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tv   The Bottom Line 2019 Ep 8  Al Jazeera  December 12, 2019 6:32am-7:01am +03

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company aramco was hit by drones and missiles which saudi arabia the u.s. and european allies blamed on iran the 70 soldiers have been killed in an attack on a military camp in western asia where it happened in that is close to the border with mali no one has so far claimed responsibility but fighters linked to iceland ike al qaeda are increasingly active there. in his governing hindu nationalist government is a kid parliamentary approval for a controversial citizenship law. discriminates against muslims all right up to date those are the latest headlines. coming up that's the bottom line. fishing boats with north korea washing up on the shores of japan. some carrying dead bodies. one of many students to gates these mysterious go ships on al-jazeera. hi i'm steve clemons and i have a question for you are you concerned that the world's economy is more fragile than
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anyone is admitting let's get to the bottom line. you can always find doomsday predictions telling you that the dollar is on the verge of collapse or the global financial system is in serious danger but how much of it is true let's look at this clock this is a live shot of the u.s. national debt clock in new york it's not 100 percent accurate but it gives you a good estimate of the american national deficit right now earlier this year it pushed well beyond 20 trillion dollars it's $22.00 trillion dollars now but what does that mean for the united states and for the world is this guy about to fall what do we really need to be worried about and what trend should we be paying attention to fortunately we have 3 people in the room who have all the answers to these questions sandra to v.t. is c.e.o. of the global consultancy firm beyond global and she's author of super hubs how the financial elite and their networks rule our world edward luce is the chief u.s. commentator for the financial times and doug redeker who has represented the u.s.
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in the executive board of the international monetary fund is also a top leader at the world economic forum in davos it's so great to be with all of you here today thanks for joining me and let me just start out we're looking at the national debt clock is that something that we should care about or is it just a number show in principle you should always care about the level of the national why that is that because it's a measure of what you can. for in the future as well as today i'd say that the absolute number 23 trillion whatever it might be. isn't as important as the share of g.d.p. and it's still considerably below 100 percent of g.d.p. in the united states particularly if you include publicly held debt that is that it's called that no debt as implied by what we social security. in the future in the next 2030 years whatever that might be it's actually not that and so numbers like 22 trillion. they are just numbers what matters is ratios and the
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ratio of compared to say china compared to a lot of europe and compared to parts of the united states history particularly after the 2nd world war is not that high what matters is will growth exceed interest but i want to hear you say it's really a number when obama came into office that clock was around 10 trillion dollars now it's about 20 which 20 trillion dollars when when trump came in it's 2 trillion dollars you're now and you're saying that we really need to worry about a debt debt to g.d.p. ratio which i think the united states is a is is about 90 percent there are different numbers depending on how you can do you know what the right number is virtually and somewhere around 90 there are different ways of calculated let's call it 90 plus so when i do so with that. so give me give me give us some other numbers like what is japan at i mean japan is going to be staggering japan as well north of 200 percent of g.d.p. debt to g.d.p. and japan is always considered an outlier whenever you have those great graphs and
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charts there's always the question do you include japan or do you do that little squiggly thing because if you include japan it's such an outlier that everybody else is down here and japan is up there but japan is a very different economic model because it's a different social model to different political model japan is homogeneous japan has outlasted every economic bear it's. in 4 years on the assumption that someday the japanese will pull together and as a homogenous culture they will bear any costs an absurd amount of debt to g.d.p. but let me go back to my made it to era point so i am more worried because i think it's not a number that bothers me you're right 22 trillion 23 trillion i mean it's an absurd or whatever number that does bother you so what bothers me is the deficit more than the debt because the deficit which is roughly a trillion dollars a year in good times in the us right now and the jump administration means that
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people are getting used to things that we are borrowing to pay for it so it's not just the sum total of the outstanding debt stock it's a fact that an ongoing basis we are now building up obligations to our people and to other government functions that need to be paid for on a rolling basis so it's not that under the obama administration as a means by which to respond to the financial crisis we had a stimulus which then rolled off as the economy picked up in the crisis became something that we take care of me let me just let me just make your point for you in a way and in 2016 the national deficit was 580 $5000000000.00 and that has grown steadily every year now in 200-1900 it's $1.00 trillion $1.11 trillion dollars and as you said it's likely to continue to grow and so put this in real terms i mean these are numbers right now what are we not able to do what is the united states not able to do because of this deficit that's building and creating future obligations so i
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wouldn't look at it that way because we're able to do anything we want right now if we just consider that borrowing is a costly sexercise right what's happened in the world over the past let's call it the past decades but certainly in the past decade and certainly in the past recent few years is no longer do countries borrow on the expectation that they will repay they borrow on the expect. that they will refinance and in the 0 or low or negative interest rate environment that's a costless exercise you just borrow because you're actually getting paid in germany's case you're getting paid for the privilege of borrowing so that's a great thing but that's not necessarily going to last forever in fact that would argue it's impossible to believe it's going to last forever so at some point these low absurdly low and negative interest rate borrowing costs are going to turn around and since you're not being you're not borrowing on the basis of an ability to repay it warring on the basis of an ability to refinance when those refinancing
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costs go up where's the money coming just because i know you're going to bring sondra very quick point i'm not sure you're disagreeing with me. we're talking about whether the tax is being used well and i'd agree entirely with these deficits that we've seen generated in the last 23 years on the tramp have been wasted on the corporate sector that was already highly profitable that was already by start right buying back shares with dividends so there was no so they were investing in capacity having that added to the economy that would be a different thing from a sickly basically shelving it a stock buyback showing in other ways are are things that are unproductive the do not add to the stuff that promised during the election campaign training infrastructure all the stuff he hasn't done since he was elected if the deficit was being used to raise future growth rates that i would have a and i suspect they would have a different view of whether the. sand you've written about super hub's of the
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financial elites and as i understand it really the way this is a stacked deck if you will the global economy in certain ways and so i'd be upset in your perspective what doug just shared and but doug just zeroed in that this is in a way a stacked deck and that the numbers do matter but you've written that these folks are doing it purposely. well let me differentiate i think after the financial crisis of 2008 the debt that was taken on was a bug not a feature i think since president trump has taken over it's become a feature not a bug and i would say that dead is one risk and interaction with growth but also risks have the nasty habit of interacting with each other and exacerbating each other so i think an other risk that is very dangerous when it comes together with debt is the global trade war because that will weigh on growth and potential long
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term globalization because we see protectionism all over the world so i think when you take all these forests together and the fact that since 2008 the world has become more interconnected technical progress has been exponential. and i just think that we cannot it's impossible to say what the black swan will be when a crisis will happen and what will trigger it but that the whole system as such has become more fragile as a fact so just how do you look at both risks and then the status of the dollar and the status of the u.s. economy the predominant position that america has in the world today are you still worried at all about that or do you think that actually we're over reaping that fragility so i would i would divide into 2 things the dollar and the financial market supremacy right the new york stock exchange as you see that sort of listen thing on the on the dollar itself what i guess none of us and to submit it was that you were going to have this bullying approach by the u.s.
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president that effectively because remember dollar values as any currency values have to be valued against something else so if you are tamping down the economic potential and activity of another country then by definition their currency is probably going to be weaker these are the the dollar so the u.s. is a very resilient economy and has performed very well in spite of what i did. especially in. the u.s. economy has done well because it has intrinsic benefits and because as we just talked about you've got these deficits that we've incurred taken on to stimulate when stimulus might not have even been necessary but we're doing well the u.s. economy is doing well but because of the trade wars because of the abuse i would argue of sanctions and tariffs and other means you're actually seeing a tamping down of confidence in other countries and other major currencies so the dollar continues to appreciate which is exactly what of course donald trump doesn't want to see and why he's been jawboning jay powell to try and reduce u.s.
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interest rates that's a separate issue the dollar so far has been stronger than the president would like it has been very resilient i would argue it is going to continue to be resilient however it is resilient in spite of the fact that most of the rest of the world views dollar supremacy no longer as a necessarily a good thing or even something that they are willing to tolerate for the greater global good they actually view it as there is no alternative there is an effort now on multiple levels to see if they can find an alternative but for a variety of reasons it's very difficult to see that there is going to be one can't the chinese renminbi eventually be an alternate will eventually is a long time but less so in the forseeable future the problem with the room in b. is. the room in b. is a managed currency so nobody believes that the chinese economy much less the chinese . currency is actually set by the markets so if you're going to be using it as a reserve currency or as
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a currency for your transactions and trade you want to know that the value is either going to be retained so it's stable because it's fully fairly valued or because you can anticipate what's going to happen basically market driven mechanisms in the chinese case it is not implicitly is explosively a tool of the chinese government and so therefore the room in b. as in a trap. the alternative to the dollar still has a long way to introduce is going to focus for a minute and would love your view if if donald trump is pounding on the chairman of the federal reserve board jay powell as doug just shared. on the level of interest rates doesn't that reduce the sense of independence of the u.s. dollar and what's going to do it you have a kind of china mimicry where the central government is pounding on economic authorities to get economic results here is there any risk in donald trump's behavior well yes of course he wants to be an autocrat and so he behaves like an autocrat including those that he criticizes but i think the effect will still be
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that the dollar will be will remain strong only because it's the best house in the neighborhood but i think part of the the exorbitant privilege the fact that the u.s. can print dollars is also still considered a safe haven despite because of the institutions which while he has tried to undermine them and he has arguably weakened checks and balances it still compared to other countries relatively secure and i love this analogy best house in the neighborhood where it's wrong that this is the best house in the neighborhood or just every other house just really sucks so bad that i think i think. to rephrase what they're saying is that the dollar is the tortoise toward you know tallest dwarf is the tallest 12 but to go back to the house analogy best house of the neighborhood as a former american economic public official once said it's not the wolf at the door it's the termites in the foundation right so what might the day the termites in the
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foundation. political america is becoming increasingly ungovernable we have a president who's just discussing who is attacking one of the most secure institutions in the federal system namely the u.s. federal reserve. we have a separation of powers that isn't delivering political decision making but most importantly of all we have a budgetary situation. that is increasingly if you look at the share a federal budget expenditures going on yesterday and not tomorrow and tomorrow means training young people education infrastructure opportunities and environments in which big new business is a created particularly you know when demography is increasingly aging but what the budget is increasingly going on is social security medicare interest payments on debt on yesterday in other words and that's those are the termites of the foundation there's no one particular moment where you realize it's not a sort of flash crisis it's a gradual thing to which we get
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a cloud let me ask you about that because i think why wouldn't there be a flash crisis as i would look at markets in the past or the change in political power historically something comes to mind is great britain in the 1950 s. in the suez crisis where with a single crisis it was became a punctuation point that the world realized your home country was no longer able to be the m.p.r. instrument which drew support from the pound right eisenhower a little bit but it was britain's dependence it raises the question with their minds in the in their framework are we not paying enough attention to the fact that tomorrow we may look at a very different. american situation with with regard to the rest of the world and his timing way once famously or one of his characters once famously said how did you go bankrupt gradually then suddenly. so they're not mutually exclusive the termites in the foundation eventual cause it to collapse if it goes on like that what could cause that. you know
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a crisis in the gulf where america basically because the people don't want to risk troops. and spend more money where china takes over basically being the guarantor of global oil supply and supplies i suppose that could be and meant it could be dramatic reform to make china's currency open and liquid and deepen its capital. it that i find it's less probable. any number of cracks one of ants could cause this foundation to collapse but for the time being we're talking about as i said earlier the told us to off the dollar the dollar is the least bad option available and i'd like to see this you know i think in the sense that whether we get the return of president trump of the united states or you get. elizabeth warren or bernie sanders any number of other candidates as well do you think that could have ramifications to push reset on the way the dollar is looked at in the world so i would say the
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it's not just the dollar i think the big issue and it's akin to what you're describing is about us in gauge went and the multilateral world order that we and the europeans created post world war 2 whether it's bretton woods institutions the u.n. or a wide range of the accepted institutions and norms that global trade commerce finance economic. everything the i mean ironically you know this week the demario will cease to function as it was designed to explain that tell our audience what the. has a dispute settlement board body which is supposed to have 7 judges called the appellate body. it is supposed to have a minimum of 3 and as of december 10th 2 of those judges terms expire and the u.s. has withheld support for renewing or extending those terms so that as midnight december 10th there will only be one in power judge which is below the kora which
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means that the dispute settlement mechanism cannot function but again that's that's you know arcane stuff but what matters more i think then the deputy you know is this institutional framing of do we believe in these multilateral institutions or not and you were asking about what happens as a result of the 2020 elections here in the united. states i would say that you've got either a return to normal or you don't and normal to me let's say the you don't is the reelection of donald trump or as you said you know elizabeth warren bernie sanders who are really seeking a revolution on a lot of different levels not just military engagement and isolationism versus interventionism just the us role in the world a joe biden style presidency would be more continuity go back to quote normal and in a normal environment then i think the u.s. dollar and the u.s.
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preeminence in financial markets and economic prowess around the world is restored it won't go back to the way it was but it largely stays on the status quo before the trump administration sought to challenge that multilateral system if we are seeing a reelection of donald trump or something like a worn presidency where she seeks to overtly change the paradigm then you are looking at an increasing motivation of other countries to to create new institutions new mechanisms i still don't see a challenge to the dollar but i do see challenges to business as usual are we going to go back to normal if we're not then all bets are off sandra what doug just described this is something that i see going on globally that that the pressures of whether the system goes back to normal and pushes reset or changes and if you look at the political dynamics in advanced industrial democracies one after the other
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the rise of populism is essentially a rejection of the social contract and the economic contract so we're talking at a big macro level about the dollar and global influence and markets but beneath that and the way growth has been shared has created incredible political tumble and change and i'm interested in your insights again coming back to super hubs in the financial elites do they get the message that the equation is not working that even if they. as they want to keep things back where they were but are they willing to tweak it so that we get something between doug's 1st option and 2nd option. yes so in my book super apps i explain the financial system as a complex self organizing system that is based on network theory i explain it with network theory that sounds complicated but it actually makes it easier to understand and in this network we're all nodes and super hubs are the center of nodes and i do think that the super work together very effectively after the crap
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financial crisis of 2008 where i said the redistribution from the 99 percent to the one percent was a bug not the feature and or a trump has turned it around to an extreme and i think so it's now resilient it's going to be with us well it's now increased exponentially and donald trump knows that if there are checks and balances he can brain he won't have absolute power so that is the purpose why surprisingly effectively he has undermined global institutions which are based on our common norms and values race and disrupting that disrupt stability and creates new risks but i would like to draw attention to another fact because we are focusing really on the financial system while we must not forget the fact that the u.s. is still so strong with regard to the financial system and the dollars of monopolism you know through due to globalization and technical progress and we are seeing the tech world in the tech world is increasingly more venturing over into the financial world the guys are getting bigger and bigger peter teal writes dr burke and all right getting more parts i think it's
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a parallel danger thank you ed let me just ask you the last couple of minutes as you look at the dashboard of the global economy to be america's place in it what are the parts of it that you think are most important to look at today i think we haven't talked enough about china and india both of which are going to synchronize slowed. china has provided more of the source of global demand for global growth since the 2008 crisis in the united states more than the u.s. consumer yes. and china is now is now slowing india is slowing very rapidly so that there is a global synchronized slowdown going on. but you know we've got this sort of. of the east. larry summers used to talk about the world economy flying on the american can back of the american consumer is that true again it's very least a twin engine but actually it's more than 20 so it's getting more complex but the whole of slowing but the part of the world that needs to be growing rapidly is
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slowing most markedly and that's asia what is your black swan that we should be thinking about oh i think technological decoupling i think there's a very real risk accelerating every day that you're going to end up in the very near future with a chinese bloc a u.s. bloc and the europeans caught in the middle and everybody else caught in the middle without the half the u.s. brings to the table so the economy of the 21st century is going to be very much technologically driven 5 g. is the start and that infrastructure is clearly now going to be divided and that can happen and they can still also use the dollar they can still use the dollar but i would say my black swan is that you could end up with not a central bank created currency as a threat to the u.s. dollar but you end up with some form of a digital currency that does end up being so that's a crypto currency a bit coins well i wouldn't call it a big coin and i don't think anybody's come up with the right model yet but in terms of your black swan scenario facebook's libra could be that either but there
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are a lot of impediments to it but given the suspicions of central bank created reserve currencies the idea of this technological barak ation in the currency realm is not something that i would say 30 seconds on your black swan well there's an embarrassment of riches. and i the greatest was actually that i'm seeing is inequality which is increasing exponentially 20153080 people have as much wealth 3600000000 people in the world and now that's 80 people versus 3600000000 people yes and 200-1000 that. on the part of the billionaires to 26 from 80 to 26 now have as much as 3800000000 people so this is said to further increase also due to technological you know the tech giants so it's getting worse and worse and less stable i love spending time with you but it's kind of depressing in some way things are not all well in the economic house i'd like to thank you all for
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being with us doug redeker a senior fellow in global economy a development program at brookings institution edward luce chief u.s. commentator for the financial times and standard of beauty c.e.o. of beyond global in new york thank you all so much for being with me today before we get to the bottom line let's go back to new york there is the u.s. national debt clock that we saw at the beginning of the show notice any difference it's not precise but more than $70000000.00 in debt was added in half an hour and for now none of that makes a difference according to our experts so what does matter government debt that cripples new investment trade wars that slow growth inequality were just a few dozen 1000000000 billionaires hold more wealth than 3 and a half 1000000000 people and tech companies that today are more powerful than governments fear is replacing trust in the world and that may cause future earthquakes shaking up the global economy creating a less mighty dollar and changing america's place in the world and that's the bottom line.
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capturing a moment in time. snapshots of all the lives. of the stories. providing the clips into someone else's what. they. do. or. inspiring documentaries from impassioned filmmakers. witness on al-jazeera. the latest news as it breaks all the holes in its path what destroyed and this is all that's left with details coverage when mexico elected a new president last year the still largely of the promises that he would end the plague of violence in the country and feel as journalism from around the world this
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rally was a pretty hot place that ought to track the logic of it that the altitude rally held in hong kong. from ancient embryos to communist leaders. age old philosophies and the rule of order remain central to the world's oldest living civilization. in the 1st of a 2 part series the big picture charts how a history spanning by 1000 years shaped china's world in the industrialized world. the china complex part one on al-jazeera. al-jazeera where every.
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he's promised but hours away from the u.k. election there are signs boris johnson is facing a tough race. hello and welcome to our there on live from doha i'm also coming up israel faces another vote but there's little hope it will break the loop of elections that are paralyzed the government. violent protests in india after parliament approved a citizenship law that many say discriminates against muslims. and find out how to china's trying to balance the demands of its being middle class with efforts for
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green a feature. of the final opinion polls ahead of elections in the u.k. a pointing to a narrow victory for prime minister boris johnson's conservative party but the prospect of a hung parliament where there is no clear winner still can't be ruled out and that raises the possibility of breck's it being further delayed or even canceled the reports from london. after touring the country boris johnson was back in the capital to deliver his final campaign message the conservative policies lead in opinion polls has narrowed ahead of the vote anything less than a majority could be disastrous for the conservatives and johnson's hopes of delivering bricks it opposed 24 hours to end the deadlock 24 hours to break.


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