1
00:00:00,120 --> 00:00:13,880
Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jelie.

2
00:00:13,960 --> 00:00:17,560
Speaker 1: We bring you insight from the best in economics, finance, investment,

3
00:00:18,000 --> 00:00:23,520
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

4
00:00:23,600 --> 00:00:30,360
Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg. This

5
00:00:30,520 --> 00:00:34,239
Speaker 1: is Bloomberg Surveillance with Jonathan Faraoh and Tom McKeene. The

6
00:00:34,360 --> 00:00:38,280
Speaker 1: SMP five hundred heading for a fourth straight week of gains,

7
00:00:38,320 --> 00:00:40,280
Speaker 1: but a little bit of weakness emerging in the past

8
00:00:40,320 --> 00:00:43,560
Speaker 1: few days, sparks some would say, by jitters around tax

9
00:00:43,600 --> 00:00:46,240
Speaker 1: cuts and whether the GOP has the votes to get

10
00:00:46,280 --> 00:00:48,640
Speaker 1: this done next week. As far as futures are concerned,

11
00:00:48,680 --> 00:00:51,480
Speaker 1: this Friday morning, a little bit firmer at five points

12
00:00:51,520 --> 00:00:54,960
Speaker 1: on the SMP five hundred, positive sixty two points on

13
00:00:55,040 --> 00:00:57,640
Speaker 1: the doubt in the bondom market. It's as you were,

14
00:00:57,920 --> 00:01:00,960
Speaker 1: incredibly tight trading ranges through the year and over the

15
00:01:01,040 --> 00:01:03,320
Speaker 1: last month as well. Somewhere in the two thirties were

16
00:01:03,400 --> 00:01:05,959
Speaker 1: up another basis point at two thirty six on a

17
00:01:06,040 --> 00:01:07,959
Speaker 1: US ten year. At the front end of the curve

18
00:01:07,959 --> 00:01:10,080
Speaker 1: on a US two year, we are trading at one

19
00:01:10,120 --> 00:01:14,080
Speaker 1: point eight two percent. Confidence that growth will improve and

20
00:01:14,160 --> 00:01:17,400
Speaker 1: inflation will stay low, shared by most investors and central

21
00:01:17,400 --> 00:01:20,679
Speaker 1: bankers are like going into ten. And in the FX market,

22
00:01:20,720 --> 00:01:22,479
Speaker 1: it's just a story of dollar witness through the year

23
00:01:22,480 --> 00:01:25,360
Speaker 1: and on the session as well, with one exception some

24
00:01:25,720 --> 00:01:29,640
Speaker 1: dollar strength against the pound. Even as European leaders vote

25
00:01:29,680 --> 00:01:33,240
Speaker 1: to go to Phase two of Brexit negotiations, the cable

26
00:01:33,360 --> 00:01:35,760
Speaker 1: rate on the back fot south of one thirty four.

27
00:01:35,760 --> 00:01:38,360
Speaker 1: At one thirty three ninety two, we're down a third

28
00:01:38,400 --> 00:01:40,440
Speaker 1: of one percent for the year so far. Tho, it

29
00:01:40,480 --> 00:01:44,880
Speaker 1: has been the pain trade of seventeen. All the ingredients

30
00:01:45,080 --> 00:01:48,360
Speaker 1: for a year of dollar strength, rate hikes, better growth,

31
00:01:48,360 --> 00:01:52,160
Speaker 1: pushing through fiscal stimulus seemingly, and yet we grind towards

32
00:01:52,240 --> 00:01:54,720
Speaker 1: one of the worst years for the green back in

33
00:01:54,720 --> 00:01:59,680
Speaker 1: a decade. To discuss Bob sinch Amherst Pierpont global strategist,

34
00:01:59,760 --> 00:02:02,680
Speaker 1: Bob a man that has followed the FX market four decades,

35
00:02:02,840 --> 00:02:05,400
Speaker 1: we have not seen a year like this for quite

36
00:02:05,400 --> 00:02:07,200
Speaker 1: a while for the US dollar. Yet we had the

37
00:02:07,240 --> 00:02:10,520
Speaker 1: recipe and the ingredients for a year that should have

38
00:02:10,560 --> 00:02:13,040
Speaker 1: been good. What happened? You know? I think the markets

39
00:02:13,080 --> 00:02:15,840
Speaker 1: discounted a lot of this. Remember the dollar had a

40
00:02:16,000 --> 00:02:18,160
Speaker 1: huge run up from the election to the end of

41
00:02:18,160 --> 00:02:20,400
Speaker 1: the year, and in fact peaked right around the year end.

42
00:02:20,480 --> 00:02:23,360
Speaker 1: So you know, when we do these annual comparisons, we

43
00:02:23,400 --> 00:02:26,320
Speaker 1: will be comparing the dollar move this year to just

44
00:02:26,400 --> 00:02:28,920
Speaker 1: about its peak at the end of December of of

45
00:02:29,040 --> 00:02:31,960
Speaker 1: last year. Uh And I think the market just got

46
00:02:32,000 --> 00:02:35,160
Speaker 1: two builed up um on US growth earlier in the year.

47
00:02:35,200 --> 00:02:39,079
Speaker 1: They got two builed up on on higher US interest rates,

48
00:02:39,200 --> 00:02:41,880
Speaker 1: and two bowled up on the dollar. And so the

49
00:02:41,880 --> 00:02:45,560
Speaker 1: the year was really one of trying to digest those

50
00:02:45,600 --> 00:02:49,960
Speaker 1: long positions um and And I think also, you know,

51
00:02:50,000 --> 00:02:52,040
Speaker 1: one of the big disappointments I think if you look

52
00:02:52,080 --> 00:02:54,640
Speaker 1: at the year as a whole, is that the US

53
00:02:54,720 --> 00:02:58,320
Speaker 1: trade balance and therefore current account balance hasn't really improved

54
00:02:58,320 --> 00:03:02,400
Speaker 1: all that much, even though we're almost at balance in

55
00:03:02,440 --> 00:03:05,600
Speaker 1: the oil trade balance for the US. So you know,

56
00:03:05,639 --> 00:03:07,800
Speaker 1: the US trade balance and oil had gotten out to

57
00:03:07,840 --> 00:03:10,600
Speaker 1: his wide is about forty billion dollars during the peak,

58
00:03:10,639 --> 00:03:13,920
Speaker 1: and oil prices it's down down to less than five billion.

59
00:03:14,520 --> 00:03:17,000
Speaker 1: Yet the total trade balances is why as it's ever been,

60
00:03:17,040 --> 00:03:20,040
Speaker 1: which means we have records record deficit in the non

61
00:03:20,040 --> 00:03:22,360
Speaker 1: oil trade balance. So I think that there were some

62
00:03:22,400 --> 00:03:25,760
Speaker 1: expectations that trade would improve because of the U S

63
00:03:25,800 --> 00:03:30,040
Speaker 1: improvement in the oil balance. There were expectations that, um,

64
00:03:30,560 --> 00:03:34,960
Speaker 1: you know, that the markets would would embrace um, these reforms.

65
00:03:34,960 --> 00:03:37,880
Speaker 1: In the US, it embraced growth, and I think a

66
00:03:37,880 --> 00:03:40,080
Speaker 1: lot of it just got discounted in that big run

67
00:03:40,160 --> 00:03:42,200
Speaker 1: up in the dollar in November and December. We've been

68
00:03:42,240 --> 00:03:46,160
Speaker 1: digesting ever since. So if we think about excessive bullishness

69
00:03:46,160 --> 00:03:48,560
Speaker 1: in the dollar at the end of two thousand and

70
00:03:48,720 --> 00:03:52,040
Speaker 1: uh and sixteen and the response that we saw in

71
00:03:52,080 --> 00:03:55,840
Speaker 1: two thousand seventeen of disappointment, you sort of look around

72
00:03:55,840 --> 00:03:58,720
Speaker 1: and say, well, where's the greatest optimism right now in

73
00:03:58,840 --> 00:04:02,480
Speaker 1: terms of market action in price action, it's bitcoin. So

74
00:04:02,520 --> 00:04:04,280
Speaker 1: you're wonder where the bitcoin is going to be the

75
00:04:04,320 --> 00:04:07,160
Speaker 1: disappointment of two thousand and eight. Maybe we're gonna spend

76
00:04:07,160 --> 00:04:09,200
Speaker 1: a little bit more time talking about the fundamentals in

77
00:04:09,200 --> 00:04:11,520
Speaker 1: this tax plan and where the GOP is at. I

78
00:04:11,560 --> 00:04:14,840
Speaker 1: want to talk tactically just ahead of and you mentioned

79
00:04:14,880 --> 00:04:18,400
Speaker 1: some of the positioning going into this year. Everyone seemingly

80
00:04:18,720 --> 00:04:20,599
Speaker 1: on the one side of the boat for dollar strength,

81
00:04:20,640 --> 00:04:22,359
Speaker 1: and you were wondering where the marginal bar was going

82
00:04:22,400 --> 00:04:25,400
Speaker 1: to come through come from when net lungs was so big.

83
00:04:25,920 --> 00:04:28,240
Speaker 1: What does the positioning look like coming into next year now, Bob,

84
00:04:29,040 --> 00:04:32,599
Speaker 1: you know the market's a bit a bit underweighted on dollars,

85
00:04:32,960 --> 00:04:35,800
Speaker 1: I think, a little bit overweighted on the euro, overweight

86
00:04:35,839 --> 00:04:38,680
Speaker 1: on the Euro. But I don't think the positions are

87
00:04:38,720 --> 00:04:42,600
Speaker 1: as extreme as we've seen because we just haven't seen

88
00:04:42,640 --> 00:04:45,360
Speaker 1: the results this year in currency trading. We haven't seen

89
00:04:45,400 --> 00:04:48,679
Speaker 1: the results in trading in a lot of the commodity markets.

90
00:04:49,200 --> 00:04:50,839
Speaker 1: So I don't think going into the end of the

91
00:04:50,880 --> 00:04:54,160
Speaker 1: year we have big, big positioning. But if we do, um,

92
00:04:54,440 --> 00:04:57,200
Speaker 1: I think the one that's been embraced is euro strength

93
00:04:57,279 --> 00:04:59,880
Speaker 1: because of the strength of the economy and that filtering through.

94
00:05:00,040 --> 00:05:02,320
Speaker 1: You didn't mention that you had such great helpa. You're

95
00:05:02,360 --> 00:05:06,120
Speaker 1: into the year. Happened about October. Packed it and I'm

96
00:05:06,160 --> 00:05:09,000
Speaker 1: sure Bob sent you with this with AMers Uh Pure

97
00:05:09,000 --> 00:05:12,680
Speaker 1: of Bloomberg Surveillance. This morning. Good morning, brought you by Investco.

98
00:05:12,760 --> 00:05:17,160
Speaker 1: Investco dedicated to delivering an investment experience that can help

99
00:05:17,200 --> 00:05:20,080
Speaker 1: you get more out of life. Learn more at investco

100
00:05:20,160 --> 00:05:24,480
Speaker 1: dot com slash more out of life. What's the number

101
00:05:24,480 --> 00:05:28,200
Speaker 1: one mistake, Bob sinch that people make when they bet

102
00:05:28,200 --> 00:05:31,000
Speaker 1: on the dollar. We say the dollar, but you got

103
00:05:31,000 --> 00:05:34,640
Speaker 1: to do the dollar against something else to make any money.

104
00:05:34,680 --> 00:05:39,120
Speaker 1: What's the rookie mistake in a belief on dollars stronger

105
00:05:39,240 --> 00:05:42,600
Speaker 1: or for that matter, dollar weaker. You know. I think

106
00:05:42,640 --> 00:05:45,279
Speaker 1: that that we've been in a in a in an

107
00:05:45,279 --> 00:05:49,440
Speaker 1: exchange rate market that's been dominated by capital flows for

108
00:05:49,440 --> 00:05:52,520
Speaker 1: for a couple of decades now. And one thing that

109
00:05:52,560 --> 00:05:55,280
Speaker 1: I think did come through in two thousand and seventeen

110
00:05:56,040 --> 00:05:59,680
Speaker 1: UM is that current account balances still matter, and so

111
00:06:00,080 --> 00:06:03,320
Speaker 1: big current account surplus in Japan, big current accounts surplus

112
00:06:03,320 --> 00:06:06,920
Speaker 1: and the Eurozone, those currencies held up pretty well during

113
00:06:06,920 --> 00:06:09,560
Speaker 1: the year. And as I said, big current account deficit

114
00:06:09,600 --> 00:06:14,000
Speaker 1: in the US that requires continuing capital inflows into the US.

115
00:06:14,760 --> 00:06:17,120
Speaker 1: If that's going to happen in two thousand and eighteen,

116
00:06:17,120 --> 00:06:19,279
Speaker 1: and I think it will, I think it's not going

117
00:06:19,320 --> 00:06:21,520
Speaker 1: to be because US short term rates go up. I

118
00:06:21,520 --> 00:06:24,080
Speaker 1: think it's gonna it will be driven by long term

119
00:06:24,120 --> 00:06:27,120
Speaker 1: US rates going higher. So I think that the dollars

120
00:06:27,200 --> 00:06:29,719
Speaker 1: fortunes in two thousand and eighteen are similar to the

121
00:06:29,760 --> 00:06:33,920
Speaker 1: bond market's fortunes, obviously inversely related to the bond market

122
00:06:33,960 --> 00:06:37,120
Speaker 1: fortune fortunes and and I think one of the key

123
00:06:37,160 --> 00:06:39,839
Speaker 1: issues will be to see whether US bond yields rise

124
00:06:40,480 --> 00:06:43,520
Speaker 1: as the FED gets out of the way UM in

125
00:06:43,640 --> 00:06:46,800
Speaker 1: terms of beginning to to sell bonds. At the same time,

126
00:06:46,839 --> 00:06:50,320
Speaker 1: the deficit projections get get moved higher. Uh. And the

127
00:06:50,400 --> 00:06:52,880
Speaker 1: question is, well, that creates some some congestion in the

128
00:06:52,920 --> 00:06:54,800
Speaker 1: bond market. So what we've got to think about and

129
00:06:54,800 --> 00:06:58,600
Speaker 1: then is structural forces reassertting themselves. That means stronger Euro, stronger,

130
00:06:58,680 --> 00:07:02,400
Speaker 1: Swissy stronger, and weak compound and we could dollarways that

131
00:07:02,440 --> 00:07:04,800
Speaker 1: how we've got to think about get ten next year. Well,

132
00:07:04,839 --> 00:07:08,280
Speaker 1: I think that's what drove this year. I think that

133
00:07:08,320 --> 00:07:11,160
Speaker 1: the markets were all boiled up on the cyclical story

134
00:07:11,200 --> 00:07:14,000
Speaker 1: at the end of two thousand sixteen, and when the

135
00:07:14,040 --> 00:07:17,600
Speaker 1: cyclical story didn't continue to drive those capital flows, we

136
00:07:17,640 --> 00:07:21,560
Speaker 1: went back to um you know, the underlying current account balances.

137
00:07:21,560 --> 00:07:23,240
Speaker 1: And I think that's what helped the end and the

138
00:07:23,240 --> 00:07:27,560
Speaker 1: Euro this year. The question will become do those capital

139
00:07:27,600 --> 00:07:30,920
Speaker 1: flows become bigger again in two thousand eighteen. And I

140
00:07:30,960 --> 00:07:33,240
Speaker 1: think the driver of that is not short term rates

141
00:07:33,240 --> 00:07:34,800
Speaker 1: and the FED. I think the driver of that is

142
00:07:34,800 --> 00:07:37,720
Speaker 1: bonn yields, and so it's really dependent upon bon yields.

143
00:07:37,800 --> 00:07:39,720
Speaker 1: We think bon yields are going higher in eighteen in

144
00:07:39,720 --> 00:07:42,280
Speaker 1: the two thou eighteen in the US. To me, this

145
00:07:42,400 --> 00:07:46,520
Speaker 1: is absolutely fascinating. As you say, there's almost a zeitgeist

146
00:07:46,680 --> 00:07:49,520
Speaker 1: rain which is the theme for next year? Do they

147
00:07:49,560 --> 00:07:53,080
Speaker 1: ever work out? Does the beliefs that John and I

148
00:07:53,160 --> 00:07:56,920
Speaker 1: read about and typically, Yeah, I was gonna say, I mean,

149
00:07:56,920 --> 00:07:59,880
Speaker 1: the dollar is going to be stronger, Trump won US ascendant.

150
00:08:00,240 --> 00:08:03,560
Speaker 1: That worked out. But right now, whatever you read across

151
00:08:03,680 --> 00:08:06,760
Speaker 1: all the literature, are you sitting there is a grizzled

152
00:08:06,760 --> 00:08:09,400
Speaker 1: Bob since you're going are you guys kidding me? Yeah?

153
00:08:09,400 --> 00:08:11,800
Speaker 1: I mean I think that that there is some pressure

154
00:08:12,080 --> 00:08:14,520
Speaker 1: on people who are deeply involved in the business to

155
00:08:14,560 --> 00:08:17,160
Speaker 1: come up with these ideas for the year. You know,

156
00:08:17,880 --> 00:08:21,240
Speaker 1: the Trump trade, the higher US interest rates, fiscal stimulus,

157
00:08:21,600 --> 00:08:23,680
Speaker 1: that all did drive the dollar. It drove it for

158
00:08:23,720 --> 00:08:27,400
Speaker 1: eight weeks in November and December of two thousand and sixteen.

159
00:08:28,240 --> 00:08:30,960
Speaker 1: And the problem is by that time everybody was on

160
00:08:31,000 --> 00:08:33,360
Speaker 1: the trade in the position, Bob, we don't care. Here's

161
00:08:33,360 --> 00:08:37,319
Speaker 1: what we care about. Pharaoh's so large, John, Pharaoh is

162
00:08:37,360 --> 00:08:41,480
Speaker 1: now so large at Bloomberg that his entire compensation package

163
00:08:41,600 --> 00:08:44,960
Speaker 1: is hedged. The problem is John's going back to London

164
00:08:45,040 --> 00:08:47,800
Speaker 1: for the holidays to see mom, you know, and the

165
00:08:47,840 --> 00:08:51,640
Speaker 1: rest of it can what sterling level does he need

166
00:08:52,120 --> 00:08:54,560
Speaker 1: to live large in the United Kingdom in the next

167
00:08:54,600 --> 00:08:57,520
Speaker 1: two weeks? You know, I think he's doing okay at

168
00:08:57,840 --> 00:09:02,360
Speaker 1: one thirty. I don't. He's an unhappy camper full disclosure

169
00:09:02,360 --> 00:09:07,840
Speaker 1: here funded in dollars and saying absolutely naked with no hedges. Okay,

170
00:09:08,120 --> 00:09:12,160
Speaker 1: So as I'm going back into the UK, we're going

171
00:09:12,400 --> 00:09:15,400
Speaker 1: pure on hedge dollars back into sterling. You know. The

172
00:09:15,440 --> 00:09:18,240
Speaker 1: other issue is when Jonathan goes home, does he actually

173
00:09:18,240 --> 00:09:21,360
Speaker 1: pay for anything? You know, I mean everybody's going to

174
00:09:21,440 --> 00:09:25,880
Speaker 1: be paying for hands price on the Bloomberg as I see,

175
00:09:25,880 --> 00:09:30,480
Speaker 1: it's nice spot price at the terminal at JFK. Was

176
00:09:30,559 --> 00:09:33,240
Speaker 1: walking down thread Needle Street down towards our new office,

177
00:09:33,320 --> 00:09:35,560
Speaker 1: and they like they bow, they do the head the

178
00:09:35,600 --> 00:09:39,240
Speaker 1: tap thing from medieval England. When he walks by, what's

179
00:09:39,240 --> 00:09:42,600
Speaker 1: your call on sterling for next year? Boring? You killed

180
00:09:42,600 --> 00:09:46,240
Speaker 1: it this year? Full disclosure, Yeah, we had it was okay.

181
00:09:46,000 --> 00:09:48,880
Speaker 1: I think it's relatively boring. You know. One of the

182
00:09:48,920 --> 00:09:52,600
Speaker 1: things that I think may surprise us in in in

183
00:09:52,720 --> 00:09:57,040
Speaker 1: the in two thousand and eighteen is the Brexit negotiations.

184
00:09:57,200 --> 00:09:59,440
Speaker 1: I don't think they're going to be as difficult for

185
00:09:59,480 --> 00:10:02,880
Speaker 1: the UK a on a relative basis as they were

186
00:10:02,960 --> 00:10:06,199
Speaker 1: in Phase one. Look in Phase one, the the EU

187
00:10:06,400 --> 00:10:09,560
Speaker 1: leadership had very little to give up, and this was

188
00:10:09,840 --> 00:10:12,680
Speaker 1: primarily about how much money the UK was going to

189
00:10:12,720 --> 00:10:14,480
Speaker 1: pay to get out of the deal. And so I

190
00:10:14,520 --> 00:10:17,640
Speaker 1: think that that the EU leaders didn't have a lot

191
00:10:17,679 --> 00:10:21,600
Speaker 1: of disagreement. I come back to the fact that that

192
00:10:21,679 --> 00:10:24,880
Speaker 1: the EU has is a major exporter to the u K.

193
00:10:25,760 --> 00:10:28,000
Speaker 1: And that creates a lot more strength for the UK

194
00:10:28,120 --> 00:10:32,360
Speaker 1: and the trade negotiations than people generally perceive pay upon.

195
00:10:32,440 --> 00:10:50,480
Speaker 1: The global strategist Gideon Rose with us with a really

196
00:10:50,920 --> 00:10:55,800
Speaker 1: interesting and emotional issue of foreign affairs. The Undead Passed

197
00:10:55,880 --> 00:11:02,360
Speaker 1: with two actual plaques from Auschwitz, was very, very very

198
00:11:02,840 --> 00:11:06,560
Speaker 1: emotional cover. John Ferro, you look through it and you

199
00:11:06,640 --> 00:11:09,480
Speaker 1: go to the challenges of the Middle East that are

200
00:11:10,000 --> 00:11:13,040
Speaker 1: spoken of within the Undead Past getting and I'm thinking

201
00:11:13,040 --> 00:11:15,920
Speaker 1: about the United States State Department in the era of

202
00:11:15,960 --> 00:11:19,040
Speaker 1: the reluctant hedge him on what that means for the

203
00:11:19,040 --> 00:11:21,880
Speaker 1: Middle East. So basically there's a big picture and the details.

204
00:11:21,880 --> 00:11:24,840
Speaker 1: The big picture is we're getting a preview of what

205
00:11:24,960 --> 00:11:29,680
Speaker 1: a post American world would look like. Um the essentially

206
00:11:29,720 --> 00:11:31,840
Speaker 1: the United States. It's almost like we're in the Iliad

207
00:11:32,000 --> 00:11:34,760
Speaker 1: and where the Greeks and the United States is Achilles,

208
00:11:34,920 --> 00:11:38,640
Speaker 1: and essentially we're sulking in our tent. We walked off

209
00:11:38,679 --> 00:11:42,640
Speaker 1: the battlefield, and the enemy, the Trojans, are winning because

210
00:11:42,640 --> 00:11:46,040
Speaker 1: we're basically not fighting. And the question now is you

211
00:11:46,160 --> 00:11:49,240
Speaker 1: have in Saudi Arabia interesting developments where there's both internal

212
00:11:49,280 --> 00:11:53,960
Speaker 1: reform but also a regional uh a regional Hedgeman trying

213
00:11:53,960 --> 00:11:56,559
Speaker 1: to be born. You have Iran doing the same thing

214
00:11:56,559 --> 00:11:58,680
Speaker 1: in reverse from the north and the Gulf. You have

215
00:11:58,960 --> 00:12:02,200
Speaker 1: Syria in which we've not only defeated Isis on one hand,

216
00:12:02,240 --> 00:12:04,880
Speaker 1: but also the Russians have basically helped a sad win.

217
00:12:05,320 --> 00:12:09,280
Speaker 1: So you're entering a new phase in Syria. And all

218
00:12:09,360 --> 00:12:13,400
Speaker 1: this is playing out with essentially the US completely distracted,

219
00:12:13,480 --> 00:12:17,120
Speaker 1: having no essential state department, no diplomatic apparatus, uh AT

220
00:12:17,120 --> 00:12:19,520
Speaker 1: a half hearted attempt to do a piece deal, but

221
00:12:19,559 --> 00:12:21,520
Speaker 1: with things like the move of the embassy to Jerusalem,

222
00:12:21,520 --> 00:12:23,320
Speaker 1: there's no possible way you're gonna get a piece deal.

223
00:12:23,640 --> 00:12:27,200
Speaker 1: So essentially the Middle East is working on its own

224
00:12:27,280 --> 00:12:30,480
Speaker 1: dynamics going forward in interesting ways with stuff happening. In

225
00:12:30,520 --> 00:12:32,840
Speaker 1: the United States is sort of watching from the sidelines,

226
00:12:32,960 --> 00:12:36,320
Speaker 1: and nobody is quite sure just how long the unraveling

227
00:12:36,320 --> 00:12:38,520
Speaker 1: will continue and if and when the US will ever

228
00:12:38,559 --> 00:12:40,720
Speaker 1: come back to the diplomatic game. Gidion. We have an

229
00:12:40,720 --> 00:12:43,960
Speaker 1: emerging alliance as this is happening, one that many years

230
00:12:43,960 --> 00:12:46,720
Speaker 1: ago people might not have expected. Emerging alliance between Saudi

231
00:12:46,720 --> 00:12:50,240
Speaker 1: Arabia and Israel, with the bond, the glue keeping those

232
00:12:50,240 --> 00:12:53,880
Speaker 1: two together, a will and effort, the objective to to

233
00:12:53,960 --> 00:12:56,760
Speaker 1: isolate Iran. How is this going to evolve in the

234
00:12:56,800 --> 00:13:01,320
Speaker 1: coming year? Well, I mean essentially, Uh, you have guards,

235
00:13:01,480 --> 00:13:04,120
Speaker 1: you know, guardians of the old order that are essentially

236
00:13:04,120 --> 00:13:07,280
Speaker 1: happy with the status quo, Israel and Saudi Arabia, which

237
00:13:07,320 --> 00:13:10,600
Speaker 1: actually are strong in their position and actually care about it,

238
00:13:10,640 --> 00:13:13,760
Speaker 1: and Iran, which is trying to make inroads and essentially

239
00:13:13,840 --> 00:13:16,079
Speaker 1: counter them and with its own allies. So you're having

240
00:13:16,120 --> 00:13:19,880
Speaker 1: kind of regional teams pick sides, uh. And what the

241
00:13:19,920 --> 00:13:24,199
Speaker 1: Saudis and the uh Israelis are happy about. What this administration.

242
00:13:24,280 --> 00:13:26,800
Speaker 1: Is they felt the Obama administration was almost moving to

243
00:13:26,840 --> 00:13:29,080
Speaker 1: be neutral between them and the Saudis, and now they're

244
00:13:29,080 --> 00:13:31,959
Speaker 1: happy that the Trump administration is backing them. But the

245
00:13:32,040 --> 00:13:35,040
Speaker 1: question in the long run is Israel and Saudi Arabia

246
00:13:35,080 --> 00:13:37,160
Speaker 1: are not enough to make a Middle East policy with

247
00:13:37,240 --> 00:13:40,120
Speaker 1: and they're actually uh gonna be. You need to have

248
00:13:40,200 --> 00:13:44,440
Speaker 1: some way of bringing Iran into the negotiations and stabilizing

249
00:13:44,480 --> 00:13:46,800
Speaker 1: the situation in some way, and the question of what

250
00:13:46,880 --> 00:13:49,000
Speaker 1: happens with the future of the Iran nuclear deal is

251
00:13:49,000 --> 00:13:51,160
Speaker 1: actually crucial and interest So, Gideon, as you think about

252
00:13:51,160 --> 00:13:54,320
Speaker 1: the Middle East right now, there are several hot spots Yemen,

253
00:13:55,080 --> 00:13:57,719
Speaker 1: Lebanon emerging so in the last couple of months much

254
00:13:57,760 --> 00:14:00,320
Speaker 1: more so, and Syria as well. As you look at

255
00:14:00,320 --> 00:14:03,080
Speaker 1: this evolving relationship between the saud East Israel, and there

256
00:14:03,080 --> 00:14:06,800
Speaker 1: are oppositions wereran, Which region, which area of the Middle

257
00:14:06,800 --> 00:14:10,400
Speaker 1: East You're most concerned about things bubbling over? Well, Syria

258
00:14:10,640 --> 00:14:13,400
Speaker 1: is always has been in the last several years, the

259
00:14:14,600 --> 00:14:18,480
Speaker 1: potential for regional conflagration. Um now we're moving into an

260
00:14:18,520 --> 00:14:21,240
Speaker 1: interesting area there because we're not quite sure what's going

261
00:14:21,280 --> 00:14:26,080
Speaker 1: to happen with a post Isis. But strengthened Assad regime

262
00:14:26,120 --> 00:14:28,440
Speaker 1: and what will the future of Syria look like. Uh,

263
00:14:28,560 --> 00:14:31,320
Speaker 1: that has potential. Yemen's a terrible tragedy, but I don't

264
00:14:31,320 --> 00:14:33,280
Speaker 1: see it blowing up. The really interesting thing is the

265
00:14:33,320 --> 00:14:36,880
Speaker 1: Saudi Iranian relationship. And also, frankly, it would be interesting

266
00:14:36,880 --> 00:14:39,680
Speaker 1: to see if there are any repercussions between what happens

267
00:14:39,760 --> 00:14:46,280
Speaker 1: in the American domestic political situation and the Middle Eastern situation, because, uh,

268
00:14:46,360 --> 00:14:49,920
Speaker 1: the the the Saudias are close allies of the Trump

269
00:14:49,960 --> 00:14:52,520
Speaker 1: administration as well as the Israelis, and if the Trump

270
00:14:52,520 --> 00:14:56,880
Speaker 1: administration finds itself in real troubles in that could be

271
00:14:56,880 --> 00:14:59,840
Speaker 1: a problematic for Middle Eastern diplomacy. Were the Middle Eastern

272
00:15:00,000 --> 00:15:03,480
Speaker 1: plomacy and we all have, I mean literally, folks. The

273
00:15:03,560 --> 00:15:08,160
Speaker 1: evening of September eleven, I picked up eight hundred pages

274
00:15:08,280 --> 00:15:11,640
Speaker 1: of Albert Harani and as one volume, the History of

275
00:15:11,680 --> 00:15:14,560
Speaker 1: the Arab People. That's a true story. I picked it

276
00:15:14,640 --> 00:15:17,560
Speaker 1: up that evening and ran through it in about three months,

277
00:15:17,600 --> 00:15:21,520
Speaker 1: two months. Maybe we all have our legacy knowledge of

278
00:15:21,600 --> 00:15:25,440
Speaker 1: the Middle East. Gideon Rose, those books are old news.

279
00:15:26,080 --> 00:15:31,360
Speaker 1: What's the new book being written? Now? What's what's the zeit?

280
00:15:31,480 --> 00:15:35,400
Speaker 1: Guys that you would recommend we learn about about this

281
00:15:35,560 --> 00:15:39,160
Speaker 1: new Middle East. It's a fascinating question. Basically, when you're

282
00:15:39,160 --> 00:15:41,200
Speaker 1: looking at the Middle East, you always have to remember

283
00:15:41,240 --> 00:15:44,280
Speaker 1: the past because you want to understand the problems and

284
00:15:44,320 --> 00:15:46,560
Speaker 1: the motivations of the different actors. But you have to

285
00:15:46,600 --> 00:15:49,400
Speaker 1: get past and transcend the past so that actually you

286
00:15:49,400 --> 00:15:51,880
Speaker 1: can focus in the future. I think the question of

287
00:15:51,920 --> 00:15:55,880
Speaker 1: whether we can actually create some kind of balance between

288
00:15:55,920 --> 00:15:59,560
Speaker 1: the Saudias and the Iranians in which their regional rivalry

289
00:15:59,680 --> 00:16:03,920
Speaker 1: can can be stabilized without destroying the region, where they

290
00:16:03,920 --> 00:16:07,360
Speaker 1: can compete in a structure that for regional influence that

291
00:16:07,520 --> 00:16:10,520
Speaker 1: is not destructive to everything around it. That will be

292
00:16:10,560 --> 00:16:13,200
Speaker 1: the key question. I've had the privilege of meeting three

293
00:16:13,520 --> 00:16:16,960
Speaker 1: of Faisal's immediate and directs, and it's what I believe

294
00:16:16,960 --> 00:16:19,800
Speaker 1: it was maybe a brother, I'll be honest, I can't remember.

295
00:16:19,880 --> 00:16:27,880
Speaker 1: And it's completely authentic tribal Aristocaracratic royal Middle East heritage.

296
00:16:27,920 --> 00:16:30,320
Speaker 1: And we all were weaned on Lawrence of Arabian all

297
00:16:30,360 --> 00:16:34,600
Speaker 1: of our false mythologies. This new guy is trying to

298
00:16:34,680 --> 00:16:38,200
Speaker 1: get them away from that. How do you do that

299
00:16:38,240 --> 00:16:41,160
Speaker 1: within a tribal legacy? I I find it fascinating. So

300
00:16:41,200 --> 00:16:43,720
Speaker 1: what's happening with the Mohammed bin Salman in Saudi Arabia?

301
00:16:43,920 --> 00:16:49,040
Speaker 1: Fantastic reform UH moves, but where it's actually going? Is

302
00:16:49,080 --> 00:16:52,400
Speaker 1: this just an increased play for personal power and control?

303
00:16:52,640 --> 00:16:54,920
Speaker 1: And what does he want to do with the power

304
00:16:54,960 --> 00:16:57,360
Speaker 1: when he has it? Does he want to liberalize Saudi Arabia?

305
00:16:57,480 --> 00:16:59,080
Speaker 1: Are we talking? Look at me? What's gonna happen with

306
00:16:59,200 --> 00:17:02,720
Speaker 1: energy markets? With happened with religious extremism and control there?

307
00:17:03,000 --> 00:17:05,440
Speaker 1: And foreign policy? It's actually really interesting because he's trying

308
00:17:05,440 --> 00:17:07,639
Speaker 1: to It seems like he's trying to do interesting things domestically,

309
00:17:07,840 --> 00:17:09,959
Speaker 1: but he's also been a strapper US on foreign policy

310
00:17:10,000 --> 00:17:11,600
Speaker 1: and the m in side of things has not worked

311
00:17:11,600 --> 00:17:13,800
Speaker 1: well at all. So the end, what will happen with

312
00:17:13,880 --> 00:17:16,720
Speaker 1: Mohammed bin Salmans Saudi Arabia going forward is a really

313
00:17:16,720 --> 00:17:19,240
Speaker 1: interesting question. Some people would argue Gideon that this is

314
00:17:19,240 --> 00:17:22,439
Speaker 1: a power graph under the veil of reform, and there

315
00:17:22,440 --> 00:17:26,920
Speaker 1: are still significant doubts whether he can really contain Wahabism

316
00:17:27,240 --> 00:17:30,280
Speaker 1: in Saudi Arabia? Can he really do that? When he

317
00:17:30,320 --> 00:17:32,560
Speaker 1: talks about a moderate Islam, I don't think of what

318
00:17:32,680 --> 00:17:38,000
Speaker 1: hobbyism is that Uh look, any of these religions has

319
00:17:38,840 --> 00:17:42,520
Speaker 1: variants that can be more militant or more pacific, and

320
00:17:42,600 --> 00:17:46,080
Speaker 1: there's plenty of room for political authorities in a place

321
00:17:46,080 --> 00:17:49,720
Speaker 1: like Saudi Arabia to shade the coverage and interpretation into

322
00:17:49,840 --> 00:17:52,560
Speaker 1: various kinds of quiescence or not. Religious wise, So if

323
00:17:52,560 --> 00:17:54,919
Speaker 1: he wanted to do some reform, he could, but we

324
00:17:55,040 --> 00:17:57,000
Speaker 1: just don't know. And one of the things we'll all

325
00:17:57,040 --> 00:17:59,320
Speaker 1: be watching is to see not just how the power

326
00:17:59,520 --> 00:18:02,639
Speaker 1: play works out internally, but what the fruits of it

327
00:18:02,680 --> 00:18:04,399
Speaker 1: are in terms of what does he do with the

328
00:18:04,440 --> 00:18:06,679
Speaker 1: power position that he has consolidated. So, given what does

329
00:18:06,680 --> 00:18:11,640
Speaker 1: success look like for MBS, success would look like maintaining

330
00:18:12,359 --> 00:18:15,800
Speaker 1: domestic power, having sent a clear message that he won't

331
00:18:15,840 --> 00:18:19,760
Speaker 1: tolerate opposition to his policies, and then some kind of

332
00:18:19,800 --> 00:18:22,440
Speaker 1: attempt to gradually reform to be able to take the

333
00:18:22,520 --> 00:18:25,520
Speaker 1: kingdom strengths, stabilize it, and move it forward into the

334
00:18:25,520 --> 00:18:28,040
Speaker 1: twenty one century with a different kind of model that's

335
00:18:28,080 --> 00:18:32,600
Speaker 1: more adapted to the future of the Middle East, energy wise, socially, religiously, etcetera.

336
00:18:32,640 --> 00:18:35,880
Speaker 1: That's a big challenge, and uh, we don't know whether

337
00:18:35,920 --> 00:18:37,840
Speaker 1: he can pull it off, find a question. This has

338
00:18:37,840 --> 00:18:41,960
Speaker 1: been wonderful getting rose. What's your challenge with foreign affairs? Folks.

339
00:18:41,960 --> 00:18:44,360
Speaker 1: I'm gonna make this simple, John, help me here, because

340
00:18:44,359 --> 00:18:46,120
Speaker 1: I don't know if I have the pricing right. It's

341
00:18:46,119 --> 00:18:49,359
Speaker 1: a price of two Manhattan's. Maybe it's a price of

342
00:18:49,400 --> 00:18:52,479
Speaker 1: to Gibson's. Our our challenge is pretty simple. Actually, we

343
00:18:52,600 --> 00:18:56,159
Speaker 1: are essentially shock troops of the Enlightenment. Our goal is

344
00:18:56,200 --> 00:18:59,800
Speaker 1: simply to apply reason to public policy for the public benefit,

345
00:18:59,880 --> 00:19:02,359
Speaker 1: to provide a forum for serious discussion of real issues.

346
00:19:02,520 --> 00:19:05,159
Speaker 1: And this whole question of fake news, the whole question

347
00:19:05,200 --> 00:19:08,119
Speaker 1: of trying to undermine standards of truth. That's the biggest

348
00:19:08,119 --> 00:19:11,680
Speaker 1: single challenge, because it doesn't matter about which political side

349
00:19:11,720 --> 00:19:14,000
Speaker 1: you're on. There should be as as Dan pat Monehan

350
00:19:14,080 --> 00:19:15,679
Speaker 1: used to say, you can have the right to your

351
00:19:15,680 --> 00:19:18,119
Speaker 1: own opinions, but not your own facts. And that's the

352
00:19:18,160 --> 00:19:20,159
Speaker 1: biggest challenge we're in is that now facts and the

353
00:19:20,200 --> 00:19:22,679
Speaker 1: logic themselves are creating a part of the environment on

354
00:19:22,720 --> 00:19:25,640
Speaker 1: behalf of all the foreign affairs and counts on forign relations.

355
00:19:25,680 --> 00:19:28,880
Speaker 1: What's the print subscription dynamic right now? To do this year?

356
00:19:28,960 --> 00:19:31,120
Speaker 1: We're actually doing pretty well. We're up over a couple

357
00:19:31,160 --> 00:19:33,760
Speaker 1: hundred thousand and you could basically subscribe anyway you want.

358
00:19:33,800 --> 00:19:37,280
Speaker 1: Go to Foreign Affairs dot com and we're seeing a

359
00:19:37,320 --> 00:19:41,439
Speaker 1: resurgence of journalism. Let me give you the real sales

360
00:19:41,520 --> 00:19:46,240
Speaker 1: job here, folks. The Prince subscription has adult larger font

361
00:19:46,400 --> 00:19:50,159
Speaker 1: you can actually read the damn thing. Two, you get

362
00:19:50,200 --> 00:19:54,359
Speaker 1: a subscription for Foreign Affairs for the mouthy brat you

363
00:19:54,480 --> 00:19:58,240
Speaker 1: have at home who's an undergraduate somewhere. You get on

364
00:19:58,280 --> 00:20:01,119
Speaker 1: the subscription and you say, you don't get the Daily Pharaoh.

365
00:20:01,119 --> 00:20:03,359
Speaker 1: You get a daily or weekly. Do understand that that

366
00:20:03,440 --> 00:20:05,240
Speaker 1: kind of magazine is going to make the mouthy brand

367
00:20:05,320 --> 00:20:07,760
Speaker 1: in the family even mouth yet it is, that's true.

368
00:20:08,160 --> 00:20:10,480
Speaker 1: But you get on the subscription and you say you

369
00:20:10,560 --> 00:20:12,919
Speaker 1: must read one article or you don't get the allowance

370
00:20:13,200 --> 00:20:16,000
Speaker 1: to go to Florida for winter break. Hopefully it's not spinach,

371
00:20:16,040 --> 00:20:18,080
Speaker 1: and hopefully they're already reading an online and using it

372
00:20:18,119 --> 00:20:21,760
Speaker 1: for their debate teams and other kinds of preparation. But together,

373
00:20:21,840 --> 00:20:23,840
Speaker 1: you're doing the digital and you're doing the producing Foreign

374
00:20:23,840 --> 00:20:27,520
Speaker 1: Affairs magazine. You're end of my sales pitch. Joe Biden's

375
00:20:27,600 --> 00:20:31,560
Speaker 1: in it some really interesting cross political analysis. The Undead

376
00:20:31,600 --> 00:20:46,560
Speaker 1: Past John Farrell what's the one thing you see on

377
00:20:46,560 --> 00:20:48,399
Speaker 1: the data screen here, I just say a week, a

378
00:20:48,480 --> 00:20:50,399
Speaker 1: dollar that's just struggling to get a bit, not just

379
00:20:50,440 --> 00:20:53,359
Speaker 1: today but throughout the whole of Tom and I know

380
00:20:53,400 --> 00:20:54,880
Speaker 1: we've talked about this a lot in the last couple

381
00:20:54,920 --> 00:20:56,879
Speaker 1: of days, but really, as we round out the year

382
00:20:56,880 --> 00:21:00,159
Speaker 1: and look at and with a prestigious guest next to

383
00:21:00,240 --> 00:21:02,560
Speaker 1: us as well, that's what I'm thinking about. What went

384
00:21:02,600 --> 00:21:05,000
Speaker 1: wrong with the call for a stronger dollar this year?

385
00:21:06,320 --> 00:21:11,200
Speaker 1: To bring him in, bring him involved. I don't know

386
00:21:11,240 --> 00:21:14,440
Speaker 1: what's wrong with Tom Key this morning. I'm worried about Steelers,

387
00:21:14,480 --> 00:21:19,919
Speaker 1: Patriots data CEO and founder. Yes, it's always great to

388
00:21:19,920 --> 00:21:22,360
Speaker 1: catch up with you. Tax cutter set to go through,

389
00:21:22,440 --> 00:21:25,840
Speaker 1: Fiscal stimulus is set to happen, g d P is exalerating,

390
00:21:25,920 --> 00:21:29,080
Speaker 1: great hikes are going to continue through this year through

391
00:21:29,119 --> 00:21:32,800
Speaker 1: next year. What's the dollar doing down here? Well, so

392
00:21:33,280 --> 00:21:35,960
Speaker 1: I think when when you look at the dollar, it

393
00:21:36,000 --> 00:21:38,800
Speaker 1: tends to move in cycles, and we had a really

394
00:21:38,840 --> 00:21:41,879
Speaker 1: big dollar strengthening cycle from the summer of two thousand

395
00:21:42,000 --> 00:21:45,560
Speaker 1: fourteen too January this year, depending on how you counted,

396
00:21:46,280 --> 00:21:48,320
Speaker 1: and once you had one of these really big movement

397
00:21:48,359 --> 00:21:51,080
Speaker 1: becomes hard to just to sustain the gains, and you

398
00:21:51,160 --> 00:21:55,640
Speaker 1: need to have like continuously good news. And this year

399
00:21:55,640 --> 00:21:57,119
Speaker 1: we've we've had a lot of good news, but a

400
00:21:57,119 --> 00:21:59,920
Speaker 1: lot of us priced in and early in the year

401
00:22:00,720 --> 00:22:03,119
Speaker 1: Trump arguably started to talk the currency down, So I

402
00:22:03,119 --> 00:22:05,479
Speaker 1: think that was a part of the turning point. Another

403
00:22:05,640 --> 00:22:07,600
Speaker 1: really important part of the turning point was that we

404
00:22:07,640 --> 00:22:10,360
Speaker 1: started to have much better global growth. Right, So it's

405
00:22:10,359 --> 00:22:12,560
Speaker 1: always very attempting to sort of be okay, we want

406
00:22:12,600 --> 00:22:14,399
Speaker 1: to trade the dollars. Lets look, look, let's look at

407
00:22:14,400 --> 00:22:16,880
Speaker 1: you as fundamentals, but effects is always a relative game,

408
00:22:17,359 --> 00:22:20,280
Speaker 1: and we've had a lot better growth. Like just let

409
00:22:20,320 --> 00:22:23,240
Speaker 1: me emphasize one point from the ECB press conference last

410
00:22:23,320 --> 00:22:27,320
Speaker 1: year yesterday. The ESPN our projects essentially two and a

411
00:22:27,359 --> 00:22:29,879
Speaker 1: half percent growth for two thousand and eighteen. That's the

412
00:22:29,920 --> 00:22:34,639
Speaker 1: same as United States, and and they have no population growth.

413
00:22:34,720 --> 00:22:37,359
Speaker 1: So in in in GDP per capital terms, it's it's

414
00:22:37,440 --> 00:22:41,720
Speaker 1: growing faster than United States, even though United States has

415
00:22:41,720 --> 00:22:44,120
Speaker 1: to do fiscal stimulus our at tax cuts to get there.

416
00:22:44,320 --> 00:22:47,200
Speaker 1: It's kind of interesting. Yet we have a deposit rate

417
00:22:47,200 --> 00:22:50,240
Speaker 1: in Europe negative forty basis. Noticed, I'm noticed, and at

418
00:22:50,280 --> 00:22:53,359
Speaker 1: the front end in the United States, we continue to

419
00:22:53,440 --> 00:22:56,400
Speaker 1: grind higher. I'm trying to reconcile those two things. Yes,

420
00:22:56,520 --> 00:22:58,359
Speaker 1: can you help me? This is really good news for

421
00:22:58,400 --> 00:23:01,080
Speaker 1: me because I have to make a living predicting currencies,

422
00:23:01,080 --> 00:23:04,320
Speaker 1: and if it was easy, then I wouldn't have a job.

423
00:23:04,640 --> 00:23:06,800
Speaker 1: So this this year has been really interesting, right, because

424
00:23:06,800 --> 00:23:10,479
Speaker 1: we've had these huge divergence between the signal from interest

425
00:23:10,560 --> 00:23:13,520
Speaker 1: rates and what currencies have actually done. So I think

426
00:23:13,520 --> 00:23:16,520
Speaker 1: there's been some really important flow effects that has pushed

427
00:23:16,520 --> 00:23:19,960
Speaker 1: the US higher, and I think that can continue. But

428
00:23:20,359 --> 00:23:22,800
Speaker 1: since identified this an hour ago, let's go into this.

429
00:23:22,840 --> 00:23:26,879
Speaker 1: There's two drivers of effects flows money slashing around, and

430
00:23:26,920 --> 00:23:30,440
Speaker 1: am I right? Real interest rates inflation adjusted interest rates

431
00:23:30,440 --> 00:23:34,320
Speaker 1: and their expectations that right versus president indust rates. Now

432
00:23:34,359 --> 00:23:39,840
Speaker 1: you're really going into uh always religious debate. I'm on

433
00:23:39,880 --> 00:23:41,880
Speaker 1: the edge of Michael. Help you here about the edge

434
00:23:41,920 --> 00:23:46,240
Speaker 1: of Michael Rosenberg. One I want ends you'd be thinking

435
00:23:46,280 --> 00:23:49,160
Speaker 1: about great differentials at the front end. Yeah, that would

436
00:23:49,160 --> 00:23:52,400
Speaker 1: be effects one I want. And that's right. Um, if

437
00:23:52,640 --> 00:23:55,359
Speaker 1: you're looking at emerging market country, I always look at

438
00:23:55,359 --> 00:23:58,000
Speaker 1: real interest rates for detail countries. I think normal is

439
00:23:58,000 --> 00:24:01,920
Speaker 1: more Chapter eight of your wonderful Important and I might

440
00:24:01,960 --> 00:24:05,359
Speaker 1: point out at the time courageous book pounding the European

441
00:24:05,440 --> 00:24:08,960
Speaker 1: society to get their act together. Chapter eight, where's the growth?

442
00:24:09,600 --> 00:24:12,600
Speaker 1: The cost of deflation? Can you say now your book

443
00:24:12,640 --> 00:24:15,640
Speaker 1: is old and the Europe is on a new regime

444
00:24:15,960 --> 00:24:18,080
Speaker 1: and you need to write a new book about a

445
00:24:18,119 --> 00:24:20,760
Speaker 1: European GDP that may be bigger than the U S

446
00:24:20,800 --> 00:24:23,320
Speaker 1: g d P. Yes, that that book came out in

447
00:24:23,320 --> 00:24:26,280
Speaker 1: two thousand thirty and I think a lot of things

448
00:24:26,280 --> 00:24:28,240
Speaker 1: have changed as a fair few chapters I would like

449
00:24:28,320 --> 00:24:30,879
Speaker 1: to add as the refugee crisis that was not in

450
00:24:30,920 --> 00:24:34,560
Speaker 1: the book, and now we actually seem to have come

451
00:24:34,640 --> 00:24:38,280
Speaker 1: through in a way where after ten years pretty much

452
00:24:38,320 --> 00:24:40,439
Speaker 1: but no growth. Okay, let me help you with the

453
00:24:40,480 --> 00:24:42,880
Speaker 1: title here, and I need a royalty on this. Are

454
00:24:42,920 --> 00:24:46,320
Speaker 1: you going to write the Rise of the euro? Well,

455
00:24:46,760 --> 00:24:47,960
Speaker 1: the first thing I have to do this, I have

456
00:24:47,960 --> 00:24:50,200
Speaker 1: to get an approval from my wife to write another book,

457
00:24:50,240 --> 00:24:52,040
Speaker 1: because it takes a thought. You needed to get an

458
00:24:52,119 --> 00:24:54,840
Speaker 1: approval from Mrs Nordvig for me to get a royalty.

459
00:24:56,440 --> 00:24:58,359
Speaker 1: He needs an approval for both. Is that what we

460
00:24:58,480 --> 00:25:02,480
Speaker 1: faced out a Ryan seeing euro a rising Europe? Is

461
00:25:02,520 --> 00:25:06,520
Speaker 1: the excitement justified? Yents I do so I was. I

462
00:25:06,600 --> 00:25:09,160
Speaker 1: was just speaking with the Lisa Brahmas and Alex Steel

463
00:25:09,200 --> 00:25:10,919
Speaker 1: this morning where we touched on this topic and the

464
00:25:11,000 --> 00:25:14,800
Speaker 1: one chart actually just tweeted out now is about the

465
00:25:14,840 --> 00:25:18,199
Speaker 1: public support for the euro So the whole thesis in

466
00:25:18,240 --> 00:25:20,280
Speaker 1: the book that wrote back in two thousand and thirteen

467
00:25:20,440 --> 00:25:23,760
Speaker 1: was that the project was very, very shaky if public

468
00:25:23,800 --> 00:25:26,919
Speaker 1: support was going down, and now we're actually having a

469
00:25:26,920 --> 00:25:29,160
Speaker 1: turning point in the public support. So this is really

470
00:25:29,200 --> 00:25:32,800
Speaker 1: important because it means that the sort of forces in

471
00:25:32,840 --> 00:25:36,760
Speaker 1: Europe that were ready to embrace a breakup potentially having

472
00:25:37,240 --> 00:25:39,680
Speaker 1: a less less momentum, and that that could keep the

473
00:25:39,720 --> 00:25:42,600
Speaker 1: thing together. So when we think about political forces reasserting

474
00:25:42,600 --> 00:25:46,280
Speaker 1: themselves in I think most people think instantly they think

475
00:25:46,320 --> 00:25:48,840
Speaker 1: Italy and what's going to happen with the Italian election

476
00:25:48,920 --> 00:25:51,719
Speaker 1: and how that may kind of throw this whole, this

477
00:25:51,760 --> 00:25:54,440
Speaker 1: whole happy talk around Europe of course with it. So

478
00:25:54,480 --> 00:25:57,520
Speaker 1: this this is why I watched these opinion polls very

479
00:25:57,600 --> 00:25:59,760
Speaker 1: very carefully, right, because if you look at the different

480
00:25:59,800 --> 00:26:03,320
Speaker 1: part aunties in Italy, there are right wing parties that

481
00:26:03,359 --> 00:26:06,560
Speaker 1: are anti Europe and there are left wing parties that

482
00:26:06,600 --> 00:26:09,080
Speaker 1: are anti Europe, but they also look at opinion polls.

483
00:26:09,600 --> 00:26:12,399
Speaker 1: If they can see it's actually not that popular to

484
00:26:12,480 --> 00:26:15,280
Speaker 1: be anti Euro, they're gonna tone down the rhetoric. And

485
00:26:15,280 --> 00:26:18,640
Speaker 1: we learn in France it's not in France in Italy. So,

486
00:26:18,720 --> 00:26:22,440
Speaker 1: and Italy has always been the big public problem country

487
00:26:22,480 --> 00:26:25,480
Speaker 1: in that support for the Euro is kind of fifty fifty, right,

488
00:26:25,720 --> 00:26:27,560
Speaker 1: So it makes a big difference where the ten percent

489
00:26:27,640 --> 00:26:31,560
Speaker 1: is going to swing six against it or in favor

490
00:26:31,600 --> 00:26:33,320
Speaker 1: of it. Just because the time I want to go

491
00:26:33,359 --> 00:26:36,040
Speaker 1: over to Asia, my recollection I could be wronging it

492
00:26:36,080 --> 00:26:38,320
Speaker 1: is correctly, please is at the beginning of the year

493
00:26:38,320 --> 00:26:40,760
Speaker 1: there was almost a partition of euro U S trans

494
00:26:40,800 --> 00:26:44,080
Speaker 1: Atlantic dynamics and then a whole another beast called Asia

495
00:26:44,480 --> 00:26:48,399
Speaker 1: d X Y or Asia Japan, whatever that dynamic is.

496
00:26:48,400 --> 00:26:52,360
Speaker 1: Is dollar dynamics separate with Europe and then over here

497
00:26:52,480 --> 00:26:57,280
Speaker 1: Asia or are they more of a converging set of dynamics. Well, so,

498
00:26:57,640 --> 00:27:00,159
Speaker 1: I think you're making a really good point because as

499
00:27:00,320 --> 00:27:05,040
Speaker 1: some flow dynamics that are very Asia specific. Yes, there's

500
00:27:05,080 --> 00:27:07,679
Speaker 1: the capital flight that has been happening out of China

501
00:27:08,240 --> 00:27:11,720
Speaker 1: up until earlier this year but stopped for various reasons.

502
00:27:11,800 --> 00:27:15,320
Speaker 1: We go into then there's also a country like Korea,

503
00:27:15,359 --> 00:27:19,320
Speaker 1: another very important country in Asia. They have essentially stopped

504
00:27:19,359 --> 00:27:22,399
Speaker 1: intervening in the currency market this year. That allows the

505
00:27:22,440 --> 00:27:24,280
Speaker 1: currency to go to a different level than we've seen

506
00:27:24,280 --> 00:27:27,120
Speaker 1: in the the ones that great. Yeah, well, I want

507
00:27:27,119 --> 00:27:28,879
Speaker 1: to rip the script up right now and if you

508
00:27:28,920 --> 00:27:31,960
Speaker 1: don't want to answer this, that's okay, without question. On

509
00:27:32,000 --> 00:27:35,879
Speaker 1: this Friday in December, the bitcoin focus is on the

510
00:27:36,080 --> 00:27:39,960
Speaker 1: frenzy in Korea. With your work at Golden Section, work

511
00:27:39,960 --> 00:27:43,159
Speaker 1: at the beautiful book you put out the Fall of

512
00:27:43,200 --> 00:27:47,760
Speaker 1: the Euro, what do you see is the trading frenzy

513
00:27:47,880 --> 00:27:52,560
Speaker 1: of China, Japan and Korea over this thing called bitcoin.

514
00:27:53,000 --> 00:27:56,600
Speaker 1: You've lived that psychology, You've traveled there a million times.

515
00:27:56,920 --> 00:28:01,440
Speaker 1: How do you distill the bitcoin z that we see

516
00:28:01,520 --> 00:28:05,320
Speaker 1: within the Pacific rim was that they definitely have a

517
00:28:05,440 --> 00:28:08,680
Speaker 1: gambling culture that is different from what we know here

518
00:28:08,720 --> 00:28:12,040
Speaker 1: and you can see that on the exchanges for for

519
00:28:12,160 --> 00:28:15,080
Speaker 1: bitcoin in Asia. But I would add one more thing.

520
00:28:16,040 --> 00:28:21,760
Speaker 1: So there's more and more people who are serious investors

521
00:28:21,800 --> 00:28:25,560
Speaker 1: that have managed institutional money over the last couple of

522
00:28:25,560 --> 00:28:30,520
Speaker 1: decades that are telling me we're closing down our hedge fund,

523
00:28:30,800 --> 00:28:33,560
Speaker 1: maybe multiple and dollar hedge fund. Our focus going forward

524
00:28:34,000 --> 00:28:38,400
Speaker 1: is gonna be cryptocurrencies. It's stunning. It's not just a

525
00:28:38,480 --> 00:28:43,440
Speaker 1: retail phenomenon. That's going to be an institutional chapter to this.

526
00:28:43,440 --> 00:28:45,800
Speaker 1: This is so too important. Are they going to Kogermon

527
00:28:46,280 --> 00:28:49,920
Speaker 1: the Long Short Cryptocurrency Fund? Are they going there because

528
00:28:49,920 --> 00:28:52,120
Speaker 1: they want to? Are they going there because they think

529
00:28:52,160 --> 00:28:55,680
Speaker 1: that's the only alpha creating game in town to make

530
00:28:55,720 --> 00:28:59,160
Speaker 1: two and twenty. It's probably a mix. But I really

531
00:28:59,200 --> 00:29:02,520
Speaker 1: think there are there is people who are fundamental believers

532
00:29:02,520 --> 00:29:04,720
Speaker 1: in this. You can maybe call them religious about it,

533
00:29:04,760 --> 00:29:07,840
Speaker 1: but there are smart people who have conviction this space.

534
00:29:08,240 --> 00:29:10,360
Speaker 1: And sometimes when I sit down with these people who

535
00:29:10,360 --> 00:29:12,479
Speaker 1: I'm known for years and hear what they say about it,

536
00:29:12,520 --> 00:29:17,360
Speaker 1: I'm I'm surprised how broad baseds and and how it's

537
00:29:17,400 --> 00:29:20,720
Speaker 1: mergings an institutional space. Now I'm not surprised the funds

538
00:29:20,720 --> 00:29:23,000
Speaker 1: are closed and I'm surprised to go into cryptos. Global

539
00:29:23,040 --> 00:29:28,040
Speaker 1: macro just got killed by central banks. Todd one data point.

540
00:29:28,400 --> 00:29:31,640
Speaker 1: Even people who have been successful, been successful in macro

541
00:29:31,880 --> 00:29:34,480
Speaker 1: are doing it. It's amazing. That's interesting. Now, that's interesting.

542
00:29:34,520 --> 00:29:37,360
Speaker 1: The Interview of the Week Howard Ward, gam Coo and

543
00:29:37,440 --> 00:29:41,320
Speaker 1: Gabelly up this year and he's not making two and twenty.

544
00:29:41,560 --> 00:29:46,520
Speaker 1: I speak to Mario Gabelly on television today around twelve noonishing, yes,

545
00:29:46,600 --> 00:29:49,960
Speaker 1: we will speak about the media Fox in Disney with

546
00:29:50,080 --> 00:29:53,479
Speaker 1: Mr Gabelly as well. Yes, Nordvig, thank you so much, greatly,

547
00:29:53,720 --> 00:30:14,479
Speaker 1: greatly appreciate your wisdom. It is good to catch up

548
00:30:14,520 --> 00:30:17,680
Speaker 1: with Sony com or he's with Sony copor he's with Redefined.

549
00:30:18,360 --> 00:30:21,080
Speaker 1: But far more than that, he takes a very broad,

550
00:30:22,200 --> 00:30:27,320
Speaker 1: a holistic view of a europe Uh. That's really sort

551
00:30:27,360 --> 00:30:31,200
Speaker 1: of in ascendency Sony, good morning. Did you did you

552
00:30:31,280 --> 00:30:35,479
Speaker 1: ever think you would see forecast of European real g

553
00:30:35,560 --> 00:30:43,080
Speaker 1: d P larger than American Um. Yes, even at the

554
00:30:43,200 --> 00:30:47,959
Speaker 1: depth of the European crisis, I never lost my faith

555
00:30:48,360 --> 00:30:54,480
Speaker 1: in the US ability uh to get together and be resilient.

556
00:30:55,600 --> 00:31:00,560
Speaker 1: Part of it, of course, is simply a question of

557
00:31:00,640 --> 00:31:04,440
Speaker 1: bouncing back. The sad reality is that even with the

558
00:31:04,560 --> 00:31:09,840
Speaker 1: relatively optimistic forecast that we see today, many European countries,

559
00:31:10,000 --> 00:31:12,760
Speaker 1: especially in the UA Zone, will still have g dps

560
00:31:13,360 --> 00:31:16,080
Speaker 1: that are lower than they would than they were back

561
00:31:16,120 --> 00:31:20,120
Speaker 1: in two thousand seven and eight. Uh So, yes, it

562
00:31:20,160 --> 00:31:23,959
Speaker 1: looks good on a relative basis in a world that

563
00:31:24,120 --> 00:31:29,720
Speaker 1: is otherwise confronted with slowing growth and rich economies. But

564
00:31:30,120 --> 00:31:36,440
Speaker 1: we have had a lost decade in Europe. Certainly, we've

565
00:31:36,440 --> 00:31:39,320
Speaker 1: had a lost decade in Europe, arguably because there was

566
00:31:39,320 --> 00:31:42,120
Speaker 1: a man called three around the e c B and

567
00:31:42,120 --> 00:31:44,680
Speaker 1: then we got a man called Drug that boiled everything out.

568
00:31:45,040 --> 00:31:48,760
Speaker 1: Is this president dr recovery or is this Europe's recovery

569
00:31:48,800 --> 00:31:53,400
Speaker 1: driven by politicians that got their act together? Well, I

570
00:31:53,440 --> 00:31:56,160
Speaker 1: think part of it is simply again the question of

571
00:31:56,240 --> 00:32:00,480
Speaker 1: bouncing back. At some point, real economic activity had to

572
00:32:00,520 --> 00:32:03,960
Speaker 1: pick up. But yes, you are right that tre Set

573
00:32:04,360 --> 00:32:08,600
Speaker 1: built a bad blow at the start by raising interest

574
00:32:08,680 --> 00:32:12,800
Speaker 1: rate prematurely, by taking a divergent vie on monetary policy

575
00:32:12,840 --> 00:32:15,280
Speaker 1: compared to what the Fed and the Bank of England

576
00:32:15,280 --> 00:32:19,040
Speaker 1: were doing, and that probably cost Europe three or four

577
00:32:19,200 --> 00:32:22,760
Speaker 1: years of much lower growth in a deeper recession than

578
00:32:22,800 --> 00:32:25,800
Speaker 1: we would have needed to have had. And yes, Drug

579
00:32:26,120 --> 00:32:32,239
Speaker 1: has contributed to restoring confidence, particularly to taking away the

580
00:32:32,320 --> 00:32:37,160
Speaker 1: possibility of a breakup of the Eurozone that haunted investment

581
00:32:37,240 --> 00:32:43,440
Speaker 1: and economic activity in Europe for several years. But some

582
00:32:43,600 --> 00:32:47,240
Speaker 1: of this is simply the result of the asset prise

583
00:32:47,280 --> 00:32:50,800
Speaker 1: inflation we have seen and may actually be temporary rather

584
00:32:50,840 --> 00:32:53,800
Speaker 1: than real seal hell, one of the things we can

585
00:32:53,800 --> 00:32:55,720
Speaker 1: do with you, and this goes of course your advice

586
00:32:55,760 --> 00:32:57,959
Speaker 1: to the Norwegian government, your work with O. E. C.

587
00:32:58,040 --> 00:33:00,480
Speaker 1: D and I m F. We got like eight ways

588
00:33:00,520 --> 00:33:03,120
Speaker 1: to go here. But in the time that we've got left, Sony,

589
00:33:03,360 --> 00:33:06,560
Speaker 1: both John and I are to be kind surprised that

590
00:33:06,680 --> 00:33:10,560
Speaker 1: Germany can't get its act together. I guess the election

591
00:33:10,840 --> 00:33:14,160
Speaker 1: is old news, but have you been surprised by the

592
00:33:14,400 --> 00:33:21,320
Speaker 1: struggle to get to a two thousand eighteen coalition? Well

593
00:33:22,080 --> 00:33:26,240
Speaker 1: not really, because there has been a president of the

594
00:33:26,360 --> 00:33:32,040
Speaker 1: junior party in grand coalitions across Europe having to pay

595
00:33:32,120 --> 00:33:37,480
Speaker 1: a significant electoral cost, and this time, after several such

596
00:33:37,560 --> 00:33:40,440
Speaker 1: years and coalition of being the junior partner, the SPT

597
00:33:40,640 --> 00:33:44,680
Speaker 1: decided that enough was enough and the mathematics simply didn't.

598
00:33:44,680 --> 00:33:47,560
Speaker 1: But but we have to remember, and this is very important,

599
00:33:47,560 --> 00:33:52,240
Speaker 1: that Germany is a federal economy, with most key critical

600
00:33:52,360 --> 00:33:56,720
Speaker 1: economic decision making actually not lying with the federal government.

601
00:33:57,120 --> 00:34:01,160
Speaker 1: So in that sense Germany can, as opposed to France

602
00:34:01,200 --> 00:34:03,880
Speaker 1: and the UK, which are far more centralized, we afford

603
00:34:04,360 --> 00:34:08,160
Speaker 1: afford to be without a federal government without any serious

604
00:34:08,239 --> 00:34:13,080
Speaker 1: economic costs for far longer than these other centralized economies,

605
00:34:13,080 --> 00:34:17,120
Speaker 1: and the example of Belgium, which set the record for

606
00:34:17,160 --> 00:34:20,560
Speaker 1: not having a government while the economy did quite well,

607
00:34:21,760 --> 00:34:26,640
Speaker 1: is perhaps the best comparison. Like Germany, Belgium itself has

608
00:34:26,760 --> 00:34:29,680
Speaker 1: multiple levels of government. The federal government in Belgium is

609
00:34:29,719 --> 00:34:36,680
Speaker 1: only responsible for some small decisions rather than being all important. Sonny,

610
00:34:36,719 --> 00:34:39,200
Speaker 1: thank you so much. Nice to catch up, refels CDVO.

611
00:34:39,280 --> 00:34:43,759
Speaker 1: Sony Kapor is managing director for Redefined with a Good

612
00:34:43,760 --> 00:34:48,200
Speaker 1: Perspective and Europe jen if I just it is one

613
00:34:48,239 --> 00:34:50,520
Speaker 1: of the great surprises of the year. I just thought

614
00:34:50,600 --> 00:34:53,760
Speaker 1: a coalition would be doable in Germany. I think everyone

615
00:34:53,800 --> 00:34:57,280
Speaker 1: just saw. Everyone just thought smooth sailing for Chancellor Angela Merkel.

616
00:34:57,440 --> 00:34:59,640
Speaker 1: That probably was the political surprise this year. That was sunny,

617
00:34:59,760 --> 00:35:02,319
Speaker 1: called Cappolla points out Tom Ready, the lesson is that

618
00:35:02,680 --> 00:35:05,279
Speaker 1: you don't really need a government sometimes in Europe for

619
00:35:05,320 --> 00:35:14,920
Speaker 1: things to be uncounty. Thanks for listening to the Bloomberg

620
00:35:14,960 --> 00:35:20,879
Speaker 1: Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,

621
00:35:21,280 --> 00:35:25,480
Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at

622
00:35:25,520 --> 00:35:29,799
Speaker 1: Tom Keane Before the podcast. You can always catch us worldwide.

623
00:35:30,239 --> 00:35:31,320
Speaker 1: I'm Bloomberg Radio