Surveillance: Fed's Balance Sheet With Bullard

the lack of storage available, just shocking. Well, let's talk about that with Francisco Blanche Bank America Global head of Commodities and Derivotius Research. Lucky to have Francisco join us on the phone this morning. Fantastic to have you with us. Francisco, let's start the show. We are we breaching storage capacity in various parts of the United States. Thanks for having me. Jonathan, Um, we are. We are not yet, but we are going

to get there very soon. I remember you were asking before, what's the bigger show because the demand show sply shock. Well it's the demand shok. We think that demand will be down seventeen million barrels a day in the month of April globally. Remember that's a seventeen percent decline on a hundred million barrel base. So UM the supply self, by contrast, I think it's probably gonna be about three

or four million barrels in April. UM. So, so now we're looking at a massive glass that we've never seen before. When when when you say, when you say Francisco demand goes down seventeen million barrels, What demand drops? I mean what usage causes that drop? And demand do we stop? I mean is it John stop? And do using ubers in the Bentley and all that? What causes it? Well? So, so, first of all, um, I would say the most impacted

sector is UH airlines. In the U s Alone, we've seen traffic traffic down more than eighty five percent um TOM eighty five I mean, we've basically shut down most domestic travel in Europe. We can see similar numbers down eighty nine percent across most countries. UM. If you look at China, however, which is interesting, the drop there also was about eighty five percent at the trial. However, they've only recovered to around of normal levels despite having been

dealing with the virus for three months. So so clearly the airline sector is the most impacted one. Uh, followed by UM, you know you're asking about Uger's and I think a lot of people are working from home now, so that's a lot of restaurants are shut down. Uh. Basically two people are going are losing jobs, so there's a lot of people staying home either because then at have jobs because they're working remotely. So it's also heard

in gulfiling demand. We're in numbers down thirty uh year and year in gasoline man here, so it's really across the board, but the most impacted sector is the airline sector. So going forward, Sebastian Gailey of Nordea Bank earlier in the show was saying that he expects oil to go back up to forty five barrel at some point in the not so distant future. How realistic is that and how long lasting is this period of time where we

could see sub twenty dollars a barrel oil? Um. So we're we're looking at this crisis into UH looking at the two main parameters. One is the depth of the initial drop and then second is the dulation of the crisis. UM. I think we have a you know, I think we have a reasonable handle on the droop. We think seventeen million barrels today is the right number. It could be twenty, it could be fifteen. Again, it's hard to tell, right, Um,

there's a lot of guesswork going on here. But then the duration is a little more complete hit it um. Now in China, as I said before, we started to see a very modest recovery, although for example, traffic, which which also took a big hitting China, is back to about normal, so roughly down fifteen percent year and year. I suppose we're not earlier um earlier in in in the first quarter. So those are the key numbers really to watch the recovery rate. Do you just assume a

week bundled commodity index? Do you just assume weaker Aussie dollar versus the yan or other metrics? I mean, is it just a fade away for commodities. Um, it's gonna be a little bit of straight away for a little bit.

But but then remember the other thing that's gonna happen tom in the in the second half of the year maybe is that we are going to to lose a lot of supply either because in cases like copper, we have fifteen percent of supply at risk, or in cases like oil, we're just gonna decimate investment across a broad range of regions, which in turn will lead to a supply decline into one UM and then then as it released to our culture. That's the news about you know,

news about UH. Potentially the some some agricultural commodity producers facing UM coronavirus risks as well at their at their plans. So I think I think the biggest risk really is is UH demand goes down nationally, prices go down. Then as we recover, we will have hampered, we will have heard our productive capacity and thus what leads to the price rally at some point in in the recovery cycle. Whether that's end of twenty one, I don't know. It

depends on how long this this UH crisis last. Francisco Blach, the Bank America winking on the commodity round. They crew dressed specifically. We would like to welcome to the SIS President Jo Bollard, to Bloomberg Television and Radio Worldwide, thank you for joining us this morning. I want to see if we can't catch up a little bit about ten days ago you predicted we could see unemployment as high as thirty percent in the second quarter, and you call

for a massive stimulus program. We got a massive stimulus program. So does that change your forecast for unemployment and growth? Yeah, thanks for having me this morning. I did want to see pandemic relief. I wouldn't call it stimulus. I would call it pandemic relief. Uh. What I interpret the program is trying to do is stabilize incomes and stabilize businesses as we work our way through this investment in our national health over the next couple of months. Here on

the unemployment, uh, we do have a blog on this. Uh. If you read the blog carefully, you'll see that there is a way to bound the unemployment rate. It's going to be somewhere between ten and I think the upper bound is like but that's because we're just identifying vulnerable workers in this environment. And what's going to happen is that those workers, some of those workers are going to have to seek relief so that they can pay their

bills through this period. So we're expecting the unemployment rate to spike, but let's call that pandemic relieve. Then they can pay their bills and once the virus goes away, then we'll be able to return to normal. So hopefully, if this all works smoothly, and there's a lot in the legislation as well, UM, we'll be able to come out on the other side and get the economy rock and again. Well, Wednesday is April one. Mortgage payments are due, rent payments are due, Utility bills are do. Could we

have a problem if people can't pay their bills on Wednesday? Uh? My sense is, of course, we're in a crisis situation ration. But my sense is that everyone really understands what's going on here now because obviously it's been the topic number one, not just in the US but around the world. So I think people pretty much understand that, Uh, the relief is supposed to enable people to pay their bills as

best they can. Um, there might be some uh delays and things you'd expect that in a crisis situation, but by and large, I think there are plenty of resources in the fiscal package to handle what we're going to go through here. Well, the main street lending program that you guys have announced is in the package. How's that going to work? And when does that start? Uh? That's in the design phase right now. So I think from a firm's point of view, there are two ways to

handle the crisis. One would be the traditional, which would be to shut down temporarily and send the workers over to the pandemic relief or unemployment line. And a lot of that is going to occur. That's already occurred. We sell the claims number last week, UH, and that's okay, you're getting UH, and the the umployment insurance benefit is beefed up, so they're going to get closer to acent or maybe a dent of what they would would have gotten had they just continued to work. So I think

that part that's one way to go. But if if the firm goes in that direction, they might lose connection with their workers. So another direction to go is to go to the Small Business Administration get a loan, which is ultimately forgivable if you meet certain conditions, mainly that

you keep your payroll more or less intact. So if you go that route as a firm, then you might be able to retain all your workers and then when the startup occurs later, you'll be able to have the same workers and you don't have to go higher all over again and get your business ramped up again. So that might be a better way to go for many companies. If companies decide to go that way, then we'll see lower unemployment and more uptake on sp a loan side.

Your district has a lower incidence of infection rate at this point, So what's happening in your district? I normally ask you what the CEOs are telling you, but I also want to know what mom and pop are telling you from the mom and pop stores. Yeah, we do have a lower rate of infection, but boy, it's pretty quiet, uh the you know where I live here in the fameless metro area. You know, most things are shut down.

People stay at home. So that makes me think, uh, and just reading about it across the country that the idea that there's a lot of regional variation here probably not the right way to think about this. I think pretty much everywhere has has bought into the idea that you should be very careful about going out and very careful about spreading this vibrus. Also, I think another thing to keep in mind, this is not just things that

are ordered by health officials. This is individuals and families making their own decisions and businesses making their own decisions about how they want to handle the situation. So what you have is a kind of private sector and household response to the crisis, which includes them not wanting to get sick and not wanting to get others that are

in their circle sick. So because of that, um, regardless of what the health officials would say, at this point, I think everyone wants to basically stay home until this virus goes away. And so because of that, I think all across the country you're basically in a partial shutdown situation. Let me ask you a couple of things about the

bill that passed and the defense new powers. The language in the bill says you can buy corporate bonds down to the lowest rating for corporates, and uh, those are obviously the ones who are going to need the most help, But they're also the ones most likely to see their ratings downgraded into junk, which in theory, you can't own. So how much risk are you willing to take on? Yeah, well we've got we've got to think about exactly how

to execute on that one. But the main idea of a program like that is to restore basic market functioning. Which broke down as this crisis broke out here. So I think we've got backing from the Treasury that's at three program very powerful, and I think we'll be able to keep price discovery going in that in that sector there. Uh, you need bus also getting a nod in the bill. Is that going to be a new program to buy immunees or are you just going to use the existing

program that you set up last week? Well, again, I think uh. And eventually that kind of market is mostly that we want market functioning to occur. So I think investors got so worried about state and local government that they started to pull away from those kinds of investments, which have historically been pretty solid. So hopefully we'll get price discovery going in and and uh, I think the

market will actually be fine here. Again, I think there are plenty of resources in the bill uh to handle our current situation, and that should reassure investors that state and local governments will be made whole here. Uh, the law unintended consequences is kicked it in the mortgage market. The big massive purchases you've made it NBA are now leading to big margin calls for brokers. Uh. Is that something you can do something about, or there are other

possible unintended consequences you worry about. UM. We we have heard reports of that, and I think that uh, the MBS purchases can be adjusted so that we get uh sort of accurate pricing in that in that market to meet the needs of those that are producing mbs. Uh. We'll see how that goes. That's a very uh, minute by minute kind of decision on intervention and purchases of MBS. But we have a great team in New York that's that's working on that. I think we'll be able to

get good outcomes there. I'm wondering when you think about where all this leads what you see ahead. You're going to have trillions in a aditional national debt. You're going to have billions in loans out to companies at very low rates. Can you raise rates? Are you pretty much stuck forever? Now? Stuck forever? Well? I think near term, as we come out of this, interest rates so will

probably stay very low for quite a while. UM. We are taking on more debt as a nation, but we're taking it on a very low interest rate, so that part should work good well for the near term. UM. You know, as we get further out past the crisis, we'll have to evaluate our fiscal strategy and see it. But that'll be up to Congress what they want to do. Uh. It's a big country. We can carry, you know, ten percent more debt. You know, it's not ideal, but we

can certainly do it. And if there was ever a time where you wanted to uh do something like this, now is that time? Uh? One last question here. Someone said, when you first cut rates and set up lending programs, you were throwing the kitchen sink at things. And then you cut rates again and set up more programs and through the kitchen sink again. Do you have more than one sink or do you throw the same sink over

and over again? Basically what's left in the toolbox. Well, I think the bottom line is that this these thirteen three authorities that are in the Federal Reserve Act are very powerful and uh because they're they're set up to allow the FED to do lending in unusual and excitent circumstances with the consent of the Treasury, and so you can do a lot with that. And I think that's what we're seeing right now. And if we had to

do more with that we could. It's a board of governors programs now an FMC programers aboard, and we do need treasury authority, but in special situations like this one, and what could be more special than this one, makes a lot of sense to go ahead use that power and uh and simply in smooth out this ride as we get to the other side of this virus very quickly.

Do you think baseball season stants this year? You're a big Cardinals fan, I adam, I haven't seen anything about baseball so far, so I was actually I don't know about you, but I was. One of the aspects of this crisis is I was very shocked when when sports decided to shut down. That really jolted me. So one of one of many jolts during this crisis, but it was shocking. Jim Bullard, President of the St. Louis Fat thank you very much for joining us this morning on

Bloomberg Radio and television worldwide. I found myself watching football games from twenty years ago, watching the highlights this seasons twenty years ago, over the weekend, just trying to also, yeah, I just trying to keep in touch with with sport. Yeah, I just didn't do that. What I know is Bullard mentioned he's a Cardinals fan, and that Bill started barking right away. You know, well that Bill was Red Cells, right,

die Hard. Well, you know he loves the Dodgers. He likes love Okay, Yeah, Hayley from Beverly Hills got him into the Dodgers. He's got the coat and the whole thing. That Bill can come on and talk about. You know, we're talking about Jim Bullers and we gotta go to break, we gotta come back and talk about this. I mean, I just what are these guys supposed to say? I mean, they gotta wait to see what happens. We're gonna carry

on talking about this. We've got missed the castle. Great to have you with us on the fine, fantastic to have you with us. In fact, let's talk about the Federal Reserve. That a meet again until April twenty nine. We've learned that that doesn't really matter. Do you expect anything else from them anytime soon? Well, there's a lot of details to come out, especially about this main street lending program um and I think they're going to roll

with the punchers here. And I think you heard from Bullard and we've been seeing the set is very creative and very aggressive here when it's these problems. So UM I wouldn't rule out more FED action, but we're not forecasting anything specifically at this point. First, we're making it up as we go, and all of our listeners, whatever their level of sophistication, know that what's the attribute of how we make this up as we go that we

should focus on. Well, I would say from the point of view of government policy, there's there's two pieces to this. One is not making it up. We've gone through the global financial crisis, We've dealt with issues that are threatened systemic uh stability. We've kind of created an infrastructure around that, and we're drawing on that and that's a really good

thing and it's happening really quickly. The thing that's really unique about this crisis is how much we're hurting individuals, small businesses, and a targeted way in a very short time. And that's where making things up in terms of getting these loan programs out, having the FED to a remarkable amount to actually become a creditor to the corporate sector at the at the lowest level, UM is really starting to be kind of really unprecedented, and as you say,

it's really making things up. So there's some of this which is got a very good toolbox, but there definitely is some stuff here which we're we're really responding in an unprecedented way. I want to talk about that unprecedented function here, the fiscal stimulus function right now. If the Federal Reserve, essentially with the four hundred and fifty billion dollars they're being provided by the US Treasury that they're going to lever up and lend out, how are they

going to do that given their staffing and expertise. Well, I think to a large degree, they're going to work through banks and other financial intermediaries. The SPA is basically going to guarantee loans taken by banks. The FED is going to oversee it, Treasury is going to oversee it in some ways. But you have to work through the channels that exist. If you had to have the Treasury and the Fed manage the individual loan decisions that we made here, we'd never get things out. And this is

a big issue. Even going through the banking system. We've been going through channels. As Bullard was saying a few minutes ago, we know unemployment is rising, people are being laid off. The question is can you get the money

into the system quickly enough to limit the damage. Cushion has provide us with a sense that not too much damage is being done once the economy turns on the lights again, Bruce, That's where I wanted to go, this question of speed and the sense that it needed to be done last week, two weeks ago, not now, And

we still don't have the program up and running. And I'm wondering, do you have a sense of how much of the damage has already been done in an irreversible way in terms of layoffs and small businesses that have to shut down. UM, I don't think we know what. We can see a hint of that in last week's claims numbers. We know there's going to be a huge rise in unemployment in the next month or two. How many businesses closed, I don't know, but it's going to be a lot. And let me just say, because I

think there's an interesting international comparison here. Europe has a system where institutionally it's a lot harder to have that flexibility, and and I think over long periods of time, flexibility has been very helpful for the US, but in this situation, their structures, their programs that actually provided a very important circuit breaker. And I don't think you're gonna see unemployment rise in Europe anyway like what we're expecting to see in the US in the coming few months. Why can't

we be like that? Man, it's a brilliant insight. Dr kas was great. Okay, everybody out there wants us to be like Europe for a cup of coffee, maybe three cups of coffee maybe out of the fourth of July. Why can't we european ee and then pull back and become like we are later on? Well, I think that's in some ways what we're trying to do. All those to be to be accurate. Here, we are still largely providing the support to income to people who are laid off,

providing checks to people. We're not doing what the UK is doing, which is providing companies support for their payrolls. We're not doing the German government is doing in terms of subsizing short term work. I mean, that's a good question. I mean, is the institutional side, which you can't change at this point, but the way our approach is going on policy, well, it could be different, but but it is definitely a different one right now than what the

Europeans are doing. The backdrop to give you guys a window window this listening across this nation is JP Morgan launches off the great work of Robert Melman from years ago, a fifteen page report Friday Evening which is a must read on Global Wall Street, and Faroly Walas is through with the US view, and then Kasmin drops in with the Global view and it just has you, brother, there, how many people put that report together, Bruce, like, literally

like fifteen people right, well globally now we've got actually a bit more than thirty economists, Yeah, exactly, And it's just extraordinary. And so I I just I'm absolutely fascinated by what the American outcome is. If the EU approach works so well, do you just assume income substitution two, income substitution three? I mean, is that where we're heading?

So I think the the issue here is you've got attention, because just remember when we when we get to the point where we turn the lights on, and that's the big call, when the virus starts to fade, when we begin to take the restrictive policies off, you're gonna get a huge bouncing growth, You're gonna have some rebound. The question really is how much lingering damage is done and whether the cushions we put in place here make it such that we can come mostly back to normal and

our our view as we're not. You know, we have a big rebound in the second half of the year. We have the US growing at all nine pace in the second half of the year, but that still leaves output three percentage points below where it was on the path we were following. So there's a lot of damage we think is going to get done, and this is going to take a long time to heal. Um. We hope it's not going to be like the global financial crisis where really we haven't healed fully from that that damage.

But you know, it's way too early to kind of judge how the path ahead is gonna is going to

be filled. And you know, the other in here just keep in mind is the amount of debt that's going to be needed, both on the public and private sector side to fill the gap in the next few months is going to be an overhang issue that the ramifications of which we still really I don't think understand and that the ramifications of which everyone is trying to understand with whatever data, however sports it may be, is that

we have. We're speaking with Bruce Kasman, JP, Morgan's chief economist Managing director of Global Research UH and Bruce, you're the perfect person for us to speak with, given your intersection of working at the New York FED and the sort of mechanics of the market, as well as working globally and covering everything as a senior international economist at Morgan Stanley Howd of JP Morgan, and I'm wondering as we head forward, a key question is are we poised

for a inflationary or deflationary environment going forward? What's your take on that? Well, I think over the next six months it's pretty clear it's going to be deflationary. Just look at what oil prices are doing. The service sector is much bigger than goods producing industries, which might have some supply chain pressures, so you look at the entertainment, hotels, airlines, things of that. Inflation is going to calm down sharply. The question is where do we come out of this.

I think certainly for the next couple of years, you have to believe the rise and unemployment. The weakness and growth that's not going to be completely paid back. It's going to be disinflationary. We'll have negative inflation in the near term, will have low inflation, and obviously that's a big challenge for central bankers who have already been having a very hard time getting inflation up over the last decade. So what does that mean in terms of how much

debt some of these developed markets can incur? Well, I don't think there's a real constraint on the public sector side, especially given how low interest rates are and how much central banks are supporting in terms of the funding. I think the bigger issue for the next couple of years is really the build up of debt on the private sector side and how much that hinders the recovery once we get back to more normal conditions over a longer

period of time. The build up in public sector dead has issues that particularly I think in Europe is an important issue where there's not enough burden sharing going on across countries. But that's more of a chronic issue, which has I think hard it's hard to figure out exactly how that's gonna affect us over the next five seven years. There's so many things you don't know about the next three months, so it's hard to go there at this point. Bruce Casmin, thank you so much for joining us today.

Greatly greatly appreciate that Bruce Casmin is with JP Morgan. It is also a time to when you get Foreign Affairs Magazine, not reading two articles, but because if everybody's stuck at home reading three or four articles, are going to what he invented, which is the CFR website, which we make light of it now, but folks, when Richard Hass invented the modern Council on Foreign Relations website, it was an act of God never before as you had.

So it's smart programming slammed in front of you on International relations website designer Richard Has the President of the Council on Foreign Relations. Richard, did you know what you would rot when you were screaming, we've got to do a website and do it right? Did you have any idea where this would lead? Not even close? Uh, not even uh close. But it really is an amazing resource now and I feel like I have the right to brag on it. Please so many well because other people

doing of of the work. But and it's it highlights our work, but also the best one anywhere. I think one of the one of the reasons it's so good is we curate and we've tried to create one stop shopping whether you're an expert or also whether you're also

if you're a beginner. We have, for example, the most traffic part of the website, Tom, all these backgrounders and who are not experts, case, okay, let me come me interrupting Ambassador hass and paulse when wants to jump here as well, folks, dirty little secret, Tom Keene, isn't that smart? I just go over to see how far and read the backgrounders as fast as I can. They go, Paul Richard, they go, oh god, he's just unbelievable, and Paul, Paul

chump in here. But I was reading the backgrounders, right. We know that we we know the truth. So Richard's as we sit back and take a look at what's going on around the world here with this virus, what did you some of your takeaways as to some of the governmental responses that we've observed. My first takeaway is that this is part and parcel of the world we live in. All these people who talk about it being a black swan are coming out of the blue or

dead rock. This was predictable, it happened now, and guess what if things like this are going to happen again. That's my my first takeaway. So governments need to be prepared. They should have been better prepared than they were. The international health machinery should have been much more oil than it was. We all ought to have had stock files.

China ought to have communicated openly and honestly about its uh you know what had happened there, and then moving forward, governments have to have against stockpiles, they've got to have testing, they've got to have protocols ready. Essentially, the world was caught flat footed for this, and most of the responses

have been inadequate at incoherent, ours in particular. Uh So, you know, it seems to me what's inevitable is that there will be COVID twenty or COVID twenty one or some other disease, and that we have to be prepared for it much better than we work for this. So how do you think you know life will change after this? Extly? We let we get to the other side here. Do you really believe that governments can in fact, you know,

kind of prepare as you were just suggesting. To some extent, I would think that you're going to see a larger role for government. A couple of areas that come to mind, as I do think you'll have more stockpiles of say equipment or ventilators. I think something like the Defense Production Act that idea will become more of a peacetime or normal things. So we're gonna have relationships established between the private sector and government much more elaborate than they are now.

I think you'll see less supply, less supply chain dependency. So I would think in a couple of years you're going to see a policy where the United States will say two things, we are not going to single source anything that's critical it in China or anywhere else we may. We're going to multiple sources so we're less dependent on an interruption from one source. And second of all, we're going to build a domestic capacity, so we're going to become a little bit more self reliant. I think that's

in our future. Tell me about Laurie Garrett. You have one of the jewels in our coverage of these viruses, and Laurie Garrett, her work on Ebola was original and path breaking as well. I'm sure you're calling up Laura. You're running into her in the hallway it's thee far and saying Lorie, what's going on? How does she report to you? Well, actually, Laurie, while she's still a member of the Council Foreign Relation, is not on our staff anymore.

Medias's active on MSNBC and she's been an important voice in this debate for years, and she was one of those who first said you had better get ready, this is coming. We have three people. We have three people. One is Tom Frieden, the former head of the c d C. He's active on our staff. You have a guy named Tom Boiki who started up a new really important sight called Think Global Health. It's on CFAR dot org.

It has become actually the best virtual venue where the leading experts in the world have conversations about global health issues. It started off just weeks before this happened, coincidentally, but it's already become a central hub of the conversation. And then we have one other person, youngs and Wang, who's an expert on Chinese public health is as it turns out,

so we've actually got three people on staff. As well as any number of members I know my board, for example, we have people like Peggy Hamburg, the former head of the f D A H. Sylvia Burwell, the former head of j J. We've got several former heads of Homeland Security. So it turns out that we have an enormous access to resource. So, Richard, what do you think this virus again kind of looking ahead a little bit means for globalization?

Is that have we seen peak globalization? Globalization continues. Globalization itself is just a reality. It's about the globalization is simply the reality that an awful lot of stuff crosses borders in great value, of great velocity. That doesn't change the real What could change is the collective response to globalization, and so far it's been anemic. Whether it's in the health area, obviously, climate change, you name it, global response

to globalization has been inadequate. I wish I could sit here and say it's going to be a lot better at going forwardly with a little in our lesson. But I'm worried that we're entering a period where a lot of countries are going to be looking inward. They're going to be strapped for cash. Given everything that this is going to cost. So I don't I don't think this is going to be a great era of what people

in my business called global governance. I worried that they will continue to be a large gap between these global challengers and the collective response. I I look at Bessador has at the challenges forward, and they sent her back to your book. We should mention that, Richard as Folks is a new book coming up May twelve, on the world. It's a wonderful briefing forward. Your previous book was on

disarray and our fiscal responsibility. I believe the helicopters over Central Park are dropping money from what I can observe from here, Richard Hass give us an update your report on our fiscal responsibility. Well, helicopters are dropping money, and they're gonna have to drop a lot more. Not only is taking care of the public health directly expensive, UH relief for American firms and citizens and workers. So we

just passed a two trillion dollar not. My prediction, Tom is that's the first of several and the longer this goes on, the more we're going to need. Now, before this crisis even hit us, we were already racking off deficits at the tune of more than a trillion dollars a year. So we're gonna start racking up deficits at the tune of three five trillion dollars this year. Our debt UH is going to grow well into the twenties

or thirty trillions of dollars. And the question is to what extent is the world going to be permanently willing to to finance it. Richard has thank you so much for your time today across this morning. He is the president of the cons on Foreign Relations on LinkedIn and Twitter.

I've just put out this extraordinary compendium of medicine, think global health and look for that and study that in the coming days with the Council on Foreign Relations joining us now A step gallon of Northdea Bank, Celia macro strategies. That always great to get your voice on this program. A nineteen handle on w T I. Just how much does that complicate things in this market? What's the both a negative and a good thing? And it's a huge transfer of wealth not immediately been but in the coming

month as things start to normalize. And the question that you have to ask yourself if you're a bank and you're letting to shill or the industry is whether this is shock is temporary or not. And behind that, it's about whether the Russians and the saalities that will be ascate the process and arrive at an agreement they both need to. The problem is they're both authoritarian figures and therefore they would lose if they would back down. And that means several weeks at least of this process before

it happens. And I think this is a part which is not expected that eventually we're going to get some kind of normalization. Having said that, there's an oil gl whatever happens. Because of the production right now, uh and and because of the speed with which will be able to reduce some of their output, that should be a uh. It obviously will have an impact. Uh. And that means that old prices is probably going to be back up to forty five dollars within a few months. So it's uh,

it's a complex story. It's an important story from the point of view of the bags because whether they kill the shield or industry or not is the strategic decision.

And behind that there's a lot of backing so from some of the credit facility who which are available, but it's a it's an important conundrum from a high yield perspective, and of course it needs There are a lot of things which are attractive from within the resource sector, but from a yield perspective, from an equity perspective, lots of dislocations which means they themselves were exploited by merging or

foreign investors like ourselves. We opened a credit fund, for example, are actively in this business, Sebastian, I'm you said a lot of things that are very controversial. A lot of people would disagree that it's a positive right now to have lower oil prices just because nobody's going out and spending any money or traveling forty five dollars a barrel. How do we get there, Well, we get there by

an agreement between the Sautheast and the Russians. That should be enough to squeeze basically a lot, a lot of the various positions you have in the old market, and that eventually should recenter the market source that and that the equivalmrate. I think shouldn't be a surprised too to anyone that the question is how fast we get there they is it five months or is it a year or is it two years or is it a few weeks? And the odds because the escalation processed by definition, it's

a very slow process. Uh, it'll take probably a few months. Sebasti. What are the ramifications of an extension of what I'm going to call a grim virus outlook from March to April and even into May. How does that fold into economic calculations? What it means that the pain from a deficit point of view is it is probably gonna be higher than is currently expected. Having said that, the fiscal package combined with the package one from the set is

a very impressive one. People should be reassured if they if you believe in apple Pie basically should believe in the US governments and and the Federal Reserve, then they actually will manage the crisis very well. But he focus on this not on the United States, some parts of emerging markets, such as India, where the situation is getting dire very rapidly. It's it means it's a difficult environment

for some better for other. It's probably the US. I'm glad you mentioned this because you know percolating folks in the literature over the weekend is what will be the action step for the I m F. I guess they got one trillion dollars available. That's what Pharaoh has available as well. But you know these got one trillion dollars available. Do you expect I m F to be more vocal this week in beginning to assist em? So when I shoot, my father was an I m F first, and I

guess I was trained in that in that group. But the I m F is ultimately that some of its part, in the biggest part in it is in the United States cossion. It's not what it's not what the US, it's not what the IMF wants, it's what the United States want, and what the United States will want is to stabilize some of its allies and to some extent to help other emerging markets because it's not really good

for for US products are going forward. So the discussions are probably ongoing, but from a reputational point of view, it's very difficult for India, which whose data is probably questionable, is to go to the I m F at this point in time would be seen very badly by the populations and by the government. None that means that delays

the eventual intervention by by the MS. So you have some major economies such a Danya, which definitely needs some help, and you have some economies like Mexico, which has a currency that you've appreciated by is in difficulty, but it's extremely well positioned. And once the US rebounds, we've seen record lows for the Randwana Mexican pay. So in the last couple of weeks, eve I just wanted to finish

up by talking about the FED. Last week. Quite rightly, we spent a lot of time thinking about where the FED was having success. Let's spend a little bit of time talking about how much they're spending to have that success. The bannet sheet expanded six hundred billion dollars in one week, and if George can Carve, as formerly of Namora pointed out, that's the equivalent of QUE two coming out of the

financial crisis SEP. That's huge. Sure. I mean, the center banks learned from the past and they anticipate in the They basically become very adaptive and you should expect them to to become very original going forward. This is not the end process. From a FET point of view, they're very efficient and if you believe the FET, you believe in apple Pie then then believe that they're actually doing

the right thing, and they definitely are. The shock is a brutal one, but they will continue to steadily innovate and surprises, and I think that will translate to health for moments and pop shops and people who think they won't have access to that credit because they're too small. It eventually will happen. So nobody should be discouraged by this. Well, it certainly have last week, that's for sure. Sep. Always appreciate your time, Sep Galty that of not da Bank.

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