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Speaker 1: This is a Bloomberg Business Flash and I'm Karen Moscow.
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Speaker 1: US stocks are falling, with the SNP five hundred remaining
Speaker 1: within a tight trading range after data on inflation and
Speaker 1: housing signal the economy maybe gaining enough momentum for the
Speaker 1: Federal Reserve to gradually raise interest rates. We checked the
Speaker 1: markets every fifteen minutes throughout the trading day on Bloomberg.
Speaker 1: The SNP five hundred down three tenths per cent or
Speaker 1: seven points to fifty nine down Jones Industrial Average down
Speaker 1: half per cent or eighty two points to seventeen thousand,
Speaker 1: six hundred twenty eight. Then astacts down four tenths per
Speaker 1: cent or seventeen points to forty seven fifty eight. Ten
Speaker 1: year treasury of two thirty seconds, the yield one points
Speaker 1: and four percent yield done a two year point eight
Speaker 1: zero percent, nim X scret oil up a quarter per cent,
Speaker 1: or eleven cents to forty eighty three a barrel COMEXS
Speaker 1: gold up a tenth of upper cent or a dollar
Speaker 1: eighty to twelve seventies six, and ounce the euro a
Speaker 1: dollar thirteen forty one. The en one oh nine point
Speaker 1: oh two I report this morning showed the costa living
Speaker 1: in the US climbed in April by the most in
Speaker 1: three years, an indication that inflation may be picking up.
Speaker 1: Separate data showed residential starts in crease six point six
Speaker 1: percent to a one point one seven million annualized rate
Speaker 1: from a one point one million rate in March. Investors
Speaker 1: queuing up to finance at Del's sixty seven billion dollar
Speaker 1: acquisition of e m C with a computer maker, poise
Speaker 1: to boost its offering for what's likely to be the
Speaker 1: year's second biggest corporate bond sale. The company has received
Speaker 1: more than eighty billion dollars of orders from investors by
Speaker 1: the time its bankers closed the books on Tuesday that,
Speaker 1: according to people familiar with the transaction, that's a Bloomberg
Speaker 1: business flash. Tom and Mike Karen, thanks so much, Mike,
Speaker 1: Robert Gordon, move over talk about the splash six months ago.
Speaker 1: I know you're reading every word of Gordon is weighty
Speaker 1: tones about is it the what the hell happened? Category?
Speaker 1: Is that safe enough? Well? Yeah, it's a good way
Speaker 1: to put us. Yeah. And here is an important effort
Speaker 1: to give depth and and and I'm gonna use this
Speaker 1: word with great respect thickness to the conversation. Why don't
Speaker 1: you bring in the author of Money Changes Everything, How
Speaker 1: finance made civilization possible? He doesn't apologize. Uh. Yale Professor
Speaker 1: William Getsman is the author of the book, and it's
Speaker 1: basically a look at, um, how we developed in part
Speaker 1: faster better. Uh, the civilization we know today because we
Speaker 1: were able to use finance to get there. Uh. It's
Speaker 1: a time machine, you say, because we can move our
Speaker 1: assets backwards and forward in time. Yes, that's a simple
Speaker 1: way of looking at it. Um. You know, a simple
Speaker 1: thing like a mortgage actually is amazing when you think
Speaker 1: about it. It It gives you a lot of money
Speaker 1: up front to buy a house, and then it also
Speaker 1: moves your money into the future so that the lender
Speaker 1: gets Um gets to live off of the proceeds um
Speaker 1: stretching out for decades. And interestingly is is people figured
Speaker 1: this out centuries and centuries ago. I mean, we tend
Speaker 1: to think of Wall Street today it's the center of
Speaker 1: innovation in finance, but it's almost as if everything new
Speaker 1: is old again. Oh, the calculation of complex UH investment
Speaker 1: instruments and UM mortgages and loans goes back almost five
Speaker 1: thousand years. There is a book that that changed me
Speaker 1: in Splendid Exchange, William Bernstein, and he gives a rave
Speaker 1: blurb to your effort this idea of finance and where
Speaker 1: we are now, which is that it's a train wreck, etcetera, etcetera.
Speaker 1: You work with Bob Schiller, Yale and and a lot
Speaker 1: of other people trying to get us beyond the crisis?
Speaker 1: Are we even Are we even remotely back to a
Speaker 1: respect for money and a respect for Wall Street. I
Speaker 1: think as everybody begins to look at how much they've
Speaker 1: saved and what they're gonna need for the future, they
Speaker 1: naturally going to turn towards the financial markets to do so.
Speaker 1: And so even those that are deeply suspicious of savings
Speaker 1: are and of Wall Street are thinking about their mutual
Speaker 1: funds or their a t F. So I think there's
Speaker 1: a part of all of us that needs to and
Speaker 1: actually does respect finance. But um, people can get very
Speaker 1: worked up about what they see, UM right in front
Speaker 1: of them in terms of inequality. You wrote a definitive
Speaker 1: book on seventeen twenty. We were talking yesterday about Steven
Speaker 1: Carter's Boomberg View essay on eighteen sixteen and Mr Trump's
Speaker 1: idea of debt reputed repudiation. What can we learn from
Speaker 1: the eighteenth cent tree, I mean, pre Adam Smith. What
Speaker 1: do we learn from Enlightenment finance? Well, that's when all
Speaker 1: the mathematics a finance really was developed, particularly for savings
Speaker 1: like annuities. And uh, sir, we don't do logarithms on
Speaker 1: Tuesday here, but you know, um, the whole notion of
Speaker 1: somebody being able to buy an annuity today for themselves
Speaker 1: or for their children and then count on that sustaining
Speaker 1: them into the future, that particular structure developed in the
Speaker 1: eighteenth century. And actually it was a way that government's
Speaker 1: financed themselves. So when I look at what Donald Trump
Speaker 1: has to say about uh, I guess refinancing the debt um,
Speaker 1: I look at it in terms of this broader long
Speaker 1: term history of how governments have financed themselves. And social Security,
Speaker 1: for example, is UM an important UM thing that came
Speaker 1: out of that early financial in UM development. And yet
Speaker 1: we haven't been able to excuse me Mike as a
Speaker 1: surveillance b exclusive. He does not mention rogue off at
Speaker 1: reinhard nothing about Harvard in this book. I don't know
Speaker 1: what that's about. Uh, we haven't been able to improve
Speaker 1: on social security enough to keep it solid well, hasn't
Speaker 1: gone broke yet, and I think there are pretty reasonable
Speaker 1: plans to UM continue to support it. But I think
Speaker 1: actually it's an idea that we could push a little
Speaker 1: harder and develop add ons to social security that would
Speaker 1: be UM economically beneficial to the United States and also
Speaker 1: give a broader set of people a chance to participate
Speaker 1: in in in the in the growth of assets as
Speaker 1: opposed to simply investing in government bonds. You go back
Speaker 1: in your history and trace finance through Greece and Rome, China,
Speaker 1: medieval Europe. Uh, did many of these kind steps evolved
Speaker 1: separately in different places or did we build one on
Speaker 1: another to come up with the financial world we have today.
Speaker 1: You know what's really interesting is if you look at China,
Speaker 1: which was quite separate from the from from Europe from
Speaker 1: for centuries. They had the same kinds of problems that
Speaker 1: um the Europeans had, but they solve them in different
Speaker 1: ways by creating a larger governmental structure with an accounting
Speaker 1: system as opposed to a I would say, a bond
Speaker 1: based system. So when the Europeans were developing municipal bonds
Speaker 1: and debt finance, the Chinese were kind of doing the
Speaker 1: opposite and creating a governmental structure that was more prone
Speaker 1: to lend two people rather than to borrow from them.
Speaker 1: You mentioned Bob Schiller on page three thirty one. That's
Speaker 1: a disgrace in itself. You should have been mentioned on
Speaker 1: page three or even in the introduction. You get the
Speaker 1: canes in emotion in page four forty something. We've become
Speaker 1: more emotional, We've become more Shalrian behavioral in that. What
Speaker 1: have we learned about the behavior of black swans beyond
Speaker 1: the stereotypes of the depression? What have we learned about
Speaker 1: the emotion of finance? You know, I think that the
Speaker 1: brain has two parts to it, and uh, we've seen
Speaker 1: some fantastic work by Dan Conneman about this, and one
Speaker 1: part is very reactive and emotional. The other part is
Speaker 1: rational and calculating. UM. The rational calculating part, I think
Speaker 1: is the part that is closely tied to financial calculation
Speaker 1: and thinking carefully about the future. A lot of people
Speaker 1: don't like to go there, and and they don't necessarily
Speaker 1: have to if they can delegate their decision making to others.
Speaker 1: But UM, I see the UM, the EBB and flow
Speaker 1: of of reactions to the markets in terms of sometimes
Speaker 1: that uh that uh, that type number one brain, the
Speaker 1: type that overreacts is um is in play right now. Um.
Speaker 1: What we've seen, and this is work with Bob Schilder
Speaker 1: that's not in the book, but some research that he
Speaker 1: and I and and somebody else are conducting. We've taken
Speaker 1: a survey over many years and found that people tend
Speaker 1: to overestimate the probabilities of a crash by by factors
Speaker 1: of five or ten. So um, you know, it's it's
Speaker 1: always latent there that that fear. Mike, I'm too choked
Speaker 1: up to talk. You're gonna have to take a page
Speaker 1: five oh five. He's got a brilliant income substitution. Uh,
Speaker 1: Harry Markowitz chart on the mathematical method of optimization. It's
Speaker 1: it's it's it's gorgeous, including dynamic. He's trying to sell
Speaker 1: this book. I can't talk. Is there a foundation stone
Speaker 1: for finance? One concept that is most important time is money,
Speaker 1: very simple, it's a it's the closest connection between money
Speaker 1: and time is finance? Professor? Seriously, are we gonna get
Speaker 1: back to where James Diamond is somebody America respects. I'm
Speaker 1: not sure exactly how to answer that question. Um but
Speaker 1: um uh. You know, I think that um the culture
Speaker 1: will always have some level of antagonism towards the financial
Speaker 1: uh infrastructure and people that speak for it. And um
Speaker 1: I think it's the duty of of of society to
Speaker 1: um uh to help people understand that finance works for them.
Speaker 1: Not enough time, Thank you so much, William Getsman. Money
Speaker 1: changes everything. How finance made civilization possible? This is an
Speaker 1: important book from Princeton University Press. Sending out for Money
Speaker 1: changes everything. This is a great song. This song is
Speaker 1: thirty two years old. What is that about? Bad