WEBVTT - We Have to Restructure Globalization, Stiglitz Says 0:00:00.080 --> 0:00:13.040 Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. 0:00:13.480 --> 0:00:17.560 Daily we bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:30.760 Bloomberg dot Com, and of course on the Bloomberg. He 0:00:30.880 --> 0:00:34.559 is Lurid from Columbia. Uh. He is a gentleman of 0:00:34.680 --> 0:00:38.280 liberal thought who, unfortunately conservatives have to read to try 0:00:38.320 --> 0:00:42.199 to keep up to speed on the outrages on income, 0:00:42.440 --> 0:00:47.320 on wealth, the pushback from conservatives as well. The classic 0:00:47.360 --> 0:00:51.600 two thousand two is globalization and as discontents. There's a 0:00:51.640 --> 0:00:54.600 long new afterward. It's not just like a six page afterward. 0:00:54.640 --> 0:00:57.920 You really put some thought into it when you wrote 0:00:58.040 --> 0:01:00.319 the afterward. I'm sure you had an idea in your 0:01:00.320 --> 0:01:03.160 mind and then you had to rewrite the afterward. What 0:01:03.240 --> 0:01:06.080 was the rewrite like of the new afterward? Well, the 0:01:06.120 --> 0:01:09.800 big idea it was that when I wrote Globization Discontent, 0:01:10.000 --> 0:01:14.320 I just left uh. Being Chief Economists of the World Bank, 0:01:15.240 --> 0:01:18.280 I saw the discontent in the developing world, and I 0:01:18.319 --> 0:01:21.400 saw that there was a real rationale behind that discontent. 0:01:22.319 --> 0:01:31.840 Globalization had been unfair, particularly for say Africa, up and afterwards, yeah, exactly. 0:01:31.959 --> 0:01:36.520 And then uh Trump becomes president the United States and 0:01:36.560 --> 0:01:39.920 he says globalization is unfair to the United States. And 0:01:39.959 --> 0:01:42.840 you have to ask the question, how can globalization be 0:01:43.400 --> 0:01:47.120 unfair to the United States, unfair to the developing world. 0:01:47.280 --> 0:01:49.160 How can it be that something that was supposed to 0:01:49.240 --> 0:01:54.000 be so good for everybody while winds up being hated 0:01:54.120 --> 0:01:58.760 by everybody. And one of the reasons for writing the 0:01:58.760 --> 0:02:02.600 book was to try to to unravel that that dilemma. 0:02:03.040 --> 0:02:09.360 Another one was that Trump says, uh, NAFTA and every 0:02:09.360 --> 0:02:13.080 one of our other trade deals or the worst deal ever. 0:02:13.600 --> 0:02:16.440 And what he seems to suggest is that actually almost 0:02:16.480 --> 0:02:22.080 said is that our trade negotiations got snookered by the 0:02:22.240 --> 0:02:27.400 smart trade negotiators from Mexico. And come on, he said 0:02:27.400 --> 0:02:30.800 in China, Joe Joe stickless with us from Columbia, Folks, 0:02:31.320 --> 0:02:36.239 Professor Stiglets, he said in Shina, he blamed past presidents exactly, 0:02:36.600 --> 0:02:40.120 that that that we that we have been taken advantage 0:02:40.120 --> 0:02:44.480 of by by those in other countries, and that you know, 0:02:44.880 --> 0:02:48.280 I've watched these trade negotiations for thirty five years, and 0:02:48.360 --> 0:02:52.960 the idea that we were snookered by by those in 0:02:52.960 --> 0:02:57.000 other countries that they took advantage of us is absolutely wrong. 0:02:57.400 --> 0:03:01.000 We got what we asked for. The real question was 0:03:01.280 --> 0:03:03.560 were we asking for the right thing? Okay, but whether 0:03:03.639 --> 0:03:06.680 this Joe is you grew up in blue collar Gary, Indiana, 0:03:06.919 --> 0:03:12.200 Mr Trump fact represents a huge swath of disaffected blue 0:03:12.200 --> 0:03:16.600 collar America. Now why is this blue collar now different 0:03:16.639 --> 0:03:19.600 from the blue collar you knew in Gary, Indiana long 0:03:19.600 --> 0:03:23.400 ago and far away? Well, first, he doesn't represent those 0:03:23.520 --> 0:03:26.959 they voted for him. Voted for him, but they voted 0:03:26.960 --> 0:03:30.960 for him because he says that he's going to put 0:03:31.000 --> 0:03:33.919 forward a set of economic policies that are going to 0:03:34.320 --> 0:03:37.120 let's make their play better. And that was the third 0:03:37.160 --> 0:03:40.920 reason I wrote the book. I wanted to answer the question, 0:03:41.360 --> 0:03:44.840 would the policies that he put forward actually do what 0:03:44.920 --> 0:03:50.080 he promises? Or is there in third way another way? Uh, 0:03:50.160 --> 0:03:54.680 it's clear that the policies that we did in the past, 0:03:54.680 --> 0:03:59.680 it's clear that. And my argument was that his protectionism 0:04:00.200 --> 0:04:02.000 was not gonna work either. It was actually going to 0:04:02.120 --> 0:04:05.400 make them worse off. Okay, I learned people go, how 0:04:05.400 --> 0:04:07.040 did you learn to wear a bow tie? Tom? And 0:04:07.400 --> 0:04:10.040 it wasn't that I got it from Senator Simon of Illinois. 0:04:10.320 --> 0:04:12.440 But that was a good in the esteemed economists from 0:04:12.440 --> 0:04:16.000 Illinois long ago and far away. Where are the Democrats 0:04:16.120 --> 0:04:21.359 in your party who can move centrist to assuage the 0:04:21.640 --> 0:04:26.560 fears of more traditional, non Trumpian Republicans. Do you have 0:04:26.680 --> 0:04:30.200 any optimism the Democratic Party can get out of its 0:04:30.240 --> 0:04:34.400 own way in its own recent historical baggage. I think 0:04:34.440 --> 0:04:37.080 so I do have some money. Why do you say that, Well, 0:04:37.120 --> 0:04:41.800 I think one of the elements, Uh, they're beginning to grasp. Uh. 0:04:41.880 --> 0:04:45.360 One of the elements of correcting where the problem is 0:04:45.440 --> 0:04:50.919 where things have gone wrong is market power. Uh that Uh. 0:04:51.000 --> 0:04:53.920 One of the reasons that globalization is being so bad 0:04:54.560 --> 0:04:59.440 is that it has weakened UH workers marketing power and 0:05:00.160 --> 0:05:05.839 UH play provided a framework in which large corporations have 0:05:05.920 --> 0:05:09.839 gotten larger and larger. So there's an increasing concentration of 0:05:09.960 --> 0:05:13.080 market power, uh, just like there was in the goaded 0:05:13.160 --> 0:05:16.720 age at the end of the nineteenth century. Uh. And 0:05:16.760 --> 0:05:19.640 they've grasped that and says we uh, And I said, 0:05:19.680 --> 0:05:22.560 we have to do something about that. A second element 0:05:23.080 --> 0:05:25.799 is that we have to have systems of social protection 0:05:26.240 --> 0:05:31.599 without protectionism. UM. And part of social protection is having 0:05:31.640 --> 0:05:36.719 a tax system that's fair. Uh. So underlying one of 0:05:36.760 --> 0:05:41.400 the elements of of making our economic system work is 0:05:41.440 --> 0:05:44.200 that those who gain have to share some of the 0:05:44.279 --> 0:05:47.360 benefits with those who have lost. Show the primal screen 0:05:48.160 --> 0:05:51.680 from conservative the four conservative Democrats that are out there, 0:05:51.720 --> 0:05:54.719 but a huge body of people who I would suggest 0:05:54.800 --> 0:05:58.120 didn't want to vote for President Trump is there's the 0:05:58.440 --> 0:06:02.440 Democratic Party, his law its way from the wards of Gary, 0:06:02.480 --> 0:06:05.600 Indiana from years ago, and from other geographers, well, Pat 0:06:05.600 --> 0:06:09.080 Toomey of Senator from Pennsylvania's to deal with us every day? 0:06:09.520 --> 0:06:13.640 Why is your world you grew up in so embarrassing 0:06:14.240 --> 0:06:19.000 to East coast and left coast Democrats. Well, that's a 0:06:19.040 --> 0:06:24.880 political issue. Uh, let's get back to Mike McKie political classes. 0:06:25.200 --> 0:06:35.120 They're the only ones that don'ts no. But uh, there 0:06:35.160 --> 0:06:38.520 are many complexities to these political dynamics. We all know 0:06:39.200 --> 0:06:43.440 that in the United States, Uh, money matters in politics. 0:06:44.000 --> 0:06:50.800 And I'm afraid that that the search for money has distroyed. 0:06:50.880 --> 0:06:57.400 It has led to a focus on where the money is, 0:06:57.640 --> 0:07:00.320 you know, exact simple and and I'm for you only. 0:07:00.360 --> 0:07:02.720 I think we have to get back to the roots 0:07:02.960 --> 0:07:07.560 of where where the voters are, and the voters are 0:07:08.960 --> 0:07:11.720 ordinary citizens who have not done very well, and you know, 0:07:11.800 --> 0:07:15.960 just the real the reality is that most Americans have 0:07:16.320 --> 0:07:19.560 lost uh as a result what has going on in 0:07:19.560 --> 0:07:22.880 the last thirty third of a century. And globalization, as 0:07:22.880 --> 0:07:26.680 I point out in my book, is a part, not 0:07:26.840 --> 0:07:29.200 the only part of the story, but an important part 0:07:29.200 --> 0:07:32.480 of the story. And we have to restructure globalization. It's 0:07:32.480 --> 0:07:36.680 not with globalization itself, it's with the way we manage globalization. 0:07:37.440 --> 0:07:40.720 So let me ask one quick set up, please, you 0:07:40.760 --> 0:07:43.040 only get thirty seconds, and then we can delve into 0:07:43.040 --> 0:07:46.880 this later. The tax bill argument that the administration makes 0:07:47.000 --> 0:07:51.160 is especially the repatriation that their their concept is sevent 0:07:52.520 --> 0:07:57.080 of corporate earnings go to labor, go to labor, and 0:07:57.120 --> 0:08:00.560 only to capital, which is kind of the opposite of 0:08:00.600 --> 0:08:06.200 what most people have said. So do you disagree with them? Uh? 0:08:06.320 --> 0:08:08.760 Their analysis of what will happen as a result of 0:08:08.760 --> 0:08:12.800 the corporate income tax cut is uh. But if we'll 0:08:12.800 --> 0:08:15.160 get into I want to ask that because that's one 0:08:15.200 --> 0:08:18.640 of their major arguments that they make, that workers will 0:08:18.680 --> 0:08:20.120 get a big raise out of this. And you were 0:08:20.160 --> 0:08:23.559 talking how even the CEOs, even the CEOs have said 0:08:23.840 --> 0:08:26.440 that's wrong. I mean, it's really striking that We've gotten 0:08:26.640 --> 0:08:28.880 a big dose of honesty from a lot of the CEOs, 0:08:28.920 --> 0:08:32.360 you know. Uh. Cone asked a group of CEOs what 0:08:32.360 --> 0:08:34.120 were they going to do with the tax cut, and 0:08:34.200 --> 0:08:36.640 only three of them their hands and said, maybe we'll 0:08:37.000 --> 0:08:42.120 show a little investment traditional economics. Uh. Research shows that 0:08:42.240 --> 0:08:48.960 workers get maybe of profit corporate profits, whereas capital the 0:08:48.960 --> 0:08:53.840 owners get, which, as you were just saying, makes logical sense. Uh. 0:08:53.880 --> 0:08:57.400 And yet the the argument for the tax bill reverses 0:08:57.480 --> 0:09:03.400 that do you know of any economic research supporting that idea? No? Uh, no, 0:09:03.559 --> 0:09:08.480 no credible research actually. Uh. After the Console of Economic 0:09:08.520 --> 0:09:13.320 Advisors came out with the report, uh uh, there were 0:09:13.320 --> 0:09:18.320 two very good articles that were very quickly published on 0:09:18.360 --> 0:09:24.000 the internet, uh, analyzing where what the weight of evidence was. 0:09:24.160 --> 0:09:29.439 And and it was quite frankly an embarrassment because for 0:09:30.160 --> 0:09:33.599 uh fifty years, the SIN sixth creation the Console of 0:09:33.640 --> 0:09:40.280 Economic Advisors has always tried to be reflect the best 0:09:40.320 --> 0:09:46.080 of economic science, you know it when the evidence was 0:09:46.160 --> 0:09:49.760 against it, they would be totally silent, you know. And 0:09:49.760 --> 0:09:53.800 and sometimes politicians do put forward something, but it was 0:09:54.120 --> 0:09:58.920 never actually going on the record, uh, and and uh 0:09:59.080 --> 0:10:02.760 saying things that we're against what economic science. Ha said 0:10:02.840 --> 0:10:07.000 and this was an embarrassment for UH what has has 0:10:07.040 --> 0:10:11.080 been a very strong institution in our government, UM, one 0:10:11.120 --> 0:10:15.120 that tries to give the American people, and I'm bipartisan 0:10:15.200 --> 0:10:22.440 basis the what economics says about various policies being advocated 0:10:22.440 --> 0:10:24.959 by administrations. You see what I've done here, Tom, I've 0:10:25.000 --> 0:10:28.880 set up a shameless plug for Bloomberg News is to 0:10:29.000 --> 0:10:32.520 lou On Eurompeia and his story this morning on this Uh, 0:10:32.559 --> 0:10:35.800 if you look at Bloomberg dot com, he's looked at 0:10:35.800 --> 0:10:38.079 what CEOs are saying they will do with the cash. 0:10:38.120 --> 0:10:42.079 So there's a third good story out there for you, Joe. UM. 0:10:42.160 --> 0:10:44.520 The other thing we're talking about during the break is 0:10:44.679 --> 0:10:48.079 the tax trigger that they're putting into this and UH, 0:10:48.240 --> 0:10:50.959 let's leave aside the the idea of you know, the 0:10:51.360 --> 0:10:53.680 value of this tax plan and the politics of this 0:10:53.720 --> 0:10:56.720 tax plan, but just uh, from a from an economic 0:10:56.760 --> 0:11:01.280 point of view, tax trigger bad idea. What the basic 0:11:01.360 --> 0:11:06.800 problem is that, UH, when the nature of the tax 0:11:06.800 --> 0:11:10.880 trigger is that when if the tax revenues are less 0:11:11.040 --> 0:11:14.760 than they say, and almost surely they will be, uh, 0:11:14.800 --> 0:11:19.560 it raises taxes. That's what economists call is pro cyclical 0:11:19.720 --> 0:11:22.800 tax policy. In other words, tax policy is supposed to 0:11:23.679 --> 0:11:27.760 run against the tax so that when the economy is weak, 0:11:28.120 --> 0:11:31.319 taxes are cut to stimulate the economy. When the economy 0:11:31.440 --> 0:11:35.199 is strong, uh, you raise taxes. We're doing just the opposite. 0:11:35.240 --> 0:11:39.000 The economy is relatively strong and we're lowering taxes. That's 0:11:39.080 --> 0:11:43.480 going to be pro you know, exaggerate the movements of 0:11:43.520 --> 0:11:47.160 the economy, and the tax trigger will do just the opposite. 0:11:47.800 --> 0:11:51.280 If the economy gets weak, tax revenues go down, and 0:11:51.600 --> 0:11:55.280 the tax trigger says, now we're gonna raise taxes um 0:11:55.559 --> 0:11:59.200 and that will weaken economy further. It's the worst kind 0:11:59.200 --> 0:12:01.560 of economic say that you could imagine. And I tried 0:12:01.559 --> 0:12:04.160 to read it yesterday. Man, he's glazed over by paragraph 0:12:04.240 --> 0:12:08.560 three and forty two numbers of it's formulaic beyond believe Joe. 0:12:09.080 --> 0:12:12.160 There's a lot of people out there who have grown 0:12:12.240 --> 0:12:17.800 up Republican who want to find an alternative. Can your 0:12:17.880 --> 0:12:23.920 Democratic Party generate an alternative for two thousand twenty Yes, 0:12:23.960 --> 0:12:27.200 I think they can. Uh, Well, who is going to 0:12:27.280 --> 0:12:29.839 be a long process. I mean, I think one of 0:12:29.880 --> 0:12:33.040 the reasons that you don't see people uh putting their 0:12:33.080 --> 0:12:36.319 names for it is we know the political what the 0:12:36.360 --> 0:12:40.880 political process works. It looks like whoever there there there, Joe, 0:12:41.040 --> 0:12:45.200 everybody who's running is older than you. Uh, not everybody. 0:12:45.200 --> 0:12:49.240 There are some some people who are who are younger, 0:12:49.280 --> 0:12:53.720 who have a lot of ability. The real question is 0:12:53.760 --> 0:12:57.720 what will the central messages of and the central platform 0:12:57.760 --> 0:13:02.200 of the Democratic Party look like. And I think uh 0:13:02.320 --> 0:13:04.920 to come back say in my book, Uh, one of 0:13:04.960 --> 0:13:09.920 my messages of my book Globalization, it's discontents to revisit 0:13:09.960 --> 0:13:14.080 it is we have to manage globalization better. It's not 0:13:14.120 --> 0:13:17.040 with the problem with globalization, it's the way we managed it. 0:13:17.760 --> 0:13:20.560 When it's working well, it can lead the economy you 0:13:20.600 --> 0:13:23.840 do well. But the problem when it's not well managed. 0:13:23.920 --> 0:13:27.280 Even if the economy does well, more than of the 0:13:27.280 --> 0:13:29.679 benefits go to the people at the top. And so 0:13:29.840 --> 0:13:33.679 you have to have systems of social protection without protectionism, 0:13:33.720 --> 0:13:37.160 which is the route that the Republicans are going. So 0:13:37.480 --> 0:13:39.360 it has to be a different message. Part of that 0:13:39.400 --> 0:13:44.439 message is market power, ugglomeration of market and within you're afterwards, 0:13:44.440 --> 0:13:48.120 we've got the phrase market power just took us. Congratulations 0:13:48.160 --> 0:13:51.120 from two thousand two on a strong new edition of 0:13:51.160 --> 0:13:56.280 his classic Globalization, Globalization and its disc Well, we've got 0:13:56.280 --> 0:13:57.800 to go. I know you do. I mean we've got 0:13:57.800 --> 0:14:00.800 to um get you into our London studios as well. 0:14:00.840 --> 0:14:23.640 When you're over there. We migrate now to a careful 0:14:23.640 --> 0:14:26.560 discussion in uh too short a time here this morning 0:14:26.560 --> 0:14:30.600 with vage matel of I n G on the foreign 0:14:30.600 --> 0:14:34.200 exchange space verage. I'm sure you saw the news on 0:14:34.280 --> 0:14:39.640 Britain with an attendant strength in cable. What euro Sterling? 0:14:39.680 --> 0:14:42.360 I haven't talked about it in a while. Is a 0:14:42.440 --> 0:14:46.520 euro Sterling a profitable place to play the back and 0:14:46.600 --> 0:14:51.840 forth of Brexit. Well, for most of your Sterling has 0:14:51.920 --> 0:14:55.400 kind of been a political gauge for rest risks, political 0:14:55.480 --> 0:14:58.560 risk in both Europe and and the UK. Earlier this 0:14:58.640 --> 0:15:00.760 year was the French elections. He saw the Euro sort 0:15:00.760 --> 0:15:04.080 of pricing a bit of political streaming over summer, the 0:15:04.080 --> 0:15:06.520 Euro turned into a safe haven and it's kind of 0:15:06.520 --> 0:15:09.400 demonstrating these characteristics at the moment as well. Our outlook 0:15:09.400 --> 0:15:12.400 going into next year for US we see two cyclical 0:15:12.440 --> 0:15:15.400 forces offsetting each other for Eurosterling. So whilst you're going 0:15:15.440 --> 0:15:18.280 to get a positive repricing in on the Sterling side 0:15:18.320 --> 0:15:22.200 as Brexit talks make some good progress in the UK economy, 0:15:22.320 --> 0:15:25.760 maybe instill some animal confidence. Equally, the Eurozone economy looks 0:15:25.800 --> 0:15:29.440 pretty upbeating that's right where I wanted to go. They're 0:15:29.480 --> 0:15:33.560 both strengthening as the I n G car right exactly. 0:15:33.640 --> 0:15:35.840 So for us, we actually see we've we've got a 0:15:35.920 --> 0:15:38.080 nuanced profile. We actually think the first quarter might be 0:15:38.480 --> 0:15:42.240 relatively better for Sterling against the Euro, just purely because 0:15:42.280 --> 0:15:44.880 you have the specter of the Italian election risks for 0:15:44.920 --> 0:15:47.960 the Eurozone and also a positive repricing on the Brexit front. 0:15:48.000 --> 0:15:50.320 We're seeing part of that today, a transition deal with 0:15:50.320 --> 0:15:53.560 the next catalyst that we think could drive Sterling even higher. 0:15:53.840 --> 0:15:56.200 We're looking sort of for the low eight five eight 0:15:56.320 --> 0:15:59.480 five level that that's our sort of mid early sort 0:15:59.520 --> 0:16:02.040 of next year. A target after that. We're kind of 0:16:02.080 --> 0:16:04.480 then in sort of this period where it will net 0:16:04.480 --> 0:16:06.520 around that sort of a five level and sort of 0:16:06.520 --> 0:16:10.040 cycle thats fluctuate around there unless we get another layer 0:16:10.040 --> 0:16:14.600 of positive steering in the UK economy towards a soft Brexit. Uh. 0:16:15.080 --> 0:16:17.320 We're not making any big calls here. That's the that's 0:16:17.360 --> 0:16:20.000 the twenty nineteen story. But for now, eighty five is 0:16:20.000 --> 0:16:22.520 what we're looking at. What is your single best idea 0:16:22.640 --> 0:16:24.480 in the next year, just grab it up here. What 0:16:24.480 --> 0:16:28.880 does a cross rate where you think alpha can be made? Well, 0:16:28.960 --> 0:16:30.640 so we we were sort of running with this sort 0:16:30.640 --> 0:16:33.240 of monetary convergence theme going into next year. So it's 0:16:33.320 --> 0:16:36.080 it's it's where the low yielders can play sort of 0:16:36.120 --> 0:16:38.720 catch up against the sort of against the sort of 0:16:38.800 --> 0:16:42.200 higher yielders. The yend actually looks like a pretty good 0:16:42.200 --> 0:16:45.040 place that I want it finds the peak dollar yen 0:16:45.120 --> 0:16:46.880 sort of finding a peak up in one fifteen. But 0:16:46.920 --> 0:16:50.400 yen crosses as well, especially against sort of some of 0:16:50.400 --> 0:16:52.160 the some of the higher yielders which are suffering like 0:16:52.200 --> 0:16:54.560 as the year, et cetera. So we were quite like 0:16:54.720 --> 0:16:59.200 these sort of convergence trades for US. We're also quite 0:16:59.240 --> 0:17:02.840 like euros, so euro against the Aussi dollar again another 0:17:02.920 --> 0:17:06.639 convergence trade there, the ECB tightening, the Australian, your curves 0:17:06.680 --> 0:17:09.920 thaying relatively flat, going into neetka, all of these convergent, 0:17:09.960 --> 0:17:12.600 your convergent trades. Well, right, we're gonna have fun and 0:17:12.680 --> 0:17:14.840 this in the Bloomberg folks, you'll see this chart first 0:17:14.840 --> 0:17:18.240 out on Twitter. Thank you for listening to Bloomberg Radio. 0:17:18.640 --> 0:17:23.040 You're looking for stronger yen which and dollar yen is 0:17:23.080 --> 0:17:25.640 from one eleven down to one oh nine one oh eight. 0:17:25.640 --> 0:17:30.240 Do I have that right exactly exactly? And so for us, 0:17:30.280 --> 0:17:33.240 what we're looking at, it's this idea of a V 0:17:33.440 --> 0:17:37.080 shaped invertive V shaped profile for Dollienne. You may get 0:17:37.160 --> 0:17:40.440 arrived just purely. Is this that the tax still goes 0:17:40.480 --> 0:17:42.520 through maybe at the turn of the year, but I 0:17:42.560 --> 0:17:44.840 think it'll be quickly faded. I think markets have learned 0:17:44.840 --> 0:17:47.560 their lesson from translation earlier this year. They want to 0:17:47.560 --> 0:17:49.600 see the evidence in the growth. They want to see 0:17:49.640 --> 0:17:52.040 the evidence in the data. I don't think we don't 0:17:52.040 --> 0:17:53.760 think we're going to get that sort of evidence coming 0:17:53.800 --> 0:17:56.760 through at all the US economy going into next year. 0:17:56.800 --> 0:17:59.400 Where's your target? And Aussie And I'm going to put 0:17:59.400 --> 0:18:02.160 this chart out folks, based on what Varage says, where's 0:18:02.200 --> 0:18:05.720 your target on Ozzie again, Well, so I think when 0:18:05.760 --> 0:18:07.920 we look at it, it's sort of it's it's it's 0:18:08.000 --> 0:18:10.760 kind of around the sort of potentially could go back 0:18:10.800 --> 0:18:13.119 to sort of those low low seventy five, sort of 0:18:13.119 --> 0:18:16.720 low seventies level, so to ciclically, that's where direction of 0:18:16.760 --> 0:18:19.360 travel seems to be going. I'm making the Varage Patel 0:18:19.520 --> 0:18:22.920 circle on my Bloomberg chart right now down at the 0:18:23.040 --> 0:18:25.560 seventies six level, folks, we're gonna put this is what 0:18:25.600 --> 0:18:27.280 I love about surveillance. We can have a pro like 0:18:27.440 --> 0:18:30.119 Verage Patel on we can make the chart is he 0:18:30.320 --> 0:18:32.960 speaks and in this case with radio, you can see 0:18:32.960 --> 0:18:35.600 it out on Twitter just like that. That's very good 0:18:35.720 --> 0:18:37.800 from my m G. Varage Patel, Thank you so much. Rage. 0:18:37.800 --> 0:18:40.359 We gotta get you back on longer next time. Sorry 0:18:40.359 --> 0:19:00.119 for this the abruptness this time. Jeff Kerry, are you 0:19:00.200 --> 0:19:01.959 see with us with Golden sax? He looks at come 0:19:02.000 --> 0:19:06.480 on days and particularly oil Will you go to Vienna two? 0:19:06.920 --> 0:19:11.080 S's like watching I mean, let's be honest here, is 0:19:11.119 --> 0:19:12.800 it like watching paint dry? I mean you look at 0:19:12.840 --> 0:19:17.240 the list of planary speakers and closing comments. Is it 0:19:17.359 --> 0:19:20.640 like the definition of watching paint dry? There's a reason 0:19:20.640 --> 0:19:22.800 why I haven't been back for a little Yes, exactly, 0:19:22.800 --> 0:19:25.800 That's what I thought. You say. The story with this 0:19:25.880 --> 0:19:30.520 opaque is the mystery over inventories. Is that like where's 0:19:30.560 --> 0:19:33.840 the oil? Well? I mean there's different metrics to measure 0:19:33.840 --> 0:19:36.560 the inventories, and if you go with the opaque data, 0:19:36.720 --> 0:19:40.520 it would suggest that rebalancing is roughly complete. Now, if 0:19:40.520 --> 0:19:43.199 you use the I A data, it would say it's yes, 0:19:43.359 --> 0:19:48.119 it's roughly complete. Now that's not the end of the uncertainty. 0:19:48.200 --> 0:19:50.199 Then if you add in what metrics do you use? 0:19:50.240 --> 0:19:52.560 Do you use days of forward consumption or do you 0:19:52.640 --> 0:19:55.640 use the inventory levels? Um? That will if you use 0:19:55.720 --> 0:19:59.360 days of forward consumption of the rebalancing. So how far 0:19:59.560 --> 0:20:02.160 we are along the rebalancing path. There's a high level 0:20:02.160 --> 0:20:04.680 of uncertainties, which is enough for you to make a call. 0:20:04.760 --> 0:20:06.399 I mean, if we're an arrange bond quality of a 0:20:06.480 --> 0:20:08.959 vector up vector, well are our base case is that 0:20:09.000 --> 0:20:14.480 we're still having the cut ending in April of next year, 0:20:14.600 --> 0:20:17.680 and then we have a you know, a a gradual 0:20:17.920 --> 0:20:20.920 increase in both OPEC and Russian production after that. Now, 0:20:21.240 --> 0:20:24.719 obviously the meeting is going to lead to most likely 0:20:24.960 --> 0:20:27.840 some extension beyond that um. You know, of the three 0:20:27.880 --> 0:20:29.880 outcomes that you would have, you know, than the nine 0:20:29.880 --> 0:20:33.639 month extension UM, which would be I think the market 0:20:33.680 --> 0:20:36.560 really has not priced that in yet, a six month extension, 0:20:36.560 --> 0:20:38.800 which is roughly what the market has priced in, and 0:20:38.800 --> 0:20:41.879 then a three month month extension with a reassessment or 0:20:41.920 --> 0:20:45.240 a taper discussing how you would actually create an exit strategy. 0:20:45.280 --> 0:20:50.000 Have you ever seen this this almost negotiated or discourse 0:20:50.320 --> 0:20:56.040 driven dynamics and oils supply. No, And and I think 0:20:56.080 --> 0:20:58.880 one of the key the key issues is that there's 0:20:58.920 --> 0:21:02.560 so much debate eight right now on what you're going 0:21:02.600 --> 0:21:04.160 to use as a metric. So if you go back 0:21:04.200 --> 0:21:07.360 to November two thousand and fourteen, that one was viewed 0:21:07.400 --> 0:21:09.680 as having a high level uncertain it really didn't because 0:21:09.720 --> 0:21:12.800 it was either cut or don't cut. This one is 0:21:13.160 --> 0:21:15.680 where are we in the rebalancing process and how much 0:21:15.720 --> 0:21:17.919 do we need to actually still do to get a 0:21:17.960 --> 0:21:20.399 rebalanced market. And that's where the core the debate is 0:21:20.680 --> 0:21:22.960 that is less of a black and white and much 0:21:23.000 --> 0:21:25.879 more of a gray area to be in. We should 0:21:25.920 --> 0:21:31.159 mention the West Texas four right now brent significantly higher 0:21:31.480 --> 0:21:34.479 than they were earlier this year, and everybody says, you know, 0:21:34.760 --> 0:21:36.800 the deal is why, But there were a lot of 0:21:36.800 --> 0:21:39.280 predictions at the time that they were making a deal 0:21:40.240 --> 0:21:42.520 among these countries that what that's going to do is 0:21:42.560 --> 0:21:46.320 bring American fract oil back into the marketplace and scent 0:21:46.440 --> 0:21:49.879 producers and that would put a cap on prices doesn't 0:21:49.880 --> 0:21:52.320 seem to have happened yet. Well, first I want to 0:21:52.320 --> 0:21:55.400 correct there. You know, are we at fifty seven fifty 0:21:55.600 --> 0:21:58.720 due to the OPEC cut strictly no demand, Let's do 0:21:58.760 --> 0:22:02.000 not underestimate demand in on globally is on fire right 0:22:02.119 --> 0:22:04.720 because the economies are getting exactly I mean that that's 0:22:04.800 --> 0:22:06.479 because you got to look at the fact that copper 0:22:06.560 --> 0:22:09.760 is sitting near right now, which has nothing to do 0:22:09.800 --> 0:22:11.840 with an opeca. But anyway, let's go back to your 0:22:11.920 --> 0:22:15.320 question about the supply response from the shale producers. We 0:22:15.400 --> 0:22:17.800 saw earlier this year when we got up around fifty 0:22:17.880 --> 0:22:22.040 six dollars of barrel, we saw a substantial response from 0:22:22.160 --> 0:22:24.280 US shale producers in terms of the rig count. We 0:22:24.280 --> 0:22:26.600 aren't seeing it this time. One of the key issues 0:22:27.160 --> 0:22:30.639 is the fact that the investors um after May and 0:22:30.720 --> 0:22:34.720 June this year, UM, we're less willing to accept um 0:22:34.880 --> 0:22:38.119 large CAPEX programs. And I would say that if the 0:22:38.200 --> 0:22:42.159 dicipline being imposed on the producers by the investors, it's 0:22:42.240 --> 0:22:44.639 leading to a very different outcome, much more constrained in 0:22:44.720 --> 0:22:47.840 terms of why did they not want to accept it. 0:22:47.960 --> 0:22:51.440 They want returns and they want they want cash, they 0:22:51.440 --> 0:22:54.520 want dividends they are no that they're no longer going 0:22:54.600 --> 0:22:58.639 to allow them to deficit spend. So, um, what's the 0:22:58.680 --> 0:23:03.560 break even return price now for for oil? Particularly you 0:23:03.600 --> 0:23:06.320 know coming out of the the United States? You know, 0:23:06.680 --> 0:23:08.679 just looking at the behavior of the producers of the 0:23:08.760 --> 0:23:12.320 last last year, looking at the financial data coming out 0:23:12.359 --> 0:23:14.159 of out of the companies, that put us somewhere in 0:23:14.200 --> 0:23:18.320 that fifty seven range. So thirty dollars is not gonna 0:23:18.320 --> 0:23:20.720 happen again? Well, I mean you're gonna say it's not 0:23:20.720 --> 0:23:22.959 gonna happen again. You have a train wreck and demand. 0:23:23.040 --> 0:23:25.960 You could easily see that again. But you know, barring 0:23:26.000 --> 0:23:28.080 a train wreck and demand, the answer is unlikely. What 0:23:28.160 --> 0:23:31.320 about much higher than we are right now? I mean, 0:23:31.400 --> 0:23:34.200 is there is there? Does the supply that we provide 0:23:34.240 --> 0:23:38.879 now uh put a cap? Well? Actually, I think given 0:23:39.000 --> 0:23:42.520 the the strength we've seen in the fundamental day data recently, 0:23:42.840 --> 0:23:46.560 the level of you know, geopolitical uncertainty out there, combined 0:23:46.600 --> 0:23:48.600 that with the rhetoric around the OPEC cut of a 0:23:48.640 --> 0:23:51.720 potential nine month extension, it's actually kind of surprising that 0:23:51.760 --> 0:23:53.840 this market hasn't moved higher. I mean, I like to 0:23:53.880 --> 0:23:56.560 point out, you know, during that hurricane season back in 0:23:56.880 --> 0:23:59.480 late August of this year. These markets just really did 0:23:59.520 --> 0:24:01.879 not move, which is an indication that you know that 0:24:01.960 --> 0:24:04.840 volatility both to the upside and downside really has been 0:24:04.840 --> 0:24:07.439 capped recently. Jeff Curry, thank you so much. Don't be 0:24:07.440 --> 0:24:10.000 a stranger. He's with Goldman Saxons, look at comodies and 0:24:10.040 --> 0:24:14.560 particularly the OPEC meeting to come all sources and perfectly 0:24:14.680 --> 0:24:18.320 Mr Curry emphasizing that there's a huge uncertainty out of 0:24:18.320 --> 0:24:42.480 this meeting as well, arguably in terms of international relations. 0:24:42.560 --> 0:24:45.399 My interview of the week, if not the month, he 0:24:45.480 --> 0:24:49.240 has James Travitas is at the Fletcher School, Toughs University, 0:24:49.320 --> 0:24:52.560 formal Admiral of the Navy with a modest knowledge of 0:24:52.840 --> 0:24:57.240 our history of jaw boning and such. Admiral, My book 0:24:57.240 --> 0:25:00.680 of the summer was your fantastic leader's bookshelf, but easily 0:25:01.000 --> 0:25:02.560