WEBVTT - Commodity Currencies are Special, Ruskin Says 0:00:00.440 --> 0:00:12.960 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:13.480 --> 0:00:17.560 Jay Lee. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:28.240 Bloomberg dot Com, and of course on the Bloomberg I'm 0:00:28.240 --> 0:00:30.760 placed to say that in London, famous for attackis Joins 0:00:30.800 --> 0:00:33.960 us now the UBS cohead of FX and rates and Females. 0:00:34.000 --> 0:00:36.600 I want to begin with something that's front and center 0:00:36.680 --> 0:00:38.760 for the world of politics, but certainly not front and 0:00:38.840 --> 0:00:41.839 center for global markets. And that's the potential of the 0:00:41.840 --> 0:00:44.360 government shutdown in the United States of America. When the 0:00:44.360 --> 0:00:46.800 clients call you famous and ask you what does it mean? 0:00:46.840 --> 0:00:50.760 What are the consequences? What do you say? Well, long term, 0:00:50.920 --> 0:00:56.000 no US legislative body has basically allowed this to go 0:00:56.160 --> 0:00:59.640 over the cliff in a way that disrupts the payment 0:00:59.680 --> 0:01:03.000 flow for the US. So the long term it's probably 0:01:03.120 --> 0:01:05.240 something that will mean reverted. The short term, it can 0:01:05.280 --> 0:01:08.680 cause some noise in particularly for money markets, as the 0:01:08.760 --> 0:01:13.160 government runs up and down. It's um it's cash balances, 0:01:13.480 --> 0:01:19.399 it creates significant excess or are are less than that 0:01:19.600 --> 0:01:22.800 supply in uh in money markets and that's what's the 0:01:22.840 --> 0:01:25.320 most important short of impact. Well famous in the money 0:01:25.319 --> 0:01:27.920 markets and in the ferry front end of the treasury curve, 0:01:27.959 --> 0:01:30.280 you can get these kind of little kinks and the 0:01:30.400 --> 0:01:32.080 kind of account for when you might get a shut 0:01:32.120 --> 0:01:34.920 down and when things will reopen again. Our swhere though, 0:01:35.200 --> 0:01:37.560 does this actually have any impact for the effects market, 0:01:37.600 --> 0:01:41.080 et cetera. Uh not really, We've done a detailed study. 0:01:41.400 --> 0:01:43.320 This has a lot to do. This with a lot 0:01:43.360 --> 0:01:46.240 of fixed income instruments and how they trade against one another, 0:01:46.640 --> 0:01:49.680 But in terms of money market directions, not that much. 0:01:49.800 --> 0:01:52.400 The thing so far famous it's a weaker dollar. It's 0:01:52.400 --> 0:01:54.960 been you know, dollar that's crept lower lower lower, had 0:01:55.000 --> 0:01:57.920 its worst year in a decade on the dollar index 0:01:58.000 --> 0:02:00.840 last year and continues to plunge through three year. Love's 0:02:00.880 --> 0:02:03.320 on my screen, weaker against the era once again. We 0:02:03.400 --> 0:02:06.680 had someone from Deutsche Bank last week on this program 0:02:06.800 --> 0:02:09.040 saying that we could get to one thirty on euro 0:02:09.160 --> 0:02:11.360 dollar sooner than you think, Tha mus What takes us 0:02:11.400 --> 0:02:15.640 to one thirty from four on my screen? Uh? Well, 0:02:16.280 --> 0:02:19.239 one thirty is our long term target as well, maybe 0:02:19.240 --> 0:02:21.120 not as quickly as we have gone so far, but 0:02:21.240 --> 0:02:23.320 that's the direction of travel. There's a lot of things 0:02:23.560 --> 0:02:27.160 going on. First of all, the dollar is still expensive. Secondly, 0:02:27.240 --> 0:02:30.360 police normalization is not priced outside of the US. So 0:02:30.400 --> 0:02:32.120 the fact that the rest of the world is growing 0:02:32.200 --> 0:02:36.920 quite handsomely means that there is more to pricing currencies 0:02:36.919 --> 0:02:40.320 outside of the US UM And at the same time, 0:02:40.360 --> 0:02:44.320 what is hugely important is that UH, typically when financial 0:02:44.320 --> 0:02:47.600 conditions you get this, you get weaker dollar, you get 0:02:47.639 --> 0:02:51.400 higher oil prices, you get higher youths as equity Israeli 0:02:51.440 --> 0:02:54.840 and this is a good kind of reflationary dynamic. Good 0:02:54.840 --> 0:02:56.919 morning everyone, John Faro in New York on time, keen 0:02:56.960 --> 0:02:58.919 in London on Friday, and it's a Friday to get 0:02:58.919 --> 0:03:02.680 brief done market dynamics and of course a huge focus 0:03:02.720 --> 0:03:06.120 on Washington, but also almost weekend reading to get the 0:03:06.200 --> 0:03:08.639 next week, which will be spirited the same in the 0:03:08.720 --> 0:03:12.079 least and perhaps we'll see President Trump and Davos later. 0:03:12.639 --> 0:03:15.800 Uh in the week theme of fiatokus with us he 0:03:15.960 --> 0:03:18.680 is with ubs Tea mus when I look at the 0:03:18.680 --> 0:03:22.160 dollar dynamics and I look at exogenous shocks, and it 0:03:22.320 --> 0:03:25.480 occur to me. One of the great exogynist shocks last 0:03:25.560 --> 0:03:27.880 year was a single headline by Donald Karney in the 0:03:27.919 --> 0:03:30.480 Bank of England where there was just one point where 0:03:30.520 --> 0:03:34.240 he said, just almost in a whisper, there is no inflation. 0:03:35.400 --> 0:03:38.040 You people see inflation. I get that. You told us 0:03:38.040 --> 0:03:41.000 an hour ago. You're looking for three ish inflation, which 0:03:41.040 --> 0:03:43.960 is a lot. How do you get there? What is 0:03:44.000 --> 0:03:48.640 the catalyst to finally jump start a higher rate of 0:03:48.680 --> 0:03:51.840 price change? So there's a very good question. There's always 0:03:52.240 --> 0:03:54.400 to begin with. There are different things when you talk 0:03:54.400 --> 0:03:58.640 about inflation. When you're talking about underlying core PC, it's 0:03:59.160 --> 0:04:01.400 it's there's a lot of one of components that will 0:04:01.440 --> 0:04:04.240 fall off next year, and we'll take you somewhere around 0:04:04.240 --> 0:04:07.160 one point seven one point eight in core PC, which 0:04:07.200 --> 0:04:09.560 is not astonishing, but at the very least it's better 0:04:09.600 --> 0:04:12.680 than where we are here. That's one layer. The second layer, 0:04:12.720 --> 0:04:15.400 which goes from a quarter headline, particularly when it comes 0:04:15.440 --> 0:04:21.040 to CPI against PC, is the commodities um and commodities. 0:04:21.160 --> 0:04:23.880 You know, if you compare from the middle of the 0:04:23.960 --> 0:04:27.240 year last year until the current levels, oil price have 0:04:27.360 --> 0:04:30.440 almost doubled, and that's going to have an impact which 0:04:30.480 --> 0:04:31.800 will show up in the middle of the year and 0:04:31.839 --> 0:04:35.760 we'll take headline CPI higher depending on how higher oil 0:04:35.800 --> 0:04:38.120 prices go from here you could end up slightly shy. 0:04:38.160 --> 0:04:41.200 A three percent on headline CPI. Is that something that 0:04:41.240 --> 0:04:44.800 should scare us completely. No, it's going to be temporary, 0:04:44.839 --> 0:04:48.000 but at the same time it's going to revive some 0:04:48.120 --> 0:04:50.360 confidence because the risk was that we would continue to 0:04:50.400 --> 0:04:54.839 print that super low prints so far within that, you know, 0:04:55.000 --> 0:04:58.920 super low prints is the parsing almost on an international 0:04:59.000 --> 0:05:03.440 basis of good inflation. It's not there or service sector 0:05:03.640 --> 0:05:07.800 inflation in America. I see it in Cleveland CPI, which 0:05:07.839 --> 0:05:10.160 to me gives me much more of like the reality 0:05:10.360 --> 0:05:14.640 higher CPI. Are we looking at inflation correctly? Is it 0:05:14.680 --> 0:05:18.120 comes over to dollar dynamics and FECs dynamics or are 0:05:18.160 --> 0:05:22.039 we are we askewed because of goods dynamics in China? 0:05:22.560 --> 0:05:25.680 I think that's a very good observation. I think that 0:05:26.480 --> 0:05:31.039 particularly if you look at goods in the US due 0:05:31.040 --> 0:05:34.039 to past dollar strength, and what's going on globally with 0:05:34.080 --> 0:05:36.960 disinflation is not just China, it's also the huge output 0:05:36.960 --> 0:05:40.120 gap in Europe as well. When you're looking at goods 0:05:40.120 --> 0:05:42.839 inflation that has uh you know, it's about a quarter 0:05:42.960 --> 0:05:46.080 of core PC and it has been near zero for 0:05:46.160 --> 0:05:49.400 the last few years. Right, that's a huge disinflationary pressure. 0:05:49.760 --> 0:05:52.760 You need the global output gap to narrow for that 0:05:52.880 --> 0:05:54.720 to start picking up. And that's why we have not 0:05:54.880 --> 0:05:57.799 been on the side of high inflation up until recently. 0:05:58.160 --> 0:06:00.839 And when we don't expect that now either, just gradual 0:06:00.920 --> 0:06:03.200 grind higher from current levels, which should be healthy for 0:06:03.279 --> 0:06:06.279 the markets. That's the macro bank drop. How do central 0:06:06.320 --> 0:06:10.359 banks respond to the world you've just described, So for 0:06:10.440 --> 0:06:13.559 now most central banks are warning for a tighter pace 0:06:14.080 --> 0:06:18.240 of adjustment or normalization. I would add one more point 0:06:18.240 --> 0:06:21.320 to what she said. It's also about what's priced, right, 0:06:21.839 --> 0:06:25.400 So we can talk about the front end in the US, 0:06:25.440 --> 0:06:27.000 but with the long end of the curve at two 0:06:27.000 --> 0:06:29.720 point six destined to rise, I don't know the two 0:06:29.760 --> 0:06:33.240 point seven this year in our forecast, and probably approached something, 0:06:33.360 --> 0:06:36.119 you know, slight side of three percent next couple of years. 0:06:36.800 --> 0:06:40.000 A lot is already priced in UH. The European bond market, 0:06:40.040 --> 0:06:42.120 on the other hand, and the Japanese bond market. The 0:06:42.279 --> 0:06:45.280 yields there are to load their expensive bond markets, and 0:06:45.360 --> 0:06:48.600 the market is trying to gauge when UH these yields 0:06:48.600 --> 0:06:50.960 will adjust, when these central banks will adjust and when 0:06:50.960 --> 0:06:53.359 they adjust, UH, it's going to have an impact on 0:06:53.360 --> 0:06:57.160 those bond markets, and that translates into the currency frontloading 0:06:57.200 --> 0:06:59.280 some of that, which is part of what's happening famous 0:06:59.440 --> 0:07:01.120 US saying that the the front end in Europe that 0:07:01.160 --> 0:07:04.960 needs to adjust more than anywhere else, the overall level 0:07:05.000 --> 0:07:08.040 of the curve and the long end as well, UH, 0:07:08.040 --> 0:07:11.800 and probably particularly outside of Germany, the curve can actually steep, 0:07:11.800 --> 0:07:15.239 and so as the front and just across countries, probably 0:07:15.240 --> 0:07:18.520 outside of Germany, the long and should adjust even further. 0:07:20.120 --> 0:07:22.640 I look, seems just just one more question if we could, 0:07:22.760 --> 0:07:27.320 uh quickly here at the linkage that we see of 0:07:27.440 --> 0:07:30.800 dollar dynamics and fects dynamics with gold. Is there any 0:07:30.880 --> 0:07:33.200 linkage still? It seems like the old maxims are just 0:07:33.280 --> 0:07:35.800 out the door, out the window. Absolutely, But it's not 0:07:35.920 --> 0:07:39.360 just that dollar. It's also the level of real rates UH, 0:07:39.400 --> 0:07:43.280 and and real rates in the US are fair there 0:07:43.280 --> 0:07:45.520 where they should be, if not on the high side, 0:07:45.560 --> 0:07:49.240 which has been something that has anchored gold a lot 0:07:49.280 --> 0:07:51.920 more than other commodities which are a lot more closely 0:07:51.920 --> 0:08:02.200 correlated to oil the dollar as such as oil. This 0:08:02.280 --> 0:08:04.080 is a joy. This is something John Fair and I've 0:08:04.080 --> 0:08:08.000 really looked forward to Conahegan, who I first met through aluminum. 0:08:08.240 --> 0:08:13.160 Uh is truly expert at the detailed fundamental of the softs. 0:08:13.160 --> 0:08:14.800 It's a British thing, John, you have to have a 0:08:14.800 --> 0:08:17.440 British accent to do this. It's just part of the 0:08:17.480 --> 0:08:21.239 act and it is the romance of the commodity business. 0:08:21.320 --> 0:08:26.040 Forget about something boring like oil, you know something like that. 0:08:26.240 --> 0:08:29.720 It's it's the part that we all learned about, which 0:08:29.760 --> 0:08:32.800 is making opportunities and things like cocoa and things like coffee. 0:08:32.800 --> 0:08:37.880 Conahegan's with e DA and f Man ConA. The coffee 0:08:37.920 --> 0:08:43.480 market now seems to be multinational. It seems to be 0:08:43.800 --> 0:08:48.680 all the same physical characteristics of an agricultural commodity. What's 0:08:48.720 --> 0:08:51.640 the demand side of coffee? Look like we talk in 0:08:51.760 --> 0:08:58.839 oil demands better oil up? Is that elasticity there in coffee? Um? 0:08:58.920 --> 0:09:03.520 So No, I'm the industrial commodities like energy or I 0:09:03.520 --> 0:09:07.960 suppose it doesn't move with economic cycles. This is a 0:09:08.000 --> 0:09:11.200 trend that's very long term. So at the moment, coffee 0:09:11.280 --> 0:09:14.480 demand globally is going about two percent per year. There 0:09:14.559 --> 0:09:16.840 was a time was actually going about three percent. This 0:09:16.880 --> 0:09:20.240 was when you were seeing the Asian emerging market in 0:09:20.280 --> 0:09:24.560 particular moving away from tea into coffee, and that's definitely 0:09:24.600 --> 0:09:29.000 been compensating for a slowdown in growth in the mature 0:09:29.080 --> 0:09:31.480 marketers as Europe and America. But don't get me wrong, 0:09:31.520 --> 0:09:34.520 even in Europe and America, compared to consumption of sugar, 0:09:34.600 --> 0:09:38.240 which is static to maybe declining, coffee consumption is still 0:09:38.400 --> 0:09:42.240 very much, very much a desirable commodity and growing still 0:09:42.480 --> 0:09:45.400 within that is the elephant in the room. China. And 0:09:45.480 --> 0:09:47.560 we talk about China, and you know, John Fair and 0:09:47.600 --> 0:09:50.280 I have ten or fifteen topics on China that we 0:09:50.360 --> 0:09:53.160 circle around, but we don't get down to the nitty gritty, 0:09:53.240 --> 0:09:56.320 like I understand that pork is a huge part of 0:09:56.320 --> 0:09:59.520 the Chinese inflation dynamic, and I would believe part of 0:09:59.559 --> 0:10:03.120 the China He's diet where does coffee is just one 0:10:03.120 --> 0:10:06.280 example of a soft command and he fits into China's 0:10:06.440 --> 0:10:09.840 day to day life. So it's definitely not as a 0:10:09.840 --> 0:10:13.760 staple commodity, nothing like pork as you mentioned, or even grains. 0:10:14.480 --> 0:10:20.280 We are talking about a substitution away from your traditional tea, 0:10:20.520 --> 0:10:24.440 green tea, jasmine tea, and a marked shift from that 0:10:24.600 --> 0:10:27.920 towards coffee. And this is definitely a Western influence. So 0:10:28.240 --> 0:10:31.360 as you start seeing more and more coffee shops like 0:10:31.440 --> 0:10:34.640 the Starbucks or independent coffee shops start coming into um 0:10:35.120 --> 0:10:37.679 into China, we are seeing a lot of the middle 0:10:37.720 --> 0:10:42.240 class consumers really tapping into that conda. I can't see 0:10:42.320 --> 0:10:45.839 John Farrell drinking sipping jasmine tea down at Fortnum and 0:10:45.920 --> 0:10:50.199 Mason and just can' I am caffeine free? Believe it? Yeah, yeah, 0:10:50.240 --> 0:10:54.400 believe it or not? Now kind of you? Instead to 0:10:54.400 --> 0:10:56.920 two important things, and it was on the middle class, 0:10:57.240 --> 0:11:00.680 the middle class in China and the consumption of of coffee. 0:11:00.840 --> 0:11:05.280 Does that extend to India as well in the urban 0:11:05.320 --> 0:11:09.240 cities yes, so for sure. In the rural areas no, 0:11:09.840 --> 0:11:16.280 But once you start seeing the delis, the Shanghai's, the Bombays, Mumbai's, 0:11:16.600 --> 0:11:19.480 that is the country's. Those are the cities where high 0:11:19.559 --> 0:11:22.559 urban population growth is seeing a big demand for that 0:11:22.679 --> 0:11:25.680 sort of quick coffee fix, that caffeine boost, which is 0:11:25.679 --> 0:11:28.640 associated with big city dwellers. Because the big E M 0:11:28.760 --> 0:11:31.800 bricks trade of many many years ago was to go long. 0:11:31.840 --> 0:11:37.120 Soft commodities go along, things like coffee and meet as well, 0:11:37.160 --> 0:11:39.240 because it was going to be consumed by a rising 0:11:39.280 --> 0:11:42.959 middle class and seemingly these prices could only go higher, 0:11:43.080 --> 0:11:45.520 higher higher. Is that's still the theme here kind of 0:11:45.600 --> 0:11:47.760 or has it changed? No? I think that theme is 0:11:47.760 --> 0:11:51.000 still very much there. It's just that lately, because agricultural 0:11:51.000 --> 0:11:53.719 commodities have been so well supplied, prices have just been 0:11:53.840 --> 0:11:56.800 flapped to doing nothing. I think that the stories sort 0:11:56.840 --> 0:12:00.520 of disappeared. But there in the middle clas Us wants 0:12:00.520 --> 0:12:04.200 to move away from carbohydrates and basic staples like wheat 0:12:04.240 --> 0:12:07.400 and rice, and they're definitely moving towards high proteins. So 0:12:07.760 --> 0:12:10.880 it's the polks, it's the chickens, it's the beefs, it's 0:12:10.920 --> 0:12:15.120 the dairies milk, and you name it high cafe. It 0:12:15.120 --> 0:12:18.000 sounds like Tom Caine. This was this was the morning 0:12:18.400 --> 0:12:21.200 you got that right, Um, John Field. This was amazing. 0:12:21.240 --> 0:12:23.480 We got through a discussion with Conor Hay without talking 0:12:23.559 --> 0:12:26.160 about bitcoin. That's soft. Do you want to do that? No, 0:12:26.280 --> 0:12:28.040 we shouldn't do that. We did that already and she 0:12:28.240 --> 0:12:39.040 almost stormed out of she did not. Isaac Boltansky is 0:12:39.240 --> 0:12:43.160 more than interesting. Uh he is acclaimed coming out of 0:12:43.200 --> 0:12:49.880 the troubled Asset Relief Program TARP over to Compass Point Research, 0:12:50.360 --> 0:12:56.800 Ian Lucas Devas right, a hyper hyper detailed note on 0:12:56.920 --> 0:13:00.440 all the Washington dynamics. We protect the copyright of our guests. 0:13:00.440 --> 0:13:03.000 We're not going to send you out the note, Isaac, 0:13:03.160 --> 0:13:06.000 how do you put I'm just curious, how do the 0:13:06.080 --> 0:13:10.640 two of you put your note together? It's extraordinary how 0:13:10.679 --> 0:13:16.960 detailed it is. There is a plethora of information that 0:13:17.040 --> 0:13:18.840 comes out of d C, and I think our job 0:13:18.960 --> 0:13:22.520 is to try to track all of it, synthesize it, 0:13:22.520 --> 0:13:27.440 and make it digestible for institutional investors. If the Democrats 0:13:27.440 --> 0:13:31.400 spoke to you today, Senator Schumer and others with your 0:13:30.880 --> 0:13:35.600 your the fire hose of data you have coming in, 0:13:36.040 --> 0:13:40.480 can they actually deflect shut down over to blaming the Republicans? 0:13:42.480 --> 0:13:44.200 You know, I think Tom, the way this is going 0:13:44.280 --> 0:13:46.160 to play out is it's going to be viewed as 0:13:46.200 --> 0:13:50.319 a pox on both their houses. And in that scenario, 0:13:50.520 --> 0:13:54.400 you have to expect a lengthier shutdown if it does occur, because, 0:13:54.440 --> 0:13:59.360 as we all know, thinking polls tend to catalyze lawmakers. 0:13:59.520 --> 0:14:02.760 And if the polls holed up, which right now they 0:14:02.800 --> 0:14:06.880 show general blame for Republicans and Democrats at around the 0:14:07.080 --> 0:14:11.400 world thirties, then neither side is going to be incentivized 0:14:11.440 --> 0:14:15.360 to blink Isaac. Right now, the markets not blinking. The 0:14:15.400 --> 0:14:18.080 market strugging this off. In terms of the price action 0:14:18.120 --> 0:14:21.360 on my screen, Futures firmer. Yes, the dollars weak, but 0:14:21.400 --> 0:14:23.160 the dollar has been weak for over a year now, 0:14:23.400 --> 0:14:25.920 Treasury yields climbing harder. I would say that most people 0:14:25.920 --> 0:14:28.920 on Wall Street aren't really too bothered about this. I 0:14:28.920 --> 0:14:30.720 don't see the urgency on the screen. Do you see 0:14:30.760 --> 0:14:32.760 any urgency from the clients you speak to, from the 0:14:32.800 --> 0:14:34.800 investor base you speak to, and what are they asking 0:14:34.840 --> 0:14:38.880 you about what's happening in Washington, d C. You won't 0:14:38.880 --> 0:14:41.360 hear this often from a DC policy analyst, but I 0:14:41.440 --> 0:14:45.239 have been telling clients to look away from the nonsense 0:14:45.320 --> 0:14:48.520 in my city right now. The reality is that the 0:14:48.560 --> 0:14:51.960 market impact from a government shutdown at this point should 0:14:51.960 --> 0:14:55.520 be muted because it doesn't encompass the debt ceiling, which 0:14:55.560 --> 0:14:58.520 is perhaps the most important component of all of the 0:14:58.560 --> 0:15:01.200 fiscal fights. And as we've seen in the past, the 0:15:01.360 --> 0:15:05.160 missed economic activity will be recovered at a later point, 0:15:05.360 --> 0:15:07.560 so all the folks who aren't getting paid during this, 0:15:08.040 --> 0:15:10.680 all the contracts that get held up will be made up. 0:15:11.280 --> 0:15:14.720 The only cautionary note within that viewpoint is I have 0:15:14.800 --> 0:15:19.560 sent some degree of of jitterariness among equity investors, and 0:15:19.640 --> 0:15:23.640 so there could be a push to use this government 0:15:24.720 --> 0:15:28.640 shut down to justify a risk off bias that was 0:15:28.680 --> 0:15:34.400 already present and maybe not a reason absolutely right. My 0:15:34.400 --> 0:15:36.800 my advice today is we've got to look past this 0:15:36.920 --> 0:15:39.920 and realize that DC has delivered on the one thing 0:15:40.000 --> 0:15:42.560 that it could have possibly delivered on, which was the 0:15:42.600 --> 0:15:45.720 tax cuts. There wasn't much that was going to happen 0:15:45.760 --> 0:15:49.040 this year, and I feel highly confident that the debt 0:15:49.080 --> 0:15:51.680 ceiling is not going to be used in a game 0:15:51.720 --> 0:15:56.040 of chicken between these two parties. Is how many sections 0:15:56.080 --> 0:15:58.760 of the Democratic Party where there are there? I would 0:15:58.800 --> 0:16:02.320 say that within the media over the last excellent number 0:16:02.320 --> 0:16:06.040 of years, the focus has been hugely on the Republicans 0:16:06.200 --> 0:16:09.160 on the hill, and we forget about how fractious the 0:16:09.200 --> 0:16:12.520 Democratic Party has been in our history. How fractious is 0:16:12.560 --> 0:16:17.320 the Democratic Party right now. There's an old line that 0:16:17.760 --> 0:16:20.920 trying to get Democrats to caucus together and and agree 0:16:20.960 --> 0:16:22.880 on a bill is like trying to make cats walk 0:16:22.920 --> 0:16:28.560 in line. And it's been interesting because this year, excusely, 0:16:28.560 --> 0:16:32.560 this Congress they've actually been incredibly unified. And I think 0:16:32.600 --> 0:16:34.280 it's important to note that there's a bit of a 0:16:34.320 --> 0:16:37.920 shifting of the guard going on here, and Chuck Schumer 0:16:38.000 --> 0:16:40.640 has been able to hold his party in line and 0:16:40.760 --> 0:16:45.680 is really orchestrating um a cohesive pushback here. He's only 0:16:45.680 --> 0:16:48.480 lost one of his members in the Senate, Joe Mansion 0:16:48.600 --> 0:16:51.200 from West Virginia, a state that the President won by 0:16:51.240 --> 0:16:55.480 forty two points, and so it's actually been impressive that 0:16:55.560 --> 0:16:57.720 he's been able to hold those Democrats in line. So 0:16:57.720 --> 0:16:59.960 why does it helped me out with something? If getting 0:17:00.040 --> 0:17:02.160 the Democrats together is like herding cats, and we know 0:17:02.200 --> 0:17:04.960 how divided the GOP is right now, why are you 0:17:05.040 --> 0:17:08.000 so confident that the debt scening issue isn't going to 0:17:08.040 --> 0:17:12.320 be an issue at all? Sure, it's a fair question. 0:17:12.600 --> 0:17:17.359 It's a it's a belief that ultimately the markets can 0:17:17.359 --> 0:17:20.520 dictate action in d C and if there is a 0:17:20.680 --> 0:17:25.320 sign that the debt ceiling is being used as a 0:17:25.359 --> 0:17:29.040 bargaining chip unfairly, there will be a market reaction. And 0:17:30.000 --> 0:17:34.320 while most Congress people don't have Bloomberg or CNB, is 0:17:34.320 --> 0:17:38.359 CNBC or any of the markets on their excusing yes, 0:17:38.800 --> 0:17:42.879 um uh, they do have. They do see the screen 0:17:42.920 --> 0:17:45.320 when there's a three or five percent sell off, and 0:17:45.400 --> 0:17:48.240 so that's why I feel confident that the market can 0:17:48.280 --> 0:17:51.200 force action on the debt ceiling. Some came a note 0:17:51.200 --> 0:17:53.879 coming from an official, a headline crossing the Bloomberg terminal. 0:17:53.960 --> 0:17:56.680 Right now, the President United States is said to stay 0:17:56.680 --> 0:18:01.040 in Washington, d C. Until the shutdown is averted. So 0:18:01.119 --> 0:18:04.120 that can have some consequences for his trip next week 0:18:04.160 --> 0:18:07.360 potentially to Dana, Switzerland, if this hasn't been down with 0:18:07.800 --> 0:18:11.600 by then. Yeah, and that percolated in the zeitgeist this morning. 0:18:11.600 --> 0:18:13.880 If you've seen that headline. I don't see that here 0:18:13.880 --> 0:18:17.520 in our London studios, John, but if you see that headline, 0:18:18.160 --> 0:18:21.920 that really begins to turn into news the rumor and 0:18:22.000 --> 0:18:25.560 speculation that was seen earlier. UM, I don't have any 0:18:25.600 --> 0:18:28.080 you know, I'm not doing a Michael Beschlaus act, but 0:18:28.680 --> 0:18:32.359 I don't understand how a president travels during a government shutdown. 0:18:32.800 --> 0:18:36.080 I find that bizarre. But uh, you know, we'll have 0:18:36.160 --> 0:18:38.920 to see. Yeah, you would assume you would assume Isaac 0:18:39.000 --> 0:18:41.160 that he doesn't travel to Dava, Switzerland if the government 0:18:41.200 --> 0:18:43.879 does shut down. Is that something you would assume? I 0:18:43.880 --> 0:18:46.520 think you're absolutely right. Look, the optics of him traveling 0:18:46.520 --> 0:18:49.639 were already ub optimal, so it would be all it 0:18:49.680 --> 0:18:52.840 would be much worse given if there was a government shutdown. 0:18:52.960 --> 0:18:55.320 And then we should say, John Farrell, this is Kazia 0:18:55.400 --> 0:18:59.760 clemens Is. I'll get it right, Klemazinska. There it is 0:19:00.160 --> 0:19:04.040 of Bloomberg. Bloomberg first word. And this is from quote 0:19:04.119 --> 0:19:09.159 unquote an official, which you know usually coming out of Bloomberg. Uh, 0:19:09.400 --> 0:19:15.840 that's got some substance to it. Averted. There it is, Isaac. 0:19:16.000 --> 0:19:18.119 What what do the Democrats want to get out of this? 0:19:18.320 --> 0:19:20.760 All of this? You know, I think I can speak 0:19:20.760 --> 0:19:23.320 for a hundred of our listeners are all sort of 0:19:23.359 --> 0:19:27.000 exhausted by it. It's your fault, Isaac. But what do 0:19:27.080 --> 0:19:29.000 the Democrats want to get out of this? Where do 0:19:29.040 --> 0:19:32.480 they want to be? One week, three weeks, the shutdowns done, 0:19:32.520 --> 0:19:35.320 we all kiss it, makeup, We get to the dead ceiling, 0:19:35.359 --> 0:19:37.000 we all kiss it, makeup. Where do they want to 0:19:37.040 --> 0:19:43.520 be as the campaign season begins for November six? Sure 0:19:44.480 --> 0:19:48.800 Democrats recognize that this is their only leverage point this year. 0:19:49.960 --> 0:19:54.639 Totally agree because that's the heart of the matter, right right, 0:19:54.720 --> 0:19:56.880 So they want they want it all they want to 0:19:56.920 --> 0:20:00.680 They want everything they can get realistically, if they will 0:20:00.960 --> 0:20:02.840 hope to get out of this is a deal over 0:20:02.920 --> 0:20:06.600 DACA funding for the children Health Insurance program, and I 0:20:06.640 --> 0:20:09.080 think if you get that up from the six years 0:20:09.160 --> 0:20:12.120 it's currently being offered to ten years and a deal 0:20:12.200 --> 0:20:16.480 on just DAKA, Democrats would blink. Um. There isn't much 0:20:16.480 --> 0:20:21.120 optimism about a broader immigration deal at this point. Get 0:20:21.119 --> 0:20:23.119 me to the midterms. You get a deal on DHAKA. 0:20:23.520 --> 0:20:27.640 Is that enough to sound the electorate? I think right 0:20:27.680 --> 0:20:31.280 now this is about placating to the base, and the 0:20:31.359 --> 0:20:34.399 base of the Democratic Party has shown that the DOCA 0:20:34.440 --> 0:20:37.399 issue is important to them. It is a central pillar 0:20:37.520 --> 0:20:41.280 for them. It's also an issue that many Democrats uh 0:20:42.240 --> 0:20:46.480 feel they can run on in certain congressional districts. I 0:20:46.520 --> 0:20:49.159 don't think that alone is enough to deliver them the 0:20:49.400 --> 0:20:51.439 House or the Senate, but I still believe that the 0:20:51.440 --> 0:20:55.840 odds heaverly favored Democrats taking the House and Republicans holding 0:20:55.840 --> 0:21:06.600 the Senate. Andrew Bishop Um is quietly legendary Eurasia group 0:21:06.640 --> 0:21:11.000 working with Dr Bremer among others. UM and we're working 0:21:11.040 --> 0:21:14.520 on sort of not only Europe, but the interdependencies of 0:21:14.520 --> 0:21:16.520 Europe and the synthesis of Europe with the rest of 0:21:16.520 --> 0:21:19.679 the global economy. He wrote up with Courts last summer 0:21:19.720 --> 0:21:22.680 on Germany and other nations as well. Andrew Bishop with 0:21:22.720 --> 0:21:26.040 the European Briefing right now with Eurasia Group and Andres 0:21:26.040 --> 0:21:28.320 thrilled to have you with us in Chess or a 0:21:28.359 --> 0:21:30.880 miracle I believe is not going to have a government shutdown. 0:21:31.000 --> 0:21:34.960 Perhaps you'll actually get to Dabos. What is the strength 0:21:35.160 --> 0:21:38.960 and power of the most powerful leader in Europe after 0:21:39.040 --> 0:21:42.359 a coalition battle and frankly after just the years that 0:21:42.440 --> 0:21:46.720 have gone by good morning, I think that's a good point. 0:21:46.760 --> 0:21:49.239 Mercle is, you know, sort of towards the tail end 0:21:49.280 --> 0:21:53.760 of her of her tenure, but she's strong enough, especially 0:21:53.800 --> 0:21:57.240 when combined with President mccronel to send a powerful message 0:21:57.240 --> 0:21:59.800 to to President Trump next week. And I think that 0:21:59.800 --> 0:22:02.240 that truly the spirit behind her going once against the 0:22:02.320 --> 0:22:05.240 Davos and I believe she and McCrow will both be 0:22:05.320 --> 0:22:08.040 speaking on Wednesday, so two days before Trump. We've all 0:22:08.080 --> 0:22:11.080 been fascinated by the frequent flyer Miles on Air France 0:22:11.119 --> 0:22:13.760 and Mr mccrosben. He's been on a road like I 0:22:14.119 --> 0:22:17.520 believe I've never seen. Let's back up, what's the why 0:22:17.520 --> 0:22:21.480 why is Mr McCraw hit the road before these important meetings. 0:22:23.080 --> 0:22:26.120 I think that the main reason is that he perceives opportunity. 0:22:26.160 --> 0:22:28.320 He sees the window of opportunity and the fact that Merkel, 0:22:28.400 --> 0:22:31.200 as you just said, is busy with domestic issues, uh 0:22:31.240 --> 0:22:34.280 and President Trump neither has the interest nor necessarily the 0:22:34.320 --> 0:22:36.800 appeal uh to really be the world's leader, you know. 0:22:36.840 --> 0:22:39.800 And so President she has seen that opportunity as well, 0:22:39.840 --> 0:22:42.440 but he's taking a much slower approach. President McCrow is 0:22:42.520 --> 0:22:44.760 essentially doing the same thing as she, but in a 0:22:44.840 --> 0:22:48.280 in a much more opportunistic and tactical way, really trying 0:22:48.320 --> 0:22:52.119 to find little crises like when Lebanon's Prime minister was was, 0:22:52.200 --> 0:22:55.159 you know, held in in riad to to score some points. 0:22:55.680 --> 0:22:59.000 What can Mircael achieve in her final term, which is 0:22:59.040 --> 0:23:04.040 most likely to be her final term, Andrew, I think 0:23:04.080 --> 0:23:06.280 that the greatest thing she could achieve is to to 0:23:06.520 --> 0:23:10.920 maintain the German polity sort of on on a stable track. 0:23:11.040 --> 0:23:14.040 I mean, one of the big concerns is that, you know, 0:23:14.119 --> 0:23:17.640 yet another grand coalition will further aggravate voters who feel 0:23:17.680 --> 0:23:20.320