WEBVTT - Surveillance: ECB Not On Autopilot, Lagarde Says 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Ley. 0:00:14.000 --> 0:00:17.599 We bring you insight from the best in economics, finance, investment, 0:00:18.040 --> 0:00:23.560 and international relations. Find Bloomberg Surveillance on Apple Podcasts, Sam Cloud, 0:00:23.640 --> 0:00:27.360 Bloomberg dot Com, and of course on the Bloomberg. To 0:00:27.440 --> 0:00:32.640 those who think that it's autopilot, I think that's that's ridiculous. Um, 0:00:32.680 --> 0:00:35.120 there is a forward guidance which is strong, which is 0:00:35.159 --> 0:00:40.000 setting you know, a very clear timetable that is fact independent. 0:00:40.760 --> 0:00:43.400 But let's look at the facts. Let's look at how 0:00:43.760 --> 0:00:46.280 the economy evolves. That's what we do. We need to 0:00:46.280 --> 0:00:49.240 be fact driven. We need to be clear now communication 0:00:49.280 --> 0:00:52.440 and we will be. And I'm saying today don't assume 0:00:52.479 --> 0:00:55.800 that it will be on autopilot. Yesterday you talked to 0:00:55.960 --> 0:00:59.000 quite extensively about negative rates. He said, tearing is working well, 0:00:59.120 --> 0:01:01.160 but is there a point? Actually the side effects of 0:01:01.200 --> 0:01:03.560 negative rates means that you need to scale it back. 0:01:04.560 --> 0:01:07.280 We will be looking at the side effects as part 0:01:07.319 --> 0:01:10.720 of the strategy review. There's no question about that. We 0:01:10.760 --> 0:01:13.200 need to be attentive to that. Financial stability is not 0:01:13.360 --> 0:01:18.640 our first driver of concern and consideration, but we will. 0:01:18.680 --> 0:01:21.000 We will have to look at it, of course is 0:01:21.240 --> 0:01:22.920 and we need don't forget that, we need to have 0:01:23.440 --> 0:01:26.039 a banking sector in the your area that acts as 0:01:26.040 --> 0:01:29.880 a good channel of transmission, which means that, which means 0:01:29.880 --> 0:01:33.479 one that you could extend hearing or the multiple responses. 0:01:34.200 --> 0:01:36.560 It's not, as I said yesterday, we're not considering that 0:01:36.760 --> 0:01:39.480 at the moment. The President Trump left have also saying 0:01:39.520 --> 0:01:42.640 that actually still thinking about possible tariffs against Germany and 0:01:42.680 --> 0:01:47.480 Europe in general. You're seeing, you know, growth in Europe. 0:01:47.480 --> 0:01:51.320 How do you match up the two We're saying modest 0:01:51.360 --> 0:01:56.560 growth in Europe, we're saying a bit more modest downside 0:01:56.680 --> 0:01:59.440 risks as well. So that's probably the reason why it's 0:01:59.440 --> 0:02:02.760 it's kind of slightly balanced to the upside, but very 0:02:02.760 --> 0:02:07.040 slightly um you know, we we shall see. What I 0:02:07.120 --> 0:02:08.840 was pleased about is to see that there had been 0:02:08.880 --> 0:02:13.360 a good first meeting between Lay and President of the 0:02:13.360 --> 0:02:16.800 European Commission and President Trump. So that's that's, you know, 0:02:16.880 --> 0:02:20.080 it's better to start off on on on a good footing, 0:02:20.600 --> 0:02:24.880 and there would be difficult relationships going forward and points 0:02:24.880 --> 0:02:27.880 of negotiations that will be hard, you know, whether it's trade, 0:02:27.919 --> 0:02:31.799 whether it's tags, whether it's technology, whether it's energy, the 0:02:31.960 --> 0:02:36.120 multiple topics. But as a Usula said, Europe and the 0:02:36.240 --> 0:02:39.120 United States have been friends for a long long time. 0:02:39.240 --> 0:02:42.440 It will not go away. And in many instances they 0:02:42.480 --> 0:02:45.880 have joint interests. But Europe is different. Europe operates on 0:02:45.919 --> 0:02:49.480 different values with different systems and and that needs to 0:02:49.520 --> 0:02:51.880 be secured and preserved for the sake of the Europeans. 0:02:52.080 --> 0:02:54.520 There are our tears. The biggest concerned easy for for 0:02:54.600 --> 0:02:59.280 the European economy. It's a big concern. Let's face it. Um, 0:02:59.680 --> 0:03:03.960 don't get that there is trade intra Europe and that 0:03:04.000 --> 0:03:07.919 would not need be affected, but trade with the United States, 0:03:07.919 --> 0:03:12.720 which is an important trade partner, would would be affected 0:03:12.800 --> 0:03:16.119 if there was a sudden rise on on ontariff's yes, 0:03:16.320 --> 0:03:18.160 or a terry fools where you know it for that 0:03:18.400 --> 0:03:21.000 you you you tariff me, I'll terryf you. That's going 0:03:21.040 --> 0:03:23.040 to operate as a break on the economy for sure. 0:03:23.520 --> 0:03:25.399 You've done a number of public events in the last 0:03:25.400 --> 0:03:30.079 couple of weeks. What concerns that people raise with you? Um, 0:03:30.600 --> 0:03:37.520 you know it varies. UM. When I talked to when 0:03:37.520 --> 0:03:40.000 I talk to family members, they say, explain what you 0:03:40.080 --> 0:03:42.680 do mom? Please we don't really understand. And that's a 0:03:42.840 --> 0:03:46.120 real good signal for me that we need to to 0:03:46.240 --> 0:03:50.480 communicate in a more explicit way about what we procure. 0:03:51.560 --> 0:03:54.560 You know, because if we explain that exactly what we do, 0:03:54.680 --> 0:03:58.840 it's it's technically sound. The experts will understand, family members 0:03:58.880 --> 0:04:02.960 and that actually drivers, the hairdressers and the shopkeepers are 0:04:02.960 --> 0:04:04.840 not going to understand. But if we explain that what 0:04:05.160 --> 0:04:10.960 we do actually procures growth, facilitates investment, and creates jobs, 0:04:11.280 --> 0:04:13.960 then it means something. But we should not be the 0:04:14.000 --> 0:04:15.920 only one to try to do that. So is it 0:04:16.000 --> 0:04:19.880 reconnecting with the citizens or I think that's an important factor. Yeah, 0:04:19.960 --> 0:04:23.719 because you know, the people of Europe, particularly the your area, 0:04:23.880 --> 0:04:27.600 are quite bullish about the Euro. They're pleased to have 0:04:27.640 --> 0:04:29.560 the Euro as their currency, and we do everything we 0:04:29.600 --> 0:04:33.200 can to make sure that Euros can flow easily, that 0:04:33.320 --> 0:04:40.840 payments are secure, that what they have is solid stability. Um. 0:04:40.960 --> 0:04:43.400 But but I think we need we need to do 0:04:43.440 --> 0:04:45.680 a bit more And a lot of the focus here 0:04:45.720 --> 0:04:48.560 is on sustainability. You talked about sustainability. Is there a 0:04:48.640 --> 0:04:52.000 danger that we have outsized expectations about what central banks 0:04:52.040 --> 0:04:57.280 can do to tackle this? Possibly? But I think that nonetheless, 0:04:57.720 --> 0:05:01.599 each and everyone of us has to floor what he 0:05:01.720 --> 0:05:04.640 or she can do about the current risks. And I 0:05:04.680 --> 0:05:08.600 think that it has been under The risks caused by 0:05:08.640 --> 0:05:14.000 climate change on corporates, on the economy, on general stability 0:05:14.320 --> 0:05:18.559 have been largely underestimated, and for good reasons, because many 0:05:20.240 --> 0:05:24.159 risks are difficult to assess. We are talking about what 0:05:24.240 --> 0:05:26.880 happens in thirty years. It's not in the cards of 0:05:26.960 --> 0:05:31.479 a stress tester to anticipate what happens in thirty years. 0:05:31.520 --> 0:05:33.480 You know, you look at the immediate future, you do. 0:05:33.600 --> 0:05:36.840 You look at the market risks, you look at macro risks, 0:05:36.880 --> 0:05:41.000 but the climate risks in thirty years that need action. Now, 0:05:41.120 --> 0:05:45.560 if we want to remedy those risks, that's difficult, but 0:05:45.720 --> 0:05:59.960 we need We need to do it absolutely the start 0:06:00.040 --> 0:06:02.640 you of what's available, and that's really one of the 0:06:02.680 --> 0:06:07.000 great focuses for Christine Lagarde to assist her economists with 0:06:07.160 --> 0:06:11.440 the tools available, given how odd the times are a 0:06:11.520 --> 0:06:15.360 perfect person to speak to honest the limitations that constraints 0:06:15.360 --> 0:06:18.839 that we see with an economics, finance and particularly investment 0:06:18.839 --> 0:06:22.080 in Sheila Ptel, She's a golden Sax asset management. She 0:06:22.279 --> 0:06:24.720 is their chairman, and we're thrilled she could join us 0:06:24.839 --> 0:06:26.960 for what I wish was a four hour conversation, and 0:06:27.000 --> 0:06:29.599 we're not going to do that. Uh. Today, I have 0:06:29.920 --> 0:06:32.320 eight things to talk about and only a few times 0:06:32.360 --> 0:06:34.520 or two. I need to talk first of all about 0:06:34.520 --> 0:06:37.880 your core obligation to the Golden Sex company. Golden Sacks 0:06:37.920 --> 0:06:41.760 Asset Management for years has had not a stumble, But 0:06:41.960 --> 0:06:45.240 I need to be focused. You have had great acclaim 0:06:45.640 --> 0:06:49.000 for bringing a new focus to Golden Sex Asset Management 0:06:49.200 --> 0:06:52.520 to compete out there? What's the Patel focus for Golden 0:06:52.560 --> 0:06:55.800 Sex Asset Management? Look? As an investor, you focus a 0:06:55.920 --> 0:06:58.240 number one has to be your client needs. And what 0:06:58.320 --> 0:07:01.000 I would say we've tried to do is refocused our 0:07:01.160 --> 0:07:03.960 entire investing team on the questions clients are asking us. 0:07:04.000 --> 0:07:05.800 What are they asking you right now? They're asking us 0:07:05.800 --> 0:07:08.760 about E s G and sustainability. They're asking us about 0:07:08.800 --> 0:07:11.360 what to do in this low yield environment, and they're 0:07:11.400 --> 0:07:14.200 asking us how they should think about asset allocation in 0:07:14.240 --> 0:07:17.000 the broader context of all their stakeholders. What we heard 0:07:17.000 --> 0:07:19.760 this week and a Happy Valley is the arch question 0:07:19.800 --> 0:07:24.200 of the efficient frontier and asset allocation given low rates 0:07:24.200 --> 0:07:25.680 we've got boom bust, and I don't want to get 0:07:25.680 --> 0:07:29.320 into boom busted. You your your leader, David was quite 0:07:29.800 --> 0:07:31.840 it was quite good on that as well. Forget about that. 0:07:32.160 --> 0:07:35.080 Forget about I gotta put my money in the market 0:07:35.160 --> 0:07:38.600 after bonds up, yields down, stocks up, up, up up 0:07:38.760 --> 0:07:41.800 is your answer to buy more tesla? Well, it doesn't 0:07:41.840 --> 0:07:44.000 necessarily have to be Tesla, but I would say people 0:07:44.000 --> 0:07:46.760 have been penalized more for trying to guess when the 0:07:46.760 --> 0:07:49.400 market would go down, then by keeping to a steady 0:07:49.400 --> 0:07:52.640 core asset allocation, particularly with exposure to equities, when you 0:07:52.680 --> 0:07:55.440 believe that growth is stable. Do we think that growth 0:07:55.800 --> 0:07:59.320 is growing exponentially growing getting better over the next year. No, 0:07:59.480 --> 0:08:02.640 But do we think the US looks decent? There are 0:08:02.720 --> 0:08:05.880 hotspots in Europe of both growth and pain, and that 0:08:05.920 --> 0:08:09.880 we have interesting opportunities in em and particularly in Japan. Yes, Okay, 0:08:09.960 --> 0:08:13.040 your charm as you came up on the trading side, 0:08:13.120 --> 0:08:15.200 on the management side, on what I'm going to call 0:08:15.280 --> 0:08:19.680 the execution side. This isn't some Ivory Tower exercise for you. 0:08:19.800 --> 0:08:24.480 Even though you've got prodigious academics from an execution trading side, 0:08:25.080 --> 0:08:28.640 your expert in the observance of liquidity, is a liquidity 0:08:28.680 --> 0:08:31.400 there in the market's given shocks. Right now, I would 0:08:31.400 --> 0:08:33.560 say liquidity is there. We're certainly in a better place 0:08:33.559 --> 0:08:35.640 than we were a year ago at DAVAS. A year 0:08:35.679 --> 0:08:38.920 ago you had everyone worried about liquidity, extremely worried about 0:08:38.920 --> 0:08:41.480 where the markets went head and we were counseling carm 0:08:41.520 --> 0:08:44.280 and I think today you have people worried about liquidity 0:08:44.320 --> 0:08:46.360 given the mix of private to public that they have 0:08:46.400 --> 0:08:50.040 in their portfolios, particularly the way that various investors have 0:08:50.120 --> 0:08:52.920 leaned into things like private credit. Where we see the 0:08:52.960 --> 0:08:55.840 balance is by making sure that the overall portfolio has 0:08:55.920 --> 0:08:58.160 liquidity needed for the needs That will be different for 0:08:58.160 --> 0:09:00.360 a pension than a sovereign wealth fund and for an 0:09:00.360 --> 0:09:03.120 insurance company. Can I go off script on a Friday? 0:09:03.120 --> 0:09:06.760 We can do that, Shela Patil portfolio insurance. This is 0:09:06.800 --> 0:09:11.520 before your time. Our e t s the new portfolio insurance. 0:09:11.559 --> 0:09:13.720 This is beneath you to talk about. I get that 0:09:14.120 --> 0:09:17.559 everybody listening and watching should they be petrified of the 0:09:17.679 --> 0:09:21.199 certitude that ETFs are the only way to go. I 0:09:21.240 --> 0:09:23.400 don't think it's a new portfolio insurance, and I think 0:09:23.440 --> 0:09:26.520 there's a huge diversification of the options in the e 0:09:26.640 --> 0:09:31.920 t F markets, they span an incredible number. Well, it's 0:09:31.920 --> 0:09:34.480 a very very broad market. I think what we have 0:09:34.559 --> 0:09:36.800 to think about with e t s is really what 0:09:36.960 --> 0:09:39.240 is the purpose of having them in your portfolio? Is 0:09:39.280 --> 0:09:41.760 it the best exposure to a particular index is in 0:09:41.760 --> 0:09:44.079 an area where you just want beta versus alpha. And 0:09:44.200 --> 0:09:45.640 it goes back to the question of do you want 0:09:45.640 --> 0:09:48.360 active or passive in certain segments of the market. I 0:09:48.480 --> 0:09:51.160 think that's a question that investors need to answer themselves 0:09:51.280 --> 0:09:54.640 over and over again, and it's become very binary. We 0:09:54.760 --> 0:09:57.000 love binaries. It's easier to say choose air, choose be, 0:09:57.400 --> 0:09:59.880 But the reality is we see a bounce portfolio includes 0:10:00.040 --> 0:10:02.360 both passive and active, depending on where you think the 0:10:02.400 --> 0:10:05.360 opportunity set is in an asset class. Unfortunately, last night 0:10:05.400 --> 0:10:08.000 I was talking about c D e F. I wasn't 0:10:08.080 --> 0:10:11.160 binary last night. Sheila was right, that's a simpler in 0:10:11.280 --> 0:10:25.679 better world. What we're gona do today is trying to 0:10:25.800 --> 0:10:29.079 give you a recapitulation of the proper theory and foundation 0:10:29.200 --> 0:10:32.439 of this. Joining us later Robert Schiller, the Laureate of 0:10:32.559 --> 0:10:36.640 Yale University and joining us now someone as a claim 0:10:36.760 --> 0:10:40.000 Jacob Frankel joins as chairman of JP Morgan Chase International, 0:10:40.360 --> 0:10:43.760 former governor of the Bank of Israel and Chicago academic 0:10:43.920 --> 0:10:48.240 from just a few years ago as well. The uproar 0:10:48.520 --> 0:10:53.559 here is the sick locality of markets linked into your 0:10:53.640 --> 0:10:57.800 world of economics. Possibly is done and there will be 0:10:57.960 --> 0:11:03.240 a more leaden, non vollow a trend because central banks 0:11:03.280 --> 0:11:06.640 have dragged us down to the zero bound. I don't 0:11:06.720 --> 0:11:10.240 see this in the academic literature. Is it an original 0:11:10.400 --> 0:11:14.559 idea that needs to be tested to begin with? It 0:11:14.880 --> 0:11:18.960 is being tested, and frankly, I think that the zero bound, 0:11:19.160 --> 0:11:23.600 or the driving down on interest rate to zero was emphasized, 0:11:24.000 --> 0:11:26.960 has been emphasized as the way in which the crisis 0:11:27.040 --> 0:11:30.520 that emanated twelve years ago came to the system so 0:11:30.720 --> 0:11:34.720 called unconventional policies. But if we are talking now about 0:11:35.080 --> 0:11:38.439 a recovery, getting out of it, coming back to normalcy, 0:11:38.840 --> 0:11:42.520 I think that the zero interest rates has exhausted its 0:11:42.600 --> 0:11:46.920 benefits and it's time now to think again, how do 0:11:47.040 --> 0:11:50.599 we come to the highway from this particular detail, to 0:11:50.760 --> 0:11:53.839 return to the highway in which interest rates are at 0:11:53.960 --> 0:11:58.400 normal level, in which financial industry can perform well. Because 0:11:58.440 --> 0:12:04.080 at the present time, engining systems, insurance, life insurance, even 0:12:04.160 --> 0:12:09.400 banking have to redesign their business model to accommodate zero 0:12:09.520 --> 0:12:12.839 interest rates, which makes no sense. I think that at 0:12:12.920 --> 0:12:15.680 this stage we will need to bring back the other 0:12:15.880 --> 0:12:19.520 policy instruments. The other policy instruments have to do with 0:12:19.760 --> 0:12:24.000 fiscal policy, have to do with structure policy. Today, the 0:12:24.160 --> 0:12:30.320 greatest danger to the economy is growth comes from fragmentation. 0:12:30.720 --> 0:12:35.880 The world is global, policy making is local. The pressures 0:12:36.080 --> 0:12:39.800 on policy makers come from domestic pressures. And if you 0:12:39.920 --> 0:12:44.240 have great fragmentation within economies, you will end up having 0:12:44.320 --> 0:12:49.559 also great fugment fragmentations between economies and the bridges that 0:12:49.679 --> 0:12:52.960 are so essential for the functioning of the global economy. 0:12:53.280 --> 0:12:55.439 Maybe have your voice is so important. I have to 0:12:55.520 --> 0:12:59.160 get this on record. If we begin a path to normalcy, 0:12:59.840 --> 0:13:03.520 do we sustain a Latin non volatile state or do 0:13:03.640 --> 0:13:07.680 we maintain the normal historic boom and bus cycles. At 0:13:07.760 --> 0:13:10.439 Rogof and Rhiner, I've talked about which is it is 0:13:10.440 --> 0:13:14.280 a binomial? Is a bipolar? Almost? Which is it? It's no, 0:13:14.880 --> 0:13:17.679 it's not a law of nature that it will be 0:13:17.840 --> 0:13:20.440 either or it depends on the policy. Let me give 0:13:20.480 --> 0:13:24.439 you an example here the recovery started, and suddenly the 0:13:24.600 --> 0:13:29.040 trade wall came in. Trade wall means you break a 0:13:29.160 --> 0:13:34.679 bridge between important partners. This creates volatility. Then there is 0:13:34.720 --> 0:13:37.720 a glimpse of hope that this trade wall may be settled, 0:13:37.800 --> 0:13:40.599 at least as phase one. Then suddenly the markets like 0:13:40.720 --> 0:13:44.079 it again. Amusan coming down to Earth will say, hey, 0:13:44.200 --> 0:13:47.679 we have volatility. But let's understand that volatility is a 0:13:47.760 --> 0:13:53.000 reflection of the signals that policy makers give to markets, 0:13:53.160 --> 0:13:57.040 and in the market in which financial markets are important, 0:13:57.120 --> 0:13:59.600 that they are growing to be more and more important. 0:14:00.080 --> 0:14:04.559 That's the market in which expectations about the future transmitting 0:14:04.600 --> 0:14:09.840 itself to current behavior. So let's be very careful worlds metals, 0:14:10.040 --> 0:14:13.439 expectations metters, and if things are still not done but 0:14:13.559 --> 0:14:17.000 they are expected to be done, volatility already comes in 0:14:17.400 --> 0:14:21.360 to your claim on to on on the bank of Israel, 0:14:21.440 --> 0:14:23.760 and folks, let's make clear here as we more. In 0:14:23.800 --> 0:14:26.400 the late Paul Worker, people talk of Frankel as a 0:14:26.440 --> 0:14:29.120 vocal equivalent with the courage of what he did in 0:14:29.240 --> 0:14:32.960 Israel years ago. You had a tool kit. Then Legard 0:14:33.080 --> 0:14:36.320 this morning with Francine talks about tools or finities is 0:14:36.360 --> 0:14:39.800 written about this authoritatively at the FED. What's in the 0:14:39.920 --> 0:14:43.640 tool kit at the zero bound. Well, the tool kit 0:14:43.880 --> 0:14:49.000 today is much less potent than what it used to be, 0:14:49.120 --> 0:14:53.840 which is Bridgewater's point alately, but it is also not 0:14:54.320 --> 0:14:59.720 a cause of nature. It is again a policy maker making. 0:15:00.160 --> 0:15:03.120 What do I have in mind? The most important tool 0:15:03.760 --> 0:15:08.600 in the policy arsenal is interest rate. Of course, you 0:15:08.640 --> 0:15:13.280 can always speak about macroprudential policies. You can speak about guidance, 0:15:13.400 --> 0:15:16.640 how to manipulate expectations, you can speak about many things. 0:15:16.720 --> 0:15:19.680 But let's face it, it is the interest rates the 0:15:19.840 --> 0:15:24.480 central bank is setting, which is the jewel in the 0:15:24.600 --> 0:15:27.520 crown of policy making arsenal. If we think if it 0:15:27.680 --> 0:15:30.320 is being stuck at close to zero, in addition to 0:15:30.440 --> 0:15:35.000 the damage to the financial industry, it also projects that 0:15:35.080 --> 0:15:38.080 the monetary authority can do in the future less than 0:15:38.160 --> 0:15:40.120 what he did in the past, which is another reason 0:15:40.440 --> 0:15:43.200 to wake up other policy instruments. I think that the 0:15:43.440 --> 0:15:47.360 only game in town syndrome in which central banks have 0:15:47.520 --> 0:15:51.480 become two centered to the debate, has to be changed. 0:15:51.560 --> 0:15:55.400 It's a very very dubious compliment. The spirited conversation he 0:15:55.480 --> 0:15:57.600 or Jacob Franklin. Some of the themes that we're seeing 0:15:57.640 --> 0:16:00.520 here from central banks and praticularly from those after a 0:16:00.640 --> 0:16:04.400 bang up successful two thousand nineteen Dr Frankel, of course, 0:16:04.840 --> 0:16:20.520 with JP Morgan International Panels continue a very important panel 0:16:21.000 --> 0:16:24.960 UH this morning on central banking and on treasury as well. 0:16:25.080 --> 0:16:27.840 What I like about this panel, it's a mixture of 0:16:28.200 --> 0:16:32.600 the bankers and the finance officials together and has led 0:16:32.640 --> 0:16:36.000 to a spirited conversation about the mysteries. Of course, we 0:16:36.080 --> 0:16:38.760 can summarize that and maybe do better than five or 0:16:38.800 --> 0:16:41.920 six people talking at once to singularly talk to the 0:16:42.000 --> 0:16:46.280 gentleman from Mexico. I know Guria brings first rate academic 0:16:46.400 --> 0:16:48.720 economics to his job at the O E c D 0:16:49.440 --> 0:16:52.600 UH as their secretary General has held court for some times. 0:16:52.960 --> 0:16:55.120 And the good news here with Lawrence Boone and the 0:16:55.160 --> 0:16:57.880 other great analysts at the O E c D is 0:16:58.000 --> 0:17:01.440 very simply he can synthesize a lot for us. He 0:17:01.520 --> 0:17:03.920 takes the sunglasses off now so we can do TV. 0:17:04.520 --> 0:17:07.320 I wore my sunglasses one and Saturn. They said, don't 0:17:07.359 --> 0:17:10.280 ever do that again. Wonderful they have you here. But 0:17:10.640 --> 0:17:13.720 the themes are so important. There's Qi, there's boomer bus, 0:17:14.080 --> 0:17:16.040 or this is that you're gonna go back to your 0:17:16.119 --> 0:17:18.480 lawns Boon and say this is what I want you 0:17:18.520 --> 0:17:22.760 to research. What is it. Basically, we have to get 0:17:22.840 --> 0:17:26.760 back to productivity, we have to get back to skills, 0:17:27.440 --> 0:17:31.480 and we basically have to find a way to lower 0:17:31.600 --> 0:17:34.760 the trade tensions. They're still there. They've already cost us 0:17:34.840 --> 0:17:38.919 more than one percent of the world's GDP growth. Uh 0:17:39.520 --> 0:17:43.280 the rate of growth of trade went from five and 0:17:43.320 --> 0:17:46.440 a half percent to practically flat. The rate of growth 0:17:46.520 --> 0:17:50.440 of investment went from five six percent. Voices on held 0:17:50.480 --> 0:17:52.240 to the President of the United States, we're able to 0:17:52.320 --> 0:17:54.600 corner Donald Trump at the espresso bar and say, look, 0:17:54.680 --> 0:17:56.639 this is the way it is for the O. E c. D, 0:17:56.720 --> 0:17:59.720 if not for your America. We have said it in 0:18:00.000 --> 0:18:03.359 so many ways, written it, we've insisted, we published it, 0:18:03.880 --> 0:18:08.600 and basically saying the trade tensions are causing disruption. Why 0:18:09.040 --> 0:18:15.160 because they're causing uncertainty. Uncertainty killed investment. Investment, of course, 0:18:15.320 --> 0:18:18.240 is the seed of the growth of tomorrow. So basically, 0:18:18.400 --> 0:18:22.480 by by creating the trade tensions, you kill the investment, 0:18:22.560 --> 0:18:24.639 you kill the growth. How this is what has happened. 0:18:24.760 --> 0:18:27.000 How much of a headache is does the US and 0:18:27.240 --> 0:18:30.560 in particular does the US administration think that actually tears 0:18:30.640 --> 0:18:34.000 work and will they use them against Europe? Well, first 0:18:34.040 --> 0:18:38.439 of all, I hope that they don't use them against Europe. 0:18:38.560 --> 0:18:41.240 And I think there's when there's a will, there's a way. 0:18:41.720 --> 0:18:47.760 And yesterday we found a way. The French UH agreed 0:18:47.920 --> 0:18:52.399 to defer the action on their digital taxation law, and 0:18:52.680 --> 0:18:56.840 the Americans agreed to defer the actions on their three 0:18:56.920 --> 0:19:01.679 or one you know, potentially the sanctions, et cetera. Because 0:19:01.720 --> 0:19:04.920 it was not just a question against French champagne or 0:19:05.000 --> 0:19:09.240 French wine. It was a European against the United States issue. Eventually, 0:19:09.560 --> 0:19:12.680 so and what happened they both agreed that they would 0:19:12.720 --> 0:19:15.720 give multilateral solutions a chance. That means to the o 0:19:15.840 --> 0:19:18.080 e c D the mandate to work on a final 0:19:18.160 --> 0:19:21.240 solution on digital taxation, so Europe can come together. So 0:19:21.400 --> 0:19:23.480 how can the O c D come together on this? Well, 0:19:23.920 --> 0:19:27.280 because we have a hundred and thirty seven countries working 0:19:27.359 --> 0:19:30.240 on this solution, not just Europe, and by the way, 0:19:30.480 --> 0:19:34.400 a nightmare. We had pretty strong support from practically every 0:19:34.440 --> 0:19:39.879 European country and the US have been participating rather enthusiastically. 0:19:39.960 --> 0:19:43.240 Why because there are a number of elements of the 0:19:43.320 --> 0:19:46.800 package that we're proposing on digital taxation that are very 0:19:47.040 --> 0:19:52.160 akin to the to the tax reform that was done 0:19:52.200 --> 0:19:53.760 in the United States a couple of years ago. So 0:19:53.840 --> 0:19:57.159 you think you'll be able to break a deal the 0:19:57.359 --> 0:20:01.320 in in the time that has run seen the think 0:20:01.400 --> 0:20:06.280 of the option instead of a multilateral solution which everybody 0:20:06.320 --> 0:20:09.600 will embrace, and they're all willing to sunset their own 0:20:09.680 --> 0:20:14.400 domestic laws and come to the multilateral solution. Imagine forty 0:20:14.760 --> 0:20:21.040 five fifty whatever different legislations with different types of taxes, 0:20:21.080 --> 0:20:25.560 et cetera. And remember Europe is not on taxes. It's 0:20:25.600 --> 0:20:29.280 not Europe Brussels meaning the European Commission, every it's every 0:20:29.400 --> 0:20:34.120 country on its own. So I think that the alternative 0:20:34.280 --> 0:20:37.960 is so disruptive that they will all be trying very 0:20:38.040 --> 0:20:42.040 hard to get a deal within the the bureaucracy of 0:20:42.119 --> 0:20:44.800 the O E c D. Do you have a mercantile division? 0:20:45.000 --> 0:20:47.680 I mean, are we back to mercantilism here? Every every 0:20:47.800 --> 0:20:51.800 We have a trade division, we have a Trade Directorate, 0:20:51.920 --> 0:20:55.880 and we also have a director that deals with enterprise 0:20:55.920 --> 0:20:58.960 and financial affairs. So yes, the answers, yes, So where's 0:20:59.000 --> 0:21:01.520 the you're the students, you taught a man or eight 0:21:01.600 --> 0:21:03.960 years ago. This is really important. Are we back to 0:21:04.119 --> 0:21:08.400 not multilateral, not back to bilateral trilateral? Are we back 0:21:08.440 --> 0:21:11.720 to a mercantilistic every nation for itself? That's what I 0:21:11.840 --> 0:21:14.560 heard from the President when he gave that press conference here. 0:21:15.600 --> 0:21:18.960 How are we going to deal with things like international 0:21:19.040 --> 0:21:22.480 trade if not multilaterally? How are we going to deal 0:21:22.880 --> 0:21:27.080 with international investment flows if not multilaterally? How do we 0:21:27.200 --> 0:21:30.359 deal with migration flows if not multilaterally? How do you 0:21:30.480 --> 0:21:33.520 deal with things like climate? Are you predicting that the 0:21:33.560 --> 0:21:39.560 president United States policies will impinge on us multi multinational investment? 0:21:39.920 --> 0:21:43.520 Is he gonna limit the investment of Johnson and Johnson abroad? 0:21:44.160 --> 0:21:48.359 It is already having an impact lowering the rate of 0:21:48.400 --> 0:21:51.080 growth of the United States, just like it is having 0:21:51.160 --> 0:21:54.840 an impact on China. So already we know the cost 0:21:55.640 --> 0:22:01.160 of these trade tensions. They impinge directly on uh, the well, 0:22:01.440 --> 0:22:06.440 they create uncertainty, they create they create you know, lower growth, 0:22:06.640 --> 0:22:10.359 they create lower jobs. So if we know the consequences, 0:22:10.560 --> 0:22:12.480 you know, and we know that there are better options, 0:22:12.800 --> 0:22:16.400 let's go in that direction. But have we reached peak multilateralism? 0:22:16.520 --> 0:22:19.480 Does it just go down from here? No? You never 0:22:19.600 --> 0:22:24.200 reached peak multilateralism. Actually, I would say that today we 0:22:24.400 --> 0:22:28.760 have to defend multilateralism. We have to prove that this 0:22:29.040 --> 0:22:32.800 is no way, because otherwise there's gonna be a lot 0:22:32.840 --> 0:22:37.360 of pressure against multilateralism. There already is, and we're trying 0:22:37.440 --> 0:22:40.000 to push it back. And Gary as always, thank you 0:22:40.040 --> 0:22:42.159 so much for joining us. He as the obviously the 0:22:42.359 --> 0:22:57.520 Secretary General. And hell Guria was really eloquent off the 0:22:57.640 --> 0:23:01.920 microphone about the differential between the I M FEW and 0:23:02.040 --> 0:23:06.320 the grimmer oe us off the mic. No, no, but 0:23:06.440 --> 0:23:08.800 this is published. It's published news that I M F 0:23:08.960 --> 0:23:11.000 is more optimistic right now than O. E. C. D. 0:23:11.440 --> 0:23:14.080 And all our good guests on Bloomberg Surveillance. We go 0:23:14.240 --> 0:23:16.760 back home with a variance of opinion while the guest 0:23:16.840 --> 0:23:20.720 coverage continues with Steve Paliuca Bank Capital C. Stephen. Great 0:23:20.760 --> 0:23:22.400 to have you with us, Great to be here, fantastic 0:23:22.480 --> 0:23:23.600 to have you with us in the studio. And I 0:23:23.640 --> 0:23:25.720 finally tell you here let's talk about that. How's the 0:23:25.760 --> 0:23:28.320 economy got a series of businesses through the U. S 0:23:28.359 --> 0:23:30.360 economy at the moment worldwide for that matter, as well? 0:23:30.520 --> 0:23:32.960 What do you say? You know, I agree with Telman, 0:23:33.000 --> 0:23:35.280 it's kind of chugging along. Our businesses are doing well, 0:23:35.720 --> 0:23:39.320 record on record low unemployment in the US. We've had 0:23:39.440 --> 0:23:41.879 we've had kind of an oil dividend for six or 0:23:41.920 --> 0:23:45.679 seven years now. Oil is very cheap. Energy is very cheap. Uh, 0:23:46.320 --> 0:23:49.000 and so planes are full, you know, restaurants for fall 0:23:49.080 --> 0:23:50.960 and things are going pretty well. What's the scale meter 0:23:51.160 --> 0:23:53.920 right now for bank capital that everybody's out there? We 0:23:54.000 --> 0:23:56.960 got to scale this scale, that defined scale and what 0:23:57.080 --> 0:23:59.879 it means for you, Well, we really try to just 0:24:00.040 --> 0:24:01.840 do the best transactions built. We wudn't want to be 0:24:01.840 --> 0:24:03.800 the biggest, We want to be the best. We have 0:24:04.160 --> 0:24:06.600 about a hundred and five billion dollars of assets today. 0:24:07.119 --> 0:24:08.920 We think that brings us an advantage because we're a 0:24:08.920 --> 0:24:11.920 global firm. We actually stem from a consulting firm. We 0:24:11.960 --> 0:24:14.720 weren't really financial people, and the belief was back in 0:24:16.119 --> 0:24:18.159 from started with Bill Bain and mid Romney in that 0:24:18.800 --> 0:24:21.480 we could take the consulting skills and really transform business. 0:24:22.080 --> 0:24:24.440 This is a really important point. I'm gonna stake this 0:24:24.520 --> 0:24:26.320 and you tell me if I'm wrong. You're not slaves 0:24:26.359 --> 0:24:28.760