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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene. Daily

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Speaker 1: we bring you insight from the best of economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot com, and of course on the Bloomberg. It

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Speaker 1: is very very good to uh run in with h

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Speaker 1: harm Bundles here this morning. We'll talk on the US

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Speaker 1: economy and maybe even touch on Germany as Oh well,

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Speaker 1: we've got headlines coming out the Walter Journal talking about

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Speaker 1: Marvel in the semiconductor space. That's now an official deal.

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Speaker 1: Marvel and Cavy in cave Um to combine creating an

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Speaker 1: infrastructure is the lead headline. Right, arm bundles with us,

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Speaker 1: Let's let's go big abroad here, Harm on a Monday.

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Speaker 1: Do you believe even the president's three percent GDP whatever

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Speaker 1: in the moment is he's talking about, we can do

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Speaker 1: a sustain three percent or even higher. Do you buy it? Unfortunately? No.

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Speaker 1: First of all, we got to clarify sustained three percent

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Speaker 1: grows means lifting potential grows towards three percent, not the

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Speaker 1: last two quarters of three percent gdpugles, which we have

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Speaker 1: seen for various reasons. So the reason why I don't

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Speaker 1: think we're getting back to three percent potential GDP goes.

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Speaker 1: I mean, one important one is that we just have

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Speaker 1: a less favorable demographic environment. Labor force grows is much

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Speaker 1: slower than at any time after World War Two, much slower,

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Speaker 1: and so and the second component of productivity growth of

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Speaker 1: potential GDP goes is potential productivity. So the productivity is

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Speaker 1: very slow. It has been slow in the seventies and

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Speaker 1: eighties and in the nineties. You know, we had the

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Speaker 1: I T boom, but we know what sparked it. Just

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Speaker 1: to say that by cutting corporate tax rates and getting

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Speaker 1: rid of regulation that would have kicked in two thousand twenty, know,

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Speaker 1: we are more than doubling our productivity growth. I have

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Speaker 1: my serious doubts. Unfortunately I have to say, no, I

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Speaker 1: don't believe in it. Harm What do you say to

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Speaker 1: those that say we're already there GDP has a three handle. Yeah, Well,

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Speaker 1: that's why I started to clarify that the talk is

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Speaker 1: about potential growth. Of course, we can always have one too,

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Speaker 1: maybe three quarters of consecutive strong growth. I mean Obama

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Speaker 1: had almost four and a half percent. I think into

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Speaker 1: the two thousand, fourteens and two consecutive quarters and nobody

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Speaker 1: started saying that this is now sustainable. UM. Over the

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Speaker 1: last two quarters, I would say we have witnessed positive

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Speaker 1: impact from from strong global growth to US export has

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Speaker 1: been surprisingly well, capex has rebounded that was mostly energy related,

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Speaker 1: and consumer spending has been holding up very well because

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Speaker 1: of a drop in the savings rate. So I don't

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Speaker 1: think none of that will be replicated to that extent

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Speaker 1: for the coming several quarters. So let me be clear, Hair, Harm,

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Speaker 1: we don't need it. Well, they're up to down in

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Speaker 1: d C. You're saying we don't need the tax cuts

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Speaker 1: for the US economy, but at the same time we

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Speaker 1: aren't achieved three percent. It was a politician. That's a

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Speaker 1: very difficult message to send the electorate that it's not

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Speaker 1: as possible, and I think we do do down here

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Speaker 1: isn't worth it? So so what is the future actually held? Harm? Yeah,

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Speaker 1: I mean you're right, but of course you raised some expectations.

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Speaker 1: I guess that's the that's the game in politics right now.

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Speaker 1: You overpromise and then you try to to deliver as

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Speaker 1: much as you can. Um. You're certainly right. I agree,

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Speaker 1: we do not need a stimulus a text cut in

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Speaker 1: the in the current environment, with the unemployment rate atward

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Speaker 1: four percent and the output get basically close, we do

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Speaker 1: not need the stimulus, and certainly not one that comes

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Speaker 1: at the expense of another fiscal cliff in eight years

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Speaker 1: down the road. Um. I think the time for tax

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Speaker 1: reform would be right because you know, I mean, it

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Speaker 1: is always tough to get something from Washington, and the

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Speaker 1: time the timing was good because Republicans were controlling all

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Speaker 1: the branches of the government. So that's why I think

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Speaker 1: they we're trying to push for some text reform that's

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Speaker 1: at least what we thought initially, you know, simplifying the

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Speaker 1: tax code, cutting the statutory tax rate, which makes sense

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Speaker 1: because it's very high, but at the same time close

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Speaker 1: some loopholes, so the whole thing would be more or

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Speaker 1: less revenue neutrals, I think that would have been worse

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Speaker 1: while but the past we are going down right now,

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Speaker 1: I think it's wrong. The path that we're going down

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Speaker 1: right now always assumes in every discussion that somehow this

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Speaker 1: creates growth. Does it create any growth? Is it about

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Speaker 1: what people talk about or maybe the signs in the

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Speaker 1: right direction, But the magnitude or amplitude is not there

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Speaker 1: or is that just a pipe dream? And you can't

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Speaker 1: even bring over tax cuts to any kind of economic growth.

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Speaker 1: Well we have, I mean, the numbers we talk about

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Speaker 1: is the stimulus if you want, of all point eight

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Speaker 1: percent of GDP, and we we we do think it

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Speaker 1: helps GDP grows a little bit in the near term,

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Speaker 1: maybe to the extent of a quarter of a percentage point.

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Speaker 1: So we have a very low multiplier in technical terms.

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Speaker 1: And we know that because there are plenty of empirical

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Speaker 1: studies who suggest that among all the policy options that

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Speaker 1: the government has, tax cuts for the corporations have the

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Speaker 1: smallest multiplayer. Why is that because corporations they are flush

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Speaker 1: in cash anyway, interest rates are low, So what do

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Speaker 1: we do. Do they do with the money they buy

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Speaker 1: back their own stocks or increase the dividends. Is that

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Speaker 1: going to change? Well we'll find out, but my best

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Speaker 1: guess is no. I mean, the latest the latest empirical

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Speaker 1: evidence that we had was was harm Let's let's be

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Speaker 1: clear here, it's not going to change anything. Something this

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Speaker 1: administration hopes that will happen is that those extra profits

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Speaker 1: as tax cuts come through, will go into higher wages.

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Speaker 1: Have you spoken to a single CEO that says the

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Speaker 1: benefits from tax cuts will go to the staff, will

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Speaker 1: go to the employees. No. I mean the most that

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Speaker 1: we are hearing is that it brings back some investment

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Speaker 1: and some jobs. Right, there's no talk about higher wages.

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Speaker 1: I mean that they may implicitly think it will follow.

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Speaker 1: But I have my again, I have my have my

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Speaker 1: doubts that the big problem of the US is the

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Speaker 1: quality and the education of the of the labor force.

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Speaker 1: There's just another NBR working paper out there that talks

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Speaker 1: about vocational training compares to the US with Germany, and

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Speaker 1: you know that's what we have been saying. Let's up

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Speaker 1: the script. This came up this weekend actually over a

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Speaker 1: beverage of my choice. The idea here of the German

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Speaker 1: labor model, almost a guild model of teaching people skills

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Speaker 1: for labor can that move over to the United States,

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Speaker 1: sugar can and my understanding. First of all, my understanding

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Speaker 1: is that many governments, including the current one and the

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Speaker 1: previous one, have talked to German officials of how to

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Speaker 1: implement the model. I think the big obstacle is you

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Speaker 1: would need an upfront government investment to this to build

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Speaker 1: these schools that you need, UM where the companies then

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Speaker 1: can send their um the apprentices too. So I think

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Speaker 1: it would. But that would be the type of change

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Speaker 1: in the US economy that would would help. It would

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Speaker 1: be a huge initiative, a huge infrastructure investment, if you

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Speaker 1: want with I think would deliver a very big bang

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Speaker 1: for the book. How how do you respond culturally to

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Speaker 1: the idea a large body of lesser educated America doesn't

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Speaker 1: desire to do what i'll call labor jobs. Well, I

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Speaker 1: think that always depends on how interesting these labor jobs.

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Speaker 1: And because I mean labor jobs when we say it,

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Speaker 1: we may think about like putting together some footballs or

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Speaker 1: T shirts or whatever. But I think the manufacturing jobs

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Speaker 1: these days are very interesting, right, It's all it's all

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Speaker 1: high tech. That's why you need to train these people. UM.

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Speaker 1: So I think I think they would respond pretty well

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Speaker 1: because we are we are seeing in Germany that people

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Speaker 1: enjoy the work in these in these modern facilities, and

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Speaker 1: actually the pace not so bad because productivity is high.

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Speaker 1: Arm boundles thank you so much with UNI credit this

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Speaker 1: morning or briefly there in the American economies with us

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Speaker 1: right now Mr Sachs of Columbia, Jeffrey Sachs, of course

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Speaker 1: a founding member of the Earth Institute and the one

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Speaker 1: block we have them today. We'll see if we can

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Speaker 1: get to climate change. But far more is tax change,

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Speaker 1: Professor Sax and tax cuts. Let's have you way in

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Speaker 1: on Kevin Hassett, PhD from Pennsylvania suggesting we can't get

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Speaker 1: the magnitude of growth out of tax cuts, and a

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Speaker 1: few qualified people including Lawrence Summers and others pushing back

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Speaker 1: vigorously on the idea we can generate growth from tax cuts.

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Speaker 1: Can we? We cannot pay for these tax cuts out

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Speaker 1: of growth alone. We will have large budget debt. Do

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Speaker 1: you have a number in your head? I don't think

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Speaker 1: the growth effect is is anything significant, and certainly will

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Speaker 1: have well over a trillion dollars in the coming decade

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Speaker 1: of of deficits and possibly two trillion or more. All

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Speaker 1: of this is what we are rerunning again and again,

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Speaker 1: false claims about self financing tax cuts that end up

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Speaker 1: with large deficits and growing public debt. And we should

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Speaker 1: be alarmed right now because the debt to GDP ratio

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Speaker 1: has doubled during the last decade and it's on track

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Speaker 1: to double again, and this is alarming for those of

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Speaker 1: us who care about the future of our country. Jeff,

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Speaker 1: I want you to speak right now to a Republican.

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Speaker 1: They went to Columbia, they went to school, they got

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Speaker 1: a real job, they're enjoying paying alternative minimum tax. But

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Speaker 1: they're not an upper one per center. They're making two

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Speaker 1: eight five seven and their spouses making one forty two five,

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Speaker 1: and they're like, we should feel better than we do.

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Speaker 1: They're aggregate taxes, they claim are summed up large. Should

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Speaker 1: they support this tax cut? They should certainly not support

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Speaker 1: this tax cut, because none of us in America should

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Speaker 1: be supporting an unaffordable tax cut. Wheretent of the tax

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Speaker 1: cut goes to the top one percent, right off the top,

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Speaker 1: and we know that whatever we do now is going

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Speaker 1: to have to be reversed in the next few years

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Speaker 1: because this is unaffordable. The Senate is saying as much.

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Speaker 1: It's at absolutely shocking to have a Senate bill which says, Okay,

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Speaker 1: this is all temporary, but we're still going to give

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Speaker 1: this unbelievable windfall to the richest people in the country.

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Speaker 1: Feral does this discussion happened in the United Kingdom where

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Speaker 1: it's totally focused on the upper one instead of the

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Speaker 1: fifteen to the upper five. Well, on the contrary, I

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Speaker 1: think the fiscal hawks in the United Kingdom remained fiscal

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Speaker 1: hawks once they get in power, and I think maybe

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Speaker 1: that's the big difference. If there's an ideology of the

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Speaker 1: Conservative Party, it's consistent, it's consistent when they're in the opposition,

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Speaker 1: and it's consistent when they're in power, and I think

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Speaker 1: that's something that maybe has gone missing this time. Professor's

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Speaker 1: something that really fascinates me is the disconnect between the

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Speaker 1: populist politics on the campaign trail last year, the economic

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Speaker 1: problems that underpinned them that got this president elected, and

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Speaker 1: then the policy that's set to be executed down in

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Speaker 1: d C. It doesn't seem to address the very thing

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Speaker 1: that got the president into the White House. Our politics

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Speaker 1: are thoroughly corrupted by money. Uh Supreme Court made sure

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Speaker 1: that that was true with the series of terrible decisions

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Speaker 1: that left the Republican Party in the hands of a

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Speaker 1: few billionaires. The few billionaires are driving this process. They

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Speaker 1: are repeatedly putting forward legislation that the public opposes. The

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Speaker 1: public wants higher taxes on companies. The public wants higher

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Speaker 1: taxes on the rich. The Republican leadership is proposing exactly

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Speaker 1: the opposite of what their own constituents want. Why because

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Speaker 1: people like David and Charles Coke, who put in enough

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Speaker 1: money to buy the Republican Party leadership, threatened uh congressmen

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Speaker 1: and senators that dare to oppose them with the hostile

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Speaker 1: advertising and with the primary challengers in the next election.

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Speaker 1: So this is corruption that observing. This is not ideology.

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Speaker 1: This is corruption. Our our politics are broken in this

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Speaker 1: country and those of us who watch it up close

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Speaker 1: are shocked by how much money changes hands day by day.

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Speaker 1: We are only a semi democracy at this point. This

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Speaker 1: is completely different in the UK, which has its own

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Speaker 1: political challenges. But this is not the situation in the

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Speaker 1: United Kingdom. It's not the situation in Western Europe. This

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Speaker 1: is a unique failing of the United States and other

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Speaker 1: corrupt countries. Professor, that there will be some listeners that

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Speaker 1: pushed back aggressively from the things you've said in the

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Speaker 1: last couple of moments. But something I want to touch

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Speaker 1: on with you in the in the ninety sections that

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Speaker 1: we have left is if the economic problems that got

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Speaker 1: President Trump elected and not addressed in the next three

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Speaker 1: and a half years. What are the political consequences when

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Speaker 1: the next election comes around. Well, we know that elections

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Speaker 1: are not really choices about policies. We've got growing violence

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Speaker 1: in this country. We have hate, we have people listening

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Speaker 1: to completely different uh news outlets or media outlets. Our

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Speaker 1: country is falling apart in the sense of uh more, hatred, polarization,

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Speaker 1: and violence. So I'm I'm very worried about what we see.

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Speaker 1: And it comes down to the fact that our elected

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Speaker 1: representatives do not represent those who elected them. Are you

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Speaker 1: going to redo price of civilization? Are you going to

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Speaker 1: freshen it up and updated? Yes, I'm gonna be your

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Speaker 1: book agent here, but let's go what are you doing?

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Speaker 1: I am constantly uh worried about these problems, and my

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Speaker 1: next book coming out is about our foreign policy, which

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Speaker 1: is also in complete disarray. We are unilaterally giving away

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Speaker 1: all of the structures of stability, growth and safety that

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Speaker 1: were created in the post World War two period. Gotta

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Speaker 1: go in London and New York, even on the telephone,

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Speaker 1: will do it by semaphore. We got to get you

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Speaker 1: back to talk about this linkage of foreign policy to

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Speaker 1: our domestic commonwealth. Now we go to the media wars

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Speaker 1: in We're gonna have an intelligent conversation here. More on

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Speaker 1: the content is colleague Quig Moffatt looks more at the distribution,

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Speaker 1: the wireless, that kind of thing. Michael Nathanson and moft

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Speaker 1: over at Sanford Bernstein for years and their own Shingle

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Speaker 1: excuse me, most successfully in the last couple of years.

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Speaker 1: And Mr Nathanson does content. This is about Mr Murdoch,

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Speaker 1: and I would say it's been the catalyst for the

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Speaker 1: entire industry in every platform, the the newsful over the weekend,

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Speaker 1: and this I found stunning. What are you focused on

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Speaker 1: this Monday morning of where will be in five years?

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Speaker 1: That's a great question. I'm focused on Murdoch's realization and

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Speaker 1: it needs to change his business. That the battle over

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Speaker 1: scripted content fought by Netflix, Amazon. At some point it's

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Speaker 1: going to get more intense and Fox maybe of subscale

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Speaker 1: and entertainment content to fight that battle. That's entertainment content.

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Speaker 1: Do you keep entertainment separate from the entertainment of news

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Speaker 1: across all these different platforms? Yes, the world's breaking down.

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Speaker 1: We think sports and news is a separate business. Yeah,

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Speaker 1: it's a better model because it's live. Like your radio show.

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Speaker 1: Every day is different. We tune in live, is it? Yes? Yeah,

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Speaker 1: this is not tape delay. But the fact that murrac

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Speaker 1: can win on live, live sports and Fox News and

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Speaker 1: Sports networks. I think in his mind says we should

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Speaker 1: separate the company into two businesses. One is entertainment, which

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Speaker 1: gets more competitive, and the second is live and live

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Speaker 1: is what's going to fuel consumption going forward. Michael, help

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Speaker 1: me out here. When you said Murdoch, Rupert or James,

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Speaker 1: who's who's driving last? Who's driving now? Because ten years ago,

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Speaker 1: if we sat here and said the twenty one century

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Speaker 1: Fox assets would be up for sale because they're going

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Speaker 1: to get smaller and streamlined and the other guys are

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Speaker 1: going to get bigger, and I said that Rupert would

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Speaker 1: be driving this, I'd be laughed at the room. So

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Speaker 1: now I see James and Laughlin coming into the business.

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Speaker 1: I'm trying to work out who's in charge right now.

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Speaker 1: That's another great question. It has to be a family decision.

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Speaker 1: You know, we I'll never know those family conversations. But

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Speaker 1: this doesn't happen without his permission, right, This is not

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Speaker 1: James and Laughlin doing this without Rupert's permission. But it

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Speaker 1: makes a ton of sense, does it. You know. It's

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Speaker 1: what shocked people was the stock has been treating like

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Speaker 1: death for a couple of years now. The Murdoch discount,

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Speaker 1: as you write about, had came back in full force,

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Speaker 1: and all of a sudden, out of nowhere, this rumor

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Speaker 1: popped up that he talked to Disney. And because the

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Speaker 1: journal keep writing about it, it it says to me it's real,

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Speaker 1: and it has to be probably from the entire family

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Speaker 1: is rethinking their footprint going forward. It seems to me

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Speaker 1: that everything's up for graps right now. I T and

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Speaker 1: T and Time Warner, a Time Warner up for graps

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Speaker 1: again now, becauld someone come out of the top and

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Speaker 1: have a look. We are you know, we still believe

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Speaker 1: in Craig coovers Tea that we still think T gets

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Speaker 1: his deal down Time Warner. But if you're a Disney

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Speaker 1: or a Comcast or Sony, you're gonna slow down your

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Speaker 1: Fox negotiations for conversations until you figure out what happens

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Speaker 1: with Time Warner. Because Time Warner that if that wasn't

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Speaker 1: acquired by Tea would come back out and and Brian Sutler.

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Speaker 1: It's CNN doing a nice summer of this. I thought

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Speaker 1: this weekend is the whole ad model entertainment or digital

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Speaker 1: video or news, whatever subpart, is the whole ad model

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Speaker 1: broken or done? I break into two two bits, news

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Speaker 1: and sports because it aggregates live scale. Audis is that

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Speaker 1: that's not dead. The entertainment model is breaking down, and

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Speaker 1: the growth of Facebook and Google make it really hard

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Speaker 1: to compete in digital, right, so you have old growth

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Speaker 1: in digital going to two platforms. That's that's uncommon. Why

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Speaker 1: is ESPN struggling? ESPN struggling because they're losing subscribers. They've

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Speaker 1: got contracts that allow camp operators to drop ESPN, so

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Speaker 1: they're losing subscribers above the rate of court cutting, and

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Speaker 1: they have very expensive contracts. Most notably, they have an

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Speaker 1: NFL deal that's a terrible deal. Breaking news. Michael Nathan's

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Speaker 1: and this from London and Alex sends in John an email.

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Speaker 1: I have to quote it exactly. It's such important breaking news.

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Speaker 1: Arsenal versus Tottenham is a big deal, Tom, a big deal?

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Speaker 1: Is that breaking? That's breaking? I could go to sports

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Speaker 1: that they're saying, stupid Americans shut up and listen to Ferrell.

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Speaker 1: Why you bring up you bring up English Emmier League.

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Speaker 1: Now Sky Sports in the United Kingdom, here's the twenty

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Speaker 1: one century Fox assets. Sky they want to buy the

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Speaker 1: whole asset. I look at Sky Sports at the moment,

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Speaker 1: they've got to pay more and more for the television rights,

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Speaker 1: but the live audience isn't getting any larger as the

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Speaker 1: cost increases. That's not just a phenomenon in the UK,

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Speaker 1: that exists here in the United States as well. So

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Speaker 1: so let me ask a couple of questions and you

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Speaker 1: can have it as much time as you need to

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Speaker 1: answer them. Okay, this deal with twenty one century Fox,

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Speaker 1: what happens to Sky as James Murdoch wants his baby

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Speaker 1: in the UK? One and two? If sports is really

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Speaker 1: that important, why is the cost of the TV rights

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Speaker 1: getting higher yet the audience is getting smaller? Okay? Number two?

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Speaker 1: First go for it. Okay. So I started my career

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Speaker 1: burnst incurring European media way back when, and we don't

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Speaker 1: like European media because there's three year rates windows. So

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Speaker 1: unfortunately in the UK every three years there's another negotiation. Right,

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Speaker 1: So the within the UK and eventually in the US,

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Speaker 1: is that you've got new entrance coming in. Who are

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Speaker 1: going to be those rights higher? Right, So unfortunately supply demand,

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Speaker 1: there's a few set of great rights. Three year windows

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Speaker 1: make the rights inflation even steeper, and the and the

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Speaker 1: the audience decline. That's a worry, right, were every week

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Speaker 1: we're right at the NFL's rating is coming down. That's

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Speaker 1: a worry. There's still the tallest the tallest tree in

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Speaker 1: the forest, so they matter in terms of driving reach

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Speaker 1: and engagement. But it's a long term problem. I can

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Speaker 1: deny that on the first question. Yeah, we're kind of

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Speaker 1: it's kind of a mystery, right, So why are you

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Speaker 1: thinking about getting av and acid that you sent your

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Speaker 1: whole life trying to buy? It's it's a great question,

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Speaker 1: and it's it's it's a mystery to us. Where where's

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Speaker 1: the landscape twelve months from now or an institutional hold

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Speaker 1: thirty six months from now? And what do you buy

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Speaker 1: hold or selling? I mean there has to be action

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Speaker 1: on the part of institutional shareholders away from the soap

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Speaker 1: opera of the murder family. So we have two buys. Okay,

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Speaker 1: the bias are Disney and Fox, and the idea is

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Speaker 1: that Disney and Fox own strong positions in sports, also

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Speaker 1: have content in scripted entertainment that that could support We

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Speaker 1: have cells on Discovery, who are we think the losers

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Speaker 1: in this battle? And AMC Networks and Snap and Twitter?

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Speaker 1: What is the distinction between your enthusiasm over Disney and

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Speaker 1: you're good and smart competitor Rich Greenfield has been tard

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Speaker 1: and feathered by Mr Igor with all good collegiality on

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Speaker 1: a Monday. What's the distinction between Nathanson and Greenfield's view?

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Speaker 1: We were both Brandis alumni. I didn't want to bring

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Speaker 1: that up exactly, so we love from Brandis. My view

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Speaker 1: is that I think ESPN has got more pricing power

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Speaker 1: that they're gonna be able to raise affiliate fees over

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Speaker 1: the next couple of years, and expect when then when

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Speaker 1: the NFL, when the new NFL deal comes due, they're

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Speaker 1: gonna move from Monday to Sunday and save a lot

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Speaker 1: of money. Can we discuss your Twitter showt that you

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Speaker 1: just thrown up? Yes, sir? What's behind it? Uh? Well?

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Speaker 1: Two things. One is we've Twitter is not a very

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Speaker 1: great place for advertising brand advertisers. Have you looked at

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Speaker 1: your Twitter so for the first time in about five

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Speaker 1: years on Twitter. I saw a commercial and advert come

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Speaker 1: up in my face in the last two weeks. But seriously,

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Speaker 1: good morning. For the first time in like five years,

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Speaker 1: I still want to come up, what why and what's

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Speaker 1: going on? That's going on because we think advertisers want

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Speaker 1: to find a third platform besides Facebook and Google. Right, So,

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Speaker 1: so Twitters out there trying to bang the drums, trying

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Speaker 1: to get new brands on. The problem is where was

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Speaker 1: that commercial? Was it stuck between you know, a Trump

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Speaker 1: rant and a you know, sexual harassment, you know, claimed

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Speaker 1: by someone. It's not the place for brands to advertise.

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Speaker 1: That's one and two. There's no they create no e.

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Speaker 1: But you know, we look at the cash flow ten seconds.

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Speaker 1: That's gonna buy him? Who's gonna buy Twitter? I'm gonna

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Speaker 1: make some money this morning. Okay, we have a selling

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Speaker 1: twittery thing. Twitter. We sold at half the prices today

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Speaker 1: and probably some ccial media company is gonna buy it.

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Speaker 1: There's no there's no but died there. You can't buy

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Speaker 1: it between billion dollar right down on me? You know. Okay,

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Speaker 1: this has been great. Michael Nathans and Trooper particularly come

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Speaker 1: into our World headquarters on a Monday. He is with Mafit,

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Speaker 1: Nathan Center, John Farren, Tom Keene with a precious six

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Speaker 1: minutes with the number one expert in the world on

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Speaker 1: hyper inflation, Steve Hankey is out of Boulder, Colorado from

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Speaker 1: a few years ago. This is Kenneth Boulding Space in

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Speaker 1: the midwest of a Colorado of the sixties and he

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Speaker 1: has held court at the Johns Hopkins University and owns

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Speaker 1: this discussion and the clarity of discussion of hyper inflation.

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Speaker 1: Professor Hanky, wonderful to have you back on us. Is

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Speaker 1: the mess of Zimbabwe? Is it transferable to other countries

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Speaker 1: or is it discreet to that cultural and political experiment. Well,

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Speaker 1: I think it's completely transferable, tom uh. If you have

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Speaker 1: as a society that becomes totally politicized, which is in

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Speaker 1: fact what's happened in Zimbabwe for the last thirty seven

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Speaker 1: years of Mogabi's reign, you have politicians and civil servants

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Speaker 1: making all the decisions. They're they're all over all aspects

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Speaker 1: of life uh in Zimbabwe, state owned enterprises, capital controls,

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Speaker 1: price controls, in poor controls, you name it and and

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Speaker 1: the result is waste, fraud and abuse. Brought in They

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Speaker 1: were a great band waste, fraud and Abuse plate at

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Speaker 1: Talagi's up on Boulder Hill, up on boulders of Hill.

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Speaker 1: Years go, Steve Hanky. Everyone everyone, You and you and

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Speaker 1: I have been to that place. You have been to Talagis.

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Speaker 1: More More, we've solved I slum functions at Talagi's a

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Speaker 1: few years ago. Steve Hank. Everyone wants to know what

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Speaker 1: you think of bitcoin? Is bitcoin? Does it have elements

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Speaker 1: of sixteen thirty seven and the tulips? Does bitcoin have

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Speaker 1: elements of the currency of Zimbabwe? Well, I think the

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00:25:02,720 --> 00:25:05,960
Speaker 1: answer to both of those is yes, because bitcoin is

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00:25:06,200 --> 00:25:11,240
Speaker 1: a speculative, highly speculative asset, of course, but it is

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00:25:11,280 --> 00:25:15,200
Speaker 1: not a currency because a currency, to qualify as a currency,

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00:25:16,040 --> 00:25:20,359
Speaker 1: you have to have some semblance of a stable unit

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00:25:20,400 --> 00:25:26,159
Speaker 1: of account, some semblance. So it's more like Zimbabwe. You see,

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00:25:26,240 --> 00:25:29,359
Speaker 1: when they had the hyper inflation in two thousand and

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00:25:29,400 --> 00:25:33,120
Speaker 1: seven and two thousand and eight, you had a situation

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00:25:33,200 --> 00:25:41,240
Speaker 1: where um, the hundred trillion dollars Zimbabwe no was virtually worthless.

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00:25:41,320 --> 00:25:45,800
Speaker 1: In November of two thousand and eight, hundred trillion dollar note.

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00:25:46,760 --> 00:25:54,600
Speaker 1: The inflation UH was an incredible uh eighty nine point

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00:25:54,760 --> 00:25:59,240
Speaker 1: seven six tillion percent. Now you've got to get a pencil.

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00:25:59,280 --> 00:26:02,600
Speaker 1: I just write done eight nine seven and then put

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00:26:02,640 --> 00:26:05,960
Speaker 1: twenties zeros after it, and that was the annual rate

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00:26:06,000 --> 00:26:08,480
Speaker 1: of inflation. Steve, just because of the time, I want

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00:26:08,480 --> 00:26:11,560
Speaker 1: to get my colleague John Farrow in your Stephen Hankee

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00:26:11,640 --> 00:26:15,680
Speaker 1: of Johns Hopkins University, Steve, why is the price of

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00:26:15,760 --> 00:26:19,920
Speaker 1: bitcoin different in Zimbabwe compared to the price of bitcoin

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00:26:20,200 --> 00:26:22,359
Speaker 1: did I see in my Bloomberg And if there's really

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00:26:22,359 --> 00:26:25,040
Speaker 1: a future, doesn't that just need to be one price

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00:26:25,080 --> 00:26:29,280
Speaker 1: regardless of the exchange. Well, there there there does have

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00:26:29,359 --> 00:26:34,560
Speaker 1: to be one price. But remember you have um US

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00:26:35,600 --> 00:26:41,120
Speaker 1: stocks old mutual trades in London and trades in Harrarit

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00:26:41,640 --> 00:26:48,880
Speaker 1: at different prices. It ends up uh getting arbitraged out.

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00:26:48,920 --> 00:26:51,439
Speaker 1: But it takes it takes a little time. It doesn't

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00:26:51,440 --> 00:26:55,920
Speaker 1: work perfectly. So there are there are two prices obviously

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00:26:56,040 --> 00:27:01,320
Speaker 1: for old mutual shares in London and and in Zimbabwe,

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00:27:01,400 --> 00:27:05,040
Speaker 1: because in Zimbabwe they they trade what they call a

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00:27:05,240 --> 00:27:10,360
Speaker 1: new Zim dollar. The economy there is officially dollarized by

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00:27:10,400 --> 00:27:14,720
Speaker 1: the way the US dollar. But once the Unity government

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00:27:14,800 --> 00:27:18,160
Speaker 1: broke down in two thousand and thirteen in Mugabi came

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00:27:18,200 --> 00:27:23,679
Speaker 1: back strong and shame in control. They started printing news

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00:27:23,840 --> 00:27:29,040
Speaker 1: and zim dollars. Uh they call them bond notes, and

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00:27:29,480 --> 00:27:34,240
Speaker 1: there's electronic money too. And now they have another hyper

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00:27:34,280 --> 00:27:37,199
Speaker 1: inflation going. It's a lot smaller than the than the

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00:27:37,240 --> 00:27:40,240
Speaker 1: first one, but it's running at about three hundred five

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00:27:40,280 --> 00:27:44,920
Speaker 1: percent a year the inflation in Zimbabwean and that second

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00:27:45,040 --> 00:27:48,640
Speaker 1: hyper inflation in ten years is in fact what did

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00:27:48,720 --> 00:27:52,800
Speaker 1: Mugabi in that That was when everyone just through in

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00:27:52,880 --> 00:27:55,520
Speaker 1: the talent. We're not going to have this again. Ste

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00:27:55,520 --> 00:27:58,880
Speaker 1: if you specialize in troubled currencies. As we wrap things

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00:27:58,960 --> 00:28:01,280
Speaker 1: up with you, what is the few shaw of the

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00:28:01,320 --> 00:28:06,480
Speaker 1: foreign exchange market in Zimbobwhite post mcgabi. Well, I think

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00:28:06,520 --> 00:28:11,159
Speaker 1: the key thing is they will have to uh follow

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Speaker 1: the rules of dollarization, and that is if you have

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00:28:14,640 --> 00:28:18,639
Speaker 1: a dollarized country like Panama, there thirty three others in

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00:28:18,640 --> 00:28:22,080
Speaker 1: the world, they do very very well, very rapid rates

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00:28:22,119 --> 00:28:26,879
Speaker 1: of growth, and they will have to prohibit the government

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00:28:27,080 --> 00:28:31,679
Speaker 1: from printing any kind of funny money that they're doing. Now, well,

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Speaker 1: we gotta leave it there, Steve. We've got to get

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00:28:33,600 --> 00:28:35,840
Speaker 1: you back on again. Never enough time. Steve Hankey with

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Speaker 1: the Johns Hopkins at University on Bitcoin and of course,

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00:28:39,880 --> 00:28:44,400
Speaker 1: his expertise on hyper uh inflation. Thanks for listening to

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Speaker 1: the Bloomberg Surveillance podcast. Subscribe and listen to interviews on

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00:28:49,280 --> 00:28:54,880
Speaker 1: Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm

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00:28:54,920 --> 00:28:58,360
Speaker 1: on Twitter at Tom Keene Before the podcast. You can

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Speaker 1: always catch us World. I'm Bloomberg radioh