1 00:00:06,530 --> 00:00:09,730 Speaker 1: Hello. You're listening to Kobe time, a podcast series on 2 00:00:09,730 --> 00:00:12,610 Speaker 1: markets and economies from DBS group research. I'm Taimur baig 3 00:00:12,610 --> 00:00:16,210 Speaker 1: chief economist welcome to our a first episode. 4 00:00:16,750 --> 00:00:19,720 Speaker 1: So I have just come back from a full month 5 00:00:19,720 --> 00:00:23,029 Speaker 1: of travel through the US europe and UK. And if 6 00:00:23,030 --> 00:00:26,220 Speaker 1: there was one common topic I discussed with family, friends 7 00:00:26,220 --> 00:00:29,790 Speaker 1: and colleagues during the trip, surprise surprise it was inflation 8 00:00:29,800 --> 00:00:32,500 Speaker 1: but it was not just inflation, it was also things 9 00:00:32,500 --> 00:00:36,029 Speaker 1: that stem from it from interest rate increases to recession risks, 10 00:00:36,040 --> 00:00:39,589 Speaker 1: housing market, currency market volatility and of course the war 11 00:00:39,590 --> 00:00:40,360 Speaker 1: in Ukraine. 12 00:00:40,620 --> 00:00:43,330 Speaker 1: So I think it's appropriate to resume our series after 13 00:00:43,330 --> 00:00:47,280 Speaker 1: my month of being away with a dive in global macro. 14 00:00:47,290 --> 00:00:50,000 Speaker 1: I'm very pleased for that to have with us robert 15 00:00:50,000 --> 00:00:54,760 Speaker 1: deco professor of economics at the University of southern California roberts. 16 00:00:54,770 --> 00:00:56,690 Speaker 1: Specializations range from international 17 00:00:56,705 --> 00:01:00,715 Speaker 1: finance to open economy and development as well as economies 18 00:01:00,715 --> 00:01:04,375 Speaker 1: of Japan and East asia. In addition to academia robert 19 00:01:04,375 --> 00:01:07,285 Speaker 1: has worked at the International monetary fund and was a 20 00:01:07,295 --> 00:01:10,955 Speaker 1: visiting scholar at the Federal Reserve Board of Governors. Professor 21 00:01:10,955 --> 00:01:12,705 Speaker 1: robert Michael, welcome to Kobe time. 22 00:01:12,805 --> 00:01:16,554 Speaker 2: Thank you. Thank you. It's a real real pleasure and 23 00:01:16,565 --> 00:01:18,605 Speaker 2: it's great to meet up with you again. 24 00:01:18,694 --> 00:01:21,165 Speaker 1: I know it's been a long long time robert and 25 00:01:21,165 --> 00:01:23,215 Speaker 1: I hope next time we meet it will be in person. 26 00:01:23,255 --> 00:01:24,604 Speaker 2: Great 27 00:01:24,940 --> 00:01:29,160 Speaker 1: robert. Normally we start our macro discussions with the U. S. 28 00:01:29,160 --> 00:01:30,580 Speaker 1: And you were based in L. A. So we have 29 00:01:30,580 --> 00:01:32,179 Speaker 1: to talk a lot about the U. S. But I 30 00:01:32,180 --> 00:01:34,860 Speaker 1: would like to turn things around a bit and start 31 00:01:34,860 --> 00:01:38,210 Speaker 1: with a key area of your interest, Japan. So sitting 32 00:01:38,209 --> 00:01:41,390 Speaker 1: here in Singapore from the market side of the business, 33 00:01:41,390 --> 00:01:45,039 Speaker 1: we have been struck by the extraordinary magnitude of depreciation 34 00:01:45,190 --> 00:01:48,220 Speaker 1: we've seen this year. And as you well know that 35 00:01:48,230 --> 00:01:51,820 Speaker 1: many financial markets participants have been basically calling the yield 36 00:01:51,820 --> 00:01:54,870 Speaker 1: curve control of the bank of Japan unsustainable. But they're 37 00:01:54,870 --> 00:01:58,510 Speaker 1: holding fast. So let's start with your perspective on Japan, 38 00:01:58,660 --> 00:02:07,040 Speaker 2: mm hmm. Um I think they're quite disconnected from in 39 00:02:07,040 --> 00:02:11,010 Speaker 2: terms of monetary policy from the United States and, and europe. 40 00:02:11,020 --> 00:02:14,230 Speaker 2: And I think the reason for that is that 41 00:02:14,660 --> 00:02:19,700 Speaker 2: Their view is that the domestic economies still still weak. 42 00:02:19,710 --> 00:02:26,780 Speaker 2: Uh the wage increases have not have not, wages haven't 43 00:02:26,780 --> 00:02:34,800 Speaker 2: risen that much. They're like 1.5, or so. And so 44 00:02:34,800 --> 00:02:37,930 Speaker 2: the domestic economy is weak and they need to continue 45 00:02:37,940 --> 00:02:39,490 Speaker 2: their 46 00:02:39,980 --> 00:02:45,980 Speaker 2: Loose monetary policies to get the domestic economy to recover 47 00:02:45,980 --> 00:02:51,130 Speaker 2: some more. And the inflation rates are there. Uh you know, 48 00:02:51,130 --> 00:02:55,240 Speaker 2: it's not like 0.5 as it was like a couple 49 00:02:55,240 --> 00:02:58,820 Speaker 2: of years ago, but it's still just a tad above two. 50 00:02:58,830 --> 00:03:03,430 Speaker 2: So it's not, it's not, it's a bit above there. 51 00:03:04,200 --> 00:03:07,850 Speaker 2: Their targets at the official target is a little bit 52 00:03:07,850 --> 00:03:11,500 Speaker 2: of love to I guess. So it's sort of around 53 00:03:11,500 --> 00:03:15,500 Speaker 2: that level now and uh so it hasn't exceeded it 54 00:03:15,500 --> 00:03:16,110 Speaker 2: by 55 00:03:16,880 --> 00:03:22,640 Speaker 2: any kind of margin. So I think the authorities feel 56 00:03:22,650 --> 00:03:29,640 Speaker 2: that the they're loose monetary policies is still justified, justified 57 00:03:29,639 --> 00:03:35,130 Speaker 2: at this point. The only concern there is the weekend, 58 00:03:35,140 --> 00:03:38,950 Speaker 2: it hasn't been this week since the early nineties and 59 00:03:38,960 --> 00:03:43,050 Speaker 2: that has resulted in given the high dollar based commodity 60 00:03:43,050 --> 00:03:44,690 Speaker 2: prices and oil prices and 61 00:03:44,970 --> 00:03:47,770 Speaker 2: of the input prices. That means that those prices are 62 00:03:47,770 --> 00:03:48,800 Speaker 2: coming in even 63 00:03:49,420 --> 00:03:53,940 Speaker 2: higher because of the weaker, weaker yen into Japan, which 64 00:03:53,940 --> 00:03:57,980 Speaker 2: is um causing they import a lot of their foodstuffs, 65 00:03:57,980 --> 00:04:02,510 Speaker 2: for example, food and energy. And that's causing some problems 66 00:04:02,510 --> 00:04:06,580 Speaker 2: for households which their budgets are stressed quite a bit 67 00:04:06,590 --> 00:04:10,190 Speaker 2: because of the high food prices and in terms of production, 68 00:04:10,190 --> 00:04:13,950 Speaker 2: the high energy prices. So, so that's a concern. But 69 00:04:13,950 --> 00:04:15,160 Speaker 2: there's um 70 00:04:15,810 --> 00:04:20,240 Speaker 2: there hasn't been intervention and I don't think the exchange 71 00:04:20,240 --> 00:04:26,219 Speaker 2: rate intervention has been taken taken very seriously. So um yeah, 72 00:04:26,230 --> 00:04:27,800 Speaker 2: I think the 73 00:04:28,610 --> 00:04:31,700 Speaker 2: of course if as if they have to start raising 74 00:04:31,700 --> 00:04:35,260 Speaker 2: their short term interest rates, they can't maintain their 10 75 00:04:35,260 --> 00:04:38,760 Speaker 2: year rate at 100.5% so that's going to have to go. 76 00:04:38,770 --> 00:04:45,350 Speaker 2: So it's gonna whether they're um they're they're announcement of 77 00:04:45,350 --> 00:04:49,440 Speaker 2: holding interest rates to interest rates constant would be, or 78 00:04:49,440 --> 00:04:52,020 Speaker 2: at least the 10 year rate constant. It's gonna depend 79 00:04:52,020 --> 00:04:54,610 Speaker 2: on what they're gonna do to the short rates, but 80 00:04:54,620 --> 00:04:56,270 Speaker 2: they didn't, they haven't raised it and 81 00:04:56,800 --> 00:04:59,750 Speaker 2: But I think it all depends on the inflation rate 82 00:04:59,750 --> 00:05:02,960 Speaker 2: as it starts creeping up towards 3%, even if the 83 00:05:02,960 --> 00:05:08,200 Speaker 2: domestic economy doesn't improve that that much. I think they're 84 00:05:08,200 --> 00:05:09,690 Speaker 2: gonna have to start raising it 85 00:05:12,529 --> 00:05:13,099 Speaker 2: and 86 00:05:13,110 --> 00:05:16,980 Speaker 1: in terms of the sustainability of the yield curve control. 87 00:05:16,990 --> 00:05:20,229 Speaker 1: Do you see any physical limits or it is really 88 00:05:20,230 --> 00:05:22,969 Speaker 1: going to be a bit of an intellectual exercise for 89 00:05:22,970 --> 00:05:24,700 Speaker 1: the good of the economy? They'll give up. It will 90 00:05:24,700 --> 00:05:25,890 Speaker 1: not be something that 91 00:05:25,940 --> 00:05:27,969 Speaker 2: I think they would have to give up if they 92 00:05:27,970 --> 00:05:30,200 Speaker 2: start raising their short rates. Yeah, absolutely. 93 00:05:30,600 --> 00:05:31,280 Speaker 2: No, 94 00:05:31,279 --> 00:05:34,350 Speaker 1: I am just talking in terms of the quantitative, you 95 00:05:34,350 --> 00:05:34,890 Speaker 2: know, 96 00:05:34,900 --> 00:05:36,539 Speaker 1: magnitude. 97 00:05:36,550 --> 00:05:39,880 Speaker 2: Well, they, so it's 0.5, so they can say, Okay, 98 00:05:39,880 --> 00:05:46,679 Speaker 2: we'll make it 2%, 3% 99 00:05:47,450 --> 00:05:52,099 Speaker 2: I don't, you know, it was all done to um 100 00:05:52,110 --> 00:05:56,430 Speaker 2: so there's two, there's two things. One is uh it's, 101 00:05:56,440 --> 00:05:59,120 Speaker 2: was to stimulate the economy kind of keep the long 102 00:05:59,120 --> 00:06:02,680 Speaker 2: rates low. And the other thing is to have that 103 00:06:02,690 --> 00:06:05,810 Speaker 2: have a certain gap between the short rates and the 104 00:06:05,810 --> 00:06:09,650 Speaker 2: long rates to maintain the profitability of the banking system, 105 00:06:10,220 --> 00:06:13,260 Speaker 2: right? Because they banks make money on the yoke and 106 00:06:13,260 --> 00:06:16,750 Speaker 2: they're an important part of the japanese stock market and 107 00:06:16,760 --> 00:06:21,430 Speaker 2: uh and the economy. So in that sense, I can, 108 00:06:21,440 --> 00:06:24,549 Speaker 2: you know, they could kind of bump bump both up 109 00:06:25,130 --> 00:06:29,070 Speaker 2: at a certain point. But um so that's, so that's 110 00:06:29,070 --> 00:06:32,640 Speaker 2: certainly possible, but it's not as crucial as when they 111 00:06:32,640 --> 00:06:36,469 Speaker 2: were suffering from near deflation, but that all this kind 112 00:06:36,470 --> 00:06:40,450 Speaker 2: of came uh, you know, board because of that. So, right, 113 00:06:40,450 --> 00:06:42,280 Speaker 1: they finally got what they wanted. But they got a 114 00:06:42,279 --> 00:06:44,380 Speaker 1: bit too much of it. It seems like very quickly. 115 00:06:44,390 --> 00:06:47,070 Speaker 2: I'm not so sure if it's too much yet. That's 116 00:06:47,070 --> 00:06:49,740 Speaker 2: the surprise of the whole thing that it's a little 117 00:06:49,740 --> 00:06:53,290 Speaker 2: bit of, it's the mystery continues because as the rest 118 00:06:53,290 --> 00:06:54,580 Speaker 2: of the world europe, 119 00:06:54,900 --> 00:06:59,440 Speaker 2: The US have inflation rates approaching 9% still just a 120 00:06:59,450 --> 00:07:03,550 Speaker 2: little above two there. So, you know, it's still still 121 00:07:03,550 --> 00:07:05,229 Speaker 2: a mystery there. 122 00:07:05,230 --> 00:07:09,370 Speaker 1: Right. So in terms of that mystery, is it because 123 00:07:09,380 --> 00:07:13,460 Speaker 1: that unlike the european or the US economy's 124 00:07:13,470 --> 00:07:14,750 Speaker 2: Japan's 125 00:07:14,760 --> 00:07:18,590 Speaker 1: fiscal supporter on the pandemic was not commensurately large, is it? 126 00:07:18,590 --> 00:07:22,930 Speaker 1: Because they have chronically large output gap and therefore producers 127 00:07:22,930 --> 00:07:24,780 Speaker 1: still have no power to raise crisis. 128 00:07:26,110 --> 00:07:31,400 Speaker 2: Mm hmm. I think it's both the, as you, as 129 00:07:31,400 --> 00:07:34,600 Speaker 2: you point out that the fiscal response was, was nothing 130 00:07:34,600 --> 00:07:38,300 Speaker 2: like that in the US given their budget, budgetary situation 131 00:07:38,310 --> 00:07:42,100 Speaker 2: is quite dire. You know, the the debt GDP ratio 132 00:07:42,100 --> 00:07:44,560 Speaker 2: is much higher. So they don't have the fiscal space 133 00:07:44,560 --> 00:07:48,250 Speaker 2: to didn't have the fiscal space to do that. And 134 00:07:48,250 --> 00:07:50,140 Speaker 2: also the the 135 00:07:50,910 --> 00:07:55,790 Speaker 2: yeah, the kind of general, um, but I got output 136 00:07:55,790 --> 00:08:00,850 Speaker 2: gap and the recessed state of the economy going to um, 137 00:08:00,860 --> 00:08:02,640 Speaker 2: you know, 138 00:08:03,890 --> 00:08:08,040 Speaker 2: aging of the population and lack of productivity growth, TfB growth. 139 00:08:08,040 --> 00:08:09,100 Speaker 2: Things like that. Yeah. 140 00:08:10,160 --> 00:08:13,040 Speaker 1: Um, so to that point that, 141 00:08:13,040 --> 00:08:14,160 Speaker 2: you know, t. 142 00:08:14,160 --> 00:08:18,710 Speaker 1: F. P growth and aging and structural decline in economic growth, 143 00:08:18,720 --> 00:08:21,780 Speaker 1: you have been, you know, writing about and following Japan 144 00:08:21,790 --> 00:08:25,110 Speaker 1: through this entire phase, you know, struggles to get out 145 00:08:25,110 --> 00:08:27,580 Speaker 1: of the nineties crisis through various policies to the 146 00:08:27,810 --> 00:08:32,120 Speaker 1: arts and the tents, um, what are the broader lessons robert? 147 00:08:32,130 --> 00:08:34,660 Speaker 1: I mean, sitting in Singapore, I see, you know, Singapore 148 00:08:34,660 --> 00:08:38,350 Speaker 1: has an asian dynamic and as it sort of hits 149 00:08:38,350 --> 00:08:41,489 Speaker 1: toward the frontier production, almost certainly, you know, structurally 150 00:08:41,500 --> 00:08:42,800 Speaker 2: europe 151 00:08:42,800 --> 00:08:46,540 Speaker 1: has the same issue, perhaps even us. So what are your, 152 00:08:46,550 --> 00:08:47,500 Speaker 1: I 153 00:08:47,510 --> 00:08:51,689 Speaker 2: don't know what lessons positive lessons Japan the rest of 154 00:08:51,690 --> 00:08:53,400 Speaker 2: the world could learn from it. I think the 155 00:08:53,559 --> 00:08:55,920 Speaker 2: the only lesson is that don't let your economy age 156 00:08:55,920 --> 00:09:00,839 Speaker 2: some age so drastically. Uh, and that's hard to do 157 00:09:00,840 --> 00:09:06,079 Speaker 2: with just pro NATO list policies that they like some 158 00:09:06,080 --> 00:09:11,120 Speaker 2: european countries, Japan tried with, uh, certainly the abe administration 159 00:09:11,120 --> 00:09:11,970 Speaker 2: with 160 00:09:12,500 --> 00:09:19,959 Speaker 2: giving, um, essentially very inexpensive childcare and and subsidies for 161 00:09:19,970 --> 00:09:23,590 Speaker 2: raising the number of Children. But that hasn't really work 162 00:09:23,600 --> 00:09:28,120 Speaker 2: that much. And I think what what hurts the country is, 163 00:09:28,130 --> 00:09:33,160 Speaker 2: is really the lack of lack of immigration and um, 164 00:09:33,170 --> 00:09:37,540 Speaker 2: I think, I think Japan has a lot to learn from, 165 00:09:37,550 --> 00:09:41,770 Speaker 2: from Singapore, I think to uh 166 00:09:42,000 --> 00:09:44,770 Speaker 2: sort of bring in talent, try to bring in talent 167 00:09:44,770 --> 00:09:47,740 Speaker 2: from all over the world at at various levels like 168 00:09:47,750 --> 00:09:53,160 Speaker 2: um physical labor and also intellectual labor, but they haven't, 169 00:09:53,170 --> 00:09:59,420 Speaker 2: they haven't done that. Um, although abe has tried and 170 00:10:00,000 --> 00:10:05,520 Speaker 2: I think that's probably the biggest reason why they're suffering 171 00:10:05,520 --> 00:10:09,150 Speaker 2: from an aging population that's more drastic than 172 00:10:09,970 --> 00:10:11,969 Speaker 2: other countries and 173 00:10:12,790 --> 00:10:15,130 Speaker 2: I think um 174 00:10:15,940 --> 00:10:19,110 Speaker 2: so I mean, what do you do when you have 175 00:10:19,120 --> 00:10:22,870 Speaker 2: a population is aging is Japan, I mean you have high, 176 00:10:22,880 --> 00:10:26,170 Speaker 2: you have high debt, I think the policies that they 177 00:10:26,170 --> 00:10:29,489 Speaker 2: took our sort of appropriate, you're not gonna have a 178 00:10:29,490 --> 00:10:32,330 Speaker 2: lot of risk capital prices going up in a situation 179 00:10:32,330 --> 00:10:36,670 Speaker 2: like that, so, but you have deflation and debt 180 00:10:37,220 --> 00:10:41,550 Speaker 2: sort of, the JGB prices have been going up, so 181 00:10:41,559 --> 00:10:44,579 Speaker 2: holding bonds have been a good asset choice and holding 182 00:10:44,580 --> 00:10:48,400 Speaker 2: money has been a good asset choice. So um that's 183 00:10:48,410 --> 00:10:52,100 Speaker 2: um so that's why the bonds found a ready market 184 00:10:52,110 --> 00:10:55,740 Speaker 2: in Japan their debt. So I think, I think they've 185 00:10:55,740 --> 00:10:59,370 Speaker 2: done about as given, given the aging of the population 186 00:10:59,370 --> 00:11:04,530 Speaker 2: they've done about as um well as they could. Again, 187 00:11:04,530 --> 00:11:05,120 Speaker 2: there's 188 00:11:05,380 --> 00:11:09,040 Speaker 2: things like innovation policies and all that, but it's uh 189 00:11:09,050 --> 00:11:12,570 Speaker 2: those things are always very hard to see. Um although 190 00:11:12,570 --> 00:11:15,130 Speaker 2: this new um 191 00:11:15,950 --> 00:11:22,100 Speaker 2: Kishida, the Prime Minister is um trying to um promote 192 00:11:22,100 --> 00:11:25,630 Speaker 2: more innovation by bringing back sort of more of the 193 00:11:25,630 --> 00:11:29,990 Speaker 2: Japan inc approach where you, you subsidize industries and things 194 00:11:29,990 --> 00:11:32,150 Speaker 2: like that and that may bear fruit, but I'm, 195 00:11:32,910 --> 00:11:35,840 Speaker 2: you know, that that era seems to have passed in 196 00:11:35,840 --> 00:11:39,950 Speaker 2: the global economy. So, so, so I think, yeah, the 197 00:11:39,960 --> 00:11:42,829 Speaker 2: only lesson is that try not to get your economy 198 00:11:42,830 --> 00:11:45,880 Speaker 2: aging and be be more open to the international economy 199 00:11:45,880 --> 00:11:46,890 Speaker 2: bring people in 200 00:11:47,420 --> 00:11:48,790 Speaker 2: and 201 00:11:49,760 --> 00:11:54,140 Speaker 2: but they, and I think europe is going that way 202 00:11:54,140 --> 00:11:57,350 Speaker 2: and Singapore has as well. And of course the United 203 00:11:57,350 --> 00:12:02,280 Speaker 2: States has always been very open to mobility of human capital. 204 00:12:02,280 --> 00:12:04,570 Speaker 2: And I think that's where it's been, it's been very 205 00:12:04,570 --> 00:12:10,240 Speaker 2: hard for Japan to adapt. And they're kind of at 206 00:12:10,240 --> 00:12:11,089 Speaker 2: their current 207 00:12:11,420 --> 00:12:14,330 Speaker 2: current difficulties there robert, 208 00:12:14,330 --> 00:12:17,010 Speaker 1: you sort of talked about one of the consequences of 209 00:12:17,020 --> 00:12:20,510 Speaker 1: aging as debt and deflation. I don't know if you 210 00:12:20,510 --> 00:12:24,189 Speaker 1: read this book, Charles good heart and Britain wrote this 211 00:12:24,190 --> 00:12:27,569 Speaker 1: book a couple of years ago called the Great demographic reversal. 212 00:12:27,580 --> 00:12:29,989 Speaker 1: And they have a sort of a provocative thesis which 213 00:12:29,990 --> 00:12:33,099 Speaker 1: is we should not look at Japan and take away 214 00:12:33,100 --> 00:12:36,740 Speaker 1: that aging and deflation come hand in hand? Japan's deflation 215 00:12:36,740 --> 00:12:38,300 Speaker 1: is more related to 216 00:12:38,610 --> 00:12:41,900 Speaker 1: recent market liberalization over the last two decades as well 217 00:12:41,900 --> 00:12:44,990 Speaker 1: as you know china's exporting of you know, low prices 218 00:12:45,000 --> 00:12:48,719 Speaker 1: to the tradable sector. And their point is that as U. S. 219 00:12:48,720 --> 00:12:52,420 Speaker 1: And europe and other countries age, they will actually see 220 00:12:52,429 --> 00:12:55,690 Speaker 1: inflationary impact because labor force shrinks and which demand will 221 00:12:55,690 --> 00:12:56,700 Speaker 1: actually pick up. 222 00:12:56,900 --> 00:12:57,500 Speaker 1: Um you 223 00:12:57,500 --> 00:12:58,569 Speaker 2: know, I 224 00:12:58,580 --> 00:13:00,699 Speaker 1: mean, I have always been in your camp because even 225 00:13:00,700 --> 00:13:03,710 Speaker 1: in the I. M. F. When we wrote papers on demographic, 226 00:13:03,710 --> 00:13:08,740 Speaker 1: the stylist fact common with aging was dissipation of price pressure. 227 00:13:08,750 --> 00:13:11,579 Speaker 1: So what do you think of this pushback that it 228 00:13:11,580 --> 00:13:13,059 Speaker 1: may actually be the other way around. 229 00:13:13,070 --> 00:13:15,650 Speaker 2: So so they're arguing that wages are going to be 230 00:13:15,650 --> 00:13:18,679 Speaker 2: increasing with with 231 00:13:18,690 --> 00:13:19,709 Speaker 1: shrinking of the labor force, 232 00:13:19,710 --> 00:13:22,520 Speaker 2: a shortage of shortage of the working age population 233 00:13:22,800 --> 00:13:26,900 Speaker 2: and that yeah, I mean those um 234 00:13:27,910 --> 00:13:31,880 Speaker 2: I think what's the Japanese lesson is that it's indeed true. 235 00:13:31,890 --> 00:13:41,030 Speaker 2: The working age population has has has gone down, but again, 236 00:13:41,030 --> 00:13:47,190 Speaker 2: that's been augmented by by imports from china and um 237 00:13:47,200 --> 00:13:49,970 Speaker 2: china and the rest of the world. What what what's 238 00:13:49,970 --> 00:13:52,870 Speaker 2: heard is that the demand for japanese products has 239 00:13:53,370 --> 00:13:57,050 Speaker 2: has gone down like globally, right? Because of the competition 240 00:13:57,050 --> 00:14:01,069 Speaker 2: in Korea and china and other Southeast asian countries and 241 00:14:01,070 --> 00:14:04,260 Speaker 2: domestic still a large domestic economy, but 242 00:14:04,550 --> 00:14:10,040 Speaker 2: the demand for um Japanese consumption goods such as um 243 00:14:10,050 --> 00:14:14,059 Speaker 2: cars and also since it's the population, so aging, there's 244 00:14:14,070 --> 00:14:17,490 Speaker 2: very little new household formation, so when you buy a house, 245 00:14:17,500 --> 00:14:20,570 Speaker 2: there's all the stuff that goes into them and build 246 00:14:20,570 --> 00:14:25,100 Speaker 2: a house material, but that demands just collapsed. So home 247 00:14:25,100 --> 00:14:30,280 Speaker 2: electronics and materials to build housing, furniture, clothing 248 00:14:30,560 --> 00:14:34,470 Speaker 2: because you're not working, people aren't working as much those. 249 00:14:34,480 --> 00:14:40,250 Speaker 2: So domestic consumption demand um is growing miserably has been 250 00:14:40,250 --> 00:14:43,980 Speaker 2: growing miserably and and that's contributed to the lack of 251 00:14:43,980 --> 00:14:49,140 Speaker 2: domestic market growth and low investment because companies can't find 252 00:14:49,140 --> 00:14:53,810 Speaker 2: markets for their products and so therefore low, low GDP 253 00:14:53,810 --> 00:14:56,450 Speaker 2: and and deflation as a consequence. 254 00:14:56,880 --> 00:15:01,190 Speaker 2: Um So yes, I I know Charles's arguments, I've heard 255 00:15:01,190 --> 00:15:04,840 Speaker 2: other people comment on his book and it doesn't seem 256 00:15:04,840 --> 00:15:05,460 Speaker 2: to be, 257 00:15:06,030 --> 00:15:14,020 Speaker 2: had received a very widespread um widespread positive or widespread 258 00:15:14,020 --> 00:15:18,020 Speaker 2: agreement and and I don't particularly agree agree with. I 259 00:15:18,020 --> 00:15:21,170 Speaker 2: mean I think they need to argue that the which 260 00:15:21,170 --> 00:15:25,970 Speaker 2: which they are charges arguing that the globalization, internationalization has ended. 261 00:15:25,980 --> 00:15:29,530 Speaker 2: So that deflationary forces there and then all you have 262 00:15:29,530 --> 00:15:33,270 Speaker 2: is this kind of high wages right? 263 00:15:33,610 --> 00:15:37,310 Speaker 2: That's gonna cause that's gonna cause inflation. But 264 00:15:37,860 --> 00:15:40,700 Speaker 2: you know it like I think the counter argument has been, 265 00:15:40,700 --> 00:15:44,120 Speaker 2: well you're gonna still have globalized India is coming. Huh? 266 00:15:45,620 --> 00:15:49,550 Speaker 2: The south south asian economies are coming on board and 267 00:15:49,550 --> 00:15:52,340 Speaker 2: certainly Philippines and South East Asia have a young demographic. 268 00:15:52,340 --> 00:15:55,370 Speaker 2: They're producing a lot. So that's that's going to continue. 269 00:15:55,380 --> 00:15:57,770 Speaker 2: And that the 270 00:15:58,390 --> 00:16:03,460 Speaker 2: um it's the and the robots are gonna robots are 271 00:16:03,460 --> 00:16:05,850 Speaker 2: gonna come in and replace the labor anyway. So you 272 00:16:05,850 --> 00:16:10,100 Speaker 2: may not need to need that much demand any of immigration. 273 00:16:10,110 --> 00:16:14,380 Speaker 2: So it's a it's um it's it's an interesting it's 274 00:16:14,380 --> 00:16:16,630 Speaker 2: an interesting hypothesis. Um 275 00:16:17,350 --> 00:16:21,380 Speaker 2: But I'm not I'm not too I'm not too sure 276 00:16:21,380 --> 00:16:22,980 Speaker 2: if it's gonna be right. Yeah. 277 00:16:23,510 --> 00:16:26,350 Speaker 1: Very good. Now that's that's a very 278 00:16:26,360 --> 00:16:27,100 Speaker 2: you know 279 00:16:27,110 --> 00:16:30,940 Speaker 1: nuanced response. I appreciate that robert. All right, so let's 280 00:16:30,940 --> 00:16:35,240 Speaker 1: cross the pacific back to your short. Um So during 281 00:16:35,240 --> 00:16:37,120 Speaker 1: my visit to the U. S. Last month I heard 282 00:16:37,130 --> 00:16:40,040 Speaker 1: nothing but stories of you know, soaring gas prices and 283 00:16:40,040 --> 00:16:44,740 Speaker 1: soaring cost of hiring labor. So let's get a sense 284 00:16:44,750 --> 00:16:47,350 Speaker 1: of your take on the inflation situation. 285 00:16:47,360 --> 00:16:49,460 Speaker 2: Yeah. So 286 00:16:52,350 --> 00:16:56,400 Speaker 2: when people are forecasting right? It's like 8 8.5 9 287 00:16:56,400 --> 00:16:56,800 Speaker 2: and 288 00:16:57,430 --> 00:17:02,490 Speaker 2: um you know people have been forecasting a turn into 289 00:17:02,500 --> 00:17:05,169 Speaker 2: lower inflation for the last three or three months or 290 00:17:05,170 --> 00:17:06,600 Speaker 2: so and it hasn't happened yet. 291 00:17:07,200 --> 00:17:12,409 Speaker 2: Um But if oil prices are declining somewhat and 292 00:17:12,930 --> 00:17:17,830 Speaker 2: so I think simply by what people are saying what 293 00:17:17,830 --> 00:17:20,930 Speaker 2: the I don't know the technical term of it but 294 00:17:20,940 --> 00:17:24,780 Speaker 2: the since the level last year was was high, you 295 00:17:24,780 --> 00:17:27,810 Speaker 2: know the growth, relatively speaking the growth, 296 00:17:28,600 --> 00:17:30,540 Speaker 2: I was not going to raise the inflation as much. 297 00:17:30,540 --> 00:17:33,750 Speaker 2: So that's gonna kind of mechanically bring it down. Um 298 00:17:34,350 --> 00:17:39,350 Speaker 2: But kind of more more broadly thinking about the thinking 299 00:17:39,350 --> 00:17:42,290 Speaker 2: about the economics. Um It's 300 00:17:42,810 --> 00:17:51,240 Speaker 2: clearly this uh administration and um the central bank was 301 00:17:51,250 --> 00:17:54,930 Speaker 2: it was very much very much behind the curve. And 302 00:17:54,930 --> 00:17:57,810 Speaker 2: they're not even I mean the raising rates at a 303 00:17:57,820 --> 00:18:03,679 Speaker 2: fairly rapid rapid clip but because of concerns about the 304 00:18:03,680 --> 00:18:06,510 Speaker 2: financial markets and I think also about the labor markets 305 00:18:06,510 --> 00:18:09,540 Speaker 2: they it's not the real rates are still 306 00:18:11,010 --> 00:18:17,679 Speaker 2: quite negative. Yeah you have like 6% negative real real 307 00:18:17,680 --> 00:18:22,350 Speaker 2: interest rates. So you can take overall, you know people 308 00:18:22,350 --> 00:18:26,920 Speaker 2: think positive real interest rates are um less stimulative than 309 00:18:26,920 --> 00:18:29,070 Speaker 2: negative real interest rates and you kind of still have 310 00:18:29,070 --> 00:18:30,710 Speaker 2: negative real interest rates. So 311 00:18:30,920 --> 00:18:35,320 Speaker 2: the stimulus today is it's less than before but it's 312 00:18:35,330 --> 00:18:39,070 Speaker 2: it's still stimulate it's still a stimulative situation given the 313 00:18:39,080 --> 00:18:44,820 Speaker 2: expected given the actual inflation. Right? So and and I 314 00:18:44,820 --> 00:18:47,660 Speaker 2: can't really imagine this 315 00:18:48,660 --> 00:18:54,439 Speaker 2: Central bank being like the Volcker central bank and you 316 00:18:54,440 --> 00:18:57,550 Speaker 2: know and also we don't have a history of the 317 00:18:57,550 --> 00:19:01,320 Speaker 2: entire seventies of having high inflation where Volker had the 318 00:19:01,320 --> 00:19:05,160 Speaker 2: background and the support to do that. So this central 319 00:19:05,160 --> 00:19:07,490 Speaker 2: bank I don't think it's going to do that and 320 00:19:07,490 --> 00:19:10,929 Speaker 2: therefore you're going to kind of continue to have longer 321 00:19:10,940 --> 00:19:13,320 Speaker 2: negative real interest rates and 322 00:19:14,510 --> 00:19:21,480 Speaker 2: Therefore more stimulative than otherwise and inflation could um continue longer. 323 00:19:21,480 --> 00:19:27,629 Speaker 2: Like you can't. So looking at this history in 1982 324 00:19:27,640 --> 00:19:30,190 Speaker 2: you know we had to start to have these very 325 00:19:30,190 --> 00:19:32,179 Speaker 2: rapid interest rate increases and 326 00:19:32,750 --> 00:19:37,730 Speaker 2: the economy started growing again in 84 85 you like 327 00:19:37,730 --> 00:19:40,820 Speaker 2: around the mid eighties combined with the collapse of Opec 328 00:19:40,820 --> 00:19:44,960 Speaker 2: and the falling oil prices you started to have low 329 00:19:44,960 --> 00:19:49,740 Speaker 2: and stable inflation in the like 85 85 86. And 330 00:19:49,750 --> 00:19:52,869 Speaker 2: I think the decline in inflation is going to be 331 00:19:52,880 --> 00:19:58,300 Speaker 2: a little more little more tamed and you know we 332 00:19:58,300 --> 00:20:00,710 Speaker 2: may not reach 2% by 333 00:20:01,330 --> 00:20:05,620 Speaker 2: 2024. We might I think I think it will be 334 00:20:05,619 --> 00:20:10,130 Speaker 2: higher than that uh higher than that for longer. So 335 00:20:10,130 --> 00:20:14,430 Speaker 2: if I were I the tips spread I mean let's 336 00:20:14,430 --> 00:20:18,639 Speaker 2: say it's between two up 2.5 around 2.5 337 00:20:19,359 --> 00:20:22,840 Speaker 2: And I think if I I would bet on something 338 00:20:22,840 --> 00:20:26,840 Speaker 2: higher than 2.5 over the next five years on average. 339 00:20:26,850 --> 00:20:27,359 Speaker 2: Yeah 340 00:20:28,030 --> 00:20:34,210 Speaker 2: so that's mainly because of the more accommodating um more 341 00:20:34,210 --> 00:20:35,680 Speaker 2: accommodating um 342 00:20:37,770 --> 00:20:40,959 Speaker 2: not not a not a draconian monetary tightening sort of 343 00:20:40,960 --> 00:20:44,240 Speaker 2: more accommodating. Being aware of the labor markets and the 344 00:20:44,240 --> 00:20:45,720 Speaker 2: financial markets. 345 00:20:45,730 --> 00:20:47,030 Speaker 1: Very interesting 346 00:20:47,030 --> 00:20:48,660 Speaker 2: thing. So 347 00:20:48,660 --> 00:20:52,720 Speaker 1: so robert you're basically saying that the demand side impulse 348 00:20:52,720 --> 00:20:55,100 Speaker 1: is not going to go away even if we have 349 00:20:55,100 --> 00:20:58,170 Speaker 1: some favorable developments on the supply side. So you know 350 00:20:58,180 --> 00:21:01,520 Speaker 1: all production gets wrapped up the war in Ukraine ends 351 00:21:01,530 --> 00:21:05,200 Speaker 1: even then you don't think the demands that impulse will 352 00:21:05,210 --> 00:21:06,380 Speaker 1: go and therefore 353 00:21:06,720 --> 00:21:08,669 Speaker 1: inflation net net will remain 354 00:21:08,869 --> 00:21:09,560 Speaker 2: substantially 355 00:21:09,560 --> 00:21:10,320 Speaker 1: above target. 356 00:21:11,220 --> 00:21:15,890 Speaker 2: Yeah. Above target. That's right. I think I think there's 357 00:21:15,890 --> 00:21:19,650 Speaker 2: two you know economists here kind of on both both 358 00:21:19,650 --> 00:21:24,150 Speaker 2: sides of this like there's one group who say its 359 00:21:24,160 --> 00:21:29,950 Speaker 2: supply side stuff temporary and you know the china's covid 360 00:21:29,950 --> 00:21:31,080 Speaker 2: and um 361 00:21:31,619 --> 00:21:34,379 Speaker 2: and the other group says yeah but it's it's a 362 00:21:34,380 --> 00:21:38,630 Speaker 2: combination and uh um the 363 00:21:39,500 --> 00:21:42,330 Speaker 2: like someone like Larry summers for example would say that 364 00:21:42,330 --> 00:21:42,740 Speaker 2: it's 365 00:21:43,359 --> 00:21:46,290 Speaker 2: you know it's um you gotta unless you tighten money 366 00:21:46,290 --> 00:21:48,930 Speaker 2: or have a have a crank have a deep recession 367 00:21:48,930 --> 00:21:51,369 Speaker 2: you're not gonna get the inflation rate down 368 00:21:52,140 --> 00:21:56,109 Speaker 2: and I'm a little bit more towards the summer's camp 369 00:21:56,109 --> 00:21:58,929 Speaker 2: on this that you need to you need to really 370 00:22:00,109 --> 00:22:02,450 Speaker 2: you need to have a recession um 371 00:22:03,010 --> 00:22:06,570 Speaker 2: Like not again it's very divided people people so you 372 00:22:06,570 --> 00:22:09,590 Speaker 2: don't need a recession. We really need a recession to 373 00:22:09,590 --> 00:22:15,070 Speaker 2: bring the inflation rate down to target and I don't 374 00:22:15,070 --> 00:22:15,990 Speaker 2: think this 375 00:22:16,800 --> 00:22:22,460 Speaker 2: um the demand side. Both, both the fiscal side and 376 00:22:22,460 --> 00:22:25,670 Speaker 2: the monetary side because we're talking about even another some 377 00:22:25,670 --> 00:22:28,310 Speaker 2: more money from more spending coming on before the health 378 00:22:28,310 --> 00:22:33,040 Speaker 2: care and the prescription which I think are necessary things 379 00:22:33,040 --> 00:22:37,260 Speaker 2: for the U. S. But we're not talking about fiscal 380 00:22:37,260 --> 00:22:41,109 Speaker 2: tax tax increases or you know we're still, the debate 381 00:22:41,109 --> 00:22:44,600 Speaker 2: is still on increasing government spending. So 382 00:22:44,900 --> 00:22:49,340 Speaker 2: um for those reasons. Um Yes I I guess I 383 00:22:49,340 --> 00:22:51,170 Speaker 2: agree with what you're saying. 384 00:22:51,720 --> 00:22:53,629 Speaker 2: Yeah that I 385 00:22:53,630 --> 00:22:54,800 Speaker 1: suppose you know 386 00:22:54,810 --> 00:22:55,609 Speaker 2: so 387 00:22:55,619 --> 00:23:00,000 Speaker 1: extending that summer's Dicle argument that you need substantial rise 388 00:23:00,010 --> 00:23:02,680 Speaker 1: in unemployment or a deep recession to bring prices under 389 00:23:02,680 --> 00:23:06,840 Speaker 1: control that desirable. I mean what would you rather have 390 00:23:06,850 --> 00:23:09,250 Speaker 1: live with inflation or lose your job? I think most 391 00:23:09,250 --> 00:23:10,929 Speaker 1: people will say the former. 392 00:23:10,990 --> 00:23:13,690 Speaker 2: I think that's right. I think that that's there in 393 00:23:13,700 --> 00:23:17,180 Speaker 2: there in lies the political conundrum that's exactly right that 394 00:23:17,190 --> 00:23:19,830 Speaker 2: I'm a tenured professor so I'd rather have low prices 395 00:23:20,010 --> 00:23:25,330 Speaker 2: so summers but that's not good for your for the 396 00:23:25,340 --> 00:23:30,300 Speaker 2: for the lovely baristas and charming waiters and 397 00:23:30,859 --> 00:23:33,820 Speaker 2: you know the very helpful um 398 00:23:34,800 --> 00:23:37,860 Speaker 2: Production workers. It's and it's not a good thing so 399 00:23:37,869 --> 00:23:44,300 Speaker 2: that that's the and the it's it's a little bit different. 400 00:23:44,300 --> 00:23:47,850 Speaker 2: Again the 80s was a different different thing that 401 00:23:48,480 --> 00:23:52,930 Speaker 2: the political sort of composition of the electorate was different 402 00:23:52,940 --> 00:23:57,080 Speaker 2: from today. So I think now it's less it's more 403 00:23:57,080 --> 00:24:02,119 Speaker 2: diverse and younger. The younger people have much the U. S. 404 00:24:02,119 --> 00:24:05,570 Speaker 2: One of the interesting compared to Japan is that the 405 00:24:05,580 --> 00:24:11,470 Speaker 2: millennium population fraction of the voting public is now larger 406 00:24:11,470 --> 00:24:13,570 Speaker 2: than the baby boom generation. Whereas Japan you have so 407 00:24:13,570 --> 00:24:15,750 Speaker 2: many old people that the old people still kind of 408 00:24:16,050 --> 00:24:19,310 Speaker 2: have political power but here the power is shifting to 409 00:24:19,310 --> 00:24:23,480 Speaker 2: more people thirties, twenties thirties and they you know this 410 00:24:23,490 --> 00:24:26,490 Speaker 2: inflation is actually good for them better for them than 411 00:24:26,500 --> 00:24:30,480 Speaker 2: for us. So I think that's the there's a shift 412 00:24:30,480 --> 00:24:34,320 Speaker 2: and politicians are rationally responding to that so there is 413 00:24:34,320 --> 00:24:36,320 Speaker 2: going to be an inflationary more of an inflation of 414 00:24:36,320 --> 00:24:39,580 Speaker 2: bias today than in the 19. And this other people 415 00:24:39,580 --> 00:24:42,120 Speaker 2: have kind of commented on this but I think that's 416 00:24:42,550 --> 00:24:44,520 Speaker 2: I can't I agree with that. Yeah. 417 00:24:44,530 --> 00:24:47,850 Speaker 1: Right. But but that's about the political imperative 418 00:24:47,859 --> 00:24:48,429 Speaker 2: I would like to 419 00:24:48,430 --> 00:24:50,700 Speaker 1: think the Federal reserve is above that. 420 00:24:51,210 --> 00:24:55,170 Speaker 2: Okay. Yeah probably. That's right. But 421 00:24:56,820 --> 00:25:00,770 Speaker 2: Well if the Feds interested in 2% inflation what? Right. 422 00:25:00,770 --> 00:25:04,260 Speaker 2: I mean fed has a dual mandate but uh which 423 00:25:04,260 --> 00:25:08,930 Speaker 2: makes which makes it more complicated. But 424 00:25:09,820 --> 00:25:11,859 Speaker 2: yeah it wasn't 425 00:25:13,670 --> 00:25:16,240 Speaker 2: You know, they didn't even have a mandate in the 1980s. 426 00:25:16,250 --> 00:25:19,750 Speaker 2: So it was and they still kept still lowered it 427 00:25:19,760 --> 00:25:20,600 Speaker 2: to um 428 00:25:21,260 --> 00:25:23,879 Speaker 2: um I think inflation was thought to be evil number 429 00:25:23,880 --> 00:25:28,170 Speaker 2: one today. It's today it's not and I think um 430 00:25:28,180 --> 00:25:31,149 Speaker 2: some inflation is beneficial for the U. S. Debt as well. 431 00:25:31,160 --> 00:25:35,570 Speaker 2: So and maybe we're not gonna talk about emerging markets 432 00:25:35,570 --> 00:25:36,350 Speaker 2: but the 433 00:25:36,900 --> 00:25:39,120 Speaker 2: um I think the U. S. Would like to have 434 00:25:39,119 --> 00:25:41,710 Speaker 2: the dollar with a weaker than than it is currently 435 00:25:41,720 --> 00:25:42,990 Speaker 2: for the U. S. Economy 436 00:25:43,580 --> 00:25:47,820 Speaker 2: but you know, but still foreigners who hold dollars such 437 00:25:47,820 --> 00:25:51,070 Speaker 2: as uh the chinese japanese and the Germans. I mean 438 00:25:51,070 --> 00:25:55,090 Speaker 2: they're the the inflation is not not helpful for they're 439 00:25:55,100 --> 00:25:58,980 Speaker 2: gonna have capital losses there too. So I think I 440 00:25:58,980 --> 00:25:59,990 Speaker 2: think it's um 441 00:26:03,070 --> 00:26:06,670 Speaker 2: yeah so so for those various reasons um I think 442 00:26:06,670 --> 00:26:08,570 Speaker 2: inflation is gonna be a little elevated. I 443 00:26:09,440 --> 00:26:12,649 Speaker 2: I do think being an old old sort of an 444 00:26:12,650 --> 00:26:14,660 Speaker 2: older economist. Um 445 00:26:15,200 --> 00:26:18,350 Speaker 2: I do think that this credibility of the Fed in 446 00:26:18,350 --> 00:26:22,580 Speaker 2: the 1980s was gained at great cost of inflation and 447 00:26:22,580 --> 00:26:26,030 Speaker 2: the unemployment. And uh I'm 448 00:26:26,570 --> 00:26:28,280 Speaker 2: I'm a little bit 449 00:26:28,910 --> 00:26:31,490 Speaker 2: um have mixed feelings that 450 00:26:32,359 --> 00:26:35,359 Speaker 2: you know, the credibility of the Fed as an inflation 451 00:26:35,359 --> 00:26:37,010 Speaker 2: fighter is is sort of 452 00:26:37,960 --> 00:26:40,980 Speaker 2: quite a little bit less today than than it used 453 00:26:40,980 --> 00:26:43,040 Speaker 2: to be. And it's kind of incredible is being dissipated 454 00:26:43,040 --> 00:26:45,969 Speaker 2: a little bit. Um You know, looks at financial markets 455 00:26:45,970 --> 00:26:47,460 Speaker 2: and that's a very good thing. 456 00:26:48,020 --> 00:26:51,770 Speaker 2: So so for those reasons I think inflation will be 457 00:26:52,460 --> 00:26:53,659 Speaker 2: will be um 458 00:26:54,190 --> 00:26:57,350 Speaker 2: more elevated but but who knows, you know, we might 459 00:26:57,350 --> 00:27:01,160 Speaker 2: actually have a have a recession for regardless of what 460 00:27:01,160 --> 00:27:04,640 Speaker 2: the Fed. Um I don't know it might not be 461 00:27:04,640 --> 00:27:09,050 Speaker 2: from over tightening but recessions start from all unexpected reasons 462 00:27:09,050 --> 00:27:09,389 Speaker 2: and 463 00:27:09,980 --> 00:27:13,389 Speaker 2: you have one and then the problem is solved so. 464 00:27:13,400 --> 00:27:14,370 Speaker 2: Right 465 00:27:14,380 --> 00:27:14,919 Speaker 1: and you 466 00:27:14,920 --> 00:27:16,620 Speaker 2: know so 467 00:27:16,630 --> 00:27:20,870 Speaker 1: you know we're talking we're recording this on friday morning 468 00:27:20,869 --> 00:27:24,730 Speaker 1: on thursday we had the second quarter GDP data which 469 00:27:24,730 --> 00:27:26,990 Speaker 1: showed the US economy contracting on the back of the 470 00:27:26,990 --> 00:27:30,590 Speaker 1: first quarter contraction. So I suppose it would have to 471 00:27:30,590 --> 00:27:31,629 Speaker 1: start with housing. 472 00:27:31,750 --> 00:27:35,230 Speaker 1: So what's your local observation the red hot southern California 473 00:27:35,230 --> 00:27:38,530 Speaker 1: housing market? Is it getting dented by the higher interest rates? Yeah. 474 00:27:38,530 --> 00:27:43,790 Speaker 2: Yeah the the the mo higher mortgage rates certainly dented 475 00:27:43,800 --> 00:27:47,670 Speaker 2: like in my neighborhood um you know you have 476 00:27:48,630 --> 00:27:52,140 Speaker 2: Maybe two or 3% prices have fallen since its peak 477 00:27:52,140 --> 00:27:56,530 Speaker 2: in peak. You look at so all over southern California 478 00:27:56,530 --> 00:27:59,229 Speaker 2: the higher end form higher end houses are selling less 479 00:27:59,230 --> 00:28:02,929 Speaker 2: and yes indeed I think for the time being housing 480 00:28:02,930 --> 00:28:04,770 Speaker 2: prices have peaked and they started falling 481 00:28:05,160 --> 00:28:09,430 Speaker 2: So they've fallen maybe like 2% over the last two months. Yeah. 482 00:28:09,440 --> 00:28:10,710 Speaker 2: Around here. 483 00:28:10,720 --> 00:28:14,110 Speaker 1: Right. And what about that component in the C. P. I. 484 00:28:14,119 --> 00:28:16,510 Speaker 1: Owners equivalent for rent? Yeah. 485 00:28:16,520 --> 00:28:20,149 Speaker 2: So that that would help kind mechanically that would help. 486 00:28:20,150 --> 00:28:24,680 Speaker 2: And also rents if the economy is a little weak 487 00:28:24,680 --> 00:28:27,350 Speaker 2: or landlords can't hike rents as quickly. 488 00:28:27,520 --> 00:28:30,070 Speaker 2: Right? So that so actual rents are not going to 489 00:28:30,070 --> 00:28:32,970 Speaker 2: be rising as much and certainly the imputed rents as 490 00:28:32,970 --> 00:28:37,419 Speaker 2: housing prices fall are going to be um um lower 491 00:28:37,420 --> 00:28:39,730 Speaker 2: so that that will bring down and the housing components 492 00:28:39,730 --> 00:28:43,330 Speaker 2: a large component of the CPI I so that's gonna 493 00:28:43,340 --> 00:28:47,160 Speaker 2: bring it down and you have energy and 494 00:28:47,870 --> 00:28:52,190 Speaker 2: energy and energy coming down. Foods are concerned that we 495 00:28:52,190 --> 00:28:56,630 Speaker 2: haven't seen declining food prices yet. So but 496 00:28:56,640 --> 00:29:00,250 Speaker 1: right. You know actually that's probably even a graver concern 497 00:29:00,250 --> 00:29:02,720 Speaker 1: for emerging markets. We will talk about that 498 00:29:02,870 --> 00:29:07,730 Speaker 1: uh momentarily. So one upshot from this higher interest rate 499 00:29:07,730 --> 00:29:10,340 Speaker 1: has been this is amazing you know, strength of the U. S. 500 00:29:10,340 --> 00:29:13,620 Speaker 1: Dollar on the at the expense of the rest of 501 00:29:13,620 --> 00:29:16,700 Speaker 1: the world. So I was in London I mean 1 502 00:29:16,700 --> 00:29:21,240 Speaker 1: $19 for a pound. I don't remember that ever. Uh 503 00:29:21,240 --> 00:29:24,160 Speaker 1: And and similarly, you know your dollar going towards parity 504 00:29:24,160 --> 00:29:27,620 Speaker 1: and of course more importantly emerging market currencies coming under pressure. 505 00:29:27,630 --> 00:29:29,270 Speaker 1: Um So 506 00:29:30,260 --> 00:29:32,160 Speaker 1: to the point of 507 00:29:32,190 --> 00:29:32,840 Speaker 2: discussing 508 00:29:32,840 --> 00:29:37,690 Speaker 1: About recession and perhaps the Fed not being inclined to 509 00:29:37,700 --> 00:29:40,390 Speaker 1: engineer a massive recession meaning sooner or later they will 510 00:29:40,390 --> 00:29:44,459 Speaker 1: relent from taking interest rates a past 4% or something. 511 00:29:44,470 --> 00:29:47,620 Speaker 1: What is the market began to price that out? Is 512 00:29:47,620 --> 00:29:50,310 Speaker 1: the dollar peaking or you see further and if you 513 00:29:50,310 --> 00:29:53,690 Speaker 1: do see further dollar strength, what does it mean for? 514 00:29:53,700 --> 00:29:58,320 Speaker 2: I'm sort of I thought it was. Yeah, I mean 515 00:29:58,320 --> 00:29:59,690 Speaker 2: I think it's um 516 00:30:00,240 --> 00:30:02,490 Speaker 2: I follow the dollar rate and I think it's peak 517 00:30:02,490 --> 00:30:08,520 Speaker 2: there 130. You know 33 or so. So I think 518 00:30:08,520 --> 00:30:11,430 Speaker 2: you've seen, I mean inflation should you know you and 519 00:30:11,430 --> 00:30:16,290 Speaker 2: I are specialists like inflation should depreciate the US currency. 520 00:30:16,300 --> 00:30:19,060 Speaker 2: You have the interest rate stuff but that's the cap 521 00:30:19,060 --> 00:30:23,850 Speaker 2: brings in capital flows but also simply by purchasing power parity, 522 00:30:23,860 --> 00:30:27,300 Speaker 2: the monetarist argument that should help push the inflation. Right? 523 00:30:27,580 --> 00:30:31,020 Speaker 2: So the the and which is the desire of the 524 00:30:31,030 --> 00:30:34,210 Speaker 2: Fed as well to some extent to a large extent. 525 00:30:34,220 --> 00:30:35,350 Speaker 2: So 526 00:30:36,250 --> 00:30:40,660 Speaker 2: I think the yeah, I mean I think it's a 527 00:30:40,660 --> 00:30:43,050 Speaker 2: good the dollar has 528 00:30:43,840 --> 00:30:46,050 Speaker 2: reached a peak or close to its peak and 529 00:30:46,670 --> 00:30:48,990 Speaker 2: that's why we're sort of upset. We didn't travel this 530 00:30:48,990 --> 00:30:50,700 Speaker 2: summer because it wouldn't be it would have been the 531 00:30:50,700 --> 00:30:53,010 Speaker 2: time to go to europe or Japan or where? 532 00:30:53,020 --> 00:30:56,290 Speaker 1: Right. Right. But I guess, you know, there are two 533 00:30:56,290 --> 00:30:58,880 Speaker 1: ends of this argument. So one and the dollar across 534 00:30:58,880 --> 00:31:01,750 Speaker 1: the basket of currencies may have peaked. But the sort 535 00:31:01,750 --> 00:31:04,300 Speaker 1: of narrative that we're seeing out of europe and elsewhere, 536 00:31:04,310 --> 00:31:07,670 Speaker 1: they are also falling into, you know, major recessionary dynamics. 537 00:31:07,910 --> 00:31:09,010 Speaker 2: Yeah. 538 00:31:09,020 --> 00:31:13,220 Speaker 1: You'll still find europe rather reasonably priced. Uh 539 00:31:13,230 --> 00:31:14,110 Speaker 2: the 540 00:31:14,120 --> 00:31:16,200 Speaker 1: dollar substantially weaker 541 00:31:16,210 --> 00:31:19,420 Speaker 2: like a week. You're right, The U. S. Economy, why 542 00:31:19,420 --> 00:31:21,700 Speaker 2: the dollar stronger is partly the high interest rates but 543 00:31:21,700 --> 00:31:26,050 Speaker 2: also the the real economy stronger than Japan and europe. 544 00:31:26,060 --> 00:31:29,930 Speaker 2: And that's that certainly helps in strengthening the strengthening the currency. 545 00:31:29,940 --> 00:31:30,970 Speaker 2: So yeah, 546 00:31:31,440 --> 00:31:33,580 Speaker 1: so robert you and I both as students as well 547 00:31:33,580 --> 00:31:37,180 Speaker 1: as professionals through our carriers have seen every single rate 548 00:31:37,180 --> 00:31:39,980 Speaker 1: hike cycle out of the US being accompanied by some 549 00:31:39,980 --> 00:31:42,720 Speaker 1: sort of an E. M. Crisis some deeper than others. 550 00:31:42,730 --> 00:31:43,709 Speaker 2: Yeah. Are 551 00:31:43,710 --> 00:31:46,500 Speaker 1: we going to see ways of default and and major 552 00:31:46,500 --> 00:31:47,020 Speaker 1: crisis 553 00:31:47,020 --> 00:31:54,910 Speaker 2: now, capitals, capitals flowing out. Right. So if that if 554 00:31:54,910 --> 00:32:00,120 Speaker 2: that continues to accelerate, then you're gonna have investment 555 00:32:01,010 --> 00:32:05,090 Speaker 2: investment declining. And these countries have to start raising interest 556 00:32:05,090 --> 00:32:07,660 Speaker 2: rates to defend their currencies. And 557 00:32:08,340 --> 00:32:09,810 Speaker 2: uh 558 00:32:10,390 --> 00:32:12,310 Speaker 2: so it's not um 559 00:32:12,940 --> 00:32:16,150 Speaker 2: it's not a it's not a it's not a particular 560 00:32:16,980 --> 00:32:19,860 Speaker 2: positive outlook, but one should also, I think, look at 561 00:32:19,870 --> 00:32:24,740 Speaker 2: emerging markets um sort of country by country, I think 562 00:32:24,750 --> 00:32:29,410 Speaker 2: we first sort of, you and I first connected because 563 00:32:29,410 --> 00:32:34,830 Speaker 2: we were working on a similar topic, interest rate, interest rate, 564 00:32:34,830 --> 00:32:38,980 Speaker 2: defense of currencies. And and these are these are countries 565 00:32:38,980 --> 00:32:41,910 Speaker 2: and um these are and so we looked at, I 566 00:32:41,910 --> 00:32:44,430 Speaker 2: think you and I you work with the 567 00:32:45,280 --> 00:32:48,200 Speaker 2: I guess he he became the governor of the Bank 568 00:32:48,200 --> 00:32:49,760 Speaker 2: of brazil, 569 00:32:50,260 --> 00:32:52,400 Speaker 1: who's now the head of the western hemisphere department of 570 00:32:52,400 --> 00:32:52,990 Speaker 1: the I m f 571 00:32:53,000 --> 00:32:55,690 Speaker 2: Okay, there you go, you and that's a that was 572 00:32:55,690 --> 00:32:58,780 Speaker 2: a great paper. And so I think, 573 00:33:00,760 --> 00:33:04,990 Speaker 2: I think ultimately it depends on the on the fundamental 574 00:33:05,000 --> 00:33:07,530 Speaker 2: kind of strengths of these emerging markets. Like if they're 575 00:33:07,530 --> 00:33:10,360 Speaker 2: if they're fundamentals are really strong, this is they can 576 00:33:10,370 --> 00:33:14,209 Speaker 2: they're going to be able to withstand, withstand this capital outflows, 577 00:33:14,210 --> 00:33:16,360 Speaker 2: higher us interest rates. And 578 00:33:16,900 --> 00:33:20,080 Speaker 2: um but I think in in in those cases of 579 00:33:20,080 --> 00:33:22,959 Speaker 2: these emerging lands also during the Latin american crisis of 580 00:33:22,960 --> 00:33:27,520 Speaker 2: the 1919 eighties. Each country, it was not just simply 581 00:33:27,520 --> 00:33:32,640 Speaker 2: driven by um the high interest rates during the Volcker era. 582 00:33:32,650 --> 00:33:36,960 Speaker 2: These countries really had domestic, they borrowed too much during 583 00:33:36,960 --> 00:33:39,600 Speaker 2: the oil surplus of the 19 seventies and 584 00:33:39,880 --> 00:33:43,100 Speaker 2: their investments were not good, right? They were investing in 585 00:33:43,100 --> 00:33:46,320 Speaker 2: kind of crappy projects and that's when the interest rates rose. 586 00:33:46,320 --> 00:33:49,290 Speaker 2: That that's why they heard similarly the situation 587 00:33:49,910 --> 00:33:56,090 Speaker 2: the asian countries right during the 1919 1919 nineties. So 588 00:33:56,100 --> 00:33:59,990 Speaker 2: I feel that it's not, it's not saying oh the U. S. 589 00:33:59,990 --> 00:34:02,900 Speaker 2: Interest rates have risen, capital is going to be more 590 00:34:02,910 --> 00:34:05,300 Speaker 2: or less, it's gonna not gonna be floating as much 591 00:34:05,300 --> 00:34:08,100 Speaker 2: to our countries, they're gonna go back. Well if you 592 00:34:08,100 --> 00:34:12,440 Speaker 2: have um if you have a fundamental like Singapore is 593 00:34:12,440 --> 00:34:14,740 Speaker 2: not going to have any problem. If you have fundamentally 594 00:34:14,739 --> 00:34:15,850 Speaker 2: strong economy, 595 00:34:16,050 --> 00:34:19,089 Speaker 2: it's going to it's going to be um you're gonna 596 00:34:19,100 --> 00:34:23,060 Speaker 2: be able to withstand it fine. And most of these cases, 597 00:34:23,070 --> 00:34:25,770 Speaker 2: you know, we we study individual countries or regions and 598 00:34:25,770 --> 00:34:29,299 Speaker 2: they have flaws. They're severely flawed in some way and 599 00:34:29,300 --> 00:34:35,150 Speaker 2: this capital outflow just exacerbates. And I think um I 600 00:34:35,160 --> 00:34:37,310 Speaker 2: mean as far as I I follow asia much more, 601 00:34:37,320 --> 00:34:41,300 Speaker 2: much more carefully than anywhere else. And I feel that, 602 00:34:42,540 --> 00:34:45,500 Speaker 2: I mean certainly, you know Korea is no longer emerging market, 603 00:34:45,500 --> 00:34:50,359 Speaker 2: that's fine, they're fine, Japan basically is fine, china's Singapore 604 00:34:50,360 --> 00:34:54,739 Speaker 2: is fine. Yeah, I feel generally it seems very strong 605 00:34:54,739 --> 00:34:58,140 Speaker 2: in that in that region. So um 606 00:34:58,680 --> 00:35:02,700 Speaker 2: I'm not I'm not that I'm not that concerned um 607 00:35:04,719 --> 00:35:09,299 Speaker 2: concerned about it. And yeah, but again, I don't know, 608 00:35:09,300 --> 00:35:12,520 Speaker 2: I don't know the individual countries in latin America for example, 609 00:35:12,520 --> 00:35:13,480 Speaker 2: as well. So, 610 00:35:13,480 --> 00:35:15,440 Speaker 1: robert when you were talking in the context of talking 611 00:35:15,440 --> 00:35:17,790 Speaker 1: with the US earlier that food prices have not come down. 612 00:35:17,790 --> 00:35:20,980 Speaker 1: So I suppose my worry is that energy food mix. 613 00:35:20,989 --> 00:35:25,800 Speaker 1: I mean, there are manifestations of various supply side developments 614 00:35:25,800 --> 00:35:29,030 Speaker 1: around the world, but the extent of they can create 615 00:35:29,030 --> 00:35:31,049 Speaker 1: distress for particularly commodity in 616 00:35:31,060 --> 00:35:32,020 Speaker 1: important economies. 617 00:35:32,090 --> 00:35:34,489 Speaker 2: I think that's right, like Vietnam for example, but 618 00:35:34,489 --> 00:35:37,770 Speaker 1: that's that's where the worries are that even this year's 619 00:35:37,770 --> 00:35:40,830 Speaker 1: high energy prices will feed into higher food prices next year, 620 00:35:40,840 --> 00:35:45,879 Speaker 1: fertilizing other channels. Um so, so in some ways, 621 00:35:46,020 --> 00:35:46,940 Speaker 2: just 622 00:35:46,940 --> 00:35:49,610 Speaker 1: Like the 70s, it really ends and begins and ends 623 00:35:49,610 --> 00:35:52,190 Speaker 1: with oil, if you can get some oil under control. 624 00:35:52,190 --> 00:35:54,219 Speaker 1: I think a lot of the discussions were happening 625 00:35:54,400 --> 00:35:58,169 Speaker 1: having will probably start to fade. So, so let's let's 626 00:35:58,170 --> 00:35:59,339 Speaker 1: hope for that 627 00:35:59,350 --> 00:36:03,070 Speaker 2: oil prices come under. Um but 628 00:36:03,070 --> 00:36:05,980 Speaker 1: but see even on that issue, robert, I have a 629 00:36:05,989 --> 00:36:09,910 Speaker 1: lot of, you know, conflicting thoughts in my head because 630 00:36:09,920 --> 00:36:13,830 Speaker 1: on one hand, the the desire now to pump more 631 00:36:13,830 --> 00:36:16,890 Speaker 1: oil more coal, because we have high energy prices, I 632 00:36:16,890 --> 00:36:19,780 Speaker 1: worry that that will undermine the climate change agenda. And 633 00:36:19,780 --> 00:36:21,840 Speaker 1: I also feel that, you know, basic economic sort of 634 00:36:21,840 --> 00:36:23,290 Speaker 1: dictates that you do want 635 00:36:23,530 --> 00:36:26,950 Speaker 1: the relative prices of fossil fuel products to be high otherwise, 636 00:36:26,960 --> 00:36:31,610 Speaker 1: why would anybody start investing or using alternative fuel. What 637 00:36:31,610 --> 00:36:34,180 Speaker 1: are your thoughts on this? Well, 638 00:36:34,180 --> 00:36:38,710 Speaker 2: it's the usual the argument that the market will solve 639 00:36:38,710 --> 00:36:41,320 Speaker 2: the energy shortage problem and promote 640 00:36:42,070 --> 00:36:45,540 Speaker 2: it's it's clearly that clearly that case. And 641 00:36:46,400 --> 00:36:50,080 Speaker 2: um but it's it's it's the pace if you secular 642 00:36:50,080 --> 00:36:52,300 Speaker 2: early expect as we do, you have 643 00:36:52,969 --> 00:36:56,899 Speaker 2: eventually oil running up out and oil prices rising over 644 00:36:56,900 --> 00:37:01,219 Speaker 2: 50 years. And also you have a climate climate problem 645 00:37:01,219 --> 00:37:01,730 Speaker 2: where the 646 00:37:02,420 --> 00:37:05,270 Speaker 2: in that case, the government needs to subsidize because it's 647 00:37:05,270 --> 00:37:08,860 Speaker 2: kind of a public good. Right. In those cases, 648 00:37:09,719 --> 00:37:14,219 Speaker 2: you can have this increase. Um um 649 00:37:15,150 --> 00:37:18,410 Speaker 2: and what price was secular, the increasing that promote conservation 650 00:37:18,410 --> 00:37:23,980 Speaker 2: and conservation and moving towards um more energy efficient types 651 00:37:23,980 --> 00:37:27,660 Speaker 2: of transportation systems, I think, I think that will that 652 00:37:27,660 --> 00:37:30,589 Speaker 2: will continue. But I think it's just the pace, the 653 00:37:30,600 --> 00:37:34,520 Speaker 2: rapid rise over the last year of of commodity prices. 654 00:37:34,520 --> 00:37:38,680 Speaker 2: That's um um that's difficult to deal with. And and 655 00:37:38,690 --> 00:37:41,060 Speaker 2: that's not a it's not a long term 656 00:37:41,400 --> 00:37:45,640 Speaker 2: um structural change kind of argument. You know, that's that's 657 00:37:45,640 --> 00:37:48,600 Speaker 2: more of a more of a shock. That, um is, 658 00:37:48,610 --> 00:37:52,380 Speaker 2: um these disturbances are maybe hard to manage in the 659 00:37:52,380 --> 00:37:55,190 Speaker 2: in the in the short room because um 660 00:37:55,830 --> 00:37:59,170 Speaker 2: they're not they're not insured against these shocks. A lot 661 00:37:59,170 --> 00:38:01,630 Speaker 2: of these countries that for the reasons you mentioned inflation, 662 00:38:01,640 --> 00:38:04,570 Speaker 2: food prices going up sharply, they don't have the stuff 663 00:38:04,570 --> 00:38:08,180 Speaker 2: stored and, you know, they're not hedged with against these, 664 00:38:08,190 --> 00:38:12,110 Speaker 2: um these food and oil prices and that that's that's 665 00:38:12,110 --> 00:38:13,220 Speaker 2: going to create a problem. 666 00:38:14,530 --> 00:38:16,270 Speaker 2: So yeah in the short run 667 00:38:17,000 --> 00:38:17,780 Speaker 2: um 668 00:38:18,989 --> 00:38:19,830 Speaker 2: I think you will 669 00:38:21,710 --> 00:38:25,570 Speaker 2: these these shocks um if you can smooth them that 670 00:38:25,570 --> 00:38:27,800 Speaker 2: that's fine but if you can't um 671 00:38:28,420 --> 00:38:32,320 Speaker 2: um I won't say that um 672 00:38:33,530 --> 00:38:35,900 Speaker 2: that these shocks are good things because they're gonna promote 673 00:38:35,910 --> 00:38:39,690 Speaker 2: energy sufficiency because that's more of a longer term thing. 674 00:38:39,719 --> 00:38:40,270 Speaker 2: Yeah 675 00:38:41,660 --> 00:38:45,700 Speaker 1: indeed. Um So robert earlier we were talking about you 676 00:38:45,700 --> 00:38:50,149 Speaker 1: know the proton good heart thesis that one push back 677 00:38:50,150 --> 00:38:52,460 Speaker 1: against the idea that the world is de globalizing is 678 00:38:52,460 --> 00:38:54,350 Speaker 1: that well there are many other parts of the world 679 00:38:54,350 --> 00:38:56,930 Speaker 1: that will remain very much globalized and we have favorable 680 00:38:56,930 --> 00:39:02,440 Speaker 1: demographic to bring us you know cheap manufacturing for income. 681 00:39:02,450 --> 00:39:08,009 Speaker 1: But we certainly cannot avoid the firm fact that the 682 00:39:08,010 --> 00:39:09,690 Speaker 1: west is trying to drive us away 683 00:39:09,690 --> 00:39:10,240 Speaker 2: from 684 00:39:10,440 --> 00:39:13,510 Speaker 1: relying too much on china so that china plus one 685 00:39:13,510 --> 00:39:18,570 Speaker 1: strategies and you know finding ways to push back against I. P. 686 00:39:18,570 --> 00:39:20,680 Speaker 1: And all that sort of stuff. So so this this 687 00:39:20,680 --> 00:39:25,400 Speaker 1: narrative of pushback would that undermine global growth prospects? I 688 00:39:25,400 --> 00:39:27,730 Speaker 1: mean we have been such a big data to china's 689 00:39:27,730 --> 00:39:30,280 Speaker 1: growth over the last two decades. Where are we going 690 00:39:30,280 --> 00:39:32,830 Speaker 1: to get alternative sources of growth if we're going to 691 00:39:32,830 --> 00:39:34,650 Speaker 1: start pushing china toward the corner. 692 00:39:36,680 --> 00:39:39,110 Speaker 2: Um No I don't 693 00:39:42,210 --> 00:39:45,610 Speaker 2: well chinese growth you know it's it's it's enormous but 694 00:39:45,620 --> 00:39:50,430 Speaker 2: it's it's not going to see the see that those 695 00:39:50,440 --> 00:39:54,200 Speaker 2: high single digit growth rates that did it. It's gonna 696 00:39:54,200 --> 00:39:59,299 Speaker 2: drop 554% which was like korean levels, these are the 697 00:39:59,300 --> 00:40:03,320 Speaker 2: kind of examples that you see all first japan, then 698 00:40:03,330 --> 00:40:07,500 Speaker 2: the knicks and then the china so its growth rate 699 00:40:07,500 --> 00:40:08,509 Speaker 2: is gonna 700 00:40:09,040 --> 00:40:13,880 Speaker 2: gonna go down, go down to some extent and you 701 00:40:13,880 --> 00:40:17,340 Speaker 2: know I've always been, maybe people have different views on 702 00:40:17,340 --> 00:40:19,360 Speaker 2: it but I'm hopeful for 703 00:40:20,190 --> 00:40:22,390 Speaker 2: they tend to focus a lot of demographics but I'm 704 00:40:22,390 --> 00:40:24,850 Speaker 2: hopeful for like the Philippines and 705 00:40:25,910 --> 00:40:30,670 Speaker 2: the South south asian countries um and even africa and 706 00:40:30,680 --> 00:40:33,630 Speaker 2: to take take up some of this to take up 707 00:40:33,630 --> 00:40:37,430 Speaker 2: some of this like I mean I'm an internationalist and 708 00:40:37,440 --> 00:40:39,400 Speaker 2: um I think um 709 00:40:39,930 --> 00:40:42,440 Speaker 2: the 710 00:40:50,890 --> 00:40:56,050 Speaker 2: the west has compared Eastern, it was a very china 711 00:40:56,050 --> 00:41:00,480 Speaker 2: faced a very benign environment until fairly global environment until now. 712 00:41:01,080 --> 00:41:07,379 Speaker 2: And so you know I hope I hope that 713 00:41:08,380 --> 00:41:11,340 Speaker 2: I hope that benign environment will continue but 714 00:41:11,950 --> 00:41:15,870 Speaker 2: you know there's this this geo geopolitical issue that that 715 00:41:15,880 --> 00:41:19,900 Speaker 2: you know that's that's going on right now. Um my 716 00:41:20,430 --> 00:41:23,520 Speaker 2: my feeling is that as I was saying unlike the 717 00:41:23,520 --> 00:41:27,150 Speaker 2: soviet union china was the beneficiary of the of the 718 00:41:27,150 --> 00:41:30,550 Speaker 2: global system and of a benign global system and I 719 00:41:30,550 --> 00:41:33,239 Speaker 2: think their their leaders are going to realize that 720 00:41:33,850 --> 00:41:37,009 Speaker 2: you know what are we going to gain from kind 721 00:41:37,010 --> 00:41:42,370 Speaker 2: of exciting with being sort of pariahs of the international 722 00:41:42,370 --> 00:41:46,739 Speaker 2: system because they gain and and just doing this calculus 723 00:41:46,750 --> 00:41:48,370 Speaker 2: of how 724 00:41:49,300 --> 00:41:52,510 Speaker 2: europe and the rest of the open part of Asia 725 00:41:52,510 --> 00:41:57,190 Speaker 2: and the United States um that that of where their 726 00:41:57,190 --> 00:42:00,730 Speaker 2: future is gonna lie will make them 727 00:42:01,380 --> 00:42:04,240 Speaker 2: and I and I don't will they may not admit it, 728 00:42:04,250 --> 00:42:04,680 Speaker 2: but 729 00:42:05,500 --> 00:42:07,370 Speaker 2: a rational actor would kind of 730 00:42:08,530 --> 00:42:12,900 Speaker 2: jointly determine sort of global where the global economy would 731 00:42:12,910 --> 00:42:15,969 Speaker 2: belong with the U. S. And I think european countries 732 00:42:15,980 --> 00:42:19,649 Speaker 2: like china would and I so I'm not I don't 733 00:42:19,650 --> 00:42:23,370 Speaker 2: think it's gonna head in the direction of let's um 734 00:42:23,380 --> 00:42:24,070 Speaker 2: you know, 735 00:42:24,930 --> 00:42:27,730 Speaker 2: let's be a pariah of the goal because they they 736 00:42:27,730 --> 00:42:30,750 Speaker 2: benefited so much and it's it's just been so good 737 00:42:30,750 --> 00:42:33,260 Speaker 2: for china, whereas for the soviet union, I think it's 738 00:42:33,260 --> 00:42:37,430 Speaker 2: arguable where the internationalization has helped them that much except 739 00:42:37,430 --> 00:42:41,210 Speaker 2: for the oil prices and stuff. But for china it's 740 00:42:41,219 --> 00:42:45,420 Speaker 2: um it's very clear so I'm not that negative about 741 00:42:46,000 --> 00:42:51,570 Speaker 2: china kind of disappearing from global the global picture. Yeah 742 00:42:51,650 --> 00:42:52,560 Speaker 1: that is robert. I mean 743 00:42:52,560 --> 00:42:55,739 Speaker 2: this is this is again it's like the the most 744 00:42:55,739 --> 00:42:58,920 Speaker 2: the very important political economy question, I don't think anyone 745 00:42:58,920 --> 00:43:00,529 Speaker 2: has an answer right? 746 00:43:00,540 --> 00:43:02,550 Speaker 1: Um Well I guess, you know, I I worry the 747 00:43:02,560 --> 00:43:04,070 Speaker 1: other side of the thing which is that it's not 748 00:43:04,070 --> 00:43:06,890 Speaker 1: just a question of whether china was to be part 749 00:43:06,890 --> 00:43:08,580 Speaker 1: or not. I think the answer to that is pretty 750 00:43:08,580 --> 00:43:11,990 Speaker 1: clear they do, but the pushback that they're getting particularly 751 00:43:11,989 --> 00:43:14,440 Speaker 1: from the US and perhaps increasingly this is a coalition 752 00:43:14,440 --> 00:43:15,330 Speaker 1: of democracies 753 00:43:15,500 --> 00:43:18,280 Speaker 1: and how that ends up worries me quite a bit 754 00:43:18,280 --> 00:43:21,140 Speaker 1: and it's I'm not alone sitting here in Singapore. There 755 00:43:21,140 --> 00:43:24,500 Speaker 1: are others also worry that countries also gets sort of, 756 00:43:24,500 --> 00:43:26,790 Speaker 1: you know, pulled and pushed between these two great powers 757 00:43:26,790 --> 00:43:28,819 Speaker 1: and how that sort of gets in the way of 758 00:43:28,820 --> 00:43:30,810 Speaker 1: investment and so on. But 759 00:43:30,820 --> 00:43:32,660 Speaker 2: there's no doubt about that. 760 00:43:32,770 --> 00:43:36,320 Speaker 1: But I'm glad that you still are sort of, you know, 761 00:43:36,330 --> 00:43:40,100 Speaker 1: pinning your hopes on rational actors. That's what we need. 762 00:43:40,110 --> 00:43:41,180 Speaker 2: Right, 763 00:43:41,950 --> 00:43:45,080 Speaker 1: robert deco. Thank you so much for your time and 764 00:43:45,320 --> 00:43:45,820 Speaker 1: it 765 00:43:45,820 --> 00:43:48,150 Speaker 2: was really, really great talking to you and don't be 766 00:43:48,150 --> 00:43:50,120 Speaker 2: a stranger. I'll see you in L. A. Yeah, 767 00:43:50,130 --> 00:43:53,300 Speaker 1: I will try to make this happen. Thanks to our 768 00:43:53,300 --> 00:43:56,190 Speaker 1: listeners as well, Kobe time was produced by ken Del 769 00:43:56,190 --> 00:44:01,030 Speaker 1: Ridge from Spy studios daisy Sharma and validly provided additional assistance. 770 00:44:01,239 --> 00:44:03,710 Speaker 1: Kobe time is for information only and does not represent 771 00:44:03,719 --> 00:44:07,460 Speaker 1: any trade recommendations. All 81 episodes of the podcast are 772 00:44:07,460 --> 00:44:11,609 Speaker 1: available on youtube and on all major platforms including Apple, 773 00:44:11,610 --> 00:44:15,430 Speaker 1: google and Spotify. As for our research publications, webinars and 774 00:44:15,430 --> 00:44:18,170 Speaker 1: live streams. You can find them all by Googling Devious 775 00:44:18,170 --> 00:44:20,530 Speaker 1: Research Library. Have a great day