WEBVTT - Kopi Time E122 - Development Multilateralism with Atlantic Council’s Martin Mühleisen 0:00:05.940 --> 0:00:09.000 Welcome to Copy Time, a podcast series on Markets and 0:00:09.010 --> 0:00:12.399 Economies from D BS Group Research. I'm Tare, chief Economist. 0:00:12.619 --> 0:00:15.600 Welcoming you to our 122nd episode. 0:00:16.159 --> 0:00:20.770 Today we will discuss global macro and development multilateralism. Our 0:00:20.780 --> 0:00:24.870 return guest is Martin Mhn, a non-resident, senior fellow at 0:00:24.879 --> 0:00:28.420 the Atlantic Council's Geo Economic Center. Prior to the Council, 0:00:28.430 --> 0:00:31.459 Martin spent several decades at the International Monetary Fund in 0:00:31.469 --> 0:00:35.759 various senior capacity. And his last position there was director 0:00:35.770 --> 0:00:40.180 for the Department of Strategy Policy and Review Martin Mizen. 0:00:40.189 --> 0:00:41.939 A warm welcome back to COVID time. 0:00:42.790 --> 0:00:45.869 Thank you, Tamo. It's great to be back and congratulations 0:00:45.880 --> 0:00:47.290 on the great run of your show. 0:00:47.810 --> 0:00:50.569 Thank you very much Martin. I think if I'm not mistaken, 0:00:50.580 --> 0:00:52.709 you and I did exactly half the number of episodes 0:00:52.720 --> 0:00:54.720 ago back when it was like in the sixties. 0:00:55.599 --> 0:00:58.220 That's right. Yeah. Although, you know, it doesn't feel that 0:00:58.229 --> 0:01:01.099 long ago and you know, we haven't grown that much older, right? 0:01:01.110 --> 0:01:03.299 It sounds like, oh, back in the sixties. 0:01:04.800 --> 0:01:07.339 No. And in fact, you and I met in person 0:01:07.349 --> 0:01:10.059 just a week ago uh in Washington DC. You're kind 0:01:10.069 --> 0:01:12.319 enough to take me out to lunch. Uh, Martin, let's 0:01:12.330 --> 0:01:15.360 start with that. Some takeaways from the IMF meetings for you. 0:01:17.169 --> 0:01:21.149 Yeah, the IMF meetings. It was a great show as always. Um, 0:01:21.160 --> 0:01:24.940 you know, all the, the tents were erected and, uh, 0:01:25.279 --> 0:01:28.839 the meetings were announced and the words were spoken but 0:01:29.269 --> 0:01:32.629 one could not come away from the meetings, um, with 0:01:32.639 --> 0:01:36.629 the sense of, well, you know, there isn't really much 0:01:36.639 --> 0:01:39.449 that people can agree on and by people, I mean, 0:01:39.459 --> 0:01:43.419 the whole world community, um it's not just the two 0:01:43.430 --> 0:01:46.860 big um countries that are kind of um 0:01:47.190 --> 0:01:51.500 you know, being declared geopolitical, you know, rivals, I mean, 0:01:51.510 --> 0:01:53.959 talking China and Russia, of course, they would have resisted 0:01:53.970 --> 0:01:57.569 a lot of the language on, on the politics, usually 0:01:57.580 --> 0:01:58.830 ahead of a communique. 0:01:59.370 --> 0:02:04.239 Um but also, um you know, within Europe um within 0:02:04.250 --> 0:02:07.959 the development community and the finance community, it's no longer 0:02:07.970 --> 0:02:12.059 the old multilateralism, there's a lot at stake in various ways, 0:02:12.070 --> 0:02:15.130 but it doesn't lead to multilateral outcomes. The real show 0:02:15.139 --> 0:02:18.830 is going on elsewhere, I think now having said that 0:02:18.839 --> 0:02:22.978 um obviously, there was some kind of small steps forward 0:02:22.990 --> 0:02:25.050 on issues where everybody has an interest. 0:02:25.639 --> 0:02:30.100 Um uh First of all, just before the meeting started, 0:02:30.110 --> 0:02:33.539 um the managing director had been reappointed for another five years, 0:02:34.149 --> 0:02:37.138 uh which seemed to be a kind of a solution 0:02:37.149 --> 0:02:39.940 where everybody could agree on because deviating from it would 0:02:39.949 --> 0:02:42.519 have been a big mess. And um she had a 0:02:42.538 --> 0:02:46.698 lot of supporters but it wasn't really unanimous. Um uh 0:02:46.770 --> 0:02:49.039 at least at the beginning, I mean, the, the IMF 0:02:49.050 --> 0:02:53.410 always rallies around um in the board meetings usually. But 0:02:53.419 --> 0:02:58.758 um uh there was also some progress on the quota before. 0:02:58.770 --> 0:03:01.668 Of course, it's been a while already that the US agreed. 0:03:02.080 --> 0:03:04.948 And if you read the communique language, um there's a 0:03:04.960 --> 0:03:08.490 lot of talk about. Well, uh first of all, you know, 0:03:08.500 --> 0:03:12.698 we're going to implement this. So the US um obviously 0:03:12.710 --> 0:03:15.750 in the crosshairs here because they need Congress to act, 0:03:16.250 --> 0:03:19.860 but they were writing, they were supporting that language um 0:03:19.869 --> 0:03:23.869 that the, the, the actual quota gets uh legislated and 0:03:23.880 --> 0:03:26.619 uh uh uh appropriated 0:03:27.059 --> 0:03:29.949 and then paid in. Um There was some talk about 0:03:29.960 --> 0:03:33.359 how to switch between the quota and the arrangements to 0:03:33.369 --> 0:03:37.399 borrow in case quotas get delayed. So that's all like process. 0:03:37.410 --> 0:03:40.949 Um And um uh it's fine that it proceeds 0:03:41.320 --> 0:03:44.360 some other stuff. Um Martin 0:03:44.389 --> 0:03:45.850 before you move on, I just want to ask you 0:03:45.860 --> 0:03:49.770 one question just for the listeners. Um understanding uh explain 0:03:49.779 --> 0:03:52.669 the substance of the quota rearrangement. Does it mean a 0:03:52.679 --> 0:03:55.580 reduction in the voting power of the United States and 0:03:55.589 --> 0:03:58.550 European countries and by extension and increase in the voting 0:03:58.559 --> 0:03:59.940 power of emerging market economies? 0:04:00.580 --> 0:04:02.479 Yeah. No. So that's the problem when you come out 0:04:02.490 --> 0:04:06.479 of the spring meetings. You're still stuck with the technicalities. OK, 0:04:06.490 --> 0:04:07.770 let's step back. Um 0:04:08.309 --> 0:04:11.570 um The quota is the IMF S capital. If you want, right? 0:04:11.580 --> 0:04:14.929 Um It's the paid in share capital uh of each 0:04:14.940 --> 0:04:18.890 member country and it also determines the vote. Um the 0:04:18.899 --> 0:04:23.209 voting power more or less. Um and um 0:04:24.290 --> 0:04:28.350 what was agreed was not a real realignment of quotas 0:04:28.359 --> 0:04:33.130 which is a big demand by especially China also emerging markets. 0:04:33.488 --> 0:04:38.089 They feel underrepresented at the IMF um which they are, 0:04:38.100 --> 0:04:40.880 I mean, factually speaking, you know, the, the IMF always 0:04:40.890 --> 0:04:44.868 was supposed to have votes according to the size of 0:04:44.880 --> 0:04:48.589 its member economies and China is obviously undervalued at the moment. 0:04:49.220 --> 0:04:53.190 Um No, it was instead a commitment by the US 0:04:53.200 --> 0:04:54.919 to increase its share 0:04:55.600 --> 0:04:58.010 uh or it's not, not its share, but it's, it's 0:04:58.019 --> 0:05:03.618 actual capital um which it did to solidify the finances 0:05:03.630 --> 0:05:06.260 of the IMF because a lot of the finances, a 0:05:06.269 --> 0:05:09.720 lot of the lending capacity of the IMF um is 0:05:09.730 --> 0:05:13.790 based on arrangements to borrow if needed from member countries 0:05:13.799 --> 0:05:14.178 and 0:05:14.600 --> 0:05:17.980 to make the IMF more stable, the, the US agreed 0:05:17.988 --> 0:05:21.979 to raise its capital. Now, it only did that because 0:05:22.190 --> 0:05:26.899 it got the uh agreement from everybody else to also 0:05:26.910 --> 0:05:30.119 raise their capital share, but in the same proportion like 0:05:30.130 --> 0:05:33.738 the US. So in other words, the IMF gets more capital, great, 0:05:34.059 --> 0:05:36.890 but there's no realignment of votes not so great as 0:05:36.899 --> 0:05:38.178 some will say. Ok. 0:05:38.549 --> 0:05:42.289 And um it's still an important step um because it, 0:05:42.299 --> 0:05:46.769 it also demonstrates the US commitment to the IMF but 0:05:46.779 --> 0:05:50.329 um it's only kind of half the the issue. And 0:05:50.339 --> 0:05:53.670 it's kind of surprising that some other countries agreed. 0:05:54.369 --> 0:05:57.410 But, you know, there we come to this geopolitical thing 0:05:57.420 --> 0:06:00.339 because it was a good move. And I think 0:06:01.029 --> 0:06:03.600 if China had, for example, said, well, we don't agree 0:06:03.609 --> 0:06:06.720 to this unless we get a bigger vote, they could 0:06:06.730 --> 0:06:11.200 have been presented as someone who blocked an IMF kind 0:06:11.209 --> 0:06:13.940 of a good thing for the fund for their own 0:06:13.959 --> 0:06:17.440 parochial reasons. And why would they do that? Because the 0:06:17.450 --> 0:06:20.100 global South needs a lot of money. So the other 0:06:20.109 --> 0:06:22.368 way around, if the US had done nothing, they could 0:06:22.380 --> 0:06:25.600 have been accused of just ignoring the plight of these countries. 0:06:25.779 --> 0:06:28.349 So everybody had an interest to say, well, look, we 0:06:28.359 --> 0:06:30.690 support more capital for the IMF 0:06:31.359 --> 0:06:35.649 so it can lend more. Um uh But uh that 0:06:35.660 --> 0:06:38.659 was kind of the, the, the lowest common denominator. And 0:06:39.339 --> 0:06:41.500 what I was saying earlier is that now they need 0:06:41.510 --> 0:06:44.809 to implement that the Congress needs to legislate the money, 0:06:44.820 --> 0:06:47.839 other countries obviously too. But it's always the Congress that 0:06:47.850 --> 0:06:51.010 proves the sticking part. That's how it was in 2010. 0:06:51.019 --> 0:06:53.359 It took them six years I think to come around. 0:06:54.160 --> 0:06:57.160 Um And then of course, there's the lowest commitment to 0:06:57.170 --> 0:06:57.920 review 0:06:58.579 --> 0:07:02.230 the um the quota shares and the voting shares of 0:07:02.238 --> 0:07:05.869 the IMF and to find the process forward. Now, uh 0:07:06.250 --> 0:07:07.919 you know, I don't want to kind of bring up 0:07:07.928 --> 0:07:10.920 comparisons to Damocles, but it goes a little bit in 0:07:10.929 --> 0:07:16.369 that direction because there are so many interests interwoven um 0:07:16.380 --> 0:07:20.250 uh into that quota formula they even have um which 0:07:20.260 --> 0:07:23.459 is kind of a guideline. It's not, it's not deterministic 0:07:23.760 --> 0:07:24.200 but 0:07:24.760 --> 0:07:28.260 kind of figuring out the relative kind of standings of 0:07:28.269 --> 0:07:33.329 various European countries within that quota arrangement, finding out the 0:07:33.339 --> 0:07:36.730 relative strength of say, Japan and China, 0:07:37.390 --> 0:07:38.049 um 0:07:38.880 --> 0:07:42.450 figuring out how much vote to really give the developing countries. 0:07:42.459 --> 0:07:46.579 Although economically speaking, they're really, I mean, they're so small still, 0:07:46.589 --> 0:07:50.149 unfortunately that they're not really way out of line. It's 0:07:50.160 --> 0:07:53.290 more a political question. So how much votes should Africa 0:07:53.299 --> 0:07:56.380 have in the IMF it's a big political issue and, 0:07:56.390 --> 0:08:00.160 you know, they just got another board chair, the 25th 0:08:00.170 --> 0:08:02.119 board chair of the IMF goes to Africa. 0:08:02.790 --> 0:08:05.640 So then I have three, which is good, I think, 0:08:05.809 --> 0:08:10.359 but figuring out how to kind of divide the political 0:08:10.369 --> 0:08:13.190 and the economic influence and fit it into a formula. 0:08:13.709 --> 0:08:16.010 If you ask me, they're gonna talk about that for 0:08:16.019 --> 0:08:19.809 ages and not making progress, which means that, you know, 0:08:19.820 --> 0:08:23.880 China will again, probably have to ask itself, do we 0:08:23.890 --> 0:08:27.410 still support this institution in a few years if nothing 0:08:27.420 --> 0:08:29.450 happens or what do we do? So so far they've 0:08:29.459 --> 0:08:31.089 been playing along constructively. 0:08:31.730 --> 0:08:35.760 But um it's, it's heightening the, the tension between what 0:08:35.770 --> 0:08:37.679 the IMF really is and what it's supposed to 0:08:37.690 --> 0:08:40.270 be. Excellent, very, very useful. Thanks Martin. 0:08:42.260 --> 0:08:45.320 Yeah. Um So the quota that, you know, the, the, 0:08:45.330 --> 0:08:48.080 the agreement was some way forward now, they, they commit 0:08:48.090 --> 0:08:50.400 to further process. Um 0:08:51.159 --> 0:08:56.239 uh the common framework uh as always is under debate. 0:08:56.440 --> 0:09:00.739 Um so, you know, low income and developing countries are 0:09:00.750 --> 0:09:01.579 over indebted. 0:09:02.380 --> 0:09:05.669 There has been problems with countries like Zambia that 0:09:06.840 --> 0:09:10.598 needed to restructure its debt and they, you know, took 0:09:10.609 --> 0:09:14.109 them forever to do that in part because China not 0:09:14.119 --> 0:09:17.380 always China but often China was very slow in restructuring. 0:09:18.210 --> 0:09:22.669 Um They've been making progress on that one. The, the 0:09:22.679 --> 0:09:26.589 interesting thing here is that um the IMF came out 0:09:26.599 --> 0:09:29.270 with a policy paper just before the meeting started. 0:09:30.989 --> 0:09:33.349 Um and that's not, that's a very tactical paper and 0:09:33.359 --> 0:09:38.049 very difficult to read. I have to warn our, our 0:09:38.059 --> 0:09:42.159 uh all our, our listeners about um you know, delving 0:09:42.169 --> 0:09:44.520 into that paper, there's a lot of legalese in there, 0:09:44.530 --> 0:09:47.250 but it's, it's really important. The issue here is the 0:09:47.260 --> 0:09:50.650 follow Zambia had to wait for an IMF program for 0:09:50.659 --> 0:09:53.549 three years or so because the creditors could not agree 0:09:53.559 --> 0:09:54.460 on a restructuring 0:09:55.320 --> 0:09:58.869 under the old kind of rules if you want 1020 0:09:58.880 --> 0:10:01.739 years ago when China was not yet a big creditor, 0:10:01.750 --> 0:10:04.059 but there was only the Paris Club. So the the 0:10:04.070 --> 0:10:06.218 advanced industrial economies 0:10:06.950 --> 0:10:10.020 um usually agreement in the Paris Club that they would 0:10:10.030 --> 0:10:13.169 take on this, this debt restructure and let alone agree 0:10:13.179 --> 0:10:16.369 on it yet was already enough for the IMF to say, ok, 0:10:16.380 --> 0:10:17.989 we're going to have a deal one day. So we 0:10:18.000 --> 0:10:18.570 move forward 0:10:19.419 --> 0:10:21.799 with China that didn't work because there was no way 0:10:21.809 --> 0:10:25.969 of gauging whether China really was serious when they said, well, 0:10:25.979 --> 0:10:28.319 you know, we're going to engage and we're gonna talk 0:10:28.780 --> 0:10:31.109 and you know, it, it took a lot of years 0:10:31.119 --> 0:10:33.690 at the beginning, but that was due to in part 0:10:33.700 --> 0:10:36.718 internal issues in China. But 0:10:37.330 --> 0:10:40.460 I think the the international community has come to the 0:10:40.469 --> 0:10:42.929 point where they said, well, China has now done a 0:10:42.940 --> 0:10:48.330 few restructurings. They have participated not smoothly, mind you it's 0:10:48.340 --> 0:10:49.909 still a process with them, but 0:10:50.559 --> 0:10:53.978 there is something going on with China that we can say, ok, 0:10:54.020 --> 0:10:57.500 once they say they engage, we're most likely going to 0:10:57.510 --> 0:10:59.890 get to some point where we have an agreement with 0:10:59.900 --> 0:11:02.570 them and that should be enough for the IMF to 0:11:02.580 --> 0:11:06.939 go forward. And so that's one thing that's the assurances 0:11:06.950 --> 0:11:11.210 policy and there's a little kind of um you know, 0:11:11.219 --> 0:11:15.289 a little kind of tool that can threaten China if 0:11:15.299 --> 0:11:16.429 a country wants to, 0:11:16.859 --> 0:11:19.909 to say, well, if China doesn't engage at all or 0:11:19.919 --> 0:11:23.239 not timely enough, but we've made all efforts to reach out. 0:11:23.250 --> 0:11:24.659 We made good offers to them 0:11:25.479 --> 0:11:26.909 that the IMF can say, well, 0:11:27.630 --> 0:11:30.659 China, too bad, you're not going to get paid um under, 0:11:30.669 --> 0:11:33.409 under our, under our IMF program. 0:11:34.130 --> 0:11:36.280 Um You have to wait until you come to a 0:11:36.289 --> 0:11:39.989 debt agreement. In the meantime, the country gets IMF money 0:11:40.309 --> 0:11:43.000 but you will not get paid from it, we stop 0:11:43.010 --> 0:11:45.069 the payments to the country as soon as they even 0:11:45.080 --> 0:11:47.589 think of repaying you. So, in a way it's, it's 0:11:47.599 --> 0:11:50.190 defaulting on China keeping them in default. 0:11:51.030 --> 0:11:53.349 Um, but the IMF goes ahead and that, that is 0:11:53.359 --> 0:11:55.369 something that used to be just impossible. 0:11:56.070 --> 0:11:59.349 Uh In the, in the eighties, nineties, two thousands, it 0:11:59.359 --> 0:12:02.280 got changed a little bit when Russia did its first 0:12:02.289 --> 0:12:05.739 Ukraine thing in, uh with the, with the Crimea and 0:12:05.760 --> 0:12:09.609 Donbas in 2000. Uh when was it 15 or 14, 0:12:09.750 --> 0:12:12.190 it got changed a little bit um to open the 0:12:12.200 --> 0:12:14.969 door slightly to be able to lend to Ukraine. 0:12:15.659 --> 0:12:19.390 And now it's, it's been even further widened the door. 0:12:19.400 --> 0:12:22.718 It doesn't mention China of course. But the so called 0:12:22.729 --> 0:12:25.900 policy of lending into official arrears is a big step 0:12:25.909 --> 0:12:27.690 for the fund. But still, I would 0:12:27.780 --> 0:12:31.219 see, for example, in the Ukraine context, Ukraine can default 0:12:31.229 --> 0:12:33.909 or not service its debt to Russia but still receive 0:12:33.919 --> 0:12:35.219 an IMF program disperse. 0:12:35.590 --> 0:12:39.780 Yeah, so back then, uh in short, um Russia held 0:12:39.789 --> 0:12:42.880 a 3 billion uh bond that it had uh 0:12:43.469 --> 0:12:46.510 kind of gotten from Ukraine in exchange for money. But 0:12:46.520 --> 0:12:51.179 under a regime in Ukraine, that was still kind of 0:12:51.190 --> 0:12:52.770 um you know, to Russia's liking. 0:12:53.609 --> 0:12:56.718 And the Ukrainians after the change in power and that 0:12:56.840 --> 0:13:00.968 little green men invasion of Crimea said there's no way 0:13:00.979 --> 0:13:02.989 we're going to pay, in fact, to cost us so 0:13:03.000 --> 0:13:04.789 much damage. We're not going to pay. 0:13:05.520 --> 0:13:09.400 And the international community said, well, if um if a 0:13:09.409 --> 0:13:13.059 predator like Russia is no longer relevant for program financing 0:13:13.070 --> 0:13:15.630 in the, in the future, which obviously it wasn't because 0:13:15.640 --> 0:13:17.099 they had become enemies by then. 0:13:17.929 --> 0:13:21.090 Um The IMF can still go ahead while the debt 0:13:21.099 --> 0:13:24.000 is being sorted out provided that the country doesn't repay 0:13:24.010 --> 0:13:27.710 the debt. So in other words, if Ukraine doesn't pay Russia, 0:13:27.719 --> 0:13:28.469 we can move ahead. 0:13:29.549 --> 0:13:33.169 So, um that was the lending into official arrears policy. 0:13:33.179 --> 0:13:35.359 And as I said, it has now been widened a 0:13:35.369 --> 0:13:38.950 little bit further, but it's a very kind of weak 0:13:38.960 --> 0:13:43.369 leverage against China because it's uh you know, tell me 0:13:43.380 --> 0:13:46.330 which country would like to default on China intentionally 0:13:46.594 --> 0:13:49.385 and all the trade links, the financing links, the cross 0:13:49.414 --> 0:13:52.715 default clauses and God knows what. Um so it's very 0:13:52.724 --> 0:13:55.375 unlikely but it's there as a little tool to be used. 0:13:55.674 --> 0:13:58.984 But the real issue is the assurances policy. So that's 0:13:58.994 --> 0:14:01.895 a vote of confidence if you want in China, of, 0:14:02.065 --> 0:14:06.635 of them playing by the rules just very slowly, they 0:14:06.645 --> 0:14:08.854 need to still figure out a lot of the details 0:14:08.864 --> 0:14:12.534 and the internal coordinations very weak. Um So the IMF 0:14:12.544 --> 0:14:14.614 can then faster. So that's I think 0:14:15.440 --> 0:14:18.150 uh you know, a good move. It's a marginal one. 0:14:18.159 --> 0:14:20.700 We'll have to see how it works out uh in 0:14:20.710 --> 0:14:23.409 the future. But that's one of the achievements of the 0:14:23.419 --> 0:14:26.289 board before the meetings. Um 0:14:27.510 --> 0:14:31.590 We also got some news, I think just yesterday, again, 0:14:31.599 --> 0:14:33.590 not related to the meetings directly 0:14:34.210 --> 0:14:37.830 that the African Development Bank seems to have come to 0:14:37.840 --> 0:14:43.219 a point with IMF shareholders that they can use SDRS 0:14:43.559 --> 0:14:45.469 that the fund is issuing, 0:14:46.320 --> 0:14:50.849 um, to finance, to, to raise finance that they can 0:14:50.859 --> 0:14:55.219 only lend to Africa. So again, that sounds not such 0:14:55.229 --> 0:14:58.219 a big thing, but it has the seeds of something bigger, 0:14:59.260 --> 0:15:00.059 um, 0:15:00.729 --> 0:15:04.969 that gets us deep into development finance. So the issue 0:15:04.979 --> 0:15:05.669 is that 0:15:06.409 --> 0:15:13.630 um SDRS are being regarded by central banks as reserve currency, right? 0:15:14.140 --> 0:15:17.030 That's part of the deal of the IMF. Um As 0:15:17.039 --> 0:15:20.229 long as um the fund is using conditionality for its 0:15:20.239 --> 0:15:25.380 programs and is able of addressing countries balance of payments issues. 0:15:26.090 --> 0:15:29.390 The the the claims that central banks have on the 0:15:29.400 --> 0:15:29.950 IMF 0:15:30.849 --> 0:15:34.760 because the IMF is financed by member country contributions way 0:15:34.770 --> 0:15:39.469 back in the bo gold and nowadays currency. So as 0:15:39.479 --> 0:15:42.070 long as that claim is of a very high quality, 0:15:42.080 --> 0:15:44.280 the banks, the central banks can say, oh look, you know, 0:15:44.289 --> 0:15:46.549 it's part of our reserves, ok? 0:15:47.260 --> 0:15:49.559 Because the, the IMF owes them SDRS. 0:15:50.219 --> 0:15:55.239 Now say if the IMF would hand out SDRS to 0:15:56.109 --> 0:15:58.690 institutions that are of not such great quality 0:15:59.789 --> 0:16:03.270 and those institutions would then lend and make losses and 0:16:03.280 --> 0:16:05.609 the IMF would have to at some point record a 0:16:05.619 --> 0:16:08.979 loss on its books on its SDRS that would be 0:16:08.989 --> 0:16:12.109 passed on to the member countries and you cannot have 0:16:12.119 --> 0:16:15.179 losses on central bank reserves, right. It has to be 0:16:15.190 --> 0:16:19.909 absolutely safe, that asset. So that's the link here. That's 0:16:19.919 --> 0:16:24.450 so kind of complicated. Sometimes. The centerpiece here is IMF conditionality. 0:16:25.200 --> 0:16:25.739 Um 0:16:26.609 --> 0:16:30.520 And that's why this RST the resilience and sustainability trust 0:16:30.530 --> 0:16:34.150 that the IMF came up with um to lend to 0:16:34.159 --> 0:16:40.239 um poorer countries for climate purposes, um which was heralded, 0:16:40.250 --> 0:16:43.799 you know, all around the world as a major step forward. Well, 0:16:43.809 --> 0:16:46.510 it's actually a fairly small amount. It's big for some 0:16:46.520 --> 0:16:47.989 island countries. Yes. But, 0:16:48.359 --> 0:16:50.880 and the rest of the scheme of things, it's in 0:16:50.890 --> 0:16:53.640 the bigger scheme, it's not so big. And the reason 0:16:53.650 --> 0:16:58.450 is because it's all funded on STR contributions and those 0:16:58.460 --> 0:16:59.369 have to be 0:17:02.760 --> 0:17:05.649 reserves and extra reserves in these trust funds. And the 0:17:05.660 --> 0:17:06.599 conditionality has, 0:17:07.880 --> 0:17:10.239 you have a full fledged IMF program and you get 0:17:10.250 --> 0:17:14.349 some money from the trust fund and it's just complicated. 0:17:14.359 --> 0:17:17.708 It's a big mess bureaucratically and the, the outcome is 0:17:17.719 --> 0:17:20.669 not that great. So the African Development Bank now, 0:17:21.390 --> 0:17:21.760 oh, 0:17:23.968 --> 0:17:26.428 with a bunch of guarantees from the UK and other 0:17:26.438 --> 0:17:30.609 countries to do exactly the same. But it doesn't require 0:17:30.619 --> 0:17:31.788 a full IMF program 0:17:32.599 --> 0:17:36.390 because apparently it has sufficient guarantees from other countries to 0:17:36.400 --> 0:17:40.880 use these SDRS. So that's uh an un bureaucratic way 0:17:40.890 --> 0:17:44.859 of proceeding. And if it gains uh followers, it could 0:17:44.869 --> 0:17:47.339 also apply to others like L A DB and the 0:17:47.349 --> 0:17:50.599 Asia Development Bank and so forth. And that would open 0:17:50.609 --> 0:17:53.959 up new ways of financing. Um within limits, I would 0:17:53.969 --> 0:17:54.839 say still. But 0:17:55.199 --> 0:17:59.050 it, it does away with this um IMF program requirement. 0:17:59.060 --> 0:18:01.458 That kind of is a conflict of interest for the 0:18:01.469 --> 0:18:06.819 IMF really and uh just creates unnecessary bureaucratic hurdles. So, 0:18:07.650 --> 0:18:09.699 uh you know, I've been going on to explain a 0:18:09.709 --> 0:18:12.520 lot of this and I'm, I'm sorry, I hope this 0:18:12.530 --> 0:18:15.020 is interesting for people, but you can see that the 0:18:15.030 --> 0:18:17.530 devil is in the details. First of all, and second, 0:18:17.949 --> 0:18:19.469 all these incremental 0:18:19.979 --> 0:18:24.430 kind of ways of making progress are really because there 0:18:24.439 --> 0:18:27.979 is no other ways forward. There's no big decision on 0:18:27.989 --> 0:18:31.280 the voting shares, there's no big decision on, you know, 0:18:31.290 --> 0:18:34.439 uh raising lots of money for the World Bank and this. 0:18:34.449 --> 0:18:37.829 So everybody is trying to, to tweak the existing system 0:18:37.839 --> 0:18:40.000 so that something comes out of it and they can 0:18:40.010 --> 0:18:41.079 claim it as a success, 0:18:41.880 --> 0:18:47.179 right? Um I think uh I mean, a super helpful Martin. 0:18:47.189 --> 0:18:49.030 Uh but at the same time as you correctly say, 0:18:49.040 --> 0:18:52.978 these are uh on the margin, uh these are not 0:18:52.989 --> 0:18:56.379 uh seismic in terms of global development, finance or meeting 0:18:56.390 --> 0:19:00.079 any of the major lumpy needs of the developing world. 0:19:00.089 --> 0:19:02.149 And going back to the first point in terms of 0:19:02.160 --> 0:19:05.409 the voice and the quota in this international organization, certainly 0:19:05.420 --> 0:19:08.458 that crisis is not being resolved by these incremental changes. 0:19:08.839 --> 0:19:11.859 Martin, I felt that, you know, the April meetings were 0:19:11.869 --> 0:19:16.540 not that different in terms of communication than the October 0:19:16.550 --> 0:19:19.880 2023 meetings in Marrakesh. Although there was one word that 0:19:19.890 --> 0:19:22.670 was not mentioned at all in those meetings and are 0:19:22.680 --> 0:19:25.229 mentioned a lot these days and including in the three 0:19:25.239 --> 0:19:28.979 meetings is the word overcapacity. So the Americans are, you know, 0:19:28.989 --> 0:19:32.859 looking hard at China's industrial capacity and terming it as 0:19:32.869 --> 0:19:36.219 overcapacity with the risk of exporting deflation. 0:19:36.569 --> 0:19:39.069 Uh What do you think of this argument? And where 0:19:39.079 --> 0:19:41.150 do you think the IMF stands on this? 0:19:43.010 --> 0:19:46.239 Um more than the argument first. Um I think it 0:19:46.250 --> 0:19:47.000 reflects 0:19:47.630 --> 0:19:52.829 um a very different view, a philosophical difference of the, 0:19:52.839 --> 0:19:55.579 the role of the state in China as opposed to 0:19:55.589 --> 0:19:57.708 a lot of parts of the rest of the world. 0:19:58.459 --> 0:20:03.900 Um The the private sector is kind of um an 0:20:03.910 --> 0:20:07.698 interesting entity in uh in China, right? The question is 0:20:07.709 --> 0:20:10.739 whether it ever existed or it has probably existed for 0:20:10.750 --> 0:20:11.510 a while. But then 0:20:12.170 --> 0:20:14.229 in the last couple of years, they have clamped down 0:20:14.239 --> 0:20:18.669 like quite a bit on entrepreneurs because they saw um 0:20:18.680 --> 0:20:19.938 first of all 0:20:21.109 --> 0:20:24.170 growth of inequality in China. But I think more importantly, 0:20:24.579 --> 0:20:28.198 I think the leadership feared that the role of the 0:20:28.209 --> 0:20:30.630 party was being questioned. And so what I saw is 0:20:30.640 --> 0:20:33.579 that there was a lot of clamping down on private 0:20:33.589 --> 0:20:35.889 investment and private entrepreneurship 0:20:36.489 --> 0:20:39.469 um in the uh uh at least in the finance 0:20:39.479 --> 0:20:42.938 sector and to some extent, probably elsewhere, although don't get 0:20:42.949 --> 0:20:46.140 me wrong. I mean, obviously you have companies that are 0:20:46.150 --> 0:20:50.550 fairly independent in in China. But I think uh the 0:20:50.560 --> 0:20:54.869 overall notion that, that these, that these kind of operate 0:20:54.880 --> 0:20:58.069 independently of the party and the state is something that 0:20:58.500 --> 0:21:03.290 China wouldn't probably subscribe to as opposed to um Western 0:21:03.300 --> 0:21:05.270 liberal democracies where, you know, 0:21:05.910 --> 0:21:07.609 you have to have a good reason for the state 0:21:07.619 --> 0:21:11.060 to interfere with your business. So I think China looks 0:21:11.069 --> 0:21:13.040 at its economy and says, well, it's part of the 0:21:13.050 --> 0:21:17.909 state broadly speaking. So what do we do? Um to 0:21:17.920 --> 0:21:20.290 first of all address the big slump that we've been 0:21:20.300 --> 0:21:26.300 facing because of our housing, our problems, our debt, our demographics, 0:21:26.729 --> 0:21:31.409 um we need to avoid um first of all, social 0:21:31.420 --> 0:21:35.250 uncertainty and social upheaval that threatens the rule of the party. 0:21:35.780 --> 0:21:39.310 And b um we need to prepare um especially given 0:21:39.319 --> 0:21:42.800 our demographics for the challenges of the next 1020 years. 0:21:43.449 --> 0:21:45.619 And so they seem to have come to a conclusion 0:21:45.630 --> 0:21:45.910 that 0:21:46.680 --> 0:21:51.520 um they need to find ways to support what they 0:21:51.530 --> 0:21:55.530 see as first of all, key industries and second uh 0:21:55.550 --> 0:21:59.829 key markets. So it's no accident. I think that China 0:21:59.839 --> 0:22:02.760 is doing a lot of business with the global South 0:22:02.770 --> 0:22:05.188 as we call it. Um because that's where the population 0:22:05.199 --> 0:22:08.800 growth sits over the next, you know, 2030 40 years. 0:22:09.300 --> 0:22:13.060 Um And it's no kind of surprise that they're trying 0:22:13.069 --> 0:22:14.239 to boost 0:22:14.949 --> 0:22:17.579 industries that they think would be critical, like, you know, 0:22:17.589 --> 0:22:20.369 green energy um technology A I 0:22:21.270 --> 0:22:23.609 EVs if you want. So 0:22:24.520 --> 0:22:28.709 um what happens is that, I think China which is inward, 0:22:28.719 --> 0:22:31.369 I think, uh you know, to a, to a, to 0:22:31.380 --> 0:22:34.260 a degree that we in the West can't really imagine 0:22:34.760 --> 0:22:37.959 uh a billion people that are very internally consumed with 0:22:37.969 --> 0:22:41.099 their own issues. They don't, I think, look so far 0:22:41.109 --> 0:22:43.540 out and if the Chinese say, well, we need this, 0:22:43.800 --> 0:22:47.020 who's going to stop us and that of course, brings 0:22:47.030 --> 0:22:50.339 them into that conflict with the US. Who as you said, 0:22:51.020 --> 0:22:54.329 things, this is overcapacity, they're manufacturing their way out of 0:22:54.339 --> 0:22:57.020 the crisis, they're being a burden on the rest of 0:22:57.030 --> 0:23:00.399 the world. And um that I think will lead us 0:23:00.410 --> 0:23:04.188 into even greater conflict if um there's a change of 0:23:04.199 --> 0:23:05.199 power in Washington. 0:23:05.859 --> 0:23:08.750 Um but I think it's, it's rooted in this fundamental 0:23:09.609 --> 0:23:12.170 difference of view of what the state is there for 0:23:12.180 --> 0:23:14.270 and the role of subsidies and all that. 0:23:14.900 --> 0:23:18.760 So um I don't think it's gonna go away anytime soon. 0:23:18.829 --> 0:23:22.920 I mean, we hear from uh Secretary of State Lincoln 0:23:22.930 --> 0:23:25.458 being in China and being accused of speaking in two 0:23:25.469 --> 0:23:30.579 tongues about seeking greater um and better relations with China. 0:23:30.589 --> 0:23:32.599 But at the same time, of course, the US is 0:23:32.609 --> 0:23:34.680 preparing economic steps against China. 0:23:36.040 --> 0:23:41.660 Um it's, it's really causing the Europeans big difficulties because 0:23:41.670 --> 0:23:44.579 they rely much more. I think on China as an 0:23:44.589 --> 0:23:47.790 export market than the US and also of course, a 0:23:48.030 --> 0:23:52.930 trade partner on imports. Um and it's, it's adding to 0:23:52.939 --> 0:23:56.619 this sense that I felt during the spring meetings that, 0:23:57.010 --> 0:24:00.219 you know, really the the big powers can kind of 0:24:00.229 --> 0:24:02.579 have started to talk past each other to some sense 0:24:03.040 --> 0:24:04.859 and I don't know how it's going to play out. 0:24:05.290 --> 0:24:07.449 I have to admit, but I don't think there's going 0:24:07.459 --> 0:24:11.040 to be any way the Chinese will stop subsidizing some 0:24:11.050 --> 0:24:14.729 of these companies, Europe and the US will probably try 0:24:14.739 --> 0:24:17.089 to raise tariffs and keep them out in other ways. 0:24:17.099 --> 0:24:20.199 But you know, the Chinese economy is still a big 0:24:20.209 --> 0:24:21.699 juggernaut and um 0:24:22.520 --> 0:24:26.060 uh to some extent, it's helpful, as you yourself said, 0:24:26.069 --> 0:24:28.939 a couple of times also in last week's interview with 0:24:28.949 --> 0:24:31.939 Alexis Crow, which was really good. Um you know, 0:24:32.680 --> 0:24:35.180 is there really a problem if China supports a lot 0:24:35.189 --> 0:24:38.420 of green technology to the world that everybody needs. 0:24:39.140 --> 0:24:42.540 Um one can have different views on that. I think 0:24:42.579 --> 0:24:47.079 that Western countries, the liberal democracies still want to have 0:24:47.089 --> 0:24:50.219 some capacity left to do it themselves because being dependent 0:24:50.229 --> 0:24:51.280 on another country, 0:24:52.150 --> 0:24:55.500 as you know, especially in this time of geopolitical strife 0:24:55.510 --> 0:24:59.439 has been uh risky and the Russians to see from 0:24:59.449 --> 0:25:00.199 the other way around. 0:25:00.880 --> 0:25:02.939 So there is a there is a trend for 0:25:04.010 --> 0:25:06.948 on shoring reshoring and that applies to all kind of 0:25:06.959 --> 0:25:09.099 sectors and I don't see a way out right now, 0:25:09.109 --> 0:25:12.530 but it's a problem as we know and this deflationary 0:25:13.020 --> 0:25:16.188 impasse from China um may be with us, but so 0:25:16.199 --> 0:25:20.000 is probably a somewhat inflationary impulse from the US, given 0:25:20.430 --> 0:25:23.239 what they do on fiscal policy, which probably the Chinese 0:25:23.250 --> 0:25:26.770 will tell them. Well, you know, they bring your house 0:25:26.780 --> 0:25:28.379 in order. First, I could imagine. 0:25:29.800 --> 0:25:33.698 Uh Martin, do you feel that the US Treasury's line 0:25:33.709 --> 0:25:36.649 of argument on overcapacity would be something that the IMF 0:25:36.660 --> 0:25:38.359 would be sort of forced to take up and there 0:25:38.369 --> 0:25:42.169 will be in their articles for consultation with China or elsewhere. 0:25:42.180 --> 0:25:44.810 This issue will become something that the IMF staff adopt. 0:25:46.680 --> 0:25:50.329 You know, the IMF um that falls under IMF surveillance, right? 0:25:50.339 --> 0:25:53.839 Because they are not trade organization, but of course, they 0:25:53.849 --> 0:25:56.329 are responsible for exchange rates and the like 0:25:57.140 --> 0:26:00.780 the IMF surveillance has not been its strongest suit unfortunately, 0:26:01.020 --> 0:26:03.989 in recent years of the last five to be precise 0:26:04.689 --> 0:26:08.750 um because the focus was elsewhere. And um 0:26:09.550 --> 0:26:11.560 if you have a business model where you need the 0:26:11.569 --> 0:26:15.390 big countries to provide funds for lending to small economies 0:26:15.400 --> 0:26:17.400 and poor economies, then you don't want to go up 0:26:17.410 --> 0:26:18.129 against Europe 0:26:18.890 --> 0:26:22.630 biggest contributors. And, you know, I I've been really disappointed 0:26:22.640 --> 0:26:26.410 by the way in general that um that the fund 0:26:26.420 --> 0:26:29.520 has handled surveillance in recent years. It's been surprising that 0:26:29.530 --> 0:26:32.949 they've come back to the spring meetings by talking about 0:26:32.959 --> 0:26:36.839 the global economy almost exclusively in the curtain raiser almost 0:26:36.849 --> 0:26:41.310 without mentioning climate. Um It's not that climate isn't important, 0:26:41.319 --> 0:26:44.199 but they focused not enough on what they were supposed 0:26:44.209 --> 0:26:44.589 to do. 0:26:44.989 --> 0:26:47.599 So whether there's guts in the IMF to take on 0:26:47.609 --> 0:26:49.819 China on this one. We'll see, I think the recent 0:26:49.829 --> 0:26:53.410 staff reports have not been bad but on this particular issue, 0:26:53.819 --> 0:26:56.349 um we'll have to see the, the key report here 0:26:56.359 --> 0:26:59.050 if you ask me is the so called external sector 0:26:59.060 --> 0:27:00.760 report in June or July, 0:27:01.439 --> 0:27:05.239 where they go through global current account imbalances where they 0:27:05.250 --> 0:27:08.040 look at the exchange rate valuation and where they come 0:27:08.050 --> 0:27:12.640 to a a judgment whether um you know, there there 0:27:12.650 --> 0:27:16.659 is some, some, some policies that need to be adjusted. 0:27:17.430 --> 0:27:22.660 Um I would imagine that the pressure from uh from 0:27:22.670 --> 0:27:25.959 uh across uh 19th street from, from the Treasury is 0:27:25.969 --> 0:27:29.369 big on writing something we'll have to see. I mean, 0:27:29.380 --> 0:27:32.290 you know, as an economist, I would say, as someone 0:27:32.300 --> 0:27:35.290 who's grown up in the, in the uh in, in, 0:27:35.300 --> 0:27:38.560 in market economies, I would say, well, of course, China 0:27:38.569 --> 0:27:42.640 is doing something that's patently unfair from a western sense 0:27:42.650 --> 0:27:44.689 of the world, but whether China is listening is a 0:27:44.699 --> 0:27:45.409 different story. 0:27:45.930 --> 0:27:49.629 So I would hope that the IMF is clear on it. They, 0:27:49.640 --> 0:27:52.729 they at least the China reports have been pretty good in, 0:27:52.739 --> 0:27:56.739 in the last few years. But whether the institutions comes 0:27:56.750 --> 0:27:59.589 up with a, with a tough call that gets through 0:27:59.599 --> 0:28:02.410 its board, we'll have to see. Um I think there's 0:28:02.420 --> 0:28:07.030 ample evidence that China is hurting in some areas uh competitors. 0:28:07.709 --> 0:28:11.650 But um you know, that's one part where we'll have 0:28:11.660 --> 0:28:14.780 to see whether the fund is really still powerful enough 0:28:14.790 --> 0:28:17.729 to send unpleasant messages to its members and it has 0:28:17.739 --> 0:28:21.000 to be matched by, by messengers on the US, which 0:28:21.010 --> 0:28:21.569 they've started. 0:28:22.589 --> 0:28:24.238 That's right. So I want to talk a little bit 0:28:24.250 --> 0:28:27.969 about the US. Um But, but I, I'll start by 0:28:27.979 --> 0:28:30.458 referring something on the international front, which is that there 0:28:30.469 --> 0:28:35.089 was this US, Korea Japan trilateral finance dialogue. Uh right 0:28:35.099 --> 0:28:39.199 during the beginning of the meetings and the communique they issued, 0:28:39.209 --> 0:28:41.329 I I thought it was interesting because normally these are 0:28:41.339 --> 0:28:45.810 rather proforma importance of cooper operation, that sort of stuff 0:28:45.819 --> 0:28:47.800 uh that is mentioned. But in this one, there was 0:28:47.810 --> 0:28:50.719 explicit mention of the recent weakness in the yen and 0:28:50.729 --> 0:28:51.209 the one 0:28:51.619 --> 0:28:55.900 uh so clearly, even at the rather so almost like 0:28:55.910 --> 0:28:59.239 diplomatic level, the exchange issue is now coming to the fore. 0:28:59.380 --> 0:29:01.400 So let me reverse it around and say that, you know, 0:29:01.410 --> 0:29:03.930 we could talk about yen and one later but the 0:29:03.939 --> 0:29:06.040 US dollar, I mean, what's your sense of the US 0:29:06.050 --> 0:29:09.079 dollar valuation? Uh And uh 0:29:09.540 --> 0:29:12.229 what do you make of, you know, currencies like Yemen, 0:29:12.250 --> 0:29:15.010 one weakening, sharp Yemen. Are they just Correll of one 0:29:15.020 --> 0:29:18.489 another or it's about us being relatively so much stronger 0:29:18.500 --> 0:29:20.469 than the rest of the world, they can absorb high 0:29:20.479 --> 0:29:23.479 interest rates and maintain a US strong dollar. And it 0:29:23.489 --> 0:29:25.180 is the problem for the rest of the world, not 0:29:25.189 --> 0:29:26.109 a problem for the US. 0:29:28.140 --> 0:29:31.380 Um Well, problems in the rest of the world also 0:29:31.390 --> 0:29:35.040 come around usually because cheaper exchange rates also mean that 0:29:35.050 --> 0:29:38.040 um are not cheaper but but but these kind of 0:29:38.050 --> 0:29:41.020 valuations of the exchange rate means that competitors will become 0:29:41.030 --> 0:29:45.800 more competitive and the US economy will become less competitive. 0:29:46.239 --> 0:29:49.819 So at some point, there's gonna be some further widening 0:29:49.829 --> 0:29:52.439 of the deficit in the US and some complaints about 0:29:53.079 --> 0:29:57.829 how could other countries undercut them. Um Again, this has become, 0:29:57.839 --> 0:30:00.739 this would become a big problem. Um If you think 0:30:00.750 --> 0:30:04.449 about the next administration being from a different party, because then, 0:30:04.459 --> 0:30:06.819 you know, economics doesn't play such a big role. It's 0:30:06.829 --> 0:30:09.160 the numbers and how can they export so much to 0:30:09.170 --> 0:30:10.239 us out of the right. 0:30:10.979 --> 0:30:15.459 Um The, the problem will then be that fiscal policy 0:30:15.469 --> 0:30:19.300 will probably not be tightened. Um It's rarely the case 0:30:19.310 --> 0:30:22.390 under populist governments. We're already talking about new tax cuts 0:30:22.400 --> 0:30:26.280 under the Trump administration possibly or an extension of current 0:30:26.290 --> 0:30:30.430 tax cuts. So, um right now, to be honest, um 0:30:31.849 --> 0:30:34.910 if one, if one is a member of a Liberal 0:30:34.920 --> 0:30:39.140 Democratic state like Japan and Korea, are, they will understand 0:30:39.150 --> 0:30:44.040 that the US right now, especially the Biden administration is 0:30:44.050 --> 0:30:48.319 not going to commit political suicide by kind of talking about, 0:30:48.599 --> 0:30:52.479 you know, tax uh tax rises or expenditure cuts and 0:30:52.489 --> 0:30:52.770 the like. 0:30:53.680 --> 0:30:57.430 So I think everybody needs to, I think, understand that 0:30:57.439 --> 0:31:01.420 right now, um the focus of the Biden administration is 0:31:01.430 --> 0:31:04.500 exclusively on November and you can see that in other 0:31:04.510 --> 0:31:08.140 measures as well when they came up with steel and 0:31:08.150 --> 0:31:12.010 aluminum tariffs on the Monday of the, of the spring meetings, 0:31:12.020 --> 0:31:16.099 a great move to get people all excited about bilateralism. 0:31:17.670 --> 0:31:20.829 But you know, they have elections to win and these 0:31:20.839 --> 0:31:23.989 elections in a way are critical for what's gonna happen, 0:31:24.000 --> 0:31:27.130 not just the next four years, but much longer. What's 0:31:27.140 --> 0:31:27.800 happened to 0:31:29.099 --> 0:31:32.520 geopolitical developments around the world. It's a question, I don't 0:31:32.530 --> 0:31:35.020 want to say war and peace, but it gets, it 0:31:35.030 --> 0:31:38.239 gets increasingly up there if you, if you have someone 0:31:38.250 --> 0:31:39.839 who is reasonable in the White House. 0:31:40.640 --> 0:31:44.920 Um So, um I mean, there's gonna be some talk, 0:31:44.930 --> 0:31:48.969 they'll think about how to respond on uh monetary policy 0:31:48.979 --> 0:31:50.140 in these countries, I'm sure, 0:31:51.099 --> 0:31:53.579 but it's going to play out to the disadvantage eventually 0:31:53.589 --> 0:31:56.430 of the US, if there's some export competition that's heating 0:31:56.439 --> 0:31:59.160 up and then, you know, it plays in the hands 0:31:59.170 --> 0:32:01.500 of those who want more terrorists but that, that's a 0:32:01.510 --> 0:32:03.989 bit down the road, I think for the moment, uh 0:32:04.000 --> 0:32:06.189 I think the countries will have no choice but to 0:32:06.199 --> 0:32:09.160 keep up with it. Um The fed is, I think 0:32:09.170 --> 0:32:12.819 in my view, right? Not to um play politics. So 0:32:12.829 --> 0:32:15.729 they need to focus on their mandate, which means they 0:32:15.739 --> 0:32:19.109 may not cut uh anytime soon, who knows how long 0:32:19.119 --> 0:32:19.829 it's going to take 0:32:20.550 --> 0:32:22.969 and other countries will have to accommodate it. I mean, 0:32:22.979 --> 0:32:26.520 it's not their fault obviously, but um you know, if, if, 0:32:26.530 --> 0:32:29.290 if Japan and Korea feel that 0:32:30.089 --> 0:32:33.329 um, the inflation targets are being threatened, well, they need 0:32:33.339 --> 0:32:36.349 to raise rates and it's going to be unfortunate. But, um, 0:32:36.660 --> 0:32:40.589 let's talk again in a year from time when, um, 0:32:40.770 --> 0:32:43.709 there's another, but there's the same administration still and then 0:32:43.719 --> 0:32:46.119 kind of getting really worried about fiscal trends which are 0:32:46.130 --> 0:32:49.010 clearly on a, on a path in the US that 0:32:49.020 --> 0:32:51.900 can go on much until after the uh once the 0:32:51.910 --> 0:32:52.709 elections are over. 0:32:53.459 --> 0:32:55.979 Right? I mean, I never thought that I would see 0:32:55.989 --> 0:32:59.160 trillion dollar interest payment on the US fiscal accounts in 0:32:59.170 --> 0:33:02.989 2023 2024. But that's where we are at. Martin. You 0:33:03.000 --> 0:33:04.750 spent a number of years covering Japan. I had the 0:33:04.760 --> 0:33:06.560 pleasure of working with you in Japan. So I will 0:33:06.569 --> 0:33:08.689 sort of, you know, end the Asian discussion with a 0:33:08.699 --> 0:33:12.130 little more discourse on Japan. Uh It's, it's a pretty 0:33:12.140 --> 0:33:15.859 remarkable situation where, you know, we had decades of deflationary 0:33:15.869 --> 0:33:18.680 dynamic and unconventional monetary policy 0:33:18.930 --> 0:33:22.910 and now we have the makings of inflation beginning to 0:33:22.920 --> 0:33:26.400 become an issue. Uh but more importantly, that extremely weak 0:33:26.410 --> 0:33:29.310 yen at any sort of reasonable measure, one would say 0:33:29.319 --> 0:33:31.859 it's substantially undervalued. 0:33:32.540 --> 0:33:36.040 What, what do you think of, you know, Boj and Governor, 0:33:36.359 --> 0:33:39.300 h I mean, does it make sense for them to 0:33:39.550 --> 0:33:42.170 uh you know, be fairly aggressive on monetary policy? Because 0:33:42.180 --> 0:33:45.900 you and I remember uh 23 years ago Japan tried 0:33:45.910 --> 0:33:49.160 to normalize monetary policy and it ended up being in recession. 0:33:49.849 --> 0:33:50.140 Yeah. 0:33:50.949 --> 0:33:53.219 So again, I said, you know, if, if they feel 0:33:53.229 --> 0:33:55.699 that inflation is getting a bit out of control then 0:33:55.709 --> 0:33:58.099 they need to do something. But to some extent it 0:33:58.109 --> 0:34:00.869 may be helpful for Japan. I don't know exactly the 0:34:00.880 --> 0:34:04.430 latest CP I readings. But, um, there's a, there's a 0:34:04.439 --> 0:34:07.579 reason they've gone off their zero interest rate policy, maybe 0:34:07.589 --> 0:34:11.570 they can absorb a little bit of that. Um, they've become, 0:34:12.020 --> 0:34:16.090 you know, almost like a post aging country now. It, 0:34:16.100 --> 0:34:18.009 it seems like they've gone through the worst of the 0:34:18.020 --> 0:34:19.810 aging process. And now, um, 0:34:20.438 --> 0:34:23.029 I think there were some good pieces on Bloomberg the 0:34:23.039 --> 0:34:26.168 other day. Um, Bloomberg says, well, you know, the demographics 0:34:26.178 --> 0:34:29.308 are much worse now, in some other countries, Europe, Japan 0:34:29.319 --> 0:34:33.319 is actually not stabilizing, but it's not so bad anymore. 0:34:33.329 --> 0:34:34.658 So they're over to become. 0:34:35.459 --> 0:34:38.949 And, um, they've been surprising everybody I think with their 0:34:38.959 --> 0:34:42.919 resilience and their inventiveness and that exchange rate will have, 0:34:42.949 --> 0:34:47.310 will help their companies, um, for a while. But, um, 0:34:47.330 --> 0:34:50.270 clearly there is a manpower constraint and, uh, you know, 0:34:50.280 --> 0:34:53.600 when once that kind of begins to bite too much 0:34:53.610 --> 0:34:56.760 into wages and competitiveness, I think BOJ will need to act. 0:34:57.350 --> 0:35:01.090 So maybe it's becoming a bit more like, um normal country. 0:35:01.530 --> 0:35:03.929 But again, um, once the elections are over in the 0:35:03.939 --> 0:35:08.290 US and everything goes, um, as many people around the 0:35:08.300 --> 0:35:12.089 globe hope then there should be some, I would expect 0:35:12.100 --> 0:35:15.370 some correction on fiscal policy after that because you know, 0:35:15.679 --> 0:35:18.850 there's some very good economists in that administration and they 0:35:18.860 --> 0:35:21.320 know the trends just as much as we do. So 0:35:21.330 --> 0:35:24.290 I think these countries will give the USA little bit 0:35:24.300 --> 0:35:26.259 of the benefit of the doubt for a couple of 0:35:26.270 --> 0:35:26.810 months 0:35:27.120 --> 0:35:31.229 and then we'll see um if nothing happens, then next 0:35:31.239 --> 0:35:33.780 year will be the the time for much more serious 0:35:33.790 --> 0:35:34.699 discussions about 0:35:35.389 --> 0:35:37.389 global imbalances again. So 0:35:37.399 --> 0:35:40.590 Martin, in your view, consolidation in the fiscal side in 0:35:40.600 --> 0:35:44.489 the United States would lead to some degree of curtailing 0:35:44.500 --> 0:35:47.860 of demand, uh, which then ought to play into a 0:35:47.870 --> 0:35:51.010 weakening of the US dollar. And that should give some 0:35:51.020 --> 0:35:53.090 degree of breathing room for the Japan and the careers 0:35:53.100 --> 0:35:53.250 of the 0:35:53.260 --> 0:35:53.610 world. 0:35:54.750 --> 0:35:56.770 Yeah, I think so. I mean, once the fed starts 0:35:56.780 --> 0:36:00.159 is able to start easing rates, I think then things 0:36:00.169 --> 0:36:02.949 should adjust a bit. I mean, a lot of what 0:36:02.959 --> 0:36:05.969 we're seeing now is being driven by, by fears about 0:36:05.979 --> 0:36:10.899 the unsustainable US fiscal position. Right. So 10 year yields 0:36:10.909 --> 0:36:14.009 are moving very fast again. Um, they hit last year's 0:36:14.020 --> 0:36:18.040 level and there's fear that there's going to be more so, 0:36:18.500 --> 0:36:22.080 you know, people, some, some, some capital is kind of 0:36:22.090 --> 0:36:24.479 coming into the yes and going like, great, we're going 0:36:24.489 --> 0:36:29.250 to use these rates. Um, others are more fearful. But I, 0:36:29.260 --> 0:36:32.030 I think there's a lot of it driven by uncertainty 0:36:32.040 --> 0:36:34.100 right now and I think that things will come down 0:36:34.110 --> 0:36:38.360 once we're back into some quieter um, waters hopefully. 0:36:39.120 --> 0:36:46.739 Um, and also assuming that there's no financial accident in between. Right? 0:36:46.750 --> 0:36:49.590 And obviously the faster things change, the more risk there 0:36:49.600 --> 0:36:51.020 is that something goes up somewhere, 0:36:51.300 --> 0:36:54.889 right? I was plotting the GDP numbers that came out 0:36:54.899 --> 0:36:57.350 yesterday for the United States. And of course, along with 0:36:57.360 --> 0:36:59.939 the growth data and the national account data, you get 0:36:59.949 --> 0:37:02.820 all those different consumption expenditure deflator 0:37:03.560 --> 0:37:09.719 the first quarter, consumer expenditure deflator and the core consumer 0:37:09.729 --> 0:37:13.199 expenditure deflate did not look good. Martin uh used the 0:37:13.209 --> 0:37:17.000 chart is sort of alarming that from mid 22 onward, 0:37:17.010 --> 0:37:19.500 you see this inflation going all the way to the 0:37:19.510 --> 0:37:22.850 end of 2023 and then there's a really unpleasant bumper 0:37:22.860 --> 0:37:24.819 for the first quarter of 2024. 0:37:25.120 --> 0:37:28.820 Um So what if that baseline scenario which I think 0:37:28.830 --> 0:37:30.659 both you and I would like to see pan out 0:37:30.669 --> 0:37:33.300 which is some softening of demand, some softening of the 0:37:33.310 --> 0:37:37.179 inflation and then some rate cuts. Uh What if we 0:37:37.189 --> 0:37:41.239 don't get that? And we have all of 2024 without 0:37:41.250 --> 0:37:44.330 any rate cuts in the US? Are we then looking 0:37:44.340 --> 0:37:46.780 at some serious risk of emerging market crisis? 0:37:48.659 --> 0:37:51.049 Well, yeah, well, that's a different story. We haven't talked 0:37:51.060 --> 0:37:54.300 about it. Yeah. Um um because we were focusing, I 0:37:54.310 --> 0:37:57.040 guess in Japan and Korea. But yeah, and I mean, 0:37:57.050 --> 0:37:59.209 there's also a possibility the fed may raise again at 0:37:59.219 --> 0:38:02.449 some point. Although, and you've talked about that with um 0:38:02.570 --> 0:38:05.600 with your, with your counterparts, I think the last couple 0:38:05.610 --> 0:38:08.639 of times um there are some factors that 0:38:09.830 --> 0:38:13.459 may suggest that well, the long term or medium term 0:38:13.469 --> 0:38:16.250 downward glide path for inflation is still there like, you know, 0:38:16.260 --> 0:38:19.790 housing and the like, but I'm not a market analyst. 0:38:19.800 --> 0:38:22.090 So um you know, much more about that than I do. 0:38:22.429 --> 0:38:26.120 But yeah, there's a lot of uncertainty now, emerging markets 0:38:26.129 --> 0:38:26.569 um 0:38:27.709 --> 0:38:32.310 have come through COVID rather well with all the market 0:38:32.320 --> 0:38:33.479 generations and 0:38:34.389 --> 0:38:38.090 supply cuts and inflation uh supply chain uh problems and, 0:38:38.100 --> 0:38:41.860 and uh inflation, many have been quite alert on the 0:38:41.870 --> 0:38:45.469 monetary policy front tightened early, were able to, to loosen 0:38:45.479 --> 0:38:48.560 up again, couldn't totally um 0:38:49.370 --> 0:38:53.070 uh avoid a peak in inflation, of course, but I 0:38:53.080 --> 0:38:56.049 think we're able to manage it in a very responsible 0:38:56.060 --> 0:38:59.199 way and kept stability and kept capital flows in check. 0:38:59.510 --> 0:39:03.270 So very good economic management. And I would expect that, 0:39:03.280 --> 0:39:05.790 you know, some of the large countries especially um 0:39:06.620 --> 0:39:09.780 in Asia that they will continue to do very well. 0:39:10.120 --> 0:39:13.129 They've just grown also so big and, and, and have 0:39:13.139 --> 0:39:16.209 gotten so good at managing their economies that um 0:39:16.929 --> 0:39:20.679 barring some major shock somewhere else in the financial world, 0:39:20.689 --> 0:39:23.709 they should I think relatively well, but there's a big 0:39:23.719 --> 0:39:29.060 bunch of emerging markets um elsewhere that um may also 0:39:29.070 --> 0:39:31.790 have been jumping on the fiscal bandwagon and you may 0:39:31.800 --> 0:39:35.199 not see it yet, but coming you know, coming into 0:39:35.209 --> 0:39:40.000 next year may require a lot more financing, may have to, to, 0:39:40.020 --> 0:39:41.580 uh you know, roll over that 0:39:42.169 --> 0:39:44.429 and um may not have done this all in the 0:39:44.439 --> 0:39:47.899 local currencies and even if so maybe hit by some 0:39:48.000 --> 0:39:50.820 interest shocks because of, you know, what, what the US 0:39:50.830 --> 0:39:54.469 is doing. So, yeah, the potential is there. Um I 0:39:54.479 --> 0:39:56.860 wouldn't be surprised. Um 0:39:57.719 --> 0:40:00.009 I've been very worried before COVID when I was still 0:40:00.020 --> 0:40:02.739 at the fund about emerging markets and I've been proven 0:40:02.750 --> 0:40:05.929 wrong to some extent. Um So I wouldn't kind of 0:40:05.949 --> 0:40:10.800 buy wolf necessarily on emerging markets as a whole. I've 0:40:10.810 --> 0:40:13.500 learned my lesson there. But um 0:40:14.270 --> 0:40:16.679 for some countries, it's gonna get more and more difficult. 0:40:16.689 --> 0:40:19.770 I don't want to mention any names but um look at, 0:40:19.780 --> 0:40:23.129 look at fiscal paths in in emerging markets and then 0:40:23.139 --> 0:40:26.050 you'll then you'll see where maybe there are some problem 0:40:26.060 --> 0:40:29.899 candidates and we're not even talking about the Argentina of 0:40:29.909 --> 0:40:30.638 this world. Yeah. 0:40:31.629 --> 0:40:34.439 Uh Martin, I have no problems mentioning names but even 0:40:34.449 --> 0:40:36.929 beyond the emerging market space. And going back to our 0:40:36.939 --> 0:40:40.850 early discussion on Japan and Korea, particularly Korea, I mean, 0:40:40.860 --> 0:40:44.870 you know, huge housing overhang, lots of debt issue, lots 0:40:44.879 --> 0:40:48.270 of short term, short duration risk. Uh and if rates 0:40:48.280 --> 0:40:50.209 do remain where they are in the US for the 0:40:50.219 --> 0:40:53.020 rest of the year, I do wonder if that makes 0:40:53.030 --> 0:40:56.659 life difficult for our former IMF colleague who's now heading 0:40:56.669 --> 0:40:58.310 the Bank of Korea 0:40:58.679 --> 0:41:02.429 Uh So, um, but you're right. Uh, we probably would 0:41:02.439 --> 0:41:05.399 have been convinced if two years ago somebody told us 0:41:05.409 --> 0:41:07.219 rates would be where they are now for a prolonged period, 0:41:07.229 --> 0:41:10.350 we would have predicted major rippling crisis in various parts 0:41:10.360 --> 0:41:12.659 of em. And DM. And so far the absorption capacity 0:41:12.669 --> 0:41:14.860 of the global economy has been pretty impressive. 0:41:15.770 --> 0:41:18.699 Yeah. No, it's been interesting. Right. The big blow up, uh, 0:41:18.709 --> 0:41:22.239 from this tightening episode that the FED went through after 0:41:22.250 --> 0:41:23.260 missing it first 0:41:23.909 --> 0:41:27.090 uh was in, in the US itself, the regional banks 0:41:27.100 --> 0:41:30.340 and then credit, of course. Right. So that was really interesting. 0:41:30.350 --> 0:41:33.570 It didn't have any effects beyond that too much. Um 0:41:34.310 --> 0:41:36.000 So hopefully we don't see it now, 0:41:36.860 --> 0:41:40.560 but the usual um rule is, I guess if something 0:41:40.649 --> 0:41:43.399 really unexpected happens and it happens fast, like 0:41:44.060 --> 0:41:46.399 a change in the red outlook in the US to, 0:41:46.409 --> 0:41:48.719 to the upside that could trigger some 0:41:49.360 --> 0:41:53.810 more upheaval. I mean, again, you talked about private equity, 0:41:53.820 --> 0:41:56.070 I think before there's a lot of uncertainty there in 0:41:56.080 --> 0:42:00.379 the non-bank financial sector. Um the GFSR, the, the global 0:42:00.389 --> 0:42:04.219 financial stability report of the IMF looked into it, but 0:42:04.229 --> 0:42:08.040 overall the the assessment was pretty sanguine and also when 0:42:08.050 --> 0:42:10.540 you talk to people elsewhere, I mean, there is nobody 0:42:10.550 --> 0:42:13.379 who kind of rings the alarm bells big time. 0:42:14.189 --> 0:42:17.090 But um we've been too long in this business time. 0:42:17.100 --> 0:42:18.409 All right, we know that something 0:42:19.199 --> 0:42:23.120 can happen very quickly and then everybody says, why didn't 0:42:23.129 --> 0:42:25.129 you see it before? Yeah. 0:42:25.739 --> 0:42:27.610 I mean, if only somebody were to go back to 0:42:27.620 --> 0:42:29.739 the 2006 US article for report 0:42:30.540 --> 0:42:33.560 it's pretty sanguine, you know. And then one year later 0:42:34.129 --> 0:42:34.139 I 0:42:34.780 --> 0:42:36.770 think I already moved off the team back then. 0:42:38.040 --> 0:42:41.219 I was not pointing any fingers. Martin, I think there's 0:42:41.229 --> 0:42:43.010 a different Martin who was involved there. 0:42:43.689 --> 0:42:46.659 No, actually, I mean, but, but it's interesting you bring 0:42:46.669 --> 0:42:49.759 this up because, um, I would like to see this 0:42:49.770 --> 0:42:52.479 more from the fun look. I mean, back in, 0:42:53.310 --> 0:42:56.010 uh, I think it was 06 or 07 0:42:56.739 --> 0:42:58.540 and I had actually moved off the team, but I 0:42:58.550 --> 0:43:02.000 did cover the housing market when it was still kind of, ok, 0:43:02.010 --> 0:43:05.169 it was running up. Um, but, but the IMF at 0:43:05.179 --> 0:43:06.719 some point called the US recession 0:43:07.620 --> 0:43:10.879 and uh the, the team did it very deliberately. Um, 0:43:11.129 --> 0:43:14.120 and they were kind of right. I think it wasn't 0:43:14.129 --> 0:43:17.659 the 2007 report, I believe they called the US recession, 0:43:18.209 --> 0:43:20.759 you know, and they had to run against some, you know, 0:43:20.770 --> 0:43:25.399 resistance uh internally and externally. Well, what they didn't see 0:43:25.409 --> 0:43:28.020 coming was a global financial crisis but they did, they 0:43:28.030 --> 0:43:31.469 did see the, the, the, the, the situation change in 0:43:31.479 --> 0:43:32.360 the US and 0:43:33.260 --> 0:43:36.600 I would wish the, the fund in general had more 0:43:36.610 --> 0:43:39.409 guts of calling out countries on this. It's just too 0:43:39.419 --> 0:43:42.759 important and, you know, they can be wrong, of course. But, um, 0:43:43.399 --> 0:43:45.939 they, they need to do their job, they need to 0:43:45.949 --> 0:43:49.760 be led to do their job. And so, um, you know, 0:43:49.770 --> 0:43:52.239 if there is a shift or now a bit more 0:43:52.250 --> 0:43:55.560 awareness and focus on surveillance at the IMF if the 0:43:55.570 --> 0:43:58.489 spring meetings may give you some hope. I mean, the 0:43:58.500 --> 0:44:01.199 US fiscal deficit was obvious they can move around that, 0:44:01.209 --> 0:44:03.770 but there's also other issues that need to be addressed 0:44:04.209 --> 0:44:07.879 and if there's a move back toward greater surveillance emphasis, 0:44:07.889 --> 0:44:09.929 that would be all the better for the global economy. 0:44:10.379 --> 0:44:11.459 Yeah, absolutely. 0:44:11.909 --> 0:44:14.669 Uh So in terms of surveillance, uh Martin, uh when 0:44:14.679 --> 0:44:17.010 you and I met in Morocco during the annual meetings 0:44:17.020 --> 0:44:19.649 last year, uh there was a lot of chat, there 0:44:19.659 --> 0:44:21.840 was a high profile report on the cost of geo 0:44:21.889 --> 0:44:25.270 economic fragmentation. So earlier in the conversation, you've already touched 0:44:25.280 --> 0:44:26.319 upon that issue that 0:44:26.830 --> 0:44:30.649 in the name of security resilience of supply chain, some 0:44:30.659 --> 0:44:36.259 degree of uring offshoring is inevitable. Uh Now, through this meetings, 0:44:36.270 --> 0:44:39.449 we also saw the am continue to produce research underscoring this. 0:44:39.669 --> 0:44:41.959 Uh And I think I saw a speech by GTA 0:44:42.179 --> 0:44:45.010 Goinna given in November where she basically pointed out that 0:44:45.020 --> 0:44:47.319 all we're doing is lengthening the global supply chain. We're 0:44:47.330 --> 0:44:50.439 not necessarily creating a more resilient system. We're just saying 0:44:50.719 --> 0:44:52.520 I'm not going to import from China and then China 0:44:52.530 --> 0:44:54.280 goes and invest in Mexico and then I end up 0:44:54.370 --> 0:44:57.219 importing from Mexico. Does it really make us more resilient? 0:44:57.429 --> 0:44:59.729 So I want to hear your take on this whole 0:44:59.739 --> 0:45:01.459 geo economic fragmentation thesis. 0:45:03.489 --> 0:45:08.090 So, um if you impose constraints on the system, I 0:45:08.100 --> 0:45:12.489 think by default, it's gonna be less efficient than um otherwise, right. 0:45:12.500 --> 0:45:16.149 So that's the basic optimization theory now. 0:45:16.850 --> 0:45:19.590 Has the world found a good way to kind of 0:45:19.600 --> 0:45:23.109 work around some of these restrictions? It's actually quite amazing. 0:45:23.360 --> 0:45:30.580 Um For example, after the Iran Israel conflict escalated and, 0:45:30.590 --> 0:45:35.439 and the uh the Yemenite militias started shooting at the 0:45:35.479 --> 0:45:38.270 Gulf of the Strait of Hormuz and the whole Gulf, 0:45:38.439 --> 0:45:41.949 how seamlessly things seem to have been rerouted. 0:45:42.770 --> 0:45:46.649 Um Just like during COVID, I mean, it took some time, obviously, 0:45:46.659 --> 0:45:48.899 but um all of a sudden, you know, things kept 0:45:48.909 --> 0:45:51.989 flowing again. Uh you bottlenecks were at rest 0:45:52.729 --> 0:45:57.649 uh restrictions on, on certain Chinese imports, you know, can 0:45:57.659 --> 0:46:00.919 be overcome. So it seems like there is there is 0:46:00.929 --> 0:46:01.750 this um 0:46:02.399 --> 0:46:07.080 ability of, of uh the global trade network to absorb 0:46:07.090 --> 0:46:08.260 quite a number of shocks. 0:46:09.669 --> 0:46:10.169 No. 0:46:10.909 --> 0:46:14.790 Um perhaps that is because we haven't really seen either 0:46:14.800 --> 0:46:18.810 side engaging in a full blown trade war yet. And 0:46:18.820 --> 0:46:21.770 I say yet because as you know, one of the 0:46:21.780 --> 0:46:24.509 candidates here in the US has said that there's going 0:46:24.520 --> 0:46:27.830 to be big tariffs on everything from China uh from, 0:46:27.840 --> 0:46:30.169 you know, baby diapers to high end chips. 0:46:30.919 --> 0:46:33.989 And what that will do if China retaliates, I don't. 0:46:34.219 --> 0:46:38.239 But clearly this the specter of more constraints on the 0:46:38.250 --> 0:46:42.449 global economy is hanging over us. That's why these elections 0:46:42.459 --> 0:46:43.479 are also so important. 0:46:44.179 --> 0:46:47.219 Um And um 0:46:48.010 --> 0:46:51.549 how long the system can work around all these constraints 0:46:51.560 --> 0:46:54.800 remains to be seen. Now, China is very proactive. Um 0:46:55.030 --> 0:46:58.580 as you and I discussed, I threw over lunch too bad. 0:46:58.590 --> 0:47:01.889 We didn't record it back then. But um uh you 0:47:01.899 --> 0:47:05.639 were quite amazed by the amount of investment, for example 0:47:05.649 --> 0:47:09.290 of China in Mexico. Um Of course, in Vietnam, in 0:47:09.300 --> 0:47:12.189 all of Asia, there's a lot of Chinese companies that 0:47:12.199 --> 0:47:15.750 are setting up shop there. Um because that way they 0:47:15.760 --> 0:47:17.750 can work around some of the constraints. 0:47:18.399 --> 0:47:19.060 Um 0:47:19.899 --> 0:47:23.320 And um you know, I I think this is good 0:47:23.330 --> 0:47:26.629 because it also means that um in a sense, the 0:47:26.639 --> 0:47:29.819 the the globalization increases, more countries have a stake in 0:47:29.830 --> 0:47:33.080 free investment and trade, right? Because in the end, it 0:47:33.090 --> 0:47:37.049 provides jobs in Mexico or elsewhere for people, even if 0:47:37.060 --> 0:47:40.399 they work for a Chinese company. Um the Chinese are 0:47:40.409 --> 0:47:45.439 also actively getting into Europe. Um President Xi is, is 0:47:45.449 --> 0:47:48.000 visiting Hungary of all places where they got 0:47:48.590 --> 0:47:52.729 um uh approval to open up big. Uh I think 0:47:52.739 --> 0:47:55.439 it's a uh some it company, I have to look 0:47:55.449 --> 0:47:58.649 it up again. Uh It's a huge green field investment 0:47:58.659 --> 0:48:02.889 um into the European Union and some other countries also. 0:48:03.389 --> 0:48:07.649 So um China itself is preparing for it. Um The 0:48:07.659 --> 0:48:11.290 US is trying to get together alliances on its part 0:48:11.300 --> 0:48:15.409 to work around this. Everybody's grambling for minerals and metals 0:48:15.419 --> 0:48:17.070 and all this. So 0:48:17.590 --> 0:48:19.169 I think we're still at a point where it's in 0:48:19.179 --> 0:48:23.089 everybody's interest to keep things going. Um, I don't see 0:48:23.929 --> 0:48:27.889 any big confrontation yet. If the Biden administration can continue, 0:48:27.899 --> 0:48:30.110 I think it's going to continue that way. But, 0:48:30.989 --> 0:48:35.750 um, if political relations deteriorate, then we may be into 0:48:35.760 --> 0:48:38.889 more of a full blown trade war and then, um, 0:48:39.270 --> 0:48:41.830 I don't know whether the world will separate into 0:48:42.530 --> 0:48:45.699 different camps or whether the middle is strong enough to 0:48:45.709 --> 0:48:49.350 tell the big guys. Well, you know, sorry, but we cannot, 0:48:49.419 --> 0:48:52.589 we cannot decide between of you. You have to continue 0:48:52.600 --> 0:48:55.330 to work with, with us and we have to continue 0:48:55.340 --> 0:48:57.239 to work with both of you. I don't know, it's 0:48:57.250 --> 0:49:01.509 an interesting situation, but I don't see that um 0:49:02.250 --> 0:49:05.989 uh fragmentation uh is necessarily continuing in a way that 0:49:06.000 --> 0:49:08.050 allows all actors to adjust smoothly, 0:49:08.860 --> 0:49:12.000 it can blow up and it can blow up for 0:49:12.010 --> 0:49:15.179 other reasons. It can also become much more difficult if, 0:49:16.189 --> 0:49:18.689 if Russia has big wins in Ukraine and the whole 0:49:18.699 --> 0:49:22.570 European situation is different and Europe starts kind of uh 0:49:23.179 --> 0:49:25.810 turning on itself and, and tearing itself apart and in 0:49:25.820 --> 0:49:26.889 how to respond, 0:49:28.120 --> 0:49:30.270 it's very difficult to say, but there's a lot of 0:49:30.280 --> 0:49:32.979 uncertainties out there. And I wouldn't be so sanguine about 0:49:33.419 --> 0:49:37.540 the future of globalization so far about the future of 0:49:37.550 --> 0:49:40.100 fragmentation so far. It's been OK, 0:49:40.820 --> 0:49:42.949 we could live with it, but it doesn't mean that 0:49:42.959 --> 0:49:44.820 it's going to continue that way. Right. 0:49:44.830 --> 0:49:47.300 Since we just touched on Europe, Martin, let's just jump 0:49:47.310 --> 0:49:51.409 over there. Uh, your thoughts on Europe? I mean, we've 0:49:51.419 --> 0:49:53.949 seen the US sort of, you know, really have a 0:49:53.959 --> 0:49:59.389 turbocharge public sector driven economic recovery and even though yesterday's 0:49:59.399 --> 0:50:03.179 GDP numbers were slightly below expectations, still pretty strong numbers 0:50:03.189 --> 0:50:05.879 from there, China, we all know it has problems and 0:50:05.889 --> 0:50:07.629 it's trying to work through that. So, where is, you know, 0:50:07.649 --> 0:50:09.120 Europe in the middle of all this? 0:50:10.669 --> 0:50:13.529 Well, um 0:50:14.520 --> 0:50:18.750 Europe is, is, is a pretty, pretty sad state right now. 0:50:18.760 --> 0:50:23.040 I mean, politically, economically, I think they're turning the corner slowly. 0:50:23.610 --> 0:50:27.520 Um again, the fund was very sanguine on their kind 0:50:27.530 --> 0:50:31.469 of recovery. Um There's room for rate cuts perhaps at 0:50:31.479 --> 0:50:35.060 some point with inflation coming down. But um 0:50:36.020 --> 0:50:36.840 it's, 0:50:37.760 --> 0:50:39.139 it's, it's the shape of 0:50:39.929 --> 0:50:43.879 in the European relations that kind of gives uh reason 0:50:43.889 --> 0:50:45.939 to be concerned and it's going to carry through to 0:50:45.949 --> 0:50:50.429 economics at some point. Um The, the Germans are kind 0:50:50.439 --> 0:50:53.530 of caught in their coalition disputes and they're not really ready, 0:50:53.540 --> 0:50:56.810 I think for big action. Um the problem with Europe 0:50:56.820 --> 0:50:59.839 is that it cannot really compete the way it is 0:50:59.850 --> 0:51:01.679 set up right now with the big guys. 0:51:02.570 --> 0:51:06.830 And in order to get there, they need reforms inside 0:51:06.840 --> 0:51:10.320 the European Union. Everybody is talking about, you know, 0:51:11.409 --> 0:51:14.388 the, the, the the banking and the common banking union 0:51:14.399 --> 0:51:18.189 capital markets and all that. Um I think it's, it 0:51:18.199 --> 0:51:19.870 needs more than that um 0:51:20.949 --> 0:51:24.850 it needs a willingness to not always push your national 0:51:24.860 --> 0:51:28.330 champions when it comes to all sorts of European projects. 0:51:28.340 --> 0:51:29.850 Think about European defense. 0:51:30.929 --> 0:51:33.709 Oh man, it's so difficult to kind of come to 0:51:33.719 --> 0:51:37.909 some common understanding because underneath every initiative 0:51:38.729 --> 0:51:42.339 is always a fight about so which parts of my 0:51:42.350 --> 0:51:46.209 domestic industry will benefit from. So it's also a mindset. 0:51:46.219 --> 0:51:49.649 It's Europe doesn't really have a European mindset yet. It's 0:51:49.659 --> 0:51:50.300 still uh 0:51:51.090 --> 0:51:53.109 uh a number of countries that 0:51:53.820 --> 0:51:57.260 have kind of given up some of the sovereignty, but 0:51:57.270 --> 0:52:00.310 they're still very sovereign. I mean, you don't have to 0:52:00.320 --> 0:52:02.860 be in Hungary necessarily to see that. Right. There are 0:52:02.870 --> 0:52:05.979 some states that are much more extreme on this one 0:52:05.989 --> 0:52:09.000 than others. But as long as Germany and France can 0:52:09.010 --> 0:52:11.830 agree on things which they seem to have difficulties doing 0:52:11.840 --> 0:52:15.359 at the moment because they are both pushing their um 0:52:15.459 --> 0:52:18.800 domestic interests first in the name of European 0:52:19.600 --> 0:52:23.939 uh action. Uh You will not see much action. So 0:52:24.550 --> 0:52:27.299 it doesn't, it doesn't, it's not just the mechanics of 0:52:27.310 --> 0:52:30.489 a common market, it's also the, the heart and soul 0:52:30.500 --> 0:52:31.419 of a common market. 0:52:32.040 --> 0:52:33.129 And, um, 0:52:34.649 --> 0:52:36.709 you know, having lived in the US now for more 0:52:36.719 --> 0:52:40.669 than a, almost 30 years now, actually, no, more than 30. 0:52:40.790 --> 0:52:43.709 Um Yeah. Yeah. No, it's been more than 30. Um 0:52:45.889 --> 0:52:48.779 everywhere you go in the US, you have a familiar 0:52:48.790 --> 0:52:50.840 feel in the cities you go and you could say, well, 0:52:50.850 --> 0:52:52.919 you know, it's always the same chain stores and stuff 0:52:52.929 --> 0:52:55.908 and all this. Ok, fine. I I grant that II 0:52:55.919 --> 0:52:58.449 I would love to be a little bit less for that, 0:52:58.459 --> 0:53:02.350 but the economy is always functioning in the same principles, 0:53:02.360 --> 0:53:04.669 you know what you get also as an investor. Yes, 0:53:04.679 --> 0:53:07.709 there's difference between state regulations here or there. 0:53:08.800 --> 0:53:11.979 You know, companies wanna wanna settle in Delaware still. But 0:53:12.439 --> 0:53:16.219 uh it's, it feels like a common market although people 0:53:16.229 --> 0:53:22.319 sometimes have um different dialects in Europe. Um it still doesn't, 0:53:22.330 --> 0:53:24.709 if you go there, there's a lot that has been achieved. 0:53:24.719 --> 0:53:28.799 No question. And uh it's been visionary in the last, 0:53:28.810 --> 0:53:31.219 you know, 50 60 70 80 years, 0:53:32.010 --> 0:53:34.830 but it's not there yet. And I'm, I wonder whether 0:53:34.840 --> 0:53:36.629 it will ever get there or whether it's going to 0:53:36.639 --> 0:53:37.300 be eaten 0:53:38.050 --> 0:53:41.149 uh alive by Russia and China and the US who 0:53:41.159 --> 0:53:44.449 all have their interests. I mean, just today, there was 0:53:44.459 --> 0:53:48.270 a big article in the German newspaper about how the, 0:53:48.280 --> 0:53:52.909 the A FD that, that Russia, the Russia file party, 0:53:53.729 --> 0:53:58.110 autocratic file party in Germany has been influenced by the 0:53:58.120 --> 0:54:01.129 Kremlin and by Chinese state security. 0:54:02.030 --> 0:54:04.909 And you know, these guys are supposed to get a 0:54:04.919 --> 0:54:08.489 big share of the next parliamentary elections. So Europe is 0:54:08.500 --> 0:54:09.290 not only 0:54:10.360 --> 0:54:14.459 kind of still stuck in its partial sovereignty, it's also 0:54:14.469 --> 0:54:17.479 subject to all these foreign interests coming in because they 0:54:17.489 --> 0:54:20.770 are not kind of grappling with how to respond in 0:54:20.780 --> 0:54:24.570 a determined way. I mean, just imagine the Russians use 0:54:24.580 --> 0:54:27.139 an outfit for the voice of Europe to get their 0:54:27.149 --> 0:54:29.060 propaganda into, into Europe. 0:54:30.179 --> 0:54:35.069 And the, the, the US and Europe have nothing comparable. 0:54:35.080 --> 0:54:37.199 There used to be a voice of America that got 0:54:38.010 --> 0:54:40.929 the voice across and help people kind of see through 0:54:40.939 --> 0:54:43.409 communism in the old days. Right now, the shoe is 0:54:43.419 --> 0:54:46.300 on the other foot, but it's the influence against democracy 0:54:46.310 --> 0:54:48.069 that's kind of gaining 0:54:48.770 --> 0:54:52.530 and there's still no response to that. Um So 0:54:53.340 --> 0:54:56.678 I don't see how, how Europe gets to this point 0:54:56.689 --> 0:55:00.259 where they agree to be um a strong economy that 0:55:00.270 --> 0:55:02.790 can really compete with China and the US. 0:55:03.469 --> 0:55:05.638 And so as long as that's not happening, they're gonna 0:55:05.649 --> 0:55:06.870 at some point be 0:55:07.750 --> 0:55:12.350 either demographically outflanked or simply become less and less meaningful 0:55:12.360 --> 0:55:14.520 and then trade will shift away from them because they 0:55:14.530 --> 0:55:16.360 don't have as much to offer anymore 0:55:17.120 --> 0:55:18.899 to, to the rest of the world as they, 0:55:19.929 --> 0:55:23.530 right. Um Europe lacks a European mindset. I'm going to 0:55:23.540 --> 0:55:28.459 use that code Martin, that was very good. Um It 0:55:28.469 --> 0:55:30.679 evokes I think, you know, exactly what it needs to 0:55:30.689 --> 0:55:33.929 sort of underscore. Um Finally, Martin, I mean, you and 0:55:33.939 --> 0:55:36.899 I are both ex IMF staff, we would like to 0:55:36.909 --> 0:55:41.649 see this institution, you know, maintain its relevance and leverage. 0:55:41.830 --> 0:55:43.219 Uh But, you know, 0:55:43.594 --> 0:55:46.195 having these conversations with you and, and hearing sort of, 0:55:46.205 --> 0:55:48.834 you know, lack of progress in these important issues like 0:55:48.985 --> 0:55:53.514 quota uh and, and not much you know, progress in 0:55:53.524 --> 0:55:58.254 the common framework either. Uh Do you worry that independent of, 0:55:58.264 --> 0:56:01.495 you know, who's president today or next year that the 0:56:01.504 --> 0:56:04.074 relevance and leverage of this institution has sort of eroded? 0:56:04.084 --> 0:56:06.534 And what would you like to see for that to 0:56:06.544 --> 0:56:07.215 be restored? 0:56:09.699 --> 0:56:12.510 Uh Well, uh for the last one, it takes all 0:56:12.540 --> 0:56:15.239 members that are determined to um 0:56:16.379 --> 0:56:20.070 shape the institutions and the way um that they were 0:56:20.080 --> 0:56:21.320 supposed to, to be. 0:56:22.070 --> 0:56:22.580 Um 0:56:23.629 --> 0:56:26.530 that is not the case right now because um 0:56:27.790 --> 0:56:28.570 um 0:56:30.729 --> 0:56:33.090 I think the the the key issue here is that 0:56:33.469 --> 0:56:35.659 um there's a lot of um 0:56:36.340 --> 0:56:39.439 stuff going on elsewhere like in the climate discussions, right? 0:56:39.969 --> 0:56:40.469 The 0:56:41.219 --> 0:56:46.759 the the the the the industrialized countries are um being blamed, 0:56:47.389 --> 0:56:49.729 you know, rightly, in many respects for 0:56:50.790 --> 0:56:54.370 um getting the global climate to where it is right now. 0:56:54.729 --> 0:56:55.969 Um this is 0:56:57.129 --> 0:57:00.189 can be measured where the, the co two emissions came 0:57:00.199 --> 0:57:00.469 from 0:57:01.260 --> 0:57:05.580 and the global South wants compensation, wants help in meeting 0:57:05.590 --> 0:57:06.949 the challenges and 0:57:07.639 --> 0:57:08.699 uh they want money 0:57:09.429 --> 0:57:11.850 now, is this money all going to be used for 0:57:11.860 --> 0:57:15.760 climate projects and raising, you know, dams everywhere where there's 0:57:15.770 --> 0:57:16.729 a flood or 0:57:17.449 --> 0:57:20.629 I'm not sure. But the point is um there's this 0:57:20.639 --> 0:57:23.870 huge debate about um helping 0:57:25.510 --> 0:57:29.780 developing countries that have not contributed to the climate crisis 0:57:29.790 --> 0:57:30.669 in adapting 0:57:31.649 --> 0:57:32.310 preparing. 0:57:33.020 --> 0:57:36.959 So that's that and there's also the pressures on um 0:57:36.969 --> 0:57:41.030 governments to finance their own climate transition. Talk about electrification 0:57:41.040 --> 0:57:42.159 of the grid and all this. 0:57:43.030 --> 0:57:43.629 Um 0:57:44.520 --> 0:57:50.020 there is the need to um uh influence the politics 0:57:50.030 --> 0:57:55.020 of partners in developing countries that are geopolitically important 0:57:56.060 --> 0:57:58.199 and more and more and more of these kind of 0:57:58.209 --> 0:58:02.870 tasks that fall on advanced economies and they don't have 0:58:02.879 --> 0:58:03.560 the money for it. 0:58:04.510 --> 0:58:07.250 Yeah, because the budgets are, as we discussed, you know, 0:58:07.260 --> 0:58:09.409 they are already pretty stretched and a lot of that 0:58:09.419 --> 0:58:11.729 has to do with aging and social 0:58:12.590 --> 0:58:17.090 um uh transfers that relate to health and pension spending. 0:58:17.929 --> 0:58:21.899 So, where's money? Where's money left? Well, look at it, 0:58:22.669 --> 0:58:26.639 the IMF has a trillion lending capacity, a trillion dollars. 0:58:27.479 --> 0:58:30.260 Um The World Bank needs more and well, with the 0:58:30.270 --> 0:58:33.659 World Bank, we need to leverage um private money, right? 0:58:33.810 --> 0:58:37.370 So the the World Bank lends and then private sector 0:58:37.379 --> 0:58:41.600 comes in and fills the rest. So I don't think 0:58:41.610 --> 0:58:45.280 that leveraging is going so well, quite frankly. Um it's 0:58:45.290 --> 0:58:48.000 uh it's not from billions to trillions, it's from billions 0:58:48.010 --> 0:58:49.679 to a few more billions at best. 0:58:50.729 --> 0:58:54.379 Um but the IMF still has a trillion and for 0:58:54.389 --> 0:58:57.979 someone who comes from the developing work and to get 0:58:57.989 --> 0:59:01.239 into the, to the IMF to lead it, it's almost like, 0:59:01.250 --> 0:59:02.919 you know, a kid in a candy store all of 0:59:02.929 --> 0:59:06.899 a sudden we have all that money and um people 0:59:06.909 --> 0:59:09.100 are frustrated that they can't use it to the, to 0:59:09.110 --> 0:59:10.750 the fullest. So 0:59:11.510 --> 0:59:12.070 um 0:59:12.949 --> 0:59:15.070 the, the thing that's been going on for the last 0:59:15.080 --> 0:59:18.189 five years has been a steady expansion of trying to 0:59:18.199 --> 0:59:21.090 get more finance to developing countries from the IMF 0:59:21.790 --> 0:59:24.929 what's not so much kind of evolved in line with 0:59:24.939 --> 0:59:25.729 it has been 0:59:26.449 --> 0:59:27.110 um 0:59:27.889 --> 0:59:31.489 the conditionality and the debt restructuring that's needed to make 0:59:31.500 --> 0:59:32.629 these programs work. 0:59:33.659 --> 0:59:36.179 And that's where the biggest risk is for the institution 0:59:36.189 --> 0:59:39.000 in my view. Um You don't even have to talk 0:59:39.010 --> 0:59:41.919 about Argentina, which is, you know, are they ever going 0:59:41.929 --> 0:59:43.780 to get out of that 40 billion hole? We'll have 0:59:43.790 --> 0:59:46.939 to see. But um other countries also get a lot 0:59:46.949 --> 0:59:49.699 of money and, and the problem is also that developing 0:59:49.709 --> 0:59:54.520 countries get most of their money these days from multilateral institutions. 0:59:54.850 --> 0:59:56.879 So they keep on lending, which is good. 0:59:58.199 --> 1:00:01.699 They may not get so much in terms of reforms always, 1:00:01.709 --> 1:00:04.610 which is not good. And you know, the way things 1:00:04.620 --> 1:00:08.300 are going in five years, 10 years, there's a risk 1:00:08.310 --> 1:00:11.520 that countries can't repay their money to the multilateral institutions 1:00:11.530 --> 1:00:12.580 if things go badly 1:00:13.540 --> 1:00:16.159 and then there's going to be again, calls for um 1:00:16.169 --> 1:00:20.290 multilateral debt forgiveness and you know, another jubilee campaign and 1:00:20.300 --> 1:00:23.919 this and that and I have sympathy for that, but 1:00:23.929 --> 1:00:26.129 it should not have happened or it should not happen 1:00:26.139 --> 1:00:29.770 that way if, if countries want to transfer money to 1:00:29.780 --> 1:00:32.320 the developing country, well, it has to be grants, 1:00:33.080 --> 1:00:36.419 some countries do it, but there's just not more money around. 1:00:36.429 --> 1:00:40.139 So they're using the institutions right now as a substitute 1:00:40.479 --> 1:00:41.979 and it's going to blow up in the face of 1:00:41.989 --> 1:00:45.939 these institutions. And it's never been good, you know, to 1:00:45.949 --> 1:00:47.540 see that happen the last time 1:00:48.290 --> 1:00:53.110 um the IMF went through a huge restructuring in the 2006. 1:00:53.739 --> 1:00:56.709 Um lots of people left, it was written off and 1:00:56.719 --> 1:00:59.479 then the global financial crisis came and all of a sudden, 1:00:59.489 --> 1:01:02.750 it didn't even have the wherewithal to address all these 1:01:02.760 --> 1:01:04.159 issues overnight. 1:01:04.790 --> 1:01:08.110 So it would hurt to see the institutions go down 1:01:08.120 --> 1:01:12.110 that way again. And for that, we need responsible kind 1:01:12.120 --> 1:01:16.199 of leadership, the the the IMF and World Bank, I 1:01:16.209 --> 1:01:17.770 think need to be integrated 1:01:18.679 --> 1:01:21.620 better in a way how uh 1:01:22.919 --> 1:01:25.620 advanced economies help 1:01:26.909 --> 1:01:30.810 uh developing countries, there needs to be more than just 1:01:30.820 --> 1:01:32.570 monetary incentives. Um 1:01:33.239 --> 1:01:33.439 I 1:01:34.600 --> 1:01:36.679 the Atlantic Council that kind of goes into that a 1:01:36.689 --> 1:01:39.479 little bit. I think countries need to be convinced to 1:01:39.489 --> 1:01:43.040 do the reforms, right? And the populations need to see 1:01:43.050 --> 1:01:46.060 that it's not just the West also showing up with 1:01:46.070 --> 1:01:48.949 money like the Chinese do. Um There needs to be 1:01:48.959 --> 1:01:52.030 a real attempt at reform which can be difficult, but 1:01:52.040 --> 1:01:55.270 I think there's more incentives that the West can offer 1:01:55.280 --> 1:01:57.139 than just money to help countries do it. 1:01:57.840 --> 1:02:00.419 And if it's done in a smart way, the institutions 1:02:00.429 --> 1:02:03.439 could be really helpful. So I think that the West 1:02:03.449 --> 1:02:06.219 needs to make sure the institutions function, they need to 1:02:06.229 --> 1:02:11.060 be doing their jobs, right? Um They should be careful 1:02:11.070 --> 1:02:14.020 to dilute control at the moment. I don't believe the 1:02:14.030 --> 1:02:16.689 interests of China in getting more votes at the IMF 1:02:16.699 --> 1:02:17.580 are so benign. 1:02:18.429 --> 1:02:21.850 So there needs to be some kind of broader concept 1:02:21.860 --> 1:02:24.310 of how to use the institutions and you have, you 1:02:24.320 --> 1:02:25.770 need to have the leadership to do it 1:02:26.379 --> 1:02:31.199 um to really make them useful from a geopolitical perspective. Otherwise, 1:02:31.209 --> 1:02:33.770 you know, we have a multilateral institution that's just been 1:02:33.780 --> 1:02:34.840 used as a piggy bank 1:02:35.560 --> 1:02:37.939 and eventually it will have to be refinanced and that's 1:02:37.949 --> 1:02:38.699 going to be awkward. 1:02:39.340 --> 1:02:41.989 Um So let's be careful how to, how to use them, 1:02:42.000 --> 1:02:42.800 let's use them. Right. 1:02:43.949 --> 1:02:47.639 Right. I think the warning is very well taken. Martin. 1:02:47.649 --> 1:02:51.330 I I share your uh concerns. Uh We've done quite 1:02:51.340 --> 1:02:53.850 the trip of the world. Mart. I say, you know, 1:02:53.860 --> 1:02:55.770 thank you very much for your time and insights. 1:02:56.800 --> 1:03:00.320 Thanks for having me time. So whenever we meet again, 1:03:00.330 --> 1:03:02.120 if we meet again, we say the last one we 1:03:02.129 --> 1:03:03.600 did in our 100 twenties. 1:03:04.629 --> 1:03:06.459 Yes, but we're not going to wait till 100 and 1:03:06.469 --> 1:03:08.780 80 for the next month. We'll do it much before that. 1:03:09.459 --> 1:03:09.780 Uh 1:03:09.919 --> 1:03:10.699 Thank you for having 1:03:10.780 --> 1:03:13.179 me. Great to have you Martin and thanks to our 1:03:13.189 --> 1:03:16.030 listeners as well. Copy Time was produced by Ken Delbridge 1:03:16.040 --> 1:03:20.000 at Spy studios, Violet Le and Daisy. She provided additional assistance. 1:03:20.080 --> 1:03:22.510 It is for information only and does not represent any 1:03:22.520 --> 1:03:24.239 trade recommendations or what 1:03:24.364 --> 1:03:28.114 122 episodes of copy time are available on youtube and 1:03:28.125 --> 1:03:31.925 on all major podcast platforms including Apple Google and Spotify. 1:03:32.205 --> 1:03:34.945 As for our research publications, webinars and live streams, you 1:03:34.955 --> 1:03:38.554 can find them all by Googling devious research library. Have 1:03:38.564 --> 1:03:39.294 a great day.