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Speaker 1: Brought you by Bank of America, Mary Lynch. Investing in

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Speaker 1: local communities, economies and a sustainable future. That's the power

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Speaker 1: of global connections, Mary Lynch, Pierce Fenner and Smith Incorporated

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Speaker 1: Member s I p C. Welcome to the Bloomberg Surveillance Podcast.

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Speaker 1: I'm Tom Keene with David Gura. Daily we bring you

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Speaker 1: insight from the best in economics, finance, investment and international relations.

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Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com and

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Speaker 1: of course on the Bloomberg. Good Morning on a Monday,

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Speaker 1: the ninth of January, David Garrett and Tom Keen in

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Speaker 1: London to day neither snow in New York, in nor Ay,

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Speaker 1: strike on the underground could keep us away and we

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Speaker 1: had both Prime Minister to reason. Bay says yesterday that

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Speaker 1: the Brightxit process is a muddled that leaving the European

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Speaker 1: Unions about getting the right relationship her words, not about

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Speaker 1: keeping bits of membership. And the latest on Brexit with

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Speaker 1: Baroness Hellman Kennedy. The Baroness Kennedy of the Shaw's Member

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Speaker 1: of the House of Lords. Markets perspective from Alberto Gallo

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Speaker 1: and Roger Brudle of Capital Economics. Will also talk with

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Speaker 1: Harvard commist Ed Glazer about fiscal policy. The prospects were

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Speaker 1: big infrastructure spending coming out of Washington, d C. But first,

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Speaker 1: Baroness Helma Kennedy, Chair of the House of Lords, European

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Speaker 1: Union Committee, Principal Box Frouds, Mansfield College Joints, is here

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Speaker 1: in London. Great to see you again. Great to see

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Speaker 1: you in London. Let's let's start by talking about that

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Speaker 1: interview yesterday, Treesa May sitting down and and talking about

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Speaker 1: getting that relationship right. Do you have a clear sense

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Speaker 1: of what that relationship is going to look like would

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Speaker 1: be I certainly don't. And and of course our statement

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Speaker 1: yesterday was to deal with all the criticisms as a muddle.

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Speaker 1: And that's coming from many different quarters. And of course

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Speaker 1: we've just had this sort of scoldal of of the

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Speaker 1: sacking of her European UM adviser and UM and so

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Speaker 1: and his replacement, and so there's been a serious assault

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Speaker 1: upon those who are involved in UM sort of preparation

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Speaker 1: for negotiation and and saying how muddled all of this is.

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Speaker 1: And and that's the sense that many people get UM.

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Speaker 1: And certainly I'm on the European Union Select Committee. Um,

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Speaker 1: we've been taking lots of evidence around different issues that

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Speaker 1: are going to we want to be fed into the negotiation,

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Speaker 1: and so far we've had very little feedback um from

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Speaker 1: the Center and from Downing Street as to where they're

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Speaker 1: going to be taking this. Now. She's quite right not

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Speaker 1: to want to drip feed everything that's going to be

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Speaker 1: on the negotiation table. Um. I cheered and give out

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Speaker 1: a report on the business of protecting the rights of

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Speaker 1: European Union citizens living here and British citizens living in

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Speaker 1: other parts of Europe, that that should be dealt with

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Speaker 1: even before we get into negotiation, that we should take

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Speaker 1: the initiative and actually protect the rights of those who

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Speaker 1: are already here, and by taking that sort of moral

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Speaker 1: high around, other countries would would step up to the

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Speaker 1: plate and do the same thing and it would win

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Speaker 1: as good good will in the negotiation. So I think

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Speaker 1: that we've been rather slow off the mark on that

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Speaker 1: and people have been disappointed, um other things. UM. I

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Speaker 1: think it's very interesting. I mean, there's no doubt that

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Speaker 1: people have been rather pleased to see that some of

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Speaker 1: the horrors that were promised by George Osborne and and

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Speaker 1: David Cameron. You know that there was all going to

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Speaker 1: be collapsed and immediately people were going to feel the

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Speaker 1: impact of this, and in fact, economically it has not

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Speaker 1: been that's not been the picture over the last six months,

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Speaker 1: um and that has been giving reassurance to certain people,

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Speaker 1: and lots of people that I know who were remainers

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Speaker 1: have started start of reconciling themselves to the fact that

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Speaker 1: this is the the you know, we're where it's going

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Speaker 1: to have. You know, it was like grief. You had

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Speaker 1: to go through all the protests not believing it, thinking

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Speaker 1: there was some you know, nifty way of getting around it,

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Speaker 1: and so on. And then it became the argument between

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Speaker 1: hard and soft brexit, you know, whether it was going

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Speaker 1: to be you know, cut and run, or whether it

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Speaker 1: was going to be much a much closer to what

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Speaker 1: we're already doing. And I think that, I mean, I

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Speaker 1: I always go back to the fact that if if

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Speaker 1: forty eight percent wanted to remain and fifty two to leave,

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Speaker 1: yes it means you leave, but you have to take

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Speaker 1: account of the forty eight percent. And therefore I would

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Speaker 1: have found the thought that finding some real way in

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Speaker 1: the middle and compromising was what what Theresa is going

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Speaker 1: to have to try to do. You mentioned citizens of

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Speaker 1: the European and living here in the UK. How precarious

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Speaker 1: position are they in right now? You express the need

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Speaker 1: for some urgency dealing with their situation? Are they telling

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Speaker 1: you they need that. We've been inundated with uh correspondence

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Speaker 1: from people really fearful of their position, partly because, for example,

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Speaker 1: are things they didn't know. They didn't know that for

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Speaker 1: some of them, if at times when they're not working

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Speaker 1: they're supposed to have private insurance and not be using

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Speaker 1: the National Health Service and so that that will will

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Speaker 1: be a detriment to the getting residency in the ordinary,

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Speaker 1: ordinary way, even if they've lived here more than five years.

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Speaker 1: I think that the government's got to create something new

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Speaker 1: and for people in this category, they don't have to

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Speaker 1: go through the normal procedures. We're going to create a

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Speaker 1: new one, a simple one, and we're going to make

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Speaker 1: it very easy for you to acquire the right to

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Speaker 1: remain with all the citizens entitlements that go with it.

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Speaker 1: From a policy perspective, here, what seems to be the

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Speaker 1: biggest overarching issue that this government is dealing with. Is

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Speaker 1: it trade? Is an immigration? Is it the economy at large.

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Speaker 1: The way that Theresa May seems to be reading it

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Speaker 1: is that it's about immigration. That she's read that the

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Speaker 1: electorates um impulse was about feeling that jobs are being

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Speaker 1: taken away, that the future of their children is being

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Speaker 1: affected by too many people being able to come here

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Speaker 1: to work. Now, then, of course there are all those

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Speaker 1: people who actually rely on Romanian workers and so on,

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Speaker 1: the National health services absolutely people with with doctors and

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Speaker 1: nurses and people from the rest of Europe who you know,

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Speaker 1: and it wouldn't function without them, and so you have

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Speaker 1: to remind people that there are benefits in all of

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Speaker 1: those too. But the strong sense that people have, i

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Speaker 1: mean particularly working class people up and you know in

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Speaker 1: the north and in you know, far away from the metropolis,

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Speaker 1: is that actually, you know, what's going to happen to

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Speaker 1: our to our kids, what's the future for them and

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Speaker 1: so um, it's it's very easy to make it about immigration.

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Speaker 1: Continuous discussion with us this morning and David Gera and

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Speaker 1: Tom Keene from London, both of us here all week. David,

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Speaker 1: great to have you here joining us as we we

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Speaker 1: do more and more, particularly the excitement of a new

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Speaker 1: Bloomberg headquarters down by Mansion House. We'll see that, I

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Speaker 1: believe later this year. Like the Evian of desks, they're

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Speaker 1: really getting to work. They got those, they got the

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Speaker 1: helicopter pad Forkorsky and to get from Heathrow quickly. And

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Speaker 1: it looks good Helena Kennedy with us in the House

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Speaker 1: of Lords and UH so much to do with a

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Speaker 1: labor and a liberal voice within uh the United Kingdom.

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Speaker 1: I believe and correct me if I'm wrong that a

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Speaker 1: lot of Whales voted for Brexit, even though Wales gets

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Speaker 1: a lot of support at present from you budgeting and finance.

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Speaker 1: And that's if you were having a beverage of your

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Speaker 1: choice at a pub in northern Wales that you know

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Speaker 1: better than me, and three guys set across the table

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Speaker 1: and said, Baroness would due respect, you're wrong. How do

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Speaker 1: you speak to the other side within the United Kingdom?

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Speaker 1: Just flat out afraid of those migrants? I mean, I

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Speaker 1: think that you have to actually engage with the fact

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Speaker 1: that first of all, we do have illegals here in

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Speaker 1: Britain and UH, and that governments are going to have

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Speaker 1: to deal with that. I think that you have to

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Speaker 1: remind people how we need um workers to come and

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Speaker 1: who've got skills, like we need more doctors, and you

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Speaker 1: can't do that overnight. So if you cut off that supply,

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Speaker 1: you'd be in serious trouble. And once you start having

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Speaker 1: to do the whole visa application process to get them

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Speaker 1: to come in, then that's very time consuming and we

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Speaker 1: may find real gaps in the provision of something that

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Speaker 1: people find very precious in their lives, which is the

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Speaker 1: existence of the National Health Service. But the other things

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Speaker 1: like that are going to be affected long the care

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Speaker 1: of the elderly. Many of the people who looking after

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Speaker 1: our elderly are in fact immigrants, and so I mean

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Speaker 1: you really do have to remind people of the ways

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Speaker 1: in which having immigrants come into the country and also

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Speaker 1: reminding people that we actually have a short fall between um,

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Speaker 1: the age of you know, of our citizenry, a large

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Speaker 1: number of them are older and are going to have

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Speaker 1: real needs as they go in you live longer, and

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Speaker 1: that we don't have enough young people paying tax and

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Speaker 1: so on within the current population. So um, but we

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Speaker 1: also have to address the fact that there are people

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Speaker 1: who are fearful for their children and for the jobs

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Speaker 1: that their children might do, particularly people who are living

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Speaker 1: in what were the industrialized areas of Britain, and we

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Speaker 1: didn't ever invest adequately in in in you know, putting

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Speaker 1: things in place of mining, steel working, ship building, dogging,

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Speaker 1: all that stuff. But since visiting here that the conversation

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Speaker 1: about this is very robust and seems to be happening

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Speaker 1: after the vote took place. Is it a civil conversation

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Speaker 1: about the future of the UK and its relationship with

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Speaker 1: the EU. How would you assess the quality of the

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Speaker 1: robustness of that conversation. Well, I I have a slight

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Speaker 1: anxiety because I think that it's sometimes it becomes much

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Speaker 1: more vitriolic than than has been normal in in um

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Speaker 1: political adversarial discussion. Um, it's because it's turned nasty at times.

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Speaker 1: I mean, we had this business and I say this

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Speaker 1: as a lawyer of course, but you know where suddenly

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Speaker 1: our judges were being called enemies of the people because

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Speaker 1: of making a decision that was about saying, actually this

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Speaker 1: is a constitutional issue and actually triggering article you know

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Speaker 1: fifties should be done by by Parliament. You know, the

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Speaker 1: judges were just doing their job of looking at what

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Speaker 1: were the legal issues there. And we've now got the

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Speaker 1: Supreme Court about to do the same, but they were

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Speaker 1: absolutely excoriated in the ugliest way and and by politicians,

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Speaker 1: some of the politicians on on the sort of hard right,

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Speaker 1: who are bricks and years. So that was that that is,

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Speaker 1: that is not the normal kind of way of having

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Speaker 1: a discourse in Britain, and I hope we can pull

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Speaker 1: it back because I think we do need to have

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Speaker 1: a better conversation and people are more likely to listen

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Speaker 1: to concerns about what are the job implications, that the

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Speaker 1: investment implications and so on in the long term where

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Speaker 1: the problems might be, how we might get a better

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Speaker 1: result having a better conversation, and I think that at

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Speaker 1: the moment it's rather course you have to leave it there,

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Speaker 1: Lady Kennedy. Thanks to speaking to you again as well.

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Speaker 1: I just got an email from Anthony from Sparta who says,

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Speaker 1: when I come to London, I started talking like accident.

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Speaker 1: It's everybody does that. They come from America and it's

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Speaker 1: like it's like a bad walt you start talking with

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Speaker 1: the British accent. Shouldn't do that. Albert O Gallo doesn't

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Speaker 1: have a British accent. It's Italian there. It's one of

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Speaker 1: our really most valued. Guests Albertigalo with Algebras this morning.

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Speaker 1: And you know, we look back to your courage to

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Speaker 1: go long Southern Europe years ago in the depths of

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Speaker 1: the world's coming to an end. Where are you long

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Speaker 1: right now? Or is the Trump reflation so distorted the

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Speaker 1: Albert Gallo world. We are long inflation in Europe. In

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Speaker 1: the Eurozone, we've been since last year. And you know

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Speaker 1: this was when everyone expected the Eurozone to stay in

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Speaker 1: a permanent inflation state like Japan. Things have changed. You know,

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Speaker 1: there's stimulus in the US, there's populism, and populism globally

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Speaker 1: is reflationary. And we are also very short on some

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Speaker 1: government bond markets, particularly guilts the UK, which is going

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Speaker 1: to issue a lot more bonds and has a way

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Speaker 1: high inflation rate, and also France, which has a very

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Speaker 1: challenging election ahead. Do you double barrel your caution and

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Speaker 1: guilts on the fixed income paper full faith and credit

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Speaker 1: paper of the United Kingdom? You're betting price down, yield higher.

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Speaker 1: Do you double barrel that with the weak Sterling as well? Yeah,

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Speaker 1: I think the Sterling has a shorter horizon um. You know,

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Speaker 1: the ffex market could panic again as we go into

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Speaker 1: triggering Article fifty withother real plan, because it's clear that

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Speaker 1: there is no plan the reason may wasn't even able

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Speaker 1: to tell the Queen about it. So um for for guilts,

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Speaker 1: I think the time horizon is a little bit longer

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Speaker 1: because you need to see the pass through of the

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Speaker 1: week sterling into inflation, into food prices which are ten

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Speaker 1: percent of inflation, and other import prices. Remember the UK

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Speaker 1: imports around half of the goods that it consumes, and

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Speaker 1: in case of food is even more than half. So

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Speaker 1: the weaker sterling will you know, we'll go down, probably

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Speaker 1: will stay lower, especially versus the dollar, and then you'll

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Speaker 1: see the pass through into into guilds. Now, in between

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Speaker 1: these two things, the Bank of England. The Bank of

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Speaker 1: England has depleted dimmunition, they have only six percent effects

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Speaker 1: reserves and they have let people leverage up close to

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Speaker 1: the highs of two thousand and six and seven. So

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Speaker 1: if the average British family has the same level of

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Speaker 1: debt as pre crisis, it means the bankoving and cannot

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Speaker 1: hike rates. So defending the currency is very hard. Fighting

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Speaker 1: against inflation is very hard. How do you factor inequality

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Speaker 1: into all of this? There is a standoutline in your

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Speaker 1: most recent notice that even it's qui infinity fades the

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Speaker 1: rise and inequality continues to provide futile ground for politics

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Speaker 1: of of rage. We've seen it. Do you expect it

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Speaker 1: to continue get worse? What's your forecast for it? Well,

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Speaker 1: Brexit has divided the UK, but my my thinking has

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Speaker 1: been for many years that the UK was a divided

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Speaker 1: kingdom already before that because of the imbalanced growth model

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Speaker 1: that it has developed over over the last three decades.

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Speaker 1: So based on finance, based on London, very unequal geographically

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Speaker 1: between the South and North, and also across society. So

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Speaker 1: you have zero point seven percent of the population here

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Speaker 1: which is privately educated and has sevent of all the

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Speaker 1: jobs in uh in in the judiciary, in journalists, even

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Speaker 1: rugby players so h and an MPs in parliament of course.

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Speaker 1: So you need inclusive growth. You need to create opportunities

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Speaker 1: for everyone, and it starts with education. It's not about benefits,

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Speaker 1: it's not about giving one off tax cuts. So it's

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Speaker 1: a very tough job for one government to do. It's

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Speaker 1: much easier to blame foreigners, try to unify people that way,

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Speaker 1: but it doesn't work. Inequality is key. This is the

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Speaker 1: year of where where the politics of populism are not

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Speaker 1: a slogan anymore. They actually become economic policy and they're

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Speaker 1: gonna make real damage potentially in some cases. You know,

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Speaker 1: the UK is one of these cases. Very quickly. Here

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Speaker 1: for for a bund investor looking at the US, what

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Speaker 1: is here she doing this interregnum as we wait to

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Speaker 1: see what Congress will do in terms of fiscal spending

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Speaker 1: or tax reform. What's what's the play at this point

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Speaker 1: in the US. You know, first the the politics of

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Speaker 1: of spending, of um of populism are a bit more

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Speaker 1: positive at least domestically because there is infrastructure investment and

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Speaker 1: there are some tax cards which are less important for

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Speaker 1: for for growth. But but infrastructure investment is very is

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Speaker 1: very positive and we have been waiting for this for

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Speaker 1: a long time. During the Abutment administration, it was very

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Speaker 1: hard to do anything. So I think a lot of

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Speaker 1: it is priced in. So the risk is that the

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Speaker 1: spending plan may be delayed. And you know, U S

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Speaker 1: treasuries are one of the few bonds that give you

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Speaker 1: gives you the same amount of yield as inflation, so

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Speaker 1: you know when the spending plan has a hiccup, then

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Speaker 1: people could buy treasuries. You know, it's very well priced. Alberta,

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Speaker 1: thank you so much for your perspective. It's been very valuable.

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Speaker 1: He is with Algebras all week in London, David Gurr

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Speaker 1: and Tim Keen Worldwide, This is Bloomberg, brought you by

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Speaker 1: Bank of America Mary Lynch. Dedicated to bringing our clients

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Speaker 1: insights and solutions to meet the challenges of a transforming world.

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Speaker 1: That's the power of global connections. Mary Lynch, Pierce Federan

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Speaker 1: Smith Incorporated Member s I p C A churn to

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Speaker 1: the tape this morning. London is not looking at the tape.

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Speaker 1: They are looking at a good old all American, all

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Speaker 1: British nineties seventies strike. David. It's it's something to make

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Speaker 1: a joke about, but there's no joke. It's a big deal.

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Speaker 1: And people saying that it's making things difficult today. As

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Speaker 1: I said, walking the streets, you sense that they're more

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Speaker 1: packed than perhaps they would be otherwise, and it was

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Speaker 1: something to see. Excuse me, Yeah, substanchques are substantial here. Uh.

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Speaker 1: And I heard the Mayor of London on the radio

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Speaker 1: this morning saying He condemns the strike in particular Sadik Khan,

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Speaker 1: saying that he has tried through the weekend to resolve

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Speaker 1: issues with this particular union, was unable to do that

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Speaker 1: and he uh understandably upset with the strikes here in

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Speaker 1: London today. You wonder where it will be through the year,

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Speaker 1: and you wonder if it comes over the United States.

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Speaker 1: So also they have a better economy, but a lot

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Speaker 1: of Americans I don't agree with that. There's been some

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Speaker 1: wage inflation. The headline Friday was wage growth like two

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Speaker 1: thousand nine. But there's a butt but exactly. And we

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Speaker 1: were talking really just about the culture of striking here

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Speaker 1: and we'll see if we get that in the US

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Speaker 1: as well. And Glazer joins us now. He is the

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Speaker 1: Fred and Eleanor Glimp Professor of Economics at Harvard University.

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Speaker 1: Joining us now by phones at Glazier. Great to speak

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Speaker 1: with you. You You have written about focus so much on

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Speaker 1: infrastructure spending. We are at a moment, dare I say

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Speaker 1: in the U s where this conversation has come to

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Speaker 1: the four years looking back on what you wrote over

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Speaker 1: the summer when it was Bernie Sanders, it was talking

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Speaker 1: about this in detail. What do you make of the

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Speaker 1: change here, the Republican embrace here. It's as I wouldn't say,

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Speaker 1: the whole party, most of the party here embracing the

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Speaker 1: idea of a big fiscal stimulus package. It's fascinating, isn't it? Um?

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Speaker 1: But of course there are Republican roots in this. I

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Speaker 1: mean it was Eisenhower. Of course, we gave us the

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Speaker 1: highway system. And in some sense the push towards infrastructure

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Speaker 1: is just the fact that we need to do something

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Speaker 1: to make America great again. Uh. And in an absence

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Speaker 1: aplausible alternatives, infrastructure comes to the fore. It's a Pavlovian

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Speaker 1: response there from Adlazier to make America love you? Ask

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Speaker 1: you here just about Uh? Is there a continuum here

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Speaker 1: from what we've heard from central bankers over the last

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Speaker 1: year or so calling for more physical spending. Do you

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Speaker 1: see this as a response to that or did this

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Speaker 1: come out of something else? Entirely? I think it only

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Speaker 1: partially reflects that. I think it really does reflect a

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Speaker 1: larger sense that, you know, we've got to do something,

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Speaker 1: and infrastructure is it. And I think it's very dangerous,

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Speaker 1: quite honestly, because in fact, the right way to do

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Speaker 1: infrastructures to focus on the microeconomics of it, not the

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Speaker 1: macroeconomics of it. When we start thinking that infrastructure is

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Speaker 1: the solution to all of our problems, we get things

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Speaker 1: like Detroit's people move our monorail right, we get bridges

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Speaker 1: to nowhere. When we focus on will this actually reduced

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Speaker 1: travel times for enough people to justify the cost, and

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Speaker 1: we get sensible investments. You mentioned focusing on the micro issues,

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Speaker 1: and I wonder here, if that's the case, why haven't

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Speaker 1: we seen more movement on it exclusive of Washington taking

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Speaker 1: the initiative. Why don't we see more municipalities and states

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Speaker 1: trying to venture forward on this? Oh? We have. Actually,

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Speaker 1: there was a remarkable spate of local initiatives for infrastructure

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Speaker 1: spending during the last election cycle. Um, but you are

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Speaker 1: right in that in the you know, since World War Two,

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Speaker 1: we've had a norm in which we think Washington pays

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Speaker 1: for infrastructure, and consequently, localities have underdeveloped their own willingness

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Speaker 1: and ability to take the lead on infrastructure. And it's

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Speaker 1: deeply unhealthy. I mean, the best infrastructure because when users pay,

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Speaker 1: not when taxpayers four hundred miles away. And well, what's

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Speaker 1: interesting and I congratulate you on the panel you have

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Speaker 1: at Brookings with a Secretary Summers. But among other there

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Speaker 1: is Clifford Winston, who I've interviewed every any number of

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Speaker 1: times about how our government spends money. Within the politics

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Speaker 1: of infrastructure framed for us what Democratic Party infrastructure is

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Speaker 1: and what Republican Party infrastructure is to me, and I

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Speaker 1: think to all our listeners were a little unclear on

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Speaker 1: that distinction. What has the distinction? So it's not I

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Speaker 1: congratulate your listeners on their lack of clarity, as that

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Speaker 1: lack of clarity is appropriated. But if you wanted to

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Speaker 1: draw a broad stereotype, it's it's the Democratic infrastructure is

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Speaker 1: more just directly paid for by Washington, maybe through the

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Speaker 1: help of some expert dominated UH Infrastructure Bank, whereas the

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Speaker 1: Republican approaches more through the use of tax credits to subsidence,

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Speaker 1: public private partnerships. Um. Both approaches have their have their flaws,

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Speaker 1: and both have their merits. When you when you're listening

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Speaker 1: to lawmakers, now, when you're you're looking for contours to

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Speaker 1: this plan, what's most important? What are you looking to

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Speaker 1: to hear from them? Um? I think if we are

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Speaker 1: going to see a massive trillion non attacks credit plan

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Speaker 1: being pushed forward. The big issue is how are we

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Speaker 1: going to put checks on that to avoid its abuse?

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Speaker 1: How are we going to make sure this isn't going

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Speaker 1: to be a boon doggle for particularly connected uh private contractors. UM.

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Speaker 1: If we are moving towards something that looks more like

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Speaker 1: a democratic plan, the questions how in the world are

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Speaker 1: you going to make sure that this is actually targeted

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Speaker 1: towards infrastructure that people actually value. Um. The big virtue

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Speaker 1: of the Republican plan is that pretty much if you

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Speaker 1: have a public private partnership, there's got to be some

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Speaker 1: attention to back end revenues, some attention to users who

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Speaker 1: will actually uh take the take the roads at some

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Speaker 1: point in time, and that's that's really valuable. On the

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Speaker 1: other hand, if you have the government paying for eight

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Speaker 1: of the equity stakes through tax credits, and potential for

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Speaker 1: abuse is enormous, you need to pay attention to check that. Yeah.

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Speaker 1: I remember reading Alan Kruger's piece, I think in the

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Speaker 1: Wall Street Journal a couple of weeks back, and he

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Speaker 1: was critical of the sort of establishment of a private

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Speaker 1: private public partnership in that way because of the tax

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Speaker 1: benefits how different will it be to police that? Do

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Speaker 1: you think? Uh? Not impossible? Actually at Wardo Angle of

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Speaker 1: Yale and UH, Chile is actually the great expert on

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Speaker 1: public private partnerships globally. In some places like Chile they

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Speaker 1: work very well. In some places like South Are in Africa,

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Speaker 1: they don't. In the question where does the US bid

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Speaker 1: on thetreme on that um and again, p pps are

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Speaker 1: going to be good when you want to think, let's

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Speaker 1: say we imagine and a dedicated lane for autonomous vehicles.

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Speaker 1: That's perfect place to think about p pps working. If

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Speaker 1: you want to think about repaving our roads in in

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Speaker 1: downtown Washington, d C. It's hard to imagine how a

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Speaker 1: PPP is going to be any use in that at

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Speaker 1: glasure you lived is frankly some of us did. Good Morning,

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Speaker 1: Bloomberg twelve Boston. The mother of all infrastructure projects, the

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Speaker 1: Big Dig. Now you mentioned that Republicans do this, Democrats

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Speaker 1: do that. What happened with just all American bonds to

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Speaker 1: pay out fifty years of debt for a project that

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Speaker 1: benefits I mean, you can all, I think we can

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Speaker 1: all say the Big Dig clearly benefited people driving with

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Speaker 1: four wheels down the road. What did you learn about

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Speaker 1: the debt experience of the Big Dig that we can

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Speaker 1: apply today. Well, so, one of the one of the

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Speaker 1: lessons of the Big Dig is that the Big Thig

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Speaker 1: really was sold by by a supporters with the promise

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Speaker 1: of being paid for overwhelmingly with federal bucks. Now there's

430
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Speaker 1: certain was federal subsidy, probably even more federal subsidy than

431
00:23:29,359 --> 00:23:31,640
Speaker 1: I than I would have liked, But overwhelmingly the Big

432
00:23:31,640 --> 00:23:36,000
Speaker 1: Dig was actually paid for with Massachusetts funding. But you know,

433
00:23:36,080 --> 00:23:39,120
Speaker 1: it was the federal funding that caused the the local

434
00:23:39,160 --> 00:23:41,120
Speaker 1: decision making to get skewed on this. So I think

435
00:23:41,119 --> 00:23:43,159
Speaker 1: it's a it's a lesson about how having less federal

436
00:23:43,200 --> 00:23:46,359
Speaker 1: funding actually could potentially make local decision making better. The

437
00:23:46,359 --> 00:23:49,240
Speaker 1: second lesson of the Big Dig is so much attention

438
00:23:49,600 --> 00:23:52,720
Speaker 1: was paid towards not disturbing anyone. There was not a

439
00:23:52,760 --> 00:23:57,879
Speaker 1: single eminent domain h used against residences there. Now, you know,

440
00:23:57,960 --> 00:23:59,920
Speaker 1: I understand why we did that. We did too much

441
00:24:00,080 --> 00:24:02,119
Speaker 1: terms of eminent domain in the immediate post war period.

442
00:24:02,480 --> 00:24:05,000
Speaker 1: But the cost of making sure that not a single

443
00:24:05,040 --> 00:24:09,280
Speaker 1: person is disturbed might be might be just too high. Um.

444
00:24:09,320 --> 00:24:12,360
Speaker 1: And the third lesson again is just you know, ruthless

445
00:24:12,359 --> 00:24:15,320
Speaker 1: attention towards cost benefit analysis when doing these things, really

446
00:24:15,359 --> 00:24:18,240
Speaker 1: you can't just get involved in some big story about

447
00:24:18,240 --> 00:24:19,560
Speaker 1: how you're going to do the big dig and it's

448
00:24:19,560 --> 00:24:21,440
Speaker 1: going to bring everything back. You've really got to add

449
00:24:21,520 --> 00:24:23,359
Speaker 1: up whether or not the number of people who benefit

450
00:24:23,400 --> 00:24:25,359
Speaker 1: from this are really going to be you know, uh,

451
00:24:25,600 --> 00:24:27,320
Speaker 1: going to make up the cost, and are there other

452
00:24:27,400 --> 00:24:30,240
Speaker 1: cheaper options, like say, moving for the airport in Boston,

453
00:24:30,280 --> 00:24:33,080
Speaker 1: which would have been a much more cost much more

454
00:24:33,080 --> 00:24:36,760
Speaker 1: cost effective means of saving transportation time. We're gonna come

455
00:24:36,760 --> 00:24:37,879
Speaker 1: back with you here in a moment, but let me

456
00:24:37,880 --> 00:24:39,560
Speaker 1: just ask you quickly how useful it is to look

457
00:24:39,560 --> 00:24:42,600
Speaker 1: back on the stimulus package of two tho not. I mean,

458
00:24:42,640 --> 00:24:45,199
Speaker 1: what's being proposed here is a much larger package than

459
00:24:45,240 --> 00:24:51,160
Speaker 1: that it is um And to the extent to which

460
00:24:51,280 --> 00:24:54,800
Speaker 1: this is actually going to be targeted towards things that

461
00:24:54,920 --> 00:24:58,119
Speaker 1: users value, I think that's okay, uh, to the extent

462
00:24:58,160 --> 00:24:59,879
Speaker 1: to which it's just going to be one big fiscal

463
00:24:59,880 --> 00:25:01,600
Speaker 1: But Nancy, it's dangerous. So I think we have to

464
00:25:01,600 --> 00:25:03,960
Speaker 1: see how it evolves, and those of us who hope

465
00:25:04,000 --> 00:25:05,639
Speaker 1: for the best need to keep you pushing to make

466
00:25:05,680 --> 00:25:08,520
Speaker 1: sure this is actually not being done with the idea

467
00:25:08,560 --> 00:25:11,879
Speaker 1: that it's gonna rushed up America's growth. Faich who knows

468
00:25:11,880 --> 00:25:14,159
Speaker 1: that it will ever do that or not? Um make

469
00:25:14,200 --> 00:25:16,479
Speaker 1: sure that it actually focuses on john real service deliveray.

470
00:25:16,480 --> 00:25:19,280
Speaker 1: Do you see, folks, how fancy professor some Harvard could

471
00:25:19,320 --> 00:25:22,160
Speaker 1: just glibally say well, we could move the airport. Now

472
00:25:22,880 --> 00:25:26,560
Speaker 1: you know, first of all, if you're gonna move Logan,

473
00:25:26,800 --> 00:25:29,800
Speaker 1: where are you going to put it? Would be another question.

474
00:25:29,800 --> 00:25:32,440
Speaker 1: We're going to continue with that glacier. Maybe you'll move

475
00:25:32,560 --> 00:25:36,480
Speaker 1: I don't move JFK somewhere that'll that'll create some infrastructure

476
00:25:36,600 --> 00:25:39,639
Speaker 1: from London. This entire week, David Gurr and Tom Keane,

477
00:25:39,640 --> 00:25:43,440
Speaker 1: we've invaded London. It's a London with a really significant

478
00:25:43,760 --> 00:25:48,440
Speaker 1: one day strike of their subway system, the tube, millions

479
00:25:48,480 --> 00:25:51,960
Speaker 1: stranded and with some real hardship, including getting guests to Bloomberg.

480
00:25:52,000 --> 00:25:55,280
Speaker 1: We've been our staff has been dealing with that all morning.

481
00:25:55,320 --> 00:25:58,639
Speaker 1: But we are here and we say good morning on economics,

482
00:25:58,680 --> 00:26:03,879
Speaker 1: finance and international relations. Uh, David, we we need to

483
00:26:03,880 --> 00:26:07,200
Speaker 1: do a massive shout out to British Airways. They delivered

484
00:26:07,200 --> 00:26:09,879
Speaker 1: the goods on Saturday. You and I were were waving

485
00:26:09,880 --> 00:26:12,440
Speaker 1: at each other on the plane to plane guitar Mac

486
00:26:13,640 --> 00:26:17,640
Speaker 1: I your plane first here. I thought it was great

487
00:26:17,640 --> 00:26:19,840
Speaker 1: how they used Plymouth gin to de Ice. I thought

488
00:26:19,840 --> 00:26:23,560
Speaker 1: that was just absolutely you know, a pretty good British

489
00:26:23,640 --> 00:26:25,960
Speaker 1: gin to de Ice. I'm like how they did that,

490
00:26:26,040 --> 00:26:28,080
Speaker 1: but a massive shout out to British Air that got

491
00:26:28,160 --> 00:26:31,320
Speaker 1: us here in one piece. Along with our executive producer

492
00:26:31,400 --> 00:26:35,080
Speaker 1: Rachel wor Spend, we say good morning again from London,

493
00:26:35,080 --> 00:26:36,920
Speaker 1: and of course we begin two weeks on the road

494
00:26:36,960 --> 00:26:40,040
Speaker 1: to Davos in the World Economic Forum as well. And

495
00:26:40,080 --> 00:26:42,119
Speaker 1: there's too much to talk about, David, why don't you

496
00:26:42,160 --> 00:26:47,040
Speaker 1: bring in our steam gases? Truly an expert, and I

497
00:26:47,080 --> 00:26:51,000
Speaker 1: can't think of a topic with more amateurs babbling, including me,

498
00:26:51,520 --> 00:26:55,359
Speaker 1: than infrastructure at Glaser economics professor at Harvard with us

499
00:26:55,400 --> 00:26:57,399
Speaker 1: on the line here as he prepares for a Brookings

500
00:26:57,400 --> 00:27:01,199
Speaker 1: Institution event on the prospect for infrastructure spending later today

501
00:27:01,240 --> 00:27:03,520
Speaker 1: in Washington. D see, we were talking about that two

502
00:27:04,480 --> 00:27:06,800
Speaker 1: nine stimulus package that was one, of course pushed through

503
00:27:07,480 --> 00:27:09,080
Speaker 1: as a result of the moment there was there was

504
00:27:09,119 --> 00:27:11,879
Speaker 1: a proceived need to do something after the financial crisis.

505
00:27:11,920 --> 00:27:14,119
Speaker 1: This is something different entirely. We don't have that a

506
00:27:14,240 --> 00:27:16,359
Speaker 1: crisis in the backdrop. Does that make it easier or

507
00:27:16,400 --> 00:27:20,000
Speaker 1: harder to prepare a package like this one? Well, harder

508
00:27:20,040 --> 00:27:22,000
Speaker 1: to get it through, but easier to actually plan for

509
00:27:22,040 --> 00:27:25,280
Speaker 1: it sensibly. Right, It's very very hard to do infrastructure

510
00:27:25,359 --> 00:27:28,080
Speaker 1: quickly and wisely, and the push to get the money

511
00:27:28,080 --> 00:27:30,119
Speaker 1: out of the door quickly certainly made it harder to

512
00:27:30,160 --> 00:27:33,639
Speaker 1: be wise. In two nine, if if, if I'm a

513
00:27:33,760 --> 00:27:37,600
Speaker 1: school in need and the package that's developed here involves

514
00:27:37,640 --> 00:27:40,119
Speaker 1: a public private partnership, how do you how do you

515
00:27:40,160 --> 00:27:42,399
Speaker 1: get people to invest in things where the cost benefit

516
00:27:42,480 --> 00:27:45,640
Speaker 1: is not immediately apparent when something needs to be improved

517
00:27:45,720 --> 00:27:47,680
Speaker 1: or bettered, but you're not going to get a great

518
00:27:47,680 --> 00:27:50,879
Speaker 1: bang for your buck, at least not in the short term. Well,

519
00:27:50,880 --> 00:27:53,399
Speaker 1: that's that's where you actually do need federal spending I mean,

520
00:27:53,680 --> 00:27:56,119
Speaker 1: or at least local spending. I mean, in some cases,

521
00:27:56,160 --> 00:27:58,040
Speaker 1: things that are not going to yield revenues can be

522
00:27:58,040 --> 00:28:00,159
Speaker 1: paid for by local property taxes. Right. So of my

523
00:28:00,200 --> 00:28:03,120
Speaker 1: favorite funding models for infrastructure is Hong Kong mass transit,

524
00:28:03,240 --> 00:28:06,200
Speaker 1: where they keep fares low, but they also are real

525
00:28:06,280 --> 00:28:09,280
Speaker 1: estate developers who build skyscrapers atop the new subway stops.

526
00:28:09,280 --> 00:28:11,400
Speaker 1: So there were there are ways of essentially back ending

527
00:28:11,400 --> 00:28:14,200
Speaker 1: the revenue that that really works. And I think, actually

528
00:28:14,240 --> 00:28:17,320
Speaker 1: you mentioned British airways, one of the most striking differences

529
00:28:17,920 --> 00:28:20,760
Speaker 1: in airport quality is the sort of divergence between JFK

530
00:28:20,880 --> 00:28:22,840
Speaker 1: and Heathrow, And it's hard not to think that Margaret

531
00:28:22,920 --> 00:28:25,800
Speaker 1: Match's decision to privatize the British airports in the nine

532
00:28:26,200 --> 00:28:29,199
Speaker 1: had something to do with that. You know, when you

533
00:28:29,240 --> 00:28:31,440
Speaker 1: talk about that that Hong Kong project, I'm struck by

534
00:28:31,440 --> 00:28:34,000
Speaker 1: how creative that is. And I wonder what's going to

535
00:28:34,080 --> 00:28:37,200
Speaker 1: catalyze or kickstart more creativity when it comes to infrastructure

536
00:28:37,200 --> 00:28:40,360
Speaker 1: spending in the US. Well, I think you're absolutely right.

537
00:28:40,360 --> 00:28:43,480
Speaker 1: I mean, the the the role of the private sector

538
00:28:43,560 --> 00:28:46,640
Speaker 1: to do creative things is unparalleled. And you know, when

539
00:28:46,680 --> 00:28:50,320
Speaker 1: you think about all this talk about about federal infrastructure spending,

540
00:28:50,680 --> 00:28:52,320
Speaker 1: UH fifteen years ago, it was hard not to think

541
00:28:52,360 --> 00:28:53,920
Speaker 1: the most creative thing that was going on was the

542
00:28:53,960 --> 00:28:57,280
Speaker 1: dollar buses that were applying between Boston, New York and Washington.

543
00:28:57,440 --> 00:29:01,680
Speaker 1: Totally free enterprise, providing cheap trans for ordinary people. So

544
00:29:01,920 --> 00:29:05,280
Speaker 1: I think that a private model has attractive attributes, but

545
00:29:05,280 --> 00:29:06,960
Speaker 1: it's not going to handle everything it's not going to

546
00:29:07,000 --> 00:29:08,840
Speaker 1: handle your school that needs fixing it. It's not gonna

547
00:29:08,840 --> 00:29:12,280
Speaker 1: handle the podles. And let's not forget private enterprise can

548
00:29:12,280 --> 00:29:14,280
Speaker 1: also be creative and figuring out how to game whatever

549
00:29:14,320 --> 00:29:16,280
Speaker 1: system has put in place and take advantage of it.

550
00:29:16,320 --> 00:29:18,960
Speaker 1: So you'll be watched. You read my script this morning

551
00:29:19,040 --> 00:29:21,800
Speaker 1: Laurence Summers, who will be with you at Brookings. And

552
00:29:21,880 --> 00:29:25,760
Speaker 1: we're thrilled that Larry Summers joined us last week. UM

553
00:29:25,920 --> 00:29:28,960
Speaker 1: has a very nuanced up ed piece in the ft today.

554
00:29:29,000 --> 00:29:31,800
Speaker 1: I'm sure off the Brooking seminar work that you're gonna

555
00:29:31,880 --> 00:29:36,400
Speaker 1: do about gaming the system and that the plutocracy can

556
00:29:36,480 --> 00:29:41,480
Speaker 1: game infrastructure development that the professor would suggest does not

557
00:29:41,640 --> 00:29:45,440
Speaker 1: benefit at all. Discuss that how can the plutocrats game

558
00:29:45,480 --> 00:29:49,800
Speaker 1: infrastructure at our disadvantage? Well, you know we have a

559
00:29:49,800 --> 00:29:51,640
Speaker 1: long history of this in the US, right that the

560
00:29:51,760 --> 00:29:56,080
Speaker 1: musical Hamilton's Is is raging on Broadway, and in fact

561
00:29:56,080 --> 00:29:58,760
Speaker 1: Alexander Hamilton was intimately involved in one of the great

562
00:29:58,800 --> 00:30:03,160
Speaker 1: infrastructure cons in US history. Um, you know it is

563
00:30:03,200 --> 00:30:05,080
Speaker 1: the Actually the person who came up with the scheme

564
00:30:05,160 --> 00:30:07,960
Speaker 1: was his eventual arch enemy, Aaron Burr, who would finally

565
00:30:07,960 --> 00:30:10,160
Speaker 1: shoot Hamilton's on the shores of the Hudson. But before

566
00:30:10,200 --> 00:30:12,960
Speaker 1: Burr shoots Hamilton's, he hires them to be his lawyer,

567
00:30:13,560 --> 00:30:15,400
Speaker 1: and they come up with a scheme to have a

568
00:30:15,440 --> 00:30:18,000
Speaker 1: water company New York, because New York thought it needed

569
00:30:18,000 --> 00:30:20,760
Speaker 1: a water company in Hamilton's convinces the New York City

570
00:30:20,800 --> 00:30:24,240
Speaker 1: Council that you know, building their public infrastructure would involve

571
00:30:24,320 --> 00:30:26,520
Speaker 1: burdens and taxes. That's a direct quote that that the

572
00:30:26,560 --> 00:30:29,000
Speaker 1: city shouldn't pay for. So consequently they should have a

573
00:30:29,040 --> 00:30:32,360
Speaker 1: private company that delivers the water. Um so, but the

574
00:30:32,400 --> 00:30:34,960
Speaker 1: private company needs a subsidy, of course, and the subsidies

575
00:30:35,000 --> 00:30:36,960
Speaker 1: that can run a bank, and you know bank is

576
00:30:37,160 --> 00:30:39,080
Speaker 1: banking is close to a monopoly in New York at

577
00:30:39,080 --> 00:30:42,520
Speaker 1: the time. So Aaron Burg gets his bank come water company,

578
00:30:42,720 --> 00:30:44,360
Speaker 1: and of course it does exactly what you think it

579
00:30:44,360 --> 00:30:46,880
Speaker 1: would do, would do a lot of banking and basically

580
00:30:46,880 --> 00:30:49,080
Speaker 1: no water provision. And of course this is still with

581
00:30:49,160 --> 00:30:51,360
Speaker 1: us today because the bank of the Manhattan Water Company

582
00:30:52,200 --> 00:30:55,400
Speaker 1: became Chase. Manhattan Bank became JP Morgan Chase, and it

583
00:30:55,520 --> 00:30:57,719
Speaker 1: never did much to deliver water. So we have a

584
00:30:57,720 --> 00:31:01,560
Speaker 1: long history of trying to design public private partnership deliver infrastructure.

585
00:31:01,600 --> 00:31:04,480
Speaker 1: Which don't really end up delivering the infrastructure. We note

586
00:31:04,520 --> 00:31:07,720
Speaker 1: when the employment report comes out the deficit in productivity.

587
00:31:07,760 --> 00:31:11,000
Speaker 1: Can you draw a line between infrastructure spending and productivity

588
00:31:11,000 --> 00:31:15,080
Speaker 1: in this country? People claim that you can, but it's very,

589
00:31:15,160 --> 00:31:17,640
Speaker 1: very hard, And again I think focusing on the macro

590
00:31:17,760 --> 00:31:20,080
Speaker 1: side of it as mistake. You really want to focus

591
00:31:20,080 --> 00:31:23,680
Speaker 1: on the hours and the waste that's involved in the

592
00:31:23,680 --> 00:31:25,840
Speaker 1: direct infrastructure rather than trying to focus on the macro.

593
00:31:26,160 --> 00:31:29,720
Speaker 1: The macro bottom line, what did the politicians focus on

594
00:31:31,880 --> 00:31:36,000
Speaker 1: making America great again? Right? Yeah, but come on, tip O'Neil.

595
00:31:36,120 --> 00:31:39,600
Speaker 1: Tip O'Neil made Boston great again. My experience and I

596
00:31:39,720 --> 00:31:43,520
Speaker 1: personally experienced the miracle of the Interstate highway system, and

597
00:31:43,520 --> 00:31:46,000
Speaker 1: there were a lot of other big projects that this

598
00:31:46,120 --> 00:31:49,440
Speaker 1: nation did. Sometimes we seem to almost get it right,

599
00:31:49,480 --> 00:31:54,080
Speaker 1: don't we. We do we do UM and the interstate.

600
00:31:54,200 --> 00:31:57,480
Speaker 1: You know, the returns to those early highway investments were

601
00:31:57,600 --> 00:31:59,800
Speaker 1: quite high. I think the usual view is that the

602
00:32:00,120 --> 00:32:03,720
Speaker 1: returns to secondary highway investments have gotten lower. UM theory

603
00:32:03,800 --> 00:32:08,000
Speaker 1: canal with spectacular of course, largely user fee funded, although

604
00:32:08,000 --> 00:32:10,479
Speaker 1: the government did have to have to land initially, and

605
00:32:10,520 --> 00:32:13,120
Speaker 1: I think going forward it's likely the biggest infrastructure winds

606
00:32:13,120 --> 00:32:14,920
Speaker 1: are going to be in areas with new technology, maybe

607
00:32:14,920 --> 00:32:17,880
Speaker 1: something around autonomous vehicles, for example, rather than just building

608
00:32:17,880 --> 00:32:20,560
Speaker 1: out the current system, although the returns to maintaining the

609
00:32:20,600 --> 00:32:23,680
Speaker 1: current system remain extremely high. Do we have a problem

610
00:32:23,680 --> 00:32:26,840
Speaker 1: here because our sense of infrastructure is outdated? We talked

611
00:32:26,840 --> 00:32:29,520
Speaker 1: about infrastructure. We think about roads and airports and bridges,

612
00:32:29,560 --> 00:32:32,640
Speaker 1: but in this two thousand seventeen it really has a

613
00:32:32,680 --> 00:32:36,480
Speaker 1: lot to do with fiber optic cables and internet connectivity,

614
00:32:36,520 --> 00:32:39,560
Speaker 1: things like that. That's that's surely correct, and that's surely

615
00:32:39,560 --> 00:32:42,360
Speaker 1: where the higher return things are likely to be. But again,

616
00:32:42,480 --> 00:32:45,360
Speaker 1: once you get the higher the technology, the more wary

617
00:32:45,480 --> 00:32:47,160
Speaker 1: we are of thinking that they should be done with

618
00:32:47,240 --> 00:32:49,960
Speaker 1: federal spending, right, rather than with private dollars. Okay, well,

619
00:32:50,040 --> 00:32:53,000
Speaker 1: help me here, I I believe and you know again,

620
00:32:53,040 --> 00:32:55,280
Speaker 1: correct me if I'm wrong. We need a tunnel under

621
00:32:55,320 --> 00:32:59,080
Speaker 1: the Hudson River. Everybody agrees we need another tunnel except

622
00:32:59,080 --> 00:33:02,760
Speaker 1: Governor Christie whatever. But we need a tunnel under the

623
00:33:02,840 --> 00:33:06,920
Speaker 1: Hudson River. How does Glacier believe we should finance a

624
00:33:07,040 --> 00:33:12,280
Speaker 1: gazillion dollar project? Well, ideally a tunnel under the Hudson

625
00:33:12,360 --> 00:33:14,360
Speaker 1: River should be paid for by some combination of user

626
00:33:14,440 --> 00:33:18,160
Speaker 1: fees I eat, tunnel tunnel payments and perhaps property tax

627
00:33:18,200 --> 00:33:20,560
Speaker 1: revenues from people who actually use the tunnel. I mean,

628
00:33:20,560 --> 00:33:22,920
Speaker 1: there's no reason why taxpayers in Montana should pay for that.

629
00:33:23,920 --> 00:33:28,320
Speaker 1: Should John Tucker pay for it in New Jersey? Well

630
00:33:28,440 --> 00:33:31,800
Speaker 1: if if he's going to use it, sure, if his

631
00:33:31,840 --> 00:33:35,560
Speaker 1: property values are going to increase from it, sure, But

632
00:33:35,800 --> 00:33:39,120
Speaker 1: you know, it's the principle of sort of everybody paying

633
00:33:39,120 --> 00:33:41,560
Speaker 1: for everybody's else's infrastructure doesn't make a lot of sense.

634
00:33:42,120 --> 00:33:44,400
Speaker 1: And Tom talked about getting it right and when you

635
00:33:44,440 --> 00:33:47,040
Speaker 1: look at the history, how long does it take after

636
00:33:47,080 --> 00:33:51,160
Speaker 1: a big spending project to assess accurately as best we

637
00:33:51,200 --> 00:33:53,000
Speaker 1: can whether or not in fact worked, whether or not

638
00:33:53,080 --> 00:33:55,720
Speaker 1: it's had the kind of positive economic effects we'd hope for.

639
00:33:56,600 --> 00:33:59,480
Speaker 1: It depends a lot on whether not the the infrastructure

640
00:33:59,560 --> 00:34:01,400
Speaker 1: is really being done just for the users, in which

641
00:34:01,400 --> 00:34:03,239
Speaker 1: case is quite easy to assess. We look at how

642
00:34:03,240 --> 00:34:04,840
Speaker 1: many people take it and mean, it was pretty clear

643
00:34:05,040 --> 00:34:07,280
Speaker 1: that the treatment Detroy people move a monorail had failed

644
00:34:07,280 --> 00:34:09,800
Speaker 1: pretty quickly, or whether or not we're hoping for larger

645
00:34:09,840 --> 00:34:12,840
Speaker 1: economic effects, in which case it becomes harder and longer,

646
00:34:13,320 --> 00:34:14,960
Speaker 1: we're still on show whether or not the you know,

647
00:34:15,000 --> 00:34:16,920
Speaker 1: whether the big Big covered it's costs in some sort

648
00:34:16,920 --> 00:34:20,960
Speaker 1: of large scale way at all. I mean fifteen years later. Okay,

649
00:34:21,000 --> 00:34:23,880
Speaker 1: help me here, with the political reality of the president elect,

650
00:34:24,200 --> 00:34:27,319
Speaker 1: he's got to throw infrastructure to West Virginia. How do

651
00:34:27,400 --> 00:34:32,600
Speaker 1: we how do we protect all including West Virginia of

652
00:34:32,920 --> 00:34:35,160
Speaker 1: Robert Bird's road to nowhere? I mean, how do we

653
00:34:35,560 --> 00:34:38,160
Speaker 1: how do we protect what is clearly a balance with

654
00:34:38,280 --> 00:34:42,040
Speaker 1: the senator from West Virginia says we need our fair share. Well,

655
00:34:42,040 --> 00:34:43,840
Speaker 1: that's a big problem. And as soon as anything that

656
00:34:44,000 --> 00:34:46,480
Speaker 1: you know, goes through the Senate ends up in roads

657
00:34:46,480 --> 00:34:48,799
Speaker 1: in West Virginia, roads in Montana, right, I mean, we

658
00:34:48,880 --> 00:34:51,400
Speaker 1: have you know, much more stimulus spending per capita and

659
00:34:51,400 --> 00:34:53,520
Speaker 1: low density parts of the US than in high density

660
00:34:53,560 --> 00:34:56,800
Speaker 1: parts of the US. Um there's also a big problem

661
00:34:56,800 --> 00:34:58,719
Speaker 1: in the sense that we don't actually need infrastructure in

662
00:34:58,760 --> 00:35:01,240
Speaker 1: the parts of the country that are that are declining,

663
00:35:01,440 --> 00:35:03,880
Speaker 1: their places that have you know, typically an abundance of

664
00:35:03,920 --> 00:35:06,719
Speaker 1: infrastructure relative to the level of demand. We need infrastructure

665
00:35:06,719 --> 00:35:09,680
Speaker 1: in places that are growing. So any attempt to sort

666
00:35:09,680 --> 00:35:12,719
Speaker 1: of target the infrastructure to combat economic decline is likely

667
00:35:12,800 --> 00:35:16,000
Speaker 1: to be highly counterproductive. Okay, leisure, thank you, thank you,

668
00:35:16,080 --> 00:35:18,320
Speaker 1: thank you. From Harvard today, of course was an important

669
00:35:18,880 --> 00:35:21,759
Speaker 1: parents at Brookings. This is uh David part of the

670
00:35:21,800 --> 00:35:27,400
Speaker 1: Appalachian Development Highway system. From London to David Gurra and

671
00:35:27,560 --> 00:35:43,040
Speaker 1: Tom King. This is a joy and it is particularly

672
00:35:43,040 --> 00:35:47,240
Speaker 1: well timed. With a terrific essay today in the Daily

673
00:35:47,280 --> 00:35:51,560
Speaker 1: Telegraph here in London by one our Boodle. He is

674
00:35:51,600 --> 00:35:55,319
Speaker 1: out of Oxford. He founded Capital Economics their first year

675
00:35:55,360 --> 00:35:58,000
Speaker 1: out of box. They want a big fancy economic prize

676
00:35:58,560 --> 00:36:03,040
Speaker 1: in London. By It's a very strong Telegraph today Ambrose

677
00:36:03,080 --> 00:36:07,200
Speaker 1: Evans Pritchard writing about higher inflation in Germany. And you

678
00:36:07,320 --> 00:36:13,320
Speaker 1: do a exceptionally important essay on pounds sterling, and in

679
00:36:13,440 --> 00:36:16,360
Speaker 1: it you use a word that only someone from Oxford

680
00:36:16,160 --> 00:36:21,440
Speaker 1: come up with, saying that we're slightly bonkers. I immediately

681
00:36:21,440 --> 00:36:25,000
Speaker 1: went to the Oxford English Dictionary. O E ed bonkers

682
00:36:26,280 --> 00:36:29,640
Speaker 1: from the English Navy, the British Navy, light in the head,

683
00:36:30,040 --> 00:36:33,200
Speaker 1: slightly drunk. Who is light in the head and slightly

684
00:36:33,280 --> 00:36:36,120
Speaker 1: drunk when it comes to sterling analysis? Well, I was

685
00:36:36,200 --> 00:36:39,000
Speaker 1: using this word. I guess the American for it. Maybe crackers,

686
00:36:39,000 --> 00:36:41,480
Speaker 1: and I'm not sure anyway, I was using the word

687
00:36:41,480 --> 00:36:44,160
Speaker 1: in relation to the British monetary authorities, the Bank of

688
00:36:44,200 --> 00:36:47,600
Speaker 1: England and the Treasury who for the last i don't know,

689
00:36:47,680 --> 00:36:50,800
Speaker 1: twenty five years, I thought that it doesn't really matter

690
00:36:50,920 --> 00:36:53,880
Speaker 1: the exchange rate for the pound, and I think this

691
00:36:54,080 --> 00:36:58,080
Speaker 1: is fundamentally and utterly wrong. Don't get me wrong. I

692
00:36:58,120 --> 00:37:00,320
Speaker 1: think that the pound is now pretty competitive against the

693
00:37:00,360 --> 00:37:04,279
Speaker 1: dollar and other currencies. Just above one dollar, it's pretty good.

694
00:37:04,400 --> 00:37:06,319
Speaker 1: But I wanted to stay at that level, and the

695
00:37:06,360 --> 00:37:08,799
Speaker 1: British authorities here just don't have a policy for it

696
00:37:08,840 --> 00:37:11,520
Speaker 1: at all. Is that because of distraction? Is it a

697
00:37:11,560 --> 00:37:14,320
Speaker 1: deliberate lack of having a policy or what explains the

698
00:37:14,360 --> 00:37:16,960
Speaker 1: absence of it. Well, it's partly to do with the

699
00:37:17,000 --> 00:37:19,880
Speaker 1: G seven, because as you know, we're not supposed to

700
00:37:19,960 --> 00:37:23,239
Speaker 1: any of us have exchange rate policies. But I think

701
00:37:23,239 --> 00:37:27,320
Speaker 1: it goes deeper than that. It's the history of Britain,

702
00:37:27,360 --> 00:37:30,319
Speaker 1: the fact that we were in the European exchange rate

703
00:37:30,360 --> 00:37:33,360
Speaker 1: mechanism and we came out of it in two on

704
00:37:33,400 --> 00:37:35,400
Speaker 1: a day that was known as Black Wednesday as they

705
00:37:35,480 --> 00:37:37,600
Speaker 1: came out. In fact, we were kicked out. We failed

706
00:37:37,640 --> 00:37:40,400
Speaker 1: to hold the bound in that exchange rate mechanism, and

707
00:37:40,480 --> 00:37:43,480
Speaker 1: it traumatized the British authority. Since then, they've just reached

708
00:37:43,480 --> 00:37:46,520
Speaker 1: the conclusion that this is something to the Roger Buddle.

709
00:37:46,600 --> 00:37:49,359
Speaker 1: The chart that I show on TV and you can

710
00:37:49,400 --> 00:37:52,080
Speaker 1: see a TV go on the terminal from time to

711
00:37:52,160 --> 00:37:58,760
Speaker 1: time sterling trade weighted weakness leaving low sterling trade weightedness,

712
00:37:59,040 --> 00:38:02,080
Speaker 1: and we're right back there right now. It's the only

713
00:38:02,200 --> 00:38:06,520
Speaker 1: country among the G seven with such saggy currency performance.

714
00:38:06,840 --> 00:38:10,440
Speaker 1: What does that signal? Well, there have been some significant

715
00:38:10,440 --> 00:38:12,920
Speaker 1: problems with the British economy. I think at this sort

716
00:38:12,960 --> 00:38:15,000
Speaker 1: of level we'll find the economy doing a lot better.

717
00:38:15,480 --> 00:38:17,440
Speaker 1: You know, people point to the low level of the

718
00:38:17,440 --> 00:38:21,280
Speaker 1: pound after the RM, after the Lehman's collapse, and I think, gosh,

719
00:38:21,440 --> 00:38:23,800
Speaker 1: weren't things really bad then. I don't think this is

720
00:38:23,880 --> 00:38:26,040
Speaker 1: right at all. That was the sort of exchange rate

721
00:38:26,080 --> 00:38:29,080
Speaker 1: we needed. The problem was we didn't keep it. After

722
00:38:29,120 --> 00:38:31,760
Speaker 1: those low levels, the pound went right back up there again.

723
00:38:31,760 --> 00:38:33,560
Speaker 1: And that's what I think we need to defend against.

724
00:38:33,800 --> 00:38:36,120
Speaker 1: And we were speaking with Bernice Heleny Kennedy a little

725
00:38:36,120 --> 00:38:38,759
Speaker 1: while ago, talking a bit about how the economy has

726
00:38:38,760 --> 00:38:41,399
Speaker 1: performed since that Brexit referendum vote, and there are those

727
00:38:41,400 --> 00:38:44,080
Speaker 1: who say, look, things aren't all that bad. Sriling aside.

728
00:38:44,120 --> 00:38:47,279
Speaker 1: I suppose that's an indication here that the concern was

729
00:38:47,320 --> 00:38:49,160
Speaker 1: overblown going into that vote. What do you make of

730
00:38:49,280 --> 00:38:51,000
Speaker 1: of how the economy stands now and is it something

731
00:38:51,000 --> 00:38:53,280
Speaker 1: that you think will change rather radically when that Article

732
00:38:53,280 --> 00:38:56,200
Speaker 1: fifty is finally triggered. No. I was among the few

733
00:38:56,239 --> 00:38:59,560
Speaker 1: economists who were actively campaigning for brexfast, and I did

734
00:39:00,080 --> 00:39:02,400
Speaker 1: say and I believed that the economy wouldn't be that

735
00:39:02,480 --> 00:39:05,840
Speaker 1: badly affected acals. So far, it's proved exactly the case.

736
00:39:06,400 --> 00:39:09,839
Speaker 1: Now it is possible that confidence will fall back next year.

737
00:39:09,920 --> 00:39:12,279
Speaker 1: I'd be very surprised, though. I mean, when you see

738
00:39:12,320 --> 00:39:17,520
Speaker 1: a pattern like this, people have one opinion, pushing their

739
00:39:17,560 --> 00:39:20,680
Speaker 1: pessimism further and further into the future as the numbers

740
00:39:20,719 --> 00:39:22,279
Speaker 1: come in the other way, I think you've got to

741
00:39:22,320 --> 00:39:25,240
Speaker 1: ask yourself the question, have they got it fundamentally wrong?

742
00:39:25,480 --> 00:39:27,440
Speaker 1: And I think the answer is yes, they have got

743
00:39:27,480 --> 00:39:30,759
Speaker 1: it fundamentally wrong. Now, when we trigger Article fifty, they'll

744
00:39:30,760 --> 00:39:33,359
Speaker 1: then be a period of negotiation, and I think we've

745
00:39:33,360 --> 00:39:36,480
Speaker 1: got to be prepared for some bad news, some companies,

746
00:39:36,480 --> 00:39:39,160
Speaker 1: including some American companies, are going to say, right, that's it,

747
00:39:39,239 --> 00:39:41,560
Speaker 1: We're moving business out of the UK. Do I think

748
00:39:41,600 --> 00:39:44,280
Speaker 1: there's going to be a wholesale move No, I really don't.

749
00:39:44,480 --> 00:39:47,400
Speaker 1: And when it comes down to it, London and Britain

750
00:39:47,440 --> 00:39:50,600
Speaker 1: are pretty attractive places to do business if you contemplate

751
00:39:50,600 --> 00:39:53,480
Speaker 1: the alternatives. Lots of American banks saying they might move

752
00:39:53,480 --> 00:39:55,480
Speaker 1: business out of London. They're not going to move it

753
00:39:55,480 --> 00:39:59,360
Speaker 1: to Frankfurt and Parish. They've as good as said recently

754
00:39:59,360 --> 00:40:00,920
Speaker 1: that if they move at AOL, they'll move it to

755
00:40:01,000 --> 00:40:03,279
Speaker 1: New York rather than frank Burton Paris. How long do

756
00:40:03,320 --> 00:40:05,560
Speaker 1: you think that equilibration will take? That is, if you

757
00:40:05,600 --> 00:40:07,560
Speaker 1: see some companies weighing whether or not to stay here

758
00:40:07,840 --> 00:40:09,880
Speaker 1: at whatever downside they might have, it's that a process

759
00:40:09,880 --> 00:40:13,319
Speaker 1: of several months years. I guess it may take a

760
00:40:13,360 --> 00:40:15,279
Speaker 1: few years, but I don't think it's going to be

761
00:40:15,640 --> 00:40:17,480
Speaker 1: very serious. I think we're going to see a string

762
00:40:17,520 --> 00:40:19,880
Speaker 1: of news items, but they aren't going to amount to

763
00:40:20,000 --> 00:40:23,359
Speaker 1: very much. The strengths of London are absolutely enormous. I mean,

764
00:40:23,400 --> 00:40:25,600
Speaker 1: would you really want to be regulated by the EU,

765
00:40:26,080 --> 00:40:28,600
Speaker 1: whether you're in the financial business or any other business.

766
00:40:28,960 --> 00:40:32,640
Speaker 1: Surely you'd rather be regulated in the UK. What leadership

767
00:40:32,760 --> 00:40:35,799
Speaker 1: would you like to see, Roger Boodle from what I'm

768
00:40:35,840 --> 00:40:41,839
Speaker 1: gonna call British financiers, banking heads and heads of big companies,

769
00:40:42,280 --> 00:40:46,480
Speaker 1: movers and shakers, the people in tuxedos at the mansion house.

770
00:40:46,880 --> 00:40:50,720
Speaker 1: What what's your to do list for these young fellows

771
00:40:50,760 --> 00:40:54,600
Speaker 1: and a few women too, Well, I guess, first of all,

772
00:40:54,760 --> 00:40:59,560
Speaker 1: stopped talking Britain down. Many of them have Actually Brown

773
00:40:59,600 --> 00:41:03,279
Speaker 1: would agree with you. Well, you know, they many of

774
00:41:03,280 --> 00:41:06,960
Speaker 1: them have changed their tune because before the referendum vote

775
00:41:07,000 --> 00:41:10,440
Speaker 1: and immediately afterwards, they were making noises to the effect

776
00:41:10,480 --> 00:41:14,000
Speaker 1: that they would be moving business abroad. More recently they've

777
00:41:14,160 --> 00:41:17,160
Speaker 1: downplayed that. I have some sympathy for them. I mean,

778
00:41:17,160 --> 00:41:20,000
Speaker 1: for a start, if you were in their position, wouldn't

779
00:41:20,040 --> 00:41:23,520
Speaker 1: you before the event try to persuade the government that

780
00:41:23,800 --> 00:41:25,160
Speaker 1: was going to give you better in order to get

781
00:41:25,200 --> 00:41:27,600
Speaker 1: some sort of hand out? And equally, you know, the

782
00:41:27,600 --> 00:41:30,640
Speaker 1: status crows obviously much more comfortable than what the alternative

783
00:41:30,719 --> 00:41:32,799
Speaker 1: might be. But now that we've voted to come out,

784
00:41:32,880 --> 00:41:34,920
Speaker 1: and I think it's pretty clear the government's not going

785
00:41:35,000 --> 00:41:37,600
Speaker 1: to row back on all that. It's about time they

786
00:41:37,680 --> 00:41:39,520
Speaker 1: told it like it is, and I think they gradually

787
00:41:39,560 --> 00:41:42,640
Speaker 1: are doing that. I look at the Prime Minister speaking

788
00:41:42,640 --> 00:41:45,759
Speaker 1: today about social welfare policies and I wonder you, as

789
00:41:45,800 --> 00:41:48,279
Speaker 1: someone who lives here, is this government able to do

790
00:41:48,320 --> 00:41:49,960
Speaker 1: all that the government should do? Or is break it

791
00:41:50,040 --> 00:41:52,240
Speaker 1: something that's taking up so much attention that it's it's

792
00:41:52,280 --> 00:41:55,320
Speaker 1: difficult for it to proceed apace with other policies that

793
00:41:55,520 --> 00:41:57,480
Speaker 1: that has on its plate. Well, I think the Prime

794
00:41:57,520 --> 00:42:01,279
Speaker 1: Minister's made some very good speeches and she talks very well.

795
00:42:01,400 --> 00:42:04,440
Speaker 1: It all sounds very ground. How much of that she's

796
00:42:04,440 --> 00:42:07,239
Speaker 1: going to be able to deliver I'm frankly very skeptical.

797
00:42:07,520 --> 00:42:09,799
Speaker 1: Now that's not all about Brexit, but it is true

798
00:42:09,880 --> 00:42:13,439
Speaker 1: that Brexit is pretty all consuming, particularly since there wasn't

799
00:42:13,480 --> 00:42:17,920
Speaker 1: a proper plan beforehand. People and they say, you know,

800
00:42:18,160 --> 00:42:21,400
Speaker 1: the government's all sixes and sevens, Well, why is this surprising?

801
00:42:21,440 --> 00:42:23,160
Speaker 1: This is, you know, the most important thing that's happened

802
00:42:23,200 --> 00:42:26,320
Speaker 1: in British history since since the war. Capital economics. I

803
00:42:26,360 --> 00:42:28,920
Speaker 1: want to come back and actually talk capital economics with

804
00:42:29,040 --> 00:42:31,480
Speaker 1: you twenty seconds. Give me an update here and the

805
00:42:31,560 --> 00:42:35,080
Speaker 1: current account deficit, goods services and the money flowing in

806
00:42:35,120 --> 00:42:37,560
Speaker 1: and out of England. Where does that stand right now? Oh,

807
00:42:37,560 --> 00:42:40,759
Speaker 1: it's pretty grim. The current account deficit pushing six six

808
00:42:41,200 --> 00:42:45,080
Speaker 1: or so of g D p uh. That's I think

809
00:42:45,120 --> 00:42:47,520
Speaker 1: a really big worry. I think it's partly to do

810
00:42:47,600 --> 00:42:49,680
Speaker 1: with the fact that the pound has been so high.

811
00:42:50,040 --> 00:42:51,640
Speaker 1: I think what we're now going to find is that's

812
00:42:51,680 --> 00:42:54,760
Speaker 1: going to correct. Britain has been a very attractive place

813
00:42:54,800 --> 00:42:58,399
Speaker 1: for people to put capital. Now that sounds good. I'd

814
00:42:58,480 --> 00:43:01,200
Speaker 1: much rather it was a much more tractic place to

815
00:43:01,239 --> 00:43:03,719
Speaker 1: buy goods and services from Roger Bruddle with us writing

816
00:43:03,760 --> 00:43:06,440
Speaker 1: today in the Telegraph and of course always writing for

817
00:43:06,520 --> 00:43:10,880
Speaker 1: Capital Economics, certainly out of the financial crisis, the advent

818
00:43:10,880 --> 00:43:14,600
Speaker 1: of Capital Economics has been of immense benefit with their notes.

819
00:43:14,640 --> 00:43:17,879
Speaker 1: We would mention don't email me or David for your

820
00:43:17,960 --> 00:43:21,520
Speaker 1: copy of Capital Economics. We protect the copyright of all

821
00:43:21,560 --> 00:43:24,840
Speaker 1: of our good guest, David Gurring, Tim Keene in London,

822
00:43:25,440 --> 00:43:28,640
Speaker 1: wonderful to have you with us worldwide in the United

823
00:43:28,719 --> 00:43:31,760
Speaker 1: Kingdom and of course of course all of America. Today

824
00:43:31,920 --> 00:43:34,400
Speaker 1: we start strowing with Roger Boutell, who was chairman of

825
00:43:34,480 --> 00:43:38,680
Speaker 1: Capital Economics. We talked earlier about his Telegraph essay today

826
00:43:39,080 --> 00:43:41,400
Speaker 1: confusion over the effects of the weak pound and just

827
00:43:41,400 --> 00:43:44,319
Speaker 1: put that on Twitter and can't say enough about what

828
00:43:44,360 --> 00:43:47,000
Speaker 1: he's doing there, along with the Ambras, Evans, Pritchard and

829
00:43:47,000 --> 00:43:49,160
Speaker 1: and others. Roger Boutle, if we can look at the

830
00:43:49,200 --> 00:43:54,160
Speaker 1: cap economics point, I'm looking at butterflies. We've been looking

831
00:43:54,200 --> 00:43:57,920
Speaker 1: at butterfly effects around the world. Edward Lewins of the

832
00:43:58,000 --> 00:44:01,920
Speaker 1: m I T years ago on butterflies flapping and Turkey

833
00:44:02,000 --> 00:44:06,960
Speaker 1: or the Philippines or Malaysia, Turkish lira is weaker and

834
00:44:07,040 --> 00:44:13,279
Speaker 1: weaker with a second derivative acceleration. What does that signal? Well,

835
00:44:13,480 --> 00:44:16,960
Speaker 1: I think you're bound to find in today's environment a

836
00:44:17,040 --> 00:44:21,000
Speaker 1: number of countries that are very severely at risk, particularly

837
00:44:21,040 --> 00:44:24,520
Speaker 1: where you've got into play between politics and economics. And

838
00:44:24,520 --> 00:44:26,800
Speaker 1: this is exactly what you've got in Turkey. Turkey is

839
00:44:26,840 --> 00:44:29,200
Speaker 1: not the only case. There are very many countries around

840
00:44:29,200 --> 00:44:32,840
Speaker 1: the world where you've got to think a dangerous linkage

841
00:44:32,920 --> 00:44:36,799
Speaker 1: between potential political instability and instability of the currency in

842
00:44:36,840 --> 00:44:38,919
Speaker 1: the economy. I set you up for that answer because

843
00:44:38,920 --> 00:44:40,960
Speaker 1: I knew what you'd say. Now I'm not sure what

844
00:44:41,000 --> 00:44:45,200
Speaker 1: you'll say. Are there institutions that can get out in front,

845
00:44:46,080 --> 00:44:50,440
Speaker 1: the instabilities of e M distribution, or by definition, do

846
00:44:50,560 --> 00:44:55,120
Speaker 1: we just wait, wait, wait until it unwines. I'm not

847
00:44:55,239 --> 00:44:57,799
Speaker 1: sure that there's a great deal that can be done

848
00:44:57,800 --> 00:45:00,359
Speaker 1: at this juncture, and indeed, I think potentially it could

849
00:45:00,360 --> 00:45:03,440
Speaker 1: get a fair bit worse in the sense that, if

850
00:45:03,440 --> 00:45:05,600
Speaker 1: it's right, I think it is right. The dollar interest

851
00:45:05,680 --> 00:45:07,400
Speaker 1: rates are going up a fair bit this year, and

852
00:45:07,400 --> 00:45:09,719
Speaker 1: the dollar is going to strengthen. This is going to

853
00:45:09,840 --> 00:45:12,279
Speaker 1: call into question the economic policies of a lot of

854
00:45:12,320 --> 00:45:16,200
Speaker 1: emerging markets around the world. Trade down anything to that,

855
00:45:16,520 --> 00:45:18,640
Speaker 1: if you would, We in the US wondering what's going

856
00:45:18,680 --> 00:45:20,960
Speaker 1: to happen with regard to trade policy. Perhaps we're seeing

857
00:45:21,000 --> 00:45:24,040
Speaker 1: some early getting an early sense of that with some

858
00:45:24,080 --> 00:45:25,680
Speaker 1: of the tweets that the president leftist sent out of

859
00:45:25,760 --> 00:45:28,520
Speaker 1: via a number of companies in particular. How real a

860
00:45:28,560 --> 00:45:31,279
Speaker 1: concern is that, to you, a disruption to the way

861
00:45:31,320 --> 00:45:32,920
Speaker 1: the US trades with the world, the way that other

862
00:45:32,920 --> 00:45:36,080
Speaker 1: companies are able to engage in business. I think it's

863
00:45:36,080 --> 00:45:39,399
Speaker 1: a very serious risk. Now. I'm hoping, along with lots

864
00:45:39,400 --> 00:45:41,440
Speaker 1: of other people, that we're not going to see anything

865
00:45:41,480 --> 00:45:45,120
Speaker 1: remotely like a trade war, and that Okay, President Trump's

866
00:45:45,120 --> 00:45:47,319
Speaker 1: going to score a few hits, as it were, in

867
00:45:47,360 --> 00:45:50,520
Speaker 1: particular areas, which will, no doubt bolster is popularity. But

868
00:45:50,600 --> 00:45:53,960
Speaker 1: we're not going to see a wholesale resort to protectionism.

869
00:45:54,040 --> 00:45:57,080
Speaker 1: I'm hoping that's the case, but you can't be sure. Meanwhile,

870
00:45:57,080 --> 00:46:00,759
Speaker 1: whatever gains he manages to secure from that particular path

871
00:46:00,800 --> 00:46:02,880
Speaker 1: of policies, you've got to set that against what's going

872
00:46:02,960 --> 00:46:06,359
Speaker 1: to be happening to the dollar. The tallest strengthening. That's

873
00:46:06,360 --> 00:46:08,560
Speaker 1: going to be a serious problem for US producer. How

874
00:46:08,560 --> 00:46:10,480
Speaker 1: many chapters are in there? How many chapters are left

875
00:46:10,480 --> 00:46:14,000
Speaker 1: in the strong dollar story? Do you think, well, look,

876
00:46:14,080 --> 00:46:17,399
Speaker 1: you know, strong or weak currency. It's not everything, But

877
00:46:18,520 --> 00:46:20,879
Speaker 1: this is potentially quite important because on the other side

878
00:46:20,880 --> 00:46:22,719
Speaker 1: of the world, you've got something going on which is

879
00:46:22,719 --> 00:46:26,239
Speaker 1: equally concerning. That's to say, you've got the weakening of

880
00:46:26,280 --> 00:46:29,879
Speaker 1: the rem MB, the Chinese currency. It was a significant

881
00:46:29,920 --> 00:46:32,920
Speaker 1: capital outflows. Now this is I think it's potentially a

882
00:46:32,960 --> 00:46:35,120
Speaker 1: really big concern if you play that into what Trump

883
00:46:35,120 --> 00:46:37,080
Speaker 1: says his policy is going to be. If the Chinese

884
00:46:37,120 --> 00:46:40,680
Speaker 1: authorities allow the rem MB to weaken very severely, then

885
00:46:40,719 --> 00:46:43,359
Speaker 1: you get some nasty rhetoric and maybe some vigorous action.

886
00:46:43,400 --> 00:46:46,800
Speaker 1: From President Trump that potentially pretty dangerous. Who does a

887
00:46:46,880 --> 00:46:49,600
Speaker 1: guy like you watch in Europe? If you have the

888
00:46:49,640 --> 00:46:53,000
Speaker 1: frustration of saying, okay, when is Europe going to develop

889
00:46:53,000 --> 00:46:56,920
Speaker 1: a rhetoric and discourse to move on? Is a new Europe?

890
00:46:56,960 --> 00:46:59,719
Speaker 1: Is there one individual that you think as their heads

891
00:46:59,719 --> 00:47:06,360
Speaker 1: screw and don't there is there one person we should

892
00:47:06,400 --> 00:47:10,880
Speaker 1: watch more than we probably are. I can't think of

893
00:47:10,920 --> 00:47:19,759
Speaker 1: anybody that I'm afraid. I can't think of any no, not,

894
00:47:20,000 --> 00:47:23,920
Speaker 1: no one really that would be reasonably well known. And

895
00:47:23,960 --> 00:47:26,480
Speaker 1: I don't see any encouraging signs in here. The economy,

896
00:47:26,480 --> 00:47:28,239
Speaker 1: of course, in Europe last year, let's just say two

897
00:47:28,280 --> 00:47:31,480
Speaker 1: thousand and sixteen didn't do too badly by European standards,

898
00:47:31,680 --> 00:47:34,560
Speaker 1: up one and a half percent, but the underlying problems

899
00:47:34,600 --> 00:47:37,600
Speaker 1: are still exactly the same, and there's no real sign

900
00:47:37,680 --> 00:47:40,000
Speaker 1: I think of coming to grips with the big divergences

901
00:47:40,080 --> 00:47:42,440
Speaker 1: you've got we were talking earlier on. You've got German

902
00:47:42,480 --> 00:47:45,360
Speaker 1: inflation pretty high for Germany. You've got Italy in some

903
00:47:45,440 --> 00:47:49,880
Speaker 1: measures in deflation calling for complete the opposite monetary policies.

904
00:47:50,200 --> 00:47:53,359
Speaker 1: You need the Germans to relax fiscal policy. Are they

905
00:47:53,400 --> 00:47:55,640
Speaker 1: going to well, you must be joking. They're not going

906
00:47:55,680 --> 00:47:57,919
Speaker 1: to have a Greece. I know Tom was talking about

907
00:47:57,960 --> 00:48:06,879
Speaker 1: that a bit earlier, untelling only go someplace, warned there's

908
00:48:06,920 --> 00:48:09,719
Speaker 1: elephants in the Alps. Are we any closer to a

909
00:48:09,800 --> 00:48:14,239
Speaker 1: resolution Greece? I don't think so, not fundamentally. Of course.

910
00:48:14,239 --> 00:48:16,280
Speaker 1: The story has been, as you know, over a number

911
00:48:16,280 --> 00:48:20,279
Speaker 1: of years. Alone comes up, the Greeks can't refinance it.

912
00:48:20,360 --> 00:48:22,759
Speaker 1: Then someone provides some money to roll the thing over,

913
00:48:23,480 --> 00:48:26,560
Speaker 1: and we keep carrying on. Is there any fundamental solution

914
00:48:26,600 --> 00:48:28,800
Speaker 1: to through all this to the Greek problem? The answers No.

915
00:48:29,320 --> 00:48:31,640
Speaker 1: Occasionally there's a bit of a pickup in the economy,

916
00:48:32,120 --> 00:48:37,440
Speaker 1: doesn't get anywhere. Unemployment remains dreadfully high, about youth unemployment

917
00:48:37,440 --> 00:48:41,160
Speaker 1: about fifty. No, the Greek position is still appalling. Roger

918
00:48:41,200 --> 00:48:44,440
Speaker 1: Brutle just I glimmer in the newspapers today as the

919
00:48:44,440 --> 00:48:47,440
Speaker 1: North season not worth what it was, maybe Scotland will

920
00:48:47,480 --> 00:48:51,600
Speaker 1: pipe down about leaving this year, noted a kingdom. Can

921
00:48:51,640 --> 00:48:55,680
Speaker 1: we do a n after with Britain? I don't know

922
00:48:55,719 --> 00:48:59,239
Speaker 1: what the acronym would be, but do you foresee where

923
00:48:59,239 --> 00:49:04,120
Speaker 1: Britain truly looks across the Atlantic to America? In a

924
00:49:04,200 --> 00:49:07,440
Speaker 1: trade agreement. Is that even feasible within the sphere of

925
00:49:07,520 --> 00:49:10,600
Speaker 1: capital economics. I think it is feasible. Yes, of course,

926
00:49:10,640 --> 00:49:13,080
Speaker 1: it's something that a number of people on both sides

927
00:49:13,120 --> 00:49:16,120
Speaker 1: of the Atlantic over recent years have talked about. The

928
00:49:16,160 --> 00:49:18,719
Speaker 1: important thing is Britain, of course, couldn't do something like

929
00:49:18,800 --> 00:49:22,360
Speaker 1: that inside the EU. Once it leaves the EU, it

930
00:49:22,480 --> 00:49:25,640
Speaker 1: can contemplate that. I think this is exactly the sort

931
00:49:25,680 --> 00:49:30,040
Speaker 1: of relationship that many British people would absolutely love pre

932
00:49:30,160 --> 00:49:34,440
Speaker 1: trade cooperation, friendship, but not trying all of us to

933
00:49:34,760 --> 00:49:37,600
Speaker 1: merge into some sort of commonality, not trying to obey

934
00:49:37,960 --> 00:49:42,200
Speaker 1: the same laws, language difference. What we're talking about. What

935
00:49:42,239 --> 00:49:46,080
Speaker 1: was the word we were doing earlier there bonkers Barker's Yeah,

936
00:49:46,400 --> 00:49:49,840
Speaker 1: Barker's wouldn't translate right, Well, that's true what was at

937
00:49:49,880 --> 00:49:53,120
Speaker 1: Churchill said to countries or cultures divided by a common language.

938
00:49:55,280 --> 00:49:57,960
Speaker 1: But you should be trying to bridge that this week, right,

939
00:49:58,920 --> 00:50:02,759
Speaker 1: you should try Paris. It's Roger Bootle, thank you so much.

940
00:50:02,760 --> 00:50:05,279
Speaker 1: He is a chairman of Capital Economics. And you know

941
00:50:05,320 --> 00:50:08,480
Speaker 1: we had Jason Trinodon from Fatiguous Research the other day.

942
00:50:08,520 --> 00:50:11,920
Speaker 1: There have been some wonderful shops David that have come

943
00:50:11,960 --> 00:50:14,680
Speaker 1: out of this financial crisis, and one of them, right

944
00:50:14,719 --> 00:50:17,520
Speaker 1: from the drop of a hat, was capital economics from

945
00:50:17,640 --> 00:50:19,720
Speaker 1: I remember when the first report came. I was like, oh,

946
00:50:20,000 --> 00:50:23,080
Speaker 1: boodles in business. This is a good thing. A lot

947
00:50:23,080 --> 00:50:25,960
Speaker 1: of others as well, not just capital. This has been

948
00:50:25,960 --> 00:50:30,560
Speaker 1: a wonderful first made possible by Rachel Worspan. Could not

949
00:50:30,640 --> 00:50:34,880
Speaker 1: have done it without her executive professor getting us started

950
00:50:34,880 --> 00:50:37,359
Speaker 1: for an entire week in London. We'd like to thank

951
00:50:37,400 --> 00:50:41,719
Speaker 1: the Underground and the Tube forgetting our guests here today.

952
00:50:41,920 --> 00:50:47,600
Speaker 1: Well maybe tomorrows to strike over tomorrow, Roger. Now, now

953
00:50:47,600 --> 00:50:49,600
Speaker 1: it's on the British airways. I think that tomorrow there's

954
00:50:49,640 --> 00:50:53,360
Speaker 1: a small British airways. Really we're going nowhere, we're stopped.

955
00:50:53,480 --> 00:50:55,680
Speaker 1: The European tour continues. Well, here we are. We're up.

956
00:50:55,760 --> 00:50:59,000
Speaker 1: All of you. Have a good Monday to the week again.

957
00:50:59,040 --> 00:51:01,279
Speaker 1: We'll be here through the week and then onto Switzerland

958
00:51:01,600 --> 00:51:11,920
Speaker 1: for the meetings of the World Economic Form. Thanks for

959
00:51:12,000 --> 00:51:16,440
Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to

960
00:51:16,600 --> 00:51:21,680
Speaker 1: interviews on iTunes, SoundCloud, or whichever podcast platform you prefer.

961
00:51:22,440 --> 00:51:25,319
Speaker 1: I'm out on Twitter at Tom Keene. David Gura is

962
00:51:25,440 --> 00:51:29,200
Speaker 1: at David Gura Before the podcast. You can always catch

963
00:51:29,280 --> 00:51:45,840
Speaker 1: us worldwide on Bloomberg Radio, brought you by Bank of America.

964
00:51:45,920 --> 00:51:50,160
Speaker 1: Mary Lynch dedicated to bringing our clients insights and solutions

965
00:51:50,440 --> 00:51:53,759
Speaker 1: to meet the challenges of a transforming world. That's the

966
00:51:53,800 --> 00:51:57,680
Speaker 1: power of global connections. Mary Lynch, Pierce, Feeder and Smith

967
00:51:58,080 --> 00:52:00,759
Speaker 1: Incorporated Member s I p C