Surveillance: Protectionism Will Make Us Poor, Salmond Says

of course, on the Bloomberg. Donald Trump's and victory triggered a sell off in global bonds and emerging market assets while the dollar rose. Now we're seeing some of those post election moves scale back as investors assess whether they're overreacting the Trump's victory. For more, we're very pleased to welcome Alex Salmon. He is the former First Minister of Scotland. Good morning, Holger's meeting. Chief economist at Barenberg also joins us.

Thank you for joining us. Let me start off with you, right, What does it Donald trump victory mean to you? Is this the end of austerity? Is this actually inequality? How do you explain it? Because if you can explain it, it means that he has a clear mandate to do

what exactly. Well, I don't think Hamdy knowes. I mean, obviously, the campaign rhetoric employed by the Donald is very frightening to lots of people, to Mexican, to Muslims, perhaps to gaze to minorities, and you see some of that reaction. It's not just disappointment, there's fear in that reaction. And more international terms, then, I think it's a balance between an expansionally domestic policy in the economy, but also the

threat of protectionism, which an international affairs and trade. Now, I mean the few things which are absolutely hastan laws and economics, but one of them is protectionism makes everybody poorer. The less international trade you have, the less freedom of trade you have, the more the more poor people. Yet this is where the world is going. Well, there's a

lot of protections forces. I mean, it's it's one of the natural populist instincts, and it's usually the job of politicians to resist that populist instinct for the greater good.

But so you've got the balance between an expansionary policy to restore the broken infrastructure of the of the United States in the one hand, but the looming threat of protectionism, which certainly will absolutely make everybody poorer, including the dispossessed, the disappointed of the United States who Donald Trump was meant to be appealing to. Now it's helped me here with my observation that London has barely been affected by Brexit. How is brexit the initial days here, the initial weeks,

How has it affected Scotland. Well that there hasn't been a dramatic effect, but of course know that's one in London. So it's about like jumping off the post Office talent and halfway down saying well, we're all right so far at the ground jet. There hasn't been a Brexit in Scotland. It would be jumping off the scott Monument in Edinburgh, being halfway down and saying we're all right so far.

So we don't know. I mean. The difficulty I think it's looming in the economy is there's a growing realization that the UK government doesn't know either, and the indicatetion no clear strategy will affect real economic and fancy. That sets us up for our next segment on Brexit. But really today to me is almost currency dynamics. Yeah, it's currency dynamics. It's also again to access point you know

about protectionism. If you're in Europe and whole ground, I know you've held the view the German jew for for quite some time. Right an angler miracle has been the beacon of stability for eleven years. How does she fight this current wave of populism which brings a lot of things with it. How we cope with immigration, how we cope with trade deals, how we cope with open borders. First of all, life fully agree with what we just heard.

Protectionism is the real risk here. So far, policymakers around the Western world have held the line we have not had an increase in protectionism yet, but now with the Brexit move vote and Donald Trump, there is a risk of protectionism writhing. The German position is very clear. Germany did the hard labor market reforms ten twelve years ago. As a result, it has record employment, It has a strong domestic situation, and as a result, populists in Germany

are at around fifteen fourteen percent. They are not close to anywhere where they are in the UK or the US, but very I mean very you know, clearly, we spoke to a couple of the Trump advisors David now Pass, Mr. Navarro and Peter Navarro was very clear he believes that any country with a surplus, and he mentioned Germany, he talked about China, any country with a surplus is cheating America in trade deals. That is just wrong. Economics period,

simply wrong. Any sort of second year student of economics or first year student of economics food, No, that is wrong. If you look at the German date of what you see is dependents are rising four percent, government spending is rising four percent year over, Your private consumption is fairly strong.

You cannot simply accuse the Germans of underspending. Alright, we have Sirry Alex, And it was some time of Alex pulled that thought because we're just getting the former French finance minster, Emmanuel mccoon, who has just said he's running for president. I was seeing life pictures from Bob Tom. This is north of Paris. I think it's about forty five minutes from Paris. We had covered him extensively. When

he's talking about reforms again, remember there's a presidential election. Um, I'm losing my voice town, but there's a presidential election in France next year. The markets need to decide whether they believe the polls. There is certainly someone from the far right is Mahin Lupin, who is much more palatable than her father ever was. But with anti Europe stands, antimmigration stands. Macon is not from that camp. He's very young, he's about thirty nine. He answer, it's a crowded field

of where mccorn wants to be. Right, he's a socialist. So if you look at the left of talk field. Let's rip up the script right now. We see this this important moment for France. Alex Samon, you've seen this before and it's almost a new populism. Did Mr Trump and frankly other elections, did they change the traditional calculus of voting across Europe. Well, I think it'd be be very adventurous after Brexit and after Trump to state that Marie La Penn is not going to have a chance

of winning the Fence presidential election. However, you would say that the electoral system in France can of mitigates against it because they have a knockout system which goes to runoff. And I was you couldn't, for example, when a presidential election of France without winning the popular vote like Mr Trump did. I could also say that, you know, scott was quite interesting here that Scotland is a country where the insubject party, the SMP, the one who's become dominant.

It's actually very progressive party in both in towns of international trade but in terms of domestic politics. So it's not a given that parties which are against the establishment have to be protectionists in terms of attitude the world or for that matter, device you had your referendum, settled it well last year. Yeah, I mean looks since it was two years ago. But since then the SMP has won fifty six out of fifty nine Westminster seats in the in the in the elections, and the SMP have

been domestical. Yeah. I just like to emphasize one point. If we look at France, we find that among the most popular politicians in that country on the center right up reformer for your reformer on the center left, Macon Vales an economic reformer. So while there's a lot of talk about lupendent, there is a tail risk. The really interesting thing in France is reformers are reformed. Do you mean a more Anglo Saxon model, I mean a more

Anglo Merker reforms and stability. Can I can I steal the phrase you can tell with royalty, so you have to pay a premium to Holger every time you use it. I think we're also seeing life pictures of Mahin Lupin, who's actually rebranding her movement and doesn't want to be called Mahein Lupin anymore. She wants to be called Mahein the problem Holgar and then I'll ask Alex the same thing.

She's opening her headquarters in Paris. Their tom is that all has been around forever, right, He's been in politics for what sixty years, and so if you see a wave of people wanting something new, then he's a favorite currently. But he may not be the right person. Well, actually he would be because he when he was Prime minister, he was the one who actually instituted reformed and then it was his president she Raq who did not back

him up against street protests. But so risk the record is that he actually wants to perceivee it, wants to do reformed and if president he would That's a reasonable point. But remember and it's the supports that in France, by definition, you come up against the strongest candidate because of the knockout system, Lepine will face the strongest alternative candidate argument that doesn't up and then the United States, right. I mean, it reminds me of two thousand and two. I was

covering the French elections. Then Tom and her father Jean marche Lupin you know, came out of nowhere to that second round of the presidential elections. Always driving the conversation in international relations with that question. The gentleman who invented it out of the Washington consensus, Joseph and I of course at the Harvard Kennedy School. His power and interdependence is the iconic text, professor, and I wonderful to have you with us. How do you define Trump foreign policy? Well, Tom,

it's early. We don't know based on the campaign which of the contradictory statements is going to be operational. But I would say on security policy he's more likely to day on course. On trade policy, I think you can have radical changes the end of TPP and t tipped and stuff forth. So a mixed bag and still unconnectable. The backdrop from your wonderful monograph of a year ago, your smaller size book, which is which I claimed was a must read, and your reaffirmation and project syndicate the

other day is on your optimism on the nation. Let's go to the quote I called my morning must read for this morning, This from Professor uh Ni and it's real simple. We oscillate between triumphalism and declinism. The US is not in decline. Finally, Professor and I goes on to say, there is Russia a country in decline. Mr Trump is correct to avoid the complete isolation of Russia, with which we have overlapping interests. No one would could gain from a Cold war, Professor and I. How should

Mr Trump uh discuss, act and behave with Mr Putin? Well, he's got a double task. One is, he doesn't want to undercut the sanctions which tell Putin that you can't steal yourr neighbor's territory by force, as he did with Ukraine. On the other hand, we do have business to do with the Russians, Iran, Afghanistan, North Korea, the Arctic. There are lots of things where we and and of course Syria in the Middle East, lots of things where we

have to do business. So he's got to have a business like relationship, which is of course what he prides himself in, but at the same time not not let pouting off the hook in regard to his aggression against Ukraine. Professor, I love what you wrote. Forget soft power, the US risks losing hard power, right, I mean, if they're retrenching,

if they're becoming much more inward looking. You could also see the Chinese uh, you know, forcing the rest of the world to adopt the reminbi as a reserve and s do you think there's a real possibility that four years from now the US loses real power. I doubt that you're going to see that rendom b is the reserve currency. You have to have deep and flexible capital markets and a real rule of law before a currency becomes a dominant reserve currency. China is a long way

from that, uh. And in terms of hard military power, Trump has said that he is going to invest in that area. So I think we're actually likely to lose more in the terms of soft power people who want to follow our values because of the rhetoric we're using. A right, doubt, we're going to lose a lot in hard power, either economic or military capability. Right, Professor, what are your values are the values under this presidency going to be the same as they were ten years ago.

I I believe in democracy. I believe in tallers towards people as certain openness, and those are issues which have been questioned in UH in the campaign. I hope that that the President elect is going to reaffirm them, as many people have urged him to do. Professor, Now you have a chapter in your classic book Coping with Interdependence. Help us here with President Trump and how he needs to cope with a new Westphalian world, how he needs to quote, UH, cope with his Fred Zacharias says, a

hub and spoke system, there's a new calculus here. How does a president cope with that? Well? Well, UH, for seventy years since Harry Truman's day, the United States is not a system of alliances which has provided stability and security. And every market requires a political framework of security for itself for it to flourish. And if Trump undercuts those alliances is then you're going to see the spillover into

the UH prospects for markets and growth. I think if you look at his initial statements since the last week's election, UH, he's tended to be reaffirming on those alliances. He complains about NATO not paying enough for its own defense, but so did previous presidents, and he has at least so far authorized the view that we will defend the NATO partners.

This is what we love about Bloomberg surveillance. Joseph and I with us UH and also joining US today Jim O'Neill, of course, with his service to Goldman Saxon, then to the United Kingdom. Mr O'Neil, you're here, professor and I they're talking about interdependence and the new calculus. Help you here with how the United Kingdom fits into a new Trump foreign policy. So Higil Farage, I believe is stepping

in on this debate. It's great to be on the same UH session as A as somebody like Jokes had the pleasure of trusting him about the big world in

the PASTA. I find the line thinking that this is just the whole chump development is a further step on the path to an increasingly complex world and a couple of other things that for the UK, and I think you've seen the Chancellor articulated reasonably well that we just had the so called economic con functional dialogue with China and He was pretty clear because he was quiz directly

about that. As the you know, the number one finance guy in this country, we have to We're a very small, open country and especially post Brexit, we have to have as good relationships with the US as we can, but we have to be probably even more on the front foot with some of these newer guys like China. Is an agel forage help with that conversation or is he

an abstraction? You know that that is something for the tactics of the policy makers to focus on what it what is really important for the underlying and long term

health of the UK. We need to be on the front foot with the likes of a China, despite some of the obvious challenges that creates, because we we need to be in the center of global trade flows more than we have successfully been in the past, and we have to remain in the sense of global capital flows and whilst that raises some challenges for us, as we saw in things, I was involved in the policy. We were one of the earliest participants in the Asian Infrastructure Bank.

I was there for the signing. We have to do like no other It doesn'ntagonizing or playing tough guy with China work. Listen, I'll go back to what I said about the dollar. I remember all this stuff in the early eighties about beating up on Japan, and you know it never really happened. Who you put your trust in matters. Investors have put their trust in independent registered investment advisors to the tune of four trillion dollars. Why they see

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Let me bring in now, Charles wide Plots, Professor of International Economics the Graduate Institute of International Development Studies in Geneva, on a day when President Obama is speaking about democracy in Athens, preparing to head to Germany after that to meet with the Chancellor of Germany, Angela Merkel. Let's start in France. We're reaching you in France today, Professor white Plots. Emmanuel Macrons declaring his candidacy in France this morning. What

does that say to you about what's going on in France? Indeed, what's going on in Europe him declaring his candidacy. Well, generally in Europe, as you know, there is also a Trump like phenomenon happening. All sorts of strange populist are climbing in public opinion polls. Next month we have a referendum in Italy that can turn ugly, and then next year we have an acceence in France. So there's plenty to worry about. Cho's why plots. It's wonderful to speak

to you today. We sparked with Paul Degar yesterday, and so much of this is about clearing the markets and how your Europe is behind. What is the urgency of Europe clearing their markets to move forward to get to us like growth. Well, the problem with Europe is that it's a large number of countries and everyone as its share of trouble. So today President Obama is in Greece,

which is a very very troubled country. Interestingly, he's been calling for that restructuring public that restructuring in Greece is absolutely right, but the others don't want. And his next trip to Germany he might raise the issue with Chancellor Miracle. He will be told no way so that's one issue. But you know, if you think about my own country, friends, the labor market is pretty much in a mess. The government is huge, uh and has been running a deficits

since nineteen seventies three. Uh. So the list of things that have to be done in every country is pretty well known. What's missing is the politician's readiness to do that. And I think when they watch what's happening in the US, they are even less willing to tackle any of the real issues. How are they hearing what President Obama has to say on this trip and light of what happened here in the US last week, how is his message being interpreted? Do you think, well, it's a goodbye message.

People in Europe like the Obama way more and the Americans, I think, uh, And they are sad to see him go, and they are sad to see him being replaced by Trump. Uh. They are very worried about that, by the way. Uh. But but you know, when he goes and makes a great species about democracy and all of that, that's viewtiful. But everybody knows that. Everybody knows that democracy is are

very complex things to make work. And at the time when the population in Europe pretty much like in the US, A significant segment of the population is really upset about what has been there a lot for the last twenty or thirty years. It's very, very, very hard to think about good outcomes. Charles White plots with us, of course he is. He's joining his by phone from from France. It's great to have you with us again here. Let's talk a little bit about productivity. We're focused here on

manufacturing in the US. When you look at it more broadly, when you look at the state manufacturing globally, what do you see. Well, we we had a major slowdown in productivity for the last twenty years. Uh. One reason is that industries shrinking and services are increasing, and services are typically low productivity gains or zero productivity gains. So this shifting production in production pattern through the developed world these is a major source of low productivity gains. Is it

because there's too much money slashing around? Is it just we're paying the price of capital deepening of just over investment. I don't think there has been over investment quite to the country. Since the crisis in two thousand and eight, investment has been extremely low, extremely depressed. Had many discussions about why. I tend to believe that the poor over old growth pattern in the developed country as discouraged firms

from from investing, and that's weighing on productivity gains. You you're right when you when you look at the complement of what the e c B is considering when it meets at the beginning of December, how heavily does productivity way When they're looking at the data, I don't think they are very worried about that. They maybe they shoot, but I think they are. They are very worried that inflation is stuck uh, not far from zero and has

been there for the last three years. Uh. And therefore and they want to keep growth, but that's not happening easily. It chose White Plots and with a shout out to John the Sylvia of of Wells Fargo with your work, Professor white Plots on labor mobility. As we have economic slowdown, disinflation, we become rigid as a society. How critical is that idea, that dream of moving to a new place, How does

that fold into European and for that better US economics. Well, uh, we we have in most European countries very rigid markets. So It's not only that people don't move from one country to another, they don't even move within their own countries, or they move much less than the US worker is used to to move. So that's that's been that's been known for for decades before we stopped the monetary union. UH, And it was clear that this was one of the drawbacks of having a common currency. UM. But to me,

that's that's not the most important issue. To me, the most important issue is that many in many countries, labor markets are frozen. It's hard to fire people, so firms don't hire. Uh. They are in some countries minimum wages are very high, so they are discouraging employment of the non qualified workers. UH. Dismissals are very difficult, very costly,

and legally uncertain, and so and so forth. So we the problem really is at the national level that this labor markets just not function and and we generate their machinery to create an employment. I don't know if you thought about this, but if we get Trump inflation, if we get some forms stimulus and reflation within the United States, do we just presume economic growth that raises wages? Is there the real riskier stag wage inflation where we've got

inflation with no real rage increase. Well as you know that. The mystery is why inflation wage inflation is not higher in the US, given that the unemployment rate is very low. The continuous debates about why it is the case. I think the silver lining of Trump is that if he does it, he might UH in pomp up government spending on infrastructure, increase the deficit. That would be good news for the world over because it would mean more growth

in the US, return of inflation in the US. We all need to see some inflation from the zero levels we have had, so that there is a little bit of silver lining out there, depending on what the next president will do or not to. Let's we talk about a pause here in the US among policymakers as they wait to see what kind of infrastructure package a president elect Donald Trump will be able to get through the

Congress and how that might affect monetary policy. How do you how do you see that playing out in Europe a similar short of wait and see approach. Yeah, everybody is UH is mesmerized by the political situation Asian in the US, A great number of economies at least had been calling for the US to pump up public investment in infrastructure, but as we know, Obama had exactly zero chance of passing that through Congress. I am not sure that Trump will be able to do much better with

his Congress, but I certainly wish him good luck. You mentioned this a moment ago, our colleague Tracy Alloway, tweeting out a timetable from JP Morgan here of what electoral events we will have here in two thousand seventeen in Europe, branching from primaries and France to the Italian referendum, to an Austrian presidential election, a German presidential election, in general elections in the Netherlands. It's a busy year two thousand seventeen.

What does Europe look like after that year is done? Oh god, that's a scary question. It's likely that the Australians real elect Natzi president. That wouldn't be the first time. They already did it fifteen or twenty years ago. Uh So, that's one thing. In the Netherlands there is a very virulent far right, reasonably racist party which is going up and up and up in a in a Germany. Well, maybe miracle will still be the miracles. Chancellor. She has

been and win it. Uh and in Germany as in France, as you may know, there is a serious challenge from the far right Marian Lepin. I personally don't believe she has any chance, but I also believed from had zero chance, so I wouldn't bet on it. Yeah, well, yeah, you have a lot of company in that. Thank you so much with the Graduate Institute, Geneva. David our next guest, and thrilled these on because we we have not been

good about commodities. We are in the surveillance commodity time out share amid the blur that you described, Tom, we have not talked enough about oil and other commodities. As you say, I'm pleased to bring in Dane Davis now he's a commodities analyst at Barclays. Is I look at oil here? Brent sven W T forty dang. Great to have you with us, glad to be here. Let's start with with the big question here. We we've seen what's happened in the equities market since Donald Trump was elected.

What have we seen in the commodity space broadly? What kind of moves have we seen? Well, to put it quite shortly, Donald Trump through his election has made medals great again. Uh. And I'm being cheeky here, but tom It says that, yeah. No, but what we've seen is a massive rally across the entire complex and medals um and it's it's it's wide ranging. It's not just iron or it's steel, it's copper, it's sinc and the like.

Now this rally has started appear out recently, but since It's election, there's just been a massive increase in the metals complex. Looking at the timing here, what do you what do you make of it? How how closely can you tie these two things together? Obviously investors placing a big bet here on the fact that Donald Trump has said he wants to get an infrastructure built through through Congress that could have an effect on metals prices. Uh,

do you draw the correlation that closely? Well? I think when it comes to commodities, you have to be careful of disentangling causal relationships, right. I think it's very easy for me to come on here and say, yep, Donald Trump, it's all him. But in actuality, I think a closer look at the data and the price movement shows that the prices for the metals complex in particular, they were

rallying before the election of Donald Trump. Now that tells me, given that very few people thought he was able to win, it's not a Donald Trump thing. What I think is going on here is I think that this is a China story. Uh so, the Chinese economy has actually coming quite strongly in twenty sixteen. I think that's leading to a rallying commodities. Dane. I've got a copper chart which shows a rally and really it's through two thousand sixteen range bounded and up we go with the recent news.

Oh that's great, I'll put out the copper chart folks on Twitter under be surveillance. But is it a breakout of what is a five year old bear market? I don't see it technically, is it? We don't know yet. Coppers are really interesting in the you identified something. I think that's quite important. The other medals were rallying earlier into this year, yet copper was lagging. And if you believe the doctor Copper thesis, whereas copper is the best

tracker for the macro economy, that tells you something. That tells you that we had a global economy that was still stuck in mediocre growth, and we had a Chinese economy that was returning to growth and it was growing, but yet the market wasn't really certain about it. I think as we go forward, I would say fall the copper price among all of the medals, because that's going to tell you what's going on. The Chinese property mark. It has been reheated. That is what's triggered the iron

ore rise. It triggered the steel rise, and now it's trying to trigger the other medals to increase. If that property market, though, shows signs of slowing down, we could be back where we were at the beginning of this year. Uh. It's it's a rally built on very tenuous grounds. Agreed. I strongly agree with that. And I just you know, I just want to frame through the Barclays lens and all the different people you've got telling you what to do, you are not calling this a commodity breakout. I want

to be clear on that. Yeah, I think that's absolutely clear. I think that there's still a lot that we haven't yet determined. I think the property market within China, I think that's number one. Number two returning to Trump is you know, there's a lot of hype about his infrastructure plans. We don't yet know what those infrastructure plans will be. Moreover, the market is focusing I think on the good things about the Trump's plan, but less on the bad things

are the less desirable things. For example, if Trump threatends the global trade order, that's going to have knock on effects in the world's largest market for metals consumption, China. I mean, you can imagine a trade war would have terrible effects onto the Chinese economy, could also affect other emerging markets such as Mexico and Brazil. So whereas we might see a gain in metals consumption in the US, we could see a fall in other markets, and you

could actually have a net decline. Now that's not what we're calling for, but that's a possibility and something to keep in mind as we cut through the euphoria that we've been seeing. Dan Davis in the latest Barkley's Commodity to You, you describe that tension very well. I let Tom use his standard caveat here about respecting the copyright of the gas, but check check out the note if

if you can seek it out from from Barkleys. You mentioned that the Chinese property market, what does what does Chinese policy look like right now when it comes to economic stimulus, great questions, So I think it's important to go back to there are very real concerns of a hard landing. I talked to a lot of clients that were concerned that the Chinese ECON would actually go negative. We were in a very different environment. Automobile production was down in the first nine months of the year. The

real estate market was showing severe signs of weakness. Than what the Chinese did in the very beginning this year is uh. They played a song with the familiar tune. They essentially loosen up their credit bubble. Uh. They loosen up credit standards, loaning standards, and they allowed people to invest and buy homes. Now, this had the very positive effect in the short term of twenty sixteen of boosting

construction UM. But as we start to look into the foreword, there's a real question here of how many times can you stimulate your way to growth, how many times can you reheat the property market. I think it's likely that it cools as we go into seventeen and eighteen and moreover, I think that there's the very hard limit of demography.

You know, the Chinese population is aging, a lot of the growth is already behind it in terms of its population bubble, So that puts another heartlement on the property market. And I'm looking at trade figures here, trade figures for October, Chinese trade figures, and they look disappointing to me. How much of a red flag is that for you? I think you need more than one data point to make

a trend. Uh. The weakness in October, I think it is concerning, but it's not yet concerning enough, and it's not yet confirmed by more trade data points to be a worrying trend. But I think it is something that goes back to my key thesis here is let's hold up. You know, we've seen this massive rally and copper going from two o eight to two fifty. Uh, let's just recheck fundamentals, look at what the data is actually telling us and not what you know, we might think may

happen in the future. Help me with the esoterics. You know, I've spent too much money in London? Can I make it back in Zinc? I mean, we don't talk enough on this show, David Grafinitely there's a reason for that, you know. I think that's that is a very esoteric question, and here would be my answer to you. I think that we're are a new air of commodities, and so when you look at something like copper or zinc or nickel, or that it's no longer the rising China lifts all boats.

I think that the price outlook for various commodities inc concluded copper included iron ore will be increasingly determined by supply fundamentals. UH. Look for those markets which have very tight supply fundamentals, which are facing problems and getting production into into the market, which are facing the threat of resource nationalism. Those commodities, I think are going to be

your best chance going forward. The other commodities though that have new supply coming online in fifteen sixteen, new supply coming online in the future, iron ore, I think it's a good example of this. I think those commodities are the most pressure as we move forward. I want to get to oil here in just a minute, but maybe one more more question here about about metals. What are we seeing in terms of disruption when it comes to

demand for copper. I know that there were strikes Indonesia and and labor disputes improve these things having effect on the price of copper where they pretty at the margins. I think they do have a psychological effect on the price of copper. So you're right, we've been having it's been a quiet ear so far. But then in this third quarter, going into the fourth quarter of the disruption started to suddenly tick up. There were storms in Australia

that knocked out several copper mines. There were labor disputes in Indonesia at the Grassburg mine. Uh, there's been issues with the Philippines and there they have a very new regulatory climate. So there's been more disruptions to production and copper and other metals. But I think that doesn't really necessarily affect the balances today. I think that does, though,

give you a psychological argument for higher prices. Whether or not it actually is impacted the true balances, it's hard to determine, but I think it does give you know, a market boost. Dane Davis with his fundamentals and the medals and the courses work with Michael Cohen and others at Barclays on oil as well. Dane Davis with us with Barclays, and you know, we're lucky folks, and that Dane Davis. Well, he like deals in the land of rebar, copper, palladium.

Down the hall is Michael Cohen or in Russell, Mr and Mahesh they look at oil. Help us here, Dane. And this is within the microeconomics and commodities. I mean, like aluminium is aluminum and it's totally different. There's fewer bearers to entry, et cetera than copper. What's your interpretation of oil microeconomics right now? Is it a whole new terrain because of US fracking where the rules of guys like you use are forever changed. Well, I think the way to address this is to look at the supply

side and let's do some comparisons here. Let's talk about oil, and let's talk about natural gas and copper. For copper, we haven't really had any revolutions in the production of copper mining since the nineteen eighties. Uh in the nine

eighties they create a new process using various as. It's where they could extract copper from deposits that were previously on an economical But since then, really, if you want to get copper today, it's the same way you got copper ten years ago, twenty years ago, thirty years ago. You dig a massive pit in the ground and you you just mine it out. Now, when we talk about natural gas or if we talk about oil, we've seen massive revolutions on the supply side for both of those commodities.

And so when I think when you look at prices today and you look at trying to understand price action, I think it's important to understand we're in a new world with say natural gas production. You know, I'm from Ohio, Northeast Ohio, and I've witnessed firsthand the the revolution that we've seen thanks to shale gas technologies and the transformation of the Ohio and Pennsylvania economies. I thought you were

gonna say the Cleveland Indians. No, no, no. You know, my father's actually a Yankees fans, so I uh no, No, we're Yankees fans in the David's household. So he needs he needs to protect he does, he does. No. But but in oil it's the same thing too. I mean, if you go back to two thousand and seven and two thousand and eight, there were the concerns of peak oil, and that which was once a fringe theory, was seriously being discussed in the mainstream. And then we've had the

tight oil in the US revolutionized the market. So when we look at the microeconomics of commodities, whether it's oil, natural gas, copper, or some of the metals, it's important to keep in mind, how are these commodities brought to the market and have there been any technological innovations and bringing those commodities to the market. Dan Davis, I'm looking at Brent your forty two a barrel. Let's look at that through the prism of this meeting taking place in

Vienna at the end of the month. Is optimism based into that price or pessimism? Well, I you know, I think when it comes to OPEC, I think the key thing here is that you have to separate rhetoric from reality. And you know, there's two questions here, one whether or not OPE comes to an agreement, and then the second question is are they actually able to carry through any agreements that they reach? Right, So, we are in a

new world. Going back to what I just said with regards to oil supply, It's no longer the situation that we found ourselves uh in the nineteen seventies or nineteen eighties. There's new ways to get oil to the market. And there's new areas where we get oil to the market.

And so when you have an economics going back to microeconomics, when you have an organization of cartel which consoles supply, they already have a difficult time and you know, rashing supply among the different producers, they're strong incentives to cheat. But when you have a market, when that cartel has a declining share of overall input, the incentive has become that much more stronger. So I think the real question is, and not not to avoid your question, is are they

able to enforce any agreements that they come to. Didn One last question on a revisit of the arch call, which is the China commodity boom, the boom of the last x number of years. Are we back on the track of what has been well over a half century of just general commodity deflation due to technological progress and due to improve processes worldwide. Are we back to the normal? Well, I'm gonna sound like an economist here and give it classic economist answer. It depends, It depends. It depends on

the commodity. Uh. Look, I think for something like UH copper or zinc or that where the supply side is constrained. I think that you you you might not see strong deflation, but for other commodities where we've seen technological revolutions, you might. And I think to the demand outlook for commodities are very different. If you take aluminium copper. I was just in London for Luman Week. The outlook for aluminium is

very very bright. Uh, there's this substitution effect that you were using aluminium and vehicles were using aluminum, and our iPhones and our you know, our laptops in the like. So the demand growth there looks to be pretty strong. Copper, surprisingly, despite being the macro metal, the demand outlook isn't that great. It's you're looking at one point five to two percent growth annually per year. So it all depends on, you know, the particulars of each commodity. I think that's the message.

Look at each commodity on its own, don't view it as an asset. Classic Dane Davis thinking so much with Barclays. Thank you. Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on iTunes, SoundCloud, or whichever podcast platform you prefer. I'm out on Twitter at Tom Keene David Gura is at David Gura. Before the podcast, you can always catch us worldwide. I'm Bloomberg Radio. Who

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