WEBVTT - Kopi Time E063: Ilan Goldfajn on global outlook, inflation, EM risks 0:00:05.440 --> 0:00:08.920 Hi you're listening to copy time, a podcast series on 0:00:08.920 --> 0:00:11.899 markets and economies from DBS group research and 10 Rubik. 0:00:11.900 --> 0:00:15.060 Chief economist. Welcome to our 63rd episode. 0:00:15.540 --> 0:00:18.320 This is a very special episode for me see I 0:00:18.320 --> 0:00:20.970 was a graduate student in the late 1990s and in 0:00:20.970 --> 0:00:23.550 1998 I happened to get a summer internship 0:00:24.040 --> 0:00:26.860 at the Washington D. C. Headquarters of the International monetary fund. 0:00:27.340 --> 0:00:30.480 I was highly interested in the drivers and implications of 0:00:30.480 --> 0:00:33.510 financial crisis and as luck would have it, I was 0:00:33.510 --> 0:00:36.700 pleased under the supervision of a young Brazilian economist with 0:00:36.700 --> 0:00:39.809 whom I would develop such good chemistry that we went 0:00:39.810 --> 0:00:42.550 on to co author three publications over the next few years, 0:00:42.560 --> 0:00:46.690 which no doubt contributed immensely to my PhD completion and 0:00:46.690 --> 0:00:48.550 subsequent employment at the I. M. F. 0:00:49.140 --> 0:00:53.740 That resilient economist, Ellen Goldfein soon thereafter left Washington D. C. 0:00:53.740 --> 0:00:56.500 To go back to his country where over the last 0:00:56.500 --> 0:00:59.390 two decades he has done just about everything across the 0:00:59.390 --> 0:01:00.560 public and private sector. 0:01:01.340 --> 0:01:04.440 Ellen Goldfein is presently chairman of the Board Credit Suisse 0:01:04.440 --> 0:01:07.640 brazil but it was recently announced that at the beginning 0:01:07.640 --> 0:01:10.819 of next year he would join the I. M. F. 0:01:10.830 --> 0:01:12.649 Western hemisphere department as the head 0:01:13.240 --> 0:01:15.650 Ellen was governor of the Central Bank of Brazil from 0:01:15.650 --> 0:01:20.160 2016 to March 2019 and Deputy Governor from 2000 to 0:01:20.160 --> 0:01:20.950 2003 0:01:21.340 --> 0:01:23.850 In 2018, he was named Central Banker of the Year 0:01:23.850 --> 0:01:24.960 by the Banker Magazine. 0:01:25.340 --> 0:01:28.760 Previously in his career, Ellen was partnered Chief economist and 0:01:28.760 --> 0:01:30.950 advisor to the board of Itau Unibanco 0:01:31.340 --> 0:01:35.220 Also he was founding partner of Quiano Investimentos and partner 0:01:35.230 --> 0:01:39.160 of Gavea Investimentos. Ellen go find a very warm welcome 0:01:39.160 --> 0:01:39.760 to Kobe time. 0:01:41.140 --> 0:01:43.450 Yeah, thank your time or it's um, 0:01:43.840 --> 0:01:47.260 he's walking into a memory lane remembering 0:01:47.740 --> 0:01:49.660 Especially on the 90s. Uh, 0:01:50.040 --> 0:01:53.460 well he wrote all these papers, you know, until today 0:01:53.840 --> 0:01:55.059 they are quite cited 0:01:55.440 --> 0:01:56.760 and the reward 0:01:57.140 --> 0:02:02.500 still I got all these uh, citation indexes and our 0:02:02.500 --> 0:02:03.559 paper is one of the 0:02:04.040 --> 0:02:07.250 the most cited because it's about contagion 0:02:07.640 --> 0:02:08.860 and then it's about 0:02:09.240 --> 0:02:13.460 Uh, you you mentioned 98 and it was just after 0:02:14.040 --> 0:02:16.350 the asian crisis and it's a, 0:02:16.740 --> 0:02:19.090 it was it was the moment where I was sitting 0:02:19.090 --> 0:02:20.359 in the asian department 0:02:20.740 --> 0:02:23.460 writing papers and it was very nice that you, 0:02:23.840 --> 0:02:25.059 you arrived and 0:02:25.440 --> 0:02:27.060 then the rest is history 0:02:27.440 --> 0:02:29.859 for both of us. I'm very happy to be here. 0:02:30.340 --> 0:02:32.950 Actually. I'm basically recording 0:02:33.340 --> 0:02:34.859 this. I'm not giving 0:02:35.240 --> 0:02:39.050 any interview any podcast but I'm doing this because just 0:02:39.050 --> 0:02:40.260 because of this, 0:02:40.840 --> 0:02:43.750 our relationship from there from the past, 0:02:44.340 --> 0:02:46.960 I'm very grateful for that and I really appreciate it. 0:02:46.960 --> 0:02:50.070 And as you were recalling, I'm also recalling that another 0:02:50.070 --> 0:02:52.790 paper that we worked on where we looked at the 0:02:52.800 --> 0:02:56.940 impact of one country's contagion and reaction in another and 0:02:56.940 --> 0:03:00.340 you had that innovative approach of looking at data from 0:03:00.340 --> 0:03:02.660 resident flu and non resident flows to sort of, you know, 0:03:02.740 --> 0:03:04.560 parts, you know, which part of the 0:03:04.639 --> 0:03:08.000 investor reacts first and what sort of inside information they 0:03:08.000 --> 0:03:10.760 have over the economy. I thought that was very innovative 0:03:10.760 --> 0:03:12.260 and I'm glad that you know, I got to work 0:03:12.260 --> 0:03:14.710 with you on that. I've seen many, many papers subsequently 0:03:14.720 --> 0:03:17.720 approaching that 20 years ago it was you know, very 0:03:17.720 --> 0:03:18.260 cutting edge 0:03:18.740 --> 0:03:21.160 Iran again, real pleasure. And I'm very grateful that you're 0:03:21.160 --> 0:03:24.440 with us. I want to start with talking about of course, 0:03:24.440 --> 0:03:25.760 what else? The global pandemic, 0:03:26.240 --> 0:03:30.080 What's your view on the fourth quarter and beyond for 0:03:30.080 --> 0:03:34.920 the global economy as vaccination admittedly spreading unevenly but spreading nonetheless. 0:03:34.920 --> 0:03:38.560 And we're even seeing some news about antiviral pills getting introduced. 0:03:39.840 --> 0:03:41.960 Well, hopefully we are 0:03:42.540 --> 0:03:44.060 at the beginning of the end 0:03:44.740 --> 0:03:49.300 uh of discovered it will not end immediately. I think 0:03:49.300 --> 0:03:50.650 it will take some time 0:03:51.140 --> 0:03:52.850 vaccinations are there 0:03:53.340 --> 0:03:56.850 booster shots are coming some countries, 0:03:57.340 --> 0:03:59.950 the symmetry on vaccination is still there 0:04:00.440 --> 0:04:03.460 but slowly and steadily. We are getting into 0:04:03.940 --> 0:04:11.050 developing economies more and more percentage of people vaccinated fully vaccinated. 0:04:11.540 --> 0:04:14.860 Uh my country brazil started in 0:04:15.240 --> 0:04:17.460 in the left foot. But now you have 0:04:18.140 --> 0:04:26.239 Uh 50% fully vaccinated and more and almost fooled. Almost 90%. 0:04:26.240 --> 0:04:27.650 More than 90%. 0:04:28.140 --> 0:04:29.359 We have the first shot 0:04:29.839 --> 0:04:32.960 uh on on 0:04:33.440 --> 0:04:36.369 because there is a difference with nationalism. Nika they're giving 0:04:36.370 --> 0:04:37.250 three months. So 0:04:37.740 --> 0:04:39.560 between the first and the second, you have 0:04:39.940 --> 0:04:41.349 periods of time. But 0:04:41.839 --> 0:04:44.680 at the end of the day, I'm I'm starting to 0:04:44.680 --> 0:04:46.550 believe that we are at the beginning 0:04:47.140 --> 0:04:48.760 of the end of this covered 0:04:49.240 --> 0:04:54.120 markets of course are already ahead of the curve have 0:04:54.120 --> 0:04:54.760 boomed 0:04:55.240 --> 0:04:58.560 and economies advanced economies have recovered. 0:04:59.140 --> 0:05:05.280 So the U. S. Recovered from the fall of last year, europe, 0:05:05.290 --> 0:05:08.160 even even emerging markets are just basically 0:05:08.740 --> 0:05:11.130 Uh you may not want to call it a bishop 0:05:11.130 --> 0:05:15.739 recovery but everybody just fell a lot in 2020 and 0:05:15.740 --> 0:05:20.330 recovering 2021. So you question, the fourth part is basically 0:05:20.339 --> 0:05:22.860 what's going to happen after the Bishop Recovery? 0:05:23.240 --> 0:05:25.850 Uh We're gonna put video to recover. 0:05:26.240 --> 0:05:28.160 We're gonna hit some 0:05:28.540 --> 0:05:30.550 some wall and on, 0:05:30.940 --> 0:05:35.950 oh immediately I think most of the countries will hit 0:05:36.339 --> 0:05:41.260 the potential which won't mean either higher inflation and 0:05:41.640 --> 0:05:45.919 and will mean that you will have to aboard strong recovery, 0:05:45.930 --> 0:05:47.460 others have space. 0:05:47.940 --> 0:05:49.050 We are seeing 0:05:49.540 --> 0:05:53.290 quite a bit of monetary and fiscal stimulus. So whoever 0:05:53.290 --> 0:05:56.159 has space will just use the space. 0:05:56.540 --> 0:05:58.969 The rest that do not have space in terms of 0:05:58.970 --> 0:06:02.150 potential will just hit some limits. 0:06:02.640 --> 0:06:07.289 Uh and that's basically what I expect from 2020. We 0:06:07.290 --> 0:06:10.730 can talk about the limits on advanced economies which will 0:06:10.730 --> 0:06:12.150 basically give the 0:06:12.740 --> 0:06:16.250 the overall global scenario is shaped. 0:06:17.940 --> 0:06:21.270 Um You began by talking about brazil so maybe we 0:06:21.270 --> 0:06:23.680 just talk a little bit about latin America. I'm sitting 0:06:23.680 --> 0:06:25.890 here in Asia. You know, we don't follow latin America 0:06:25.890 --> 0:06:28.310 very closely but we do know that there are latin 0:06:28.310 --> 0:06:31.200 american economies which are very long the commodity cycle and 0:06:31.200 --> 0:06:34.239 we're seeing some strength and commodity prices and you mentioned 0:06:34.240 --> 0:06:35.960 the progress with vaccinations. So 0:06:36.040 --> 0:06:39.360 What's your overall sense of Latin as we head into 2022? 0:06:41.040 --> 0:06:44.960 Well, a tom was hardly hit by the covid. 0:06:45.839 --> 0:06:48.960 It it affected 0:06:49.440 --> 0:06:53.159 uh quite a bit of the population, the mood, 0:06:53.839 --> 0:06:57.460 even the political institutional arrangements were 0:06:57.839 --> 0:06:58.349 she cooks? 0:06:58.940 --> 0:07:00.859 I can give you several examples 0:07:01.440 --> 0:07:05.360 uh social unrest in chile before the covid. 0:07:05.839 --> 0:07:08.750 But now we have a constitution amendment that will be 0:07:09.339 --> 0:07:10.660 will be voting there 0:07:11.140 --> 0:07:14.860 uh next year, which changed 0:07:15.240 --> 0:07:17.360 a lot of the important rules 0:07:17.940 --> 0:07:21.660 and uh in chile. You have with sarah 0:07:22.040 --> 0:07:23.660 unrest in Colombia, 0:07:24.340 --> 0:07:27.660 A more difficult time in Colombia. You also have 0:07:28.340 --> 0:07:31.360 peru we had a terrorist election, 0:07:32.140 --> 0:07:33.660 a more 0:07:34.340 --> 0:07:35.140 uh huh 0:07:36.040 --> 0:07:37.660 candidate that was 0:07:38.140 --> 0:07:42.660 elected with now challenges to deliver what I promised. 0:07:43.340 --> 0:07:46.250 Uh So I will say that 0:07:46.640 --> 0:07:49.360 latin America has emerged from the covid 0:07:50.040 --> 0:07:53.760 With a lot of challenges, social challenges. one 0:07:54.140 --> 0:07:58.960 political challenges, but also economic challenge for example, that 0:07:59.540 --> 0:08:00.560 that has increased. 0:08:01.540 --> 0:08:04.060 So there are some smaller economies, 0:08:04.640 --> 0:08:06.050 we? Ve realized that 0:08:06.640 --> 0:08:08.160 I had to use 0:08:08.540 --> 0:08:10.060 whatever they call to 0:08:10.840 --> 0:08:13.450 uh maintain their economies functioning 0:08:13.840 --> 0:08:15.950 and now they have to deal with their lives. That's 0:08:15.950 --> 0:08:17.160 what what are you gonna do? 0:08:18.240 --> 0:08:19.560 Uh So 0:08:20.140 --> 0:08:23.050 yeah, that's economies are basically 0:08:23.840 --> 0:08:25.960 still stimulating their economies. 0:08:26.440 --> 0:08:27.660 But some of the 0:08:28.140 --> 0:08:32.829 emerging market economy, developing economies, especially in latin America do 0:08:32.830 --> 0:08:33.960 not have space 0:08:34.740 --> 0:08:35.660 to stimulate 0:08:36.040 --> 0:08:37.660 the space, Physical space. I mean, 0:08:38.040 --> 0:08:42.060 stimulus before I mentioned space in terms of potential output, 0:08:42.640 --> 0:08:45.160 but I don't think this is the limit 0:08:45.640 --> 0:08:48.160 in latin America is still a lot of unemployment. 0:08:48.640 --> 0:08:51.660 We still capacity 0:08:52.040 --> 0:08:53.150 to absorb. 0:08:53.540 --> 0:08:55.550 But the limit here is fiscal minutes. 0:08:56.040 --> 0:08:57.660 And this is where I believe 0:08:58.240 --> 0:09:01.660 the challenge will be economically. 0:09:02.040 --> 0:09:07.160 So political challenges is to do some challenges. Social challenges 0:09:07.540 --> 0:09:10.750 and they come from some economic difficulties where there are faced. 0:09:11.340 --> 0:09:11.960 I had 0:09:13.040 --> 0:09:16.230 uh indeed Ilan. I mean as you absolutely, you know, 0:09:16.240 --> 0:09:18.890 correctly point out that we not only have the issue 0:09:18.890 --> 0:09:22.280 whether the health crisis morphs into a financial crisis and 0:09:22.280 --> 0:09:24.620 economic crisis as the cost of dealing with the health 0:09:24.620 --> 0:09:27.349 crisis comes to you in the coming years. But also 0:09:27.360 --> 0:09:29.949 it seems like you know, social and political fabric have 0:09:29.950 --> 0:09:30.650 also been 0:09:30.840 --> 0:09:34.050 stretch substantially by the stress of the pandemic obviously 0:09:34.240 --> 0:09:37.320 and and many countries are you know sort of convulsing 0:09:37.320 --> 0:09:40.470 from that. So yeah, I think that you know, your 0:09:40.470 --> 0:09:44.580 your future institution a multilateral one and your former institution, 0:09:44.590 --> 0:09:48.010 bilateral government wants all will have their work cut out 0:09:48.010 --> 0:09:48.960 in the coming years. 0:09:49.640 --> 0:09:53.090 Uh Now of course one thing that can trip up 0:09:53.100 --> 0:09:56.430 latin America asia E. M. In general as we have 0:09:56.429 --> 0:09:59.080 seen in the past repeatedly is a rise in the U. S. 0:09:59.080 --> 0:10:02.550 Treasury yield from 94 onward. We have seen this game 0:10:02.550 --> 0:10:04.059 play out a number of times. 0:10:04.540 --> 0:10:09.010 Um So if we see you know, slight increase in U. S. 0:10:09.010 --> 0:10:12.150 10 year yield and as to the course of next year, 0:10:12.160 --> 0:10:14.900 the U. S. Federal reserve carries out paper market starts 0:10:14.900 --> 0:10:16.059 pricing an interest rate hike 0:10:16.440 --> 0:10:18.559 late next year, early night in the following year. 0:10:18.940 --> 0:10:21.890 Um So you've already said about the debt but beyond that, 0:10:21.890 --> 0:10:23.640 you know, what is your sense of the shock absorption 0:10:23.640 --> 0:10:25.560 capacity of the global markets? 0:10:27.040 --> 0:10:29.860 I think I think the situation is 0:10:30.540 --> 0:10:34.760 a bit vulnerable in the sense that 0:10:35.340 --> 0:10:37.760 if you have that if you have 0:10:38.840 --> 0:10:40.760 prices markets are 0:10:41.340 --> 0:10:43.050 I have 0:10:43.740 --> 0:10:48.059 uh increase quite a bit prices are 0:10:48.840 --> 0:10:51.560 I? Evaluation and not 0:10:52.140 --> 0:10:53.060 I'm not cheap. 0:10:53.540 --> 0:10:55.459 Uh So 0:10:56.040 --> 0:10:58.160 if you have a period of 0:10:58.840 --> 0:11:02.160 more contraction is monetary policy coming from 0:11:02.740 --> 0:11:03.850 global markets? 0:11:04.440 --> 0:11:06.660 You all you tend to have a correction 0:11:07.240 --> 0:11:10.449 in prices, stock markets in general 0:11:11.140 --> 0:11:14.140 in the bond markets because to absolve the higher industry, 0:11:14.140 --> 0:11:15.760 the market interest that's going up. 0:11:17.040 --> 0:11:17.459 Mhm. 0:11:18.140 --> 0:11:19.250 But also 0:11:19.640 --> 0:11:21.160 the council markets, 0:11:21.740 --> 0:11:24.560 strong dollar means deposition 0:11:25.040 --> 0:11:26.059 across the border. 0:11:26.840 --> 0:11:30.350 So if you're in a world with higher inflation 0:11:31.040 --> 0:11:32.559 and you get the position 0:11:33.140 --> 0:11:35.360 of the currencies against the dollar, 0:11:36.040 --> 0:11:38.459 you tend to have more pressure inflation 0:11:38.940 --> 0:11:41.460 and that means more pressure on interest rates. 0:11:42.140 --> 0:11:46.120 And that that means that the challenge to a continuous recovery, 0:11:46.120 --> 0:11:47.260 which was your question 0:11:47.640 --> 0:11:49.650 and the beginning will be more difficult. 0:11:50.340 --> 0:11:52.260 So a beach 0:11:52.940 --> 0:11:55.550 definition of the scenario for next year 0:11:56.040 --> 0:11:58.559 will be whether we have higher interest rates 0:11:59.240 --> 0:12:00.050 globally. 0:12:00.540 --> 0:12:02.550 And as I will say, defined 0:12:02.940 --> 0:12:04.860 90% of what we're gonna see 0:12:05.340 --> 0:12:06.150 next year, 0:12:06.540 --> 0:12:08.660 The other 10% Arabia's Democratic 0:12:09.040 --> 0:12:12.250 each country, how much vulnerable they are. 0:12:12.640 --> 0:12:14.980 What can they do? What is the policies and the 0:12:14.980 --> 0:12:15.360 rest 0:12:15.840 --> 0:12:18.360 But the the immediate impact 0:12:19.040 --> 0:12:19.760 is 0:12:20.140 --> 0:12:21.240 uh huh 0:12:22.040 --> 0:12:24.210 US Treasury yields 0:12:25.240 --> 0:12:26.950 other global interest rates. 0:12:28.340 --> 0:12:30.950 You know, I'm again thinking back, I think 20 years 0:12:30.950 --> 0:12:33.880 ago you had a paper on the pass through from 0:12:33.880 --> 0:12:35.910 depreciation to inflation. And as you were saying that I 0:12:35.910 --> 0:12:37.160 was thinking of that paper 0:12:37.540 --> 0:12:40.460 um so let's talk a little bit more about inflation 0:12:40.460 --> 0:12:43.140 because there is such a heated debate in the West 0:12:43.140 --> 0:12:46.929 in particular about the temporary and permanent nature of the 0:12:46.929 --> 0:12:50.260 ongoing rise in global inflation and even within temporary, you 0:12:50.260 --> 0:12:52.970 know how temporary the chip shortages will the last 3 0:12:52.970 --> 0:12:56.160 to 6 months if they last for nine months? Would 0:12:56.240 --> 0:12:58.760 producers start passing on those prices or will there 0:12:59.140 --> 0:13:01.939 margins come under pressure. So all those discussion is also 0:13:01.940 --> 0:13:04.210 going on. So I'm going to hear a little bit 0:13:04.210 --> 0:13:06.850 about what you're thinking is on this record in this regard. 0:13:08.540 --> 0:13:10.660 Well, I think global inflation has 0:13:11.440 --> 0:13:15.550 uh has several, several factors, 0:13:16.240 --> 0:13:17.559 several causes. 0:13:18.240 --> 0:13:21.750 Some of them you could see temporary, others not So 0:13:22.440 --> 0:13:25.559 the recovery from Covid was not planned. 0:13:26.040 --> 0:13:28.620 As the covid was not planned. You have all this 0:13:28.620 --> 0:13:29.060 there 0:13:29.540 --> 0:13:32.960 lockdowns and social distancing 0:13:33.340 --> 0:13:34.860 all of this affecting 0:13:35.340 --> 0:13:41.660 the supply chains. Somehow some sectors recovered immediately. 0:13:42.340 --> 0:13:43.860 They actually some actually boom 0:13:44.540 --> 0:13:46.360 in the coffee because they were 0:13:46.740 --> 0:13:47.850 more demanded, 0:13:48.540 --> 0:13:51.610 others have not recovered. Yes. And part of the services, 0:13:51.650 --> 0:13:52.650 tourism 0:13:53.340 --> 0:13:57.150 airlines feel like that is still to still 0:13:57.840 --> 0:14:01.260 way to go in the recovery. But 0:14:02.240 --> 0:14:04.250 when you look at the same 0:14:05.140 --> 0:14:05.650 product 0:14:06.240 --> 0:14:09.150 when you have different changes and you know that 0:14:09.640 --> 0:14:13.309 in order to produce today globally you have fix produce 0:14:13.309 --> 0:14:15.550 all over all over the world 0:14:16.340 --> 0:14:19.530 and sometimes you have interruption in a part of the 0:14:19.530 --> 0:14:19.960 chain 0:14:20.640 --> 0:14:23.030 and for some reason the worker were not able to 0:14:23.030 --> 0:14:23.760 produce 0:14:24.440 --> 0:14:27.200 at the same level that other parts of the chill 0:14:27.200 --> 0:14:30.260 produced and that generated some scarcity 0:14:30.640 --> 0:14:33.060 and has you know scarcity in splashed 0:14:33.440 --> 0:14:35.150 shortages mean 0:14:35.640 --> 0:14:36.750 high inflation. 0:14:37.340 --> 0:14:41.760 So that is part of what I call the temporary 0:14:41.760 --> 0:14:42.160 part 0:14:42.640 --> 0:14:43.450 which is 0:14:44.240 --> 0:14:47.450 uh covid relating at semantic recovery 0:14:48.240 --> 0:14:50.100 tend to have this 0:14:50.940 --> 0:14:53.460 temporary supply disruptions 0:14:53.940 --> 0:14:56.160 and that was saying all over 0:14:56.640 --> 0:14:58.650 all of the global economy. 0:14:59.440 --> 0:15:00.150 Uh huh. 0:15:00.540 --> 0:15:03.060 But there is part of what we're seeing 0:15:03.540 --> 0:15:04.760 that is uh 0:15:05.340 --> 0:15:06.710 not only this 0:15:07.640 --> 0:15:10.850 supply effects Emperor supply effect. 0:15:11.740 --> 0:15:13.860 Arab it is basically 0:15:14.740 --> 0:15:16.660 roof recovery and 0:15:17.440 --> 0:15:19.060 when we see in the U. S. 0:15:19.840 --> 0:15:21.850 Very 0:15:22.640 --> 0:15:24.650 you see a lot of 0:15:25.140 --> 0:15:27.450 vargas is but not enough 0:15:28.040 --> 0:15:28.760 job 0:15:29.340 --> 0:15:32.060 jobs to fill designs is 0:15:32.640 --> 0:15:34.460 I need to generalize phenomenon 0:15:35.140 --> 0:15:37.150 that is leading to higher wages. 0:15:37.940 --> 0:15:41.450 one cannot ignore that that's the basic mechanism 0:15:42.140 --> 0:15:44.360 where demand driven inflation 0:15:44.840 --> 0:15:45.860 generates, 0:15:46.540 --> 0:15:47.760 it's inflation, 0:15:48.340 --> 0:15:49.960 more demand. The supply, 0:15:50.540 --> 0:15:52.760 labour market is tied 0:15:53.340 --> 0:15:54.560 wages go up 0:15:55.140 --> 0:15:57.260 at the beginning the mark up 0:15:58.140 --> 0:16:00.260 goes down but at some point 0:16:00.640 --> 0:16:02.260 this implies hard inflation. 0:16:03.240 --> 0:16:05.160 Another sign that there is some 0:16:06.440 --> 0:16:07.660 hit it 0:16:08.240 --> 0:16:11.359 global economy is that commodities boomed 0:16:12.040 --> 0:16:12.850 as you mentioned. 0:16:13.340 --> 0:16:15.920 I mean you see all the it's back and forth 0:16:15.920 --> 0:16:16.850 every time you have a 0:16:17.240 --> 0:16:19.850 crisis or problem in china. 0:16:20.340 --> 0:16:25.530 Oh there is a flight to quality and commodities go down. 0:16:25.530 --> 0:16:25.860 But 0:16:26.340 --> 0:16:27.150 trends 0:16:27.640 --> 0:16:31.060 when you look at oil and you look at 0:16:31.540 --> 0:16:32.860 metallics and 0:16:33.240 --> 0:16:33.960 those 0:16:34.340 --> 0:16:36.860 common is over the last 0:16:37.540 --> 0:16:40.860 two years after the comedy you started recovering comedy is 0:16:40.860 --> 0:16:41.350 going up. 0:16:41.940 --> 0:16:43.650 So that gives me a sign 0:16:44.340 --> 0:16:45.360 that 0:16:45.940 --> 0:16:49.060 this part of the inflation may not be so 0:16:49.740 --> 0:16:53.359 so temporary. So if you combine 0:16:55.040 --> 0:16:57.350 temporary effects 0:16:57.740 --> 0:17:00.560 plus the more permanent effect you get high inflation. 0:17:01.040 --> 0:17:03.770 And I believe that's the reason we are having 0:17:04.340 --> 0:17:06.170 inflation everywhere. 0:17:06.640 --> 0:17:07.770 On top of that 0:17:08.340 --> 0:17:10.670 as you mentioned there is exchange rates 0:17:11.240 --> 0:17:12.950 and exchange. It sometimes reflect 0:17:13.740 --> 0:17:16.260 just democratic issues. So 0:17:16.940 --> 0:17:20.060 if you have a country that has political problems or 0:17:20.640 --> 0:17:22.770 economic debt issues or 0:17:23.340 --> 0:17:27.170 you guys capital outflows and that means the deposition. 0:17:27.640 --> 0:17:29.770 Once you have the deposition there is 0:17:30.540 --> 0:17:31.560 past for effect. 0:17:32.040 --> 0:17:35.000 So and if you're in a recovery and that's part 0:17:35.000 --> 0:17:37.389 of the paper you mentioned. Thank you if you're in 0:17:37.390 --> 0:17:39.270 a recovery the past was higher 0:17:39.640 --> 0:17:41.169 and when you're not in the republic 0:17:41.740 --> 0:17:43.770 given the procession depends 0:17:44.140 --> 0:17:47.420 to have a higher or lower passport, the fate of 0:17:47.420 --> 0:17:51.040 some factors, one of them is going to recover or not. 0:17:51.050 --> 0:17:53.490 The second is if you do if your parents is 0:17:53.490 --> 0:17:54.760 already undervalued 0:17:55.540 --> 0:17:57.629 and sometimes these are on the planet and if you 0:17:57.630 --> 0:17:58.660 get an additional 0:17:59.140 --> 0:18:00.960 the procession coming from 0:18:01.340 --> 0:18:03.950 whatever reason that means higher pressure. So 0:18:04.340 --> 0:18:06.350 global in pleasure. Plus 0:18:06.740 --> 0:18:08.959 it is symptomatic inflation which is sovereign 0:18:09.340 --> 0:18:11.050 inflation. They're all giving 0:18:11.540 --> 0:18:14.560 more or less inflation 0:18:15.040 --> 0:18:20.260 uh in our major markets developing in that part 0:18:21.940 --> 0:18:27.609 from the perspective of central bank should supply side inflation 0:18:27.619 --> 0:18:28.359 be ignored. 0:18:30.340 --> 0:18:32.670 No I don't think they usually ignored 0:18:33.040 --> 0:18:34.960 but it should be treated differently 0:18:35.340 --> 0:18:36.560 from demand 0:18:37.340 --> 0:18:38.860 side inflation. 0:18:39.340 --> 0:18:41.859 one of the months that inflation things are much easier 0:18:42.540 --> 0:18:44.460 because the demand side inflation means that 0:18:45.140 --> 0:18:47.500 you have an inflation and you have to go back 0:18:47.500 --> 0:18:48.770 to your target. 0:18:49.140 --> 0:18:52.419 Well you have to uh you don't have a inflation 0:18:52.420 --> 0:18:54.950 target but you have just the target or you just 0:18:54.950 --> 0:18:56.850 care about inflation. You have to react 0:18:57.540 --> 0:18:58.670 because inflation is up. 0:18:59.240 --> 0:19:01.270 If you have a demand side inflation 0:19:01.640 --> 0:19:03.170 you're reacting when 0:19:03.540 --> 0:19:04.350 you are 0:19:05.740 --> 0:19:06.270 yeah 0:19:07.540 --> 0:19:10.449 above full full employment you are 0:19:10.940 --> 0:19:12.350 or overheating. 0:19:12.740 --> 0:19:16.760 You are below the national rate of unemployment. Whatever 0:19:17.140 --> 0:19:20.510