Speaker 1: This is Bloomberg Wall Street Week. Market shrug off higher
Speaker 1: consumer prices. The economy is in the process of rebounding.
Speaker 1: Will the Federal Reserve have its own digital currency? The
Speaker 1: financial stories that cheap hard work. Many people think the
Speaker 1: eels are just going to keep marching up. We have
Speaker 1: more spending coming out of Congress. One of the big
Speaker 1: questions I think on investor's minds inflation through the eyes
Speaker 1: of the most influential voices. Larry Summer is the former
Speaker 1: Treasury Secretary Bryan Wynahan back of America, Will CEO of
Speaker 1: Charlie Sharp. Bloomberg Wall Street Week with David Weston from
Speaker 1: Bloomberg Radio. Inflation record, COVID numbers and an unresolved standoff
Speaker 1: with Russia, leaving us with an uncertain start to the
Speaker 1: new year. This is Bloomberg Wall Street Week. I'm David
Speaker 1: western It wasn't just the winter cold snap that may
Speaker 1: have sent a shiver down your spine. This week Wednesday,
Speaker 1: we heard what we had suspected. Inflation last year was
Speaker 1: the worst it has been in nearly four decades, up
Speaker 1: a whopping seven percent. Here's American Action Forum President Douglas
Speaker 1: Holtz Eaken. They do have a real problem. There's real
Speaker 1: heat on these inflation numbers, and all that inflation certainly
Speaker 1: has the attention of the Federal Reserve, as Chair J.
Speaker 1: Powell testified at his Senate confirmation hearing, that the Fed
Speaker 1: has to turn its attention now from supporting the economy
Speaker 1: to making sure inflation doesn't become a long term problem.
Speaker 1: We will use our tools to support the economy and
Speaker 1: a strong labor market and to prevent higher inflation from
Speaker 1: becoming entrenched. And if all that weren't enough, Russia came
Speaker 1: to the table with the United States and then with
Speaker 1: other NATO allies to talk about all those Russian troops
Speaker 1: massing on the Ukraine border, and the Party is basically
Speaker 1: agreed to disagree at least for now, leaving prospects of
Speaker 1: a further invasion still up in the air, which was part,
Speaker 1: but only part of what drove oil prices up this week.
Speaker 1: Here's i h S Market Chair Dan Jurgen. There's geopolitical
Speaker 1: anxiety feeding into the market on top of a tightening
Speaker 1: market that's coming with the economic rebound. Three big banks
Speaker 1: reported their earnings at the end of the week was
Speaker 1: something of a mixed bag. JP Morgan reported record profits,
Speaker 1: but disappointed a bit on trading and is adding to
Speaker 1: its cost. City also came up short on trading in
Speaker 1: the midst of a major restructuring there, and Wells Fargo
Speaker 1: said it's tepid loan growth in the fourth quarter should
Speaker 1: pick up this year. Going beyond the banks, the markets
Speaker 1: overall well. They had a volatile week, responding to the
Speaker 1: high inflation numbers, the low retail sales numbers on Friday,
Speaker 1: and the testimony of FED Chair J Powell that reducing
Speaker 1: monetary policy support is now a certainty. Socks fell for
Speaker 1: the second week in a row, with the SPI and
Speaker 1: the NAZAC both off about three tenths of a percent,
Speaker 1: while yields on the ten year climbed a hundred and
Speaker 1: twenty five basis points and in the week at one
Speaker 1: point seven eight. That's the highest level since the pandemic hit.
Speaker 1: To put this rather confusing week in perspective, we welcome
Speaker 1: to Bob Diamond these Atlas Merchant Capital founding partner in
Speaker 1: CEO and joe An Feenie Advisors, capital management partner and
Speaker 1: portfolio manager. So Joanne, let me start with you. Respect
Speaker 1: equities in particular, Typically when the interest rates are going up.
Speaker 1: That's not necessarily something all equities like, the equities respond
Speaker 1: that way this week, yeah, you know, and they've responded
Speaker 1: that way since the late fall, when I think it
Speaker 1: became finally clear to investors that interest rates would have
Speaker 1: to go up given the level of inflation. We're seeing
Speaker 1: the tightness in the labor markets and the slowness with
Speaker 1: which supply is coming back on one and so yeah,
Speaker 1: we certainly saw evaluations come back and some come down,
Speaker 1: in some places more than others. And you know that
Speaker 1: we just don't know for how long that's going to
Speaker 1: go on, which points that big question that investors always face.
Speaker 1: You try to time this market where you just hold
Speaker 1: on for the long haul. So, Bob, what about the
Speaker 1: Fed trying to time bringing it back down again? How
Speaker 1: risky is that? Because the track record on the so
Speaker 1: called South Atlantics is not a great one. So, David,
Speaker 1: we talked about this um um, you know when we
Speaker 1: when we talked in December, um, the Fed needs to
Speaker 1: begin moving UM. As of today, they're still very very easy,
Speaker 1: ultra easy, I would call it. The balance sheet is
Speaker 1: still expanding. They're still um, you know, almost a hundred
Speaker 1: billion in in uh in um uh security purchases each
Speaker 1: month UM, and I think it's time that they get
Speaker 1: on with it. So UM. I think the sooner they
Speaker 1: begin this process of kind of easing into an economy
Speaker 1: that has recovered and is growing and has a very
Speaker 1: very tight labor market, the better. At the same time,
Speaker 1: I've you've got omicron out there, you've got the COVID virus,
Speaker 1: and so you can't quite know where the economy is going.
Speaker 1: So how big a risk is it that so called
Speaker 1: policy mistake stopping on the great break too fast and
Speaker 1: leading into dare say, a recession? Listen, it is it
Speaker 1: is everyone has said, who has been on already? This
Speaker 1: is tricky, It's not it's not five minute rice to
Speaker 1: time this. But I think the biggest mistake that the
Speaker 1: FED could make would be to delay too long beginning
Speaker 1: to get to neutral. And I think, you know, David,
Speaker 1: we've talked about this before, and Joanne and I have
Speaker 1: talked about this, but when the FED goes from ultra
Speaker 1: easy to neutral, it's usually fine for the markets. That's
Speaker 1: been the history. We're not even close to neutral yet.
Speaker 1: So when I say begin the actions, what I'm talking
Speaker 1: about is getting closer to neutral. If you look at
Speaker 1: the futures markets, then they're expecting FED funds not this year,
Speaker 1: but at the end of two thousand and twenty three,
Speaker 1: FED funds will be one and a half to one
Speaker 1: and three quarters. Neutral is maybe two two and a
Speaker 1: half percent. And I would just bring up, you know,
Speaker 1: it kind of ages me and my experience on Wall Street.
Speaker 1: But if you look at the experience in the early
Speaker 1: eighties when Bulker had to really you know, put the
Speaker 1: brakes on, short rates got to fifteen. So if we
Speaker 1: talk about getting short rates overnight FED funds back to
Speaker 1: two percent or two and a half percent um, I
Speaker 1: think that's what we should be aiming for, you know.
Speaker 1: And and to that point, uh, you know, Bob, you
Speaker 1: put it really in good context, right, this not the eighties. Right,
Speaker 1: short rates heading to fiftcent is very unlikely for that
Speaker 1: to be in our future. So we're really looking at
Speaker 1: short rates in the two ish bus percent range. And also, right,
Speaker 1: this is a very different economy from where we were
Speaker 1: back then in the seventies and eighties when we had
Speaker 1: to deal with those oil embargoes and the slowdown in production.
Speaker 1: This time, the FED at least has a tail and
Speaker 1: help it solve the inflation problem. And that more supply
Speaker 1: is going to be coming back online this year. Just
Speaker 1: look at the semiconductor industry, which is bringing new factories
Speaker 1: up and running and we'll be putting out chips starting
Speaker 1: mid year, and that's going to help by bringing up supply.
Speaker 1: That will help close that gap between consumer demand, which
Speaker 1: is incredibly strong and the gap in supply that we've
Speaker 1: been suffering. That should also help to bring down inflation
Speaker 1: even as those interest rates go off. Bob Diamond and
Speaker 1: Joy and Feeny will be staying with us as we
Speaker 1: turn to the specifics of the tech sector and especially
Speaker 1: fintech that's gonna happen. This is Wall Stree Week on Bloomberg.
Speaker 1: This is Bloomberg Wall Street Week with David Weston from
Speaker 1: Bloomberg Radio. Joe An Feeni of Advisor's Capital Management and
Speaker 1: Bob Diamond of Atlas Merchant Capital are still with us
Speaker 1: as we turn from the markets overall to one segment
Speaker 1: that has been particularly riled by the talk of higher rates,
Speaker 1: and that is the tech sector and more specifically fintech.
Speaker 1: But let me start with you. You've got some experience
Speaker 1: now it's just with banks, but also with tech and
Speaker 1: specifically fintech with your major deal involving Circle. So give
Speaker 1: me your sense. Typically it's thought that tech gets beaten
Speaker 1: up with higher rates. Is that true? Now? Is this
Speaker 1: the time not to invest in tech come back to
Speaker 1: higher rates? David, we're talking about just getting back to neutral.
Speaker 1: So we're talking about maybe a ten year in the
Speaker 1: higher end of one and a half to three and
Speaker 1: rather than the lower end, and we're talking about two
Speaker 1: percent at funds rates. So no, I don't think they'll
Speaker 1: be a negative impact. UM. Our investments, our last three
Speaker 1: or four investments, an Atlas, Merchant Capital have all had
Speaker 1: a very very strong tech angle to them. UM. We're
Speaker 1: very very positive overall on the fintech sector. UM stable
Speaker 1: coins in particular, as you know, we we announced in
Speaker 1: Conquered Acquisition Corps of merger with Circle. UM and I
Speaker 1: think payments technology, stable coins UM. You know, the ability
Speaker 1: to to uh impact the costs of commercial services UH,
Speaker 1: the opportunity to increase economic stability. All these things we
Speaker 1: think are very very positive. So UM, there will be
Speaker 1: winners and losers. UM. I think there are periods in
Speaker 1: the market where anything with a tech angle, whether it
Speaker 1: was fintech or outside of finance, you know, had a
Speaker 1: good bid UM and I think it's it's appropriate that
Speaker 1: there are you know a little bit more selective in
Speaker 1: terms of the platforms that will be both successful. But
Speaker 1: within financial services the impact of technology and the impact
Speaker 1: of technology focused platforms UM is significant and we really
Speaker 1: like it is a is a an area to invest,
Speaker 1: you know, And I think that the news that of
Speaker 1: JP Morgan just you know, really confirms that they are
Speaker 1: spending because competition is up and they need to become
Speaker 1: more efficient. And where are they going to get that technology? Well,
Speaker 1: some of it will be internal, but if you go
Speaker 1: beyond the big money center banks, think of all the
Speaker 1: regional banks, community banks, they also need to become more efficient.
Speaker 1: And so a lot of the fintech names that are
Speaker 1: providing some of those capabilities, whether it's a smaller name
Speaker 1: like an Encino or a larger name, you know, they
Speaker 1: got thrown out too over the last several months with
Speaker 1: all those multiples coming down, So you know, it's like
Speaker 1: the babies got thrown out with the bath order over
Speaker 1: the last several months. And I think this year we're
Speaker 1: going to see quality names really come back. So as
Speaker 1: Bob was saying, we're going to have to be really selective,
Speaker 1: but I think investors are gonna start looking more carefully
Speaker 1: at the companies to see if they actually have customers,
Speaker 1: a well defined market and customers that have money to spend.
Speaker 1: And and some of these companies have proved themselves already
Speaker 1: and they're multiple still got crushed. So I think there's
Speaker 1: a real opportunity for tech investing right now. You know,
Speaker 1: you don't want to buy tech necessarily when it's really high.
Speaker 1: You want to buy it when the market is panicking
Speaker 1: and when the numbers have really come down as they
Speaker 1: have a little less months. And Joanne, I would also say,
Speaker 1: you and I have talked about this, but there are
Speaker 1: sectors like using stable coins again UM, where you know,
Speaker 1: we should really embrace and encourage clear regulation uh. And
Speaker 1: I think in the case of of Circle, we certainly
Speaker 1: do uh embrace regulation. And I think that can also
Speaker 1: help separate UM platforms from those that are more investable
Speaker 1: than than others. And Joan, I wonder if that takes
Speaker 1: us to Another big story of the week actually was
Speaker 1: the nomination by President Biden is Sarah Bloom Raskin to
Speaker 1: be the vice chair of the FED for supervision because
Speaker 1: she worked when she was a Treasury she worked specifically
Speaker 1: on regulation crypto. I'm told she's one of the first
Speaker 1: people to say we need to regulate this and came
Speaker 1: up with a paper on it. So does that mean
Speaker 1: that we're going to have that regulation sooner rather than
Speaker 1: later and maybe have it be informed. Yeah, I think
Speaker 1: that's right. I mean, she has to stellar reputation that
Speaker 1: she's pretty highly respected, and she certainly has the experience
Speaker 1: in her various areas of work over the past many
Speaker 1: years to be able to think and lead discussions pretty
Speaker 1: pretty well on that. But you know, I think people
Speaker 1: again not separating which companies actually benefit from more concise,
Speaker 1: more thorough regulation and which once might lose. You had
Speaker 1: the whole area trade down on the fear of more regulation,
Speaker 1: but actually it should be viewed as a positive for
Speaker 1: the development of products in that set, and I think
Speaker 1: people probably misread that. So once again, going forward, I
Speaker 1: think we're going to get some clarity on the direction
Speaker 1: which regulation is likely to go, and I think that
Speaker 1: could actually help some of the better companies. Joy and
Speaker 1: I couldn't agree more. I think there's a there's a
Speaker 1: perception that you know, regulation is negative, regulations not negative.
Speaker 1: You know, good sound regulation will make it more clear
Speaker 1: who are the winners and who are the losers, and
Speaker 1: which you know can operate within a highly regulated financial
Speaker 1: services industry. My unders ending is that the FED white
Speaker 1: paper on stable coins is coming out very soon, and
Speaker 1: I think that will add to some clarity around that
Speaker 1: as well. So so Bob, you've mentioned stable coins a
Speaker 1: couple of times, and really focus, if you would, on
Speaker 1: the payment companies, because you do have experience, You've got
Speaker 1: investments in the area. What will be the difference between
Speaker 1: the sheep and the goats, if I can put it
Speaker 1: that way, Because there are a lot of companies out
Speaker 1: there right now, which ones will survive and flourish and
Speaker 1: which ones will follow the wayside. So there are there
Speaker 1: are stable coin companies or companies that are platforms that
Speaker 1: that expect to be that would prefer to be offshore,
Speaker 1: that would prefer to be outside of the regulatory perimeter,
Speaker 1: and I think I think those will be very challenged
Speaker 1: in terms of becoming um you know, really used is payments.
Speaker 1: And there are others like Circle, which has said they
Speaker 1: planned to m apply with the o C c UM
Speaker 1: for a full reserve banking license. That's how that's how
Speaker 1: much they would um prefer to be within the regulatory
Speaker 1: perimeter of of the US financial system. So UM, I
Speaker 1: think I think we'll see it with more clarity David,
Speaker 1: going forward, but I think we can see it, and
Speaker 1: there's ore there's already a separation from those that had
Speaker 1: prefer to stay outside of the regulatory perimeter and those
Speaker 1: that would prefer to operate inside. Joyn, I'm really curious
Speaker 1: again for you, as a portfolio manage, we hear increasingly
Speaker 1: people say, even the we're skeptical of cryptocurrency overall, that
Speaker 1: there is a role in your portfolio for some of
Speaker 1: it for various reasons. Do you feel that way? Do
Speaker 1: you look to balance to some extent have some role
Speaker 1: for cryptocurrency, whether stable coin or a different sort. Yeah,
Speaker 1: you know there can be a role for it. As
Speaker 1: Bob was saying, it's at this point a bit of
Speaker 1: a wild west, right. Some are quality and they're really
Speaker 1: careful about adhering to what is likely to be regulatory
Speaker 1: frameworks that keep them safe, right and create transparency. Um,
Speaker 1: but you know, we do create opportunity for our clients
Speaker 1: to be involved in some of the cryptocurrencies. We like
Speaker 1: the ones that have a more grounded foundation in the
Speaker 1: underlyingable wuting technology. UM. But you know, it's a bit
Speaker 1: hard right now to get too to evolved because again
Speaker 1: there's going to be a shakeout among those who are
Speaker 1: are more careful about keeping those transparency uh, you know,
Speaker 1: guard rails in place and keeping out some of the
Speaker 1: more de various activities that have been you know, used
Speaker 1: in those platforms and also you know, potential for hacking
Speaker 1: and other things. So one really has to be careful.
Speaker 1: But you know, it's a clearly speculative um, you know,
Speaker 1: potentially a lot of upside, but also a riskier position,
Speaker 1: so one wants to limit exposure. I think that that
Speaker 1: realm at this point. Great having both of you with us.
Speaker 1: That's Bob Diamond of Atlas Merchant Capital and Joe an
Speaker 1: Fee of Advisor's Capital Management coming up. It looks like
Speaker 1: FED Chair j Pal is headed toward us second tour
Speaker 1: of duty. But what confronts him this time may be
Speaker 1: very different from what he's seen before. We ask former
Speaker 1: FED Governor Dan Torulo of Harvard. They could dust off
Speaker 1: a lot of the tools from the eighties. You know
Speaker 1: the output gap analysis h Phillips curve. This is Wall
Speaker 1: Street Week on Bloomberg. This is Bloomberg Wall Street Week
Speaker 1: with David Weston from Bloomberg Radio economic defender of last
Speaker 1: resort since the Great Financial Crisis of two thousand eight,
Speaker 1: it's been the Federal Reserve we've depended on to bail
Speaker 1: out the economy when things got rough. The ongoing labor
Speaker 1: market slack and the subdued inflation outlook are key reasons
Speaker 1: for the Committee's decision to maintain the current high degree
Speaker 1: of monetary policy. Monetary policy will likely remain highly accommodative
Speaker 1: for quite some time, but now we face something we
Speaker 1: haven't seen for a while, a FED bent on tightening
Speaker 1: rather than loosening. With Chair J. Powell testifying his confirmation
Speaker 1: hearing this week, the quantitative easing has to come to
Speaker 1: an end. Will be normalizing policy, meaning we're gonna end
Speaker 1: our asset purchase in March, that rate hikes are coming
Speaker 1: this year. If we have to raise interest rates more
Speaker 1: over time, we will, And that the Fed's balance sheet
Speaker 1: is just too big we're mindful of the balance sheet
Speaker 1: is nine trillion dollars. It's far above where it needs
Speaker 1: to be, in short, that the economy no longer needs
Speaker 1: the sort of monetary policy support the FED has been
Speaker 1: providing for over a decade. The economy no longer needs,
Speaker 1: or once the very highly accommodative policies that we've had
Speaker 1: in place to deal with the pandemic in the aftermath.
Speaker 1: And so, as J. Piale is on the brink of
Speaker 1: being confirmed for a second term as Chair of the
Speaker 1: Federal Reserve, it's time to think about how different the
Speaker 1: next four years maybe from what came before, and to
Speaker 1: help us take a look at what the Federal Reserve
Speaker 1: has in store for it. Coming up, we welcome to
Speaker 1: a former member of the Federal Reserve Board. He is
Speaker 1: Daniel Tarullo. Dan, thanks so much for being with us.
Speaker 1: It's been one thing to manage the Fed. It's not
Speaker 1: been easy, I'm not saying, and we were losing monetary
Speaker 1: policy supporting economy. How difficult will it be if and
Speaker 1: when J. Powell gets confirmed as the next chair to
Speaker 1: really have a very different regime. Well, David, it's true
Speaker 1: for the first time really in about forty years. Inflation
Speaker 1: is the part of the dual mandate that's front and center,
Speaker 1: if not standing alone at least much more prominent than
Speaker 1: it has been. And essentially what they're confronting here is
Speaker 1: that had, of course a major supply side shock in
Speaker 1: the form of the virus of uncertain duration with literal
Speaker 1: variants that keep mucking up people's efforts to analyze when
Speaker 1: the effects will pass through. At the same time, they've
Speaker 1: had an awful lot of fiscal stimulus over the last
Speaker 1: couple of years, and so when you have reduced supply
Speaker 1: and increased demand predictably, you've got inflation of the sort
Speaker 1: that we haven't seen in some time now. The FED
Speaker 1: spent most of telling itself and us that they thought
Speaker 1: that inflation was going to be transitory because it was
Speaker 1: grounded in those supply side effects people not going to work,
Speaker 1: not being able to get things around the country, and
Speaker 1: the like. Obviously they're not holding to that line anymore. UH,
Speaker 1: And the the implicit policy implication of their view last
Speaker 1: year that they didn't really need to do much has
Speaker 1: now obviously been abandoned. But they now need a new
Speaker 1: hypothesis as to uh, the trajectory of inflation and what
Speaker 1: will cause it to perhaps recede, what will cause it
Speaker 1: to embed itself. UH. And and that's really I think
Speaker 1: the first order of business on monetary policy for the
Speaker 1: FED this year. Do they have, as far as you
Speaker 1: can tell, a theory of the case at this point?
Speaker 1: What are they managing this for? As they say, we
Speaker 1: have to get inflation down. We heard that from both
Speaker 1: FED Chair j Pal aswell as lair Brainer this week.
Speaker 1: They agree in the goal, but did they have a
Speaker 1: theory about how to come about with that goal? Well,
Speaker 1: they have. I wouldn't have expected that at confirmation hearings
Speaker 1: they would have put forth a more or less nuanced
Speaker 1: monetary policy view. Uh. So, I don't know what they're
Speaker 1: operating theory is now, but it's surely not just going
Speaker 1: to be last year's I mean, there are several options, right. Uh.
Speaker 1: They tend to talk about expectations a lot that is
Speaker 1: uh well grounded inflation expectations in the public and markets
Speaker 1: keeping inflation down. Um, that's a that's a hard one
Speaker 1: to judge in real time, and nobody really quite understands
Speaker 1: why expectations change. They could dust off a lot of
Speaker 1: the tools from the eighties, you know, the output gap analysis, uh,
Speaker 1: Phillips curve the relationship between inflation and unemployment, wage price cycles. Uh,
Speaker 1: and try to apply that right now? Are they could
Speaker 1: come up really with transitory version two, which would basically say, look,
Speaker 1: we think the medium term are longer term disinflationary forces
Speaker 1: in the economy. Globalization, demographics and the like are still
Speaker 1: at work, um, and so we we don't need to
Speaker 1: make major adjustments in monetary policy, but we do make
Speaker 1: need to make some. So those are at least three
Speaker 1: possibilities or some combination of them. But I haven't seen
Speaker 1: anything yet, uh that would give us a hint as
Speaker 1: to which particular blend of those notions the feed is
Speaker 1: going to redoct What's important, David, though, is that they
Speaker 1: do articulate, as you put it, a theory of the
Speaker 1: case so that they can then judge incoming data against
Speaker 1: that theory, and that allows them to make policy adjustments
Speaker 1: as appropriate. Thank you so much to Daniel Tarullo of
Speaker 1: the Harvard Law School. Coming up, we wrap up the
Speaker 1: week special contribute to Larry Summers of Harvard. This is
Speaker 1: Wall Street Week on Bloomberg. This is Bloomberg Wall Street
Speaker 1: Week with David Weston from Bloomberg Radio. This is Wall
Speaker 1: Street Week. I'm David Weston. We are delighted to welcome
Speaker 1: back once again our special between Larry Summers to Wall
Speaker 1: Street week. So, Larry, we had a lot of data
Speaker 1: flow this week, and i'd like your reaction to and
Speaker 1: let's lead off with the lead, which is the CPI
Speaker 1: numbers of seven percent. It's been a good long time
Speaker 1: since we've seen that kind of number. It has David
Speaker 1: Richard Nixon imposed wage price controls when inflation was about
Speaker 1: two thirds as high as it's been last year. This
Speaker 1: is above any place that got during the Guns and
Speaker 1: Butter Vietnam inflation. I ate the data flow is saying
Speaker 1: what I thought for quite some time that yes, there
Speaker 1: are transitory elements in inflation, and very likely they will recede,
Speaker 1: but we are basically moving towards UH higher entrenched inflation.
Speaker 1: It's there in expectations, it's there in wages, it's there
Speaker 1: in labor shortages, it's there in the pervasive pattern across
Speaker 1: many different UH prices, and people try to excuse it
Speaker 1: by picking this figure and that figure from UH month
Speaker 1: to month. But we've got an overheated economy and the
Speaker 1: Fed is going to have a very real challenge of
Speaker 1: cooling that economy off. UM and doing it in a
Speaker 1: controlled way that has not been done very successfully UH
Speaker 1: in UH the past. So it's gonna be a very
Speaker 1: challenging year for macroeconomic policy. And I suspect that the
Speaker 1: approach depends on what the causes are of the underlying inflation,
Speaker 1: and we have various candidates put forward. For example, we
Speaker 1: talked with Briand's you know him well from the White
Speaker 1: Hosts week. He said, well, really, this is a supply
Speaker 1: side problem. Once we get the supply chain fixed, it'll
Speaker 1: be all fixed. Is he right? No, he's wrong. UH.
Speaker 1: We have a massive overheated labor market. We have the
Speaker 1: highest ratio of vacancies to unemployment in the country's history
Speaker 1: by a large margin. We have shortages of labor in
Speaker 1: everything from psychotherapy UH to McDonald's, in everything from investment
Speaker 1: analysts to UH garters. That suggests a ay surfeit of
Speaker 1: purchasing power and demand relative to the capacity of the
Speaker 1: economy to UH produce. And unless we bring those things
Speaker 1: into balance, we're gonna have not just higher inflation, but
Speaker 1: possibly even UH accelerating UH inflation. And we need to
Speaker 1: recognize that we have an overheated economy that we are
Speaker 1: going to need UH to cool off UM in UH
Speaker 1: the time to come, and until we do that, it
Speaker 1: is going to be much more difficult to address the problem. Yes,
Speaker 1: we need to do what we can to open up ports. Yes,
Speaker 1: if there was anything we could do to cause there
Speaker 1: to be more semiconductors, UH, that would be good. Yes,
Speaker 1: better childcare arrangements to enable more women to work UH
Speaker 1: would be desirable. But fundamentally, this inflation is about UM
Speaker 1: and overheating economy, and that's the thing that UH we
Speaker 1: have to address. All which takes us back to your
Speaker 1: statement that it's pretty difficult for the FED to have
Speaker 1: a soft landing here. The tracker is not unblemished. I
Speaker 1: think it's fair to say with the three new nominees
Speaker 1: from President Biden, he will have basically put five people
Speaker 1: in place, renominating J Pal as Chair, promoting his proposals,
Speaker 1: proposing LEO branded and then three new members. What do
Speaker 1: we know about these people? What does it say about
Speaker 1: the constitution the FED going forward? Assuming they get confirmed.
Speaker 1: Let me say that I strongly support UH the reconfirmation
Speaker 1: of J. Powell, and I strongly support Layo Brader's nomination
Speaker 1: to be UH Vice chair of the FED. The President
Speaker 1: has made clear his commitment to the independence of the FED.
Speaker 1: Part of that commitment is allowing and encouraging the FED
Speaker 1: to be focused on its fundamental jobs of maintaining a
Speaker 1: non inflationary economy with as strong employment as is possible
Speaker 1: on a sustained basis. If a sense develops that there's
Speaker 1: a desire to politicize the FED by focusing it towards
Speaker 1: other issues beyond the crucial issues of financial stability, I
Speaker 1: think that could be problematic for the Fed's credibility, and
Speaker 1: so it will be very important UH tow for the
Speaker 1: nominees who have distinguished track records in different UH areas
Speaker 1: in the past to present their views UH to UH
Speaker 1: Congress and for Congress to very seriously consider those views.
Speaker 1: Curious about where you think we are and dealing with
Speaker 1: pandemic and more pointedly in the past on this program,
Speaker 1: you question, particularly during the Trump administration, the competence of
Speaker 1: the government. What they did demonstrating competence in the way
Speaker 1: they handled it. At this point is the Biden administration
Speaker 1: demonstrating competence in the way it's handling the pandemic. It
Speaker 1: is so much easier to be on the outside and
Speaker 1: criticize and carp and judge things in retrospect that I'm
Speaker 1: reluctant to pass judgment on UH what the Biden administration
Speaker 1: has done. Certainly, UH we now need to be focused
Speaker 1: on much more than vaccination, on rapid dissemination of treatment,
Speaker 1: particularly on the availability of tests. I wish those things
Speaker 1: had happened faster. I wish the CDC and the f
Speaker 1: d A had broken more out of their conventional rhythms
Speaker 1: to reflect the extraordinary situation UH that we're dealing with.
Speaker 1: But I would underscore one thing, David, and that is
Speaker 1: that COVID anywhere is a risk of mutation that could
Speaker 1: lead to catastrophe everywhere, and that we are under investing
Speaker 1: as a global system on a massive scale in the
Speaker 1: global effort to contain UH covid, and in addition to
Speaker 1: its moral significance around the world, we are making it
Speaker 1: more likely that the next UH vaccine, the next COVID strain,
Speaker 1: will have O macrons transmissibility and some other strained UH lethality.
Speaker 1: And that is a grave risk to H the global system,
Speaker 1: and one that I think is not getting enough attention. Okay,
Speaker 1: well said, thank you so much. It's always a polite
Speaker 1: to have you. That is Larry Summers, of course of
Speaker 1: Harvard University. Thank you. Finally, one more thought playing by
Speaker 1: the rules of vaccine mandates. Everyone is talking about them,
Speaker 1: from banks saying that if you don't get the JAB
Speaker 1: you can't keep your job, to the Supreme Court ruling
Speaker 1: that it's up to Congress, not the President, to make
Speaker 1: them universal. In early while millions stayed at home, millions
Speaker 1: of healthcare workers heroically state that they're at worked. These
Speaker 1: same workers are enough for us to tune between losing
Speaker 1: their jobs and complying with the government's vaccine mandate. It's
Speaker 1: one thing to try to tell your employee is what
Speaker 1: they need to do to come to work. It's quite
Speaker 1: another when it's an independent contractor who makes tens of
Speaker 1: millions of dollars a year, has a vocal global fan base,
Speaker 1: and oh, by the way, is arguably the greatest of
Speaker 1: all time. That's what Australia has on its hands in
Speaker 1: Novak Djokovic looking to break his tie with failed Nadal
Speaker 1: and Roger Federer for the most Grand Slam wins ever
Speaker 1: by a man, and oh, by the way, he's an
Speaker 1: outspoken skeptic of vaccinations. Mr Djokovic has been shall we say,
Speaker 1: a bit kg about his vaccination status, invoking instead he
Speaker 1: has claimed that he caught the virus, recovered and is
Speaker 1: therefore immune, all of which got him into the country,
Speaker 1: only to have the government say it wasn't enough and
Speaker 1: you'd have to leave and say goodbye to that twenty
Speaker 1: one Grand Slam title, which put the issue in the
Speaker 1: lap of the courts, the courts of law and the
Speaker 1: courts of public opinion. As tensions continued in advance of
Speaker 1: the start of the Australian Open next week. Rules rules
Speaker 1: and there are not special cases. But it's not only
Speaker 1: tennis stars playing a bit fast and loose with vaccine
Speaker 1: mandates these days. We have the infamous case of NFL
Speaker 1: quarterback Aaron Rodgers, who was forced to sit out when
Speaker 1: it turned out he really hadn't been vaccinated, after he
Speaker 1: led everyone to believe that he had the choice that
Speaker 1: was in my best interest. You might respect it, you
Speaker 1: might hate it. And of course, not far from Wall Street,
Speaker 1: superstar guard Kyrie Irving of the Brooklyn Nets hasn't been
Speaker 1: able to play at home all season long, although his
Speaker 1: team needs him so badly. It is now starting to
Speaker 1: let him play on the road where local authorities permit
Speaker 1: understood their their choice to to say, if you're not
Speaker 1: gonna be vaccinated, fully vaccinated, then you know you can't
Speaker 1: be a full participant. And um, I knew the consequences.
Speaker 1: I wasn't prepared for them by no stretch of imagination.
Speaker 1: But all that may pale in comparison to what China
Speaker 1: has in front of it, trying to keep to its
Speaker 1: zero COVID policy with hundreds of athletes through an entire
Speaker 1: Winter Olympics, with one city close of about eleven million people,
Speaker 1: and now cases of oh macron found in Chianjin, which
Speaker 1: is just you know, around the corner from Beijing, and
Speaker 1: an Olympics coming up in less than a month. Um,
Speaker 1: all eyes on China right now. So if you think
Speaker 1: you're struggling with your version of a vaccine mandate, to
Speaker 1: just think about the for Australians or the Chinese, or
Speaker 1: for that matter, the NBA that does it. For this
Speaker 1: episode of Wall Street Week, I'm David Weston. This is Bloomberg.
Speaker 1: See you next week.