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The World Wants the Fed to Stop Raising Rates · Stephanomics

• 0:06
  Speaker 1: Hello, Stephanomics. Here the podcast that brings you the global economy,
• 0:09
  Speaker 1: and this week we are circling the globe to give
• 0:12
  Speaker 1: you an insight into three key pieces of the grand
• 0:15
  Speaker 1: economic jigsaw. We discussed week after week, people, property, and policy.
• 0:21
  Speaker 1: People we know have been a highly sought after commodity
• 0:25
  Speaker 1: in the post COVID world, with employers everywhere struggling to
• 0:29
  Speaker 1: fill empty positions, but millions of people who did have
• 0:32
  Speaker 1: jobs before the pandemic still somehow missing. What's interesting, though,
• 0:37
  Speaker 1: is it's not only the low skilled, potentially unrewarding jobs
• 0:41
  Speaker 1: that are going unfilled. Fashion houses in Italy are also
• 0:45
  Speaker 1: struggling to find people who want to learn how to
• 0:48
  Speaker 1: hand stitch a belt buckle or fashion and elegant pair
• 0:52
  Speaker 1: of shoes. We go to the rolling hills of Tuscany
• 0:55
  Speaker 1: to talk to the head of the iconic fashion brand
• 0:57
  Speaker 1: Fendi about that shortage. In a for a while, we
• 1:01
  Speaker 1: also have the stunning news from Hong Kong that the
• 1:04
  Speaker 1: world's priciest housing market is finally getting very slightly more affordable.
• 1:08
  Speaker 1: Our chief Asia economy correspondent, Ender Current explores why prices
• 1:13
  Speaker 1: are falling there and whether three million dollars can now
• 1:16
  Speaker 1: buy a harbor view in just a few minutes. But
• 1:21
  Speaker 1: first we're going to Washington, d C. For arguably the
• 1:24
  Speaker 1: most important single policy decision in the entire global economy,
• 1:28
  Speaker 1: and it's happening again this week, as the US Central
• 1:31
  Speaker 1: Bank meets to set interest rates. It's particularly interesting this
• 1:35
  Speaker 1: time around because we're expecting the first normal sized interest
• 1:38
  Speaker 1: rate rise half a percentage point since the FED began
• 1:42
  Speaker 1: raising the cost of money in America aggressively some months ago.
• 1:46
  Speaker 1: The FED senior policymakers were also meeting the day after
• 1:50
  Speaker 1: a surprisingly weak figure for US consumer price inflation, holding
• 1:55
  Speaker 1: out the tantalizing possibility that the US might just be
• 1:59
  Speaker 1: turning the corn in its fight against inflation. Well, Bloomberg
• 2:03
  Speaker 1: Chief US economist Anna Wong is grabbing a few minutes
• 2:06
  Speaker 1: on a very busy day to talk to us. Anna,
• 2:08
  Speaker 1: Thank you very much. Um, First, I guess you should
• 2:12
  Speaker 1: just remind us what's happened so far. How much has
• 2:16
  Speaker 1: the FED tightened monetary policy, raised interest rates? And where
• 2:20
  Speaker 1: is it left the official interest rate right now? So
• 2:24
  Speaker 1: this year we saw one of the most rap rapid
• 2:27
  Speaker 1: FED tightening cycle. It's the most rapid pace since the
• 2:30
  Speaker 1: nineteen eighties from zero percent of the Fed Funds rate
• 2:34
  Speaker 1: earlier this year, the Fed has hiked to currently four
• 2:39
  Speaker 1: percent on the upper end, and they're expecting to hike
• 2:43
  Speaker 1: fifty basis point later today too, so that the Fed
• 2:47
  Speaker 1: funds rate will will reach four point five percent after today.
• 2:53
  Speaker 1: And yes, we should explain I'm talking to you because
• 2:55
  Speaker 1: you'd be so busy immediately after the decision we're talking
• 2:58
  Speaker 1: at just before UM. But there is I think it
• 3:02
  Speaker 1: would be safe to say the world would be pretty
• 3:05
  Speaker 1: surprised if we didn't see that half a point interest
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  Speaker 1: rate rise, even though there'll be other details that will
• 3:10
  Speaker 1: get later from the from the press conference, that that
• 3:13
  Speaker 1: seems to be a done deal. Is that fair? That
• 3:16
  Speaker 1: would be a fair characterization. And again, for people who
• 3:20
  Speaker 1: aren't sort of looking at every twist and turn in
• 3:22
  Speaker 1: the markets, just explain what interest rate they're actually setting,
• 3:25
  Speaker 1: because I know some people might think they're setting the
• 3:28
  Speaker 1: interest rate that we might be able to get immediately
• 3:30
  Speaker 1: in a savings account or that we borrow at if
• 3:32
  Speaker 1: we got a mortgage. What is the rate that they're
• 3:35
  Speaker 1: setting and why is it significant? Right? So, the Federal
• 3:38
  Speaker 1: Reserve set a rate called the Federal funds rate, and
• 3:42
  Speaker 1: that's the rate that the borrow rate that the FED
• 3:46
  Speaker 1: lends to other branks. It will take some time for
• 3:50
  Speaker 1: other banks to channel that kind of higher or lower
• 3:53
  Speaker 1: interest rates to you know other you know, other entities
• 3:57
  Speaker 1: that require funds. Ultimately, what affects economy the most is
• 4:01
  Speaker 1: um the longer term rates. So think about um. When
• 4:05
  Speaker 1: you go buy a car, your you might need auto loans,
• 4:08
  Speaker 1: and those auto loans are tied to five tends to
• 4:12
  Speaker 1: be most affected by five year treasury yield, and then mortgages,
• 4:16
  Speaker 1: which will affects a lot of people are most affected
• 4:20
  Speaker 1: by ten year treasury yields. So when the Fed sets
• 4:23
  Speaker 1: a very short term rates, it's trying to affect the
• 4:26
  Speaker 1: rates down the yield curve. Ideally, when the Fed wants
• 4:30
  Speaker 1: to lower inflation, they want to raise the short term
• 4:34
  Speaker 1: rates and then and and as a result, the two
• 4:37
  Speaker 1: year rates will rise, and as a result, five year
• 4:40
  Speaker 1: rates will rise. But sometimes things just don't go their way.
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  Speaker 1: I mean, for example, if um, you know, if if
• 4:47
  Speaker 1: suddenly there's a global financial turmoil, let's say in China,
• 4:51
  Speaker 1: then suddenly a lot of capital will flow out of
• 4:54
  Speaker 1: China and into the United States seeking safe haven protection
• 4:58
  Speaker 1: and that could loosen financial additions. So so so when
• 5:02
  Speaker 1: the FED sets monetary policy, trying to heighten monetary policy,
• 5:06
  Speaker 1: and it actually depends a lot more other than the
• 5:09
  Speaker 1: immediate instrument that they can control. Yeah, so it's sort
• 5:12
  Speaker 1: of setting the floor for rates and hoping that that
• 5:15
  Speaker 1: has a kind of ripple effect for the rest of
• 5:17
  Speaker 1: the market. But as you say, loads of other things
• 5:19
  Speaker 1: can get in the way, whether people are feeling confident,
• 5:21
  Speaker 1: whether banks are desperate to lend or desperate not to lend,
• 5:24
  Speaker 1: And there's lots of things that can have affected. So
• 5:26
  Speaker 1: it's certainly the case that the rate you hear about
• 5:28
  Speaker 1: when you hear about the federal funds rate or in
• 5:30
  Speaker 1: other countries, the base rate is not necessarily the rate
• 5:33
  Speaker 1: that you're going to be offered if you try and
• 5:35
  Speaker 1: borrow money. Now, I mentioned that there was a pretty
• 5:39
  Speaker 1: interesting inflation number that came out earlier this week that
• 5:44
  Speaker 1: surprised many people, was much lower than expected. Um. Does
• 5:48
  Speaker 1: that change the calculation that that Fed policymakers have been
• 5:52
  Speaker 1: making at their meeting, Well, it's certainly. The surprise yesterday
• 5:58
  Speaker 1: was really a big surprise, an unusually large surprise. UM.
• 6:02
  Speaker 1: Just to say, how how big of a surprise it is?
• 6:06
  Speaker 1: Most people on the Bloomberg survey, I think that it
• 6:10
  Speaker 1: would be the monthly change on the headline would be
• 6:12
  Speaker 1: point three somethings gone up just in one month, Yes,
• 6:17
  Speaker 1: in one month. And we were expecting a softer point too.
• 6:20
  Speaker 1: And there are some people who think it's point too,
• 6:22
  Speaker 1: but nobody thought it would be point one. So we
• 6:25
  Speaker 1: were just talking about the ripple effect of fitts Uh
• 6:28
  Speaker 1: monetary policy. Well, what what yesterday's report did was that
• 6:32
  Speaker 1: it lowered the ten year treasury yields by twenty bits
• 6:36
  Speaker 1: immediately upon its release. Two year treasury yields also plunged
• 6:40
  Speaker 1: by twenty basis point upon the release of the of
• 6:43
  Speaker 1: the report. And what that suggests to you is that
• 6:46
  Speaker 1: investors are revising down their outlook several months and years
• 6:52
  Speaker 1: ahead of where inflation could be. On a very basic level,
• 6:55
  Speaker 1: if you think interest rates on average, you're going to
• 6:57
  Speaker 1: be a bit lower over the next two years than
• 6:59
  Speaker 1: you're the rate you can you will lend to someone
• 7:01
  Speaker 1: for two years. Um goes goes down a bit. But
• 7:04
  Speaker 1: there was a there was an interesting kind of side
• 7:07
  Speaker 1: drama around that decision because, as you say, it was
• 7:10
  Speaker 1: a surprising result, and when you have a surprise, you
• 7:13
  Speaker 1: have the potential maybe for people to make money who
• 7:16
  Speaker 1: were betting on one side, and then the market moves
• 7:19
  Speaker 1: dramatically and actually there was some pretty suspicious goings on.
• 7:23
  Speaker 1: So tell us more about that, right, So, about a
• 7:26
  Speaker 1: minute before the data CPI data was released at eight thirty,
• 7:31
  Speaker 1: that was suddenly a significant amount of trading on a
• 7:35
  Speaker 1: treasury yield and UM in the direction of where where
• 7:39
  Speaker 1: if you we do get a dolvish CPI price, that
• 7:43
  Speaker 1: that would be where things would be trading. So so
• 7:45
  Speaker 1: by by being a bit early before you know everybody
• 7:49
  Speaker 1: gets the same data, somebody is making a lot of
• 7:52
  Speaker 1: money with that move. So it's very unusual and statistically
• 7:56
  Speaker 1: it just doesn't happen in in even in previous releases,
• 8:00
  Speaker 1: don't see that kind of UM you know, UM trading activity.
• 8:04
  Speaker 1: And also what makes it even more suspicious is at
• 8:08
  Speaker 1: the same time, a data delivery platform that's very popular
• 8:12
  Speaker 1: among pop policy makers and Wall Street analysts, Haver Analytics,
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  Speaker 1: also crashed UM at the same time. And if you
• 8:22
  Speaker 1: put the two dots together, UM you know that trading
• 8:25
  Speaker 1: activity and also the crash of haveor it almost you know,
• 8:30
  Speaker 1: it's a theory, but it's not a Faverify theory. But
• 8:33
  Speaker 1: a theory could be that somebody could be trying to
• 8:36
  Speaker 1: delay the reaction of you know, Wall Street analysts so
• 8:40
  Speaker 1: that they can prolong on that you know, early information.
• 8:44
  Speaker 1: If they do have early information of the CPI report,
• 8:46
  Speaker 1: then they could prolong that period where they're um trading
• 8:50
  Speaker 1: before everybody gets in on the information. And as you said,
• 8:55
  Speaker 1: they could be we could be talking about big money.
• 8:58
  Speaker 1: And certainly anyone used to work at FED, the FED
• 9:01
  Speaker 1: and some people in the U. S. Treasury would have
• 9:04
  Speaker 1: in the U. S. Administration would have prior notice of
• 9:07
  Speaker 1: that figure. And as you said, it was a surprise.
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  Speaker 1: Anyone who looked at it would say that's going to
• 9:12
  Speaker 1: cause a market move. So there's now going to be
• 9:15
  Speaker 1: a real microscope on all the people who who did
• 9:19
  Speaker 1: see that data before, because we pretty explosive if they
• 9:21
  Speaker 1: had leaked it. I don't envy them. I think they're
• 9:23
  Speaker 1: in for a pretty uncomfortable UM week or so. But
• 9:28
  Speaker 1: just to get back to the sort of main story,
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  Speaker 1: I mean, Anna, when you sit around, I don't know
• 9:31
  Speaker 1: if you're going to be able to get to see
• 9:32
  Speaker 1: any of your family over the holiday period. But when
• 9:34
  Speaker 1: they say, Anna, you're the U S economist. Are we
• 9:38
  Speaker 1: nearing the end of this battle against inflation? What do
• 9:41
  Speaker 1: you say? And and they will hate me for it,
• 9:46
  Speaker 1: but I'll say, it's really unclear. UM. So so I
• 9:54
  Speaker 1: you know, economists did have a poor track record with
• 9:57
  Speaker 1: with UM with predicting the rise of inflation in the
• 10:01
  Speaker 1: last two years. But I think what we did learn
• 10:03
  Speaker 1: is that UM, there are ways that inflation could continue
• 10:07
  Speaker 1: to surprise. And number one is that if there are
• 10:12
  Speaker 1: unforeseen external supply shocks. So suppose that you know, China
• 10:18
  Speaker 1: reopened successfully in six months time and commodity prices spike again,
• 10:23
  Speaker 1: and that UM Russia decide to cut UM supply of
• 10:28
  Speaker 1: oil production so that so that they could punish those
• 10:32
  Speaker 1: who who who joined in on the G seven price caps.
• 10:35
  Speaker 1: Then what we see is that our surgeons of UH
• 10:39
  Speaker 1: inflation mid next year, and then inflation expectations would could
• 10:43
  Speaker 1: rise significantly, and then the Fed will have to you know,
• 10:48
  Speaker 1: revamp their their whole rates rise UM campaign, even after
• 10:53
  Speaker 1: pausing around UM, you know, the second quarter of next
• 10:57
  Speaker 1: year as everybody currently expects. So so I think they're
• 11:01
  Speaker 1: looking ahead there's just so much uncertain certainty. And I
• 11:05
  Speaker 1: think the most useful way to look at the world
• 11:08
  Speaker 1: right now is scenario planning, and just think about how,
• 11:11
  Speaker 1: you know, if what shocks could lead to a surprising
• 11:15
  Speaker 1: resurgence and inflation, or what shocks could lead to more
• 11:17
  Speaker 1: deflationary pressure, And if you think about how the economy
• 11:21
  Speaker 1: is being affected by these higher interest rates. You know,
• 11:24
  Speaker 1: we talk about a recession being inevitable in the US
• 11:27
  Speaker 1: and other places because of this need to squeeze demand
• 11:32
  Speaker 1: and bring inflation down. And are we are we seeing
• 11:35
  Speaker 1: that happen? And are you any clearer on whether we
• 11:40
  Speaker 1: will have a recession in the US? You know, there, Stephanie,
• 11:44
  Speaker 1: there has been a little bit of a disconnect. Everybody
• 11:47
  Speaker 1: became more gloomy about the U S economy. Recession talks
• 11:53
  Speaker 1: has increased significantly over the past two weeks. But on
• 11:57
  Speaker 1: the other hand, real data is surprising on the on
• 12:00
  Speaker 1: how resilient US consumers are. You know, we have seen
• 12:05
  Speaker 1: several data points that suggest, uh, people are still spending
• 12:09
  Speaker 1: so and what's the reason for that? And I think
• 12:12
  Speaker 1: the reason is that there's still a lot of money
• 12:14
  Speaker 1: slashing around the economy. And even though Um, the pandemic
• 12:20
  Speaker 1: stimulus has long ended. The fact is a lot of
• 12:23
  Speaker 1: those money is still in the bank account of um,
• 12:27
  Speaker 1: you know, not only households but also state and local government. UM.
• 12:32
  Speaker 1: So looking forward to next year, even though our recession
• 12:36
  Speaker 1: probability models are flashing really read right now and suggesting
• 12:41
  Speaker 1: to us that a recession could happen around August or
• 12:44
  Speaker 1: September of next year, UM, there is a chance that
• 12:49
  Speaker 1: the recession might not happen then and then until much later,
• 12:53
  Speaker 1: just because um, you know, people do have savings and
• 12:58
  Speaker 1: so currently the recession and we are expecting would be
• 13:02
  Speaker 1: a shallow one where consumption would still be positive, where um,
• 13:07
  Speaker 1: you know, things are still pretty good from from the
• 13:09
  Speaker 1: household side. Unemployment rate rise to about five percent, but
• 13:14
  Speaker 1: you know, all in all, it's it's not the two
• 13:17
  Speaker 1: thousand and eight kind of recession. And I guess that
• 13:20
  Speaker 1: would be a decent Christmas present for people if you said,
• 13:23
  Speaker 1: if we were going to get rid of inflation without
• 13:26
  Speaker 1: having a deep, a deep recession and conceivably no recession
• 13:31
  Speaker 1: at all, although idea doesn't sound like you're betting on that,
• 13:34
  Speaker 1: that's right, and I won't thank you so much. Thank
• 13:37
  Speaker 1: you Stephanie now I said the FED decision had global implications.
• 13:49
  Speaker 1: Hong Kong is kilometers away, but it does feel the
• 13:53
  Speaker 1: full force of US interest rate increases because its currency
• 13:57
  Speaker 1: is directly linked to the US dollar. So when the
• 13:59
  Speaker 1: FED hikes, Hong Kong has to hide two there, with
• 14:02
  Speaker 1: more hands on control from Beijing and the lingering impact
• 14:05
  Speaker 1: of China's COVID zero policies, higher interest rates are just
• 14:10
  Speaker 1: one of the factors making Hong Kong real estate ever
• 14:13
  Speaker 1: so slightly more affordable. Is in the current okay, I
• 14:21
  Speaker 1: can I ask you a couple of questions. Where are we?
• 14:25
  Speaker 1: We are in the middle of one shy it's actually
• 14:27
  Speaker 1: one shy road, and we're waiting to meet our Ms Cheng,
• 14:31
  Speaker 1: Lily Chang, who is a real estate agent, and we're
• 14:34
  Speaker 1: hoping that Ms. Chang will be able to give us
• 14:36
  Speaker 1: a tour of a property and to explain to us
• 14:39
  Speaker 1: what she does. And it's a sunny Friday morning. My
• 14:42
  Speaker 1: producer Yang Yang and I are standing in front of
• 14:44
  Speaker 1: a fancy apartment building at the heart of Hong Kong Island.
• 14:48
  Speaker 1: The building is converted from an old food market that
• 14:51
  Speaker 1: dates back to the nineteen thirties. These days instead of
• 14:55
  Speaker 1: fresh food vendors. The Art Deco architecture is the home
• 14:59
  Speaker 1: to a booty cafe, a furniture shop, and a forty
• 15:03
  Speaker 1: three floor residential blocks. Wow, it's a view that grasps
• 15:20
  Speaker 1: almost everything quintessential of Hong Kong. From the apartment's thirty
• 15:24
  Speaker 1: third floor balcony, you can see the mountains, to see
• 15:28
  Speaker 1: the forests of skyscrapers, and of course, the famous horse
• 15:32
  Speaker 1: track in nearby Happy Valley. See the recent horse You
• 15:36
  Speaker 1: can see that. This is all the race track. You
• 15:40
  Speaker 1: see what you? Yeah, this one we just saw twenty
• 15:43
  Speaker 1: five million dollars. That's more than three million US dollars
• 15:53
  Speaker 1: for nine square feet million to save you a horse
• 15:56
  Speaker 1: racing ticket. What a Steal's nice to you have? The
• 16:02
  Speaker 1: douple benefits jokes aside, it might actually be a steel
• 16:12
  Speaker 1: Chang told us with that in the good years, she
• 16:14
  Speaker 1: could easily sell this apartment for two million Hong Kong
• 16:18
  Speaker 1: dollars more in much less time one months. Yeah, if
• 16:22
  Speaker 1: the good is the good time. The Hong Kong has
• 16:30
  Speaker 1: long been known as one of the world's least affordable
• 16:33
  Speaker 1: housing markets. That may be changing. The city now has
• 16:38
  Speaker 1: more empty office space than ever before, and the house
• 16:40
  Speaker 1: prices are in decline. So what dragged the markets down?
• 16:45
  Speaker 1: Chang says China's COVID zero policy had played a big role.
• 16:49
  Speaker 1: So we have before, we have a lot of the
• 16:53
  Speaker 1: Chinese people, they come easy to come Hong Kong and
• 16:56
  Speaker 1: they would make the investment in Hong Kong, or they
• 16:59
  Speaker 1: weren't Honko. But now this kind of China and Hong
• 17:03
  Speaker 1: Kong these two three years. Hong Kong has only recently
• 17:10
  Speaker 1: reopened its international border to the world after being shut since,
• 17:15
  Speaker 1: but travel between Hong Kong and mainland China has been
• 17:19
  Speaker 1: dampened by Beijing's COVID policies, which are now in the
• 17:23
  Speaker 1: course of being eased. There's another complication here, the US
• 17:28
  Speaker 1: Federal Reserve. Because Hong Kong's currency is linked to the
• 17:32
  Speaker 1: US dollar, the giant finance hoube effectively imports US monetary policy.
• 17:38
  Speaker 1: While the correlation isn't exact, it does mean that when
• 17:41
  Speaker 1: FED Chair Jerome Powell raises rates in Washington, the effects
• 17:45
  Speaker 1: of those hikes rickichet through Hong Kong's banking system. Just
• 17:50
  Speaker 1: like US, house prices are cooling in Hong Kong's residential market,
• 17:55
  Speaker 1: economists are estimating a fall in house prices of up
• 17:58
  Speaker 1: to thirty percent from their each trusting one to three.
• 18:01
  Speaker 1: Trusting one to three to get a better idea of
• 18:05
  Speaker 1: when the housing market might bounce back, if it bounces back,
• 18:09
  Speaker 1: I went to see Nelson Wong, who's among those seeing
• 18:11
  Speaker 1: the hit to real estate, and Nelson Wall, executive director
• 18:16
  Speaker 1: at Johns Lane lessa for Hong Kong Research. From his office,
• 18:20
  Speaker 1: Wong pointed across the harbor to Hong Kong's old Airport.
• 18:23
  Speaker 1: It's now in part being redeveloped for residential units that
• 18:27
  Speaker 1: are struggling to sell. You can see the tact area
• 18:32
  Speaker 1: from here. Um you see the cruise terminal which is
• 18:36
  Speaker 1: right on the old Tech Airport runway, and then further
• 18:41
  Speaker 1: back is the various residential developments that are on the runway.
• 18:48
  Speaker 1: In Hong Kong, high real estate valuations have long been
• 18:52
  Speaker 1: a pillar of the city's economic model, along with spanking
• 18:56
  Speaker 1: and trade. With the city's borders closed to the rest
• 18:59
  Speaker 1: of the mainland, the wobble in housing is all the
• 19:02
  Speaker 1: more acute. The unfortunate thing is that when Mr Powell
• 19:07
  Speaker 1: thinks of indust rates um, he would not take into
• 19:11
  Speaker 1: account what happens in Hong Kong. Of course, what's happening
• 19:14
  Speaker 1: in Hong Kong is just one part of a broader
• 19:17
  Speaker 1: global story. As real estate marketcy prices going to decline.
• 19:21
  Speaker 1: The worst inflation outbreaking decades hasn't turn sparked the most
• 19:25
  Speaker 1: aggressive Montre policy tightening cycle in forty years, which is
• 19:29
  Speaker 1: driving up mortgages and driving down house prices and demand.
• 19:34
  Speaker 1: Because of its huge multiplier effect, real estate is at
• 19:37
  Speaker 1: the center of economic activity everywhere, but in Hong Kong,
• 19:41
  Speaker 1: Nelson says, the authority's hands are tied. We think that
• 19:45
  Speaker 1: that the slowdown would continue if we do not act
• 19:51
  Speaker 1: at this point, and there are frankly not a lot
• 19:54
  Speaker 1: that the Hong Kong government can can act on. It
• 19:57
  Speaker 1: cannot change the indest rate, It cannot change the political
• 20:00
  Speaker 1: or geopolitical situations around US or in Europe for the meta.
• 20:05
  Speaker 1: While Nelson sees a further decline in prices, he also
• 20:09
  Speaker 1: sees the bottom in Hong Kong's market. After my chat
• 20:12
  Speaker 1: with Nelson, I went to see another veteran of Hong
• 20:14
  Speaker 1: Kong's real estate market, Kimmi Kimany, to hear her views
• 20:18
  Speaker 1: on what lies ahead. This is Kimmi Kimani from Savills
• 20:21
  Speaker 1: residential services. I'm in charge of the residential team in
• 20:25
  Speaker 1: Hong Kong. So we do leasing, we do sales, we
• 20:28
  Speaker 1: do corporate tendency management, et cetera. We basically do everything,
• 20:32
  Speaker 1: except we don't find partners. Kimmi sees another decline in
• 20:36
  Speaker 1: prices next year and says selling high end apartments in
• 20:40
  Speaker 1: Hong Kong isn't like it used to be. The valuations
• 20:43
  Speaker 1: Kimmi mentions here are Hong Kong dollars. Everyone's looking for
• 20:46
  Speaker 1: a bargain. So if it's under under value, everybody wants it.
• 20:51
  Speaker 1: Let's say, if your property is you're asking for fifty million,
• 20:55
  Speaker 1: bank valuation is forty five million, and the seller is
• 20:58
  Speaker 1: selling it for forty million, Yes you will have bias
• 21:01
  Speaker 1: for sure, but otherwise not. People are just it's a
• 21:04
  Speaker 1: wait and see attitude at the moment for most of
• 21:07
  Speaker 1: the buyers. And I can understand why, because of the
• 21:09
  Speaker 1: economy of Hong Kong at the moment. How to real
• 21:12
  Speaker 1: estate market plays out in Hong Kong remains unclear. A
• 21:16
  Speaker 1: steep correction in Hong Kong could be a signal of
• 21:19
  Speaker 1: deeper gloom for the global economy. Still, those like Kimmy
• 21:23
  Speaker 1: saying Hong Kong has seen crisis before and has always rebounded. Yeah,
• 21:28
  Speaker 1: but saying that, I want to against say that the
• 21:31
  Speaker 1: Hong Kong people have a lot of resilience. It's in
• 21:35
  Speaker 1: their DNA, it's in our blood in Hong Kong, and
• 21:39
  Speaker 1: the current for Bloomberg News. Finally we have the sad
• 21:51
  Speaker 1: case of the missing artisan. And not so long ago,
• 21:55
  Speaker 1: I seem to remember we were said to be moving
• 21:57
  Speaker 1: to a maker economy, with innovations in small scale manufacturing
• 22:01
  Speaker 1: and online retailing making it possible for more of us
• 22:04
  Speaker 1: to learn the satisfaction of making a fine object from
• 22:07
  Speaker 1: start to finish. It doesn't seem to have worked out
• 22:10
  Speaker 1: that way. In fact, it's harder than ever to persuade
• 22:13
  Speaker 1: young people to enter time honored manual professions. Australia, for example,
• 22:18
  Speaker 1: has a chronic blacksmith shortage. Dagger makers in Bali are
• 22:22
  Speaker 1: in short supply. Even Italy celebrated fashion and luxury companies
• 22:27
  Speaker 1: are struggling to find the people they need in a
• 22:29
  Speaker 1: country where the youth unemployment rate is nearly is our
• 22:33
  Speaker 1: Italian economy reporter Alessandra Mileccio. The first thing is a
• 22:41
  Speaker 1: lot of admiration for Italy to have kept this uh capacity,
• 22:46
  Speaker 1: you know, this industrial artisanal capacity, with this reactivity, this
• 22:51
  Speaker 1: capacity to innovate. I mean, that's the first thing that
• 22:54
  Speaker 1: is really striking. If we want to do more objects,
• 23:00
  Speaker 1: we need more people. And if a generation goes whereas
• 23:05
  Speaker 1: an next generation. That's Fendy's new chief executive, Sage Brunswick.
• 23:12
  Speaker 1: When he arrived in Rome almost five years ago, he
• 23:15
  Speaker 1: knew there would be challenges, but the one he wasn't
• 23:17
  Speaker 1: expecting a lack of artisans. After all, Italy is known
• 23:25
  Speaker 1: for its craftsmanship, from the violin makers, textile and master
• 23:29
  Speaker 1: painters of the Renaissance to modern fashion designers. Artisans in
• 23:32
  Speaker 1: Italy are a natural pair. But soon after taking over Fendi,
• 23:37
  Speaker 1: Runchfit realized that the skilled workers he's so admired were
• 23:41
  Speaker 1: clustered in small family firms, aging fast and beginning to disappear.
• 23:46
  Speaker 1: Is there an next generation Italians making enough children? Are
• 23:50
  Speaker 1: these children all interested to succeed their their parents in
• 23:57
  Speaker 1: the company as they were before, or should we uh
• 24:02
  Speaker 1: participate to this elaboration of the next generation. So that's
• 24:07
  Speaker 1: how the question comes. A shortage of skilled artisans is
• 24:10
  Speaker 1: a global problem from Australia's blacksmiths too much of Europe's
• 24:14
  Speaker 1: luxury sector. Young people are looking for less manual career options.
• 24:19
  Speaker 1: But what's startling about Italy is the magnitude of the phenomenon,
• 24:22
  Speaker 1: coupled with the youth unemployment rate. Near about one in
• 24:27
  Speaker 1: every two job postings goes unfilled. According to luxury trade
• 24:31
  Speaker 1: group ALTA Gamma, that means there will be ninety four
• 24:34
  Speaker 1: thousand missing workers in the fashion and jewelry sector in
• 24:38
  Speaker 1: the next few years. Stefani Lazeroni, director General of Altagama,
• 24:42
  Speaker 1: thinks the shortage is because of several factors, lack of training,
• 24:47
  Speaker 1: a mismatch between supply and demand, and a misunderstanding about pay.
• 24:53
  Speaker 1: I think that there isn't much difference in salary between
• 24:56
  Speaker 1: someone in the manufacturing sector and someone work in an office.
• 25:01
  Speaker 1: Entry level positions are the same around one thousand and
• 25:05
  Speaker 1: one thousand and two hundred euros a month, and then
• 25:09
  Speaker 1: it increases. These people are in demand because within the
• 25:13
  Speaker 1: next two to four years they will become rare and
• 25:18
  Speaker 1: so there's considerable potential for growth. Brunchwick decided to tackle
• 25:25
  Speaker 1: the problem head on. He knew money couldn't be the
• 25:27
  Speaker 1: main reason for he had trouble finding artisans. It didn't
• 25:30
  Speaker 1: make sense to him. Why would unemployed youth not want
• 25:33
  Speaker 1: to work for a luxury company on a regular contract
• 25:36
  Speaker 1: making things of beauty, especially if there were excellent long
• 25:40
  Speaker 1: term prospects. The problem seemed to be education. He knew
• 25:44
  Speaker 1: in other European countries, trade schools are common and effective.
• 25:48
  Speaker 1: As we know the Japanese's training in the nine thousand
• 25:53
  Speaker 1: young people on technical jobs per year in the education system,
• 26:00
  Speaker 1: France about half of this, and Italy fIF in another world,
• 26:06
  Speaker 1: so it means it doesn't exist. I mean education doesn't
• 26:11
  Speaker 1: provide enough technicians to the industry in general. So he
• 26:16
  Speaker 1: set out to make Fendi a leader in training. Brunchwick
• 26:19
  Speaker 1: had Fendi set up its own factories and try to
• 26:21
  Speaker 1: find ways to train people, both in house and through programs.
• 26:25
  Speaker 1: Likely adopted school initiative run by Alta Gamma in collaboration
• 26:29
  Speaker 1: with Italy's education ministry. It pairs trade schools with companies
• 26:33
  Speaker 1: like Fendi, Jeweler, Bulgarie, or brands like Lotto, Piano and Faragamo,
• 26:37
  Speaker 1: just to name a few. To find the right fit
• 26:40
  Speaker 1: for Fendi, Brunchwick traveled to one of Italy's historic shoemaking districts,
• 26:44
  Speaker 1: an area nestled in the rolling hills of central Italy's
• 26:46
  Speaker 1: Marquet region. Here he opened a sleek new factory where
• 26:50
  Speaker 1: steel machines hum in a designer pavilion near the medieval
• 26:53
  Speaker 1: city of Fermo, mixing modernity and tradition. We just I
• 27:00
  Speaker 1: did to travel to the factory and meet the artisans
• 27:02
  Speaker 1: and training Brica. Joe Malini is one of the high
• 27:05
  Speaker 1: school trainees in the formal program. The idea of shoemaking
• 27:09
  Speaker 1: was not an easy self for the eighteen year old
• 27:11
  Speaker 1: who first dreamed of becoming a hairdresser. Thefa don't want
• 27:19
  Speaker 1: to do this job because they see shoemaking as a
• 27:22
  Speaker 1: job for losers. People say, oh, you make shoes, that's
• 27:26
  Speaker 1: a bit useless. The idea of working in a factory
• 27:29
  Speaker 1: has people imagining a closed space, dark, repetitive work and
• 27:33
  Speaker 1: said workers. But it is not at all like that.
• 27:38
  Speaker 1: Legenda trees Joe Malini's personal and family history. Watching her
• 27:42
  Speaker 1: mother struggle in the profession made her wary of trying
• 27:45
  Speaker 1: the job. My mother, when I told her I chose shoemaking,
• 27:51
  Speaker 1: said she wasn't sure I was going to like it.
• 27:54
  Speaker 1: She had done it and was a bit scared that
• 27:56
  Speaker 1: that would be unhappy, but that didn't happen. She used
• 28:00
  Speaker 1: to work at home for many, many hours and small details.
• 28:04
  Speaker 1: She would do teaching for big name brands and attractively
• 28:07
  Speaker 1: perfect and it was very stressful for her. She would
• 28:10
  Speaker 1: work some day too, as she was paid by peace.
• 28:14
  Speaker 1: Here I see ladies working on stitching, and they seem happy,
• 28:19
  Speaker 1: they do a job they like. They look content to
• 28:21
  Speaker 1: be here because every day they also work on the prototypes.
• 28:24
  Speaker 1: They do different things. So now the problem was perception
• 28:28
  Speaker 1: and a Maria Bernardini, the principle of thermos or Studio
• 28:32
  Speaker 1: Ricchie Professional Trade School, says having brands like Fendi associated
• 28:36
  Speaker 1: with their internships makes a huge difference. The presence of
• 28:44
  Speaker 1: a prestigious brand helps a lot towards overcoming stereotypes, some prejudices,
• 28:50
  Speaker 1: a cultural with families that follow trends. Currently, the trend
• 28:54
  Speaker 1: is to choose high school and not trade school. If
• 28:57
  Speaker 1: you consider that only twelve of stud chose a trade school,
• 29:04
  Speaker 1: changed one. Even Carmela Cabro, professor of modeling and Projects
• 29:09
  Speaker 1: at the school, agrees. She remembers the excitement of students
• 29:13
  Speaker 1: seeing the modern factory on their first day of the
• 29:15
  Speaker 1: internship annoying as professors who have done this type of
• 29:22
  Speaker 1: work with students for years have seen students who were
• 29:24
  Speaker 1: sent here as a last resort because they weren't doing
• 29:27
  Speaker 1: very well anywhere else, and they come to life and
• 29:30
  Speaker 1: really change. One of these wide Eye trainees is eighteen
• 29:38
  Speaker 1: year old Alessiabala, who, like her friend Jomarini, also wanted
• 29:41
  Speaker 1: to go into hair dressing before seeing how the factory
• 29:44
  Speaker 1: is run. While we spoke, she was watching an employee
• 29:48
  Speaker 1: put the finishing touches on a pair of elegant Fendi boots,
• 29:51
  Speaker 1: which retail for well over a thousand euros. Their gravity
• 29:55
  Speaker 1: defying heels are so complex the engineers had to study
• 29:58
  Speaker 1: how to distribute the weight effect a week before production
• 30:01
  Speaker 1: could start. Bala says she can now imagine a future,
• 30:04
  Speaker 1: and Shoemaking comments, it's um. Everything begins on paper from
• 30:11
  Speaker 1: an idea, but it's wonderful to see it evolve and
• 30:14
  Speaker 1: I like to see that come about. I hope to
• 30:17
  Speaker 1: come here to work one day to maybe learn more
• 30:20
  Speaker 1: and specializing sectors I like from the especially that's what
• 30:27
  Speaker 1: Brunchwig is hoping and why He's opened a second factory
• 30:30
  Speaker 1: in Tuscan, his leather making district for handbags. He says
• 30:34
  Speaker 1: maybe a TV show could help too, like the ones
• 30:36
  Speaker 1: that have made cooking attractive. Frankly, to become a coup
• 30:39
  Speaker 1: was not a dream when I was young. Okay, now
• 30:42
  Speaker 1: it's a dream. Okay, they did something something would uh
• 30:45
  Speaker 1: in communicating and the interest of this of this job,
• 30:49
  Speaker 1: you just have to do the same thing. I mean,
• 30:51
  Speaker 1: if you're the one person able to transform an idea
• 30:55
  Speaker 1: into a hand bag or into a shoe, it's a
• 30:58
  Speaker 1: lot of vague yeh. Infermore, I'm Alisandra Melia Actual for
• 31:03
  Speaker 1: Bloomberg News. Well that's it for Stephanomics. We'll be back
• 31:17
  Speaker 1: next week with a sort of Christmas edition. In the meantime,
• 31:21
  Speaker 1: please rate us wherever you get this podcast, and check
• 31:23
  Speaker 1: out the Bloomberg News website for more economic news and
• 31:26
  Speaker 1: views on the global economy. You really also ought to
• 31:30
  Speaker 1: follow at economics on Twitter. This episode is produced by
• 31:33
  Speaker 1: Yang Yang, Sammer Sadi and Magnus Henrikson, with special thanks
• 31:37
  Speaker 1: to Anna wan Alessandra Miliaccio, Flavio Rodundi, and Ender Current.
• 31:43
  Speaker 1: Mike Sasso is the executive producer of stephanomics,