WEBVTT - Surveillance: Strong Dollar & Crypto with Rogoff 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.200 --> 0:00:13.039 with Jonathan Ferroll and Lisa A. Brawmowitz. Daily we bring 0:00:13.080 --> 0:00:17.159 you insight from the best and economics, finance, investment, and 0:00:17.239 --> 0:00:22.440 international relations. To find Bloomberg Surveillance on Apple podcast, SoundCloud, 0:00:22.800 --> 0:00:26.280 Bloomberg dot Com, and of course on the Bloomberg terminal. 0:00:31.200 --> 0:00:34.040 Kinneth throwing Off joins us to say he's economics and 0:00:34.080 --> 0:00:38.280 public policy professor at Harvard barely describes his public service 0:00:38.320 --> 0:00:40.640 to the nation, and of course many years is the 0:00:40.720 --> 0:00:42.720 chief economist at the I M. If there's been a 0:00:42.760 --> 0:00:46.120 few books that people have been forced to read, is well, 0:00:46.680 --> 0:00:49.160 I want to go ken to one of the great 0:00:49.280 --> 0:00:53.959 algebraic books, the giant Wendy Carlin of the University College 0:00:54.360 --> 0:00:58.960 of London, with their effort on the three equation I 0:00:59.320 --> 0:01:03.480 S L system. We have just had a natural disaster. 0:01:04.360 --> 0:01:09.200 We have had a massive COVID fiscal impulse. What does 0:01:09.319 --> 0:01:14.600 your world say of how we extract ourselves from a 0:01:14.680 --> 0:01:22.160 massive increase in the fiscal a massive increase in debt? Okay, Well, 0:01:22.200 --> 0:01:24.680 I mean I think a lot of policy of the 0:01:24.720 --> 0:01:27.640 path a couple of decades and Frankly, a lot of 0:01:27.640 --> 0:01:31.959 the academic thinking and literature was predicated on we'd never 0:01:32.080 --> 0:01:34.480 have a war, we never have a big supply shock, 0:01:34.880 --> 0:01:38.440 interest rates would never go up and guess what, oh, 0:01:38.480 --> 0:01:43.040 and there'll never be inflation. And it's happening, and we 0:01:43.200 --> 0:01:45.840 you know, we have to make adjustments that people haven't 0:01:45.840 --> 0:01:48.160 seen for a long time. And I think it's going 0:01:48.240 --> 0:01:50.840 to be much harder than it was in the nineteen eighties. 0:01:50.960 --> 0:01:54.920 The political environments changed, the economy has changes. You said, 0:01:54.920 --> 0:01:58.640 there's much more depth. The stock market's really high. People 0:01:58.680 --> 0:02:01.120 are very worried about inequality. It's going to be a 0:02:01.240 --> 0:02:05.680 heavy lift to try to treat this like a classic 0:02:05.840 --> 0:02:08.359 Kansy and demand shock because of all the news. So 0:02:08.600 --> 0:02:11.959 Ken I have to turn to Upsaled rogueoff in your 0:02:12.040 --> 0:02:16.120 excellence at i m F. Following on from Rudy dorn Bush, 0:02:16.480 --> 0:02:20.440 David fulkers Landau speaks of a dollar stronger he nailed 0:02:20.440 --> 0:02:24.200 out along with others, and here we are. How do 0:02:24.280 --> 0:02:31.200 you actually weaken the dollar? Well, you know, I mean 0:02:32.040 --> 0:02:36.120 the dominance of the dollar in trade and transactions would 0:02:36.120 --> 0:02:39.560 be there, whether the euro, you know, they're they're one 0:02:39.639 --> 0:02:43.919 fifty dollars per euro or the opposite. I mean that 0:02:43.919 --> 0:02:47.960 that's that's a given. But you know, right now, there's 0:02:48.080 --> 0:02:52.720 this concern that no matter how troubled the US is, 0:02:52.840 --> 0:02:55.320 there are other countries that are in worse shape. So 0:02:55.360 --> 0:02:59.040 it's actually, you know, uh, gonna take a chance. I 0:02:59.639 --> 0:03:02.639 I think a lot of countries are having to react 0:03:03.000 --> 0:03:09.160 because inflation goes up when the dollar strengthens. Paradoxically, we 0:03:09.240 --> 0:03:12.240 don't get that much benefit in the United States from 0:03:12.280 --> 0:03:15.000 the stronger dollar because so much of trade as priced 0:03:15.000 --> 0:03:18.360 in dollars. But the rest of the world has to react. Well, 0:03:19.000 --> 0:03:21.160 let's talk about different parts of the world than can 0:03:21.240 --> 0:03:24.280 that may be hit by a stronger dollar more substantially. 0:03:24.320 --> 0:03:26.400 Are we own the verge of a currency crisis in 0:03:26.480 --> 0:03:33.720 any emerging markets? Well, currencies have certainly fallen. I don't know, 0:03:33.840 --> 0:03:38.680 you know exactly, I'd say currency crisis, were at risk 0:03:38.960 --> 0:03:42.720 of certainly debt crisis and places like Turkey and some 0:03:42.800 --> 0:03:47.400 of the lower income, middle income emerging markets. My co 0:03:47.560 --> 0:03:50.880 author and colleague Carmen Reinhardt at the World Banks warning 0:03:50.960 --> 0:03:53.760 that there may be banking crisis and all of that, 0:03:53.840 --> 0:03:56.880 of course may lead to currency crisis, and in principle, 0:03:57.240 --> 0:04:01.600 the movement of the currencies cushioning and preventing things from 0:04:01.680 --> 0:04:05.040 you know, falling apart. But it's very stressful. I mean 0:04:05.680 --> 0:04:09.280 having your currency fall and having inflation go up and 0:04:09.320 --> 0:04:13.760 having to raise interest rates. So the position you're quite right, Kaylee. 0:04:13.880 --> 0:04:17.479 The position of emerging markets is really tough. And do 0:04:17.680 --> 0:04:19.560 rate hikes from central banks fix that or do you 0:04:19.600 --> 0:04:23.160 need direct intervention? Well, I think they're going to do 0:04:23.400 --> 0:04:28.479 a mix of both. Rate hikes help, but a lot 0:04:28.520 --> 0:04:31.640 of these countries don't really have the kind of you know, 0:04:31.800 --> 0:04:36.240 frictionless capital markets that we have certainly you know in 0:04:36.279 --> 0:04:40.000 the United States, and so they're able to intervene, but 0:04:40.120 --> 0:04:42.680 you can only do that for so long. The Asian 0:04:42.720 --> 0:04:46.160 countries have a fair amount of reserves, other countries have some, 0:04:46.520 --> 0:04:50.200 but you can't do that indefinitely. Okay. So I would 0:04:50.240 --> 0:04:52.680 like to move the conversation from fiat currencies to the 0:04:52.720 --> 0:04:56.680 realm of digital and cryptocurrencies. Can Tom was pointing out 0:04:56.720 --> 0:04:58.680 my required reading The Curse of Cash. You look at 0:04:58.680 --> 0:05:00.920 the future of currencies and digital currencies have a role 0:05:00.960 --> 0:05:03.599 to play, and I'm wondering how you differentiate the idea 0:05:03.640 --> 0:05:06.640 of CBDCs. You know, central bank digital currency is a 0:05:06.680 --> 0:05:10.960 potential digital dollar versus the broader kind of speculative assets 0:05:10.960 --> 0:05:15.120 that cryptocurrencies seem to be at the moment. Not a 0:05:15.200 --> 0:05:17.920 simple question. I mean, I think at the moment, if 0:05:17.960 --> 0:05:21.760 you think about the United States issuing the CBDC, you 0:05:21.839 --> 0:05:24.560 have to ask why they're doing it, because we have 0:05:25.120 --> 0:05:27.520 can accomplish a lot of the things the same way 0:05:27.600 --> 0:05:31.520 in the current system by making tweaks. Uh, if you 0:05:31.760 --> 0:05:34.440 did it too well, you've had a retail central bank 0:05:34.480 --> 0:05:38.520 digital currency, there'd be massive bits intermediation that we're probably 0:05:38.560 --> 0:05:41.640 not ready to handle. I think they're they're small central 0:05:41.680 --> 0:05:45.120 banks that want to issue a CBDC hoping they'll get 0:05:45.200 --> 0:05:47.560 some of the kind of business that crypto guts. But 0:05:47.640 --> 0:05:52.080 it's it's very different something that's going to be information 0:05:52.160 --> 0:05:57.320 that the central bank sees and cryptocurrencies where the general 0:05:57.400 --> 0:05:59.880 idea is to try to make it expensive to track you. 0:06:00.520 --> 0:06:03.880 I think central banks are way behind the curve and 0:06:03.960 --> 0:06:08.560 governments in general and regulating cryptocurrencies. They throw out the 0:06:08.600 --> 0:06:13.080 idea of having CBDCs to distract the conversation. But ken 0:06:13.080 --> 0:06:16.240 what's so important here, to your your very courageous book, 0:06:16.279 --> 0:06:19.760 the curse of cash is the why we both you 0:06:19.839 --> 0:06:21.839 and I are on the same page. We both agree 0:06:22.240 --> 0:06:29.000 where is regulation fine? What is the why of the delay? 0:06:29.839 --> 0:06:31.800 You know, I think it's it feels like the nine 0:06:32.120 --> 0:06:35.360 nineties in early two thousands to me when the financial 0:06:35.400 --> 0:06:40.880 system was inventing all these clever new financial engineering devices 0:06:41.240 --> 0:06:44.120 and saying, you know, catch me if you can, regulate me, 0:06:44.200 --> 0:06:46.960 if you can. And I hear very much the same 0:06:47.000 --> 0:06:51.320 things from the you know, young cryptocurrency pioneers, and there 0:06:51.320 --> 0:06:54.120 are a lot of ideas there, but they're wrong that 0:06:54.200 --> 0:06:57.000 they can't be regulated. But they're they're, you know, they're 0:06:57.080 --> 0:07:01.279 lobbying that. We we saw the Super Bowl with the 0:07:01.279 --> 0:07:06.960 ads cryptocurrency their states like Colorado in Florida, which seemed 0:07:07.000 --> 0:07:10.280 to want to be the next El Salvador. They're they're, 0:07:10.800 --> 0:07:12.840 you know, giving a lot away, a lot of money 0:07:12.880 --> 0:07:15.960 to try to control the regulation. They complain about the 0:07:16.080 --> 0:07:21.320 SEC so they're pushing back hard. Can One final question 0:07:22.120 --> 0:07:26.160 is Japanese yield curve control. Is that in the next 0:07:26.360 --> 0:07:31.840 edition of Apsfield rogue off? I mean, I I think 0:07:31.920 --> 0:07:34.680 it's not you know, it's something that works like in 0:07:34.720 --> 0:07:37.800 a zero interest rate environment, but it can come back 0:07:37.840 --> 0:07:40.600 to bite hard. And I think other central banks who 0:07:40.600 --> 0:07:44.600 have toyed with it backed off, and as interest rates rise, 0:07:44.720 --> 0:07:47.360 Japan will have its own problems. Professor, did you ever 0:07:47.440 --> 0:07:50.600 think that we have a central bank that would of 0:07:50.680 --> 0:07:53.880 the outstanding bonds let's say that j GP market. The 0:07:53.960 --> 0:07:56.360 limits to that, Ken, and you'll mind other limits to 0:07:56.440 --> 0:07:59.080 that well, I mean, in a way there are no 0:07:59.240 --> 0:08:02.560 limits to it, in the sense that central bank debt 0:08:02.680 --> 0:08:04.640 is owned by the government and so just a way 0:08:04.680 --> 0:08:08.080 of issuing short term government debt. But if interest rates 0:08:08.200 --> 0:08:12.360 rise and countries have very short term borrowing, including through 0:08:12.360 --> 0:08:15.280 the central bank, they've either got to allow inflation to 0:08:15.320 --> 0:08:17.520 go up or they've got to start unwinding a lot 0:08:17.560 --> 0:08:21.600 of that. And if global real rates rise, and I 0:08:21.640 --> 0:08:24.600 think they will continue to for a while, we're going 0:08:24.640 --> 0:08:27.000 to see a lot of pain there. Can We're looking 0:08:27.040 --> 0:08:28.960 to catch up with you, Ken Rogoff there the former 0:08:29.000 --> 0:08:30.840 I m F. Thank you for a chief Economists. Ken, 0:08:30.880 --> 0:08:39.079 Thank you sir as always right now and this is 0:08:39.120 --> 0:08:42.280 a joyful Bloomberg to welcome monthly Google Belly. He's Minister 0:08:42.520 --> 0:08:47.040 in the Presidency of South Africa, but far more in 0:08:47.080 --> 0:08:51.319 the turmoil of American political economics, the upset of developed 0:08:51.320 --> 0:08:55.400 central banks there is what is happening in emerging markets. 0:08:55.480 --> 0:08:58.040 We look at a prison today of South Africa through 0:08:58.080 --> 0:09:02.760 the experienced eyes of off Mr Ramaposs trusted advisers. Thank 0:09:02.800 --> 0:09:06.360 you so much for joining us at Bloomberg today. I 0:09:06.400 --> 0:09:09.080 need to go to the reality that our work, our 0:09:09.120 --> 0:09:12.400 medical work on COVID came out of the Johns Hopkins 0:09:12.520 --> 0:09:16.040 University and this was very much on South Africa. You 0:09:16.280 --> 0:09:20.040 have lived COVID. You replace a senior official who at 0:09:20.080 --> 0:09:24.440 age sixty two died of COVID. How immediate is COVID 0:09:24.480 --> 0:09:28.520 to South Africa and what is the COVID illness look 0:09:28.600 --> 0:09:32.040 like for South Africa in the next six months. We 0:09:32.040 --> 0:09:34.920 we thank you very much for the opportunity and your viewership. 0:09:36.040 --> 0:09:42.120 Uh so far so good. The last time I look, 0:09:43.080 --> 0:09:50.000 we seem to have everything tabling auto going down. I 0:09:50.040 --> 0:09:54.760 guess that's the reason we lifted restrictions totally in as 0:09:54.800 --> 0:10:01.120 far as COVID disconcern and encourage people to actually keep 0:10:01.160 --> 0:10:06.160 on staying or let on the communicability diseases in the 0:10:06.360 --> 0:10:11.959 old traditional way. Although I've just had this morning, which 0:10:12.040 --> 0:10:14.839 is during the day in South Africa that we seem 0:10:14.920 --> 0:10:20.040 to have found a new sub variant and it is 0:10:20.080 --> 0:10:22.680 something that we're going to look up to. But so far, 0:10:22.880 --> 0:10:29.360 so good to only recovered cost post pandemic um dealing 0:10:29.360 --> 0:10:31.840 with the economy which is even weaker than it was 0:10:32.559 --> 0:10:37.319 before pandemic, although we can say with confidence that the 0:10:37.800 --> 0:10:43.120 recent indicators have demonstrated that we are actually on the 0:10:43.160 --> 0:10:47.160 border of leveling up with the pre pandemic situation. From 0:10:47.160 --> 0:10:50.280 where you said, and with your nursing experience, when you 0:10:50.360 --> 0:10:53.079 walk in a room, you're the boss and the Roman COVID, 0:10:53.160 --> 0:10:56.360 I can see that with your nursing experience, is China 0:10:56.440 --> 0:10:58.640 getting it right or is the western world as the 0:10:58.720 --> 0:11:03.160 United States getting of it right. Um. We we've been 0:11:03.240 --> 0:11:07.800 more focused to what we're doing at home and as 0:11:07.840 --> 0:11:10.959 far as I'm concerned South Africans, they responded very positively 0:11:12.200 --> 0:11:17.120 with regard to staying more let than before COVID knowing 0:11:17.160 --> 0:11:23.480 that epitomergical diseases always um a phenomenon to stay what 0:11:23.679 --> 0:11:29.040 it about access toward a cleaner water. Kidding on Washington's 0:11:29.840 --> 0:11:33.120 because the issue of virus is an issue that is 0:11:33.120 --> 0:11:36.480 not predictable longer. Going far away, A boat went around 0:11:36.520 --> 0:11:38.640 the bottom of South Africa and it was a five 0:11:38.679 --> 0:11:42.120 thousand mile truct to Sri Lanka. Now the images of 0:11:42.160 --> 0:11:46.520 Sri Lanka collapsing are tangible. You have a South African 0:11:46.600 --> 0:11:51.720 random disarray like many other emerging markets. How immediate is 0:11:51.800 --> 0:11:58.400 the the food, the inflation, the economic unrest in South Africa? 0:11:58.480 --> 0:12:01.480 Is it's something you're focused on urgently or can you 0:12:01.600 --> 0:12:07.000 manage these challenges forward? Well? Uh, social economic situation in 0:12:07.000 --> 0:12:12.600 our country continues to be a huge threat west now 0:12:13.400 --> 0:12:17.680 with the global environment in particular big economies like United 0:12:17.679 --> 0:12:22.600 States having high inflation which has got a potential spill over. 0:12:23.480 --> 0:12:26.240 But what encourages us is that the focus of South 0:12:26.240 --> 0:12:31.640 Afghanta's Bank give us a data in projection of about 0:12:32.720 --> 0:12:37.520 UM five point four point nine, four five point seven, 0:12:38.640 --> 0:12:41.440 five point zero, four point nine, five point seven and 0:12:41.520 --> 0:12:44.600 four point seven at the third year. In other words, 0:12:44.679 --> 0:12:49.240 everything is within the range in as far as the 0:12:49.280 --> 0:12:53.880 focus of inflation is consent. Nothing is about six as 0:12:53.920 --> 0:12:57.959 oranges between three and rticore and six. And of course 0:12:59.360 --> 0:13:05.280 the the treasure is oh projection outlook gave us two 0:13:05.320 --> 0:13:09.360 point one growth this year, which is expected to averach 0:13:09.400 --> 0:13:14.480 at one point eight depending on consumer expetition. And so 0:13:14.920 --> 0:13:17.880 it is a day to remember Nelson Mandela. You will 0:13:17.920 --> 0:13:21.680 travel from Bloomberg down to the United Nations to attend 0:13:22.200 --> 0:13:26.679 UH different events there in honor of Mr Mandela. He 0:13:26.880 --> 0:13:31.280 was his anti corruption is any of us have ever seen? 0:13:32.000 --> 0:13:35.920 You have an African continent driven by different levels of corruption. 0:13:36.520 --> 0:13:40.560 What can your government do to make South Africa be 0:13:40.920 --> 0:13:44.760 much more away from corruption and much more towards the 0:13:44.800 --> 0:13:50.800 practice of legal legal affairs? UH. This is one area 0:13:50.920 --> 0:13:55.600 we as is with especially in memory of his commitment 0:13:57.160 --> 0:14:06.600 to clean government, to prosperous humanity, to human coesion. We 0:14:06.600 --> 0:14:10.720 we've demonstrated in particular when this president took over in 0:14:10.800 --> 0:14:17.080 take into account we were actually confronted with state capture 0:14:17.160 --> 0:14:20.200 for no less than ten years. When this president took 0:14:20.200 --> 0:14:23.400 over in twenty eight. In the immediate thing he attended 0:14:23.480 --> 0:14:28.000 to us to look at the prosecutorial institution is a baroner. 0:14:28.760 --> 0:14:31.840 It's it's improving, it's not yet where we want it 0:14:31.920 --> 0:14:36.960 to be. That's why we are amassing energy within the 0:14:37.040 --> 0:14:39.680 public and the private sector, trying to work with the 0:14:39.680 --> 0:14:42.960 private sector to a muscile sources so that we improved 0:14:42.960 --> 0:14:47.760 the secual caps. And the other issue is that Zondo Commission, 0:14:47.840 --> 0:14:50.920 which has been dealing with the state capture this president, 0:14:51.440 --> 0:14:56.600 what is unprecedented. Did not did not edit it, just 0:14:56.800 --> 0:15:00.160 through it in the website as it plans to put 0:15:00.240 --> 0:15:04.040 together an im Mondly, we're out of time for one 0:15:04.040 --> 0:15:06.920 reason only your entourage is over there with a sign 0:15:07.000 --> 0:15:08.720 up saying shut up. He has to go to the 0:15:08.840 --> 0:15:12.280 United Nations. Thank you so much minister for joining today. 0:15:12.360 --> 0:15:15.240 Mondy Google the belly with us from the Nation of 0:15:15.320 --> 0:15:24.320 South Africa. The read of the weekend, the read of 0:15:24.320 --> 0:15:28.360 your life, wherever you live. It's simple. Laura raym Nails 0:15:28.360 --> 0:15:31.720 at Chief US Economist a F Investments, Thank you, Laura. 0:15:31.800 --> 0:15:34.920 You wrote up where I went, which is the stickiness 0:15:35.120 --> 0:15:37.680 of rent. We all know this huge uproar in New 0:15:37.760 --> 0:15:41.280 York City about it. Williamsburg is a small enclave out 0:15:41.280 --> 0:15:44.120 to the east of Manhattan, and there there was an 0:15:44.120 --> 0:15:47.840 apartment listed for a cheap thirty five dollars. And when 0:15:47.920 --> 0:15:51.760 in a frenzy at four four thousand fifty, how do 0:15:51.800 --> 0:15:56.120 we bring down rents in America? So this is one 0:15:56.160 --> 0:15:59.920 of the ironies of this fate Hi cycle. The SAT 0:16:00.160 --> 0:16:05.320 is actually through raising rates, disincentivizing home builders in an 0:16:05.400 --> 0:16:09.080 environment where we have a shortage of housing supply. So 0:16:09.200 --> 0:16:11.240 I think it's very likely over the next year we 0:16:11.320 --> 0:16:16.440 continue to see rent putting upward pressure on inflation, and 0:16:16.600 --> 0:16:18.160 we know we're going to get into the data. This 0:16:18.200 --> 0:16:21.640 week is gonna be focused on housing. Clearly, housing sales 0:16:21.680 --> 0:16:24.520 are going to be continue to moderate. But this is 0:16:24.560 --> 0:16:28.160 one of the I think inconsistencies of the Fed's rate 0:16:28.240 --> 0:16:31.840 hikes activity with their goals, and one of the ways 0:16:31.840 --> 0:16:34.480 in which they're kind of facing a different inflation demon 0:16:34.760 --> 0:16:37.840 than they are used to coming from. This writes some 0:16:37.880 --> 0:16:40.880 important questions, and condescent And on Twitter has asked this 0:16:40.960 --> 0:16:44.400 question too. What is the optimal way of using realized 0:16:44.560 --> 0:16:48.280 inflation data to make a forward looking monetary policy decision? 0:16:49.640 --> 0:16:52.440 You know, to me, we are focusing so much on 0:16:52.480 --> 0:16:56.720 this monthly University of Michigan number, which in reality is 0:16:57.160 --> 0:17:01.240 um so sensitive to gasoline prices, and so I think 0:17:01.240 --> 0:17:02.920 we're really made too much of it when it went up, 0:17:02.960 --> 0:17:04.560 We're making too much of it when it comes down. 0:17:04.920 --> 0:17:08.879 The market indicators are more contained when it comes to 0:17:08.880 --> 0:17:11.880 inflation expectations, but when we look at inflation right now 0:17:11.920 --> 0:17:15.159 over the next year, a bottom up approach is really bad, 0:17:15.320 --> 0:17:18.960 you know. Not the Philip cur dynamics that drive inflation 0:17:19.000 --> 0:17:21.840 over the long run, but really taking it apart, and 0:17:22.119 --> 0:17:25.760 when you do that, you do not have durable good deflation, 0:17:25.840 --> 0:17:29.119 you do not have energy price deflation. It is virtually 0:17:29.160 --> 0:17:33.120 impossible to craft the story where inflation comes neatly back 0:17:33.160 --> 0:17:35.719 down to two percent. So much have to go right 0:17:35.760 --> 0:17:39.040 to get inflation to behave well, okay, Well, one of 0:17:39.040 --> 0:17:41.399 those factors obviously is going to be the Federals are 0:17:41.680 --> 0:17:44.720 hiking rates trying to bring in demand, Laura, and and 0:17:44.800 --> 0:17:48.000 this the question really surrounds how much the economy and 0:17:48.040 --> 0:17:50.520 the American consumer in particular, is going to be able 0:17:50.560 --> 0:17:53.960 to tolerate. And if you ask big banks CEOs, they're 0:17:53.960 --> 0:17:56.560 looking fine. We're just hearing from the CFO Bank of 0:17:56.600 --> 0:17:59.480 America Alistair Borthwick saying the U S consumer spending levels 0:17:59.480 --> 0:18:02.840 remain high. They delivered the highest quarter ever for spending 0:18:02.840 --> 0:18:06.200 in the second quarter. They sound quite optimistic. How optimistic 0:18:06.200 --> 0:18:08.960 are you on the U S consumer? You know, I 0:18:09.040 --> 0:18:12.520 described the the U. S consumer as resilient, and I 0:18:12.520 --> 0:18:17.679 think there's better foundation for growth going forward for I 0:18:17.720 --> 0:18:22.040 think the household, you know, looking at what's driving household spending, 0:18:22.359 --> 0:18:25.080 a lot of those components are still there. But when 0:18:25.119 --> 0:18:30.480 you back out inflation, it's clearly crowding out other discretionary spending. 0:18:30.720 --> 0:18:33.960 So again a place where inflation in and of itself 0:18:34.440 --> 0:18:37.960 is hannibalizing other demands. When you are looking at the 0:18:38.000 --> 0:18:40.199 retail stones number, it's solid that you back up the 0:18:40.240 --> 0:18:46.280 inflation impact. Real consumption is slowing, it's not in negative territory, 0:18:46.280 --> 0:18:48.919 it's not contracting, and that speaks to the resilience of 0:18:48.920 --> 0:18:51.600 the consumer because look at our economy versus a lot 0:18:51.600 --> 0:18:53.720 of the rest of the developed world. We're still in 0:18:53.800 --> 0:18:57.360 better I think, you know, standing we're still have better 0:18:57.400 --> 0:19:00.000 economic activities does not mean the fin needs to do more. 0:19:02.000 --> 0:19:03.760 I think they're there. I think they need to go 0:19:03.920 --> 0:19:07.000 fast to neutral, get there, and then they need to 0:19:07.040 --> 0:19:10.280 become more data dependent. They need to give these rain 0:19:10.359 --> 0:19:14.679 heights time to work on the economy and not be 0:19:14.920 --> 0:19:18.920 so reliant on the models that are really constructed for 0:19:19.640 --> 0:19:23.439 you know, prior episodes where we don't have inflation coming 0:19:23.600 --> 0:19:26.359 from the disruption and supply chain, from all of the 0:19:26.440 --> 0:19:31.320 unique pandemic driven inflationary factors. So I wouldn't be a 0:19:31.400 --> 0:19:35.200 favor of fas to neutral even a little bit beyond 0:19:35.240 --> 0:19:38.280 get us the three percent and then take a minute 0:19:38.520 --> 0:19:41.760 and see it would have the data respond and realize 0:19:41.800 --> 0:19:43.880 that we're just in a very different environment. I don't 0:19:43.880 --> 0:19:46.679 think there's enough acknowledgement on that from the FED. A 0:19:46.720 --> 0:19:50.080 great Laura, thank you Laura. In the of FS investments, 0:19:50.119 --> 0:19:58.159 I agree, we're in a very different environment. This is 0:19:58.160 --> 0:20:02.080 a joy right now and arguably after Ken Rogoff, after 0:20:02.119 --> 0:20:05.520 the senior officer from South African others, I'm sorry, this 0:20:05.640 --> 0:20:08.040 is the most important interview of the day. Marco Peppick 0:20:08.160 --> 0:20:10.919 is chief strategist a clock Tower Group and what he 0:20:10.960 --> 0:20:16.119 does is absolutely unique is folding geopolitical strategy which is 0:20:16.160 --> 0:20:20.200 his wheelhouse and water bonds gonna do? What are equity's 0:20:20.240 --> 0:20:23.880 gonna do? And the distinctive feature of this is he 0:20:23.960 --> 0:20:28.399 has called bottom in June for the equity market. How 0:20:28.480 --> 0:20:31.960 do you get from a synthesis of geopolitics and frankly 0:20:32.080 --> 0:20:37.240 central bank analysis to buy equities? Now? Well, I think 0:20:37.240 --> 0:20:39.760 the most important thing Tom is what's going to happen 0:20:39.800 --> 0:20:42.520 to oil prices. We had j Polo who told us 0:20:42.640 --> 0:20:45.639 on June fifteenth that he is focusing on headline inflation 0:20:46.240 --> 0:20:48.800 UM as opposed to core, which we have all thought 0:20:49.000 --> 0:20:52.760 was the key monetary policy instrument. And so what's important 0:20:52.760 --> 0:20:56.000 now is whether oil prices have more upside or downside, 0:20:56.160 --> 0:20:59.040 And in my view, there's more downside, and there's going 0:20:59.080 --> 0:21:02.399 to be a flip correlation between equities and oil. This 0:21:02.560 --> 0:21:05.679 is too important, Ed Morris very much. And the Marco 0:21:05.760 --> 0:21:09.880 Pappa camp says, here's the geo politics. There's a tendency 0:21:09.920 --> 0:21:14.160 here to lower oil prices. Ninety on Brent clear, hundred 0:21:14.200 --> 0:21:17.320 on Brent clearly says that. The other crew says they'll 0:21:17.359 --> 0:21:21.399 be em demand that will keep oil sustained. Will that 0:21:21.520 --> 0:21:23.840 e M demand not be there? Yeah, I don't think so. 0:21:23.960 --> 0:21:26.560 And I actually think the biggest red herring right now 0:21:26.600 --> 0:21:29.600 for investors is zero COVID policy in China. Everybody thinks 0:21:29.600 --> 0:21:32.040 once it's over, there's going to be this lift up 0:21:32.080 --> 0:21:35.200 in Chinese demand, and I'm worried that that's full's gold. 0:21:35.560 --> 0:21:38.680 They are having structural secular problems. They're pushing on a 0:21:38.760 --> 0:21:42.199 string households, and a private sector in China is experiencing 0:21:42.240 --> 0:21:45.360 what we did in two thousand and so I don't 0:21:45.359 --> 0:21:49.600 think there'll be significant liftoff in e M demand. Well, 0:21:49.720 --> 0:21:52.160 I'm just paying attention to headlines that are coming out 0:21:52.160 --> 0:21:54.280 of Reuters right now, we're all paying attention to nord 0:21:54.359 --> 0:21:56.560 Stream one and whether or not that's going to reopen fully. 0:21:56.560 --> 0:21:58.920 On Thursday, Reuters now reporting that the own V expects 0:21:58.960 --> 0:22:01.520 work on nord Stream one to be completed and says 0:22:01.600 --> 0:22:05.520 deliveries will resume after we're completed. If gas is continuing 0:22:05.560 --> 0:22:07.760 to float to Europe and prices come down as you 0:22:08.480 --> 0:22:11.359 are indicating, Marco, what does that mean for the Euro Well, 0:22:11.400 --> 0:22:13.960 I mean huge liftoff, right. I think about it this way. 0:22:14.280 --> 0:22:17.400 During the euro Area crisis, which was a moment when 0:22:17.440 --> 0:22:22.040 we literally we're wondering whether the asset under question would 0:22:22.080 --> 0:22:25.399 even exist, the euro never came to parody. So I 0:22:25.400 --> 0:22:28.280 think there's been really sort of pricing in of the 0:22:28.320 --> 0:22:31.600 apocalyptic scenario. The TTF contract, if you look at the 0:22:31.600 --> 0:22:34.919 December two thousand contract, is up something like hundred and 0:22:34.960 --> 0:22:37.960 fifty percent this year. Does a natural gas hub over 0:22:38.000 --> 0:22:40.320 during Europe? So when you think about what's going on 0:22:40.520 --> 0:22:43.760 in Europe, I think the worst case scenarios price stain. 0:22:44.119 --> 0:22:46.280 But the problem for Russia is that while they're playing 0:22:46.359 --> 0:22:50.080 this game of chicken with Europe, se of their total 0:22:50.119 --> 0:22:53.480 and demand for natural gas is Europe and they don't 0:22:53.520 --> 0:22:57.120 have a way to alternate that demand. Their their transmission 0:22:57.160 --> 0:23:01.199 mechanism for natural gas our pipe planes, they're nailed to 0:23:01.240 --> 0:23:04.600 the ground. Okay, where else in the market other than 0:23:04.600 --> 0:23:07.359 the era would need to reprice to consider that, because 0:23:07.359 --> 0:23:09.760 the narrative seems to be that Europe is going into 0:23:09.800 --> 0:23:11.639 a recession. The gas issue may make it worse, but 0:23:11.680 --> 0:23:15.080 we're already there. Well, you know, markets discount the future 0:23:15.240 --> 0:23:16.879 six to twelve months ahead of time. I mean, at 0:23:16.960 --> 0:23:19.080 least that's what we all think. So I would say 0:23:19.080 --> 0:23:21.600 that when the economist puts in their cover, you know, 0:23:21.760 --> 0:23:25.160 the bear chasing a little red riding hood through the pipelines, 0:23:25.320 --> 0:23:28.280 as you probably have seen this week, I think it's 0:23:28.359 --> 0:23:32.080 fully priced. The worst case scenario for Wall Street watching 0:23:32.160 --> 0:23:34.920 this morning, and I mean global Wall Street. You speak 0:23:34.960 --> 0:23:38.199 about you've written about the nonlinearities of Putin and what 0:23:38.320 --> 0:23:40.639 we see in the war in Ukraine. Now we have 0:23:40.680 --> 0:23:44.720 some experience in a war you polarize, a stalemate or 0:23:44.840 --> 0:23:48.720 Moscow wins. Updated on that, well, I think that what's 0:23:48.800 --> 0:23:51.199 very important for investors to understand is that they're not 0:23:51.240 --> 0:23:54.520 looking at an engineering problem. So we don't know exactly 0:23:54.520 --> 0:23:56.600 how the war ends, but you know what other war 0:23:56.680 --> 0:23:59.760 didn't end, the Korean War. It's literally still going on. 0:23:59.840 --> 0:24:03.040 It's sixty nine years later. So all the market needs 0:24:03.119 --> 0:24:05.760 is a stalemate, and all it needs is a signal 0:24:06.080 --> 0:24:11.879 that Russia is satiated with Dombas, because after that market 0:24:11.960 --> 0:24:15.119 is going to discount future you know, worst case, what 0:24:15.160 --> 0:24:18.840 does the DMZ look like in the new Ukrainian Russian border. 0:24:19.320 --> 0:24:21.520 I think that you'll have a line of control between 0:24:21.560 --> 0:24:24.560 Ukrainian and Russian forces. And while Ukraine will continue to 0:24:24.560 --> 0:24:27.640 be armed by the West, it's much more different. It's 0:24:27.640 --> 0:24:30.120 a different situation to try to have an offensive operation 0:24:30.160 --> 0:24:33.120 against in trench Russian troops, which means that you have 0:24:33.480 --> 0:24:36.680 a frozen conflict for um, you know, for the rest 0:24:36.680 --> 0:24:39.160 of the decade. Now, what's important about that is not Russia, 0:24:39.200 --> 0:24:42.119 it's not Ukraine, it's not even the US. It's politics 0:24:42.119 --> 0:24:44.800 in Europe. And one of the things that I've emphasized 0:24:44.840 --> 0:24:47.080 is that politics in Europe are going to change. If 0:24:47.119 --> 0:24:51.280 this war gets bogged down in Dombas, If Kiev, Kharkiev, Shernikiv, 0:24:51.359 --> 0:24:55.000 these big cities are not in newspapers anymore, European policy 0:24:55.040 --> 0:24:57.520 makers will will lose the nerve and so you will 0:24:57.560 --> 0:25:01.160 see a toning down of tensions between Russia and Europe. Okay, 0:25:01.160 --> 0:25:02.960