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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 Ferroll 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, SoundCloud, Bloomberg

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Speaker 1: dot Com, and of course on the Bloomberg Terminal. Jean

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Speaker 1: Pavan join. Just now they had av blank Rock Investment Institute. John,

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Speaker 1: to make it simple, you still like ankuties why? I

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Speaker 1: think you know, we've covered a bit of the central

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Speaker 1: land landscape here and uh, I agree with a lot

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Speaker 1: of what has been said. Um, I think we end

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Speaker 1: up living with more inflation uh than the rhetoric is suggesting. Um.

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Speaker 1: You know, at the end of the day, we're only

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Speaker 1: talking about normalization of policy the FED. I don't think

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Speaker 1: despite the talk, the hard talk, the tough talk, I

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Speaker 1: don't think they will really go beyond neutral, at least

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Speaker 1: for now. They're not intending to it really. I mean,

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Speaker 1: if they were, they would show unemployment rising from the

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Speaker 1: unelty level that it currently is at. And so given

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Speaker 1: all this, I think we see a bit of excessive hawkishness, um,

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Speaker 1: you know, being uh being driving markets at this at

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Speaker 1: this juncture, and so we think we're gonna be uh

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Speaker 1: at the end of the day. Uh, I see a

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Speaker 1: rate background that's gonna be a somewhat more conducive or

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Speaker 1: supportive of of equities. And it's a relative call, right,

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Speaker 1: I mean, its environment. The place you don't want to

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Speaker 1: be is in fixed incomes. So I think on the

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Speaker 1: right of the basis, equity do look a lot more

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Speaker 1: attractive than chicks incoming and enclachery environment. John, we're looking

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Speaker 1: on the Bloomberg terminal. A little bit of unraveling and

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Speaker 1: emerging markets is indicated by currencies. There's other tea leaves

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Speaker 1: as well. You grew up with a PhD at the

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Speaker 1: House of Bernanke at Princeton, where he believes financial stability

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Speaker 1: is everything. From your view at black Rock, how financially

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Speaker 1: stable is e M right now? So e M is

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Speaker 1: a is a big space, right. I Mean, I'm sorry

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Speaker 1: to to state the obvious at the outset, but it's

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Speaker 1: partically important this juncture because we have a very complex

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Speaker 1: story playing out in the m over the course of

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Speaker 1: twenty two Uh. There's a commodity story that is playing out.

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Speaker 1: So we've seen that in America been performing fairly well.

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Speaker 1: Uh during appeard we have a China story, which we think,

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Speaker 1: you know, it's not necessarily e M anymore, but as

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Speaker 1: part of the D index. And then you have the

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Speaker 1: fallout from Russia and it has been that has been

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Speaker 1: affecting especially in European emerging markets. So these are very

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Speaker 1: distinct forces. I think overall, we it turns out where

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Speaker 1: in an environment where rates are still pretty low, and

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Speaker 1: and e M world has been earlier on in trying

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Speaker 1: to normalize policy. I mean they've started earlier. I think

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Speaker 1: they were ahead of this, uh, and I think that

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Speaker 1: provides a bit more resilience. And so that's why we

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Speaker 1: we continue to be overweight, you know em local dead

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Speaker 1: for instance, We think that continues to be attractive in

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Speaker 1: this environment. So how can you look at sectors at

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Speaker 1: a time when so many people are talking about specific

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Speaker 1: idiosyncratic stories within emerging markets or within the equity markets

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Speaker 1: if you're looking for example oil versus financials or versus

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Speaker 1: consumer discretionary, And how are you surgical as a very

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Speaker 1: big firm at a time when so many people are

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Speaker 1: talking about security selection. So this, you know, this environment

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Speaker 1: is one where beta is uh, is not gonna be

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Speaker 1: your your friend. Uh. I guess you know. There's uh,

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Speaker 1: there's gonna be quite a bit of challenges, which we've

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Speaker 1: already talked about, and so I think that makes security

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Speaker 1: selection potentially, um environment more conducive for security selection. UM

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Speaker 1: my team is responsible for broad asset allocation. So I'm

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Speaker 1: not I'm not the one that's going to be very

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Speaker 1: surgical on this, but certainly we have, you know, a

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Speaker 1: large set of teams here that are, you know, seeking

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Speaker 1: opportunities into this environment. I think at the broad micro level,

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Speaker 1: I mean things like I mean the comedity story I

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Speaker 1: think has a lot of as a lot of security

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Speaker 1: selection implications. The climate transition high it's playing because that's

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Speaker 1: not a straight line, and that's another big team I

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Speaker 1: think on security selection. And I think a third big

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Speaker 1: one is making sure that the read true from the

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Speaker 1: rate adjustment the scount rate now that are going up

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Speaker 1: into the earnings potential of companies that connection is not misread.

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Speaker 1: And I think there's a bit too much of a

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Speaker 1: mechanical read through that higher rate is back for protect

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Speaker 1: for instance, we think it's it's a lot more nuance

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Speaker 1: than that, and that's where the opportunities will will arise

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Speaker 1: of blank Rock the investment Institution. Great to catch up

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Speaker 1: with you, sir, as always, Kelsey Barrow with us right

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Speaker 1: now with Bob Michael, JP Morgan on yield with an

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Speaker 1: exceptionally smart note that pushes against step in the bonds. Now, Kelsey,

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Speaker 1: thank you for joining this morning. You use this phrase

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Speaker 1: over soul. Let's be clear, yield that's price price down,

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Speaker 1: yield up, and you say price can stay down and

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Speaker 1: discuss that. Yeah, so oversold markets can stay oversold. We've

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Speaker 1: seen a massive rise in yields. It's been globally oriented.

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Speaker 1: You have the two year German booned above zero for

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Speaker 1: the first time since UM and we think that this

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Speaker 1: hawk ish rhetoric from central banks around the world is

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Speaker 1: not going to stop anytime soon. I heard you guys

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Speaker 1: discussing inflation and inflation expectations rising. Well, the flip side

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Speaker 1: of inflation expectations rising is that front end real yields

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Speaker 1: are still falling. So right now you have the two

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Speaker 1: year reel ye old debt minus one point eight percent.

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Speaker 1: That's almost four hundred basis points away from where we

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Speaker 1: got at the end of the last cycle. So this

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Speaker 1: tells me that the Fed still needs to push on

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Speaker 1: this hawk is rhetoric. They're going to need to tighten

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Speaker 1: policy a fair bit in order to pull back on

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Speaker 1: the economy is John Farrell, is Kelsey, Barrow, Moura, Hawkerston Summers.

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Speaker 1: Perhaps perhaps they're on the same page, but counts, see,

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Speaker 1: what you think they should do and what you think

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Speaker 1: they will do can be two different things. Um with

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Speaker 1: you when that should given what the market is telling

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Speaker 1: us at the moment, what do you think they'll do?

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Speaker 1: What kind of numb are you looking for on the

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Speaker 1: FED funds? Right? Sure? So I think that they are

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Speaker 1: definitely comfortable doing fifty basis points at the at the

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Speaker 1: next meeting. I think that they would ideally like to

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Speaker 1: be above two percent by the end of the year,

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Speaker 1: and I think that the economy will work with them

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Speaker 1: on that. We do still see the U S economy

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Speaker 1: as fairly resilient. There's a lot of pent up demand

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Speaker 1: for spending, particularly on the service side. People do want

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Speaker 1: to get out there and they do want to travel.

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Speaker 1: So this long awaited move back from the good spending

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Speaker 1: the pandemic winners, to the pandemic the reopening winners, that's

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Speaker 1: still really happening right now. And given the fact that

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Speaker 1: we just are rising in the savings rate is low,

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Speaker 1: you know, this is still an economy that's operating above

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Speaker 1: trend that can be resilient to some shocks. So Kelseye.

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Speaker 1: That's the reason why I know that Bob Michael likes credit.

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Speaker 1: And I'm looking right now at how your bonds. You know,

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Speaker 1: at six point six percent, they have been climbing dramatically.

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Speaker 1: We've also seen investment grade credit yields rise dramatically. How

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Speaker 1: much do you parse out the value that you're getting

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Speaker 1: by just buying and holding and clipping coupons versus the

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Speaker 1: potential rate shock. Should the Fed go much more aggressively

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Speaker 1: to gertail inflation. Yeah? Absolutely. I mean we've seen a

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Speaker 1: massive repricing in yields. You have the high old index

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Speaker 1: above uh six point seven percent in an all in yield.

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Speaker 1: You have investment grade credit with yields that are nearly

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Speaker 1: double what they were just six or nine months ago um.

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Speaker 1: And so there's a lot more value to that credit

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Speaker 1: now than we had before. And at the same time,

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Speaker 1: the corporate fundamentals remain strong when we look at leverage ratio,

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Speaker 1: as we look at the cash that they have on hand. UM.

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Speaker 1: When we look at their ability to maintain their margins

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Speaker 1: by raising prices. This is not an easy time for corporates,

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Speaker 1: but they're coming from a very strong place. So we've

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Speaker 1: got a rule framework of bear markets in equity, in

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Speaker 1: a bear market in bonds priced down, yield up? Can

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Speaker 1: there be a Catharsis selected people on load bonds in

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Speaker 1: a panic? Is there a history of that? Well, we

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Speaker 1: are seeing a lack of of of buying right now,

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Speaker 1: I think, particularly from the foreign base, and I know

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Speaker 1: you watch the spread between or the currency pair of

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Speaker 1: the US dollar and the yen um. One of the

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Speaker 1: ways that we're seeing this translate um into the bond

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Speaker 1: market from the currency market is that weakness in yen

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Speaker 1: is driving us selling from the Japanese investors selling their

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Speaker 1: foreign foreign treasury bonds or their treasury bonds um and

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Speaker 1: that is putting further upward pressure on yields when there

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Speaker 1: just isn't a lot of people who are comfortable stepping

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Speaker 1: into this market right now and trying to catch that

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Speaker 1: falling knife. So Cassy, just explain this and let's finish it.

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Speaker 1: Why you and the team, along with Bob still so

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Speaker 1: constructive on credit, given everything you've said about core government bonds. Yeah,

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Speaker 1: so I think right now what we want to have

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Speaker 1: is we want to have that credit exposure, but we

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Speaker 1: want to get it in structures that are shorter duration,

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Speaker 1: um that are floating rate, that protect you from what

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Speaker 1: we do believe is still going to be higher yields

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Speaker 1: for now. Cassy Barrow awesome. As always, nobody's like Jeffrey you.

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Speaker 1: Jeff you is from another planet and I'm lucky that

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Speaker 1: he comes down the planet Earth to catch up with

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Speaker 1: us this morning, Senior and mea market is trying to

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Speaker 1: just a being white man and Jeff great to catch

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Speaker 1: up with you. Buddy. Let's get to the heart of

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Speaker 1: the city, and that's foreign exchange sterling. A lot of

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Speaker 1: weaker off, some really really weak data in the UK.

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Speaker 1: Asked this if Jane Foley earlier this morning, Jeff, what's

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Speaker 1: the lesson we're learning from the UK's experience with the

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Speaker 1: hikey cycle very early, very early on in that hiking

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Speaker 1: cycle and a week of data that started to come through. Well,

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Speaker 1: the be a lesson here is stagflation has two parts

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Speaker 1: of it. You've got to focus on the stag nation

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Speaker 1: as well as the inflation. And now as far as

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Speaker 1: the UK is concerned, looking at the retail sales numbers,

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Speaker 1: are looking at the gas bills, which is what everyone's

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Speaker 1: doing probably ten times a day right now. Absolutely, you

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Speaker 1: know stagnation is coming for the UK household, Jeff, you

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Speaker 1: so importantly. There are leakages within our sort or two.

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Speaker 1: There are things that react and change the story. What

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Speaker 1: are you watching is the metric that will change the

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Speaker 1: story out pairs July. Is it dour dynamics or is

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Speaker 1: it something e M developed nation dynamics. I think we're

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Speaker 1: going to see quite a bit of chop and change

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Speaker 1: in e M right now. What has been the theme

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Speaker 1: stagflation again, So how do you play that through e M?

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Speaker 1: You want to own commodity block currencies. In our positioning

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Speaker 1: indicators in eFlow, every single Latin American currency was overheld,

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Speaker 1: was well owned in the first quarter, but now that's

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Speaker 1: starting to change. We've seen the Mexican pacer starting to

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Speaker 1: fall back, so that inflation protection trade, especially within an

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Speaker 1: emerging market. If you look at the rand that's probably

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Speaker 1: to come off now. Are people now looking to go

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Speaker 1: back to Asia ex China? Exactly? Exactly what do we

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Speaker 1: do about Pacific rim X Japan at a one after

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Speaker 1: one thirty? What does sing dollar do? Just as one example,

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Speaker 1: so you you look at where dollyan is right now,

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Speaker 1: people are thinking, okay, are the German car manufacturers telling

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Speaker 1: the ECB to call the b O j No, this

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Speaker 1: is the wrong continent. Places like you know, Taiwan, like Singapore, Thailand.

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Speaker 1: You know, these are areas where every one percent move

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Speaker 1: in dollar yen high actually offsets any benefit they get

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Speaker 1: from dollar stronger as well, so we and hurts them

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Speaker 1: arguably more certainly more than the US and the Eurozone.

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Speaker 1: So this is where the intra region dynamics are in play.

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Speaker 1: But we like Southeast Asia potentially as Thailand continues them

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Speaker 1: to open up, but also in your places life, time, career,

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Speaker 1: the tightening places. You know, these two economies really pushing

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Speaker 1: forward right now. You want to own them, Jeff, A

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Speaker 1: lot of investors have been tying at Japan and some

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Speaker 1: of the dynamics. They're into the US bond market saying

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Speaker 1: they're the biggest buyers of US treasuries and this is

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Speaker 1: because of the currency adjustments over history, this dynamic of

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Speaker 1: a weaker yen changes that dynamic dramatically. How much do

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Speaker 1: you think that's going to influence the long end and

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Speaker 1: send yields higher. I'm actually not too focused on the

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Speaker 1: treasury market, but you're absolutely right in saying Japanese and

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Speaker 1: also add Taiwanese and Korean investors, you know, those big

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Speaker 1: Asian savings pools. It's not the treasury market you should

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Speaker 1: look at. It is US high yield. You know, these

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Speaker 1: are the areas where Asian investors have been picking up

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Speaker 1: cooper but have been picking up coupon over the last

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Speaker 1: few years. Now we're seeing spread widening if they begin

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Speaker 1: to exit, if they begin to repatriate to stabilizing them

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Speaker 1: to some extent, and then the widening that we're seeing

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Speaker 1: due to the FED right now in US corporate spreads,

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Speaker 1: that's going to accelerate because the Asian bid is gone. Jeff,

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Speaker 1: Let's sit on this for a minute, and are you

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Speaker 1: saying that basically, the stronger that the dollar gets, and

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Speaker 1: the more you see yields continuing to climb and the

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Speaker 1: opposite happening elsewhere, you're going to see more and more

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Speaker 1: weakness in the credit space that perhaps isn't fundamentally driven

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Speaker 1: but simply a supply demand mimic because if you look

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Speaker 1: at say career, if I'm a career on a time

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Speaker 1: on ease investor, and right now, finally I'm seeing some

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Speaker 1: movement in my own yield cup while the dollar is strong,

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Speaker 1: while I have good total returns. If I had my coupon,

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Speaker 1: my my duration plus my ex it's looking pretty good

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Speaker 1: right now. Let me get out, you know, while the

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Speaker 1: five FED is still not, you know, really pressing the

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Speaker 1: pedalants into tightening and capture some of my own yield

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Speaker 1: on shore where I don't have to take into count

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Speaker 1: the f X risk. For Japanese and pension investors, maybe

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Speaker 1: they can take into account that the higher yields that

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Speaker 1: same dynamic. They're not getting tightening in Japan via rates,

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Speaker 1: but they can top that up with a higher dollar.

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Speaker 1: And at the same time, so that flow moving out

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Speaker 1: of US treasuries for sure, but also corporate high you're

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Speaker 1: going back to Asia while they're taking profit on a

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Speaker 1: very structural multi year total return trade. That is something

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Speaker 1: that could exacerbate tensions in the US credit market if

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Speaker 1: this is potentially a massive shift. One thing we haven't

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Speaker 1: mentioned is what you think this means for the US

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Speaker 1: secretary story. M H, Well, the U S security story.

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Speaker 1: I think you know that if I look at the

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Speaker 1: what what eyebox high yield, it's underperformed their SMP by

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Speaker 1: that I think six percent six percentage points this year already.

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Speaker 1: So but this wasn't always the case. You know, this

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Speaker 1: has been more recent, so the two were working in

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Speaker 1: lock lock steps. So from point of view an international investor,

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Speaker 1: now you're seeing differentiation. So now that the tightening and

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Speaker 1: US financial conditions is finally moving from equities to corporate spreads,

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Speaker 1: you know that is the fourth shooter drop. Basically, I

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Speaker 1: think they're going to be more attuned to that, So

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Speaker 1: I would expect corporate credit to underperform equities much more

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Speaker 1: up ahead. Your final question from me, have you got

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Speaker 1: a number in mind for the peak of the FED

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Speaker 1: funds right in this cycle? Do you have a number

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Speaker 1: in mind? So I would actually put you pick a

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Speaker 1: number where terminal rates So we're sorry when neutral rators

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Speaker 1: say you want of three, then you add potentially a

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Speaker 1: hundred hundred fifty basis points above that. That's where it

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Speaker 1: is absolute basis absolutely true, but on a relative basis

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Speaker 1: relative to neutral, FED will be restrictive to bring down inflation,

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Speaker 1: and that number is the one that you need to

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Speaker 1: have in mind. Jeff, you if we and White Manager, Jeff,

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Speaker 1: thank you, sir. As always, we will stop here with

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Speaker 1: the student of this nation. He is without question the

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Speaker 1: most articulate conservative economists we have. Glenn Hubbard joins us

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Speaker 1: from Colombia. His service there is dean of the Business School,

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Speaker 1: former chairman of the Council on Economic Advisors, and I

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Speaker 1: really can't say enough about his book The Wall and

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Speaker 1: the Bridge, where he leads off, where the walls come

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Speaker 1: a tumbling down and Mr Gorbuschev tear down this wall,

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Speaker 1: and how we have circled around to the chaos of

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Speaker 1: the day. Glen Hubbard, I want to go back to

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Speaker 1: your Florida and my western New York, long ago and

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Speaker 1: far away of where Milton Friedman just simply said, what

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Speaker 1: is the right policy? Now? The policy showed up one

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Speaker 1: year later in the form of Paul Voker. Where is

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Speaker 1: today's Paul Woker? Well, I think the FED has now

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Speaker 1: understood that it's been behind the curve and needs to

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Speaker 1: step in. I do worry that the period from five

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Speaker 1: to three is more instructive than people might think. For today,

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Speaker 1: I think it's a little naive to think that the

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Speaker 1: FED wants to crush inflation. The two hundred ish faces

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Speaker 1: points in the FAD funds rate is going to do that.

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Speaker 1: So we'll have to see. But I do think that

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Speaker 1: Fed has the courage to act, and I don't think

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Speaker 1: the market should take comfort in that. I'm not gonna

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Speaker 1: jink you, but I'm not Gonnam mince words or the

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Speaker 1: Republican president. You're shortlisted as chairman. There's no other way

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Speaker 1: around that, Chairman Hubbard, let me make it clear. Volker

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Speaker 1: had twelve percent yields or whatever they were. Powell has

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Speaker 1: one percent yields, two percent yields. We can't do what

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Speaker 1: Voker did. Canley, Well, it's difficult, and I'll tell you why.

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Speaker 1: Not so much about the fence courage, but about other things,

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Speaker 1: for example, fiscal policy and the budget. As the FED titans,

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Speaker 1: the federal deficit gets a lot words from shorten the

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Speaker 1: maturity the debt. We have a very large debt today

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Speaker 1: relative to what Paul Volker faced. There are also issues

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Speaker 1: of how much of a recession the FED is willing

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Speaker 1: to tolerate. If the FED wants to get back to

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Speaker 1: two percent inflation, I find it hard to believe that

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Speaker 1: the soft landing is possible. Glenn, What does that mean

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Speaker 1: you were saying? And I want to pick up on this,

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Speaker 1: this idea of the fact that there seems to be

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Speaker 1: complacency in certain risk assets. Where is that complacency? How

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Speaker 1: disruptive could these tightening cycles be for markets? Well, it

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Speaker 1: depends on how far the FED feels it has to go.

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Speaker 1: You you mentioned before about the possibility of several fifty

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Speaker 1: basis point hikes. I think the FED will take a

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Speaker 1: look and see what's happening in the economy. But I

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Speaker 1: don't think we're in stagflation right now. I think we're

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Speaker 1: in an inflationary boom. I think there's a lot of

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Speaker 1: wind at the back still, So I do think the

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Speaker 1: FED is going to have to take fairly bold action,

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Speaker 1: Not like Paul Volker, but pretty bold. Do you believe

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Speaker 1: that Bill Dudley is correct that we're going to see

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Speaker 1: four percent FED funds rate over the next two years.

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Speaker 1: I don't think you could rule it out. I think

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Speaker 1: it depends obviously on geopolitical events that none of us

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Speaker 1: can sit here and forecast today. But I do think

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Speaker 1: that the FED should be prepared to do what it takes,

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Speaker 1: and if the market believe that, it will do what

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Speaker 1: it takes to put the inflation genie back the bottle.

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Speaker 1: Glen Hubbard moments ago a world class economist Nglist of

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Speaker 1: Sweden and the Stockholm School just came out with a

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Speaker 1: stunning headline which directly addresses this scene. Demon Hubbard uh

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Speaker 1: Vis of the Rights Bank says, not a period of normalization,

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Speaker 1: but a new policy. Is that really what we're talking

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Speaker 1: about here is we need to make up a new

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Speaker 1: policy original economics. I don't know that it's a new

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Speaker 1: policy as much as going back to being serious about

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Speaker 1: the factors that cause inflation. We got this inflation because

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Speaker 1: the man was growing too fast relative to supply. It's

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Speaker 1: not even that complicated. It's not all Ladimir and it's

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Speaker 1: not all supply chains, and so I think it's more

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Speaker 1: matter of getting back to bases, to be honest. Okay,

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Speaker 1: so we had a big, big fiscal inpust. What is

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Speaker 1: the Hubbard prescription, away from the politics of it all,

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Speaker 1: to diminish this inflation down to say three or lower. Well,

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Speaker 1: we don't. We will already see a winding back of

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Speaker 1: some of the fiscal impulse simply because we won't see

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Speaker 1: additional stimulus on monetary fault policy. The FED has to

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Speaker 1: follow through that. It's very serious and then it's not

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Speaker 1: simply underwriting a put for the stock market every time

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Speaker 1: financial markets have a hiccup. We're speaking with Glenn Hubbard

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Speaker 1: of Columbia University, and we're talking about the new dynamic

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Speaker 1: and what the FEED is looking at with respect to inflation.

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Speaker 1: What about the labor market? You write about economic bridges

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Speaker 1: and the economic bridges at a time when participation rate

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Speaker 1: remains well below where we were pre pandemic. How does

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Speaker 1: the FED effectively curtail inflation while allowing that participation break

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Speaker 1: to get back to something that is more representative of

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Speaker 1: a robust economy. What's a good question. Participations are critical

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Speaker 1: social issue. I don't think letting the economy run hot

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Speaker 1: it's going to fix the participation problem. There are things

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Speaker 1: that can training, education, a lot of fiscal interventions, but

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Speaker 1: they're really not in the FEDS tool kit. The labor

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Speaker 1: market has the FEDS should see it is actually running

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Speaker 1: quite hot. It would be better if the administration focused

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Speaker 1: more on participation, but so far not. How much has

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Speaker 1: the FED lost credibility and trying to address issues that

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Speaker 1: really are only addressable on the fiscal side. Well, I

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Speaker 1: think the FEDS still has abundant credibility with the public.

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Speaker 1: I I really do. I think the feds conversion recently

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Speaker 1: has helped that. But I think the FED does itself

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Speaker 1: no favors when it tries to widen its role in

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Speaker 1: issues that are really more for fiscal policy. If members

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Speaker 1: of Congress and the administration won't do the right thing,

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Speaker 1: that's not an excuse for the FED to step Onack.

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Speaker 1: We had an interesting debate yesterday with Claudius some out

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Speaker 1: of the Michigan academic assets and Matt Shapiro, Old Kimball

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Speaker 1: and the most of them out there, and and she

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Speaker 1: was really quite heated about the policy gloom of stagflation.

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Speaker 1: Now is is it precisely Hubbard economics? No, it's not.

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Speaker 1: But what does the stagflation gloom get wrong? Well, I

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Speaker 1: think if you start up where we are now, I

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Speaker 1: think we're in a classic inflationary boom. We've seen fairly

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Speaker 1: good numbers for output for jobs, we're running ahead of

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Speaker 1: potential growth. We're in inflationary boom. We're not in stagflation.

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Speaker 1: So Glenn, this is critical. Do we underestimate grossly Republicans, Democrats,

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Speaker 1: economists of all persuasion? Do we just simply miscalculate the

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Speaker 1: technological impulse that's making this so difficult right now, the

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Speaker 1: benefits and the the hazards of technology revolution over decades.

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Speaker 1: I think we did. Tom. I think the technology has

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Speaker 1: been an enormal source obviously productivity growth. I'm very optimistic

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Speaker 1: for that growing going forward. What makes me worried is

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Speaker 1: not science or economics. It's politics. Whether we figure out

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Speaker 1: how to help everybody get involved in the games from technology,

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Speaker 1: that's really where the political disruption is coming. Yeah, John,

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Speaker 1: I think this is so important, this idea of the

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Speaker 1: political disruption of technology. It's something Glen's written about for years.

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Speaker 1: And to meet John Across is all politics. Just wonderful

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Speaker 1: to catch up with Glenn as always, and Glenn we

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Speaker 1: have the Colly So thank you, sir, as a white

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Speaker 1: Glen Hubbot of Columbia, fantastic on the Federal's and beyond.

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Speaker 1: If long ago and far away you are an Asian

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Speaker 1: and you come in through Ellis Island and end up

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Speaker 1: in Stockton, California, and if you're possibly better than good

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Speaker 1: at mathematics. Maybe you go to Washington and it was not.

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Speaker 1: Mr Smith goes to Washington as Mr Sing goes to Washington.

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Speaker 1: Dolly Sing's great grand uncle was the first Asian in

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Speaker 1: Congress back in nine seven. It is a heritage of

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Speaker 1: academic excellence. Doaldson joining joining us now from the White

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Speaker 1: House is Deputy National UH, Deputy National Security Advisor on

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Speaker 1: International economics. Your title is bologny. What you really are

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Speaker 1: is the most knowledgeable person about the sanctions that we

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Speaker 1: have on this war on Ukraine. Give us an update

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Speaker 1: this morning, our our sanctions working against Mr Putin. Yeah,

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Speaker 1: you've ever sold me toma. Thank you for that introduction. Yes,

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Speaker 1: the sanctions are working. But let me let me explain

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Speaker 1: the objectives. We had three going into this invasion. One

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Speaker 1: is leave Russia. Uh, leave the world knowing that this

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Speaker 1: invasion by Russia would be a strategic failure, galvanize and

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Speaker 1: unify the West, and have Ukraine emerges this sovereign nation.

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Speaker 1: Now the sanctions, UH, they're having the debilitating hit that

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Speaker 1: we expected. The economy is going to contract by double digits.

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Speaker 1: Inflation in Russia is at seventeen and a half percent. Uh.

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Speaker 1: You have more than seven fifty companies that have already

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Speaker 1: fled Russia. More than of Russia's best and brightest have

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Speaker 1: exited UH. The countries on the cost of default. The

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Speaker 1: country is becoming isolated into a pariah state. If this

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Speaker 1: is the end game that Putin wanted, I think he

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Speaker 1: was a big miscalculation. It was just saying, you are

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Speaker 1: front and center, and particularly with your family's heritage, of

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Speaker 1: the need for the White House in America to convince

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Speaker 1: India to hold back from the behavior maybe of the

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Speaker 1: last number of weeks in February twenty four, What does

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Speaker 1: the Biden administration's plan to convince India to support our

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Speaker 1: sanctions to support this allied effort. Well, India is a

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Speaker 1: friend and a partner. I have deep personal affection for India,

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Speaker 1: as you're alluding to. Um. But but look, this is

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Speaker 1: not about the unilateral exercise of American financial force. Our

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Speaker 1: conversation with India is, Look, we're trying to uphold and

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Speaker 1: defend the core principles that underpinn peace and security for

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Speaker 1: all of us. That's a shared interests with India. We've

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Speaker 1: also pointed out that as Russia becomes UH, China's junior

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Speaker 1: partner and uh and and as Beijing has more and

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Speaker 1: more leverage over Russia, that's not going to play to

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Speaker 1: India's benefits. So we want to step up for India,

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Speaker 1: help it diversify away from Russian defense equipment. We want

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Speaker 1: to help India diversify away from Russian energy sources. The

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Speaker 1: amount that India imports from Russia in terms of crude

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Speaker 1: oil is a very small percentage of the total one too,

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Speaker 1: just like we're doing with Europe, we want to step

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Speaker 1: up for India and be a friend and a partner.

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Speaker 1: And I think if we do that, and we work

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Speaker 1: together on the spillovers from energy and food and migration

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Speaker 1: and and anchor the economic relationship we have with India

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Speaker 1: over time, we think if we play the long game

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Speaker 1: with India, it'll accrue to our advantage. Delepe. Is it

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Speaker 1: the same story with China, Well, look, China has a

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Speaker 1: choice to make if it's serious about upholding the principles

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Speaker 1: that it espouses sovereignty and territorial integrity. This is the

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Speaker 1: moment to show it. Europe is watching, the US is watching,

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Speaker 1: the world is watching. Are they serious about these principles?

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Speaker 1: Uh and and do they care about the spillovers, the

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Speaker 1: global spillovers from Putin's war and energy markets and food.

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Speaker 1: You know, they already have a homegrown supply shock from

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Speaker 1: the zero COVID policy. Do they want to add to

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Speaker 1: that shock? Um, So we're watching very closely. We have

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Speaker 1: options in case China actively attempts to undermine our sanctions

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Speaker 1: or back fill those measures. What are those options to leave? Well,

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Speaker 1: I don't want to specify what those are. I think

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Speaker 1: you know what they are. We have a range of tools,

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Speaker 1: including secondary sanctions. We always carry that stick, but we

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Speaker 1: don't wave it around. So that that's the key, and

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Speaker 1: you don't wave it around. You carry that stick. But

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Speaker 1: there's this debate going on whether to ease Chinese sanctions

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Speaker 1: to actually uh or Chinese levies anyway in order to

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Speaker 1: reduce the inflationary pressure on one hand, while also threatening

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Speaker 1: sanctions on the other. If there isn't a more active

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Speaker 1: pushback to what we're seeing in Russia, how does that

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Speaker 1: balance get adjusted? How active are those conversations at the

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Speaker 1: admitt station is having with China right now? You're asking

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Speaker 1: about the Russian sanctions right, Well, we'll try. Secretary Jenny

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Speaker 1: yell And actually talked about the potential for putting some

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Speaker 1: restrictions even on China, should they not come out more

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Speaker 1: actively or undermine the allies efforts. And I'm wondering how

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Speaker 1: much those are discussions right now. Well, look, our our

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Speaker 1: our first and best option is diplomacy. So are our efforts.

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Speaker 1: I think as Secretary was alluding to or to broaden

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Speaker 1: the coalition of countries that are applying the sanctions. That

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Speaker 1: increases the direct impact. It also increases the indirect signal

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Speaker 1: that this is again not just a US effort, this

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Speaker 1: is a shared global desire UH to impose costs on

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Speaker 1: a country that's brutally invaded forty four Millionais and people. Now,

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Speaker 1: she mentioned a range of options that are at our

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Speaker 1: disposal if if China or any other country attempts to

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Speaker 1: undermine our efforts or tries to backfill the export controls.

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Speaker 1: But I don't want to go any further than that.

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Speaker 1: It's just saying thank you so much, so much to

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Speaker 1: talk about. We hope to speak to you again soon.

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Speaker 1: Dalip Singh is the White House Deputy National Security Advisor,

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Speaker 1: and I kid you not, folks, he is arguably the

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Speaker 1: number one person we have on the many nuances of

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Speaker 1: these sanctions. This is the Bloomberg Surveillance Podcast. Thanks for listening.

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Speaker 1: Join us live weekdays from seven to ten am Eastern

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00:28:16,359 --> 00:28:20,400
Speaker 1: on Bloomberg Radio and on Bloomberg Television each day from

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Speaker 1: six to nine am for insight from the best in economics, finance, investment,

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00:28:25,880 --> 00:28:30,919
Speaker 1: and international relations. And subscribe to the Surveillance podcast on

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Speaker 1: Apple podcast, SoundCloud, Bloomberg dot com, and of course on

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Speaker 1: the terminal. I'm Tom Keene, and this is Bloomberg