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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along

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Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jay Ley, we bring

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Speaker 1: you insight from the best and economics, finance, investment, and

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Speaker 1: international relations. Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg

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Speaker 1: dot Com, and of course on the Bloomberg terminal. We

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Speaker 1: will summarize with Seth Carpenter reachief global Economists at Morgan Stanley. Seth,

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Speaker 1: I want to go to w t O Global markdown

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Speaker 1: on g d P, but we must speak of what

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Speaker 1: Ellen Setner will parse of this inflation report. Is there

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Speaker 1: any site out there, Professor Carpenter, Dr Carpenter of demand destruction?

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Speaker 1: Uh So, demand instruction is a tricky phrase, right. It

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Speaker 1: says that prices have gone up because there was so

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Speaker 1: much demand that demand goes away, which presumably then brings

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Speaker 1: prices back down. I do think it's clearly a hit

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Speaker 1: to the consumer. From the surgeon oil prices, Tom mentioned

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Speaker 1: just how much gasolute prices were up. You were both

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Speaker 1: talking about where real wages are going. I think it's

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Speaker 1: unquestionable that when uh, some of the categories energy, food,

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Speaker 1: that especially the lower end of the income distribution. Can't

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Speaker 1: just substitute away from that's got to be a hit

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Speaker 1: overall two consumption spending. But I think it's more important

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Speaker 1: with this report, though, is the fact that core underperformed

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Speaker 1: and we saw the rallying rates. I think if you

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Speaker 1: look at use car prices, they were down sharply. Even

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Speaker 1: the rent and overs owner's equivalent rent, which stayed solid,

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Speaker 1: was actually off just a little bit. So instead of

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Speaker 1: a continuing upward trend to those key drivers of inflation,

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Speaker 1: we're actually seeing a little bit of a softening. So

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Speaker 1: in our numbers at least, and it's always hard to

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Speaker 1: make a forecast, but in our numbers, we've got to

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Speaker 1: the peak of inflation and we're likely to start to

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Speaker 1: see things come off, albeit gradually, from here. So if

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Speaker 1: I gotta say the number, the absolute number came in

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Speaker 1: above expectations. In the new Jerk respons is almost as

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Speaker 1: though this is a downside surprise. What do you make

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Speaker 1: of that? I think it really is the difference between

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Speaker 1: core and headline. I think everyone knew that oil prices

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Speaker 1: had gone up and that that was going to show

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Speaker 1: through to this month's print. I think everyone knew that

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Speaker 1: commodity prices for agriculture had gone up, and that that

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Speaker 1: was going to show through to this month's print. And

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Speaker 1: so for the durable underlying trend of inflation that's going

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Speaker 1: to be with us not just this year but next year,

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Speaker 1: that the Fed may have to respond to again, not

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Speaker 1: just this year but next year. That I think is

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Speaker 1: what the rates market is reacting to. So how much

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Speaker 1: can you really project out from this one report? We've

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Speaker 1: been talking about how it's not just necessarily the peak,

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Speaker 1: but how quickly it comes down on the margins. How

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Speaker 1: much does your forecast change after today's number. Well, on

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Speaker 1: the bright side, our forecast doesn't have to change all

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Speaker 1: that much. The core was a little bit softer. But

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Speaker 1: for me, what's really important here is the pattern that

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Speaker 1: we are starting to see some of that softer reading

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Speaker 1: in some of the goods. We are starting to see

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Speaker 1: for instances used prices start to come down. I think

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Speaker 1: in that sense it's very much the pattern the trend,

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Speaker 1: as opposed to the specific number. Does that pattern change

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Speaker 1: anything for the Fed seth Uh? You know, at the margin,

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Speaker 1: it probably takes off just a little bit of the

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Speaker 1: you know, the fire on the on the on the

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Speaker 1: burner at this stage but I don't think it changes

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Speaker 1: things dramatically. There's no two ways about it. Inflation is high.

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Speaker 1: Inflation is too high for the Fed's comfort level. All

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Speaker 1: of the members of the FED, even the historically debblish ones,

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Speaker 1: have said exactly the same thing. So in that regard,

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Speaker 1: I don't think this actually changes things much. In fact,

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Speaker 1: one of the points I've been making to clients is

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Speaker 1: one month's CPI here there is not going to be

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Speaker 1: respositive for the FED. What's gonna matter at least as

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Speaker 1: much is how strong is the real economy. How much

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Speaker 1: can they lean in to the strength of the economy

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Speaker 1: to slow things down to get inflation under control. That

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Speaker 1: I think is going to be the key well, and

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Speaker 1: that comes down to the tolerance of consumers for higher prices,

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Speaker 1: their propensity to continue spending even in the face of them. Seth,

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Speaker 1: what is your expectation around the demand picture and whether

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Speaker 1: or not destruction is going to start to take form

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Speaker 1: in the face of the higher prices really across the board. Yeah,

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Speaker 1: So Ellen set in our chief US economist and her

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Speaker 1: team put out a bit of a forecast revision on Friday,

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Speaker 1: and we took down the consumption path for the second quarter,

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Speaker 1: largely because we did see this big spike in oil prices.

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Speaker 1: Now a lot of those that rise in oil prices

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Speaker 1: from the Russian invasion of Ukraine has has reversed, not

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Speaker 1: but a lot of it has come out. Nevertheless, what

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Speaker 1: we see in the data as a regular pattern is

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Speaker 1: when energy prices spike for supply reasons, we do see

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Speaker 1: a pullback overall and spending in the next couple of months,

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Speaker 1: and so we are expecting to to be on the

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Speaker 1: softer side for consumption Sethan. Wanting to talk about the

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Speaker 1: social impact here. The integrand, Folks is the area above

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Speaker 1: or below whatever the horizontal line is. It's one measurement

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Speaker 1: of the tone of the x. X in the Great

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Speaker 1: Financial Crisis has an integran of negative income Seth that

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Speaker 1: is small now compared to what we're going through. The

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Speaker 1: agony year for certain death stiles of America has to

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Speaker 1: be tangible, uh, no question about it. The past couple

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Speaker 1: of years has been extraordinarily difficult for folks, and it

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Speaker 1: has been extraordinarily more difficult for folks at the lower

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Speaker 1: entity income contribution um. The only silver lining there is

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Speaker 1: that we do see a differential in wage growth across

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Speaker 1: the income distribution, and it has been highest at the

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Speaker 1: lowest quintile. So in that sense there's a bit of comfort.

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Speaker 1: But I suspect for anyone who had lost their job

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Speaker 1: during the pandemic, that's a bit of cold come but

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Speaker 1: but Seth very quickly here, I'm so sorry, we don't

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Speaker 1: have the time. I'm looking at a middle class flat

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Speaker 1: on its back on an inflation basis, unquestionably, unquestionably, and

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Speaker 1: in that regard, I think the retreat of oil prices,

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Speaker 1: some of it on the news of the coordinated release

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Speaker 1: from the Strategic Petroleum Reserve. That's got to help some,

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Speaker 1: but it's not going to go anywhere near to the

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Speaker 1: extent of making people feel good. The economy is growing

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Speaker 1: extraordinarily rapidly, jobs are being created extraordinarily rapidly, and yet

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Speaker 1: I think the sentiment, as measured through various surveys, is

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Speaker 1: that people are still feeling fairly hard done by. And

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Speaker 1: that's a very challenging thing when the macro feeling doesn't

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Speaker 1: match the micro feeling. Dr Carpenters, thank you so much.

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Speaker 1: With Morgan Stanley, Seth Carpenter. She is watching the French

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Speaker 1: elections is one example of the new autocracy worldwide, the

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Speaker 1: strident moment that we live in, and that is Joyce Shaying,

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Speaker 1: Chair of Global Research at JP Morgan, hurting cats, dealing

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Speaker 1: with Bruce Casman every day as best she can. Joyce,

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Speaker 1: give me the new theme at JP Morrigan. You wrote

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Speaker 1: most of Diamonds forty four page letter. What is the

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Speaker 1: research theme of your shop into the rest of the year. Well,

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Speaker 1: you know, we've taken half first half growth down quite

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Speaker 1: a lot because of Russia, Ukraine in the higher energy crisis.

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Speaker 1: I mean in Europe we're down three percentage points on

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Speaker 1: first half growth. So right now what we're looking at

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Speaker 1: is really the first energy crisis in the decarbonization era.

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Speaker 1: And what jam has been writing about is the need

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Speaker 1: for a martial plan, something where we actually look at

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Speaker 1: how we can accelerate this transition, ensure our energy security

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Speaker 1: and also just get used to the world where we're

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Speaker 1: in place for more volatile cycles, higher inflation, higher treasury

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Speaker 1: yields still to come. So there's a lot to watch

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Speaker 1: right now in the commodities markets. Um, we're beginning to

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Speaker 1: see just a lot of those pressures still with us.

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Speaker 1: You know, I look here, Joyce, at the martial plan

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Speaker 1: of JP Morgan, and I look at David Folk its

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Speaker 1: land out the academic over Deutsche Bank saying the same thing.

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Speaker 1: There will be a massive fiscal stimulus in Europe, whether

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Speaker 1: they like it or not. And then I've got atmar

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Speaker 1: Is seeing the giant of Germanic economics in the FT,

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Speaker 1: screaming enough we need to tame inflation. Describe those two

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Speaker 1: forces pushing against each other, government fiscal stimulus versus in

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Speaker 1: a titanic fear of inflation. Well, I mean we're looking

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Speaker 1: at very broad based inflation right now. It's not just

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Speaker 1: energy prices. I mean, taking a look at what we

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Speaker 1: see in Europe, the surge in the euro Area, we

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Speaker 1: see that natural gas prices have actually pushed inflation about.

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Speaker 1: And looking at the US, global inflation tracking close to

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Speaker 1: nine in the first quarter of the year. So there's

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Speaker 1: also rent inflation, there's wage inflation. So these inflationary pressures

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Speaker 1: mean that the central banks newly are going to have

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Speaker 1: to respond here, and we do see the moving fifty

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Speaker 1: basis points in the next couple of moves. We do

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Speaker 1: see that more stimulus is probably going to have to

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Speaker 1: come online in China, particularly where growth is coming down there.

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Speaker 1: But also in other places, we're seeing now the first

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Speaker 1: discussions on whether they're going to need to be some subsidies,

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Speaker 1: some automatic stabilizers that are put into places energy price

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Speaker 1: to stay at these levels. And we do see UM

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Speaker 1: Brent oil steing, you know, above a hundred dollar mark

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Speaker 1: here Joyce, At what point do rates become restrictive? How

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Speaker 1: high do benchmark overnight borrowing costs have to go before

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Speaker 1: it actually has an impact on inflation. We really see

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Speaker 1: the threads UM the thuds fund rates getting to two

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Speaker 1: and seven eights next year and then you have more

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Speaker 1: of a pause, but I think they're gonna move fifty

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Speaker 1: at the next two meetings. Um you're reverted to twenty

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Speaker 1: five basis coins in July and they're after But I

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Speaker 1: think the issue is to get to neutral as quickly

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Speaker 1: as possible and see where it settles, see if you

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Speaker 1: can anchor inflationary expectations. But to your point about oil

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Speaker 1: at a hundred and the fact that China is slowing down,

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Speaker 1: at what point are we looking at these dueling shocks

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Speaker 1: where basically these inflationary pressures are going to take some

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Speaker 1: time to roll over, are exacerbated by the shocks and

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Speaker 1: we'll all inevitably conspire to a slowdown that people are

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Speaker 1: not accurately pricing. Yeah, well, everybody has first half growth down,

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Speaker 1: but then they have this tilt up in the second

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Speaker 1: half of the year, and that's really what remains to

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Speaker 1: be seen. We're going to see a lot of um,

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Speaker 1: you know, stress that comes in other parts of the

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Speaker 1: world apart from the US in Europe. I mean, if

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Speaker 1: you take a look at emerging markets, um you know,

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Speaker 1: food inflation is as much as forty of the basket

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Speaker 1: in certain countries like India, um in you know, the

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Speaker 1: the Ascan countries. So these pressures are going to be

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Speaker 1: with us. And I think that you know, we've made

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Speaker 1: material downward revisions to growth. But the question is not

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Speaker 1: going to continue in the second half of the year.

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Speaker 1: And all eyes will be on China because we are

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Speaker 1: seeing that the numbers that will come out for March

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Speaker 1: and April are really gonna come down materially as they

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Speaker 1: increased the lockdowns. The lockdowns in China they're affect being

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Speaker 1: really the equivalent of more than a third of GDP

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Speaker 1: right now. Well, of course it could have a direct

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Speaker 1: impact on Chinese growth joys, but at the same time,

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Speaker 1: a lot of production is housed in China. We've seen

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Speaker 1: the impact has already had on company these that have

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Speaker 1: production in Shanghai if supply stays constrained to a certain extent,

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Speaker 1: potentially exacerbated by China's COVID zero policy. How much is

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Speaker 1: the FED acting on demand actually able to make a difference.

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Speaker 1: We talk a lot about the Fed's ability to engineer

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Speaker 1: a soft landing. What about their ability to actually engineer

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Speaker 1: a rolling over in inflation. Well, I mean, I think

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Speaker 1: there's the FED hikes, but there's also the faster q

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Speaker 1: T to come. You know, we really do see it's

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Speaker 1: the combination of the two things. But it's also doing

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Speaker 1: fifty basis point moves to try to anchor the inflationary

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Speaker 1: you know, expectations. So I think, you know, the FED

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Speaker 1: is in the front seat taking the lead on this,

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Speaker 1: but we are seeing that across the developed markets and

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Speaker 1: the emerging markets. I mean, there's more rate hikes to

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Speaker 1: come here. But you know, I think that you know,

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Speaker 1: on the oil side, releasing from the Strategic Controlling Reserve Fund,

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Speaker 1: we don't think you're going to get to some of

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Speaker 1: the worst case scenarios that we had thought about with

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Speaker 1: higher oil prices. I mean, there are still ways in

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Speaker 1: which in the oil market, that's a global market, you know,

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Speaker 1: action are being taken right now well and obviously when

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Speaker 1: faced with higher prices at the pump, when faced with

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Speaker 1: higher prices at the grocery store. In theory, at some

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Speaker 1: point higher prices are going to alter consumer behavior in

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Speaker 1: a more material way. When do you anticipate that real

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Speaker 1: demand destruction may kick in. I think that that's still

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Speaker 1: a ways away. I mean the mobility, the summer driving season,

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Speaker 1: and that's kicking in, you know. I think that that

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Speaker 1: demand destruction will happen, you know, at some point um

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Speaker 1: in time. But you know, we are not in the

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Speaker 1: scenarios now where we see oil over a hundred and

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Speaker 1: thirty dollars for beer. We're more in the range of

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Speaker 1: looking at UH one dollars, you know, still seeing oil

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Speaker 1: prices very luvated. But I think that you have a

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Speaker 1: lot of pent up demand here still as the mobility

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Speaker 1: comes back online. So that's gonna take some time, and

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Speaker 1: I don't think it's going to be something that we

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Speaker 1: see in the next quarter or something. Joyce, let me

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Speaker 1: ask you a sell side question, that's what on everybody's

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Speaker 1: mind right now, whether big tech. I mean, we saw

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Speaker 1: the Amazon bond deal yesterday where they from this see

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Speaker 1: go out. I don't know. Maybe you've got a phone

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Speaker 1: call from Mr Jasse. I can see Jesse get Shane

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Speaker 1: on the phone. We need to move five billion of this.

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Speaker 1: What what do you think about the vibrancy of big

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Speaker 1: tech in America? You know, look, I think that this

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Speaker 1: is a pandemic that has really just changed the way

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Speaker 1: that we live. That we were the dependentization, um, the

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Speaker 1: dependency that we have on big tech. So yeah, we

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Speaker 1: still see that there's pressures that are going to be

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Speaker 1: in the equity market. A lot of that coming off

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Speaker 1: of the growth numbers, the higher energy prices, UM, the

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Speaker 1: fact that we had just such a massive rally. But

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Speaker 1: I don't think that changes the overall story, um your

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Speaker 1: vortex for what we actually need now as consumers, as

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Speaker 1: we're coming back into the office and getting back to normal,

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Speaker 1: I do want to just ask you, Joyce, as you

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Speaker 1: talk about big tech, A lot of it has to

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Speaker 1: be tied to the bond market, which has given a

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Speaker 1: lot of the relative valuation trade too big tech. How

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Speaker 1: concerned are you about the bond markets I don't want

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Speaker 1: to say breaking, but breaking in terms of the lack

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Speaker 1: of liquidity as the FED withdraws, how much is that

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Speaker 1: going to caller the narrative in a way over the

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Speaker 1: next six months that perhaps is different than even the

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Speaker 1: rate hikes. Well, I think that you know, now ten

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Speaker 1: year yields are in the three year high. They're finally

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Speaker 1: looking like their fairly price. But I think that has

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Speaker 1: further to go. Now this year, we're looking at about

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Speaker 1: two hundred billions of treasuries that will run off this

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Speaker 1: year compared to um UM relatives to our baseline forecast,

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Speaker 1: due to a faster normalization that's occurring. I also think

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Speaker 1: that the Fed is slowly onboard on selling um you know,

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Speaker 1: MBS um to get to an all treasury balance sheet

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Speaker 1: by the middle of next year. So I think, you know,

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Speaker 1: MBS sales are a real possibility in three I think

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Speaker 1: that the sales might actually take the form of setting

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Speaker 1: a floor on the runoff rather than a cap on

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Speaker 1: the runoff. But I think Treasury, you'll still have you

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Speaker 1: hire to go here um and um you know we

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Speaker 1: have the stage that for the balance sheet runoff nuns

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Speaker 1: and may um you know, and right now some of

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Speaker 1: those higher energy prices seem like they were in checks. Joyce,

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Speaker 1: thank you. It's been way too long. We've got to

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Speaker 1: do this more often. I'm thinking weekly, Joyce. Put it

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Speaker 1: on acclendar, Joyce chain of JP Morgan ahead of all

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Speaker 1: their research effort there as well. Right now to bring

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Speaker 1: you up to date on the dynamics of this bond market,

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Speaker 1: this original space. Robert Tip joins us chief investment strategist

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Speaker 1: ahead of all of global bonds at PIGAM Fixed Income.

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Speaker 1: How much bloods on the street, Robert, let me cut

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Speaker 1: to the chase. Price down means money is being lost?

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Speaker 1: How much tremendous amounting. This is a record move in

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Speaker 1: bond yields we haven't seen for you know, thirty years

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Speaker 1: plus and uh, even greater dropped in price because you're

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Speaker 1: starting from low yields, which means prices are more sensitive

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Speaker 1: to yield movements. So it's been a tough period and

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Speaker 1: we've really jumped the rails in terms of growth and inflation,

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Speaker 1: and investors had gone a long way towards handicapping that

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Speaker 1: right here. Uh, and we're kind of at a waiting

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Speaker 1: station in the market at this point. You can see

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Speaker 1: today that I think in the price action where the

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Speaker 1: market is rallying in the face of what we've been

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Speaker 1: warned by the President's gonna be a high inflation number.

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Speaker 1: So suggesting the market is pretty oversold here, at least

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Speaker 1: short term. Okay, over sold? Does that mean that you're buying? Yeah,

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Speaker 1: I mean, you know, we don't. We don't uh discuss

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Speaker 1: client accounts and short term activity. I think though it's

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Speaker 1: reasonable to expect. This is what you typically get in

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Speaker 1: these cycles is that after the market has gotten say

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Speaker 1: two d basis points ahead of the FAT, the market

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Speaker 1: is that far ahead in terms of pricing in rate hikes,

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Speaker 1: it's typical to get a drop in volatility, consolidation and rates,

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Speaker 1: and even a consolidation and risk markets. In other words,

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Speaker 1: some retracement tighters, some improven in performance. Well, the market

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Speaker 1: waits for the FED to catch up h and then

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Speaker 1: re evaluate what's going to be the next step in

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Speaker 1: this process. So you're not exactly a screaming pool here. Basically,

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Speaker 1: what I'm hearing from you, and this is something that

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Speaker 1: I'm actually I've been giving a lot of thought to,

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Speaker 1: is that if suddenly we had been talking about how

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Speaker 1: yields of two on the tenure would break the market,

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Speaker 1: would break the economy. They are not, and that is

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Speaker 1: because growth is as fast as it is. What kind

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Speaker 1: of messages that send you over the longer term about

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Speaker 1: how much higher yields can go than people previously we're expecting.

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Speaker 1: Basically the threshold has gone up dramatically because of the

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Speaker 1: growth picture, right, So I think there are number of

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Speaker 1: steps here. First one on your comment that you can't

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Speaker 1: get a big rally here, you can't be very optimistic here.

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Speaker 1: Remind you last year that in the midst of what

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Speaker 1: was the strong economy in high inflation, then tenue rallied

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Speaker 1: from down to one fifteen only two then turn around

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Speaker 1: and have to reprice for what we have now. So

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Speaker 1: I think it's um you want to jump to the

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Speaker 1: conclusion and that this is going to be a one

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Speaker 1: way much higher and yields from here. In terms of

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Speaker 1: breaking the economy, though, uh, you know, you're looking at

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Speaker 1: a housing market that is incredibly strong, with very strong

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Speaker 1: price appreciation and some underlying micro demographics that are boosting activity.

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Speaker 1: And so as a result, uh, you know, having your

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Speaker 1: mortgage rate go up to five percent, it's not clear

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Speaker 1: that's going to break it. Corporate performance has been very strong,

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Speaker 1: and it's very common that arise in rates does not

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Speaker 1: you know, necessarily kill the earnings per share outlook for equities,

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Speaker 1: and so I think you're looking at a very strong

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Speaker 1: economy with very hyphenomenal growth and that's why it's able

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Speaker 1: to tolerate the interest rates increases that we've seen so

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Speaker 1: far and may be able to tolerate more. Is that

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Speaker 1: the signal you're taking from a yield curve that is

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Speaker 1: steeping back out to north of basis points. I think

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Speaker 1: the part of the yield curve to look at, and

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Speaker 1: Grum and Pal I think tried to direct us to this.

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Speaker 1: Another FED research has as well is the first two

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Speaker 1: years of the curve. The first two years of the

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Speaker 1: curve was incredibly steep. And when that's the case, in

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Speaker 1: other words, the three basis points, you know, great hikes

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Speaker 1: from the start of the cycle. That is a sign

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Speaker 1: of Feds be raising rates because the economy looks good

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Speaker 1: and they have runway to do. So that's the part

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Speaker 1: that's typically a good indicator on the economy. The two

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Speaker 1: tents curve is signaling that after they get there, and

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Speaker 1: the market is banking on a soft landing. That is

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Speaker 1: not going to be the important call. I don't think

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Speaker 1: until at least six, if not twelve to twenty four

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Speaker 1: months down the road, once they've taken up some of

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Speaker 1: the slack on the front end of the curve, then

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Speaker 1: the markets I think will be in the right place

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Speaker 1: to reevaluate whether this recession or not coming. But I

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Speaker 1: think it's way too early. Uh. And that's the part

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Speaker 1: of the current to look at is the first couple

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Speaker 1: of years, not the two tents, all right, So you're

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Speaker 1: looking more where the feed is looking. How do you

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Speaker 1: think the fete is viewing really ills that are still negative?

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Speaker 1: And how credible the market seems to believe that it is. Yeah,

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Speaker 1: I think there's so many moving parts here that investors

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Speaker 1: are you know, much better off looking at nominal yields,

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Speaker 1: looking at overall conditions and whether they're tight or loose, uh,

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Speaker 1: and then letting the break evens the expected inflation rates,

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Speaker 1: and letting the real yields drop out, because right now,

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Speaker 1: you know, with inflation and let's say it's eight percent

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Speaker 1: in a thirty eight basis point that funds rate, you're

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Speaker 1: looking at almost a negative seven percent meal yield at

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Speaker 1: the front end of the curve that's going to destroy

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Speaker 1: the entire curve. The liquidity of the tips market will

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Speaker 1: compound that and some of the dedicated investor based market

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Speaker 1: segmentation and distort that as well. So I think going

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Speaker 1: right to the real yields is the most confusing way

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Speaker 1: to try to unravel it. Raber Tip, thank you for that.

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Speaker 1: Totally agree there on the residual focus is a little

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Speaker 1: bit out of let lack, and you gotta look in

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Speaker 1: a more complex analysis of inflation adjusted yields. Mr. Tip.

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Speaker 1: Of course, with Pigam, we moved to Ukraine now and

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Speaker 1: we do this with truly an expert on human rights.

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Speaker 1: Julie Norman is co director of UCL Center on US Politics,

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Speaker 1: but her work at American University is on the heartbreak

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Speaker 1: of terror, in the heartbreak of human rights. Many talk it,

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Speaker 1: she does it. Dr Norman, we gotta cut to the chase.

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Speaker 1: You were unprepared. We were unprepared for what we see

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Speaker 1: in Ukraine. Forget about the Hague, forget about war crimes.

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Speaker 1: How do you respond to this in real time? Well, Tom,

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Speaker 1: it's certainly horrific the images that we've seen, especially over

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Speaker 1: this last week or two and unfortunately they are unlikely

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Speaker 1: to stop for expecting even more atrocities in the next

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Speaker 1: wave of the war, which will most likely take place

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Speaker 1: in the East. As you mentioned, there's been a lot

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Speaker 1: of discussion about war crimes trials perhaps in the future

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Speaker 1: work or nentrepreneals tend to be quite time consuming even

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Speaker 1: when they do take place. There's a lot of questions

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Speaker 1: whether the International Criminal Court would have a jurisdiction over

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Speaker 1: what's happening now anyway. But the important thing to remember

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Speaker 1: two is those uh, those type of litigation don't usually

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Speaker 1: deter any actions in the moment, and so even if

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Speaker 1: there were to take place later, they would not stop

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Speaker 1: putin now. Um, so what we have to do now

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Speaker 1: more is focus on how can this conflict end. As

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Speaker 1: long as the conflict is continuing, I expect that we

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Speaker 1: will continue to see the kinds of atrocities that we saw. Unfortunately,

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Speaker 1: so that's now a too h a double sided coin

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Speaker 1: of diplomacy in the military side, and need to be

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Speaker 1: very delicate here, Professor Norman. And that is reports or

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Speaker 1: speculation rumor of chemical weapons being used down by the

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Speaker 1: Black Sea. How do you determine that in your academics

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Speaker 1: do you look for like canisters that the stuff was

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Speaker 1: used in or am I thinking from World War One?

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Speaker 1: How do you detect chemical weapons? Yeah, well, obviously depends

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Speaker 1: on the type of weapon that's use of, what kind

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Speaker 1: of residue is left, what kind of as you mentioned,

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00:23:10,200 --> 00:23:12,680
Speaker 1: like canisters, are these kinds of things, It tends to

434
00:23:12,760 --> 00:23:15,639
Speaker 1: be against something that is difficult to often show in

435
00:23:15,680 --> 00:23:18,440
Speaker 1: the moment, especially in a situation like Mario Paul where

436
00:23:18,560 --> 00:23:21,399
Speaker 1: just access to the city has been very limited. So

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00:23:21,520 --> 00:23:23,240
Speaker 1: we have heard some of these reports, but they have

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Speaker 1: not been verified. It's also important to note that again

439
00:23:26,359 --> 00:23:29,119
Speaker 1: chemical weapons take many different forms, and we would consider

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00:23:29,320 --> 00:23:31,320
Speaker 1: say tear gas a form a chemical weapon, but not

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00:23:31,440 --> 00:23:34,000
Speaker 1: obviously one that is you know, is deadly in that

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00:23:34,160 --> 00:23:36,560
Speaker 1: kind of thing. So the scale twitch a weapon has

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00:23:36,600 --> 00:23:38,520
Speaker 1: been used, usually you have to look at what actually

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00:23:38,600 --> 00:23:41,639
Speaker 1: is happening to people in that area. It usually, again

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00:23:41,680 --> 00:23:43,600
Speaker 1: you have to have some kind of forensic evidence to

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00:23:43,680 --> 00:23:46,600
Speaker 1: show the impact as well as actually having either residue

447
00:23:46,680 --> 00:23:49,360
Speaker 1: or having canister or something like that from things like phosphorus.

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00:23:49,480 --> 00:23:52,560
Speaker 1: But again it's not even clear what chemical weapons has

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00:23:52,600 --> 00:23:54,560
Speaker 1: been alleged to use, much less if we're where they

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00:23:54,600 --> 00:23:57,399
Speaker 1: were deployed um. But again this is something that we

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00:23:57,680 --> 00:24:00,240
Speaker 1: were aware of, has been a possibility. Do we said

452
00:24:00,280 --> 00:24:02,880
Speaker 1: why this is so crucial is because of the potential

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Speaker 1: response to the use of an escalation or something that

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00:24:07,280 --> 00:24:10,760
Speaker 1: is new and more horrific in this war. What do

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Speaker 1: you expect the response to be at a time when

456
00:24:12,800 --> 00:24:17,480
Speaker 1: the United Kingdom has comed out and talked about NATO deployment. Well,

457
00:24:17,760 --> 00:24:20,439
Speaker 1: the UK and NATO have obviously been trying as much

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00:24:20,480 --> 00:24:23,439
Speaker 1: as they can to de escalate the conflict, but at

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00:24:23,480 --> 00:24:26,720
Speaker 1: the same time to support Ukraine's through military aid. As

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00:24:26,760 --> 00:24:30,280
Speaker 1: you noted, what would perhaps change that variable would be

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Speaker 1: if there was a deployment of either a tactical nutier

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Speaker 1: weapon or a chemical weapon. NATO has been pretty close

463
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Speaker 1: to the chest in terms of what their options would

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Speaker 1: be after that. It's expected that there would be more

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Speaker 1: of a robust response, but again, the alliance up until

466
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Speaker 1: this point has been so committed to trying not to

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Speaker 1: get boots on the ground, not to get this actually

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00:24:50,720 --> 00:24:53,400
Speaker 1: becoming some kind of even broader conflict, and it will

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00:24:53,440 --> 00:24:55,960
Speaker 1: be very difficult to find that balanced if indeed something

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Speaker 1: like chemical weapons are used. Professor Norman, thank you so

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Speaker 1: much for joining us this morning. This is the Bloomberg

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Speaker 1: Surveillance Podcast. Thanks for listening. Join us live weekdays from

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00:25:05,960 --> 00:25:09,119
Speaker 1: seven to ten a m. Eastern on Bloomberg Radio and

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00:25:09,320 --> 00:25:13,080
Speaker 1: on Bloomberg Television each day from six to nine am

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00:25:13,600 --> 00:25:17,320
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Speaker 1: international relations. And subscribe to the Surveillance podcast on Apple podcast, SoundCloud,

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Speaker 1: Bloomberg dot com, and of course on the terminal. I'm

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00:25:27,800 --> 00:25:30,440
Speaker 1: Tom Keene, and this is Bloomberg