1 00:00:09,840 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,319 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg John 5 00:00:27,360 --> 00:00:29,240 Speaker 1: gets on the phone on place to say, is Mike Wilson, 6 00:00:29,280 --> 00:00:32,839 Speaker 1: Multin Stanley, chief US equity strategist, might always fantastic to 7 00:00:32,880 --> 00:00:35,040 Speaker 1: catch up with you. Let's just start with that first question, 8 00:00:35,520 --> 00:00:39,120 Speaker 1: how should invest this process? The agreement overnight in Washington, 9 00:00:39,200 --> 00:00:42,760 Speaker 1: d C. Well, good morning to all of you. I 10 00:00:42,760 --> 00:00:45,920 Speaker 1: hope you're doing well in this lockdown. But you know, look, 11 00:00:45,920 --> 00:00:47,960 Speaker 1: I think this is uh, you know, this has been 12 00:00:47,960 --> 00:00:50,280 Speaker 1: expected obviously for the last couple of weeks. We didn't 13 00:00:50,280 --> 00:00:53,239 Speaker 1: know the exact timing over to the size, but I 14 00:00:53,320 --> 00:00:56,480 Speaker 1: think given in the state of Washington over the last 15 00:00:56,520 --> 00:00:58,880 Speaker 1: few years, they got this done pretty quickly. And to 16 00:00:59,040 --> 00:01:01,920 Speaker 1: try and as a series number at least I mentioned 17 00:01:01,960 --> 00:01:04,600 Speaker 1: you know which you've include QUI we've got a six 18 00:01:04,680 --> 00:01:07,720 Speaker 1: trillion dollar stimulus of some you know, some form. You know, 19 00:01:07,800 --> 00:01:10,240 Speaker 1: our estimates are like everybody else, we think the second 20 00:01:10,319 --> 00:01:11,440 Speaker 1: quarter is going to be a bit of a black 21 00:01:11,480 --> 00:01:14,640 Speaker 1: hole on the economy. It's about a trillion dollar hit, 22 00:01:14,760 --> 00:01:16,880 Speaker 1: maybe a trillion two trillion three when all of a 23 00:01:16,880 --> 00:01:19,160 Speaker 1: sudden done, assuming there's a recovery in the back half. 24 00:01:19,680 --> 00:01:21,560 Speaker 1: So you've got about a trillion trillion two hit to 25 00:01:21,640 --> 00:01:24,080 Speaker 1: the economy and you've got a six trillion dollar stimulus. 26 00:01:24,200 --> 00:01:26,760 Speaker 1: I mean, it seems it seems like that's appropriate, and 27 00:01:26,840 --> 00:01:30,240 Speaker 1: it seems like that's gonna be good enough to uh 28 00:01:30,400 --> 00:01:31,800 Speaker 1: kind of put in a low here, which is what 29 00:01:31,880 --> 00:01:33,400 Speaker 1: we've been sort of calling for. It doesn't mean it's 30 00:01:33,400 --> 00:01:35,080 Speaker 1: gonna not be volatile, doesn't mean we're not going to 31 00:01:35,160 --> 00:01:38,000 Speaker 1: read test some of these levels. But stocks have discounted 32 00:01:38,240 --> 00:01:41,200 Speaker 1: a lot of bad news, and we think, you know, 33 00:01:41,400 --> 00:01:42,800 Speaker 1: as we've been saying for the last few weeks, you 34 00:01:42,800 --> 00:01:45,360 Speaker 1: should be you know, averaging in over this period where 35 00:01:45,400 --> 00:01:48,000 Speaker 1: the news is going to be really scary. You know. 36 00:01:48,080 --> 00:01:50,360 Speaker 1: I look, Mike Wilson, and good morning to you and 37 00:01:51,080 --> 00:01:54,279 Speaker 1: to all of Morgan Stanley on lockdown nationwide and indeed 38 00:01:54,360 --> 00:01:58,280 Speaker 1: worldwide as well. Mike Wilson. So much of this is 39 00:01:58,320 --> 00:02:03,960 Speaker 1: about the elasticities of malieabilities of corporations. Can they adjust 40 00:02:04,560 --> 00:02:08,480 Speaker 1: on the income statement to that one trillion dollar hole 41 00:02:08,639 --> 00:02:11,480 Speaker 1: this quarter. Yeah, that's the right question time. I mean, 42 00:02:11,639 --> 00:02:13,839 Speaker 1: here's the way I think about it, which is maybe 43 00:02:13,880 --> 00:02:17,880 Speaker 1: a little bit different than the consensus, which is the government, 44 00:02:18,120 --> 00:02:20,880 Speaker 1: you know, because this is a such a shock. I mean, 45 00:02:20,880 --> 00:02:23,679 Speaker 1: we've never seen anything like this. Okay, let's and John 46 00:02:23,760 --> 00:02:25,799 Speaker 1: you said it right, there's a there's a human toll here. 47 00:02:25,840 --> 00:02:28,639 Speaker 1: It's not just a statistic. Okay. People are going to 48 00:02:28,680 --> 00:02:30,280 Speaker 1: be losing their jobs and some of those jobs are 49 00:02:30,360 --> 00:02:32,560 Speaker 1: gonna be coming back for a while. That is whatever 50 00:02:32,680 --> 00:02:35,160 Speaker 1: sssion is. And so there is a human cost, there's 51 00:02:35,200 --> 00:02:39,120 Speaker 1: an economic cost, and that's typically you know, what happens 52 00:02:39,200 --> 00:02:40,480 Speaker 1: is when you have a when you have a situation, 53 00:02:40,520 --> 00:02:44,000 Speaker 1: as government does step in with easier monetary policy and stimulus. 54 00:02:44,040 --> 00:02:46,160 Speaker 1: And I think in that case, the government is on 55 00:02:46,280 --> 00:02:49,040 Speaker 1: the ball. Now, when we think about it as equity 56 00:02:49,120 --> 00:02:51,600 Speaker 1: strategist and investors, you know, we try to and we 57 00:02:51,680 --> 00:02:53,480 Speaker 1: try to be objective about what's actually going on. And 58 00:02:53,560 --> 00:02:56,200 Speaker 1: here's the way I think about it. So companies are 59 00:02:56,400 --> 00:02:58,720 Speaker 1: basically we're going to go through a full employment cycle 60 00:02:59,200 --> 00:03:02,240 Speaker 1: in a month, meaning typically it takes about two years 61 00:03:02,840 --> 00:03:05,320 Speaker 1: for us to see an unemployment rate go up three 62 00:03:05,400 --> 00:03:07,359 Speaker 1: or four basis points, which is likely what's going to 63 00:03:07,440 --> 00:03:10,480 Speaker 1: happen over the next thirty days. Okay, now that's really 64 00:03:10,720 --> 00:03:12,480 Speaker 1: scary and bad, But at the same time, what it 65 00:03:12,520 --> 00:03:15,440 Speaker 1: really means is that, you know, costs, costs are gonna 66 00:03:15,440 --> 00:03:17,079 Speaker 1: be coming down. I mean, companies are going to be 67 00:03:17,080 --> 00:03:19,840 Speaker 1: getting their house in order, so to speak. And that's 68 00:03:19,880 --> 00:03:22,560 Speaker 1: the bad news. The good news is is that protects margins, 69 00:03:22,880 --> 00:03:25,840 Speaker 1: it protects the cash flow, and the government is really 70 00:03:25,919 --> 00:03:28,320 Speaker 1: stepping in here in a way where you could argue 71 00:03:28,919 --> 00:03:31,760 Speaker 1: they are allowing companies to take those costs off their 72 00:03:31,800 --> 00:03:34,280 Speaker 1: income statement and put it onto the government's balance sheet. 73 00:03:34,720 --> 00:03:37,800 Speaker 1: So it's not gonna be seamless. It's not only there's 74 00:03:37,840 --> 00:03:40,440 Speaker 1: not going to be damaged in that transition, but in 75 00:03:40,560 --> 00:03:44,480 Speaker 1: many ways you're transferring the risk of shareholders to the 76 00:03:44,560 --> 00:03:48,520 Speaker 1: federal government. Mike, this sort of supports the sense that 77 00:03:48,760 --> 00:03:51,680 Speaker 1: you're giving out there a couple of weeks ago that 78 00:03:51,760 --> 00:03:53,800 Speaker 1: we're starting to get to a place where you feel 79 00:03:53,800 --> 00:03:56,640 Speaker 1: comfortable buying, and in fact, uh, you're more bullish and 80 00:03:56,720 --> 00:03:59,040 Speaker 1: you have been in a while on stocks. At the 81 00:03:59,080 --> 00:04:01,480 Speaker 1: same time, if you look at Targets, Chief executive officer, 82 00:04:01,960 --> 00:04:04,520 Speaker 1: he said this today, it's difficult to provide guidance with 83 00:04:04,600 --> 00:04:08,000 Speaker 1: any precision in this environment. America is largely out of business. 84 00:04:08,200 --> 00:04:10,920 Speaker 1: There's no playbook, and we are writing the script each 85 00:04:11,080 --> 00:04:14,600 Speaker 1: and every day. How bullish can you be? How much 86 00:04:14,720 --> 00:04:18,120 Speaker 1: upside can there be at a time of incredible uncertainty 87 00:04:18,480 --> 00:04:21,760 Speaker 1: and companies laying off workers, the psychological impact of that 88 00:04:21,880 --> 00:04:26,200 Speaker 1: demand and supply destruction destruction, Well, I mean, it's always 89 00:04:26,240 --> 00:04:29,640 Speaker 1: a continuum of risk reward, right. So the way we 90 00:04:29,720 --> 00:04:32,280 Speaker 1: think about it is, you know, it's it's hard to 91 00:04:32,320 --> 00:04:34,960 Speaker 1: get bullish, you know when when all these bad things 92 00:04:35,000 --> 00:04:37,840 Speaker 1: are happening around you at the same time. You know, 93 00:04:38,080 --> 00:04:41,200 Speaker 1: if we're thinking about an investment horizon of twelve months 94 00:04:41,320 --> 00:04:44,040 Speaker 1: or longer, which is the way we think about our process, 95 00:04:44,600 --> 00:04:47,040 Speaker 1: then you know, this is the best risk reward we've 96 00:04:47,080 --> 00:04:50,200 Speaker 1: seen in quite a while. You know, it's ironic. I mean, 97 00:04:50,520 --> 00:04:52,760 Speaker 1: market like, markets top on good news and they bottom 98 00:04:52,839 --> 00:04:54,440 Speaker 1: on bad news. And that's where we are. We're at 99 00:04:54,440 --> 00:04:56,960 Speaker 1: a period of you really really bad news that the 100 00:04:57,000 --> 00:04:59,800 Speaker 1: stock markets crashed. It's crashed in a way like we've 101 00:05:00,000 --> 00:05:04,640 Speaker 1: early seen maybe twice in history nine okay, and it's 102 00:05:04,680 --> 00:05:07,680 Speaker 1: crashing because the economy is crashing, so you know, you 103 00:05:07,760 --> 00:05:09,400 Speaker 1: have to put that all into context. And when we 104 00:05:09,520 --> 00:05:11,680 Speaker 1: step back and we say, okay, we don't think we're 105 00:05:11,720 --> 00:05:13,360 Speaker 1: going to go into a depression. We don't know that, 106 00:05:13,480 --> 00:05:15,160 Speaker 1: but we have to have a view. We think this 107 00:05:15,240 --> 00:05:17,160 Speaker 1: is gonna be a really steep procession. There's gonna be 108 00:05:17,200 --> 00:05:19,960 Speaker 1: tremendous policy response on the other side, and then by 109 00:05:20,040 --> 00:05:22,719 Speaker 1: next year we'll be recovering to some degree. And that's 110 00:05:22,760 --> 00:05:24,720 Speaker 1: what goes into our models and our thought process when 111 00:05:24,760 --> 00:05:27,200 Speaker 1: we think about the twelve month view. So you know, 112 00:05:27,360 --> 00:05:30,320 Speaker 1: that's that's the thought process, that's the math, and you 113 00:05:30,360 --> 00:05:33,160 Speaker 1: know we've done the work. We've pretty presented for people 114 00:05:33,200 --> 00:05:34,680 Speaker 1: to look at, and we think it you know, this 115 00:05:34,800 --> 00:05:36,560 Speaker 1: is this is where it makes sense. You know. One 116 00:05:36,640 --> 00:05:38,280 Speaker 1: last comment on this, which I think is important. You know, 117 00:05:38,360 --> 00:05:40,920 Speaker 1: people don't think about risk reward much when they invest. 118 00:05:41,560 --> 00:05:43,880 Speaker 1: I mean when I say people, I mean the average person. 119 00:05:43,960 --> 00:05:46,920 Speaker 1: I think a lot of you know, strategic strategic as 120 00:05:47,040 --> 00:05:49,840 Speaker 1: allocators do for sure, and when we do that, that's 121 00:05:49,880 --> 00:05:51,960 Speaker 1: one of our jobs here. And if you think about 122 00:05:52,000 --> 00:05:55,080 Speaker 1: the risk reward today, people in December felt like the 123 00:05:55,200 --> 00:05:58,280 Speaker 1: risk reward was more attractive than it is today, and 124 00:05:58,360 --> 00:06:00,720 Speaker 1: that just doesn't mean that the math doesn't compute on that. 125 00:06:01,279 --> 00:06:03,840 Speaker 1: And this is just a remainder that price matters, right, 126 00:06:03,920 --> 00:06:07,680 Speaker 1: Price matters and the upside and price matters on the downside. 127 00:06:07,760 --> 00:06:10,080 Speaker 1: That is the final arbiter of when you should be 128 00:06:10,120 --> 00:06:13,479 Speaker 1: committing capital or removing capital from investments. It's strangely count 129 00:06:13,480 --> 00:06:15,160 Speaker 1: of intuitive, but it's something we keep going back to 130 00:06:15,200 --> 00:06:17,240 Speaker 1: on this program, Mike, that risk appetite seems to be 131 00:06:17,279 --> 00:06:20,680 Speaker 1: positively correlated with the direction of price. Risk cappitite goes 132 00:06:20,760 --> 00:06:24,400 Speaker 1: up as prices arising, goes down as prices are going lower. 133 00:06:24,960 --> 00:06:28,600 Speaker 1: The drawdown we have seen has gone through several phases 134 00:06:28,839 --> 00:06:31,159 Speaker 1: over the last one month alone. The more recent phase 135 00:06:31,200 --> 00:06:33,560 Speaker 1: has been a really ugly one, the liquidation phase, the 136 00:06:33,600 --> 00:06:37,120 Speaker 1: sell everything face. Can you identify some points Mike, which 137 00:06:37,400 --> 00:06:39,000 Speaker 1: kind of signal to you at the moment that we're 138 00:06:39,040 --> 00:06:40,920 Speaker 1: working our way through that we're working our way out 139 00:06:41,000 --> 00:06:45,600 Speaker 1: of that ugly face. Yeah. I was saying credit is 140 00:06:45,680 --> 00:06:49,160 Speaker 1: one area where I mean that's to me that you know, 141 00:06:49,160 --> 00:06:51,800 Speaker 1: the bigger issue over the last three months for markets, 142 00:06:52,480 --> 00:06:54,520 Speaker 1: Uh this you know, I want to sell the wrong way. 143 00:06:54,600 --> 00:06:56,919 Speaker 1: But the bigger issue for markets was the oil price collapse. 144 00:06:57,440 --> 00:06:59,280 Speaker 1: Then it was the virus because that's when the credit 145 00:06:59,320 --> 00:07:01,920 Speaker 1: markets really came include. And the credit markets, you know, 146 00:07:02,000 --> 00:07:05,520 Speaker 1: are incredit critically important for the economy and how kind 147 00:07:05,560 --> 00:07:09,400 Speaker 1: of markets function overall. So they became completely dislocated over 148 00:07:09,400 --> 00:07:11,120 Speaker 1: the last month, and that's when the FED really got 149 00:07:11,160 --> 00:07:13,760 Speaker 1: active as they should and they now have you know, 150 00:07:14,080 --> 00:07:17,160 Speaker 1: intervene and the funding markets in particular. Uh, they've got 151 00:07:17,240 --> 00:07:20,040 Speaker 1: that under control. And then of course they injected capital 152 00:07:20,120 --> 00:07:22,360 Speaker 1: directly into the credit market the Monday, and that you know, 153 00:07:22,480 --> 00:07:26,000 Speaker 1: allowed investment grade credit to start to heal. So the 154 00:07:26,080 --> 00:07:28,680 Speaker 1: credit you know, liquidation looks like you know that that 155 00:07:28,800 --> 00:07:31,640 Speaker 1: could continue in the lowest quality credits, but that's really important. 156 00:07:31,680 --> 00:07:34,040 Speaker 1: So I think we've seen you know, people basically selling 157 00:07:34,080 --> 00:07:35,600 Speaker 1: what they can sell. The other thing, I would argue, 158 00:07:35,840 --> 00:07:37,360 Speaker 1: you know, there was a period of about a week 159 00:07:37,440 --> 00:07:39,320 Speaker 1: or two where it didn't matter what it was. Everything 160 00:07:39,400 --> 00:07:42,800 Speaker 1: was for sale gold right, Uh, you know, high quality bonds, 161 00:07:43,360 --> 00:07:45,440 Speaker 1: low quality styles. I mean, everything was being sold to 162 00:07:45,600 --> 00:07:49,000 Speaker 1: raise money into that liquidation phase was quite clear. What 163 00:07:49,080 --> 00:07:51,160 Speaker 1: I would remind listeners of is that we had the 164 00:07:51,280 --> 00:07:55,000 Speaker 1: reverse situation last Paul. So when everybody, you know, when 165 00:07:55,040 --> 00:07:57,440 Speaker 1: the fed came back in and did que four right. 166 00:07:57,480 --> 00:08:01,840 Speaker 1: We had basically systematic strategies and risk seekers basically putting 167 00:08:01,880 --> 00:08:04,600 Speaker 1: on too much leverage. So these things work both directions, 168 00:08:04,640 --> 00:08:06,280 Speaker 1: and I would I would continue to go back and 169 00:08:06,360 --> 00:08:09,000 Speaker 1: argue at the fourth quarter rally really should not have 170 00:08:09,120 --> 00:08:11,040 Speaker 1: happened to the magnitude that it does, and so it 171 00:08:11,120 --> 00:08:13,280 Speaker 1: cuts both ways, like where he can work both ways, 172 00:08:13,720 --> 00:08:17,120 Speaker 1: and in many respects, this you know, liquidation phase we're 173 00:08:17,160 --> 00:08:21,000 Speaker 1: having is happening because people got two levered and the 174 00:08:21,080 --> 00:08:23,440 Speaker 1: fourth we're on the premise that you know, nothing bad 175 00:08:23,560 --> 00:08:26,440 Speaker 1: was ever going to happen again, Mike, always send my 176 00:08:26,480 --> 00:08:27,840 Speaker 1: best of the team, won't you? And my best of 177 00:08:27,880 --> 00:08:30,520 Speaker 1: you and yours as well, Mike Wilson, that of Morgan Stanley, 178 00:08:30,520 --> 00:08:35,920 Speaker 1: the chief US equity strategy. Now let's do this right now, 179 00:08:36,040 --> 00:08:38,199 Speaker 1: let us bring in our esteem guests. He of course 180 00:08:38,400 --> 00:08:42,319 Speaker 1: uh served his India is their central bank governor, and 181 00:08:42,440 --> 00:08:44,520 Speaker 1: of course is at the Universe of Chicago. But that 182 00:08:44,679 --> 00:08:48,520 Speaker 1: barely describes the social contribution of Rob and Roger and 183 00:08:48,679 --> 00:08:52,439 Speaker 1: his book fault Lines was definitive twelve years ago in 184 00:08:52,520 --> 00:08:55,920 Speaker 1: a financial crisis. And now the third pillar was my 185 00:08:56,080 --> 00:08:59,000 Speaker 1: book of the year last year. The third pillar is 186 00:08:59,080 --> 00:09:04,400 Speaker 1: a primal scream for a return of community. Professor, thank 187 00:09:04,440 --> 00:09:07,200 Speaker 1: you so much at this historic moment for being with us. 188 00:09:07,640 --> 00:09:14,240 Speaker 1: Where is the community known as America. It's it's struggling, 189 00:09:14,440 --> 00:09:17,000 Speaker 1: I mean, like every other country in the world, to 190 00:09:17,440 --> 00:09:23,599 Speaker 1: find the resources to deal with this totally unexpected and 191 00:09:23,800 --> 00:09:29,720 Speaker 1: unanticipated disease uh pandemic. Um. I think we will emerge 192 00:09:29,800 --> 00:09:33,800 Speaker 1: from this stronger. I think you know, people are talking 193 00:09:33,840 --> 00:09:38,360 Speaker 1: about the isolation that this uh pandemic creates, but it 194 00:09:38,440 --> 00:09:42,920 Speaker 1: also creates a sense of togetherness. The package that was 195 00:09:43,000 --> 00:09:45,679 Speaker 1: put together, I guess the word cares is in it. 196 00:09:46,280 --> 00:09:48,760 Speaker 1: It's a way of telling people everywhere in the country 197 00:09:48,840 --> 00:09:53,280 Speaker 1: that you belong in one big hole and that that 198 00:09:53,480 --> 00:09:56,800 Speaker 1: big community the nation cares about you. And of course, 199 00:09:58,160 --> 00:10:00,360 Speaker 1: what would be nice is if that when down to 200 00:10:00,480 --> 00:10:03,200 Speaker 1: the local level and we've got far more local action 201 00:10:03,440 --> 00:10:08,480 Speaker 1: once this pandemic is defeated, Professor. In an audial world, 202 00:10:08,520 --> 00:10:10,719 Speaker 1: we'd have the fiscal support package before we get the 203 00:10:10,720 --> 00:10:12,520 Speaker 1: shut down, to make sure that some of these companies 204 00:10:12,600 --> 00:10:15,679 Speaker 1: don't start folding, don't start laying off people before they 205 00:10:15,720 --> 00:10:17,120 Speaker 1: have a chance to get the money. And that's the 206 00:10:17,160 --> 00:10:19,800 Speaker 1: story in the United States, the sequencing, it's just a 207 00:10:19,880 --> 00:10:23,360 Speaker 1: little bit messy in your India. With one point three 208 00:10:23,520 --> 00:10:26,840 Speaker 1: billion people lockdown for three weeks, what are they doing 209 00:10:26,880 --> 00:10:28,959 Speaker 1: on the fiscal side, on the monty policy side to 210 00:10:29,000 --> 00:10:30,959 Speaker 1: try and cushion what will be a massive blow to 211 00:10:31,000 --> 00:10:37,199 Speaker 1: the economy. It's worse. I mean, governments simply happened to 212 00:10:37,360 --> 00:10:39,400 Speaker 1: come to terms with what is happening. I think in 213 00:10:39,480 --> 00:10:42,640 Speaker 1: India we've got the lockdown first and now they're contemplating 214 00:10:42,720 --> 00:10:45,240 Speaker 1: what they will do on the fiscal side. It's also harder. 215 00:10:45,320 --> 00:10:48,280 Speaker 1: How do you get money to a worker who has 216 00:10:48,360 --> 00:10:52,839 Speaker 1: no formal bank account? Uh And what we're seeing right 217 00:10:52,960 --> 00:10:56,280 Speaker 1: now is the first phase where people are trying to 218 00:10:56,360 --> 00:10:58,800 Speaker 1: come to terms with not going to work. There are 219 00:10:58,880 --> 00:11:01,880 Speaker 1: lots of poor house holes that have absolutely no income, 220 00:11:01,960 --> 00:11:07,000 Speaker 1: no savings, and they also aren't necessarily better off by 221 00:11:07,040 --> 00:11:09,240 Speaker 1: being locked down at home because home is a slum 222 00:11:09,360 --> 00:11:12,120 Speaker 1: where everybody sort of really lives on top of each other. 223 00:11:12,840 --> 00:11:16,199 Speaker 1: So I think India will have to see over the 224 00:11:16,320 --> 00:11:19,120 Speaker 1: next few days whether this is sensible. It can't go 225 00:11:19,280 --> 00:11:21,760 Speaker 1: the same way as the West, but will also have 226 00:11:21,880 --> 00:11:25,880 Speaker 1: to work very quickly in getting money directly to households, 227 00:11:26,320 --> 00:11:31,400 Speaker 1: especially in the urban areas where you know the lockdown 228 00:11:31,520 --> 00:11:35,360 Speaker 1: is going to be far more problematic, and also on 229 00:11:35,480 --> 00:11:38,480 Speaker 1: small and medium sized firms which are already hurting because 230 00:11:38,840 --> 00:11:43,800 Speaker 1: of previous the previous demonetization which reduced informality, as well 231 00:11:43,880 --> 00:11:46,120 Speaker 1: as the rollout of a goods and service tax which 232 00:11:46,160 --> 00:11:49,599 Speaker 1: put great streams on small businesses. But now we have 233 00:11:49,720 --> 00:11:52,760 Speaker 1: the third blow, which is coronavirus, and I don't think 234 00:11:52,960 --> 00:11:55,880 Speaker 1: many small and medium enterprises are prepared to handle it. 235 00:11:56,280 --> 00:11:58,760 Speaker 1: Professor Rice, a really excellent point and something I'd like 236 00:11:58,840 --> 00:12:00,720 Speaker 1: to dig a little bit data on. Hind, every single 237 00:12:00,800 --> 00:12:02,640 Speaker 1: data point we receive in the next month will be 238 00:12:02,720 --> 00:12:06,360 Speaker 1: real economic pain and real psychological pain as well. You've 239 00:12:06,440 --> 00:12:09,000 Speaker 1: brought up the issue of the unbanked, the individuals in 240 00:12:09,080 --> 00:12:11,199 Speaker 1: society that don't have a bank account that one be 241 00:12:11,240 --> 00:12:13,480 Speaker 1: able to cash that check in the same way as well, 242 00:12:13,640 --> 00:12:15,679 Speaker 1: especially in the developed world, what can you do in 243 00:12:15,720 --> 00:12:18,000 Speaker 1: a country like India, in an emerging market where so 244 00:12:18,080 --> 00:12:22,160 Speaker 1: many of societies still do not have bank accounts, Well, 245 00:12:22,640 --> 00:12:24,960 Speaker 1: you you will have to find some way to get 246 00:12:25,080 --> 00:12:28,160 Speaker 1: money to them, and this is where you might have 247 00:12:28,320 --> 00:12:31,800 Speaker 1: to use community resources. Of course, bearing in mind that 248 00:12:31,960 --> 00:12:35,560 Speaker 1: getting a bunch of people together as dangerous at these times. 249 00:12:36,200 --> 00:12:40,360 Speaker 1: But perhaps funnel money through the post office. You will 250 00:12:40,480 --> 00:12:43,120 Speaker 1: have to accept a fair amount of leakage money going 251 00:12:43,200 --> 00:12:46,520 Speaker 1: to people who don't actually deserve to get that money 252 00:12:46,559 --> 00:12:49,840 Speaker 1: because they've manipulated the system. But that is the price 253 00:12:49,960 --> 00:12:53,040 Speaker 1: you have to pay to keep people from starvation at 254 00:12:53,120 --> 00:12:56,840 Speaker 1: this point. So, I mean, India has many people banked, 255 00:12:57,880 --> 00:13:00,320 Speaker 1: that was one of the achievements over the last few years, 256 00:13:00,600 --> 00:13:03,280 Speaker 1: but there are still some unbanked people, and the way 257 00:13:03,360 --> 00:13:07,640 Speaker 1: to do that might be through community institutions. Professor, India 258 00:13:07,840 --> 00:13:10,199 Speaker 1: and a lot of the developing world have really relied 259 00:13:10,400 --> 00:13:14,079 Speaker 1: on fast growth for their entire ecosystem. I'm just looking 260 00:13:14,200 --> 00:13:17,680 Speaker 1: right now at the growth in the GDP of India 261 00:13:17,800 --> 00:13:20,440 Speaker 1: over the past few years eight percent, eight point three percent, 262 00:13:20,559 --> 00:13:23,160 Speaker 1: seven percent now coming out of i n G saying 263 00:13:23,280 --> 00:13:26,480 Speaker 1: that India's economy is plaised to shrink next quarter and 264 00:13:26,520 --> 00:13:29,800 Speaker 1: the full year expansion is supposed to be perhaps uh 265 00:13:30,480 --> 00:13:32,679 Speaker 1: significantly lower than it has been in a long time. 266 00:13:32,760 --> 00:13:35,760 Speaker 1: How much does that challenge the financial structure right now 267 00:13:35,840 --> 00:13:39,280 Speaker 1: of India and it's just an incredible economic engine in 268 00:13:39,360 --> 00:13:42,559 Speaker 1: the longer term, Well, I think it's a challenge for 269 00:13:42,760 --> 00:13:46,760 Speaker 1: all developing countries which don't have the kind of resources 270 00:13:46,920 --> 00:13:51,959 Speaker 1: than industrial countries. Have remembered that industrial countries are putting 271 00:13:52,240 --> 00:13:56,360 Speaker 1: enormous amounts of wealth to work in questioning the blows 272 00:13:56,440 --> 00:14:00,559 Speaker 1: from this this crisis. Emerging markets and developed in countries 273 00:14:00,679 --> 00:14:05,280 Speaker 1: don't have that spare cushion, and especially when you're running 274 00:14:05,320 --> 00:14:08,480 Speaker 1: already a large fiscal deficit, your debt to GDPs at 275 00:14:08,559 --> 00:14:13,440 Speaker 1: levels which markets already start worrying about, and your inflation 276 00:14:13,559 --> 00:14:16,800 Speaker 1: is not zero, so the printing press can't start up 277 00:14:17,000 --> 00:14:20,600 Speaker 1: as we see with the central banks and industrial countries. 278 00:14:21,160 --> 00:14:23,920 Speaker 1: So e ms and developing countries have to keep in 279 00:14:24,040 --> 00:14:27,400 Speaker 1: mind that they have to maintain some sense of fiscal 280 00:14:27,960 --> 00:14:33,360 Speaker 1: and monetary responsibility even while dealing with this unprecedented crisis. 281 00:14:34,000 --> 00:14:37,760 Speaker 1: And that means that you know they many of them 282 00:14:37,800 --> 00:14:40,800 Speaker 1: are at this point facing capital outflows. So you have 283 00:14:41,040 --> 00:14:44,080 Speaker 1: you can't cut interest rates to zero. You have to 284 00:14:44,160 --> 00:14:47,320 Speaker 1: main interest rates and maintain interest rates at the reasonable level. 285 00:14:47,880 --> 00:14:50,200 Speaker 1: You can't blow out your fiscal depths. That you have 286 00:14:50,280 --> 00:14:54,240 Speaker 1: to be very careful about where you apply resources. And 287 00:14:54,320 --> 00:14:57,640 Speaker 1: of course you really hope that you have the medical 288 00:14:57,720 --> 00:15:00,920 Speaker 1: resources to cope because your medical resolve, also the refraction 289 00:15:01,000 --> 00:15:04,480 Speaker 1: of the ones in industrial countries, and everybody at this 290 00:15:04,600 --> 00:15:07,720 Speaker 1: point is looking for those resources ventilators that are premium 291 00:15:07,760 --> 00:15:11,120 Speaker 1: across the world. So what I think at this point 292 00:15:11,160 --> 00:15:14,160 Speaker 1: emerging markets and developing countries they're looking for is certainly 293 00:15:14,280 --> 00:15:16,960 Speaker 1: trying to make the best of their own situation, but 294 00:15:17,080 --> 00:15:20,640 Speaker 1: also more global cooperation and Professor, I mean, this is 295 00:15:20,680 --> 00:15:23,200 Speaker 1: such an important issue for the entire world because the 296 00:15:23,240 --> 00:15:27,040 Speaker 1: developing nations have been the engine of growth for years 297 00:15:27,280 --> 00:15:30,640 Speaker 1: and I'm wondering what this means extrapolate out into what 298 00:15:30,840 --> 00:15:34,840 Speaker 1: the scenario is given India's precarious situation and frankly that 299 00:15:35,120 --> 00:15:38,360 Speaker 1: of all developing nations right now. Yeah, no, I I 300 00:15:39,080 --> 00:15:43,240 Speaker 1: think for for the next month and a half, countries 301 00:15:43,280 --> 00:15:45,320 Speaker 1: will have to try and get ahead of the of 302 00:15:45,400 --> 00:15:48,400 Speaker 1: the virus. And this is where India's lockdown comes in, 303 00:15:48,560 --> 00:15:51,240 Speaker 1: and it's an attempt to prevent the surge that's happening 304 00:15:51,280 --> 00:15:55,120 Speaker 1: in an variety of other countries and to prepare their 305 00:15:55,200 --> 00:16:00,480 Speaker 1: medical resources for the eventual rise in cases. So this 306 00:16:00,680 --> 00:16:04,600 Speaker 1: is something that every developing country now understands it has 307 00:16:04,680 --> 00:16:08,320 Speaker 1: to do. But of course it would help if there 308 00:16:08,400 --> 00:16:12,280 Speaker 1: were more resources available, especially for the poorest countries in Africa. 309 00:16:13,720 --> 00:16:16,240 Speaker 1: What we know from this virus is there's no point 310 00:16:16,840 --> 00:16:21,160 Speaker 1: eliminating it in the West or in East Asia. If 311 00:16:21,200 --> 00:16:23,320 Speaker 1: it comes back from some other part of the world 312 00:16:23,400 --> 00:16:26,200 Speaker 1: where it's not controlled to some extent. We can't have 313 00:16:26,280 --> 00:16:31,960 Speaker 1: an open world again until we will eliminate this virus everywhere. Professor, 314 00:16:32,400 --> 00:16:33,920 Speaker 1: which we shake its hand this morning, I'm gonna have 315 00:16:33,960 --> 00:16:39,320 Speaker 1: to leave it there. The secret sauce for Lisa Bramo, 316 00:16:39,360 --> 00:16:43,000 Speaker 1: it's John Farrell and I Paul Sweeney Francine liquid is 317 00:16:43,040 --> 00:16:47,080 Speaker 1: we lean over the desk and we actually read the research. 318 00:16:47,280 --> 00:16:51,720 Speaker 1: This is always problematic with Karl Weinberg of high frequency Economics, 319 00:16:52,040 --> 00:16:54,080 Speaker 1: because he has the audacity. At least it tore right 320 00:16:54,120 --> 00:16:58,920 Speaker 1: an international peace, a United States peace, and a China piece. 321 00:16:59,040 --> 00:17:03,479 Speaker 1: I read every word of them on Sunday, and Karl Weinberg, 322 00:17:03,720 --> 00:17:07,840 Speaker 1: what stunned me was, after a mere thirty two years 323 00:17:07,920 --> 00:17:11,720 Speaker 1: of doing this, you decided you couldn't make a forecast. 324 00:17:12,359 --> 00:17:16,920 Speaker 1: What does that feel like? It feels like sailing on 325 00:17:17,119 --> 00:17:20,359 Speaker 1: the ocean without a sale or a rudder. You know, 326 00:17:20,560 --> 00:17:23,720 Speaker 1: we are in unschowed territory as far as the economy 327 00:17:23,840 --> 00:17:27,240 Speaker 1: is concerned. Great example of that is tomorrow's number on 328 00:17:27,359 --> 00:17:31,600 Speaker 1: initial claims for unemployment. Absolutely no idea how that number 329 00:17:31,640 --> 00:17:33,920 Speaker 1: is going to print. It's going to be big, it's 330 00:17:34,000 --> 00:17:36,440 Speaker 1: probably going to be a record. But more than that, 331 00:17:36,640 --> 00:17:39,560 Speaker 1: more detailed than that, no precedent to move on. And 332 00:17:39,680 --> 00:17:42,440 Speaker 1: that's a really important number because we're coming up on 333 00:17:42,520 --> 00:17:45,280 Speaker 1: the employment report in another ten days or so, and 334 00:17:45,640 --> 00:17:47,800 Speaker 1: and that's another number we don't know anything about. We 335 00:17:48,240 --> 00:17:51,240 Speaker 1: really do not know the true state of any major 336 00:17:51,280 --> 00:17:54,359 Speaker 1: economy in the world right now. The shock of this 337 00:17:55,080 --> 00:17:57,760 Speaker 1: is the shock, as Alan Ruskin of Deutsche Bank says, 338 00:17:57,960 --> 00:18:02,840 Speaker 1: of depth and to ration. Is Karl Weinberg more concerned 339 00:18:02,880 --> 00:18:08,360 Speaker 1: about the depth or the duration of what we're living. Yes, 340 00:18:08,760 --> 00:18:12,320 Speaker 1: I'm concerned about both the depth and the duration. And 341 00:18:12,359 --> 00:18:15,160 Speaker 1: it's not a lessing matter. I apologize for lessing at 342 00:18:15,200 --> 00:18:19,240 Speaker 1: it all right. The shock itself, the lockdown is unprecedented. 343 00:18:19,600 --> 00:18:22,840 Speaker 1: The complications of it, you know, no historical precedents to 344 00:18:22,880 --> 00:18:25,240 Speaker 1: agd against them that I can think of making. You know, 345 00:18:25,760 --> 00:18:27,760 Speaker 1: maybe you spoken to someone who has a precedent, but 346 00:18:27,880 --> 00:18:31,120 Speaker 1: I don't. And of course the driving factory, the driver 347 00:18:31,600 --> 00:18:34,440 Speaker 1: is the disease, the virus and nobody really has a 348 00:18:34,560 --> 00:18:37,159 Speaker 1: handle on the medicine or the science of that to 349 00:18:37,320 --> 00:18:40,159 Speaker 1: tell us how long this is gonna last. So we 350 00:18:40,280 --> 00:18:42,360 Speaker 1: are very much a wrong for the ride right now 351 00:18:42,640 --> 00:18:45,200 Speaker 1: and um trying our best just to keep up with 352 00:18:45,280 --> 00:18:48,320 Speaker 1: the news. We're looking forward to some we we're looking 353 00:18:48,359 --> 00:18:51,240 Speaker 1: forward to the survey data for March, but the surveys 354 00:18:51,320 --> 00:18:53,960 Speaker 1: we're seeing seemed to have been taken too early in 355 00:18:54,040 --> 00:18:56,320 Speaker 1: the months to be able to give us a good 356 00:18:56,440 --> 00:19:00,919 Speaker 1: bead on what's happening. So, for instance, markets MR yesterday, 357 00:19:00,960 --> 00:19:04,040 Speaker 1: which are flawed indicators anyhow, but if you just say 358 00:19:04,119 --> 00:19:06,200 Speaker 1: that even they couldn't use a big moves like this. 359 00:19:06,720 --> 00:19:09,920 Speaker 1: They showed that the climb manufacturing activities for the month 360 00:19:10,000 --> 00:19:13,320 Speaker 1: of March, said that you expect that, but February had 361 00:19:13,359 --> 00:19:16,080 Speaker 1: blipped up the levels of the industries. Tell us that 362 00:19:16,240 --> 00:19:20,239 Speaker 1: manufacturing in Europe and Japan and the United States as 363 00:19:20,280 --> 00:19:23,320 Speaker 1: we were was down and marched from federately, but no 364 00:19:23,480 --> 00:19:26,560 Speaker 1: worse than it was less small and last summer level. 365 00:19:26,880 --> 00:19:31,240 Speaker 1: And that's just ridiculous. Well, Carl, No, I mean I 366 00:19:31,320 --> 00:19:33,320 Speaker 1: want to break in and get a sense from you. 367 00:19:33,480 --> 00:19:36,199 Speaker 1: You know, we're talking about how it's unprecedented and how 368 00:19:36,240 --> 00:19:38,840 Speaker 1: We just don't have a sense of of how long, 369 00:19:39,000 --> 00:19:41,400 Speaker 1: how deep. But it's it's it seems like it's really bad. 370 00:19:41,520 --> 00:19:44,800 Speaker 1: We know the virus will eventually be stopped, whether it's 371 00:19:44,840 --> 00:19:47,240 Speaker 1: by a vaccine or whether it's just by herd immunity 372 00:19:47,320 --> 00:19:50,520 Speaker 1: after everybody gets it. This does have an end point, 373 00:19:50,600 --> 00:19:52,960 Speaker 1: we don't know when it is. And the question is 374 00:19:53,040 --> 00:19:56,200 Speaker 1: how quickly can people get their jobs back? Can the 375 00:19:56,280 --> 00:19:59,840 Speaker 1: economy get back up to steam? Is there a precedent 376 00:20:00,280 --> 00:20:03,600 Speaker 1: with the job market destruction and then recreation? And how 377 00:20:03,720 --> 00:20:07,840 Speaker 1: long are short of a time that could take? Well, 378 00:20:08,560 --> 00:20:11,320 Speaker 1: I can't really think of a good one to tell 379 00:20:11,320 --> 00:20:13,440 Speaker 1: you the truth. I need to tend to elevance. You 380 00:20:13,520 --> 00:20:17,480 Speaker 1: want to think about the Japanese uh tsunami in twenty eleven, 381 00:20:17,520 --> 00:20:19,359 Speaker 1: and there are all kinds of things out there that 382 00:20:19,440 --> 00:20:22,320 Speaker 1: are similar, but nothing on such a global scale. The 383 00:20:22,480 --> 00:20:25,800 Speaker 1: really big anomies say, it's not only the duration. If 384 00:20:25,840 --> 00:20:27,479 Speaker 1: you told me the date when this was all going 385 00:20:27,520 --> 00:20:29,720 Speaker 1: to stop, I'd be happy to know it. But what 386 00:20:29,840 --> 00:20:33,080 Speaker 1: I don't know is what's going to break in between. Okay, 387 00:20:33,080 --> 00:20:35,520 Speaker 1: if you shut the economy down for a month or 388 00:20:35,600 --> 00:20:37,760 Speaker 1: a week or three months, and it definitely turns out 389 00:20:37,800 --> 00:20:40,439 Speaker 1: to be some firms are going to sell, and are 390 00:20:40,520 --> 00:20:42,880 Speaker 1: they going to be big or small firms? Are they're 391 00:20:42,880 --> 00:20:45,399 Speaker 1: going to be systemically important? Are they're going to be 392 00:20:45,520 --> 00:20:49,760 Speaker 1: financial system and regularities that they're going to banks that fell? 393 00:20:50,359 --> 00:20:53,040 Speaker 1: Uh is they're going to markets that fail, But we 394 00:20:53,080 --> 00:20:54,960 Speaker 1: don't know what breaks. And that's what I'm going to 395 00:20:55,040 --> 00:20:57,480 Speaker 1: determine the question of whether they're the jobs for people 396 00:20:57,520 --> 00:21:00,440 Speaker 1: when this all ends. Tom, You know, I been thinking 397 00:21:00,480 --> 00:21:02,360 Speaker 1: and talking a lot about this with people. How will 398 00:21:02,359 --> 00:21:04,640 Speaker 1: the world look after this is over? Are you still 399 00:21:04,680 --> 00:21:06,639 Speaker 1: going to go to the Irish pub downstairs from you? 400 00:21:06,840 --> 00:21:08,639 Speaker 1: Of course you will. Will you still come to the 401 00:21:08,680 --> 00:21:11,280 Speaker 1: one up by near me by me? Yeah, of course 402 00:21:11,359 --> 00:21:13,560 Speaker 1: you will, you know. But I do wonder about how 403 00:21:13,680 --> 00:21:16,800 Speaker 1: things are going to change permanently when it comes to 404 00:21:16,920 --> 00:21:19,680 Speaker 1: office space, when it comes to just the landscape of 405 00:21:19,760 --> 00:21:23,200 Speaker 1: what people need to desire. Dr Weinberg then along that line, 406 00:21:23,280 --> 00:21:27,280 Speaker 1: one final question, Carl Weinberg, what does business investment do? 407 00:21:27,400 --> 00:21:29,200 Speaker 1: I mean it's going to take quarters to get that 408 00:21:29,359 --> 00:21:34,000 Speaker 1: inherent confidence back, isn't it? Absolutely? Tom? I just want 409 00:21:34,040 --> 00:21:36,720 Speaker 1: to go back to Lisa's common just now. Tom would 410 00:21:36,800 --> 00:21:39,600 Speaker 1: like to go back to that Irish poke downstairs if 411 00:21:39,640 --> 00:21:42,480 Speaker 1: it were open, and that's really the question. Will be 412 00:21:42,600 --> 00:21:46,520 Speaker 1: Irish probably open. After this will be enterprise called bankrupt. 413 00:21:46,800 --> 00:21:49,280 Speaker 1: That's the key to the future. Well, I don't know 414 00:21:49,400 --> 00:21:52,000 Speaker 1: the answering. I just saw it on Twitter somebody saying 415 00:21:52,040 --> 00:21:55,239 Speaker 1: Department of Labor just issuing some documents to help out 416 00:21:55,359 --> 00:21:58,879 Speaker 1: businesses moments ago. Carl Weinberg, thank you so much and 417 00:21:58,960 --> 00:22:02,920 Speaker 1: we value immensely your research pieces the Weinberg Global look 418 00:22:02,960 --> 00:22:07,399 Speaker 1: about ten pages long, and his wonderful US work as 419 00:22:07,480 --> 00:22:10,640 Speaker 1: well with John Sylvia helping out there, and of course 420 00:22:10,720 --> 00:22:16,320 Speaker 1: the view of China from high frequency economics. It is 421 00:22:16,359 --> 00:22:19,720 Speaker 1: a labor economy. It is an economy of jobless claims 422 00:22:19,760 --> 00:22:23,200 Speaker 1: tomorrow some estimating one million, one and a half million 423 00:22:23,320 --> 00:22:27,760 Speaker 1: is a Bloomberg survey, two million, even three million, maybe 424 00:22:27,800 --> 00:22:30,440 Speaker 1: not in one week, but spread out over fourteen days. 425 00:22:31,520 --> 00:22:35,080 Speaker 1: These are numbers, folks, that no one has ever perceived. 426 00:22:35,280 --> 00:22:39,200 Speaker 1: Academics think about this public that Cherniva is it barred. 427 00:22:40,280 --> 00:22:44,960 Speaker 1: She's professor of economics and far more importantly an important 428 00:22:45,040 --> 00:22:49,680 Speaker 1: book coming out, The Case for a Job Guarantee. That's 429 00:22:49,720 --> 00:22:54,760 Speaker 1: a controversial title professor as well. With this legislation, Are 430 00:22:54,840 --> 00:22:59,399 Speaker 1: we any closer to a job guarantee? Good morning, Tom 431 00:22:59,520 --> 00:23:02,280 Speaker 1: and Paul. No, we are not close to a job guarantee. 432 00:23:02,320 --> 00:23:06,040 Speaker 1: And I am looking at the provisions and I actually 433 00:23:06,080 --> 00:23:10,760 Speaker 1: don't see anything specific specifically targeted to the labor market. 434 00:23:11,400 --> 00:23:15,359 Speaker 1: We have some emergency measures that I think you're trying 435 00:23:15,400 --> 00:23:17,920 Speaker 1: to stop the hemorrhage, and you know there's good measures, 436 00:23:18,760 --> 00:23:21,120 Speaker 1: but we need we need to keep a laser sharp 437 00:23:21,400 --> 00:23:24,400 Speaker 1: and focus on jobs. Right. We have we have atomized 438 00:23:24,640 --> 00:23:27,800 Speaker 1: our labor economy over X number of years. I've said 439 00:23:27,840 --> 00:23:30,480 Speaker 1: this on the show, Folks on Labor Day, I always 440 00:23:30,560 --> 00:23:32,920 Speaker 1: try to read some labor chapter in a book. I 441 00:23:33,000 --> 00:23:38,639 Speaker 1: read Paul Samuelson from another time in place on labor 442 00:23:38,840 --> 00:23:42,879 Speaker 1: in America. I mean, it's gone, isn't it? Puffly? Now? 443 00:23:42,960 --> 00:23:46,200 Speaker 1: I mean there really is no labor representation? Am I 444 00:23:46,359 --> 00:23:50,640 Speaker 1: right on that this is true? There's no strong labor representation, 445 00:23:51,240 --> 00:23:54,440 Speaker 1: And we are putting labor on the back burner. And 446 00:23:54,640 --> 00:23:58,080 Speaker 1: we will not come out of this uh moment without 447 00:23:58,320 --> 00:24:02,359 Speaker 1: some bold, big programs to restore jobs and incomes. And 448 00:24:02,600 --> 00:24:05,480 Speaker 1: we just can't think in the conventional ways. You know, 449 00:24:05,600 --> 00:24:10,399 Speaker 1: we're looking at potentially quarter to unemployment rates of thirty 450 00:24:10,840 --> 00:24:13,760 Speaker 1: if we listened to the St. Louis FED, that is 451 00:24:13,920 --> 00:24:16,080 Speaker 1: greater than what we had seen in the Great Depression. 452 00:24:16,520 --> 00:24:19,040 Speaker 1: And there is only one solution to a problem like this, 453 00:24:19,440 --> 00:24:23,240 Speaker 1: and that is direct employment, bold, big public investments. So 454 00:24:23,400 --> 00:24:27,440 Speaker 1: publicly looking at the trade the fiscal stimulus plan just 455 00:24:27,920 --> 00:24:30,960 Speaker 1: emerging from Congress, what are some of the key highlights 456 00:24:31,240 --> 00:24:34,640 Speaker 1: for you as it relates to getting people back to work. 457 00:24:36,680 --> 00:24:38,800 Speaker 1: What I am seeing is a lot of focus on 458 00:24:38,880 --> 00:24:40,919 Speaker 1: income support, which is the right thing to do at 459 00:24:41,000 --> 00:24:44,399 Speaker 1: this moment, some strength and of unemployment insurance and this 460 00:24:44,600 --> 00:24:48,280 Speaker 1: one time payment which probably will go for rent and 461 00:24:48,359 --> 00:24:50,280 Speaker 1: food for the amount of April. But that is it. 462 00:24:50,880 --> 00:24:56,560 Speaker 1: And unemployment insurance is not a pro job creation policy. 463 00:24:56,640 --> 00:24:59,000 Speaker 1: It's a policy that stops sort of the floor from 464 00:24:59,359 --> 00:25:02,080 Speaker 1: you know, falling from underneath us. And so what we 465 00:25:02,200 --> 00:25:06,879 Speaker 1: need is to start thinking about how to return jobs back. Uh. 466 00:25:07,320 --> 00:25:11,680 Speaker 1: Once unemployment developed, it has this terrible, terrible way of 467 00:25:11,760 --> 00:25:16,520 Speaker 1: self perpetuating. Because um, we tried this last time during 468 00:25:16,600 --> 00:25:19,560 Speaker 1: the two thousand and eight Great Financial Crisis, we strengthen 469 00:25:19,640 --> 00:25:22,560 Speaker 1: unemployment insurance. We could have done better, but we It 470 00:25:22,640 --> 00:25:26,520 Speaker 1: took us ten years to bring unemployment down to its 471 00:25:26,680 --> 00:25:30,040 Speaker 1: historic lows. So we cannot afford to wait this long 472 00:25:31,000 --> 00:25:35,960 Speaker 1: or potentially longer unless we do some direct job creation. So, Professor, 473 00:25:36,000 --> 00:25:38,679 Speaker 1: a lot of Wall Street economers are scrambling to come 474 00:25:38,680 --> 00:25:41,840 Speaker 1: out with GDP forecasts, and I think, you know, many 475 00:25:41,920 --> 00:25:44,240 Speaker 1: of them kind of I think incorporate kind of a 476 00:25:44,359 --> 00:25:48,080 Speaker 1: V shaped recovery, a sharp sharp decline in two q 477 00:25:48,280 --> 00:25:51,720 Speaker 1: GDP followed by pretty you know, solid bounce back in 478 00:25:51,840 --> 00:25:54,159 Speaker 1: queues three and four. How do you view how this 479 00:25:54,440 --> 00:25:58,520 Speaker 1: might unfold? Yeah, Paul, I think you absolutely correct. All 480 00:25:58,560 --> 00:26:01,359 Speaker 1: of these provisions right now now are designed to patch 481 00:26:01,440 --> 00:26:03,800 Speaker 1: us over for a couple of months. So whether these 482 00:26:03,800 --> 00:26:06,639 Speaker 1: a loan guarantees, you know, various all of the various 483 00:26:06,680 --> 00:26:10,040 Speaker 1: policies are with the short term under the assumption that 484 00:26:10,119 --> 00:26:12,920 Speaker 1: people will happily return back oh work, but that that 485 00:26:13,080 --> 00:26:16,800 Speaker 1: ship has sailed in some sense, because even if if 486 00:26:16,840 --> 00:26:19,600 Speaker 1: a lot of business is reopened, we already have plenty 487 00:26:19,640 --> 00:26:22,800 Speaker 1: of off and loss of income which will kind of 488 00:26:22,960 --> 00:26:26,560 Speaker 1: ripple through the economy, and folks, even if they get 489 00:26:26,920 --> 00:26:29,120 Speaker 1: alone to pass them over for a couple of months, 490 00:26:29,200 --> 00:26:33,159 Speaker 1: if the customers are not returning in big numbers, we 491 00:26:33,240 --> 00:26:36,320 Speaker 1: will see the problems down the line, professor, one final 492 00:26:36,440 --> 00:26:38,560 Speaker 1: question that it's too short a time to talk to you. 493 00:26:38,600 --> 00:26:41,280 Speaker 1: Would love to have you on again. Is the basic 494 00:26:41,560 --> 00:26:46,239 Speaker 1: idea of an individualistic almost Lackey in America. And as 495 00:26:46,320 --> 00:26:49,760 Speaker 1: somebody said brilliantly in essay this week, this is a 496 00:26:49,880 --> 00:26:53,000 Speaker 1: hobbsy in crisis. We've gone back to natural man and 497 00:26:53,119 --> 00:26:56,439 Speaker 1: natural law and all that of another time and place. 498 00:26:56,920 --> 00:27:02,680 Speaker 1: How do we recapture the collectivism of labor? I don't 499 00:27:02,680 --> 00:27:07,800 Speaker 1: see any evidence the mood is out there. No, you're 500 00:27:08,520 --> 00:27:11,240 Speaker 1: you may be right, but I fear that the economic 501 00:27:11,359 --> 00:27:14,960 Speaker 1: pain is ahead of us, and we will be once 502 00:27:15,040 --> 00:27:17,440 Speaker 1: again engaged in this conversation. What we do, we would 503 00:27:17,480 --> 00:27:21,280 Speaker 1: do wrong? Could we have prepared better? Can we stabilize 504 00:27:21,320 --> 00:27:23,720 Speaker 1: the foundations of the economy and the foundations of the 505 00:27:23,760 --> 00:27:26,840 Speaker 1: labor market? Working people? We need good jobs and good incomes. 506 00:27:26,920 --> 00:27:29,920 Speaker 1: And I hope that we start this conversation as em 507 00:27:29,960 --> 00:27:32,239 Speaker 1: as possible so we don't have to go through yet 508 00:27:32,280 --> 00:27:37,720 Speaker 1: another very very protracted downturn. Polinare pablinnatured, thank you so 509 00:27:37,880 --> 00:27:41,639 Speaker 1: much with Bard today with a really out of consensus 510 00:27:41,760 --> 00:27:47,479 Speaker 1: view there for so many on global Wall Street right now, 511 00:27:47,560 --> 00:27:50,960 Speaker 1: A gentleman who is expert at labor economics, and he 512 00:27:51,040 --> 00:27:55,280 Speaker 1: has the ultimate accolade of a polarized Washington. He writes 513 00:27:55,320 --> 00:27:58,000 Speaker 1: for the Center on Budget and Policy Priorities. Of course, 514 00:27:58,040 --> 00:28:01,280 Speaker 1: has been iconic in his public support of Vice President 515 00:28:01,400 --> 00:28:05,879 Speaker 1: Biden the last go around. UH And Jared Bernstein joins 516 00:28:05,960 --> 00:28:08,959 Speaker 1: us right now. He is a liberal who Conservatives are 517 00:28:09,080 --> 00:28:12,959 Speaker 1: compelled to read at each and every moment. Jared, wonderful day. 518 00:28:13,000 --> 00:28:17,640 Speaker 1: Have you with us today? Can you explain the reticence 519 00:28:17,880 --> 00:28:23,000 Speaker 1: of Senate Republicans to get this bill done? I mean, 520 00:28:23,080 --> 00:28:27,000 Speaker 1: it seems like the compromise is supposed to benefit eleven 521 00:28:27,480 --> 00:28:32,480 Speaker 1: pages of America, two trillion dollars in all. Explain the 522 00:28:32,640 --> 00:28:39,000 Speaker 1: Washington reticence to assist their electorate. Yeah, I think I 523 00:28:39,080 --> 00:28:42,960 Speaker 1: can do that. It took way too long for members 524 00:28:43,040 --> 00:28:46,120 Speaker 1: of Congress to recognize urgency. That was clear to any 525 00:28:46,200 --> 00:28:50,080 Speaker 1: of us who've been watching markets and other economic indicators. 526 00:28:50,160 --> 00:28:52,400 Speaker 1: And unfortunately, one of the things that happens in this 527 00:28:52,560 --> 00:28:56,080 Speaker 1: kind of situation is that you have the Christmas tree problem. 528 00:28:56,480 --> 00:28:59,120 Speaker 1: Members of Congress see a big bill coming down the 529 00:28:59,200 --> 00:29:01,360 Speaker 1: pipe that has to pass, and they think they have 530 00:29:01,520 --> 00:29:04,040 Speaker 1: leverage to put stuff on it, but doesn't belong there. 531 00:29:04,440 --> 00:29:07,000 Speaker 1: I will say though, that for this Congress, it looks 532 00:29:07,040 --> 00:29:10,920 Speaker 1: like they did ultimately act pretty quickly, and uh, the 533 00:29:11,080 --> 00:29:14,680 Speaker 1: deal should be perhaps later today. The Senate and the 534 00:29:14,720 --> 00:29:17,440 Speaker 1: White House are in agreement. Now it's all about the House, 535 00:29:18,040 --> 00:29:19,760 Speaker 1: and what I'm hearing on the ground is that the 536 00:29:19,840 --> 00:29:22,680 Speaker 1: House is uh are going to join on pretty quickly. 537 00:29:24,200 --> 00:29:27,920 Speaker 1: So Jared, it's interesting here. Do you think this deal 538 00:29:28,160 --> 00:29:31,720 Speaker 1: two trillion dollars, obviously a huge number, really jumps out 539 00:29:31,800 --> 00:29:34,000 Speaker 1: at people. Is it enough? Or do you think this 540 00:29:34,160 --> 00:29:37,800 Speaker 1: is just the first in a series of fiscal stimulus 541 00:29:37,840 --> 00:29:40,440 Speaker 1: plans that will be needed to keep this economy, you know, 542 00:29:40,880 --> 00:29:45,440 Speaker 1: from going too far south. It is the largest stimulus 543 00:29:45,760 --> 00:29:48,280 Speaker 1: I believe we've ever heard of. It's of g d 544 00:29:48,440 --> 00:29:52,040 Speaker 1: p uh and it's uh. And yes, we will definitely 545 00:29:52,400 --> 00:29:56,080 Speaker 1: need more trips to the well. Uh. This is actually 546 00:29:56,200 --> 00:29:59,600 Speaker 1: the third trip there. There's been two other stimulus bills 547 00:29:59,640 --> 00:30:02,560 Speaker 1: so far. The first one was a narrow one directed 548 00:30:02,600 --> 00:30:06,520 Speaker 1: at health crisis. The second one was a small stimulus. 549 00:30:07,000 --> 00:30:08,760 Speaker 1: This is a big stimulus, but we're going to need 550 00:30:08,840 --> 00:30:10,960 Speaker 1: more trips to the weather. At least two things left 551 00:30:11,000 --> 00:30:13,400 Speaker 1: out of this bill. First of all, it has nothing 552 00:30:13,480 --> 00:30:16,640 Speaker 1: on state fiscal release that turns out to be critically important. 553 00:30:16,680 --> 00:30:19,800 Speaker 1: It was important last time in a shallower down turn. 554 00:30:20,320 --> 00:30:25,880 Speaker 1: And secondly, uh the uh the bill um has just 555 00:30:26,160 --> 00:30:29,120 Speaker 1: one time payments to households. Those are going to be 556 00:30:29,240 --> 00:30:31,560 Speaker 1: very useful, but I think we'll have to do more 557 00:30:31,600 --> 00:30:34,600 Speaker 1: than one round of that. So Jared, there's you know. 558 00:30:34,880 --> 00:30:36,680 Speaker 1: I'm going to ask you to look into your crystal ball, 559 00:30:36,800 --> 00:30:39,680 Speaker 1: your g DP crystal ball. How do you think g 560 00:30:39,880 --> 00:30:42,840 Speaker 1: d P is going to play out over the next 561 00:30:42,880 --> 00:30:45,720 Speaker 1: several quarters. I think Wall Street, many on Wall Street 562 00:30:45,720 --> 00:30:47,880 Speaker 1: are looking for a V type, some are looking for 563 00:30:48,040 --> 00:30:50,080 Speaker 1: a U type of recovery, and some are just flat 564 00:30:50,120 --> 00:30:52,880 Speaker 1: out saying this is an L type recovery. And we'll 565 00:30:52,920 --> 00:30:56,640 Speaker 1: get back to you whether you know this thing turns up. Well, 566 00:30:56,720 --> 00:30:58,720 Speaker 1: here's how I would explain that. You think think of 567 00:30:58,800 --> 00:31:01,040 Speaker 1: the V or the U or the is having two parts, 568 00:31:01,120 --> 00:31:04,160 Speaker 1: one part down in one part either upper sideways. The 569 00:31:04,280 --> 00:31:06,920 Speaker 1: down part. Economists can explain to you, and I will. 570 00:31:07,280 --> 00:31:10,160 Speaker 1: The up part epidemiologists can explain to you, and they will, 571 00:31:11,080 --> 00:31:12,720 Speaker 1: or at least they will when they have the data. 572 00:31:12,840 --> 00:31:15,120 Speaker 1: The down part is baked in the cake and it's 573 00:31:15,160 --> 00:31:17,680 Speaker 1: going to be double digits, and it's probably happening as 574 00:31:17,760 --> 00:31:21,280 Speaker 1: we speak that has double a double digit GDP decline 575 00:31:21,320 --> 00:31:24,320 Speaker 1: with a negative handle. Uh. And then the up part, 576 00:31:24,400 --> 00:31:28,479 Speaker 1: whether it's a v is a matter of when containment occurs. Uh. 577 00:31:28,800 --> 00:31:31,200 Speaker 1: No question. There will be lots of pent up demand, 578 00:31:31,280 --> 00:31:34,400 Speaker 1: you know, air airplane trips and conferences that many will 579 00:31:34,400 --> 00:31:38,080 Speaker 1: be rescheduled. People will go on vacations and back to restaurants. 580 00:31:38,080 --> 00:31:40,080 Speaker 1: So I I think Trump is correct when he says 581 00:31:40,120 --> 00:31:43,520 Speaker 1: there's pent up demand. The question is how intact will 582 00:31:43,560 --> 00:31:45,680 Speaker 1: the economy be on the other side of this such 583 00:31:45,800 --> 00:31:50,080 Speaker 1: that it can absorb and reflect that to men. I mean, Jared, 584 00:31:50,960 --> 00:31:53,040 Speaker 1: this is all well and great, but I want you 585 00:31:53,120 --> 00:31:54,920 Speaker 1: to explain. I want you to go all Dean Baker 586 00:31:55,040 --> 00:31:58,040 Speaker 1: on me right now. And so there's a whole left 587 00:31:58,160 --> 00:32:01,040 Speaker 1: feeling that, you know, life will go and there's a 588 00:32:01,080 --> 00:32:04,640 Speaker 1: conservative ethos which many of our listeners and viewers share. 589 00:32:05,320 --> 00:32:08,680 Speaker 1: There's this conservative ethos, Oh, no, we're giving it away. 590 00:32:09,680 --> 00:32:14,520 Speaker 1: Isn't anything we spent now paid back in ongoing g 591 00:32:14,720 --> 00:32:18,520 Speaker 1: d P over quarters and indeed years. I mean we're 592 00:32:18,560 --> 00:32:23,240 Speaker 1: going to get the money back eventually, right, Yes. And 593 00:32:23,400 --> 00:32:27,640 Speaker 1: I think the notion that you can somehow pivot from 594 00:32:27,880 --> 00:32:30,960 Speaker 1: where we are now to a better economy by easter 595 00:32:31,560 --> 00:32:35,920 Speaker 1: is completely nonsense. I mean, as I've said, the second 596 00:32:36,000 --> 00:32:38,320 Speaker 1: quarter is a deep recession baked in the case. That's 597 00:32:38,360 --> 00:32:41,600 Speaker 1: not just me, that's everybody. And uh the idea that 598 00:32:41,840 --> 00:32:45,800 Speaker 1: you can um punt on containment efforts only means a 599 00:32:47,160 --> 00:32:50,680 Speaker 1: much larger economic problem down the road. So yeah, I 600 00:32:50,760 --> 00:32:53,600 Speaker 1: think we're going to have to just do what the 601 00:32:54,040 --> 00:32:56,920 Speaker 1: uh what the health experts are telling us and recognize 602 00:32:56,960 --> 00:32:59,840 Speaker 1: and keep that the key to your questions, tom if 603 00:33:00,080 --> 00:33:02,720 Speaker 1: making sure that we have an economy that can bounce 604 00:33:02,760 --> 00:33:04,840 Speaker 1: back at the other side of this. That's why the 605 00:33:04,960 --> 00:33:07,600 Speaker 1: eight hundred plus billion in this in this bill we're 606 00:33:07,640 --> 00:33:10,520 Speaker 1: talking about to help preserve small and large business is 607 00:33:10,640 --> 00:33:14,320 Speaker 1: very important. But I remember this is really important, folks. 608 00:33:14,680 --> 00:33:17,040 Speaker 1: In A E. A and two thousand nine, the American 609 00:33:17,080 --> 00:33:21,520 Speaker 1: Economic Association Olivier Blanchard, the giant of French economics, working 610 00:33:21,600 --> 00:33:23,280 Speaker 1: with the I m F, working out of M I T. 611 00:33:23,760 --> 00:33:26,800 Speaker 1: Professor Blanchard got up Jared and he put up a 612 00:33:26,880 --> 00:33:28,800 Speaker 1: chart and he said, you know, there's been a real crash, 613 00:33:28,920 --> 00:33:32,280 Speaker 1: but here's the run rate to get back and someday 614 00:33:32,440 --> 00:33:36,000 Speaker 1: we'll get back. I mean those laws are still in place. 615 00:33:36,400 --> 00:33:40,000 Speaker 1: If we spend ten percent of GDP now and seven 616 00:33:40,120 --> 00:33:43,200 Speaker 1: percent of g d P in eight weeks or eight months, whatever, 617 00:33:43,880 --> 00:33:48,560 Speaker 1: we're gonna get it back down the road. Right Listen, Tom, Yes, right, 618 00:33:48,640 --> 00:33:51,200 Speaker 1: I totally agree with you. But here's the thing you 619 00:33:51,320 --> 00:33:54,520 Speaker 1: have to appreciate. I'm sure you do. You think, and 620 00:33:54,680 --> 00:33:58,040 Speaker 1: I think medium and long term. Sounds like you're thinking 621 00:33:58,160 --> 00:34:02,600 Speaker 1: long term. Politicians think in very very short term. Uh So, 622 00:34:02,920 --> 00:34:06,760 Speaker 1: when you're talking about Trump, who feels like his and 623 00:34:06,880 --> 00:34:09,759 Speaker 1: I think correctly, feels like his electoral prospects are very 624 00:34:09,880 --> 00:34:13,040 Speaker 1: much damaged by what's going on, he's thinking in terms 625 00:34:13,080 --> 00:34:15,920 Speaker 1: of weeks, not seven eight years to make up an 626 00:34:15,960 --> 00:34:19,520 Speaker 1: outcoat gasp that, yes, eventually we'll make up. So, Jared, 627 00:34:19,600 --> 00:34:21,839 Speaker 1: I guess the one of the next issues is as 628 00:34:21,880 --> 00:34:24,560 Speaker 1: we pass through what's coming out of Congress right now 629 00:34:24,920 --> 00:34:27,799 Speaker 1: in terms of the two trillion dollar fiscal stimulus plan, 630 00:34:28,480 --> 00:34:31,279 Speaker 1: what is what does Congress need to focus on next? 631 00:34:31,440 --> 00:34:35,080 Speaker 1: Do you think from a from a stimulus perspective, Well, 632 00:34:35,160 --> 00:34:37,799 Speaker 1: that's a great question. A couple of things. First of all, 633 00:34:38,000 --> 00:34:40,960 Speaker 1: state fiscal relief is essential, and it's not in this bill. 634 00:34:41,400 --> 00:34:44,560 Speaker 1: American states have to balance their budgets, and given the 635 00:34:44,960 --> 00:34:47,800 Speaker 1: demands on their unemployment insurance system, UH, they're going to 636 00:34:47,840 --> 00:34:50,880 Speaker 1: be facing a big time. Secondly, there will need to 637 00:34:50,960 --> 00:34:53,719 Speaker 1: be another trip to the well to help support households 638 00:34:53,719 --> 00:34:58,040 Speaker 1: who are losing paychecks week by week. And also it's 639 00:34:58,080 --> 00:35:00,960 Speaker 1: important to note that in this bill, it is true 640 00:35:01,040 --> 00:35:04,239 Speaker 1: that low income households are eligible for these checks, but 641 00:35:04,360 --> 00:35:07,200 Speaker 1: many of them don't file federal tax returns just because 642 00:35:07,239 --> 00:35:10,000 Speaker 1: their income isn't high enough, and that means that they 643 00:35:10,120 --> 00:35:13,719 Speaker 1: won't get those checks unless they file. That's the way 644 00:35:13,760 --> 00:35:15,960 Speaker 1: the thing is set up, so they're going to need 645 00:35:16,040 --> 00:35:19,040 Speaker 1: to They're gonna need to file in order to get 646 00:35:19,120 --> 00:35:22,640 Speaker 1: their checks. Jared Bernstein, thank you so much for the 647 00:35:22,680 --> 00:35:25,800 Speaker 1: Center and Budget and Policy Priorities. Can't say enough about 648 00:35:25,880 --> 00:35:29,719 Speaker 1: his work. Really compelling reading always from Professor Bernstein. Thanks 649 00:35:29,760 --> 00:35:33,960 Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen 650 00:35:34,239 --> 00:35:39,560 Speaker 1: to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform 651 00:35:39,680 --> 00:35:43,960 Speaker 1: you prefer. I'm on Twitter at Tom Keane before the podcast. 652 00:35:44,040 --> 00:35:47,520 Speaker 1: You can always catch us worldwide. I'm Bloomberg Radio