WEBVTT - Surveillance: G-7 Summit With Bremmer 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownwitz. Daily we bring you 0:00:13.320 --> 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, Suncloud, Bloomberg dot Com, 0:00:23.920 --> 0:00:30.000 and of course on the Bloomberg terminal. Let us turn 0:00:30.080 --> 0:00:32.920 out to the President's trip and we're thrilled to speak 0:00:32.960 --> 0:00:35.960 today to Ian Bremer of Eurasia Group. It is G 0:00:36.240 --> 0:00:39.360 zero media, but far more is the effect of his 0:00:39.520 --> 0:00:43.120 many books upon our thinking of international relations, and that 0:00:43.280 --> 0:00:48.000 includes the phrase a G zero world. Dr Bremer. President 0:00:48.040 --> 0:00:50.960 Biden will travel to that the G eight x Russia, 0:00:51.400 --> 0:00:55.040 the G seven meetings. How G zero is this G 0:00:55.280 --> 0:00:59.600 seven meeting? Well, it's less G zero than last year, 0:00:59.680 --> 0:01:03.040 since the G seven didn't even meet UH in the 0:01:03.120 --> 0:01:07.399 year of the pandemic UH. It clearly is a little 0:01:07.560 --> 0:01:11.160 more aligned. We've got a few pieces of news that matter, 0:01:11.600 --> 0:01:16.200 the Europeans and the Americans coordinating pretty effectively in the 0:01:16.319 --> 0:01:20.440 response to the downing of the Ryan airplane to mince 0:01:20.560 --> 0:01:24.240 the diversion a couple of weeks ago. So everyone pretty 0:01:24.280 --> 0:01:28.800 irritated at Blarus, right Now secondly, you've got the Biden 0:01:28.800 --> 0:01:33.200 administration announcing coordination of this global minimum tax. It will 0:01:33.240 --> 0:01:36.240 take years if it ever gets done, to get the 0:01:36.360 --> 0:01:40.720 US Senate and individual European parliaments to ratify it. But 0:01:40.840 --> 0:01:44.480 still it's a meaningful move towards coordination among the G 0:01:44.640 --> 0:01:47.000 seven that sets up the O E C D in 0:01:47.040 --> 0:01:50.120 that direction. So it's not like nothing is getting done. 0:01:50.560 --> 0:01:55.440 But on really big issues out there, like on coronavirus response, 0:01:55.640 --> 0:02:00.000 like on climate change, we are very very far from 0:02:00.080 --> 0:02:04.360 meaningful global coordination. And even on China, where the US 0:02:04.440 --> 0:02:08.600 of course sees Beijing as its principal adversary through a 0:02:08.720 --> 0:02:13.760 national security lens, the Europeans largely do not. And and 0:02:13.919 --> 0:02:18.200 this is perhaps the most principal issue that really divides 0:02:18.280 --> 0:02:20.960 the G seven in a in a Cold War era, 0:02:21.760 --> 0:02:24.440 seven is all rowing in the same direction because everyone 0:02:24.520 --> 0:02:28.000 sees the Soviets as their principal adversary. Today that is 0:02:28.040 --> 0:02:30.880 no longer the case at all, and it makes life 0:02:30.919 --> 0:02:32.919 a lot more difficult. You see, and you see the 0:02:33.240 --> 0:02:36.440 polarity of Europe. Mr Orban of Hungary coming on saying 0:02:36.440 --> 0:02:40.239 the Global minimum corporate tax plan his quote absurd. Okay, 0:02:40.240 --> 0:02:43.919 that's one view from Eastern Europe. What captured my attention 0:02:44.120 --> 0:02:48.160 was the miracle victory and domestic ellections in Germany over 0:02:48.200 --> 0:02:51.200 the weekend. And to borrow from Mr Trump and the Queen, 0:02:51.760 --> 0:02:55.520 does the President Chancellor Malcha walk in front of him? 0:02:56.080 --> 0:02:59.079 I mean the body language that we're gonna see at 0:02:59.120 --> 0:03:02.960 this summit has to tilt to the Chancellor of Germany 0:03:03.160 --> 0:03:07.239 in her stem career, in her recent political victory. Well, 0:03:07.240 --> 0:03:10.080 since it's her last G seven, sure I'd let her 0:03:10.160 --> 0:03:14.680 do that. And and since the relationship between Biden and 0:03:14.760 --> 0:03:18.919 Merkel has always been friendly. I've seen Biden now attend 0:03:18.960 --> 0:03:22.920 in person Munich security conferences for fifteen years. There's always 0:03:22.960 --> 0:03:25.560 been a good relationship with Merkel and the top of 0:03:25.600 --> 0:03:29.680 the German government, the Biden administration is staffed, its cabinet 0:03:29.720 --> 0:03:34.640 are largely Atlanticists who like these people. The European Allies 0:03:34.760 --> 0:03:38.680 or bond Is the singular major exception, are much happier 0:03:38.880 --> 0:03:41.480 with Biden than they were with Trump. But that doesn't 0:03:41.480 --> 0:03:43.920 mean they trust the Americans. That doesn't mean there as 0:03:43.920 --> 0:03:46.560 a line with the Americans. And they also are very 0:03:46.600 --> 0:03:53.760 aware of just how unstable and politically divided Biden's own 0:03:53.920 --> 0:03:57.920 leadership for the future is and so the willingness of 0:03:57.960 --> 0:04:01.840 the Europeans to suddenly count funny United States that they 0:04:01.920 --> 0:04:05.440 are somewhat less aligned with, and they also don't necessarily 0:04:05.480 --> 0:04:08.800 trust the long term nature of its commitment. That the 0:04:08.920 --> 0:04:12.960 US EU relationship is nowhere close to where Biden would 0:04:13.080 --> 0:04:17.160 like it to be. And this idea ever back, Tom, 0:04:17.200 --> 0:04:19.640 I mean when when Biden said America is back in 0:04:19.720 --> 0:04:24.000 terms of power, America never went anywhere. Not our dollar, 0:04:24.160 --> 0:04:27.400 not our tech companies, not our energy production. In terms 0:04:27.440 --> 0:04:30.040 of the influence we have with allies around the world, 0:04:30.360 --> 0:04:33.200 America has been deteriorating for a long time and it's 0:04:33.240 --> 0:04:36.120 not changing very much right now. Can it ever get 0:04:36.120 --> 0:04:38.560 back in? You know, I split my adult life between 0:04:39.120 --> 0:04:43.040 Germany and the US, And when I first came here 0:04:43.120 --> 0:04:45.919 in the nineties, in the in the early Auts, I 0:04:46.000 --> 0:04:49.960 was welcomed with open arms. They were so excited to 0:04:50.080 --> 0:04:54.160 have an American in their midst who actually spoke the language. 0:04:54.440 --> 0:04:58.719 There was a real brotherhood between the two countries. After 0:04:58.839 --> 0:05:03.240 the healing from World War Two, and and then with 0:05:03.480 --> 0:05:08.040 the first UM or the second move into Iraq under 0:05:08.120 --> 0:05:12.520 Bush too um the relationship disintegrated a little and was 0:05:12.760 --> 0:05:17.880 absolutely destroyed by President Trump? Can we ever get back together? 0:05:18.960 --> 0:05:23.279 It wasn't destroyed by Trump. It was deteriorating under Bush, 0:05:23.440 --> 0:05:28.680 under Obama, and under Trump, and that deterioration accelerated over time. 0:05:29.000 --> 0:05:30.800 But I think it has less to do with the 0:05:30.839 --> 0:05:34.440 individual presidents. It has more to do with the fact 0:05:34.480 --> 0:05:38.480 that the United States no longer leads by example. In 0:05:38.560 --> 0:05:43.240 the eyes of Europeans, our democracy is by far the 0:05:43.279 --> 0:05:49.000 most divided and dysfunctional. January six was an absolute shock 0:05:49.680 --> 0:05:52.560 to the Europeans, more so than it was in the 0:05:52.640 --> 0:05:55.599 United States. We kind of got through. It was soft, 0:05:55.720 --> 0:05:57.320 you know, I mean, we don't we don't have these 0:05:57.360 --> 0:06:00.040 structural problems. Anyone that said it was a coup, No, 0:06:00.240 --> 0:06:02.520 it's not a coup. You know. We we came back 0:06:02.560 --> 0:06:06.000 and we get to business as usual, such as it is. 0:06:06.360 --> 0:06:09.240 The Europeans are pretty startled by all of this. And 0:06:09.320 --> 0:06:11.760 let's also keep in mind, you remember when when the 0:06:11.760 --> 0:06:15.320 Snowden revelation showed that the I'm gonna Merkel's cell phone 0:06:15.400 --> 0:06:19.440 was being hacked by the Americans. It's just a very 0:06:19.520 --> 0:06:23.599 different environment where the US is seen as much more unilateralist. 0:06:23.920 --> 0:06:27.600 Biden says, we're pulling out of Afghanistan. Europeans have as 0:06:27.640 --> 0:06:30.400 many troops there as in the US. He didn't coordinate that. 0:06:31.000 --> 0:06:34.280 The Europeans we announced we're going to not pay attention 0:06:34.320 --> 0:06:38.159 to patents anymore, um for for coronavirus. The Germans and 0:06:38.200 --> 0:06:41.880 the EU strongly opposed. That wasn't coordinated advanced by the 0:06:41.960 --> 0:06:44.640 United States. So even though they liked this guy, and 0:06:44.720 --> 0:06:47.800 even though they trust us more than the Chinese, were 0:06:47.839 --> 0:06:51.560 actually farther apart than we have been. And and that's 0:06:51.560 --> 0:06:53.480 exactly where I wanted to go. And I don't mean 0:06:53.520 --> 0:06:56.440 to cut you off. If there's this question about how, yes, 0:06:56.520 --> 0:06:58.719 the US perhaps is it as far apart from Germany 0:06:58.960 --> 0:07:02.320 as they are with not However, what kind of consensus, 0:07:02.360 --> 0:07:05.239 what kind of alliance can they forge if there isn't 0:07:05.279 --> 0:07:08.479 that trust. And frankly, if Germany looks at the US 0:07:08.520 --> 0:07:12.320 and says you're not leading by example, we can forge 0:07:12.560 --> 0:07:17.200 a lot of coordinated policies when it's intentional and when 0:07:17.200 --> 0:07:21.360 it's specific. So if we sit down and say that 0:07:21.440 --> 0:07:26.320 we want to work together on dealing with digital services, 0:07:26.360 --> 0:07:28.600 tax dealing with an alternamentum attacks, we don't have to 0:07:28.680 --> 0:07:32.200 hit each other with, you know, an escalating tariff environment, 0:07:32.400 --> 0:07:36.760 we can create predictability for the markets on Blarus, an 0:07:36.760 --> 0:07:39.320 issue that is, you know, not front of line for 0:07:39.400 --> 0:07:43.160 the average American in Washington. But nonetheless, Biden made it 0:07:43.200 --> 0:07:46.120 clear that he wanted to coordinate with the Europeans, and 0:07:46.200 --> 0:07:49.320 we did that. We did that effectively. But that's very 0:07:49.360 --> 0:07:51.320 different from saying that on the issues that are the 0:07:51.360 --> 0:07:54.320 top priority of the United States that the Europeans will 0:07:54.320 --> 0:07:55.880 see them in the same way. And one thing we 0:07:55.920 --> 0:07:58.600 haven't mentioned so far, which matters a lot more than 0:07:58.600 --> 0:08:01.760 what we've seen in the US is Brexit. The UK 0:08:02.400 --> 0:08:06.480 is by far the most aligned and closest former European 0:08:06.560 --> 0:08:10.200 country with the United States. They're no longer in the EU. 0:08:10.480 --> 0:08:13.240 The UK relationship with the EU is very strange. This 0:08:13.320 --> 0:08:16.680 makes it a lot harder for the Americans to actually 0:08:16.720 --> 0:08:19.000 get the Europeans on the same page because the UK 0:08:19.160 --> 0:08:22.800 used to help us with that inside the EU don't anymore. So, Ian, 0:08:23.040 --> 0:08:25.080 can you give us a sense of what kind of 0:08:25.080 --> 0:08:28.160 guide posts you're looking forward to determine whether this global 0:08:28.200 --> 0:08:31.840 tour that President Biden is embarking on today is successful. 0:08:32.880 --> 0:08:36.880 I want to see how much Emmanuel mccron talks about 0:08:36.960 --> 0:08:41.080 strategic autonomy in front of the Americans. The French have 0:08:41.160 --> 0:08:45.440 a very different view of the future of Europe in 0:08:45.559 --> 0:08:49.520 terms of national security, in terms of migrants, um, in 0:08:49.640 --> 0:08:52.360 terms of the Middle East, North Africa, you name it. 0:08:52.600 --> 0:08:54.600 I want to see to what in the Mediterranean. I 0:08:54.600 --> 0:08:57.040 want to see to what extent he is trying to 0:08:57.120 --> 0:08:59.520 make a name for himself. Let's keep in mind Merkel 0:08:59.600 --> 0:09:02.719 did very well in these elections in East Germany. Mccron 0:09:03.360 --> 0:09:05.560 is gonna be there after Merkel was gone, and he 0:09:05.559 --> 0:09:07.880 sees himself as the future leader of Europe. So I 0:09:07.920 --> 0:09:10.320 want to watch that. I want to see the mood 0:09:10.440 --> 0:09:13.320 music between the Germans and the Americans at the high levels, 0:09:13.360 --> 0:09:16.160 see how much it looks coordinated in advance. And I 0:09:16.160 --> 0:09:18.800 want to see if there's any substance to the reference 0:09:18.840 --> 0:09:22.760 to the cogs that come out. Nobody cares. When's your 0:09:22.800 --> 0:09:26.959 next book out? Early next year? Early next year? Give 0:09:27.040 --> 0:09:30.240 us the thief, give us a tease here. It's called 0:09:30.559 --> 0:09:34.319 the crisis we need and and given that coronavirus, I mean, 0:09:34.320 --> 0:09:37.720 the lessons we've learned from coronavirus globally do not exist. 0:09:38.200 --> 0:09:42.760 So to what extent can we take from that? Uh? 0:09:43.120 --> 0:09:47.920 Any solace that with climate, with the technology revolution, with 0:09:48.040 --> 0:09:51.760 cyber are are we going to be able to use 0:09:51.880 --> 0:09:55.240 those to change our governance? Winston Churchill, looking at the 0:09:55.280 --> 0:09:58.240 world after coronavirus, would be very disappointed we did not 0:09:58.320 --> 0:10:01.600 take advantage of this. Cristis about the drought very quickly here, 0:10:01.720 --> 0:10:04.080 Dr Bremer. The drought in the United States, I think 0:10:04.200 --> 0:10:08.280 is underplayed right now, do you agree? I think that 0:10:08.360 --> 0:10:11.600 Americans are paying a lot more attention to climate young people, 0:10:11.760 --> 0:10:14.120 whether they're from the left or the right or five 0:10:14.200 --> 0:10:16.720 years ago, the factors it's hitting a lot of Americans 0:10:16.760 --> 0:10:19.280 at home really matters. Dr Bremer, Thank you so much. 0:10:19.400 --> 0:10:21.880 Really look forward to getting out six months now where 0:10:21.920 --> 0:10:30.480 we can planning his top risks of two thousand right now. 0:10:30.640 --> 0:10:33.240 Luigi san Gallas with us from Italy and from the 0:10:33.240 --> 0:10:36.439 Boost School of Chicago, and I really can't say enough 0:10:36.480 --> 0:10:41.200 about his podcast Capitalism and also of course A Capitalism 0:10:41.400 --> 0:10:45.240 for the People is wonderful book, a really different view 0:10:45.280 --> 0:10:49.600 on the American economic and political experiment. Professor's in Gallis, 0:10:49.640 --> 0:10:52.319 thank you so much for joining us this morning. How 0:10:52.320 --> 0:10:57.400 will President Biden be greeted in Europe? I think that 0:10:57.720 --> 0:11:01.880 uh Matt was right, He's greeted very nicely just because 0:11:01.880 --> 0:11:04.800 it's not Trump. I think that Trump did create a 0:11:04.840 --> 0:11:08.600 long term friction, and some of that can be fixed 0:11:08.600 --> 0:11:11.559 by just not being Trump. But I think that there 0:11:11.800 --> 0:11:16.360 is a longer term concern of whether the US policy 0:11:16.360 --> 0:11:19.640 and the European policy are aligned in the future. And 0:11:19.640 --> 0:11:23.400 I think that the the giant in the room is 0:11:23.440 --> 0:11:27.560 of courch China, and the policy that Germany as in 0:11:27.600 --> 0:11:30.440 mind and indirect to you as in mind for China 0:11:30.559 --> 0:11:33.400 is very different you from the policy that the Buying 0:11:33.440 --> 0:11:36.040 administration as in mind. So I think that there's a 0:11:36.040 --> 0:11:38.760 whisk for conflict there. Luigi, what do you expect to 0:11:38.800 --> 0:11:42.280 actually come from these meetings with European allies with respect 0:11:42.320 --> 0:11:44.920 to China policy? What are you hoping could get accomplished 0:11:44.960 --> 0:11:50.200 or will actually tell you something concrete? Um, Honestly, I 0:11:50.200 --> 0:11:53.199 don't hope, I don't I don't expect anything to to 0:11:53.240 --> 0:11:58.960 take place. I think that Germany wants to maintain very 0:11:58.960 --> 0:12:02.720 stronger eight relationships with China and there is not going 0:12:02.760 --> 0:12:07.320 to do anything to jeopardize those and so uh And 0:12:07.400 --> 0:12:11.120 I think the United States like a stronger voice on 0:12:11.240 --> 0:12:15.040 human rights and also on trade policy in general. So 0:12:15.280 --> 0:12:18.480 I don't see much of a space for agreement there 0:12:19.480 --> 0:12:22.360 has Germany becomes somewhat of a problem here, Luigi. I 0:12:22.360 --> 0:12:26.840 mean um Berlin wants stronger ties with Beijing, and Berlin 0:12:27.000 --> 0:12:31.720 also wants to send money to Moscow via the Nord 0:12:31.800 --> 0:12:34.720 dream To pipeline. It seems like the Germans are not 0:12:34.840 --> 0:12:39.120 willing to let go of a lot of US adversaries 0:12:41.240 --> 0:12:47.160 in parties that the Trump presidency represented a structure that 0:12:47.320 --> 0:12:52.840 is difficult to undo. Germany realized that cannot rely longer 0:12:52.960 --> 0:12:56.920 term on on the relation the same way that used to, 0:12:57.400 --> 0:13:01.040 and so I think it started to craft a European policy. 0:13:01.720 --> 0:13:05.280 The problem is that there's not really European state, let 0:13:05.320 --> 0:13:07.360 alone the European Army. So I think it's gonna be 0:13:07.360 --> 0:13:10.719 a bit of a of a challenge there, because if 0:13:10.760 --> 0:13:14.080 you hope, were to spoke with a common uh language 0:13:14.080 --> 0:13:18.319 and a common message, I think would be one thing. Unfortunately, 0:13:18.760 --> 0:13:23.120 in foreign policy we steal a pretty fracture, Luigi, on 0:13:23.240 --> 0:13:28.480 your take on American capitalism, where is our capitalism now? 0:13:28.679 --> 0:13:33.760 With the dominance of these technology companies. President Biden's dealing 0:13:33.800 --> 0:13:37.320 with it, our radio or TV listeners and viewers, each 0:13:37.320 --> 0:13:42.559 of us is dealing with this technological revolution, whether it's Amazon, Google, 0:13:43.000 --> 0:13:46.520 or things we don't even understand, how will our capitalism 0:13:46.640 --> 0:13:51.400 survive that? So I think it's a mixed view. On 0:13:51.480 --> 0:13:54.800 the one end, that technologist boat us an enormous amount 0:13:54.800 --> 0:13:59.120 of benefits. I think would be hard to imagine the 0:13:59.240 --> 0:14:03.000 life under the pandemic without the technology that was provided 0:14:03.080 --> 0:14:06.319 from the zoom we're using to the Amazon, the river, 0:14:06.480 --> 0:14:08.800 our food to our door steps and sounds of food. 0:14:08.840 --> 0:14:12.640 So there is no doubt that there being enormous improvement, 0:14:12.760 --> 0:14:18.079 enormous benefits. UH. The concern I have is that the 0:14:18.120 --> 0:14:24.120 market is becoming more concentrated and less uh contestable UM 0:14:24.440 --> 0:14:29.120 and more importantly, that these companies can pretty quickly have 0:14:29.480 --> 0:14:34.680 also some power and determine what we see, what we read, 0:14:35.560 --> 0:14:39.680 what we do and UH. And when we start to 0:14:39.960 --> 0:14:43.120 such a large market power, the concern is that you 0:14:43.200 --> 0:14:45.400 might use it not only for economic reason but also 0:14:45.440 --> 0:14:48.560 for political reasons. So I think that the easier concern 0:14:48.600 --> 0:14:55.240 that is not just about uh the economic effects of concentration, 0:14:55.280 --> 0:14:58.360 but also the political effects. There's a quick question, Luigi 0:14:58.560 --> 0:15:01.840 about the dynamite of the economy with concentration at the 0:15:01.880 --> 0:15:05.200 top and then highly intended companies that have more legacy 0:15:05.200 --> 0:15:08.080 businesses making up the remaining economy. Do you think the 0:15:08.080 --> 0:15:11.240 economy that you're describing here with the concentration of big 0:15:11.280 --> 0:15:16.120 tech is less dynamic and poised for slower growth. I 0:15:16.160 --> 0:15:18.800 think the wis the wish that is less dynamic, and 0:15:18.840 --> 0:15:21.600 I think that that's where, in my view, one of 0:15:21.640 --> 0:15:25.080 the direction of the anti trust should be um. In 0:15:25.160 --> 0:15:27.040 my view, I know this is a disputed view, but 0:15:27.080 --> 0:15:30.520 in my view, the trial against Microsoft in the late 0:15:30.600 --> 0:15:35.320 nineties was very useful to provide a space for the 0:15:35.360 --> 0:15:38.920 common technology revolution. I think that if Google exists today 0:15:38.960 --> 0:15:43.400 in part is because the d o J sue Microsoft. 0:15:43.480 --> 0:15:46.800 So it's only fair that the J was sue Google 0:15:46.920 --> 0:15:50.160 to let the next Google come about. Luis, you gotta 0:15:50.200 --> 0:15:52.520 leave it there, Luigi's and Gale, thank you so much. 0:15:53.040 --> 0:15:55.960 Really look forward to you coaching Tottenham here in the 0:15:56.000 --> 0:15:59.840 coming weeks. He is from the University of Chicago Booths School. 0:16:00.040 --> 0:16:01.680 Of course, I can't say enough his book of the 0:16:01.680 --> 0:16:09.920 Summer a number of years ago on capitalism, Stewart Chiser 0:16:10.000 --> 0:16:11.480 Joy doesn't get it right to it. Would you be 0:16:11.600 --> 0:16:14.640 as head of equity derivative strategy stored in your world 0:16:14.640 --> 0:16:17.840 of equities. Is your world linked to the ten year 0:16:18.000 --> 0:16:22.000 yield and the shock we see with low yields? Thod 0:16:22.000 --> 0:16:24.480 Martin Tom, It definitely is. And I think really what 0:16:24.480 --> 0:16:27.000 you've seen recently is probably pretty positive for equities in 0:16:27.040 --> 0:16:30.160 the sense that inflation break evens and inflation expectations that 0:16:30.280 --> 0:16:32.520 started to get to the level at which we thought 0:16:32.520 --> 0:16:35.440 it was going to become disruptive for equity markets. But 0:16:35.520 --> 0:16:37.200 now with like you know, with the tender break even 0:16:37.200 --> 0:16:39.480 back bold to forty, with ten year yields pulling back 0:16:39.520 --> 0:16:41.960 a little bit, I think that sort of has relieved 0:16:41.960 --> 0:16:43.600 the pressure a bit. You know, we had a very 0:16:43.960 --> 0:16:47.880 fast and high volatility rise in rates and inflation expectations. 0:16:48.160 --> 0:16:49.560 The fact that those have come off a bit, I 0:16:49.600 --> 0:16:51.960 think is kind of reduced a little pressure on markets. 0:16:51.960 --> 0:16:53.920 But but there's definitely a link between the two, no doubt. 0:16:54.160 --> 0:16:56.600 So what where is the source of potential volatility here 0:16:58.080 --> 0:17:00.360 for markets? I mean, I think I think FED policy 0:17:00.400 --> 0:17:02.400 is gonna be probably the number one source of potential 0:17:02.480 --> 0:17:04.640 volatility over the next couple of weeks. Obviously we get 0:17:04.640 --> 0:17:07.520 a big inflation print on Thursday. You know, ubs is 0:17:07.520 --> 0:17:10.760 is well above consensus for both core and headline, So 0:17:10.800 --> 0:17:13.320 I think that will test the recent moves and markets. 0:17:13.320 --> 0:17:15.199 You know, you you got tenure break evens up to 0:17:15.560 --> 0:17:17.480 sixty ish um the last time we had a strong 0:17:17.520 --> 0:17:19.400 inflation print, So I think it'll be interesting to see 0:17:19.400 --> 0:17:21.760 how that plays out. And then secondly, you know, the 0:17:21.760 --> 0:17:24.199 following week, how does that impact FED thinking? You know, 0:17:24.320 --> 0:17:26.920 do the dots move um? Does the FED start to 0:17:26.960 --> 0:17:29.440 speak a little more positively about the growth outlook, which 0:17:29.440 --> 0:17:31.199 the market might read as hawker? So I think over 0:17:31.280 --> 0:17:32.639 the course of the next month, those are gonna be 0:17:32.680 --> 0:17:35.280 the two big ones and then two key learnings upon 0:17:35.359 --> 0:17:37.479 us at that point. But story, why am I not 0:17:37.520 --> 0:17:39.600 to believe that what the markets pricing in right now 0:17:39.760 --> 0:17:42.800 is effectively what the market forces here. If we do 0:17:42.880 --> 0:17:47.080 get a higher than projected read on that inflation, what 0:17:47.160 --> 0:17:50.119 would change the dynamics here that would take us anywhere 0:17:50.640 --> 0:17:52.600 away from one five where we are right now on 0:17:52.640 --> 0:17:55.520 the tenure yield. Well, it's a great question. I think 0:17:55.560 --> 0:17:57.480 what most people are saying on the market side is 0:17:57.520 --> 0:17:59.480 number one, a lot of the inflation is coming from 0:17:59.560 --> 0:18:02.240 things like use car prices, which they expect to kind 0:18:02.240 --> 0:18:04.800 of be quote unquote transitory. If it hurts me to 0:18:04.800 --> 0:18:07.000 say that term, but but that's the one that's out there. 0:18:10.520 --> 0:18:12.240 So I think, look, I think you know what would 0:18:12.280 --> 0:18:14.800 get it to move would be do you see things 0:18:14.880 --> 0:18:18.600 like wage inflation, like rents um like goods prices inflation 0:18:18.640 --> 0:18:20.600 that might be a little more sustainable. So I think 0:18:20.600 --> 0:18:22.720 it's going to be below the surface and the inflation print. 0:18:22.760 --> 0:18:25.720 What are the drivers and does that start to dislodge things? 0:18:26.080 --> 0:18:27.399 If you were to say, you know what could be 0:18:27.440 --> 0:18:30.720 most disruptive from markets, I think it's gonna be longer 0:18:30.840 --> 0:18:33.639 term inflation expectations, you know, the fit excuse me. The 0:18:33.640 --> 0:18:36.080 FED looks at survey based inflation. So if things like 0:18:36.200 --> 0:18:39.119 University of Michigan long term inflation start to move, if 0:18:39.160 --> 0:18:41.960 the inflation term structure, you know, you know, stops being 0:18:42.000 --> 0:18:44.240 inverted from you know, five year to thirty year, that 0:18:44.280 --> 0:18:46.560 could be an issue as well. So look, it's it's 0:18:46.560 --> 0:18:48.840 a high inflation print, and then it's the components of 0:18:48.880 --> 0:18:52.560 that print um that look less transitory than that maybe 0:18:52.560 --> 0:18:54.800 the FED and the markets are currently expecting. So are 0:18:54.840 --> 0:18:57.320 we overplaying the inflation story which we're not gonna have 0:18:57.359 --> 0:18:59.359 an answer to until the end of the year, and 0:18:59.359 --> 0:19:02.640 perhaps are playing some of these other factors like, for example, 0:19:02.680 --> 0:19:07.879 earnings disappointments, especially given how high expectations are. It's a 0:19:07.880 --> 0:19:10.639 great question. I mean it's it's it's hard for portfolio 0:19:10.720 --> 0:19:13.600 manager or risk manager to ignore the cadence of the 0:19:13.600 --> 0:19:16.000 inflation data, right, So it could be that six months 0:19:16.040 --> 0:19:17.960 from now we look back and we think that that 0:19:18.000 --> 0:19:20.439 was a tempest in a teapot. But you know, an 0:19:20.480 --> 0:19:23.199 investor can't ignore that stuff as it's happening. So I 0:19:23.240 --> 0:19:25.879 think people are responding rationally to the data that that 0:19:25.960 --> 0:19:29.760 they're seeing. Um In terms of earnings, expectations I think 0:19:29.760 --> 0:19:31.520 are high at the single stock level, but if you 0:19:31.560 --> 0:19:35.600 look collectively, you know, SMPPS for next quarter I think 0:19:35.600 --> 0:19:38.919 still shows a sequential decline versus last quarter. So we 0:19:38.960 --> 0:19:41.040 do think there's you know, the potential as we get 0:19:41.040 --> 0:19:43.320 into actually post f O m C. I think as 0:19:43.320 --> 0:19:45.920 people start to look at it, look at earnings and 0:19:46.160 --> 0:19:48.600 sharpen their pencils. I think earnings could you know, turn 0:19:48.640 --> 0:19:51.040 out to be a positive catalyst over over the course 0:19:51.040 --> 0:19:53.160 of the rest of the month. We've heard that now 0:19:53.200 --> 0:19:55.879 this is the second time. That's an important insight. Sharpen 0:19:55.920 --> 0:19:57.880 the pencils as we go to earnings and of course, 0:19:57.880 --> 0:20:00.440 we'll do that here on Surveillan Stewart cards, and we 0:20:00.520 --> 0:20:02.879 look forward to you sharpening at your pencil in a 0:20:02.880 --> 0:20:05.320 couple of weeks with us as well. UBS had an 0:20:05.359 --> 0:20:13.920 equity derivative research. Joining us now is someone who has 0:20:13.920 --> 0:20:17.399 a courage to take a longer perspective. Claudia Sam is 0:20:17.400 --> 0:20:20.840 one of the most interesting practicing economists in the nation 0:20:20.960 --> 0:20:25.199 with Jane Family Institute formally with the Federal Reserve and 0:20:25.400 --> 0:20:29.880 always controversial. We're thrilled and Missam could join us. This warning, Claudia, 0:20:29.960 --> 0:20:33.760 I love your Morning Report where you say, look, would 0:20:33.760 --> 0:20:37.879 everybody grow up and stop looking at weekly claims, stop 0:20:37.960 --> 0:20:41.480 looking monthly, monthly thinking monthly. You want us to have 0:20:41.600 --> 0:20:44.480 the courage to look out a decade. What do you 0:20:44.520 --> 0:20:48.760 mean by that? Well, I follow every shred of data, 0:20:48.920 --> 0:20:52.919 just like anyone else who's doing macroeconomics right now. But 0:20:53.040 --> 0:20:56.160 I am so frustrated with the fact that we can't 0:20:56.200 --> 0:20:59.640 even set the latest numbers in the context of the pandemic, 0:21:00.320 --> 0:21:03.840 let alone the decades of trend that we have seen. 0:21:04.280 --> 0:21:08.320 Inflation is just one example, has trended down decade after decade. 0:21:08.600 --> 0:21:11.800 Trends do not reverse in a month. Or two like 0:21:11.880 --> 0:21:16.439 this is absurd. And we also, and this is very disconcerting, 0:21:16.520 --> 0:21:20.840 have seen for decades fewer people working. I mean the 0:21:20.840 --> 0:21:25.320 employment to population ratio. If you smooth across the recessions, 0:21:25.359 --> 0:21:29.399 it's been going down. Claudia Samas again as Air Force 0:21:29.440 --> 0:21:33.960 one begins a flight three p m. This afternoon, President, 0:21:34.040 --> 0:21:36.840 the first Lady will be at Royal Air Force Milden 0:21:36.880 --> 0:21:40.159 Hall in the United Kingdom and then onto Cornwall in 0:21:40.240 --> 0:21:44.080 the G seven meetings. Very impressive. They're going to go 0:21:44.119 --> 0:21:46.760 to Tregana Castle. I think that was in poll dark 0:21:46.840 --> 0:21:50.280 as as well. Claudia. G seven meetings speaks to the 0:21:50.320 --> 0:21:55.040 international economy. Where does the US fit in right now? 0:21:55.200 --> 0:21:59.840 After the Trump years? The President clearly wants to reassert 0:22:00.320 --> 0:22:05.280 abiden tone internationally. How would you suggest his best practice 0:22:05.320 --> 0:22:09.399 would be, it's time to lead and and it's time 0:22:09.440 --> 0:22:12.840 to work with these other countries. It's just like this 0:22:12.880 --> 0:22:15.720 moment in the pandemic. We are not going to be 0:22:15.800 --> 0:22:19.000 on track until the least privileged among us in the 0:22:19.040 --> 0:22:22.640 world community are on track. And the United States has 0:22:22.680 --> 0:22:26.320 a responsibility, a moral responsibility to help people get out 0:22:26.320 --> 0:22:29.720 of the pandemic and the vaccines. But there's a leadership 0:22:29.720 --> 0:22:32.560 in the global economy that frankly starts at home and 0:22:32.640 --> 0:22:35.480 investing in the United States and its people. Like that's 0:22:35.520 --> 0:22:38.119 an example we need to set for the rest of 0:22:38.119 --> 0:22:40.600 the world. Let's tie the idea of the global stage 0:22:40.880 --> 0:22:44.520 with the domestic one. The idea here of inflation being 0:22:44.560 --> 0:22:47.439 an international story. And one reason why people say for 0:22:47.520 --> 0:22:50.359 decades inflation has been coming down is because of the 0:22:50.400 --> 0:22:53.280 disinflation that was imported from China, the idea that there 0:22:53.280 --> 0:22:56.040 could be some cheap labor uh and and and cheap 0:22:56.080 --> 0:22:59.199 goods that the US was importing. We are seeing a 0:22:59.320 --> 0:23:02.600 shift in How much does that change the underlying premise 0:23:02.640 --> 0:23:05.359 that inflation will not pick up if China is a 0:23:05.359 --> 0:23:10.040 wealthier nation that's seeing inflation itself pick up, right, well, 0:23:10.080 --> 0:23:12.920 I think it's important, especially as we watch the month 0:23:12.960 --> 0:23:16.639 to month numbers, to know that we have different cross currents, right, 0:23:16.680 --> 0:23:19.679 deflationary pressures, particularly now that we are still in a 0:23:19.720 --> 0:23:23.560 pandemic around the world there with US Now, obviously there 0:23:23.600 --> 0:23:26.760 are supply chain issues that have come from the pandemic 0:23:26.880 --> 0:23:28.879