WEBVTT - Surveillance: The U.S. Cannot Escape Global Slowdown, Mann Says 0:00:00.080 --> 0:00:12.960 Ye. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane 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 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:33.519 Bloomberg dot Com, and of course on the Bloomberg This is, 0:00:33.560 --> 0:00:37.400 without question, are a conversation in economics today. Katherine Man 0:00:37.479 --> 0:00:40.600 is with us at Queen Victoria Street with Francine in London. 0:00:40.640 --> 0:00:43.440 She's the head of City Group, the former chief Economists 0:00:43.479 --> 0:00:45.320 for the o e c D and now joining us 0:00:45.320 --> 0:00:48.680 from Dubai. The Secretary General of the o e c D. 0:00:48.920 --> 0:00:52.199 And Helguria with us as well. Dr Guria, this is 0:00:52.240 --> 0:00:55.360 wonderful to have you and Dr Man with us as well. 0:00:55.600 --> 0:00:57.720 I know Guria. I want to start with the state 0:00:57.840 --> 0:01:01.280 of the global economy. We see dissent platition here there 0:01:01.320 --> 0:01:04.440 in everywhere. Give us the measurement that the o e 0:01:04.440 --> 0:01:08.360 c D has right now of a move to economic slowdown, 0:01:08.600 --> 0:01:13.000 to recession or maybe even the Lawrence Summer's secular stagnation. 0:01:16.840 --> 0:01:22.400 I am not predicting that there's gonna be a recession. 0:01:23.160 --> 0:01:26.039 What I am predicting and what we are seeing and 0:01:26.160 --> 0:01:30.760 living is that we're slowing down the growth. We thought 0:01:30.800 --> 0:01:33.559 we were going to be closer to four percent growth 0:01:33.760 --> 0:01:38.880 in and our latest projection is of three and the 0:01:39.000 --> 0:01:43.120 hot percent. What happened in the meantime the trade tensions 0:01:43.680 --> 0:01:46.440 and why is it that we are having the trade 0:01:46.440 --> 0:01:50.640 tensions affect the prospects for world economy so much? Well, 0:01:50.840 --> 0:01:57.360 basically because when you invest to produce and you produced 0:01:57.400 --> 0:02:00.240 to sell, but if you don't know whether you can sell, 0:02:00.320 --> 0:02:02.680 or you don't know what price you can sell, what 0:02:02.760 --> 0:02:05.640 tariff is going to be applied to your sales, then 0:02:05.800 --> 0:02:08.720 what happens is you don't invest. And if you don't invest, 0:02:08.760 --> 0:02:11.680 then you do not have growth. This is what is 0:02:11.720 --> 0:02:14.520 happening now and this is the size of the impact, 0:02:14.760 --> 0:02:19.440 and this is why this is so serious. Um, Mr Guria, 0:02:19.639 --> 0:02:22.080 Good morning from London. Paul Krugman was talking to us 0:02:22.120 --> 0:02:25.120 a little bit earlier on about interest rates and you 0:02:25.120 --> 0:02:28.000 know the recession. He basically, you know, put it bluntly 0:02:28.040 --> 0:02:30.680 in saying the world it's worse off now than in 0:02:30.720 --> 0:02:32.880 two thousand and seven if there were to be a crisis. 0:02:32.960 --> 0:02:39.440 Do you agree with that statement? No, I don't. We've 0:02:39.520 --> 0:02:44.480 learned a lot and the banking system is much more 0:02:44.520 --> 0:02:50.520 strongly capitalized, it's better regulated, it's also a better supervised. 0:02:51.040 --> 0:02:56.239 But it is true that some of the capital that 0:02:56.280 --> 0:03:00.440 we had, some of the ammunition that we had before 0:03:00.480 --> 0:03:04.679 the crisis, has been used precisely to deal with the crisis. 0:03:05.120 --> 0:03:08.799 And therefore, in many cases, for example, the fiscal tool, 0:03:09.560 --> 0:03:14.240 the degrees of freedom are less. The monetary policy tool, well, 0:03:14.280 --> 0:03:18.200 we've used it to the hilt for practically ten years, 0:03:18.800 --> 0:03:26.120 and therefore you have less flexibility on that score. Does it? 0:03:26.280 --> 0:03:28.239 But does it? Is it likely that we see a 0:03:28.360 --> 0:03:31.240 US recession this year? And if the FED doesn't have 0:03:31.320 --> 0:03:33.840 the tools, what does that mean to where we end up? 0:03:37.480 --> 0:03:40.680 I do not see a recession in the United States. 0:03:40.680 --> 0:03:43.840 In fact, the United States is one of the economies 0:03:43.880 --> 0:03:48.400 that are doing better. And at the same time, what 0:03:48.520 --> 0:03:52.560 the FED has done is to be evidence based, which 0:03:52.600 --> 0:03:55.440 they said they were doing. They're doing it, and that is, 0:03:56.000 --> 0:03:59.920 if you see a slowdown in the economy, uh, then 0:04:00.040 --> 0:04:04.559 of course you go slower in terms of the increases 0:04:04.720 --> 0:04:09.400 in the interest rates. So already they said instead of three, 0:04:09.960 --> 0:04:13.920 maybe we'll be doing two. And that's in time. You're 0:04:13.960 --> 0:04:20.800 having this very very healthy, well and very vigorous job creation. Well, 0:04:20.839 --> 0:04:23.599 I know Guria with us in Dubaian in London, Katherine 0:04:23.600 --> 0:04:25.960 Man and Katherine I'm pleased to say, joining us in 0:04:25.960 --> 0:04:29.599 the conversation as well is muhammadl Area is watching and 0:04:29.680 --> 0:04:33.479 sends it an immediate email for Dr Mann Katherine Man 0:04:33.880 --> 0:04:36.600 very simply, here, can any kind of global slow down, 0:04:36.640 --> 0:04:40.680 global disinflation, the sluggishness in Europe and on and on. 0:04:41.080 --> 0:04:43.560 Is that enough to stall or even drag down the 0:04:43.680 --> 0:04:49.280 US economy? How does that reaction function work? Well? The U. S. 0:04:49.320 --> 0:04:53.720 Economy is a much more closed economy than virtually any 0:04:53.720 --> 0:04:57.479 other one UH in the globe, and right now the 0:04:57.560 --> 0:05:01.159 domestic source of growth coming on the tight labor market 0:05:01.279 --> 0:05:06.239 and rising wages is providing momentum for the U. S. Economy. 0:05:06.279 --> 0:05:10.920 There is still also in place government spending associated with 0:05:11.279 --> 0:05:15.440 the fiscal program that has not faded completely yet UH. 0:05:15.520 --> 0:05:17.880 And so if you look at the U. S economy, 0:05:17.920 --> 0:05:22.159 it has a very strong domestic sources of growth. That 0:05:22.279 --> 0:05:25.320 doesn't mean it's immune from the rest of the world. 0:05:25.400 --> 0:05:28.359 It doesn't mean it's immune from the trade tensions and 0:05:28.360 --> 0:05:31.840 the consequences of the trade tensions. It just means that 0:05:32.160 --> 0:05:35.039 in the waiting between the two of them, the US 0:05:35.120 --> 0:05:40.200 economy is growing more robustly because the domestic side is 0:05:40.279 --> 0:05:43.440 much more resilient. Uh, it won't you know. I think 0:05:43.440 --> 0:05:46.280 what we we we recognize is is that, you know, 0:05:46.640 --> 0:05:50.320 if there is a exacerbation of the trade tensions, if 0:05:50.680 --> 0:05:54.719 we get to a much broader array of trade tensions, 0:05:54.760 --> 0:05:58.360 not just China, but also potentially with Europe um Section 0:05:58.440 --> 0:06:02.040 two three two issue coming up here later in the month, 0:06:02.360 --> 0:06:05.200 potentially a report issued about that. Um, you know, you 0:06:05.240 --> 0:06:08.160 start to layer on top of each other, these issues 0:06:08.240 --> 0:06:12.000 on the trade side, and it feeds back to domestic investment. 0:06:12.200 --> 0:06:18.039 Domestic investment pauses, uh, domestic investment pauses. Justice on Huldgreya said, Um, 0:06:18.200 --> 0:06:20.920 we were a team you know, back there when I 0:06:20.960 --> 0:06:22.440 was Chief of commiss O E c D. And and 0:06:22.480 --> 0:06:25.760 that's exactly the point. You weigh on uncertainty, you weigh 0:06:25.760 --> 0:06:28.279 on investment, and ultimately that drags down the economy. But 0:06:28.320 --> 0:06:31.200 this is really important, Dr Guria, with Lawrence Spoon in 0:06:31.320 --> 0:06:33.560 your team at O E c D in Paris, what 0:06:33.720 --> 0:06:36.320 is the state of the fat tail right now? What 0:06:36.520 --> 0:06:39.880 is our financial stability? What is our ability to withstand 0:06:39.960 --> 0:06:42.920 a set of shocks or even one shock that could 0:06:43.000 --> 0:06:50.520 be out there. As they said before, today the banks 0:06:51.160 --> 0:06:55.320 are much more strongly capitalized, and they've been capitalized and 0:06:55.320 --> 0:06:58.240 they were from seven to ten times more than they 0:06:58.240 --> 0:07:02.760 were before the crisis, and they're better regulated, they're better supervisor, 0:07:02.839 --> 0:07:05.960 all these stress tests that are constantly being made, and 0:07:06.360 --> 0:07:10.920 at the same time, the world is uh, you know, 0:07:11.800 --> 0:07:15.880 better prepared to deal with the bad news. What we're 0:07:16.000 --> 0:07:19.640 very bad at is dealing with surprises. And what I 0:07:19.680 --> 0:07:23.680 see here is that some bad news in the offing. 0:07:23.960 --> 0:07:27.320 I do not see very many you know, out of 0:07:27.320 --> 0:07:30.640 the blue surprises happening in the world economy that could really, 0:07:31.240 --> 0:07:36.200 you know, cause a negative growth recession as has been suggested. 0:07:36.280 --> 0:07:40.200 I do not see a recession in the horizon. And 0:07:40.320 --> 0:07:43.000 Mr Grea, how much do you worry about this, this 0:07:43.080 --> 0:07:47.000 war of words between France and it Is it going 0:07:47.040 --> 0:07:49.800 to hurt investment? And is it really a kind of 0:07:50.000 --> 0:07:53.440 you know, difficult moment for Europe that's crystallized just with 0:07:53.480 --> 0:08:02.960 this listen. Wars uh, unless they are the war against 0:08:03.280 --> 0:08:08.400 hunger or the war against the ignorance or you know 0:08:08.480 --> 0:08:13.000 that the wars are bad and even wars of words 0:08:13.080 --> 0:08:16.840 are bad. But I have to say, if there's gonna 0:08:16.880 --> 0:08:20.520 be a war. Better be of words rather than of 0:08:20.600 --> 0:08:24.920 the alternatives. So I would say at this stage there 0:08:24.920 --> 0:08:29.400 are issues that have to be addressed between Italy and 0:08:29.600 --> 0:08:34.679 uh France. There's a new government in Italy, it's installing itself, 0:08:35.160 --> 0:08:38.440 is trying to find its place, it's space, it's dealing 0:08:38.440 --> 0:08:42.280 with the European Union and at the same time, now 0:08:42.360 --> 0:08:47.079 this confrontation with France is very unfortunate for the atmosphere 0:08:47.960 --> 0:08:51.400 around Europe. But I'm sure the wisdom of the two 0:08:51.440 --> 0:08:55.240 countries is going to find a way out. This has 0:08:55.280 --> 0:08:57.480 been wonderful and hill Garia, thank you so much from 0:08:57.520 --> 0:09:00.319 Dubie this morning and Catherine Man in London as well, 0:09:00.360 --> 0:09:03.040 the former Chief econs for Dr Guria at the O 0:09:03.160 --> 0:09:19.839 E c D. Here, Buns, is what you and I 0:09:19.880 --> 0:09:23.280 have been watching since Davos point one zero seven point 0:09:23.280 --> 0:09:25.200 oh nine. You know it's below point one zero, I 0:09:25.280 --> 0:09:28.160 get it. But the disinflation is out, there's tangible. Why 0:09:28.200 --> 0:09:31.199 don't you bring in doctor Man, who's who's really fabulous 0:09:31.240 --> 0:09:35.360 on this continental disinflation joining us from London, formerly the 0:09:35.480 --> 0:09:37.800 Chief economist of the O E c D and currently 0:09:37.840 --> 0:09:41.520 the City Group Global Chief Economist. Good morning to Catherine 0:09:41.559 --> 0:09:44.760 we are pricing out global growth, and we are seemingly 0:09:44.800 --> 0:09:47.920 pricing down inflation expectations as well. Have your thoughts on 0:09:47.960 --> 0:09:51.320 that well, I mean, you know, if if growth comes 0:09:51.320 --> 0:09:54.960 in dramatically slower, then then you would expect inflation to 0:09:55.240 --> 0:09:57.800 UH to also come in slower as well. But I 0:09:57.840 --> 0:10:00.600 do think that we we have to remember that the 0:10:00.720 --> 0:10:04.959 domestic economies UH in the form of tight labor markets. 0:10:04.960 --> 0:10:07.480 This is true for the United States and Spades. It's 0:10:07.520 --> 0:10:10.680 also true in Europe. Many of those economies have tight 0:10:10.760 --> 0:10:14.319 labor markets. They do have resilient consumption, and we are 0:10:14.400 --> 0:10:17.680 seeing wages rise both in the US and in Europe 0:10:17.920 --> 0:10:20.800 and and even in Japan, and so UH, you know 0:10:20.840 --> 0:10:23.440 what you have there, If you have nominal wages rising 0:10:23.520 --> 0:10:26.680 and you have prices not coming through with any top 0:10:26.720 --> 0:10:30.240 line inflation, then you get real wage increases and that's 0:10:30.240 --> 0:10:33.040 actually pretty good for the workers. So from a market's perspective, 0:10:33.080 --> 0:10:34.640 cancer and I'm always trying to work out where the 0:10:34.640 --> 0:10:37.280 element of surprise might come from. Whereas the boat to 0:10:37.520 --> 0:10:39.880 stack to the one side, so to speak, do you 0:10:39.920 --> 0:10:42.160 think some people have gravitated too much that the one 0:10:42.200 --> 0:10:45.000 side of the boat calling for lower growth pricing out 0:10:45.040 --> 0:10:47.640 inflation in an economy here in America where things still 0:10:47.640 --> 0:10:50.160 look pretty good. Yeah, well, I think you know the 0:10:50.200 --> 0:10:51.840 issue is is that we've got, as I say, this 0:10:51.880 --> 0:10:55.240 domestic resilience that comes from very strong labor markets, but 0:10:55.320 --> 0:10:59.360 we have there's undeniable trade trade headwinds UM and the 0:10:59.400 --> 0:11:03.600 real question is can those trade headwinds be be uh dampened, 0:11:03.720 --> 0:11:08.800 be resolved before there's permanent damage to UM investor psyche 0:11:09.080 --> 0:11:11.880 and and following through that to to consumers as well. 0:11:11.920 --> 0:11:14.520 I mean, I think that there's still time, there's still 0:11:14.559 --> 0:11:18.800 time to get resolution UH, to revive trade UH and 0:11:18.880 --> 0:11:21.280 to to to support global growth. But but you know 0:11:21.320 --> 0:11:23.680 the time it's running out for that. What you're saying, 0:11:23.840 --> 0:11:26.680 what Richard Clarida is saying, John Ferrey had mentioned Steve 0:11:26.679 --> 0:11:29.959 Stanley Damer's Pierre Put among others, is there's a two 0:11:30.040 --> 0:11:35.240 part GDP calculation. One is a domestic resiliency and the 0:11:35.320 --> 0:11:39.960 others all this international noise. What's our history of escaping 0:11:40.000 --> 0:11:45.600 the international noise too? Is Clarata would say a solid outcome. Well, 0:11:45.640 --> 0:11:49.040 the US has more is a is a larger economy, 0:11:49.040 --> 0:11:52.600 it's a more closed economy, and so it is UH 0:11:52.760 --> 0:11:57.120 less buffeted by the external environment, but as compared to 0:11:57.160 --> 0:12:01.839 for example, the European economies or or Japan. Um. But 0:12:02.000 --> 0:12:04.280 you know, it's it's not a good idea to be 0:12:04.320 --> 0:12:07.640 complacent and to say that there's no feedback loop from 0:12:07.640 --> 0:12:10.040 a slowing global economy back to the U S. That's 0:12:10.080 --> 0:12:13.080 that's a complacency to say that the US is a 0:12:13.080 --> 0:12:16.520 closed economy and can whether the weather, the trade storms. 0:12:16.520 --> 0:12:20.960 It can't because, um, a lot of US companies are 0:12:21.120 --> 0:12:25.360 outwardly uh, you know, they're out little outwardly engaged. Uh. 0:12:25.400 --> 0:12:27.880 They get a lot of profits and sales from the 0:12:27.920 --> 0:12:31.000 foreign marketplace. And so if the global economy is not 0:12:31.120 --> 0:12:33.640 doing well, those companies in the U S will not 0:12:33.720 --> 0:12:35.520 do well. Those are the companies that are part of 0:12:35.520 --> 0:12:37.760 the S and P and part of the uh, you know, 0:12:37.840 --> 0:12:42.199 the Dow. And so you'll have financial markets reacting to 0:12:42.480 --> 0:12:46.040 a slowdown in the global markets, even if part of 0:12:46.080 --> 0:12:48.360 the US is still very strong. So you get a 0:12:48.440 --> 0:12:53.760 financial market situation where that turbulence on Wall Street reflecting 0:12:53.760 --> 0:12:57.640 global slowdown in the trade war that feeds into the 0:12:57.679 --> 0:13:00.520 domestic economy. You can't say you can't complete we escape 0:13:00.559 --> 0:13:02.839 that even in a closed economy, like the US. So, Catherine, 0:13:02.880 --> 0:13:05.320 to your point, the mechanism for the feedback loop is 0:13:05.360 --> 0:13:08.439 financial markets. How important is the f X channel with 0:13:08.480 --> 0:13:11.200 the dollars showing some renewed strength of the last week 0:13:11.280 --> 0:13:14.760 or so, well, so the you know, when we think 0:13:14.800 --> 0:13:17.920 about the challenges of the dollar strength, the the issue 0:13:17.960 --> 0:13:22.720 there becomes, um, how are emerging markets in particular, but 0:13:23.240 --> 0:13:26.600 markets in general going to be able to handle debt 0:13:26.640 --> 0:13:30.160 service debt, service of dollar denominated debt, because of course 0:13:30.160 --> 0:13:33.240 he gets more expensive to service that dollar denominated debt. 0:13:33.320 --> 0:13:35.760 And if they're servicing the debt, then then they're not 0:13:35.800 --> 0:13:38.840 going to be able to be supporting their own growth. 0:13:39.240 --> 0:13:43.120 And uh so that is a further headwind for a 0:13:43.200 --> 0:13:46.439 number of the economies around the world, doctor Man. If 0:13:46.440 --> 0:13:50.160 we could move over to the domestic economy and something 0:13:50.480 --> 0:13:52.800 you know, we mentioned this on television really this morning, 0:13:53.360 --> 0:13:56.560 which is scale. Every time a corporate officer brings up 0:13:56.600 --> 0:13:59.839 the phrase scale, I think of Katherine Man, folks, and 0:14:00.040 --> 0:14:02.360 you're you don't mince any words, doctor Man. You say, 0:14:02.360 --> 0:14:05.240 it's not the more the monopoly. Are we heading towards 0:14:05.280 --> 0:14:09.480 monopolistic tendencies? I think it's it's a little premature to 0:14:09.480 --> 0:14:12.520 say that we're headed towards monopolists in tendencies. But but 0:14:12.600 --> 0:14:14.480 I do think that there's been a lot of mergers 0:14:14.480 --> 0:14:18.120 and acquisitions UM in the over the last ten years, 0:14:18.160 --> 0:14:21.560 when when funding was cheap and stock market was high, 0:14:21.640 --> 0:14:24.720 and you know that. And it's not just an Amazon effect. 0:14:24.760 --> 0:14:28.400 It's also think about it in in the intermediate space, 0:14:28.480 --> 0:14:32.520 whether it be chemicals, whether it be um you know, uh, 0:14:33.280 --> 0:14:36.960 agricultural space, but also in some top line spaces for example, 0:14:37.040 --> 0:14:41.880 you know hotels news. You've correctly state this is about scale, 0:14:42.360 --> 0:14:45.080 which always ends up being a lower labor a lower 0:14:45.160 --> 0:14:49.200 labor component. Well, so, yeah, because what happened is, I say, 0:14:49.240 --> 0:14:51.400 the research we used to worry about scale, and we 0:14:51.480 --> 0:14:54.160 used to worry about monopolies because we thought, well, you'd 0:14:54.160 --> 0:14:57.040 become a monopolist and then you raise your prices. But 0:14:57.160 --> 0:15:00.400 these days the research is much more clear that rather 0:15:00.480 --> 0:15:04.800 than raise prices, the the consequence of of of scale, 0:15:05.360 --> 0:15:08.239 consequence of of not maybe not scale, but the consequences 0:15:08.360 --> 0:15:13.080 of of less competition, uh is the burden is on 0:15:13.120 --> 0:15:16.880 workers because they can't change jobs to get to get 0:15:16.960 --> 0:15:20.760 higher wages. So the wage compression is the consequence of 0:15:21.400 --> 0:15:24.640 less competition. Catherine Grant to catch on with you. You You 0:15:24.720 --> 0:15:27.320 want to us from London today, formerly the Chief Economist 0:15:27.320 --> 0:15:29.280 of the O E C D and now the City 0:15:29.280 --> 0:15:46.880 Group Global Chief Economist. Joining us now the Panada. Gary 0:15:46.960 --> 0:15:49.840 Shilling joins us of Ammer's College or he does the 0:15:49.880 --> 0:15:53.040 physics of economics, Dr Shilling, I want to look back 0:15:53.080 --> 0:15:56.200 at your great call of lower interest rates, persistent interest 0:15:56.280 --> 0:16:00.160 rates and the chorus quarter to quarter, he's wrong, he's wrong, 0:16:00.440 --> 0:16:03.760 he's wrong, He's wrong. What are the inflation East? Does 0:16:03.880 --> 0:16:06.720 most get wrong in their call? How did they don't 0:16:06.760 --> 0:16:09.200 give me Paul Krugman one on one, get me Gary 0:16:09.280 --> 0:16:12.200 Shilling one oh one on what the inflation East has 0:16:12.240 --> 0:16:16.240 got wrong? They simply failed to recognize that the world 0:16:16.280 --> 0:16:19.920 has got too much supply relative to demand. When you 0:16:19.920 --> 0:16:24.000 have excess to supply relative to demand, prices go down. 0:16:24.640 --> 0:16:27.520 And the problem was that in the sixties you had 0:16:27.560 --> 0:16:30.680 the opposite with Vietnam and great society on top of 0:16:30.720 --> 0:16:34.720 a fully employed economy. Excess demand prices went up, and 0:16:34.760 --> 0:16:36.600 a lot of people thought that that's the way God 0:16:36.680 --> 0:16:39.560 made the world and didn't realize that things really changed 0:16:39.640 --> 0:16:42.680 or remarkably in the early eighties. I mentioned day Will 0:16:42.720 --> 0:16:45.600 bernanke on Friday, chapter seven or whatever, is the one 0:16:45.640 --> 0:16:48.920 little talk on anset prices within the comparison of now 0:16:49.120 --> 0:16:53.680 versus the sixties. Back then we had a credit expansion 0:16:53.960 --> 0:16:57.000 coming out of World War Two that boosted that demand. 0:16:57.720 --> 0:17:02.280 Now we've got a debt expand in our spy side, 0:17:02.280 --> 0:17:05.720 lower prices. What does that large debt end up doing 0:17:06.320 --> 0:17:09.040 to the responsiveness of our listeners to the times that 0:17:09.480 --> 0:17:11.800 it's deflation? Are you think about it when when debt 0:17:11.880 --> 0:17:15.760 was of course, you know, this is the time folks 0:17:15.840 --> 0:17:19.439 to mention Gary Shilling's classic book, Deflation. John, it's the 0:17:19.480 --> 0:17:24.080 paperback with two blue collars. That Bill we literally paid 0:17:24.240 --> 0:17:28.480 vet Bill's vet bill for a year with the royalties off. 0:17:29.040 --> 0:17:33.359 You're my agent there, top. No. No, The reality is 0:17:33.400 --> 0:17:37.200 that that you have an entirely different, different situation and 0:17:37.200 --> 0:17:39.760 and uh, you know, I think people have simply failed 0:17:39.840 --> 0:17:43.959 to realize. Said that again, a globalized economy is very, 0:17:44.040 --> 0:17:47.879 very different. And and when you have a big debt load, 0:17:48.359 --> 0:17:52.240 it obviously running up a debt means you've got more demand. 0:17:52.320 --> 0:17:55.960 I mean even even you know, we've had disinflation, even 0:17:56.080 --> 0:18:00.240 with the huge run up in debt globally and now 0:18:00.280 --> 0:18:02.320 you're getting the point you say, how far can this go? 0:18:02.480 --> 0:18:04.679 Now there's you know, nobody put in a number and 0:18:04.680 --> 0:18:06.880 said this as far as that can go. And then 0:18:06.920 --> 0:18:09.520 it's got to collapse where you certainly feel that you're 0:18:09.560 --> 0:18:11.399 closer to the top and you are of the bottom. 0:18:12.240 --> 0:18:14.080 And when you start to when you start to see 0:18:14.119 --> 0:18:19.000 the debt contraction, obviously, that's very deflationary. A number of 0:18:19.040 --> 0:18:21.480 years ago, Gary, we talked about the concept of the 0:18:21.560 --> 0:18:25.400 Japanification of the German bond market. I've heard that phrase 0:18:25.640 --> 0:18:28.359 increasingly over the last week. Once again, is that what 0:18:28.440 --> 0:18:32.400 we face here, the Japanification of core government bond markets 0:18:32.400 --> 0:18:36.080 in places like Germany. Well, you certainly would think so. 0:18:36.119 --> 0:18:39.040 I mean, Germany obviously is a has a very strong 0:18:39.080 --> 0:18:43.880 export economy. They have a very u show say, restrained 0:18:43.960 --> 0:18:46.760 view of the world. You look at the average German investor, 0:18:46.800 --> 0:18:49.320 they got more bonds and stocks. You know, stocks are 0:18:49.359 --> 0:18:52.040 for speculators as far as they're concerned. So you have 0:18:52.119 --> 0:18:54.600 a you have a very different attitude there. But but 0:18:54.840 --> 0:18:59.520 with their with all these self reinforcing deflationary forces in 0:18:59.520 --> 0:19:01.440 in germ me, I mean very you know, they're running 0:19:01.440 --> 0:19:05.679 a government surplus. Uh, the huge exports. Uh, they're now 0:19:05.720 --> 0:19:10.080 getting squeeze obviously with a slowing global economy. But you 0:19:10.119 --> 0:19:11.720 have the same kind of and this is this is 0:19:11.720 --> 0:19:14.000 true globally. I mean when you look at the you 0:19:14.040 --> 0:19:17.520 look at the demographics. Uh yeah, I think productivity is 0:19:17.560 --> 0:19:19.520 going to come back. I think that that you do. 0:19:19.640 --> 0:19:22.480 What's what's the countless for that? Garty? Well, new technologies. 0:19:22.680 --> 0:19:24.640 The thing is that they have to get big enough 0:19:24.680 --> 0:19:27.840 to really move the needle. You look at the Indultal Revolution. 0:19:27.880 --> 0:19:31.280 It started in your country, England and New England in 0:19:31.280 --> 0:19:34.040 the late seventeen hundreds, but it wasn't big enough until 0:19:34.080 --> 0:19:36.480 after the Civil War the second half of nineteenth century 0:19:36.720 --> 0:19:38.560 in this country to move a needle. The same with 0:19:38.640 --> 0:19:43.040 true of railroads. And I think now you have you know, biotech, robotics. 0:19:43.200 --> 0:19:46.800 Uh okay, but Gary, let's go let's go physics here. 0:19:47.200 --> 0:19:53.439 The idea of mainline economists is the distribution of that productivity, 0:19:53.520 --> 0:19:57.800 the distribution of that better economy is evenly divided across 0:19:57.840 --> 0:20:02.120 some form of Gaussian or Bell of Space Bologny. It's 0:20:02.119 --> 0:20:05.959 a bimodal America. John Edwards is right, it's two Americas. 0:20:06.200 --> 0:20:09.920 What portion of all these good gains are driving to 0:20:10.040 --> 0:20:13.600 the halves in this guilded age. Well are obviously they're 0:20:13.640 --> 0:20:16.080 obviously going to the topic. But but when you have 0:20:16.200 --> 0:20:20.440 strong economic growth, you always get income polarization. That's that's 0:20:20.480 --> 0:20:23.679 simply here. I don't disagree, but we're looking for some 0:20:23.720 --> 0:20:25.280 of the people. Look at this. Where are some of 0:20:25.320 --> 0:20:27.480 the richest people in the world. They're in China, they're 0:20:27.520 --> 0:20:30.680 in India. I mean except for Jeff Bezos. I mean, 0:20:30.920 --> 0:20:33.200 I mean that's what when you when you get growth, 0:20:33.280 --> 0:20:37.399 you get huge disparity. And obviously, uh, you know in 0:20:37.400 --> 0:20:39.879 the country like this where we're not happy with that. 0:20:40.640 --> 0:20:42.880 You gotta wait for things to give me a legit calm, 0:20:42.920 --> 0:20:46.159 a thirty year bond, how low can that you'll go to? Oh, 0:20:46.280 --> 0:20:54.440 come on one? One hundred basis points and I think 0:20:54.480 --> 0:20:56.480 ten years going to go to one point? Why? Why? 0:20:56.520 --> 0:20:58.600 Because I think I think we're gonna I think we're 0:20:58.720 --> 0:21:01.400 entering a recession. We're gonna have a recession, and that's 0:21:01.400 --> 0:21:07.120 going to be the final leg down in what recession? 0:21:07.560 --> 0:21:09.840 You are so gloomy on a Monday and take a 0:21:09.920 --> 0:21:14.760 note only book showing on Wednesday, okay, Gary showing thank you? 0:21:16.400 --> 0:21:19.440 And John I put out his book on Twitter, just 0:21:19.520 --> 0:21:22.520 you know, to keep that it's it's a very nice blue. 0:21:22.560 --> 0:21:27.840 We still have a selected copies we can paint for this. 0:21:43.640 --> 0:21:46.680 We product the copyright of all of our guests. You 0:21:46.760 --> 0:21:50.440 want High Tongue Research. It's out of Shanghai in London 0:21:50.840 --> 0:21:53.879 and it is absolutely lights up brilliant. Why don't you 0:21:53.880 --> 0:21:57.040 bring in our next guests because everybody's flying around on 0:21:57.119 --> 0:22:00.719 airplanes posturing and I don't buy for a minute. Un 0:22:01.000 --> 0:22:03.800 On Miranda car joining us now High Tongue International China 0:22:04.240 --> 0:22:07.560 macro strategist Miranda, what can we achieve this week as 0:22:07.600 --> 0:22:12.240 Ambassador light Hiser and Secretary Manuchin head over to Beijing, Well, 0:22:12.280 --> 0:22:13.879 the best that can be hoped for is that the 0:22:13.920 --> 0:22:17.520 talks continue um. I don't think anyone's expecting a final 0:22:17.560 --> 0:22:21.200 deal and hence why the from she Um summit was postponed. 0:22:21.800 --> 0:22:24.639 But if we can get the best it can be 0:22:24.680 --> 0:22:28.680 hoped for is the negotiations can continue m The new 0:22:28.720 --> 0:22:31.960 tariffs aren't imposed on the first of March, and basically 0:22:32.000 --> 0:22:34.800 they then continue over the next few months to get 0:22:34.880 --> 0:22:37.600 some kind of deal in place, which can you know, 0:22:38.119 --> 0:22:41.920 Trump and She can sign off on. But no big 0:22:42.440 --> 0:22:46.480 announcements this week. We think it's still going to be talking, Miranda. 0:22:46.520 --> 0:22:48.560 We keep talking about the clock is ticking. The clock 0:22:48.640 --> 0:22:51.159 is ticking down to the March first deadline. Do you 0:22:51.200 --> 0:22:54.440 consider that deadline a hard deadline, a line in the sand? 0:22:54.480 --> 0:22:58.400 What is it? Well, if they can just in some ways, 0:22:58.400 --> 0:22:59.959 it is a hard deadline. But the thing is they 0:23:00.000 --> 0:23:02.000 can just push, they can keep the talks going. They 0:23:02.000 --> 0:23:04.760 can say we'll have another stay of execution. Well we'll 0:23:04.800 --> 0:23:08.040 talk for another three months. There's been significant progress on 0:23:08.080 --> 0:23:11.280 the Chinese side, um in terms of trying to trying 0:23:11.280 --> 0:23:13.800 to address some of the US concerns. But you know, 0:23:14.560 --> 0:23:16.880 you still don't have verification, you still don't have the 0:23:16.920 --> 0:23:20.159 systems of guarantees. You need a long term framework, and 0:23:20.200 --> 0:23:23.040 that's gonna that's not gonna happen by the first of March. UM. 0:23:23.119 --> 0:23:26.040 So as long as they don't agree not to raise 0:23:26.119 --> 0:23:29.760 taffs further, that's probably the best outcome we can hope for. Well, 0:23:29.760 --> 0:23:31.760 it's the best outcome we can hope for. What's the 0:23:31.800 --> 0:23:35.040 best outcome China can hope for. It to be clear here, Miranda, 0:23:35.280 --> 0:23:37.520 China really wants to get a deal done. Let's start 0:23:37.520 --> 0:23:41.760 with first principles. Why does China need a deal, Well, 0:23:42.280 --> 0:23:44.320 it's the one that's being hurt. I mean that you're 0:23:44.359 --> 0:23:47.520 you're seeing the slowdown now coming through the Q four 0:23:47.760 --> 0:23:51.679 exports were still strong, but now we're getting um signs 0:23:51.680 --> 0:23:54.400 of the weakness in the trade actually coming through into 0:23:54.440 --> 0:23:57.600 the figures, and you're you're you're getting the even the 0:23:57.640 --> 0:24:01.680 state media guiding down to six percent growth for Q 0:24:01.880 --> 0:24:04.120 one as a whole, so one of the worst performances 0:24:04.640 --> 0:24:08.760 since since in the last ten years, um so so. 0:24:08.800 --> 0:24:12.320 So they need the trade to pick up again, um 0:24:12.440 --> 0:24:14.600 and and and to get investment back in the country 0:24:14.640 --> 0:24:17.720 because it's it's it's going to be the Chinese economy 0:24:17.720 --> 0:24:19.720 which will suffer. And at the moment, most of the 0:24:19.720 --> 0:24:21.760 companies are saying, no, we can. We can cope with 0:24:21.800 --> 0:24:24.600 the tariffs at the current levels temperature, it's not too bad. 0:24:24.960 --> 0:24:26.359 We can sweep up a lot a lot of the 0:24:26.440 --> 0:24:29.359 Q fours results. Comments have been saying we can cope 0:24:29.359 --> 0:24:32.040 with this level. But if it gets to twenty five, 0:24:32.280 --> 0:24:35.160 that's when that's when the pain would start. If you 0:24:35.240 --> 0:24:38.640