WEBVTT - Could See A U.S. And Global Recession By End Of 2019: Sri-Kumar 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:33.360 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Will 0:00:33.440 --> 0:00:38.520 emerging market currencies be the primary victim of the ongoing 0:00:38.800 --> 0:00:42.640 trade skirmishes? Here to answer that question is Komal Street Kumar. 0:00:42.960 --> 0:00:45.879 He is president and founder of Street Kumar Global Strategy 0:00:45.920 --> 0:00:49.159 is also a Bloomberg opinion columnist. Coming to us from 0:00:49.200 --> 0:00:52.000 the lovely Santa Monica, California. Samal, Thank you so much, 0:00:52.240 --> 0:00:54.480 uh Sree, thank you so much for being with us. 0:00:54.760 --> 0:00:58.800 So what is your take on emerging markets currencies heading 0:00:58.800 --> 0:01:01.440 into your end here? Good to be with you and 0:01:01.520 --> 0:01:04.920 PIM Lisa. In terms of what is happening, the emerging 0:01:04.959 --> 0:01:10.040 markets are clearly reacting to a stronger and stronger dollar 0:01:10.160 --> 0:01:13.639 that we have seen over the last several months, FED 0:01:13.840 --> 0:01:16.520 which insists that it has not stopped hiking, it is 0:01:16.560 --> 0:01:19.840 going to keep increasing interest rates, and we have a 0:01:19.880 --> 0:01:23.840 situation of trade war which is really very negative for 0:01:23.920 --> 0:01:28.080 many of the emerging markets. So it may not always 0:01:28.120 --> 0:01:32.160 be a conscious move to depreciate their currencies in order 0:01:32.200 --> 0:01:36.319 to fight a trade war, Lisa, but that clearly is 0:01:36.360 --> 0:01:40.480 the ultimate result. We have seen that recently with the 0:01:40.520 --> 0:01:43.240 Turkish lira. We have seen the Argentine pace, so the 0:01:43.240 --> 0:01:46.679 Indian rupee. In the case of Argentina and India, they 0:01:46.720 --> 0:01:50.320 have been all time record lows, and Argentina is going 0:01:50.360 --> 0:01:54.240 to compete with the United States for Chinese markets. The 0:01:54.280 --> 0:01:59.000 Indian manufactured exports will become even more competitive globally. So 0:01:59.040 --> 0:02:01.680 I the problem here is that it is going to 0:02:01.800 --> 0:02:05.200 worsen President Trump's problems. The U S trade deficit is 0:02:05.240 --> 0:02:07.960 going to worsen, and we are going to have to 0:02:08.040 --> 0:02:11.720 face some way to depreciate the US dollar. And once 0:02:11.760 --> 0:02:16.400 that happens, then you have the other countries reacting yet again, Shree. 0:02:16.720 --> 0:02:18.360 One of the area One of the things that I 0:02:18.400 --> 0:02:20.800 look at on a pretty regular basis is the price 0:02:20.840 --> 0:02:23.960 of copper as a proxy for industrial activity, as it 0:02:24.080 --> 0:02:27.800 is an industrial medal. The price of copper is down 0:02:27.880 --> 0:02:32.600 more than fifteen percent since it's high in mid June. 0:02:32.919 --> 0:02:35.120 Do you believe that we're going to find that the 0:02:35.160 --> 0:02:38.520 world economy is not as robust as many economists belief. 0:02:40.120 --> 0:02:43.600 That is a great question, and I would pare your 0:02:43.800 --> 0:02:47.880 answering your question to what we see as a message 0:02:47.960 --> 0:02:50.639 that is coming from one is from Dr Copper as 0:02:50.680 --> 0:02:55.160 it's popularly known for its record in predicting the global economy, 0:02:55.639 --> 0:02:59.800 along with what you see happening with the US equity market, 0:03:00.240 --> 0:03:02.920 which has been rushing up in the last few days 0:03:02.960 --> 0:03:06.639 because of corporate turnings, even as the bond market continues 0:03:06.720 --> 0:03:09.520 to give you dangerous signals and the two to ten 0:03:09.639 --> 0:03:12.240 years spread on the U S treasuries continues to be 0:03:12.240 --> 0:03:17.600 below thirty basis points. The combination of weakness and copper 0:03:18.400 --> 0:03:21.560 and a very narrow spread suggests to me that if 0:03:21.840 --> 0:03:25.480 we could invert the Eelk curve even by September, if 0:03:25.480 --> 0:03:28.080 the FED were to high cut on September twenty six, 0:03:28.760 --> 0:03:32.400 and then you're looking possibly for a US recession and 0:03:32.560 --> 0:03:35.520 a global recession towards the end of next year, and 0:03:35.560 --> 0:03:38.800 if we have a trade war accelerating, it only pushes 0:03:38.920 --> 0:03:43.120 the world further into recession. Well, that's a pretty a 0:03:43.160 --> 0:03:45.920 pretty dire prediction, and there are a growing number of 0:03:45.920 --> 0:03:48.720 people who do agree with you. Actually, I want to 0:03:48.760 --> 0:03:52.040 push back a little bit on this idea of the 0:03:52.200 --> 0:03:57.240 ongoing appreciation of emerging market currencies in the appreciation of 0:03:57.280 --> 0:04:00.800 the US dollar. First of all, you are being some 0:04:00.920 --> 0:04:04.760 of these developing nations deploying their foreign currency reserves to 0:04:04.840 --> 0:04:07.640 support the currencies. So that's is evidence that they don't 0:04:07.680 --> 0:04:10.600 want to see such depreciation. Uh and and in the 0:04:10.720 --> 0:04:13.200 US is one country, but there are other countries that 0:04:13.240 --> 0:04:17.599 are increasingly dominant, including China and India, which can drive 0:04:17.640 --> 0:04:19.520 a lot of economic activities. So what do you say 0:04:19.520 --> 0:04:23.400 to people who argue for emerging market investments now? Based 0:04:23.440 --> 0:04:27.400 on those arguments, I would say emerging markets are going 0:04:27.440 --> 0:04:31.440 to look great, but not yet. In other words, the 0:04:31.480 --> 0:04:34.800 emerging market currencies are going to continue to depreciate. In 0:04:34.839 --> 0:04:39.600 my opinion, Lisa, you were right on in saying that 0:04:39.640 --> 0:04:43.840 many countries don't want it to depreciate. Both India and 0:04:43.960 --> 0:04:48.000 Argentina are facing the prospect of higher domestic inflation as 0:04:48.040 --> 0:04:51.960 a result of weaker currencies. So for even for domestic reasons, 0:04:52.040 --> 0:04:54.840 they want to support currencies. The problem is the following 0:04:55.320 --> 0:04:57.760 they are not in control of it. If the FED 0:04:57.800 --> 0:05:01.880 word to increase interest rates and if President Bush President 0:05:01.920 --> 0:05:05.240 Trump were to continue with the trade wars, their currencies 0:05:05.279 --> 0:05:08.800 are going to depreciate no matter what they do, or 0:05:08.920 --> 0:05:11.680 the central banks are going to figure out that they're 0:05:11.720 --> 0:05:14.600 going to spend more and more of their dollar reserves 0:05:15.080 --> 0:05:18.320 to defend the currencies, which is basically meaningless if the 0:05:18.360 --> 0:05:22.440 fundamentals are suggesting a weaker currency. So it is may 0:05:22.480 --> 0:05:25.960 not be intentional that these countries are doing it, and 0:05:26.000 --> 0:05:29.120 you're right in saying that they are trying to control inflation. 0:05:29.520 --> 0:05:32.720 They don't want the currencies to depreciate, but it's beyond 0:05:32.760 --> 0:05:37.160 their control. Also taken to account that recently Larry Cudlow, 0:05:37.880 --> 0:05:41.599 economic advisor to the President, has suggested that the FED 0:05:41.680 --> 0:05:45.480 go very slow on its rate heights. The concern here 0:05:45.680 --> 0:05:48.360 is if the Fed were to keep tightening, it's going 0:05:48.400 --> 0:05:52.120 to cause the dollar to strengthen even further, worse than 0:05:52.360 --> 0:05:55.880 the trade situation. So you're going to have a conflict 0:05:55.920 --> 0:05:59.800 between the Fed and the administration coming up between the 0:05:59.839 --> 0:06:02.360 next two to three months. All Right, we want to 0:06:02.400 --> 0:06:05.039 thank you very much for being with us. Kamal Ah 0:06:05.279 --> 0:06:08.279 Kumar as the president and the founder of a Shriek 0:06:08.360 --> 0:06:13.320 Kumar Global Strategies, he is also a Bloomberg opinion columnist. 0:06:13.839 --> 0:06:16.880 Is based in Santa Monica, California, and you can follow 0:06:16.920 --> 0:06:21.880 Shri on Twitter at Shri s r i K Global. 0:06:36.360 --> 0:06:41.400 The United States spends the most on healthcare per person. 0:06:42.240 --> 0:06:46.560 It spends something on the order of about three point 0:06:46.640 --> 0:06:52.080 three trillion dollars. That's nearly of US g D P. 0:06:52.800 --> 0:06:55.239 Here to telp us about how this money is spent 0:06:55.360 --> 0:06:58.760 and can it be more efficiently used in order to 0:06:58.800 --> 0:07:03.000 bring high quality health care to Americans is VJ Governor 0:07:03.080 --> 0:07:06.640 de Rogin. He is a the Cox Distinguished Professor from 0:07:06.760 --> 0:07:10.840 Dartmouth's Touch School of Business. Also joining us is Robbie 0:07:10.920 --> 0:07:14.960 Rama Murti. He is the University Distinguished Professor of International 0:07:15.080 --> 0:07:18.239 Business and Strategy and Director of the Center for Emerging 0:07:18.320 --> 0:07:23.240 Markets at Northeastern University. They are both the authors of 0:07:23.280 --> 0:07:27.200 the new book entitled Reverse Innovation in Healthcare, How to 0:07:27.280 --> 0:07:31.080 make Value Based Delivery Work. Gentlemen and professors, thank you 0:07:31.160 --> 0:07:34.160 very much for being with us. Professor Governor de Rogin, 0:07:34.280 --> 0:07:36.920 I want to begin with you and just set out 0:07:37.040 --> 0:07:42.760 why did you decide to write this book? See the 0:07:42.840 --> 0:07:46.360 baby started on this book is both of us are 0:07:46.440 --> 0:07:51.280 from India, and what we found was India is a 0:07:51.360 --> 0:07:56.600 country which has got one billion population who are poor. 0:07:56.880 --> 0:08:00.360 Therefore they can't afford to pay a lot on healthcare. 0:08:00.880 --> 0:08:05.560 And India also has limited number of doctors and limited 0:08:05.680 --> 0:08:09.160 number of hospitals. So the question is how do you 0:08:09.240 --> 0:08:14.680 serve a large fraction of the population with limited hospital 0:08:14.720 --> 0:08:18.240 infrastructure and medical doctors. The only way you can do 0:08:18.280 --> 0:08:22.320 it is through health care delivery innovations. So we said 0:08:22.480 --> 0:08:26.320 there has to be some hospitals which do breakthrough health 0:08:26.360 --> 0:08:29.800 care delivery innovations, and we found seven of them and 0:08:29.840 --> 0:08:34.800 we use that to really generate our insights about how 0:08:34.920 --> 0:08:38.719 you can lower health care costs dramatically. So Rob, come 0:08:38.720 --> 0:08:40.400 on in here. Can you give us a sense of 0:08:40.440 --> 0:08:43.280 what some of those innovations were that you found in 0:08:43.360 --> 0:08:47.800 those hospitals. Yeah, one of the important innovations that these 0:08:47.800 --> 0:08:51.719 hospitals use is how they configure their assets into a 0:08:51.800 --> 0:08:57.120 hub and spoke network and they send advanced procedures and 0:08:57.160 --> 0:09:00.439 patients requiring advanced care to the hubs where they also 0:09:00.480 --> 0:09:03.960 have the most advanced specialists and the most advanced equipment, 0:09:04.200 --> 0:09:08.439 and in the spokes they deal with more routine cases. Now, 0:09:08.480 --> 0:09:11.480 this may seem like a simple idea, but in fact 0:09:11.480 --> 0:09:14.160 in the US it is something we don't see very 0:09:14.240 --> 0:09:16.480 much of. We have, in other words, in the US 0:09:16.520 --> 0:09:19.160 too many hospitals that are aspire to be hubs and 0:09:19.240 --> 0:09:22.440 not enough spokes, and therefore you have hospitals that become 0:09:22.520 --> 0:09:26.280 very expensive because every hospital is trying to do every procedure. 0:09:27.080 --> 0:09:30.040 This is one example. Now, as a result of this 0:09:30.160 --> 0:09:35.600 configuration in the Indian situation, you actually have hospitals that 0:09:35.760 --> 0:09:40.520 too high volumes of various surgeries. And it's not because 0:09:41.720 --> 0:09:45.120 there are many more Indians requiring those procedures. It's just 0:09:45.240 --> 0:09:48.800 that the available volume is funneled into the hubs, and 0:09:48.840 --> 0:09:51.480 so you can have a heart hospital that does six 0:09:52.600 --> 0:09:55.960 open heart surgeries in a year compared to about four 0:09:56.000 --> 0:10:00.920 thousand in even the most advanced, leading h heart hospital 0:10:00.920 --> 0:10:03.520 in the US. So this is one example. And we 0:10:03.559 --> 0:10:07.360 have five principles that we identified from the research. And 0:10:07.400 --> 0:10:11.240 this is one of the principles. If you if you 0:10:11.240 --> 0:10:12.720 want me that I can quickly balk you through the 0:10:12.720 --> 0:10:15.920 other principles, sure give us one. Give us another one 0:10:15.960 --> 0:10:18.400 that you believe could be applicable to the United States. 0:10:19.080 --> 0:10:23.040 Another principle we identified, we call it tasks shifting and 0:10:23.120 --> 0:10:26.480 this is trying to free up doctors so they do 0:10:26.720 --> 0:10:30.400 the work that only doctors can do and allow others 0:10:30.440 --> 0:10:35.400 to do less sophisticated work. In the US, again, we 0:10:35.440 --> 0:10:37.880 have the opposite situation where doctors spent more than half 0:10:37.880 --> 0:10:41.520 their time on administrative work. And if you look at 0:10:41.559 --> 0:10:46.360 the Indian example our hospitals, we studied, a doctor in 0:10:46.440 --> 0:10:49.840 one of the eye hospitals is surrounded by ten support 0:10:49.920 --> 0:10:53.080 staff who free up the doctor from all of the 0:10:53.120 --> 0:10:56.080 non medical work. So this doctor is three or four 0:10:56.120 --> 0:10:59.319 times as productive as an eye surgeon in the US. 0:10:59.360 --> 0:11:02.680 So we called the stash shifting. And the interesting thing 0:11:02.760 --> 0:11:06.080 about what the Indians do is not just that they 0:11:06.280 --> 0:11:10.200 have nurses and nurse practitioners helping doctors. They have created 0:11:10.320 --> 0:11:15.920 entirely new categories of workers, each appropriately matched to the 0:11:15.920 --> 0:11:19.480 work required. And this not only saves money, but actually 0:11:19.520 --> 0:11:24.520 improves quality because each person is really qualified and motivated 0:11:24.559 --> 0:11:27.160 to do the task that they are assigned. Yeah. Well, 0:11:27.280 --> 0:11:30.160 one thing that is sort of interesting in light of 0:11:30.240 --> 0:11:33.040 healthcare conversations in the US right now is the cost 0:11:33.080 --> 0:11:35.000 of pharmaceuticals. And j I want you to come on 0:11:35.080 --> 0:11:37.480 in here, because a lot of people say, yeah, healthcare 0:11:37.520 --> 0:11:40.920 is cheaper in other countries outside the US because drug 0:11:40.920 --> 0:11:45.360 companies can sell pharmaceuticals at lower prices, the generics are 0:11:45.400 --> 0:11:47.280 sold at lower prices. Do you think that that is 0:11:47.320 --> 0:11:51.400 a significant component of the lower cost of healthcare in 0:11:51.440 --> 0:11:57.200 some in India and other countries. Certainly generic drugs can 0:11:57.240 --> 0:12:02.080 contribute to lower costs in a kind tree like India. Certainly, 0:12:02.559 --> 0:12:07.320 labor cost is also cheaper. For instance, doctors salaries or 0:12:07.400 --> 0:12:11.280 nurses salaries are cheaper in India's compared to the US. 0:12:12.200 --> 0:12:15.920 We kind of adjusted for all those and what we 0:12:16.040 --> 0:12:21.200 find is even after you adjust the Indian cost structure 0:12:21.320 --> 0:12:25.800 for US salaries and US drug prices, what we find 0:12:26.040 --> 0:12:31.400 is the Indian exemplars if you take open heart surgery, 0:12:31.440 --> 0:12:36.040 they are still of the cost of open heart surgery 0:12:36.120 --> 0:12:42.600 in this country and their quality is better than what 0:12:42.679 --> 0:12:47.440 we find in the US. For instance, in open heart surgery, 0:12:48.080 --> 0:12:52.720 one measure of quality is mortality rates thirty days after surgery. 0:12:54.320 --> 0:12:56.920 For Nara and Health, which is one of our hospitals 0:12:56.920 --> 0:13:01.520 in India, their mortality rates thirty days after surgery is 0:13:01.640 --> 0:13:06.600 one point four and the US average is one point nine. 0:13:07.400 --> 0:13:10.480 So their quality is on part, maybe even slightly ahead 0:13:11.480 --> 0:13:15.560 so therefore, reverse innovation is not just about reducing cost. 0:13:16.000 --> 0:13:20.479 It is about delivering value that means very high quality 0:13:20.760 --> 0:13:25.400 at very low cost. Professor Ramamorty, what you believe to 0:13:25.480 --> 0:13:29.720 be the biggest obstacle in the United States to implementing 0:13:29.800 --> 0:13:33.800 some of the described efficiencies and changes which would benefit 0:13:34.320 --> 0:13:38.440 the population. I think the fee for service system that 0:13:38.520 --> 0:13:43.600 we have is a major impediment because it motivates UH 0:13:43.760 --> 0:13:47.800 everyone in the system to provide services without looking keeping 0:13:47.800 --> 0:13:49.880 their eye on the ultimate objective, which is the health 0:13:49.920 --> 0:13:53.560 of the patient. And now there are plans in place 0:13:53.679 --> 0:13:57.560 to move, especially in medicare, to a different system, which 0:13:57.600 --> 0:14:00.880 is more risk sharing with the hospital us in the providers. 0:14:01.080 --> 0:14:02.719 We think that's a step in the right direction. That's 0:14:02.720 --> 0:14:05.200 one reason they wrote the book at this time, because 0:14:05.200 --> 0:14:07.760 we think as hospitals move in that direction, they're going 0:14:07.800 --> 0:14:10.000 to be looking for ways to bring down their cost 0:14:10.080 --> 0:14:14.280 without loading their quality. Ravi Rama Morty University Distinguished Professor 0:14:14.280 --> 0:14:16.800 of International Business and Strategy and Director of the Center 0:14:16.920 --> 0:14:21.920 for Emerging Markets at Northeastern University, and VJ. Govinda jan 0:14:22.080 --> 0:14:25.440 He is the Cocks Distinguished Professor at Dartmouth's Tuch School 0:14:25.480 --> 0:14:45.320 of Business. Authors of verse innovation and healthcare kind of 0:14:45.360 --> 0:14:49.880 bringing Dan Hansen. He is UK economist for Bloomberg Economics 0:14:50.200 --> 0:14:52.760 and he joins us from our London bureau. Dan, thank 0:14:52.800 --> 0:14:55.080 you very much for being with us. Maybe you could 0:14:55.120 --> 0:14:59.000 just outline what has the analysis said about the future 0:14:59.120 --> 0:15:02.040 of the UK at economy if it is outside of 0:15:02.040 --> 0:15:06.480 the European Union. Thanks for having me. So if we're 0:15:06.480 --> 0:15:09.600 outside the European Union, the UK economies outside the European Union, 0:15:09.640 --> 0:15:12.120 that it's going to be costly for us. I mean, 0:15:12.200 --> 0:15:16.160 so much depends on the deal we get with the 0:15:16.200 --> 0:15:18.520 European Union, and that's why the events over the past 0:15:18.520 --> 0:15:21.120 few days have been so important. You've seen the UK 0:15:21.320 --> 0:15:25.920 government appear at least to move towards a softer Brexit. 0:15:27.040 --> 0:15:30.680 But even that softer Brexit we think could see the 0:15:30.720 --> 0:15:35.360 economy around five smaller by about twenty thirties. That's a 0:15:35.440 --> 0:15:40.400 significant hit um. And if we go towards this dreaded 0:15:40.520 --> 0:15:44.240 no deal scenario, that cost could rise substantially up to 0:15:44.680 --> 0:15:47.520 maybe perhaps seven percent of GDP. So these are these 0:15:47.560 --> 0:15:50.120 are big numbers that we're talking about, and I think 0:15:50.120 --> 0:15:53.680 the really important point here is it's the form of 0:15:53.720 --> 0:15:55.800 Brexit that matters the most. It's not that we're just 0:15:55.920 --> 0:15:58.720 leaving and there's just this cost. It really is the 0:15:58.720 --> 0:16:00.400 shape of the deal we're going to get the EU 0:16:00.480 --> 0:16:03.040 that will determine the ultimate cost of the UK economy. 0:16:03.280 --> 0:16:05.760 You know, Dan, whenever you talk about these projections, I'm 0:16:05.800 --> 0:16:08.320 sure you get a lot of feedback from people saying, Oh, 0:16:08.360 --> 0:16:11.240 you're just taking the worst case scenario and you're against brexits, 0:16:11.280 --> 0:16:13.360 you're trying to paint it this way, or you're four Brexits, 0:16:13.440 --> 0:16:15.960 you're trying to paint it that way. And wondering is 0:16:15.960 --> 0:16:19.760 there any way to quantify what the economic effect has 0:16:19.880 --> 0:16:26.000 already been stemming from the uncertainty that Brexit has introduced. Yes, sure, 0:16:26.080 --> 0:16:28.040 so we we've done some analysis on this and it 0:16:28.680 --> 0:16:31.520 really comes down to what's your counter factual um and 0:16:31.640 --> 0:16:33.760 the way we take We take quite a simple approach 0:16:33.800 --> 0:16:36.760 and just say what we have forecast had the UK 0:16:37.560 --> 0:16:40.840 not decided to leave the European Union, and our numbers 0:16:40.880 --> 0:16:42.960 suggests that the UK is about at the moment, it 0:16:43.000 --> 0:16:45.240 is about one per cent smaller than it otherwise would 0:16:45.240 --> 0:16:48.680 have been. Now, you're quite right, it's uncertainty that's had 0:16:48.720 --> 0:16:51.520 an effect, especially on business investment in the United Kingdom. 0:16:51.960 --> 0:16:54.040 But it's also this drop in the pound that's fed 0:16:54.080 --> 0:16:57.640 through to inflation and that squeeze incomes in the UK. 0:16:57.800 --> 0:17:00.560 It's made things a lot more expensive for consumers and 0:17:00.600 --> 0:17:03.440 that's seeing consumer spending slow. So it's those two effects 0:17:03.480 --> 0:17:05.960 really that have that have seen the economy slow. But 0:17:06.000 --> 0:17:09.560 our number is about one of GDP, so or the 0:17:09.640 --> 0:17:11.520 economy we think about one percent of g d P 0:17:11.720 --> 0:17:14.280 smaller than it otherwise would have been. What do you 0:17:14.359 --> 0:17:17.480 believe the reaction or the next moves on the part 0:17:17.520 --> 0:17:19.840 of the Bank of England are going to be given 0:17:19.840 --> 0:17:23.040 this scenario. So it's really difficult for the Bank of 0:17:23.080 --> 0:17:27.320 England because they've been struggling with this uh, this overshoot 0:17:27.359 --> 0:17:29.520 of inflation. So inflation has gone up at the end 0:17:29.520 --> 0:17:31.600 of last year it's up at three percent in the UK, 0:17:31.800 --> 0:17:34.359 but as I say, that was all sterling driven and 0:17:34.400 --> 0:17:37.359 the Bank of Englan's target's actually two percent. But at 0:17:37.359 --> 0:17:39.240 the same time they've had a slowing economy, so you've 0:17:39.240 --> 0:17:42.280 had the monetary policy maker's nightmare. It's the trade off. 0:17:42.320 --> 0:17:44.679 They've got surging inflation, you've got a slowing economy. What 0:17:44.840 --> 0:17:48.399 you do um in the immediate aftermath of the Brexit vote, 0:17:48.600 --> 0:17:52.440 they loosen policy and quite significantly. But back in November 0:17:52.880 --> 0:17:56.359 they lifted rates very marginally by twenty five basis points 0:17:56.359 --> 0:17:59.240 and took back some of that stimulus. And now we 0:17:59.320 --> 0:18:02.480 think they're nex meeting which comes on the second of August, 0:18:02.480 --> 0:18:05.320 they're going to lift rates again. The unemployment rate in 0:18:05.359 --> 0:18:09.360 the United Kingdoms at a forty two year low. Growth 0:18:09.440 --> 0:18:12.520 we saw figures today that showed growth likely to rebound 0:18:12.520 --> 0:18:15.560 in the second quarter UM and inflation is coming down 0:18:15.560 --> 0:18:18.040 but it's still above the two percent target, and pay 0:18:18.080 --> 0:18:20.280 growth is picking up. So all of those factors together 0:18:20.320 --> 0:18:22.480 we think their next move is actually gonna come in 0:18:22.520 --> 0:18:24.680 a couple of weeks time, on the second of August. 0:18:24.880 --> 0:18:27.400 All right, although the manufacturing get out of the UK 0:18:27.920 --> 0:18:33.199 were somewhat disappointing, right well, I mean the manufacturing sector 0:18:33.240 --> 0:18:37.040 groom month or month. It was the broader factory sector, 0:18:37.040 --> 0:18:39.280 you're right, did contract, But part of that was due 0:18:39.359 --> 0:18:43.400 to erratic factors. One which is the it's been very 0:18:43.400 --> 0:18:46.240 hot weather here in the UK for once, and the weather. 0:18:46.440 --> 0:18:48.720 I love the blaming of the weather. It's always a 0:18:48.760 --> 0:18:53.960 good thing to go to. I would just say I 0:18:54.359 --> 0:18:58.160 was watching our television coverage earlier today and Tom Keene 0:18:58.880 --> 0:19:03.479 was at the Parliament Square in front of Westminster and 0:19:03.560 --> 0:19:07.800 you could see all the grass has decidedly gone brown 0:19:07.920 --> 0:19:12.080 because of this hot Alright, alright, so whether weather matters, Dan, 0:19:12.400 --> 0:19:14.520 just just real quick here, I want to get your sense, 0:19:14.520 --> 0:19:16.639 going back to what you were saying, the form of 0:19:16.760 --> 0:19:20.520 Brexit matters quite a bit. Do you see a much 0:19:20.600 --> 0:19:23.239 greater likelihood that we are going to get a so 0:19:23.320 --> 0:19:26.800 called no deal Brexit which would ultimately remove in your prediction, 0:19:27.280 --> 0:19:29.600 about seven percent of GDP annually by the end of 0:19:31.760 --> 0:19:34.880 At the moment, I think there is a risk simply 0:19:34.920 --> 0:19:38.120 because of what's happened in the last twenty four hours. 0:19:38.119 --> 0:19:41.439 It's quite clear in the UK cabinet too, of the 0:19:41.440 --> 0:19:45.840 most prominent Brexiteers have left, the resigned from the UK 0:19:45.880 --> 0:19:51.760 Cabinet and you've got a lot of hardline Conservative lawmakers. 0:19:51.760 --> 0:19:54.080 So that's the party who are empower in the UK, 0:19:54.359 --> 0:19:57.879 who are quite keen to have a very clean break 0:19:58.880 --> 0:20:01.720 from the European Union. And now if they decide to 0:20:01.840 --> 0:20:06.080 challenge to reason as leadership, um, then it's quite possible 0:20:06.080 --> 0:20:11.160 that you end up getting a very uh anti EU 0:20:11.320 --> 0:20:14.280 or the pro Brexit leader in the Tory Party, and 0:20:14.280 --> 0:20:17.199 that lifts the chances quite significantly of a of a 0:20:17.320 --> 0:20:19.960 harder or even a no deal Brexit. Well, thank you 0:20:20.040 --> 0:20:21.760 so much. Unfortunately we've got to leave it there, but 0:20:21.760 --> 0:20:25.240 we'll talk with you soon again about this issue. Dan Hanson, 0:20:25.320 --> 0:20:29.919 UK economist for Bloomberg Economics talking all about the various 0:20:29.920 --> 0:20:47.320 scenarios and effects of Brexit. Tessa shares up nearly two 0:20:47.359 --> 0:20:50.639 percent today, following a three percent gaining yesterday after news 0:20:50.640 --> 0:20:55.399 came out today that the company is planning a Chinese 0:20:55.640 --> 0:20:59.840 auto manufacturing plant with the capacity to produce five hundred 0:21:00.200 --> 0:21:03.880 thousand cars. Joining us now, Jamie Butter's US autos editor 0:21:03.960 --> 0:21:07.520 for Bloomberg News, joining us from the Detroit bureau. Jamie, 0:21:07.840 --> 0:21:11.080 this is a really big deal. Explain why. I mean, 0:21:11.119 --> 0:21:13.480 there's there's sort of two sides to this. Tesla needs 0:21:13.560 --> 0:21:15.920 the sort of production haft that they could potentially get 0:21:15.960 --> 0:21:18.160 from this, but also tell us what it means about 0:21:18.200 --> 0:21:21.800 what's going on between the US and China. Well, yeah, 0:21:21.840 --> 0:21:24.000 those are those some pretty big things. So yeah, I mean, 0:21:24.040 --> 0:21:27.480 Tesla you know, has been so it's small, it's still 0:21:27.520 --> 0:21:29.560 kind of starting up. They really only have the one 0:21:30.080 --> 0:21:33.040 car factory this, you know, to get one in China 0:21:33.280 --> 0:21:35.400 and then they'll announce by the end of the year, 0:21:35.480 --> 0:21:39.399 should announce some plans for a third assembly planned in Europe. 0:21:39.640 --> 0:21:41.879 You know, that really can go a long way towards 0:21:41.920 --> 0:21:44.960 them really kind of becoming a real automaker or something 0:21:45.119 --> 0:21:49.159 stable enough to survive a recession, um big enough to 0:21:49.320 --> 0:21:52.480 really gain some economies of scale. So it's this is 0:21:52.480 --> 0:21:54.760 an important step. We've kind of seen it coming, he's 0:21:54.760 --> 0:21:56.639 been talking, I've been working on it for more than 0:21:56.680 --> 0:21:59.280 a year. But to actually get it to come together 0:21:59.400 --> 0:22:02.080 as a Holy owned Tesla plant in China, it's a 0:22:02.080 --> 0:22:04.520 big step for Tesla. Of course, they've got to pay 0:22:04.520 --> 0:22:06.919 for it, and there's some other issues there. But it 0:22:07.040 --> 0:22:09.640 is very interesting when you think about it in light 0:22:09.680 --> 0:22:12.879 of all the trade chaos. You know that the Trump 0:22:12.920 --> 0:22:17.320 administration is created and we're seeing rising tariffs in the 0:22:17.440 --> 0:22:21.000 US US against China made products in China against US 0:22:21.080 --> 0:22:24.679 made products including automobiles as well as aluminum and steel, 0:22:24.720 --> 0:22:27.359 and all these other things going on. And so here's 0:22:27.840 --> 0:22:32.000 the you know, the youngest publicly traded US automaker UH 0:22:32.400 --> 0:22:35.439 announcing plans to build a factory and basically double their 0:22:35.480 --> 0:22:39.680 capacity by building a factory in in Shanghai outside of Shanghai, 0:22:40.160 --> 0:22:43.480 uh so, which which will help it avoid the tariffs 0:22:43.480 --> 0:22:46.080 on both sides of the deal. But it'll be really 0:22:46.320 --> 0:22:48.760 I'll be really curious to see if President Trump has 0:22:48.760 --> 0:22:52.000 anything to say about it. He's criticized Harley Davidson for 0:22:52.040 --> 0:22:55.359 their plans to move some work outside of the US 0:22:55.440 --> 0:22:59.080 and order to avoid Europe's tariffs against US made products. 0:22:59.640 --> 0:23:02.520 This is gonna take any work away from the US. 0:23:02.720 --> 0:23:07.199 But sometimes the President gets real sensitive about American companies 0:23:07.400 --> 0:23:10.520 creating manufacturing jobs anywhere other than the US. Of a 0:23:11.600 --> 0:23:14.800 Jamie Butters, Is it at all ironic that on this day, 0:23:14.840 --> 0:23:18.600 when we're talking about China and Tesla, that Tesla laid 0:23:18.600 --> 0:23:25.200 off nine percent of its workforce. Um? Is it ironic? Well? Oh, 0:23:25.320 --> 0:23:27.840 and also I'll give you a moment to ponder that. 0:23:28.040 --> 0:23:32.800 As we recall in there was a story about how 0:23:32.840 --> 0:23:36.640 Tesla was going to produce electric vehicles in China. Oh 0:23:36.680 --> 0:23:42.560 but wait, that story surfaced again in and if they 0:23:42.600 --> 0:23:46.359 had actually started building that plant in it would already 0:23:46.400 --> 0:23:53.280 be finished by now. Yeah. Uh, but they Tesla has 0:23:53.359 --> 0:23:56.159 moved at a very rapid pace to grow at the 0:23:56.240 --> 0:23:58.800 rate they have, and I don't know if they could 0:23:58.840 --> 0:24:03.679 have had the money or the uh you know, intellectual 0:24:03.760 --> 0:24:06.560 energy to need it to do all that. Uh. You know, 0:24:06.560 --> 0:24:09.480 Ellen Musk really does everything very his very hands on. 0:24:09.960 --> 0:24:12.840 Uh so having another operation on another continent may have 0:24:12.920 --> 0:24:15.520 been too much for them at the time. It is interesting, 0:24:15.560 --> 0:24:18.520 you're right. I mean, they're gonna add thousands, presumably thousands 0:24:18.520 --> 0:24:20.480 of jobs. We don't know how many, but some number 0:24:20.480 --> 0:24:25.240 of thousands in China, and they're cutting uh thousands, you 0:24:25.320 --> 0:24:28.639 know about was about three thousand, mostly in the US. 0:24:29.040 --> 0:24:31.040 You know, it seems that a lot of the US 0:24:31.119 --> 0:24:34.719 cutbacks are related to the Solar City operations. We're certainly 0:24:34.760 --> 0:24:37.280 seeing a lot you know, the retail folks and installers 0:24:37.400 --> 0:24:40.399 from Solar City. So it may just be more of 0:24:40.440 --> 0:24:42.560 a business alignment. A lot, you know, a lot of 0:24:42.600 --> 0:24:45.240 things are fungible. I mean they're saying, you know, this 0:24:45.280 --> 0:24:48.040 plant is only going to produce vehicles for China. The 0:24:48.280 --> 0:24:50.480 California plant will produce for the rest of the world, 0:24:50.560 --> 0:24:53.120