WEBVTT - Blanchflower: BOE forecasts have been too optimistic

0:00:02.320 --> 0:00:05.720
<v Speaker 1>Global business news twenty four hours a day. If Bloomberg

0:00:05.760 --> 0:00:08.840
<v Speaker 1>dot com the radio plus mobile act and on your radio,

0:00:09.119 --> 0:00:12.840
<v Speaker 1>this is a Broomberg business flash and I'm Karen Moscow.

0:00:12.960 --> 0:00:15.040
<v Speaker 1>Socks are lower, with the S and P five hundred

0:00:15.080 --> 0:00:17.840
<v Speaker 1>index slipping for a second day as investors consider the

0:00:17.880 --> 0:00:20.920
<v Speaker 1>capacity of central banks to boost global growth. We check

0:00:21.000 --> 0:00:23.560
<v Speaker 1>the markets every fifteen minutes throughout the trading day. On

0:00:23.600 --> 0:00:26.960
<v Speaker 1>Bloomberg SNP five hundred down half per cent or nine points,

0:00:26.960 --> 0:00:29.560
<v Speaker 1>to twenty ten, the Dow Jones Industrial Average down four

0:00:29.600 --> 0:00:32.400
<v Speaker 1>tenths per cent or sixty one points to seventeen thousand,

0:00:32.440 --> 0:00:35.839
<v Speaker 1>one hundred sixty seven, and the NASDAC is down four

0:00:35.880 --> 0:00:38.520
<v Speaker 1>ten percent or twenty points, to forty seven twenty nine.

0:00:38.560 --> 0:00:40.879
<v Speaker 1>Ten year treasury of five thirty seconds, the yield one

0:00:40.880 --> 0:00:43.440
<v Speaker 1>point nine three percent yield on the two year point

0:00:43.479 --> 0:00:46.479
<v Speaker 1>nine five percent. Nimex screwed oil down two percent or

0:00:46.520 --> 0:00:49.120
<v Speaker 1>seventy three cents to thirty six forty seven. A barrel

0:00:49.320 --> 0:00:52.000
<v Speaker 1>comes goal down one point two percent or fifteen dollars

0:00:52.000 --> 0:00:54.760
<v Speaker 1>fifty cents at twelve twenty nine fifty and ounce. The

0:00:54.800 --> 0:00:57.440
<v Speaker 1>euro and dollar eleven oh five. The yen is at

0:00:57.480 --> 0:01:00.600
<v Speaker 1>one twelve point eight eight. Faraoh Corporate Stion, a maker

0:01:00.600 --> 0:01:04.040
<v Speaker 1>of chemicals for the manufacturing industry, recently receiving a takeover

0:01:04.080 --> 0:01:06.920
<v Speaker 1>approach from Apollo Global Management. That's according to people with

0:01:07.080 --> 0:01:10.360
<v Speaker 1>knowledge of the matter. Farrah rebuffing the initial approach, which

0:01:10.400 --> 0:01:13.360
<v Speaker 1>was made without or within rather recent weeks, that people said,

0:01:13.400 --> 0:01:16.920
<v Speaker 1>asking not to be identified as the matter isn't public.

0:01:18.440 --> 0:01:22.360
<v Speaker 1>And Valiant Pharmaceuticals plunging in early twittering as much as

0:01:22.480 --> 0:01:25.360
<v Speaker 1>this morning after it corrected its Ebada guidance lower to

0:01:25.480 --> 0:01:28.200
<v Speaker 1>six billion dollars. And that's a Bloomberg business flash, Tom

0:01:28.200 --> 0:01:31.080
<v Speaker 1>and Mike Karena. Thanks so much of Bloomberg surveillance bunched

0:01:31.120 --> 0:01:36.319
<v Speaker 1>by interactive brokers. Traders University, even experienced traders need to

0:01:36.360 --> 0:01:40.040
<v Speaker 1>keep learning. Traders University will get you up to speed

0:01:40.720 --> 0:01:45.400
<v Speaker 1>quickly with short videos, webinars, courses and more. Visit ib k,

0:01:45.800 --> 0:01:51.880
<v Speaker 1>r B dot, come slash, stay ahead. And Valiant continues

0:01:51.960 --> 0:01:55.440
<v Speaker 1>to not find a bid. Mike down right now, we

0:01:55.480 --> 0:01:58.760
<v Speaker 1>have a forty handle. Take your money it appears out

0:01:58.800 --> 0:02:00.760
<v Speaker 1>of value, put it into Arrow and the hope that

0:02:00.800 --> 0:02:04.160
<v Speaker 1>maybe they'll restart those talks with Apollo Global. Pharaoh up

0:02:04.360 --> 0:02:09.520
<v Speaker 1>about ten right now. Um, here's some interesting and exciting news.

0:02:09.919 --> 0:02:12.600
<v Speaker 1>The Canadian Prime Minister, Justin Trudeau back in the United States.

0:02:12.639 --> 0:02:14.640
<v Speaker 1>He's gonna be in New York next couple of days.

0:02:14.639 --> 0:02:18.040
<v Speaker 1>He wants to he's visiting some folks of the United Nations.

0:02:18.120 --> 0:02:20.760
<v Speaker 1>Wants to run for a seat on the United Nations

0:02:20.760 --> 0:02:24.839
<v Speaker 1>Security Council. Canada that is, but we've already given him

0:02:24.880 --> 0:02:29.480
<v Speaker 1>a seat. We we are very excited that Justin Trudeau

0:02:29.639 --> 0:02:33.200
<v Speaker 1>will be our guest at nine o'clock on Thursday, Bloomberg

0:02:33.240 --> 0:02:36.840
<v Speaker 1>Surveillance Bloomberg Go on television, John Michael Fwaite will interview

0:02:37.120 --> 0:02:42.360
<v Speaker 1>the new Prime Minister of Canada. Good so you will

0:02:42.400 --> 0:02:45.640
<v Speaker 1>not want to miss that on Thursday. David Blanchard joining

0:02:45.680 --> 0:02:50.079
<v Speaker 1>us now from Dirtmouth on austerity. Is there still austerity

0:02:50.120 --> 0:02:53.880
<v Speaker 1>out there? Danny certainly is. I'm afraid. And in the

0:02:54.000 --> 0:02:57.840
<v Speaker 1>UK we've talked that the UK chuncelor tomorrow is going

0:02:57.840 --> 0:03:00.320
<v Speaker 1>to impose a big new round about sterity as the

0:03:00.360 --> 0:03:05.480
<v Speaker 1>economy flowed. Well, they've got makes no sense, makes no

0:03:05.600 --> 0:03:09.200
<v Speaker 1>sense to me. They've got a pledge to balance the budget.

0:03:09.240 --> 0:03:14.120
<v Speaker 1>By what he's going to have to do something? You know,

0:03:14.520 --> 0:03:16.720
<v Speaker 1>he certainly has a right. Well, he certainly has a

0:03:16.720 --> 0:03:18.840
<v Speaker 1>pledge to do it with no economists, as far as

0:03:18.880 --> 0:03:21.480
<v Speaker 1>I can tell in the World's a good idea. But

0:03:21.600 --> 0:03:23.440
<v Speaker 1>he has a problem in the sense that there is

0:03:23.480 --> 0:03:26.079
<v Speaker 1>a Brexit vote that's coming, so he has to balance

0:03:26.200 --> 0:03:30.000
<v Speaker 1>that trying to make people feel good about where they

0:03:30.040 --> 0:03:33.160
<v Speaker 1>are now against the rather foolish pledge that he made

0:03:33.440 --> 0:03:35.760
<v Speaker 1>to balance the budget. And the big problem he's had

0:03:36.200 --> 0:03:39.680
<v Speaker 1>is that the forecast he made in November looked far

0:03:39.720 --> 0:03:42.360
<v Speaker 1>too optimistic. They had a set of scenarios and I

0:03:42.440 --> 0:03:44.560
<v Speaker 1>argued at the time their work case scenario was my

0:03:44.680 --> 0:03:48.840
<v Speaker 1>best case scenario. And essentially that's what's happened. Nominal GDP

0:03:49.080 --> 0:03:52.800
<v Speaker 1>got revised downward a lot, and the good news, if

0:03:52.800 --> 0:03:55.520
<v Speaker 1>he liked the kind of bubbly news he produced in

0:03:55.600 --> 0:03:58.160
<v Speaker 1>November three months ago, has now just sort of gone

0:03:58.200 --> 0:04:01.160
<v Speaker 1>up in his smoke, and he has this delicate balancing

0:04:01.160 --> 0:04:04.120
<v Speaker 1>act to do. And my suspicion is, and that it's

0:04:04.160 --> 0:04:06.960
<v Speaker 1>well cropped out, he's going to cut one point two

0:04:07.040 --> 0:04:10.200
<v Speaker 1>billion dollars from the disabled to fund tax cuts, which

0:04:10.240 --> 0:04:13.640
<v Speaker 1>is probably not very popular. David had the privilege of

0:04:13.640 --> 0:04:16.240
<v Speaker 1>sitting in your lecture at Dartmouth you when I did

0:04:16.279 --> 0:04:19.560
<v Speaker 1>something once for your good students in the Hangover community

0:04:19.839 --> 0:04:23.599
<v Speaker 1>ages ago. I believe then some of what we talked

0:04:23.600 --> 0:04:26.279
<v Speaker 1>about was in the textbooks. Most of what Mike and

0:04:26.360 --> 0:04:30.400
<v Speaker 1>I talk about now isn't in the textbooks. How seat

0:04:30.400 --> 0:04:34.359
<v Speaker 1>of the pants are our central banks at this moment?

0:04:35.560 --> 0:04:37.520
<v Speaker 1>I think that's a great question, Tom. I think I've

0:04:37.560 --> 0:04:39.919
<v Speaker 1>said to you on a few occasions. But if we

0:04:40.040 --> 0:04:41.960
<v Speaker 1>look back at what we did when we went in,

0:04:42.080 --> 0:04:44.839
<v Speaker 1>I started the Monetary Policy Committee, and we thought about

0:04:44.880 --> 0:04:48.120
<v Speaker 1>what we do and what we did to how we

0:04:48.160 --> 0:04:50.840
<v Speaker 1>went to non conventional policy and what it meant, and

0:04:50.880 --> 0:04:53.240
<v Speaker 1>we were literally they're flying by the seat of our plants,

0:04:53.720 --> 0:04:56.600
<v Speaker 1>and we always thought, well, when we have to do exit,

0:04:57.000 --> 0:04:59.000
<v Speaker 1>that's going to be very difficult. We're going to have

0:04:59.080 --> 0:05:02.239
<v Speaker 1>to look at the day eater and that's really a problem.

0:05:02.240 --> 0:05:03.960
<v Speaker 1>And people say things that they have a plan, that

0:05:04.000 --> 0:05:06.080
<v Speaker 1>said has to plan, the MPC has a plan, Well,

0:05:06.080 --> 0:05:09.080
<v Speaker 1>they actually really the plan is to follow the data.

0:05:09.200 --> 0:05:13.000
<v Speaker 1>And I have a sneaking feeling that right now looks

0:05:13.040 --> 0:05:16.679
<v Speaker 1>a lot like the turning points in two thousand and eight.

0:05:16.880 --> 0:05:19.120
<v Speaker 1>We've had very bad p M I for the UK

0:05:19.279 --> 0:05:22.760
<v Speaker 1>and the US bad retail sales numbers this morning, bad

0:05:22.800 --> 0:05:28.039
<v Speaker 1>wholesale data, which suggests that potentially we are seeing a

0:05:28.160 --> 0:05:31.320
<v Speaker 1>turning point. And of course what happens today is that

0:05:31.400 --> 0:05:35.240
<v Speaker 1>central banks can't cut rates by five basis points as

0:05:35.279 --> 0:05:38.159
<v Speaker 1>they did in oh I'm not suggesting the scale of

0:05:38.160 --> 0:05:41.480
<v Speaker 1>the shock is as high, but it certainly looks that

0:05:42.600 --> 0:05:46.280
<v Speaker 1>there are turning points going on, especially driven by the

0:05:46.320 --> 0:05:52.599
<v Speaker 1>slowing of the world's second largest economy, the government from

0:05:52.640 --> 0:05:54.760
<v Speaker 1>the what you were talking about with the the UK

0:05:55.400 --> 0:06:00.000
<v Speaker 1>government into the political campaign here pretty much any account

0:06:00.000 --> 0:06:02.760
<v Speaker 1>and this will tell you that it is not the

0:06:02.839 --> 0:06:06.080
<v Speaker 1>case that countries have to balance their budget in the

0:06:06.120 --> 0:06:10.800
<v Speaker 1>same way that families do. But on the converse side,

0:06:11.240 --> 0:06:18.920
<v Speaker 1>is there an economic advantage to having a balanced budget? Well,

0:06:19.000 --> 0:06:24.320
<v Speaker 1>certainly having credible fiscal plan makes sense, but the question,

0:06:24.400 --> 0:06:27.479
<v Speaker 1>first of all is over what time period should you

0:06:27.600 --> 0:06:30.920
<v Speaker 1>balance that budget. Countries, as you say, aren't like households.

0:06:31.160 --> 0:06:33.040
<v Speaker 1>And I remember one final work, and I won't tell

0:06:33.080 --> 0:06:34.880
<v Speaker 1>you who it was, but I was having a conversation

0:06:34.880 --> 0:06:37.800
<v Speaker 1>with a famous central banker who said that that he

0:06:37.880 --> 0:06:39.719
<v Speaker 1>thought that a balance in the budget over about a

0:06:39.720 --> 0:06:42.720
<v Speaker 1>fifteen year period was a pretty good idea. In the

0:06:42.839 --> 0:06:46.240
<v Speaker 1>UK there's a debate between the two parties about what

0:06:46.360 --> 0:06:49.160
<v Speaker 1>should you balance, and the Labor Party this week came

0:06:49.160 --> 0:06:52.320
<v Speaker 1>out and said, let's think about balancing the um that

0:06:52.760 --> 0:06:55.120
<v Speaker 1>if you like the current part of the budget over

0:06:55.360 --> 0:06:59.359
<v Speaker 1>a reasonably short period, but exclude from that spending on

0:06:59.480 --> 0:07:01.960
<v Speaker 1>in better summons, you don't have to balance that. You

0:07:02.000 --> 0:07:05.080
<v Speaker 1>can borrow money at such low rates that potentially this

0:07:05.120 --> 0:07:08.520
<v Speaker 1>will be self salancing. So there are obvious issues in

0:07:08.560 --> 0:07:11.600
<v Speaker 1>the economics about over what time period do you try

0:07:11.600 --> 0:07:14.880
<v Speaker 1>and balance budgets when when you're at the zero lower bound?

0:07:15.160 --> 0:07:18.120
<v Speaker 1>And do you include investment spending? In my view is

0:07:18.120 --> 0:07:21.400
<v Speaker 1>that you shouldn't include investment spending and fifteen years is

0:07:21.400 --> 0:07:25.160
<v Speaker 1>probably a reasonable time across a cycle or so trying balancing.

0:07:25.240 --> 0:07:27.640
<v Speaker 1>And obviously the Chance in the UK has sound out

0:07:27.680 --> 0:07:30.320
<v Speaker 1>the error of his way because he basically can't balance

0:07:30.360 --> 0:07:33.000
<v Speaker 1>the budget. Said he'd removed the deputy in a parliament

0:07:33.160 --> 0:07:35.720
<v Speaker 1>and he hasn't even removed half of it. So plans

0:07:35.760 --> 0:07:38.920
<v Speaker 1>written down the refine. But the practicalities in this world

0:07:38.920 --> 0:07:41.520
<v Speaker 1>that Tom just talked about, this is the world was

0:07:41.680 --> 0:07:44.880
<v Speaker 1>not seen. You shouldn't have silly rules when these rules

0:07:44.920 --> 0:07:48.280
<v Speaker 1>don't apply now. Um, I was just telling someone to

0:07:48.360 --> 0:07:52.640
<v Speaker 1>read Scodolski's monograph The Return of Kings, which I urge

0:07:52.680 --> 0:07:57.360
<v Speaker 1>every conservative and obviously liberal to read, and it is

0:07:57.480 --> 0:08:02.520
<v Speaker 1>so informative about when getting the foxholes. I would suggest,

0:08:02.600 --> 0:08:06.400
<v Speaker 1>professor did a large part of the Western civilization public

0:08:06.840 --> 0:08:09.760
<v Speaker 1>feels like they're in a foxhll. Mike McKee mentioned the

0:08:09.760 --> 0:08:13.280
<v Speaker 1>other day the exit polling out of Michigan eight percent

0:08:13.360 --> 0:08:15.400
<v Speaker 1>or so of the people felt that we're getting ahead

0:08:15.840 --> 0:08:19.320
<v Speaker 1>eight zero, So a lot of people are in the foxhole.

0:08:19.760 --> 0:08:25.480
<v Speaker 1>What is your Keynesian prescription that the establishment can affect

0:08:26.120 --> 0:08:32.719
<v Speaker 1>to help the people who feel like they're in a foxhole? Well,

0:08:33.080 --> 0:08:38.640
<v Speaker 1>and you got thirty seconds more monetary stimulus if you

0:08:38.679 --> 0:08:40.840
<v Speaker 1>think people have done badly in the US. In the

0:08:40.960 --> 0:08:44.280
<v Speaker 1>UK real wages about eight percent compared to the start

0:08:44.360 --> 0:08:47.079
<v Speaker 1>of the recession. So essentially what we've seen is, I mean,

0:08:47.360 --> 0:08:49.680
<v Speaker 1>on this program, we've taught endlessly about it. My view

0:08:49.720 --> 0:08:53.240
<v Speaker 1>is affected two little stimulus and the fiscal AFOA bailed

0:08:53.240 --> 0:08:56.000
<v Speaker 1>out of Kansism too soon, and that's why we have

0:08:56.080 --> 0:08:58.320
<v Speaker 1>the descent in the UK have out breath, and in

0:08:58.360 --> 0:09:01.560
<v Speaker 1>the US Trump and another gree Well, I know when

0:09:01.640 --> 0:09:04.120
<v Speaker 1>Dartmouth gets to the final four, you'll be at Houston.

0:09:04.200 --> 0:09:07.320
<v Speaker 1>But uh, Professor Blanchard, thank you? So are you marrying

0:09:07.320 --> 0:09:09.800
<v Speaker 1>any daughters this summer? Are you? Are you gonna help

0:09:09.840 --> 0:09:14.200
<v Speaker 1>the UK GDP again as you always do? I know

0:09:14.320 --> 0:09:19.240
<v Speaker 1>I always do, but not this year. David Blanchard single

0:09:19.360 --> 0:09:23.360
<v Speaker 1>handedly turning the United Kingdom from recession to globe the

0:09:23.480 --> 0:09:26.840
<v Speaker 1>economic growth with a wedding or two a few years ago.

0:09:26.880 --> 0:09:29.160
<v Speaker 1>He is at Dartmouth. Mike, We've got to look at

0:09:29.240 --> 0:09:32.480
<v Speaker 1>Valiant down three or three. That's not a you know,

0:09:32.520 --> 0:09:35.680
<v Speaker 1>you're not missed hearing me. Well here's the thing. And

0:09:35.800 --> 0:09:37.760
<v Speaker 1>you talked about stock price going up and down. Here's

0:09:37.920 --> 0:09:41.280
<v Speaker 1>a great way to think about it. In by as

0:09:41.320 --> 0:09:45.280
<v Speaker 1>of June of two thousand fifteen, last year, nine months ago,

0:09:45.679 --> 0:09:49.240
<v Speaker 1>this was a seventy six billion dollar company. It is

0:09:49.280 --> 0:09:55.000
<v Speaker 1>now a fifteen billion dollar company some sort of scale

0:09:55.000 --> 0:09:57.760
<v Speaker 1>on much A massive shout out to Cynthia Coons, who

0:09:57.800 --> 0:10:01.839
<v Speaker 1>was buried personally, came off the all to inform our

0:10:01.920 --> 0:10:04.360
<v Speaker 1>show of what you heard in the call. And Lisa

0:10:04.400 --> 0:10:07.480
<v Speaker 1>Bramo it's in get flight really looking forward to what

0:10:07.559 --> 0:10:10.720
<v Speaker 1>Max Neson we'll do with this, Mike, and I don't

0:10:10.720 --> 0:10:12.599
<v Speaker 1>do bi hold cell you know. I know there's a

0:10:12.640 --> 0:10:16.080
<v Speaker 1>whole industry for that, and other people do that. But

0:10:16.200 --> 0:10:20.559
<v Speaker 1>this has now gone over to the realm of corporate governance,

0:10:20.880 --> 0:10:24.920
<v Speaker 1>corporate finance, and almost I got to be careful here, Mike.

0:10:25.280 --> 0:10:28.400
<v Speaker 1>I don't want to say forensic accounting, but at least

0:10:28.600 --> 0:10:33.000
<v Speaker 1>academic accounting, to say to yourself what happened and still

0:10:33.040 --> 0:10:34.520
<v Speaker 1>no bid. I don't want to say we found a

0:10:34.520 --> 0:10:37.760
<v Speaker 1>bid here at seven point zero two and does seem

0:10:37.800 --> 0:10:39.599
<v Speaker 1>to have put in a bottom for the moment, But

0:10:39.880 --> 0:10:44.559
<v Speaker 1>we watch throughout the day. Tomorrow we'll be with you, Mike,

0:10:44.600 --> 0:10:47.280
<v Speaker 1>and I haven't extended what is the hour day to

0:10:47.320 --> 0:10:50.600
<v Speaker 1>morow something like that. Me and Janet we will be

0:10:50.600 --> 0:10:56.000
<v Speaker 1>here early, early, early with perspective and conversation on these

0:10:56.040 --> 0:10:59.280
<v Speaker 1>unusual times, and then we'll move one PM with Scarlet

0:10:59.320 --> 0:11:03.600
<v Speaker 1>Fou on televis Genneral Radio worldwide for our special informed

0:11:03.640 --> 0:11:07.880
<v Speaker 1>coverage of York Federal Reserve System. We are produced by

0:11:08.040 --> 0:11:11.240
<v Speaker 1>y U n can Fell. You our global technical director

0:11:11.280 --> 0:11:12.400
<v Speaker 1>of Bloomberg Surveillance