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Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox.

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Speaker 1: Along with my co host Lisa Abramowitz. Each day we

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Speaker 1: bring you the most important, noteworthy, and useful interviews for

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Speaker 1: you and your money, whether you're at the grocery store

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Speaker 1: or the trading floor. Find the Bloomberg P L Podcast

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Speaker 1: on iTunes, SoundCloud and at Bloomberg dot com. I want

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Speaker 1: to bring in Christian Catalini. He is a professor at

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Speaker 1: the m I T. Sloan School of Management, coming to

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Speaker 1: us from Boston. Christian, you recently wrote a paper UH

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Speaker 1: with Joshua and Gance of the University of Toronto arguing

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Speaker 1: that cryptocurrencies will affect key costs in the economy and

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Speaker 1: namely the cost of verifying transactions, the cost of running

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Speaker 1: a network platform or a marketplace. I just want to

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Speaker 1: get your sense of where we are in the evolution

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Speaker 1: away from paper money and towards cryptocurrencies. So thank you

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Speaker 1: very much for having me here. UM. I think this

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Speaker 1: is an interesting time, UM are around this space. We

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Speaker 1: we we just came back from I think the most

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Speaker 1: ip phase around cryptocurrencies and blockchain and digital ledgers. UH

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Speaker 1: twenty sixteen and fifteen have seen a lot of VC

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Speaker 1: investment and attention in this space, and I think as

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Speaker 1: people are starting to build solutions that actually deliver value

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Speaker 1: UH to to customers to different industry verticals, we're coming

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Speaker 1: closer to two applications. UH. Digital currency is clearly one.

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Speaker 1: A number of central banks are looking at this really

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Speaker 1: closely because it has implications for how we think about

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Speaker 1: monetary policy, taxation, UH, and a number of other dimensions.

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Speaker 1: Of course, as many other systemic changes. UH. It's unlikely

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Speaker 1: to happen overnight, and I think a lot of the

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Speaker 1: IPE has inserved well this UH this ecosystem because the

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Speaker 1: technology is complex and bringing it to market what will

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Speaker 1: take some time. Can you speak in detail about blockchain

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Speaker 1: and its ability to create or to offer tamper proof

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Speaker 1: trans action records. I mean that's part of the promise, absolutely,

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Speaker 1: and in fact, so in our piece, what we're trying

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Speaker 1: to focus on is really basic economic theory. So from

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Speaker 1: from an economics perspective, we verify attributes of transactions all

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Speaker 1: the time. Anything you can think of in the economy

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Speaker 1: is essentially a transaction, whether you're authenticate yourself, you buy

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Speaker 1: goods yourself goods, you're trading UM, and those attributes matter

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Speaker 1: a lot because often, you know, as long as things

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Speaker 1: go well, we we don't worry and and the transaction

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Speaker 1: goes smoothly. But when there's an exception, we often need

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Speaker 1: to go back and verify credentials of individuals involved, attributes

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Speaker 1: of the goods, think about the provenance, how they've been

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Speaker 1: manipulated across the supply chain, and that's usually very costly.

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Speaker 1: We usually perform an audit when we need to verify attributes.

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Speaker 1: Um I think the promise of blocation is really lowering

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Speaker 1: the cost of that process, that process of verifying attributes

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Speaker 1: to almost to zero, and that's quite fascinating, you know,

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Speaker 1: to to markets. Well, Christian, I want to look at bitcoin,

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Speaker 1: which is probably the most close watched virtual currency out there. Yesterday,

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Speaker 1: there was a story in the Wall Street Journal that

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Speaker 1: Circle Internet Financial, which is one of the most heavily

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Speaker 1: funded digital currency startups, will no longer offer customers the

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Speaker 1: ability to buy and sell bitcoins based on the setbacks

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Speaker 1: that we have seen with bitcoin gaining cloud as a currency,

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Speaker 1: and you know, the failure for block chain to really

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Speaker 1: take off at the big banks. What's your optimism that

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Speaker 1: we will transfer the financial system towards something that is

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Speaker 1: more in line with a cryptocurrency model. Absolutely, so I

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Speaker 1: think those are all very valid points and and those

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Speaker 1: are kind of the main challenges of a technology that

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Speaker 1: is evolving into compliance. Right. So Bitcoin was designed, let's

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Speaker 1: remember that to be totally decentralized, censorship proof and distribute it. Right.

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Speaker 1: So it was in in total antithesis to the regular

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Speaker 1: financial system. Uh, therefore it made some choices in terms of,

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Speaker 1: you know, the privacy of the transactions, who can vet

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Speaker 1: transactions that were very deu syncratic to Bitcoin at the

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Speaker 1: same time, and we need to not forget that the

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Speaker 1: major breakthrough in cryptography behind blockchain is much more general

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Speaker 1: and in fact, what you're seeing now is you know, banks,

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Speaker 1: financial institutions, accounting firms rethinking this technology from the ground

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Speaker 1: up and repurposing it for different markets. In different settings.

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Speaker 1: You will need different types of cryptocurrencies with different properties,

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Speaker 1: with different you know, compliance levels. Bitcoin, I think it's

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Speaker 1: scaling quite successfully on a global scale, but not necessarily

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Speaker 1: you know, in the way that it's the most compatible

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Speaker 1: to current financial systems. Um the movie that you you

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Speaker 1: mentioned by Circle is one where the company is seeing

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Speaker 1: itself more and more as you know, a global payment

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Speaker 1: app where people can easily transfer money across the globe.

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Speaker 1: It doesn't really matter what cryptocurrency they use. It could

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Speaker 1: be bitcoin, it could be something else. Uh, the technology

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Speaker 1: is still kind of working in the background, but the

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Speaker 1: consumer doesn't really need to see it. Is This competition

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Speaker 1: include companies such as Venmo and then maybe bringing our three,

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Speaker 1: which is that consortium back by financial firms right JP,

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Speaker 1: Morgan Chase, Bank of America and Barclay's absolutely and in fact,

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Speaker 1: I think you're seeing a lot of experimentations from startups

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Speaker 1: that maybe want to tie themselves to to bitcoin or

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Speaker 1: etherium or other cryptocurrencies to consertions of banks. Are three

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Speaker 1: recently released Korda's fascinating to see how even within that consortium,

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Speaker 1: some players have decided to just tell people what courtA

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Speaker 1: is briefly because that's an interesting collaboration result. Yea. So

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Speaker 1: essentially that's a number of banks that have decided to

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Speaker 1: design their own protocol to streamline transactions because I think

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Speaker 1: there's a huge opportunity here in improving our settlement and

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Speaker 1: reconciliation of books. Happens on a global scale. Um, but

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Speaker 1: even within KORDA I think you're starting to see that,

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Speaker 1: you know, uh, Goldman, Sacks and others are deciding to

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Speaker 1: go alone because maybe they want a slightly different implementation

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Speaker 1: of the same technology. So real quick, what's the one

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Speaker 1: thing that you're looking for, the one development that will

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Speaker 1: push the evolution of cryptocurrency into the mainstream and make

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Speaker 1: it the base of the financial system. I think it

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Speaker 1: will take time, but I think what we may see

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Speaker 1: is maybe an economy, a government or um. You know,

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Speaker 1: it could be even like a private player within an

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Speaker 1: ecosystem with the supply chain doing a major adoption effort. Um.

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Speaker 1: I think that would take some time, but as you

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Speaker 1: as you know, like recent events like the India demonetization

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Speaker 1: of the thousand and five hundred Europe's can provide the

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Speaker 1: fuel for for further adoption in this market. And I

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Speaker 1: wouldn't be surprised if, you know, given the current microeconomic turmoil,

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Speaker 1: maybe a central bank we considered this as an opportunity

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Speaker 1: to reform taxes and how they do many of their

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Speaker 1: services to citizens. Christian Catalini, thank you very much, Professor

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Speaker 1: of Entrepreneurship at the m I. T. Sloan School of Management.

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Speaker 1: If you want some immediate thoughts from our next guest,

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Speaker 1: John Stults was is Oppenheimer's chief investment strategist. He knows

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Speaker 1: everything about global markets. John, it's always a pleasure. Thanks

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Speaker 1: for being here with us. Let's start off with the

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Speaker 1: Mario Draga European Central Bank, and then I want to

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Speaker 1: get your thoughts on emerging markets. But won't you start

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Speaker 1: there and tell us what that all means for investors. Well,

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Speaker 1: we've been big fans of Mario dragging for a long

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Speaker 1: time with think his his process of doing whatever it

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Speaker 1: takes has has helped Europe. It's a very complex situation.

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Speaker 1: But when you consider it that it's they're coming up

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Speaker 1: on their second anniversary of KWI and already they're talking

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Speaker 1: tapering much of that not officially talking, but I was

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Speaker 1: just auty. We learned today at sixty right, sixty billion,

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Speaker 1: but for a longer period of time until December. It

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Speaker 1: reminds me of Shakespeare Arose by any other name, you know,

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Speaker 1: it's I mean, honestly, everyone today is debating the meaning

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Speaker 1: of taper. Basically, they said that they're going to lower

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Speaker 1: the pace of purchases next year of the longer term

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Speaker 1: bonds that they're buying, but they haven't discussed tapering. So

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Speaker 1: then you had all of these journalists asking Mario Traggy, wait,

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Speaker 1: but how does that work? You're you're you're slowing the purchases.

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Speaker 1: I actually looked up tapering in the dictionary this morning.

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Speaker 1: I'm like, that's the definition of it. That's the thing,

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Speaker 1: you know, The process is always one of a lot

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Speaker 1: of dialogue, questions of semantics, always wide for interpretation, and

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Speaker 1: that that probably offers the day to day drama for

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Speaker 1: the markets, which I think we saw on the currency

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Speaker 1: with the Europe first was stronger than it moved lower

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Speaker 1: uh ash as the announcement came out today. But I

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Speaker 1: think the good news is just the thought that they're

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Speaker 1: thinking of going to that UH sixty UH number on

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Speaker 1: a monthly basis versus eighties shows it yet very much

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Speaker 1: on parallel to Bernanky in in May of twenty uh

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Speaker 1: when when Bernanky intimated that the Fed was beginning to

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Speaker 1: think about the possibility of tapering, and uh when the

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Speaker 1: market took that the market actually had a tantrum. Then

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Speaker 1: it doesn't look like we're getting that today, And I

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Speaker 1: wanted to ask you about that. That to me is

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Speaker 1: meaningful that We're not seeing a tantment markets. Yes, you

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Speaker 1: are seeing some price wings, but these are pretty minor

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Speaker 1: moves in the scheme of things. This is not another

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Speaker 1: taper tantrum all over again. Does this mean to you

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Speaker 1: that central bankers have really lost their clout, that people

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Speaker 1: are not looking to them as much anymore. I really

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Speaker 1: don't think that that that's the the issue. I think

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Speaker 1: it's more that I think there's a recognition that the

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Speaker 1: central bankers have become remarkably experienced since two thousand and

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Speaker 1: eight dealing with a significant crisis situation, coming out of

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Speaker 1: it and managing a recovery process, both sometimes on a

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Speaker 1: concerted effort and sometimes really on a parallel effort. It

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Speaker 1: just just depends what they appear to have learned from

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Speaker 1: one another. And of course the next chapter is as

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Speaker 1: government start fiscal spend. We think the infrastructure story here

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Speaker 1: from state side, which would have happened I there with

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Speaker 1: Hillary Clinton and now will happen probably a greater extent

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Speaker 1: with Donald Trump, will spread around the world, and it's

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Speaker 1: something that's needed both by developed nations as well as

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Speaker 1: emerging nations. So and it will relieve, it will take

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Speaker 1: the onus away from the central banks we think of

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Speaker 1: having to carry these economies, aren't we. You mentioned emerging nations.

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Speaker 1: I'd like you to get a little specific and tell

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Speaker 1: us which ones do you think will benefit the most

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Speaker 1: from the fiscal stimulus that you're describing may appear in

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Speaker 1: the United States. Well, I would have to think that

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Speaker 1: on a regional basis, Uh, we would probably there's risks,

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Speaker 1: of course, because of the president elect Candida with Mario.

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Speaker 1: In fact, Mario said spec he said, quote political uncertainty

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Speaker 1: is dominant, and he cited Brexit and the election of

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Speaker 1: Donald Trump. Yeah, without a doubt that there are all

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Speaker 1: kinds of questions is to to what's going to come.

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Speaker 1: But I think that in terms of signals that are

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Speaker 1: coming out of fifty six Street and Fifth Avenue, we

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Speaker 1: would have to think that what we're looking at is uh,

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Speaker 1: certainly it's somewhat of a melioration from where the very

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Speaker 1: sharp rhetoric during the campaign being rounded out here. We'd

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Speaker 1: have to think in terms of emerging markets, we think

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Speaker 1: Asia looks like it's it's plenty happy about what's going on,

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Speaker 1: compared to what many would have thought initially, Uh, not

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Speaker 1: necessarily on China, but on the region, so their trading

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Speaker 1: partners of what we do like about China. Of course,

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Speaker 1: as we saw an uptick in imports and in exports, UH,

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Speaker 1: that's a good sign. And we can't help but think that, Yeah,

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Speaker 1: Donald Trump is a globalist, even though he is, he

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Speaker 1: is looking to uh perhaps take back some of the

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Speaker 1: economic edge we gave away years ago in trade agreements.

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Speaker 1: Now on a world where the competitive landscape has been

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Speaker 1: vastly reduced or leveled by globalization as well as by technology,

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Speaker 1: where emerging markets are so which countries okay? In terms

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Speaker 1: in terms of countries, I'd have to think, Uh, Korea, Taiwan.

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Speaker 1: I would have to think, are you naming countries that

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Speaker 1: have turmoil related to the political issues or opportunities both well?

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Speaker 1: I would say here opportunities from the extent that of

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Speaker 1: multinational uh trade positions that will likely not be as

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Speaker 1: affected as negatively as might be thought. And we'd have

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Speaker 1: to think China will come will benefit from this as well.

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Speaker 1: We we've just been usually we like to benefit from

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Speaker 1: the region more than direct in China. What about back

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Speaker 1: here in the U s UM, I've heard some calls

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Speaker 1: for decline and the SMP UH. Some people are saying

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Speaker 1: maybe just a ten percent. What's your thought? What what

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Speaker 1: in terms of you know, and we'd have to get

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Speaker 1: some kind of a bolt from the blue to see

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Speaker 1: some kind of a decline. Do you think that the

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Speaker 1: SMP is going to keep going up? I think that

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Speaker 1: the S and P will likely level out. We're hoping

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Speaker 1: it will go through our twenty target, which we put

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Speaker 1: in last December twenty two. We're about two and a

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Speaker 1: half percent away from that right now. But we've seen

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Speaker 1: real good performance, much better performance out of mids and smalls,

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Speaker 1: and we were market capagnostic also, so we're optimistic. We

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Speaker 1: think the the but the the level of and and

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Speaker 1: momentum that we're seeing now we think will carry through

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Speaker 1: the end of the year. But the first quarter may

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Speaker 1: have a traditional New Year's revisiting and consideration, but we're

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Speaker 1: not looking for a significant drop. Just real quick, What

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Speaker 1: about highyeld bonds related to high yield? You know, the

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Speaker 1: thing about high yield is if, if if anything, it

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Speaker 1: tends to be an area that we're sentiment swings very

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Speaker 1: sharply either one side of the boat or the other.

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Speaker 1: Right now, the fact that you're dealing with a scenario

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Speaker 1: that appears to be a continuation of increasing growth. State

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Speaker 1: side moving forward should be good for high yield bonds,

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Speaker 1: which are proxies for the equity market within the bond

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Speaker 1: space forward. You sound pretty bullish. Yeah, I still am bullish,

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Speaker 1: and I have been bullish actually since January of two

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Speaker 1: thousand and nine when we were looking forward. Fortunately we

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Speaker 1: were quoted by by a newspaper out in Des Moines

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Speaker 1: at that time, Otherwise we would have forgotten when we

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Speaker 1: turned bullish. John stultis Oppenheimer's chief investment strategist. Thank you

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Speaker 1: so much. I want to learn more about moonshot ideas,

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Speaker 1: to sort of out there crazy ideas that may one

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Speaker 1: day make another billion dollars with us, to tell us

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Speaker 1: all about those ambitions, ambitions and how they may be

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Speaker 1: getting ratcheted back at Google. Is Max Chafkin, Bloomberg tech

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Speaker 1: reporter who's here in Bloomberg eleven three Oh's studio. Max,

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Speaker 1: you wrote this fascinating story about how Google makes so

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Speaker 1: much money. Me that never had to worry about financial

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Speaker 1: discipline until now set the scene for us. Right. So, uh,

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Speaker 1: basically you think of Google, and you think of um

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Speaker 1: search obviously, but you also think of a very successful

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Speaker 1: email program. Maybe YouTube, Um, maybe you start thinking about

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Speaker 1: these these further off ideas, the self driving car, they

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Speaker 1: make internet balloons. Uh, they have venture capital arms, they

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Speaker 1: have all these different divisions trying to find a cure

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Speaker 1: for death trying. Yeah, there's a company called Calico trying

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Speaker 1: to find a cure for death, run by Art Levinson,

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Speaker 1: um and and and the weird kind of reality of

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Speaker 1: this is that there's really only one piece of the

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Speaker 1: business that makes a lot of money, which is their

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Speaker 1: advertising part, primarily search ads, the little ads that show

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Speaker 1: up when you search and you know, and that and

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Speaker 1: that's created kind of like one of the weirdest companies

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Speaker 1: I think in like the history of capitalism, where you

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Speaker 1: have this amazingly successful business and then all these other

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Speaker 1: businesses that are outside of that and um. For years, uh,

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Speaker 1: Larry Page ands are gay Brand basically allowed these other businesses,

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Speaker 1: which are kind of these little fife tums to just

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Speaker 1: do whatever they want. And now Google, which is now

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Speaker 1: called Alphabet, is trying to kind of rain that in

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Speaker 1: but also ran it in a way that doesn't totally

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Speaker 1: squash innovation. You know. One of the illustrations for this

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Speaker 1: story is an energy generating kite, and I confessed that

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Speaker 1: it immediately brought to mind images of Howard Hughes and

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Speaker 1: the spruce goose, the mega plane that flew just once.

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Speaker 1: Can you tell us about Astro Teller, the people that

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Speaker 1: you met while you made this story come to life? Right? So,

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Speaker 1: so my co writer and I Mark Bergen went inside

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Speaker 1: of X, which is used to be called Google X.

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Speaker 1: It is the crazy research lab that's responsible for for

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Speaker 1: Google's moonshots. They call themselves the Moonshot Factory. They all

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Speaker 1: have these crazy titles. Astro I think is now called CEO,

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Speaker 1: but for a long time he was keptain of moonshots

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Speaker 1: um and and so you have and so anyway, it's

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Speaker 1: it's it's this crazy research lab they have. They have

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Speaker 1: the driver car, they have the energy generating kites, they

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Speaker 1: have these Internet balloons, and they have drone delivery and

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Speaker 1: you know, all of these things. You know, they could

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Speaker 1: be huge businesses, but they're all still sort of a

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Speaker 1: ways off. I'd say the car, the driverless car, is

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Speaker 1: the thing that's closest to becoming you know, a revenue

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Speaker 1: generating uh business. They're they're supposedly they're going to spin

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Speaker 1: it off next year, although we don't know for sure.

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Speaker 1: I love this quote from the Owner's manual for Google shareholders,

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Speaker 1: do not be surprised if we place smaller bets in

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Speaker 1: areas that seem very speculative or even strange. Uh. You know,

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Speaker 1: you were talking Max about how Google is unlike any

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Speaker 1: other company possibly in history, because they get most of

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Speaker 1: their revenue from one area and then invest in all

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Speaker 1: these other areas. One possible agent for change has been

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Speaker 1: Ruth Poorat, who came to the company last year as

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Speaker 1: chief financial officer from Morgan Stanley. Uh. And she's developed

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Speaker 1: sort of an unflattering reputation among these sort of Moonshot magicians. Correct. Right, Well,

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Speaker 1: so it's probably important to point out that on Wall

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Speaker 1: Street people love this. They love they They're very happy

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Speaker 1: that Google is trying to be a little bit smarter

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Speaker 1: about how it spends its money. However, in the Moonshot

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Speaker 1: Factory and in some of these other divisions, uh, this

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Speaker 1: is look really looked at as like bringing in this

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Speaker 1: kind of New York Wall Street type to kind of,

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Speaker 1: you know, make a bunch of decisions where you know

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Speaker 1: what I mean, where where. From their perspective, she doesn't

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Speaker 1: know anything about Yeah, it's some one person called called

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Speaker 1: her referred to as a hatchet man. Um. Now, I

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Speaker 1: think what Google would say, and what what what people

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Speaker 1: inside of these bets as they're called say, is that

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Speaker 1: you know, from you know, constraints, you can still have innovation.

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Speaker 1: That sometimes it's important actually to say like you can

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Speaker 1: only spend this much money, because that forces people to

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Speaker 1: be a little bit more creative. I actually think there's

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Speaker 1: something to that. And I think one of the things,

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Speaker 1: especially when you look at, say the driverless car, I

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Speaker 1: think it's possible that the driverless car suffered a little

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Speaker 1: bit from basically an almost unlimited budget. Um. You know,

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Speaker 1: Google is technologically ahead of just just about everybody else,

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Speaker 1: but commercially they are actually kind of behind a bunch

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Speaker 1: of companies there, behind Tesla, they're behind Uber and you

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Speaker 1: wonder if maybe if they had had placed some more

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Speaker 1: constraints on the business, they would have been forced to

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Speaker 1: take a product to market sooner. On the other hand,

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Speaker 1: their safety reasons and and you know, it's a long game.

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Speaker 1: So we'll see. How was the food. The food at

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Speaker 1: Google and Alphabet is excellent, as you might imagine. Um,

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Speaker 1: And and one of the one of the most surreal experiences, Uh, Mark,

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Speaker 1: my co writer and I had during the during our

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Speaker 1: visit to X was you know, sitting there and there's

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Speaker 1: this picnic area where people are picking at you know,

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Speaker 1: seared tofu it's probably locally sourced or something. And you know,

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Speaker 1: just a few feet away from this picnic area, there's

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Speaker 1: a drone going up and down and up and down,

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Speaker 1: and everybody's just you know, basically ignoring it, like you know,

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Speaker 1: like it's nothing, and you just realize, like, man, this

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Speaker 1: is a this is an interesting place. Is a place

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Speaker 1: that's that's doing things that nobody else is doing, and

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Speaker 1: it's kind of doing it on a scale that nobody

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Speaker 1: else is doing it at while you're doing it on

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Speaker 1: a great scale. By sharing this information in this story

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Speaker 1: with us Max Chafkin, also with Mark Bergen, co authors

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Speaker 1: of this great story, you've got to read about Google

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Speaker 1: making so much money that it doesn't necessarily have to

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Speaker 1: worry about discipline. I want to take a look at bonds.

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Speaker 1: I want to look at particular European bonds which have

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Speaker 1: been out responding to today's ECB announcement that they will

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Speaker 1: slower the amount of bonds that they will purchase each

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Speaker 1: month starting in April next year. But they also had

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Speaker 1: some other messages that might be a little bit more uh,

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Speaker 1: sort of dovish. Frankly, I want to bring in for

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Speaker 1: more insight, uh, Max seems abay, Euro Area economist for

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Speaker 1: Bloomberg Intelligence. Uh, to give us a better sense of

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Speaker 1: what's going on here. So Maxie, what's your big takeaway

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Speaker 1: from the CBS announcement today? Yes, Settle from London. Well,

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Speaker 1: the the announcement of d c B was quite a

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Speaker 1: surprise actually because right, yeah, because they went for for

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Speaker 1: actually it went for longer than what I expected, but

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Speaker 1: at a bit at a smaller pace. So now they're

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Speaker 1: gonna buy sixty billion months starting in April until December

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Speaker 1: two thousand seventeen. So that means they're going to go

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Speaker 1: for one more year of que market expectations, well for

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Speaker 1: something a bit a bit shorter at the same current

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Speaker 1: eighty billion pace. So they're going smaller but for longer. Wait,

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Speaker 1: hold on, I just I want to raise one important point.

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Speaker 1: They also lowered the yields, or they allowed the ECB

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Speaker 1: to buy bonds with yields that are lower than the

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Speaker 1: deposit rate. In other words, Uh, this is saying, Okay,

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Speaker 1: you want to go buy those two year German yields,

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Speaker 1: German bonds that have yields that are too low under

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Speaker 1: the current provisions, go ahead, We're going to allow that.

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Speaker 1: And what you're seeing is a steepening in the yield curve.

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Speaker 1: In fact, the German yield curve steepened to the widest

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Speaker 1: of the year and uh and and the most in

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Speaker 1: in many years. So I'm looking at this and wondering,

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Speaker 1: is this a similar move to the Bank of Japan.

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Speaker 1: Is this basically the e c B saying we're gonna

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Speaker 1: peg short term rates and we're gonna allow longer term

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Speaker 1: rates to sort of creep upward. Well that's not what

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Speaker 1: they said explicitly, but maybe they're going to that. The

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Speaker 1: deposit rule well actually something they put in place from

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Speaker 1: the start to avoid making losses on on these purchases.

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Speaker 1: And basically now they can buy anything below the deposit

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Speaker 1: which is set a minus your point four percent. And

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Speaker 1: also another cuy parameters that changed today is the fact

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Speaker 1: that they can buy anything now until one year maturity.

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Speaker 1: Before that it was from two years and thirty years,

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Speaker 1: and now it's also one year to thirty years. So

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Speaker 1: there's there's a double effect here, obviously weighing on the

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Speaker 1: on the short end of the curveous, Can I just

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Speaker 1: ask you to comment on whether these projections into two

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Speaker 1: thousand nineteen really make any sense? I mean, I know

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Speaker 1: they have to answer the question and they have to

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Speaker 1: check the box. But you know, even if we just

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Speaker 1: look back to two thousand fifteen, originally the European Central

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Speaker 1: Bank estimated that they would have maybe a trillion euros

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Speaker 1: on their balance sheet. Today they have more than two

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Speaker 1: and a quarter trillion on target. This is a changing situation.

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Speaker 1: So why did these projections out to two thousand nineteen

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Speaker 1: and and beyond, Why does that really matter? Well, Um,

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Speaker 1: as an economist, it's always difficult to to to talk

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Speaker 1: about projection in the next three years. Obviously, it's already

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Speaker 1: difficult to do it for the next year, the next

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Speaker 1: two years, so three years obviously it's a bit stretched. Um.

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Speaker 1: The thing is they have to publish this because it's

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Speaker 1: also an eddication of how they assess um their own homework,

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Speaker 1: how they are reaching the target. And this thing to

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Speaker 1: to to be careful with these projection is that they

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Speaker 1: what they did today the announcement and all the decisions

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Speaker 1: are not penciled in these projections because they were made

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Speaker 1: before that. So it's important to keep that in mind. Um. Obviously, Drag,

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Speaker 1: you acknowledge during the press conference, just it just explained,

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Speaker 1: and so what does that mean? What should we what

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Speaker 1: should we take away from that? Well, let's takeaway is

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Speaker 1: that you acknowledge during the press conference that one point

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Speaker 1: seven percent in two thousand nineteen, which is the projection

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Speaker 1: they have now for inflation, is you acknowledge it is

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Speaker 1: not close to the target to the mandate and that

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Speaker 1: means the it's a very dovish message actually that they

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Speaker 1: could actually go for even longer than the seven two

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Speaker 1: seventeen uh. And yeah, again that's the dovish message from

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Speaker 1: drug Is saying we're not done here. It could be

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Speaker 1: much longer than than what we have today. Maxim, what

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Speaker 1: insight did you glean on what the latest ECB announcements

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Speaker 1: mean for the peripheral nations, namely Italy which has struggled, uh,

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Speaker 1: certainly after the no referendum vote, but also because of

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Speaker 1: the banking system there. Well, we know that the career

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Speaker 1: program is helping the periphery more than the core. If

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Speaker 1: even if they buy more at the core then at

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Speaker 1: the periphery because of the capital keys. But the message

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Speaker 1: sent from the EC year is that we're gonna be

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Speaker 1: here for longer. Mario Dreggie said that. He said, there's

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Speaker 1: no tampering. We're gonna stay in the market. We're gonna

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Speaker 1: continue exert pressure on prices. It was very clear about this.

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Speaker 1: The message is your boring costs are gonna say, uh,

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Speaker 1: for longer, I'm gonna stay very low, and that we're

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Speaker 1: here to help you, not just the periphery but the

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Speaker 1: Eurozone as a whole. Speak if you can about the

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Speaker 1: implications for currencies, because the tenure US Treasury at right

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Speaker 1: now two point three nine percent, a sell off of

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Speaker 1: sixteen thirty seconds. The thirty year stands at three point

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Speaker 1: oh eight percent. It is off one and six thirty seconds.

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Speaker 1: Implications for the euro and the dollar well, Obviously the

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Speaker 1: e c b S is probably expecting, it's probably hoping

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Speaker 1: for this to have an effects effect. Obviously with the

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Speaker 1: fom C next week, this would also be a factor. Uh,

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Speaker 1: it's not a policy target, as they say, but it's

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Speaker 1: surely something they're watching today. Thanks for listening to the

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Speaker 1: Bloomberg pien L Podcast. You can subscribe and listen to

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Speaker 1: interviews at iTunes, SoundCloud, or whatever podcast platform you prefer.

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Speaker 1: I'm pim Fox. I'm out there on Twitter at pim Fox.

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Speaker 1: I'm out there on Twitter at Lisa Abramo. It's one

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Speaker 1: before the podcast. You can always catch us worldwide on

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Speaker 1: Bloomberg Radio