0year, we probably have to be looking at a global recession. We are going to test 1 . A lot of things would have to go incredibly wrong to get the 1 . You have to have a recession to get there. The u. S. Economy could go to recession. Unless the market begins to price an additional cuts, the 10 year at most will drop down to the 160 range. The fed will have to ease again. The fed is going nowhere. If there is any sort of weakness in the data, you will see an outsized rally in bonds. Jonathan joining me, kathy jones, george bory, and in chicago, jim bianco. Jim, lets begin with you, looking out to 2020, it seems the consensus view is for rates they are or go lower. Where you come down in that debate right now . Jim i think thats probably right. Rates will probably drift lower. Thats been the story the last 10 years. Weve had no inflation, we are in a record expansion, we cannot generate any inflation right now, rates are down 75 basis on ts this year, at least the 10year yield. The path of least resistance has been lower and i dont think that will change going into 2020. Kathy we are calling for higher rates this year, not a huge breakout to the upside, but 2. 25 to 2. 5 on the 10 year. Unlike last year, we were starting at a higher level with the economy slowing down. Now we have a lower level with the economy looking a little bit better, the global economy, in particular. We see room for the term premium to come up and expectations to pick up a little bit. George i to say we are in a similar camp since we think that rates have room to move up from here, roughly 22 and a quarter is our target. You can summarize in a simple way. We expect growth to be upwards of 2 . We think inflation will be around 2 and we think the 10 year yield will be on average around 2 . Its kind of a two by two by two forecast, if you will. Jonathan similar data points this year, as well, so what has taken us to 225 when we experience rates around 150 with the same economic backdrop next year that you are looking to repeat next year . George like kathy said, i think the differences growth differentials, and although the economy decelerated a little this year, expectation will reaccelerate next year. That in another itself will allow yields to move higher. We think the fed will be anchored, we dont think it will do anything. The monetary stimulus you saw in the middle of this year starts to filter its way both domestically and internationally and that helps boost growth incrementally. Jonathan jim, we are arguing 25 or 50 basis points, but what are your thoughts on gdp picking up as the new year grows older . Jim i think theres the possibility it can pick up, but i would also remind you that the u. S. Rates, with a two handle on the 30 year, we have the highest rates in the developed world for the first time in history. I think global rates, Global Growth matters for the bond market, and with all the other rates being lower and a lot of them being negative and they will probably stay there, it will be a tremendous downward pull on our interest rates. We cannot remain the outlier in interest rates. We have never been here before as the highest rate and i dont think it is going to stay that way much longer. Either the rest of the world is going to have to come up a lot or we will have to be pulled lower and i think pulled lower we will see first. Jonathan lets talk about the shape of the yield curve. We are ending 2019 with some steepness, relative to where we have been, the inversion through the middle part of this year and the summer. 2 10. Your take . George we think there could be 10, as much as 15 basis points of steepening, but 510 is a good central call as the fed stays anchored. You get a modest uplift in yield. Thats one of our highest conviction views, position for a steeper yield curve next year, and we think that kind of positioning will work best. Kathy i agree, looking for a steeper yield curve because the fed will stay on hold. I think if there was a surprise, its that we get a lift in inflation and inflation expectations. It is starting to build a little bit and we are seeing the breakevens in the tips market come out. I think if there is a surprise, it might be a little more inflation or at least the expectation of it than we have seen before. Jonathan lets talk about what that means for the consensus call next year. The risk of Morgan Stanley, which i know is shared by many who watch this program, the risk has skewed asymmetrically to cuts in 2020, but the reaction function of the fed has shifted. Is that your take . Kathy i think they would need to see, as jay powell said, they would need to see a Material Change in the outlook to make a change good the interpretation is we would have to see a worse economy in order to start cutting again and we are not even considering raising rates. But if we are right, we see more upward pressure on inflation, that sort of expectation might shift in the second half of the year. Jonathan jim, do you share that view . That the fed is not going anywhere through 2020 . Do you have an understanding of the threshold that would bring the fed back to the table . Jim no, and i dont know if any of us really do. Remember, they did a fed listens tour in 2019 and they will do it in the first half of next year, roll out a new policy directive. It is expected to be an average inflation targeting policy, which means even if we get the uptick of inflation expectations, the fed will allow it to happen without even considering raising rates. I think that raising rates, unless something dramatic happens, is off the table. Lowering rates, there are a lot of things could happen to make rates go lower. The uncertainty around more trade in the phase two talks, the elections, and just correction in the stock market. As much as they want to say it doesnt matter, it does. It does every time it happens. Jonathan how do you push that view through the rest of the yield curve . Particularly in the environment you described, what does it mean for further out . Jim i think the front end will stay anchored. I think if long rates come down, the problem with the yield curve is it is a corollary to your rate call. I think the yield curve could be flatter. If theres going to be a surprise in the yield curve call, its because the repo market does not seem to be fixed. I mean, we are going to get through yearend, but we will continue to have 60 billion per month of buying treasury yields, and that could have downward pressure. They are trading on the lower end of the target the fed have. With all of the stimulus they are pumping in, there could be a breakthrough and you could see a 140 or something on the three month bill without the fed moving, because of what is happening in the repo market. Jonathan one thing i try to do on a program like this is work out where the consensus is, the growing fame and the growing consensus into the new year and where you should push against that. Where is the pain trade for the 10 year yield through 2020, higher or lower . Jim ive always thought the pain trade in the bond market has been lower. I think most people are really scratching their head as to why we are in one handle given the news, and especially with the pain trade being in lower in europe. I continue to think that is the pain trade right now. If we were to go to the low ones, especially without signs as you saw in the top, without signs of a recession. If we were to go back to the lows we were in august of this year, and may be lower. Jonathan george . George i think the pain trade from a capital at risk standpoint would be materially higher rates. The tremendous amount of money that has been put into the market across all of fixed income this year, massive inflows. A lot of that money is committed at very low yields. A 100 basis point jump in yields means significant capital losses or market to market losses across the market. Jim has a good point, but i think the consensus view is a range, a relatively tight range. I would say it is basically what lets call it 150 to 225. If you go outside that range, vol will go through the roof. If we do go below the 150 level, it is duration extensions, it is sort of people really, as jim said, you will see a meaningful scramble to get yourself invested and stay invested in a very low yield environment. Jonathan final word, kathy. Kathy i think the pain trade is lower, but for different reason. Thats because spreads are very tight in the credit market. If are going below on 150, and means the economy is doing poorly and spreads are too tight in that environment. If we are going down there because were on the cusp of recession, the yield chasing and the sort of goldilocks scenario for credit will have to reverse itself. I think thats where the pain is. Jonathan youre saying you need a recession environment to experience some of this. Sub 150. Thats what we need . Kathy i think so. If we get that, it means credit spreads are too tight. Jonathan you guys are sticking with me. We will talk about credit. Next up on this program. Coming up, the auction block. Wrapping up a big year for high yields. That conversation is next. This is bloomberg real yield. Jonathan im jonathan ferro. This is bloomberg real yield. I want to begin in asia, dollar bond issuance fell 550 million this week. 2019 sales topped 126 billion. In the u. S. , highgrade issuance slowed before the year end holidays with sales just surpassing 1. 1 trillion for the year, a 4 decline from last years total, and closing out the year with u. S. Junk issuance pushing 2019 sales closer to 270 billion, more than a a 60 increase from 2018. Staying with high yield, Morgan Stanley weighing in on the big rally in cccs. Valuations are tight. Credit valuations are tight. Highyield valuations are low. Cccs have come back. There will be some supply. It will not be this easy forever. Jonathan back with me around the table is kathy jones, george bory, jim bianco. George, what a way to end the year, cccs, massive rallies, 12 Straight Days of gains. Why . George across highyield, you are pulling in 2020 returns into 2019. I think there is a yearend squeeze going on as people scramble. We just talked about yields in general, looking for that recovery trade. Where can i get the incremental yield, where can i get the incremental return, how can i set myself up for next year . We have seen a meaningful squeeze into the market. Cccs, if you look at that universe, there are about 10 companies that are up anywhere from 10 to 20 in returns. In just the last month. Jonathan that concentrated. George just in the last month. That is the interesting thing about cccs, it is very idiosyncratic. It is very company specific. It is not an asset class in and of itself, it is a basket of very specific companies that are doing very different things. It is definitely the high beta part of the credit market, so people will use that as a data trade, but right now, cccs are basically a bet on two things, and that is basically energy, and to a certain extent, retail. There are a few other plays in there. But those are your two bets, and i think people have been creeping back into the energy trade as oil prices have come up, and looking for that to be the next big play for next year. Jonathan kathy jones, your thoughts on this . You have been conservative on the program with spreads going tighter. We are starting to pick up in cccs. As you look at this, what are you thinking . Kathy im thinking this is the last push where people are willing to buy just about anything in order to get a little bit of incremental return and they are disregarding the risk involved. Not too surprising, it is the end of the year. Not that much liquidity, a little bit of a rally in oil prices which has given us a boost. They are not afraid of duration. It is not surprising, but would you want to hold it for any length of time . We think not. Jonathan what do you think, jim bianco . Jim ive got to agree with george and kathy. Ccc is in the early part of an economic cycle, is a bunch of beatendown cyclicals. Thats why you want to run into it when you come out of the recession as they rally. Right now it is the land of misfit toys, broken companies that have problems if you are in cccs in the 11th year of a recovery. A lot of it is energy, its been rallying. Energys rallying, but lets step back from the last 12 days. Cccs have been a terrible investment for the highyield market all year. They have lagged Everything Else. They are highlighted by energy, which has lagged Everything Else as well. The only reason somebody would want to buy that stock is if there was a turnaround or workout player that thinks they could come in, sell off assets, fire management, and resell the company. If you are not in that game, at this stage, you dont want to be playing in that space. Jonathan i want to pick up on something you said. We are in the 11th year. Why is that relevant . Spreads are back to levels in 2014, 2018, and you could have taken that as a signal that we are late cycle. But here we are in 2020 looking for more expansion. Why is it relevant that we are in year 11 and spreads are where they are . Jim from the ccc perspective, to stick with that, is that any kind of cyclical that has been sold off, was sold off early in the recovery, has recovered. Anything that is left in that category right now, when you get late cycle, is a problem of credit. That is pretty much all the way up and down the line. There is really hard to find value at the lower end of the credit. It is hard to find value in the Investment Grade at the end of the cycle as well, too, because it isnt just the general selloff you get coming out of recession. That is why i think people have to look at these. George is right, it is a collection of companies, not necessarily thematic. It is thematic at the beginning of the cycle. Jonathan the risk is this continues, and then you look at the other places that did not participate this year, leveraged loans, elsewhere. Your thoughts on that . George if you look across credit in general, the leading edge of the selloff was certainly in the loan market. I think you can make the argument that there is some incremental value there, especially when you think about some structured products that package up loans, like a clo. There is some value there, but it is buyer beware. You have to be be careful of what you are buying, look carefully at the managers, the loans themselves. We would take a somewhat cautious approach, but those prices were down pretty dramatically just a month or two ago, so there was some genuine value there. Our central message for highyield overall is take a more defensive stance. Be realistic about what the asset class can deliver. Anything greater than a 3 return, once you start to carve out the risky or less liquid parts of the market, would be impressive in our opinion, given where yields are starting. Given where spreads are starting. But at 2 , 3 , maybe 3. 5 full return on a relatively low risk profile portfolio is very achievable. Jonathan kathy, i know your take is that we have seen the price of appreciation. Next year for high yield, a story of coupon. For you, george, Investment Grade, i was looking through your base case, spreads widening through 2020. What is driving that . George a couple of things. Number one, we have had a tremendous technical backdrop. Huge inflows into the asset class and that is across fixed income overall. We think that moderates. The other thing that was a big seachange this year is a lot of Investment Grade companies actually started to reduce debt. You dont typically see a company deleverage voluntarily. We had a few very big names, very Large Cap Companies that purposely tried to delever or modestly restructure their balance sheet. The pace of that is likely to slow next year. The pressure on companies to continue to do it is likely to slow. Slightly higher yields, a little bit less demand, or inflows into the asset class, combined with less of what i would call less than friendly credit activity. Spreads modestly wider. That is our base case. I think there is a reasonable probability for that. Jonathan still ahead on this program, the final spread, the week ahead and a holidayshortened trading week. 2020 conviction calls next on the program. This is bloomberg real yield. This is bloomberg real yield. Jonathan from new york city, for our audience worldwide, im jonathan ferro. This is bloomberg real yield. It is time now for the final spread. Coming up on monday, a slew of u. S. Economic data, including durable goods orders and new home sales. Tuesday, markets in the united states, closing early for christmas and remaining closed through christmas day. Wall street reopening on thursday with initial jobless claims. Friday, china reporting industrial profits. With some final thoughts, my guests still with us. The conviction trade going into 2020, the calls. Jim bianco, beginning with you, what is your conviction call going into the new year . Jim lower yields. Jonathan very short and straightforward. Lower yields. George bory . George steeper yield curve is our highest conviction view as it relates to rates. On the credit side, it is protect your capital. There is an inverse between that steepening curve, so move down the curve for spread. On that steepening bias. Jonathan to be clear, the steeper yield curve driven by the longer end . Highyield debt high rates on tens . George primarily by 10s. 30s move slower. Kathy we agree, steeper yield curves driven by higher rates, wider credit spends, especially at the lower end of credit quality. Jonathan can we put a number on those wider credit spreads . What are you looking for . Kathy Investment Grade, modest spread widening. High yield, it doesnt take much to blow out 100 or 150 basis points if you get a hiccup in the market. It could happen. Jonathan your thoughts, finally, to get some pushback around here . There is a consensus about curve steepening. You dont share it, do you . Jim no, i dont. Like i said, the curve is somewhat related to your rate call. If ive got rates going down, the curve being somewhat anchored, unless something dramatic happens, youll probably wind up with the flattening of the yield curve, too. I do think that the story has been the curve has been flattening since 2014. Maybe it bottomed for good in september of this year, but it has been in a long downtrend. I suspect we will continue to see it move at least flatter. I dont think we will get back to septembers inversion, but it will keep going lower. Jonathan lets get to the final round, the rapidfire around. Three quick questions in three quick answers. The 10year yield, 2. 80, can we retest the high from 2019, in 2020, yes or no . George . George retest the high of the yield . Jonathan 10 year at 2. 80. George no. Kathy no. Jim no. Jonathan u. S. Twos versus tens, steeper or flatter through yearend into 2020 . A decent idea of where this is going. Kathy steeper. Jim flatter. George steeper. Jonathan fomc, unchanged for the year, rate cut, rate hike . George cut. Kathy unchanged. Jim unchanged. Jonathan great to catch up with you. Thank you very much for joining us. Thank you to you at home. From new york, that does it for us. I will see you in the new year. Enjoy the holidays. This was bloomberg real yield this is bloomberg tv. [ dramatic music ] this holiday. Ahhhhh ahhhhh a distant friend returns. Elliott. You came back and while lots of things have changed. Wooooah woah its called the internet. Some things havent. Get ready for a reunion 3 million light years in the making. Woohoo yeah francine Minouche Shafik knows the worlds of economics and finance well. She was the youngest ever Vice President at the world bank before becoming deputy managing director at the imf. At the bank of england, she was responsible for Balance Sheets of nearly 500 billion pounds. Forbes even named her one of the most powerful women on the globe. Now, she is back to the world of academia as the director of the worldrenowned London School of economics. In september, i spoke with Minouche Shafik for leaders with lacqua. There is a huge transformation in technology, society, and Everything Else. What do you see . How would you describe the current environment that we live in . Minouche well, i think all over the world, we are seeing people question globalization and the impact of technology. And you can understand why, if you look at what has happened to Income Distribution around the world. The people who have done the best in the last decade are the top 1 and the growing middleclass in emerging markets. But the middle class in the advanced economies have suffered flat or declining real income. And so, there is a backlash at the moment. We see that with the rise of populism across a whole range of countries. And i think that has colored both economics and politics all over the world. Francine has inequality really led to populism . And if so, howd you create a Fairer Society . Minouche i think it is not just about inequality. It is about people feeling about their own futures and the futures of their children, and whether they see opportunities for themselves and their children in the future. A lot of people maybe have experienced flat income. But they very much worry about whether they have the skills to succeed in the economy of the future. And a lot of that is driven primarily by technology. People often blame globalization. I think it is actually the root cause is technology. Globalization makes it happen faster, because Technology Makes it spread more quickly. We have been here before, whenever theres a big technological disruption in the world. People worry about what is often called technological unemployment. But we also know from history that new jobs emerge. And the real challenge for us as societies is to prepare people sufficiently quickly for those new jobs. Or do we leave some people behind . Francine does a Fairer Society start through education . Minouche i hate to say this, but all roads lead back to education, both education from the very beginning, because we know that the highest returns are nearly childhood, and the benefits of very Young Children getting taught how to learn, and have good Cognitive Development at the earliest stages has paid off throughout their lives. And in many ways, if you want to equalize opportunities, those early stages are the most important. But we also need to think much more than in the past about education later in life. And the old model that you get all the education you need to thrive in the economy between the ages of 18 and 21, which is the old Higher Education model, is completely outdated. Particularly in the labor market, where people are going to have many more jobs than they did in the past. Francine whose job is it to reeducate in the early part, but also later parts . Is it companies or is it the governments . Minouche i like to think of as a partnership between individuals, governments, and business. And there is always the question of how do you pay for that . And i think countries have very, very different models. If you look at the u. S. Model, it tends to put more of the responsibility on the individual, through Student Loans and a more kind of marketoriented approach. In continental europe, you tend to have more statefunded systems, with incentives for employers to provide training. I think i am agnostic about the exact structure, but the problem is it needs to happen. And i think what we are seeing at the moment and why levels of anxiety are so high is because there just is not enough resources going into it. I mean, you have the nordics, the danes, the finns, the swedes putting 1 of gdp into what are called active labor policies to prepare workers for the jobs of the future. Most advanced economies are putting in less than half of that. And so, whether it is funded by the employers, by the state, or by individuals through loan programs, the key problem is we are not investing enough. Francine so what happens if we do not retrain the workforce . Minouche well, i think we are seeing the consequences of that, which is if people do not feel they can participate and benefit from the economy of the future, they will vote for policies that thwart modernization of the economy. They will vote for protectionism. There will vote for policies that take us backwards. And much of the politics of today, the sort of nostalgia politics we see, is a reflection of individuals feeling like i have not got a chance in that future, so im going to do everything i can to thwart it. Francine how much does that have to do with media, social media . How much is it real . There are stagnant wages, and people dont feel their kids will have a better life than they have. Minouche well, i think the media has a very Important Role to play in clarifying the debate, and shows like this are a very important part of that. I think, though, that the evidence, in terms of the decline in social mobility in many countries, is pretty clear. If you look, for example, at how long it takes to go from being in the Lower Income Group to being middleclass in different countries, it varies hugely. Again, the nordics always stand out as the more successful ones. It takes 50 or 60 years to become middleclass. In countries like the u. K. Or the u. S. , it can take 100 years. In very unequal societies like south africa or brazil, it can take over 300 years to go from one class to another. And so, in those societies, you are really telling people, you have not got a chance. And i think giving people a sense that they do have a chance will be transformative, both for our economies, but also the politics of those countries. Francine you have always done research on the social impact of things. What did you see when so many did not see . Why did you start working on those things, maybe before your time, almost . Minouche for me, i was very keen to understand the root causes, and you know, one could see the backlash, and i know what the easy answers were. But the motto at the London School of economics is to know the causes of things, because only when you really understand the root causes will you be able to find the right solutions. And so much of what i see now is a reflection of the fact that we had an old social contract, which said what you would get as a citizen and what you were entitled to and how society would support you in difficult times. I think that social contract is broken now. And it is broken because of technology, also because of the changing role of women. In the past, a lot of the social contract was borne by women. They looked after the young and the old for free. Women are now working. And that is and our social contract has not kept up with that. That is what we have an old age care crisis. That is why we have problems with understanding, you know, with childcare and those kind of issues. And then i guess the third dimension of the failing social contract has to do with what has happened with the environment, and that is a whole other range of issues. And so we need to redefine those relationships. Francine but how do redefine that social contract . Minouche well, i think there are many aspects to it. Again, it requires a partnership between business, government, and individuals. And there are many models out there. There are many models for how to organize childcare, for example. It is pretty clear that countries that spend more on family benefits are more successful at getting women to stay in the workplace. More women working in the work place means theres higher output in the economy. It also means that you have higher productivity. There has been really Good Research recently been done at the imf that shows that the more women working, the more productive the economy is as a whole, because you do a much better job of matching people to the best jobs. And if you have more men and women working, they have complementary skills. And so, productivity in the whole economy goes up. So that is solving that one problem is an avenue to solving many, many problems. And i think it is possible to structure it in a way, if you look at it holistically, that means that a new social contract could be both socially better but also economically better. Francine up next, how will technology reshape the jobs market, and how can universities train their students for careers that do not exist yet . More with Minouche Shafik, next. Francine the London School of economics has produced many notable alumni in the worlds of economics and business, including more than 50 heads of state or government and 18 nobel prize winners. But as the world changes with ever faster advances in technology, how should the lse prepare its students for their future careers . Minouche shafik is still with me. If you look at the pace of change in technology over the last 10 years, does that accelerate . You know, is it quadruple fold . Will it accelerate in the next two years, and can education really keep up . Or are we training for jobs that will not exist by the time people are trained . Minouche yeah. I think that is impossible to predict. We all think that change is happening anytime faster than any time in history. But i suspect previous generations said the same thing, when electricfication came. And youre absolutely right. Trying to predict which jobs people will being doing in 10 or 20 years time is a difficult game. In the 1960s, there was a huge deal of manpower planning, where people tried to predict what job needs there were, and that was a complete failure. What we cant know, though, and we are starting to think about, what skills do we equip the next generation for . We know they wanted critical skills, so we want to make sure everybody has a core competency in being able to operate in the digital economy. We know that entrepreneurial skills would be more important in the future. And we know that having a broad ability to learn and get up to speed quickly, no matter what job you are doing, will be essential. And having that kind of flexibility in the way you learn will be a vital skill. And i think if we do that for the next generation, they will be ready for whatever jobs appear in the decade ahead. Francine so what is that, Critical Thinking, and how is that different than we have done so far . Minouche i think Critical Thinking is absolutely vital. A lot of us went to school, including me, when we were asked to learn lots of stuff and regurgitate it back in an exam in an almost mechanistic way. That is a complete waste of time in an era of search engines. This generation can get any facts they want at their fingertips within seconds. What is really tough, and we all experience this every day, is we have this deluge of facts and sifting through it and coming to a view on it, and having an independent perspective on it, that is what is difficult. And that is what we have to teach the next generation. Francine if you had to go back and go to university tomorrow, what would you choose . Minouche [laughs] that is good question. I would i think i would certainly invest a bit more in digital competence. But i would still go back and do a broad kind of social science degree, because im interested in understanding the world with a bit more quantitative methods, i think, added to it. Francine if you look at what you are doing now at the London School of economics and what you did at the bank of england, how is it different . Minouche well, it is interesting. I sometimes joke that the biggest challenge in Central Banks is groupthink. A tendency for everyone to think the same, and the consensus view to prevail, and not having enough criticism and debate. The biggest problem in university is lack of groupthink. Because everyone is an individual, everyone has their own point of view, everyone likes a good argument. And getting consensus about the collective view and the collective interest is much harder in the University Context than in the central bank. Francine what does that mean for Central BanksGoing Forward . We are in 2019, possibly running out of ammunition. We have a possible recession looming. Do we need to think completely differently to what we have done in the last 10 years . Minouche well, i think Central Banks have been quite creative in the postcrisis period with quantitative easing and other measures they have taken to stimulate the economy. I think they will continue to need to be very creative Going Forward. I do not quite buy the argument that they have run out of ammunition. I think there is more that Central Banks can do, but i do accept the point that at the margin, the impact of repeating the same things diminishes over time, and you need to come up with some new ideas. And i also think we are entering a period in which fiscal policy will have to play a bigger role. Francine is that how you read the appointment of madame lagarde as head of ecb, that she is a politician and the first female to lead the ecb . Minouche i think christine will do a great job at the ecb. I think she will be able to do three important things. One, she will be able to marshal all the talent of the staff of the ecb to come up with new ideas. Second, i think she has got the political negotiation skills to manage the european political scene and the role of the ecb. And third, she has got great communication skills, which are necessary for any central banker to persuade the public that what they are doing is the right thing. Francine up next, challenges in central banking. What can Monetary Policy do to reduce inequality . More with Minouche Shafik, next. Francine when Minouche Shafik was at the imf, she was responsible for many of the crisis countries in the euro zone and arab countries in transition. Later, she moved to the world of central banking at the bank of england. So, what did she learn about how policy can reduce inequality, and what do todays Central Banks need to do to prevent the next crisis . Minouche shafik is still with me. What does the boe need . Would you have been at the boe had you known about brexit, or is it becoming much more politically difficult to be an independent central bank . Minouche well, i think it is a much tougher time to be a central banker, partly because Central Banks roles have grown. And, say, in the case of the bank of england taking on things like supervision and financial stability, which were the right decisions, but it means youre more visible, the central bank Balance Sheets have grown. All of them have grown enormously. And that means you are taking on more financial risk, and you are much more active in the markets. So i think it is a tough time to be a central banker, but there are three things i mentioned the ability to pull together the talent and staff in the Central Banks, the ability to manage the politics, and the ability to communicate are vital for all central bankers, especially these days. Francine Minouche Shafik, if you look at Center Bankers around the world, who actually has the toughest job . Minouche [laughs] i think they all have a tough job these days. I tell you, i think they all have a tough job, because the ones in the emerging markets are on the receiving end of a great deal of global volatility, and they have to manage those risks, and the ones in the advanced economies are dealing with the zero lower bound and the challenges of that. I would not single out any. No one has it easy. That is what im saying. [laughs] francine we were talking about fiscal policy. Right . And it is very clear you think fiscal policy is a solution. Why are we not getting fiscal policy from countries . Minouche well, i think, i think there are the signs of a shift that many people realize fiscal policy will have to play a bigger role. It is not a panacea. I think Monetary Policy still has an Important Role to play. But, there are things fiscal policy can do, both to help stimulate demand, but also to help transform the supply side of the economy. So i think in more and more countries, we are seeing that argument being made. Francine we were talking about, you know, fairness and a Fairer Society, and retraining the workforce. If you look at the global economy, do you worry that if there was something really ugly happening, the next recession, that countries would not come together to take the action that they did in 2008, 2009 . Minouche yeah. You know, i sometimes joke that well, first, to say that the actions that g20 took in 2008 were decisive and impressive, both on coordinated Monetary Policy and fiscal policy. I sometimes joke that the g20 is sort of like a teabag. It only works when it is in hot water. And the rest of the time, you have lots of communiques, which do not do very much. I would like to think if we have another crisis, and we were in hot water together, i think the g20 would have to come together and act decisively. I think it was exceptionally well done at the time of the crisis, because we had very good leadership across many countries, but crises do focus the mind. Francine when do you think the next crisis will be . [laughter] francine cassandra with a crystal ball. Minouche [laughs] economists are notoriously bad at predicting turning points, so i am not going to even go there. But, you know, there are lots of warning signs out there that there is the slowing of the world economy. We can see that trend. It is good to prepare. Francine do you ever miss being an economist . Minouche [laughs] i have lots of good economists at the lse. So i am still in the thick of it, and we have got lots of policy makers coming through for discussions and lectures and for advice. And so, i still feel quite engaged. Francine Minouche Shafik, what defines you as a leader . You have always been in Public Policy. Right . Has that have you always felt that actually you want to give back to society, or is it Something Else . Minouche i think, for me, personally, that sort of public purpose was always very central to my thinking about my career. I was born in egypt. I saw a lot of poverty growing up around me. I you know, my family lost a great deal at one point and went from being rather well off to not being well off at all. And so, i could see that economic outcomes affected people hugely, and that there was a way that policy could improve that. And so, i guess that was what motivated me from the very beginning. And i think the challenges of leading in the public realm are quite tough, because you the metrics are not so straightforward. You do not have a simple bottom line that you have got to deliver against. And you have got many, many stake holders to manage. Francine and there is mistrust. Look at the institutions. I am thinking of the world bank and the imf. They maybe do better to reconnect with the common citizen. Minouche yes, it is a huge challenge, especially in the cacophony we live in, where there are so many messages, and being heard is really difficult. And that has changed hugely. I think doing Public Policy you know, i can still remember, when i first started at the world bank, every World Bank Report was classified as official secret, and it was never disseminated. When you were a poor phd student and you could get your hands on one of those data reports, it was like a gold mine. Now, of course, everything is published, and it is all available on the internet. And that is huge. That is great. That is a wonderful piece of progress that we have moved away from that kind of secretive, closed world to one that is much more open. Francine is it ever too transparent . Is it ever do you ever think that actually there is so much information out there, even for economists, that you kind of lose your train of thought . Minouche i guess no. I actually think, on balance, that transparency is good. Yeah, it comes with some costs, in terms of how debate is conducted, but i think, netnet, i think it is a good thing. Francine what do you like most about being at the London School of economics . Is it the students . Is it the teachers . Minouche i think being completely surrounded by a lot of clever people is really fun and challenging. I think we play a really important social purpose, both in terms of educating the next generation, but also in providing a place where civilized, rigorous debate can happen. And there is a lot of that around these days, and being able to preserve a space where people with very different points of view can come together and have a civilized argument and disagree, but use facts and evidence as the basis of that disagreement, is so important. And i think if we can preserve that at a place like the lse, it is hugely valuable. Francine Minouche Shafik, thank you so much. Minouche pleasure. Really lovely to be here. Alix top 2020 oil picks. Bryan singer lays his case for why next year could be the year for resources. Palladiums recordbreaking rally. The precious metal tops 2000. Is there more upside or can other metals catch up . Goldman goes green. The bank will spend 750 billion over the next decade in the Climate Transition and will curb lending to coal financing. Alix im alix steel. Welcome to bloomberg commodities edge, 30 minutes focus on the companies, physical assets, and trading behind the hottest commodities with the smartest voices in the business