WEBVTT - Surveillance: Negative Rates With Kroszner 0:00:05.080 --> 0:00:13.040 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:13.480 --> 0:00:17.560 Jay Lee. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.319 Bloomberg dot Com, and of course on the Bloomberg. I 0:00:27.360 --> 0:00:29.760 grew up, you know, depression, baby parents and all that, 0:00:30.480 --> 0:00:34.000 and John that the word depression has always been misused 0:00:34.000 --> 0:00:37.520 by the media and frankly by academics as well. Guess 0:00:37.560 --> 0:00:40.880 what the way you just used it is correct. Let's 0:00:40.920 --> 0:00:45.280 discuss with Abraham rap Bowery City, Global head of FFX Analysis, 0:00:45.320 --> 0:00:47.879 and he can win on the Club of Economy like anyone. 0:00:48.080 --> 0:00:51.120 Abraham fantastic to catch up with his Let's just start 0:00:51.159 --> 0:00:54.440 there with the labor market, some depressing statistics, and I 0:00:54.440 --> 0:00:56.240 think we go back to the question we keep asking 0:00:56.280 --> 0:01:02.400 on programs like this, how long will it take to heal? Hi? John, 0:01:02.440 --> 0:01:05.560 great to be back and yes, key, key question. And 0:01:05.959 --> 0:01:07.959 let me give you two sides of the spectrum. I 0:01:08.000 --> 0:01:10.720 think the positive news is going to be I think 0:01:10.800 --> 0:01:13.920 continuing claims they are going to start peaking quite soon. 0:01:14.640 --> 0:01:17.200 So despite the numbers being you know, let's let's say 0:01:17.240 --> 0:01:20.520 twenty five million or so as of today. I think 0:01:20.560 --> 0:01:23.479 within within two three weeks, I think that number might 0:01:23.520 --> 0:01:25.880 start to come down. And I think that's obviously a 0:01:26.000 --> 0:01:28.000 tiny flicker of light at the end of the tunnel. 0:01:28.400 --> 0:01:30.600 But when it comes to full healing and and Chap 0:01:30.640 --> 0:01:32.360 Howell has touched on it, I think it will be 0:01:32.360 --> 0:01:34.400 a long time. There's going to be a long debate 0:01:34.440 --> 0:01:36.679 about this, but I think it will be years. So 0:01:36.760 --> 0:01:39.319 we're looking at I think in an economy that's only 0:01:39.360 --> 0:01:41.520 going to truly come out of recession, be back and 0:01:41.720 --> 0:01:45.480 kind of where it was maybe in two Everham John 0:01:45.560 --> 0:01:48.280 from Coventry just emailed in and noted how rude I 0:01:48.360 --> 0:01:52.000 was to interrupt Lisa there on the recession of seventies 0:01:52.040 --> 0:01:57.240 three seventy four. Even that was a manufacturing goods America 0:01:57.360 --> 0:02:02.720 which is gone. This depression is a service sector depression. 0:02:03.200 --> 0:02:07.640 How does City Group Economics feel we recover given so 0:02:07.680 --> 0:02:13.480 many of these jobs are lower rage service sector. Yes, 0:02:13.760 --> 0:02:15.919 so there, there are There are a couple of things 0:02:16.000 --> 0:02:18.320 to note there, but the most important you're you already 0:02:18.400 --> 0:02:22.640 highlighted that it's going to be very, very uneven across sectors. 0:02:22.639 --> 0:02:26.880 But what is less unusual is that the lowest earners 0:02:26.919 --> 0:02:29.640 are going to be hardest hit in recession. So even 0:02:29.680 --> 0:02:32.480 even in those manufacturing recessions, maybe the wage levels were 0:02:32.560 --> 0:02:34.920 somewhat different, but it was still the case that the 0:02:35.080 --> 0:02:38.720 pain in the labor market would disproportionately fall on low 0:02:38.800 --> 0:02:42.880 wage earners. This time around, I would argue, we actually 0:02:42.960 --> 0:02:46.760 do have more assistant factor, a systant larger assistance for 0:02:46.880 --> 0:02:49.000 some of these than we have had in the past. 0:02:49.639 --> 0:02:54.440 And therefore, I think, even though the outlook looks very somber, 0:02:54.800 --> 0:02:57.760 I think the the possibility that we can avoid greater 0:02:57.840 --> 0:03:00.240 damage than we didn't in the past, it's probably about 0:03:00.280 --> 0:03:04.440 the same as it wasn't in previously very deep recessions. 0:03:04.480 --> 0:03:08.120 So I don't want to be excessively pessimistic at this point. 0:03:08.280 --> 0:03:10.880 But this is not to dismiss this is husually challenging. 0:03:10.919 --> 0:03:13.560 Times will lie ahead of us, and they may well have, 0:03:14.000 --> 0:03:15.800 and this is the big debate. They might well have 0:03:15.919 --> 0:03:21.120 broader implications for not least politics here. But here's what 0:03:21.160 --> 0:03:23.040 I'm struggling with. People are saying that we're going to 0:03:23.160 --> 0:03:28.480 see the unemployment rate drop sharply to as much as 0:03:28.480 --> 0:03:31.320 others have even come out with higher estimates and then 0:03:31.320 --> 0:03:34.160 it will come back to about ten percent by year end. 0:03:34.320 --> 0:03:36.440 This is the estimate by Goldman, Sachs and a number 0:03:36.440 --> 0:03:39.400 of others. And yet as we see from the United Kingdom, 0:03:39.480 --> 0:03:42.080 they say everybody back to work, and nobody's coming, or 0:03:42.080 --> 0:03:44.240 a very few people are coming because they don't feel 0:03:44.280 --> 0:03:47.240 confident that they're not going to get sick. How much 0:03:47.480 --> 0:03:51.360 is that headwind to these predictions of a rapidly falling 0:03:51.440 --> 0:03:55.600 unemployment rate after it hits some of these peaks. Yes, 0:03:55.640 --> 0:03:58.320 so I would I would say that at the margin, 0:03:58.600 --> 0:04:02.600 I see more downside risk enough relative to these standard forecasts, 0:04:02.600 --> 0:04:06.440 and that for some combination of reasons that the return 0:04:06.480 --> 0:04:09.200 to work will be slower, that behavior will be more 0:04:09.320 --> 0:04:11.600 more effective than we currently think, but also because we 0:04:11.640 --> 0:04:16.040 could see setbacks on the health side. That being said, 0:04:16.880 --> 0:04:19.200 we should keep in mind that this is a quote 0:04:19.279 --> 0:04:23.039 unquote artificial recession to start with, so there was an 0:04:23.080 --> 0:04:27.760 imposed arrest to activity, and what that means is, unlike 0:04:27.800 --> 0:04:31.000 other recessions, we had some pent up demand coming out 0:04:31.000 --> 0:04:33.960 of it. So that's very unusual in historical context. So 0:04:34.000 --> 0:04:36.400 I think we should be highly confident that we will 0:04:36.440 --> 0:04:39.479 see pretty sharp drops in unemployment over the next couple 0:04:39.480 --> 0:04:41.480 of months. Whether that will take us back to ten 0:04:41.560 --> 0:04:44.039 percent by year end or it will be somewhat higher. 0:04:44.080 --> 0:04:46.640 I think that's an open question. But it should still 0:04:46.680 --> 0:04:49.160 come down pretty sharply. So the momentum will be very 0:04:49.240 --> 0:04:52.440 clear for unemployment to come down. But there are some 0:04:52.520 --> 0:04:54.560 very big questions about certain sectors, and to meet the 0:04:54.560 --> 0:04:57.400 most obvious one, it is commercial realistic how that sector 0:04:57.440 --> 0:05:00.000 will will recover, for instance. I think there's a huge 0:05:00.160 --> 0:05:02.160 question mark, and then obviously applies to a number of 0:05:02.200 --> 0:05:04.520 other sectors that have been hearted in this recession as well. 0:05:04.640 --> 0:05:06.880 There's a huge policy debate going on as well, Abraham, 0:05:06.920 --> 0:05:08.560 that I think we should weigh in on. Two. There 0:05:08.600 --> 0:05:10.839 is a division between the Federal Reserve Chairman and the 0:05:10.839 --> 0:05:13.000 President of the United States. In the last twenty four hours, 0:05:13.120 --> 0:05:15.919 Chairman Pal said more fiscal support could be costly, but 0:05:16.000 --> 0:05:19.120 worth it. President Trump then called Speaker Pelosis stimulus bill 0:05:19.200 --> 0:05:22.440 dead on arrival. Chairman Pal said negative rates aren't something 0:05:22.440 --> 0:05:24.920 we're looking at. President Trump said he's a believer in 0:05:25.000 --> 0:05:28.239 negative rates. We need to reconcile these differences and fast. 0:05:28.480 --> 0:05:31.680 What do you think the next policy move is? Yes, 0:05:31.880 --> 0:05:34.400 very very very interesting debate. So I think one thing 0:05:34.480 --> 0:05:37.000 is very clear. We're not going to see negative policy 0:05:37.080 --> 0:05:39.440 rates in the US for quite a while. I think CHAIRP. 0:05:39.440 --> 0:05:42.280 Powell was very clear. I think the President has limited 0:05:42.320 --> 0:05:44.039 means to put pressure on him, and I think he 0:05:44.160 --> 0:05:46.840 is very isolated in his views on negative rates in 0:05:46.839 --> 0:05:49.320 the US context right now. So the FED will continue 0:05:49.360 --> 0:05:52.000 to use the tools it has and may well reinforce them, 0:05:52.000 --> 0:05:55.120 but they will be heavily waited towards towards asset purchases. 0:05:55.480 --> 0:05:58.560 But the physical equation is also very interesting because we've 0:05:58.600 --> 0:06:01.560 all kind of got used to the recent US fiscal 0:06:01.600 --> 0:06:06.520 playbook where by parties and differences or parties and differences 0:06:06.560 --> 0:06:10.240 on the fiscal side have been effectively resolved by adopting 0:06:10.240 --> 0:06:12.760 proposals from both sides of the aisle. So the end 0:06:12.800 --> 0:06:16.280 result was just more fiscal stimulus, and that's I think 0:06:16.320 --> 0:06:20.160 an argument in the US's favor for the recovery. And 0:06:20.360 --> 0:06:22.400 right now, for the first time in a while, it's 0:06:22.440 --> 0:06:24.560 possible that we go back to the old model where 0:06:24.560 --> 0:06:26.800 you need to find an overlap between the two sides, 0:06:27.080 --> 0:06:29.760 and that for the time being means somewhat later and 0:06:29.800 --> 0:06:32.320 somewhat smaller stimulus. So I see a bit of a 0:06:32.320 --> 0:06:34.400 bit of a risk on the fiscal side relative to 0:06:34.400 --> 0:06:37.160 invest their expectations when it comes to so called Phase four, 0:06:37.520 --> 0:06:40.040 Phase four and beyond. But I do think we will 0:06:40.040 --> 0:06:44.440 get sizeable stimulus here. Still, everyone generalis out beautifully all 0:06:44.480 --> 0:06:48.800 the beliefs and certitudes everyone has with all your experience you, 0:06:49.080 --> 0:06:52.159 Catherine Man, the City Group team, can you these people 0:06:52.320 --> 0:06:56.040 actually stay certain in their beliefs with the twenty two 0:06:56.400 --> 0:07:02.520 or twenty five or unemployment rate. I think you make 0:07:02.560 --> 0:07:04.760 a very good point, Tom. I think we have to 0:07:04.800 --> 0:07:08.760 be very humble. These are unprecedented circumstances. We've already seen 0:07:09.080 --> 0:07:12.120 a number of unprecedented policy responses as well. But you know, 0:07:12.200 --> 0:07:14.520 some of the really big questions, they're very hard to resolve. 0:07:14.520 --> 0:07:16.800 It just to give you a very simple list, is 0:07:16.800 --> 0:07:19.600 obviously the future of the virus and how we're going 0:07:19.640 --> 0:07:23.880 to address it. The future of capitalism coming out of 0:07:23.960 --> 0:07:27.840 such a such an enormous event, future of globalization. There 0:07:27.880 --> 0:07:30.280 are any number of sexual implications, and I think it 0:07:30.280 --> 0:07:33.080 would be it would be daft to assume that we 0:07:33.080 --> 0:07:36.120 we have a lot of visibility on these issues. And 0:07:36.160 --> 0:07:37.760 that's why we also tell invest that you need to 0:07:37.760 --> 0:07:42.800 be very agile and be be ready to change your 0:07:42.840 --> 0:07:46.120 mind when the facts change. So we we certainly look 0:07:46.360 --> 0:07:49.840 look at the next few months with an expectation that 0:07:49.920 --> 0:07:53.000 a lot of surprises will will come our way, and 0:07:53.000 --> 0:07:55.800 hopefully some of them are positive. Abraham FANTASTICA catch up 0:07:55.800 --> 0:08:02.840 with you, even rap Bari there of City, which I'm 0:08:02.840 --> 0:08:05.240 sure some of you in our audience will remember last 0:08:05.320 --> 0:08:08.800 November the Bloomberg New Economy Forum, when the former Secretary 0:08:08.800 --> 0:08:11.080 of State Henry Kissing had sold us that the U. 0:08:11.200 --> 0:08:13.760 S and China in the foothills of a cold war, 0:08:14.240 --> 0:08:16.960 but it was not too late to do something about it. 0:08:17.280 --> 0:08:20.040 I wonder if it's too light now. It is such 0:08:20.080 --> 0:08:23.320 a change with us now, folks, and without question or 0:08:23.440 --> 0:08:26.840 conversation of the day on Asia and on China, this 0:08:26.920 --> 0:08:29.800 is the conversation of surveillance. I wish President Trump could 0:08:29.800 --> 0:08:34.040 listen to this morning. Is a must read book. A 0:08:34.200 --> 0:08:39.720 rave review for George Magnus Red Flags. It is extraordinary, 0:08:40.040 --> 0:08:43.959 It is short, exceptionally intense. It is a tour to 0:08:44.080 --> 0:08:47.720 force from the Yale University Press. I'm gonna ask a big, 0:08:47.760 --> 0:08:50.520 fancy question and then I want John to pick it 0:08:50.640 --> 0:08:53.720 up with a really direct moment that we're in on China. 0:08:54.240 --> 0:08:58.120 As we talked about before, George Magnus, You're right, the 0:08:58.200 --> 0:09:04.880 Chinese nations years of shame. How does President Trump affect 0:09:05.480 --> 0:09:09.320 the shame and the suffering that China faced for those 0:09:09.440 --> 0:09:14.240 hundred years before and that sexties and seventies and eighties. 0:09:16.120 --> 0:09:21.320 UM great question to start with, Tom Well. I mean, 0:09:21.440 --> 0:09:24.880 the the what the Chinese call their Century of Humiliation, 0:09:25.400 --> 0:09:29.480 which was when foreigner foreign countries basically carved up the 0:09:29.559 --> 0:09:34.600 country in the nineteenth century. Um is basically lives on 0:09:34.840 --> 0:09:39.880 very much in China's consciousness and in its leaders narrative. UM, 0:09:40.200 --> 0:09:46.560 and they are determined. According to one Seasonings has framed 0:09:46.600 --> 0:09:50.000 as the Chinese dream of the rejuvenile, rejuvenation of the 0:09:50.080 --> 0:09:53.280 Chinese people, you know, not to allow this to happen 0:09:53.400 --> 0:09:55.719 ever again, and for China to reclaim its role in 0:09:55.760 --> 0:09:59.199 the world. So what that really means in the current 0:09:59.280 --> 0:10:04.120 context of trade war, you know, virus war goodness, those 0:10:04.160 --> 0:10:07.560 we want to kind of call it, is that every 0:10:07.600 --> 0:10:11.720 time the Chinese feel that their foreigners, in this case 0:10:11.760 --> 0:10:15.320 obviously the United States or the West are interfering or 0:10:15.400 --> 0:10:20.520 pressuring China, UM, it basically gets their hackles up because 0:10:20.520 --> 0:10:23.920 they fear and feel that this is kind of history 0:10:23.960 --> 0:10:27.680 repeating itself, which they refuse to allow to happen. So 0:10:27.679 --> 0:10:30.600 I'm trying to understand, George, how we should characterize this moment. 0:10:30.720 --> 0:10:33.920 If a number of months ago the former Secretary of 0:10:33.960 --> 0:10:36.200 State and Kissinger said that we're in the foothills of 0:10:36.200 --> 0:10:41.080 the Cold War? Are we in one now? Well, I 0:10:41.120 --> 0:10:46.160 mean it certainly has all the aura of developing that way, 0:10:46.280 --> 0:10:50.800 right we are. You know, the relations between senior political 0:10:50.920 --> 0:10:57.320 leaders are frosty to say at least actually um and um. 0:10:58.360 --> 0:11:01.080 There are too many is where they used to be 0:11:01.200 --> 0:11:04.480 dialogue between let's say, the United States and China, where 0:11:05.000 --> 0:11:10.600 it's just basically stopped the accusations which are flying from 0:11:10.720 --> 0:11:14.360 one side to the other and back again. Are you 0:11:14.720 --> 0:11:17.839 not propitious? I mean, there is still obviously a very 0:11:17.920 --> 0:11:22.640 high level of economic independence between the United States and China, 0:11:22.679 --> 0:11:27.360 and China and other Western countries, but this interdependence is 0:11:27.480 --> 0:11:31.800 being chipped away at through what a lot of Americans 0:11:31.920 --> 0:11:36.400 called decoupling. The Chinese call itself reliance. It's basically, these 0:11:36.440 --> 0:11:40.920 are other sides of the same coin. And yeah, we'd 0:11:40.920 --> 0:11:44.560 have to be very nervous. I think that this is 0:11:44.600 --> 0:11:47.040 going to kind of end up with not just a 0:11:47.120 --> 0:11:50.599 kind of a frosty relationship, but one in which effectively, 0:11:50.640 --> 0:11:55.680 you know, cooperative relationships breakdown completely. George, the measures that 0:11:55.679 --> 0:11:58.199 have been taken so far, such as the US preventing 0:11:58.400 --> 0:12:02.680 your government pension from investor in Chinese companies, have largely 0:12:02.760 --> 0:12:05.880 been symbolic and not that effectual when it comes to 0:12:06.120 --> 0:12:10.679 actual flows of capital. What's the red line from your perspective, 0:12:10.720 --> 0:12:14.240 in which we've really entered into a true escalation that 0:12:14.280 --> 0:12:17.560 will be very difficult to back down from. Well, this 0:12:18.360 --> 0:12:22.199 movement by the President to stop the public pension fund 0:12:22.240 --> 0:12:27.240 from purchasing China, or to warn the investments in Chinese companies, 0:12:27.640 --> 0:12:30.160 you know, could backfire if some of these companies are 0:12:30.160 --> 0:12:33.840 held to be liable or culpable in the kind of 0:12:33.880 --> 0:12:38.160 coronavirus pandemic u is um. You know. It is again, 0:12:38.200 --> 0:12:40.840 it's a it's a new twist in what is already 0:12:41.000 --> 0:12:46.880 quite a worrying tale, really, because we already have a 0:12:46.920 --> 0:12:49.800 war so called war going on in terms of trade 0:12:49.800 --> 0:12:52.960 and tariffs. It's going on in technology, it's going on 0:12:53.040 --> 0:12:56.400 in other areas that are kind of buried in the 0:12:56.480 --> 0:13:00.840 kind of mantra of sort of national security financial a 0:13:00.920 --> 0:13:04.440 financial war or what the Chinese cause smokeless financial war 0:13:05.160 --> 0:13:09.000 um would be would be a big problem as well, 0:13:09.080 --> 0:13:13.160 because actually, here the United States has a huge amount 0:13:13.240 --> 0:13:17.480 of leverage because the Chinese need capital influence, they want them, 0:13:17.520 --> 0:13:22.640 they want international investors, including the United States, to invest 0:13:22.800 --> 0:13:26.720 in Chinese equity and bond markets. They need the dollars, 0:13:26.760 --> 0:13:31.160 they need dollar financing and so um. In a way, 0:13:31.600 --> 0:13:33.800 you might say, or some people might say that the 0:13:33.840 --> 0:13:36.920 President is simply trying to exercise the leverage that he 0:13:37.000 --> 0:13:40.560 has because the dollar and the US financial system is 0:13:40.600 --> 0:13:45.080 so important in the global economy and for China. But 0:13:45.160 --> 0:13:48.240 in another way, you know, it's one thing to base 0:13:48.600 --> 0:13:51.240 My view is it's one thing to say we don't 0:13:51.280 --> 0:13:53.800 you want you investing in these companies because they're not 0:13:53.840 --> 0:13:57.160 transparent and they don't meet our accounting standards. It's quite 0:13:57.160 --> 0:13:59.560 another thing to say, we don't want you investing in 0:13:59.600 --> 0:14:02.160 these Panese because we think they might be couple and 0:14:02.240 --> 0:14:06.640 the coronavirus pandemic, because that basically conveys something very very 0:14:06.679 --> 0:14:10.880 different to Beijing and obviously upstay Ante in terms of tension. 0:14:11.520 --> 0:14:13.440 George We've gotta get you back on because we need 0:14:13.480 --> 0:14:16.320 a huge discussion on the best way forward to change 0:14:16.360 --> 0:14:18.640 the behavior of the Chinese Communist Party. And I know 0:14:18.720 --> 0:14:21.240 that we have two parties that both want to do that, 0:14:21.520 --> 0:14:23.800 but I think have two different visions on how to 0:14:23.840 --> 0:14:26.360 go about doing it, particularly in the United States. George 0:14:26.440 --> 0:14:29.080 Magnus there of the University of Oxford, this is going 0:14:29.120 --> 0:14:31.120 to be a critical issue. We've said it so many 0:14:31.120 --> 0:14:38.040 times on this program. Let me ask a fancy question, John. 0:14:38.080 --> 0:14:40.480 I think it's really important to shift to the fiscal debate. Now. 0:14:40.480 --> 0:14:44.160 We can do that with Julia Carnado macroeconomic policy. She's 0:14:44.160 --> 0:14:46.760 been wonderful not only on a monetary theory that's out 0:14:46.760 --> 0:14:50.480 there and and such, but but also the shift from 0:14:50.480 --> 0:14:54.280 monetary over to the other areas. Julia. The arch theory 0:14:54.320 --> 0:14:56.920 here which many bring up, Dr Pos and I believe 0:14:56.960 --> 0:15:01.120 brought it up with Chairman Paul yesterday, is Olivier Blanchard 0:15:01.200 --> 0:15:05.280 and Lawrence Summers. And that is a strange word hysteresis, 0:15:05.920 --> 0:15:08.240 which is about if you're out of a job, you 0:15:08.320 --> 0:15:10.360 stay out of a job, it's even harder to get 0:15:10.360 --> 0:15:13.920 back in. What's the hystoriesis meet around the United States 0:15:13.960 --> 0:15:19.480 of America right now. This is a very dangerous territory 0:15:19.520 --> 0:15:22.840 we're in um and there's This is exactly why Powell 0:15:22.880 --> 0:15:25.400 came out and sort of issued his call to arms 0:15:25.560 --> 0:15:29.560 for fiscal policymakers UM. To have this many millions and 0:15:29.600 --> 0:15:32.640 millions of people, eight weeks of jobless claims that busted 0:15:32.680 --> 0:15:36.640 through multiple times any prior record, in the deepest recessions 0:15:36.680 --> 0:15:39.240 we've ever seen. We cannot take this lightly. We cannot 0:15:39.240 --> 0:15:43.760 assume this will all just snap back to normal. Julia, 0:15:43.880 --> 0:15:48.200 I'm struck by a statistical aberration in the data, and 0:15:48.280 --> 0:15:50.200 not sorry to get geeky, but I think this is 0:15:50.240 --> 0:15:55.320 important to really gauge whether people are actually receiving unemployment benefits. 0:15:55.360 --> 0:15:58.120 We talk about thirty six and a half million people 0:15:58.120 --> 0:16:01.560 who have filed initial jobless claimed and yet the continuing 0:16:01.600 --> 0:16:05.000 claims is so far below that it came in far 0:16:05.120 --> 0:16:07.240 below where people expected. This is the number of people 0:16:07.280 --> 0:16:11.200 actually receiving benefits. What does this mean? Does it mean 0:16:11.280 --> 0:16:14.400 that basically the gears in states and municipalities are not 0:16:14.440 --> 0:16:16.480 moving quickly enough to get money to people who are 0:16:16.480 --> 0:16:20.680 out of work. Yeah, exactly, so, we've seen we know 0:16:20.880 --> 0:16:24.520 that many, many states are having problems processing these claims. 0:16:24.520 --> 0:16:27.720 So even if you can file an initial claim, even 0:16:27.760 --> 0:16:30.920 in states like New York, UM, people have been waiting 0:16:30.960 --> 0:16:34.960 to be to receive benefits for weeks. People have filed 0:16:35.000 --> 0:16:39.120 six eight weeks ago and still aren't receiving benefits. So 0:16:39.160 --> 0:16:43.400 the benefit program was well designed, it was fairly generous, UM, 0:16:43.440 --> 0:16:45.840 but we just don't have the technology in place to 0:16:45.880 --> 0:16:49.040 get the money to people. Judy, let's talk about the 0:16:49.120 --> 0:16:52.760 quere how long it takes to hail time alone is 0:16:52.800 --> 0:16:56.080 not enough. What do we need today? We need to 0:16:56.120 --> 0:16:59.600 bridge this gap. And what's what Powell's message was is 0:16:59.640 --> 0:17:02.200 that this gap is going to be longer than we thought. 0:17:02.720 --> 0:17:05.919 If this narrative about opening the economy up as a 0:17:05.960 --> 0:17:09.840 false narrative. UM, as long as we have a rampant disease, 0:17:09.920 --> 0:17:12.359 people aren't going to go back out and go about 0:17:12.400 --> 0:17:15.240 business as normal, and businesses will still be struggling to 0:17:15.280 --> 0:17:18.480 make ends meet. So this is about getting us through 0:17:18.480 --> 0:17:20.639 this public health crisis that looks like it's going to 0:17:20.680 --> 0:17:23.520 be a matter of many months, not just two or 0:17:23.560 --> 0:17:27.439 three months. And so we need to get money to people, 0:17:27.800 --> 0:17:31.320 businesses and consumers so that they can pay their rent, 0:17:31.400 --> 0:17:33.720 so that they don't default so that we don't see 0:17:33.720 --> 0:17:36.920 a wave of business failures which would start a snowball 0:17:36.960 --> 0:17:39.879 effect of more job losses and more loss and confidence. 0:17:39.920 --> 0:17:42.720 So time is really of the essence here, Jerny. And 0:17:42.880 --> 0:17:46.000 how do you establish what is temporary just in terms 0:17:46.000 --> 0:17:50.080 of damage and what might be more permanent. Well, I 0:17:50.080 --> 0:17:52.119 still think we're in a phase where a lot of 0:17:52.160 --> 0:17:56.719 this could be temporary. Uh, you know, the relationships between 0:17:56.720 --> 0:18:00.640 employers and their workers hasn't been disrupted for that long. UM, 0:18:00.800 --> 0:18:03.480 So it is, but we are seeing what's troubling, and 0:18:03.520 --> 0:18:06.320 I think what Powell is hearing from his business contacts 0:18:06.600 --> 0:18:09.119 is that more businesses are saying, you know, no, thanks 0:18:09.160 --> 0:18:12.199 to these loan programs, UM, I'm just going to hunker 0:18:12.240 --> 0:18:16.280 down and actually permanently reduce my operations. And that's exactly 0:18:16.320 --> 0:18:18.879 the transition we don't want businesses to make. So in 0:18:19.040 --> 0:18:22.040 that first wave, and we saw that in the employment report, right, 0:18:22.320 --> 0:18:25.439 the vast majority of people are still characterized as on 0:18:25.600 --> 0:18:29.800 temporary layoff UM. But those can become permanent very quickly. 0:18:30.440 --> 0:18:32.680 So we don't know. There's not a lot of precision 0:18:32.720 --> 0:18:36.080 in this UM, but we still have time. Like we're 0:18:36.080 --> 0:18:38.560 still in a good spot. Excuse me, where we could 0:18:38.840 --> 0:18:41.560 we could pull this off. We could pull this off. 0:18:41.840 --> 0:18:44.280 When you look at what's being proposed in Washington, you 0:18:44.320 --> 0:18:46.840 look at the timeline that's getting stretched out as an 0:18:46.840 --> 0:18:50.640 increasing number of lawmakers say, we need to wait. When 0:18:50.960 --> 0:18:54.080 is the latest that they can pass something in order 0:18:54.119 --> 0:18:57.080 to rescue this market and prevent us from entering a depression. 0:18:59.280 --> 0:19:02.720 We've got weeks, not months to do this. So if 0:19:02.760 --> 0:19:05.360 you think about one example is state and local governments 0:19:05.359 --> 0:19:09.159 horsing budget crises UM. Their budget year typically ends in 0:19:09.240 --> 0:19:13.000 June UM, so they're having to make budgets for next 0:19:13.040 --> 0:19:15.920 fiscal year, which starts in July. So if they don't 0:19:15.960 --> 0:19:18.919 have money to plug that hole, many of them have 0:19:19.000 --> 0:19:22.160 balanced budget requirements, they have to lay off staff and 0:19:22.200 --> 0:19:25.560 cut back services. That's exactly the kind of second round 0:19:25.600 --> 0:19:28.520 effect we want to avoid. So we have June to 0:19:28.600 --> 0:19:31.000 get money to state and local governments so that they 0:19:31.040 --> 0:19:35.080 don't go into a round of permanent layoff. Julie, the 0:19:35.200 --> 0:19:38.800 key distinction here is it in America, we don't want 0:19:38.800 --> 0:19:42.119 to provide direct aid individuals, we don't trust them, etcetera, etcetera. 0:19:42.359 --> 0:19:44.320 I don't want to get into the cultural debate, folks, 0:19:44.400 --> 0:19:46.760 But the fact is we don't. And in Europe they 0:19:46.800 --> 0:19:49.520 provide direct subsidies so people can pay their rent as 0:19:49.560 --> 0:19:53.159 you expect. You explained to help businesses and all that. 0:19:53.240 --> 0:19:55.680 I get that theory. Do you see you have any 0:19:55.720 --> 0:19:59.200 optimism that we can shift the ethos in America to 0:19:59.320 --> 0:20:04.480 a more year European direct benefit tone. I think so. 0:20:04.600 --> 0:20:07.960 I mean, we we are seeing, actually, although the administration 0:20:08.040 --> 0:20:10.560 hasn't gotten on board, we're starting to see at least 0:20:10.600 --> 0:20:15.760 some bipartisan support for for stronger, more lasting income support 0:20:15.800 --> 0:20:18.600 to get us through this. Um it's early days. We 0:20:18.680 --> 0:20:21.440 need more of it, but UM, I think it's quite possible. 0:20:21.440 --> 0:20:25.240 Because these are their voters. UM, it should follow that 0:20:25.320 --> 0:20:29.159 if there is a pandemic, this is nobody's folved, uh 0:20:29.240 --> 0:20:31.840 to actually get money to people so that they don't 0:20:32.200 --> 0:20:37.720 dessault or go hungry lose their homes. This is sort 0:20:37.760 --> 0:20:41.760 of pretty easy, low hanging fruit for most politicians of 0:20:41.840 --> 0:20:44.480 either party. So I'm optimistic we can start to see 0:20:44.520 --> 0:20:48.679 that gel as the urgency starts to the message of 0:20:48.800 --> 0:20:53.199 urgency gets received by the policy maker. Julia not to 0:20:53.200 --> 0:20:56.600 catch up with you, Judia Karna, that of macroeconomic policy 0:21:02.280 --> 0:21:06.320 here from our surveillance Central Park Office, I can look 0:21:06.400 --> 0:21:10.360 over to Anglewood, New Jersey and see brilliant math students 0:21:10.480 --> 0:21:14.520 all lined up on the palisades gazing out. And if 0:21:14.560 --> 0:21:16.760 they're smart enough, they'll be lucky enough to go to 0:21:16.800 --> 0:21:20.879 Brown University in Providence, or north to a smaller city 0:21:21.240 --> 0:21:24.560 of Boston and Cambridge to Harvard and do better than 0:21:24.600 --> 0:21:27.520 go to economics, and they can be like Randall Krosner, 0:21:27.600 --> 0:21:30.520 the former governor of the Federal Reserve System and now 0:21:30.560 --> 0:21:33.480 of course a force at the Booth School in Chicago. 0:21:33.520 --> 0:21:35.840 Were thrilled to Governor Krosner could join us with all 0:21:35.880 --> 0:21:39.119 this terrific news flow that we have. Brandy. The the 0:21:39.520 --> 0:21:42.440 the path of the ten uere yield that we've seen, 0:21:42.520 --> 0:21:45.600 and as John Taylor of Stanford would call it, the 0:21:45.640 --> 0:21:49.040 great moderation that we have seen and we had for 0:21:49.080 --> 0:21:52.840 a long time. I guess some stability and volatility is 0:21:52.880 --> 0:21:58.800 the path of the tenure yield following economic things that 0:21:58.880 --> 0:22:03.920 are out there, or are our economic our investment, our 0:22:04.040 --> 0:22:10.399 financed stuff following the tenure yield. Which is it sh 0:22:11.000 --> 0:22:13.920 It's a very interesting way to put it. I think 0:22:13.960 --> 0:22:19.879 it's reflecting the the economic fundamentals and the forces that 0:22:19.960 --> 0:22:23.600 are there, but it does have a broader psychological impact 0:22:23.640 --> 0:22:26.480 that sort of there's a feedback mechanism of what you're 0:22:26.520 --> 0:22:28.800 getting head on that It's a very interesting way of 0:22:28.800 --> 0:22:30.800 putting it. So I think it makes a lot of 0:22:30.840 --> 0:22:34.560 sense that the tenure yield has come down so much. 0:22:34.840 --> 0:22:38.880 We're clearly in a very low inflation environment. We're clearly 0:22:39.480 --> 0:22:41.600 no one is worried that, at least in the shortage 0:22:41.600 --> 0:22:44.600 immediate run, that we're going to have ab inflation. I mean, 0:22:44.680 --> 0:22:48.000 some people have been concerned about the increasing defense balance sheets, 0:22:48.040 --> 0:22:51.320 but they've been concerned when I was there at the 0:22:51.400 --> 0:22:54.120 global financial crisis that we would have this high inflation 0:22:54.119 --> 0:22:56.440 of the next decade. We didn't have that. I don't 0:22:56.440 --> 0:22:59.200 see that that coming now. But I also think it's 0:22:59.320 --> 0:23:03.760 reflecting a you know, that low yield is also telling 0:23:03.840 --> 0:23:06.760 us something about the uncertainty that people have, the concerns 0:23:06.840 --> 0:23:12.440 that people have about the economic situation. Ran I'm gonna 0:23:12.440 --> 0:23:14.679 be root here, Paul jump in on this question because 0:23:14.960 --> 0:23:18.320 I don't want to go you know, uh, the mental 0:23:18.440 --> 0:23:21.400 Black wonderful professor in New York University has done great, 0:23:21.400 --> 0:23:25.840