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Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene

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Speaker 1: Jay Lee. We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg John

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Speaker 1: just to give you some of the ants on who

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Speaker 1: the next governor of the Bank Kifingdom will be. General

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Speaker 1: Lines has become the front run that way said it

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Speaker 1: has cut the odds on him to six to four

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Speaker 1: after seeing notable support from gamblers. So that's a story

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Speaker 1: that emerged over the weekend. Tom certainly not hearing this

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Speaker 1: from official lines, but certainly a lot of speculation over

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Speaker 1: the last couple of days have sport betting in the

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Speaker 1: United States, and we're now going to have betting on

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Speaker 1: who does sends at the FED meeting or you can

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Speaker 1: have whether Michael McKee whoever in the UK. Mcke, that's

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Speaker 1: not rude. I don't think that you and I would

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Speaker 1: be able to bet on that, given that we would

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Speaker 1: have inside information that Michael McKee, my ass well, we

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Speaker 1: know he's rude. So let's trying start of trouble. Let's

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Speaker 1: let's talk to someone graceful here, Gabriela Sciantos with us

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Speaker 1: the JP Morgan. I want to go back, given the

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Speaker 1: moment we're in toward James Diamond got on a platform

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Speaker 1: and I don't remember where it was around Brexit and

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Speaker 1: basically said JP Morgan believes in London. Now you don't

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Speaker 1: need to do a sales job this morning on JP

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Speaker 1: Morgan in London. But as no, not that you're a

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Speaker 1: representative for the executives of the bank, but as an

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Speaker 1: international bank, London in the United Kingdom is critical. Whatever

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Speaker 1: happens here, London is still London, isn't it. Absolutely? And

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Speaker 1: we do think that we have changed the protagonist of

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Speaker 1: the Brexit movie. Um, but it's over the next six

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Speaker 1: months or so going to look fairly similar to the

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Speaker 1: one that we were watching for. But eventually there will

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Speaker 1: be um, you know, a day after Brexit, right, So

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Speaker 1: we just need to get through some some more of

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Speaker 1: this period of uncertainty and then life will move on, right.

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Speaker 1: And this this is the same for for Brexit, it's

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Speaker 1: the same for the trade uncertainty we're living through. Cyclically,

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Speaker 1: it's a big challenge, but eventually there will be a

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Speaker 1: day off one thing, john It's extraordinary. Speaking of London

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Speaker 1: is the mayor of London with a harsh criticism by

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Speaker 1: the President of the United States, Boris Johnson's lineage is extraordinary,

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Speaker 1: going back three generations a Muslim, I'm going to say

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Speaker 1: great grandfather. Uh, there's a whole Jewish wing to his

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Speaker 1: family as well. I mean this guy, and this guy

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Speaker 1: was a liberal mayor, right, I mean socially liberal mayor

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Speaker 1: to some degree, sending not as liberalist the one we

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Speaker 1: have now, but he's straddled society perhaps better than most conservatives.

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Speaker 1: Getting some reaction from Europe now mis Chambonnier saying we

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Speaker 1: look forward to can constructively with Prime Minister Boris Johnson

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Speaker 1: when he takes office to facilitate the ratification of the

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Speaker 1: withdrawal Agreement and achieve an orderly Brexit. We are ready

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Speaker 1: also to rework the agreed declaration on a new Partnership

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Speaker 1: in line with European Commission guidelines. It is going to

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Speaker 1: be fascinating to see what kind of different approach a

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Speaker 1: Prime Minister Boris Johnson takes with European leaders and whether

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Speaker 1: he can get a different result to Prime Minister make can.

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Speaker 1: I note the FORO decimal points, Swisses come in strong

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Speaker 1: Swiss and German two year has come down another to

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Speaker 1: whatever you call it, where it's almost near record law.

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Speaker 1: I mean, I'm not going to say markets moving, I'm

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Speaker 1: Prime Minister Johnson, but I'm looking at my Bloomberg screen

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Speaker 1: and markets are moving. I think Europe shifts quickly to

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Speaker 1: the ECB decision on Thursday, and I think that's at

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Speaker 1: the epicenter of FX price s action in g ten,

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Speaker 1: especially at the moment. Just the idea being that if

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Speaker 1: the Europeans ease, the SMB needs to follow up with something.

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Speaker 1: Otherwise all they're gonna get is euro Swiss lower and

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Speaker 1: euro Swiss lower strongest we see is the last thing

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Speaker 1: that President Jordan wants over in Zurich, Switzerland. It's the

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Speaker 1: last thing he wants. So look, the politics in the

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Speaker 1: UK is going to take center stage for Sterling crosses

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Speaker 1: everything house in Europe, the distraction will be on the

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Speaker 1: e c B in a common day. Where's the distraction

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Speaker 1: of multinationals in Europe? I mean, they all pay big

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Speaker 1: fat dividends, Gabriel sants, but within your asset management, do

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Speaker 1: you buy their dividend? And the plot forward or do

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Speaker 1: you have to stay in the United States. So Europe

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Speaker 1: is tough to to become very positive on here in

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Speaker 1: the short term thinking about European equities, about financials, uh,

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Speaker 1: and if we're in this environment that we didn't expect

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Speaker 1: to be in just a few months ago. But if

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Speaker 1: indeed we do see rate cuts probably in September by

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Speaker 1: the e c B, um, that's an environment where European

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Speaker 1: financials will struggle to really break out. Um. Europe of

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Speaker 1: course also at the center of a lot of this

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Speaker 1: uncertainty Breggs trade. So it seems tough to to become

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Speaker 1: very very up mystock about European equities here, John Siemens

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Speaker 1: dividends three point You know, it's just it's a bigger dividend.

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Speaker 1: Decent dividends on a foot see as well in some

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Speaker 1: of the big energy names. Just depends whether you want

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Speaker 1: to take that kind of risk at the moment without dividends.

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Speaker 1: I mean Gabriella earlier, she spent some time with one

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Speaker 1: of my properties earlier. John, this morning she modeled out

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Speaker 1: of two share by back. Can I just get a

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Speaker 1: final word on the United Kingdom, on on Brexit and

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Speaker 1: the markets, we can talk to the end of the

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Speaker 1: earth about Sterlink. I want to talk about rates in

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Speaker 1: the United Kingdom and guilt specifically. I am fascinated to

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Speaker 1: see how the guilt market responds to a Prime minister

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Speaker 1: that maybe a little bit bolder and more aggressive with

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Speaker 1: the Europeans and push the line that they're willing to

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Speaker 1: go through with a hard brexit on October thirty one

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Speaker 1: without a deal. Do you see a market gabriella that

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Speaker 1: behaves like an emerging market country order developed market country?

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Speaker 1: And what I mean by that is, do yields grind

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Speaker 1: tighter lower in the United Kingdom on the risk of

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Speaker 1: a heart brexit or they start to go a little

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Speaker 1: bit higher on the fear that the foreign money starts

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Speaker 1: to flee stelling denominated assets. We do think UK guilts

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Speaker 1: are likely to grind lower. I do think the expectation

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Speaker 1: would be if you did have a heart bregsit that

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Speaker 1: the Bank of England would respond by cutting race to

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Speaker 1: try to um stimulate growth and try to prevent some

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Speaker 1: sort of worse adverse reactions. So we do think ultimately

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Speaker 1: UK guilts are likely to grind lower, following in line

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Speaker 1: with the rest of the global theme or scene. Is

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Speaker 1: there an opportunity internationally? I mean you live on airplanes.

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Speaker 1: Is there an opportunity internationally right now? There is? UM

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Speaker 1: of course, all about time frames, we do think internationally

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Speaker 1: five tenures out will have its day in the sun.

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Speaker 1: Once again, I think more tactically, there are some positive stories.

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Speaker 1: There are few and far in between. UM. One story

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Speaker 1: that as a as a good UM Brazilian, I would

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Speaker 1: be remiss not to bring out that is one area

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Speaker 1: of the world that we're actually seeing a reduction in

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Speaker 1: economic policy uncertainty UM. And that's really around h some

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Speaker 1: more implementation of reforms UM, both in terms of fiscal

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Speaker 1: as well as economic reforms. So that's one area that's

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Speaker 1: really standing out here in the short term as moving

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Speaker 1: in a different direction and a positive one. Get a

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Speaker 1: better sense of joining us from JP Morgan as in management.

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Speaker 1: Great to cat show me this morning, appreciate your patients.

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Speaker 1: We will have a new Prime Minister in the United

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Speaker 1: Kingdom and his name will be Boris Johnson. With a

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Speaker 1: Prime Minister Johnson's ascent or selection, I should say, by

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Speaker 1: what is it like a hundred and seventy thousand people?

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Speaker 1: About a hundred and sixty I think I mean, that's like,

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Speaker 1: you know, the Friday brunch crowd of the Ned. You know,

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Speaker 1: that's the way the process works in the United Kingdom.

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Speaker 1: You're selecting the leader of your party, which is a

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Speaker 1: consequence becomes the Prime Minister. Can people vote that don't

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Speaker 1: on land? I mean it's it's like quait if you're

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Speaker 1: if you're a member of the Conservative Party, you can vote,

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Speaker 1: and the membership basis about a hundred and sixty. We

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Speaker 1: got to an expert to give us some real perspective

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Speaker 1: on this. We're thrilled at Katherine Bernard joins us with

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Speaker 1: Cambridge University. She's truly provided value to surveilance in the

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Speaker 1: nuances of this moment. Professor, what is the nuance for

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Speaker 1: Boris Johnson? Literally in the next forty eight hours? What's

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Speaker 1: in here to do? I don't. I don't think Boris

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Speaker 1: Johnson does nuance. He does big picture stuff, he does

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Speaker 1: bold colors. Um. What he's good at is getting some

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Speaker 1: good people around him who can deliver on the things

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Speaker 1: that he wants to do. But what he's got doing

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Speaker 1: the next forty eight hours is first of all, to

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Speaker 1: say he's got a big speech to give tomorrow, where

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Speaker 1: he's going to set out not just his priorities in

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Speaker 1: respect to Brexit, but also priorities in respect of um

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Speaker 1: social policy, which he is very keen to pursue alongside,

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Speaker 1: so he can show that there's a domestic agenda as

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Speaker 1: well as a Brexit agenda. Is there a risk, Catherine,

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Speaker 1: that some of the some of the MPs within the

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Speaker 1: Conservative Party start to deffect Do you see that as

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Speaker 1: a risk and immediate risk that this majority that the

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Speaker 1: Prime Minister will be holding, a very very slim majority,

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Speaker 1: how together by politicians in Northern Ireland, may fall apart

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Speaker 1: quite quickly. Well, that's that's a great fear for Boris Johnson,

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Speaker 1: which is why there's much talk about the fact that

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Speaker 1: there's likely to be a snap general election. Some people

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Speaker 1: say on the fourth of October. But the problem then,

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Speaker 1: as if he goes for a snap general election before

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Speaker 1: the third first of October, is that it will become

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Speaker 1: a four party race and the Brexit Party will be

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Speaker 1: able to hammer the Conservatives by saying you the Conservatives

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Speaker 1: haven't haven't delivered Brexit, and so some people say you

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Speaker 1: might wait until the early spring. But the problem is

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Speaker 1: it's really difficult to govern when you have got no

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Speaker 1: majority that can de presci your legislation through. He's got

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Speaker 1: to get to what time the thirty one? Can he

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Speaker 1: get there? Well, of course he can very easily get there,

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Speaker 1: because the default position is that the UK crashes out

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Speaker 1: of the EU without any deal on the thirty first

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Speaker 1: of October. Um that it is possible to extend that date,

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Speaker 1: but that requires the unanimous agreement of the remaining EU

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Speaker 1: states the EU, and it's not clear that they would

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Speaker 1: agree to an extension if one were asked for um,

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Speaker 1: if they think the UK is just playing for time

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Speaker 1: because we're not actually doing anything concrete. It was always

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Speaker 1: assumed that it was never a credible threat. A hard

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Speaker 1: brexit from the Prime Minister Theresa May was never a

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Speaker 1: credible threat. Has it become somewhat more credible with prim Uster,

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Speaker 1: Boris Johnson, Catherine going into these negotiations again with the Europeans.

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Speaker 1: I think it has become a much more credible threat.

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Speaker 1: There are people around, not just who are Boris Johnson supporters,

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Speaker 1: who who say that the chances of US having a

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Speaker 1: no deal Brexit now are up between seventy So I

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Speaker 1: think the chances of an odeal Brexit have gone up

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Speaker 1: quite considerably. The planning has also increased in order to

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Speaker 1: hit that date of the U thirty one October. But

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Speaker 1: the fact is um the Parliament voted last week over

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Speaker 1: a very technical point in the Northern Ireland legislation to say, actually,

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Speaker 1: we don't want Parliament to be proobed. That's suspended. So

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Speaker 1: it may be sending out a more complicated message we're

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Speaker 1: not heading for a no deal brexit. What will be

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Speaker 1: Prime Minister Johnson's complicated Irish message versus what we saw

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Speaker 1: from Prime Minister May. Well, he's absolutely convinced that the

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Speaker 1: Northern Ireland border problem can be sorted out by technology.

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Speaker 1: And just to remind your listeners who may not be

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Speaker 1: living and breathing the question that there would be a

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Speaker 1: few hours we have, well, we have forty two listeners

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Speaker 1: and I would say forty four of the forty two

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Speaker 1: listeners are not living in breathing Brexit. The Northern Ireland

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Speaker 1: border issue is that at the moment there is no

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Speaker 1: physical border between the North of Ireland and the south,

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Speaker 1: and if we leave the European Union without a deal, um,

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Speaker 1: it's inevitable that a border will a physical border will

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Speaker 1: re emerge. Between the North and South, and that goes

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Speaker 1: directly contrary the spirit of the Good Friday Agreement, which

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Speaker 1: was that extraordinary agreement which led to significant peace in

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Speaker 1: Northern Ireland. And so the question is how do you

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Speaker 1: square the circle of us leaving the Single Market in

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Speaker 1: the Customs Union, the key components of the EU, while

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Speaker 1: not reintroducing a hard border. And so Boris Johnson's onto

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Speaker 1: that is, we can do it through the wonders of technology.

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Speaker 1: The problem is lots of people say there is no

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Speaker 1: technology that exists at the moment that doesn't rely on,

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Speaker 1: for example, cameras and cameras require infrastructure and that becomes

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Speaker 1: something like a physical border in Northern Ireland. And that's

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Speaker 1: the real problem. Kathern just to pick up on a

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Speaker 1: line that was used in that acceptance speech from Boris

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Speaker 1: john So just about an hour ago, deliver Brexit, Unite

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Speaker 1: the country, defeat Jeremy Corbyn. Those three objectives, which one

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Speaker 1: is the hardest? I think the I think they're all

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Speaker 1: a star in terms of difficulty. I mean delivering Brexit

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Speaker 1: at one level. Of course, it's going to happen automatically

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Speaker 1: on the thirty first of October. So from one point

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Speaker 1: of view, that will be the easiest. But of course

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Speaker 1: the third first of October is a date, and a

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Speaker 1: hard Brexit is not actually an event, but it's a process,

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Speaker 1: and it's what happens on the thirty one November and

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Speaker 1: December and so forth that really becomes the issue. So actually,

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Speaker 1: at one level, delivering Brexit is very easy. What's much

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Speaker 1: more difficult will be delivering Brexit in a way that

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Speaker 1: satisfies a very divided country. And so in fact one

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Speaker 1: leads to another. In the immediate In the immediate term,

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Speaker 1: he's got to unite the party. Tom four pm London time,

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Speaker 1: he will speak to the Tory rank and file MPs,

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Speaker 1: so in a round about three hours time in the UK,

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Speaker 1: he's got to sit down with the Tory rank and

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Speaker 1: file m peace and try and unite them. Catherine, how

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Speaker 1: does he do that today? Well, that's the relatively easy

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Speaker 1: part because the rank and file are certainly those who

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Speaker 1: are members voted overwhelmingly for Boris Johnson premiership. So that

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Speaker 1: will bit will be the easy bit, And he will

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Speaker 1: make a tub something speech saying that we will be

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Speaker 1: leaving the you on third first of October, and we

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Speaker 1: were great and glorious country. But it's all very good

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Speaker 1: talking in adjectives and abstract nouns, it's actually delivering that

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Speaker 1: it's going to be damned so harder. I mean, we

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Speaker 1: got to remember that this guy's a guy who studied Greek,

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Speaker 1: in Greek and Latin. It acts for he's got a

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Speaker 1: high fancy degree and all that. Professor, what is his

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Speaker 1: prime ministerial parallel? I mean, you know he likes to

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Speaker 1: be Disraeli and say he's a a man of many

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Speaker 1: seasons in many interests, that he does this and he

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Speaker 1: does that. Is there any previous Boris Johnson that's held

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Speaker 1: the office. Well, I think he fancies modeling into off

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Speaker 1: from Winston Churchill, who was also a man with a

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Speaker 1: very large personality and a very large land. The question

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Speaker 1: is whether he will have the dexterity of a Churchill

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Speaker 1: to both deliver a Brexit that doesn't damage the country

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Speaker 1: and also brings the public back together because at the

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Speaker 1: moment the country, like Parliament, is absolutely divided down the middle,

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Speaker 1: and the and the figures haven't changed dramatically or remember

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Speaker 1: on the twenty three of June it was forty eight

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Speaker 1: in favor of leave at the moment, it might be

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Speaker 1: forty eight in favor of Remain, but it's very difficult

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Speaker 1: to tell. But the fact is the country is split

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Speaker 1: and it's going to be a huge challenge for someone

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Speaker 1: like Boris Joarston, who led the Leave campaign to really

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Speaker 1: reach out to those remainers. Professor, thank you for your

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Speaker 1: time with at Cambridge and has just given us wonderful perspective.

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Speaker 1: Love catching up at Catherine makes it very very clear

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Speaker 1: and easy to understand because the process in the United

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Speaker 1: Kingdom is very complex and foreign to so many people.

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Speaker 1: And it's in English. You know it's definition. Yeah, I get.

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Speaker 1: It was quite quite funny. I'm filmed today full avoid

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Speaker 1: the mathiness of late July and August. That is difficult

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Speaker 1: to do with one of our most acute thinkers on

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Speaker 1: central Banks, that as an Ariana Cucha Lakota, of course

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Speaker 1: acclaimed at Minnesota and now at the University of Rochester

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Speaker 1: and joins us on the shores of the Genesee River today,

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Speaker 1: Professor Katcha Lakota, wonderful to have you with us. If

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Speaker 1: I go back to the writings of the late nineties,

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Speaker 1: including Coacha, Lakota and Phelan, there's the reality of what

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Speaker 1: if we ever got to the zero bound. Well, here

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Speaker 1: we are, twenty years later at the zero bounder in

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Speaker 1: the vicinity of it. Are we looking at central banks

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Speaker 1: and can they do what they need to do at

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Speaker 1: the zero bound or is this all an exercise and

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Speaker 1: futility right now? Tomm Yeah, thanks a lot for having

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Speaker 1: me on. You know, I think that the zero bound

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Speaker 1: what seems like they just a theory out of this

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Speaker 1: rit called curios um um twenty years ago, with the

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Speaker 1: exception of Japan obviously, but central banks around the world

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Speaker 1: are having to live with it, and I think it's

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Speaker 1: very much a factor in the Fed's current thinking is

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Speaker 1: that we don't want to get ourselves into a recession

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Speaker 1: where we would really face the need to use our ammunition,

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Speaker 1: so let's keep the economy as healthy as we possibly

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Speaker 1: can now um, And I think that's definitely a factor,

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Speaker 1: and they're thinking about their easy decision they're going to

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Speaker 1: next week. You have been a student. I believe you

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Speaker 1: taught it Rochester measured one on one or maybe it

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Speaker 1: was two or three. I can't remember the course. Alan

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Speaker 1: Greenspan delivered us the phrase measured and an incremental policy.

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Speaker 1: Do we need to go back to burns dynamism. Do

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Speaker 1: we need to go back to fifty basis points or

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Speaker 1: abrupt moves or do we stay a measured way as

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Speaker 1: a reigning theory of central banking. That is a great question,

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Speaker 1: and I that's it. You got it. Boris Johnson didn't

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Speaker 1: get the great question today. That's it. I'm done. Continue.

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Speaker 1: But I I think, first of all, I think the

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Speaker 1: FED is very dominated by the gradualist thinking UH that

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Speaker 1: that you attribute to UH to former Chairman Greenspan. With

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Speaker 1: that set, I would prefer if they committed themselves to

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Speaker 1: being to an aggressive response if we had a significant downturn,

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Speaker 1: So if unemployment were to rise above four percent, which

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Speaker 1: doesn't sound that significant, but it would mean a big

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Speaker 1: increase over where we are today. UM, if and that

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Speaker 1: looked like it was something that's sustainable, I think the

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Speaker 1: FED should really say, Okay, we're going to call interest

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Speaker 1: rates UH significantly and aggressively at that point. And that

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Speaker 1: would be a better response than the more gradual approach

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Speaker 1: that there there, they're h they're still stuck in Marianna.

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Speaker 1: It looks like we finally have a really contentious Federal

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Speaker 1: Reserve meeting. We've heard arguments for no cuts. We've heard

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Speaker 1: arguments for twenty five basis point cuts. We've heard an

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Speaker 1: argument that sounds like an argument for a fifty basis

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Speaker 1: point cut. Not how to take me inside that room?

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Speaker 1: How difficult will it be to find consensus? On July one?

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Speaker 1: I think, uh, this this chairman is you know, been

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Speaker 1: proven himself to be a consensus builder. Um. I think

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Speaker 1: the bulk of the communication has been pretty clear that

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Speaker 1: that we're aiming at twenty five basis points. For myself,

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Speaker 1: I had prefer to see um a dissent actually at

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Speaker 1: the next next week's meeting. I think the censor play

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Speaker 1: an important role in terms of communicating the public that

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Speaker 1: the fet is taking on board all risks. UM. So

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Speaker 1: I would expect a hawkish hawkish descent next week. Um,

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Speaker 1: and so saying maybe this isn't the time to to

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Speaker 1: to cut interest rates. Professor Andy holding Over at the

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Speaker 1: Bank of England out with a set of headlines of

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Speaker 1: their brexity and all that. But he has a headline

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Speaker 1: which also goes to the heart of all of our

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Speaker 1: listeners as well. He says United Kingdom workers are experiencing

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Speaker 1: a paid disaster. So many Americans feel that way that

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Speaker 1: they're in a quote unquote paid disaster. How do we

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Speaker 1: boost that quickly in lieu of a productivity advancement? Yeah,

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Speaker 1: you know, I think that is a very challenging question,

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Speaker 1: and it uh is one that economists and policy makers

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Speaker 1: are strongly with around the world. It is I think

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Speaker 1: largely outside the purview of short term policy to make

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Speaker 1: that happen. I think it's really more a longer term issues.

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Speaker 1: But yeah, I think, you know, uh Andy Halliday is right.

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Speaker 1: I think in the UK they are facing pay disaster.

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Speaker 1: Things are a little better for our workers here in

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Speaker 1: the United States. But but certainly midy Americans would would

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Speaker 1: agree with Mr Hawley statement, Well, if we get a

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Speaker 1: jump condition away from green spani and measure, we expect

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Speaker 1: to see you with a pipe, holding a pipe, blowing

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Speaker 1: Arthur Burnsey and smoke signals at any point. Professor Cutch Dakota,

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Speaker 1: thank you so much. Of course, it esteemed moment ferals

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Speaker 1: aping the International Monetary Fund. They're out with a midyear correction,

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Speaker 1: if you will, on the world economic outlook. The headline

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Speaker 1: is weaker growth, but it is a jumble as well

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Speaker 1: around trade. The headline they cut their global outlook see

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Speaker 1: downside risks on trade tensions. I was able to speak

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Speaker 1: with our director of Economic research, their chief economists, get

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Speaker 1: to gopeneth curious our conversation, get gopeneth on trade. The

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Speaker 1: US is growing at the arend two point six percent,

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Speaker 1: and that is a solid economy. The labor markets are

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Speaker 1: quite strong and you see wage growth. So there are

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Speaker 1: you know, good signs of solid growth. And with that said,

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Speaker 1: there are downside risks, especially coming from the rest of

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Speaker 1: the world. One of the great things you do within

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Speaker 1: this report is really in partition the service sector in

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Speaker 1: the United States and other nations with the goods producing sector.

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Speaker 1: What is the distinction of your analysis of a better

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Speaker 1: performing service sector versus all the uproar we see in

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Speaker 1: goods So, you know, it's it's great to look at

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Speaker 1: the distinction between what's happening with manufacturing and services, because

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Speaker 1: that's exactly where we see the negative outcomes of heightened

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Speaker 1: policy and certainty. So manufacturing pususing managers in disease continue

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Speaker 1: to decline, while at the same time services sector continues

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Speaker 1: to hold up and consumer sentiment is strong. Now you

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Speaker 1: know that is partly a reflection of the fact that

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Speaker 1: there has been improvements in labor market outcomes, and most

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Speaker 1: of the major economies of the world there's been wage growth,

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Speaker 1: so that is holding up fairly well. But it's all

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Speaker 1: the uncertainty on the trade and technology front that's weighing

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Speaker 1: on uncertainty going forward on manufacturing and industrial production. And

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Speaker 1: what's so important here within the body of research we

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Speaker 1: see a bloomberg each day is the idea of the

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Speaker 1: inflation dynamics separately of service sector and goods producing sector.

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Speaker 1: Do your academics at the I m F believe they'll

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Speaker 1: stay where they are? Does service sector come down with

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Speaker 1: diminished growth? Does the goods producing sector come up with

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Speaker 1: any trade solution? What are those dynamics between that two

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Speaker 1: part inflation? So inflation is certainly under shooting for most

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Speaker 1: of the major economies, I mean in the US more

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Speaker 1: recently in your area, it is a well below target. Now,

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Speaker 1: the explanation for why that is is varied. There could

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Speaker 1: be still an improvement to labor force participation rate that

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Speaker 1: could against strengthened wages going forward for for workers. But

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Speaker 1: in the US we've also seen an improvement in productivity.

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Speaker 1: So if you look at unit label costs, those things

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Speaker 1: haven't gone up as much, which is why we're not

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Speaker 1: seeing as much in inflation, but we should expect to

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Speaker 1: see that going forward. Yeah, I know you need to

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Speaker 1: be political as chief economists for UH the I m F.

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Speaker 1: I love your phrasing of the turmoil that's out there now,

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Speaker 1: policy actions and missteps. Let's talk about the policy actions

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Speaker 1: and missteps of a mercantile United States of America. How

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Speaker 1: much at risk is the multilateral or even a constructive

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Speaker 1: bilateral debate for America with the president's strong mercantilism. The

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Speaker 1: way we see it that this sluggishness in global growth

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Speaker 1: is to extent self inflicted UH and it is an

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Speaker 1: outcome of prolonged uncertainty on the trade front, escalating tensions

431
00:25:08,760 --> 00:25:14,479
Speaker 1: on technology, the prolonged uncertainty with Brexit UH and so

432
00:25:14,520 --> 00:25:17,480
Speaker 1: these factors are weighing on growth. So while on one

433
00:25:17,520 --> 00:25:20,880
Speaker 1: hand we do see tightening labor markets and raising wages,

434
00:25:21,280 --> 00:25:23,960
Speaker 1: on the other hand, we do see this uncertainty, this

435
00:25:24,080 --> 00:25:28,439
Speaker 1: negative sentiment that's weighing on growth going forward. How urgent

436
00:25:28,640 --> 00:25:31,000
Speaker 1: is it to clear the market of a trade war?

437
00:25:31,280 --> 00:25:33,360
Speaker 1: Is it an immediacy that we need to do this?

438
00:25:33,440 --> 00:25:36,719
Speaker 1: In two thousand nineteen, or can it wait for the

439
00:25:36,760 --> 00:25:39,359
Speaker 1: I m F Annual meeting to figure out how to

440
00:25:39,600 --> 00:25:43,760
Speaker 1: end our various trade wars. I mean, it's absolutely urgent

441
00:25:43,800 --> 00:25:46,879
Speaker 1: to end these trade wars as soon as possible, to

442
00:25:47,000 --> 00:25:50,480
Speaker 1: not escalate, and also to roll back the tariffs in place.

443
00:25:50,560 --> 00:25:53,080
Speaker 1: That will have a big boost to business sentiment, that

444
00:25:53,119 --> 00:25:55,639
Speaker 1: will raise investment, and that will be good for the

445
00:25:55,680 --> 00:25:59,520
Speaker 1: global economy. Get it gop out of Princeton, and she

446
00:25:59,640 --> 00:26:03,879
Speaker 1: has a wonderful lineage and economics out of Delhi as well.

447
00:26:03,920 --> 00:26:06,800
Speaker 1: I was with Madame Legard the day the get it

448
00:26:06,880 --> 00:26:10,119
Speaker 1: was announced that get Gopinath would take over Paul Sweeney,

449
00:26:10,240 --> 00:26:12,239
Speaker 1: and I said this to Madame Legard, and I can

450
00:26:12,280 --> 00:26:15,200
Speaker 1: say it to le Garden because she's so competent. It's

451
00:26:15,200 --> 00:26:19,000
Speaker 1: just great to have this whole modern diversity thing where

452
00:26:19,000 --> 00:26:22,439
Speaker 1: the talent is so competent that people don't even have

453
00:26:22,520 --> 00:26:24,919
Speaker 1: to It's like Geno that came across just when you

454
00:26:25,000 --> 00:26:28,119
Speaker 1: hired Gino Martinetta, the same thing. Nobody cares. It's just

455
00:26:28,600 --> 00:26:31,080
Speaker 1: they're so damned competent. You just sit there with your

456
00:26:31,560 --> 00:26:34,280
Speaker 1: you know, did you listen, Yeah, I mean her comments

457
00:26:34,280 --> 00:26:37,080
Speaker 1: were I thought, you know, very coaching in the sense

458
00:26:37,119 --> 00:26:39,560
Speaker 1: that you know this while the consumer is strong, um,

459
00:26:39,600 --> 00:26:42,200
Speaker 1: you know, the manufacturing globally is concerned and the trade

460
00:26:42,240 --> 00:26:44,199
Speaker 1: is playing right into that and that's something that the

461
00:26:44,200 --> 00:26:46,560
Speaker 1: market has to clear suggest. We we taped, as you know,

462
00:26:46,600 --> 00:26:49,480
Speaker 1: a four our interviews. That a little bit I'm kidding,

463
00:26:49,520 --> 00:26:53,879
Speaker 1: but it was a few other themes. She was diplomatic,

464
00:26:53,920 --> 00:26:55,760
Speaker 1: as you must be at the I m F, but

465
00:26:56,440 --> 00:27:04,160
Speaker 1: academically scathing about the death of multilateral and black negotiations.

466
00:27:04,480 --> 00:27:09,080
Speaker 1: She was surgical in a criticism of the many people

467
00:27:09,119 --> 00:27:11,800
Speaker 1: in the world that are looking for my way or

468
00:27:11,800 --> 00:27:15,440
Speaker 1: that's right. The bilateral agreements, well even I'm not sure

469
00:27:15,440 --> 00:27:18,600
Speaker 1: they're bilateral. I was just in the Fhirst Trump lateral

470
00:27:18,840 --> 00:27:22,560
Speaker 1: Trump ladder, right, and you know, you know, even the Brexit,

471
00:27:22,600 --> 00:27:24,520
Speaker 1: which is the topic of the day once again. I mean,

472
00:27:24,600 --> 00:27:26,520
Speaker 1: you know, a lot of that is being built upon. Oh,

473
00:27:26,840 --> 00:27:29,240
Speaker 1: the UK and the US can get a great trade

474
00:27:29,240 --> 00:27:31,479
Speaker 1: deal together and you won't even miss the EU. And

475
00:27:32,040 --> 00:27:33,800
Speaker 1: you know, I just can't see how that's going to

476
00:27:33,880 --> 00:27:36,359
Speaker 1: kill you. But did you notice Pharrell's had his phone

477
00:27:36,359 --> 00:27:40,800
Speaker 1: glued to him all morning waiting for the conferences, had

478
00:27:40,840 --> 00:27:43,440
Speaker 1: the captain It's really good. I mean, it was really

479
00:27:43,520 --> 00:27:46,359
Speaker 1: nice how they did it. I don't understand the process,

480
00:27:46,400 --> 00:27:49,320
Speaker 1: but to see Mr Haunt and Mr Johnson get up

481
00:27:49,359 --> 00:27:52,240
Speaker 1: both on stage and they did the class the announcement things.

482
00:27:52,560 --> 00:27:54,280
Speaker 1: It was sort of like, you know, an oscar kind

483
00:27:54,280 --> 00:27:57,040
Speaker 1: of thing, and right the envelope, please, it'll be interesting tomorrow.

484
00:27:57,040 --> 00:27:59,520
Speaker 1: I just feel like I put a camera into into

485
00:27:59,560 --> 00:28:01,720
Speaker 1: the castle just says, you know, the prime ministers go

486
00:28:01,800 --> 00:28:05,480
Speaker 1: to the Queen and one tenders his her resignation and

487
00:28:06,160 --> 00:28:08,760
Speaker 1: question and then I guess Mr Johnson will then go

488
00:28:08,880 --> 00:28:13,240
Speaker 1: and presumably receive, and the symbolism goes so far, Paul,

489
00:28:13,320 --> 00:28:16,880
Speaker 1: that prime Minister may shows up with full prime ministerial

490
00:28:17,600 --> 00:28:23,119
Speaker 1: security entourage. And the tradition is she leaves the palace

491
00:28:23,840 --> 00:28:26,480
Speaker 1: as a private citizen, right and if she gets in

492
00:28:26,520 --> 00:28:29,480
Speaker 1: the golf stream, but she leases a private Everything I

493
00:28:29,560 --> 00:28:32,000
Speaker 1: learned about that is I learned from the TV show

494
00:28:32,040 --> 00:28:34,280
Speaker 1: The Crown, you know, that's it. That's kind of my

495
00:28:34,800 --> 00:28:39,280
Speaker 1: British civics. Lesson market, such a tramp, That's what I

496
00:28:39,320 --> 00:28:42,240
Speaker 1: learned from the Crun. Now I'm watching I'm watching something.

497
00:28:42,240 --> 00:28:44,160
Speaker 1: I'm sure a huge part of our audience has already

498
00:28:44,160 --> 00:28:49,160
Speaker 1: seen something American Revolutionary Ward. You know it's I don't

499
00:28:49,160 --> 00:28:52,320
Speaker 1: know the cliffs of it's it's a clips of Dover,

500
00:28:52,400 --> 00:28:56,000
Speaker 1: but I think it's Cornwall or something. Right. We're very British,

501
00:28:56,040 --> 00:28:58,480
Speaker 1: sure and it thanks to John Farrell, Anna Edwards in

502
00:28:58,520 --> 00:29:13,520
Speaker 1: francinequa why Sminster this morning? We're very valuable. On Thursday,

503
00:29:13,760 --> 00:29:16,040
Speaker 1: one weather report I saw says it will be one

504
00:29:16,600 --> 00:29:21,120
Speaker 1: nine degrees fahrenheit in Paris. Francing the Quad demands that

505
00:29:21,240 --> 00:29:24,280
Speaker 1: she only appear on Bloomberg Surveillance New York. When we

506
00:29:24,360 --> 00:29:27,520
Speaker 1: speak celsius, it's in the vicinity of forty two to

507
00:29:27,640 --> 00:29:30,880
Speaker 1: forty three degrees celsius. It will be ninety three in

508
00:29:31,000 --> 00:29:34,600
Speaker 1: southern England on Thursday. And doing yo woman's duty on

509
00:29:34,680 --> 00:29:40,160
Speaker 1: Westminster today and the heat was Francine, Francine. How un

510
00:29:40,320 --> 00:29:43,720
Speaker 1: air conditioned is the United Kingdom? The BBC is an

511
00:29:43,800 --> 00:29:47,040
Speaker 1: article that's just stunning. I mean, in America they estimate

512
00:29:48,400 --> 00:29:52,560
Speaker 1: of energy consumption is air conditioning? Is it like as

513
00:29:52,560 --> 00:29:54,800
Speaker 1: bad as they say in the United Kingdom? I'm sorry,

514
00:29:54,840 --> 00:29:56,720
Speaker 1: what is air conditioning? I don't think we have it

515
00:29:56,760 --> 00:29:59,280
Speaker 1: in the UK. I think offices have it just about

516
00:29:59,280 --> 00:30:00,880
Speaker 1: so you can get some work done. But we're just

517
00:30:00,920 --> 00:30:03,200
Speaker 1: not used to the heat top so you know, things

518
00:30:03,320 --> 00:30:06,200
Speaker 1: actually melt in the UK because it's only lost four

519
00:30:06,280 --> 00:30:08,440
Speaker 1: to five years that you have these heat waves. In

520
00:30:08,480 --> 00:30:11,720
Speaker 1: the past, it never happened. It was English weather. It

521
00:30:11,760 --> 00:30:14,640
Speaker 1: was like, you know, twenty five at Best Sea. Within

522
00:30:14,640 --> 00:30:17,200
Speaker 1: the limited time we've got Francine, you're back at Queen

523
00:30:17,280 --> 00:30:21,120
Speaker 1: Victoria's Street. I believe are conditioned um and and within

524
00:30:21,240 --> 00:30:24,000
Speaker 1: that is who Boris Johnson's going to offend the most

525
00:30:24,640 --> 00:30:26,600
Speaker 1: in the next forty eight hours as he picks a

526
00:30:26,720 --> 00:30:31,800
Speaker 1: cabinet I mean wins. I would probably go out on

527
00:30:31,840 --> 00:30:33,840
Speaker 1: the limb and say the person he's going to offend

528
00:30:33,880 --> 00:30:35,800
Speaker 1: the most is probably the EU when he shows up

529
00:30:35,840 --> 00:30:38,440
Speaker 1: to try and renegotiate the deal. But in the moment, look,

530
00:30:38,480 --> 00:30:41,080
Speaker 1: we don't really know Tom because he has a really

531
00:30:41,120 --> 00:30:45,000
Speaker 1: broad base of allies from Hancock, who's you know, pro

532
00:30:45,160 --> 00:30:48,800
Speaker 1: renegotiating the deal but a pro remainder, to someone like

533
00:30:48,880 --> 00:30:51,080
Speaker 1: Jacob ri Smog who's really on the other spectrum. And

534
00:30:51,200 --> 00:30:54,120
Speaker 1: Arch breaks a tear. So he'll look at the vote today.

535
00:30:54,200 --> 00:30:57,040
Speaker 1: So he won by sixty six percent, that's two and one.

536
00:30:57,120 --> 00:31:00,240
Speaker 1: That's a pretty long margin, and he may just say, look,

537
00:31:00,280 --> 00:31:02,480
Speaker 1: I want to chancell that's the bregsit here, because he'll

538
00:31:02,480 --> 00:31:04,640
Speaker 1: help me. He'll you know, try and give it to

539
00:31:04,680 --> 00:31:08,400
Speaker 1: his supporters or people that have made him a prime minister.

540
00:31:08,680 --> 00:31:11,080
Speaker 1: Or he'll think, well, look I only got sixty or

541
00:31:11,120 --> 00:31:13,200
Speaker 1: six percent of the vote. That's not bad, but I

542
00:31:13,200 --> 00:31:16,120
Speaker 1: could have done better, and so I'll appoint some key

543
00:31:16,200 --> 00:31:18,880
Speaker 1: pro remainders in the cabinet to keep them on side.

544
00:31:18,880 --> 00:31:20,600
Speaker 1: So at the moment we don't really know he's thinking,

545
00:31:20,960 --> 00:31:23,000
Speaker 1: but that that's the kind of you know, generic things

546
00:31:23,000 --> 00:31:25,240
Speaker 1: that he'll have to decide in the next couple of days.

547
00:31:25,400 --> 00:31:29,520
Speaker 1: So Francine, realistically, what can bar Boris Johnson get done

548
00:31:29,560 --> 00:31:32,520
Speaker 1: in the next several months. What's the expectation. Well, so

549
00:31:32,560 --> 00:31:34,800
Speaker 1: he keeps on saying that young the thirty one of October,

550
00:31:34,880 --> 00:31:37,720
Speaker 1: he'll leave. It was very very interesting for me to

551
00:31:37,840 --> 00:31:40,000
Speaker 1: listen to the speech that he gave right after he

552
00:31:40,040 --> 00:31:42,760
Speaker 1: was announced as a Conservative leader, which means that tomorrow

553
00:31:42,760 --> 00:31:45,240
Speaker 1: he'll be prime minister, where he said basically, if you

554
00:31:45,240 --> 00:31:47,760
Speaker 1: look at the mantra that he used a campaign, that's

555
00:31:47,760 --> 00:31:51,480
Speaker 1: what he'll continue doing. A deliver breggsit. Remember we're exactly

556
00:31:51,480 --> 00:31:55,120
Speaker 1: a hundred days from that thirty first October deadline to

557
00:31:55,520 --> 00:31:58,560
Speaker 1: unite the country. Unclear how he'll do that and three

558
00:31:58,600 --> 00:32:02,040
Speaker 1: defeat Jeremy Corbin. Now is that an election campaign? Does

559
00:32:02,080 --> 00:32:03,920
Speaker 1: it mean that he wants to start campaigning and then

560
00:32:03,960 --> 00:32:06,200
Speaker 1: call a general election? And is that why he's saying

561
00:32:06,200 --> 00:32:09,280
Speaker 1: he's going to defeat Jeremy Corbyn. It's unclear for the moment.

562
00:32:09,600 --> 00:32:11,960
Speaker 1: We know that he wants to um you know, so

563
00:32:12,080 --> 00:32:15,120
Speaker 1: you know, renegotiate Brexit and quit the block by the

564
00:32:15,160 --> 00:32:17,440
Speaker 1: thirty one, So he'll try to go back to the

565
00:32:17,480 --> 00:32:19,800
Speaker 1: EU and see whether they can change anything on the

566
00:32:19,800 --> 00:32:22,800
Speaker 1: so called Irish backstop. So Francine, does do you think

567
00:32:22,840 --> 00:32:26,040
Speaker 1: bors Johnson has anything in his toolbox to get this

568
00:32:26,120 --> 00:32:29,160
Speaker 1: thing across the finish line that perhaps Theresa May did

569
00:32:29,160 --> 00:32:31,560
Speaker 1: not have having not really when you speak to a

570
00:32:31,600 --> 00:32:33,880
Speaker 1: lot of insiders at Westminster, he said, you know, his

571
00:32:34,040 --> 00:32:37,000
Speaker 1: style is very different, his energy is very different, and

572
00:32:37,000 --> 00:32:40,479
Speaker 1: so that may actually um scare on the one side

573
00:32:40,640 --> 00:32:42,720
Speaker 1: the EU to give him a little bit more because

574
00:32:42,720 --> 00:32:44,800
Speaker 1: he means business. When he says that they'll leave on

575
00:32:44,840 --> 00:32:49,120
Speaker 1: the thirty one of October two or die. Others will say,

576
00:32:49,160 --> 00:32:51,800
Speaker 1: you know, the minds of the parliamentarians will be focused

577
00:32:52,080 --> 00:32:54,479
Speaker 1: because he's serious about a no deal. But remember how

578
00:32:54,520 --> 00:32:57,120
Speaker 1: many times have we said about Theresa May the fact that,

579
00:32:57,440 --> 00:32:59,160
Speaker 1: you know, if you get close to a no deal

580
00:32:59,560 --> 00:33:02,200
Speaker 1: and then people will suddenly freak out and vote for

581
00:33:02,280 --> 00:33:04,280
Speaker 1: what's in you know, on the table. I'm not sure

582
00:33:04,320 --> 00:33:06,240
Speaker 1: that's the right way of looking at this. What do

583
00:33:06,400 --> 00:33:10,080
Speaker 1: former prime ministers do? Do they get a prime Ministerial library?

584
00:33:10,320 --> 00:33:15,560
Speaker 1: I mean that's a little bit different. Actually, remember Tony

585
00:33:15,600 --> 00:33:18,440
Speaker 1: Blair became a special envoid to the Middle East and

586
00:33:18,440 --> 00:33:20,760
Speaker 1: then now he's campaigning to have a second referendum and

587
00:33:20,760 --> 00:33:23,120
Speaker 1: to stop Brexit. If you look at David Cameron, he

588
00:33:23,200 --> 00:33:26,400
Speaker 1: really kind of, you know, fallen out of the face

589
00:33:26,400 --> 00:33:29,040
Speaker 1: of the earth if you're a common citizen. But he

590
00:33:29,200 --> 00:33:32,120
Speaker 1: is on the circuit of a talk circuit, getting quite

591
00:33:32,160 --> 00:33:34,040
Speaker 1: a lot of money for it. So it will be

592
00:33:34,080 --> 00:33:37,080
Speaker 1: interesting to see what Theresa May does next, if anything. So,

593
00:33:37,240 --> 00:33:40,000
Speaker 1: Francy and one of my you know, my pet solution

594
00:33:40,040 --> 00:33:42,120
Speaker 1: for this whole Brexit thing has always been let's just

595
00:33:42,160 --> 00:33:45,160
Speaker 1: do it again, a second referendum. Any chance that that

596
00:33:45,320 --> 00:33:48,080
Speaker 1: is still on the table. Yeah, So I still hear

597
00:33:48,160 --> 00:33:50,120
Speaker 1: that a lot of people are saying well, look, it

598
00:33:50,160 --> 00:33:53,200
Speaker 1: means that a lot of people, Um, you know that

599
00:33:53,200 --> 00:33:55,400
Speaker 1: that it puts us closer to a second referendum. But

600
00:33:55,440 --> 00:33:58,000
Speaker 1: if you think about it, so the people that voted

601
00:33:58,000 --> 00:34:01,200
Speaker 1: for Brexit will feel cheated. Um, you know, what does

602
00:34:01,240 --> 00:34:04,080
Speaker 1: it take for a Boris Johnson, someone who's really the

603
00:34:04,120 --> 00:34:07,040
Speaker 1: face of Brexit, to say, guys, no, no, we're just kidding.

604
00:34:07,160 --> 00:34:09,120
Speaker 1: Let's do it again. And then if you have a

605
00:34:09,160 --> 00:34:11,000
Speaker 1: poll that's really close, or actually, if you have a

606
00:34:11,080 --> 00:34:13,799
Speaker 1: vote that's really close, let's say fifty three forty seven

607
00:34:13,880 --> 00:34:15,680
Speaker 1: the other way, what do you do due to a

608
00:34:15,760 --> 00:34:18,239
Speaker 1: third time? So I keep on hearing that from from

609
00:34:18,320 --> 00:34:20,759
Speaker 1: mainly people that want to I think stay in the EU.

610
00:34:21,080 --> 00:34:23,600
Speaker 1: It was pretty hot today and the green wasn't it? Yeah?

611
00:34:23,640 --> 00:34:27,239
Speaker 1: No kidding? How do you make I mean, should we

612
00:34:27,280 --> 00:34:29,719
Speaker 1: ask the one from Italy here and get something constructive

613
00:34:29,719 --> 00:34:33,000
Speaker 1: done on Bloomberg surveillance? How does fans make an apper

614
00:34:33,080 --> 00:34:35,680
Speaker 1: all sprits? I mean, we're all a bunch of tourists.

615
00:34:36,000 --> 00:34:38,759
Speaker 1: We don't know what we're doing. You're the real deal, Francing,

616
00:34:39,360 --> 00:34:41,759
Speaker 1: How do you make an apper all sprits? I'm gonna

617
00:34:41,800 --> 00:34:43,680
Speaker 1: break your hard time. So I love an apperle spirts

618
00:34:43,719 --> 00:34:45,840
Speaker 1: like many people do. But actually there's a new drink

619
00:34:46,320 --> 00:34:50,720
Speaker 1: that's like it's it's called the Udo Sprits with Pudo

620
00:34:50,800 --> 00:34:53,600
Speaker 1: Sprits and it's actually with elder flower. I don't know

621
00:34:53,640 --> 00:34:56,759
Speaker 1: whether you know Apprile. If there's no deal, Brexit will

622
00:34:56,800 --> 00:34:59,359
Speaker 1: be brought in the country, but it's it's a bit

623
00:34:59,360 --> 00:35:02,040
Speaker 1: of prosecco, a little bit less of April and a

624
00:35:02,080 --> 00:35:05,319
Speaker 1: splash of soda water. Tom very good, that sounds good

625
00:35:05,360 --> 00:35:11,480
Speaker 1: on it. She looks so common connected out there. Everybody else,

626
00:35:10,920 --> 00:35:15,279
Speaker 1: you know, Roger Roger Boodle was just a mess with

627
00:35:15,440 --> 00:35:18,200
Speaker 1: capital economics of Fritzie is like, can we do this

628
00:35:18,280 --> 00:35:21,359
Speaker 1: every day? Francie, thank you so much. Are you at

629
00:35:21,400 --> 00:35:27,359
Speaker 1: the Green tomorrow? Um? Perhaps perhaps depends what Boris is doing.

630
00:35:27,360 --> 00:35:29,480
Speaker 1: I think maybe you'll be in the Cabinain I could

631
00:35:29,560 --> 00:35:36,000
Speaker 1: see that, Francie mclock Captain Tier. Thanks for listening to

632
00:35:36,080 --> 00:35:40,600
Speaker 1: the Bloomberg Surveillance podcast. Subscribe and listen to interviews on

633
00:35:40,640 --> 00:35:46,480
Speaker 1: Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm

634
00:35:46,520 --> 00:35:49,839
Speaker 1: on Twitter at Tom Keane before the podcast. You can

635
00:35:49,880 --> 00:35:53,080
Speaker 1: always catch us worldwide. I'm Bloomberg Radio