1
00:00:05,120 --> 00:00:09,200
Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along

2
00:00:09,200 --> 00:00:13,039
Speaker 1: with Jonathan Ferroll and Lisa A. Brawmowitz. Daily we bring

3
00:00:13,080 --> 00:00:17,159
Speaker 1: you insight from the best and economics, finance, investment, and

4
00:00:17,239 --> 00:00:22,440
Speaker 1: international relations. To find Bloomberg Surveillance on Apple podcast, SoundCloud,

5
00:00:22,800 --> 00:00:26,280
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg terminal.

6
00:00:31,200 --> 00:00:34,040
Speaker 1: Kinneth throwing Off joins us to say he's economics and

7
00:00:34,080 --> 00:00:38,280
Speaker 1: public policy professor at Harvard barely describes his public service

8
00:00:38,320 --> 00:00:40,640
Speaker 1: to the nation, and of course many years is the

9
00:00:40,720 --> 00:00:42,720
Speaker 1: chief economist at the I M. If there's been a

10
00:00:42,760 --> 00:00:46,120
Speaker 1: few books that people have been forced to read, is well,

11
00:00:46,680 --> 00:00:49,160
Speaker 1: I want to go ken to one of the great

12
00:00:49,280 --> 00:00:53,959
Speaker 1: algebraic books, the giant Wendy Carlin of the University College

13
00:00:54,360 --> 00:00:58,960
Speaker 1: of London, with their effort on the three equation I

14
00:00:59,320 --> 00:01:03,480
Speaker 1: S L system. We have just had a natural disaster.

15
00:01:04,360 --> 00:01:09,200
Speaker 1: We have had a massive COVID fiscal impulse. What does

16
00:01:09,319 --> 00:01:14,600
Speaker 1: your world say of how we extract ourselves from a

17
00:01:14,680 --> 00:01:22,160
Speaker 1: massive increase in the fiscal a massive increase in debt? Okay, Well,

18
00:01:22,200 --> 00:01:24,680
Speaker 1: I mean I think a lot of policy of the

19
00:01:24,720 --> 00:01:27,640
Speaker 1: path a couple of decades and Frankly, a lot of

20
00:01:27,640 --> 00:01:31,959
Speaker 1: the academic thinking and literature was predicated on we'd never

21
00:01:32,080 --> 00:01:34,480
Speaker 1: have a war, we never have a big supply shock,

22
00:01:34,880 --> 00:01:38,440
Speaker 1: interest rates would never go up and guess what, oh,

23
00:01:38,480 --> 00:01:43,040
Speaker 1: and there'll never be inflation. And it's happening, and we

24
00:01:43,200 --> 00:01:45,840
Speaker 1: you know, we have to make adjustments that people haven't

25
00:01:45,840 --> 00:01:48,160
Speaker 1: seen for a long time. And I think it's going

26
00:01:48,240 --> 00:01:50,840
Speaker 1: to be much harder than it was in the nineteen eighties.

27
00:01:50,960 --> 00:01:54,920
Speaker 1: The political environments changed, the economy has changes. You said,

28
00:01:54,920 --> 00:01:58,640
Speaker 1: there's much more depth. The stock market's really high. People

29
00:01:58,680 --> 00:02:01,120
Speaker 1: are very worried about inequality. It's going to be a

30
00:02:01,240 --> 00:02:05,680
Speaker 1: heavy lift to try to treat this like a classic

31
00:02:05,840 --> 00:02:08,359
Speaker 1: Kansy and demand shock because of all the news. So

32
00:02:08,600 --> 00:02:11,959
Speaker 1: Ken I have to turn to Upsaled rogueoff in your

33
00:02:12,040 --> 00:02:16,120
Speaker 1: excellence at i m F. Following on from Rudy dorn Bush,

34
00:02:16,480 --> 00:02:20,440
Speaker 1: David fulkers Landau speaks of a dollar stronger he nailed

35
00:02:20,440 --> 00:02:24,200
Speaker 1: out along with others, and here we are. How do

36
00:02:24,280 --> 00:02:31,200
Speaker 1: you actually weaken the dollar? Well, you know, I mean

37
00:02:32,040 --> 00:02:36,120
Speaker 1: the dominance of the dollar in trade and transactions would

38
00:02:36,120 --> 00:02:39,560
Speaker 1: be there, whether the euro, you know, they're they're one

39
00:02:39,639 --> 00:02:43,919
Speaker 1: fifty dollars per euro or the opposite. I mean that

40
00:02:43,919 --> 00:02:47,960
Speaker 1: that's that's a given. But you know, right now, there's

41
00:02:48,080 --> 00:02:52,720
Speaker 1: this concern that no matter how troubled the US is,

42
00:02:52,840 --> 00:02:55,320
Speaker 1: there are other countries that are in worse shape. So

43
00:02:55,360 --> 00:02:59,040
Speaker 1: it's actually, you know, uh, gonna take a chance. I

44
00:02:59,639 --> 00:03:02,639
Speaker 1: I think a lot of countries are having to react

45
00:03:03,000 --> 00:03:09,160
Speaker 1: because inflation goes up when the dollar strengthens. Paradoxically, we

46
00:03:09,240 --> 00:03:12,240
Speaker 1: don't get that much benefit in the United States from

47
00:03:12,280 --> 00:03:15,000
Speaker 1: the stronger dollar because so much of trade as priced

48
00:03:15,000 --> 00:03:18,360
Speaker 1: in dollars. But the rest of the world has to react. Well,

49
00:03:19,000 --> 00:03:21,160
Speaker 1: let's talk about different parts of the world than can

50
00:03:21,240 --> 00:03:24,280
Speaker 1: that may be hit by a stronger dollar more substantially.

51
00:03:24,320 --> 00:03:26,400
Speaker 1: Are we own the verge of a currency crisis in

52
00:03:26,480 --> 00:03:33,720
Speaker 1: any emerging markets? Well, currencies have certainly fallen. I don't know,

53
00:03:33,840 --> 00:03:38,680
Speaker 1: you know exactly, I'd say currency crisis, were at risk

54
00:03:38,960 --> 00:03:42,720
Speaker 1: of certainly debt crisis and places like Turkey and some

55
00:03:42,800 --> 00:03:47,400
Speaker 1: of the lower income, middle income emerging markets. My co

56
00:03:47,560 --> 00:03:50,880
Speaker 1: author and colleague Carmen Reinhardt at the World Banks warning

57
00:03:50,960 --> 00:03:53,760
Speaker 1: that there may be banking crisis and all of that,

58
00:03:53,840 --> 00:03:56,880
Speaker 1: of course may lead to currency crisis, and in principle,

59
00:03:57,240 --> 00:04:01,600
Speaker 1: the movement of the currencies cushioning and preventing things from

60
00:04:01,680 --> 00:04:05,040
Speaker 1: you know, falling apart. But it's very stressful. I mean

61
00:04:05,680 --> 00:04:09,280
Speaker 1: having your currency fall and having inflation go up and

62
00:04:09,320 --> 00:04:13,760
Speaker 1: having to raise interest rates. So the position you're quite right, Kaylee.

63
00:04:13,880 --> 00:04:17,479
Speaker 1: The position of emerging markets is really tough. And do

64
00:04:17,680 --> 00:04:19,560
Speaker 1: rate hikes from central banks fix that or do you

65
00:04:19,600 --> 00:04:23,160
Speaker 1: need direct intervention? Well, I think they're going to do

66
00:04:23,400 --> 00:04:28,479
Speaker 1: a mix of both. Rate hikes help, but a lot

67
00:04:28,520 --> 00:04:31,640
Speaker 1: of these countries don't really have the kind of you know,

68
00:04:31,800 --> 00:04:36,240
Speaker 1: frictionless capital markets that we have certainly you know in

69
00:04:36,279 --> 00:04:40,000
Speaker 1: the United States, and so they're able to intervene, but

70
00:04:40,120 --> 00:04:42,680
Speaker 1: you can only do that for so long. The Asian

71
00:04:42,720 --> 00:04:46,160
Speaker 1: countries have a fair amount of reserves, other countries have some,

72
00:04:46,520 --> 00:04:50,200
Speaker 1: but you can't do that indefinitely. Okay. So I would

73
00:04:50,240 --> 00:04:52,680
Speaker 1: like to move the conversation from fiat currencies to the

74
00:04:52,720 --> 00:04:56,680
Speaker 1: realm of digital and cryptocurrencies. Can Tom was pointing out

75
00:04:56,720 --> 00:04:58,680
Speaker 1: my required reading The Curse of Cash. You look at

76
00:04:58,680 --> 00:05:00,920
Speaker 1: the future of currencies and digital currencies have a role

77
00:05:00,960 --> 00:05:03,599
Speaker 1: to play, and I'm wondering how you differentiate the idea

78
00:05:03,640 --> 00:05:06,640
Speaker 1: of CBDCs. You know, central bank digital currency is a

79
00:05:06,680 --> 00:05:10,960
Speaker 1: potential digital dollar versus the broader kind of speculative assets

80
00:05:10,960 --> 00:05:15,120
Speaker 1: that cryptocurrencies seem to be at the moment. Not a

81
00:05:15,200 --> 00:05:17,920
Speaker 1: simple question. I mean, I think at the moment, if

82
00:05:17,960 --> 00:05:21,760
Speaker 1: you think about the United States issuing the CBDC, you

83
00:05:21,839 --> 00:05:24,560
Speaker 1: have to ask why they're doing it, because we have

84
00:05:25,120 --> 00:05:27,520
Speaker 1: can accomplish a lot of the things the same way

85
00:05:27,600 --> 00:05:31,520
Speaker 1: in the current system by making tweaks. Uh, if you

86
00:05:31,760 --> 00:05:34,440
Speaker 1: did it too well, you've had a retail central bank

87
00:05:34,480 --> 00:05:38,520
Speaker 1: digital currency, there'd be massive bits intermediation that we're probably

88
00:05:38,560 --> 00:05:41,640
Speaker 1: not ready to handle. I think they're they're small central

89
00:05:41,680 --> 00:05:45,120
Speaker 1: banks that want to issue a CBDC hoping they'll get

90
00:05:45,200 --> 00:05:47,560
Speaker 1: some of the kind of business that crypto guts. But

91
00:05:47,640 --> 00:05:52,080
Speaker 1: it's it's very different something that's going to be information

92
00:05:52,160 --> 00:05:57,320
Speaker 1: that the central bank sees and cryptocurrencies where the general

93
00:05:57,400 --> 00:05:59,880
Speaker 1: idea is to try to make it expensive to track you.

94
00:06:00,520 --> 00:06:03,880
Speaker 1: I think central banks are way behind the curve and

95
00:06:03,960 --> 00:06:08,560
Speaker 1: governments in general and regulating cryptocurrencies. They throw out the

96
00:06:08,600 --> 00:06:13,080
Speaker 1: idea of having CBDCs to distract the conversation. But ken

97
00:06:13,080 --> 00:06:16,240
Speaker 1: what's so important here, to your your very courageous book,

98
00:06:16,279 --> 00:06:19,760
Speaker 1: the curse of cash is the why we both you

99
00:06:19,839 --> 00:06:21,839
Speaker 1: and I are on the same page. We both agree

100
00:06:22,240 --> 00:06:29,000
Speaker 1: where is regulation fine? What is the why of the delay?

101
00:06:29,839 --> 00:06:31,800
Speaker 1: You know, I think it's it feels like the nine

102
00:06:32,120 --> 00:06:35,360
Speaker 1: nineties in early two thousands to me when the financial

103
00:06:35,400 --> 00:06:40,880
Speaker 1: system was inventing all these clever new financial engineering devices

104
00:06:41,240 --> 00:06:44,120
Speaker 1: and saying, you know, catch me if you can, regulate me,

105
00:06:44,200 --> 00:06:46,960
Speaker 1: if you can. And I hear very much the same

106
00:06:47,000 --> 00:06:51,320
Speaker 1: things from the you know, young cryptocurrency pioneers, and there

107
00:06:51,320 --> 00:06:54,120
Speaker 1: are a lot of ideas there, but they're wrong that

108
00:06:54,200 --> 00:06:57,000
Speaker 1: they can't be regulated. But they're they're, you know, they're

109
00:06:57,080 --> 00:07:01,279
Speaker 1: lobbying that. We we saw the Super Bowl with the

110
00:07:01,279 --> 00:07:06,960
Speaker 1: ads cryptocurrency their states like Colorado in Florida, which seemed

111
00:07:07,000 --> 00:07:10,280
Speaker 1: to want to be the next El Salvador. They're they're,

112
00:07:10,800 --> 00:07:12,840
Speaker 1: you know, giving a lot away, a lot of money

113
00:07:12,880 --> 00:07:15,960
Speaker 1: to try to control the regulation. They complain about the

114
00:07:16,080 --> 00:07:21,320
Speaker 1: SEC so they're pushing back hard. Can One final question

115
00:07:22,120 --> 00:07:26,160
Speaker 1: is Japanese yield curve control. Is that in the next

116
00:07:26,360 --> 00:07:31,840
Speaker 1: edition of Apsfield rogue off? I mean, I I think

117
00:07:31,920 --> 00:07:34,680
Speaker 1: it's not you know, it's something that works like in

118
00:07:34,720 --> 00:07:37,800
Speaker 1: a zero interest rate environment, but it can come back

119
00:07:37,840 --> 00:07:40,600
Speaker 1: to bite hard. And I think other central banks who

120
00:07:40,600 --> 00:07:44,600
Speaker 1: have toyed with it backed off, and as interest rates rise,

121
00:07:44,720 --> 00:07:47,360
Speaker 1: Japan will have its own problems. Professor, did you ever

122
00:07:47,440 --> 00:07:50,600
Speaker 1: think that we have a central bank that would of

123
00:07:50,680 --> 00:07:53,880
Speaker 1: the outstanding bonds let's say that j GP market. The

124
00:07:53,960 --> 00:07:56,360
Speaker 1: limits to that, Ken, and you'll mind other limits to

125
00:07:56,440 --> 00:07:59,080
Speaker 1: that well, I mean, in a way there are no

126
00:07:59,240 --> 00:08:02,560
Speaker 1: limits to it, in the sense that central bank debt

127
00:08:02,680 --> 00:08:04,640
Speaker 1: is owned by the government and so just a way

128
00:08:04,680 --> 00:08:08,080
Speaker 1: of issuing short term government debt. But if interest rates

129
00:08:08,200 --> 00:08:12,360
Speaker 1: rise and countries have very short term borrowing, including through

130
00:08:12,360 --> 00:08:15,280
Speaker 1: the central bank, they've either got to allow inflation to

131
00:08:15,320 --> 00:08:17,520
Speaker 1: go up or they've got to start unwinding a lot

132
00:08:17,560 --> 00:08:21,600
Speaker 1: of that. And if global real rates rise, and I

133
00:08:21,640 --> 00:08:24,600
Speaker 1: think they will continue to for a while, we're going

134
00:08:24,640 --> 00:08:27,000
Speaker 1: to see a lot of pain there. Can We're looking

135
00:08:27,040 --> 00:08:28,960
Speaker 1: to catch up with you, Ken Rogoff there the former

136
00:08:29,000 --> 00:08:30,840
Speaker 1: I m F. Thank you for a chief Economists. Ken,

137
00:08:30,880 --> 00:08:39,079
Speaker 1: Thank you sir as always right now and this is

138
00:08:39,120 --> 00:08:42,280
Speaker 1: a joyful Bloomberg to welcome monthly Google Belly. He's Minister

139
00:08:42,520 --> 00:08:47,040
Speaker 1: in the Presidency of South Africa, but far more in

140
00:08:47,080 --> 00:08:51,319
Speaker 1: the turmoil of American political economics, the upset of developed

141
00:08:51,320 --> 00:08:55,400
Speaker 1: central banks there is what is happening in emerging markets.

142
00:08:55,480 --> 00:08:58,040
Speaker 1: We look at a prison today of South Africa through

143
00:08:58,080 --> 00:09:02,760
Speaker 1: the experienced eyes of off Mr Ramaposs trusted advisers. Thank

144
00:09:02,800 --> 00:09:06,360
Speaker 1: you so much for joining us at Bloomberg today. I

145
00:09:06,400 --> 00:09:09,080
Speaker 1: need to go to the reality that our work, our

146
00:09:09,120 --> 00:09:12,400
Speaker 1: medical work on COVID came out of the Johns Hopkins

147
00:09:12,520 --> 00:09:16,040
Speaker 1: University and this was very much on South Africa. You

148
00:09:16,280 --> 00:09:20,040
Speaker 1: have lived COVID. You replace a senior official who at

149
00:09:20,080 --> 00:09:24,440
Speaker 1: age sixty two died of COVID. How immediate is COVID

150
00:09:24,480 --> 00:09:28,520
Speaker 1: to South Africa and what is the COVID illness look

151
00:09:28,600 --> 00:09:32,040
Speaker 1: like for South Africa in the next six months. We

152
00:09:32,040 --> 00:09:34,920
Speaker 1: we thank you very much for the opportunity and your viewership.

153
00:09:36,040 --> 00:09:42,120
Speaker 1: Uh so far so good. The last time I look,

154
00:09:43,080 --> 00:09:50,000
Speaker 1: we seem to have everything tabling auto going down. I

155
00:09:50,040 --> 00:09:54,760
Speaker 1: guess that's the reason we lifted restrictions totally in as

156
00:09:54,800 --> 00:10:01,120
Speaker 1: far as COVID disconcern and encourage people to actually keep

157
00:10:01,160 --> 00:10:06,160
Speaker 1: on staying or let on the communicability diseases in the

158
00:10:06,360 --> 00:10:11,959
Speaker 1: old traditional way. Although I've just had this morning, which

159
00:10:12,040 --> 00:10:14,839
Speaker 1: is during the day in South Africa that we seem

160
00:10:14,920 --> 00:10:20,040
Speaker 1: to have found a new sub variant and it is

161
00:10:20,080 --> 00:10:22,680
Speaker 1: something that we're going to look up to. But so far,

162
00:10:22,880 --> 00:10:29,360
Speaker 1: so good to only recovered cost post pandemic um dealing

163
00:10:29,360 --> 00:10:31,840
Speaker 1: with the economy which is even weaker than it was

164
00:10:32,559 --> 00:10:37,319
Speaker 1: before pandemic, although we can say with confidence that the

165
00:10:37,800 --> 00:10:43,120
Speaker 1: recent indicators have demonstrated that we are actually on the

166
00:10:43,160 --> 00:10:47,160
Speaker 1: border of leveling up with the pre pandemic situation. From

167
00:10:47,160 --> 00:10:50,280
Speaker 1: where you said, and with your nursing experience, when you

168
00:10:50,360 --> 00:10:53,079
Speaker 1: walk in a room, you're the boss and the Roman COVID,

169
00:10:53,160 --> 00:10:56,360
Speaker 1: I can see that with your nursing experience, is China

170
00:10:56,440 --> 00:10:58,640
Speaker 1: getting it right or is the western world as the

171
00:10:58,720 --> 00:11:03,160
Speaker 1: United States getting of it right. Um. We we've been

172
00:11:03,240 --> 00:11:07,800
Speaker 1: more focused to what we're doing at home and as

173
00:11:07,840 --> 00:11:10,959
Speaker 1: far as I'm concerned South Africans, they responded very positively

174
00:11:12,200 --> 00:11:17,120
Speaker 1: with regard to staying more let than before COVID knowing

175
00:11:17,160 --> 00:11:23,480
Speaker 1: that epitomergical diseases always um a phenomenon to stay what

176
00:11:23,679 --> 00:11:29,040
Speaker 1: it about access toward a cleaner water. Kidding on Washington's

177
00:11:29,840 --> 00:11:33,120
Speaker 1: because the issue of virus is an issue that is

178
00:11:33,120 --> 00:11:36,480
Speaker 1: not predictable longer. Going far away, A boat went around

179
00:11:36,520 --> 00:11:38,640
Speaker 1: the bottom of South Africa and it was a five

180
00:11:38,679 --> 00:11:42,120
Speaker 1: thousand mile truct to Sri Lanka. Now the images of

181
00:11:42,160 --> 00:11:46,520
Speaker 1: Sri Lanka collapsing are tangible. You have a South African

182
00:11:46,600 --> 00:11:51,720
Speaker 1: random disarray like many other emerging markets. How immediate is

183
00:11:51,800 --> 00:11:58,400
Speaker 1: the the food, the inflation, the economic unrest in South Africa?

184
00:11:58,480 --> 00:12:01,480
Speaker 1: Is it's something you're focused on urgently or can you

185
00:12:01,600 --> 00:12:07,000
Speaker 1: manage these challenges forward? Well? Uh, social economic situation in

186
00:12:07,000 --> 00:12:12,600
Speaker 1: our country continues to be a huge threat west now

187
00:12:13,400 --> 00:12:17,680
Speaker 1: with the global environment in particular big economies like United

188
00:12:17,679 --> 00:12:22,600
Speaker 1: States having high inflation which has got a potential spill over.

189
00:12:23,480 --> 00:12:26,240
Speaker 1: But what encourages us is that the focus of South

190
00:12:26,240 --> 00:12:31,640
Speaker 1: Afghanta's Bank give us a data in projection of about

191
00:12:32,720 --> 00:12:37,520
Speaker 1: UM five point four point nine, four five point seven,

192
00:12:38,640 --> 00:12:41,440
Speaker 1: five point zero, four point nine, five point seven and

193
00:12:41,520 --> 00:12:44,600
Speaker 1: four point seven at the third year. In other words,

194
00:12:44,679 --> 00:12:49,240
Speaker 1: everything is within the range in as far as the

195
00:12:49,280 --> 00:12:53,880
Speaker 1: focus of inflation is consent. Nothing is about six as

196
00:12:53,920 --> 00:12:57,959
Speaker 1: oranges between three and rticore and six. And of course

197
00:12:59,360 --> 00:13:05,280
Speaker 1: the the treasure is oh projection outlook gave us two

198
00:13:05,320 --> 00:13:09,360
Speaker 1: point one growth this year, which is expected to averach

199
00:13:09,400 --> 00:13:14,480
Speaker 1: at one point eight depending on consumer expetition. And so

200
00:13:14,920 --> 00:13:17,880
Speaker 1: it is a day to remember Nelson Mandela. You will

201
00:13:17,920 --> 00:13:21,680
Speaker 1: travel from Bloomberg down to the United Nations to attend

202
00:13:22,200 --> 00:13:26,679
Speaker 1: UH different events there in honor of Mr Mandela. He

203
00:13:26,880 --> 00:13:31,280
Speaker 1: was his anti corruption is any of us have ever seen?

204
00:13:32,000 --> 00:13:35,920
Speaker 1: You have an African continent driven by different levels of corruption.

205
00:13:36,520 --> 00:13:40,560
Speaker 1: What can your government do to make South Africa be

206
00:13:40,920 --> 00:13:44,760
Speaker 1: much more away from corruption and much more towards the

207
00:13:44,800 --> 00:13:50,800
Speaker 1: practice of legal legal affairs? UH. This is one area

208
00:13:50,920 --> 00:13:55,600
Speaker 1: we as is with especially in memory of his commitment

209
00:13:57,160 --> 00:14:06,600
Speaker 1: to clean government, to prosperous humanity, to human coesion. We

210
00:14:06,600 --> 00:14:10,720
Speaker 1: we've demonstrated in particular when this president took over in

211
00:14:10,800 --> 00:14:17,080
Speaker 1: take into account we were actually confronted with state capture

212
00:14:17,160 --> 00:14:20,200
Speaker 1: for no less than ten years. When this president took

213
00:14:20,200 --> 00:14:23,400
Speaker 1: over in twenty eight. In the immediate thing he attended

214
00:14:23,480 --> 00:14:28,000
Speaker 1: to us to look at the prosecutorial institution is a baroner.

215
00:14:28,760 --> 00:14:31,840
Speaker 1: It's it's improving, it's not yet where we want it

216
00:14:31,920 --> 00:14:36,960
Speaker 1: to be. That's why we are amassing energy within the

217
00:14:37,040 --> 00:14:39,680
Speaker 1: public and the private sector, trying to work with the

218
00:14:39,680 --> 00:14:42,960
Speaker 1: private sector to a muscile sources so that we improved

219
00:14:42,960 --> 00:14:47,760
Speaker 1: the secual caps. And the other issue is that Zondo Commission,

220
00:14:47,840 --> 00:14:50,920
Speaker 1: which has been dealing with the state capture this president,

221
00:14:51,440 --> 00:14:56,600
Speaker 1: what is unprecedented. Did not did not edit it, just

222
00:14:56,800 --> 00:15:00,160
Speaker 1: through it in the website as it plans to put

223
00:15:00,240 --> 00:15:04,040
Speaker 1: together an im Mondly, we're out of time for one

224
00:15:04,040 --> 00:15:06,920
Speaker 1: reason only your entourage is over there with a sign

225
00:15:07,000 --> 00:15:08,720
Speaker 1: up saying shut up. He has to go to the

226
00:15:08,840 --> 00:15:12,280
Speaker 1: United Nations. Thank you so much minister for joining today.

227
00:15:12,360 --> 00:15:15,240
Speaker 1: Mondy Google the belly with us from the Nation of

228
00:15:15,320 --> 00:15:24,320
Speaker 1: South Africa. The read of the weekend, the read of

229
00:15:24,320 --> 00:15:28,360
Speaker 1: your life, wherever you live. It's simple. Laura raym Nails

230
00:15:28,360 --> 00:15:31,720
Speaker 1: at Chief US Economist a F Investments, Thank you, Laura.

231
00:15:31,800 --> 00:15:34,920
Speaker 1: You wrote up where I went, which is the stickiness

232
00:15:35,120 --> 00:15:37,680
Speaker 1: of rent. We all know this huge uproar in New

233
00:15:37,760 --> 00:15:41,280
Speaker 1: York City about it. Williamsburg is a small enclave out

234
00:15:41,280 --> 00:15:44,120
Speaker 1: to the east of Manhattan, and there there was an

235
00:15:44,120 --> 00:15:47,840
Speaker 1: apartment listed for a cheap thirty five dollars. And when

236
00:15:47,920 --> 00:15:51,760
Speaker 1: in a frenzy at four four thousand fifty, how do

237
00:15:51,800 --> 00:15:56,120
Speaker 1: we bring down rents in America? So this is one

238
00:15:56,160 --> 00:15:59,920
Speaker 1: of the ironies of this fate Hi cycle. The SAT

239
00:16:00,160 --> 00:16:05,320
Speaker 1: is actually through raising rates, disincentivizing home builders in an

240
00:16:05,400 --> 00:16:09,080
Speaker 1: environment where we have a shortage of housing supply. So

241
00:16:09,200 --> 00:16:11,240
Speaker 1: I think it's very likely over the next year we

242
00:16:11,320 --> 00:16:16,440
Speaker 1: continue to see rent putting upward pressure on inflation, and

243
00:16:16,600 --> 00:16:18,160
Speaker 1: we know we're going to get into the data. This

244
00:16:18,200 --> 00:16:21,640
Speaker 1: week is gonna be focused on housing. Clearly, housing sales

245
00:16:21,680 --> 00:16:24,520
Speaker 1: are going to be continue to moderate. But this is

246
00:16:24,560 --> 00:16:28,160
Speaker 1: one of the I think inconsistencies of the Fed's rate

247
00:16:28,240 --> 00:16:31,840
Speaker 1: hikes activity with their goals, and one of the ways

248
00:16:31,840 --> 00:16:34,480
Speaker 1: in which they're kind of facing a different inflation demon

249
00:16:34,760 --> 00:16:37,840
Speaker 1: than they are used to coming from. This writes some

250
00:16:37,880 --> 00:16:40,880
Speaker 1: important questions, and condescent And on Twitter has asked this

251
00:16:40,960 --> 00:16:44,400
Speaker 1: question too. What is the optimal way of using realized

252
00:16:44,560 --> 00:16:48,280
Speaker 1: inflation data to make a forward looking monetary policy decision?

253
00:16:49,640 --> 00:16:52,440
Speaker 1: You know, to me, we are focusing so much on

254
00:16:52,480 --> 00:16:56,720
Speaker 1: this monthly University of Michigan number, which in reality is

255
00:16:57,160 --> 00:17:01,240
Speaker 1: um so sensitive to gasoline prices, and so I think

256
00:17:01,240 --> 00:17:02,920
Speaker 1: we're really made too much of it when it went up,

257
00:17:02,960 --> 00:17:04,560
Speaker 1: We're making too much of it when it comes down.

258
00:17:04,920 --> 00:17:08,879
Speaker 1: The market indicators are more contained when it comes to

259
00:17:08,880 --> 00:17:11,880
Speaker 1: inflation expectations, but when we look at inflation right now

260
00:17:11,920 --> 00:17:15,159
Speaker 1: over the next year, a bottom up approach is really bad,

261
00:17:15,320 --> 00:17:18,960
Speaker 1: you know. Not the Philip cur dynamics that drive inflation

262
00:17:19,000 --> 00:17:21,840
Speaker 1: over the long run, but really taking it apart, and

263
00:17:22,119 --> 00:17:25,760
Speaker 1: when you do that, you do not have durable good deflation,

264
00:17:25,840 --> 00:17:29,119
Speaker 1: you do not have energy price deflation. It is virtually

265
00:17:29,160 --> 00:17:33,120
Speaker 1: impossible to craft the story where inflation comes neatly back

266
00:17:33,160 --> 00:17:35,719
Speaker 1: down to two percent. So much have to go right

267
00:17:35,760 --> 00:17:39,040
Speaker 1: to get inflation to behave well, okay, Well, one of

268
00:17:39,040 --> 00:17:41,399
Speaker 1: those factors obviously is going to be the Federals are

269
00:17:41,680 --> 00:17:44,720
Speaker 1: hiking rates trying to bring in demand, Laura, and and

270
00:17:44,800 --> 00:17:48,000
Speaker 1: this the question really surrounds how much the economy and

271
00:17:48,040 --> 00:17:50,520
Speaker 1: the American consumer in particular, is going to be able

272
00:17:50,560 --> 00:17:53,960
Speaker 1: to tolerate. And if you ask big banks CEOs, they're

273
00:17:53,960 --> 00:17:56,560
Speaker 1: looking fine. We're just hearing from the CFO Bank of

274
00:17:56,600 --> 00:17:59,480
Speaker 1: America Alistair Borthwick saying the U S consumer spending levels

275
00:17:59,480 --> 00:18:02,840
Speaker 1: remain high. They delivered the highest quarter ever for spending

276
00:18:02,840 --> 00:18:06,200
Speaker 1: in the second quarter. They sound quite optimistic. How optimistic

277
00:18:06,200 --> 00:18:08,960
Speaker 1: are you on the U S consumer? You know, I

278
00:18:09,040 --> 00:18:12,520
Speaker 1: described the the U. S consumer as resilient, and I

279
00:18:12,520 --> 00:18:17,679
Speaker 1: think there's better foundation for growth going forward for I

280
00:18:17,720 --> 00:18:22,040
Speaker 1: think the household, you know, looking at what's driving household spending,

281
00:18:22,359 --> 00:18:25,080
Speaker 1: a lot of those components are still there. But when

282
00:18:25,119 --> 00:18:30,480
Speaker 1: you back out inflation, it's clearly crowding out other discretionary spending.

283
00:18:30,720 --> 00:18:33,960
Speaker 1: So again a place where inflation in and of itself

284
00:18:34,440 --> 00:18:37,960
Speaker 1: is hannibalizing other demands. When you are looking at the

285
00:18:38,000 --> 00:18:40,199
Speaker 1: retail stones number, it's solid that you back up the

286
00:18:40,240 --> 00:18:46,280
Speaker 1: inflation impact. Real consumption is slowing, it's not in negative territory,

287
00:18:46,280 --> 00:18:48,919
Speaker 1: it's not contracting, and that speaks to the resilience of

288
00:18:48,920 --> 00:18:51,600
Speaker 1: the consumer because look at our economy versus a lot

289
00:18:51,600 --> 00:18:53,720
Speaker 1: of the rest of the developed world. We're still in

290
00:18:53,800 --> 00:18:57,360
Speaker 1: better I think, you know, standing we're still have better

291
00:18:57,400 --> 00:19:00,000
Speaker 1: economic activities does not mean the fin needs to do more.

292
00:19:02,000 --> 00:19:03,760
Speaker 1: I think they're there. I think they need to go

293
00:19:03,920 --> 00:19:07,000
Speaker 1: fast to neutral, get there, and then they need to

294
00:19:07,040 --> 00:19:10,280
Speaker 1: become more data dependent. They need to give these rain

295
00:19:10,359 --> 00:19:14,679
Speaker 1: heights time to work on the economy and not be

296
00:19:14,920 --> 00:19:18,920
Speaker 1: so reliant on the models that are really constructed for

297
00:19:19,640 --> 00:19:23,439
Speaker 1: you know, prior episodes where we don't have inflation coming

298
00:19:23,600 --> 00:19:26,359
Speaker 1: from the disruption and supply chain, from all of the

299
00:19:26,440 --> 00:19:31,320
Speaker 1: unique pandemic driven inflationary factors. So I wouldn't be a

300
00:19:31,400 --> 00:19:35,200
Speaker 1: favor of fas to neutral even a little bit beyond

301
00:19:35,240 --> 00:19:38,280
Speaker 1: get us the three percent and then take a minute

302
00:19:38,520 --> 00:19:41,760
Speaker 1: and see it would have the data respond and realize

303
00:19:41,800 --> 00:19:43,880
Speaker 1: that we're just in a very different environment. I don't

304
00:19:43,880 --> 00:19:46,679
Speaker 1: think there's enough acknowledgement on that from the FED. A

305
00:19:46,720 --> 00:19:50,080
Speaker 1: great Laura, thank you Laura. In the of FS investments,

306
00:19:50,119 --> 00:19:58,159
Speaker 1: I agree, we're in a very different environment. This is

307
00:19:58,160 --> 00:20:02,080
Speaker 1: a joy right now and arguably after Ken Rogoff, after

308
00:20:02,119 --> 00:20:05,520
Speaker 1: the senior officer from South African others, I'm sorry, this

309
00:20:05,640 --> 00:20:08,040
Speaker 1: is the most important interview of the day. Marco Peppick

310
00:20:08,160 --> 00:20:10,919
Speaker 1: is chief strategist a clock Tower Group and what he

311
00:20:10,960 --> 00:20:16,119
Speaker 1: does is absolutely unique is folding geopolitical strategy which is

312
00:20:16,160 --> 00:20:20,200
Speaker 1: his wheelhouse and water bonds gonna do? What are equity's

313
00:20:20,240 --> 00:20:23,880
Speaker 1: gonna do? And the distinctive feature of this is he

314
00:20:23,960 --> 00:20:28,399
Speaker 1: has called bottom in June for the equity market. How

315
00:20:28,480 --> 00:20:31,960
Speaker 1: do you get from a synthesis of geopolitics and frankly

316
00:20:32,080 --> 00:20:37,240
Speaker 1: central bank analysis to buy equities? Now? Well, I think

317
00:20:37,240 --> 00:20:39,760
Speaker 1: the most important thing Tom is what's going to happen

318
00:20:39,800 --> 00:20:42,520
Speaker 1: to oil prices. We had j Polo who told us

319
00:20:42,640 --> 00:20:45,639
Speaker 1: on June fifteenth that he is focusing on headline inflation

320
00:20:46,240 --> 00:20:48,800
Speaker 1: UM as opposed to core, which we have all thought

321
00:20:49,000 --> 00:20:52,760
Speaker 1: was the key monetary policy instrument. And so what's important

322
00:20:52,760 --> 00:20:56,000
Speaker 1: now is whether oil prices have more upside or downside,

323
00:20:56,160 --> 00:20:59,040
Speaker 1: And in my view, there's more downside, and there's going

324
00:20:59,080 --> 00:21:02,399
Speaker 1: to be a flip correlation between equities and oil. This

325
00:21:02,560 --> 00:21:05,679
Speaker 1: is too important, Ed Morris very much. And the Marco

326
00:21:05,760 --> 00:21:09,880
Speaker 1: Pappa camp says, here's the geo politics. There's a tendency

327
00:21:09,920 --> 00:21:14,160
Speaker 1: here to lower oil prices. Ninety on Brent clear, hundred

328
00:21:14,200 --> 00:21:17,320
Speaker 1: on Brent clearly says that. The other crew says they'll

329
00:21:17,359 --> 00:21:21,399
Speaker 1: be em demand that will keep oil sustained. Will that

330
00:21:21,520 --> 00:21:23,840
Speaker 1: e M demand not be there? Yeah, I don't think so.

331
00:21:23,960 --> 00:21:26,560
Speaker 1: And I actually think the biggest red herring right now

332
00:21:26,600 --> 00:21:29,600
Speaker 1: for investors is zero COVID policy in China. Everybody thinks

333
00:21:29,600 --> 00:21:32,040
Speaker 1: once it's over, there's going to be this lift up

334
00:21:32,080 --> 00:21:35,200
Speaker 1: in Chinese demand, and I'm worried that that's full's gold.

335
00:21:35,560 --> 00:21:38,680
Speaker 1: They are having structural secular problems. They're pushing on a

336
00:21:38,760 --> 00:21:42,199
Speaker 1: string households, and a private sector in China is experiencing

337
00:21:42,240 --> 00:21:45,360
Speaker 1: what we did in two thousand and so I don't

338
00:21:45,359 --> 00:21:49,600
Speaker 1: think there'll be significant liftoff in e M demand. Well,

339
00:21:49,720 --> 00:21:52,160
Speaker 1: I'm just paying attention to headlines that are coming out

340
00:21:52,160 --> 00:21:54,280
Speaker 1: of Reuters right now, we're all paying attention to nord

341
00:21:54,359 --> 00:21:56,560
Speaker 1: Stream one and whether or not that's going to reopen fully.

342
00:21:56,560 --> 00:21:58,920
Speaker 1: On Thursday, Reuters now reporting that the own V expects

343
00:21:58,960 --> 00:22:01,520
Speaker 1: work on nord Stream one to be completed and says

344
00:22:01,600 --> 00:22:05,520
Speaker 1: deliveries will resume after we're completed. If gas is continuing

345
00:22:05,560 --> 00:22:07,760
Speaker 1: to float to Europe and prices come down as you

346
00:22:08,480 --> 00:22:11,359
Speaker 1: are indicating, Marco, what does that mean for the Euro Well,

347
00:22:11,400 --> 00:22:13,960
Speaker 1: I mean huge liftoff, right. I think about it this way.

348
00:22:14,280 --> 00:22:17,400
Speaker 1: During the euro Area crisis, which was a moment when

349
00:22:17,440 --> 00:22:22,040
Speaker 1: we literally we're wondering whether the asset under question would

350
00:22:22,080 --> 00:22:25,399
Speaker 1: even exist, the euro never came to parody. So I

351
00:22:25,400 --> 00:22:28,280
Speaker 1: think there's been really sort of pricing in of the

352
00:22:28,320 --> 00:22:31,600
Speaker 1: apocalyptic scenario. The TTF contract, if you look at the

353
00:22:31,600 --> 00:22:34,919
Speaker 1: December two thousand contract, is up something like hundred and

354
00:22:34,960 --> 00:22:37,960
Speaker 1: fifty percent this year. Does a natural gas hub over

355
00:22:38,000 --> 00:22:40,320
Speaker 1: during Europe? So when you think about what's going on

356
00:22:40,520 --> 00:22:43,760
Speaker 1: in Europe, I think the worst case scenarios price stain.

357
00:22:44,119 --> 00:22:46,280
Speaker 1: But the problem for Russia is that while they're playing

358
00:22:46,359 --> 00:22:50,080
Speaker 1: this game of chicken with Europe, se of their total

359
00:22:50,119 --> 00:22:53,480
Speaker 1: and demand for natural gas is Europe and they don't

360
00:22:53,520 --> 00:22:57,120
Speaker 1: have a way to alternate that demand. Their their transmission

361
00:22:57,160 --> 00:23:01,199
Speaker 1: mechanism for natural gas our pipe planes, they're nailed to

362
00:23:01,240 --> 00:23:04,600
Speaker 1: the ground. Okay, where else in the market other than

363
00:23:04,600 --> 00:23:07,359
Speaker 1: the era would need to reprice to consider that, because

364
00:23:07,359 --> 00:23:09,760
Speaker 1: the narrative seems to be that Europe is going into

365
00:23:09,800 --> 00:23:11,639
Speaker 1: a recession. The gas issue may make it worse, but

366
00:23:11,680 --> 00:23:15,080
Speaker 1: we're already there. Well, you know, markets discount the future

367
00:23:15,240 --> 00:23:16,879
Speaker 1: six to twelve months ahead of time. I mean, at

368
00:23:16,960 --> 00:23:19,080
Speaker 1: least that's what we all think. So I would say

369
00:23:19,080 --> 00:23:21,600
Speaker 1: that when the economist puts in their cover, you know,

370
00:23:21,760 --> 00:23:25,160
Speaker 1: the bear chasing a little red riding hood through the pipelines,

371
00:23:25,320 --> 00:23:28,280
Speaker 1: as you probably have seen this week, I think it's

372
00:23:28,359 --> 00:23:32,080
Speaker 1: fully priced. The worst case scenario for Wall Street watching

373
00:23:32,160 --> 00:23:34,920
Speaker 1: this morning, and I mean global Wall Street. You speak

374
00:23:34,960 --> 00:23:38,199
Speaker 1: about you've written about the nonlinearities of Putin and what

375
00:23:38,320 --> 00:23:40,639
Speaker 1: we see in the war in Ukraine. Now we have

376
00:23:40,680 --> 00:23:44,720
Speaker 1: some experience in a war you polarize, a stalemate or

377
00:23:44,840 --> 00:23:48,720
Speaker 1: Moscow wins. Updated on that, well, I think that what's

378
00:23:48,800 --> 00:23:51,199
Speaker 1: very important for investors to understand is that they're not

379
00:23:51,240 --> 00:23:54,520
Speaker 1: looking at an engineering problem. So we don't know exactly

380
00:23:54,520 --> 00:23:56,600
Speaker 1: how the war ends, but you know what other war

381
00:23:56,680 --> 00:23:59,760
Speaker 1: didn't end, the Korean War. It's literally still going on.

382
00:23:59,840 --> 00:24:03,040
Speaker 1: It's sixty nine years later. So all the market needs

383
00:24:03,119 --> 00:24:05,760
Speaker 1: is a stalemate, and all it needs is a signal

384
00:24:06,080 --> 00:24:11,879
Speaker 1: that Russia is satiated with Dombas, because after that market

385
00:24:11,960 --> 00:24:15,119
Speaker 1: is going to discount future you know, worst case, what

386
00:24:15,160 --> 00:24:18,840
Speaker 1: does the DMZ look like in the new Ukrainian Russian border.

387
00:24:19,320 --> 00:24:21,520
Speaker 1: I think that you'll have a line of control between

388
00:24:21,560 --> 00:24:24,560
Speaker 1: Ukrainian and Russian forces. And while Ukraine will continue to

389
00:24:24,560 --> 00:24:27,640
Speaker 1: be armed by the West, it's much more different. It's

390
00:24:27,640 --> 00:24:30,120
Speaker 1: a different situation to try to have an offensive operation

391
00:24:30,160 --> 00:24:33,120
Speaker 1: against in trench Russian troops, which means that you have

392
00:24:33,480 --> 00:24:36,680
Speaker 1: a frozen conflict for um, you know, for the rest

393
00:24:36,680 --> 00:24:39,160
Speaker 1: of the decade. Now, what's important about that is not Russia,

394
00:24:39,200 --> 00:24:42,119
Speaker 1: it's not Ukraine, it's not even the US. It's politics

395
00:24:42,119 --> 00:24:44,800
Speaker 1: in Europe. And one of the things that I've emphasized

396
00:24:44,840 --> 00:24:47,080
Speaker 1: is that politics in Europe are going to change. If

397
00:24:47,119 --> 00:24:51,280
Speaker 1: this war gets bogged down in Dombas, If Kiev, Kharkiev, Shernikiv,

398
00:24:51,359 --> 00:24:55,000
Speaker 1: these big cities are not in newspapers anymore, European policy

399
00:24:55,040 --> 00:24:57,520
Speaker 1: makers will will lose the nerve and so you will

400
00:24:57,560 --> 00:25:01,160
Speaker 1: see a toning down of tensions between Russia and Europe. Okay,

401
00:25:01,160 --> 00:25:02,960
Speaker 1: So if it's a toning down to tensions, is it

402
00:25:03,000 --> 00:25:06,119
Speaker 1: also a fraying of the really solid alliance that we

403
00:25:06,200 --> 00:25:09,040
Speaker 1: have seen take shape in a real way in the

404
00:25:09,080 --> 00:25:11,800
Speaker 1: response to the war in Ukraine. You know, I always

405
00:25:11,840 --> 00:25:15,200
Speaker 1: thought that the sort of a transatlantic alliance, this idea

406
00:25:15,280 --> 00:25:19,520
Speaker 1: that you know, we've we've rebuilt the alliances in the West. Um,

407
00:25:19,560 --> 00:25:21,320
Speaker 1: that was always sort of a spur of the moment.

408
00:25:21,680 --> 00:25:23,960
Speaker 1: At the end of the day, US has much higher

409
00:25:24,040 --> 00:25:28,040
Speaker 1: risk tolerance to conflict in Europe because ultimately the backlashes

410
00:25:28,280 --> 00:25:32,080
Speaker 1: is happening in Europe. Europeans have much lower risk tolerance

411
00:25:32,119 --> 00:25:34,040
Speaker 1: to that. And so yes, I do think that there's

412
00:25:34,080 --> 00:25:36,320
Speaker 1: going to be a fraying on the alliance between Europe

413
00:25:36,320 --> 00:25:38,840
Speaker 1: and the US. Market will be a stranger wonderful to see.

414
00:25:38,880 --> 00:25:42,160
Speaker 1: Here with clock Tower today, Marco Paprick joins us here

415
00:25:44,880 --> 00:25:48,640
Speaker 1: this is the Bloomberg Surveillance Podcast. Thanks for listening. Join

416
00:25:48,760 --> 00:25:52,080
Speaker 1: us live weekdays from seven to ten am Eastern on

417
00:25:52,160 --> 00:25:56,439
Speaker 1: Bloomberg Radio and on Bloomberg Television each day from six

418
00:25:56,520 --> 00:25:59,840
Speaker 1: to nine am for insight from the best and ekn

419
00:26:00,080 --> 00:26:04,760
Speaker 1: Mix Finance, investment and international Relations. And subscribe to the

420
00:26:04,920 --> 00:26:09,560
Speaker 1: Surveillance podcast on Apple podcast, SoundCloud, Bloomberg dot com, and

421
00:26:09,640 --> 00:26:12,919
Speaker 1: of course, on the terminal. I'm Tom Keene, and this

422
00:26:14,040 --> 00:26:14,679
Speaker 1: is Bloomberg.