Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane, along
Speaker 1: with Jonathan Ferrell and Lisa brown Witz Jay Lee. We
Speaker 1: bring you insight from the best and economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple, podcast, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg terminal.
Speaker 1: It's been a tough year so far for the big
Speaker 1: banks on Wall Street, on the stock price. We can
Speaker 1: now catch up with Jamie Diamond of JP Morgan sitting
Speaker 1: down with Bloomberg's France saint. Thank you so much, John. Yes,
Speaker 1: we're in London and we could not be more pleased.
Speaker 1: I say the Royal Weed. We're really delighted. Speak to
Speaker 1: Jamie Diamond, thank you so much for taking the time.
Speaker 1: Walster in London speak to us. So the Fed, the Fed,
Speaker 1: the Fed today we're expecting fifty basis points hikes. What
Speaker 1: happens to inflation? Here? Is this your biggest concern? So
Speaker 1: first all, Francine happy to be here and give it
Speaker 1: a little perspective. We have and this this is contradictory
Speaker 1: about to say both the true very strong US economy.
Speaker 1: They consumers in great shape, lots of money spending the money, jobs,
Speaker 1: of plentiful wages of going up, though everything is distorted
Speaker 1: by inflation and all that, but those are good news.
Speaker 1: And businesses are in very good shape. And the FED
Speaker 1: is going to have to raise rates and reverse Q
Speaker 1: eight and they're gonna, you know, if they can. They're
Speaker 1: gonna try to slow down the economy enough eight percent
Speaker 1: starts to come down over time, and I wish them
Speaker 1: the best. You know, we're a little late, but you
Speaker 1: remember two years ago we have fifteen percent unemployment and
Speaker 1: no vaccine. So I think people should take a deep breath,
Speaker 1: give him a chance. And I think they're gonna move.
Speaker 1: I think the sooner they move, the better. So yeah,
Speaker 1: they're gonna be raising races. Breath, But can they engineer
Speaker 1: a soft planting or is there a worry of recession?
Speaker 1: Of course, but none of us will ever know, right,
Speaker 1: But if I had to, I'm not a betting man.
Speaker 1: I just the odds of the following something like, yes,
Speaker 1: they can engineer soft landing, a third of persent chance,
Speaker 1: probably a third of percent chance. They can engineer a
Speaker 1: mild recession. Think of we've had mild FED induced recessions before,
Speaker 1: you know, where inflation goes up one and a half
Speaker 1: for two percent, everything slows down, phases coming down, and
Speaker 1: it's six or nine months, and then there's a chance
Speaker 1: it's gonna be much harder than that. And then in
Speaker 1: the face of all of that, you have Ukraine, which
Speaker 1: is a huge global issue. And do you fear the
Speaker 1: FED and do you fear a policy mistake from the Fed?
Speaker 1: And what does does to consumers? I'm not I'm not
Speaker 1: afraid of the FED. You know, I'll change this subject
Speaker 1: a little bit. I think America needs very good domestic
Speaker 1: policy to improve the growth the economy, which makes the
Speaker 1: FED job easier. And that is about regulations and rules
Speaker 1: and policies and improving projects and things like that. So
Speaker 1: you have increased the supply side as opposed to, you know,
Speaker 1: do something the demand side. So the FED job would
Speaker 1: be easier if we had very rational, thoughtful economic policy.
Speaker 1: What could go wrong? But I mean, when you talk about,
Speaker 1: you know, a strong US consumer or strong business. You
Speaker 1: talked us about storm clouds, what are those storm crowds? Clouds?
Speaker 1: And what's worst case are your I hate the word unprecedented,
Speaker 1: but there's kind of fiscal and monetary induced unbelievable growth
Speaker 1: in the U S, which was true around the world,
Speaker 1: though it's obviously slow going down in Europe. That's abnormal.
Speaker 1: We've never really quite had that before. We've never had
Speaker 1: q T before. So you know, you look at QUEI,
Speaker 1: that's one of the greatest experiments ever done. They're gonna
Speaker 1: be writing books for fifty years on it, and we're
Speaker 1: gonna have to reverse it, and that's a huge change
Speaker 1: in the flow of funds over time around bonds and
Speaker 1: rates and stuff like that. My own view is that
Speaker 1: Rachel probably will still have to go up from here. Uh.
Speaker 1: And then you've got Ukraine, which you know, I think
Speaker 1: is a potent. When you look at Ukraine, obviously the
Speaker 1: wishful thinking is that we have a FED and dew
Speaker 1: slow down works. The world is fine, Ukraine resolves, but
Speaker 1: there's a chance that this goes on for years and
Speaker 1: you completely rattle global energy markets, wheat markets, commodity markets,
Speaker 1: and you know that we need, as you know, the
Speaker 1: Western world needs to be prepared for that and needs
Speaker 1: to take every action today to be prepared that that
Speaker 1: can get really bad tomorrow. And you know it gets
Speaker 1: really bad tomorrow, you don't have time So how do
Speaker 1: you handle that? How what what's your plan B if
Speaker 1: it does go shape. I like the fact that it
Speaker 1: will deal with it, you know, I mean that's life.
Speaker 1: I mean, I like, in my view the most important
Speaker 1: thing is American growth and that America. You know, I
Speaker 1: called this Marshall Plan for Energy that we do everything
Speaker 1: we can and this doesn't violate climate change, it doesn't
Speaker 1: change anything about long term objectives. But we do everything
Speaker 1: you can to get oil and gas into the hands
Speaker 1: of Europeans so they don't freeze in the winter. You know.
Speaker 1: And again I'm not saying it's going to happen, but
Speaker 1: you know, you have a couple of problems out there
Speaker 1: that the national energy stuff is, the global energy is precarious,
Speaker 1: and if oil goes to that's a huge problem for people.
Speaker 1: And we should do everything we can today. We need
Speaker 1: to pump moral and gas. We do. I feel like
Speaker 1: at the US Frankers they could drill mar We get
Speaker 1: confused about policy and that somehow doing that is bad
Speaker 1: for the climate. It's not. You know, we need you know,
Speaker 1: if you want transitioning gas, replace called and we should
Speaker 1: approve all the gleen stuff too, even the green stuff.
Speaker 1: Takes five years to ten years to approve. In the
Speaker 1: United States, I mean, America's needs to get us act
Speaker 1: together and they should have a war room. They shouldt
Speaker 1: everyone involved, get all the people and say what do
Speaker 1: we need to do in a consistent careering way. We
Speaker 1: need to get more gas to LERG terminals. We can't
Speaker 1: do that without a gas pipeline, you know. And so
Speaker 1: we're just not national anymore. We we we we have
Speaker 1: misconceived notions about how we gonna get things done, and
Speaker 1: so they're trying. But the roll of Europe and this
Speaker 1: could Europe see a recession because of the energy prices. Absolutely,
Speaker 1: you know, our condoms would say that you had slowed
Speaker 1: down to two percent of something. But the problem with
Speaker 1: right now and the economs would agree with me. We're
Speaker 1: looking at a static analysis that if things stay the
Speaker 1: way they are, but you and I know for certain
Speaker 1: things don't stay the way they are. And my view
Speaker 1: is as a very high chance that oil go higher.
Speaker 1: That only takes a million to two million barrels off
Speaker 1: the market a day. That can drive prices up thirty
Speaker 1: or forty dollars, and so we should prepare for that today.
Speaker 1: And uh so but but but I like the fact.
Speaker 1: I think it's great that the Western world has gotten
Speaker 1: together and who would have thought would get Sweden, Finland, Germany, Switzerland,
Speaker 1: all of us. But that working together part we need
Speaker 1: to make permanent for global security. First of all, just
Speaker 1: going back to the European economy, how quickly could we
Speaker 1: see a recession and how deep could it be? I
Speaker 1: don't know. I mean, you know, I hate to guess
Speaker 1: the future. No one really knows the future. I've never
Speaker 1: seen any really guess it. Well, but again, if you have,
Speaker 1: if Ukraine gets worse, I would assume that you're going
Speaker 1: to go to a recession and may take a couple
Speaker 1: of cores, but I would assume that our sanctions working.
Speaker 1: So are the sanctions trying to deter Russia from continuing
Speaker 1: the war and you crying? Or is it just to
Speaker 1: try and put the Russian contom there? Well, sanction is
Speaker 1: not the same of having tanks and airplanes, okay, but
Speaker 1: they are working to the extent that you know, the
Speaker 1: Russian GDP is gonna drop by ten or fift with
Speaker 1: the current sanctions. Remember there are sanctions that also the
Speaker 1: export controls and stuff like that, And you know, the
Speaker 1: next round. If you're really stop stops oil, and you
Speaker 1: can really stop oil being delivered, you know Europe, I
Speaker 1: mean Russia, you can get another teen percent down. So
Speaker 1: it's a tool in the tool kit. It's not definitive,
Speaker 1: which definitive is tanks, So you know we're not don't
Speaker 1: don't confuse the two, but you know one is a
Speaker 1: pretty powerful The sanctions are pretty powerful to all. But
Speaker 1: if you expect this to last for I think you
Speaker 1: said years. I don't expect it. I said we should
Speaker 1: be prepared for it too. I don't know what's going
Speaker 1: to happen. But how do you see this ending? And actually,
Speaker 1: if you're if you're a president of the US, if
Speaker 1: you're a president of the Commission, if you're the FED,
Speaker 1: right now, you need to game theory and it could
Speaker 1: go either way. It's like a three way system. So
Speaker 1: what do you do is listen. I think it's a
Speaker 1: mistake to guess at which one will be. It should
Speaker 1: be all three of them. And I think, you know,
Speaker 1: I think basically the Cold War is back. I think
Speaker 1: the whole world learned something that we always knew that
Speaker 1: national security is always the most important thing, but it
Speaker 1: kind of recedes in the background. We're all doing well,
Speaker 1: but now it's the most important thing. It should be
Speaker 1: the most important thing for the rest of our lives.
Speaker 1: So maybe we all learned that that is a permanent
Speaker 1: date of affairs. The Cold War is back. Uh. The
Speaker 1: Allies have to call ESCE and not just for military purposes,
Speaker 1: but for global economic strategic investment purposes, so that we've
Speaker 1: got a safe world if and if we don't do that,
Speaker 1: you know, you would you see Ukraine, you can see
Speaker 1: all around the world. You will see forms of chaos.
Speaker 1: So the impact on the economy, I mean, would you
Speaker 1: go around a trading floor until the young kids that
Speaker 1: I've never dealt with inflation that actually interest rates could
Speaker 1: be about five shortly, of course, of course that's you know,
Speaker 1: things change, and you know, I mean, I think you
Speaker 1: can easily see five percent bonds. The bonds have already
Speaker 1: ten year bonds. Were reacted dramatically and hopefully it won't
Speaker 1: go a lot. But I don't think it's a disaster.
Speaker 1: I don't think a slowdown as a disaster. I don't
Speaker 1: think a many Look when you say a many recessions,
Speaker 1: I feel for the people get hurt in that but
Speaker 1: it's not a disaster for the world economy. I think
Speaker 1: the potential outcomes Ukraine are And you've got to just
Speaker 1: separate the two and just remember when you talk about war,
Speaker 1: we didn't know how bad Vietnam is going to get.
Speaker 1: We don't know how long Gfghaistan was gonna last. The Russians,
Speaker 1: you know how long ifgast was gonna last. You can
Speaker 1: go war after war after war. They were not predictable.
Speaker 1: You didn't know the World War War was gonna be
Speaker 1: like that. You didn't know the World War two is
Speaker 1: going to start in September of nine. So I think
Speaker 1: predicting the outcomes war, you've got to be very curious.
Speaker 1: So why our markets so relaxed? That's markets, you know.
Speaker 1: I'm that can change just like that. Do you think
Speaker 1: it will? Are we expecting a big comm guessing? I
Speaker 1: don't know. I mean, again, fancying my job in life,
Speaker 1: I will serve our clients with thicker thin and our
Speaker 1: country and stuff like that. And of course we're always
Speaker 1: I mean, as a rule of thumb, we're always prepared
Speaker 1: for bid outcomes, not because we're predicting them. Because I
Speaker 1: need to say to the shareholder of the American public,
Speaker 1: my regulators, you know, the UK that JP Morgan will
Speaker 1: be safe and sound and help your country and your
Speaker 1: people if things get bad, and that is our job.
Speaker 1: Now we're dealing with a whole bunch of different things,
Speaker 1: and we're prepared. You know, we have extraordinary capability and capital,
Speaker 1: but earnest power. And where's China and this right now? Look,
Speaker 1: I my view is that China can't possibly like this,
Speaker 1: and they're playing if you look at them, they're playing
Speaker 1: a very neutral role. They're not trying to anger the
Speaker 1: United States. They know that the American Congress may very well,
Speaker 1: the Congress, not just the President, can come in and
Speaker 1: put you know, the secondary sanctions. They do three point
Speaker 1: five trillion dollars of trade with the West, imports and exports.
Speaker 1: They a hundred and fifty billion with Russia. Okay, one
Speaker 1: number is critically important. Sanctions against them maybe bad for
Speaker 1: the Western world, it will be even worse for them,
Speaker 1: and so they don't need that. They want to grow
Speaker 1: their country, they want to expand you know, maybe they
Speaker 1: don't like the West so much. They like this. I
Speaker 1: don't I just don't believe that's true. I think that
Speaker 1: they're caught between a rock and heart place that had
Speaker 1: the so called ally who's putting them in a difficult place?
Speaker 1: Can we still rely on China given the COVID zero
Speaker 1: policy and actually the shocks that's coming just from from
Speaker 1: that policy continuing. I think China has done. You gotta
Speaker 1: put China perspective. It's done a very good job developing
Speaker 1: itself over thirty or forty years. It doesn't have all
Speaker 1: the strains to the Western world. Okay, it doesn't. It
Speaker 1: doesn't have our food or water, or energy, or innovation
Speaker 1: or rule of law. You know that the the the
Speaker 1: competition of ideas. You know, autocracy has huge negatives. They
Speaker 1: don't have enough food, war and energy. Their their neighbors
Speaker 1: are very complex Russia, Indian Pact and Afghanistan, Philippino and Japan, Korea.
Speaker 1: It's hard for them to be expansion there. Uh, they
Speaker 1: don't have are a lot of things you have. So yes,
Speaker 1: I think we should be worried about them, and I
Speaker 1: think the West should negotiate, you know, how we're going
Speaker 1: to deal with trade, unfair competition, I p if, but
Speaker 1: sit down with them, you know, work work it through
Speaker 1: with them. We should don't need to be afraid of them.
Speaker 1: We should be afraid of is our own incompetence, not
Speaker 1: dealing with the Chinese as long as we stay together.
Speaker 1: If the Western world doesn't stay together, no little cherry
Speaker 1: pick every nation and and then you'll you'll end up
Speaker 1: what we had with Germany and North Dream too, which
Speaker 1: will be that would be a problem. Are you committed
Speaker 1: to China? So if we're seeing a splits and we're
Speaker 1: seeing the HSBC and an investor activism, could you see
Speaker 1: big banks actually being split into because of this East
Speaker 1: West tension? I think again, you gotta look business. You
Speaker 1: run for thirty or forty years. So we've made a
Speaker 1: big investment in China. The Greater China, including Hong Kong,
Speaker 1: etor you know, will be thirty or four percent in
Speaker 1: the global market one day. There there they will be
Speaker 1: a fully developed nation in twenty or thirty years, their
Speaker 1: politics will change. Is there a chance of a very
Speaker 1: bad outcome that you know, the world completely separates. There's
Speaker 1: a chance, you know that that will be bad for
Speaker 1: JP Morgan, but will survive. But I think there's a
Speaker 1: much bigger chance that that the blocks will negotiate strategic
Speaker 1: economic a bunch of other arrangements. Like I said three
Speaker 1: point five trade, where will change, what will change, it'll
Speaker 1: it'll take time. What will change is anything to do
Speaker 1: with national security anything. So think of AI five G, penicillin,
Speaker 1: rare earth, semiconductors, those supply chains will be brought back.
Speaker 1: As Janet Young said, the day will be friendly sourced
Speaker 1: doesn't be in the States. It's got to be in
Speaker 1: an ally, and so I think old nations are going
Speaker 1: to do that. China already does that. So this is
Speaker 1: a unilateral thing. And I think the rest of the
Speaker 1: trade will be fine or fundamentally fine. And they may
Speaker 1: that may take time, but you know, but that will
Speaker 1: happen over time. And it's kind of a little surprising
Speaker 1: to me how much the Western world relied on China,
Speaker 1: not not for trade and for sneakers and for shirts
Speaker 1: and stuff, but for rare earth. But they have them.
Speaker 1: We don't know we do. That's that's that's the whole thing.
Speaker 1: America's got tons of rare earths. It's just quote will
Speaker 1: cost a lot more money to take it out and
Speaker 1: smelt it, and therefore and their environmentalists and all that.
Speaker 1: That's why I'm saying national security. If I was in
Speaker 1: Why it's the only thing I'd be doing now is
Speaker 1: national security, and I'd be making decisions every day about
Speaker 1: how we create more secure energy, rare earth commodities, wet,
Speaker 1: all the things that the world's gonna need, not against
Speaker 1: China but to protect the Western world and um so
Speaker 1: all these things could be done. America is not used
Speaker 1: to have an industrial policy. To do that successfully, you're
Speaker 1: gonna have to have some form of industrial policy where
Speaker 1: you're doing some kind of subsidies. It should but but
Speaker 1: be clear, I don't want to subsidize a company. I
Speaker 1: just think some of these things need to be brought
Speaker 1: back to the United States. Probably be inflationary, right, does
Speaker 1: it is crypto? I think head against inflation, right. No,
Speaker 1: I think the higher rates go, the more cost to
Speaker 1: hold an asset. Doesn't produce at of things. So, but
Speaker 1: I think national secure already is number one. I would
Speaker 1: not do something because of inflation because of national security.
Speaker 1: They are completely different, and people shouldn't get confused. Two.
Speaker 1: And you know that this is why the America has
Speaker 1: to take leadership and that this is a matter of
Speaker 1: national security. If everything turns out fire in Ukraine, but
Speaker 1: I'll take a deep breath and say we overreacted. I'd
Speaker 1: rather that then we all take a deep breath and say,
Speaker 1: my god, we were not prepared. And when it comes
Speaker 1: to Roe v. Wade, we've been talking about nothing else
Speaker 1: for the lost two days. What does it mean for
Speaker 1: JP Morgan? And I'm not going to get involved in that.
Speaker 1: I think it's a mistake. You know, these things are
Speaker 1: very complicated, and you know people pass laws everywhere. There's
Speaker 1: actually a hundred things in the law. It's not it's
Speaker 1: not there are a hundred things in all these laws,
Speaker 1: a hundred like And so when you people say support this,
Speaker 1: support that, all you're doing is being sucked into support
Speaker 1: something you probably shouldn't. I've looked at all the voting
Speaker 1: laws and looked all these laws, and you look at them.
Speaker 1: I agree with some of the things they say. I
Speaker 1: don't agree with some of the things they say. In
Speaker 1: New York does a better job than Georgia this. So
Speaker 1: I'm not gonna get sucked into saying I support your law.
Speaker 1: But instead of support, I mean, do you see actually
Speaker 1: for for such a big bank in the US having
Speaker 1: to shift because of policies? Will deal with it. I
Speaker 1: don't sit here and fear that whatever it is, we'll
Speaker 1: deal with it and we'll take care of our people
Speaker 1: like we've alway said we would. All right, Jamie Diamond,
Speaker 1: thanks so much. I need to talk to you about
Speaker 1: the UK. We need to have a conversation as about
Speaker 1: the UKNSA city of London, Jamie Diamonds, and we'll have
Speaker 1: plenty more from London throughout the day. Fancying lankwith thank you.
Speaker 1: Sitting down with Jammie down the CEO of JP Morgan Chase,
Speaker 1: do you have a two hard discussion on us today
Speaker 1: with Kenneth Rogoff that we squeezed into a matter of minutes.
Speaker 1: We do that again with the laureate from New York University.
Speaker 1: Paul Romer joins us. He is a different economist and
Speaker 1: that from day one the gentleman of Colorado has done
Speaker 1: academics at Rochester and beyond where he has said, always
Speaker 1: consider technology. Paul Romer joins us at this morning, professor,
Speaker 1: thank you so much for joining. I want to go
Speaker 1: back to the heart of it, indogenous technological change. Do
Speaker 1: we actually understand what technology is doing to the American
Speaker 1: labor economy, to people in our many death stiles yea
Speaker 1: so there's a good way to see if some of
Speaker 1: the problems were experiencing the US are technology based. Look
Speaker 1: at other countries, same technology shocks are hitting all countries.
Speaker 1: And what's unfortunate is the US really stands out as
Speaker 1: an outlier with this declining fraction of adult males, adult
Speaker 1: females who are working. All of the other countries Britain, Germany,
Speaker 1: you know, they're seeing these steady increases. So it can't
Speaker 1: be technology which is explaining this decline in the US.
Speaker 1: Jeffrey Sachs would agree with you his book over ten
Speaker 1: years ago. Now I really got out front on this
Speaker 1: from a whole different angle, I would say, Professor Roman,
Speaker 1: Professor Sax, two different views on a part of America
Speaker 1: that can't get a job. Why can't they? Yeah, I
Speaker 1: think can't get a job is not quite right because
Speaker 1: we've got all this evidence that there are jobs that
Speaker 1: are available right now. The returns to work, just the
Speaker 1: compensation you get, the quality of what the work is
Speaker 1: like is just not high enough. We've let this deteriorate
Speaker 1: through a couple of decades now, and what we have
Speaker 1: to commit to is that everyone should be working. But
Speaker 1: if you work, you should uh, earn enough to make
Speaker 1: it worth your your trouble. So these increases we were
Speaker 1: seeing for jobs like a gas station at end increase,
Speaker 1: that's catching up for the clients that we tolerated for
Speaker 1: for much too long. And uh, we should we should
Speaker 1: be pushing for more increases in wages, more attractiveness of work,
Speaker 1: because we can't live in a society where people just
Speaker 1: check out, especially adults. Adults checkout and don't work. And Paul,
Speaker 1: you're saying, this is the participation rate still hasn't gotten
Speaker 1: back to where it was pre pandemic. I still below that.
Speaker 1: Still you're talking about the need for even fast stir
Speaker 1: wage increases at a time when people are very concerned
Speaker 1: about the highest levels of consumer price inflation. Going back
Speaker 1: to Night one, how much do you think that the
Speaker 1: flood of money put into the economy during the pandemic,
Speaker 1: the checks sent to individuals, actually undermined the ability to
Speaker 1: engage in fiscal stimulus like what you're talking about to
Speaker 1: get more people into the workforce. Well, you have to
Speaker 1: think about targeting the fiscal stimulus, like what would be
Speaker 1: a targeted measure. We could have a subsidy for wages
Speaker 1: at the bottom end of the wage distribution. The government
Speaker 1: could pick up part of the cost, or we could
Speaker 1: be like other countries, we don't make the worker in
Speaker 1: the firm cover the full cost of the health insurance
Speaker 1: for the worker. There's ways to target spending to make
Speaker 1: work more attractive that that don't involve just like sending
Speaker 1: checks to to everybody in the economy. And if you
Speaker 1: think about inflation, it's a weighted average of a bunch
Speaker 1: of price changes. So the wrong response right now is
Speaker 1: to say we want to make those gas station attendants
Speaker 1: have uh lower wages or stop them from getting wage increases.
Speaker 1: There's a lot of other prices in the economy that
Speaker 1: we could be putting some pressure on without hammering the
Speaker 1: low wage workers who have been hammered for two decades.
Speaker 1: There's the show and then there's the will. And as
Speaker 1: we talk, we know that President Biden is going to
Speaker 1: speak at two pm today to talk about deficit reduction,
Speaker 1: to appeal to a lot of voters who are concerned
Speaker 1: about how much the debt limit and the debt has
Speaker 1: increased in this nation. What do you think will happen
Speaker 1: given that the fiscal stimulus that you're talking about is
Speaker 1: unlikely and given the pace of inflation, how it's being
Speaker 1: targeted right now. Let me be honest, um on especially
Speaker 1: in the realm of politics. I've been telling everybody for
Speaker 1: about four years now, add more variants to your estimates,
Speaker 1: put more weight in the tails. We've seen more astonishing
Speaker 1: unexpected things in the last four years than in the
Speaker 1: rest of my lifetime. So I'm not I'm not gonna
Speaker 1: make any strong predictions about what's going to happen in
Speaker 1: the politics. All I can tell you is what I
Speaker 1: think should happen, and we should make we should make
Speaker 1: work attractive for everybody. Paul Roman, this is great. I
Speaker 1: love it how the Nobel laureate folks is telling us
Speaker 1: there's been four once in a lifetime events in the
Speaker 1: last four years. Professor Roma, I want to go to
Speaker 1: the behavioral heart of the matter, and maybe this is
Speaker 1: very Jeff sax Like and others as well. Did all
Speaker 1: of this wage challenge and disincentive start with executive bonuses
Speaker 1: and the way that executives are compensated, and that well
Speaker 1: meeting executives look at that if they give a wage
Speaker 1: growth to their lower two death siles, three death siles
Speaker 1: of staff of labor they're taking dollar for dollar from
Speaker 1: their bonus. Yeah. Yeah. To be honest, I think economists
Speaker 1: contributed to this because we argued, uh, and I was
Speaker 1: one of them. I these sounded right to me that
Speaker 1: if we made the compensation for exact citives more variable,
Speaker 1: they'd have stronger incentives to do their jobs well. But
Speaker 1: more variable got translated into just higher payments almost across
Speaker 1: the board, and so we provided cover for this change
Speaker 1: in norms um and at the same time, we didn't
Speaker 1: pay enough attention to the really serious lagging effects we
Speaker 1: were seeing in the rest of the economy. And there
Speaker 1: were many beneficial effects from opening up to free trade,
Speaker 1: but we understood at the time that one of the
Speaker 1: harmful effects would be that people would lose jobs in manufacturing.
Speaker 1: And we always said, well, you can do something to
Speaker 1: help those those workers. So everybody benefits from trade. But
Speaker 1: the problem is we didn't do that something, and so
Speaker 1: they suffered. One of the things here, folks, that we
Speaker 1: need to say, as Professor Romer is truly expert at
Speaker 1: monetary theory as well. You're having a cup of coffee
Speaker 1: today with the Chairman of the Federal Reserve System, and
Speaker 1: he's looking at you saying, tell me about technology, tell
Speaker 1: me about labor, tell me about the dynamics of the
Speaker 1: American economy. Should he care about that or does he
Speaker 1: need to stay riveted on a FED mandate in the
Speaker 1: purity of what a central bank does? You know? I
Speaker 1: think I would tell him to stay focused on his mandate,
Speaker 1: which is really to watch inflation. And if you think
Speaker 1: about what was most damaging in the end of the seventies,
Speaker 1: it was the sense of living in a world where
Speaker 1: things are out of control. And what vulgar Re established
Speaker 1: for us was that there was somebody who was in
Speaker 1: control and would bring inflation down. I think the job
Speaker 1: of the FED right now is to show that they
Speaker 1: can bring inflation down, both technically and politically. They've got
Speaker 1: the room to do that, and they will. He needs
Speaker 1: to reassure people and give them confidence. But I think
Speaker 1: we really need to not let Congress and the executive
Speaker 1: branch off the hook on the rest of economic policy.
Speaker 1: It's their job to think hard about what do we
Speaker 1: do to make work and economic life attract of everybody.
Speaker 1: But one of the biggest questions is whether the Fed's
Speaker 1: going to try to get back down to a two
Speaker 1: and a half to two percent inflation rate in the
Speaker 1: near term, and that this will decide how quickly they
Speaker 1: have to go in the potential destruction to the economy.
Speaker 1: Do you think that they should target a higher rate
Speaker 1: of say three percent or more the adam posing like
Speaker 1: kind of idea. I'm I'm persuaded by that argument. And three.
Speaker 1: You know, Olivia Bonch Harden were signing about four percent
Speaker 1: for a while. I think either of those numbers would
Speaker 1: be fine. But the argument you hear about that against
Speaker 1: that as well. If it's three or four percent, it'll
Speaker 1: it'll also be six or seven or eight or nine.
Speaker 1: And that doesn't make any sense to me. We could
Speaker 1: target a stable four percent inflation rate if we wanted to,
Speaker 1: or a stable two percent. I think we'd be much
Speaker 1: better off at a stable three percent, maybe better off
Speaker 1: at a stable four percent. Paul, you lived the Colorado Boom.
Speaker 1: All I did was go down to the sink and
Speaker 1: boulder and have Beer's course three two is like your
Speaker 1: course three to light, Paul is your father's fault. I
Speaker 1: want to make that clear, just so we understand that
Speaker 1: you live, take that, you'll take that you live the
Speaker 1: Colorado Boom. I can't say enough about that. There's a
Speaker 1: part of America like in Ohio with the primary we
Speaker 1: saw yesterday screaming that they want their Colorado boom. How
Speaker 1: do we move the Colorado boom to Ohio without the
Speaker 1: cores three to beer. Yeah. You know, one thing that
Speaker 1: we aren't paying enough attention to is that the jobs
Speaker 1: can come to the workers, but the workers ought to
Speaker 1: be able to go to the jobs. UM mobility has
Speaker 1: gone down, like cross state mobility, partly because we've put
Speaker 1: restrictions on the supply of new housing. Housing has gotten
Speaker 1: so expensive in places that have these hot, these hot
Speaker 1: labor markets. So this is not something you can turn
Speaker 1: around in a quarter or a year. But we should
Speaker 1: be trying to increase the mobility of labor. And also
Speaker 1: recognize a point I've been hammer around for a while,
Speaker 1: which is that the future is in cities. And we
Speaker 1: kept be talking about how do we bring life back
Speaker 1: all this kind of manufacturing and other kinds of economic
Speaker 1: activity to small rural towns. It's not going to happen.
Speaker 1: We've got to make room in cities for everybody who
Speaker 1: wants to move there, to move there and get a job.
Speaker 1: Paul has been fantastic listening to you. Thanks for giving
Speaker 1: us your time. Paul Runner, there of n why you
Speaker 1: John Us now? Ben Laidler Global Markets Strategies, to eat
Speaker 1: Tire to Tamas what he really thinks not far from
Speaker 1: peak Fed fear? Ben Laidler, what makes you think that?
Speaker 1: I think we've we've priced in three and a half
Speaker 1: percent for the terminal FED funds, right, We've got this
Speaker 1: sort of double barrel tightening going on, Holliday's tightening and
Speaker 1: the Fed funds. Right, I think we're pretty close to
Speaker 1: peak inflation eight and a half percent. I think the
Speaker 1: market sort of jaw bones are tightening of financial conditions
Speaker 1: and economic conditions already sort of weakening. So I'm not
Speaker 1: sure what entirely there yet, And I don't think power
Speaker 1: is gonna tunnel dubbish on us, But I do think
Speaker 1: markets have priced in a lot here um, and and
Speaker 1: we're very sensitive to a little bit of loosening of
Speaker 1: this sort of Fed vice that we've been caught in. Right,
Speaker 1: They've been driving down valuations and driving up recession fears. Uh,
Speaker 1: And I see both of those loosening off a little
Speaker 1: bit over the next few weeks. So when do you
Speaker 1: think that financial conditions have tightened enough, and it starts
Speaker 1: have sold off enough to slow the economy enough to
Speaker 1: get inflation back to a reasonable point for the FED.
Speaker 1: I think we're well on our way right where equities
Speaker 1: are are in a correction, mortgage rates are over five cent,
Speaker 1: we have real real yields for the first time in
Speaker 1: in years. The economy is slowing, not just in the
Speaker 1: US but around the world. If there is a silver
Speaker 1: lining to what's going on in China and what's going
Speaker 1: on in Europe is the whole world is now clearly slowing.
Speaker 1: So I think you put all that together, and I think,
Speaker 1: along with the again these expectations, So this unprecedented sort
Speaker 1: of double barreled FED tightening here both off the balance
Speaker 1: sheet and the and the interest rate. Um, I think,
Speaker 1: I think enough being done. And again I think, um,
Speaker 1: we're primed for more hawkishness, and we don't get that. Again.
Speaker 1: I see the jaws of this vice loosening off a
Speaker 1: little bit, and and equities training better than they certainly
Speaker 1: have done over the last few months. And that's the
Speaker 1: broadest story I want to talk about. A single name.
Speaker 1: T K. You've seen this move and lift this morning
Speaker 1: down twenty in the pre market, it's about access to
Speaker 1: labor and the cost of labor. And I imagine, yes,
Speaker 1: Lift has its own unique problems and Uper maybe shares them,
Speaker 1: and we'll hear from over a little bit later this morning.
Speaker 1: But I'm surely that's a signal about the broader issue
Speaker 1: in the US labor market at the moment. And Ben Ladler,
Speaker 1: I mean, what this comes down to, our models of
Speaker 1: digital models that are not profit later? Is profit all
Speaker 1: that matters now, Ben Ladler, It is the only anchor
Speaker 1: for this market. I mean, just to be gross and simplistic,
Speaker 1: you're only there's only two ways to make money in equities,
Speaker 1: right either valuations carp or only to go up. Hopefully
Speaker 1: they both go up together. But right now evaluations have
Speaker 1: been falling, and if the Fed States hawkish, they may
Speaker 1: continue to fall. So it's all on earnings. And luckily,
Speaker 1: the big silver lining to all this is a corporates
Speaker 1: remain in very good shape. I mean, despite the sort
Speaker 1: of headline numbers and some sort of high profile misses,
Speaker 1: earnings and beating expectations on both sides of the Atlantic,
Speaker 1: profit margins are near record highs and very resilient, and
Speaker 1: and corporate CEOs of voting with their balance sheets, and
Speaker 1: they're investing very aggressively, and that's your closest leading indicator.
Speaker 1: That's what earnings are going to be in the future.
Speaker 1: Ben labor of Open great to catch out, buddy, as always.
Speaker 1: Right now, we're going to digress to the issue of
Speaker 1: the moment, which is riveted America. And what we do
Speaker 1: with surveillance is we've done with Ukraine, as we've done
Speaker 1: with COVID is literally fine legit experts. That would be
Speaker 1: a comark. She's senior fellow at the Brookings Institute, yes,
Speaker 1: professor at Harvard, but far more she is a student
Speaker 1: of presidential success and failure, and a book of another
Speaker 1: a number of years ago, the end of government as
Speaker 1: we know it, making public policy work alloying. You wrote
Speaker 1: a definitive essay I thought very balanced for Brookings yesterday
Speaker 1: on this raging debate of abortion, and at the end
Speaker 1: of it you predict off of the mask experience of COVID,
Speaker 1: a tsunami, a fury. When does the tsunami hit? Um, Hello,
Speaker 1: and thank you for having me. Um. The tsunami is
Speaker 1: hits hit yesterday. Look at hit last night with the
Speaker 1: demonstrations outside the Supreme Court. I think these will continue,
Speaker 1: and I think what it's gonna do, it's going to
Speaker 1: increase turnout for the mid term elections. So a sleepy
Speaker 1: and kind of indifferent Democratic electorate I think has gotten
Speaker 1: a big wake up call, and I think people are
Speaker 1: going to come out to vote in November, perhaps even
Speaker 1: up ending some of those elections which we were assuming
Speaker 1: was going to go to the Republicans. Laine Linda Greenhouse,
Speaker 1: among others, have walked through the Mississippi circuit approach and
Speaker 1: what the Supreme Court traditionally has done. Is any of
Speaker 1: that nuance gonna matter in this debate? Or is it
Speaker 1: so polarized and each and every American so decisive of
Speaker 1: their choice on the choice of abortion that all the
Speaker 1: niceties really don't matter. It's an interesting question because part
Speaker 1: of what we're going to wait and see is how
Speaker 1: this in fact plays out. Um, there will be states
Speaker 1: that will still offer abortion, but at six weeks or
Speaker 1: at fifteen weeks, okay, So um, you know this doesn't
Speaker 1: mean automatically abortion disappears everywhere. And the more interesting thing
Speaker 1: that's been happening is while attention has been focused on
Speaker 1: the UH States getting rid of abortion. There are other
Speaker 1: states like Maryland, Connecticut, Oregon who are increasing their abortion workforce.
Speaker 1: They are allowing non doctors other other health professionals like
Speaker 1: like nurse practitioners to perform abortions. They are getting ready
Speaker 1: for the abortion influx. So people are going to be
Speaker 1: traveling to get abortions. It's um, it's abortions will not
Speaker 1: be appropriate, but that people will be traveling. As your
Speaker 1: map shows, um, some will have to travel very far.
Speaker 1: And this is going to, like all things, it will
Speaker 1: have a small effect on the well educated and people
Speaker 1: with money, and it's going to have a big effect
Speaker 1: on poor women who can't afford to travel or who
Speaker 1: can't even get the information about traveling. So it's gonna
Speaker 1: have a very disparate effect. But we will have abortion
Speaker 1: providing states and abortion banned states. Here's a question about
Speaker 1: how this transforms the election heading into the midterms, a
Speaker 1: lot of people saying that this was a leak to
Speaker 1: impart in order to galvanize voters. There's a lot of
Speaker 1: speculation all sides. Putting all that aside, do you think
Speaker 1: that this fundamentally reshapes the Democrats chance of actually being
Speaker 1: a little bit more successful in the midterms. I think
Speaker 1: it does. I think it's a fundamental reshaping um, particularly
Speaker 1: in the Senate. Okay, I think that the Senate races,
Speaker 1: because there's statewide races as opposed to districts drawn from
Speaker 1: one party or the other. I think this fundamentally increases
Speaker 1: the Democrats chances of holding the Senate. UM. I think
Speaker 1: there's gonna be real outrage at just the the interference
Speaker 1: here in people's lives, and the irony is that many
Speaker 1: of the same people advocating this rather draconian choice about
Speaker 1: what women should do with their bodies were also the
Speaker 1: same people who are arguing for um medical choice and
Speaker 1: medical freedom when it came to whether or not they
Speaker 1: got a COVID test or a COVID shot. So this,
Speaker 1: this is this is going to really get people riled up.
Speaker 1: It has already. I think it will continue to rile
Speaker 1: people up all the way through November. Elaine, wonderful to
Speaker 1: hear from you this morning. Thank you. Elene came out
Speaker 1: that of the Brookings Institution, I want to toss out
Speaker 1: right now, and we're doing this as we introduced Barbara
Speaker 1: Corker and who we like to talk to once a
Speaker 1: year twice here she is a dynamo of the five
Speaker 1: bureaus and joins us today. But I don't want to
Speaker 1: make a joke about this. People magazine does it absolutely
Speaker 1: killer issue every year on women across all of entertainment,
Speaker 1: across all of enterprise and capitalism, and Barbara, they have
Speaker 1: selected you as a beautiful person. I mean, we were
Speaker 1: talking about Adell earlier in the show. I don't want
Speaker 1: you to sing like Adele, but I guess we can
Speaker 1: talk about your wheelhouse year, which is real estate, all
Speaker 1: the other things you've done over the years, Barbara, We've
Speaker 1: never seen rent and housing in this city the disaster
Speaker 1: that it is today. How do we extricate ourselves from
Speaker 1: this train wreck of real estate pricing? Well, it's not
Speaker 1: a total train wreck, because it depends upon whose viewpoint
Speaker 1: you have. If you're a buyer right now, you're complaining
Speaker 1: that you can possibly afforded. Interest rates have gone from
Speaker 1: what two and a half percent to five point three
Speaker 1: I think as of yesterday, and so everything's less affordable.
Speaker 1: So it's a train wreck from a Buias view. But interesting,
Speaker 1: Tom is the buyers. I'm not slowing down. People are
Speaker 1: still grabbing real estate, So nothing is happening, and that's
Speaker 1: making a lot of people nervous. It doesn't make me nervous, honestly,
Speaker 1: because I see that the under footings of the market
Speaker 1: are very solid. They're real usage buying real homes that
Speaker 1: are highly leveraged, and they aren't loaned out with crazy,
Speaker 1: crazy configurations. If I look at Cork and Group, you
Speaker 1: know that you built from scratch. If I look at
Speaker 1: it on say Tony Madison Avenue or down in the
Speaker 1: fancy downtown area, the number one fear is we don't
Speaker 1: want to make New York City look like a given
Speaker 1: East German city. We don't want row after row of
Speaker 1: ugly high rise high rises. How do we create more
Speaker 1: housing that mayor Adams wants without looking like a given
Speaker 1: city in Eastern Europe. Well, the reality is that they're
Speaker 1: not going to be putting affordable housing right next door
Speaker 1: at the fifteen million dollar condos. It's just not gonna happen. So,
Speaker 1: whether you like the concept that there are some poor
Speaker 1: neighborhoods and some very very rich neighborhoods, that guy has
Speaker 1: been cast in New York a long long time ago.
Speaker 1: There was never a time when Midtown Manhattan was inexpensive,
Speaker 1: nor will they ever be, I hope, But the problem
Speaker 1: really is in the city's court for making affordable housing.
Speaker 1: Our supply is like a third of what we actually need,
Speaker 1: and I think those public work programs are going to happen,
Speaker 1: and I don't think they're gonna happen in the part
Speaker 1: of town that people want to impress their friends with.
Speaker 1: It's just not going to be Barbara, you're talking about
Speaker 1: how the footings of this market are incredibly solid, that
Speaker 1: people are not leveraging their purchases. Are you saying that
Speaker 1: the housing market of two is more immune to the
Speaker 1: rising interest rates that a lot of people are hoping
Speaker 1: will damp in some of the price increases that we've
Speaker 1: seen on homes. I'm not saying it's totally immune, but
Speaker 1: it's better equipped to handle it simply because you don't
Speaker 1: have leverage buying in the sun Belt right now, about
Speaker 1: one and eight homes of being purchased by investors. That
Speaker 1: worries me. You didn't see that two years ago. So
Speaker 1: that makes a buyer that I'm not as confident as
Speaker 1: a regular buyer who's going to raise their kids in
Speaker 1: that house. But the people who are buying homes today
Speaker 1: are not highly leveraged, and there are no bank programs
Speaker 1: that make them more tempt them to be leveraged out,
Speaker 1: and so that gives me a great, great peace of mind.
Speaker 1: Of course, interest rates is a partner in the housing market.
Speaker 1: If those continue to shoot up, the government will put
Speaker 1: down the housing market and with it the inflation and
Speaker 1: all the problems will follow. The housing markets a leader
Speaker 1: in the inflation category, so that if that changes, if
Speaker 1: if people are irresponsible in the government in that regard,
Speaker 1: of course we could demolish this housing market, but nobody's
Speaker 1: really expecting them to act that way. What would you
Speaker 1: map you share my competence, What would you be investing
Speaker 1: in right now, Barbara, if you had a million two
Speaker 1: million dollars. What I'm investing is secondary cities. Used to
Speaker 1: be that the primary cities like New York City Chicago
Speaker 1: was the best place for investments in real estate, and
Speaker 1: of course I love that because it's a slow way
Speaker 1: to get very rich. But what I'm doing right now
Speaker 1: is I'm investing in minor, minor cities or secondary cities.
Speaker 1: I should call them or they'll be offended, like Baltimore
Speaker 1: UM and many of the small cities in the mid
Speaker 1: West because the inflation rates are greatest there in real
Speaker 1: estate values, Barbara, like Chicago or Los Angeles or Miami,
Speaker 1: right as a set in darry City. Yes, thank you
Speaker 1: very much for giving me my words, Barbara. Barbara a
Speaker 1: simple question which so many people want to know. If
Speaker 1: house prices go up, should people's property texts go up? No?
Speaker 1: I just don't think so. It would break the back
Speaker 1: of the housing market. You can't have that. People can't
Speaker 1: take it on both sides. Okay, Barbara cork And thank
Speaker 1: you so much for joining the Corkin group and featured
Speaker 1: in People's magazine. Really good to see that as well.
Speaker 1: And you know her from Shark Tank. I should say.
Speaker 1: This is the Bloomberg Surveillance Podcast. Thanks for listening. Join
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Speaker 1: the Turn. I'm Tom keene In. This is Bloomer