1 00:00:09,720 --> 00:00:12,880 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene with 2 00:00:13,600 --> 00:00:16,520 Speaker 1: David Gura. Daily we bring you insight from the best 3 00:00:16,560 --> 00:00:22,279 Speaker 1: of economics, finance, investment, and international relations. Find Bloomberg Surveillance 4 00:00:22,320 --> 00:00:27,000 Speaker 1: on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course, 5 00:00:27,320 --> 00:00:34,400 Speaker 1: on the Bloomberg Good morning everyone, Uh, this is the 6 00:00:34,400 --> 00:00:36,519 Speaker 1: interview of the day. If you care about the future 7 00:00:36,520 --> 00:00:40,199 Speaker 1: of Europe. The Peterson Institute has Adam Posen driving the 8 00:00:40,240 --> 00:00:43,720 Speaker 1: ship off of Fred Bergson's decades of work and Jacob 9 00:00:43,800 --> 00:00:47,159 Speaker 1: Kirker guard but David Gura Gerreman Zelmyer out of m 10 00:00:47,200 --> 00:00:50,760 Speaker 1: I T is their definitive voice on Germany and it's 11 00:00:50,760 --> 00:00:52,199 Speaker 1: great to have him with us here from our Bloomberg 12 00:00:52,280 --> 00:00:54,520 Speaker 1: nighty nine one studios in Washington, d C. To talk 13 00:00:54,520 --> 00:00:57,040 Speaker 1: about this election yesterday on Gela Merkel winning a fourth 14 00:00:57,160 --> 00:01:01,080 Speaker 1: term as German Chancellor. However, the coalition bill thing begins. 15 00:01:01,080 --> 00:01:03,240 Speaker 1: There's talk of a Jamaica coalition. Will dig into what 16 00:01:03,320 --> 00:01:06,160 Speaker 1: that means here just above a German let me start 17 00:01:06,160 --> 00:01:08,280 Speaker 1: with the the a f D, this alliance for Germany 18 00:01:08,280 --> 00:01:10,240 Speaker 1: and maybe you can help those of us who don't 19 00:01:10,280 --> 00:01:13,240 Speaker 1: follow German politics closely regularly understand what the a f 20 00:01:13,360 --> 00:01:16,200 Speaker 1: D is and the significance here of that party getting 21 00:01:16,200 --> 00:01:20,360 Speaker 1: a few seats in the Parliament. Yes, thank you so much, David. 22 00:01:20,400 --> 00:01:23,200 Speaker 1: It's it's nice to be with you. So so the 23 00:01:23,240 --> 00:01:27,240 Speaker 1: a f D one about of the vote yesterday, which 24 00:01:27,840 --> 00:01:31,640 Speaker 1: was a bigger win for them than expected. They are 25 00:01:31,760 --> 00:01:37,920 Speaker 1: a right wing populist party that campaigns mostly on two issues, 26 00:01:38,400 --> 00:01:43,920 Speaker 1: anti immigration h and anti Euros. So they actually started 27 00:01:43,920 --> 00:01:47,160 Speaker 1: out as a pure anti euro party and then transformed 28 00:01:47,160 --> 00:01:51,000 Speaker 1: themselves into a more generic right wing party well to 29 00:01:51,040 --> 00:01:54,840 Speaker 1: the right of Mrs Michaels Christian Democrats that used to 30 00:01:54,880 --> 00:01:57,640 Speaker 1: be the most right wing party in Germany for most 31 00:01:57,640 --> 00:02:01,800 Speaker 1: of the post war period. Now they are not anti EU. 32 00:02:01,920 --> 00:02:05,400 Speaker 1: So this is not a UKIP party. It's not the 33 00:02:05,400 --> 00:02:08,880 Speaker 1: faunace you know, in that sense. They also pretty much 34 00:02:09,040 --> 00:02:12,639 Speaker 1: a pro market but they will make it more difficult 35 00:02:12,960 --> 00:02:17,360 Speaker 1: for Mrs Michael to find compromises on reforming the euro area. 36 00:02:17,600 --> 00:02:19,919 Speaker 1: Dr Seedlemar how much in the end was this election 37 00:02:19,960 --> 00:02:22,399 Speaker 1: about the economy? I think of how we talk about 38 00:02:22,440 --> 00:02:25,480 Speaker 1: immigration in this country. There's a link, whether there or not, 39 00:02:25,600 --> 00:02:28,240 Speaker 1: between between immigration the economy. When we when we talk 40 00:02:28,280 --> 00:02:31,120 Speaker 1: about the issue of immigration. Was this Was this an 41 00:02:31,120 --> 00:02:35,400 Speaker 1: election that's centered on economic issues? No, and not really, 42 00:02:35,440 --> 00:02:39,040 Speaker 1: I mean on on economic issues. The governing coalition has 43 00:02:39,080 --> 00:02:42,959 Speaker 1: done very well. It was you know, Germany was one 44 00:02:42,960 --> 00:02:47,120 Speaker 1: of the first countries to recover from the Great Financial Crisis. 45 00:02:47,160 --> 00:02:49,840 Speaker 1: It wasn't really affected by the by the euro crisis, 46 00:02:49,919 --> 00:02:55,239 Speaker 1: and unemployment is at an all time low. What was 47 00:02:55,280 --> 00:02:58,120 Speaker 1: a big deal in this election is, in some sense 48 00:02:58,160 --> 00:03:01,839 Speaker 1: the lagged effect of the one million or so refugees 49 00:03:01,880 --> 00:03:06,800 Speaker 1: that enter Germany in fifteen and early twenty sixteen, and 50 00:03:07,520 --> 00:03:13,120 Speaker 1: the resulting sense of loss of security, the difficulties in 51 00:03:13,120 --> 00:03:18,040 Speaker 1: integrating these refugees. So that was an important and important theme, 52 00:03:18,160 --> 00:03:20,280 Speaker 1: and that's part of the reason why the a f D, 53 00:03:20,840 --> 00:03:23,359 Speaker 1: the right wing populist party, did so well. Help me 54 00:03:23,440 --> 00:03:27,280 Speaker 1: understand how coalition building might work here in Germany going forward. 55 00:03:27,280 --> 00:03:29,840 Speaker 1: I mentioned that the Jamaica coalition named that because of 56 00:03:29,840 --> 00:03:31,960 Speaker 1: the color scheme of each of the parties that might 57 00:03:32,160 --> 00:03:34,760 Speaker 1: might comprise it, what's likely to happen here and how 58 00:03:34,840 --> 00:03:38,360 Speaker 1: quickly does this need to happen to to ensure the continuity, 59 00:03:38,400 --> 00:03:43,880 Speaker 1: among other things. Yes, so, the real significance of yesterday's 60 00:03:43,920 --> 00:03:48,720 Speaker 1: election result is that the Social Democrats, the second biggest 61 00:03:48,760 --> 00:03:52,920 Speaker 1: party that have so far governed with Mrs Mickle, took 62 00:03:52,960 --> 00:03:56,040 Speaker 1: themselves out of the running for a continuation of their 63 00:03:56,080 --> 00:04:00,000 Speaker 1: coalition with Mrs Mickle, and that would have meant based 64 00:04:00,000 --> 00:04:03,480 Speaker 1: sickly politics as usual. You know, these parties are not 65 00:04:03,720 --> 00:04:07,040 Speaker 1: terribly far apart on on most economic issues, so that 66 00:04:07,080 --> 00:04:10,720 Speaker 1: would have provided a sense of stability. Now they did very, 67 00:04:10,800 --> 00:04:13,720 Speaker 1: very poorly, and the sense among them is that they 68 00:04:13,720 --> 00:04:17,840 Speaker 1: did poorly because they were associated with this government. So 69 00:04:17,880 --> 00:04:20,240 Speaker 1: they decided that they will spend the next four years 70 00:04:20,279 --> 00:04:22,599 Speaker 1: in opposition. This may not be the last word, but 71 00:04:22,720 --> 00:04:25,240 Speaker 1: so far that's what they announced, and so that gives 72 00:04:25,320 --> 00:04:28,120 Speaker 1: Ms Miracle only one option, which is to form a 73 00:04:28,160 --> 00:04:32,360 Speaker 1: coalition with the right of center Liberal Party. So liberal 74 00:04:32,400 --> 00:04:35,320 Speaker 1: means something different from what it means in the US, 75 00:04:35,360 --> 00:04:37,600 Speaker 1: so this is more of a libertarian a party pro 76 00:04:37,720 --> 00:04:42,279 Speaker 1: market and the Green Party, which is an an environmental 77 00:04:42,960 --> 00:04:47,640 Speaker 1: party but also with US type liberal ideas, and they 78 00:04:47,640 --> 00:04:51,960 Speaker 1: had definitely left of Mrs Miracles. So she's going to 79 00:04:52,080 --> 00:04:56,320 Speaker 1: have a tough job negotiating a common government platform with 80 00:04:56,400 --> 00:04:59,920 Speaker 1: these two parties that are that are quite quite different. 81 00:05:00,520 --> 00:05:04,040 Speaker 1: And as far as your area of policies are going 82 00:05:04,120 --> 00:05:07,520 Speaker 1: to be The Free Democrats, the Liberal Party are quite 83 00:05:07,520 --> 00:05:10,240 Speaker 1: far to the right from from Mrs mackels, so they 84 00:05:10,279 --> 00:05:13,679 Speaker 1: have taken a very tough line on, for example, issues 85 00:05:13,760 --> 00:05:17,120 Speaker 1: like that relief, on issues like, you know, a common 86 00:05:17,200 --> 00:05:21,359 Speaker 1: fiscal budget for the euro Area. They reject these sorts 87 00:05:21,360 --> 00:05:23,960 Speaker 1: of things, and these are precisely the things that Mrs 88 00:05:24,040 --> 00:05:27,960 Speaker 1: mcken needs to talk about with a prison McCain France, German, 89 00:05:27,960 --> 00:05:29,960 Speaker 1: thank you so much. Really look forward to you're writing 90 00:05:29,960 --> 00:05:32,839 Speaker 1: for the Peterson Institute here in the coming days on 91 00:05:33,080 --> 00:05:37,440 Speaker 1: Germany German Zettomyer with the Peterson Institute. David, we just 92 00:05:37,480 --> 00:05:42,359 Speaker 1: gotta hate note from Boston. Tom, I don't care about 93 00:05:42,400 --> 00:05:44,600 Speaker 1: the New York giants. I'm not going to touch this 94 00:05:45,720 --> 00:05:49,640 Speaker 1: Boston one of six one FM. I'm sorry, this is Bloomberg. 95 00:06:03,640 --> 00:06:05,920 Speaker 1: It has been a joy over the last number of 96 00:06:05,920 --> 00:06:08,960 Speaker 1: weeks to speak to John vale Nko with his direct 97 00:06:09,279 --> 00:06:14,960 Speaker 1: knowledge of Japan, which for all of us, about the 98 00:06:15,000 --> 00:06:18,039 Speaker 1: farthest west I've gone deep into Japan was a Grand 99 00:06:18,080 --> 00:06:21,440 Speaker 1: Hyatt hotel where you sit there and you have a 100 00:06:21,480 --> 00:06:23,440 Speaker 1: cigar at the end of the bar, like one B. 101 00:06:23,640 --> 00:06:27,359 Speaker 1: Murray did and lost in translation full disclosure, folks, The 102 00:06:27,400 --> 00:06:31,560 Speaker 1: band at the Grand Hyatt in Tokyo is much better 103 00:06:31,600 --> 00:06:35,720 Speaker 1: than in the movie Lost in Translation. If you can't 104 00:06:35,720 --> 00:06:37,560 Speaker 1: find the place, it's a very hard It's very hard 105 00:06:37,600 --> 00:06:39,560 Speaker 1: to find. You gotta go like some secret door of 106 00:06:39,720 --> 00:06:46,080 Speaker 1: fifty stories talk Aoka, Toyama on the west coast of 107 00:06:46,200 --> 00:06:51,560 Speaker 1: Toyama Prefecture in Japan. It's like opposite of Tokyo, way 108 00:06:51,600 --> 00:06:54,640 Speaker 1: over on the west coast, I believe. How does Mr 109 00:06:54,720 --> 00:06:59,400 Speaker 1: Abe play in the hinterlands. He's pretty popular. I guess 110 00:06:59,440 --> 00:07:02,480 Speaker 1: they're a little bit more traditional values over there than 111 00:07:02,520 --> 00:07:05,040 Speaker 1: they are in the city. So uh, there was a 112 00:07:05,080 --> 00:07:08,880 Speaker 1: time when the mayor of Tokyo was a Communist Party 113 00:07:09,000 --> 00:07:13,840 Speaker 1: uh person, and so the urban area can be quite 114 00:07:14,200 --> 00:07:18,360 Speaker 1: much more liberal than the the outlying areas. How much 115 00:07:18,400 --> 00:07:20,720 Speaker 1: of of an appetite is there in Japan for him 116 00:07:20,760 --> 00:07:24,400 Speaker 1: to continue serving as as Prime minister. He's been in 117 00:07:24,480 --> 00:07:27,640 Speaker 1: place two times now, and we're looking at him getting 118 00:07:27,640 --> 00:07:29,800 Speaker 1: well into his seventies. If he's if he's to continue, 119 00:07:30,360 --> 00:07:32,360 Speaker 1: is there any unease with that? Somebody's serving a ten 120 00:07:32,400 --> 00:07:34,720 Speaker 1: year as long as the one he's looking at. I 121 00:07:34,720 --> 00:07:37,680 Speaker 1: don't think anybody's too worried except for maybe his rivals 122 00:07:37,880 --> 00:07:42,000 Speaker 1: within the Democratic Party about his tenure. Um. Other than 123 00:07:42,040 --> 00:07:44,280 Speaker 1: the fact that maybe some people thought he was getting 124 00:07:44,320 --> 00:07:49,040 Speaker 1: a bit haughty and a little bit um careless about 125 00:07:49,400 --> 00:07:52,200 Speaker 1: how much power he was wielding. Um. There was some 126 00:07:53,280 --> 00:07:57,840 Speaker 1: minor scandals in the past that people thought he glossed over, 127 00:07:58,160 --> 00:08:01,640 Speaker 1: and I think rightfully so because they were quite minor. 128 00:08:02,080 --> 00:08:04,320 Speaker 1: But for the most part, people are voting on the issues, 129 00:08:05,040 --> 00:08:09,400 Speaker 1: and they're voting on him, especially for the economy and 130 00:08:09,520 --> 00:08:13,360 Speaker 1: for their view on the military. Help with it. When 131 00:08:13,360 --> 00:08:16,520 Speaker 1: the economy and the mathematics here, real g d P 132 00:08:16,840 --> 00:08:22,080 Speaker 1: is pretty sporting, but the deflation is there, so nominal 133 00:08:22,160 --> 00:08:26,560 Speaker 1: GDP is not all that good, which affects the voters. 134 00:08:27,000 --> 00:08:28,880 Speaker 1: Do they wake up on the morning and go, oh, 135 00:08:29,040 --> 00:08:33,000 Speaker 1: real GDP outstanding or do they look at a lethargic 136 00:08:33,200 --> 00:08:36,680 Speaker 1: nominal top line? G DP is more important? What do 137 00:08:36,679 --> 00:08:39,480 Speaker 1: the people think. I think they look at real GDP 138 00:08:39,800 --> 00:08:43,199 Speaker 1: and yes, and I think they do um because they 139 00:08:43,240 --> 00:08:46,720 Speaker 1: know that the population is shrinking and that Japan is 140 00:08:46,760 --> 00:08:50,040 Speaker 1: not a high growth area. And to say that the 141 00:08:50,120 --> 00:08:55,920 Speaker 1: Japanese people really dislike deflation is not really too accurate 142 00:08:55,960 --> 00:08:59,200 Speaker 1: to be honest, um. And it's more like no inflation 143 00:08:59,360 --> 00:09:01,400 Speaker 1: is what I've called it for the last couple of decades. 144 00:09:01,440 --> 00:09:05,280 Speaker 1: It's not really prices shrinking, it's the prices going flat 145 00:09:05,960 --> 00:09:09,000 Speaker 1: and there's no And right now there's basically no inflation 146 00:09:09,080 --> 00:09:11,959 Speaker 1: in Japan, and Jappie people don't actually mind that. I 147 00:09:11,960 --> 00:09:14,520 Speaker 1: guess they're used to it, but they really don't like 148 00:09:14,600 --> 00:09:17,600 Speaker 1: it when prices rise. Remember one time when they raised 149 00:09:17,600 --> 00:09:19,960 Speaker 1: the taxi fairs in Japan, there was almost a strike 150 00:09:20,240 --> 00:09:23,520 Speaker 1: all the public. They was very easy to get taxis 151 00:09:23,559 --> 00:09:26,400 Speaker 1: after that, and they only raised it a little bit. 152 00:09:26,440 --> 00:09:30,600 Speaker 1: So the Japanese are actually against inflation in any way. Surprisingly, 153 00:09:30,840 --> 00:09:32,720 Speaker 1: we talk about the election here that that's been called 154 00:09:32,760 --> 00:09:34,240 Speaker 1: it just a moment. First, let me ask you about 155 00:09:34,240 --> 00:09:37,280 Speaker 1: this economic package. This was something that you expected would happen. 156 00:09:37,320 --> 00:09:40,200 Speaker 1: We'd see the V A T A tax raised. What 157 00:09:40,360 --> 00:09:42,199 Speaker 1: is this prim is what's he able to do here 158 00:09:42,200 --> 00:09:44,400 Speaker 1: when he looks at this demographic challenges through training and 159 00:09:44,440 --> 00:09:47,760 Speaker 1: through education. How widely spent will this money be? Do 160 00:09:47,760 --> 00:09:49,760 Speaker 1: you think, well, I hope he doesn't spend at all, 161 00:09:49,880 --> 00:09:52,240 Speaker 1: because I mean they have to make some progress. I mean, 162 00:09:52,240 --> 00:09:56,040 Speaker 1: the people who are pushing this is the Ministry of Finance, Originally, 163 00:09:56,080 --> 00:09:57,959 Speaker 1: you know, some time back they wanted the v A 164 00:09:58,080 --> 00:10:01,880 Speaker 1: T to be a consumption tax to in the year 165 00:10:02,679 --> 00:10:05,240 Speaker 1: for the Olympics. But they're barely going to get it 166 00:10:05,280 --> 00:10:08,480 Speaker 1: to ten UH, and so this will probably happen actually 167 00:10:08,520 --> 00:10:12,240 Speaker 1: in October of two thousand nineteen. They have to announce 168 00:10:12,240 --> 00:10:15,080 Speaker 1: it well in advance so that the companies can prepare 169 00:10:15,120 --> 00:10:18,480 Speaker 1: their their software systems and whatnot for it. But I 170 00:10:19,160 --> 00:10:23,480 Speaker 1: do hope that he spends UH, maybe only the minority 171 00:10:23,559 --> 00:10:26,960 Speaker 1: of it, and it will be spent on increasing productivity. 172 00:10:27,400 --> 00:10:29,240 Speaker 1: He gave a very good speech at the New York's 173 00:10:29,440 --> 00:10:35,280 Speaker 1: Exchange recently and outlined his UH uses for the increase 174 00:10:35,360 --> 00:10:39,840 Speaker 1: in in tax and UH it's mostly for the elderly, 175 00:10:40,000 --> 00:10:45,719 Speaker 1: and it's mostly for education and for um UH improving 176 00:10:45,760 --> 00:10:50,320 Speaker 1: the productivity of the country, especially education of older people. 177 00:10:50,480 --> 00:10:53,240 Speaker 1: Re educating them. That's a kind of a bad word 178 00:10:53,320 --> 00:10:56,400 Speaker 1: from the Red Guard days, but basically they give them 179 00:10:56,400 --> 00:10:59,040 Speaker 1: additional training so that they can be useful or foreigner 180 00:10:59,120 --> 00:11:02,480 Speaker 1: fair is important. I mean, there's yes, terrific foreign affairs 181 00:11:02,600 --> 00:11:05,280 Speaker 1: right now. Yes, that's helping him a lot, because he's 182 00:11:05,280 --> 00:11:09,240 Speaker 1: always been a bit of a hawk on UH North 183 00:11:09,320 --> 00:11:12,960 Speaker 1: Korea and to a lesser extent on China, and he's 184 00:11:13,000 --> 00:11:16,520 Speaker 1: basically been proven right in saying that this is something 185 00:11:16,559 --> 00:11:20,079 Speaker 1: that we really should be worried about. He's talking um 186 00:11:20,160 --> 00:11:24,080 Speaker 1: now about maybe not amending the Constitution, which is very, 187 00:11:24,160 --> 00:11:29,000 Speaker 1: very troublesome, and in terms of taking away the the 188 00:11:29,000 --> 00:11:33,040 Speaker 1: the defense only clause of the Constitution and maybe just 189 00:11:33,160 --> 00:11:39,920 Speaker 1: reinterpreting it or adding another phrase to the constitution. Uh so, 190 00:11:40,120 --> 00:11:43,480 Speaker 1: hopefully that will be not too traumatic. Walk us through 191 00:11:43,520 --> 00:11:45,920 Speaker 1: his his calculus here and calling for this this election, 192 00:11:45,920 --> 00:11:48,000 Speaker 1: we mentioned raising taxes, going against something I think he 193 00:11:48,040 --> 00:11:50,680 Speaker 1: said he wouldn't do. And he also noted this morning 194 00:11:50,679 --> 00:11:53,480 Speaker 1: in his press conference that the situation North Korea, the 195 00:11:53,480 --> 00:11:56,400 Speaker 1: foreign affairs that Tom just mentioned is also necessitating this 196 00:11:56,920 --> 00:11:59,800 Speaker 1: as well. We've seen a recent snap election in the UK. 197 00:11:59,880 --> 00:12:02,600 Speaker 1: Now go according to to plan. How confident is this 198 00:12:02,600 --> 00:12:04,959 Speaker 1: Prime ministeries Shinzo Abe and how this is going to 199 00:12:05,000 --> 00:12:07,720 Speaker 1: play out to you think, Well, his approval ratings have 200 00:12:07,920 --> 00:12:10,280 Speaker 1: risen recently on the back of North Korea and the 201 00:12:10,320 --> 00:12:12,800 Speaker 1: economy being strong, and so he's pretty confident. I think 202 00:12:12,800 --> 00:12:16,640 Speaker 1: he should be um that it will be successful. I 203 00:12:16,640 --> 00:12:19,640 Speaker 1: mean to get you know, as many as he has 204 00:12:19,720 --> 00:12:22,760 Speaker 1: currently will not be too easy um and I hope 205 00:12:22,800 --> 00:12:27,000 Speaker 1: that the uh he's not too disappointed that he did this. 206 00:12:28,120 --> 00:12:30,920 Speaker 1: But I can't imagine to be anything like May because 207 00:12:30,920 --> 00:12:34,079 Speaker 1: the economy is strong and things are really going his way. 208 00:12:34,440 --> 00:12:36,680 Speaker 1: But the timing is related to the V A. T hike. 209 00:12:37,240 --> 00:12:41,280 Speaker 1: One final question. I looked at a great distribution chart 210 00:12:41,320 --> 00:12:44,800 Speaker 1: in the ft today of the parliamentary structure of Germany 211 00:12:45,040 --> 00:12:48,520 Speaker 1: where there's two big parties. FTP has gotten smaller and 212 00:12:48,559 --> 00:12:50,840 Speaker 1: there's three or four other parties, including the alt right 213 00:12:50,880 --> 00:12:55,040 Speaker 1: around it. That's not Japan. Japan is still lb P 214 00:12:55,720 --> 00:12:58,080 Speaker 1: and the other guys, and the other guys don't have 215 00:12:58,120 --> 00:13:00,760 Speaker 1: their act together. Is that the right end elsis? It 216 00:13:00,960 --> 00:13:03,280 Speaker 1: is for a while there the other guys had their 217 00:13:03,280 --> 00:13:05,480 Speaker 1: act together, but they kind of blew it and they're 218 00:13:05,600 --> 00:13:09,440 Speaker 1: basically a nonfunctioning sort of coalition or various factions. They're 219 00:13:09,480 --> 00:13:12,280 Speaker 1: not they're not effective right now. We spoke a couple 220 00:13:12,280 --> 00:13:15,560 Speaker 1: of times back about a local election in Japan and 221 00:13:15,920 --> 00:13:19,600 Speaker 1: Uriko Koike won the local election in Tokyo, and at 222 00:13:19,600 --> 00:13:21,280 Speaker 1: the time we were wondering sort of what the import 223 00:13:21,280 --> 00:13:23,720 Speaker 1: of that might be. She now declaring a new party 224 00:13:23,800 --> 00:13:26,320 Speaker 1: or a new coalition party of Hope. I gather it's 225 00:13:26,360 --> 00:13:28,520 Speaker 1: going to be called how closely should be we'll be 226 00:13:28,520 --> 00:13:30,920 Speaker 1: watching her and what is that signal to you about 227 00:13:31,000 --> 00:13:33,480 Speaker 1: Japanese politics going for I hadn't thought of that till now, 228 00:13:33,520 --> 00:13:35,640 Speaker 1: but it could be related to the fact that she's 229 00:13:35,679 --> 00:13:39,600 Speaker 1: not ready to retain sort of national election, So hurrying 230 00:13:39,720 --> 00:13:42,960 Speaker 1: up the election now might be a factor in terms 231 00:13:42,960 --> 00:13:46,520 Speaker 1: of preventing her from getting prepared for it. Very interesting, 232 00:13:46,559 --> 00:13:48,559 Speaker 1: John Vale, thank you, Thank you so much. We really 233 00:13:48,600 --> 00:13:52,240 Speaker 1: appreciate it this morning, very very valuable. Like I really 234 00:13:52,240 --> 00:13:55,160 Speaker 1: can't say enough about getting that perspective and some of 235 00:13:55,160 --> 00:13:58,840 Speaker 1: these global events synthesizing it into what we're doing here, 236 00:13:58,880 --> 00:14:02,040 Speaker 1: which which David g h is to a huge extent 237 00:14:02,440 --> 00:14:07,240 Speaker 1: Central Bank speakers this week and after the press conference 238 00:14:07,240 --> 00:14:10,560 Speaker 1: of Cherry yelling. I really wonder what will be the 239 00:14:10,600 --> 00:14:15,520 Speaker 1: concision and insight within those speeches or is it going 240 00:14:15,559 --> 00:14:17,040 Speaker 1: to be you know, the theme this week and be 241 00:14:17,080 --> 00:14:20,920 Speaker 1: boilerplate just mail it in. I'm not critical if they 242 00:14:21,000 --> 00:14:24,640 Speaker 1: mailed in, but I don't know if there's a plan. Yeah, 243 00:14:24,840 --> 00:14:26,600 Speaker 1: in a few minutes, we're gonna check in with Michael McKie, 244 00:14:26,640 --> 00:14:30,240 Speaker 1: who's out in Cleveland, Ohio. Are international economics and policy correspondent, 245 00:14:30,680 --> 00:14:35,120 Speaker 1: and just come I checked there at out gave scheduled 246 00:14:35,120 --> 00:14:41,280 Speaker 1: wealth at I will have you know so full disclosure, folks, 247 00:14:41,320 --> 00:14:44,800 Speaker 1: some of the sausage banking here at Bloomberg Surveillance. Do 248 00:14:44,840 --> 00:14:48,720 Speaker 1: you know that just by chance once m McKey and 249 00:14:48,760 --> 00:14:53,640 Speaker 1: ire in Washington, just by chance to Pittsburgh Penguins were there, 250 00:14:54,000 --> 00:14:56,880 Speaker 1: and just by chance we had seats ten rows up 251 00:14:57,200 --> 00:15:00,360 Speaker 1: watching old Vetchkan do it on the power pledge Spike 252 00:15:00,400 --> 00:15:06,480 Speaker 1: Champions so close to the bureau. It's it was just 253 00:15:06,720 --> 00:15:11,400 Speaker 1: by chance, Washington Capitals, Pittsburgh Penguins, just by chance with 254 00:15:11,560 --> 00:15:26,640 Speaker 1: Michael McKee and now folks from Berlin, and he is 255 00:15:26,680 --> 00:15:32,680 Speaker 1: the greatest American watcher of Berlin. It's John C. Corn Blue, 256 00:15:32,720 --> 00:15:36,880 Speaker 1: ambassador of the United States to Germany long ago and 257 00:15:37,040 --> 00:15:44,840 Speaker 1: far away ambassador the article Reagan's Brandenburg Concerto? Was there 258 00:15:44,880 --> 00:15:48,800 Speaker 1: a concerto with this election? As we see the right, 259 00:15:49,080 --> 00:15:54,600 Speaker 1: the far right joined the Bundestag. Well, I supposed to 260 00:15:54,720 --> 00:15:57,640 Speaker 1: use your analogy. What we're probably talking about here is 261 00:15:58,680 --> 00:16:04,240 Speaker 1: very deconstruct did modern music, uh it was? There is 262 00:16:04,280 --> 00:16:07,600 Speaker 1: a melody in there somewhere, but it's gonna be a 263 00:16:07,600 --> 00:16:10,360 Speaker 1: while to figure out exactly what it is. I like that, 264 00:16:10,400 --> 00:16:13,720 Speaker 1: and to me, the key idea is the idea of 265 00:16:13,760 --> 00:16:18,680 Speaker 1: the permanence of this. To the right thrust, how permanent 266 00:16:18,800 --> 00:16:22,800 Speaker 1: does it? Does it seem to you? I think what 267 00:16:23,000 --> 00:16:26,960 Speaker 1: is permanent is is not only in Germany but in 268 00:16:27,040 --> 00:16:29,720 Speaker 1: all of Europe, Western Europe at least, but also in 269 00:16:29,760 --> 00:16:33,080 Speaker 1: Poland and of course in the United States. What is 270 00:16:33,080 --> 00:16:38,200 Speaker 1: permanent is that the structures, the expectations, and the mood 271 00:16:38,240 --> 00:16:42,400 Speaker 1: of voters in all of these countries is changing very dramatically, 272 00:16:43,120 --> 00:16:44,920 Speaker 1: and it's changing for a whole lot of reasons which 273 00:16:44,960 --> 00:16:46,840 Speaker 1: we can go into. But I think, in other words, 274 00:16:46,880 --> 00:16:49,480 Speaker 1: it's never going to be the same again. It's never 275 00:16:49,520 --> 00:16:51,680 Speaker 1: going to be the same again. How is this coalition 276 00:16:51,720 --> 00:16:53,960 Speaker 1: building process going to be different than it has been 277 00:16:53,960 --> 00:16:56,720 Speaker 1: in the fast in the past. Well, it's gonna be 278 00:16:56,760 --> 00:16:59,480 Speaker 1: different again because it's more complicated. Um, I was trying 279 00:16:59,480 --> 00:17:02,680 Speaker 1: to think over time, I don't think that there's ever 280 00:17:02,800 --> 00:17:04,960 Speaker 1: been I'm quite sure I'm right about this. There's never 281 00:17:05,000 --> 00:17:08,120 Speaker 1: been a coalition government in Germany which has had more 282 00:17:08,160 --> 00:17:11,160 Speaker 1: than two parties in it, and usually they have been 283 00:17:11,200 --> 00:17:14,320 Speaker 1: parties which were ideologically suited to each other. There was 284 00:17:14,359 --> 00:17:17,040 Speaker 1: one exception with the SPD and the FDP, but otherwise 285 00:17:17,480 --> 00:17:20,080 Speaker 1: they have been close to each other. This time it's 286 00:17:20,080 --> 00:17:23,600 Speaker 1: going to be unless something major changes, there's going to 287 00:17:23,680 --> 00:17:27,000 Speaker 1: be a coalition of three parties, and of three parties, 288 00:17:27,119 --> 00:17:30,639 Speaker 1: each of whom is ideologically different than the other two. 289 00:17:31,040 --> 00:17:33,920 Speaker 1: In other words, the CDU and the FDP don't really 290 00:17:33,920 --> 00:17:36,400 Speaker 1: see eye to eye. The FDP and the Greens don't 291 00:17:36,400 --> 00:17:37,840 Speaker 1: see eye to eye, and the Greens in the c 292 00:17:37,960 --> 00:17:40,199 Speaker 1: DU don't see I see eye to eye. How do 293 00:17:40,240 --> 00:17:42,840 Speaker 1: you assess the integrity of a coalition if if no 294 00:17:42,880 --> 00:17:45,880 Speaker 1: one is seeing eye to eye? How optimistic can one 295 00:17:45,920 --> 00:17:48,760 Speaker 1: be that a coalition, however it's formed, However, Codalesces is 296 00:17:48,800 --> 00:17:51,879 Speaker 1: going to be able to do anything, or maintain the 297 00:17:51,920 --> 00:17:54,480 Speaker 1: status quo, or or continue to work on economic and 298 00:17:54,560 --> 00:17:58,760 Speaker 1: social issues for instance. Well, um, politicians like to be 299 00:17:58,800 --> 00:18:02,440 Speaker 1: in office, so they will reach an agreement, and then 300 00:18:02,440 --> 00:18:05,159 Speaker 1: the question is whether the leaders of the parties are 301 00:18:05,200 --> 00:18:08,640 Speaker 1: skillful enough to carry it out in the government which 302 00:18:08,720 --> 00:18:12,080 Speaker 1: is just leaving office now. In Germany there were two parties, 303 00:18:12,160 --> 00:18:14,479 Speaker 1: the c DU and the SPD. Who were you know, 304 00:18:14,560 --> 00:18:17,720 Speaker 1: they're once conservative one social Democratic, but they really saw 305 00:18:17,760 --> 00:18:20,080 Speaker 1: I to eye on a whole lot of stuff. They 306 00:18:20,080 --> 00:18:24,399 Speaker 1: couldn't get very much done, not because they had of 307 00:18:24,400 --> 00:18:26,720 Speaker 1: the votes in the Parliament, but because they didn't know 308 00:18:26,760 --> 00:18:30,320 Speaker 1: what to do. And so you can almost argue the 309 00:18:30,320 --> 00:18:33,240 Speaker 1: opposite that with a party, a coalition with two new 310 00:18:33,280 --> 00:18:36,119 Speaker 1: parties and that you might find some ideas for a change. 311 00:18:36,720 --> 00:18:39,240 Speaker 1: How do you think Wolfgang Schrybler was watching the election 312 00:18:39,280 --> 00:18:41,679 Speaker 1: results come in yesterday? What do you think he was thinking? 313 00:18:41,720 --> 00:18:43,880 Speaker 1: And and what do you what's your sense of of 314 00:18:43,920 --> 00:18:48,120 Speaker 1: what this means for his tenure. Um? I think it 315 00:18:48,160 --> 00:18:51,720 Speaker 1: means for his tenure that it will just continue. Maybe not, 316 00:18:51,920 --> 00:18:54,560 Speaker 1: maybe the FDP will demand the finance ministry. I'm just 317 00:18:54,640 --> 00:18:57,960 Speaker 1: not sure about that. But I think that what he 318 00:18:58,440 --> 00:19:03,200 Speaker 1: was probably thinking privately, he was this just shows how 319 00:19:03,800 --> 00:19:06,320 Speaker 1: important his goals are and how he's got to be 320 00:19:06,359 --> 00:19:08,840 Speaker 1: determined to stick around to make sure that they realized. 321 00:19:09,240 --> 00:19:12,720 Speaker 1: There were some rumors before the election that if this 322 00:19:13,160 --> 00:19:16,560 Speaker 1: outcome happened, he might end up being Foreign Minister, which 323 00:19:16,600 --> 00:19:18,760 Speaker 1: would be I think a good think for Germany actually, 324 00:19:19,240 --> 00:19:22,280 Speaker 1: But I think that whenever happens, he's going to be 325 00:19:22,320 --> 00:19:25,280 Speaker 1: there in some major role. I remember the generational change 326 00:19:25,280 --> 00:19:29,359 Speaker 1: ambassador from Conrad aden Hour over to a young, sprightly 327 00:19:29,480 --> 00:19:33,120 Speaker 1: JFK like Billy Brandt. Is there is there a generational 328 00:19:33,200 --> 00:19:37,280 Speaker 1: shift this time around? Or is not a representative of 329 00:19:37,280 --> 00:19:40,439 Speaker 1: the past. Well, she's a representative of the past, but 330 00:19:40,680 --> 00:19:43,720 Speaker 1: there is no generational change that The leaders of the 331 00:19:43,800 --> 00:19:47,040 Speaker 1: two other parties that with are with her are both 332 00:19:47,160 --> 00:19:52,199 Speaker 1: under fifty uh and um, and they're both very modern, 333 00:19:52,560 --> 00:19:57,720 Speaker 1: also very attractive people. They're both good, good people uh 334 00:19:57,760 --> 00:19:59,760 Speaker 1: and so in a way that may be a generational 335 00:19:59,800 --> 00:20:02,960 Speaker 1: change age, but I personally think the generational change is 336 00:20:03,040 --> 00:20:08,439 Speaker 1: one more election cycle away. The people, if I may 337 00:20:08,480 --> 00:20:10,879 Speaker 1: put it this way, of my generation are just hanging 338 00:20:10,880 --> 00:20:13,120 Speaker 1: on too long. We should get out of the way, 339 00:20:13,160 --> 00:20:17,159 Speaker 1: But we're not for various reasons, partially because they're on 340 00:20:17,200 --> 00:20:19,960 Speaker 1: a whole lot of people ten years younger who want 341 00:20:20,000 --> 00:20:22,680 Speaker 1: to be in these jobs. I think. But five years 342 00:20:22,720 --> 00:20:25,080 Speaker 1: from now Germany is going to go through a major 343 00:20:25,160 --> 00:20:28,520 Speaker 1: generational change. There will be nobody left who remembers the 344 00:20:28,560 --> 00:20:30,919 Speaker 1: Cold War that I mean World War two is what 345 00:20:30,960 --> 00:20:32,800 Speaker 1: do you predict on that? Well, with the West and 346 00:20:32,840 --> 00:20:36,040 Speaker 1: East Germany, will they further divide with that lack of 347 00:20:36,200 --> 00:20:40,240 Speaker 1: institutional memory. They may, but it's not too important because 348 00:20:40,240 --> 00:20:43,960 Speaker 1: East Germany is is a very dependent part of Germany, 349 00:20:44,000 --> 00:20:46,280 Speaker 1: so it doesn't matter. I think the more important thing 350 00:20:46,400 --> 00:20:49,920 Speaker 1: is going to be does this next generation of Germans 351 00:20:50,960 --> 00:20:54,080 Speaker 1: jump totally into shall we say, the digital world, which 352 00:20:54,119 --> 00:20:57,960 Speaker 1: I hope they will, or does it become more national oriented? 353 00:20:58,080 --> 00:21:00,960 Speaker 1: A sensitive question to end the best if I could, 354 00:21:01,400 --> 00:21:03,960 Speaker 1: I will say this with delicacy and respect to all 355 00:21:04,000 --> 00:21:08,520 Speaker 1: of Germany. The alt right, the far right that enters today. 356 00:21:08,560 --> 00:21:14,359 Speaker 1: Everybody makes an uproar about the Bundestag. Do they carry 357 00:21:14,400 --> 00:21:19,160 Speaker 1: that institutional memory? Do they link who they are back 358 00:21:19,200 --> 00:21:23,520 Speaker 1: to these difficult ghosts of a long time ago. Well, 359 00:21:23,920 --> 00:21:26,639 Speaker 1: they are, like everybody else, a mixture of people. And 360 00:21:26,680 --> 00:21:30,000 Speaker 1: in fact, one of the imponderables of this new situation 361 00:21:30,920 --> 00:21:34,879 Speaker 1: is going to be how how much cohesion the a 362 00:21:35,040 --> 00:21:37,920 Speaker 1: f D has. They are actually a combination about five 363 00:21:38,040 --> 00:21:41,760 Speaker 1: or six different groupings. There's one grouping which you could 364 00:21:41,800 --> 00:21:49,439 Speaker 1: almost call unreconstructed UH admirers of the past, including the 365 00:21:49,520 --> 00:21:52,120 Speaker 1: third right. There's a there's one person there, for example, 366 00:21:52,520 --> 00:21:55,600 Speaker 1: who says it's now time for us to remember the 367 00:21:55,640 --> 00:21:59,280 Speaker 1: heroism of German soldiers who fought in World War Two. Well, 368 00:21:59,320 --> 00:22:01,320 Speaker 1: they were here and they were young men who were 369 00:22:01,400 --> 00:22:04,280 Speaker 1: killed for nothing. But the fact is the purpose of 370 00:22:04,320 --> 00:22:07,280 Speaker 1: this army was to conquer others and to destroy others. 371 00:22:07,280 --> 00:22:11,400 Speaker 1: So you can't really honor them. You see how difficult. Yes, ambassador, 372 00:22:11,520 --> 00:22:13,520 Speaker 1: thank you so much. We're honored you with us today. 373 00:22:13,520 --> 00:22:16,680 Speaker 1: We'll have to get Ambassador Koren Blumont against soon. Were 374 00:22:16,680 --> 00:22:21,880 Speaker 1: those important comments and perspective from New York? Stay with us. 375 00:22:21,920 --> 00:22:37,960 Speaker 1: This is Bloomberg. The euro migrates south. We started a 376 00:22:38,080 --> 00:22:43,160 Speaker 1: one one nineteen and we've migrated down and I guess 377 00:22:43,200 --> 00:22:46,639 Speaker 1: I can say German election, but now David, it is 378 00:22:47,000 --> 00:22:51,920 Speaker 1: not German election. It's Druggy elects to speak. Yes, Drug 379 00:22:52,160 --> 00:22:54,199 Speaker 1: speaking now, just looking at some of these headlines, it's 380 00:22:54,240 --> 00:22:57,919 Speaker 1: the beginning of our central Bank. Speaking Derby today, he 381 00:22:57,960 --> 00:23:00,680 Speaker 1: says the Euro Area recovery has accelerate it and broadened 382 00:23:00,680 --> 00:23:03,920 Speaker 1: its supported by passed through of stimulus. Recovery was still 383 00:23:03,920 --> 00:23:07,560 Speaker 1: translated into stronger inflation, and he says, quote a very 384 00:23:07,600 --> 00:23:11,679 Speaker 1: substantial degree of accommodation is needed. Again, Mario Draggie speaking here, 385 00:23:11,720 --> 00:23:13,359 Speaker 1: just looking at some of these headlines. Crossing from his 386 00:23:13,400 --> 00:23:15,840 Speaker 1: prepared for marks will continue to follow those here on 387 00:23:15,880 --> 00:23:22,960 Speaker 1: the show six on euro asconstin London advising the Princess 388 00:23:23,040 --> 00:23:26,600 Speaker 1: Royal in London on hydro carbons is Phil Verliger. Of 389 00:23:26,640 --> 00:23:30,520 Speaker 1: course p K. Verliger, President has been just wonderful at 390 00:23:30,560 --> 00:23:34,280 Speaker 1: speaking to us about the dynamics and the veracity of 391 00:23:34,320 --> 00:23:38,160 Speaker 1: our guestimates on oil. Phil, wonderful to speak to you 392 00:23:38,760 --> 00:23:41,800 Speaker 1: from our studios in London. Do you know what oil 393 00:23:41,920 --> 00:23:48,720 Speaker 1: demand is right now? No, and nobody does. It's the 394 00:23:49,040 --> 00:23:52,440 Speaker 1: you know, the macro economists, the Bureau of Economics does 395 00:23:52,480 --> 00:23:56,639 Speaker 1: a wonderful job on GDP and they still there's a 396 00:23:56,640 --> 00:23:59,080 Speaker 1: good deal of uncertainty in the case of oil. We 397 00:23:59,160 --> 00:24:01,520 Speaker 1: really don't know what consumption is. We kind of know 398 00:24:01,560 --> 00:24:04,679 Speaker 1: what production is. We may know what stock changes and 399 00:24:04,720 --> 00:24:08,520 Speaker 1: we back into consumption. But what we do know is, 400 00:24:08,560 --> 00:24:11,480 Speaker 1: and what you just said from what Mario Droggi said, 401 00:24:12,040 --> 00:24:14,720 Speaker 1: is Europe is picking up. The economy in Europe is 402 00:24:14,760 --> 00:24:17,120 Speaker 1: moving ahead. If you look at the now casts for 403 00:24:17,200 --> 00:24:22,080 Speaker 1: the Europe now cast for the US, things are moving ahead. Harvey. Yes, 404 00:24:22,119 --> 00:24:25,920 Speaker 1: it's going to give a uh pause or a slight 405 00:24:26,000 --> 00:24:29,679 Speaker 1: slow down for a quarter, but the global economy is 406 00:24:29,720 --> 00:24:32,679 Speaker 1: finally moving ahead and it's maybe it's breaking out of 407 00:24:32,680 --> 00:24:36,440 Speaker 1: this two growth. Uh And I you know, I read 408 00:24:36,440 --> 00:24:38,920 Speaker 1: all these economists and look and if that's the case, 409 00:24:38,960 --> 00:24:40,800 Speaker 1: oil is going to pick up. We know oil is 410 00:24:40,800 --> 00:24:44,480 Speaker 1: gonna get consumed because there is a link. And what 411 00:24:44,560 --> 00:24:48,520 Speaker 1: we also know is that oil growth is about two 412 00:24:48,560 --> 00:24:53,440 Speaker 1: percentage points lower, at least historically, other than economic growth. 413 00:24:53,480 --> 00:24:55,520 Speaker 1: So you know we're going to get a percentage or 414 00:24:55,560 --> 00:24:58,240 Speaker 1: so that really wasn't factored in. And that's adding to 415 00:24:58,320 --> 00:25:02,199 Speaker 1: the two prices, and that's brand up. In addition, we 416 00:25:02,280 --> 00:25:08,399 Speaker 1: have the the hurricanes really distorted and made impossible for 417 00:25:08,480 --> 00:25:11,879 Speaker 1: while exports of US crude oil. So that's widening the 418 00:25:12,000 --> 00:25:16,440 Speaker 1: w T I Brent spread. So the global oil situation 419 00:25:16,480 --> 00:25:19,760 Speaker 1: has gotten better. We're talking to you from from London today, 420 00:25:19,920 --> 00:25:22,840 Speaker 1: and I wonder how the the U. S. Oil picture 421 00:25:22,920 --> 00:25:25,240 Speaker 1: looks from from across the Atlantic. What are folks telling 422 00:25:25,280 --> 00:25:27,399 Speaker 1: you about their observations of of of the U. S. 423 00:25:27,440 --> 00:25:31,440 Speaker 1: Oil economy. Well, I arrived yesterday and so I'm still 424 00:25:31,440 --> 00:25:36,280 Speaker 1: suffering from jet lag, so I'm sorry. But what you 425 00:25:36,400 --> 00:25:41,800 Speaker 1: hear is, yeah, I when I talk to people in Europe, 426 00:25:42,640 --> 00:25:45,040 Speaker 1: and I've been talking to him there, they don't ask 427 00:25:45,080 --> 00:25:48,000 Speaker 1: about the oil situation. We kind of have a picture, 428 00:25:48,160 --> 00:25:50,399 Speaker 1: and the US demand growth has not been as strong 429 00:25:50,440 --> 00:25:52,960 Speaker 1: as people think it is. But I mean they're more 430 00:25:53,040 --> 00:25:58,120 Speaker 1: puzzled about the economic situation in the United States and 431 00:25:58,480 --> 00:26:03,119 Speaker 1: frankly the political situation. It's so it's you're not here, 432 00:26:03,160 --> 00:26:06,119 Speaker 1: you know, I haven't heard very much the question focus 433 00:26:06,200 --> 00:26:10,320 Speaker 1: really is here and what happened here, and what's happened 434 00:26:10,320 --> 00:26:13,879 Speaker 1: here is that the United States have become a major 435 00:26:13,960 --> 00:26:18,159 Speaker 1: exporter of oil to South America. Mexico gets half its gas, 436 00:26:18,200 --> 00:26:22,280 Speaker 1: half its oil products from the United States. The hurricanes 437 00:26:22,320 --> 00:26:25,719 Speaker 1: took that out, and so what happened is Europe started 438 00:26:25,720 --> 00:26:28,200 Speaker 1: sending products to South America, to Mexico and to other 439 00:26:28,240 --> 00:26:32,280 Speaker 1: South American countries. Asia is sending it, California sending it. 440 00:26:32,280 --> 00:26:36,320 Speaker 1: It's a global market. And the situation that's changed, and 441 00:26:36,359 --> 00:26:39,080 Speaker 1: I've been following this a long time, is the United 442 00:26:39,119 --> 00:26:42,760 Speaker 1: States is now a very large exporter of products principle 443 00:26:42,840 --> 00:26:45,400 Speaker 1: to South America. So in the minute we've got left 444 00:26:45,400 --> 00:26:47,760 Speaker 1: with you, and I'm sorry it's too short today, is 445 00:26:47,800 --> 00:26:50,359 Speaker 1: are we up to our eyeballs in oil? You have 446 00:26:50,520 --> 00:26:54,760 Speaker 1: you were incredibly bright about peak oil and what you 447 00:26:54,760 --> 00:26:57,880 Speaker 1: know in hindsight was a folly. Are we still up 448 00:26:57,880 --> 00:27:02,480 Speaker 1: to our eyeballs and hydrocarbons? We're up to eyeballs and 449 00:27:02,560 --> 00:27:05,960 Speaker 1: hydrocarbons and tanks, and we're starting to work them off 450 00:27:07,000 --> 00:27:10,159 Speaker 1: the reserve. You there's plenty of oil out there, and 451 00:27:10,160 --> 00:27:13,320 Speaker 1: we're entering in tom to the twilight of the oil era. 452 00:27:13,720 --> 00:27:16,880 Speaker 1: I mean, electric cars are coming, uh, and it's coming 453 00:27:16,960 --> 00:27:19,919 Speaker 1: much faster. The price of electric cars is falling, and 454 00:27:19,960 --> 00:27:23,320 Speaker 1: so it's gonna be like electric cars gonna take off 455 00:27:23,560 --> 00:27:26,879 Speaker 1: the way cell phones took off. I mean and at 456 00:27:26,880 --> 00:27:28,560 Speaker 1: the turn of the century, if you talk to us 457 00:27:28,560 --> 00:27:31,160 Speaker 1: a telephone company that they'd say, gee, we're gonna wire, 458 00:27:31,160 --> 00:27:33,159 Speaker 1: We're gonna have more land lines. While land lines are 459 00:27:33,200 --> 00:27:37,320 Speaker 1: down by about everybody's on cell phones now. And the 460 00:27:37,359 --> 00:27:40,880 Speaker 1: same thing is gonna happen in automobiles. It's it's yeah, 461 00:27:41,080 --> 00:27:44,520 Speaker 1: the oil industry is in denial, but that's what's gonna 462 00:27:44,520 --> 00:27:46,920 Speaker 1: happen to shorts feel verly good, thank you so much 463 00:27:48,280 --> 00:27:51,960 Speaker 1: in London and can convey enough over the years, David Gara, 464 00:27:52,040 --> 00:27:55,200 Speaker 1: the value he has brought us, the perspective right and wrong, 465 00:27:55,280 --> 00:27:57,840 Speaker 1: and of course with the dropping whale price right right 466 00:27:57,920 --> 00:28:00,760 Speaker 1: right from Ville Burger. Are you going to get an 467 00:28:00,760 --> 00:28:04,040 Speaker 1: electric car? David, I have a hybrid. I'm halfway there. 468 00:28:04,080 --> 00:28:06,439 Speaker 1: You have a hype, Michael Barr. I mean John Tucker 469 00:28:06,520 --> 00:28:09,359 Speaker 1: is a harmer, and you know I just rent the 470 00:28:09,400 --> 00:28:10,800 Speaker 1: belly and say thank you. What do you what do 471 00:28:10,880 --> 00:28:17,600 Speaker 1: you drive? Okay? I just don't not yet to electric cars. 472 00:28:31,160 --> 00:28:33,040 Speaker 1: Tape Garrett and Tom Keane in New York. This is 473 00:28:33,080 --> 00:28:35,960 Speaker 1: Bloomberg surveillance on Bloomberg Radio. Over these last few months, 474 00:28:35,960 --> 00:28:39,040 Speaker 1: we've seen the People's Bank of China, the PBOC, tightening 475 00:28:39,040 --> 00:28:41,719 Speaker 1: controls of outflows in that country. And somebody who's been 476 00:28:41,720 --> 00:28:45,320 Speaker 1: watching that closely, prestis the Tlani, Senior Professor of Trade 477 00:28:45,360 --> 00:28:48,480 Speaker 1: Policy at Cornell University, senior fellow at the Brookings Institution. 478 00:28:48,520 --> 00:28:50,960 Speaker 1: Author of course, have gaining currency, the rise of the 479 00:28:50,960 --> 00:28:52,800 Speaker 1: Redmond b He joins us now on our phone line. 480 00:28:53,040 --> 00:28:54,720 Speaker 1: Great to speak with you this morning. Let me ask 481 00:28:54,760 --> 00:28:58,000 Speaker 1: you just how well the PBOC is doing here controlling 482 00:28:58,040 --> 00:29:01,320 Speaker 1: the Redman b at this point. Well, the PBOC is 483 00:29:01,360 --> 00:29:04,600 Speaker 1: certainly in a good spot right now, David, because the 484 00:29:04,640 --> 00:29:08,000 Speaker 1: fact that the dollar is depreciating relative to the other 485 00:29:08,040 --> 00:29:11,360 Speaker 1: major currency, at least until a few days ago, imply 486 00:29:11,560 --> 00:29:15,160 Speaker 1: that the PBOC was able to let the an Indy 487 00:29:15,200 --> 00:29:18,760 Speaker 1: actually appreciate a little bit against the dollar while not 488 00:29:18,920 --> 00:29:23,680 Speaker 1: losing competitiveness against other major export markets of China like Europe, 489 00:29:23,760 --> 00:29:27,040 Speaker 1: Japan and so forth. Um, So it's taken a lot 490 00:29:27,080 --> 00:29:30,080 Speaker 1: of pressure off the PDOC, which until recently had been 491 00:29:30,120 --> 00:29:34,400 Speaker 1: battling capital outflows and a lot of depreciation pressures on 492 00:29:34,480 --> 00:29:36,880 Speaker 1: their min b um. They had put in place what 493 00:29:36,960 --> 00:29:40,480 Speaker 1: they called the counter cyclical adjustment factor, which is basically 494 00:29:40,520 --> 00:29:43,280 Speaker 1: a fudge factor in the exchange rate, to try to 495 00:29:43,320 --> 00:29:45,920 Speaker 1: prevent what they saw as depreciation pressures. So now all 496 00:29:45,960 --> 00:29:47,720 Speaker 1: of that is often they can manage it a lot 497 00:29:47,720 --> 00:29:51,000 Speaker 1: more effectively. Do investors, do economists have a good sense 498 00:29:51,040 --> 00:29:53,600 Speaker 1: of what the p BOC's policy is at this point 499 00:29:53,600 --> 00:29:56,840 Speaker 1: you talk about that that fudge factor. Three words to 500 00:29:56,880 --> 00:30:00,320 Speaker 1: describe that that fudge factor there is the PBOC becoming 501 00:30:00,320 --> 00:30:04,800 Speaker 1: a clearer communicator of policy. They tried what they sent 502 00:30:04,920 --> 00:30:07,680 Speaker 1: to markets some time ago, a few months ago in Faclos, 503 00:30:07,760 --> 00:30:11,280 Speaker 1: that they were going to manage the currencies value against 504 00:30:11,280 --> 00:30:14,520 Speaker 1: a basket of currencies rather than just the US dollar. 505 00:30:15,040 --> 00:30:17,920 Speaker 1: Markets didn't quite believe them. Markets have been trying to 506 00:30:17,960 --> 00:30:22,600 Speaker 1: test them um, and the PDOC has basically responded by 507 00:30:22,640 --> 00:30:25,600 Speaker 1: saying that they are in fact doing that, but that 508 00:30:25,880 --> 00:30:28,200 Speaker 1: since markets don't always get it tried, they need to 509 00:30:28,240 --> 00:30:31,480 Speaker 1: have this counter cyclical legisment factor. So it's not been 510 00:30:32,320 --> 00:30:36,400 Speaker 1: a paragon of good communication the PDOC. That is um 511 00:30:36,400 --> 00:30:38,400 Speaker 1: And I think they could accomplish a lot more if 512 00:30:38,400 --> 00:30:42,160 Speaker 1: they simply did what they say they are doing, and 513 00:30:42,200 --> 00:30:45,800 Speaker 1: if they articulated that policy clearly and showed that they 514 00:30:45,840 --> 00:30:48,760 Speaker 1: meant it. I mean, I guess the question is and 515 00:30:48,880 --> 00:30:53,680 Speaker 1: I guess it goes to any good old international economics textbook, professor. 516 00:30:54,440 --> 00:30:58,040 Speaker 1: I think of Absfeld Rugoff. What's the tri lama for China? 517 00:30:58,560 --> 00:31:02,560 Speaker 1: If they have such an artificial construct of government, economics 518 00:31:02,560 --> 00:31:07,320 Speaker 1: and society, do they have a traditional international economic trial lemma? 519 00:31:08,560 --> 00:31:10,800 Speaker 1: So they had in a curious part of the trial 520 00:31:10,880 --> 00:31:13,800 Speaker 1: ement um Um. What they've tried to do is based 521 00:31:13,840 --> 00:31:17,880 Speaker 1: somewhere in the middle, so muggling through by having a 522 00:31:18,040 --> 00:31:22,080 Speaker 1: somewhat flexible exchange rate and increasing the open capital account 523 00:31:22,120 --> 00:31:25,480 Speaker 1: and some independence of monety policy. But if they're learning, 524 00:31:25,480 --> 00:31:28,920 Speaker 1: particularly during times of stress and financial markets, you can't 525 00:31:28,920 --> 00:31:31,360 Speaker 1: have it all, and that's driven them into a corner 526 00:31:31,440 --> 00:31:36,280 Speaker 1: many times, I think muddling through that's a c f 527 00:31:36,360 --> 00:31:42,360 Speaker 1: A institute. You have to muddeling through really speaks volumes. Well, 528 00:31:42,440 --> 00:31:44,880 Speaker 1: let's hand it to them. They have actually muddled through 529 00:31:44,960 --> 00:31:48,040 Speaker 1: reasonably competently. So if you had to give a price 530 00:31:48,040 --> 00:31:50,480 Speaker 1: of muddling through, the Chinese would certainly get it because 531 00:31:50,480 --> 00:31:54,400 Speaker 1: it's something they've done with a reasonable degree of effectiveness. Again, 532 00:31:54,600 --> 00:31:58,680 Speaker 1: excepting periods of stressfulhen things start coming apart each one, 533 00:31:58,760 --> 00:32:00,560 Speaker 1: give us a preview you would have of what we 534 00:32:00,600 --> 00:32:03,200 Speaker 1: can expect here when the People's Congress gets underway in 535 00:32:03,200 --> 00:32:04,760 Speaker 1: a few weeks at time. What are you going to 536 00:32:04,800 --> 00:32:06,960 Speaker 1: be watching? What are you gonna be listening to? As 537 00:32:07,000 --> 00:32:10,479 Speaker 1: that as that Congress gets under Why the betting, by 538 00:32:10,520 --> 00:32:14,400 Speaker 1: and large David seems to be that Presidency Jamping will 539 00:32:14,480 --> 00:32:17,960 Speaker 1: end up consolidating his powers. Now, whether he does this 540 00:32:19,040 --> 00:32:23,960 Speaker 1: somewhat overtly by making sure that the main policy making 541 00:32:24,000 --> 00:32:26,440 Speaker 1: body in China, the Standing Committee of the Polity Bureau, 542 00:32:27,120 --> 00:32:31,640 Speaker 1: is stacked with his people, or if he provides a 543 00:32:31,640 --> 00:32:34,600 Speaker 1: little more balance, will be interesting to see. But what 544 00:32:34,840 --> 00:32:38,040 Speaker 1: comes after the People's Congress, I think is going to 545 00:32:38,080 --> 00:32:42,520 Speaker 1: be far more interesting because under any scenario, presidency will 546 00:32:42,560 --> 00:32:45,920 Speaker 1: consolidate his power, and then the question is will he 547 00:32:46,000 --> 00:32:49,560 Speaker 1: reveal his proof stripes, and will those stripes mean that 548 00:32:49,680 --> 00:32:52,680 Speaker 1: he is an economic reformer who is now going to 549 00:32:52,840 --> 00:32:57,080 Speaker 1: use his added power to push through major economic reforms, 550 00:32:57,240 --> 00:33:02,080 Speaker 1: or will he retreat to a more government led economic structure. 551 00:33:02,120 --> 00:33:04,840 Speaker 1: And the betting, at least on my parties on the latter, 552 00:33:05,640 --> 00:33:09,600 Speaker 1: I mean to get away from the linear algebra absolute rugoff. 553 00:33:10,400 --> 00:33:15,760 Speaker 1: What is the not thuggery but the power dynamic between 554 00:33:15,840 --> 00:33:20,880 Speaker 1: Beijing and the larger metropolitan areas. It's a very complicated 555 00:33:20,960 --> 00:33:26,000 Speaker 1: dynamic at any time because the provincial governors do tend 556 00:33:26,040 --> 00:33:29,120 Speaker 1: to be quite powerful. But what stain Thing has done 557 00:33:29,200 --> 00:33:32,680 Speaker 1: quite effectively during the past few years. He brings some 558 00:33:32,800 --> 00:33:37,560 Speaker 1: of the more recalcitrant governors under his domain. He's eliminated 559 00:33:37,560 --> 00:33:40,479 Speaker 1: a few of them through his anti corruption drive, and 560 00:33:40,560 --> 00:33:45,600 Speaker 1: he's made it very clear that dissension from Beijing, especially 561 00:33:45,600 --> 00:33:49,400 Speaker 1: open dissension, will not be tolerated. But there is a 562 00:33:49,440 --> 00:33:52,040 Speaker 1: limit to how aggressively he can push on that, because 563 00:33:52,080 --> 00:33:55,840 Speaker 1: the local bosses do have their own power basis. But 564 00:33:55,920 --> 00:33:58,760 Speaker 1: he is he is getting rid of the opposition quite well. 565 00:33:58,960 --> 00:34:01,640 Speaker 1: I can't say goodbye to you because in our agreement, 566 00:34:01,880 --> 00:34:06,000 Speaker 1: Mr Gurus says goodbye to everything. From Cornell, each represent 567 00:34:06,320 --> 00:34:08,399 Speaker 1: always great to speak to, each represent Joining us today 568 00:34:08,440 --> 00:34:19,759 Speaker 1: from Ithaca, I believe. Thanks for listening to the Bloomberg 569 00:34:19,800 --> 00:34:26,120 Speaker 1: Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, 570 00:34:26,480 --> 00:34:30,319 Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at 571 00:34:30,360 --> 00:34:35,040 Speaker 1: Tom Keene. David Gura is at David Gura. Before the podcast, 572 00:34:35,320 --> 00:34:38,719 Speaker 1: you can always catch us worldwide. I'm Bloomberg Radio