WEBVTT - What Does 2024 Hold for the UK Economy? 0:00:00.200 --> 0:00:02.400 So the last year has been quite painful for the 0:00:02.520 --> 0:00:08.200 UK economy. Interest rates went up, rent prices spiraled out 0:00:08.200 --> 0:00:10.959 of control, housing sales collapsed, and of course, on top 0:00:11.000 --> 0:00:13.400 of that, the worst cost of living crisis in a generation. 0:00:14.440 --> 0:00:17.119 But on the more positive side, okay, UK consumers and 0:00:17.160 --> 0:00:20.840 households have shown they're pretty resilient and as we reach 0:00:20.880 --> 0:00:22.360 the end of the year, there are also signs that 0:00:22.400 --> 0:00:25.400 inflation is cooling. So is there room to be more 0:00:25.400 --> 0:00:29.240 optimistic in the outlook for next year? Welcome to In 0:00:29.320 --> 0:00:32.440 the City, Bloomberg's podcast, connecting you to the conversations and 0:00:32.520 --> 0:00:35.320 the stories shaping the world of finance. I'm front sin 0:00:35.400 --> 0:00:37.960 Laqwa in our London studio and today I'm joined by 0:00:38.040 --> 0:00:41.240 John Steppek, bloomberg Senior reporter and writer of the Money 0:00:41.280 --> 0:00:44.560 Distilled newsletter, also a little bit of a house pricing guru, 0:00:45.040 --> 0:00:50.400 and Phil Aldrich, Bloomberg's UK senior economics reporter guy. So 0:00:50.440 --> 0:00:52.280 we know that every year people just tune into the 0:00:52.320 --> 0:00:55.640 podcast to know how much their house is worth. So, John, 0:00:56.040 --> 0:00:58.320 where a house price is going in twenty twenty four? Right? 0:00:58.360 --> 0:01:00.680 Well, I actually think that I think that continue knew 0:01:00.720 --> 0:01:05.040 to ease lower in real terms, but I expected them 0:01:05.120 --> 0:01:08.440 befall a lot further best year. I thought they would 0:01:08.440 --> 0:01:12.880 probably be down about ten percent in nominal terms, which 0:01:12.920 --> 0:01:15.200 is pretty much in line with most of the economists 0:01:15.200 --> 0:01:18.679 eventually came me think, but that's not happened, and it's 0:01:18.720 --> 0:01:21.040 been really interesting now. It's been really resilient because I 0:01:21.040 --> 0:01:23.080 didn't actually think the economy was going to be a problem. 0:01:23.080 --> 0:01:25.880 I thought the economy was basically going to be a 0:01:25.920 --> 0:01:30.080 bit rubbish but not terrible, which is basically what's happened. 0:01:30.360 --> 0:01:34.000 But then expect house prices to stick where they are 0:01:34.160 --> 0:01:35.560 as much as they have. 0:01:36.080 --> 0:01:37.480 But I remember, I mean last year was just a 0:01:37.880 --> 0:01:41.480 we thought it would be worse than it is overall, right, Phil. 0:01:41.400 --> 0:01:44.240 Yeah, so John, you're in good company because hadifax a 0:01:44.319 --> 0:01:47.520 nation where both were forecasting sort of eight percent ish fools. 0:01:47.560 --> 0:01:50.080 I think so, And there was some even even more 0:01:50.160 --> 0:01:55.400 dramatic house price crushes out there. But I think they're 0:01:55.400 --> 0:01:58.160 going to creep up a whole percentage point. 0:01:59.320 --> 0:02:02.920 The prediction of that is it one percentage point move 0:02:03.080 --> 0:02:03.840 by Phil Aldrich? 0:02:04.520 --> 0:02:08.799 Yeah, because obviously the I think the mortgage conditions are easing. 0:02:09.000 --> 0:02:11.880 I mean, it's still expensive compared to what people had 0:02:11.919 --> 0:02:15.440 a couple of years ago. And again, if we get 0:02:16.080 --> 0:02:19.000 massive unemployment, which I don't think is going to happen, 0:02:19.000 --> 0:02:20.880 but if we did get a shop runs in unemployment, 0:02:20.880 --> 0:02:23.240 then you would start to see the kind of the 0:02:23.320 --> 0:02:26.240 kind of scenarios that John was predicting for last year. 0:02:26.600 --> 0:02:30.320 Yeah, that is, isn't it? The jobs factor? And then 0:02:30.320 --> 0:02:32.640 also I do think the mortgage rates is interesting. I 0:02:32.639 --> 0:02:36.200 think one thing whenever I look at the economists predictions 0:02:36.280 --> 0:02:38.280 is that one thing that they tended and I think 0:02:38.280 --> 0:02:41.760 it's because of a micro level. They tended to forget 0:02:41.919 --> 0:02:45.480 the average mortgage rates are not the rates that people 0:02:45.560 --> 0:02:49.000 actually get because nobody gets the average mortgage rate. They 0:02:49.040 --> 0:02:51.720 always get the best buy rate, and so they were 0:02:51.760 --> 0:02:54.919 actually probably about a percentage point lower than most people. 0:02:54.960 --> 0:02:59.560 Then you know, the models were based on but even then, 0:02:59.600 --> 0:03:01.280 you know, you're I'm still talking about you know, it 0:03:01.360 --> 0:03:03.520 was like going up from one and a half to 0:03:03.560 --> 0:03:06.680 four and a half percent, and still all that's happened 0:03:06.760 --> 0:03:09.720 is that maybe the number of transactions kind of dropped 0:03:09.760 --> 0:03:11.160 off quite significantly. 0:03:11.240 --> 0:03:14.000 But you had an interesting theory, and actually we haven't 0:03:14.040 --> 0:03:16.680 been to feel about how many interest rate cuts you're 0:03:16.720 --> 0:03:18.680 expecting for the Bank of England, and John was thinking, 0:03:18.680 --> 0:03:20.640 actually could be a way to cush in the mortgage market. 0:03:21.000 --> 0:03:23.160 So if they can't, I mean, this would be I 0:03:23.160 --> 0:03:25.079 don't know how they pull it off, right, They would 0:03:25.080 --> 0:03:27.320 start cutting right at the time when people start remortgaging 0:03:27.320 --> 0:03:30.040 the most, and so you kind of you could get 0:03:30.080 --> 0:03:34.040 away with a softening economy but helping out people with 0:03:34.760 --> 0:03:35.360 new houses. 0:03:36.000 --> 0:03:37.960 Oh, you've all I mean, you've already got that. This 0:03:38.040 --> 0:03:42.400 is the thing because the I mean market expectations peaked 0:03:42.480 --> 0:03:45.240 a good few months ago, and now that you know, 0:03:45.320 --> 0:03:47.920 gelt yields and kind of forward swap rates and all 0:03:47.960 --> 0:03:52.400 the rest that are dropping down, mortgages are getting increasingly cheaper. 0:03:52.960 --> 0:03:56.080 So in a weird kind of way, if you haven't 0:03:56.080 --> 0:03:59.840 already had to remortgage, whatever you're facing next year is 0:04:00.000 --> 0:04:02.000 actually not going to be as bad as you'd may 0:04:02.000 --> 0:04:05.960 be expected or applanned for, assuming mortgageries keep going down. 0:04:06.360 --> 0:04:10.560 And so if the transmission mechanism has been because that's 0:04:10.600 --> 0:04:13.080 the thing, the priests of credit is the transmission mechanism 0:04:13.120 --> 0:04:15.400 by which the Bank of England is made slow down 0:04:15.480 --> 0:04:18.400 the economy. And we kept talking about who everyone's spending 0:04:18.480 --> 0:04:21.240 was going to be squeezed by rising mortgageries, So maybe 0:04:21.279 --> 0:04:24.960 that's not actually it's going to happen, at least not 0:04:25.040 --> 0:04:25.839 to that extent. 0:04:26.920 --> 0:04:29.599 But how many interest rate cuts are you expecting next year? 0:04:29.920 --> 0:04:33.040 I think maybe maybe maybe two two in the second 0:04:33.080 --> 0:04:33.640 half of the year. 0:04:34.320 --> 0:04:35.719 The market's like out of control. 0:04:36.160 --> 0:04:38.800 Yeah, well they've got they've got four in for the 0:04:38.839 --> 0:04:41.120 second half of next year or between May and December, 0:04:41.160 --> 0:04:44.400 and and then like there could be a fifth, so 0:04:44.440 --> 0:04:46.560 you'll you get you get the fifth one sort of 0:04:46.560 --> 0:04:50.600 early twenty twenty five. I think that that's too strong, 0:04:50.600 --> 0:04:52.400 because actually I think the economy is going to look 0:04:52.560 --> 0:04:54.760 reasonably resilient next year. You know, we're going to have 0:04:54.760 --> 0:04:56.920 an election and the government is going to do whatever 0:04:56.960 --> 0:04:59.680 it can right to make sure that the economy is 0:04:59.680 --> 0:05:01.880 not in it knees. And actually there's a whole lot 0:05:01.920 --> 0:05:07.360 of spending or sort of living standard boost coming through 0:05:07.720 --> 0:05:10.720 from April next year, and then maybe even more if 0:05:10.720 --> 0:05:12.320 they managed to squeeze in a couple of tacks or 0:05:12.600 --> 0:05:15.040 a bit of a tax cut in the March budget. 0:05:15.120 --> 0:05:17.240 So I think there's going to be this kind of 0:05:17.279 --> 0:05:19.880 this household spending power is going to start to start 0:05:19.920 --> 0:05:23.080 to really buoy the economy, so why would you be 0:05:23.160 --> 0:05:26.479 cutting rates aggressively in that situation? That's my thinking. 0:05:27.120 --> 0:05:29.240 But phil Over, how would you describe the UK economy 0:05:29.240 --> 0:05:31.400 Because it's staged, so it's not great, it's not awful, 0:05:31.560 --> 0:05:33.600 it's kind of like in this limbo. It's a bit stagnant, 0:05:33.640 --> 0:05:35.600 which I guess makes it harder for the Bank of 0:05:35.640 --> 0:05:36.880 England to set interest rates. 0:05:37.040 --> 0:05:41.040 Forecasts are all basically like zero to zero point two 0:05:41.040 --> 0:05:43.520 percent growth a quarter. I mean it is we're basically 0:05:43.560 --> 0:05:47.400 flatlining with high higher than required inflation, which is sort 0:05:47.400 --> 0:05:50.280 of stagnation as where we are. The thing is, what 0:05:50.320 --> 0:05:53.400 we are going to see is everything's relative right. Households 0:05:53.400 --> 0:05:56.119 are going to start to feel better than they did 0:05:57.000 --> 0:06:00.760 in twenty twenty three, and that's just pure because wages 0:06:00.800 --> 0:06:05.200 have risen. So they'll get these wage rises in January 0:06:05.200 --> 0:06:08.320 and February, which are probably going to be higher than 0:06:08.360 --> 0:06:11.480 what the inflation rate is across twenty twenty four, and 0:06:11.520 --> 0:06:13.560 then you're going to get all this The benefits and 0:06:13.640 --> 0:06:17.560 pensions are resetting at inflation rates that were set in 0:06:17.600 --> 0:06:21.480 September twenty twenty three, so that's like and actually for 0:06:22.120 --> 0:06:24.600 pensions it was wages, so you've got eight point five 0:06:24.640 --> 0:06:28.040 percent increase in pensioner benefits and you've got a six 0:06:28.080 --> 0:06:33.120 point seven percent increase in working age welfare recipients, and 0:06:33.200 --> 0:06:35.560 those will be above inflation at the time that they 0:06:35.560 --> 0:06:37.159 come through, so that's going to feel like a bump. 0:06:37.400 --> 0:06:40.800 Energy prices are falling. Obviously, we don't know what's going 0:06:40.839 --> 0:06:43.839 to happen. The sewers Canal may cause another supply change, 0:06:43.880 --> 0:06:48.400 Shark and Israel Gaza could somehow destabilize the Middle East 0:06:48.400 --> 0:06:50.800 and we could get But the current outlook is you've 0:06:50.839 --> 0:06:54.200 got energy prices falling, you know, in April again, we've 0:06:54.200 --> 0:06:56.520 got the knicks cut from January. You know, are we 0:06:56.560 --> 0:06:59.280 going to get income tax cuts in the March budget. 0:06:59.279 --> 0:07:02.680 It's plausible. It's there's going to be a chunk of 0:07:02.720 --> 0:07:05.719 sort of spending power that will start to feed through 0:07:06.080 --> 0:07:08.479 in the second half of the year. So it'll be 0:07:08.520 --> 0:07:10.120 a kind of year or two hearts in my moment, 0:07:10.160 --> 0:07:12.240 So we're going to we even have a very shallow 0:07:12.280 --> 0:07:16.200 technical recession and then start to see some resilience. But 0:07:16.240 --> 0:07:18.520 I don't think there's any there will be any urgency 0:07:18.600 --> 0:07:20.480 for the Bank of England to do straight cuts. You 0:07:20.560 --> 0:07:22.720 only see that happening to the economy was already tanking. 0:07:22.800 --> 0:07:25.120 So okay, if we take a step back, there's a 0:07:25.160 --> 0:07:27.400 lot of talk about the FED cutting and I think 0:07:27.440 --> 0:07:29.520 that the only question that we probably need to ask 0:07:29.560 --> 0:07:32.680 ourselves is that because it tracks inflation or is that 0:07:32.720 --> 0:07:36.800 because they're cutting interest rates into a recession? And that 0:07:36.880 --> 0:07:39.679 will also, I guess impact what the Bank of England does. 0:07:40.040 --> 0:07:41.960 Yeah, I mean I think that's driven by inflation. I 0:07:41.960 --> 0:07:44.880 think the Fed's got a mental target for where real 0:07:45.080 --> 0:07:47.200 entest rate it should be. And if you look back 0:07:47.240 --> 0:07:49.320 over before two thousand and eight, even if you look 0:07:49.320 --> 0:07:51.520 at the Bank of England, so the Bank England based 0:07:51.600 --> 0:07:55.440 ray was was was the highest lane and then wage 0:07:55.480 --> 0:07:58.680 inflation and then CPI was a bit two percent the 0:07:58.800 --> 0:08:02.880 points roughly below that consistently. So actually, if if inflation 0:08:03.000 --> 0:08:06.800 is coming down and the Bank englandry is at five 0:08:06.800 --> 0:08:09.480 point two five percent and inflation gets closer the you 0:08:09.520 --> 0:08:12.640 know three, then maybe they think about it. But I do, yeah, 0:08:12.640 --> 0:08:14.960 I mean, I agree, we feel I think that five 0:08:15.040 --> 0:08:18.200 cuts next year is just kind of nuts, just like, 0:08:18.360 --> 0:08:21.440 why would you you know, do that unless unless the 0:08:21.440 --> 0:08:23.520 economy is actually run into trouble. And again there's not 0:08:23.640 --> 0:08:25.400 much reason to say that, because the other thing isn't 0:08:25.720 --> 0:08:28.680 April does a whopping big minimum wage rise as well. 0:08:28.760 --> 0:08:29.480 Yeah, yeah, exactly. 0:08:29.840 --> 0:08:33.520 Now I know a lot of companies are not quite 0:08:33.520 --> 0:08:36.160 feel able to admit that, you know, they're not actually 0:08:36.160 --> 0:08:38.640 so happy about that, but you know, even then, I 0:08:38.679 --> 0:08:41.800 think they're going to be prepared for it. So yeah, 0:08:41.840 --> 0:08:43.679 so the people spend power is going to go up, 0:08:43.720 --> 0:08:45.800 and there is that, So really I think it does 0:08:45.840 --> 0:08:48.640 boil down. What does happen with inflation next year for 0:08:48.720 --> 0:08:51.720 the UK? And it's just hard to see it getting 0:08:51.720 --> 0:08:53.360 to a point where they cut it that far. 0:08:53.400 --> 0:08:55.960 But inflation, so inflation is coming down, but it's still 0:08:56.000 --> 0:08:56.720 quite persistent. 0:08:56.880 --> 0:08:57.360 Exactly. 0:08:57.559 --> 0:09:02.360 Yeah, so the under underlying services inflation. Megan Green at 0:09:02.360 --> 0:09:04.439 the Bank of England, she looks in this particular measure 0:09:04.440 --> 0:09:06.480 which is sort of you take the energy element out 0:09:06.480 --> 0:09:09.520 of services and then you're looking at really what is 0:09:09.679 --> 0:09:14.119 just embedded in in domestic prices and that is basically 0:09:14.200 --> 0:09:17.400 static at about six percent, just over six percent. And 0:09:17.760 --> 0:09:20.800 Bloomberg Economics have sort of they've created this data set 0:09:20.800 --> 0:09:22.840 as well because it doesn't the ONNUS doesn't produce it, 0:09:23.080 --> 0:09:26.080 so you can say that basically there is some there 0:09:26.120 --> 0:09:30.480 are definitely underlying price pressures in the UK. So does 0:09:30.520 --> 0:09:34.720 inflation come down rapidly? I think everyone expects the headline 0:09:34.760 --> 0:09:37.920 rate to be coming down, but these But then just 0:09:38.000 --> 0:09:41.600 because of the rebasing, you know, as energy prices dropping 0:09:41.640 --> 0:09:46.319 it automatically, as some goods price inflation from last year 0:09:46.360 --> 0:09:48.760 from twenty twenty three starts to drop out, you get 0:09:48.760 --> 0:09:51.160 that rebasing, so you're going to get that fall. But 0:09:51.200 --> 0:09:53.160 then people will begin to point to the fact that 0:09:53.280 --> 0:09:55.280 underlined there seems to be pressure, so that you'll see 0:09:55.280 --> 0:09:57.760 that you'll see inflation lift off again. And if you've 0:09:57.800 --> 0:10:00.760 got because yeah, the minimum wage risers is is it 0:10:00.840 --> 0:10:03.080 another huge one? Simon Francis called calculated that if you 0:10:03.080 --> 0:10:06.040 put the pensioners and the and the welfare recipients and 0:10:06.080 --> 0:10:09.400 the minimum wage rise together, you've got twenty million people 0:10:09.559 --> 0:10:14.160 getting above inflation at that point increases in their income, 0:10:14.360 --> 0:10:16.920 which is a big is a big sort of potential 0:10:16.920 --> 0:10:18.000 inflation research. 0:10:19.080 --> 0:10:21.000 But this is why I don't understand. So mid December 0:10:21.000 --> 0:10:24.000 also Governor Bailey warned that actually borrowing costs may have 0:10:24.040 --> 0:10:27.480 to rise again, which the market is completely discounting. I mean, 0:10:27.520 --> 0:10:29.280 why are we so sure that there won't be interest 0:10:29.400 --> 0:10:30.440 rate rises next year. 0:10:30.880 --> 0:10:34.120 I mean, I'd be surprised if there's entry straight rises, 0:10:34.120 --> 0:10:36.400 particularly if the Fed is going the other way. I mean, 0:10:36.400 --> 0:10:39.040 a lower does bible down it. Certainly from a market 0:10:39.080 --> 0:10:41.760 point of view, I feel that it's just the Feed 0:10:41.920 --> 0:10:44.440 is the big daddy, and then everybody else is just 0:10:44.480 --> 0:10:47.360 expected to fall in the lane. There is also a perception, 0:10:47.559 --> 0:10:51.480 partly fuel Bailey to be feel that the UK is 0:10:51.520 --> 0:10:54.800 still in dire straits compared to where it actually is, 0:10:54.840 --> 0:10:59.920 which is mediocre at lost. So you know, I think 0:11:00.040 --> 0:11:02.240 there's a bit of mixed messaging coming out there, and 0:11:02.240 --> 0:11:05.880 also probably a bit of defensiveness because obviously the Bank 0:11:05.920 --> 0:11:09.400 England was criticized quite heavily fun pain to not fast 0:11:09.520 --> 0:11:12.199 enough to tackle inflation, and now there's a lot of 0:11:12.200 --> 0:11:14.400 pushback from not again not just the Bank England, but 0:11:14.440 --> 0:11:17.439 lots of central bankers, including the FED, against this idea 0:11:17.440 --> 0:11:20.520 of the rates are going to huddle downwards, and I think, 0:11:20.679 --> 0:11:23.920 I mean, I think that's somewhere in the middle. I mean, 0:11:23.960 --> 0:11:26.320 my own view is that interest rates have peaked and 0:11:26.360 --> 0:11:28.120 they're not going to go above five and a quarter 0:11:28.200 --> 0:11:31.280 percent next year. Equally, I don't think they're going to 0:11:31.320 --> 0:11:33.560 be down as far as kind of four percent by 0:11:33.559 --> 0:11:35.960 the end of the year, because that seems very aggressive, 0:11:37.040 --> 0:11:39.079 and yeah, it's just and also I guess there's a 0:11:39.120 --> 0:11:42.360 bit of irrational exuberance as well, because markets are kind 0:11:42.360 --> 0:11:45.640 of really they've clearly been desperate for interest rates to 0:11:45.640 --> 0:11:48.920 peak basically since they started going up, and now that 0:11:48.920 --> 0:11:51.560 they've got this kind of sense that, oh, actually that 0:11:51.760 --> 0:11:54.440 is it, everyone's desperate to go back to. You know, 0:11:54.559 --> 0:11:57.199 they kind of off to the races kind of world 0:11:57.200 --> 0:12:00.320 where like bitcoins shooting up and things like that, very 0:12:00.320 --> 0:12:04.120 speculative environment, and I think I always think, I say 0:12:04.160 --> 0:12:07.920 think part is just pure wishful thinking the economy. 0:12:08.040 --> 0:12:10.760 And I understand that, you know, Governor Bailey keeps on 0:12:10.840 --> 0:12:12.800 saying that we're in a bit of dire straits and 0:12:12.840 --> 0:12:16.079 as you say, it's mediocre at best, But how can 0:12:16.080 --> 0:12:18.280 you go from three and a half percent interest rates 0:12:18.280 --> 0:12:21.680 to five point twenty five without something more of a 0:12:21.760 --> 0:12:25.440 shock It is twenty twenty four. I mean, we're actually 0:12:25.440 --> 0:12:28.720 going to get away with having this economy be okay 0:12:28.800 --> 0:12:31.560 and then going back to normal cycles after all we've 0:12:31.559 --> 0:12:33.520 lived through in the last three years, I. 0:12:33.400 --> 0:12:36.440 Mean three and a half being the what people think 0:12:36.480 --> 0:12:38.360 that the sort of neutral rate of interest will be, 0:12:38.640 --> 0:12:42.360 the sort of where in straits will eventually settle. Yeah, 0:12:42.960 --> 0:12:44.679 I could get them to get finish the strates to 0:12:44.720 --> 0:12:49.480 get down there really quickly, would I mean, that would 0:12:49.520 --> 0:12:53.040 be such a stimulative effect that I just can't see 0:12:53.040 --> 0:12:56.800 any central bankers, having just lived through a massive inflation shock, 0:12:56.960 --> 0:12:59.800 just being like right this unless unless yeah, you're just 0:12:59.840 --> 0:13:01.880 not going to You're just not going to see that 0:13:02.200 --> 0:13:04.959 at the moment in the you know, interest rates are 0:13:05.000 --> 0:13:08.160 below or have been below the rate of inflation, and 0:13:08.200 --> 0:13:11.880 then they'll soon be above the rate of inflation, and 0:13:11.920 --> 0:13:15.000 there and so there will be there is effectively a 0:13:16.000 --> 0:13:19.480 sort of tightening impact simply because inflation is falling, So 0:13:19.760 --> 0:13:23.240 you in a way doing nothing is still a sort 0:13:23.240 --> 0:13:27.360 of active policy, especially when you think that the equilibrient 0:13:27.400 --> 0:13:29.720 rate is about three and a half percent, so you 0:13:29.760 --> 0:13:33.080 know you can see cuts coming just because you know 0:13:33.960 --> 0:13:37.840 it doesn't need to be as as aggressively tightening once 0:13:37.840 --> 0:13:41.800 you've got the headline rate of inflation lot. But you 0:13:42.480 --> 0:13:45.800 can also see that they will be wanting to absolutely 0:13:46.040 --> 0:13:49.280 be sure that they have squeezed the inflation out of 0:13:49.280 --> 0:13:53.720 the system. Because that has been an absolute nightmare for them, 0:13:53.920 --> 0:13:58.760 you know, reputationally, it's been damaging economically. So it's something 0:13:58.840 --> 0:14:00.600 which you don't want to have to cut back to 0:14:00.720 --> 0:14:04.440 because as it would be a clear demonstration of failure 0:14:04.520 --> 0:14:06.480 as well if they did have to come back to 0:14:06.480 --> 0:14:08.120 importation with high rights. 0:14:08.160 --> 0:14:10.920 I think in terms of things breaking, like you know, 0:14:10.960 --> 0:14:13.520 the idea we've got away with interest rates going up 0:14:13.559 --> 0:14:16.320 so far, so fast, and I mean absolutely, I mean 0:14:16.360 --> 0:14:19.960 I think anyone that you'd asked eighteen months ago interest 0:14:20.000 --> 0:14:21.880 rates are going to go from zero point five percent 0:14:21.920 --> 0:14:24.240 to five point five and a quarter percent in eighteen months, 0:14:24.240 --> 0:14:26.280 they would think, you know, the world was going to end, 0:14:26.920 --> 0:14:29.680 and it hasn't. And but I think that if you 0:14:29.920 --> 0:14:33.480 dig deeper, then a lot of that is because whether 0:14:33.520 --> 0:14:39.160 we kind of fully appreciate it or not, everyone's balance 0:14:39.160 --> 0:14:41.720 sheet is more resilient than it was in two thousand 0:14:41.800 --> 0:14:43.320 and eight. And I know, always go back to two 0:14:43.360 --> 0:14:46.280 thousand and eight except the governments, except the governments exactly. 0:14:46.360 --> 0:14:49.400 But the difference is the government is the one entity 0:14:50.120 --> 0:14:53.600 that has got if you like, the kind of the 0:14:53.760 --> 0:14:57.720 longest kind of runway. Now you know, we might have 0:14:57.760 --> 0:14:59.960 was suffering debt crisis, and that is the one thing 0:15:00.200 --> 0:15:03.360 I guess that if I was going to worry about anything, 0:15:04.480 --> 0:15:08.360 then something happening with sovereign debts somewhere in the world 0:15:08.440 --> 0:15:10.160 would be looks kind of weak point. 0:15:10.320 --> 0:15:11.160 What does that look like? 0:15:11.520 --> 0:15:13.240 Well, this is the promise, like, well, what does it 0:15:13.280 --> 0:15:15.080 look like? It's like, what happens if? I mean, I 0:15:15.080 --> 0:15:18.080 don't like, I don't see a run on the pound 0:15:18.760 --> 0:15:20.440 or even I mean, I mean, I guess the most 0:15:20.560 --> 0:15:23.600 the weirdest thing is the most vulnerable place would be 0:15:23.600 --> 0:15:27.080 the Eurozone. But only because of the nature of the 0:15:27.120 --> 0:15:30.760 euro It's you know, if if, because it's this kind 0:15:30.800 --> 0:15:36.480 of slightly frankensteinish still political construct. It means that if France, 0:15:36.520 --> 0:15:39.120 say blows the budget in Germany he's like, well, sorry, 0:15:39.120 --> 0:15:41.280 we're not going to, you know, help you out with that, 0:15:41.640 --> 0:15:45.360 then potentially you could have the euro fracture. But again 0:15:45.440 --> 0:15:47.520 that's kind of you know, that's what happened in the 0:15:47.520 --> 0:15:51.200 Greek Southern debt crisis. And at that point, I feel, 0:15:51.600 --> 0:15:55.520 much as I'm quite a euroskeptic, I do think that 0:15:56.040 --> 0:16:00.000 they got the institutional structures in place in the permits 0:16:00.320 --> 0:16:02.920 for the Central Bank to basically do what it wants 0:16:03.720 --> 0:16:06.840 to patch up and protect the Euro. So beyond that 0:16:06.880 --> 0:16:08.360 it is hard to see. I mean maybe, I mean 0:16:08.440 --> 0:16:12.320 Japan is an interesting one. If the Japanese suddenly I 0:16:12.320 --> 0:16:14.800 mean think they've been very I mean everyone thought they 0:16:14.800 --> 0:16:17.240 were going to tighten monetary policy, they shouldn't. They haven't, 0:16:17.240 --> 0:16:18.600 which is why the end is kind. 0:16:18.480 --> 0:16:20.760 Of yeah exactly. 0:16:20.800 --> 0:16:25.080 So it's that's probably interesting in terms of if Japan 0:16:25.240 --> 0:16:29.560 does tighten monetary policy at some point, there's the risk 0:16:29.600 --> 0:16:31.560 of you know, a kind of flood of cash moving 0:16:31.600 --> 0:16:34.280 from one end of the world to another, and that 0:16:34.400 --> 0:16:37.600 might be something that causes some things to break. 0:16:38.160 --> 0:16:42.440 But what would it mean for the UK economy that much? 0:16:42.520 --> 0:16:45.880 I mean, I think for the UK economy, I don't 0:16:45.920 --> 0:16:49.800 think there's anything that's going to blow up. And I 0:16:49.840 --> 0:16:54.040 think that's basically because credit has been more restrictive since 0:16:54.040 --> 0:16:57.080 two thousand and eight, and so households aren't actually overborrowed 0:16:57.120 --> 0:16:59.960 relative to where they were back then. Companies actually aren't 0:17:00.160 --> 0:17:02.120 of the border reactors to be able to work back then, 0:17:02.440 --> 0:17:04.600 and that's why everyone's corked. I mean, there's not been 0:17:04.640 --> 0:17:09.000 happy bank balance sheets again. The banks that are resilient, well, 0:17:09.080 --> 0:17:11.720 I think that the private credit market. I think the 0:17:11.760 --> 0:17:15.040 stuff in the shadow, in the shadow banking sector is 0:17:15.320 --> 0:17:19.879 frightening because the private equity, uh, you know, what are 0:17:19.880 --> 0:17:22.120 the valuations, what are the real valuations that no one 0:17:22.160 --> 0:17:24.560 knows you know, a lot of them. And there's private credit, 0:17:24.640 --> 0:17:26.600 which is a lot of the private credit providers are 0:17:26.600 --> 0:17:30.960 owned by private equity companies, private equity firms who own 0:17:31.280 --> 0:17:33.919 some of the companies in their portfolio that are being 0:17:33.960 --> 0:17:35.480 lent to by the private credit companies. I mean it 0:17:35.520 --> 0:17:39.080 is a there's a sort of incestuous issue of opacity, 0:17:39.240 --> 0:17:41.800 which you know, if you would look somewhere where you go, 0:17:42.000 --> 0:17:44.200 nobody quite understands it what's going to blow up, And 0:17:44.240 --> 0:17:46.560 it's quite a substantial part of the economy. And it's 0:17:46.600 --> 0:17:48.600 one that it feels to me like a potential subprime 0:17:48.600 --> 0:17:51.159 because nobody understands where the risks lie, how big the 0:17:51.280 --> 0:17:54.440 risks are, and when the valuations start falling, how how 0:17:54.560 --> 0:17:58.200 these are declared. And you could get like these big selfs, 0:17:58.240 --> 0:18:00.920 So you could get some kind of real I'd say, 0:18:00.920 --> 0:18:03.240 at the extreme, some financial instability. 0:18:02.760 --> 0:18:05.639 That twenty twenty four, I think forty countries vote. I 0:18:05.680 --> 0:18:09.280 think more than forty countries vote. The UK has to 0:18:09.359 --> 0:18:12.760 vote before end of January twenty twenty five, and then 0:18:12.760 --> 0:18:16.719 you have the US elections. These two would I mean 0:18:16.720 --> 0:18:20.199 it certainly the UK if Labor gets into power changes 0:18:20.200 --> 0:18:21.600 everything about the economy, does it not? 0:18:23.400 --> 0:18:25.960 I actually don't think so. Not in the UK. I 0:18:26.000 --> 0:18:29.359 don't think the difference between the two parties is that 0:18:29.440 --> 0:18:33.679 great anymore, or certainly not the way they're talking. So 0:18:33.840 --> 0:18:36.640 Labor have kind of like obviously been very keen to 0:18:36.720 --> 0:18:40.560 impress upoint business that we are not Jeremy Corbin, you know, 0:18:40.720 --> 0:18:42.560 part two, but. 0:18:42.480 --> 0:18:43.520 We have very little detail. 0:18:43.920 --> 0:18:47.280 Oh yeah, yeah, yeah, absolutely, But I mean there's certainly 0:18:47.400 --> 0:18:49.880 the pitch is that there's not a lot of give 0:18:50.040 --> 0:18:53.240 in the system, so you know, they're going to have 0:18:53.280 --> 0:18:55.960 to be sensible with the finances all that sort of stuff. 0:18:56.160 --> 0:18:59.119 So don't actually think it does change things that much 0:18:59.160 --> 0:19:00.480 from a market view. 0:19:00.680 --> 0:19:02.760 They talk about wanting to be in power for ten years, right, 0:19:02.800 --> 0:19:04.880 and if they come in and they do something which 0:19:04.920 --> 0:19:07.240 is completely contrary to what they're talking about now, they 0:19:07.280 --> 0:19:09.800 will be out and the next vote. I think that 0:19:09.800 --> 0:19:13.879 they're definitely trying to be you know, remodel Blair and 0:19:14.040 --> 0:19:19.119 provide a stable economic backdrop, you know, and actually, in 0:19:19.119 --> 0:19:21.000 a way, I was thinking, our election is going to 0:19:21.000 --> 0:19:23.520 be between at the moments of a managerial prime minister 0:19:23.560 --> 0:19:26.080 who people think is very solid on the economy and 0:19:26.359 --> 0:19:29.159 a managerial Labor party which basically is saying we're going 0:19:29.200 --> 0:19:33.240 to do what he says. And so you have actually 0:19:33.280 --> 0:19:36.119 in a way got the UK for international businesses. That 0:19:36.160 --> 0:19:40.240 would be quite stable because you don't have a al 0:19:40.400 --> 0:19:43.600 Penn or AfD or you know, on the other side 0:19:43.600 --> 0:19:45.640 that's a real threat. I mean, reforms just are sort 0:19:45.640 --> 0:19:48.200 of steal votes from the Tories, but it's not a 0:19:48.280 --> 0:19:51.639 real threat. So that feels quite stable. And then in 0:19:51.680 --> 0:19:55.880 a way also if you think that if Richie, if 0:19:55.920 --> 0:19:57.800 the Tories do come back in but with a very 0:19:57.840 --> 0:20:01.000 slim majority, which is I mean that's the best hope 0:20:01.000 --> 0:20:03.840