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Speaker 1: This is Bloomberg Surveillance. I've been thinking the ten years

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Speaker 1: in a one and a half two and a half

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Speaker 1: trade dance, and that's where we've been, and I think

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Speaker 1: that's where we're going to stay. I think there's a

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Speaker 1: growing sentiment that maybe negative rates are at all that

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Speaker 1: they were supposed to be in terms of stimulating growth

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Speaker 1: and inflation. Of precondition for a bear market is not

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Speaker 1: necessarily a session. Bear markets can occur even at the

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Speaker 1: US failed to fall to recession. Bloomberg Surveillance, you're linked

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Speaker 1: to the world of economics, flinance and investment on Bloomberg Radio.

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Speaker 1: Good morning everyone, Michael McKee and Tim Keene, Bloomberg Surveillance Worldwide.

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Speaker 1: Good morning, United Kingdom. We're gonna touch on Brexit, which

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Speaker 1: has moved all the way to a debate of some

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Speaker 1: type in Shanghai at the G twenty meetings as well.

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Speaker 1: Jamie Murray to join us here in a moment from

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Speaker 1: Bloomberg Economics of Bloomberg Intelligence. Futures of eight now, futures

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Speaker 1: up seventy three record low yield, and the German five year,

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Speaker 1: the two years, the three digits, what we do yields

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Speaker 1: to three or four digits when it matters the German

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Speaker 1: two year negative zero point five five one. That's really

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Speaker 1: close to a record law. I don't believe we're there,

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Speaker 1: but we're getting there. Maybe Michael mckie's wisdom on that

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Speaker 1: Bluemberg surveillance brought to my Cone Residuck Accounting Tax Advisory.

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Speaker 1: To keep your business on top of issues in the

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Speaker 1: evolving renewable energy market, it takes dedicated industry experts like

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Speaker 1: Cone Resnick. Find out more it Cone residik dot com.

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Speaker 1: We thank Cone Residuck for their a support. Mike, I'm

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Speaker 1: doing my taxes this weekend. The incense came in from Amazon.

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Speaker 1: You know, fill the room with incense. You see what

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Speaker 1: we can do, put on some spa music, and exactly

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Speaker 1: we're gonna release your tax returns to the public. Yes,

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Speaker 1: what is the story on that? Mr Trump is not?

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Speaker 1: Is it? Uh? He's so far making excuses for doing it.

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Speaker 1: Became Mitt Romney, of all people, brought brought it up

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Speaker 1: as something that dumb he is. Does he have tour

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Speaker 1: or is it it doesn't have to Ms Romney suggested

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Speaker 1: there might be something hidden in there, like much lower

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Speaker 1: income than Mr Trump claims. Okay, Jamie Marie as we

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Speaker 1: look at global economics. He runs economics for so much,

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Speaker 1: Bloomberg Economics and Bloomberg Intelligence. Jamie, I don't even know

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Speaker 1: where to start, but I guess we start with a

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Speaker 1: Brexast update. What will you listen for this weekend and

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Speaker 1: in the next week? In the UK rhetoric on an

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Speaker 1: exit from Europe, I think the thing to recognizes we're

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Speaker 1: quite a long way from a vote here. The vote

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Speaker 1: is going to be twenty three of June. There's gonna

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Speaker 1: be a lot of campaigning over the next scar the

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Speaker 1: next month or two, um, So there's there's a long

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Speaker 1: way to run. So I wouldn't attach too much weight

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Speaker 1: to any particular comments and politicians just yeah, there's I

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Speaker 1: would say, there's, there's, there's any time. Well, what's the

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Speaker 1: argument that the probe EU side is going to make. Well,

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Speaker 1: I think there's a general feeling that the UK could

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Speaker 1: could benefit from being outside the Union, from trade ties

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Speaker 1: and the reduction in the burden of regulation from from Europe.

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Speaker 1: I think that the trouble with those arguments is that

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Speaker 1: there's no guarantees that if Britain leaves it will be

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Speaker 1: able to make up for the beneficial trade ties that

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Speaker 1: had for the EU, and it's not clear that the

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Speaker 1: legislation that is infixed on the UK by a europe

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Speaker 1: is actually that unpalatable. Um. So it's it's kind of

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Speaker 1: the cases it's hard to make in our view, the

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Speaker 1: harder to make a case for leaving. Yeah, it's it's

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Speaker 1: it's harder to the downside risks. It is kind of

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Speaker 1: a leap into unknown as as politicians say, the downside

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Speaker 1: risks are probably bigger than the upside risks are. And

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Speaker 1: you've also propounding, like the longer term view, you've got

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Speaker 1: this this possibility that there's gonna be some significant short

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Speaker 1: term disruption. I mean, we've done some modeling and we've

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Speaker 1: run some shocks through our through our models, we don't

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Speaker 1: know a tempera cent exchange rate shock. We've done a

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Speaker 1: hundred basis points on into lending at a confidence shock

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Speaker 1: to demand, so people feeling less comfortable, spending less and

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Speaker 1: we think that could push inflation up significantly. We think

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Speaker 1: growth to be far slower in the near term, and

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Speaker 1: we think the next move to interest rates would be

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Speaker 1: a cut to zero if the Britain left Union. The

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Speaker 1: economist a couple of days ago, Jimmy, I assume you

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Speaker 1: saw it made a splash and trying to calculate the

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Speaker 1: class in and out of Brexit. Do you have all

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Speaker 1: your good research, Do you have a number that that

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Speaker 1: London and the United Kingdom gains or loses off of

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Speaker 1: the transaction of leaving the EU. We have, we have

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Speaker 1: some numbers. So we've got that short term impact, which

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Speaker 1: which is temporary, that wouldn't that wouldn't last forever. But

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Speaker 1: the medium term impact we think would be relatively large.

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Speaker 1: So um, it's unclear exactly what post brexit arrangements would

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Speaker 1: look like, but assuming that the government is able to

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Speaker 1: clamp down a migration flows, that would make the economy

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Speaker 1: smaller about out one percent by tw If the trade

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Speaker 1: arrangements we have with the you aren't replicated or made

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Speaker 1: better by leaving, then you're looking at another two percent

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Speaker 1: of g d P. So the economy could be three

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Speaker 1: percent of GDP smaller in the medium term, not per year,

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Speaker 1: but just just over overall. Yes, so the economy economic

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Speaker 1: output per year would be lower by three for the

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Speaker 1: rest of time relative to what it would otherwise have been.

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Speaker 1: What about the impact internally within Great Britain? They lose

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Speaker 1: some of the trade aspects, but how much of the

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Speaker 1: economy is dependent on that Would people be better off

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Speaker 1: in terms of the companies that would no longer be

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Speaker 1: under the control of Brussels in terms of the rules

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Speaker 1: and regulations for the account I mean, it's it's hard

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Speaker 1: to think of specific examples where interfering from Europe really

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Speaker 1: produces negative outcomes for British business. Things like the Working

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Speaker 1: Time Directive, for example, which prevent British workers and working

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Speaker 1: more than I think as about thirty eight hours a week. UM.

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Speaker 1: Those things are generally thought to be good both by

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Speaker 1: workers and by by businesses, and that's probably one of

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Speaker 1: the bigger intrusions into British life and the e UM.

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Speaker 1: So my my opinion is that the leaving leaving that

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Speaker 1: regulation behind isn't really in a solution. And if you

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Speaker 1: think about the said the banking sector, for example, leaving

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Speaker 1: the EU is very unlikely to prompt a big relaxation

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Speaker 1: of rules on banks in the UK. It's not like

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Speaker 1: there's some sort of sunny upland for British banks where

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Speaker 1: they no longer have to be regulated at all. The

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Speaker 1: Bank of England is just as as tighter regulation, if

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Speaker 1: not tighter than Europe. So, so what are the benefits

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Speaker 1: to leaving the EU? You've cited a lot of benefits

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Speaker 1: or analysis to suggest there are benefits just staying within

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Speaker 1: this experiment. What's the upside for leaving? The upside to

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Speaker 1: leaving is that some hope that trade fellow those with

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Speaker 1: the rest of the world that's expanding quite fast, like China.

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Speaker 1: The emerging market would be bigger because we could negotiate

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Speaker 1: bilateral trade agreements with them that we cannot do dependently

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Speaker 1: of the EU. And I think that's the biggest economic

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Speaker 1: sort of benefit to the to the UK. Those who

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Speaker 1: are worried about the level of migrations for non economic

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Speaker 1: reasons for them, that too could be a benefit. So

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Speaker 1: people seeing a lower migration as a result of the

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Speaker 1: leaving unfascinated. I'm as want to inform folks, And Jamie's

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Speaker 1: good answer, which didn't mention scout, how do you you know?

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Speaker 1: And I understand you're not doing this from a political angle,

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Speaker 1: but do you just presume that if Brexit occurs, the

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Speaker 1: real issue is of Scottish overlay. So I think the

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Speaker 1: the I think leaving would almost would almost certainly trigger

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Speaker 1: another referendum in Scotland on the membership of the Union

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Speaker 1: the UK. UM When that would happen, I think it

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Speaker 1: probably a year or two once the Avers the negotiations

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Speaker 1: are complete, because you really need to know what's gonna

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Speaker 1: be in place afterwards before Scotland can make a decision

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Speaker 1: about the about its own membership of the UK. So

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Speaker 1: I think that's that would be quite a long way off.

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Speaker 1: But yes, it would be a risk, and we know

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Speaker 1: we know what the consequences of breaking in the UK already. Well,

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Speaker 1: we were just talking with a couple of guests who

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Speaker 1: said yes then and Mr Cameron got concessions from the EU,

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Speaker 1: but they're hard to explain. Can you put into words

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Speaker 1: for us what they're going to try to sell out

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Speaker 1: of the deal? Well, so the only UM. So we've

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Speaker 1: got a few few things, some sort of more politicals

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Speaker 1: to others more sort of policy economic. One of the

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Speaker 1: one of the concessions was that there were no longer

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Speaker 1: going to be subject to the ever closer Union part

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Speaker 1: of the agreement with the UM. What that means is

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Speaker 1: kind of fuzzy. Who knows whether the degree to which

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Speaker 1: the opinion was going closer anyway? It's it's hard to

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Speaker 1: it's hard to sell that, but he will highlight it

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Speaker 1: is as something he's brought home. UM. And the other

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Speaker 1: one is a changes to benefits. So he's managed to

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Speaker 1: secure a break on the payment of in work benefits

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Speaker 1: that UM credits you get for basically pay lower taxes

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Speaker 1: UM because you are working lower a cube a few

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Speaker 1: hours a week UM, that benefit that that in work

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Speaker 1: benefit would no longer be payable to recent migrants. UH.

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Speaker 1: And the idea is that dissuas him from coming. The

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Speaker 1: trouble is that it probably won't because most people come

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Speaker 1: here to work anyway. The the income differential is very

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Speaker 1: wide already, and even if you make these tweaks to

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Speaker 1: the the payment of benefits, the incentive to come to

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Speaker 1: Britain is still quite strong. UM. So my guess is

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Speaker 1: that it wouldn't have an enormous influence on migration, which

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Speaker 1: is what it was intended to address. Jamie, thank you

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Speaker 1: so much. Jamie Murray is a Bloomberg intelligence in Bloomberg

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Speaker 1: Economics is warning a good briefing there, and Brexit is

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Speaker 1: Jamie started at the beginning, it's it's out there in June,

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Speaker 1: but I thought it was really a nuanced week of

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Speaker 1: Brexit debate. I was really taken back somewhere I saw

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Speaker 1: this morning. I'm sorry, folks, I can't cite it of

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Speaker 1: of a real interested in having somehow Brexit creep into

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Speaker 1: the communication in Shanghai. I find that almost unimaginable. Yeah,

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Speaker 1: maybe a little early for that, yeah kind of thing.

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Speaker 1: I don't know that they would get involved in exact

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Speaker 1: using sides. Yeah, but it is going to be a

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Speaker 1: fascinating couple of months with Brexit, with China, with oil,

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Speaker 1: with the elections, UM lot of twenty to keep their

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Speaker 1: eyes on. Yeah. Absolutely, a currency markets Yeah, and Nearer

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Speaker 1: one seven fractionally stronger again this morning, sterling one. Now

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Speaker 1: let's talk to John Tucker and get the latest world

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Speaker 1: in national headlines. John tom and the Republican presidential can

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Speaker 1: that it's going their separate ways today after a knockdown,

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Speaker 1: dragout debate that featured name calling, insults, and finger pointing,

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Speaker 1: US military expanding the war in Islamic State group with

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Speaker 1: an assault on the Internet. US officials say the newly

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Speaker 1: launched aggressive campaign of cyber attacks targets the group's abilities

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Speaker 1: to use social media and the internet. President Obama heads

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Speaker 1: to Florida today defending the results of the massive economic

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Speaker 1: stimulant bill he signed early in his first term, and

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Speaker 1: to keep prices stable and to avoid a glutt the

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Speaker 1: cartel is keeping a lid on production OPEC and oil

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Speaker 1: no maple syrup. The Federation of Quebec Maple Syrup Producers

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Speaker 1: accounts for sevent world supply. They are strictly limiting how

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Speaker 1: much can be extracted and sold. This season, Global News

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Speaker 1: twenty four hours a day, power journalists in more than

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Speaker 1: one fifty news bureaus around the world. John Tucker, you've

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Speaker 1: been a funt of news wisdom this week. Funt, I

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Speaker 1: think there are different grades as well, like oil of

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Speaker 1: syrup okay, very good on the maple syrup. Watch Bloomberg's

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Speaker 1: surveillance the news update protected by your Mercedes Benz Tri

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Speaker 1: drive today,