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Speaker 1: Hi, and welcome back to Bloomberg Benchmark, a podcast about

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Speaker 1: the global economy. I'm Tori Stiill, a US economics reporter

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Speaker 1: in d C with Bloomberg News. It is October eight,

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Speaker 1: on Thursday, and I am with my colleague and co host, Akiedo,

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Speaker 1: our editor for Benchmark, in San Francisco. Hey, Colary, how's

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Speaker 1: it going good? Good? How are things your way? It's good,

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Speaker 1: it's good, great time to be in San Francisco. Well,

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Speaker 1: Dan is actually on a train to New York, so

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Speaker 1: he's not going to be joining us today. But we

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Speaker 1: do have a very special guest. Katarina Surviva, a data

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Speaker 1: editor with Bloomberg, is right next to me in our

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Speaker 1: studio in d C. Hello. Hi, I'm so excited to

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Speaker 1: be here. So, Katarina, you just got back from your

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Speaker 1: honeymoon in Italy, where I hope you've been too busy

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Speaker 1: relaxing to pay attention to all the stressful things happening

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Speaker 1: in the global economy right now. Tory, what do you

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Speaker 1: think is the one thing that she should know from

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Speaker 1: the past week? Definitely the jobs report, which was in

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Speaker 1: a nutshell abysmal. Payrolls rose just a hundred and forty

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Speaker 1: two thousand in September, and that was after games in

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Speaker 1: August and July were revised down. So we lost fifty

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Speaker 1: nine thousand jobs, or I should say we had fifty

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Speaker 1: nine thousand jobs fewer than we originally thought we had. Also,

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Speaker 1: average hourly earnings fell by a penny from the prior

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Speaker 1: month and year every year. You know, wage growth was

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Speaker 1: just two point two percent, which if you listen to

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Speaker 1: our episode on wages, you know that's really nothing to

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Speaker 1: write home about. Um, we saw weakness in factory payrolls,

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Speaker 1: we saw labor force participation slow. So, in short, this

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Speaker 1: report makes it almost impossible for the Federal Reserve to

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Speaker 1: justify in October rate hike. And the remaining question is,

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Speaker 1: you know, will they take off the table entirely. We'll

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Speaker 1: have to wait and see how the data turned out.

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Speaker 1: It's interesting because we talked about wages back a couple

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Speaker 1: weeks ago. We talked about how it's a story because

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Speaker 1: the job market is doing really well, but economic growth

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Speaker 1: wage growth is really really slow. I guess this kind

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Speaker 1: of makes sense now that the job market looks like

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Speaker 1: the job market isn't doing as well as we thought

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Speaker 1: it was. Even though this is really depressing news. Right.

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Speaker 1: It seems like some of the weakness that we've been

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Speaker 1: seeing is starting to bleed over into the labor market

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Speaker 1: as well. Yeah, definitely, you know. Related to that, The

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Speaker 1: thing I wanted to talk about was that our very

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Speaker 1: own Bloomberg Markets magazine came out with their annual list

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Speaker 1: of the most influential people in global finance and fed

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Speaker 1: cheer Janny Allen, who I guess we talk about every

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Speaker 1: single week on podcast, was crowned the top of this list,

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Speaker 1: and our colleagues Chris Condon and Rich Miller wrote this

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Speaker 1: great profile of her of you know, her decision making style,

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Speaker 1: which is really collaborative. Apparently she doesn't really give her

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Speaker 1: own opinions until everyone else speaks. Pretty cool stuff. And

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Speaker 1: they also talk about what hangs in the balance, as

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Speaker 1: I said, considers raising rates for the first time since

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Speaker 1: basically Tory was born. So it's a great profile. Um,

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Speaker 1: you can check it out on Bloomberg dot com. So

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Speaker 1: you missed a lot, Katarina, Yeah serious. Do you have

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Speaker 1: all caught up now on the global economy? Yes? I

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Speaker 1: now feel completely caught up things well, Katarina, welcome back.

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Speaker 1: We're really excited to have you on the show today

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Speaker 1: because you just had the most beautiful wedding in Lisbon

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Speaker 1: that I had the great pleasure of attending. Because we're

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Speaker 1: both pretty and dense nerds. We talked a lot about

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Speaker 1: the economics of the wedding, um and the two years

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Speaker 1: leading up to it. I was thinking that it's kind

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Speaker 1: of a perfect symbiotic relationship between you and Europe. Europe

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Speaker 1: created all these conditions for you to have this amazing wedding,

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Speaker 1: and you did great things for Europe by having your

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Speaker 1: wedding there. And Tory and I also realize that we've

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Speaker 1: only talked about depressing things since we launched this show. Yeah,

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Speaker 1: no more being downers for now. Yeah, so we'll only

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Speaker 1: be talking about happy things this week. So let's set

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Speaker 1: the stage here, Katina, you got married in Lisbon back

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Speaker 1: in mid September, back a couple of weeks ago, and

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Speaker 1: what was once the Austro Hungarian Embassy back in the day,

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Speaker 1: fancy and I know it was a gorgeous rooftop ceremony, beautiful,

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Speaker 1: funny day. Let's first talk about the ways that global

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Speaker 1: financial markets kind of conspired to give you the perfect wedding.

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Speaker 1: The euro right now is currently ridiculously cheap against the

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Speaker 1: US dollar, and that meant that in dollar terms, your

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Speaker 1: wedding turned out to be a lot cheaper than you

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Speaker 1: had expected. Right right, Yeah, So, as you mentioned, Um,

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Speaker 1: we got engaged two years ago and started planning all

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Speaker 1: of this, and we basically budgeted with a euro rate

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Speaker 1: of about one thirty, because when we got engaged it

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Speaker 1: was in the one thirties and a of course now

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Speaker 1: it's around one ten, one eleven. It's quite a difference.

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Speaker 1: I mean it's it's basically twenty cent difference for every dollar. Tori,

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Speaker 1: do you want to give us a really quick primer

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Speaker 1: on why the euro weekends so spectacularly over the course

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Speaker 1: of the last few years, Um, Katerina, you got engaged

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Speaker 1: two years ago, but the euro has been weakening for

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Speaker 1: about seven years now. Definitely. So for this episode, when

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Speaker 1: we're talking about, you know, the yearro versus the dollar

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Speaker 1: and we say its strengthened or weekend, Um, we're looking

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Speaker 1: at the year and the dollar, So no other currencies

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Speaker 1: for this purpose, just big picture. The main reason that

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Speaker 1: the Euro is so much weaker now is just simply

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Speaker 1: that the European economy has performed worse than the U

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Speaker 1: S economy. I'm gonna unpack that in a second, but

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Speaker 1: that's the broad takeaway. So, you know, in April two

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Speaker 1: thousand eight, at the peak of the euro's strength, it

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Speaker 1: cost one point six dollars to get one euro, and

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Speaker 1: then a lot on came this tiny little hiccup called

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Speaker 1: the global financial crisis, and things have pretty much gone

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Speaker 1: downhill for the Euro ever since. And a lot of

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Speaker 1: that can be traced to the Greek debt crisis and

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Speaker 1: other problems in heavily indebted European nations, you know, Greece, Ireland, Portugal, Cyprus,

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Speaker 1: they all got bailouts and Spanish banks got rescued. There

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Speaker 1: were fears that, you know, the year Zone would break up, um,

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Speaker 1: but then things settled down when the European Central Bank

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Speaker 1: President came out and said, you know, we're going to

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Speaker 1: do whatever it takes to preserve the common currency. And

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Speaker 1: that was in So after that things started improving in Greece. Um.

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Speaker 1: You know, they were spending less than they were collecting

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Speaker 1: and their economy was starting to recover, but people were

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Speaker 1: fed up with austerity. The unemployment rate there has been

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Speaker 1: around twent for years now. It's still around there, and

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Speaker 1: so the public voted for a new government that wanted

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Speaker 1: to reverse that austerity. They decided to fight austerity, and

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Speaker 1: they did not win that fight. Greeks banks closed, It's

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Speaker 1: stock market closed, they fell back into the recession. Um. Eventually,

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Speaker 1: Greece ended up accepting a new bailout on terms that

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Speaker 1: were harsher than the other one. So this whole time,

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Speaker 1: Europe's economy has been pretty mediocre, even though the ECB

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Speaker 1: has been ultra accommodative and done its own version of quantitative,

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Speaker 1: easy to know goose growth um. But economists still see

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Speaker 1: the Eurozone expanding at a one point five percent pace

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Speaker 1: this year, and by contrast, the US has seen growing

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Speaker 1: at a two point five percent pace this year. You know,

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Speaker 1: it's interesting because right now the narrative in the US

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Speaker 1: is when is the going to raise interest rates? And

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Speaker 1: Europe it's all about potential speculation that the ECB might

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Speaker 1: come out with even more stimulus, even more quantitative easing

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Speaker 1: than before. So it's pretty clear that the two banks

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Speaker 1: are going separate ways, and that obviously weighs on the

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Speaker 1: euro even more exactly, so, you know, as disappointing as

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Speaker 1: the US recovery has been, it's been much much stronger

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Speaker 1: than Europes, and that's been reflected in foreign exchange markets

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Speaker 1: through a stronger dollar. The lowest uro ever got against

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Speaker 1: the dollar post financial crisis was when it cost one

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Speaker 1: point oh five dollars for every euro in March of

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Speaker 1: this year. And so keep in mind we're recording this

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Speaker 1: on October seven, so now it's at about one point

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Speaker 1: one too. If the Fed, like you mentioned, decides that

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Speaker 1: the US economy is healthy enough and strong enough to

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Speaker 1: withstand higher interest rates, that exchange rate could actually approach parity,

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Speaker 1: so a one for one ratio if the dollar strengthens

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Speaker 1: even more. But if the Fed holds off um, it

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Speaker 1: may signal to investors that the US just isn't so

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Speaker 1: strong after all, and the dollar could weaken. So lots

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Speaker 1: going on, lots for Katerina to have swirling around her

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Speaker 1: head as she's planning her wedding. Yeah, when did you

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Speaker 1: exactly decide to convert your dollars into euros? How did

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Speaker 1: with all that going on, how did you approach that?

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Speaker 1: Just because I'm sure you had to make decisions at

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Speaker 1: some point and you don't want to lose, but it's

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Speaker 1: very uncertain with what's going to happen? So how did

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Speaker 1: you approach that? Yeah, so basically, we spent the first

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Speaker 1: year that we were engaged trying to figure out where

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Speaker 1: to get married, and then the second year we were

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Speaker 1: really planning it in Portugal. So we decided um that

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Speaker 1: we would kind of start saving our money, and we

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Speaker 1: figured out last year that it would be better to

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Speaker 1: just do a few different small transfers at a time

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Speaker 1: rather than one, you know, waiting and doing one lump sum,

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Speaker 1: because we knew that the exchange rate can be quite

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Speaker 1: fickle and things can move around, so we thought that, Okay,

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Speaker 1: while we aren't exactly FX experts, this was kind of

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Speaker 1: a way for us to maybe take advantage of some

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Speaker 1: price improvements if it did improve. And that is actually

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Speaker 1: what happened. But when we did our first trans for

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Speaker 1: in September of last year, the euro market rate was

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Speaker 1: just under one thirties, so it was still pretty high. Yeah,

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Speaker 1: and you used to be on our f X news

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Speaker 1: team here, right, so you had a little bit of

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Speaker 1: background in this, Yeah, and did that like player roll

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Speaker 1: at all? You're like, all right, just say we got

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Speaker 1: an arbitrage this, Like, well that definitely, I mean, I

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Speaker 1: covered effects for two years and it was the main

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Speaker 1: the biggest currencies, which are the year of the dollar

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Speaker 1: in the end, and those two years we saw um

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Speaker 1: extreme extreme end strength and of course now we're seeing

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Speaker 1: the exact opposite of that extreme en weakness. So I

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Speaker 1: think that was a great lesson. And you just never

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Speaker 1: know what's going to happen. I mean, things can change

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Speaker 1: on a dime, and I think that's really what we've

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Speaker 1: seen with the Euro because when I broke under one,

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Speaker 1: I was shocked when that happened. I mean the whole

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Speaker 1: time I was reporting on the Euro during the heat

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Speaker 1: of the Greek depth crisis, it didn't go under one eighteen,

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Speaker 1: So it was just it was quite a shock. So Karinea,

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Speaker 1: how much would you say that you ended up saving

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Speaker 1: as a result of the weaker Euro? So I ran

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Speaker 1: all the numbers and um so we did six transfers total.

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Speaker 1: We did one in September, November, February, April, July, and

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Speaker 1: then we did one right after the wedding, so the

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Speaker 1: ultra hedge, yeah, the ultra head. So basically we were

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Speaker 1: able to save about twenty euros and that's looking at

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Speaker 1: how much we were able to get UM doing the

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Speaker 1: six different transfers when we did them, compared to if

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Speaker 1: we had transferred all of the money when we got

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Speaker 1: engaged back in September of two thousand thirteen, that's a

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Speaker 1: big chunk of change. Yeah, it's a it's a lot

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Speaker 1: of money. Um, just to give you an idea. Yeah,

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Speaker 1: when we got engaged to the Euros at one twenty

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Speaker 1: and the biggest transfer we did was in February of

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Speaker 1: this year, and we were able on that day we

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Speaker 1: got a market rate of one fourteen. Wow. Um. The

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Speaker 1: best rate we got was in April when we transferred

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Speaker 1: at a rate of one oh seven. Gosh, that's as incredible.

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Speaker 1: So yeah, I mean it's it's a good amount. On

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Speaker 1: top of all these currency savings you and Justin knows

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Speaker 1: have benefited from relatively cheap living costs right now in Portugal, right,

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Speaker 1: this is a pretty cool number. The economist tracks the

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Speaker 1: price of Big Max from McDonald's in all these different

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Speaker 1: countries around the world and they use it as a

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Speaker 1: proxy for how expensive life is in all those different places.

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Speaker 1: So the average Big Mac in the US and July

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Speaker 1: was four dollars and seventy nine cents. This was three

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Speaker 1: dollars and twenty nine cents in Portugal, so a good

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Speaker 1: dollar fifty cent difference UM in Portugal. It actually turned

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Speaker 1: out to be one of the cheapest prices in Europe.

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Speaker 1: So it's probably really smart that you didn't get married

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Speaker 1: in the Alps since a big mac was at a

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Speaker 1: whopping six dollars eighty two cents and clan. When you

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Speaker 1: Justin got engaged and you said, for the first year

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Speaker 1: you try to try to decide where to get married,

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Speaker 1: was this cost an issue of this cheap relatively cheap

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Speaker 1: living costs in Portugal? Did you think about that? Yeah, definitely. Yeah,

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Speaker 1: we were looking at the US, um obviously where we

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Speaker 1: live right now and where Justin is from, and Portugal,

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Speaker 1: where all of my family is, and the two factors

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Speaker 1: were kind of okay, where you know, are people willing

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Speaker 1: to travel to Portugal r p R is my family

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Speaker 1: willing to travel to the US? So I mean, first

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Speaker 1: of all, it was the people and what would be

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Speaker 1: best for everyone. And then the second factor, yeah, definitely,

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Speaker 1: um was money because it I think we we ended

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Speaker 1: up spending less money than we would have in the US.

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Speaker 1: Or another way to look at it is in the US,

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Speaker 1: we would not have had as nice of a wedding

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Speaker 1: as we were able to have in Portugal. So let's

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Speaker 1: for your break exactly. We're all talking about how Katerina

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Speaker 1: been benefited from a cheaper Euro, but you guys also

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Speaker 1: sort of helped out Portugal, you know, if you think

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Speaker 1: about it like this, So currency weekends and all of

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Speaker 1: a sudden, people can finally take that euro trip that

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Speaker 1: they've been wanting to take because it seems like an

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Speaker 1: opportune time to do it. So currency weekends and foreigners

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Speaker 1: come in and drop a ton of money, and that

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Speaker 1: helps the economy, that helps the people living there. To Katarina,

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Speaker 1: how many guests traveled to Portugal for your wedding, We

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Speaker 1: had about sixty people come out from the US, well

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Speaker 1: from the U S and UM a few other places.

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Speaker 1: U one of my good friends and her husband came

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Speaker 1: from Australia. We had some friends um from other places

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Speaker 1: in Europe. So these are sixty five people who probably

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Speaker 1: wouldn't have gone to Portugal otherwise and spent money on lodging,

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Speaker 1: on food on the you know, ver day, you you

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Speaker 1: really did your part to save uh Europe. To single handedly,

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Speaker 1: anything I can do to help guys, Kenny, how is

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Speaker 1: Portugal's economy doing right now? It's it has returned to growth. Um,

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Speaker 1: it did suffer a pretty bad recession when the rest

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Speaker 1: of Europe UM was in crisis as well. There's kind

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Speaker 1: of this saying that Portugal had the bust without the boom,

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Speaker 1: because you really didn't have um years of huge economic

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Speaker 1: growth before this crisis in Portugal. But it had a

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Speaker 1: bailout in two thousand eleven, and it exited the bailout

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Speaker 1: last year. They raised taxes, they cut a good amount

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Speaker 1: of spending. So UM, Portugal's doing okay. I mean, it's

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Speaker 1: it's slowly getting back on its feet. They just had

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Speaker 1: elections UM and they reelected the prime minister who had

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Speaker 1: implemented a lot of these austerity measures. So I think

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Speaker 1: that's being seen as kind of a good sign for

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Speaker 1: Europe that voters are um choosing to reelect some of

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Speaker 1: these leaders that are implementing pretty tough policies. I mean,

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Speaker 1: taxes have really gone up across the board. Um, They're

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Speaker 1: they're working through some pension reforms right now. So it's

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Speaker 1: just there's a lot of kind of tumult and chaos

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Speaker 1: a little bit going on. So it's a lot for

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Speaker 1: people to deal with, but yeah, it's it's they're set

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Speaker 1: to grow. Economists are forecasting one point six percent growth

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Speaker 1: this year, so you know it's slowly but yeah, I mean,

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Speaker 1: I'm planning a trip to Paris next year, running the

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Speaker 1: Paris Marathon, and so I've also got my eyes on

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Speaker 1: exchange rates, so fingers crossed. Book those hotels now, lock

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Speaker 1: those rates in. And Katerina, your honeymoon was in Italy, right, yeah,

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Speaker 1: that's right, yeah enough, Yeah, and Italy is also obviously

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Speaker 1: a struggling economy right now, probably potentially doing um, struggling

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Speaker 1: even more than Portugal is at the moment. So even

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Speaker 1: for your honeymoon, you were able to walk in those

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Speaker 1: uh you know the benefits of a cheap euro too. Yeah, yeah,

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Speaker 1: we actually, um, we paid most of the hotels where

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Speaker 1: we stayed, we pre paid for them, and we did

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Speaker 1: a lot of that in February when the euro was

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Speaker 1: really low, so we kind of looked out with that

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Speaker 1: because you know, those those are pretty expensive things, you know,

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Speaker 1: when you're staying in a hotel for multiple nights. So um,

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Speaker 1: that was definitely nice. Well, Katerina, thanks so much for

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Speaker 1: joining us today. Thank you for having me, Thanks to

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Speaker 1: all of you for listening to Bloomberg Benchmark. We will

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Speaker 1: be back next week and you can find us on

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Speaker 1: Bloomberg dot com as well as on iTunes and pocket casts.

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Speaker 1: And while you're there, please take a moment to rate, review,

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Speaker 1: subscribe to the show. Um all those things help other

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Speaker 1: listeners discover us, and feel free to tweet at Katerina

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Speaker 1: at at Katerina Arriva if you'd like some free wedding

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Speaker 1: advice and tell us what you've got at the show too.

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Speaker 1: You can reach us and follow us on Twitter at

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Speaker 1: at Tori Stillwell and at Aki e O seven. See

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Speaker 1: you next week in bonus points, and you can spill

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