Brexit Future is Uncertain After Election, Says Rosenberg

and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course on the Bloomberg phil and Powder joins us now here on Bloomberg eleven three oh Studios in New York, and great to have you with us. Suffice to say this was a bit of a surprise for for you, as it was for many people.

I think, yes, clearly the lead had been narrowing spectacularly, but yes, to have actually a minority government and the tourists coming out of this much the minute, especially Mrs May is a surprise as you you piece together what happened here, what what you attributed to. I mean, these are these are early hours, yet we don't know a whole lot still about turnout, who voted, who didn't, vote, etcetera.

But what you attributed to first this was not a brexit actually, uh, the British people, for better words, considered brexit done deal. They don't know what it means yet, but it's going to be out. So it became an issue about the kind of bris that they're on the living and apparently on a number of key issues Mrs May managed to push the wrong button, especially on the MENSA attacks and other social economic issues. What what happens from here? As you see it? I mentioned the negotiations

that are taking place. We expect the Prime Minister to go to bucking In Palace. That indicates that she has gotten some commitment here that a coalition could could be formed. How tenuous a coalition would that bedia think? And what does it mean for for the negotiations over breaks that are scheduled to take place I think in just ten

days time. It's it's very hard to say. Clearly, they have a majority three nineteen Conservatives, ten Democratic Unionists and so they can govern whether they will lost beyond the fall or whether w generary election, which of course, but the Tories wouldn't enter with Mrs May, Mrs making the leadership it's it's all possible. I think we're going to see the negotiations starting in a very different tone from the band that Mrs May hope to start with so

confident with personal mandate. There is no mandate, and I think Britain will end up playing a lot nicer. Who's gonna Who's gonna set that tone? Is that going to be the the EU taking advantage here of of a change in dynamic? Is it going to be a chastened there reason May if in fact she continues to service as Prime Minister. Who's going to set the tone going forward here in those negotiations? Well, it's a two party negotiation, right, so I don't think that Mrs clearly Bill jointly determined

the tone. But the tone is going to be, I think, very much less assertive and aggressive and no no deals better than a bad deal type of stuff that was in the air until not that long ago. You mentioned that it's it's it was not a Brexit vote. What are the kind of global ramifications of the vote that we had yesterday? Are they diminished as well? In other words, is the outcome from this going to have less of an effect than the outcome of the vote we had

last last June. Well, what was interesting in UH where this election was that UH in Britain unlike in France, but like in Germany, the traditional two large parties are back right. This is the obviously don't happen in France, and it hasn't never been every add but here are two key European countries ready old sort of center left and center right dominant again old the minority parties UH flunked out. Let's come back to that. That's an important point.

Film about her with US City. Good morning, David, you're back. I had a dream last night and you said on the runway Reagan Bloomberg surveillance this morning with all of our news flow and thanks to our team for really working truly around the clock over the last hours. I love your idea, Professor Powder. We've come full circle back to two parties, which I guess goes back to the seventies and the eighties, almost pre Thatcher. I would I would put it to where we are, where does labor

fit into labor? I mean the unions. That's the big difference. The atomization of any labor market now makes it totally different than the nostalgia we have for another time. In yes, the Labor Party in terms of ideology at the moment is very much the leadership like the Labor Party of Michael Foot in the seventies. But clearly the role of the unions in the economy is much weak, and they

still have a significant savers inside the Labor Party. But yet from that perspective we are not back where we where before, because as you say, the atomization of the labor market, the fact that organized labor is almost a contradiction in terms right, that really is a qualitative change that we see in this country, as indeed we see

in continental Europe. A critical question on this morning, and I haven't had time to ask it with the news flow, is this a generational election or is it just another election? Is there a shift going on? Almost as in Japan. It's interesting in some way as usual, they all suggested, No, it's a generational election in the sense that Labor got voted in by the young. But at the same time, Labor's leadership inspires the young is very no past generation.

So it is it's a it's a very strange concoction of youngsters going a ladders. Wow, there you go. Is there is their residence here, with what we saw as the residents here, with what we saw with with Bernie Sanders in the US very much. Yes, How does Jeremy Corby murag from from all from all of this? He was the one where everyone had been talking about, who is he going to continue to lead his party? Is this a victory in some small light for for him?

And absolutely? I mean, you know, he led his party into this election. People thought that he was go to bomb and he's done much better than expected. Though he gains from this personal level and his wing of the party gains from this. Yes, go ahead, no, go ahead,

Please insist you're on the runway right yesterday? How how do you see treason a you know, a few months in here settling into this job as prime minister, we've now had occasion to listen to her, could deliver many important speeches, some of which were tied to two terrible events, terrorist events in the country. But how how do you see her in that role? How is she doing as prime minister in terms of the duties of the job of taking care of the country, of addressing national tragedies

and big, big events, and of planning a path forward. Well, unfortunately, we haven't seen any real ideas, initiatives, deep thoughts like brexit means brexit and enough is enough and not a substitute for policies, right, So I think she has to me got a lot to prove that you can actually lead by addressing concrete issues with concrete policies. And unless she does that, I don't think she lost long has her reactiveness been because of the fact that Brexit is

so all consuming? Do you see it being that that she's myopic or shortsighted, or is she just dealing with what she has to do that being this is this is the overarching, biggest issue that this government has to do. And she comes from the background bitches home office of the pulpit of the Interior, if you are, and so international cross border issues simply not part of uh what's just all about? And it shows. But we're waiting at some point we may have comments from the Prime Minister

of the United Kingdom. We've got all sorts of feeds into our world headquarters, into our radio operation. Here the jaguar waits outside of ten Downing Street, My great the Queen, I mean, rather the Prime Minister over to jaguar jaguar jaguar anyways, Uh it is silver uh and the cat is not separately North Nicole Sturgeon is taking questions and speaking. I believe it's boothouse, Fuessor Bouder, b u t e

beaute house. I think I am. I'm in Scotland, I'm the beautiful lot of jokes here mute but mute house. There it is. But she is speaking after the SMP was defeated, Alex Sanmon even losing his seat among other worthies. And the clear sight guys this morning is she will tilt away from an independence focus to an s MP brex, said Professor Bower. Within your wonderful understanding of the culture and politics of Europe and the United Kingdom, How does

remain deal on this interesting morning? Remain in Northern Ireland, Remain in Scotland. How lonely are they this morning? Remain Have I have a lot of company? Now they've got company in England. You think there's been a shift back to remain well in a sense that d not the main but the from the desire for a softer breck shit then, but Mrs May seemed to be hinting at step away even from a no deal is UH is better than than a bad deal, so UM, I don't

think regrettably the remains is an option. At this point the UK will have to leave the EEL before it kind of applied to rejoin. But I think the softer landing for all concerned is good news. The uber driver showed up, the uber driver the new normal in the UK six minutes feeling matter. What's tod that you? Yesterday the President of the e CV was in Estonia, not in in Frankfort, but in Estonia, delivering that new policy

statement and taking questions from from reporters. What's that? What was the key headline for you of what Mr drug he said yesterday? Well, no surprises, A right, They're not going to cut rates, uh. It makes no sense to cut rates when you're at the zeroo abound unless you're going to get rid of cash, which they won't, and they will go easy on on the tapering of the of the balance sheet. There's both entirely expected. I think the fact that he is uh concern about the continuing

weakness of inflation is also not a surprise. We have the flatters Philip skirls. Since you know Mr Philip invented and uh, there's no admission yet that they're out of AMMO, but they're clearly shame. You're not going to cut rates and the build taper more slowly or affect he es basically recognized reality that the ECB in terms of the ability to stimulate the economy is uh now a bit player.

To let me pull back the surveillance, Curtiney, here a little bit that we take these press conferences after the policy statements renounce, and you and I listen and decide how long we're gonna we're gonna take it. We really take it in full. You were very engaged with what with Mark d saying, yeah, it started out dry as dust, you mean Bowder nodded off over his audience, and then seriously, Professor, it really clicked in. I mean he really went at it about how he does not have the fear that

so many of the handwringers have. You mentioned this earlier this morning. You see it as a very stable process to do what he has to do on the balance sheet on normalizing rates. Oh, you got to give me a bigger answer on a Friday than yes, you can

do that on Wednesday. The balance sheet isn't on the issue, but right from an economic technical perspective, a bit bit political issue because the central bank, especially on the asset side of his balance sheet, has all kinds of rubbish that central bank should not have the engage in credit policy increased a fiscal policy, and that's an issue from

a technical point of view. As soon as they get away from the zeroo abound, they can play the interest rates again, even if the balance sheet is likely to GDP by then about twice the size that as the GDP of the fense balance sheet. Incidentally, not the the two day FED meeting next week, give us a bit of a preview for what you're looking for. Their seems like insensus we're gonna see rates when it comes to the balance sheet. What are you hoping to hear from

from the Fed next week? Just um a clear statement that they are no looking at this very seriously, working on the communications strategy only to avoid recurrence of tape a tantum nonsense, and that they will do this in a way that will not upset especially the RMBS market, and that they'll do it slowly, gradually, and that there are no villan boarders. Thank you so much for your

about surveillance greatly, greatly, Ship David. I'm I'm upset the first Lady, the former first Lady, Michelle Obama making an uproar about the president wearing his tucks for eight years, the same tux for eight years. Can I do a shout out this morning? I got my tux of trash and Vaudeville down in the East Village and that was like fourteen years ago, John Tucker, your tux goes back, you know, years, goes back like twenty three years, right, Yeah, I got it from Jerry Mahoney. Anyways, I I think

Mrs eight years is just breaking in a tuxedo. Stay with us worldwide. This is Bloomberg surveillance much more. Next right now, what a perfect guest to wrap up the week. Jeffrey Rosenberg is at Blackrock and what he does is he brings a synthesis of what we do economics, financial investment with prodigious math skills out of Carnegie Mellon. Are we in a normal distribution, Jeffrey Rosenberg? Is this a normal environment we're in in terms of financial stability? Thanks

Tom for that. Uh No, we're certainly not. And you know, just just to sort of talk about the distributional outcomes after the UK election. You know, one of the things that this has resulted in is is really raising the uncertainty around both sides of the distribution. Does this increase the odds of a hard breath Brexit possibly, does it

increase the odds of a softer Bregxit. The change in the leadership that you just talked about and what might result from that has has shifted the distribution and and increased the uncertainty of over what this means for the bregsit. That's certainly one of the main takeaways this morning. I'm fairly confident they were paying attention to this on thread Needle Street. There's a b E B o E meeting next week in London. How are they processing what's transpired

here over the last twenty four hours. So again, you know, the issue is what is the implications for the UK economy of the Brexit negotiations and what kind of uncertainty does that, along the way translate into for the currency, what does the currency due to inflation and inflation expectations and what does the uncertainty due to the performance of

the economy. If anything, uncertainty here is going to keep the BOE more accommodative for a longer period of time as they as they watch what the exit negotiations mean for the fundamental performance the UK economy. Were looking forward to there being a limited amount of political risk after the elections in France just a couple of weeks ago. Does this add more political risk to political risk? Stay the same? How do you how do you view that?

So you know, and and shameless plug here we we just published on the Black Ark website a whole treatise on on political risk and and and the rise of populism and and and some of the changes and certainly in the aftermath of the French election, the tide appears to be actually decreasing in terms of uh the kinds of political risk, particularly when we're focused on Europe that are associated with the breakup risk, you know, the kinds of risks. Look at the market reaction this morning about

the UK. This is not systemic risk, this is not spillovers. This is important to the UK domestic economy, it's important to UK related assets, but it's having a very minor impact relative to the kinds of conversations we had when we were talking about political risk. Where really was affecting global market position global markets, So certainly there appears to

be a bit of decline. We had had that risk around the lead up to the French elections, but the very surprising result appears to be dampening that some risks around that, certainly because you've got the potential early call for elections in in in Italy. But relative to the kinds of volatility politics have driven in terms of financial markets,

today's events certainly seem much much lower. Well said, But the theme of the week away from all this follow a that we've been dealing with is the idea of an inflation vector going the wrong way? Does the politics subdue nominal GDP? Does it put a dampening on the animal spirit? And maybe we do get decent real GDP, but the inflation just isn't there. Is that an outcome

that you and share yell and have to consider. So so it's a really interesting question around what the politics implies for the inflationary outlook because we've how to separate the time horizons over which we're talking about the the inflation going the other way. Tom that's the near term dynamic, that's the cp I figures. Next week, we're gonna have a CPI report a lot of focus that's about the near term. What's one of the implications of the UK election.

It's out in the tail of the distribution, but the win, according to the Labor Party UH is raising the odds of potentially a political shift towards more fiscal expansionary policies, more debt and deficit policies, which is inflationary and and is certainly an impact of greater issuance of government debt and potentially higher risk premium around that. It's not in the market today, it's not part of the whole conversation

around near term impacts. But the shift towards more am accommodation, more fiscal policy expansion, more debt and deficits is a push towards higher inflationary environments. That's what you've seen here in the US vs of a fiscal policy, a lot of talk about it for a time, a lot of optimism. Optimism about it changed how you view the potential for it in other countries. Well, you know, we we we've had a big turnaround in terms of expectations around fiscal policy.

The initial enthusiasm UH in the US, UH you know, certainly followed by an unwinding of that. You know, the fiscal policy is run by politicians, so the political uncertainty and the potential swings makes it harder for markets to price what those outcomes are relative to monetary policy run by technocrats, run under various forms of we don't want to get in the whole debate event how hard and

fast they follow the rules. But there is a reaction function that monetary policy tries to show to the market, so that there's a little bit more predictability, if you will. On the fiscal policy side, very hard to predict that. And so the swings here and the UK, you know, again pivoting off of last night's results, the swings here are are really headspinning for financial marketing, and so it widens the scope of uncertainty. Markets have a hard time

sort of pricing those outcomes. I get about eight more questions, but no time. Jeff Rosenberg, right, Well, we'll see your research note this weekend or into Monday as well. He is with black Rock uh this morning runch you by Bank of America Mary Lynch with virtual reality, virtually everything will change. Discover opportunities in a transforming world VI of a mL dot com slash VR, Mary Lynch, Pierced Fenner

and Smith Incorporated. After what we saw yesterday, the bright lights, the show biz of the Comy testimony, how about a move back to reality. Listen to this sentence, folks. He strengthened priority programs to fight public corruption, transnational criminal enterprises and violent gangs, and work to protect our children. Uh and cherished civil rights. That would be an essay by Robert Mueller, Director of the FBI, on one Chris Wecker as he left the FBI eleven years ago. Chris Wecker,

good morning, Good morning. You worked with Mr Muller. There's this odd linkage now between the Special Council and the former acting director. How do you perceive that Mr Muller will move forward after the testimony yesterday? Yeah, Well, it's interesting. A couple of revelations yesterday and question marks were questions were answered in that the the Jim Comy's interactions with the President have are now in the hands are are are being examined by a special counsel Mueller. That was

an open question until yesterday. So his note, his memos, they're all in the hands of former Director Mueller, that's one significant thing. Yeah, they know each other pretty well. Uh. At one time, Robert Mueller as director the FBI reported to Jim Comey as the Deputy Attorney General. That's the reporting hierarchy. Uh and still is was and is. So they certainly know each other. But I will say that former Director Mueller has the blinders on. He he knows

a lot of people in those circles. It's not unusual for these people be very familiar with each other. I don't think it's going to affect him one bit that he knows Jim Comey, and I think Jim Comey has will cooperate fully with that investigation. That's about the best, uh, the thing that you can say about that relationship. Chris, let me ask you. There was a comment from the House Speaker yesterday that we've seen some missteps here by

this president because he's new to the job. I'm paraphrasing there, but that was the thrust of what the House Speaker had to say. Contrast that with what we saw and heard yesterday from James Comby. He is somebody who, during the course of that almost three hour hearing, really came across as somebody who knows about the way government works, knows about the way separation of powers and agencies works.

There were indications here that he did some things deliberately so that we could see a special council tell us a bit more about that. The way that James Coby knows how to maneuver and make his way through the system down in Washington, well, that was a big reveal yesterday that he basically manipulated the system to get a special counsel appointed. But I think what what he also have to consider is that Jim Comey laid out his own failings yesterday. And I'm a big fan of his,

We've worked together. I think he has total integrity. I don't think he lies. I think he tells the truth. But he also showed how weak he was and not pushing back at the President when he felt like something inappropriate was going on. That's one thing I would have expected much much more courage and fortitude and decisiveness on

his part. And secondly, he's now painting a picture of a mandate from the president or directed from the President, to to derail the Flint investigation, and if that were the case, he should have referred that he should have refused himself as a potential witness and referred that to his number two or number three as to whether a preliminary inquiries should have been opened up under the Attorney

General guidelines. And that's a fairly low bar, but instead he stuck it in the corner of his desk and for later use. Chris, let me ask you. You you mentioned the respect that you have for the former FBI director. Talk about the significance of who accompanied him or went to this hearing with him. It was remarkable to see Hart to sixteen, that big hearing room packed to the gills with reporters. He saw the tables in the back of the room. There weren't a whole lot of seats

behind him. But my understanding is a number of FBI agents, a number of his now former colleagues, made their way there of their own volition to sit behind him at the here And what did that signify to you? Well, it's well known that Director Comey had a lot of empathy for the agents he got to Everage Field office. Uh. He was very personable, you know. And Director Muller I served under him. He was more business like. He was

more he was all about business. And there weren't a lot of personal relationships developed, but I have utmost respect for Mueller and the way he handled his job. Comey was just basically won over the agents in the office. I think there was there was quite a bit of dissension, however, about how he handled a lot of things the further you go out from his inner circle, but I do think they appreciate the fact he gotta see them and he and he really loved being director of the FBI.

Chris Bucker, great to speak with you. Thank you very much for the time here as we continue to analyze the hearing yesterday before the Senate Select Committee on Intelligence at James coming there in two sessions open and closed yesterday. Chris Wecker, former Assistant Director of the Federal View of Investigation, joining us on our phone line, David Gura and Tom Keene in New York in our Bloomberg eleven three oh studios. This is Bloomberg Surveillance on Bloomberg Radio from here in

New York. We're paying attention to what's going on in London in the US looking over to the United Kingdom. That's something that Thomas Wright does day in and day out as a director of the Project on International Order and Strategy at the Brookings Institution. He's the author of All Measures Short of War, The Contest for the twenty three Century, and the Future of American Power. Thomas Right,

great to speak with you once again. Congratulations on the new book, and I want to start with the opinion piece that Gary Cohen, the director of the National Economic Council UH and H. R. McMaster, the President's National Security advisor, wrote for the Wall Street Journal just a couple of weeks ago. That piece, America first doesn't mean America alone. Those two men wrote about the arena in America's role in the arena. What does the arena look like to

you today? Yeah, it's a great question coming just you know, hours after another sort of astonishing um election results in the UK. I guess we can get onto that in a minute. But one that really know and had had predicted.

And I think what what what I try to argue in the book, and it is that I think this post co war order that we saw where the world was converging on a sort of single model of an open global economy, no international institutions, respect for borders, um, sort of very centril type of politics that that has come to an end and is unraveling, and around the world we sort of see the return of a more nationalist deo, politically competitive, even a cantilist world, and I

think that the British election was the latest example of that. Last night, the sort of another rejection of the establishment on the col McMaster op ed that was I thought a very curious piece because it was really their effort to try to um co opt in a way the Trump America First policy and show that it was um not you know, as radical as some people make out.

But I thought it was came in for an awful lot of criticism because they did sort of deride this idea of the global community and they said the world is an inherently competitive place. And I think they didn't really give much assurance to US allies and that the US will continue to play the role that has played since War two. How long does it take Thomas Right

for a president to develop a doctrine? You you read what those two men wrote, and you can think that perhaps what they're doing is try to lay the paper the belief system when it comes to foreign policy. This administration has. When you look to history, how quickly can a policy perspective, a policy platform change and how much staying power does it have. Well, it usually takes quite

some time if it appears at all. I mean there's all a sort of an elusive search for the doctrine of whatever president is in power, you know, the Obama doctor and really I think chuck well into the second term for people to you know, identify it as sort of this desire for restraint and the pullback from the Middle East. And the reason is is that in the early period of any administration, there's lots of contradictory actions

and decisions that sort of cut neater directions. So if you remember with President Obama, you know, in his first year he didn't mini search to Afghanistan, so that didn't very much look, that didn't really look like a strategy

of restraint or pulling back. So I think it often takes time, but I think this time it would be much more difficult because there's an inherent sort of contradiction at the heart of this administration, which is the president has one set of ideas and it's unique I think in his ideology and his temperament, in the way he processed this information, and then his cabinet are actually much more traditional in the mainstream, and that's never going to

be resolved. I think that's right where he wanted to go. What's magical about your book? Time all measures short of war? As you take us back to the real add event of the modern liberal thought on how America acts in the world. This goes back to Harry Truman and Dean Atchison, among I mean others. They invented a liberal theme coming out of World War two. Is it dead? I don't think it's dead. I think it's under serious stress, you know.

I think it's been rejected by the current president. But um, the case I try to make in the book is if you look at it and sort of try to look at it objectively, it actually still offers a much better way of protecting America's interest from really the interest in most countries in the world over the alternatives. Because any sort of any you know, state of affairs has

to be dude relative to the to the alternatives. And in this case, you know, the alternative is a sturge of influence order that's much more sort of nineteenth century style, where the major powers are competing and and will really be not cooperating, possibly on the verge of conflict with each other. Um. You know, the global economy will be damaged by that, the be less trade, less openness, and I think in the long run that's something that I

think people will will be very uncomfortable with. After the the US elected via its president to withdraw from the Paris Agreement, Scott PRUITTT, the administrator of the Environmental Protection Agency, spoke to reporters and addressed the issue of whether or not the US would have occasion to come back to the table to renegotiate that particular deal, and he said, we'll always have a seat at the table where the United States. How do you you process what he said there?

And in light of what we've seen here over the last four or five months, how reparable is the damage that we've seen to the trans atlantic relationship, to a relationship with NATO allies? How how can you how successfully do you think the US can reverse some of that? Yeah, it's a great question. It's won't've been trying to think about recently, because you know, a lot of what the

Trump administration is doing can be reversed. You know, Paris is a good example the US isn't technically out of Paris until which is after the next election, because there's a three or where waiting time period in the in the accord um, so a future president could reverse that. And of course the future president can you know, if there was a new Obama or somebody like that, come in and recome in America to the world and undo

a lot of the damage. But the interesting question I think is how what could happen if the reversible you know, what could break that can't be fixed. And I particularly worried about the NATO comments in that regard because I think, you know, if an alliance is discredited, it's impossible to put back together. And I think on climate there are worries that we're going to lose time, you know, very valuable time to need to deal with these problems. And there you know, as you saw in the Middle East

last week, we're cutter in Saudi Arabia. You know, there's the potential of sort of a side conflict that could erupt that would have major implications because of sort of US disinterest. So there's many things that I think could break, some of them that are probably are reversible. Great to speak with you once again, Thomas Right, the author of All Measures or If We're the Contest for the twenty one Century and the Future of American Power, his new book.

He is the director of the Project on International Order and Strategy at the Brookings Institution. And thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keene. David Gura is at David Gura. Before the podcast, you can always catch us worldwide. I'm Bloomberg Radio. Runch you by Bank of America Mary Lynch.

With virtual reality, virtually everything will change. Discover opportunities in a transforming world. Be of a mL dot Com, slash VR, Mary Lynch, Pierced Fenner and Smith Incorporated.