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Benchmark's Look Back at the Biggest Economic Stories of 2017 · Trumponomics

• 0:09
  Speaker 1: Welcome to Benchmark, the show about the global economy. I'm
• 0:12
  Speaker 1: Scott Landman and economics editor at Bloomberg News in Washington,
• 0:15
  Speaker 1: and I'm Daniel Moss, Economics RATA with Bloomberg View in
• 0:19
  Speaker 1: New York. Today we're giving you part one of our
• 0:22
  Speaker 1: two part Year and Special Dan and I have brought
• 0:26
  Speaker 1: in three of our colleagues who cover economies around the world.
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  Speaker 1: Next week we'll talk about our predictions, but first a
• 0:34
  Speaker 1: look back at sea, where we've asked everyone, including ourselves,
• 0:38
  Speaker 1: three key questions. One what was the most surprising economic
• 0:43
  Speaker 1: development of the year. Two who was a key influential
• 0:47
  Speaker 1: person that you may not have heard of? And three
• 0:50
  Speaker 1: what was a non economic development that had an economic impact?
• 0:54
  Speaker 1: We all came up with some pretty intriguing answers. So
• 0:58
  Speaker 1: without further Ado Well Review seventeen Joining us today, we
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  Speaker 1: have a whole panel of special guests. In addition to
• 1:13
  Speaker 1: my regular co host Dan Moss in New York. Joining
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  Speaker 1: him in the studio there is Vivian Rodriguez, our managing
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  Speaker 1: editor for Latin America Economy and Government Coverage in New York. Vivian,
• 1:26
  Speaker 1: thanks for being with us. Thank you good it's a
• 1:28
  Speaker 1: pleasure to be here in Frankfurt. We have Janna Rondo,
• 1:32
  Speaker 1: our European economy editor, Janna, how's it going? Very well things?
• 1:38
  Speaker 1: And last but not least, joining us all the way
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  Speaker 1: from Hong Kong is Enda Current, our chief Asia economic correspondent,
• 1:46
  Speaker 1: and ah, good evening, Good evening's great to be on.
• 1:49
  Speaker 1: Thank you. All right, let's jump into it with our
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  Speaker 1: first question about what was the most surprising economic development
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  Speaker 1: of the year. Let's start with Jana. As far as
• 2:04
  Speaker 1: the your area is concerned, one really has to say
• 2:07
  Speaker 1: the strength of the recovery. It's domestically driven, it's increasingly
• 2:11
  Speaker 1: broad based, itself sustained, and it came, i should say,
• 2:16
  Speaker 1: as a bit of a surprise to the European Central Bank.
• 2:20
  Speaker 1: Since they put out forecasts at the end of last year,
• 2:23
  Speaker 1: they have had to revise them up several times. And
• 2:26
  Speaker 1: the Eurozone at the moment is having its best economic
• 2:30
  Speaker 1: performance in a decade. That is quite something, I would say.
• 2:34
  Speaker 1: It is something that is remarkable given how sclerotic the
• 2:37
  Speaker 1: recovery has been in recent years, you know, not just there,
• 2:40
  Speaker 1: but across the vast economies in general. Let's go next
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  Speaker 1: to Enda in Hong Kong and what was the most
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  Speaker 1: surprising economic development of as far as you're concerned, Scott.
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  Speaker 1: For me, I think one of the big developments has
• 2:55
  Speaker 1: been the steep decline in unemployment. Some of the world's
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  Speaker 1: biggest economies were seen jobless rates fall two decades or
• 3:02
  Speaker 1: multi decade loads in big economies like Japan, Canada, UK, US,
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  Speaker 1: Germany and others. It's brought to o e C the
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  Speaker 1: average down to below six percent. But the thing is
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  Speaker 1: it's come with something of a twist because even though
• 3:14
  Speaker 1: jobs are being added and labor markets are pretty tight,
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  Speaker 1: wage growth is still quite subdued, not just in Japan
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  Speaker 1: but right around the world in these advanced economies, and
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  Speaker 1: that's one of the big reasons behind the slogae inflation
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  Speaker 1: that central bankers continue to complain about. The reasons for
• 3:29
  Speaker 1: it are multiple. It's blamed on new technology, it's blamed
• 3:32
  Speaker 1: on part time workers, and it's blamed on a reluctance
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  Speaker 1: among companies to invest. However, there is some tentative signs
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  Speaker 1: that perhaps the Great Capex Revolution might actually be starting.
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  Speaker 1: We're seeing some big companies like Samsung and tie Out
• 3:45
  Speaker 1: and others, certainly in Asia talked about spending more investing
• 3:48
  Speaker 1: in their plans and investing in their staff. So perhaps
• 3:51
  Speaker 1: next year we might see something of a pickup in wages. Interesting.
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  Speaker 1: All right, let's come back across the Atlantic or the Pacific,
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  Speaker 1: I guess to New York in our studio there, Vivian,
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  Speaker 1: what's your take on this question. Well, definitely one indicator
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  Speaker 1: here that surprised economists and also government officials. I mean,
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  Speaker 1: everybody got this wrong in Latin America was the inflation
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  Speaker 1: level for Brazil in two thousand and seventeen. I mean,
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  Speaker 1: at the beginning of this year, a lot of people
• 4:19
  Speaker 1: were expecting inflation to ads to be now around the
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  Speaker 1: five percent rate. Actually the targeting Brazil's four point five percent,
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  Speaker 1: and we are much closer to three. So this really
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  Speaker 1: also led the central bank to cut interest rates way
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  Speaker 1: more aggressively than expected. We're talking about extra three hundred
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  Speaker 1: basis points of interest rate cuts. I mean Brazil interest
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  Speaker 1: rates actually just touched a record low early in December.
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  Speaker 1: So definitely quite a I would say a three hundred
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  Speaker 1: basis points a mismatch or surprising figure for people who
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  Speaker 1: pay close attention to Latin Americ economics. Definitely, after all
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  Speaker 1: the political turmoil. They've had their you know, it's pretty
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  Speaker 1: interesting to note those kinds of economic developments. Yeah, we
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  Speaker 1: almost lost a president in May, so it's pretty surprising.
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  Speaker 1: All right, thank you, Vivian Dan. Let's go to you next.
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  Speaker 1: I'm surprised that Asian officials consistently expressed surprise that Donald
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  Speaker 1: Trump withdrew the United States from the Trans Pacific Partnership.
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  Speaker 1: He indicated he would do that during the campaign. Hillary Clinton,
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  Speaker 1: who was for it, subsequently came out against it, and
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  Speaker 1: in the Democratic primaries Bernie Sanders was against it as well.
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  Speaker 1: Why was it such a surprise that Trump did this? Well,
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  Speaker 1: it really wasn't if you follow the campaign, But I guess,
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  Speaker 1: you know, years of watching these things to actually see
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  Speaker 1: something like that happened probably was unthinkable, would you say, Well,
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  Speaker 1: end it was present for a number of these discussions,
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  Speaker 1: certainly in the first part of the year, and it
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  Speaker 1: just kept coming up, and it didn't it They just
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  Speaker 1: couldn't leave it alone. And I'm like, why he said
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  Speaker 1: he would do this, That is right, But it's worth
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  Speaker 1: nothing that they've plowed on with t p P plus
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  Speaker 1: eleven don they're determined to get and some form of
• 6:04
  Speaker 1: deal over the line even without the US anyway, I
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  Speaker 1: was surprised that they were surprised, so the t p
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  Speaker 1: P might come back in some form after all. Thanks Dan,
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  Speaker 1: all Right, I'm gonna go last year and a Vivian
• 6:17
  Speaker 1: and have kind of alluded to this already, But for me,
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  Speaker 1: the most surprising economic development of the year had to
• 6:25
  Speaker 1: have been how inflation came down and how wages were
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  Speaker 1: so weak here in the United States, despite the economy
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  Speaker 1: being fairly solid, with unemployment dipping well below five percent.
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  Speaker 1: It seems like it's about to go below four percent.
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  Speaker 1: Nobody really expected inflation to suddenly fall as it did
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  Speaker 1: from earlier this year until just pretty recently when it's
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  Speaker 1: finally begun to stabilize. It's still a good chunk below
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  Speaker 1: the federal reserves two percent target. Wages have not really
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  Speaker 1: been pushing up much. They're kind of stuck within this
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  Speaker 1: range of games two to three percent that they've been
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  Speaker 1: for the last two years. So you know, that's really
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  Speaker 1: puzzled a lot of people and forced economists to sort
• 7:13
  Speaker 1: of rethink how they're looking at the U S economy.
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  Speaker 1: Next question to our panel, Name a key influential person
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  Speaker 1: that few people have ever heard of end Up Tree
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  Speaker 1: Muliani Indrawati, Finance Minister of Indonesia. She doesn't make global headlines,
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  Speaker 1: but she's running in one of the world's biggest economies,
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  Speaker 1: in a vast nation, in a pretty complicated part of
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  Speaker 1: the world. She made waves at the beginning of this
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  Speaker 1: year don when she slept a ban on JP Morgan
• 7:40
  Speaker 1: after analysts recommended to sell Indonesian stocks. That drew criticism
• 7:45
  Speaker 1: that she was pushing censorship. But since then she has
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  Speaker 1: steered a massive tax eminacy to generated billions for the government.
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  Speaker 1: She saw the government to get a coveted ratings upgrade,
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  Speaker 1: and of course she doesn't get the same global airtime
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  Speaker 1: as her peers. But behind the scenes that I'm f
• 7:59
  Speaker 1: meetings into a meetings, she's considered to be determined, dogged
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  Speaker 1: and one of the more effective financemners out there. Good call,
• 8:06
  Speaker 1: not without her missteps, but nevertheless a tremendous advocate for
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  Speaker 1: her country and for the regent. Yana Mark Ferracci he's
• 8:14
  Speaker 1: a friend turned special advisor to French President Emmanuel mccon,
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  Speaker 1: who was elected by a decisive margin in May, and
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  Speaker 1: Ferracci is one of the brains behind the country's reworking
• 8:28
  Speaker 1: of the unemployment benefits system. Unions will fight tooth and
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  Speaker 1: nail over it. But Farracci really has two advantages. He
• 8:38
  Speaker 1: is the son of a labor and social law expert
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  Speaker 1: with extensive networks in French social groups, which is obviously
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  Speaker 1: going to be a big plus. And he has the
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  Speaker 1: ear of Macon himself. He was the best man in
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  Speaker 1: his wedding for example. Well, one very interesting character is
• 8:56
  Speaker 1: del Fonso Gajardo. He's the Economy Minister of Mexico, always
• 9:01
  Speaker 1: a little bit under the shadow of Louis vide Garai,
• 9:03
  Speaker 1: which is now the top negotiator on NAFTA, But the
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  Speaker 1: reality is guar Haardo is truly the man tirelessly working
• 9:12
  Speaker 1: to preserve and advocate for mexico interests in these very
• 9:17
  Speaker 1: lengthy and I would say, hey, close to dramatic negotiations
• 9:21
  Speaker 1: of involving NAFTA now taking place every month. So so
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  Speaker 1: definitely someone people don't hear about a lot outside of
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  Speaker 1: Latin America. But quite a bulldog, quite a diplomat, quiet
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  Speaker 1: and it was extreamly the knowledgeable man who is really
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  Speaker 1: doing a lot of work from Mexico. Scott, Well, Dan,
• 9:40
  Speaker 1: I'm going to offer a little twist here. You didn't
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  Speaker 1: say that the person had to be living. So my
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  Speaker 1: pick is William Phillips. He is the economist behind the
• 9:50
  Speaker 1: eponymous Phillips curve. And if there's one idea that's had
• 9:55
  Speaker 1: a stranglehold on Federal Reserve policymakers in it is Phillips curve,
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  Speaker 1: the idea that decline in the unemployment rate will eventually
• 10:04
  Speaker 1: push up wages and thus inflation. And just like in
• 10:07
  Speaker 1: the first question when I talked about how inflation and
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  Speaker 1: wages being weak was a major surprise in the Fed
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  Speaker 1: has continued to raise interest rates, and a lot of
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  Speaker 1: that is because of this very man, William Phillips, and
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  Speaker 1: the idea of the Phillips curve influential, even though he
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  Speaker 1: didn't show up exactly. My pick is a gentleman called
• 10:30
  Speaker 1: Claudio Borrio. He is a senior official at the Bank
• 10:34
  Speaker 1: for International Settlements in Switzerland that's kind of a central
• 10:38
  Speaker 1: bank for central banks. He published a very provocative paper
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  Speaker 1: in September which continues to get quite a lot of buzz.
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  Speaker 1: One of the things he went into is explaining the
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  Speaker 1: impact of a global market for labor. We're used to
• 10:54
  Speaker 1: talking about globalization the context of stuff being cheaper on
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  Speaker 1: the shelves at Walmart. But what if the labor pool
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  Speaker 1: was not a national labor pool at all? So this
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  Speaker 1: idea of hinging policy on national unemployment rights may really
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  Speaker 1: be wide of the mark. All right, great answers everybody,
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  Speaker 1: Very interesting. Let's go on to our third and final
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  Speaker 1: round for this episode, and we're going a little bit
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  Speaker 1: outside our normal economic willhouse here. What is one non macroeconomic,
• 11:28
  Speaker 1: non political development that had a significant economic impact in
• 11:34
  Speaker 1: Vivian Why don't you go first? Well, we kind of
• 11:37
  Speaker 1: mentioned it a little bit, and I'm sorry it is
• 11:39
  Speaker 1: a bit political, but it was the tape scandal in
• 11:41
  Speaker 1: Brazil early in May, I mean overnight, you almost the
• 11:45
  Speaker 1: top of the president market sell off. We really thought
• 11:48
  Speaker 1: Tamar was going to have to resign after these tapes
• 11:51
  Speaker 1: were leaked to the press allegedly, you know, showing that
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  Speaker 1: he discussed hush money to a former ally and this
• 11:58
  Speaker 1: on the backon Impeachman. The trauma in Brazil just just
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  Speaker 1: really brought back some of the darkest moments, you know,
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  Speaker 1: literally in questions of hours, So quite a dramatic moment
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  Speaker 1: for Brazil. In Latin America. All right, a little political,
• 12:11
  Speaker 1: I'll have to say, but I'll give you a pass there.
• 12:14
  Speaker 1: Let's turn to ender. What do you think is a
• 12:17
  Speaker 1: major development that had a significant economic impact, Scott. I
• 12:21
  Speaker 1: think it has to be the digital currency boom. It's
• 12:23
  Speaker 1: eight years now since bitcoin was born and it has
• 12:26
  Speaker 1: since moved into something of a runaway boom that central
• 12:29
  Speaker 1: banks are really struggling to get a grip on two
• 12:31
  Speaker 1: issues here, how to regulate them and do central banks
• 12:34
  Speaker 1: themselves issue some converse sovereign version? Central banks are pretty
• 12:38
  Speaker 1: headson't about it. I crackdown and private digital issuers, for example,
• 12:42
  Speaker 1: but they also recognize the potentially for the underlying technology
• 12:45
  Speaker 1: that I can play a role in finance. One example
• 12:47
  Speaker 1: is New Zealand. They're talking about plans for future issues
• 12:50
  Speaker 1: and how they can use digital units in their strategies.
• 12:53
  Speaker 1: But let me give you a flavor of how divided
• 12:54
  Speaker 1: the opinion is. ECB Vice President veto Or Constantio set
• 12:58
  Speaker 1: in September that bit coin is not a currency, but
• 13:01
  Speaker 1: it is a tulip. Definitely a hot topic we're going
• 13:04
  Speaker 1: to be talking about for years to come. Jana, let's
• 13:08
  Speaker 1: go to you. I also picked something that borders on
• 13:11
  Speaker 1: on technology. I would say innovation in the car industry.
• 13:16
  Speaker 1: As we all remember, there was a big diesel scandal
• 13:19
  Speaker 1: and it rocked automakers. So they have really increased spending
• 13:25
  Speaker 1: on developing more attractive electric cars to kick start sluggish demand,
• 13:31
  Speaker 1: to also show that they care about the environment. But
• 13:35
  Speaker 1: whether that investment actually will pay off remains very uncertain
• 13:39
  Speaker 1: because at the moment, battery prices are very high. They
• 13:42
  Speaker 1: squeeze returns compared to equivalent engines that run on gas
• 13:47
  Speaker 1: or fuel and um even Tesla when you look at
• 13:51
  Speaker 1: the market leader, even Tesla is struggling somewhat because the
• 13:55
  Speaker 1: company did unveiled cheaper car. Now it has problems producing
• 13:59
  Speaker 1: them in great mass. So it's definitely an interesting thing
• 14:03
  Speaker 1: to watch also in the future. All right, Dan, you've
• 14:06
  Speaker 1: got a pretty interesting one that I hadn't been familiar
• 14:09
  Speaker 1: with before. Go ahead, I'm going for a career company
• 14:12
  Speaker 1: in Japan called Yamato Holdings. These are the guys that
• 14:17
  Speaker 1: have the little trucks in Tokyo that seemed to be
• 14:19
  Speaker 1: everywhere with the logo of the cat and the little
• 14:23
  Speaker 1: kitten in its mouth. For the first time in about
• 14:26
  Speaker 1: three decades, that's three decades, they raised their base charge
• 14:32
  Speaker 1: to their most important customers. It took a long time.
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  Speaker 1: What's important is that it happened. They also had to
• 14:40
  Speaker 1: pay overtime to about forty seven thousand employees. The tightness
• 14:46
  Speaker 1: of the Japanese labor market and the declining pool of
• 14:49
  Speaker 1: available labor may finally be starting to bite. And if
• 14:54
  Speaker 1: we look back and say, right, this is the year
• 14:56
  Speaker 1: where this equation turned in Japan, we may well be
• 14:59
  Speaker 1: thinking about cats and kittens. We'll see if it's another
• 15:03
  Speaker 1: twenty seven years before they raise their prices again. Dan,
• 15:06
  Speaker 1: But let's come back to the United States, and I'm
• 15:10
  Speaker 1: going to pick an answer that probably won't shock anybody,
• 15:13
  Speaker 1: but it's the continuing rise and rise of Amazon dot
• 15:18
  Speaker 1: Com and especially looking at how they surprised everybody and
• 15:23
  Speaker 1: they bought Whole Foods, the pretty well known grocery chain
• 15:27
  Speaker 1: that caters to people looking for organic goods, high end
• 15:31
  Speaker 1: kind of stuff, metro markets, whatever you want to call it.
• 15:35
  Speaker 1: They are having effects on holding down inflation. Going back
• 15:40
  Speaker 1: to previous answers, you know, they keep moving into new markets,
• 15:44
  Speaker 1: new products, growing and growing. I personally order more from
• 15:49
  Speaker 1: Amazon that I probably ever have before it's just something
• 15:53
  Speaker 1: that is continuing to affect the world economy, even though uh,
• 15:58
  Speaker 1: you know, it's kind of separate it from a macroeconomic
• 16:01
  Speaker 1: development specifically. And with that we conclude our part one
• 16:07
  Speaker 1: of the Benchmark Year End Spectacular look back at seventeen.
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  Speaker 1: I want to thank our panelists for participating, Enda, Janna,
• 16:16
  Speaker 1: Vivian thank you so much for being with us. Tune
• 16:21
  Speaker 1: in next week for part two of our year end Spectacular,
• 16:24
  Speaker 1: where we'll look ahead to In the meantime, you can
• 16:27
  Speaker 1: find us on the Bloomberg terminal, Bloomberg dot Com, or
• 16:30
  Speaker 1: Bloomberg app, as well as on Apple podcast, pocket Casts
• 16:33
  Speaker 1: and Stitcher. While you're there, take a minute to rate
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  Speaker 1: and review the show so more listeners can find us
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  Speaker 1: and let us know what you thought of the show.
• 16:41
  Speaker 1: You can follow me on Twitter at at Scott Landman
• 16:44
  Speaker 1: Dan You're at most Underscore Eco. Enda is that at
• 16:49
  Speaker 1: Enda Current, Janna is at at j R A and
• 16:53
  Speaker 1: d Ow and Vivian is that at v I V
• 16:56
  Speaker 1: Underscore r O D thirteen. This episod out of Benchmark
• 17:00
  Speaker 1: was produced by Sarah Patterson and Tofer Forhes. The head
• 17:04
  Speaker 1: of Bloomberg Podcasts is Francesca Levy, thanks for listening, See
• 17:08
  Speaker 1: you next time.