Surveillance: Europe Better Off Without the Euro, Bootle Says

Anthony Gardner joins. He's a former United States Ambassador of the European Union. We are Thrilledi's with us. He speaks to six languages. I wish I could speak and he joins us this morning as well. What's the secret to learning five languages? What is the secret? Having an Italian mother helps? And you're having an Italian mother? Goes Okay, we can stop the show right now, move on Morris

Streets segment. Okay, Anthony, we are here in Klaus Schwab in the World Economic Forum has decided we're having globalization four point oh. Has there been a shift in the concept of globalization in politics and in economics. Oh, I think there has been there's been a move in many countries, not on the States, but in Europe of of being inward looking and basically challenging the precepts of an open

world trading system and a rules based multilateral order. That's what's now on the agenda began decide talks about the death of the liberal orders, define that define the Washington Consensus liberal order, and how it's changed. Well, certainly the importance of rules like the w t O, of the multilateral system, international law as a way to deal with disputes.

And now one country after an they're not only the United States has invoked national security exemption, but others Russia and Saudi Arabia are now saying, once we invoke our own interests national security, otherwise rules don't apply. Judges can't rule on disputes. That undermines a lot of the basis for a free, open trading system. More so, are we

less multilateral now than we were the pre Trump election? Yeah, we're much more personality driven, But there are opportunities and personality driven you know, situations if you look at some of the strong man that this is where well, at the beginning of the Trump administration. We advise our clients that if you really wanted to get close to him,

you need to appeal to his ego. Right. That doesn't necessarily mean you're going to get everything you want, but having the seat at the table it's important, particularly when you're dealing with a guy that looks from his advantage points first. So are we less absolutely, But are there opportunities? For sure, there's opportunities. Okay, But but togatherings like Davos

actually give ammunition to the populists. Well they might, indeed, But I think Dallas has tried to open up to just not the you know, not just the business community, but others NGOs. They've been doing it for a while and they're continuing to emphasize the importance of other stakeholders in the system. So they are opening up and listening. But Babbos wants the populace there as well. They want

Donald Trump there. They wanted to ains and vict Urban because when you ignore them, this is how things fall apart. You have to engage. Well, if someone wants to go left for someone wants to go right, you still have to engage because there are always opportunities to make a deal and when people described to ignore him. This is why the Democrats are having a lot of problems. They're ignoring him instead of engaging him. They're getting emotional about

him then looking strategically. When you look at opportunities and focus solely on that, you get things done. I think that's absolutely right. This is a very fine, difficult line for the Democrats and others to to to demand to manage how do we look and be tough and to engage with the European allies and and say to the Chinese you need to reform, but at the same time

defend the system. It we built up together, right, and and the system has benefited us beyond any other country, but we're not making that case in a good way. Really important. This idea of be tough and the definition and be tough, and it's an honor to go to you Mores. I think of Ron Brown is a tough

kid out of Harlem. He had some opportunities and then he landed at Middlebury College, the only black guy in Vermont from what I could tell at the time, and he learned along the way a pragmatic approach, which was the Ron Brown method. You've done the same thing and your career. Where did the pragmatic approach go to an

America and shut down that won't even attend AVOs? Well, it started when people start to focus on personality, selfishness as well, personalities driven in politics instead of getting things done for people. Listen, well, we were in government, we did a lot of things. We didn't have to beat our chest about them. We got them done for the benefit of things. Now you have a situation where people are very focused on themselves first and ultimately where things go.

But Morris, it also gets people to vote when they haven't voted in ten years. So Twitter, social media is a tool to get people to vote. This is very interesting and this is an interesting point. Hillary Clinton still got more votes than Donald Trump. This is what people keep forgetting right. The reason she lost is because she

ran a populace campaign instead of electoral college campaign. So this whole thesis about being on Twitter and all these crazy things just because you're on Twitter and you have a lot of following Democratic candidates for two twenty learn anything from the election? Are you going to run for president? All everybody else is in They learn from Secretary Clinton's tobacco. No, of course, not what they're doing is going too far

to the left. So you look at some of these younger rising stars where everyone's saying, we gotta be on Twitter, We've got to act like Trump. Now, how you win. You know how you won elections. You talk about issues that matter, You put together strategies that matter. And this is why the Democrats have to have a strategy in the House or they're gonna lose. I agree they look the asset test is are we making America stronger? Are we supporting the interests of our exporters, are farmers and

our ranches and so forth? My view, my conclusion about the Trump tactics is no, we are not. I'm all four tactics at work. I'm all for opening up the Chinese market, bringing more cases w t O with our European allies. I I just think the American elector will have to ask the question, are these tactics working administration? This is why this is exactly why I believe it's going to be shut down for six months, because the very people that that you outline that this is supposed

to help, it's hurting them. They haven't psychologically gotten there. It will take six months. Norman, give us the background here and take a green book I am f F approach on the global financial stability. Given his comment of a shutdown for six months and the tensions that the ambassadors speaks, do we have a system that can withstand this? Uh? It depends on the country, and it depends on the

type of shock. I think what makes a lot of these discussions highly relevant from markets is every election is not just about policies, it's about the system itself. And so that's why you have this pricing and of team changes and actual regime changes which are coming through with Trump and also with with Brexit. These are things that we haven't seen in thirty or forty years in the global economy, and that's why you're getting tremendous repricings of

markets around a lot of these events. John, what's relevant for markets and devils? So, so President Trump is not coming, No one from his administration is coming. The French president isn't coming. Three so May had to cancel it because she's negotiating a possible plan exit. Um, Tom's not going

to move the markets. So what are you looking for? Well, my guess is the big stuff is happening off the slopes, meaning it matters what the US and China are gonna be saying to each other outside of Davos over the next few weeks leading up to this March. Personal banks, central banks, I think are acting in a uncoordinated fashion, but in the same direction. I mean, they're all turning dubbish. But not because they've gathered in one place and decided

this is the right policy systemically. It's because it's the right policy for each individual economy. The choice we've got to go or we can extend this conversation three hours. If they want to make news, they should be focusing on who should be the head of the World Bank, and I should make sure it's a woman, and I don't matter, all right. Actually that's as they say, would you guys? Shut up? Tony Gardner from were you as a pastor to the you Morris Freed of Mercury Partners

and John Norman of JP Morgan. Let's bring a Jude in. Emmanuel bt G, Chief Equities and derivative Strategist, Good morning to Julian. You're morning on the try story. Please. Well, look, so China is coming to Washington at the end of the month, So in our view, everything between now and then is probably just to and fro jockeying for position.

The negotiations are going to happen, we expect at some point heading towards March, there's going to be favorable uh, not necessarily resolution, but certainly favorable news that's going to ease tensions in despite the denial. We've got a taste of what it would mean for the market, both in equity and foreign exchange, quite clearly positive for stocks and

negative for the U. S. Dollar. To what degree do you think that the trade story can drive things sustainably through Well, it actually can be a very profound positive. The story of the fourth quarter of eighteen was one of just intense negativity, and clearly the frictions with China really did, you know, compound what we're already other items, um, including this whole idea that the global slowdown was certainly

very much caused by these trade frictions. The disinflation story now literally you've gone from the glass half empty to the glass half full. People find themselves under invested, things look better, The FED is is really eased off, and we think that's a material positive. Good news is now starting to become good news, and we're seeing stocks respond accordingly,

some people are pushing ban Julian. They say, whether a deal is sufficient to underpin sentiment in the long run, that remains questionable, because what we really need to see is the data are in China stabilize, And what we haven't seen so far is exactly that you can have the sentiment improve, but do you have the fundamentals improved simultaneously. Julian, Uh, there's no question about the fact that the data does

need to improve in China. And obviously, you know, part of what we as global investors have to deal with is that there's always a bit of a view that the data is somewhat opaque in China. But if you look at how the last year has developed, it really has sort of trended in a classic way that global recessions, stock market tops and then ultimate recoveries off of stimulus tend to proceed. The question is is is China willing to do sort of whatever it takes stimulus wise to

really move their economy forward. We think that ultimately is the year unfalls, the answer is likely to be yes. Well, the market is also making that conclusion. The market pricing increasingly for a stability story emerging in China and positioning for that as well. Juden, how do you convince people that this is more than just a relief rally for

an ugly December. Well, truthfully, this is one of these times, John, where essentially, as investors, we are paid to invest, and the price action of the last three to four weeks is telling an investor that that conditions are better, certainly more favorable than was appeared at the end of the year.

And essentially what we have, particularly after the SMP crossed through that level, is pressure to perform, which I might add is very rare this early in the year, and that's likely something that's going to cause momentum to continue to move forward. Julian, that's the international story that we spent the first five minutes of the program talking about. Let's talk about the domestic story in the United States. Is it the shutdown shaping the market story eventually or

is the market shaping the shutdown? And the reason I asked this is we've seen several reports and a ton of speculation that the President is comfortable with the length of the shutdown and its impact on the U S economy just so long as the market holds up. So it's the shutdown going to hit the market or is the market essentially shaping the shutdown Julian, which one is it? Well, if you look at past shutdowns, they tend to have

very little effect on the market. But what's potentially different this time is because the measures a sentiment, the confidence measures were so elevated for such a long time in and then along came the fourth quarter and those measures started to come off. You know, you're at a point where, yes, obviously people are under invested, Yes the economy looks better than everyone expected, but it's very important to keep confidence elevated really to keep economic activity sort of moving along.

And in that respect, you know, obviously both the Republicans and the Democrats seem to not be carrying out the will of the people by keeping the government closed. We think ultimately that will resolve itself as well. But it really is one of those things where the disconnect between the government and and and the stock market should remain that way. And and we did a lot of work

that shows that gridlock is not positive for markets. You just have this sent an extreme of the fourth quarter, and you're seeing a rally that makes sense whether there is or is not continue government shutdown, Julian. There is a belief that they fed as in a holding pattern until the market has sounded the old Claire. I think it's morphed into something a little bit more than that now, Julian, because I don't think we're gonna get a clean month of data for the US economy for several months now.

I'll wait the Federal Reserve. Surely count think about moving without a clean month of economic data, or two or three for that matter, for the U s economy. No. And and look, if you look at the president's own economists, their estimates of how much the economy UH could slow based on the government shutdown are actually somewhat higher than

private estimates. And in that regard, you know, we think the FED, we take the Chairman Powell at his word in that public appearance on January the fourth, we actually don't believe that there's going to be a rate hike UH this entire year. And actually, if we're wrong, we think that the economy will will surprise to the upside, not only in the US but globally as well. The FED saw what happened in the fourth quarter. The last

thing they want to do is precipitate a recession. There sufficient geopolitical risk such that it makes even more sense to be patients. So Judy and the Federal Reserve is going to be more accommodative. And the final point I want to explore his whether Washington, d C. And the political story can also be accommodative. At the same time, we've had a massive towel wind for this market from

the tax cut. There was some hope that the story would shift towards some kind of bipartisan push around infrastructure. Headlines just crops from Reuters saying that the Trump administration, together with Cabinat officials have discussed infrastructure. Is that a pipe during Julian Uh, Well, in in the current Washington climate, anything with the phrase bipartisan is probably somewhat excessively hopeful.

That having been said, Uh, you know, as an incumbent, whether you're a Democrat or Republican, you're going to get to the middle of the year and you're going to see that the next election cycle is close at hand. So from that regard, you could have action moving towards infrastructure later in the year, particularly if the economy and the tax receipts hold up better. Than expected, such that

the deficit doesn't continu new blowing out. Hey, Julian, loved the piece of research that just crossed across my desk from from my team, from you and the team over at bt i G. The wall is built, but you're not talking about the wall on the southern border. Is

the good news enough to keep on climbing? And from what you've said so far, I can conclude, Julian that you think it is bt i G Chief Equity and to riversist strategist joining us here in New York, Julian Emmanuel to run us through some of the price action. There are times where a book comes across the desk where you say, okay, we're gonna talk about economics and international relations and the markets that we're gonna promote. John

Farrell's The Real Yield. And there's other times you have to just rip it up and talk about the book. We'll do that in a moment. Peppermagram joins us, of course, on international economics, she served under the younger George Bush and joins us now, but just quickly here on international economics, Klaus Schwab has trotting trotting out the idea this year of globalization four point oh hyphen what it means and

how it could benefit us. All that pushes massively against the zeitgeist, the populism, which says, wait a minute, globalization is not benefiting all, doesn't it. Yeah, But I agree with kush Slob on that one, and I think people are underestimating how much innovation is occurring and how many people can participate and be in that innovation. Uh So I have a very optimistic outlook for the world economy

of the moment. I have to say, how is globalization different from Joseph Stiglett's discontent in his book of a decade ago, Globalization and It's Discontent. So Josephs view was there were all these people being left behind. I think what we're actually is that there's a community of people who can't get on accord with where the world economy is going. But that doesn't mean that they have to

be left behind. So for example, automation, everybody assumes automation robotics equals unemployment, but in fact what we're seeing is since eighteen o four, in the introduction of the very first robotic, which was the Jackard weaving room, we've had nothing but more employment, in fact, record employment in China, record employment in the United States, in spite of or in fact, I would argue because of it. So then the issue isn't that they're left behind because they can't.

It's because you won't let the door open. So here's my question for CEO is when's the last time you hired someone who didn't have a college degree. Because those people are not stupid, they're just not allowed in. And that's the problem I usually, folks. Here I continue with Pippa on economics, finance, investment. But Pippa, you've hit the home run with Chris Lewis with your new book, The

Leadership Lab. Folks, this is a revolution very book. It reads two d pages, it feels like eight hundred pages because it is so dense with Bursted one page and two page thoughts like it will go from a booming stock market to it's the same whole world over, living in the present but destroying the future, etcetera, etcetera. Pippa, you open The Leadership Lab with what every single listener feels, and that is the information overload today? How do you

move forward? Given the information overload today? So the first thing is everybody is so analytical and they have to be more parenthetical. And what that means just less focused on the data and more focused on how people are feeling, less on the numbers, and more on looking across the landscape and understanding what's the zeitgeist. And I think this is something that a lot of our business leaders and political leaders actually very good at. They're kind of disconnected

from the zeitgeist. Chef Ray, you go to Richard Edelman, folks will be speaking. I believe with Mr Edelman and as Edelman trust parameter, we do that every year in Davos. It's my it's my must read of the year. Just fabulous. Fifty six pages from Edelman. And you go right where Richard Edelman is, Pippo Magram. You say, can we trust our leaders? How's our trust measurement with our leaders? Right now? I'm looking at Brexit and I'm looking at the shutdown.

It's not going very well. And it's like the only category of leadership where public trust has remained high, interestingly give the military and so definitely our leaders need to change how they're interfacing with the public's say, if they still feel entightened to the public's trust instead of that they have to earn it. That's a totally different mindset, Pippa.

You end your book with what's been the heart and soul of my work at Bloomberg, which is the a historical society and a complete understand a misunderstanding of history. I would you know suggest parenthetic be Folks. It's worse in America than it is over here in England. Are we getting more historical now? With the crisis ten years ago and with a political crisis now in so many nations? Are we beginning to learn our history? You know, I'm

not sure that we are. I think what happens instead is a new generation of both business and political leaders isn't emerging, and they have a new on how we solve problems. We just saw about it in the election. All than these new members of Congress, a lot of women, may be people who had no political background. So instead of going back, what we're doing is going forward. And the people who are trying to live in the past in a nostalgic environment are so surely being eased off stage. Pippa.

One final thought, and this, I think, Folks, is really subtle in office, but not in power. The leadership presumption of winning a democratic election, but you're not quote unquote in power. Discussed that, yeah, And I think this is the thing that everybody feels is like I've got a boss upstairs. He's in office, but he isn't a power. He doesn't actually know what's happening in the company or in the country. And what we need is for people to be in office who have power, but that has

to be earned. And so heavily described how you can restore the trust and your employees, your clients and customers, your voters. Can't say leadership. I can't say enough about this as an airplane book, and folks, I'm not going to mince words about it. The Leadership Lab was built to be downloaded on Kindle or you dip into it, dive into just so Pippamagram and Chris Lewis could get your brain going on some of the linkages here of media communication technology with what Pip is so good at,

which is just fundamental economics. Pippamagram, thank you so much, greatly appreciated the Leadership Lab. I'll put that out on social right now. John, I'm gonna bring in Roger Boodle, but you lead it off with Mr bruddle because I don't know where John Farrell wants to go John Roger Boodle and capital economics one percent e U G d P in this Brexit mess. Well, maybe Roger can stand by explanning to us where we are in this Brexit mess right now? What's happening, Roger, Well, we are in

a mess. I don't really know what's going to happen. Plans always asking me, and it could be a whole load of things. Maybe we get a full clean Brexit, we leave without a deal. It's possible. And maybe we don't have a Brexit at all, that's possible. We may have a general election, another referendum. We may have Mrs mayos did you name it? Other team? Possible teen. I think we get to plan be Monday, and I believe John Farrell told me Roger that Mrs May is speaking

to European leaders. How does she speak to them after that defeat the other day? I don't know quite Frankly, I don't know why she hasn't resigned. She hasn't got I think, anything more to say. They apparently have not got anything more to give, So I think this is all going to be afraid. I'm afraid of completely pointless exercise. Okay, well, then we're going to get to Plan B on Monday. I have no idea what's going to happen there, And then we staggered to March twenty nine and all the

Western Roger boodle is a grizzled pro on this. What are you watching within their path? Well, of course you know you have to seasonal just for me, because I'm a Brexiteer. I support Brexit. What am I looking for? Well, from my point of view, you see, actually, if there's no agreed alternative, the legal default position is that we leave on the twenty ninth of March. You know, primary legislation has been passed in the House of Commons to that effect. It wants to stop it, then the government

has got to coalace on some other thing. And actually how that past in the House of Commons. As things stand at the moment, I can't see what that thing will be unless it's actually to delay or pull Brexit altogether. Let's call the economics rider rutal capital economics and the United States economy. How's the US doing well? It's doing extremely well up to now, and I think you can begin to see signs of things slowing, and indeed we do think the economy will slow a fair bit a

variety of reasons. First of all, the Fed's rate rises that we've had so far, and then also the fading effects of the fiscal boost from President Trump. All that should, I think lead to some sort of slowdown, and you know we are getting now. I think a pretty convincing picture of a slowing world. At the moment, the US sticks out like a sore thumbers being different, but I

don't think that can last for a long time. If the world really is slowing, then I would affect that also to flow into the US and cause the US to slow as well. What will central bankers do? I mean, if you've got a slowing theme and capital economic stunning, one real GDP call for Europe. I'm looking at week nominal GDP weak animal spirits. Do you just pencil in persistent, chronic, forever negative interest rates in Germany? I think probably you

have to. For forever is a very big word, but for the facture, yeah, I mean, I think my own position is that the hero is not going to be sustained. You know, I don't want to sound like Ambro sevens Pritchard is writing you a wonderful thematic pieces on Europe. But how does a banking system sustain and prosper and do societal good with chronic negative interest rates? I I that's a none of the textbooks I looked at. Yeah, of course it's an aberration, and it's there because the

European economy is in a mess. And it's in a mess, in my view, primarily because of the Euro which should never have been formed. And I think both Europe and the world will be here off if the euro would disband it. That's the problem, Uncaulse. The European leaders are still staggering on trying to patch the whole thing up

and hoping for the best. Then how how do you sell I mean, I granted Mr Johnson spoke today and I'm talking to your folks about a populism where Mr Johnson has, from what I could tell, am I reading a very narrow part of the English Whales population and certainly of the United Kingdom as well. He wants to expand that audience. I believe, or take fractured labor politics, they want to stabilize and expand their audience. I don't

hear anybody reaching out to expand audiences. Do I well. Politically, I'm afraid this really is a mess. And the British people voted to leave the European Unions fairly decisive fifty two. But our political leaders in Parliament are sharply divided and they none of them connect really very well across the whole of the country, which is your point. They have their support as they also have their strong poss Well,

this has been too short. Roger Boodle, thank you so much with Capital economics, and I can't say enough whatever your politics of terseness of his essays in the Telegraph make for most reading as well. 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 Keane before the podcast. You can always catch us worldwide. I'm Bloomberg Radio.