Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene
Speaker 1: Jay Lee. We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. I
Speaker 1: grew up, you know, depression, baby parents and all that,
Speaker 1: and John that the word depression has always been misused
Speaker 1: by the media and frankly by academics as well. Guess
Speaker 1: what the way you just used it is correct. Let's
Speaker 1: discuss with Abraham rap Bowery City, Global head of FFX Analysis,
Speaker 1: and he can win on the Club of Economy like anyone.
Speaker 1: Abraham fantastic to catch up with his Let's just start
Speaker 1: there with the labor market, some depressing statistics, and I
Speaker 1: think we go back to the question we keep asking
Speaker 1: on programs like this, how long will it take to heal? Hi? John,
Speaker 1: great to be back and yes, key, key question. And
Speaker 1: let me give you two sides of the spectrum. I
Speaker 1: think the positive news is going to be I think
Speaker 1: continuing claims they are going to start peaking quite soon.
Speaker 1: So despite the numbers being you know, let's let's say
Speaker 1: twenty five million or so as of today. I think
Speaker 1: within within two three weeks, I think that number might
Speaker 1: start to come down. And I think that's obviously a
Speaker 1: tiny flicker of light at the end of the tunnel.
Speaker 1: But when it comes to full healing and and Chap
Speaker 1: Howell has touched on it, I think it will be
Speaker 1: a long time. There's going to be a long debate
Speaker 1: about this, but I think it will be years. So
Speaker 1: we're looking at I think in an economy that's only
Speaker 1: going to truly come out of recession, be back and
Speaker 1: kind of where it was maybe in two Everham John
Speaker 1: from Coventry just emailed in and noted how rude I
Speaker 1: was to interrupt Lisa there on the recession of seventies
Speaker 1: three seventy four. Even that was a manufacturing goods America
Speaker 1: which is gone. This depression is a service sector depression.
Speaker 1: How does City Group Economics feel we recover given so
Speaker 1: many of these jobs are lower rage service sector. Yes,
Speaker 1: so there, there are There are a couple of things
Speaker 1: to note there, but the most important you're you already
Speaker 1: highlighted that it's going to be very, very uneven across sectors.
Speaker 1: But what is less unusual is that the lowest earners
Speaker 1: are going to be hardest hit in recession. So even
Speaker 1: even in those manufacturing recessions, maybe the wage levels were
Speaker 1: somewhat different, but it was still the case that the
Speaker 1: pain in the labor market would disproportionately fall on low
Speaker 1: wage earners. This time around, I would argue, we actually
Speaker 1: do have more assistant factor, a systant larger assistance for
Speaker 1: some of these than we have had in the past.
Speaker 1: And therefore, I think, even though the outlook looks very somber,
Speaker 1: I think the the possibility that we can avoid greater
Speaker 1: damage than we didn't in the past, it's probably about
Speaker 1: the same as it wasn't in previously very deep recessions.
Speaker 1: So I don't want to be excessively pessimistic at this point.
Speaker 1: But this is not to dismiss this is husually challenging.
Speaker 1: Times will lie ahead of us, and they may well have,
Speaker 1: and this is the big debate. They might well have
Speaker 1: broader implications for not least politics here. But here's what
Speaker 1: I'm struggling with. People are saying that we're going to
Speaker 1: see the unemployment rate drop sharply to as much as
Speaker 1: others have even come out with higher estimates and then
Speaker 1: it will come back to about ten percent by year end.
Speaker 1: This is the estimate by Goldman, Sachs and a number
Speaker 1: of others. And yet as we see from the United Kingdom,
Speaker 1: they say everybody back to work, and nobody's coming, or
Speaker 1: a very few people are coming because they don't feel
Speaker 1: confident that they're not going to get sick. How much
Speaker 1: is that headwind to these predictions of a rapidly falling
Speaker 1: unemployment rate after it hits some of these peaks. Yes,
Speaker 1: so I would I would say that at the margin,
Speaker 1: I see more downside risk enough relative to these standard forecasts,
Speaker 1: and that for some combination of reasons that the return
Speaker 1: to work will be slower, that behavior will be more
Speaker 1: more effective than we currently think, but also because we
Speaker 1: could see setbacks on the health side. That being said,
Speaker 1: we should keep in mind that this is a quote
Speaker 1: unquote artificial recession to start with, so there was an
Speaker 1: imposed arrest to activity, and what that means is, unlike
Speaker 1: other recessions, we had some pent up demand coming out
Speaker 1: of it. So that's very unusual in historical context. So
Speaker 1: I think we should be highly confident that we will
Speaker 1: see pretty sharp drops in unemployment over the next couple
Speaker 1: of months. Whether that will take us back to ten
Speaker 1: percent by year end or it will be somewhat higher.
Speaker 1: I think that's an open question. But it should still
Speaker 1: come down pretty sharply. So the momentum will be very
Speaker 1: clear for unemployment to come down. But there are some
Speaker 1: very big questions about certain sectors, and to meet the
Speaker 1: most obvious one, it is commercial realistic how that sector
Speaker 1: will will recover, for instance. I think there's a huge
Speaker 1: question mark, and then obviously applies to a number of
Speaker 1: other sectors that have been hearted in this recession as well.
Speaker 1: There's a huge policy debate going on as well, Abraham,
Speaker 1: that I think we should weigh in on. Two. There
Speaker 1: is a division between the Federal Reserve Chairman and the
Speaker 1: President of the United States. In the last twenty four hours,
Speaker 1: Chairman Pal said more fiscal support could be costly, but
Speaker 1: worth it. President Trump then called Speaker Pelosis stimulus bill
Speaker 1: dead on arrival. Chairman Pal said negative rates aren't something
Speaker 1: we're looking at. President Trump said he's a believer in
Speaker 1: negative rates. We need to reconcile these differences and fast.
Speaker 1: What do you think the next policy move is? Yes,
Speaker 1: very very very interesting debate. So I think one thing
Speaker 1: is very clear. We're not going to see negative policy
Speaker 1: rates in the US for quite a while. I think CHAIRP.
Speaker 1: Powell was very clear. I think the President has limited
Speaker 1: means to put pressure on him, and I think he
Speaker 1: is very isolated in his views on negative rates in
Speaker 1: the US context right now. So the FED will continue
Speaker 1: to use the tools it has and may well reinforce them,
Speaker 1: but they will be heavily waited towards towards asset purchases.
Speaker 1: But the physical equation is also very interesting because we've
Speaker 1: all kind of got used to the recent US fiscal
Speaker 1: playbook where by parties and differences or parties and differences
Speaker 1: on the fiscal side have been effectively resolved by adopting
Speaker 1: proposals from both sides of the aisle. So the end
Speaker 1: result was just more fiscal stimulus, and that's I think
Speaker 1: an argument in the US's favor for the recovery. And
Speaker 1: right now, for the first time in a while, it's
Speaker 1: possible that we go back to the old model where
Speaker 1: you need to find an overlap between the two sides,
Speaker 1: and that for the time being means somewhat later and
Speaker 1: somewhat smaller stimulus. So I see a bit of a
Speaker 1: bit of a risk on the fiscal side relative to
Speaker 1: invest their expectations when it comes to so called Phase four,
Speaker 1: Phase four and beyond. But I do think we will
Speaker 1: get sizeable stimulus here. Still, everyone generalis out beautifully all
Speaker 1: the beliefs and certitudes everyone has with all your experience you,
Speaker 1: Catherine Man, the City Group team, can you these people
Speaker 1: actually stay certain in their beliefs with the twenty two
Speaker 1: or twenty five or unemployment rate. I think you make
Speaker 1: a very good point, Tom. I think we have to
Speaker 1: be very humble. These are unprecedented circumstances. We've already seen
Speaker 1: a number of unprecedented policy responses as well. But you know,
Speaker 1: some of the really big questions, they're very hard to resolve.
Speaker 1: It just to give you a very simple list, is
Speaker 1: obviously the future of the virus and how we're going
Speaker 1: to address it. The future of capitalism coming out of
Speaker 1: such a such an enormous event, future of globalization. There
Speaker 1: are any number of sexual implications, and I think it
Speaker 1: would be it would be daft to assume that we
Speaker 1: we have a lot of visibility on these issues. And
Speaker 1: that's why we also tell invest that you need to
Speaker 1: be very agile and be be ready to change your
Speaker 1: mind when the facts change. So we we certainly look
Speaker 1: look at the next few months with an expectation that
Speaker 1: a lot of surprises will will come our way, and
Speaker 1: hopefully some of them are positive. Abraham FANTASTICA catch up
Speaker 1: with you, even rap Bari there of City, which I'm
Speaker 1: sure some of you in our audience will remember last
Speaker 1: November the Bloomberg New Economy Forum, when the former Secretary
Speaker 1: of State Henry Kissing had sold us that the U.
Speaker 1: S and China in the foothills of a cold war,
Speaker 1: but it was not too late to do something about it.
Speaker 1: I wonder if it's too light now. It is such
Speaker 1: a change with us now, folks, and without question or
Speaker 1: conversation of the day on Asia and on China, this
Speaker 1: is the conversation of surveillance. I wish President Trump could
Speaker 1: listen to this morning. Is a must read book. A
Speaker 1: rave review for George Magnus Red Flags. It is extraordinary,
Speaker 1: It is short, exceptionally intense. It is a tour to
Speaker 1: force from the Yale University Press. I'm gonna ask a big,
Speaker 1: fancy question and then I want John to pick it
Speaker 1: up with a really direct moment that we're in on China.
Speaker 1: As we talked about before, George Magnus, You're right, the
Speaker 1: Chinese nations years of shame. How does President Trump affect
Speaker 1: the shame and the suffering that China faced for those
Speaker 1: hundred years before and that sexties and seventies and eighties.
Speaker 1: UM great question to start with, Tom Well. I mean,
Speaker 1: the the what the Chinese call their Century of Humiliation,
Speaker 1: which was when foreigner foreign countries basically carved up the
Speaker 1: country in the nineteenth century. Um is basically lives on
Speaker 1: very much in China's consciousness and in its leaders narrative. UM,
Speaker 1: and they are determined. According to one Seasonings has framed
Speaker 1: as the Chinese dream of the rejuvenile, rejuvenation of the
Speaker 1: Chinese people, you know, not to allow this to happen
Speaker 1: ever again, and for China to reclaim its role in
Speaker 1: the world. So what that really means in the current
Speaker 1: context of trade war, you know, virus war goodness, those
Speaker 1: we want to kind of call it, is that every
Speaker 1: time the Chinese feel that their foreigners, in this case
Speaker 1: obviously the United States or the West are interfering or
Speaker 1: pressuring China, UM, it basically gets their hackles up because
Speaker 1: they fear and feel that this is kind of history
Speaker 1: repeating itself, which they refuse to allow to happen. So
Speaker 1: I'm trying to understand, George, how we should characterize this moment.
Speaker 1: If a number of months ago the former Secretary of
Speaker 1: State and Kissinger said that we're in the foothills of
Speaker 1: the Cold War? Are we in one now? Well, I
Speaker 1: mean it certainly has all the aura of developing that way,
Speaker 1: right we are. You know, the relations between senior political
Speaker 1: leaders are frosty to say at least actually um and um.
Speaker 1: There are too many is where they used to be
Speaker 1: dialogue between let's say, the United States and China, where
Speaker 1: it's just basically stopped the accusations which are flying from
Speaker 1: one side to the other and back again. Are you
Speaker 1: not propitious? I mean, there is still obviously a very
Speaker 1: high level of economic independence between the United States and China,
Speaker 1: and China and other Western countries, but this interdependence is
Speaker 1: being chipped away at through what a lot of Americans
Speaker 1: called decoupling. The Chinese call itself reliance. It's basically, these
Speaker 1: are other sides of the same coin. And yeah, we'd
Speaker 1: have to be very nervous. I think that this is
Speaker 1: going to kind of end up with not just a
Speaker 1: kind of a frosty relationship, but one in which effectively,
Speaker 1: you know, cooperative relationships breakdown completely. George, the measures that
Speaker 1: have been taken so far, such as the US preventing
Speaker 1: your government pension from investor in Chinese companies, have largely
Speaker 1: been symbolic and not that effectual when it comes to
Speaker 1: actual flows of capital. What's the red line from your perspective,
Speaker 1: in which we've really entered into a true escalation that
Speaker 1: will be very difficult to back down from. Well, this
Speaker 1: movement by the President to stop the public pension fund
Speaker 1: from purchasing China, or to warn the investments in Chinese companies,
Speaker 1: you know, could backfire if some of these companies are
Speaker 1: held to be liable or culpable in the kind of
Speaker 1: coronavirus pandemic u is um. You know. It is again,
Speaker 1: it's a it's a new twist in what is already
Speaker 1: quite a worrying tale, really, because we already have a
Speaker 1: war so called war going on in terms of trade
Speaker 1: and tariffs. It's going on in technology, it's going on
Speaker 1: in other areas that are kind of buried in the
Speaker 1: kind of mantra of sort of national security financial a
Speaker 1: financial war or what the Chinese cause smokeless financial war
Speaker 1: um would be would be a big problem as well,
Speaker 1: because actually, here the United States has a huge amount
Speaker 1: of leverage because the Chinese need capital influence, they want them,
Speaker 1: they want international investors, including the United States, to invest
Speaker 1: in Chinese equity and bond markets. They need the dollars,
Speaker 1: they need dollar financing and so um. In a way,
Speaker 1: you might say, or some people might say that the
Speaker 1: President is simply trying to exercise the leverage that he
Speaker 1: has because the dollar and the US financial system is
Speaker 1: so important in the global economy and for China. But
Speaker 1: in another way, you know, it's one thing to base
Speaker 1: My view is it's one thing to say we don't
Speaker 1: you want you investing in these companies because they're not
Speaker 1: transparent and they don't meet our accounting standards. It's quite
Speaker 1: another thing to say, we don't want you investing in
Speaker 1: these Panese because we think they might be couple and
Speaker 1: the coronavirus pandemic, because that basically conveys something very very
Speaker 1: different to Beijing and obviously upstay Ante in terms of tension.
Speaker 1: George We've gotta get you back on because we need
Speaker 1: a huge discussion on the best way forward to change
Speaker 1: the behavior of the Chinese Communist Party. And I know
Speaker 1: that we have two parties that both want to do that,
Speaker 1: but I think have two different visions on how to
Speaker 1: go about doing it, particularly in the United States. George
Speaker 1: Magnus there of the University of Oxford, this is going
Speaker 1: to be a critical issue. We've said it so many
Speaker 1: times on this program. Let me ask a fancy question, John.
Speaker 1: I think it's really important to shift to the fiscal debate. Now.
Speaker 1: We can do that with Julia Carnado macroeconomic policy. She's
Speaker 1: been wonderful not only on a monetary theory that's out
Speaker 1: there and and such, but but also the shift from
Speaker 1: monetary over to the other areas. Julia. The arch theory
Speaker 1: here which many bring up, Dr Pos and I believe
Speaker 1: brought it up with Chairman Paul yesterday, is Olivier Blanchard
Speaker 1: and Lawrence Summers. And that is a strange word hysteresis,
Speaker 1: which is about if you're out of a job, you
Speaker 1: stay out of a job, it's even harder to get
Speaker 1: back in. What's the hystoriesis meet around the United States
Speaker 1: of America right now. This is a very dangerous territory
Speaker 1: we're in um and there's This is exactly why Powell
Speaker 1: came out and sort of issued his call to arms
Speaker 1: for fiscal policymakers UM. To have this many millions and
Speaker 1: millions of people, eight weeks of jobless claims that busted
Speaker 1: through multiple times any prior record, in the deepest recessions
Speaker 1: we've ever seen. We cannot take this lightly. We cannot
Speaker 1: assume this will all just snap back to normal. Julia,
Speaker 1: I'm struck by a statistical aberration in the data, and
Speaker 1: not sorry to get geeky, but I think this is
Speaker 1: important to really gauge whether people are actually receiving unemployment benefits.
Speaker 1: We talk about thirty six and a half million people
Speaker 1: who have filed initial jobless claimed and yet the continuing
Speaker 1: claims is so far below that it came in far
Speaker 1: below where people expected. This is the number of people
Speaker 1: actually receiving benefits. What does this mean? Does it mean
Speaker 1: that basically the gears in states and municipalities are not
Speaker 1: moving quickly enough to get money to people who are
Speaker 1: out of work. Yeah, exactly, so, we've seen we know
Speaker 1: that many, many states are having problems processing these claims.
Speaker 1: So even if you can file an initial claim, even
Speaker 1: in states like New York, UM, people have been waiting
Speaker 1: to be to receive benefits for weeks. People have filed
Speaker 1: six eight weeks ago and still aren't receiving benefits. So
Speaker 1: the benefit program was well designed, it was fairly generous, UM,
Speaker 1: but we just don't have the technology in place to
Speaker 1: get the money to people. Judy, let's talk about the
Speaker 1: quere how long it takes to hail time alone is
Speaker 1: not enough. What do we need today? We need to
Speaker 1: bridge this gap. And what's what Powell's message was is
Speaker 1: that this gap is going to be longer than we thought.
Speaker 1: If this narrative about opening the economy up as a
Speaker 1: false narrative. UM, as long as we have a rampant disease,
Speaker 1: people aren't going to go back out and go about
Speaker 1: business as normal, and businesses will still be struggling to
Speaker 1: make ends meet. So this is about getting us through
Speaker 1: this public health crisis that looks like it's going to
Speaker 1: be a matter of many months, not just two or
Speaker 1: three months. And so we need to get money to people,
Speaker 1: businesses and consumers so that they can pay their rent,
Speaker 1: so that they don't default so that we don't see
Speaker 1: a wave of business failures which would start a snowball
Speaker 1: effect of more job losses and more loss and confidence.
Speaker 1: So time is really of the essence here, Jerny. And
Speaker 1: how do you establish what is temporary just in terms
Speaker 1: of damage and what might be more permanent. Well, I
Speaker 1: still think we're in a phase where a lot of
Speaker 1: this could be temporary. Uh, you know, the relationships between
Speaker 1: employers and their workers hasn't been disrupted for that long. UM,
Speaker 1: So it is, but we are seeing what's troubling, and
Speaker 1: I think what Powell is hearing from his business contacts
Speaker 1: is that more businesses are saying, you know, no, thanks
Speaker 1: to these loan programs, UM, I'm just going to hunker
Speaker 1: down and actually permanently reduce my operations. And that's exactly
Speaker 1: the transition we don't want businesses to make. So in
Speaker 1: that first wave, and we saw that in the employment report, right,
Speaker 1: the vast majority of people are still characterized as on
Speaker 1: temporary layoff UM. But those can become permanent very quickly.
Speaker 1: So we don't know. There's not a lot of precision
Speaker 1: in this UM, but we still have time. Like we're
Speaker 1: still in a good spot. Excuse me, where we could
Speaker 1: we could pull this off. We could pull this off.
Speaker 1: When you look at what's being proposed in Washington, you
Speaker 1: look at the timeline that's getting stretched out as an
Speaker 1: increasing number of lawmakers say, we need to wait. When
Speaker 1: is the latest that they can pass something in order
Speaker 1: to rescue this market and prevent us from entering a depression.
Speaker 1: We've got weeks, not months to do this. So if
Speaker 1: you think about one example is state and local governments
Speaker 1: horsing budget crises UM. Their budget year typically ends in
Speaker 1: June UM, so they're having to make budgets for next
Speaker 1: fiscal year, which starts in July. So if they don't
Speaker 1: have money to plug that hole, many of them have
Speaker 1: balanced budget requirements, they have to lay off staff and
Speaker 1: cut back services. That's exactly the kind of second round
Speaker 1: effect we want to avoid. So we have June to
Speaker 1: get money to state and local governments so that they
Speaker 1: don't go into a round of permanent layoff. Julie, the
Speaker 1: key distinction here is it in America, we don't want
Speaker 1: to provide direct aid individuals, we don't trust them, etcetera, etcetera.
Speaker 1: I don't want to get into the cultural debate, folks,
Speaker 1: But the fact is we don't. And in Europe they
Speaker 1: provide direct subsidies so people can pay their rent as
Speaker 1: you expect. You explained to help businesses and all that.
Speaker 1: I get that theory. Do you see you have any
Speaker 1: optimism that we can shift the ethos in America to
Speaker 1: a more year European direct benefit tone. I think so.
Speaker 1: I mean, we we are seeing, actually, although the administration
Speaker 1: hasn't gotten on board, we're starting to see at least
Speaker 1: some bipartisan support for for stronger, more lasting income support
Speaker 1: to get us through this. Um it's early days. We
Speaker 1: need more of it, but UM, I think it's quite possible.
Speaker 1: Because these are their voters. UM, it should follow that
Speaker 1: if there is a pandemic, this is nobody's folved, uh
Speaker 1: to actually get money to people so that they don't
Speaker 1: dessault or go hungry lose their homes. This is sort
Speaker 1: of pretty easy, low hanging fruit for most politicians of
Speaker 1: either party. So I'm optimistic we can start to see
Speaker 1: that gel as the urgency starts to the message of
Speaker 1: urgency gets received by the policy maker. Julia not to
Speaker 1: catch up with you, Judia Karna, that of macroeconomic policy
Speaker 1: here from our surveillance Central Park Office, I can look
Speaker 1: over to Anglewood, New Jersey and see brilliant math students
Speaker 1: all lined up on the palisades gazing out. And if
Speaker 1: they're smart enough, they'll be lucky enough to go to
Speaker 1: Brown University in Providence, or north to a smaller city
Speaker 1: of Boston and Cambridge to Harvard and do better than
Speaker 1: go to economics, and they can be like Randall Krosner,
Speaker 1: the former governor of the Federal Reserve System and now
Speaker 1: of course a force at the Booth School in Chicago.
Speaker 1: Were thrilled to Governor Krosner could join us with all
Speaker 1: this terrific news flow that we have. Brandy. The the
Speaker 1: the path of the ten uere yield that we've seen,
Speaker 1: and as John Taylor of Stanford would call it, the
Speaker 1: great moderation that we have seen and we had for
Speaker 1: a long time. I guess some stability and volatility is
Speaker 1: the path of the tenure yield following economic things that
Speaker 1: are out there, or are our economic our investment, our
Speaker 1: financed stuff following the tenure yield. Which is it sh
Speaker 1: It's a very interesting way to put it. I think
Speaker 1: it's reflecting the the economic fundamentals and the forces that
Speaker 1: are there, but it does have a broader psychological impact
Speaker 1: that sort of there's a feedback mechanism of what you're
Speaker 1: getting head on that It's a very interesting way of
Speaker 1: putting it. So I think it makes a lot of
Speaker 1: sense that the tenure yield has come down so much.
Speaker 1: We're clearly in a very low inflation environment. We're clearly
Speaker 1: no one is worried that, at least in the shortage
Speaker 1: immediate run, that we're going to have ab inflation. I mean,
Speaker 1: some people have been concerned about the increasing defense balance sheets,
Speaker 1: but they've been concerned when I was there at the
Speaker 1: global financial crisis that we would have this high inflation
Speaker 1: of the next decade. We didn't have that. I don't
Speaker 1: see that that coming now. But I also think it's
Speaker 1: reflecting a you know, that low yield is also telling
Speaker 1: us something about the uncertainty that people have, the concerns
Speaker 1: that people have about the economic situation. Ran I'm gonna
Speaker 1: be root here, Paul jump in on this question because
Speaker 1: I don't want to go you know, uh, the mental
Speaker 1: Black wonderful professor in New York University has done great,
Speaker 1: great research on recurrence equations and feedback loops, Professor Crost
Speaker 1: are real simple. Can economists and even well meaning chairman's
Speaker 1: of the Federal Reserve be so presumptive as to believe
Speaker 1: they can break the feedback loops? That's also another very
Speaker 1: interesting question, because my last one for the quarter going
Speaker 1: that no, no, no, no, they're more more coming the
Speaker 1: because it's a very um challenging game when you're have
Speaker 1: a megaphone like a FED chairman, because you want to
Speaker 1: be realistic, like the chairman was yesterday, that you know
Speaker 1: they're gonna be a lot of challenges. Head don't think
Speaker 1: that this is just you know, we turn the lights off,
Speaker 1: we're going to turn the lights back back on again.
Speaker 1: But you also don't want to scare people because that
Speaker 1: can make it more difficult to have the recovery. And
Speaker 1: so you try to um talk in a way that
Speaker 1: is realistic but gets to the direction that you want.
Speaker 1: It's very very difficult. Look what happened to Alan Greenspan
Speaker 1: when he was trying to be realistic that he social
Speaker 1: irrational exuberants and the stock market shell by a very
Speaker 1: significant amount. It's really something Paul I was rude. Their
Speaker 1: Roman Freedman is the Giant at New York University has
Speaker 1: really studied the recurrence equations, the feedback loops, the redos
Speaker 1: that happened behaviorally within an economic system. Paul So, Professor.
Speaker 1: We heard from a FED chairman pal yesterday. He seemed
Speaker 1: to pooh pooh negative interest rates. Give us your thoughts
Speaker 1: about how you think the FED thinks about kind of
Speaker 1: ne injuries interest rates as a as a policy matter.
Speaker 1: So I think it's um if not part of their DNA.
Speaker 1: They really don't want to go there, but certainly in
Speaker 1: an environment where we're in, you never want to say
Speaker 1: never about anything. If we were to get into a
Speaker 1: deflationary situation and sort of the price level is falling
Speaker 1: by let's say two percent per year, if they refuse
Speaker 1: to go below zero, that would mean that real interest
Speaker 1: rates would be two percent, and that would be quite
Speaker 1: high relative to what they've been over the last decade.
Speaker 1: That would mean plite monetary policy. So they would have
Speaker 1: to in extreme circumstances. I think we consider that, but
Speaker 1: part of the I don't think it was an accident
Speaker 1: to the chairman talked about his reluctance to go negative
Speaker 1: and talked about the fiscal authorities doing more because the
Speaker 1: fiscal authorities do more and do the right things. Um.
Speaker 1: Then he feels that they're not going to be put
Speaker 1: in that situation of a significant deflation where they might
Speaker 1: have to consider that. So as we think about their
Speaker 1: policy going forward, here is it? Is it really are
Speaker 1: they trying to Is FED Chairman Pal and the rest
Speaker 1: of the federal reserved really trying to put some pressure
Speaker 1: on Congress to step up and do even more from
Speaker 1: a fiscal stimulus perspective. Well, I think they worry that. Um.
Speaker 1: I mean, I think they're they're quite delighted that we
Speaker 1: were able to get bi partisan support for these very
Speaker 1: large spending bills and get it through very quickly. I
Speaker 1: don't think people would have anticipated that. I think it's
Speaker 1: now clear that there's a lot more partisan wrangling that's
Speaker 1: going on that's going to slow down the next steps.
Speaker 1: And and I think, um fit share Powell really doesn't
Speaker 1: want the burden to be put onto the FIT. You know, like,
Speaker 1: if if everybody else can't act well, then the FED
Speaker 1: will take care of it. The FED can't through the virus, said,
Speaker 1: can't prepare broken supply chains, They can't get people comfortable
Speaker 1: with going out to to consume. Other things have to happen.
Speaker 1: And and that's effect that you know implicitly that was message,
Speaker 1: don't put all the burden on us, Um, it's got
Speaker 1: to be a shared burden. Randall crossing with his folks
Speaker 1: from our governor of the Fellow Reserve System at the
Speaker 1: Booth School of Chicago. And of course with prodigious math capabilities.
Speaker 1: Randy was born in Englewood, New Jersey. I know that's
Speaker 1: what it is. I mean, I can see it over there.
Speaker 1: I see all sorts of square roots floating in the
Speaker 1: atmosphere over Andwood, New Jersey. Right now, Professor Crossner, let
Speaker 1: me ask you a Mathew question about a non Mathew concept.
Speaker 1: And this comes from the economic lightweight, Olivier Blanchard of
Speaker 1: M I T. And a guy named Summers from Harvard
Speaker 1: as well. Folks, I'm kidding here, and that these are
Speaker 1: all concept ideas that are particularly perceived by the media
Speaker 1: as concept ideas. And Professor Crosner knows underlying Blanchard and
Speaker 1: Summer's work on histories, this is prodigious math abilities. What's
Speaker 1: the math of our unemployment? A professor, Um, that's a
Speaker 1: big number. That's good. You get that yeah, yeah, no.
Speaker 1: But the challenges when you get to numbers like this
Speaker 1: and this persists, there's a scarring that goes on. That's
Speaker 1: that sort of history assistance, sort of a fancy way
Speaker 1: of just saying that this is not something that's temporary
Speaker 1: but has long legs. This is scarring that that happens.
Speaker 1: It's not just oh, someone thrown out of work and
Speaker 1: the populations out of work and then they just find
Speaker 1: a job again. It makes it very very difficult when
Speaker 1: people are out of work for a long time to
Speaker 1: be able to get back into the labor force. When
Speaker 1: you have that many people out, that means that people
Speaker 1: need dramatically different kinds of skills and it's very tough
Speaker 1: to get them reskilled so so quickly, and it makes
Speaker 1: it very difficult when you have those high employment rates
Speaker 1: to be able to move move them down. And that's
Speaker 1: why I think it's very important that policy think about
Speaker 1: the transition that they're trying to think about. Well, can
Speaker 1: we just get to February? I have you always gone
Speaker 1: The meteor has hit, the dinosaurs have been been made extinct,
Speaker 1: and there's no way we're going to bring them back. Okay,
Speaker 1: but why can't we be Germany. I mean, this is
Speaker 1: a really important question folks in terms of retraining the
Speaker 1: Germans on the high ground on us, Professor cross Or
Speaker 1: why can't we Retraine? And frankly Chicago in the Midwest
Speaker 1: is like would be the nexus of this. So I
Speaker 1: think I think there are two things. One is that
Speaker 1: there is this long history of apprenticeship systems in in
Speaker 1: Germany and so people building skills abroad a broad skill set.
Speaker 1: We don't have that in the US. And also to
Speaker 1: the culture, there's a cultural piece to it. In Germany,
Speaker 1: when people grow up together, one person goes on to
Speaker 1: become CEO of a company, another person becomes the someone
Speaker 1: who works in um in metal work and becomes a welder.
Speaker 1: They can they generally tend to stay friends and stay
Speaker 1: in the same social circles. In the US, we don't
Speaker 1: have that, And so I think it's a combination of
Speaker 1: a cultural thing and the structures, the predecision structures. What
Speaker 1: you just heard their folks are Randall Crosser tattooed to
Speaker 1: your brain on Germany. And I'm pleased to say, Richard
Speaker 1: Clara to the vice chairman is expert on this, as
Speaker 1: is Adam Posen, who asked Chairman Powell the question yesterday, Randy,
Speaker 1: that was so valuable, so brilliant, Thank you so much.
Speaker 1: He is at the Boost School of Chicago Randall Crosser
Speaker 1: as well. What Maijing discussion here a nursing on the
Speaker 1: doctors they leave the hospital and the idea of what
Speaker 1: that means when there is a pandemic. Here is Jason
Speaker 1: Farley of Johns Hopkins University. Let's listen. Well, I think
Speaker 1: you're seeing professionals who you know, as you would see
Speaker 1: a soldier at war who can be relaxed between the battles.
Speaker 1: You can see healthcare workers relacing in it in those battles. Um.
Speaker 1: I don't think the public should take a sense of
Speaker 1: you know, uh, lack of urgency in our response and
Speaker 1: buy that urgency I mean continuing to be safer at home,
Speaker 1: continuing to social distance, physical distance by no means are
Speaker 1: we out of vote this more beautifully said. So with that,
Speaker 1: there's this a huge tension between lockdown stay at home
Speaker 1: the Wisconsin legislation that we've seen in the last uh
Speaker 1: twenty four hours. How do you perceive the gray area
Speaker 1: between a strict lockdown, stay at home and getting back
Speaker 1: to normal well, I think you characterized it perfectly at
Speaker 1: this sense of gray in which, um, you know, everyone
Speaker 1: is opening up in a slightly different ways across the country,
Speaker 1: across the world, um, and we really need to pay
Speaker 1: very close attention and be vigilant to how that opening
Speaker 1: up and how our change in our behavior. How are
Speaker 1: you know, quite frankly, our our decrease in social and
Speaker 1: physical distancing from one another. A return to work is
Speaker 1: going to impact new cases. We we anticipate that it
Speaker 1: will impact new cases. And yet there are some painful
Speaker 1: decisions that have to be made in as you've mentioned
Speaker 1: multiple times, the recession, preventing depression economically and in many cases, um,
Speaker 1: you know, just saving businesses. So it is a delicate
Speaker 1: balance between being able to open up expand the economic environment,
Speaker 1: while you know, also being vigilant to prevent ongoing transmission.
Speaker 1: Can we guestimate, Jason Farley, how many people so far
Speaker 1: have had COVID and how many of those people are immune?
Speaker 1: So the immune question is always very hard one. At
Speaker 1: this point we are doing, you know, investigators across the
Speaker 1: world are really struggling with uh, you know, coming to
Speaker 1: grips with whether or not immunity will occur as a
Speaker 1: results of infection for some people, we believe that it will.
Speaker 1: But we are seeing cases of relapse reinfection, if you will.
Speaker 1: And so what's critical to understand is in these patients
Speaker 1: who have you know, a supposed relapse, were they truly
Speaker 1: tested negative and repeatedly negative for the virus and and
Speaker 1: basically became what we would call convalescents. So they recovered,
Speaker 1: and we we can detect antibodies in those circumstances, and
Speaker 1: then we follow those people over time to see if
Speaker 1: reinfection occurs in those circumstances. We're actually launching a study
Speaker 1: in June to do exactly that at John Hopkins to
Speaker 1: really follow people longitudinally for at least twelve months and
Speaker 1: a cohort of patients UH to see if what the prevalence,
Speaker 1: what the incidence of the virus is in this twelve
Speaker 1: month period, particularly if we begin to experience a second
Speaker 1: or you know, forbid, you know, um a third wave
Speaker 1: of this infection. And so we're really trying to be
Speaker 1: vigilant in our understanding of the potential for reinfection, the
Speaker 1: level of immunity that occurs, and what that ultimately helps
Speaker 1: us to understand about the potential for this growing concern
Speaker 1: of a second wave. Our country is working together to
Speaker 1: try and figure this out, or is it everyone for themselves.
Speaker 1: I think much of the global community is working together. Unfortunately,
Speaker 1: I do believe that, you know, from a US perspective,
Speaker 1: we have opted out of that global community in many ways,
Speaker 1: not only the rhetoric from the White House about multiple
Speaker 1: UH responses from other countries, specifically of course, the focus
Speaker 1: on China, but also the global vaccine initiatives. The US
Speaker 1: has decided that we're going to go it alone and
Speaker 1: not participate in several of the global vaccine initiatives, which
Speaker 1: UM is very nearsighted on our part. Um, I do believe,
Speaker 1: you know, we have our first trial starting here in
Speaker 1: the US very soon, UH, some ongoing trials, but John
Speaker 1: Hopkins specifically in June, so in a few weeks we'll
Speaker 1: have our verse vaccine trials going. And in addition, um,
Speaker 1: you know, multiple different vaccine candidates, so it's not just
Speaker 1: one vaccine. UM. While the rest of the world is
Speaker 1: moving ahead, and we know that an Oxford and other
Speaker 1: locations around the world, we have seen you know, the
Speaker 1: vaccine initiatives really take off so I think we are
Speaker 1: being nearsighted in the US response and not participating in
Speaker 1: global efforts. Jason Farley, Johns Hopkins University, Nursing. Just a
Speaker 1: very smart, holistic conversation there, folks on the trends right now.
Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and
Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast
Speaker 1: platform you prefer. I'm on Twitter at Tom Keane before
Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg
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