1
00:00:00,120 --> 00:00:02,920
Speaker 1: Brought you by Bank of America Mary Lynch. Investing in

2
00:00:03,000 --> 00:00:07,840
Speaker 1: local communities, economies and a sustainable future. That's the power

3
00:00:08,080 --> 00:00:12,360
Speaker 1: of global connections, Mary Lynch, Pierce Fenner and Smith Incorporated

4
00:00:12,760 --> 00:00:27,400
Speaker 1: Member s I p C. Welcome to the Bloomberg Surveillance Podcast.

5
00:00:27,840 --> 00:00:31,520
Speaker 1: I'm Tom Keene with David Gura. Daily we bring you

6
00:00:31,560 --> 00:00:36,600
Speaker 1: insight from the best in economics, finance, investment and international relations.

7
00:00:37,000 --> 00:00:41,600
Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and

8
00:00:41,680 --> 00:00:48,960
Speaker 1: of course on the Bloomberg. We have a special guest

9
00:00:49,000 --> 00:00:52,159
Speaker 1: in London day Yes, Film Bowdery, the global chief economistic

10
00:00:52,200 --> 00:00:53,880
Speaker 1: City Group, joins us from there. We miss having him

11
00:00:53,880 --> 00:00:55,680
Speaker 1: here in our Bloomberg eleven three oh studios in New York,

12
00:00:55,680 --> 00:00:58,320
Speaker 1: but great to have you with us from London. There

13
00:00:58,400 --> 00:01:00,600
Speaker 1: is there is such symbolism to this moment when we

14
00:01:00,640 --> 00:01:03,240
Speaker 1: see this letter being delivered to Donald Tusk, the the

15
00:01:03,240 --> 00:01:07,080
Speaker 1: EU Council at present, what notionally changes as a result

16
00:01:07,080 --> 00:01:09,120
Speaker 1: of this, and indeed we have the symbolism what what's

17
00:01:09,120 --> 00:01:11,240
Speaker 1: going to change with regard to the economy When this

18
00:01:11,319 --> 00:01:18,080
Speaker 1: letter is delivered, the clock starts sticking unless a miracle

19
00:01:18,160 --> 00:01:21,640
Speaker 1: happens Britain will be out of the EU in two

20
00:01:21,720 --> 00:01:27,160
Speaker 1: years time, and so the diual concentrate mind. And we'll

21
00:01:27,240 --> 00:01:33,680
Speaker 1: see the opening bid of the British government in that letter,

22
00:01:33,800 --> 00:01:38,280
Speaker 1: and we'll get I think, also quite publicly with dispect

23
00:01:38,840 --> 00:01:44,200
Speaker 1: the initial response of the European Council and and the

24
00:01:44,240 --> 00:01:47,240
Speaker 1: Commission and indeed European Parliament, which of course has to

25
00:01:47,240 --> 00:01:49,920
Speaker 1: approve to hold you it really is a it's it's

26
00:01:49,960 --> 00:01:56,440
Speaker 1: a defining moment, uh. And I think those who I

27
00:01:56,520 --> 00:01:59,760
Speaker 1: hope it wouldn't happen or felt that it could happen

28
00:02:00,360 --> 00:02:05,920
Speaker 1: uh smoothly and without um any material pain for the

29
00:02:05,920 --> 00:02:09,880
Speaker 1: British economy, will, I think, have then those wrapped in

30
00:02:10,120 --> 00:02:16,000
Speaker 1: the unpalatable facts as the weeks become months. How worried

31
00:02:16,000 --> 00:02:18,320
Speaker 1: do you hear about the element of surprising that we've

32
00:02:18,360 --> 00:02:21,040
Speaker 1: heard quite a bit from Prime Minister Theresa May since

33
00:02:21,080 --> 00:02:24,560
Speaker 1: since this referendum she stuck to the timetable she set

34
00:02:24,600 --> 00:02:29,160
Speaker 1: out several months ago. Are are you worried about a

35
00:02:29,200 --> 00:02:30,840
Speaker 1: sort of surprise factor here in light of what we've

36
00:02:30,840 --> 00:02:35,840
Speaker 1: seen in the UK economy thus far. No, I think

37
00:02:35,919 --> 00:02:41,200
Speaker 1: the positions uh are pretty clear. The British government has

38
00:02:41,600 --> 00:02:48,320
Speaker 1: UH I think UH waded back from its uh Conservative

39
00:02:48,320 --> 00:02:55,960
Speaker 1: Party Conference rhetoric and it's embrace of the heart brekxhit.

40
00:02:56,200 --> 00:02:59,960
Speaker 1: It's clearly trying to UH find a way of getting

41
00:03:00,520 --> 00:03:05,920
Speaker 1: uh some interim agreement which phil have significant continuity for

42
00:03:06,080 --> 00:03:12,320
Speaker 1: British business. So I think there's uh at disappoint a little. UH.

43
00:03:12,480 --> 00:03:16,000
Speaker 1: I think I'm not surprised if you don't get an

44
00:03:16,000 --> 00:03:20,960
Speaker 1: early agreement on uh the existing EU citizens in the

45
00:03:21,040 --> 00:03:24,880
Speaker 1: UK and UK you on lordn Island and on the budget.

46
00:03:24,919 --> 00:03:27,120
Speaker 1: That would be a surprise. If they we do this

47
00:03:27,200 --> 00:03:30,600
Speaker 1: in two years, Professor Powder, it will be a century,

48
00:03:30,639 --> 00:03:36,600
Speaker 1: one hundred years from the Paris peace conference associated with Versailles.

49
00:03:37,120 --> 00:03:41,600
Speaker 1: I don't see David Lord, George of Vittorio Orlando, George

50
00:03:41,600 --> 00:03:47,120
Speaker 1: Clemenceau or Woodward Wilson in sight. How do negotiations actually occur?

51
00:03:47,640 --> 00:03:50,960
Speaker 1: I mean, what, how do you visualize negotiations? Have they

52
00:03:51,080 --> 00:03:53,960
Speaker 1: done it? Ah? You know, look kinto hotel in Brussels

53
00:03:54,080 --> 00:03:56,920
Speaker 1: or I mean, I mean, what's gonna be at the table.

54
00:03:56,960 --> 00:04:02,320
Speaker 1: Where's the table gonna be? There's no president for exactly, uh,

55
00:04:02,600 --> 00:04:05,920
Speaker 1: For all I know, they will be sitting in the

56
00:04:06,080 --> 00:04:08,840
Speaker 1: will their spaniord on the ground plus in Brussels. But

57
00:04:09,320 --> 00:04:15,440
Speaker 1: I think they'll probably UH meeting UH Commission premises or

58
00:04:15,480 --> 00:04:20,200
Speaker 1: something like that. It's doubt why they would assist on

59
00:04:20,520 --> 00:04:24,600
Speaker 1: on neutral territory sort of a demilitarized zone in the

60
00:04:24,680 --> 00:04:29,279
Speaker 1: middle of Brussels. Um the logistics are actually not going

61
00:04:29,360 --> 00:04:33,080
Speaker 1: to be that important. It's really uh the mandates the

62
00:04:33,320 --> 00:04:37,719
Speaker 1: negotiators will start with and be especially interesting to see

63
00:04:38,720 --> 00:04:42,960
Speaker 1: what the you know, the Commission and the Council come

64
00:04:43,040 --> 00:04:47,560
Speaker 1: up with in terms of guidelines and sort of opening positions.

65
00:04:48,360 --> 00:04:50,440
Speaker 1: That's the great uncertainty to be at this point. I

66
00:04:50,480 --> 00:04:52,760
Speaker 1: feel one of the soft data telling us now about

67
00:04:52,839 --> 00:04:56,120
Speaker 1: the UK economy, how is sentiment in the United Kingdom

68
00:04:56,160 --> 00:04:59,800
Speaker 1: about the Brexit and need what may follow after Well,

69
00:05:00,200 --> 00:05:03,600
Speaker 1: sentiment has been remarkably robust until quite recently. There is

70
00:05:03,680 --> 00:05:10,680
Speaker 1: some indication now that especially among Samese and very recently

71
00:05:11,279 --> 00:05:20,320
Speaker 1: also among uh major corporations Japanese among them making a

72
00:05:20,680 --> 00:05:26,720
Speaker 1: capital expands in FDI decisions, that they are looking at

73
00:05:26,800 --> 00:05:31,960
Speaker 1: ways of reducing the exposure to to Britain. But but

74
00:05:32,160 --> 00:05:37,920
Speaker 1: until now, consumer sentiment has been remarkably robust, and UH

75
00:05:38,720 --> 00:05:42,320
Speaker 1: as has a corporate sentiment the only place where we've

76
00:05:42,400 --> 00:05:46,920
Speaker 1: seen concern expressed and the anticipation of pain has been

77
00:05:47,760 --> 00:05:50,600
Speaker 1: the exchange rate, and ironically that is of cause helped

78
00:05:51,480 --> 00:05:54,160
Speaker 1: the rest of the economy. There's no question about that.

79
00:05:54,279 --> 00:05:56,799
Speaker 1: Let's come back with Villan Bouder in our London studios

80
00:05:57,320 --> 00:05:59,640
Speaker 1: and as most history outside of David, it was something

81
00:05:59,720 --> 00:06:03,599
Speaker 1: that the Prime Minister migrate by jaguar from ten Downing

82
00:06:03,680 --> 00:06:06,680
Speaker 1: Street over to Parliament. I mean there's that, you know,

83
00:06:06,800 --> 00:06:09,240
Speaker 1: for even for us from a distance, it's happening and

84
00:06:09,360 --> 00:06:11,479
Speaker 1: the se see the footage that are calling. Matt Miller

85
00:06:11,520 --> 00:06:14,120
Speaker 1: tweeted out as well of the the Ambassador to the

86
00:06:14,160 --> 00:06:16,080
Speaker 1: EU arriving in the jaguar as well, with that letter

87
00:06:16,160 --> 00:06:18,360
Speaker 1: in a briefcase soon to be delivered to the President

88
00:06:18,440 --> 00:06:20,880
Speaker 1: of the EU Council. Yeah, I mean I would have

89
00:06:20,960 --> 00:06:26,040
Speaker 1: gone in a range over land Rover Defender hic with

90
00:06:26,160 --> 00:06:29,800
Speaker 1: the Hunter boots looking very queenly out in the tundra.

91
00:06:30,760 --> 00:06:33,320
Speaker 1: David Gern Time Keena New York in our London studios,

92
00:06:33,400 --> 00:06:37,480
Speaker 1: Villain Powder of City, Professor Powder, help me here with

93
00:06:37,600 --> 00:06:41,880
Speaker 1: your great call on slower economic growth, on a global

94
00:06:42,200 --> 00:06:45,080
Speaker 1: slow down. What's gonna take for you to move your

95
00:06:45,160 --> 00:06:47,520
Speaker 1: vector I don't mean to get the gloom right, but

96
00:06:47,720 --> 00:06:50,040
Speaker 1: how do you get more optimistic? What do you need

97
00:06:50,120 --> 00:06:53,320
Speaker 1: to observe in the global economy that would get you

98
00:06:53,480 --> 00:06:59,120
Speaker 1: more optimistic about economic growth? Well, uh, from a sustained,

99
00:06:59,240 --> 00:07:05,400
Speaker 1: longer run active we would need UM structural reforms, UM,

100
00:07:06,080 --> 00:07:12,440
Speaker 1: more capital expenditure broadly defined, including infrastructure, human capital, and

101
00:07:12,840 --> 00:07:18,920
Speaker 1: I think an elimination of trade barriers and barriers of

102
00:07:19,080 --> 00:07:24,200
Speaker 1: mobility of laboring capital. So all these things. Uh, we're

103
00:07:24,240 --> 00:07:28,000
Speaker 1: moving into opposite direction. So that's unlikely to happen from

104
00:07:28,040 --> 00:07:32,840
Speaker 1: a short run cychnical perspective, but we uh, anything that

105
00:07:33,400 --> 00:07:39,240
Speaker 1: looks like a fiscal stimulus UM implemented or anticipated will

106
00:07:39,360 --> 00:07:44,080
Speaker 1: boost the level of activity. That's happened in the US

107
00:07:44,120 --> 00:07:47,320
Speaker 1: a certain extent or there was growing doubt about the

108
00:07:47,400 --> 00:07:51,840
Speaker 1: ability of administration to deliver the meaning for fiscal stimulus.

109
00:07:51,880 --> 00:07:55,920
Speaker 1: I think that particular source of animal spirits may be

110
00:07:56,520 --> 00:08:02,800
Speaker 1: wearing thin um and likewise less fiscal restraint in the

111
00:08:03,000 --> 00:08:05,320
Speaker 1: r Area Party as a result of a number of

112
00:08:05,440 --> 00:08:08,960
Speaker 1: key elections taking place. All that I think boosts economic

113
00:08:09,040 --> 00:08:13,440
Speaker 1: activity and the cycnical UH. In the cytical manner um,

114
00:08:13,880 --> 00:08:16,600
Speaker 1: that's not sustainable, of course, but it's nice. But at

115
00:08:16,680 --> 00:08:19,920
Speaker 1: last you mentioned that growing doubt, and I wonder what's

116
00:08:20,000 --> 00:08:22,840
Speaker 1: changed about your outlook here over the last week in

117
00:08:22,960 --> 00:08:25,640
Speaker 1: light of what we saw in Washington on Friday's we

118
00:08:25,680 --> 00:08:28,640
Speaker 1: saw that healthcare build being pulled off, the pulled off

119
00:08:28,680 --> 00:08:33,120
Speaker 1: the Congress's floor. It was just the ability to deliver right. Um,

120
00:08:33,760 --> 00:08:39,439
Speaker 1: we really has to look at the at Washington as

121
00:08:39,520 --> 00:08:43,120
Speaker 1: not having the Republicans in charge of the White House

122
00:08:43,600 --> 00:08:47,959
Speaker 1: and both Houses of Congress, but being you know, in

123
00:08:48,120 --> 00:08:52,360
Speaker 1: charge of both houses of Congress with an independent in

124
00:08:52,760 --> 00:08:56,439
Speaker 1: UH in the White House, and it's become clear that

125
00:08:56,559 --> 00:09:02,440
Speaker 1: the ability of the President and the Congress to deliver

126
00:09:02,679 --> 00:09:08,439
Speaker 1: key reforms is very questionable. And even within the Republicans

127
00:09:08,760 --> 00:09:13,559
Speaker 1: in the House and the Senate, there are these very

128
00:09:13,679 --> 00:09:16,480
Speaker 1: sharp divisions now. But have under mind speak of Ryan's

129
00:09:17,400 --> 00:09:22,679
Speaker 1: position is credibility. UH. The and the Freedom Caucus and

130
00:09:23,000 --> 00:09:30,880
Speaker 1: other tea parties are I think orthogonal both to Ryan

131
00:09:31,000 --> 00:09:35,199
Speaker 1: and and to Trump. So it just looks like a

132
00:09:35,240 --> 00:09:37,679
Speaker 1: bit of it is organized. Mess help us with this

133
00:09:38,040 --> 00:09:41,360
Speaker 1: strange word eurosclerosis. I mentioned it the other day and

134
00:09:41,440 --> 00:09:44,760
Speaker 1: got a nasty note from someone saying, oh, you're so gloomy.

135
00:09:45,520 --> 00:09:48,199
Speaker 1: The nominal GDP that City Group looks for for the

136
00:09:48,320 --> 00:09:52,600
Speaker 1: United States of America. Is it unique, separate and discreet

137
00:09:53,080 --> 00:09:59,360
Speaker 1: or is it just plain old simple eurosclerosis And you

138
00:09:59,440 --> 00:10:01,880
Speaker 1: mean the the low growth in the United States. Yes,

139
00:10:03,760 --> 00:10:09,800
Speaker 1: it's UH, partly, of course, reflection of of eighteen of demographics.

140
00:10:10,080 --> 00:10:13,760
Speaker 1: But on top of that, I think there is forty

141
00:10:13,880 --> 00:10:24,960
Speaker 1: years of progressive over regulation increasingly distortionary, and I think

142
00:10:25,120 --> 00:10:32,319
Speaker 1: UM UH distribution early and desirable taxation UM a legal

143
00:10:32,480 --> 00:10:41,040
Speaker 1: system that has made lawsuits so easy that the whole

144
00:10:42,240 --> 00:10:46,920
Speaker 1: ranges of human activity, including health care, are slowed down

145
00:10:47,840 --> 00:10:52,280
Speaker 1: and burdened with enormous costs. So the US is indeed

146
00:10:52,360 --> 00:10:59,640
Speaker 1: a country that is in deep seated supply side trouble

147
00:11:00,160 --> 00:11:09,640
Speaker 1: and needs UH both widespread deregulation and UM active tax

148
00:11:09,720 --> 00:11:15,640
Speaker 1: reforms and selective boosts in public expenditure on health, education

149
00:11:15,880 --> 00:11:19,400
Speaker 1: and infrastructure. So the country really has all its work

150
00:11:19,559 --> 00:11:22,240
Speaker 1: cut out for us for it. So Villain Batter thank

151
00:11:22,280 --> 00:11:25,560
Speaker 1: you so much, with City greatly appreciate particularly UH David

152
00:11:25,600 --> 00:11:27,920
Speaker 1: and I Agan, thank you for your work. The day

153
00:11:27,960 --> 00:11:31,679
Speaker 1: of the Netherlands election. That was really a special moment

154
00:11:39,840 --> 00:11:42,920
Speaker 1: brought to you by Bank of America Mary Lynch dedicated

155
00:11:43,280 --> 00:11:46,640
Speaker 1: to bringing our clients insights and solutions to meet the

156
00:11:46,800 --> 00:11:51,160
Speaker 1: challenges of a transforming world. That's the power of global connections.

157
00:11:51,559 --> 00:11:56,040
Speaker 1: Mary Lynch, Pierce, Fenner and Smith Incorporated, Member s I

158
00:11:56,240 --> 00:12:02,760
Speaker 1: p C. On this historic day for the United Kingdom,

159
00:12:03,320 --> 00:12:07,880
Speaker 1: Daniel Jurgen, Professor Jurgen, Dr Jurgen Rather The Commanding Heights

160
00:12:08,000 --> 00:12:11,800
Speaker 1: is the iconic book on the ascent of the United Kingdom.

161
00:12:12,440 --> 00:12:15,480
Speaker 1: This is not a United Kingdom. Clement at Lee would

162
00:12:15,559 --> 00:12:18,280
Speaker 1: know at the end of World War to the Prime

163
00:12:18,320 --> 00:12:23,280
Speaker 1: Minister gave a rousing speech today, what is the perspective

164
00:12:23,400 --> 00:12:26,880
Speaker 1: you can give on how these negotiations will go? For

165
00:12:27,000 --> 00:12:31,840
Speaker 1: Prime Minister May, given the sprawl from nineteen fifty two,

166
00:12:32,600 --> 00:12:35,640
Speaker 1: all of the trade discussions of you the Union, what

167
00:12:35,880 --> 00:12:39,520
Speaker 1: is the perspective today forward? I think that the good

168
00:12:39,600 --> 00:12:42,280
Speaker 1: Morning Tom. I think that the phony war that's going

169
00:12:42,320 --> 00:12:45,960
Speaker 1: on for the last ten months about Brexit, of course

170
00:12:46,000 --> 00:12:48,000
Speaker 1: it's now the real war has begun, and I think

171
00:12:48,040 --> 00:12:50,640
Speaker 1: it's going to be a big and tough struggle. No

172
00:12:50,720 --> 00:12:53,280
Speaker 1: one really knows how it's going to go. The EU

173
00:12:53,520 --> 00:13:00,680
Speaker 1: is proposing a sixty uh dollar bill to UH to Britain,

174
00:13:01,480 --> 00:13:03,599
Speaker 1: and I think it's what's at stake, of course, is

175
00:13:03,640 --> 00:13:06,040
Speaker 1: not only for Britain, but is for the EU, which

176
00:13:06,160 --> 00:13:10,080
Speaker 1: is dealing with the stresses that come from the common

177
00:13:10,600 --> 00:13:13,800
Speaker 1: having a common currency that isn't backed up by common institutions,

178
00:13:13,880 --> 00:13:18,559
Speaker 1: the euro, and compounded by the open borders. So I

179
00:13:18,600 --> 00:13:21,920
Speaker 1: mean for for the EU as much as Britain. This

180
00:13:22,080 --> 00:13:24,679
Speaker 1: incogation so essential because it's also about the future of

181
00:13:24,720 --> 00:13:27,920
Speaker 1: the EU. Where is the commanding heights of Europe? Is

182
00:13:28,000 --> 00:13:32,040
Speaker 1: it a Chancellor Miracle's desk? At this point it has been.

183
00:13:32,520 --> 00:13:36,240
Speaker 1: Germany has been really the political and economic engine that

184
00:13:36,360 --> 00:13:41,079
Speaker 1: has kept the whole thing together. Her position thought have

185
00:13:41,200 --> 00:13:45,079
Speaker 1: been weakened by the influx of million migrants, but the

186
00:13:45,160 --> 00:13:50,160
Speaker 1: Germans did well in the most recent UH elections her party,

187
00:13:50,280 --> 00:13:53,800
Speaker 1: So she is the you know, she is the kind

188
00:13:53,800 --> 00:13:59,040
Speaker 1: of personification of Europe right now, particularly with this potential

189
00:13:59,120 --> 00:14:03,000
Speaker 1: disarray in France. M hm. There was a remarkable moment

190
00:14:03,080 --> 00:14:05,360
Speaker 1: in the speech, I thought when Prime Minister Theresa May said,

191
00:14:05,440 --> 00:14:08,240
Speaker 1: perhaps more than ever, the world needs the democratic, liberal

192
00:14:08,360 --> 00:14:10,240
Speaker 1: values of Europe. And you heard the jeering and the

193
00:14:10,320 --> 00:14:13,679
Speaker 1: laughter from the backbenches in parliament. What did you make

194
00:14:13,760 --> 00:14:16,319
Speaker 1: of that line? What did you make of the overtures

195
00:14:16,400 --> 00:14:19,280
Speaker 1: that the Prime Minister made to the greater European community

196
00:14:19,320 --> 00:14:22,640
Speaker 1: in the speech today, Well, I think she's uh, you know,

197
00:14:22,840 --> 00:14:26,960
Speaker 1: she has to play a very complex hand here in

198
00:14:27,160 --> 00:14:30,840
Speaker 1: terms of what what part of Europe or europe connections

199
00:14:30,920 --> 00:14:34,960
Speaker 1: will remain, and so uh, you know, that's an olive

200
00:14:35,040 --> 00:14:40,720
Speaker 1: branch in a way to the uh, to the Europeans. Uh.

201
00:14:41,200 --> 00:14:43,520
Speaker 1: You know, I'm sure that line was very carefully crafted

202
00:14:43,600 --> 00:14:47,600
Speaker 1: as they begin these really tough negotiations for which there's

203
00:14:47,640 --> 00:14:51,880
Speaker 1: no precedent. What's the best case scenario here for a deal?

204
00:14:51,920 --> 00:14:54,440
Speaker 1: I imagine the best cases one that's concluded or agreed

205
00:14:54,520 --> 00:14:57,320
Speaker 1: upon within this two year period. But what are you

206
00:14:57,400 --> 00:14:59,080
Speaker 1: looking for when when when you think of what a

207
00:14:59,120 --> 00:15:01,400
Speaker 1: good deal for for the UK and the EU might

208
00:15:01,440 --> 00:15:04,200
Speaker 1: be Well, for the UK, I think it would be

209
00:15:04,320 --> 00:15:08,040
Speaker 1: a way to continue to be active in almost in

210
00:15:08,120 --> 00:15:11,520
Speaker 1: a free trade like way with the EU, sort of

211
00:15:11,560 --> 00:15:15,440
Speaker 1: going back to what the European Community was a trading group,

212
00:15:15,760 --> 00:15:19,200
Speaker 1: and to maintain the financial position of London as a

213
00:15:19,240 --> 00:15:23,000
Speaker 1: as a as as the basis for Europe. I think

214
00:15:23,080 --> 00:15:25,720
Speaker 1: for the EU, the stakes really are to make sure

215
00:15:25,800 --> 00:15:28,000
Speaker 1: that this is not the first as many uh, and

216
00:15:28,160 --> 00:15:31,680
Speaker 1: that this doesn't seed populism. And I'll tell you, uh,

217
00:15:32,280 --> 00:15:35,520
Speaker 1: you know, the French elections will be so so critical

218
00:15:36,240 --> 00:15:40,800
Speaker 1: uh to what happens next on oil, And of course

219
00:15:40,840 --> 00:15:43,240
Speaker 1: everybody wants to know what, Daniel, you're going to think oil.

220
00:15:43,560 --> 00:15:48,080
Speaker 1: Let's bring the two together. Oil in Scotland. The North

221
00:15:48,200 --> 00:15:52,320
Speaker 1: Sea isn't the North Sea of the Commanding Heights, is it? No,

222
00:15:53,120 --> 00:15:57,760
Speaker 1: it's quite different. You know, when they had the Scottish referendum,

223
00:15:57,800 --> 00:16:00,880
Speaker 1: which was very close of two years ago, it was

224
00:16:00,960 --> 00:16:03,400
Speaker 1: when oil was still a hundred dollars a barrel. I've

225
00:16:03,600 --> 00:16:06,320
Speaker 1: often wondered how that vote would have gone when oil

226
00:16:06,440 --> 00:16:09,040
Speaker 1: was forty or fifty dollars a barrel, because part of

227
00:16:09,080 --> 00:16:11,840
Speaker 1: Scottish nationalism has always been well it's our oil and

228
00:16:11,920 --> 00:16:15,360
Speaker 1: we'll get the oil. And uh, but in a lower

229
00:16:15,440 --> 00:16:19,680
Speaker 1: price range Scotland, you know that it doesn't have that

230
00:16:20,640 --> 00:16:26,680
Speaker 1: fiscal advantage that comes from higher priced oil. So um, uh,

231
00:16:27,160 --> 00:16:30,320
Speaker 1: you know it's a question of the Scottish Parliament may

232
00:16:30,440 --> 00:16:32,400
Speaker 1: vote that they want a referendum, but that doesn't mean

233
00:16:32,440 --> 00:16:36,560
Speaker 1: that they'll necessarily be a referendum. I should say so

234
00:16:36,720 --> 00:16:39,240
Speaker 1: for Theresa May, this is really a two front War

235
00:16:39,440 --> 00:16:42,600
Speaker 1: one is one of Brussels and the others with Edinburgh.

236
00:16:43,120 --> 00:16:44,880
Speaker 1: I'm putting, are these e I A data will get

237
00:16:44,920 --> 00:16:50,160
Speaker 1: today at three Wall Street times and putting will never

238
00:16:50,280 --> 00:16:52,360
Speaker 1: come on the show. And yet and folded into the

239
00:16:52,440 --> 00:16:55,960
Speaker 1: conversation that was dominant. I didn't say which data? Did

240
00:16:56,000 --> 00:16:59,040
Speaker 1: you say the data the ID and folded into the

241
00:16:59,040 --> 00:17:01,080
Speaker 1: conversation You hadn't to a couple of weeks back at

242
00:17:01,080 --> 00:17:03,120
Speaker 1: your your Sarah conference that you know what we heard

243
00:17:03,160 --> 00:17:05,760
Speaker 1: from the Saudio oil ministry there. Well, it was very

244
00:17:05,840 --> 00:17:08,560
Speaker 1: interesting because of course, Uh, when we began the conference,

245
00:17:08,560 --> 00:17:11,680
Speaker 1: the oil price was up from what had been when

246
00:17:11,720 --> 00:17:13,920
Speaker 1: we helped sire a week the year earlier. By the

247
00:17:14,040 --> 00:17:16,000
Speaker 1: end of the week the oil price was down ten percent.

248
00:17:16,320 --> 00:17:20,240
Speaker 1: Not connected to the conference, I think to to UH,

249
00:17:21,040 --> 00:17:24,000
Speaker 1: because we have the Saudi minister, the Russian minister, UH,

250
00:17:25,240 --> 00:17:27,520
Speaker 1: the Secretary General of OPEC, the head of i A there,

251
00:17:28,160 --> 00:17:31,080
Speaker 1: and you know the message was that this OPAC not

252
00:17:31,240 --> 00:17:35,639
Speaker 1: OPE agreement is really going to going to hold. But UH,

253
00:17:36,080 --> 00:17:39,120
Speaker 1: as you point to inventories, you know that they said

254
00:17:39,160 --> 00:17:42,359
Speaker 1: the key metric if that they'll be looking at is inventories,

255
00:17:42,400 --> 00:17:46,879
Speaker 1: and inventories remain high. I think that. Um. What was

256
00:17:46,960 --> 00:17:49,560
Speaker 1: already clear in Houston is that the next key day

257
00:17:49,960 --> 00:17:53,920
Speaker 1: is May when OPEC meets, and I think coming out

258
00:17:54,000 --> 00:17:57,639
Speaker 1: of this meeting this weekend, Wait, they're signaling that, Uh

259
00:17:58,000 --> 00:18:01,960
Speaker 1: they really if if they don't extend their six months agreements,

260
00:18:02,040 --> 00:18:05,240
Speaker 1: six months goes by quickly. Uh, that would put a

261
00:18:05,480 --> 00:18:08,480
Speaker 1: new pressure on the oil price, particularly, I should say,

262
00:18:08,760 --> 00:18:10,879
Speaker 1: with the amount that US producers have been able to

263
00:18:11,000 --> 00:18:14,200
Speaker 1: hedge their production forward. Dr. You're gonna honor to have

264
00:18:14,320 --> 00:18:16,280
Speaker 1: you on with this, for this historic to have United

265
00:18:16,359 --> 00:18:20,600
Speaker 1: Kingdom folks, I'll put out on Twitter, Yurgens. The Commanding

266
00:18:20,760 --> 00:18:36,200
Speaker 1: Heights can't say enough about it. We are in the

267
00:18:36,400 --> 00:18:39,400
Speaker 1: edge of April, and April in any in all cases

268
00:18:39,480 --> 00:18:42,840
Speaker 1: means the meetings of the International Monetary Fund will of

269
00:18:42,880 --> 00:18:45,680
Speaker 1: course give you complete coverage of that. We begin today

270
00:18:45,720 --> 00:18:49,680
Speaker 1: with the publication of Fiscal Politics and are honor to

271
00:18:49,760 --> 00:18:55,040
Speaker 1: bring you Vito gas Bar with the International Monetary UH Fund.

272
00:18:55,359 --> 00:19:00,840
Speaker 1: Dr gaspar good morning, going within your wonder document and

273
00:19:01,040 --> 00:19:05,439
Speaker 1: thoughtful two plus excuse me, four hundred plus pages. Uh,

274
00:19:05,600 --> 00:19:08,640
Speaker 1: could you please tell me what you learned about austerity?

275
00:19:09,119 --> 00:19:11,320
Speaker 1: You know, I look at the history being made by

276
00:19:11,400 --> 00:19:14,399
Speaker 1: Prime Minister made today, I look at the challenges of

277
00:19:14,480 --> 00:19:17,280
Speaker 1: Europe and that word from three or four years ago

278
00:19:17,480 --> 00:19:22,920
Speaker 1: was austerity. How does austerity fold into our political fiscal

279
00:19:23,520 --> 00:19:31,680
Speaker 1: or our fiscal politics? So, Tom, Uh, the UH political

280
00:19:31,760 --> 00:19:36,840
Speaker 1: economy aspects. The link between politics and economics was a

281
00:19:37,000 --> 00:19:40,960
Speaker 1: tradition UH in economics up to the beginning of the

282
00:19:41,040 --> 00:19:47,240
Speaker 1: twentieth century. That tradition has been a little bit lost recently,

283
00:19:48,240 --> 00:19:52,840
Speaker 1: and about two years ago, UH we decided at the

284
00:19:52,920 --> 00:19:57,480
Speaker 1: Fiscal Affairs Department of the International Monetary Fund that looking

285
00:19:57,760 --> 00:20:01,640
Speaker 1: at the relation between polit tics and economics in general,

286
00:20:02,040 --> 00:20:08,200
Speaker 1: and especially the relation between politics and fiscal policy was key,

287
00:20:08,720 --> 00:20:13,320
Speaker 1: and so we launched this project that is now come

288
00:20:13,560 --> 00:20:19,840
Speaker 1: to the presentation of this book that includes three parts

289
00:20:20,000 --> 00:20:26,280
Speaker 1: and nineteen chapters on a very wide variety of topics

290
00:20:26,560 --> 00:20:33,320
Speaker 1: on fiscal policy and politics. Unfortunately, we don't have a

291
00:20:33,480 --> 00:20:40,440
Speaker 1: special focus on austerity, but we do have quite a

292
00:20:40,600 --> 00:20:46,320
Speaker 1: lot on how one should think about the political conditions

293
00:20:46,680 --> 00:20:55,000
Speaker 1: that allow governments to UH follow sound countersyclical fiscal policies,

294
00:20:55,520 --> 00:20:59,720
Speaker 1: which is a key priority today. I hope Tom that

295
00:21:00,119 --> 00:21:03,600
Speaker 1: given that we launched this program, this project two years ago,

296
00:21:04,240 --> 00:21:07,640
Speaker 1: you will concede to us that we got our timing

297
00:21:08,280 --> 00:21:12,960
Speaker 1: more or less right. No, Tom Hm. One of the

298
00:21:13,040 --> 00:21:15,119
Speaker 1: chapters of the nineteen that stood out to me is

299
00:21:15,119 --> 00:21:17,840
Speaker 1: one that you authored here on lessons that the European

300
00:21:17,920 --> 00:21:21,119
Speaker 1: Union can learn from early American history. Give us the

301
00:21:21,200 --> 00:21:23,800
Speaker 1: crisis of that what what? What lessons are there to

302
00:21:23,840 --> 00:21:25,800
Speaker 1: be learned from what happened in this country when it

303
00:21:25,840 --> 00:21:32,320
Speaker 1: comes to supernational fiscal policy. Oh, that experience is absolutely fascinating.

304
00:21:32,640 --> 00:21:37,000
Speaker 1: So if you go to the beginning of the US

305
00:21:37,200 --> 00:21:43,840
Speaker 1: administration with Alexander Hamilton's so in a seventeen seventeen eighty

306
00:21:43,960 --> 00:21:49,399
Speaker 1: nine Hamilton's already benefited from the US Constitution. One of

307
00:21:49,560 --> 00:21:53,800
Speaker 1: the innovations from the US Constitution was that the federal

308
00:21:53,920 --> 00:21:59,119
Speaker 1: government was given the power to tax. Since that power

309
00:21:59,560 --> 00:22:05,159
Speaker 1: was no longer disputed, the federal government had the ability

310
00:22:05,320 --> 00:22:11,840
Speaker 1: to generate the revenues necessary to service and repay the

311
00:22:12,040 --> 00:22:17,840
Speaker 1: very large debts that had been accumulated during the War

312
00:22:18,200 --> 00:22:25,640
Speaker 1: of Independence. And Alexander Hamilton's was extremely systematic in building

313
00:22:26,359 --> 00:22:31,280
Speaker 1: the new US federal administration that, of course did not

314
00:22:32,400 --> 00:22:38,119
Speaker 1: exist before. He built up the US tax capacity at

315
00:22:38,160 --> 00:22:42,320
Speaker 1: the federal level completely from scratch, and one of the

316
00:22:42,560 --> 00:22:47,320
Speaker 1: aspects that I developed more in this paper is that

317
00:22:47,720 --> 00:22:53,320
Speaker 1: he set up the conditions UH that allow US Treasury

318
00:22:53,440 --> 00:22:59,000
Speaker 1: bonds to become the ultimate safe asset in the US

319
00:22:59,200 --> 00:23:04,320
Speaker 1: and a cord or stone of the US financial system.

320
00:23:05,000 --> 00:23:09,520
Speaker 1: And that is the part which I believe is more

321
00:23:10,080 --> 00:23:15,000
Speaker 1: relevant for European integration. Today, we're gonna we have breaking news, sir,

322
00:23:15,119 --> 00:23:16,800
Speaker 1: so we're gonna have to leave it short. But Vitur

323
00:23:16,880 --> 00:23:21,520
Speaker 1: Gaspar congratulations on this work from the International Monetary Fund.

324
00:23:21,800 --> 00:23:25,440
Speaker 1: Fiscal politics really beginning to kick off the view of

325
00:23:25,520 --> 00:23:28,240
Speaker 1: international economics that focuses on the World Bank and i

326
00:23:28,400 --> 00:23:39,600
Speaker 1: m F meetings here in the end of April. Thanks

327
00:23:39,640 --> 00:23:44,040
Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen

328
00:23:44,160 --> 00:23:49,480
Speaker 1: to interviews on iTunes, SoundCloud, or whichever podcast platform you prefer.

329
00:23:50,240 --> 00:23:53,080
Speaker 1: I'm out on Twitter at Tom Keene. David Gura is

330
00:23:53,240 --> 00:23:57,000
Speaker 1: at David Gura. Before the podcast, you can always catch

331
00:23:57,119 --> 00:24:13,640
Speaker 1: us worldwide. I'm Bloomberg Radio, brought you by Bank of America,

332
00:24:13,720 --> 00:24:17,919
Speaker 1: Mary Lynch, dedicated to bringing our clients insights and solutions

333
00:24:18,280 --> 00:24:21,560
Speaker 1: to meet the challenges of a transforming world. That's the

334
00:24:21,640 --> 00:24:26,720
Speaker 1: power of global connections. Mary Lynch, Pierce Feeder and Smith Incorporated,

335
00:24:26,920 --> 00:24:28,560
Speaker 1: member s I p C,