Latest / Bloomberg Intelligence / HFE's Weinberg Still Forecasts Global Economic Downturn (Audio)

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HFE's Weinberg Still Forecasts Global Economic Downturn (Audio) · Bloomberg Intelligence

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  Speaker 1: all right, thank you very much, Bill Maloney, and to
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  Speaker 1: hear live breaking news over your Bloomberg Time squawk SQ
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  Speaker 1: you a w K on your terminal. I'm Charlie Pellock.
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  Speaker 1: That's the Bloomberg business flash. This is taking stock. The
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  Speaker 1: Fed in focus on Bloomberg Radio Central Banks in focus.
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  Speaker 1: As we turned to the Bank of England's Hill Mary
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  Speaker 1: policy passes. Our Bloomberg intelligence in team in London puts
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  Speaker 1: it a three wronged easing of monetary conditions. Will it
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  Speaker 1: be enough? Our NEXCU says, depending on what happens with inflation,
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  Speaker 1: Could it be a little bit too much? It's certainly
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  Speaker 1: hit the pound hard today. Joining us now is Carl Weinberg.
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  Speaker 1: He is chief economist Managing director for High Frequency Economics
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  Speaker 1: So Carl, Now that you've had a little more chance
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  Speaker 1: to read through everything that the Bank of England said
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  Speaker 1: its statement, listen to Mark Karney, Uh, think about it.
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  Speaker 1: How big, how important is this move by the Bank
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  Speaker 1: of England today. Well, it's a really substantial program, There's
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  Speaker 1: no doubt about that. So he very clearly saw them
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  Speaker 1: cut down the cost of borrowing, both directly and indirectly
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  Speaker 1: by lowering their bank rate, by setting up a program
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  Speaker 1: to channel funds at the lowest possible cost into banks.
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  Speaker 1: To make sure that those lower interest rates passed through
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  Speaker 1: the economy, we saw purchases of corporate bonds and government
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  Speaker 1: bonds announced. It just doesn't get any more comprehensive than this.
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  Speaker 1: If they wanted to hit the we're hit the nail
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  Speaker 1: on the head with a hammer. They certainly hit it hard.
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  Speaker 1: Did they hit it with a sledgehammer? Does this stuff
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  Speaker 1: actually work? Or does it just create problems that they
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  Speaker 1: can't solve that are even bigger down the road? I
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  Speaker 1: pim Well, you know that's the big question, you know,
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  Speaker 1: down the road. How do we unwind all of this?
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  Speaker 1: That's always the question. But that's not the question for today,
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  Speaker 1: and it's not the question for the next period of time.
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  Speaker 1: When I first read the program this morning, I thought
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  Speaker 1: maybe they had been a little bit too aggressive in
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  Speaker 1: their forecast of marking down their economic growth prospects and
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  Speaker 1: their inflation forecast. I thought, you know, they could have
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  Speaker 1: been a little bit more conservative about that. But then
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  Speaker 1: during the course of the day I've reflected on a
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  Speaker 1: little bit, and I think that maybe this is where
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  Speaker 1: they want to be. They would rather hit it too
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  Speaker 1: hard and then be able to come back, then not
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  Speaker 1: hit it enough and to be seen chasing after an
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  Speaker 1: ever receding target. So I think that they've hit it
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  Speaker 1: overly hard, probably on purpose, and warned us that you know,
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  Speaker 1: there's more to come if necessary, but unspoken as the
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  Speaker 1: fact that if it's not necessary, it doesn't have to
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  Speaker 1: get any bigger than this. Well, Carl, and I guess
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  Speaker 1: that's one of one of the analysies I've read, uh
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  Speaker 1: following the and of course there's lots right everyone's trying
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  Speaker 1: to figure this out, is that that maybe the view
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  Speaker 1: of the economy the Bank oftving express today lowered it
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  Speaker 1: by a good margin but it never turns negative, was
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  Speaker 1: too optimistic, which is one reason they'd have to maybe
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  Speaker 1: cut more in November. But is Mark Kearney's marketing his
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  Speaker 1: team figuring that if we are aggressive now and we
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  Speaker 1: take all these steps, we can avoid that deep of
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  Speaker 1: a slump in the UK economy. Is that why they
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  Speaker 1: didn't downgrade their forecast of the economy even further. Well,
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  Speaker 1: you know, Kathleen, I'm going to answer your question with
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  Speaker 1: a question, and that question is who knows? All right?
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  Speaker 1: We are in uncharted territory as far as the UK
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  Speaker 1: economy is concerned. We don't have a recent historical precedent
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  Speaker 1: to look back on and say, the last time a
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  Speaker 1: country west the European Union, this is what happened. You know.
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  Speaker 1: We don't know what the new terms of business are
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  Speaker 1: going to be. We don't know anything about how the
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  Speaker 1: UK economy is going to look two years from now,
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  Speaker 1: except that it's going to be different. So the Bank
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  Speaker 1: has staked itself out as being a bearer on the subject,
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  Speaker 1: and this of course was very controversial during the campaign.
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  Speaker 1: The Governor was accused of being prejudiced towards the Stay
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  Speaker 1: side and he had to send himself in Parliament on this.
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  Speaker 1: But he is very clearly on the view that this
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  Speaker 1: is a hard hit to the economy, that the risks
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  Speaker 1: are huge, and he's prepared to forecast that those risks
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  Speaker 1: turned into realities, and that's what we saw today. So
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  Speaker 1: this is this is where they are, and they could
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  Speaker 1: very well be right. And I just don't know enough.
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  Speaker 1: I'm not smart enough to figure out in this uncertain
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  Speaker 1: circumstance whether I think they're right or right. I'm just
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  Speaker 1: along for the ride at this point, Carl, I just
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  Speaker 1: want to push a little bit on being along for
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  Speaker 1: this ride. I mean, as we're talking about parallel economies,
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  Speaker 1: because when you talk about low interest rates and bond buying,
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  Speaker 1: that's the financial economy. Revolving credit rates, they remain high.
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  Speaker 1: Down payments for real estate have increased in your lucky
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  Speaker 1: if you can get the mortgage at three and a
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  Speaker 1: half percent, at least in the United States, and we've
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  Speaker 1: got sluggish wage growth in the developing in the developed world,
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  Speaker 1: How is what they're doing actually feeding into the real economy. Yeah, Well,
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  Speaker 1: in the specifics of the UK market right now, mortgage
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  Speaker 1: lending has been the only lending that's been occurring. It's
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  Speaker 1: been actually at a faster rate than they'd like to see.
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  Speaker 1: The real estate market has been through the roof there,
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  Speaker 1: and they've been trying to cool lending. So in a sense,
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  Speaker 1: this is kind of a stop and start and then
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  Speaker 1: start again policy on housing to try to keep it
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  Speaker 1: from collapsing altogether. On their forecast, they're predicting a decline
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  Speaker 1: in house prices. They're predicting almost no economic growth in
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  Speaker 1: the second half of this year. This is a much
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  Speaker 1: more severe circumstance than we've seen before, and you've got
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  Speaker 1: to believe that if that's what that's what's actually going
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  Speaker 1: to happen. Lower interest rates certainly can't hurt and whatever
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  Speaker 1: help they provide would be welcomers. Well, of course, you
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  Speaker 1: just mentioned, Carl, the fact that they've got this found
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  Speaker 1: clever corporate lending program and can talk about that more
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  Speaker 1: in a minute. In ten seconds, though, do you see
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  Speaker 1: another rate cut in November? Um, I'm gonna say, I
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  Speaker 1: don't know. Let's go yet to see some real hard
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  Speaker 1: data on how the economy has performed in this post
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  Speaker 1: brexit period. Let's look at some real hard numbers and
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  Speaker 1: then we'll make a judgment. All Right, We've got more
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  Speaker 1: with Carl Weinberg. He is chief economist high Frequency Economics.
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  Speaker 1: You can follow him on Twitter at c B Weinberg.
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  Speaker 1: We've got more on the Bank of England's rate decision,
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  Speaker 1: the European Central Bank and negative interest rates in the
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  Speaker 1: future of the global economy. This is taking Stock. I'm
• 7:39
  Speaker 1: Pim Fox, my co host Kathleen Hayes. This is Bloomberg.
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  Speaker 1: Bank of England Governor Mark Karney said he is against
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  Speaker 1: negative interest rates. He doesn't like the idea of helicopter money.
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  Speaker 1: But as he decides to buy more bonds in the UK,
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  Speaker 1: is that where he's heading. That's next on taking Stock
• 8:04
  Speaker 1: broadcasting live to New York, Bloomberg eleven, Rio to Washington,
• 8:08
  Speaker 1: d C. Bloomberg to Boston, Bloomberg twelve to San Francisco,
• 8:13
  Speaker 1: Bloomberg nine to the country, SIS at jam General one
• 8:17
  Speaker 1: nineteen and around the globe the Bloomberg Radio Plus happened.
• 8:21
  Speaker 1: Bloomberg got gone. This is taking Stock. I'm Kathleen Hayes
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  Speaker 1: along with him Fox. The Bank of England cutting its
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  Speaker 1: key rate, getting ready to buy more bonds. Most of
• 8:31
  Speaker 1: the world is heading in the direction of more stimulus.
• 8:33
  Speaker 1: Can the Federal Reserve resist? And are there some signals
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  Speaker 1: some negative signals about the entire global economy With all
• 8:40
  Speaker 1: these central banks. On the March, We're going to continue
• 8:43
  Speaker 1: our conversation with Karl Weinberger of High Frequency Economics. Right now,
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  Speaker 1: let's go to Charlie Kellett in the Bloomberg news room
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  Speaker 1: for Bloomberg Business Flag and I thank you Phim, thank
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  Speaker 1: you Kathleen. On mixed picture for stocks right now, little change,
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  Speaker 1: that is the takeaway here. We've got the down industrials
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  Speaker 1: down eleven points eighteen pounds than three hundred forty three,
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  Speaker 1: a drop there of less than point one percent, SMP
• 9:04
  Speaker 1: five hundred index unchanged, and nastack is up seven to
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  Speaker 1: fifty one sixty seven, a game there of two tenths
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  Speaker 1: of one percent. Mixed corporate earnings offering little direction. Fertilizer
• 9:15
  Speaker 1: maker CF Industries seeing its steepest drop since January after
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  Speaker 1: its results miss analyst predictions. Shares of CF they are
• 9:24
  Speaker 1: down now by twelve point three two percent. MetLife tumbling
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  Speaker 1: nine point one percent after its quarterly profit disappointed Bank
• 9:32
  Speaker 1: of England Governor Mark Carney unveiling an exceptional package of stimulus,
• 9:36
  Speaker 1: including the Bank's first interest rate cut in seven years.
• 9:40
  Speaker 1: Those policy makers slash growth forecast by the most ever
• 9:43
  Speaker 1: after Britain's decision to leave the European Union, and of
• 9:46
  Speaker 1: the news conference, Carney took questions on a number of topics,
• 9:50
  Speaker 1: including last June's Brexit vote. There is a great degree
• 9:54
  Speaker 1: of uncertainty. It's entirely understandable that there is there's uncertainty
• 9:57
  Speaker 1: about the eventual model that we will have at the
• 10:00
  Speaker 1: European Union. There are number of options on the table
• 10:03
  Speaker 1: um whichever model has chosen itself will require some degree
• 10:08
  Speaker 1: of adjustment in the economy and that brings its own
• 10:10
  Speaker 1: effects on growth and uh end productivity for a period
• 10:14
  Speaker 1: of time. And whilst we gets the all important July
• 10:17
  Speaker 1: jobs are the August jobs numbered, July jobs number tomorrow morning.
• 10:22
  Speaker 1: Today we got jobless claims. The number of Americans filing
• 10:24
  Speaker 1: applications for unemployment benefits rose last week to a level
• 10:28
  Speaker 1: that's still under scores health in the labor market. Claims
• 10:31
  Speaker 1: up by three thousand, two hundred sixty nine thousand, ten year,
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  Speaker 1: up eleven thirty seconds, yield one point five percent, Gold
• 10:38
  Speaker 1: up two tenths of one percent. And now let's take
• 10:41
  Speaker 1: a look at other stories making news. Thank you Charlie
• 10:45
  Speaker 1: from the Bloomberg News room. I'm Jill Schneider. This news
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• 12:30
  Speaker 1: and we thank you and again recapping little change for
• 12:33
  Speaker 1: US equities twenty six minutes to go ahead of the close.
• 12:36
  Speaker 1: We've got the SMP five D indecks down by less
• 12:39
  Speaker 1: than half a point. I'm Charlie Paloton Pats of Bloombird
• 12:42
  Speaker 1: Business Flash. This is taking stock the FED in focus
• 12:47
  Speaker 1: on Bloomberg Radio. We can't heer our conversation. Now. I'm
• 12:52
  Speaker 1: taking a look at the Bank of England, what they did,
• 12:54
  Speaker 1: what they said, and what is going to happen next.
• 12:56
  Speaker 1: Carl Weinbergger's ar guests chief economist, Managing director for High
• 13:00
  Speaker 1: Frequency Economics. You know, Carl PM was just raising the
• 13:04
  Speaker 1: question about will this work? You know you're gonna buy bonds,
• 13:09
  Speaker 1: and I think it's interesting to ponder a point that
• 13:11
  Speaker 1: our Bloomberg intelligence team made about the bond buying, which is,
• 13:15
  Speaker 1: you know you're sending a signal it's going to be stimulus,
• 13:18
  Speaker 1: and that along with the bond buying getting yields down
• 13:21
  Speaker 1: on on borrowing costs, right and along with this targeted
• 13:24
  Speaker 1: corporate bond buying program where they're really going to try
• 13:27
  Speaker 1: to funnel money to real UK businesses right that that
• 13:31
  Speaker 1: they're trying to hit this whole question of the impact
• 13:34
  Speaker 1: of uncertainty, which has been a big hit to their
• 13:37
  Speaker 1: economy already by making sure that businesses can really get
• 13:41
  Speaker 1: money and really do stuff. Is this is this a
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  Speaker 1: clever step by the Bank afy And do you think
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  Speaker 1: of potentially more effective than some other things central banks
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  Speaker 1: have done well? I think it's certainly what they hope
• 13:50
  Speaker 1: to do, Kathleen, and certainly lending to businesses has been
• 13:53
  Speaker 1: a store point. We've seen credit overall in the UK
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  Speaker 1: go from contraction to a very tepid rate of increase
• 13:59
  Speaker 1: in the last few monthly reports, but lending the businesses
• 14:03
  Speaker 1: remains flat at best. Most of the lending has been
• 14:06
  Speaker 1: to consumers and for mortgages. So businesses do need more
• 14:10
  Speaker 1: credit and they'll need it more than ever in this
• 14:12
  Speaker 1: uncertain period in the UK, starting as they did with
• 14:16
  Speaker 1: yields a little higher than they have been recently in Europe. Uh,
• 14:20
  Speaker 1: there's certainly a case to be made that long term
• 14:23
  Speaker 1: interest rates and borrowing costs and the cost of bancredit
• 14:26
  Speaker 1: can be made cheaper to advantage to bring the economy
• 14:31
  Speaker 1: up a little bit at a faster pace of growth.
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  Speaker 1: You know, of course, ten year yields are only sixty
• 14:35
  Speaker 1: four basis points, so you can only get so much
• 14:39
  Speaker 1: out of buying, you know, more sovereign bonds and bringing
• 14:42
  Speaker 1: down the yield curve. As far as corporate bonds are concerned,
• 14:45
  Speaker 1: I personally have a problem with this. It doesn't stop
• 14:48
  Speaker 1: the Bank of England or the ECB from doing it.
• 14:50
  Speaker 1: But I view corporate bond purchases as more microeconomic policy
• 14:54
  Speaker 1: and tinkering with the price of risk, rather than macroeconomic policy,
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  Speaker 1: which is what happens when they by a sovereign bond
• 15:01
  Speaker 1: and bring down all interest rates. But that's my problem,
• 15:03
  Speaker 1: not theres They clearly think that lower corporate yields relative
• 15:07
  Speaker 1: to sovereigns are going to help, and more power to them,
• 15:10
  Speaker 1: Carl Weinberke. If you take a look at commodity prices,
• 15:14
  Speaker 1: corn down to about twenty one month lows, wheat hitting
• 15:17
  Speaker 1: a nine year low, soybeans down ten percent from June,
• 15:20
  Speaker 1: down from the peak, agricultural prices falling, crude trading it
• 15:27
  Speaker 1: around forty one about right now, just up about two
• 15:30
  Speaker 1: and a quarter percent. Are we going to experience an
• 15:34
  Speaker 1: economic downturn as a result of these easy money policies?
• 15:38
  Speaker 1: Okammy is stealing my my report to clients over tonight's
• 15:42
  Speaker 1: report and the one that they'll be getting over the weekend.
• 15:44
  Speaker 1: At High Frequency Economics, we are writing about a global
• 15:47
  Speaker 1: economic downturn. We've been writing about it for a long time,
• 15:50
  Speaker 1: and following commodity prices certainly impoverished big parts of the
• 15:54
  Speaker 1: world economy. I view the decline in world trade is
• 15:57
  Speaker 1: being directly linked to the drop and come moodity prices,
• 16:00
  Speaker 1: which makes commodity producers poorer and means they import less
• 16:04
  Speaker 1: stuff from US, which means US exports are a week
• 16:07
  Speaker 1: part of the US outlook. And we've been linking that
• 16:10
  Speaker 1: drop in world trade to an expected slow down impossible
• 16:13
  Speaker 1: contraction of the world economy for a long time. Right now,
• 16:17
  Speaker 1: I track seven central banks and all of them are
• 16:20
  Speaker 1: now easy now have easy monetary conditions, including the FED
• 16:25
  Speaker 1: which is not tightening uh and including d c B
• 16:28
  Speaker 1: which is easing monetary conditions like MAD, the Bank of
• 16:32
  Speaker 1: Japan which is using conditions like ultramad, the BIKE, the
• 16:35
  Speaker 1: Bank of Reserve, Bank of Australia, which just cut interest
• 16:38
  Speaker 1: rates this week, the Canadians who cut interest rates in
• 16:41
  Speaker 1: recent months. All the central banks are doing the same thing.
• 16:44
  Speaker 1: They're going full out toward easing, and they're marking down
• 16:48
  Speaker 1: their forecast every time they do a new forecast exercise
• 16:51
  Speaker 1: to predict even slower and slower growth. I can't help
• 16:53
  Speaker 1: but feel that they're telling us what we should be
• 16:56
  Speaker 1: seeing in the world right now, which is a coordinated
• 16:59
  Speaker 1: slow down in many parts of the world economy at
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  Speaker 1: the same time, and a possible contraction in a lot
• 17:04
  Speaker 1: of places. It's not good carny chance that it's oh
• 17:07
  Speaker 1: the balls now and the fiscal court of the UK,
• 17:10
  Speaker 1: of the Fed of Japan, every country supposedly the fiscal
• 17:13
  Speaker 1: guy's got to carry the ball. Now. Is that going
• 17:15
  Speaker 1: to happen? Well, the ball. That's been what the central
• 17:18
  Speaker 1: bankers have been saying for a while. We know Mario
• 17:20
  Speaker 1: drag said it explicitly. We know that the I m
• 17:23
  Speaker 1: F is called for more fiscal stimulus. Whether it's going
• 17:26
  Speaker 1: to happen or not, you know, that's a political decision.
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  Speaker 1: The economics of it, though, in my view are compelling.
• 17:33
  Speaker 1: This is not the time for austerity. And while in
• 17:36
  Speaker 1: some places like Japan, fiscal policy is misplaced. They're they're
• 17:40
  Speaker 1: trying to fight a demographic challenge that can't be overcome
• 17:44
  Speaker 1: by any economic policy. But certainly the case of Europe,
• 17:47
  Speaker 1: Europe needs a kickstart, and fiscal policy is the way
• 17:50
  Speaker 1: to do it. In many countries in Europe have the
• 17:52
  Speaker 1: fiscal space to make that happen. The UK has committed
• 17:55
  Speaker 1: to fiscal stimulus, that's a good side. The Canadians have
• 17:58
  Speaker 1: committed to fiscal stimulut us. That's a good time the US.
• 18:02
  Speaker 1: We're not going to see any fiscal stimulus here for
• 18:04
  Speaker 1: quite a while. I'm pretty sure of that, just looking
• 18:06
  Speaker 1: at the politics of UH in Washington and the prospects
• 18:10
  Speaker 1: will come out of the upcoming election. UM and UH
• 18:13
  Speaker 1: so who's left, you know, So it's a mixed bag.
• 18:16
  Speaker 1: Some people are moving in that direction. I wish we
• 18:19
  Speaker 1: would see more, but realistically, I don't think the biggest
• 18:22
  Speaker 1: players are going to be at the table for that game.
• 18:24
  Speaker 1: Carl Weinberg, thank you very much, Chief Economist high Frequency Economics.
• 18:29
  Speaker 1: You can follow Carl Weinberg on Twitter at c B
• 18:33
  Speaker 1: Weinberg giving us his thoughts on the Bank of England's
• 18:37
  Speaker 1: rate decision and the potential turned down in the global economy.
• 18:43
  Speaker 1: Looking for fiscal stimulus, that's what Carl Weinberg says might
• 18:48
  Speaker 1: actually be needed. This is taking Stockheim pim Fox My
• 18:51
  Speaker 1: co host Kathleen Hayes, this is Bloomberg Central banks around
• 19:01
  Speaker 1: the world trying to boost their economies. That fed dragging
• 19:04
  Speaker 1: its feet on a raid hike. But what about companies?
• 19:06
  Speaker 1: What about their profits? What about their earnings? Jack Rivken
• 19:10
  Speaker 1: from Altegris coming up next on Bloomberg Radio