WEBVTT - Surveillance: Citi's Morse on Oil Downgrade 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Ley. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.960 Bloomberg dot Com, and of course on the Bloomberger Chinese 0:00:27.960 --> 0:00:31.200 oil demand, as you said, dropping about three billion, three 0:00:31.240 --> 0:00:34.879 billion bill barrels a day of total consumption, the largest 0:00:34.920 --> 0:00:37.600 demand shock the oil market has suffered since the global 0:00:37.640 --> 0:00:40.479 financial crisis of two thousand and eight. Why are we 0:00:40.560 --> 0:00:42.840 seeing oil prices getting a bit of a bid today? 0:00:43.159 --> 0:00:45.360 Why are they having a lift? Why are they slightly up? 0:00:45.440 --> 0:00:48.280 Because the thing was so bad? But what is that 0:00:48.360 --> 0:00:50.040 really pricing it in? I mean, last week was not 0:00:50.120 --> 0:00:52.199 a blood bath. Last week was the sell off, but 0:00:52.280 --> 0:00:54.680 it was not less because not just apeople don't know 0:00:54.920 --> 0:00:57.080 what to price in. They don't know how long this 0:00:57.200 --> 0:00:59.000 will go on for. They don't know how much worse 0:00:59.040 --> 0:01:01.360 it will get. Let's ask the economists what to do. 0:01:01.560 --> 0:01:04.080 John Riding bring capital chief economic advice that you want 0:01:04.080 --> 0:01:05.520 to get around the table here in New York. Good 0:01:05.520 --> 0:01:11.600 morning to John, Good morning Johnathan. What do you tell clients? Well, look, 0:01:12.200 --> 0:01:16.039 what has to train I think recognized. First of all, 0:01:16.240 --> 0:01:20.600 the coronavirus is it's like all illnesses. It's terrible. It's 0:01:20.640 --> 0:01:26.160 spreading rapidly. Um. But one has to put it in perspective. 0:01:26.240 --> 0:01:29.080 So what what is it analytically? And I've argued that 0:01:29.319 --> 0:01:33.080 it's more a supply shock than it is a demand shock, 0:01:33.160 --> 0:01:35.000 at least for the rest of the world that we 0:01:35.120 --> 0:01:39.280 have integrated global supply chains. We had a shock to 0:01:39.360 --> 0:01:43.600 the supply chain last year from tariffs in the trade wars. 0:01:44.360 --> 0:01:47.120 Um we got that behind us, and now we have 0:01:47.640 --> 0:01:52.600 a uh supply chain shock coming out of the factory 0:01:52.640 --> 0:01:57.080 stain closed, which is a Chinese decision in terms of 0:01:57.480 --> 0:02:00.680 limiting the spread. Then of course us to the travel 0:02:00.760 --> 0:02:02.600 band and soul. But if we go back to looking 0:02:02.640 --> 0:02:06.960 at stars, it will, no doubt we got under control 0:02:07.040 --> 0:02:10.720 with that. The timeline in the case of stars from 0:02:11.760 --> 0:02:14.799 who are declaring it an international mergency I think was 0:02:14.880 --> 0:02:18.359 that March thirteenth, two thousand three too, being sounding the 0:02:18.440 --> 0:02:22.720 old clear was in July of two thousand three. Um, 0:02:23.080 --> 0:02:25.560 we don't know if it's got the same timeline. It 0:02:25.720 --> 0:02:29.040 spreads more rapidly because we've now had double the cases 0:02:29.120 --> 0:02:31.320 than there were a total number of stars cases, it 0:02:31.840 --> 0:02:35.480 doesn't appear to be as deadly. Um. But that said, 0:02:35.520 --> 0:02:37.400 a lot of people are pushed back on using Stars 0:02:37.440 --> 0:02:39.840 as an example of what to expect here, saying the 0:02:39.960 --> 0:02:43.000 Chinese economy is much more pivotal in the world. We 0:02:43.120 --> 0:02:45.320 also have the backdrop of all of these tensions. And 0:02:45.320 --> 0:02:47.480 I think it's interesting that John and and really salient 0:02:47.560 --> 0:02:50.600 that John started on the blowback that the US is 0:02:50.639 --> 0:02:53.679 getting from China on the response, how much is this 0:02:53.760 --> 0:02:56.600 going to potentially rise to a political issue and cause 0:02:56.680 --> 0:02:59.239 tensions on the trade front at a time when we had, 0:02:59.720 --> 0:03:03.520 you know, had some sort of resolution. We've we had 0:03:03.560 --> 0:03:07.160 phase one deal, Phase one deal sign now we move 0:03:07.280 --> 0:03:10.960 on to phase two, and you know, the coronavirus has 0:03:11.080 --> 0:03:15.160 created some uncomfortable mood music for those negotiations, especially when 0:03:15.760 --> 0:03:21.760 the side of the administration that has been more anti China, 0:03:22.040 --> 0:03:27.440 more pro tariff makes comments. Uh you know that you 0:03:27.520 --> 0:03:31.079 referred to earlier being made. But that being said, common 0:03:31.160 --> 0:03:34.400 heads provided prevailed in the trail talks, the trade talks, 0:03:34.400 --> 0:03:36.800 and I think that will uh you know, that will 0:03:36.880 --> 0:03:42.560 happen here. Um, there will be an impact on growth 0:03:43.040 --> 0:03:44.680 in the first quarter. As I said in the US 0:03:44.760 --> 0:03:47.400 I think will primarily see it in the supply chain, 0:03:47.600 --> 0:03:50.720 not in the consequences of reduced demand for China, that 0:03:50.880 --> 0:03:52.960 that will have an impact. But the US is still 0:03:53.520 --> 0:03:57.920 a relatively closed economy, and you work in the demand 0:03:58.000 --> 0:03:59.880 numbers and they're they're pretty small for the US. The 0:04:00.080 --> 0:04:06.720 erruption to supply maybe more, maybe more significant, but without 0:04:07.840 --> 0:04:12.520 having a crystal ball and looking at stars and think 0:04:12.560 --> 0:04:15.720 about this, that it's probably going to be hopefully going 0:04:15.760 --> 0:04:19.440 to be a first quarter event, and then the economy 0:04:19.560 --> 0:04:23.359 does Jonathan, many people share that hope. The difficulty they 0:04:23.440 --> 0:04:24.840 might have be having at this point is that we 0:04:24.920 --> 0:04:27.360 spent much of last year with this tug of war 0:04:27.480 --> 0:04:31.240 between the consumer, this resilient consumer, this resilient services sector, 0:04:31.560 --> 0:04:34.560 and this really really soft manufacturing sector, not just a 0:04:34.600 --> 0:04:36.680 story for the United States, but a story for much 0:04:36.680 --> 0:04:39.640 of the developed world, including China as well, and we 0:04:39.760 --> 0:04:43.520 never quite resolved the question. There were hopes that we'd 0:04:43.560 --> 0:04:46.160 come into this year and that manufacturing would start to 0:04:46.200 --> 0:04:48.480 pick up and to stabilize, but it was never quite resolved, 0:04:48.880 --> 0:04:50.760 and that an issue like this, a shock like this, 0:04:50.880 --> 0:04:53.520 can derail things again. What do you say about that 0:04:53.560 --> 0:04:56.400 particular dilemmon John I think the key thing is to 0:04:56.560 --> 0:05:02.200 watch jobs, because what keeps the consumer in aime is employment, 0:05:02.680 --> 0:05:06.200 and employment growth has remainder of us. The signals for 0:05:06.320 --> 0:05:09.640 January is that has continued in the first quarter. Very 0:05:09.680 --> 0:05:12.240 strong readings on the labor market out of the consumer 0:05:12.320 --> 0:05:18.200 Confidence report UH, the initial jobless claims data remain extremely low. 0:05:18.839 --> 0:05:22.760 So I see, we have to watch jobs and that's 0:05:22.800 --> 0:05:27.800 the key thing here. UM. And the payrolls report this Friday, John, 0:05:28.000 --> 0:05:32.040 how important this payrolls this Friday? Given a lot of 0:05:32.080 --> 0:05:35.760 this though predate a lot of this particular survey will 0:05:35.800 --> 0:05:37.800 just predate any of the stress that we see in 0:05:37.880 --> 0:05:41.920 the global economy right now. But economic momentum is very important. 0:05:42.360 --> 0:05:46.000 And you know when when when you're you're looking at 0:05:47.000 --> 0:05:49.880 the impact of something like sorts, it's like, what is 0:05:50.000 --> 0:05:53.600 the what what does the momentum in the economy that's 0:05:53.600 --> 0:05:57.840 been impacted? And the job's momentum has been strong, UM, 0:05:58.160 --> 0:06:02.480 and if it remains strong, then the US will power 0:06:02.600 --> 0:06:06.880 through this um and that's key. And I think there 0:06:07.000 --> 0:06:10.560 are some signs we'll see what you know, we had 0:06:10.720 --> 0:06:13.680 very weak Chicago p M I reading last week on 0:06:13.760 --> 0:06:17.560 manufacturing that may have been distorted by Bowing, given the 0:06:17.640 --> 0:06:21.719 Bowing is headquartered in Chicago. We had a very strong 0:06:21.880 --> 0:06:25.400 reading out of the Richmond Fed Manufacturing Indicator, which we 0:06:25.560 --> 0:06:30.599 found to be statistically a fairly useful indicator of manufacturing. 0:06:30.680 --> 0:06:33.760 And we will get to know this morning with the 0:06:34.279 --> 0:06:37.120 I S M reading later on what what the January 0:06:37.200 --> 0:06:41.280 manufacturing numbers like. Absolutely the difference between an economy that 0:06:41.360 --> 0:06:44.360 doesn't have manufacturers at two percent growing economy and we 0:06:44.440 --> 0:06:48.400 saw that last year and one word, capital spending comes back, 0:06:49.279 --> 0:06:52.520 uh and manufacturing kicks in and then that becomes two 0:06:52.560 --> 0:06:57.200 and a half percent maybe better economic growth, but um, 0:06:58.360 --> 0:07:01.000 the construction numbers, the residents numbers look good that I 0:07:01.040 --> 0:07:02.960 think I was going to continue to drive the economy 0:07:03.680 --> 0:07:07.040 and I think everything comes down to employment growth. Here 0:07:07.120 --> 0:07:09.120 for a while, John, great, catch up with you to 0:07:09.240 --> 0:07:12.280 get your thoughts. As always, John Riding Bring Capital, Chief 0:07:12.400 --> 0:07:26.840 Economic Advisor, the focus of global markets and the world 0:07:27.160 --> 0:07:29.960 on the coronavirus coming out of China. Joining us now, 0:07:30.000 --> 0:07:33.440 I'm really pleased to say is Dr Amish Adalga JOHNS. Hopkins, 0:07:33.480 --> 0:07:37.240 Bloomberg School of Public Health, Senior Scholar, doctor. Fantastic to 0:07:37.280 --> 0:07:39.160 have you with us on the program to get your 0:07:39.200 --> 0:07:42.280 brilliant insight. Let's just begin with a rather simple question 0:07:42.360 --> 0:07:45.160 that deserves, I'm sure a complex answer. What makes this 0:07:45.280 --> 0:07:49.920 coronavirus just so difficult to contain? What makes it so 0:07:50.000 --> 0:07:53.840 difficult to contain is that it is spreading between humans efficiently. 0:07:53.920 --> 0:07:55.680 That means a person can get infected and pass it 0:07:55.720 --> 0:07:57.360 on to somebody else and then maybe pass it on 0:07:57.440 --> 0:08:00.160 to somebody else. So it's spreading in the community and 0:08:00.280 --> 0:08:02.440 that makes it very hard. And it's also spread through 0:08:02.440 --> 0:08:05.119 the respiratory route coughs and sneezes, which are much harder 0:08:05.480 --> 0:08:08.200 to really contain than something that spread a different manner. 0:08:08.240 --> 0:08:09.960 So there's a lot of characteristics that are kind of 0:08:10.200 --> 0:08:12.680 pushing that case count higher. To the last few weeks, 0:08:12.720 --> 0:08:14.440 a lot of people have been trying to understand the 0:08:14.520 --> 0:08:17.480 so called incubation period, the length of it, and whether 0:08:17.520 --> 0:08:20.200 you're contagious durre in it. Do we know anything more 0:08:20.240 --> 0:08:24.440 about that? Now? We have seen some data coming from 0:08:24.520 --> 0:08:29.559 Germany that is really suggestive of transmission during the incubation period, 0:08:29.600 --> 0:08:31.840 when someone who wasn't sick at all passed it on 0:08:31.960 --> 0:08:34.839 to somebody somebody and then they got ill. This is 0:08:34.920 --> 0:08:37.120 something we hadn't seen with coronavirus is and it is 0:08:37.200 --> 0:08:39.400 something that makes control very hard because if you don't 0:08:39.440 --> 0:08:42.560 know who is who is contagious, you can't isolate them, 0:08:42.600 --> 0:08:44.800 you can't quote, you can't do any type of social 0:08:44.880 --> 0:08:47.680 distancing to keep them away from other people. It usually 0:08:47.760 --> 0:08:50.520 doesn't cause the force of the epidemic. It's not going 0:08:50.640 --> 0:08:52.760 to spread, it's not going to be a big force 0:08:52.840 --> 0:08:54.520 in the spread of it, but it becomes very hard 0:08:54.559 --> 0:08:57.920 to completely eliminate the infection if you have these asymptomatic 0:08:58.480 --> 0:09:01.440 people who are able to bread during your incubation period. 0:09:01.800 --> 0:09:03.920 What's the fatality rate been, Like, I've heard a lot 0:09:04.000 --> 0:09:07.400 of arguments saying that that common flu is incredibly fatal 0:09:07.520 --> 0:09:10.079 and has had a much broader impact, yet it hasn't 0:09:10.080 --> 0:09:14.439 necessarily created the same sort of hysteria. So the fatality 0:09:14.520 --> 0:09:16.679 rate that we're often quoting now is two percent, But 0:09:16.760 --> 0:09:19.520 that's a very skewed number because that number is derived 0:09:19.600 --> 0:09:22.600 from the cases that are being diagnosed in China, which 0:09:22.720 --> 0:09:26.160 are going to be selected from the more sick group 0:09:26.200 --> 0:09:28.040 of people. They're not testing people that are out in 0:09:28.120 --> 0:09:30.920 the in the community who have maybe more like common 0:09:31.000 --> 0:09:35.120 cold like symptoms which coronaviruses can cause versus testing. People 0:09:35.200 --> 0:09:38.320 that are in the hospital with pneumonia need to be hospitalized, 0:09:38.360 --> 0:09:40.360 so you're getting what's called a severity bias. So that 0:09:40.440 --> 0:09:42.480 two percent we expect to come down as more and 0:09:42.600 --> 0:09:45.120 more people who have mild symptoms are tested, and as 0:09:45.200 --> 0:09:47.319 you've seen, the rate has been coming down as we 0:09:47.400 --> 0:09:49.960 get the case council higher and there have been there's 0:09:50.000 --> 0:09:52.760 only been one death outside of China, so that really 0:09:53.160 --> 0:09:54.800 argues that this is going to be less severe in 0:09:54.920 --> 0:09:58.200 terms of fatality, much less severe than Stars. For example. 0:09:58.360 --> 0:10:00.800 Dr Dodga, do you think that the action that we've 0:10:00.840 --> 0:10:04.160 seen in terms of stopping flights and just in general 0:10:04.280 --> 0:10:07.240 recommending people don't go to China has been an overreaction 0:10:07.640 --> 0:10:11.120 based on what you just said. It's one thing to 0:10:11.200 --> 0:10:13.600 have travel advisories for individuals that are going to China 0:10:13.720 --> 0:10:15.680 so that they are aware of what the risks may 0:10:15.720 --> 0:10:17.560 be and what protective actions to take, but it's quite 0:10:17.559 --> 0:10:21.839 another to basically enact the travel ban against China and 0:10:21.960 --> 0:10:24.880 people coming from from China. That I think is not warranted, 0:10:24.920 --> 0:10:27.079 and we've learned that from many outbreaks that those travel 0:10:27.160 --> 0:10:31.440 bands do not work. They dive, they divert precious public 0:10:31.480 --> 0:10:34.040 health resources to enforcing a travel ban and and really 0:10:34.080 --> 0:10:37.280 looking at travelers versus actually ramping up our health system 0:10:37.679 --> 0:10:39.720 to be able to deal with these cases when they 0:10:39.760 --> 0:10:41.840 do occur in the United States, and it ends up 0:10:41.880 --> 0:10:45.120 making things worse in China because it creates economic damage, 0:10:45.280 --> 0:10:49.120 It creates stigmatization, and make logistically harder to get resources 0:10:49.200 --> 0:10:52.079 into that area, and it will not really have a 0:10:52.120 --> 0:10:54.920 measurable impact on on a respiratory disease that's spreading this 0:10:55.040 --> 0:10:57.960 well in the community and over and almost two dozen countries. 0:10:58.160 --> 0:10:59.840 I think that we have to prepare for the event 0:11:00.000 --> 0:11:02.199 reality that this will come to the United States and 0:11:02.280 --> 0:11:04.880 we will have an outbreak of it here, and it 0:11:04.960 --> 0:11:06.520 may not be very severe, but it can be very 0:11:06.559 --> 0:11:09.400 disruptive to our health system, which runs basically at capacity 0:11:09.440 --> 0:11:11.520 on every day. This is a take that I think 0:11:11.520 --> 0:11:14.160 a lot of people outside of the medical world struggle with. 0:11:14.720 --> 0:11:18.320 They look at the quarantine measures within China, massive cities 0:11:18.360 --> 0:11:21.320 effectually being shut down, and asked them, sounds okay, if 0:11:21.360 --> 0:11:24.240 they've got quarantine measures, why wouldn't we shut down our 0:11:24.320 --> 0:11:28.240 borders to the epicenter of where this disease, where this 0:11:28.360 --> 0:11:31.000 virus has come from, and they're just from someone from 0:11:31.040 --> 0:11:33.839 outside the medical world. That's kind of the response to 0:11:33.960 --> 0:11:37.760 what you've just said. What do you say back to that? Well, 0:11:37.800 --> 0:11:39.719 first of all, I would say that China's quarantining a 0:11:39.760 --> 0:11:43.160 fifty million people was also unwarranted. That made conditions much 0:11:43.200 --> 0:11:47.520 worse than Wuhan, with shortages, with shortages of food, medical 0:11:47.559 --> 0:11:52.000 bed shortages, physician shortages, had people fled that area, lots 0:11:52.040 --> 0:11:54.480 of mistrust of public health authority, so that that on 0:11:54.840 --> 0:11:57.640 what China did was also wrong as well. But the 0:11:57.720 --> 0:11:59.880 point what I'm trying to make is that this has 0:12:00.040 --> 0:12:02.439 probably been spreading for some time in China before it 0:12:02.520 --> 0:12:05.360 was noticed. At least in November, it was spreading and 0:12:05.440 --> 0:12:08.719 there were many many travelers leaving Wuhan. And remember that 0:12:08.840 --> 0:12:11.800 the spectrum of illness at this that the coronavirus causes 0:12:12.320 --> 0:12:15.760 includes things like the common cold, very mild type of symptoms, 0:12:15.800 --> 0:12:18.960 and many patients. I suspect that there are more cases 0:12:19.000 --> 0:12:21.680 in the world that have not been diagnosed because they recovered, 0:12:21.800 --> 0:12:24.280 or they were very mild or mixed in with flu 0:12:24.760 --> 0:12:27.840 and not diagnosed because they're very poor diagnosing viral infections. 0:12:28.840 --> 0:12:30.839 So it's likely that this is already spread and is 0:12:30.920 --> 0:12:34.440 not completely containable. And what we want to do now 0:12:34.559 --> 0:12:38.160 while we have time is actually prepare our hospitals, make 0:12:38.160 --> 0:12:40.760 sure our supply chains are good, make sure that that 0:12:40.920 --> 0:12:44.040 diagnostic testing is scaled up. Because this this is really 0:12:44.080 --> 0:12:47.760 going to come here inevitably. Do you want to blunt 0:12:47.800 --> 0:12:50.120 the impact of it? And if you spend a lot 0:12:50.160 --> 0:12:55.600 of time focusing on travelers and quarantines and travel bands, 0:12:55.800 --> 0:12:58.640 you're really diverting precious resources. And in the end it 0:12:58.720 --> 0:13:00.360 may not it's not going to make much of a 0:13:00.400 --> 0:13:02.760 difference because this is a respiratory virus that has some 0:13:02.920 --> 0:13:05.600 spread during a day symptomatic period, so it becomes very 0:13:05.679 --> 0:13:08.520 hard to contain. And travel bands did not work during 0:13:08.600 --> 0:13:10.320 H one and one, they did not work during Ebola, 0:13:10.440 --> 0:13:13.080 they did not work during HIV. They do not work, 0:13:13.280 --> 0:13:16.480 and they actually make things much harder. Even though politicians 0:13:16.559 --> 0:13:18.480 love to run for them when when any time of 0:13:18.520 --> 0:13:21.080 outbreak occurs, don't to appreciate your point of view this morning, 0:13:21.120 --> 0:13:23.120 that's start to amish down yet, John, I guess from 0:13:23.120 --> 0:13:26.480 the Johns Hopkins Bloomberg School of Public Health, they senior 0:13:26.559 --> 0:13:28.800 Schollar there. We should of course point out that Michael 0:13:28.840 --> 0:13:31.520 and Bloomberg is the founder a majority owner of Bloomberg Alp, 0:13:31.679 --> 0:13:46.800 the parent company of Bloomberg News. John, you know, Miranda 0:13:46.880 --> 0:13:49.959 Carr is like a few of the people we have. 0:13:50.200 --> 0:13:55.240 It's like authentic knowledge in China, not the distance thing. 0:13:55.559 --> 0:13:58.679 I feel like incredible live and breathes it. Yeah, I 0:13:58.760 --> 0:14:01.439 mean I feel so distant. I got I been to China. 0:14:02.200 --> 0:14:05.040 I've been literally like in Hong Kong. I mean like 0:14:05.480 --> 0:14:08.160 three quarters of a mile. You go to China and 0:14:08.240 --> 0:14:10.760 then you stay in the hotel. Yeah. I mean it's 0:14:10.760 --> 0:14:15.520 a complete boggest statement to say been to China. We 0:14:15.559 --> 0:14:17.840 can bring it, Miranda car right now, High Time Security 0:14:17.920 --> 0:14:20.840 Senior analyst, Miranda talk to us about the damage being 0:14:20.920 --> 0:14:25.600 done to the economy at the moment. Well, you've got bitter. 0:14:25.680 --> 0:14:27.440 We got two elements to it. I mean the first 0:14:27.560 --> 0:14:31.320 is the consumption hit. So Spring festival the consumption. No 0:14:31.400 --> 0:14:33.360 one was going out, no one was spending going out 0:14:33.440 --> 0:14:35.800 and seeing people. So you've had that sort of short 0:14:35.920 --> 0:14:39.640 term economic hit. But the longer term economic hit could 0:14:39.680 --> 0:14:42.240 be the one where we're seeing now where instead of 0:14:42.360 --> 0:14:44.840 going back to work and production starting to kick off, 0:14:44.920 --> 0:14:47.040 where you want the Spring festival sort of post spring 0:14:47.120 --> 0:14:50.120 festival ranks where everyone's like, you know, having a key 0:14:50.200 --> 0:14:53.640 I on new export orders and production levels that's not 0:14:53.800 --> 0:14:56.480 starting now UM. And so this is where sort of 0:14:56.480 --> 0:14:59.680 a lot of the sort of industrials UM and you know, 0:14:59.840 --> 0:15:03.160 the private sector manufacturing may see a bigger hit than 0:15:03.200 --> 0:15:05.640 what we saw as a consumption hit over the spring 0:15:05.760 --> 0:15:07.920 festival shutdown RAND And we had a guest on the 0:15:07.960 --> 0:15:10.240 program in the last hour that said he's much more 0:15:10.320 --> 0:15:13.440 worried about the supply chain hit than the demand side hit. 0:15:14.400 --> 0:15:17.440 Does that resonate with you, Well, yeah, I mean good, 0:15:17.440 --> 0:15:19.280 because with the demand side you can get I mean 0:15:19.320 --> 0:15:21.760 not you know, if people can spend money over Spring festival, 0:15:21.840 --> 0:15:23.840 they can basically they've still got it in their pockets. 0:15:23.920 --> 0:15:25.800 They can go out and when when the virus passes, 0:15:26.280 --> 0:15:29.200 that consumption rebound can happen. But the trouble is going 0:15:29.280 --> 0:15:31.640 to be in areas where you know, they were already 0:15:31.720 --> 0:15:34.320 under pressure for the trade war and the supply chain 0:15:34.480 --> 0:15:37.440 sort of you know, shifting around into other areas, other countries, 0:15:37.840 --> 0:15:41.280 UM and other areas of the world. Now if they're 0:15:41.320 --> 0:15:43.920 not getting the sort of export rebound, they're already suffering 0:15:43.960 --> 0:15:47.640 cash flow problems. And then you have a production shutdown, UM, 0:15:47.800 --> 0:15:49.120 then that means you're going to have a lot of 0:15:49.160 --> 0:15:51.360 the sort of same sector are going to be struggling 0:15:52.000 --> 0:15:54.480 with both cash flows and orders as we come into 0:15:54.560 --> 0:15:57.560 Q two UM and that will then depend, you know, 0:15:57.720 --> 0:16:00.440 depends how long the virus and hits um If it 0:16:00.480 --> 0:16:02.880 continues on to Q two, then then then that could 0:16:02.880 --> 0:16:06.200 be a real struggle. MINDA. There's been some speculation that 0:16:06.280 --> 0:16:09.040 the PBOC that that the Beijing or will inject a 0:16:09.120 --> 0:16:12.720 significant amount of additional stimulus to offset any potential economic 0:16:12.760 --> 0:16:16.960 shock here. How much ammunition do they have to completely 0:16:17.080 --> 0:16:21.080 cushion the blow here? Well, interestingly, so they've actually got 0:16:21.840 --> 0:16:24.080 because they didn't go sort of full help in the 0:16:24.160 --> 0:16:27.600 stimulus for on the trade war, they still have a 0:16:27.680 --> 0:16:29.480 little bit of ammunition left. I mean, if you think 0:16:29.520 --> 0:16:33.240 of infrastructure last year, it was only four UM your 0:16:33.280 --> 0:16:35.760 and your growth, So they've still got they can still 0:16:35.840 --> 0:16:38.080 bring forward a lot of the local government spending, local 0:16:38.160 --> 0:16:41.720 government bond issuance UM and get that spending. But again 0:16:41.800 --> 0:16:44.600 it does come down to when the virus starts peaking 0:16:44.920 --> 0:16:48.800 and construction CONSTRUCTUSUS. You know, you can't put infrastructure in place, 0:16:49.440 --> 0:16:51.960 um is people aren't be able to move around. So 0:16:52.280 --> 0:16:54.080 it really needs you need, really need the virus to 0:16:54.200 --> 0:16:58.040 start sort of peeking and then movement to start going again. 0:16:58.280 --> 0:17:00.920 And then once you get into q Q, then you're 0:17:01.000 --> 0:17:04.680 likely to see a bit much much bigger stimulus package 0:17:04.720 --> 0:17:08.080 than you saw, particularly monetary policy easing, but also more 0:17:08.480 --> 0:17:11.440 infrastructure investment plans arounder. The constructive view on all of 0:17:11.520 --> 0:17:13.960 this is that we get some kind of V shape recovery. 0:17:14.320 --> 0:17:16.080 It's an inflection point that you have in mind that 0:17:16.119 --> 0:17:17.840 we go beyond that. The longer this goes on for, 0:17:18.040 --> 0:17:19.960 the more you doubt that we will get that sharp 0:17:20.119 --> 0:17:24.200 V shape recovery out of the Chinese economy. Well, the 0:17:24.240 --> 0:17:27.440 official projections at the moment are for for the peak 0:17:27.600 --> 0:17:31.359 in seventeenth of February, and it's an incredibly precise date. Um. 0:17:31.640 --> 0:17:34.600 If it peaks then and then starts declining, then then 0:17:34.640 --> 0:17:36.360 we're basically we're going to see sort of Q two 0:17:36.680 --> 0:17:39.520 Q two rebound. The risk is obviously, you know, you know, 0:17:39.680 --> 0:17:41.879 even this time last week, singing was going to be 0:17:42.000 --> 0:17:46.800 over seventeen um in in infected cases. No one was 0:17:46.840 --> 0:17:50.639 imagining that. So therefore there's it's the uncertainty about when 0:17:50.720 --> 0:17:52.760 that peak is going to happen, which is which is 0:17:52.800 --> 0:17:56.560 a big problem, and all the associated shutdowns with trying 0:17:56.600 --> 0:17:59.440 to prevent that, rather than necessarily the scale of the 0:17:59.560 --> 0:18:04.280 effect itself, Miranda, will this affect agricultural transfer from the 0:18:04.359 --> 0:18:09.159 United States to China, like to be direct soybeans from 0:18:09.200 --> 0:18:11.320 the United States of China. Does any of that get 0:18:11.359 --> 0:18:14.680 gummed up so far? Well? I think no. I think 0:18:14.840 --> 0:18:18.840 that that that may have issues, but I think it 0:18:18.920 --> 0:18:22.040 appoints to an even more interesting one because one is 0:18:22.160 --> 0:18:24.320 one of the one of the things which is a 0:18:24.400 --> 0:18:26.439 big factor. I mean, one of the issues this year 0:18:26.560 --> 0:18:29.320 was going to be the you know, the pick price 0:18:29.560 --> 0:18:32.800 increases because of the swine fever. That's basically a food 0:18:32.840 --> 0:18:35.480 safety issue. And then now you've got this which is 0:18:35.480 --> 0:18:38.440 obviously coming from from from wild you know, supposedly coming 0:18:38.480 --> 0:18:41.440 from wild animals, and you've got this whole supply chain, 0:18:41.640 --> 0:18:45.040 food distribution, food safety, all of that different aspects, and 0:18:45.080 --> 0:18:48.600 suddenly China's going to take quite dramatic action in order 0:18:48.680 --> 0:18:50.920 to do that and make that investment. And to be honest, 0:18:51.040 --> 0:18:53.520 that's where some of the most interesting you know, if 0:18:53.560 --> 0:18:55.680 you're if you're thinking about where the upside from this 0:18:55.800 --> 0:18:58.480 can come then it's in that kind of you know, 0:18:58.560 --> 0:19:01.159 the could chain distribution in the seat safety and all 0:19:01.240 --> 0:19:05.240 the sort of defeat manufacturers. He should actually be benefiting 0:19:05.280 --> 0:19:07.480 from this because that's where they're going to have to 0:19:07.520 --> 0:19:09.639 address a lot of the issues that have got us 0:19:09.640 --> 0:19:11.600 into this place in the first place. Miranda, thank you 0:19:11.680 --> 0:19:14.960 so much. Brian to car with Hi Tong International this morning. 0:19:23.960 --> 0:19:26.280 This is a joy. We haven't talked to Mickey Levy 0:19:26.320 --> 0:19:28.640 at some length here in a while, and it's important 0:19:28.680 --> 0:19:32.480 to do that now. He's with Barrenburg Bank, but that 0:19:32.680 --> 0:19:37.600 barely describes his contribution to thinking about what central banks do. 0:19:37.880 --> 0:19:41.280 He's associated with the Shadow Open Market Committee. I'm not 0:19:41.280 --> 0:19:43.000 going to go into it all because of time, but 0:19:43.200 --> 0:19:46.840 the answer is back thirty fifty years as a group 0:19:47.440 --> 0:19:51.720 concerned about flow dynamics and stock dynamics within the Central 0:19:51.760 --> 0:19:55.720 Bank and worried about rising prices. Dr Levy, thank you 0:19:55.840 --> 0:19:58.880 so much for being with us today. There's this perennial 0:19:59.040 --> 0:20:03.200 call for inflation. Vice Chairman Clarica said to Bloomberg a 0:20:03.280 --> 0:20:07.639 few days ago he sees us nearing a tourist inflation. 0:20:08.200 --> 0:20:10.680 Have we given up on the inflation watch? Is there 0:20:10.800 --> 0:20:14.840 inflation out there to worry about a little bit, Tom, 0:20:14.920 --> 0:20:18.080 but not really. I mean nominal GDP growth, that is current, 0:20:18.160 --> 0:20:21.440 all are spending in the economy is growing only modestly, 0:20:21.640 --> 0:20:25.480 so businesses really don't have much pricing power. Um, it's 0:20:25.560 --> 0:20:29.359 really interesting and perplexing that the FED is, you know, 0:20:29.560 --> 0:20:32.920 still insistent that inflation goes up to two percent. The 0:20:33.000 --> 0:20:36.680 economy is really benefiting with the lower inflation. In fact, 0:20:36.840 --> 0:20:40.200 if you consider what's happening emmy out of China and 0:20:40.320 --> 0:20:42.920 with the sharply lower fil prices, that's going to flow 0:20:43.040 --> 0:20:49.600 through to UH lower energy prices, which benefits us consumers. 0:20:49.840 --> 0:20:53.040 So what's wrong with that? I mean, what's so important here? Mickey? 0:20:53.160 --> 0:20:55.560 And and and this goes to Javier blast I thought 0:20:55.600 --> 0:20:58.200 that a phenomenal job with Bloomberg Energy this morning of 0:20:58.359 --> 0:21:02.000 explaining this all of a sudden, it's really become global 0:21:02.160 --> 0:21:04.080 even if it's just a virus. I don't mean to 0:21:04.119 --> 0:21:07.280 make light of the horrific damage this virus is doing. 0:21:07.880 --> 0:21:12.880 But what's the deflationary impulse you can gauge at Barrenberg 0:21:13.040 --> 0:21:17.800 right now, Um, not much of a deflationary impact. But 0:21:17.920 --> 0:21:21.760 to the way I view what's going on in China, 0:21:21.880 --> 0:21:26.040 is it's the negative supply shock, So it's in China. 0:21:26.400 --> 0:21:30.720 UM aggregate demand is going to decline. That is, people 0:21:30.880 --> 0:21:33.720 are going to save more, they're going to spend less. 0:21:33.760 --> 0:21:36.240 They're gonna spend more on things, the things they things 0:21:36.320 --> 0:21:38.440 they think are necessary, but they're going to spend much 0:21:38.600 --> 0:21:45.560 less on discretionary spending like autos and consumer electronics and 0:21:45.680 --> 0:21:49.160 the like. And and this emanates around the world. Then 0:21:49.240 --> 0:21:52.320 on the on the production side of things, just the 0:21:52.920 --> 0:21:57.880 bottlenecks and supply chains and the disruptions. We we really 0:21:57.960 --> 0:22:02.240 don't know the impact of this, but I would firstly, yeah, 0:22:02.320 --> 0:22:06.399 the economy in China was weak to start with, and 0:22:06.800 --> 0:22:09.120 you know, the official numbers they'll knock off a few 0:22:09.200 --> 0:22:12.480 tents from GDP, but in reality they're probably facing a 0:22:12.640 --> 0:22:16.000 near term decline in GDP. And this is going to 0:22:16.080 --> 0:22:20.480