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Speaker 1: This is Bloomberg Wall Street Week. Market shrug off higher

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Speaker 1: consumer prices. The economy is in the process of rebounding.

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Speaker 1: Will the Federal Reserve have its own digital currency? The

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Speaker 1: financial stories that cheap hard work. Many people think the

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Speaker 1: eels are just going to keep marching up. We have

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Speaker 1: more spending coming out of Congress. One of the big

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Speaker 1: questions I think on investor's minds inflation through the eyes

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Speaker 1: of the most influential voices. Larry Summer is the former

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Speaker 1: Treasury Secretary Bryan Wynahan back of America, Will CEO of

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Speaker 1: Charlie Sharp. Bloomberg Wall Street Week with David Weston from

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Speaker 1: Bloomberg Radio. Inflation record, COVID numbers and an unresolved standoff

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Speaker 1: with Russia, leaving us with an uncertain start to the

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Speaker 1: new year. This is Bloomberg Wall Street Week. I'm David

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Speaker 1: western It wasn't just the winter cold snap that may

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Speaker 1: have sent a shiver down your spine. This week Wednesday,

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Speaker 1: we heard what we had suspected. Inflation last year was

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Speaker 1: the worst it has been in nearly four decades, up

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Speaker 1: a whopping seven percent. Here's American Action Forum President Douglas

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Speaker 1: Holtz Eaken. They do have a real problem. There's real

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Speaker 1: heat on these inflation numbers, and all that inflation certainly

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Speaker 1: has the attention of the Federal Reserve, as Chair J.

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Speaker 1: Powell testified at his Senate confirmation hearing, that the Fed

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Speaker 1: has to turn its attention now from supporting the economy

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Speaker 1: to making sure inflation doesn't become a long term problem.

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Speaker 1: We will use our tools to support the economy and

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Speaker 1: a strong labor market and to prevent higher inflation from

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Speaker 1: becoming entrenched. And if all that weren't enough, Russia came

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Speaker 1: to the table with the United States and then with

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Speaker 1: other NATO allies to talk about all those Russian troops

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Speaker 1: massing on the Ukraine border, and the Party is basically

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Speaker 1: agreed to disagree at least for now, leaving prospects of

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Speaker 1: a further invasion still up in the air, which was part,

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Speaker 1: but only part of what drove oil prices up this week.

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Speaker 1: Here's i h S Market Chair Dan Jurgen. There's geopolitical

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Speaker 1: anxiety feeding into the market on top of a tightening

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Speaker 1: market that's coming with the economic rebound. Three big banks

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Speaker 1: reported their earnings at the end of the week was

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Speaker 1: something of a mixed bag. JP Morgan reported record profits,

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Speaker 1: but disappointed a bit on trading and is adding to

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Speaker 1: its cost. City also came up short on trading in

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Speaker 1: the midst of a major restructuring there, and Wells Fargo

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Speaker 1: said it's tepid loan growth in the fourth quarter should

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Speaker 1: pick up this year. Going beyond the banks, the markets

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Speaker 1: overall well. They had a volatile week, responding to the

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Speaker 1: high inflation numbers, the low retail sales numbers on Friday,

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Speaker 1: and the testimony of FED Chair J Powell that reducing

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Speaker 1: monetary policy support is now a certainty. Socks fell for

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Speaker 1: the second week in a row, with the SPI and

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Speaker 1: the NAZAC both off about three tenths of a percent,

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Speaker 1: while yields on the ten year climbed a hundred and

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Speaker 1: twenty five basis points and in the week at one

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Speaker 1: point seven eight. That's the highest level since the pandemic hit.

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Speaker 1: To put this rather confusing week in perspective, we welcome

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Speaker 1: to Bob Diamond these Atlas Merchant Capital founding partner in

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Speaker 1: CEO and joe An Feenie Advisors, capital management partner and

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Speaker 1: portfolio manager. So Joanne, let me start with you. Respect

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Speaker 1: equities in particular, Typically when the interest rates are going up.

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Speaker 1: That's not necessarily something all equities like, the equities respond

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Speaker 1: that way this week, yeah, you know, and they've responded

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Speaker 1: that way since the late fall, when I think it

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Speaker 1: became finally clear to investors that interest rates would have

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Speaker 1: to go up given the level of inflation. We're seeing

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Speaker 1: the tightness in the labor markets and the slowness with

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Speaker 1: which supply is coming back on one and so yeah,

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Speaker 1: we certainly saw evaluations come back and some come down,

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Speaker 1: in some places more than others. And you know that

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Speaker 1: we just don't know for how long that's going to

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Speaker 1: go on, which points that big question that investors always face.

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Speaker 1: You try to time this market where you just hold

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Speaker 1: on for the long haul. So, Bob, what about the

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Speaker 1: Fed trying to time bringing it back down again? How

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Speaker 1: risky is that? Because the track record on the so

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Speaker 1: called South Atlantics is not a great one. So, David,

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Speaker 1: we talked about this um um, you know when we

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Speaker 1: when we talked in December, um, the Fed needs to

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Speaker 1: begin moving UM. As of today, they're still very very easy,

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Speaker 1: ultra easy, I would call it. The balance sheet is

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Speaker 1: still expanding. They're still um, you know, almost a hundred

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Speaker 1: billion in in uh in um uh security purchases each

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Speaker 1: month UM, and I think it's time that they get

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Speaker 1: on with it. So UM. I think the sooner they

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Speaker 1: begin this process of kind of easing into an economy

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Speaker 1: that has recovered and is growing and has a very

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Speaker 1: very tight labor market, the better. At the same time,

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Speaker 1: I've you've got omicron out there, you've got the COVID virus,

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Speaker 1: and so you can't quite know where the economy is going.

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Speaker 1: So how big a risk is it that so called

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Speaker 1: policy mistake stopping on the great break too fast and

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Speaker 1: leading into dare say, a recession? Listen, it is it

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Speaker 1: is everyone has said, who has been on already? This

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Speaker 1: is tricky, It's not it's not five minute rice to

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Speaker 1: time this. But I think the biggest mistake that the

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Speaker 1: FED could make would be to delay too long beginning

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Speaker 1: to get to neutral. And I think, you know, David,

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Speaker 1: we've talked about this before, and Joanne and I have

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Speaker 1: talked about this, but when the FED goes from ultra

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Speaker 1: easy to neutral, it's usually fine for the markets. That's

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Speaker 1: been the history. We're not even close to neutral yet.

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Speaker 1: So when I say begin the actions, what I'm talking

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Speaker 1: about is getting closer to neutral. If you look at

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Speaker 1: the futures markets, then they're expecting FED funds not this year,

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Speaker 1: but at the end of two thousand and twenty three,

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Speaker 1: FED funds will be one and a half to one

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Speaker 1: and three quarters. Neutral is maybe two two and a

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Speaker 1: half percent. And I would just bring up, you know,

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Speaker 1: it kind of ages me and my experience on Wall Street.

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Speaker 1: But if you look at the experience in the early

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Speaker 1: eighties when Bulker had to really you know, put the

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Speaker 1: brakes on, short rates got to fifteen. So if we

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Speaker 1: talk about getting short rates overnight FED funds back to

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Speaker 1: two percent or two and a half percent um, I

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Speaker 1: think that's what we should be aiming for, you know.

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Speaker 1: And and to that point, uh, you know, Bob, you

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Speaker 1: put it really in good context, right, this not the eighties. Right,

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Speaker 1: short rates heading to fiftcent is very unlikely for that

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Speaker 1: to be in our future. So we're really looking at

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Speaker 1: short rates in the two ish bus percent range. And also, right,

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Speaker 1: this is a very different economy from where we were

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Speaker 1: back then in the seventies and eighties when we had

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Speaker 1: to deal with those oil embargoes and the slowdown in production.

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Speaker 1: This time, the FED at least has a tail and

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Speaker 1: help it solve the inflation problem. And that more supply

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Speaker 1: is going to be coming back online this year. Just

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Speaker 1: look at the semiconductor industry, which is bringing new factories

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Speaker 1: up and running and we'll be putting out chips starting

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Speaker 1: mid year, and that's going to help by bringing up supply.

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Speaker 1: That will help close that gap between consumer demand, which

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Speaker 1: is incredibly strong and the gap in supply that we've

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Speaker 1: been suffering. That should also help to bring down inflation

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Speaker 1: even as those interest rates go off. Bob Diamond and

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Speaker 1: Joy and Feeny will be staying with us as we

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Speaker 1: turn to the specifics of the tech sector and especially

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Speaker 1: fintech that's gonna happen. This is Wall Stree Week on Bloomberg.

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Speaker 1: This is Bloomberg Wall Street Week with David Weston from

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Speaker 1: Bloomberg Radio. Joe An Feeni of Advisor's Capital Management and

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Speaker 1: Bob Diamond of Atlas Merchant Capital are still with us

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Speaker 1: as we turn from the markets overall to one segment

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Speaker 1: that has been particularly riled by the talk of higher rates,

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Speaker 1: and that is the tech sector and more specifically fintech.

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Speaker 1: But let me start with you. You've got some experience

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Speaker 1: now it's just with banks, but also with tech and

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Speaker 1: specifically fintech with your major deal involving Circle. So give

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Speaker 1: me your sense. Typically it's thought that tech gets beaten

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Speaker 1: up with higher rates. Is that true? Now? Is this

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Speaker 1: the time not to invest in tech come back to

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Speaker 1: higher rates? David, we're talking about just getting back to neutral.

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Speaker 1: So we're talking about maybe a ten year in the

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Speaker 1: higher end of one and a half to three and

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Speaker 1: rather than the lower end, and we're talking about two

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Speaker 1: percent at funds rates. So no, I don't think they'll

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Speaker 1: be a negative impact. UM. Our investments, our last three

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Speaker 1: or four investments, an Atlas, Merchant Capital have all had

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Speaker 1: a very very strong tech angle to them. UM. We're

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Speaker 1: very very positive overall on the fintech sector. UM stable

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Speaker 1: coins in particular, as you know, we we announced in

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Speaker 1: Conquered Acquisition Corps of merger with Circle. UM and I

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Speaker 1: think payments technology, stable coins UM. You know, the ability

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Speaker 1: to to uh impact the costs of commercial services UH,

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Speaker 1: the opportunity to increase economic stability. All these things we

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Speaker 1: think are very very positive. So UM, there will be

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Speaker 1: winners and losers. UM. I think there are periods in

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Speaker 1: the market where anything with a tech angle, whether it

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Speaker 1: was fintech or outside of finance, you know, had a

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Speaker 1: good bid UM and I think it's it's appropriate that

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Speaker 1: there are you know a little bit more selective in

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Speaker 1: terms of the platforms that will be both successful. But

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Speaker 1: within financial services the impact of technology and the impact

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Speaker 1: of technology focused platforms UM is significant and we really

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Speaker 1: like it is a is a an area to invest,

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Speaker 1: you know, And I think that the news that of

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Speaker 1: JP Morgan just you know, really confirms that they are

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Speaker 1: spending because competition is up and they need to become

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Speaker 1: more efficient. And where are they going to get that technology? Well,

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Speaker 1: some of it will be internal, but if you go

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Speaker 1: beyond the big money center banks, think of all the

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Speaker 1: regional banks, community banks, they also need to become more efficient.

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Speaker 1: And so a lot of the fintech names that are

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Speaker 1: providing some of those capabilities, whether it's a smaller name

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Speaker 1: like an Encino or a larger name, you know, they

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Speaker 1: got thrown out too over the last several months with

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Speaker 1: all those multiples coming down, So you know, it's like

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Speaker 1: the babies got thrown out with the bath order over

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Speaker 1: the last several months. And I think this year we're

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Speaker 1: going to see quality names really come back. So as

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Speaker 1: Bob was saying, we're going to have to be really selective,

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Speaker 1: but I think investors are gonna start looking more carefully

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Speaker 1: at the companies to see if they actually have customers,

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Speaker 1: a well defined market and customers that have money to spend.

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Speaker 1: And and some of these companies have proved themselves already

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Speaker 1: and they're multiple still got crushed. So I think there's

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Speaker 1: a real opportunity for tech investing right now. You know,

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Speaker 1: you don't want to buy tech necessarily when it's really high.

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Speaker 1: You want to buy it when the market is panicking

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Speaker 1: and when the numbers have really come down as they

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Speaker 1: have a little less months. And Joanne, I would also say,

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Speaker 1: you and I have talked about this, but there are

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Speaker 1: sectors like using stable coins again UM, where you know,

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Speaker 1: we should really embrace and encourage clear regulation uh. And

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Speaker 1: I think in the case of of Circle, we certainly

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Speaker 1: do uh embrace regulation. And I think that can also

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Speaker 1: help separate UM platforms from those that are more investable

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Speaker 1: than than others. And Joan, I wonder if that takes

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Speaker 1: us to Another big story of the week actually was

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Speaker 1: the nomination by President Biden is Sarah Bloom Raskin to

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Speaker 1: be the vice chair of the FED for supervision because

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Speaker 1: she worked when she was a Treasury she worked specifically

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Speaker 1: on regulation crypto. I'm told she's one of the first

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Speaker 1: people to say we need to regulate this and came

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Speaker 1: up with a paper on it. So does that mean

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Speaker 1: that we're going to have that regulation sooner rather than

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Speaker 1: later and maybe have it be informed. Yeah, I think

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Speaker 1: that's right. I mean, she has to stellar reputation that

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Speaker 1: she's pretty highly respected, and she certainly has the experience

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Speaker 1: in her various areas of work over the past many

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Speaker 1: years to be able to think and lead discussions pretty

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Speaker 1: pretty well on that. But you know, I think people

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Speaker 1: again not separating which companies actually benefit from more concise,

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Speaker 1: more thorough regulation and which once might lose. You had

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Speaker 1: the whole area trade down on the fear of more regulation,

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Speaker 1: but actually it should be viewed as a positive for

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Speaker 1: the development of products in that set, and I think

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Speaker 1: people probably misread that. So once again, going forward, I

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Speaker 1: think we're going to get some clarity on the direction

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Speaker 1: which regulation is likely to go, and I think that

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Speaker 1: could actually help some of the better companies. Joy and

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Speaker 1: I couldn't agree more. I think there's a there's a

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Speaker 1: perception that you know, regulation is negative, regulations not negative.

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Speaker 1: You know, good sound regulation will make it more clear

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Speaker 1: who are the winners and who are the losers, and

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Speaker 1: which you know can operate within a highly regulated financial

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Speaker 1: services industry. My unders ending is that the FED white

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Speaker 1: paper on stable coins is coming out very soon, and

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Speaker 1: I think that will add to some clarity around that

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Speaker 1: as well. So so Bob, you've mentioned stable coins a

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Speaker 1: couple of times, and really focus, if you would, on

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Speaker 1: the payment companies, because you do have experience, You've got

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Speaker 1: investments in the area. What will be the difference between

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Speaker 1: the sheep and the goats, if I can put it

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Speaker 1: that way, Because there are a lot of companies out

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Speaker 1: there right now, which ones will survive and flourish and

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Speaker 1: which ones will follow the wayside. So there are there

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Speaker 1: are stable coin companies or companies that are platforms that

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Speaker 1: that expect to be that would prefer to be offshore,

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Speaker 1: that would prefer to be outside of the regulatory perimeter,

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Speaker 1: and I think I think those will be very challenged

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Speaker 1: in terms of becoming um you know, really used is payments.

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Speaker 1: And there are others like Circle, which has said they

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Speaker 1: planned to m apply with the o C c UM

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Speaker 1: for a full reserve banking license. That's how that's how

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Speaker 1: much they would um prefer to be within the regulatory

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Speaker 1: perimeter of of the US financial system. So UM, I

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Speaker 1: think I think we'll see it with more clarity David,

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Speaker 1: going forward, but I think we can see it, and

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Speaker 1: there's ore there's already a separation from those that had

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Speaker 1: prefer to stay outside of the regulatory perimeter and those

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Speaker 1: that would prefer to operate inside. Joyn, I'm really curious

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Speaker 1: again for you, as a portfolio manage, we hear increasingly

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Speaker 1: people say, even the we're skeptical of cryptocurrency overall, that

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Speaker 1: there is a role in your portfolio for some of

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Speaker 1: it for various reasons. Do you feel that way? Do

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Speaker 1: you look to balance to some extent have some role

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Speaker 1: for cryptocurrency, whether stable coin or a different sort. Yeah,

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Speaker 1: you know there can be a role for it. As

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Speaker 1: Bob was saying, it's at this point a bit of

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Speaker 1: a wild west, right. Some are quality and they're really

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Speaker 1: careful about adhering to what is likely to be regulatory

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Speaker 1: frameworks that keep them safe, right and create transparency. Um,

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Speaker 1: but you know, we do create opportunity for our clients

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Speaker 1: to be involved in some of the cryptocurrencies. We like

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Speaker 1: the ones that have a more grounded foundation in the

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Speaker 1: underlyingable wuting technology. UM. But you know, it's a bit

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Speaker 1: hard right now to get too to evolved because again

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Speaker 1: there's going to be a shakeout among those who are

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Speaker 1: are more careful about keeping those transparency uh, you know,

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Speaker 1: guard rails in place and keeping out some of the

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Speaker 1: more de various activities that have been you know, used

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Speaker 1: in those platforms and also you know, potential for hacking

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Speaker 1: and other things. So one really has to be careful.

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Speaker 1: But you know, it's a clearly speculative um, you know,

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Speaker 1: potentially a lot of upside, but also a riskier position,

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Speaker 1: so one wants to limit exposure. I think that that

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Speaker 1: realm at this point. Great having both of you with us.

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Speaker 1: That's Bob Diamond of Atlas Merchant Capital and Joe an

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Speaker 1: Fee of Advisor's Capital Management coming up. It looks like

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Speaker 1: FED Chair j Pal is headed toward us second tour

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Speaker 1: of duty. But what confronts him this time may be

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Speaker 1: very different from what he's seen before. We ask former

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Speaker 1: FED Governor Dan Torulo of Harvard. They could dust off

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Speaker 1: a lot of the tools from the eighties. You know

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Speaker 1: the output gap analysis h Phillips curve. This is Wall

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Speaker 1: Street Week on Bloomberg. This is Bloomberg Wall Street Week

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Speaker 1: with David Weston from Bloomberg Radio economic defender of last

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Speaker 1: resort since the Great Financial Crisis of two thousand eight,

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Speaker 1: it's been the Federal Reserve we've depended on to bail

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Speaker 1: out the economy when things got rough. The ongoing labor

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Speaker 1: market slack and the subdued inflation outlook are key reasons

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Speaker 1: for the Committee's decision to maintain the current high degree

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Speaker 1: of monetary policy. Monetary policy will likely remain highly accommodative

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Speaker 1: for quite some time, but now we face something we

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Speaker 1: haven't seen for a while, a FED bent on tightening

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Speaker 1: rather than loosening. With Chair J. Powell testifying his confirmation

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Speaker 1: hearing this week, the quantitative easing has to come to

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Speaker 1: an end. Will be normalizing policy, meaning we're gonna end

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Speaker 1: our asset purchase in March, that rate hikes are coming

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Speaker 1: this year. If we have to raise interest rates more

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Speaker 1: over time, we will, And that the Fed's balance sheet

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Speaker 1: is just too big we're mindful of the balance sheet

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Speaker 1: is nine trillion dollars. It's far above where it needs

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Speaker 1: to be, in short, that the economy no longer needs

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Speaker 1: the sort of monetary policy support the FED has been

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Speaker 1: providing for over a decade. The economy no longer needs,

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Speaker 1: or once the very highly accommodative policies that we've had

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Speaker 1: in place to deal with the pandemic in the aftermath.

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Speaker 1: And so, as J. Piale is on the brink of

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Speaker 1: being confirmed for a second term as Chair of the

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Speaker 1: Federal Reserve, it's time to think about how different the

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Speaker 1: next four years maybe from what came before, and to

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Speaker 1: help us take a look at what the Federal Reserve

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Speaker 1: has in store for it. Coming up, we welcome to

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Speaker 1: a former member of the Federal Reserve Board. He is

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Speaker 1: Daniel Tarullo. Dan, thanks so much for being with us.

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Speaker 1: It's been one thing to manage the Fed. It's not

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Speaker 1: been easy, I'm not saying, and we were losing monetary

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Speaker 1: policy supporting economy. How difficult will it be if and

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Speaker 1: when J. Powell gets confirmed as the next chair to

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Speaker 1: really have a very different regime. Well, David, it's true

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Speaker 1: for the first time really in about forty years. Inflation

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Speaker 1: is the part of the dual mandate that's front and center,

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Speaker 1: if not standing alone at least much more prominent than

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Speaker 1: it has been. And essentially what they're confronting here is

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Speaker 1: that had, of course a major supply side shock in

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Speaker 1: the form of the virus of uncertain duration with literal

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Speaker 1: variants that keep mucking up people's efforts to analyze when

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Speaker 1: the effects will pass through. At the same time, they've

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Speaker 1: had an awful lot of fiscal stimulus over the last

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Speaker 1: couple of years, and so when you have reduced supply

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Speaker 1: and increased demand predictably, you've got inflation of the sort

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Speaker 1: that we haven't seen in some time now. The FED

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Speaker 1: spent most of telling itself and us that they thought

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Speaker 1: that inflation was going to be transitory because it was

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Speaker 1: grounded in those supply side effects people not going to work,

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Speaker 1: not being able to get things around the country, and

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Speaker 1: the like. Obviously they're not holding to that line anymore. UH,

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Speaker 1: And the the implicit policy implication of their view last

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Speaker 1: year that they didn't really need to do much has

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Speaker 1: now obviously been abandoned. But they now need a new

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Speaker 1: hypothesis as to uh, the trajectory of inflation and what

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Speaker 1: will cause it to perhaps recede, what will cause it

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Speaker 1: to embed itself. UH. And and that's really I think

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Speaker 1: the first order of business on monetary policy for the

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Speaker 1: FED this year. Do they have, as far as you

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Speaker 1: can tell, a theory of the case at this point?

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Speaker 1: What are they managing this for? As they say, we

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Speaker 1: have to get inflation down. We heard that from both

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Speaker 1: FED Chair j Pal aswell as lair Brainer this week.

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Speaker 1: They agree in the goal, but did they have a

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Speaker 1: theory about how to come about with that goal? Well,

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Speaker 1: they have. I wouldn't have expected that at confirmation hearings

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Speaker 1: they would have put forth a more or less nuanced

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Speaker 1: monetary policy view. Uh. So, I don't know what they're

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Speaker 1: operating theory is now, but it's surely not just going

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Speaker 1: to be last year's I mean, there are several options, right. Uh.

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Speaker 1: They tend to talk about expectations a lot that is

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Speaker 1: uh well grounded inflation expectations in the public and markets

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Speaker 1: keeping inflation down. Um, that's a that's a hard one

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Speaker 1: to judge in real time, and nobody really quite understands

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Speaker 1: why expectations change. They could dust off a lot of

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Speaker 1: the tools from the eighties, you know, the output gap analysis, uh,

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Speaker 1: Phillips curve the relationship between inflation and unemployment, wage price cycles. Uh,

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Speaker 1: and try to apply that right now? Are they could

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Speaker 1: come up really with transitory version two, which would basically say, look,

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Speaker 1: we think the medium term are longer term disinflationary forces

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Speaker 1: in the economy. Globalization, demographics and the like are still

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Speaker 1: at work, um, and so we we don't need to

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Speaker 1: make major adjustments in monetary policy, but we do make

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Speaker 1: need to make some. So those are at least three

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Speaker 1: possibilities or some combination of them. But I haven't seen

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Speaker 1: anything yet, uh that would give us a hint as

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Speaker 1: to which particular blend of those notions the feed is

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Speaker 1: going to redoct What's important, David, though, is that they

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Speaker 1: do articulate, as you put it, a theory of the

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Speaker 1: case so that they can then judge incoming data against

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Speaker 1: that theory, and that allows them to make policy adjustments

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Speaker 1: as appropriate. Thank you so much to Daniel Tarullo of

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Speaker 1: the Harvard Law School. Coming up, we wrap up the

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Speaker 1: week special contribute to Larry Summers of Harvard. This is

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Speaker 1: Wall Street Week on Bloomberg. This is Bloomberg Wall Street

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Speaker 1: Week with David Weston from Bloomberg Radio. This is Wall

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Speaker 1: Street Week. I'm David Weston. We are delighted to welcome

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Speaker 1: back once again our special between Larry Summers to Wall

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Speaker 1: Street week. So, Larry, we had a lot of data

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Speaker 1: flow this week, and i'd like your reaction to and

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Speaker 1: let's lead off with the lead, which is the CPI

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Speaker 1: numbers of seven percent. It's been a good long time

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Speaker 1: since we've seen that kind of number. It has David

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Speaker 1: Richard Nixon imposed wage price controls when inflation was about

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Speaker 1: two thirds as high as it's been last year. This

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Speaker 1: is above any place that got during the Guns and

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Speaker 1: Butter Vietnam inflation. I ate the data flow is saying

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Speaker 1: what I thought for quite some time that yes, there

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Speaker 1: are transitory elements in inflation, and very likely they will recede,

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Speaker 1: but we are basically moving towards UH higher entrenched inflation.

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Speaker 1: It's there in expectations, it's there in wages, it's there

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Speaker 1: in labor shortages, it's there in the pervasive pattern across

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Speaker 1: many different UH prices, and people try to excuse it

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Speaker 1: by picking this figure and that figure from UH month

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Speaker 1: to month. But we've got an overheated economy and the

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Speaker 1: Fed is going to have a very real challenge of

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Speaker 1: cooling that economy off. UM and doing it in a

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Speaker 1: controlled way that has not been done very successfully UH

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Speaker 1: in UH the past. So it's gonna be a very

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Speaker 1: challenging year for macroeconomic policy. And I suspect that the

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Speaker 1: approach depends on what the causes are of the underlying inflation,

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Speaker 1: and we have various candidates put forward. For example, we

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Speaker 1: talked with Briand's you know him well from the White

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Speaker 1: Hosts week. He said, well, really, this is a supply

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Speaker 1: side problem. Once we get the supply chain fixed, it'll

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Speaker 1: be all fixed. Is he right? No, he's wrong. UH.

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Speaker 1: We have a massive overheated labor market. We have the

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Speaker 1: highest ratio of vacancies to unemployment in the country's history

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Speaker 1: by a large margin. We have shortages of labor in

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Speaker 1: everything from psychotherapy UH to McDonald's, in everything from investment

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Speaker 1: analysts to UH garters. That suggests a ay surfeit of

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Speaker 1: purchasing power and demand relative to the capacity of the

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Speaker 1: economy to UH produce. And unless we bring those things

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Speaker 1: into balance, we're gonna have not just higher inflation, but

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Speaker 1: possibly even UH accelerating UH inflation. And we need to

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Speaker 1: recognize that we have an overheated economy that we are

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Speaker 1: going to need UH to cool off UM in UH

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Speaker 1: the time to come, and until we do that, it

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Speaker 1: is going to be much more difficult to address the problem. Yes,

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00:24:31,760 --> 00:24:35,200
Speaker 1: we need to do what we can to open up ports. Yes,

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00:24:35,280 --> 00:24:37,919
Speaker 1: if there was anything we could do to cause there

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00:24:37,960 --> 00:24:42,320
Speaker 1: to be more semiconductors, UH, that would be good. Yes,

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00:24:42,600 --> 00:24:48,080
Speaker 1: better childcare arrangements to enable more women to work UH

436
00:24:48,440 --> 00:24:58,240
Speaker 1: would be desirable. But fundamentally, this inflation is about UM

437
00:24:58,480 --> 00:25:04,040
Speaker 1: and overheating economy, and that's the thing that UH we

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00:25:04,119 --> 00:25:07,080
Speaker 1: have to address. All which takes us back to your

439
00:25:07,080 --> 00:25:09,520
Speaker 1: statement that it's pretty difficult for the FED to have

440
00:25:09,600 --> 00:25:12,320
Speaker 1: a soft landing here. The tracker is not unblemished. I

441
00:25:12,359 --> 00:25:15,919
Speaker 1: think it's fair to say with the three new nominees

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00:25:16,000 --> 00:25:19,560
Speaker 1: from President Biden, he will have basically put five people

443
00:25:19,560 --> 00:25:23,679
Speaker 1: in place, renominating J Pal as Chair, promoting his proposals,

444
00:25:23,720 --> 00:25:26,399
Speaker 1: proposing LEO branded and then three new members. What do

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00:25:26,440 --> 00:25:27,920
Speaker 1: we know about these people? What does it say about

446
00:25:27,920 --> 00:25:30,800
Speaker 1: the constitution the FED going forward? Assuming they get confirmed.

447
00:25:31,560 --> 00:25:37,840
Speaker 1: Let me say that I strongly support UH the reconfirmation

448
00:25:38,720 --> 00:25:45,280
Speaker 1: of J. Powell, and I strongly support Layo Brader's nomination

449
00:25:45,880 --> 00:25:51,920
Speaker 1: to be UH Vice chair of the FED. The President

450
00:25:52,040 --> 00:25:58,480
Speaker 1: has made clear his commitment to the independence of the FED.

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00:25:59,359 --> 00:26:04,440
Speaker 1: Part of that commitment is allowing and encouraging the FED

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00:26:04,520 --> 00:26:09,919
Speaker 1: to be focused on its fundamental jobs of maintaining a

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00:26:10,040 --> 00:26:15,440
Speaker 1: non inflationary economy with as strong employment as is possible

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00:26:15,880 --> 00:26:21,240
Speaker 1: on a sustained basis. If a sense develops that there's

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00:26:21,240 --> 00:26:26,520
Speaker 1: a desire to politicize the FED by focusing it towards

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00:26:27,080 --> 00:26:32,520
Speaker 1: other issues beyond the crucial issues of financial stability, I

457
00:26:32,560 --> 00:26:38,080
Speaker 1: think that could be problematic for the Fed's credibility, and

458
00:26:38,119 --> 00:26:43,560
Speaker 1: so it will be very important UH tow for the

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00:26:43,680 --> 00:26:49,040
Speaker 1: nominees who have distinguished track records in different UH areas

460
00:26:49,200 --> 00:26:55,320
Speaker 1: in the past to present their views UH to UH

461
00:26:55,520 --> 00:26:59,560
Speaker 1: Congress and for Congress to very seriously consider those views.

462
00:27:00,080 --> 00:27:01,840
Speaker 1: Curious about where you think we are and dealing with

463
00:27:01,880 --> 00:27:05,280
Speaker 1: pandemic and more pointedly in the past on this program,

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00:27:05,400 --> 00:27:08,600
Speaker 1: you question, particularly during the Trump administration, the competence of

465
00:27:08,640 --> 00:27:11,000
Speaker 1: the government. What they did demonstrating competence in the way

466
00:27:11,000 --> 00:27:13,800
Speaker 1: they handled it. At this point is the Biden administration

467
00:27:13,840 --> 00:27:16,960
Speaker 1: demonstrating competence in the way it's handling the pandemic. It

468
00:27:17,160 --> 00:27:20,959
Speaker 1: is so much easier to be on the outside and

469
00:27:21,080 --> 00:27:28,400
Speaker 1: criticize and carp and judge things in retrospect that I'm

470
00:27:28,400 --> 00:27:34,640
Speaker 1: reluctant to pass judgment on UH what the Biden administration

471
00:27:35,359 --> 00:27:40,399
Speaker 1: has done. Certainly, UH we now need to be focused

472
00:27:40,440 --> 00:27:44,840
Speaker 1: on much more than vaccination, on rapid dissemination of treatment,

473
00:27:45,320 --> 00:27:50,959
Speaker 1: particularly on the availability of tests. I wish those things

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00:27:51,000 --> 00:27:55,560
Speaker 1: had happened faster. I wish the CDC and the f

475
00:27:55,720 --> 00:28:00,280
Speaker 1: d A had broken more out of their conventional rhythms

476
00:28:00,320 --> 00:28:05,960
Speaker 1: to reflect the extraordinary situation UH that we're dealing with.

477
00:28:06,680 --> 00:28:10,840
Speaker 1: But I would underscore one thing, David, and that is

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00:28:10,920 --> 00:28:18,040
Speaker 1: that COVID anywhere is a risk of mutation that could

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00:28:18,160 --> 00:28:24,160
Speaker 1: lead to catastrophe everywhere, and that we are under investing

480
00:28:24,800 --> 00:28:29,280
Speaker 1: as a global system on a massive scale in the

481
00:28:29,400 --> 00:28:35,480
Speaker 1: global effort to contain UH covid, and in addition to

482
00:28:35,640 --> 00:28:40,520
Speaker 1: its moral significance around the world, we are making it

483
00:28:40,640 --> 00:28:46,680
Speaker 1: more likely that the next UH vaccine, the next COVID strain,

484
00:28:47,320 --> 00:28:56,400
Speaker 1: will have O macrons transmissibility and some other strained UH lethality.

485
00:28:56,680 --> 00:29:02,440
Speaker 1: And that is a grave risk to H the global system,

486
00:29:02,480 --> 00:29:05,800
Speaker 1: and one that I think is not getting enough attention. Okay,

487
00:29:05,920 --> 00:29:08,120
Speaker 1: well said, thank you so much. It's always a polite

488
00:29:08,160 --> 00:29:10,080
Speaker 1: to have you. That is Larry Summers, of course of

489
00:29:10,200 --> 00:29:14,400
Speaker 1: Harvard University. Thank you. Finally, one more thought playing by

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00:29:14,440 --> 00:29:18,440
Speaker 1: the rules of vaccine mandates. Everyone is talking about them,

491
00:29:18,480 --> 00:29:20,600
Speaker 1: from banks saying that if you don't get the JAB

492
00:29:20,720 --> 00:29:23,720
Speaker 1: you can't keep your job, to the Supreme Court ruling

493
00:29:23,760 --> 00:29:26,320
Speaker 1: that it's up to Congress, not the President, to make

494
00:29:26,320 --> 00:29:30,600
Speaker 1: them universal. In early while millions stayed at home, millions

495
00:29:30,600 --> 00:29:34,320
Speaker 1: of healthcare workers heroically state that they're at worked. These

496
00:29:34,360 --> 00:29:37,000
Speaker 1: same workers are enough for us to tune between losing

497
00:29:37,000 --> 00:29:40,120
Speaker 1: their jobs and complying with the government's vaccine mandate. It's

498
00:29:40,160 --> 00:29:41,960
Speaker 1: one thing to try to tell your employee is what

499
00:29:42,000 --> 00:29:43,840
Speaker 1: they need to do to come to work. It's quite

500
00:29:43,880 --> 00:29:47,400
Speaker 1: another when it's an independent contractor who makes tens of

501
00:29:47,400 --> 00:29:51,000
Speaker 1: millions of dollars a year, has a vocal global fan base,

502
00:29:51,120 --> 00:29:53,840
Speaker 1: and oh, by the way, is arguably the greatest of

503
00:29:53,880 --> 00:29:56,840
Speaker 1: all time. That's what Australia has on its hands in

504
00:29:56,920 --> 00:30:00,680
Speaker 1: Novak Djokovic looking to break his tie with failed Nadal

505
00:30:00,800 --> 00:30:03,920
Speaker 1: and Roger Federer for the most Grand Slam wins ever

506
00:30:04,360 --> 00:30:07,000
Speaker 1: by a man, and oh, by the way, he's an

507
00:30:07,000 --> 00:30:11,200
Speaker 1: outspoken skeptic of vaccinations. Mr Djokovic has been shall we say,

508
00:30:11,200 --> 00:30:14,800
Speaker 1: a bit kg about his vaccination status, invoking instead he

509
00:30:14,840 --> 00:30:17,280
Speaker 1: has claimed that he caught the virus, recovered and is

510
00:30:17,320 --> 00:30:20,480
Speaker 1: therefore immune, all of which got him into the country,

511
00:30:20,800 --> 00:30:23,040
Speaker 1: only to have the government say it wasn't enough and

512
00:30:23,120 --> 00:30:25,800
Speaker 1: you'd have to leave and say goodbye to that twenty

513
00:30:25,840 --> 00:30:28,520
Speaker 1: one Grand Slam title, which put the issue in the

514
00:30:28,560 --> 00:30:30,640
Speaker 1: lap of the courts, the courts of law and the

515
00:30:30,680 --> 00:30:34,240
Speaker 1: courts of public opinion. As tensions continued in advance of

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00:30:34,320 --> 00:30:41,280
Speaker 1: the start of the Australian Open next week. Rules rules

517
00:30:42,560 --> 00:30:45,600
Speaker 1: and there are not special cases. But it's not only

518
00:30:45,680 --> 00:30:48,360
Speaker 1: tennis stars playing a bit fast and loose with vaccine

519
00:30:48,400 --> 00:30:51,120
Speaker 1: mandates these days. We have the infamous case of NFL

520
00:30:51,200 --> 00:30:54,480
Speaker 1: quarterback Aaron Rodgers, who was forced to sit out when

521
00:30:54,520 --> 00:30:57,200
Speaker 1: it turned out he really hadn't been vaccinated, after he

522
00:30:57,320 --> 00:31:00,560
Speaker 1: led everyone to believe that he had the choice that

523
00:31:00,680 --> 00:31:03,040
Speaker 1: was in my best interest. You might respect it, you

524
00:31:03,120 --> 00:31:06,160
Speaker 1: might hate it. And of course, not far from Wall Street,

525
00:31:06,240 --> 00:31:09,560
Speaker 1: superstar guard Kyrie Irving of the Brooklyn Nets hasn't been

526
00:31:09,600 --> 00:31:13,120
Speaker 1: able to play at home all season long, although his

527
00:31:13,200 --> 00:31:16,120
Speaker 1: team needs him so badly. It is now starting to

528
00:31:16,200 --> 00:31:19,200
Speaker 1: let him play on the road where local authorities permit

529
00:31:19,520 --> 00:31:21,920
Speaker 1: understood their their choice to to say, if you're not

530
00:31:21,920 --> 00:31:24,360
Speaker 1: gonna be vaccinated, fully vaccinated, then you know you can't

531
00:31:24,360 --> 00:31:28,040
Speaker 1: be a full participant. And um, I knew the consequences.

532
00:31:28,400 --> 00:31:31,240
Speaker 1: I wasn't prepared for them by no stretch of imagination.

533
00:31:31,480 --> 00:31:34,240
Speaker 1: But all that may pale in comparison to what China

534
00:31:34,320 --> 00:31:36,360
Speaker 1: has in front of it, trying to keep to its

535
00:31:36,520 --> 00:31:39,960
Speaker 1: zero COVID policy with hundreds of athletes through an entire

536
00:31:40,160 --> 00:31:44,440
Speaker 1: Winter Olympics, with one city close of about eleven million people,

537
00:31:44,960 --> 00:31:48,120
Speaker 1: and now cases of oh macron found in Chianjin, which

538
00:31:48,160 --> 00:31:50,680
Speaker 1: is just you know, around the corner from Beijing, and

539
00:31:50,720 --> 00:31:53,680
Speaker 1: an Olympics coming up in less than a month. Um,

540
00:31:53,800 --> 00:31:56,360
Speaker 1: all eyes on China right now. So if you think

541
00:31:56,400 --> 00:31:59,320
Speaker 1: you're struggling with your version of a vaccine mandate, to

542
00:31:59,400 --> 00:32:02,959
Speaker 1: just think about the for Australians or the Chinese, or

543
00:32:03,000 --> 00:32:06,560
Speaker 1: for that matter, the NBA that does it. For this

544
00:32:06,600 --> 00:32:09,680
Speaker 1: episode of Wall Street Week, I'm David Weston. This is Bloomberg.

545
00:32:09,880 --> 00:32:12,080
Speaker 1: See you next week.