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You seem to be arguing that a recession
may be in the cards given that there is

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broad central bank consensus that they
have to keep hiking rates because

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inflation is so high.
Do you think and especially with the Fed

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considering maybe probably 75 maybe 100
basis points can central banks take the

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needed steps without severely disrupting
not just the global economy but

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particularly the developing economies.
It's hard to do.

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And you know so inflation is a real
problem.

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So I'm not saying it's easy but I do
think the central banks have more tools

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than just the interest rate hikes.
So one way for the for the governments

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and the central banks to go is to focus
more on production.

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How do you get more things out in the
economy.

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And that makes it right.
It means that you won't have to do as

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many rate hikes.
How did you make that work though.

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You need right now to bring down
inflation.

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You're going to see the economy globally
getting hit hard right now.

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Investing money to make the economy more
productive plays out not over weeks or

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months but over years.
That's true.

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But investors look ahead.
So if you can if you can create the

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right environment then there'll be a
positive response from markets.

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You would see for example bond yields
would go down even as equities went up

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in price.
That would be a stabilization signal

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from markets.
But that that takes I think more

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production.
And you know the systems that can

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actually produce more and I think the
Fed the central banks themselves can do

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use regulatory policy and also their
bond policies better to encourage supply

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to increase.
You know central banks have fallen into

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this idea that they only affect demand.
But in reality the the financial systems

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and the central banks have a massive
impact on supply and investment.

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You're making a very interesting
argument that there's a misallocation of

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capital.
You need to have more capital out in the

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world for it to go to emerging markets
small businesses women et cetera.

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You seem to be saying that for example
the Fed shouldn't just slowed just so

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you know let the bonds roll off faster.
They should be selling bonds.

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ECB should be selling bonds.
What do you mean by that.

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Wouldn't that be potentially disruptive
to bond markets and then disruptive to

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the economy.
You know at first the bond markets will

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say that but at some point you have to
have more capital outside the bond

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markets.
That actually makes them more credit

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worthy.
And so you you might see a situation

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where the yield curve is higher but the
risk curve is is better than it is right

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now.
That would be the goal of of having a

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growth oriented monetary policy.
I think even more powerful is on the

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fiscal policy side.
The governments are borrowing so much

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that it means there's not much CAC.
There's not enough capital left in the

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productive sides of the economies around
the world.

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David Then there's a Shery Ahn joining
the conversation and Kathleen on really

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boosting the productivity and not just
focusing on reducing consumption how we

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line our fiscal authorities as well with
monetary policy makers.

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Yeah that's exactly right.
So we know that government spending it's

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very hard to make it as efficient and
effective and well allocated as private

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sector spending.
That's the basis of of the of the market

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system.
And so right now what we know is the

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huge amount of the world's capital is
being allocated by government.

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And so that can help explain why median
incomes haven't been rising.

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It puts a burden on the bottom on the
day except for the highest income sides

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of the economy who benefit from bonds.
Everyone else really benefits from jobs

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from new companies from start ups from
getting their first job.

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And we need to draw those people into
the economy in order to produce more.

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David is Heidi chiming in from Sydney.
I just want to throw out this quick

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chart showing that the Bloomberg Global
Growth Tracker actually fell to zero for

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the month.
We know that the risk of recession is

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looming large for the Eurozone for the
U.K.

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for the U.S..
Historically we would have seen growth

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out of China coming to the rescue here.
How much downside this time is there

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from the Chinese slowdown particularly
when it comes to emerging nations that

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typically would have benefited from that
Chinese growth engine.

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Yeah.
This is very interesting.

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You know Europe is facing a problem.
It is clear the reason they were very

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dependent on energy from Russia.
Natural gas oil and coal.

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And so as that is reduced it creates
higher prices inflation rate hikes.

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And that's a complicated mix.
And so it's interesting China in

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previous global down cycles was it was a
counter cyclical meaning they would they

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would cut interest rates they would
increase their government spending and

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they're doing less of that this time.
So they had you know they had a actual

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contraction in the second quarter.
The quarter over quarter growth was was

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negative.
And so

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as they go into their party Congress
today they have been less eager to

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really stimulate this time.
That may be good for their economy and

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good for the long run but it means for
the world you've got the number two

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economy.
That's not really right.

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You know jumping forward that puts more
burden on the US.

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But you know the US is a big strong
economy.

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It could handle it if it if it really
started producing more.

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You know another threat though to the
developing world is you know aggressive

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Fed rate hikes are making key dollar
even stronger.

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That increases the risk of capital
outflows.

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It makes the cost of dollar financing
even more expensive at a time when

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they're highly indebted after borrowing
so much to deal with a pandemic.

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Do you see specific countries that are
most at risk now into sliding into

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financial crisis.
And is this kind of thing that you think

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could spread this could become more of a
global financial phenomenon.

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I'm worried about the weaker countries
because the bond market cuts them off.

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You know the investment the cap people
take their money from international

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reserves the country's reserves and move
it out.

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And we've seen a big decline in
international reserves.

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So that's a very real risk.
And as that as the US as the rates rise

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it leaves others behind that.
I think the U.S.

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has to do what's right for the US.
So I I just think there are more tools

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that could be used than the rate hikes.
And then the countries themselves have

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to do more to make their currencies.
You know I favor everyone trying to

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achieve strong and stable currencies.
That's what's best for growth.

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And that could be done better.
A lot of countries are intervening but

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they're sterilizing the intervention.
So in effect it neutralizes what you're

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doing.
The currency keeps weakening.

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So that's that's a challenge.
I think that it could be done better on

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that score.
In the last couple of weeks we've seen a

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raft of pledges when it comes to
bailouts from both the IMF and China

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also agreeing to forgive some African
loans as well.

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How much progress are we seeing on debt
relief.

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And that should more be done especially
from countries that can do it like

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China.
This is important for some countries.

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The debt is simply unsustainable.
So this quicker that you can move to a

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restructuring the sooner the country can
get back on its feet.

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So that should be the goal.
Sri Lanka is in that situation and

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others we're working with closely with
the IMF on Zambia where China is one of

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the co-chairs of the creditors
committee.

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And so I'm hoping that there can be
progress but that gets into several

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steps in order to get to the actual debt
restructuring and the countries need to

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move quickly.
And I hope the creditors will help them

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do that.
Recognize you know and I say this with

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China that it's in their interest to
have a stronger developing world because

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they're selling a lot of things to that
world.

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So I think they could do a bit better
and move more quickly on that.

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Private sector creditors as well are
dragging their feet.

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And it would be better for everyone to
get on with it and get the

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restructurings going.
David on the topic of a debt relief for

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Ukraine.
Does the World Bank need to be playing a

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more prominent role.
This is the IMF given that there doesn't

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seem to be a clear path towards repaying
that debt.

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Does that funding need to come now from
grants rather than loans.

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Yes.
So I'm sorry I lost the Ukraine right

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there.
Well the Ukraine clearly is in a war

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very difficult war has a lot of debt.
They're looking at.

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To reduce that debt.
And they've.

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They're working with the private sector
individual bond issuer issuances.

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So I think grants are very important.
Europe has put money in the US has put a

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lot of grant funding in.
World Bank is has stepped up in the

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early stages in March and April with
large packages.

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So I I think there's more work to be
done for Ukraine.

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And I would like to see an early debt
restructuring that would help people see

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light at the end of the tunnel.
Well right next to Ukraine Europe and

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Europe's energy problem which you say is
immense.

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And you have noted that it spills over
you know Netflix natural gas not enough

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electricity and fertilizer.
I mean food prices everything.

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And you also say the U.S.
is one of a few countries in the world

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in a position to increase supply of oil.
So to increase output and yet the Biden

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team is not doing it.
Is this a time for global leaders to say

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look we've got green energy objectives
but we've got to put that to the side

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for one moment and just turn to the
world's in intense need to get more

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energy now to help solve these
imbalances.

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You know I don't know that you have to
say put something aside.

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What we can recognize is that unless
there's more supplies of cleaner energy

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for example natural gas better than some
of the alternatives the world will turn

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to dirtier sources of energy.
That's already happening heavily in

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Europe with them reopening the coal
fired power plants and buying coal from

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around the world.
So you're getting more production of

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coal which not only is carbon intensive
but it's also often got got air

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pollution qualities within it as well.
So I think there can be.

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So I did see United Arab Emirates today
saying it could it could increase its

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production.
That's good.

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The U.S.
is a big producer so it's able to do

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that.
And I think now is timely.

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Prices are high and that that energy can
be used very importantly by the world to

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feed people.
Canada also is a big potential source of

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energy and could be doing more in that
regard.

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Natural gas goes straight into
fertilizer which goes straight into

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crops.
So there's got to be in people's minds

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this connection that if you're going in
that direction you're helping feed

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people.