WEBVTT - Surveillance: Hard Brexit Looks Very Tangible, Foley Says 0:00:09.840 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily 0:00:13.960 --> 0:00:17.560 we bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:34.120 Bloomberg dot Com and of course on the Bloomberg. Within 0:00:34.200 --> 0:00:37.160 all of this news, within the stories of the day, 0:00:37.800 --> 0:00:41.800 there's an ability to triangulate and what the pros triangulate 0:00:41.880 --> 0:00:46.320 with it's foreign exchange. From our Bloomberg Interactive Brooker Studios, 0:00:46.720 --> 0:00:50.160 we go to London and Jane Folly of Robbo Bank, 0:00:50.280 --> 0:00:52.600 Jane within the blur. Sometimes when I look at my 0:00:52.640 --> 0:00:55.800 Bloomberg screen, I squint my eyes. It's just because the 0:00:55.800 --> 0:00:57.720 red and the green could tell me what's going on. 0:00:58.160 --> 0:01:02.279 When you try to triangulate the markets right now, you've 0:01:02.280 --> 0:01:06.640 got to be focused on more than cable right well. 0:01:06.680 --> 0:01:09.360 I think Sterling really does give us a really good 0:01:09.400 --> 0:01:12.560 reflection about how vulnerable investors are feeling with respect to 0:01:12.600 --> 0:01:16.480 the uncertainty, the political uncertainty in the UK right now. 0:01:16.800 --> 0:01:19.920 And it's been very interesting this morning listening to jurisam May. 0:01:20.000 --> 0:01:22.360 She came in front of Parliament and she sounded very 0:01:22.440 --> 0:01:26.440 defiant initially with respect to you, her dear, but she 0:01:26.560 --> 0:01:29.120 has been stood now for two hours, more than two hours, 0:01:29.440 --> 0:01:31.959 and there has been a lot of pressure from MP's 0:01:32.200 --> 0:01:36.280 John Ferrell is going Jane, come on now. I just 0:01:36.280 --> 0:01:38.720 thought it's really interesting watching these headlines to drop across 0:01:38.720 --> 0:01:41.880 the bloomberg of people I've never heard of resigning, and 0:01:41.920 --> 0:01:44.640 I imagine most people in the FX market have never 0:01:44.680 --> 0:01:48.440 heard of them either, with the exception of tomic rap Jane, 0:01:48.520 --> 0:01:50.920 how important is that just in terms of we don't 0:01:50.960 --> 0:01:53.080 know who these people are, but just the numbers are 0:01:53.080 --> 0:01:58.360 what is important here. You have had already four ministers 0:01:58.400 --> 0:02:02.080 resigning and an additional to a parliamentary Private secretary. But 0:02:02.160 --> 0:02:04.720 even if you didn't know those names, you would know 0:02:04.760 --> 0:02:07.760 the name as you pointed out of Brexit secretary rather 0:02:07.800 --> 0:02:10.200 now he is he has resigned and you could say, 0:02:10.720 --> 0:02:13.519 you know, this is the second Brexit minister to set 0:02:13.639 --> 0:02:17.639 to step down, the second one that really does reinforce 0:02:17.760 --> 0:02:21.400 the splits within the cabinet. So we have here in 0:02:21.440 --> 0:02:26.600 the UK an extremely divided cabinet and extremely divided government 0:02:27.360 --> 0:02:30.880 and an opposition party which is very market unfriendly, an 0:02:30.880 --> 0:02:33.200 opposition party which is on the far left that has 0:02:33.280 --> 0:02:37.520 policies to renationalize, etcetera. So the political backdop from an 0:02:37.520 --> 0:02:40.880 investor's point of view now is looking really very ugly 0:02:41.360 --> 0:02:44.000 and right now also, as many and pis have pointed 0:02:44.000 --> 0:02:47.160 out to the Prime Minister in Parliament this morning, there 0:02:47.400 --> 0:02:52.079 probably isn't parliamentary backing for her deal, and she has 0:02:52.120 --> 0:02:54.640 said if there isn't a deal, the UK is still 0:02:54.680 --> 0:02:57.960 going to leave the EU in March next year, meaning 0:02:58.280 --> 0:03:01.120 that the prospect of a hard bread is looking very 0:03:01.160 --> 0:03:04.160 tangible today. So Jane, looking at the market right now 0:03:04.240 --> 0:03:08.000 overnight ball on cable really elevated yesterday and today as well. 0:03:08.120 --> 0:03:10.639 Still I'm looking at the pricing for a bank having 0:03:10.680 --> 0:03:14.040 them great hike being taken out for the spring of 0:03:14.160 --> 0:03:15.880 next year. What do you think we should be paying 0:03:15.880 --> 0:03:20.120 attention to in markets right now? Well, you know, unfortunately, 0:03:20.240 --> 0:03:22.360 because it's so political, there are a lot of investors 0:03:22.400 --> 0:03:24.280 who are waiting on the headline, on the sidelines, just 0:03:24.400 --> 0:03:27.120 waiting for those headlines, waiting to see what's going to happen. 0:03:27.400 --> 0:03:31.160 So politics is very dominant certainly for the UK. I 0:03:31.160 --> 0:03:33.280 mean beyond that, of course, there is still the focus 0:03:33.320 --> 0:03:35.920 on on the trade deals on China and the US, 0:03:36.040 --> 0:03:38.240 on the U s data, see how much that the 0:03:38.240 --> 0:03:41.840 Fed can hike, to see how much the Federal Reserve 0:03:41.840 --> 0:03:44.400 could be impacted by the global growth outlook. There is 0:03:44.400 --> 0:03:47.320 still bad data for Q three from Germany, from Japan, 0:03:47.400 --> 0:03:49.560 et cetera, so that there is still an awful lot 0:03:49.600 --> 0:03:52.000 to focus on. But in the UK for sterling, it's 0:03:52.080 --> 0:03:56.240 really quite simple. It's on those headlines regarding the UK 0:03:56.360 --> 0:03:59.320 politic political backdrop, it's it's the end of the year. 0:03:59.480 --> 0:04:01.920 You're going to start writing the rabble being piece. What 0:04:01.960 --> 0:04:04.040 are you writing on the dollar right now? I mean, 0:04:04.080 --> 0:04:08.400 I know the cables the focus today one, but do 0:04:08.480 --> 0:04:11.560 you have an interesting dollar call or are you just 0:04:11.640 --> 0:04:15.840 waiting to see what breaks well. I've been really since 0:04:16.160 --> 0:04:18.480 since March. It's much of its extincts. To be precise, 0:04:18.520 --> 0:04:22.000 I've been adollable and my focus was one twelve, which 0:04:22.160 --> 0:04:24.440 really right now doesn't look that far away. I'm talking 0:04:24.440 --> 0:04:28.279 about your dollar clearly doesn't look that far away. Now. Now, 0:04:28.440 --> 0:04:31.280 I think I can present an argument many commentators can 0:04:31.279 --> 0:04:33.360 that next year we could see a sarin in the 0:04:33.400 --> 0:04:35.800 outlook for the US, we could see growth platoning, we 0:04:35.800 --> 0:04:38.880 could see a platoning in U S rates. But I'm 0:04:38.920 --> 0:04:41.840 also still really quite concerned about Europe. I'm concerned about 0:04:41.839 --> 0:04:45.440 European growth, I'm concerned about ECB policy, concerned very much 0:04:45.440 --> 0:04:49.240 about populism and the politics in Europe too. So I 0:04:49.279 --> 0:04:52.080 don't really see a case well by the euro is 0:04:52.120 --> 0:04:53.760 going to be in any position to take back a 0:04:53.800 --> 0:04:56.520 lot of ground against I've never asked this question. I'm 0:04:56.520 --> 0:04:59.880 going to do it right now. Is Brexit just pop 0:05:00.200 --> 0:05:05.160 is um United Kingdom flavor? Yeah, we've seen populism obviously 0:05:05.160 --> 0:05:07.760 in the US. We've seen populism in the UK. We've 0:05:07.800 --> 0:05:11.599 seen populism. We have it. We have it in Sweden, 0:05:11.760 --> 0:05:15.160 in Germany, we have it in Poland and in Czech Republic. 0:05:15.400 --> 0:05:19.120 Jane Folly's excellence totally different than yours. Like when Jane talks, 0:05:19.279 --> 0:05:21.239 you know where she's from. Where are you from? Jane? 0:05:22.320 --> 0:05:25.160 Actually I'm from Ireland, but I was. I grew up 0:05:25.200 --> 0:05:28.200 in Southland, South London, and so that's that much different 0:05:28.240 --> 0:05:30.680 from where you are up in the Midlands. Yeah, OK, 0:05:30.760 --> 0:05:33.440 though if I had a Midlands accent, you wouldn't be 0:05:33.400 --> 0:05:37.600 a radio very very different, but ware into your joinus. 0:05:37.680 --> 0:05:40.280 I mean, Brexit is just the populism of the era 0:05:40.400 --> 0:05:43.720 defined in the United The really interesting thing about Brexit 0:05:44.000 --> 0:05:46.600 is that on the dawn of Brexit, when we had 0:05:46.760 --> 0:05:49.200 the sun come up the following day after the votes, 0:05:49.960 --> 0:05:52.480 and many people sat there and said, big problem for 0:05:52.520 --> 0:05:55.520 the continent, perhaps the world. Within a couple of months 0:05:55.880 --> 0:05:58.560 it became less the world, maybe the continent, and then 0:05:58.600 --> 0:06:00.240 a couple of months after that it could be came 0:06:00.400 --> 0:06:02.160 maybe this is just a U case. So what's a 0:06:02.200 --> 0:06:05.000 big problem right now, Jane? Is it expanding back out 0:06:05.120 --> 0:06:08.000 from the United Kingdom or is it a discreet story. 0:06:09.320 --> 0:06:11.960 I think there's two aspects here which could impact the 0:06:11.960 --> 0:06:14.400 the Eurozone and the EU and and the FIRTS is 0:06:14.480 --> 0:06:17.200 just as trade in the UK, we import a lot 0:06:17.240 --> 0:06:21.839 more from Europe than they do from US, and particularly Germany, 0:06:21.880 --> 0:06:25.680 so that so there's a straight trade front. Um. There's 0:06:25.680 --> 0:06:29.080 a lot of concerns about supply change, cars, autos except 0:06:29.120 --> 0:06:30.599 are going back and forth across the border. So we 0:06:30.600 --> 0:06:33.040 have this story. But there is the other story, and 0:06:33.080 --> 0:06:36.800 this is about the integrity of the European project, of 0:06:36.839 --> 0:06:40.680 the Eurozone project, of the EU. And and this is 0:06:41.080 --> 0:06:43.520 a question or this is a threat perhaps, so Brexit 0:06:43.600 --> 0:06:46.360 is potentially a threat to both of those, particularly when 0:06:46.400 --> 0:06:49.640 you have populism and Italy nibbling at the at the 0:06:50.279 --> 0:06:53.000 the project as well, where you have nationalism in some 0:06:53.040 --> 0:06:56.400 countries as well, So populism nationalism they already there in 0:06:56.440 --> 0:06:59.000 Europe and that to have Brexit happening on the advocates 0:06:59.080 --> 0:07:03.360 here is thing which again could undermine the project. So 0:07:03.360 --> 0:07:06.960 the letters are going in leading Brexit backer Jacob Reese 0:07:07.040 --> 0:07:11.160 Mark calling for a leadership challenge. Now as we know, Jane, 0:07:11.240 --> 0:07:14.240 you need forty eight of these letters to trigger a 0:07:14.320 --> 0:07:17.680 leadership challenge. Is that what is next on the horizon 0:07:17.720 --> 0:07:19.800 as you sit there in the city of London, people 0:07:19.840 --> 0:07:22.600 coming around to that idea that a leadership challenge is coming. 0:07:23.880 --> 0:07:26.480 We've seen several headlines this morning. I think this weekend 0:07:26.600 --> 0:07:30.200 is going to be really crucial. We've seen treason May 0:07:30.320 --> 0:07:33.520 really fighting for her job before UM and I think 0:07:33.600 --> 0:07:36.200 this weekend is going to be really crucial for her too. 0:07:36.440 --> 0:07:38.960 And what's really quite interesting and the two hours where 0:07:38.960 --> 0:07:42.120 she's been on her feet in Parliament today is a 0:07:42.160 --> 0:07:45.640 lot of lack of support to some of the funds 0:07:45.680 --> 0:07:47.120 for that for the deal, but also a lot of 0:07:47.200 --> 0:07:49.520 questions here for a second referendum, to a lot of 0:07:49.560 --> 0:07:52.360 people saying that they don't think that there is enough 0:07:52.400 --> 0:07:57.520 support in Parliament for her, and calls again again about 0:07:57.560 --> 0:08:00.640 her her leadership or questions about her ship. You know, 0:08:00.680 --> 0:08:02.520 of course I get all my history out of movies 0:08:02.720 --> 0:08:05.120 and and Jane Foley to go back to Lincoln. Daniel 0:08:05.160 --> 0:08:07.840 day Lewis is Lincoln. They're all job owning about the 0:08:07.880 --> 0:08:11.280 Emancipation Act. And basically it's like, if you vote for this, 0:08:11.440 --> 0:08:13.920 I'll give you a you know, some bargain in your 0:08:13.960 --> 0:08:17.480 district in Ohio or wherever. Is that what goes on here? 0:08:17.520 --> 0:08:20.040 I mean this Prime Minister may leave House of Commons 0:08:20.040 --> 0:08:22.120 and go find and can ask a question in English? 0:08:22.240 --> 0:08:25.120 Hold on, but could some does a member of Parliament 0:08:25.320 --> 0:08:28.160 get a phone call? You know, we'll give you a subway, 0:08:28.600 --> 0:08:31.840 a subway stop, or you know, some infrastructure project. It's 0:08:32.880 --> 0:08:36.400 that's what we're doing in America. It's not as it's 0:08:36.440 --> 0:08:40.120 common in the UK. But where do you have that is? 0:08:40.160 --> 0:08:43.439 Obviously with the d Up Treason may have a minority. 0:08:43.600 --> 0:08:46.079 The Troy Party have a minority in the House of 0:08:46.120 --> 0:08:48.360 Commons and she very reliant on the nine of tendencies 0:08:48.640 --> 0:08:51.960 from the Northern Island d Up Party to support her 0:08:52.320 --> 0:08:54.440 and went in order to buy that support after the 0:08:54.440 --> 0:08:58.200 election that last year, and she did certainly the several confessions. 0:08:58.400 --> 0:09:01.280 Now this is Reese marg Is that how you said? 0:09:01.640 --> 0:09:04.800 Did I do well? Calls for a leadership challenge to 0:09:04.920 --> 0:09:08.719 check that? Three minutes ago I missed it, did I 0:09:08.760 --> 0:09:12.720 was just sending fan letters out and Jacoba, where your keyboard, Jim? 0:09:13.040 --> 0:09:17.560 Jane Fowley, what's a leadership challenge? This would be when 0:09:18.520 --> 0:09:22.199 within the the electoral process is very different. We don't 0:09:22.240 --> 0:09:24.800 elect a president or Prime minister in the way that 0:09:24.840 --> 0:09:27.640 you do. We elect the party and then the party 0:09:27.920 --> 0:09:31.120 chooses the leadership. So this is the different here in 0:09:31.160 --> 0:09:36.199 the US. So they would be potentially putting other names 0:09:36.440 --> 0:09:39.280 in the hats and choosing a new OA. We would 0:09:39.280 --> 0:09:42.080 still have a Tory government. Jane Fowley. Thank you Civics 0:09:42.160 --> 0:09:57.439 with Jane Foley of Rabble Bank today for our American audience. John, 0:09:57.720 --> 0:10:00.600 My worst woman in London was that ending in line 0:10:00.640 --> 0:10:02.880 at the Tower of London to get in. It was 0:10:03.040 --> 0:10:06.680 finding a bar. I could watch an American Football League 0:10:06.720 --> 0:10:10.400 game and the Detroit Lions are playing, and that's why 0:10:10.480 --> 0:10:14.400 it's so important to get deep Brexit perspective from our 0:10:14.480 --> 0:10:19.880 London bureau chief who loves he worships the Detroit Lions. 0:10:20.000 --> 0:10:25.920 He does, he doesn't care about Villa west Ham East 0:10:25.960 --> 0:10:32.600 Poultry whatever the Calean. This is the one guy in 0:10:32.640 --> 0:10:34.640 the United Kingdom I want to talk to you today. 0:10:34.800 --> 0:10:37.800 Why do you bring him? Mr Calenan of the Detroit 0:10:37.880 --> 0:10:40.960 Lion not speaking to our London bureau chief about the 0:10:41.120 --> 0:10:44.199 Detroit Lions. We're going to talk to him about Brexit. 0:10:44.280 --> 0:10:47.840 Good morning to you or good afternoon to you, Neil Canahan, 0:10:48.360 --> 0:10:50.360 good morning. I could give your chapter in first about 0:10:50.360 --> 0:10:53.480 the Lions as well, obviously carriage Tom you probably will 0:10:53.559 --> 0:10:55.800 do that, Neil. Just the Prime Minister last the week 0:10:56.640 --> 0:11:00.560 looking increasingly unlikely, Jonathan Um. She came about today at 0:11:00.640 --> 0:11:04.080 ten thirty am. She looked confident, she was prepared, the 0:11:04.120 --> 0:11:06.360 speech was good, and then it just all began to 0:11:06.400 --> 0:11:10.440 fall apart. MP after MP it stood up and said 0:11:10.440 --> 0:11:13.520 that they would oppose the deal that she has agreed, 0:11:14.120 --> 0:11:17.560 and the chatter during the morning was increasingly that they 0:11:17.559 --> 0:11:19.600 were getting close to the number of votes that would 0:11:19.600 --> 0:11:22.480 trigger a vote of confidence in her leadership. The BBC 0:11:22.720 --> 0:11:26.000 is now saying that that looks likely. Jacob Reese magg 0:11:26.000 --> 0:11:30.440 who's an arch your your skeptic. He's now said that 0:11:30.480 --> 0:11:32.640 he's going to send in a letter of no confidence. 0:11:32.640 --> 0:11:34.439 He wouldn't do that, I don't think unless he was 0:11:34.480 --> 0:11:36.520 actually confident that they have the votes to trigger that, 0:11:37.000 --> 0:11:42.000 to trigger the leadership confidence motion. And so it will 0:11:42.080 --> 0:11:44.640 be very, very tough for Treason May to survive the week. 0:11:44.679 --> 0:11:47.280 But then she we've been writing her offer in nearly 0:11:47.280 --> 0:11:50.199 two years and she's still there. Forty eight votes, forty 0:11:50.240 --> 0:11:53.520 eight letters needed to get the leadership contest, and I 0:11:53.559 --> 0:11:56.040 understand you need about a hundred and fifty eight votes 0:11:56.559 --> 0:11:59.040 to push him out of the position. Now do they 0:11:59.040 --> 0:12:03.240 have the numbers? They have about a core of about 0:12:03.280 --> 0:12:07.840 a g who have consistently been against the deal that 0:12:07.960 --> 0:12:10.240 was under negotiation, and her in favor of no deal. 0:12:10.320 --> 0:12:12.679 But now based on what we saw earlier on or MP, 0:12:12.800 --> 0:12:15.600 after MP and her own party stood up and basically 0:12:16.440 --> 0:12:19.600 congratulated her for her work, but said this is not 0:12:19.679 --> 0:12:22.920 going to fly with me or my constituents, and I'm 0:12:22.960 --> 0:12:25.440 going to oppose the deal. And therefore she's really going 0:12:25.480 --> 0:12:27.800 to struggle in that leadership contest. The question is who 0:12:27.800 --> 0:12:30.920 comes forward? Does Boris Johnson finally make a move. He's 0:12:30.920 --> 0:12:33.400 treating to before and never has. Who's going to be 0:12:33.440 --> 0:12:37.160 the obvious competitor to her? Dominic rab who who resigned 0:12:37.160 --> 0:12:39.800 this morning is probably a contender as well. And then 0:12:39.840 --> 0:12:42.559 the dangerous that the votes get split and she survives, 0:12:42.600 --> 0:12:44.920 and what's the alternative? And I think that's what's interesting 0:12:45.120 --> 0:12:47.280 about all of this. Prime Minister Masa's it's my deal, 0:12:47.400 --> 0:12:50.240 no deal, or no Brexit at all. The people, the 0:12:50.240 --> 0:12:53.080 individuals that have resigned have said plenty about why they 0:12:53.120 --> 0:12:55.200 don't like the deal on the table, but said little 0:12:55.200 --> 0:12:58.080 about what the alternative if they pursue would be. Do 0:12:58.120 --> 0:13:00.560 we have any idea what the brexit? He has actually 0:13:00.559 --> 0:13:04.280 one here, Neil I think that the Parliament is so 0:13:04.440 --> 0:13:07.319 split you just can't say. Because there is an animent 0:13:07.360 --> 0:13:10.760 of people who do want to second referendum, and she 0:13:10.920 --> 0:13:13.560 left opened that possibility last night when she talked about 0:13:13.600 --> 0:13:16.200 now Brexit and the last two years with being a 0:13:16.240 --> 0:13:19.240 lot of talk about nothing, but that that would seem unlikely. 0:13:19.280 --> 0:13:22.120 They don't have enough votes at the momentum. High bragsit 0:13:22.400 --> 0:13:25.680 that the right at the risk of that has risen marketly, 0:13:25.720 --> 0:13:27.720 and that's what markets are showing this morning. Neil I 0:13:27.720 --> 0:13:30.400 can get away with this you with your Irish heritage. 0:13:30.440 --> 0:13:32.600 If we go back to David Lloyd George, who, among 0:13:32.640 --> 0:13:37.080 other things folks spoke Welsh and English was a second language, 0:13:37.080 --> 0:13:40.960 which I find extraordinary. But within the Irish question in 0:13:41.000 --> 0:13:44.320 the huge battles coming out of World War One, he 0:13:44.600 --> 0:13:48.600 was shown the door in nine two. When in a 0:13:48.640 --> 0:13:51.840 parliamentary system, when you're showing the door, do you know 0:13:51.920 --> 0:13:55.439 who's going to take over or is it a mystery 0:13:55.640 --> 0:13:58.199 right to the last moment? Is are there ducks lined 0:13:58.320 --> 0:14:01.840 up now to take over for prime minister? May I 0:14:01.880 --> 0:14:04.079 think that's exactly what will be happening in this afternoon. 0:14:04.240 --> 0:14:06.720 People will be justling for a position so that they're 0:14:06.760 --> 0:14:11.200 ready to launch their pitch and to go for the leadership. 0:14:11.760 --> 0:14:16.160 Baris Johnson, Dominick rab maybe even Michael go if treason 0:14:16.360 --> 0:14:19.360 it's gone, Jim Ferroll. It's so different than America. Well, 0:14:19.360 --> 0:14:21.920 it's not a presidential system. You're the leader of the 0:14:21.960 --> 0:14:24.920 party and then you are therefore also the prime minister 0:14:24.960 --> 0:14:27.360 of your in power um and you vote for the 0:14:27.400 --> 0:14:29.960 leader of the party. As a conservative core, it's not 0:14:30.000 --> 0:14:32.880 the people that vote for not all of the country, 0:14:33.000 --> 0:14:36.480 it's the conservative members that ultimately will vote for the 0:14:36.200 --> 0:14:39.640 like the part today it was about speaking to her party, 0:14:40.320 --> 0:14:44.160 Parliament and the country. You know, it's it's just different. 0:14:44.440 --> 0:14:46.840 But some people speaking to their constituency and you know 0:14:46.880 --> 0:14:48.920 the political game for so many people. Tom, that's how 0:14:48.920 --> 0:14:53.720 do I get reelected? Neil Alliance Packers and the Lions 0:14:53.760 --> 0:14:55.680 pack I mean, can the Lions do it to the Packers? 0:14:55.880 --> 0:14:59.680 They're stumbling the way we've been playing for the last 0:14:59.680 --> 0:15:03.520 few we with no corner box radio against ironn Rodgers. No, okay, 0:15:04.160 --> 0:15:08.040 there you are folks from London and Ireland nailing the 0:15:08.080 --> 0:15:12.000 Michael Bard talk on the Detroit Lions, Neil calling and 0:15:12.120 --> 0:15:15.880 joining us. Is that? That's the coolest thing about Bloomberg 0:15:16.000 --> 0:15:18.680 is a guy running or London office is from Ireland 0:15:18.920 --> 0:15:22.320 and loves Michael Barr's Detroit. You keep asking how they 0:15:22.360 --> 0:15:26.400 film one body stadium with NFL fans. There are tons 0:15:26.520 --> 0:15:29.760 in snowing. If you been over to blooming deal ship 0:15:29.840 --> 0:15:32.800 my music, I'm gonna get I wouldn't. I would never 0:15:32.880 --> 0:15:35.600 do that. Have you been over to Bloomingdale's and seeing 0:15:35.640 --> 0:15:52.840 their Christmas display into other respects? Oh? Mr? You real's you? 0:15:53.000 --> 0:15:59.600 Not me? You got that right? Feel like him? This morning. 0:15:59.640 --> 0:16:21.000 You means and I quote stink stop the Brexit vote 0:16:21.560 --> 0:16:25.200 was clubs call it fifty eight, depending on who's counting 0:16:25.200 --> 0:16:29.160 and what the mood was. But in David blanch Flowers Cardiff, 0:16:29.480 --> 0:16:34.640 where Whales said leave, Cardiff said remain. The prosperity perhaps 0:16:34.680 --> 0:16:40.040 of Cardiff with a sizeable vote of remains six and leave. 0:16:42.040 --> 0:16:45.160 David blanche Flower, of course a member of the Bank 0:16:45.200 --> 0:16:49.720 of England's committee, and of course iconic and wage economics 0:16:49.800 --> 0:16:54.080 and macro economics at Dartmouth College, Professor blanch Flower, wonderfully 0:16:54.080 --> 0:16:56.160 have you with us this morning, Just give us a 0:16:56.200 --> 0:17:00.600 glimmer of your whales. Why did Cardiff say remain in 0:17:00.600 --> 0:17:06.800 in Whales stunned? In certainly, well, in some sense what 0:17:06.840 --> 0:17:11.080 we've seen around the globe is the big cities essentially 0:17:11.240 --> 0:17:13.680 work in pre content with where things were. So think 0:17:13.720 --> 0:17:16.480 about in the US New York and the big cities Chicago, 0:17:17.040 --> 0:17:22.199 in Britain, London, Um, Edinburgh all voted to remain. The 0:17:22.280 --> 0:17:25.520 rest of the rest of Wales essentially was pretty unhappy, 0:17:25.560 --> 0:17:29.000 the old coal towns and the steel towns and rural Wales. 0:17:29.040 --> 0:17:31.159 But I think the answer now is actually that it 0:17:31.200 --> 0:17:34.120 appears that the polling in Wales has kind of moved 0:17:34.119 --> 0:17:38.480 in the other direction, particularly has as Brittles has not delivered. 0:17:38.640 --> 0:17:41.399 And obviously today is a big day where markets are 0:17:41.440 --> 0:17:44.560 in turmoil because it's quite clear that there really hasn't 0:17:44.560 --> 0:17:47.159 been a deal and there's no deal, there's credible on 0:17:47.160 --> 0:17:49.240 the table. So now we have I think particularly the 0:17:49.240 --> 0:17:53.080 big deal today is Scottland back, because Scotland is pretty 0:17:53.119 --> 0:17:55.840 unhappy and they're not even included, not the words of 0:17:55.880 --> 0:17:59.160 Scotland isn't even in the in this five page document, 0:17:59.240 --> 0:18:02.280 and the and the Scots and the Welsh, I think 0:18:02.840 --> 0:18:04.800 saying if Ireland has a deal, we want to deal 0:18:04.920 --> 0:18:08.200 well exactly. And Prime Minister May, in a huge emotion 0:18:08.359 --> 0:18:12.280 earlier this morning, it seems hours ago, said Scotland is 0:18:12.359 --> 0:18:15.200 part of the United Kingdom which carries a certain seventeen 0:18:15.520 --> 0:18:20.040 oh three residents. Residents I should say to it, Professor 0:18:20.080 --> 0:18:23.560 Blanche Flower, within this and there's been upset one, upset 0:18:23.600 --> 0:18:27.040 two checkers dot dot don Here we are in November 0:18:27.080 --> 0:18:30.439 of two thousand and eighteen. Are we any closer in 0:18:30.520 --> 0:18:35.600 your reading to a desire for a second referendum? Or 0:18:35.640 --> 0:18:40.360 is that the great untouchable? Well, I think we probably 0:18:40.480 --> 0:18:44.600 are closer to revos. I mean essentially there's three options 0:18:44.600 --> 0:18:47.680 on the table, leave with no deal, don't leave it all, 0:18:48.119 --> 0:18:53.520 or leave with this deal. And this deal looks hugely unacceptable. Um. Um. 0:18:53.520 --> 0:18:58.159 Reese has actually called for a maze resignation. UM. I 0:18:58.240 --> 0:18:59.920 think in the end what we're going to see is 0:19:00.040 --> 0:19:02.640 this deal isn't very isn't a really very good I mean, 0:19:02.640 --> 0:19:06.480 the person in charge of negotiating the deal, Dominic Rum, 0:19:06.480 --> 0:19:09.159 has now quit. He's the person supposedly in charge of it. 0:19:09.560 --> 0:19:12.640 So I think this just looks like, you know, a 0:19:12.640 --> 0:19:15.800 total collapse of the deal, lack of political support, and 0:19:15.840 --> 0:19:18.520 I suspect in the end we're going to see some 0:19:18.600 --> 0:19:20.720 kind of revote. I when there was seven hundred thousand 0:19:20.720 --> 0:19:23.960 people demonstrating in London very peacefly a week or so ago. 0:19:24.440 --> 0:19:27.240 So I think I think in some sense that the option, 0:19:27.320 --> 0:19:30.880 this option of take this deal looks already like it's 0:19:30.880 --> 0:19:33.000 not going to happen. Them in the market responding, we've 0:19:33.040 --> 0:19:36.520 seen a huge collapse in British banks, RBS and Barkleys. 0:19:36.560 --> 0:19:40.840 We've seen the British house builders Persimmon and and and others. 0:19:40.880 --> 0:19:42.639 I mean they've done eight per cent or so so 0:19:42.680 --> 0:19:45.080 when markets respond like that, I think you kind of 0:19:45.280 --> 0:19:47.240 have to rethink. And even if there's a fall of 0:19:47.280 --> 0:19:51.239 the government, um, the people are not going to be 0:19:51.359 --> 0:19:52.800 you know, the deal is not going to be much 0:19:52.800 --> 0:19:55.119 better if you have a new prime minister tomorrow. So 0:19:55.160 --> 0:19:57.840 I think the answer is that this, this is really 0:19:57.840 --> 0:20:02.200 not a credible outcome. We may well see another another vote, 0:20:02.440 --> 0:20:05.080 and we may well in the end see you know that. 0:20:05.440 --> 0:20:07.080 I don't think the no Deal is going to happen. 0:20:07.080 --> 0:20:09.720 I think we've probably going to be um back to 0:20:09.760 --> 0:20:12.760 where you were, folks, Royal Bank of Scotland down ten eleven. 0:20:13.200 --> 0:20:18.560 Here in London trading today David blanche Flower, Governor Kearney 0:20:18.600 --> 0:20:22.120 has some constraints here, fewer degrees of freedom, and one 0:20:22.119 --> 0:20:24.960 of them, as we saw in US retail sales, goes 0:20:25.000 --> 0:20:28.399 to a blanch Flower tone, which is where's the inflation? 0:20:28.560 --> 0:20:32.040 I mean every report is sort of kind of like, really, 0:20:32.240 --> 0:20:35.600 where's the inflation? Where is that dynamic? From where you 0:20:35.640 --> 0:20:40.480 sit right now? Are are are central bankers misjudging that 0:20:40.840 --> 0:20:46.480 modest measured inflation fear? Absolutely? I mean if you look 0:20:46.560 --> 0:20:48.760 both in the US and the UK, the question you 0:20:48.880 --> 0:20:51.760 probably ask yourself is where where is the evidence that 0:20:51.760 --> 0:20:54.200 you need to raise rates to deal with the inflation 0:20:54.560 --> 0:20:58.600 inflationing expectations of flat certainly not rising. Inflation looks to 0:20:58.640 --> 0:21:03.000 be very weak. There is and obviously the downside risk. 0:21:03.080 --> 0:21:05.200 Let's go to Karnie. I mean, Connie made it clear 0:21:05.240 --> 0:21:08.280 that he thought the biggest downside risk we're actually from 0:21:08.280 --> 0:21:11.480 brexit will too. Equally that that today you would clearly 0:21:11.560 --> 0:21:13.440 argue on what you and I've been talking about, that 0:21:13.560 --> 0:21:15.760 those risks are greater and the big deal, of course 0:21:15.800 --> 0:21:18.080 in the US we're hearing some business folks, is that 0:21:18.440 --> 0:21:22.280 the downside risk from trade wars. I suspect with rate 0:21:22.400 --> 0:21:25.960 rises coming the slowing of the world economy. What we're 0:21:25.960 --> 0:21:29.639 seeing is slowing of economy is induced by errors by 0:21:29.680 --> 0:21:32.280 the central bank, especially the stead I think it's all 0:21:32.440 --> 0:21:35.560 in all probability. The US is now slowing and what 0:21:35.640 --> 0:21:38.520 we're hearing out of the FED members is complete error. Daniel, 0:21:38.840 --> 0:21:41.720 I once attended and spoke modestly to one of your 0:21:41.840 --> 0:21:45.040 packed lecture halls at Dartmouth College, and folks, the thing 0:21:45.080 --> 0:21:48.200 was completely packed with Keynesians, just so yeah, you know, 0:21:48.280 --> 0:21:51.920 I mean completely stacked, but you could hear a pin 0:21:52.000 --> 0:21:56.480 drop over the under employed. This has been a life 0:21:56.480 --> 0:22:00.399 study for you. I get more male professor plants, flower 0:22:00.920 --> 0:22:04.160 and elite saying it's a fully employed economy that I've 0:22:04.200 --> 0:22:13.560 ever gotten before. How underemployed are the underemployed in America? Well, 0:22:13.600 --> 0:22:17.199 it's it's certainly clear that underemployment in America is a 0:22:17.240 --> 0:22:19.800 really big deal. Um and David Bell and I have 0:22:19.840 --> 0:22:22.639 a paper that people can see on my website. It 0:22:22.760 --> 0:22:25.639 basically shows you that it's the main variable that explains 0:22:26.000 --> 0:22:30.280 labor markets slack. It's under employment that's holding down wages. 0:22:31.040 --> 0:22:33.760 We have poorer data on the US than any other place. 0:22:34.320 --> 0:22:37.120 But it's not just the part time for economic reasons. 0:22:37.119 --> 0:22:39.280 It's people who are part time. They're happy to be 0:22:39.400 --> 0:22:42.240 part time, they want more hours, and many full time 0:22:42.280 --> 0:22:46.280 people do too, So that's the mismeasured factor. But it 0:22:46.320 --> 0:22:48.080 seems to me when you go around the country you 0:22:48.160 --> 0:22:50.720 talk to people that many of them say and like 0:22:50.800 --> 0:22:52.840 more hours. I'd like to work more than I can do. 0:22:53.160 --> 0:22:56.880 People are ours constrained. And if that's so, that probably 0:22:56.960 --> 0:22:59.720 means that the nerors so called full employment rate of 0:23:00.040 --> 0:23:02.600 woman is well below where we are, perhaps in the 0:23:02.680 --> 0:23:04.240 order of three percent, not four and a half of 0:23:04.280 --> 0:23:07.000