WEBVTT - Truss Resigns as UK Premier After Tax-Cut Backfire 0:00:01.840 --> 0:00:04.480 This is Bloomberg Business Week. I'm Carol Masser and I'm 0:00:04.519 --> 0:00:07.320 Bloomberg Quick Takes Tim Stanovic. We're here every day bringing 0:00:07.360 --> 0:00:09.880 you the latest news from the world of business and finance, 0:00:09.880 --> 0:00:13.680 plus technology, politics, economics, all purtnising the power of Business 0:00:13.720 --> 0:00:17.160 Week reporters and editors, not to mention our journalists and 0:00:17.200 --> 0:00:20.040 analyst in more than one twenty countries. You can download 0:00:20.040 --> 0:00:23.480 Bloomberg Business Weekend iTunes, SoundCloud, or Bloomberg dot Com. You 0:00:23.520 --> 0:00:25.479 can also listen to our radio show at two pm 0:00:25.480 --> 0:00:28.440 Eastern Time on Bloomberg Radio or watch us on YouTube 0:00:28.440 --> 0:00:32.800 search Bloomberg glovel News. Carol Masser along with Mike Reagan 0:00:33.000 --> 0:00:35.519 in for Tim Stanovic on this Thursday, and as we 0:00:35.560 --> 0:00:38.120 mentioned at the top, really uh the news heard round 0:00:38.120 --> 0:00:40.280 the world, and that was the resignation of UK Prime 0:00:40.320 --> 0:00:43.559 Minister Liz Trust a top story without a doubt. So 0:00:43.600 --> 0:00:45.800 with what you need to know in the implications of 0:00:45.800 --> 0:00:49.440 the instability, let's get to ed Price principle for geopolitical 0:00:49.479 --> 0:00:52.840 forecasting at Ergo, it's a global consulting and forecasting firm. 0:00:52.960 --> 0:00:55.800 Ed is a former British trade official representing the UK 0:00:55.880 --> 0:00:58.160 government to Wall Street and the U S official sector 0:00:58.240 --> 0:01:01.640 that was from A one, and he has also advised 0:01:01.680 --> 0:01:03.840 members of the European and British parliaments and worked in 0:01:03.840 --> 0:01:05.959 the City of London. I laid all that because this 0:01:06.040 --> 0:01:07.800 is why you want to listen to him, He joins 0:01:07.840 --> 0:01:10.959 us in our Bloomberg Interactive Broker studio. Welcome. How are you. 0:01:11.720 --> 0:01:16.200 I've been better busy man these days, I imagine I 0:01:16.240 --> 0:01:19.039 feel slightly busy, I have to say. Going around the 0:01:19.080 --> 0:01:21.160 news room, we've all kind of laughed and not laughed 0:01:21.240 --> 0:01:22.560 that this whole idea of what's going on in the 0:01:22.600 --> 0:01:25.640 UK is making the US and it's politics that are 0:01:25.680 --> 0:01:29.679 not always so stable as well, um looking rather good 0:01:29.720 --> 0:01:33.840 at this point. Explain what is going on in the UK? Okay, 0:01:33.920 --> 0:01:35.920 so what's going on in the UK is that a 0:01:36.040 --> 0:01:39.640 prime minister has resigned after twenty minutes, which is never 0:01:39.680 --> 0:01:41.880 a good look. For twenty minutes you can read forty 0:01:41.959 --> 0:01:45.560 five days depending on how you count. Um. And that 0:01:45.920 --> 0:01:48.920 obviously is the result of a period of some confusion 0:01:48.960 --> 0:01:53.080 over the UK fiscal policy. The former Chancellor Quasi Quartein 0:01:53.640 --> 0:01:55.360 decided that it would be a good idea to cut 0:01:55.520 --> 0:01:59.480 taxes during an inflationary spiral. The macro text books will 0:01:59.480 --> 0:02:01.280 tell you that to not in fact a very good 0:02:01.320 --> 0:02:04.080 idea which he which he found out unfortunately. But now 0:02:04.080 --> 0:02:07.160 we're seeing that filter through into the Prime Minister and 0:02:07.600 --> 0:02:09.440 really see her sort of bear the brunt of that 0:02:09.600 --> 0:02:11.799 on a delayed action, you know. And I think the 0:02:11.840 --> 0:02:14.480 most surprising news event of the day for me after 0:02:14.840 --> 0:02:18.639 Liz Trust's resignation, was the possibility of that Boris Johnson 0:02:19.440 --> 0:02:21.000 might throw his hat in the ring. You know. I 0:02:21.000 --> 0:02:23.160 have this image of Boris when he was Mayor of 0:02:23.200 --> 0:02:26.320 London on that zip line with the two British flags. 0:02:26.680 --> 0:02:29.360 You know, what are the odds of him actually zip 0:02:29.360 --> 0:02:31.760 lining on the Downing Street again and uh and taking 0:02:31.760 --> 0:02:34.960 the job. I'm sorry that image is still in I'd 0:02:34.960 --> 0:02:38.320 like to apologize on the behalf of the trouble troubled nation. Um, 0:02:38.400 --> 0:02:41.000 I think they're relatively low. They're very high that he 0:02:41.000 --> 0:02:43.360 will stand. It's very it's a very high chance in 0:02:43.360 --> 0:02:45.639 my mind that a lot of people will think, let's 0:02:45.639 --> 0:02:47.360 get him back in. I mean, that's not that's not 0:02:47.400 --> 0:02:50.080 something that hasn't happened. Churchill was out and back in, 0:02:50.240 --> 0:02:52.320 Heath was out and back in, so the so called 0:02:52.360 --> 0:02:55.440 big beasts have done it before, but it does seem 0:02:55.480 --> 0:02:57.680 to me if you look at the betting houses that 0:02:57.800 --> 0:03:01.480 Rishi Sunac is lee, which I mean, you guys, tell 0:03:01.520 --> 0:03:03.359 me that seems like a problem in its own right, 0:03:03.680 --> 0:03:07.280 because of course she just lost the popular vote within 0:03:07.320 --> 0:03:10.840 the Conservative Party to Liz Trust. And if there's something 0:03:10.880 --> 0:03:14.320 about Brexit, it's it's democracy and populism. So I don't 0:03:14.320 --> 0:03:16.040 know if that I don't know if that's quite gonna work. 0:03:16.240 --> 0:03:19.920 So help us understand what went so wrong so quickly 0:03:19.919 --> 0:03:22.680 for Liz Trust. Is it a case of unpopular policies? 0:03:22.680 --> 0:03:24.799 I mean, I get the whole idea of as someone 0:03:24.840 --> 0:03:27.399 who studied economics, like there's just certain policies you don't 0:03:27.400 --> 0:03:31.200 do in certain environments. But is it her misread bad 0:03:31.240 --> 0:03:34.080 advisors what went went so wrong? Because safe to say, 0:03:34.160 --> 0:03:36.480 all leaders, many leaders and developed nations are in a 0:03:36.560 --> 0:03:38.800 tricky spot right now. We feel in the United States 0:03:38.800 --> 0:03:42.400 with high inflation, tox of recession, you know, global central 0:03:42.400 --> 0:03:46.160 bankers continue to raise rates. It's not popular. Well that's 0:03:46.160 --> 0:03:48.720 a that's a profound point, Like the outcome of populism 0:03:48.800 --> 0:03:52.320 isn't necessarily popular, But that doesn't mean that populism won't 0:03:52.360 --> 0:03:55.240 continue apace if indeed it might actually be pushed further 0:03:55.320 --> 0:04:00.000 because of that, because of those wobbles. What went wrong? Ideology? Uh, 0:04:00.160 --> 0:04:03.880 you don't get to decide what the bond markets think. 0:04:04.120 --> 0:04:06.480 That's the whole point of the bond markets. They don't. 0:04:06.560 --> 0:04:09.440 They decide for themselves. Um. And I know a lot 0:04:09.480 --> 0:04:11.440 of advisors in the UK system, and I know a 0:04:11.440 --> 0:04:14.240 few bond traders. They're pretty smart people. What you don't 0:04:14.240 --> 0:04:16.719 do is get up in front of everybody and say 0:04:16.760 --> 0:04:18.560 this is how it will be. We have a forty 0:04:18.600 --> 0:04:22.200 five and then forty three billion unfunded tax cut. Everything's 0:04:22.200 --> 0:04:24.279 going to be fine. Because my copy about the shrub 0:04:24.320 --> 0:04:26.080 told me it was going to be fine. It does 0:04:26.160 --> 0:04:27.800 It doesn't work like that, right, Am I wrong? No? 0:04:28.000 --> 0:04:31.520 She totally disregarded so much right within the system in 0:04:31.520 --> 0:04:34.640 the UK system and probably warnings right and understanding what 0:04:34.720 --> 0:04:37.560 the implications were for her policies. I think that's I 0:04:37.560 --> 0:04:39.440 think it's that simple and so but you know, I 0:04:39.680 --> 0:04:43.160 think there's a there's an optimistic tone to take, which 0:04:43.160 --> 0:04:46.120 is that the systems wrenched arount. So you know, we 0:04:46.120 --> 0:04:47.719 can't do that with peuting, we can't do that with 0:04:47.800 --> 0:04:51.080 huge in pit. You know, the system, the markets, the 0:04:51.120 --> 0:04:53.440 democracy that we have. It's turned around and it said, no, 0:04:53.720 --> 0:04:56.280 that doesn't quite work. Reality check. It's time for the 0:04:56.320 --> 0:04:58.719 next person. So it looks bad on the surface. And 0:04:58.720 --> 0:05:01.599 I'm not going to tell you other word, but you know, 0:05:01.640 --> 0:05:04.960 a smart fiscal policy is such a lynch pin of 0:05:05.080 --> 0:05:08.800 British politics, I guess politics everywhere in general. And I wonder, 0:05:08.920 --> 0:05:11.960 does this give labor sort of the upper hand, you know, 0:05:12.320 --> 0:05:15.200 enough to sort of change the balance in the next election, 0:05:15.400 --> 0:05:18.760 or our attention spans short enough that it shouldn't matter. 0:05:18.920 --> 0:05:20.320 You're asking me if the Labor Party is going to 0:05:20.320 --> 0:05:25.560 win the next life Basically, yes, I think. I think 0:05:25.600 --> 0:05:28.119 we've got to the project. In an objective opinion, of course, 0:05:28.160 --> 0:05:32.040 that's my that's my forecasting. And so well, look the 0:05:32.120 --> 0:05:33.840 Tories have been in for twelve years. I mean, if 0:05:33.839 --> 0:05:36.560 we if a cast of minds back to Thatcher, she 0:05:37.080 --> 0:05:40.440 began her supply side reforms at the very start of 0:05:40.440 --> 0:05:43.000 a political cycle, so she had time for that pain 0:05:43.080 --> 0:05:45.200 to go through the labor market and for things to adjust. 0:05:45.880 --> 0:05:48.080 Trust was of course at the end of the political cycle, 0:05:48.360 --> 0:05:50.640 which means that I would have thought the Labor Party 0:05:50.680 --> 0:05:53.840 would win whatever was going on regardless of whether or 0:05:53.880 --> 0:05:55.599 not the Prime Minister has been compared to a Lettice 0:05:55.640 --> 0:05:58.040 on television. Right, So, yes, I think the Labor Party 0:05:58.240 --> 0:05:59.760 I was obsessed with a lettis I'm just going to 0:05:59.800 --> 0:06:02.960 say bit weird continual. It's a bit weird and maybe 0:06:03.000 --> 0:06:06.200 unfair to the Lettuce. But but I think that what's 0:06:06.240 --> 0:06:09.120 interesting is that the Labor Party is going to have 0:06:09.120 --> 0:06:11.440 a mess to clear up. And if I was being cynical, 0:06:11.440 --> 0:06:13.279 I would say to myself or maybe now is the time, 0:06:13.400 --> 0:06:15.800 if you're a conservative, to sort of wash your hands 0:06:15.800 --> 0:06:18.920 of it, say well, let the other guys clean it up, 0:06:19.120 --> 0:06:21.479 because this is a sort of two three year process 0:06:21.560 --> 0:06:24.320 at least. Well, here's our Bloomberg story. Whoever you know 0:06:24.920 --> 0:06:27.679 wins or loses trust a successor to inherit a grim 0:06:27.760 --> 0:06:30.080 UK economy, like you can't change any of that, and 0:06:30.080 --> 0:06:32.279 there's some tough things that need to be done. Correct 0:06:32.760 --> 0:06:35.360 again correct, Yes, I'm not gonna like to So the 0:06:35.400 --> 0:06:38.840 O E C D is forecasting zero percent growth. Your 0:06:38.880 --> 0:06:41.559 listeners are mathematicians and finances they all know that zero 0:06:41.720 --> 0:06:46.000 is a bad number. That's probably optimistic. Okay, But but 0:06:46.040 --> 0:06:47.800 again I'll go back, and of course I would say this. 0:06:47.920 --> 0:06:50.479 Given my background, I think that the UK is is 0:06:50.640 --> 0:06:54.600 very good at imposing shocks on itself early. It's kind 0:06:54.640 --> 0:06:57.480 of ahead of the globalization curve every time. So this 0:06:57.520 --> 0:07:00.520 does look ugly. Sterling has taken a hit obviously, and 0:07:00.640 --> 0:07:03.440 probably parities cable rate parities is something that we should 0:07:03.480 --> 0:07:05.440 talk about. But I don't look at the country and think, right, 0:07:05.640 --> 0:07:08.520 it's completely finished. I think, right, this, this shock that 0:07:08.600 --> 0:07:12.200 it's going through, you know, in the manner of thatcher before, 0:07:12.520 --> 0:07:15.120 will result in something else. And I think I know 0:07:15.160 --> 0:07:17.680 the answer to this question, given your your resume and uh, 0:07:17.800 --> 0:07:21.080 you know work as a trade official. Part does did 0:07:21.080 --> 0:07:24.960 practice make this situation? The Brexit makes this situation worse 0:07:25.120 --> 0:07:28.239 or better for for Britain right now. So so Brexit 0:07:28.360 --> 0:07:31.040 was always going to be a short term hit to GDP. 0:07:31.440 --> 0:07:33.240 Brexit was always going to take the form of a 0:07:33.240 --> 0:07:36.400 supply shock. Um. It wasn't always a parent in my 0:07:36.440 --> 0:07:41.520 mind exactly how the policy mechanisms would respond, because on 0:07:41.560 --> 0:07:43.640 the one side, you could say, well, look, that's going 0:07:43.680 --> 0:07:46.200 to be inflationary, because supply shocks inflationary, so that the 0:07:46.240 --> 0:07:49.040 central bank will have to hike. On the other hand, um, 0:07:49.080 --> 0:07:51.520 it might have been that sort of demand destruction and 0:07:51.640 --> 0:07:54.119 a recession had a different response. But it was always 0:07:54.120 --> 0:07:56.360 going to be something that was tricky. I don't think 0:07:56.360 --> 0:07:59.480 that Brexit's the only factor. Of course, we had this. 0:08:00.040 --> 0:08:03.000 We had COVID. I'm sorry to remind everyone we had COVID. 0:08:03.640 --> 0:08:05.840 We still have it. Actually we still have the vaccine 0:08:05.880 --> 0:08:07.440 line that I saw last night. I've probably got it 0:08:07.520 --> 0:08:14.720 right now, to be honest with you, chuck this guy out. Yeah, 0:08:15.360 --> 0:08:18.120 just kidding, but but it's also not kidding. You're not kidding. 0:08:18.840 --> 0:08:23.440 It's a British COVID, though it's much more charming, that's right. 0:08:24.480 --> 0:08:29.520 But then the war in Ukraine, Well that's a big, 0:08:29.640 --> 0:08:31.920 huge factor. I mean it's you know, every day we 0:08:32.000 --> 0:08:33.600 come in here and we just think we figured out 0:08:33.600 --> 0:08:35.600 the big macro things that we're facing, and then something like, 0:08:35.640 --> 0:08:37.520 of course earlier this year, the war in Ukraine. So 0:08:37.679 --> 0:08:40.080 how do you factor that, you know? And then today 0:08:40.120 --> 0:08:42.960 it's of course not surprised, but to see the resignation 0:08:43.080 --> 0:08:46.839 of trust. Um, so how do you factor Ukraine then 0:08:46.840 --> 0:08:50.400 into all of this? Well, I think that Ukraine is 0:08:50.400 --> 0:08:53.559 is a sort of signal to everyone that you're not 0:08:53.600 --> 0:08:56.760 necessarily safe, right, And I think it's the first time. 0:08:56.800 --> 0:08:59.760 I mean it's like tank battles in Eastern Europe. I 0:08:59.760 --> 0:09:02.120 mean it's wild. That's from seasons one and two. Right, 0:09:02.200 --> 0:09:04.960 It's it's crazy that it's back. So my father, who 0:09:05.040 --> 0:09:07.400 fought in World War Two and his brothers, well like 0:09:07.480 --> 0:09:10.040 it's like, that's what it's crazy. My family too. We 0:09:10.080 --> 0:09:12.600 lost people in both of those wars. Right. Um, But 0:09:12.679 --> 0:09:15.560 I think that that's that's number one, spooking people to 0:09:15.640 --> 0:09:17.840 some degree, spooking markets. That's part of why the dollar 0:09:17.920 --> 0:09:20.800 is so strong. I would imagine, including fed hiking. But 0:09:20.840 --> 0:09:23.800 I think it's also something that it's it's sort of 0:09:23.800 --> 0:09:26.240 feeding into the zeitgeists in another way, which is, well, 0:09:26.320 --> 0:09:29.040 let's stress test everything. I mean, let's really think about 0:09:29.040 --> 0:09:31.200 how safe we are or are not. And I would 0:09:31.200 --> 0:09:33.520 suggest to you that maybe that's what Sterling is going through. 0:09:33.800 --> 0:09:36.600 So now we've back to your point on brekxfit. People 0:09:36.600 --> 0:09:39.640 are looking at Sterling and thinking, well, does it really 0:09:39.679 --> 0:09:42.760 deserve to be one to one with the dollar? Um, 0:09:42.800 --> 0:09:45.120 So if you're asking me how that affects, does it, well, 0:09:45.160 --> 0:09:48.080 I would I would say probably not, probably not. I 0:09:48.080 --> 0:09:51.080 imagine that we're going to see parity and how will 0:09:51.120 --> 0:09:54.640 that be received on the ground in Britain, you know, 0:09:54.760 --> 0:09:58.040 is that is that considered a disaster or does the 0:09:58.080 --> 0:10:00.360 old trope that you know, weaker currency is going to 0:10:00.360 --> 0:10:03.080 help the domestic economy. Will people rally be behind that 0:10:03.200 --> 0:10:05.760 or will they say, oh, boy, were at parody with 0:10:05.840 --> 0:10:08.400 the Americans, this is a disaster. Well yeah, go back, 0:10:08.440 --> 0:10:09.840 I mean go back to O E c D forecast 0:10:12.000 --> 0:10:14.000 and that zero figure. If you break it down, it 0:10:14.040 --> 0:10:17.840 looks like point seven positive for government consumption. It looks 0:10:17.880 --> 0:10:21.080 like point seven negative for loss of exports. So if 0:10:21.120 --> 0:10:23.600 you're if you're thinking about a sort of medium term correction, 0:10:23.600 --> 0:10:26.120 if you're thinking about global Britain, if you're thinking about 0:10:26.160 --> 0:10:29.760 the reason that we did exit the European Union or 0:10:29.880 --> 0:10:33.240 orbit purportedly the purported reason a part of that was 0:10:33.960 --> 0:10:36.400 trading in the world and trying to get our exports back. 0:10:37.000 --> 0:10:39.520 I'm not sure that that factor because it will be 0:10:39.559 --> 0:10:41.600 on a lag. Of course, it's a supply side issue. 0:10:41.640 --> 0:10:43.720 It takes a long time to build capacity. I'm not 0:10:43.760 --> 0:10:47.400 sure that that issue is as important as the psychology 0:10:47.480 --> 0:10:50.080 of not being able to visit Fifth Avenue at Christmas 0:10:51.280 --> 0:10:53.680 really powerful, right, We felt that certainly during COVID right 0:10:53.720 --> 0:10:55.160 when all of a sudden things that we just took 0:10:55.160 --> 0:10:58.440 for granted UM shut down. So, as I said, you 0:10:58.520 --> 0:11:02.200 have advised UM. You represent the UK government, you know, 0:11:02.320 --> 0:11:05.959 representing and talking to folkus on Wall Street. We've got 0:11:06.000 --> 0:11:09.680 a very smart investment audience. So what would be your 0:11:09.760 --> 0:11:11.800 takeaway or something for them to think about over the 0:11:11.800 --> 0:11:13.720 next couple of weeks as we continue to see what's 0:11:13.720 --> 0:11:16.600 playing out in the UK and then more broadly about 0:11:16.640 --> 0:11:19.520 what's going on in Europe. Okay, well, I mean I'll 0:11:19.520 --> 0:11:21.240 take the UK first, and of course I would say 0:11:21.280 --> 0:11:23.400 what I'm about to say, which is, don't count the 0:11:23.480 --> 0:11:26.760 UK out. This is the country that brought uniteteen forty. 0:11:27.640 --> 0:11:31.880 Democracies look messy, but the markets and elections are four. 0:11:31.960 --> 0:11:35.480 There are messy. There are messy indeed, yes I stand correct, 0:11:35.920 --> 0:11:38.440 they are messy, UM. But but I think it's going 0:11:38.480 --> 0:11:40.560 to be okay medium term. And I wouldn't write the 0:11:40.640 --> 0:11:43.680 UK off because, as I said previously, we're very good 0:11:43.679 --> 0:11:46.800 at corrections. We're very good at them in ways that 0:11:46.840 --> 0:11:49.040 you know, let's segue into Europe. I don't think that 0:11:49.120 --> 0:11:52.160 other other countries are. So I think that while there's 0:11:52.200 --> 0:11:55.120 a question over the value of sterling, and that's a 0:11:55.160 --> 0:11:58.360 justified question. There's still a question mark over the existence 0:11:58.400 --> 0:12:00.600 of the euro. And if we start to see those 0:12:00.679 --> 0:12:04.080 bomb spreads wide and again, which I imagine we will 0:12:04.120 --> 0:12:06.640 at some point, you guys again, tell me if I'm wrong. Um, 0:12:06.760 --> 0:12:10.600 then then I think the the capricious attention of markets 0:12:10.840 --> 0:12:13.439 will sort of drift away from the UK and start 0:12:13.480 --> 0:12:17.080 looking at the your area again. Well, right now, the 0:12:17.160 --> 0:12:19.760 spreads are about thirty basis points in the favor of 0:12:19.760 --> 0:12:22.839 the guilt market, while blow treasury yields. Do they belong there? 0:12:22.960 --> 0:12:26.760 Do you think? Um? I think guilts look healthier if 0:12:26.760 --> 0:12:27.760 I can put it like that. I mean, what the 0:12:27.760 --> 0:12:30.280 ten years three point nine and the thirty years three 0:12:30.280 --> 0:12:33.640 point nine five, that's better. I think their reaction to 0:12:33.840 --> 0:12:36.679 to trust his resignation was met in a way. I 0:12:36.720 --> 0:12:38.840 don't think that they worried about it too much. You 0:12:38.880 --> 0:12:41.400 can't do that. I always say, meth do you copyright? 0:12:41.480 --> 0:12:46.760 I've broken? Copyright comes up with COVID takes my lines. Now, 0:12:47.200 --> 0:12:48.880 you know, just got about a minute left here, and 0:12:48.920 --> 0:12:50.840 I do think about you know, here in the United States, 0:12:50.920 --> 0:12:52.760 we look over at the UK in terms of politics 0:12:52.800 --> 0:12:54.800 and we're like oh my god, it's crazy. But in 0:12:54.840 --> 0:12:57.079 some ways it does feel like when something's not working, 0:12:57.120 --> 0:13:00.160 it's like next and let's figure it out. Is that air? 0:13:00.240 --> 0:13:03.400 Is there efficiency to it? Well? I think so. I 0:13:03.440 --> 0:13:06.319 mean I'm someone, maybe I'm maybe I'm based subjective. Yeah, yes, 0:13:06.320 --> 0:13:09.800 I'm totally subpecting, totally biased. But I look at the 0:13:09.880 --> 0:13:13.560 UK and I think to myself, well, this is a wobble. 0:13:13.640 --> 0:13:16.640 This is what we would call a wobble. It's not good, um, 0:13:16.760 --> 0:13:19.959 But but wobbles end. And so I would again say 0:13:20.040 --> 0:13:23.120 to you, our cycles seem a bit nastier. We've gone 0:13:23.120 --> 0:13:25.199 through any number of moments in our history where it 0:13:25.240 --> 0:13:27.520 looked like it looked like game over. If I'm being 0:13:27.559 --> 0:13:31.400 a frank right, um, but I think we left out 0:13:31.400 --> 0:13:33.920 The most important question is you wrote it up at 0:13:33.960 --> 0:13:37.720 recently you talk about the possibility of fourteen pound pints 0:13:37.720 --> 0:13:41.000 in the pub? Did I must have forgotten about it? 0:13:41.720 --> 0:13:44.800 Was that maybe someone else, maybe someone else fourteen pound pints? 0:13:44.800 --> 0:13:46.000 Are you trying to you're trying to give me a 0:13:46.000 --> 0:13:49.440 heart on air? What are the odds of fourteen pound 0:13:49.440 --> 0:13:52.679 points in the pubs in London? If listen, if if 0:13:52.760 --> 0:13:54.839 the point goes to fourteen pounds. I will go back 0:13:54.880 --> 0:13:57.720 and stand myself with one platform and one platform only, 0:13:57.760 --> 0:13:59.600 which is getting the price of a point back down 0:13:59.600 --> 0:14:02.400 to five and you will have people voting for that 0:14:02.440 --> 0:14:05.200 platform um at price. Thank you so much, really a 0:14:05.240 --> 0:14:08.360 pleasure principle at Ergo. I told you about his background Google, 0:14:08.440 --> 0:14:10.880 Let me can hear more former British trade official and 0:14:10.960 --> 0:14:13.320 so much more. Joining us here in our Bloomberg Interactive 0:14:13.320 --> 0:14:17.280 Broker Studio. You're listening to Bloomberg Business Week with Carol 0:14:17.360 --> 0:14:21.800 Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. 0:14:22.080 --> 0:14:24.960 Well inflation and rising labor costs will increase US national 0:14:24.960 --> 0:14:27.920 healthcare spending by three seventy billion in the next five years. 0:14:27.960 --> 0:14:31.240 Is according to a McKinsey report. Consumer prices are rising 0:14:31.280 --> 0:14:34.240 faster than health care inflation, but general inflation has recently 0:14:34.320 --> 0:14:37.880 driven up healthcare supply input costs. So when thoughts on 0:14:38.160 --> 0:14:41.680 that and more with us as he is every week. 0:14:41.800 --> 0:14:44.320 Dr Ian LUs beda clinical professor of medicine at n 0:14:44.440 --> 0:14:46.720 y U Land, going back with us on the phone 0:14:46.760 --> 0:14:49.200 in New York City. Ian, we love having you here. 0:14:49.240 --> 0:14:51.840 Great to have you here on this Thursday with Mike 0:14:51.880 --> 0:14:56.000 Reagan and myself. How are you a pleasure? Thanks, guys. 0:14:56.000 --> 0:14:59.080 Hope everyone is staying healthy and well with the new 0:14:59.120 --> 0:15:03.080 COVID variance out there, but it seems to be under control. 0:15:03.200 --> 0:15:07.280 But what's not under control, unfortunately, is healthcare inflation. We're 0:15:07.280 --> 0:15:11.280 seeing rises of over six percent a year. Healthcare is 0:15:11.320 --> 0:15:15.360 twenty of the GDP, over four trillion dollars a year 0:15:15.760 --> 0:15:18.880 and really estimated by two be up to six point 0:15:18.920 --> 0:15:21.200 eight trillion dollars a year. And there are a lot 0:15:21.200 --> 0:15:25.200 of reasons, unfortunately why we're seeing healthcare inflation, and we 0:15:25.280 --> 0:15:27.920 can talk about that, but certainly part of the problem 0:15:27.960 --> 0:15:30.200 is our our per capita costs. You know, it's about 0:15:30.240 --> 0:15:34.840 twelve tho dollars per person per year. Other countries like France, 0:15:34.920 --> 0:15:37.720 Canada about half that, five to six thousand a year. 0:15:37.840 --> 0:15:40.680 So the real question is why or our costs higher 0:15:40.680 --> 0:15:43.760 than other countries. That guy would like to unpack a 0:15:43.760 --> 0:15:46.479 little bit. Some of the main drivers of that inflation, 0:15:46.600 --> 0:15:49.320 you know, my guests, would be that there were so 0:15:49.360 --> 0:15:53.320 many health insurance claims for COVID, whether it be testing 0:15:53.520 --> 0:15:56.960 or treatment. Is that one of the big drivers of 0:15:57.120 --> 0:16:01.360 the increase in particularly health insurance costs. Yeah, they're really 0:16:01.360 --> 0:16:04.320 a number of drivers. One is hospital care, which is 0:16:04.520 --> 0:16:06.800 very expensive. You know, you can just look at the 0:16:06.840 --> 0:16:09.920 bills from even an e er visit. That's about thirty 0:16:10.360 --> 0:16:15.640 of the cost. The workforce is about of the healthcare costs. 0:16:15.680 --> 0:16:19.440 And we're really seeing wage pressure, you know, both physicians 0:16:19.480 --> 0:16:22.560 and r n s because there's a labor shortage. A 0:16:22.640 --> 0:16:26.520 number of physicians have retired, a number of nurses are 0:16:26.600 --> 0:16:30.800 leaving the workforce, so there's really wage pressure in that area. 0:16:31.160 --> 0:16:34.720 And definitely illness things like the pandemic and aging population 0:16:35.120 --> 0:16:39.360 and unhealthy population. About of the US is obese, overweight. 0:16:39.960 --> 0:16:46.160 They use a lot of resources diabetes, hypertension, more technology. Also, 0:16:46.280 --> 0:16:50.120 you know, we have robotic surgery and all of those 0:16:50.120 --> 0:16:53.120 are very very expensive. They're high quality, high tech, but 0:16:53.240 --> 0:16:57.480 also very expensive. So we're really seeing a combination of things. 0:16:57.600 --> 0:17:01.320 And the pandemic did not help with resource utilization. All 0:17:01.360 --> 0:17:04.479 of those nasal swabs that people are doing sometimes on 0:17:04.760 --> 0:17:08.000 a daily or weekly basis really add up the nets, 0:17:08.160 --> 0:17:10.760 you know, government money that's been printed in order to 0:17:10.800 --> 0:17:14.119 give out those um kits. So we've really had a 0:17:14.200 --> 0:17:17.639 number of forces that are raising prices and there are 0:17:17.640 --> 0:17:22.439 not a lot of market forces competition, advertising prices to 0:17:22.840 --> 0:17:26.480 help lower that. That's part of the challenge. So not 0:17:26.560 --> 0:17:29.080 a new right. We talked about this for a long time, 0:17:29.160 --> 0:17:31.440 the cost of healthcare, But Ian, I do feel like 0:17:31.440 --> 0:17:34.200 there's expectations among Americans that I want a certain level 0:17:34.200 --> 0:17:36.439 of care when I walk into hospital, I want X 0:17:36.560 --> 0:17:41.240 y Z. I mean, how do we change the thinking 0:17:41.359 --> 0:17:44.119 or how do we really constructively get the price of 0:17:44.160 --> 0:17:49.000 healthcare down? You know, you're exactly right, Carol the the 0:17:49.200 --> 0:17:52.840 we want Cadillac care, and we do have amazing high 0:17:52.840 --> 0:17:55.520 tech care, really the state of the art UM, but 0:17:55.640 --> 0:17:57.399 we don't really want to pay for it, and we, 0:17:57.560 --> 0:18:00.919 unfortunately we will have to choose. In other countries, there 0:18:00.960 --> 0:18:04.240 are delays. If you need hip, elective, hip surgery, knee replacement, 0:18:04.520 --> 0:18:07.120 you can't walk in if you're eighty five years old 0:18:07.160 --> 0:18:09.760 and get it the next week. In the US we can. 0:18:10.160 --> 0:18:14.480 So I think we need to shift expectations and really say, 0:18:14.960 --> 0:18:19.240 without rationing care per se, can we change our expectations. 0:18:19.280 --> 0:18:22.000 We certainly want high quality care, but if we give 0:18:22.080 --> 0:18:26.800 high quality care to everybody all the time, UM, without 0:18:26.800 --> 0:18:31.720 any competition or cost uh market forces, we're going to 0:18:31.800 --> 0:18:34.600 be in trouble with higher percent of our budget. Alright, 0:18:34.600 --> 0:18:36.760 thirty seconds left. I gotta ask you because I want 0:18:36.760 --> 0:18:39.280 to know I'm double boosted and double vaxed. I've seen 0:18:39.320 --> 0:18:42.399 the lines to the vaccine. Who should get that next 0:18:42.400 --> 0:18:45.600 booster just quickly and when we yeah, yeah, the by 0:18:45.680 --> 0:18:49.280 vay want, which is the B four and five are 0:18:49.560 --> 0:18:52.359 is important to get. Certainly if you have chronic medical 0:18:52.440 --> 0:18:55.720 issues or if you're older above sixty, it makes sense. 0:18:55.720 --> 0:18:58.639 It is available for everyone young and old, um, but 0:18:58.760 --> 0:19:01.439 certainly the tar a good audience should be people with 0:19:01.520 --> 0:19:04.280 underlying medical problems. There are a couple of new variants 0:19:04.320 --> 0:19:07.040 out there to which may be a bigger problem. You 0:19:07.119 --> 0:19:10.119 don't really know how effective the new vaccine is for those, 0:19:10.200 --> 0:19:13.120 but probably will help. Certainly, if you have medical issues, 0:19:13.280 --> 0:19:15.080 it makes sense to get it. How how long do 0:19:15.119 --> 0:19:17.199 you wait after you've had COVID? Yes, I'm asking you 0:19:17.280 --> 0:19:21.359 Dr las beta for me, just quickly. Your antibodies and 0:19:21.400 --> 0:19:23.919 T cells are good for at least three to four months, 0:19:23.920 --> 0:19:27.480 so I would not rush to get the vaccine if 0:19:27.520 --> 0:19:30.320 you had COVID within the last few months. There's really 0:19:30.320 --> 0:19:33.119 no data on that. Your body should be fined for 0:19:33.160 --> 0:19:36.040 at least three months. Thank you, So much as always, 0:19:36.080 --> 0:19:38.359 and smart to talk about inflation in healthcare because it's 0:19:38.400 --> 0:19:41.439 certainly something that's very persistent. Dr Ian las Beta over 0:19:41.440 --> 0:19:44.840 at n y Landgown Medical Center. This is Bloomberg Business 0:19:44.880 --> 0:19:48.680 Week with Carol Masser and Bloomberg Quick Takes Tim Stinovic 0:19:49.119 --> 0:19:52.080 on Bloomberg Radio. Well, stepping away from the turmoil in 0:19:52.119 --> 0:19:54.760 the UK government for a moment, and yet I gotta say, 0:19:54.800 --> 0:19:56.480 what's going on there is just another one of the 0:19:56.520 --> 0:20:00.600 geopolitical concerns that impact anyone and everyone that it's a company, 0:20:00.640 --> 0:20:02.560 we talk about it all the time with leaders. So 0:20:02.560 --> 0:20:04.159 we're curious to see what our next guest has to 0:20:04.200 --> 0:20:06.679 say about the macro environment. And so great to have 0:20:06.720 --> 0:20:10.360 back with us. Joe Preston, President CEO at New Balance 0:20:10.400 --> 0:20:13.480 Privately Held, spending some time with our editorial teams here 0:20:13.720 --> 0:20:16.520