
Speaker 1: is of course the potential for stiling to valy hard

345
00:19:23,160 --> 00:19:26,679
Speaker 1: if a deal is signed in November or whenever, but

346
00:19:26,760 --> 00:19:28,879
Speaker 1: if that doesn't get through, rati factor in Parliament and

347
00:19:28,920 --> 00:19:31,600
Speaker 1: Starling still looks pretty fun. Very quickly here, Jane, what

348
00:19:31,680 --> 00:19:36,320
Speaker 1: are you watching within this trade war that we're in.

349
00:19:36,400 --> 00:19:39,240
Speaker 1: The Chinese are responded, They say they will respond as

350
00:19:39,240 --> 00:19:43,159
Speaker 1: a September twenty day. What actually is the one perspective

351
00:19:43,240 --> 00:19:47,919
Speaker 1: or item that you're looking towards. Well, I think we

352
00:19:48,400 --> 00:19:50,000
Speaker 1: I think you're right. I think we need to watch

353
00:19:50,000 --> 00:19:53,280
Speaker 1: what China's do. I think it's quite interesting. Also another

354
00:19:53,400 --> 00:19:56,000
Speaker 1: factor to watch US corporates. We've seen some pushback from

355
00:19:56,080 --> 00:19:59,520
Speaker 1: US corporates over the last few weeks, but specifically US farmers.

356
00:19:59,720 --> 00:20:02,960
Speaker 1: You've go to watch the November mix terms as well

357
00:20:03,000 --> 00:20:05,040
Speaker 1: that this could all be interesting. So don't think there's

358
00:20:05,080 --> 00:20:07,199
Speaker 1: one particular thing. I think this is a confluence of

359
00:20:07,480 --> 00:20:11,040
Speaker 1: a lot of different factors coming together. Jane, fully, thank

360
00:20:11,080 --> 00:20:25,240
Speaker 1: you so much, greatly appreciate it. With robo bank today,

361
00:20:26,720 --> 00:20:30,119
Speaker 1: the chairman of the Senate Judiciary Committee, this, of course,

362
00:20:30,240 --> 00:20:34,160
Speaker 1: is the Senator Charles Grassley, Republican of Iowa. Next Monday,

363
00:20:34,520 --> 00:20:39,880
Speaker 1: he has set aside time to hear from Judge Brett Kavanaugh,

364
00:20:40,320 --> 00:20:43,639
Speaker 1: of course, nominated to the Supreme Court, and to also

365
00:20:43,800 --> 00:20:48,159
Speaker 1: here from Christine Blaze Ford, a research psychologist in Northern

366
00:20:48,200 --> 00:20:54,760
Speaker 1: California who has accused Judge Kavanaugh of sexual assault, and

367
00:20:54,880 --> 00:20:56,520
Speaker 1: here to tell us a little bit more about this

368
00:20:57,160 --> 00:20:59,720
Speaker 1: is our own Bloomberg expert when it comes to the

369
00:21:00,000 --> 00:21:03,760
Speaker 1: Bereame Court. Kimberly, Robinson, Kimberly, thank you very much for

370
00:21:03,880 --> 00:21:08,320
Speaker 1: being with us. Can you explain what this is setting

371
00:21:08,440 --> 00:21:12,120
Speaker 1: up on Monday? What exactly are we going to kind

372
00:21:12,119 --> 00:21:15,680
Speaker 1: of be presented with. Well, this is a really rapidly

373
00:21:15,800 --> 00:21:19,920
Speaker 1: developing story, so what we say now might change completely

374
00:21:19,920 --> 00:21:24,240
Speaker 1: on Monday. But right now, Republican senators have said that

375
00:21:24,320 --> 00:21:28,199
Speaker 1: they want to give Kavanaugh's accuser a form where she

376
00:21:28,240 --> 00:21:32,440
Speaker 1: can really air out the complete allegations that she has

377
00:21:32,480 --> 00:21:35,720
Speaker 1: against Brett Kavanaugh. But then we're also going to hear

378
00:21:35,760 --> 00:21:38,640
Speaker 1: from Brett Kavanaugh so that, in his words, he can

379
00:21:38,720 --> 00:21:44,800
Speaker 1: defend his integrity. Now, the President has defended Judge Kavanaugh,

380
00:21:44,800 --> 00:21:49,600
Speaker 1: correct calling him an outstanding judge and dismissing as quote ridiculous.

381
00:21:50,400 --> 00:21:54,359
Speaker 1: The prospect that Brett Kavanaugh might withdraw his nomination is

382
00:21:54,400 --> 00:21:57,840
Speaker 1: that correct? Well, that's true, but the White House's response

383
00:21:57,920 --> 00:22:01,560
Speaker 1: has been somewhat surprising. They do say that they still

384
00:22:01,560 --> 00:22:05,000
Speaker 1: support Brett Kavanaugh and that they don't intend to pull

385
00:22:05,080 --> 00:22:09,440
Speaker 1: his nomination. At the same time, we saw White House

386
00:22:09,480 --> 00:22:12,160
Speaker 1: advisor Kelly and Conway come out and say that this

387
00:22:12,200 --> 00:22:16,120
Speaker 1: woman's allegations must be given a full hearing um. And

388
00:22:16,200 --> 00:22:19,080
Speaker 1: so it's kind of a bit of a surprise given

389
00:22:19,160 --> 00:22:21,639
Speaker 1: some of the allegations that we've heard against the President

390
00:22:22,160 --> 00:22:24,760
Speaker 1: himself and the tactics we've seen from the White House

391
00:22:24,760 --> 00:22:27,960
Speaker 1: on those. But they are standing by Kavanaugh as of now.

392
00:22:28,160 --> 00:22:31,359
Speaker 1: I believe that that the debate of this, and you know,

393
00:22:31,400 --> 00:22:34,000
Speaker 1: I give credit to Michael and Kimberly, who I thought

394
00:22:34,440 --> 00:22:39,000
Speaker 1: framed Ms. Conway's intent here is the Republican calculus on

395
00:22:39,080 --> 00:22:42,320
Speaker 1: women and on suburban women, the people that you know,

396
00:22:42,359 --> 00:22:45,199
Speaker 1: frankly put Mr Trump over the edge to victory, uh

397
00:22:45,320 --> 00:22:48,639
Speaker 1: in two thousand sixteen. From where you sit with the

398
00:22:48,680 --> 00:22:52,320
Speaker 1: Supreme Court tilt, do you think that politics is just

399
00:22:52,440 --> 00:22:55,280
Speaker 1: all supreme here it has nothing to do with Mr

400
00:22:55,359 --> 00:22:58,400
Speaker 1: Kavanaugh or or you know, the debate at hand, and

401
00:22:58,480 --> 00:23:02,320
Speaker 1: everything to do with the election in November. Well, that's

402
00:23:02,359 --> 00:23:05,639
Speaker 1: really what Brett Kavanaugh's nomination has been all about, you know,

403
00:23:05,760 --> 00:23:09,080
Speaker 1: is for Democrats firing up their base, for Republicans making

404
00:23:09,080 --> 00:23:12,080
Speaker 1: sure that Kavanaugh is confirmed before the mid term elections.

405
00:23:12,400 --> 00:23:15,199
Speaker 1: Um So, politics has been, you know, weighing pretty heavily

406
00:23:15,240 --> 00:23:18,320
Speaker 1: on this nomination from the start, but now being in

407
00:23:18,359 --> 00:23:21,760
Speaker 1: the me too moment um and having these allegations come out,

408
00:23:21,800 --> 00:23:23,840
Speaker 1: of course this is going to be bigger than just

409
00:23:23,920 --> 00:23:27,040
Speaker 1: the Supreme Court, Kimberly, do we know anything about how

410
00:23:27,119 --> 00:23:31,840
Speaker 1: senators on the Judiciary Committee feel about this revelation and

411
00:23:31,960 --> 00:23:35,399
Speaker 1: we have any update on how they might vote? Well,

412
00:23:35,600 --> 00:23:37,720
Speaker 1: I think how they will vote will have to be

413
00:23:37,800 --> 00:23:40,679
Speaker 1: seen on after we have the hearing on Monday. But

414
00:23:40,760 --> 00:23:45,240
Speaker 1: pretty early on, once the accuser came forward publicly, Uh,

415
00:23:45,240 --> 00:23:48,080
Speaker 1: Senator Jeff Flake, who's on the Judiciary Committee, and of

416
00:23:48,119 --> 00:23:51,359
Speaker 1: course they must have vote for Republicans, Um said that

417
00:23:51,400 --> 00:23:54,160
Speaker 1: he was not comfortable moving forward with the hearing until

418
00:23:54,200 --> 00:23:56,360
Speaker 1: they at least heard from her accuser. And I think

419
00:23:56,359 --> 00:23:58,920
Speaker 1: that's really what put the thumbs on the scale Um

420
00:23:58,960 --> 00:24:02,080
Speaker 1: for kind of delaying the nomination and pushing it back

421
00:24:02,119 --> 00:24:05,960
Speaker 1: a little bit. All Right, this is going to be

422
00:24:06,000 --> 00:24:10,080
Speaker 1: a tricky one and that's why I give it to you, uh,

423
00:24:10,200 --> 00:24:13,119
Speaker 1: not to make light of any of these accusations, but

424
00:24:13,600 --> 00:24:18,240
Speaker 1: when are these accusations supposedly to have taken place? Well,

425
00:24:18,280 --> 00:24:21,680
Speaker 1: you know, this is something that Republicans had pointed out

426
00:24:21,760 --> 00:24:24,240
Speaker 1: very early on, is that these accusations took place while

427
00:24:24,280 --> 00:24:26,640
Speaker 1: both of these individuals were in high school, both under

428
00:24:26,680 --> 00:24:29,920
Speaker 1: the age of eighteen, UM, and there there was really

429
00:24:30,000 --> 00:24:32,639
Speaker 1: a robust and important debate about whether or not that

430
00:24:32,800 --> 00:24:36,520
Speaker 1: is disqualifying for Supreme Court nominee. But at this point

431
00:24:36,560 --> 00:24:38,760
Speaker 1: it might be a bit beside the point. And that's

432
00:24:38,800 --> 00:24:42,520
Speaker 1: because Brett Kavanaugh has come out unequivocally against these allegations,

433
00:24:42,560 --> 00:24:44,639
Speaker 1: saying that they don't matter. And so I think the

434
00:24:44,640 --> 00:24:47,520
Speaker 1: issue now will be if you believe this woman, um,

435
00:24:47,600 --> 00:24:50,520
Speaker 1: does lying about it disqualify you for a seat on

436
00:24:50,560 --> 00:24:52,320
Speaker 1: the Supreme Court? And I think that is a much

437
00:24:52,359 --> 00:24:55,760
Speaker 1: easier question, um than the one about the timing. Nicely

438
00:24:55,800 --> 00:25:00,760
Speaker 1: answered Kimberly Robinson, thank you for a journalistic approach there.

439
00:25:06,680 --> 00:25:10,880
Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and

440
00:25:10,920 --> 00:25:16,240
Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast

441
00:25:16,280 --> 00:25:20,520
Speaker 1: platform you prefer. I'm on Twitter at Tom Keene before

442
00:25:20,560 --> 00:25:24,400
Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg

443
00:25:24,480 --> 00:25:24,800
Speaker 1: Radio