1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene along 2 00:00:09,240 --> 00:00:12,719 Speaker 1: with Jonathan Farrell and Lisa Brown Witz Jay Ley. We 3 00:00:12,880 --> 00:00:16,800 Speaker 1: bring you insight from the best and economics, finance, investment, 4 00:00:17,079 --> 00:00:22,440 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcast, Suncloud, 5 00:00:22,840 --> 00:00:26,280 Speaker 1: Bloomberg dot Com and of course on the Bloomberg Termainment. 6 00:00:28,880 --> 00:00:32,400 Speaker 1: Really timely conversation always with Ray Dalio, but with what's 7 00:00:32,440 --> 00:00:35,239 Speaker 1: going on, and we'll finish strong with China here in 8 00:00:35,320 --> 00:00:38,880 Speaker 1: a moment. This is really really timely for Global Wall Street. 9 00:00:38,920 --> 00:00:41,159 Speaker 1: We will come all of you on Bloomberg Television and 10 00:00:41,200 --> 00:00:43,800 Speaker 1: I'm Bloomberg Radio. John Farrell mentions ever Grand there is 11 00:00:43,840 --> 00:00:47,120 Speaker 1: Bridgewater up to their eyeballs and ever Grand paper. No, 12 00:00:47,200 --> 00:00:49,120 Speaker 1: we don't have you don't have any other I gotta 13 00:00:49,159 --> 00:00:51,440 Speaker 1: make some news here, help me out. Ray Ray has 14 00:00:51,479 --> 00:00:54,240 Speaker 1: the bravest bio I've ever seen. Let me go here, 15 00:00:54,320 --> 00:00:57,520 Speaker 1: and I have a nodding familiarity with us. In his 16 00:00:57,680 --> 00:01:02,200 Speaker 1: high school years, Daio was a media ocre student. What happened? 17 00:01:02,480 --> 00:01:05,399 Speaker 1: How did you go from a mediocre student to the 18 00:01:05,520 --> 00:01:11,200 Speaker 1: success you've seen over so many years? Um? Then, I 19 00:01:11,240 --> 00:01:13,600 Speaker 1: like markets, I was a kid that I mean school 20 00:01:13,959 --> 00:01:16,840 Speaker 1: that when they cram stuff down your throat and it 21 00:01:16,880 --> 00:01:20,920 Speaker 1: just didn't interested in markets. Interested the markets interested you 22 00:01:21,000 --> 00:01:23,959 Speaker 1: in the mathematics of the markets and the girls. Okay, 23 00:01:23,959 --> 00:01:26,319 Speaker 1: of course we knew that, but Long Island. But the 24 00:01:26,440 --> 00:01:29,720 Speaker 1: dynamics of it, the dynamics of the markets. When did 25 00:01:29,720 --> 00:01:31,560 Speaker 1: that click in for you? Did it wait for when 26 00:01:32,120 --> 00:01:34,520 Speaker 1: you were talking? Well, like I caddied, and this was 27 00:01:34,560 --> 00:01:36,880 Speaker 1: the sixties, and it was you know, that was the 28 00:01:36,880 --> 00:01:39,240 Speaker 1: hottest time in the markets. Like every time you get 29 00:01:39,240 --> 00:01:41,720 Speaker 1: a haircutters shoe shot, and somebody would talk to you 30 00:01:41,720 --> 00:01:44,440 Speaker 1: about the markets. So I caddied, and I took my 31 00:01:44,480 --> 00:01:47,240 Speaker 1: caddying money and I put it in the markets. And um, 32 00:01:47,280 --> 00:01:49,120 Speaker 1: I didn't know what I was doing. The first stock 33 00:01:49,200 --> 00:01:52,080 Speaker 1: I bought was my whole criteria was it was the 34 00:01:52,080 --> 00:01:54,240 Speaker 1: only company that I ever heard of that was selling 35 00:01:54,320 --> 00:01:57,880 Speaker 1: for a lot less than five dollars a year, Northeast Airlines. 36 00:01:58,600 --> 00:02:01,960 Speaker 1: They did well, and and and and you know, like 37 00:02:02,000 --> 00:02:04,520 Speaker 1: my investment criteria was I could buy more shares, so 38 00:02:04,560 --> 00:02:06,240 Speaker 1: if it went up, I'd make more money. That was 39 00:02:06,280 --> 00:02:08,360 Speaker 1: my crow. Did it work out? Well? What happened is 40 00:02:08,360 --> 00:02:09,960 Speaker 1: it has come to and he was about to go 41 00:02:10,040 --> 00:02:13,440 Speaker 1: bankrupt and somebody acquired and it tripled, and I thought 42 00:02:13,480 --> 00:02:16,280 Speaker 1: this game is easy. It was to start right, Yeah, 43 00:02:16,280 --> 00:02:18,480 Speaker 1: But of course the game isn't easy. The game has 44 00:02:18,639 --> 00:02:21,320 Speaker 1: not been easy for Bridgewater. Let's get this on the way. 45 00:02:21,320 --> 00:02:24,560 Speaker 1: Our Catherine Burton has done wonderful reporting on the struggles 46 00:02:24,560 --> 00:02:28,400 Speaker 1: of the entire industry. The difference is, you know, seven 47 00:02:28,440 --> 00:02:32,000 Speaker 1: oh eight you had challenging years and you bounced back 48 00:02:32,080 --> 00:02:36,079 Speaker 1: with a vengeance. Can you bounce back now? With markets 49 00:02:36,080 --> 00:02:39,640 Speaker 1: at the zero bound um? Seven oh eight week was 50 00:02:39,680 --> 00:02:42,520 Speaker 1: a great year because we caught the we anticipated the 51 00:02:42,520 --> 00:02:45,520 Speaker 1: financial crisis and we did great, and then we had 52 00:02:45,880 --> 00:02:50,000 Speaker 1: seven and so on. Recently we got we missed the 53 00:02:50,080 --> 00:02:52,800 Speaker 1: COVID coming and then we got hit by the COVID 54 00:02:52,880 --> 00:02:57,359 Speaker 1: coming um and so then we bounced back from from that. 55 00:02:57,480 --> 00:03:01,399 Speaker 1: But I think we um we didn't take as much 56 00:03:01,520 --> 00:03:04,320 Speaker 1: risk as we could because we added we added value, 57 00:03:04,360 --> 00:03:06,720 Speaker 1: but not as much as we should have added. I 58 00:03:06,760 --> 00:03:09,639 Speaker 1: want you to speak to Bridgewater clients now and those 59 00:03:09,680 --> 00:03:13,480 Speaker 1: with billions lined up considering giving you money. What are 60 00:03:13,520 --> 00:03:17,840 Speaker 1: the new procedures at Bridgewater to be more supple in 61 00:03:17,880 --> 00:03:21,320 Speaker 1: the market, given where credit markets are again at the 62 00:03:21,400 --> 00:03:25,120 Speaker 1: zero back Well, I don't think there's new procedures. It 63 00:03:25,320 --> 00:03:27,800 Speaker 1: is the amount of risk that one wants to take 64 00:03:27,880 --> 00:03:30,800 Speaker 1: at certain times. So if you take our all Weather Fund, 65 00:03:30,880 --> 00:03:35,000 Speaker 1: for example, I think it's up ten plus something this year, 66 00:03:35,400 --> 00:03:38,920 Speaker 1: it could have been um more aggressive. The question is 67 00:03:38,960 --> 00:03:41,160 Speaker 1: in this risk environment, how much do you want to 68 00:03:41,160 --> 00:03:44,680 Speaker 1: be aggressive? You know? So, um, you know, we're always 69 00:03:44,720 --> 00:03:47,840 Speaker 1: looking at things that we can do better. That pandemic 70 00:03:48,400 --> 00:03:51,200 Speaker 1: is something that we've examined and we learn a little 71 00:03:51,240 --> 00:03:54,400 Speaker 1: bit more, but by and large it's you know, uh, 72 00:03:54,800 --> 00:03:58,960 Speaker 1: it's the same, just more of it. Stephen Roacheville University 73 00:03:59,000 --> 00:04:01,840 Speaker 1: had claimed at Morgan Stanley says it's the single biggest 74 00:04:01,920 --> 00:04:04,560 Speaker 1: miss he's ever missed. Was how we came out of 75 00:04:04,600 --> 00:04:07,760 Speaker 1: the pandemic. How do you feel the nation and our 76 00:04:07,920 --> 00:04:12,040 Speaker 1: fiscal status will come out of the huge debt build 77 00:04:12,120 --> 00:04:16,560 Speaker 1: up we have. How do you believe America will d debt? Well, 78 00:04:16,600 --> 00:04:20,520 Speaker 1: this is all happened over and over again. Um, that's 79 00:04:20,520 --> 00:04:23,360 Speaker 1: what quote my attention. When you hit a zero interest 80 00:04:23,440 --> 00:04:27,680 Speaker 1: rate and you have too much debt and everybody needs money, 81 00:04:28,279 --> 00:04:32,040 Speaker 1: the way it works is the government sends out the checks, 82 00:04:32,160 --> 00:04:34,599 Speaker 1: but the government can't print money, so it has to 83 00:04:34,640 --> 00:04:37,599 Speaker 1: borrow money. From the Federal Reserve and borrow money from others, 84 00:04:37,880 --> 00:04:40,240 Speaker 1: and they don't have enough money, so that they print 85 00:04:40,279 --> 00:04:43,359 Speaker 1: the money. And so the value of cash and the 86 00:04:43,440 --> 00:04:48,240 Speaker 1: value of bonds as negative real returns, significantly negative real returns, 87 00:04:48,520 --> 00:04:53,240 Speaker 1: and so money goes somewhere else. It goes into traditionally equities, 88 00:04:53,320 --> 00:04:57,200 Speaker 1: it goes into gold, it goes into property, it goes Yeah, 89 00:04:57,440 --> 00:05:00,560 Speaker 1: the house over there way just went up three thousand 90 00:05:00,560 --> 00:05:03,800 Speaker 1: dollars when you sat down on the chair. Continue the 91 00:05:04,400 --> 00:05:09,560 Speaker 1: But the same thing happened in um V one August 92 00:05:09,600 --> 00:05:13,200 Speaker 1: nineteen seventy one. Same thing happened in March nineteen thirty three, 93 00:05:13,640 --> 00:05:16,120 Speaker 1: and that was when they produced a lot more money. 94 00:05:16,279 --> 00:05:20,280 Speaker 1: And that monetization which moves its way through the system mechanistically. 95 00:05:20,440 --> 00:05:22,919 Speaker 1: The way it works, a bond confedera reserve comes in 96 00:05:22,960 --> 00:05:25,320 Speaker 1: and buys a bond, it gives it to an investor. 97 00:05:25,800 --> 00:05:29,200 Speaker 1: That investor then in turns puts it into other investments, 98 00:05:29,400 --> 00:05:31,680 Speaker 1: and then it gives it to the public through the government. 99 00:05:31,760 --> 00:05:34,839 Speaker 1: So this is um that's the way the mechanics. Regelio 100 00:05:34,880 --> 00:05:37,279 Speaker 1: with this at the Granite Economic Forum on Bloomberg Radio 101 00:05:37,279 --> 00:05:41,120 Speaker 1: and Bloomberg Television this morning. Let's go to China now, 102 00:05:41,160 --> 00:05:42,839 Speaker 1: it's so much in the news. I wanted to wait, 103 00:05:42,920 --> 00:05:44,679 Speaker 1: but I think we've just got to get to China 104 00:05:44,800 --> 00:05:47,560 Speaker 1: right now. This is a new Beijing. Is it a 105 00:05:47,640 --> 00:05:50,320 Speaker 1: return to an old Beijing that you and I knew 106 00:05:50,720 --> 00:05:53,640 Speaker 1: when you were buying Northeast air or is you do 107 00:05:53,680 --> 00:05:58,000 Speaker 1: you envision a Beijing that's moving to a new territory. Well, 108 00:05:58,440 --> 00:06:02,320 Speaker 1: you have daughter in southern law in Shanghai, and you 109 00:06:02,600 --> 00:06:04,720 Speaker 1: and and so we get to living at real time. 110 00:06:04,760 --> 00:06:07,719 Speaker 1: We're living in real time. And the more you have contact, 111 00:06:07,760 --> 00:06:09,680 Speaker 1: I think the more you understand it. I don't think 112 00:06:09,680 --> 00:06:14,280 Speaker 1: it's well understood for a long time. The the question 113 00:06:16,120 --> 00:06:21,559 Speaker 1: is how can communism and capitalism coexists? That's the riddle 114 00:06:21,560 --> 00:06:23,120 Speaker 1: you have to answer. And he had to answer it 115 00:06:23,160 --> 00:06:26,040 Speaker 1: a while ago. And what do these people want at 116 00:06:26,040 --> 00:06:29,279 Speaker 1: the top and what they The answer to that riddle 117 00:06:29,440 --> 00:06:32,800 Speaker 1: was told also by Deng shell Ping. When he was asked, 118 00:06:33,040 --> 00:06:35,600 Speaker 1: he said, it's glorious to be rich. And then they 119 00:06:35,640 --> 00:06:38,279 Speaker 1: asked about capitalism, and he says, it doesn't matter if 120 00:06:38,320 --> 00:06:40,240 Speaker 1: it's a black cat or a white cat, just as 121 00:06:40,240 --> 00:06:43,200 Speaker 1: long as it catches mice. And so the idea is 122 00:06:43,360 --> 00:06:51,240 Speaker 1: producing wealth and so capitalism, capitalism, yes, but the redistribution. Okay. 123 00:06:51,240 --> 00:06:53,320 Speaker 1: So we have four things that are really going on 124 00:06:53,360 --> 00:06:58,880 Speaker 1: in China. If if you understand their intend um, common 125 00:06:58,960 --> 00:07:02,880 Speaker 1: prosperity is the word now, okay, and there's been the 126 00:07:02,920 --> 00:07:06,880 Speaker 1: objective to raise money and then to broaden the base 127 00:07:06,920 --> 00:07:10,280 Speaker 1: of that. Okay, that's common prosperity. So if you look 128 00:07:10,280 --> 00:07:12,800 Speaker 1: at their tax rates, they're lower than the United States. 129 00:07:12,800 --> 00:07:15,560 Speaker 1: If you look at the measures of almost capitalism, they 130 00:07:15,560 --> 00:07:18,400 Speaker 1: have as much capitalism or more capitalism, much more so 131 00:07:18,520 --> 00:07:21,520 Speaker 1: than Europe for example. And then and now they're in 132 00:07:21,520 --> 00:07:25,720 Speaker 1: a prospect to broaden that. So I think there's a 133 00:07:25,760 --> 00:07:30,120 Speaker 1: tendency and an understandable tendency to think, because they are 134 00:07:30,440 --> 00:07:35,600 Speaker 1: maoist and capital and communists, that they're going to go 135 00:07:35,680 --> 00:07:38,280 Speaker 1: back to that kind of a thing. Then they're not. 136 00:07:38,560 --> 00:07:44,000 Speaker 1: And den Cha Ping excuse me, Um, Shishi Ping. Just Um, 137 00:07:44,040 --> 00:07:47,520 Speaker 1: for example, introduced the newest stock market in Beijing. He 138 00:07:47,600 --> 00:07:49,960 Speaker 1: made a point of being the one who introduced the 139 00:07:50,000 --> 00:07:52,960 Speaker 1: market in Beijing to the small and medium sized enterprises. 140 00:07:53,360 --> 00:07:57,040 Speaker 1: They know that it catches mice. And so the issue 141 00:07:57,200 --> 00:08:00,880 Speaker 1: is that the capitalist is not in control. The issue 142 00:08:00,920 --> 00:08:03,960 Speaker 1: is that there's a system for the whole system. And 143 00:08:04,000 --> 00:08:07,040 Speaker 1: then what they want to do is make sure that um, 144 00:08:07,080 --> 00:08:10,600 Speaker 1: it's not a capitalist driven system. So and then there's 145 00:08:10,680 --> 00:08:13,440 Speaker 1: data control and then and then you have to understand 146 00:08:13,440 --> 00:08:18,040 Speaker 1: there's micromanagement. It's like the kids. There's a top down 147 00:08:18,120 --> 00:08:20,480 Speaker 1: versus bottom up. Whether you like it or not, it's 148 00:08:20,480 --> 00:08:25,040 Speaker 1: what happen our listeners and our viewers prosper from their 149 00:08:25,080 --> 00:08:28,880 Speaker 1: micro management of the real estate debt collapse. We're beginning 150 00:08:28,920 --> 00:08:32,800 Speaker 1: to see in China, what is the opportunity if we 151 00:08:32,920 --> 00:08:38,640 Speaker 1: see their dominant investor position domestically go down in price. 152 00:08:38,760 --> 00:08:41,600 Speaker 1: How do you play that? Well, the mechanics are the 153 00:08:41,640 --> 00:08:44,760 Speaker 1: same as UM. The United States went through and everybody 154 00:08:44,760 --> 00:08:47,400 Speaker 1: else went through, so it would be very similar to 155 00:08:48,400 --> 00:08:52,240 Speaker 1: our two thousand eight mechanical. So what we do it's 156 00:08:52,240 --> 00:08:55,880 Speaker 1: tappened over and over again is UM the central Bank 157 00:08:55,960 --> 00:08:59,160 Speaker 1: makes a decision of moral hazard. You know, they never 158 00:08:59,240 --> 00:09:01,079 Speaker 1: used to have more? Do you believe they're there right 159 00:09:01,080 --> 00:09:03,000 Speaker 1: now after this week that we've seen in the market, 160 00:09:03,040 --> 00:09:06,120 Speaker 1: So they knew that this was happening, and there's the 161 00:09:06,200 --> 00:09:10,199 Speaker 1: preparation for this, and they know that there's more and 162 00:09:10,200 --> 00:09:13,440 Speaker 1: and that's a good thing, not a bad thing. Because 163 00:09:13,480 --> 00:09:16,040 Speaker 1: in the past it used to be contro that they 164 00:09:16,040 --> 00:09:19,840 Speaker 1: would guarantee it the banks, five major banks would loan 165 00:09:20,120 --> 00:09:24,600 Speaker 1: state owned enterprises and local governments with implied government guarantees, 166 00:09:24,640 --> 00:09:27,280 Speaker 1: and it was bad. So the process is the same. 167 00:09:27,440 --> 00:09:30,400 Speaker 1: Expect the exact same type of processes we would go through, 168 00:09:30,760 --> 00:09:34,079 Speaker 1: which is to say that there will be more, There 169 00:09:34,080 --> 00:09:37,360 Speaker 1: will be stung, investors will be stung. That's how it works, 170 00:09:37,720 --> 00:09:41,080 Speaker 1: and that the system will be protected because it's denominated 171 00:09:41,080 --> 00:09:42,840 Speaker 1: in their own courtcul I want to get this on 172 00:09:42,880 --> 00:09:45,240 Speaker 1: the record or Redelio, because every Wall Street firm is 173 00:09:45,240 --> 00:09:47,800 Speaker 1: saying this morning, this is not a Lehman moment. What 174 00:09:47,960 --> 00:09:51,280 Speaker 1: we witnessed yesterday and the lesson in price. Explain why 175 00:09:51,360 --> 00:09:53,880 Speaker 1: this is not a Lehman moment to Redelio, Well, because 176 00:09:53,920 --> 00:09:59,959 Speaker 1: a Lehman moment produced pervasive structural damage through the system 177 00:10:00,080 --> 00:10:04,160 Speaker 1: method that wasn't rectified until the Treasury came across in 178 00:10:04,280 --> 00:10:06,880 Speaker 1: terms of it's borrowing, and then the bed came across 179 00:10:06,920 --> 00:10:10,840 Speaker 1: with quantitative easy. But this is not that kind of 180 00:10:10,840 --> 00:10:14,600 Speaker 1: a shake up type of thing. This is three billion 181 00:10:14,720 --> 00:10:17,800 Speaker 1: is what they owe, and this is all manageable. The 182 00:10:17,800 --> 00:10:21,920 Speaker 1: basic economics is for all countries in all time is 183 00:10:21,960 --> 00:10:25,480 Speaker 1: that if you're that is in your own currency, you 184 00:10:25,520 --> 00:10:27,640 Speaker 1: can deal with it. You could work you could work 185 00:10:27,640 --> 00:10:29,920 Speaker 1: it out. We've seen it all happen over and over again, 186 00:10:30,080 --> 00:10:34,200 Speaker 1: and it's a good thing that lenders get stung or 187 00:10:34,240 --> 00:10:37,280 Speaker 1: that the borrowers get stung. That's how the system works. Okay, 188 00:10:37,280 --> 00:10:38,880 Speaker 1: I want to go to my number one question to 189 00:10:39,000 --> 00:10:41,760 Speaker 1: Ray Dalio. I'm fascinated by this. You and I have 190 00:10:41,800 --> 00:10:44,679 Speaker 1: said at the Mbar at the Mandarin and Hong Kong 191 00:10:45,000 --> 00:10:48,319 Speaker 1: and looked at that spectacular experiment. I had the honor 192 00:10:48,360 --> 00:10:50,800 Speaker 1: of Lord Patton with us the day of the Hong 193 00:10:50,840 --> 00:10:54,800 Speaker 1: Kong collapse, a change essentially and polity there. How should 194 00:10:54,800 --> 00:10:58,360 Speaker 1: our western banks, the people you know, James Diamond Staley 195 00:10:58,400 --> 00:11:01,800 Speaker 1: of Barclays, Moye Han of a reinvigorated Bank of America, 196 00:11:02,080 --> 00:11:05,920 Speaker 1: how should the Western banks adapt an adjust in Hong 197 00:11:06,000 --> 00:11:10,360 Speaker 1: Kong to new China realities? Well, I think very simply, 198 00:11:10,400 --> 00:11:13,520 Speaker 1: you have to decide whether the rules and the place 199 00:11:13,679 --> 00:11:16,080 Speaker 1: is a place that you're comfortable with. They will set 200 00:11:16,080 --> 00:11:19,280 Speaker 1: the rules and you go in there and you decide 201 00:11:19,280 --> 00:11:21,520 Speaker 1: if you're going to be part of that as a 202 00:11:21,520 --> 00:11:24,280 Speaker 1: as a good citizen, or you're not and then but 203 00:11:24,400 --> 00:11:26,760 Speaker 1: you don't jump in and out you're in. Other words, 204 00:11:26,920 --> 00:11:30,280 Speaker 1: China's a strategic play. You're not going to jump in 205 00:11:30,360 --> 00:11:33,120 Speaker 1: and out, so and and the amount that you're in 206 00:11:33,400 --> 00:11:35,920 Speaker 1: should be that which you're comfortable with. It's the same 207 00:11:35,960 --> 00:11:39,560 Speaker 1: as an investor. It's not smart to sell on the 208 00:11:39,640 --> 00:11:44,360 Speaker 1: break or buy it's it's it's a strategic play. Most 209 00:11:44,400 --> 00:11:50,360 Speaker 1: investors are very overweight in the United States or other places. Diversification. 210 00:11:50,640 --> 00:11:54,880 Speaker 1: There's a competition, a big competition, a war of sorts 211 00:11:54,920 --> 00:11:59,800 Speaker 1: going on between in technology and so on. The diversification 212 00:12:00,040 --> 00:12:03,240 Speaker 1: put the amount that and the exposure that you want 213 00:12:03,280 --> 00:12:05,680 Speaker 1: to have there because you have to have places on 214 00:12:06,360 --> 00:12:08,760 Speaker 1: some money on two chips because they are at risks 215 00:12:08,800 --> 00:12:12,400 Speaker 1: in the United States do when we look at technology 216 00:12:12,400 --> 00:12:15,320 Speaker 1: and it's something you address courageously. In Principles, the book 217 00:12:15,320 --> 00:12:17,520 Speaker 1: did so well. Whence the movie come out fourth of 218 00:12:17,600 --> 00:12:23,520 Speaker 1: July one Hanks is playing Dalio. Okay, so Principles was 219 00:12:23,559 --> 00:12:28,360 Speaker 1: a huge success. If President she said, read Principles, what 220 00:12:28,520 --> 00:12:31,000 Speaker 1: would chapter would you wanted to read? What does he 221 00:12:31,040 --> 00:12:35,000 Speaker 1: need to know about Dalio? Principles? Well, um, I think 222 00:12:35,040 --> 00:12:38,880 Speaker 1: like everybody, Um, the key is um you know what 223 00:12:39,000 --> 00:12:40,760 Speaker 1: you don't know, that what you don't know, and how 224 00:12:40,800 --> 00:12:42,319 Speaker 1: to deal with what does he not know about the 225 00:12:42,400 --> 00:12:45,600 Speaker 1: United States of America, the resiliency of this nation from 226 00:12:45,640 --> 00:12:49,000 Speaker 1: the Pacific Rim, from Australia and MacArthur all the way 227 00:12:49,080 --> 00:12:51,480 Speaker 1: up to Tokyo. Well, there's a different there's a totally 228 00:12:51,520 --> 00:12:55,440 Speaker 1: different approach. It's UM, whether you like it or not. UM. 229 00:12:57,320 --> 00:13:01,400 Speaker 1: We are a bottom up individualists. It's bill about individualists 230 00:13:01,440 --> 00:13:06,360 Speaker 1: and build I think, and the individuals and bring immigrants 231 00:13:06,400 --> 00:13:09,520 Speaker 1: to the United States, and and and that the power 232 00:13:09,559 --> 00:13:13,520 Speaker 1: of the individual. In China, it is UM the top 233 00:13:13,600 --> 00:13:16,240 Speaker 1: down and it is an an extended family. One of 234 00:13:16,280 --> 00:13:19,280 Speaker 1: the leaders said to me, for example, it's like you know, 235 00:13:19,280 --> 00:13:21,720 Speaker 1: a strict parent and that. And so when we deal 236 00:13:21,760 --> 00:13:25,040 Speaker 1: with things like video games, do you want your kids 237 00:13:25,120 --> 00:13:27,480 Speaker 1: to watch video games? In the United States, we would 238 00:13:27,480 --> 00:13:31,199 Speaker 1: say that's a parental decision. Generally speaking, it wouldn't be 239 00:13:31,240 --> 00:13:33,920 Speaker 1: the state to make that. They would say, it's terrible 240 00:13:34,000 --> 00:13:36,480 Speaker 1: what's going on, and the state is going to mandate it. 241 00:13:36,800 --> 00:13:39,080 Speaker 1: So that there are two those two approaches. And I 242 00:13:39,080 --> 00:13:43,120 Speaker 1: would say that the understanding, the relative merits and understanding 243 00:13:43,559 --> 00:13:46,800 Speaker 1: really how we can get along because there's a risk 244 00:13:46,800 --> 00:13:49,760 Speaker 1: of war. You know, there's a risk of conflict here, 245 00:13:50,160 --> 00:13:53,199 Speaker 1: and so understand how we can get along. I wish 246 00:13:53,240 --> 00:13:57,600 Speaker 1: that yes, Chinese understood Americans better in Americans understood bring 247 00:13:57,640 --> 00:14:00,199 Speaker 1: it back to not so much to Bridgewater at the 248 00:14:00,240 --> 00:14:03,720 Speaker 1: alternative investment business again at the zero boundary. You've written 249 00:14:03,760 --> 00:14:06,760 Speaker 1: about this, You've been very eloquent. Bridgewater Folks has a 250 00:14:06,800 --> 00:14:10,920 Speaker 1: great series on YouTube with Bob Prince really walking through 251 00:14:11,400 --> 00:14:15,200 Speaker 1: the realities of being at the lower bound. Is the 252 00:14:15,320 --> 00:14:20,000 Speaker 1: game over? Is the volatility so taken out almost like 253 00:14:20,040 --> 00:14:23,720 Speaker 1: a sum Nolan Japanese bond market, that we can't provide 254 00:14:23,880 --> 00:14:28,200 Speaker 1: value anymore above long only institutional money. Yeah, the the 255 00:14:28,760 --> 00:14:32,120 Speaker 1: value of interest rates um the impact of interest rates 256 00:14:32,160 --> 00:14:35,080 Speaker 1: has been largely taken out in terms of the magnitudes. 257 00:14:35,120 --> 00:14:37,600 Speaker 1: You're not going to have that kind of volatility, and 258 00:14:37,640 --> 00:14:39,400 Speaker 1: if things go down, you're not gonna have the same 259 00:14:39,480 --> 00:14:42,320 Speaker 1: kind of protections from the bonds as as you do. 260 00:14:42,600 --> 00:14:45,920 Speaker 1: It's changed because then you get quantitative easing. It gets 261 00:14:46,000 --> 00:14:49,360 Speaker 1: transmitted so that when you need an easy you get 262 00:14:49,400 --> 00:14:52,040 Speaker 1: the printing of money and then you have the reflation 263 00:14:52,120 --> 00:14:55,320 Speaker 1: type of dynamic. So that's the way, that's what the 264 00:14:55,440 --> 00:14:59,320 Speaker 1: volatility is transmitted. We've had plenty of volatility in the markets, 265 00:14:59,320 --> 00:15:01,880 Speaker 1: but not in the on market. Right. Look at how 266 00:15:02,000 --> 00:15:08,200 Speaker 1: the markets obeyed since um in last April. They printed 267 00:15:08,240 --> 00:15:11,160 Speaker 1: the money and sent out the checks. That's the way 268 00:15:11,200 --> 00:15:14,480 Speaker 1: the dynamic works. Well, what will the consultancy business be? 269 00:15:14,720 --> 00:15:17,280 Speaker 1: I mean, we've all been wrong that the actual assumption 270 00:15:17,440 --> 00:15:20,760 Speaker 1: is single digit six or seven percent, and everybody and 271 00:15:20,840 --> 00:15:22,960 Speaker 1: people that caught the right have been looking at double 272 00:15:23,000 --> 00:15:27,920 Speaker 1: digit actual returns. Are you and Bridgewater stealed for a 273 00:15:27,960 --> 00:15:31,680 Speaker 1: single digit future or can you be more optimistic? I 274 00:15:31,720 --> 00:15:36,320 Speaker 1: think that if if I think we're going to get 275 00:15:36,520 --> 00:15:41,720 Speaker 1: another round every another round of que quei huie dale 276 00:15:41,720 --> 00:15:44,400 Speaker 1: you know now sorry, there's gonna be called queie dale. 277 00:15:44,400 --> 00:15:48,520 Speaker 1: You're predicting another round of queueie not immediately. I think 278 00:15:48,520 --> 00:15:50,760 Speaker 1: that what happens is you get a taper. I think 279 00:15:50,800 --> 00:15:54,640 Speaker 1: like every tightening of interest rates has been less than 280 00:15:54,680 --> 00:16:00,560 Speaker 1: the one before it, since two thousands, since at gy peak, 281 00:16:00,640 --> 00:16:02,960 Speaker 1: and every trough in interest rates has been lower than 282 00:16:03,000 --> 00:16:04,640 Speaker 1: the one before it. And then when we had zero, 283 00:16:05,040 --> 00:16:08,200 Speaker 1: then we did quei and every que has been larger 284 00:16:08,200 --> 00:16:12,160 Speaker 1: than the one before before it because we've accumulated so 285 00:16:12,280 --> 00:16:14,840 Speaker 1: much that and that we're now printing. I think that 286 00:16:14,880 --> 00:16:18,480 Speaker 1: you'll have probably one pull back and I'll call that 287 00:16:18,560 --> 00:16:21,280 Speaker 1: a mock charge, and then you set the markets down 288 00:16:21,280 --> 00:16:24,120 Speaker 1: because the duration of the bond market and the duration 289 00:16:24,120 --> 00:16:27,520 Speaker 1: of assets is longer. That means interest rate sensitivity is greater. 290 00:16:27,880 --> 00:16:30,760 Speaker 1: You have that particular correction, and then you'll have another 291 00:16:30,840 --> 00:16:33,040 Speaker 1: round of that. And so I think it's that's the 292 00:16:33,120 --> 00:16:36,440 Speaker 1: nature of the beast that we're in with the QUI understand, 293 00:16:36,520 --> 00:16:39,480 Speaker 1: and that means negative real returns. The things that must 294 00:16:39,520 --> 00:16:42,400 Speaker 1: happen is that cash is going to have a lower 295 00:16:42,440 --> 00:16:47,440 Speaker 1: interest rates than bonds. That negative UM let me answer, 296 00:16:47,600 --> 00:16:50,520 Speaker 1: Let me get my thought through, and then it'll come through. Continue. 297 00:16:50,880 --> 00:16:56,760 Speaker 1: So what you'll get is um a significantly negative real 298 00:16:56,880 --> 00:17:01,840 Speaker 1: cash rate, a negative and probably more significant real bond ary, 299 00:17:02,400 --> 00:17:05,320 Speaker 1: and that you're going to continue to have to have 300 00:17:05,920 --> 00:17:09,920 Speaker 1: interest rates significantly below nominal GDP. Growth in other words, 301 00:17:09,960 --> 00:17:13,600 Speaker 1: inflation pressure real growth. The average thing is going to 302 00:17:14,359 --> 00:17:19,040 Speaker 1: increase this tecnominal nominal g d P. That's production of 303 00:17:19,160 --> 00:17:22,399 Speaker 1: inflation and growth. You put those two things combined, you 304 00:17:22,400 --> 00:17:24,480 Speaker 1: would rather own a piece of that, which is a 305 00:17:24,480 --> 00:17:27,440 Speaker 1: piece of economy, than you would want to own interest rates. 306 00:17:27,560 --> 00:17:30,240 Speaker 1: That's the environment. We've got to wrap it up here 307 00:17:30,240 --> 00:17:33,600 Speaker 1: in a bit um. People are listening to this worldwide. 308 00:17:33,640 --> 00:17:37,600 Speaker 1: My colleague Matthew Miller is in Berlin listening, and he's 309 00:17:37,640 --> 00:17:41,159 Speaker 1: in my ear with Bloomberg Technology saying can you just 310 00:17:41,480 --> 00:17:46,360 Speaker 1: ask him about bitcoin? Paulson of the hedge fund game, 311 00:17:46,400 --> 00:17:49,720 Speaker 1: not Henry Paulson, the other Paulson, the great benefactor of 312 00:17:49,800 --> 00:17:53,880 Speaker 1: Central Park. John Paulson is saying bitcoin is a fraud. 313 00:17:54,040 --> 00:17:57,119 Speaker 1: And I speak with my own words there, But what 314 00:17:57,200 --> 00:18:00,560 Speaker 1: do you think about bitcoin? Is it a durable thing 315 00:18:00,680 --> 00:18:05,080 Speaker 1: for banks or for institutions? UM? I always going to 316 00:18:05,200 --> 00:18:07,399 Speaker 1: ask a big I'm not an expert on bitcop but 317 00:18:07,440 --> 00:18:09,240 Speaker 1: I'll tell you what I think. I'll tell you what 318 00:18:09,280 --> 00:18:11,920 Speaker 1: I think anyway. Anyways, take it it's not worth much, 319 00:18:12,320 --> 00:18:18,199 Speaker 1: but um bitcoin um has an imputed value, not and 320 00:18:19,160 --> 00:18:24,320 Speaker 1: uh not a intrinsic value. And and so it depends 321 00:18:24,359 --> 00:18:28,040 Speaker 1: what it's perceived as it's a tremendous accomplishment to have 322 00:18:28,160 --> 00:18:30,720 Speaker 1: done that programming, not have it hacked, and to have 323 00:18:31,040 --> 00:18:35,600 Speaker 1: its advancement at the same time, and so it will 324 00:18:35,680 --> 00:18:40,960 Speaker 1: have the perceived value that it is given by the marketplace. Uh. Now, 325 00:18:41,359 --> 00:18:43,760 Speaker 1: at the time. Right now, if you take the value 326 00:18:43,760 --> 00:18:46,000 Speaker 1: of bitcoin, you to take the price, what should the 327 00:18:46,040 --> 00:18:50,200 Speaker 1: price be? And you since the quantity doesn't change, you 328 00:18:50,240 --> 00:18:53,080 Speaker 1: know what, it's a function of demand. Right now, bitcoin 329 00:18:53,200 --> 00:18:56,080 Speaker 1: is worth a little less than a trillion dollars. Gold 330 00:18:56,200 --> 00:18:59,200 Speaker 1: or gold in existence is worth if you take central 331 00:18:59,240 --> 00:19:01,800 Speaker 1: banks and jewelry out of it, about five trillion. So 332 00:19:01,800 --> 00:19:06,119 Speaker 1: it's about of that market that represents, you know, the 333 00:19:06,200 --> 00:19:09,240 Speaker 1: hedge market and so on. I think that there. I 334 00:19:09,280 --> 00:19:14,000 Speaker 1: think if you if it's successful, really successful, um it, 335 00:19:14,000 --> 00:19:16,040 Speaker 1: it's not going to be a lot more than that. 336 00:19:16,240 --> 00:19:19,480 Speaker 1: And if it's um and also if it's successful, there's 337 00:19:19,480 --> 00:19:22,600 Speaker 1: a risk of government will outlaw it. So that's what 338 00:19:22,640 --> 00:19:26,080 Speaker 1: I think. Seconds. I believe there's a new book coming out. 339 00:19:26,880 --> 00:19:29,440 Speaker 1: Give us twenty seconds on your new book coming up. Well, 340 00:19:29,480 --> 00:19:32,240 Speaker 1: it's a study I did to understand what's going on now. 341 00:19:32,280 --> 00:19:35,040 Speaker 1: I did the last five years to understand the rises 342 00:19:35,280 --> 00:19:38,320 Speaker 1: in declines of reserve currencies and empires. And it's called 343 00:19:38,320 --> 00:19:42,439 Speaker 1: the Changing World Order, and it um it describes the 344 00:19:42,560 --> 00:19:45,840 Speaker 1: changing world order we're in. But putting it for an 345 00:19:45,880 --> 00:19:48,800 Speaker 1: historical perspect we'll go for another hour here. I'm kidding 346 00:19:49,200 --> 00:19:51,840 Speaker 1: Dalio with us, thank you so much, with Bridgewater today, 347 00:19:52,240 --> 00:19:54,840 Speaker 1: the huge impact of principles a few years ago in 348 00:19:54,840 --> 00:19:57,960 Speaker 1: the changing world order, look for that year, in the 349 00:19:58,040 --> 00:20:01,720 Speaker 1: coming weeks, h in months. Just so much to talk 350 00:20:01,760 --> 00:20:05,399 Speaker 1: about here over the next number of hours of the 351 00:20:05,400 --> 00:20:14,600 Speaker 1: Greenwich World Economic Form. We start strong in the sell 352 00:20:14,640 --> 00:20:18,080 Speaker 1: hear with Mr Dahlio, with us later with Noil Rebini 353 00:20:18,760 --> 00:20:22,159 Speaker 1: crisis economics of eleven years ago, but far more than 354 00:20:22,200 --> 00:20:25,880 Speaker 1: Nora Rebini, who got way out front of that crisis 355 00:20:25,880 --> 00:20:29,560 Speaker 1: of of oh five, seeing things come along in oh seven, 356 00:20:29,640 --> 00:20:31,520 Speaker 1: oh eight, oh nine. And I want to give you 357 00:20:31,520 --> 00:20:33,919 Speaker 1: a little window right now before we get to the 358 00:20:34,000 --> 00:20:36,840 Speaker 1: present moment of what Noil and I have lived. There 359 00:20:36,960 --> 00:20:39,600 Speaker 1: was you and I in Davos at a hotel. It 360 00:20:39,720 --> 00:20:42,320 Speaker 1: was a late night and we sat there and we 361 00:20:42,480 --> 00:20:46,400 Speaker 1: penciled out the reversion of the mean of the housing market, 362 00:20:46,880 --> 00:20:49,920 Speaker 1: and you said it's got to end. And it did 363 00:20:50,359 --> 00:20:54,240 Speaker 1: a year later, maybe eighteen months later. Bring us forward, 364 00:20:54,359 --> 00:20:58,520 Speaker 1: now that we are so debt encumbered, do we have 365 00:20:58,600 --> 00:21:01,159 Speaker 1: the degrees of freedom that we had when you and 366 00:21:01,200 --> 00:21:05,359 Speaker 1: I said at that quiet bar in Davos. Well, my 367 00:21:05,440 --> 00:21:08,840 Speaker 1: concern is that compared to a decade ago, that levels, 368 00:21:08,920 --> 00:21:13,320 Speaker 1: both private and public are much higher than before twenty 369 00:21:13,400 --> 00:21:17,280 Speaker 1: years ago. That to GDP ratial globally was about GDP. 370 00:21:17,680 --> 00:21:20,760 Speaker 1: Right now is three and sixty and rising in advanced 371 00:21:20,760 --> 00:21:24,800 Speaker 1: economies is four percent of GDP and rising in Chinese 372 00:21:24,800 --> 00:21:28,280 Speaker 1: tre GDP and rising. So my concern is that we 373 00:21:28,320 --> 00:21:31,119 Speaker 1: are in a that trap. It's not just physical dominance, 374 00:21:31,320 --> 00:21:34,119 Speaker 1: but when central bank is gonna want to essentially phase 375 00:21:34,119 --> 00:21:38,159 Speaker 1: out unconventional monetary policy, given that that ratios, there is 376 00:21:38,200 --> 00:21:40,240 Speaker 1: a risk of a crash in the bond market and 377 00:21:40,280 --> 00:21:43,560 Speaker 1: the credit market, the stock marketing economy, and therefore they 378 00:21:43,560 --> 00:21:45,920 Speaker 1: will be in that that trap and unable to normalize 379 00:21:46,040 --> 00:21:49,280 Speaker 1: policy rates. That's why I see inflation. I had drubin. 380 00:21:49,440 --> 00:21:51,480 Speaker 1: I am so honored that you're here. I am pleased 381 00:21:51,520 --> 00:21:54,320 Speaker 1: to announce folks that Berry I Can Green's new book 382 00:21:54,520 --> 00:21:57,360 Speaker 1: and Debt is my book of the year, and this 383 00:21:57,440 --> 00:21:59,360 Speaker 1: is the guy that talked to about it. I can 384 00:21:59,400 --> 00:22:03,720 Speaker 1: Green space and some golden feathers over this new debt crisis. Now, 385 00:22:04,080 --> 00:22:07,439 Speaker 1: how do you interpret the outcome of this build up 386 00:22:07,440 --> 00:22:11,080 Speaker 1: in debt, which is life at zero bound. Well, we're 387 00:22:11,119 --> 00:22:13,520 Speaker 1: in a situation in which, in normal times we're not 388 00:22:13,640 --> 00:22:17,320 Speaker 1: reducing debts and deficits, while whenever there is a crisis 389 00:22:17,359 --> 00:22:20,560 Speaker 1: then we have to back stop the financial system. There 390 00:22:20,640 --> 00:22:23,240 Speaker 1: is more built up of public debt, there is more 391 00:22:23,280 --> 00:22:25,840 Speaker 1: built up of private debt because with zero policy rates 392 00:22:25,920 --> 00:22:29,359 Speaker 1: or negative policy rates or quantity division and credits is cheap. 393 00:22:29,640 --> 00:22:32,720 Speaker 1: So we are in that supercycle where both in good 394 00:22:32,760 --> 00:22:35,760 Speaker 1: times and in bad times that racis arising, and therefore 395 00:22:35,760 --> 00:22:38,560 Speaker 1: eventually central banks are in a trap. People said they're 396 00:22:38,560 --> 00:22:41,280 Speaker 1: going to normalize policy rates, but with these levels of 397 00:22:41,400 --> 00:22:43,959 Speaker 1: private and public that if they were trying to do that, 398 00:22:44,280 --> 00:22:47,280 Speaker 1: that they market crash and economic rush, and therefore I 399 00:22:47,320 --> 00:22:50,119 Speaker 1: think the path of list resistance given that that race 400 00:22:50,240 --> 00:22:52,280 Speaker 1: is going to be to wipe out the real value 401 00:22:52,280 --> 00:22:55,879 Speaker 1: of nominal datatics, interest rates, we've higher inflation. That's one 402 00:22:55,920 --> 00:22:58,680 Speaker 1: of the reasons why I see loose monetary policy, loose 403 00:22:58,720 --> 00:23:02,639 Speaker 1: fiscal policy, loose create policy, and eventually inflation being the 404 00:23:02,760 --> 00:23:06,040 Speaker 1: source of the wiping up critical story. I went through 405 00:23:06,040 --> 00:23:10,120 Speaker 1: the New European Paintings gallery at this weekend. Noraal speaks 406 00:23:10,119 --> 00:23:12,800 Speaker 1: of the old world you symbolize. Are we going to 407 00:23:12,880 --> 00:23:14,800 Speaker 1: do the same thing they did in Venice in the 408 00:23:14,880 --> 00:23:18,480 Speaker 1: city state of the fifteenth century, which has inflated our 409 00:23:18,520 --> 00:23:21,600 Speaker 1: way out of our present challenges. Well, we have a 410 00:23:21,680 --> 00:23:24,400 Speaker 1: huge amount of debt and deficity. What are the options. 411 00:23:24,520 --> 00:23:28,199 Speaker 1: Are we gonna cut government spending politically, the pressure everywhere 412 00:23:28,200 --> 00:23:31,200 Speaker 1: in the world is to do more spending to essentially 413 00:23:31,200 --> 00:23:33,720 Speaker 1: deal with income and wealth inequality. Are we gonna raise 414 00:23:33,800 --> 00:23:36,040 Speaker 1: taxes on the wealth in the reach It's gonna be 415 00:23:36,040 --> 00:23:38,320 Speaker 1: constraints on that, So they'll be constraints are going to 416 00:23:38,840 --> 00:23:41,840 Speaker 1: imply the deficits remain high, and therefore the path of 417 00:23:41,880 --> 00:23:44,280 Speaker 1: list resistance is going to be to monetize them and 418 00:23:44,320 --> 00:23:47,160 Speaker 1: try to wipe up with higher inflation. The real value 419 00:23:47,160 --> 00:23:50,359 Speaker 1: of nominal fixed interest rate that of course, over time 420 00:23:50,600 --> 00:23:52,840 Speaker 1: that is going to reprice short term debt is going 421 00:23:52,880 --> 00:23:55,520 Speaker 1: to be higher interest rates with high in volatile inflation, 422 00:23:55,600 --> 00:23:58,520 Speaker 1: inflation ris primare gonna go higher. So that's going to 423 00:23:58,600 --> 00:24:01,160 Speaker 1: be a solutional in the short term and eventually high 424 00:24:01,240 --> 00:24:04,480 Speaker 1: that ratios with real rates rising over time is gonna 425 00:24:04,480 --> 00:24:08,240 Speaker 1: imply that defaults because it be unsustainable that situation, both 426 00:24:08,240 --> 00:24:10,639 Speaker 1: in the private sector and in the public sector in 427 00:24:10,640 --> 00:24:13,480 Speaker 1: a number of countries. So I see both inflation and 428 00:24:13,520 --> 00:24:16,240 Speaker 1: that crisis. I had yes John Hay could catch up 429 00:24:16,280 --> 00:24:18,199 Speaker 1: with you again, but have you won with this on 430 00:24:18,240 --> 00:24:20,320 Speaker 1: the show? Walk me through what that means for trained 431 00:24:20,320 --> 00:24:22,399 Speaker 1: growth through the next couple of years, then through the 432 00:24:22,440 --> 00:24:27,760 Speaker 1: next ten years for that matter. Even everything you've just described, Well, 433 00:24:27,800 --> 00:24:30,480 Speaker 1: we have on one side that ratios that are unsustainable. 434 00:24:30,560 --> 00:24:34,480 Speaker 1: And as I pointed out, the current amount stafulation where 435 00:24:34,520 --> 00:24:37,239 Speaker 1: growth is lower and inflation is higher, is not just 436 00:24:37,359 --> 00:24:40,800 Speaker 1: driven by short term supply bottlenecks, both in goods market 437 00:24:40,880 --> 00:24:43,880 Speaker 1: the labor market. I pointed out that I see over 438 00:24:43,920 --> 00:24:47,200 Speaker 1: the medium term nine negative supply shocks. They're going to 439 00:24:47,320 --> 00:24:50,560 Speaker 1: reduce potential growth and increased cost of production over time. 440 00:24:50,960 --> 00:24:55,320 Speaker 1: Very briefly, what's gonna happen is neglobalization and protectionism, where 441 00:24:55,320 --> 00:24:59,080 Speaker 1: I have volcanization of global supply chains, aging of population 442 00:24:59,359 --> 00:25:03,360 Speaker 1: in advance, colom and emerging markets, restrictions to migration from 443 00:25:03,560 --> 00:25:07,240 Speaker 1: South to north, decoupling between US and China, and trade 444 00:25:07,240 --> 00:25:11,400 Speaker 1: technology data information will have Global climate change is gonna 445 00:25:11,400 --> 00:25:14,600 Speaker 1: increase the cost of energy and the cost of food prices, 446 00:25:14,800 --> 00:25:18,840 Speaker 1: where pandemic is gonna disrupt again global supply chains. We 447 00:25:18,880 --> 00:25:21,480 Speaker 1: have also cyber warfare. There's going to be a source 448 00:25:21,480 --> 00:25:24,840 Speaker 1: of disruptional production. And finally, the rising income and while 449 00:25:24,920 --> 00:25:28,760 Speaker 1: inequality implies that will be monitoring fiscal policy, trying to 450 00:25:28,840 --> 00:25:32,639 Speaker 1: help workers labor unions, and that's gonna put upper pressure 451 00:25:32,680 --> 00:25:34,840 Speaker 1: on wages. So I say, a situation which over the 452 00:25:34,880 --> 00:25:37,880 Speaker 1: medium term we loose monitor and physical and credit policy 453 00:25:38,080 --> 00:25:40,800 Speaker 1: and these negative supply shocks, you could end up over 454 00:25:40,840 --> 00:25:43,919 Speaker 1: the medium term in a situation of stagflation like in 455 00:25:43,960 --> 00:25:47,160 Speaker 1: the nineteen seventies. That's the situation I worry about. And no, really, 456 00:25:47,400 --> 00:25:50,119 Speaker 1: this is far more nuanced than I think many people realize. 457 00:25:50,480 --> 00:25:52,080 Speaker 1: A lot of people are making this call for higher 458 00:25:52,119 --> 00:25:56,120 Speaker 1: inflation based on loose fiscal policy, monitory policy staying easy. 459 00:25:56,520 --> 00:26:00,199 Speaker 1: You're focused almost overwhelmingly on these structural issues that you 460 00:26:00,200 --> 00:26:03,680 Speaker 1: think you're just gonna stick beyond the fiscal the fiscal 461 00:26:03,720 --> 00:26:05,959 Speaker 1: push that we've seen over the last year fading. How 462 00:26:06,040 --> 00:26:09,040 Speaker 1: under appreciated is that view when you go to events 463 00:26:09,080 --> 00:26:11,480 Speaker 1: like this and have that conversation on the sidelines of 464 00:26:11,560 --> 00:26:16,120 Speaker 1: economic forums like the one you ran, well, I think 465 00:26:16,119 --> 00:26:19,080 Speaker 1: it's unappreciated because even those who worry about the rising 466 00:26:19,119 --> 00:26:23,520 Speaker 1: inflation make an argument at once the short term bottomnecks 467 00:26:23,520 --> 00:26:26,000 Speaker 1: are gonna go away. The source of inflation is going 468 00:26:26,040 --> 00:26:29,439 Speaker 1: to be essentially overheating of the economic coming from the 469 00:26:29,480 --> 00:26:32,840 Speaker 1: fact that moneitoring, physical and credit policy still to loose. 470 00:26:33,119 --> 00:26:35,720 Speaker 1: I agree on that side that aggre demand is going 471 00:26:35,760 --> 00:26:38,520 Speaker 1: to be in overheating, but also worry about the medium 472 00:26:38,640 --> 00:26:41,479 Speaker 1: term aggregate supply of the economy. And I see these 473 00:26:41,480 --> 00:26:44,640 Speaker 1: global trends that are just the reversal of the forces 474 00:26:44,640 --> 00:26:47,400 Speaker 1: that for the last thirty years kept inflation low. All 475 00:26:47,440 --> 00:26:50,480 Speaker 1: of them are reversing in the direction where potential growth 476 00:26:50,560 --> 00:26:52,920 Speaker 1: is going to be lower, cost of production is gonna 477 00:26:52,920 --> 00:26:56,159 Speaker 1: be higher, and since monitoring physical policy and credit policy 478 00:26:56,160 --> 00:26:58,800 Speaker 1: are gonna be loose, eventually we end up with inflation 479 00:26:59,080 --> 00:27:03,480 Speaker 1: and slower growth. That's stagflation. Dr Rubini. In a final question, 480 00:27:03,720 --> 00:27:06,960 Speaker 1: I want you to address for our audience and radio 481 00:27:07,160 --> 00:27:13,080 Speaker 1: and TV the optimism you have of the American economic experiment. 482 00:27:13,200 --> 00:27:16,760 Speaker 1: I have fought for a decade plus of calling you, Dr. 483 00:27:16,880 --> 00:27:19,400 Speaker 1: Do I don't buy it for a minute. You've got 484 00:27:19,400 --> 00:27:22,680 Speaker 1: a lot of worries out there, but state the optimism 485 00:27:22,760 --> 00:27:26,880 Speaker 1: you have on the American experiment. Well. On the American experiment, 486 00:27:26,880 --> 00:27:29,320 Speaker 1: I would say the most positive thing about it is 487 00:27:29,359 --> 00:27:31,719 Speaker 1: that there is going to be a huge amount of 488 00:27:31,760 --> 00:27:38,000 Speaker 1: technological innovation, whether it's AI, machine learning, robotic, automation, all 489 00:27:38,080 --> 00:27:42,880 Speaker 1: the essentially application coming of it gonna over time increase 490 00:27:42,920 --> 00:27:47,960 Speaker 1: productivity growth significantly. However, I worried that AI automation, robotic 491 00:27:48,080 --> 00:27:50,280 Speaker 1: is going to also have negative spelobe. It's going to 492 00:27:50,320 --> 00:27:53,159 Speaker 1: increase income and wealthy inequality is going to lead to 493 00:27:53,359 --> 00:27:58,200 Speaker 1: massive technological unemployment. Central bank responsibility and the central bank 494 00:27:58,320 --> 00:28:03,160 Speaker 1: is is the social guide of last resort. Do social 495 00:28:03,320 --> 00:28:06,959 Speaker 1: policy within the central bank history? Well, I worried at 496 00:28:06,960 --> 00:28:08,960 Speaker 1: the central banks now are on a mission creep. They 497 00:28:09,040 --> 00:28:12,639 Speaker 1: started by worrying about inflation, than growth, than financial stability, 498 00:28:12,880 --> 00:28:16,520 Speaker 1: than income inequality, than global climate change, and a list 499 00:28:16,600 --> 00:28:19,560 Speaker 1: of other factors. And that mission creep implies that they 500 00:28:19,600 --> 00:28:23,000 Speaker 1: are becoming highly unconventional and that's going to lead us 501 00:28:23,000 --> 00:28:25,520 Speaker 1: to higher inflation over time. You have to limit what 502 00:28:25,680 --> 00:28:27,440 Speaker 1: you have to do, and what you can do is 503 00:28:27,480 --> 00:28:30,920 Speaker 1: only growth, inflation and maybe financial stability. So that initial 504 00:28:30,960 --> 00:28:32,920 Speaker 1: criep is part of what's going to lead to higher 505 00:28:32,960 --> 00:28:36,160 Speaker 1: inflation by unconventional mount of policy being around for much 506 00:28:36,240 --> 00:28:39,240 Speaker 1: longer than otherwise. Noria, thank you, sir as always got 507 00:28:39,320 --> 00:28:41,800 Speaker 1: to catch up. I thought No Real liked to two. 508 00:28:42,440 --> 00:28:46,440 Speaker 1: So I know no Real likes that one's smiling. Take 509 00:28:47,800 --> 00:28:50,920 Speaker 1: you got too much of respect. He has old world 510 00:28:51,160 --> 00:28:57,080 Speaker 1: doctor realist. This is John John. This is really important. 511 00:28:57,200 --> 00:29:00,960 Speaker 1: He represents an old world economic It's worried about the 512 00:29:01,080 --> 00:29:05,680 Speaker 1: solidity of balance sheets and financial statements versus an American 513 00:29:05,840 --> 00:29:10,440 Speaker 1: modern income statement dynamics. That's a difference. He's not Dr Doom, 514 00:29:10,760 --> 00:29:13,440 Speaker 1: He's Dr Istanbul. He's been a good friend of this 515 00:29:13,520 --> 00:29:15,960 Speaker 1: program over the yes and we appreciate it. Nown Rebani Dad, 516 00:29:16,000 --> 00:29:19,720 Speaker 1: the CEO of Rabini Macro Associates and co CEO of 517 00:29:20,000 --> 00:29:28,040 Speaker 1: Veeping Bust dot com right now and this is a 518 00:29:28,120 --> 00:29:31,760 Speaker 1: great joy. She gave us so much perspective on Afghanistan 519 00:29:31,880 --> 00:29:35,200 Speaker 1: and looking west to her around Shiny Bachelovs joins us 520 00:29:35,320 --> 00:29:37,680 Speaker 1: right now from Rock Creek. She will have an important 521 00:29:37,760 --> 00:29:42,560 Speaker 1: conversation to a sprightly Alan Greenspan tomorrow here at the 522 00:29:42,640 --> 00:29:47,840 Speaker 1: Greenwich Economic Forum. That will be a timely conversation. Dr Beschelov, 523 00:29:47,960 --> 00:29:50,800 Speaker 1: thank you so much for joining us. There's a nostalgia 524 00:29:51,040 --> 00:29:54,160 Speaker 1: right now of moving from the chaos of the poll 525 00:29:54,360 --> 00:29:57,440 Speaker 1: fed making it up as we go back to the 526 00:29:57,640 --> 00:30:01,320 Speaker 1: cadence of the FED of Arthur Burns, of Alan Greenspan. 527 00:30:01,880 --> 00:30:04,720 Speaker 1: Can we go back and if not, how do we 528 00:30:04,840 --> 00:30:09,480 Speaker 1: move forward out of this crisis? I think, tom what 529 00:30:09,640 --> 00:30:12,280 Speaker 1: has been really interesting is I don't think it has 530 00:30:12,320 --> 00:30:15,960 Speaker 1: been so chaotic. In fact, the BED has been giving 531 00:30:16,120 --> 00:30:19,560 Speaker 1: us a pretty good indication of where it has been 532 00:30:19,680 --> 00:30:23,680 Speaker 1: and where it's going. Obviously, the times have been you know, 533 00:30:23,800 --> 00:30:26,840 Speaker 1: the kind of the pandemic which killed more than it 534 00:30:27,040 --> 00:30:31,360 Speaker 1: killed even in was something that no federal reserved with 535 00:30:31,640 --> 00:30:36,120 Speaker 1: Alan Greenspan or the Burns or J. Powell could threat 536 00:30:36,200 --> 00:30:39,320 Speaker 1: to very easily. But no question, I think the meeting 537 00:30:39,600 --> 00:30:43,120 Speaker 1: this week today tomorrow is going to be very critical 538 00:30:43,680 --> 00:30:46,840 Speaker 1: and people will be listening very quick, very very carefully, 539 00:30:46,920 --> 00:30:48,840 Speaker 1: like the way they used to listen to the way 540 00:30:48,920 --> 00:30:52,120 Speaker 1: Alan talk, not just what he said but loud. His 541 00:30:52,240 --> 00:30:57,040 Speaker 1: voice was No, I think you're absolutely right. I want 542 00:30:57,080 --> 00:31:00,360 Speaker 1: to speak to you about the fame Greenspan granularity, the 543 00:31:00,440 --> 00:31:02,800 Speaker 1: way the gentleman from n YU would look at each 544 00:31:02,880 --> 00:31:07,400 Speaker 1: in every rail car, each and every data that granularity 545 00:31:07,560 --> 00:31:11,960 Speaker 1: works in goods producing economies. Do you have a confidence 546 00:31:12,040 --> 00:31:16,000 Speaker 1: that we can shift to a service sector prosperity and 547 00:31:16,160 --> 00:31:19,480 Speaker 1: do that with this technology overlay we're all talking about. 548 00:31:20,920 --> 00:31:23,320 Speaker 1: So the interesting thing in talking to Alan is that 549 00:31:23,440 --> 00:31:26,240 Speaker 1: he does these daily forecast Remember he was a forecaster 550 00:31:26,480 --> 00:31:30,479 Speaker 1: before he was a um VET chair and he has 551 00:31:30,560 --> 00:31:34,120 Speaker 1: continued doing that. Interestingly with the huge problems we have 552 00:31:34,320 --> 00:31:37,680 Speaker 1: with the supply chain right now. The kind of work 553 00:31:37,760 --> 00:31:41,600 Speaker 1: he was doing on railways and counting the rails, rail 554 00:31:41,840 --> 00:31:46,400 Speaker 1: wasted trucks and UM and cars and UH and looking 555 00:31:46,560 --> 00:31:49,280 Speaker 1: at UH, the sort of the minution on the supply 556 00:31:49,440 --> 00:31:54,520 Speaker 1: side has become incredibly, incredibly valuable because the tech sector, 557 00:31:54,640 --> 00:31:57,760 Speaker 1: as you said, may not get UH well measured in 558 00:31:57,880 --> 00:32:01,320 Speaker 1: some of his UM some of his estimate, But supply 559 00:32:01,480 --> 00:32:05,719 Speaker 1: chain problems that we're facing is very traditional economics one 560 00:32:05,760 --> 00:32:08,520 Speaker 1: oh one. Obviously a lot of the supply chain issues 561 00:32:08,560 --> 00:32:10,560 Speaker 1: have led to higher inflation, and we actually had the 562 00:32:10,600 --> 00:32:13,800 Speaker 1: o E c D releasing its interim forecast earlier today 563 00:32:13,880 --> 00:32:16,440 Speaker 1: expecting higher inflation in the US and the UK and 564 00:32:16,560 --> 00:32:19,400 Speaker 1: in the deuro Zone, but also saying that supportive fiscal 565 00:32:19,440 --> 00:32:22,720 Speaker 1: and monetary policy needs to stay in place. Is that 566 00:32:22,840 --> 00:32:25,320 Speaker 1: going to mean inflation runs too hot for too long? 567 00:32:26,880 --> 00:32:29,480 Speaker 1: I actually believe in the drug quick we are looking 568 00:32:29,680 --> 00:32:33,240 Speaker 1: at inflation being more office short to medium term issue. 569 00:32:33,680 --> 00:32:36,640 Speaker 1: There's no question that if you throw in so much 570 00:32:36,720 --> 00:32:40,040 Speaker 1: liquidity that will not start slowly being taken out of 571 00:32:40,240 --> 00:32:44,000 Speaker 1: the economy if you have the kind of disruptions we have. 572 00:32:44,240 --> 00:32:47,520 Speaker 1: Even as we're speaking, there are ports uh re ports 573 00:32:47,600 --> 00:32:51,360 Speaker 1: that are getting closed down because of sick people with COVID, 574 00:32:51,880 --> 00:32:54,960 Speaker 1: so that while that is going on, there's no question 575 00:32:55,040 --> 00:32:57,640 Speaker 1: we're going to have disruptions and that will be pushing 576 00:32:57,760 --> 00:33:02,480 Speaker 1: up inflation. I think as we get to two thowy three, 577 00:33:02,600 --> 00:33:05,880 Speaker 1: if the assumption is you know, COVID is endemic and 578 00:33:05,960 --> 00:33:08,160 Speaker 1: it sort of stays on in a smaller way, that 579 00:33:08,280 --> 00:33:12,200 Speaker 1: would be a different scenario. Obviously, if that continues, I 580 00:33:12,280 --> 00:33:15,720 Speaker 1: think that's a whole other issue, bigger problems than inflation. Well, 581 00:33:15,760 --> 00:33:18,240 Speaker 1: you mentioned port closures there. Obviously we had one in 582 00:33:18,400 --> 00:33:20,280 Speaker 1: China for quite some time at one of the world's 583 00:33:20,320 --> 00:33:22,880 Speaker 1: biggest ports. And also going on in China, you had 584 00:33:22,920 --> 00:33:25,000 Speaker 1: broader restrictions due to the delta variant. You have a 585 00:33:25,080 --> 00:33:28,880 Speaker 1: crackdown on steel production because of a decarbonization effort, and 586 00:33:29,160 --> 00:33:32,080 Speaker 1: you have the situation with the property sector being trying 587 00:33:32,360 --> 00:33:35,040 Speaker 1: trying to be rained in by every regulators. And obviously 588 00:33:35,400 --> 00:33:38,680 Speaker 1: ever grant is front end center. How worried about China 589 00:33:38,800 --> 00:33:41,840 Speaker 1: are you when you think about a global economy right now? 590 00:33:43,200 --> 00:33:46,400 Speaker 1: So everground obviously is a big topic today, but it 591 00:33:46,520 --> 00:33:48,840 Speaker 1: has been really the problems that ever ground have been 592 00:33:48,880 --> 00:33:52,360 Speaker 1: known in the marketplace for some time. The bigger topic 593 00:33:52,440 --> 00:33:54,960 Speaker 1: I think in China is that we're so used for 594 00:33:55,120 --> 00:34:00,080 Speaker 1: growth rates in China having been that people don't like 595 00:34:00,360 --> 00:34:03,520 Speaker 1: that kind of growth rate is not going to stay forever. 596 00:34:04,040 --> 00:34:06,720 Speaker 1: So if you assume a more normalized growth rate in 597 00:34:06,920 --> 00:34:10,480 Speaker 1: China which moves down too closer to four or five 598 00:34:10,600 --> 00:34:13,680 Speaker 1: six percent regarding you know, that's a very big range 599 00:34:13,760 --> 00:34:15,440 Speaker 1: I'm giving you. I think we will be in a 600 00:34:15,560 --> 00:34:19,440 Speaker 1: very different situation in China. Obviously, they have major problems 601 00:34:19,640 --> 00:34:23,800 Speaker 1: with an aging population, and um those are sort of 602 00:34:24,280 --> 00:34:27,840 Speaker 1: the aging population and the fact that you will have 603 00:34:28,040 --> 00:34:30,440 Speaker 1: a slower growth rate, I think are the bigger issues 604 00:34:30,520 --> 00:34:33,640 Speaker 1: that are getting forgotten as we get concentrated on ever 605 00:34:33,760 --> 00:34:36,560 Speaker 1: ground day and on ever ground d I think the 606 00:34:36,680 --> 00:34:40,600 Speaker 1: government will not bail out, most likely, but they will 607 00:34:40,719 --> 00:34:43,400 Speaker 1: manage it in the way and they will sort of 608 00:34:43,480 --> 00:34:47,120 Speaker 1: let it go out and uh and down slowly in 609 00:34:47,200 --> 00:34:49,520 Speaker 1: a managed way. Probably there's a lot of faith that'll 610 00:34:49,520 --> 00:34:51,000 Speaker 1: be able to do that after Now we've gotta leave 611 00:34:51,000 --> 00:34:52,640 Speaker 1: it there. It's a really important final part as well 612 00:34:52,920 --> 00:35:01,680 Speaker 1: as lost there the Rock Creek CEO. It is a 613 00:35:01,719 --> 00:35:05,360 Speaker 1: granwage economic forum and it is about well your image 614 00:35:05,360 --> 00:35:07,839 Speaker 1: of Connecticut, of the boats that stand around me here 615 00:35:08,120 --> 00:35:11,000 Speaker 1: my grand Banks fifty four over there more looks little 616 00:35:11,080 --> 00:35:14,759 Speaker 1: small in Greenwich Harbor, but it is a Connecticut that 617 00:35:15,000 --> 00:35:18,680 Speaker 1: mirrors this nation. The income disparities in this state are 618 00:35:18,760 --> 00:35:23,680 Speaker 1: absolutely extraordinary. Ned Laban, as governor, is steering the state forward. 619 00:35:24,000 --> 00:35:27,319 Speaker 1: We have a conversation now on the inequalities of the state. 620 00:35:27,400 --> 00:35:30,040 Speaker 1: You are the courage as a fancy guy growing up 621 00:35:30,080 --> 00:35:32,960 Speaker 1: with the Lamont family. You went down to Bridgepoort and 622 00:35:33,080 --> 00:35:36,440 Speaker 1: taught what were the lessons you learned in Bridgeport away 623 00:35:36,480 --> 00:35:41,400 Speaker 1: from entrepreneurship about the economic disparities of your state? Givarney 624 00:35:41,480 --> 00:35:45,040 Speaker 1: tom Um, Welcome to Connecticut. I taught up at Harding 625 00:35:45,120 --> 00:35:47,600 Speaker 1: High School. That was probably twenty years ago. I taught 626 00:35:47,640 --> 00:35:50,080 Speaker 1: a class on entrepreneurship, how to start up a business. 627 00:35:50,239 --> 00:35:53,080 Speaker 1: Here's here's what I learned. I said, find an entrepreneur 628 00:35:53,120 --> 00:35:54,960 Speaker 1: and write a story about somebody you know it started 629 00:35:55,040 --> 00:35:57,160 Speaker 1: up a business and they didn't know. They didn't have 630 00:35:57,440 --> 00:36:00,279 Speaker 1: role models there. So I brought in entrepreneur who had 631 00:36:00,360 --> 00:36:02,920 Speaker 1: created businesses, trying to inspire these kids that you can 632 00:36:02,960 --> 00:36:05,120 Speaker 1: do it too. What do you need from the Biden 633 00:36:05,160 --> 00:36:08,040 Speaker 1: administration taxes or front center. We'll get to the salt 634 00:36:08,160 --> 00:36:11,480 Speaker 1: thing in a moment, But on a holistic basis of 635 00:36:11,640 --> 00:36:15,440 Speaker 1: all the people of Connecticut, the North up towards western 636 00:36:15,560 --> 00:36:18,400 Speaker 1: Massachusetts and over to the eastern Rhode Island, what do 637 00:36:18,480 --> 00:36:22,359 Speaker 1: you need holistically from the Biden administration on a new 638 00:36:22,440 --> 00:36:26,720 Speaker 1: text policy. I want to see this infrastructure bill pass. 639 00:36:27,200 --> 00:36:31,399 Speaker 1: You know, I could take tennes all go into Metro North. 640 00:36:31,680 --> 00:36:34,920 Speaker 1: A lot of Metro North helps too. I mean, we 641 00:36:35,120 --> 00:36:37,200 Speaker 1: have a lot of people move in the state. Fifty 642 00:36:37,239 --> 00:36:39,120 Speaker 1: thousand folks have moved in the state in the last 643 00:36:39,200 --> 00:36:41,520 Speaker 1: eight months. And uh, I want to do everything I 644 00:36:41,560 --> 00:36:44,120 Speaker 1: can to speed up rail service from Stamford down to 645 00:36:44,320 --> 00:36:47,319 Speaker 1: a Grand Central. That infrastructure bill helps. There a lot 646 00:36:47,719 --> 00:36:50,000 Speaker 1: on taxes. You gotta pay your bills, so just do 647 00:36:50,080 --> 00:36:52,880 Speaker 1: it cautiously. You took the Metro North, I believe, or 648 00:36:52,880 --> 00:36:55,880 Speaker 1: at least the symbolism of it down to mets Yankees. 649 00:36:56,000 --> 00:36:58,359 Speaker 1: With a new governor of New York state to us, 650 00:36:58,440 --> 00:37:01,640 Speaker 1: we're nationwide and we're world wide. The emotion you felt 651 00:37:01,920 --> 00:37:07,160 Speaker 1: on this important rememberance at nine eleven anniversary of nine eleven. 652 00:37:07,280 --> 00:37:09,640 Speaker 1: I was in the city that day, Remember like yesterday, 653 00:37:09,680 --> 00:37:12,240 Speaker 1: Remember going out in the street. The cell phones weren't working. 654 00:37:12,280 --> 00:37:14,399 Speaker 1: You said, man, this is something the likes of which 655 00:37:14,440 --> 00:37:17,040 Speaker 1: we've never been through before. And there I was whether 656 00:37:17,280 --> 00:37:19,440 Speaker 1: Eric Adams and gat the Uncle the new leaders of 657 00:37:20,280 --> 00:37:23,319 Speaker 1: New or you can get it done. I was very 658 00:37:23,360 --> 00:37:27,000 Speaker 1: impressed with both them. Look, Connecticut, we live and die 659 00:37:27,040 --> 00:37:29,000 Speaker 1: by how successful in New York is. We've got to 660 00:37:29,080 --> 00:37:31,560 Speaker 1: work very collaboratively. It doesn't work for me to um 661 00:37:31,960 --> 00:37:34,279 Speaker 1: speed up metro north of the Westchester border, and then 662 00:37:34,320 --> 00:37:37,400 Speaker 1: it's up to them. We got to do it together. Obviously, 663 00:37:37,440 --> 00:37:40,239 Speaker 1: We've also never dealt with a situation like this when 664 00:37:40,280 --> 00:37:43,279 Speaker 1: talking about the pandemic, Governor, and this is something that 665 00:37:43,480 --> 00:37:45,560 Speaker 1: is front and center am in this current surgeon and 666 00:37:45,680 --> 00:37:48,440 Speaker 1: as the school season is still underway, with many students 667 00:37:48,800 --> 00:37:52,040 Speaker 1: not able or eligible to be vaccinated, why is it 668 00:37:52,200 --> 00:37:54,719 Speaker 1: that those who are eligible don't need to be in 669 00:37:54,760 --> 00:38:00,480 Speaker 1: the state of Connecticut. Why is it those who are 670 00:38:00,640 --> 00:38:03,920 Speaker 1: not eligible? What I can tell you is our schools 671 00:38:03,960 --> 00:38:06,640 Speaker 1: are open. Our schools are open. Last September, that made 672 00:38:06,680 --> 00:38:08,560 Speaker 1: a big difference. In New York City took a little 673 00:38:08,560 --> 00:38:10,879 Speaker 1: bit longer. I think a lot of families started moving 674 00:38:10,920 --> 00:38:13,640 Speaker 1: to Connecticut because they wanted their kids in school, were 675 00:38:13,680 --> 00:38:16,520 Speaker 1: able to do that safely. This year, our schools have 676 00:38:16,600 --> 00:38:20,840 Speaker 1: been opened a very few quarantines, almost none, mainly because 677 00:38:21,600 --> 00:38:24,160 Speaker 1: teachers are vaccinated and kids are wearing a mask. We're 678 00:38:24,160 --> 00:38:26,200 Speaker 1: gonna do that a little bit longer so our kids 679 00:38:26,480 --> 00:38:28,399 Speaker 1: can stay in school and their parents can get back 680 00:38:28,440 --> 00:38:32,200 Speaker 1: to work. So that means the September mask mandate is 681 00:38:32,239 --> 00:38:37,719 Speaker 1: going to be extended for how long? I think it's 682 00:38:37,760 --> 00:38:39,399 Speaker 1: going to be extended a little bit longer. I gotta 683 00:38:39,480 --> 00:38:41,840 Speaker 1: work with my friends in the legislature on that. I 684 00:38:41,960 --> 00:38:44,880 Speaker 1: see um the virus coming up obviously less in Florida 685 00:38:44,880 --> 00:38:48,800 Speaker 1: and Georgia, now more North and South Carolina, Tennessee. So 686 00:38:49,000 --> 00:38:51,200 Speaker 1: is it heads up here during the flu season? I 687 00:38:51,280 --> 00:38:54,520 Speaker 1: want to be careful. Is there a polarized tax out 688 00:38:54,560 --> 00:38:57,920 Speaker 1: there and it's assault tax? I hear you stop conversations 689 00:38:57,960 --> 00:39:01,480 Speaker 1: when you talk about this tax. It's on property and 690 00:39:01,600 --> 00:39:05,560 Speaker 1: my ability to deduct my Greenwich taxes, my Connecticut state 691 00:39:05,640 --> 00:39:09,719 Speaker 1: taxes over a certain level. That lament on how we 692 00:39:10,000 --> 00:39:16,319 Speaker 1: affect a real estate tax deduction fairly well. Obviously, when 693 00:39:16,400 --> 00:39:19,560 Speaker 1: they you know, latterly ended the salt deduction, it hit 694 00:39:19,760 --> 00:39:22,840 Speaker 1: states like ours a lot. And you can argue about 695 00:39:22,920 --> 00:39:26,160 Speaker 1: the intellectual merits of the salt deduction. I can just 696 00:39:26,200 --> 00:39:28,480 Speaker 1: tell you that Connecticut is one of the few donor states. 697 00:39:28,560 --> 00:39:31,000 Speaker 1: We send a lot more money to Washington than we 698 00:39:31,040 --> 00:39:33,200 Speaker 1: get back, just critically, you send a lot more money 699 00:39:33,239 --> 00:39:37,680 Speaker 1: to Mitch McConnell's Kentucky. Absolutely. Oh yeah, So I'm fighting 700 00:39:37,719 --> 00:39:41,000 Speaker 1: for Connecticut. So that's why I think anything that reduces 701 00:39:41,120 --> 00:39:43,600 Speaker 1: taxes for people at all income brackets here at the 702 00:39:43,640 --> 00:39:46,960 Speaker 1: federal level makes sense. That includes getting back the salt deduction. 703 00:39:47,560 --> 00:39:49,440 Speaker 1: Thank you so much for joining us at the Greenwich 704 00:39:49,520 --> 00:39:57,879 Speaker 1: Economic Forum right now. And this is a great joy. 705 00:39:58,040 --> 00:40:01,560 Speaker 1: She gave us so much perspective on Afghanistan and looking 706 00:40:01,640 --> 00:40:04,839 Speaker 1: west to her around. Shanni bachelovs joins us right now 707 00:40:04,920 --> 00:40:08,320 Speaker 1: from Rock Creek. She will have an important conversation to 708 00:40:08,480 --> 00:40:13,560 Speaker 1: a sprightly Alan Greenspan tomorrow here at the Greenwich Economic Forum. 709 00:40:13,640 --> 00:40:17,480 Speaker 1: That will be a timely conversation. Dr Bachelov, Thank you 710 00:40:17,560 --> 00:40:20,680 Speaker 1: so much for joining us. There's a nostalgia right now 711 00:40:21,320 --> 00:40:24,720 Speaker 1: of moving from the chaos of the Powell Fed making 712 00:40:24,800 --> 00:40:27,680 Speaker 1: it up as we go back to the cadence of 713 00:40:27,800 --> 00:40:31,440 Speaker 1: the FED of Arthur Burns, of Alan Greenspan. Can we 714 00:40:31,600 --> 00:40:34,840 Speaker 1: go back and if not, how do we move forward 715 00:40:34,960 --> 00:40:39,200 Speaker 1: out of this crisis? I think tom what has been 716 00:40:39,239 --> 00:40:42,440 Speaker 1: really interesting is I don't think it has been so chaotic. 717 00:40:42,560 --> 00:40:46,080 Speaker 1: In fact, the BED has been giving us a pretty 718 00:40:46,120 --> 00:40:51,440 Speaker 1: good indication of where it has been and where it's going. Obviously, 719 00:40:51,600 --> 00:40:53,560 Speaker 1: the times have been you know, the kind of the 720 00:40:53,680 --> 00:40:58,600 Speaker 1: pandemic which killed more than it killed even was something 721 00:40:58,800 --> 00:41:03,120 Speaker 1: that no FED reserved with Alan Greenspan or Arthur Burns 722 00:41:03,320 --> 00:41:07,560 Speaker 1: or J. Powell could threat to very easily. But no question, 723 00:41:07,680 --> 00:41:10,839 Speaker 1: I think the meeting this week, today tomorrow is going 724 00:41:10,920 --> 00:41:14,959 Speaker 1: to be very critical and people will be listening very quick, 725 00:41:15,200 --> 00:41:17,560 Speaker 1: very very carefully, like the way they used to listen 726 00:41:17,680 --> 00:41:19,919 Speaker 1: to the way Alan taught not just what he said, 727 00:41:20,400 --> 00:41:25,960 Speaker 1: but loud his voice was No, I think you're absolutely right. 728 00:41:26,040 --> 00:41:29,240 Speaker 1: I want to speak to you about the famed Greenspan granularity, 729 00:41:29,600 --> 00:41:31,799 Speaker 1: the way the gentleman from n YU would look at 730 00:41:31,880 --> 00:41:35,680 Speaker 1: each in every rail car, each and every data that 731 00:41:35,880 --> 00:41:40,560 Speaker 1: granularity works in goods producing economies. Do you have a 732 00:41:40,680 --> 00:41:44,840 Speaker 1: confidence that we can shift to a service sector prosperity 733 00:41:45,239 --> 00:41:48,760 Speaker 1: and do that with this technology overlay we're all talking about. 734 00:41:50,200 --> 00:41:52,600 Speaker 1: So the interesting thing in talking to Alan is that 735 00:41:52,719 --> 00:41:55,560 Speaker 1: he does these daily forecast Remember he was a forecaster 736 00:41:55,760 --> 00:41:59,719 Speaker 1: before he was a um VET chair, and he has 737 00:41:59,760 --> 00:42:03,239 Speaker 1: can genue doing that. Interestingly with the huge problems we 738 00:42:03,360 --> 00:42:06,680 Speaker 1: have with the supply chain right now. The kind of 739 00:42:06,760 --> 00:42:10,320 Speaker 1: work he was doing on railways and counting the rails, 740 00:42:10,680 --> 00:42:15,239 Speaker 1: rail wasted trucks and UM and cars and UH and 741 00:42:15,400 --> 00:42:18,160 Speaker 1: looking at UH, the sort of the minution on the 742 00:42:18,239 --> 00:42:23,120 Speaker 1: supply side has become incredibly, incredibly valuable. But because the 743 00:42:23,200 --> 00:42:26,279 Speaker 1: tech sector, as you said, may not get UH well 744 00:42:26,440 --> 00:42:29,320 Speaker 1: measured in some of his UM some of his estimates. 745 00:42:29,760 --> 00:42:33,840 Speaker 1: But supply chain problems that we're facing is very traditional 746 00:42:34,280 --> 00:42:37,240 Speaker 1: economics one oh one. Obviously a lot of the supply 747 00:42:37,320 --> 00:42:39,600 Speaker 1: chain issues have led to higher inflation, and we actually 748 00:42:39,640 --> 00:42:42,320 Speaker 1: had the o e c D releasing its interim forecast 749 00:42:42,400 --> 00:42:45,200 Speaker 1: earlier today expecting higher inflation in the US and the 750 00:42:45,320 --> 00:42:47,719 Speaker 1: UK and in the deuro Zone, but also saying that 751 00:42:47,840 --> 00:42:51,200 Speaker 1: supportive fiscal and monetary policy needs to stay in place. 752 00:42:51,840 --> 00:42:54,120 Speaker 1: Is that going to mean inflation runs too hot for 753 00:42:54,239 --> 00:42:57,920 Speaker 1: too long? I actually believe in the drug quick we 754 00:42:58,120 --> 00:43:01,400 Speaker 1: are looking at inflation being more office short to medium 755 00:43:01,880 --> 00:43:05,400 Speaker 1: term issue. There's no question that if you throw in 756 00:43:05,560 --> 00:43:08,840 Speaker 1: so much liquidity that will not start slowly being taken 757 00:43:08,920 --> 00:43:12,200 Speaker 1: out of the economy if you have the kind of 758 00:43:12,400 --> 00:43:15,840 Speaker 1: disruptions we have. Even as we're speaking, there are ports 759 00:43:16,120 --> 00:43:19,359 Speaker 1: uh reports that are getting closed down because of sick 760 00:43:19,440 --> 00:43:23,360 Speaker 1: people with COVID, so that while that is going on, 761 00:43:23,480 --> 00:43:26,120 Speaker 1: there's no question we're going to have disruptions and that 762 00:43:26,239 --> 00:43:29,160 Speaker 1: will be pushing up inflation. I think as we get 763 00:43:29,200 --> 00:43:33,400 Speaker 1: into two thousand three, if the assumption is you know, 764 00:43:33,560 --> 00:43:36,200 Speaker 1: COVID is endemic and it sort of stays on in 765 00:43:36,280 --> 00:43:39,760 Speaker 1: a smaller way, that would be a different scenario. Obviously, 766 00:43:40,000 --> 00:43:42,880 Speaker 1: if that continues, I think that's a whole other issue, 767 00:43:42,920 --> 00:43:46,399 Speaker 1: bigger problems than inflation. Well, you mentioned port closures there. 768 00:43:46,440 --> 00:43:48,759 Speaker 1: Obviously we had one in China for quite some time 769 00:43:48,800 --> 00:43:51,279 Speaker 1: at one of the world's biggest ports. And also going 770 00:43:51,320 --> 00:43:53,360 Speaker 1: on in China, you had broader restrictions due to the 771 00:43:53,400 --> 00:43:56,560 Speaker 1: delta variant. You have a crackdown on steel production because 772 00:43:56,600 --> 00:43:59,600 Speaker 1: of a decarbonization effort, and you have the situation with 773 00:43:59,719 --> 00:44:02,440 Speaker 1: the property sector being trying trying to be ranged in 774 00:44:02,520 --> 00:44:06,320 Speaker 1: by every regulators, and obviously ever grant is front end center. 775 00:44:06,760 --> 00:44:09,520 Speaker 1: How worried about China are you when you think about 776 00:44:09,600 --> 00:44:14,080 Speaker 1: a global economy right now? So Everground obviously is a 777 00:44:14,120 --> 00:44:17,120 Speaker 1: big topic today, but it has been really the problems 778 00:44:17,160 --> 00:44:19,520 Speaker 1: that ever ground have been known in the marketplace for 779 00:44:19,680 --> 00:44:22,880 Speaker 1: some time. The bigger topic I think in China is 780 00:44:22,960 --> 00:44:25,799 Speaker 1: that we're so used for growth rates in China having 781 00:44:25,840 --> 00:44:30,719 Speaker 1: been that people don't realize that kind of growth rate 782 00:44:30,840 --> 00:44:34,240 Speaker 1: is not going to stay forever. So if you assume 783 00:44:34,360 --> 00:44:37,480 Speaker 1: a more normalized growth rate in China, which moves down 784 00:44:38,000 --> 00:44:41,920 Speaker 1: to closer to four or five six percent regards, you know, 785 00:44:42,000 --> 00:44:44,000 Speaker 1: that's a very big rand I'm giving you. I think 786 00:44:44,080 --> 00:44:46,360 Speaker 1: we will be in a very different situation in China. 787 00:44:46,480 --> 00:44:52,239 Speaker 1: Obviously they have major problems with an aging population, and um, 788 00:44:52,400 --> 00:44:56,160 Speaker 1: those are sort of the aging population and the fact 789 00:44:56,360 --> 00:44:58,680 Speaker 1: that you will have a slower growth rate I think 790 00:44:58,719 --> 00:45:01,279 Speaker 1: are the bigger issues that are getting forgotten as we 791 00:45:01,440 --> 00:45:04,480 Speaker 1: get concentrated on ever grand Day and on ever Ground. 792 00:45:04,640 --> 00:45:08,960 Speaker 1: I think, um, the government will not bail out most likely, 793 00:45:09,320 --> 00:45:12,160 Speaker 1: but they will manage it in the way and they 794 00:45:12,239 --> 00:45:14,759 Speaker 1: will sort of let it go out and uh and 795 00:45:14,920 --> 00:45:18,279 Speaker 1: down slowly in a managed way. Probably. There's a lot 796 00:45:18,320 --> 00:45:19,920 Speaker 1: of faith they'll be able to do that. After we've 797 00:45:19,920 --> 00:45:21,600 Speaker 1: gotta leave it there. It's a really important final point 798 00:45:21,640 --> 00:45:24,960 Speaker 1: as well as I've actually lost there the Rock Creek CEO. 799 00:45:25,760 --> 00:45:29,480 Speaker 1: This is the Bloomberg Surveillance Podcast. Thanks for listening. Join 800 00:45:29,600 --> 00:45:32,960 Speaker 1: us live weekdays from seven to ten am Eastern on 801 00:45:33,040 --> 00:45:37,239 Speaker 1: Bloomberg Radio and on Bloomberg Television each day from six 802 00:45:37,400 --> 00:45:42,240 Speaker 1: to nine am for insight from the best in economics, finance, investment, 803 00:45:42,400 --> 00:45:47,400 Speaker 1: and international relations. And subscribe to the Surveillance podcast on 804 00:45:47,520 --> 00:45:51,320 Speaker 1: Apple podcast, SoundCloud, Bloomberg dot com, and of course on 805 00:45:51,440 --> 00:46:00,920 Speaker 1: the terminal. I'm Tom keene In. This is bloomberg S