WEBVTT - Asian Markets Brace for Fed's Rate Decision

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg

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<v Speaker 1>Daybreak Asia podcast. I'm Doug Krisner. You can join Brian

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<v Speaker 1>Curtis and myself for the stories, making news and moving

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<v Speaker 1>markets in the Apec region. You can subscribe to the

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<v Speaker 1>show anywhere you get your podcast and always on Bloomberg Radio,

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<v Speaker 1>the Bloomberg Terminal, and the Bloomberg Business app.

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<v Speaker 2>Bill Lee, chief economist at the Milkin Institute, who is

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<v Speaker 2>in Singapore for the eleventh annual Milkin Institute Asia Summit. Bill,

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<v Speaker 2>always a pleasure to have you with us on the program.

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<v Speaker 2>Lots to talk about this morning. We can talk about China,

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<v Speaker 2>we can talk about the US. We can talk about US,

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<v Speaker 2>China and the FED. Let's start off with the Fed.

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<v Speaker 2>I'm curious why you think this time the FED decided

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<v Speaker 2>to not be very clear about its course of action. Generally,

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<v Speaker 2>the market tends to know what the Fed is going

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<v Speaker 2>to do when we get to the day. Not this time.

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<v Speaker 3>Why, under Chair Powell, I think we've noticed that the

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<v Speaker 3>FED has really held its cards very close to the chest,

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<v Speaker 3>and they're maximize the amount of optionality they have by

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<v Speaker 3>saying that we're completely data dependent and we're going to

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<v Speaker 3>look at the last bit of data before we make

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<v Speaker 3>up our minds. In a way, it's done a disservice

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<v Speaker 3>to financial markets. When I use that the FED Reserve

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<v Speaker 3>in the old days, there's a lot of there's a

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<v Speaker 3>sense that we understood how the FED worked, we understood

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<v Speaker 3>its framework, we can anticipate its decision making. And I said,

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<v Speaker 3>I must say a criticism of the current FED is

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<v Speaker 3>this complete data dependency without telling markets what exactly it's

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<v Speaker 3>going to do with the data. And I think that

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<v Speaker 3>has been characteristic of Chair Paul's caution and wanting to

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<v Speaker 3>preserve his legacy of sticking the soft landing and being

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<v Speaker 3>one of the few FED chairmen who's able to do that.

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<v Speaker 1>Bill We've been talking about this debate in the marketplace

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<v Speaker 1>whether it's going to be a twenty five basis point

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<v Speaker 1>raid cut or a fifty basis point raid cut.

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<v Speaker 3>WO tear to weigh in, Well, let me just bring

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<v Speaker 3>out the old school model of how the Federal Reserve

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<v Speaker 3>has always worked and really continues to work at its core,

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<v Speaker 3>which is to say, they really want to make a

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<v Speaker 3>path that's clear to financial markets that we are going

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<v Speaker 3>to get back to neutrality. I personally believe that that

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<v Speaker 3>we should do it fairly quickly because the economy has

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<v Speaker 3>been cruising at at a steady pace, at a very strong,

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<v Speaker 3>steady pace, with inflation clearly coming down. But we're so

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<v Speaker 3>far away from a neutral interest rate that we should

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<v Speaker 3>just get on with it because there isn't a lot

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<v Speaker 3>of danger of inflation resurging, and the weakening economy has

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<v Speaker 3>got financial markets concerned, and I think cher Paul should

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<v Speaker 3>do a better job of explaining to financial markets there's

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<v Speaker 3>nothing to be concerned about. The US economy is on

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<v Speaker 3>cruise control and where in fact, you know, better than

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<v Speaker 3>normal right now, the labor market is not really shows

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<v Speaker 3>no signs of weakness at all, regardless of what whether

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<v Speaker 3>people believe this so called sombl or not. Normally pay

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<v Speaker 3>roll increases are like one hundred and fifty thousand.

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<v Speaker 2>We're a little crimped on time today. So let's kind

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<v Speaker 2>of have a little rapid fire action here. Let me

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<v Speaker 2>ask you, you know we usually have unanimous votes there,

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<v Speaker 2>do you expect a lot more divergence or dissent in

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<v Speaker 2>this decision?

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<v Speaker 3>I think the current Fed really is really wanting to

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<v Speaker 3>show a sign of unity, and that's why Chirpaul has

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<v Speaker 3>been so cautious in telling markets what the FED will

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<v Speaker 3>be doing until it actually does it, So I doubt

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<v Speaker 3>that there'll be much in a way of decent.

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<v Speaker 1>So I'm imagining that China is going to be a

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<v Speaker 1>big topic for the eleventh annual Milkin Institute Asia Summit.

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<v Speaker 1>Are you concerned about the degree to which China is

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<v Speaker 1>really stuck in this deflationary trap?

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<v Speaker 3>You know absolutely. In fact, I've been in Korea at

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<v Speaker 3>the World College Forum. I just came here and the

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<v Speaker 3>discussion is really all about China, and I've been telling

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<v Speaker 3>everyone China suffers some of the bad des deficient demand,

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<v Speaker 3>debilitating debt, and dismal demographics, and the debt's burden local

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<v Speaker 3>governments has really hindered the ability of the local governments

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<v Speaker 3>to part participate in the kind of fiscal policy that's

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<v Speaker 3>needed to stimulate the economy. And Chairman, She's aversion for

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<v Speaker 3>direct transfers to households and keeping supply side measures going

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<v Speaker 3>has really shown to be ineffective. And I hope they

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<v Speaker 3>will see the light that the American and Western way

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<v Speaker 3>of COUNTERCYCLEO fiscal policy directly transferred to the households.

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<v Speaker 2>We imagine the Chinese economy to be stumbling a little

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<v Speaker 2>bit now, but the US economy to be in a

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<v Speaker 2>good place. Meantime, China's actually going faster than the US,

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<v Speaker 2>even if it doesn't make the five percent target.

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<v Speaker 3>Why, well, what's relative to normal?

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<v Speaker 4>Right?

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<v Speaker 3>China's demographics has really slowed down to the point where

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<v Speaker 3>normal growth to keep the population employed, it has to

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<v Speaker 3>be above five to seven percent, And now it looks

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<v Speaker 3>like the every forecast is showing China to be below

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<v Speaker 3>five except for the official one. So I think the

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<v Speaker 3>measures of differences about normality and population and technology and

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<v Speaker 3>productivity growth are really explaining most of the difference between

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<v Speaker 3>the two growth rates.

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<v Speaker 1>Very quickly, Bill, in about ten seconds, will we get

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<v Speaker 1>something from the PBOC that is stimulative here in the

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<v Speaker 1>near term.

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<v Speaker 3>That's not what they need. They need a fiscal policy,

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<v Speaker 3>fiscal stimulus, support income.

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<v Speaker 1>Okay, yeah, Bill Well Billy, chief economist at the Milk

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<v Speaker 1>and Institute in Singapore for the eleventh annual Milk and

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<v Speaker 1>Institute Asia Summit.

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<v Speaker 2>David Finnerty from our Bloomberg Live team, So we're looking

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<v Speaker 2>at the FED. I'm wondering, David, whether or not you

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<v Speaker 2>think that perhaps too much positivity has been priced into

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<v Speaker 2>markets at the moment.

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<v Speaker 4>Yeah. Well, in terms of you going with it's fifty

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<v Speaker 4>or twenty five, I think, certainly at my end it

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<v Speaker 4>should be twenty five. I think the market is, as

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<v Speaker 4>we've seen several times, it says it's really biased what's

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<v Speaker 4>right cuts, and it is what it is. So you

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<v Speaker 4>give them any chance of price in fifty, those certainly

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<v Speaker 4>run with that. And I think reality is if the

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<v Speaker 4>Fed does cut fifty, the markets could go, oh, you

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<v Speaker 4>mean fifty to fifty to fifty. So I reality, that's

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<v Speaker 4>what it's going to do. It will try and price in.

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<v Speaker 4>I think it will. We'll be back to six rate

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<v Speaker 4>cuts because it's called a point weight cuts this year.

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<v Speaker 4>I mean, the market's going to go with it if

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<v Speaker 4>you give it any chance. So I think I'm in.

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<v Speaker 4>There's something in the twenty five camp. And one of

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<v Speaker 4>the logic is I said, if you go fifty, the

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<v Speaker 4>market's going to go because you remember, back in the

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<v Speaker 4>June dot plot was we go The media forecast was

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<v Speaker 4>for one rate cut this year, So suddenly you do

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<v Speaker 4>fifty just three months later, it looks panicky. Yes, the

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<v Speaker 4>data has slowed down. I get that, but I don't

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<v Speaker 4>think the data warrants are fifty. But if you give fifty,

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<v Speaker 4>the market's going to go. You're behind the curve. We're

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<v Speaker 4>going to price in more weight cuts very quickly.

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<v Speaker 1>Yeah, the bond market certainly has done a lot of

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<v Speaker 1>the heavy lifting lately, and that's one of the factors

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<v Speaker 1>that has really kind of made financial conditions relatively easy.

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<v Speaker 1>The other part of the story is the dollar and

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<v Speaker 1>its relative weakness, and also higher stock prices. So do

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<v Speaker 1>you think that the FED would be right in erring

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<v Speaker 1>on the on the conservative side.

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<v Speaker 4>For me based off the data? If there really the

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<v Speaker 4>Fed's looking at, we're here not to control stock market

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<v Speaker 4>indirect you could say it is, but if it's looking here,

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<v Speaker 4>we're trying to get that soft landing. I think the

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<v Speaker 4>data for me warrants a twenty five, and then you

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<v Speaker 4>can you can leave the door open to look for

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<v Speaker 4>data weekends, then we can do fifty. That's fine, But

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<v Speaker 4>the moment, I don't think you know, four point two

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<v Speaker 4>percent on employment rate. Yes, it's been upticking, but it

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<v Speaker 4>did stabilize last month, So let's see that uptick trend continues.

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<v Speaker 4>I know, could argument be if you leave it you're

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<v Speaker 4>behind the curve. But then again, are you going too

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<v Speaker 4>aggressively too early? So I'm I'm for me. I think

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<v Speaker 4>twenty five is wanted.

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<v Speaker 2>I kind of think they'll go fifty. But then we'll

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<v Speaker 2>have more hawkish commentary than what some people might be expected,

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<v Speaker 2>just to give them, you know, a very broad range

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<v Speaker 2>of movement. Now you've got, you know, a lot of

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<v Speaker 2>room there in between the fifty, and you know, Policymaker

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<v Speaker 2>Powell who's sounding like, you know, this might be all

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<v Speaker 2>you get for a while. So I don't know, I mean,

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<v Speaker 2>we can muse about all of this. You know, your

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<v Speaker 2>your thoughts on whether the economy needs some juicing.

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<v Speaker 4>Well, at the moment, I said, I think base it's

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<v Speaker 4>certainly slowing down. I think twenty I said, I'm in

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<v Speaker 4>the twenty five camp. I think the cats for the

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<v Speaker 4>Fed if you do fifty and go oh and that's it,

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<v Speaker 4>the market's going to go no, no, no, no, you're

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<v Speaker 4>fifty to fifty to fifty, and that's what the market.

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<v Speaker 4>You know, the market is buiased that way. So you know,

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<v Speaker 4>I think you it's go be very tough for the

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<v Speaker 4>market to the Feds have credit.

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<v Speaker 2>They could do it they could do it in a

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<v Speaker 2>slightly different way. They could say, well, the Fed funds

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<v Speaker 2>rates at five and a half percent, and they could

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<v Speaker 2>kind of say, you know, we think fifty basis points

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<v Speaker 2>is a way to kind of bring that because inflation's

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<v Speaker 2>down below three percent, right, so there's a really big gap.

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<v Speaker 2>So they could say, well, fifty basis points is the

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<v Speaker 2>first step. It's going to take some time for us

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<v Speaker 2>to see how this works out. I don't expect too

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<v Speaker 2>much in the short term.

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<v Speaker 4>Yeah, I get your point. I mean, i'd say, the

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<v Speaker 4>market's going to hear what it wants to hear, and

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<v Speaker 4>the market's going to go fifty and I want six

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<v Speaker 4>rate cuts this year. I want six quad of points

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<v Speaker 4>and you've opened the door to that, and I'm going

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<v Speaker 4>to run with that. So it's the market interprets it

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<v Speaker 4>how it wants to interpret, and it's very biased towards

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<v Speaker 4>anything dubbish. I'm going to that's all I'm going to hear.

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<v Speaker 4>I forget the rest. I'm hearing the Dovist parts.

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<v Speaker 1>So you fear like a tantrum. And at this point

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<v Speaker 1>the Fed cannot afford to have the market not on

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<v Speaker 1>its side. Is that fair?

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<v Speaker 4>I think it's tough to control the markets. Is that

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<v Speaker 4>you've seen how much the markets whipsawed this year, said

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<v Speaker 4>go back to January with the sick rate cuts, expecting

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<v Speaker 4>one in March, and then it went back to no

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<v Speaker 4>rate cuts. And so the market continue shows its hand

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<v Speaker 4>in terms of its behavior. And I just think you've

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<v Speaker 4>got to be careful what you asked for in that

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<v Speaker 4>the market is going to go very aggressively. If you

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<v Speaker 4>give me signals of a rate cut, I will literally

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<v Speaker 4>run with it. So I think fifty is the market's going.

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<v Speaker 4>You're well behind the right curve. We're going to put

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<v Speaker 4>in one fifty this year and then let's not get

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<v Speaker 4>to next year because we've got to do more next year.

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<v Speaker 4>So I think heels get crashed and stuff. So I

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<v Speaker 4>think it's just it creates a mess for the FED

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<v Speaker 4>to try and control it. You know, you've got like

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<v Speaker 4>this kid who's running around. You're trying to control what

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<v Speaker 4>it does on the lease and the market's going, well,

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<v Speaker 4>you give me a big leash to just do what want,

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<v Speaker 4>and I'm going to I.

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<v Speaker 2>Think the market's pretty I think the market is pretty mature,

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<v Speaker 2>and it seems like right now it's kind of understands

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<v Speaker 2>that whether it's twenty five or fifty, it's the beginning

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<v Speaker 2>of a cycle, and the cycle, you know, there's no

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<v Speaker 2>rush to do it, but you do have the election

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<v Speaker 2>coming up, so maybe you act now and then see

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<v Speaker 2>how things move over the next few months. I take

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<v Speaker 2>your point that market can be kind of needy sometimes,

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<v Speaker 2>but if you look at the market performance of late,

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<v Speaker 2>it seems like even though we've swung from twenty five

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<v Speaker 2>to fifty, the market's kind of hanging in there.

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<v Speaker 4>Well, if you mean I mean which market do you mean?

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<v Speaker 4>You mean the equity because the equity market is going

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<v Speaker 4>to love rate cuts and understand these, So the bond

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<v Speaker 4>market is sully volatile. I mean, if you see the

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<v Speaker 4>market's mature, I agree with saying, but you can go

0:11:09.440 --> 0:11:11.679
<v Speaker 4>back to well, hold it just back in January, the

0:11:11.679 --> 0:11:14.200
<v Speaker 4>market's going, I think the six rate cuts warrant it,

0:11:14.800 --> 0:11:17.240
<v Speaker 4>and here we are later on at the moment we've

0:11:17.280 --> 0:11:21.480
<v Speaker 4>had none. So yes, it is mature, But then it's

0:11:21.520 --> 0:11:25.400
<v Speaker 4>shown a very strong bias towards a certain way. And

0:11:25.440 --> 0:11:27.280
<v Speaker 4>that's so that's what I'm just saying, is if you

0:11:27.320 --> 0:11:29.160
<v Speaker 4>get all I'm trying to say is if you give

0:11:29.240 --> 0:11:32.679
<v Speaker 4>that bias encouragement. It will run with it without question.

0:11:32.559 --> 0:11:34.880
<v Speaker 1>No doubt about that. I agree with that, and so

0:11:35.000 --> 0:11:37.200
<v Speaker 1>talk to me a little bit about your expectations for

0:11:37.240 --> 0:11:40.760
<v Speaker 1>how the dollar would react to the scenarios that we're

0:11:40.800 --> 0:11:43.560
<v Speaker 1>laying out twenty five fifty. I mean, what is the

0:11:43.640 --> 0:11:45.040
<v Speaker 1>dollar reflecting right now?

0:11:45.480 --> 0:11:47.120
<v Speaker 4>Yeah, well, I think that's a good question. I think

0:11:47.120 --> 0:11:50.319
<v Speaker 4>the dollar the dollars. The reality is traders want to

0:11:50.360 --> 0:11:52.240
<v Speaker 4>sell the dollars. So again it's like they want rate

0:11:52.240 --> 0:11:54.840
<v Speaker 4>cuts and they headgs, funds something want to sell the

0:11:54.880 --> 0:11:57.319
<v Speaker 4>dollar if they can. So I think you do twenty

0:11:57.320 --> 0:11:59.920
<v Speaker 4>five or fifty. Obviously, if it's fifty, then just sell

0:12:00.120 --> 0:12:02.480
<v Speaker 4>Dollar's very simple as that, because even if the dot

0:12:02.520 --> 0:12:05.520
<v Speaker 4>plot is, say on the more hawkish side, so we say,

0:12:05.760 --> 0:12:07.839
<v Speaker 4>the markets go, I don't care it's fifty to fifty

0:12:07.840 --> 0:12:10.120
<v Speaker 4>to fifty, it's sever a dollar. I think what happens

0:12:10.160 --> 0:12:11.640
<v Speaker 4>is if you get a twenty five, you obvious get

0:12:11.640 --> 0:12:14.600
<v Speaker 4>a knee cher reaction. Dollars should totally go high initially,

0:12:14.760 --> 0:12:17.000
<v Speaker 4>but then very quickly it's like lots of headlines, you go, okay,

0:12:17.000 --> 0:12:19.080
<v Speaker 4>that's initial. Then they'll very quickly look at what the

0:12:19.120 --> 0:12:21.200
<v Speaker 4>dot plot does and then you've got to go to

0:12:21.240 --> 0:12:24.840
<v Speaker 4>what Powell says. Remember it's a biased this in terms

0:12:24.880 --> 0:12:28.200
<v Speaker 4>of I want to hear something duvish and then I

0:12:28.200 --> 0:12:29.599
<v Speaker 4>see it, I'm going to rum with that. So I

0:12:29.600 --> 0:12:33.240
<v Speaker 4>think you got a little of whipsaws with the market

0:12:33.400 --> 0:12:35.480
<v Speaker 4>trying to sell a dollar if it's got a chance.

0:12:35.559 --> 0:12:38.240
<v Speaker 2>Yeah, we had Ray Dalio on earlier. He said twenty

0:12:38.240 --> 0:12:40.319
<v Speaker 2>five or fifty, it doesn't matter if the US economy

0:12:40.360 --> 0:12:44.000
<v Speaker 2>is close to equilibrium. He wishes that policymakers would look

0:12:44.040 --> 0:12:46.800
<v Speaker 2>at the big picture and the long term picture rather

0:12:46.880 --> 0:12:49.640
<v Speaker 2>than short term consideration. So do you think there's any

0:12:49.720 --> 0:12:51.400
<v Speaker 2>chance of that from the Fed or can you expect

0:12:51.440 --> 0:12:52.600
<v Speaker 2>it from the fiscal authorities?

0:12:53.240 --> 0:12:53.320
<v Speaker 5>No?

0:12:53.400 --> 0:12:55.160
<v Speaker 4>I think it's a fair point. And at the end

0:12:55.160 --> 0:12:57.520
<v Speaker 4>of day, you sort of you're supposed to look longer term.

0:12:57.720 --> 0:12:59.960
<v Speaker 4>By again, the market thinks short term if we're wanting

0:13:00.520 --> 0:13:02.880
<v Speaker 4>So I think that one thing the Federal go and

0:13:02.920 --> 0:13:04.959
<v Speaker 4>the coupe anounce say, okay, where we do twenty five

0:13:04.960 --> 0:13:08.400
<v Speaker 4>to fifty. The real question guys, where's the terminal rate

0:13:08.440 --> 0:13:09.720
<v Speaker 4>going to be? And obviously that will have a bead

0:13:09.800 --> 0:13:12.240
<v Speaker 4>idea in that dot plot. So I think the Fed

0:13:12.360 --> 0:13:15.240
<v Speaker 4>tries to go long term, but the market thinks short term,

0:13:15.320 --> 0:13:17.280
<v Speaker 4>and that's sort of that austraders the FOE came about.

0:13:17.720 --> 0:13:20.199
<v Speaker 2>For the record, I don't think the market's mature all

0:13:20.240 --> 0:13:22.800
<v Speaker 2>the time, just has sort of been behaving that way lately.

0:13:22.880 --> 0:13:26.600
<v Speaker 2>There's plenty of times it give be Bertie Finicky, pretty panicky, David,

0:13:26.640 --> 0:13:30.200
<v Speaker 2>Thank you very much, David Finnergy Bloomberg FX rates St.

0:13:36.800 --> 0:13:41.240
<v Speaker 2>Paul Brody, global blockchain leader at ey Paul is in

0:13:41.280 --> 0:13:44.960
<v Speaker 2>Singapore for the Token twenty forty nine Cryptos summit. I

0:13:45.000 --> 0:13:48.000
<v Speaker 2>was just talking about the transition in part from retail

0:13:48.080 --> 0:13:52.000
<v Speaker 2>customers to institutional customers and what one of the catalysts

0:13:52.080 --> 0:13:52.560
<v Speaker 2>might be for that.

0:13:52.840 --> 0:13:54.920
<v Speaker 5>So the thing that we're seeing is what we're calling

0:13:54.960 --> 0:13:58.840
<v Speaker 5>global regulatory conversions, and what's going on here is as

0:13:58.960 --> 0:14:04.080
<v Speaker 5>regulators have taken steps to bring crypto inside of legal frameworks,

0:14:04.240 --> 0:14:06.880
<v Speaker 5>and we've seen that in Singapore, Japan, and across the

0:14:06.920 --> 0:14:09.720
<v Speaker 5>European Union as well as the ETS. What's happened is

0:14:09.760 --> 0:14:12.280
<v Speaker 5>we've shifted from this model where any consumer can do

0:14:12.360 --> 0:14:15.480
<v Speaker 5>this and their consumers were doing it, to one where

0:14:15.520 --> 0:14:20.920
<v Speaker 5>things are now accessible by institutions, pension funds, major sort

0:14:20.960 --> 0:14:24.320
<v Speaker 5>of private investors, things like that, And so where the

0:14:24.360 --> 0:14:27.200
<v Speaker 5>big money is. If you look at the world's RULs

0:14:27.240 --> 0:14:31.360
<v Speaker 5>of capital, it's inside of institutions, and they can't touch

0:14:31.680 --> 0:14:35.880
<v Speaker 5>cryptocurrencies or digital assets until they are regulated in these

0:14:35.960 --> 0:14:37.120
<v Speaker 5>national ecosystems.

0:14:37.600 --> 0:14:39.880
<v Speaker 1>You know, it's interesting. There was a report that we

0:14:39.880 --> 0:14:42.480
<v Speaker 1>were talking about last week where the FBI here in

0:14:42.520 --> 0:14:45.440
<v Speaker 1>the US has closed that Americans lost to staggering five

0:14:45.440 --> 0:14:50.080
<v Speaker 1>point six billion to cryptocurrency related fraud in twenty twenty three.

0:14:50.240 --> 0:14:53.680
<v Speaker 1>Talk to me a little bit about the public relations

0:14:53.800 --> 0:14:58.360
<v Speaker 1>campaign that needs to take place, maybe to repair some

0:14:58.560 --> 0:15:03.560
<v Speaker 1>of the reputational harm that the overall cryptocurrency space has

0:15:03.600 --> 0:15:04.520
<v Speaker 1>suffered as of late.

0:15:05.840 --> 0:15:08.400
<v Speaker 5>So there is a huge amount of damage that's been done.

0:15:08.480 --> 0:15:11.720
<v Speaker 5>And I used to joke that the special thing that

0:15:11.760 --> 0:15:13.800
<v Speaker 5>crypto was good at giving to the people who hate

0:15:13.800 --> 0:15:17.040
<v Speaker 5>crypto is ammunition. We are great at sort of providing

0:15:17.360 --> 0:15:19.760
<v Speaker 5>frauds and cons and things like that. And I think

0:15:20.120 --> 0:15:22.440
<v Speaker 5>what's happened. And I spoke to one European regular. He

0:15:22.800 --> 0:15:24.640
<v Speaker 5>put it very nice, and he said, the more we

0:15:24.720 --> 0:15:27.680
<v Speaker 5>warned people against doing stuff, the more they did it.

0:15:27.880 --> 0:15:30.480
<v Speaker 5>And we came to realize that the best path to

0:15:30.520 --> 0:15:34.640
<v Speaker 5>improving the ecosystem was to regulate it and give people

0:15:34.680 --> 0:15:38.520
<v Speaker 5>more confidence, and I do think that regulatory involvement has

0:15:38.560 --> 0:15:41.360
<v Speaker 5>been a big catalyst to improving the perception of the industry.

0:15:42.280 --> 0:15:45.000
<v Speaker 2>Yeah, that's very interesting. It's something that a lot of

0:15:45.000 --> 0:15:47.440
<v Speaker 2>people in their gut probably wouldn't feel is the case

0:15:47.480 --> 0:15:50.680
<v Speaker 2>that regulation can make a difference and actually broaden it.

0:15:50.880 --> 0:15:53.920
<v Speaker 2>I'm curious when we talk about that move from the

0:15:53.960 --> 0:15:57.280
<v Speaker 2>retail customer to the institutional does that also mean that

0:15:57.320 --> 0:16:01.040
<v Speaker 2>the focus has changed a little bit away from cryptocurrencies

0:16:01.080 --> 0:16:03.280
<v Speaker 2>and more to the blockchain.

0:16:04.400 --> 0:16:04.920
<v Speaker 5>A little bit.

0:16:05.000 --> 0:16:05.280
<v Speaker 4>Yes.

0:16:05.640 --> 0:16:08.720
<v Speaker 5>I think one of the consensuses here at this event

0:16:08.920 --> 0:16:11.280
<v Speaker 5>is that crypto is out a role. It's going to

0:16:11.320 --> 0:16:14.080
<v Speaker 5>grow substantially, but there's probably an upper limit on the

0:16:14.120 --> 0:16:17.760
<v Speaker 5>sides of the cryptocurrency industry, and it's probably roughly similar

0:16:17.760 --> 0:16:20.240
<v Speaker 5>to what we have in gold today, which is something

0:16:20.320 --> 0:16:22.840
<v Speaker 5>between ten and fifteen trillion dollars, which, to give you

0:16:22.840 --> 0:16:26.520
<v Speaker 5>a sense of scale, is ten times what exists now. However,

0:16:27.000 --> 0:16:30.520
<v Speaker 5>that hails in comparison to some of the other industries

0:16:30.560 --> 0:16:34.560
<v Speaker 5>where you can have really substantial asset tokenization, such as

0:16:34.600 --> 0:16:37.480
<v Speaker 5>real estate. There's three hundred and seventy nine trillion dollars

0:16:37.520 --> 0:16:39.920
<v Speaker 5>of real estate in the world. There's another roughly two

0:16:40.080 --> 0:16:43.440
<v Speaker 5>hundred to three hundred trillion in liquid bank deposits, bonds,

0:16:43.440 --> 0:16:46.120
<v Speaker 5>and stocks. So people really have their eye on all

0:16:46.160 --> 0:16:48.800
<v Speaker 5>these other assets and they believe that the sort of

0:16:48.880 --> 0:16:51.840
<v Speaker 5>overall growth room in that space is much much larger,

0:16:52.000 --> 0:16:55.760
<v Speaker 5>and hence the shift towards digital assets. I wouldn't say

0:16:55.760 --> 0:16:58.800
<v Speaker 5>away from crypto, but people see it as a bigger prize.

0:16:58.960 --> 0:17:01.960
<v Speaker 1>I remember the hype around blockchain when it first kind

0:17:02.000 --> 0:17:06.160
<v Speaker 1>of became a point of discussion here, and then subsequently

0:17:06.200 --> 0:17:08.360
<v Speaker 1>the move into a lot of the cryptocurrency, the way

0:17:08.400 --> 0:17:11.600
<v Speaker 1>in which blockchain was applied to crypto. It seems though

0:17:11.840 --> 0:17:15.800
<v Speaker 1>lately the market's focused on anything related to artificial intelligence.

0:17:16.119 --> 0:17:19.560
<v Speaker 1>Is there a lot of competition for new capital, let's

0:17:19.560 --> 0:17:22.800
<v Speaker 1>say that you're fighting for because of the current hype

0:17:22.880 --> 0:17:23.600
<v Speaker 1>around AI.

0:17:25.240 --> 0:17:28.359
<v Speaker 5>There's definitely competition for capital. There's competition even more so

0:17:28.440 --> 0:17:32.760
<v Speaker 5>for mind share, although there is also this integration that

0:17:32.880 --> 0:17:36.119
<v Speaker 5>is going on. So two, there's probably three areas in

0:17:36.119 --> 0:17:39.359
<v Speaker 5>particular where we see the most integration. First, using AI

0:17:39.520 --> 0:17:44.400
<v Speaker 5>to develop crypto applications and crypto software. Secondly, using distributed

0:17:44.440 --> 0:17:48.440
<v Speaker 5>computing systems built on cryptocurrency technology to handle the compute

0:17:48.480 --> 0:17:53.000
<v Speaker 5>workload for AI. And then thirdly, kind of this idea

0:17:53.040 --> 0:17:57.000
<v Speaker 5>that AI is for decision making and blockchain ecosystems for execution,

0:17:57.320 --> 0:17:59.280
<v Speaker 5>that they can be very complementary together.

0:18:00.119 --> 0:18:03.159
<v Speaker 2>So Jamie Diamond says JP Morgan is one of the

0:18:03.200 --> 0:18:06.920
<v Speaker 2>biggest users of blockchain. Yet he says, we've been talking

0:18:07.000 --> 0:18:10.280
<v Speaker 2>about blockchain for twelve years, not much has happened. Is

0:18:10.320 --> 0:18:10.800
<v Speaker 2>he wrong?

0:18:12.480 --> 0:18:15.359
<v Speaker 5>He's not entirely wrong, And I, for one, kind of

0:18:15.400 --> 0:18:17.800
<v Speaker 5>really believe that we The problem has been that we

0:18:17.880 --> 0:18:21.479
<v Speaker 5>have not solved some of the critical issues for institutional enterprise.

0:18:21.520 --> 0:18:24.760
<v Speaker 5>You just one of them was regulation, right, so institutions

0:18:24.800 --> 0:18:27.440
<v Speaker 5>just really can't use it that much without good regulation.

0:18:27.800 --> 0:18:31.480
<v Speaker 5>And the second is a technological one, which is mostly privacy.

0:18:31.560 --> 0:18:33.760
<v Speaker 5>So the industry has done an amazing job of solving

0:18:33.800 --> 0:18:35.200
<v Speaker 5>the scalability problem.

0:18:35.359 --> 0:18:35.520
<v Speaker 3>Right.

0:18:35.560 --> 0:18:37.480
<v Speaker 5>Where theorem used to be able to handle a million

0:18:37.560 --> 0:18:40.040
<v Speaker 5>transactions to day, we can now do several one hundred

0:18:40.040 --> 0:18:42.280
<v Speaker 5>million a day through all these layer twos. The bigger

0:18:42.320 --> 0:18:44.640
<v Speaker 5>problem has been that if you're an institution or an enterprise,

0:18:44.960 --> 0:18:47.800
<v Speaker 5>you must have privacy technology. And it's really only just

0:18:47.960 --> 0:18:50.959
<v Speaker 5>now that privacy systems like the architecture that we've been

0:18:50.960 --> 0:18:53.439
<v Speaker 5>building and others have been working on are coming to

0:18:53.440 --> 0:18:56.040
<v Speaker 5>the point where they are mature enough and scalable enough

0:18:56.119 --> 0:18:58.959
<v Speaker 5>for businesses to use comfortably and without fear of kind

0:18:59.000 --> 0:19:00.800
<v Speaker 5>of losing their sensitive data.

0:19:01.440 --> 0:19:04.280
<v Speaker 2>Paul Brody, thank you very much for joining us. Paul Brody,

0:19:04.280 --> 0:19:08.560
<v Speaker 2>Global Blockchain Leader at EY. He drives the EY initiatives

0:19:08.600 --> 0:19:12.320
<v Speaker 2>and investments in blockchain technology.

0:19:13.960 --> 0:19:16.919
<v Speaker 1>This has been the Bloomberg Daybreak Asia podcast, bringing you

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