Speaker 1: Hello, and welcome to Stephanomics, the podcast that brings the
Speaker 1: global economy to you. And there's another traffic jam building
Speaker 1: outside the biggest US ports, with twenty six container ships
Speaker 1: on the last count lined up off the Californian coast
Speaker 1: waiting for a parking space at the ports of Los
Speaker 1: Angeles and Long Beach. We keep coming back to this
Speaker 1: topic of Stephonomics, not just because we like ships, but
Speaker 1: also to stay grounded and to remember in all our
Speaker 1: high for lutin conversations about the future of money or
Speaker 1: digital economy, that most of what we buy in one
Speaker 1: click doesn't get made in one click, and it doesn't
Speaker 1: get beamed across the world to your doorstep. It comes
Speaker 1: by ship. Traffic jams outside ports are one consequence. Another
Speaker 1: it turns out that the Port of London, despite Brexit,
Speaker 1: is buzzing. Our global supply chains are Brendan Murray has
Speaker 1: been down to the docks to investigate. We have that later.
Speaker 1: We also have a report from our Swiss economy reporter,
Speaker 1: Catherine Boseley on why some are not so happy about
Speaker 1: that breakthrough agreement to charge a minimum corporate tax rate
Speaker 1: on global companies. But first, now, President Biden has already
Speaker 1: made quite an impression on America's public finances in his
Speaker 1: first month's in office, all those multi trillion dollar spending
Speaker 1: packages and plans for future tax hikes. But with the
Speaker 1: hiring and potentially firing decisions he makes in the coming months,
Speaker 1: he may yet have an even bigger long term impact
Speaker 1: on the Federal Reserve. Definitely time to have a chat
Speaker 1: with two of the most experienced FED reporters on the planet,
Speaker 1: let alone at Bloomberg, Greg Torres and Rich Miller. Rich
Speaker 1: quickly set the stage for us. You know, what, what
Speaker 1: are the personnel decisions that President Biden's looking at at
Speaker 1: the US Central Bank in the next year or so
Speaker 1: and why why are they so important? Well, the top, top,
Speaker 1: top of the paps is is the Airmanship. Jerome Powell's
Speaker 1: term four year term expires in February and Washington Weggs
Speaker 1: called it. The FED chairman the second most powerful person
Speaker 1: in Washington after the president, so you can imagine how
Speaker 1: important that position is. But it's not just him. There's
Speaker 1: also the Vice Chairman of Supervision. His post comes up
Speaker 1: actually before Chairman pals Uh. And then you also have
Speaker 1: the Vice Chairman who follows monetary policy. And on top
Speaker 1: of that, there's one empty seat that has yet to
Speaker 1: be filled, so potentially four of the seven seats are
Speaker 1: up for grabs for Biden to to reshape probably one
Speaker 1: of the most powerful central bank, certainly one of the
Speaker 1: most powerful central banks in the world, and one of
Speaker 1: the most powerful institutions in the U S economy. Great
Speaker 1: touris people just coming to the coming to this today
Speaker 1: might wonder why we even having the conversation because j
Speaker 1: pal the current chairman, is generally felt to have done
Speaker 1: a good job, So why are we even thinking about
Speaker 1: not reappointing him. Well, there are two progressives on the
Speaker 1: Senate Banking Committee that matter a lot, Shared Brown and
Speaker 1: Elizabeth Warren, and in recent hearings expressed reservations. I guess
Speaker 1: it's the word about j. Palell's regulatory record and what
Speaker 1: he's done has gone along with Vice Chair of Supervision
Speaker 1: Randall Quarrels. Powell is a believer in kind of the
Speaker 1: financial system as it is. He's not um, He's not
Speaker 1: a big time innovator in my opinion. You know what
Speaker 1: needs to be rebuilt or fixed in in a way.
Speaker 1: So people want, especially these progresses a little bit more restraint,
Speaker 1: a little bit more um scrutiny, and a financial system
Speaker 1: that bends more toward equality and rich. So there's that
Speaker 1: point where people actually want to be shifting policy in
Speaker 1: a sort of slightly less in favor of Wall Street
Speaker 1: and more in favor of reform. But there's also, I
Speaker 1: guess a kind of classic thing where you know, j
Speaker 1: Pal is a Republican, You've got Democrats quite keen to
Speaker 1: have their own people in charge. What are the other
Speaker 1: factors that that Biden is now weighing and thinking about this? Well, well,
Speaker 1: there certainly is that. I mean that one cuts both ways,
Speaker 1: because Biden has sort of portrayed himself as a bipartisan,
Speaker 1: you know, healer of Washington's um afraid politics, so he
Speaker 1: could make a not in that direction by keeping power republican.
Speaker 1: But I mean the other thing is I guess that
Speaker 1: you know, for one of a better word, that the
Speaker 1: other progressives don't think Chairman Powell was woken up. He
Speaker 1: hasn't been as full throted as as they like about
Speaker 1: what the Fed can do uh for in reducing income inequality.
Speaker 1: He hasn't been as full throted of out what the
Speaker 1: Fed can do to counteract high black unemployment. He hasn't
Speaker 1: been a full throat at about in support of a
Speaker 1: central bank digital currency, which which some progressives like because
Speaker 1: it will help the could help the unbanked and the
Speaker 1: poor who don't have a financial accounts. So there's a constituency,
Speaker 1: as Craig said, you know, this sort of band of
Speaker 1: progressives who think that he's he's not been a supportive
Speaker 1: of what you know, you might call democratic priorities in
Speaker 1: his you know, four years that he's been in office.
Speaker 1: I guess Craig to state the obvious. He's a white man.
Speaker 1: Donald Trump, by and large nominated didn't always get past appointed,
Speaker 1: but nominated a lot of white men for for the FED.
Speaker 1: I guess the symbolism matters as well. Yes it does.
Speaker 1: It's kind of a myth that it's Biden faces one
Speaker 1: big choice. Actually he has four choices. In the mix
Speaker 1: of those choices or a lot. It feels like quite
Speaker 1: an important time for US monetary policy, trying to gauge
Speaker 1: these conflicting impulses. We have transit tree inflation, we hope
Speaker 1: transit tree, but quite a lot of inflation seemingly coming
Speaker 1: down the track. But we also have potentially another round
Speaker 1: of of of COVID. I mean, should the should the
Speaker 1: financial market? Should all of us be be worried about
Speaker 1: a shift in the FED leadership at this kind of time? Rich,
Speaker 1: I think it is a very very tricky time. And
Speaker 1: that's one thing you arguably that Power has going for him.
Speaker 1: You don't, you know, you don't change horses and where
Speaker 1: you're in the middle of a raging stream. One person
Speaker 1: that Craig didn't mention, that's probably the leading candidate for
Speaker 1: the chair if if Power doesn't get it is a
Speaker 1: layout brainerd who's who's who's who's on the FED. And
Speaker 1: it's kind of a known quantity to the markets and
Speaker 1: has voted against the number of the measures to ease
Speaker 1: bank regulation that Powell and quarrels of vice chair supported.
Speaker 1: So she's kind of seen as the leading candidate other
Speaker 1: than Powell to get the chairman's post, And seeing as
Speaker 1: she's kind of a known quantity of the markets, it
Speaker 1: wouldn't probably be too risky to you know, appoint her
Speaker 1: instead of Powell, even though she's seen as someone who
Speaker 1: will be a little less um, a little more dubbish,
Speaker 1: a little less worry about inflation risk but arguably if
Speaker 1: you if you came with somebody who wasn't quite as
Speaker 1: well known to the markets and who might not have
Speaker 1: it in a monetary policy background, you might have more trouble.
Speaker 1: It is true that she's named for being more dovish,
Speaker 1: but from where the Fed currently is, it's hard to
Speaker 1: think how you could be more dovish. I mean, they're
Speaker 1: still they at least for now, still have this extraordinarily
Speaker 1: loose policy and are very, very dedicated to holding it
Speaker 1: despite these quite remarkable inflation numbers we've had over the
Speaker 1: last few months. Okay, so I'm gonna put you on
Speaker 1: the spot, both of you, and ask you seasoned observers
Speaker 1: as you are of the Washington political scene, what do
Speaker 1: you think is going to happen? Where do you think
Speaker 1: he's gonna end up? Craig first, So I'm going to
Speaker 1: be provocative and say perhaps we should expect an upset
Speaker 1: here and that they go with Lele Brainerd and they
Speaker 1: reconstruct the board. It looks more democratic and more blue
Speaker 1: and more oriented towards the big goals of the Biden program. Rich,
Speaker 1: I'll take the other on that one. I'll take the
Speaker 1: I think and Pale and then who would you still
Speaker 1: say that the other two will be I mean, I
Speaker 1: agree with Craig in the sense that then then the
Speaker 1: president has to make some nods to the progressives in
Speaker 1: getting someone and and so to diversity. So I mean
Speaker 1: one one name that's been mentioned is, uh, you know,
Speaker 1: Raphael Bostick, who's the African American black president of the
Speaker 1: Atlanta FEDS, maybe the vice chair or um um. And
Speaker 1: then Lisa Cook, black economist, has also been mentioned as
Speaker 1: for as a leading candidate for the open post. I mentioned,
Speaker 1: I mentioned there was an open post on the FED.
Speaker 1: So yeah, he'd have to bounce out, you know, other
Speaker 1: interests with the other other positions. And that's why if
Speaker 1: Powell gets it, you know, you you really have to
Speaker 1: watch what you know the the other positions especially carefully. Well,
Speaker 1: we certainly had a reminder that these decisions are always political,
Speaker 1: even though the Federal Reserve does try and stay above
Speaker 1: the fray the rest of the time. And we have
Speaker 1: you on record, both of you telling us what's going
Speaker 1: to happen, and we will surely have you back when
Speaker 1: we find out who was right. Well, maybe you were
Speaker 1: all wrong, but thank you very much for joining us.
Speaker 1: Thank you you might remember we started the year with
Speaker 1: the chaos at the Port of Dover after France closed
Speaker 1: its borders to UK freight traffic. Our reporter Lizzie Burden
Speaker 1: interviewed East European drivers sitting in their cabs, living on biscuits,
Speaker 1: wondering if they were going to get home for Christmas,
Speaker 1: and what with Brexit and COVID and Boris Johnson. There's
Speaker 1: been plenty of chaos to go around in the UK
Speaker 1: over the past year or two, but some things are
Speaker 1: going right, and surprisingly, perhaps the Port of London is
Speaker 1: one of them. Here's Brendan Murray in the heart of
Speaker 1: London's financial district. A yellow and red boat run by
Speaker 1: the delivery giant d h L travels up and down
Speaker 1: the river terms every day with packages from all over
Speaker 1: the world twenty miles downstream. It's just another work day
Speaker 1: for Katherine Spain, whose job as a senior harbor Master
Speaker 1: with the Port of London is ensuring goods like these
Speaker 1: never stopped flowing into a British economy hard hit by
Speaker 1: the pandemic. The office varies so much from day to day.
Speaker 1: Um I mean ships are coming in from all over
Speaker 1: the world. From the other side of the world in
Speaker 1: a China directs to the London Gateway. We have aggregate
Speaker 1: vestivals coming in from the Northy Judging Gap grounds to
Speaker 1: the terminals. You know, stuff coming in a lot from
Speaker 1: northern Europe, but it could come in from absolutely anywhere.
Speaker 1: What Spain and her colleagues are witnessing is a revival
Speaker 1: of commercial traffic along the Thames, once the maritime center
Speaker 1: of the world. London Sports handled more cargo than any
Speaker 1: of its UK rivals last year, the first time that's
Speaker 1: happened in two decades. It's a sprawling complex that includes
Speaker 1: a major container terminal called the DP World Gateway, as
Speaker 1: well as the historic Tilbury Docks, which are used for
Speaker 1: cruise ships and other cargo. The pandemic, it seems, brought
Speaker 1: out the online shopper in all of us and served
Speaker 1: as a reminder that people still buy a lot of
Speaker 1: physical stuff even in the digital economy. That's been a
Speaker 1: big lift in London's efforts to be a bustling crossroads
Speaker 1: for trade, says Robin Mortimer, the CEO of the Port
Speaker 1: of London Authority. So you can sort of see, you know,
Speaker 1: that whole two thousand year journey from a timey little
Speaker 1: Roman port right in the center of London now to
Speaker 1: a huge globally competitive container terminal out in the in
Speaker 1: the estuary um Now. One of the interesting things is
Speaker 1: that because so much of the infrastructure of the Port
Speaker 1: of London has moved out of the main populated capital city,
Speaker 1: there is a sort of perception that the Port of
Speaker 1: London is um something of the past and it's a
Speaker 1: little bit out site, out of mind, I think for people,
Speaker 1: London story as a trading city has taken a number
Speaker 1: of turns over the centuries. Twenty miles down river from London,
Speaker 1: Tilbury's Docks have been a mainstay for a hundred early
Speaker 1: five years, launching ships across the British Empire and welcoming
Speaker 1: generations of immigrants to England shores. So the peak trade
Speaker 1: of the city of London was both in the nineteen
Speaker 1: thirties and nineteen sixties either side. In the Second World War,
Speaker 1: that's Arthur peter Stone. In the Second World War, the Germans,
Speaker 1: they understood full well that the quarter London was key
Speaker 1: to the British economy, so therefore it became a big
Speaker 1: target at that time. None of you was it an
Speaker 1: economic target, but it was very easy to spot from
Speaker 1: the air for bombits because you know, London could have
Speaker 1: a blackout during the bits, so the pilots couldn't see
Speaker 1: where built the buildings were, but they could see the
Speaker 1: water with the moon shining off of it, and so
Speaker 1: they therefore they could they could target the docks. So
Speaker 1: amazingly the dots carried on working all through the blitz
Speaker 1: or through the war, and just carried on night and
Speaker 1: day even with bomb dropping around. Fast forward to this
Speaker 1: year and you see where how as and logistics depots
Speaker 1: springing up along the river bank southeast of the city.
Speaker 1: The Port Authority is buying up land and old docks
Speaker 1: to meet the demand, and it plans to develop London's
Speaker 1: first shipyard in a century. Bookings for cruise ship voyages
Speaker 1: from Tilbury are picking up again, and just across the river,
Speaker 1: Amazon is opening a distribution center employing more than workers.
Speaker 1: And it's not just commerce. Thatt's returning locals are hungry
Speaker 1: for outdoor recreation like kayaking and paddle boarding, but the
Speaker 1: biggest opportunities are London's links to the global economy, a
Speaker 1: big question mark after the UK split from the European
Speaker 1: Union this year. Such links bring great potential, but there's
Speaker 1: also the risk of disruptions, like the ship that got
Speaker 1: stuck in the Suez Canal earlier this year. Charles Hammond,
Speaker 1: the group Chief executive of Fourth Ports, which operates Tilbury,
Speaker 1: says Brexit and the pandemic have refocused attention on London
Speaker 1: as a vital gateway for global trade. I think it's
Speaker 1: a good thing that people are reminded of the fundamental
Speaker 1: importance of trade and supply chains to a modern economy.
Speaker 1: And I think given the pandemic, given other hiccups like seers,
Speaker 1: people are no longer taking that for granted, and I
Speaker 1: think are understanding the role that essential workers, essential facilities
Speaker 1: playing doing that. So I think in the pandemic a
Speaker 1: lot of things that were maybe largely taken for granted
Speaker 1: are now much more appreciated, and I'd like to think
Speaker 1: ports are one of those facilities. M H. Finally, you know,
Speaker 1: we believe in balanced reporting on this podcast, but I
Speaker 1: fear we may not have been entirely balanced in our
Speaker 1: reporting of the big tax agreement hammered out among G
Speaker 1: seven finance ministers last month. We may have given the
Speaker 1: impression that companies being forced to pammin and rate on
Speaker 1: their profits. However cleverly they organized their affairs was an
Speaker 1: entirely positive development. President Biden and many European leaders would
Speaker 1: tend to think so. They're hoping to get precious new
Speaker 1: revenues out of this for infrastructure and education. But as always,
Speaker 1: there is another side to the story, and you're likely
Speaker 1: to hear it most often in the corridors of Dublin
Speaker 1: and Zurich. Here's our europe Economy Reporter and Deputy bureau
Speaker 1: Chief in Zurich, Catherine Bosley. Finance ministers representing the world's
Speaker 1: twenty biggest economies broke into a plaza their progress on
Speaker 1: establishing a global minimum corporate tax rate of sitting in
Speaker 1: their meeting in Venice this month. As an observer, Swiss
Speaker 1: finance Minister Willie Maha didn't join in the clapping. Countries
Speaker 1: like Switzerland and Ireland are watching the US led international
Speaker 1: push with consternation because they could be the losers right now,
Speaker 1: Ireland's levee for companies is twelve point five percent and
Speaker 1: one in five workers is employed directly worrying directly by
Speaker 1: foreign multinationals. Last year, levels on the ten biggest companies
Speaker 1: accounted for half of all net corporate tax receipts in
Speaker 1: the country. Finance Minister Pascal Danahos as this country must
Speaker 1: now brace for a hit of two billion euros to
Speaker 1: corporate tax income per year by twenty five, about four
Speaker 1: percent of Ireland's annual tax receipts. I mean, if the
Speaker 1: minimum tax is introduced as envisaged by the G seven
Speaker 1: D twenty and the os is inclusive framework, if it
Speaker 1: really is introduced in that way, this is a really
Speaker 1: massive change to the international tax system. Michael Devereaux, director
Speaker 1: of the Oxford University's Center for Business Taxation. I don't
Speaker 1: think we can really underestimate how big a change it is.
Speaker 1: It really makes a difference to minimum tax rates around
Speaker 1: the world. Officials in Switzerland, which had to give up
Speaker 1: banking secrecy for offshore accounts in the face of US
Speaker 1: pressure a decade ago, are concerned they'll lose out on
Speaker 1: money they need to maintain infrastructure. Finance Minister Maua says
Speaker 1: as many as four thousand companies could be affected by
Speaker 1: the global reform. He's declined to put a price tag
Speaker 1: on the damage. A city that embodies Switzerland's reliance on
Speaker 1: multinational corporations is Basil, whome to some of the world's
Speaker 1: biggest drug companies, Rush and Novartists. There's also Lanza, which
Speaker 1: produces madernast COVID nineteen vaccine. Before the pandemic struck, levies
Speaker 1: on corporate profits constituted nearly a quarter of the municipalities.
Speaker 1: Tax revenue scated to money is the one thing, and
Speaker 1: the other thing, which is probably much more important for us,
Speaker 1: are the jobs. These aren't letterbox companies. They are companies
Speaker 1: that generate lots of jobs here and people work there,
Speaker 1: so we don't have any interest in a big company.
Speaker 1: Leaving that was tanyaz Oland, finance director of the City
Speaker 1: of Basel. The Global Tax Accord, with its fift minimum rate,
Speaker 1: which is running under the auspices of the O E
Speaker 1: c D, is on track to be finalized at the
Speaker 1: G twenty summit in Rome in October, with the new
Speaker 1: provisions coming into force, but there are still lots of
Speaker 1: details to be hammered out, including what sort of tax
Speaker 1: deductions might be granted. Hungary, Estonia and Ireland are also
Speaker 1: challenging the proposals, with Hungarian Prime Minister Victor Orban calling
Speaker 1: the plan absurd. The opposition of the three countries, who
Speaker 1: together account for just three point six percent of the
Speaker 1: US population, is significant. A unanimous decision among all the
Speaker 1: blocks countries may be needed to craft a legal directive
Speaker 1: for the EU to adopt the reform. Here's Mark Redmond,
Speaker 1: CEO of American Chamber of Commerce Ireland. We're talking now
Speaker 1: at the end of July, right, and there's a lot
Speaker 1: of road to travel whichween now and the planned if
Speaker 1: you will, deadline in October for the o e c
Speaker 1: D to finally sort out all the open questions. And
Speaker 1: our understanding is there are a lot of open questions.
Speaker 1: There is a lot of work to be done at
Speaker 1: O e c D level to get to an agreement.
Speaker 1: Switzerland has chosen the path of least resistance and is
Speaker 1: going along with the o e c D S tax plan.
Speaker 1: Informal proposals on how to keep the country attractive have
Speaker 1: ranged from carbon tax credits or offsets for R and
Speaker 1: D investments to lowering individuals social insurance contributions in the
Speaker 1: famously low tax Canton or state of Tuk, home to
Speaker 1: commodities giant Glencore budget master. Hence, Tendler is relaxed about
Speaker 1: the change. He says it's best to treat the reform
Speaker 1: like an opportunity. Mon conjol nine and mon conjol one
Speaker 1: can say no, one can criticize it, one can oppose it.
Speaker 1: But the question is what good is that it's no good?
Speaker 1: At the end of the day, we're in this vortex.
Speaker 1: We have to go with it and sees opportunities and
Speaker 1: not say no. Treasury Secretary Janet Yellen and President Biden
Speaker 1: have hailed the global tax deal is the end of
Speaker 1: a damaging global race to the bottom in corporate taxes.
Speaker 1: That may be true, but as you raise a glass
Speaker 1: to that, spare thought for countries who had better big
Speaker 1: chunk of their economy on winning that race. M Well,
Speaker 1: I'm sorry to say that's it for This series of
Speaker 1: Stephanomics was supposed to be off now until October that
Speaker 1: if I talked to anyone exciting before then, you can
Speaker 1: be sure we'll be putting it on this feed. In
Speaker 1: the meantime, you can get your fix of insights and
Speaker 1: news from Bloomberg Economics on the Bloomberg Terminal website or
Speaker 1: app all by subscribing to as Economics on Twitter. This
Speaker 1: entire series was manfully produced by Magnus Henrickson and the
Speaker 1: global tax story this week was based on reporting by Mourueno, Konyam,
Speaker 1: Peter Flannagan, Katherine Boseley, Leonard ken Chopper and Claudia Madeler.
Speaker 1: Special thanks also to Craig Torres, Rich Miller and Brendan Murray.
Speaker 1: Mike Sasso, his executive producer of Stephanomics and the head
Speaker 1: of Bloomberg Podcast is Francesca Levi. Enjoy your summer, Pom.