1
00:00:02,600 --> 00:00:13,000
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 Lee. 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 --> 00:00:28,280
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Please

5
00:00:28,320 --> 00:00:30,040
Speaker 1: to say that joining me in the studio, have alongside

6
00:00:30,040 --> 00:00:32,120
Speaker 1: Tom Keen and myself here in New York Eat and

7
00:00:32,200 --> 00:00:35,559
Speaker 1: Shepherdson Pantheon Metro Economics Chief Economy's Good morning to wi

8
00:00:35,680 --> 00:00:37,440
Speaker 1: in good morning. Let's start with that day to add

9
00:00:37,440 --> 00:00:40,520
Speaker 1: a China sub fifty for a fifth straight month. Not great,

10
00:00:40,760 --> 00:00:44,400
Speaker 1: but small signs of improvement in the Chinese data you'll

11
00:00:44,440 --> 00:00:47,800
Speaker 1: read this morning, please Ian, Yes, definitely less bad. You

12
00:00:47,920 --> 00:00:51,440
Speaker 1: noticed I didn't say better, but less bad. Less bad,

13
00:00:51,600 --> 00:00:54,480
Speaker 1: And on the Kaishin Index, which is the unofficial pre

14
00:00:54,520 --> 00:00:57,640
Speaker 1: My survey which tends to capture the views of smaller

15
00:00:57,680 --> 00:01:00,200
Speaker 1: private companies and not so many of the big s

16
00:01:00,320 --> 00:01:05,800
Speaker 1: o s substantially better but also very volatile. So certainly

17
00:01:05,800 --> 00:01:08,040
Speaker 1: I'd rather see these numbers than weaken numbers. But it's

18
00:01:08,080 --> 00:01:10,000
Speaker 1: it's it's too early to get the flags out, it's

19
00:01:10,040 --> 00:01:11,959
Speaker 1: too early to say this is the major turning point.

20
00:01:12,280 --> 00:01:14,399
Speaker 1: And also, you know, looking at the policy stands and

21
00:01:14,440 --> 00:01:16,560
Speaker 1: looking at the slow growth of the money supply in China,

22
00:01:16,640 --> 00:01:19,119
Speaker 1: it's kind of hard to see that a good reason

23
00:01:19,160 --> 00:01:21,160
Speaker 1: why you should be expecting things to be taking off

24
00:01:21,240 --> 00:01:24,520
Speaker 1: rapidly right now. But as far as it goes, markets

25
00:01:24,560 --> 00:01:26,640
Speaker 1: will be pleased to see these numbers. But I think

26
00:01:27,000 --> 00:01:31,160
Speaker 1: caution and skepticism is still appropriate. New orders improve, export

27
00:01:31,240 --> 00:01:33,920
Speaker 1: orders improve, A lot of things beneath the surface improved.

28
00:01:33,959 --> 00:01:35,800
Speaker 1: But to your point, I don't find many people this

29
00:01:35,840 --> 00:01:38,280
Speaker 1: morning saying this is the beginning of a turning point.

30
00:01:38,280 --> 00:01:40,560
Speaker 1: What I do see is just this wall of doubt,

31
00:01:40,800 --> 00:01:43,039
Speaker 1: this wall of data around trade talks that begin again

32
00:01:43,120 --> 00:01:46,240
Speaker 1: next week. This call from Morgan Stanley's Michael Jesus, who

33
00:01:46,240 --> 00:01:48,440
Speaker 1: said the following, we have more conviction that without a

34
00:01:48,520 --> 00:01:52,240
Speaker 1: circuit breaker, escalation continues over the medium term, meaning any

35
00:01:52,240 --> 00:01:56,160
Speaker 1: pauses fleeting. Investors should price in all announced actions, even

36
00:01:56,200 --> 00:01:59,800
Speaker 1: if further delays or pauses are announced. What do you

37
00:01:59,840 --> 00:02:02,040
Speaker 1: make of that? Again? Oh? I agree. I mean, I

38
00:02:02,080 --> 00:02:03,480
Speaker 1: don't think we're going to get a tread deal this

39
00:02:03,520 --> 00:02:05,680
Speaker 1: side of the election. I think we're going to get

40
00:02:05,680 --> 00:02:08,240
Speaker 1: some warm noises next week. But I think that really

41
00:02:08,240 --> 00:02:10,680
Speaker 1: what's happening here is that China is essentially given up

42
00:02:10,880 --> 00:02:14,280
Speaker 1: on Trump. Any deal that Trump is willing to sign

43
00:02:14,280 --> 00:02:17,760
Speaker 1: as a deal that China can't sign. Uhiation pings under

44
00:02:17,880 --> 00:02:20,720
Speaker 1: enormous pressure not to be seen to be bowing to

45
00:02:20,840 --> 00:02:23,120
Speaker 1: Trump because of what's going on in Hong Kong. It

46
00:02:23,160 --> 00:02:26,080
Speaker 1: can't appear to be weak. And so I think that

47
00:02:26,120 --> 00:02:28,120
Speaker 1: what they're planning to do now is to string Trump

48
00:02:28,120 --> 00:02:31,480
Speaker 1: along until the election. They can read the polling, they

49
00:02:31,480 --> 00:02:33,680
Speaker 1: can see what's happening with the impeachment. They see Trump

50
00:02:33,760 --> 00:02:36,880
Speaker 1: as as as rather less likely to be reelected than

51
00:02:36,919 --> 00:02:40,079
Speaker 1: markets think, and therefore for them it might be more

52
00:02:40,120 --> 00:02:43,840
Speaker 1: sensible to wait for the next guy. Which differentials more

53
00:02:43,880 --> 00:02:48,760
Speaker 1: important the dynamics of our exports to China or there's

54
00:02:48,880 --> 00:02:52,560
Speaker 1: stuff coming in here, Well, it depends where you sit.

55
00:02:52,639 --> 00:02:55,080
Speaker 1: You know, if I were a US manufacturer right now,

56
00:02:55,200 --> 00:02:58,880
Speaker 1: I'd be extremely nervous about the exports story, And if

57
00:02:58,880 --> 00:03:00,440
Speaker 1: I were a retailer in the U S I'd be

58
00:03:00,520 --> 00:03:02,160
Speaker 1: really worried about what's going to happen to the price

59
00:03:02,160 --> 00:03:06,240
Speaker 1: of Chinese imports. But both of them are going to suffer.

60
00:03:06,280 --> 00:03:08,760
Speaker 1: So what that means is that we have potentially a

61
00:03:08,840 --> 00:03:12,079
Speaker 1: growth hit through the weaker exports and US export or

62
00:03:12,240 --> 00:03:13,560
Speaker 1: if you look at the U s p M I,

63
00:03:13,800 --> 00:03:18,080
Speaker 1: the export orders numbers are horrendous, absolutely awful. But of

64
00:03:18,120 --> 00:03:19,960
Speaker 1: course we now have a fifteen cent tariff on a

65
00:03:19,960 --> 00:03:22,520
Speaker 1: bunch of consumer goods and the remaining consumer goods being

66
00:03:22,520 --> 00:03:25,160
Speaker 1: tariffed in December. So it's very difficult from both sides,

67
00:03:25,200 --> 00:03:28,639
Speaker 1: growth down and inflation potentially up. And we're going to

68
00:03:28,760 --> 00:03:31,280
Speaker 1: rip up the script right now. There's a red sticky

69
00:03:31,360 --> 00:03:34,120
Speaker 1: John that the yields in the repoll market. This is

70
00:03:34,280 --> 00:03:37,080
Speaker 1: overnight repose. I don't want to go into much of

71
00:03:37,120 --> 00:03:40,480
Speaker 1: the minutia here on a Monday morning, but those numbers

72
00:03:40,520 --> 00:03:43,520
Speaker 1: are above where they're supposed to be. They just can't

73
00:03:44,040 --> 00:03:49,200
Speaker 1: get the rates in this arcane short term trust market,

74
00:03:49,400 --> 00:03:53,200
Speaker 1: lower quarter end quota end today, there's noise there. I

75
00:03:53,240 --> 00:03:55,640
Speaker 1: can imagine the neal fens going to come in again

76
00:03:55,920 --> 00:03:58,440
Speaker 1: as they've indicated they will do, and we see how

77
00:03:58,520 --> 00:04:02,600
Speaker 1: much more than the they do is bid for etcetera.

78
00:04:03,600 --> 00:04:05,480
Speaker 1: What have you learned about this scene in the last

79
00:04:05,520 --> 00:04:08,160
Speaker 1: week and a half. I mean, as John correctly stayed

80
00:04:08,200 --> 00:04:13,480
Speaker 1: September thirty, yield comes in nicely above two percent. I mean,

81
00:04:13,520 --> 00:04:16,200
Speaker 1: what have you learned about the report? What? What? What

82
00:04:16,240 --> 00:04:18,800
Speaker 1: we've learned is that all those people who said that

83
00:04:18,880 --> 00:04:21,360
Speaker 1: as the quantity of reserves shrinks, the report market is

84
00:04:21,360 --> 00:04:24,000
Speaker 1: going to run into trouble, we're right. And so there

85
00:04:24,000 --> 00:04:26,479
Speaker 1: are there's really two ways out of it. Either the

86
00:04:26,480 --> 00:04:30,719
Speaker 1: Fed ads reserves permanently, presumably of the order of several

87
00:04:30,760 --> 00:04:33,279
Speaker 1: hundred billion. The problem with that is that it's qui,

88
00:04:33,480 --> 00:04:36,200
Speaker 1: which they don't want to do at this point. Or

89
00:04:36,240 --> 00:04:40,159
Speaker 1: they have to go back essentially to these frequent repo operations,

90
00:04:41,000 --> 00:04:43,920
Speaker 1: but but permanently. It's it's very clear now that with

91
00:04:44,000 --> 00:04:46,840
Speaker 1: the stock of reserves having shrunk so far, there is

92
00:04:47,000 --> 00:04:50,880
Speaker 1: not enough liquidity in the market to prevent these spikes. Um,

93
00:04:51,000 --> 00:04:52,680
Speaker 1: they're not going to go away with their own accord.

94
00:04:52,720 --> 00:04:55,120
Speaker 1: This is not going to be fixed, I think by

95
00:04:55,200 --> 00:04:57,760
Speaker 1: an organic expansion of the Fed's balance sheet, because it's

96
00:04:57,800 --> 00:05:00,719
Speaker 1: just not going to be quick enough. So they have

97
00:05:00,800 --> 00:05:03,359
Speaker 1: to make a decision and something's going to change. I

98
00:05:03,400 --> 00:05:05,640
Speaker 1: am not wedded one way or the other to the

99
00:05:05,640 --> 00:05:08,600
Speaker 1: permanent reserve out or to the endless repos but one

100
00:05:08,640 --> 00:05:11,159
Speaker 1: of those two things has to happen because otherwise the

101
00:05:11,200 --> 00:05:12,880
Speaker 1: problem is just going to keep coming up and I

102
00:05:12,960 --> 00:05:15,440
Speaker 1: think to worry about and from well that's from a

103
00:05:15,480 --> 00:05:19,440
Speaker 1: macro perspective. No, not really, because they'll keep fixing it.

104
00:05:19,960 --> 00:05:22,799
Speaker 1: If they don't keep fixing it, then eventually the spike

105
00:05:22,839 --> 00:05:25,159
Speaker 1: in rates will start passing through to business and consumer

106
00:05:25,200 --> 00:05:28,080
Speaker 1: borrowing costs. But it's inconceivable that they won't fix it.

107
00:05:28,279 --> 00:05:30,360
Speaker 1: So the question is really a technical one for markets,

108
00:05:30,360 --> 00:05:32,520
Speaker 1: which is which fix do they go for? And at

109
00:05:32,520 --> 00:05:34,760
Speaker 1: the moment we don't have clarity, but can we just

110
00:05:34,800 --> 00:05:36,680
Speaker 1: say it on a Monday morning where nobody wants to

111
00:05:36,680 --> 00:05:39,640
Speaker 1: do the math, that all we're talking about is this

112
00:05:39,839 --> 00:05:45,000
Speaker 1: quei quei like kuwie infinity or as the institutional voices say,

113
00:05:45,040 --> 00:05:48,919
Speaker 1: such as William Dudley, wait time, it's not que I

114
00:05:48,960 --> 00:05:52,640
Speaker 1: mean with within your thesis of this, which is, well,

115
00:05:52,680 --> 00:05:55,560
Speaker 1: if you permanently had reserves, it is quei. If you're

116
00:05:55,560 --> 00:05:59,400
Speaker 1: doing endless short term repos then then it isn't. So

117
00:06:00,040 --> 00:06:02,840
Speaker 1: you could they can dress it up in different ways,

118
00:06:02,880 --> 00:06:05,039
Speaker 1: but the fact is if they're going to add reading

119
00:06:05,040 --> 00:06:07,520
Speaker 1: this morning, analysts some analysts thinking they're going to add

120
00:06:07,760 --> 00:06:11,400
Speaker 1: follon in reserves, that that's that is QUEI there's just

121
00:06:11,440 --> 00:06:13,240
Speaker 1: no way around it. We could call it something different,

122
00:06:13,279 --> 00:06:15,760
Speaker 1: but it is. And I don't think they want to

123
00:06:15,800 --> 00:06:17,400
Speaker 1: go down that road at the moment, but they do

124
00:06:17,480 --> 00:06:20,080
Speaker 1: have to do something. I mean, doing nothing is not

125
00:06:20,120 --> 00:06:22,160
Speaker 1: an option, that's for sure. Let's get to the economic

126
00:06:22,240 --> 00:06:24,159
Speaker 1: data were said to see through the week. I SAMs

127
00:06:24,200 --> 00:06:27,839
Speaker 1: tomorrow in America, pay rolls coming up on Friday, a

128
00:06:27,960 --> 00:06:31,560
Speaker 1: small crack and essentially the last man standing in the

129
00:06:31,600 --> 00:06:35,960
Speaker 1: developed economy, which is the US consumer confidence last week

130
00:06:36,320 --> 00:06:39,200
Speaker 1: just a little bit. Consumer spending not coming in quite

131
00:06:39,240 --> 00:06:41,840
Speaker 1: as firm as some people were looking for. And how

132
00:06:41,839 --> 00:06:44,240
Speaker 1: on top of that are you at the moment? I'm

133
00:06:44,279 --> 00:06:46,599
Speaker 1: getting twitchy about the consumer I gotta say, those spending

134
00:06:46,680 --> 00:06:48,600
Speaker 1: numbers last week for August looked to me to be

135
00:06:48,839 --> 00:06:50,680
Speaker 1: right for an upward revision. There were there were so

136
00:06:50,800 --> 00:06:53,000
Speaker 1: low and so inconsistent with some of the other stuff.

137
00:06:53,040 --> 00:06:55,720
Speaker 1: I think they'll be revised higher. But I don't like

138
00:06:55,800 --> 00:06:58,720
Speaker 1: the declining the conference numbers. And what I think has

139
00:06:58,720 --> 00:07:00,320
Speaker 1: happened here is they're both in the business on the

140
00:07:00,360 --> 00:07:03,120
Speaker 1: consumer side. The breakdown of the China trade talks in

141
00:07:03,160 --> 00:07:05,880
Speaker 1: April May and the big increase in tariff since then,

142
00:07:06,040 --> 00:07:08,760
Speaker 1: and the imposition of tarifs on consumer goods, which really

143
00:07:08,839 --> 00:07:11,520
Speaker 1: nobody thought they'd be dumb enough to do. That's really

144
00:07:11,560 --> 00:07:13,840
Speaker 1: scaring people, and it's and it's really beginning to eat

145
00:07:13,880 --> 00:07:16,400
Speaker 1: into confidence and in a way that I think we've

146
00:07:16,440 --> 00:07:18,480
Speaker 1: become very blase. We were thinking, O the consumer is

147
00:07:18,520 --> 00:07:20,960
Speaker 1: just completely rock solid, is never going to fold? Well,

148
00:07:21,000 --> 00:07:23,520
Speaker 1: they're not folding, but they're just they're beginning to wobble.

149
00:07:24,040 --> 00:07:27,920
Speaker 1: Thank god Watford folded. Yes, or only second bottom? You're

150
00:07:27,920 --> 00:07:31,120
Speaker 1: only second to the bottom. I mean I I I folks.

151
00:07:31,160 --> 00:07:35,120
Speaker 1: I found this new thing that saves me so much time.

152
00:07:35,520 --> 00:07:39,160
Speaker 1: I don't have to watch Saturday's Sunday Morning football. I

153
00:07:39,200 --> 00:07:42,840
Speaker 1: get on YouTube every goal it's called where they show

154
00:07:42,960 --> 00:07:45,600
Speaker 1: every goal score. Did you see they spell? They spent

155
00:07:45,680 --> 00:07:51,560
Speaker 1: a lot of Lester Lester, Lester. They spent a lot

156
00:07:51,600 --> 00:07:54,760
Speaker 1: of time on Luster. That's because Ter scored five. Time

157
00:07:54,840 --> 00:07:57,320
Speaker 1: to show five goals in Newcastle one night. I want

158
00:07:57,320 --> 00:07:59,000
Speaker 1: to get to the business side of this, because it

159
00:07:59,080 --> 00:08:02,240
Speaker 1: is Bloomberg Survey Island. If you're relegated, what does the

160
00:08:02,280 --> 00:08:05,680
Speaker 1: owner do? Well? You get a big parachute payment from

161
00:08:05,720 --> 00:08:08,920
Speaker 1: the Premier League too to ease your transition, and what

162
00:08:08,960 --> 00:08:10,960
Speaker 1: you hope is that you can spend some money and

163
00:08:11,000 --> 00:08:14,360
Speaker 1: come bouncing back up again. Things get difficult if you

164
00:08:14,440 --> 00:08:17,120
Speaker 1: go down and don't manage to come back the following year.

165
00:08:17,200 --> 00:08:21,080
Speaker 1: So under the two relegations, under the current ownership we have,

166
00:08:21,360 --> 00:08:24,360
Speaker 1: Newcastle has rebounded both times. But the squad now is

167
00:08:24,400 --> 00:08:28,720
Speaker 1: so weak and the current coaches so challenge. Shall we

168
00:08:28,760 --> 00:08:31,280
Speaker 1: say that that were we to be relegated, which frankly,

169
00:08:31,360 --> 00:08:34,560
Speaker 1: even in in September now looks inevitable, then we probably

170
00:08:34,559 --> 00:08:36,520
Speaker 1: won't come back up again and it'll all go to

171
00:08:36,559 --> 00:08:39,480
Speaker 1: hell InHand. To take this seriously, it's fun to watch

172
00:08:39,559 --> 00:08:43,240
Speaker 1: Newcast United, particularly at home. I find it used to be.

173
00:08:43,520 --> 00:08:46,440
Speaker 1: I mean, it's not fun for the tarts are like

174
00:08:46,520 --> 00:08:49,320
Speaker 1: in Aceptic, you know. The tarts are like the Dellas

175
00:08:49,360 --> 00:09:10,679
Speaker 1: cowboys in a big, fancy stadium. And there's news with

176
00:09:10,920 --> 00:09:15,239
Speaker 1: us now with the subnieth anniversary of the communist experiment

177
00:09:15,240 --> 00:09:18,839
Speaker 1: in China. Elizabeth Economy, I can't say enough about her book,

178
00:09:19,280 --> 00:09:23,200
Speaker 1: The Third Revolution, And in chapter eight the Road Forward,

179
00:09:23,280 --> 00:09:26,080
Speaker 1: let's get an update, how's the road forward? For President? She?

180
00:09:27,040 --> 00:09:30,840
Speaker 1: So President, she is facing some pretty serious headwinds right now.

181
00:09:31,280 --> 00:09:35,720
Speaker 1: Both at home where he confronts a slowing Chinese economy,

182
00:09:35,800 --> 00:09:41,080
Speaker 1: concerns over employment, the environment. Uh, you know, his anti

183
00:09:41,120 --> 00:09:44,280
Speaker 1: corruption campaign is still moving forward, but a lot of

184
00:09:44,600 --> 00:09:49,120
Speaker 1: discontented people right now within China, uh, and certainly abroad.

185
00:09:49,640 --> 00:09:54,440
Speaker 1: Obviously the protests in Hong Kong a very serious challenge

186
00:09:54,720 --> 00:09:59,320
Speaker 1: to sort of legitimacy of that communist experiment, as well

187
00:09:59,360 --> 00:10:01,960
Speaker 1: as the US at a trade war and pushback against

188
00:10:02,520 --> 00:10:05,840
Speaker 1: many of the Belton Road projects. So these are you know,

189
00:10:05,840 --> 00:10:10,199
Speaker 1: she Jinping's major initiatives right reclaiming sovereignty over Hong Kong, Taiwan,

190
00:10:10,280 --> 00:10:14,040
Speaker 1: the South China, see the Belton Road, expanding Chinese influence,

191
00:10:14,559 --> 00:10:17,480
Speaker 1: China's growing presence on the global stage. So you know,

192
00:10:17,600 --> 00:10:20,520
Speaker 1: things are are different. He's in a difficult position right now.

193
00:10:20,720 --> 00:10:24,600
Speaker 1: A hundred and sixty jets. I think five tanks will

194
00:10:24,679 --> 00:10:29,760
Speaker 1: roll through the capital tomorrow. Let what's the story the

195
00:10:29,840 --> 00:10:32,480
Speaker 1: Chinese leader is telling the Chinese people at the moment

196
00:10:32,840 --> 00:10:36,479
Speaker 1: to keep things together? What's the story? So? She Jinping

197
00:10:36,559 --> 00:10:40,920
Speaker 1: really uses two different narratives to rally support. The first

198
00:10:41,160 --> 00:10:44,600
Speaker 1: is uh, we have risen right, he very famously said

199
00:10:45,040 --> 00:10:48,880
Speaker 1: in his acceptance speech for his second five year term.

200
00:10:49,120 --> 00:10:52,720
Speaker 1: You know, China has stood up, grown rich, is now

201
00:10:52,800 --> 00:10:55,720
Speaker 1: moving towards center stage, and it's really rising on the

202
00:10:55,720 --> 00:10:59,120
Speaker 1: global stage. Right, is the return of China, the rejuvenation

203
00:10:59,160 --> 00:11:01,600
Speaker 1: of the great Chinese nation, And that's the type of

204
00:11:01,640 --> 00:11:04,880
Speaker 1: thing that this military parade speaks to. At the same time,

205
00:11:04,920 --> 00:11:07,920
Speaker 1: we've seen over the past month or so, in preparation

206
00:11:08,280 --> 00:11:12,280
Speaker 1: for this event, that he's he's using that threat narrative,

207
00:11:12,520 --> 00:11:15,240
Speaker 1: right the US is trying to contain us. We face

208
00:11:15,320 --> 00:11:18,560
Speaker 1: threats to our core interests. We face threats to the

209
00:11:18,640 --> 00:11:22,160
Speaker 1: leadership of the Chinese Communist Party. So that's the other

210
00:11:22,559 --> 00:11:26,240
Speaker 1: sort of narrative that he's developed in order to bind

211
00:11:26,320 --> 00:11:30,600
Speaker 1: the Chinese people to to him into the Chinese Communist Party.

212
00:11:30,880 --> 00:11:33,200
Speaker 1: Seventy years of the Communist Party, and arguably the biggest

213
00:11:33,200 --> 00:11:34,960
Speaker 1: threat to them right now is what is happening with

214
00:11:34,960 --> 00:11:38,800
Speaker 1: the economy. How big a threat is the slowdown in

215
00:11:38,920 --> 00:11:41,679
Speaker 1: China at the moment to the Chinese I've seen economists

216
00:11:41,679 --> 00:11:44,960
Speaker 1: looking for five percent GDP growth in China through the

217
00:11:44,960 --> 00:11:47,559
Speaker 1: next twelve months. Does five percent get it done? Does

218
00:11:47,640 --> 00:11:50,640
Speaker 1: that keep things stable? I don't think that there is

219
00:11:50,679 --> 00:11:55,440
Speaker 1: a magic number, Frankly that will lead to instability in China.

220
00:11:55,480 --> 00:11:57,880
Speaker 1: It could be five percent, it could be four percent. Uh,

221
00:11:57,960 --> 00:12:00,600
Speaker 1: They're going to continue to try to use all the

222
00:12:00,640 --> 00:12:04,000
Speaker 1: mechanisms that they have at their disposal, from you know,

223
00:12:04,200 --> 00:12:09,400
Speaker 1: encouraging banks to loan more, encouraging local governments to invest more,

224
00:12:09,920 --> 00:12:13,240
Speaker 1: using the state owned enterprises. They will continue to pump

225
00:12:13,320 --> 00:12:16,719
Speaker 1: money into the system to the best of their ability

226
00:12:16,760 --> 00:12:22,280
Speaker 1: to maintain stability. They also have an extraordinary coercive police apparatus. Right.

227
00:12:22,320 --> 00:12:26,160
Speaker 1: They spend more on their internal policing than they do

228
00:12:26,240 --> 00:12:29,719
Speaker 1: on the Chinese People's Liberation Army. Right, they have two

229
00:12:30,120 --> 00:12:33,600
Speaker 1: million surveillance cameras. You know, phones are now being fitted

230
00:12:33,640 --> 00:12:37,079
Speaker 1: with these apps that download every piece of information from

231
00:12:37,080 --> 00:12:39,960
Speaker 1: where you're shopping, to your health records, right to the

232
00:12:40,000 --> 00:12:43,679
Speaker 1: local public security bureaus. So even if the thing slows

233
00:12:43,720 --> 00:12:46,920
Speaker 1: down and you begin to have some marginal social unrest,

234
00:12:47,320 --> 00:12:50,440
Speaker 1: they have in place very serious police capability. It's an

235
00:12:50,480 --> 00:12:52,719
Speaker 1: argument I here, again and again and again on the

236
00:12:52,760 --> 00:12:55,880
Speaker 1: program like this, that the president in China can white

237
00:12:56,160 --> 00:12:59,280
Speaker 1: this president out here in the United States can white

238
00:12:59,320 --> 00:13:02,079
Speaker 1: things out and still the next election. And I struggle

239
00:13:02,120 --> 00:13:04,160
Speaker 1: with this idea because I don't see a single Democrat

240
00:13:04,240 --> 00:13:06,920
Speaker 1: on the stage in the debates. Who doesn't agree with

241
00:13:06,960 --> 00:13:09,760
Speaker 1: the president on most aspects of taking on China. They

242
00:13:09,840 --> 00:13:12,719
Speaker 1: might disagree on the approach, but they agree on the objective.

243
00:13:13,240 --> 00:13:14,840
Speaker 1: And if I was the Chinese right now and I

244
00:13:14,880 --> 00:13:17,560
Speaker 1: was thinking about facing a first term president or a

245
00:13:17,600 --> 00:13:21,240
Speaker 1: second term president with all of that in mindless, doesn't

246
00:13:21,240 --> 00:13:24,880
Speaker 1: facing a second term president make a little bit more sense? Well,

247
00:13:24,920 --> 00:13:27,079
Speaker 1: I think it's yes, it's the devil you know, as

248
00:13:27,080 --> 00:13:28,680
Speaker 1: opposed to the one that you don't know. I think

249
00:13:28,679 --> 00:13:30,760
Speaker 1: that's pretty much how they look at I think the

250
00:13:30,800 --> 00:13:33,640
Speaker 1: concern in China around President Trump is really that even

251
00:13:33,679 --> 00:13:36,240
Speaker 1: if they get a trade deal done on Friday, when

252
00:13:36,280 --> 00:13:38,800
Speaker 1: Monday comes around, he's going to turn up and say, oh,

253
00:13:38,880 --> 00:13:41,719
Speaker 1: actually you now need to do this or that. So

254
00:13:41,760 --> 00:13:44,520
Speaker 1: I think that uncertainty that he brings to the table

255
00:13:44,640 --> 00:13:48,200
Speaker 1: is is, you know, challenging for the Chinese. Do you

256
00:13:48,240 --> 00:13:52,640
Speaker 1: recommend little kids start Bandarin early? Were you on? You know?

257
00:13:52,720 --> 00:13:55,319
Speaker 1: The vogue is, you know, we have to learn Chinese?

258
00:13:55,520 --> 00:13:59,920
Speaker 1: Why does no one learn harm Why does nobody learn Mandarin,

259
00:14:00,360 --> 00:14:03,800
Speaker 1: which is the which is the main language that's used

260
00:14:05,840 --> 00:14:09,040
Speaker 1: children start Children should start learning Chinese if they want

261
00:14:09,080 --> 00:14:12,920
Speaker 1: to learn Chinese. Look, my kids all studied Chinese five

262
00:14:13,080 --> 00:14:17,040
Speaker 1: six years. They also studied I've got a classics major,

263
00:14:17,400 --> 00:14:19,440
Speaker 1: i have an econ major. I've got our history major.

264
00:14:19,560 --> 00:14:22,480
Speaker 1: I've got nobody pursuing China. They all studied in China.

265
00:14:23,200 --> 00:14:25,920
Speaker 1: It really should stem from the desire of the child.

266
00:14:26,160 --> 00:14:29,800
Speaker 1: I don't believe in forcing children to study anything. Pharaohs

267
00:14:29,800 --> 00:14:32,840
Speaker 1: all over babbel Mandarin. He's just killing it. And I'm

268
00:14:32,880 --> 00:14:36,960
Speaker 1: loving babble Mandarin. You're right, You're right. Thanks for that, Elizabeth,

269
00:14:37,560 --> 00:14:40,600
Speaker 1: Thank you so much. I can't say enough folks about that.

270
00:14:40,640 --> 00:14:43,920
Speaker 1: That's not a short read, but it's just an easy, wonderful,

271
00:14:44,160 --> 00:15:02,360
Speaker 1: thoughtful read on today's China. The Third Revolution. Saints Winning

272
00:15:02,400 --> 00:15:05,080
Speaker 1: was one of the criteria for Henrietta Trains to join us,

273
00:15:05,400 --> 00:15:08,240
Speaker 1: as she joins us right now with their affinity for

274
00:15:08,800 --> 00:15:11,360
Speaker 1: New Orleans, as we look at policy, Henrietta, I'm going

275
00:15:11,400 --> 00:15:13,560
Speaker 1: to really stay on your research note, which I thought

276
00:15:13,600 --> 00:15:16,640
Speaker 1: was brilliant with data partners, and that is I love

277
00:15:16,680 --> 00:15:20,720
Speaker 1: your phrase the investment wars described that right now between

278
00:15:20,840 --> 00:15:24,720
Speaker 1: US and China. What are the investment wars? Well? Sure,

279
00:15:24,840 --> 00:15:29,520
Speaker 1: first off, whodet Branda Celestry for taking me last night.

280
00:15:29,560 --> 00:15:34,360
Speaker 1: That was the last um. The investment wars are essentially

281
00:15:34,440 --> 00:15:39,840
Speaker 1: just another another parallel track on the broader US China

282
00:15:39,880 --> 00:15:42,160
Speaker 1: trade agenda. And you know the fact that it caught

283
00:15:42,200 --> 00:15:45,480
Speaker 1: investors by surprise on Friday, I thought was particularly illuminating.

284
00:15:45,840 --> 00:15:49,160
Speaker 1: Not only have there been obviously great reporting by Jenny

285
00:15:49,280 --> 00:15:51,960
Speaker 1: Leonard and the folks in your team, but the the

286
00:15:52,040 --> 00:15:55,200
Speaker 1: Senators on Capitol Hill, including specifically from the Republican Party,

287
00:15:55,360 --> 00:15:58,280
Speaker 1: have been pushing for various avenues like this, as has

288
00:15:58,360 --> 00:16:01,800
Speaker 1: the SEC itself, sing we need further access, we need

289
00:16:01,840 --> 00:16:04,840
Speaker 1: more clarity, more transparency. If you're going to be a

290
00:16:04,920 --> 00:16:07,400
Speaker 1: Chinese company and be listed on our exchanges and we

291
00:16:07,440 --> 00:16:09,120
Speaker 1: can't even take a look at your balance sheets, how

292
00:16:09,120 --> 00:16:10,760
Speaker 1: are we going to work this out? Then we had to.

293
00:16:10,800 --> 00:16:14,440
Speaker 1: The White House has issued a partial qualified tonal, pushing

294
00:16:14,480 --> 00:16:16,160
Speaker 1: back just a little bit against some of them caught,

295
00:16:16,200 --> 00:16:20,080
Speaker 1: and that's partial. The broadest story. The broadest story is,

296
00:16:20,120 --> 00:16:24,600
Speaker 1: Henrietta points out, is about curbing US investments into Chinese assets.

297
00:16:24,600 --> 00:16:26,760
Speaker 1: That's the broader story. One of the options was an

298
00:16:26,760 --> 00:16:30,000
Speaker 1: extreme option, which was delisting Chinese companies, and the White

299
00:16:30,000 --> 00:16:33,080
Speaker 1: House essentially pushing back against that and denied that it

300
00:16:33,160 --> 00:16:37,080
Speaker 1: was considering delisting Chinese companies at this time, but Henriette,

301
00:16:37,080 --> 00:16:40,120
Speaker 1: to the broadest story still stands, and as you've pointed out,

302
00:16:40,200 --> 00:16:42,800
Speaker 1: this isn't a secret on Capitol Hill. Many people are

303
00:16:42,840 --> 00:16:45,720
Speaker 1: talking about it. How do you see it evolving in

304
00:16:45,760 --> 00:16:48,920
Speaker 1: the months to come into actual policy, Well, the first

305
00:16:48,920 --> 00:16:50,440
Speaker 1: thing I would look at is what can the president

306
00:16:50,480 --> 00:16:53,760
Speaker 1: do unilatterally, So I spent time talking with folks and

307
00:16:54,040 --> 00:16:56,760
Speaker 1: understanding the Treasury's position, and there are some small things

308
00:16:56,760 --> 00:16:59,520
Speaker 1: on the margins that the administration can do without Congress,

309
00:16:59,720 --> 00:17:02,280
Speaker 1: and we're out probably causing an uproar. So one of

310
00:17:02,320 --> 00:17:05,439
Speaker 1: the things specifically would be to institute those kinds of

311
00:17:05,480 --> 00:17:09,800
Speaker 1: investment restrictions into things that they specifically control. Specifically here

312
00:17:10,000 --> 00:17:12,760
Speaker 1: the stiff their Savings Plans, the TSPs, which are the

313
00:17:13,160 --> 00:17:15,400
Speaker 1: um investment plans that we have for U. S. Government

314
00:17:15,440 --> 00:17:17,879
Speaker 1: or civil service employees. So if the Treasury wanted to

315
00:17:17,920 --> 00:17:21,280
Speaker 1: make that change, you know laterally at TSP they could UM.

316
00:17:21,320 --> 00:17:24,920
Speaker 1: Getting Chinese companies entirely off US exchanges is something that

317
00:17:24,960 --> 00:17:27,320
Speaker 1: I think is more effectively what they're trying to do

318
00:17:27,440 --> 00:17:30,560
Speaker 1: via the export control restrictions, where they essentially say if

319
00:17:30,600 --> 00:17:32,800
Speaker 1: you're a Chinese company, you are not allowed to invest

320
00:17:32,840 --> 00:17:35,720
Speaker 1: in the U S company, and vice versa. By the way,

321
00:17:35,760 --> 00:17:41,440
Speaker 1: they're also experts expressly prohibiting the export of specific high

322
00:17:41,560 --> 00:17:45,639
Speaker 1: end technology components AI biotechnology. If you're in that space,

323
00:17:45,920 --> 00:17:48,399
Speaker 1: forget it. There's no investment flow that's going to happen.

324
00:17:48,440 --> 00:17:50,520
Speaker 1: I mean, it's so bad that your employees can't even

325
00:17:50,520 --> 00:17:53,359
Speaker 1: travel to China and you can't have Chinese employees come

326
00:17:53,400 --> 00:17:55,840
Speaker 1: to your country to your company and see what it

327
00:17:55,920 --> 00:17:58,639
Speaker 1: is that you're working on. So there are insidious ways

328
00:17:58,720 --> 00:18:03,560
Speaker 1: and and they're hard to convey to investor. Ways that

329
00:18:03,680 --> 00:18:08,119
Speaker 1: the Treasury, the Pentagon, Scifius, and all these agencies are

330
00:18:08,119 --> 00:18:10,240
Speaker 1: working on and have been working on since at least

331
00:18:10,280 --> 00:18:12,800
Speaker 1: two thousands seventeen, and they're gonna be rolled out at

332
00:18:12,800 --> 00:18:16,560
Speaker 1: the end of probably next week, is my understanding. Interesting

333
00:18:16,600 --> 00:18:20,760
Speaker 1: three things in particular artificial intelligence, robotics, and three D printing.

334
00:18:21,119 --> 00:18:22,879
Speaker 1: So those are your first couple that are going to

335
00:18:22,960 --> 00:18:25,040
Speaker 1: come and that includes investment restrictions. If you want to

336
00:18:25,040 --> 00:18:28,000
Speaker 1: see real time examples, call up the Bureau of Industry

337
00:18:28,000 --> 00:18:30,200
Speaker 1: and Security. I know that's wonky, but those are the

338
00:18:30,200 --> 00:18:32,320
Speaker 1: guys who are working on it. Right now. For anyone

339
00:18:32,359 --> 00:18:34,240
Speaker 1: that's interested in the investment side of this and the

340
00:18:34,240 --> 00:18:36,919
Speaker 1: accounting standards, I encourage you to watch The China Hustle,

341
00:18:37,000 --> 00:18:39,520
Speaker 1: a great documentary of Edible and Hulu right now, really

342
00:18:39,520 --> 00:18:42,639
Speaker 1: really interesting stuff tom about this, the lack of accounting

343
00:18:42,640 --> 00:18:46,199
Speaker 1: standards that are equivalent to what US companies are subjected to.

344
00:18:46,320 --> 00:18:49,320
Speaker 1: You know, let's sing national anthem right now. So China

345
00:18:49,400 --> 00:18:53,800
Speaker 1: cuts off soybeans, what does that do to our intellectual Henrietta,

346
00:18:53,840 --> 00:18:56,399
Speaker 1: do you see this effort that was described in several

347
00:18:56,440 --> 00:18:59,320
Speaker 1: media out that some Friday is distinctly separate from the

348
00:18:59,320 --> 00:19:04,040
Speaker 1: trade store as talks progress next week? I do not. Um. Indeed,

349
00:19:04,040 --> 00:19:07,000
Speaker 1: there have been so many different examples of how poorly

350
00:19:07,200 --> 00:19:10,440
Speaker 1: talks are going. Um, let's for a second, talk about

351
00:19:10,440 --> 00:19:14,640
Speaker 1: how we impose sanctions on Chinese shipping and cargo companies

352
00:19:14,680 --> 00:19:18,320
Speaker 1: for importing Iranian oil. Um. They took a small scale step.

353
00:19:18,400 --> 00:19:20,480
Speaker 1: But if you are paying attention, why would you think

354
00:19:20,520 --> 00:19:23,119
Speaker 1: that the US China talks are going well? And that's

355
00:19:23,160 --> 00:19:26,280
Speaker 1: sort of the kind of component we see all the time.

356
00:19:26,359 --> 00:19:28,560
Speaker 1: They're just on these smaller scales that are not so

357
00:19:28,680 --> 00:19:31,800
Speaker 1: flashy as these investors restrictions and to, you know, to

358
00:19:32,040 --> 00:19:34,240
Speaker 1: give investors some credit. It's tough to follow. There's a

359
00:19:34,280 --> 00:19:37,119
Speaker 1: lot going on. UM. So you see that, you know,

360
00:19:37,240 --> 00:19:39,480
Speaker 1: Vice Mayor Luca is supposed to come over, and we

361
00:19:39,560 --> 00:19:43,520
Speaker 1: tentatively are expecting October tenth and eleventh, and maybe there

362
00:19:43,520 --> 00:19:45,320
Speaker 1: could be a pause. I'm a little anxious that we

363
00:19:45,320 --> 00:19:47,440
Speaker 1: are already in the pause time. And the pause time

364
00:19:47,480 --> 00:19:50,359
Speaker 1: is supposed to be when China makes some soy or

365
00:19:50,440 --> 00:19:53,760
Speaker 1: pork purchases, and they're already doing that. The farmers are

366
00:19:54,000 --> 00:19:57,840
Speaker 1: adamant that we get even the smallest level of purchase UM,

367
00:19:57,840 --> 00:20:00,400
Speaker 1: and speaking to the farmers is genuinely scary the these days,

368
00:20:00,480 --> 00:20:02,639
Speaker 1: so um to to think that there's going to be

369
00:20:02,640 --> 00:20:04,720
Speaker 1: maybe a thirty sixty day pause. I don't see a

370
00:20:04,800 --> 00:20:07,440
Speaker 1: ninety day pause happening. But that's the best base scenario.

371
00:20:08,000 --> 00:20:10,720
Speaker 1: But what's Chuck Grassley or Pat Roberts do. I mean,

372
00:20:11,560 --> 00:20:14,240
Speaker 1: it's genuinely and I get a lot of mail on this, folks,

373
00:20:14,240 --> 00:20:17,639
Speaker 1: good morning out of the Midwest, simply what are the

374
00:20:17,760 --> 00:20:22,880
Speaker 1: farmers going to do? Well? I'll tell you what's interesting

375
00:20:23,040 --> 00:20:25,440
Speaker 1: is that they are looking to expand trade with India.

376
00:20:25,680 --> 00:20:29,160
Speaker 1: They're talking about bright spots in the Caribbean Islands. Um,

377
00:20:29,240 --> 00:20:32,520
Speaker 1: they're extraordinarily anxious about the potential for auto tariffs and

378
00:20:32,560 --> 00:20:35,800
Speaker 1: these forthcoming EU tariffs because they have to have that

379
00:20:35,920 --> 00:20:39,720
Speaker 1: open line of trade on soy, lentils, peas and almonds

380
00:20:39,800 --> 00:20:43,320
Speaker 1: with the EU and that's basically their only shining light

381
00:20:43,400 --> 00:20:45,800
Speaker 1: right now, and so they're just very protective of that.

382
00:20:46,200 --> 00:20:48,880
Speaker 1: But they don't see the China trade war ending. Support

383
00:20:48,920 --> 00:20:51,960
Speaker 1: among farmers remains high enough that the President and Pat

384
00:20:52,040 --> 00:20:53,800
Speaker 1: Roberts and Chuck Grass they have to sort of sit

385
00:20:53,840 --> 00:20:56,040
Speaker 1: down and let this play out. Why don't you go

386
00:20:56,119 --> 00:20:58,840
Speaker 1: and talk to the Senate Agriculture Committee staff and say

387
00:20:58,840 --> 00:20:59,960
Speaker 1: what do you think is going to happen with the

388
00:21:00,040 --> 00:21:02,280
Speaker 1: List four B tariffs in December? They say, I don't care.

389
00:21:02,480 --> 00:21:05,320
Speaker 1: We've already been tariff to Kingdom. Come nothing. Well, that

390
00:21:05,119 --> 00:21:08,960
Speaker 1: that's my next question. What's the Henrietta Trey's date calendar

391
00:21:09,040 --> 00:21:12,480
Speaker 1: for October, November and December. What's the next important date

392
00:21:12,560 --> 00:21:17,400
Speaker 1: coming up where we see true impact upon our listeners. Well,

393
00:21:17,440 --> 00:21:20,000
Speaker 1: the probably the biggest headline is going to come on

394
00:21:20,000 --> 00:21:22,560
Speaker 1: either of the tenth of the eleventh when ust here

395
00:21:22,600 --> 00:21:25,920
Speaker 1: Lifefiser in NUCA actually meet. So that'll be your next

396
00:21:26,080 --> 00:21:29,119
Speaker 1: major event. So the run up here. Obviously, tomorrow is

397
00:21:29,160 --> 00:21:31,439
Speaker 1: the seventieth Anniversity of the PRC, so I wouldn't expect

398
00:21:31,440 --> 00:21:33,359
Speaker 1: a lot of data in the next two days. But

399
00:21:33,400 --> 00:21:35,600
Speaker 1: as we head into the week of October seven, I

400
00:21:35,640 --> 00:21:37,440
Speaker 1: would suggest that things are going to get very hot

401
00:21:37,440 --> 00:21:40,119
Speaker 1: and heavy. Um. And then looking ahead, obviously we have

402
00:21:40,200 --> 00:21:44,840
Speaker 1: the following Tuesday, October, which is when the previously set

403
00:21:44,880 --> 00:21:49,479
Speaker 1: thresholds were extraordinarily raised to thirty in a matter of

404
00:21:49,560 --> 00:21:52,760
Speaker 1: three hours, which has really thrown the manufacturers for a loop.

405
00:21:53,040 --> 00:21:55,440
Speaker 1: So that's two d and fifty billion dollars worth of

406
00:21:55,600 --> 00:21:58,960
Speaker 1: including consumer facing goods and industrial inputs that are going

407
00:21:59,000 --> 00:22:01,760
Speaker 1: to rise from stance really on October fifteenth, unless they

408
00:22:01,760 --> 00:22:04,239
Speaker 1: reach a pause agreement. UM. As I said, I think

409
00:22:04,280 --> 00:22:07,200
Speaker 1: at best you probably get a thirty to sixty day delay.

410
00:22:07,480 --> 00:22:10,800
Speaker 1: I wouldn't see another Argentina style delay of ninety days

411
00:22:10,800 --> 00:22:13,120
Speaker 1: happening again because obviously that didn't pan out very well

412
00:22:13,119 --> 00:22:15,359
Speaker 1: for the US last time. UM. And then we have

413
00:22:15,480 --> 00:22:20,040
Speaker 1: intermittent dates in November with the Huawei temporary band uh

414
00:22:20,080 --> 00:22:25,200
Speaker 1: sorry temporary license being expiring, which the administration indicated last

415
00:22:25,240 --> 00:22:27,800
Speaker 1: week sort of along the allignes of the Uran sanctions

416
00:22:28,119 --> 00:22:30,520
Speaker 1: that they are not going to be extending again, So

417
00:22:30,720 --> 00:22:34,199
Speaker 1: there's gonna be escalating tensions throughout the fall leading up

418
00:22:34,200 --> 00:22:37,600
Speaker 1: to probably the most headline catching on the street, which

419
00:22:37,640 --> 00:22:40,879
Speaker 1: is the December fifteenth escalation of the hundred sixty billion

420
00:22:40,880 --> 00:22:45,480
Speaker 1: dollars worth of tariffs at Henranda. Thank you so much, partners.

421
00:22:45,520 --> 00:22:48,359
Speaker 1: A nice briefing there on the China dynamics on the

422
00:22:48,400 --> 00:23:07,040
Speaker 1: calendar for it is well. Jane Foley was with us

423
00:23:07,080 --> 00:23:09,520
Speaker 1: I think a week ago, eight days ago, ten days ago,

424
00:23:09,600 --> 00:23:12,520
Speaker 1: eight days, a week whatever with Robbo Bank, and the

425
00:23:12,520 --> 00:23:15,640
Speaker 1: Euro is moving so dramatically we thought we would get

426
00:23:15,640 --> 00:23:18,320
Speaker 1: her back on again to give us an update. Jane.

427
00:23:18,320 --> 00:23:21,040
Speaker 1: There's a chart I use which is what one of

428
00:23:21,040 --> 00:23:22,960
Speaker 1: the gifts of the Bloomberg. It has to do with

429
00:23:23,000 --> 00:23:29,240
Speaker 1: a guy named Wells Wilder, and it's extremely complex trend mathematics.

430
00:23:29,920 --> 00:23:32,200
Speaker 1: And the basic idea is if I was teaching a

431
00:23:32,359 --> 00:23:37,000
Speaker 1: course on trend right now, I could use the chart

432
00:23:37,160 --> 00:23:42,439
Speaker 1: of short euro week euro. Is that absolutely textbook trend?

433
00:23:42,720 --> 00:23:47,080
Speaker 1: Is that true? From your vantage point? It is? But

434
00:23:47,119 --> 00:23:49,200
Speaker 1: I think it's any part of the story. I mean, certainly,

435
00:23:49,240 --> 00:23:51,280
Speaker 1: if we look back over the last few weeks. Only

436
00:23:51,280 --> 00:23:54,240
Speaker 1: in the last few months, there is increasing concern about

437
00:23:54,280 --> 00:23:56,840
Speaker 1: the state of the German economy, particularly I mean, if

438
00:23:56,840 --> 00:23:59,199
Speaker 1: we look at the pm I data for most of

439
00:23:59,200 --> 00:24:01,480
Speaker 1: the years and really have been trending there with the

440
00:24:01,480 --> 00:24:04,360
Speaker 1: best part of two years now and certainly with Germany

441
00:24:04,840 --> 00:24:07,840
Speaker 1: um there is the risk that we could be quite

442
00:24:07,840 --> 00:24:11,080
Speaker 1: close to a technical recession. Certainly the manufacturing, the industrial

443
00:24:11,200 --> 00:24:14,360
Speaker 1: sector appears to be already in recession. But it's not

444
00:24:14,560 --> 00:24:16,479
Speaker 1: all of the news. I think when we look at

445
00:24:16,480 --> 00:24:18,800
Speaker 1: your A dollar, we've got to look at the dollars side.

446
00:24:18,800 --> 00:24:21,320
Speaker 1: And I'm looking at a chat right now, which is

447
00:24:21,320 --> 00:24:24,040
Speaker 1: a very simple chart, and this is just a chart

448
00:24:24,119 --> 00:24:26,600
Speaker 1: from the b I s their data, and it's just

449
00:24:26,680 --> 00:24:30,399
Speaker 1: showing global US dollar credit and non residents and this

450
00:24:30,480 --> 00:24:33,560
Speaker 1: has gone up from around one trillion dollars in two

451
00:24:33,600 --> 00:24:37,800
Speaker 1: thousand to six trillion in UM what list the current day.

452
00:24:37,840 --> 00:24:41,040
Speaker 1: And I think this shows the dollar really is dominant

453
00:24:41,040 --> 00:24:43,800
Speaker 1: on the payment system, and this is why people need dollars,

454
00:24:44,200 --> 00:24:47,920
Speaker 1: particularly when risker version goes up. What's your target then

455
00:24:47,960 --> 00:24:51,160
Speaker 1: on week euro We've talked earlier with one of your

456
00:24:51,200 --> 00:24:55,080
Speaker 1: colleagues and crime Jordan Rochester of Normura, and he says,

457
00:24:55,640 --> 00:24:58,119
Speaker 1: it's all great, and you can frame out week euro

458
00:24:58,680 --> 00:25:01,840
Speaker 1: at the moment everybody goes parody, watch all sorts of

459
00:25:01,880 --> 00:25:05,600
Speaker 1: strange things happen. Do you agree with that? Well, in

460
00:25:05,640 --> 00:25:07,520
Speaker 1: a party, I think is still a long way away.

461
00:25:07,520 --> 00:25:11,800
Speaker 1: I mean yeah, I mean we were were dollar bulls

462
00:25:12,359 --> 00:25:14,080
Speaker 1: UM and we have been, you know, really since the

463
00:25:14,080 --> 00:25:18,479
Speaker 1: beginning of last the consensus that it's now just hit

464
00:25:18,480 --> 00:25:20,200
Speaker 1: our target, which is one or nine. So we've got

465
00:25:20,200 --> 00:25:23,200
Speaker 1: to rethink UM. And I think looking at the data

466
00:25:23,280 --> 00:25:25,760
Speaker 1: that we have from the Eurozone, looking at the sets

467
00:25:25,760 --> 00:25:28,920
Speaker 1: of dollar demand, there is a risk that dollar is

468
00:25:28,960 --> 00:25:31,480
Speaker 1: going to go and you know, one of five seems

469
00:25:31,600 --> 00:25:34,360
Speaker 1: a long way away and right now, and I think

470
00:25:34,480 --> 00:25:37,760
Speaker 1: parity perhaps a little bit too far, and I think

471
00:25:38,160 --> 00:25:40,440
Speaker 1: certainly to put on our predictions, I think for that

472
00:25:40,480 --> 00:25:43,399
Speaker 1: to happen, we really would have to have something really

473
00:25:44,359 --> 00:25:47,240
Speaker 1: significantly worse happened in terms of the years economy than

474
00:25:47,640 --> 00:25:52,280
Speaker 1: is anticipated, and probably in terms of trade wars between

475
00:25:52,280 --> 00:25:56,320
Speaker 1: the years and China sort of contributing to that. So, Jane,

476
00:25:56,359 --> 00:25:59,040
Speaker 1: you mentioned earlier the weakness in the manufacturing sector in

477
00:25:59,359 --> 00:26:02,159
Speaker 1: your particularly we're even seen it obviously in Germany, but

478
00:26:02,240 --> 00:26:05,960
Speaker 1: the consumer, much like in the US, the consumer remains resilient.

479
00:26:06,960 --> 00:26:10,040
Speaker 1: How do you think that can last? Well, I think

480
00:26:10,040 --> 00:26:12,520
Speaker 1: we're beginning to see the first signs of softness there.

481
00:26:12,520 --> 00:26:15,600
Speaker 1: I mean, the reason that the consumer remains resilient is,

482
00:26:15,600 --> 00:26:19,520
Speaker 1: of course, the labor market has been particularly strong. UM. Now,

483
00:26:20,160 --> 00:26:22,920
Speaker 1: m once we begin to see more signs of softness

484
00:26:22,960 --> 00:26:25,440
Speaker 1: in the labor market, clearly consumer confidence takes a dip

485
00:26:25,520 --> 00:26:28,560
Speaker 1: and and he or the consumer remains or becomes far

486
00:26:28,640 --> 00:26:33,000
Speaker 1: more likely to stop spending. Now, if we look at

487
00:26:33,119 --> 00:26:36,760
Speaker 1: the unemployment data that we had this morning for September,

488
00:26:36,880 --> 00:26:41,960
Speaker 1: we saw UM the change down ten thousand, a small

489
00:26:42,000 --> 00:26:43,800
Speaker 1: revision to the last time. But I think if we

490
00:26:43,880 --> 00:26:46,440
Speaker 1: look back over the last three months, we are beginning

491
00:26:46,480 --> 00:26:48,840
Speaker 1: to see a little bit of softness coming through, which

492
00:26:48,840 --> 00:26:50,920
Speaker 1: is what you can expect. I mean, unemployment is it

493
00:26:50,960 --> 00:26:54,760
Speaker 1: called a lagged indicator. When all the books dry up. UM.

494
00:26:54,960 --> 00:26:57,760
Speaker 1: Factory owners don't get rid of their stuff immediately. They

495
00:26:57,800 --> 00:27:00,800
Speaker 1: hang on as long as they visibly hand and hence

496
00:27:00,840 --> 00:27:03,159
Speaker 1: we get the lag in those numbers. But if we

497
00:27:03,240 --> 00:27:06,399
Speaker 1: do continue to get softness through and the labor market

498
00:27:06,800 --> 00:27:08,480
Speaker 1: through to the end of the year, I think we

499
00:27:08,520 --> 00:27:11,520
Speaker 1: can expect that we will begin to get consumer confidence

500
00:27:11,520 --> 00:27:15,760
Speaker 1: softening and the retail um sector really beginning to reflect

501
00:27:15,760 --> 00:27:17,919
Speaker 1: that as well. So, Jane, what are your thoughts on

502
00:27:18,119 --> 00:27:21,240
Speaker 1: sterling where you seem to be hurtling towards some type

503
00:27:21,240 --> 00:27:24,840
Speaker 1: of perhaps hard at Brexit. Yet I'm kind of seeing

504
00:27:24,840 --> 00:27:26,680
Speaker 1: there was a little lifting Sterling off of the one

505
00:27:26,680 --> 00:27:29,480
Speaker 1: twenty level here up to one. What are your thoughts

506
00:27:29,480 --> 00:27:33,040
Speaker 1: about sterling here? Is we really get close to Halloween? Well,

507
00:27:33,080 --> 00:27:35,040
Speaker 1: I mean, I think we all know it's it's quite binary.

508
00:27:35,119 --> 00:27:36,760
Speaker 1: If there's a deal, sterling will go up, and if

509
00:27:36,760 --> 00:27:39,000
Speaker 1: there isn't a deal, sterling will go down. And and

510
00:27:39,040 --> 00:27:41,320
Speaker 1: it is quite interesting today that there have been another

511
00:27:41,960 --> 00:27:45,240
Speaker 1: round of reports suggesting that the Tory Party the UK

512
00:27:45,320 --> 00:27:48,440
Speaker 1: government could be about to put some papers in front

513
00:27:48,440 --> 00:27:50,399
Speaker 1: of the EU by the end of this week, and

514
00:27:50,400 --> 00:27:56,480
Speaker 1: that would be another round of compromises or potential compromises

515
00:27:56,520 --> 00:27:58,680
Speaker 1: that the UK could be willing to make. But it's

516
00:27:58,800 --> 00:28:00,840
Speaker 1: very difficult to know what to believe, because if we

517
00:28:00,880 --> 00:28:03,399
Speaker 1: look back at the Weekend Press, the weekend Press was

518
00:28:03,440 --> 00:28:06,160
Speaker 1: suggesting that the DUP, which is of course the ulster

519
00:28:06,680 --> 00:28:11,520
Speaker 1: Um union As Party, were pretty uncompromising and that is

520
00:28:11,600 --> 00:28:15,720
Speaker 1: quite that is quite important because although the DUP only

521
00:28:15,760 --> 00:28:19,400
Speaker 1: has nine or so seats in the UK houses of Parliament,

522
00:28:19,880 --> 00:28:23,320
Speaker 1: is often considered that if the d u P are

523
00:28:23,960 --> 00:28:26,320
Speaker 1: agree with a certain type of plan and that would

524
00:28:26,359 --> 00:28:30,720
Speaker 1: be related to the contentious issues of the Northern Ireland issue,

525
00:28:31,160 --> 00:28:34,040
Speaker 1: if the DUP are happy with it, then many other

526
00:28:34,640 --> 00:28:37,680
Speaker 1: MPs from all the other parties would likely go along

527
00:28:37,720 --> 00:28:39,680
Speaker 1: with it. So people do use what the d u

528
00:28:39,760 --> 00:28:43,560
Speaker 1: P says a litmustes and over the weekend they were uncompromising,

529
00:28:43,640 --> 00:28:50,000
Speaker 1: suggesting that the the the new um factors which the

530
00:28:50,040 --> 00:28:52,800
Speaker 1: Prime Minister could present to the to the e U

531
00:28:52,880 --> 00:28:55,280
Speaker 1: to day may not be acceptable. So it's very very

532
00:28:55,320 --> 00:28:58,520
Speaker 1: difficult to know what to believe. One day where we

533
00:28:58,800 --> 00:29:01,760
Speaker 1: see air and then next day it's going cold again. Jane,

534
00:29:01,760 --> 00:29:04,880
Speaker 1: thank you so much, Jane fully rubble Bank. Thanks for

535
00:29:04,960 --> 00:29:09,360
Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to

536
00:29:09,520 --> 00:29:15,240
Speaker 1: interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer.

537
00:29:15,800 --> 00:29:19,160
Speaker 1: I'm on Twitter at Tom Keene before the podcast. You

538
00:29:19,160 --> 00:29:22,600
Speaker 1: can always catch us worldwide. I'm Bloomberg Radio