♪ >> good evening, good morning and good 2020. this is always one of the high points of the year. we will take it for what it is. a surveillance special -- a look a year ahead to 2020. we are always trying to find someone with experience, with perspective. they have been right and wrong. we can do no better after this most interesting 2019 than abby joseph cohen, senior strategist at goldman sachs. her contribution to the american financial system and her work with the cfa, institute among

others. an extraordinary year to look forward to. thank you so much for being with us. much to talk about in the next half-hour. i want to talk about your new effort, thinking about immigration and what it means. we must talk about the central bank. we've got to talk about the markets. you have been the gloom cruise great piñata. good times, bad times. we cannot possibly go up. confounded off the gloom of last december, but confounded over one year, five years, 10 years to good and substantial equity returns. when does it end? abby: tom, thank you first of all for having me here for this discussion. gloom at year-end 2019 in many ways set us up for a good start to 2019 in the markets. one of the things i am concerned about is just how happy everybody is as year-end 2019.

i think what is priced into the market right now is an economic scenario that seems to be the most likely. no recession. the economy perking up a little bit. corporate profits in single digits, maybe higher growth. it is priced into the market. what i am worried about is when valuation is already there, the risks could in fact could be to the downside rather than the upside. the base case is for mild returns. not just in the united states, but several other equity markets. let's call it mid-single digit along with profit growth in 2020. there are a number of things on the horizon that could push us. with valuation where it is, there is no margin for error. tom: i want to talk about the idea of a correction. it seems it is impossible to go down 10% and maybe for a blink we go down 18%. ies is if we get to

enough down, there will be panic selling that takes us down further. do you buy that idea? abby: let's add to the panic selling, the whole concept of the structure of the market which has become increasingly dependent on etf's and other things which are index related, especially market cap waited indices. declinesare n of the sort we saw in november and december 2018, that takes on a life of its own because the stocks that are most heavily sold are the most liquid stocks and the stocks that have performed the best. i think in 2020, investors need to be thinking about the stocks that did not have good price momentum thus far, but offer a good value. what we are seeing in the equity market right now is all this unprecedented spread in p.e. ratios. there is a group of stocks with p.e.'s very high but there are

number of stocks on the low side, and maybe that is where the best opportunities are for portfolio protection. tom: we've got to get out of the housekeeping and that is dividend growth, share buyback . does it continue? abby: share buybacks have been an important part of the story for the last several years. there are some signs it could be slowing. one of the things that always troubles me about share buybacks is that companies are using and toash to do this raise regular dividends, but we have also seen the percentage of cash being used for future growth in the form of capx and research and development is actually not at a good level. that worries me because it says companies not really seeing good reinvestment opportunities. tom: you put together a terrific powerpoint for some of your clients.

part of that is about the uncertainty that is out there. the lack of spending. let's go to the goldman sachs looks at. business investment. linkedin, the trade war with a dearth of investment, and the future in terms of owning equities. abby: it is no secret that c apx was disappointing in 2019. it was negative and we think it will continue in 2020. when we talk to companies about why that is, many of them point to the uncertainty of the trade battle. we see this not just in the united states, by the way, but trade policy uncertainty is more dramatic in some other countries as well. what we basically see his companies are not sure about where they should be investing for their supply chains. so, they are sitting on their hands right now. that is not good for long-term economic growth. tom: i am going to predict in 2020, there will be a new study of what globalization means.

for multinationals and the big companies we are comfortable buying right now in the u.s., what is the new globalization that abby joseph cohen sees? abby: it is one where there is a very significant impact from political forces in many countries. we're seeing pushback not just in the united states, but many other nations. i worry about it because we have had since the end of the second world war this period of multilateralism. not just in terms of trade and economic relationships, but also in terms of political and military alliances. in 2020, i think could be a year where we see these things breaking further apart. that disturbs me in terms of the long-term consequences. tom: i wanted go to the more granular view on the call for internationals. interview after interview of bloomberg surveillance, the percolation of international

e.m. currency seem to do better. on the chart of international investment, u.s. up, international flat. does that change next year? abby: if we take a look at the forecast from my goldman sachs colleagues, when we look at the developed markets, we are not seeing much differentiation. nglecally, mid, high-si digit returns for equities. depending on where the year ends. it is tied to profit gains. where we see more valuation opportunity is in the emerging markets. but, let's be very careful. emerging-market indices are now heavily dominated by china. very often when individual investors say i want e.m. exposure, make a careful decision about whether you want that exposure to china or whether you wanted to e.m. ex-china. tom: all of this is driven by revenue. you go up the income statement with the regime we've got now --

19 doing well.92 doin we seem to be desperate to by revenue. we seem to be desperate to buy nominal gdp's. is that in next year? abby: we seem to be desperate to buy earnings growth, per se. one of the things i am glad you point out the difference between is that a good deal of the earnings growth for some companies has really come about because of the reduction of the corporate tax rate. not what we want to pay a lot for. we want to pay for revenue. we take a look at some of the categories that have not performed well. we all know that technology stocks have done an outstanding stock performers in the u.s. markets. one of the reasons the u.s. has outperformed other markets is because we are more tech heavy than the indices and other countries. when we take a look going forward and we say, ok, we don't expect a recession.

we expect modest improvement in gdp to 2% or better, it basically pushes us in the direction of some industrials and others that have not performed well. makes a strong point about why we want to look at companies that offer growth, but growth at reasonable price. tom: as we close out this discussion about equity, we will talk fed in the moment, i want to focus and we into the idea of equity outperformance and the gloom that is pervaded. it has been a single digit world. 9% return. it seems like we were too cautious over the last 10 years. should we maintain that caution or can we begin to lift our single-digit expectations? abby: i find myself to be more cautious than i was and it is strictly driven by valuation. the worst part of the great recession, what was price then at those p.e.'s of eight times

earnings was the assumption the prophet recession would last another three to five years. what is priced in now at p.e. of 18 times earnings is the assumption there will not be recession, that profit growth will continue, so on. there is no margin for error. that is what i am most looking at. could there be surprises? will the surprises be positive or negative? i believe that we have a chance of more negative surprises than positive, including things that happen outside the united states. tom: i've got more questions on the markets. i will squeeze in them on the discussion on the fed. abby joseph cohen went of goldman sachs. a really special section on her current research. stay with us. this year ahead view for "bloomberg surveillance." ♪

tom: we welcome you to bloomberg surveillance: a year ahead. we are thrilled to bring you abby joseph cohen and, senior investment strategist at goldman sachs. so much more with the american financial system. she worked with the cfa institute over the years. the market devolves into market policy. are we done with the dots? can we bury the dots in 2020? abby: i don't think we will be paying as much attention to the dots because we think the trend in interest rates is basically tish in 2020. justice say we have seen the decompression of ratios in the equity market, we have seen the compression of yields in the bond market. we see the compression and terms of the term premium, the duration of the bonds where longs are not yielding much more than shorts. we see this compression in terms of quality. we arlower quality bonds are

not yielding much more than higher quality bonds. i find this disturbing. tom: it is very different to say the least. abby: it is very different. keep in mind, those people who argue equity valuations is just fine because of discounted cash flows and so on are basing those numbers on interest rates that are at historically low levels. if interest rates were to start to move up, there would be an impact on equity valuation. tom: this is not in the textbooks. the new powell said, bank of england and others have to deal with the material world that is not in the textbooks that we studied. how unusual is this world and do we go back to what we -- do we go beyond to something that we make it up as we go? abby: this is an extraordinary period in economic history. when i was a junior economist at the fed, we were fighting

inflation and we continued to fight inflation for many years. now, the fear is that we are fighting deflation. let's be clear. in the united states, there is not deflation, right? wages are rising. most important, goods inflation is moving up as well. where has there been deflation? there has been deflation in places like japan, but it is not really that common. why are interest rates as low as they are? in many cases, it is because it is the single most used policy tool in many nations. in europe, for example, not much use of fiscal policy for stimulus reasons that have to do with the compact that put the eu together. so, we have a situation in the united states where our interest rates are being held out in part because interest rates are negative in other countries. if you are an investor based in any number of developed economies, you say i don't want

my negative yield on my own country's 10 year. abby: you are getting out in front of my calendar. tom: in january in davos at the world economic forum, negative interest rates. i don't want to get you in trouble with goldman sachs, but is it an extreme at that worn out its welcome or is there value to this original central bank policy? abby: i can explain it as a monetary economist with cemex variance and say, ok, in a financial crisis, the idea was for a short period of time to have negative interest rates. what we are seeing in terms of the implications from the real economy, not so pleasant. so, for example, in nations where the yields are negative, people are not spending money. in fact, they are saving more than they did before. there is the opposite impact. it is not stimulative.

we see the impact in the united states. our fed has pushed back against the idea of negative yields, yet our yields are much lower than they would be because it is happening in other countries. tom: one of the great losses in economics was margaret goodwin. precisely this criticism of the professor's work is that people like you are in the at the real of economics talking to chairman powell and the rest of us are out there with the negative interest rates. it does not were created is chairman powell aware of that into 2020? there is almost a social need to normalize rates back to the incentives we knew? abby: i have great confidence in chairman powell and also with the teams he has. not just the members of the board, but also his staff members. i think they see the pragmatic aspect of what's happening right now. i think they would like nothing more than to be in an environment where we have real interest rates return to

positive levels, because it is something they know how to use as a policy lever. they are in an awkward position right now in terms of having very limited policy tools. tom: this goes back to your work in academics, some high-level mathematics. i don't know differential equations but abby joseph cohen can do the math. do we escape out of this central-bank experiment with smooth, controllable curves and drift functions, or do you look of it in 2020 or 2025 discontinuous moments? abby: i'm going to change the question a little bit and say what are the other issues that are leading to these very low interest rates? because we tend to focus only on policy tools. i think one of the things that many people forget about is that we have been in an environment in which this move towards globalization has in fact kept

inflation lower. we are also in an environment where in many countries, population growth is extremely slow, if not stagnant. what actually gives us long-term economic growth is population growth. if population is not growing in japan and it is not growing in china, very importantly, and extremely sluggish population growth in europe, maybe we can understand better why those economies have slowed, why there are some signs of deflation elsewhere. the united states has been fortunate. we have had among the fastest rates of population growth and we have to point out very clearly that about half of that over the last decade has come from immigration. tom: this is so important. abby joseph cohen with us to drive into 2020. it is an election year. part of that will be the fabric of the nation. the idea of the people of the united states of america. she has been looking into that,

coming up on this year ahead. abby joseph cohen on immigration. "bloomberg surveillance." ♪

tom: we welcome all of you again. a year ahead, bloomberg surveillance. we love doing this every year. our team tries to put together a good conversation then that is easy with abby joseph cohen because every time she walks in the door, i know there is new research. you go to where henry kissinger is, which is the fabric of a nation and about immigration, migration, the demographic trends. what did you learn in your study? abby: clearly, ours has been a nation of immigration. there has been so much noise in the discussion over the last few years that we need to look at the data, which is what we have done. one of the key observations we

have made is this -- over the last 10 years, because the native population is getting older, there's a lower birth rate, a higher death rate. in fact, about 50% of the growth in our labor force and our population is now coming from immigration. that's something that really is the lifeblood for any nation's economic growth. the nations right now in the world that are struggling are often those with extremely low birth rates and in some cases stagnant population growth. tom: there has to be a policy. have life and bloomberg, i seen many policies succeed and go down on flames on vote in washington. how do we get something voted on that benefits all? abby: looking at the economic dimension, we have identified some things that are really important for the united states. for example, when we take a look at those people who have doctorates in things like engineering and computer science, who are working in u.s.

industry, something on the order of 40% or 50% of them are immigrants. tom: are they taking jobs from americans? abby: they are not. we have had conversations with the american academy for the advancement of science who says the problem is that we have an inadequate pipeline. we are not training our kids at k-12,ng enough age, to be interested in strong in math and science read the time they get to college, they are already behind. we take a look at graduate schools, what we see is that 60% of students in masters and phd programs in the applied sciences and engineering are immigrants. while there has been this discussion about unauthorized immigration -- clearly, we understand the issues associated with it -- we are seeing a decline in authorized immigration. for example, since 2015, there has been a notable decline in the number of foreign students

coming into the united states. there has been a 20% decline in the visas that we have issued for people coming in for specialized employment. so, i worry we are harming ourselves. we need to be filling that native pipeline. we need to be improving education. but in the meantime, we are hurting ourselves. tom: let's take a famous goldman sachs abby joseph cohen scattered out chart. i don't have it in front of me. it has all of those dots linking lower quintile, lower quartile, low-wage jobs and it folds into consumption and folds into nominal gdp. that linkage is still there? abby: that linkage is still there and recent data from the commerce the permit show something interesting. the fastest-growing job categories in the united states tends to be those filled by immigrants. they fall into two categories. the high skilled jobs -- i.t., engineering and so on.

advanced health care. then, at the other end are things like accommodation and retail trade and food. these two sets of categories tend to be overrepresented, if you will, by immigrants. the formation we see from immigrants represents about 43% or 44% of the total. when households are formed, they buy homes, they furnish the homes, they pay property taxes. it is an aborted ecosystem associated. tom: what is the compare and contrast to europe and other countries? i think about the mckinsey study and goldman sachs study. there has to be a compare and contrast. what is our best practice on immigration when you look at other nations and others tackling the same fears? abby: other nations are dealing with things in a somewhat different way. the united states historically is quite different from other nations because other than the

native americans who were here, we are all immigrants. some forced through slavery but we are all immigrants. we have had over the last 200 years, cycles in terms of immigration policies. sometimes extremely welcoming and sometimes perhaps when there is perceived economic duress or some political advantage to be taken, that is when we see the periods of restriction. what we have seen that now distinguishes our history from ourselves has been the attitude we are taking towards refugees. the united states previously had always been one of the most welcoming nations towards refugees and now not so much. tom: abby joseph cohen of goldman sachs. love doing this. a year ahead deal and we have done this with abby joseph cohen, senior investment strategist at goldman sachs. we hope for all of the a wonderful 2020. i cannot promise you the equity returns of next year. maybe we will get half as much

this year. this is bloomberg surveillance. ♪

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haslinda: hello, i'm haslinda amin. he is the central bank governor of one of the largest financial hubs in the world, singapore's ravi menon is betting big on fintech, exploring digital currencies, looking to take the lead of what the future of banking will look like at a time of global uncertainty. this is a conversation with the managing director of the monetary authority of singapore. ravi menon, thank you so much for your time today. ravi: thank you, haslinda. haslinda: when it comes to singapore's innovation efforts, one of the key areas is fintech and the monetary authority of singapore plays a huge role in that. in fact, some of the initiatives included revelatory sandboxes

where companies can try out their ideas alongside regulators. since the initiative was launched in 2015, what has been achieved? what do you view is the key successes so far? ravi: we have come quite a long way. it is heartwarming how things have taken shape. we now have a vibrant fintech ecosystem. if you look at financial institutions, fintech is not only about nonfinancial players applying technology to financial services. a big part is in the application of technology within financial institutions to create better products. if you look at our national institutions today, we have more than 14 innovation labs.

in 2015, there were hardly any. many of the global banks, insurance companies, and asset managers that set up regional or global innovation centers have been doing very interesting experiments, a range of technologies from blockchain on in a variety of use cases. so, that is very exciting. a lot of collaboration is coming out of that. the fintech community itself, in 2015, we had 50 startups. now, it is over 600 and still growing. this is just over the space of four years. it is attracting a lot of interest. if you look at financing, in 2015, we had $400 million worth of investment going into fintech. that has grown 2.5 times. we just crossed $1 billion in funding of singapore headquartered fintech firms over the first three quarters. we are not done yet. we have got another quarter to go. we will be well in excess of one

billion singapore dollars. haslinda: in terms of funding, you are allocated $225 million over the next few years to develop fintech. what is the funding plan for after those five years? ravi: that is something we are reviewing right now. this was announced in 2015, and the funding period is going to end soon, i think it has been money that is extremely well spent, both in terms of supporting fintech infrastructure and architecture. the public good nature of which this funding is required, we have had to lay the cost on financial institutions. this has been good. second, the labs i spoke about. going forward, i suppose we will have to take deep dives in certain areas of technology. two areas that come to mind, cyber security, and artificial intelligence. these are, in a sense, pervasive horizontal types of technologies with very multiple applications. we had a grant where we support ai experiments directly and an

interesting feature is that even as you employ artificial intelligence, it requires the financial institution to make sure that you train the people so that they can take on the new jobs. it is not about machines taking jobs. it is machines enhancing the jobs people can do. i think there's more scope to expand our horizons beyond that. cyber is another area. we are given small grants to institutions to upgrade cyber security capabilities. we can now think blue skies about what is the next quantum leap to make in cyber for the financial sector. we will probably announce it sometime next year. haslinda: earlier, you touched on digital banking. you are encouraging digital banks to further the competition within the financial space. how much traction has there been? ravi: referring to the digital bank licenses, we just put out the requirements, and we are now getting lots of interest. so i think next year, you will

see who will be successful. we have five licenses up there. this will inject more competition, and i think that is good. it is part of the purpose. but we are not starting from a position of weakness. the banks, both local and foreign banks have strong digital offerings. i think some of them, local banks have won accolades with respect to digital infrastructure for being the world's best. haslinda: it has changed the banking landscape, right? ravi: the last four or five -- three years, it has changed

tremendously. it has been a big leap. it is not as if we are lacking something. no bank we are in competition with is lacking either. it is very keen competition, but we thought we could do even more. the main purpose is not so much that the existing landscape is lacking, but can it be made better? haslinda: given these developments, do you envisage a time when there needs to be consolidation within the banking industry, because if you recall what the founding father of singapore said, three banks are too many. what do you think now, as we sit here about talking about the digital banks? ravi: if some consolidation happens, it might not be an entirely bad thing. but one needs to be mindful of a concentration risk. three banks is not too many, because if there were three local banks, first you have to

understand there are 150 banks operating in singapore. about 20 of them probably are very active in the retail business. they have very large presence, some banks like citibank have almost as much accounts as they local banks, and in many areas of business, they are dominant. deutsche, and so on, ubs and credit suisse are dominant in banking. if you look at business lines, various business lines, foreign bank strength is very strong. we have quite a diverse landscape. it is not clear to me that we need to see more consolidation. what we are more likely to see and what we would like to see are interesting joint ventures and a combination between traditional services and nonfinancial players, that really harnesses it, rather than consolidation on its own, which is mostly about cutting costs.

which i'm not sure is the paramount need for now. haslinda: what is your view on whether banks should be involved? ravi: we need to invest in technology, get our hands dirty. haslinda: that takes us to libra. ravi: facebook's proposal has generated tremendous amounts of new thinking. haslinda: i want to touch on digital currency. not too long ago, federal bankers stayed clear of digital currency, but the landscape has changed. ♪

haslinda: i want to touch on digital currency. not too long ago, federal bankers stayed clear of digital currency, but the landscape has changed. we have the likes of sweden, the bahamas, china, talking about potentially having their own digital currency. what is your view on whether central banks should be involved in digital currency? ravi: we should be involved, meaning we need to keep abreast

of the technology. we need to get our hands dirty and actually work with cryptocurrencies and gain valuable experience, because we issued the singapore dollar as a digital currency. that was in blockchain, so i think it is impossible for us to be immersed in it and not stay away from it. then the question becomes a bit more -- the answers become more nuanced. what is the purpose? what is a digital currency supposed to do? we make another distinction between this. the wholesale additional currency is what you see in blockchain. whereas with any digital token, it is not necessarily have a life of its own, but it is used to affect the transaction. canada will issue additional currency. it does not get outside of that banking system. what people hold on to, so if

the problem you are trying to solve is cross-border payments, you don't need a retail additional currency. our leaning is that for now, we don't see a need for retail, which means issuing currency directly to the public. that is not how money is issued in real life. and for all these years, it has always been through the banking system. there is good reason for doing that. the banks create out of a monetary base, create money through the lending activity. through the credit creation process. if central banks were to be directly issuing digital currencies to the general public, what do the central banks do with this money? central banks are not geared up to be the people who extend credit.

that is the job of banks. so we need to think how that will work in practice. then you have to also ask why there is a demand for central banks to issue currency. quite different from retail. i think, this is probably less of a monetary policy question than a political one, if people need to have a digital equivalent of cash, with all of the properties of cash, the two most important being anonymity and finality, what do i mean -- anonymity means today i make a transfer to your account, it is confidential, but if the authorities suspect some wrongdoing, they can actually lift and look into the transaction. that is how we detect money laundering, tax evasion, because there is a digital trail in the transaction record. when we go into digital payment,

you lose that absolute anonymity of cash, there's no way that can be traced. haslinda: that takes us to libra. we have had the g7 sounding a note of caution. where do you stand on that, because facebook says that regulators are delaying regulation, and that is tantamount to putting a lid on innovation. ravi: we welcome innovation. i think facebook's proposal has generated tremendous amount of new thinking, which is essential for the future. and all that you said earlier on about the central banks showing interest in digital currencies have been given a big boost by what facebook has done. on the face of it, pardon the

pun, facebook's proposition is that it wants to make cross-border payments cheaper, faster, and better, and it wants to enhance financial inclusion, because it is far easier to have a bank account. on the face of it, i think it was a lofty ambition, and i think they deserve an answer that the central banking community and the banking community needs to work on. partly, because we have not done too good a job at this that you have proposals like this emerging. not saying that the proposal is bad. it is pointing to a real gap. i have empathy for that. haslinda: mark carney talked about a reserve currency, presumably on the basis of the dominance of the u.s. dollar. what is your take on this idea? ravi: that gives another nuance

to the whole issue of central banking currencies. is it fairly for payment, for anonymity? here, i think the argument is about the dominance of the u.s. dollar and whether that is a healthy thing for global financial stability. because even when two countries trade or two people make transactions, there is a dollar link that gets converted. bilateral exchange rates are referenced to the u.s. dollar and then back to the cross rates. so is that a good or bad thing? that system has served us well so far. going forward, it is not unreasonable, as mark seems to be alluding, not unreasonable to ask if that is the best way forward, whether we should find a more stable system of global reserve currency. again, it is all about the way regulators in the central banks think, do we have a

concentration risk in the u.s. dollar, and what if something went wrong? do we want something that is a bit more diversified? i think that is one of the questions that libra poses, because of its proposal to basket of currency. the central banking community is trying to get at the same thing. there is now tremendous unrealistic expectation placed on the central bank when you run into monetary policy. i think that is wrong. ♪

haslinda: you alluded to the challenges facing central bankers today. in your view, what is the biggest challenge given all the uncertainties?

technology is one. also geopolitics, coming from where central bankers seem to be the go to to solve the problems of the world. ravi: yes. i think that is one of the big burdens that has been placed on central bankers across the world, because of what they did fabulously during the financial crisis and subsequently, and holding up the global economy and global financial system. there is now tremendous unrealistic expectations placed on central banks that every rough patch we run into, monetary policy is going to get us out of it. i think that is wrong. i think it is also wrong for central banks to feed that expectation. monetary policy provides the

basis for sustained noninflationary economic growth. it provides stability, predictability over the medium term. that is the basis for them caring on economic activity. but it can't be that every slowdown, every risk or threat on the horizon has to be addressed by monetary policy. i think fiscal policy has a strong role to play, and that has not been sufficiently addressed, partly because too much of the weight has been placed on monetary policy. we need a better balance between the two, otherwise it is exceedingly unfair on the central banking community. haslinda: speaking of the global economy, there is talk of possibly a looming global recession. singapore escaped a technical recession and the mes east policy, but not to the extent that some people expected. what is driving some of the optimism that you see, perhaps in 2020? ravi: i think you always want to keep some powder dry and not deplete all your policy assets. singapore is fortunate, we have both monetary and fiscal policy buffers. quite good.

our public finances are strong. we can, if we want, if it is necessary, apply fiscal stimulus. we have been on and appreciating path of the rate right now, we have a sufficient buffer there. we have reduced the slope. let's see how the data comes out. a key assessment to be made is whether this is bottoming out and whether we will see a modest recovery next year. if that is the case, i think we're in pretty good shape, but if things take a turn for the worse, i think you need some buffer. you need some ammunition. and so, we are keeping some powder dry and, if necessary, we are prepared to use it. there is still space. haslinda: speaking of space, what policy tools have not been used? because when you take a look at

central banks, they are willing to cut rates, to go to negative. they are talking about qe. for singapore, how might qe look if you need qe of some form? ravi: singapore would not need qe, because our monetary policy is based on exchange rate. so we are not subject to the zero lower bound of interest rates, and even then then you have lower interest rates. with the exchange rate, that does not apply. we can, if necessary, bring the exchange rate to zero, as we have done before. we have never before had a policy of deliberately depreciating the currency, but we can re-center the exchange rate downward, which we have done before, too. if we think the current rate is too tight, we can re-center and without flexibility, there is actually no constraint. so we have a fair amount of policy space on the monetary fund. we don't have to think about qe. haslinda: back in may, the u.s.

treasury put singapore for the first time on the watchlist for monetary currency practices. by rule, in its upcoming report, it will include singapore. what is your take on whether there has been a missed understanding of how singapore carries out its currency practices? ravi: yes. we have been in close touch with the u.s. treasury on this. very good conversations. very good exchange of views. we are keeping very close touch. they understand how monetary policy works, and in the report, i think there is acknowledgment that in the small economy, the exchange rate matters more than the interest rate. therefore, we have chosen to

target the exchange rate, and that means that sometimes, you have to intervene in both directions to keep the exchange rate on the prescribed path. so i think they understand that, but they have a framework which they need to apply globally. they want to make sure that currency intervention is not carried out with the purpose of gaining unfair export competitiveness advantage. we have explained to them extensively that that is never the way we operate. our exchange rate is solely guided by inflation and growth, the typical monetary policy considerations. we have also announced we will be transparent in our exchange rate interventions. beginning in july, we announced how much we have intervened. we can't do it in real time for obvious reasons. obvious tactical reasons. but, we don't have a problem disclosing how much we intervened in the preceding six months. so people know how much we have intervened. haslinda: is there concern, given the unpredictability of

the trump administration, that could be used in event of a trade war, for instance? ravi: we actually run a trade deficit with the united states, so there ought not to be a complaint on that front. so, i don't see it becoming an issue, and like i said, although we have been named in the report, we have had very good conversations with the u.s. treasury, ongoing dialogue. exchange of views, very constructive and fruitful. we understand their concerns. they understand where we are operating from. so i think -- i am pretty hopeful that being named in the report is one thing, but whether that leads to adverse consequences is quite another. i don't think it's likely. haslinda: one final question, what keeps you up at night? ravi: when you ask this question to bankers, you get a very similar answer. i think about technology risk. because all the stuff we have talked about, economic slowdown,

trade war, they are not entirely new. you can figure out what the likely consequences are, the likely countermeasures might be, and so on. traditional financial stability issues, we have got a reasonably good handle on it. since the last crisis, the financial stability board has done a good job. i think we have not paid enough attention to technology-related risk. and the pervasive user technology is usually beneficial, but i'm not sure all the players involved, financial institutions, consumers, central banks, regulators, and governments, whether all of us have a good handle on the various kinds of cyber risks or more broadly, technology-related risks that can potentially have systemic consequences and can bring down institutions potentially or bring down or create gridlock in the financial

system. haslinda: ravi menon, thank you so much for your insight today. it has been a pleasure. thank you. ravi: thank you, haslinda, thank you. ♪ here, it all starts with a simple...

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