The Stephanomics Global Preview for 2022

Also normally in d C, but currently holidaying in Cornwall in England. There's Bloomberg's chief economist, Tom Marlick, and from New York, Aaron Rutkoff, who runs all things green at Bloomberg, among other things. Also from London, and delighted to say, we have Muktaba Rahman, the Europe Managing director of the Eurasia Research Group. He's new to Stephonomics, I think, but definitely not new to Bloomberg and probably known by many people listening as a great source of wisdom on what's

happening behind the scenes in Europe. So thank you everyone and welcome. This is all about looking ahead, not looking back, but I can't resist very briefly asking you what the most memorable moment of one was for you. Nancy, I think that it was first when President Biden came into office and just started wearing a mask everywhere and and really just you know, visually and in terms of his behavior, was taking coronavirus much more seriously than President trumpad Aaron,

what was it for you? Well, I had the chance to go to COP twenty six and after such a long build up, to return to United Nations Climate talks, actually seeing people all in one place and I'll gather together in addressing climate change after the kind of in the middle of the long shadow of the pandemic. Did did leave quite a quite an impression on me, even though the outcome of it may not have lived up to some people's expectations of what might have come after

such a long week. Well, so we will probably be getting into that with you a bit later, but tom alt So for me, Stephanie, it was that moment in March where the US top diplomat Anthony Blincoln sat down with China's top diplomat Yang Jeacher, and it was meant to be a meeting that got the U. S. China relationship back on track after the tumult and the trade wars of the Trump years. But that's not quite what happened.

Yang Jia Cher used the opportunity to deliver a forty five minute protocol breaching Harangue, saying the US had no standing to speak for the world and no moral authority to criticize China over Shinjiang, Taiwan, Hong Kong, cyber espionage or anything else. And for me, that was a kind of a critical moment, a kind of watershed moment in geopolitics, where China said, you know what, We're not second place, We're not the disciple. We're not going to listen to

you anymore. We're going to go on go on our own path. I remember us having a conversation immediately afterwards. It was definitely one where it helped to be fluent in Mandarin to get the true implications of that, but it was it was quite a moment. Muktaba Ravan, what did What are you going to most remember from one,

without doubt the outcome of the German elections. I think we spent most of the year looking at the differences between arm In Lachette and Marcus Zoda and we've ended up with Olaf Schultz, former finance minister, in partnership with the Greens and the Liberal Democrats, which was I think a complete surprise. A government that looks as though they're going to do big things in Germany and big things

in Europe. It is interesting. I interviewed Olaf Schultz earlier in the summer and asked him, why are you even bothering, you know, looking at the polls, why are you even bothering to be in this election and carry on the campaigning? And he said, well, you know, people with if they could choose me and not just the party, they would want me as chancellor. And I still think I can do that. And of course he was right and I was wrong to be to be negative. And let's let's

kick off with you Tom Alick. Just thinking a bit about the economy and oh Macron, because that's put paid to a lot of people's expectations very early, already in two or before it's even started. So should we be throwing away all of our forecasts for the next year thanks to the spread of that variant. So if we were having this conversation in December, Stephanie, nobody would have said a virus creeping out of a wohan wet market will trigger the biggest global downturn since the Great Depression.

And if we were having this conversation in December twenty twenty, I don't think anyone would have said that the US would be ending with inflation close to seven. So clearly COVID has made the already murky crystal ball of economic forecasting even murkier. And we should be a bit humble about our predictions. We're always humble, obviously, some more than others. Um said that said, with a macron, I think clearly

it's going to be a bump. Um. We're already seeing that we've just pulled together on now casts for growth at the end of one. They're coming down more or less across the board. As a macron triggers more caution from consumers and businesses and governments. But I think it's going to be a bump. I don't think it's going to derail the recovery. Firstly, whilst O macrons seems to be more contagious than other variants, it doesn't so far

appear to be more deadly. Secondly, the world is just getting smarter at dealing with COVID, and you see each successive wave is having a smaller impact on the economy. And I guess just to stick with the macroeconomics for a minute, the other sort of dramatic thing that happened in December, apart from the the rise of O Macron, was this shift from the US Central Bank the Federal Reserve, where it really came round to saying inflations now enemy

number one for the US economy. And as we know, there's been many critics, including Larry Summers, who we heard from in last week's episode, who think it's about time that the Federal Reserve stopped using the word transitory when it comes to inflation. But we are now looking at several rate increases, are quite significant tightening of monetary policy for two at a time when we know a lot of that emergency fiscal support for the U s economy is also going to be drying up. Tom, you talk

about what we don't expect twelve months out. Is it conceivable that we might be talking about a coming recession in twelve months time? What are the risks? Well, I'm not sure it's going to be a recession. The US recovery still has further to run. The US households are still sitting on a bunch of pandemic savings which they

need to spend. At the same time, the beginning of the FED tightening cycle and what looks like potentially a rather hurried tightening cycle, does come with some pretty significant risks attached. First, as you mentioned, Stephanie, the FED will be raising interest rates at almost exactly the moment when US fiscal policy starts to run out of umph. Will hear more about this from Nancy, I'm sure, but from what I can see, the opposition of Senator Joe Mansion

has dealt a death blow to Biden's Build Back Better agenda. Second, the FED is going to be tightening at a moment when US equity markets and US property prices are pretty close to bubble territory, and that's potentially a toxic combination. Thirdly, already in one we've seen some emerging markets getting into trouble, especially Turkey, a reflection of the shall we say, idiosyncratic

approach to policymaking from President Urduan. For the rest of the emerging market universe, the start of the FED tightening cycle is going to be a challenge movement. We're going to see capital outflows, falling currencies, weaker markets, and a challenge to growth at exactly the moment when the spread of the omicron variant means they need more rather than

lass support. And Nancy, we mentioned President Biden's fiscal woes or fiscal congressional woes with his fiscal package, that this is actually in asking you this question, we have to come clean that we're actually recording this just before Christmas Eve. So it's the worst possible time to be asking you what's going to happen to the great Build Back Better or agenda because we still have this big tax and spending package that we don't know the fate of you.

By the time this comes out just around New Year's do you think President Biden will have passed or be about to pass those important tax changes and spending increases. I don't think so. I think that as Senator Mansion made his position very clear in a Fox News program

that he was going to oppose it. Uh, there was a lot of animosity between himself and the White House earlier this week, and and you know, people at the Senate will go home to celebrate the holidays, just like a lot of other people, and so we will not see resolution by New Year's and I would argue we

probably won't even see resolution by mid January. UM. It's a huge disappointment to the White House because they had really planned in two on having the president's domestic economic agenda sort of in the bag and done so they could move on to some other policy things like their China policy or some other foreign policy questions, and then also just implementing and selling the economic package, and so

this just really prolongs that. And there were also a number of policy changes in there that were very important to the progressive wing of the party. And so now you have a riff between Senator Joe Mansion, the key you know, fiftieth senator who President Biden needs in support, but also with the progressives who feel like these are the things that they wanted and this was the legacy that they wanted Democrats to to really show in voters, and it seems like that is slipping away from the

Biden administration. If presidents don't manage to pass particularly early in their administration when they're supposed to have a bit more ability to do stuff, usually if they don't pass kind of signature legislation. They tend to be relying on the economy for whatever support they have in the polls. We've got sort of pretty strong economic recovery at the moment, but it is coming with this higher inflation, but wages at the lower end of the pace Kale are going up.

Is it going to do him good as we go through the year. It doesn't. It doesn't feel like that that that relatively positive picture is doing the administration much good. It isn't. And we have seen Paul after a political poll and it's really fascinating showing that the majority of Americans feel like they do not feel optimistic about the economy. There was a fascinating ABC News Washing and Post poll in November that showed seventy of Americans rathe the economy negatively.

Despite what you said, which is that the data is actually pretty mixed. Um. But what White House people and economists and pundance that I talked to really believe is that the overhang of inflation and just the uncertainty caused by COVID and the virus is coloring people's perception entirely. And it's just the sense that people having to pay

more for groceries and gas. Um, you know, rent, if they're renting their apartment or their house, that is really coloring you know, everyone's perception, even people who are middle income or higher income, who are not as affected by an increase in the price of milk, for instance. But it's just really sort of psychological at this point, and it's it is really affecting the president's approval numbers. Well, Aaron.

One of the other things that was supposed to be the great distinguishing feature of this of anustration was its record on the climate. It was gonna be he was going to be the greenest president ever. Um. You mentioned Cop twenty six in Glasgow. One of the disappointments there arguably was that the US was not able to bring a dramatic new commitment, or not one that seemed to

be very dramatic to to outsiders. If if the president can't pass these big tax and spending plans, um, what chance does he have of being truly transformational on the environment. Yet it's very tough. I mean, he and entered office, everyone knew he would rejoin the Paris Agreement, the idea that the United States would set a net zero target at mid century like so many other large nations have,

was established. Um, what Biden really wanted to arrive at cop able to show and what he now with mansioned statement on the billback better plan seems really in doubt. It's his ability to move the needle on American emissions between now and you know, the plan us to reduce emissions by half over the two thousand five levels by the end of this decade, and without passing legislation, it's

going to be really hard to do those things. There was money in the spending plan for things like ev infrastructure, subsidies for consumers who are putting solar panels on their roofs, are adopting electric cars, incentives for people to build for a company to build more renewable energy. None of those things can really effectively be done without passing legislation. You

can't you can't do it with executive action. One of the really interesting things about watching this debate play out in Washington is that it's one of the first times we've been able to see climate modelers, so professors who

apply you know, real world computer modeling. We're analyzing legislation in real time as it was changed, and being able to analyze what it would do to emissions UM and by the end of the process there were still a huge ability to drive emissions down with the legislation as it stood. But without that, I don't think it can be replaced by by anything um in executive action. Since we're looking ahead, I mean that the there is another COP. There's another big meeting in Egypt later in twenty two.

If what you say is true is the is there going to be a great loss of momentum at least coming from the US. Well, you know, one of the things we saw at this COP that is a sign of some some optimism for COP twenty seven in Egypt is that the U. S. And China, which are agreeing on so little right now and there's so little cooperation between them, did make a bilateral agreement to cooperate on some key things like methane emissions. So there will be things to check in on at COP twenty seven that

will be really interesting. That said, I don't think you can expect to see more action than we saw at COP twenty six, which probably sounds a little disappointing. COP twenty six was sort of in this five year post Paris model where a lot, not just the big emitters like the U, S and China, but the whole world was supposed to do a stock taking. Um, it's not that COP twenty seven won't be interesting, but I think the chances of it exceeding what we saw a copped

and sex are actually quite quite low. So I think that is a bit of a downer heading into the next year if you're looking for big action on climate Moxamma ram And I mean if we cross the Atlantic, we've been talking about the interplay between politics and the economy in the US and how that may play out next year. I mean, how is the recovery playing out for governments in Europe? Has has O Macron sent everyone

back to square one on that? I mean, it definitely comes at a very difficult political moment for Europe and for the EU, because you've got major transitions that are likely next year. And I'm I'm thinking about France and Italy in particular, or they've just happened here, I'm thinking

about Germany. I mean, there is a risk that the incoming government in Berlin wobbles a little bit because there is a perception that Ola Schultz has been to lax on restrictions, and some of the surge that way now seeing is because his government hasn't leaned into the challenges aggressively as they needed to. I'd argue on Micron is probably the single biggest unknown for the outcome of the

French election. Macron has his election on the tenth and twenty fourth of April next year, and you know, as as as things stand, I think because of that election, he's ruled against the kind of draconian social restrictions we're seeing in countries like Denmark and the Netherlands and probably in the UK, because he thinks they will probably test

the nation's patients and puncture. The economic recovery. France is looking at six or seven percent growth this year, so he's he's making a big gamble that boosters on the vaccination side and tightening of the health pass will allow France to weather what would otherwise be a sixth wave. If the gamble fails, I think he may forfeit his claim to have steered France through the pandemic reasonably well. I would say that people around Macron believe actually there

is a resurgence of the pandemic. It could play quite well for him because his ratings typically tend to rise into into in times of acute health crisis. But I think the big point is it has unknown and unpredicted impact on a very consequential race in the European Union

next year. Well, we'll come back to you on the on the more on the on the European politics in a minute, But Tom, we should get back to China because it was such a big feature of discussions last year when you we were talking about the FED at the beginning raising rates. It's certainly the first time I can remember that we're going into a year where the US Central Bank is expected to be raising interest rates, but China is actually not going to be slavishly following

the FED. It's going to be doing its own thing, cutting rates to support its economy. That is a moment in itself, isn't it, Tom? But I guess we should also worry about two of the largest economies in the world slowing down at the same time. So I think there's a couple of things going on their staff. The first, as you know, is that the FED and the PUC are very likely going to be moving in opposite directions

in two and that in itself is already pretty remark cable. Historically, because China's currency, the rem and B, was tied to the dollar, the People's Bank of China had to follow the FED. It didn't matter what economic conditions were like in China. If the FED hiked, the PBOC had to follow them, and if the FED cut, the PBOC had

to follow them. Now, after a decade of careful, painstaking reforms, the remin b is much closer to a free floating currency, and that's given China's central bank a new degree of freedom on how it manages monetary policy, and we already see them using it. The second important implication of the PBOC loosening is what it says about China's current economic condition.

In the third quarter of one we saw China grind to a halt, a reflection of the ever grand property slump of the government's zero COVID strategy and all that means for lockdowns and of energy shortages. And in two two of those problems, the property slump and the zero COVID strategy are going to be there with China still.

What that means is that the PBOC is very likely going to need to loosen further, and they're going to be pretty grateful that those years of reform on the exchange rate have brought them the freedom to move in a different direction from a tightening fed. You've just you've added in another question market with something to worry about. For the for the strength of the of the global economy. In in two we seem to be adding them up. Aaron Rakoff, you will have a better sense of this

than anyone. I always feel there's a bit of a sort of disconnect in discussions around China and climate because on the one hand, we sort of, you know, they didn't the leaderships, senior leadership, didn't come to COP twenty six, the the commitments on the sort of global stage seem

a bit um week compared to some countries. But then I talked to China experts who say, no, they're the country that has done most to really embed climate commitments in their development strategy, at least on paper, and it's going to fundamentally change the direction of the economy in the next few years. So so what's right, I mean, should we take um China more or less seriously on the climate? Well, I mean, you can look at China's current emissions and it's really the lynch pain for the

whole world. In a lot of ways. The Chinese emissions right now are about the equivalent of the next for largest emitters nation states combined um and within China, you can look at some of the biggest emitting companies, many which are state controlled or heavily state influenced, and the emissions of those companies will be as large as some very significant you know, like individual Europeans and Chinese steelmaker will have the same size emissions. But there's also a

lot of signs for optimism there. I mean, unlike Joe Biden's struggles in the United States, the Chinese government does have a large voice in terms of what it's a huge omitting companies do. There's not a need to pass legislation. China is enormous consumer and driver of the renewable energy transition. Whether you're looking at things like the installed wind capacity that will be added in two so much of that will be in China. The same thing with a new

solar capacity will be arriving in China. And even at the end of this year, we saw China cross a threshold where one in five vehicle sold was an electric vehicle. So there really are signs for optimism there. Uh, it's like everything else though, I guess a bit of a mixed bag. And I think Tom also mentioned the sort of the energy shortages and ectricity problems in China last year.

I did see there was an article in The Economist actually that was claiming that this two was going to be a real reality check moment for the world's climate ambitions, because we saw last year when push comes to shove, or in the case of the UK, you know, the wind fails to blow, um, we immediately crank up you know, the dirtiest power stations again, or in the case of China and India, we crank up coal output because energy prices are soaring, and that and those carbon neutral options,

those green options that we like to think we have, are actually not quite there yet. Do we have a another disconnect there between our our great green ambitions and where the world actually is now. I think that's right. If the expectation is that renewable energy could step in the place of very volatible fossil energy markets and just you know, be a stabilizing force when the price of natural gas or oil or call was shooting up, I

think that that is premature. On the other hand, I think there's a certain degree of the transition that is beaked into the kick ring now, even if you're looking at a place like China. UM, the China's whole strategy around electric vehicle adoption is because they don't have much in the way of oil domestically. They're reliant in an

American and Australian lergy imports. So I don't think there's anything that's going to throw off the continued adoption in around the world, but especially in China, of renewable energy. And I think one of the really fascinating questions to track in the year ahead is the extent to which higher fossil energy prices, higher oil prices um are something that drive people towards more renewable energy investment, or it creates kind of political backlash against renewables and slows things down.

It's a real open question. I think. I feel like it's an economist I should know whether it's a good thing or a bad thing for energy prices to go up. But I agree with you, I think it's it's it's kind of difficult. Um. Mid climate concerns were pretty prominent in the German election When I talked to our German correspondents a few weeks ago about the new government, they didn't think it was going to signal a very big

change in German policy for twenty two empty two. But you've already highlighted we have another fantastically important election coming up, the French presidential election. Is there a chance of a serious upset there? Quickly on Germany, Stephanie, before I talked to you about France, I think we're actually upcoming a bit more bullish on Germany. Actually, I think Schultz is going to do quite a lot domestically on fiscal policy.

I think that's clear. They're not going to amend the constitution, but they're figuring out all kinds of innovative ways in which they can circumvent the rules and ensure they're they're spending more, maybe you know, in the order of no point five one one five percentage GDP that could be quite substantial. But even on Europe, I think people are getting a bit more optimistic about what shots might do.

The Finance Minister Christine Lindner has been sounding very very dovish indeed, and I think now the question is if Linda is not a constraint how far the shots himself want to go. So I think Germany is something to watch, certainly on the Europe side, where there might be quite some upside surprise next year. In France, I think, look, Macron is in an interesting position. He's at twenty tw ex percent, quite stable for a sitting president at this

point in his political cycle. All of the carnage is one level below Macron, primarily on the center right and the far right, where you have Lapen, Valerie Progress who is the nominee for the center right, and Eric Zamore, this somewhat weird racist pundit who announced his campaign to great fanfare, had a fair amoun of momentum but has now has now dropped off. He's basically around fourteen percent. Progress has got something of a boost, she's at seventeen

and La penn is in second place. So Macron is floating above all of this mess. Assuming or Macron does not massively derail things, I suspect you know he will. He will ultimately capture the Elize his His most competitive contender would be Valerie Progress in the run off. If she can get into the run off, she'll be dangerous for him because she's competent, Centrists sensible on Europe. There's a very large part of the left that feels they

put Macron into power. Now they feel completely disenfranchised because he tapped to the right during his during his presidency, her challenge will be getting into the runoff. So I think, look, I think it should be good for Macron, assuming no big surprises. Otherwise, I think progress is the one to look for. The last thing I'll say on the pen, I think this is her final moment. She's a proven loser at every every every election she's runn she typically

performs worse than her pollings. I suspect next year Will Will Will Will will be much the same, and at some point the niece will then take over and there'll be a bigger challenge for two thousand and twenty seven. This is a family that just keeps on producing more potential candidates for the for the far right. And you'll correct me, but my memory is this time in the residential cycle where Macron was elected. At this stage he was nowhere as a candidate. I mean we should remember

he was an outsider. He had created his own political movement in order to run and conversations we would have had even sort of early in the year of the election. UM, he would not have featured very prominently in UM. It took a scandal, uh, and the for for one of the other main candidates to put in more seriously in the running. You know, is there any chance of that it's just someone coming out of nowhere at this point, Well,

we've already had two surprises, Stephanie. I mean, Eric Zamore was a surprise, and Valerie Progresses, the center right nominee,

was a surprise. We all expected Michelle Barnier. So I absolutely expect there to be more surprised as I can't say what they will be, but inherent I think in the French race, because it's a two round runoff means as you approached the first round on the tenth of April, if there was a big terrorist attack some of the bad news, that could completely derail Macron and then all of a sudden you've got to run off with you know, a candidate with lpennens and more or something else, which

I think would be quite dangerous with lots of downside risks. So it's absolutely possible. So I guess that's that's one tip for next year. If you're if you're someone who loves the thrills and spills of an entertaining presidential election and you're casting around for one to follow. France has a proven track record of being entertaining, um and full

of surprises. As we speak, there has been no end of scandals and bad news for Boris Johnson in the UK, which we don't need to go into, but mainly involved various leaks involving lots of parties that he had been part of, all his staff have been part of when everybody else was supposedly locked up at home due to COVID. I guess I'll just ask you the straight question. There's no election scheduled, but will Boris Johnson still be Prime

Minister of the UK in twelve months time? So it was Stephanie where a Fort that he will be replaced next year, and I'd say strong upward pressure on that number. You know, I'll say to you that every single person I'm talking to Westminster basically thinks it's the base case that he will go next year. They think it's inevitable. Now you know he's really in trouble, and you know

the Tory Party is not the labor party. If they believe Johnson's an electoral liability, they will look to ditch him, I think next year so that they're competitive for twenty four. Everybody is looking at the at the swinging Shropshire North where the Tories just lost a safe seat to the Liberal Democrats and calculating what that would mean for their seats. I think there's lots of concern about Johnson and what are the opinion polls saying Labor has a nine point

lead now on average. I think in the last five or ten surveys, you know, can the Tories close that gap or his case star I'm going to keep a steel on those numbers. If he does, I suspect that again will promote more trouble for Johnson next year. The one thing to look for will be the main local elections. If the Tories performed badly in those local authority elections, then I think there will be a move to probably on seat him with a view to the third quarter

next year. So if you weren't paying attention to Shropshire North, that's another election for you to to to pay attention to. Thanks thanks mad Nancy. If we come back to the us UM, the big political event there for two is obviously going to be the mid terms. At the moment, very low expectations in terms of the Democrat outcome. The Democrat result in those elections is inflation does does does?

What happens to inflation between now and then? Is that going to have a big impact on those results or do you think it's it's already sort of toast for the Democrats. I think that the Democrats, you know, historically the party in power always loses seats in the mid terms, and I think that people in the White House expect that Democrats will lose seats. I think it's just a

matter of to what degree they lose seats. I think the two key things that I'll be watching in the mid terms are what is happening with COVID and what is happening with the economy, particularly with inflation. Um you know, I think people in the White House are hoping that inflation eases by the summer, because that's when voters typically

make up their minds. But a lot of economists think it will ease sometime in two but not necessarily by the election, And so I think the timing of when prices start to drop will be very key to Biden's political future. And then of course just COVID, I mean, are they able to get it under control? Is there a new variant um, can they convince more people to

get vaccinated and boosted? Those are really the outstanding questions that I think, will you know, determine that the contours of the midterms and what happens with Democrats if they lose both the House and Senate or just one um, But I think people in the White House are bracing for a big loss in and just quickly. I mean,

you spend your life working in the White House. I mean a year ago, the staff is that you see there would have been super excited and enthusiastic about getting getting their hands back on the levers of power in the US. You had a big State of the Union addressed by President Biden that people got felt like was a real sort of momentum. Are they all really depressed now and they have their hands heads in their hands?

That's a great question. I think it has been a very very rough stretch for them, and it started with the withdrawal from Afghan to stand in August, which did not go as they thought it would. It was you know, very poor, and and the President was very upset about it. His advisors were upset about it. They were blaming people. Um. And then I think that inflation and how long it has lasted has been a surprise to them. They were wrong about the trajectory of that, and it has caught

the muff guard. And then COVID has just been a real problem for them. They really claimed victory and July fourth and said that there was going to be a return to normalcy. That has not turned out to be the case. And I feel like people there feel very frustrated that, you know, their plans have gone a little bit astray, partly you know, out of their own making, like the Afghanistan withdrawal, But then other things are a little bit out of their control, like a new variant

or Americans refusal to get vaccinated. Those are things that they can't necessarily control, but yet will still be blamed for. Okay, well, we had pretty much to the end. Uh tol M actually started by reminding us of some of the stories that called us by surprise in the last year or two. UM. So I want to just end by asking all of you briefly what you'll be looking out for in the form of surprises. You know what, what would be the wild card that you think, um, we should pay attention

to in twenty twenty two. Well, I think one thing that's gonna be fascinating to watch play out next year is the way that net zero is defined by big

banks and big financial firms. We saw four and fifty financial firms worldwide, including all the biggest banks in the US and Europe, sign up to a net zero plan and the margins of COP that kind of on the sidelines of COP, no one really knows what it means to be a net zero bank at this point, and that process of defining that is going to play out over the upcoming months, and it will be fascinating to see how a big bank like JP Morgan tries to um, you know, shape those rules in terms of how we

define that and finance more broadly, As the sort of options for big like government action under Biden are diminishing the role of finance and business in the energy transition, next year is just going to be enormous. So whether that's watching venture capital spending on things like clean meat or new materials, or um looking at the nascent market for carbon removal and watching how venture money moves into that.

I think all of those things are going to be really fascinating and I could wouldn't be a good climate editor without mentioning the always wild card hanging over all of this, which is, you know, the likelihood and chance for extreme weather disasters fueled by climate change to really affect the way, um this story unfolds in the year ahead. I mean, that's a risk we're going to be living

with basically forever now, um. And there's all all manner of risk on that front next year, and we should say there was plenty of that in twenty one as well. Thanks um mox Abo Roman, what's your wild card? We're looking at the tensions between Eastern and Western Europe. I think they could prove to be a very big deal

next year. Poland and Hungary and have not received money from this Pandemic Recovery fund that was the style lisition in December twenty to facilitate economic recovery on the back of COVID because the institutions in Brussels, Germany other member states want to bring them back into compliance with the EUSE Treatise. There's a sense that the democratic backsliding that we've seen in both those countries has gone too far, and now is the moment to pull them back into

the quote unquote European fold. I think their their threat effectively to the rest of Europe is give us our money or will wreck your union. So does does the European Union become ungovernable next year because of the vetos that are being used by Poland and Hungary that prevent progress on legislative and strategic and political goals. I think that's a big risk and something certainly will be watching closely. Nancy. I'm assuming on the base of what you said that

your wild card isn't a great stunning Democrat victory in elections. Yes, it's not that. I In addition to inflation and what happens with COVID, I would say the wild card that we haven't talked about in the U s A is the housing market. Um. The housing market has really taken off, particularly for single family homes and so have been homes as people were looking for more space and backyards in

the pandemic, and I think it's been very frothy. Prices have risen quite a bit um and I think that it's something that economists that I talked to, but also White House officials are closely watching just to see if this ends up being some sort of housing bubble. Tom Wolick, your world card, um so so. Two years into the pandemic stuff, I'm finding it increasingly difficult to separate my

entrenched pessimism from attempts at objective analysis. And I have to say that the threat of extreme weather events, a collapse of the European Union or bursting of the US real estate bubble on on helping with that effort. But let me let me add to the sort of sense of despair by throwing out the possibility of a twilight of the economic idols um so um across the world. We've just just throwing that out throwing out there. Now I'm gonna attempt to define it as well. Um So.

Around the world we've seen sort of this populous wave sweep away all of the institutions, um But the institutions that have remained standing have been the economic policy institutions. Right. We can still count on the I, m F and the FED and the other central banks for objective analysis for policy decisions which are well intentioned and which are right. More often than they're wrong. But in one we've seen scandal after scandal. We've seen scandals at the I m

F and the World Bank. Accusations that the head of the International Monetary Fund was cooking the books on the Doing Business rankings to elevate China up the rankings. Allegations about insider trading at the FED, members of the f O m C actively trading in the markets which are

shaped so heavily by their interest rate decisions. So my risk for two, and it really is a risk, not a base case, is that we see a collapse of confidence in the economic policy institutions, and of course coming at a moment when inflation is high and inflation expectations arising. If that collapsing confidence happens, it really couldn't be worse timed. Well. Typically, Tom will like you've ended on this very magisterial note, so I must immediately lower the tone and say my

personal wild card is much more prosaic. It's the English football team is going to win the cat Art World Cup. Um, and then all the people that have been complaining about this is a horribly controversial World Cup, a completely the wrong time in a country that doesn't play football. We will all agree that it was a fantastic place to hold the World Cup after all. Thanks to everyone who's

been on this panel, I hope you've enjoyed listening. We'll be back next week with more on the ground insight into the global economy, and in the meantime, you can find us on the Bloomberg Terminal, website, app, or wherever you get your podcasts. And for more news and analysis from Bloomberg Economics, you should also follow at Economics on Twitter.

You can find me on at my Stephanomics. This episode was produced by Mangus Hendrickson, with special thanks to my panelist Muktaba Raman, Nancy Cook, Aaron Rutkoff, and Tom Marlick. Mike Sasso is our executive producer and the head of Bloomberg Podcast is Francesca Levi. A very happy New Year.