Trumponomics

If it feels like the US relationship with China is a tinderbox waiting to explode, chalk some of it up to political expedience. Leaders on either side of the Pacific have played the blame game for years, faulting each other for their troubles while failing to enact necessary reforms at home, says economist and China scholar Stephen Roach. Meantime, these “false narratives” have built up so much animosity that a new Cold War has emerged, he says. The fight, as Senior Editor Chris Anstey explains, potentially spans everything from rules governing the internet to the most mundane facet of consumerism. On this first Stephanomics episode of the new year, we feature a double shot of brewing economic and political conflict between the US and its Western allies on one side and China on the other. Host Stephanie Flanders talks with Roach about his new book, Accidental Conflict: America, China, and the Clash of False Narratives. Things didn’t have to be this bad, says Roach, a former chief economist for Morgan Stanley and now senior fellow at Yale Law School. Years ago, the US and China regularly held big economic and strategic forums. Nowadays, Chinese officials have Zoom calls, or Joe Biden and Xi Jinping meet on the sidelines of a G20 summit, accomplishing “nothing,” Roach says. What happened? Roach says the deterioration of US-China relations stems from a zeal for blaming the other side for one’s own shortcomings. US leaders routinely blame China for the large trade imbalance favoring the Chinese, Roach says. To be sure, China is the biggest source of the imbalance, but countries run trade deficits because they fail to save. “And when you don’t save and you want to grow, you import surplus savings from abroad, and you run massive current account or balance of payments deficits,” Roach says. In China, leaders know they need to rejigger their economy to reduce dependence on exports and investment while bolstering domestic consumer consumption. But it’s easier just to blame the US for constraining its growth, Roach says. In a lighter segment, Anstey explains a growing rift between the US and China. He does so by way of the lowly desiccant, those small packets of silica gel that keep moisture out of everything from new sneakers to electronics. Last year, China decided the world needed a new production standard for desiccant packets, part of a much larger effort to influence standards on everything from desiccants to internet protocols. The latter would give Beijing a larger say in how things are made globally. Ultimately, US representatives helped kill the new desiccant standard, much to the delight of sneaker, textile and food companies who figure one desiccant is as good as the next. Still, the fight over production standards is heating up, and where moisture-reducing packets are low-risk, cybersecurity experts worry more about China’s efforts to influence internet standards.See omnystudio.com/listener for privacy information.

Hosted by Bloomberg Opinion senior executive editor Tim O'Brien, Crash Course will bring listeners directly into the arenas where epic business and social upheavals occur. Every week, Crash Course will explore the lessons to be learned when creativity and ambition collide with competition and power -- on Wall Street and Main Street, and in Hollywood and Washington.See omnystudio.com/listener for privacy information.

A push for peace in Ukraine, a recovering China and good news for US consumers may be in the cards.Will China keep moving beyond its "Covid-zero" policy in the face of a massive infection wave? When and how will Russia's war on Ukraine end? Will Donald Trump really go ahead with his US presidential campaign next year? Groundhog Day won't arrive in the US until February, but until then the Stephanomics podcast has assembled a crack team of prognosticators rivaling Punxsutawney Phil himself to give a glimpse into 2023.In this annual look-ahead edition of the podcast, host Stephanie Flanders delves into the future with Charles Grant, director of the Centre for European Reform, and three Bloomberg experts, Chief Economist Tom Orlik, Washington Bureau Chief Peggy Collins and London-based TV anchor Francine Lacqua. First, with inflation and interest rates dominating economic headlines, Orlik gives a somewhat reassuring outlook for the US. Price hikes will fall rapidly from their perch above 7% in 2023, but they'll remain high enough that the Federal Reserve will keep tightening the money supply for now, Orlik says.In US politics, Trump's bid for a second term has gotten off to a slow start. Facing multiple criminal investigations and diminishing party support, some are wondering if his heart is really in it. However, since he's announced that he's running, we'd better assume the Republican might be on the ballot in 2024, even if potential rivals like Florida Governor Ron DeSantis don't clear a path for him, Collins said. The man who defeated Trump in 2020, President Joe Biden, has his own challenges next year now that the GOP controls the House of Representatives. Collins sees Biden circumventing a deadlocked Congress by making prolific use of executive orders, as many of his predecessors have done in the past.Across the Atlantic, Grant predicts the French, Italians and Germans, joined by the US, will eventually urge Ukraine to cede territory to reach a peace agreement, despite the tens of thousands of its citizens killed by Russia in its war. While some Eastern European nations are taking a hardline stance against the Kremlin, including pushing for regime change, Biden and his allies foresee having to work with Russia over the long term, Grant says, and may take a more diplomatic approach. Meantime, the continent has been spared a full-on energy crisis, in part because of a mild European winter and a large supply of natural gas in storage, Lacqua says. That could change, though, with the European Union's new cap on gas prices. Energy importers may choose to send their natural gas elsewhere and cause prices in Europe to soar, Lacqua warns.China currently faces a national crisis as coronavirus cases flood hospitals and threaten to kill more than a million people. It's a public health catastrophe that was triggered by Xi Jinping's sudden reversal of his "Covid-zero" policy. But in 2023, that turnabout may have Beijing's desired effects: After the infection wave recedes, Orlik predicts China's economy may finally turn the corner. He sees the country growing by 5.1% next year, with the risk being that it grows too quickly and puts a strain on the world's commodity supplies. For now, the US and Europe have been somewhat at odds over China, with the US more concerned about Beijing's accumulation of power and the threat to US security. Europe may be forced to side with its US allies, Grant says. "The more we get into a sort of new Cold War, the more inevitably the Europeans, however reluctantly, are forced to take sides and will take sides on the American side," he says.See omnystudio.com/listener for privacy information.

Thirty years after the Cold War ended, a new one of sorts is emerging between China and the West, a leading economic scholar asserts. As a muscular China seeks to refashion trade and geopolitical organizations in its own image, the US and many of its allies face a key challenge: keeping Beijing on board with trade pacts and efforts to slow global warming without ceding ground on democratic freedoms. In this special episode of the Stephanomics podcast, host Stephanie Flanders talks economics and geopolitics with Paul Tucker, a former deputy governor of the Bank of England and author of the new book, Global Discord: Values and Power in a Fractured World Order. Years ago, world leaders could set their monetary, national security and human rights policies independently, but nowadays all of those things are interconnected and everything is more complicated. This new reality was evident when the Group of Seven leading economies, responding to the Kremlin’s war on Ukraine, froze Russian currency reserves held in Western banks, Tucker says. Tucker predicts that developing nations will eventually topple the existing world order, shaping one in which the US, Europe and Japan no longer call all the shots. In this new iteration, international trade and diplomatic entities will have to be completely remade. But Tucker says that’s still a few decades away, because while China is already a world power, India and a few other developing nations remain a ways off. For now, the US will enjoy a “lingering status quo” in global finance as issuer of the world’s premier reserve currency, but global trade, cross-border investment and everything else will see more jostling for power, something between a “superpower struggle” and a “new Cold War.” Tucker sees China trying to influence global trade and politics much more in coming years, a real concern for the West since Beijing tends to prioritize Communist Party control over civil liberties. World leaders will need to walk a fine line when dealing with Beijing, he says, working with China on pressing global issues while distancing themselves on others. “I think the big thing is China is too powerful” for the US and its allies to tell it how to reorder its society, Tucker tells Flanders. Still, the West should “should find common cause” where it can.See omnystudio.com/listener for privacy information.

There's evidence the Federal Reserve may have finally gained the upper hand in its war against inflation, a potential relief not only for US investors but also real estate agents 8,000 miles away in Hong Kong. The central bank's year-long rate-hike campaign has stymied America's housing market as well as that of the Asian financial hub, and people on both continents will be glad to see the back of it.  This week, we explore how global challenges like inflation, rising interest rates and worker shortages are moving markets in three continents. First, Chief US Economist Anna Wong tells host Stephanie Flanders that, while inflation appears to be slowing in the US, it's too early to tell if the Fed has won the war. Too many risks remain in the global economy, including Russia cutting its oil production or China's reopening sending commodities prices soaring.  What appears more clear, Wong says, is that someone may have gotten a heads-up on this week's surprising US inflation report. A minute before the Consumer Price Index numbers went public, someone traded heavily on Treasury futures. "So, by being a bit early, before everybody gets the same data, somebody is making a lot of money with that move,'' she says.  Next, we travel to Hong Kong, home to one of the world's priciest property markets. Reporter Enda Curran and producer Yang Yang visit a 33rd-floor apartment that just sold for $3.2 million -- a relative bargain for a unit with a view of the famous Happy Valley Racecourse. In a better market, it might have fetched almost 10% more, the unit's real estate agent said. While China's restrictive "Covid zero" policy may be partly to blame, so too is US monetary policy. Since Hong Kong's currency is linked to the US dollar, Fed rate hikes ricochet across the city's system. And just as US housing prices are cooling off, economists say prices here could fall 30% from their peak. Finally, reporter Alessandra Migliaccio shares how Italy's legendary fashion companies are struggling to persuade young people to make 1,000-euro boots. The nation's youth unemployment rate is almost 24%, but roughly one in every two job postings in the luxury industry goes unfilled, according to trade group Altagamma. New Fendi Chief Executive Officer Serge Brunschwig is on something of a crusade to reverse the trend and get Italian youth to take up the craft. Still, it's no easy sell. In the words of one 18-year-old who's learning shoemaking, ``People say, `Oh, you make shoes? That’s a bit useless.'"See omnystudio.com/listener for privacy information.

As the rest of the world raises interest rates to battle inflation, Japan curiously is clinging to low rates to raise wages and finally move past its long battle with deflation. But as Tokyo tries to hold the line, the fastest inflation in decades is spooking a country unaccustomed to it. And the “decoupling” of the US and China, along with Russia’s war on Ukraine, are also raising tough questions for a historically pacifist nation whose biggest export market is governed by Beijing, but whose national security has long depended on Washington. This week, we devote our entire Stephanomics podcast to Japan, delving into its economy, its ties to China and the US and its efforts to stay on friendly terms with both. First, reporter Yoshiaki Nohara brings us the noisy scene inside the Toyosu Market, the world’s largest wholesale fish market. There, businesses face a dilemma: costs of materials are rising at a 9.1% clip, but consumer inflation is running at a more modest 3.6%. So, wholesale fish merchants, restaurants and other businesses are eating some of the inflation for fear of alienating a Japanese public that’s used to prices falling, not rising.“We really wonder whether customers will keep coming back if we raise prices,” one businessman tells Nohara. That reluctance to boost prices, though, is creating a bit of a vicious cycle for Japan. Worker wages are stuck and won’t rise until businesses can pass along more of their rising prices to consumers. However, consumers won’t accept higher prices until they see higher wages. For now, the Bank of Japan and Ministry of Finance are trying to force wages up by keeping interest rates at rock-bottom levels—even if the yen craters, too.Next, host Stephanie Flanders, who’s in Tokyo this week, chats with reporter Isabel Reynolds about the way Japan is being drawn into global conflicts and its delicate efforts to keep everyone happy. This week, Prime Minister Fumio Kishida ordered an increase in defense spending that could strangely put his country almost on par with Russia. Meantime, Japan finds itself caught between its loyalty to the US and its crucial trading ties with China, Reynolds says. The US has been signaling it’s getting more aggressive toward China on trade issues, and while Japan has been reluctant to take sides, it may be forced to follow America’s lead if things escalate, she says. Finally, Flanders chats with Takehiko Nakao, a former senior official with the Ministry of Finance, about whether Japan is finally ready to shed its years-long deflation, as well as the nation’s need to ensure its own national security in light of the threat from China while also maintaining economic ties with Beijing. See omnystudio.com/listener for privacy information.

Europe might just avoid what had been a widely predicted, Kremlin-induced energy crisis this winter, thanks to a surprisingly large stock of natural gas. But are the continent’s efforts to conserve giving a bah humbug to the holidays? Some of Europe’s best-loved Christmas markets are shutting their holiday lights earlier to save electricity or even banning them outright. Even worse, Frankfurt’s famous market is—perish the thought—forgoing heated toilets. In this episode we delve into the energy challenges facing Europe as it works to replace natural gas cut off by Russia. First, reporter Bastian Benrath visits with retailers in Frankfurt’s famed Christmas market, where cutbacks to the city’s large holiday light displays threaten to sap some of its magic and give shoppers less reason to turn out. Other cities like Zurich, Berlin and London also have trimmed holiday display hours or reduced their size, and Paris is turning off the lights at the Eiffel Tower an hour early. What really annoys retailers about this Scrooge-like behavior is that keeping the lights on may expend less energy than powering and heating the markets themselves. As Benrath reports, “in many places, cutting the Christmas lights might actually be more about saving face than actually about saving energy.” In a follow-up discussion, host Stephanie Flanders talks European energy with Maeva Cousin, Bloomberg’s senior euro-area economist, and Bloomberg Opinion columnist Javier Blas. The continent appears ready to confront the winter without mass shortages of gas, thanks in part to forecasts that were overly pessimistic, reduced demand from China and relatively mild European weather, Cousin says. Still, Blas warns that the continent isn’t out of the woods yet. In the short term, a harsher winter than forecast could still lead to blackouts. In the long term, Europe’s high energy costs could persuade companies to relocate to places with cheaper costs, like Texas. Finally, reporter Colum Murphy reflects on the protests over China’s “Covid zero” policy. The plight of residents stuck in lockdowns there has come into stark focus. While images of jubilant crowds at World Cup soccer games flicker on TV screens, “at home in China the people are living in strict conditions,” Murphy says. And for President Xi Jinping, the protests are a huge embarrassment, coming “just after receiving the backing of the whole party.”See omnystudio.com/listener for privacy information.

Back in the days when bands like Led Zeppelin or The Who toured America, teens lined up overnight at ticket booths, hoping for great seats when the window opened. As time went on, the queue moved to the telephone and ultimately online. All the while, one company increased its grip on the live-event market. That company is Ticketmaster.  But that could change thanks to Taylor Swift. Having waited years to see her live again, millions of fans were blocked by a combination of crushing demand, technical breakdown and the ascendance of bot-buyers who funnel tickets to a secondary market that charges sky-high prices. (In the 20th century, they were called scalpers.) As reporter Augusta Saraiva explains, this consumer calamity infuriated Swift’s fans, many of whom are swimming in cash saved up during the pandemic and desperate to spend it, regardless of the shaky economic landscape. This strange state affairs already has a name: “Swiftonomics.” Lawmakers have seized on the popular outrage, uniting with fans against what many have long alleged to be Ticketmaster’s monopoly power. Host Stephanie Flanders speaks with Bloomberg industry analyst Eleanor Tyler about how the debacle, and its growing political exploitation, may be the tipping point for increased antitrust regulation that finally breaks Ticketmaster’s spell over the live event marketplace. Then we dive headlong into a different thicket: how recycling doesn’t work as advertised. Consumers may feel better about mass consumption because there’s a blue bin for everything, but the hard truth is they’re fooling themselves. Most of the plastics, clothes and other items they seek to recycle wind up in landfills or dumped on the developing world. Along the shoreline of Accra, Ghana, what locals call “dead white people’s clothes” can be found in piles up to six feet high.  Reporter Natalie Pearson explains that while fast-fashion chains like H&M and Zara encourage recycling, only a small fraction of their clothes will ever be remade into new items. Bloomberg recently surveyed the problem in Accra, where some 40% of the imported clothes end up as trash, and in the Indian state of Gujarat, where roughly one-third have no use. Finally, Flanders sits down with Bennington College Senior Fellow and visiting faculty member Judith Enck, a US Environmental Protection Agency official during the Obama administration, to discuss just how broken the recycling system is, and how it could be made to work better.See omnystudio.com/listener for privacy information.

Buckle up. Global financial leaders warn that the current era of expensive money is likely to stick around for at least another year, and maybe longer. Easing up on interest rates now would only embed high inflation in people's assumptions, and "that's where it becomes very long-lasting," says former UBS Group AG Chairman Axel Weber. In this special edition from the Bloomberg New Economy Forum in Singapore, three experts in banking and monetary policy share with host Stephanie Flanders why central bankers will be battling inflation in the short term as well as the long. In the US, there's little doubt the Federal Reserve will bump up interest rates again this year, says Gita Gopinath, first deputy managing director of the International Monetary Fund. "For 2023, the question is more about how long are you going to keep these rates at the levels that they've moved them to. And we see a need to keep it at over 4% for all of 2023 to be able to bring inflation down durably,'' Gopinath said. Globally, changes in the supply chain and the transition to a greener economy will drive up energy costs and could lead to structurally higher inflation, said Davide Serra, chief executive of asset manager Algebris Investments. As usual, the poorest are most in jeopardy. Already, about 60% of low-income countries are in high-debt distress, Gopinath said, and while a systemic debt crisis has yet to materialize, she warns these are "very risky times."See omnystudio.com/listener for privacy information.

Investors were floored when China started cracking down on homegrown tech giants like Alibaba Group Holding Ltd. and Tencent Holdings Ltd. in late 2020. They shouldn't have been, argues Kendra Schaefer, an expert on Chinese tech policy with Beijing-based Trivium China. For almost 20 years, the Chinese Communist Party has struggled to understand how its sprawling internet and financial technology industry fit with a socialist market economy, and things finally boiled over two years ago, Schaefer says. Increasingly, Chinese leader Xi Jinping and his party want technology firms to meet "state-directed goals," she says. In this special edition from the Bloomberg New Economy Forum in Singapore, we dive into the complexities of Chinese economic policy. One of the more recent challenges for investors and foreign businesses operating in China is a lack of good intelligence, Schaefer tells host Stephanie Flanders. There's been an "exodus" of Chinese policy experts since the pandemic began, she says, partly because of restrictions on travel inside the country. Schaefer herself recently relocated to the US from Beijing. For now, many foreign companies have been confused by recent aggressive moves out of Beijing and powerless to do much about it. While investors were befuddled by new regulations on China's big tech firms, behind the scenes the country was increasingly uneasy with their power and apparent lack of interest in Communist Party objectives. Instead of "disrupting pizza delivery," tech giants should focus more on developing high-end computer chips, Schaefer says, citing the opinion of party leaders.  Meantime, manufacturers have seen production grind to a halt at the slightest spread of Covid-19. For sure, some companies have talked about mitigating risk and diversifying outside of China. However, leaving altogether is hardly an option for many. Duplicating the country's supply chain would take 10 years, so "people are just doing their best to hedge their bets," Schaefer says.See omnystudio.com/listener for privacy information.