WEBVTT - The Geopolitical Order Tipping Point with Bremmer 0:00:05.720 --> 0:00:12.960 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:13.480 --> 0:00:17.560 Jai Leye. 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 --> 0:00:28.160 Bloomberg dot Com, and of course on the Bloomberg. Yeah. 0:00:33.720 --> 0:00:37.479 It's a story defining important political outcomes, how we understand 0:00:37.560 --> 0:00:41.280 what shape political preferences is shifting radically. It's no longer 0:00:41.320 --> 0:00:44.240 just a case of left and and right. It's globalism 0:00:44.360 --> 0:00:47.800 versus nationalism, the conflict between the citizen of the state. 0:00:47.880 --> 0:00:51.559 It often comes down to us versus Them. That's the 0:00:51.600 --> 0:00:54.320 title of in Bremer's new book, Us Versus Them, The 0:00:54.480 --> 0:00:57.760 Failure of Globalism. And I'm pleased to say that the 0:00:57.800 --> 0:01:00.440 Eurasia Group founder and President joins us now here in 0:01:00.440 --> 0:01:02.880 New York and good morning and congratulations to you. Thank 0:01:02.880 --> 0:01:04.760 you having it told me about the essence of this 0:01:04.800 --> 0:01:08.000 book and why this is some important to you right now. Uh, 0:01:08.080 --> 0:01:11.240 it's important because I've never experienced our country so divided. 0:01:11.680 --> 0:01:13.840 And when you travel you go to Europe and increasing 0:01:13.840 --> 0:01:16.120 the other countries too, you feel it there and and 0:01:16.120 --> 0:01:18.400 that's happening when the global economy is doing better than 0:01:18.360 --> 0:01:21.399 at any point in over a decade, which means that 0:01:21.440 --> 0:01:24.920 we are getting something fundamentally wrong in liberal democracies with 0:01:25.040 --> 0:01:27.839 our citizens. In fact, the only country among the advanced 0:01:27.840 --> 0:01:31.120 industrial democracies that you're not experiencing this is Japan, where 0:01:31.120 --> 0:01:34.840 they have no immigration and where the population is shrinking 0:01:34.880 --> 0:01:38.360 incredibly rapidly, so per capita. They feel like they're doing great. 0:01:38.440 --> 0:01:41.319 But it's not just economics, right, It's much deeper than that. 0:01:41.360 --> 0:01:46.040 It's about security, um, It's about identity and culture and society, 0:01:46.160 --> 0:01:49.000 and and it basically is saying that the values that 0:01:49.040 --> 0:01:51.640 the United States has been promoting, both at home and 0:01:51.680 --> 0:01:55.720 abroad since after World War Two just don't apply to 0:01:55.840 --> 0:01:58.800 the average person anymore. And that's why we got Trump 0:01:58.840 --> 0:02:01.720 and Sanders, and that's why you got Brexit. And it's 0:02:01.800 --> 0:02:04.320 just picking up momentum, it's not getting fixed. And your 0:02:04.360 --> 0:02:06.880 point in the book, really in the conclusion, is that 0:02:07.080 --> 0:02:09.960 the president the United States, President Trump, didn't create US 0:02:10.040 --> 0:02:13.720 versus them. Us versus them created President Donald Trump. It 0:02:14.080 --> 0:02:16.919 created the the outcome of the Ukit the Brexit decision 0:02:17.280 --> 0:02:20.639 as well, and these necessarily negative outcomes, as far as 0:02:20.639 --> 0:02:26.280 you're concerned, and I think they are because Trump's solutions 0:02:27.080 --> 0:02:30.480 are more divisive. No, no one is better at painting 0:02:30.560 --> 0:02:35.560 us versus them than Donald Trump is America First is 0:02:35.720 --> 0:02:41.000 in a sense and encapulation of that um and everything 0:02:41.040 --> 0:02:44.440 he says about Mexicans. We need to build a wall, 0:02:45.080 --> 0:02:48.359 it's a fake news, and how everyone is a winner 0:02:48.480 --> 0:02:53.480 or a loser. He's doing that and facilitating a deepening 0:02:53.720 --> 0:02:58.040 of divisions that have already made us no longer understand 0:02:58.080 --> 0:03:00.600 what it is the United States fundamental he stands for. 0:03:00.919 --> 0:03:04.240 And that's happening in a world where China has the 0:03:04.280 --> 0:03:06.840 strongest leader they've had since Mao, and the Chinese know 0:03:06.960 --> 0:03:10.320 exactly what they stand for and they're building it long term. 0:03:10.360 --> 0:03:13.080 This is a it's a profound tipping point in the 0:03:13.160 --> 0:03:19.040 geopolitical order, and it really is um forces I think 0:03:19.200 --> 0:03:21.240 us all to look at what kind of society we 0:03:21.280 --> 0:03:24.320 want to build here in the United States. Perhaps importantly 0:03:24.320 --> 0:03:27.639 that in what has happened and why this message resonates 0:03:27.680 --> 0:03:30.600 with so many different people across the planet right now 0:03:31.080 --> 0:03:35.560 is because previous administrations have completely failed to insulate large 0:03:35.600 --> 0:03:38.800 sweats of society, whether it's in the United States, the UK, 0:03:39.000 --> 0:03:42.800 and across much of Europe as well insulate them from 0:03:42.920 --> 0:03:46.960 the negative impact of globalization. Previous administrations are quite clearly 0:03:46.960 --> 0:03:49.840 failed to do that. I mean even Obama, who was 0:03:49.960 --> 0:03:53.440 voted for precisely not as a Democrat, but because he was. 0:03:53.480 --> 0:03:56.160 He beat Hillary right, because he was a first term senator, 0:03:56.560 --> 0:04:00.400 first black man. Everyone thought, here's a new guy that 0:04:00.440 --> 0:04:04.160 we can all have hoped for. And yet the swamp 0:04:04.560 --> 0:04:07.560 could not be drained his ability. I mean a little 0:04:07.600 --> 0:04:10.440 things like saying I'm not going to pay for pix up, 0:04:10.520 --> 0:04:13.320 pay for play for American ambassadors around the world, to 0:04:13.440 --> 0:04:17.400 big things like building infrastructure, improving education, dealing with gun 0:04:17.440 --> 0:04:20.840 control in the poorest areas of the country. Couldn't get 0:04:20.880 --> 0:04:23.719 it done, and so a lot of people got disappointed. 0:04:23.720 --> 0:04:26.239 A lot of those Obama voters went to vote for Trump, 0:04:26.320 --> 0:04:28.880 some went to vote for Sanders. They're gonna be disillusioned 0:04:28.880 --> 0:04:31.520 again because in four and eight years their situation isn't 0:04:31.520 --> 0:04:33.360 going to be better. So we have more and more 0:04:33.400 --> 0:04:36.160 people in America saying should I bother voting at all, 0:04:36.520 --> 0:04:39.440 More and more young people saying the system is rigged 0:04:39.480 --> 0:04:42.880 and I'd rather have a military dictatorship than have a 0:04:42.920 --> 0:04:45.839 democracy because this system doesn't work for me. More and 0:04:45.920 --> 0:04:49.279 more people willing to vote outside of the elites and 0:04:49.320 --> 0:04:53.640 the establishment, thinking that the business community, the political community, 0:04:53.800 --> 0:04:56.839 the media, the public intellectuals are all in it for 0:04:56.920 --> 0:04:59.919 themselves and no one cares about them. And that's odd 0:05:00.040 --> 0:05:02.560 viously happening across Europe to this is not just an 0:05:02.560 --> 0:05:06.680 American phenomena. So what's the solution. Well, in the near term, 0:05:06.680 --> 0:05:10.520 precisely because it's not a crisis and the elites aren't 0:05:10.560 --> 0:05:14.760 experiencing any trouble themselves, especially because the economy is doing 0:05:14.800 --> 0:05:18.719 so well. It's a combination of candy to keep people 0:05:18.720 --> 0:05:20.880 happy right now. So let's give everyone a tax break. 0:05:20.960 --> 0:05:23.040 Let's blow out the budgets, even if the bill is 0:05:23.080 --> 0:05:24.840 going to come do in a very serious way on 0:05:24.880 --> 0:05:27.800 the back of the working class in five or ten years. 0:05:28.000 --> 0:05:31.040 Let's just throw some cash at them now, and it's 0:05:31.120 --> 0:05:35.440 build walls, it's divide people more effectively. The long term 0:05:35.480 --> 0:05:39.479 solution is you need to change the social contract. The 0:05:39.560 --> 0:05:44.040 long term solution, especially with technology facilitating divisions and fake 0:05:44.080 --> 0:05:47.919 news within our countries, are liberal democracies and a new 0:05:48.000 --> 0:05:51.839 industrial revolution or post industrial revolution going to take displace 0:05:51.960 --> 0:05:55.080 so many people in terms of automation, artificial intelligence. The 0:05:55.240 --> 0:05:59.000 long term is a would would require something very new. 0:05:59.040 --> 0:06:02.280 Deal like would require the kind I mean, there's no 0:06:02.400 --> 0:06:06.520 magic in the fact that we need serious investments in 0:06:06.520 --> 0:06:10.240 infrastructure and education the rest. But Trump Trump did Infrastructure week. 0:06:10.279 --> 0:06:12.920 It was a failure, became the butt of jokes, while 0:06:12.960 --> 0:06:15.919 Trump does US versus them every day. One thing the 0:06:15.920 --> 0:06:18.479 president has done that most people would agree with is 0:06:18.480 --> 0:06:20.760 is take on China and try and break the status 0:06:20.839 --> 0:06:23.520 quo that has shaped the global economy. The Chinese do 0:06:23.560 --> 0:06:26.760 not abide by the global rules. They don't go by 0:06:26.839 --> 0:06:29.280 the mantra of free trade. They have their own rules. 0:06:29.320 --> 0:06:31.240 They played by their own book. Correct. Do you think 0:06:31.240 --> 0:06:33.000 the president is going down the right path there trying 0:06:33.040 --> 0:06:36.280 to break up what has been a country that has 0:06:36.320 --> 0:06:38.640 really been elitch on the global trading system for for 0:06:38.720 --> 0:06:42.080 much of the last decade. I'm conflicted. I mean, first 0:06:42.120 --> 0:06:44.320 of all, it is true that if we have a 0:06:44.320 --> 0:06:47.080 trade war with the Chinese, we both lose, but we 0:06:47.200 --> 0:06:49.520 win against the Chinese. In other words, they'll get a 0:06:49.640 --> 0:06:52.039 lot more hurt than we will. They know that, so 0:06:52.160 --> 0:06:55.120 our ability to push them and get them to actually 0:06:55.120 --> 0:06:58.080 be flexible with us is significant, and Trump has already 0:06:58.080 --> 0:07:00.760 had some success there. My problem, Blom is that if 0:07:00.760 --> 0:07:04.200 you want to beat up on the Chinese for deserved 0:07:04.360 --> 0:07:08.120 reasons in terms of intellectually property stealing, no reciprocity and 0:07:08.160 --> 0:07:12.080 market openness of the rest, you really want allies. You 0:07:12.160 --> 0:07:15.000 really want the Europeans with you, You want the Japanese 0:07:15.040 --> 0:07:19.000 with you, and and Trump just doesn't trust multilateralism. He 0:07:19.040 --> 0:07:21.760 wants to do this himself. This is critical and it 0:07:21.800 --> 0:07:24.400 goes to work with your colleague Robert Caplan in his 0:07:24.440 --> 0:07:26.920 book The Return of Marco Polo. You've got a great 0:07:26.960 --> 0:07:30.800 section on, for example, Indonesia, or you could speak about 0:07:30.800 --> 0:07:34.240 the New Vietnam as well. Are those allies we have 0:07:34.280 --> 0:07:36.600 the ability to speak to as we look at the 0:07:36.640 --> 0:07:40.880 South China see the major conduit for oil and goods 0:07:40.880 --> 0:07:45.600 in the Pacific some call Caplin calls it China's Mediterranean. 0:07:46.000 --> 0:07:48.280 Does a president even know where the South China see 0:07:48.280 --> 0:07:50.240 is on the map? They used to be allies that 0:07:50.320 --> 0:07:53.600 we could speak to more effectively withdrawing from the Trans 0:07:53.680 --> 0:07:57.000 Pacific Partnership than dangling it for a second and then 0:07:57.040 --> 0:08:01.760 saying nah doesn't help. Our military presence in the region, 0:08:01.800 --> 0:08:04.840 of course, is still dominant and beats the Chinese um 0:08:04.840 --> 0:08:06.800 except for you know, sort of really close to the 0:08:06.920 --> 0:08:10.840 Chinese shores. That is changing. But you know the fact 0:08:10.920 --> 0:08:15.440 is that every day that we withdraw, every day that 0:08:15.480 --> 0:08:18.800 we say it's all about us, baby, we're not doing multilateral, 0:08:18.920 --> 0:08:21.280 is another day where the Chinese economy is more and 0:08:21.320 --> 0:08:25.440 more dominant over these countries due to Indonesia. What does 0:08:25.520 --> 0:08:29.400 our non engagement do. I'm just picking on the eye 0:08:29.400 --> 0:08:33.520 country to Indonesia. I mean it means that they recognize 0:08:33.559 --> 0:08:36.480 that one belt, one road is their marshal alone. It's 0:08:36.480 --> 0:08:39.040 their marshal plan. They're not alone. The Chinese are prepared 0:08:39.040 --> 0:08:41.080 to throw an enormous amount of money and there's massive 0:08:41.120 --> 0:08:43.720 numbers of Chinese expats in Indonesia and the Philippines and 0:08:43.720 --> 0:08:46.920 Australia who are actually becoming the key business people in 0:08:46.960 --> 0:09:02.800 those countries. Five things you need to know to start 0:09:02.800 --> 0:09:05.800 your day. We do this with Brian Weezer Pivotal Squeezing. 0:09:05.920 --> 0:09:08.120 You know, five things, four things, six things. It's with 0:09:08.200 --> 0:09:12.480 Brian Weezer. That's a good thing. Brought you by Interactive Brokers, 0:09:12.640 --> 0:09:16.680 rated number one best online broker two thousand eighteen and 0:09:16.760 --> 0:09:21.000 a top online broker for the eight consecutive year by 0:09:21.080 --> 0:09:25.200 Baron's visit ib k R dot com slash why I 0:09:25.360 --> 0:09:29.120 be to learn more? Brian Weiser, let's jump into it 0:09:29.240 --> 0:09:33.280 right now. Is a traditional ad business dead? Disney Access, 0:09:33.280 --> 0:09:37.600 traditional TV? This that Martin Sorel the gossip of your 0:09:37.640 --> 0:09:43.120 industry is mad been dead? The TV series? No, you know, 0:09:43.160 --> 0:09:47.160 I think advertising is in a constant stative evolution. Um. 0:09:47.200 --> 0:09:49.440 I think sometimes we you know, how often have we 0:09:49.480 --> 0:09:51.200 heard the phrase the world's changed more in the last 0:09:51.200 --> 0:09:53.199 five years in the last fifty to which I sat? 0:09:53.240 --> 0:09:56.400 Anyone prove it quantified? John? This is Brian's first time 0:09:56.400 --> 0:10:00.240 on radio. Would you move as Mike's by him? Are 0:10:00.280 --> 0:10:02.640 you okay over there? I'm good, I'm gonna have radio. 0:10:02.679 --> 0:10:05.960 Guy has been on the Times of Times, c I, 0:10:06.000 --> 0:10:08.920 t R Vancouver. I used to be the president Society there. 0:10:09.000 --> 0:10:12.000 Did you get that we got? Brian knows what he's doing. 0:10:13.200 --> 0:10:17.199 Is the business? No, it is not. I think that 0:10:17.480 --> 0:10:19.400 there are a number of challenges in a number of 0:10:19.440 --> 0:10:21.839 different parts of the industry, and unfortunately a lot of 0:10:21.880 --> 0:10:25.040 the numbers are often obscured. The agency space, for example, 0:10:25.160 --> 0:10:26.920 is obscured by the fact that we can't see what 0:10:27.000 --> 0:10:29.400 the media agency business is doing separate from the creative 0:10:29.440 --> 0:10:32.640 agency business. Um, we can't see the degree to which 0:10:32.679 --> 0:10:36.719 individual clients are experiencing like for like fee pressure or 0:10:36.880 --> 0:10:40.120 putting like for like fee pressure on their agencies. Um. 0:10:40.160 --> 0:10:43.360 When it comes to traditional media, there is weakness, but 0:10:43.520 --> 0:10:46.240 is the melting ice cube when it comes to TV 0:10:46.320 --> 0:10:49.480 advertising for example, Uh, it's you know, a negative two 0:10:49.480 --> 0:10:52.640 percent number. It's not going away. It remains the least 0:10:52.679 --> 0:10:56.600 batt alternative for the largest advertisers. But UM, you know, 0:10:56.640 --> 0:10:59.480 all this stuff is moving just very gradually. Can we 0:10:59.520 --> 0:11:03.400 get yourself on Facebook? One of only two cells on 0:11:03.400 --> 0:11:06.960 Facebook forty two buys two holds and it's you and 0:11:07.040 --> 0:11:09.800 Simon Baker over at Solk gen Um with two sounds 0:11:09.840 --> 0:11:12.840 on Facebook? What do you see that the bulk of 0:11:12.920 --> 0:11:15.680 the analyst community aren't getting as far as you are 0:11:15.720 --> 0:11:19.040 concern the single biggest issue for Facebook that most people 0:11:19.080 --> 0:11:21.400 do not appreciate. And let me clarify, I'm I'm no 0:11:21.559 --> 0:11:25.439 perma bear on Facebook. I had one of the highest 0:11:25.440 --> 0:11:29.080 price targets on Wall Street at the end of UM. 0:11:29.120 --> 0:11:32.360 But certainly there's a mismanagement issues that have come to 0:11:32.440 --> 0:11:36.240 light over that period of time. The data privacy issue 0:11:36.360 --> 0:11:39.400 is merely a symptom. I think mismanagement of the company 0:11:39.640 --> 0:11:43.120 is a risk, not something we're seeing in the numbers. Clearly, 0:11:43.720 --> 0:11:46.920 the biggest single problem facing Facebook is the limits to 0:11:46.960 --> 0:11:48.640 growth that are available to them. In other words, the 0:11:48.679 --> 0:11:54.840 advertising industry has not expanded faster than it otherwise would have. Doo, 0:11:55.000 --> 0:11:57.400 I don't know my face, I like you know, I 0:11:57.440 --> 0:11:59.600 got a big fine blah blahlah I never I never 0:11:59.640 --> 0:12:01.760 go to never. All due respect, though neither of you 0:12:01.840 --> 0:12:05.760 nor me, none of us matter. The consumer is the advertiser. 0:12:05.920 --> 0:12:08.240 It doesn't matter whether or not we're there. It matters 0:12:08.240 --> 0:12:10.240 whether or not it's the least bat alternative to a 0:12:10.240 --> 0:12:13.000 digital to an advertiser has a digital budget right the 0:12:13.040 --> 0:12:15.640 fact that we're not, When did they change their behavior? 0:12:15.800 --> 0:12:18.560 That's the money question. When a lot of people reduce 0:12:18.600 --> 0:12:21.840 their time on the platform substantially, that would be a 0:12:21.880 --> 0:12:24.440 catalyst for change. But I think the bigger, more pressing 0:12:24.480 --> 0:12:26.920 issue is that there's only so much that they can 0:12:27.000 --> 0:12:29.640 increase their spending, and not a kind. It's only so 0:12:29.720 --> 0:12:32.400 much that you can increase your spending because the total 0:12:32.440 --> 0:12:35.800 pie for advertising is relatively fixed. That is the sync 0:12:35.920 --> 0:12:38.480 biggest thing that most Twitter take out, they finally get 0:12:38.520 --> 0:12:42.000 taken out stocks, better, income statements better. Is this not 0:12:42.160 --> 0:12:44.120 the time they go? I mean it can always be. 0:12:44.280 --> 0:12:47.720 It's always a possibility. Um, certainly, I think risks are 0:12:47.720 --> 0:12:50.560 still to the downside for the stock. I think there's 0:12:50.559 --> 0:12:53.400 a lot of positive things to read through from yesterday's numbers, 0:12:53.840 --> 0:12:55.920 but not right away. I just got an email from 0:12:55.920 --> 0:12:59.679 a listener cave we love the Cavy is listening at 0:12:59.679 --> 0:13:01.400 this morning. She said, well, you could have taken me 0:13:01.440 --> 0:13:03.319 to work. I go, but you're not my daughter. So 0:13:03.920 --> 0:13:06.880 the youngest one emails in and goes, you didn't let 0:13:06.880 --> 0:13:10.280 me come to work because ran fell you is styling? 0:13:10.440 --> 0:13:14.240 So major it is it? Bring your challenge to excuse 0:13:14.280 --> 0:13:16.480 me if you bring your issue, if your royal like 0:13:16.520 --> 0:13:19.680 a royal baby, isn't issue to work. We should have 0:13:19.720 --> 0:13:21.960 brought the dog to work. Can I just say, get 0:13:22.000 --> 0:13:24.199 that bill to come in later? Can we get vet 0:13:24.200 --> 0:13:27.880 better the next hour? Can I just say, Ryan, you 0:13:28.120 --> 0:13:32.360 fell you is styling today at work with her dad? 0:13:32.600 --> 0:13:46.839 This is Bloomberg wonderful to have. I brought a gallo 0:13:46.920 --> 0:13:50.480 with us with wonderful wisdom on fixed income dynamics and 0:13:50.520 --> 0:13:54.319 the interdependencies of what we see not only in Europe 0:13:54.320 --> 0:13:58.200 but in general UM as well. Alberto Gallo, I guess 0:13:58.280 --> 0:14:02.360 we have caution, but we have an unchanged confidence. How 0:14:02.400 --> 0:14:06.160 could we have it both ways? A good morning from London. 0:14:06.240 --> 0:14:10.280 I think what Drug is essentially saying is that a 0:14:10.320 --> 0:14:12.760 bit like us, they have no idea why the data 0:14:12.840 --> 0:14:17.920 has been slowing in the first quarter. So it could 0:14:19.240 --> 0:14:21.080 it could be the weather. It could be easter, could 0:14:21.120 --> 0:14:23.240 be that a lot of people got sick because the 0:14:23.240 --> 0:14:26.960 weather was too cold, or it could be lower demand. Now, 0:14:27.640 --> 0:14:30.920 if if this was just a soft patch, we would 0:14:30.960 --> 0:14:34.640 have had some signs of mean reversion, uh, and we're 0:14:34.640 --> 0:14:38.840 not getting that. And I suspect that given the trade conflict, 0:14:39.800 --> 0:14:44.760 the slower you know, the tougher negotiations with Asia and 0:14:45.440 --> 0:14:49.120 some other economies in the world that are also slowing, 0:14:49.120 --> 0:14:51.440 you know, this may be something a bit more structural 0:14:51.800 --> 0:14:55.360 than just a soft patch. And the question is has 0:14:55.440 --> 0:14:59.000 the ECB missed the train on raising rates? Do they 0:14:59.000 --> 0:15:02.120 have enough time to realize rates in the next twenty 0:15:02.120 --> 0:15:05.720 four months before Mr Druggi leaves. I think they won't 0:15:05.760 --> 0:15:07.680 be able to do a lot. I think they will 0:15:07.760 --> 0:15:12.000 barely manage to normalize the deposit rate to zero. I mean, 0:15:12.000 --> 0:15:16.360 I look, Alberta at the dynamics here, the market speaks. 0:15:16.840 --> 0:15:20.320 You are so good at the interdependencies of the European markets. 0:15:20.680 --> 0:15:22.560 What is the market telling you when you take the 0:15:22.640 --> 0:15:26.600 fixed income market, when you fold in CDs. Is the 0:15:26.800 --> 0:15:33.040 confidence there in the markets on European growth? Europe is growing, 0:15:33.400 --> 0:15:36.920 but um, the marketing fixed income it's looking for places 0:15:36.960 --> 0:15:40.400 to hide. We know that data in the US is strong. 0:15:40.520 --> 0:15:43.880 We saw the jobless claims are you know, one of 0:15:43.960 --> 0:15:46.880 the lowest numbers of the past few years. It's the 0:15:46.880 --> 0:15:52.960 lowest since nineteen I think just came up a bit earlier. Um, 0:15:53.000 --> 0:15:55.680 so do you do? US economy is doing well, the 0:15:55.760 --> 0:15:57.840 FED is going to continue to hike, and fixed income 0:15:57.880 --> 0:16:01.480 investors are looking for um pavens or places too high, 0:16:01.560 --> 0:16:03.680 and Europe is one of them. So what happens is 0:16:03.680 --> 0:16:06.280 if growth in Europe is softening, you know, people are 0:16:06.280 --> 0:16:11.960 buying bones, but also BTPs, Portuguese bombs, Spanish bonds, and 0:16:12.120 --> 0:16:15.520 you know, I think until DCB remains quiet, and I 0:16:15.520 --> 0:16:17.880 think they're going to remain quiet for a bit longer. Okay, 0:16:17.880 --> 0:16:19.920 they're gonna remain quiet. I get all this, and then 0:16:19.960 --> 0:16:22.800 whether you know, the banks are all the same, Alberto, 0:16:22.880 --> 0:16:27.800 there there betwixt by inflation or non inflation, and they're 0:16:27.840 --> 0:16:30.440 all struggling with their crystal ball and what they're gonna 0:16:30.440 --> 0:16:33.680 do with it. The money question is what will be 0:16:33.720 --> 0:16:39.600 the exaggerin in shock that changes this measured pace of 0:16:39.640 --> 0:16:42.840 a measured belief. Is that what we're waiting for is 0:16:43.320 --> 0:16:48.200 some exoggerin is shocked like oil. We could have a 0:16:48.240 --> 0:16:50.960 positive shock to inflation. I agree, there could be you know, 0:16:51.080 --> 0:16:55.800 rising oil and and you know supply constraints or the 0:16:55.920 --> 0:16:59.480 U S economy accelerating. However, I'm starting to worry about 0:16:59.520 --> 0:17:02.840 negative arks too, I know. Such you know, you say, 0:17:02.880 --> 0:17:05.679 I'm more and more about the negative side. But you know, 0:17:05.800 --> 0:17:08.200 geo political risk. If you have a two high spike 0:17:08.240 --> 0:17:11.479 in oil, that can also constrain growth, fell a supply 0:17:11.520 --> 0:17:14.240 shock with oil spike into a D plus, so geo 0:17:14.240 --> 0:17:19.359 political tensions you run Turkey, Russia, UM, and also the 0:17:19.600 --> 0:17:22.040 global imbalances. You know, we focus a lot on growth, 0:17:22.080 --> 0:17:25.040 on the on the changes in growth, on on unemployment changes. 0:17:25.359 --> 0:17:28.399 But if you look at the stock of debt in 0:17:28.440 --> 0:17:30.760 the US, the stock of consumer debt in the UK, 0:17:30.880 --> 0:17:33.359 of the stock of sovereign debt in Europe and Italy. 0:17:33.680 --> 0:17:37.159 So the stock variables are still very bad. What we 0:17:37.240 --> 0:17:39.880 have to think about if something goes wrong like in February, 0:17:40.359 --> 0:17:42.959 you don't have a lot of room, a lot of leeway. 0:17:43.080 --> 0:17:46.080 You know, recovers don't die of old age like um 0:17:46.400 --> 0:17:48.879 miss Ellen used to say. But if you're ninety nine 0:17:48.960 --> 0:17:52.080 years old and someone pushes you over you you know 0:17:51.840 --> 0:17:54.920 you just have a little bit of of of room 0:17:55.240 --> 0:17:58.000 dollar weakness and some euro strength up to two or 0:17:58.040 --> 0:18:03.000 seven pim near the hotel. Yeah, well, I don't I 0:18:03.040 --> 0:18:05.800 just want to know a great question. I just don't understand. 0:18:05.880 --> 0:18:08.199 Why would you buy a tenure Spanish bond at one 0:18:08.840 --> 0:18:11.560 when you can buy a US tenure just under three 0:18:11.600 --> 0:18:15.600 percent and you have a euro? Come on, how did 0:18:15.600 --> 0:18:19.720 that make any sense? If you if you convert euros 0:18:19.760 --> 0:18:23.639 to dollar, you know that you know the dollar yields 0:18:23.840 --> 0:18:26.639 roughly three percent, right, and you were yield zero. But 0:18:26.680 --> 0:18:30.600 if you buy European sovereign bond you converted two dollars, 0:18:30.600 --> 0:18:32.480 you get that three percent on the top of the 0:18:32.560 --> 0:18:34.800 yield that the European bond gives you. So for example, 0:18:34.880 --> 0:18:37.639 b dps ten year an hour at one point seventy four. 0:18:38.440 --> 0:18:40.920 If you buy it and then hedge the euro in 0:18:40.960 --> 0:18:45.399 two dollars, you're getting close to five. Okay, there's that's 0:18:45.440 --> 0:18:48.919 that's attractive. There's a pro anthematics, a bird o piment 0:18:49.000 --> 0:18:52.440 a really good observation, which I believe Mr Drogs Italian. 0:18:52.880 --> 0:18:56.600 Does he have any kind of domestic constituency where he 0:18:56.640 --> 0:19:01.480 would run for prime minister in Italy? So there's been 0:19:01.520 --> 0:19:06.080 this discussion. I don't think he would like to go 0:19:06.200 --> 0:19:10.119 back um at the moment, given the um, you know, 0:19:10.640 --> 0:19:13.800 political confusion. I do think that he would be a 0:19:13.800 --> 0:19:17.200 great candidate for European you know, for for European role, 0:19:17.600 --> 0:19:20.040 uh you know. And I hope as a European cities 0:19:20.080 --> 0:19:24.520 and that he continues um you know, European Institute, maybe 0:19:24.760 --> 0:19:27.639 on the fiscal side, like you know, finance men or 0:19:27.720 --> 0:19:31.240 or European Commission President. Alberta Golos thank you so much 0:19:31.280 --> 0:19:33.880 today as we see the euro surge here coming off 0:19:33.880 --> 0:19:36.760 of dragon comments Mr Glos with Algebras and we greatly 0:19:36.800 --> 0:19:53.560 appreciate his interest. Tom, do you know why you're able 0:19:53.600 --> 0:19:55.800 to buy products let's say they are made in China 0:19:55.920 --> 0:19:57.720 and have them ship to the United states and why 0:19:57.720 --> 0:20:00.320 they's so cost effective for those companies. How has to 0:20:00.359 --> 0:20:03.760 do with postal rates? Has to do with the cost 0:20:03.840 --> 0:20:07.040 of actually making that shipment happen. Here to tell us 0:20:07.040 --> 0:20:10.320 about those kinds of details is Cheryl Bolm. He is 0:20:10.640 --> 0:20:14.760 Cheryl is Bloomberg's own government White House reporter focusing on trade. 0:20:14.800 --> 0:20:17.160 And Cheryl, thanks so much for being with us. Tell 0:20:17.240 --> 0:20:19.560 Tom exactly what this all has to do with the 0:20:19.600 --> 0:20:24.840 U S Postal Service and the cost of delivering shipments 0:20:24.960 --> 0:20:28.720 both domestically and internationally. That's right, This is this is 0:20:28.800 --> 0:20:32.160 not a new issue, but it's certainly one that has 0:20:32.280 --> 0:20:38.760 come up very suddenly, and especially for US manufacturers. UM, 0:20:38.840 --> 0:20:43.080 there's been increased focus on the US Postal Service. The 0:20:43.119 --> 0:20:48.440 President has been tweeting about it in order to reform UM. 0:20:48.480 --> 0:20:53.920 But really, what what manufacturers, the US manufacturers have discovered 0:20:54.560 --> 0:20:57.359 is that, especially with the rise of e commerce and 0:20:57.359 --> 0:21:01.280 the ability of consumers to just go on line order 0:21:01.520 --> 0:21:06.360 whatever toy, whatever products they want, UM that uh, these 0:21:06.359 --> 0:21:09.320 a lot of these products are being shipped from China 0:21:09.400 --> 0:21:14.040 for free. And why is that? Explaining the detail what happens? 0:21:14.320 --> 0:21:17.879 Tom King goes online, he wants another bow tie and 0:21:18.000 --> 0:21:21.880 it turns out that it's going to be shipped from Shanghai. 0:21:22.080 --> 0:21:25.240 Why is it less expensive to get it from Shanghai 0:21:25.280 --> 0:21:29.080 than it is from let's say, Chapel Hill from across 0:21:29.119 --> 0:21:32.000 the street. That's right, um. And so this goes back 0:21:32.680 --> 0:21:37.800 to UM, a very very old organization called the Universal 0:21:38.440 --> 0:21:43.640 Um Postal Union, which is headquartered in Switzerland and it's 0:21:43.720 --> 0:21:46.800 part of the United Nations now it's a u N 0:21:46.840 --> 0:21:51.040 group and they get together every four years and they 0:21:51.040 --> 0:21:54.600 set postal rates for the delivery of of foreign mail. 0:21:55.080 --> 0:21:58.800 And so uh what happens is is China or any 0:21:58.800 --> 0:22:03.800 other country their product um to US border and then 0:22:04.200 --> 0:22:08.560 the US Postal Service then takes that and delivers it 0:22:08.640 --> 0:22:12.359 to the to the final destination. They are paid that 0:22:12.560 --> 0:22:17.119 US Postal Services paid a See, it's called a terminal do. Uh. 0:22:17.160 --> 0:22:21.919 The terminal do system is set by this Universal Postal 0:22:22.040 --> 0:22:27.959 Union and basically different countries are put into different categories 0:22:28.680 --> 0:22:32.000 really based on how developed they are, China being one 0:22:32.000 --> 0:22:36.080 of the countries that is considered developing and they get 0:22:36.080 --> 0:22:38.600 a very very low rate. So how much does it 0:22:38.640 --> 0:22:41.119 cost to ship to ship the bow tie from China 0:22:41.240 --> 0:22:44.760 versus shipping it from across the street. Well, there there 0:22:44.760 --> 0:22:47.879 are a couple of factors in play here. There's concerned 0:22:47.880 --> 0:22:52.800 by manufacturers that China itself, China Post is subsidizing the 0:22:53.400 --> 0:22:58.040 the first leg getting it from China to the United States. Um. 0:22:58.119 --> 0:23:00.600 But really one of one of the Manu factors I 0:23:00.680 --> 0:23:04.400 talked to said that for him, he's based in New 0:23:04.480 --> 0:23:07.840 Jersey and for him to ship a package to California 0:23:07.880 --> 0:23:13.160 would cost about eighteen dollars, whereas his Chinese counterpart would 0:23:13.200 --> 0:23:16.640 pay about three dollars and seventy cents for that same 0:23:16.680 --> 0:23:22.880 package o bucks versus under four bucks. That's right. That's 0:23:22.920 --> 0:23:27.720 that's has been his experience, and he pays to get 0:23:27.800 --> 0:23:32.040 the package across the Pacific Ocean that would be the 0:23:32.359 --> 0:23:37.080 foreign post. And so that in this case the China Post. Um, 0:23:37.119 --> 0:23:42.080 there's concern that the Chinese are subsidizing. I mean, I 0:23:42.080 --> 0:23:44.320 mean to explain this year on the time we've got left, 0:23:44.320 --> 0:23:47.920 and this is critical. It's just a classic linear sequence problem. 0:23:48.080 --> 0:23:54.000 The bottom line is possibly the Chinese postal system is 0:23:54.080 --> 0:23:58.679