 Hello and welcome to episode 112 of the market maker podcast and this week, Piers and I are going to talk about economic and financial catastrophes. Not my words. Everyone's favourite topic. Yeah, not my words. That was the US Treasury Secretary, former head of the Fed, Janet Yellen, urging Congress on Thursday to raise the debt ceiling. And there's been a major talking point, both in mainstream media and also in financial markets, certainly has had quite a large impact in pockets of the market, which we'll talk about. But conscious of the fact that many students particularly might not be familiar with the concept of the debt ceiling, what it is, what it entails, what the process is, has it happened before? And if so, what was the market impact? What's the likely outcome here? So we're going to go over all of that. And we're going to talk about Donald Trump. That's right. He's back on the scene for, well, earlier in the week, the wrong reasons. We won't delve into that side of things. But he has been commenting about this debt ceiling issue. And of course, he's going to be running, he's gunning for the Republican candidacy to run for president again. So he's definitely been vocal on this issue. And for good reason, he has a track record in this department, which we'll also go into. And the question is, is with some of his comments, could he be right in terms of his strategy and how he thinks he would play this game? And so we'll have a look at that as well. But otherwise, other topics to touch upon this week, we had the Bank of England raise rates again. It's the 12th consecutive time. So we'll have a look at that. And then also a number of big investment banks changing their tune on the likes of the sterling currency. I mean, even you and I were pretty sizable bears not so long ago, but things change. And certainly the banks are changing tact as well on their view on their outlook going forward for the British pound. And finally, US CPI weakened. And actually I was just looking at the stocks performance on the week. Mega cap tech is absolutely smashing it so far. So all this talk of debt ceiling worries and economic catastrophes. I don't think the memo quite landed on the door of big tech because looking at the NASDAQ on my chart, still going up overnight. And the S&P is trading at a pretty decent level as well. So yeah, that's what's on the agenda. So to kick it off, Piers, maybe we could start with what is the debt ceiling? Yeah. Well, I think always the best thing to start here is, rather than the debt ceiling, it's just the debt and trying to get your head around it. Great. There's a great website. Well, I don't know if anybody's been to New York, then you might notice near Times Square. There's the US debt clock. So they've got this big clock on the wall that's kind of measuring how the amount of total US debt is changing over time, right? What's interesting is they have moved it. I was there, I was in New York in February. They have moved it. It used to be in a very prominent location. And I'm not kidding. It was on a really busy junction by Times Square, you know, very prominent. They've now moved it down one of the side streets. That was a physical thing then. I know that was a website. Why would they do that in the first place? I don't know. I don't know the reasoning behind or who got it up there. Well, there must be a campaign of some sort, an anti-establishment. But the website is perhaps what more people are familiar with. So you should go and have a look at it. It's usdebtclock.org. Okay, usdebtclock.org. And on there, it's just counting over time. How's the debt levels in the US changing? There's a whole load of figures on this website, but top left is the key one, right? That's the total amount of national debt. And right now we're at $31.7 trillion. What's amazing about this is just how quickly it's changing over time. So I got my stopwatch out just before coming on air. And every 40 seconds, another $1 million gets added to the US debt maintain. Okay, 1 million every 40 seconds. And if you break it down, debt per citizen, it's basically $95,000. But that's per citizen. If you think about it from a taxpayer's point of view, obviously adults and workers pay tax. So from a taxpayer's point of view, it's nearly $250,000 owed per taxpayer in the US. So the point is, there's a lot of debt here, right? And it's crazy amounts and it's just going up and it's going up and it's going up. And it's, you know, through the decades, it's been rising and rising and rising. We've had some episodes where it's gone through surges to the upside, when we have a crisis. The COVID situation of the last few years has again been a real catalyst for, you know, a big surge to the upside. That's because government stimulus programs to support economies through crises. You know, that means the government steps in and spends more. But, you know, they don't have, they don't have a money tree where they can just pluck the notes off, right? The money's got to come from somewhere so they borrow it in order to fund these big stimulus programs, okay? And so the borrowing levels has got to now 31.74 trillion. Now, why is this important, like, right now? And why is it getting more attention in the press? We actually talked about this in January, you might remember, on one of the pod episodes. But the reason why it's now grabbing more headlines, more column inches, and that trend's going to continue in the weeks to come. And I would predict that by the time we get to the last week of May or the start of June, it is going to dominate. That'll be all you can read about in the financial, the Financial Times front page will be talking about the debt ceiling every day. It's coming. It's where we're now coming to the big crescendo. Why? Well, because the US's debt level, which as I said is going up $1 million every 40 seconds, is going to hit what's called the debt ceiling. And this is quite simply, it's the amount of money that Congress has agreed to borrow. It has set a limit. And that's the total amount that Congress, that's the political system has signed off on. And unless Congress approves the borrowing of additional money on top of that, then it's, it's, it's not legal, right? You can't, the government can't borrow more than what the government itself has agreed to borrow. And this debt ceiling is approaching. I'm going to sit in a nutshell. I mean, the history behind this is, because it's a little bit weird, right? The US, other countries that operate with the debt ceiling, which is a self-imposed limit that can only be increased if a bill is passed through government. It's like putting a gun to your head every couple of years or putting a gun to the government's head every couple of years when you've got to try and get this through. And it's become a political weapon. But look, the history of it is actually the debt ceiling has been around since 1917. Prior to that, like most governments to this day any borrowing was kind of agreed for specific purposes, right? Budget and like, so let's say an example in the US would be they dug the Panama Canal. And that was an expensive project. And so, right, the government signed it off. If you like, there was a bill that went through the House of Representatives and the Senate and Congress signed off on this spending project. And so that used to be what happened every time there was a big project, right? Let's talk about it and let's agree. But in 1917, as the US were looking to enter the First World War, the spend was going to be massive. And so they put in place this idea, well, let's set a debt ceiling. So I guess just to give ourselves self-enforced discipline, if you like, I mean, ironically, discipline is definitely not a word you would use when it comes to describing where the US are with their debt levels will perhaps come on to that later. But so in 1917, this thing kicked in, right? And it was actually in the 1930s they set a single debt ceiling and actual figure. And since then, every year, we've had issues. And actually, since 1960, the debt ceiling has been renegotiated higher 78 times, 49 times under Republican presidents, 29 times under Democrats. And so, yeah, this is the debt ceiling. And here we are yet again. It happens all the time. It's just this time is a little bit more spicy. So two points there. One, given I agree the intensity of the issue will become more acute as we get towards the end of the month. Is there a potential then to initiate some sort of trade short term to capture some of that, you know, manifestation of fear in the market. Is that a thing? Is that how it is? It's definitely from a trade with my traders hat on. Then yet there's volatility is going to increase in certain assets. And it depends how far this game of chicken goes down the path because what happens with this debt ceiling thing. So it has to be that a bill has to get passed through the House of Representatives and the Senate, which means that it becomes incredibly political. And the thing about debt and spending is an incredibly divisive political concept. Okay. And typically, and I'm going to very much be kind of generalizing here, but typically your Democrat side of the aisle. And if you want to talk in UK terms, the Labour Party side that the left side, typically left leaning political organizations have the ethos of where they as a government should play a larger role in society they should play a larger role in running an economy through that larger role should involve taxing people more and spending more. Okay, so that the left side tend to want to spend a lot more money and have more control over the system. The right side of the aisle, the Republicans or the conservatives right, they kind of the opposite in terms of their political ethos they want to take to have less influence their kind of free market thinkers, you know, let the economy get on with it itself. And they typically are tax less spend less right. So that's the kind of the divide here in the political sort of ethos so what happens when we come up against the debt ceiling because who's in power at the moment in the US while the Democrats right in terms of the president. The House of Representatives is a Democrat but the House and then you got your two, your two parts of Congress the House of Representatives and you got the Senate so really in the US political system you got three pillars, if you like. Okay, now at the moment two of them are Democrat. So you got the House the White House is Democrat and the Senate, right but then in the House you've got the Republicans who have the majority. When we come up to the debt ceiling. This is the Republicans chance, who are the party not in power from the presidential point of view. This is the Republicans chance that they've got a weapon here, because, because they control the House of Representatives any bills that get signed off in that part of Congress, well actually they're in control of because they have the majority. So, when the Democrats go right we're going to raise the debt ceiling because that we want to spend a load of money on things like climate change and so on. We're going to raise the debt ceiling we're going to borrow more well that's the exact opposite to the Republican ethos right and the Republicans are going no, no way. And this become you get this standoff and what happens is the Republicans say, well look, if you want to raise your debt ceiling, yet again, well, fine. However, we're only going to do it, we're only going to agree to that if you agree to our list of terms which is now about a mile long. If you agree to fund my US Mexico border. Indeed. Let's talk a little bit about that and Trump and I'll come back to that second point I wanted to have. Because, you know, if you polarize that scenario you described where Republicans can really have a lot of leverage for negotiation. So Donald Trump urged Republican lawmakers to just let the US default, let it happen. On its debts, unless Democrats capitulate to demands for massive spending cuts, that was what he said and all very timely of course he said this in New Hampshire. And that's a critical early voting state for these things so given how expansive the US is US is strategically you want to focus on swing areas important ones that then influence and act to sentiment bellwethers for other areas. In New Hampshire is one of those so he made those comments at a town hall gathering primetime television broadcast there. He said, it's really psychological more than anything else, and it could be really bad. It could be maybe nothing. Maybe it's a bad week or a bad day. Who knows. You've got to admire the fact that I think everyone's so kind of cautious, particularly tiptoeing around the political spectrum, but also the market. The repercussion it could have. And here he is just out there saying exactly what he thinks with no barrier at all. And to give it some context the reason why he is quite important within this from how he suggests to manage the situation of the course is because the United States federal government shut down for a record breaking 35 days this was the end of 2018 going through that new year period is the longest government shut down in history, and the second within his term as president so he's been through this twice. So to give it some context what does that mean I got the numbers here as a result nine executive departments with around 800,000 employees had to shut down partially or in full because of this brinksmanship that was happening, and that affected about one fourth of government activities causing employees to be furloughed and required to work without pay at that point. The Congressional Budget Office estimated the shutdown cost the American economy to be in around at least 11 billion US dollars, excluding indirect costs that were difficult to kind of quantify so the idea here then the strategy that using Trump's model is that look, they are in government, they will take the blame. So he's got nothing to lose by suggesting this, because in the end the Democrats will have to buckle to some money. The problem that he ran into when he was in power was that I remember because he was trying to fund at the time he had a demand for just short of six billion he wanted in federal funds to fund the border wall the Mexican wall. God knows what state that's in these days. But the Democrats like no way we're not paying we're not paying for that. And he was like right we'll shut down and let's play out the every at the beginning. And this goes on to my kind of second point the markets were fairly kind of passive in reaction to this it was like all very. This happened before it's happened 78 times or whatever the figure is and it's like yeah, it will get resolved but what Trump did was something we've never seen before is he went another week. And actually it becomes almost self defeating in a way because every time it compounds because more and more people then are not getting paid. It's not being productive in the economy. There's kind of first second order impacts of that. And in the end he had to buckle. So yeah, it's that on my second question then the US can't default right. So what's the problem. And we're standing here looking at that that clock I'm almost hypnotized by looking at those numbers 31.7 trillion. Let's go 50 trillion. What difference does it make like we've done it 78 times what was that figure back in when did you say 1917. What was it then and if you said to someone in 1935 like this this figure 32 trillion, they would have thought your bonkers. I don't know, I don't, I don't understand why we sit here every almost other year. And we get so fascinated by this thing. And I think I saw the short end of the rates market so fixed income which is highly sensitive to this did take quite a substantial move this week. And I think I read the probability it was pricing over default was in like the low single percentage figures. Again, I can see that from a function of. I don't know, maybe hedging for worse case outcomes or making money specatively on predicting the short term market movements over this repeatable cycle. Yeah, it's not going to default though. I mean so Well, yeah, you're look you're right. This is a repeatable cycle. So each time the cycle comes around each time we arrive at the part of the cycle where it's right we're back to hit the debt ceiling. Right the Democrats and the Republicans start arguing throwing their toys back and okay how far down that half do they want to go beyond the deadline. So how many weeks and then how many weeks is the government shut down and all the rest of it. I mean, really, the impact on financial markets is always temporary. Right. And how large the impact is temporarily very much depends on your view at that point in the cycle each time and your view is right. So just how far apart are the two sites. You know at what stage of the negotiation. And is there any kind of sign that they're coming together, and how quickly are they coming together and when might they find a middle ground and when might this thing get passed through. And what happens with the inevitability that they will agree terms, and that we will have forgotten all about this, you know in a month's time. Okay that's always been the case now human beings that we're we're a bit, we're a bit irrational. We're led by the sensationalist media, who, you know each time we arrive at this part in the cycle, you know love to hype it up, and then we consume that we we kind of maybe irrationally fear that default scenario, even though 78 times before it hasn't happened and the 79th time now, it won't happen. And Trump's points quite an interesting one. Well, I guess it's an interesting one his point is well I don't know what will happen it might be bad might not be bad. His point is that really we fear the unknown more than anything else. And that unknown is what would happen if the US just didn't agree to raise the ceiling and would there be a default and what would be the repercussions and our fear about that unknown is monstrous. Okay, and if it were to actually happen. I'm pretty sure there wouldn't be a default and I don't know they'd sort it out another way and it wouldn't have the knock on ramifications of a, you know, financial disaster across the earth. But that's kind of what people fear right and that's what drives this short term volatility in the run up to this debt ceiling deadline. You know, each each time and, and it's actually quite like Trump's attitude towards this. I mean, there aren't many more individuals that I dislike more than Trump, but every now and then I do find myself aligning with his approach. I actually think that there's two, there's two things to Trump's comment. Number one is just the debt levels generally. And I've spoken about this. The debt levels are going in the wrong direction that they're already too high, they're trending further higher. That's going to carry an inevitable moment, tipping point in the future, where all of this kind of debt fueled multi decade cycle is going to come crashing down. Okay, so I think I'm definitely with him on the fact that it's too much debt. The other point is about negotiation. And look, Trump has a very aggressive bully boy approach when it comes to negotiation. And you have to say, as a straight up negotiation tactic, very effective. You might not like it in terms of it being aggressive and bullying but I tell you what it does concentrate the mind to get things done. So his approach is well, you know, Democrats, we will not agree to your increased in spending. That's it. Well, we're not, we are not negotiating. So when I said earlier, are they going to find a middle ground or Trump's approach is to go nowhere near the middle ground and in fact, move further away from the middle ground as the negotiations go on, dragging the other side, firstly to the middle ground, and then beyond the middle ground to kind of reach Trump who's kind of moved way off free. Right. And so in the end, Trump gets a deal that is closer to his starting point. You know, it goes beyond that middle ground if you see what I'm trying to say. So I actually do like his approach here because my view is on debt, but they've got too much on the need to stop spending. I think politically as well from a strategic point of view, it's a good topic for him to really start galvanizing his base in the run up. And he can talk about America. And I read he was talking about what he would have done differently with Ukraine, all these types of things. He's trying to really tap into that already. And these are very important issues for the voting base at the moment, just given the cost of living crisis. And he's really going to be tapping into all of that. That does lead me then to my kind of next series of questions, which is, you mentioned there about mainstream media and the consumption of that from an average Joe on the street. Now, they are going to be reading that this is a potential disaster, a collapse, we're already seeing all of this financial market volatility and interest rates and mortgage defaults and the rest of it. If the consumer then gets less confident and we're already talking about the prospects of do we don't we slow down? Do we have a recession or not? Does that accelerate that? And as a knock on effect, impact growth, impact the Fed and this idea about then this rate cutting priced in by markets toward the end of the year. It does accelerate that. But for how long? Remember, don't forget that this always gets resolved and therefore it will create temporary volatility. But that being said, I mean, I do think besides a further apart than they've ever been going into this situation, so it might be that we have a more elongated government shutdown, a more elongated period of limbo and uncertainty. Now, what will that have an impact? Yeah, it will. You know, just simple stuff like if the risk of US default goes up, right, and it might be still super low, but it might be just moving from super super low to not quite so low, right, still stays low. But that move that direction of travel means that US yields, US Treasury yields will go up. Now, US Treasury yields are a benchmark yield that is a reference point for the rate of interest on loans, like literally across the planet. Never mind just in the US, right US government bond yields are, you know, the number one reference point when you're setting loan rates. So if these yields go up well then yeah the cost of borrowing goes up across the system right and so it's like another interest rate hike, even though it's not the Fed necessarily going right we're raising interest rates, borrowing costs go up anyway, because of how the market works right so you can certainly get borrowing costs going up exacerbating of course and already in a chronic cost of living crisis it's the perfect, it is literally the perfect narrative for the Republicans, because Biden wants to spend more, and the Republicans can say look your spending is out control, your spending got us to where we are in the first place anyway, because we got always inflation, but now the Fed's having to put their rates on, now you want to spend more, we're saying no, and you Democrats are refusing to agree to spend less and so now we've hit the debt ceiling and you're making matters even worse it's literally the perfect platform to the Republicans, I think. You know who's loving this, who sat on the sidelines just going, I love this little TV show that comes on every other year. It's the people I always go back to, who enjoy all of the things that the West do. China must be sitting there, Xi Jinping must be sitting there. And we talked about this before, with the inflation situation why not, why not poke Russia again, stoke the energy situation. And this whole debt ceiling goes on, maybe I might make some noises about Taiwan again, that will throw a little spanner in the works. It's, when you think about that Ray Dalio kind of super cycle when he's talking about the transition of power of time. It's so, it's when you actually look objectively, it's so hilarious how Western society is set up where we're almost our worst enemy. I've got a slight tangent here because I was having a conversation with someone. I just bumped you know when you're on the tube, and you kind of get on the tube and then like there's someone right next to you, who that you know you don't know very well but you just randomly happen to be stood like right next to them because the tubes packed. So you've got no choice but to kind of engage in conversation and right it's obviously starts off small talk and then, then you get on to maybe some interesting topics but anyway this, this lady's husband, we used to live like two doors down from them years back. Her husband is the like project manager for major construction projects, right, so such as he did the Tottenham football stadium project, which is widely considered to be the best stadium in the world, right, obviously. But at the moment he's been doing Madison Square Garden upgrade in New York. And I was basically talking and I was saying that what's what's next, what's next for this guy, what's he going to do next and and she said I well he's really holding out for Chelsea. He wants the Chelsea stadium upgrade and that's been a massive saga over decades because they haven't been able to get planning permission anyway I was saying well, you know what's the hold up now and she goes well American owners. And I said, Well, what do you mean they throwing money at Chelsea likes going out fashion they spent like 300 million on payers she goes yeah American money is not worth as much anymore. And I said what, how do you mean. And she said well, basically American money is leveraged is borrowed right is debt leveraged, but now interest rates are up and they keep going up. So basically the cost of borrowing has got so high that actually US leveraged money isn't as valuable anymore. And she was saying basically he's he's really looking for projects that are owned by the Saudis or the Qataris or the Middle East because that's just straight up cash. No debt interest on cash. And so that money is now more valuable. So I guess my point with that tangent kind of comes back coming back to the debt ceiling and everything is the more indebted. The US become and you could say the West more broadly the more debt indebted they become when interest rates go up. Then unfortunately, it has a hugely negative impact on your status in the world in terms of your, your, your power to invest and spend and grow. So, and at the same time, the opposite effect is happening with the realization of the economic potential or productivity of China, Africa, all these other places long term. Yeah, where it is cash, because it's sponsored by the Chinese state. And to put some numbers on what I'm saying. So, as the US debt moves up, of course, and as interest rates go up, well then their, their, their net interest payments go up. Right and you've kind of got the double whammy over the last 12 months, because not only has debt gone up a lot because of fiscal stimulus during COVID. The interest rates have gone up a lot at the same time. So you're getting a double upward force on net interest payments so in 2022, the US government's net interest payments on their debt was $400 billion. Okay. The deficit of 6.8%. Now that was last year, based on an average interest rate, which was still on average because remember interest rates went from zero to basically 5%. So on average, that calculation was based on a 2% interest rate. Well in 2023, it's going to be an average of 5%. And so it's going to go from 400 billion to what I don't know 8900 billion spent just on interest costs to put that into context. That last year when they were spending 400 billion that was more than they spent on elementary and secondary education, disaster relief, agriculture, science and space programs, foreign aid, natural resources, veterans benefits and services and environmental protection combined. So they spent more on their debt interest than all of that stuff, and that's just going to get worse. So the point is, the longer debt goes up, and with interest rates staying high. They're just going to have less money to spend on their economy. The thing here, leading us into a little bit of the inflation numbers that came out of the US this week was that the inflation numbers actually dropped. We'll talk about that in a moment. Stocks had a temporary rally. However, then, and just leaning into a little bit about your buddy, who you're talking about. It flipped and it flipped in the intraday, because there was a Bloomberg source report people familiar with the matter, where an investment firm called the Royal Group, and the Royal Group is controlled by a top Abu Dhabi Royal family member. And the source report was saying they've built a short position worth billions of dollars into US stocks. And this is a complete contrast to what we heard I think this is an October of last year, six months ago or so. But they were saying they were going to invest as much as 10 billion into US stocks and European stocks, and actually markets sold off a bit on that. Interesting just given again it's that middle eastern money that was steering the ship of US equities momentarily mid week this week. US inflation then US CPI rose by 4.9% from a year earlier that actually marks the first sub 5% reading in two years. The core reading ex food and energy, and that also called slightly, and I know you've spoken about this before but perhaps maybe just a quick summary of why it's important but several key elements showed moderation in April and shelter costs, which are the biggest services component make up about one third of the overall CPI index rose by 0.4% last month that was up, but that is the smallest in over a year. So yeah the inflation figures then what do you think. Yeah, I think it was a, it was kind of a bit bit mixed, but net overall marginally positive. I mean I think you mentioned tech stocks have been having a good week. I mean this talks didn't react necessarily like bang immediately but I think in the end you have seen rate rate sensitive sectors have gone up. It's a bit mixed because yeah that headline readings great below 5% you know that psychological but lowest reading on the headline for two more than two years obviously that trend is continuing. The reason why it's mixed because the trend on the core CPI side is not continuing it's not going down it was going down and it's kind of not anymore it kind of came off its peak from September of last year when core inflation was 6.6% month on month that dropped from 6.6% 6.3% 6% 5.7% that was December, January 5.6, February 5.5 so the rate of decline slowing then so February 5.5, March 5.6 that ticked back up, April 5.5 so really when you're in 2023 four months of data now in for inflation is flat. It's not going down anymore. It's flat. And so that's why it's it's still a little bit mixed, however, you would be the counter to to that analysis is to say well yeah it is flat, but the reasons why it's flat seems to weirdly mostly be due to car sales which have suddenly ramped back up again on a year on year comparison so a lot of that core goods inflation was driven by a huge 4.4% monthly jump in used car prices. You might say that's a, maybe a temporary upside influence, the more important driver of core CPI as you mentioned it shelter services, and all the data is still pointing towards the fact that that has reached the tipping point now. And so you are, I think net overall, whilst that used car sales number was has been a bit of a spanner in the works this month, I think that more broadly, inflation does seem to be tracking lower, but we had a really strong labor market report last week out of the US so it's kind of the jury's still out a little bit on how fast inflation might continue to drop in 2023 Powell certainly doesn't think it's going to drop as fast as markets expect. And so that's why some out there are saying the interest rates will have to stay higher for longer they may even have to go up more. And then let's conclude then a quick wrap of Bank of England who raised interest rates 0.25% four and a half percent now for benchmark rate. They warned it would not hit its inflation target until 2025. So just kind of connecting to what you were just describing but the inflation situation still much worse here you could say in terms of how high the numbers still remain. They did say though that the UK will not experience a recession. And if you remember, several months ago, I mean it was ultra doom gloom UK. However, things the tide has seemingly turned quite a lot and actually the downturn has not been even from backward looking economic data that we've had not as bad as feared. They released their forecasts, which they do every other meeting essentially kind of like the Fed do with their projections and they showed a higher past the CPI and the biggest GDP forecast upgrade on record. The improvement mainly due to lower energy prices, prices along with fiscal stimulus, lower unemployment boosting consumer confidence and spending was the rationale. It's all a bit weird, isn't it? Because yeah, we were very well I've been I won't put words in your mind. I was very bearish the UK at the start of this year. Just hasn't happened yet. Should I add that word in? You're still holding on. Yeah, it's like, well what recession. And even though I think it's because energy costs right household energy cut the gas price. That that was kind of what was feeding a lot of that kind of negativity around the UK economic outlook, six months ago, right. But that's fallen off a cliff, right the gas pricing, which obviously was driven by the Ukraine Russia thing. But that's like collapse. So we're expecting one of the big elements that's contributing to inflation and the cost of living crisis here in the UK. One of those big major forces is going away. It's not going away immediately because household gas bills haven't gone down. That's just the way the pricing of it works, but it will do right so I think that's a really big piece of this puzzle that shifted people's outlook but to go as far as to say we're not even going to have a recession now. You know, inflation's going to stay higher for longer. That means then the pathways open for the Bank of England to continue to hike rates. So this is where it comes. And look when we talk about things like FX exchange rates. It's always monetary policy differential. So what is the monetary policy outlook in one country, the UK versus the monetary policy outlook in another country, let's say the US, and then look at the table FX rate so sterling versus the dollar and right now we've had quite a radical shift in the last few months and it's gone from in the US right and the Fed are going to have to hike more for longer, but really the Fed are now at the top. Okay, pal said as much so the Fed have stopped hiking. But here in the UK it's kind of gone the opposite. It's like well they're going to have to stop hiking and start cutting rates because we're going to have a massive recession. It's gone from that to actually now. They're continuing to hike and they will continue to hike even more. So it's kind of really flipped and that's why cable that sterling versus the dollar has had a really strong rally. This year in 2023. And really if you go back to the autumn of last year we were, we nose dived down to 107 very briefly, and now we're tracking up above 125 and that's kind of back to levels yeah we haven't seen since last summer. And yeah it's sterling is back. It would seem. Yeah and the team at Goldman Sachs and exactly as you described they said essentially, we think that the same factors that acted as headwinds on sterling in 2022. Mostly natural gas prices and the relative stance of the Bank of England's policy have now turned to tailwinds. And so then city, so Jen, Nat West, they're all upgrading their forecasts and it all comes after this week. Was it the cable hit a five month high. No, there was a cable to a one year high against the dollar. So sterling and five months high against the euro. So yeah, it's all. I bet Bojo is not liking that is he must be the coronation. All right, cool. Well look, we'll wrap it up there for this week. Thanks everyone for listening. Thank you peers for for sharing your insights and we'll catch you next week. Take care everyone. Have a good weekend.