WEBVTT - Bloomberg Wall Street Week - May 24th, 2024 0:00:00.280 --> 0:00:02.599 This is Bloomberg Wall Street Week. 0:00:02.680 --> 0:00:07.280 The global push into infrastructure, breaking the IPO logjam in text. 0:00:07.160 --> 0:00:09.280 The financial stories that shape. 0:00:08.920 --> 0:00:12.040 Our work, cutting inflation without losing jobs. Do we need 0:00:12.119 --> 0:00:14.560 rate cuts and if so? How many? Investing in the 0:00:14.560 --> 0:00:16.120 time of geopolitical turmoil? 0:00:16.200 --> 0:00:18.560 Through the eyes of the most influential voices. 0:00:18.720 --> 0:00:22.480 Ten Rogueff economists at Harvard, former FDIC had Shiela Bert 0:00:22.640 --> 0:00:27.360 ge CEO, Larry Kulp, San Francisco FED President Mary Daily, Bloomberg. 0:00:26.840 --> 0:00:30.240 Wall Street Week with David Weston from Bloomberg Radio. 0:00:30.360 --> 0:00:33.560 Great Britain gets a snap election, the FED debates whether 0:00:33.600 --> 0:00:37.880 it's gone high enough, and Nvidia shoots the lights out again. 0:00:38.520 --> 0:00:42.400 This is Bloomberg Wall Street Week. I'm David Weston. This week, 0:00:42.479 --> 0:00:45.440 former New Jersey Governor Christine Todd Whitman tells us that 0:00:45.520 --> 0:00:48.919 small nuclear reactors may be the answer for our AI 0:00:49.040 --> 0:00:50.360 data center needs. 0:00:50.760 --> 0:00:53.680 The manas for power of these data centers is in enormous. 0:00:54.480 --> 0:00:57.520 Nobel Prize winning economist Paul Kruman on why he doesn't 0:00:57.560 --> 0:00:59.320 know where interest rates are headed. 0:01:00.080 --> 0:01:04.280 On interest rates, I am fanatically confused. 0:01:05.040 --> 0:01:08.240 And Henry McVay KKR reports on his trip to China 0:01:08.560 --> 0:01:10.080 and what needs to come. 0:01:09.920 --> 0:01:12.959 Next, they can actually encourage more urbanization. 0:01:26.080 --> 0:01:28.320 We start with the week in the markets, where equities 0:01:28.400 --> 0:01:31.119 ended strong after a sag in the middle of the week. 0:01:31.280 --> 0:01:33.000 The S and P five hundred ended up just. 0:01:32.959 --> 0:01:35.480 A bit at fifty three h four, which keep them 0:01:35.520 --> 0:01:38.800 above the Bloomberg Els median year and number of fifty 0:01:38.840 --> 0:01:41.880 two hundred. The Nasdaq added one point four percent for 0:01:41.920 --> 0:01:44.000 the week, while the yield on the tenure was up 0:01:44.080 --> 0:01:46.360 just over four basis points to end the week at 0:01:46.400 --> 0:01:48.880 four point four to six percent. To take us through 0:01:48.920 --> 0:01:51.559 what we've seen this week, welcome back now, Scott Kroner. 0:01:51.840 --> 0:01:54.760 He's City US equity strategist. Scott, always a delight to 0:01:54.760 --> 0:01:56.440 have you with us. So give us a sense of 0:01:56.440 --> 0:01:58.480 what we think you saw this week. As I say, 0:01:58.640 --> 0:02:00.560 it's sagging the length and it came back at the end. 0:02:00.560 --> 0:02:02.000 What's going on? Right? 0:02:02.040 --> 0:02:04.440 So I think what's going on is the market continues 0:02:04.480 --> 0:02:08.520 to navigate where we think we are regarding economic conditions 0:02:08.560 --> 0:02:10.440 and the read through to FED policy. 0:02:10.600 --> 0:02:12.160 Okay, so we're back. 0:02:12.000 --> 0:02:15.280 And forth between stronger economic data which would signal a 0:02:15.360 --> 0:02:19.040 higher for longer FED versus signs of softening and ongoing 0:02:19.080 --> 0:02:20.000 deceleration and. 0:02:19.960 --> 0:02:22.880 Inflation, which gives a little bit more confidence. 0:02:22.400 --> 0:02:23.480 That you get a FED pivot. 0:02:23.720 --> 0:02:26.919 So we're back and forth between this ongoing debate and 0:02:27.160 --> 0:02:30.680 the data. It tends to be supportive on a transitory 0:02:30.720 --> 0:02:34.160 basis on both sides. In the meantime, we continue to 0:02:34.160 --> 0:02:37.200 have this new growth driver in town. We're now a 0:02:37.280 --> 0:02:40.960 year into this generative AI craze, if you will, and 0:02:41.000 --> 0:02:44.000 it was reinforced this week. So a number of things 0:02:44.040 --> 0:02:46.079 going on in both the macro and then let's call 0:02:46.120 --> 0:02:50.320 it the micro and new growth paradigm approach as well. 0:02:50.440 --> 0:02:51.720 Well, Scott, as I listened to you, I wonder if 0:02:51.760 --> 0:02:53.680 that's a little bit of microcosmic with a year so far, 0:02:53.720 --> 0:02:55.880 because we go back and look the first quarter, the 0:02:55.880 --> 0:02:57.640 equies were really on the march off the S and 0:02:57.639 --> 0:02:59.400 P of five hundred. Then it dipped at the beginning 0:02:59.360 --> 0:03:01.320 of the second quarter and it's come back up again. 0:03:01.520 --> 0:03:03.480 Now we went into the year expecting what was it, 0:03:03.600 --> 0:03:05.639 six rakes cuts and now we're down to maybe one 0:03:05.680 --> 0:03:06.320 one and a half. 0:03:07.000 --> 0:03:10.240 Yeah, So it's really interesting the way the market is 0:03:10.320 --> 0:03:13.280 navigating this. The way we tend to think of it, 0:03:13.320 --> 0:03:16.320 and the data tends to show this is that the 0:03:16.360 --> 0:03:20.000 growth profile and the growth influence on equities can often 0:03:20.200 --> 0:03:25.040 outweigh the interest rate influence as it pertains to the 0:03:25.120 --> 0:03:30.600 discounting mechanism and expectations for economic activity. What's been happening 0:03:30.720 --> 0:03:33.560 is that growth has been winning as more and more 0:03:33.639 --> 0:03:38.440 companies are now getting on this generative AI phase and 0:03:38.920 --> 0:03:42.680 really going more aggressively down the path of investing in 0:03:43.000 --> 0:03:47.600 future opportunities that should support longer term growth drivers for 0:03:47.680 --> 0:03:50.360 the broader US equity markets. 0:03:50.400 --> 0:03:52.840 And what about your views, because you are delighted to 0:03:52.840 --> 0:03:54.360 say one of our elves, as we call you, the 0:03:54.400 --> 0:03:56.400 Bloomberg elis here one of the analysts. You set it out 0:03:56.400 --> 0:03:58.360 that year toward the top of the pack of elves, 0:03:58.640 --> 0:03:59.400 and now you're. 0:03:59.280 --> 0:04:01.200 Sort of toward the did you move or did the 0:04:01.280 --> 0:04:02.160 rest of the pack move? 0:04:03.000 --> 0:04:05.240 I say, essentially, what's happening is the rest of the 0:04:05.280 --> 0:04:07.640 pack has been marketing with the market move and is 0:04:07.880 --> 0:04:10.880 leapfrogging us a bit, which is fine. I think the 0:04:10.920 --> 0:04:13.320 way we're looking at it is that we're still expressing 0:04:13.320 --> 0:04:17.240 a very constructive view on the fundamental setup for US 0:04:17.279 --> 0:04:20.560 equities at this point, particularly the S and P five hundred, 0:04:20.839 --> 0:04:22.880 But we do have to recognize it a lot has 0:04:22.920 --> 0:04:26.800 happened pretty quickly from a performance perspective, and more recently, 0:04:27.279 --> 0:04:32.400 our ongoing panic euphoria model is tripped into euphoria, which 0:04:32.440 --> 0:04:35.160 is usually not a great sign for forward performance. 0:04:35.480 --> 0:04:39.040 At the same time, we've seen valuations. 0:04:38.279 --> 0:04:42.400 Move higher to a point where the implied growth expectations 0:04:42.680 --> 0:04:46.160 supporting this market are getting pretty aggressive, so put us 0:04:46.200 --> 0:04:50.760 in an ongoing fundamentally constructive view, but shorter term, we 0:04:50.800 --> 0:04:52.960 think the risk rewards pretty balanced right now. 0:04:53.040 --> 0:04:55.159 David, what about the breadth of the market going into 0:04:55.160 --> 0:04:57.320 the year, We were really concerned it was so narrow. 0:04:57.560 --> 0:04:59.719 There was some hope that we're broadening out. Is it 0:04:59.760 --> 0:05:02.360 brought out from that Magnificent seven or whatever you want 0:05:02.360 --> 0:05:02.800 to call them? 0:05:03.440 --> 0:05:05.120 I think it is, but not in the way that 0:05:05.200 --> 0:05:07.960 many were expecting from a performance perspective. 0:05:08.600 --> 0:05:10.240 Off of the rally that began. 0:05:10.160 --> 0:05:14.400 Last November, we saw areas such as industrials and financials 0:05:14.480 --> 0:05:18.080 participate quite strongly as this year unfolded. 0:05:18.440 --> 0:05:20.440 Then as we hit the middle part. 0:05:20.320 --> 0:05:23.880 Of this year thus far, we began to see other areas. 0:05:24.080 --> 0:05:26.600 Energy kicked in for a period of time, and more 0:05:26.640 --> 0:05:30.880 recently it's been utilities. So while tech communications services are 0:05:30.920 --> 0:05:32.599 still your leading sectors. 0:05:32.839 --> 0:05:34.760 You are seeing different pockets of. 0:05:34.760 --> 0:05:37.760 The market kick in at different times, and it ends 0:05:37.839 --> 0:05:39.720 up supporting this broader index move. 0:05:40.040 --> 0:05:42.479 So, Scott, you mentioned actually a year ago you pointed 0:05:42.480 --> 0:05:43.880 out it was just a year ago that a company, 0:05:43.880 --> 0:05:46.279 I know you don't talk individual companies, I'll name the company, 0:05:46.279 --> 0:05:48.680 and Vidia came out with those blockbuster numbers. We had 0:05:48.720 --> 0:05:50.760 some more this week, but it sped out from Nvidia. 0:05:50.800 --> 0:05:52.800 There are all other companies as well that seem to 0:05:52.839 --> 0:05:54.800 get along for the ride. At the same time, a 0:05:54.800 --> 0:05:56.760 lot of other companies are spending money right now. They're 0:05:56.800 --> 0:06:00.240 investing money, so why does that buttress their stock because 0:06:00.240 --> 0:06:01.680 they actually haven't spent coming in. 0:06:01.880 --> 0:06:04.000 Yeah, So I think the way this is setting up, 0:06:04.000 --> 0:06:07.400 we're spending a lot more time now talking about capital expenditures, 0:06:07.560 --> 0:06:10.120 and I think one of the dynamics that is at 0:06:10.160 --> 0:06:12.880 hand right now is that you're seeing a lot of 0:06:12.920 --> 0:06:18.799 the investment into AI and related applications, and the semiconductor 0:06:18.839 --> 0:06:23.280 comportion component of that feels that quite quite directly, as 0:06:23.320 --> 0:06:27.200 does the software component. But so we're watching this AI 0:06:27.520 --> 0:06:30.800 narrative unfold through two paths. The first is you're going 0:06:30.839 --> 0:06:33.839 to have companies that are directly exposed. These tend to 0:06:33.839 --> 0:06:36.839 be your mag seven or Big seven components, where we're 0:06:36.839 --> 0:06:39.919 going to be measuring them directly on the way AI 0:06:40.080 --> 0:06:43.000 is feeding their fundamentals in the months to come. On 0:06:43.040 --> 0:06:46.160 the other hand, the bigger picture, and perhaps the more 0:06:46.240 --> 0:06:50.080 important longer term picture, is that now as more and 0:06:50.120 --> 0:06:53.960 more companies embrace the opportunity in generator of AI, they're 0:06:54.000 --> 0:06:59.680 putting a lot of effort into establishing their own ways 0:06:59.720 --> 0:07:02.680 of of benefiting from AI. What this is going to 0:07:02.760 --> 0:07:06.440 mean over time is that the investment and spending that's 0:07:06.560 --> 0:07:12.280 unfolding right now should translate into various forms of productivity enhancement, 0:07:12.480 --> 0:07:15.840 perhaps margin improvement, and ultimately what we really want to 0:07:15.840 --> 0:07:21.320 see is profitability enhancement, which in turn leads to higher valuations. 0:07:21.720 --> 0:07:24.920 All told, the setup is very clear right now. It's 0:07:24.920 --> 0:07:27.880 going to play out as I mentioned, months and perhaps 0:07:27.960 --> 0:07:30.480 in some cases over the next couple of years. 0:07:30.680 --> 0:07:33.120 But what it's doing is providing. 0:07:32.840 --> 0:07:36.200 The broader market, as we mentioned at the outset, a 0:07:36.360 --> 0:07:41.200 very compelling longer term growth opportunity that is taking fundamental 0:07:41.240 --> 0:07:45.520 expectations over and above traditional economic sensitivities. 0:07:45.560 --> 0:07:48.080 How much time do we have before they have to 0:07:48.160 --> 0:07:49.400 deliver on that productivity. 0:07:50.200 --> 0:07:50.960 It's going to vary. 0:07:51.000 --> 0:07:53.360 We think for some of the more direct beneficiaries, they 0:07:53.440 --> 0:07:56.920 need to start showing it in the months in quarters 0:07:56.920 --> 0:07:59.560 to come. For companies where it's going to be more 0:07:59.600 --> 0:08:02.960 of a prot activity enhancing application, we're going to be 0:08:02.960 --> 0:08:05.520 watching for that. I think probably is twenty twenty five 0:08:05.600 --> 0:08:07.880 kicks in and beyond, so it's going to be in 0:08:07.920 --> 0:08:11.080 some cases months, quarters and other cases. We have to 0:08:11.080 --> 0:08:13.240 give companies a couple of years to build these these 0:08:13.720 --> 0:08:16.040 products and services in product Tooty, thanks so much. 0:08:16.040 --> 0:08:19.760 Set's got Chronic City US equity strategies. China is on 0:08:19.840 --> 0:08:23.040 everyone's minds right now. Where it's going, where it's the economy, 0:08:23.160 --> 0:08:26.280 is where investment opportunities may be. Henry k Vay, he's 0:08:26.280 --> 0:08:28.720 the CIO of KKR balance Sheet, goes around the world 0:08:28.800 --> 0:08:31.600 and travels to places like China, comes back with reports. 0:08:31.600 --> 0:08:33.679 And he's just come back from China right now. We're 0:08:33.679 --> 0:08:35.920 welcoming back now to Wall Street weeks. So Henry, great 0:08:35.920 --> 0:08:38.320 to have you back with us. We've done different countries 0:08:38.400 --> 0:08:40.840 that Japan, we've done Indian, now let's do China. 0:08:41.000 --> 0:08:44.120 Great just coming back would you learn you know, I'd say. 0:08:43.960 --> 0:08:46.840 On the positive the economy is bottoming. We heard a 0:08:46.840 --> 0:08:49.480 couple of different data points, I think from companies in 0:08:49.520 --> 0:08:52.120 the logistics business that are seeing the US consumer pick 0:08:52.200 --> 0:08:54.000 up a bit, So that was a positive, and I 0:08:54.040 --> 0:08:56.559 do think we're things have bottomed also in Europe and 0:08:56.559 --> 0:08:59.600 there's a little bit more demand. But overall it's still 0:08:59.640 --> 0:09:03.679 a pretty sluggish economy post COVID, with very low inflation. 0:09:03.960 --> 0:09:08.079 And the growth that is there is not evenly distributed. 0:09:08.120 --> 0:09:09.840 There's some areas growing much more than others. 0:09:09.880 --> 0:09:12.079 As I understand it, We've spent a lot of time. 0:09:12.120 --> 0:09:14.120 I've actually been to China four times in the last 0:09:14.160 --> 0:09:16.240 five quarters, so I'll give you how I think the 0:09:16.280 --> 0:09:19.160 evolution of the economy is changing. Really, a lot of 0:09:19.200 --> 0:09:22.200 people focus on fixed investment, they focus on exports. I 0:09:22.200 --> 0:09:25.240 think the Chinese government is really repositioning the economy towards 0:09:25.280 --> 0:09:27.960 a couple of different things. One is this whole idea 0:09:28.080 --> 0:09:32.040 of digitalization, particularly as it relates to the industrial sector. 0:09:32.280 --> 0:09:34.920 They're trying to automate that sector be more effective and 0:09:35.000 --> 0:09:37.640 more competitive globally. In the past, I think a lot 0:09:37.679 --> 0:09:40.240 of people thought about China in terms of e commerce 0:09:40.280 --> 0:09:43.640 Ali Baba, domestic consumption. The focus right now from the 0:09:43.679 --> 0:09:47.319 government really is on industrial automation. China today actually has 0:09:47.320 --> 0:09:49.920 about half the world's robots on the industrial side, which 0:09:49.960 --> 0:09:53.160 is an amazing statistic. The second big driver is around 0:09:53.240 --> 0:09:57.360 the green effort, and they're trying to really dominate batteries, 0:09:58.200 --> 0:10:01.480 evs and solar panel that and they're trying to export 0:10:01.520 --> 0:10:05.079 some of that globally. So those are really the growth drivers. 0:10:05.280 --> 0:10:09.640 The offset, which is still problematic is around housing and 0:10:09.720 --> 0:10:11.920 our estimate as they have somewhere between kind of twenty 0:10:11.960 --> 0:10:15.080 and thirty million too many homes and so they're trying 0:10:15.120 --> 0:10:18.400 to clean that out right now. But that's a disinflationary 0:10:18.440 --> 0:10:21.920 force and it clearly has an impact on domestic psychology 0:10:21.920 --> 0:10:22.360 as well. 0:10:22.559 --> 0:10:26.240 Someone What China is investing in the green transition has 0:10:26.280 --> 0:10:28.480 gotten the attention of places like the United States and Europe, 0:10:28.520 --> 0:10:32.240 whether it's solar panels or batteries or evs, because there's 0:10:32.280 --> 0:10:34.720 a concern of a build of overcapacity. 0:10:35.200 --> 0:10:37.319 Do you see over capacity and what does that do 0:10:37.400 --> 0:10:38.000 to margins? 0:10:38.240 --> 0:10:40.360 I think what's going to happen around the world right 0:10:40.400 --> 0:10:42.880 now is that industries such as autos are going to 0:10:42.880 --> 0:10:45.679 become of national interests. We've already seen that in technology 0:10:45.920 --> 0:10:48.960 could expand into two other sectors, so there's definitely going 0:10:49.000 --> 0:10:54.000 to be sensitivity. You saw President Biden talked about increasing 0:10:54.040 --> 0:10:56.760 the tariff there. Europe, I think is going to do 0:10:56.800 --> 0:10:59.920 a similar a similar type of strategy. So you can 0:11:00.080 --> 0:11:02.800 have capacity. The question is is where can that capacity go. 0:11:03.120 --> 0:11:05.160 I think probably if you're China, you'll see more of 0:11:05.200 --> 0:11:08.680 it go into places such as Latin America, other places 0:11:09.080 --> 0:11:12.880 maybe Eastern Europe or where they have partners that maybe 0:11:12.880 --> 0:11:16.720 there's increasing kind of bilateral trade. That doesn't seem to 0:11:16.720 --> 0:11:18.600 be the case in the US and Europe right now. 0:11:18.880 --> 0:11:19.760 So there is growth. 0:11:19.800 --> 0:11:22.040 You found growth there, as you said, it's bottomed. At 0:11:22.080 --> 0:11:24.319 the same time when you're take into account the disinflation, 0:11:24.520 --> 0:11:27.280 the nominal GDP actually is not growing at the same 0:11:27.360 --> 0:11:29.719 rate as that some other places like Europe and the 0:11:29.840 --> 0:11:30.319 United States. 0:11:30.400 --> 0:11:33.280 If I could give an insight to your viewers, KKR 0:11:33.360 --> 0:11:35.920 typically has one hundred and fifty businesses around the world, 0:11:35.960 --> 0:11:38.040 you know upwards of two hundred now where we operate. 0:11:38.320 --> 0:11:41.920 You've got to focus on nominal revenues. Nominal GDP what 0:11:41.960 --> 0:11:45.200 does that mean? It's real GDP plus inflation. A lot 0:11:45.280 --> 0:11:48.160 of times the cell side focuses on real GDP and 0:11:48.200 --> 0:11:50.839 what you've seen in China. When I started going there 0:11:50.880 --> 0:11:53.000 in nineteen ninety five and when I started at KRE, 0:11:53.160 --> 0:11:55.840 nominal GDP was in the teens and twenty percent. There's 0:11:55.880 --> 0:11:57.640 a lot of growth and a lot of profit that 0:11:58.040 --> 0:12:00.560 comes with that. Today that number is probably about a 0:12:00.559 --> 0:12:03.840 third of that. So really that inflation component has come down. 0:12:04.040 --> 0:12:04.960 And then second thing. 0:12:04.840 --> 0:12:05.880 Is on the real GDP. 0:12:06.280 --> 0:12:10.000 The productivity has come down in concert with slower labor 0:12:10.040 --> 0:12:12.400 force growth, so it is a big deal. At the 0:12:12.440 --> 0:12:15.120 same time, the Western world has put a huge amount 0:12:15.160 --> 0:12:18.240 of fiscal stimulus into the system and that's driving a 0:12:18.280 --> 0:12:21.360 little more inflation, a little more nominal GDP. 0:12:21.720 --> 0:12:23.679 Thank you so much, Henry, Always love having you on. 0:12:24.000 --> 0:12:27.559 That's henryk vay Cio of the KKR balance Sheet. 0:12:28.920 --> 0:12:29.400 Coming up. 0:12:29.440 --> 0:12:32.280 If we're all going to use generative AI, then we're 0:12:32.320 --> 0:12:35.040 going to need a lot more power. We talk with 0:12:35.080 --> 0:12:38.760 former New Jersey governor and EPA administrator Christine Todd Whitman 0:12:38.920 --> 0:12:42.000 about whether nuclear power could be part of the answer. 0:12:42.360 --> 0:12:44.760 But this is where small module reactors can be perfect 0:12:44.760 --> 0:12:46.960 because you just can put them there right next to 0:12:47.000 --> 0:12:48.000 those data centers. 0:12:49.240 --> 0:12:51.520 That's next on Wall Street Week on Bloomberg. 0:12:52.640 --> 0:12:56.840 This is Bloomberg Well Street Week with David Weston from 0:12:56.960 --> 0:13:02.720 Bloomberg Radio. 0:13:04.679 --> 0:13:06.400 This is Wall Street Week. I'm David Weston. 0:13:06.480 --> 0:13:09.840 The sprint toward generative AI has turbocharged the move to 0:13:09.840 --> 0:13:12.840 build data centers, and every one of them needs power, 0:13:13.200 --> 0:13:15.880 lots of it, with some believing they provide a good 0:13:16.000 --> 0:13:19.199 use case for those small modular nuclear reactors we've heard 0:13:19.200 --> 0:13:19.720 so much about. 0:13:20.000 --> 0:13:20.600 To take us through the. 0:13:20.600 --> 0:13:24.040 Possibilities, we welcome now Christine Todd Whitman, co founder and 0:13:24.080 --> 0:13:27.000 co chair of the States United Democracy Center MSSUS. 0:13:27.000 --> 0:13:28.319 Whitner, of course earlier. 0:13:28.000 --> 0:13:31.000 Served as EPA administrator and as Governor of the State 0:13:31.040 --> 0:13:33.559 of New Jersey. So Governor Werner, thank you so much 0:13:33.600 --> 0:13:36.280 for joining us here on Wall Street Week. As you know, 0:13:36.400 --> 0:13:38.960 generative AI is all the rage these days, at least 0:13:39.000 --> 0:13:41.640 on paper, and as we talk about that, we talk 0:13:41.679 --> 0:13:43.800 about a lot of data centers, the need for them 0:13:43.800 --> 0:13:46.680 and the need for power, and that has really spurred 0:13:46.679 --> 0:13:49.880 to the forefront the discussion of those small modular reactors, 0:13:49.920 --> 0:13:52.000 something you've talked about in the past. Is this a 0:13:52.080 --> 0:13:55.000 spur to actually get us going on those SMRs? 0:13:56.280 --> 0:13:59.000 I certainly hope. So, because it is true those data 0:13:59.000 --> 0:14:02.920 centers pull of power, and most people aren't thinking about that. 0:14:02.960 --> 0:14:05.960 They don't know what they're beginning to now to understand 0:14:06.040 --> 0:14:09.320 just how much they draw down on the grid. So 0:14:09.400 --> 0:14:11.920 this is where small modular actors can be perfect because 0:14:11.960 --> 0:14:14.079 you just can put them there, right next to those 0:14:14.160 --> 0:14:18.120 data centers and provide the power for that particular center. 0:14:18.640 --> 0:14:20.760 And it makes a whole bunch of sense when you 0:14:20.800 --> 0:14:23.239 look at the issues that we're facing and the economic 0:14:23.600 --> 0:14:26.840 price we're paying for what's going on with Mother Nature 0:14:26.840 --> 0:14:29.760 and the environment, and it is due to changing climate, 0:14:29.840 --> 0:14:32.440 and I think we all have to recognize that now, 0:14:32.920 --> 0:14:34.840 and so we need to do what makes sense. But 0:14:34.920 --> 0:14:38.040 that doesn't creator our economy, and this certainly wouldn't. We 0:14:38.080 --> 0:14:41.120 can build these things, we can distribute these things, and 0:14:41.200 --> 0:14:45.000 it makes a great deal of sense. They're mutually supportive, so. 0:14:44.920 --> 0:14:48.240 It increases the demand the opportunity for these What are 0:14:48.280 --> 0:14:50.120 the hurdles because as I say, you and I have 0:14:50.200 --> 0:14:51.960 talked about this in the past. You've been an advocate 0:14:51.960 --> 0:14:53.960 for experimenting and using these in the past. 0:14:53.920 --> 0:14:54.560 We haven't gotten there. 0:14:54.640 --> 0:14:56.040 As I under said, there are a lot of plans 0:14:56.080 --> 0:14:58.560 for them, but I'm not sure any have gotten built yet. 0:14:58.760 --> 0:15:03.040 No, they haven't Canada. They're moving forward. It's obviously the 0:15:03.200 --> 0:15:05.400 regulatory hurdles because we want to make sure that they're 0:15:05.400 --> 0:15:08.720 absolutely safe, and not all of those are federal. A 0:15:08.720 --> 0:15:14.080 lot of those regulatory roadblocks, as it were, or things 0:15:14.080 --> 0:15:16.280 that slow it down, which is we all know costs money, 0:15:16.760 --> 0:15:20.920 our local or state regulations and we've got to respect those. 0:15:20.960 --> 0:15:23.960 But I think what we're seeing now is the pressure 0:15:24.440 --> 0:15:28.200 coming that is going to, I believe, as you mentioned, 0:15:28.640 --> 0:15:32.280 perhaps spur an effort to move these things through, not 0:15:32.320 --> 0:15:34.440 to cut may corners, but to make sure that you're 0:15:34.560 --> 0:15:39.200 not holding anything up unnecessarily. Because they have a proven technology, 0:15:40.040 --> 0:15:43.280 they are easier to build, they're much safer to use 0:15:43.640 --> 0:15:45.880 or easier to use, and they can be used in 0:15:45.920 --> 0:15:49.440 discrete ways, such as putting them next to a data 0:15:49.480 --> 0:15:53.680 center and having them supply the power for that data center. 0:15:54.360 --> 0:15:56.920 You're very familiar with the regulatory structure, and it was 0:15:56.920 --> 0:15:59.480 put in place for various reasons with the very large 0:15:59.560 --> 0:16:04.000 nuclear Do those same considerations apply with the small modular reactors. 0:16:04.080 --> 0:16:06.720 Should it be the same regulatory system or should it 0:16:06.720 --> 0:16:09.600 be an entirely different way of approaching regulation. 0:16:09.680 --> 0:16:13.320 It wouldn't be entirely different, but certainly the way these 0:16:13.440 --> 0:16:17.600 things are constructed is entirely different and that needs to 0:16:17.600 --> 0:16:22.080 be regulated, be recognized from the regulatory perspective, so that 0:16:22.120 --> 0:16:25.560 there are vast differences. But because you're talking nuclear and 0:16:25.680 --> 0:16:29.120 people are very concerned, even though our history with nuclear 0:16:29.160 --> 0:16:32.440 has been extremely safe, you have to answer those questions. 0:16:32.560 --> 0:16:37.120 And so the NRC needs to take a step back 0:16:37.160 --> 0:16:40.960 and say, Okay, let's really look at the SMRs, the 0:16:40.960 --> 0:16:45.160 small module reactors, and identify they use a different kind 0:16:45.200 --> 0:16:48.400 of material. Some of them are molten salt reactors. That's 0:16:48.480 --> 0:16:52.000 entirely different way of producing the nuclear power. They're done 0:16:52.240 --> 0:16:55.360 in one place, which again is entirely different. You're not 0:16:55.440 --> 0:16:59.080 moving pieces sequentially to a site. You move the whole 0:16:59.120 --> 0:17:01.960 thing to a site. All those things. It is a 0:17:02.000 --> 0:17:04.880 different process and it does need to be handled differently. 0:17:05.240 --> 0:17:07.399 I'm just not sure that the NRC at the moment, 0:17:07.440 --> 0:17:09.760 and I don't know. I'm not saying they're not looking 0:17:09.800 --> 0:17:13.200 at what they need to do to update the regulations, 0:17:13.240 --> 0:17:14.439 but they certainly should be. 0:17:14.880 --> 0:17:16.480 I'm going to put this in the larger context of 0:17:16.520 --> 0:17:18.840 the climate, something you've been very outspoken on when you 0:17:18.840 --> 0:17:20.760 were governor of New Jersey when you're a mystery of VPA. 0:17:20.840 --> 0:17:23.919 And since then, if we in fact buy build all 0:17:23.960 --> 0:17:26.840 of these data centers and do not use something like 0:17:26.920 --> 0:17:29.320 small moduor reactors, what is the possible risk for the 0:17:29.400 --> 0:17:31.640 environment to respect the use of fossil fuels. 0:17:31.840 --> 0:17:34.240 It's huge because the demand for power of these data 0:17:34.240 --> 0:17:37.479 centers is enormous, and you're going to go to the fastest, 0:17:37.560 --> 0:17:40.159 cheapest power, and that's going to put more pressure on 0:17:40.200 --> 0:17:44.919 opening more coal and not closing coal. And you know 0:17:45.000 --> 0:17:46.520 the thing that I think you and I have talked 0:17:46.520 --> 0:17:49.359 about this, David. The thing that we're missing here is 0:17:49.400 --> 0:17:53.760 the understanding that nuclear can be the bridge if we 0:17:53.880 --> 0:18:00.920 ever get to making the making our renewable power base power. 0:18:01.359 --> 0:18:03.360 It's going to take a long time before we can 0:18:03.400 --> 0:18:09.879 rely solely on whens various forms of green power, and 0:18:09.960 --> 0:18:12.680 so we need a bridge and this is the best 0:18:12.720 --> 0:18:15.560 way to my mind to. 0:18:14.960 --> 0:18:16.439 Do this pretty quickly. 0:18:16.800 --> 0:18:19.880 Many thanks to Christine Todd Whitman of the state's United 0:18:19.960 --> 0:18:20.920 Democracy Center. 0:18:21.960 --> 0:18:25.120 I thought Hamilton had it right. He said a national 0:18:25.119 --> 0:18:28.560 debt could be a national blessing, and the national debt 0:18:28.640 --> 0:18:31.800 having a liquid market there provides a good benchmark for 0:18:31.840 --> 0:18:34.960 the private sector. It probably underpins the role of the 0:18:35.000 --> 0:18:38.040 dollar in the world. It allows the Fed to conduct 0:18:38.440 --> 0:18:42.600 monetary policy easily. I think we have to keep in 0:18:42.760 --> 0:18:46.919 mind the costs of paying down the debt. There is 0:18:47.040 --> 0:18:50.359 among some people a single minded focus on it, but 0:18:50.400 --> 0:18:53.200 there's no free lunch in this world, and eliminating the 0:18:53.280 --> 0:18:55.520 national debt, while it may sound. 0:18:55.320 --> 0:18:57.399 Attractive, has its costs as well. 0:18:58.040 --> 0:19:00.440 The President, by the way, in his program, is paying 0:19:00.480 --> 0:19:03.560 down as much debt as we can retire in the 0:19:03.560 --> 0:19:04.479 next ten years. 0:19:04.760 --> 0:19:05.840 We're moving in that direction. 0:19:05.920 --> 0:19:07.800 But whether we should pay it all off, I think 0:19:07.840 --> 0:19:08.879 this is a more open question. 0:19:11.240 --> 0:19:13.919 That was Larry Lindsay, director of the National Economic Council 0:19:13.960 --> 0:19:16.800 under President George W. Bush, appearing on Wall Street Week 0:19:16.840 --> 0:19:19.160 back in March of two thousand and one, back when 0:19:19.200 --> 0:19:22.320 the concern was about possibly having too little federal debt 0:19:22.600 --> 0:19:25.040 rather than too much to take us through our current 0:19:25.160 --> 0:19:28.520 very different situation. Welcome back now, Nobel Prize winning economists 0:19:28.520 --> 0:19:31.359 and New York Times columnist Paul Krugman of the City 0:19:31.480 --> 0:19:33.560 University of New York. So, doctor Pruy, thank you so 0:19:33.640 --> 0:19:35.119 much for being back with us. As I say, it 0:19:35.160 --> 0:19:37.199 was a very different time then when they thought we 0:19:37.240 --> 0:19:39.879 may eliminate the national debt. But now we're hearing a 0:19:39.920 --> 0:19:42.040 lot from people saying they're concern has gotten to be 0:19:42.080 --> 0:19:42.520 too big? 0:19:42.880 --> 0:19:44.800 Is it too big? Is it a problem for our 0:19:44.840 --> 0:19:45.760