WEBVTT - Surveillance: Eichengreen on Globalization's New Normal 0:00:00.040 --> 0:00:02.600 Who you put your trust in matters. Investors have put 0:00:02.680 --> 0:00:07.000 their trust and independent registered investment advisors to the two 0:00:07.040 --> 0:00:10.680 and four trillion dollars. Why learn more at find your 0:00:10.760 --> 0:00:26.360 Independent Advisor dot com. Welcome to the Bloomberg Surveillance Podcast. 0:00:26.760 --> 0:00:30.480 I'm Tom Keene with David Gura. Daily we bring you 0:00:30.520 --> 0:00:35.560 insight from the best in economics, finance, investment, and international relations. 0:00:35.960 --> 0:00:40.559 Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot com, and 0:00:40.640 --> 0:00:47.960 of course, on the Bloomberg. A few minutes ago, present 0:00:48.040 --> 0:00:50.680 Elect Donald Trump saying in a statement he intends to 0:00:50.680 --> 0:00:54.080 nominate Rex Tillerson, the chairman and CEO of x On Mobile, 0:00:54.080 --> 0:00:56.440 to be Secretary of State, saying he was quote one 0:00:56.480 --> 0:01:00.200 of the most accomplished business leaders and international dealmakers in 0:01:00.240 --> 0:01:01.880 the world. And here from some perspective on that is 0:01:01.920 --> 0:01:04.880 Gideon Rose. He's the editor of Foreign Affairs magazine. Peter G. Peterson, 0:01:04.959 --> 0:01:07.640 Chair at the Council on Forimulations, getting good to see 0:01:07.680 --> 0:01:10.880 you good. Let's start with that with this nomination, this 0:01:11.040 --> 0:01:13.280 pick to be Secretary of State. I was thinking ahead 0:01:13.319 --> 0:01:15.920 to what these confirmation hearings will look like and what 0:01:15.959 --> 0:01:17.520 will be discussed, and it strikes me that for the 0:01:17.560 --> 0:01:19.440 first time in a long while, they're going to center 0:01:19.480 --> 0:01:23.480 on business much more probably than the candidate's vision for 0:01:23.480 --> 0:01:27.040 foreign policy. Um, well, it'll I think it's the relation 0:01:27.080 --> 0:01:29.680 between those two which is the question for Tillerson is 0:01:30.040 --> 0:01:35.000 he has extraordinary business experience and extraordinarily extraordinary skill, How 0:01:35.040 --> 0:01:38.000 does that apply to foreign policy? And and what is 0:01:38.040 --> 0:01:40.640 the carryover? Is there a difference between what you do 0:01:40.720 --> 0:01:43.440 as head of Exxon and a difference in what you 0:01:43.480 --> 0:01:45.680 do is Secretary of State, and how does that play in? 0:01:45.720 --> 0:01:47.240 And of course the Russia angle is going to be 0:01:47.240 --> 0:01:49.280 a major topic of concern. Let's pull on some of 0:01:49.280 --> 0:01:51.840 those threads there and first look at the similarities, so 0:01:51.880 --> 0:01:54.000 much as there are some between running a big multinational 0:01:54.000 --> 0:01:56.960 company like this and the State Department. We know of 0:01:57.040 --> 0:02:00.520 the bureaucracy of Washington, how byzantine the State Apartment is, 0:02:00.560 --> 0:02:03.040 like many other agencies in Washington. How much of a 0:02:03.080 --> 0:02:06.240 deficit will that be to come into running an organization 0:02:06.320 --> 0:02:09.240 having no familiarity with that, with that bureaucracy. Well, on 0:02:09.280 --> 0:02:12.480 the one hand, running any kind of large organization like 0:02:12.520 --> 0:02:14.720 that and doing it successfully has a lot of experience 0:02:14.760 --> 0:02:17.360 that can carry over, and so that's really good compared 0:02:17.400 --> 0:02:20.120 to a person taking over who hasn't managed anything. On 0:02:20.160 --> 0:02:22.480 the other hand, the restrictions on what you can do 0:02:22.840 --> 0:02:26.359 running a government department as opposed and running an independent 0:02:26.400 --> 0:02:28.919 foreign service as opposed to running a company in which 0:02:28.960 --> 0:02:31.560 you are the CEO, UH, you can do a lot less. 0:02:31.600 --> 0:02:34.120 And I think that even President elect Trump is going 0:02:34.200 --> 0:02:36.520 to find that, which is that just because your president 0:02:36.560 --> 0:02:39.560 doesn't mean you're the CEO of the entire country and 0:02:39.560 --> 0:02:41.360 you get to order everybody in the government to do 0:02:41.400 --> 0:02:44.680 what you want. And we just don't know how the 0:02:44.760 --> 0:02:48.480 independent institutions of the Foreign Service, the armed forces, the 0:02:48.520 --> 0:02:51.440 civil service, how all how the Trump administration is going 0:02:51.440 --> 0:02:54.639 to react if those parts of the permanent government and 0:02:54.800 --> 0:02:58.040 Congress have somewhat different views on policy. Let's look to 0:02:58.360 --> 0:03:01.400 history as a guide here. How important is this relationship 0:03:01.440 --> 0:03:05.239 between a president and UH and his secretary of state. It's, 0:03:05.360 --> 0:03:07.880 first of all, the answer is with all cabinet appointments, 0:03:07.880 --> 0:03:10.080 in all relationships, it all depends on the president. Because 0:03:10.080 --> 0:03:14.520 the president is the ultimate decision maker and gets the 0:03:14.520 --> 0:03:17.320 the deputies that he wants and runs things the way 0:03:17.400 --> 0:03:19.640 he wants to run them. So the secretary of State 0:03:19.680 --> 0:03:22.720 relationship is obviously a crucial and important one. But one 0:03:22.720 --> 0:03:24.520 of the big things in this administration, I think they 0:03:24.520 --> 0:03:26.400 we're all going to be looking for is to see 0:03:26.400 --> 0:03:28.880 what the relationship between the White House and the NSC 0:03:29.000 --> 0:03:32.200 on the one hand, and the various cabinet departments is. 0:03:32.240 --> 0:03:35.160 We've had a concentration of power in the executive in 0:03:35.320 --> 0:03:38.400 and in the White House in recent years. Will that 0:03:38.560 --> 0:03:42.000 change in this situation? Will people like Tillerson or General 0:03:42.040 --> 0:03:46.480 Maddest or Stevution or other people have more autonomy and 0:03:46.520 --> 0:03:48.800 power than they have had recently? Because right now the 0:03:48.800 --> 0:03:51.840 White House itself seems to be staffed up less and 0:03:51.960 --> 0:03:55.880 less impressively than the departments. What is this this decision 0:03:55.880 --> 0:03:58.800 telegraphed to you about the foreign policy priorities of this 0:03:58.960 --> 0:04:02.360 incoming administration. You mentioned Rex Tillerson's ties to Russia. We've 0:04:02.400 --> 0:04:04.600 seen the photograph of him and Vladimir Putina that he's 0:04:04.640 --> 0:04:07.560 received this award from the head of of Russia. He's 0:04:07.600 --> 0:04:09.960 done a lot of business there. Does it give you 0:04:10.000 --> 0:04:12.360 the sense here that this administration will be, if not 0:04:12.400 --> 0:04:15.640 fully focused, heavily focused on the relationship with Russia on 0:04:15.720 --> 0:04:18.280 day one? Well, it does suggest that there's gonna be 0:04:18.320 --> 0:04:20.719 a change in the relationship to Russia. And it also 0:04:20.760 --> 0:04:23.920 suggests that deal making and business skill is something this 0:04:24.160 --> 0:04:27.480 new president elect takes very seriously. The question is how 0:04:27.520 --> 0:04:30.159 does that play into existing American farm policy and in 0:04:30.240 --> 0:04:33.200 Russia in particular. You haven't just been about deal making 0:04:33.200 --> 0:04:35.599 with Russia, You've been criticizing them, you've been opposing them. 0:04:35.960 --> 0:04:38.159 And how is that going to play out? And we 0:04:38.320 --> 0:04:40.840 just again don't know yet. And as the sen some 0:04:40.839 --> 0:04:43.680 senators have already said they're going to question this. Um. 0:04:43.720 --> 0:04:46.080 I think he'll get through ultimately. But how this plays 0:04:46.120 --> 0:04:48.560 in even to the story about Russian hacking into the election, 0:04:48.920 --> 0:04:51.880 there's an odd Russia angle to all this that nobody 0:04:51.920 --> 0:04:54.360 really knows yet how far it goes. Giving Rosa with 0:04:54.440 --> 0:04:57.240 his Foreign Affairs magazine, I have the new issue in 0:04:57.279 --> 0:05:01.200 front of me on eight pages. I can't say enough 0:05:01.240 --> 0:05:04.919 about it. For the price of one of David Gura's 0:05:05.000 --> 0:05:08.360 artisanal martiniz over in Brooklyn, you can have a year 0:05:08.400 --> 0:05:12.599 long subscription and it will make all wiser. I read 0:05:12.640 --> 0:05:16.520 it cover to cover this issue. Tim Geitner on lessons 0:05:16.600 --> 0:05:22.160 learned from the Crisis. Robin Niblet of Chatham House on liberalism, 0:05:22.200 --> 0:05:26.520 and there is a spectacular article from Catherine Newman and 0:05:26.640 --> 0:05:30.960 Hello Winston on us manufacturing the little shatter all of 0:05:31.000 --> 0:05:35.400 your preconceived conceptions that are like mine wrong, Gideon, the 0:05:35.480 --> 0:05:39.600 institutional mix here, the testing, the uncertainty. I hear in 0:05:39.640 --> 0:05:44.200 your voice there, I guess you don't work in a vacuum. 0:05:44.520 --> 0:05:48.159 Who does a Secretary of State turn to in Washington 0:05:48.520 --> 0:05:51.360 besides the Council on Foreign Relations and to read Foreign 0:05:51.360 --> 0:05:55.320 Affairs magazine to get wiser faster? Is there a bureaucracy 0:05:55.360 --> 0:05:57.520 to help him? So this is a great question, Tom, 0:05:57.520 --> 0:05:59.440 because of course there is a major bureaucracy. You have 0:05:59.480 --> 0:06:04.480 an intelligent community that is professionally charged with keeping tabs 0:06:04.520 --> 0:06:06.919 on the world and providing accurate information. You have a 0:06:06.920 --> 0:06:09.760 foreign service, you have a uniform military, uh, you have 0:06:09.800 --> 0:06:14.080 a civil service. And those people are all really superb professionals. 0:06:14.080 --> 0:06:16.919 By and large, we often derived them as bureaucrats, but 0:06:17.040 --> 0:06:20.280 the fact is they're often very serious, competent professionals who 0:06:20.360 --> 0:06:23.479 work very hard behind the scenes to to get things right. 0:06:23.560 --> 0:06:26.000 And one of the things that people are worrying about 0:06:26.080 --> 0:06:29.839 or are looking at with concern is the new the 0:06:29.880 --> 0:06:35.960 transition at least apparent lack of connect with the professional staff, 0:06:36.040 --> 0:06:39.360 as it were, of the government, as evidenced by uh, 0:06:39.400 --> 0:06:42.680 not just the President Alex not getting the intelligence briefings, 0:06:42.680 --> 0:06:46.240 but also dissing the concerns of the intelligence community when 0:06:46.279 --> 0:06:48.240 it comes to things like the Russian hackings. So the 0:06:48.240 --> 0:06:50.480 professionals who you would think would be the people you're 0:06:50.480 --> 0:06:52.760 gonna rely on for your staff right now are a 0:06:52.800 --> 0:06:55.440 little bit concerned how uh they're going to fare in 0:06:55.480 --> 0:06:58.520 the new administration. If I look up diplomacy in the 0:06:58.600 --> 0:07:00.840 in Thesaurius, I don't think that deal making would be 0:07:01.440 --> 0:07:03.640 a word there next to it. Are we right to 0:07:03.720 --> 0:07:07.040 use these interchangeably? Is deal making the same as diplomacy? 0:07:07.120 --> 0:07:09.440 Dealmaking is not the same as diplomacy. But it's not 0:07:09.480 --> 0:07:12.880 true that dealmaking isn't a part of diplomacy. It often 0:07:12.960 --> 0:07:15.840 can be. The question is what kinds of deals with 0:07:15.920 --> 0:07:19.520 whom and what the overall strategy guiding them? So right now, 0:07:19.560 --> 0:07:21.880 so one of the things that we're not clear about. 0:07:21.880 --> 0:07:24.920 People don't like uncertainty, and for good reason, right uh. 0:07:25.160 --> 0:07:29.200 The the things like the call with Taiwan and the 0:07:29.320 --> 0:07:33.520 question of is our China policy going to be overturned 0:07:33.520 --> 0:07:35.680 I mean, the US China relationship is the single most 0:07:35.680 --> 0:07:38.320 important relationship in the world over the next generation. It 0:07:38.360 --> 0:07:41.400 could bring untold prosperity to both countries. It could also 0:07:41.440 --> 0:07:45.440 bring conflict and economic disaster for the world. So messing 0:07:45.440 --> 0:07:49.320 around with that and not even knowing people, not knowing 0:07:49.400 --> 0:07:52.240 how much the new administration is messing around with that 0:07:52.600 --> 0:07:55.480 is kind of an uncertain trumpet at this point. I look, 0:07:55.560 --> 0:07:59.120 I look to a natural security, national security and natural security, 0:07:59.280 --> 0:08:02.080 the issue of client change. You have Rex Taylerson, who 0:08:02.080 --> 0:08:04.400 has been somewhat ahead out front of that, more so 0:08:04.480 --> 0:08:06.840 than perhaps that the President elect has been. How big 0:08:06.840 --> 0:08:08.280 an issue is this going to be for the State 0:08:08.280 --> 0:08:11.320 Department going forward holding to that agreement that was agreed 0:08:11.360 --> 0:08:13.240 to in Paris a few months ago. I don't think 0:08:13.320 --> 0:08:15.640 this is necessarily going to be just a State department issue. 0:08:15.640 --> 0:08:16.800 I mean, if you have a head of the e 0:08:16.880 --> 0:08:19.680 p A who might have different views than to Tilson, 0:08:19.720 --> 0:08:24.040 and and even the President elect has had different views 0:08:24.040 --> 0:08:26.240 on the subject on the campaign trail versus what his 0:08:26.280 --> 0:08:29.840 businesses have said when they're actually uh coming up against 0:08:29.840 --> 0:08:34.000 things like rising seas. So we just don't know. Gideon, 0:08:34.040 --> 0:08:37.320 Thank you so much. Gideon rose Um so much to 0:08:37.360 --> 0:08:41.040 do with foreign affairs at magazine Out of Order, the 0:08:41.120 --> 0:08:45.160 future of the international UH system. It is their issue 0:08:45.240 --> 0:08:47.439 just out. I really can't say enough about the previous 0:08:47.440 --> 0:09:03.960 issue on populism as well. We're fortunate to be joined 0:09:04.000 --> 0:09:06.440 by Barry ike and Green, Professor of Economics and Political 0:09:06.480 --> 0:09:09.319 Science at UC Berkeley, currently a Distinguished visitor at the 0:09:09.360 --> 0:09:12.959 American Academy in Berlin. Shortly after the show today, he'll 0:09:12.960 --> 0:09:15.160 be delivering a lecture on the populist turn in American 0:09:15.200 --> 0:09:18.640 politics implications for Europe. That lecture arranged by the American 0:09:18.640 --> 0:09:22.680 Academy in Berlin and the Champeter Seminar at Humboldt University. Barry, 0:09:22.720 --> 0:09:25.800 I can be great to have you with us. Hi, David, Hi, Tom. 0:09:25.840 --> 0:09:27.280 We were a few weeks ago. Tom and I were 0:09:27.280 --> 0:09:30.440 in the audiences that Christine Legard gave a speech here 0:09:31.280 --> 0:09:35.079 at Bloomberg. She talked about people talking about D globalization. 0:09:35.640 --> 0:09:38.480 She was worried about the prospects for D globalization. Who 0:09:38.520 --> 0:09:41.920 in this day and age is making the case for globalization. 0:09:43.200 --> 0:09:48.559 I don't think that globalization really has UH business advocates, 0:09:48.559 --> 0:09:53.040 political advocates hyperglobalization at least of the sort that we 0:09:53.160 --> 0:09:57.760 experienced prior to the financial crisis. What we're I think 0:09:57.800 --> 0:10:00.800 settling into as a new normal in terms of globalization, 0:10:00.880 --> 0:10:04.040 or that would be the best outcome we can hope for. UM. 0:10:04.080 --> 0:10:08.679 We had hyperglobalization where credeing financial clothes across borders for 0:10:08.840 --> 0:10:13.480 growing faster than the global economy, but that was driven 0:10:13.520 --> 0:10:16.439 by China, a story that's over. That was driven by 0:10:16.559 --> 0:10:20.400 global supply chains. A story that's over that was driven 0:10:20.440 --> 0:10:24.760 by financial deregulation, which is over. So I think settling 0:10:24.760 --> 0:10:29.600 into a new equilibrium where UM, trade, financial clothes, and 0:10:29.840 --> 0:10:32.600 the global economy are all growing at about the same 0:10:32.720 --> 0:10:39.839 rate together is a better situation than UH having create 0:10:39.960 --> 0:10:44.400 trade and international finance outstripped the real economy. We see 0:10:44.400 --> 0:10:48.559 the tendency here toward looking inward, maybe to rejecting a 0:10:48.600 --> 0:10:50.800 lot of the multilateralism that we've seen over these last 0:10:50.840 --> 0:10:54.319 few years. You've looked at at history, you talk about equilibrium. 0:10:54.360 --> 0:10:56.960 How cyclical is this? Do you do you expect a 0:10:57.080 --> 0:11:01.400 period of inwardism followed by then a more multilateral view 0:11:01.400 --> 0:11:04.360 of the world Again, I think we will suffer through 0:11:04.400 --> 0:11:09.400 a period of um looking inward if policymakers do not 0:11:09.559 --> 0:11:13.120 do a better job at getting economic growth going. So 0:11:13.200 --> 0:11:17.760 I think UM, faster growth heals a lot of wounds 0:11:17.800 --> 0:11:22.120 economically and politically, and and and more successful economic growth 0:11:22.120 --> 0:11:27.000 could lay the basis for a little bit more enthusiasm 0:11:27.000 --> 0:11:30.800 and support for the multilateral system. So that's assuming a 0:11:30.840 --> 0:11:34.199 positive outcome. It would be nice if it happened. Barry, 0:11:34.360 --> 0:11:37.479 help us here with the core I can green knowledge, 0:11:37.480 --> 0:11:41.600 which is our exorbitant privilege. I love chapter four of 0:11:41.640 --> 0:11:45.360 one of your great short books, Global Imbalances and Lessons 0:11:45.360 --> 0:11:49.920 of Breton Woods Sterling's Past Dollars Future that was written 0:11:49.960 --> 0:11:53.400 a few years ago. Do you just maintain, within all 0:11:53.440 --> 0:11:57.679 of our international relations and the president elects daily dynamics, 0:11:58.040 --> 0:12:03.240 that the dollar will be our orbitant privilege? The um 0:12:03.480 --> 0:12:07.120 great advantage Mr Crump has is the same one John 0:12:07.200 --> 0:12:10.719 Connolly had when he said it's our currency, it's your 0:12:10.800 --> 0:12:15.000 problem in that there are not viable alternatives to the dollar. 0:12:15.320 --> 0:12:20.720 So even if there is more uncertainty and instability in 0:12:20.760 --> 0:12:25.079 the United States, there's really nowhere to UH to flee 0:12:25.120 --> 0:12:28.600 to UH for the moment. Over time, the Europeans might 0:12:28.679 --> 0:12:31.400 get their act together, the Chinese might get their act together. 0:12:31.440 --> 0:12:33.680 But I think for the time. For the time being, 0:12:33.679 --> 0:12:36.040 it's all about the dollar. Some would say your most 0:12:36.040 --> 0:12:41.560 wistful book is the European economies. Buried in the middle 0:12:41.600 --> 0:12:45.440 of it is towards the Golden Age. Nobody right now 0:12:45.480 --> 0:12:48.400 berries looking for the Golden Age in Europe. We're doing 0:12:48.440 --> 0:12:52.320 a ten for one reverse split on unit credit another bank. 0:12:52.760 --> 0:12:55.680 You know that's been around since you began teaching at Berkeley. 0:12:55.840 --> 0:12:59.320 It's going down the tubes. Uh the unrest that we've 0:12:59.320 --> 0:13:02.160 been talking about with you through the morning. Where is 0:13:02.200 --> 0:13:04.439 the Golden Age? It's out there somewhere. I know it's 0:13:04.480 --> 0:13:09.120 about growth. Is it really about technological progress? I think 0:13:09.160 --> 0:13:13.040 it's partly about technological progress. So Europe's Golden Age was 0:13:13.880 --> 0:13:16.680 supported by the fact that Europe was starting out behind 0:13:17.000 --> 0:13:20.959 and it could import technology from the United States and 0:13:21.160 --> 0:13:24.959 in the third quarter of the twentieth century, and even 0:13:25.040 --> 0:13:28.520 after that, it was partly a matter of political solidarity. 0:13:28.679 --> 0:13:33.120 So Europeans were able to pull together in part because 0:13:33.200 --> 0:13:37.079 of the Cold War and uh UM wanting to keep 0:13:37.120 --> 0:13:41.959 the Soviets out as it were. I I think now 0:13:42.000 --> 0:13:47.720 there are both technological headwinds and political headwinds that Um 0:13:47.840 --> 0:13:52.199 the Europeans would have to surmount that they're unlikely to surmount. 0:13:52.520 --> 0:13:57.160 Um so um. Another golden age is not in the cards. 0:13:57.880 --> 0:14:00.839 We've we've watched this low and slow global growth, and 0:14:01.120 --> 0:14:05.120 we've seen here the fracturing of a big international trade deal. 0:14:05.679 --> 0:14:08.120 Talk if you would, about the relationship between the two things. 0:14:08.120 --> 0:14:09.600 In other words, is it possible to have an uptick 0:14:09.640 --> 0:14:11.679 and global growth here if we don't have the kind 0:14:11.720 --> 0:14:15.560 of robust trading that might lead to it. I I 0:14:15.600 --> 0:14:18.840 think the robust trading system would be a consequence of 0:14:19.600 --> 0:14:22.840 better economic growth. There'd be more support for openness as 0:14:23.240 --> 0:14:26.160 we were talking about a moment ago, rather than being 0:14:26.200 --> 0:14:31.000 the engine of UH faster growth. So I think the engine, 0:14:31.000 --> 0:14:35.160 you know, has to be started at home through UH 0:14:35.240 --> 0:14:38.160 fixing the financial system in Europe, through a better balance 0:14:38.160 --> 0:14:42.240 of monitoring fiscal policies, and the trade growth will follow. 0:14:42.800 --> 0:14:45.600 One of the great moments of my career Bloomberg Folks 0:14:45.680 --> 0:14:49.200 was enjoying seeing Professor Iken Green battle in Singapore a 0:14:49.240 --> 0:14:53.040 million years ago? Were there worthy emerging market central bank 0:14:53.120 --> 0:14:57.280 chief over the future of India. Let me cut to 0:14:57.320 --> 0:14:59.560 the chase. Mr Ike and Green got the debate right, 0:15:00.040 --> 0:15:03.040 got any the other guy didn't. David gerrom My book 0:15:03.040 --> 0:15:06.320 of the Year, Ken Rogoff, The Curse of Cash. It's 0:15:06.320 --> 0:15:09.000 a brave book. It's kind of a very Green would 0:15:09.000 --> 0:15:11.920 have written. And then it talks about cash. He hedges it, 0:15:12.400 --> 0:15:15.720 he shows the weaknesses of his argument. He brings otmar Issing, 0:15:16.120 --> 0:15:19.560 the acclaimed German economists into it on page four. And 0:15:19.600 --> 0:15:21.880 then there's the thing on negative rates. But you know, 0:15:21.920 --> 0:15:25.160 we talked to Professor Rogoff even he didn't expect what's 0:15:25.160 --> 0:15:27.800 occurred in India, right, and we've we've seen a real 0:15:27.840 --> 0:15:30.240 political backlash there. And Barry, I can Green, I wonder 0:15:30.280 --> 0:15:33.040 what you make of this of a of of Ken 0:15:33.080 --> 0:15:35.600 Rogoff's argument and be sort of how it's played out, 0:15:35.640 --> 0:15:38.720 not exactly how Ken Rogoff prescribed it to take place 0:15:38.880 --> 0:15:41.480 in India here over the last couple of weeks. Yeah, 0:15:41.520 --> 0:15:45.240 I think there's a lot of um distance between Ken's 0:15:45.680 --> 0:15:50.320 careful book and the not so careful policies that they've 0:15:50.360 --> 0:15:53.640 adopted now in India. As I understand it, the argument 0:15:53.720 --> 0:15:58.160 for doing that kind of monetary reform and doing away 0:15:58.280 --> 0:16:03.840 with big bank bills is to crack down on money 0:16:03.920 --> 0:16:09.240 launderers and drug traffickers and other people who uh use 0:16:09.360 --> 0:16:12.880 hundred dollar bills and five hundred euro notes. What they've 0:16:12.920 --> 0:16:16.240 done in India is removed so many banknotes as to 0:16:16.280 --> 0:16:20.960 create hardship for shopkeepers and and and poor people without 0:16:21.040 --> 0:16:23.880 making other provision for them. These are people who are 0:16:23.960 --> 0:16:29.600 under banked, not necessarily because they're avading taxes, but simply 0:16:29.640 --> 0:16:31.960 because they're under banked. And I think that's where the 0:16:32.720 --> 0:16:36.720 backlash comes from, the that the measure was poorly targeted. 0:16:37.440 --> 0:16:39.640 Let's take a step back and talk about reform more broadly. 0:16:39.680 --> 0:16:41.880 Can talk about that as one facet of reform. You're 0:16:41.960 --> 0:16:46.600 you're speaking on reform in Europe populism in Europe today? 0:16:46.800 --> 0:16:48.520 Where do things need to head? As you see when 0:16:48.520 --> 0:16:51.080 it comes to the banking regulation in Europe. But we 0:16:51.080 --> 0:16:54.200 we've heard the cries for the removal of the the 0:16:54.240 --> 0:16:57.520 revision of Dodd Franca in the US. What's the future 0:16:57.600 --> 0:17:00.480 of regulation here in the year two thousand seventeen. Well, 0:17:00.520 --> 0:17:03.040 in Europe, I think they have a problem with the 0:17:03.080 --> 0:17:06.960 new resolution regime where they make it very hard to 0:17:07.680 --> 0:17:11.280 uh and check public funds into bad banks and under 0:17:11.280 --> 0:17:15.200 capitalized banks. And that's part of the reason why progress 0:17:15.280 --> 0:17:19.520 in resolving the Italian banking problem has been so slow 0:17:20.160 --> 0:17:24.800 in in the US case, it would obviously be reckless 0:17:24.840 --> 0:17:28.320 to remove Dodd Frank before you had other ideas about 0:17:29.840 --> 0:17:32.840 a substitute for it. So to go back to pre 0:17:33.520 --> 0:17:37.919 two and seven bank regulation um would not be a 0:17:37.960 --> 0:17:44.760 solution obviously to any of the unintended consequences of Dodd Frank. 0:17:44.880 --> 0:17:50.280 So it's easy for populists to object to measures in 0:17:50.359 --> 0:17:55.119 place and to criticize Dodd Frank. It's much harder to 0:17:55.640 --> 0:17:57.920 see what they're going to put in its place, and 0:17:57.920 --> 0:18:00.880 where we're waiting to find out. I wonder what you've 0:18:00.920 --> 0:18:04.400 heard in the conversation, the ongoing conversation about the prospects 0:18:04.440 --> 0:18:07.800 for an infrastructure spending package here in the United States, 0:18:08.119 --> 0:18:10.400 how that could be most effective, if in fact there 0:18:10.440 --> 0:18:12.960 there is one, and whether you are cheered by the 0:18:12.960 --> 0:18:15.439 fact that what's being promoted here it seems as a 0:18:15.480 --> 0:18:18.880 sort of public private partnership model. Well, I think what 0:18:18.920 --> 0:18:23.479 we um want to see is UH infrastructure spending that 0:18:23.520 --> 0:18:28.800 actually increases the productivity of the economy, not wide elephants, 0:18:28.880 --> 0:18:34.560 but but productive productive investment UH infrastructure projects. We don't 0:18:34.600 --> 0:18:38.240 have any evidence that that's what we're we're going to 0:18:38.359 --> 0:18:43.399 see going forward. The real question is whether UH infrastructure 0:18:44.119 --> 0:18:49.680 projects go to the UH states of the president's friends 0:18:49.800 --> 0:18:54.560 and political allies, or or or or or business partners, 0:18:55.359 --> 0:18:59.080 or whether they really go to enhance the productivity and 0:18:59.080 --> 0:19:02.920 efficiency of the economy with dollars strength. Professor I con Green, 0:19:03.040 --> 0:19:06.840 how close are we to the strong dollar policies of 0:19:06.960 --> 0:19:10.240 late nineties into two thousand two or to the Plaza 0:19:10.280 --> 0:19:15.320 Accord world of a lifetime ago. I think we're very 0:19:15.440 --> 0:19:18.680 very where. We're a galaxy away from the Plaza Accord. 0:19:18.840 --> 0:19:24.080 We're not going to get that kind of agreement internationally, 0:19:24.359 --> 0:19:29.520 especially given the diplomatic and geo political tensions that are 0:19:29.560 --> 0:19:33.320 are are coming down the road. I don't think it's 0:19:33.720 --> 0:19:39.600 this administration's policy to support or maintain a strong dollar, 0:19:39.680 --> 0:19:45.119 but that's what they're getting, obviously from the expectation of 0:19:45.880 --> 0:19:51.159 increased deficit spending. I would add to the UH what 0:19:51.280 --> 0:19:54.520 you asked, Tom, that those of us who worry about 0:19:54.560 --> 0:19:57.560 protectionism have more reason to worry given the strength of 0:19:57.640 --> 0:19:59.960 the dollar. Well, thank you so much, Barry. I agree 0:20:00.160 --> 0:20:05.280 this morning from our studios in Berlin, David Geren, Tom King, worldwide, 0:20:06.119 --> 0:20:18.240 this is Bloomberg, who you put your trust in matters. 0:20:18.400 --> 0:20:23.040 Investors have put their trust in independent registered investment advisors 0:20:23.320 --> 0:20:26.120 to the two and of four trillion dollars. Why they 0:20:26.119 --> 0:20:29.439 see their roles to serve, not sell. That's why Charles 0:20:29.440 --> 0:20:33.919 Schwab is committed to the success over seven thousand independent 0:20:33.960 --> 0:20:39.760 financial advisors who passionately dedicate themselves to helping people achieve 0:20:40.080 --> 0:20:44.919 their financial goals. Learn more at find your Independent Advisor 0:20:45.359 --> 0:20:54.280 dot com. We now turn to what do you actually 0:20:54.359 --> 0:20:59.200 do in banking? Joining us buying Fortress Diamond at the 0:20:59.240 --> 0:21:05.520 absolute Autumn David Harrow, he of Chicago, he of Harris Associates. David, 0:21:05.800 --> 0:21:10.840 once again congratulations with being out front on ownership of 0:21:10.920 --> 0:21:13.879 banking shares and it has been a test of Harris 0:21:14.000 --> 0:21:18.240 Associates and your patients. Do you celebrate this morning the 0:21:18.320 --> 0:21:23.240 restructure of UniCredit? What does it mean for your portfolio? UM? 0:21:23.320 --> 0:21:25.840 First of all, we never celebrate in this business. Tom, 0:21:25.880 --> 0:21:30.399 you should know that UM. The Unit Credit news is 0:21:30.520 --> 0:21:35.440 good because it shows that some proactivity is finally occurring 0:21:35.520 --> 0:21:38.720 in Italy. Uh it is their biggest bank. We do 0:21:38.800 --> 0:21:41.399 have an Italian bank, but our Italian bank doesn't have 0:21:41.520 --> 0:21:45.200 any of the issues that that un Credit has. UM 0:21:45.320 --> 0:21:47.800 un Credit has been selling some assets, which is good. 0:21:47.800 --> 0:21:51.800 They're raising capital, which is good. They're really fortifying themselves. 0:21:51.840 --> 0:21:55.439 And if they could get this Montepeche d siana um 0:21:55.640 --> 0:21:59.600 situation six and get to ntail situation six, they'll be 0:21:59.640 --> 0:22:03.080 on their way. But our view was a lot of 0:22:03.080 --> 0:22:07.120 these European banking shares were just selling to low prices. 0:22:07.200 --> 0:22:10.960 They were overly reflecting um, the bad news that's in 0:22:11.000 --> 0:22:13.439 Europe and not reflecting some of the positive things that 0:22:13.480 --> 0:22:15.840 were happening. And so we we thought it was an 0:22:15.840 --> 0:22:19.679 opportunity and it took a while for the shares to 0:22:19.720 --> 0:22:22.280 perk up, but they're finally doing. So Now, what are 0:22:22.359 --> 0:22:24.480 what are some of those positive things that are happening 0:22:24.480 --> 0:22:26.800 in Europe? When you we hear we do hear the 0:22:26.800 --> 0:22:29.240 bad news more often than the good. Well, yeah, first 0:22:29.240 --> 0:22:33.439 of all, you have the plateau of slowing growth. Growth 0:22:33.440 --> 0:22:35.960 seems to be picking up a little bit. Second of all, 0:22:36.040 --> 0:22:41.840 you have loan losses have actually declined pretty much across Europe, 0:22:41.880 --> 0:22:44.720 and it's been kind of a source of profit in 0:22:44.720 --> 0:22:48.800 a way because you're just seeing higher quality credit than 0:22:48.840 --> 0:22:52.680 what you have seen in Europe. You're actually seeing some 0:22:52.800 --> 0:22:56.800 credit growth in the low single digits, and you're seeing 0:22:56.840 --> 0:23:00.320 banks proactively cut fees. So at the beginning of the year, 0:23:00.359 --> 0:23:03.440 when everyone was fearing at these low negative rates with 0:23:03.680 --> 0:23:07.840 smash earnings of banks, we haven't seen bank earnings be smashed. 0:23:07.880 --> 0:23:11.320 In fact, we've seen some stability or growing. David, I 0:23:11.359 --> 0:23:13.479 gotta I gotta make some money back because I keep 0:23:13.600 --> 0:23:17.560 losing embedding against the packers, Uh, David Hero, Should I 0:23:17.560 --> 0:23:21.960 be acquiring European bank shares this morning? I think they still. 0:23:22.000 --> 0:23:25.359 I think there's certain certain banks. Again, as you know, Tom, 0:23:25.359 --> 0:23:29.800 we're really stock selective, company selective, and I think certain 0:23:29.960 --> 0:23:32.440 of the high quality banks that are still selling out 0:23:32.440 --> 0:23:36.320 attractive valuations, being p parabond as I saw paul O 0:23:36.520 --> 0:23:41.840 Lloyd's credit suits. These are things which still offer very 0:23:41.960 --> 0:23:46.400 very good value all for their Each individual UH company 0:23:46.440 --> 0:23:49.720 has its own reasons, really, but they're selling that low prices, 0:23:49.760 --> 0:23:52.280 and I believe almost in every one of those cases 0:23:52.320 --> 0:23:54.879 I mentioned, you're going to continue to see earnings growth. 0:23:56.040 --> 0:23:59.639 Can you attribute the political stability that we're seeing, I mean, 0:24:00.240 --> 0:24:02.080 are looking back at that referendum, and it seems now 0:24:02.119 --> 0:24:03.880 that you do have at leasy say taking more proactive 0:24:03.880 --> 0:24:06.600 approach here too, to these banks. Can you attribute that 0:24:06.640 --> 0:24:08.760 to the referendum and we got the news yesterday that 0:24:08.800 --> 0:24:10.960 pure Color Pedant will stay on as the finance minister 0:24:11.080 --> 0:24:13.280