1 00:00:02,560 --> 00:00:07,040 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:09,880 --> 00:00:13,120 Speaker 2: This is the Bloomberg Day BAQ podcast. Good morning, It's Tuesday, 3 00:00:13,119 --> 00:00:16,600 Speaker 2: the twenty second of July. I'm Caroline Hepkeat in London. 4 00:00:16,520 --> 00:00:19,960 Speaker 3: And I'm Stephen Carolin Brussels. Coming up today, stock market 5 00:00:20,000 --> 00:00:23,439 Speaker 3: investors shrug off trade uncertainty as the S and P 6 00:00:23,560 --> 00:00:27,000 Speaker 3: five hundred closes above six three hundred points for the 7 00:00:27,080 --> 00:00:27,760 Speaker 3: first time. 8 00:00:28,360 --> 00:00:32,840 Speaker 2: Capital gains vanish into black holes in the latest etf 9 00:00:33,040 --> 00:00:33,760 Speaker 2: tax trick. 10 00:00:34,200 --> 00:00:36,200 Speaker 4: We have an exclusive report. 11 00:00:36,400 --> 00:00:39,440 Speaker 3: Plus not such a sterling idea. The Bank of England 12 00:00:39,520 --> 00:00:42,400 Speaker 3: goes cold on the concept of a digital pound. 13 00:00:42,920 --> 00:00:45,040 Speaker 4: Let's start with a roundup of our top stories. 14 00:00:46,000 --> 00:00:49,479 Speaker 3: Global equity markets are continuing to defy persistent trade and 15 00:00:49,520 --> 00:00:52,600 Speaker 3: geopolitical tensions as the S and P five hundred index 16 00:00:52,680 --> 00:00:56,400 Speaker 3: closes at yet another record high. Stocks have surged since 17 00:00:56,400 --> 00:00:58,800 Speaker 3: their slump in April as some of the world's largest 18 00:00:58,840 --> 00:01:02,720 Speaker 3: asset managers lean more heavily into the rally. Wells Fargo's 19 00:01:02,760 --> 00:01:06,319 Speaker 3: top us equity strategist, Christopher Harvey says he expects the 20 00:01:06,400 --> 00:01:10,160 Speaker 3: SMP five hundred to deliver another double digit increase in 21 00:01:10,200 --> 00:01:11,520 Speaker 3: the second half of the year. 22 00:01:11,880 --> 00:01:14,560 Speaker 5: What we're seeing is the winners continue to win. The 23 00:01:14,680 --> 00:01:18,520 Speaker 5: ubercap companies have the higher margins are gaining more market share. 24 00:01:18,680 --> 00:01:22,000 Speaker 5: There is a real secular trade in AI that will continue. 25 00:01:22,080 --> 00:01:24,840 Speaker 5: I was here during the nineties. This is not a 26 00:01:24,840 --> 00:01:27,480 Speaker 5: fair comparison. It is much stronger and the fundamentals are 27 00:01:27,560 --> 00:01:29,760 Speaker 5: much better than today than they were back then. 28 00:01:30,240 --> 00:01:33,400 Speaker 3: Harvey is the most buller strategies tracked by Bloomberg Forecasting 29 00:01:33,480 --> 00:01:36,640 Speaker 3: the SMP five hundred will climb above seven thousand points 30 00:01:36,640 --> 00:01:38,640 Speaker 3: by the end of the year. It closed yesterday at 31 00:01:38,720 --> 00:01:41,840 Speaker 3: just over six three hundred. The market wager is that 32 00:01:41,880 --> 00:01:44,920 Speaker 3: while President Donald Trump is threatening to disrupt the economic 33 00:01:45,040 --> 00:01:48,320 Speaker 3: order once again, he will ultimately step back from the brink. 34 00:01:48,840 --> 00:01:51,720 Speaker 3: While second quarter earning season is off to a strong start, 35 00:01:51,760 --> 00:01:54,360 Speaker 3: the rally faces a key test this week as major 36 00:01:54,400 --> 00:01:58,120 Speaker 3: companies such as Tesla and Alphabet have yet to report well. 37 00:01:58,040 --> 00:02:02,360 Speaker 2: Corporate profit Full casting faster in Europe the Middle Eastern 38 00:02:02,440 --> 00:02:06,320 Speaker 2: Africa than they are in Asia or Latin America. According 39 00:02:06,360 --> 00:02:09,640 Speaker 2: to the latest data compiled by Bloomberg, stocks that in 40 00:02:09,680 --> 00:02:12,120 Speaker 2: the region have posted their biggest year to date rally 41 00:02:12,160 --> 00:02:15,360 Speaker 2: since two thousand and nine, and analysts are stepping up 42 00:02:15,400 --> 00:02:19,600 Speaker 2: the average twelve month earnings projections for companies in the 43 00:02:19,760 --> 00:02:26,120 Speaker 2: MSCI em EMEA index. Despite the ongoing threat of US tariffs, 44 00:02:26,120 --> 00:02:29,520 Speaker 2: investors have been drawn to the emir region by factors 45 00:02:29,560 --> 00:02:35,160 Speaker 2: including economic reforms in Nigeria and Morocco, peace hopes in Ukraine, 46 00:02:35,360 --> 00:02:38,400 Speaker 2: and gold's boost to South African miners. 47 00:02:39,080 --> 00:02:42,239 Speaker 3: Astraseneca is to invest fifty billion dollars in the United 48 00:02:42,240 --> 00:02:46,160 Speaker 3: States before twenty thirty, becoming the latest European farmer company 49 00:02:46,200 --> 00:02:50,160 Speaker 3: to ratchet up spending ahead of potential tariffs on imported medicines. 50 00:02:50,280 --> 00:02:53,160 Speaker 3: Bloombergs Uwan Paths has more drug giants. 51 00:02:53,160 --> 00:02:56,200 Speaker 6: Astraseneka frequently tops the list of the most valuable companies 52 00:02:56,240 --> 00:02:59,240 Speaker 6: on the London Stock Exchange. Now, the Cambridge based company 53 00:02:59,280 --> 00:03:02,600 Speaker 6: says it's to invest fifty billion dollars in manufacturing as 54 00:03:02,639 --> 00:03:05,840 Speaker 6: well as research and development in the United States. Kevin 55 00:03:05,880 --> 00:03:08,680 Speaker 6: has It, director of the US National Economic Council, says 56 00:03:08,680 --> 00:03:12,200 Speaker 6: that after the investment, substantially all of Astra's products sold 57 00:03:12,240 --> 00:03:15,160 Speaker 6: in the United States will be produced in the United States. 58 00:03:15,520 --> 00:03:18,079 Speaker 6: It comes just six months after the company abandoned plans 59 00:03:18,120 --> 00:03:21,200 Speaker 6: to build a new vaccine plant in Liverpool. In London, 60 00:03:21,200 --> 00:03:22,600 Speaker 6: I'm you in pots of Boomberg Radio. 61 00:03:23,600 --> 00:03:26,840 Speaker 2: Now, US Treasury Secretary Scott Besson says that there should 62 00:03:26,880 --> 00:03:30,040 Speaker 2: be a review of the decision to renovate parts of 63 00:03:30,080 --> 00:03:34,200 Speaker 2: the Federal Reserve's headquarters in Washington. In a social media post, 64 00:03:34,280 --> 00:03:36,960 Speaker 2: The Best Sense said the Central Banks should conduct quote 65 00:03:37,160 --> 00:03:42,680 Speaker 2: an exhaustive internal review of its non monetary policy operations. Meantime, 66 00:03:42,760 --> 00:03:47,600 Speaker 2: Florida Republican Congresswoman Anna Paulina Luhner has asked the Justice 67 00:03:47,640 --> 00:03:52,000 Speaker 2: Department to consider investigating Chaired your Own Powell for allegedly 68 00:03:52,120 --> 00:03:56,120 Speaker 2: lying under oath. She claims Powell made false statements about 69 00:03:56,120 --> 00:04:02,760 Speaker 2: the Fed's restoration project. Bloomberg's Michael McKee has and the holds. 70 00:04:02,360 --> 00:04:05,400 Speaker 7: Almost no weight in any other administration. You dismissed it 71 00:04:05,400 --> 00:04:08,839 Speaker 7: as a publicity st But of course under this administration, 72 00:04:09,000 --> 00:04:11,920 Speaker 7: it's hard to know what the Justice Department will actually 73 00:04:12,000 --> 00:04:15,080 Speaker 7: do since they served more as the president's lawyers. But 74 00:04:16,040 --> 00:04:19,560 Speaker 7: there is little evidence of any kind of crime here. 75 00:04:20,560 --> 00:04:23,800 Speaker 2: Bloomberg's Michael McKee speaking there As Powell continues to face 76 00:04:23,839 --> 00:04:27,200 Speaker 2: criticism from President Trump for the Fird's decision to hold 77 00:04:27,240 --> 00:04:29,200 Speaker 2: interest rates steady. 78 00:04:29,360 --> 00:04:33,279 Speaker 3: The UK's Foreign secretary has described an Israeli aid scheme 79 00:04:33,320 --> 00:04:36,600 Speaker 3: in Gaza as grotesque as he repeated calls for an 80 00:04:36,600 --> 00:04:41,039 Speaker 3: immediate ceasefire. David Lammy yesterday joined twenty seven foreign ministers 81 00:04:41,080 --> 00:04:43,479 Speaker 3: and signing a joint statement calling for the release of 82 00:04:43,560 --> 00:04:47,320 Speaker 3: all hostages and the resumption of aid deliveries. The Hamas 83 00:04:47,440 --> 00:04:50,160 Speaker 3: run government claims that almost one thousand Palestinians have been 84 00:04:50,240 --> 00:04:53,560 Speaker 3: killed while waiting for aid under a US backed distribution, 85 00:04:53,839 --> 00:04:55,760 Speaker 3: which Lammy says is inhumane. 86 00:04:57,040 --> 00:05:01,440 Speaker 8: It forces desperate civilians, children among them, to scramble unsafely 87 00:05:01,600 --> 00:05:06,239 Speaker 8: for the essentials of life. It's a grotesque spectacle reckon 88 00:05:06,400 --> 00:05:08,280 Speaker 8: a terrible human cost. 89 00:05:09,160 --> 00:05:12,600 Speaker 3: David Lammie was speaking as Israel has disputed these circumstances 90 00:05:12,640 --> 00:05:16,240 Speaker 3: and figures for those killed while waiting for aid. Israel 91 00:05:16,320 --> 00:05:18,960 Speaker 3: also says a letter signed by the UK's Foreign Secretary 92 00:05:18,960 --> 00:05:22,240 Speaker 3: and others is disconnected from reality and sends the wrong 93 00:05:22,279 --> 00:05:23,320 Speaker 3: message to Hamas. 94 00:05:23,960 --> 00:05:29,400 Speaker 2: Microsoft is rushing to stop hackers wreaking global havoc after 95 00:05:29,600 --> 00:05:33,280 Speaker 2: they exploited a floor in the firm's software over the weekend. 96 00:05:33,440 --> 00:05:37,040 Speaker 2: Microsoft release. They fixed for the vulnerability in servers of 97 00:05:37,120 --> 00:05:41,159 Speaker 2: the share Point document management software, but say that they're 98 00:05:41,240 --> 00:05:44,560 Speaker 2: still working to repair other parts of the system. The 99 00:05:44,600 --> 00:05:47,520 Speaker 2: floor was reportedly used to break into the file systems 100 00:05:47,520 --> 00:05:51,120 Speaker 2: of national government in Europe, the Middle East and the US, 101 00:05:51,320 --> 00:05:53,600 Speaker 2: according to cybersecurity researchers. 102 00:05:54,480 --> 00:05:56,599 Speaker 3: When in the UK they're in Labor Party and Reform 103 00:05:56,760 --> 00:06:01,039 Speaker 3: UK are separately considering increasing the return hirement age. The 104 00:06:01,080 --> 00:06:04,359 Speaker 3: news comes as Working Pension Secretary Liz Candle announced yesterday 105 00:06:04,360 --> 00:06:07,480 Speaker 3: the next statutory review into the age when government pensions 106 00:06:07,560 --> 00:06:11,480 Speaker 3: kick in, currently set at sixty six. According to Candle, 107 00:06:11,520 --> 00:06:14,160 Speaker 3: the system is in need of immediate change. 108 00:06:14,920 --> 00:06:19,360 Speaker 9: Unless we act, tomorrow's pensioners will be poorer than today's 109 00:06:19,760 --> 00:06:23,640 Speaker 9: because people who are saving aren't saving enough for their retirement, 110 00:06:23,880 --> 00:06:27,760 Speaker 9: and crucially because almost half of the working age population 111 00:06:28,240 --> 00:06:30,839 Speaker 9: isn't saving anything for their retirement at all. 112 00:06:31,160 --> 00:06:33,600 Speaker 3: The government's lives. Candle delivering a speech there in London. 113 00:06:33,640 --> 00:06:37,400 Speaker 3: While the Government's required to review the state pension every 114 00:06:37,560 --> 00:06:40,200 Speaker 3: six years, the last one was in twenty twenty three, 115 00:06:40,360 --> 00:06:43,400 Speaker 3: making this announcement three years early. At a separate event 116 00:06:43,480 --> 00:06:46,200 Speaker 3: for former UK's Nigel Faraj said he thought the state 117 00:06:46,320 --> 00:06:48,200 Speaker 3: pension age would have to rise. 118 00:06:49,240 --> 00:06:51,799 Speaker 2: And those are our top stories for you this morning. 119 00:06:52,080 --> 00:06:54,880 Speaker 2: So let's have a look at the markets This morning, 120 00:06:55,000 --> 00:06:57,799 Speaker 2: US stocks closed at a new high, although only inched 121 00:06:57,880 --> 00:07:00,760 Speaker 2: up by tenth of one percent yesterday's stop futures for 122 00:07:00,800 --> 00:07:03,880 Speaker 2: the US in the red Ustox fifty futures also dipping, 123 00:07:03,920 --> 00:07:06,680 Speaker 2: now four tenths of one percent. The dollar is a 124 00:07:06,680 --> 00:07:10,560 Speaker 2: bit firmer after Monday's sell off. Japanese stocks are down there, 125 00:07:10,600 --> 00:07:13,280 Speaker 2: back to trading after the holiday on Monday. At thirty 126 00:07:13,360 --> 00:07:16,000 Speaker 2: a jgbs now trading at three spots zero one percent, 127 00:07:16,200 --> 00:07:19,679 Speaker 2: up nearly three basis points. Are they vulnerable to more selling? 128 00:07:19,760 --> 00:07:22,840 Speaker 2: The yield curve has steepened, And of course we can't 129 00:07:22,840 --> 00:07:25,040 Speaker 2: forget that there are lots of earnings out this week, 130 00:07:25,080 --> 00:07:28,320 Speaker 2: including from big US megacap stocks. But we begin with 131 00:07:28,400 --> 00:07:31,480 Speaker 2: general motors earnings today well. 132 00:07:31,360 --> 00:07:33,640 Speaker 3: In a moment, as those stock markets in the US 133 00:07:33,680 --> 00:07:35,840 Speaker 3: continue to rise to record highs, we have an exclusive 134 00:07:35,880 --> 00:07:39,440 Speaker 3: report on the ETF tax trick being used to help 135 00:07:39,720 --> 00:07:42,520 Speaker 3: rich investors minimize their tax bills in the US, plus 136 00:07:42,520 --> 00:07:45,280 Speaker 3: the Bank of England going cold on a digital pound. 137 00:07:45,880 --> 00:07:47,920 Speaker 3: But first, another story we've been reading this morning from 138 00:07:47,960 --> 00:07:50,720 Speaker 3: our food editor, Cake Crad about how it's not just 139 00:07:51,040 --> 00:07:53,240 Speaker 3: US amateurs and by us I mean me who are 140 00:07:53,280 --> 00:07:55,760 Speaker 3: getting cooking tips from YouTube. Top level chefs are doing 141 00:07:55,800 --> 00:07:57,760 Speaker 3: a two. So it's fine. It's fine to learn how 142 00:07:57,800 --> 00:07:58,720 Speaker 3: to cook on the internet. 143 00:07:59,080 --> 00:07:59,600 Speaker 4: Yeah it's not. 144 00:08:00,000 --> 00:08:02,120 Speaker 3: You're talking about James Lowe in particular, the chef who 145 00:08:02,360 --> 00:08:05,080 Speaker 3: was of very recently at Lyle's in shortage would close 146 00:08:05,160 --> 00:08:07,960 Speaker 3: down who learned how to prepare a bluefin tuna for 147 00:08:08,080 --> 00:08:12,240 Speaker 3: watching Japanese fish experts on YouTube? Is this the next 148 00:08:12,240 --> 00:08:14,000 Speaker 3: generation of cooking shows on TV? 149 00:08:15,080 --> 00:08:18,679 Speaker 2: It certainly is, as long as you have got the skills. 150 00:08:18,720 --> 00:08:21,080 Speaker 2: I mean, I've got experience of this also, but mainly 151 00:08:21,120 --> 00:08:25,840 Speaker 2: of the kind of cautionary tale variety. Yet you remember this. 152 00:08:25,920 --> 00:08:28,320 Speaker 2: I mean it's only a couple of years ago and 153 00:08:28,360 --> 00:08:31,200 Speaker 2: one of my kids, very into baking, we tried to 154 00:08:31,320 --> 00:08:36,000 Speaker 2: replicate a five minute YouTube video of an extravagant. 155 00:08:35,360 --> 00:08:38,520 Speaker 3: Cake seven hours or something like that. Yeah, this is 156 00:08:38,520 --> 00:08:40,720 Speaker 3: the problem. Two days of the weekend, I end up 157 00:08:40,720 --> 00:08:43,680 Speaker 3: watching the entire video about fifteen times over to try 158 00:08:43,720 --> 00:08:45,679 Speaker 3: and figure out all the parts in between that I've 159 00:08:45,720 --> 00:08:48,400 Speaker 3: missed essentially, So, I mean, the TikTok first of this 160 00:08:48,520 --> 00:08:50,720 Speaker 3: is like the hyperdriversion of it. But good to know 161 00:08:50,800 --> 00:08:52,720 Speaker 3: that even those at the very top of their profession 162 00:08:52,880 --> 00:08:57,280 Speaker 3: are also using these online platforms to ope their skills. 163 00:08:57,280 --> 00:09:00,440 Speaker 3: You can read Cake Creator's piece on Bloomberg. Calm will 164 00:09:00,440 --> 00:09:01,680 Speaker 3: put a link to it in our show notes. 165 00:09:02,760 --> 00:09:05,160 Speaker 2: Now, after a decade where the S and p f 166 00:09:05,200 --> 00:09:08,560 Speaker 2: I found that index has tripled and more investors are 167 00:09:08,600 --> 00:09:12,240 Speaker 2: making bullish calls for this year too. Wealthy investors are 168 00:09:12,280 --> 00:09:17,120 Speaker 2: also looking for ways to lower their capital gains tax bills. 169 00:09:17,040 --> 00:09:18,040 Speaker 4: In the United States. 170 00:09:18,040 --> 00:09:21,480 Speaker 2: That has led to a rise in a creative tactic, 171 00:09:21,840 --> 00:09:25,160 Speaker 2: including one using ETFs that is the subject of today's 172 00:09:25,160 --> 00:09:28,720 Speaker 2: Bloomberg Big Take Report, and our cross Asset Markets reporter 173 00:09:29,160 --> 00:09:32,640 Speaker 2: Justina Lee joins us now for more on this. So, 174 00:09:32,880 --> 00:09:36,160 Speaker 2: just before we get into those details, let's start with 175 00:09:36,240 --> 00:09:39,240 Speaker 2: the kind of bullish sentiment that we're seeing in markets. 176 00:09:39,240 --> 00:09:42,600 Speaker 2: Investors do seem to be less worried about Donald Trump's 177 00:09:42,600 --> 00:09:45,760 Speaker 2: trade policies right now that that is going to dent 178 00:09:46,040 --> 00:09:49,199 Speaker 2: their stock market gains seems quite a positive backdrop. 179 00:09:51,040 --> 00:09:51,800 Speaker 4: Yeah, that's right. 180 00:09:51,920 --> 00:09:54,480 Speaker 1: I mean, I think it really goes back to you know, 181 00:09:54,640 --> 00:09:59,240 Speaker 1: the Trump always chickens out acronym Taco, and I think 182 00:09:59,400 --> 00:10:01,960 Speaker 1: so part of it is that people just don't think 183 00:10:02,360 --> 00:10:05,600 Speaker 1: that we're going to get the worst of his TERRORFF policies. 184 00:10:05,960 --> 00:10:09,160 Speaker 1: I think that's one factor. Another is there is still 185 00:10:09,600 --> 00:10:13,080 Speaker 1: quite a lot of optimism that we're going to get 186 00:10:13,080 --> 00:10:16,120 Speaker 1: those FED rate cuts. So I think those combined together, 187 00:10:16,280 --> 00:10:19,720 Speaker 1: and also the fact that the US economy still seems 188 00:10:19,760 --> 00:10:21,680 Speaker 1: to be doing pretty well, I think that's kind of 189 00:10:21,760 --> 00:10:25,320 Speaker 1: keeping the US economy of the US dock market kind 190 00:10:25,320 --> 00:10:27,160 Speaker 1: of near recordized. 191 00:10:26,920 --> 00:10:28,600 Speaker 3: So a lot of people out there making a lot 192 00:10:28,640 --> 00:10:32,000 Speaker 3: of money. Justina, but you've been reporting on this particular 193 00:10:32,440 --> 00:10:35,079 Speaker 3: tax trick to do with ETFs. Talk to us how 194 00:10:35,080 --> 00:10:35,720 Speaker 3: does it work? 195 00:10:37,720 --> 00:10:40,880 Speaker 1: So the thing to remember about ETFs in the US 196 00:10:41,160 --> 00:10:43,679 Speaker 1: is that even when they trade, and even when they 197 00:10:43,760 --> 00:10:46,719 Speaker 1: sell a position that's made a lot of money, they 198 00:10:46,720 --> 00:10:50,520 Speaker 1: don't usually have to pay any capital gains tax on it. 199 00:10:50,960 --> 00:10:54,599 Speaker 1: And the reason is that because of the way ETFs 200 00:10:54,720 --> 00:10:59,120 Speaker 1: are created and redeemed, they don't actually sell their positions 201 00:10:59,240 --> 00:11:02,160 Speaker 1: for cash, and so when they have a position that 202 00:11:02,520 --> 00:11:04,600 Speaker 1: has made a lot of money they want to offload, 203 00:11:05,080 --> 00:11:08,560 Speaker 1: usually they just kind of trade it in kind with 204 00:11:08,840 --> 00:11:12,360 Speaker 1: a market maker, and because of this, they don't incur 205 00:11:12,679 --> 00:11:15,280 Speaker 1: a capital gains tax bill. And it's really just this 206 00:11:15,679 --> 00:11:19,840 Speaker 1: loophole that was kind of created before ETFs even became 207 00:11:19,880 --> 00:11:22,679 Speaker 1: a thing, and then it's kind of become standard practice, 208 00:11:23,000 --> 00:11:25,360 Speaker 1: and it's a big reason why we've seen a lot 209 00:11:25,400 --> 00:11:29,360 Speaker 1: of mutual funds converted into ETFs. And in the case 210 00:11:29,400 --> 00:11:32,040 Speaker 1: of kind of my story today, I kind of talk 211 00:11:32,120 --> 00:11:35,720 Speaker 1: about these ETFs that are created from kind of seed, 212 00:11:35,720 --> 00:11:40,040 Speaker 1: it from appreciated securities, so that basically you see the 213 00:11:40,080 --> 00:11:43,520 Speaker 1: ETF with these positions that have already made money, and 214 00:11:43,559 --> 00:11:45,960 Speaker 1: once they become an ETFs, you can trade out of 215 00:11:46,000 --> 00:11:47,359 Speaker 1: them without paying. 216 00:11:47,120 --> 00:11:52,520 Speaker 2: Text okay, and these are known as three five one conversions. 217 00:11:53,360 --> 00:11:55,040 Speaker 4: How popular are they. 218 00:11:54,920 --> 00:11:59,440 Speaker 1: Then, Yeah, so that's pretty hard to tell because they're 219 00:11:59,480 --> 00:12:02,680 Speaker 1: not laid in any way. Usually you kind of have 220 00:12:02,800 --> 00:12:04,959 Speaker 1: to do a bit of guest work, as I kind 221 00:12:04,960 --> 00:12:08,360 Speaker 1: of had to for this story, because obviously one telltale 222 00:12:08,440 --> 00:12:11,080 Speaker 1: sign is that they start trading with a lot of 223 00:12:11,120 --> 00:12:14,760 Speaker 1: assets because they're already seated with these securities. But there 224 00:12:14,760 --> 00:12:17,000 Speaker 1: are signs that they're becoming more popular. 225 00:12:17,200 --> 00:12:17,360 Speaker 10: You know. 226 00:12:17,400 --> 00:12:20,760 Speaker 1: For instance, I speak to this lawyer that says that 227 00:12:20,840 --> 00:12:23,440 Speaker 1: he has worked too close to one hundred of these 228 00:12:24,160 --> 00:12:26,439 Speaker 1: and this is only in the last few years, and 229 00:12:26,760 --> 00:12:29,960 Speaker 1: we kind of see from some more obvious examples that 230 00:12:30,400 --> 00:12:32,040 Speaker 1: you know, it feels like there are more and more. 231 00:12:32,559 --> 00:12:35,719 Speaker 1: Like I speak to one issuer kind of culled Cambria 232 00:12:35,840 --> 00:12:39,160 Speaker 1: and they've done two and they're doing two more this year. 233 00:12:39,840 --> 00:12:42,559 Speaker 3: Okay, an interesting one to watch, Justina Lee, thank you 234 00:12:42,640 --> 00:12:44,480 Speaker 3: for very much for bringing us details of your reporter 235 00:12:44,520 --> 00:12:45,840 Speaker 3: our cross asset market supporter. 236 00:12:45,960 --> 00:12:46,200 Speaker 8: There. 237 00:12:47,760 --> 00:12:50,880 Speaker 2: Bank of England officials are considering whether to set aside 238 00:12:51,000 --> 00:12:55,120 Speaker 2: plans to create a digital pound for households amid growing 239 00:12:55,160 --> 00:12:58,440 Speaker 2: skepticism over the project's benefits. It's the latest sign of 240 00:12:58,559 --> 00:13:03,240 Speaker 2: dwindling support for tax back to digital currencies globally, and 241 00:13:03,320 --> 00:13:07,080 Speaker 2: our UK Economy reporter Tom Reese joins us now for 242 00:13:07,240 --> 00:13:07,920 Speaker 2: more on this. 243 00:13:08,360 --> 00:13:09,200 Speaker 4: Tom good Morning. 244 00:13:09,240 --> 00:13:12,280 Speaker 2: Remind us what is the digital pound and why was 245 00:13:12,280 --> 00:13:14,280 Speaker 2: the Bank of England actually working on it? 246 00:13:15,880 --> 00:13:19,440 Speaker 10: So a digital pound would be like a digital form 247 00:13:19,480 --> 00:13:22,680 Speaker 10: of cash. It's one of these central bank digital currencies 248 00:13:22,760 --> 00:13:26,360 Speaker 10: or CDCs that a lot of jurisdictions have been looking at. 249 00:13:26,400 --> 00:13:26,439 Speaker 7: You. 250 00:13:26,559 --> 00:13:29,040 Speaker 10: You'd hold it in a digital wallet like you may 251 00:13:29,080 --> 00:13:31,679 Speaker 10: do with a cryptocurrency, and we come with a lot 252 00:13:31,679 --> 00:13:35,959 Speaker 10: of the benefits people see with cryptocurrencies. But crucially this 253 00:13:36,000 --> 00:13:38,360 Speaker 10: is issued by the center bank, so it's the safer, 254 00:13:38,840 --> 00:13:41,840 Speaker 10: more stabled digital currency, fully backed by the state. So 255 00:13:41,920 --> 00:13:45,400 Speaker 10: it comes with you know, those exciting potential benefits for 256 00:13:45,480 --> 00:13:48,480 Speaker 10: fast achieve of payments lots of course of like smart 257 00:13:48,520 --> 00:13:52,920 Speaker 10: contracts and micropayments, but without that that danger and that 258 00:13:53,000 --> 00:13:56,200 Speaker 10: instability that we see in the cryptocurrency market. 259 00:13:56,880 --> 00:13:59,080 Speaker 3: So why are they now doubting the project? 260 00:14:01,040 --> 00:14:04,600 Speaker 10: So there's there's a few problems. It seems particularly plasly 261 00:14:04,720 --> 00:14:07,040 Speaker 10: difficult in the UK. You know, this project has come 262 00:14:07,120 --> 00:14:11,079 Speaker 10: under attack from rulemakers here in both House Commons and 263 00:14:11,120 --> 00:14:13,520 Speaker 10: the Lords. They struggled to see a need for it. 264 00:14:13,840 --> 00:14:17,800 Speaker 10: There are major doubts among the public. Pollings showed that, 265 00:14:18,920 --> 00:14:21,320 Speaker 10: and then the banks will worry about it because it 266 00:14:21,400 --> 00:14:24,240 Speaker 10: causes a bit of a financial stability. So imagine we're 267 00:14:24,240 --> 00:14:27,840 Speaker 10: in a crisis. In to the financial crisis, it said, 268 00:14:27,920 --> 00:14:29,880 Speaker 10: rather than running down to the bank and with drawing 269 00:14:30,000 --> 00:14:33,360 Speaker 10: your deposits, you put it in a digital pound that 270 00:14:33,440 --> 00:14:36,320 Speaker 10: is fully backed by the state. So that there's that worry. 271 00:14:36,520 --> 00:14:40,120 Speaker 10: But probably the most crucial factor is that payments innovations 272 00:14:40,760 --> 00:14:44,800 Speaker 10: are advancing in the private sector and rather interested in 273 00:14:44,840 --> 00:14:49,200 Speaker 10: working paper out by the Bank late last year suggested 274 00:14:49,240 --> 00:14:52,440 Speaker 10: that the benefits from the CBC have diminished considerably in 275 00:14:52,480 --> 00:14:56,160 Speaker 10: recent years, but because of those advances, So it's a big, costly, 276 00:14:56,840 --> 00:15:03,600 Speaker 10: controversial stability risks and so maybe that there's not really 277 00:15:03,680 --> 00:15:04,560 Speaker 10: a need for anymore. 278 00:15:05,120 --> 00:15:10,240 Speaker 2: That's interesting that the digital banking services have diminished that need. 279 00:15:10,280 --> 00:15:12,800 Speaker 2: I mean, does it actually mean that the digital pound 280 00:15:12,840 --> 00:15:13,840 Speaker 2: idea is dead? 281 00:15:15,800 --> 00:15:16,400 Speaker 3: Not necessarily. 282 00:15:16,480 --> 00:15:19,280 Speaker 10: I mean, first of all, it's a joint decision for 283 00:15:19,320 --> 00:15:22,280 Speaker 10: the BWI and UK Treasury to make, but it's pretty 284 00:15:22,280 --> 00:15:24,920 Speaker 10: crucial that Central Bank is worried about it. And you know, 285 00:15:25,200 --> 00:15:29,880 Speaker 10: we're seeing globally this sort of shift away from CBDCs, 286 00:15:30,120 --> 00:15:35,280 Speaker 10: especially since the Trump administration came back into power. The 287 00:15:35,400 --> 00:15:39,480 Speaker 10: most importantly is the rise of stable coins. You know, 288 00:15:39,480 --> 00:15:42,680 Speaker 10: if we see those really mergers as a proper payment 289 00:15:42,760 --> 00:15:45,160 Speaker 10: method for consumers, and let's say, you know, a US 290 00:15:45,240 --> 00:15:48,760 Speaker 10: dollar stable coin becomes like a major payment method for 291 00:15:49,040 --> 00:15:52,040 Speaker 10: UK consumers, then I think we will see the UK 292 00:15:52,280 --> 00:15:55,480 Speaker 10: probably do at CBC. You know, we've heard Andrew Bailey, 293 00:15:55,520 --> 00:15:58,640 Speaker 10: the governor, warn about this risk. You know, he says 294 00:15:58,680 --> 00:16:02,720 Speaker 10: it could undermine the public's trust in money. In that scenario, 295 00:16:03,120 --> 00:16:05,000 Speaker 10: I think they probably will have to push your head. 296 00:16:05,720 --> 00:16:07,520 Speaker 10: But for now, I think it's just going to put 297 00:16:07,560 --> 00:16:10,160 Speaker 10: it on the shelf ready just in case of that 298 00:16:10,320 --> 00:16:14,360 Speaker 10: risk and wait and see. Maybe hope it doesn't have 299 00:16:14,400 --> 00:16:17,520 Speaker 10: to use it, but there is always that risk that 300 00:16:17,920 --> 00:16:19,880 Speaker 10: it needs to to kind of pull it out the locker. 301 00:16:20,000 --> 00:16:24,240 Speaker 10: So it's wait and see. But they're definitely more skeptical 302 00:16:24,320 --> 00:16:27,280 Speaker 10: than they were a few years ago when they said 303 00:16:27,320 --> 00:16:29,640 Speaker 10: they thought it was likely that it was needed. You know, 304 00:16:30,320 --> 00:16:32,080 Speaker 10: we have seen this made shift in turn. 305 00:16:33,160 --> 00:16:35,760 Speaker 3: This is Bloomberg Daybreak Europe. You're a morning brief on 306 00:16:35,840 --> 00:16:39,000 Speaker 3: the stories making news from London to Wall Street and beyond. 307 00:16:39,320 --> 00:16:43,280 Speaker 2: Look for us on your podcast feed every morning on Apple, Spotify, 308 00:16:43,360 --> 00:16:45,320 Speaker 2: and anywhere else you get your podcasts. 309 00:16:45,360 --> 00:16:48,400 Speaker 3: You can also listen live each morning on London Dab Radio, 310 00:16:48,440 --> 00:16:51,120 Speaker 3: the Bloomberg Business app, and Bloomberg dot Com. 311 00:16:51,160 --> 00:16:53,920 Speaker 2: Our flagship New York station is also available on your 312 00:16:53,960 --> 00:16:58,680 Speaker 2: Amazon Alexa devices. 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