HFE's Weinberg Still Forecasts Global Economic Downturn (Audio)

afternoon call, and here's Bill Maloney. Good afternoon, Charlie. Manus averages are quiet today, with the Dow currently lower by eighteen points, SEPs are little changed and NAZAC is higher by seven. The small cap six hundred is also a little changed, and the US ten nield at one point five zero percent. Seven out of tennis B sectors are lower, led by lasses and energy, financials and the utilities, while

technology and materials led to the upside down. Transports rise ten points and as a by text fall all fifteen utilities drop three and the VIX is down by three point four percent. Down Leaders to the downside included Disney Home Depot and Boeing leaders included Intel, Visa, and Microsoft. See if industry is pledged as much as fifteen percent, that's Motion's two thousand and eight after earnings. First Solar

fell well. Harmon gained seven percent after its results, and some of the names pointing after the belt tonight include Monster Beverage, Geno Therapeutics, Kraft, Heinns, and Price Line. Live from the first breaking news ask on Bill Maloney, Charlie all right, thank you very much, Bill Maloney, and to hear live breaking news over your Bloomberg Time squawk SQ you a w K on your terminal. I'm Charlie Pellock.

That's the Bloomberg business flash. This is taking stock. The Fed in focus on Bloomberg Radio Central Banks in focus. As we turned to the Bank of England's Hill Mary policy passes. Our Bloomberg intelligence in team in London puts it a three wronged easing of monetary conditions. Will it be enough? Our NEXCU says, depending on what happens with inflation, Could it be a little bit too much? It's certainly hit the pound hard today. Joining us now is Carl Weinberg.

He is chief economist Managing director for High Frequency Economics So Carl, Now that you've had a little more chance to read through everything that the Bank of England said its statement, listen to Mark Karney, Uh, think about it. How big, how important is this move by the Bank of England today. Well, it's a really substantial program, There's

no doubt about that. So he very clearly saw them cut down the cost of borrowing, both directly and indirectly by lowering their bank rate, by setting up a program to channel funds at the lowest possible cost into banks. To make sure that those lower interest rates passed through the economy, we saw purchases of corporate bonds and government bonds announced. It just doesn't get any more comprehensive than this. If they wanted to hit the we're hit the nail

on the head with a hammer. They certainly hit it hard. Did they hit it with a sledgehammer? Does this stuff actually work? Or does it just create problems that they can't solve that are even bigger down the road? I pim Well, you know that's the big question, you know, down the road. How do we unwind all of this? That's always the question. But that's not the question for today, and it's not the question for the next period of time.

When I first read the program this morning, I thought maybe they had been a little bit too aggressive in their forecast of marking down their economic growth prospects and their inflation forecast. I thought, you know, they could have been a little bit more conservative about that. But then during the course of the day I've reflected on a little bit, and I think that maybe this is where

they want to be. They would rather hit it too hard and then be able to come back, then not hit it enough and to be seen chasing after an ever receding target. So I think that they've hit it overly hard, probably on purpose, and warned us that you know, there's more to come if necessary, but unspoken as the fact that if it's not necessary, it doesn't have to

get any bigger than this. Well, Carl, and I guess that's one of one of the analysies I've read, uh following the and of course there's lots right everyone's trying to figure this out, is that that maybe the view of the economy the Bank oftving express today lowered it by a good margin but it never turns negative, was too optimistic, which is one reason they'd have to maybe

cut more in November. But is Mark Kearney's marketing his team figuring that if we are aggressive now and we take all these steps, we can avoid that deep of a slump in the UK economy. Is that why they didn't downgrade their forecast of the economy even further. Well, you know, Kathleen, I'm going to answer your question with a question, and that question is who knows? All right? We are in uncharted territory as far as the UK

economy is concerned. We don't have a recent historical precedent to look back on and say, the last time a country west the European Union, this is what happened. You know. We don't know what the new terms of business are going to be. We don't know anything about how the UK economy is going to look two years from now, except that it's going to be different. So the Bank has staked itself out as being a bearer on the subject, and this of course was very controversial during the campaign.

The Governor was accused of being prejudiced towards the Stay side and he had to send himself in Parliament on this. But he is very clearly on the view that this is a hard hit to the economy, that the risks are huge, and he's prepared to forecast that those risks turned into realities, and that's what we saw today. So this is this is where they are, and they could very well be right. And I just don't know enough. I'm not smart enough to figure out in this uncertain

circumstance whether I think they're right or right. I'm just along for the ride at this point, Carl, I just want to push a little bit on being along for this ride. I mean, as we're talking about parallel economies, because when you talk about low interest rates and bond buying, that's the financial economy. Revolving credit rates, they remain high.

Down payments for real estate have increased in your lucky if you can get the mortgage at three and a half percent, at least in the United States, and we've got sluggish wage growth in the developing in the developed world, How is what they're doing actually feeding into the real economy. Yeah, Well, in the specifics of the UK market right now, mortgage lending has been the only lending that's been occurring. It's been actually at a faster rate than they'd like to see.

The real estate market has been through the roof there, and they've been trying to cool lending. So in a sense, this is kind of a stop and start and then start again policy on housing to try to keep it from collapsing altogether. On their forecast, they're predicting a decline in house prices. They're predicting almost no economic growth in

the second half of this year. This is a much more severe circumstance than we've seen before, and you've got to believe that if that's what that's what's actually going to happen. Lower interest rates certainly can't hurt and whatever help they provide would be welcomers. Well, of course, you just mentioned, Carl, the fact that they've got this found clever corporate lending program and can talk about that more in a minute. In ten seconds, though, do you see

another rate cut in November? Um, I'm gonna say, I don't know. Let's go yet to see some real hard data on how the economy has performed in this post brexit period. Let's look at some real hard numbers and then we'll make a judgment. All Right, We've got more with Carl Weinberg. He is chief economist high Frequency Economics. You can follow him on Twitter at c B Weinberg. We've got more on the Bank of England's rate decision, the European Central Bank and negative interest rates in the

future of the global economy. This is taking Stock. I'm Pim Fox, my co host Kathleen Hayes. This is Bloomberg. Bank of England Governor Mark Karney said he is against negative interest rates. He doesn't like the idea of helicopter money. But as he decides to buy more bonds in the UK,

is that where he's heading. That's next on taking Stock broadcasting live to New York, Bloomberg eleven, Rio to Washington, d C. Bloomberg to Boston, Bloomberg twelve to San Francisco, Bloomberg nine to the country, SIS at jam General one nineteen and around the globe the Bloomberg Radio Plus happened. Bloomberg got gone. This is taking Stock. I'm Kathleen Hayes along with him Fox. The Bank of England cutting its

key rate, getting ready to buy more bonds. Most of the world is heading in the direction of more stimulus. Can the Federal Reserve resist? And are there some signals some negative signals about the entire global economy With all these central banks. On the March, We're going to continue our conversation with Karl Weinberger of High Frequency Economics. Right now, let's go to Charlie Kellett in the Bloomberg news room for Bloomberg Business Flag and I thank you Phim, thank

you Kathleen. On mixed picture for stocks right now, little change, that is the takeaway here. We've got the down industrials down eleven points eighteen pounds than three hundred forty three, a drop there of less than point one percent, SMP five hundred index unchanged, and nastack is up seven to fifty one sixty seven, a game there of two tenths of one percent. Mixed corporate earnings offering little direction. Fertilizer maker CF Industries seeing its steepest drop since January after

its results miss analyst predictions. Shares of CF they are down now by twelve point three two percent. MetLife tumbling nine point one percent after its quarterly profit disappointed Bank of England Governor Mark Carney unveiling an exceptional package of stimulus, including the Bank's first interest rate cut in seven years.

Those policy makers slash growth forecast by the most ever after Britain's decision to leave the European Union, and of the news conference, Carney took questions on a number of topics, including last June's Brexit vote. There is a great degree of uncertainty. It's entirely understandable that there is there's uncertainty about the eventual model that we will have at the

European Union. There are number of options on the table um whichever model has chosen itself will require some degree of adjustment in the economy and that brings its own effects on growth and uh end productivity for a period of time. And whilst we gets the all important July jobs are the August jobs numbered, July jobs number tomorrow morning. Today we got jobless claims. The number of Americans filing applications for unemployment benefits rose last week to a level

that's still under scores health in the labor market. Claims up by three thousand, two hundred sixty nine thousand, ten year, up eleven thirty seconds, yield one point five percent, Gold up two tenths of one percent. And now let's take a look at other stories making news. Thank you Charlie from the Bloomberg News room. I'm Jill Schneider. This news update is brought to you by Blue Jeans Enterprise Video Cloud. See Faces, Emotions, Energy, see the people your team's video

from any device. Start a free thirty day trial at blue Jeans dot com and click the radio Mike. Blue Jeans Work Smarter, Connect Better. Some Republicans are angry with presidential nominee Donald Trump for refusing to endorse how speaker Paul Ryan. Trump campaign chairman Paul Manafort says this should not be a concern. Of course, he's going to work

with Pau Ryan. Of course he's tried to bridge the party together with But Ryan is also running against somebody who's not gonna win, but nonetheless is a strong supporter of Mr Trump's. Meanwhile, another GOP congressman is saying he is unlikely to support Donald Trump for president. Adam Kinzinger of Illinois says Trump is quote beginning to cross a lot of red lines of the unforgivable in politics. Kinsinger

also says he will not support Hillary Clinton. London police say a nineteen year old man is in custody after a knife attack last night that left one woman dead, although police say at this point there is nothing linking the suspect to terrorism. This local resident says it's something that's always on her mind. It's living in London, especially in central London. There's always that thing, kind of thing in the back of your mind, you know, you live

with terror is. Five people were also injured in the attack. Dozens were arrested today in the latest crackdown on organized crime by the FBI and New York City Police. The suspects are reputed members of the Banano, Genovesi and Colombo crime families. The arrests were made in New York, Newark, New Haven, Boston and Miami. The arrests follow a multi year investigation. Global News twenty four hours a day, powered by more than twenty journalists and analysts in more than

one hundred twenty countries. I'm Jil Schneider and this is Bloomberg, Charlie, and we thank you and again recapping little change for US equities twenty six minutes to go ahead of the close. We've got the SMP five D indecks down by less than half a point. I'm Charlie Paloton Pats of Bloombird Business Flash. This is taking stock the FED in focus

on Bloomberg Radio. We can't heer our conversation. Now. I'm taking a look at the Bank of England, what they did, what they said, and what is going to happen next. Carl Weinbergger's ar guests chief economist, Managing director for High Frequency Economics. You know, Carl PM was just raising the

question about will this work? You know you're gonna buy bonds, and I think it's interesting to ponder a point that our Bloomberg intelligence team made about the bond buying, which is, you know you're sending a signal it's going to be stimulus, and that along with the bond buying getting yields down on on borrowing costs, right and along with this targeted corporate bond buying program where they're really going to try to funnel money to real UK businesses right that that

they're trying to hit this whole question of the impact of uncertainty, which has been a big hit to their economy already by making sure that businesses can really get money and really do stuff. Is this is this a clever step by the Bank afy And do you think of potentially more effective than some other things central banks have done well? I think it's certainly what they hope to do, Kathleen, and certainly lending to businesses has been

a store point. We've seen credit overall in the UK go from contraction to a very tepid rate of increase in the last few monthly reports, but lending the businesses remains flat at best. Most of the lending has been to consumers and for mortgages. So businesses do need more credit and they'll need it more than ever in this uncertain period in the UK, starting as they did with

yields a little higher than they have been recently in Europe. Uh, there's certainly a case to be made that long term interest rates and borrowing costs and the cost of bancredit can be made cheaper to advantage to bring the economy up a little bit at a faster pace of growth. You know, of course, ten year yields are only sixty four basis points, so you can only get so much out of buying, you know, more sovereign bonds and bringing down the yield curve. As far as corporate bonds are concerned,

I personally have a problem with this. It doesn't stop the Bank of England or the ECB from doing it. But I view corporate bond purchases as more microeconomic policy and tinkering with the price of risk, rather than macroeconomic policy, which is what happens when they by a sovereign bond and bring down all interest rates. But that's my problem, not theres They clearly think that lower corporate yields relative to sovereigns are going to help, and more power to them,

Carl Weinberke. If you take a look at commodity prices, corn down to about twenty one month lows, wheat hitting a nine year low, soybeans down ten percent from June, down from the peak, agricultural prices falling, crude trading it around forty one about right now, just up about two and a quarter percent. Are we going to experience an economic downturn as a result of these easy money policies?

Okammy is stealing my my report to clients over tonight's report and the one that they'll be getting over the weekend. At High Frequency Economics, we are writing about a global economic downturn. We've been writing about it for a long time, and following commodity prices certainly impoverished big parts of the

world economy. I view the decline in world trade is being directly linked to the drop and come moodity prices, which makes commodity producers poorer and means they import less stuff from US, which means US exports are a week part of the US outlook. And we've been linking that drop in world trade to an expected slow down impossible

contraction of the world economy for a long time. Right now, I track seven central banks and all of them are now easy now have easy monetary conditions, including the FED which is not tightening uh and including d c B which is easing monetary conditions like MAD, the Bank of Japan which is using conditions like ultramad, the BIKE, the Bank of Reserve, Bank of Australia, which just cut interest rates this week, the Canadians who cut interest rates in

recent months. All the central banks are doing the same thing. They're going full out toward easing, and they're marking down their forecast every time they do a new forecast exercise to predict even slower and slower growth. I can't help but feel that they're telling us what we should be seeing in the world right now, which is a coordinated slow down in many parts of the world economy at the same time, and a possible contraction in a lot

of places. It's not good carny chance that it's oh the balls now and the fiscal court of the UK, of the Fed of Japan, every country supposedly the fiscal guy's got to carry the ball. Now. Is that going to happen? Well, the ball. That's been what the central bankers have been saying for a while. We know Mario drag said it explicitly. We know that the I m F is called for more fiscal stimulus. Whether it's going to happen or not, you know, that's a political decision.

The economics of it, though, in my view are compelling. This is not the time for austerity. And while in some places like Japan, fiscal policy is misplaced. They're they're trying to fight a demographic challenge that can't be overcome by any economic policy. But certainly the case of Europe, Europe needs a kickstart, and fiscal policy is the way to do it. In many countries in Europe have the fiscal space to make that happen. The UK has committed

to fiscal stimulus, that's a good side. The Canadians have committed to fiscal stimulut us. That's a good time the US. We're not going to see any fiscal stimulus here for quite a while. I'm pretty sure of that, just looking at the politics of UH in Washington and the prospects will come out of the upcoming election. UM and UH so who's left, you know, So it's a mixed bag.

Some people are moving in that direction. I wish we would see more, but realistically, I don't think the biggest players are going to be at the table for that game. Carl Weinberg, thank you very much, Chief Economist high Frequency Economics. You can follow Carl Weinberg on Twitter at c B Weinberg giving us his thoughts on the Bank of England's rate decision and the potential turned down in the global economy. Looking for fiscal stimulus, that's what Carl Weinberg says might

actually be needed. This is taking Stockheim pim Fox My co host Kathleen Hayes, this is Bloomberg Central banks around the world trying to boost their economies. That fed dragging its feet on a raid hike. But what about companies? What about their profits? What about their earnings? Jack Rivken from Altegris coming up next on Bloomberg Radio