International Relations and Global Market Overview

Please note this automated transcription may contain errors.

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Richard Green: So very pleasant. Good morning to everybody. My name is Richard green I'm director of the USC Lusk center for real estate and welcome back to Lusk Perspectives. This is, I believe, our 21st installment

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Richard Green: Of a series that we started on March 22 as we all needed entertainment, as we remain at home, and it is my very distinct pleasure to welcome today. A good friend of the Lusk Center Colin Barrow.

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Richard Green: Colin has had three distinguished careers. He very successful in private equity very successful in politics. He was leader of Westminster.

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Richard Green: Which is the part of London that you have likely visited. If you have ever been to London and leader is equivalent to a mayor of an American city.

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Richard Green: And since then, and academic with positions, both at Stanford and here at USC. We have had Collin speak to our students here. We've had him speak to our board.

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Richard Green: He always is thought provoking and crowd pleasing at the same time I hear people calling quote you months after they hear you, which is the sign of someone who says things that stick. And so again, I'd like you to welcome you back and let me ask you to take it away.

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Colin Barrow: All right. Thank you. Well, you've you've asked me to speak about what's going on in the European Union.

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Colin Barrow: Or rather, in Europe.

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Colin Barrow: As a Brit. I should probably put it that way.

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Colin Barrow: And I wanted to start by citing to experiences they've just I'm speaking to an hour from Switzerland, which is where I primarily live. I also have a home in London.

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Colin Barrow: But about two weeks ago they opened the border to Italy. So we got in the car and drove to Venice.

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Colin Barrow: Which was memorably empty but functioning in every respect, famous Venetian arrogance was absent though that restaurateurs were Prostrating themselves in front of our feet as the few tourists around saying, Please come into our place that will be wonderful will feed you. Well, and

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Colin Barrow: Nobody was wearing a mask, except in shops.

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Colin Barrow: And on public transport, but other than that everything was kind of normal

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Colin Barrow: The second experience was a subset of that was in Milan, where it's quite different to what is very frightened everybody's wearing masks everywhere.

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Colin Barrow: And not going out quite as much as they used to.

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Colin Barrow: But shopping. Nonetheless, in next week we're going to London, and I tried to fix that with a friend of mine, whether we should and Anna has been trying to do the same thing, trying to fix up a friend of mine to go to dinner.

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Colin Barrow: And people say, well, you know, it's kind of early days. Now, I'm not sure about public transport. I'm not sure about being available via to achieve the distancing and so on. So, so

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Colin Barrow: The fierceness of the reaction in two countries that have done it very fiercely initially was locked down very firm and so as Britain.

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Colin Barrow: When you come out of lockdown as we're now beginning to do. People are very jumpy initially is three weeks ahead of us, head of Britain, that is, and Britain is only just emerging into the light. Now,

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Colin Barrow: So the process. The last time I gave this word on this conversation. I spoke a little bit about about everybody being locked down now. Now it's a question of everybody coming out and what the consequences of that.

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Colin Barrow: People coming out in different countries or different times, but I can tell you system was one of the first

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Colin Barrow: And now everything is pretty much pretty much back to normal. I would just be out for a walk in as a bunch of kids on a basketball court not observing any social distancing, not wearing masks not doing anything.

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Colin Barrow: Out of the ordinary at all. You wouldn't know you take around

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Colin Barrow: And these cut these

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Colin Barrow: Activities are there, despite the fact that

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Colin Barrow: Quite a lot of people died.

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Colin Barrow: Everybody knows somebody who's had it. Everybody knows somebody who's died right and it's been a pretty serious event over here. And a lot of people are impacted by

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Colin Barrow: The economic effects. I think the things I'd like to say is that I think the economic effects are somewhat or will turn out to be somewhat exaggerated.

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Colin Barrow: I'll explain why if you imagine if you have a private business you have a landlord, a bank you have customers and you have stopped.

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Colin Barrow: It is quite possible that you will have done a deal with your landlord to defer roll up maintain your cash flow, maybe even forgive the rent for this period. You certainly can't be evicted.

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Colin Barrow: Secondly, in your staff and are paid by the stage and they're paid less than they would ordinarily be paid in most cases, but the they absorb that. And the tax effects. Make it bearable. So your staff have gone away as a cost your you might find that your

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Colin Barrow: Cost of your real estate is going away. It may be that your bank has also forgiven you. Or they'll probably

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Colin Barrow: Have, roll, roll it up and your turn over, of course, will have disappeared for that period and same time. So the net economic effect on you as a business is much less than the gross reduction in GDP might imply

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Colin Barrow: So then we might find that quite a lot of businesses will have whether this perfectly well even though their operations, a bit like in those fatality industry in the travel industry might have been brought to a complete halt.

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Colin Barrow: In in many businesses, those operations have not been brought to a complete halt at all. They have been

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Colin Barrow: Operating perfectly well but with people.

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Colin Barrow: In, dare I say the middle and upper income bracket functioning using technologies such as the one we using now so I suspect

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Colin Barrow: Though I hesitate to say too much about economics, I, I suspect that we're going to find that the damage to the economy.

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Colin Barrow: Will not be as great as it is reported to be. However, there will be one effect which will be that quite a lot of middle to lower income people.

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Colin Barrow: Is becoming increasingly clear that will not go back to work will will either return to their own country, or will will have to retrain and do something else.

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Colin Barrow: And that will be in some ways, good news for business. Although on attractive that that's the reason it means that the labor supplies will get easier.

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Colin Barrow: The cost of labor will reduce the pressures for full employment or reduced and therefore things may get better rather quicker than expected. Even the Bank of England is forecasting a V shaped recovery.

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Colin Barrow: And rather than an L shaped or U shaped recovery which is remarkable from an otherwise conservative institution that said five or 10% reduction in GDP for the year is what is the consensus view in most countries.

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Colin Barrow: With

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Colin Barrow: Considerable fiscal measures which vary vary widely from country to country being put in place to cushion the impact of the

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Colin Barrow: Economic fall, but now everybody's beginning to get used to getting back to work and it seems to be going reasonably well although there will be

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Colin Barrow: Probably some permanent adjustment. Another permanent adjustment, which will be that all these nice middle class people used to go on trains and go to work every day, you'll probably find

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Colin Barrow: That it's rather nicer to work from home, as long as they can find something to do the children who will shortly be allowed back into schools.

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Colin Barrow: Once that is the case, the attractions or working from home will be considerable and quite a lot. And the, the gentle trend away from working in cities towards working in the penumbra cities will probably accelerate some walk

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Colin Barrow: The aggregation effect of being in a city being around people being able to see people and so on so forth will still be there, but people will possibly only practice that two or three times a week.

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Colin Barrow: As opposed to everyday rigorously on the 815 from here to there. So there will be fundamental changes. I suspect we will travel less

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Colin Barrow: Same amount for leisure, but less for business. I think that finance directors are likely to suggest that teleconferencing is a perfectly good way of communicating with people and you can go and see your customers once a year, or

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Colin Barrow: So that's the. Those are the broad

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Colin Barrow: Trends. I think I can go into quite a lot of it in some in greater detail, particularly the politics of it which is in England quite fierce and it's germane to a substantially American audience that political leaders initially in a crisis like this.

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Colin Barrow: Have a certain amount of support from their electorates as crisis leaders often do but gradually the media, especially if they adopt the

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Colin Barrow: You know, US and UK model of adversarial journalism.

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Colin Barrow: Will soon pick that apart and we've seen Boris Johnson's popularity go from plus 16 to minus seven also

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Colin Barrow: Over the course of this epidemic when he is a relatively sympathetic figure having himself been hit quite hard with the honest so

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Colin Barrow: It leaders are not coming out of this. Well, and in many countries, the government systems are not getting coming out of this well.

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Colin Barrow: My own country included Switzerland to operate is done this very differently from the UK to that with a radio DJ over the UK has has sort of tripped out with its nationalized medicine.

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Colin Barrow: Shown to be not a better mousetrap particularly it's it's got its own problems, not least the fact that it has prioritized cove it to the exclusion of virtually any other medical condition.

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Colin Barrow: So as a result, a lot of cancer patients now turning up saying why under the tree for several months. My diagnoses have been delayed.

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Colin Barrow: And so on. And I have ready access to doctors and hospitals and song because they've all been too busy dealing with Kobe that has been a problem for the government. And I think the inevitable public inquiry will show the show the government service to have been a bit lacking.

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Colin Barrow: And that may be an impetus for government reform.

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Colin Barrow: broader trend on so

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Richard Green: I just want to hit on that point because it's really important when you talk a little bit about how the Swiss health system is different from the UK health system because there are I think probably people in our audience who don't know

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Colin Barrow: Yes, the, the UK health system is what is called a single payer system. It is a nationalized system. It covers about 93% of the population that covers the whole population, but

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Colin Barrow: And everybody has the right to go into hospital, get a medical care free at the point of delivery.

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Colin Barrow: As with any subsystem and doesn't take long to work out that if everybody can use it at all times without any payment.

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Colin Barrow: They will inevitably have to be some rationing, and that is the central control mechanism that has been used during this to prioritize cope it in Switzerland, the system is very different.

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Colin Barrow: The government is there as a guarantor.

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Colin Barrow: Of a minimum standard of color and a private insurance company is obligated all the private insurance companies are obligated to offer to anyone who's got the right to live in Switzerland, the right to be covered at broadly the same rate.

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Colin Barrow: To that that minimum standard. Now, if they want to add on private rooms fluffy pillows.

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Colin Barrow: You know, all sorts of bells and whistles, they can but but the basic level of cover is guaranteed by the state and provided by private providers working for private insurance.

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Colin Barrow: And it's the extras that provide the competitive differences between the insurance card. So this. So, the system is very different, but the outcome is broadly the same

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Colin Barrow: The vast majority of people just have the fluffy pillows type of thing enhanced accessory has all the same, same care for the system is different and therefore the degree of control by the central government.

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Richard Green: You, we're gonna move on to the next topic, but I just wanted it sort of

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Colin Barrow: Yeah i well i wasn't going to move on to the next topic. I was gonna, I was gonna let you move me on to the next.

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Richard Green: Ah, okay, very good. Well, okay, so let's

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Richard Green: So let's do that. So I you talk about leadership and it being difficult to avoid the pitfalls of dealing with

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Richard Green: adversarial press, but as it happens, I was reading a story about Angela Merkel this morning where her popularity is like 82%

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Colin Barrow: Yes, now

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Richard Green: So what what is different is just Germany different or is it that Merkel is different.

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Colin Barrow: It's it is I think both

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Colin Barrow: Germany is not the most

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Colin Barrow: adversarial nor the least adversarial

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Colin Barrow: Press. But Angular Merkel is a very different kind of leader from those

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Colin Barrow: So first of all, she's she is a scientist and she when you hear talk about this.

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Colin Barrow: Disease. You hear her speaking in scientific terms of defer to the scientist takes advice and she explains it in scientific terms and she will say things like

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Colin Barrow: If we do too much of that, then this will be the consequence and it will have the our rate will go up to this, and therefore 6.4% of hospitals will be overwhelmed and here

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Colin Barrow: She speaks in those terms, and as a result in his journey has got some of the best results in Europe. She's got the credit for that.

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Colin Barrow: Because she is supposed to be in charge. And in many ways, she is the German system is very similar. By the way, to system. There's one major difference from any other parts of Europe, as far as I can tell.

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Colin Barrow: Which is that public health in Germany is in the hands of local government and the states.

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Colin Barrow: Have their own public health departments, which means that they can jump on particular issues with the local health

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Colin Barrow: The local police the local state scenery and so on and so forth in a way that in England takes forever. It's got all got headquarters and all come back down again, and nobody

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Colin Barrow: You know, it's all government machine. It's, it's when people speak disparagingly of the federal, federal government in the United States. That's how Britain is and

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Colin Barrow: When people think about distributed systems. That's how Germany. Germany but Angela Merkel is is coming to the end of our time.

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Colin Barrow: And I think she's been given the benefit of reasonably successful run and she's done pretty well Germany Germans are proud of themselves and many ways right so

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Richard Green: Yeah, it is kind of interesting here. You're so one of the things that just try to remember where I read it may have been the Financial Times this morning.

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Richard Green: Is

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Richard Green: I know Merkel actually has very little direct power on what states do in Germany, but she has been able to persuade them to pretty much operate in lockstep with each other with respect to public health.

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Colin Barrow: Yes, yes.

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Richard Green: And and that's a very big contrast with the United States.

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Colin Barrow: Yes. And indeed, the European Union, except in financial matter, the financial matter of support, which I guess we'll come on to at some point.

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Colin Barrow: European Union has been quite successful in that in managing the travel restrictions around the area, but so that everybody has brought a the same

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Colin Barrow: travel restrictions across the Schengen area that is being something where Merkel and macro have been very instrumental so her powers of persuasion and brokering and reason and, you know, all, all of that, rather than demagoguery.

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Colin Barrow: Admired costs here.

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Richard Green: So I think that does you're going to segue. You're going to bring me nicely into a segue point. And by the way, for people who have any questions for calling please type them into the Q AMP a box and I will forward them to call them.

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Richard Green: Support from the government. Now, here we've had quite a lot of it in the United States to very generous unemployment benefits unemployment benefits going people who in the past and get them that isn't an contractors

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Richard Green: Alone forgivable loan program for employers who keep their employers, employees on payroll.

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Richard Green: And as a result, this. We're having a sort of divergence right now in the US. And I think it's also true in Europe, you were referring to this between personal income and GDP.

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Richard Green: So we can be certain that GDP in the second quarter in the US will have fallen considerably, just because we're not doing as much stuff as we were before.

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Richard Green: But at the same time, people are getting cash that's allowing them to pay their rent and so on.

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Richard Green: All of this at the moment is going to disappear at the end of this month.

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Richard Green: And it's something that makes me very nervous about the economy in the US, unless the senate comes back and agrees something with the house and we get further relief. What is the trajectory of this these sorts of policies in Europe right now and I'm assuming there's variation across

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The UK

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Colin Barrow: Yeah, there is quite a bit of difference but but but broadly.

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Colin Barrow: In most way people are the government's are broadly supporting people to sit on the bench. So, that is, if you know the distinctions between the the the regime's leading concern is very much they're almost all as equally generous as as as each other. They all they're all time limited

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Colin Barrow: And some require you to register as I employed as in the US and others, in which case you break the link with the company. In other cases, they they support you in the company.

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Colin Barrow: As in the UK. And if the key thing. And the advantage of that is that if you plan then at the end to make a lot of people redundant, you've got to go through the consultancy

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Colin Barrow: consultation process that we have and it starts about now. And there are because the if you're going to make people redundant. At the end of the furlough system which is in October.

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Colin Barrow: Then you've got to start consulting people now so we're beginning to see the signs of companies that are going to retain most of their people and companies that are going to lose a large number of their people.

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Colin Barrow: In the US, that's masked in a way because they're already gone and it's. The question is, are they rehired

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Colin Barrow: But, but, yes, the burden of your, your point is correct, you know, the rubber is has not yet hit the road.

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Colin Barrow: And it is about. It is kind of beginning to happen now. And this is when we're going to see the shape of how many for example restaurants are going to be able to survive on

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Colin Barrow: To me to distancing or want me to distancing. How many, how many people are going to want to go to town and talk to people going to work shop locally and those sorts of

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Colin Barrow: Issues are going to have to work themselves through into the economy. But essentially, if the business survives, then the benefits of full employment, they have

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Colin Barrow: Some employment will in fact help some companies restructure themselves save themselves to money and then put themselves in derivative of the future.

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Colin Barrow: And take a set of decisions they might they might have been a bit reluctant to take up for coded so in some respects that companies will probably do better.

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Colin Barrow: And there will be a certain a net loss of wealth in the in the economy, but some companies will do better and some individuals were to very badly, particularly in the black economy by which I don't know if that term is widely used in the US.

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Colin Barrow: But I mean,

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Richard Green: Like all the informal economy.

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Colin Barrow: Okay, well, there we are. It is the same. It is. It's the same concept.

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Colin Barrow: That that economy has been cruelly shown up because you know people who don't have who aren't in the system can't claim on the system. And that's been very difficult

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Richard Green: So one of the things that's happening in the US is we're seeing covert have very disparate impact. And I think you were referring a little bit to this.

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Richard Green: Respect to the economy in Europe before. But I'm talking about directly in terms of health impacts. When we look at communities of color.

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Richard Green: They are disproportionately bearing the burden of code and exactly why that is. I mean, one of the things I've decided is I'm sort of

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Richard Green: Keeping my mouth shut about what causes coven and what doesn't, because every time we think we know something, it proves to be

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Richard Green: Incorrect. I do think the evidence is pretty convincing that wearing masks. A good idea and I want to come back to that in a bit, but

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Richard Green: But in this country, African Americans, Latinos are dying it much faster rates from covert than other groups. Is there a similar sort of dynamic playing out in Europe.

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Colin Barrow: Yes, that is a that is a common thought and the fear about ascribing causes is is shared as well that there seemed to be two.

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Colin Barrow: Things that are are reasonably good reasonable respectable cause or respectively academically supported causal explanations. One is that poverty is disproportionately

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Colin Barrow: Linked to diseases like diabetes and and some of the other comorbidities associated with this disease and poverty is also disproportionately associated with those communities.

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Colin Barrow: So, so that's one that seemed well it seems to be some evidence, the other, which is just not so obvious, which is in England, in particular.

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Colin Barrow: The term we use is black Asian and minority ethnic beam.

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Colin Barrow: That those people are disproportionately employed in the health service and hospitals are fearsome breeding grounds for this virus. So

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Colin Barrow: Quite a lot of health professionals have have added unfortunately it's all the statistics of deaths, because they have they have been involved in health service. You don't want to go to hospital if you

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Colin Barrow: Fear. This particular virus.

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Richard Green: So again, I'll remind you if you have questions for Colin please type them into the Q AMP a box that you should be seeing on your screen.

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Colin Barrow: My turn things on the chat box. I

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Richard Green: Don't care. I am not.

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Richard Green: Oh, that's

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Colin Barrow: What I

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Richard Green: Tell people where to enter their questions.

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Richard Green: Okay, um,

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Richard Green: Let's turn a little bit to

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Richard Green: Us European relations and so the world is be we were globalizing pretty rapidly and pretty ubiquitously

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Richard Green: On I'm and this has led to a number of phenomena, one of which are very efficient supply chains. I want to come back to that point a little later.

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Richard Green: But just generally the politics of globalization and relationships between the UK and the US, Europe and the UK, US

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Richard Green: Do you see covered changing that accelerating it decelerating it what what do you see going forward in terms of these relationships and how will this matter to things like capital flows, for example.

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Colin Barrow: Okay. The, the, I'll tell a story about the about something called exercise signet

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Colin Barrow: Exercise signet or sickness. I can't remember exactly what it was, was it was a disaster planning exercise that was done in the UK Government to prepare for

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Colin Barrow: The major risks and things good good good church throes of course in 2016, the first of which number one top of top of the pile was a pandemic. They modeled is on a on a flu pandemic. But nevertheless, it was a pandemic.

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Colin Barrow: And they realized that they would need a whole lot of kit, they would need

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Colin Barrow: Personal protective equipment they would need testing facilities they would need all the stuff that we now know we need

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Colin Barrow: And they the civil servants who were charged with growing up this disaster plan. So don't worry, Minister, we've got it all sorted out. We've got our supply chains all set up.

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Colin Barrow: France China.

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Colin Barrow: And everybody said, Oh, well that's all right, then. No problem will soon be able to get the kit. We don't need to stop pilot no issue when the, when this one came around

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Colin Barrow: The French decided that they were going to keep all their personal protective equipment for the needs of France.

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Colin Barrow: And it wasn't so easy as people thought to get stuff out of China, because there were other considerations that work there because everybody wanted to get their stuff out of China and the Chinese were making the most of it.

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Colin Barrow: It's hard for me as a capitalist to criticize them for that.

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Colin Barrow: And so the nature of globalization, it doesn't really work in a in an emergency emergency where there's massive international competition for resources.

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Colin Barrow: You, you can't necessarily rely on the supply chains that work in peacetime, and I think people are going to start saying what is important for strategic what is strategically important

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Colin Barrow: And the Germans will, for example, say it is strategically important to have a very well developed testing system for diseases and they had one it was domestic and they used it.

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Colin Barrow: There might be some who might say we should have a stockpile of this equipment that we needed Switzerland did have a stockpile of equipment and

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Colin Barrow: France did not know the Britain so so people might start to say some things are strategically important and that is playing itself out with Huawei

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Colin Barrow: Where suddenly the British, who were okay with where we are now not okay with our quality because they're beginning to say, not just because of Hong Kong.

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Colin Barrow: But because of issues with supplies and with the giant thinking about the Chinese state that maybe you don't want to put yourself in the hands of a forum tar

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Colin Barrow: And I think America has chosen to restrict the production of certain vaccine or is it renders here the treatment room members here to the people who the producer producers before they went to go to America birth, you can understand that. But it's kind of new in the context of globalization.

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Colin Barrow: So I think that the people are going to think about that stuff a lot more. We're going to see things about strategic reserves now important it is to be

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Colin Barrow: Food sufficient and oil sufficient and those sorts of considerations are going to come into political political life, and they've been kind of forgot about a bit. They were there after the Second World War, and they've gone away, and now they're going to come back in my view.

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Richard Green: Well I you know you're reminding me of how visited Japan was really important to me in terms of understanding Japanese policy.

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Richard Green: With respect to rice. Because when you go, this is at the time. The first time I went there was when property values in Japan where such that the Imperial

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Richard Green: Palace was worth more than the entire state of California.

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Richard Green: Yeah, and you come in from the airport and they're all these rice paddies, and you think this is crazy. Why are they wasting this land cultivating rice. You could use it for much more

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Richard Green: productive purposes, and then you talk to Japanese people, they say, Well, you know, we start nearly starve to death after World War Two.

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Richard Green: Because we didn't have our own rice. And so for us, it's worth giving up some prosperity and they knew. I mean, they were very explicit about the trade off. It wasn't some nonsense article

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Richard Green: argument about how it was important. You know, for Japanese values to have farmers or anything like that. It was

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Richard Green: Being without rice scares us. And so we don't care that it's costing us money. We're going to have enough rice on our own to sustain ourselves if we ever need to and that that that conversation stuck with me ever since.

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Richard Green: And now I think the world is to get more like that, but it's a very, to your point very kind of anti capitalist argument because it asserts that you need some inefficiencies.

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Richard Green: And your own autonomy.

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Richard Green: In order to have security and things that you really matter.

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Colin Barrow: Well, I mean, we spend all this money on defense.

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Colin Barrow: I mean, that is the the most obvious example of something where you throw

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Colin Barrow: Money away, basically. Yeah.

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Colin Barrow: Yeah you carry out of the window and throw you know, throw bombs of people and block the money.

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Colin Barrow: You know, or hold them in reserve for that. Now, we will need it will need it. But how

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Colin Barrow: Yeah. Isn't defense against pandemics defense against rockets, which is the more important, you might

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Richard Green: So well. The other thing is, I'm curious if you're thinking about the supply chain.

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Richard Green: The other element is you identified strict teacher

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Richard Green: Things like

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Richard Green: Medicine or like pee pee equipment.

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Richard Green: That was just redundant to their pee pee or personal protective anyway um but the other thing that was really striking to me is if you look at us manufacturing

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Richard Green: A very large share of it. And I don't remember the exact percentage, right now it's something like 40% has somewhere along the

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Richard Green: Manufacturing process one Chinese at least one Chinese part

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Richard Green: And if you think about it, if that part is only available in China.

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Richard Green: It doesn't matter that you have all the other parts you still can't build the thing that you want to build without that particular Chinese heart. So when you look at Chinese content is a share of American manufacturing, it's actually still pretty small.

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Richard Green: This is distinct from Chinese goods that get imported the United States look at something that's called made in America that it typically still has pretty overwhelmingly North American content in it.

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Richard Green: But all you need is that one screw. Yeah, it's a special screw from China.

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Richard Green: And if you can't get any more suddenly your process is screwed up. And so I wonder if that's going to lead to beyond the strategic sorts of things at least trying to create redundancies.

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Richard Green: In in the supply chain and his business equipped to do this, given that their motivation properly. So his bottom line, which means cost reduction redundancy, by its very nature means you're adding cost to the process.

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Colin Barrow: Yeah, although there's another factor at work, which is what to which is the whole social responsibility agenda. This is, you know, climate change, all that stuff that evolves deferring current enjoyment for future sustainability, but future security for future

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Colin Barrow: Long

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Colin Barrow: Word in the injunction in business school to look after the long term interest of the shareholders. So it's business survivability business survival.

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Colin Barrow: Is is always part of the chief executives objective set and and survival means means dealing with the supply chain issue and dealing with securities security of supply.

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Colin Barrow: If you need to stockpiles group stockpiles gurus. But, you know, and if you need to, for example, be a bit jumpy about certain business partners in certain parts of the world. Well, you may have to do that.

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Colin Barrow: But I think there's going to, we're going to see a lot of that. And it's going to be limitations to imitate there will be increased arguments for the power of the state.

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Colin Barrow: And there will be increased arguments for the security of business and and long term sustainability of business and those two factors will be medium term trends that will come out of this much more than being caring for our neighbors, I think.

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Richard Green: So, I, I'm going to move on to questions from the audience a minute but i want i want to reserve one more for myself. So as we think about coming out of this.

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Richard Green: I'm governments have borrowed a lot in order to get us through this and for whatever it's worth. I think that's the right thing to do. But once we get past it.

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Richard Green: Presumably governments are going to want to start paying this money that it's borrow. They've borrowed back. Um, how do you see that

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Richard Green: Happening. What sort of changes and tax policy might you see your body will not see or spending policy, etc. So do you have any thoughts on the long term to school implications of all of this.

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Colin Barrow: Yeah, I mean, the government should be very ready to step up to the plate and put on a sandwich put money into this this problem and they seem to have

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Colin Barrow: Been pretty cavalier about about what the consequences of that might be

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Colin Barrow: I don't think we're going to see much inflation anytime soon. I'm not an economist, but I somehow all the pressures seem to me to push the other way.

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Colin Barrow: That doesn't seem to be the risk, the risk and I think after a decade or quantitative easing. Sure, which has been broadly successful depending. Oh, look.

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Colin Barrow: I don't think people are going to be in a big rush to tighten the fiscal screw just at the time when many businesses and areas of the economy are fragile.

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Colin Barrow: So I suspect that the temptation to punt all this into the long into the medium term future, particularly when interest rates for as low as they are.

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Colin Barrow: That that temptation will be very strong and I think we're about see a financial statement tomorrow. We've in England with there was one in a way from from Boris Johnson last week promising all kinds of construction, you know, this is almost champion in its generosity.

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Colin Barrow: And, and, you know, that seems to be the way governments are seeing it. There is one rather egregious exception. Our which is the European Union.

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Colin Barrow: Where the European Union has failed to agree amidst the richer countries that they should support the

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Colin Barrow: The poorer countries of the South. So, France and Germany have been sponsoring a program to try and make 750 million dollars worth of credit but euros available to Italy, Spain, Portugal and so

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Colin Barrow: And the fiscal fiscally prudent are saying no, actually we don't see why we should

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Colin Barrow: pay money to support other countries, we've got enough bills of our own to pick up. So maybe that's a signal that there are limits to the amount of fiscal space. Everybody thinks they've got but for the moment they seem to be spending quite eye watering.

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Colin Barrow: Quite eye watering level. And I don't think they're too concerned about what consequences are know it seems like the central banks.

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Richard Green: So from the audience from a harsh shut Lonnie

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Richard Green: And I don't know if you want to take this one or not. But how do you see real estate prices in both the residential and commercial sector in Europe, but mainly in London.

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Colin Barrow: In London well in in London, I can speak more to the residential and commercial but I, of course, have an opinion about it the residential has come to a complete

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Colin Barrow: Pretty much complete hold. There are some exceptional properties that are moving but relatively few and it will be a while before it's clear what the, what the direction of travel is is going to be. We were in a downturn anyway.

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Colin Barrow: There may be some people who are forced to sell by economic circumstances but possibly not in the center of London. Most people who own property in the center of London unlikely to be forced sellers and the pressure on the banks to force them out will be will be

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Colin Barrow: On bank, not to force them out will be there. So I suspect that there won't be too much price disclosure of that kind.

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Colin Barrow: My phone is decided to ring if you can hear it. I'm sorry. It's fine. I will. It was somebody calling

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Colin Barrow: And in quick in the case of commercial real estate. I think there's a there's a real worry about the

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Colin Barrow: People be being stuck with classes or real estate. It's the same problem as in the US with the malls classes of real estate that are no longer

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Colin Barrow: Really viable and there's been a fight for some while between the retailers who are in too many places wanting to get out of the leases that they've signed

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Colin Barrow: And they're treating this as an opportunity to do so. So I suspect that the the the revenue side of

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Colin Barrow: A number of property companies operate commercial property companies operating in UK will be under some pressure. Also, as I mentioned before, office.

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Colin Barrow: Space in central cities, particularly London will be will be under some pressure because there will be quite a lot of people are going to say, well, we only need half the number of

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Colin Barrow: Seats in those offices now because the rest of the people working from home, they only need to be here, two or three days a week.

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Colin Barrow: So there will be some pressure of that kind, will wait to see how significant it is

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Richard Green: From James Torres, what are the keys going forward for both European and American real estate professionals fillets facilitate more real estate transactions up. It says, The Atlantic or their companies are technologies that are bright lights in this intercontinental real estate challenge.

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Colin Barrow: I'm not sure I understood the question you read a bit bit quickly, you know, are there any particular trends that are going to emerge technical technologically that are going to change.

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Richard Green: You know I asked a for me to stay

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Richard Green: Yeah. And also, dude. Will these technologies basically allow Americans to participate more in Europe and vice versa and real estate markets. I think that's the thrust of the question.

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Colin Barrow: I frankly don't know, I, I'm not quite sure what technologies are are likely to have emerged from the present situation that weren't there before.

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Colin Barrow: The

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Colin Barrow: Maybe the question I could clarify in some way. I

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Richard Green: Yeah, so it's James, do you want to try that again.

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Richard Green: I'll ask if he

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Richard Green: Wants to take his question again.

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Colin Barrow: Because this sort of technology that we're using here, it's been, been there for a while, we just all learn how to use it.

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Richard Green: So what one thing I found

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Richard Green: Really interesting was your market, the opening about Venice and how people are not wearing masks.

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Colin Barrow: Only in shops.

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Richard Green: Yeah, in shops, a

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Richard Green: Is there any sign of a recurrence or

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Colin Barrow: Things no be no there isn't, and there was there been a occasional they've been small outbreaks in Germany, and I think it was one in northern Italy.

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Colin Barrow: But very small and very localized very easily contained. They just have some factory. A lot of people get it because they're all in

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Colin Barrow: There because they're working practices there and the government jumps all over it locks it all up, puts all the people away for two weeks and out. They come healthy

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Colin Barrow: Yeah. And they know that the treatments are stronger and better than they have been in the past. And so they a few of these people die and so

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Colin Barrow: The death rate which is the sort of hallmark gold standard runs through all of this, the very small changes, following the major on locking that's taken place.

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Colin Barrow: And that is, is a good sign for the future. People say, Well, that's because it's the summer and the virus doesn't prosper in the summer. Well, maybe, but it's

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Richard Green: In summer here in the viruses raging here.

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Colin Barrow: Yes. And it's summer in Brazil, and there's quite a few cases there and it's summer in India. It's quite a few cases there. What the what.

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Colin Barrow: Although you might think that that India would because everybody lives very close together, you would think that in, you would have very large rates infection, not so

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Colin Barrow: And similarly, Brazil has a relatively stable situation as lots of people getting into everyday people dying every day is not getting any bigger

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Colin Barrow: So, you know, I don't think the heat is the issue. I think the issue is because there's another factor at work and it's not easy to see what it is. So,

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Richard Green: Ah, OK. We have

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Richard Green: Okay, this is so this is big. It's a James thing because the pandemic has halted travel

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Richard Green: Yeah, um, how can basically Americans or Europeans do business with each other transactions and world where. And as you know, Americans are not permitted to go to Europe.

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Colin Barrow: Yes, nor Europeans permission to go to America so

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Colin Barrow: The well i think you know we're doing it now. And I think that it's perfectly. It's always been perfectly possible to do business in this way.

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Colin Barrow: I have contracted for real estate on the phone with a with a video tour with with measurement with all kinds of we've all seen propositions of this kind, transmitted from other countries for years.

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Colin Barrow: Some of the cultural things are the subtleties of harder to get out. But nonetheless, a broadly, you know, it's all doable if you're prepared to

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Colin Barrow: To put up with a certain amount of

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Colin Barrow: Uncertainty you build that into your equation. And it's still all doable. I think we may get back to the point where you have trusted agents in different parts of the world who are there all the time.

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Colin Barrow: And we and we perhaps sit at home more and work through other people that may be a trend and but I don't think the total amount of

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Colin Barrow: capital flows will diminish. If there's if people got money to invest

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Colin Barrow: There's normally plenty of people offering assistance as to how to get it placed

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Colin Barrow: And there's that it shouldn't really be too difficult to continue that process. I don't think we're going to see that a grinding of the wheels of capitalism. In other words, I think that's going to be that's that that's going to function just fine.

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Colin Barrow: That over time, some relationships may be more difficult to sustain because people won't see one another that much but I mean you can you can get a pretty good idea of the people you're dealing with on the phone and like this. So maybe we'll just get a bit more used to it.

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Richard Green: Well, Colin Barrow, always a delight to talk with you. Thank you very much for your insights this morning.

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Richard Green: Our next event is next Tuesday week from today at 11am Pacific Time bird Anderson, who runs construction lending for Wells Fargo will be our guest next week. And again, Colin. Thank you very much for joining us today.

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Colin Barrow: My pleasure. Thanks.

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Richard Green: Okay. Take care everybody stay safe. Okay, you too. Bye bye. Bye.