Speaker 1: Welcome to Bloomberg Opinion listeners. I'm Bonny Quinn this week.
Speaker 1: What really matters here is whether Republican Party actors, especially
Speaker 1: other politicians, believe that trump endorsement mattered. Jonathan Bernstein on
Speaker 1: the JD vans Win. Also, you would expect national politicians
Speaker 1: to say, we need two more Senate seats to make
Speaker 1: a difference enough in the Senate to pass something. It's
Speaker 1: going to take clarity. Harvard professor Ceda Scotch Pole on
Speaker 1: how Democrats already have a playbook for battles, including whatever
Speaker 1: happens on Rovie Wade. They just need to use it.
Speaker 1: And later, as that import demand goes up, you end
Speaker 1: up with a balance of payments crisis and Pakistan goes
Speaker 1: to the I m F and that underpins the removal
Speaker 1: of Imran Khan from office. David Fickling on how Pakistan's
Speaker 1: growth seeds its own political turmoil. First though, to the
Speaker 1: whippiest of flippy weeks in the market. Jonathan Livin fed
Speaker 1: Watcher for Bloomberg Opinion. Jonathan, the Fed hiked by fifty
Speaker 1: basis points and it was seen as a dobbish move
Speaker 1: by the market. What does this say about market seption
Speaker 1: of the Federal Reserve. Yeah, well it was seen as
Speaker 1: dubblished because Powell came out and essentially ruled out the
Speaker 1: possibility of a future seventy five basis point hike, right,
Speaker 1: And markets had begun to price in a high probability
Speaker 1: of one of these jumbo sized moves as the Fed
Speaker 1: essentially recognizes that it has been behind the curve and J.
Speaker 1: Powell goes out and says we need to front mode policy.
Speaker 1: So he comes out and he says we're not currently
Speaker 1: thinking about seventy five basis points, and the market just
Speaker 1: ripped because it was preparing itself for that sort of
Speaker 1: worst case scenario. Of course, the interesting thing is the
Speaker 1: market is giving back almost all of them, exactly you. Right,
Speaker 1: Investors have a greater tendency to take risks when they
Speaker 1: know what the Fed will do, when it will do it,
Speaker 1: and by how much. So my question is, even after
Speaker 1: that fifty basis point interest rate increase, is the so
Speaker 1: called Powell put intact and operational. I really don't think
Speaker 1: that the power put is intact. I think, quite frankly,
Speaker 1: market misinterpreted POW. I think what's happening is that the
Speaker 1: market is saying to itself, Okay, Powell said seventy five
Speaker 1: basis points. But folks went home and they thought about this,
Speaker 1: and they said, well, he said, no, seventy five basis points.
Speaker 1: But he also praised Vulcar as he as he has
Speaker 1: done in the past, and he said, you know what,
Speaker 1: inflation is the biggest concern on my mind right now,
Speaker 1: and I'm going to do what it takes to fight
Speaker 1: the worst inflation this country as seeing in forty years.
Speaker 1: I think that tells you something about where he's ultimately going.
Speaker 1: So so you're saying that Powell preserved optionality, my meaning
Speaker 1: being that the FMC could still move by seventy five
Speaker 1: basis points or an act even an intermeding increase of
Speaker 1: the deemed it necessary. Well, I think I think a
Speaker 1: couple of things. I think he meant what he said
Speaker 1: when he said, at the moment, seventy five basis points
Speaker 1: was on the table. You know, had the market sustained
Speaker 1: its gains, I think maybe seventy five by this point
Speaker 1: would have been back on the table, because I think
Speaker 1: he doesn't want to see yields coming down and stock
Speaker 1: markets ripping like that. Um. But I think I think
Speaker 1: the broader message really is, it's where we're going to
Speaker 1: end up. I think the pace is important. I think
Speaker 1: that the FED is behind the curve and it isn't
Speaker 1: a bit of a rush to get where it's going.
Speaker 1: But ultimately the big question is where are we going
Speaker 1: to end up in the middle of You ask a
Speaker 1: Pardoner in question in one of your columns. Does the
Speaker 1: FED want to get to two percent enough to cause
Speaker 1: the recession? Does it? Yeah, that's the big question. I
Speaker 1: mean J. Powell essentially told us that he's willing to
Speaker 1: do that yesterday. My view is just that his view
Speaker 1: can change very quickly when a recession is breathing down
Speaker 1: on us and the political pressure is all around him. Say,
Speaker 1: you know, the stock market is off from its highs.
Speaker 1: It becomes a lot harder for him to go before
Speaker 1: the microphone and say I must press on when those
Speaker 1: are the circumstances around him. I think right now it's
Speaker 1: easy for him to go before the microphone and make
Speaker 1: these sort of declarations because the unemployment rate is so low,
Speaker 1: because the labor market is so hot. Yeah. And the
Speaker 1: other thing is that we have new language to parse.
Speaker 1: So I'm going to ask you to define softish landing.
Speaker 1: Is it a mild recession? That's the big question. I
Speaker 1: think the popular thing on the street is to say,
Speaker 1: if we do get a recession, and it would probably
Speaker 1: come in three maybe even that there's a high probability
Speaker 1: that it could be mildish. And the reason is the
Speaker 1: mild so strong we're becoming powell talker is at this
Speaker 1: point we are guilty as charged. But I think the
Speaker 1: bottom line, and I think Power himself knows this, is
Speaker 1: that when that unemployment rate starts picking up, it just
Speaker 1: starts to feed upon itself. So we may think, you know,
Speaker 1: we have a nice cushion. Now it'll probably be mild,
Speaker 1: but things can easily get out of control in a
Speaker 1: hiking cycle like this. How long before powell Ish becomes
Speaker 1: part of the lexicon? Jonathan, Oh my gosh, I hope
Speaker 1: to banish it as soon as possible. Fun Well, it
Speaker 1: certainly seems like Dovish hikes are all the rage of
Speaker 1: bank Covingland also with a so called Dovish hike this week,
Speaker 1: Roberto Early of Piper Sandler says qualitatively, the market reaction
Speaker 1: is on par with what is technically called a path surprise.
Speaker 1: Would you agree with that I think a lot of
Speaker 1: what we saw was essentially some of the famous short covering.
Speaker 1: And you know, I think the tell on all of
Speaker 1: that is that we woke up and we were essentially
Speaker 1: going in the opposite direction. I think, you know, essentially
Speaker 1: nothing happened, but the mood did a complete one eight
Speaker 1: And the reason is that people actually thought about what
Speaker 1: j Pal had said in its entirety. And I think
Speaker 1: the other thing that we have to have to remember
Speaker 1: finding is what's going on with commodities markets. Right oil
Speaker 1: began ripping higher, and the market just decided that it
Speaker 1: was going to ignore that because it had, you know,
Speaker 1: this thirty second sound bite from j Pal. But I
Speaker 1: think we have to remember that there are multitude of
Speaker 1: risks out there right now beyond whatever the FED decides
Speaker 1: to do. One of them is what's going on in
Speaker 1: Ukraine with Russia. Another one is China. And having noticed,
Speaker 1: if oil decides to rip high from here, should it
Speaker 1: go to one fifty? All bets are off. Jonathan live
Speaker 1: in in Miami, and don't forget listeners. Getting tough to
Speaker 1: be a Twitter at Bonnie Quinn or email v Quinn
Speaker 1: at Bloomberg dot net. Opinions and comments always welcome. Julianna
Speaker 1: Goldman wrote a call him this week in which he
Speaker 1: outlines a potential path to victory for Democrats on everything
Speaker 1: from the mid terms to abortion rights. In it, Julianna
Speaker 1: draws on the work of our next guest, Theta Sculptural
Speaker 1: Victors Thomas, Professor of Government and Sociology at Harvard University Professor,
Speaker 1: How do democrats use the Stacy Abrams playbook to achieve
Speaker 1: their ends? In particular regarding role, Well, it's the same
Speaker 1: for just about every pressing issue. A simple thing that
Speaker 1: I think we've learned from American politics in practice and
Speaker 1: even some of the best scholarship, is that people are
Speaker 1: persuaded by relationships. They're not simply persuaded by hearing about
Speaker 1: an issue one or two times in a TV ad
Speaker 1: or in the abstract. Politics happens in conversations among people
Speaker 1: who know each other, neighbors, coworkers, people who attend the
Speaker 1: same church, people who attend the same boarding events. So
Speaker 1: you have to have an underground presence to explain what
Speaker 1: an issue means, what its ramifications are, and why people
Speaker 1: should care about it. Now, the reason that we're speaking
Speaker 1: about the quote unquote. Stacy Abram's playbook is that your paper,
Speaker 1: which by the way, listeners can read via a link.
Speaker 1: And Julianna Goldman's column points out that democrats fortunes in
Speaker 1: Georgia shifted post fourteen. What happened well after years Georgia,
Speaker 1: as a sister state of North Carolina, reached a kind
Speaker 1: of boil in when they were crucial Senate contests that
Speaker 1: required high state wide turnout among Democrats. And we know
Speaker 1: that in this era, Democrats tend to include more and
Speaker 1: more college educated people of all backgrounds, but also minorities
Speaker 1: who are often make modest incomes and live in both
Speaker 1: rural and urban areas, at least in the South, and
Speaker 1: movements in both those states tried to turn people out
Speaker 1: and fell short. That was a moment in which groups
Speaker 1: working with Stacy Abrams, who at that time was in
Speaker 1: the Democratic Party minority in the state legislature, they look
Speaker 1: at the situation and learn some lessons. Bringing in outside consultants,
Speaker 1: registering voters, even delivering messages during a few weeks leading
Speaker 1: into a crucial election is not enough, particularly if you're
Speaker 1: talking about voters who may not be registered, or who,
Speaker 1: if registered, may not vote regularly. You have to have
Speaker 1: people in their communities, in their neighborhoods who can build
Speaker 1: relationships and talk to people about issues over many months,
Speaker 1: and Stacy Abrams obviously very successfully did that for that
Speaker 1: crucial Senate seat. In what should happen across the country
Speaker 1: in terms of building out what you call a lottice
Speaker 1: work well, For one thing, you have to take state
Speaker 1: politics seriously. And that's one of the things that happened
Speaker 1: was the various groups networked around stay Abrams in Georgia
Speaker 1: from It's not likely to happen overnight, but things are
Speaker 1: speeded up. If you think about politics is tapping into
Speaker 1: networks and organizations that already exist in people's daily lives,
Speaker 1: and in the case of issues that may seem obvious
Speaker 1: to highly educated voters. And I think it's fair to
Speaker 1: say that for many highly educated voters in the United States,
Speaker 1: their positions on abortion and access to abortion care those
Speaker 1: have been staked out for such people for quite a
Speaker 1: long time. It's not just women, men and women alike.
Speaker 1: But if you think about it, the people who are
Speaker 1: most affected by access to abortion care are I don't know,
Speaker 1: they tend to be lower income people working maybe multiple jobs,
Speaker 1: trying to raise children. A lot of people seek abortions
Speaker 1: already have children and don't think they can afford more.
Speaker 1: And they may be living in places where they haven't
Speaker 1: had a lot of access to health care of all kinds.
Speaker 1: They may not instantly understand what it means to have
Speaker 1: a draft Supreme Court opinion leak, and so they're gonna
Speaker 1: turn to people around them to understand the meaning of that.
Speaker 1: And even if they understand the meaning, they may not
Speaker 1: think their votes could make any difference in unless people
Speaker 1: explain that who you elect to your state legislature and
Speaker 1: who you turn out to vote for for Congress could matter.
Speaker 1: We talk about the thermostatic effect. When policy moves in
Speaker 1: the direction you voted, your less likely to mobilize. In
Speaker 1: this case, those who vote a Democrats will see policy
Speaker 1: move in the opposite direction and how they voted. So
Speaker 1: what does that mean for galvanizing action even among those
Speaker 1: who did vote before well, especially democratic constituencies have a
Speaker 1: tendency to despair if they don't get results, and of
Speaker 1: course their modern Republican party has been very good at
Speaker 1: making sure Democrats don't get results, even when they appear
Speaker 1: to quote control Congress. In the case of the abortion ruling,
Speaker 1: it's going to take clarity to one thing. You would
Speaker 1: expect national politicians to say, we need two more Senate
Speaker 1: seats to make a difference enough in the Senate to
Speaker 1: pass something that could codify the rights to have access
Speaker 1: to abortion care. Just having nominal control isn't enough. I
Speaker 1: don't think a lot of people out there on the
Speaker 1: Democratic side understand that necessarily. They don't understand that it
Speaker 1: isn't just a question saying Joe Biden has failed. Joe
Speaker 1: Biden doesn't have a working majority in the U. S.
Speaker 1: Senate for most of what he wants. Speaking of Joe Biden,
Speaker 1: what should he do? He should be clear about what
Speaker 1: this dakes are. I mean, for example, he's out there
Speaker 1: saying the White House is going to do everything I
Speaker 1: can to protect rarning rights. He should be straightforward. He
Speaker 1: should be straightforward that it's going to take an Act
Speaker 1: of Congress that he can sign into law, and then
Speaker 1: he needs two more Senate seats and we need to
Speaker 1: hold onto the House of Representatives, we Democrats. He should say,
Speaker 1: he should be clear, is there a danger of Democrats
Speaker 1: get stuck on the filibuster question and that narrative becomes
Speaker 1: the dominant narrative. Well, it is very important, but there's
Speaker 1: a real danger that activists are going to go into
Speaker 1: the streets and start yelling that Joe Manson should book
Speaker 1: to get rid of the filibuster. Always not going to
Speaker 1: He's made that clear, you know. I think at one
Speaker 1: point Joe Manchin said, if you want to get rid
Speaker 1: of the filibuster or like more Democrats, well that's right,
Speaker 1: that's exactly right. And there's nothing wrong with Joe Manchon.
Speaker 1: He's representing his state. Can the Stacy Abrams playbook be
Speaker 1: replicated in states where there already is a lot of work,
Speaker 1: where there already was a network up and running. He
Speaker 1: just perhaps not as effective as the one in Georgia.
Speaker 1: And you point out that the North Carolina network put
Speaker 1: into place by Reverend William Barber didn't work quite as
Speaker 1: well as the Georgia one, even though the intentions were
Speaker 1: the same. All the intentions were the same, but the
Speaker 1: actual presence of organizations and activiss was much more concentrated
Speaker 1: in the big cities. And that is a democratic problem.
Speaker 1: In a lot of states, Democrats don't have a lot
Speaker 1: of outreach into areas beyond metropolis, in the near suburbs,
Speaker 1: the wealthier suburbs or college town So in many states,
Speaker 1: for example, in the Midwest, it's going to take a
Speaker 1: longer time to build up a presence of people who
Speaker 1: are Democrats and are your neighbors. I don't think it's hopeless,
Speaker 1: and I don't expect this abortion battle to be the
Speaker 1: only battle that matters. With this very radical Supreme Court majority,
Speaker 1: the abortion decision is going to present problems for the
Speaker 1: Republican Party as well. So instead of thinking of it
Speaker 1: is something that's going to be settled instantly, and that's
Speaker 1: true of climate politics. It's true of a fight to
Speaker 1: get some kind of a basic family and child allowance
Speaker 1: or two lower prescription drug prices. And the Georgia lesson
Speaker 1: is that having a presence locally, focusing on state as
Speaker 1: well as national politics, it takes time. It may take
Speaker 1: multiple election cycles. Harvard's Ceta Scotch poll primary season kicked
Speaker 1: off in earnest this week, with Ohio and Indiana going
Speaker 1: to the polls. For a review, I spoke with Jonathan
Speaker 1: Bernstein Jonathan J. D Vance wins the primary and Ohio
Speaker 1: it will was to be a bellweather. What conclusions can
Speaker 1: we draw about a Trump endorsement from this particular race, Well,
Speaker 1: this is definitely score one for Trump. Four of the
Speaker 1: five major candidates who were vying for Trump's endorsement, that
Speaker 1: was basically the campaign for most of them, Dance got
Speaker 1: the nod. And because he was a bit behind in
Speaker 1: the polls and wound up winning fairly comfortably, that's going
Speaker 1: to be perceived as a Trump effect, showing the Trump's
Speaker 1: endorsement is worth a lot. It is also true that
Speaker 1: this is exactly the kind of situation where a high
Speaker 1: profile endorsement can make a big difference. It's a multi
Speaker 1: candidate race with five candidates putting on serious campaigns and
Speaker 1: without big policy differences for the most part between the candidates.
Speaker 1: So voters are looking for some sort of queue. Because
Speaker 1: voters don't get very involved. They see commercials, but you know,
Speaker 1: for primary most of them are not scouring issue statements
Speaker 1: and all that to try to figure out who it is.
Speaker 1: You know, just tell me who's the most conservative, tell
Speaker 1: me who's the real conservative. And so using a high
Speaker 1: profile endorsement to make that sort of decision is an
Speaker 1: easy endorsement for Trump to show he still has clout.
Speaker 1: And of course what really matters here is whether Republican
Speaker 1: Party actors, especially other politicians, believe that his endorsement mattered.
Speaker 1: And it does seem like they jumped on board immediately.
Speaker 1: Are we now going to see because of how Van's performed,
Speaker 1: candidates cast Republican primaries change up their positions and vie
Speaker 1: with each other for an endorsement because Vans changed his
Speaker 1: positions radically. Yeah, I think that, you know, there's sort
Speaker 1: of a difference between the policy position and seeking Trump's endorsement.
Speaker 1: Trump seems to mostly care about these days, is talking
Speaker 1: about is falsehoods about the election and supposed voter fraud
Speaker 1: and things like that. For the most part, you know,
Speaker 1: you can get away with talking about a whole lot
Speaker 1: of things besides from that, and he's not going to
Speaker 1: pay a whole lot of attention to it. What kind
Speaker 1: of effect it has on other candidates depends a lot
Speaker 1: on what happens over the rest of this month and
Speaker 1: the primary season, because there are a bunch of primaries
Speaker 1: coming up where Trump probably will not get the same
Speaker 1: kind of credit for winning. In fact, his candidates may
Speaker 1: lose a few races. He's got some trouble in Idaho
Speaker 1: and Pennsylvania, in Georgia that his candidates may very well
Speaker 1: not win. And next week we have Nebraska and West
Speaker 1: Virginia and West Virginia Trump is endorsed and incumbent Alex Mooney,
Speaker 1: but his competitor is also an incumbent, David McKinley, So
Speaker 1: obviously that will be a bell weather to McKinley voting
Speaker 1: for the infrastructure Billa, and that's apparently why Trump didn't
Speaker 1: endorse him. You know, it's hard to tell with Trump,
Speaker 1: because you know, he's not somebody who cares a lot
Speaker 1: about Paul. See what we heard about Ohio is that
Speaker 1: he watched the debate and thought that Vance was the
Speaker 1: most convincing candidate. So whatever. Um, He's got trouble in
Speaker 1: Nebraska because he's endorsed candidate who has been accused of
Speaker 1: sexual misconduct. He's got trouble in Idaho coming up later
Speaker 1: in the month, where he's endorsed the lieutenant governor who's
Speaker 1: taking on an incumbent governor, and the same thing in Georgia,
Speaker 1: where you know, he's put a lot of effort into
Speaker 1: supporting candidates for governor and for Secretary of State, against
Speaker 1: incumbents who did not help him try to overturn the election.
Speaker 1: You know, the other major thing that we can't ignore
Speaker 1: that happened this week was obviously the Row league, and
Speaker 1: it's very possibly going to be the opinion which will
Speaker 1: be out before the mid terms. Does this completely change
Speaker 1: the outlook for the mid terms? Now? I probably would
Speaker 1: be willing to go out on a limb and say
Speaker 1: it won't completely change the mid terms. I think it's
Speaker 1: very very hard to predict. We don't really have a
Speaker 1: lot of similar cases. You know, usually midterms ride not
Speaker 1: sort of directly on the economy, but on presidential approval,
Speaker 1: and that in turn depends on the economy, so inflation important.
Speaker 1: But in that it has hurt Biden's approval ratings, which
Speaker 1: drags down Democrats. We have not had a situation quite
Speaker 1: like the Row decision. It's still going to follow out Row,
Speaker 1: even if it winds up not fully overturning it, but
Speaker 1: most likely it's going to fully overturn Round, and that
Speaker 1: certainly could have political effects in November elections. But it's
Speaker 1: very very hard to predict what they'll be because it
Speaker 1: depends on individual actors and how they react to something.
Speaker 1: That hasn't happened before, right, and the Biden coalition so
Speaker 1: far has been a very odd coalition, and it will
Speaker 1: remain to be seen. Does this actually galvanize other kinds
Speaker 1: of voters, not just the suburban voter, but maybe young
Speaker 1: people to come out and vote and so on, because
Speaker 1: there had been a bit of an enthusiasm dampening, let's say,
Speaker 1: on the Democrat side up to now. Yeah. Absolutely, And
Speaker 1: you know, all of which is sort of normal. After
Speaker 1: people elected president, they tend to sort of think, okay,
Speaker 1: I've taken care of that, whereas the out party tends
Speaker 1: to gain enthusiasm because they get really upset about all
Speaker 1: the things the president is doing. Now this is a
Speaker 1: little different because usually policy moves in the president's direction,
Speaker 1: in the party's direction that's in office. This time policy
Speaker 1: is moving opposite that. So you normally have what political
Speaker 1: science called thermostat effect. As you get a democratic president,
Speaker 1: everybody in the country gets more conservative. If you have
Speaker 1: a Republican president, people get more liberal. We think that
Speaker 1: has to do with policy changing, But in this case,
Speaker 1: policy is changing in the other directions. So again, very
Speaker 1: hard to predict whether that motivates people or doesn't. Normally,
Speaker 1: I'd say, you know, we're over hyping things. Supreme Court decisions,
Speaker 1: no matter how important, people forget about it, or they
Speaker 1: don't vote on it, or it just reinforces what they
Speaker 1: were going to do anyway. But this is different enough
Speaker 1: and big enough that perhaps it will have some effect.
Speaker 1: But again, whether it does and what that effect would
Speaker 1: be I Jonathan Bernstein. There By the way, do get
Speaker 1: in touch. Comments and opinions always welcome at Volley Quinn
Speaker 1: on Twitter or email v Quinn at Bloomberg dot net.
Speaker 1: Last week you may remember we spoke with Halen Thompson,
Speaker 1: author of Disorder Hard Times in the twenty first century,
Speaker 1: the world economy is facing some pretty serious energy constraints.
Speaker 1: At any point when there's any significant growth, the world
Speaker 1: economy is now running into high energy prices. This thesis
Speaker 1: that fossil fuel economics are a significant contributor to crises
Speaker 1: and political change is something David Fickling has been writing
Speaker 1: about in relation to Pakistan in recent weeks. He joins
Speaker 1: from Sydney, Australia, David, Pakistan is in crisis again. Its
Speaker 1: finances are severely strained, inflation is running above and the
Speaker 1: RUPE has lost a fifth of its value against the U. S.
Speaker 1: Dollar in the last twelve months. For these and definitely
Speaker 1: many other reasons, Prime Minister in Ran Khan was ousted
Speaker 1: a month ago and fresh I m F talks are
Speaker 1: necessary so Pakistan can extend yet another emergency loan program.
Speaker 1: How did Pakistan arrive here? Again? Absolutely, I mean, this
Speaker 1: is a fascinating example of the way energy economics played
Speaker 1: into politics. And this is not the first instance that
Speaker 1: we've seen. In fact, really through fifty years odd of
Speaker 1: Pakistan's history, we've seen essentially the same thing, which is
Speaker 1: that every time the economy starts to grow quite rapidly,
Speaker 1: growing economy needs more energy, and Pakistan is energy poor.
Speaker 1: It needs to import a lot of this energy, particularly
Speaker 1: obviously petroleum, and as that important demand goes up, you
Speaker 1: end up with a balance of payments crisis and Pakistan
Speaker 1: goes to the I m F and it's heading to
Speaker 1: the IMF again. That underpins the removal of Imran Khan
Speaker 1: from office. The next bailout will be I think the
Speaker 1: nineteen Since the early seventies, so energy is an absolute
Speaker 1: constraint on Pakistan's growth rate, and for years now Pakistan
Speaker 1: has recognized this and has been trying to find ways
Speaker 1: to get around it. If you go back to the
Speaker 1: early tens when Noah's Sherriff was Prime minister, the actic
Speaker 1: at that point was to build a lot of nuclear
Speaker 1: power plants and lignite coal plants. There's lignite coal in
Speaker 1: Sinda Province in the desert there that would provide a
Speaker 1: domestic power su Pakistan. Historically, it's grid was powered largely
Speaker 1: by hydro electricity from the Indus Valley and up in
Speaker 1: the Himalayas, and then very substantially by fuel oil and
Speaker 1: natural gas, which has increasingly been imported. There's been a
Speaker 1: small amount of local natural gas, but that's dwindling. Imran
Speaker 1: Khan then came along and canceled some of those coal
Speaker 1: plants and focused very heavily on boosting hydro electric output
Speaker 1: even further. But it's clearly still not working because I
Speaker 1: think one of the fundamental problems here is that you
Speaker 1: have a growing household sector. The household sector still wants
Speaker 1: to use a lot of this natural gas and oil
Speaker 1: for transport and domestic cooking and heating and that sort
Speaker 1: of thing, and so the problem doesn't really go away
Speaker 1: and we're having yet another energy related balance of payments crisis.
Speaker 1: The one thing that's not happening here that I think
Speaker 1: should be happening is to look at the new renewables
Speaker 1: that we're seeing everywhere else in the world. This is
Speaker 1: a domestic source of energy. It's a very cheap source
Speaker 1: of energy. If you look just across the border from
Speaker 1: Pakistan Sin Province in Goodyar, at that area of India,
Speaker 1: you see a lot of wind and solar expansion. But
Speaker 1: Pakistan's only looking to target about sort of ten percent
Speaker 1: of wind and solar in the grid by thirty which
Speaker 1: by that point is really far too low. And this
Speaker 1: is the cheapest source of energy to Pakistan, but for
Speaker 1: reasons that aren't really very clear, it's still not making
Speaker 1: its way into the grid now. To be clear, these
Speaker 1: were obviously problems evident in Pakistan and other countries before
Speaker 1: the war, but Russia's war on Ukraine has exacerbated the situation.
Speaker 1: Tell Us how where does Pakistan import is energy from? Well,
Speaker 1: it's largely as far as the oil and gas is concerned,
Speaker 1: this is coming from the Gulf, from Opec. Of course,
Speaker 1: if you look at on the map, Pakistan is directly
Speaker 1: across from there. But yes, the importance of the Russia
Speaker 1: situation here is that that she's up the global cost
Speaker 1: of petroleum. And so even though Pakistan is not importing
Speaker 1: anything from Russia of any great scale, the cost of
Speaker 1: its imports go up. The volume doesn't go up, but
Speaker 1: the cost goes up, and that means that the pain
Speaker 1: is self in the current account and that ultimately leads
Speaker 1: into the balance of payments and that causes pressure on
Speaker 1: the currency and a visit to the I m F.
Speaker 1: And of course we're seeing this in so many different
Speaker 1: countries at the moment. Are they all experiencing the same
Speaker 1: thing for the same reason. So, for example, Sri Lanka,
Speaker 1: another country experiencing runaway inflation, it's also getting relief soon,
Speaker 1: it hopes from the I m F. We have Nigeria's
Speaker 1: national energy grid collapsing, we have protests and prove partially
Speaker 1: because of energy and inflation are the same reasons underpinning
Speaker 1: all of these political crises. I think it's a bit
Speaker 1: more diverse than that, because, of course you have a
Speaker 1: range of different economies in relation to energy. Of course,
Speaker 1: Nigeria you mentioned is a substantial exporter of energy. One
Speaker 1: of the world's bigger oil exporters. The issues of Nigeria's
Speaker 1: grid are much more to do with the general sort
Speaker 1: of dysfunction of Nigeria and government there. But of course
Speaker 1: energy is a global market. Food is a global market,
Speaker 1: and food is related to the energy market. Of course,
Speaker 1: producing food requires a lot of fertilizer. Fertilizer is largely
Speaker 1: made from natural gas, and just producing fertilizer in general
Speaker 1: is an energy intensive process. So these are sort of
Speaker 1: cascading situations that ultimately come back to a fact that
Speaker 1: the world's demand for energy is rising faster than the
Speaker 1: world's supply of energy, and that's being felt very intensely
Speaker 1: in the bit of the energy complex which is most
Speaker 1: easy to flex, and the just which is the fuel market.
Speaker 1: The fuel market can move energy globally. If I have
Speaker 1: a wind farm here in Australia, I cannot sell that
Speaker 1: electricity to the US, But if I have an oil
Speaker 1: field in Australia, I can sell that oil sit the Earth.
Speaker 1: So so the fuel market has traditionally been the way
Speaker 1: that the world's energy system balances out, and that's where
Speaker 1: we're feeling the pressure now. So, David, how realistic is
Speaker 1: Pakistan's plan to lower imported energy. It's trying to increase
Speaker 1: hydro electric power to the mix as supposed to a
Speaker 1: third of the mix by would that entail even more
Speaker 1: investment from China, which obviously carries its own risks. Everything
Speaker 1: that's driven the past decade of Pakistan's energy policy has
Speaker 1: related a lot to the fact that Pakistan is the
Speaker 1: biggest recipient of Chinese Belton Road funding and from the
Speaker 1: Nara Sharif Era when it was building a lot of
Speaker 1: this lignite coal plants, to the Imran can Era, which
Speaker 1: has focused more on major dime building project as a
Speaker 1: lot of Chinese capital and Chinese expertise that is driving that.
Speaker 1: I would argue that the dependence on hydro electricity is
Speaker 1: too great for a large country in Pakistan. You need
Speaker 1: diverse sources of energy. We see this in the example
Speaker 1: of China and Brazil. Actually in the past year they've
Speaker 1: both had problems of drought that has reduced the supply
Speaker 1: of hydro electricity. As the supply of hydro systy goes down,
Speaker 1: you need to go to other sources of energy. We
Speaker 1: know that the problem, of course with Pakistan is that
Speaker 1: it can't afford all this imported energy that it's dependent on.
Speaker 1: If that becomes contingent on drought, on the state of
Speaker 1: the monsoon, on the state of the snow melt from
Speaker 1: the Himalayas, then it's still not escaping this cycle of
Speaker 1: being constrained always by the energy supply. Pakistan has fantastic
Speaker 1: hydro potential, so it's fortunate in that sense, but it
Speaker 1: also does have fantastic solar and wind potential that could
Speaker 1: be instead of targeting ten percent, you could be targeting
Speaker 1: that that would balance out the hydro a little bit better.
Speaker 1: Pakistan is a poor country that has recently built a
Speaker 1: lot of coal fire power. It's likely that that's going
Speaker 1: to be in the mix for a while, but something
Speaker 1: that at least reduces the dependence on that and on
Speaker 1: imported fuel oil and natural gas, which according to government's plans,
Speaker 1: goes out of the economy altogether. But I have my
Speaker 1: dad to that whether that will be sustainable. David, what
Speaker 1: happens if the Middle Eastern countries start pumping more oil
Speaker 1: into the market. What is The points Hellen Thompson made
Speaker 1: last week was that the Saudias have to decide at
Speaker 1: some point who they want to provide oil too, is
Speaker 1: that the Russians, the Chinese, as the Europeans, and we're
Speaker 1: seeing Germany now even decided may be able to go
Speaker 1: it alone a little more. Where is Pakistan in a
Speaker 1: matrix like that, Well, it's not a key buyer to
Speaker 1: the extent of some other economies in the region. And
Speaker 1: I think the obvious ones that you need to talk
Speaker 1: about obviously mentioned China, but also right next door to
Speaker 1: Pakistan India UM. India's demand growth for oil and petroleum
Speaker 1: generally is seen as being the strongest in the world
Speaker 1: and even actually stronger than China potentially over the years ahead.
Speaker 1: And that's where a lot of the focus from Saudi
Speaker 1: Arabia has been. Of course, for quite a long time,
Speaker 1: there has been that this sort of ongoing m and
Speaker 1: A situation and between Saudi Aramco and Reliance Reliances, the
Speaker 1: Indian company that operates the world's biggest refinery, jam Nagar,
Speaker 1: quite close to the Pakistan border in Gujarat. Saudi Aramco
Speaker 1: for a long time was looking to make an investment
Speaker 1: in in Reliance, but Maka Shambani Reliance is chief executive.
Speaker 1: He has been moving in another direction. He's been moving
Speaker 1: towards towards renewables. He's looking to build a lot of
Speaker 1: hydrogen electrolyzers and this sort of thing, and those talks
Speaker 1: have essentially broken down. There's no prospects after several years
Speaker 1: where Saudi Aramco was essentially offering more and more generous
Speaker 1: terms to reliance, there's not really going to be a
Speaker 1: deal between those two countries where Pakistan fix into this.
Speaker 1: It's a smaller buyer, it doesn't have the diplomatic advantages
Speaker 1: of a major buyer like India, but it's still a
Speaker 1: significant customer in that Indian Ocean region. David, how many
Speaker 1: countries like Pakistan are out there with that specific set
Speaker 1: of problems. I think it's an unusual country in that
Speaker 1: it's a fifth largest country in the world by population.
Speaker 1: It is growing very fast, but it's still very poor. It's,
Speaker 1: you know, significantly poorer than than India and even Bangladesh
Speaker 1: at this point, which might be a comparable country. And
Speaker 1: of course it's very energy short. Another example Mexico that
Speaker 1: substantially wealthier, Brazil, Nigeria. These are all countries that are
Speaker 1: actually fairly self sufficient in energy. It's unusual to have
Speaker 1: a country of Pakistan's level of development that is as
Speaker 1: energy dependent and at a relatively low income level. Indonesia
Speaker 1: is another good example. It's traditionally been an all exportuit
Speaker 1: was at one time a member of OPEC, but as
Speaker 1: its economy has grown and as its population has grown,
Speaker 1: it's become more and more dependent on inputs from other
Speaker 1: countries for energy, and that becomes a problem. David Pickling,
Speaker 1: We're now choosing to end all conversations, not with you, though,
Speaker 1: as always we love to hear from you and Bonnie
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