Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along
Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jailey. We bring you
Speaker 1: insight from the best and economics, finance, investment, and international relations.
Speaker 1: Find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg dot Com,
Speaker 1: and of course, on the Bloomberg terminal. David folks Landa
Speaker 1: joins us just to say he's chief economist of Deutsche Bank.
Speaker 1: Barely describes his contribution to economics, and I think of
Speaker 1: Michael Dooley, David folks Landau and Peter Garber and their
Speaker 1: important research on intervention of two decades ago. Dfl you
Speaker 1: and others at Deutsche Bank are talking very seriously about
Speaker 1: a need to intervene here the weak euro intervention of
Speaker 1: another time and place was eighty five cents ninety cents.
Speaker 1: Now you're talking intervention one ten. Why is that, Well,
Speaker 1: it's a question of how to control inflation without doing
Speaker 1: too much damage, and there the easiest way and the
Speaker 1: most effective way to do that would be for the
Speaker 1: European Central Bank to raise rates, or to find some
Speaker 1: way of talking rates up and indicating that that's what
Speaker 1: they will do. You will recall that when they went
Speaker 1: negative in two thousand and fourteen, the dollar appreciated from
Speaker 1: somewhere around one three six to one ten in a
Speaker 1: matter of nine months. And so any move now to
Speaker 1: increase rates and to the signal that they will be
Speaker 1: going positive would precipitate a very very quick dollars appreciation,
Speaker 1: which would re cost be great for inflation within within Europe,
Speaker 1: which will be one of the main problems they will
Speaker 1: have given what's in the pipeline. Now, let's go to
Speaker 1: Rudiger Dornbush and can Ago if they would suggest and
Speaker 1: less coordinated intervention will not be effective. Do you see
Speaker 1: this as a singular EU effort or would it be coordinated?
Speaker 1: There is not a chance in the world that we
Speaker 1: will get it coordinated intervention, even in times like this
Speaker 1: with the door in Europe's on Europe's doorstep, those days
Speaker 1: are gone, I think not. Even the direct intervention for
Speaker 1: the sake of getting moving the change is something that
Speaker 1: I think the ECP would do. It's more a question
Speaker 1: of indicating concern and changing the tonality around that rather
Speaker 1: than direct intervention. I think that's just not in the
Speaker 1: cars right now. So what would they have to say
Speaker 1: I mean, is this basically them coming out and saying,
Speaker 1: there are no great hikes on the horizon, We're going
Speaker 1: to continue all of our emergency purchases in full for
Speaker 1: a prolonged period of time and we have your back.
Speaker 1: Is that basically the idea, and that would weaken the currency,
Speaker 1: It wouldn't necessarily strengthen it. So what could they even say? No?
Speaker 1: I think they would have to go back to the
Speaker 1: narrative of saying that we will raise rates this year
Speaker 1: because the inflation is our top priority and there our
Speaker 1: main objective, and that that will be reflected hopefully in
Speaker 1: their inflation forecast. And we have inflation in Europe somewhere
Speaker 1: around six and a half per cent for this year,
Speaker 1: and that number just cannot stand without being being confronted
Speaker 1: with the policy tradition to admit that they will undoubtedly
Speaker 1: and say that we will now think start thinking about
Speaker 1: moving this year and rather than pushing it further out,
Speaker 1: and then what would that be enough? Though, David, And
Speaker 1: the reason why I asked this is because we've got
Speaker 1: an increasing number of analysts and economists coming on and
Speaker 1: saying we're getting to the point where central banks lack
Speaker 1: the ability to really influence inflation and even growth, given
Speaker 1: some of the exogenous shocks. Do you think that that
Speaker 1: will actually make a difference, a sort of tighter verbiage
Speaker 1: at least from the ECB at a time when the
Speaker 1: economy is getting hammered by some of the pressures from
Speaker 1: the from the invasion. There's no doubt if it went
Speaker 1: for the exchange rate that the raising rates themselves, it
Speaker 1: would feed slowly through the economy, of course, to impact
Speaker 1: on demand, impact on credit availability, and things like that,
Speaker 1: but the exchange rate impact will be dramatic and it
Speaker 1: will be fast. So that's why I said at the
Speaker 1: outset that the best tool for them available is to
Speaker 1: talk up the exchange it as best as they can.
Speaker 1: They will do that by giving the market greatest certainty
Speaker 1: and greater conviction that they will raise rates and that
Speaker 1: they will think in terms of moving towards a positive
Speaker 1: depot rate this year or certainly very early next year.
Speaker 1: That's certainty is important, and I think that you would
Speaker 1: see an immediately beneficial effect for the exchange rate, and
Speaker 1: immediate feed through through inflation would make it much easier
Speaker 1: for them to macro manage the economy. David ruled a
Speaker 1: one thirteen brent crude to one thirteen as well, that's
Speaker 1: just by convenience. And the answer is these are shocks
Speaker 1: to the system as they filter through to the balance
Speaker 1: sheets into the right downs to come. Is commercial banking
Speaker 1: in Europe at risk? No, not at all. I think
Speaker 1: commercial banking in Europe has improved tremendously in terms of
Speaker 1: quality of balance sheet, quality of earnings, so I don't
Speaker 1: think that's an issue now. Clearly, like any other industry,
Speaker 1: these shocks will affect the banking system, but in terms
Speaker 1: of a serious impairment, I don't think that's an issue.
Speaker 1: But but basically, the two big forces in Europe right now.
Speaker 1: One of them is the inflationary impact of the oil price.
Speaker 1: Energy price increases and what that will do to to
Speaker 1: aggregate demand to production manufacturing, and so that's clearly a
Speaker 1: big shock. But on the other hand, you have to
Speaker 1: remember there's also a massive positive demand shock coming from
Speaker 1: the rearmament in Europe, in particularly in Germany. We're talking
Speaker 1: about a hundred billion, not all in one year obviously,
Speaker 1: but the amounts of money that are now in play,
Speaker 1: particularly the early disbursed of the quick dist perseman coming
Speaker 1: out of the europe European funds as such that this
Speaker 1: is a very serious stimulus. So these are the two forces.
Speaker 1: On the one hand, you have the deflationary force coming
Speaker 1: from an energy price increase. On the other hand, you
Speaker 1: have the estimuative force coming from the fiscal expenditure, which
Speaker 1: is which is close to as much as the Americans did,
Speaker 1: not quite but but it's a very very significant impulse.
Speaker 1: What is the significance of euro one sixteen long ago,
Speaker 1: far away, and you were directly involved with this was
Speaker 1: the pricing of a euro in a much more peaceful,
Speaker 1: maybe an ancient time as well. If we see intervention,
Speaker 1: if we balance off against strong dollar, it's not night,
Speaker 1: it's not the financial crisis as well. Here we are
Speaker 1: at one eleven. Is one sixteen the fair value of euro? No? Uh. Ultimately,
Speaker 1: once the ECB indicates incredibly that it will move positive
Speaker 1: on a depo rate and that increases, we would expect
Speaker 1: the euro to go right through one twenty into the
Speaker 1: one thirties. So it will be it will be a
Speaker 1: dramatic change, just the way it happened in two thousand
Speaker 1: fourteen on the other way around. UH. And that's something
Speaker 1: we're quite confident about. So there's nothing there's nothing special
Speaker 1: about one sixteen and it is in fact, there are
Speaker 1: a lot higher than that, regardless of what the e
Speaker 1: c B does. Your comments on fiscal spending, and frankly
Speaker 1: Germany's pledged to actually meet that two or more target
Speaker 1: for military spending is really notable. Do you think that
Speaker 1: because of some of these fiscal expenditures that talks of
Speaker 1: stagflation in Europe are perhaps overblown? Yes, they're definitely overblown.
Speaker 1: I think that when I look at the press and
Speaker 1: I listened to what everybody's saying, the the impact of
Speaker 1: that additional expenditure will be quite dramatic because it will
Speaker 1: support manufacturing all across Era, and it will be spend
Speaker 1: very widely. And also and also the money is coming
Speaker 1: out of the Recovery and Resilience Fund, the quick distperson
Speaker 1: is there. For instance, Italy is already on the way
Speaker 1: to spending six billions just for income maintence to to
Speaker 1: cope with gas price increases, that is income immediately, and
Speaker 1: so we will see a big, big impulse, fiscal impulse
Speaker 1: coming from that. So yeah, so my senses, I do
Speaker 1: not expect that the Ukraine and and the subsequent price
Speaker 1: increases in oil and gas and commodities agricultural as well,
Speaker 1: will have more than half a percent impact on the
Speaker 1: European on growth within the Eurozone, not much more than that.
Speaker 1: What would have to happen, What would have to happen, David,
Speaker 1: for for you to rethink that, for you to think
Speaker 1: that perhaps the impact of higher commodity costs will have
Speaker 1: a greater effect on the prospects of growth. There is
Speaker 1: a seven d pound gorilla in the room, and that
Speaker 1: is if not stream one the gas pipeline gets disrupted
Speaker 1: in otherwids, if either the Europeans are no longer able
Speaker 1: to want to buy buy the gas or from Russia
Speaker 1: or Russia or Russia custom of either way, that will
Speaker 1: be a very very significant chock now Europe, Europe gets
Speaker 1: it's a gas from Russia, Germany more. If that gets
Speaker 1: cut off, then you will have to see some form
Speaker 1: of prioritization. Households come first, industry comes last, and you
Speaker 1: will have a very serious recession in that case. So
Speaker 1: that I think is something that you can sort of
Speaker 1: see it playing into the market now. Some people and
Speaker 1: and and what my drive this is, surprisingly enough, is
Speaker 1: a social media This is the first war major war
Speaker 1: that we see all around the world and social media.
Speaker 1: The Russians attack Kiev, which they will shortly and other cities.
Speaker 1: Everything that goes on, you will find their per video
Speaker 1: around the world. That will create enormous pressure to stop
Speaker 1: buying oil and gas from Russia. And and if that
Speaker 1: gets cut off, and then I think we will see
Speaker 1: much more significant impact in Europe than we've seen so far. David,
Speaker 1: Thank you, sir. As always, David focused land that of
Speaker 1: Deutsche Banks. I'm really important points on Europe and the risks,
Speaker 1: the tail risk around the story at the moment. Laurence
Speaker 1: Somers joins us. He is at Harvard University and of
Speaker 1: course the former Secretary Treasury of the United States. Professor Somers,
Speaker 1: thank you so much for joining this morning. I want
Speaker 1: to go back to mc chesney, Martin, and Truman. I
Speaker 1: want to go back to mc chesney, Martin and Johnson.
Speaker 1: In war, what should a chairman of the Federal Reserve
Speaker 1: System do in a time of crisis? In war? Stay
Speaker 1: on plan or amend to the politicians. Let me just
Speaker 1: first say that I was very proud of our president
Speaker 1: last night. I thought the way in which he spoke
Speaker 1: to the stakes of what we're involved in in Ukraine,
Speaker 1: what we're involved in, and what the obligation of the
Speaker 1: United States is to uphold world warder at a moment
Speaker 1: like this was profoundly important and profoundly inspiring. It We're
Speaker 1: gonna talk about economic and uh financial stuff in just
Speaker 1: a minute, uh Tom, and I'm happy to do that.
Speaker 1: But the real stakes ari in freedom, in the maintenance
Speaker 1: of civilization, in the resistance uh to naked aggression, and
Speaker 1: history is going to remember that a lot longer than
Speaker 1: it's going to remember anything. With the FED funds rate, Larry,
Speaker 1: I think a lot of people would agree with you.
Speaker 1: I'm sorry, so sorry, but to follow on to really
Speaker 1: get to the FED funds rate, you know, what is
Speaker 1: the cost the US is willing to bear when you
Speaker 1: talk about exactly preserving those freedoms, and then the Fed's
Speaker 1: role in trying to tamp down if they already missed
Speaker 1: the boat on that, I think the FED has been
Speaker 1: very late. I think it's been way behind the curve.
Speaker 1: And I think one of the reasons why it's costly
Speaker 1: when you're behind the curve is that sometimes you can
Speaker 1: get shocks that make it harder for you to act.
Speaker 1: But I don't think the FED has any alternative now
Speaker 1: but to mount a strong response to inflation at a
Speaker 1: time when I think we are at or over the
Speaker 1: brink of a spiral of rising inflation UH breaking out.
Speaker 1: You're seeing that in the numbers for expected inflation over
Speaker 1: the next year or over the next couple of years.
Speaker 1: The place you're seeing it most clearly is in the
Speaker 1: wage data and the data on vacancies, which are pointing
Speaker 1: to wage inflation at close to six percent and pressures
Speaker 1: for that to accelerate. And I think that knee to
Speaker 1: be ringing all the alarm bells at UH the FED.
Speaker 1: So I think there's much more risk of the FED
Speaker 1: doing too little than there is of the FED doing
Speaker 1: UH too much at a moment UH like this. I
Speaker 1: think the Fed's obsession with a high pressure economy was
Speaker 1: way excessive because they didn't think about how pressured an
Speaker 1: economy we were going to be able to have over
Speaker 1: the longer term. And I think the next recession probably
Speaker 1: has mistaken monetary policy written all over it. Larry, there
Speaker 1: is a discussion about this before the invasion of Ukraine
Speaker 1: by Russia, that perhaps the FED was way too late
Speaker 1: and had to move very quickly. Now, the suggestion coming
Speaker 1: from markets is that even if the FED moves quickly,
Speaker 1: it's not going to matter in terms of staving off
Speaker 1: a near term recession. It's not going to matter in
Speaker 1: terms of landing this economy in a more controlled way.
Speaker 1: Do you agree with that sentiment. I think the difficulty
Speaker 1: of getting a soft landing where we both brought inflation
Speaker 1: down and we brought and we avoided recession was always
Speaker 1: very difficult, and I think with ten dollar oil it
Speaker 1: is uh that much more difficult. And so I think
Speaker 1: we're gonna have to if we want to bring down inflation,
Speaker 1: uh and we don't have a financial accident, We're going
Speaker 1: to need to see interest rates higher than the FED
Speaker 1: war markets are now priced, are now pricing in Larry
Speaker 1: David focused Landow, of course, of the academics of Duley
Speaker 1: Focus Landown. Garber in a Deutsche Bank now is suggesting
Speaker 1: that EU will need intervention to see strong dollar become
Speaker 1: a weaker dollars worried about two weeks of a year
Speaker 1: as well. He made very clear that this time around
Speaker 1: it is a less than coordinated intervention. Can a singular
Speaker 1: intervention work at any time in place. I don't think
Speaker 1: the track record on currency interventions is very encouraging. I don't.
Speaker 1: I don't envision that you're likely to see uh currency
Speaker 1: intervention by the United States to weaken uh the dollar,
Speaker 1: Nor is that something that I would uh advocate UH
Speaker 1: very much. UH. The contrary, I suspect that Europe's gonna
Speaker 1: that the more relevant tool is uh the use of
Speaker 1: monetary policy rather than currency intervention. Professor Summers, thank you
Speaker 1: so much, the former Secretary of Treasury of the United States,
Speaker 1: Lawrence Summers always from Harvard, Silbert de Gallo, and John.
Speaker 1: What joy to have ALBERTA gool in the studios with us,
Speaker 1: A real symbol of the end of the pandemic, a
Speaker 1: gentleman of Europe is public service to Italy and the Navy.
Speaker 1: And a guy who knows it's priced up and yield down.
Speaker 1: John a friend, How better back. I didn't even know
Speaker 1: he was here in New York until I saw him
Speaker 1: in a commercial break. How better good to see you.
Speaker 1: Let's just start with a massive distication we've seen in
Speaker 1: this European credit market recently. The extent of destruction you've
Speaker 1: seen in the market Albetta and where you've been taking opportunities,
Speaker 1: where you've been taking some purchases in this is a
Speaker 1: bear market, it's a high ball environment. We want to
Speaker 1: be preserving capital and we want to be in companies
Speaker 1: that have government support or shareholder support. Now, the good
Speaker 1: thing is there are regions of the world which are
Speaker 1: in a defense mode in towards state capitalism. Europe has
Speaker 1: supported companies during COVID and we'll continue to do so
Speaker 1: during the next months. So you know, there are names
Speaker 1: that in the in the travel sector, in the industrial
Speaker 1: sector that go down, but then they have sovereign support
Speaker 1: and those are big opportunities and they yield a lot
Speaker 1: more than inflation. You know, think about also the banks.
Speaker 1: So we are buying in these sectors. We were very
Speaker 1: cautious at the beginning of the year and we're buying slowly.
Speaker 1: The weak spot continues to be emerging markets. And when
Speaker 1: people see the FED, you know, doing less, I think
Speaker 1: that's wrong. The FED will continue to tackle inflation that
Speaker 1: will continue to hurt emerging markets together with political and
Speaker 1: geopolitical risk. Better just to pick up on what you
Speaker 1: were talking about and where you're buying, do you do
Speaker 1: that throughout the whole of Europe. Is the revis towards
Speaker 1: a particular part of Europe? How do you think about that?
Speaker 1: We are doing it across However, there are countries in
Speaker 1: the world there are more vulnerable to high commodity prices
Speaker 1: and high energy. So you know, Southern Europe is more vulnerable.
Speaker 1: But outside of the Western European countries, you know, you've
Speaker 1: got Turkey, You've got Egypt, There's a lot of countries
Speaker 1: that are more vulnerable, and um in emerging markets, you
Speaker 1: would say that there's still a mine field. There's still
Speaker 1: a lot of a lot of countries that are going
Speaker 1: to be affected by the combination of high energy prices
Speaker 1: and higher interest rates in the US and a stronger dollar.
Speaker 1: So we're very very cautious there, and we are using
Speaker 1: limited dry powder at this stage. We expect a little
Speaker 1: bit more volatilely later in the year. Alberta, you were
Speaker 1: saying that the FED is still going to high rates
Speaker 1: as much as perhaps people have previously thought, because inflation
Speaker 1: is still very much an issue. Is it the same
Speaker 1: story for the e c B. E c B is
Speaker 1: likely to step back, perhaps only do one hike this year.
Speaker 1: They clearly have a closer issue. But also inflation in
Speaker 1: Europe is a lot more driven by energy, So half
Speaker 1: of the you know, five percent inflation in Europe comes
Speaker 1: from energy. In the US, you know, it's around one
Speaker 1: third of the seven and a half percent CPI year
Speaker 1: on year that comes from energy at least so far.
Speaker 1: So European inflation can still be you know, deemed more transitory.
Speaker 1: But in the US, you know, there's rents, there is
Speaker 1: a serve dess in wages, so it's a kind of
Speaker 1: a different problem here. Does that make you in general
Speaker 1: more bullish ironically on European corporate debt, on European rates
Speaker 1: simply because you have the e c B benchmark at
Speaker 1: a time when the FED is going in the opposite direction.
Speaker 1: That's exactly right. We're in a in the context of
Speaker 1: a bear market for bonds. The place to hide, the
Speaker 1: least bad place to hide is still Europe. And within that,
Speaker 1: in the credit market, you can still find companies and
Speaker 1: sectors that have sovereign support, so you get a less
Speaker 1: howkish e c B and then you get some sovereign
Speaker 1: support for example, to French companies or two UK companies,
Speaker 1: So there are some places to hide in Europe, where
Speaker 1: you are where you want to be kosherous. The most
Speaker 1: is still in e M in my opinion, because you
Speaker 1: have compounded effect of higher commodity prices, which is bad
Speaker 1: for some EM countries, and then you have a stronger
Speaker 1: dollar and higher fed rates. Bet so you mentioned the
Speaker 1: federal reserve. You think they still hike Most people have
Speaker 1: seen as the case. Whether it's own, it's about how
Speaker 1: far they can actually push it. The e c B
Speaker 1: is it even part of the conversation for twenty two anymore?
Speaker 1: As far as you're concerned, it's possibly the one hike
Speaker 1: in in two dozens and twenty two. It really depends
Speaker 1: on how long this lasts. European countries have around five
Speaker 1: months of gas supply of gas reserves, so you know,
Speaker 1: if it's if the conflict in Russia Ukraine is a
Speaker 1: matter of weeks, then you know we could still see
Speaker 1: you know, positive growth and more physical spending. Think about
Speaker 1: Germany up in the defense spending, so it will become
Speaker 1: a reflationary environment which is positive, and the c B
Speaker 1: will have to hike if the last months instead of week,
Speaker 1: If if the war is not over by the summer,
Speaker 1: then we're really looking at um. You know, much lower
Speaker 1: growth in Europe. Let me got a big problem gas
Speaker 1: right now by more than thirty percent in Europe. I better.
Speaker 1: It's great to see. You've got to catch out, buddy,
Speaker 1: hopefully next time in the different circumstances to have a
Speaker 1: more broader conversation about this market. We have done everything
Speaker 1: we can to bring you informed gas on these many
Speaker 1: topics of war, and an informed GAS on oil, on
Speaker 1: supply demand and indeed on international trade. Is Amrita Sand,
Speaker 1: founder of Energy Aspects, out with a spectacular note on
Speaker 1: the realities of what we're reporting. Em Rita sent, I
Speaker 1: learned a long, long time ago to have immense respect
Speaker 1: for the trust of the system, and that trust is
Speaker 1: the basic idea of letters of credit. Tell me how
Speaker 1: letters of credit are going to work now, next week
Speaker 1: into April or to the point of backgradation that John
Speaker 1: Farrell just talked about. Yeah, it's the best question I've
Speaker 1: been asked. I'll tell you that much. Come because you know,
Speaker 1: the problem is exactly like you said, there is no
Speaker 1: letters of credit right now. No nobody is willing to
Speaker 1: issue refiners any bias with letters of credit because of
Speaker 1: the banking uncertainty now what does it looked like in
Speaker 1: a week's time. It's hard for me to say. However,
Speaker 1: I will say this, the US in particular, but even
Speaker 1: some European countries are fearing oil prices gas prices being
Speaker 1: so high it is going to hurt the economy, so
Speaker 1: they want to carve out exemptions. They need to be
Speaker 1: very specific and clear about these exemptions. Once those exemptions
Speaker 1: are announced, then letters of credit can resume again with
Speaker 1: those certain banks and you can see some trade startup.
Speaker 1: But right now it's complete paralysis and RATA in the
Speaker 1: mad time OPEC plus decreeing to raise all output by
Speaker 1: drum roll, four hundred thousand bowers a day in April
Speaker 1: according to a delicate I mean that's nothing. I'm rata
Speaker 1: have a blast on Bloomberg opinion saying the situation called
Speaker 1: for emergency measures. What are those emergency measures? Yes, the
Speaker 1: four on a thousand, and we all know that in
Speaker 1: reality is going to be half of that, because most
Speaker 1: of these countries don't have the spec capacity well emergency measures.
Speaker 1: We saw the idea releasing sixty million barrels of spr
Speaker 1: yesterday night and prices rallied by six dollars on the
Speaker 1: back of that news just tells you. I've been talking
Speaker 1: to traders and they're like, well, if you really wanted
Speaker 1: to make a difference, you needed two hundred million barrels.
Speaker 1: So that's not happening because we don't have that much oil.
Speaker 1: What's the pricing mechanism here? I'm readA You've got some
Speaker 1: people saying this is a completely type market where people
Speaker 1: can't get physically physical delivery, and other people saying there
Speaker 1: are some oil companies that are taking advantage of this
Speaker 1: and kicking up pricing. Which is it? It's the former.
Speaker 1: I mean, look, yes, it's not that the oil isn't there.
Speaker 1: The Russian oil is there, but if you don't want
Speaker 1: to touch it, then you don't have that oil. I
Speaker 1: think it's very important to understand, particularly for Europe, this
Speaker 1: is very short haul barrels. Now, if Europe needs to
Speaker 1: go and get something to substitute for Russian oil, say
Speaker 1: let's say they get US oil or West African oil,
Speaker 1: the sailing time is a lot longer, so they will
Speaker 1: be left with the period of no oil coming to Europe.
Speaker 1: And that's why you're going to get refinery suffering. That's
Speaker 1: why the ultimate solver mechanism is high prices demand has
Speaker 1: to come down. Well, but I'm real to the reason
Speaker 1: why I ask is because people have been arguing, for
Speaker 1: for example, the US to support the shale industry, to
Speaker 1: support the local the domestic energy industry, and other people
Speaker 1: have come out and pointed out, you know what, they
Speaker 1: could actually increase production dramatically. They're just not doing it
Speaker 1: yet on their own volition. What's your view on that? Again,
Speaker 1: I mean, it's a tricky one because, yes, they are
Speaker 1: not doing it because shareholders are making them return money
Speaker 1: right to them because they've been lost making for a decade. Yes,
Speaker 1: absolutely right, But they are also uh getting or they're
Speaker 1: trying to send the signal to the Biden administration because
Speaker 1: the Biden administration ultimately wants to transition to a green
Speaker 1: energy and a lot of the measures more medium to
Speaker 1: measures that they are taking doesn't encourage a lot of
Speaker 1: really in the US. And that's the conversation they want
Speaker 1: to have, saying, Okay, if we're gonna drill right now,
Speaker 1: get more oil out, but we also want that certainty
Speaker 1: that we can continue doing that in the medium tum
Speaker 1: and reads. What you just said is so so important,
Speaker 1: just moments ago. Essentially what you said is spring in reverse.
Speaker 1: And I remember when Jeff Curry of Goldman came on
Speaker 1: with Tom and I on radio and he said, basically,
Speaker 1: we need to breach storage capacity. And once we've done that,
Speaker 1: you could see negative prices and everyone was like, wow, negative,
Speaker 1: that's ridiculous. And then we had negative prices. That's what's happened.
Speaker 1: You need to reverse engineer that for me? And how
Speaker 1: me understand down, Rita, if it's spring reverse, how high
Speaker 1: decrude prices need to go to destroy demand? How much
Speaker 1: more higher from here can they go? That's exactly it.
Speaker 1: This is COVID and reverse accurate. We have never tested this.
Speaker 1: We went two hundred and forty seven two thousand and eight.
Speaker 1: That's not what killed the market. It was a credit crisis.
Speaker 1: We can easily breach hundred and fifty. We have genuinely
Speaker 1: never tested what price do we need to be okay?
Speaker 1: If the economy is okay to really curtail global growth?
Speaker 1: We could be really talking about numbers. We've you know,
Speaker 1: one s. You could get to be picking a number
Speaker 1: right now, John, can we go nerd here? I think
Speaker 1: we're trying right now? Is oil a gift and good
Speaker 1: big chunk. If it is, we've never tested it. Yes,
Speaker 1: we've never tested it, and it's in elastic. Right, you're
Speaker 1: coming out of COVID. You still want to travel? John?
Speaker 1: You like that? Just like that. I mean that the
Speaker 1: numbers on sight, it's what we could be testing here.
Speaker 1: And Rate said, we need to continue this conversation, come
Speaker 1: back soon, thank you, and descent of energy aspects now
Speaker 1: on our politics and particularly the pass forward for very
Speaker 1: much his Democratic Party, Howard Dean is whether us. He
Speaker 1: is a former presidential candidate. Dr Dean is chair of
Speaker 1: the Democratic National Committee and his skied every black Diamond
Speaker 1: at Killington, Vermont. We welcome him, uh this morning. Yeah, Well,
Speaker 1: I want to go away from the normal political talk, Howard,
Speaker 1: and I want to ask you a difficult question. You
Speaker 1: and I grew up with John Stennis. We grew up
Speaker 1: with Democratic Southern senators were in a war. We have
Speaker 1: a wartime president. How does the Democratic Party get the
Speaker 1: military back? I'm not worry. I don't think we I
Speaker 1: think we have the military back. I think the vast
Speaker 1: majority of military people do not believe we should live
Speaker 1: in a fascist society. And I think the leadership of
Speaker 1: the military is doing a great job. I think both
Speaker 1: thought they did a great job resisting trump craziness. So
Speaker 1: I'm not the least bit worried about the military. I'm
Speaker 1: worried about the people who are driving around in the
Speaker 1: trucks and clogging up the works and just talking about
Speaker 1: neo Nazi ideology on the floor of Congress. How does
Speaker 1: the Democratic Party and particularly newer candidates come on in
Speaker 1: the quarters maybe in the coming years. How do they
Speaker 1: fight off these autocratic tendencies. How do the Democrats collalesce
Speaker 1: around a middle message. Well, that's the key question. Um, look,
Speaker 1: I think they re message. I don't. I thought, Biden,
Speaker 1: whatever you have happened to think about this particular issue.
Speaker 1: I thought one of the great lines in Biden's speech
Speaker 1: last night was we don't want to defund the police.
Speaker 1: We want to fund the police. And what he means
Speaker 1: by that is we do need police reform, absolutely. But
Speaker 1: Eric Adams is mayor today in New York City because
Speaker 1: he because most of the people in the community that
Speaker 1: voted for him most enthusiastically, which is particularly black immigrants,
Speaker 1: do not want to defund the police. So I think
Speaker 1: Biden hit all the high notes yesterday as I was
Speaker 1: we were driving around before the program, I think people
Speaker 1: have low expectations. I thought it was one of the
Speaker 1: best day of this Union's addresses that I've seen in
Speaker 1: the last twenty years. Aheads being, I apologize for interrupting.
Speaker 1: You know, you're saying he hit all the high points,
Speaker 1: and he did of the Democratic Party and what he
Speaker 1: wants to sort of push forward in his agenda. But
Speaker 1: right now, there is one conversation that is dominating American
Speaker 1: families and it is inflation. It is what they spend
Speaker 1: when they go to the store. It is only exacerbated
Speaker 1: by the Russian invasion of Ukraine with gas prices. And
Speaker 1: yet the message has been, you know, keep going with
Speaker 1: some of these plans and eventually it'll work its way out.
Speaker 1: Do you think that the Democratic Party needs to go
Speaker 1: further with respect to supporting national domestic oil producers and
Speaker 1: refiners to try to give them more support to increase
Speaker 1: the domestic production to isolate Russia. No, the problem is
Speaker 1: not domestic production. We actually, as you well known, in
Speaker 1: this country, produce more oil than we use. The problem
Speaker 1: is it get it gets sent all over in the
Speaker 1: world market. We're probably gonna have to figure out a
Speaker 1: way to keep that here. Look, we've been practicing modern
Speaker 1: monetary theory, whether you like it or not, for the
Speaker 1: last fifteen years. The Republicans, who probably don't know what
Speaker 1: monetary modern monetary theory is, have been practicing a big
Speaker 1: time run the deficit up as high as you possibly like. Well,
Speaker 1: when you do that, and what monetary modern, modern monetary
Speaker 1: theory says is that inflation is the problem, and that
Speaker 1: is what we're hitting now. We're gonna have to raise
Speaker 1: interest rates and there's no nice way to say this, um,
Speaker 1: but the the oil market, you know, this is all
Speaker 1: short term stuff. Uh, And I think trying to tackle
Speaker 1: the oil market and bring oil prices down by doing
Speaker 1: anything other than reducing removing oil from the um from
Speaker 1: the reserves and putting putting that in the market is silly.
Speaker 1: But we're not going to go our way out of this.
Speaker 1: And that's that seems to be a one line that
Speaker 1: the party seems to be taking. You have other members
Speaker 1: of the Democratic Party, including Joe Mansion of West Virginia,
Speaker 1: coming out and saying, actually, this was the way that
Speaker 1: we need to go. I'm just wondering if there are
Speaker 1: other concrete steps to take so that some of these shocks.
Speaker 1: Because the price increase that we've seen in oil has
Speaker 1: been a shock, the price increase that we've seen in
Speaker 1: wheat is increasingly becoming a shock. These are major issues
Speaker 1: for the global economy. At what point you have to
Speaker 1: say we have to take an immediate reaction to this.
Speaker 1: We are taking an immediate reaction. Look, there is a
Speaker 1: war going on, and the war is being conducted by
Speaker 1: one of the biggest oil powers in the world against
Speaker 1: one of the biggest grain producers in the world. What
Speaker 1: do you expect The solution to this is a deal
Speaker 1: with Putin? And I think Biden is doing a great
Speaker 1: job doing that. Governor Dean, the junior senator from Vermont,
Speaker 1: is eighty. He will enjoy his eighty first birthday here
Speaker 1: in September. The Democrats are about to lose this, that,
Speaker 1: and something else in Washington. I'll let you and the
Speaker 1: experts decide what it is. How far his Senator Sanders
Speaker 1: in the Liberals overreached um. Look, I think the biggest
Speaker 1: problem with the so called left is not that they're wrong,
Speaker 1: it's that they can't get their messaging straight. And one
Speaker 1: of the interesting things. Is this a over medicare for all? Um,
Speaker 1: we should have medicare for all, but we should have
Speaker 1: medicare for all who wanted you. This is the most
Speaker 1: libertarian country in the face of the earth, and that
Speaker 1: includes left, right or center. People don't like to be
Speaker 1: told what to do. They like to be given their
Speaker 1: own choices, so we often do the right thing. We
Speaker 1: need a system of universal healthcare that works. Is our
Speaker 1: healthcare system is absolutely broken in terms of it's in
Speaker 1: terms of the way that we spend money and who
Speaker 1: has to pay for that and suffer as a result.
Speaker 1: But the fact is you cannot message a package that
Speaker 1: alienates a significant portion of American people. And that's our problem.
Speaker 1: Our problem is not what we don't know what to do.
Speaker 1: Our problems. We insist, or at least on the left side,
Speaker 1: which I count myself on on many issues. We insist
Speaker 1: on messaging it in such a way that we hit
Speaker 1: people over the head with it, and that conveys the
Speaker 1: message that we're smarter than you are. And that's one
Speaker 1: of the reasons that people like Trump, who are completely
Speaker 1: unqualified to be anything uh managed to win. But because
Speaker 1: we alienate people, we can't alienate we can't alienate ordinary Americans.
Speaker 1: We have to stop doing that. Well, how a daint
Speaker 1: don't you need to refresh if the senators then, because
Speaker 1: there's a lot of sentences to speak that way when
Speaker 1: you I'm for term limits, I'm for term limits in
Speaker 1: the United States Senate. I think it's worked well in
Speaker 1: the presidency, and I think we ought to limit terms
Speaker 1: to at maximum three terms six year terms in the Senate.
Speaker 1: We have to limit terms in the House. Look, the
Speaker 1: political institutions in the democracy are always far behind where
Speaker 1: the public is. That's the nature of democracies that the
Speaker 1: public runs the place. But there's no organized way for
Speaker 1: them to do that other than through the political process.
Speaker 1: When you have a party that doesn't give a damn
Speaker 1: what happens to the country as long as they are
Speaker 1: in power and willing to cheat on the voting uh
Speaker 1: and and and refuse to confirm the president's most basic appointments,
Speaker 1: that is a democracy that doesn't work. And the way
Speaker 1: to do that is to limit people's terms so there's
Speaker 1: no more incentive to do all this gerrymatting, mannering, and
Speaker 1: all this crazy stuff so that the democracy works again.
Speaker 1: And that's and I've I've thrown up my hands. I
Speaker 1: think we need term limits in the worst way, and
Speaker 1: to including term limits on the Supreme Court, which is
Speaker 1: now nothing but a bunch of partisan hacks. If three
Speaker 1: of themselves admitted how it, would you have said that
Speaker 1: if there was a majority for people with more of
Speaker 1: the old views, I would have said that if you
Speaker 1: get a Senate that's completely out of touch with where
Speaker 1: the rest of America is, and when you're having people
Speaker 1: who are ninety years old running for re election in Iowa,
Speaker 1: which is just ridiculous. We had a nice he wrote,
Speaker 1: speak for the House last night, didn't we? Yes, we did,
Speaker 1: and I stick to my guns. Term limps are good
Speaker 1: for everybody, both Democrats and Republicans, and we need them
Speaker 1: how it dained. Thank you, sir, Gonna catch up. This
Speaker 1: is the Bloomberg Surveillance Podcast. Thanks for listening. Join us
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Speaker 1: the terminal. I'm Tom keene In. This is Bloomberg. M