WEBVTT - Surveillance: The U.K. Is Split, Cambridge's Barnard Says 0:00:00.080 --> 0:00:13.040 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:13.480 --> 0:00:17.560 Jay Lee. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:34.320 Bloomberg dot Com, and of course on the Bloomberg John 0:00:34.880 --> 0:00:36.080 just to give you some of the ants on who 0:00:36.120 --> 0:00:38.720 the next governor of the Bank Kifingdom will be. General 0:00:38.800 --> 0:00:41.560 Lines has become the front run that way said it 0:00:41.600 --> 0:00:43.480 has cut the odds on him to six to four 0:00:43.920 --> 0:00:46.840 after seeing notable support from gamblers. So that's a story 0:00:46.880 --> 0:00:49.519 that emerged over the weekend. Tom certainly not hearing this 0:00:49.560 --> 0:00:52.279 from official lines, but certainly a lot of speculation over 0:00:52.280 --> 0:00:54.200 the last couple of days have sport betting in the 0:00:54.240 --> 0:00:56.120 United States, and we're now going to have betting on 0:00:56.160 --> 0:00:58.360 who does sends at the FED meeting or you can 0:00:58.440 --> 0:01:04.240 have whether Michael McKee whoever in the UK. Mcke, that's 0:01:04.280 --> 0:01:05.960 not rude. I don't think that you and I would 0:01:06.000 --> 0:01:07.480 be able to bet on that, given that we would 0:01:07.520 --> 0:01:10.000 have inside information that Michael McKee, my ass well, we 0:01:10.080 --> 0:01:13.160 know he's rude. So let's trying start of trouble. Let's 0:01:13.200 --> 0:01:16.600 let's talk to someone graceful here, Gabriela Sciantos with us 0:01:16.840 --> 0:01:18.720 the JP Morgan. I want to go back, given the 0:01:18.760 --> 0:01:22.400 moment we're in toward James Diamond got on a platform 0:01:22.680 --> 0:01:25.960 and I don't remember where it was around Brexit and 0:01:26.000 --> 0:01:29.319 basically said JP Morgan believes in London. Now you don't 0:01:29.360 --> 0:01:31.480 need to do a sales job this morning on JP 0:01:31.480 --> 0:01:35.080 Morgan in London. But as no, not that you're a 0:01:35.120 --> 0:01:38.520 representative for the executives of the bank, but as an 0:01:38.560 --> 0:01:43.480 international bank, London in the United Kingdom is critical. Whatever 0:01:43.640 --> 0:01:48.360 happens here, London is still London, isn't it. Absolutely? And 0:01:48.440 --> 0:01:51.960 we do think that we have changed the protagonist of 0:01:52.720 --> 0:01:56.200 the Brexit movie. Um, but it's over the next six 0:01:56.240 --> 0:01:58.840 months or so going to look fairly similar to the 0:01:58.840 --> 0:02:01.640 one that we were watching for. But eventually there will 0:02:01.720 --> 0:02:06.160 be um, you know, a day after Brexit, right, So 0:02:06.240 --> 0:02:08.480 we just need to get through some some more of 0:02:08.560 --> 0:02:12.200 this period of uncertainty and then life will move on, right. 0:02:12.240 --> 0:02:14.840 And this this is the same for for Brexit, it's 0:02:14.880 --> 0:02:17.960 the same for the trade uncertainty we're living through. Cyclically, 0:02:18.000 --> 0:02:21.040 it's a big challenge, but eventually there will be a 0:02:21.120 --> 0:02:24.560 day off one thing, john It's extraordinary. Speaking of London 0:02:24.880 --> 0:02:27.400 is the mayor of London with a harsh criticism by 0:02:27.440 --> 0:02:33.239 the President of the United States, Boris Johnson's lineage is extraordinary, 0:02:33.440 --> 0:02:36.720 going back three generations a Muslim, I'm going to say 0:02:36.800 --> 0:02:40.240 great grandfather. Uh, there's a whole Jewish wing to his 0:02:40.360 --> 0:02:42.480 family as well. I mean this guy, and this guy 0:02:42.600 --> 0:02:46.200 was a liberal mayor, right, I mean socially liberal mayor 0:02:46.480 --> 0:02:48.880 to some degree, sending not as liberalist the one we 0:02:48.919 --> 0:02:56.519 have now, but he's straddled society perhaps better than most conservatives. 0:02:56.520 --> 0:02:59.200 Getting some reaction from Europe now mis Chambonnier saying we 0:02:59.240 --> 0:03:02.320 look forward to can constructively with Prime Minister Boris Johnson 0:03:02.320 --> 0:03:05.280 when he takes office to facilitate the ratification of the 0:03:05.280 --> 0:03:08.160 withdrawal Agreement and achieve an orderly Brexit. We are ready 0:03:08.200 --> 0:03:10.960 also to rework the agreed declaration on a new Partnership 0:03:11.000 --> 0:03:14.160 in line with European Commission guidelines. It is going to 0:03:14.240 --> 0:03:17.840 be fascinating to see what kind of different approach a 0:03:17.919 --> 0:03:21.280 Prime Minister Boris Johnson takes with European leaders and whether 0:03:21.360 --> 0:03:24.280 he can get a different result to Prime Minister make can. 0:03:24.320 --> 0:03:27.959 I note the FORO decimal points, Swisses come in strong 0:03:28.080 --> 0:03:33.040 Swiss and German two year has come down another to 0:03:33.240 --> 0:03:36.400 whatever you call it, where it's almost near record law. 0:03:36.440 --> 0:03:39.240 I mean, I'm not going to say markets moving, I'm 0:03:39.280 --> 0:03:42.760 Prime Minister Johnson, but I'm looking at my Bloomberg screen 0:03:42.760 --> 0:03:44.960 and markets are moving. I think Europe shifts quickly to 0:03:45.000 --> 0:03:47.200 the ECB decision on Thursday, and I think that's at 0:03:47.200 --> 0:03:49.880 the epicenter of FX price s action in g ten, 0:03:50.000 --> 0:03:52.440 especially at the moment. Just the idea being that if 0:03:52.440 --> 0:03:55.800 the Europeans ease, the SMB needs to follow up with something. 0:03:55.840 --> 0:03:58.320 Otherwise all they're gonna get is euro Swiss lower and 0:03:58.360 --> 0:04:02.360 euro Swiss lower strongest we see is the last thing 0:04:02.520 --> 0:04:05.560 that President Jordan wants over in Zurich, Switzerland. It's the 0:04:05.600 --> 0:04:07.840 last thing he wants. So look, the politics in the 0:04:07.880 --> 0:04:10.200 UK is going to take center stage for Sterling crosses 0:04:10.240 --> 0:04:12.800 everything house in Europe, the distraction will be on the 0:04:12.800 --> 0:04:15.200 e c B in a common day. Where's the distraction 0:04:15.240 --> 0:04:17.640 of multinationals in Europe? I mean, they all pay big 0:04:17.680 --> 0:04:22.200 fat dividends, Gabriel sants, but within your asset management, do 0:04:22.279 --> 0:04:25.600 you buy their dividend? And the plot forward or do 0:04:25.640 --> 0:04:28.080 you have to stay in the United States. So Europe 0:04:28.120 --> 0:04:31.800 is tough to to become very positive on here in 0:04:31.839 --> 0:04:37.280 the short term thinking about European equities, about financials, uh, 0:04:37.320 --> 0:04:40.000 and if we're in this environment that we didn't expect 0:04:40.000 --> 0:04:42.080 to be in just a few months ago. But if 0:04:42.120 --> 0:04:45.720 indeed we do see rate cuts probably in September by 0:04:45.720 --> 0:04:49.200 the e c B, um, that's an environment where European 0:04:49.279 --> 0:04:52.640 financials will struggle to really break out. Um. Europe of 0:04:52.680 --> 0:04:54.800 course also at the center of a lot of this 0:04:54.960 --> 0:04:59.080 uncertainty Breggs trade. So it seems tough to to become 0:04:59.279 --> 0:05:02.520 very very up mystock about European equities here, John Siemens 0:05:02.520 --> 0:05:06.560 dividends three point You know, it's just it's a bigger dividend. 0:05:07.120 --> 0:05:09.680 Decent dividends on a foot see as well in some 0:05:09.760 --> 0:05:12.400 of the big energy names. Just depends whether you want 0:05:12.400 --> 0:05:15.159 to take that kind of risk at the moment without dividends. 0:05:15.320 --> 0:05:18.840 I mean Gabriella earlier, she spent some time with one 0:05:18.839 --> 0:05:22.280 of my properties earlier. John, this morning she modeled out 0:05:22.279 --> 0:05:25.960 of two share by back. Can I just get a 0:05:25.960 --> 0:05:28.240 final word on the United Kingdom, on on Brexit and 0:05:28.320 --> 0:05:30.640 the markets, we can talk to the end of the 0:05:30.640 --> 0:05:33.320 earth about Sterlink. I want to talk about rates in 0:05:33.360 --> 0:05:36.720 the United Kingdom and guilt specifically. I am fascinated to 0:05:36.760 --> 0:05:40.599 see how the guilt market responds to a Prime minister 0:05:41.000 --> 0:05:42.880 that maybe a little bit bolder and more aggressive with 0:05:42.920 --> 0:05:44.760 the Europeans and push the line that they're willing to 0:05:44.760 --> 0:05:47.160 go through with a hard brexit on October thirty one 0:05:47.279 --> 0:05:50.080 without a deal. Do you see a market gabriella that 0:05:50.120 --> 0:05:53.239 behaves like an emerging market country order developed market country? 0:05:53.240 --> 0:05:55.480 And what I mean by that is, do yields grind 0:05:55.520 --> 0:05:58.159 tighter lower in the United Kingdom on the risk of 0:05:58.160 --> 0:06:00.560 a heart brexit or they start to go a little 0:06:00.560 --> 0:06:03.240 bit higher on the fear that the foreign money starts 0:06:03.279 --> 0:06:08.320 to flee stelling denominated assets. We do think UK guilts 0:06:08.320 --> 0:06:11.320 are likely to grind lower. I do think the expectation 0:06:11.360 --> 0:06:13.320 would be if you did have a heart bregsit that 0:06:13.400 --> 0:06:16.720 the Bank of England would respond by cutting race to 0:06:16.800 --> 0:06:20.680 try to um stimulate growth and try to prevent some 0:06:20.760 --> 0:06:24.520 sort of worse adverse reactions. So we do think ultimately 0:06:25.000 --> 0:06:28.279 UK guilts are likely to grind lower, following in line 0:06:28.320 --> 0:06:30.440 with the rest of the global theme or scene. Is 0:06:30.440 --> 0:06:33.200 there an opportunity internationally? I mean you live on airplanes. 0:06:33.240 --> 0:06:37.440 Is there an opportunity internationally right now? There is? UM 0:06:37.520 --> 0:06:40.760 of course, all about time frames, we do think internationally 0:06:40.839 --> 0:06:43.240 five tenures out will have its day in the sun. 0:06:43.320 --> 0:06:47.640 Once again, I think more tactically, there are some positive stories. 0:06:47.680 --> 0:06:51.120 There are few and far in between. UM. One story 0:06:51.160 --> 0:06:54.920 that as a as a good UM Brazilian, I would 0:06:54.920 --> 0:06:57.800 be remiss not to bring out that is one area 0:06:57.800 --> 0:07:00.440 of the world that we're actually seeing a reduction in 0:07:00.520 --> 0:07:05.480 economic policy uncertainty UM. And that's really around h some 0:07:05.520 --> 0:07:10.000 more implementation of reforms UM, both in terms of fiscal 0:07:10.040 --> 0:07:13.280 as well as economic reforms. So that's one area that's 0:07:13.280 --> 0:07:16.400 really standing out here in the short term as moving 0:07:16.520 --> 0:07:20.000 in a different direction and a positive one. Get a 0:07:20.000 --> 0:07:22.720 better sense of joining us from JP Morgan as in management. 0:07:22.720 --> 0:07:25.520 Great to cat show me this morning, appreciate your patients. 0:07:26.000 --> 0:07:27.480 We will have a new Prime Minister in the United 0:07:27.560 --> 0:07:40.400 Kingdom and his name will be Boris Johnson. With a 0:07:40.560 --> 0:07:44.680 Prime Minister Johnson's ascent or selection, I should say, by 0:07:44.920 --> 0:07:47.440 what is it like a hundred and seventy thousand people? 0:07:47.560 --> 0:07:49.440 About a hundred and sixty I think I mean, that's like, 0:07:49.520 --> 0:07:52.320 you know, the Friday brunch crowd of the Ned. You know, 0:07:52.480 --> 0:07:54.320 that's the way the process works in the United Kingdom. 0:07:54.360 --> 0:07:57.320 You're selecting the leader of your party, which is a 0:07:57.360 --> 0:08:01.200 consequence becomes the Prime Minister. Can people vote that don't 0:08:01.200 --> 0:08:04.000 on land? I mean it's it's like quait if you're 0:08:04.280 --> 0:08:06.520 if you're a member of the Conservative Party, you can vote, 0:08:06.880 --> 0:08:09.360 and the membership basis about a hundred and sixty. We 0:08:09.440 --> 0:08:11.920 got to an expert to give us some real perspective 0:08:11.960 --> 0:08:15.040 on this. We're thrilled at Katherine Bernard joins us with 0:08:15.160 --> 0:08:20.080 Cambridge University. She's truly provided value to surveilance in the 0:08:20.240 --> 0:08:25.200 nuances of this moment. Professor, what is the nuance for 0:08:25.280 --> 0:08:29.720 Boris Johnson? Literally in the next forty eight hours? What's 0:08:29.760 --> 0:08:33.120 in here to do? I don't. I don't think Boris 0:08:33.160 --> 0:08:36.920 Johnson does nuance. He does big picture stuff, he does 0:08:37.000 --> 0:08:40.480 bold colors. Um. What he's good at is getting some 0:08:40.960 --> 0:08:43.960 good people around him who can deliver on the things 0:08:43.960 --> 0:08:46.280 that he wants to do. But what he's got doing 0:08:46.320 --> 0:08:48.680 the next forty eight hours is first of all, to 0:08:48.760 --> 0:08:51.800 say he's got a big speech to give tomorrow, where 0:08:51.880 --> 0:08:54.680 he's going to set out not just his priorities in 0:08:54.720 --> 0:08:58.280 respect to Brexit, but also priorities in respect of um 0:08:58.640 --> 0:09:02.120 social policy, which he is very keen to pursue alongside, 0:09:02.200 --> 0:09:05.000 so he can show that there's a domestic agenda as 0:09:05.000 --> 0:09:08.280 well as a Brexit agenda. Is there a risk, Catherine, 0:09:08.320 --> 0:09:10.880 that some of the some of the MPs within the 0:09:10.960 --> 0:09:13.400 Conservative Party start to deffect Do you see that as 0:09:13.400 --> 0:09:16.240 a risk and immediate risk that this majority that the 0:09:16.280 --> 0:09:18.920 Prime Minister will be holding, a very very slim majority, 0:09:19.000 --> 0:09:22.600 how together by politicians in Northern Ireland, may fall apart 0:09:22.679 --> 0:09:26.600 quite quickly. Well, that's that's a great fear for Boris Johnson, 0:09:26.600 --> 0:09:28.719 which is why there's much talk about the fact that 0:09:28.760 --> 0:09:32.160 there's likely to be a snap general election. Some people 0:09:32.200 --> 0:09:36.960 say on the fourth of October. But the problem then, 0:09:37.000 --> 0:09:39.280 as if he goes for a snap general election before 0:09:39.360 --> 0:09:41.800 the third first of October, is that it will become 0:09:41.800 --> 0:09:44.880 a four party race and the Brexit Party will be 0:09:44.920 --> 0:09:48.479 able to hammer the Conservatives by saying you the Conservatives 0:09:48.679 --> 0:09:51.920 haven't haven't delivered Brexit, and so some people say you 0:09:52.000 --> 0:09:55.960 might wait until the early spring. But the problem is 0:09:56.040 --> 0:09:58.680 it's really difficult to govern when you have got no 0:09:58.800 --> 0:10:02.240 majority that can de presci your legislation through. He's got 0:10:02.280 --> 0:10:04.360 to get to what time the thirty one? Can he 0:10:04.400 --> 0:10:08.040 get there? Well, of course he can very easily get there, 0:10:08.080 --> 0:10:12.000 because the default position is that the UK crashes out 0:10:12.040 --> 0:10:14.840 of the EU without any deal on the thirty first 0:10:14.880 --> 0:10:19.040 of October. Um that it is possible to extend that date, 0:10:19.160 --> 0:10:23.359 but that requires the unanimous agreement of the remaining EU 0:10:23.520 --> 0:10:26.800 states the EU, and it's not clear that they would 0:10:26.840 --> 0:10:30.440 agree to an extension if one were asked for um, 0:10:30.480 --> 0:10:33.280 if they think the UK is just playing for time 0:10:33.320 --> 0:10:35.880 because we're not actually doing anything concrete. It was always 0:10:35.880 --> 0:10:38.280 assumed that it was never a credible threat. A hard 0:10:38.320 --> 0:10:41.200 brexit from the Prime Minister Theresa May was never a 0:10:41.200 --> 0:10:46.199 credible threat. Has it become somewhat more credible with prim Uster, 0:10:46.280 --> 0:10:49.920 Boris Johnson, Catherine going into these negotiations again with the Europeans. 0:10:51.000 --> 0:10:53.120 I think it has become a much more credible threat. 0:10:53.120 --> 0:10:57.040 There are people around, not just who are Boris Johnson supporters, 0:10:57.040 --> 0:10:59.520 who who say that the chances of US having a 0:10:59.600 --> 0:11:04.600 no deal Brexit now are up between seventy So I 0:11:04.640 --> 0:11:06.720 think the chances of an odeal Brexit have gone up 0:11:06.800 --> 0:11:12.199 quite considerably. The planning has also increased in order to 0:11:12.280 --> 0:11:16.440 hit that date of the U thirty one October. But 0:11:16.520 --> 0:11:20.720 the fact is um the Parliament voted last week over 0:11:20.840 --> 0:11:24.880 a very technical point in the Northern Ireland legislation to say, actually, 0:11:25.040 --> 0:11:27.920 we don't want Parliament to be proobed. That's suspended. So 0:11:28.360 --> 0:11:31.319 it may be sending out a more complicated message we're 0:11:31.320 --> 0:11:33.400 not heading for a no deal brexit. What will be 0:11:33.480 --> 0:11:38.520 Prime Minister Johnson's complicated Irish message versus what we saw 0:11:38.600 --> 0:11:43.160 from Prime Minister May. Well, he's absolutely convinced that the 0:11:43.200 --> 0:11:46.480 Northern Ireland border problem can be sorted out by technology. 0:11:46.840 --> 0:11:49.680 And just to remind your listeners who may not be 0:11:49.760 --> 0:11:52.400 living and breathing the question that there would be a 0:11:52.400 --> 0:11:54.960 few hours we have, well, we have forty two listeners 0:11:55.000 --> 0:11:57.360 and I would say forty four of the forty two 0:11:57.400 --> 0:12:03.000 listeners are not living in breathing Brexit. The Northern Ireland 0:12:03.040 --> 0:12:05.600 border issue is that at the moment there is no 0:12:05.760 --> 0:12:08.360 physical border between the North of Ireland and the south, 0:12:09.000 --> 0:12:13.640 and if we leave the European Union without a deal, um, 0:12:13.679 --> 0:12:17.040 it's inevitable that a border will a physical border will 0:12:17.160 --> 0:12:19.480 re emerge. Between the North and South, and that goes 0:12:19.559 --> 0:12:22.320 directly contrary the spirit of the Good Friday Agreement, which 0:12:22.440 --> 0:12:26.640 was that extraordinary agreement which led to significant peace in 0:12:26.679 --> 0:12:29.760 Northern Ireland. And so the question is how do you 0:12:29.800 --> 0:12:33.160 square the circle of us leaving the Single Market in 0:12:33.200 --> 0:12:36.840 the Customs Union, the key components of the EU, while 0:12:36.920 --> 0:12:40.440 not reintroducing a hard border. And so Boris Johnson's onto 0:12:40.520 --> 0:12:43.040 that is, we can do it through the wonders of technology. 0:12:43.360 --> 0:12:45.439 The problem is lots of people say there is no 0:12:45.520 --> 0:12:47.960 technology that exists at the moment that doesn't rely on, 0:12:48.000 --> 0:12:52.720 for example, cameras and cameras require infrastructure and that becomes 0:12:52.760 --> 0:12:55.280 something like a physical border in Northern Ireland. And that's 0:12:55.320 --> 0:12:57.200 the real problem. Kathern just to pick up on a 0:12:57.240 --> 0:12:59.720 line that was used in that acceptance speech from Boris 0:12:59.760 --> 0:13:03.000 john So just about an hour ago, deliver Brexit, Unite 0:13:03.040 --> 0:13:06.800 the country, defeat Jeremy Corbyn. Those three objectives, which one 0:13:06.840 --> 0:13:11.640 is the hardest? I think the I think they're all 0:13:11.679 --> 0:13:15.160 a star in terms of difficulty. I mean delivering Brexit 0:13:15.200 --> 0:13:17.559 at one level. Of course, it's going to happen automatically 0:13:17.559 --> 0:13:19.760 on the thirty first of October. So from one point 0:13:19.760 --> 0:13:22.280 of view, that will be the easiest. But of course 0:13:22.400 --> 0:13:25.320 the third first of October is a date, and a 0:13:25.400 --> 0:13:28.439 hard Brexit is not actually an event, but it's a process, 0:13:28.800 --> 0:13:31.200 and it's what happens on the thirty one November and 0:13:31.760 --> 0:13:35.440 December and so forth that really becomes the issue. So actually, 0:13:35.440 --> 0:13:38.800 at one level, delivering Brexit is very easy. What's much 0:13:38.840 --> 0:13:41.440 more difficult will be delivering Brexit in a way that 0:13:41.520 --> 0:13:45.400 satisfies a very divided country. And so in fact one 0:13:45.520 --> 0:13:49.040 leads to another. In the immediate In the immediate term, 0:13:49.040 --> 0:13:52.559 he's got to unite the party. Tom four pm London time, 0:13:52.880 --> 0:13:55.160 he will speak to the Tory rank and file MPs, 0:13:55.640 --> 0:13:58.200 so in a round about three hours time in the UK, 0:13:58.280 --> 0:13:59.760 he's got to sit down with the Tory rank and 0:13:59.800 --> 0:14:02.319 file m peace and try and unite them. Catherine, how 0:14:02.320 --> 0:14:06.079 does he do that today? Well, that's the relatively easy 0:14:06.120 --> 0:14:08.720 part because the rank and file are certainly those who 0:14:08.760 --> 0:14:13.440 are members voted overwhelmingly for Boris Johnson premiership. So that 0:14:13.480 --> 0:14:15.160 will bit will be the easy bit, And he will 0:14:15.200 --> 0:14:18.079 make a tub something speech saying that we will be 0:14:18.200 --> 0:14:20.320 leaving the you on third first of October, and we 0:14:20.440 --> 0:14:24.160 were great and glorious country. But it's all very good 0:14:24.280 --> 0:14:28.520 talking in adjectives and abstract nouns, it's actually delivering that 0:14:28.640 --> 0:14:30.280 it's going to be damned so harder. I mean, we 0:14:30.360 --> 0:14:32.720 got to remember that this guy's a guy who studied Greek, 0:14:32.760 --> 0:14:36.480 in Greek and Latin. It acts for he's got a 0:14:36.560 --> 0:14:41.440 high fancy degree and all that. Professor, what is his 0:14:41.640 --> 0:14:46.440 prime ministerial parallel? I mean, you know he likes to 0:14:46.480 --> 0:14:49.120 be Disraeli and say he's a a man of many 0:14:49.160 --> 0:14:51.520 seasons in many interests, that he does this and he 0:14:51.560 --> 0:14:55.800 does that. Is there any previous Boris Johnson that's held 0:14:55.840 --> 0:15:00.120 the office. Well, I think he fancies modeling into off 0:15:00.200 --> 0:15:03.520 from Winston Churchill, who was also a man with a 0:15:03.600 --> 0:15:08.120 very large personality and a very large land. The question 0:15:08.240 --> 0:15:11.040 is whether he will have the dexterity of a Churchill 0:15:11.440 --> 0:15:14.920 to both deliver a Brexit that doesn't damage the country 0:15:15.240 --> 0:15:18.520 and also brings the public back together because at the 0:15:18.560 --> 0:15:22.360 moment the country, like Parliament, is absolutely divided down the middle, 0:15:22.800 --> 0:15:25.400 and the and the figures haven't changed dramatically or remember 0:15:25.400 --> 0:15:29.080 on the twenty three of June it was forty eight 0:15:29.120 --> 0:15:31.320 in favor of leave at the moment, it might be 0:15:32.040 --> 0:15:34.320 forty eight in favor of Remain, but it's very difficult 0:15:34.320 --> 0:15:36.880 to tell. But the fact is the country is split 0:15:37.040 --> 0:15:39.240 and it's going to be a huge challenge for someone 0:15:39.280 --> 0:15:42.840 like Boris Joarston, who led the Leave campaign to really 0:15:42.880 --> 0:15:46.080 reach out to those remainers. Professor, thank you for your 0:15:46.080 --> 0:15:51.720 time with at Cambridge and has just given us wonderful perspective. 0:15:51.840 --> 0:15:54.600 Love catching up at Catherine makes it very very clear 0:15:54.600 --> 0:15:56.520 and easy to understand because the process in the United 0:15:56.600 --> 0:15:59.040 Kingdom is very complex and foreign to so many people. 0:15:59.240 --> 0:16:03.880 And it's in English. You know it's definition. Yeah, I get. 0:16:03.960 --> 0:16:19.600 It was quite quite funny. I'm filmed today full avoid 0:16:19.640 --> 0:16:23.440 the mathiness of late July and August. That is difficult 0:16:23.480 --> 0:16:26.480 to do with one of our most acute thinkers on 0:16:26.680 --> 0:16:29.920 central Banks, that as an Ariana Cucha Lakota, of course 0:16:29.960 --> 0:16:33.080 acclaimed at Minnesota and now at the University of Rochester 0:16:33.760 --> 0:16:36.920 and joins us on the shores of the Genesee River today, 0:16:36.960 --> 0:16:40.320 Professor Katcha Lakota, wonderful to have you with us. If 0:16:40.360 --> 0:16:43.200 I go back to the writings of the late nineties, 0:16:43.240 --> 0:16:47.840 including Coacha, Lakota and Phelan, there's the reality of what 0:16:48.000 --> 0:16:51.680 if we ever got to the zero bound. Well, here 0:16:51.720 --> 0:16:55.160 we are, twenty years later at the zero bounder in 0:16:55.160 --> 0:16:58.640 the vicinity of it. Are we looking at central banks 0:16:58.640 --> 0:17:01.200 and can they do what they need to do at 0:17:01.240 --> 0:17:04.399 the zero bound or is this all an exercise and 0:17:04.480 --> 0:17:08.760 futility right now? Tomm Yeah, thanks a lot for having 0:17:08.760 --> 0:17:11.960 me on. You know, I think that the zero bound 0:17:12.000 --> 0:17:15.480 what seems like they just a theory out of this 0:17:15.640 --> 0:17:18.960 rit called curios um um twenty years ago, with the 0:17:18.960 --> 0:17:22.640 exception of Japan obviously, but central banks around the world 0:17:22.640 --> 0:17:25.120 are having to live with it, and I think it's 0:17:25.280 --> 0:17:28.320 very much a factor in the Fed's current thinking is 0:17:29.320 --> 0:17:31.760 that we don't want to get ourselves into a recession 0:17:31.840 --> 0:17:34.960 where we would really face the need to use our ammunition, 0:17:35.160 --> 0:17:37.520 so let's keep the economy as healthy as we possibly 0:17:37.560 --> 0:17:41.399 can now um, And I think that's definitely a factor, 0:17:41.400 --> 0:17:44.280 and they're thinking about their easy decision they're going to 0:17:44.560 --> 0:17:47.000 next week. You have been a student. I believe you 0:17:47.080 --> 0:17:49.560 taught it Rochester measured one on one or maybe it 0:17:49.600 --> 0:17:52.280 was two or three. I can't remember the course. Alan 0:17:52.320 --> 0:17:57.680 Greenspan delivered us the phrase measured and an incremental policy. 0:17:57.720 --> 0:18:00.960 Do we need to go back to burns dynamism. Do 0:18:01.000 --> 0:18:03.720 we need to go back to fifty basis points or 0:18:04.240 --> 0:18:07.040 abrupt moves or do we stay a measured way as 0:18:07.119 --> 0:18:12.159 a reigning theory of central banking. That is a great question, 0:18:12.200 --> 0:18:15.280 and I that's it. You got it. Boris Johnson didn't 0:18:15.280 --> 0:18:20.800 get the great question today. That's it. I'm done. Continue. 0:18:21.640 --> 0:18:24.280 But I I think, first of all, I think the 0:18:24.320 --> 0:18:29.000 FED is very dominated by the gradualist thinking UH that 0:18:29.000 --> 0:18:32.720 that you attribute to UH to former Chairman Greenspan. With 0:18:32.880 --> 0:18:36.440 that set, I would prefer if they committed themselves to 0:18:36.640 --> 0:18:42.560 being to an aggressive response if we had a significant downturn, 0:18:42.600 --> 0:18:46.640 So if unemployment were to rise above four percent, which 0:18:46.640 --> 0:18:48.640 doesn't sound that significant, but it would mean a big 0:18:48.640 --> 0:18:52.439 increase over where we are today. UM, if and that 0:18:52.480 --> 0:18:54.359 looked like it was something that's sustainable, I think the 0:18:54.400 --> 0:18:57.200 FED should really say, Okay, we're going to call interest 0:18:57.280 --> 0:19:01.600 rates UH significantly and aggressively at that point. And that 0:19:01.680 --> 0:19:05.760 would be a better response than the more gradual approach 0:19:05.800 --> 0:19:09.200 that there there, they're h they're still stuck in Marianna. 0:19:09.280 --> 0:19:12.080 It looks like we finally have a really contentious Federal 0:19:12.119 --> 0:19:15.120 Reserve meeting. We've heard arguments for no cuts. We've heard 0:19:15.200 --> 0:19:18.119 arguments for twenty five basis point cuts. We've heard an 0:19:18.160 --> 0:19:20.359 argument that sounds like an argument for a fifty basis 0:19:20.400 --> 0:19:23.600 point cut. Not how to take me inside that room? 0:19:23.720 --> 0:19:27.320 How difficult will it be to find consensus? On July one? 0:19:29.160 --> 0:19:33.160 I think, uh, this this chairman is you know, been 0:19:33.400 --> 0:19:37.360 proven himself to be a consensus builder. Um. I think 0:19:37.400 --> 0:19:41.640 the bulk of the communication has been pretty clear that 0:19:41.640 --> 0:19:46.000 that we're aiming at twenty five basis points. For myself, 0:19:46.040 --> 0:19:49.520 I had prefer to see um a dissent actually at 0:19:49.560 --> 0:19:53.480 the next next week's meeting. I think the censor play 0:19:53.480 --> 0:19:56.600 an important role in terms of communicating the public that 0:19:56.520 --> 0:19:59.159 the fet is taking on board all risks. UM. So 0:19:59.200 --> 0:20:03.520 I would expect a hawkish hawkish descent next week. Um, 0:20:03.640 --> 0:20:07.760 and so saying maybe this isn't the time to to 0:20:07.760 --> 0:20:11.000 to cut interest rates. Professor Andy holding Over at the 0:20:11.000 --> 0:20:13.879 Bank of England out with a set of headlines of 0:20:13.920 --> 0:20:16.160 their brexity and all that. But he has a headline 0:20:16.640 --> 0:20:18.320 which also goes to the heart of all of our 0:20:18.359 --> 0:20:25.480 listeners as well. He says United Kingdom workers are experiencing 0:20:25.680 --> 0:20:31.320 a paid disaster. So many Americans feel that way that 0:20:31.400 --> 0:20:35.240 they're in a quote unquote paid disaster. How do we 0:20:35.359 --> 0:20:42.520 boost that quickly in lieu of a productivity advancement? Yeah, 0:20:42.760 --> 0:20:45.919 you know, I think that is a very challenging question, 0:20:46.000 --> 0:20:49.600 and it uh is one that economists and policy makers 0:20:49.600 --> 0:20:54.040 are strongly with around the world. It is I think 0:20:54.280 --> 0:20:57.520 largely outside the purview of short term policy to make 0:20:57.600 --> 0:21:02.200 that happen. I think it's really more a longer term issues. 0:21:02.440 --> 0:21:06.159 But yeah, I think, you know, uh Andy Halliday is right. 0:21:06.200 --> 0:21:08.719 I think in the UK they are facing pay disaster. 0:21:08.840 --> 0:21:11.199 Things are a little better for our workers here in 0:21:11.240 --> 0:21:15.320 the United States. But but certainly midy Americans would would 0:21:15.320 --> 0:21:18.320 agree with Mr Hawley statement, Well, if we get a 0:21:18.400 --> 0:21:21.119 jump condition away from green spani and measure, we expect 0:21:21.160 --> 0:21:23.560 to see you with a pipe, holding a pipe, blowing 0:21:23.720 --> 0:21:27.920 Arthur Burnsey and smoke signals at any point. Professor Cutch Dakota, 0:21:28.480 --> 0:21:32.119 thank you so much. Of course, it esteemed moment ferals 0:21:32.119 --> 0:21:47.920 aping the International Monetary Fund. They're out with a midyear correction, 0:21:48.000 --> 0:21:51.040 if you will, on the world economic outlook. The headline 0:21:51.080 --> 0:21:54.280 is weaker growth, but it is a jumble as well 0:21:55.000 --> 0:21:58.440 around trade. The headline they cut their global outlook see 0:21:58.480 --> 0:22:02.439 downside risks on trade tensions. I was able to speak 0:22:02.440 --> 0:22:06.400 with our director of Economic research, their chief economists, get 0:22:06.520 --> 0:22:11.199 to gopeneth curious our conversation, get gopeneth on trade. The 0:22:11.320 --> 0:22:13.439 US is growing at the arend two point six percent, 0:22:13.560 --> 0:22:17.920 and that is a solid economy. The labor markets are 0:22:18.000 --> 0:22:21.240 quite strong and you see wage growth. So there are 0:22:22.160 --> 0:22:25.000 you know, good signs of solid growth. And with that said, 0:22:25.040 --> 0:22:28.840 there are downside risks, especially coming from the rest of 0:22:28.880 --> 0:22:31.240 the world. One of the great things you do within 0:22:31.320 --> 0:22:35.600 this report is really in partition the service sector in 0:22:35.680 --> 0:22:39.640 the United States and other nations with the goods producing sector. 0:22:40.040 --> 0:22:43.280 What is the distinction of your analysis of a better 0:22:43.320 --> 0:22:47.159 performing service sector versus all the uproar we see in 0:22:47.240 --> 0:22:49.959 goods So, you know, it's it's great to look at 0:22:49.960 --> 0:22:53.080 the distinction between what's happening with manufacturing and services, because 0:22:53.119 --> 0:22:57.720 that's exactly where we see the negative outcomes of heightened 0:22:57.720 --> 0:23:01.840 policy and certainty. So manufacturing pususing managers in disease continue 0:23:01.880 --> 0:23:05.520 to decline, while at the same time services sector continues 0:23:05.560 --> 0:23:08.840 to hold up and consumer sentiment is strong. Now you 0:23:08.880 --> 0:23:11.520 know that is partly a reflection of the fact that 0:23:11.560 --> 0:23:14.160 there has been improvements in labor market outcomes, and most 0:23:14.160 --> 0:23:17.000 of the major economies of the world there's been wage growth, 0:23:17.200 --> 0:23:19.480