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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along

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Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jaily. We bring you

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Speaker 1: insight from the best and economics, finance, investment, and international relations.

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Speaker 1: Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot Com

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Speaker 1: and of course on the Bloomberg terminal. Right now on

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Speaker 1: an odd Monday, as we look at sport around there.

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Speaker 1: The sport of economics is led by Michael Spence, the

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Speaker 1: laureate and founder of Education Quality at Stanford University and

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Speaker 1: of course General Atlantic Senior Adviser, Professor Spence thrilled to

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Speaker 1: have you with us this morning. Michael Spence, we see

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Speaker 1: a white house looking at wages. We see a white

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Speaker 1: house looking for wage lift. And one of the great thinkings,

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Speaker 1: including what we saw from Jamie Diamond's letter, was the

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Speaker 1: ability to get wage growth in America. How do you

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Speaker 1: get wage growth given technology and how do you get

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Speaker 1: wage growth given the concentration of wages like Amazon and

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Speaker 1: like others which you guys call monopsony. Right, Well, it's

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Speaker 1: a complicated, uh challenge, but I think you know there

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Speaker 1: are a number of things that are important. You have

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Speaker 1: the tax system, which isn't directly wages but effect incomes. Second, Um,

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Speaker 1: you need to strengthen the UH, the institutions that you

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Speaker 1: know support unions UH and and and and change the

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Speaker 1: bargaining power um. And that's especially important when you have

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Speaker 1: big monopsony sort of buying power. And and and Third,

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Speaker 1: you have to deal with this skills challenge that we

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Speaker 1: that we face. I mean, you know, wages are going

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Speaker 1: to reflect the you know, the the value of various

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Speaker 1: kinds of labor in the marketplace, regardless of these changes

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Speaker 1: in sort of bargaining power. And and we know that

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Speaker 1: as our economy transforms digitally that we need a new

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Speaker 1: set of skills and we need institutions public and private

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Speaker 1: that get that help us get that done. Professor, off

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Speaker 1: of your wonderful book, The next convergence of a decade ago,

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Speaker 1: what is the next labor convergence? Do you perceive globally

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Speaker 1: as you write with Stiglets and others about a K

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Speaker 1: shaped economy, do you see any power for labor to

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Speaker 1: reaffirm what we see in our nostalgia? Yes, I do. Actually,

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Speaker 1: you know, I think we're in for you know a

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Speaker 1: couple of things. One is a very powerful recovery that's

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Speaker 1: underway in America and I think will come with a

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Speaker 1: slight lag here in Europe. Second, we have you know, um,

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Speaker 1: productivity enhancing technology that's ready for prime time. UM. And Third,

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Speaker 1: we have governments that have decided that that they need

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Speaker 1: to use their fiscal power to make sure that the

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Speaker 1: demand side of the market, and particularly the employment side,

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Speaker 1: is good. So UM, if we convince you know, a

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Speaker 1: sufficiently large part of the economy to engage in in

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Speaker 1: this process of innovation, I think we could have an

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Speaker 1: employment and productivity boom and a real change in the

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Speaker 1: dynamics that we've been seeing for the last couple of decades. Michael,

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Speaker 1: do a minimum But does a minimum wage gap or

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Speaker 1: the idea here of some sort of minimum wage that's

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Speaker 1: higher than where it is now lead to higher wages,

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Speaker 1: fewer jobs or both. Well, I mean this is controversial

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Speaker 1: within the economics profession, so um, and you'll get views

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Speaker 1: on all sides, sometimes politically motivated and sometimes just because

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Speaker 1: people reach different conclusions, Lisa, But I mean bottom line

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Speaker 1: is minimum wages probably don't cost us much employment. They

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Speaker 1: affect the incomes at the lower end of the income

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Speaker 1: spectrum UM, but they don't actually have much of an

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Speaker 1: effect on, you know, the this challenge we face and

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Speaker 1: sort of raising middle income incomes relative to the sort

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Speaker 1: of the top um. So it's an important tool. I

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Speaker 1: think we should use it to the extent our political

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Speaker 1: system allows us. But it's only part of the solution.

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Speaker 1: And I asked, because you know, Tom asked the right

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Speaker 1: question to start this out with, which is the technical

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Speaker 1: technological innovation. It's going to leave a lot of people

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Speaker 1: without the skills, without perhaps a role in a labor

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Speaker 1: market the way that they once did, and certainly if

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Speaker 1: they have a role, it will be at a much

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Speaker 1: lower rate. What do we do with those people? I'm

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Speaker 1: not saying it's sort of it's a lot of people.

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Speaker 1: We all have people in our circles who belong there

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Speaker 1: and their question is do you do your training? Do

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Speaker 1: you have some sort of universal U income? What's your view?

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Speaker 1: I think he used all available weapons, Lisa um. So

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Speaker 1: you know, I'm not sure which version of a universal

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Speaker 1: basic income you know, will finally emerge. But I think

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Speaker 1: we have to put a floor and just on tolerated

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Speaker 1: situation in which we have poor people. But but I

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Speaker 1: think we need an all hands on deck I led

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Speaker 1: by government, but with engagement from business and education to

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Speaker 1: tackle to tackle the skills transitions that we need as well.

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Speaker 1: So I'm I'm this. This challenge is so important um

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Speaker 1: to the kind of cohesiveness of our society that I

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Speaker 1: think it's an all hands on deck. You use all

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Speaker 1: the instruments you've got to try to deal with it.

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Speaker 1: But we have to reverse these trends. Michael Spence. In

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Speaker 1: the time that we've got left with you, I think

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Speaker 1: we must turn to your focus over the last decade

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Speaker 1: on China. There's a lot of fears out there. I'm

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Speaker 1: gonna say there's some misinformation, but what I mostly note

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Speaker 1: is a careful considered study of the access between Beijing

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Speaker 1: and Washington. How much power does Beijing have? Well, they

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Speaker 1: have tom They have a lot of power now because

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Speaker 1: they have a big, thriving economy. It's recovering quickly. It's technologically,

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Speaker 1: in in other ways dynamic. I mean, you know in

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Speaker 1: every country, including China. You know, if they make some

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Speaker 1: big policy mistakes, um, they could screw it up. But

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Speaker 1: on balanced, they have an enormous amount of power that

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Speaker 1: stems from primarily their big domestic market which people want

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Speaker 1: to have access to as investors and as in terms

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Speaker 1: of trade. So they're powerful and we have to deal

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Speaker 1: with them as a powerful potential trading and investment partner

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Speaker 1: and and and competitor. I look, I look Michael at China,

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Speaker 1: and I look at Hong Kong and how it's changed.

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Speaker 1: What would you recommend if you were consulting to the

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Speaker 1: major Western banks on Hong Kong. Should they sustain in

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Speaker 1: Hong Kong or take a different strategy? No, I think

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Speaker 1: that you know they will. They will. I would recommend

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Speaker 1: that they try to hang in there and comply with

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Speaker 1: the laws. But I mean Bill wrench Uh made some

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Speaker 1: very interesting remarks I think in reporting the Congress. He

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Speaker 1: basically said, you know, we're we're approaching you know, kind

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Speaker 1: of slow motion train wreck in which the major multi nationals,

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Speaker 1: including the banks, are going to find themselves, you know,

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Speaker 1: straddling borders and and and one way or another, you know,

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Speaker 1: not in compliance with the laws and regulations of where

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Speaker 1: they sit. Uh, either way they go. So I think

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Speaker 1: they need to be aware of that and the risks

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Speaker 1: are associated with that. But I wouldn't recommend a precipitous

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Speaker 1: withdrawal at this point, Michael, stay close. I just want

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Speaker 1: to summarize the pace coming out of the White House

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Speaker 1: right now about the labor market and average whites. Told

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Speaker 1: me you you might find this interesting. A couple of weeks ago,

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Speaker 1: we had your Bernstein put out a pace on the

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Speaker 1: base effects ahead of the inflation report and Cecity arounds.

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Speaker 1: The chaman of the Council that we can convise this

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Speaker 1: out for the White House is put out a pace

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Speaker 1: just on average whites. Really really intuitive, I think easy

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Speaker 1: to understand for people with an economics background, perhaps counterintuitive

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Speaker 1: for other people looking at what happened last year April,

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Speaker 1: because of compositional effects and the labor market, we had

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Speaker 1: a lot of the low earners drop out of the

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Speaker 1: labor force and wages actually searched at a time of

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Speaker 1: immense weakness in the economy. And I think what they're

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Speaker 1: preparing people for tom is just to indicate when that

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Speaker 1: labor composition shifts the other way, you could get negative

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Speaker 1: wage growth in the United States of America and essentially

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Speaker 1: concluding it's nothing to worry about. So we've had a

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Speaker 1: Jared Bernstein piece a couple of weeks ago ahead of

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Speaker 1: an inflation print, preparing everyone to say this is just

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Speaker 1: base effects. And now we have a secili rouse piece

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Speaker 1: coming out from the White House in a blog basically

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Speaker 1: preparing people for weaker wages because of compositional effects. Michael,

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Speaker 1: if I can bring you back in just quickly, the

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Speaker 1: economy is going to be pretty complex and nuanced in

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Speaker 1: one This seems to be a big effort from the

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Speaker 1: White House to help everybody understand the signaling that we

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Speaker 1: should take or maybe shouldn't take from economic data. How

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Speaker 1: important do you think that is for this year, just

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Speaker 1: in terms of how we response react on Main Street

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Speaker 1: to things like headline inflation economic disa every single month. Well,

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Speaker 1: I think it's very important. I mean, the narrative really matters.

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Speaker 1: And and they're right. You know, if we get a major,

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Speaker 1: major recovery in the shutdown sectors you know that we've

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Speaker 1: talked about many times before, which tend to employ the

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Speaker 1: lower end of the wage spectrum folks, if they come

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Speaker 1: back into the labor market or just re employed, um,

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Speaker 1: then you could get something that looks like a bad

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Speaker 1: signal in you know, from the point of view an

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Speaker 1: administration that's that is essentially said one of their high

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Speaker 1: priorities is dealing with a employment and be you know,

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Speaker 1: a fairer set of outcomes in terms of so they

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Speaker 1: want they want the recovery, but they don't want people

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Speaker 1: to misinterpret the signals that are coming out of the

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Speaker 1: prices in the labor market or elsewhere in the economy.

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Speaker 1: So I think it's really important Michael's good to match up,

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Speaker 1: especially to get a final thought on that, because not

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Speaker 1: cogree with you. I think it's important to Michael Spence

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Speaker 1: that on the latest in this economy worldwide and the

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Speaker 1: domestic story in America. Say right now, not only the

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Speaker 1: conversation of the day for us on vaccination and COVID,

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Speaker 1: but this is the most serious conversation. Is all of

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Speaker 1: us attend the end of a pandemic? Or for Levy

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Speaker 1: is with Boston's Children Hospital. That barely describes his assertive

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Speaker 1: work in pediatrics and in vaccinations and precision vaccinations for children.

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Speaker 1: He is an FDA Advisory Panel member as well. Dr Levy,

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Speaker 1: thank you so much for joining us. Now is it

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Speaker 1: safe now for an eight year old to get the

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Speaker 1: first shot and then the second shot? Thank you for that. Um, Look,

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Speaker 1: we are blessed here in the United States to have

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Speaker 1: three vaccines under emergency you so authorization. The J and

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Speaker 1: J is on pause. Um. However, the youngest age group

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Speaker 1: that can currently receive any of these vaccines are sixteen

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Speaker 1: year old for the Fiser product. At the moment, nobody

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Speaker 1: under the age of sixteen years is eligible to receive

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Speaker 1: a vaccine. There are ongoing clinical trials to assess safety

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Speaker 1: and efficacy of the coronavirus vaccines in those younger than

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Speaker 1: sixteen years of age, and to my view as a pediatrician,

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Speaker 1: that's very important my time of say Leninger biochem and

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Speaker 1: all that. It comes up to this medical phrase tighter

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Speaker 1: t I T E R. Or maybe it's simply the

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Speaker 1: dosage allowed. Do we just assume it's the same vaccine

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Speaker 1: for children, just a smaller dosage for little people. No,

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Speaker 1: kids are not just little adults. Uh. You know, from

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Speaker 1: the day we're born to the day we die, the

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Speaker 1: only constant thing in life is change, and our immune

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Speaker 1: system is no different when you look at a baby

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Speaker 1: all the way through an elderly individual. The immune system

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Speaker 1: keeps evolving. So we cannot assume that a vaccine that's

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Speaker 1: safe and effective in one age group is safe and

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Speaker 1: effective in another age group, and often dose may be different,

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Speaker 1: and immunogenicity the ability of a vaccine tosspect if anybodies

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Speaker 1: could be different, Well, how much higher is the bar

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Speaker 1: in terms of side effects for children given the fact

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Speaker 1: that they don't present with the same degree of illness

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Speaker 1: on average? Thank you for that. We we view it

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Speaker 1: as very important to remember the future our children when

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Speaker 1: considering this pandemic. And there are multiple reasons to want

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Speaker 1: to have vaccines against COVID for kids. Although it's uncommon,

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Speaker 1: severe COVID does occur in children in the form of

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Speaker 1: a multi system inflammatory syndrome, and children are mis c

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Speaker 1: Children do become infected and they excrete the virus, and

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Speaker 1: they could infect parents or teachers or other children. And

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Speaker 1: because childhood infection is often symptomatic, other precautions won't suffice.

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Speaker 1: And you know, the majority of vaccines in the world

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Speaker 1: are given to kids. The majority of the global vaccine

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Speaker 1: market is a pediatric market, and the infrastructure to deliver

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Speaker 1: vaccines across the world is by and larger a pediatric infrastructure.

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Speaker 1: So if you want to get a high percentage of

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Speaker 1: a population immunized around the globe for any infection. Pediatric

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Speaker 1: immunization is often the path um and and so we

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Speaker 1: view this as a very important component of the fight

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Speaker 1: against this pandemic. Well, I want to dovetail this conversation

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Speaker 1: with a J and J issue, and this is a

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Speaker 1: delicate topic, but the idea that the J and J

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Speaker 1: vaccine was paused and its distribution because of six known

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Speaker 1: cases of this rare thrombosis out of seven million inoculations given,

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Speaker 1: is the bar that much higher for unusual developments, even

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Speaker 1: if they are marginal and very rare, when you're inoculating

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Speaker 1: a population that is not as at risk. And I'm

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Speaker 1: thinking about a possible recommendation by the f d A

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Speaker 1: by Friday that perhaps the J and J vaccine can

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Speaker 1: go to people who are older than the age of fifty,

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Speaker 1: but not younger. Well, you know, vaccines are something that

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Speaker 1: you give to healthy people, so they've got to be safe,

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Speaker 1: and so there there is a very big emphasis on

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Speaker 1: safety and that continues even after an authorization. Even after

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Speaker 1: an authorization and you scale the vaccine and you're pushing

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Speaker 1: it out to the population, there are passive and active

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Speaker 1: systems to to monitor, to surveillance for safety. And if

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Speaker 1: there is a signal, even if it's a small and

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Speaker 1: rare signal was as was the case with A J

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Speaker 1: and J, it needs to be pursued. So although the

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Speaker 1: pause is awkward in my view, it's the right decision

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Speaker 1: and in the long run that will lead to confidence

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Speaker 1: in the public. Federal authorities are taking safety seriously, and

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Speaker 1: of course, when you're developing a vaccine product for kids,

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Speaker 1: safety will come first, and that's why there are rigorous

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Speaker 1: clinical trials now that are double blinded, placebo controlled prospective

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Speaker 1: studies to assess safety and efficacy. And when the sponsors

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Speaker 1: such as Fiser leave, they have the right data to

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Speaker 1: indicate that they will submit to f d A and

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Speaker 1: FDA may convene the Advisory Committee to look at those data.

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Speaker 1: And as you know, those briefing documents are made publicly

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Speaker 1: available to any Americans, so we have a very good

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Speaker 1: and transparent process. Dr Lovey, thank you so much, Joe

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Speaker 1: for Levy where it's too short of visit. We look

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Speaker 1: forward to another conversation soon. He's at Boston's Children Hospital,

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Speaker 1: the Precision Vaccine program, Michael Kushner said the show. Right now,

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Speaker 1: he's with Margain Sale and their chief investment officer and

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Speaker 1: radio and television someone with perspective, Michael. Over the weekend,

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Speaker 1: I saw a massive rerationalization of worry. There's no other

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Speaker 1: way to put it. What is the outcome when you

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Speaker 1: see so many people worrying about our collective set of worries.

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Speaker 1: It's quite quite interesting. But if you look at global

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Speaker 1: aiman number of positivity cases arising. India's got problems on

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Speaker 1: the several countries are on the world. Turkey, UM has

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Speaker 1: has issues. UH. The United States has had the largest

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Speaker 1: vaccine rollout out of side of a few small countries

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Speaker 1: and UM. I think that's one reason why UM. The

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Speaker 1: US is doing a little better right now. Things look

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Speaker 1: a little up and up on the US, except for bonds,

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Speaker 1: which are looking a little bit on the down and down.

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Speaker 1: I mean, I looked Michael at what to do here,

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Speaker 1: and I guess equity markets is one of our focuses.

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Speaker 1: But you're working in fixed term as if fixed income.

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Speaker 1: We've seen this yield lower, move price up, yield down.

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Speaker 1: Is it tradeable, it's it's it's very difficult. We still

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Speaker 1: think longer term the trending yields is higher. I'm not

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Speaker 1: sure how much higher. We were talking about two percent

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Speaker 1: kind of a longer term term rate for ten year

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Speaker 1: ten year treasuries. But in the short term we had

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Speaker 1: a lot, a lot of positive news on the economy,

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Speaker 1: a surge of of of of positivity in terms of

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Speaker 1: the data in in March, and the market got ahead

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Speaker 1: of itself in terms of predicting when the Fed was

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Speaker 1: going to move. Put at one point in March, you're

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Speaker 1: predicting a rate hike in two thousand twenty two. And

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Speaker 1: the FETE has successfully, i think, pushed against that logic

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Speaker 1: and that narrative such that now it's being pushed back

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Speaker 1: out again. If the market is continues to trade short

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Speaker 1: and the and the fight continues to double down on

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Speaker 1: it's no no rate hikes sol mid two thousand twenty

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Speaker 1: three or late even later than that, then the treasury

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Speaker 1: market has room to stay, you know, stay stay firm,

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Speaker 1: I mean yield staying on the low side. Michael, can

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Speaker 1: you talk about the relationship between the U S treasury

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Speaker 1: market in Europe right now? We've had some really interesting

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Speaker 1: kills the Bloomberg team over in London putting them together BMP,

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Speaker 1: Parabound Manual Life looking for tenure yields in Germany, to

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Speaker 1: maybe turn positive by year end then get back towards zero.

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Speaker 1: What would that mean for the treasury market, Michael as

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Speaker 1: a very good point. One another reason why I think

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Speaker 1: treasuries have done so well in the last several weeks

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Speaker 1: is that yields are exceptionally high in the US relative

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Speaker 1: to the rest of the world. And with the vaccines

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Speaker 1: roll out accelerating in Europe and getting better lockdowns presumably

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Speaker 1: ending at some point in the in the late spring,

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Speaker 1: that Europe will catch up. So one constraint I think

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Speaker 1: that's been on the for the rise of tenure treasures

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Speaker 1: has been the low level of yields outside the US.

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Speaker 1: So and if that narrative is some merit to it,

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Speaker 1: then in order to get US heels higher, European deals

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Speaker 1: have to go higher first in order to catch up

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Speaker 1: a bit with the U S. So. Yes, I think

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Speaker 1: if you if you're looking for higher U S yields,

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Speaker 1: you probably have to look for higher European heels um first.

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Speaker 1: What if I'm looking for income right now, Michael, where

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Speaker 1: am I going right now? That the place to go

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Speaker 1: is in is in credit markets, whether it's an in

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Speaker 1: structured credit like mortgage backed securities and or um investment

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Speaker 1: grade credit, corporate credit, or high yield credit. In a

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Speaker 1: world of stability, are we entering a kind of goldilocks

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Speaker 1: period where things are slowing down? Remember the Chinese economy

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Speaker 1: is slowing down. It's very likely on an annual basis,

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Speaker 1: will be growing slower than the US in the first

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Speaker 1: half of this year. That's good news for the global economy.

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Speaker 1: We don't want to to the boom being too strong

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Speaker 1: such that central banks actually need to push higher rates

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Speaker 1: higher sooner than otherwise. So a slow down and China

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Speaker 1: relative to the rest of the world emerging markets not

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Speaker 1: doing that well in the short run relative developed markets

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Speaker 1: also softens the surgeon and seeing an impact of the

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Speaker 1: surgeon spending in the United States, which lengthens the business cycle,

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Speaker 1: which lengthens the probability that credit spreads will stay stay low.

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Speaker 1: I have to ask this, Michael, because we are seeing

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Speaker 1: a post credit crisis tights on spreads basically the extra

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Speaker 1: yield that investors earned to own credit over rates. Is

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Speaker 1: there any sign of froth? Are there any pockets or

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Speaker 1: is this all making sense to you based on where

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Speaker 1: we are. It makes sense to me if you look

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Speaker 1: at the history of credit spreads. They are the tight

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Speaker 1: end of the range. In many cases they are in

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Speaker 1: depending upon the security company and rating they are near.

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Speaker 1: They're all time loads, which we saw in the very

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Speaker 1: early two thousands or in the mid nineties. However, we

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Speaker 1: are in a relatively unique economic situation. Historically, when do

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Speaker 1: you see credits for his widening and see significant underperformance,

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Speaker 1: whether it's high yield er i g. Is when we're

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Speaker 1: nearing the end of the business cycle and the feed

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Speaker 1: is raising rates. You look historically that's what you see,

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Speaker 1: and right now it looks pretty clear to me that

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Speaker 1: the feed is not raising rates till at least probably

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Speaker 1: the end of two twenty three. Michael is going to

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Speaker 1: see you, as always good to hear from you. Michaelkushmer

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Speaker 1: markin Stanley ce IO of global fixed income yields in

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Speaker 1: last week by seven or sub basis points on a

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Speaker 1: tenure this morning, unchanged tom at a one fifty eight

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Speaker 1: on tens on thirties, you'll yield. You know, if the

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Speaker 1: gloom of the weekend John to really yield from a

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Speaker 1: negative point eight one to a negative point seven nine.

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Speaker 1: I guess that's a little bit of a movi here

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Speaker 1: in a recalibration as well. To me, it's what you

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Speaker 1: see with Coca Cola and also with Harley Davidson. I mean,

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Speaker 1: it's a discreet, smaller story unique to motorcycles, John, around

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Speaker 1: the world and across America. But I'm sorry when you

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Speaker 1: shift your revenue guestimate any responsible manager from twenty two

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Speaker 1: and a half up ten four points to that vector,

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Speaker 1: that dynamic gets your get your attention at leasta raising

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Speaker 1: the outlook on about one how many times we've seen that.

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Speaker 1: I'm struggling right now because i know you're gonna make

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Speaker 1: fun of me for being a Debbie downer, But I'm

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Speaker 1: just trying to understand the consequences of the moral hazard

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Speaker 1: of allowing companies to pile on debt at very low costs.

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Speaker 1: It keeps them alive for longer. What does it do

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Speaker 1: down the line? Have we forever prolonged a credit default cycle?

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Speaker 1: Or is this going to be something that we will

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Speaker 1: feel at a later date? And there is a question

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Speaker 1: of the president that the FETE has set. Are they

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Speaker 1: part of the fundamentals as you've asked before, John, in

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Speaker 1: terms of swooping in and saving credit markets if everything

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Speaker 1: goes south, well, every dollar to a debt is not equal.

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Speaker 1: So let's think about where the dollar of debt has

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Speaker 1: gone so far, and we mentioned last week on this

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Speaker 1: show the amount of that's gone to refinancing. Yet today

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Speaker 1: for high yield so sent according to Barkleys, more than

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Speaker 1: seventy percent of high yield issuance has gone to refinancing.

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Speaker 1: So these are we are thrilled and Michael should joins

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Speaker 1: us right now with market field asset management of course

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Speaker 1: has great affection for one of those super League teams,

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Speaker 1: Manchester United. Michael, I want you to bring this into

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Speaker 1: the arc of this asset boom that we're in. Is

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Speaker 1: the super leaguing of English football, of European football just

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Speaker 1: another symbol of the global financialization of these times. I

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Speaker 1: mean the short answer is yes. I mean, you know,

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Speaker 1: the commercialization of sports, you know, has has has accelerated

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Speaker 1: over over the last over the last twenty years. Uh

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Speaker 1: you know, and I think that you know, the COVID period, Um,

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Speaker 1: you know, you know who's who's you know, I think

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Speaker 1: crystallize the needs of the largest clubs to make sure

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Speaker 1: that they know that they can continue to increase their

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Speaker 1: share of whatever their venue is available. Um, you know,

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Speaker 1: as JP Morgan. I'll point out the JP Morgan once

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Speaker 1: for banks that finance free leverage buyout of Manchester United

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Speaker 1: back in two thousand and five, um, you know, which

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Speaker 1: was a transaction that nobody actually thought could get done. Um.

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Speaker 1: So you know, JP Morgan has had a hand in

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Speaker 1: the commercialization of of of English football back to that

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Speaker 1: period of time. And you know, I would look at

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Speaker 1: that LBO of man United ass as one of the

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Speaker 1: sort of key, you know, key moments which have got

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Speaker 1: us to this sad story today. Michael. We've been familiar

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Speaker 1: with this conversation now for the best part of two decades,

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Speaker 1: and I think this feels very different as I read

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Speaker 1: through these headlines again that JP Morgan is underwriting this,

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Speaker 1: but the clubs themselves have signed to a binding deal

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Speaker 1: that was key to JP Morgan's backing, and that's according

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Speaker 1: to our sources. Michael. So this isn't just a threat anymore,

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Speaker 1: is it. This feels real, you know, it does feel real.

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Speaker 1: I mean it's possible that the some kind of political

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Speaker 1: intervention will will you make it harder? I mean you

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Speaker 1: could you could have a windfall acts put on the

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Speaker 1: clubs or something of that nature and I'm sure any

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Speaker 1: binding agreement has some sort of forced masure clause, you know,

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Speaker 1: clause within it. But no, I think this is a

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Speaker 1: you know, this is a genuine attempt to recast who

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Speaker 1: owned sport. Um And you know this is somewhat you know,

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Speaker 1: it's a more radical version of the Premier League itself,

432
00:24:19,560 --> 00:24:22,120
Speaker 1: which was an attempt of the larger clubs to take

433
00:24:22,200 --> 00:24:25,160
Speaker 1: control of English football away from the league. In this case,

434
00:24:25,280 --> 00:24:28,320
Speaker 1: it would be European clubs taking control of the sport

435
00:24:28,359 --> 00:24:31,240
Speaker 1: away from the UEFA, which is the you know, which

436
00:24:31,320 --> 00:24:33,879
Speaker 1: is the European League. Um. But but no, but this

437
00:24:34,040 --> 00:24:38,280
Speaker 1: feels like a definite attempt to change things. Um. It

438
00:24:38,440 --> 00:24:41,600
Speaker 1: is possible that this particular proposal you know, you know,

439
00:24:41,760 --> 00:24:45,320
Speaker 1: gets diverted, but it will only get diverted by another

440
00:24:45,480 --> 00:24:49,720
Speaker 1: massive shift of revenue and control towards the largest clubs

441
00:24:49,800 --> 00:24:51,960
Speaker 1: within you know, you know, within Europe, and you know

442
00:24:52,040 --> 00:24:54,560
Speaker 1: this change is coming. Well, Michael, let's talk about what

443
00:24:54,600 --> 00:24:57,880
Speaker 1: could jeopardize this just briefly. There has been a push

444
00:24:57,920 --> 00:24:59,680
Speaker 1: from the domestic leagues to say that if you go

445
00:24:59,760 --> 00:25:01,680
Speaker 1: ahead and do this, you won't be able to participate

446
00:25:01,720 --> 00:25:03,840
Speaker 1: in the domestic competition. But I think The bigger threat

447
00:25:04,080 --> 00:25:06,240
Speaker 1: is a threat that hangs over the players that participate

448
00:25:06,320 --> 00:25:08,760
Speaker 1: in this, which is from FIFA. That could mean that

449
00:25:08,840 --> 00:25:12,520
Speaker 1: these players wouldn't participate in the international game anymore and

450
00:25:12,640 --> 00:25:15,760
Speaker 1: represent their country. Now, Michael, as you look through sports,

451
00:25:15,880 --> 00:25:18,080
Speaker 1: can you think of a president here before and whether

452
00:25:18,200 --> 00:25:20,399
Speaker 1: that is an effective stick to stop this from happening.

453
00:25:21,160 --> 00:25:23,480
Speaker 1: You know, it did happen in cricket, Thicke. It's a

454
00:25:23,560 --> 00:25:26,159
Speaker 1: very very different game. It was not heavily commercialized in

455
00:25:26,200 --> 00:25:30,600
Speaker 1: the nineteen seventies and an Australian TV mogul, Kobe Packer,

456
00:25:30,920 --> 00:25:33,879
Speaker 1: you know, did create his own you know, better paid

457
00:25:34,320 --> 00:25:37,240
Speaker 1: you know, Australian Cricket league and did get some of

458
00:25:37,320 --> 00:25:39,280
Speaker 1: the best global players to play him that league and

459
00:25:39,359 --> 00:25:42,399
Speaker 1: for a period of time they did not play test cricket.

460
00:25:42,520 --> 00:25:46,520
Speaker 1: Now you know, that lasted a few years, was fairly successful.

461
00:25:46,640 --> 00:25:49,480
Speaker 1: Some players didn't join the league something and stayed playing

462
00:25:49,480 --> 00:25:52,439
Speaker 1: international crickets. Some players did and you know, everything merged

463
00:25:52,480 --> 00:25:55,040
Speaker 1: together again. Um, you know, but I think you know,

464
00:25:55,320 --> 00:25:57,960
Speaker 1: you know, at this point in time, the players themselves

465
00:25:58,000 --> 00:26:01,000
Speaker 1: are so much more commercialized and the agents themselves are

466
00:26:01,200 --> 00:26:05,360
Speaker 1: are you big businesses? You know, you know, with within themselves.

467
00:26:05,440 --> 00:26:07,720
Speaker 1: And my guess is that there's been a lot of

468
00:26:07,840 --> 00:26:11,520
Speaker 1: behind the scenes conversations about this, so I think that

469
00:26:11,720 --> 00:26:16,159
Speaker 1: most of the best players would bioritize playing in the

470
00:26:16,280 --> 00:26:20,080
Speaker 1: best club football over international football. I don't think it's universal,

471
00:26:20,480 --> 00:26:23,680
Speaker 1: but I think enough of them would. Um that all

472
00:26:23,760 --> 00:26:25,920
Speaker 1: that would happen if you ban them in the international

473
00:26:26,000 --> 00:26:28,359
Speaker 1: game is the international game itself would become you know,

474
00:26:28,440 --> 00:26:30,719
Speaker 1: something of a backwater and you end up with two

475
00:26:30,760 --> 00:26:35,800
Speaker 1: tier sport, domestic sport club together with with international sport,

476
00:26:35,880 --> 00:26:39,040
Speaker 1: and then above it the sort of super Pan you know,

477
00:26:39,200 --> 00:26:43,560
Speaker 1: Pan European League, which really would be you know, garnering

478
00:26:43,640 --> 00:26:46,560
Speaker 1: the best you know, the best TV slots, the best ratings,

479
00:26:46,680 --> 00:26:49,560
Speaker 1: for best sponsorship, um, you know, and that's what the

480
00:26:49,600 --> 00:26:51,200
Speaker 1: world would look like. Well, Michael, let's pick up on

481
00:26:51,240 --> 00:26:53,480
Speaker 1: the TV slots point. I'm really looking forward to hearing

482
00:26:53,560 --> 00:26:55,560
Speaker 1: from Paul Sweeney a little bit later on this morning

483
00:26:55,600 --> 00:26:56,960
Speaker 1: to see what he's going to say about where this

484
00:26:57,080 --> 00:27:00,359
Speaker 1: leaves the broadcasters tom who have signed multi year tracks

485
00:27:00,400 --> 00:27:03,480
Speaker 1: for some of these broadcasting issues in the league's like

486
00:27:03,640 --> 00:27:06,240
Speaker 1: the Premier League in the UK for that matter, over

487
00:27:06,320 --> 00:27:08,440
Speaker 1: in Spain too, I know recently one must just signed

488
00:27:08,480 --> 00:27:11,080
Speaker 1: for Seria over in Italy. Now you're telling me those

489
00:27:11,119 --> 00:27:13,920
Speaker 1: broadcasters will stick to those deals or won't. Try and

490
00:27:14,000 --> 00:27:15,879
Speaker 1: come back again and say, hold on a minute. If

491
00:27:15,920 --> 00:27:17,840
Speaker 1: you've not got Manchester United, if you've not got Real

492
00:27:17,920 --> 00:27:20,000
Speaker 1: Madrid playing, you've not got Barcelona playing? What am I

493
00:27:20,080 --> 00:27:22,240
Speaker 1: paying for? And we'll have to see and we welcome

494
00:27:22,280 --> 00:27:25,480
Speaker 1: all of you on radio and television this historic moment

495
00:27:25,520 --> 00:27:29,400
Speaker 1: where an American bank JP Morgan will finance the changing

496
00:27:29,920 --> 00:27:33,680
Speaker 1: of English football and of course all of European football

497
00:27:34,040 --> 00:27:36,600
Speaker 1: as well. Lisa, Yeah, well, this is the question here,

498
00:27:36,800 --> 00:27:41,160
Speaker 1: the idea of US banks moving into financing European football.

499
00:27:41,400 --> 00:27:44,280
Speaker 1: Is this the investment opportunity? Is this a rejiggering of

500
00:27:44,359 --> 00:27:48,120
Speaker 1: the entire financing of the major European sport? Michael, what's

501
00:27:48,160 --> 00:27:51,440
Speaker 1: your view on that in terms of European sports as

502
00:27:51,480 --> 00:27:55,600
Speaker 1: a potential investment opportunity and US banks having increasingly heavy

503
00:27:55,640 --> 00:28:00,520
Speaker 1: hand in financing it. You know, the story of football

504
00:28:00,560 --> 00:28:04,000
Speaker 1: has been that as as revenues increase, you know, there's

505
00:28:04,040 --> 00:28:05,800
Speaker 1: the sort of you know, so much of the money

506
00:28:05,880 --> 00:28:08,239
Speaker 1: ends up leaving the game two players, you know, two

507
00:28:08,320 --> 00:28:10,320
Speaker 1: players and agents. So I mean, I think this would

508
00:28:10,359 --> 00:28:12,800
Speaker 1: be you know, this would be similar to what's happened

509
00:28:12,800 --> 00:28:15,959
Speaker 1: when when the value of TV rights as has exploded. Yes,

510
00:28:16,040 --> 00:28:19,960
Speaker 1: the clubs generate more revenue. Um, you know, they end

511
00:28:20,080 --> 00:28:25,080
Speaker 1: up spending it greatly on player compensation, agent compensation and um,

512
00:28:25,480 --> 00:28:27,720
Speaker 1: you know, you know, transfer fees, which is the you know,

513
00:28:27,880 --> 00:28:33,080
Speaker 1: European football phenomenon. Um. You know, do you know do

514
00:28:33,280 --> 00:28:35,680
Speaker 1: some of the sort of superclubs managed to to you know,

515
00:28:35,800 --> 00:28:39,200
Speaker 1: to continue to sort of increase their value. Yes, probably, um,

516
00:28:39,240 --> 00:28:41,160
Speaker 1: But I don't think, you know, I think that that

517
00:28:41,440 --> 00:28:44,040
Speaker 1: at the end of the day, you know, European clubs

518
00:28:44,160 --> 00:28:47,000
Speaker 1: probably closed the gap on their large on the between

519
00:28:47,040 --> 00:28:49,200
Speaker 1: their values and the and the values of the largest

520
00:28:49,240 --> 00:28:52,960
Speaker 1: American franchises. But you know, it wouldn't make European football

521
00:28:53,040 --> 00:28:55,560
Speaker 1: more valuable than say the NFL or the NBA. I

522
00:28:55,600 --> 00:28:57,960
Speaker 1: mean I think, you know, I think that you know,

523
00:28:58,080 --> 00:28:59,920
Speaker 1: it would it would simply close the gap between one

524
00:29:00,000 --> 00:29:02,640
Speaker 1: and events is right now over in training over in

525
00:29:02,720 --> 00:29:06,920
Speaker 1: Milan are up by ran about this. Market likes what

526
00:29:07,040 --> 00:29:09,200
Speaker 1: it hears and Tom, I think the real tragedy of this,

527
00:29:09,400 --> 00:29:11,640
Speaker 1: if there is one, for many people, is what happens

528
00:29:11,640 --> 00:29:14,240
Speaker 1: to the smaller clubs. The smaller teams. They get left

529
00:29:14,280 --> 00:29:16,320
Speaker 1: behind in all of this and don't get to compete

530
00:29:16,400 --> 00:29:18,920
Speaker 1: or at least even try to get access to compete

531
00:29:19,360 --> 00:29:23,240
Speaker 1: in Europe's largest sport on Europe's biggest stage. Well this

532
00:29:23,400 --> 00:29:26,840
Speaker 1: is important. Michael Shawl against Stephen from Hong Kong emails

533
00:29:26,880 --> 00:29:29,800
Speaker 1: Z and says you haven't mentioned worst him. Michael shaw

534
00:29:30,000 --> 00:29:33,640
Speaker 1: I believe west Ham is not a Super League team.

535
00:29:34,120 --> 00:29:36,360
Speaker 1: I mean, how do we keep west Ham and the

536
00:29:36,480 --> 00:29:42,400
Speaker 1: others motivated to be part of elite football? I mean

537
00:29:42,680 --> 00:29:45,560
Speaker 1: you can't in that situation. You can create a second

538
00:29:45,560 --> 00:29:49,440
Speaker 1: tier competition, you know, which is competitive. And you know,

539
00:29:49,760 --> 00:29:51,800
Speaker 1: as I said, this happened in the English game. English

540
00:29:51,840 --> 00:29:55,000
Speaker 1: game used to be more more, more, more unified until

541
00:29:55,080 --> 00:29:58,480
Speaker 1: the Pamier League came along. Um. You know, I think

542
00:29:58,640 --> 00:30:00,719
Speaker 1: as they say, it just becomes they say it does

543
00:30:00,800 --> 00:30:02,680
Speaker 1: become a two tier. You know, it does become a

544
00:30:02,760 --> 00:30:05,960
Speaker 1: two tier sport. Um. You know, I think there would

545
00:30:06,040 --> 00:30:10,040
Speaker 1: be enough in there would be enough interest outside of

546
00:30:10,120 --> 00:30:13,640
Speaker 1: this super league to maintain something below it, but it

547
00:30:13,720 --> 00:30:16,640
Speaker 1: would be you know, it would be second tier. Um,

548
00:30:17,000 --> 00:30:19,640
Speaker 1: and retaining young players would be much more you know,

549
00:30:19,720 --> 00:30:23,120
Speaker 1: would be much more difficult. So they say I don't

550
00:30:23,160 --> 00:30:27,920
Speaker 1: think you'd see the illumination of this second tier, but

551
00:30:28,040 --> 00:30:31,520
Speaker 1: it would be a much drearier, less hopeful place. Um

552
00:30:31,760 --> 00:30:33,719
Speaker 1: funnily enough, on a st a day to day basis,

553
00:30:34,040 --> 00:30:35,520
Speaker 1: you know it can still be. You know it can

554
00:30:35,560 --> 00:30:38,280
Speaker 1: still be, it can still be enjoyable, but you know

555
00:30:38,320 --> 00:30:40,400
Speaker 1: there's a sadness to it. But you know at the moment,

556
00:30:40,720 --> 00:30:43,800
Speaker 1: any club, over a period of time, with the right

557
00:30:43,880 --> 00:30:46,720
Speaker 1: financing and the right management, can theoretically become a very

558
00:30:46,760 --> 00:30:50,320
Speaker 1: successful club at the highest level. Michael, fantastic to get

559
00:30:50,360 --> 00:30:51,840
Speaker 1: you on the program, to get your thoughts on this.

560
00:30:52,000 --> 00:30:56,280
Speaker 1: Just a really important change for the world's biggest sport, Michael,

561
00:30:56,320 --> 00:31:06,760
Speaker 1: Shall their market field assid management see wonderful right now

562
00:31:06,800 --> 00:31:09,560
Speaker 1: and I've been really anticipating in thanks Paris for bringing

563
00:31:09,720 --> 00:31:13,520
Speaker 1: in Sr. Prasadas with us. He's at Cornell. That barely

564
00:31:13,600 --> 00:31:16,800
Speaker 1: describes the fact he's definitive on China, with his tour

565
00:31:16,880 --> 00:31:19,800
Speaker 1: of duty at the International Monetary Fund, his work at

566
00:31:19,840 --> 00:31:22,840
Speaker 1: Brown in Chicago as well. We're thrilled the Professor Prasad

567
00:31:23,280 --> 00:31:27,239
Speaker 1: could join us. Uh this morning. Sure I have all

568
00:31:27,360 --> 00:31:30,560
Speaker 1: sorts of books on China right now. Stravitis and Ackerman's

569
00:31:31,040 --> 00:31:34,200
Speaker 1: two thousand thirty four The Bookmaker Shure Marble Bonnie, the

570
00:31:34,240 --> 00:31:37,560
Speaker 1: book by George Magnus. And within all of this is

571
00:31:37,600 --> 00:31:42,600
Speaker 1: amateurs like me, oversimplifying, of getting things too simple. Give

572
00:31:42,680 --> 00:31:46,960
Speaker 1: us one window into the complexities of this modern China.

573
00:31:48,480 --> 00:31:52,640
Speaker 1: So China certainly wants to drive the debate on a

574
00:31:52,720 --> 00:31:56,920
Speaker 1: variety of issues. On the multilateral front, China's hope before

575
00:31:56,960 --> 00:32:00,080
Speaker 1: the COVID pandemic hit was to pitch itself as the

576
00:32:00,200 --> 00:32:04,720
Speaker 1: great globalizer in contrast to the previous administration which was

577
00:32:04,760 --> 00:32:08,880
Speaker 1: against multilateralism, which was against globalization. But now things are

578
00:32:08,920 --> 00:32:12,600
Speaker 1: shifting UM. There is pushback against China, including from many

579
00:32:12,680 --> 00:32:16,720
Speaker 1: of its close training partners such as Australia UM, and

580
00:32:16,960 --> 00:32:19,960
Speaker 1: it looks like multilateralism is slowly making its way back

581
00:32:20,040 --> 00:32:23,560
Speaker 1: into Washington. Whether the world is going to buy Washington's

582
00:32:23,600 --> 00:32:27,200
Speaker 1: move towards multilateralism after what happened over the last four

583
00:32:27,280 --> 00:32:30,400
Speaker 1: years remains to be seen, but certainly China is going

584
00:32:30,480 --> 00:32:33,680
Speaker 1: to be a very important player in terms of driving

585
00:32:33,760 --> 00:32:36,600
Speaker 1: the rules in international trade and finance. And whether the

586
00:32:36,720 --> 00:32:39,120
Speaker 1: US is going to try to fill the void that

587
00:32:39,200 --> 00:32:41,200
Speaker 1: it left for the last few years is going to

588
00:32:41,280 --> 00:32:43,480
Speaker 1: be the key power play for the next three or

589
00:32:43,520 --> 00:32:45,480
Speaker 1: four years, the professor, Let's talk about where that void

590
00:32:45,520 --> 00:32:47,840
Speaker 1: has been more pronounced in the last five years, and

591
00:32:47,880 --> 00:32:50,520
Speaker 1: that's within the Asian region. There was a conversation just

592
00:32:50,600 --> 00:32:52,560
Speaker 1: for a brief moment of time about the United States

593
00:32:52,960 --> 00:32:56,800
Speaker 1: establishing some kind of partnership with Asian countries to have

594
00:32:57,240 --> 00:32:59,680
Speaker 1: tried in the same way that maybe Europe does. At

595
00:32:59,720 --> 00:33:01,600
Speaker 1: least I was a story for the future, Professor. Then

596
00:33:01,640 --> 00:33:04,360
Speaker 1: the previous administration left that behind. Do you see them

597
00:33:04,440 --> 00:33:06,880
Speaker 1: re establishing that down in DC an effort to put

598
00:33:06,920 --> 00:33:10,000
Speaker 1: a stronger out within the region in Asia, to attract

599
00:33:10,040 --> 00:33:11,800
Speaker 1: those countries to deal with the United States in a

600
00:33:11,840 --> 00:33:14,640
Speaker 1: way that they haven't been able to. So, as she

601
00:33:14,720 --> 00:33:17,840
Speaker 1: correctly put it, Jonathan, there wasn't a pivot towards Asia

602
00:33:17,880 --> 00:33:20,000
Speaker 1: and then a pivot away from Asia and indeed from

603
00:33:20,000 --> 00:33:22,000
Speaker 1: the rest of the world. And now I think we

604
00:33:22,040 --> 00:33:25,800
Speaker 1: will see a more gradual pivote back towards Asia because

605
00:33:25,880 --> 00:33:28,040
Speaker 1: that's where a lot of the action is. And the

606
00:33:28,080 --> 00:33:31,320
Speaker 1: Biden administration has made it clear while it is willing

607
00:33:31,440 --> 00:33:33,800
Speaker 1: to talk about multi letters, so it is going to

608
00:33:33,880 --> 00:33:36,640
Speaker 1: take a tough line in particular against China, so on

609
00:33:36,760 --> 00:33:39,800
Speaker 1: trade issues, the baseline of conflict that it came into

610
00:33:40,640 --> 00:33:42,840
Speaker 1: China that is going to remain the baseline. So it's

611
00:33:42,880 --> 00:33:45,000
Speaker 1: not going to go off the baseline. If anything, they're

612
00:33:45,000 --> 00:33:48,480
Speaker 1: going to bring a larger set of issials into that discussion.

613
00:33:48,960 --> 00:33:53,800
Speaker 1: And the recent discussion with the Japanese leadership of course

614
00:33:53,880 --> 00:33:57,680
Speaker 1: points out that the US is trying to strategically bring

615
00:33:57,760 --> 00:34:00,959
Speaker 1: its allies around. Now the problem of countries in Asias

616
00:34:01,000 --> 00:34:03,600
Speaker 1: whether they can really trust the US because they did

617
00:34:03,680 --> 00:34:06,320
Speaker 1: trust the US earlier, even though they have very close

618
00:34:06,360 --> 00:34:11,359
Speaker 1: relationships with China, both trade, financial um and political um,

619
00:34:11,480 --> 00:34:14,000
Speaker 1: and they concern now about whether they can really trust

620
00:34:14,040 --> 00:34:16,080
Speaker 1: the US to watch their back. So I think what

621
00:34:16,239 --> 00:34:19,319
Speaker 1: the Biden administration does in terms of not just talk

622
00:34:19,440 --> 00:34:21,759
Speaker 1: but action in the next two or three years is

623
00:34:21,800 --> 00:34:24,200
Speaker 1: going to be really crucial. I want to do tell

624
00:34:24,280 --> 00:34:26,000
Speaker 1: this conversation with a book that you just wrote on

625
00:34:26,080 --> 00:34:30,280
Speaker 1: digital currencies, the idea that China is launching a digital un.

626
00:34:30,400 --> 00:34:33,959
Speaker 1: How much does a digital un give China an upper

627
00:34:34,040 --> 00:34:37,680
Speaker 1: hand in economic dominance? So the book is coming in September.

628
00:34:37,719 --> 00:34:39,360
Speaker 1: I wish it was here already, would have been a

629
00:34:39,440 --> 00:34:42,840
Speaker 1: great time. But thank you for mentioning that um the

630
00:34:43,239 --> 00:34:47,360
Speaker 1: digital Yuan is something that is crucial for domestic purposes

631
00:34:47,440 --> 00:34:50,360
Speaker 1: in China. I think the Chinese government is very concerned

632
00:34:50,400 --> 00:34:53,440
Speaker 1: about ali pay and reach at they're dominating the payment space.

633
00:34:53,880 --> 00:34:56,560
Speaker 1: They want an alternative. They want to keep retail central

634
00:34:56,600 --> 00:34:59,320
Speaker 1: bank money relevant in China, but it's just going to

635
00:35:00,000 --> 00:35:03,840
Speaker 1: able the dollar's dominants and innovate. Not really. Most international

636
00:35:03,920 --> 00:35:07,520
Speaker 1: payments are already digital, and ultimately what matters for the

637
00:35:07,640 --> 00:35:11,120
Speaker 1: currency's role in international payments is how deep the country's

638
00:35:11,160 --> 00:35:15,560
Speaker 1: financial markets are, how much investors trusted, especially trust its

639
00:35:15,600 --> 00:35:19,600
Speaker 1: institutional framework such as an independent central bank and institutionalized

640
00:35:19,600 --> 00:35:22,760
Speaker 1: system of checks and balances and so on. China doesn't

641
00:35:22,840 --> 00:35:25,360
Speaker 1: quite have that. So certainly the digital you want, in

642
00:35:25,480 --> 00:35:28,600
Speaker 1: addition to China's cross board and inter bank payment system,

643
00:35:28,800 --> 00:35:30,839
Speaker 1: which is the payment system that can talk with other

644
00:35:30,880 --> 00:35:33,839
Speaker 1: countries payment systems, will help the un become a more

645
00:35:33,880 --> 00:35:37,960
Speaker 1: important international currency, but a larger reserve currency that will

646
00:35:38,000 --> 00:35:40,400
Speaker 1: take a lot more. So we hope that when you

647
00:35:40,560 --> 00:35:42,759
Speaker 1: come back that is populished and we can have that

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Speaker 1: conversation then as well. For sat There, the Cornal University

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Speaker 1: City Professor of Trying Policy, this is the Bloomberg Surveillance Podcast.

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Speaker 1: Thanks for listening. Join us live week days from seven

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Speaker 1: Bloomberg dot com, and of course, on the terminal. I'm

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Speaker 1: Tom keene In. This is Bloomberg