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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along

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Speaker 1: with Jonathan Ferrell and Lisa brown Witz Jailey, we bring

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Speaker 1: you insight from the best and economics, finance, investment and

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Speaker 1: international relations. Find Bloomberg Surveillance on Apple podcast, Suncloud, Bloomberg

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Speaker 1: dot Com and of course on the Bloomberg terminal. Exceptionally

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Speaker 1: important research by the gentleman from Dartmouth. David blanche Flower

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Speaker 1: joins us now his public service to his United Kingdom,

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Speaker 1: to his Wales, frankly, to his car to football team

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Speaker 1: as well, and we're thrilled at Danny bluch Flower could

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Speaker 1: join us this morning. Daddy, I'm gonna die good to see.

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Speaker 1: I'm gonna digress here. I know John wants to drive

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Speaker 1: in dive into this research. We are seeing big tech

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Speaker 1: now show that David cart and Alan Krueger got it right.

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Speaker 1: They nailed it on the minimum wage. Now we have

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Speaker 1: big tech bidding up labor to seventeen eighteen dollars an

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Speaker 1: hour across America. What is the effect of big tech

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Speaker 1: and a minimum wage? Well, I I always living in Hannow, Hampshire.

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Speaker 1: Tom My kids used to go and work at the

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Speaker 1: local cinema and they'd work at ten bucks an hour,

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Speaker 1: And obviously north of the northern part of the United States,

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Speaker 1: the minimum wage didn't bind. But what we're seeing here

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Speaker 1: is a labor market adjusting to a shock um and

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Speaker 1: and basically firms having to pay the going price. The

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Speaker 1: question would you guys are all thinking about, is does

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Speaker 1: that continue in the future. Just because there's a once

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Speaker 1: off rise in wages doesn't necessarily mean something going forward

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Speaker 1: for us. Start with, this week announced three bonus for

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Speaker 1: all its staff, but that lifts prices this year and

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Speaker 1: does nothing next year. So the question is, you know

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Speaker 1: we're we're emerging from a bottleneck. I don't see anything

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Speaker 1: really actually suggests that prices in eighteen months will will

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Speaker 1: continue to rise. This is a once off jump for

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Speaker 1: an economy that's adjusting. Firms are having to pay for

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Speaker 1: those shortages. But arise today doesn't mean arise tomorrow. Danny,

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Speaker 1: I don't want to bury the lead here. You've got

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Speaker 1: a recession call. A recession call when people are looking

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Speaker 1: at four percent growth next year, what's the recession call about? Well,

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Speaker 1: if you have a new paper coming out on Monday,

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Speaker 1: if you and Dave Wilson Twitt put out the chart

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Speaker 1: yesterday if you look at what predicts all six of

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Speaker 1: the last six recessions, it's actually consumer sentiment, consumer expectations,

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Speaker 1: and that if you look at the paper I have

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Speaker 1: coming out that turned in the US around April May

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Speaker 1: this year, it looks almost identical to what happened in

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Speaker 1: two thousand and seven. And people can pooh pooh it,

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Speaker 1: but these are the data. These data are precisely what

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Speaker 1: explains six of the last six recession. Nothing else does,

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Speaker 1: and there are no false calls. So the question is

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Speaker 1: what's going on? And I think the answer is that

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Speaker 1: it's about the spread of COVID we've seen and at

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Speaker 1: the it's particularly amongst women who said they're fearful of

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Speaker 1: going back to work, with seeing people withdrawing, and in

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Speaker 1: the last month we sort of huge drop in the

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Speaker 1: female participation rate of eighteen to twenty five year olds

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Speaker 1: and and and sorry to thirty five year olds and

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Speaker 1: thirty five to forty four year olds. So I think

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Speaker 1: it's women being very fearful. Anxiety in the US has

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Speaker 1: reason that suggests spending is going to pull back, and

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Speaker 1: it would not be surprising consistent with that to see

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Speaker 1: falls in retail trade. So I'm not saying this will happen,

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Speaker 1: but all the other data is completely messed up. These

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Speaker 1: data are the best you have, and it's rate, and

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Speaker 1: it now is flashing rate. Danny. There's a lot here

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Speaker 1: to pack to unpack. We've got the participation rate, We've

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Speaker 1: got the labor market and the question over whether it's

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Speaker 1: tight or loose. And then there's the issue of the

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Speaker 1: importance of consumer sentiments surveys, which has been called into

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Speaker 1: question by some people. Others would argue that if you

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Speaker 1: look at other consumer sentiment surveys, like the Langer one,

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Speaker 1: it shows a different picture of the University of Michigan survey.

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Speaker 1: The basic this isn't clean either. How would you respond, Well,

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Speaker 1: you know they can make stuff up. But the question

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Speaker 1: is what does the data actually show. And so there's

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Speaker 1: the set of econometrics, particularly show that these things predicted.

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Speaker 1: So you you may not like it, but that's factually

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Speaker 1: what it does. Particularly in these data we actually now

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Speaker 1: have from the Center, from the Conference Board, we have

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Speaker 1: data since two thousand and seven on the eight biggest

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Speaker 1: states um and basically in the expectations induicries there predict

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Speaker 1: behavior twelve months ahead, so people can pooh pooh, just

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Speaker 1: go and look at the data, run it yourself. It's

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Speaker 1: not the case that they don't like it because they're

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Speaker 1: just making it up. The data shows that you can

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Speaker 1: predict with exactly these data. The question is whether this

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Speaker 1: is the this is the seventh of seven, and is

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Speaker 1: this the one that gets it wrong? Um. I think

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Speaker 1: the concern is that most of the other data looks

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Speaker 1: to be crazy. I mean, if you look at Tom

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Speaker 1: always asked me about the wage code, Well, for every

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Speaker 1: recession I've ever seen in the world, as the unblow

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Speaker 1: rate goes up, wage growth slows. Well, in this one,

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Speaker 1: the opposite happens. The Phillips curve now slopes up, the

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Speaker 1: wage curve slopes up. It's not clear that that's true.

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Speaker 1: And most of the other day, I don't believe you

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Speaker 1: asked me which day. I do believe it's these day too.

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Speaker 1: So Danny, underlying this is the idea that you don't

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Speaker 1: think that the labor market is as tight as other

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Speaker 1: people think. That is sort of the presumption that seems

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Speaker 1: to be baked in. Can you explain why that is

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Speaker 1: at a time when you do see all of these

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Speaker 1: job openings and you do see the wage hikes that

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Speaker 1: we are seeing right now to entice people back into

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Speaker 1: the labor force. Well, the best analogy is that this

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Speaker 1: is like a hurricane hitting a place hitt and say that,

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Speaker 1: I don't know that the coast of Florida. So presumably

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Speaker 1: what happens is when that occurs, is the price of

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Speaker 1: roofers and plumbers and gardeners rise as an economy adjusts.

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Speaker 1: Just just go back to the fact that we had

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Speaker 1: in April, the unemployment rate went from three and a

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Speaker 1: half percent to when you calculated right to twenty and

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Speaker 1: wage growth went from three to eight percent. Well, so

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Speaker 1: unemployment rights like crazy. So what happened was the bottom

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Speaker 1: part of the labor market drops out. There are certainly

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Speaker 1: adjustment costs coming. People are withdrawing from particular kinds of

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Speaker 1: goods for particular kinds of work, and firms are having

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Speaker 1: to pay pe because they don't want to go and

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Speaker 1: work in a school, they don't want to work in

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Speaker 1: consumer facing places. And that's the surveys from Grant Thornton

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Speaker 1: and the conference boards saying people if they're forced to

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Speaker 1: go back to work, they're going to look for another

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Speaker 1: job or quit. So we're seeing people retiring. So this

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Speaker 1: is an adjustment of an economy that's been hit by

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Speaker 1: this shock, and people are fearful, and all the evidences

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Speaker 1: that fear rose dramatically around May of this year, and

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Speaker 1: that it particularly is driven by women being fearful that

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Speaker 1: they all got to work and bring something home to

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Speaker 1: their families. That's consistent with the data. I mean, whether

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Speaker 1: whether whether this is whether this is predictive, we will see,

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Speaker 1: but be mindful that the people who guess have no

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Speaker 1: no mechanism by which they can predict the last six

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Speaker 1: and these days to predicted six of the last six,

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Speaker 1: and so it's mindful to them to come up with, well,

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Speaker 1: how do you predict the session with what you have

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Speaker 1: been talking about? And the answer is they can't. They're

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Speaker 1: just making it up. Nobody has a crystal ball, Danny.

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Speaker 1: It's always going to catch up, sir, before you go.

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Speaker 1: Before you go, an important note, we were all thinking

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Speaker 1: of the late great Alan Krueger this week. I know

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Speaker 1: you were too, sir. Your thoughts on that, buddy, Well,

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Speaker 1: I'm so pleased that David Carden and Josh and Guido

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Speaker 1: got this prize. But if you read, if you read

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Speaker 1: the thing from the Nobel Prize. Most of this work

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Speaker 1: was joined with Alan um Alan, our friend and colleague

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Speaker 1: beyond Blumber for a really long time. So I was

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Speaker 1: really pleased at the price came. But it was a

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Speaker 1: sad day too. It was a great day for the

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Speaker 1: work that he did. The guy was a shoe in

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Speaker 1: for a Nobel and if you read it, I mean

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Speaker 1: he should have been there on the stage. His work

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Speaker 1: is was brilliant and wonderful and we miss him hugely.

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Speaker 1: We don't understand why, lovely Danny, well, we all miss

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Speaker 1: him this week. And Danny just finally, you've been saying

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Speaker 1: for a long time, thinking about the work of An

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Speaker 1: and Crewe ground others, that the Nobild Prize needed to change.

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Speaker 1: We needed to get to award it to someone who's

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Speaker 1: actually found something out that we can work with. I

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Speaker 1: think that's right. And if you look the Economics Prize,

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Speaker 1: a Young Prize, you award your awards stuff and methodology, um,

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Speaker 1: and eventually you have to stop that and and actually

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Speaker 1: it will start to award for people who found things.

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Speaker 1: In essence, there was a prize to ago to the

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Speaker 1: flow on a Husband and that was great, but in

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Speaker 1: essence it probably should have come first, the Card and Kruger,

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Speaker 1: and in fact, if it had come and Alan would

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Speaker 1: have been alive. But I think what we're actually going

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Speaker 1: to see, and you could look back on the prize

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Speaker 1: in economics and say, what do these people find? It

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Speaker 1: is what they actually wrote true, and the vast majority

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Speaker 1: of the case we have no idea. So I think

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Speaker 1: increasingly what we're hopefully going to see a prize is

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Speaker 1: given to people who found stuff, And David Carter and

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Speaker 1: Alan Kruger found stuff about the minimum wage. David worked

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Speaker 1: on the Marial boatlift, and work on about immigration, and

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Speaker 1: you know, the rate of return to schooling and all

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Speaker 1: sorts of cool things. So I'm just really impressed with it.

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Speaker 1: But John and and Tom, I mean, this guy was

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Speaker 1: a great guy, and we've missed him in America, and

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Speaker 1: the academic communities worse off for the loss of a group.

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Speaker 1: Hey here, Danny, Hey here, a great man, Danny Plans,

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Speaker 1: Thank you, sir. We finished strong here in this last

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Speaker 1: half hour this morning with Jennifer Lee, senior economist at DEMO.

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Speaker 1: Were thrilled that she could join us this morning. Jennifer,

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Speaker 1: the arch debate right now is a consumer where the

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Speaker 1: glass is half full, or a consumer where the glass

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Speaker 1: is half empty. Which is it. I'm going to go

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Speaker 1: with the glass is half full? Story Um, good morning everyone.

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Speaker 1: I think if you heard a big five relief down

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Speaker 1: to the studio is probably me when I when I

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Speaker 1: saw the other headline numbers as Michael's just saying, you

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Speaker 1: a very strong beat and strengths across the board. So

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Speaker 1: weird results such as as you pointed up with the

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Speaker 1: auto sector with stronger auto sales. But so I'll take

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Speaker 1: it with a little bit of a grain of salt.

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Speaker 1: Maybe they're trying to get a little bit of relief.

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Speaker 1: I think, just getting some more chips out there and

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Speaker 1: into the cars of awful lots. I think the most

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Speaker 1: telling or the most interesting point, this is the one

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Speaker 1: I always look at, is like the dining out just um.

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Speaker 1: I think that speaks volumes about you know, where the

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Speaker 1: consumer is apt these days and if they're still confident

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Speaker 1: enough it's still comfortable enough to go out there and

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Speaker 1: you know, have lunch or have a glass of wine

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Speaker 1: on the patio. I think that's that's very positive news.

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Speaker 1: Help us with the ambiguity of if rates go up,

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Speaker 1: inflation and goes up, there's a better economy, etcetera. There's

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Speaker 1: a group that says the ambiguity will tilt towards woe

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Speaker 1: is me, do this do this worry and others saying

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Speaker 1: this is every sign of a good economy, which is it?

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Speaker 1: You know, obviously a lot of people if you're if

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Speaker 1: you're a big borrower, you're not gonna want those higher rates.

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Speaker 1: But um, you know, we don't want to see the

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Speaker 1: FED or any central bank for that matter, staying on

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Speaker 1: the sigline, staying in this emergency accommodative mold forever. I mean,

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Speaker 1: that's obviously not good news, and there's not a good

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Speaker 1: sign for the for the for any economy. So the

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Speaker 1: fact that they are finally um you know, talking about

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Speaker 1: not even talking about, they're actually gonna do it. Um,

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Speaker 1: they're going to start tapering, you know, probably to make

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Speaker 1: the announcement at the November meeting and probably kick it

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Speaker 1: off before the end of the month or earlier or

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Speaker 1: at the December meeting. You know. The fact that they're

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Speaker 1: actually doing that, I think is speaks volumes for the

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Speaker 1: economy and the fact that we are finally moving away

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Speaker 1: from this emergency these emergency measures and trying to get

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Speaker 1: back toward some semblance of normalcy. Jennifer, can you respond

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Speaker 1: to Danny Blancheflower please, basically saying the consumer sentiment indications

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Speaker 1: point to a very different story than some of these

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Speaker 1: other indicators, and yet we are seeing ongoing strength. Can

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Speaker 1: you sort of pair these differences as we wait for

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Speaker 1: that ten am Eastern University of Michigan sentiment survey. So

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Speaker 1: I think those the surveys are always interesting to look at,

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Speaker 1: but you know, it's it depends on the timing of

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Speaker 1: this survey. You know, when you're catching I mean I

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Speaker 1: had to see it, but you know, your your mood

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Speaker 1: could change. I think, you know, from from from from

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Speaker 1: day to day. But you know, I think it's uh,

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Speaker 1: it's it's the overall trend. Like right now, for example,

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Speaker 1: the University of Michigan, Uh, we're waiting for at ten o'clock.

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Speaker 1: The numbers have actually been been fairly low, the confidence levels,

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Speaker 1: but they are off the bottom, which is which is

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Speaker 1: a good sign. And so I sort of like I

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Speaker 1: take it as a mix between what we're seeing for

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Speaker 1: the Conference Board measure for example, and the University of Michigan.

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Speaker 1: But overall, you know, if if think it all goes

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Speaker 1: back to you know, the fundamentals. Uh, you know, whether

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Speaker 1: or not there is a job out there for for

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Speaker 1: the for the average American. And we all know that

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Speaker 1: the john market is extremely tight right now with still

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Speaker 1: almost eleven million jobs available out there, So the job

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Speaker 1: market is strong, wages are rising, Uh, the household net

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Speaker 1: worth I still I believe is at an all time

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Speaker 1: high as well. All those are really strong sources of support.

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Speaker 1: So yes, we'll get swayed by the day to day um.

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Speaker 1: You know, um stories about you know about the Delta

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Speaker 1: Varian or we know with all these supply issues and

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Speaker 1: all that, um. But at the end of the day,

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Speaker 1: just I think with the average consumer knowing that they

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Speaker 1: have a city income, knowing that they have a strong network,

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Speaker 1: I think speaks against six volumes. Jennifer, thank you for

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Speaker 1: you want to get Steni Felida now a one hour

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Speaker 1: conversation on Golden Sachs. Well, okay, we'll do it in

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Speaker 1: less than one hour. Christian Balloo joins us with a

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Speaker 1: really really important look at Golden Sex Senior analyst and

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Speaker 1: Autonomous Research this morning, Christian, I'm gonna go retail and

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Speaker 1: you Lisa's got some other thoughts on Marcus, which you

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Speaker 1: say is grossly underestimated. I want to talk to you

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Speaker 1: about Clay Christiansen and the classic innovator's dilemma and all

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Speaker 1: of the major banks scared stiff of neo banks. How

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Speaker 1: Solomon and Goldman Sachs doing on challenging the innovator's dilemma

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Speaker 1: and doing neo bank right. It did a very good job.

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Speaker 1: But I think they had very early insights in that

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Speaker 1: you could essentially build a any type a bank essentially

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Speaker 1: from scratchy don't have any legacy infrastructure, whether that be

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Speaker 1: physical footprint or or a technology, and that allowed them

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Speaker 1: to really create something interesting. It's not perfect. Um, they

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Speaker 1: still don't have a robust check in feature or robust

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Speaker 1: robust payment features. But I think I think the point

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Speaker 1: here is I think they've been they're a very good job,

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Speaker 1: and I think it's been someone on the look to

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Speaker 1: think when you think about the partnership that if if,

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Speaker 1: if they've they've acquired where it's Apple, et cetera. It

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Speaker 1: does speak to the technology prowess of the Marcus Marcus franchise.

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Speaker 1: Will the old banks build their neo banks like Goldman,

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Speaker 1: or will they acquire their neo banks. That's an interesting question.

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Speaker 1: I probably leave that one to my UM too much

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Speaker 1: to my bank A. I think the issue acquisitions is,

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Speaker 1: I mean these folks are expensive, right, UM, it would

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Speaker 1: be probably pretty dilutive to go and require a decent

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Speaker 1: sized new bank as so much suspicion is most of

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Speaker 1: it will be done organically. Build up perspective, but again

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Speaker 1: probably better for my band collects. Comment on that, Christian

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Speaker 1: more broadly, why do you think the Goldman's access transformation

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Speaker 1: has been underappreciated by other analysts? It's it's a great question.

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Speaker 1: I think part of it is we are in a

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Speaker 1: very robust part of the capital market cycle, as you

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Speaker 1: just seen today. Um, they could put keep putting out

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Speaker 1: blowout results of the blow out results, a lot of

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Speaker 1: it driven by a traditional goldmen you know, strong m

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Speaker 1: and a strong Equitti's trading things that were you know

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Speaker 1: that people are traditionally who don't know goldmen traditionally four

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Speaker 1: And I think it's it's really um if you like

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Speaker 1: masked the broader transformation, particularly a Marcus and also very

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Speaker 1: important on alternative UM, the alternative asset manager remember uh

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Speaker 1: at this by our analysis Goldman is probably the fastest

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Speaker 1: growing skills alternative asset manager out there. That is not

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Speaker 1: an easy feats giving um, you know, the competitive landscaping

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Speaker 1: that business. So there's been a lot of really good

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Speaker 1: stuff going underneath. But the reality is, you know, you know,

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Speaker 1: results just dominated by absolutely awesome investment bank that's doing

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Speaker 1: that is probably a tole cycle. Well that's that's where

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Speaker 1: I wanted to go with this. I mean, because if

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Speaker 1: you actually look at asset management, there was a slight

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Speaker 1: miss there, but really it's the investment banking, the trading

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Speaker 1: that came in one and a half a billion dollars

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Speaker 1: in revenue above what the expectation was. I mean, it

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Speaker 1: was a blowout quarter. Is this the cycle peak or

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Speaker 1: is this Goldman Sachs gaining share from others gaining share

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Speaker 1: particularly from the European peers. A good question. It's always

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Speaker 1: had to call it peak, so I'm not going to

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Speaker 1: exactly call the peak, but we are somewhere around. UM

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Speaker 1: and when we're some way in the mountain top right,

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Speaker 1: and you already begins is some businesses rule of us.

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Speaker 1: So fixed income has always started to slow down, Equities

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Speaker 1: still growing m and a still growing uh, but but

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Speaker 1: clearly we are we are very strong here at twenty

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Speaker 1: twenty and twenty one will be the best here's for

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Speaker 1: investment banking since two thousand and nine, right, so you

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Speaker 1: know we know what happened after two nine. Um So,

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Speaker 1: so I do think we are we are close to

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Speaker 1: um something that feels h near a peak. That said, though,

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Speaker 1: that's that's the Goldman. It's very important to remember that

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Speaker 1: the game market share, so in fixed income share has

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Speaker 1: almost doubled by our analysis, from seven percent in twenty seventeen,

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Speaker 1: it's about twelve thirteen percent today. In equities, they've been

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Speaker 1: getting about a hundred based points of market share every

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Speaker 1: year since twenty seventeen as well, So you have seen

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Speaker 1: market share growth of Goldman UM. So it's a combination

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Speaker 1: of strong markets and market share games. We compare Goldman,

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Speaker 1: Sachs and Morgan Stanley frequently. Who's winning in your opinion?

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Speaker 1: That's it's a it's a really good question. Look, I

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Speaker 1: think when you think about strategic evolution, it's very clear

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Speaker 1: that Morgan Stanley is ahead, right. They they've been on

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Speaker 1: a longer path and arguably kind of in a steady

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Speaker 1: state now with a new business model right, it's basically

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Speaker 1: a wealth and as a manager they had their growth

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Speaker 1: rates are comparable to anybody in the industry, best in

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Speaker 1: class organic growth rates of almost ten percent. That's comparable

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Speaker 1: to again best in class, like a show up, So

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Speaker 1: they really have you know, they're there. They figured out

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Speaker 1: the strategy and there there. I think they're there. And

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Speaker 1: then Goldman is motivate process. We're still in the middle

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Speaker 1: of the transition here. Uh, and so there's still an

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Speaker 1: execution to go. So if you want to ask me

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Speaker 1: in terms of a UM strategic transformation, timeline of Morgan

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Speaker 1: Stanley is clearly ahead. Is there an urge to merge?

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Speaker 1: I mean I mentioned scale earlier. Is there a frenzy

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Speaker 1: where we are in the interest rate environment or maybe

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Speaker 1: the death acquiring environment to do transactions, to do can

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Speaker 1: combinations to generate scale? I think so. I think Morgan

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Speaker 1: Stanley has been a post a child of how to

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Speaker 1: do this right. You know, you figure out a strategy

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Speaker 1: and essentially take advantage of um UM you know, very

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Speaker 1: accommodating markets to what an accelerate and strategy by M

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Speaker 1: and A. But it's advanced a fast forward as a

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Speaker 1: manager and the bot you trade to really posted the

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Speaker 1: wealth management franchise and it's it's not one of us.

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Speaker 1: They've actually had multiple expansion on buying. Essentially, do companies

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Speaker 1: that would do need to taxical book which you probably

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Speaker 1: wouldn't have happened a couple of years ago. So so

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Speaker 1: I certainly am one that believes that clever M and

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Speaker 1: A UM in this environment where innovation is happening very quickly,

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Speaker 1: UM and and and and financing is you know, very

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Speaker 1: available and EM and it makes a lot of sense

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Speaker 1: to U to to to accelerate code. You gotta leave

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Speaker 1: it there, Christian Bolder, thing for for the brief with

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Speaker 1: autonomous research today on not Global Wall Street, but well

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Speaker 1: they are global, but let's call it American Wall Street.

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Speaker 1: As well as we spoke to Adam Posing and this

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Speaker 1: allusion to the research of Olivier Blanchard. We now speak

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Speaker 1: with John Lipsky. He's a former first deputy Managing director

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Speaker 1: and interimanaging director of a tumultuous I m F. And

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Speaker 1: what is so important about John Lipsky's work now at

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Speaker 1: Johns Hopkins is not his public service but the when

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Speaker 1: of it. He was in the crucible of the financial

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Speaker 1: crisis of oh seven, oh eight and oh nine with

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Speaker 1: his service at the i m F. John, we have

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Speaker 1: so little time and too many questions with the uproar

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Speaker 1: now on data integrity. When you were at the i

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Speaker 1: m F, did you always and in each instant see

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Speaker 1: data integrity? Absolutely, it's completely important and central to the

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Speaker 1: I m F s being able to conduct it said,

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Speaker 1: it's work in an authoritative and uh comprehensive way. It's

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Speaker 1: absolutely critical. And you know the i m F over

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Speaker 1: the years has made great efforts in conjunction working together

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Speaker 1: with its member countries to improve the production of data,

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Speaker 1: to improve the quality, and that that goes on. I

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Speaker 1: think in the current context, the i m F is

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Speaker 1: going to redouble efforts to create confidence in their data.

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Speaker 1: John Letsky, my memory serves me you gave a landmark

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Speaker 1: speech in Hanoi a few years ago in Vietnam, and

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Speaker 1: within that you said, Southeast Asia matters. Is the crisis

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Speaker 1: at the I m F A time too? At the margin?

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Speaker 1: Give more governance to the Pacific rim. Well, first of all,

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Speaker 1: I think we need to take a look at the

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Speaker 1: idea that there's a crisis at the IMF. Certainly there's

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Speaker 1: been a kafuffle of some consult okay, fair of importance. Yesterday,

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Speaker 1: the Inner National Monitoring Financial Committee though that's the executive

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Speaker 1: committee of the Board of Governors of the Fund, reaffirmed

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Speaker 1: its confidence in the Managing Director and essentially said, let's

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Speaker 1: move forward from this from this problem. But for sure,

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Speaker 1: it'sn't going to be important that the IMF membership comes

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Speaker 1: to an agreement as it has said it would by

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Speaker 1: December three to undergo to have a new review of quotas,

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Speaker 1: and in that review, for sure the fastest growing economies

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Speaker 1: are going to be rewarded with a larger voting share

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Speaker 1: in the fund almost without question. One of the litmus

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Speaker 1: tests will be will China become the number two, at

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Speaker 1: least number two countries in the IMF in terms of

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Speaker 1: voting chair. How does that change John the tenor of

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Speaker 1: the i m F, the actions that the i m

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Speaker 1: F takes if China becomes the number two. Actually it's

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Speaker 1: more I think a matter of image and pride than

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Speaker 1: it is in terms of actual day to day working.

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Speaker 1: The members of the i m S ex Ecutive Board,

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Speaker 1: that's the decision making political level decision making body, and

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Speaker 1: the Fund understands who China is, who Japan is, etcetera, etcetera. So,

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Speaker 1: in actual consideration of policies, UH, their weights are realistic,

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Speaker 1: but in terms of voting shares and details and public image,

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Speaker 1: it's of importance in ensuring the credibility the institution. John,

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Speaker 1: yesterday we had Muhammadalarian on and he said that right

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Speaker 1: now he is very concerned about the diverging economic fates

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Speaker 1: of the developed and the developing worlds, and he basically

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Speaker 1: was saying that there are big potholes and vulnerabilities that

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Speaker 1: are getting developed that potentially could come to a head

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Speaker 1: in the near future. Do you agree. Oh? Absolutely, And

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Speaker 1: of course that was one of the principal themes of

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Speaker 1: the I m F World Economic Outlook, that the recovery

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Speaker 1: is showing divergence and looking forward that divergence is going

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Speaker 1: to get bigger and many of the developing countries are

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Speaker 1: struggling in many ways. That is going to continue into

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Speaker 1: the coming years and act and is needed. John always

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Speaker 1: great to catch up with. He sir a voice I've

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Speaker 1: always respected. John Lipsky there the former first deputy Managing

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Speaker 1: Director at the IMAM. This is the Bloomberg Surveillance Podcast.

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Speaker 1: Thanks for listening. Join us live weekdays from seven to

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Speaker 1: subscribe to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg

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Speaker 1: and this is Bloomberg