1
00:00:03,360 --> 00:00:07,480
Speaker 1: This is Bloomberg Surveillance. We're in trouble with these super

2
00:00:07,560 --> 00:00:13,400
Speaker 1: low rates. We are causing financial instability, We're causing risk taking.

3
00:00:13,520 --> 00:00:16,759
Speaker 1: The world has a golden opportunity at the moment to

4
00:00:16,800 --> 00:00:21,440
Speaker 1: achieve what I call a deflationarily balancing the proper recession.

5
00:00:21,640 --> 00:00:26,040
Speaker 1: Yet and remember, not all profit recessance proceed catchural recession.

6
00:00:26,120 --> 00:00:30,360
Speaker 1: Bloomberg Surveillance your link to the world of economics, finance,

7
00:00:30,440 --> 00:00:34,599
Speaker 1: and investment on Bloomberg Radio. Good morning everyone, Bloomberg Survens,

8
00:00:34,760 --> 00:00:37,080
Speaker 1: Michael McKee and Tom Keed. We are in New York.

9
00:00:37,120 --> 00:00:40,800
Speaker 1: We welcome all of you worldwide, all of you worldwide

10
00:00:40,840 --> 00:00:45,960
Speaker 1: and of course across is a great nation. Bloomer FM

11
00:00:46,000 --> 00:00:49,200
Speaker 1: in Washington, Good morning, Bloomberg trough hunted Boston, Bloomberg elevens.

12
00:00:49,240 --> 00:00:51,839
Speaker 1: Rio in a wonderful really spring like a lot of

13
00:00:51,920 --> 00:00:55,880
Speaker 1: rain yesterday, but gorgeous New York today. And actually how

14
00:00:55,880 --> 00:00:57,800
Speaker 1: the flowers are gonna be with all the rain. Yeah,

15
00:00:57,840 --> 00:01:01,280
Speaker 1: it's a drenching, not not a wrenching like flooding and

16
00:01:01,320 --> 00:01:02,920
Speaker 1: all that, but it was it was a lot of rain.

17
00:01:03,320 --> 00:01:05,959
Speaker 1: Bloomberg nine six the Bay Area. Good morning out in

18
00:01:05,959 --> 00:01:10,360
Speaker 1: San Francisco. Right here, the weather has been spectacular recently.

19
00:01:10,400 --> 00:01:13,200
Speaker 1: This morning Bloomberg Surveillance is always in the eight o'clock hour,

20
00:01:13,680 --> 00:01:18,080
Speaker 1: Brought you by cone Resnick Accounting, Tax Advisory Trust cone

21
00:01:18,080 --> 00:01:21,880
Speaker 1: Resnick for the strategy, the insight your business needs to

22
00:01:21,959 --> 00:01:25,000
Speaker 1: move forward. Find out what cone Resnick thinks. Sign up

23
00:01:25,280 --> 00:01:28,560
Speaker 1: for insights at cone Resnick dot com, c O H

24
00:01:28,680 --> 00:01:34,280
Speaker 1: N R E Z and I c K dot com.

25
00:01:34,280 --> 00:01:37,160
Speaker 1: We have spoken him far too much recently and somehow

26
00:01:37,200 --> 00:01:39,360
Speaker 1: Mike to June, He's gonna be like our best friend.

27
00:01:39,880 --> 00:01:44,280
Speaker 1: He is head of Brexit rate strategy at U b S.

28
00:01:44,520 --> 00:01:48,200
Speaker 1: I'm kidding. John Raith has had a UK rate strategy

29
00:01:48,240 --> 00:01:51,920
Speaker 1: at UBS, which means he is as much as anybody

30
00:01:51,920 --> 00:01:56,480
Speaker 1: I know, knee deep and thinking about where Brexit goes.

31
00:01:56,600 --> 00:02:00,240
Speaker 1: Generate once again, good morning, U will will Brexit the

32
00:02:00,360 --> 00:02:03,440
Speaker 1: only topic of the meeting? I mean? Is it the

33
00:02:03,480 --> 00:02:06,320
Speaker 1: backstory at the G twenty meeting? Nobody wants to talk

34
00:02:06,360 --> 00:02:10,160
Speaker 1: about UM. I'm sure it will. It will come up.

35
00:02:10,200 --> 00:02:13,280
Speaker 1: I think for some of the countries there it will

36
00:02:13,320 --> 00:02:17,040
Speaker 1: be a major preoccupation. For others perhaps a little less so.

37
00:02:17,639 --> 00:02:21,360
Speaker 1: We've heard some comments today from UM from from buddhad

38
00:02:21,400 --> 00:02:24,840
Speaker 1: for example, a Fed officials, saying that he doesn't think Brexit,

39
00:02:24,880 --> 00:02:27,040
Speaker 1: even if it does happen, will have a major impact

40
00:02:27,200 --> 00:02:30,280
Speaker 1: on the outlook for the US, but clearly closer to

41
00:02:30,720 --> 00:02:34,440
Speaker 1: Europe and the Eurozone and obviously in the UK itself

42
00:02:34,480 --> 00:02:40,240
Speaker 1: it's it's a very major event. Is uh have you

43
00:02:40,320 --> 00:02:44,160
Speaker 1: been able to has anybody been able to quantify the

44
00:02:44,200 --> 00:02:49,840
Speaker 1: impact on GDP basis a national accounts basis or is

45
00:02:49,840 --> 00:02:52,640
Speaker 1: it too complicated? Yeah? I mean that the issue we

46
00:02:52,680 --> 00:02:54,800
Speaker 1: have really, of course is there's no precedent for this.

47
00:02:54,960 --> 00:02:57,920
Speaker 1: I think, um, you know, I should stress our view

48
00:02:58,040 --> 00:03:00,600
Speaker 1: is that ultimately the UK will stay in EU, and

49
00:03:01,240 --> 00:03:04,680
Speaker 1: any dip in activity that we see in the next

50
00:03:04,720 --> 00:03:06,840
Speaker 1: few months running up to the vote on the sort

51
00:03:06,840 --> 00:03:10,840
Speaker 1: of uncertainty and nervousness will probably bounce back in the

52
00:03:10,840 --> 00:03:14,280
Speaker 1: second half of the year. But if the UK were

53
00:03:14,360 --> 00:03:16,919
Speaker 1: to votes leave, then there's a whole range of scenarios

54
00:03:16,919 --> 00:03:19,679
Speaker 1: as to how the situation would unfold, and we've sort

55
00:03:19,680 --> 00:03:23,799
Speaker 1: of categorized them as a softer brexit, where there's a

56
00:03:23,840 --> 00:03:27,000
Speaker 1: sort of fairly friendly and rapid re establishment of trading

57
00:03:27,520 --> 00:03:31,079
Speaker 1: agreements and so on, and all the way to sort

58
00:03:31,120 --> 00:03:35,120
Speaker 1: of hard brexit where some tough negotiating and the establishment

59
00:03:35,200 --> 00:03:37,520
Speaker 1: of trade barriers, things that the hits of GDP will

60
00:03:37,520 --> 00:03:41,480
Speaker 1: be larger. How did Sterling rebound yesterday? You know, when

61
00:03:41,520 --> 00:03:44,560
Speaker 1: you talk to the experts at U b S about

62
00:03:44,640 --> 00:03:48,360
Speaker 1: how a bid comes in, what's the why the big

63
00:03:48,440 --> 00:03:51,040
Speaker 1: came in? Was it just the street set enough and

64
00:03:51,080 --> 00:03:53,800
Speaker 1: they're looking for a quick scalp or is there an

65
00:03:53,880 --> 00:03:57,440
Speaker 1: underlying story to that? What we saw is today up

66
00:03:57,480 --> 00:04:02,400
Speaker 1: to well, I mean, I suppose you have to see

67
00:04:02,400 --> 00:04:03,920
Speaker 1: it in the broader context that we were up at

68
00:04:03,960 --> 00:04:06,360
Speaker 1: sort of one fifty four not very long ago. The

69
00:04:06,440 --> 00:04:10,240
Speaker 1: define is dramatic and there will be temporary corrections. And

70
00:04:10,280 --> 00:04:13,400
Speaker 1: that said, you know, at the moment, which is somewhat

71
00:04:13,400 --> 00:04:15,880
Speaker 1: ironic in this debate, the economic data in the UK

72
00:04:16,720 --> 00:04:19,480
Speaker 1: continues to print pretty favorably. So there are some sort

73
00:04:19,520 --> 00:04:23,640
Speaker 1: of fundamental reasons for temporary periods of Sterling strength, but

74
00:04:23,680 --> 00:04:27,000
Speaker 1: in our view, sure to be overwhelmed by this background

75
00:04:27,400 --> 00:04:29,800
Speaker 1: risk all the way through to June generates review for

76
00:04:29,880 --> 00:04:34,240
Speaker 1: American audience the flows of capital and current account within

77
00:04:34,360 --> 00:04:36,320
Speaker 1: United Kingdom. I think we've got a real idea of

78
00:04:36,360 --> 00:04:39,599
Speaker 1: the flip in current account balances in Japan. Tell me

79
00:04:39,680 --> 00:04:45,400
Speaker 1: about the current account surplus deficit flows in the United Kingdom. Yeah,

80
00:04:45,440 --> 00:04:47,640
Speaker 1: I mean that that's that you've hit on something important

81
00:04:47,680 --> 00:04:52,000
Speaker 1: in this debate. There's a large, persistent current account deficit

82
00:04:52,480 --> 00:04:56,279
Speaker 1: in the UK, exacerbated over recent years by the fact

83
00:04:56,320 --> 00:04:58,320
Speaker 1: that the UK economy has been growing so much faster

84
00:04:58,400 --> 00:05:02,840
Speaker 1: than most of those in the Eurozone. UM and often

85
00:05:02,880 --> 00:05:05,239
Speaker 1: when you see a sliding the currency on the scale

86
00:05:05,279 --> 00:05:08,520
Speaker 1: we've seen recently in Sterling, attention turns to the current

87
00:05:08,520 --> 00:05:11,600
Speaker 1: account situation, and when there is a large deficit, it

88
00:05:11,680 --> 00:05:15,640
Speaker 1: exacerbates the risks of a sort of more out of

89
00:05:15,720 --> 00:05:18,160
Speaker 1: control decline in the currency because of the fact that

90
00:05:18,520 --> 00:05:21,960
Speaker 1: external investors are having to fund the current account. The

91
00:05:22,000 --> 00:05:24,920
Speaker 1: odd solution Michael was to send Aubrey and matter and

92
00:05:25,360 --> 00:05:28,120
Speaker 1: Aubrey looks like ROSSI crawl. Send him down to take

93
00:05:28,160 --> 00:05:34,440
Speaker 1: over Barbados again. There used to be uh, the pound

94
00:05:34,520 --> 00:05:36,880
Speaker 1: is so widely used in such a deep currency is

95
00:05:38,440 --> 00:05:42,440
Speaker 1: are were is there a chance we see a really big,

96
00:05:42,520 --> 00:05:48,200
Speaker 1: disorderly decline. There is a chance, I think, you know,

97
00:05:48,279 --> 00:05:50,679
Speaker 1: we would compare this really to the to the financial

98
00:05:50,720 --> 00:05:52,719
Speaker 1: crisis when in the year running up to it, as

99
00:05:53,200 --> 00:05:57,560
Speaker 1: the financial system deteriorated we saw sterling weakened steadily, as

100
00:05:57,600 --> 00:05:59,680
Speaker 1: I would argue it has been recently, and then when

101
00:06:00,400 --> 00:06:03,560
Speaker 1: things went really wrong in in late two thousand and eight,

102
00:06:03,640 --> 00:06:05,839
Speaker 1: it was sterling that suffered the most because of the

103
00:06:05,920 --> 00:06:09,719
Speaker 1: UK's exposure to the financial sector being that much larger

104
00:06:09,760 --> 00:06:12,840
Speaker 1: than anyone else's. I think when the same situation again,

105
00:06:12,880 --> 00:06:16,279
Speaker 1: this sort of gradual weakening of sterling slightly to continue,

106
00:06:16,360 --> 00:06:19,960
Speaker 1: and if on the twenty four June the UK has

107
00:06:20,000 --> 00:06:22,920
Speaker 1: taken the decision to leave the EU, then you could

108
00:06:22,960 --> 00:06:26,479
Speaker 1: see a much more significant fall in the following months,

109
00:06:26,480 --> 00:06:28,840
Speaker 1: although as I said before, that's not our central view.

110
00:06:28,880 --> 00:06:30,760
Speaker 1: We still think the UK will be a member of

111
00:06:30,760 --> 00:06:34,320
Speaker 1: the EU beyond the referendum. Well, at this point the

112
00:06:34,360 --> 00:06:42,120
Speaker 1: currency reflecting uncertainty. Is it x Brexit vote? Is it

113
00:06:42,200 --> 00:06:45,479
Speaker 1: fairly do that or are we seeing where you know,

114
00:06:45,560 --> 00:06:50,359
Speaker 1: moves that should be made given the current account? Um, well,

115
00:06:50,520 --> 00:06:52,479
Speaker 1: I think you know that was all factored in before

116
00:06:52,520 --> 00:06:54,800
Speaker 1: as far as currency markets were concerned. I think the

117
00:06:54,800 --> 00:06:57,479
Speaker 1: only new information in the last few months that's coincided

118
00:06:57,520 --> 00:07:00,520
Speaker 1: with this fall in sterling is is the referendum suddenly

119
00:07:00,720 --> 00:07:04,720
Speaker 1: coming into focus, the date being fixed. Um, it's becoming

120
00:07:04,920 --> 00:07:09,680
Speaker 1: imminent in in terms of markets, attention span, um and

121
00:07:09,720 --> 00:07:13,200
Speaker 1: having and having a big impact. Another said before, you

122
00:07:13,240 --> 00:07:15,600
Speaker 1: know that the data in the UK just doesn't merit this.

123
00:07:16,280 --> 00:07:18,200
Speaker 1: I mean, if you look, just as one example, at

124
00:07:18,240 --> 00:07:20,960
Speaker 1: the um that the p m I indussees they're stronger

125
00:07:20,960 --> 00:07:23,360
Speaker 1: in the UK than than any of the other major

126
00:07:23,400 --> 00:07:27,160
Speaker 1: global economies, Unemployment slow, retail selves are strong. You know,

127
00:07:27,200 --> 00:07:30,360
Speaker 1: there's no reason for Sterling to be undermined, like well said,

128
00:07:30,400 --> 00:07:33,720
Speaker 1: but does that imply an expectation of a slowing United

129
00:07:33,800 --> 00:07:38,280
Speaker 1: Kingdom real g d D Yeah. Possibly, But when you

130
00:07:38,320 --> 00:07:41,520
Speaker 1: look at the extent of that implied slowing compared to

131
00:07:42,880 --> 00:07:46,080
Speaker 1: where we are in other economies already, and in the

132
00:07:46,120 --> 00:07:48,720
Speaker 1: context of the scale of the fallen Sterling, I think

133
00:07:49,200 --> 00:07:52,120
Speaker 1: it goes way beyond what most forecasts are. I mean,

134
00:07:52,560 --> 00:07:54,600
Speaker 1: you know, ours is that the recovery continues at a

135
00:07:54,640 --> 00:07:58,160
Speaker 1: similar pace to the past few years. And I mean,

136
00:07:58,200 --> 00:08:01,360
Speaker 1: I think that's pretty much the consensus unless we do

137
00:08:01,480 --> 00:08:03,559
Speaker 1: get a vote to lea the EU, at which point

138
00:08:04,000 --> 00:08:05,760
Speaker 1: I'm sure there would be a lot of downward revisions

139
00:08:05,800 --> 00:08:09,560
Speaker 1: to GDP and and every chance that the recovery stalls,

140
00:08:09,600 --> 00:08:12,120
Speaker 1: at least for the balances of this year. Okay, but

141
00:08:12,200 --> 00:08:15,160
Speaker 1: if we get you know, clearly the elite outcome, which

142
00:08:15,200 --> 00:08:19,320
Speaker 1: is no Brexit, and you know everything's do you have

143
00:08:19,360 --> 00:08:22,920
Speaker 1: a level that sterling rebounds to. Well, I mean over

144
00:08:22,960 --> 00:08:25,600
Speaker 1: the over the sort of coming months after that. It

145
00:08:25,600 --> 00:08:28,320
Speaker 1: will take a while, and it will depend on any

146
00:08:28,360 --> 00:08:31,400
Speaker 1: sort of significant dent to activity in the interim. But

147
00:08:31,920 --> 00:08:35,080
Speaker 1: you know, we still see a possibility of of sterling

148
00:08:35,160 --> 00:08:39,160
Speaker 1: ending this year significantly stronger than its current level. But

149
00:08:39,280 --> 00:08:42,000
Speaker 1: as I say, it will depend on activity indicators beyond

150
00:08:42,080 --> 00:08:45,199
Speaker 1: the referendum, which will tell us how much damage has

151
00:08:45,240 --> 00:08:48,840
Speaker 1: been done and how persistent or temporary it may turn

152
00:08:48,880 --> 00:08:53,680
Speaker 1: out to be. Well, let me ask about that. The

153
00:08:53,679 --> 00:08:56,880
Speaker 1: the O E C D among others have been talking

154
00:08:57,000 --> 00:09:00,480
Speaker 1: apparently a new noe doubt from your competitors. It's any group.

155
00:09:00,640 --> 00:09:03,880
Speaker 1: We're talking about much much slower growth around the world.

156
00:09:04,240 --> 00:09:10,600
Speaker 1: How does that affect the UK um again exprexit. Yeah,

157
00:09:10,640 --> 00:09:13,840
Speaker 1: I mean it clearly. If it is a global slowing,

158
00:09:13,840 --> 00:09:16,120
Speaker 1: it will it will affect all to a degree. I mean,

159
00:09:16,120 --> 00:09:18,360
Speaker 1: I think you know, as recent years have shown us,

160
00:09:18,400 --> 00:09:23,480
Speaker 1: the UK has proved quite resilient m to the slower

161
00:09:23,480 --> 00:09:26,439
Speaker 1: growth and the woes of the Arizone in particular, and

162
00:09:26,559 --> 00:09:28,120
Speaker 1: I think a large part of the reason for that

163
00:09:28,200 --> 00:09:33,080
Speaker 1: is it has been long a service based economy, which

164
00:09:33,240 --> 00:09:37,120
Speaker 1: is more able to perform domestically and more insulated from

165
00:09:37,120 --> 00:09:40,840
Speaker 1: global slowdowns in terms of dropping demands for manufactured goods

166
00:09:40,840 --> 00:09:43,680
Speaker 1: and so on than certain other economies are. So, you know,

167
00:09:43,720 --> 00:09:46,839
Speaker 1: the recovery is somewhat mature, and I'm sure that if

168
00:09:46,880 --> 00:09:49,959
Speaker 1: growth started to slow, it might see you know, slowing

169
00:09:50,040 --> 00:09:52,760
Speaker 1: or even an end to the decline in the unemployment rate.

170
00:09:52,800 --> 00:09:55,600
Speaker 1: But um, if there is a sort of genuine slowing

171
00:09:55,640 --> 00:09:57,920
Speaker 1: of growing demand, I don't think the UK is at

172
00:09:58,000 --> 00:10:00,520
Speaker 1: most risk from that by any means. Race for Us

173
00:10:00,559 --> 00:10:04,000
Speaker 1: will continue this discussion and he is with UBS Michael

174
00:10:04,040 --> 00:10:08,000
Speaker 1: McKey the Bank of England Museum with an important tweet today.

175
00:10:08,080 --> 00:10:12,440
Speaker 1: In seventeen twenty three, Sir Christopher Wren died. I've been

176
00:10:12,480 --> 00:10:16,000
Speaker 1: doing a cycle of his churches in when I'm in Lion.

177
00:10:16,520 --> 00:10:18,840
Speaker 1: It's really something. Most of them were destroyed in World

178
00:10:18,880 --> 00:10:23,040
Speaker 1: War Two and with a lot of courage they were rebuilt.

179
00:10:23,600 --> 00:10:28,480
Speaker 1: It was very, very uh cool. Mr Murdock's father was

180
00:10:28,600 --> 00:10:32,520
Speaker 1: instrumental in helping rebuild Brides and Fleet Street and it's

181
00:10:32,559 --> 00:10:36,200
Speaker 1: really I really urge people to go see Christopher Wren's magic.

182
00:10:36,280 --> 00:10:40,080
Speaker 1: Outside of our new headquarters in London is his jewel

183
00:10:40,520 --> 00:10:44,400
Speaker 1: right next to mansion house. Sir Christopher Wren on this

184
00:10:44,480 --> 00:10:52,920
Speaker 1: day died in seventeen twenty three. Futures exactly flat. Let's

185
00:10:52,920 --> 00:10:55,520
Speaker 1: bring in John Tacker now with the latest news from

186
00:10:55,520 --> 00:10:58,000
Speaker 1: around the world. John Houston is gonna be the site

187
00:10:58,000 --> 00:11:00,920
Speaker 1: of to Night's Republican presidential debate, with the Donald Trump

188
00:11:01,080 --> 00:11:03,880
Speaker 1: rivals getting one more chance to try and derail the

189
00:11:04,000 --> 00:11:07,480
Speaker 1: GOP front runner. Uh Santa emergency in Virginia. That's where

190
00:11:07,480 --> 00:11:10,560
Speaker 1: four people were killed after tornadoes damage homes left thousands

191
00:11:10,600 --> 00:11:14,600
Speaker 1: without power across the state. It's official. The natural gas

192
00:11:14,640 --> 00:11:18,680
Speaker 1: flowing out of America's shale formations is now available to

193
00:11:19,120 --> 00:11:23,280
Speaker 1: the world. The liquefied natural gas tanker Asia Vision. It

194
00:11:23,440 --> 00:11:27,240
Speaker 1: left the Shaneer Energy Saving Passed Export Terminal in Louisiana

195
00:11:27,320 --> 00:11:30,880
Speaker 1: yesterday with the first cargo of US shale gas. The

196
00:11:30,920 --> 00:11:35,079
Speaker 1: tanker bound for Brazil and score one for humans. Mercedes

197
00:11:35,120 --> 00:11:37,360
Speaker 1: ben says, with a growing array of options on its cars,

198
00:11:37,760 --> 00:11:40,480
Speaker 1: robots can't keep up. They were lying more and more

199
00:11:40,520 --> 00:11:44,360
Speaker 1: in human workers on the assembly line, reclaiming space there

200
00:11:45,320 --> 00:11:52,040
Speaker 1: to put in those options. Interesting, did the natural gas thing? Yeah, look, Mike,

201
00:11:52,160 --> 00:11:57,120
Speaker 1: look at net gas one point seven three five gazillion

202
00:11:57,200 --> 00:12:01,040
Speaker 1: British thermal units. We'll have to talk near with David Wilson.

203
00:12:01,040 --> 00:12:08,840
Speaker 1: Will do that in the next hour Bloomberg Surveillance. This

204
00:12:08,920 --> 00:12:10,400
Speaker 1: new's update was brought to you by the all new

205
00:12:10,480 --> 00:12:13,800
Speaker 1: BMW Springfield. Find amazing pricing at every certified prewned BMW

206
00:12:13,880 --> 00:12:17,760
Speaker 1: Visit BMW Springfield and j dot Com Financing and leasing available.

207
00:12:17,800 --> 00:12:19,200
Speaker 1: BMW Financial Services