Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee.
Speaker 1: We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. Joining
Speaker 1: us in New York, We've got a great guest as well,
Speaker 1: joining us from our studios Interactive Brokers Studios at Bloomberg.
Speaker 1: Jeff Curry Goldman Sacks, Global head of Commodities Research and partner.
Speaker 1: Joining us now, Jeff, good morning to you, and let's
Speaker 1: get to the news that just crossed the wires, shall
Speaker 1: we crossing the Bloomberg? That China's getting ready to cut
Speaker 1: imports terrorists on some goods from November. Is this a
Speaker 1: white flag? What is this? Well, they were already experiencing
Speaker 1: inflationary parishures. And one thing we've argued about these hereoffs
Speaker 1: is there not unlikely to have that big of an
Speaker 1: impact on demand or supply chains, but have a much
Speaker 1: larger impact on inflationary pressures. So by cutting them, it's
Speaker 1: actually easing an inflationary environment which was exacerbated by swine
Speaker 1: flu and other domestic problems. What's been fascinating about the
Speaker 1: commodity market through so far. If I said to you, Jeff,
Speaker 1: that we were going to have a big trade dispute
Speaker 1: between the United States and China. If I said we'd
Speaker 1: have big concerns over emerging markets and a stronger dollar
Speaker 1: story emerged through and then said guess where commodities are,
Speaker 1: would you have guests? Correctly, there one fly in the ointment.
Speaker 1: There really is the dollar, which is what put downward
Speaker 1: pressure on the metals complex. When we look at energy,
Speaker 1: it's a very different story. Oil is where it would
Speaker 1: be with or without the dollar. I like to say
Speaker 1: that oil causes the dollar, the dollar causes non energy.
Speaker 1: So the big difference here really is in the metal side,
Speaker 1: that copper sitting far lower than we would have expected.
Speaker 1: Jeff Curry, Good morning from the Plaza Hotel. Jeff, I,
Speaker 1: I'm fascinated by the supply dynamic into the next Vienna meeting.
Speaker 1: I understand there's a marginal issue with this given country
Speaker 1: that given country, but what will be the supply elasticities
Speaker 1: that they confront in Vienna. Well, I think the big
Speaker 1: concern is does Saudi and the core OPEC have additional
Speaker 1: capacity to deal with the Iranian outage UM, they're making
Speaker 1: large scale investments. Right now, rig counts in Saudi Arabia
Speaker 1: are up. The neutral zone has three hundred thousand barrels
Speaker 1: per day of additional capacity. Russia has two hundred. So yeah,
Speaker 1: right now it's a concerning issue. But as we look
Speaker 1: out forward six months and beyond UM, it becomes less
Speaker 1: of an issue. What is your target on print crude UM?
Speaker 1: We are seventy five at the end of this year.
Speaker 1: We think it will hover in that UM low eight
Speaker 1: high high seventy range. I think the key here is
Speaker 1: from an investment perspective, oils backward it it has a
Speaker 1: ten percent carry. Even though that we're not bullish on prices,
Speaker 1: were bullish on owning oil because of that carry. Let's
Speaker 1: talk about that a little bit deeper. And if we
Speaker 1: can strip away the jog and Jeff, when you say
Speaker 1: the oil is banquidated, what do you mean by that
Speaker 1: and why is it significant? It means inventories are low,
Speaker 1: so spot prices sit above forward, so you buy forward
Speaker 1: at a discount and roll up that curve. Think about
Speaker 1: it is like the interest rate on a bond um
Speaker 1: and in the current environment that dividend or whatever you
Speaker 1: want to call it for oil is paying ten fascinating
Speaker 1: and the president pushing back against pack Your thoughts on that, Jeff,
Speaker 1: because I'd love to hear what you think the willingness
Speaker 1: the president's questioning the willingness of OPEC to push back
Speaker 1: with more supply to meet high crude prices. Does the
Speaker 1: ability exist before we actually actually question the willingness Jeff? Well,
Speaker 1: in terms of looking at the willingness, they pumped a
Speaker 1: lot of oil on this market back in August, and
Speaker 1: look what it did to Brent prices in Brent term structure. Um,
Speaker 1: they backed up, inventories, came back down on and oil
Speaker 1: prices went right back up. So clearly, um, they do have,
Speaker 1: at least in the immediate term, enough a capacity to
Speaker 1: start to keep you know, keep this market balance and
Speaker 1: push it slightly into a curclus. I like to emphasize
Speaker 1: historically they never pushed this market into a surplus voluntarily.
Speaker 1: They did a little bit in August and then backed off.
Speaker 1: The big question is Tom asked, is you know what's
Speaker 1: their capacity coming from here? The highest we've ever seen
Speaker 1: Saudi hit was ten point six. They're producing ten point
Speaker 1: but they're making investments. Jeff, you know, let me ask
Speaker 1: you the question, and you know you're one of the
Speaker 1: grades of petroleum economics and petroleum discourse in the world.
Speaker 1: When you hear the president lecture Saudi Arabia, how does
Speaker 1: a pro like you respond to that. I like to
Speaker 1: use the example of soybeans. What did we learn this summer?
Speaker 1: Um that the administration is willing to use all the
Speaker 1: tools at his disposal to be able to keep prices
Speaker 1: of commodities um and a manageable range um. It was
Speaker 1: that Arip'll see a you know, obscure nineteen thirty depression
Speaker 1: era law that they were able to use to be
Speaker 1: able to subsidize farmers. I think what we learn from
Speaker 1: that is there's a willingness by this administration to do
Speaker 1: whatever it takes to keep prices in manageable. Okay, that's
Speaker 1: very nostalgic. I'm sitting in the palm court, John Ferrell
Speaker 1: word Conrad Hilton bailed out the hotel in about nine four.
Speaker 1: That's all great. Let's move forward to can the President
Speaker 1: provide discourse on oil into to keep the price down.
Speaker 1: I don't have an interview Jeff Curry that believes he
Speaker 1: can succeed at that. When you get into five it
Speaker 1: starts to become an issue. But when you look out
Speaker 1: that you've got huge pipe capacity coming online in the Permian.
Speaker 1: You know that's the pipe to get the oil out
Speaker 1: of the Mid continent the US down to the Gulf
Speaker 1: coast um coming online in September this year. So your
Speaker 1: wind of tightness really is between now and let's say
Speaker 1: third quarter of next year. John, John Permian, you can
Speaker 1: translate it is Texas. Thank you, Tom, thank you, thank you.
Speaker 1: I am just shocked by Tom's knowledge of the Planza
Speaker 1: Hotel in New York. I'm guessing you frequent this bar
Speaker 1: quite often. To this bar was redesigned about four or
Speaker 1: five years ago and designed beverage of my choice. At
Speaker 1: what did they redesign in terms of the beverage of
Speaker 1: your price? Jeff Curry of Goldman Sacks. I now we've
Speaker 1: got to let you go to get back to the
Speaker 1: trading flaws of government downtown. So thank you very much
Speaker 1: for giving us your time this morning. Jeff Goldman Sacks
Speaker 1: Global ahead of Commodity's research and partner John Ferrell from
Speaker 1: our studios Queen Victoria Street in London, I'm Tom Keane
Speaker 1: at the Bloomberg Global Forum here in the palm court
Speaker 1: of the Fame Plaza Hotel. For important conversation and thinking forward,
Speaker 1: we begin our coverage. Was someone important a day ago
Speaker 1: and ever more important right now, Werner Hoyer of Germany,
Speaker 1: President of the European Investment Bank, and we welcome in
Speaker 1: this morning. Is wonderful to speak to you. But my phrase,
Speaker 1: Mr Hoyer is a rip up the script, and I
Speaker 1: must rip up the script this morning. We saw the
Speaker 1: President speak yesterday at the United Nations, and I thought
Speaker 1: American media singled out the German UH Party for the quality,
Speaker 1: the tone, the moments of laughter. Is the president spoke?
Speaker 1: Speak right now with your your domestic politics experience of Germany,
Speaker 1: about the German view of President Trump and of Chancellor
Speaker 1: A Miracle's government's view of President Trump. What is the
Speaker 1: distinctive characteristic to you? Well, I think I'm not alleged
Speaker 1: biased to talk about President Trump because I am representing
Speaker 1: the European Union from their years of experience in my
Speaker 1: own country. We are a little bit puzzled, you know,
Speaker 1: the United States of America has always been the big
Speaker 1: example for Germans. The Americans were the ones who got
Speaker 1: out out of the misery and our own crimes of
Speaker 1: World War two and the Holocaust. So we owe a
Speaker 1: lot to America, not only for that, but also for
Speaker 1: help to shape happening us, to shape our constitution. Are
Speaker 1: a real political, democratic life. So seeing America going in
Speaker 1: a completely different direction from what they taught us decades ago,
Speaker 1: this is irritating, but of course the American people must
Speaker 1: make their own choices. Bloomberg spoke to Actual vor this
Speaker 1: morning in Zurich and it came up as well, do
Speaker 1: you detect and again this goes to your abilities at
Speaker 1: the European doesn't be like a pan European view. Do
Speaker 1: you detect that they look at President Trump in his
Speaker 1: sense of globalism, is a one awful moment for America?
Speaker 1: Or is there a new permanence here to America being
Speaker 1: less multi labal. Well, when I talk about America, I
Speaker 1: do not necessarily talk about President Trump. So I see
Speaker 1: that the prod them too is legitimized to take his
Speaker 1: positions and represent the United States takes these positions. However,
Speaker 1: I am very encouraged what I see on issues like globalization,
Speaker 1: on issues like climate or so by American society, American
Speaker 1: industry by many states, the global Covenant of Mayors and
Speaker 1: all these developments which are very encouraging. So I don't
Speaker 1: give America lost. Let us turn to the European investment
Speaker 1: things tell us about the state of investment public in
Speaker 1: private in Europe. Is there a forward momentum or is
Speaker 1: it going quarter to quarter. I'm very critical of that.
Speaker 1: I believe that Europe is behind an investment. There is
Speaker 1: a huge gap, in particular when it comes to innovation
Speaker 1: and when it comes to infrastructure, both new infrastructure Rhodes communication, energy,
Speaker 1: transmission parts rail in particular, but also when it comes
Speaker 1: to to innovation. I think we we invest much too little,
Speaker 1: both industry and the states into the future of the
Speaker 1: of the European Union when it is right to speak
Speaker 1: used Jonathan Farr, joining from the City of Larning on
Speaker 1: investment in Europe, is actually quite fascinating that there is
Speaker 1: a reluctance from the Germans, who run a very balanced
Speaker 1: budget to invest in their own country in infrastructure. That
Speaker 1: has been a case for a long long time. How
Speaker 1: do we address those issues, How do we convince the
Speaker 1: German government that is good for them and good for
Speaker 1: the continent as well. I think there is so far
Speaker 1: a lack of awareness how the bad situation of the
Speaker 1: infrastructure in Germany hurts the future of the country. I
Speaker 1: believe that a rebalancing of the budget is possible without
Speaker 1: getting or without losing sight of the objective of balanced budgets,
Speaker 1: which is what the Germans have achieved that was a
Speaker 1: huge success and which they want to maintain, which I
Speaker 1: perfectly understand. But I think it's doable by some reshifting
Speaker 1: in the budget and giving more attention to the quality
Speaker 1: and restoration and rehabilitation of infrastructure, just as well as
Speaker 1: to much more, much more innovation, research, technology, and the
Speaker 1: whole thing begins with education. Do you think it's possible
Speaker 1: that in ten years time we could look back on
Speaker 1: Chancellor Michael's leadership in Germany and actually view it as
Speaker 1: I squander a decade, Not at all. This lady has
Speaker 1: achieved so much for Germany. It's reputation and it's competitiveness
Speaker 1: in the world that I think whatever happens to her
Speaker 1: in the next many years, she will really might be
Speaker 1: a remaining as one of the key leaders of Germany
Speaker 1: after World War Two. If you're just joining US worldwide
Speaker 1: Verner Hoyer with us. He's president of the European Investment Bank.
Speaker 1: Here at the Bloomberg Global Business Forum. UH in the
Speaker 1: thrilled that you're all with us coast to coast across America.
Speaker 1: Mr Royer. When we look at at you mentioned the
Speaker 1: lag and infrastructure within UH Europe, most Americans would kill
Speaker 1: for Swiss trains or German trains or even the tube
Speaker 1: in London. I mean would be UH the state of it.
Speaker 1: And part of that is the logistics in what Mr
Speaker 1: Truche has always told me is the challenges of crossing borders.
Speaker 1: Is it going to be a more connected Europe? I
Speaker 1: mean ten and twenty years on from these historic moments,
Speaker 1: will it be an interconnected Europe? And air in rail
Speaker 1: in our road we have already very much advanced. They're
Speaker 1: still improvements are possible in particularly in some parts of Europe,
Speaker 1: like Eastern Europe. We must invest more into Eastern Europe,
Speaker 1: there is, there is no question about that. But I'm
Speaker 1: I'm less concerned that we might not make enough progress.
Speaker 1: I'm concerned we might go back, We might make going
Speaker 1: to a recess or a regress, because what is happening presently,
Speaker 1: the longing for borders and border controls and everything that
Speaker 1: is very, very difficult and dangerous for logistics. This is
Speaker 1: coming back, and I'm really surprised that this came back,
Speaker 1: and I'm really surprised that this is getting so much momentum.
Speaker 1: There's a history to all of this, and if I
Speaker 1: could just take Germany and Italy as one example, it's
Speaker 1: a new capitalism in Europe. We here interview, the interview,
Speaker 1: some people saying no, we don't want to be Anglo American,
Speaker 1: others saying we need to nudge towards a more Anglo
Speaker 1: American capitalism. You sense a new capitalism in continental Europe.
Speaker 1: Where as it's steady as you goes well. I think
Speaker 1: as long as we remind ourselves that the social market
Speaker 1: economy was the recipe for progress, not only in Germany
Speaker 1: but practically in many parts of Europe, and wherever this
Speaker 1: path was not taken, it didn't go so well. As
Speaker 1: long as we remember what we owe to the social
Speaker 1: market it kind of the balancing between the investments, the
Speaker 1: social dimensions and and the the private ownership, then we
Speaker 1: can still consider continue to make progress also in Europe,
Speaker 1: when in countries like Italy they feel constrained, and they
Speaker 1: feel constrained by rules that are said at the EU level,
Speaker 1: often by unelected officials. What do you say to the
Speaker 1: Italian government right now, who are ultimately trying to bend
Speaker 1: the rules. In some people's minds, the rules currently as
Speaker 1: they stand is to limit the budget deficit to three
Speaker 1: percent of GDP and sure that your debt to GDP
Speaker 1: is moving in the right direction. Italy is trying to
Speaker 1: tear up the script. What's your message them today, Well,
Speaker 1: we have a new situation in Italy that's legitimate to
Speaker 1: to to explore your feels, more boundaries and more new paths.
Speaker 1: On the other hand, Italy and and many other European
Speaker 1: countries were just about to implode because of the oversized deficit.
Speaker 1: They have been very successful in reducing that considerably over
Speaker 1: the last couple of years. Deviating from that path now,
Speaker 1: which was not prescribed by unelected officials, that was a
Speaker 1: political decision at that time by elected politicians, would be
Speaker 1: big mistake. But do you think that the budget deficits
Speaker 1: in Europe have perhaps overstated and that the actual problem
Speaker 1: with an impotent central bank that just refused to act
Speaker 1: like other central banks for a long long time. Under
Speaker 1: Jean plautrichia All, the European Central Bank has done a
Speaker 1: marvelous job when going for the protection of the currency
Speaker 1: and the stability in Europe a couple of years ago
Speaker 1: with a very clear position to do whatever it takes. However,
Speaker 1: this is a position that kind of be maintained forever
Speaker 1: as we continue the United States. When it comes to
Speaker 1: monetary policy, the United States is always a couple of
Speaker 1: years ahead, so we're not in the process of seeing
Speaker 1: that that zero right interest rates will will disappear very soon,
Speaker 1: hopefully gradually and without any any damage to the companies
Speaker 1: that need to to to adjust to slowly arising interest rates.
Speaker 1: Werner Joyer, where this President of the European Investment Bank
Speaker 1: here at the Bloomberg Global Business Forum is We have
Speaker 1: many important speeches today, but this is a wonderful focus
Speaker 1: on the dynamics of Europe. The word of the moment
Speaker 1: Burner in every NBA program in America scale scale, scale,
Speaker 1: We're looking for scale, scale, scale. Europe has a complete
Speaker 1: disinterpretation or reinterpretation that word from America. Are we going
Speaker 1: to see scale in corporate America's from mergers, combinations and
Speaker 1: transactions are we going to go out and buy revenue
Speaker 1: instead of build revenue across Europe. That could be and
Speaker 1: I think it would not be very helpful. I believe
Speaker 1: that we have to make sure that whatever we develop
Speaker 1: in the technological field and new and further develop will
Speaker 1: fit into a system, that is, that is in the
Speaker 1: within the limits and constraints of competition law. And sometimes
Speaker 1: I missed that, and we see the little dimension in
Speaker 1: some some sectors where America is definitely leading. We admire
Speaker 1: that a lot, but this is on the long run
Speaker 1: not compatible with the rules of competition. I mean your
Speaker 1: your dissertation years ago theoretical approaches to the role of
Speaker 1: money as a capital property. This goes back to a
Speaker 1: huge theme in academics in America, which is monopoly businesses,
Speaker 1: but also the strange word monopsony, which weakens labor. Europe
Speaker 1: has always been far more sensitive to that than America.
Speaker 1: How will that change in the coming years or does
Speaker 1: labor maintain power in Europe or do they does it
Speaker 1: fade away? I think it it maintains power because everybody,
Speaker 1: even among the employers, but in particular on the political side,
Speaker 1: are pretty much aware of the of the value of
Speaker 1: having stable social label relations. And this has been achieved
Speaker 1: in Europe more or less over the last two decades.
Speaker 1: And I think everybody is interested in preserving that, but
Speaker 1: otherwise it might lead to disruptions which can be very detrimental.
Speaker 1: And John Farrell this was unique in two thousand, eight,
Speaker 1: nine ten, where Germany adapt their labor force far better
Speaker 1: to financial melt down than other countries, including the United States,
Speaker 1: and arguingly they started doing that a good ten years
Speaker 1: before the financial crisis. Actually, here the reality Vernos, you know,
Speaker 1: is terrifically high unemployment in places like Spain, Italy, Greece.
Speaker 1: At the youth level, the picture is even more ugly.
Speaker 1: What's the solution to that? What's the remedy? What would
Speaker 1: you prescribe? At the moment, I believe we should overcome
Speaker 1: the division of labor where innovation modern technologies for the
Speaker 1: development of those takes place in the successful country of
Speaker 1: the north, and in the south we observe second rank
Speaker 1: industries or something like that. We must bring innovation your technologies.
Speaker 1: We must bring climate change activities into the countries of
Speaker 1: the South which are so far trailing. We must overcome
Speaker 1: the division between innovation and uh and the development innovation
Speaker 1: and climate innovation and education. All this belongs together. We
Speaker 1: need a much more holistic view. And when it comes
Speaker 1: to Spain, you can see how successful they have been
Speaker 1: over the last couple of years, and if they pursue
Speaker 1: that course also in the future with a sense for
Speaker 1: social balance, I think that Spain will be at par
Speaker 1: with Germany very soon. Vernon Horror, thank you so much.
Speaker 1: He's President of the European Investment Bank. Here at the
Speaker 1: Bloomberg Global Business Forum, Welcome to our audience from Bloomberg
Speaker 1: Tell Vision as well as Bloomberg Radio. Because we are
Speaker 1: joined by Michael R. Bloomberg, former Mayor of the City
Speaker 1: of New York and of course the founder and majority
Speaker 1: shareholder of Bloomberg LP, the parent company of Bloomberg News.
Speaker 1: We call him our boss. He's also the founder of
Speaker 1: Bloomberg Philanthropies and is the U N Secretary General's Special
Speaker 1: Envoy for Climate Actions. That's a lot I can outrage
Speaker 1: if you named everything after yourself, really with me as
Speaker 1: the Trump does that too. She write a book and
Speaker 1: called Bloomberg. Okay, so we're here at the second annual
Speaker 1: Blobal Business Form. Like what's changed since the first, in
Speaker 1: terms of global business. Is it better is it worse? Well,
Speaker 1: I would prefer that the world laughed with us then
Speaker 1: laughed at us. But yeah, things have changed. The tariff
Speaker 1: for is starting hard to see how it doesn't continue
Speaker 1: or even grow worse. Uh, didn't have happen. Wasn't there
Speaker 1: a year ago? But I think the fundamental things of
Speaker 1: the public worrying about technology taking away their jobs, not
Speaker 1: understanding the environmental challenges we have. Uh, those kinds of
Speaker 1: things were there a year ago. They were there two
Speaker 1: or three years ago. They influenced the last presidential election.
Speaker 1: They'll influence this mid term election. They'll influence the election.
Speaker 1: As you suggest that we had climate, we have technology.
Speaker 1: But really what has changed to some of grates trade?
Speaker 1: We saw that yesterday in the nations. A lot of
Speaker 1: talk about trade, a lot of restrictions, whether it's China,
Speaker 1: whether it's sanctioning as a RAN or whatever. How much
Speaker 1: are the Unitate's hurting itself? There's a new requorter. The
Speaker 1: ECB says, actually noted states will hurt the most right now.
Speaker 1: I think the United States will get hurt. And you
Speaker 1: have to understand China is so big that anything you
Speaker 1: do to China has a minimal impact on the country
Speaker 1: and only on a long term basis, And an awful
Speaker 1: lot of people in China that don't buy American products.
Speaker 1: Is five hundred million people in China that is still
Speaker 1: haven't come out of poverty, and they're not affected by
Speaker 1: any of this. Government social programs actually do better in
Speaker 1: down markets and downtimes because they don't get cut, whereas
Speaker 1: anything that you have in the private sector may go
Speaker 1: down in value and your pension fans puttings maybe less
Speaker 1: and because you have investments and they don't have that.
Speaker 1: So I think it is fundamentally different. It is very much,
Speaker 1: very worrisome, and regardless of whether you Republican or a Democrat,
Speaker 1: this is just a failure of our government and maybe
Speaker 1: we should look in the mirror. It's a failure of
Speaker 1: ourselves to not demand more from our elected officials. And
Speaker 1: yet does the Trump adminstration to have a point when
Speaker 1: it comes to China. China has been restrictive in trade,
Speaker 1: they have. Everybody agrees that China has done a lot
Speaker 1: of things that aren't fair, and administrations going back, both
Speaker 1: Republican and Democrat, have not done anything about it. It's
Speaker 1: not that Donald Trump is wrong and fighting it. It
Speaker 1: is the ways he's fighting it, because number one, it
Speaker 1: doesn't work. He puts people on the other side in
Speaker 1: a situation where they can't cave. They have their domestic
Speaker 1: and familihoods to worry about um. And the second thing is, uh,
Speaker 1: he's just going after the wrong things there are. We
Speaker 1: need to have access to their markets. We need to
Speaker 1: be able to go over and open companies and compete.
Speaker 1: We don't need to stop them from selling us products.
Speaker 1: Quite the contrary. If they want to sell us products
Speaker 1: at a lower price than we can produce ourselves, our
Speaker 1: consumers benefit from that. But we've got to make sure
Speaker 1: that our workers don't get hurt by that, and they
Speaker 1: don't get hurt if you create other jobs and other
Speaker 1: markets for us to sell our goods into. And so
Speaker 1: if you block one thing, they're going to block the other.
Speaker 1: And no matter which where you work, you're gonna get hurt.
Speaker 1: So how long can this go on? Particularly dispute with
Speaker 1: China before permanent changes are vague, Whether it's companies changing
Speaker 1: their supply lines or whether it's to them that are
Speaker 1: China reaching out to Asia and other trading partners and
Speaker 1: there'll be permanent damage. Well, companies are very flexible. They're
Speaker 1: already opening UH plants and offices and other countries that
Speaker 1: are outside of the American Chinese battle. UH, They're already
Speaker 1: readjusting their pricing and how they manifest facture. The supply
Speaker 1: chains can change. Literally in the middle of the night,
Speaker 1: they send a message to the ship, go here rather
Speaker 1: than go there with the parts that you've got that
Speaker 1: we need him in a different plant. Um. It's much
Speaker 1: harder for us to change what you do when you
Speaker 1: annoy people, when you antagonize people, when you make enemies
Speaker 1: where it's hard to one day say they're bad and
Speaker 1: the next day say they're good. Given the problems that
Speaker 1: we face, the challenges, let me put it that way,
Speaker 1: we face. Is it time for another business leader? I
Speaker 1: mean we have one in the White doest now. But
Speaker 1: you recently said that you were not going to decide
Speaker 1: about President la after the mid terms. I assume that
Speaker 1: as you have a business leader now. Donald Trump is
Speaker 1: a real estate promoter, and I don't know whether he's
Speaker 1: good or bad. He built a lot of real estate
Speaker 1: or owns a lot of real estate, a lot of
Speaker 1: golf courses. Um, but he's not a businessman in the
Speaker 1: sense that he has run a big organization. How you
Speaker 1: work together, how you attract good people, how you adjudicate disagreements, um,
Speaker 1: how you deal with other companies, in this case other governments.
Speaker 1: And it shows and maybe Clinton and a little bit
Speaker 1: Bush they had some management experience. But you've got to
Speaker 1: understand that all of these the top jobs, these are
Speaker 1: executive jobs. They're not about policy. We keep asking about policy,
Speaker 1: but policy is going to be set by advisors they
Speaker 1: bring in because nobody can be an expert on all
Speaker 1: of these things. The job is to manage, in Trump's case,
Speaker 1: for million people who work for the federal government, and
Speaker 1: that's not his expertise. Okay, many thanks to Michael R.
Speaker 1: Bloomberg coincidentally coming from the Bloomberg Clo Business Forum to
Speaker 1: have David Western there alongside Michael Bloomberg as we kick
Speaker 1: off the Bloomberg Global Business Forum in New York. A
Speaker 1: speech with Prime Minister to reason may coming up a
Speaker 1: little bit later, and some debates still Overtrade. And as
Speaker 1: my points out, and I think most people agree, the
Speaker 1: problem is very much China and has been for a
Speaker 1: long long time, and it's been a consequence of the
Speaker 1: utter failure of previous administrations to address the issue. I
Speaker 1: think the real debate still is the best line of
Speaker 1: attack to get the Chinese to do what's right and
Speaker 1: open up a whole lot quicker than a half big well.
Speaker 1: That seems to be the debate at the moment. As
Speaker 1: you say, it's been the debate for decades, but the
Speaker 1: immediacy of it and the tone is radically changed. John
Speaker 1: Farrow in London and our Queen Victoria Street studios next
Speaker 1: to Mansion House, and I am Tom Keene, not at
Speaker 1: our World headquarters, but rather at the Plaza Hotel, the
Speaker 1: Bloomberg Global Business Forum, and is a decidedly special Bloomberg
Speaker 1: surveillance this morning, not only because of the event and
Speaker 1: the people involved. Of course, Prime Minister may speaking later
Speaker 1: among high points Madame Legarde as well, But what is
Speaker 1: so fascinating is the news flow. And we need to
Speaker 1: become expert right now on one of those themes, which
Speaker 1: is the trade we've been talking about and with us
Speaker 1: on El Guria. He is, of course the fifth Secondary
Speaker 1: General of the Organization for Economic Cooperation and Development, and
Speaker 1: in this non cooperative world, it is the O e.
Speaker 1: C d buried on your website. You're wonderful informative website.
Speaker 1: Is an important video which Jack des Bugwaddy of Columbia University,
Speaker 1: who has been has made a religion. Professor bug Waddy
Speaker 1: has made a religion about the value of growth in
Speaker 1: free trade. Is Bugwatty's world at risk? It is crucial
Speaker 1: that trade continues to drive growth. Typically, we had a
Speaker 1: rate of growth of trade which was doubled the rate
Speaker 1: of growth of the world GDP. That means the trade
Speaker 1: was driving the growth, you know, and that was Today
Speaker 1: the rate of growth of trade is below the rate
Speaker 1: of growth of the world GDP. It it was flat
Speaker 1: for some time, it was very weak, and now it's
Speaker 1: still about three percent, whereas the rate of growth the
Speaker 1: expected rate of growth of the world's economies about three
Speaker 1: point seven. So, uh, you know, trade is not helping.
Speaker 1: And of course the trade wars, that trade tensions, that tarists,
Speaker 1: et cetera, clearly are not helping. You are one of
Speaker 1: the most important voices in the world on these matters.
Speaker 1: And it's not only that, but it's your economics and
Speaker 1: understanding of Mexico. Just as one part of the trade debate,
Speaker 1: how its threat is NAFTA. When Richard has has a
Speaker 1: Canadian delegation up at CFR. I believe it was yesterday,
Speaker 1: and we may have a bilateral Mexico United States with
Speaker 1: Canada removed. I mean, these are tensions we've never witnessed.
Speaker 1: I was one of the negotiators of the original NAFTA,
Speaker 1: so it's your fault. And and I have to say
Speaker 1: it was born as a trilateral agreement, and it will
Speaker 1: be a trilateral agreement. We all benefit from having Canada,
Speaker 1: Mexico and the United States in the mix. The three
Speaker 1: countries benefit, the region benefits were collectively more competitive, more productive.
Speaker 1: So it's a win wind wind proposition. Mr Secretary, let
Speaker 1: me bring in my colleague in London, John Farrell. Good
Speaker 1: morning John, Good morning to Song, Good morning to you, Angert.
Speaker 1: Always great to get your inside. What do you do
Speaker 1: when one country doesn't play by the rules, and that
Speaker 1: one country just tremendously well for a significant period of
Speaker 1: time by not playing by the rules, and that one
Speaker 1: country is China, what do you do? What is happening
Speaker 1: now is that more and more China is becoming incorporated
Speaker 1: into all the big flows, not only of information and
Speaker 1: trade and finance, but also in terms of the disciplines.
Speaker 1: For example, they were very active in the Steel over
Speaker 1: Capacity Global Forum that we created in the G twenty
Speaker 1: in order to deal with the substance of the steel
Speaker 1: over capacity, one of the origins of the very recent
Speaker 1: trade tensions, as you know, because that's what started, that's
Speaker 1: what sparked the whole thing, and China has been very
Speaker 1: active in their giving information and trying to see what
Speaker 1: we're going to be doing about dismantling some of the capacity.
Speaker 1: So it's a very good example of how they're moving in.
Speaker 1: I think they are very convinced that it's it's the
Speaker 1: only way in which they are going to avoid further
Speaker 1: tensions like the ones we're teen today. Well, the sound
Speaker 1: convinced that's enough. Are you convinced? The problem with multilateralism
Speaker 1: as you can say anything about it. It's wonderful, it's great,
Speaker 1: but it's not fast. But it tends to stick better,
Speaker 1: the ownership is more diversified, and it tends it has
Speaker 1: more staying power than when you go unilateral. So this
Speaker 1: is why we should persevere with multilateralism, but we also
Speaker 1: have to get it to function better because sometimes it's
Speaker 1: just too slow, and we persevere in this, just postponing
Speaker 1: and postponing the decision. But that's the problem. You have
Speaker 1: a political issue with the electorate if you're the leader
Speaker 1: of a respective country, and in this case, the example
Speaker 1: is the United States. How do you convince the electorate
Speaker 1: that the multilateral approach of the last several decades that
Speaker 1: has yielded next to nothing to get Shotte to open
Speaker 1: up more aggressively and much more quickly, it's going to
Speaker 1: start yielding results in the near future. How do you
Speaker 1: convince the electorate of that. These are two different aspects
Speaker 1: of the same problem, but they're dealt with differently. They
Speaker 1: have two different channels. One is the pressure that is
Speaker 1: exercised by one party on the other with the tariffs.
Speaker 1: But the only way in which we're going to reduce
Speaker 1: capacity is precisely through the negotiation in the global forum.
Speaker 1: Otherwise we're going to be seeing a revival of these
Speaker 1: tariff issues in the next five, ten, fifteen years. We
Speaker 1: have to deal with a substance with the underlying problem.
Speaker 1: Is there a permanence to a Trump lateral policy? Is
Speaker 1: there a permanence to my way or the highway? Is
Speaker 1: the president defines his globalism. The question is whether it
Speaker 1: is a negotiating strategy or whether it is a permanent
Speaker 1: way of looking at the world. Why, because we built
Speaker 1: you know that this multilateral world over the last six years,
Speaker 1: and the US have been absolutely crucial in this building
Speaker 1: of this world that we have today, including institutions like
Speaker 1: the OE c D which were born around the you know,
Speaker 1: the the recovery of Europe UH and then UH have
Speaker 1: gone around these convergence of policies. So we have to
Speaker 1: keep at it. We just have to keep proving multilateral
Speaker 1: is a better way. One final question, what's in the
Speaker 1: pixie dust in Paris? Is in Paris? Is that you
Speaker 1: have Catherine Man wanted from Brandeis University over to Paris,
Speaker 1: and now you have Laurence Boone I was so excited
Speaker 1: to see that she would take over. Is what is
Speaker 1: the what is the curia pixie dust? These brilliant economists
Speaker 1: to go to Paris has nothing to do with Paris?
Speaker 1: Right The choice? Well, for to all the food is
Speaker 1: still good, or so they say. But then but then
Speaker 1: tom uh. The most important thing is all these crucial
Speaker 1: jobs are chosen exclusively by merit. And in both cases
Speaker 1: these two ladies have been fantastic. Of course Cathy left
Speaker 1: it to go to become a chief Economy City Bank.
Speaker 1: And now Laurens Boon what we stole her from ASA,
Speaker 1: and now she's going to be dedicating herself to a
Speaker 1: little bit more of uh, you know, of civil service again.
Speaker 1: They'll always be Paris. Thank you so much, and Gloria
Speaker 1: greatly appreciated, of course, Fifth Secretary General of the Seed.
Speaker 1: Wonderful to you. That's on your go to your if
Speaker 1: you're just joining us Bloomberg Surveillance Worldwide from London and
Speaker 1: from New York at the Bloomberg Global Business Forum and
Speaker 1: with us Roger Ferguson Uh, Roger, I I look at
Speaker 1: the FED in the Challenge forward and if we go
Speaker 1: back to chair yelling and your introductions of chair yelling
Speaker 1: at the Economic Club of New York, it was about
Speaker 1: labor slack. The mystery here are rising wages? You deal
Speaker 1: with this every day and t I a a teachers
Speaker 1: flat on their backs in terms of real wage compensation. Wages?
Speaker 1: Are wages are rising? And my mail says Tom, no,
Speaker 1: they're not. How does that dovetail in a gilded age?
Speaker 1: So one of two or three things that received. There
Speaker 1: are some pockets where this clearly labor shortage and wages
Speaker 1: are clearly risings. So one can think about truckers, for example,
Speaker 1: as an area of wages are clearly rising. So you've
Speaker 1: got the scarce skill population. The second population you have
Speaker 1: are those where technology is changing and let's say, disrupting
Speaker 1: UH and increasing productivity, and I think their wages should
Speaker 1: be rising maybe a little more quickly than they are,
Speaker 1: but they haven't really risen very much. And the third
Speaker 1: group is i'd say the unskilled, where you know the
Speaker 1: labor demand is not outstripping supply. And so what you've
Speaker 1: seen in this economy is it has many different labor
Speaker 1: markets and you put them all together and you end
Speaker 1: up getting relatively slow wage growth overall, some pockets hot
Speaker 1: or some colder Roger. It's Jonathan Farah here in London.
Speaker 1: Fantastic to hear your insight on a day where we
Speaker 1: do get a Federal reserved decision. Let's pick up on
Speaker 1: that about how difficult it is to read the labor
Speaker 1: market and put it together with your assertion and other
Speaker 1: people's too, that the Federal Reserve is dying to engineer
Speaker 1: a soft landing. Just how difficult will that be? And
Speaker 1: it's there any historical comparison that you reflect on to
Speaker 1: say that it can be done. Um, one is optimistic
Speaker 1: that it can be done. The true reality is that
Speaker 1: it's rarely been done. Uh. And I think this time
Speaker 1: they're dealing with a number of things that may make
Speaker 1: it even more difficult. One Tom's already alluded to, which
Speaker 1: is fiscal policies also quite stimulative. That's not gonna last forever,
Speaker 1: but we've had a major tax cut here last year
Speaker 1: that's still playing through. The second I think that they're
Speaker 1: dealing with is there are some geopolitical uncertainties uh, though
Speaker 1: it yet has not yet become a major force in
Speaker 1: the U. S economy, the rising trade tensions some might
Speaker 1: call it maybe looming trade war may create some headwinds
Speaker 1: in the near future. And the third, obviously, is the
Speaker 1: state of financial markets themselves. UM valuations relatively high across
Speaker 1: almost any asset class. And so I think, you know,
Speaker 1: this is going to be a very interesting and I
Speaker 1: would have to say relatively challenging charing trying to try
Speaker 1: to uh engineer the soft landing against all of that backdrop. Roger,
Speaker 1: it's interesting that whenever we hear from FED chair J. Powell,
Speaker 1: he reflected, and we've heard this a couple of times,
Speaker 1: he reflects on previous financial crisis and it reflects on
Speaker 1: previous economic downturns, and he says that over the last
Speaker 1: couple of decades they haven't been caused by inflation. The
Speaker 1: most important aspect is to be handling the financial aspect
Speaker 1: a lot more effectively. Do you think that's where the
Speaker 1: focus is right now on the core of the f
Speaker 1: O m C to to really try and manage the
Speaker 1: potential for financial excess is to be just around the corner.
Speaker 1: I think the FIT is trying to manage both right,
Speaker 1: because I recognize that they are also looking at an
Speaker 1: unemployment rate that is historically low, um, you know, measures
Speaker 1: that suggest very very little, if any slack left in
Speaker 1: the labor markets. Um. They're looking at an inflation picture
Speaker 1: that is starting to move to uh their two percent target,
Speaker 1: And so they've got to keep one eye firmly planted
Speaker 1: on the real economy because that is really the essence
Speaker 1: of their dual mandate. But you're right, at the same time,
Speaker 1: they have to ask questions about how much debt has
Speaker 1: been built up in the system and is there a
Speaker 1: leverage that's somewhere, And so they have to be cautious
Speaker 1: about changing the FED funds rate and implications across the
Speaker 1: YO curve because of the possibility, not likelihood, the possibility
Speaker 1: of financial instability starting to emerge from their gradual movement
Speaker 1: of interest rates. We welcome all of you worldwide on
Speaker 1: Bloomberg Surveillance from New York. Roger Ferguson with us, a
Speaker 1: former vice chairman of the Fellow Reserve and now senior
Speaker 1: vice president in charge of America's failure in retirement. You
Speaker 1: are at t I a A. It's your fault and
Speaker 1: that would be ARISA of nineteen seventy four has been
Speaker 1: a failure. What you live this every day at t
Speaker 1: I A A with teachers trying to assault it away,
Speaker 1: trying to get the retirement and as a nation we've failed.
Speaker 1: What are we gonna do to turn around the failure
Speaker 1: of the defined contribution system? So let me um rephrase
Speaker 1: your question a little bit and describe what it is
Speaker 1: that we do. Um So, we at t I A A,
Speaker 1: teachers at Shots Annuity Association have been around for a
Speaker 1: hundred years. Uh for that hundred years we've meant creating
Speaker 1: retirement security and more broadly, financial security for literally millions
Speaker 1: of Americans. We think we've got a model that actually
Speaker 1: has been working very very well UM and indeed UH
Speaker 1: our participants have retired safely and have a high degree
Speaker 1: of confident, but a huge body of America does not
Speaker 1: have the luxury of four or three B and the
Speaker 1: rest exactly right. So that takes me to the next point,
Speaker 1: which is, Okay, what can I say America learned from
Speaker 1: the successes of T I, A A over the last
Speaker 1: hundred years, And I think there are a number of lessons. First,
Speaker 1: you have to have a good defined hybrid dB DC,
Speaker 1: defined contribution define benefit plan. The way we do that
Speaker 1: is we have individuals saving UH starting from their first
Speaker 1: day at work. But most importantly, they're saving towards getting
Speaker 1: guaranteed income for life in the form of an annuity.
Speaker 1: So the way we have created financial security in retirement
Speaker 1: has been by having people saved and then having the
Speaker 1: option to annuitize. This is brilliant. It's the most important
Speaker 1: conversation I've had on retirement in two, three or four years.
Speaker 1: Roger Ferguson No. One in Washington is listening. How do
Speaker 1: we get a p h d. From Harvard to explain
Speaker 1: to a bunch of politicians that define contribution, the variability,
Speaker 1: take care of the lock in individualism of America. It's failed.
Speaker 1: How do we get back to the retirement plan? It's
Speaker 1: a hybrid with what our parents knew well the actual
Speaker 1: There are some good news in Washington that there have
Speaker 1: been a number of bills that have been proposed and
Speaker 1: a gradually working the way through. So there's actually a
Speaker 1: small group of Martin's listening closely. And the reason that
Speaker 1: they're listening is the point that you're making, Tom, which
Speaker 1: is that fight retirement security may well be one of,
Speaker 1: if not the defining political economy issues of the twenty
Speaker 1: first century. And so what I'm observing is retirement security
Speaker 1: or insecurity is rising, and mainly slowly on the legislative
Speaker 1: agenda through acts such as the uh VISA, R E
Speaker 1: s A Act and others. So I see the emerging
Speaker 1: of a of a real interest in this. Do we
Speaker 1: get back to the success of the British system? I mean,
Speaker 1: John Ferrell's in London, living fat and happy. He's he's
Speaker 1: got his retirement slotted in. When he was twenty five
Speaker 1: years old in London, But can't we get best practices
Speaker 1: some other nations without being socialistic. Look, I think the
Speaker 1: reality is we're working hard to do that, and so
Speaker 1: society is looking for the models we recorgate. I hear
Speaker 1: that a pure DC plan hasn't worked, and so a
Speaker 1: bunch of us are saying, and it's now being heard,
Speaker 1: you need a hybrid plan. But you have to recognize
Speaker 1: that it's going to take some time because we move
Speaker 1: dramatically from defined benefit divine contribution in the private sector
Speaker 1: and now trying to turn that ship is something that's
Speaker 1: gonna take some time. Do you look at the moment
Speaker 1: we're in in the report that I know you stayed
Speaker 1: out of politics. I give you great credit for that,
Speaker 1: But do you look at the moment that Washington's in
Speaker 1: right now? Is a one off? Or is there a
Speaker 1: permanence to this anger within parts of America? Look, let's
Speaker 1: hope there's not a permanence to the anger. I think
Speaker 1: what we have to now understand is, well, what are
Speaker 1: the airline causes that's driving this? And I think one
Speaker 1: of the big underlying causes is the thing we just
Speaker 1: started talking about a little bit which is wage inequality.
Speaker 1: There's a sense that some folks are doing really well,
Speaker 1: particularly in the last ten years of recovery, and many
Speaker 1: have been left behind. Uh And so I think we
Speaker 1: do need to rally around the observation that we have
Speaker 1: the emergence of two unequal societies and policies. Got to
Speaker 1: figure out how to bring those back together again, to
Speaker 1: overcome the resentment that some folks are feeling and recognize
Speaker 1: that the upper round that maybe you know, they have
Speaker 1: benefited um a lot more than maybe other thing they deserve.
Speaker 1: Roger first, and thank you so much for your time today,
Speaker 1: the former vice Chairman of the Federal Reserve System, and
Speaker 1: of course with t I A. Thanks for listening to
Speaker 1: the Bloomberg Surveillance podcast. Subscribe and listen to interviews on
Speaker 1: Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm
Speaker 1: on Twitter at Tom Keane before the podcast. You can
Speaker 1: always catch us worldwide. I'm Bloomberg Radio.