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

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Speaker 1: Daily we bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg So

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Speaker 1: let us begin. It is about the next financial crisis

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Speaker 1: that will not happen. Uh. As we began to put

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Speaker 1: this panel together, uh, it just got better and better

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Speaker 1: and weren't wonderful. Uh. And I'm not going to go

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Speaker 1: through all their bios because that will take precious time.

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Speaker 1: And Richards is with us. She has a wonderful concision

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Speaker 1: in her analysis of finance and investment. I call her

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Speaker 1: the mathematician. We enjoy so much having her with us

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Speaker 1: on Bloomberg Surveillance. And I just I was just thrilled

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Speaker 1: and Ann could find the time to be with us today.

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Speaker 1: Jess Staley runs a bank. Uh. He said, the most

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Speaker 1: intelligent thing I've heard up the valley so far, which

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Speaker 1: just it feels like two thousand six. We get to

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Speaker 1: that in a moment. Uh. We have another banker, whether

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Speaker 1: it's Mr Corbett. Now I've got it out of the way.

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Speaker 1: All I wanted to know from Mr Corbett, who's a

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Speaker 1: real football But there's guys I played football. He was

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Speaker 1: like the real deal. So all we talked about was

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Speaker 1: Patriots Eagles, which I think has lost to translation at Davos,

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Speaker 1: but we got that out of the way. We are

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Speaker 1: honored to have find seeing High with us from China.

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Speaker 1: Thank you so much for attending today with your work

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Speaker 1: in Shanghai over the years, and now of course in Beijing. Uh,

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Speaker 1: David rubensteins with us and Ken Rogoff who were with

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Speaker 1: me last year, and thank you so much for again

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Speaker 1: being with us. With different views. I always would start

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Speaker 1: with Enriched, but because of his acclaim on financial crisis,

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Speaker 1: may start with Dr Roga. First. Uh, your your book

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Speaker 1: which was my book of the year last year, The

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Speaker 1: Curse of Cash. I hear a new edition The Curse

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Speaker 1: of Bitcoin. Well that well that move sales. Who it's

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Speaker 1: the last quarter of the book. Actually, yeah it was.

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Speaker 1: And this is an important note because it was my

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Speaker 1: most courageous book ever and that can receives serious uh

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Speaker 1: criticism and threat from his book. It's not just about

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Speaker 1: the beginning of the book. It's about negative interest rates

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Speaker 1: and it's about all the upward Mabel wells as if

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Speaker 1: we have another financial crisis, there really isn't a plan,

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Speaker 1: a even of what central banks would do. So I

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Speaker 1: think it's something we need to talk about. Let's talk

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Speaker 1: right now about the acclaim of your work with Karmen Ryner.

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Speaker 1: This time is different? Do you feel that now that

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Speaker 1: this time is different? I mean I don't. I feel

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Speaker 1: we're still coming out of the last financial crisis at

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Speaker 1: deep is Slamic. Financial crisis like we experience has a

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Speaker 1: long afterlife, and taking eight to ten years to fully

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Speaker 1: recover is not unusual. And I must say a lot

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Speaker 1: of the talk about secular stagnation things will never be

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Speaker 1: good again conflates genuine issues like demographics, productivity with UH

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Speaker 1: the financial crisis, And so I'm actually I'm not going

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Speaker 1: to tell you there's not going to be another financial crisis.

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Speaker 1: Sales of my book would collapse. But I'm kind of

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Speaker 1: optimistic going forward about you know, where the world economy

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Speaker 1: is at the moment. We can talk about could there

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Speaker 1: be a financial crisis, of course, could there be a recession, absolutely,

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Speaker 1: But I actually think we're at the tail end of

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Speaker 1: the last one. UH. In a typical pretty typic culture jectory.

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Speaker 1: What was the number one lesson we learned coming out

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Speaker 1: of this crisis? Oh boy, I'd leave it to I'm

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Speaker 1: gonna ask them to I only got like three questions today.

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Speaker 1: But but from where you sit, I mean, in the

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Speaker 1: middle of your book, you go into this whole thing

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Speaker 1: on Spanish Spinisher amount of the collapse, saying and it

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Speaker 1: was longer than ten years. Yeah, I mean, certainly the

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Speaker 1: theme this time, as different as people convinced themselves, is

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Speaker 1: different that everything is going to go to the moon

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Speaker 1: forever and it never does, And particularly when you see

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Speaker 1: debt rising at an aggressive pace, you should look out

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Speaker 1: for that. And in the current environment, interest rates are

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Speaker 1: really low, and so you can say debt levels are

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Speaker 1: high around the world, but not compared to the interest

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Speaker 1: rates that we have. So I'd actually throw out that

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Speaker 1: the biggest risk to the global economies that we're probably

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Speaker 1: in an inflection point where the you know, tightening of

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Speaker 1: labor market, statement of demand could get inflation, could get investment,

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Speaker 1: which we haven't had, and then if something pushed up

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Speaker 1: real interest rates. It's not my baseline case, sure, everyone,

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Speaker 1: but we don't really know why they went down so much.

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Speaker 1: They're phenomenals. And if they went up the places that

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Speaker 1: weren't enjoying as much growth and had a lot of

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Speaker 1: debt Italy, Japan, for example, some emerging markets, they could

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Speaker 1: have a lot of problems. I certainly see China as

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Speaker 1: a place where they're at an earlier stage of this.

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Speaker 1: They didn't have the financial crisis. They did a great job,

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Speaker 1: but they do have a lot of the characteristics of

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Speaker 1: a typical financial crisis. Building up some of the themes

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Speaker 1: to speak to our panels about. And I thought you

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Speaker 1: had a very important perspective in the in the in

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Speaker 1: the room about our collective memories, in the number of

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Speaker 1: people in the financial business that really have not enjoyed

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Speaker 1: how you get into a crisis. What would you say

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Speaker 1: to the young crew who haven't enjoyed two thousand seven

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Speaker 1: or some of the moments of two thousand eight and nine. Well,

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Speaker 1: I think I think what kind of said is absolutely right,

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Speaker 1: and it's not even a plan A. So we have

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Speaker 1: we have far fewer tools to deal with any event

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Speaker 1: that happens. And by the way, it will happen somewhere

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Speaker 1: where none of us are looking. It never happens where

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Speaker 1: you're looking at always happens somewhere else. And I think

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Speaker 1: if you look at what's changed, what's shifted over the

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Speaker 1: last ten years, we really have had ten years without

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Speaker 1: any form of credit cycle. So we've now got a

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Speaker 1: whole bunch of people who have never gone through a

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Speaker 1: default cycle. And financial crisis are pretty simple. They always

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Speaker 1: start with somebody borrowing, short lending, long been leverage in there,

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Speaker 1: and a default, so you know, absolutely, so you know,

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Speaker 1: we know that the elements will be there, we just

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Speaker 1: don't know what the triggers are. And when you look

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Speaker 1: at some of the new structures that haven't been through

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Speaker 1: that tried and tested pro process around, for example, structured

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Speaker 1: leverage dtfs or peer to peer lending, new things which

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Speaker 1: are good developments in many senses, but they have not

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Speaker 1: been through the rigor in the way a bank two

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Speaker 1: or three d year old bank has it's kind of

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Speaker 1: figured out how it manages a credit cycle through that period.

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Speaker 1: We've got a lot of things that are now big

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Speaker 1: operators in the market that we don't really know how

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Speaker 1: we'll respond to the next one. So you know, I

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Speaker 1: think you've got to look for where the kernels are

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Speaker 1: for what will happen when eventually we go over the

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Speaker 1: top and we start to go down the other side.

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Speaker 1: It's in those sorts of things that would be the

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Speaker 1: unexpected places that have not been through this stuff before.

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Speaker 1: Did you figure out who do you go to the next?

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Speaker 1: Among two major banks? And Mr Corbett and Mr Staley,

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Speaker 1: I'm just gonna be polite and go b is before

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Speaker 1: see is that just Daley? So many of the things

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Speaker 1: as well. I'll go with the bank names today. When

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Speaker 1: you look at the resurrection of Barclays that you're trying

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Speaker 1: to manage right now, and if you look at how

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Speaker 1: you're trying to steal the bank for the future, You've

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Speaker 1: mentioned to me that you do see the asset size

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Speaker 1: James McIntosh and the Journal today has a fabulous start

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Speaker 1: chart on the non correlation of stocks and bonds as well.

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Speaker 1: How do you look at the markets and tie that

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Speaker 1: into where we are now? Is we get ready for

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Speaker 1: whatever the crisis is down the road? But I do

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Speaker 1: feel it's a little bit like two thousand and six

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Speaker 1: when we're all talking about whether we've solved the riddle

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Speaker 1: of economic crisises. It take some comfort in Kin saying

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Speaker 1: he doesn't see it emminally on the edge. But you know,

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Speaker 1: given given asset valuations, given that we've got four percent

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Speaker 1: global economic growth, Uh, it seems like we're in a

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Speaker 1: pretty good place right now economically. But we've got a

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Speaker 1: monetary policy which is still seems like it's in the

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Speaker 1: remnants of a depression era, and I think we have

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Speaker 1: all very little capacity and the capital markets to do

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Speaker 1: with the real move in in interest rates. What I

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Speaker 1: would also say is, I do think that the banks

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Speaker 1: are in such a different position than they were in

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Speaker 1: two thousand and six, two thousand and seven. If there

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Speaker 1: is going to be another financial crisis, my bet is,

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Speaker 1: you know, most crisises are are where where we run

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Speaker 1: into something that was totally obvious, but we all missed it.

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Speaker 1: So two thousand and eight was strip as securities or

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Speaker 1: cash need no capital that I think that got wrong.

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Speaker 1: Thousand nine was a Eurozone bar whereas the units are

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Speaker 1: in credit. We sort of got that one wrong. Uh,

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Speaker 1: there's something out there in the capital markets. Um, given

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Speaker 1: where you know, equity markets are at a whole time

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Speaker 1: high and and volatilities that at all time low, that's

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Speaker 1: not a sustainable proposition. I don't think it's going to

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Speaker 1: come from the banks uh. And I guess the final

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Speaker 1: thing for me is, uh, we just got done with

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Speaker 1: our stress test with the Bank of England, and you know, uh,

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Speaker 1: Mike goes to the same process with process with the FED.

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Speaker 1: When I look at the stress test, um and and

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Speaker 1: what we clearly focused on is how does Barkley's do

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Speaker 1: coming out of that? The really issue take the stress

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Speaker 1: that our regulators are putting these banks through and apply

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Speaker 1: that stress to the rest of the economy. And uh.

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Speaker 1: And I think given where debt levels are, given our

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Speaker 1: exposure to low interest rates, if we do have another

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Speaker 1: economic cycle, which I would argue we will, I think

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Speaker 1: the capital markets will be tested. Michael Spencer wrote an

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Speaker 1: essay seven years ago, I think on type one and

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Speaker 1: type two regulation and almost you can't see what you're

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Speaker 1: supposed to see, but you can see things that you

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Speaker 1: could that are a distraction. It was not that it

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Speaker 1: was confusing, but Jess goes right to it. We have

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Speaker 1: stress tests. Do you believe in stress tests? Distress tests

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Speaker 1: keep you from a financial crisis? Really a gimmick. I

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Speaker 1: think we've done a lot actually with the conventional banking system,

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Speaker 1: but that pushes a lot of the problems into the

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Speaker 1: shadow banking system, and you know that that that could

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Speaker 1: be where we see the next problem come from stress us.

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Speaker 1: We're a good idea, but that they're not perfect. And

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Speaker 1: you know that, Michael Corbett. When you look at banks,

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Speaker 1: there are a different kind of bank than they were

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Speaker 1: at the beginning of the last UH financial crisis. You

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Speaker 1: speak of resiliency, but you mentioned to me a word

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Speaker 1: which I'm hearing. It's almost maybe my phrase for Davos

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Speaker 1: this year. Maybe it's Davos scales up. We need scale.

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Speaker 1: Michael Nathanson in media with Moffatt Nathanson the other day

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Speaker 1: told me we are going to have scale and media

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Speaker 1: like we have with Fox and Disney, and we can

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Speaker 1: maybe address that later on. David Rubinstein tell us about

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Speaker 1: scale in banking to try to avoid the agony of

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Speaker 1: the next financial crisis. If you think about where are

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Speaker 1: some of the lessons that came out of the last crisis,

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Speaker 1: And one of the challenges was that we had a

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Speaker 1: global banking business model where everyone or most big banks

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Speaker 1: were seeking or trying to execute against similar plans be

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Speaker 1: everything to everybody, the financial supermarket. You remember, oh six

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Speaker 1: oh seven, that was the talk that was the rage

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Speaker 1: I think what's different today is coming out of the crisis,

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Speaker 1: what you've seen banks do in many ways is go

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Speaker 1: back to their basics, or go back to the areas

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Speaker 1: that they believe they've got a competitive advantage, and that

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Speaker 1: competitive advantage is oftentimes steeped in scale. And we think

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Speaker 1: of scale and whether scales in your markets business, or

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Speaker 1: your banking business, or your lending business. In today's age

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Speaker 1: of slower growth and more regulation, if you don't have scale,

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Speaker 1: the odds are you can't buy it. Right. You're not

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Speaker 1: seeing big banks get bigger through quisition. You've got to

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Speaker 1: build it, and in slower growth, that's tougher to do.

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Speaker 1: And so what we've seen is the industry in many

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Speaker 1: ways pull back to areas of strength, areas of scale,

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Speaker 1: and you've ended up with very different business models, which

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Speaker 1: in itself is far more resilient. So we can use

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Speaker 1: different examples of firms out there in terms of how

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Speaker 1: they change. But when we look at City as an example,

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Speaker 1: I can tell you the things that we're not today.

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Speaker 1: We're not an insurance company, we're not an asset manager,

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Speaker 1: we're not a hedge fund, were not any of those things.

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Speaker 1: Were simply a bank and a bank that operates globally,

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Speaker 1: and that's the scale that we've pulled back to. And

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Speaker 1: as you can go around and look at Justice Bank

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Speaker 1: and look at other banks, and you can see the

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Speaker 1: divergence of business models. And I think that's that's quite

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Speaker 1: powerful in terms of what it means for resiliency for

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Speaker 1: the system. Do you day to day having better knowledge

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Speaker 1: of your global bank? How do you keep track within

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Speaker 1: the scale? How do you coordinate your global bank if

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Speaker 1: you're bigger and bigger scale? I mean the aniless conference

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Speaker 1: calls doesn't do it, endless travel doesn't do it. How

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Speaker 1: are the communications going to exist within a given institution

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Speaker 1: if we all decide to scale up. If you think

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Speaker 1: in many ways of what's going on in the world,

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Speaker 1: and in particular on the institutional side, and a business

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Speaker 1: and others are great examples of it, is they're scaling

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Speaker 1: as well. So it's not that we're necessarily covering more clients.

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Speaker 1: We're not. We're actually covering less. It's not that we're

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Speaker 1: entering more countries or doing more things. We're just doing

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Speaker 1: more with what we have and using the benefits of

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Speaker 1: scale against that. So we're not adding complexity. In fact,

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Speaker 1: we've taken complexity out of the out of the bank

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Speaker 1: and out of the system. I want to turn a

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Speaker 1: little bit of politics here, and I think this is

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Speaker 1: so important thing. You and I were talking and you

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Speaker 1: brilliantly said that you would like to respond to what

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Speaker 1: is clearly part of the Western zeitgeist in this January

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Speaker 1: of two eighteen. And it's not that it's about China

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Speaker 1: or it's China's fault, but that China is a number

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Speaker 1: one risk we enjoyed with Bloomberg Surveillance working with Ian Bremer,

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Speaker 1: and you raise your group early in the year and

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Speaker 1: they did place China is the number one risk of

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Speaker 1: the number that they had uh through their annual review.

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Speaker 1: You take a real issue in that, why is China

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Speaker 1: not a risk? Um? Well, before I answered your question,

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Speaker 1: let me say, since I'm the only regulator here, I

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Speaker 1: think as regulator you have to always stay alert on

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Speaker 1: any financial risk that's coming up. And although the economy

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Speaker 1: is doing quite well globally, but we cannot be complacent.

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Speaker 1: And in terms of financial risk, I think every christ

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Speaker 1: it is almost seemed to be associated with some kind

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Speaker 1: of asset bubble, right, it could be that could be

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Speaker 1: accurate it could be something else. And so this is

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Speaker 1: the sign that we should look around. Are there any

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Speaker 1: asset bubbles in any major economies? And if you find some,

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Speaker 1: you know, the emerging asset bubble, then as a regulator,

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Speaker 1: we've got to do something about it. So this is

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Speaker 1: my opening statement. But to answer your question, um, since

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Speaker 1: the Chinese economy is so large, right, so if something

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Speaker 1: bad happens to the Chinese economy, the rest of the

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Speaker 1: world will be affected. So it's you know, the concern

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Speaker 1: about China in that sense, it's justified. We realize that

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Speaker 1: we have some problems quite some years ago, and the

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Speaker 1: problem is mainly with a lot of that and we

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Speaker 1: have too much that in our system macro what we

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Speaker 1: use you know, this macro UH in that in this

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Speaker 1: ratio whatever uses a non financial sector that divided by

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Speaker 1: GDP has been a rising all the time. It's now

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Speaker 1: So we realized that, you know, some time ago, and

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Speaker 1: we began to take actions two years ago. And the

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Speaker 1: good news at this point is that that ratio for

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Speaker 1: the first time platoid in the last quarter of last

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Speaker 1: year UH, it did not rise. UH. And furthermore, M

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Speaker 1: two divided by GDP is also not rising and M

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Speaker 1: to The growth rate of M two in China last

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Speaker 1: year was only eight two, which is almost two percentage

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Speaker 1: lower than nominal GDP growth rate. So you can see

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Speaker 1: the effect of taking these UH tightening actions. UH Now,

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Speaker 1: since the macro that level is so high, So people

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Speaker 1: will still be worried about the consequences of something happens

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Speaker 1: to the to the financial system. And I can tell

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Speaker 1: you know, in the Chinese system, if something bad happens

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Speaker 1: to UH certain small financial institutions, right, what we will do,

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Speaker 1: and this is the lesson we learned from the US

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Speaker 1: financial crisis. What we will do is that we will

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Speaker 1: move very swiftly to contain that risk, to make sure

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Speaker 1: that whatever panics caused by this you know, small institution

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Speaker 1: does not spread into the entire system quickly. And if

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Speaker 1: you can contain that risk and make sure the planic

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Speaker 1: does not spread, then the entire financial system will be okay.

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Speaker 1: And the way that we move swiftly in China is that,

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Speaker 1: you know, I'm almost sure that if something like that happens,

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Speaker 1: the Central Bank in China will coming immediately. Some of

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Speaker 1: the larger healthy financial institutions will be brought in to

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Speaker 1: take care of that small institution immediately so that the

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Speaker 1: inter bank lending does not phreeze, right and the system

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Speaker 1: can still function right now. This is something that the

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Speaker 1: Chinese government always does value well, right because you know,

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Speaker 1: our system can function really quickly. But of course, if

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Speaker 1: you know the larger problem is so big, then even

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Speaker 1: if you can move swiftly, you will not be able

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Speaker 1: to deal with the impast system. You know, the bigger

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Speaker 1: system in the rest is bigger risk in the system.

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Speaker 1: So that is why moving earlier to contain the scale

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Speaker 1: of the of the empire system, the risk of the

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Speaker 1: empire system is so important. And as I said, you

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Speaker 1: know we've made some progress in that as well. One

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Speaker 1: thing I noticed her and I left David Rubinstein for

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Speaker 1: left last, because I think he can provide us with

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Speaker 1: a terrific perspective of not only finance and economics and investment,

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Speaker 1: but bring it over to our geopolitics as well. I

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Speaker 1: was thunderstruck by Richard Edelman's Trust Barometer released yesterday. Every

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Speaker 1: year it's different. I think it's an incredibly important document

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Speaker 1: and the fracture is the word of the moment here.

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Speaker 1: We're fractured. Craig Gibbs article today in the Journal. We're

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Speaker 1: fractured within our nations, and it really shows, as you

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Speaker 1: mentioned to me earlier, the geo political mix that we're

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Speaker 1: in as we speak to bankers and managers of money,

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Speaker 1: and of course in a steamed academic that speaks to me,

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Speaker 1: David Rubinstein, of exogenous shocks out there that get us

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Speaker 1: to the next crisis. Well, um, the most exogenous shock

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Speaker 1: I'm worried about the moment is these lights. They're very hot.

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Speaker 1: So we do the surveillance, Dad, I hope they're getting

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Speaker 1: you know, vitamin D into me at least something. I'll

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Speaker 1: get something out of this. Stop. But if anybody thinks

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Speaker 1: that's what it is, these lights are very very hot. Okay,

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Speaker 1: So global warming is coming here? Um, he's say, such

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Speaker 1: a TV story. Just get right to thank you so

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Speaker 1: much for your program. Thank you very much for the plug.

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Speaker 1: So right now, the biggest concern I have is that

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Speaker 1: most people think there's no problem of a likely recession

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Speaker 1: this year and maybe even early next year. Generally, when

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Speaker 1: people are very happy and confident, something wrong happens, um,

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Speaker 1: as you know from your own research. So I am

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Speaker 1: nervous that the conventional wisdom is that we have no

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Speaker 1: recession problems around the world. Everybody's doing quite well. As

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Speaker 1: John Kenneth Galbraith, the former Harvard faculty member, famously said,

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Speaker 1: the conventional wisdom is usually wrong, and it might be

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Speaker 1: in this case. So what would produce a recession this year?

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Speaker 1: I'm not saying what happened, but what is the thing

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Speaker 1: that I most worry about? Well, I do worry that

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Speaker 1: government's uh, maybe having a little bit too much debt,

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Speaker 1: and maybe they have too much entitlement programs that they're

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Speaker 1: not holdingly going to be able to honor. And at

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Speaker 1: some point people will wake up and say, the US

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Speaker 1: government has twenty trillion dollars of debt and funded liabilities

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Speaker 1: that are hard to fathom about. They're being actually paid

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Speaker 1: but leaving it out of side, and people don't worry

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Speaker 1: about their while I worry about geopolitical things that we

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Speaker 1: can't anticipate, the so called Black Swans so um an

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Speaker 1: unanticipated nine eleven type events. Somewhere in the Western world.

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Speaker 1: A dirty bomb goes off somewhere, Russia decides have invade someplace.

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Speaker 1: The Middle East gets hot again in certain parts that

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Speaker 1: are not yet hot. Maybe there's some more hot disputes

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Speaker 1: between Saudi Arabia and Iran. We don't know, maybe something

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Speaker 1: between China and Japan. So you never know what's going

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Speaker 1: to happen, or it could be a pandemic. So I

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Speaker 1: think when everybody's complacing, that's usually when you have to

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Speaker 1: be nervous. Now that your earlier question, what was the

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Speaker 1: lesson of the last recession by your own debt back

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Speaker 1: at a discount? Um, Those people that bought their own

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Speaker 1: debt back and the discount made great fortunes. And if

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Speaker 1: you can't buy your own debt back and the discount,

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Speaker 1: hold on, hold on, hold on, don't give back the

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Speaker 1: keys to the banks, because eventually the economy will come back,

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Speaker 1: and if you hold on, you'll make a lot of money.

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Speaker 1: And the people that made the most money out of

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Speaker 1: the last recession in private equit least. But people that

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Speaker 1: bought their own debt back or managed to keep the

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Speaker 1: banks away and hold held onto the assets until the

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Speaker 1: economy came back. That's what happened. Great fortunes were made

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Speaker 1: and great reputations were made by holding onto assets or

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Speaker 1: buying your own debt back at a discount. So when

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Speaker 1: the economy starts going this way, you know, don't run

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Speaker 1: for the fences, be there, and you know, hang around

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Speaker 1: the hoop because you're gonna buy some things a great

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Speaker 1: discounts within this. And again we welcome all of you

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Speaker 1: were streaming with the World Economic Forum website and the

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Speaker 1: top link as well. And again I thank Bloomberg for

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Speaker 1: their commitment to this event on Bloomberg Radio and television worldwide.

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Speaker 1: So we've gone around UH once and I can go

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Speaker 1: eight or any different ways. Jess, I want you to

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Speaker 1: lead it off here with a more open discussion about

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Speaker 1: things on your mind. I want to keep this open

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Speaker 1: as we look at the crisis that Ken Rogo wrote about, Jess,

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Speaker 1: expand further. Please look. And I think as we've also

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Speaker 1: of talked about um UM, it all seemed so erosy

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Speaker 1: at four percent global economic growth and UM, I think

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Speaker 1: we saw the economic calamity when we missed the last

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Speaker 1: financial crisis and the and the damage that was done globally.

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Speaker 1: And I do think one thing that is different this

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Speaker 1: time that we need to utilize UM is I think

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Speaker 1: the the connectivity and the collaboration between regulators and academics

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Speaker 1: and and and private ectory firms and investment firms. And

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Speaker 1: banks is at a whole another level than than it

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Speaker 1: was pre crisis. Uh. You go back to two thousand

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Speaker 1: and five, thousand and six, a bank would meet with

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Speaker 1: the Fed maybe once every quarter. UH. Today we have

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Speaker 1: you know, the Bank of England in the p r

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Speaker 1: A and the f c A. They're in the bank

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Speaker 1: every day. Do the British do this better? Do they

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Speaker 1: they have a more focus? I'm gonna call it simple.

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Speaker 1: I think I think in both sides of the Atlantic,

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Speaker 1: the degree of integration or or or work between the

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Speaker 1: regulators and the banking community not only to fix what

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Speaker 1: happened last time, but now I think as most of

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Speaker 1: the corrections through bank regulation have occurred, it really is

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Speaker 1: we need to work collaborately with our regulators to avoid

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Speaker 1: the next crisis. You know, on one level, pre two

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Speaker 1: thousand and UH and and and and two thousand and nine,

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00:24:11,880 --> 00:24:14,960
Speaker 1: the regulators were there just to bear witness and if

431
00:24:15,000 --> 00:24:17,840
Speaker 1: something went wrong they would use their abilities to bring

432
00:24:17,880 --> 00:24:20,120
Speaker 1: the big bank in or to do something in order

433
00:24:20,160 --> 00:24:25,160
Speaker 1: to try to uh course correct the economy UH real time. Today,

434
00:24:25,640 --> 00:24:28,880
Speaker 1: the the political body have told the regulators, I want

435
00:24:28,920 --> 00:24:31,240
Speaker 1: you to regulate the systems through stress tests or whatnot,

436
00:24:31,400 --> 00:24:34,280
Speaker 1: so you avoid the next financial crisis. You know, my

437
00:24:34,560 --> 00:24:37,600
Speaker 1: some almost fourty years career in finance, we've never avoided

438
00:24:37,600 --> 00:24:40,320
Speaker 1: the next financial crisis. And so and so what I

439
00:24:40,359 --> 00:24:45,560
Speaker 1: think is incumbent upon banks and acidatial firms and academics

440
00:24:46,000 --> 00:24:48,600
Speaker 1: is to work collaboratly with regulators in tour to try

441
00:24:48,680 --> 00:24:52,119
Speaker 1: to avoid the next financial crisis. Because rightly so, the

442
00:24:52,160 --> 00:24:55,560
Speaker 1: political costs that the banks have endured because of what

443
00:24:55,640 --> 00:24:58,640
Speaker 1: happened uh ten ten years ago, it's been very high.

444
00:24:59,119 --> 00:25:01,720
Speaker 1: And uh so I do think we all need to

445
00:25:01,720 --> 00:25:04,320
Speaker 1: sit down in forums like this and even though it's

446
00:25:04,359 --> 00:25:07,199
Speaker 1: all rosy and whatnot, and say, what what you know,

447
00:25:07,240 --> 00:25:09,320
Speaker 1: what could we be missing? What could be happening in

448
00:25:09,400 --> 00:25:12,760
Speaker 1: the non banking financial market, whether it's levels of debt,

449
00:25:12,840 --> 00:25:15,280
Speaker 1: whether it's uh you know how you know how much

450
00:25:15,280 --> 00:25:19,760
Speaker 1: short interest is there in uh in volatility? How much

451
00:25:19,800 --> 00:25:22,639
Speaker 1: are we building structure notes around the world that are

452
00:25:22,680 --> 00:25:26,159
Speaker 1: basically trying to enhance yield by selling volatility, which at

453
00:25:26,200 --> 00:25:28,040
Speaker 1: this level is a very smart thing to do. If

454
00:25:28,160 --> 00:25:31,000
Speaker 1: this thing turns hold on your are you worried about that?

455
00:25:31,080 --> 00:25:34,800
Speaker 1: Are you not worried about the present? Absolutely, You're not

456
00:25:34,840 --> 00:25:37,480
Speaker 1: worried about this right a bank. I mean when if

457
00:25:37,480 --> 00:25:39,600
Speaker 1: you look at if you if you look at the

458
00:25:39,680 --> 00:25:42,840
Speaker 1: damp and volatility that's out there and everybody's planning to play,

459
00:25:43,040 --> 00:25:47,000
Speaker 1: is it is very easy looking. You have to pay

460
00:25:47,040 --> 00:25:49,359
Speaker 1: attention to it again, you know, you think of where

461
00:25:49,359 --> 00:25:51,960
Speaker 1: we are today. We went through a government shutdown over

462
00:25:52,000 --> 00:25:56,760
Speaker 1: the weekend and the market shup, you know, So you

463
00:25:57,040 --> 00:25:59,480
Speaker 1: go through these events, you've got to ask the question

464
00:25:59,520 --> 00:26:02,879
Speaker 1: and the challenges I think from the asset management or

465
00:26:03,000 --> 00:26:07,399
Speaker 1: from the the investing side is along the way, you

466
00:26:07,480 --> 00:26:11,000
Speaker 1: sold Brexit, you brought it back high. If you sold

467
00:26:11,080 --> 00:26:14,400
Speaker 1: President Trump's election, you bought it back higher. And so

468
00:26:14,520 --> 00:26:17,119
Speaker 1: I think people stopped selling. And so there's a numbness

469
00:26:17,200 --> 00:26:22,200
Speaker 1: out there. There's a uh an ambivalence out there. That's

470
00:26:22,240 --> 00:26:25,359
Speaker 1: concerning because when the next turn comes, and it will come,

471
00:26:26,119 --> 00:26:28,640
Speaker 1: it's likely to be more violent than it would otherwise

472
00:26:28,680 --> 00:26:30,680
Speaker 1: be if we let some pressure off along the way.

473
00:26:30,720 --> 00:26:33,520
Speaker 1: If you as you mentioned the new bank, if you

474
00:26:33,680 --> 00:26:36,480
Speaker 1: will with the media, with all we do about FICK

475
00:26:36,560 --> 00:26:39,560
Speaker 1: and worrying about trading and jobs, did you see a

476
00:26:39,720 --> 00:26:43,840
Speaker 1: new trading process in banks as we go to the

477
00:26:43,840 --> 00:26:48,439
Speaker 1: next financial crisis? Is FICK is uh fixed? Income, currency

478
00:26:48,440 --> 00:26:51,160
Speaker 1: commands is going to be something different for the bank

479
00:26:51,240 --> 00:26:53,840
Speaker 1: than is now or certainly different than what it was

480
00:26:53,880 --> 00:26:56,240
Speaker 1: in two thousands. But one of the things time we've

481
00:26:56,240 --> 00:26:59,840
Speaker 1: stopped talking about because the central banks have largely taken

482
00:27:00,119 --> 00:27:04,120
Speaker 1: the role of being the significant liquidity provider. But bank

483
00:27:04,160 --> 00:27:08,600
Speaker 1: balance sheets today around the globe are much smaller in

484
00:27:08,720 --> 00:27:13,240
Speaker 1: terms of their dedicated capital UH and risk taking tolerance

485
00:27:13,280 --> 00:27:18,119
Speaker 1: to pre crisis. So when the Great Science Fair project

486
00:27:18,240 --> 00:27:22,639
Speaker 1: ends around Queue and we're talking potentially maybe can I

487
00:27:22,680 --> 00:27:25,040
Speaker 1: steal that I've never used that. I love that the

488
00:27:25,080 --> 00:27:27,800
Speaker 1: Science Fair and we see and we see maybe the

489
00:27:27,800 --> 00:27:32,040
Speaker 1: Bank of England start to pull liquidity to titan maybe

490
00:27:32,040 --> 00:27:34,719
Speaker 1: sometime early next year we see the Bank of Japan

491
00:27:34,800 --> 00:27:37,760
Speaker 1: and things start to change. What's liquidity gonna look and

492
00:27:37,760 --> 00:27:41,119
Speaker 1: feel like? We don't know because it hasn't really been tested?

493
00:27:41,160 --> 00:27:44,280
Speaker 1: Postcript your of course this spring at Harvard is Science

494
00:27:44,320 --> 00:27:46,680
Speaker 1: Fair four oh one something like that. How's all this

495
00:27:46,760 --> 00:27:51,000
Speaker 1: gonna end? This? This wonderful banking experience? A Chairman Powell

496
00:27:51,080 --> 00:27:54,560
Speaker 1: as a some challenges as this governor think the four

497
00:27:54,720 --> 00:27:58,320
Speaker 1: thing it's Josh said of interest rates rise faster than

498
00:27:58,440 --> 00:28:03,080
Speaker 1: the markets expecting because inflation could come on US suddenly.

499
00:28:03,160 --> 00:28:05,840
Speaker 1: I think US inflation will exceed two percent this here,

500
00:28:06,320 --> 00:28:09,240
Speaker 1: and we may start seeing it elsewhere. We may already

501
00:28:09,280 --> 00:28:11,600
Speaker 1: be singing in China. I don't know. And if they

502
00:28:11,640 --> 00:28:16,359
Speaker 1: start tightening faster than markets expect, how our capital market's

503
00:28:16,359 --> 00:28:19,320
Speaker 1: going to take it. I want to mention something about

504
00:28:19,320 --> 00:28:23,960
Speaker 1: what David said about geopolitical risk. I normally say, when

505
00:28:24,400 --> 00:28:26,760
Speaker 1: we're reaching to try to think of what could go wrong,

506
00:28:27,040 --> 00:28:30,240
Speaker 1: and we're pointing to geopolitical risk, things are pretty good.

507
00:28:30,640 --> 00:28:33,199
Speaker 1: Because you're really racking your brains to try to think

508
00:28:33,240 --> 00:28:35,120
Speaker 1: of what's wrong. I have to say, we haven't had

509
00:28:35,119 --> 00:28:38,960
Speaker 1: President Trump before, and so you know that sort of uh,

510
00:28:39,320 --> 00:28:43,440
Speaker 1: I think introduces a certain randomness that you have got.

511
00:28:43,520 --> 00:28:47,160
Speaker 1: Thirty two minutes into the panel before we mentioned the tours.

512
00:28:47,680 --> 00:28:49,720
Speaker 1: We don't we don't, we don't have to dwell on it.

513
00:28:49,920 --> 00:28:53,800
Speaker 1: But I mean I I'd sort of torn between a

514
00:28:53,880 --> 00:28:58,400
Speaker 1: crisis and China and an artificial crisis in the United States,

515
00:28:58,400 --> 00:29:01,600
Speaker 1: as you know, being being the biggest US uh SO

516
00:29:01,840 --> 00:29:04,640
Speaker 1: and and the stock market. By the way, I don't

517
00:29:04,640 --> 00:29:07,520
Speaker 1: think an equity market collapse is nearly as bad as

518
00:29:07,520 --> 00:29:10,760
Speaker 1: a dead crisis. It's not pleasant but it's not clearly

519
00:29:10,800 --> 00:29:12,840
Speaker 1: as bad as a dead crisis. But I have to

520
00:29:12,880 --> 00:29:16,120
Speaker 1: say it is not hard to imagine a stock price collapse.

521
00:29:16,840 --> 00:29:19,600
Speaker 1: I think the stock prices are built on the high growth,

522
00:29:19,760 --> 00:29:22,560
Speaker 1: but very much the low interest rates, and I don't

523
00:29:22,560 --> 00:29:27,040
Speaker 1: know how everything from art and bitcoin to stock prices

524
00:29:27,080 --> 00:29:30,160
Speaker 1: will react as interest rates go up. You've been listening

525
00:29:30,200 --> 00:29:33,360
Speaker 1: to this discussion. I'm sorry if I've ignored you. And

526
00:29:34,040 --> 00:29:36,520
Speaker 1: you're the one that has to sit and actually make

527
00:29:36,720 --> 00:29:41,560
Speaker 1: investment decisions and choose around these mix of issues. How

528
00:29:41,600 --> 00:29:45,560
Speaker 1: have you? How is your decision making changed MG as

529
00:29:45,640 --> 00:29:48,080
Speaker 1: we've come out of this crisis. So I think the

530
00:29:48,760 --> 00:29:52,000
Speaker 1: listening to all of that conversation the if we're talking

531
00:29:52,080 --> 00:29:54,120
Speaker 1: really about a financial crisis rather than just an equity

532
00:29:54,160 --> 00:29:57,400
Speaker 1: market correction, which could be quite a severe correction, then

533
00:29:57,480 --> 00:29:59,160
Speaker 1: I think you have to look at what is systemic,

534
00:29:59,760 --> 00:30:03,200
Speaker 1: what is actually a systemic problem, And I think listening

535
00:30:03,240 --> 00:30:06,480
Speaker 1: to this conversation, there's one thing which is potential systemic risk,

536
00:30:06,480 --> 00:30:09,280
Speaker 1: which hasn't been mentioned at all. I don't really buy

537
00:30:09,320 --> 00:30:13,680
Speaker 1: the due political arguments because geopolitical stuff happens all the time.

538
00:30:14,120 --> 00:30:17,040
Speaker 1: It has to be something which happens which fundamentally changes

539
00:30:17,680 --> 00:30:21,360
Speaker 1: the way people react to events rather than the event itself.

540
00:30:21,400 --> 00:30:24,040
Speaker 1: So it's got to change the animal spirit in some way,

541
00:30:24,160 --> 00:30:29,120
Speaker 1: and the evidence points the fact that there's a relatively

542
00:30:29,240 --> 00:30:32,959
Speaker 1: few to be seldom out the geopolitical stuff. We've not

543
00:30:33,000 --> 00:30:36,000
Speaker 1: talked about technology. We've not talked about the systemic risk

544
00:30:36,080 --> 00:30:39,120
Speaker 1: potentially from the cloud. We've not talked about the fact

545
00:30:39,120 --> 00:30:42,040
Speaker 1: that we all have businesses which are absolutely reliant on

546
00:30:42,080 --> 00:30:47,440
Speaker 1: a very small number of people who provide the pipes

547
00:30:47,560 --> 00:30:49,520
Speaker 1: that effective what we all put our businesses through. So

548
00:30:49,520 --> 00:30:50,959
Speaker 1: if you want to ask me what could happen it's

549
00:30:50,960 --> 00:30:54,160
Speaker 1: systemic out there, I'd say there's a technology thing out

550
00:30:54,200 --> 00:30:56,680
Speaker 1: there that we're all somewhat blind to, which will be

551
00:30:56,760 --> 00:30:58,960
Speaker 1: kind of interesting to think how markets would respond to

552
00:30:59,000 --> 00:31:02,120
Speaker 1: that if none of us could actually trade for one

553
00:31:02,280 --> 00:31:05,200
Speaker 1: or two or three days or so. I think the

554
00:31:05,240 --> 00:31:07,920
Speaker 1: other thing which has changed fundamentally this time around, the

555
00:31:07,920 --> 00:31:10,320
Speaker 1: point about the banks being smaller and less systemically risky,

556
00:31:10,320 --> 00:31:12,640
Speaker 1: I think, is it's absolutely right terms of the balance sheet.

557
00:31:13,760 --> 00:31:16,840
Speaker 1: But the thing that has become more connected is, as

558
00:31:16,840 --> 00:31:20,720
Speaker 1: you say, regulation, and there is a certain systemic risk

559
00:31:21,000 --> 00:31:24,760
Speaker 1: from regulation. If all regulators are effectively looking at the

560
00:31:24,800 --> 00:31:27,560
Speaker 1: same sorts of things in their stress tests. If all

561
00:31:27,560 --> 00:31:31,120
Speaker 1: big insurance companies are sort of regulated by the same

562
00:31:31,200 --> 00:31:34,360
Speaker 1: rules likewise banks, the one thing you can be sure

563
00:31:34,400 --> 00:31:37,880
Speaker 1: of is that the scenario which tips up isn't one

564
00:31:37,920 --> 00:31:41,120
Speaker 1: of the ones that featured on anybody's stress test, because

565
00:31:41,160 --> 00:31:43,760
Speaker 1: it never happens like that. So I think there are

566
00:31:43,880 --> 00:31:47,760
Speaker 1: systemic challenges out there that maybe none of us are

567
00:31:47,800 --> 00:31:49,640
Speaker 1: looking at the right place for it. So what do

568
00:31:49,680 --> 00:31:51,960
Speaker 1: you do when you try and make investment decisions against that?

569
00:31:52,040 --> 00:31:54,640
Speaker 1: You try and look right through to the fundamentals, and

570
00:31:54,720 --> 00:31:58,520
Speaker 1: you find stuff that behaves differently through the cycle. But

571
00:31:58,800 --> 00:32:01,240
Speaker 1: even if at the more distress it might all behave

572
00:32:01,240 --> 00:32:02,840
Speaker 1: in this thing I want to come back to, damn it.

573
00:32:02,960 --> 00:32:05,560
Speaker 1: Have geoclitical events, they can't affect the economy. So when

574
00:32:05,720 --> 00:32:08,840
Speaker 1: Saddam Hussein invaded Kuwait, it had a serious effect from

575
00:32:08,840 --> 00:32:11,400
Speaker 1: the U s economy. When nine eleven occurred the United States,

576
00:32:11,400 --> 00:32:13,400
Speaker 1: it has a serious effect the economy. So I think

577
00:32:13,440 --> 00:32:16,440
Speaker 1: it's unfair to say if you have a major geopolitical

578
00:32:16,520 --> 00:32:19,480
Speaker 1: event that's unanticipated, the economy will just move on as

579
00:32:19,520 --> 00:32:22,080
Speaker 1: if nothing happened. So we can't anticipate these events I

580
00:32:22,120 --> 00:32:24,000
Speaker 1: hope none of these things happen, but I think you

581
00:32:24,160 --> 00:32:26,480
Speaker 1: can't and you can't prepare for it. But when they happen,

582
00:32:26,720 --> 00:32:29,200
Speaker 1: you should expect that the economy will act differently because

583
00:32:29,240 --> 00:32:31,600
Speaker 1: people won't spend as much. People will be nervous, and

584
00:32:31,720 --> 00:32:33,920
Speaker 1: right now people are in the mood of saying, well,

585
00:32:34,000 --> 00:32:36,080
Speaker 1: something is going to happen. I don't know what it

586
00:32:35,760 --> 00:32:37,880
Speaker 1: is gonna happen, what is going to be And so

587
00:32:38,000 --> 00:32:40,280
Speaker 1: if something bad were to happen in the geopolitical sense,

588
00:32:40,400 --> 00:32:42,280
Speaker 1: I think it will frighten people a bit and they

589
00:32:42,320 --> 00:32:44,800
Speaker 1: will pull back from the capital expenditures or other kinds

590
00:32:44,800 --> 00:32:46,560
Speaker 1: of things. We just don't know what it will be.

591
00:32:47,760 --> 00:32:50,120
Speaker 1: I do think that the it's harder, though, to figure

592
00:32:50,160 --> 00:32:52,480
Speaker 1: out what's going to cause the recession than to figure

593
00:32:52,520 --> 00:32:55,760
Speaker 1: out how to make money from it. And people who

594
00:32:55,880 --> 00:32:58,880
Speaker 1: are good investors, and presently people are watching us, are

595
00:32:59,280 --> 00:33:00,960
Speaker 1: trying to figure out how to take advantage of this.

596
00:33:01,360 --> 00:33:03,840
Speaker 1: The best way to take advantage of this is wait

597
00:33:04,080 --> 00:33:07,040
Speaker 1: for things to settle down a bit and then probably

598
00:33:07,040 --> 00:33:10,280
Speaker 1: by not necessary to Trying to hit the bottom is

599
00:33:10,320 --> 00:33:13,680
Speaker 1: never possible. But when you recognize that there are fundamental

600
00:33:13,880 --> 00:33:17,000
Speaker 1: strength in an economy, and you do make investments along

601
00:33:17,040 --> 00:33:20,000
Speaker 1: those lines, the geopolitical events will ultimately go away and

602
00:33:20,040 --> 00:33:22,200
Speaker 1: the economy will come back. And economy has always come back.

603
00:33:22,360 --> 00:33:24,400
Speaker 1: So again, the people that made the greatest fortunes in

604
00:33:24,440 --> 00:33:27,400
Speaker 1: the last recession and other recessions were people who bought

605
00:33:27,400 --> 00:33:29,560
Speaker 1: things near the bottom and rode them to the top.

606
00:33:29,560 --> 00:33:31,840
Speaker 1: And I suspect that's what's gonna happen again. Last year

607
00:33:31,880 --> 00:33:34,640
Speaker 1: we had President she's speaking here and I literally, I've

608
00:33:34,680 --> 00:33:37,400
Speaker 1: said this many times on air. Literally, this valley came

609
00:33:37,440 --> 00:33:40,840
Speaker 1: to us. Stop. Professor Rogof mentions our guests coming Thursday

610
00:33:41,160 --> 00:33:43,520
Speaker 1: and Friday, the President of the United States, You serve,

611
00:33:43,600 --> 00:33:48,400
Speaker 1: President Carter, what will you anticipate from President Trump within

612
00:33:48,480 --> 00:33:52,120
Speaker 1: the new international relations that is upon this valley? And

613
00:33:52,200 --> 00:33:55,520
Speaker 1: the idea here is the Washington Consensus? Where is it?

614
00:33:56,000 --> 00:33:59,400
Speaker 1: For read Zakaria is post American world? Where is it?

615
00:33:59,680 --> 00:34:03,120
Speaker 1: Do you see a regime that the president can address?

616
00:34:03,240 --> 00:34:06,760
Speaker 1: In international relations that the president can address? And when

617
00:34:06,760 --> 00:34:08,799
Speaker 1: it was announced the President Trump was coming, I think

618
00:34:08,880 --> 00:34:11,919
Speaker 1: jaws dropped because this wasn't seen as his crowd um.

619
00:34:11,960 --> 00:34:15,759
Speaker 1: This is the center of the globalization movement, and he

620
00:34:15,760 --> 00:34:18,719
Speaker 1: hasn't been seen as the biggest supporter of globalization. So

621
00:34:18,840 --> 00:34:20,520
Speaker 1: he's coming here, I think, either to do one of

622
00:34:20,600 --> 00:34:24,160
Speaker 1: two things. Either to say he was right and globalization

623
00:34:24,239 --> 00:34:26,759
Speaker 1: isn't such a great thing and we have to accommodate

624
00:34:27,080 --> 00:34:30,480
Speaker 1: his views and change our views. Or he's going to

625
00:34:30,560 --> 00:34:33,640
Speaker 1: say he's been misinterpreted a bit, and he actually believes

626
00:34:33,640 --> 00:34:35,360
Speaker 1: in some of the things that people here believe in,

627
00:34:35,680 --> 00:34:38,960
Speaker 1: and that he may have not communicated adequately, But actually

628
00:34:39,000 --> 00:34:40,439
Speaker 1: he believes in many of the things here. I don't

629
00:34:40,440 --> 00:34:42,560
Speaker 1: know which message he's going to have, but I suspect

630
00:34:42,560 --> 00:34:45,279
Speaker 1: it's a massive message has been carefully thought through, and

631
00:34:45,280 --> 00:34:47,399
Speaker 1: he wouldn't have come without some message that he wants

632
00:34:47,400 --> 00:34:49,560
Speaker 1: to give that presumably makes a fair amount of sense.

633
00:34:50,200 --> 00:34:52,759
Speaker 1: What is the mess message of China? One year on

634
00:34:52,960 --> 00:34:56,880
Speaker 1: from the historic moment with President z last year? It

635
00:34:56,960 --> 00:35:00,719
Speaker 1: is so interesting to see the different themes you know,

636
00:35:00,760 --> 00:35:02,640
Speaker 1: in my in my world that we see every day

637
00:35:02,680 --> 00:35:06,080
Speaker 1: at Bloomberg. But but what is this? What not the

638
00:35:06,320 --> 00:35:09,640
Speaker 1: simple message, but what is the theme you see day

639
00:35:09,640 --> 00:35:13,239
Speaker 1: to day from your home in Shanghai and working now

640
00:35:13,280 --> 00:35:19,200
Speaker 1: in Beijing? Um, you know, I mean, China obviously needs

641
00:35:19,680 --> 00:35:25,439
Speaker 1: a global trading system for its only economy, and China

642
00:35:25,480 --> 00:35:29,920
Speaker 1: also realizes that realizes that as its economy grows bigger

643
00:35:29,920 --> 00:35:32,640
Speaker 1: and a bigger China needs to open up more to

644
00:35:32,760 --> 00:35:38,239
Speaker 1: the international competition. And that's what President she said last

645
00:35:38,320 --> 00:35:41,760
Speaker 1: year here that China would do, and that's something China

646
00:35:42,000 --> 00:35:45,240
Speaker 1: is doing. So, for example, in the financial service sector,

647
00:35:46,000 --> 00:35:49,840
Speaker 1: when President Trump visited China last November, we announced that

648
00:35:50,040 --> 00:35:52,520
Speaker 1: definancial sector would be opened up in a very big

649
00:35:52,560 --> 00:35:56,960
Speaker 1: way and the details are coming out very soon. Uh

650
00:35:57,080 --> 00:36:02,040
Speaker 1: So we continue to see globalization uh and worldwide trading.

651
00:36:02,080 --> 00:36:04,960
Speaker 1: The investment system is good for China, and it's a

652
00:36:05,040 --> 00:36:09,799
Speaker 1: system that China wants to help strengthens from America. If

653
00:36:09,840 --> 00:36:15,040
Speaker 1: we have an administration and a president so distrustful of China,

654
00:36:15,120 --> 00:36:18,160
Speaker 1: we talked about and we see this with Mr mccrawl

655
00:36:18,280 --> 00:36:20,919
Speaker 1: the most, without question, the most quoted dame I've seen

656
00:36:20,920 --> 00:36:23,120
Speaker 1: in the first two days of Davos has been Mr

657
00:36:23,200 --> 00:36:26,440
Speaker 1: mccawn and as many travels of recently. But what does

658
00:36:26,600 --> 00:36:29,279
Speaker 1: China need from the United States? From where you sit

659
00:36:29,360 --> 00:36:33,959
Speaker 1: as part of the government, we want, we just want

660
00:36:33,960 --> 00:36:40,200
Speaker 1: a normal relation with the United States. Um, good luck.

661
00:36:40,360 --> 00:36:45,800
Speaker 1: We think the professor said that, not me in that regard.

662
00:36:45,880 --> 00:36:49,279
Speaker 1: Let me say, I think that President Trump and not

663
00:36:50,600 --> 00:36:53,040
Speaker 1: part of his administration. I'm not speaking really, but I

664
00:36:53,080 --> 00:36:55,560
Speaker 1: suspect that he saw when she g Ping came here

665
00:36:55,640 --> 00:36:58,080
Speaker 1: last year, he was widely seen as having made a

666
00:36:58,200 --> 00:37:02,000
Speaker 1: very impressive speech talking of out imports of globalization, and

667
00:37:02,120 --> 00:37:04,760
Speaker 1: for a communist leader to come and kind of capture

668
00:37:04,800 --> 00:37:08,480
Speaker 1: the World Economic Forum was quite impressive. I think Trump

669
00:37:08,560 --> 00:37:11,920
Speaker 1: recognizes that if he comes here and makes an articulate speech,

670
00:37:12,239 --> 00:37:15,719
Speaker 1: he can reassert the US presidency is being perhaps the

671
00:37:15,719 --> 00:37:17,799
Speaker 1: most important position in the world. Right now, you have

672
00:37:17,840 --> 00:37:19,640
Speaker 1: two people who are vuying to be the most important

673
00:37:19,640 --> 00:37:22,360
Speaker 1: persons in the world. President China, President United States. I

674
00:37:22,360 --> 00:37:24,960
Speaker 1: think the President States would like to regain some of

675
00:37:24,960 --> 00:37:27,640
Speaker 1: the luster that maybe he lost a bit in the

676
00:37:27,680 --> 00:37:30,080
Speaker 1: first year in in the perception of the people around

677
00:37:30,080 --> 00:37:32,280
Speaker 1: the world, and by speaking here, I think he feels

678
00:37:32,280 --> 00:37:34,919
Speaker 1: he can probably regain that luster. How did politics plain

679
00:37:35,040 --> 00:37:38,760
Speaker 1: to your research within within the many papers, the steamed

680
00:37:38,760 --> 00:37:41,759
Speaker 1: papers that you and Carmen Reyner did, did did this

681
00:37:41,840 --> 00:37:45,640
Speaker 1: discussion fold into it or you removed from the geopolitics

682
00:37:45,640 --> 00:37:47,759
Speaker 1: that David speaks of. Well, I mean a lot of

683
00:37:47,760 --> 00:37:50,480
Speaker 1: it's in human nature, not so much geopolitics, and it

684
00:37:50,520 --> 00:37:53,040
Speaker 1: doesn't necessarily matter the left or the right. You can

685
00:37:53,080 --> 00:37:56,640
Speaker 1: have financial crisis either way. But after a financial crisis,

686
00:37:56,719 --> 00:38:00,759
Speaker 1: this fracturing is very typical the polarization. Their papers on

687
00:38:00,880 --> 00:38:06,680
Speaker 1: that economists and political scientists. Maybe it will ameliorate get

688
00:38:06,800 --> 00:38:11,160
Speaker 1: less after a while if growth continues. There are other factors.

689
00:38:11,160 --> 00:38:14,040
Speaker 1: So I mean that's something. I think that's partly because

690
00:38:14,040 --> 00:38:16,680
Speaker 1: of the financial process. Two are two bankers, and I

691
00:38:16,760 --> 00:38:19,239
Speaker 1: say this is a great cheer. I believe we had legislation,

692
00:38:20,120 --> 00:38:24,320
Speaker 1: UH tax cut legislation, and the I m F clearly

693
00:38:24,360 --> 00:38:27,120
Speaker 1: says it is a cyclical plus plus and may it'll

694
00:38:27,120 --> 00:38:31,719
Speaker 1: be longer. How will you adapt and adjust micro corpetted

695
00:38:31,760 --> 00:38:35,959
Speaker 1: an American bank to this legislation. Is it a one

696
00:38:36,040 --> 00:38:39,439
Speaker 1: off it benefits off with growth to keep us away

697
00:38:39,440 --> 00:38:42,080
Speaker 1: from a financial crisis, or can it really have a

698
00:38:42,080 --> 00:38:46,560
Speaker 1: long term structural benefit that truly changes banking and changes

699
00:38:46,560 --> 00:38:51,600
Speaker 1: your business. I think it has the ability. We don't

700
00:38:51,600 --> 00:38:53,480
Speaker 1: know yet. We don't know yet. We don't know yet.

701
00:38:53,480 --> 00:38:55,560
Speaker 1: And when you think about the the U. S economy

702
00:38:55,600 --> 00:38:59,840
Speaker 1: and the demographics of the economy, seventeen eighteen trillion dollar economy,

703
00:39:00,080 --> 00:39:03,120
Speaker 1: two thirds consumer, and we can look at the consumer

704
00:39:03,120 --> 00:39:05,600
Speaker 1: in the US. We can look at the consumer most places,

705
00:39:05,600 --> 00:39:07,920
Speaker 1: but the consumer in US is very important. And when

706
00:39:07,960 --> 00:39:10,440
Speaker 1: we look in employment, when we look at housing, when

707
00:39:10,520 --> 00:39:13,200
Speaker 1: we look at savings, all those in pretty good shape.

708
00:39:13,719 --> 00:39:15,719
Speaker 1: Yet we had an economy that was growing to point one,

709
00:39:17,239 --> 00:39:19,799
Speaker 1: So what's the catalyst? And I would say not just

710
00:39:20,040 --> 00:39:22,280
Speaker 1: as you travel in the U. S. But you travel

711
00:39:22,320 --> 00:39:25,719
Speaker 1: around the world and you have conversation with business. You said,

712
00:39:25,920 --> 00:39:28,080
Speaker 1: tell me about your business, what's your business feel like?

713
00:39:28,920 --> 00:39:32,239
Speaker 1: And time and time again, we're kind of eking it

714
00:39:32,280 --> 00:39:35,400
Speaker 1: out on top line, managing the heck out of expenses,

715
00:39:35,440 --> 00:39:40,000
Speaker 1: were being tough on capex and hiring and investment. And

716
00:39:40,080 --> 00:39:42,239
Speaker 1: maybe this is the catalyst. It's what we call maybe

717
00:39:42,239 --> 00:39:46,080
Speaker 1: it's a catalyst that takes us from optimism to confidence.

718
00:39:46,200 --> 00:39:49,160
Speaker 1: That's just daily number one. Well, please God, you have

719
00:39:49,160 --> 00:39:54,799
Speaker 1: an observation. So Barkley's is a British bank whose strategy

720
00:39:54,880 --> 00:39:57,440
Speaker 1: is to be a translantic consumer and wholesale bank, basically

721
00:39:57,480 --> 00:40:01,160
Speaker 1: anchored in New York and London. And I think this

722
00:40:01,840 --> 00:40:06,400
Speaker 1: tax cut aligned with another of other measures taken by

723
00:40:06,440 --> 00:40:09,520
Speaker 1: the U. S. Treasury into a certain extent by the

724
00:40:09,560 --> 00:40:12,960
Speaker 1: Fed as a as a global Bank. We want to

725
00:40:13,000 --> 00:40:16,960
Speaker 1: have a regulatory and environment and a tax environment that

726
00:40:17,120 --> 00:40:20,359
Speaker 1: is as equalized as we can. I think certainly one

727
00:40:20,400 --> 00:40:21,719
Speaker 1: of the one of the good things that the G

728
00:40:21,800 --> 00:40:25,320
Speaker 1: twenty did post financial crisis is as they reregulated the

729
00:40:25,360 --> 00:40:29,680
Speaker 1: financial industry, they basically kept it the regulatory environment equivalent

730
00:40:29,680 --> 00:40:32,959
Speaker 1: whether you were in Brussels or London, or New York

731
00:40:33,600 --> 00:40:39,560
Speaker 1: or or Beijing, um, recognizing that a functioning global capital

732
00:40:39,600 --> 00:40:43,280
Speaker 1: markets without barriers to flows the capital is the best

733
00:40:43,360 --> 00:40:48,520
Speaker 1: for well. I think we have preserved the the regulatory

734
00:40:48,600 --> 00:40:51,840
Speaker 1: equivalency broadly speaking around the world. I think there's a

735
00:40:51,880 --> 00:40:55,320
Speaker 1: question of whether that covenant, if you will, between countries

736
00:40:55,760 --> 00:40:59,480
Speaker 1: is holding right now. Um um uh. And there are

737
00:41:00,000 --> 00:41:01,600
Speaker 1: positive and minds to us. You know, the United States

738
00:41:01,640 --> 00:41:04,239
Speaker 1: has made a very bold move of dramatically decreasing its

739
00:41:04,280 --> 00:41:07,160
Speaker 1: quote the taxes. That has a real economic impact of

740
00:41:07,200 --> 00:41:11,120
Speaker 1: the benefit of Barkley shareholders and the cities UH shareholders.

741
00:41:11,440 --> 00:41:15,080
Speaker 1: What does it mean competitively with other countries and UH

742
00:41:15,120 --> 00:41:18,839
Speaker 1: and how all other Jurisdicans respond to a dramatic drop

743
00:41:19,000 --> 00:41:21,359
Speaker 1: in corporate texts. I think what you're likely to see

744
00:41:21,440 --> 00:41:24,160
Speaker 1: is other companies saying countries saying well, if the US

745
00:41:24,239 --> 00:41:26,200
Speaker 1: can have this big tax cut, maybe we'll have one

746
00:41:26,239 --> 00:41:28,640
Speaker 1: as well, and kind of a race to the bottom. Now,

747
00:41:28,680 --> 00:41:30,799
Speaker 1: one of the things people may not realize is when

748
00:41:30,800 --> 00:41:33,120
Speaker 1: we have these tax cuts United States, they're based on

749
00:41:33,200 --> 00:41:35,839
Speaker 1: ten year projections of what revenues are going to be

750
00:41:36,160 --> 00:41:38,000
Speaker 1: or or costs are going to be, and we really

751
00:41:38,040 --> 00:41:40,239
Speaker 1: don't know. So what you often do is you say,

752
00:41:40,280 --> 00:41:42,120
Speaker 1: this is going to give you a very good benefit

753
00:41:42,120 --> 00:41:44,120
Speaker 1: in years one, two, and three, and we'll make up

754
00:41:44,120 --> 00:41:46,439
Speaker 1: for it in years seven eight nine. But year seven

755
00:41:46,480 --> 00:41:49,400
Speaker 1: eight nine don't really come along anytime soon, So we

756
00:41:49,440 --> 00:41:51,080
Speaker 1: really don't know what the impact is going to be.

757
00:41:51,080 --> 00:41:53,799
Speaker 1: But I think and right now, that companies are going

758
00:41:53,840 --> 00:41:57,920
Speaker 1: to um I think provide bigger dividends, they're gonna do

759
00:41:58,000 --> 00:42:00,760
Speaker 1: stock buybacks, they're gonna make more m and A acquisitions,

760
00:42:00,880 --> 00:42:02,759
Speaker 1: and I think the amount of cash United States will

761
00:42:02,760 --> 00:42:05,120
Speaker 1: probably inflate the economy of bit. David Herbinstein, do you

762
00:42:05,120 --> 00:42:07,760
Speaker 1: believe in trickle down economics? That's all great for the halves?

763
00:42:07,880 --> 00:42:11,200
Speaker 1: Do you believe in trickle down economics? Needing interction like

764
00:42:11,239 --> 00:42:13,120
Speaker 1: that You hit your no, no, but you come on,

765
00:42:13,160 --> 00:42:15,239
Speaker 1: you grew up, You grew up in Baltimore, the son

766
00:42:15,280 --> 00:42:17,759
Speaker 1: of a postal worker. You grew up basic. Do you

767
00:42:17,760 --> 00:42:19,880
Speaker 1: believe in trickle down economic I want to say I believe.

768
00:42:19,960 --> 00:42:22,319
Speaker 1: I do not want to say believe in trickle down economics.

769
00:42:22,360 --> 00:42:24,839
Speaker 1: I do believe that UM, when you have a tax

770
00:42:24,880 --> 00:42:27,120
Speaker 1: cut of this amount, and many of it much of

771
00:42:27,120 --> 00:42:28,879
Speaker 1: a ghost in the middle class as well, it will

772
00:42:28,920 --> 00:42:30,640
Speaker 1: have some beneficial effect. I don't think it's only a

773
00:42:30,640 --> 00:42:34,160
Speaker 1: trickle down effect. Jess, you mentioned you're a British bank.

774
00:42:34,239 --> 00:42:37,600
Speaker 1: My number one observation for a week in London is wow,

775
00:42:37,920 --> 00:42:42,480
Speaker 1: continue change and continued enthusiasm in London, and the message

776
00:42:42,520 --> 00:42:45,560
Speaker 1: I heard interview after interview, including Jim O'Neill, was just

777
00:42:45,640 --> 00:42:48,600
Speaker 1: beginning to really diffuse across the United Kingdom. Do you

778
00:42:48,640 --> 00:42:51,560
Speaker 1: see that at Barclay's coming out of the unique financial

779
00:42:51,600 --> 00:42:54,799
Speaker 1: crisis of the United Kingdom, Northern Rock and the rest

780
00:42:54,840 --> 00:42:56,600
Speaker 1: of it, and how all of you had to adapt,

781
00:42:57,080 --> 00:42:59,600
Speaker 1: Is it a better United Kingdom even with the soap

782
00:42:59,640 --> 00:43:02,759
Speaker 1: opera known as Brexit going on? Well again, I I

783
00:43:02,800 --> 00:43:05,760
Speaker 1: do think that the Bank of England UM has done

784
00:43:05,880 --> 00:43:09,600
Speaker 1: quite a good job managing the transformation of the financial

785
00:43:09,600 --> 00:43:13,640
Speaker 1: industry posts the financial crisis and UH and uh, we've

786
00:43:13,680 --> 00:43:18,120
Speaker 1: seen reasonably strong economic growth, somewhat weaker recently, but I

787
00:43:18,239 --> 00:43:20,120
Speaker 1: you know, like all these countries a little bit. Going

788
00:43:20,160 --> 00:43:22,600
Speaker 1: back to what and I'm talking about visa the technology.

789
00:43:22,640 --> 00:43:24,080
Speaker 1: One of the things that I think is playing well

790
00:43:24,120 --> 00:43:27,080
Speaker 1: to the United Kingdom right now is technology. I've said

791
00:43:27,120 --> 00:43:29,440
Speaker 1: this in a in a couple of forms. Perhaps the

792
00:43:29,440 --> 00:43:32,520
Speaker 1: biggest economic event immediately post Brexit was a decision of

793
00:43:32,560 --> 00:43:36,000
Speaker 1: Google to make London the their second largest center for

794
00:43:36,480 --> 00:43:40,080
Speaker 1: technology development. But seven thousand engineers in the middle of

795
00:43:40,080 --> 00:43:43,160
Speaker 1: of London and the UK has gotta as an outstanding,

796
00:43:43,560 --> 00:43:47,760
Speaker 1: uh academic base. Um, I think it's in the forefront

797
00:43:47,800 --> 00:43:50,120
Speaker 1: of a lot of what's happening in technology. And there's

798
00:43:50,120 --> 00:43:51,880
Speaker 1: not a business or an industry in the world now

799
00:43:51,920 --> 00:43:55,759
Speaker 1: that's not deeply impacted by technology. And so if we

800
00:43:55,800 --> 00:43:58,680
Speaker 1: can keep the borders open to the best and the

801
00:43:58,680 --> 00:44:02,080
Speaker 1: brightest and use that academic footprint to allow a Barkleys

802
00:44:02,160 --> 00:44:04,760
Speaker 1: to be in the forefront of mobile banking and digital

803
00:44:04,800 --> 00:44:07,279
Speaker 1: safety and whatnot, that's a good thing for the UK.

804
00:44:07,760 --> 00:44:09,600
Speaker 1: Is the biggest story of two thousand and seventeen in

805
00:44:09,680 --> 00:44:12,759
Speaker 1: terms of the economy Europe, many people thought was dead

806
00:44:12,800 --> 00:44:15,120
Speaker 1: and gone. Years ago, and was going to be really

807
00:44:15,200 --> 00:44:17,560
Speaker 1: a weak sister compared to the United States. And when

808
00:44:17,560 --> 00:44:20,279
Speaker 1: you had Brexit that made people think even more so

809
00:44:20,400 --> 00:44:23,440
Speaker 1: that would be the case. And despite Brexit, the problems

810
00:44:23,440 --> 00:44:25,479
Speaker 1: in Spain, the problem is in the week in German

811
00:44:25,520 --> 00:44:28,000
Speaker 1: weaker in German government, a new French government. Europe is

812
00:44:28,040 --> 00:44:30,319
Speaker 1: not quite well. Economic prices a little bit lower, and

813
00:44:30,320 --> 00:44:32,480
Speaker 1: so it's a very attractive place to invest. Just get

814
00:44:32,480 --> 00:44:38,000
Speaker 1: a third runway. He's wrong. I just want to echo second,

815
00:44:38,000 --> 00:44:41,000
Speaker 1: what ants? How about technology? Let's face it, we don't

816
00:44:41,120 --> 00:44:44,840
Speaker 1: understand it, and it's grown and importance. That's you know,

817
00:44:44,880 --> 00:44:47,520
Speaker 1: in few off all our lives, and the idea that

818
00:44:47,800 --> 00:44:51,280
Speaker 1: something could happen that had a systemic effect of first

819
00:44:51,320 --> 00:44:55,120
Speaker 1: systemic technology crisis not you know, not that far. And

820
00:44:55,160 --> 00:44:57,880
Speaker 1: what's interesting here is Professor Rogoff told that to me

821
00:44:58,000 --> 00:45:01,520
Speaker 1: in a radio boost. I remember this conversation pushing fifteen

822
00:45:01,600 --> 00:45:04,800
Speaker 1: years ago, fourteen years ago. And yet and as you mentioned,

823
00:45:05,400 --> 00:45:10,400
Speaker 1: technology has become so many different things and so embedded

824
00:45:10,440 --> 00:45:14,400
Speaker 1: in our life. I remember at Davos, at these meetings,

825
00:45:14,960 --> 00:45:17,680
Speaker 1: the uproar over cell phones. Well wait, we can't have

826
00:45:17,760 --> 00:45:19,439
Speaker 1: these in the building. We can't And then of course

827
00:45:19,480 --> 00:45:22,319
Speaker 1: the next year every executive was had had them going

828
00:45:22,320 --> 00:45:24,040
Speaker 1: in and three assistance to tell them what to do

829
00:45:24,120 --> 00:45:27,480
Speaker 1: with it. By when we say technology in two thousand,

830
00:45:28,320 --> 00:45:30,759
Speaker 1: in two thousand twenty, what do you mean? But it's

831
00:45:30,760 --> 00:45:33,480
Speaker 1: all about it's the interconnectivity. So the amount of stuff

832
00:45:33,480 --> 00:45:35,520
Speaker 1: that we all put, the amount of data, the amount

833
00:45:35,560 --> 00:45:38,520
Speaker 1: of transactions and processing, the amount of stuff that we

834
00:45:38,680 --> 00:45:41,600
Speaker 1: put into a shared space, for example, in the cloud.

835
00:45:41,640 --> 00:45:44,040
Speaker 1: It's just kind of interesting and all of our businesses

836
00:45:44,080 --> 00:45:48,080
Speaker 1: would stop if for some reason that most of us

837
00:45:48,120 --> 00:45:51,040
Speaker 1: don't understand, because we don't really understand what the cloud is.

838
00:45:51,840 --> 00:45:54,400
Speaker 1: You're not talking here about one or two days, or

839
00:45:54,440 --> 00:45:57,160
Speaker 1: five days or six days. You're talking about something more systemic.

840
00:45:58,120 --> 00:46:01,760
Speaker 1: I'm just posing the question, right what could potentially cause

841
00:46:01,800 --> 00:46:05,120
Speaker 1: a systemic risk? The answer is if for whatever reason,

842
00:46:05,560 --> 00:46:09,480
Speaker 1: we had the inability to access Wi Fi based systems,

843
00:46:09,480 --> 00:46:14,320
Speaker 1: cloud based systems, just really simple stuff like that, hypothecating

844
00:46:14,800 --> 00:46:17,319
Speaker 1: And the answer is nobody really knows the answer to

845
00:46:17,400 --> 00:46:20,640
Speaker 1: that question. How would our businesses all work in a

846
00:46:20,680 --> 00:46:23,680
Speaker 1: world where suddenly the cell phones went down simultaneously? How

847
00:46:23,719 --> 00:46:26,120
Speaker 1: would your disaster recovery procedures work? If you'll wait your

848
00:46:26,120 --> 00:46:29,200
Speaker 1: satellite phones tucked back at your hotel room. Maybe you do,

849
00:46:29,400 --> 00:46:32,399
Speaker 1: but it's an interesting hypothesis. No. I I think every

850
00:46:32,480 --> 00:46:34,280
Speaker 1: year there seems to be a change at these meetings.

851
00:46:34,320 --> 00:46:35,920
Speaker 1: I want to again and say welcome to all of

852
00:46:35,960 --> 00:46:38,840
Speaker 1: the top link at the World Economic Forum. And of

853
00:46:38,880 --> 00:46:42,439
Speaker 1: course we're streaming across the World Economic Form site. We're

854
00:46:42,440 --> 00:46:44,640
Speaker 1: thrilled of that. And thanks to Bloomberg for their commitment

855
00:46:44,640 --> 00:46:47,520
Speaker 1: on Bloomberg Radio and television today to this panel. I'm

856
00:46:47,560 --> 00:46:49,399
Speaker 1: gonna go for five more minutes and go to find

857
00:46:49,440 --> 00:46:51,640
Speaker 1: there if I could. Uh. And then we'll open the

858
00:46:51,760 --> 00:46:54,120
Speaker 1: questions and I will say Dr Frankel, you get the

859
00:46:54,120 --> 00:46:56,839
Speaker 1: first question, so you better be ready as we'll take

860
00:46:56,880 --> 00:46:58,840
Speaker 1: a francl with us, and we'll leave with this question

861
00:46:59,120 --> 00:47:02,640
Speaker 1: here in a moment house Bitcoin. You're in the heart

862
00:47:02,640 --> 00:47:05,920
Speaker 1: of it, aren't you? In China? China? And if we

863
00:47:06,000 --> 00:47:08,759
Speaker 1: look at China, if we look at Korea, and we

864
00:47:08,840 --> 00:47:11,719
Speaker 1: look at nineteen can Ken told me Tom go along

865
00:47:11,760 --> 00:47:15,759
Speaker 1: at nine. Uh. But when you look at bitcoin, you

866
00:47:15,840 --> 00:47:19,040
Speaker 1: have had to live it as a regulator in China. Well,

867
00:47:19,400 --> 00:47:21,759
Speaker 1: in China, it's the central bank that has the deal

868
00:47:21,880 --> 00:47:27,759
Speaker 1: with bitcoin. It's not the security give us some experiences.

869
00:47:28,760 --> 00:47:35,239
Speaker 1: Our attitude is that this is something that uh that

870
00:47:35,400 --> 00:47:40,600
Speaker 1: is uh, you know, whose little value to the economy

871
00:47:41,120 --> 00:47:44,239
Speaker 1: still has to be proven. So in that sense, we

872
00:47:44,400 --> 00:47:47,720
Speaker 1: do not want them to get to kind of big

873
00:47:47,760 --> 00:47:51,160
Speaker 1: you know, too widely traded in China, and that is

874
00:47:51,160 --> 00:47:55,080
Speaker 1: why the central Bank has actually ordered the closure of

875
00:47:55,160 --> 00:47:58,040
Speaker 1: trading a big coin in China, which I support. Who

876
00:47:58,080 --> 00:48:02,560
Speaker 1: had today, Uh, let me just add one thing. Mr.

877
00:48:02,640 --> 00:48:05,560
Speaker 1: Movements then talked about how to make money in the

878
00:48:05,560 --> 00:48:09,000
Speaker 1: financial crisis. I want to say something, you know, to

879
00:48:09,080 --> 00:48:12,640
Speaker 1: the clouds, maybe here over the internet, you know, who

880
00:48:12,760 --> 00:48:17,520
Speaker 1: had that to shoot on China? If they bet that

881
00:48:17,680 --> 00:48:21,279
Speaker 1: China would somehow have a financial collapse and doing the

882
00:48:21,360 --> 00:48:24,040
Speaker 1: class it's going to happen. People have been predicting it

883
00:48:24,120 --> 00:48:26,200
Speaker 1: for ten years, and every year they've been wrong. And

884
00:48:26,200 --> 00:48:28,080
Speaker 1: that's some part because the Chinese government can move much

885
00:48:28,080 --> 00:48:30,560
Speaker 1: more quickly. The US government is so diffused it can't

886
00:48:30,560 --> 00:48:32,719
Speaker 1: really get it back together. I don't really think that's

887
00:48:32,840 --> 00:48:35,600
Speaker 1: uh something to worry about. The biggest thing I worry

888
00:48:35,600 --> 00:48:38,840
Speaker 1: about increasingly is something that we haven't talked about, and

889
00:48:38,880 --> 00:48:41,800
Speaker 1: it's not global warming. It's a phenomenon that I've noticed recently,

890
00:48:42,080 --> 00:48:45,560
Speaker 1: it's the increase in gravity. As I've gotten older, I've

891
00:48:45,640 --> 00:48:48,640
Speaker 1: noticed that things sag more, and I noticed that my

892
00:48:48,680 --> 00:48:51,120
Speaker 1: ability to jump for basketball is less. I think the

893
00:48:51,320 --> 00:48:54,120
Speaker 1: gravity and the Earth is getting much stronger, and that's

894
00:48:54,160 --> 00:48:56,840
Speaker 1: something we should worry about. Parting people my age, you

895
00:48:56,840 --> 00:49:00,719
Speaker 1: should worry much more about gravity than anything else. This

896
00:49:01,920 --> 00:49:05,160
Speaker 1: would you like to speak about gravity? And three years

897
00:49:05,200 --> 00:49:08,479
Speaker 1: working on gravitational waves and she's found them around you, David.

898
00:49:09,760 --> 00:49:11,399
Speaker 1: But this is this brings up on a point we're

899
00:49:11,400 --> 00:49:13,719
Speaker 1: going to, Professor. If we go back to Newtonian mechanics,

900
00:49:13,719 --> 00:49:17,479
Speaker 1: F equals g MM over are squared? Does the math

901
00:49:17,600 --> 00:49:20,480
Speaker 1: work or did you learn as Olivier Blanchard study that

902
00:49:20,600 --> 00:49:23,600
Speaker 1: the I M F that the models didn't work? Richard Claire,

903
00:49:23,600 --> 00:49:27,000
Speaker 1: does D S G E. Are you still a believer

904
00:49:27,239 --> 00:49:31,440
Speaker 1: in in ops Felt Rogoff for Krugman Rogoff or is

905
00:49:31,480 --> 00:49:33,520
Speaker 1: there a new math involved as we go to the

906
00:49:33,560 --> 00:49:37,719
Speaker 1: next crisis? Well, I think the models failed miserably, not

907
00:49:37,800 --> 00:49:40,279
Speaker 1: just in predicting the crisis, which we don't really think

908
00:49:40,320 --> 00:49:43,200
Speaker 1: we'd be good at anyway, but they failed in predicting

909
00:49:43,200 --> 00:49:46,080
Speaker 1: what would happen afterwards. It was much more fruitful to

910
00:49:46,120 --> 00:49:50,200
Speaker 1: look at historical example. You know, going back to the

911
00:49:50,280 --> 00:49:53,560
Speaker 1: high level of the stock market, interest rates are really low.

912
00:49:53,560 --> 00:49:56,280
Speaker 1: I think it's easily half the story of why stock

913
00:49:56,440 --> 00:49:59,480
Speaker 1: right there, Maybe so maybe three quarters of it. You know,

914
00:49:59,520 --> 00:50:03,120
Speaker 1: if interr strates go up even modestly halfway towards their

915
00:50:03,160 --> 00:50:06,600
Speaker 1: normal level, you will see a collapse in the stock market.

916
00:50:06,760 --> 00:50:10,439
Speaker 1: I mean real interest rates inflation adjusted. And I don't

917
00:50:10,440 --> 00:50:12,920
Speaker 1: know what will take the thing because they're worried. I

918
00:50:12,960 --> 00:50:15,200
Speaker 1: would have for the stock market is that the technology

919
00:50:15,280 --> 00:50:17,840
Speaker 1: unicorns when they try to go public, if they go

920
00:50:17,920 --> 00:50:21,080
Speaker 1: public at a lower valuation than their last private round,

921
00:50:21,160 --> 00:50:23,200
Speaker 1: that's going to begin to make people very nervous. And

922
00:50:23,200 --> 00:50:26,480
Speaker 1: we've already seen that that we're already seeing that now.

923
00:50:26,800 --> 00:50:28,640
Speaker 1: Well yeah, I agree, we're begin to see it now.

924
00:50:28,680 --> 00:50:30,080
Speaker 1: Would you say that will be a theme for the

925
00:50:30,080 --> 00:50:31,839
Speaker 1: next twenty four months. Were ever seeing it, they can

926
00:50:32,080 --> 00:50:34,560
Speaker 1: see more of that. Interest rate is one risk to

927
00:50:34,600 --> 00:50:37,520
Speaker 1: the U s Acuto market. Another risk is regulation. And

928
00:50:37,560 --> 00:50:41,719
Speaker 1: when you see the President teats about every high of

929
00:50:41,800 --> 00:50:46,360
Speaker 1: the stock market and takes pride in that, unavoidably, it

930
00:50:46,400 --> 00:50:49,239
Speaker 1: will have an impact on the regulators. The regulators may

931
00:50:49,280 --> 00:50:54,759
Speaker 1: not move as quick as you know, adamant as they

932
00:50:54,840 --> 00:50:58,560
Speaker 1: should and that can cause that's a very good point

933
00:50:58,600 --> 00:51:02,760
Speaker 1: that even though the financial regulation has changed and it's better,

934
00:51:03,280 --> 00:51:08,120
Speaker 1: it's enforced by people, and we've systematically seen the regulators

935
00:51:08,400 --> 00:51:12,560
Speaker 1: changed and that's changed the implementation so independent. I thought,

936
00:51:13,040 --> 00:51:16,440
Speaker 1: oh well, I mean that's a theory. It's I want

937
00:51:16,480 --> 00:51:18,640
Speaker 1: to go back to gravity. I stayed in a hotel

938
00:51:18,640 --> 00:51:23,360
Speaker 1: in London that was the height of early maybe pseudo

939
00:51:23,520 --> 00:51:26,840
Speaker 1: Edwardian banking. It was the Middle and Bank Building of

940
00:51:27,000 --> 00:51:30,719
Speaker 1: nineteen twenty four, down by mansion house and down by

941
00:51:30,719 --> 00:51:34,720
Speaker 1: our glorious new office, and it was built. Is a

942
00:51:34,760 --> 00:51:39,120
Speaker 1: is a monument just to what was before them? What's

943
00:51:39,160 --> 00:51:42,120
Speaker 1: the monument we're doing now that we did in two

944
00:51:42,120 --> 00:51:45,440
Speaker 1: thousand six, is you brilliantly stated earlier or for that matter,

945
00:51:45,480 --> 00:51:50,520
Speaker 1: inn before the substantial crisis of what's the monument in

946
00:51:50,600 --> 00:51:55,880
Speaker 1: financial system architecture now that you think is most monument

947
00:51:56,000 --> 00:51:59,359
Speaker 1: like and we need to avoid I was gonna take

948
00:51:59,400 --> 00:52:03,319
Speaker 1: it from Antice and I again, uh uh, what I

949
00:52:03,360 --> 00:52:10,000
Speaker 1: think we can't forget is that, uh the beginnings of finance. Um,

950
00:52:10,160 --> 00:52:14,520
Speaker 1: what finance really did going back a couple of centuries

951
00:52:14,560 --> 00:52:17,719
Speaker 1: ago and very much in the UK was really to

952
00:52:17,840 --> 00:52:23,000
Speaker 1: democratize economic growth. UH. Finance was the means by which

953
00:52:23,080 --> 00:52:27,719
Speaker 1: wealth could be transferred from a diverse population, not to

954
00:52:27,840 --> 00:52:30,920
Speaker 1: just a family member who inherited a big farm, but

955
00:52:31,080 --> 00:52:33,719
Speaker 1: rather to an innovator or an entrepreneur that had a

956
00:52:33,760 --> 00:52:37,400
Speaker 1: new idea. And so finance allowed for the funding of

957
00:52:37,480 --> 00:52:39,640
Speaker 1: someone who bought an idea of building a car or

958
00:52:39,640 --> 00:52:44,120
Speaker 1: building a railroad. Um. Uh. And we obviously went through

959
00:52:44,160 --> 00:52:46,520
Speaker 1: a dramatic period in two thousand and eight and nine

960
00:52:46,520 --> 00:52:49,480
Speaker 1: in the aftermath of the financial crisis. UM. But I

961
00:52:49,480 --> 00:52:51,839
Speaker 1: think I know you know City Bank does an extraordinary

962
00:52:51,920 --> 00:52:55,280
Speaker 1: job at it um. UM people like Carlisle and investments

963
00:52:55,320 --> 00:52:58,440
Speaker 1: that they make. UM. We shouldn't lose sight of the

964
00:52:58,560 --> 00:53:02,520
Speaker 1: value of finance and from item for global economic growth. Uh.

965
00:53:02,560 --> 00:53:06,160
Speaker 1: And that it does provide a very central function UH

966
00:53:06,239 --> 00:53:08,600
Speaker 1: that benefits everybody. One of the things I think we

967
00:53:08,640 --> 00:53:11,000
Speaker 1: haven't talked about is that with samuelh Anything you used

968
00:53:11,000 --> 00:53:13,560
Speaker 1: to talk about the clash of civilization. Now it's a

969
00:53:13,560 --> 00:53:17,719
Speaker 1: class of technologies. The Chinese large technology companies, are they

970
00:53:17,719 --> 00:53:19,640
Speaker 1: going to be able to take their technologies outside of

971
00:53:19,719 --> 00:53:23,000
Speaker 1: China and and really dominate the world or the American

972
00:53:23,040 --> 00:53:25,719
Speaker 1: company is going to take their technologies Facebook, Google, and

973
00:53:25,719 --> 00:53:27,839
Speaker 1: so forth and dominate the World's gonna be a big

974
00:53:27,880 --> 00:53:31,480
Speaker 1: fight between the Chinese technology companies the American technology companies

975
00:53:31,600 --> 00:53:34,719
Speaker 1: for global supremacy outside of their core countries, and that's

976
00:53:34,719 --> 00:53:37,759
Speaker 1: where you're gonna see a big fight. What I would say,

977
00:53:37,800 --> 00:53:40,640
Speaker 1: when we think of your question, what's the monument to

978
00:53:40,760 --> 00:53:44,040
Speaker 1: financial services today? What I love about the monument is

979
00:53:44,080 --> 00:53:48,399
Speaker 1: it's not physical, it's digital. It's not a building, it's

980
00:53:48,440 --> 00:53:52,040
Speaker 1: not the infrastructure of that. But the fact that finance

981
00:53:52,120 --> 00:53:55,680
Speaker 1: today is about inclusion and getting to more people in

982
00:53:55,719 --> 00:53:59,080
Speaker 1: the world and making that easier. And clearly technology digital

983
00:53:59,120 --> 00:54:01,960
Speaker 1: is pushing that the pain points that are coming out

984
00:54:02,000 --> 00:54:05,560
Speaker 1: of people's lives. So we talk about people's proclivity to

985
00:54:05,680 --> 00:54:07,839
Speaker 1: use technology, but when you think a lot of it there,

986
00:54:08,239 --> 00:54:13,480
Speaker 1: there's some that's disruptive. Most has actually been um life

987
00:54:13,640 --> 00:54:16,960
Speaker 1: enhancing where you can get your balance online, you can

988
00:54:17,320 --> 00:54:19,799
Speaker 1: you can spend online, you can borrow online, you can

989
00:54:19,840 --> 00:54:21,960
Speaker 1: do those things that we're putting more time back in

990
00:54:22,040 --> 00:54:24,759
Speaker 1: your life. And so when you think of that monument,

991
00:54:24,800 --> 00:54:26,959
Speaker 1: I think it's the push towards digital. Okay, we're gonna

992
00:54:26,960 --> 00:54:29,080
Speaker 1: go to questions. I want to make clear run television

993
00:54:29,120 --> 00:54:31,640
Speaker 1: worldwide and radio, and as you get up, please try

994
00:54:31,680 --> 00:54:35,800
Speaker 1: to avoid diving in front of the cameras or you know, uh,

995
00:54:36,040 --> 00:54:39,560
Speaker 1: making faces and hand movements. And that I am honored

996
00:54:39,600 --> 00:54:42,040
Speaker 1: to have as a first question today. Jacob Frankel, who

997
00:54:42,120 --> 00:54:45,879
Speaker 1: is ken rogof knows did original research in Chicago years

998
00:54:45,880 --> 00:54:49,640
Speaker 1: ago and foreign exchange and economics. He served as Governor

999
00:54:49,680 --> 00:54:51,719
Speaker 1: of the Bank of Israel and course holds court with

1000
00:54:51,800 --> 00:54:55,440
Speaker 1: James Diamond over at JP Morgan now Dr Franklin. Observation

1001
00:54:55,520 --> 00:54:59,480
Speaker 1: plays in a question for a good panel, Thank you

1002
00:54:59,560 --> 00:55:02,880
Speaker 1: very much. Where we are celebrating quite a few anniversaries

1003
00:55:03,440 --> 00:55:06,839
Speaker 1: this season, the tenth anniversary of the crisis that you've

1004
00:55:06,880 --> 00:55:11,960
Speaker 1: been talking about, the twentieth anniversary of the Asian financial crisis,

1005
00:55:12,000 --> 00:55:16,080
Speaker 1: the Russian default, the thirtieth anniversary or so of the

1006
00:55:16,160 --> 00:55:19,840
Speaker 1: death crisis of Latin America, and the thirtieth anniversary of

1007
00:55:19,920 --> 00:55:25,839
Speaker 1: my own presence here in Davos. Invariably, in all of

1008
00:55:25,920 --> 00:55:31,319
Speaker 1: these events, the conclusion that you started with, namely that

1009
00:55:31,440 --> 00:55:35,319
Speaker 1: the depth problem is a much more serious than an

1010
00:55:35,360 --> 00:55:39,359
Speaker 1: equity problem, is common. But are always two questions which

1011
00:55:39,400 --> 00:55:43,160
Speaker 1: you always tom have asked, number one, where is the

1012
00:55:43,320 --> 00:55:47,920
Speaker 1: risk today? And number two is it being priced properly?

1013
00:55:48,320 --> 00:55:51,200
Speaker 1: Because if we know the risk and it is being

1014
00:55:51,280 --> 00:55:54,719
Speaker 1: priced properly, it has a very different dimension now in

1015
00:55:54,800 --> 00:55:58,520
Speaker 1: order to price it properly, that's where transparency comes in.

1016
00:55:59,000 --> 00:56:02,200
Speaker 1: That's where regular asians come in, etcetera. So you've been

1017
00:56:02,239 --> 00:56:05,799
Speaker 1: asking about the future, where is the risk and if

1018
00:56:05,800 --> 00:56:09,600
Speaker 1: we know the risk, isn't being priced probably, and that's

1019
00:56:09,600 --> 00:56:12,279
Speaker 1: when we would know if we need to fasten. Are

1020
00:56:12,320 --> 00:56:15,120
Speaker 1: we pricing particularly in the short term paper market or

1021
00:56:15,160 --> 00:56:18,000
Speaker 1: do we have confidence we're pricing risk properly? Now I

1022
00:56:18,080 --> 00:56:21,080
Speaker 1: was addicted to libelary O I s for years and

1023
00:56:21,320 --> 00:56:25,520
Speaker 1: other games of measurement. Do we price risk in the

1024
00:56:25,600 --> 00:56:29,960
Speaker 1: short term paper market better? Are we smarter? It has

1025
00:56:30,000 --> 00:56:32,840
Speaker 1: to be at risk. I mean, we're in this unprecedented

1026
00:56:32,880 --> 00:56:36,920
Speaker 1: monetary experiment. Science fair, it's going to turn around. It's

1027
00:56:36,920 --> 00:56:40,319
Speaker 1: not the QWI, the low levels of interest rates as

1028
00:56:40,360 --> 00:56:44,320
Speaker 1: they reflight and who knows what's gonna happen. And on transparency,

1029
00:56:44,560 --> 00:56:49,120
Speaker 1: I mean, China's done a phenomenal job. But when I

1030
00:56:49,160 --> 00:56:51,800
Speaker 1: hear you know this time is different. China is different,

1031
00:56:52,080 --> 00:56:54,360
Speaker 1: even though it looks the same you have to you know,

1032
00:56:54,400 --> 00:56:56,960
Speaker 1: wonder I've asked you this before, and I'll get to

1033
00:56:57,080 --> 00:57:00,719
Speaker 1: Mr Corbett. The the the idea of how much of

1034
00:57:00,719 --> 00:57:04,440
Speaker 1: our dead is still at a negative nominal rate and

1035
00:57:04,480 --> 00:57:07,560
Speaker 1: with the oddities of real rates. Do you have confidence

1036
00:57:07,680 --> 00:57:11,360
Speaker 1: we can unwind from a negative interest rate to something

1037
00:57:11,400 --> 00:57:17,600
Speaker 1: more normal nominally and real confidence. No, I'm but I'm

1038
00:57:17,600 --> 00:57:21,960
Speaker 1: actually more worried, not about the unwinding, but if we

1039
00:57:22,080 --> 00:57:27,320
Speaker 1: did have a significant recession, it could happen. David gave reasons, uh,

1040
00:57:27,400 --> 00:57:30,560
Speaker 1: and gave reasons um, Jazz gave reasons. And if it

1041
00:57:30,600 --> 00:57:34,160
Speaker 1: did happen, there isn't a plan A. I mean they've

1042
00:57:34,200 --> 00:57:36,200
Speaker 1: done so much already. I mean there'd be a big

1043
00:57:36,200 --> 00:57:39,680
Speaker 1: fistical stimulus, there'd be more quantitative eating. I don't think

1044
00:57:39,800 --> 00:57:42,160
Speaker 1: either would work as well as it did last time.

1045
00:57:42,360 --> 00:57:45,360
Speaker 1: Jacob Frankos, Should Mario draggy X sooner? Should he do

1046
00:57:45,520 --> 00:57:49,200
Speaker 1: something on Thursday at the ECB meeting? Do we have

1047
00:57:49,240 --> 00:57:54,040
Speaker 1: a microphone? Does he need to act quicker to begin

1048
00:57:54,080 --> 00:57:58,840
Speaker 1: to unwind? Is doing a great job? That was a

1049
00:57:58,880 --> 00:58:01,760
Speaker 1: banker's answer for this. European should take out key Man

1050
00:58:01,800 --> 00:58:05,520
Speaker 1: insurance on him because when he goes uh, you know

1051
00:58:05,600 --> 00:58:07,680
Speaker 1: a real giant will have gone because he's an incredible job.

1052
00:58:07,800 --> 00:58:10,280
Speaker 1: And you mentioned the European expansion that's there. Let's go

1053
00:58:10,320 --> 00:58:12,960
Speaker 1: back to something Ken, they's barely touched on March fourth.

1054
00:58:13,000 --> 00:58:15,800
Speaker 1: I believe it is the Italian election as well. Ken,

1055
00:58:15,800 --> 00:58:20,840
Speaker 1: I've noticed per capita growth in Italy actually finally perfectly up.

1056
00:58:20,960 --> 00:58:24,280
Speaker 1: Is it all boats rising? Is the boom of of

1057
00:58:24,440 --> 00:58:28,560
Speaker 1: my cross France or miracles? Maybe challenge Germany? Is that

1058
00:58:28,800 --> 00:58:31,760
Speaker 1: lifting all boats? So it's supposed to work again. Like

1059
00:58:31,840 --> 00:58:35,400
Speaker 1: David Rubinstein said, Europe has been a phenomenal story this year.

1060
00:58:35,440 --> 00:58:39,480
Speaker 1: It's the most surprising thing of why global growth is

1061
00:58:39,520 --> 00:58:42,720
Speaker 1: so so good, and it's benefited Italy. But it's also

1062
00:58:42,800 --> 00:58:46,120
Speaker 1: true that even in the salad days of European growth,

1063
00:58:46,160 --> 00:58:49,640
Speaker 1: Italy didn't grow so well. When I look at their

1064
00:58:49,640 --> 00:58:52,400
Speaker 1: political system, which I want to claim to begin to understand,

1065
00:58:52,440 --> 00:58:55,000
Speaker 1: it doesn't look like it's sorting itself out. I don't

1066
00:58:55,000 --> 00:58:58,600
Speaker 1: even know if we'll see Berlsconi again. And you have

1067
00:58:58,720 --> 00:59:00,960
Speaker 1: to worry about the arm from and they have. They

1068
00:59:01,000 --> 00:59:02,960
Speaker 1: do have a lot of debt. And if the rest

1069
00:59:03,000 --> 00:59:05,640
Speaker 1: of the world in flight its interest rates, Italy could

1070
00:59:05,680 --> 00:59:09,200
Speaker 1: not keep up. Did damn g. Did you capture the

1071
00:59:09,240 --> 00:59:11,520
Speaker 1: booming Europe and you look back with all of your

1072
00:59:11,600 --> 00:59:14,840
Speaker 1: strategies and analysts, did you feel like you saw Europe

1073
00:59:14,840 --> 00:59:16,880
Speaker 1: as a value and we're able to capture that? And

1074
00:59:16,880 --> 00:59:20,280
Speaker 1: then how do you recapitulate that as we are in

1075
00:59:20,320 --> 00:59:23,040
Speaker 1: these good times? Look, I mean, we Europe, we were

1076
00:59:23,160 --> 00:59:27,320
Speaker 1: we were fortunate to be on that that trend early

1077
00:59:27,520 --> 00:59:30,840
Speaker 1: and and it was unexpectedly partly because the political noise

1078
00:59:30,880 --> 00:59:33,200
Speaker 1: dominated the headlines and neglected the fact that if you're

1079
00:59:33,200 --> 00:59:35,120
Speaker 1: coming off such a low base, you don't need that

1080
00:59:35,240 --> 00:59:37,480
Speaker 1: much of a of a percentage changed to have a

1081
00:59:37,480 --> 00:59:41,080
Speaker 1: meaningful difference to what's going on, because anything is better

1082
00:59:41,120 --> 00:59:44,760
Speaker 1: than than nothing in in a peculiar sense. So you know,

1083
00:59:44,800 --> 00:59:48,040
Speaker 1: I think Europe continues to model through on the political side.

1084
00:59:48,320 --> 00:59:51,360
Speaker 1: So I think, but going into today and looking at

1085
00:59:51,960 --> 00:59:54,280
Speaker 1: annualizing the games we've made so far this year and

1086
00:59:54,320 --> 00:59:56,640
Speaker 1: thinking can you really believe that? And that's more generally,

1087
00:59:56,640 --> 00:59:59,640
Speaker 1: that's not that's not Europe particularly, Can that really carry

1088
00:59:59,640 --> 01:00:02,320
Speaker 1: on through all of this? Here? Clearly not? So the

1089
01:00:02,360 --> 01:00:05,040
Speaker 1: smart money is taking some risk off the table. It's

1090
01:00:05,080 --> 01:00:07,760
Speaker 1: not taking all the risk off the table. It's taking

1091
01:00:07,800 --> 01:00:09,600
Speaker 1: some risk off the table. If going back to what

1092
01:00:09,680 --> 01:00:12,440
Speaker 1: Ken said, differ inter strates go up meaningfully over the

1093
01:00:12,480 --> 01:00:15,360
Speaker 1: next twelve months, there will be a bunch of people

1094
01:00:15,680 --> 01:00:19,880
Speaker 1: who have borrowed money from potentially people around this table

1095
01:00:20,000 --> 01:00:22,960
Speaker 1: or in the room, who will not be able to

1096
01:00:23,000 --> 01:00:25,400
Speaker 1: pay it back. There are those people are out there,

1097
01:00:25,440 --> 01:00:28,680
Speaker 1: and the markets are not inaggregate pricing that. So that's

1098
01:00:28,720 --> 01:00:31,400
Speaker 1: a very simplicity. That doesn't mean that every company that's

1099
01:00:31,400 --> 01:00:33,080
Speaker 1: ever borrowed money is not going to be able to

1100
01:00:33,080 --> 01:00:35,919
Speaker 1: pay back, of course, not if there are some very

1101
01:00:35,960 --> 01:00:39,479
Speaker 1: little marketing that's four to six trillion dollars emerging market

1102
01:00:39,560 --> 01:00:43,240
Speaker 1: corporate debt that's dollar denominated, and if a dollar were

1103
01:00:43,280 --> 01:00:45,480
Speaker 1: to rise above where it is now it's actually a

1104
01:00:45,560 --> 01:00:48,560
Speaker 1: fairly low point, that could cause big problems for a

1105
01:00:48,600 --> 01:00:50,560
Speaker 1: lot of those companies paying that back because they're not

1106
01:00:50,840 --> 01:00:52,400
Speaker 1: going to be at earn it in their local currency.

1107
01:00:52,560 --> 01:00:55,960
Speaker 1: We haven't mentioned three countries that have really surprising economies

1108
01:00:56,120 --> 01:00:58,120
Speaker 1: of late. One is Brazil, which has been in a

1109
01:00:58,120 --> 01:01:00,520
Speaker 1: five year recession, but it's coming back from the dead.

1110
01:01:00,760 --> 01:01:04,760
Speaker 1: And I think that you can buy very very inexpensive

1111
01:01:04,760 --> 01:01:06,840
Speaker 1: things now. Uh And I think it's a pretty good

1112
01:01:06,880 --> 01:01:10,000
Speaker 1: commy we haven't mentioned India. India has been booming at

1113
01:01:10,040 --> 01:01:12,640
Speaker 1: a higher rate actually growth rate than China the last

1114
01:01:12,680 --> 01:01:14,760
Speaker 1: couple of years. And Modi has really done an enormous

1115
01:01:14,840 --> 01:01:18,120
Speaker 1: job of getting foreign capital into that country and really

1116
01:01:18,120 --> 01:01:20,520
Speaker 1: back from the dead as well as Russia. Russia because

1117
01:01:20,600 --> 01:01:23,480
Speaker 1: whale prices are coming back and gas prices are coming back.

1118
01:01:23,640 --> 01:01:26,160
Speaker 1: I do think that Russian economy should not be written

1119
01:01:26,160 --> 01:01:28,000
Speaker 1: off as much as it was. And then to circle

1120
01:01:28,040 --> 01:01:31,160
Speaker 1: back here in our final minutes, and David, I'll go

1121
01:01:31,200 --> 01:01:32,840
Speaker 1: to you again on this and please open it up

1122
01:01:32,880 --> 01:01:34,439
Speaker 1: to the panel. We have a partid of the United

1123
01:01:34,480 --> 01:01:38,720
Speaker 1: States coming here who looks at India, I would suggest,

1124
01:01:38,880 --> 01:01:42,800
Speaker 1: is distant and removed from his discourse and analysis, and

1125
01:01:43,040 --> 01:01:45,440
Speaker 1: is focused on Russia in a completely different way than

1126
01:01:45,440 --> 01:01:49,400
Speaker 1: conventional world economic form manners. What do you want to

1127
01:01:49,440 --> 01:01:53,240
Speaker 1: hear from him? As you look at Brazil, India and

1128
01:01:53,360 --> 01:01:56,480
Speaker 1: Russia doing better. He doesn't want to talk about those countries,

1129
01:01:56,520 --> 01:01:58,920
Speaker 1: doesn't I think what he wanted to Again, again, I

1130
01:01:58,960 --> 01:02:00,520
Speaker 1: don't speak for him, but what I think he wants

1131
01:02:00,520 --> 01:02:02,800
Speaker 1: to convey is that he's not this overre that he's

1132
01:02:02,840 --> 01:02:05,360
Speaker 1: been portrayed. He does want to work with other countries

1133
01:02:05,440 --> 01:02:07,480
Speaker 1: he wants to do check the rules a little bit

1134
01:02:07,480 --> 01:02:09,400
Speaker 1: different than I have been. But I don't think he's

1135
01:02:09,400 --> 01:02:12,800
Speaker 1: coming here to uh um, you know, canstigate people. I

1136
01:02:12,800 --> 01:02:14,760
Speaker 1: don't think that's his mission. I think his mission is

1137
01:02:14,800 --> 01:02:16,640
Speaker 1: to come here and say I can work with you,

1138
01:02:16,720 --> 01:02:22,760
Speaker 1: but you've got to work somewhere. Terms. Most likely who

1139
01:02:22,800 --> 01:02:26,600
Speaker 1: will come here to castigate people because he's a politician. Remember,

1140
01:02:26,640 --> 01:02:29,600
Speaker 1: I mean he comes here to play politics, not to

1141
01:02:30,480 --> 01:02:34,760
Speaker 1: can you know they uh some kind of new economic

1142
01:02:34,800 --> 01:02:38,280
Speaker 1: agenda of his administration to the rest of the world,

1143
01:02:38,320 --> 01:02:42,200
Speaker 1: because there's no economic agenda there no at least no

1144
01:02:42,280 --> 01:02:46,760
Speaker 1: internationalist economic agenda. But I just want to I don't

1145
01:02:46,840 --> 01:02:50,320
Speaker 1: think that people working on his response where working on

1146
01:02:50,360 --> 01:02:53,840
Speaker 1: a canstigation. This is just that bad. I just want

1147
01:02:53,880 --> 01:02:56,960
Speaker 1: to respond to the Professor Lagos point that is China

1148
01:02:57,040 --> 01:03:01,360
Speaker 1: different at this time? Actually in China don't view China

1149
01:03:01,600 --> 01:03:05,320
Speaker 1: is different because we openly admit that we have too

1150
01:03:05,400 --> 01:03:07,720
Speaker 1: much debt, right, and that is why we have a

1151
01:03:07,760 --> 01:03:12,080
Speaker 1: new phrasing. China is called the gray Rhino. I mean,

1152
01:03:12,160 --> 01:03:14,680
Speaker 1: we all know about black Swan, right, and then China

1153
01:03:14,800 --> 01:03:18,560
Speaker 1: have a new phrase called Great Rhino, referring to the

1154
01:03:18,640 --> 01:03:21,840
Speaker 1: risk that everybody sees it, but you don't tackle it.

1155
01:03:21,920 --> 01:03:23,840
Speaker 1: You don't you know, you can get used to it

1156
01:03:24,120 --> 01:03:27,920
Speaker 1: and then the risk finally explode. So these things we

1157
01:03:28,000 --> 01:03:30,880
Speaker 1: have a problem. What I was trying to say is

1158
01:03:30,880 --> 01:03:34,920
Speaker 1: that the resolution of the problem, the manner of the

1159
01:03:35,000 --> 01:03:38,800
Speaker 1: resolution of the problem in China will be different from

1160
01:03:38,840 --> 01:03:41,600
Speaker 1: a lot of other countries. That from your academics at

1161
01:03:41,680 --> 01:03:45,400
Speaker 1: Stanford and going back to high how do we clear markets?

1162
01:03:45,400 --> 01:03:47,560
Speaker 1: And do we clear them the same and just day

1163
01:03:47,640 --> 01:03:50,360
Speaker 1: least London or Michael Corbett's New York, how do you

1164
01:03:50,400 --> 01:03:54,480
Speaker 1: clear those markets in China? I mean it's the combination

1165
01:03:54,520 --> 01:03:59,360
Speaker 1: of female market clearness but itself as well as government intervention.

1166
01:03:59,520 --> 01:04:03,640
Speaker 1: And that's always the case in China. You cannot use

1167
01:04:03,760 --> 01:04:07,720
Speaker 1: the will of this government different than the recent pus.

1168
01:04:07,840 --> 01:04:09,880
Speaker 1: If anything, I think the will of this government is

1169
01:04:09,960 --> 01:04:14,800
Speaker 1: even younger to help clear the market sooner than later.

1170
01:04:16,480 --> 01:04:19,280
Speaker 1: I want to follow up on something President Trump might say,

1171
01:04:19,280 --> 01:04:21,760
Speaker 1: as I think he's addressed this group and say, well,

1172
01:04:21,800 --> 01:04:24,440
Speaker 1: I understand a lot of you may not like me,

1173
01:04:24,920 --> 01:04:27,280
Speaker 1: but if you look at your wallets, you should love me.

1174
01:04:27,920 --> 01:04:31,720
Speaker 1: And the danger, I think is what Tang said is

1175
01:04:31,760 --> 01:04:34,560
Speaker 1: that if the stock market starts going down, Willie pressure

1176
01:04:34,560 --> 01:04:37,040
Speaker 1: the Federal Reserve to keep interest right slow even if

1177
01:04:37,080 --> 01:04:40,400
Speaker 1: inflation is rising. Willie pressure regulators to do things to

1178
01:04:40,440 --> 01:04:44,800
Speaker 1: reduce the economy and turn what should be an equity

1179
01:04:44,840 --> 01:04:49,160
Speaker 1: market correction. If one comes into something much deeper. You

1180
01:04:49,240 --> 01:04:52,160
Speaker 1: might try to take some credit for the economy doing

1181
01:04:52,160 --> 01:04:53,760
Speaker 1: well around the world. He would say, look what I've

1182
01:04:53,760 --> 01:04:55,480
Speaker 1: done the United States, and what I've done has been

1183
01:04:55,600 --> 01:04:59,160
Speaker 1: used as my other economies and governments, and I suspect

1184
01:04:59,160 --> 01:05:01,160
Speaker 1: you'll try to take some, rightly or wrongly, for what's

1185
01:05:01,160 --> 01:05:03,640
Speaker 1: going on with I think I would say, I do

1186
01:05:03,760 --> 01:05:07,280
Speaker 1: hope that the World Economic Forum this week stays focus

1187
01:05:07,360 --> 01:05:10,160
Speaker 1: on an issue that's been uh it focused the last

1188
01:05:10,200 --> 01:05:12,520
Speaker 1: couple of years, which is income inequality, and that all

1189
01:05:12,520 --> 01:05:14,560
Speaker 1: that's going on doesn't take our eye off of that

1190
01:05:14,640 --> 01:05:18,040
Speaker 1: challenge because it still exists. Let's leave it there. It

1191
01:05:18,080 --> 01:05:21,000
Speaker 1: has been an interesting More again to our audience here,

1192
01:05:21,000 --> 01:05:22,800
Speaker 1: I want to say thank you so much across the

1193
01:05:22,800 --> 01:05:25,720
Speaker 1: World Economic Form, and thank you again to Bloomberg and

1194
01:05:25,760 --> 01:05:29,040
Speaker 1: Bloomberg Radio, Bloomberg Television for their coverage of this event.

1195
01:05:29,080 --> 01:05:30,919
Speaker 1: But I really want to thank and I've never done

1196
01:05:30,960 --> 01:05:35,800
Speaker 1: this in fourteen years, this audience for fighting through the snow.

1197
01:05:36,680 --> 01:05:39,840
Speaker 1: It is just extraordinary, the snow and we're all out

1198
01:05:39,880 --> 01:05:42,360
Speaker 1: there today. It's some of you in some real heartship.

1199
01:05:42,560 --> 01:05:45,080
Speaker 1: Thank you so much for coming today. Thank you to

1200
01:05:45,160 --> 01:05:56,880
Speaker 1: Marjo on the World Economic Thanks for listening to the

1201
01:05:56,880 --> 01:06:03,320
Speaker 1: Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,

1202
01:06:03,760 --> 01:06:07,960
Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at

1203
01:06:08,000 --> 01:06:12,280
Speaker 1: Tom Keane before the podcast. You can always catch us worldwide.

1204
01:06:12,720 --> 01:06:13,800
Speaker 1: I'm Bloomberg Radio