WEBVTT - Bloomberg Wall Street Week - July 12th, 2024 0:00:00.280 --> 0:00:04.720 This is Bloomberg Wall Street Week. The global push into infrastructure, 0:00:04.760 --> 0:00:08.480 breaking the IPO logjam in text. The financial stories that 0:00:08.560 --> 0:00:11.680 sheepe are work cutting inflation without losing jobs. Do we 0:00:11.800 --> 0:00:14.440 need rate cuts? And if so? How many? Investing in 0:00:14.480 --> 0:00:16.120 a time of geopolitical turmoil. 0:00:16.200 --> 0:00:18.560 Through the eyes of the most influential voices. 0:00:18.720 --> 0:00:22.480 Ten Rogueff economists at Harvard former FDIC had Shila Bert 0:00:22.640 --> 0:00:27.360 ge CEO, Larry Kulp, San Francisco FED President Mary Daily Bloomberg. 0:00:26.840 --> 0:00:30.240 Wall Street Week with David Weston from Bloomberg Radio. 0:00:30.360 --> 0:00:34.159 The White House drama continues, bank earnings get started, and 0:00:34.280 --> 0:00:37.960 Chair Powell walks a line. This is Bloomberg Wall Street Week. 0:00:38.159 --> 0:00:42.080 I'm David Weston. This week Professor Kate Judge on the 0:00:42.159 --> 0:00:45.240 Bank Reserve regulations. Jay Powell says, are on the way. 0:00:45.520 --> 0:00:47.519 It certainly looks like what we're going to end up with? 0:00:48.040 --> 0:00:49.960 Is it a very different suite of reform? 0:00:50.360 --> 0:00:53.560 And Mark Soter of EGI the man picking up the 0:00:53.600 --> 0:00:56.480 baton from legendary investor Sam Zell. 0:00:56.640 --> 0:00:59.600 And Miss Malatty was my mentor and a great human being. 0:01:00.400 --> 0:01:13.800 We've all been in the roles for years. 0:01:15.520 --> 0:01:18.039 We begin with the US economy after a week when 0:01:18.120 --> 0:01:21.119 Chair Powell said he was gaining confidence but not yet 0:01:21.240 --> 0:01:24.440 enough to claim success and controlling inflation. And then on Thursday, 0:01:24.600 --> 0:01:28.160 us CPI numbers seem to underscore the progress he is 0:01:28.200 --> 0:01:31.479 seeing from an investor's perspective on the economy. We welcome 0:01:31.520 --> 0:01:34.360 back now Scott Besson. He is founder and CEO of 0:01:34.480 --> 0:01:36.759 Key Square Capitalist. So Scott, great to have you back 0:01:36.760 --> 0:01:38.600 with us. David always good to be with you. So 0:01:38.640 --> 0:01:40.480 we heard from j Powell this week and he said, 0:01:40.520 --> 0:01:43.080 look at we're looking at something in the two zero 0:01:43.080 --> 0:01:45.800 point five range, and inflation going in the right direction, 0:01:46.160 --> 0:01:49.600 and labor market's still pretty strong. Growth is pretty strong. 0:01:49.840 --> 0:01:51.640 It looks like a pretty good economy, is he right? 0:01:52.360 --> 0:01:56.040 I think if we look at the aggregate numbers, aggregates 0:01:56.040 --> 0:01:59.200 are good. But you know Chinese have a central plan 0:01:59.280 --> 0:02:00.680 and you know they tell us they have a five 0:02:00.720 --> 0:02:06.800 point five percent the GDP target. So GDP looks good, 0:02:06.880 --> 0:02:10.600 but underneath the hood, you know, there's some alarming things. 0:02:11.400 --> 0:02:14.720 The last job's number, fifty percent of the jobs were 0:02:14.760 --> 0:02:18.359 created by the government. If we have government adjacent which 0:02:18.440 --> 0:02:21.840 is healthcare and education, it was up to about eighty percent. 0:02:22.560 --> 0:02:28.360 Inflation is slowly coming down. The shelter number came down 0:02:28.400 --> 0:02:30.799 this month, and you know, I don't think the FED 0:02:30.880 --> 0:02:32.880 needs to be in a hurry. They had been with 0:02:32.960 --> 0:02:35.440 this so called dot pod, which I think they should 0:02:35.440 --> 0:02:38.280 get rid of because it's becoming an embarrassment forum. They'd 0:02:38.320 --> 0:02:41.840 been at three cuts for twenty twenty four. Just at 0:02:41.840 --> 0:02:45.239 the June meeting they adjusted to one cut and now 0:02:45.280 --> 0:02:48.760 the market is pricing in two or three for the year. 0:02:49.040 --> 0:02:52.760 So it's all over the place. So having been very wrong, 0:02:53.080 --> 0:02:58.600 why not take your time, make sure and see what happens. 0:02:58.680 --> 0:03:01.000 So let's talk about what you think second term with 0:03:01.120 --> 0:03:03.720 Donald Trump might mean for some of those very factors 0:03:03.720 --> 0:03:06.520 you're talking about, particularly that bottom fifty percent, the people 0:03:06.560 --> 0:03:09.600 who really feel that they're hurting right now. What would 0:03:09.680 --> 0:03:12.000 he do given this economy, given that's pretty good for 0:03:12.200 --> 0:03:14.120 most measurements, what would you do to really make it 0:03:14.160 --> 0:03:14.720 that much better? 0:03:14.960 --> 0:03:18.520 Well, look, I think we're going to have to reprivatize 0:03:18.560 --> 0:03:21.560 the economy because this is running on government spending where 0:03:21.560 --> 0:03:27.239 at it's seven percent peacetime non recessionary budget deficit. This 0:03:27.760 --> 0:03:31.400 is unheard of. I have a peace out today is 0:03:31.440 --> 0:03:35.840 saying for the first time, interest costs are exceeding or 0:03:35.880 --> 0:03:40.040 defense spending. So the spending is now becoming also a 0:03:40.120 --> 0:03:43.800 national security issue. So I think we are going to 0:03:43.840 --> 0:03:48.000 go back to under Donald Trump, the private sector push 0:03:48.080 --> 0:03:52.000 the economy. We didn't get inflation because the private sector 0:03:52.520 --> 0:03:57.800 impetus was met with deregulation. Under the Biden economy, they 0:03:57.920 --> 0:04:02.240 had big government spend, but it was met by increased regulation. 0:04:02.840 --> 0:04:04.800 That's the formula for inflation. 0:04:04.920 --> 0:04:06.720 There's a lot of talk, as you know, about getting 0:04:06.760 --> 0:04:10.160 the deficit under control, but President Trump in his first 0:04:10.240 --> 0:04:12.320 term did not get the deficit under control. I mean, 0:04:12.480 --> 0:04:14.600 if you look at this is the Committee for Responsible 0:04:14.640 --> 0:04:18.080 Federal Budget, they say under his administration, we added eight 0:04:18.080 --> 0:04:21.080 point four trillion dollars, and four point three trillion of 0:04:21.120 --> 0:04:23.600 that was not COVID related. We added a lot under 0:04:23.600 --> 0:04:26.480 Biden as well, but actually substantially less than under President Trump. 0:04:26.560 --> 0:04:31.000 Yeah, well, they're using CBO projections, not the actual numbers. 0:04:31.160 --> 0:04:33.480 We'll talk about taxes. That's also a concern. In that 0:04:33.520 --> 0:04:36.600 piece you refer to the Bob Rugen and Ken channel, 0:04:36.960 --> 0:04:40.359 they actually said there's a problem with the tax extending 0:04:40.360 --> 0:04:42.920 the tax cuts that we had back in twenty seventeen. 0:04:43.000 --> 0:04:45.960 If you extended that that would really substantially increase the 0:04:46.000 --> 0:04:48.520 deficit because only and I think this is a CBO number. 0:04:48.520 --> 0:04:51.000 You correct me if it's wrong, but only twenty percent 0:04:51.080 --> 0:04:52.960 of those tax cuts actually paid for themselves. 0:04:53.080 --> 0:04:57.159 Well, I think this summer around, and I think with 0:04:57.240 --> 0:04:59.520 Trump one point zero, we got to stop the clock 0:04:59.760 --> 0:05:03.400 at the end of twenty nineteen because COVID was a 0:05:03.440 --> 0:05:07.240 game changer. And I think that there is big appetite 0:05:07.400 --> 0:05:10.839 for pay fors this time. So I think we would 0:05:10.839 --> 0:05:16.040 get this Orwellian named Inflation Reduction Act under control. I 0:05:16.080 --> 0:05:18.719 think you can say a trillion on that. If you 0:05:19.600 --> 0:05:24.440 empower states on Medicaid, that's another trillion. I think that 0:05:24.440 --> 0:05:28.560 there will be some tariff income. So I think that 0:05:28.640 --> 0:05:32.560 there is a big appetite to reinstate the tax cuts. 0:05:32.680 --> 0:05:35.000 But with pay fors, well, well, terrorists, it would be 0:05:35.040 --> 0:05:37.200 income to the federal government, but the money would come 0:05:37.200 --> 0:05:39.599 out of consumers pockets. We did not, I mean, China 0:05:39.640 --> 0:05:43.440 doesn't pay that money consumers paid, and it might stow inflation. 0:05:43.880 --> 0:05:47.800 Well, look, I think that if you are if we 0:05:47.880 --> 0:05:51.760 have forty or fifty dollars oil and we have deregulation, 0:05:52.240 --> 0:05:55.919 we have higher growth, we control immigration at the border 0:05:56.320 --> 0:06:01.800 because this unfedered immigration. Now, the economics profession had for 0:06:01.920 --> 0:06:05.880 years said that somehow the one thing that didn't they 0:06:06.360 --> 0:06:10.040 respond to supply and demand was immigrant labor. Now they're saying, 0:06:10.080 --> 0:06:16.400 oh no, it does suppress inflation, increases economic growth. So 0:06:16.520 --> 0:06:19.320 I think if we secure the border, the bottom twenty 0:06:19.320 --> 0:06:22.520 five percent of Americans will see wage increases. 0:06:23.000 --> 0:06:25.080 President Trump is talking about more than securing the border. 0:06:25.080 --> 0:06:26.719 He certainly has been talking about that for a long time. 0:06:26.839 --> 0:06:29.400 He's also talking about deporting a lot of people who 0:06:29.480 --> 0:06:33.200 are not documented here. Now, wouldn't that reduce the workforce 0:06:33.279 --> 0:06:35.800 and therefore increase wage costs and inflation? 0:06:37.000 --> 0:06:40.680 It could for the bottom twenty five percent. Those people 0:06:40.720 --> 0:06:44.720 are not working in Microsoft and not even in middle 0:06:44.720 --> 0:06:47.880 income jobs. And I don't know about you, I've got 0:06:48.120 --> 0:06:50.920 no problem at the bottom twenty five percent gets a 0:06:51.000 --> 0:06:54.280 much deserved waveg increase. You know, under Trump, one point 0:06:54.360 --> 0:06:58.520 zero working class Americans did better than the top ten 0:06:58.600 --> 0:07:02.719 or twenty percent the Joe Biden economy. It's been great 0:07:03.480 --> 0:07:07.640 in the Biden economy. You either own assets or you don't. 0:07:07.800 --> 0:07:11.000 The stock market set a record high housing prices or 0:07:11.000 --> 0:07:14.600 a record high. Bottom fifty percent of Americans have debt. 0:07:15.160 --> 0:07:18.840 Most households couldn't meet a five hundred dollars medical emergency, 0:07:19.120 --> 0:07:21.120 and I think it'd be great if that group got 0:07:21.120 --> 0:07:21.880 a wage increase. 0:07:22.560 --> 0:07:25.000 Fascinating. We're always great to talk with you, Scott, Thank 0:07:25.040 --> 0:07:27.920 you so much. That is Scott Bessant of Key Squared Group. 0:07:28.720 --> 0:07:32.120 In his testimony before Congress this week, Fedchair Jpole spent 0:07:32.200 --> 0:07:34.640 a fair amount of time on those proposed Basil three 0:07:34.640 --> 0:07:38.200 regulations and specifically when we can see a new version, 0:07:38.480 --> 0:07:41.560 given the agency's decision that more than just some tweaks 0:07:41.640 --> 0:07:44.680 were needed to what the agencies first proposed to take 0:07:44.760 --> 0:07:47.080 us through. Where we are, we welcome back now, Catherine Judge. 0:07:47.120 --> 0:07:49.760 She's professor at the Columbia Law School, So professor, thanks 0:07:49.800 --> 0:07:51.960 so much for being back with us. We don't know 0:07:52.000 --> 0:07:53.240 what they're going to come out with. It looks like 0:07:53.320 --> 0:07:56.120 later on this year, won't go into effect till sometimes 0:07:56.160 --> 0:07:58.400 next year. But do we think basically they are cut 0:07:58.400 --> 0:07:59.840 back on some of these reserve requirements. 0:08:00.320 --> 0:08:02.720 That is certainly what it looks like right now. Powell 0:08:02.720 --> 0:08:04.080 has said on multiple. 0:08:03.680 --> 0:08:07.120 Occasions that we should expect broad and material changes. 0:08:07.800 --> 0:08:09.120 Again, this is not just the FAED. 0:08:09.160 --> 0:08:11.680 The FED has to work closely with the FDIC and 0:08:11.720 --> 0:08:14.320 the OCC But it certainly looks like what we're going 0:08:14.320 --> 0:08:16.920 to end up with is a very different suite of 0:08:16.960 --> 0:08:19.600 reforms than those that were proposed about a year ago. 0:08:19.800 --> 0:08:21.960 So there are specifics with regulation like this. It's come 0:08:22.000 --> 0:08:23.800 downe on Pike and we'll find out where it ends up. 0:08:24.000 --> 0:08:26.960 But we also had a pretty momentous I think term 0:08:26.960 --> 0:08:29.560 in the Supreme Court when it comes to regulation, not 0:08:29.640 --> 0:08:34.080 necessarily involving bank regulation, but about regulation overall. But particularly 0:08:34.120 --> 0:08:36.439 the thing if you were focused on, is Chevron. The 0:08:36.600 --> 0:08:39.760 overturning the Chevron doctrine, in which the courts would defer 0:08:40.000 --> 0:08:43.360 to the agency's determpretation of the statute. Could that affect 0:08:43.400 --> 0:08:45.240 banking regulation as well? 0:08:45.440 --> 0:08:46.760 It certainly could and will. 0:08:46.920 --> 0:08:50.440 I mean, if you look back historically, Chevron was actually 0:08:50.480 --> 0:08:54.880 one of the key vehicles that facilitated deregulation during the 0:08:54.960 --> 0:08:58.040 nineteen eighties and nineties. So, as you just said, the 0:08:58.040 --> 0:09:01.439 core idea of the Chevron doctrine is when a statute 0:09:01.480 --> 0:09:04.240 is ambiguous, that's going to be treated as a delegation 0:09:04.840 --> 0:09:08.959 to the relevant agency to figure out the best interpretation 0:09:09.240 --> 0:09:13.600 under the circumstances that they're facing using their expertise, and 0:09:13.640 --> 0:09:16.080 so in the nineteen nineties that was a mechanism through 0:09:16.080 --> 0:09:18.360 which they said, look, look banks can have to engage 0:09:18.400 --> 0:09:21.760 in a far broader array of activities than we previously thought. 0:09:22.559 --> 0:09:24.760 In the short run, I think banks are celebrating this 0:09:24.800 --> 0:09:27.080 as a win. Business is celebrating this is a win. 0:09:27.600 --> 0:09:29.880 Longer term, it's really hard to know. It really creates 0:09:29.920 --> 0:09:33.360 a lot more legal uncertainty. It does reduce the relative 0:09:34.320 --> 0:09:38.559 certainty regulators are going to have regarding the whether or 0:09:38.600 --> 0:09:41.040 not their rules are going to be respected, and it 0:09:41.080 --> 0:09:42.200 puts courts in the. 0:09:42.240 --> 0:09:44.640 Driving seat in a way that I think could really 0:09:44.640 --> 0:09:45.280 shake things up. 0:09:45.600 --> 0:09:46.960 So I'm going to ask you something to do something 0:09:46.960 --> 0:09:48.320 you're not going to want to do. Is just speculate, 0:09:48.480 --> 0:09:52.199 but we don't know. But you teach regulation and legislation 0:09:52.320 --> 0:09:56.160 with respective particularly financial institutions. As we look at various 0:09:56.200 --> 0:09:58.760 regulations that are pending, including the Basil three, but not 0:09:58.800 --> 0:10:01.240 limited to that. Right now, do we think that that 0:10:01.320 --> 0:10:03.400 may affect the way they go about making their rules, 0:10:03.440 --> 0:10:06.360 because now they're very a conscious effect. They're going to 0:10:06.360 --> 0:10:08.640 have a court of some sort looking over their shoulder, 0:10:08.679 --> 0:10:09.120 right quick. 0:10:10.360 --> 0:10:11.240 Yeah, So two things. 0:10:11.280 --> 0:10:13.400 One, I think it's certainly going to effect the way 0:10:13.440 --> 0:10:17.680 that they undertake rulemaking Basle three and otherwise. 0:10:18.120 --> 0:10:21.760 That's partly because again lower Bright just overall Chevron, but 0:10:21.800 --> 0:10:23.040 there are also a number. 0:10:23.000 --> 0:10:27.040 Of other significant Supreme Court decisions that really allow courts 0:10:27.080 --> 0:10:31.280 to scrutinize far more closely the decisions that regulators are 0:10:31.320 --> 0:10:34.040 making and the processes through which they're making those decisions. 0:10:34.480 --> 0:10:36.319 So there is a risk it's going to make regulators 0:10:36.360 --> 0:10:39.520 a little more gun shy and a little more worried 0:10:39.559 --> 0:10:42.520 about making sure they've crossed every single ty and have 0:10:42.559 --> 0:10:43.240 dotted all of. 0:10:43.200 --> 0:10:45.480 Their eyes before they problet get a regulation. 0:10:46.360 --> 0:10:50.560 That being said, bank regulators are also bank supervisors, and 0:10:50.559 --> 0:10:53.160 they have an ongoing duty to really promote the safety 0:10:53.240 --> 0:10:56.599 and soundness of the institutions that they oversee. So you 0:10:56.640 --> 0:10:58.680 could end up in a world where regulation is not 0:10:58.760 --> 0:11:02.079 able to keep up with potential changes in market dynamics, 0:11:02.400 --> 0:11:04.320 or risk that supervisors are. 0:11:04.200 --> 0:11:05.640 Seeing a lot more work. 0:11:05.679 --> 0:11:09.120 It's done through that supervisory process, which is far less 0:11:09.120 --> 0:11:10.880 transparent and far less uniform. 0:11:11.040 --> 0:11:13.000 Well, so this is a fascinating point I had not 0:11:13.000 --> 0:11:15.640 already thought about. It may shift away from the regulatory 0:11:15.679 --> 0:11:17.880 approach where they have a notice in comment every comments 0:11:17.880 --> 0:11:20.200 and we know what's going on. As opposed to i'll 0:11:20.240 --> 0:11:23.960 call it prosecutorial discretion of a sort through the supervisory function. 0:11:24.200 --> 0:11:27.440 That's a very different kettle of fish. 0:11:27.640 --> 0:11:29.760 It is a very different kettle of fish. It's one 0:11:29.800 --> 0:11:31.680 banks have had to deal with for a long time. 0:11:32.040 --> 0:11:35.440 But the question is relative important. One of the ways 0:11:35.520 --> 0:11:39.680 of understanding Chevron, particularly as it's been narrowed in recent years, 0:11:40.080 --> 0:11:44.000 is it created a real carrot that really encourage regulators 0:11:44.080 --> 0:11:48.240 to undertake noticing comment rulemaking, which is very time consuming, 0:11:48.480 --> 0:11:51.719 very resource intensive process, because at the end they knew 0:11:51.760 --> 0:11:54.319 they were going to get this carrot called Chevron difference. 0:11:54.920 --> 0:11:57.520 Now that you've taken that carrot away, it puts a 0:11:57.520 --> 0:11:59.560 lot more onus on the regulators to think, well, what 0:11:59.640 --> 0:12:02.000 is the right tool of the very tools I have 0:12:02.080 --> 0:12:05.160 available for trying to achieve a particular end. It still 0:12:05.240 --> 0:12:08.120 might be regulation in some set of circumstances, but it 0:12:08.120 --> 0:12:10.960 could also be supervision for banks, to be things like 0:12:10.960 --> 0:12:14.400 the living will process that we've seen being a mechanism 0:12:14.440 --> 0:12:17.040 through which you get kind of change over time. It 0:12:17.080 --> 0:12:20.040 could also, for something like the CFPB, be policy making 0:12:20.080 --> 0:12:23.920 through enforcement rather than clarify with certain terms mean use 0:12:24.000 --> 0:12:26.520 enforcement policy be a mechanism to which you make policy. 0:12:26.920 --> 0:12:29.400 So again, I think it certainly changes. 0:12:29.720 --> 0:12:33.520 The world around regulation by rulemaking, but that doesn't mean 0:12:33.600 --> 0:12:35.240 long term it's really a win for business. 0:12:35.520 --> 0:12:37.719 Professor has always a great treat to have you with us. 0:12:38.000 --> 0:12:43.079 That is Professor Catherine Judge of Columbia. Coming up, Sir 0:12:43.200 --> 0:12:46.600 Kiir Starmer has won his large majority in the British Parliament. 0:12:46.800 --> 0:12:49.079 Now what's he going to do with it? We ask 0:12:49.200 --> 0:12:52.959 former UK Ambassador to the United States, Sir Peter Westwickotte. 0:12:53.679 --> 0:12:55.880 That's next on Wall Street Week on Bloomberg. 0:12:58.240 --> 0:13:02.400 This is Bloomberg Will Street Week with David Weston from 0:13:02.559 --> 0:13:05.320 Bloomberg Radio. 0:13:10.080 --> 0:13:12.920 This is Walterree Week. I'm David Weston. Last week saw 0:13:12.960 --> 0:13:16.320 a labor government sweep into power after spending many years 0:13:16.320 --> 0:13:19.040 in the wilderness, but the size of the majority did 0:13:19.080 --> 0:13:22.600 not necessarily indicate how much the new Prime Minister, Sir 0:13:22.679 --> 0:13:25.760 Kiir Starmer can do with it. We turned to someone 0:13:25.760 --> 0:13:28.480 who spent his career in the British Foreign Service as 0:13:28.520 --> 0:13:31.840 ambassador to the United States, France and Turkey for his 0:13:32.000 --> 0:13:34.280 views on the nature of the win and what we 0:13:34.320 --> 0:13:35.280 can expect next. 0:13:37.120 --> 0:13:39.480 The interesting thing is that although they've got a huge 0:13:39.520 --> 0:13:44.040 majority and the working majority will be of one hundred 0:13:44.040 --> 0:13:47.840 and seventy or so, they've only in fact received slightly 0:13:47.920 --> 0:13:51.160 less than two percent more votes from the British public 0:13:51.480 --> 0:13:54.559 than they did last time. So what's happened is not 0:13:54.679 --> 0:13:57.520 so much that there is an overwhelming vote of confidence 0:13:57.520 --> 0:14:00.960 in the Labor Party. It is a sense that throw 0:14:01.000 --> 0:14:03.320 the bombers out if you like, that the Conservatives had 0:14:03.440 --> 0:14:05.360 had run out of road and run out of trust 0:14:05.920 --> 0:14:09.600 and run out of support, and people have to some 0:14:09.640 --> 0:14:12.680 extent voted for the Labor Party. Certainly ten percent more 0:14:12.760 --> 0:14:16.240 voted for Labor than for Conservatives, but there's also been 0:14:16.440 --> 0:14:21.080 fourteen percent for the right wing anti European Party of 0:14:21.160 --> 0:14:25.600 Nigel Farage, and the Scottish Nationalists lost big time to 0:14:25.760 --> 0:14:30.160 Labor in Scotland, and the Liberal Democrats have won more seats. 0:14:30.200 --> 0:14:33.400 They're going to have seventy one seats in the new parliament, 0:14:33.520 --> 0:14:36.000 which is a historic high. They've never done that well 0:14:36.040 --> 0:14:39.040 since the party came into being, So everybody has done 0:14:39.080 --> 0:14:42.640 well except for the Conservatives. 0:14:42.160 --> 0:14:45.080 Which leads to at least an interesting question, which is 0:14:45.400 --> 0:14:47.440 normally you think about a mandate when you have this 0:14:47.680 --> 0:14:50.840 larger majority, if it was a vote against the Conservatives 0:14:50.880 --> 0:14:54.080 more than it was for Labor. When it comes to policies, 0:14:54.560 --> 0:14:58.320 what did the British people vote for? In terms of policies. 0:14:58.680 --> 0:15:01.320 The slogan which the leader of the Labor Party came 0:15:01.400 --> 0:15:04.440 up with after road testing a number of different options, 0:15:04.800 --> 0:15:10.680 was one word change, and their focus groups and political 0:15:10.720 --> 0:15:13.640 scientists told them that that was what the British electorate 0:15:13.760 --> 0:15:17.200 really wanted to hear. These guys, the Conservatives have been 0:15:17.200 --> 0:15:20.240 in power for the last fourteen years. We've had COVID, 0:15:20.560 --> 0:15:23.800 We've had Brexit which hasn't gone well. We've got no 0:15:24.080 --> 0:15:27.240 very little economic growth, We've got no productivity, you know, 0:15:27.360 --> 0:15:31.000 investment and exports have been patchy, if not done in 0:15:31.000 --> 0:15:34.720 a whole lot of different issues, and stagnant middle class 0:15:34.720 --> 0:15:37.880 incomes over the last probably twenty years, which has upset 0:15:37.920 --> 0:15:41.080 a lot of people. So they voted for change. They 0:15:41.200 --> 0:15:43.440 voted to get rid of the guys who've been in 0:15:43.520 --> 0:15:47.760 charge for the last fourteen years. But the Labor Party 0:15:47.880 --> 0:15:51.520 was very cautious about not being very specific in terms 0:15:51.520 --> 0:15:53.520 of what that change would bring. You know, they didn't 0:15:53.520 --> 0:15:57.840 want to talk about Brexit, which almost the three quarters 0:15:57.840 --> 0:16:01.040 of the British people now recognized was doesn't mean to 0:16:01.040 --> 0:16:03.080 say three quarters of the British people want to go 0:16:03.120 --> 0:16:05.840 back into the European Union, but most people recoon that 0:16:05.920 --> 0:16:08.520 was a mistake. They didn't really get discussed. The Toriest 0:16:08.520 --> 0:16:10.520 didn't want to talk about it because it was their handiwork, 0:16:10.560 --> 0:16:11.960 and the Labor Party didn't want to talk about it 0:16:12.000 --> 0:16:14.720 because they were frightened of losing votes which had become 0:16:15.080 --> 0:16:19.360 a first time conservative voters and who were traditionally their supporters. 0:16:19.600 --> 0:16:21.640 A change, but not a change in taxes as I 0:16:21.680 --> 0:16:23.760 understand it, We're not going to increase taxes, and yet 0:16:23.880 --> 0:16:27.520 we want to increase growth, productivity and investment. How do 0:16:27.560 --> 0:16:30.040 you do those two things fiscally? Where do you come 0:16:30.120 --> 0:16:31.120 up with the money for that? 0:16:31.640 --> 0:16:33.240 Well, they're going to have a little bit of a 0:16:33.280 --> 0:16:37.400 cushion fiscally because they revised the numbers for growth and 0:16:37.440 --> 0:16:40.840 we're now looking at zero point seven percent for the 0:16:40.880 --> 0:16:43.160 first quarter of this year, whereas people thought it was 0:16:43.360 --> 0:16:46.080 pretty much stagnant. So there's a little bit more growth 0:16:46.640 --> 0:16:49.600 coming in. There is quite a lot less inflation. We 0:16:49.600 --> 0:16:52.200 were up at eleven percent last year at the highest point, 0:16:52.600 --> 0:16:55.640 and we're down at two percent now. There isn't any 0:16:55.680 --> 0:16:59.120 evidence at the moment of productivity increase. Exports have surprised 0:16:59.120 --> 0:17:01.320 people by doing a bit, but particularly of course to 0:17:01.440 --> 0:17:05.280 non European markets, so there's a little bit of extra cushion, 0:17:05.440 --> 0:17:08.359 extra wiggle room coming in there. The other thing David 0:17:08.400 --> 0:17:10.160 to be clear about is that they've said we will 0:17:10.200 --> 0:17:12.240 not be raising income tax and we will not be 0:17:12.359 --> 0:17:16.520 raising corporation tax, but they have not said they were 0:17:16.720 --> 0:17:19.159 and they will not be raising VAT, which is a 0:17:19.200 --> 0:17:22.359 sales tax. But they have not said anything about capital 0:17:22.400 --> 0:17:26.200 gains tax, and they've not said anything about some of 0:17:26.240 --> 0:17:29.560 the other business specific taxes. They've not said anything about 0:17:29.560 --> 0:17:31.800 windfoll taxes for energy companies, which have made a lot 0:17:31.800 --> 0:17:34.439 of money out of the rise of global prices as 0:17:34.440 --> 0:17:38.000 a result of the Ukraine conflict, and so the big 0:17:38.040 --> 0:17:41.000 headline tax issues they've said no, no, no, we won't mess 0:17:41.040 --> 0:17:43.800 with that, but they haven't excluded some other things. And 0:17:43.840 --> 0:17:47.560 they are going to put tax on private education fees, 0:17:47.600 --> 0:17:50.160 which they nobody's ever done before in the United Kingdom, 0:17:50.200 --> 0:17:52.720 which will raise a bit of money. And they have 0:17:52.840 --> 0:17:56.119 done something which the Tories had already done, which was 0:17:56.200 --> 0:17:58.240 to change the non dom as we call it, the 0:17:58.320 --> 0:18:02.919 non domicile tax regime for very wealthy people who have 0:18:02.960 --> 0:18:07.040 an expatriot status and who live in the UK but 0:18:07.119 --> 0:18:09.600 don't get taxed on any of the wealth that they 0:18:09.600 --> 0:18:13.600 have outside Britain. They're changing all that which the Conservatives 0:18:13.600 --> 0:18:15.440 already promised to do it. The labor parties say they'll 0:18:15.480 --> 0:18:18.199 go further. I'm not sure how fuch further they'll go. 0:18:18.600 --> 0:18:20.840 I worry that we might just drive away a lot 0:18:20.880 --> 0:18:22.520 of the wealth that we need for our economy at 0:18:22.520 --> 0:18:25.520 a time when it's still pretty fragile. So there are 0:18:25.520 --> 0:18:28.879 some areas of tax where they've got the option to 0:18:28.960 --> 0:18:31.960 raise more money, but they are scared of being deemed 0:18:32.000 --> 0:18:35.520 to be business unfriendly. And you may have noticed that 0:18:35.640 --> 0:18:38.119 even in the first day or two after the election, 0:18:38.440 --> 0:18:42.200 stock markets rallied Sterling did a bit better. The business 0:18:42.240 --> 0:18:45.679 community at the moment anyway, doesn't seem to be too scared, 0:18:46.200 --> 0:18:48.080 and they probably quite like the idea that with a 0:18:48.160 --> 0:18:51.000 whating great majority there is going to be some political 0:18:51.040 --> 0:18:54.320 stability and maybe some policy stability for the next four 0:18:54.400 --> 0:18:55.080 or five years. 0:18:55.320 --> 0:18:58.439 So Petero's talk about the relationshiptween the United Kingdom and Europe. 0:18:58.720 --> 0:19:00.840 You mentioned the name that must not be named in 0:19:00.880 --> 0:19:03.639 the campaign of Brexit that nobody wanted to talk about. 0:19:03.840 --> 0:19:06.960 What do you anticipate this Labor government might do with 0:19:07.040 --> 0:19:09.760 respect of Brexit. I understand maybe not pull back entirely, 0:19:09.960 --> 0:19:11.520 but maybe modified around the edges. 0:19:12.040 --> 0:19:16.080 Yestarmer has said and so have his other ministers, that 0:19:16.119 --> 0:19:20.480 there will be no return to the Single Market or 0:19:20.480 --> 0:19:24.760 to the Customers Union under a labor government. So that's 0:19:24.800 --> 0:19:27.520 pretty definitive in terms of not turning the clock back 0:19:27.600 --> 0:19:31.520 to pre Brexit days. Was that necessary to ensure that 0:19:31.600 --> 0:19:35.240 they got a substantial majority. Perhaps it may also be 0:19:35.359 --> 0:19:38.840 realistic in that the price of going back on the deal, 0:19:39.040 --> 0:19:42.359 which is very europe favorable. Frankly, the price of going 0:19:42.359 --> 0:19:45.040 back on the deal negotiating by Boris Johnson would be 0:19:45.119 --> 0:19:48.000 quite considerable. There would have to be restoration or free 0:19:48.080 --> 0:19:50.920 movement of labor, which is free movement of people, which 0:19:50.960 --> 0:19:56.040 is a political hot potato, especially for the Conservatives, but 0:19:56.080 --> 0:19:58.639 it's also going to be tricky for the Labor Party. 0:19:58.720 --> 0:20:00.359 So Peter, thank you so much for be with us 0:20:00.359 --> 0:20:02.040 here on Wall Street Week. Really appreciate it. That is 0:20:02.040 --> 0:20:04.800 Peter west mccott. He is former British Ambassador to the 0:20:04.880 --> 0:20:09.880 United States. Equity Group Investments was the investment firm Sam 0:20:10.000 --> 0:20:13.800 Zel ran so successfully for so many years. Mark Soder 0:20:13.880 --> 0:20:17.040 for many years served under Sam as president of the group. 0:20:17.359 --> 0:20:19.439 And we welcome h now to Wall Street Week. So 0:20:19.520 --> 0:20:21.480 welcome Mark. Great to have you here, David, thanks for 0:20:21.480 --> 0:20:24.320 having me. Sam Zel was such a friend of this program. 0:20:24.480 --> 0:20:27.880 We so benefited whenever he came on, and so we're 0:20:28.000 --> 0:20:30.560 really fortunate to have you here. First of all, talk 0:20:30.560 --> 0:20:34.120 about that transition, because those are really big shoes to fill. 0:20:34.160 --> 0:20:36.879 You were president before Sam passed away, but talk to 0:20:36.920 --> 0:20:38.600 just about that transition where you are in it. 0:20:38.840 --> 0:20:41.119 Yeah, So thank you first of all for having me. 0:20:42.320 --> 0:20:44.600 It was a long transition and continues to be a 0:20:44.600 --> 0:20:48.040 long transition. Sam put me in that role nine years ago, 0:20:48.560 --> 0:20:51.880 and when he did, it surprised me. I'm an operator 0:20:51.920 --> 0:20:54.560 at Rank Companies and I never expected to run this business. 0:20:55.119 --> 0:20:59.560 And he said, look, it's a business. If I could 0:20:59.600 --> 0:21:02.679 come back and look at the place thirty years from now, 0:21:02.720 --> 0:21:05.119 I want Equity Group to be there and healthy and running. 0:21:05.480 --> 0:21:07.439 And so I want somebody who can run a business 0:21:08.800 --> 0:21:11.520 that was again nine years ago, and he said, I 0:21:11.560 --> 0:21:14.679