WEBVTT - Surveillance: Expect Two-Quarter Recession, Roubini Says 0:00:00.080 --> 0:00:12.960 M. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane 0:00:13.480 --> 0:00:17.560 Jai Ley. We bring you inside from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.640 --> 0:00:27.600 Bloomberg dot Com, and of course on the Bloomberg Robini 0:00:27.680 --> 0:00:30.319 and I, to be direct, go way back. We go 0:00:30.480 --> 0:00:34.640 back to his incredible foresight in seeing the challenges of 0:00:34.680 --> 0:00:38.320 OH eight and oh nine in two thousand five. In 0:00:38.400 --> 0:00:41.520 two thousand six, we go back to that morning when 0:00:41.520 --> 0:00:44.879 Osama bin Laden was killed. That was a shock as 0:00:44.920 --> 0:00:47.080 he and I took the stage at milk And Institute. 0:00:47.840 --> 0:00:52.320 And now, in the stunningly historic moment for this nation, 0:00:52.560 --> 0:00:57.800 we speak with Oriel at Rubini. Oriel, what is so important? 0:00:57.920 --> 0:01:01.960 Here is the guestimate of your profession, done with great 0:01:02.040 --> 0:01:06.720 care and great respect. I was dumbfounded today that the 0:01:06.760 --> 0:01:10.800 Bank of England framed negative four percent g d P 0:01:11.600 --> 0:01:17.600 with an abrupt reversal to positive fifteen percent. Would you explain, 0:01:17.760 --> 0:01:21.920 just shortly here, why will we not see a V 0:01:22.120 --> 0:01:26.720 shaped recovery? Well, there are many reasons. I wrote a 0:01:26.760 --> 0:01:34.319 paper where I presented the fourteen reasons decide to be Yeah, 0:01:34.360 --> 0:01:37.160 But I think the main point is as follows. The 0:01:37.200 --> 0:01:39.800 balance sheets and the pennas of both at the household 0:01:39.840 --> 0:01:43.000 sector and the corporate sector have damaged, and the corporate 0:01:43.000 --> 0:01:46.680 sector had too much leverage. So coming out of the crisis, 0:01:47.040 --> 0:01:50.360 people will have first of all, less income, and secondly, 0:01:50.400 --> 0:01:53.440 because of what happened, they need to have more precautionary 0:01:53.480 --> 0:01:56.200 savings because if you end up with another second or 0:01:56.280 --> 0:01:59.560 third wave, you're really in troubled. So you have let's income, 0:01:59.640 --> 0:02:02.200 you have to because your saving grades, so your consumption 0:02:02.360 --> 0:02:05.640 is gonna slow down sharply in order to build up 0:02:05.680 --> 0:02:09.240 your savings. Investment of the household factors do not collapse. 0:02:09.360 --> 0:02:12.880 Investment means searches of new homes because credit scores are 0:02:12.919 --> 0:02:15.320 gonna be damaged and people cannot take the risk of 0:02:15.400 --> 0:02:17.040 buying a home if they don't have you a home, 0:02:17.720 --> 0:02:20.200 a job. And on the corporate sector, the same thing. 0:02:20.639 --> 0:02:23.079 You have the highly leverage corporate sector. It has to 0:02:23.160 --> 0:02:28.120 be leverage by increasing savings and reducing intent attacks. What 0:02:28.240 --> 0:02:31.080 are the savings of the corporate sector revenue minus cost 0:02:31.200 --> 0:02:34.280 which cannot cost gonna cut labor costs. We've been shedding 0:02:34.560 --> 0:02:38.000 thirty to fourty million dollars jobs right now. So that's 0:02:38.000 --> 0:02:41.119 a rebalancing of the financial balances of households and corporate 0:02:41.639 --> 0:02:46.480 More saving, less investment implies the recovery like financial to 0:02:46.520 --> 0:02:49.760 be a you Nooral, your term here, even with your 0:02:49.760 --> 0:02:53.120 public service to the nation of serving President Clinton, is 0:02:53.200 --> 0:02:56.200 you have an old world ethos, your study, your academics 0:02:56.200 --> 0:02:59.000 out of Italy, and your your real focus on the 0:02:59.120 --> 0:03:01.600 European view putting the same tall a sort of in 0:03:01.639 --> 0:03:05.400 that same cultural sphere and even dr al Arian folks 0:03:05.440 --> 0:03:09.480 as well, Noural with this pandemic, do we lose the 0:03:09.520 --> 0:03:14.560 American spirit and American exceptionalism and American optimism or are 0:03:14.600 --> 0:03:19.640 you optimistic we can get that optimism back. I'm worried 0:03:19.680 --> 0:03:23.680 about America because during the crisis, America is not leading. 0:03:24.000 --> 0:03:27.360 After nine eleven, the US created a coalition to fight 0:03:27.480 --> 0:03:31.000 al Qaeda and the terrorists. After the global financial crisis, 0:03:31.120 --> 0:03:34.160 US led the global efforts to find a coordination to 0:03:34.280 --> 0:03:38.120 these crisis. This time around, the US is missing in action. 0:03:38.360 --> 0:03:42.960 Is unilateralist, his protectionists, his isolation is and both the 0:03:43.040 --> 0:03:45.880 hard power, but more importantly the soft power of the 0:03:45.960 --> 0:03:50.200 US is falling. And look at China. The virus started 0:03:50.200 --> 0:03:53.880 in China. But China is very aggressive in providing financially 0:03:53.920 --> 0:03:57.320 to other countries, medical equipment, rights, you name it, and 0:03:57.560 --> 0:04:00.160 they're on a charm offensive and they're winning it. So 0:04:00.160 --> 0:04:03.160 soft power of China is rising. The soft power of 0:04:03.200 --> 0:04:06.240 the US is really declining because the US is missing 0:04:06.240 --> 0:04:09.480 in action, is a well on the international stage, even 0:04:09.520 --> 0:04:12.000 among our own allies. So I think that the American 0:04:12.040 --> 0:04:15.440 exceptionalist is gone. The American power is declining in relative 0:04:15.480 --> 0:04:18.160 and absolute terms, and you leve a decline of US 0:04:18.240 --> 0:04:20.560 power and the rise of power of China, and the 0:04:20.760 --> 0:04:23.320 Cold War between US and China is going to become 0:04:23.360 --> 0:04:27.320 a colder war because of this crisis. So, professor, are 0:04:27.360 --> 0:04:30.760 you to what extent do you think that global globalism 0:04:30.760 --> 0:04:33.479 in general is on the decline? Is that? Is that 0:04:33.600 --> 0:04:36.360 just clear to you that globalism is on the decline 0:04:36.360 --> 0:04:40.880 and nationalism is on the uh you know, uh increase. Yes, 0:04:41.000 --> 0:04:44.279 I think that we reach already peak globalization. At the 0:04:44.360 --> 0:04:47.560 time of the global financial crisis, were already movements towards 0:04:48.040 --> 0:04:52.000 protection and inter nationalism, the election, for example of Donald Trump. 0:04:52.279 --> 0:04:56.039 But because of this crisis, the tendency towards the globalization 0:04:56.560 --> 0:05:02.040 decoupling between US and China, volcanization of global supply chains, 0:05:02.160 --> 0:05:05.640 first in the text factor, pharma products. Even the food 0:05:05.720 --> 0:05:08.280 chain is going to be volcanized because people want to 0:05:08.320 --> 0:05:11.000 keep their food at home, because they worry about food supply, 0:05:11.560 --> 0:05:14.880 and fragmentation of the global economy. All these things were 0:05:14.880 --> 0:05:18.040 already occurring and it's gonna be accelerating. And whilst there's 0:05:18.040 --> 0:05:22.479 gonna be some reshoring of economic activity from China and 0:05:22.600 --> 0:05:25.120 Asia to the United States in Europe, that's not gonna 0:05:25.200 --> 0:05:28.360 great jobs because we're going to produce from places where 0:05:28.360 --> 0:05:31.080 there is lower level costs to places whether it's highly 0:05:31.160 --> 0:05:33.400 for costs. And therefore that reshoring is the will be 0:05:33.400 --> 0:05:37.240 capital intensive, more Baltic, more automation, more AI. So it's 0:05:37.279 --> 0:05:39.240 not going to have the job that is shoring of 0:05:39.400 --> 0:05:43.320 economic activity back to North America. Alright, So, professor, how 0:05:43.360 --> 0:05:46.560 long do you think this contraction will last? So for 0:05:46.640 --> 0:05:48.680 not in the V shaped recovery, it's just two, three 0:05:48.720 --> 0:05:51.839 or four quarters or maybe even something more. No, I 0:05:51.839 --> 0:05:55.800 do believe it's gonna be only a two quarter profession 0:05:56.120 --> 0:05:59.680 first and second quarter. We're gonna see positively growth to 0:05:59.800 --> 0:06:02.360 our the world. In the third quarter of the year. 0:06:02.720 --> 0:06:04.280 And by the way, in the third quarter you could 0:06:04.320 --> 0:06:07.000 see even actually growth rates for the US that are 0:06:07.080 --> 0:06:10.479 double digits at the analyzed rate for one quarter, because 0:06:10.480 --> 0:06:13.280 you know, you're the complete collapse of economic activity for 0:06:13.400 --> 0:06:16.159 two quarters. So once you start from that low base, 0:06:16.440 --> 0:06:18.839 it's very easy to show a quarter of say twelve 0:06:18.839 --> 0:06:22.400 percent growth analyzed. Twelve percent rows analyzed means three percent 0:06:22.480 --> 0:06:25.560 within the quarter is nothing. Three percent, but analyzed looks 0:06:25.600 --> 0:06:28.560 like twelve So it can happens for a quarter or 0:06:28.600 --> 0:06:31.839 a second quarter. But my view is that these forces 0:06:31.960 --> 0:06:34.479 they're gonna bring new first of all to the second wave, 0:06:34.760 --> 0:06:37.240 in the third wave of the virus, they're gonna lead 0:06:37.240 --> 0:06:39.680 you to such a massive loss of income and the 0:06:39.680 --> 0:06:43.040 precautionary savings of the house of factor. You can reopen 0:06:43.080 --> 0:06:45.200 the stores as much as you want, like in Berlin, 0:06:45.279 --> 0:06:47.600 like in Germent, like in China, people are not gonna 0:06:47.640 --> 0:06:51.279 spend the income and they are scared. Therefore, by next year, 0:06:51.560 --> 0:06:54.520 the MS is expecting that easier roper cross goos down 0:06:54.560 --> 0:06:57.760 three percent and next year is growing six percent, twice 0:06:57.760 --> 0:07:01.240 as much as potential. In fact, instead this year is 0:07:01.279 --> 0:07:04.640 down three percent, with consensus on that the next year 0:07:04.680 --> 0:07:07.440 when I fairly growth for the global economy, so we're 0:07:07.480 --> 0:07:09.560 not gonna make up for the loss of jobs and 0:07:09.640 --> 0:07:13.240 income and GDP of this year. That's the basest story 0:07:13.280 --> 0:07:16.000 about easier the next year. The U is a story 0:07:16.040 --> 0:07:18.600 about next year within the jobs report and the better 0:07:18.640 --> 0:07:21.400 equity markets. I thought we'd digress here and we can 0:07:21.400 --> 0:07:24.440 do that with a new digital project of Nora Rabini. 0:07:24.480 --> 0:07:28.200 He has been a pioneer and market economics folded into 0:07:28.200 --> 0:07:33.640 his first rate academic international economics at the New York University, 0:07:33.720 --> 0:07:37.400 and he's gone off digital honus with the stylish stud 0:07:37.600 --> 0:07:42.560 photographic image on Oriel today dot com, Dr Roubini, what 0:07:42.720 --> 0:07:47.720 is Noriel today dot com? Well, twice a week I 0:07:47.800 --> 0:07:50.360 do a broadcast of about an hour and a half, 0:07:50.720 --> 0:07:53.640 but I discuss what's going on in the global economy, 0:07:54.000 --> 0:07:57.920 in the market and topics like the all market, what's 0:07:57.920 --> 0:08:00.920 gonna happen to the Eurozone? That future of money and 0:08:00.960 --> 0:08:04.080 digital currency is the wha they were in a bubble 0:08:04.680 --> 0:08:07.920 and assort the topic. The format that is much longer 0:08:08.040 --> 0:08:11.080 now and a half rather than a five minutes. Okay, great, 0:08:11.160 --> 0:08:14.800 so so basically so basically you're competing with me. I 0:08:14.840 --> 0:08:21.840 love it. No real wonderful oil. Let us talk about 0:08:22.560 --> 0:08:26.920 let's talk about the Zeitgeistnial and this, folks, is so important. 0:08:27.240 --> 0:08:29.720 And trust me, folks, I the only time I've ever 0:08:29.760 --> 0:08:32.480 seen Billions is when my kids called me up and said, 0:08:32.480 --> 0:08:34.320 oh my god, you I was on it like in 0:08:34.360 --> 0:08:36.680 the background on a TV image. And that's all my 0:08:36.760 --> 0:08:41.240 kids care about. Norial, even Billions. The TV show is 0:08:41.280 --> 0:08:45.120 talking about bitcoin this year, and let's be blunt. You 0:08:45.200 --> 0:08:51.760 are scathing and your criticism of bitcoin. What does everybody 0:08:51.960 --> 0:08:56.640 enthused get wrong? Well, first of all, there was a 0:08:56.720 --> 0:09:00.200 bubble in bitcoin and crypto into thousand and seven seen, 0:09:00.679 --> 0:09:03.199 but they already has gone bast I mean Bitcoin, you 0:09:03.200 --> 0:09:06.040 will reached a pick of two twenty thousand and even 0:09:06.080 --> 0:09:08.520 with the Raality series a bit depending on the day, 0:09:08.840 --> 0:09:13.360 fifty five to sixty percent below its peak. Other top 0:09:13.400 --> 0:09:17.400 ten cryptocurrencies are about eighty percent down from the peak 0:09:17.800 --> 0:09:21.000 and three thousand class of those what I call technically 0:09:21.240 --> 0:09:24.760 ship coins, they have lost their value. So this is 0:09:24.760 --> 0:09:28.160 a bubble that has already gone past. Secondly, some people 0:09:28.240 --> 0:09:31.560 say that the bitcoin is a good hatch against risk 0:09:31.640 --> 0:09:34.240 of episodes when the markets are down. Is a head 0:09:34.280 --> 0:09:36.440 to be like hedge funds. Look at what happened in 0:09:36.600 --> 0:09:40.000 February and March. The stock market US went done by 0:09:40.120 --> 0:09:44.760 thirty five percent, Bitcoin went down by fifty and the 0:09:44.800 --> 0:09:47.920 other top ten crypto currency went done by sixty five. 0:09:48.679 --> 0:09:52.120 So when markets are in risk off bitcoin and crypto 0:09:52.200 --> 0:09:54.600 doesn't go up, it's not a hedge. It goes done 0:09:54.720 --> 0:09:57.320 more than the market. So it's not even a hedge 0:09:57.559 --> 0:10:01.240 against risk off or in the a negative animal spirits. 0:10:01.280 --> 0:10:04.160 It just doesn't. Okay, just because the time, Nora, and 0:10:04.240 --> 0:10:06.360 you're gonna do this, folks. You can tune into Noral 0:10:06.440 --> 0:10:09.720 today dot com with Dr Rubini. I believe it's tomorrow, 0:10:09.920 --> 0:10:11.760 and he's gonna go on for this for eight hours 0:10:12.000 --> 0:10:14.959 Noral in a couple of minutes. Here you even go 0:10:15.160 --> 0:10:20.120 after the institutions talking up blockchain, and the line I 0:10:20.160 --> 0:10:23.880 get is, yeah, bitcoin suspect, but blockchain is a real deal, 0:10:24.280 --> 0:10:27.800 and you don't agree with that. Blockchain is the most 0:10:27.840 --> 0:10:33.040 overhyped and least useful technology in human history. By the way, 0:10:33.400 --> 0:10:36.679 it's a blockchain in name only because all these corporate 0:10:37.000 --> 0:10:41.240 lt or corporate blockchain is not a really blockchain's private 0:10:41.760 --> 0:10:46.560 rather than public is permissions rather than permission. Less centralized. 0:10:46.880 --> 0:10:49.720 Rather they centralized, and it's based on a system of 0:10:50.440 --> 0:10:53.400 fasters that a thought is validating it rather than being fastlisted. 0:10:53.400 --> 0:10:56.400 So they call it a kind of a blockchain because e'xactly, 0:10:56.600 --> 0:10:59.319 But there's nothing to be blockchain. It's just a glorified 0:10:59.360 --> 0:11:02.280 that is what they called blockchain. It's not blockchain. And 0:11:02.280 --> 0:11:06.120 everything blockchain has failed. There's not a single use case 0:11:06.160 --> 0:11:10.760 of blockchain that's work. Visions of dollars. They've done use cases. 0:11:11.000 --> 0:11:13.640 They don't have a single app. Okay, noral. So you 0:11:13.679 --> 0:11:16.080 and I heard the Expresso bar and Davos that were 0:11:16.120 --> 0:11:18.200 hanging out with all the star oats and all that, 0:11:18.520 --> 0:11:21.360 and Brian Moyne had a Bank of America, Bill Winter's 0:11:21.360 --> 0:11:24.600 of Standard Charter or Mr Diamond from JP Morgan. They 0:11:24.600 --> 0:11:28.160 wandered by, and you're gonna tell them their banking blockchain 0:11:28.240 --> 0:11:32.880 business is suspect. Well, the money and made an interview 0:11:33.000 --> 0:11:36.400 recently and he said, we spent tons of money on 0:11:36.480 --> 0:11:40.560 blockchain experiments. We have done actually tons of happens on 0:11:40.600 --> 0:11:44.120 blockchain stuff, and we have not seen yet a single 0:11:44.120 --> 0:11:47.400 application works. He said so. The CEO of master Cat 0:11:47.400 --> 0:11:50.000 said so. They CEEO west Father said so, they all 0:11:50.040 --> 0:11:53.000 have invested tons of money. Blockchain. They tried it because 0:11:53.040 --> 0:11:55.840 it was a new technology and the schedule. They were saying, 0:11:55.840 --> 0:11:58.240 why don't he try? They tried it, and like tons 0:11:58.240 --> 0:12:00.560 of other technology, it doesn't work, work, and they're not 0:12:00.640 --> 0:12:05.000 using it. Nobody's using it. The joke, what else are 0:12:05.000 --> 0:12:07.400 you gonna talk about with blockchain and bitcoin? I mean, 0:12:07.440 --> 0:12:09.559 nor are you gonna This is gonna be on firefolks. 0:12:09.600 --> 0:12:12.000 This will be out on our podcast and you know 0:12:12.040 --> 0:12:14.600 the Bitcoin CREWI is gonna go nuts. Are you're telling 0:12:14.600 --> 0:12:16.960 me it's going to zero? Or does it have a 0:12:17.000 --> 0:12:20.840 fair value? The real value, the real value of bitcoin 0:12:20.880 --> 0:12:24.920 and cryptocurrency is not zero, is negative because that energy hawks. 0:12:25.280 --> 0:12:29.520 Since you have a fifty thou validators validating every transaction 0:12:29.600 --> 0:12:32.360 on bitcoin, the amount of energy is used is more 0:12:32.400 --> 0:12:35.200 than the entire energy used by Switzerland in a year. 0:12:35.440 --> 0:12:39.160 So it's an environmental disaster. If we're taxing properly for 0:12:39.200 --> 0:12:42.240 this negative externality, the fly should not be zero, should 0:12:42.240 --> 0:12:44.240 be negative because you have to impose a tax for 0:12:44.400 --> 0:12:48.599 something it's such an environmental disaster and energy hall. The 0:12:48.679 --> 0:12:52.080 value is negative, It's not positive. No real today dot 0:12:52.120 --> 0:12:54.960 com folks tune in Friday where Dr Rubini is gonna 0:12:54.960 --> 0:12:58.040 go mental and bitcoin and that was just a whisper 0:12:58.040 --> 0:13:00.839 of what you will hear as well. Are Obedient n 0:13:00.960 --> 0:13:03.400 y u and again his new blog No Real today 0:13:04.440 --> 0:13:09.960 dot com just turning that to the Bank of England 0:13:10.040 --> 0:13:13.640 leaving policy unchanged today, but the Governor signaling that could 0:13:13.640 --> 0:13:16.439 be stimulus ahead. We've made a very strong commitment that 0:13:16.480 --> 0:13:18.760 says this is more and faster than the Bank of 0:13:18.760 --> 0:13:20.959 in and has ever done before, but keeping more option 0:13:21.040 --> 0:13:23.920 open to my colleagues on the committee voted to do 0:13:24.000 --> 0:13:26.920 more quee now. Other members of the committee thought that 0:13:26.960 --> 0:13:30.000 it was a sensible decision to take in in our 0:13:30.040 --> 0:13:32.240 next meeting that we're not ruling anything out at the 0:13:32.240 --> 0:13:34.640 moment because it would be unwis of us to rule 0:13:34.679 --> 0:13:38.400 anything out in terms of responses. So I don't want 0:13:38.400 --> 0:13:41.000 to say we're nearer to negative rates, but we're not 0:13:41.080 --> 0:13:44.480 ruling anything out. Governor Andrew Bailey speaking to Bloomberg a 0:13:44.480 --> 0:13:46.559 little bit earlier on on the road ahead, Tom and 0:13:46.640 --> 0:13:49.280 the road ahead it looks like it has more stimulus 0:13:49.280 --> 0:13:53.079 and more QUI in John, this is so important, folks. 0:13:53.080 --> 0:13:55.720 And there was a know Excel spreadsheet with two underlying 0:13:55.760 --> 0:14:00.400 red marks. It is preposterous, John, to model negative team 0:14:00.440 --> 0:14:04.679 percent with an immediate reversal up fifteen percent. How did 0:14:04.679 --> 0:14:06.680 they come up with that? Well, I think it's also 0:14:06.720 --> 0:14:09.720 impossible to model the recovery Tom, which I wonder is 0:14:09.760 --> 0:14:12.920 the reason why they waited to do stimulus in June, 0:14:12.920 --> 0:14:14.760 because they don't know how big they're going to fail 0:14:14.840 --> 0:14:17.240 to go. And I think perhaps they want a month 0:14:17.280 --> 0:14:20.840 of reopening behind them before they project forwards how much 0:14:20.840 --> 0:14:23.600 stimulus they're gonna need. I think it's inevitable at this point, 0:14:23.840 --> 0:14:26.160 given what we heard from Hassman sawn As this morning, 0:14:26.320 --> 0:14:28.440 given what we've just heard from the governor that more 0:14:28.520 --> 0:14:30.920 quie is coming. Is just how big is the next 0:14:30.920 --> 0:14:32.800 stimulus package, the next envelope from the b A we 0:14:32.920 --> 0:14:35.160 gonna be. We welcome all of your coast to coast 0:14:35.200 --> 0:14:37.640 here in America. John, let me ask a simple question. 0:14:37.680 --> 0:14:40.880 I'll go to Ian Shepherdson and Newcastle because that football 0:14:40.880 --> 0:14:43.480 team is they're they're I'm glace, they're glad Premier League 0:14:43.480 --> 0:14:47.000 shut down. What's the difference in a labor depression in England, 0:14:47.400 --> 0:14:53.480 in London, in your Mayfair, John versus Newcastle? Well, quite 0:14:53.520 --> 0:14:55.960 clearly tom the cities and how they're going to reopen. 0:14:56.000 --> 0:14:58.080 It's going to be very different to how things open 0:14:58.320 --> 0:14:59.920 in the north of England, and I think we're gonna 0:15:00.000 --> 0:15:02.440 see that across states in the United States as well. 0:15:02.600 --> 0:15:05.640 We're gonna have different sequencing of reopenings for different parts 0:15:05.680 --> 0:15:08.960 of the country. That's advanced this discussion. Marcus Ashworth joins 0:15:09.000 --> 0:15:11.640 us right now Bloombering opinion. Marcus Lord Skodowski was on 0:15:12.200 --> 0:15:15.840 yesterday talking about a depression with inflation. Is that even 0:15:15.920 --> 0:15:20.560 feasible in the ash for Ashworth universe? Yeah, And I 0:15:20.640 --> 0:15:24.320 even saw something right about hyper deflation, which is a 0:15:24.360 --> 0:15:26.520 new one on me. But I think what we're gonna 0:15:26.520 --> 0:15:32.480 have is this horrid dual hits of certain things. Seeing 0:15:32.520 --> 0:15:35.560 sharp inflation, clearly food prices. I think that's something can 0:15:35.600 --> 0:15:38.640 be really far harder than emerging markets. But at the 0:15:38.680 --> 0:15:42.720 same time, overall deflation and we're seeing that. You look 0:15:42.760 --> 0:15:45.040 at the numbers out of South Korea, that's gonna be 0:15:45.080 --> 0:15:48.440 a very big warning sign for China. Low inflation coming 0:15:48.440 --> 0:15:51.560 into deflation. That's going to hit in Europe very evidently, 0:15:51.600 --> 0:15:53.400 if it's not there already. We're going to get that 0:15:53.520 --> 0:15:55.800 round round the globe, and that's why the bangaming and 0:15:55.880 --> 0:15:58.720 governor isn't ruling out negative rates. I think it's the 0:15:58.800 --> 0:16:00.920 Fed in the bangoving. Really you really don't want to 0:16:00.960 --> 0:16:03.720 go down there. But as John was saying earlier, QUI 0:16:04.040 --> 0:16:06.280 is going to keep on coming. It has to the 0:16:06.320 --> 0:16:09.360 Bank of England will finish its buy backs probably by 0:16:09.400 --> 0:16:11.920 the end of June into July. It needs to reload. 0:16:12.160 --> 0:16:15.240 This is a big wall of supply coming and I 0:16:15.280 --> 0:16:18.320 think we'll see a hundred billion worth of QUI minimum 0:16:18.400 --> 0:16:21.040 in June and another again in August from the Bank 0:16:21.080 --> 0:16:23.920 of England. Marcus, how much do you expect the Bank 0:16:23.960 --> 0:16:26.720 of England to expand into corporate debt and how far 0:16:26.880 --> 0:16:30.600 into particularly junk bonds the way that the United States 0:16:30.600 --> 0:16:34.800 fitters are has shown a willingness to do A fantastic question. 0:16:34.840 --> 0:16:37.520 And I note, according to Jeff good Lack that maybe 0:16:37.520 --> 0:16:40.400 the said hasn't quite actually really bought any jump bonds 0:16:40.480 --> 0:16:42.640 yet or not very much. But the point is they 0:16:42.680 --> 0:16:44.600 put it out there that they will. They've done this 0:16:44.720 --> 0:16:48.600 corporate so commercial paper buying stuff. We're seeing some signs 0:16:48.640 --> 0:16:51.080 that the European Central Bank might do it. They're taking 0:16:51.120 --> 0:16:53.360 in collaps or already they wouldn't rule it out for the 0:16:53.320 --> 0:16:56.320 the last meeting. The Bank of England has got about 0:16:56.680 --> 0:17:00.440 twenty billion worth of corporate bomb buying to do. It's 0:17:00.440 --> 0:17:03.640 a previously done ten billion and stopped. This is you 0:17:03.640 --> 0:17:05.200 know a few years, a couple of years ago or so. 0:17:05.600 --> 0:17:08.720 I think it will skew more towards corporate But again 0:17:08.720 --> 0:17:10.480 a bit like John said, they're gonna waiting to a 0:17:10.560 --> 0:17:13.159 lot of stuff to for a month worth of of 0:17:13.400 --> 0:17:17.480 re reopening. See how the economy has reacted in June 0:17:17.720 --> 0:17:20.240 and it was needed. They'll go into the real economy more. 0:17:20.320 --> 0:17:22.960 They'll buy corporate bonds more. You know, we we've seen 0:17:23.000 --> 0:17:24.879 some big signs in a Glads has climbed at a 0:17:25.359 --> 0:17:27.960 one and a half billion pound bond issue this week. 0:17:28.400 --> 0:17:31.160 More of that sort of stuff. It's helping spread than possibly. 0:17:31.200 --> 0:17:33.160 Also they go to jump ones as well. As they said, 0:17:33.160 --> 0:17:35.680 they're not really anything out. As you know though, Marcus, 0:17:35.720 --> 0:17:38.040 the Sterling credit market just does not have the depth 0:17:38.240 --> 0:17:40.520 compared to what you would see here in the United 0:17:40.560 --> 0:17:42.199 States for the Bank of England to make a difference. 0:17:42.200 --> 0:17:44.320 They've got to work for the banking channel, haven't they. 0:17:44.320 --> 0:17:47.760 What else can they do well there's no doubt about 0:17:47.800 --> 0:17:50.760 there's nothing like the US corporal market, but the Sterling 0:17:50.760 --> 0:17:53.320 one has its moments. But the thing that the Bank 0:17:53.359 --> 0:17:55.720 of England did last time around after the Brexit referendum 0:17:55.720 --> 0:17:58.639 in twenty sixteen was a sing called Term Funding Scheme 0:17:58.720 --> 0:18:01.840 t f F. They're doing it again. It transformed the 0:18:01.880 --> 0:18:04.639 mortgage market by boosting all the challenger banks. The second 0:18:04.640 --> 0:18:06.920 they turn those tear fest apps off, the challenge of 0:18:06.960 --> 0:18:10.040 banks are nowhere that it clearly works. They are trying 0:18:10.080 --> 0:18:11.840 to put stuff into the economy. They're trying to get 0:18:11.920 --> 0:18:14.920 banks to lend. They're realizing that they're the first game 0:18:14.960 --> 0:18:16.639 didn't work. They're going to have to go up to 0:18:16.680 --> 0:18:20.760 fifty of loans guaranteed by the government. They're looking at 0:18:20.800 --> 0:18:23.800 anything and everything, very much like the European model of 0:18:23.840 --> 0:18:27.520 Teltro's of going into real economy loans, so they'll be 0:18:27.560 --> 0:18:31.399 they'll be working on everything and everything. Marcus Ashworth. Always 0:18:31.400 --> 0:18:33.440 great to get your thoughts on a program, Marcus, fantastic 0:18:33.440 --> 0:18:35.840 to catch up with you, sir, Marcus Ashworth, joining us 0:18:36.080 --> 0:18:37.720 out of London on the road ahead for the Bank 0:18:37.760 --> 0:18:44.480 of England. We start with Ben Laidler of Tower Hudson Research. 0:18:44.560 --> 0:18:46.680 The CEO joined us on the phone right now, Ben, 0:18:46.720 --> 0:18:49.359 fantastic to catch up with you. Let's just talk about 0:18:49.520 --> 0:18:52.440 this economy as we reopened, before we turn to equities. 0:18:52.600 --> 0:18:57.800 How quickly can this labor market? Hell? I think it's 0:18:57.800 --> 0:19:00.960 going to be reasonably slow. I mean we can argue 0:19:00.960 --> 0:19:04.359 whether it's a switch or you or or whatever it is. 0:19:04.440 --> 0:19:07.119 But I just I mean, the numbers are dramatic. You've 0:19:07.160 --> 0:19:10.159 touched on them, right, I mean, we're gonna have the 0:19:10.240 --> 0:19:12.360 headline job blurst. I mean it's not quite as bad 0:19:12.400 --> 0:19:13.800 as that. I mean a lot of those are furloughed, 0:19:13.880 --> 0:19:16.920 rale and unemployed, but it's completely unprecedented. We we get 0:19:16.960 --> 0:19:20.000 sort of slightly, you know, numbed by the numbers, right, 0:19:20.000 --> 0:19:21.720 I mean we talked about three million, as if it's 0:19:22.119 --> 0:19:25.160 you know, yeah, better than last week, but completely unprecedented 0:19:25.760 --> 0:19:28.160 versus where we were six weeks ago. I looked then 0:19:28.200 --> 0:19:30.680 at all this news flow and if we can take 0:19:30.680 --> 0:19:32.680 it over to your United Kingdom, and we're thrilled you 0:19:32.720 --> 0:19:36.280 can come to us from London today and if we 0:19:36.359 --> 0:19:41.600 look at a collapsing labor academy, the stock market seems removed. 0:19:42.200 --> 0:19:46.639 Why is that? I think a couple of things, right, 0:19:46.680 --> 0:19:49.760 I mean, equity market is there's not the economy, right, 0:19:49.800 --> 0:19:52.000 there's a lot more tech. There's a lot less small business, 0:19:52.000 --> 0:19:54.200 a lot less consumer, a lot less real estate. So 0:19:54.359 --> 0:19:57.000 you know, you're comparing apples and oranges a little bit. Um, 0:19:57.080 --> 0:19:59.440 you know, equity markets forward looking. I mean, the incremental 0:19:59.560 --> 0:20:03.120 data is from here is frankly all positive. Right. Um, 0:20:03.160 --> 0:20:05.240 you know we're getting less jobless. It's still three million, 0:20:05.359 --> 0:20:06.960 still a ghastly number, but it's a lot better than 0:20:07.000 --> 0:20:09.359 it was last week and the week the week before that. 0:20:09.760 --> 0:20:12.720 And that goes for Frankie, every single data point you're 0:20:12.760 --> 0:20:15.520 looking at from here. I think earnings have been slashed, 0:20:15.840 --> 0:20:18.520 slashed and up to q ones. Actually, I would argue 0:20:18.560 --> 0:20:21.000 better than expected. I mean, so I think we've just 0:20:21.080 --> 0:20:25.240 discounted this awful lot sentiment terrible, and the incremental data 0:20:25.280 --> 0:20:27.919 point from here is is going to continue to be 0:20:27.960 --> 0:20:31.240 positive for you know, certainly for the near future. Wildly 0:20:31.359 --> 0:20:35.440 against your call are those that say the things are overdone. 0:20:35.560 --> 0:20:39.080 I saw some chart somewhere overnight of the continued extension 0:20:39.119 --> 0:20:42.600 of the things relative to everything else. Why is that 0:20:44.720 --> 0:20:46.800 I have a problem with at all? I mean, you know, 0:20:46.840 --> 0:20:52.360 they have more than double um the profitability growth, much 0:20:52.400 --> 0:20:55.480 better balance sheets of anything else out there, and relative 0:20:55.520 --> 0:20:59.320 to that, I think valuations are actually very undermanding that 0:20:59.480 --> 0:21:01.240 it's going to be one sector that comes out of 0:21:01.280 --> 0:21:05.360 this crisis in much better shape. And then it went 0:21:05.440 --> 0:21:10.680 in you less competition, arguably less regulatary oversight um And 0:21:10.840 --> 0:21:12.960 and that's an important call. I mean, as you know, 0:21:13.119 --> 0:21:17.600 you know, fangs close market at this point, and I 0:21:17.640 --> 0:21:19.640 would argue, you know, the real the real anchor here. 0:21:20.280 --> 0:21:22.840 Implicit in your call for Fangs and this idea that 0:21:22.840 --> 0:21:26.120 they've got a consolidation of business and less scrutiny from 0:21:26.160 --> 0:21:29.679 regulators is a loss of business in other areas of 0:21:29.760 --> 0:21:33.280 the economy and a huge transformation, frankly, of the way 0:21:33.320 --> 0:21:36.639 business is done to a bigger focus, even on the 0:21:36.720 --> 0:21:40.359 online space. I'm just wondering. You said furloughs are not 0:21:40.400 --> 0:21:43.199 the same things as layoffs, and yet Sean Donnan and 0:21:43.280 --> 0:21:46.080 Joe Doo of Bloomberg News wrote a story yesterday basically 0:21:46.080 --> 0:21:49.200 saying a lot of these temporary layoffs are becoming permanent. 0:21:49.280 --> 0:21:51.560 How much do you see that accelerating. There's a lot 0:21:51.600 --> 0:21:55.399 of these old economy businesses don't find a reason to 0:21:55.480 --> 0:21:59.600 exist in the same way that they did in the past. Yeah, 0:21:59.680 --> 0:22:02.280 that's a huge risk. And you know, what you're seeing 0:22:02.359 --> 0:22:04.119