WEBVTT - Surveillance: Jobless Aid With Scalia 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast, and I'm Tom Keane Jailey. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.400 Bloomberg dot Com, and of course, on the Bloomberg Right now, 0:00:27.400 --> 0:00:30.480 we're gonna get proportionately smarter. On a Tuesday, Mornamahangen joins 0:00:30.560 --> 0:00:33.760 us from Alians here as we consider not so much 0:00:33.840 --> 0:00:38.000 investment strategy, but the shock and awe of SMP three 0:00:38.040 --> 0:00:42.600 thousand and doubt twenty five thousand, bona. It has been 0:00:42.640 --> 0:00:48.040 an unloved bull market. How bull market? Is this or 0:00:48.120 --> 0:00:51.400 is this a pause along the way along the struggles 0:00:51.400 --> 0:00:54.200 of this pandemic? Yeah, you know, first of all, thanks 0:00:54.240 --> 0:00:56.640 for having me. This is a great new format. Enjoying 0:00:56.640 --> 0:01:00.400 it immensely. But certainly that three thousand level TOM on 0:01:00.440 --> 0:01:03.080 the SMP is something that's not only psychological, but it 0:01:03.120 --> 0:01:05.520 happens to be close to the two day moving average, 0:01:05.560 --> 0:01:08.399 so it does have some technical significance that well as well. 0:01:09.040 --> 0:01:11.480 We certainly think that if we can get through that, 0:01:11.520 --> 0:01:13.880 breakthrough that and sustain that for at least, you know, 0:01:13.959 --> 0:01:17.360 a few days, that is meaningful in terms of perhaps 0:01:18.120 --> 0:01:21.560 moving some opinions over to more bullish stands. You know, 0:01:21.640 --> 0:01:25.200 to us, clearly, this has been a bifurcated market. Um. 0:01:25.240 --> 0:01:28.320 The winners and the SMP have been tech and healthcare 0:01:28.760 --> 0:01:32.600 and the unloved cyclical sectors you know, energy, financial, industrials 0:01:32.640 --> 0:01:37.759 all still down over still very much in bear market territory. Um. Really, 0:01:37.800 --> 0:01:40.440 we think if if the market is a buyer of 0:01:40.480 --> 0:01:44.200 this reopening story, we should start to see a broadening 0:01:44.319 --> 0:01:48.280 of performance and that should include some of those cyclical sectors. Certainly, 0:01:48.320 --> 0:01:50.640 we started to see that last week as well, with 0:01:50.720 --> 0:01:54.200 industrials and energy at the top of the performance list. Um, 0:01:54.320 --> 0:01:56.960 we think that trend could continue and help carry us 0:01:57.000 --> 0:02:01.240 beyond the three thousand moves. Certainly, this morning we are 0:02:01.240 --> 0:02:04.480 seeing a buying of the reopening narrative. What kind of 0:02:04.520 --> 0:02:08.200 reopening our traders pricing in because there is the possibility 0:02:08.240 --> 0:02:11.040 that you reopen and nobody shows up because they don't 0:02:11.080 --> 0:02:13.280 have faith that they have the health controls in place 0:02:13.480 --> 0:02:17.160 that they won't get sick. Yeah, now that's a fair point. 0:02:17.240 --> 0:02:20.079 And look, as we're watching this reopening just like everyone else, 0:02:20.120 --> 0:02:22.480 we're watching the health data alongside of it. You know, 0:02:22.520 --> 0:02:25.080 one thing that's notable to us is that areas that 0:02:25.160 --> 0:02:27.359 had been the epicenter of this crisis, like New York 0:02:27.400 --> 0:02:30.720 and New Jersey, UM, really the pressure on their hospital 0:02:30.760 --> 0:02:33.120 systems has alleviated quite a bit. And so I think 0:02:33.320 --> 0:02:35.520 when we think about why we flatten this curve in 0:02:35.520 --> 0:02:37.840 the first place, is so that we wouldn't pressure the 0:02:37.880 --> 0:02:41.120 hospital systems. And some of the more southern states that 0:02:41.200 --> 0:02:43.200 we are seeing a little bit more uptick in some 0:02:43.320 --> 0:02:46.720 of the virus cases, UM, their hospital systems are generally 0:02:46.880 --> 0:02:51.120 still underutilized, I CU beds, etcetera. So to us, you know, 0:02:51.160 --> 0:02:53.960 in order to really think about re shutting the economy, 0:02:54.000 --> 0:02:56.040 or at least reshutting parts of the economy, you need 0:02:56.080 --> 0:02:58.800 to see pressure on that hospital system. So it's not 0:02:59.200 --> 0:03:02.440 another point that we are watching. The other thing I'd 0:03:02.480 --> 0:03:04.959 say briefly is just that when we think about investing 0:03:04.960 --> 0:03:08.399 in the market broadly, you know, sadly, this crisis has 0:03:08.440 --> 0:03:13.960 really impacted mom and pop businesses largely, you know, the restaurants, bars, gym's, etcetera. 0:03:14.400 --> 0:03:17.359 The SMP five hundred, however, is you know, the five 0:03:17.440 --> 0:03:22.520 hundred best capitalized, best balance sheets, biggest companies in the 0:03:22.600 --> 0:03:24.720 U S economy, and so when you think about where 0:03:24.720 --> 0:03:27.840 to put your money, perhaps that's relatively safer and it 0:03:27.919 --> 0:03:30.000 could be a driver of of what we're seeing now 0:03:30.000 --> 0:03:31.880 in the market as well. I got to lift the 0:03:31.919 --> 0:03:34.160 lid on that SMP five hundred. You did that briefly 0:03:34.200 --> 0:03:35.720 just moments ago and moment and I think that's the 0:03:35.720 --> 0:03:38.280 big topic for so many people. On the one side, 0:03:38.320 --> 0:03:42.440 we've got these crowding, stretched valuations in growth. Then on 0:03:42.480 --> 0:03:44.360 the other side we've got the potential for the value 0:03:44.400 --> 0:03:47.680 trap playing out over encyclicals. How do you draw distinction 0:03:47.720 --> 0:03:49.200 between the two at the moment and make sure you're 0:03:49.200 --> 0:03:51.720 in the right companies. Yeah, no, that's a great point, 0:03:51.720 --> 0:03:53.520 and we get that question all the time. Look, I 0:03:53.600 --> 0:03:56.400 think for a post COVID world, you need to be 0:03:56.440 --> 0:04:00.000 involved with some of these technology, particularly on the software side, 0:04:00.160 --> 0:04:05.280 that include areas like cybersecurity, cloud computing, the e gaming space, 0:04:05.360 --> 0:04:08.360 you know, the whole complex around the zoom conferencing and 0:04:08.760 --> 0:04:11.480 remote learning. Even um, it's not going to be a 0:04:11.480 --> 0:04:13.560 one year story. It's going to be a three, five, 0:04:13.680 --> 0:04:16.599 even ten year story down the road. Uh. Similarly, on 0:04:16.640 --> 0:04:18.919 the healthcare side, which may not be that long of 0:04:18.920 --> 0:04:21.320 a story, but still very important in the next probably 0:04:21.360 --> 0:04:24.640 two to five years. So I think we continue to 0:04:24.680 --> 0:04:29.599 see opportunities tactically there. So obviously it's harder to chase 0:04:29.720 --> 0:04:32.440 at these levels, but when we do get the pull backs, 0:04:32.440 --> 0:04:35.400 we've had some sideway sideways movements over the last few weeks. 0:04:35.560 --> 0:04:38.520 There has been opportunities to get involved again. On the 0:04:38.560 --> 0:04:40.240 other side, you know, we would be a little bit 0:04:40.279 --> 0:04:43.920 more selective when we think about some of the industrials, energy, financials, 0:04:44.320 --> 0:04:46.680 um there's only parts of the energy complex that are 0:04:46.720 --> 0:04:50.440 interesting to us, you know, refiners for example, or even 0:04:50.520 --> 0:04:53.800 renewable energy. On the industrial side, you know, we're we're 0:04:53.800 --> 0:04:55.920 taking a look at airlines here. I think their risk 0:04:55.960 --> 0:04:59.039 reward is interesting as well. When you think about limited 0:04:59.080 --> 0:05:02.120 downside government it might be stepping in to help bail 0:05:02.120 --> 0:05:05.040 out some of the companies and eventually we probably all 0:05:05.120 --> 0:05:08.840 will you know, have to travel again. So selective parts 0:05:08.960 --> 0:05:11.520 across both sides of the spectrum, we think makes sense. 0:05:11.880 --> 0:05:14.400 I've got to pick up on that airlines. I'm sure 0:05:14.400 --> 0:05:16.200 a lot of people set up a little bit when 0:05:16.200 --> 0:05:18.799 you said that. I know you can't do single names, 0:05:18.839 --> 0:05:22.320 but surely that's a really, really difficult decision mix when 0:05:22.360 --> 0:05:24.560 you look at that sector at the moment, some of 0:05:24.560 --> 0:05:26.480 these companies, I think it's fair to say, and I'm 0:05:26.480 --> 0:05:29.640 not being extreme saying this, some of these companies won't exist, 0:05:29.680 --> 0:05:33.600 will they. M Yeah, I certainly have to be careful 0:05:33.640 --> 0:05:36.920 across the spectrum here. Um. You know, one of the 0:05:36.960 --> 0:05:39.920 things about active management during the crisis, any crisis, but 0:05:40.000 --> 0:05:42.520 certainly this one, is there will be winners and losers, 0:05:42.600 --> 0:05:45.240 and the fundamental research will really matter. You need to 0:05:45.240 --> 0:05:47.720 look at balance sheets. You know, in a sector like airlines, 0:05:47.760 --> 0:05:50.200 you probably need to look at our the domestic internationally, 0:05:50.200 --> 0:05:51.880 you need to look at what the routes are, etcetera, 0:05:51.960 --> 0:05:55.520 etcetera UM. And you know, obviously that was one example 0:05:55.560 --> 0:05:57.720 on how to play the recovery. There are other you know, 0:05:57.960 --> 0:06:01.960 you look across hotels, gamings, that, etra, etcetera, UM, larger 0:06:01.960 --> 0:06:05.000 industrials as well, and so I think there are certainly 0:06:06.440 --> 0:06:09.359 ways to play it up. Mona, I'm not gonna buy it, Mona, 0:06:09.440 --> 0:06:12.040 I'm not gonna buy it. This is the most barbelled 0:06:12.120 --> 0:06:15.520 market we've ever had, with five or seven or ten 0:06:15.720 --> 0:06:20.000 stocks leading the way. If I'm institutional investor here in 0:06:20.040 --> 0:06:22.480 my ELPAE so far behind, I'm not going to get 0:06:22.520 --> 0:06:25.240 paid my bonus. What do I do? Buy more Amazon, 0:06:25.600 --> 0:06:29.279 buy more Apple. You know, it's interesting. I do think 0:06:29.400 --> 0:06:31.520 you make a good point about performance catch up here. 0:06:31.560 --> 0:06:35.039 You know, not many people got in at Marye and 0:06:35.080 --> 0:06:39.080 have written this move higher, and so certainly you're going 0:06:39.120 --> 0:06:40.960 to see a lot of that. I think the implications 0:06:40.960 --> 0:06:44.000 of that are more that now when you do get 0:06:44.360 --> 0:06:47.240 dips um, are they more likely to be bought or 0:06:47.240 --> 0:06:49.279 they more likely to be sold? And I think given 0:06:49.320 --> 0:06:53.240 the momentum behind the health the economy, um, and you know, 0:06:53.600 --> 0:06:56.000 just the reopening broadly, I think we're going to see 0:06:56.000 --> 0:06:58.440 a little bit more buying at this point. And so 0:06:58.480 --> 0:07:01.039 I think that's important to recting eyes as well. You know, 0:07:01.120 --> 0:07:04.200 so any opportunities you get, you know, if you can 0:07:04.279 --> 0:07:07.159 position yourself tactically during those times, it will be important. 0:07:07.520 --> 0:07:09.400 Now that being said, you know, this is a long 0:07:09.520 --> 0:07:12.720 term game here. So um, you know, while we've had 0:07:12.880 --> 0:07:15.480 a great thirty percent move, now do we expect another 0:07:15.520 --> 0:07:18.640 thirty percent you know, in the next six or eight 0:07:18.680 --> 0:07:21.320 week period or even the next quarter or two. Probably not. 0:07:21.480 --> 0:07:23.760 So you're not going to get um, you know, the 0:07:23.920 --> 0:07:26.400 quote unquote easy money once again. And so in that 0:07:26.440 --> 0:07:30.080 scenario you will get some sideways movements, you will get 0:07:30.200 --> 0:07:32.160 pull backs, you will even get those five or ten 0:07:32.200 --> 0:07:34.200 percent corrections along the way, And so those are your 0:07:34.200 --> 0:07:39.559 opportunities to get involved. Mono, what's the best hedge right now? Interesting? Yeah, 0:07:39.560 --> 0:07:41.800 you know, I think we continue to like some of 0:07:41.800 --> 0:07:45.280 those eventsive asset classes as hedges as well. So, um, 0:07:45.400 --> 0:07:48.840 we're still buyers or believers in the gold story, the 0:07:48.920 --> 0:07:51.800 US dollar. I think it's interesting still, you know, given 0:07:51.840 --> 0:07:54.080 the economy is the the U S economy has been 0:07:54.160 --> 0:07:57.400 the flight to safety asset class broadly. Um, treasuries are 0:07:57.440 --> 0:07:59.560 are somewhat interesting as well, just given you know, the 0:07:59.600 --> 0:08:02.360 support we're seeing from the Fed in the stimulus etcetera. 0:08:02.360 --> 0:08:04.440 And so I think you know, people will flock to 0:08:04.640 --> 0:08:06.920 treasures as a hedge as well. Still, so some of 0:08:06.960 --> 0:08:10.200 those as the classes, certainly parts of the high high 0:08:10.280 --> 0:08:12.720 quality investment grade bond market still makes sense to us 0:08:12.720 --> 0:08:14.680 as well. Mon Of fantastic to catch up with you. 0:08:14.840 --> 0:08:16.040 So I'm my best of the team. Well you might 0:08:16.160 --> 0:08:22.400 want to thank you for that of the job was claims. 0:08:22.400 --> 0:08:25.560 Of course, folks have been terrible. Yes, the vector is improving, 0:08:26.000 --> 0:08:29.960 but Nevertheless, it is a labor economy in America that 0:08:30.160 --> 0:08:34.959 is absolutely extraordinary. Lisa John and I said, Okay, we're 0:08:35.000 --> 0:08:37.640 gonna do a simulcast and you could get you know, 0:08:37.800 --> 0:08:40.640 Beyonce and his you know on our first show, or 0:08:40.960 --> 0:08:43.320 you know someone like that, maybe the guy that invented 0:08:43.360 --> 0:08:47.200 bed wars from Microsoft. And we said, wait, this is serious. 0:08:47.240 --> 0:08:51.000 The labor economy is imploding. So let us speak to 0:08:51.080 --> 0:08:54.160 the Secretary of Labor. He is, of course from one 0:08:54.200 --> 0:08:59.120 of the great storied conservative families of America. Eugene Scalia 0:08:59.240 --> 0:09:02.800 joins us. Now, Mr Secretary, thank you so much for 0:09:02.920 --> 0:09:06.679 starting your day with us. I want you to explain 0:09:07.320 --> 0:09:11.800 how the administration and particularly how your Cabinet office will 0:09:11.840 --> 0:09:17.120 react to twenty unemployment. What can you do from a 0:09:17.280 --> 0:09:26.360 regulation and institutional basis to protect the millions of Americans unemployed. Well, Tom, 0:09:26.400 --> 0:09:29.800 it's good to join you. Thanks for having me, and um, 0:09:29.920 --> 0:09:34.920 we have been acting on many different fronts to help 0:09:35.000 --> 0:09:39.120 the actually tens of millions Americans who have been put 0:09:39.120 --> 0:09:41.120 out a work over the last couple of months as 0:09:41.120 --> 0:09:45.640 we've idled our economy. UM, as you know, the Cares 0:09:45.720 --> 0:09:49.400 Act included a very substantial benefit for people out on 0:09:49.880 --> 0:09:53.400 unemployment six dollars a week on top of what is 0:09:53.440 --> 0:09:56.000 paid by the States. We've been working very closely with 0:09:56.120 --> 0:10:00.160 the States UH to to get those payments out and 0:10:00.480 --> 0:10:03.720 UH to help people during this challenging time. We've also 0:10:03.800 --> 0:10:09.160 been administering the paid lead provisions that Congress enacted and 0:10:09.440 --> 0:10:11.920 UH in a program that we don't administer here, but 0:10:12.200 --> 0:10:14.640 I think it's been just invaluable to American workers right 0:10:14.640 --> 0:10:17.880 now has been the Paycheck Protection Program. We estimate about 0:10:17.920 --> 0:10:21.480 fifty million American workers have been kept on payroll through 0:10:21.520 --> 0:10:24.640 that program. That said, Tom, you know we're we're pivoting 0:10:24.640 --> 0:10:29.040 now right we're reopening. I was in Florida and Georgia 0:10:29.080 --> 0:10:32.400 with the Vice President last week and and it was 0:10:32.480 --> 0:10:34.400 encouraging to see. We saw more of that over the 0:10:34.440 --> 0:10:37.440 weekend too. Secretary Scalleier, you've done a fantastic job over 0:10:37.440 --> 0:10:39.200 the last several months of providing a lot of aid 0:10:39.480 --> 0:10:42.400 to everyday Americans and companies as well down in Washington, 0:10:42.480 --> 0:10:44.920 not just the Republican Party, working with Democrats as well. 0:10:45.200 --> 0:10:47.560 I think we've all set down this program many times. 0:10:47.800 --> 0:10:50.160 What we're trying to work out though, is what happens 0:10:50.360 --> 0:10:53.640 after the reopening the help that you offered during the shutdown, 0:10:53.640 --> 0:10:56.280 Will any of that be extended at some point over 0:10:56.320 --> 0:10:59.600 the next several months. What's the current stance. Well, of course, 0:11:00.400 --> 0:11:05.120 the paid leave program UH remains in place. UH. The 0:11:05.400 --> 0:11:07.840 unemployment plus up that I mentioned in six dollars a 0:11:07.840 --> 0:11:12.080 week is in place through the end of July and UM. 0:11:12.640 --> 0:11:15.599 But as we focus on the reopening, the President is 0:11:15.640 --> 0:11:20.400 also looking at things to get the economy UH started 0:11:20.400 --> 0:11:25.120 again more broadly, not simply aid, but returning to that 0:11:25.240 --> 0:11:29.200 incredibly vibrant economy that we had through through early March. 0:11:29.280 --> 0:11:33.160 The President and I believe strongly that UH part of 0:11:33.160 --> 0:11:38.679 what was key to that economy was lightening unnecessary regulatory 0:11:38.720 --> 0:11:40.760 burdens on business. So you had the President last week 0:11:40.840 --> 0:11:44.679 signing this new executive order urging agencies to look further 0:11:44.720 --> 0:11:48.319 at ways that we can renew reduce unnecessary burdens on 0:11:48.440 --> 0:11:51.760 business so we can get businesses reopen. It was by 0:11:51.800 --> 0:11:55.200 having that vibrant business sector that we had that record 0:11:55.280 --> 0:11:59.600 low unemployment through March. So that's something that we consider 0:11:59.679 --> 0:12:03.319 a very important. Yes, we'll also look at what further 0:12:03.400 --> 0:12:06.240 support may be needed, but that this situation has been 0:12:06.320 --> 0:12:10.760 so fluid with the virus UH, and UH, you know, 0:12:11.080 --> 0:12:13.400 I'd like to see how we progress into the month 0:12:13.440 --> 0:12:18.679 of June before making decisions about what particular further measures 0:12:18.679 --> 0:12:22.400 may be needed. Secretary, the market has largely priced in 0:12:22.440 --> 0:12:25.679 an extension of those additional unemployment benefits that you were 0:12:25.679 --> 0:12:27.920 talking about in the John Ray's and I'm just wondering 0:12:28.320 --> 0:12:30.840 what metrics you're looking for that you will see in 0:12:30.960 --> 0:12:33.560 June that will make you decide that they're either needed 0:12:33.679 --> 0:12:36.680 as far as an extension goes, or not. Well. I 0:12:36.679 --> 0:12:42.400 think the six plus up was a very important support 0:12:42.440 --> 0:12:45.320 being given to American workers during a time that state 0:12:45.320 --> 0:12:48.640 and local governments were shutting down businesses and UH and 0:12:48.800 --> 0:12:51.920 telling people not to go to work. I don't see 0:12:52.240 --> 0:12:56.480 UH continuing that program in its precise form going forward 0:12:56.600 --> 0:13:01.080 from July. As we are reopening and now looking to 0:13:01.080 --> 0:13:04.440 get people UH from the sidelines back into the workplace. 0:13:04.480 --> 0:13:07.719 I think I think we'll be looking at different measures, UH, 0:13:07.880 --> 0:13:09.679 at least in terms of the things I'll be looking at. 0:13:10.000 --> 0:13:13.880 Of greatest interest will be simply how quickly we put 0:13:13.880 --> 0:13:16.360 people back to work as we reopen. We know that 0:13:16.480 --> 0:13:19.800 millions of people are starting to return to work now, UH, 0:13:19.800 --> 0:13:22.040 and we'll be getting. I think more insights into that 0:13:22.080 --> 0:13:25.520 in the coming weeks, Mr Secretary. The minimum wage is 0:13:25.600 --> 0:13:29.480 delivering my food to my house, and the elites are 0:13:29.520 --> 0:13:33.360 doing fine. I would say, as a generalization, I drove 0:13:33.360 --> 0:13:37.320 down Columbus Avenue this weekend in Manhattan and it looked 0:13:37.320 --> 0:13:40.400 like one of those movies with Bruce Willison. It was 0:13:40.480 --> 0:13:45.760 so destitute Armageddon, Like, what is your administration gonna do 0:13:46.320 --> 0:13:50.440 to get labor to get its fair share back in 0:13:50.480 --> 0:13:55.920 a spirited, open American economy. What's the strategy to stop 0:13:55.960 --> 0:14:01.040 the fifty year atomization of labor? Well all, I think 0:14:01.080 --> 0:14:03.840 before the virus struck, one of the really remarkable things 0:14:03.880 --> 0:14:07.680 about President Trump's economy was how well people lower end 0:14:07.760 --> 0:14:11.560 of the pay scale we're doing. You uh, saw the 0:14:11.559 --> 0:14:15.880 wages rising generally, but wages were rising more quickly for 0:14:16.160 --> 0:14:19.680 people in the lowest ten percent of the income scale, 0:14:19.760 --> 0:14:23.080 for people who didn't have a high school degree. We 0:14:23.160 --> 0:14:26.920 had a record low unemployment for seminarity groups who historically 0:14:26.920 --> 0:14:29.640 had been disadvantaged in the marketplace. So, you know, in 0:14:29.680 --> 0:14:32.480 all seriousness, when I look at what will be most 0:14:32.520 --> 0:14:35.360 important going forward, the single most important thing we can 0:14:35.400 --> 0:14:39.640 do for American workers, particularly those at the lower end 0:14:39.640 --> 0:14:42.760 of the pay scale is returned to the kind of 0:14:42.960 --> 0:14:46.560 vibrant economy that we had uh just just two months ago, 0:14:47.000 --> 0:14:49.640 and that was an economy driven in substantial part by 0:14:50.280 --> 0:14:54.560 a reasonable tax burden and by reducing unnecessary regulatory burden. 0:14:54.680 --> 0:14:57.880 So those will remain areas of focus, even as we 0:14:57.960 --> 0:15:00.400 also assess whether we are going to need to continue 0:15:00.480 --> 0:15:04.880 some forms of additional support, for example, for small businesses 0:15:04.920 --> 0:15:07.400 and for some workers. I think a lot of people 0:15:07.400 --> 0:15:09.840 have still going to need a lot of help, Mr Secretary, 0:15:09.880 --> 0:15:11.160 I look forward to going to be back soon so 0:15:11.160 --> 0:15:12.800 we can talk about doing just that. Because there's some 0:15:12.880 --> 0:15:16.400 real agency even as we reopened this economy, Secretary Scalia, 0:15:16.480 --> 0:15:22.320 that of the United States, the Labor Secretary. So we 0:15:22.400 --> 0:15:26.240 spoke to the Secretary of Labor, Mr Scalia. We thought 0:15:26.320 --> 0:15:28.720 we would speak to a gentleman who had the FED 0:15:28.800 --> 0:15:32.280 more than anyone in the last twenty years, his stead 0:15:32.360 --> 0:15:36.920 steadfastly on regulation and the operation of business. That is 0:15:37.040 --> 0:15:39.800 Mr Trulo now at Harvard Law, and of course the 0:15:39.840 --> 0:15:43.760 former governor of the Fellow Reserve System. Wonderful to have 0:15:43.840 --> 0:15:47.480 you with us, Professor at today. I was talking to 0:15:47.520 --> 0:15:52.840 the Secretary of Labor about the atomization of the labor economy. 0:15:53.360 --> 0:15:59.920 Now we're gonna atomize it estimated twenty three or unemployment rate. 0:16:00.520 --> 0:16:04.440 What will be the societal reaction. Well, I don't know 0:16:04.480 --> 0:16:07.720 what the public reaction will be, but I think as 0:16:07.760 --> 0:16:11.880 a macroeconomic matter, and and certainly just as a human matter, 0:16:12.360 --> 0:16:16.960 taking measures now to ensure that there is income support 0:16:17.200 --> 0:16:19.920 for the millions and millions of people who are going 0:16:20.000 --> 0:16:23.200 to remain unemployed for quite some time to come ought 0:16:23.240 --> 0:16:26.920 to be the country's highest priority right now. And I'm 0:16:26.960 --> 0:16:29.760 a bit concerned that people are are more than a 0:16:29.760 --> 0:16:32.520 bit concerned that so many people are taking what they 0:16:32.560 --> 0:16:35.480 see is a wait and see attitude. I mean, looks, 0:16:35.600 --> 0:16:38.680 as you just said, unemployment is likely to be reported 0:16:38.680 --> 0:16:42.960 in the vicinity of Remember eleven years ago, during the 0:16:43.000 --> 0:16:46.440 Great Financial Crisis, we were scrambling to try to do 0:16:46.560 --> 0:16:50.200 something a lot about ten percent unemployment. So even if 0:16:50.240 --> 0:16:53.880 you postulate a having of what the current rate probably is, 0:16:54.240 --> 0:16:57.960 would still be in a very serious position relative to 0:16:58.000 --> 0:17:01.240 the postwar econmy so, I think any in this notion 0:17:01.280 --> 0:17:04.200 of delaying and seeing whether we need to do more 0:17:04.720 --> 0:17:08.480 is really quite a bad mistake. Well, Dan, you touched 0:17:08.480 --> 0:17:10.160 on the other floor as well. It's not just about 0:17:10.200 --> 0:17:12.680 the timing, it's the composition of the next response. You're 0:17:12.680 --> 0:17:16.480 talking about a demand side effort the administration increasingly whenever 0:17:16.520 --> 0:17:17.960 I listened to them, whenever I get the chance to 0:17:18.000 --> 0:17:20.680 speak to them, a talking about a supply side response 0:17:20.720 --> 0:17:23.200 to how this economy reopen and get people back to work. 0:17:23.560 --> 0:17:25.920 What are the limitations of that down? Well, I think 0:17:26.240 --> 0:17:31.200 you don't think, Jonathan. We all recognize that this problem 0:17:31.240 --> 0:17:34.880 has been driven by epidemiology. It hasn't been driven by 0:17:35.200 --> 0:17:37.720 they're fed stepping on the branch too hard. It hasn't 0:17:37.760 --> 0:17:42.600 been driven by excessive credit, although that's probably exacerbated things. 0:17:42.840 --> 0:17:46.560 It's been driven by the epidemiology. And so getting people 0:17:46.680 --> 0:17:51.960 back to work is dependent upon the medical developments, not 0:17:52.160 --> 0:17:56.879 strictly speaking economic development. We can provide income support, but 0:17:57.240 --> 0:18:00.479 we cannot just through economic measures, make it safe for 0:18:00.520 --> 0:18:03.760 people to go out. We can't make people comfortable about 0:18:03.800 --> 0:18:06.160 going out. And I think what that means is we've 0:18:06.200 --> 0:18:09.200 got an enormous amount of uncertainty that's probably going to 0:18:09.280 --> 0:18:11.520 be with us for some time. I mean, you folks 0:18:11.520 --> 0:18:15.199 on Bloomberg have been reporting on the enormous volatility and 0:18:15.280 --> 0:18:18.080 markets over the last couple of months. We get good 0:18:18.080 --> 0:18:22.879 news on on the medical front, and everything goes up. 0:18:22.960 --> 0:18:25.600 You get some bad news, everything goes down. I think 0:18:25.640 --> 0:18:28.240 that just reflects the fact that we just don't know, 0:18:28.680 --> 0:18:33.200 and we ought to care for the possibility that things 0:18:33.200 --> 0:18:36.640 are going to be quite difficult quite some time. Dan. 0:18:36.800 --> 0:18:39.040 And to this point, this this sort of volatility that 0:18:39.080 --> 0:18:41.479 we saw in markets has basically gone away to a 0:18:41.480 --> 0:18:44.199 certain degree, in part due to what the Federal Reserve 0:18:44.280 --> 0:18:46.760 has done in terms of monetizing the debt of the 0:18:46.800 --> 0:18:50.960 United States. What's the risk for financial stability going forward, 0:18:51.119 --> 0:18:54.359 given how much debt the US is incurring, given how 0:18:54.400 --> 0:18:59.040 much the feed is interfering and pushing investors further into risk. Well, 0:18:59.320 --> 0:19:02.760 I think, you know, we we do need to acknowledge 0:19:03.160 --> 0:19:06.680 that there are going to be some risks in when 0:19:06.720 --> 0:19:11.000 everyone takes the range of fiscal and monetary measures that 0:19:11.040 --> 0:19:13.679 have been taken. But I think we need to quickly 0:19:13.800 --> 0:19:18.720 qualify that observation by saying it is absolutely necessary to 0:19:18.840 --> 0:19:23.160 do whatever we can to stop what is a very 0:19:23.200 --> 0:19:27.879 serious situation from being a chronic, highly depressed situation. In 0:19:27.920 --> 0:19:30.840 other words, we're going to have to take some risks 0:19:31.040 --> 0:19:35.960 with respect to debt levels of respect to financial stability 0:19:36.240 --> 0:19:39.600 in order to stop this thing from getting worse and 0:19:39.800 --> 0:19:43.400 staying at a at a low level. Having said that, 0:19:43.520 --> 0:19:48.160 you know, I think again we do need to recognize that, uh, 0:19:48.200 --> 0:19:51.040 there were some vulnerabilities. There were some vulnerabilities in the 0:19:51.080 --> 0:19:55.440 commercial paper market. There were some vulnerabilities in the repo market. Uh. 0:19:55.600 --> 0:19:58.080 And to return to the theme that that Jonathan was 0:19:58.119 --> 0:20:00.920 asking me about a moment ago. You know, if we're 0:20:01.119 --> 0:20:05.520 in a situation in which the FED will provide assistance 0:20:05.560 --> 0:20:10.399 to large asset managers because they have exchange traded funds 0:20:10.480 --> 0:20:15.399 with relatively illiquid assets, why why are we hesitating to 0:20:15.440 --> 0:20:19.280 provide assistance to middle and lower middle income people who 0:20:19.280 --> 0:20:21.000 are probably going to be out of many of whom 0:20:21.000 --> 0:20:22.520 are going to be out of work for a long 0:20:22.560 --> 0:20:26.040 time to come. So, yes, there are there are risks, 0:20:26.080 --> 0:20:28.320 but I don't think we need to we should be 0:20:28.359 --> 0:20:31.520 paralyzed by the risks. We've got to act to try 0:20:31.640 --> 0:20:35.560 to people floor under income of floor under the economy, 0:20:35.880 --> 0:20:40.879 and then as the medical developments permit, to start taking 0:20:40.920 --> 0:20:45.359 measures actively to build it up again. Right, Governor, have 0:20:45.440 --> 0:20:47.960 got one final question. I remember the day you joined 0:20:48.000 --> 0:20:51.560 the FED and the entire market community stood up and said, 0:20:51.560 --> 0:20:54.200 who is this guy? Why is he on the FED? 0:20:54.840 --> 0:20:58.040 They said the same thing about Chairman Powell. How's the 0:20:58.119 --> 0:21:03.160 chairman doing well? Look j J the Jed Powell has 0:21:03.240 --> 0:21:08.000 confronted a challenge that only Ben Bernankie really has confronted. 0:21:08.040 --> 0:21:13.080 The two very different kinds of challenges. Uh Ben's challenge 0:21:13.440 --> 0:21:19.200 was originating in financial markets, and everything was imploding because 0:21:19.240 --> 0:21:23.560 of the vulnerabilities in markets and in vans. Jara Powell 0:21:23.720 --> 0:21:27.200 is facing a situation in which an anxiety, an external 0:21:27.240 --> 0:21:31.679 shock has created an unprecedented situation, and you know he 0:21:31.800 --> 0:21:35.320 moved very quickly, I think to push the FED to 0:21:36.280 --> 0:21:39.440 get in place a set of emergency programs. I think 0:21:39.440 --> 0:21:42.280 he's made it clear that the Fed will do what 0:21:42.440 --> 0:21:45.680 they believe needs to be done. But I'm sure he'd 0:21:45.680 --> 0:21:47.600 be the first to say it's got a lot of 0:21:47.640 --> 0:21:49.640 work ahead of us. Down. I don't want to cause 0:21:49.680 --> 0:21:52.280 any trouble between you and your friend Jay, but I 0:21:52.320 --> 0:21:54.600 didn't want to when he first took the job at 0:21:54.600 --> 0:21:56.919 the top of the Federal Reserve, and there was a 0:21:56.920 --> 0:21:58.879 side of him where he wanted to play almost the 0:21:58.920 --> 0:22:01.239 hard guy with financial markets, the guy that was going 0:22:01.280 --> 0:22:03.080 to run the FED and not respond to where the 0:22:03.200 --> 0:22:07.359 SPX was, the SMP five was on any given day. 0:22:07.880 --> 0:22:09.640 Is there a part of you down that just feels, 0:22:09.680 --> 0:22:12.439 now that the Federal Reserve is completely capitulated, that the 0:22:12.480 --> 0:22:16.199 one mandate seems to be financial conditions. That is the 0:22:16.280 --> 0:22:20.359 exclusive channel which monety policy flows through, and therefore that 0:22:20.480 --> 0:22:23.200 is the only thing that matters right now. I don't 0:22:23.200 --> 0:22:27.120 think it. I don't think it's the only thing that matters. Um. Look, 0:22:27.160 --> 0:22:32.600 I think over a longish period of time there has 0:22:32.840 --> 0:22:37.320 been more focused on markets by all people at the FED, 0:22:37.920 --> 0:22:43.080 and perhaps some oversensitivity to markets. Having said that, though, 0:22:43.680 --> 0:22:47.120 to the degree that what happens in markets then has 0:22:47.160 --> 0:22:51.040 an impact on the real economy, it would be unwise 0:22:51.160 --> 0:22:54.560 to ignore what is going on in markets. Um. And 0:22:54.600 --> 0:22:57.040