WEBVTT - Surveillance: Trump's Tweet Policy Is Dangerous, Gartman Says 0:00:00.120 --> 0:00:02.920 Brought you by Bank of America Mary Lynch. Investing in 0:00:03.000 --> 0:00:07.840 local communities, economies and a sustainable future. That's the power 0:00:08.080 --> 0:00:12.360 of global connections. Mary Lynch, Pierce Fenner, and Smith Incorporated 0:00:12.760 --> 0:00:27.400 member s I p C. Welcome to the Bloomberg Surveillance Podcast. 0:00:27.840 --> 0:00:31.520 I'm Tom Keene with David Gura. Daily we bring you 0:00:31.560 --> 0:00:36.600 insight from the best in economics, finance, investment, and international relations. 0:00:37.000 --> 0:00:41.600 Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and 0:00:41.680 --> 0:00:49.360 of course, on the Bloomberg. Rob Carnell joins us now 0:00:49.360 --> 0:00:52.879 he's e's chief International Commist. Joinings year in Bloomberg's European 0:00:52.920 --> 0:00:55.880 headquarters in London. And let's just take stock of where 0:00:55.920 --> 0:00:57.560 things that stand right now. The swoon that we've seen 0:00:57.560 --> 0:01:00.440 about the prospects for new economic policy coming from President 0:01:00.440 --> 0:01:03.240 elect Donald Trump. Are we seeing the markets treat that 0:01:03.280 --> 0:01:06.000 more soberly and now there were such wild enthusiasm after 0:01:06.040 --> 0:01:09.160 the elections. Are we seeing some reevaluation or taking stock 0:01:09.200 --> 0:01:11.280 of the fact that may not happen as people would 0:01:11.319 --> 0:01:12.759 like it to happen, or may not happen as quickly, 0:01:13.120 --> 0:01:15.440 but we certainly don't think it will happen quite as quickly, 0:01:15.560 --> 0:01:17.840 or quite to the extent that I think people thought 0:01:17.880 --> 0:01:22.240 in the immediate aftermath of the election result. However, we 0:01:22.280 --> 0:01:25.400 will over the next couple of weeks get the president's budget, 0:01:25.440 --> 0:01:27.400 you know, which is you know, kind of Christmas president 0:01:27.480 --> 0:01:29.760 wish list, which will have everything in it. I mean, 0:01:29.880 --> 0:01:32.160 you know how these were you ask for everything on 0:01:32.200 --> 0:01:34.480 the assumption that you'll only get some of it. So 0:01:34.520 --> 0:01:36.560 I think that could provide another boost. But I think 0:01:36.560 --> 0:01:38.160 in the in the very short term, we have seen 0:01:38.160 --> 0:01:40.800 a bit of a not so much a reevaluation. Just 0:01:41.160 --> 0:01:42.959 we've gone a bit too far. Let's just take stock 0:01:43.000 --> 0:01:44.759 a little bit and wait and see what happens. Now. 0:01:45.080 --> 0:01:46.760 You mentioned that Christmas list, and I just think of 0:01:46.800 --> 0:01:48.840 the fact that we haven't really had a traditional budget 0:01:48.840 --> 0:01:52.040 process in Washington, dcver so long. Now that regular order 0:01:52.080 --> 0:01:53.680 seems like a thing of the past. Do you expect 0:01:53.720 --> 0:01:56.200 that we'll see a return to it? Will have Republicans 0:01:56.200 --> 0:01:58.400 controlling both Houses of Congress and the White Houses, Well, 0:01:58.400 --> 0:02:01.080 do you expect to return to was traditionally the process 0:02:01.080 --> 0:02:03.200 in Washington regular order? Getting a budget from the White House, 0:02:03.200 --> 0:02:05.280 getting a budget from Congress, Not having all of these 0:02:05.280 --> 0:02:07.840 continuing resolutions and staff gaps. Yeah, I think that that 0:02:07.960 --> 0:02:10.120 seems to be the most likely way of it. I mean, 0:02:10.120 --> 0:02:13.280 I dare say that Donald Trump won't be totally delighted 0:02:13.280 --> 0:02:15.600 with everything that Congress suggests he can have in the end, 0:02:15.639 --> 0:02:17.560 but I think he's got room to be optimistic that 0:02:17.600 --> 0:02:20.200 at least on the tax cutting front, they'll give him something. 0:02:20.240 --> 0:02:22.079 Maybe not as much and not as quickly, and maybe 0:02:22.120 --> 0:02:25.480 it'll be more staged, but there's certainly room for improvement 0:02:25.520 --> 0:02:26.960 on taxes. And let's place it. What's not to like 0:02:27.000 --> 0:02:29.480 about lower taxes? Everybody loves that. There is so much 0:02:29.520 --> 0:02:31.400 uncertancy right now here in the UK, here in the US, 0:02:31.480 --> 0:02:34.040 especially when it comes to trade policy. We were looking 0:02:34.040 --> 0:02:35.840 at the remarks from Trees and made the Prime Minister 0:02:35.840 --> 0:02:37.760 over the weekend looking for some guidance on what trade 0:02:37.760 --> 0:02:40.120 policy in the in the UK might look like going forward. 0:02:40.320 --> 0:02:41.880 We're certainly doing that in the U S as well. 0:02:41.919 --> 0:02:43.720 You've seen the tweets is as we all have here. 0:02:44.160 --> 0:02:46.240 Do we have a better sense of what Donald Trump's 0:02:46.280 --> 0:02:48.000 trade policy is going to be going forward? What what 0:02:48.040 --> 0:02:50.600 do you look to for for evidence of that? Yeah? Well, 0:02:50.639 --> 0:02:52.760 I think we've been looking at this really long and 0:02:52.800 --> 0:02:54.840 hard over the last couple of weeks to try and 0:02:54.840 --> 0:02:56.600 get a sense of this. This is the really crucial 0:02:56.639 --> 0:02:58.960 fact that the fiscal side is interesting and it's important, 0:02:59.240 --> 0:03:02.079 and it does make it perence to domestic domestic growth, 0:03:02.320 --> 0:03:04.280 But trades the really big one, that's the one he 0:03:04.280 --> 0:03:07.920 can really mess up on um And with the appointments 0:03:07.960 --> 0:03:12.639 of four very key trade members of his his cabinet 0:03:12.680 --> 0:03:16.080 and his team, all of whom have been extremely outspoken 0:03:16.080 --> 0:03:20.680 and negative about China and Chinese trade, that the rumors 0:03:20.720 --> 0:03:22.680 that there is going to be a sort of blanket 0:03:23.240 --> 0:03:26.160 import tariff going in that is beginning to make us 0:03:26.200 --> 0:03:27.680 think or maybe it is going to be a tougher 0:03:27.720 --> 0:03:30.919 trade Trump than we thought initially, and that could also 0:03:31.000 --> 0:03:33.360 have an impact on market sentiment. I was talking with 0:03:33.400 --> 0:03:36.040 that Michael from in the US Trade Representative yesterdays of 0:03:36.040 --> 0:03:37.880 an exit interview with him as he prepares to leave 0:03:37.880 --> 0:03:39.400 that office. He's had a tough go of it, trying 0:03:39.440 --> 0:03:41.600 to push through the Trains Pacific partnership to to no avail, 0:03:41.640 --> 0:03:43.840 maybe shaking his fist at the heavens as the ship 0:03:44.200 --> 0:03:46.920 went down. And one thing we talked about was the 0:03:46.960 --> 0:03:49.560 way that his office looks to be reconfigured at going forward. 0:03:49.600 --> 0:03:52.920 You mentioned the role of commerce in the new term. 0:03:52.960 --> 0:03:55.360 It seems like Wilbur Ross might take a larger role 0:03:55.400 --> 0:03:58.200 in negotiating trade deals. There is this Trade Council chaired 0:03:58.200 --> 0:04:00.840 by Peter Navarro. Is there a risk to that and 0:04:00.840 --> 0:04:02.800 in not having it as centralized as it as it 0:04:02.840 --> 0:04:06.280 has been the negotiation of four trade deals? The person 0:04:06.280 --> 0:04:08.760 bringing about enforcement actions the w t O. Yeah, I'm 0:04:08.800 --> 0:04:12.800 not sure. I think the era of big multilateral trade 0:04:12.840 --> 0:04:15.920 deals really is pretty much over. I think a lot 0:04:15.960 --> 0:04:18.080 of countries have realized that they can actually make much 0:04:18.120 --> 0:04:22.479 quicker progress and much more more sort of substantial progress 0:04:22.560 --> 0:04:26.840 on individual, smarter bilateral trade deals. I think there's gonna 0:04:26.839 --> 0:04:28.320 be a lot more of that going on, and for 0:04:28.360 --> 0:04:31.440 that you don't need such a centralized mechanism. You look 0:04:31.440 --> 0:04:33.719 at the balance that you have to strike between free 0:04:33.760 --> 0:04:36.599 trade and security, and that's certainly in acute focus here 0:04:37.320 --> 0:04:40.839 in the UK and in Europe. When you're making that balance, 0:04:41.000 --> 0:04:43.240 is security always going to win out? How do you? 0:04:43.279 --> 0:04:45.599 How do you tew that line? And that's that's a 0:04:45.640 --> 0:04:47.640 really tough one. I mean, I think security is often 0:04:47.680 --> 0:04:50.560 an excuse that the policymakers will just fall back on 0:04:50.680 --> 0:04:52.760 for anything they don't particularly like, or anything that they 0:04:52.800 --> 0:04:54.479 don't think it's going to go down particularly well with 0:04:54.560 --> 0:04:56.960 the with the general public. I mean, it has to 0:04:56.960 --> 0:04:58.680 be a fact that you bear in mind, in particular 0:04:58.720 --> 0:05:01.919 when you're talking about energy. It's of those crucial factors 0:05:01.960 --> 0:05:05.960 that has to be taken into account. But I'm not sure. 0:05:06.000 --> 0:05:07.600 I think it is a bit of a scapegoat at times, 0:05:07.600 --> 0:05:09.240 so when they want to do what they want to do. 0:05:09.640 --> 0:05:11.880 I know Tom wants to talk a bit about FED policy. 0:05:11.920 --> 0:05:15.279 He was hearing on your knowledge of the Rob rob 0:05:15.360 --> 0:05:18.680 Is is, I consider the major London acts on actual 0:05:18.760 --> 0:05:21.440 FED policy, and you have a huge advantage of that 0:05:21.640 --> 0:05:25.240 of being distant. There's something about we've learned that over 0:05:25.279 --> 0:05:28.720 the years. It's something about an American economist in Minnesota 0:05:28.800 --> 0:05:32.520 or North Carolina's Dennis Cartman is you have a big 0:05:32.560 --> 0:05:35.839 advantage being in London too. To our American listeners. What 0:05:35.920 --> 0:05:39.880 is the major distinction between the Washington Central Bank and 0:05:39.920 --> 0:05:44.839 the London Central Bank. I would say that the FED 0:05:45.000 --> 0:05:47.640 is is a much more political animal. I think the 0:05:47.640 --> 0:05:49.880 Bank of England is is also political. But of all 0:05:49.880 --> 0:05:52.919 the central banks, I think the all the independent central 0:05:52.960 --> 0:05:55.160 banks I'd say the FED is possibly the least independent. 0:05:55.200 --> 0:05:58.080 I think it's much more a tune that it's not 0:05:58.200 --> 0:06:01.800 driven by it's not not forced by or cajoled by. 0:06:01.880 --> 0:06:04.880 But I think it's certainly influenced far more by politics 0:06:04.960 --> 0:06:07.479 than than the most of the other central banks around 0:06:07.480 --> 0:06:10.560 the G seven. Which goes to Mr Trump in the 0:06:10.600 --> 0:06:14.200 House Financial Services Committee, etcetera. Which will you watch? Will 0:06:14.200 --> 0:06:17.279 you watch Executive Bridge or the Republicans on the Hill 0:06:18.040 --> 0:06:22.440 to see a change in tone towards our central bank? Yeah, 0:06:22.560 --> 0:06:24.640 I'm not I'm not sure what the answer to that 0:06:24.680 --> 0:06:26.520 one is. I mean, I think that there's there's very 0:06:26.600 --> 0:06:29.719 definitely a sense from Donald Trump that he would like 0:06:29.880 --> 0:06:33.080 to have more control over the FED. Um. I mean, 0:06:33.160 --> 0:06:37.080 there's been the talk about auditing the FED. I mean, 0:06:37.120 --> 0:06:39.400 of course, the FED is already audited as a as 0:06:39.400 --> 0:06:42.479 a financial institution, but it's it's monetary policy decisions have 0:06:42.560 --> 0:06:45.280 not been audited. I'm interested to know how that's going 0:06:45.320 --> 0:06:47.040 to go. I mean that that clearly makes the FED 0:06:47.080 --> 0:06:50.400 a less and even less independent at central I love 0:06:50.440 --> 0:06:54.400 this David being in London and talking about Richmond, Virginia. 0:06:55.040 --> 0:07:00.919 Mr Whacker retires and there's a character to Albrons, Richmond fed. 0:07:01.080 --> 0:07:04.480 It has a certain tone. Is there a Carnels shortlist? 0:07:05.040 --> 0:07:08.360 Who will darken the door in Richmond? Marvin Goodfriends always 0:07:08.360 --> 0:07:10.880 on the list at Carnegie Mellon that there isn't. I'm 0:07:10.920 --> 0:07:13.920 I'm always fascinated whoever comes in. I mean, you go 0:07:14.000 --> 0:07:16.560 through this this ritual process where where the new b 0:07:16.760 --> 0:07:19.080 has to be evaluated, and they typically tow the line 0:07:19.360 --> 0:07:21.400 and behaving very much a sort of neutral fashion at 0:07:21.440 --> 0:07:23.760 least the first three meetings as they get their their 0:07:23.800 --> 0:07:26.040 toe under the table and work out exactly where they 0:07:26.040 --> 0:07:28.679 sit and how the process works. And then you start 0:07:28.720 --> 0:07:31.560 to see the see them throw their their weight around, 0:07:31.760 --> 0:07:35.800 and of course they are reflecting the the regional reality 0:07:35.880 --> 0:07:37.880 of of where they're coming from. And so you know, 0:07:38.120 --> 0:07:40.800 very different economist on all around the US. They're all 0:07:40.800 --> 0:07:44.400 original folks. And you really wonder how our new president will, 0:07:44.760 --> 0:07:48.320 how everyone will adapt and adjust to the demands of 0:07:48.320 --> 0:07:52.640 a new executive branch. From London, David gurn Tim Keene 0:07:52.640 --> 0:07:56.040 Bloomberg surveillance here in the United Kingdom, around the world, 0:07:56.080 --> 0:07:58.880 across America. David, you do a data check and you 0:07:58.960 --> 0:08:01.760 just migrate immediately LA to pay so and lear the 0:08:01.760 --> 0:08:05.680 emerging market stories are really something on that depreciation seemingly 0:08:05.760 --> 0:08:07.880 continuing there. You've talked about Jeff Lackard. Think he's a 0:08:07.920 --> 0:08:09.720 guy who started out at the Richmond Fed, was an 0:08:09.760 --> 0:08:11.720 economist in the research department at the Richmond Fed. That 0:08:11.720 --> 0:08:13.760 will be something that'll be difficult to replace as well 0:08:13.800 --> 0:08:16.400 as someone with that much institutional knowledge of the place. 0:08:16.480 --> 0:08:18.960 But you're right looking at currencies this morning, Sterling as well. 0:08:19.000 --> 0:08:22.600 I've been looking at that, seeing that weekend at eighteen 0:08:22.720 --> 0:08:25.600 right now in Turkish earlier. With a new leg up, 0:08:25.600 --> 0:08:29.200 it's going to go through the recent weakness that we've seen. 0:08:29.760 --> 0:08:31.880 Uh this morning, Rob Carnell with us with the I 0:08:32.040 --> 0:08:34.680 n G. As we look at the Central Bank of 0:08:34.800 --> 0:08:38.200 the United States. We're talking in the break about Bullard, 0:08:38.200 --> 0:08:41.800 a lot laquer retireant Richmond Bullard of St. Louis has 0:08:41.800 --> 0:08:44.240 had a unique impact St. Louis known as a research 0:08:44.320 --> 0:08:47.240 house with decades and of course they're great statistical and 0:08:47.360 --> 0:08:50.680 chart base that they have, But the splash last year 0:08:51.200 --> 0:08:54.079 was a short paper, a little paper. Even Bullard admitted 0:08:54.120 --> 0:08:57.200 that about the X axis and that guys like you, 0:08:57.320 --> 0:08:59.240 Rob will always look at the Y axis, the up 0:08:59.280 --> 0:09:01.760 and down or whatever the chart is, and the time 0:09:01.800 --> 0:09:06.080 function is usually ignored. Bullard says, don't ignore the chime 0:09:06.120 --> 0:09:10.160 time function. And where we're heading is regime change. We 0:09:10.240 --> 0:09:14.199 get somewhere, things change, the FED changes. Do you believe 0:09:14.240 --> 0:09:19.040 that's feasible we ever implement Bullard regime change? I think 0:09:19.040 --> 0:09:20.640 it's I think it is feasible. I think it's a 0:09:20.720 --> 0:09:23.120 very accurate description of the world we live in. We 0:09:23.440 --> 0:09:26.959 you know that the US and much of the developed world, Europe, 0:09:26.960 --> 0:09:30.599 the UK has been in this low growth, low productivity 0:09:30.679 --> 0:09:33.760 environment for a very long period now. I think Bullard's 0:09:33.800 --> 0:09:36.240 point was was along the lines of it's difficult to 0:09:36.240 --> 0:09:39.280 see how that's going to change anytime soon, but at 0:09:39.320 --> 0:09:41.040 some point it actually will, and when it does, it 0:09:41.040 --> 0:09:44.079 will happen in a fairly step like fashion. That's the 0:09:44.120 --> 0:09:46.560 point of which the FED or whatever central bank is 0:09:46.559 --> 0:09:49.160 involved will have to react very very rapidly or find 0:09:49.160 --> 0:09:52.000 itself massively behind the curve, whether or not central banks 0:09:52.080 --> 0:09:54.280 can do that in reality. As another question, I have 0:09:54.320 --> 0:09:57.520 my doubts. How do you process what what FED presidents say, 0:09:57.520 --> 0:09:59.560 what they think, what they're believing it at this point, 0:09:59.559 --> 0:10:01.360 how are you are you reading? Every speech? Is very 0:10:01.360 --> 0:10:03.440 particular present, you don't hear enough from that you'd like 0:10:03.520 --> 0:10:05.120 to hear more from. Tom and I were talking a 0:10:05.120 --> 0:10:07.040 few weeks back about how there can be a cacophony 0:10:07.080 --> 0:10:08.840 here where you're just trying to figure out if there's 0:10:08.880 --> 0:10:11.559 some consensus among all of these participants in the films 0:10:11.640 --> 0:10:13.560 of a system, how do you how do you process all? 0:10:14.040 --> 0:10:16.680 I do sometimes wonder whether it's it's worth the effort, 0:10:17.200 --> 0:10:19.400 partly because you know, I always felt that the way 0:10:19.440 --> 0:10:23.480 that the FED was structured, they're the insiders in effect, 0:10:23.600 --> 0:10:26.160 rule the roost what they want to have with the governors, 0:10:26.200 --> 0:10:32.040 the governors, the New York President, New York Fed Vice chair, etcetera. Um, 0:10:32.400 --> 0:10:36.280 they basically set policy and if the regional FED president 0:10:36.400 --> 0:10:38.400 come alongside, all well and good, because it makes it 0:10:38.440 --> 0:10:40.840 look as if everybody is unanimous. But I'm not sure 0:10:40.880 --> 0:10:44.000 that on their own, those those four rotating regional FED 0:10:45.000 --> 0:10:48.800 members can never really change policy unless it had already 0:10:48.800 --> 0:10:52.720 been agreed by by the insiders. And you know, typically 0:10:52.720 --> 0:10:55.840 just just awaiting means that's very unlikely to happen. Interesting 0:10:55.840 --> 0:10:58.280 for the debate, and often, I think in Bullard's case, 0:10:58.320 --> 0:11:00.439 gives you a sense of where the debates going, but 0:11:00.520 --> 0:11:03.360 doesn't necessarily give you any sense of exactly what's going 0:11:03.400 --> 0:11:05.800 to happen next. Tom mentioned that the politics that the 0:11:05.800 --> 0:11:08.199 Fired is having to deal with your looking ahead to 0:11:08.440 --> 0:11:11.240 to this year and beyond. How are we going to 0:11:11.280 --> 0:11:13.679 strike a balance here between what the FED wants to do, 0:11:13.720 --> 0:11:16.080 what the FED is doing, what Congress wants the FED 0:11:16.120 --> 0:11:18.120 to be doing, and the White House. I mean, it 0:11:18.120 --> 0:11:20.199 seems like this is going to be particularly thorny field 0:11:20.240 --> 0:11:23.319 for for all of these participants to have to navigate here. 0:11:24.040 --> 0:11:26.600 How difficult is it going to be? Very difficult? In short? 0:11:26.640 --> 0:11:29.200 I mean, I wouldn't want to be cheering the FED 0:11:29.320 --> 0:11:33.120 right now. You're not going to please all the people 0:11:33.160 --> 0:11:35.280 all the time. In fact, you're probably likely to upset 0:11:35.320 --> 0:11:37.560 most of the people most of the time. With FED 0:11:37.600 --> 0:11:39.400 policy this year, they are going to be at least 0:11:39.400 --> 0:11:42.480 attempting to hike rates um. If they respond to the 0:11:42.360 --> 0:11:45.160 to the macro data um, they're going to be seen 0:11:45.200 --> 0:11:47.680 as taking the punch bowl away from the party, et cetera. 0:11:47.760 --> 0:11:50.080 You know, the usual cliches. If they don't, they're going 0:11:50.080 --> 0:11:53.040 to be criticized for being behind the curve. Um. You know, 0:11:53.080 --> 0:11:55.439 they've they've been criticized in the past producing the stock 0:11:55.480 --> 0:11:59.400 market supporting politicians. Does that change under under President elector 0:11:59.480 --> 0:12:02.360 Trump wants he gets inaugurated, will he like them to 0:12:02.400 --> 0:12:05.080 choose the stock market? It's a very difficult one. How 0:12:05.120 --> 0:12:08.080 how can you how can you operate in those environments? Well, 0:12:08.080 --> 0:12:11.680 that's the unexpected that maybe we'll begin to hear about today, 0:12:11.800 --> 0:12:14.040 this press cars. When was the last press curds of 0:12:14.160 --> 0:12:17.679 David Girl? Was it her fifty days ago? D sixty seven? 0:12:17.679 --> 0:12:20.600 I believe seven? Yeah, I mean maybe it begins to 0:12:20.640 --> 0:12:25.160 do with press conference. What's Rob Colonel's unexpected for Janet 0:12:25.200 --> 0:12:29.240 Yellen and for our economics that underpins all that we 0:12:29.320 --> 0:12:32.040 do well? Her unexpected? I think it's it's it's what 0:12:32.080 --> 0:12:33.960 they deliver in the in the next couple of months. 0:12:33.960 --> 0:12:36.199 I don't think anyone's really expecting them to move in March. 0:12:36.520 --> 0:12:39.160 I'm struggling to think why they wouldn't. Can you mentioned earlier? 0:12:39.200 --> 0:12:42.720 I believe in Bloomberg Television wage growth is just the mystery. 0:12:43.400 --> 0:12:45.600 This is the one that's that's it's the dog that's 0:12:45.600 --> 0:12:48.600 finally barking. We are now beginning to see wages growth 0:12:48.640 --> 0:12:51.319 picking up and picking up in a reasonable fashion. What 0:12:51.600 --> 0:12:54.560 happens if the core rate of inflation, we know the 0:12:54.559 --> 0:12:57.400 headline headline rate of inflation is going to pay up 0:12:57.400 --> 0:13:00.360 in the next two months and push us it into 0:13:00.360 --> 0:13:02.600 the mid twos, into into sort of levels where you 0:13:02.600 --> 0:13:04.640 wouldn't expect to see rates as low as they are. 0:13:04.880 --> 0:13:07.280 If the wages continue to rise. If we start to 0:13:07.320 --> 0:13:09.720 see the core eight moving with that, and wages of 0:13:09.760 --> 0:13:12.600 course for a big factor in service sector inflation that's 0:13:12.640 --> 0:13:14.600 likely to be pushing up, then it looks as if 0:13:14.600 --> 0:13:17.040 the Fed's left it too late and they have to 0:13:17.080 --> 0:13:20.840 then respond to that with with faster responses, more tightening 0:13:21.080 --> 0:13:24.000 their three dops. We're not forecasting that ourselves, but that's 0:13:24.040 --> 0:13:26.760 not looking totally out of the realms of possibility if 0:13:26.800 --> 0:13:29.240 these things continue moving in that direction. For quickly, here 0:13:29.280 --> 0:13:31.280 help me with Paulling. How are you regarding polling now 0:13:31.280 --> 0:13:33.120 as we look ahead the political risk and in Europe 0:13:33.120 --> 0:13:35.160 going forward to tell you what's going on in France 0:13:35.160 --> 0:13:36.920 there with the Netherlands where you're gonna pay less attention 0:13:36.960 --> 0:13:40.400 to it in light of what we've seen. Ah, the 0:13:40.520 --> 0:13:44.040 politics in Europe's really really interesting right now. You've got 0:13:44.960 --> 0:13:48.120 you've got an incredibly busy political calendar. The one that 0:13:48.160 --> 0:13:52.040 everybody has really been focusing on, I think maybe inappropriately 0:13:52.040 --> 0:13:54.920 has been France. I think that's actually much less of 0:13:54.960 --> 0:13:58.120 an issue than anybody is made out. Thank you so 0:13:58.240 --> 0:14:09.080 much in a studios here in London, brought you by 0:14:09.280 --> 0:14:13.040 Bank of America Mary Lynch. Dedicated to bringing our clients 0:14:13.120 --> 0:14:17.280 insights and solutions to meet the challenges of a transforming world. 0:14:17.760 --> 0:14:21.600 That's the power of global connections, Mary Lynch, Pierce fennerin 0:14:21.680 --> 0:14:29.720 Smith Incorporated, Member s I p C. What are bringing up, 0:14:29.720 --> 0:14:31.800 Francisco Anzaga. She is a lead economist at the World 0:14:31.840 --> 0:14:33.640 Bank based here in London. The World Bank out with 0:14:33.680 --> 0:14:37.280 its latest Global Economic Prospects Report outlook for the new year. 0:14:37.360 --> 0:14:39.000 Great to have you with us here in London and 0:14:39.000 --> 0:14:41.360 Bluebrig's at European headquarters. And I just want to pick 0:14:41.440 --> 0:14:43.920 up on a quotation from your boss from Jim Came, 0:14:43.960 --> 0:14:46.240 the President of the World Bank, talking about the momentum 0:14:46.240 --> 0:14:48.960 we're seeing right now speaking of the need to increase 0:14:49.000 --> 0:14:53.400 investments in infrastructure and people looking ahead to two thousand seventeen. 0:14:53.840 --> 0:14:56.000 What's going to catalyze that and who's going to be 0:14:56.040 --> 0:14:59.200 doing that? Do you think? Yes? Thank you for having me, 0:14:59.240 --> 0:15:02.080 Thank you for sload on the emerging markets is a 0:15:02.120 --> 0:15:05.080 is a real challenge. Investment growth in emerging markets has 0:15:05.160 --> 0:15:08.440 dropped from ten percent in two thousand ten to three 0:15:08.440 --> 0:15:11.040 point four percent in two thousand and fifteen and probably 0:15:11.080 --> 0:15:14.520 below based on partial data, and that that is something 0:15:14.560 --> 0:15:17.640 that can undermine long term growth potential. For example, it 0:15:17.720 --> 0:15:22.400 is highly correlated with productivity growth, and that undermines the 0:15:22.480 --> 0:15:26.280 potential of future growth prospect, which in turn is required 0:15:26.400 --> 0:15:28.720 to live people out of poverty. What can be done? 0:15:28.960 --> 0:15:31.480 Any number of policies is available and really depends on 0:15:31.520 --> 0:15:36.640 the countries. Some can implement public investment stimulus, which we 0:15:36.880 --> 0:15:41.480 estimate does have at least over two years and benefits 0:15:41.480 --> 0:15:44.120 for private investment as well. For example, a one percentage 0:15:44.120 --> 0:15:47.800 point increase in public investment growth might lift private investment 0:15:47.800 --> 0:15:51.000 by point three percentage points. Others don't have that option 0:15:51.120 --> 0:15:53.600 because of lack of fiscal space. They might want to 0:15:53.680 --> 0:15:57.760 reallocate expenditures towards higher yielding investment, or they might want 0:15:57.760 --> 0:16:00.720 to increase tax spaces to raise the revenue it And 0:16:00.800 --> 0:16:03.400 of course all of this works most when it's a 0:16:03.400 --> 0:16:06.440 complemented with structure reforms to improve business climates. We're talking 0:16:06.440 --> 0:16:09.560 awful lot about the the uncertainty that certainly overlaid the 0:16:09.640 --> 0:16:12.680 US and the United Kingdom. You're focused on emerging markets. 0:16:13.200 --> 0:16:16.160 There's the same sort of political uncertainty persists there as well. 0:16:16.200 --> 0:16:18.880 It's the broad brush I suppose the same emerging markets. Yes, 0:16:18.880 --> 0:16:22.120 two points on this one. Yes, Global policy uncertainty is 0:16:22.160 --> 0:16:24.640 at a record high, and it is driven by all 0:16:24.640 --> 0:16:27.920 the major most of the major economies, and it is 0:16:28.000 --> 0:16:33.160 something that affects investment. We estimate, for example, if you 0:16:33.280 --> 0:16:35.000 just look back in history, if you take the pier 0:16:35.040 --> 0:16:37.840 in twenty ten to twelve to your area crisis, the 0:16:37.920 --> 0:16:40.560 policy uncertainty in the in Europe at the time may 0:16:40.560 --> 0:16:43.520 have reduced investment growth in the eco region Eastern Europe 0:16:43.880 --> 0:16:46.520 by point six to one point three percentage points. That's 0:16:46.680 --> 0:16:50.120 global uncertainty. In addition with that document in our report, 0:16:50.160 --> 0:16:54.880 a clear increase in political risk across emerging markets, which 0:16:55.040 --> 0:16:58.760 further than weighs on investment growth in them. In Washington, 0:16:58.880 --> 0:17:00.960 there's that street between in the World Bank in the 0:17:01.000 --> 0:17:02.640 I m F. I saw you once out on that 0:17:02.760 --> 0:17:05.480 street breaking up a fist fight, and you know there's 0:17:05.480 --> 0:17:08.840 this contention between the World Bank and the International Monetary Fund, 0:17:09.000 --> 0:17:11.639 where you guys don't talk that much about foreign exchange, 0:17:11.680 --> 0:17:15.280 about the dollar and dynamics. The fact is you're putting 0:17:15.320 --> 0:17:19.240 out your wonderful report on something everyone's focusing on, which 0:17:19.240 --> 0:17:23.000 is a dearth of investment amid the beginning of emerging 0:17:23.080 --> 0:17:29.280 market foreign exchange adjustment, foreign exchange weekend rates go up, 0:17:29.880 --> 0:17:33.920 growth goes down, is an investment the first order condition 0:17:34.040 --> 0:17:38.760 affected by that growth coming down. That's our concern. So 0:17:38.840 --> 0:17:41.800 we are interested in advanced economies like the US mainly 0:17:41.960 --> 0:17:45.600 because of the impact on emerging markets. So I think 0:17:45.640 --> 0:17:48.680 what you're referring to is that the potential for dollar appreciation. 0:17:48.720 --> 0:17:51.240 And it's true that foreign currency borrowing has increased a 0:17:51.240 --> 0:17:56.160 lot in emerging markets over since the crisis. However, the 0:17:56.200 --> 0:18:01.640 bulk of borrowing by corporates in emerging markets modern remains 0:18:01.880 --> 0:18:05.720 domestic currency and remains by domestic banks. So their main 0:18:05.840 --> 0:18:09.119 vulnerability is to arise in global financing condition. The only 0:18:09.119 --> 0:18:10.880 reason I'm gonna be nice to you is Dr Kim 0:18:10.880 --> 0:18:13.560 once gave me a Dartmouth bow tag, so which was 0:18:13.600 --> 0:18:16.440 which I still treasure. It was great, but but I 0:18:16.480 --> 0:18:18.400 don't want to get you in trouble with Dr Kim. 0:18:18.440 --> 0:18:21.159 You can't mention the dreaded T word, Mr Trump. I 0:18:21.200 --> 0:18:24.480 get the idea that the World Bank can't talk about them, 0:18:24.520 --> 0:18:27.199 but come on, it's a Trump reflation, call it the 0:18:27.320 --> 0:18:31.040 U S reflation in that How does that impinge on 0:18:31.080 --> 0:18:33.800 the body of your important report? The answer is it's 0:18:33.840 --> 0:18:38.240 a huge deal, right, it's the US is a big 0:18:38.320 --> 0:18:41.399 part of the global a quarter of global TODP, a 0:18:41.480 --> 0:18:44.560 tenth of global trade. So what happens what in the US, 0:18:45.040 --> 0:18:47.400 of course, does not stay in the US. It has 0:18:47.400 --> 0:18:53.479 global implications. But that said, the new administration's policies there 0:18:53.520 --> 0:18:56.199 have been there has been much discussion about them. We 0:18:56.400 --> 0:18:59.200 simply do not have enough detailed to incorporate them into 0:18:59.200 --> 0:19:01.920 our focusts. So when we say that we expect growth 0:19:01.960 --> 0:19:03.440 in the US to rise from one point six to 0:19:03.520 --> 0:19:06.920 two point two percent in t seventeen, it is excluding 0:19:07.040 --> 0:19:11.480 all these policies that are currently being promoted. This is important, David, 0:19:11.520 --> 0:19:13.800 because within the report there's more talk about the US 0:19:13.840 --> 0:19:16.520 than I've ever seen. Absolutely, let me ask you about 0:19:16.600 --> 0:19:20.560 China and you project a slowdown in growth there, Where 0:19:20.560 --> 0:19:22.479 will we see growth? Where's the most growth going to come? 0:19:22.480 --> 0:19:24.959 From is it in South Asia in the next year. 0:19:25.000 --> 0:19:26.639 Where where do you see the bright spots in the 0:19:26.680 --> 0:19:31.600 global economy right now? Clearly China is slowing gradually, just 0:19:31.800 --> 0:19:33.960 as expected. We expect six and a half percent growth 0:19:34.000 --> 0:19:37.480 in twenty seventeen, six point three in twenty eighteen and nineteen, 0:19:37.760 --> 0:19:41.679 and the authorities are conducting a careful balancing act between 0:19:41.680 --> 0:19:48.400 reducing vulnerabilities financial vulnerabilities and steering activity with the occasional stimulus. 0:19:49.000 --> 0:19:53.760 Now surprisingly there are there. There's actually a whole group 0:19:53.840 --> 0:19:57.200 of emerging markets that is doing that has done fairly 0:19:57.240 --> 0:19:59.520 well since the crisis, and those are the commodity ex 0:19:59.760 --> 0:20:02.800 in port US. It's only one third of emerging markets. 0:20:04.280 --> 0:20:07.240 Emerging market which is just Poland is done really well. 0:20:07.440 --> 0:20:09.880 Poland is one, but the others that have perhaps done 0:20:09.920 --> 0:20:12.840 best are the ones in East Africa West Africa. It's 0:20:12.160 --> 0:20:15.520 the Rwanda and the sending guys. And one of the 0:20:15.560 --> 0:20:18.560 reasons they've done well is yes, they've benefited from law 0:20:18.680 --> 0:20:22.080 and oil prices, but also they have implemented a lot 0:20:22.160 --> 0:20:24.800