1 00:00:00,080 --> 00:00:12,960 Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jay Ley. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:28,160 Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg Yeah. 5 00:00:33,800 --> 00:00:37,000 Speaker 1: Alam Ruskin, Deutsche Bank Securities Managing Director and chief International 6 00:00:37,040 --> 00:00:41,760 Speaker 1: strategist joins us alongside Bloomberg's very own Luke Kawa. Guys, 7 00:00:41,840 --> 00:00:43,920 Speaker 1: want to talk about the volatility we're experiencing in the 8 00:00:43,960 --> 00:00:46,360 Speaker 1: equity market. Look, just how rare is it to have 9 00:00:46,479 --> 00:00:52,720 Speaker 1: persistently high volatility of extended period outside of recessionary conditions. Well, 10 00:00:52,760 --> 00:00:54,400 Speaker 1: I think I think a lot of listeners would turned 11 00:00:54,400 --> 00:00:56,640 Speaker 1: towards the late nineties as a time where you did 12 00:00:56,640 --> 00:00:59,920 Speaker 1: have kind of fixed up stocks up, and you know, 13 00:01:00,080 --> 00:01:03,040 Speaker 1: this time we've got kind of expersistently high stocks not 14 00:01:03,200 --> 00:01:06,360 Speaker 1: really going up. What I find interesting is the relative 15 00:01:06,400 --> 00:01:09,319 Speaker 1: flatness of the vixed curve. So normally we talked about 16 00:01:09,360 --> 00:01:11,800 Speaker 1: its upward sloping. That's, you know, kind of a recognition 17 00:01:11,840 --> 00:01:14,399 Speaker 1: that you know, the historical pattern of volatilities, You've got 18 00:01:14,440 --> 00:01:16,319 Speaker 1: spikes and then kind of settled down to some kind 19 00:01:16,319 --> 00:01:19,240 Speaker 1: of mode over some period of time. It's very very 20 00:01:19,319 --> 00:01:21,959 Speaker 1: flat throughout its duration. What that says is, you know, 21 00:01:22,000 --> 00:01:25,360 Speaker 1: market participants seemed to be expecting this volatility to be 22 00:01:25,400 --> 00:01:28,040 Speaker 1: sticky for a while, and they've been expecting this for 23 00:01:28,080 --> 00:01:30,400 Speaker 1: a while. That's the rare part. To have a persistently 24 00:01:30,440 --> 00:01:33,679 Speaker 1: flat curve for so long hasn't really happened in recent 25 00:01:33,720 --> 00:01:36,760 Speaker 1: history outside of you know, your two thousand eleven experiences. 26 00:01:36,880 --> 00:01:39,280 Speaker 1: What we worked about that we end up with gappy 27 00:01:39,360 --> 00:01:41,360 Speaker 1: markets and a lot of volatility and a lot of 28 00:01:41,360 --> 00:01:44,640 Speaker 1: people trying to rationalize that. And a real conversation emerged 29 00:01:44,680 --> 00:01:48,320 Speaker 1: over the last few weeks about false narratives, Alan blaming 30 00:01:48,400 --> 00:01:51,560 Speaker 1: the SMP five hundred and the movie Yesterday on Brexit. 31 00:01:51,840 --> 00:01:53,760 Speaker 1: For me, it was a pretty good illustration of the 32 00:01:53,800 --> 00:01:56,840 Speaker 1: extent to which some people are willing to embrace false 33 00:01:56,960 --> 00:02:01,480 Speaker 1: narratives to rationalize volatility and gappy markets. That's a mistake, 34 00:02:01,600 --> 00:02:05,520 Speaker 1: isn't it. Well. I think we're always looking for reasons 35 00:02:05,560 --> 00:02:09,160 Speaker 1: to explain prices, but prices themselves are usually telling us something. 36 00:02:09,520 --> 00:02:12,240 Speaker 1: And when you're seeing a market like you've seen of late, 37 00:02:12,280 --> 00:02:16,919 Speaker 1: where there's you know, sort of underlying weakness whippiness, nervousness, skittishness, 38 00:02:17,000 --> 00:02:20,519 Speaker 1: UM and the volatility you just described. It's usually telling 39 00:02:20,520 --> 00:02:24,720 Speaker 1: you that there's some sort of underlying macro piece that 40 00:02:24,919 --> 00:02:28,440 Speaker 1: is disquiet ing. And I would say in this instance, 41 00:02:28,480 --> 00:02:31,440 Speaker 1: I think the problem the market faces is that there's 42 00:02:31,480 --> 00:02:33,560 Speaker 1: a sense that we're near the end of the cycle, 43 00:02:33,600 --> 00:02:36,600 Speaker 1: as it were. UM. That's whether it's a quite you know, 44 00:02:36,720 --> 00:02:41,960 Speaker 1: a UM a false narrative is questionable perhaps, but that's 45 00:02:42,080 --> 00:02:45,959 Speaker 1: really the underlying problem I think we face. Luke uh 46 00:02:46,000 --> 00:02:48,880 Speaker 1: Talent's point, I think one thing that I've picked up recently, 47 00:02:48,919 --> 00:02:51,440 Speaker 1: it's my new favorite chart. It's a one year two 48 00:02:51,520 --> 00:02:54,680 Speaker 1: year swaption vall as a ratio of one year ten 49 00:02:54,720 --> 00:02:57,280 Speaker 1: year swaption vol so the implied volatil the tear rates 50 00:02:57,480 --> 00:03:00,960 Speaker 1: versus tenure rates. Over the next year, that ratio has 51 00:03:01,080 --> 00:03:03,440 Speaker 1: risen a quate markedly. It's risen in a way it 52 00:03:03,480 --> 00:03:06,720 Speaker 1: hasn't risen since the Taper tantrum, and to level since that. So, 53 00:03:07,040 --> 00:03:09,200 Speaker 1: in other words, the rates market seems to be pricing 54 00:03:09,280 --> 00:03:12,600 Speaker 1: in some kind of inflection point for the FED over 55 00:03:12,600 --> 00:03:15,120 Speaker 1: the next two years in a way that it hasn't 56 00:03:15,440 --> 00:03:17,839 Speaker 1: for any part of the cycle. Really, and I think 57 00:03:17,880 --> 00:03:20,520 Speaker 1: that's something that's driving a lot of the fears and 58 00:03:20,600 --> 00:03:24,160 Speaker 1: the conversation across your rates, equities credit. Can you identify 59 00:03:24,200 --> 00:03:27,760 Speaker 1: a catalyst on the horizon that would generate an inflection 60 00:03:27,800 --> 00:03:30,800 Speaker 1: point for the Federal Reserve? Alent? Well, I think the 61 00:03:30,880 --> 00:03:35,000 Speaker 1: market is already as as as we're saying earlier, suggests 62 00:03:35,000 --> 00:03:37,640 Speaker 1: that there might be an inflection point. So it's been 63 00:03:37,680 --> 00:03:41,120 Speaker 1: an unusual moment. That's really where you've had the market 64 00:03:41,200 --> 00:03:45,360 Speaker 1: taking out this amount of effect of fair tightenings and 65 00:03:45,440 --> 00:03:47,680 Speaker 1: you know, really pricing in less than one fair tightening 66 00:03:47,720 --> 00:03:50,080 Speaker 1: for two thousand and nineteen now. So I would say 67 00:03:50,160 --> 00:03:53,200 Speaker 1: that to some extent, the market feels that um and 68 00:03:53,600 --> 00:03:56,120 Speaker 1: is signaling in the Fed fund futures market that you know, 69 00:03:56,480 --> 00:03:58,880 Speaker 1: perhaps the Fed is going to be easing in twenty 70 00:03:58,560 --> 00:04:02,720 Speaker 1: twenty Sydney one. So when volatility was low and liquidity 71 00:04:02,760 --> 00:04:05,920 Speaker 1: was abundant, This is basically seen a lot of people 72 00:04:05,960 --> 00:04:08,120 Speaker 1: used to talk about being lulled into a false sense 73 00:04:08,160 --> 00:04:12,440 Speaker 1: of security. My question essentially, Alan's weather, because we have 74 00:04:12,520 --> 00:04:16,080 Speaker 1: high volatility and diminishal liquidity, are we're being lulled into 75 00:04:16,120 --> 00:04:20,640 Speaker 1: a false sense of insecurity? These fears about these fears 76 00:04:20,640 --> 00:04:24,720 Speaker 1: about a growth slow down? Is that a false sense 77 00:04:24,760 --> 00:04:28,719 Speaker 1: of insecurity? Well, I think volatility is a healthy thing 78 00:04:28,839 --> 00:04:30,640 Speaker 1: on the whole. I think it, you know, sort of 79 00:04:30,720 --> 00:04:34,120 Speaker 1: knocks out the complacent money. UM. And you've seen in 80 00:04:34,160 --> 00:04:37,880 Speaker 1: general asset prices are rich across you know, most assets. 81 00:04:38,240 --> 00:04:40,000 Speaker 1: So I think in that sense, a little bit of 82 00:04:40,080 --> 00:04:42,800 Speaker 1: volatility is no bad thing in the FED should actually 83 00:04:42,839 --> 00:04:46,200 Speaker 1: see it in that light. Um. At the same time, UM, 84 00:04:46,240 --> 00:04:49,359 Speaker 1: you know, whether this is actually suggestive of a sharper 85 00:04:49,480 --> 00:04:53,720 Speaker 1: slow down than um, you know, I expect, Yeah, absolutely, 86 00:04:53,720 --> 00:04:56,320 Speaker 1: I think the the economy is not going to slow 87 00:04:56,400 --> 00:04:59,960 Speaker 1: down as much as the market's fearing at this point 88 00:05:00,040 --> 00:05:02,920 Speaker 1: in time. Luke. So, the one of the big criticisms 89 00:05:02,920 --> 00:05:05,280 Speaker 1: of the FEDS know two thousand four, two thousand six 90 00:05:05,320 --> 00:05:08,120 Speaker 1: tightening cycle was that it was so telegraphed you knew 91 00:05:08,120 --> 00:05:11,080 Speaker 1: what was coming, and effectively they never tightened financial conditions 92 00:05:11,120 --> 00:05:12,760 Speaker 1: because you're you know, you were able to price the 93 00:05:12,800 --> 00:05:16,040 Speaker 1: path fairly, fairly easily. So again Talent's point, I think 94 00:05:16,080 --> 00:05:19,719 Speaker 1: the idea of introducing some volatility about the market implied 95 00:05:20,000 --> 00:05:23,279 Speaker 1: forward path is something that might extend the cycle kind 96 00:05:23,279 --> 00:05:26,360 Speaker 1: of counterintuitively by kind of shaking out any signs of 97 00:05:26,400 --> 00:05:29,640 Speaker 1: exuberance and risk assets. Allen, you want to answer that, Yeah, 98 00:05:29,680 --> 00:05:32,200 Speaker 1: I think you know oddly enough, if we have some 99 00:05:32,279 --> 00:05:36,360 Speaker 1: sort of slow down now, I think it is likely 100 00:05:36,360 --> 00:05:39,120 Speaker 1: we get less of a shop slow down, saying twenty 101 00:05:39,240 --> 00:05:42,640 Speaker 1: twenty one. So if nineteen is a little bit weak, 102 00:05:42,640 --> 00:05:44,880 Speaker 1: and then we perhaps thought a month or so ago 103 00:05:45,000 --> 00:05:46,920 Speaker 1: that would be no bad thing. What's the base case 104 00:05:46,960 --> 00:05:49,840 Speaker 1: for dult bank now going into the U S dollar 105 00:05:50,520 --> 00:05:54,039 Speaker 1: UM yours dollar generally a little bit weaker UM perhaps 106 00:05:54,080 --> 00:05:56,520 Speaker 1: sort of building more towards the second half of the year. 107 00:05:57,120 --> 00:06:00,400 Speaker 1: The idea in general is to have the baton from 108 00:06:00,400 --> 00:06:03,760 Speaker 1: the FED tightening story to an ECB hiking story. That's 109 00:06:03,920 --> 00:06:05,960 Speaker 1: taking a long time, and that is a big co look. 110 00:06:06,080 --> 00:06:08,400 Speaker 1: And then, Allen, two things. So you recently wrote to 111 00:06:08,440 --> 00:06:10,960 Speaker 1: something very good about the the role the US dollar 112 00:06:11,080 --> 00:06:12,880 Speaker 1: and your outlook for that and how it plays Injuria 113 00:06:12,880 --> 00:06:15,359 Speaker 1: outlook for the yield curve, So if you could address 114 00:06:15,480 --> 00:06:17,600 Speaker 1: that at all, And also we've kind of seen a 115 00:06:17,680 --> 00:06:22,560 Speaker 1: FED funds and Europe or spreads for calendar year nineteen compressed. Well, 116 00:06:22,600 --> 00:06:24,400 Speaker 1: the ECB be in a position to go if the 117 00:06:24,440 --> 00:06:26,560 Speaker 1: FED is only gone once, can those two worlds kind 118 00:06:26,600 --> 00:06:29,200 Speaker 1: of coexist. Yeah, I think that last question is probably 119 00:06:29,279 --> 00:06:31,880 Speaker 1: as important as anything in the foreign exchange world. Really, 120 00:06:32,000 --> 00:06:33,760 Speaker 1: I think you hit the nail on the head that 121 00:06:34,320 --> 00:06:38,440 Speaker 1: as FED rate expection expectations are depressed, you're finding the 122 00:06:38,480 --> 00:06:42,960 Speaker 1: same thing visa the ECB expectations. And I think it 123 00:06:43,160 --> 00:06:46,159 Speaker 1: is going to be extremely difficult to see the ECB 124 00:06:46,360 --> 00:06:49,320 Speaker 1: hiking as the FED eases. Um. You know, you have 125 00:06:49,400 --> 00:06:52,240 Speaker 1: to have some sort of environment where there's a slowdown 126 00:06:52,279 --> 00:06:55,440 Speaker 1: in the US economy and that slowdown doesn't pervade itself 127 00:06:55,760 --> 00:06:59,280 Speaker 1: throughout the world and inclusive of the euroeconomy. Um, that 128 00:06:59,360 --> 00:07:01,240 Speaker 1: does not look likely at this point in time. The 129 00:07:01,360 --> 00:07:03,680 Speaker 1: U economy is fragile. That's part of the reason we've 130 00:07:03,720 --> 00:07:08,880 Speaker 1: actually pushed out our ECB rate hiking cycle to now 131 00:07:09,200 --> 00:07:12,240 Speaker 1: rather than nineteen. You're not alone, I don't think on that. 132 00:07:12,400 --> 00:07:15,440 Speaker 1: Called President Mario Dragi delivering the latest decision and a 133 00:07:15,480 --> 00:07:18,320 Speaker 1: news conference that comes up on Thursday. A special thank 134 00:07:18,360 --> 00:07:21,600 Speaker 1: you to Alan Ruskin, Deutsche Bank Securities Managing Director and 135 00:07:21,800 --> 00:07:41,960 Speaker 1: chief International strategist. Amazing lou Count the psychology of this 136 00:07:42,000 --> 00:07:45,360 Speaker 1: market has changed. People worrying about a Federal Reserve raising 137 00:07:45,400 --> 00:07:47,800 Speaker 1: too much and now worrying about why the Federal Reserve 138 00:07:47,920 --> 00:07:51,400 Speaker 1: is not going to be racing interest rates through a 139 00:07:51,520 --> 00:07:55,480 Speaker 1: growth scare. It feels like sixteen. It feels like even again, 140 00:07:56,320 --> 00:07:58,400 Speaker 1: very very much. So when I think, you know, even 141 00:07:58,400 --> 00:08:01,240 Speaker 1: to that point this morning, when we get a spike 142 00:08:01,280 --> 00:08:05,520 Speaker 1: in futures on new positive trade headlines, it's I got 143 00:08:05,560 --> 00:08:08,080 Speaker 1: more messages about people looking to you know, sell the 144 00:08:08,200 --> 00:08:10,640 Speaker 1: rally and sell the rip, whereas before it was we 145 00:08:10,680 --> 00:08:13,160 Speaker 1: could ignore any negative catalyst and still kind of just 146 00:08:13,200 --> 00:08:16,760 Speaker 1: grind higher. However, so it is amazing how psychology has changed. 147 00:08:16,920 --> 00:08:19,680 Speaker 1: It's amazing how we are searching for narratives and uh, 148 00:08:19,720 --> 00:08:22,600 Speaker 1: you know, nothing's quite lining up. It has very much 149 00:08:22,600 --> 00:08:25,240 Speaker 1: gone from bondadep to sound the rip, bloomb ax, Luke 150 00:08:25,280 --> 00:08:43,040 Speaker 1: Chavic right to catch you out with you, sir. Our 151 00:08:43,040 --> 00:08:45,280 Speaker 1: next guest was scheduled to be was Monday, but he 152 00:08:45,360 --> 00:08:49,880 Speaker 1: was in medication at Hanover's famed medical institutions. He is 153 00:08:50,120 --> 00:08:54,120 Speaker 1: David blanche Flower of Dartmouth College, who the doctors made 154 00:08:54,160 --> 00:08:57,079 Speaker 1: him put out the tweet this weekend of his grandson 155 00:08:57,800 --> 00:09:01,599 Speaker 1: climbing out of the crib and escaping, and then a 156 00:09:01,679 --> 00:09:05,720 Speaker 1: search began across all of the New Hampshire Hills for 157 00:09:05,800 --> 00:09:08,719 Speaker 1: his grandson Danny. That was a tweet of the weekend. Uh, 158 00:09:09,040 --> 00:09:12,160 Speaker 1: wonderful to have you with us. Your grandson climbs out 159 00:09:12,160 --> 00:09:16,440 Speaker 1: of the crib at what eight months now, he's just 160 00:09:16,600 --> 00:09:20,160 Speaker 1: under two. But yeah, yeah, we kept escaping, so we 161 00:09:20,240 --> 00:09:22,640 Speaker 1: put the camera in there and then then you saw 162 00:09:22,720 --> 00:09:25,959 Speaker 1: what happened, very clever, very well. That was good to 163 00:09:26,000 --> 00:09:28,720 Speaker 1: see and I thought it was charming and thank god 164 00:09:28,760 --> 00:09:35,920 Speaker 1: for those cameras, new technology that's available today. Uh, David Blachard, 165 00:09:36,080 --> 00:09:40,640 Speaker 1: let us just start with your general comment on your 166 00:09:40,800 --> 00:09:47,440 Speaker 1: United Kingdom, Ireland, Scotland and your Wales. Well. I wrote 167 00:09:47,520 --> 00:09:50,000 Speaker 1: something yesterday where I guess the two words I would 168 00:09:50,040 --> 00:09:54,400 Speaker 1: use would be chaos reins um. I thought, actually what 169 00:09:54,520 --> 00:09:57,720 Speaker 1: summed it up? People may know about what happens in 170 00:09:57,760 --> 00:10:01,800 Speaker 1: the British Parliament, but we can talk about somebody an 171 00:10:01,880 --> 00:10:04,720 Speaker 1: MP yesterday ran down the floor of the House of 172 00:10:04,760 --> 00:10:08,480 Speaker 1: Commons and picked up the mace and ran and ran 173 00:10:08,600 --> 00:10:11,079 Speaker 1: back with it and then was sort of sent away. 174 00:10:11,360 --> 00:10:15,400 Speaker 1: I mean that it was a very unusual time denials 175 00:10:15,440 --> 00:10:17,520 Speaker 1: of things that were going to happen eventually, a vote 176 00:10:17,559 --> 00:10:20,680 Speaker 1: that didn't happen um, I mean as a chaos, the 177 00:10:20,720 --> 00:10:25,040 Speaker 1: markets went crazy. It's really, absolutely, Danny, you need to 178 00:10:25,080 --> 00:10:28,720 Speaker 1: explain this. You do know that, don't you. The Mace 179 00:10:28,880 --> 00:10:31,240 Speaker 1: is this big club that sits in the middle of 180 00:10:31,280 --> 00:10:34,360 Speaker 1: the House of Commons and essentially what it represents is 181 00:10:34,400 --> 00:10:37,880 Speaker 1: the the royal authority of Parliament. So really, if you 182 00:10:37,960 --> 00:10:41,679 Speaker 1: go ahead and lift that, essentially it's a huge descent 183 00:10:41,760 --> 00:10:45,440 Speaker 1: against whatever is taking place in Parliament. And a couple 184 00:10:45,440 --> 00:10:47,600 Speaker 1: of times before, Danny, it's not that rare has happened, 185 00:10:47,640 --> 00:10:49,440 Speaker 1: I believe a few times in the last ten years 186 00:10:49,480 --> 00:10:51,559 Speaker 1: or so, but it's certainly relevant to the overall mood 187 00:10:52,240 --> 00:10:55,880 Speaker 1: Parliament at the moment. Absolutely, I really handed it back 188 00:10:55,880 --> 00:11:01,680 Speaker 1: completely peacefully, but the scene was really quiet for chaos 189 00:11:01,760 --> 00:11:04,720 Speaker 1: e one yesterday and I don't really getting much better. 190 00:11:04,760 --> 00:11:07,040 Speaker 1: I mean, the headline in the FT today is um 191 00:11:07,160 --> 00:11:11,080 Speaker 1: Junker rules out really renegotiation and make Brexit deal. So 192 00:11:11,120 --> 00:11:13,320 Speaker 1: the question is, really, which was what we should talk about, 193 00:11:13,360 --> 00:11:15,480 Speaker 1: is where does this go? I mean the markets in 194 00:11:15,480 --> 00:11:18,240 Speaker 1: the UK that foots his back up today down sharply. 195 00:11:18,280 --> 00:11:20,800 Speaker 1: Yesterday the pound was down sharply, but I think you 196 00:11:20,880 --> 00:11:23,240 Speaker 1: were just talking about volatility and obviously what this is 197 00:11:23,240 --> 00:11:26,480 Speaker 1: going to do. It generates great volatility in the UK, 198 00:11:26,600 --> 00:11:29,640 Speaker 1: in the UK and the market. Maybe what people think 199 00:11:29,679 --> 00:11:33,240 Speaker 1: now is that hard Brexit looks less likely. Maybe Brexit 200 00:11:33,360 --> 00:11:39,559 Speaker 1: itself looks less likely. But is this enough Professor Blanchflower 201 00:11:39,679 --> 00:11:43,200 Speaker 1: to make Mark Karney blank? How can he act under 202 00:11:43,240 --> 00:11:47,600 Speaker 1: this political strain? Well, obviously, I think I would say 203 00:11:47,600 --> 00:11:50,000 Speaker 1: two things of what Mark has been doing. I mean, 204 00:11:50,000 --> 00:11:53,200 Speaker 1: he's worn for a very long time that this is 205 00:11:53,240 --> 00:11:57,960 Speaker 1: a significant downside risk to the to the British economy. 206 00:11:58,559 --> 00:12:01,200 Speaker 1: The commentary in some way has had an impact on 207 00:12:01,280 --> 00:12:04,679 Speaker 1: the on the independence of the bank, and especially with 208 00:12:04,720 --> 00:12:07,880 Speaker 1: the numbers that were produced last week which generated a 209 00:12:07,920 --> 00:12:10,520 Speaker 1: lot of concern. But I think he's he's hard to 210 00:12:10,559 --> 00:12:13,840 Speaker 1: tread a very narrow line trying to say that this this, 211 00:12:14,000 --> 00:12:17,480 Speaker 1: this is a major shot to the British economy. But obviously, 212 00:12:17,520 --> 00:12:19,520 Speaker 1: on the other hand he has to try and represent 213 00:12:19,760 --> 00:12:22,000 Speaker 1: and the independence of the bank. But the Bank surely 214 00:12:22,040 --> 00:12:24,640 Speaker 1: should have something to say. But last week I think 215 00:12:24,720 --> 00:12:26,839 Speaker 1: they made a major mistake, which was to say if 216 00:12:26,840 --> 00:12:30,160 Speaker 1: there's a haild Brexit, no output would draw up, unemployment 217 00:12:30,160 --> 00:12:32,400 Speaker 1: would rise in the Bank's response would be to raise 218 00:12:32,520 --> 00:12:35,160 Speaker 1: rates from point seven five to five and a half, 219 00:12:35,200 --> 00:12:37,960 Speaker 1: and both Andrew Senders and I put our hands up 220 00:12:38,000 --> 00:12:40,240 Speaker 1: and said, hang on, chaps, I don't think we'd be 221 00:12:40,320 --> 00:12:43,120 Speaker 1: voting for that, And that obviously generated a bit of 222 00:12:43,120 --> 00:12:47,040 Speaker 1: a furore. But clearly Mark Carney's sitting there thinking, oh 223 00:12:47,040 --> 00:12:49,880 Speaker 1: my goodness, what comes next? What the heck do we do? 224 00:12:50,360 --> 00:12:54,160 Speaker 1: What did you think of Governor King's intervention, Danny um, 225 00:12:54,240 --> 00:12:57,400 Speaker 1: I thought that was not helpful at all, as normally 226 00:12:57,480 --> 00:13:00,480 Speaker 1: his intervention is not helpful, as it wasn't helpful at 227 00:13:00,520 --> 00:13:03,840 Speaker 1: the time of implementation of austerity. So I thought that 228 00:13:03,920 --> 00:13:07,520 Speaker 1: was hugely unhelpful, Danny. Very rare for a former governor 229 00:13:07,559 --> 00:13:09,240 Speaker 1: of the Bank of England who's sort of really weighed 230 00:13:09,280 --> 00:13:12,920 Speaker 1: in and get involved in current policy. Very rare and somewhat, 231 00:13:12,960 --> 00:13:15,360 Speaker 1: in your words, unhelpful. But I do wonder where it 232 00:13:15,440 --> 00:13:18,080 Speaker 1: leads Governor Carney. He has made what many people consider 233 00:13:18,120 --> 00:13:20,400 Speaker 1: to be a series of mistakes when it comes to 234 00:13:20,440 --> 00:13:24,240 Speaker 1: communicating the view of the Bank of England on Brexit. Well, 235 00:13:24,280 --> 00:13:27,680 Speaker 1: I I think I think there's obviously he has to 236 00:13:27,679 --> 00:13:30,920 Speaker 1: try and balance this big risk that he sees in 237 00:13:30,960 --> 00:13:34,480 Speaker 1: the potential shock that he sees because of lots of comments, 238 00:13:34,520 --> 00:13:37,120 Speaker 1: particularly from the Brexit here saying all would be wonderful 239 00:13:37,240 --> 00:13:40,200 Speaker 1: just to just hang on folks. He's had to balance 240 00:13:40,320 --> 00:13:45,040 Speaker 1: that against against trying to be seen as represented project 241 00:13:45,160 --> 00:13:48,000 Speaker 1: fear or project hysteria. I think we started out on 242 00:13:48,040 --> 00:13:51,000 Speaker 1: the right line saying this is a very narrow line 243 00:13:51,080 --> 00:13:54,600 Speaker 1: to balance. He can't really do anything right, So I 244 00:13:54,600 --> 00:13:57,160 Speaker 1: think he's done pretty darned well. Actually, although last week 245 00:13:57,200 --> 00:13:59,160 Speaker 1: I think he should have read the models and being 246 00:13:59,160 --> 00:14:02,959 Speaker 1: a little more It was a classic NOWE is in 247 00:14:03,040 --> 00:14:05,720 Speaker 1: a very very difficult position, stuck between a rock and 248 00:14:05,720 --> 00:14:07,320 Speaker 1: a hard place. And I was there the day after 249 00:14:07,360 --> 00:14:09,880 Speaker 1: Brexit where there was no leadership in the country whatsoever, 250 00:14:10,240 --> 00:14:12,000 Speaker 1: and he was the one individual that stood up. What 251 00:14:12,080 --> 00:14:14,199 Speaker 1: I don't agree with it's what we have seen over 252 00:14:14,200 --> 00:14:16,240 Speaker 1: the last ten years as a series of stress tests 253 00:14:16,240 --> 00:14:19,600 Speaker 1: for the institution. That stress test is higher inflation and 254 00:14:19,640 --> 00:14:21,280 Speaker 1: what the Bank of England has chosen to do is 255 00:14:21,280 --> 00:14:24,200 Speaker 1: look through it and support output. So why is the 256 00:14:24,240 --> 00:14:27,080 Speaker 1: Bank in England, led by Governor Carney, still pushing this 257 00:14:27,160 --> 00:14:29,920 Speaker 1: idea that the next rate move in a hard Brexit 258 00:14:29,960 --> 00:14:32,400 Speaker 1: because of a push higher and inflation could be a 259 00:14:32,440 --> 00:14:36,600 Speaker 1: great hike. Well, I think that's a really good question, John, 260 00:14:36,880 --> 00:14:40,040 Speaker 1: That was actually live on Bloomberg as that as that 261 00:14:40,120 --> 00:14:42,720 Speaker 1: came through, and just like you, I felt over more. 262 00:14:42,760 --> 00:14:45,280 Speaker 1: I fell over back that when I heard that. I mean, 263 00:14:45,400 --> 00:14:47,520 Speaker 1: I mean, it seems it seems a sort of surprise 264 00:14:47,640 --> 00:14:51,280 Speaker 1: clearly that they feel like there their motivation is to 265 00:14:51,320 --> 00:14:53,920 Speaker 1: focus on inflation. But if you look back, that was 266 00:14:54,120 --> 00:14:56,440 Speaker 1: in some sense the mistake in two thousand and eight, 267 00:14:56,480 --> 00:14:59,080 Speaker 1: and why do you know, they missed the Great Recession? 268 00:14:59,400 --> 00:15:02,040 Speaker 1: So I think that's clearly been a mistake. I mean, 269 00:15:02,200 --> 00:15:05,200 Speaker 1: the idea that the MPC members would sit and votes 270 00:15:05,280 --> 00:15:09,160 Speaker 1: or rate the unemployed rate doubled um. I mean at 271 00:15:09,200 --> 00:15:11,600 Speaker 1: the very least over the time period they were looking at. 272 00:15:11,720 --> 00:15:14,320 Speaker 1: So I think this this hang up with inflation. But 273 00:15:14,560 --> 00:15:16,200 Speaker 1: you know this is this is this is very tough. 274 00:15:16,240 --> 00:15:18,520 Speaker 1: That not least because he has no idea what the 275 00:15:18,520 --> 00:15:21,200 Speaker 1: fiscal authorities are going to do and how much falls 276 00:15:21,240 --> 00:15:22,800 Speaker 1: on the bank. But I agree with you that the 277 00:15:23,520 --> 00:15:26,920 Speaker 1: emphasis on inflation clearly looked to be a mistake, especially 278 00:15:26,960 --> 00:15:29,040 Speaker 1: as you see that that that that one off inflation 279 00:15:29,080 --> 00:15:32,440 Speaker 1: would likely go away pretty quick. Jenny, very quickly here 280 00:15:32,520 --> 00:15:36,320 Speaker 1: the acclaim. Robert Peston tweets out with the former Prime Minister, 281 00:15:36,400 --> 00:15:40,320 Speaker 1: Sir John Major saying, quote, the clock must be stopped 282 00:15:40,400 --> 00:15:43,520 Speaker 1: without delay. That's one of the great issues here. People 283 00:15:43,560 --> 00:15:47,280 Speaker 1: would just like to freeze time. You can't freeze time, 284 00:15:47,360 --> 00:15:50,760 Speaker 1: can't you when you can't freeze time? Because obviously we've 285 00:15:50,800 --> 00:15:53,760 Speaker 1: had this two year transition period. But actually we had 286 00:15:53,760 --> 00:15:56,320 Speaker 1: a ruling yesterday which was actually pretty important from the 287 00:15:56,320 --> 00:16:00,720 Speaker 1: European Called of Justice saying that actually the UK could 288 00:16:00,720 --> 00:16:04,880 Speaker 1: actually say, okay, forget the forget that we triggered Article fifty, 289 00:16:04,920 --> 00:16:08,120 Speaker 1: we could stop it. Um. So you're so, you're right, 290 00:16:08,560 --> 00:16:11,880 Speaker 1: um that that Obviously the past the last two years 291 00:16:11,960 --> 00:16:15,800 Speaker 1: since that vote have been a sort of a hiatus. 292 00:16:16,240 --> 00:16:19,400 Speaker 1: But I think in the end what we're seeing is reality. 293 00:16:19,720 --> 00:16:22,800 Speaker 1: People have been hit by reality and and and the 294 00:16:22,880 --> 00:16:27,120 Speaker 1: move against leave, I think is perhaps surprisingly been relatively slow. 295 00:16:27,360 --> 00:16:28,880 Speaker 1: But I think that that I think a lot of 296 00:16:28,920 --> 00:16:31,120 Speaker 1: people now thinking perhaps that was a mistake. And I 297 00:16:31,160 --> 00:16:33,160 Speaker 1: think probably what may well end up seeing is this 298 00:16:33,280 --> 00:16:35,760 Speaker 1: second vote, what they called the people's vote. Haven't have 299 00:16:35,840 --> 00:16:38,680 Speaker 1: a second referendum? What that will ask and what will 300 00:16:38,720 --> 00:16:41,760 Speaker 1: the outcome be, I'm not sure, but but you're right, 301 00:16:41,840 --> 00:16:44,280 Speaker 1: this is this You can't set the clock back. But 302 00:16:44,360 --> 00:16:47,160 Speaker 1: for a lot of people maybe they wish they could fire. 303 00:16:47,240 --> 00:16:49,760 Speaker 1: Thank you so much. David Were of Dartmouth College here 304 00:16:49,800 --> 00:16:52,320 Speaker 1: of course his work for the Bank of England in 305 00:16:52,400 --> 00:17:11,360 Speaker 1: his classic book The Wage Curve, as well. Judy Karnata 306 00:17:11,400 --> 00:17:15,159 Speaker 1: joining US Macro Policy Perspectives Founder and President Julia, What 307 00:17:15,200 --> 00:17:16,480 Speaker 1: are you see in the data right now? Is there 308 00:17:16,520 --> 00:17:19,600 Speaker 1: anything to be concerned about? Because the equity crowd, the 309 00:17:19,640 --> 00:17:23,680 Speaker 1: investors worldwide focused on the United States and what could 310 00:17:23,680 --> 00:17:27,400 Speaker 1: break well? I think right now the data has been 311 00:17:27,600 --> 00:17:31,440 Speaker 1: perfectly fine. The labor market data was solid, even though 312 00:17:31,480 --> 00:17:35,480 Speaker 1: it was a little bit softer um. And broadly speaking, 313 00:17:35,480 --> 00:17:39,560 Speaker 1: we've got a decent recovery that's moving along. There is 314 00:17:39,600 --> 00:17:44,000 Speaker 1: a moderation anticipated next year. Uh, And there's a lot 315 00:17:44,119 --> 00:17:49,080 Speaker 1: of headwinds globally. The global economy slowed, and of course 316 00:17:49,119 --> 00:17:52,080 Speaker 1: the uncertainties from trade wars that are just dragging on 317 00:17:52,160 --> 00:17:56,960 Speaker 1: and on made dent investment and hiring at some point 318 00:17:57,080 --> 00:17:59,600 Speaker 1: next year, And I think that's the focus right now. 319 00:18:00,560 --> 00:18:07,080 Speaker 1: Can monetary policy solve the agonies of a trade war? 320 00:18:07,240 --> 00:18:13,680 Speaker 1: Just as one example, I Nope, there is not much 321 00:18:13,720 --> 00:18:17,360 Speaker 1: that that can do other than respond to any hit 322 00:18:17,480 --> 00:18:20,280 Speaker 1: to growth that comes with a trade war. They can 323 00:18:20,280 --> 00:18:23,120 Speaker 1: respond by not raising race as much as they had 324 00:18:23,119 --> 00:18:26,320 Speaker 1: previously planned to. And that seems to be the direction 325 00:18:26,359 --> 00:18:30,040 Speaker 1: of travel and said communication to signal some All they 326 00:18:30,080 --> 00:18:32,440 Speaker 1: can do is delay whatever, you know, that's all they 327 00:18:32,440 --> 00:18:35,760 Speaker 1: can do. That's right, is most of this is out 328 00:18:35,760 --> 00:18:39,600 Speaker 1: of their hands. Where's the fiscal right now? We mentioned austerity. 329 00:18:39,640 --> 00:18:43,440 Speaker 1: Danny Blancheflower was critical of Mervin King in a time 330 00:18:43,480 --> 00:18:47,040 Speaker 1: of austerity. I mean, where are we on fiscal stimulus 331 00:18:47,119 --> 00:18:50,800 Speaker 1: in the United States? We're about done with Yeah, no, 332 00:18:50,960 --> 00:18:54,760 Speaker 1: we're we're there's still fiscal stimulus in the pipeline. You know, 333 00:18:54,840 --> 00:18:58,879 Speaker 1: the direct stimulus from government spending that was legislated is 334 00:18:58,920 --> 00:19:01,320 Speaker 1: still you know, we're king its way into the economy. 335 00:19:01,359 --> 00:19:05,359 Speaker 1: We've seen government contribute positively to growth for the first 336 00:19:05,400 --> 00:19:08,920 Speaker 1: time in the cycle. Uh so we see that there. 337 00:19:09,320 --> 00:19:12,560 Speaker 1: Most of the dollars of the stimulus went to tax 338 00:19:12,680 --> 00:19:16,040 Speaker 1: cuts and that went directly into the stock market through 339 00:19:16,080 --> 00:19:20,119 Speaker 1: share by backs and the lift to two valuations. Some 340 00:19:20,280 --> 00:19:23,760 Speaker 1: of it went into capex. That boost seems that boost 341 00:19:23,760 --> 00:19:28,640 Speaker 1: seems to be fading a bit um and consumer spending 342 00:19:28,680 --> 00:19:31,399 Speaker 1: has been solid this year as well. So we do 343 00:19:31,520 --> 00:19:34,359 Speaker 1: see evidence of the fiscal stimulus. It's not going to 344 00:19:34,760 --> 00:19:38,000 Speaker 1: move into reverse next year. There's still some in the pipeline, 345 00:19:38,040 --> 00:19:42,240 Speaker 1: so that's not an imminent headwind for the economy. How 346 00:19:42,240 --> 00:19:46,680 Speaker 1: do you respond to troubled stocks becoming ever more troubled 347 00:19:46,680 --> 00:19:50,680 Speaker 1: because of our international relations and because of our monetary debate. 348 00:19:50,720 --> 00:19:54,240 Speaker 1: I mean, Deutsche Bank actually has a lift today seven 349 00:19:54,280 --> 00:19:58,720 Speaker 1: point five zero euros, but ge ebbs away six dollars 350 00:19:58,920 --> 00:20:02,800 Speaker 1: nine cents for a share of the Schenectady Giant. I mean, 351 00:20:03,280 --> 00:20:08,720 Speaker 1: there's these are exogity shocks, aren't they selected stories? Yeah? 352 00:20:08,720 --> 00:20:10,640 Speaker 1: But I mean if we stepped back a bit, look 353 00:20:10,760 --> 00:20:14,560 Speaker 1: look at how far the market went in appreciation. I mean, 354 00:20:14,600 --> 00:20:19,520 Speaker 1: it really was pricing in an unrealistically rosy scenario where 355 00:20:19,560 --> 00:20:23,959 Speaker 1: the global economy kept clicking along on all cylinders, despite 356 00:20:24,520 --> 00:20:27,919 Speaker 1: tightening monetary policy and despite trade wars. And that just 357 00:20:28,640 --> 00:20:32,200 Speaker 1: wasn't a realistic set of valuations. So in some senses, 358 00:20:32,240 --> 00:20:35,560 Speaker 1: the correction we're seeing is very healthy, a return to 359 00:20:35,680 --> 00:20:40,760 Speaker 1: more realistic valuations. We're still the stock market valuations are 360 00:20:40,800 --> 00:20:45,080 Speaker 1: still quite solid. Uh. There's nothing here that says there's 361 00:20:45,119 --> 00:20:49,480 Speaker 1: a deep worry about the valuation of companies built into prices. 362 00:20:49,880 --> 00:20:52,119 Speaker 1: It was really just coming back down to earth. In 363 00:20:52,119 --> 00:20:55,399 Speaker 1: a sentence, it is wonderful to have Julia Cornado, whether 364 00:20:55,520 --> 00:21:00,440 Speaker 1: she was was heroic and took some criticism for very 365 00:21:00,520 --> 00:21:05,080 Speaker 1: cautious view of economic GDP recovery coming out of the crisis. 366 00:21:05,119 --> 00:21:08,879 Speaker 1: She nailed that call, uh and she joins us. Now, Julie, 367 00:21:08,880 --> 00:21:10,600 Speaker 1: I want to do sort of a year end thing here. 368 00:21:10,640 --> 00:21:13,320 Speaker 1: We've got some time yere to step back, and I 369 00:21:13,359 --> 00:21:14,880 Speaker 1: want to go to one of my themes of the year, 370 00:21:14,960 --> 00:21:17,640 Speaker 1: my chart of the years of twin deficits, the deficit, 371 00:21:17,680 --> 00:21:20,679 Speaker 1: the fiscal deficit, the trade deficit. Forget about that. I 372 00:21:20,760 --> 00:21:22,800 Speaker 1: want to talk about one of the other mysteries, which 373 00:21:22,840 --> 00:21:26,320 Speaker 1: is really not chargeable, and that is within the broad 374 00:21:26,680 --> 00:21:30,199 Speaker 1: model of an economy. There's the LM curve, which is 375 00:21:30,240 --> 00:21:32,840 Speaker 1: sort of a banking money curve, and there's the I 376 00:21:33,119 --> 00:21:35,919 Speaker 1: S curve I S LM theory John Hicks, there's an 377 00:21:35,920 --> 00:21:38,879 Speaker 1: I S curve which is the real economy. Do we 378 00:21:38,960 --> 00:21:42,440 Speaker 1: know what the real economy is? With all the technology 379 00:21:42,760 --> 00:21:46,800 Speaker 1: we're dealing with today. Oh, there's a lot of changes 380 00:21:46,880 --> 00:21:51,560 Speaker 1: in the dynamics of our economy that's reflecting the technological change, 381 00:21:51,560 --> 00:21:55,240 Speaker 1: and one of them is inflation. Uh. We don't see 382 00:21:55,240 --> 00:21:57,800 Speaker 1: as much inflation as we would expect at this point 383 00:21:57,840 --> 00:22:00,760 Speaker 1: in the cycle, and part of that may be due 384 00:22:00,800 --> 00:22:03,760 Speaker 1: to the disruption from technology, which has been a real 385 00:22:04,000 --> 00:22:08,359 Speaker 1: disinflationary force. Uh. And that force doesn't seem to be spent. 386 00:22:08,440 --> 00:22:13,879 Speaker 1: There's just brutal price transparency everywhere, and that just that 387 00:22:14,119 --> 00:22:17,359 Speaker 1: really limits the degree in which those producers can pass 388 00:22:17,520 --> 00:22:21,560 Speaker 1: prices along to consumers. This is not the first railroad 389 00:22:21,600 --> 00:22:25,040 Speaker 1: revolution that failed, but there was a second and a 390 00:22:25,160 --> 00:22:28,480 Speaker 1: third one where they had a technological shift across America 391 00:22:28,920 --> 00:22:33,840 Speaker 1: because of one generation of industrial production, one generational logistics 392 00:22:33,840 --> 00:22:38,760 Speaker 1: and transportation. I would respectfully suggest Dr Coronado that what 393 00:22:38,800 --> 00:22:41,040 Speaker 1: we're living in right now is like that second or 394 00:22:41,080 --> 00:22:44,600 Speaker 1: third railroad revolution, and that we really don't know where 395 00:22:44,640 --> 00:22:49,200 Speaker 1: we are. That is, so there is an active debate 396 00:22:49,280 --> 00:22:53,359 Speaker 1: between what we can call techno optimists and techno pessimists. 397 00:22:53,680 --> 00:22:57,480 Speaker 1: UM is what we're in that transformational. It's possible we 398 00:22:57,480 --> 00:23:00,920 Speaker 1: can imagine a future with driverless cars and so on 399 00:23:00,960 --> 00:23:06,200 Speaker 1: where artificial intelligence really does transform just the way we 400 00:23:06,320 --> 00:23:11,320 Speaker 1: live um or you could not see those things come 401 00:23:11,359 --> 00:23:14,760 Speaker 1: to fruition quite as much and um, we're already seeing 402 00:23:14,840 --> 00:23:20,760 Speaker 1: some limitations of artificial intelligence and big data, so it's 403 00:23:20,840 --> 00:23:23,600 Speaker 1: yet to be seen. I mean, there certainly is room 404 00:23:23,840 --> 00:23:27,200 Speaker 1: room for optimism. Uh. And we have seen a lot 405 00:23:27,240 --> 00:23:32,600 Speaker 1: of transformational change, but we haven't seen productivity games which 406 00:23:32,640 --> 00:23:35,560 Speaker 1: we may might have expected to see. Well, I mean, 407 00:23:35,600 --> 00:23:38,000 Speaker 1: I love the idea of good technology and bad technology, 408 00:23:38,000 --> 00:23:40,320 Speaker 1: and that gets to what I wanted to do next, 409 00:23:40,640 --> 00:23:44,480 Speaker 1: which is, Okay, we've got this mysterious technological overlay, whether 410 00:23:44,520 --> 00:23:48,480 Speaker 1: it's industrial or consumer whatever, our iPhones blah blah blah. 411 00:23:48,520 --> 00:23:51,760 Speaker 1: But the other thing we've got is a polarity of benefit. 412 00:23:52,359 --> 00:23:54,960 Speaker 1: And that and I sat statistics that are just shocking 413 00:23:55,119 --> 00:23:58,080 Speaker 1: about you know, just as one example, folks, President Trump 414 00:23:58,080 --> 00:24:03,000 Speaker 1: took ex counties and in Secretary Clinton took Ye counties, 415 00:24:03,359 --> 00:24:06,320 Speaker 1: and most of the economic growth occurred in the areas 416 00:24:06,320 --> 00:24:09,520 Speaker 1: that Secretary Clinton one. Okay, I get that, I think 417 00:24:09,520 --> 00:24:14,520 Speaker 1: we all know that. But the the dispersion of technological 418 00:24:14,560 --> 00:24:20,520 Speaker 1: benefit or the dispersion of technological pain is tangible, isn't it. 419 00:24:20,600 --> 00:24:24,480 Speaker 1: Oh very much. So we we can see that the technology, 420 00:24:24,720 --> 00:24:30,280 Speaker 1: the technological change is exacerbating income inequality. So we need 421 00:24:30,359 --> 00:24:33,520 Speaker 1: more and more software engineers to develop these apps and 422 00:24:33,560 --> 00:24:36,600 Speaker 1: these changes and how we're doing things, and that puts, 423 00:24:37,119 --> 00:24:40,200 Speaker 1: say the clerk at your local grocery store or drug 424 00:24:40,240 --> 00:24:44,800 Speaker 1: store out of business. So it's a direct transmission from 425 00:24:44,800 --> 00:24:48,520 Speaker 1: from the technology that we are relying on to transform 426 00:24:48,560 --> 00:24:52,480 Speaker 1: everything and what it does to the inequality in the 427 00:24:52,560 --> 00:24:55,880 Speaker 1: job market. So that's the challenge, as you pointed out, 428 00:24:56,000 --> 00:25:00,639 Speaker 1: that brings political challenges, political backlash. I don't know that 429 00:25:00,680 --> 00:25:03,800 Speaker 1: we can stop the force of technology, but there certainly 430 00:25:03,960 --> 00:25:07,600 Speaker 1: is uh some unwanted side effects from all of this 431 00:25:08,000 --> 00:25:12,199 Speaker 1: uh improvement. Right next idea David Lifton with us the 432 00:25:12,800 --> 00:25:15,639 Speaker 1: American Representative to the I M f DR Lippman, one 433 00:25:15,680 --> 00:25:19,119 Speaker 1: of our front rate economists. Right now, he's talking in 434 00:25:19,119 --> 00:25:23,159 Speaker 1: a speech at Bloomberg today about a multilateral recovery. We 435 00:25:23,200 --> 00:25:27,080 Speaker 1: need to get back to a multilateral dialogue. Do do 436 00:25:27,240 --> 00:25:29,359 Speaker 1: we do that as a jump condition to a w 437 00:25:29,560 --> 00:25:32,320 Speaker 1: t O or an honor of George H. W. Bush 438 00:25:32,359 --> 00:25:35,680 Speaker 1: back to a GAT discussion or does it happen through 439 00:25:36,160 --> 00:25:39,800 Speaker 1: bilateral efforts that get us back to regional block efforts 440 00:25:39,800 --> 00:25:44,480 Speaker 1: that get us back to multilateral Well, it certainly doesn't 441 00:25:44,520 --> 00:25:48,760 Speaker 1: seem like we're going in that direction. Right now in 442 00:25:48,880 --> 00:25:56,480 Speaker 1: terms of more co ordination and um uh negotiation. Uh. 443 00:25:56,800 --> 00:25:59,640 Speaker 1: If we look at what's happening with Brexit and what's 444 00:25:59,680 --> 00:26:03,520 Speaker 1: happened with the US and China, you know, it's possible 445 00:26:03,600 --> 00:26:07,080 Speaker 1: that will make some progress. But they're the conditions are 446 00:26:07,200 --> 00:26:10,359 Speaker 1: very fraught. The politics around us are very fraught, and 447 00:26:10,400 --> 00:26:13,719 Speaker 1: it's not going to be easy, uh to find that 448 00:26:13,800 --> 00:26:17,200 Speaker 1: low hanging fruit. Um. You know, it's it's a very 449 00:26:17,240 --> 00:26:19,520 Speaker 1: and I think we spoke earlier. That's partly what the 450 00:26:19,520 --> 00:26:23,280 Speaker 1: markets reacting to. There really isn't a resolution in sight 451 00:26:23,920 --> 00:26:26,359 Speaker 1: whereby we can sort of redefine the rules of the 452 00:26:26,480 --> 00:26:30,520 Speaker 1: road in a mutually beneficial way and and and realize 453 00:26:30,560 --> 00:26:33,200 Speaker 1: the benefits from trade. It seems more like we are 454 00:26:33,760 --> 00:26:37,280 Speaker 1: pointing fingers at each other. And the time we've got left, 455 00:26:37,320 --> 00:26:39,679 Speaker 1: let's let's wander out to the fed parlor game. I 456 00:26:39,720 --> 00:26:41,880 Speaker 1: really don't like to do this, but with Julia Cornada, 457 00:26:41,920 --> 00:26:44,040 Speaker 1: you've got to you know, you've got to do it. 458 00:26:44,119 --> 00:26:46,560 Speaker 1: I mean, December ninetee, I don't even want to talk about. 459 00:26:46,960 --> 00:26:49,560 Speaker 1: Maybe it happens, maybe it doesn't. We're putting together wonderful 460 00:26:49,560 --> 00:26:53,960 Speaker 1: shows right now on that important December ninth teeth meeting. 461 00:26:54,200 --> 00:26:56,880 Speaker 1: As you know, Julia Golden Sacks caved in. They had 462 00:26:56,880 --> 00:26:59,240 Speaker 1: three four rate increases. They come back a little bit 463 00:26:59,560 --> 00:27:04,000 Speaker 1: with the stream March. Morgan Stanley has always been cautious 464 00:27:04,119 --> 00:27:07,960 Speaker 1: with one or two rate increases. That's it. There seems 465 00:27:08,000 --> 00:27:11,359 Speaker 1: to be a lot of opinions shifting down to complete 466 00:27:11,400 --> 00:27:16,920 Speaker 1: and total data dependency. What data will you watch? So 467 00:27:17,000 --> 00:27:20,720 Speaker 1: there are I think the leading indicators are of of 468 00:27:21,040 --> 00:27:24,000 Speaker 1: heightened importance right now? What are those? Those tend to 469 00:27:24,040 --> 00:27:28,760 Speaker 1: be the intrasensitive sectors like investment in housing. They've shown 470 00:27:28,840 --> 00:27:33,639 Speaker 1: some weakness. Are they telling us that slowing is in train? 471 00:27:33,800 --> 00:27:39,200 Speaker 1: For so that's one thing we're watching. They don't look disastrous, 472 00:27:39,240 --> 00:27:43,800 Speaker 1: but they certainly have plateaued to some degree. Um and 473 00:27:43,840 --> 00:27:49,280 Speaker 1: then financial conditions, I mean they markets are obsessively forward looking. 474 00:27:49,760 --> 00:27:53,680 Speaker 1: Are they seeing something real or is this just sort 475 00:27:53,680 --> 00:27:58,439 Speaker 1: of a sentiment um um tremor uh? And then we 476 00:27:58,480 --> 00:28:01,600 Speaker 1: sort of get back to business. Uh. That's so so 477 00:28:01,680 --> 00:28:04,480 Speaker 1: really watching how far this goes, and not just the 478 00:28:04,520 --> 00:28:08,120 Speaker 1: equity market. Really credit widening, credit spread widening has been 479 00:28:08,200 --> 00:28:10,960 Speaker 1: something to keep an eye on, so and I think 480 00:28:11,080 --> 00:28:14,440 Speaker 1: that in turn reflects the global economy and more than ever. 481 00:28:14,560 --> 00:28:17,920 Speaker 1: We have to look at what's happening in China, what's 482 00:28:17,920 --> 00:28:19,800 Speaker 1: happening around the globe, and how is not going to 483 00:28:20,320 --> 00:28:24,119 Speaker 1: ripple into our capex cycle and our hiring, etcetera. So 484 00:28:24,680 --> 00:28:27,439 Speaker 1: this has been wonderful. Julia Cornado, thank you so much greatly. 485 00:28:27,920 --> 00:28:47,120 Speaker 1: I appreciate it this morning. Within Brexit and within the debate, 486 00:28:47,440 --> 00:28:51,040 Speaker 1: there needs to be perspective and across the United Kingdom. 487 00:28:51,080 --> 00:28:54,240 Speaker 1: You can get that with the Baroness Kennedy of the Shaws. 488 00:28:54,520 --> 00:28:59,280 Speaker 1: Hellna Kennedy is an educator at Mansfield, Oxford, but so 489 00:28:59,280 --> 00:29:01,360 Speaker 1: so much more, just to give you an idea her 490 00:29:01,440 --> 00:29:05,080 Speaker 1: level of dissent within the House of Lords, Uh is 491 00:29:05,240 --> 00:29:08,080 Speaker 1: of note. Baroness, thank you so much for being with 492 00:29:08,160 --> 00:29:12,680 Speaker 1: us today. What does the House of Lords do? Given 493 00:29:12,840 --> 00:29:16,440 Speaker 1: the uproar in your Disunited Kingdom? I got a pretty 494 00:29:16,480 --> 00:29:19,040 Speaker 1: good idea of what the House of Commons does. How 495 00:29:19,080 --> 00:29:22,800 Speaker 1: does the House of Lords fit into this? Well. One 496 00:29:22,800 --> 00:29:24,760 Speaker 1: of the things that we always like to say, Tom 497 00:29:24,880 --> 00:29:26,720 Speaker 1: is that the House of Lords is of course a 498 00:29:26,840 --> 00:29:30,480 Speaker 1: revising chamber when it comes to legislation. But because we're 499 00:29:30,520 --> 00:29:33,520 Speaker 1: not elected and we're not looking over our shoulders at 500 00:29:34,360 --> 00:29:37,320 Speaker 1: the question of re election and what our constituents might 501 00:29:37,640 --> 00:29:40,480 Speaker 1: feel about the way we vote. Um. We have a 502 00:29:40,560 --> 00:29:42,960 Speaker 1: level of independence which allows us to be the people 503 00:29:42,960 --> 00:29:47,560 Speaker 1: who are protectors of our constitutional arrangements and our if 504 00:29:47,560 --> 00:29:50,320 Speaker 1: you like, liberties. And we are actually in the middle 505 00:29:50,320 --> 00:29:56,400 Speaker 1: of a constitutional crisis here. Um. And yesterday UM, the 506 00:29:55,320 --> 00:29:58,959 Speaker 1: the the decision not to have a vote on the 507 00:29:59,040 --> 00:30:02,440 Speaker 1: deal that the pri Minister had secured. Um. It was 508 00:30:02,480 --> 00:30:06,240 Speaker 1: a real moment where suddenly the House of story into chaos. 509 00:30:06,400 --> 00:30:08,640 Speaker 1: We were in fact debating the same issues in the 510 00:30:08,680 --> 00:30:11,080 Speaker 1: House of Lords and had been due last night to 511 00:30:11,120 --> 00:30:14,400 Speaker 1: have our own vote, but that was canceled. And so 512 00:30:14,440 --> 00:30:17,520 Speaker 1: there's a moment of stasis here where you know, people 513 00:30:17,520 --> 00:30:19,800 Speaker 1: are busying themselves. There's going to be a debate debate 514 00:30:19,840 --> 00:30:22,960 Speaker 1: in the Commons this afternoon about the crisis. But I'm 515 00:30:22,960 --> 00:30:25,880 Speaker 1: here in the House of Lords. We're dealing with other business. Um. 516 00:30:25,920 --> 00:30:28,160 Speaker 1: One of the issues that we're looking at is, you know, 517 00:30:28,800 --> 00:30:31,600 Speaker 1: will we need to be legislation in order to prevent 518 00:30:32,280 --> 00:30:38,120 Speaker 1: the naughtial scenario. Lord Skidelski was with us today, the 519 00:30:38,160 --> 00:30:43,320 Speaker 1: giant of economic history in your United Kingdom, the favorite 520 00:30:43,360 --> 00:30:47,760 Speaker 1: of mine, and Skadewski went straight to the Irish question, 521 00:30:47,840 --> 00:30:50,280 Speaker 1: the land question. I would say, I don't know what 522 00:30:50,320 --> 00:30:52,760 Speaker 1: the distances from Dublin to Glasgow, but I guess it's 523 00:30:52,840 --> 00:30:56,520 Speaker 1: it's like it's like Martha's vineyard over to Cape Cod. 524 00:30:56,640 --> 00:31:01,960 Speaker 1: I means that, Yeah, that's about right. So he went 525 00:31:02,240 --> 00:31:05,880 Speaker 1: right for the Irish question and how this was grossly 526 00:31:06,040 --> 00:31:10,880 Speaker 1: misjudged within the vote of Leave or remain. Do you 527 00:31:10,960 --> 00:31:14,240 Speaker 1: agree with Lord Skidelsky is the Irish question has just 528 00:31:14,360 --> 00:31:18,920 Speaker 1: reverberated from four years ago. I I agree that one 529 00:31:19,000 --> 00:31:22,600 Speaker 1: of the key things that is preventing any kind of 530 00:31:22,680 --> 00:31:26,040 Speaker 1: deal and the problem that has arisen for Theresa May, 531 00:31:26,200 --> 00:31:28,800 Speaker 1: especially when she's in a she's got a minority government 532 00:31:29,000 --> 00:31:33,040 Speaker 1: and she's dependent on the votes of the Democratic Unionist 533 00:31:33,040 --> 00:31:35,720 Speaker 1: Party the d u P, which is a very right 534 00:31:35,760 --> 00:31:40,080 Speaker 1: wing UM Northern Irish party. Because she's so dependent on them, 535 00:31:40,160 --> 00:31:42,520 Speaker 1: she really has to try and ford the deal, which 536 00:31:42,920 --> 00:31:45,440 Speaker 1: means there shouldn't be a border. And nobody wants her 537 00:31:45,480 --> 00:31:47,080 Speaker 1: to be a border between the North and the South 538 00:31:47,120 --> 00:31:49,840 Speaker 1: because that has caused so much trouble in the past 539 00:31:50,280 --> 00:31:53,640 Speaker 1: and during this period when there has been no border, 540 00:31:54,080 --> 00:31:58,280 Speaker 1: it has been greatly relished by the community's North and 541 00:31:58,320 --> 00:32:01,120 Speaker 1: South and and the idea of there being a hard 542 00:32:01,120 --> 00:32:06,000 Speaker 1: border between Northern Ireland and the Republic is just won't 543 00:32:06,000 --> 00:32:08,840 Speaker 1: be reckoned with. But the alternative of having a border, 544 00:32:08,840 --> 00:32:10,960 Speaker 1: which is the IVC, that bit of water that you 545 00:32:11,080 --> 00:32:13,440 Speaker 1: describe as being like this, this sort of bit of 546 00:32:13,440 --> 00:32:16,640 Speaker 1: water between Martha's vineyard and the Cape Um, the idea 547 00:32:16,640 --> 00:32:20,200 Speaker 1: of that becoming the border is absolutely inimical to Unionists 548 00:32:20,240 --> 00:32:22,920 Speaker 1: in Northern Ireland. So she's over a barrel on that. 549 00:32:23,520 --> 00:32:25,920 Speaker 1: And there was no question of that being something that 550 00:32:26,000 --> 00:32:28,000 Speaker 1: was in people's minds at the time of the of 551 00:32:28,080 --> 00:32:32,400 Speaker 1: the referendum. Nobody discussed it um. Obviously there might have 552 00:32:32,400 --> 00:32:35,480 Speaker 1: been sort of wrongblings about it in Northern Ireland. Not 553 00:32:35,640 --> 00:32:39,240 Speaker 1: an Ireland voted to remain in the European Union. The 554 00:32:39,280 --> 00:32:42,200 Speaker 1: European Union has put lots of money into, you know, 555 00:32:42,280 --> 00:32:46,000 Speaker 1: stabilizing the situation over there, and you wouldn't recognize Bell fast. 556 00:32:46,080 --> 00:32:50,600 Speaker 1: It's been rebuilt since the troubles um and the idea 557 00:32:50,640 --> 00:32:53,520 Speaker 1: of revisiting that is very as it creates a great 558 00:32:53,560 --> 00:32:57,560 Speaker 1: deal of anxiety. So it's a story about that's the 559 00:32:57,600 --> 00:33:00,440 Speaker 1: bell here in the House of Lords. But I it's 560 00:33:00,520 --> 00:33:03,000 Speaker 1: just that that was never really taken account of in 561 00:33:03,080 --> 00:33:07,520 Speaker 1: a serious way. Baroness Kennedy, as the creator of the 562 00:33:07,600 --> 00:33:12,680 Speaker 1: BBC TV series Blind Justice, if you had to write 563 00:33:12,840 --> 00:33:21,160 Speaker 1: a script that would reveal the political machinations on domestic 564 00:33:21,400 --> 00:33:24,000 Speaker 1: on the domestic front in the United Kingdom, with those 565 00:33:24,080 --> 00:33:29,520 Speaker 1: wanting Theresa May's job, how would you frame it? Oh 566 00:33:29,600 --> 00:33:33,000 Speaker 1: my god. That's one of the interesting things here is 567 00:33:33,040 --> 00:33:36,120 Speaker 1: that everybody, I mean, the Conservative Party at the moment 568 00:33:37,040 --> 00:33:40,520 Speaker 1: is riddled with factions of people who are supporting different 569 00:33:40,560 --> 00:33:44,240 Speaker 1: people's interests. And they're probably are about probably a dozen 570 00:33:44,280 --> 00:33:47,880 Speaker 1: contenders who are hoping that Theresa May will have to 571 00:33:48,040 --> 00:33:51,480 Speaker 1: bite the bullet and go at some point soon, and 572 00:33:51,600 --> 00:33:54,200 Speaker 1: they are ready to step into the into the fray 573 00:33:54,280 --> 00:33:56,760 Speaker 1: in the battle to take over the rein And of 574 00:33:56,800 --> 00:33:59,239 Speaker 1: course there are many people who are remainers who are 575 00:33:59,280 --> 00:34:02,080 Speaker 1: worried because most of those people are having to play 576 00:34:01,800 --> 00:34:05,400 Speaker 1: the breaksit carved and so and then they're on the 577 00:34:05,440 --> 00:34:08,759 Speaker 1: other hand, you've got their divisions are also inside the 578 00:34:09,280 --> 00:34:12,560 Speaker 1: Labor Party, so it is a very divided situation and 579 00:34:12,680 --> 00:34:16,439 Speaker 1: and the House of Commons is very fractured. And those 580 00:34:16,440 --> 00:34:19,800 Speaker 1: are the very moments in fact when you probably constitutionally 581 00:34:20,520 --> 00:34:22,480 Speaker 1: we were discussing it this morning, some of us who 582 00:34:22,480 --> 00:34:26,239 Speaker 1: are interested in the constitutional legal implications this, This is 583 00:34:26,280 --> 00:34:28,880 Speaker 1: a sort of moment where because you've got gridlock, you 584 00:34:28,880 --> 00:34:33,000 Speaker 1: ought to have a general election, but in fact that's 585 00:34:33,000 --> 00:34:35,759 Speaker 1: not likely to happen because I think that the Conservatives 586 00:34:35,760 --> 00:34:39,520 Speaker 1: will not want that to happen. Just now, now, now, now, 587 00:34:39,960 --> 00:34:43,960 Speaker 1: what do you need from Mr Corbin? Well, I mean 588 00:34:44,080 --> 00:34:47,000 Speaker 1: I would like to hear Mr Corbin saying that he um, 589 00:34:47,040 --> 00:34:51,719 Speaker 1: that he is is absolutely wholeheartedly committed to remaining and 590 00:34:51,760 --> 00:34:53,400 Speaker 1: that it would not be in the interests of the 591 00:34:53,440 --> 00:34:56,400 Speaker 1: majority of the people who would be his his you know, 592 00:34:56,640 --> 00:35:00,560 Speaker 1: traditional constituency that you know, ordinary stok and working in 593 00:35:00,640 --> 00:35:04,120 Speaker 1: middle class people in Britain UM would would often you know, 594 00:35:04,440 --> 00:35:07,640 Speaker 1: be voting labor and but they are the majority of 595 00:35:07,640 --> 00:35:09,960 Speaker 1: the people who are actually in the young, particularly who 596 00:35:10,000 --> 00:35:13,640 Speaker 1: support Jeremy Corbyn, actually want to remain in Europe and 597 00:35:13,760 --> 00:35:16,279 Speaker 1: UM and he is ambivalent about it. And I would 598 00:35:16,320 --> 00:35:20,160 Speaker 1: like to hear him coming out, well, you know, fully 599 00:35:20,200 --> 00:35:22,400 Speaker 1: saying that he's bore remaining, because I mean, I have 600 00:35:22,440 --> 00:35:25,200 Speaker 1: to tell you that that's my position. I'm a remainer, UM, 601 00:35:25,400 --> 00:35:28,480 Speaker 1: but I am also not very keen on referenda, and 602 00:35:28,560 --> 00:35:32,360 Speaker 1: so the idea of having another referendum carries with at risks, 603 00:35:32,400 --> 00:35:34,120 Speaker 1: but I think that's probably the rule that we're going 604 00:35:34,200 --> 00:35:35,600 Speaker 1: to have to go down. I think we're going to 605 00:35:35,680 --> 00:35:38,640 Speaker 1: have to have a second referendum. Bernest Kennedy, thank you 606 00:35:38,719 --> 00:35:41,000 Speaker 1: so much. I look forward to someday we're gonna have 607 00:35:41,120 --> 00:35:44,320 Speaker 1: Ernest Kennedy on folks and just talk about the uniqueness 608 00:35:44,360 --> 00:35:46,920 Speaker 1: of Mansfield College at outs when she was the force 609 00:35:47,000 --> 00:35:50,920 Speaker 1: there for a good about a time. How Leny Kennedy 610 00:35:51,040 --> 00:36:02,040 Speaker 1: with the House of Wards. Thanks for listening to the 611 00:36:02,040 --> 00:36:08,560 Speaker 1: Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, 612 00:36:08,920 --> 00:36:13,120 Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at 613 00:36:13,160 --> 00:36:17,440 Speaker 1: Tom Keene before the podcast. You can always catch us worldwide. 614 00:36:17,880 --> 00:36:18,960 Speaker 1: I'm Bloomberg Radio.