Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along
Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jaily. We bring you
Speaker 1: insight from the best and economics, finance, investment, and international relations.
Speaker 1: Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot Com
Speaker 1: and of course on the Bloomberg terminal. Right now on
Speaker 1: an odd Monday, as we look at sport around there.
Speaker 1: The sport of economics is led by Michael Spence, the
Speaker 1: laureate and founder of Education Quality at Stanford University and
Speaker 1: of course General Atlantic Senior Adviser, Professor Spence thrilled to
Speaker 1: have you with us this morning. Michael Spence, we see
Speaker 1: a white house looking at wages. We see a white
Speaker 1: house looking for wage lift. And one of the great thinkings,
Speaker 1: including what we saw from Jamie Diamond's letter, was the
Speaker 1: ability to get wage growth in America. How do you
Speaker 1: get wage growth given technology and how do you get
Speaker 1: wage growth given the concentration of wages like Amazon and
Speaker 1: like others which you guys call monopsony. Right, Well, it's
Speaker 1: a complicated, uh challenge, but I think you know there
Speaker 1: are a number of things that are important. You have
Speaker 1: the tax system, which isn't directly wages but effect incomes. Second, Um,
Speaker 1: you need to strengthen the UH, the institutions that you
Speaker 1: know support unions UH and and and and change the
Speaker 1: bargaining power um. And that's especially important when you have
Speaker 1: big monopsony sort of buying power. And and and Third,
Speaker 1: you have to deal with this skills challenge that we
Speaker 1: that we face. I mean, you know, wages are going
Speaker 1: to reflect the you know, the the value of various
Speaker 1: kinds of labor in the marketplace, regardless of these changes
Speaker 1: in sort of bargaining power. And and we know that
Speaker 1: as our economy transforms digitally that we need a new
Speaker 1: set of skills and we need institutions public and private
Speaker 1: that get that help us get that done. Professor, off
Speaker 1: of your wonderful book, The next convergence of a decade ago,
Speaker 1: what is the next labor convergence? Do you perceive globally
Speaker 1: as you write with Stiglets and others about a K
Speaker 1: shaped economy, do you see any power for labor to
Speaker 1: reaffirm what we see in our nostalgia? Yes, I do. Actually,
Speaker 1: you know, I think we're in for you know a
Speaker 1: couple of things. One is a very powerful recovery that's
Speaker 1: underway in America and I think will come with a
Speaker 1: slight lag here in Europe. Second, we have you know, um,
Speaker 1: productivity enhancing technology that's ready for prime time. UM. And Third,
Speaker 1: we have governments that have decided that that they need
Speaker 1: to use their fiscal power to make sure that the
Speaker 1: demand side of the market, and particularly the employment side,
Speaker 1: is good. So UM, if we convince you know, a
Speaker 1: sufficiently large part of the economy to engage in in
Speaker 1: this process of innovation, I think we could have an
Speaker 1: employment and productivity boom and a real change in the
Speaker 1: dynamics that we've been seeing for the last couple of decades. Michael,
Speaker 1: do a minimum But does a minimum wage gap or
Speaker 1: the idea here of some sort of minimum wage that's
Speaker 1: higher than where it is now lead to higher wages,
Speaker 1: fewer jobs or both. Well, I mean this is controversial
Speaker 1: within the economics profession, so um, and you'll get views
Speaker 1: on all sides, sometimes politically motivated and sometimes just because
Speaker 1: people reach different conclusions, Lisa, But I mean bottom line
Speaker 1: is minimum wages probably don't cost us much employment. They
Speaker 1: affect the incomes at the lower end of the income
Speaker 1: spectrum UM, but they don't actually have much of an
Speaker 1: effect on, you know, the this challenge we face and
Speaker 1: sort of raising middle income incomes relative to the sort
Speaker 1: of the top um. So it's an important tool. I
Speaker 1: think we should use it to the extent our political
Speaker 1: system allows us. But it's only part of the solution.
Speaker 1: And I asked, because you know, Tom asked the right
Speaker 1: question to start this out with, which is the technical
Speaker 1: technological innovation. It's going to leave a lot of people
Speaker 1: without the skills, without perhaps a role in a labor
Speaker 1: market the way that they once did, and certainly if
Speaker 1: they have a role, it will be at a much
Speaker 1: lower rate. What do we do with those people? I'm
Speaker 1: not saying it's sort of it's a lot of people.
Speaker 1: We all have people in our circles who belong there
Speaker 1: and their question is do you do your training? Do
Speaker 1: you have some sort of universal U income? What's your view?
Speaker 1: I think he used all available weapons, Lisa um. So
Speaker 1: you know, I'm not sure which version of a universal
Speaker 1: basic income you know, will finally emerge. But I think
Speaker 1: we have to put a floor and just on tolerated
Speaker 1: situation in which we have poor people. But but I
Speaker 1: think we need an all hands on deck I led
Speaker 1: by government, but with engagement from business and education to
Speaker 1: tackle to tackle the skills transitions that we need as well.
Speaker 1: So I'm I'm this. This challenge is so important um
Speaker 1: to the kind of cohesiveness of our society that I
Speaker 1: think it's an all hands on deck. You use all
Speaker 1: the instruments you've got to try to deal with it.
Speaker 1: But we have to reverse these trends. Michael Spence. In
Speaker 1: the time that we've got left with you, I think
Speaker 1: we must turn to your focus over the last decade
Speaker 1: on China. There's a lot of fears out there. I'm
Speaker 1: gonna say there's some misinformation, but what I mostly note
Speaker 1: is a careful considered study of the access between Beijing
Speaker 1: and Washington. How much power does Beijing have? Well, they
Speaker 1: have tom They have a lot of power now because
Speaker 1: they have a big, thriving economy. It's recovering quickly. It's technologically,
Speaker 1: in in other ways dynamic. I mean, you know in
Speaker 1: every country, including China. You know, if they make some
Speaker 1: big policy mistakes, um, they could screw it up. But
Speaker 1: on balanced, they have an enormous amount of power that
Speaker 1: stems from primarily their big domestic market which people want
Speaker 1: to have access to as investors and as in terms
Speaker 1: of trade. So they're powerful and we have to deal
Speaker 1: with them as a powerful potential trading and investment partner
Speaker 1: and and and competitor. I look, I look Michael at China,
Speaker 1: and I look at Hong Kong and how it's changed.
Speaker 1: What would you recommend if you were consulting to the
Speaker 1: major Western banks on Hong Kong. Should they sustain in
Speaker 1: Hong Kong or take a different strategy? No, I think
Speaker 1: that you know they will. They will. I would recommend
Speaker 1: that they try to hang in there and comply with
Speaker 1: the laws. But I mean Bill wrench Uh made some
Speaker 1: very interesting remarks I think in reporting the Congress. He
Speaker 1: basically said, you know, we're we're approaching you know, kind
Speaker 1: of slow motion train wreck in which the major multi nationals,
Speaker 1: including the banks, are going to find themselves, you know,
Speaker 1: straddling borders and and and one way or another, you know,
Speaker 1: not in compliance with the laws and regulations of where
Speaker 1: they sit. Uh, either way they go. So I think
Speaker 1: they need to be aware of that and the risks
Speaker 1: are associated with that. But I wouldn't recommend a precipitous
Speaker 1: withdrawal at this point, Michael, stay close. I just want
Speaker 1: to summarize the pace coming out of the White House
Speaker 1: right now about the labor market and average whites. Told
Speaker 1: me you you might find this interesting. A couple of weeks ago,
Speaker 1: we had your Bernstein put out a pace on the
Speaker 1: base effects ahead of the inflation report and Cecity arounds.
Speaker 1: The chaman of the Council that we can convise this
Speaker 1: out for the White House is put out a pace
Speaker 1: just on average whites. Really really intuitive, I think easy
Speaker 1: to understand for people with an economics background, perhaps counterintuitive
Speaker 1: for other people looking at what happened last year April,
Speaker 1: because of compositional effects and the labor market, we had
Speaker 1: a lot of the low earners drop out of the
Speaker 1: labor force and wages actually searched at a time of
Speaker 1: immense weakness in the economy. And I think what they're
Speaker 1: preparing people for tom is just to indicate when that
Speaker 1: labor composition shifts the other way, you could get negative
Speaker 1: wage growth in the United States of America and essentially
Speaker 1: concluding it's nothing to worry about. So we've had a
Speaker 1: Jared Bernstein piece a couple of weeks ago ahead of
Speaker 1: an inflation print, preparing everyone to say this is just
Speaker 1: base effects. And now we have a secili rouse piece
Speaker 1: coming out from the White House in a blog basically
Speaker 1: preparing people for weaker wages because of compositional effects. Michael,
Speaker 1: if I can bring you back in just quickly, the
Speaker 1: economy is going to be pretty complex and nuanced in
Speaker 1: one This seems to be a big effort from the
Speaker 1: White House to help everybody understand the signaling that we
Speaker 1: should take or maybe shouldn't take from economic data. How
Speaker 1: important do you think that is for this year, just
Speaker 1: in terms of how we response react on Main Street
Speaker 1: to things like headline inflation economic disa every single month. Well,
Speaker 1: I think it's very important. I mean, the narrative really matters.
Speaker 1: And and they're right. You know, if we get a major,
Speaker 1: major recovery in the shutdown sectors you know that we've
Speaker 1: talked about many times before, which tend to employ the
Speaker 1: lower end of the wage spectrum folks, if they come
Speaker 1: back into the labor market or just re employed, um,
Speaker 1: then you could get something that looks like a bad
Speaker 1: signal in you know, from the point of view an
Speaker 1: administration that's that is essentially said one of their high
Speaker 1: priorities is dealing with a employment and be you know,
Speaker 1: a fairer set of outcomes in terms of so they
Speaker 1: want they want the recovery, but they don't want people
Speaker 1: to misinterpret the signals that are coming out of the
Speaker 1: prices in the labor market or elsewhere in the economy.
Speaker 1: So I think it's really important Michael's good to match up,
Speaker 1: especially to get a final thought on that, because not
Speaker 1: cogree with you. I think it's important to Michael Spence
Speaker 1: that on the latest in this economy worldwide and the
Speaker 1: domestic story in America. Say right now, not only the
Speaker 1: conversation of the day for us on vaccination and COVID,
Speaker 1: but this is the most serious conversation. Is all of
Speaker 1: us attend the end of a pandemic? Or for Levy
Speaker 1: is with Boston's Children Hospital. That barely describes his assertive
Speaker 1: work in pediatrics and in vaccinations and precision vaccinations for children.
Speaker 1: He is an FDA Advisory Panel member as well. Dr Levy,
Speaker 1: thank you so much for joining us. Now is it
Speaker 1: safe now for an eight year old to get the
Speaker 1: first shot and then the second shot? Thank you for that. Um, Look,
Speaker 1: we are blessed here in the United States to have
Speaker 1: three vaccines under emergency you so authorization. The J and
Speaker 1: J is on pause. Um. However, the youngest age group
Speaker 1: that can currently receive any of these vaccines are sixteen
Speaker 1: year old for the Fiser product. At the moment, nobody
Speaker 1: under the age of sixteen years is eligible to receive
Speaker 1: a vaccine. There are ongoing clinical trials to assess safety
Speaker 1: and efficacy of the coronavirus vaccines in those younger than
Speaker 1: sixteen years of age, and to my view as a pediatrician,
Speaker 1: that's very important my time of say Leninger biochem and
Speaker 1: all that. It comes up to this medical phrase tighter
Speaker 1: t I T E R. Or maybe it's simply the
Speaker 1: dosage allowed. Do we just assume it's the same vaccine
Speaker 1: for children, just a smaller dosage for little people. No,
Speaker 1: kids are not just little adults. Uh. You know, from
Speaker 1: the day we're born to the day we die, the
Speaker 1: only constant thing in life is change, and our immune
Speaker 1: system is no different when you look at a baby
Speaker 1: all the way through an elderly individual. The immune system
Speaker 1: keeps evolving. So we cannot assume that a vaccine that's
Speaker 1: safe and effective in one age group is safe and
Speaker 1: effective in another age group, and often dose may be different,
Speaker 1: and immunogenicity the ability of a vaccine tosspect if anybodies
Speaker 1: could be different, Well, how much higher is the bar
Speaker 1: in terms of side effects for children given the fact
Speaker 1: that they don't present with the same degree of illness
Speaker 1: on average? Thank you for that. We we view it
Speaker 1: as very important to remember the future our children when
Speaker 1: considering this pandemic. And there are multiple reasons to want
Speaker 1: to have vaccines against COVID for kids. Although it's uncommon,
Speaker 1: severe COVID does occur in children in the form of
Speaker 1: a multi system inflammatory syndrome, and children are mis c
Speaker 1: Children do become infected and they excrete the virus, and
Speaker 1: they could infect parents or teachers or other children. And
Speaker 1: because childhood infection is often symptomatic, other precautions won't suffice.
Speaker 1: And you know, the majority of vaccines in the world
Speaker 1: are given to kids. The majority of the global vaccine
Speaker 1: market is a pediatric market, and the infrastructure to deliver
Speaker 1: vaccines across the world is by and larger a pediatric infrastructure.
Speaker 1: So if you want to get a high percentage of
Speaker 1: a population immunized around the globe for any infection. Pediatric
Speaker 1: immunization is often the path um and and so we
Speaker 1: view this as a very important component of the fight
Speaker 1: against this pandemic. Well, I want to dovetail this conversation
Speaker 1: with a J and J issue, and this is a
Speaker 1: delicate topic, but the idea that the J and J
Speaker 1: vaccine was paused and its distribution because of six known
Speaker 1: cases of this rare thrombosis out of seven million inoculations given,
Speaker 1: is the bar that much higher for unusual developments, even
Speaker 1: if they are marginal and very rare, when you're inoculating
Speaker 1: a population that is not as at risk. And I'm
Speaker 1: thinking about a possible recommendation by the f d A
Speaker 1: by Friday that perhaps the J and J vaccine can
Speaker 1: go to people who are older than the age of fifty,
Speaker 1: but not younger. Well, you know, vaccines are something that
Speaker 1: you give to healthy people, so they've got to be safe,
Speaker 1: and so there there is a very big emphasis on
Speaker 1: safety and that continues even after an authorization. Even after
Speaker 1: an authorization and you scale the vaccine and you're pushing
Speaker 1: it out to the population, there are passive and active
Speaker 1: systems to to monitor, to surveillance for safety. And if
Speaker 1: there is a signal, even if it's a small and
Speaker 1: rare signal was as was the case with A J
Speaker 1: and J, it needs to be pursued. So although the
Speaker 1: pause is awkward in my view, it's the right decision
Speaker 1: and in the long run that will lead to confidence
Speaker 1: in the public. Federal authorities are taking safety seriously, and
Speaker 1: of course, when you're developing a vaccine product for kids,
Speaker 1: safety will come first, and that's why there are rigorous
Speaker 1: clinical trials now that are double blinded, placebo controlled prospective
Speaker 1: studies to assess safety and efficacy. And when the sponsors
Speaker 1: such as Fiser leave, they have the right data to
Speaker 1: indicate that they will submit to f d A and
Speaker 1: FDA may convene the Advisory Committee to look at those data.
Speaker 1: And as you know, those briefing documents are made publicly
Speaker 1: available to any Americans, so we have a very good
Speaker 1: and transparent process. Dr Lovey, thank you so much, Joe
Speaker 1: for Levy where it's too short of visit. We look
Speaker 1: forward to another conversation soon. He's at Boston's Children Hospital,
Speaker 1: the Precision Vaccine program, Michael Kushner said the show. Right now,
Speaker 1: he's with Margain Sale and their chief investment officer and
Speaker 1: radio and television someone with perspective, Michael. Over the weekend,
Speaker 1: I saw a massive rerationalization of worry. There's no other
Speaker 1: way to put it. What is the outcome when you
Speaker 1: see so many people worrying about our collective set of worries.
Speaker 1: It's quite quite interesting. But if you look at global
Speaker 1: aiman number of positivity cases arising. India's got problems on
Speaker 1: the several countries are on the world. Turkey, UM has
Speaker 1: has issues. UH. The United States has had the largest
Speaker 1: vaccine rollout out of side of a few small countries
Speaker 1: and UM. I think that's one reason why UM. The
Speaker 1: US is doing a little better right now. Things look
Speaker 1: a little up and up on the US, except for bonds,
Speaker 1: which are looking a little bit on the down and down.
Speaker 1: I mean, I looked Michael at what to do here,
Speaker 1: and I guess equity markets is one of our focuses.
Speaker 1: But you're working in fixed term as if fixed income.
Speaker 1: We've seen this yield lower, move price up, yield down.
Speaker 1: Is it tradeable, it's it's it's very difficult. We still
Speaker 1: think longer term the trending yields is higher. I'm not
Speaker 1: sure how much higher. We were talking about two percent
Speaker 1: kind of a longer term term rate for ten year
Speaker 1: ten year treasuries. But in the short term we had
Speaker 1: a lot, a lot of positive news on the economy,
Speaker 1: a surge of of of of positivity in terms of
Speaker 1: the data in in March, and the market got ahead
Speaker 1: of itself in terms of predicting when the Fed was
Speaker 1: going to move. Put at one point in March, you're
Speaker 1: predicting a rate hike in two thousand twenty two. And
Speaker 1: the FETE has successfully, i think, pushed against that logic
Speaker 1: and that narrative such that now it's being pushed back
Speaker 1: out again. If the market is continues to trade short
Speaker 1: and the and the fight continues to double down on
Speaker 1: it's no no rate hikes sol mid two thousand twenty
Speaker 1: three or late even later than that, then the treasury
Speaker 1: market has room to stay, you know, stay stay firm,
Speaker 1: I mean yield staying on the low side. Michael, can
Speaker 1: you talk about the relationship between the U S treasury
Speaker 1: market in Europe right now? We've had some really interesting
Speaker 1: kills the Bloomberg team over in London putting them together BMP,
Speaker 1: Parabound Manual Life looking for tenure yields in Germany, to
Speaker 1: maybe turn positive by year end then get back towards zero.
Speaker 1: What would that mean for the treasury market, Michael as
Speaker 1: a very good point. One another reason why I think
Speaker 1: treasuries have done so well in the last several weeks
Speaker 1: is that yields are exceptionally high in the US relative
Speaker 1: to the rest of the world. And with the vaccines
Speaker 1: roll out accelerating in Europe and getting better lockdowns presumably
Speaker 1: ending at some point in the in the late spring,
Speaker 1: that Europe will catch up. So one constraint I think
Speaker 1: that's been on the for the rise of tenure treasures
Speaker 1: has been the low level of yields outside the US.
Speaker 1: So and if that narrative is some merit to it,
Speaker 1: then in order to get US heels higher, European deals
Speaker 1: have to go higher first in order to catch up
Speaker 1: a bit with the U S. So. Yes, I think
Speaker 1: if you if you're looking for higher U S yields,
Speaker 1: you probably have to look for higher European heels um first.
Speaker 1: What if I'm looking for income right now, Michael, where
Speaker 1: am I going right now? That the place to go
Speaker 1: is in is in credit markets, whether it's an in
Speaker 1: structured credit like mortgage backed securities and or um investment
Speaker 1: grade credit, corporate credit, or high yield credit. In a
Speaker 1: world of stability, are we entering a kind of goldilocks
Speaker 1: period where things are slowing down? Remember the Chinese economy
Speaker 1: is slowing down. It's very likely on an annual basis,
Speaker 1: will be growing slower than the US in the first
Speaker 1: half of this year. That's good news for the global economy.
Speaker 1: We don't want to to the boom being too strong
Speaker 1: such that central banks actually need to push higher rates
Speaker 1: higher sooner than otherwise. So a slow down and China
Speaker 1: relative to the rest of the world emerging markets not
Speaker 1: doing that well in the short run relative developed markets
Speaker 1: also softens the surgeon and seeing an impact of the
Speaker 1: surgeon spending in the United States, which lengthens the business cycle,
Speaker 1: which lengthens the probability that credit spreads will stay stay low.
Speaker 1: I have to ask this, Michael, because we are seeing
Speaker 1: a post credit crisis tights on spreads basically the extra
Speaker 1: yield that investors earned to own credit over rates. Is
Speaker 1: there any sign of froth? Are there any pockets or
Speaker 1: is this all making sense to you based on where
Speaker 1: we are. It makes sense to me if you look
Speaker 1: at the history of credit spreads. They are the tight
Speaker 1: end of the range. In many cases they are in
Speaker 1: depending upon the security company and rating they are near.
Speaker 1: They're all time loads, which we saw in the very
Speaker 1: early two thousands or in the mid nineties. However, we
Speaker 1: are in a relatively unique economic situation. Historically, when do
Speaker 1: you see credits for his widening and see significant underperformance,
Speaker 1: whether it's high yield er i g. Is when we're
Speaker 1: nearing the end of the business cycle and the feed
Speaker 1: is raising rates. You look historically that's what you see,
Speaker 1: and right now it looks pretty clear to me that
Speaker 1: the feed is not raising rates till at least probably
Speaker 1: the end of two twenty three. Michael is going to
Speaker 1: see you, as always good to hear from you. Michaelkushmer
Speaker 1: markin Stanley ce IO of global fixed income yields in
Speaker 1: last week by seven or sub basis points on a
Speaker 1: tenure this morning, unchanged tom at a one fifty eight
Speaker 1: on tens on thirties, you'll yield. You know, if the
Speaker 1: gloom of the weekend John to really yield from a
Speaker 1: negative point eight one to a negative point seven nine.
Speaker 1: I guess that's a little bit of a movi here
Speaker 1: in a recalibration as well. To me, it's what you
Speaker 1: see with Coca Cola and also with Harley Davidson. I mean,
Speaker 1: it's a discreet, smaller story unique to motorcycles, John, around
Speaker 1: the world and across America. But I'm sorry when you
Speaker 1: shift your revenue guestimate any responsible manager from twenty two
Speaker 1: and a half up ten four points to that vector,
Speaker 1: that dynamic gets your get your attention at leasta raising
Speaker 1: the outlook on about one how many times we've seen that.
Speaker 1: I'm struggling right now because i know you're gonna make
Speaker 1: fun of me for being a Debbie downer, But I'm
Speaker 1: just trying to understand the consequences of the moral hazard
Speaker 1: of allowing companies to pile on debt at very low costs.
Speaker 1: It keeps them alive for longer. What does it do
Speaker 1: down the line? Have we forever prolonged a credit default cycle?
Speaker 1: Or is this going to be something that we will
Speaker 1: feel at a later date? And there is a question
Speaker 1: of the president that the FETE has set. Are they
Speaker 1: part of the fundamentals as you've asked before, John, in
Speaker 1: terms of swooping in and saving credit markets if everything
Speaker 1: goes south, well, every dollar to a debt is not equal.
Speaker 1: So let's think about where the dollar of debt has
Speaker 1: gone so far, and we mentioned last week on this
Speaker 1: show the amount of that's gone to refinancing. Yet today
Speaker 1: for high yield so sent according to Barkleys, more than
Speaker 1: seventy percent of high yield issuance has gone to refinancing.
Speaker 1: So these are we are thrilled and Michael should joins
Speaker 1: us right now with market field asset management of course
Speaker 1: has great affection for one of those super League teams,
Speaker 1: Manchester United. Michael, I want you to bring this into
Speaker 1: the arc of this asset boom that we're in. Is
Speaker 1: the super leaguing of English football, of European football just
Speaker 1: another symbol of the global financialization of these times. I
Speaker 1: mean the short answer is yes. I mean, you know,
Speaker 1: the commercialization of sports, you know, has has has accelerated
Speaker 1: over over the last over the last twenty years. Uh
Speaker 1: you know, and I think that you know, the COVID period, Um,
Speaker 1: you know, you know who's who's you know, I think
Speaker 1: crystallize the needs of the largest clubs to make sure
Speaker 1: that they know that they can continue to increase their
Speaker 1: share of whatever their venue is available. Um, you know,
Speaker 1: as JP Morgan. I'll point out the JP Morgan once
Speaker 1: for banks that finance free leverage buyout of Manchester United
Speaker 1: back in two thousand and five, um, you know, which
Speaker 1: was a transaction that nobody actually thought could get done. Um.
Speaker 1: So you know, JP Morgan has had a hand in
Speaker 1: the commercialization of of of English football back to that
Speaker 1: period of time. And you know, I would look at
Speaker 1: that LBO of man United ass as one of the
Speaker 1: sort of key, you know, key moments which have got
Speaker 1: us to this sad story today. Michael. We've been familiar
Speaker 1: with this conversation now for the best part of two decades,
Speaker 1: and I think this feels very different as I read
Speaker 1: through these headlines again that JP Morgan is underwriting this,
Speaker 1: but the clubs themselves have signed to a binding deal
Speaker 1: that was key to JP Morgan's backing, and that's according
Speaker 1: to our sources. Michael. So this isn't just a threat anymore,
Speaker 1: is it. This feels real, you know, it does feel real.
Speaker 1: I mean it's possible that the some kind of political
Speaker 1: intervention will will you make it harder? I mean you
Speaker 1: could you could have a windfall acts put on the
Speaker 1: clubs or something of that nature and I'm sure any
Speaker 1: binding agreement has some sort of forced masure clause, you know,
Speaker 1: clause within it. But no, I think this is a
Speaker 1: you know, this is a genuine attempt to recast who
Speaker 1: owned sport. Um And you know this is somewhat you know,
Speaker 1: it's a more radical version of the Premier League itself,
Speaker 1: which was an attempt of the larger clubs to take
Speaker 1: control of English football away from the league. In this case,
Speaker 1: it would be European clubs taking control of the sport
Speaker 1: away from the UEFA, which is the you know, which
Speaker 1: is the European League. Um. But but no, but this
Speaker 1: feels like a definite attempt to change things. Um. It
Speaker 1: is possible that this particular proposal you know, you know,
Speaker 1: gets diverted, but it will only get diverted by another
Speaker 1: massive shift of revenue and control towards the largest clubs
Speaker 1: within you know, you know, within Europe, and you know
Speaker 1: this change is coming. Well, Michael, let's talk about what
Speaker 1: could jeopardize this just briefly. There has been a push
Speaker 1: from the domestic leagues to say that if you go
Speaker 1: ahead and do this, you won't be able to participate
Speaker 1: in the domestic competition. But I think The bigger threat
Speaker 1: is a threat that hangs over the players that participate
Speaker 1: in this, which is from FIFA. That could mean that
Speaker 1: these players wouldn't participate in the international game anymore and
Speaker 1: represent their country. Now, Michael, as you look through sports,
Speaker 1: can you think of a president here before and whether
Speaker 1: that is an effective stick to stop this from happening.
Speaker 1: You know, it did happen in cricket, Thicke. It's a
Speaker 1: very very different game. It was not heavily commercialized in
Speaker 1: the nineteen seventies and an Australian TV mogul, Kobe Packer,
Speaker 1: you know, did create his own you know, better paid
Speaker 1: you know, Australian Cricket league and did get some of
Speaker 1: the best global players to play him that league and
Speaker 1: for a period of time they did not play test cricket.
Speaker 1: Now you know, that lasted a few years, was fairly successful.
Speaker 1: Some players didn't join the league something and stayed playing
Speaker 1: international crickets. Some players did and you know, everything merged
Speaker 1: together again. Um, you know, but I think you know,
Speaker 1: you know, at this point in time, the players themselves
Speaker 1: are so much more commercialized and the agents themselves are
Speaker 1: are you big businesses? You know, you know, with within themselves.
Speaker 1: And my guess is that there's been a lot of
Speaker 1: behind the scenes conversations about this, so I think that
Speaker 1: most of the best players would bioritize playing in the
Speaker 1: best club football over international football. I don't think it's universal,
Speaker 1: but I think enough of them would. Um that all
Speaker 1: that would happen if you ban them in the international
Speaker 1: game is the international game itself would become you know,
Speaker 1: something of a backwater and you end up with two
Speaker 1: tier sport, domestic sport club together with with international sport,
Speaker 1: and then above it the sort of super Pan you know,
Speaker 1: Pan European League, which really would be you know, garnering
Speaker 1: the best you know, the best TV slots, the best ratings,
Speaker 1: for best sponsorship, um, you know, and that's what the
Speaker 1: world would look like. Well, Michael, let's pick up on
Speaker 1: the TV slots point. I'm really looking forward to hearing
Speaker 1: from Paul Sweeney a little bit later on this morning
Speaker 1: to see what he's going to say about where this
Speaker 1: leaves the broadcasters tom who have signed multi year tracks
Speaker 1: for some of these broadcasting issues in the league's like
Speaker 1: the Premier League in the UK for that matter, over
Speaker 1: in Spain too, I know recently one must just signed
Speaker 1: for Seria over in Italy. Now you're telling me those
Speaker 1: broadcasters will stick to those deals or won't. Try and
Speaker 1: come back again and say, hold on a minute. If
Speaker 1: you've not got Manchester United, if you've not got Real
Speaker 1: Madrid playing, you've not got Barcelona playing? What am I
Speaker 1: paying for? And we'll have to see and we welcome
Speaker 1: all of you on radio and television this historic moment
Speaker 1: where an American bank JP Morgan will finance the changing
Speaker 1: of English football and of course all of European football
Speaker 1: as well. Lisa, Yeah, well, this is the question here,
Speaker 1: the idea of US banks moving into financing European football.
Speaker 1: Is this the investment opportunity? Is this a rejiggering of
Speaker 1: the entire financing of the major European sport? Michael, what's
Speaker 1: your view on that in terms of European sports as
Speaker 1: a potential investment opportunity and US banks having increasingly heavy
Speaker 1: hand in financing it. You know, the story of football
Speaker 1: has been that as as revenues increase, you know, there's
Speaker 1: the sort of you know, so much of the money
Speaker 1: ends up leaving the game two players, you know, two
Speaker 1: players and agents. So I mean, I think this would
Speaker 1: be you know, this would be similar to what's happened
Speaker 1: when when the value of TV rights as has exploded. Yes,
Speaker 1: the clubs generate more revenue. Um, you know, they end
Speaker 1: up spending it greatly on player compensation, agent compensation and um,
Speaker 1: you know, you know, transfer fees, which is the you know,
Speaker 1: European football phenomenon. Um. You know, do you know do
Speaker 1: some of the sort of superclubs managed to to you know,
Speaker 1: to continue to sort of increase their value. Yes, probably, um,
Speaker 1: But I don't think, you know, I think that that
Speaker 1: at the end of the day, you know, European clubs
Speaker 1: probably closed the gap on their large on the between
Speaker 1: their values and the and the values of the largest
Speaker 1: American franchises. But you know, it wouldn't make European football
Speaker 1: more valuable than say the NFL or the NBA. I
Speaker 1: mean I think, you know, I think that you know,
Speaker 1: it would it would simply close the gap between one
Speaker 1: and events is right now over in training over in
Speaker 1: Milan are up by ran about this. Market likes what
Speaker 1: it hears and Tom, I think the real tragedy of this,
Speaker 1: if there is one, for many people, is what happens
Speaker 1: to the smaller clubs. The smaller teams. They get left
Speaker 1: behind in all of this and don't get to compete
Speaker 1: or at least even try to get access to compete
Speaker 1: in Europe's largest sport on Europe's biggest stage. Well this
Speaker 1: is important. Michael Shawl against Stephen from Hong Kong emails
Speaker 1: Z and says you haven't mentioned worst him. Michael shaw
Speaker 1: I believe west Ham is not a Super League team.
Speaker 1: I mean, how do we keep west Ham and the
Speaker 1: others motivated to be part of elite football? I mean
Speaker 1: you can't in that situation. You can create a second
Speaker 1: tier competition, you know, which is competitive. And you know,
Speaker 1: as I said, this happened in the English game. English
Speaker 1: game used to be more more, more, more unified until
Speaker 1: the Pamier League came along. Um. You know, I think
Speaker 1: as they say, it just becomes they say it does
Speaker 1: become a two tier. You know, it does become a
Speaker 1: two tier sport. Um. You know, I think there would
Speaker 1: be enough in there would be enough interest outside of
Speaker 1: this super league to maintain something below it, but it
Speaker 1: would be you know, it would be second tier. Um,
Speaker 1: and retaining young players would be much more you know,
Speaker 1: would be much more difficult. So they say I don't
Speaker 1: think you'd see the illumination of this second tier, but
Speaker 1: it would be a much drearier, less hopeful place. Um
Speaker 1: funnily enough, on a st a day to day basis,
Speaker 1: you know it can still be. You know it can
Speaker 1: still be, it can still be enjoyable, but you know
Speaker 1: there's a sadness to it. But you know at the moment,
Speaker 1: any club, over a period of time, with the right
Speaker 1: financing and the right management, can theoretically become a very
Speaker 1: successful club at the highest level. Michael, fantastic to get
Speaker 1: you on the program, to get your thoughts on this.
Speaker 1: Just a really important change for the world's biggest sport, Michael,
Speaker 1: Shall their market field assid management see wonderful right now
Speaker 1: and I've been really anticipating in thanks Paris for bringing
Speaker 1: in Sr. Prasadas with us. He's at Cornell. That barely
Speaker 1: describes the fact he's definitive on China, with his tour
Speaker 1: of duty at the International Monetary Fund, his work at
Speaker 1: Brown in Chicago as well. We're thrilled the Professor Prasad
Speaker 1: could join us. Uh this morning. Sure I have all
Speaker 1: sorts of books on China right now. Stravitis and Ackerman's
Speaker 1: two thousand thirty four The Bookmaker Shure Marble Bonnie, the
Speaker 1: book by George Magnus. And within all of this is
Speaker 1: amateurs like me, oversimplifying, of getting things too simple. Give
Speaker 1: us one window into the complexities of this modern China.
Speaker 1: So China certainly wants to drive the debate on a
Speaker 1: variety of issues. On the multilateral front, China's hope before
Speaker 1: the COVID pandemic hit was to pitch itself as the
Speaker 1: great globalizer in contrast to the previous administration which was
Speaker 1: against multilateralism, which was against globalization. But now things are
Speaker 1: shifting UM. There is pushback against China, including from many
Speaker 1: of its close training partners such as Australia UM, and
Speaker 1: it looks like multilateralism is slowly making its way back
Speaker 1: into Washington. Whether the world is going to buy Washington's
Speaker 1: move towards multilateralism after what happened over the last four
Speaker 1: years remains to be seen, but certainly China is going
Speaker 1: to be a very important player in terms of driving
Speaker 1: the rules in international trade and finance. And whether the
Speaker 1: US is going to try to fill the void that
Speaker 1: it left for the last few years is going to
Speaker 1: be the key power play for the next three or
Speaker 1: four years, the professor, Let's talk about where that void
Speaker 1: has been more pronounced in the last five years, and
Speaker 1: that's within the Asian region. There was a conversation just
Speaker 1: for a brief moment of time about the United States
Speaker 1: establishing some kind of partnership with Asian countries to have
Speaker 1: tried in the same way that maybe Europe does. At
Speaker 1: least I was a story for the future, Professor. Then
Speaker 1: the previous administration left that behind. Do you see them
Speaker 1: re establishing that down in DC an effort to put
Speaker 1: a stronger out within the region in Asia, to attract
Speaker 1: those countries to deal with the United States in a
Speaker 1: way that they haven't been able to. So, as she
Speaker 1: correctly put it, Jonathan, there wasn't a pivot towards Asia
Speaker 1: and then a pivot away from Asia and indeed from
Speaker 1: the rest of the world. And now I think we
Speaker 1: will see a more gradual pivote back towards Asia because
Speaker 1: that's where a lot of the action is. And the
Speaker 1: Biden administration has made it clear while it is willing
Speaker 1: to talk about multi letters, so it is going to
Speaker 1: take a tough line in particular against China, so on
Speaker 1: trade issues, the baseline of conflict that it came into
Speaker 1: China that is going to remain the baseline. So it's
Speaker 1: not going to go off the baseline. If anything, they're
Speaker 1: going to bring a larger set of issials into that discussion.
Speaker 1: And the recent discussion with the Japanese leadership of course
Speaker 1: points out that the US is trying to strategically bring
Speaker 1: its allies around. Now the problem of countries in Asias
Speaker 1: whether they can really trust the US because they did
Speaker 1: trust the US earlier, even though they have very close
Speaker 1: relationships with China, both trade, financial um and political um,
Speaker 1: and they concern now about whether they can really trust
Speaker 1: the US to watch their back. So I think what
Speaker 1: the Biden administration does in terms of not just talk
Speaker 1: but action in the next two or three years is
Speaker 1: going to be really crucial. I want to do tell
Speaker 1: this conversation with a book that you just wrote on
Speaker 1: digital currencies, the idea that China is launching a digital un.
Speaker 1: How much does a digital un give China an upper
Speaker 1: hand in economic dominance? So the book is coming in September.
Speaker 1: I wish it was here already, would have been a
Speaker 1: great time. But thank you for mentioning that um the
Speaker 1: digital Yuan is something that is crucial for domestic purposes
Speaker 1: in China. I think the Chinese government is very concerned
Speaker 1: about ali pay and reach at they're dominating the payment space.
Speaker 1: They want an alternative. They want to keep retail central
Speaker 1: bank money relevant in China, but it's just going to
Speaker 1: able the dollar's dominants and innovate. Not really. Most international
Speaker 1: payments are already digital, and ultimately what matters for the
Speaker 1: currency's role in international payments is how deep the country's
Speaker 1: financial markets are, how much investors trusted, especially trust its
Speaker 1: institutional framework such as an independent central bank and institutionalized
Speaker 1: system of checks and balances and so on. China doesn't
Speaker 1: quite have that. So certainly the digital you want, in
Speaker 1: addition to China's cross board and inter bank payment system,
Speaker 1: which is the payment system that can talk with other
Speaker 1: countries payment systems, will help the un become a more
Speaker 1: important international currency, but a larger reserve currency that will
Speaker 1: take a lot more. So we hope that when you
Speaker 1: come back that is populished and we can have that
Speaker 1: conversation then as well. For sat There, the Cornal University
Speaker 1: City Professor of Trying Policy, this is the Bloomberg Surveillance Podcast.
Speaker 1: Thanks for listening. Join us live week days from seven
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Speaker 1: Tom keene In. This is Bloomberg