Speaker 1: Welcome to Bloomberg Opinion. I'm Bonnie Quinn. This week, the
Speaker 1: people are not willing to back down to a bully.
Speaker 1: Taipei based Tim Coulpan on the ramifications of Speaker Pelosi's
Speaker 1: visit to Taiwan, and later David Fickling on the reopening
Speaker 1: of the Port of Odessa for grain shipments. But first
Speaker 1: to markets and John Authors. So John, quite the week. Yes,
Speaker 1: I wouldn't have thought so the first week in August.
Speaker 1: But here we are. Let's talk about false all clears.
Speaker 1: Is that what we've just got? I think so certainly.
Speaker 1: What you've seen was I thought an extreme overreaction to
Speaker 1: the notion that the FED was ready to pivot already,
Speaker 1: that the in some ways, that the battle against inflation
Speaker 1: was already one. Now, it's true that markets are about
Speaker 1: what's happening in the future, they're not about what's just happened.
Speaker 1: But when it comes to fighting inflation, rates do have
Speaker 1: to go up, and that has to tighten economic activity
Speaker 1: before inflation is beaten. You can't just skip those steps.
Speaker 1: You have to wait for them to work out in
Speaker 1: the real economy before you trade. Accordingly, he's saying, it's
Speaker 1: almost like the market is trying to trade both things
Speaker 1: at the same time. Yes, there might be very clear
Speaker 1: economic logic behind the notion that rates are going to
Speaker 1: go up, then the economy will slow, and then rachel
Speaker 1: will come down again. We've all read our economic textbooks,
Speaker 1: and you do want to guard against the future. But
Speaker 1: you can't thereby assume that you can already buy bonds
Speaker 1: as there's no nothing to worry about plainly the terms.
Speaker 1: There's a lot of problems, and you point out Lisa
Speaker 1: Shallad's points and also Ed Hyman's points, both of whom
Speaker 1: are excellent market commentators and should never be ignored. Right,
Speaker 1: We're in a genuinely unprecedented situation, in an era of
Speaker 1: international finance and unprecedented global pandemic. Any number of possibilities
Speaker 1: are sensibly open. Nobody can confidently say that anybody else
Speaker 1: is wrong about this. But there are very strong forces
Speaker 1: pushing bonds in both directions. And I think that's an
Speaker 1: important point because it is both directions. It's not like
Speaker 1: it's an ambivalent market here. It's a market that's very
Speaker 1: convinced of two different things. That's why there yeah, and
Speaker 1: that's why the Eel curve is a little bit like
Speaker 1: a slinky these days, but also because Nancy Pelosi decided
Speaker 1: to complicate things, if you want to put it that
Speaker 1: way this week. Yes, I think from the cold blooded
Speaker 1: view of a macro trader, the potential Taiwan straight issue
Speaker 1: adds up potentially to the Ukraine War plus the trade
Speaker 1: war with China all at once, only worse. It's absolutely
Speaker 1: not what anybody wants to see happen. And so the
Speaker 1: degree of saber rattling ahead of her trip, which I
Speaker 1: have to say I don't quite understand what the re
Speaker 1: for doing it this week was was very scary. I
Speaker 1: think you could see we had on Tuesday, we had
Speaker 1: a remarkable rise in bond yields I people sold their bonds,
Speaker 1: and in large part that was because there have been
Speaker 1: a somewhat extreme rush to the havens. People were wondering
Speaker 1: whether the Chinese are going to shoot Pelosi's plane down.
Speaker 1: I'm not joking that that that was going around there
Speaker 1: as a possibility, and the fact that she just landed
Speaker 1: safely and got out of the plane caused the bond
Speaker 1: market turn around. Um, so certainly you could see some
Speaker 1: kind of a short term sentiment extreme caused just by
Speaker 1: that event that seems to have gone away though in
Speaker 1: twenty four hours. Unless something else happens. China seems to
Speaker 1: have made its moves. It's already imposed economic you know, well,
Speaker 1: I guess sanctions. Yeah, there are sanctions on Taiwan, and
Speaker 1: it's going to engage in some drills. But this may
Speaker 1: not be the kick off to the retaking of Taiwan
Speaker 1: that market is looking for at some point in the future. Yeah,
Speaker 1: I mean, I mean, certainly, I am not a expert
Speaker 1: on military strategy, but I've read quite a number of
Speaker 1: notes now that have come out from people who are
Speaker 1: both the sanctions and the military exercises are quite a
Speaker 1: lot more lenient, quite a lot less aggressive than they
Speaker 1: could have been. There are much nastier sanctions packages they
Speaker 1: could have done, and they could be much more menacing
Speaker 1: when it comes to playing around with their military. So
Speaker 1: it looks as though sieg In Ping might have blinked
Speaker 1: and Nancy Pelosi hasn't. Can't imagine you'll get any great
Speaker 1: domestic political credit for it in the US, but it
Speaker 1: looks as though Pelosi might actually have one that particular contrado. Yes,
Speaker 1: they're not exactly equals, I guess in that respect, but
Speaker 1: but she may have one. So we're in August. We've
Speaker 1: had this huge move in bond market. We also saw
Speaker 1: the NASDAK reclaim lots of territory so far this week.
Speaker 1: It's very hard to believe in the idea that this
Speaker 1: could be a false or clear when you watch what's
Speaker 1: happening in the market. But I guess that's the essence
Speaker 1: of being a good trader, right. It's a very difficult one.
Speaker 1: Certainly a number of usual technical trading measures. I'm not
Speaker 1: normally a great fan of technical analysis, but it's at
Speaker 1: times like this, when markets have really been scared and
Speaker 1: when trading really is about mass psychology, that technical measures
Speaker 1: can be quite useful. And the degree to which we
Speaker 1: have had such a big reversal of such a big
Speaker 1: sell off doesn't usually happen unless the bottom is in,
Speaker 1: and that deserves some degree of respect. The nisy Fang
Speaker 1: plus index, so that the index just includes ten huge
Speaker 1: internet platform companies Apple, Amazon, Tesla, etcetera, is actually at
Speaker 1: this point up almost exactly from its low, which was
Speaker 1: in May. Some technicians would say that the rise means
Speaker 1: it's back in the bull market, still a long way
Speaker 1: below its peak, from last year, but that rise is
Speaker 1: in very very liquid stocks that people know about and
Speaker 1: are thinking about again can't be gainsaid. It doesn't seem
Speaker 1: to make sense to me, and that does imply I
Speaker 1: may in the long term be right right in inverted commas,
Speaker 1: but certainly in the short term there's something I must
Speaker 1: be missing that that you do need to have some
Speaker 1: degree of respect for that kind of a market movement. Well, listeners,
Speaker 1: if there's something you think John is missing, definitely let
Speaker 1: us know. John. Authors have you from Taipei now. On
Speaker 1: the House Speaker's visit to Taiwan with Tim Colburn, there
Speaker 1: were rumblings of the visit by the House Speaker, followed
Speaker 1: by nothing at all official on the agenda, and then
Speaker 1: suddenly as Morga's Board of meetings and press briefings talk
Speaker 1: to us about what the lasting consequences of this will
Speaker 1: be for Taiwan, both positive and negative. I mean there
Speaker 1: will be some positive ones. I guess it was a
Speaker 1: display of unity with the island. I think there will
Speaker 1: be more positive than negative. What we're hearing so far
Speaker 1: globally is a lot of pundits from around the world
Speaker 1: who have their take. You know, We're hearing from people
Speaker 1: in d C, in London and elsewhere, but there's not
Speaker 1: that many people in Taiwan who are talking about it.
Speaker 1: So so let me give you that perspective, and that
Speaker 1: is the Taiwanese people in general, see this is a
Speaker 1: positive thing. The world seems to have just suddenly realized
Speaker 1: that Taiwan is under threat, and all of the belligerents
Speaker 1: and saber rattling seems to have come as a bit
Speaker 1: of surprise too many people outside Taiwan, but people in
Speaker 1: Taiwan have been used to that. We've been dealing with
Speaker 1: for decades, various types of threats, direct indirect threats, military threats,
Speaker 1: economic threats, and even legal threats with passing of various
Speaker 1: laws in China that impact Taiwanese directly. So the positive
Speaker 1: really for the Taiwanese these and this is what I'm
Speaker 1: hearing from many many people, is that now the world
Speaker 1: has woken up. Now the world has got Taiwan on
Speaker 1: their radar, and they're very aware of the existence of
Speaker 1: threat from China, the belligerents from China. The downside, of course,
Speaker 1: is that the military have increased as we speak, China
Speaker 1: is going to be holding the largest military exercises around
Speaker 1: Taiwan since the Chinese Civil War. Essentially, they will be
Speaker 1: ringing the island of Taiwan with the various war games
Speaker 1: at six different points, very uncomfortably close to Taiwan. You know,
Speaker 1: you say that the world has woken up, but China
Speaker 1: has been ramping up things like military drills and so on.
Speaker 1: We've seen that, and I feel like, at least in markets,
Speaker 1: there was preparation for an effort to retake Taiwan or
Speaker 1: something like that in the near future. And then Ukraine happened,
Speaker 1: and some people thought that those chances went up in
Speaker 1: the near term. Some thought that that meant those chances
Speaker 1: went down in the near term. But why would it
Speaker 1: be in Taiwan's interest to just poke the bear? If
Speaker 1: you like, it's predicating the idea of victim blaming. I
Speaker 1: think it's got to reremembered that Taiwan has not threatened China,
Speaker 1: has not threatened to invade, has not threatened any military action,
Speaker 1: and it's not even threatened to change the status quo.
Speaker 1: So since President saying when got in and then got reelected,
Speaker 1: she's actually annoyed some people in her own party by
Speaker 1: not moving anywhere towards independence, And of course she's annoyed
Speaker 1: Paging by not going anywhere close to the idea of unification.
Speaker 1: She has not budged either way, and that's kind of
Speaker 1: annoyed everybody. But it needs to be remembered that Taiwan
Speaker 1: has not threatened anybody. Taiwan has not invited any of it.
Speaker 1: Pelosi wanted to come to Taiwan, and of course Taiwanese
Speaker 1: people welcome that. The President of Taiwan welcomed that. But
Speaker 1: China has d percent agency over how it acts and reacts.
Speaker 1: To think it's up to China to decide how it
Speaker 1: acts and reacts to the visit of the speaker of
Speaker 1: a democratically elected nation to the president of another democratic,
Speaker 1: ple elective nation. And to say that Taiwan is poking
Speaker 1: the bear or inviting some kind of reaction is victim blaming,
Speaker 1: and it takes away agency from Beijing to control its
Speaker 1: temper and decide what it wants to do. So great
Speaker 1: that needs to be remembered. Yeah, absolutely, that is a
Speaker 1: great reminder. At the same time, is Taiwan ready if
Speaker 1: there is some military action? Has Taiwan built up enough
Speaker 1: military Are the people interested in getting involved in some
Speaker 1: kind of a conflict. I don't think anybody in any
Speaker 1: any nation is interested in getting involved in a conflict.
Speaker 1: You know, I don't believe the pure, but we can't
Speaker 1: live in denial either of to him. I mean, there
Speaker 1: may be a conflict coming at some point, sure, absolutely,
Speaker 1: But when you're living in Taiwan and you're you're facing
Speaker 1: the threats constantly, the Taiwanese people are not willing to
Speaker 1: back down to a bully. Just because China wants something
Speaker 1: doesn't mean in the eyes of the Taiwanese people that
Speaker 1: they should do it. They have been bullied by China
Speaker 1: for a long time. They've seen what happened to Hong Kong,
Speaker 1: and the idea of one country to assist a which
Speaker 1: was dangled in front of the Taiwanese people for quite
Speaker 1: a long time, has disappeared. So it really don't how
Speaker 1: much choice. Yeah, no, absolutely. In the meantime, there have
Speaker 1: been some economic actions taken as well, so far, I
Speaker 1: guess not a massive amount of actions, but still, you know,
Speaker 1: it will hurt citrus farmers in Taiwan. Sand is not natural.
Speaker 1: Sand is not going to be exported to Taiwan, and
Speaker 1: so on. There's also the danger that the chip manufacturing
Speaker 1: industry might be hurt in some way by this. What
Speaker 1: is the view on the economic impact so far? Yeah,
Speaker 1: you're right, there's been close to two thousand food items
Speaker 1: supposedly banned from import. Citrus fruits are as types of
Speaker 1: snack foods. From an economic point of view, it's like
Speaker 1: one percent of export, but symbolically it's important, and these
Speaker 1: are kind of traditional, smaller industries that have a relatively
Speaker 1: higher labor employment rate. So you know, it's a bit
Speaker 1: of a pain. But one thing that I'm hearing from
Speaker 1: Taiwanese is great, it will make us less reliant on China,
Speaker 1: as many many people in Taiwan who feel that Taiwan
Speaker 1: is too reliant on China as an export market. I
Speaker 1: mean right, yeah, yeah, Well, the second largest economy and
Speaker 1: largest growing economy, even though China is slowing down, still
Speaker 1: a very very important market for everybody, not just for Taiwan,
Speaker 1: for everybody. Taiwanese aware of that, but they also a
Speaker 1: bit pragmatic, going well, economically, that doesn't make sense for
Speaker 1: us to be so reliant on a nation that is
Speaker 1: threatening to invade us. You know, there's there's definitely an
Speaker 1: issue there. So there's a certain amount of pragmatism by
Speaker 1: many Taiwanese right now saying, well, that kind of sucks,
Speaker 1: but it's your loss, not ours. On the chip side,
Speaker 1: there is definitely a risk. But Mark Leo, the chairman
Speaker 1: of t SMC, just said recently, if China was to invade,
Speaker 1: they would render t SMC inoperable. People who know the
Speaker 1: industry know very well, but you can't just invade Taiwan
Speaker 1: and take over the factories and somehow run it yourself.
Speaker 1: The factories are not just the equipment, it's to know how,
Speaker 1: it's the technology, it's the people, the software behind it,
Speaker 1: and actually just doesn't have the technical ability to make
Speaker 1: chips like the Taiwanese do. We know this for a
Speaker 1: fact because they've been trying. So if there was actually
Speaker 1: some kind of military action on the main island, everybody
Speaker 1: would lose, and Taiwan certainly would lose, but China would
Speaker 1: not get access to the chips. China needs Taiwan made
Speaker 1: chips just as much as everybody else, right, so they
Speaker 1: really would be shooting themselves in the foot. And the
Speaker 1: Chinese economy, which is growing very fast and it's got
Speaker 1: a very strong consumer in middle class economy needs the
Speaker 1: electronic products that are made by the Taiwanese. So it
Speaker 1: would be a very big risky move to try and
Speaker 1: take action on that front. Yeah, and I almost set
Speaker 1: to annunciated, but China could just nationalize the chip industry,
Speaker 1: you know, once it's taken over the island Milton. Well,
Speaker 1: they'd have to take over the island first, and that
Speaker 1: wouldn't be easy. You know, first of all, they'd have
Speaker 1: to take out the power stations. This is how the
Speaker 1: military started to think about it. They take out military
Speaker 1: installations first, take out power stations, take out infrastructure. And
Speaker 1: you know, if they do manage to love a whole
Speaker 1: lot of missiles and bombs of Taiwan and miss the
Speaker 1: semiconductor manufacturing factories and then managed to get boots on
Speaker 1: the ground and then managed to get people into the
Speaker 1: factories and then nationalize it, I don't think they have
Speaker 1: much left actually nationalize the The amount of destruction involved
Speaker 1: in the process of actually taking over the factories would
Speaker 1: render them useless. Anyway, Tim couldn as always do get
Speaker 1: in touch. Comments and opinions always welcome at Volley Quinn
Speaker 1: on Twitter or email v Quinn at Bloomberg dot net.
Speaker 1: The Inflation Reduction Act is a potential boon to many
Speaker 1: areas of the green economy. And it turns out the
Speaker 1: top ten districts for solar wind and battery compacity are
Speaker 1: eight six percent red. So if Republican districts tend to
Speaker 1: benefit from the green transition, why the disconnect? Why are
Speaker 1: Republicans not outwardly at least in favor. Liam Denning has
Speaker 1: been looking at the data. Liam, Why are Republicans at
Speaker 1: least outwardly not more in favor of the green transition? Well,
Speaker 1: I guess it's probably explained mostly ideology more than anything else.
Speaker 1: The genesis of this piece was I worked with an
Speaker 1: outside data firm called in a Section, and we wanted
Speaker 1: to really see if the reality is on the ground
Speaker 1: in terms of where stuff actually gets cited comports with
Speaker 1: this received wisdom on the sector in the US. You
Speaker 1: know this color code we have that basically green mixes
Speaker 1: with blue, but it doesn't mix with red. And actually,
Speaker 1: when you you know, you download all the data on
Speaker 1: where solar wind and batteries are cited or where they're
Speaker 1: planned to be cited, and then you cross references with
Speaker 1: where this stuff is being built. It's overwhelmingly in districts
Speaker 1: that are represented by Republicans. The other thing that you
Speaker 1: mapped when you mapped Green America was the emissions side
Speaker 1: of things, So the not so green America. It turns
Speaker 1: out that it's also the case that Republican congressional districts
Speaker 1: have the most emissions. Tell us a little bit about
Speaker 1: where these districts are. So, for example, Kevin McCarthy's district,
Speaker 1: it's a huge green energy district, and yet Kevin McCarthy
Speaker 1: is not exactly beer prototypical green energy. Yeah, we focused
Speaker 1: in on Kevin McCarthy obviously because he's very prominent. He's
Speaker 1: the House Minority leader, and his district is fascinating because,
Speaker 1: as you say, it is a big green energy hub
Speaker 1: in in California. In fact, in terms of planned and
Speaker 1: operating battery capacity, it's the number one district, not just
Speaker 1: in California but in the country. At the same time,
Speaker 1: it's also a big wind and solar area. His district
Speaker 1: hosts the cradle of California's wind industry, has the Harvey Desert,
Speaker 1: which hosts a lot of solar farms, and his district
Speaker 1: centers on Bakersfield, which is also the unofficial oil capital
Speaker 1: of California. So, you know, one of the takeaways we
Speaker 1: took from not just his district, but the entire project
Speaker 1: is that the underlying complexity is very different from what
Speaker 1: you hear, both in terms of kind of SoundBite politics,
Speaker 1: but also you know the left right battles you see
Speaker 1: play out on social media. Well, and some of this
Speaker 1: is do to the system too, I guess, right, because
Speaker 1: while the transition is happening, people are still working in
Speaker 1: the old energy quote unquote areas and particularly in these districts,
Speaker 1: so they want to hold on to their jobs, and
Speaker 1: there's an elector to consider it too. Yeah, I think
Speaker 1: there's a few things going on. So, as you say,
Speaker 1: there's that element of transition to use the word that
Speaker 1: everyone uses, and in a transition, you go from old
Speaker 1: to new. And one of the things that Bedevil's climate
Speaker 1: politics is that climate change operates on a geological time scale,
Speaker 1: and society operates on two year election cycles or you know,
Speaker 1: two second Twitter cycles, definitely not geological cycles. So while
Speaker 1: there is fairly consistent concern about climate change expressed by
Speaker 1: Americans in whichever pole you care to mention. You know,
Speaker 1: it doesn't always necessarily come to the top of the
Speaker 1: list around election time. I think the other thing that
Speaker 1: underlies all this is that a big reason why green
Speaker 1: infrastructure is built in red soil is that that red
Speaker 1: soil will tends to be more rural or semi rural.
Speaker 1: And you know, guess what we tend to build Giant
Speaker 1: wind turbines, giant solar farms, big battery projects, and big
Speaker 1: plant in general, whether it's power stations or industrial plants.
Speaker 1: Those tend to get built where the land is cheap.
Speaker 1: You know. A good example is wind power, which is
Speaker 1: very much a Midwestern phenomenal, at least in the onshore sector,
Speaker 1: mainly because that's where the wind blows. You know, of
Speaker 1: the country's wind potential is intense states down the middle
Speaker 1: of the country, and the house districts in those states
Speaker 1: are Republicans. So part of this is simply geography and
Speaker 1: geography being at odds with ideology. Well, and that's the
Speaker 1: only thing. It's going to take a long time to
Speaker 1: enact the screen transition, and probably a lot longer than
Speaker 1: we thought. And even countries in Europe are reconsidering things
Speaker 1: like nuclear now because they're being forced to so back
Speaker 1: to the United States. If it's going to take a
Speaker 1: lot longer than we thought to enact this transition, is
Speaker 1: it possible that the electorate will change and that perhaps
Speaker 1: even representatives change their mind. You know, a cynic would
Speaker 1: say that the one thing that tends to change a
Speaker 1: politician's mind is money. And I think one of the
Speaker 1: things that we kind of did some back of the
Speaker 1: envelope math On was saying, if measures like the Inflation
Speaker 1: Reduction Act are pasted and we see stimulus dollars flow
Speaker 1: into clean tech projects at scale, where will that money go?
Speaker 1: And when we think about the planned capacity for batteries,
Speaker 1: wind and sober in the US, three quarters to four
Speaker 1: fifths of that money is going to end up in
Speaker 1: red districts. And I think over time, as we see
Speaker 1: green energy facts on the ground being created and when
Speaker 1: they reach critical mass, bringing with them that sort of investment,
Speaker 1: creating a tax base and a constituency all their own,
Speaker 1: whether it's a business constituency or a local individual constituency,
Speaker 1: at some point that does have an impact. At some
Speaker 1: point a politician who is maybe saying we don't need
Speaker 1: any of this stuff, a local business leader is going
Speaker 1: to tap them on the back and say, actually, this
Speaker 1: stuff is making us money, Liam Denning. Many commodity prices
Speaker 1: are down substantially from their peaks. That's, however, cold comfort
Speaker 1: for nearly eight hundred million food insecure around the world.
Speaker 1: Let's get to David Fickling for some explanation. So, David,
Speaker 1: there was huge relief in grain markets when we saw
Speaker 1: that first ship leave the port of Odessa for Elebanon.
Speaker 1: Prices have come down for all sorts of grains and
Speaker 1: oil seeds, and it's a big difference from when we
Speaker 1: spoke earlier in the year about the difficulties in palm oil,
Speaker 1: wheat and other markets. But in terms of food security,
Speaker 1: the situation is much more complicated and multi factored than
Speaker 1: simply prices are too high. I think that's right. It's
Speaker 1: very much feels like we've passed the sort of acute
Speaker 1: phase of food crisis. But I think there's a chronic
Speaker 1: problem underlying this. To use the sort of medical metaphor,
Speaker 1: I mean, you look at a bunch of commodities, spring wheats,
Speaker 1: the benchmark in the US, it's done more than a
Speaker 1: third at this point from where it was in March
Speaker 1: palm all. You mentioned oil feeds that forty percent in
Speaker 1: papril corn prices, and by nearly a course in my
Speaker 1: sugar and Arabic a coffee. They're all a one year,
Speaker 1: nine months load. But although the price of these commodities
Speaker 1: are still actually reasonably hired by ten years standards, certainly
Speaker 1: compared to where we where a few months ago, there's
Speaker 1: come down a great deal and we're starting to see
Speaker 1: signs that maybe certain these things were returning to normal.
Speaker 1: So that's great, and we should be very excited for
Speaker 1: the world's poor and hungry that perhaps they have a
Speaker 1: chance to get food again. But that's not quite the case,
Speaker 1: is it. That's right, because I think there's a tendency
Speaker 1: for us in rich countries looking at commodity markets to
Speaker 1: rather overestimate the importance of the prices of benchmark commodity
Speaker 1: futures as a sort of index of the affordability of
Speaker 1: food for the world's poorest. It's certainly a factor, but
Speaker 1: one of many factors, and not even I would say
Speaker 1: the most important factor. You know, if I was to
Speaker 1: say one factor above all that affects food insecurity, and
Speaker 1: bear in mind the population of people facing under nourishment
Speaker 1: who don't have enough food through the year to give
Speaker 1: them a balanced diet. It's looking now at being the
Speaker 1: highest in one since the mid two thousands, about seven
Speaker 1: hundred and sixty eight million people, possibly higher than that.
Speaker 1: One in ten people in the world very nearly do
Speaker 1: not have enough nourishment to provide them with a balanced
Speaker 1: diet or a real improvement. That number, far from us
Speaker 1: of eight hundred million we're seeing now was in the
Speaker 1: five hundred to six hundred millions. It was quite significantly lower.
Speaker 1: A couple of factors. I mentioned war and insecurity that
Speaker 1: really is probably the biggest of all factors. And you know,
Speaker 1: one sort of measure for the sort of human cost
Speaker 1: of that is probably if you look at the number
Speaker 1: of displaced people, refugees and internally displaced people. It's been
Speaker 1: soaring over the past decade. It's it's now running a
Speaker 1: double its level of a decade ago one. It rose
Speaker 1: eight percent in one year. And there's a tendency obviously
Speaker 1: to see these benchmark bology prices as the field and
Speaker 1: end all of food prices. But actually, I mean, you know,
Speaker 1: I always go back to the great Indian economists that
Speaker 1: much of fen and his analysis of famine that previously
Speaker 1: people talked about famine as something where there simply wasn't
Speaker 1: enough food in the world to feed people, or food
Speaker 1: in that particular region to feed people. And he went
Speaker 1: back and went back at the Dayton fans and said, well,
Speaker 1: it's very rarely a general sortage of food. It's generally
Speaker 1: actually that the price of food has has risen beyond
Speaker 1: the level of people's ability to afford it. And that
Speaker 1: can be caused by rising food prices, it can be
Speaker 1: caused by falling incomes, and it can be caused by
Speaker 1: other indexes of civil disorder, and a lot of folks
Speaker 1: that we're seeing right now civil disorder, but even things
Speaker 1: like insurance on ships, crew for ships, and so on.
Speaker 1: So many varied factors go into the price of something
Speaker 1: and the delivery of something. In fact, I was looking
Speaker 1: at the overall world food price Index and it's still
Speaker 1: at one fifty four point two, which is not that
Speaker 1: far off this year's March I oft seven. So in
Speaker 1: spite of large jobs, nearly eight hundred million people are
Speaker 1: going hungry right now, and that could rise. Talk to
Speaker 1: us a little bit of about the effect of the
Speaker 1: dollar and how that set in motion a whole range
Speaker 1: of things like the evaluations and so on that also
Speaker 1: affected the price and the deliverability of food. Absolutely, I mean,
Speaker 1: I think that's crucially important. We tend to look at
Speaker 1: these quantity price in dollars and most agricultural commodities a
Speaker 1: few exceptions. Palm oil is one of price in US dollars. Obviously,
Speaker 1: we've seen a lot of dollar strength in recent months,
Speaker 1: and that's particularly bad for a lot of emerging market currencies.
Speaker 1: These are countries that are some of the world's biggest
Speaker 1: food importers and are most dependent on imports from overseas.
Speaker 1: So take Egypt for instance. Egypt is the world's largest
Speaker 1: wheat importer. The Egyptian pand has absolutely been collapsing over
Speaker 1: the past years. So whereas the rise of the US
Speaker 1: dollar price of wheat has driven up costs by about
Speaker 1: twenty three, if you add in the evaluation of the
Speaker 1: Egyptian pan, that's added in another twenty on top of that.
Speaker 1: Pakistan is not actually a huge wheat importer, but it
Speaker 1: is dependent on imports to some extent. The rupee slump
Speaker 1: has added fifty three the scent on top of that
Speaker 1: twenty three percent increase from the U S dollar price.
Speaker 1: And Turkey, I mean, Turkey's a wealthier country, but of
Speaker 1: course the Turkish era has been in the terrible States.
Speaker 1: So the collapsing there is about a hundred and seventy
Speaker 1: one percent on top of that twenty three percent increase
Speaker 1: from from the US dollar week. It's horrifying. We talk
Speaker 1: about nine eight percent invation. We're looking for to go
Speaker 1: below that in the United States. But if you're in
Speaker 1: one of these countries, you're literally talking about what nearly
Speaker 1: two added to costs. That's that's hyperinflation. That's insane. You
Speaker 1: can't feed your people of that. Yeah, And of course,
Speaker 1: you know, if you think about how a lot of
Speaker 1: these governments managed this, Egypt in particular, I think he's
Speaker 1: an interesting example because subsidized bread is really the central
Speaker 1: part of the Egyptian welfare spect. In fact, if you
Speaker 1: look at their physical numbers, their fruit subsidies, they spend
Speaker 1: as much on pretty much all other aspects of social
Speaker 1: security put together. So of course, what happens when the
Speaker 1: Egyptian pan is devalued and wheat prices go up further, Well,
Speaker 1: Egypt has been at in the market, making big purchases
Speaker 1: of of wheat. Of course, it was one of the
Speaker 1: big buyers of Ukrainian and Russian weeks, so it's sort
Speaker 1: of suffered from that, but it's still needs to buy
Speaker 1: this because it's a sort of crucial element of social stability.
Speaker 1: And what's happening as a result of that that is
Speaker 1: of course impacting Egypt's physical balances. So this is going
Speaker 1: to be an impact that will linger their physical balances,
Speaker 1: and their external balances are deteriorating as a result of this. Now,
Speaker 1: I don't have a macro economic crystal ball for Egypt
Speaker 1: and know where they're going in the next two years.
Speaker 1: But if you look at the situation of countries like
Speaker 1: Pakistan and Sri Lanka that have been making their trips
Speaker 1: to the IMF recently, you can be put in a
Speaker 1: very difficult situation when you're having to subsidize something like
Speaker 1: that in the context of weaker fiscal and external balances, right,
Speaker 1: and then you're subject to a whole range of I
Speaker 1: MF conditions for the foreseeable future. And of course you
Speaker 1: mentioned Sri Lanka, it's interval to Pakistana staring at the
Speaker 1: fold and they both no coincidence, have massive social unrest,
Speaker 1: in part because people have to stand in line for
Speaker 1: food for days. And if you're somebody with mouths to feed,
Speaker 1: or you've lost your job because of COVID and suddenly
Speaker 1: there's no tourism in your country, you must be living
Speaker 1: under severe stress, never mind being undernourished. The jobs thing
Speaker 1: I think is crucial, and it's often underestimate. This is
Speaker 1: another of these long COVID effects. A hundred million people
Speaker 1: worldwide were laid off. The global labor force of employed
Speaker 1: people dropped by a hundred million in twenty for the
Speaker 1: first time in living memory. And in terms of the
Speaker 1: people who are living below the global poverty line one
Speaker 1: dollar ninety a day, about ninety seven million were pushed
Speaker 1: below the global policy line by COVID. And so if
Speaker 1: you're in the top forty percent of the world's population,
Speaker 1: your incomes at this point down about two point eight percent,
Speaker 1: a low way you've expected to be before the pandemic.
Speaker 1: But if you're in the bottom forty percent, it's six
Speaker 1: point seven percent down. And of course those are the
Speaker 1: people who are most constrained and most dependent on being
Speaker 1: able to afford food. David, you mentioned some Southeast Asian
Speaker 1: nations that we have been talking about on the program.
Speaker 1: Tell us where else is suffering badly? Obviously many countries
Speaker 1: in Africa. Yeah, I think Africa is always on the
Speaker 1: front lines of a lot of these things. If you
Speaker 1: look at the number of people who are undernourished, the
Speaker 1: rate in Africa is just different to anywhere else in
Speaker 1: the world, even now where things have ticked up. It's
Speaker 1: probably about ten percent population of the world of the
Speaker 1: whole faces under nourishment. In Africa it's about is double
Speaker 1: the level. So although there are a larger aggregate number
Speaker 1: of people in Asia, for instance, who are affected by hunger,
Speaker 1: just because the population is so much larger, I think
Speaker 1: around five million in Asia, but two million people in
Speaker 1: Africa really affits to the population are affected by that.
Speaker 1: One interesting thing about Africa that also makes it a
Speaker 1: little bit different to a lot of these other parts
Speaker 1: of the world is that because so many countries in
Speaker 1: Sub Saharan Africa are really at the bottom end of
Speaker 1: the income distribution, they're particularly disconnected from the global commodity markets.
Speaker 1: So there are actually particularly unaffected by a lot of
Speaker 1: what we're talking about in terms of the week price
Speaker 1: and the harmorld price simply because the incoming supply chains
Speaker 1: and the availability of cash to afford imported global commodities
Speaker 1: are simply not there. So people are really very heavily
Speaker 1: dependent on locally produced produced and the price a locally
Speaker 1: produced good. So it's really quite a different picture to
Speaker 1: what we're talked frombout. Certainly in a lot of Middle
Speaker 1: Eastern and Asian countries where there is poverty, these global
Speaker 1: flows matter a little bit more well. And that's another
Speaker 1: question about globalization because of the fact that we have
Speaker 1: globalized commodity markets and we need to have because countries
Speaker 1: can't feed themselves. There's no way back from this, right,
Speaker 1: There's no sort of let's have our own supply chain
Speaker 1: because some countries just can't produce indeed, and you know,
Speaker 1: I'd say most countries are actually better off being able
Speaker 1: to be plugged into those global supply chains, being able
Speaker 1: to benempit from those commodity flows. Of course, one of
Speaker 1: the other areas that we've not talked about it's a
Speaker 1: big driver of hunger, is local climate and weather conditions.
Speaker 1: Of course, there's been a very severe three year drought
Speaker 1: in East Africa in recent years. You're just seeing in
Speaker 1: the news recently these very severe flogged in Pakistan. Pakistan,
Speaker 1: as a country that's more plugged into those global community flows,
Speaker 1: will probably in many ways do a lot better than
Speaker 1: East Africa because despite their own fiscal problems, they can
Speaker 1: benefit from food imports. They can afford food imports, but
Speaker 1: a lot of those countries in West Africa can't afford.
Speaker 1: So these chips that are leaving Ukraine. While it's wonderful
Speaker 1: and everything in the Porto Wolds are being open again
Speaker 1: with the Humanitarian Corridor is fantastic, it's really not going
Speaker 1: to provide that much relief for that many people. It will,
Speaker 1: it'll it will help certain parts of the world, a
Speaker 1: sort of more middle income parts to the world, like
Speaker 1: the Middle East, like parts of South Asia, the lower
Speaker 1: income parts the world. They have much more severe problems
Speaker 1: than It's going to take more than that to actually
Speaker 1: solve those problems. David Fickling, We're now choosing to end
Speaker 1: all conversations not with you, though, please do get in touch.
Speaker 1: I'm at Vonnie Quinn on Twitter, or send your thoughts
Speaker 1: to v Quinn at Bloomberg dot Net. Opinions and comments
Speaker 1: always very welcome. We're produced, as always by Eric mollow
Speaker 1: and don't forget. We're also available as a podcast as
Speaker 1: on Apple, Spotify or your preferred platform. To next Time
Speaker 1: on Boomberg Opinion and Vonnie Quinn mh