WEBVTT - Surveillance: IIF Annual Meeting 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.200 --> 0:00:13.160 with Jonathan Ferrell and Lisa Brownwitz. Daily we bring you 0:00:13.280 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance on Apple Podcast, sun Cloud, Bloomberg dot Com, 0:00:23.920 --> 0:00:30.000 and of course on the Bloomberg terminal. Joining us from day, 0:00:30.000 --> 0:00:33.600 say on what is shaping up today? And it started? Wait, Tomkine, 0:00:33.800 --> 0:00:36.200 You've got a special guest for us. Well, John's gonna 0:00:36.200 --> 0:00:38.960 be very interesting if you remember yesterday afternoon, and here's 0:00:39.000 --> 0:00:41.640 the headline buried in the news flow the Bank of 0:00:41.680 --> 0:00:45.280 England Governor Andrew Bailey. This is at the i F 0:00:45.360 --> 0:00:49.440 Annual Membership meeting yesterday in conversation with Tim Adams, the 0:00:49.520 --> 0:00:53.280 President and Chief Executive Officer of the Institute of International Finance. 0:00:53.320 --> 0:00:57.320 And we begin today's coverage in Washington with Mr Adams 0:00:57.360 --> 0:01:00.640 with his deep experience with the Bush administration and with 0:01:00.800 --> 0:01:04.720 international economics, certainly Tim in time of crisis. So thank 0:01:04.760 --> 0:01:07.479 you so much for starting our day, uh strong, We've 0:01:07.520 --> 0:01:09.960 got axel Weber coming up as well. Much more on 0:01:10.120 --> 0:01:13.759 year from that. What was it like yesterday when Governor 0:01:13.800 --> 0:01:17.720 Bailey set reset the global debate. Thanks Tom, it's always 0:01:17.720 --> 0:01:19.520 a pleasure to be with you. Thanks for having me. 0:01:19.720 --> 0:01:21.880 You know, look, I think we're hearing from from Governor 0:01:21.920 --> 0:01:25.360 Bailey and others will have Krota and christ Legard today. 0:01:25.640 --> 0:01:28.080 They're serious, they're serious about taking the punch bowl the way. 0:01:28.080 --> 0:01:30.720 It's time to reverse the policies we've seen over the 0:01:30.720 --> 0:01:32.960 past seven to eight years. It's time to move on 0:01:33.000 --> 0:01:35.800 to the new normal. And I think Andrew said he's 0:01:35.840 --> 0:01:39.679 ready to get on with it. Uh Stanley Fisher five 0:01:39.760 --> 0:01:42.880 years ago, six years ago talked of ultra accommodative. We've 0:01:42.959 --> 0:01:46.680 clearly moved through accommodative. We're trying to search for neutrality 0:01:47.160 --> 0:01:51.040 and even some of these bankers desire a restrictive state. 0:01:51.680 --> 0:01:55.120 Does that put out the zombie companies? Is the final 0:01:55.200 --> 0:01:59.040 result of all of this movement that we eliminate the 0:01:59.120 --> 0:02:02.120 zombie companies? And indeed, I say the zombie banks of 0:02:02.160 --> 0:02:05.559 which you represent, Yeah, well I don't represent zombie banks. 0:02:05.800 --> 0:02:08.480 Banks are in good shape, but yes, the zombie company 0:02:08.520 --> 0:02:10.440 is gonna go, and they should. This is creative destruction. 0:02:10.480 --> 0:02:12.679 This is the way cycles work, and for far too 0:02:12.720 --> 0:02:16.240 long we've had cheap liquidity, an abundant amount of liquidity, 0:02:16.240 --> 0:02:17.760 and we fund a lot of firms, a lot of 0:02:17.800 --> 0:02:20.000 sectors that probably shouldn't be in business. We need to 0:02:20.040 --> 0:02:23.760 redeploy those resources, those assets in more productive ways. You 0:02:23.880 --> 0:02:26.680 sit on the political side of this debate, serving the 0:02:26.800 --> 0:02:30.959 younger president Bush, would you suggest that politicians have power 0:02:31.040 --> 0:02:35.239 here or renewed power? With British shields out at five 0:02:35.720 --> 0:02:38.880 with yen at one six? What's the power of politicians 0:02:38.880 --> 0:02:41.280 this morning? Well, the politicians wanted both ways. They want 0:02:41.280 --> 0:02:43.720 to get rid of inflation as quickly as falsile because 0:02:43.720 --> 0:02:46.760 they see it every day gasoline prices, for example. But 0:02:46.840 --> 0:02:48.320 they want to do it in a painless way. They 0:02:48.320 --> 0:02:50.360 want to do it in a way that doesn't create disruption. 0:02:50.560 --> 0:02:53.200 That's very difficult to do. Central bankers haven't probably the 0:02:53.200 --> 0:02:55.360 toughest job they've ever had right now, Okay, I'll go 0:02:55.440 --> 0:02:57.919 with that. But Secretary Guy in your fifteen years ago 0:02:58.000 --> 0:03:01.000 seventeen years ago would say the salute is to extend 0:03:01.040 --> 0:03:04.679 the timeline. Why are we in such a hurry to 0:03:05.400 --> 0:03:09.480 bury the economy into a global recession? What's the race here? Yeah, 0:03:09.520 --> 0:03:11.280 I think there's a sense of catch up that they're 0:03:11.280 --> 0:03:13.600 waiting too loranded and so they want to make up. 0:03:13.680 --> 0:03:15.840 I think some of it is just bringing back to 0:03:15.919 --> 0:03:18.639 reputation of the institutions. There's a concern that maybe some 0:03:18.960 --> 0:03:22.120 the ft or other institutions have lost some of the 0:03:22.120 --> 0:03:25.160 reputation as being tough. I think Jay wants to prove 0:03:25.200 --> 0:03:27.000 a point, and I think you heard from Andrew yesterday 0:03:27.000 --> 0:03:29.160 he wants to prove a point too. Can they stop 0:03:29.600 --> 0:03:32.760 and pause? We can. I don't know that they will. 0:03:32.840 --> 0:03:35.520 It depends on what they might see. Obviously, there's a 0:03:35.520 --> 0:03:38.200 lot of turmoil around the World War and the continent 0:03:38.240 --> 0:03:42.000 of Europe. Gasoline prices as we see from OPEC. I 0:03:42.000 --> 0:03:44.480 think they're pretty adamant about moving ahead. I must turned 0:03:44.520 --> 0:03:46.400 to banking, of course, a great mystery, and this goes 0:03:46.440 --> 0:03:49.920 back to Fortis of Belgium years ago, which is where 0:03:49.960 --> 0:03:54.320 in Europe there were transactions and combinations across borders. That's 0:03:54.360 --> 0:03:58.200 always a challenging thing with the challenges in a selected 0:03:58.280 --> 0:04:02.560 Swiss bank. Do you look for transactions and combinations within 0:04:02.600 --> 0:04:05.840 the members of the Institute of International Finance. We do, 0:04:06.080 --> 0:04:08.480 and you know, risk assessments and an important part of 0:04:08.480 --> 0:04:10.040 what we do here. That's why we have a board 0:04:10.040 --> 0:04:12.920 of fifty institutions that comes to the world, so we 0:04:12.960 --> 0:04:15.360 constantly talk about risk. Our board meeting tomorrow will be 0:04:15.360 --> 0:04:17.640 a conversation about where do we see weaknesses in the 0:04:17.680 --> 0:04:21.400 system and how do our institutions communicate with each other? Okay, 0:04:22.279 --> 0:04:26.720 I'll go with that, But the reality is selected regions, 0:04:26.920 --> 0:04:30.680 book values of banking, or to use the American phrase, 0:04:30.960 --> 0:04:34.119 flat on their back. What is the urgency right now 0:04:34.480 --> 0:04:38.520 to pick a region within European banking? Well, we know 0:04:38.880 --> 0:04:42.400 book to value of ratios and Europe are pretty soft. 0:04:42.720 --> 0:04:45.680 But Europe needs something different than just monetary policy. They 0:04:45.680 --> 0:04:48.960 need consolidation and four thousand institutions across exactly, and so 0:04:49.000 --> 0:04:53.080 we need consolidation, and well, you need Brussels and capitals 0:04:53.080 --> 0:04:56.160 to act. We need a consolidate capital market, which benefits 0:04:56.200 --> 0:04:58.200 US firms. Here we have the largest capital market in 0:04:58.200 --> 0:05:00.800 the US, which helps the JP Morgans and Americas, which 0:05:00.800 --> 0:05:03.640 we'll hear from today and tomorrow here. But you're at 0:05:03.680 --> 0:05:06.640 needs banking consolidation in the capital market Union. You were 0:05:06.839 --> 0:05:10.880 steeped in Washington and in the politics of a traditional 0:05:10.920 --> 0:05:13.440 Republican party, which some people would say has gone the 0:05:13.480 --> 0:05:17.520 way of the fossil UH and that what does the 0:05:17.600 --> 0:05:23.960 Biden administration need to do to solidify American leadership other 0:05:24.000 --> 0:05:26.919 than to generate a strong dollar. Well, we need to 0:05:26.920 --> 0:05:29.520 deal with energy, and I think they've tried it both ways. 0:05:29.560 --> 0:05:31.760 And what is to talk about a climate transition, which 0:05:31.800 --> 0:05:34.000 we should. But in the near term, we've got to 0:05:34.040 --> 0:05:35.920 find ways to produce more oil and get it to 0:05:36.000 --> 0:05:37.560 pipe to the place it needs to be. We need 0:05:37.600 --> 0:05:40.880 to address the near term security and affordability concerns. Are 0:05:40.880 --> 0:05:43.560 you gonna make headlines today like you did with Governor 0:05:43.600 --> 0:05:46.120 Bailey yesterdays that are reduct here with Legard? Come on, 0:05:46.279 --> 0:05:49.280 we are indeed stut a very big day to Madams. 0:05:49.320 --> 0:05:52.760 Thank you so much with the Institute of International Finance, John, 0:05:52.760 --> 0:05:54.440 and I'll tell you if he can do back to back, 0:05:54.880 --> 0:05:57.440 uh John with Christine Lagard what he did with Andrew 0:05:57.440 --> 0:06:00.400 Bailey yesterday. John, our jobs are a threat. T K. 0:06:00.640 --> 0:06:13.279 Thank you a great word. Dan in Washington. Don't my 0:06:13.320 --> 0:06:15.839 favorite guest this someone who used to be a central 0:06:15.880 --> 0:06:17.720 bank it but isn't any more because they cannot tell 0:06:17.800 --> 0:06:19.479 you what they think. And all of them come out 0:06:19.520 --> 0:06:21.960 really harshly and say you're all making a terrible mistake. 0:06:22.000 --> 0:06:24.360 Why are they going more aggressively. They're just so much 0:06:24.360 --> 0:06:28.240 more open about their feelings about the situation. Tom Keane, 0:06:28.480 --> 0:06:32.080 I think you've got the perfect guests to do just that. Oh, 0:06:32.160 --> 0:06:35.200 I'm my interview of this meetings of the International Monetary Fund, 0:06:35.240 --> 0:06:37.960 and it's here at the Institute of International Finance. Axel 0:06:38.000 --> 0:06:41.279 Webber is the force of the ii F, the chairman, 0:06:41.360 --> 0:06:44.120 but I must say, far more importantly, the former president 0:06:44.120 --> 0:06:46.880 of the Bundesbank. His service to u b S is 0:06:46.920 --> 0:06:50.159 noted as well. We begin on one hour conversation. We're 0:06:50.160 --> 0:06:53.200 gonna have to cram one hour axcel into the moment. 0:06:53.480 --> 0:06:57.320 And you taught a course at Boost School Chicago central 0:06:57.320 --> 0:07:00.960 bank theories. In fact, what is the fact right now? 0:07:01.320 --> 0:07:04.239 For J. Powell? I think the fact is that central 0:07:04.240 --> 0:07:08.760 banks are in a really bad situation. They have started 0:07:09.000 --> 0:07:12.880 late in raising rates. You could see already some break 0:07:12.920 --> 0:07:15.920 into some trend break in the price level. In late 0:07:15.960 --> 0:07:20.320 two thousand. They focused on the inflation rate very early. 0:07:20.440 --> 0:07:23.640 Also X some elements that have been going up strongly, 0:07:24.000 --> 0:07:27.920 and now the central banks are doing big steps to 0:07:28.000 --> 0:07:31.960 catch up with reality, and there is some risk in that. 0:07:32.080 --> 0:07:34.960 So I now look at monetary policy as an independent 0:07:35.080 --> 0:07:38.880 risk factor. Uh, And I think monetary policy has a 0:07:38.920 --> 0:07:42.080 way to go. I don't believe that the current inflation 0:07:42.160 --> 0:07:45.800 rates will come down as easily as is predicted still 0:07:45.840 --> 0:07:48.520 by most of the central bank models. So the tough 0:07:48.560 --> 0:07:51.200 work is ahead. I got so many ways to go 0:07:51.320 --> 0:07:53.640 here and just squeeze us in the time. Do we 0:07:53.720 --> 0:07:57.280 need to abandon a two percent level? Something Bundesbank is 0:07:57.320 --> 0:08:01.440 comfortable with, something I'm gonna say traditional economics is comfortable with. 0:08:01.800 --> 0:08:04.160 But as part of the solution to move away from 0:08:04.160 --> 0:08:07.400 a two percent level of inflation towards a three percent 0:08:07.520 --> 0:08:10.480 level as appropriate, I think that would completely blow the 0:08:10.520 --> 0:08:13.920 credibility of all central banks. If they were to do that, Uh, 0:08:14.080 --> 0:08:17.440 they would be dead on arrival because if you what 0:08:17.480 --> 0:08:20.200 you need to do is to re establish the credibility 0:08:20.240 --> 0:08:23.040 of the two percent target at a rage running just 0:08:23.240 --> 0:08:26.679 below ten percent, that's a very difficult task. So central 0:08:26.680 --> 0:08:30.320 banks would, in my view, be completely misguided if they 0:08:30.320 --> 0:08:33.840 were to question the target. Now, the point is, let's 0:08:33.880 --> 0:08:36.520 get back to target and that will take them, you know, 0:08:36.600 --> 0:08:38.600 at least two years. What we're gonna do now, folks, 0:08:38.600 --> 0:08:40.440 is divingto some theory. And we can do this with 0:08:40.520 --> 0:08:43.319 Professor Weber. I'm going to work off of a wonderful 0:08:43.320 --> 0:08:46.079 piece Byambo's Evans Pritchard and the Telegraph. You can look 0:08:46.120 --> 0:08:50.280 at a theoretical construct like the Phillips curve London School 0:08:50.320 --> 0:08:53.640 of Economics the fifties, or the beverage curve. Wage cruitment 0:08:53.720 --> 0:08:57.679 talks about from even farther back as well. Central banking 0:08:57.800 --> 0:09:01.760 is hinging on a linkage between inflation an employment. Should 0:09:01.840 --> 0:09:04.120 they do that or do they need to squeeze right 0:09:04.120 --> 0:09:07.600 down to a more Germanic focus on inflation? Well, I 0:09:07.640 --> 0:09:11.160 think they're They're long term. What really matters is the 0:09:11.200 --> 0:09:13.560 amount of debt in the in the economy and how 0:09:13.559 --> 0:09:16.760 it's accommodated by central banks. So I'm still a firm 0:09:16.760 --> 0:09:19.520 believer that in the long run the balance sheet of 0:09:19.559 --> 0:09:22.680 the Fed and monetary policy matter, and in the long 0:09:22.800 --> 0:09:26.680 run inflation is largely driven by factors like how accommodative 0:09:26.760 --> 0:09:30.160 our central banks for government debt. Of course, in conducting 0:09:30.200 --> 0:09:33.280 monetary policies through the business idea, they need to look 0:09:33.360 --> 0:09:37.839 at the link between output growth, employment and inflation. It's 0:09:37.840 --> 0:09:41.440 a natural because their setting is within the economic in 0:09:41.480 --> 0:09:44.559 the economy. But long run, I think they haven't looked 0:09:44.559 --> 0:09:47.640 at the impact of this ultra easy monetary policy on 0:09:47.840 --> 0:09:51.000 inflation that was about to come. How naive are we 0:09:51.320 --> 0:09:56.600 about qt? Original? Unfounded? Rubini among others make jokes about it, 0:09:56.840 --> 0:10:01.360 q E QT How original is it in that we 0:10:01.440 --> 0:10:04.480 don't know really what's going to happen. I think the 0:10:04.520 --> 0:10:08.199 central banks have amassed a massive balance sheet, all center 0:10:08.280 --> 0:10:10.400 banks in the world, and if you look at the 0:10:10.480 --> 0:10:14.080 last ten years, the fiscal expansion of roughly to the 0:10:14.120 --> 0:10:18.040 tune of g d P globally has been accommodated by 0:10:18.040 --> 0:10:20.880 an expansion of central banks balance sheet roughly of the 0:10:20.920 --> 0:10:24.760 same amount. So this additional government debt didn't have to 0:10:24.800 --> 0:10:27.440 be held in the market. It ended up in another 0:10:27.520 --> 0:10:30.680 government balance sheet by the central bank. And we haven't 0:10:30.720 --> 0:10:33.880 seen the interest impact and the long term inflation impact 0:10:34.240 --> 0:10:37.439 of that liquidity having to come from the market as 0:10:37.440 --> 0:10:41.319 opposed to come from another source of government funding. And 0:10:41.640 --> 0:10:43.880 I think long run central banks need to bring their 0:10:43.920 --> 0:10:47.360 balance sheet down. That will put pressure on debt and 0:10:47.440 --> 0:10:50.880 governments to consolidate. And I think long run we cannot 0:10:50.960 --> 0:10:54.920 continue to run deficits that are you know, mid single 0:10:54.960 --> 0:10:58.040 digits and debt that is around under present Your history 0:10:58.400 --> 0:11:00.680 is you are death. I'm sure term a medium turn, 0:11:00.800 --> 0:11:04.120 long term analysis, there's a responsibility a character out of 0:11:04.160 --> 0:11:08.000 bundes Bank that speaks for itself is the short term 0:11:08.040 --> 0:11:12.000 path here to just extend things out, to ease up 0:11:12.000 --> 0:11:15.080 on the raising of interest rates at an appropriate point 0:11:15.440 --> 0:11:18.760 and use time to heal the wounds of the pandemic. 0:11:18.840 --> 0:11:21.600 And this that expansion, well, I think you need to 0:11:21.640 --> 0:11:24.320 start doing the U turn. You know this is a 0:11:24.400 --> 0:11:26.839 change in times. Are we near the U turn? I 0:11:26.920 --> 0:11:29.880 think central banks have started to raise rates late, but 0:11:30.360 --> 0:11:32.960 in my view they started. And now what is important 0:11:33.000 --> 0:11:35.480 is what j Pal said at the Jackson All speech. 0:11:35.720 --> 0:11:37.640 You've got to keep at it to the job's done. 0:11:37.640 --> 0:11:40.680 And the job is not done. And so central banks 0:11:40.720 --> 0:11:43.800 have to raise interest rates and at the same time 0:11:44.120 --> 0:11:47.240 they have to produce a balance sheet. How constrained is 0:11:47.280 --> 0:11:49.640 e c B. How how many degrees of freedom is 0:11:49.679 --> 0:11:53.280 Madame Leguard lost here with the war plus the overlay 0:11:53.320 --> 0:11:54.760 we've been talking quite If you of the e c 0:11:54.920 --> 0:11:57.240 d s in a worse position than to fit, their 0:11:57.320 --> 0:12:00.680 economy is likely to take a much bigger hit. Their 0:12:00.679 --> 0:12:03.760 monetary policy has weakened the euro and that is increased 0:12:03.760 --> 0:12:07.920 price pressures for European citizens were much closer to the war, 0:12:08.160 --> 0:12:10.720 and we're much more dependent on China in our exports, 0:12:10.720 --> 0:12:12.600 and China is not doing well at the moment. Is 0:12:12.640 --> 0:12:15.000 it true when you were in booth school teaching that 0:12:15.080 --> 0:12:17.200 you gave out no ways and no bees. Were you 0:12:17.240 --> 0:12:20.040 that tougher greater? No, I wasn't. I did have some 0:12:20.120 --> 0:12:23.760 azing bees, but they were clustered around people that understood 0:12:23.800 --> 0:12:27.000 the long term. Let me remind you that was in 0:12:27.080 --> 0:12:29.880 two thousand eleven. There wasn't a textbook from which you 0:12:29.920 --> 0:12:33.440 could teach the financial crisis because those textbooks was still 0:12:33.480 --> 0:12:36.040 to be written seconds. Is there a textbook? Now we're 0:12:36.120 --> 0:12:38.920 a good textbooks? Now they are good textbooks now excellent Ember. 0:12:38.920 --> 0:12:41.640 There was some insurance here, of course. The chairman of 0:12:41.640 --> 0:12:44.480 the Institute of International and Financia, former leader of the 0:12:44.480 --> 0:12:47.000 Bund despect John. You and I would have gotten quality 0:12:47.120 --> 0:12:49.560 ds in that course. I'm not sure how would've done 0:12:49.559 --> 0:12:55.959 that wild song. Hey, Tom, do you think Tim Adams 0:12:56.160 --> 0:12:58.719 who wants to be an anchor on Pluybock surveillance when 0:12:58.720 --> 0:13:02.160 you're out, he's He's smooth, There's no question about it. 0:13:02.200 --> 0:13:05.080 The gentleman from Kentucky can absolutely get it done. And 0:13:05.120 --> 0:13:07.720 for that matter, John, I thought axel Weber was smooth 0:13:07.760 --> 0:13:10.440 as well. Your thoughts, John Farrell on what we heard 0:13:10.440 --> 0:13:12.480 from the leader of the bund spank him. I think 0:13:12.520 --> 0:13:14.320 a lot of what we're experiencing right now is some 0:13:14.360 --> 0:13:16.520 of the stuff he want about more than ten years ago. 0:13:16.720 --> 0:13:19.280 That once you go down this path, it's very difficult 0:13:19.320 --> 0:13:23.040 to get back out of it. From the ultra accommodative 0:13:23.120 --> 0:13:25.480 to where we are right now, it is indeed his historic. 0:13:25.559 --> 0:13:28.080 What I've heard this morning, folks is this is a 0:13:28.160 --> 0:13:31.760 once in forty even fifty year moment for all within 0:13:31.880 --> 0:13:34.600 finance and Global Wall Street. If you're part of Global 0:13:34.640 --> 0:13:37.160 Wall Street, this is must listen. It is rare that 0:13:37.280 --> 0:13:40.079 you speak to anyone in economics who actually read chapter 0:13:40.120 --> 0:13:44.000 twenty three of a textbook which is on finance and bonds. 0:13:44.120 --> 0:13:46.760 Klaus Canoe is a governor of the Dutch Central Bank 0:13:46.840 --> 0:13:51.160 and is truly expert linking in economics to the fixed 0:13:51.200 --> 0:13:55.480 income space, including British yields at five percent. Governor, thank 0:13:55.520 --> 0:13:58.000 you so much for joining Bloomberg today. I've got to 0:13:58.040 --> 0:14:00.880 first go to the ECB questions, can you explain to 0:14:00.960 --> 0:14:03.920 me how the e c B can become more restrictive 0:14:04.520 --> 0:14:08.160 rate rate seventy five basis points with the nominal g 0:14:08.320 --> 0:14:11.840 dB construction of the continent. Where do they have the 0:14:11.880 --> 0:14:16.760 animal spirit to withstand ever higher interest rates? Well, I 0:14:16.760 --> 0:14:19.680 think to answer that question, you first have to sort 0:14:19.680 --> 0:14:21.720 of look at where we are in terms of the 0:14:21.720 --> 0:14:26.200 starting point. We're still way below neutral, so policy is 0:14:26.200 --> 0:14:29.640 still accommodative. So I think it is no regret that 0:14:29.720 --> 0:14:34.240 we have to end this accommodative phase of policy. And 0:14:35.400 --> 0:14:37.520 I mean your question of how deep should we go 0:14:37.560 --> 0:14:40.520 into a restrictive territory once we get there, well, the 0:14:40.560 --> 0:14:42.840 course that bridge when we get there, it is original 0:14:42.960 --> 0:14:46.280 right now you're in accommodated or auto accommodative. However you 0:14:46.320 --> 0:14:49.960 want to phrase it as well, what happens next after 0:14:50.000 --> 0:14:53.560 the presumed rate increase of the next meeting, Well, I 0:14:53.560 --> 0:14:56.960 mean our president has stated very clearly that we are 0:14:57.000 --> 0:15:00.720 currently in the phase of normalizing interest rates. That means 0:15:00.760 --> 0:15:04.160 taking them to neutral. Unfortunately nobody knows with any level 0:15:04.160 --> 0:15:06.920 of precision, but neutral is But I've been saying that 0:15:07.000 --> 0:15:10.440 we need at least two more significant hikes before we 0:15:10.480 --> 0:15:15.400 sort of enter the range of plausible estimates for for 0:15:15.560 --> 0:15:18.280 neutral that will take us into next year. And I 0:15:18.320 --> 0:15:21.040 hope that with the current uncertainty in the markets and 0:15:21.040 --> 0:15:24.120 the bolt market fragility, I hope you don't mind that 0:15:24.200 --> 0:15:27.000 I don't have my calendar cut out for three already. 0:15:27.440 --> 0:15:29.120 I don't know I don't have my calendar cut out 0:15:29.160 --> 0:15:32.680 for two, even even with some of my staff would 0:15:32.680 --> 0:15:34.720 say that I don't know where the calendars for this 0:15:34.800 --> 0:15:37.480 year as well. I stood at the ECB mowning with 0:15:37.560 --> 0:15:40.720 atmar Issing long ago and far away, and it was 0:15:40.760 --> 0:15:46.560 a core let's call it, Germanic Netherlands constituency wrapped around 0:15:46.640 --> 0:15:50.240 another ECB in this crisis. Right now? Is the e 0:15:50.360 --> 0:15:53.520 c be more unified than it was in two thousand 0:15:53.480 --> 0:15:57.040 and eight? We are unified, so I think if you 0:15:57.120 --> 0:15:59.800 look back over the last few years since the pandemic, 0:16:00.480 --> 0:16:04.760 all decisions have been taken with a high degree of unanimity. 0:16:04.800 --> 0:16:08.840 So we are very clear about our mandate. Inflation is 0:16:08.880 --> 0:16:15.560 way too high scent in the Netherlands, ten percent in 0:16:15.560 --> 0:16:19.200 the Euro Area, and even more important, underlying inflation trends 0:16:19.240 --> 0:16:23.080 are pointing in the wrong direction. Core inflation almost five percent, 0:16:23.440 --> 0:16:26.280 so we are determined to bring inflation back to target, 0:16:26.520 --> 0:16:30.000 and we do understand that this will require some further 0:16:30.040 --> 0:16:32.720 efforts from our site. This problem is not going to 0:16:32.800 --> 0:16:35.680 go away with a little bit of slowdown of the economy. 0:16:35.920 --> 0:16:39.480 It will require continued effort from our side, and the 0:16:39.520 --> 0:16:42.480 Council is unanimous on that entire I have to go 0:16:42.640 --> 0:16:45.840 with you to your bond expertise, linking it into a 0:16:45.880 --> 0:16:50.600 greater economic system and the idea of yields coming up, 0:16:50.680 --> 0:16:53.040 prices coming down. With the United Kingdom being in the 0:16:53.080 --> 0:16:56.960 headlines this morning, it'll be another country next. These are 0:16:57.040 --> 0:17:01.240 nonlinear functions. How close are we to a second derivative, 0:17:01.280 --> 0:17:06.560 to a convexity and acceleration where people like you lose control. Well, 0:17:06.600 --> 0:17:09.040 I think that need not be the case because that 0:17:09.200 --> 0:17:12.520 is dependent I think on responsible policy. As long as 0:17:12.560 --> 0:17:15.639 policy makers keep on doing the responsible things, then I 0:17:15.640 --> 0:17:19.760 do think bond markets can be in control. But it 0:17:19.840 --> 0:17:23.800 does put a premium on responsible behavior. Bond markets have 0:17:23.880 --> 0:17:27.439 become much much more sensitive to death sustainability issues, so 0:17:27.520 --> 0:17:31.040 that puts a burden on our fiscal authorities to also 0:17:31.240 --> 0:17:35.400 continue to pursue responsible fiscal policies. With the medium term 0:17:35.440 --> 0:17:39.560 orientation and with death sustainability being front and center of 0:17:39.560 --> 0:17:42.240 their concerns. Is there a textbook and qut when you're 0:17:42.320 --> 0:17:45.359 growing again? Was there anything about QUEI and QT? No, 0:17:45.600 --> 0:17:47.760 you're making it up as we go, right, Well, we're 0:17:47.760 --> 0:17:49.480 making out of as we go. Yes, of course we 0:17:49.600 --> 0:17:51.760 learned from the experiences of all the central banks. I 0:17:51.800 --> 0:17:54.360 think the way the FAT is dealing with QT, that's 0:17:54.400 --> 0:17:58.160 clearly also going to be an example for us. They 0:17:58.240 --> 0:18:01.399 managed to move it into the background very quickly. I 0:18:01.400 --> 0:18:04.280 think a process like QT, it should be predictable, it 0:18:04.320 --> 0:18:06.840 should be gradual, it should be even a little bit boring, 0:18:07.080 --> 0:18:09.800 right I mean Janet Yellen once quipped it's like watching 0:18:09.840 --> 0:18:12.520 paint dry, and that's a little bit. I think how 0:18:12.600 --> 0:18:14.800 you want to shape such a program. I think the 0:18:14.800 --> 0:18:17.639 FAT has been fairly successful in that and if we 0:18:17.640 --> 0:18:19.760 can take that queue as well, I would be more 0:18:19.760 --> 0:18:21.879 than happy to do so. It has not been boring 0:18:22.000 --> 0:18:24.760 for Governor Bailey. He's making it up as he goes. 0:18:24.840 --> 0:18:27.200 Literally in the last twenty four hours, What are the 0:18:27.280 --> 0:18:31.399 lessons you've learned from the the nexus of Bank of 0:18:31.480 --> 0:18:35.119 England and politics in England? What have you learned about 0:18:35.119 --> 0:18:38.399 when the first of all that monitoring and fiscal policy 0:18:38.440 --> 0:18:41.080 being at crossroads with at cross purposes with each other. 0:18:41.520 --> 0:18:45.480 That's a very dangerous cocktail for for bond markets. That's 0:18:45.600 --> 0:18:48.439 the first lesson that I would say. And secondly, the 0:18:48.520 --> 0:18:51.000 UK is a little bit in a special position because 0:18:51.000 --> 0:18:54.120 the bonds they bought are extremely long dated, so they 0:18:54.160 --> 0:18:57.560 actively have to sell. We in the Euro Area like 0:18:57.640 --> 0:19:00.520 in the US, and we have bonds over the full maturity, 0:19:00.560 --> 0:19:03.480 and we think we can do qut by just rolling 0:19:03.520 --> 0:19:07.639 off existing bonds by less than full reinvestment, which is 0:19:07.840 --> 0:19:11.120 naturally a smoother process than having to actively sell. By 0:19:11.119 --> 0:19:15.320 colleague John Faroll Adores Vermier, you're having the mother of 0:19:15.359 --> 0:19:19.400 all lifetime Vermier shows in the Netherlands next year. Can 0:19:19.440 --> 0:19:22.800 you see our show in Amsterdam and support of the 0:19:22.920 --> 0:19:25.840 vermir show? Yes, of course, I mean if you want 0:19:25.840 --> 0:19:28.200 to support it by all means. I think it's a 0:19:28.400 --> 0:19:32.720 unique opportunity to see all the Vermier's that are everywhere 0:19:32.760 --> 0:19:34.879 in the world in a different museum, in the reichs 0:19:34.960 --> 0:19:37.359 Museum in Amsterdam. Absolutely, we would love to have you 0:19:37.400 --> 0:19:42.520 and Mr Ruder show you and enjoy Claud to the 0:19:42.600 --> 0:19:46.120 Dutch Central Bank suggesting we need to be an Amsterdam 0:19:46.240 --> 0:19:49.359 next year. It was his suggestion some I'm buying that. 0:20:01.040 --> 0:20:03.760 Let's head back down to Washington, d C. Tom Keane 0:20:03.920 --> 0:20:08.359 with another fantastic interview. A nice update there, Lisa. And 0:20:08.400 --> 0:20:11.440 it's really important, folks. Off pp I is how important 0:20:11.520 --> 0:20:15.960 tomorrow's United States CPI numbers will be for these meetings 0:20:16.000 --> 0:20:18.720 of the World Bank, the i F and the International 0:20:19.280 --> 0:20:23.040 Monetary Fund. Tomorrow will come from from the offices of 0:20:23.119 --> 0:20:26.880 the International Monetary Fund with some important interviews. Right now 0:20:27.320 --> 0:20:30.000 we go all American and we can do that if 0:20:30.000 --> 0:20:32.520 you go to the Art Institute of Chicago and go 0:20:32.600 --> 0:20:35.320 to the very back of the Art Institute, pass to 0:20:35.440 --> 0:20:39.119 Chical there is the old trading room of the Chicago 0:20:39.200 --> 0:20:43.000 Commodity Exchange. It's really something to see from another time 0:20:43.040 --> 0:20:48.240 and place. That is the CFTC associated where our Midwest, 0:20:48.280 --> 0:20:52.440 but much more with what to do with derivative instruments. 0:20:52.560 --> 0:20:56.600 Kristen Johnson is c f TC Commissioner. Have you wonderful 0:20:56.640 --> 0:20:58.480 to have you here with us today. Have you ever 0:20:58.960 --> 0:21:02.040 visited that ritual room in the back of the Art Institute. 0:21:02.119 --> 0:21:04.080 I have not, and I look forward to this newly 0:21:04.119 --> 0:21:07.879 minted commissioner. You must go to the Art Institute and 0:21:07.920 --> 0:21:10.520 go to the back and there is part of my 0:21:10.560 --> 0:21:14.639 family's past. Wow, I've headed to Chicago November. Have to 0:21:14.680 --> 0:21:17.639 see it. Let's add to your list. Now the discussion 0:21:17.760 --> 0:21:21.919 everybody wants to have, which is bitcoin? And I refuse 0:21:22.080 --> 0:21:25.879 to believe this is a soft more turf war between 0:21:25.960 --> 0:21:29.760 Kristin Johnson and my good friend Gary Gainsler. How can 0:21:29.800 --> 0:21:33.280 you two get along on what to do with bitcoin 0:21:33.600 --> 0:21:36.639 and not make it as silly turf four? Oh, this 0:21:36.720 --> 0:21:38.399 is a great question, and not just a great one, 0:21:38.400 --> 0:21:41.640 a necessary one to be honest. In the current crypto 0:21:41.800 --> 0:21:44.920 onset of the current crypto winner, uh two trillion dollar 0:21:45.119 --> 0:21:48.320 assets sell off, what comes sharply into focus from my 0:21:48.400 --> 0:21:53.240 perspective is institutional investors and retail investors starting with the ladder. 0:21:53.280 --> 0:21:55.399 In fact, what we could think carefully about is the 0:21:55.440 --> 0:21:59.280 reality that retail investors have suffered significant losses in light 0:21:59.320 --> 0:22:01.800 of the onset of the crypto winner. Something else ide 0:22:01.840 --> 0:22:05.000 share is um If we coupled this thinking with the 0:22:05.080 --> 0:22:08.720 Bank of New York's announcement yesterday, this is Alexander Hamilton's bank, 0:22:09.200 --> 0:22:11.440