1 00:00:00,240 --> 00:00:05,000 Speaker 1: This is Bloomberg Wall Street Week, market shruggle, higher consumer prices. 2 00:00:05,040 --> 00:00:07,400 Speaker 1: The economy is in the process of rebounding. Will the 3 00:00:07,400 --> 00:00:10,479 Speaker 1: futteral reserve have its own digital currency? The financial stories 4 00:00:10,520 --> 00:00:12,879 Speaker 1: that cheap hard work. Many people think the deals are 5 00:00:12,880 --> 00:00:15,080 Speaker 1: just going to keep marching up. We have more spending 6 00:00:15,120 --> 00:00:17,200 Speaker 1: coming out of Congress. One of the big questions I 7 00:00:17,200 --> 00:00:19,880 Speaker 1: think on investor's minds inflations through the eyes of the 8 00:00:19,880 --> 00:00:23,560 Speaker 1: most influential voices. Larry Summer is the former Treasury Secretary 9 00:00:23,640 --> 00:00:26,759 Speaker 1: Bryan wynhand a back of America, Will CEO of Charlie 10 00:00:26,920 --> 00:00:31,560 Speaker 1: Sharp Bloomberg wool Street Week with David Weston from Bloomberg Radio. 11 00:00:31,800 --> 00:00:35,440 Speaker 1: Suddenly we want more more goods as we saw in 12 00:00:35,440 --> 00:00:39,000 Speaker 1: the strong retail sales numbers on Friday, and more workers 13 00:00:39,040 --> 00:00:41,960 Speaker 1: as we saw in those disappointing jobs numbers last week. 14 00:00:42,400 --> 00:00:45,400 Speaker 1: But the supply isn't there yet, as we saw this 15 00:00:45,440 --> 00:00:48,919 Speaker 1: week in consumer prices, with core CPI coming in at 16 00:00:48,920 --> 00:00:54,200 Speaker 1: a whopping three, well above expectations. This time, the markets 17 00:00:54,240 --> 00:00:56,160 Speaker 1: didn't take it all in stride the way they have 18 00:00:56,240 --> 00:00:58,720 Speaker 1: in the past, with the stock market having its worst 19 00:00:58,800 --> 00:01:02,160 Speaker 1: day since February after those consumer price numbers hit us 20 00:01:02,160 --> 00:01:06,160 Speaker 1: on Wednesday, got to bounce back on Thursday well, ten 21 00:01:06,240 --> 00:01:09,640 Speaker 1: year bond yields climbed up toward one point seven and 22 00:01:09,800 --> 00:01:13,559 Speaker 1: five year break evens pointed toward more inflation yet to come. 23 00:01:14,200 --> 00:01:16,600 Speaker 1: The FIT has done a wonderful job. They've done a 24 00:01:16,640 --> 00:01:20,160 Speaker 1: great job and supervising the banking system, which has performed 25 00:01:20,160 --> 00:01:23,280 Speaker 1: beautifully during this two year period. And the sharp reductions 26 00:01:23,280 --> 00:01:25,760 Speaker 1: and short term interest rates have done a terrific job 27 00:01:25,800 --> 00:01:30,120 Speaker 1: of stimulating housing and autos. They may be done um, 28 00:01:30,160 --> 00:01:32,360 Speaker 1: but we think they will wait a while before they 29 00:01:32,440 --> 00:01:34,920 Speaker 1: raise short term interest rates again. I think they want 30 00:01:34,920 --> 00:01:37,920 Speaker 1: to make sure that the labor markets have stabilized. That 31 00:01:38,040 --> 00:01:40,560 Speaker 1: was Abby Joseph Cohen on Wall Street Week back in 32 00:01:40,600 --> 00:01:43,800 Speaker 1: two thousand two. In some ways, things haven't changed all 33 00:01:43,840 --> 00:01:47,240 Speaker 1: that much. Then as now the Fed is keeping interest 34 00:01:47,319 --> 00:01:50,600 Speaker 1: rates low to stimulate the housing market. Then, as now 35 00:01:50,800 --> 00:01:53,760 Speaker 1: it's trying to strengthen the jobs market. But when do 36 00:01:53,800 --> 00:01:56,080 Speaker 1: you know that it's time to ease off of that 37 00:01:56,120 --> 00:01:59,480 Speaker 1: gas pedal. That's the question a lot of people are asking. 38 00:02:00,080 --> 00:02:02,840 Speaker 1: Dallas Fed President Rob Kaplan says that while it may 39 00:02:02,880 --> 00:02:06,360 Speaker 1: be too early, the time is coming as we see 40 00:02:06,400 --> 00:02:10,640 Speaker 1: demand kick in so This is a contrast to the 41 00:02:10,639 --> 00:02:14,600 Speaker 1: Great Recession, where we had a very slow recovery because 42 00:02:14,600 --> 00:02:19,200 Speaker 1: of sluggish demand. Households weren't spending. In the current situation, 43 00:02:19,480 --> 00:02:25,200 Speaker 1: we've got substantial demand. Households are spending. But what we're seeing, 44 00:02:25,639 --> 00:02:29,720 Speaker 1: UH from our contacts across the board is supply issues. 45 00:02:29,760 --> 00:02:32,440 Speaker 1: And my team, to their credit, had warned me for 46 00:02:32,480 --> 00:02:34,800 Speaker 1: the two weeks leading up to this report that there 47 00:02:34,840 --> 00:02:37,120 Speaker 1: was a meaningful chance it could be disappointed because we 48 00:02:37,360 --> 00:02:42,200 Speaker 1: were seeing Our estimate is something like two million fifty 49 00:02:42,240 --> 00:02:47,280 Speaker 1: five year old and above workers have have either retired 50 00:02:47,320 --> 00:02:50,639 Speaker 1: on schedule or accelerated their retirement. Got a million and 51 00:02:50,639 --> 00:02:55,200 Speaker 1: a half working mothers UH that are home with their kids. UH, 52 00:02:55,720 --> 00:02:58,960 Speaker 1: lack of childcare, school reopening is an issue. And yet 53 00:02:59,080 --> 00:03:02,960 Speaker 1: we are hearing broadly UH. Employers are trying to hire, 54 00:03:03,400 --> 00:03:07,040 Speaker 1: but they're struggling to compete with unemployment benefits. And then 55 00:03:07,040 --> 00:03:10,079 Speaker 1: the last thing we're hearing from goods companies is they're 56 00:03:10,120 --> 00:03:13,639 Speaker 1: cutting back production runs because they lack inputs. And they've 57 00:03:13,680 --> 00:03:16,959 Speaker 1: even done some temporary laidoffs. They've been telling us, UH, 58 00:03:16,960 --> 00:03:19,880 Speaker 1: and we saw all that because but they're they're gonna 59 00:03:19,880 --> 00:03:22,880 Speaker 1: be temporary because they lack the ability to have full 60 00:03:22,880 --> 00:03:25,440 Speaker 1: production runs. So we saw all that in this Job's report. 61 00:03:25,760 --> 00:03:29,040 Speaker 1: And to what extension you these specific issues in er region, 62 00:03:29,200 --> 00:03:33,000 Speaker 1: in Texas and northern Louisiana and New Mexico. We we 63 00:03:33,080 --> 00:03:36,280 Speaker 1: saw all these issues. I can tell you across the board, 64 00:03:36,320 --> 00:03:39,240 Speaker 1: and you know, we do extensive outreach here and we've 65 00:03:39,280 --> 00:03:43,120 Speaker 1: redoubled it since the pandemic, not only talking to businesses, 66 00:03:43,120 --> 00:03:45,400 Speaker 1: but I took a lot to community leaders, heads of 67 00:03:45,560 --> 00:03:49,040 Speaker 1: heads start across our district and they've been the ones 68 00:03:49,120 --> 00:03:54,840 Speaker 1: warning us UH skill training pipelines have have been reduced. 69 00:03:54,920 --> 00:03:58,320 Speaker 1: They can't get people to take money to enter skills training. 70 00:03:58,360 --> 00:04:03,000 Speaker 1: They're seeing many workers who are taking unemployment. They're reluctant 71 00:04:03,040 --> 00:04:05,720 Speaker 1: to enter full time jobs. They may be doing day 72 00:04:05,760 --> 00:04:08,720 Speaker 1: work as a replacement, which allows them to continue to 73 00:04:08,720 --> 00:04:13,279 Speaker 1: collect unemployment. And again we're seeing elevated high school dropouts. 74 00:04:14,000 --> 00:04:17,200 Speaker 1: And you notice in this Job's report one group that 75 00:04:17,279 --> 00:04:20,520 Speaker 1: had an increase in their employment with sixteen and nineteen 76 00:04:20,560 --> 00:04:22,919 Speaker 1: year olds, and normally it's say that might be good, 77 00:04:22,920 --> 00:04:24,880 Speaker 1: but a number of them were a little alarmed by 78 00:04:24,920 --> 00:04:27,920 Speaker 1: our high school dropouts that I think they would be 79 00:04:27,920 --> 00:04:29,640 Speaker 1: better off in the economy and the long run would 80 00:04:29,680 --> 00:04:33,280 Speaker 1: be better off if they finished high school, got their 81 00:04:33,360 --> 00:04:35,720 Speaker 1: g e d. At least so they could then eventually 82 00:04:35,720 --> 00:04:38,680 Speaker 1: get into skills training. But we're seeing all these trends. 83 00:04:39,160 --> 00:04:41,280 Speaker 1: I suspect that any of these decisions whether to go 84 00:04:41,320 --> 00:04:44,040 Speaker 1: back to work or not are influenced by several factors, 85 00:04:44,080 --> 00:04:47,160 Speaker 1: not just one factor. But talk about their unemployment insurance 86 00:04:47,200 --> 00:04:50,400 Speaker 1: is specifically there was a time go a year back, 87 00:04:50,800 --> 00:04:54,120 Speaker 1: where we wanted people to stay home for safety concerns, 88 00:04:54,160 --> 00:04:56,599 Speaker 1: for health concerns, we wanted to pay them to stay home. 89 00:04:57,000 --> 00:05:00,240 Speaker 1: That time is passing. If it hasn't already passed, does 90 00:05:00,279 --> 00:05:04,520 Speaker 1: the impetus for enhanced unemployment insurance really fade as it's 91 00:05:04,520 --> 00:05:06,280 Speaker 1: safer to get back. I think we want people to 92 00:05:06,320 --> 00:05:08,599 Speaker 1: go back to work now, don't we. So I'll answer 93 00:05:08,680 --> 00:05:11,000 Speaker 1: it this way because I'll stay out of the political 94 00:05:11,040 --> 00:05:14,560 Speaker 1: aspects of this. What we're hearing from contacts. You know, 95 00:05:14,560 --> 00:05:16,840 Speaker 1: if you go back six months or more obviously, or 96 00:05:16,839 --> 00:05:18,880 Speaker 1: even three months, there were a number of sectors that 97 00:05:18,960 --> 00:05:22,080 Speaker 1: hadn't yet reopened, and number of their workers didn't have 98 00:05:22,160 --> 00:05:26,280 Speaker 1: the option to come back. As sectors reopened. For example, 99 00:05:26,400 --> 00:05:30,160 Speaker 1: dining were unusual in Texas we we are now exceeding 100 00:05:30,600 --> 00:05:34,080 Speaker 1: pre pandemic levels, but still movie theaters are just starting 101 00:05:34,120 --> 00:05:36,200 Speaker 1: to reopen. I know in other parts of the country. 102 00:05:36,200 --> 00:05:40,280 Speaker 1: In New York, restaurants are just starting to fully reopen. Uh. 103 00:05:40,480 --> 00:05:42,640 Speaker 1: You want to help people that have lost their jobs, 104 00:05:42,720 --> 00:05:46,160 Speaker 1: but as we more fully reopened, and we want to 105 00:05:46,160 --> 00:05:49,040 Speaker 1: incentivize people to come back either to the jobs they 106 00:05:49,120 --> 00:05:52,520 Speaker 1: left or two other jobs. UH. Contacts are telling me 107 00:05:52,600 --> 00:05:55,560 Speaker 1: this is a real issue. One of the numbers that 108 00:05:55,720 --> 00:05:58,480 Speaker 1: people paid attention to is actually the increase in wages, 109 00:05:58,520 --> 00:06:01,760 Speaker 1: how much people were making. Given that need to get 110 00:06:01,760 --> 00:06:04,440 Speaker 1: those people off the sidelines, are we looking at possible 111 00:06:04,440 --> 00:06:07,560 Speaker 1: wage inflation just around the corner. We're hearing across the 112 00:06:07,640 --> 00:06:11,600 Speaker 1: board for unskilled workers as well as skilled workers. But but, 113 00:06:11,880 --> 00:06:15,560 Speaker 1: but but notably unskilled workers. Businesses tell us they're either 114 00:06:15,640 --> 00:06:18,880 Speaker 1: offering higher wages, but that's not doing it to get 115 00:06:18,880 --> 00:06:22,680 Speaker 1: people back, and they're offering bonuses, you know, signing bonuses. 116 00:06:23,000 --> 00:06:26,560 Speaker 1: And even with that, I think, based on our our work, 117 00:06:27,080 --> 00:06:30,919 Speaker 1: you would have seen much greater hiring in leisure and 118 00:06:31,000 --> 00:06:36,000 Speaker 1: hospitality than we saw if if they were able to 119 00:06:36,080 --> 00:06:38,640 Speaker 1: learn more works, in other words, to demand from these 120 00:06:38,680 --> 00:06:41,799 Speaker 1: businesses to higher is greater than you saw in the 121 00:06:41,839 --> 00:06:45,640 Speaker 1: growth and employment there thanks to Dallas Fed President Rob Kaplan. 122 00:06:45,800 --> 00:06:49,800 Speaker 1: Coming up, cryptocurrencies take a hit from an unexpected source. 123 00:06:50,279 --> 00:06:54,640 Speaker 1: Advocate Elon Musk, our crypto experts Jillian Tet at The 124 00:06:54,640 --> 00:06:58,800 Speaker 1: Financial Times and Peter Krause of Aperture Investors take us 125 00:06:58,839 --> 00:07:02,680 Speaker 1: through the climate olenges of bitcoin. That's next on Wall 126 00:07:02,680 --> 00:07:11,720 Speaker 1: Street Week on This is Bloomberg Wall Street Week with 127 00:07:11,800 --> 00:07:15,720 Speaker 1: David Weston from Bloomberg Radio. Elon Musk has done a 128 00:07:15,760 --> 00:07:20,160 Speaker 1: lot to boost cryptocurrencies like bitcoin and dogecoin, but suddenly 129 00:07:20,200 --> 00:07:23,320 Speaker 1: he's on the other side of the trade, joking about 130 00:07:23,360 --> 00:07:26,720 Speaker 1: doge coin being a hustle on Saturday Night Live and 131 00:07:26,760 --> 00:07:29,560 Speaker 1: then reversing his decision to accept bitcoin and payment for 132 00:07:29,600 --> 00:07:33,040 Speaker 1: Tesla's We talked with Jillian Tech, chair of the editorial 133 00:07:33,040 --> 00:07:36,120 Speaker 1: board and editor at large US for The Financial Times, 134 00:07:36,360 --> 00:07:40,120 Speaker 1: and Peter Krauss, CEO of Aperture Investors about whether the 135 00:07:40,200 --> 00:07:44,280 Speaker 1: setbacks are just a blip or reflect something deeper in 136 00:07:44,320 --> 00:07:48,240 Speaker 1: a nutshell, Well, duh, because we have warned at The 137 00:07:48,240 --> 00:07:53,520 Speaker 1: Financial Times now for many months that cryptocurrency is filthy 138 00:07:53,720 --> 00:07:56,040 Speaker 1: and there's really just two key stats you need to 139 00:07:56,040 --> 00:08:01,080 Speaker 1: know to understand why. Firstly about clip currency has been 140 00:08:01,160 --> 00:08:07,240 Speaker 1: mined using the computer algorithms in China, overwhelmingly using Chinese coal, 141 00:08:07,680 --> 00:08:11,400 Speaker 1: mostly in the west of the country. And secondly, the 142 00:08:11,440 --> 00:08:15,320 Speaker 1: sector has grown so rapidly that it now has the 143 00:08:15,360 --> 00:08:19,360 Speaker 1: carbon footprint people calculate around the size of say Sweden 144 00:08:20,040 --> 00:08:22,760 Speaker 1: UM and that is worrying. I mean, there have been 145 00:08:22,800 --> 00:08:27,640 Speaker 1: any number of activists, scientists, um investors pointing this out 146 00:08:27,680 --> 00:08:31,880 Speaker 1: and pointing out the tremendous irony that that Tesla has 147 00:08:31,880 --> 00:08:35,199 Speaker 1: been branded as e s G friendly, good for environmental, 148 00:08:35,240 --> 00:08:39,439 Speaker 1: social and governance even while it's got this filthy footprint 149 00:08:39,520 --> 00:08:42,480 Speaker 1: in bitcoin. So, Peter, there's more than a little irony here, right, 150 00:08:42,480 --> 00:08:44,280 Speaker 1: because at least we tend to think of people who 151 00:08:44,280 --> 00:08:47,400 Speaker 1: tend to invest in crypto as being very environmentally conscious, 152 00:08:47,400 --> 00:08:49,280 Speaker 1: and it turns out they may be polluting the environment, 153 00:08:49,280 --> 00:08:53,080 Speaker 1: warming up admitting a lot of greenhouse gases. Yeah. Look, 154 00:08:53,160 --> 00:08:56,360 Speaker 1: I mean, we spend an enormous amount of time every 155 00:08:56,400 --> 00:08:59,640 Speaker 1: week trying to think about e s G. Countists and 156 00:08:59,720 --> 00:09:04,760 Speaker 1: vest We designed investment processes, We have information and data 157 00:09:05,760 --> 00:09:10,199 Speaker 1: we look to enquire as to managements views on e 158 00:09:10,440 --> 00:09:13,199 Speaker 1: s G and how they deal with those different conditions, 159 00:09:13,200 --> 00:09:17,040 Speaker 1: and investors are demanding, in particular in Europe, but all 160 00:09:17,080 --> 00:09:20,240 Speaker 1: over the world investment portfolios that are e s G 161 00:09:20,440 --> 00:09:23,880 Speaker 1: friendly and in fact even e s G compliant with 162 00:09:23,920 --> 00:09:27,000 Speaker 1: some of the new regulations in Europe. So it is 163 00:09:27,080 --> 00:09:30,360 Speaker 1: in fact a paradox for investors to be investing in bitcoin, 164 00:09:30,559 --> 00:09:33,480 Speaker 1: which is exactly the opposite of that, not even close 165 00:09:33,679 --> 00:09:36,520 Speaker 1: and more interesting to the Jilly point, if it continues 166 00:09:36,559 --> 00:09:40,480 Speaker 1: to grow, If it continues to grow, the exponential effect 167 00:09:40,600 --> 00:09:44,160 Speaker 1: on the use of poor use of energy coal, dirty 168 00:09:44,280 --> 00:09:48,800 Speaker 1: energy is palpable. And so I find it, you know, 169 00:09:48,960 --> 00:09:53,040 Speaker 1: kind of almost humorous that people are investing in bitcoin, 170 00:09:53,160 --> 00:09:55,960 Speaker 1: thinking that they're doing something that's citing, and at the 171 00:09:56,000 --> 00:10:00,079 Speaker 1: same time they're acting in exactly the opposite way that 172 00:10:00,200 --> 00:10:02,320 Speaker 1: they want the rest of the world to behave. So 173 00:10:02,320 --> 00:10:04,240 Speaker 1: so Julian, that says one thing to people who want 174 00:10:04,240 --> 00:10:06,600 Speaker 1: to buy or hold the cryptocurrencies. What does it say 175 00:10:06,640 --> 00:10:08,559 Speaker 1: for the big banks? Because the big banks are getting 176 00:10:08,559 --> 00:10:11,400 Speaker 1: some pressure actually to manage some funds that actually would 177 00:10:11,400 --> 00:10:13,760 Speaker 1: include some crypto and it we have JP Morgan for example, 178 00:10:13,800 --> 00:10:15,120 Speaker 1: as we're coming out, so we're really gonna get to 179 00:10:15,200 --> 00:10:17,720 Speaker 1: zero missions. Everyone wants to get to zero missions. If 180 00:10:17,720 --> 00:10:19,160 Speaker 1: they really want to do that, does that mean they 181 00:10:19,200 --> 00:10:21,720 Speaker 1: can't hold crypto? Well, what I argue the column the 182 00:10:21,720 --> 00:10:25,319 Speaker 1: Bananche times are three key points. Firstly, this shows that 183 00:10:25,400 --> 00:10:28,960 Speaker 1: nobody can afford to ignore E s G risks, even 184 00:10:29,040 --> 00:10:31,800 Speaker 1: if they have an E S G label on of 185 00:10:31,840 --> 00:10:34,600 Speaker 1: an asset. And essentially what you're seeing is a very 186 00:10:34,600 --> 00:10:39,520 Speaker 1: fast moving sector where there aren't many binary situations. It's 187 00:10:39,559 --> 00:10:42,720 Speaker 1: not static. It's often a question of trade off and 188 00:10:42,760 --> 00:10:44,800 Speaker 1: the only way from investors to code is to take 189 00:10:44,840 --> 00:10:49,480 Speaker 1: a holistic view and recognize they will need to adjust. Secondly, though, 190 00:10:49,520 --> 00:10:52,440 Speaker 1: in coming out of that point in fact, there is 191 00:10:52,520 --> 00:10:55,240 Speaker 1: now a scramble a foot in the crypto world to 192 00:10:55,360 --> 00:10:59,200 Speaker 1: tackle these green issues or these dirty issues, and the 193 00:10:59,240 --> 00:11:02,000 Speaker 1: Unitine Nations just teamed up with the Rocky Mountain Institute 194 00:11:02,040 --> 00:11:05,080 Speaker 1: and a group of fintech leaders to explore ways to 195 00:11:05,120 --> 00:11:08,240 Speaker 1: try and deal with it. Two options. One, you change 196 00:11:08,280 --> 00:11:11,240 Speaker 1: the computing process is to slash the amount of electricity 197 00:11:11,280 --> 00:11:14,040 Speaker 1: they consume, and there's been a cryptocurrency this week called 198 00:11:14,080 --> 00:11:17,839 Speaker 1: Cheer launched to do just that. Secondly, you can try 199 00:11:17,880 --> 00:11:22,080 Speaker 1: and source it from clean energy sources, say Icelandic hydro 200 00:11:22,120 --> 00:11:25,199 Speaker 1: electric power, and create a registry. There are efforts on 201 00:11:25,320 --> 00:11:29,600 Speaker 1: that way, but the third point is that regulators clearly 202 00:11:29,600 --> 00:11:31,720 Speaker 1: need to start getting involved. I mean, the reason why 203 00:11:31,760 --> 00:11:34,720 Speaker 1: someone like Elon Musk can have almost this Wizard of 204 00:11:34,760 --> 00:11:38,160 Speaker 1: Ods like effect on the crypto market is because it's 205 00:11:38,280 --> 00:11:43,079 Speaker 1: opaque and unregulated and probably highly concentrated in its holdings. 206 00:11:43,440 --> 00:11:46,760 Speaker 1: And there are efforts underway now amongst the regulators to 207 00:11:46,960 --> 00:11:50,200 Speaker 1: exert more oversight, not just all over the questions of 208 00:11:50,920 --> 00:11:55,240 Speaker 1: market manipulation, but also money laundering and frankly, every single 209 00:11:55,280 --> 00:11:58,040 Speaker 1: big bank who's dealing with crypto or thinking about it, 210 00:11:58,200 --> 00:12:00,920 Speaker 1: and farm managers, whether it's Ferdella to your Golden Facts, 211 00:12:01,360 --> 00:12:04,800 Speaker 1: needs to throw that weight around it behind this process 212 00:12:04,840 --> 00:12:09,000 Speaker 1: big time, and ironically, green issues might turn out to 213 00:12:09,040 --> 00:12:13,000 Speaker 1: be the issue that causes everyone to runny together, even 214 00:12:13,160 --> 00:12:15,560 Speaker 1: the libertarians. I just want to jump on something to 215 00:12:15,640 --> 00:12:19,200 Speaker 1: just inject another idea into the conversation. There are there 216 00:12:19,240 --> 00:12:25,040 Speaker 1: are two uh issues around around cryptocurrencies. One is the 217 00:12:25,200 --> 00:12:29,280 Speaker 1: mining issue, which creates the sort of scarcity value and 218 00:12:29,400 --> 00:12:33,679 Speaker 1: the desire to actually earn something for producing a new bitcoin, 219 00:12:34,160 --> 00:12:37,559 Speaker 1: and that you know, that's the speculative aspect of bitcoin. 220 00:12:38,200 --> 00:12:42,520 Speaker 1: And the speculative aspect of cryptocurrency. But the more interesting 221 00:12:42,559 --> 00:12:46,000 Speaker 1: aspect of cryptocurrency is not the fact that it is 222 00:12:46,000 --> 00:12:49,600 Speaker 1: a speculative value, but that it's a mechanism by which 223 00:12:49,640 --> 00:12:55,960 Speaker 1: you can actually trade, settle, and effectively record transactions immediately 224 00:12:56,040 --> 00:12:59,360 Speaker 1: or instantaneously. That's the much more valuable part of crypto. 225 00:12:59,400 --> 00:13:04,040 Speaker 1: And you don't need mining exercises and energy um utilization 226 00:13:04,080 --> 00:13:07,439 Speaker 1: in order to go after that. So I think you 227 00:13:07,559 --> 00:13:11,520 Speaker 1: have to start thinking about unbundling the sort of speculative 228 00:13:11,600 --> 00:13:15,120 Speaker 1: aspect of crypto, which frankly has no value to it, 229 00:13:15,200 --> 00:13:17,320 Speaker 1: and now we know it's dirty as it as it 230 00:13:17,360 --> 00:13:21,560 Speaker 1: relates to the environment and the actual value crypto, which 231 00:13:21,640 --> 00:13:26,760 Speaker 1: is a currency that settles immediately, instantaneously, records the transaction, 232 00:13:27,000 --> 00:13:30,240 Speaker 1: and lowers the cost of transactions in the world, and 233 00:13:30,520 --> 00:13:33,280 Speaker 1: is the most valuable part. And so I think this 234 00:13:33,360 --> 00:13:36,040 Speaker 1: might be, to Jillian's point again, the sort of start 235 00:13:36,160 --> 00:13:40,800 Speaker 1: of unappealing the onion between the speculative aspects, which frankly 236 00:13:41,040 --> 00:13:43,120 Speaker 1: are not that valuable, and what the true value of 237 00:13:43,160 --> 00:13:46,360 Speaker 1: crypto could be over time. So so Jillian and Peter says, 238 00:13:46,400 --> 00:13:48,959 Speaker 1: you can separate out the immediate settlement on the one 239 00:13:49,040 --> 00:13:51,800 Speaker 1: hand from the speculu on the other, what about another aspect, 240 00:13:51,880 --> 00:13:54,560 Speaker 1: which is the complete anonymity, which I think we saw 241 00:13:54,640 --> 00:13:57,640 Speaker 1: this week and the Colonial pipeline hack. Actually, as we 242 00:13:57,679 --> 00:13:59,960 Speaker 1: look at all these ransomware attacks, there've been almost four 243 00:14:00,120 --> 00:14:05,120 Speaker 1: hundred on infrastructure. Could we have those ransomware infantachs without 244 00:14:05,160 --> 00:14:06,960 Speaker 1: crypto if you had to actually rate a check in 245 00:14:06,960 --> 00:14:09,320 Speaker 1: your bank account, I'm not sure the ransomware would work. 246 00:14:10,240 --> 00:14:12,480 Speaker 1: That's a great point, David, and I think the issue 247 00:14:12,480 --> 00:14:15,680 Speaker 1: is not so much anonymity, but pseudent anonymity that basically 248 00:14:15,720 --> 00:14:18,760 Speaker 1: don't know who lies behind these accounts. You canteract the accounts, 249 00:14:18,800 --> 00:14:21,760 Speaker 1: and notly enough, some law enforcement officials actually think that 250 00:14:21,920 --> 00:14:24,440 Speaker 1: the benefit to having this because they can actually see 251 00:14:24,640 --> 00:14:27,200 Speaker 1: once you get inside system, you know where accounts are 252 00:14:27,240 --> 00:14:30,080 Speaker 1: coming from. But pseudonomity is absolutely part of the issue. 253 00:14:30,520 --> 00:14:32,880 Speaker 1: And again going back to my point that actually green 254 00:14:33,040 --> 00:14:37,280 Speaker 1: might provide a spark to actually get community support for 255 00:14:37,400 --> 00:14:41,040 Speaker 1: more accountability and transparency. If you started to create a 256 00:14:41,080 --> 00:14:46,360 Speaker 1: register of green versus dirty cryptocurrencies, that's the kind of 257 00:14:46,400 --> 00:14:48,320 Speaker 1: thing that could actually put this on a more with 258 00:14:48,480 --> 00:14:51,600 Speaker 1: you're footing. That was Peter Krass of aperture Investors and 259 00:14:51,720 --> 00:14:55,160 Speaker 1: Jillian Tett of The Financial Times coming up. Inflation was 260 00:14:55,280 --> 00:14:57,720 Speaker 1: up this week and stacks and bounds were down. At 261 00:14:57,800 --> 00:14:59,960 Speaker 1: least you're part of the week. What does that mean 262 00:15:00,040 --> 00:15:03,200 Speaker 1: for investors? We ask Katherine Keating of b N y 263 00:15:03,400 --> 00:15:11,880 Speaker 1: Melon that's next on Wall Street Week on Bloomberg. This 264 00:15:12,240 --> 00:15:16,720 Speaker 1: is Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 265 00:15:16,880 --> 00:15:19,720 Speaker 1: It was a tricky week for investors as the market 266 00:15:19,760 --> 00:15:22,760 Speaker 1: has been on a tear. Even some warned of gathering 267 00:15:22,880 --> 00:15:25,760 Speaker 1: storm clouds, and this week it felt like we just 268 00:15:25,920 --> 00:15:29,240 Speaker 1: might be feeling some raindrops as well, with those CPI 269 00:15:29,400 --> 00:15:32,840 Speaker 1: numbers coming on the heels of disappointing jobs numbers last week. 270 00:15:33,280 --> 00:15:35,920 Speaker 1: So investors have to be asking themselves whether they should 271 00:15:35,920 --> 00:15:39,000 Speaker 1: be reaching for the umbrella or even running to shelter. 272 00:15:39,680 --> 00:15:42,600 Speaker 1: We ask Katherine Keating, CEO of b N y Melon 273 00:15:42,680 --> 00:15:46,880 Speaker 1: Wealth Management, whether investors are changing their strategy to hedge 274 00:15:46,880 --> 00:15:49,920 Speaker 1: for inflation. Investors always have to be concerned about inflation 275 00:15:49,960 --> 00:15:51,880 Speaker 1: because inflation is one of the things that can lead 276 00:15:51,880 --> 00:15:54,840 Speaker 1: to the end of a business cycle, tightening rates, recession, 277 00:15:55,240 --> 00:15:58,120 Speaker 1: bear markets. We don't see that yet. We actually agree 278 00:15:58,760 --> 00:16:01,440 Speaker 1: um with Chairman Pale that we should expect inflation, and 279 00:16:01,440 --> 00:16:03,800 Speaker 1: we should expect it to be transitory. There are a 280 00:16:03,840 --> 00:16:06,200 Speaker 1: lot of inflationary forces at work in the market. Were 281 00:16:06,240 --> 00:16:08,960 Speaker 1: reopening right, we wouldn't have been here together last May, 282 00:16:09,000 --> 00:16:11,520 Speaker 1: and yet here we are. We're reopening um and so 283 00:16:11,760 --> 00:16:14,480 Speaker 1: we need to expect inflation, and we need to expect 284 00:16:14,480 --> 00:16:18,560 Speaker 1: some surprises because the economy closed down in a very 285 00:16:18,560 --> 00:16:21,960 Speaker 1: synchronized manner, but it's reopening in stages, and so we 286 00:16:22,000 --> 00:16:24,600 Speaker 1: need to expect some of these surprises. And I and 287 00:16:24,640 --> 00:16:26,800 Speaker 1: I always think that Janet Yellen has a great way 288 00:16:26,840 --> 00:16:29,720 Speaker 1: of making economics human, and she reminds us it's not 289 00:16:29,800 --> 00:16:32,760 Speaker 1: just statistics, it's people's activity. And if I think of 290 00:16:32,760 --> 00:16:36,640 Speaker 1: my own activity in April, I was representing the reopening 291 00:16:36,640 --> 00:16:38,640 Speaker 1: of the economy and some of those sectors that really 292 00:16:38,680 --> 00:16:43,280 Speaker 1: drove the CPI increase, I'm grateful to be fully vaccinated. 293 00:16:43,320 --> 00:16:45,840 Speaker 1: I was traveling on my first business trip, renting a car, 294 00:16:46,000 --> 00:16:48,560 Speaker 1: flying on a plane, going to restaurants. Those were some 295 00:16:48,600 --> 00:16:53,440 Speaker 1: of the sectors. As we address transitory against not transitory, 296 00:16:53,520 --> 00:16:56,560 Speaker 1: which j Pallis talked about repeatedly, how informed should we 297 00:16:56,560 --> 00:16:58,400 Speaker 1: be about how much money is sitting on the sidelines, 298 00:16:58,400 --> 00:17:00,800 Speaker 1: particularly in households. There's a lot lot of money sitting 299 00:17:00,800 --> 00:17:02,880 Speaker 1: out there that doesn't really have a weight quite yet 300 00:17:02,920 --> 00:17:05,919 Speaker 1: to express itself. Well, that's right. If you look at households, 301 00:17:05,920 --> 00:17:09,400 Speaker 1: households are in very good shape, right, three trillion dollars 302 00:17:09,440 --> 00:17:13,080 Speaker 1: in household household bank accounts, savings accounts. You look at 303 00:17:13,080 --> 00:17:16,080 Speaker 1: stimulus this year, that's going to households, which will actually 304 00:17:16,080 --> 00:17:18,000 Speaker 1: be twice as much as what went last year, you know, 305 00:17:18,080 --> 00:17:20,720 Speaker 1: six hundred billion last year, a trillion two this year. 306 00:17:20,800 --> 00:17:23,840 Speaker 1: So households are in very good shape, which again is 307 00:17:23,880 --> 00:17:25,920 Speaker 1: a good sign for the economy because if we think 308 00:17:25,960 --> 00:17:28,880 Speaker 1: about the two thousand and eight crisis, that's a crisis 309 00:17:28,920 --> 00:17:31,240 Speaker 1: that really hit households in a different way because of 310 00:17:31,240 --> 00:17:34,359 Speaker 1: the housing component of it. Households today are actually in 311 00:17:34,520 --> 00:17:38,840 Speaker 1: very good shape. To one extent of people run away 312 00:17:38,840 --> 00:17:41,840 Speaker 1: from bonds in this environment because it seems like whatever happens, 313 00:17:41,880 --> 00:17:44,680 Speaker 1: it doesn't seem like bonds will gain in value very 314 00:17:44,720 --> 00:17:47,560 Speaker 1: much going out. Well, that's right. We are we have 315 00:17:47,640 --> 00:17:50,720 Speaker 1: seen interest rates, you know, decline for most of our 316 00:17:50,760 --> 00:17:54,040 Speaker 1: investing lives, and now we're seeing them begin to rise. 317 00:17:54,119 --> 00:17:57,359 Speaker 1: And so there's always a role for bonds in the portfolio. 318 00:17:57,440 --> 00:18:00,280 Speaker 1: It's a smaller role going forward. It's a smaller role because, 319 00:18:00,280 --> 00:18:02,399 Speaker 1: as you note, returns are going to be much lower, 320 00:18:02,440 --> 00:18:05,679 Speaker 1: but there's always a role, and we're broadening portfolios portfolios 321 00:18:05,680 --> 00:18:08,040 Speaker 1: to get exposure to other things to make up for 322 00:18:08,080 --> 00:18:09,919 Speaker 1: what you used to get from your bond portfolio. We're 323 00:18:09,920 --> 00:18:12,359 Speaker 1: seeing some of the tech stocks get particularly particularly hard now. 324 00:18:12,400 --> 00:18:14,320 Speaker 1: They drove a lot of the market for a long time, 325 00:18:14,840 --> 00:18:17,760 Speaker 1: and they're still well up overall. But at the same time, 326 00:18:18,119 --> 00:18:20,240 Speaker 1: what is the problem with tech when it comes to inflation? 327 00:18:20,280 --> 00:18:23,280 Speaker 1: Is it just because there is They're so richly valued 328 00:18:23,320 --> 00:18:25,720 Speaker 1: that when people get nervous they run away from it. Look, 329 00:18:25,760 --> 00:18:27,520 Speaker 1: I think there are two things. I think the tech 330 00:18:27,600 --> 00:18:30,359 Speaker 1: stocks really, um you know, lead the recovery because of 331 00:18:30,359 --> 00:18:32,760 Speaker 1: the way we were spending our time last year, right, 332 00:18:32,840 --> 00:18:35,879 Speaker 1: they really enabled us to keep the economy open to 333 00:18:35,880 --> 00:18:39,399 Speaker 1: a certain extent. So you saw tech stocks, um you know, 334 00:18:39,440 --> 00:18:41,959 Speaker 1: get very high multiples because of that. And also because 335 00:18:42,160 --> 00:18:44,359 Speaker 1: investors were willing to pay for growth in a sector 336 00:18:44,400 --> 00:18:46,520 Speaker 1: that was growing when you had so many sectors not growing. 337 00:18:47,080 --> 00:18:50,159 Speaker 1: Now what you see is with interest rates rising, it 338 00:18:50,280 --> 00:18:53,320 Speaker 1: actually reduces the present value of the cash flows and 339 00:18:53,320 --> 00:18:55,520 Speaker 1: earnings of tech stops and so that's what you're seeing 340 00:18:55,520 --> 00:18:58,560 Speaker 1: a rotation, but it's a rotation into sectors that we 341 00:18:58,600 --> 00:19:02,320 Speaker 1: should all be embracing. Mid cap, small cap value, non 342 00:19:02,400 --> 00:19:04,800 Speaker 1: US stocks. We think all of these will play good 343 00:19:04,880 --> 00:19:06,800 Speaker 1: roles in the portfolio. So follow up on that. Who 344 00:19:06,920 --> 00:19:11,800 Speaker 1: might benefit actually from inflation? For example, financials, So financials 345 00:19:11,880 --> 00:19:15,040 Speaker 1: um will benefit from inflation and in particular difference between 346 00:19:15,040 --> 00:19:17,240 Speaker 1: short term and long term right, um, so that's a 347 00:19:17,280 --> 00:19:21,600 Speaker 1: sector that benefits. Energy often benefits from inflation. Um. So 348 00:19:21,680 --> 00:19:24,800 Speaker 1: many sectors benefit from higher rates. How concerned are your 349 00:19:24,840 --> 00:19:27,040 Speaker 1: investors right now when you talk to them? How worried 350 00:19:27,160 --> 00:19:28,720 Speaker 1: are there because there's a lot of uncertain in the 351 00:19:28,720 --> 00:19:30,800 Speaker 1: marketplace right now. As you say, we've never seen this 352 00:19:30,840 --> 00:19:32,760 Speaker 1: happen in our economy. Ever, shut it down and bring 353 00:19:32,800 --> 00:19:35,119 Speaker 1: it back. That's how anxious are people out there. So 354 00:19:35,160 --> 00:19:36,960 Speaker 1: if we talk to our clients, they really focus on 355 00:19:37,000 --> 00:19:39,639 Speaker 1: three things. They focus on the economy because their business people, 356 00:19:39,960 --> 00:19:42,439 Speaker 1: They focus on the markets because their investors, and they 357 00:19:42,480 --> 00:19:45,920 Speaker 1: focus on taxes because their taxpayers and so um our 358 00:19:46,119 --> 00:19:48,639 Speaker 1: our clients. Our clients are sort of living the reopening 359 00:19:48,640 --> 00:19:51,280 Speaker 1: of the economy as business people, they see this supply 360 00:19:51,440 --> 00:19:53,720 Speaker 1: demand and balances as they're trying to hire and trying 361 00:19:53,760 --> 00:19:57,200 Speaker 1: to get workers. Um, they've benefited obviously from the markets 362 00:19:57,400 --> 00:19:59,919 Speaker 1: as markets have you know, tipped to all time highs 363 00:20:00,000 --> 00:20:02,560 Speaker 1: in recent weeks and even now still up nicely year 364 00:20:02,640 --> 00:20:04,800 Speaker 1: to date. And so what we're talking to them a 365 00:20:04,880 --> 00:20:07,000 Speaker 1: lot about right now is taxes. They feel that that's 366 00:20:07,080 --> 00:20:09,840 Speaker 1: much more uncertain. They know that they know the proposals 367 00:20:09,880 --> 00:20:13,439 Speaker 1: that have been um introduced by the Biden administration, but 368 00:20:13,480 --> 00:20:17,119 Speaker 1: they're asking us will they pass. There are very narrow majorities. 369 00:20:17,280 --> 00:20:19,720 Speaker 1: If they pass, when will they be effective? How will 370 00:20:19,760 --> 00:20:22,359 Speaker 1: it affect the market. So one of the questions about 371 00:20:22,359 --> 00:20:25,720 Speaker 1: tech actually I have is about taxes because if you've 372 00:20:25,760 --> 00:20:28,640 Speaker 1: made a lot of money, at least on paper by 373 00:20:28,680 --> 00:20:32,119 Speaker 1: the appreciation of the tech stocks does indicate maybe you 374 00:20:32,119 --> 00:20:34,159 Speaker 1: should sell those right now and take the lower capital 375 00:20:34,160 --> 00:20:36,199 Speaker 1: gains if you think it's around the corner. So what 376 00:20:36,280 --> 00:20:38,880 Speaker 1: we tell our clients we tell them two things. Number One, 377 00:20:38,960 --> 00:20:41,719 Speaker 1: as an investor, time is your biggest advantage because markets 378 00:20:41,720 --> 00:20:44,400 Speaker 1: tend to grow over time. So we say planned don't 379 00:20:44,440 --> 00:20:47,480 Speaker 1: panic do things that you would otherwise do for your portfolio. 380 00:20:47,920 --> 00:20:50,119 Speaker 1: Tech stocks rose to be, you know, the five largest 381 00:20:50,119 --> 00:20:53,280 Speaker 1: tech stocks rose to be something SMP five hundred. If 382 00:20:53,280 --> 00:20:56,399 Speaker 1: you've got large concentrations outside positions, you might want to 383 00:20:56,440 --> 00:20:58,680 Speaker 1: trim those. You might want to trim those for investment reasons, 384 00:20:58,720 --> 00:21:01,520 Speaker 1: but also potentially for tax That was Katherine Keating of 385 00:21:01,600 --> 00:21:05,600 Speaker 1: b n y Melon Wealth Management. Coming up, we wrap 386 00:21:05,680 --> 00:21:08,880 Speaker 1: up the week with our special contributor, Larry Summers. This 387 00:21:09,040 --> 00:21:18,320 Speaker 1: is Wall Street Week on Bloomberg. This is Bloomberg Wall 388 00:21:18,400 --> 00:21:22,199 Speaker 1: Street Week with David Weston from Bloomberg Radio. So the 389 00:21:22,240 --> 00:21:25,320 Speaker 1: markets were royal this week by one thing, really, the 390 00:21:25,400 --> 00:21:28,560 Speaker 1: prospect of inflation. And we're blessed to have with us 391 00:21:28,720 --> 00:21:31,560 Speaker 1: the special Wall Street Week contributor from Harvard, Larry Summers, 392 00:21:31,560 --> 00:21:33,960 Speaker 1: who was really the first to warn about this possibility 393 00:21:33,960 --> 00:21:37,160 Speaker 1: way back when President Biden proposed his American rescue plan 394 00:21:37,359 --> 00:21:40,080 Speaker 1: back in late January. So Larry, welcome. Let me say, 395 00:21:40,200 --> 00:21:43,480 Speaker 1: Jason Furman, an economist you know well you respect, was 396 00:21:43,520 --> 00:21:47,480 Speaker 1: on Bloomberg this week saying that no credible economists ever 397 00:21:47,560 --> 00:21:50,920 Speaker 1: doubted that this was too much stimulus. I don't remember 398 00:21:51,080 --> 00:21:53,840 Speaker 1: all those economists agreeing with you at the time. I 399 00:21:53,840 --> 00:21:57,600 Speaker 1: don't know. I didn't feel like I was echoing the 400 00:21:57,680 --> 00:22:02,879 Speaker 1: conventional wisdom at UH at the time, and David, I 401 00:22:03,359 --> 00:22:06,800 Speaker 1: nobody knows yet, and it's too early to know, and 402 00:22:07,240 --> 00:22:11,800 Speaker 1: the record of forecasters isn't UH great. But I have 403 00:22:11,960 --> 00:22:15,440 Speaker 1: to say that whether you look at average hourly earnings, 404 00:22:15,440 --> 00:22:18,000 Speaker 1: whether you look at producer prices, whether you look at 405 00:22:18,040 --> 00:22:22,359 Speaker 1: consumer prices, whether you look at direct measures of UH 406 00:22:22,720 --> 00:22:29,560 Speaker 1: labor shortage, whether you look at market expectations of UH inflation, 407 00:22:29,680 --> 00:22:34,280 Speaker 1: whether you look at survey expectations of inflation. I was 408 00:22:34,400 --> 00:22:38,920 Speaker 1: on the worried side about inflation, and it's all moved 409 00:22:39,520 --> 00:22:44,199 Speaker 1: much faster, much sooner than I had UH than I 410 00:22:44,240 --> 00:22:47,320 Speaker 1: had predicted, And I think that has to make us 411 00:22:47,640 --> 00:22:51,320 Speaker 1: nervous going forward. Yeah, no question about it. At the 412 00:22:51,359 --> 00:22:53,399 Speaker 1: same time, we have a number of people who continue 413 00:22:53,440 --> 00:22:55,480 Speaker 1: to say it's not that big a problem. They have 414 00:22:55,600 --> 00:22:57,720 Speaker 1: various reasons for that. One thing I say is it's 415 00:22:57,800 --> 00:23:00,520 Speaker 1: just specific sort of kinks in the supply eye chain 416 00:23:00,880 --> 00:23:04,359 Speaker 1: that isn't a larger phenomenon. What do you say to them? So, look, 417 00:23:05,160 --> 00:23:08,240 Speaker 1: by definition, there are always going to be a few 418 00:23:08,600 --> 00:23:13,400 Speaker 1: components of the cp I that grew rapidly in any 419 00:23:13,480 --> 00:23:17,880 Speaker 1: given month. That's what the Carter Economists said all through 420 00:23:17,960 --> 00:23:24,240 Speaker 1: the creation of UH, the Great UH inflation. I think 421 00:23:24,240 --> 00:23:27,199 Speaker 1: there's some things that are striking. If you look at 422 00:23:27,280 --> 00:23:31,000 Speaker 1: corese c p I this month, it grew faster than 423 00:23:31,440 --> 00:23:36,160 Speaker 1: headline cp I. That's exactly the opposite of what that 424 00:23:36,440 --> 00:23:42,560 Speaker 1: idea would tend to predict. If you look at the 425 00:23:42,600 --> 00:23:48,880 Speaker 1: pace of inflation, it seems to be accelerating. What I'm 426 00:23:48,920 --> 00:23:52,280 Speaker 1: struck by is how selective people are. I mean, the 427 00:23:52,400 --> 00:23:55,600 Speaker 1: thing that leaps out at me when I do micro 428 00:23:55,720 --> 00:23:59,960 Speaker 1: economic analysis of the price in disease is that house 429 00:24:00,040 --> 00:24:03,320 Speaker 1: prices by some measures are up eighteen percent over the 430 00:24:03,440 --> 00:24:08,240 Speaker 1: last year, but the owner occupied housing components of the 431 00:24:08,320 --> 00:24:14,320 Speaker 1: CPI is up like two and so that tells me 432 00:24:15,080 --> 00:24:19,280 Speaker 1: that we're probably missing something large with respect to housing. 433 00:24:19,800 --> 00:24:21,920 Speaker 1: And I think if people are seeing their house prices 434 00:24:21,960 --> 00:24:25,359 Speaker 1: go up at eighteen before too long, they're gonna be 435 00:24:25,560 --> 00:24:28,080 Speaker 1: estimating that the amount they could rent their houses for 436 00:24:28,840 --> 00:24:33,680 Speaker 1: is gonna be going up substantially. So the largest distortion 437 00:24:33,920 --> 00:24:38,840 Speaker 1: I see in the numbers is UH with respect to housing. 438 00:24:39,359 --> 00:24:42,640 Speaker 1: You know, so many people commented on use car prices 439 00:24:42,680 --> 00:24:46,879 Speaker 1: and use car prices. Surely that's not a trend. That's 440 00:24:46,920 --> 00:24:50,920 Speaker 1: going to continue, but it's only a couple percent if 441 00:24:50,960 --> 00:24:54,639 Speaker 1: that of the index. If you look at the monthly CPI, 442 00:24:54,840 --> 00:24:59,200 Speaker 1: medical care was zero UM in the most recent reading. 443 00:24:59,560 --> 00:25:02,680 Speaker 1: I don't leave for a moment that medical care prices 444 00:25:02,720 --> 00:25:05,600 Speaker 1: are gonna stay at zero. And that's a much larger 445 00:25:05,640 --> 00:25:12,520 Speaker 1: component of the CPI than UH used car prices, so 446 00:25:13,119 --> 00:25:15,560 Speaker 1: it may be that it's going to change. The other 447 00:25:15,640 --> 00:25:19,800 Speaker 1: thing to say is, let's be clear, the core cp 448 00:25:20,000 --> 00:25:24,840 Speaker 1: I grew at nine tenths of a percent. That's an 449 00:25:24,920 --> 00:25:32,119 Speaker 1: that's an annual inflation rate above eleven. So there's plenty 450 00:25:32,359 --> 00:25:35,560 Speaker 1: of room for there to be a lot of translatory 451 00:25:35,680 --> 00:25:39,280 Speaker 1: factor in it and for us still to have what 452 00:25:39,400 --> 00:25:45,280 Speaker 1: would be an extremely serious problem of UH inflation rising 453 00:25:45,280 --> 00:25:48,879 Speaker 1: to the four percent range. So I don't think you 454 00:25:48,960 --> 00:25:52,879 Speaker 1: can dismiss these figures. I also think that if you 455 00:25:53,080 --> 00:25:56,560 Speaker 1: look at the hourly earnings figures, if you look at 456 00:25:56,600 --> 00:26:01,040 Speaker 1: the producer price things, all the inputs which have to 457 00:26:01,080 --> 00:26:05,520 Speaker 1: do with future price increases, those seem to be UH 458 00:26:05,680 --> 00:26:09,960 Speaker 1: accelerating as well. So Larry, what do you say to 459 00:26:10,160 --> 00:26:13,679 Speaker 1: the Fed Frankly who keeps saying it's transitory and specifically 460 00:26:13,840 --> 00:26:15,879 Speaker 1: the arguments I understand is, look at what we're seeing 461 00:26:15,960 --> 00:26:20,359 Speaker 1: right now is the necessary reaction of economy coming back online. 462 00:26:20,480 --> 00:26:22,880 Speaker 1: And once it gets back online, things will settle back 463 00:26:22,920 --> 00:26:25,840 Speaker 1: down again. So this is just like a relatively short 464 00:26:25,920 --> 00:26:33,359 Speaker 1: one off. Look, anything's anything's possible, and they could be right. 465 00:26:34,400 --> 00:26:38,800 Speaker 1: But I always believe in government that the right strategy, 466 00:26:38,880 --> 00:26:42,399 Speaker 1: indeed in life, the right strategy is to hope for 467 00:26:42,440 --> 00:26:45,920 Speaker 1: the best and plan for the worst. And the FED 468 00:26:46,040 --> 00:26:52,720 Speaker 1: seems to be planning for a very benign scenario that 469 00:26:52,960 --> 00:26:57,720 Speaker 1: we certainly can't uh count on. And I don't think 470 00:26:57,720 --> 00:27:00,919 Speaker 1: anybody at the FED Vice Chairman Clara to acknowledge this 471 00:27:01,000 --> 00:27:04,000 Speaker 1: in the last day or two thought that inflation would 472 00:27:04,000 --> 00:27:08,840 Speaker 1: be anything like the number we saw in April. I 473 00:27:08,960 --> 00:27:13,359 Speaker 1: certainly didn't see the slightest hint of a suggestion in 474 00:27:13,440 --> 00:27:16,440 Speaker 1: anything that came from the FED that we were gonna 475 00:27:16,480 --> 00:27:22,200 Speaker 1: be seeing wage growth figures pointing to um wage growth 476 00:27:22,280 --> 00:27:29,840 Speaker 1: relative well above five even for a single month. And look, David, 477 00:27:30,040 --> 00:27:33,640 Speaker 1: you have to make a judgment. Do we think from 478 00:27:33,680 --> 00:27:38,080 Speaker 1: here that supply factors are going to be bigger than 479 00:27:38,119 --> 00:27:44,000 Speaker 1: demand factors or vice versa. On the demand side, we 480 00:27:44,080 --> 00:27:48,879 Speaker 1: have two trillion dollars of savings overhang. We have three 481 00:27:48,920 --> 00:27:52,359 Speaker 1: trillion dollars of stimulus that's worked its way only part 482 00:27:52,359 --> 00:27:57,439 Speaker 1: way through the system. We have the continuing consequence of 483 00:27:57,760 --> 00:28:03,560 Speaker 1: eighteen percent UH housing price UH increases and all the 484 00:28:03,600 --> 00:28:07,960 Speaker 1: money that that's going to free up UH for consumers. 485 00:28:08,520 --> 00:28:11,920 Speaker 1: And we have the fact that when nominal interest rates 486 00:28:11,960 --> 00:28:16,640 Speaker 1: stay the same and inflation accelerates, real interest rates to climb, 487 00:28:17,119 --> 00:28:20,280 Speaker 1: and that means people borrow and spend more. That's what 488 00:28:20,400 --> 00:28:22,760 Speaker 1: we have on the demand side, and all of that 489 00:28:22,920 --> 00:28:29,320 Speaker 1: is pointing towards more inflation. On the supply side, we 490 00:28:29,400 --> 00:28:32,920 Speaker 1: have maybe people will go back to work more when 491 00:28:33,040 --> 00:28:37,720 Speaker 1: unemployment insurance ends. I actually think that's a significant factor, 492 00:28:38,240 --> 00:28:43,240 Speaker 1: but the administration denies that unemployment insurance is relevant to 493 00:28:43,920 --> 00:28:50,680 Speaker 1: UH the decisions. People talk about all the kids going 494 00:28:50,720 --> 00:28:54,640 Speaker 1: back to school and that will enable workers to go back. 495 00:28:55,160 --> 00:28:59,480 Speaker 1: But as Jason Furman's work is gonna show, you don't 496 00:28:59,560 --> 00:29:03,400 Speaker 1: really see that when you calculated carefully, as being a 497 00:29:03,480 --> 00:29:07,600 Speaker 1: very large effect, because the change in the labor first 498 00:29:07,640 --> 00:29:11,719 Speaker 1: participation rate of people with kids and people without kids 499 00:29:12,120 --> 00:29:16,080 Speaker 1: aren't really very different. So I'm not sure what the 500 00:29:16,200 --> 00:29:20,600 Speaker 1: huge supply effect that people are looking towards So what 501 00:29:20,880 --> 00:29:25,200 Speaker 1: I see going forward is we're in a tight place 502 00:29:25,280 --> 00:29:30,360 Speaker 1: now with current inflation at a reasonably high rate, and 503 00:29:30,520 --> 00:29:34,600 Speaker 1: I seem more on the side of increased demand than 504 00:29:34,680 --> 00:29:38,440 Speaker 1: I see on the side of increased supply, and so 505 00:29:38,720 --> 00:29:42,280 Speaker 1: that makes it seem pretty unlikely to me that this 506 00:29:42,400 --> 00:29:47,200 Speaker 1: is all gonna subside. Uh, it might happen, but I 507 00:29:47,240 --> 00:29:53,120 Speaker 1: don't think it's gonna happen without policy action and policy 508 00:29:53,520 --> 00:29:58,280 Speaker 1: they are. The more determined, the more clear the evidence 509 00:29:58,760 --> 00:30:03,920 Speaker 1: that inflation is rising and inflation expectations are rising, the 510 00:30:03,960 --> 00:30:08,440 Speaker 1: more determined the FED is to say, we're nowhere near 511 00:30:09,200 --> 00:30:16,080 Speaker 1: beginning the process of um tightening monetary policy, and I 512 00:30:16,120 --> 00:30:21,200 Speaker 1: think potentially it's gonna do some real damage to their credibility, 513 00:30:21,360 --> 00:30:25,560 Speaker 1: and that's going to have important impacts for inflation expectations. 514 00:30:25,760 --> 00:30:28,520 Speaker 1: And there you have Summer's Inflation Watch the first episode 515 00:30:28,520 --> 00:30:30,719 Speaker 1: actually with Larry Summer is our special contributor at Wall 516 00:30:30,760 --> 00:30:34,560 Speaker 1: Street Week and of course from Harvard. Finally, one more thought. 517 00:30:35,040 --> 00:30:38,600 Speaker 1: The price is wrong. In one sense, this week was 518 00:30:38,720 --> 00:30:41,560 Speaker 1: all about prices, the price of gas at the pump, 519 00:30:41,840 --> 00:30:46,560 Speaker 1: producer prices, and of course those spiking consumer prices. But 520 00:30:46,680 --> 00:30:49,280 Speaker 1: there's more than just the economics and fed reaction when 521 00:30:49,320 --> 00:30:51,840 Speaker 1: it comes to prices. There's also, of course, the politics. 522 00:30:52,320 --> 00:30:55,960 Speaker 1: Pocketbook issues always loom large in any election, and even 523 00:30:56,000 --> 00:30:58,320 Speaker 1: if we may not blame the candidate for what we're 524 00:30:58,360 --> 00:31:00,720 Speaker 1: paying at the pump or in the checkout line, we 525 00:31:00,760 --> 00:31:02,960 Speaker 1: at least want the sense that they know what real 526 00:31:03,080 --> 00:31:06,160 Speaker 1: people in the real world are paying for things, which 527 00:31:06,160 --> 00:31:10,200 Speaker 1: brings us to the political price gaff, perhaps originating with 528 00:31:10,240 --> 00:31:14,560 Speaker 1: President George Herbert Walker Bush back in getting caught out 529 00:31:14,640 --> 00:31:18,440 Speaker 1: in a presidential debate having no idea what a gallon 530 00:31:18,520 --> 00:31:21,959 Speaker 1: of milk costs, and then Rudy Giuliani running for president 531 00:31:22,000 --> 00:31:24,920 Speaker 1: in two eight just hazarding a guest at the price 532 00:31:24,920 --> 00:31:28,160 Speaker 1: of milk and getting it hopelessly wrong. History may have 533 00:31:28,280 --> 00:31:31,240 Speaker 1: repeated itself sort of this week in the New York 534 00:31:31,280 --> 00:31:34,560 Speaker 1: mayoral race. When leading candidates were asked how much an 535 00:31:34,560 --> 00:31:38,480 Speaker 1: average house costs in Brooklyn. Former Wall Street banker Ray 536 00:31:38,560 --> 00:31:42,280 Speaker 1: McGuire guests it was between eighty and ninety thousand dollars. Well, 537 00:31:42,440 --> 00:31:44,920 Speaker 1: we could forgive him, because, after all, at City he 538 00:31:44,960 --> 00:31:49,000 Speaker 1: didn't handle mortgages. Sean Donovan is a different story. He 539 00:31:49,120 --> 00:31:51,840 Speaker 1: ran housing for Marion, Mike Bloomberg and then hud for 540 00:31:51,880 --> 00:31:54,440 Speaker 1: President Obama, and he guessed that a house in Brooklyn 541 00:31:54,440 --> 00:31:58,200 Speaker 1: would go for about a hundred thousand dollars, although afterwards 542 00:31:58,200 --> 00:32:00,280 Speaker 1: he did say that he just got confused because he 543 00:32:00,280 --> 00:32:03,120 Speaker 1: had too many numbers rolling around in his head. The 544 00:32:03,280 --> 00:32:07,440 Speaker 1: right answer, well, that was nine hundred thousand dollars and 545 00:32:07,520 --> 00:32:10,440 Speaker 1: leave it to Andrew Yang to nail it, though former 546 00:32:10,480 --> 00:32:14,160 Speaker 1: New York Sanitation had Catherine Garcia was awfully close at 547 00:32:14,200 --> 00:32:17,480 Speaker 1: eight hundred thousand dollars. But if it's any constellation that 548 00:32:17,680 --> 00:32:21,680 Speaker 1: eight thousand dollars could buy something in Brooklyn, according to Zillo, 549 00:32:21,800 --> 00:32:24,520 Speaker 1: it may not be a house or even an apartment. 550 00:32:25,480 --> 00:32:28,320 Speaker 1: There is a parking place in Brooklyn going for eighty 551 00:32:28,360 --> 00:32:31,760 Speaker 1: thousand dollars. That does it. For this episode of Wall 552 00:32:31,760 --> 00:32:34,560 Speaker 1: Street Week, I'm David Weston. This is Bloomberg. See you 553 00:32:34,640 --> 00:32:36,560 Speaker 1: next week.