WEBVTT - Surveillance: Exclusive With U.K.'s Johnson 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance podcast name Tom Keene. Along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownwitz Jailey, we bring you 0:00:13.320 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance, an Apple podcast, SoundCloud, Bloomberg dot Com, 0:00:23.920 --> 0:00:30.840 and of course on the Bloomberg terminal. We've caught up 0:00:31.200 --> 0:00:33.320 with the British Prime Minister Boris Johnson, John Michael the 0:00:33.320 --> 0:00:35.880 way the Bloomberg News, the editor in chief sitting down 0:00:36.080 --> 0:00:39.680 with a British leader's take a listen. China is a 0:00:39.720 --> 0:00:44.800 gigantic part of our economic life and will be for 0:00:44.840 --> 0:00:48.360 a for a long time, for for our lifetimes and that. 0:00:48.440 --> 0:00:52.920 But that does not mean that we should be a 0:00:53.159 --> 0:00:57.160 naive in the way that we look at our our 0:00:57.200 --> 0:00:59.640 critical natural infrastructure, the way we look at You mentioned 0:00:59.680 --> 0:01:04.840 nuclear power, you mentioned five G technology. Those are all 0:01:04.920 --> 0:01:08.839 legitimate concerns at any government, many many other governments around 0:01:08.880 --> 0:01:12.640 the world have. But I am I want to be 0:01:12.760 --> 0:01:15.000 I've said this many times, it's worth repeating. I am 0:01:15.120 --> 0:01:18.280 no sinophobe, very far from it. I think you think 0:01:18.280 --> 0:01:21.840 you're the last sinophile in the cabinet. No, I expect 0:01:21.880 --> 0:01:26.760 there are lots of looks China's China is great about 0:01:26.760 --> 0:01:29.400 wind power? Would you let them buy offshore wind power? 0:01:29.400 --> 0:01:31.640 That's think I think you'd have to with You'd have 0:01:31.720 --> 0:01:34.240 to look at as you'd have to look at what 0:01:34.319 --> 0:01:39.840 was your defining as strategic or critical. But I certainly 0:01:39.880 --> 0:01:44.199 think that having a know our trading relationship with China, 0:01:44.200 --> 0:01:46.480 if you look at it, what's what it's it's in 0:01:46.520 --> 0:01:49.000 spite of all the difficulties, in spite of you know, 0:01:49.040 --> 0:01:53.680 all the angry conversations about or the difficult conversations about 0:01:53.720 --> 0:01:56.800 the Dalai lam Or or Hong Kong or or the Wakers, 0:01:56.880 --> 0:01:59.560 and where where we will continue to stick to our points, right, 0:02:00.160 --> 0:02:02.080 we will continue to stick to our to our views. 0:02:03.040 --> 0:02:06.920 But actually trade with China has continued to expand for 0:02:06.960 --> 0:02:09.519 a very long time and I think probably will continue 0:02:09.520 --> 0:02:12.160 to expand, as I say, for for the rest of 0:02:12.160 --> 0:02:16.360 our lives. That doesn't mean that we should be um, 0:02:16.440 --> 0:02:19.280 you know, we should be also we should be cautious 0:02:19.680 --> 0:02:22.360 about how we had at our cn I and about 0:02:22.360 --> 0:02:26.280 how we handle FDI from China into some of our 0:02:27.160 --> 0:02:29.200 That's why we brought in some of the legislation that 0:02:29.240 --> 0:02:32.320 we have. The Prime Minister of the United Kingdom getting 0:02:32.360 --> 0:02:35.919 to greet those at copy in Glasgow, joining us now 0:02:35.960 --> 0:02:38.800 the other in chief of Bloomberg News, John michaels Wade, 0:02:38.800 --> 0:02:40.520 I put on a new shirt and sat up straight 0:02:40.560 --> 0:02:45.160 today for this discussion. John. There will be Johnson, Thank you. 0:02:45.240 --> 0:02:48.400 There will be Johnson, there will be Scotland, and there 0:02:48.400 --> 0:02:51.400 will also be the hope for a future perfect. You're 0:02:51.440 --> 0:02:54.720 wonderful book of too many years ago two thousand three. 0:02:54.720 --> 0:02:57.120 We need to redo, John, and I want to talk 0:02:57.160 --> 0:03:00.280 at the back end of that book about the back ash. 0:03:00.320 --> 0:03:03.840 You mentioned the backlash of globalization. What's going to be 0:03:03.919 --> 0:03:07.720 the backlash of climate change at the Prime Minister in 0:03:07.880 --> 0:03:12.480 others face at Glasgow. I think that's actually quite a 0:03:12.520 --> 0:03:15.000 good comparison. In fact, I think if you look at 0:03:15.400 --> 0:03:19.480 the issue in Britain of heat heat pumps, which is 0:03:19.560 --> 0:03:21.639 from a green point of view, people are trying to 0:03:21.680 --> 0:03:23.880 put in much more kind of low energy heat pumps 0:03:23.880 --> 0:03:27.080 into their houses and everyone thinks that's wonderful and green. 0:03:27.200 --> 0:03:29.959 But what's happening is consumers, who are generally quite keen 0:03:30.000 --> 0:03:31.640 on green things, they're saying, no, God, these are going 0:03:31.680 --> 0:03:34.119 to cost. It could cost five thou dollars they could 0:03:34.160 --> 0:03:36.640 cost huge amounts of money. And I think that what 0:03:36.800 --> 0:03:39.880 is happening with greenery is a little bit similar to globalization. 0:03:39.920 --> 0:03:42.640 It's something that everyone generally thinks is a good idea. 0:03:43.080 --> 0:03:45.040 And remember there was an era where people thought that 0:03:45.120 --> 0:03:47.760 generally opening up economies were great, and everyone approved of 0:03:47.760 --> 0:03:52.240 globalization until it happened to them. Everyone approves of fighting 0:03:52.280 --> 0:03:55.160 climate change until suddenly it means the price of petrol 0:03:55.720 --> 0:04:00.480 or gas as you mistaken they call it rises. That 0:04:00.200 --> 0:04:02.600 that's where that's where it hurts. It's when you're heating 0:04:02.640 --> 0:04:05.560 for your house hurts. It's where things that really affect 0:04:05.680 --> 0:04:08.920 people particularly, and Johnson is kind of caught in the 0:04:08.960 --> 0:04:10.720 middle of that as Indeed, you know, you can look 0:04:10.760 --> 0:04:13.400 at what's happening with the Democrats in Congress. Do the 0:04:13.480 --> 0:04:18.080 elites know there's a cup twenty six they have to 0:04:18.160 --> 0:04:23.680 sell to a public that's hugely skeptical. I think, well 0:04:23.760 --> 0:04:26.520 that one example of the elites is her Majesty Queen 0:04:26.520 --> 0:04:30.520 Elizabeth and she she was caught on caught on the 0:04:30.520 --> 0:04:33.320 recorder the other day talking about that that nobody was 0:04:33.360 --> 0:04:36.280 coming and that it all looked very difficult. Um. So 0:04:36.320 --> 0:04:37.920 I think some people are aware of that, but I 0:04:38.000 --> 0:04:40.120 think in general, no, I think that it's one of 0:04:40.160 --> 0:04:43.800 those zip areas where there is a divide that opens 0:04:43.880 --> 0:04:46.640 up and you look around the world. Every time it's 0:04:46.680 --> 0:04:49.400 come up, it's always sort of hit the elites harder. 0:04:49.440 --> 0:04:52.000 You might remember that example a bit ago where Macron 0:04:52.480 --> 0:04:55.680 suddenly ray you know, changed the speed limits on various 0:04:55.760 --> 0:04:58.159 roads in part for kind of green reasons, and you 0:04:58.200 --> 0:05:01.919 suddenly end up with the La Jean. There's few things 0:05:01.960 --> 0:05:04.960 that make people more annoyed than something directly hitting part 0:05:05.000 --> 0:05:08.040 of their pocketbook. You look around parts of America as 0:05:08.040 --> 0:05:10.720 well in the debates now about what happens with infrastructure 0:05:10.720 --> 0:05:13.000 bills and so on. So I do think it's I 0:05:13.040 --> 0:05:15.560 think it's a worrying area from the point of view 0:05:15.560 --> 0:05:18.960 of a kind of global elite view. Meanwhile, they are 0:05:19.040 --> 0:05:22.000 hosting a Copper twenty six at a time when there's 0:05:22.040 --> 0:05:24.440 a lot of questions around how much to open your borders. 0:05:24.640 --> 0:05:28.320 It's been an issue of serious disagreement and frankly a 0:05:28.360 --> 0:05:31.960 lot of consternation. However, at this moment in time, UK's 0:05:32.279 --> 0:05:36.200 hospitalization and death rate for from COVID has actually been 0:05:36.240 --> 0:05:38.479 going up. After being celebrated as one of the big 0:05:38.480 --> 0:05:43.040 winners from the whole pandemic. How do you respond to that, Well, 0:05:43.040 --> 0:05:47.599 it's interesting you look at the numbers for COVID. You know, sufferers, 0:05:47.600 --> 0:05:50.120 people who caughts over COVID, those have been rising very 0:05:50.200 --> 0:05:53.680 rapidly in Britain. You're right, the hospitalization and death rates 0:05:53.720 --> 0:05:56.599 have gone up, but so far, at least, at least 0:05:56.720 --> 0:05:59.440 as far as you can see, the sort of vaccine 0:05:59.480 --> 0:06:03.000 protection thing is sort of holding the current levels. I 0:06:03.000 --> 0:06:05.760 thinks around forty a day people are catching it. You 0:06:05.800 --> 0:06:08.360 would expect to see many more people dying and in 0:06:08.400 --> 0:06:11.120 the rather gruesome way in which this works, and it 0:06:11.160 --> 0:06:13.880 doesn't seem to be happening because it's it's really ripping 0:06:13.960 --> 0:06:17.840 through especially young people. Everyone who's got schools, people were 0:06:17.880 --> 0:06:20.000 working with here, you know, they they've got people are 0:06:20.040 --> 0:06:22.680 stuck at home because their children are suddenly got it. 0:06:23.040 --> 0:06:25.159 And so there is there's a degree of that, but 0:06:25.200 --> 0:06:27.920 there is also the sort of general sense that back 0:06:27.920 --> 0:06:29.720 to what you said earlier, these things to do with 0:06:30.160 --> 0:06:34.080 opening up economies, people being there, they are taking in 0:06:34.120 --> 0:06:37.520 this in COVID. You know that Johnson is going a 0:06:37.560 --> 0:06:40.240 little bit back to his more liberal routes in that interview, 0:06:40.320 --> 0:06:44.120 I talk about the fact that we're in Margaret Thatcher's study. 0:06:44.560 --> 0:06:46.640 There's a picture of her glowering down on us and 0:06:46.760 --> 0:06:49.400 a copy of High X Road to serve to a 0:06:49.560 --> 0:06:52.640 key part of the Tom Keen booklist, staring down at us. 0:06:53.240 --> 0:06:56.200 That that was the culture from which Boris Johnson came 0:06:57.000 --> 0:07:00.480 and he still has some quite strong libertarian stinks at 0:07:00.480 --> 0:07:02.800 the same time as that he is, by any measure, 0:07:02.839 --> 0:07:05.520 increasing the size of government fairly formidably. He blames that 0:07:05.560 --> 0:07:08.200 on cop COVID, and he's also trying to sort of, 0:07:08.360 --> 0:07:11.360 I suppose do a version of industrial policy to push 0:07:11.400 --> 0:07:15.160 the British economy, especially towards the North, towards manufacturing, towards 0:07:15.240 --> 0:07:18.120 things like that. The football stadiums are full again, John. 0:07:18.360 --> 0:07:21.960 The important questions, sir, Were you at lester Manchester United 0:07:22.440 --> 0:07:27.360 last weekend? No, very, very sadly I missed that. My 0:07:27.440 --> 0:07:30.200 life is happy because I saw Brendan Rodgers in a restaurant, 0:07:30.440 --> 0:07:32.559 didn't you. None of this will mean anything to people 0:07:32.640 --> 0:07:38.520 like sometimes you know Tom Night. John, Thank you, sir, 0:07:39.080 --> 0:07:41.760 great work as always. John Mchothwaite. There Bloomberg News editor 0:07:41.760 --> 0:07:44.480 in chief sitting down with the Prime Minister in the 0:07:44.600 --> 0:07:51.920 UK Tom, I'm delighted to be here in the Science 0:07:52.000 --> 0:07:53.960 Museum where we also just run from the Prime Minister 0:07:54.040 --> 0:07:56.560 of doing a big speech on innovation and he wants 0:07:56.560 --> 0:07:59.239 to attract the big box around the world. One person 0:07:59.280 --> 0:08:01.240 who was in the room and who I believe also 0:08:01.320 --> 0:08:03.640 had dinner with the Prime Minister yesterday, is David Solomon. 0:08:03.680 --> 0:08:06.000 He's the chief executive of Goldman SAX. Thank you so 0:08:06.080 --> 0:08:07.880 much for joining us. It's been a while since we 0:08:07.880 --> 0:08:09.800 saw you in London. It's it's been a while since 0:08:09.800 --> 0:08:12.440 I've been in London. I'm thrilled to be back in London. Um. 0:08:12.480 --> 0:08:15.640 It's really been since March um and to be back, 0:08:15.760 --> 0:08:17.240 it's good. It's good to be back, and it's good 0:08:17.240 --> 0:08:19.040 to be spending time with people. And and the pitch 0:08:19.080 --> 0:08:22.320 from the UK government is come here, invest to be 0:08:22.520 --> 0:08:26.800 green and you know invest the more. Have they been persuasive, 0:08:26.920 --> 0:08:29.600 What has the government been able to tell executives? Well, 0:08:29.640 --> 0:08:31.360 I you know, I think they have a good pitch. 0:08:31.400 --> 0:08:33.079 But as you know, we've been very, very committed to 0:08:33.120 --> 0:08:36.319 the UK for a long time. We have people here 0:08:36.320 --> 0:08:38.760 in the UK and in fact even you know Preak 0:08:38.800 --> 0:08:41.360 Panbamic going back to team We've built a new building 0:08:41.880 --> 0:08:44.320 here plump Tree Court, which is a billion dollar commitment. 0:08:44.760 --> 0:08:48.199 We've been growing up, you know, up also in Birmingham, 0:08:48.200 --> 0:08:50.640 where we now have expanded our presence in the UK. 0:08:51.000 --> 0:08:53.679 So we've seen the UK as a tremendous opportunity for 0:08:53.760 --> 0:08:56.480 us to have a significant outpost, serve our clients you know, 0:08:56.559 --> 0:09:00.439 both here and also provide resources across the continent. Has 0:09:00.480 --> 0:09:02.320 that changed at all because of Brexit? We have the 0:09:02.360 --> 0:09:04.800 energy crisis, there's a lack of drivers. Is there anything 0:09:04.840 --> 0:09:07.360 that you need to ask authorities to do better or 0:09:07.400 --> 0:09:09.600 that you clients want the UK to do better? Well? 0:09:09.640 --> 0:09:11.880 I think we're at a moment in time where we're 0:09:11.880 --> 0:09:13.720 coming out of the pandemic and there are a handful 0:09:13.720 --> 0:09:15.760 of things going on. I think all over the world. 0:09:16.240 --> 0:09:19.400 There are labor issues that are really a reflection of 0:09:19.400 --> 0:09:22.800 the transition out of the pandemic. There are supply chain issues. 0:09:23.320 --> 0:09:26.040 Some of this stuff is transitory. There are some secular 0:09:26.080 --> 0:09:28.760 trends that we have to watch closely. Um. But I 0:09:28.760 --> 0:09:32.200 think we're adjusting and dealing with it as anybody else's 0:09:32.240 --> 0:09:34.120 and I you know, I think leaders here are thinking 0:09:34.160 --> 0:09:35.920 about it the same way leaders are around the world. 0:09:36.120 --> 0:09:37.600 When you look at the UK and of course some 0:09:37.640 --> 0:09:39.760 of these green investments that the UK and the City 0:09:39.760 --> 0:09:42.800 of London particularly has been really trying to pitch. You've 0:09:42.800 --> 0:09:46.280 been extremely involved in carbon off setting. Can London really 0:09:46.320 --> 0:09:50.240 spearhead that movement? Well, I think it's important that governments 0:09:50.280 --> 0:09:53.000 around the world partner with the private sector to try 0:09:53.040 --> 0:09:56.680 to get capital directed toward innovation in a way that 0:09:56.720 --> 0:09:59.120 we can accelerate the climate transition. And you know, I 0:09:59.120 --> 0:10:03.080 want to emphasize it's early transition. Um. We need thoughtful policy. 0:10:03.400 --> 0:10:05.040 In my opinion, we need to put a price on 0:10:05.080 --> 0:10:07.040 carbon um and I think this is something that is 0:10:07.120 --> 0:10:11.640 very important. There's an enormous premium for certain green technologies. 0:10:11.720 --> 0:10:14.880 We can invest in technology that can collapse that premium 0:10:15.120 --> 0:10:17.960 and allow us to deliver a much more sustainable future. 0:10:18.160 --> 0:10:19.760 But this is something that's going to take some time, 0:10:19.760 --> 0:10:23.680 and I think it requires both good public policy from 0:10:23.720 --> 0:10:26.960 from our governments and then active involvement from the private sector. 0:10:27.400 --> 0:10:29.440 We're trying to do our part. I think, you know, 0:10:29.520 --> 0:10:33.320 we've made a big pledge towards seven fifty billion dollars 0:10:33.360 --> 0:10:38.720 of sustainable financing, investment advisory services. We're working toward that 0:10:39.000 --> 0:10:40.320 and we try to spend a lot of time with 0:10:40.320 --> 0:10:43.560 our clients thinking about how we can support them in 0:10:43.880 --> 0:10:46.559 their individual transitions. And so this is getting a lot 0:10:46.559 --> 0:10:48.760 of attention, as you would expect it should mean. There's 0:10:48.760 --> 0:10:51.240 also quite a lot of regulation going aheads and we've 0:10:51.240 --> 0:10:54.640 heard yesterday, for example about E S G derivatives exactly 0:10:54.679 --> 0:10:58.160 you know, where does that end? And can can London 0:10:58.200 --> 0:11:01.480 as a capital be the green finance capital of Europe 0:11:01.480 --> 0:11:04.640 and the world? Well, I think there's a real you know, 0:11:04.679 --> 0:11:07.080 we heard very very clearly from the Prime Minister, a 0:11:07.200 --> 0:11:11.119 real sense of trying to spur on in this economy. 0:11:11.200 --> 0:11:15.640 Here an opportunity to create less regulatory structure and therefore 0:11:15.720 --> 0:11:18.280 more incentives to spur more of that investment. And there's 0:11:18.320 --> 0:11:21.160 a great center of excellent and investment here, certainly around 0:11:21.160 --> 0:11:24.120 the vaccines. There was a bunch that happened here in 0:11:24.120 --> 0:11:26.800 the UK and so you know, I'm optimistic the UK 0:11:26.880 --> 0:11:29.520 will play apart. But when you think broadly about these issues, 0:11:30.000 --> 0:11:33.640 this is a global issue, and particularly in the developing world. 0:11:33.920 --> 0:11:35.760 You know, we in the developed parts of the world 0:11:35.800 --> 0:11:38.120 are going to have to help to bring the world 0:11:38.120 --> 0:11:41.560 along and get capital focused on technologies that can move 0:11:41.600 --> 0:11:44.160 this transition over time, and it's really it's not just 0:11:44.280 --> 0:11:47.040 here or there, it's everywhere, and talk to me about China. 0:11:47.120 --> 0:11:49.319 So we had exciting news from Golden Sex. I think 0:11:49.320 --> 0:11:51.679 in the last couple of days. How committed are you 0:11:51.840 --> 0:11:53.920 to China or how where we are you of things 0:11:54.000 --> 0:11:56.319 changing quite quickly given some of the economic posts he's 0:11:56.320 --> 0:11:58.480 put in place by the President. Sure, we take a 0:11:58.559 --> 0:12:01.200 very long term view, um and we take this view, 0:12:01.720 --> 0:12:04.200 you know, rooted largely in the fact that we have many, 0:12:04.240 --> 0:12:06.320 many clients that have been doing business in China for 0:12:06.320 --> 0:12:08.920 a long time. They want our support in our involvement. 0:12:09.280 --> 0:12:12.000 We're extremely pleased that after a long period of time, 0:12:12.080 --> 0:12:14.760 seventeen years since we started our joint venture, that we 0:12:14.840 --> 0:12:17.320 actually now have ownership and control of our joint venture 0:12:17.320 --> 0:12:20.400 in China. So we're thankful for that. We have a 0:12:20.440 --> 0:12:22.920 long term plan to continue to grow in China. We've 0:12:22.920 --> 0:12:26.840 recently announced a wealth management joint venture there. There's no 0:12:26.960 --> 0:12:30.959 question that the bilateral relationship between the US and China 0:12:31.559 --> 0:12:34.520 is complex and it's going to continue to evolve. We're 0:12:34.520 --> 0:12:37.800 watching it closely, but with a long term lens. China 0:12:37.840 --> 0:12:40.240 is an important part of the global economy. Goldman Sex 0:12:40.320 --> 0:12:43.440 operates as a global player with businesses around the world 0:12:43.480 --> 0:12:46.319 that are participating in global growth, and so we think 0:12:46.320 --> 0:12:48.120 in the long term that presence there will be very 0:12:48.120 --> 0:12:51.360 important for us. Is it risk you're being alone or 0:12:51.440 --> 0:12:53.240 is it safe for being a joint venture? Like, what 0:12:53.280 --> 0:12:56.679 does it mean in terms of regulatory risks? Well, I 0:12:55.800 --> 0:13:00.000 I think there are always regulatory risks um and all markets. 0:13:00.080 --> 0:13:02.960 And I think that you know, we've shown that ability 0:13:03.040 --> 0:13:06.360 to adapt to regulatory change and adapt our business appropriately 0:13:06.720 --> 0:13:09.240 to the degree that our regulatory challenges will deal with them. 0:13:09.240 --> 0:13:12.480 The big reason that we like controlling our joint venture 0:13:12.520 --> 0:13:14.520 is when we didn't own our joint venture, we own 0:13:14.559 --> 0:13:17.280 thirty three of our business in China. Every dollar of 0:13:17.320 --> 0:13:20.120 investment we made, we only own thirty three cents of it. 0:13:20.240 --> 0:13:22.920 So this allows us to continue to invest for the 0:13:23.000 --> 0:13:25.640 long term and growing our franchise in our business and 0:13:25.720 --> 0:13:28.160 serving our clients in China, and we're excited about that. 0:13:28.200 --> 0:13:30.720 And again, you know, my job in stewarding this a 0:13:30.760 --> 0:13:33.600 hundred and fifty three year old institution is to take 0:13:33.640 --> 0:13:35.920 a very you know, a very very long term view, 0:13:36.520 --> 0:13:38.480 and that's how we think about it. When we're when 0:13:38.480 --> 0:13:40.360 we're investing in building there. Did how much do you 0:13:40.360 --> 0:13:41.960 want to grow in China the next five years? I 0:13:41.960 --> 0:13:44.440 think there's I think there's a big opportunity. We've put 0:13:44.480 --> 0:13:46.440 forward a five year China plan. We haven't put the 0:13:46.480 --> 0:13:49.200 details of that five year China plan how publicly, but 0:13:49.240 --> 0:13:52.320 we run a relatively big business in China, although it's 0:13:52.320 --> 0:13:56.280 a very small part of overall Goldmen Sex. Our growth 0:13:56.400 --> 0:13:58.360 is correlated to where there's growth in the world, and 0:13:58.400 --> 0:14:02.720 there's certainly good growth in China. UM access to UM, 0:14:02.880 --> 0:14:05.880 the wealth of individuals and wealth management platform, given our 0:14:05.920 --> 0:14:09.720 broad wealth management platform, is something that's very attractive to us. 0:14:10.000 --> 0:14:12.920 Corporate activity has been quite high there. UM. There's no 0:14:13.000 --> 0:14:16.600 question that that that's something that that corporates there turned 0:14:16.640 --> 0:14:20.080 to our expertise and capital markets and advisory services. So 0:14:20.120 --> 0:14:22.320 I think there's a good opportunity set for us to 0:14:22.400 --> 0:14:25.640 prosecute over time. How painful have these high energy prices 0:14:25.680 --> 0:14:29.360 been in customers in China but elsewhere in the world. Well, 0:14:29.400 --> 0:14:33.200 I think there's there's no question that we're going to 0:14:33.240 --> 0:14:36.080 go through a period where there's more inflationary pressure on 0:14:36.120 --> 0:14:39.560 commodities prices. And this goes back to why when we 0:14:39.560 --> 0:14:42.880 were talking about sustainability broadly, I said, we have to 0:14:42.920 --> 0:14:46.520 balance good public policy, you know, with the short term implications. 0:14:46.520 --> 0:14:49.440 And that's why it's a transition. If we're too aggressive 0:14:49.440 --> 0:14:51.880 in the context of how we direct capital or the 0:14:51.920 --> 0:14:55.560 private sector, that can be more inflationary, and obviously that 0:14:55.640 --> 0:14:59.160 makes its way down to the end users individuals um 0:14:59.200 --> 0:15:01.680 and the cost of their energy or their gasoline, etcetera. 0:15:01.720 --> 0:15:04.800 And there's a balance in that. If that goes too quickly, um, 0:15:05.080 --> 0:15:07.160 you know, that's that's something that that's something that people 0:15:07.160 --> 0:15:09.200 are not going to be happy about, and for politicians 0:15:09.240 --> 0:15:11.160 that will be certainly something that they'll have to wrestle with. 0:15:11.320 --> 0:15:13.080 But what do you say to a climate change activists 0:15:13.080 --> 0:15:15.560 that says, actually, we have the energy prices. But it's 0:15:15.560 --> 0:15:18.480 also a good excuse for big banks, big companies, big 0:15:18.520 --> 0:15:22.200 finance to delay the transition, so to go through a transition, 0:15:22.280 --> 0:15:25.440 but actually not as be as aggressive in stopping, for example, 0:15:25.520 --> 0:15:28.080 funding some of the fossil fuel companies. I think this 0:15:28.200 --> 0:15:30.520 is all balance. And you know, I've said clearly that 0:15:30.600 --> 0:15:33.160 Goldman Sachs is going to be in a position where 0:15:33.200 --> 0:15:35.880 we're going to be doing business with fossil fuel companies 0:15:35.880 --> 0:15:38.480 and financing certain fossil fuel companies. But it's it's a 0:15:38.480 --> 0:15:40.560 direction of transition. We want to be in business with 0:15:40.600 --> 0:15:44.280 people that are investing in their transition. We want good 0:15:44.280 --> 0:15:46.640 public policy. I said to you earlier, we have to 0:15:46.680 --> 0:15:49.280 put a price on carbon and my opinion because that 0:15:49.320 --> 0:15:53.640 will allow us to therefore accelerate the transition. But all 0:15:53.640 --> 0:15:56.720 of this is a balance the most aggressive point of 0:15:56.800 --> 0:15:59.600 view on the transition and the least aggressive art right. 0:16:00.080 --> 0:16:03.800 It's a constructive partnership between governments and the private sector 0:16:03.840 --> 0:16:06.800 to make sure, you know, we protect our society and 0:16:06.840 --> 0:16:09.880 get capital into technologies that can evolve and help us 0:16:09.880 --> 0:16:12.440 make the world greener. And I firmly believe that something 0:16:12.480 --> 0:16:15.040 we can do. But it's something that's going to require 0:16:15.080 --> 0:16:17.240 a lot of focus and a little bit of patients, 0:16:17.240 --> 0:16:20.720 but with appropriate intention and energy and commitment um and 0:16:20.760 --> 0:16:24.400 we certainly have that. What happens if a failure, I 0:16:24.400 --> 0:16:26.760 I don't see it as as as I don't see 0:16:26.760 --> 0:16:28.640 it as black and white as being a you know, 0:16:29.360 --> 0:16:32.040 a failure. I know, you know, the Prime Minister was 0:16:32.080 --> 0:16:34.520 asked this morning, you know, what do you expect and 0:16:34.600 --> 0:16:37.080 what's a win? I think part of this and I 0:16:37.120 --> 0:16:39.000 think this is one of the constructive things about being 0:16:39.000 --> 0:16:41.960 a part of the session here today, this Global Investment Summit, 0:16:42.000 --> 0:16:44.080 and I know what will be the same with copy. 0:16:44.680 --> 0:16:47.160 You need to create dialogue. People need to have debates. 0:16:47.160 --> 0:16:50.680 We have to be willing to debate, discuss, learn and 0:16:50.720 --> 0:16:53.960 therefore make good policy decisions as we move forward. And 0:16:54.000 --> 0:16:56.520 this is all constructive part of the process. So I 0:16:56.880 --> 0:16:59.120 I see the fact that these dialogues are occurring is 0:16:59.120 --> 0:17:02.120 pushing us forward. I think that's a very very important 0:17:02.160 --> 0:17:05.080 part of the transition journey that we're on. But it's 0:17:05.119 --> 0:17:07.199 not a it's not a yes or no to me 0:17:07.280 --> 0:17:09.159 that there's a win or a failure. This is going 0:17:09.200 --> 0:17:11.320 to be a process that we're all invested heavily in. 0:17:11.680 --> 0:17:13.800 Thank you so much, David Solomon. I want to talk 0:17:13.840 --> 0:17:15.560 about your music, but we'll have to do another time. 0:17:15.600 --> 0:17:18.760 I don't know if there's anything really really happy to 0:17:18.800 --> 0:17:20.280 be with you and just happy to be back in 0:17:20.320 --> 0:17:22.280 London today. Yeah, it's nice to have you back. With that. 0:17:22.320 --> 0:17:23.600 We're going to send it back to you in New 0:17:23.680 --> 0:17:32.240 York right now to the parlor games. Subrato or Jampa 0:17:32.320 --> 0:17:34.720 joins us head of the US rates Strategy at SoC 0:17:34.800 --> 0:17:37.320 Gen's world. We could get an update heres. So Brad, 0:17:37.680 --> 0:17:40.919 how important is the adjustment in the FED message? Do 0:17:41.000 --> 0:17:43.320 they have to catch up where the market is on 0:17:43.480 --> 0:17:47.639 maybe a slower growth and maybe a more controlled inflation 0:17:50.160 --> 0:17:52.280 um Not really. I think I think that for the 0:17:52.320 --> 0:17:55.159 most part, you're going to consistently here the same message 0:17:55.160 --> 0:17:58.119 from all the feed speakers that they're probably going to 0:17:58.160 --> 0:18:01.919 be very careful and cautious on heights because of the 0:18:01.920 --> 0:18:03.920 fact that they just don't have enough information on the 0:18:03.960 --> 0:18:08.000 inflation front for them to sort of guide the markets 0:18:08.040 --> 0:18:10.640 towards rate heights. And that's why I think you're seeing 0:18:10.640 --> 0:18:12.040 a little bit of an adjustment in the in the 0:18:12.040 --> 0:18:14.600 two year part of the curve. This morning, we did 0:18:14.680 --> 0:18:17.280 see the market fully priced in three hikes by the 0:18:17.359 --> 0:18:19.800 end of three and now you're going to see a 0:18:19.800 --> 0:18:22.880 little bit of adjustment based on what the fense say. 0:18:23.119 --> 0:18:26.520 Equities are on a tear. What does that signal to 0:18:26.640 --> 0:18:32.840 you in an overarching strategy, and particularly in fixed income, well, 0:18:32.880 --> 0:18:34.880 I think that low yields are here to stay. As 0:18:34.880 --> 0:18:38.440 long as yields are low, real yields remain low, then 0:18:38.640 --> 0:18:40.879 you have to go out the respectrum and invest in 0:18:41.520 --> 0:18:44.959 higher yielding assets. So if you look at the bond 0:18:45.040 --> 0:18:49.199 market complex, whether it be high yield or or treasuries 0:18:49.240 --> 0:18:51.960 on the other end of the spectrum, your real returns 0:18:51.960 --> 0:18:54.480 are very very low. I mean, in treasuries are getting 0:18:54.600 --> 0:18:57.640 negative ninety basis points. So it just doesn't make any 0:18:57.640 --> 0:19:01.200 sense to be in bonds, and you're better investing out 0:19:01.240 --> 0:19:03.080 the respectrum. And that's why you're seeing more and more 0:19:03.200 --> 0:19:06.320 demand if you will, for risky assets as well as 0:19:06.720 --> 0:19:09.959 corporate bonds and high yielding bonds, an environment where tragedy 0:19:09.960 --> 0:19:12.159 als are going to potentially remain low for the receiver 0:19:12.160 --> 0:19:13.919 of future. So about I want to sit on the 0:19:13.920 --> 0:19:16.439 federal reserve for a minute. The idea here that very 0:19:16.480 --> 0:19:19.359 inevitably will push back as of the right rate hiking 0:19:19.400 --> 0:19:23.199 expectations that are being built into markets. Would they embrace this? 0:19:23.400 --> 0:19:26.520 I mean, markets are still chugging along even as traders 0:19:26.560 --> 0:19:29.119 price in two rate hikes. Don't they want to propagate 0:19:29.160 --> 0:19:31.600 that because it gives them, frankly, more ammunition down the 0:19:31.640 --> 0:19:34.399 line to either ease without even moving the rate just 0:19:34.480 --> 0:19:37.800 by verbal intervention, or down the line it does leave 0:19:37.840 --> 0:19:40.040 them the ability to cut because rates will not be 0:19:40.119 --> 0:19:44.080 at zero um. So I think the way I would 0:19:44.119 --> 0:19:47.639 look at it is I think montreal policy, especially rate hikes, 0:19:47.720 --> 0:19:50.360 is a very blunt tool in this environment. Right You're 0:19:50.400 --> 0:19:54.439 looking at a very unusual inflationary environment that's driven by 0:19:54.440 --> 0:19:59.200 supply chain instructions and labor shortages, you know, higher rents, 0:19:59.520 --> 0:20:02.200 and you know, the the FED can't really meaningfully do 0:20:02.280 --> 0:20:06.480 anything by raising rates to sort of fix the inflation 0:20:06.560 --> 0:20:09.120 problem that we're going through right now. So I think 0:20:09.160 --> 0:20:11.280 the best course of action for the FED is to 0:20:11.320 --> 0:20:14.960 remain patient until it really really needs to raise rates. 0:20:15.040 --> 0:20:17.200 So that's why I think they're gonna err on the 0:20:17.240 --> 0:20:19.040 side of the caution, because they know they can pivot 0:20:19.119 --> 0:20:22.399 easily to guiding the markets towards rate hexs if they 0:20:22.440 --> 0:20:25.080 need to. If they do it now, then what you're 0:20:25.119 --> 0:20:27.080