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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: This is the Bloomberg Surveillance Podcast. Catch us live weekdays

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Speaker 2: at seven am Eastern on Apple CarPlay or Android Auto

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Speaker 2: with the Bloomberg Business App. Listen on demand wherever you

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Speaker 2: get your podcasts, or watch us live on YouTube.

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Speaker 1: We start strong, like Krugman, the Nobel Laureate, someone who's

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Speaker 1: changed American economics. Claudius Sam joins us, what do I

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Speaker 1: go to first? I usually don't do this, but I am.

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Speaker 1: The thirty year bond did not print five percent. We're

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Speaker 1: almost there. The high wast four point nine to nine

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Speaker 1: seven zero yields are up. The ten year real yield,

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Speaker 1: which is a pro statistic jumps. That's the right language.

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Speaker 1: Seven basis points two point three four percent for the

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Speaker 1: yield up. And again futures at negative fifty here completely unfair.

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Speaker 1: But we turned to Claudiusam again and thank her so

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Speaker 1: much for being with us. Claudia, I'm not going to

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Speaker 1: do the minutia of market economics with you as well.

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Speaker 1: But Anna Wong at Bloomberg absolutely nailed this optimism with

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Speaker 1: a gentle revision. Is it appropriate, doctor Salm, to take

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Speaker 1: a three month moving average to give Paul Sweeney and

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Speaker 1: me the pulse of American labor.

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Speaker 3: I always think a three month average is a good

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Speaker 3: place to a good place to start.

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Speaker 4: I mean, this isn't good numbers.

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Speaker 3: Right, you know, regardless of market reactions, good news is

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Speaker 3: good news. These are jobs being created. The unemployment rate

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Speaker 3: ticked down slightly, right, Like we need we need a

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Speaker 3: resilient labor market. We need a labor market that's working

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Speaker 3: for all workers if we're going to get through this year, right,

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Speaker 3: and so like to see leave twenty twenty four and

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Speaker 3: in a relatively good place like that is encouraging. So yeah,

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Speaker 3: I would take those numbers, and we've got a solid

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Speaker 3: labor market still, and that's more celebrated Paul.

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Speaker 1: Stephanie Roth nailed this at Wolf with the unemployment rate

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Speaker 1: four point two percent to four point one percent. Somehow,

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Speaker 1: I will suggest the President of the United States, mister Biden,

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Speaker 1: will mention that somewhere at.

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Speaker 5: Some point today exactly, Claudia, how about the wages out there?

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Speaker 5: The consensus was for our four percent annualized growth rate,

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Speaker 5: and average hourly earnings came in a three point nine percent.

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Speaker 6: How do you think about the wage environment out there?

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Speaker 3: So I think the wage environment is pretty benign, at

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Speaker 3: least when we think about inflationary impacts. I mean, these

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Speaker 3: are still these are still good wage growth numbers for

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Speaker 3: American workers, and that's important for making up for the

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Speaker 3: prior price increases that we've seen. But in terms of

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Speaker 3: the FED being concerned about it, and they've told us

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Speaker 3: for some time that they don't look at these numbers

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Speaker 3: and they're concerned, you know, it's a it's a tick down.

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Speaker 3: But essentially we've been in that same place. And if

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Speaker 3: you look across a wide range of wage measures, which

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Speaker 3: some more recent research coming out of the FED is done,

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Speaker 3: I mean these the underlying pace of wage growth really

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Speaker 3: is pretty close to pre pandemic pay. So this is

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Speaker 3: not something that FED should be getting real concerned about.

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Speaker 1: Doctor Sam, Thank you so much. This has become so

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Speaker 1: wonderful to have you with us at a thirty with

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Speaker 1: your impact on academic and market economics. Claudia Sam with

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Speaker 1: us on this job's Day and now from Morgan Stanley,

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Speaker 1: ellen Zenner joins us. Ellen. I want to go into

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Speaker 1: the data and all that, but I want to go

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Speaker 1: back to early ellen Zettner, which only you and I

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Speaker 1: were around.

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Speaker 7: I'm coming in hot, just like a coming in hot.

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Speaker 1: You made your name analyzing the American consumer. To me,

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Speaker 1: that was the great error of economics in the past.

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Speaker 1: In the past eighteen months. Paul and I opened the

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Speaker 1: show with the booming Delta Airlines. What does Morgan Stanley

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Speaker 1: see is the state of the American consumer? Given this

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Speaker 1: bang on jobs.

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Speaker 7: Report, Not a lot has changed, right. People are still

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Speaker 7: spending on services, not so much on goods, travel, travel, travel,

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Speaker 7: and especially the wealthy consumers, and so not a whole

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Speaker 7: lot has changed in this report. We see it too, right,

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Speaker 7: goods in the jobs sector down, Spending on goods not

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Speaker 7: as strong as services. You know, goods are going to

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Speaker 7: be impacted by tear us more so than services, and

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Speaker 7: so we're going to continue to see that shift between

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Speaker 7: services gaining sharing at the expensive goods. But this is

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Speaker 7: a more of the same good jobs market. And yes,

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Speaker 7: there was a lot of rebound in this number from

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Speaker 7: hurricanes and strike in the last month, and that was

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Speaker 7: really the guess on how much of that payback we

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Speaker 7: would get in this number. It's still the story that

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Speaker 7: we've got some ever so gradual softening of the labor market.

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Speaker 4: Man, it's gradual.

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Speaker 6: So I mean, how do you think the Federal Reserve

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Speaker 6: is going to kind of ingest this data to way?

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Speaker 7: I don't know what number would have gotten them to

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Speaker 7: change their thoughts about being on hold here. I think

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Speaker 7: in December I was more in the camp that the

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Speaker 7: language that they used, the boilerplate language that they used,

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Speaker 7: basically was a hard pause. And now with the January meeting,

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Speaker 7: it's the housekeeping meeting where you have a lot of

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Speaker 7: shifts and voters come in and out. You've got even

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Speaker 7: more of a divergence between doves and hawks on the Fed,

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Speaker 7: and you've got uncertainty around fiscal policy, and uncertainty means

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Speaker 7: policy paralysis. Just on hold here and we'll let you

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Speaker 7: know when it's time to move again.

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Speaker 1: In the blur of this show, and trust me, folks,

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Speaker 1: there's like twenty people helping me and Paul get through this.

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Speaker 1: Every morning, I remember little things, whispers of things from

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Speaker 1: weeks ago, and one of them is an ellen Zeenner whisper.

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Speaker 1: You were heated at the polarity of consumption in America

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Speaker 1: and your definition of the haves to find the ellen

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Speaker 1: Zenner halves in America enjoying a four point one percent

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Speaker 1: unemployment rate.

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Speaker 7: Well, so the unemployment rate we saw the under employment

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Speaker 7: rate also hum down seven. We're giving strength all the

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Speaker 7: way down to the most underserved in the labor market.

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Speaker 7: But that bifurcation of the consumer, the top two income

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Speaker 7: quintiles is more than sixty percent of all consumer spending,

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Speaker 7: and a.

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Speaker 1: Fifth of America is sixty percent.

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Speaker 7: Of consumption one two fifths one, one fifth is forty five.

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Speaker 1: I just got a C minus and marine.

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Speaker 7: Well, you know I'm here to keep you honest.

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Speaker 4: Tom, there we go.

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Speaker 1: But Paul, this is incredible. One two fifths right, forty percent?

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Speaker 1: Now am I close more.

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Speaker 7: Than sixty percent? We're just not getting this. It's a

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Speaker 7: whole lot. Let's just say that a lot lot.

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Speaker 5: So how does that inform kind of your view of

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Speaker 5: kind of investment opportunities out there? Because it seems like

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Speaker 5: the economy, whether you're looking at labor, where you're looking

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Speaker 5: at the consumer, whether you're looking at the Fed, things

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Speaker 5: seem to be in pretty decent shape out there.

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Speaker 7: Right, Yeah, things are pretty decent shape. I think that

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Speaker 7: it means it's going to be higher, higher for longer

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Speaker 7: interest rate. It doesn't mean the Fed's not going to

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Speaker 7: cut this year, and I certainly wouldn't put bets that

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Speaker 7: they're going to hike based on this report, right. I

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Speaker 7: would still put a very low probability that they hike

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Speaker 7: at some.

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Speaker 4: Point this year.

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Speaker 7: But what you've got to do as a policy maker,

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Speaker 7: if you're doing prudent policy making, even when we start

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Speaker 7: to get a flurry of executive orders after January twentieth,

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Speaker 7: you want to look through price increases from tariffs because

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Speaker 7: on the other side of that, you get a hit

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Speaker 7: to aggregate demand. When that comes through, the FED could

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Speaker 7: still be cutting but later this year.

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Speaker 1: The tech team Seth Carpenter and Elan Zettner is the

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Speaker 1: way to go at Morgan Stanley Ellen. This headline just

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Speaker 1: out and I usually don't do this, but it gets

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Speaker 1: to what your meetings are going to be like at

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Speaker 1: Morgan Stanley today. Trader shift full pricing of next FED

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Speaker 1: rate cut to October. Wow, that's wow. Okay for you,

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Speaker 1: that's wow.

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Speaker 4: To me, that's a wow.

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Speaker 7: That's a wow because I have been one of the

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Speaker 7: scenarios out there is that the Fed's gonna cut, and

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Speaker 7: maybe the cut just as much as they're saying they

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Speaker 7: might cut this year, but it comes later later, because

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Speaker 7: they really have to see what policies come out of

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Speaker 7: the administration and if they do hit demand later on.

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Speaker 1: Okay, no, you're not in speaking terms of Seth Carpenter.

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Speaker 1: But the basic idea here we are is you have

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Speaker 1: a twisted economics because you're Texas. You are hard wired.

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Speaker 1: I'm realneur, No, I'm serious, You're hardwired the entrepreneurial nature

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Speaker 1: of America. Do you Seth Carpenter, Richard Berner, Steve Roach,

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Speaker 1: and everyone else in the game. Do we underestimate the

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Speaker 1: entrepreneurial spirit of say someone like Michael Dell.

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Speaker 7: I don't know if we underminestimate the entrepreneurial spirit, but

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Speaker 7: but it was it was. It was gangbusters during COVID

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Speaker 7: when people were able to have a rethink and take

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Speaker 7: advantage of excess income, low interest rates, and we saw

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Speaker 7: a proliferation of business startups. And that's always productive, fraudy

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Speaker 7: for the economy. It's just just a positive all the

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Speaker 7: way around. Now we're seeing productivity gains from the labor

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Speaker 7: market having been so tight for so long that businesses

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Speaker 7: sought efficiencies, and that's coming through now. That's not even

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Speaker 7: AI yet, So American exceptionalism is real. It's very real.

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Speaker 6: Did you change your outlook? Will you change your outlook

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Speaker 6: now that we are having a new administration come in

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Speaker 6: and you know, a kind of more solid Republican Congress?

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Speaker 7: No, no, no, I think that you know, pick your baseline.

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Speaker 7: I mean, none of us know what's going to come

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Speaker 7: out of the administration after January twentieth, and so whatever

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Speaker 7: baseline you have, it's going to be wrong.

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Speaker 1: Yep.

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Speaker 7: So you just have a lot of scenarios, and one

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Speaker 7: of those scenarios will be sort of in the pocket

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Speaker 7: of what we get.

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Speaker 1: What does it mean for the markets? For the stock market,

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Speaker 1: I mean it's away from your remit is Chief Economic

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Speaker 1: strategist GLO. I love this global ahead of thematic. Sure

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Speaker 1: job is to fix the Dallas cowboys? What is What

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Speaker 1: does it mean for the stock market? If you're sitting

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Speaker 1: down with Lisa Shallotte, what do you tell her?

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Speaker 7: Yeah? So Lisa and I are tied at the hip

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Speaker 7: now both on the Global Investment Committee at Morgan Stanley. Uh,

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Speaker 7: And look, I wouldn't be investing in aggregate indexes here

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Speaker 7: because policies are going to come fast and furious, and

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Speaker 7: they're going to infect certain pockets of the market. So

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Speaker 7: you want to be in real assets, you want to

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Speaker 7: be in energy, you want to be in commodities, you.

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Speaker 6: Want to be she's got a game.

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Speaker 7: I'll throw a paw in there. Oh, yes, today are

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Speaker 7: watching course, I'm watching Landman.

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Speaker 1: Okay, Well, what do you think Sweety's all into it?

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Speaker 1: I mean, is it?

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Speaker 4: Well, I don't know a lot about the patch.

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Speaker 7: I'm probably learning just as much as everybody else it.

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Speaker 7: You know, it's not a whole lot going on in

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Speaker 7: West Texas.

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Speaker 1: But you're plus on oil and energy.

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Speaker 7: Oil and American energy reads, healthcare financials because it's going

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Speaker 7: to be higher for longer interest rates, and so there

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Speaker 7: are plenty of pockets of investment right now. We're very,

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Speaker 7: very big on thematic investing AI and defense and specifically

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Speaker 7: software software. So there are pockets, and there are things

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Speaker 7: that we're excited about this year, and they avoid you

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Speaker 7: want to avoid things that are super impacted by the

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Speaker 7: volatility around what policies could come out of the administration.

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Speaker 1: Ellen, thank you. Allen'sler with us with Morgan Stanley. We

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Speaker 1: are so honored. In short notice she came into the

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Speaker 1: Rebecca Patterson is with us with all of our work

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Speaker 1: at Bridgewater over the years, and of course at best

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Speaker 1: in her trust as well. What does boring quiet money

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Speaker 1: do given the shock of a two hundred and fifty

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Speaker 1: six thousands to woe is Me, doom and gloom America,

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Speaker 1: forget about it? What does quiet money do this year?

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Speaker 8: I think quiet money is already invested in equities, and

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Speaker 8: as long as the consumer is holding in and they

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Speaker 8: have jobs and the confidence to spend in today's says

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Speaker 8: they do, then I think you can stay in equities now.

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Speaker 8: Given valuations, the upside's going to be a little more

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Speaker 8: limited unless we keep getting positive surprises. The challenge, I

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Speaker 8: think is where do you go in the equity market?

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Speaker 9: Right?

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Speaker 8: Small cap initially rallied on the Trump win, thinking deregulation,

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Speaker 8: lower rates, it's going to be great, And they've given

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Speaker 8: back all of those gains from right after the election

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Speaker 8: because of rising yields. Small cap needs strong growth and

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Speaker 8: lower yields, and right now they're not getting enough of both.

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Speaker 1: Lisa, thanks for doing that report. Sweeney was occupied. I

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Speaker 1: saw him on the phone with his realtor. Yeah, I

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Speaker 1: got a thirty year bond four point nine to ninety percent. Wow,

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Speaker 1: Paul does that change the landscape.

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Speaker 5: It does, Tom, and you got a big movement on

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Speaker 5: the front end of the curve the two years up

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Speaker 5: ten basis points four point three six percent there.

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Speaker 6: So, Rebecca, how do.

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Speaker 5: You think the Fed is going to digest this data

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Speaker 5: that received today because we the labor market looks pretty solid.

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Speaker 8: Yeah, I mean, I agree with Ellen who has just

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Speaker 8: done before me that a January pause is baked, fully baked. Gotcha,

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Speaker 8: And now the market is discounting that the first or

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Speaker 8: next i should say cut or the first cut this

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Speaker 8: year doesn't come till October. Who the heck knows, right,

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Speaker 8: It's going to depend on all the policies that get

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Speaker 8: rolled out. If the economy slows, if something cracks with

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Speaker 8: the upper income consumer to hurt their confidence and cause

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Speaker 8: them to pull back spending. This picture can change. If

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Speaker 8: immigrants fall sharply, wage.

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Speaker 6: Costs go up, that could. I mean, there's a.

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Speaker 8: Lot of variables that could move us in either direction.

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Speaker 8: So to me, in October cut doesn't seem crazy. I'm

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Speaker 8: I'm more interested right now. And what's going on in

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Speaker 8: the long end. The tenure yield going up, pushing up

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Speaker 8: mortgage rates, which is hurting the housing market, but also

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Speaker 8: what's causing it? Right, and we we should talk about term.

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Speaker 1: Pre Well we do that right now. Where you talking

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Speaker 1: about term premium because doctor Patterson said, Tom, we're talking

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Speaker 1: about term premit. Look, let me cut to the chase

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Speaker 1: you have been vetted. Is a FED governor, a president,

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Speaker 1: I don't know, somebody you know carrying coffee at the

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Speaker 1: Ecchos building. Whatever you've been vetted, Rebecca Patterson, this live

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Speaker 1: tweet says it all. The last cut was a mistake.

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Speaker 1: It killed the Santa rally. Fold the last cut into

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Speaker 1: your concern about rising yields.

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Speaker 8: Well, it's fascinating that as the Fed has cut a

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Speaker 8: hundred basis points, the tenure yield has gone up more

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Speaker 8: than one hundred basis points.

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Speaker 4: It's highly, highly unusual.

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Speaker 8: What I'm worried about now is if the rise in

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Speaker 8: yields is not a reflection of growth. I think today's

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Speaker 8: move right now and the tenure is stronger labor markets,

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Speaker 8: so a higher FED funds rate and strong growth, that's

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Speaker 8: not a bad thing.

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Speaker 6: But if the.

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Speaker 8: Tenure is going up because of uncertainty around policy, around

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Speaker 8: FED independence, around inflation, then you are going to see

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Speaker 8: rising yields herting stocks, and we've seen that pattern over history.

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Speaker 8: That's what I'm worried about, not the level of the yield.

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Speaker 8: What's causing the rise.

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Speaker 4: In the yield?

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Speaker 5: Well, just to that point towards the slock just in

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Speaker 5: a matter of minutes was out with a little note here.

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Speaker 5: Higher for longer continues to be the key theme in markets.

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Speaker 5: Higher for longer in the front end because of the

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Speaker 5: strong economy, higher for longer in the long end because

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Speaker 5: of a strong economy.

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Speaker 6: And fiscal worries, which goes to your point.

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Speaker 5: So I guess that kind of goes to the question

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Speaker 5: when are higher interest rates a real problem for stocks?

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Speaker 8: Again? Psychologically maybe if we crack five percent, that could

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Speaker 8: do some damage in a short term basis, but I

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Speaker 8: think I think the bigger deal is going to be

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Speaker 8: Again what's causing it. I'm watching things like Economic Surprise Index.

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Speaker 8: If growth surprises are disappointing, that's bad for term premium,

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Speaker 8: i e. Term premium goes up in a bad way.

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Speaker 8: If inflation expectations we have data Monday, we have CPI

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Speaker 8: coming up. If those things are moving in the wrong direction,

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Speaker 8: and also earnings, Look what these CEOs and CFOs are

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Speaker 8: saying if they're highlighting fiscal worries, if they're highlighting rates,

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Speaker 8: that could get reflected pretty quickly in term premium, also

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Speaker 8: pushing up you.

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Speaker 1: Yeah, that's right, we wanted to go. I'm going to

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Speaker 1: pick on Brian moynihan. I could be James Diamond or

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Speaker 1: Frankly any other C class officer out there. They've got

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Speaker 1: the bright lights of I got a two hundred and

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Speaker 1: fifty six thousand jobs report four point one percent. I'm sorry,

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Speaker 1: that's an anominal GDP locked in. Do we underestimate the

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Speaker 1: revenue growth that we're going to see all a Delta Airlines? Yeah,

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Speaker 1: six percent up in business class because Rebecca's flying around

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Speaker 1: the country on Delta.

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Speaker 8: Well, Delta is great. I mean, if you have to

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Speaker 8: pick one, that's that's the one that goes domestically, that's

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Speaker 8: whatever is taken.

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Speaker 4: Yeah, it's true.

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Speaker 1: I'm on air France and the fistfights exactly. They're all

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Speaker 1: talking in French. I don't know what they're saying.

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Speaker 6: So what are we doing here?

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Speaker 5: I think with the equity markets, one of the concerns is, boy,

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Speaker 5: we really have to if we're not going to get

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Speaker 5: a rate cut until October then boy, earnings really come

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Speaker 5: front center to support this market.

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Speaker 6: Is that a risk issue for you?

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Speaker 8: Yeah, because again there's a smaller and smaller chunk of

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Speaker 8: the consumer that's holding everything up.

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Speaker 6: Right.

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Speaker 8: The lower end consumer, we know, is hurting. So you

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Speaker 8: need the upper middle class and the upper income consumer

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Speaker 8: to continue spend. They can they have the jobs, they have,

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Speaker 8: the income, they have wealth creation from housing inequities. Do

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Speaker 8: they have the confidence and willingness to keep spending? And

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Speaker 8: that can change quickly? Right now, it looks.

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Speaker 1: Good, but with a nominal gd I mean, where would

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Speaker 1: you model out nominal GDP? I don't want you to

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Speaker 1: do it because I know you're not doing it, because

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Speaker 1: you know you're on in this wonderful garden. Leave. But

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Speaker 1: if you add an Excel spreadsheet in front of you,

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Speaker 1: you've got you've got to model four point eight percent

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Speaker 1: five percent five percent plus nominal GDP.

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Speaker 8: Right, yeah, yeah, no, it's hard to get barish on

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Speaker 8: equities in that environment. Again, the question is given valuations,

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Speaker 8: where do you go and the other thing beyond just

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Speaker 8: the consumer and the job market, think about tech, right,

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Speaker 8: we know, forget about Navidia. The rest of the mag

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Speaker 8: seven this year, next year, are going to be spending

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Speaker 8: two hundred and fifty billion.

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Speaker 1: Yeah, the Microsoft eighty billion number less.

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Speaker 8: Friday exactly, and that's money that's going into the economy,

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Speaker 8: also supporting this big nominal GDP number.

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Speaker 1: Your family members call us in time lose the jobs report.

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Speaker 1: Talk to her about the dollar. Oh, the dollar, call

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Speaker 1: for remccam patterson.

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Speaker 8: I think we have another strong dollar year. The thing

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Speaker 8: I'm focused on really is the Chinese rememby. They intervened

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Speaker 8: today to try to slow the depreciation. They need to depreciate.

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Speaker 8: But if they depreciate in a Trump administration, he's going

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Speaker 8: to come right back at him. And so what do

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Speaker 8: they do. They have to They have to stimulate the consumer.

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Speaker 8: That is their only way out, and so far President

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Speaker 8: she is not willing to give on that.

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Speaker 1: Can you model a vector of depreciation back to where

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Speaker 1: they were with weakness pre two thousand and five. I

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Speaker 1: think it was hoof that's a big move.

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Speaker 4: That's a big movie, trying to make some news.

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Speaker 8: Look in twenty eighteen, the rememby fell ten percent against

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Speaker 8: the dollar during the trade war. Most economists and strategists

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Speaker 8: I'm talking to think that is very likely to happen again.

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Speaker 8: So here's your headline. The Chinese rememby if the PBOC,

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Speaker 8: if the Central Bank lets it, is going to fall

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Speaker 8: ten percent or.

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Speaker 4: More this year.

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Speaker 6: The question is will they allow it?

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Speaker 8: Are they Are they going to avoid capital flight worries.

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Speaker 6: And prevent it, or are they.

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Speaker 8: Going to do it because they need it for exports,

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Speaker 8: they need it for manufacturing.

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Speaker 6: Did you change your outlook at all? Just real quickly?

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Speaker 6: With its new administration coming in.

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Speaker 8: I want to see which policies get pushed forward first

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Speaker 8: and the size that matters so much to me. So

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Speaker 8: I think we're all going to know a lot more,

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Speaker 8: probably by early February.

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Speaker 1: Thank you so much for coming in today. Reb Thank

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Speaker 1: you Gerson with us with great perspective. It's just like

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Speaker 1: I got goosebumps, folks. I mean, this is what it's about, Claudia.

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Speaker 1: So I'm Stephanie Roth. Before that, then we go to

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Speaker 1: Ellen Zettner. Ms. Patterson darkens the door with really important

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Speaker 1: comments there on currency, on the dollar strength. They got

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Speaker 1: a thirty year bond. Excuse me, Stephanie Roth. We go

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Speaker 1: out to four digits and surveillance five point zero zero

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Speaker 1: zero three sounds like a bank account number. We're at

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Speaker 1: five percent in a thirty year bond as well, and

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Speaker 1: then we finished wrong. I mean, I literally got ducky

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Speaker 1: bumps here. I can't I can't stand it. Christina Campman,

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Speaker 1: he joins us right now because she's gonna synthesize all

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Speaker 1: the sixty thousand feet garbage and bring it down to

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Speaker 1: yield and price and the comfort of what Paul Sweeney

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Speaker 1: talks about was I just want to get my money back.

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Speaker 1: Joining us from Invesco senior portfolio manager doesn't describe her abilities,

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Speaker 1: Christina cat Many yields are up? Are your portfolios hurting?

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Speaker 1: Because I believe price is down?

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Speaker 10: Prices are down. Look, we have been looking for a

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Speaker 10: sleeper curve. That's kind of been our thesis much of

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Speaker 10: last happening happening, And you take a step back. A

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Speaker 10: month ago, we sat down post payrolls, and I think

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Speaker 10: we talked about, like, what's a reasonable range for tens

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Speaker 10: when we have all of this uncertainty about policy and

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Speaker 10: what comes through. And we talked about four twenty five,

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Speaker 10: four seventy five, And I feel like throwing out four

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Speaker 10: seventy five. A month ago when we were sitting at

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Speaker 10: four twenty, people looked at you like.

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Speaker 4: You were crazy.

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Speaker 10: Yes we did, and here we are at four seventy eight,

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Speaker 10: and in that time you've had this massive reprice and

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Speaker 10: now you have this the market chatter talking about five

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Speaker 10: and five, twenty five and five fifty.

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Speaker 4: We've done a lot of work.

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Speaker 10: So I think from here to Ellen's point, like we're

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Speaker 10: all kind of in this holding pattern of what kind

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Speaker 10: of policies do we get and are there risks to

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Speaker 10: further higher yields for shore in a sepercurve? But I

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Speaker 10: think the bar for the Fed to hike is very high.

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Speaker 10: I think that there's a lot of value in the

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Speaker 10: front end, even with we sold off even more today.

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Speaker 4: I don't think we should be pricing at.

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Speaker 5: Hikes because again the red headline across in the Bloomberg

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Speaker 5: terminals that the traders are now saying maybe the first

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Speaker 5: rate cup won't till October.

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Speaker 6: Does that seem reasonable to you?

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Speaker 10: Look, I think part of that, when you strip it out,

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Speaker 10: is people pricing in, or the market pricing and trying

439
00:21:46,920 --> 00:21:49,000
Speaker 10: to price in some probability of a hike, which we

440
00:21:49,080 --> 00:21:50,480
Speaker 10: don't think is realistic.

441
00:21:50,520 --> 00:21:52,080
Speaker 4: But I think it's right that the FED.

442
00:21:51,920 --> 00:21:54,439
Speaker 10: Is in this weight and see period as is the

443
00:21:54,440 --> 00:21:58,520
Speaker 10: market of we know we're getting inauguration in a few weeks.

444
00:21:58,640 --> 00:22:00,639
Speaker 10: What are the policies? And it's still the question that

445
00:22:00,640 --> 00:22:03,359
Speaker 10: we've had since election day. What is the mix is?

446
00:22:03,720 --> 00:22:06,240
Speaker 10: What is the magnitude, What is the timing? What's the order?

447
00:22:06,680 --> 00:22:09,920
Speaker 1: Bring this back to the people listening and their commutes

448
00:22:09,920 --> 00:22:12,920
Speaker 1: this morning, the people waking up on the West Coast

449
00:22:13,000 --> 00:22:16,040
Speaker 1: and the shattered Los Angeles and even to the pros.

450
00:22:16,160 --> 00:22:19,320
Speaker 1: Forget about all the spread malarchy, forget about you know,

451
00:22:19,400 --> 00:22:22,520
Speaker 1: all the Frank Fobosei stuff. Do I just buy a

452
00:22:22,560 --> 00:22:25,879
Speaker 1: two year or a six month one year CD and

453
00:22:25,960 --> 00:22:27,359
Speaker 1: wait for the damage to clear.

454
00:22:27,760 --> 00:22:29,439
Speaker 10: Look, I think that you're starting to get to a

455
00:22:29,440 --> 00:22:31,840
Speaker 10: point that there's some value at the curve to say,

456
00:22:31,880 --> 00:22:35,520
Speaker 10: like should I invest the money out the curve? I

457
00:22:35,560 --> 00:22:37,919
Speaker 10: think tens is where you're safer. I think thirties you

458
00:22:38,000 --> 00:22:42,240
Speaker 10: have more. What is our fiscal what goes on? We've

459
00:22:42,520 --> 00:22:45,000
Speaker 10: and we're going to have this headline roulette, but we've

460
00:22:45,000 --> 00:22:45,680
Speaker 10: had that already.

461
00:22:45,720 --> 00:22:47,480
Speaker 4: Like to get rid of the debt ceiling, like you're

462
00:22:47,520 --> 00:22:49,280
Speaker 4: going to have noise there as a result.

463
00:22:49,680 --> 00:22:52,600
Speaker 10: So real yields is another one, Like you start to

464
00:22:52,600 --> 00:22:55,679
Speaker 10: talk about long end real yields around two fifty plus.

465
00:22:55,720 --> 00:23:00,800
Speaker 10: You're getting what inflation in fact realizes. As a personal investor,

466
00:23:00,880 --> 00:23:02,879
Speaker 10: that probably makes sense of can you put that in

467
00:23:02,920 --> 00:23:05,639
Speaker 10: your portfolio in a mix with you have some cash,

468
00:23:05,720 --> 00:23:07,480
Speaker 10: you have some combo of risk assets.

469
00:23:07,880 --> 00:23:10,840
Speaker 6: How about the credit risk here? How much credit risk

470
00:23:10,880 --> 00:23:11,919
Speaker 6: are you taking in this market?

471
00:23:12,160 --> 00:23:16,320
Speaker 10: So we have been a bit more cautious on US

472
00:23:16,400 --> 00:23:20,639
Speaker 10: credit risk, probably to our own detriment within our own funds,

473
00:23:20,720 --> 00:23:23,160
Speaker 10: and again we run global funds. We have obviously within

474
00:23:23,240 --> 00:23:28,600
Speaker 10: Invesco people that are more specifically just looking at credit. Again,

475
00:23:28,680 --> 00:23:30,760
Speaker 10: I say to our own detriment, because it's continued to

476
00:23:30,840 --> 00:23:33,160
Speaker 10: perform exceptionally well, and you look at even the start

477
00:23:33,160 --> 00:23:35,760
Speaker 10: of the year, like the corporate supply numbers this week

478
00:23:35,800 --> 00:23:36,520
Speaker 10: are incredible.

479
00:23:36,920 --> 00:23:40,720
Speaker 1: Why why why why why are they?

480
00:23:40,880 --> 00:23:43,160
Speaker 10: I think like part of it, part of it's probably

481
00:23:43,160 --> 00:23:45,080
Speaker 10: some of that, and part of it is just always

482
00:23:45,160 --> 00:23:48,720
Speaker 10: January cistin ols of calendar of issuance coming out. But

483
00:23:49,119 --> 00:23:53,080
Speaker 10: you look at that and IG spreads are incredibly well behaved,

484
00:23:53,320 --> 00:23:56,679
Speaker 10: and I think you have this sentiment in the market

485
00:23:56,880 --> 00:24:00,440
Speaker 10: about positive US and really negative the rest of the world,

486
00:24:00,560 --> 00:24:03,920
Speaker 10: And so is there some risk that US credit can

487
00:24:04,080 --> 00:24:08,520
Speaker 10: in fact widen because the sentiment is so rock solid

488
00:24:08,520 --> 00:24:09,720
Speaker 10: there that you could have a breakback.

489
00:24:09,840 --> 00:24:11,840
Speaker 1: You can't talk individuals. But let's say one of the

490
00:24:11,920 --> 00:24:14,040
Speaker 1: mag seven calls up and goes Christina and we need

491
00:24:14,080 --> 00:24:16,400
Speaker 1: a cup of coffee. What do you tell them about

492
00:24:16,440 --> 00:24:21,480
Speaker 1: the magnitude of debt issuance? Now, yields are up. Instinctively,

493
00:24:21,520 --> 00:24:24,840
Speaker 1: Paul and like, don't issue. And yet, as Christina mentions,

494
00:24:24,880 --> 00:24:27,560
Speaker 1: it's been nuts. Is that what we're going to see here?

495
00:24:27,720 --> 00:24:28,320
Speaker 4: It's been nuts?

496
00:24:28,359 --> 00:24:32,639
Speaker 10: And I think the market is more sensitive and reactive

497
00:24:33,240 --> 00:24:36,760
Speaker 10: to I don't think on a corporate level, there's a

498
00:24:36,760 --> 00:24:40,720
Speaker 10: lot of concern of you have strong balance sheets, you

499
00:24:40,760 --> 00:24:45,240
Speaker 10: have a strong consumer, and then from nations, if you look.

500
00:24:45,160 --> 00:24:48,200
Speaker 4: At like debt levels, US debt levels.

501
00:24:48,000 --> 00:24:50,960
Speaker 10: Are things that you think the market should be like

502
00:24:50,960 --> 00:24:52,879
Speaker 10: like falling out of its chair for a number of

503
00:24:53,000 --> 00:24:56,240
Speaker 10: years now as we push this, but the market gives

504
00:24:56,280 --> 00:24:59,320
Speaker 10: a lot of You've had this US exceptionalism story for

505
00:24:59,480 --> 00:25:03,240
Speaker 10: a decade, so it gives the US a lot of grace.

506
00:25:03,400 --> 00:25:06,480
Speaker 1: Paul, get one more question in here, folks. Anna Wong

507
00:25:06,560 --> 00:25:09,399
Speaker 1: will join us with a market open at nine point thirty.

508
00:25:09,920 --> 00:25:13,439
Speaker 1: She nailed the shots report. Doctor Wong will join us

509
00:25:13,440 --> 00:25:16,400
Speaker 1: some bluebrig economics. One more to Christina Campany, the.

510
00:25:16,359 --> 00:25:18,720
Speaker 6: Curve is steepening. What does that tell you?

511
00:25:20,440 --> 00:25:24,919
Speaker 10: I think it's I'm a little surprised of just today

512
00:25:24,960 --> 00:25:27,000
Speaker 10: post this number that you've actually seen a further move

513
00:25:27,000 --> 00:25:29,240
Speaker 10: in the front end. And I think to what we discussed,

514
00:25:29,280 --> 00:25:31,679
Speaker 10: it's the market talking about like will you really have

515
00:25:31,760 --> 00:25:34,199
Speaker 10: hikes from the front end. I think from here the

516
00:25:34,240 --> 00:25:38,320
Speaker 10: curve can still push a bit steeper because you have

517
00:25:38,400 --> 00:25:41,680
Speaker 10: all this uncertainty and questions about what is fiscal what

518
00:25:42,280 --> 00:25:43,240
Speaker 10: are policies, what.

519
00:25:43,200 --> 00:25:44,040
Speaker 4: Does inflation look like?

520
00:25:44,080 --> 00:25:46,959
Speaker 10: All of these things that when the curve is in

521
00:25:47,040 --> 00:25:50,480
Speaker 10: swaps two ten's only is pushing ten basis once you

522
00:25:50,480 --> 00:25:53,040
Speaker 10: don't have a lot of premium there like cash is forty.

523
00:25:53,840 --> 00:25:56,159
Speaker 10: Historically we've seen way seper numbers. So I think that

524
00:25:56,200 --> 00:25:58,439
Speaker 10: there's clear value on the front end here because I

525
00:25:58,440 --> 00:25:59,960
Speaker 10: think that the bar for the Fed to hike is

526
00:26:00,200 --> 00:26:03,200
Speaker 10: very high, and that you can still see that's the bias.

527
00:26:03,560 --> 00:26:05,359
Speaker 1: I have no idea what she just said to you.

528
00:26:05,440 --> 00:26:08,480
Speaker 1: Bol she starts slipping into investco talk.

529
00:26:08,760 --> 00:26:12,359
Speaker 5: Yeahs, Rob, bond people, they are bond people are different.

530
00:26:12,600 --> 00:26:15,680
Speaker 1: They're just different. Camp Christina can't many things.

531
00:26:15,720 --> 00:26:17,359
Speaker 6: They want to get paid back is the thing they do.

532
00:26:17,400 --> 00:26:19,840
Speaker 1: They want their money back. And Christina us your Bloomberg

533
00:26:19,880 --> 00:26:23,160
Speaker 1: terminal today. Play Christina Campany with us with Invesco.

534
00:26:29,400 --> 00:26:33,120
Speaker 2: You're listening to the Bloomberg Surveillance Podcast. Catch us live

535
00:26:33,200 --> 00:26:36,480
Speaker 2: weekday afternoons from seven to ten am Eastern. Listen on

536
00:26:36,560 --> 00:26:39,880
Speaker 2: Apple CarPlay and Android Auto with the Bloomberg Business app,

537
00:26:40,160 --> 00:26:42,080
Speaker 2: or watch us live on YouTube.

538
00:26:42,359 --> 00:26:45,200
Speaker 1: Joining us now is the laureate and there is a

539
00:26:45,359 --> 00:26:49,320
Speaker 1: Ned Philips Paul Krugman distinction in the In the year

540
00:26:49,440 --> 00:26:54,400
Speaker 1: where Professor Krugman took the trophy, he was the sole winner.

541
00:26:54,560 --> 00:26:59,399
Speaker 1: I can't tell you within modern economics a special that is.

542
00:26:59,480 --> 00:27:02,640
Speaker 1: I've been a if you're, defender of his international economics,

543
00:27:03,119 --> 00:27:05,520
Speaker 1: retiring from the New York Times colin where he's been

544
00:27:05,520 --> 00:27:08,399
Speaker 1: a lightning rod of debate, and we are honored that

545
00:27:08,440 --> 00:27:13,560
Speaker 1: we can speak our international economics forward with Paul Krubman. Paul,

546
00:27:13,600 --> 00:27:16,880
Speaker 1: thank you so much for joining Bloomberg this morning. If

547
00:27:16,880 --> 00:27:18,800
Speaker 1: you had a cup of coffee in mar A Lago

548
00:27:18,880 --> 00:27:22,119
Speaker 1: with President elect Trump this morning, how would you brief

549
00:27:22,359 --> 00:27:23,280
Speaker 1: President Trump?

550
00:27:25,240 --> 00:27:28,320
Speaker 9: I would ask, what on earth do you think you're doing.

551
00:27:28,640 --> 00:27:33,119
Speaker 9: You know, we're looking at a US economy that you know,

552
00:27:33,440 --> 00:27:37,200
Speaker 9: this morning's Dows report was really good. Everything is kind

553
00:27:37,200 --> 00:27:41,400
Speaker 9: of coming up roses. It's soft landing everywhere. And yet

554
00:27:41,440 --> 00:27:44,480
Speaker 9: he's preparing or claims he preparing to go on this

555
00:27:46,200 --> 00:27:50,760
Speaker 9: trade war against everybody. And the question really is why,

556
00:27:50,880 --> 00:27:54,800
Speaker 9: what is it? Why do you want to do something

557
00:27:54,880 --> 00:27:58,600
Speaker 9: so disruptive when you're inheriting an economy that is really

558
00:27:58,640 --> 00:27:59,440
Speaker 9: looking pretty good.

559
00:28:00,200 --> 00:28:02,960
Speaker 1: I'm looking Paul Krugman. It's something you taught with a

560
00:28:03,000 --> 00:28:06,760
Speaker 1: piece of chuck at Princeton and at City College. The

561
00:28:06,800 --> 00:28:10,159
Speaker 1: basic idea here is a tariff chart, which is the

562
00:28:10,200 --> 00:28:14,160
Speaker 1: microeconomics in dynamics. We talked to Richard Claire the other

563
00:28:14,240 --> 00:28:18,160
Speaker 1: day about the dead weight loss of tariffs for our listeners,

564
00:28:19,240 --> 00:28:22,520
Speaker 1: the magnitude of terriffs does it matter or is this

565
00:28:22,760 --> 00:28:26,200
Speaker 1: just simply a dead weight loss to each American citizen?

566
00:28:27,320 --> 00:28:29,760
Speaker 9: Oh no, the magnitude. I mean, one of the things

567
00:28:29,800 --> 00:28:36,480
Speaker 9: that you learn from a studying the economics of tariffs

568
00:28:36,720 --> 00:28:40,800
Speaker 9: is that tariffs at low rates do very very little harm.

569
00:28:42,160 --> 00:28:44,880
Speaker 9: We had an average tariff of something like two to

570
00:28:44,960 --> 00:28:48,280
Speaker 9: three percent. We do at the moment coming into this

571
00:28:49,320 --> 00:28:51,800
Speaker 9: that if you ask me how much difference would it

572
00:28:51,840 --> 00:28:54,160
Speaker 9: make if we got that down to zero, the answer

573
00:28:54,280 --> 00:28:58,760
Speaker 9: is basically invisible. But if you go from five percent

574
00:28:59,280 --> 00:29:03,440
Speaker 9: to five percent, which is what Trump's talking about for

575
00:29:03,520 --> 00:29:09,600
Speaker 9: everybody and sixty percent for China, then it's roughly speaking,

576
00:29:09,920 --> 00:29:13,360
Speaker 9: we think that the losses are to go up roughly

577
00:29:13,400 --> 00:29:16,920
Speaker 9: as the square of the teriff freight. So with Trump

578
00:29:16,960 --> 00:29:20,920
Speaker 9: talking not about a modest increase in tariffs, not about

579
00:29:21,040 --> 00:29:24,480
Speaker 9: a tariffs on a few products, but across the board

580
00:29:24,520 --> 00:29:29,560
Speaker 9: trade war, sweet holy tariff levels, that starts to become

581
00:29:29,600 --> 00:29:31,800
Speaker 9: a really really big deal, Paul have been.

582
00:29:31,840 --> 00:29:34,760
Speaker 1: If you're in folks, the textbook on this is Krugman Opsfield.

583
00:29:34,800 --> 00:29:36,960
Speaker 1: It's all again. You throw Ken rogoff In as well,

584
00:29:36,960 --> 00:29:40,000
Speaker 1: but Krugman ops Who. There's some adult textbooks out there

585
00:29:40,400 --> 00:29:44,160
Speaker 1: of what Kruman invented for us in international economics. Paul,

586
00:29:44,200 --> 00:29:47,160
Speaker 1: I've always defended you by saying, the then diagram of

587
00:29:47,240 --> 00:29:51,440
Speaker 1: Krugman economics and John Taylor economics at Stanford is pretty

588
00:29:51,440 --> 00:29:56,760
Speaker 1: pretty tight. Can Kevin Hassett advise this president towards some

589
00:29:57,000 --> 00:30:01,239
Speaker 1: form of tariff moderation or sand uh?

590
00:30:01,640 --> 00:30:08,800
Speaker 9: Kevin Hassett has a history of basically saying whatever. I mean,

591
00:30:08,840 --> 00:30:12,760
Speaker 9: he's he's been a a loyalist and a court here.

592
00:30:13,160 --> 00:30:17,000
Speaker 9: I would be really shocked if he goes to you know,

593
00:30:17,400 --> 00:30:22,480
Speaker 9: Karras appears to be a real Trump obsession. And I'd

594
00:30:22,520 --> 00:30:28,200
Speaker 9: be shocked if Hash or actually anybody uh stood up

595
00:30:28,240 --> 00:30:30,920
Speaker 9: to Trump and said, mister president, you're thinking about this

596
00:30:30,960 --> 00:30:37,160
Speaker 9: all wrong. Uh. You know, I I've been writing for listeners.

597
00:30:37,200 --> 00:30:40,520
Speaker 9: I'm retired from the Times, but not from life, and

598
00:30:40,720 --> 00:30:43,360
Speaker 9: I'm I'm writing almost every day on my substack.

599
00:30:43,440 --> 00:30:46,480
Speaker 1: How do you substack? He needs to make a buck

600
00:30:46,520 --> 00:30:49,800
Speaker 1: on this, That's what it is, Paul. How do they

601
00:30:49,840 --> 00:30:52,960
Speaker 1: still see your writing as you've exited the Times?

602
00:30:53,600 --> 00:30:57,920
Speaker 9: Okrugman dot substack dot dot com. Just google Krugman substack

603
00:30:58,080 --> 00:31:00,800
Speaker 9: and you'll find it. And look, you know, I'm free

604
00:31:00,800 --> 00:31:04,520
Speaker 9: to it's a newsletter slash blog. And I mean, and

605
00:31:04,840 --> 00:31:07,200
Speaker 9: what I wrote the other day was We're seeing a

606
00:31:07,240 --> 00:31:11,240
Speaker 9: continual dynamic where people who claim to be close to

607
00:31:11,320 --> 00:31:17,680
Speaker 9: Trump but remain anonymous tell news source newspaper writers, hey,

608
00:31:17,720 --> 00:31:20,640
Speaker 9: He's not really as crazy as he sounds, and then

609
00:31:20,680 --> 00:31:23,960
Speaker 9: Trump immediately reacts with a truth social post saying yes

610
00:31:24,040 --> 00:31:27,480
Speaker 9: I am. So. It does look like we're really talking

611
00:31:27,480 --> 00:31:30,840
Speaker 9: about in terrence on a scale that we really have

612
00:31:31,000 --> 00:31:35,640
Speaker 9: not seen. We're talking about a reversal of really ninety

613
00:31:35,760 --> 00:31:38,320
Speaker 9: years of the US policy trying to.

614
00:31:38,640 --> 00:31:39,880
Speaker 6: Where I wanted to go, Professor.

615
00:31:39,920 --> 00:31:42,200
Speaker 5: I mean, you know, I grew up on global Wall Street,

616
00:31:42,240 --> 00:31:45,160
Speaker 5: where and many of our listeners and viewers as well

617
00:31:45,840 --> 00:31:50,680
Speaker 5: of internationalism being a fundamental business tenant. Now that's taken

618
00:31:50,720 --> 00:31:53,280
Speaker 5: a back seat here over the last ten years. Is

619
00:31:53,320 --> 00:31:54,520
Speaker 5: internationalism dead?

620
00:31:55,640 --> 00:31:55,920
Speaker 1: Well?

621
00:31:56,360 --> 00:31:58,959
Speaker 9: Probably in the form it was, Yeah, I mean a

622
00:31:58,960 --> 00:32:03,120
Speaker 9: lot of this was usagemony, and we thought that a

623
00:32:03,600 --> 00:32:09,280
Speaker 9: more prosperous, peaceful world was in our interest. You know,

624
00:32:09,320 --> 00:32:11,160
Speaker 9: what was good for the world was good for America,

625
00:32:11,440 --> 00:32:13,959
Speaker 9: and we thought that freer trade was good for America,

626
00:32:14,400 --> 00:32:18,360
Speaker 9: and we led the way. We built a world trading

627
00:32:18,400 --> 00:32:22,600
Speaker 9: system kind of in US, in our own image. It's

628
00:32:22,760 --> 00:32:29,680
Speaker 9: very rules bound, legalistic, it's you know it, and it worked.

629
00:32:29,920 --> 00:32:32,680
Speaker 9: We've managed to get everybody's tariffs down. We got to

630
00:32:32,720 --> 00:32:36,720
Speaker 9: a world of pretty close to free trade. We've been

631
00:32:37,240 --> 00:32:40,600
Speaker 9: in the last couple of decades. The European Union, which

632
00:32:40,680 --> 00:32:43,600
Speaker 9: is not very united on many things but is unified

633
00:32:43,600 --> 00:32:47,600
Speaker 9: on trade policy, sort of co managed the system with US.

634
00:32:47,960 --> 00:32:52,160
Speaker 9: Now we've gotten much more nationalistic, and even Biden was

635
00:32:52,920 --> 00:32:56,360
Speaker 9: pursuing for I think pretty good reasons and pretty seriously

636
00:32:56,680 --> 00:33:03,480
Speaker 9: nationalistic policies. It's on technology and China. But so the

637
00:33:03,560 --> 00:33:08,720
Speaker 9: age of full on more globalism is good. That's behind us.

638
00:33:09,160 --> 00:33:11,880
Speaker 9: That was that that really died about a decade ago.

639
00:33:12,440 --> 00:33:16,520
Speaker 9: But there's a big difference between saying, Okay, we're going

640
00:33:16,560 --> 00:33:19,160
Speaker 9: to be much more selective about this and maybe even

641
00:33:19,200 --> 00:33:23,320
Speaker 9: be protectionists here and there, and saying, you know, smooth

642
00:33:23,320 --> 00:33:25,840
Speaker 9: Holly had the right idea, which is basically what Trump

643
00:33:25,880 --> 00:33:26,200
Speaker 9: is saying.

644
00:33:26,360 --> 00:33:28,920
Speaker 5: Right, So, professor, you know, we had today's a big

645
00:33:29,000 --> 00:33:31,880
Speaker 5: jobs day here on a global Wall Street, showing again

646
00:33:31,960 --> 00:33:34,840
Speaker 5: the strength of the US labor market. That calls into

647
00:33:34,920 --> 00:33:38,160
Speaker 5: question another one of the president policies, which is about

648
00:33:38,440 --> 00:33:41,440
Speaker 5: immigration and what to do with the migrants that are

649
00:33:41,520 --> 00:33:46,280
Speaker 5: already here. From an economic perspective, what would your how

650
00:33:46,280 --> 00:33:49,600
Speaker 5: would you advise the president on thinking about immigration policy.

651
00:33:50,480 --> 00:33:53,360
Speaker 9: I mean, immigration has been one of the great strengths

652
00:33:53,400 --> 00:33:56,400
Speaker 9: of the US economy, whatever else you may think about it,

653
00:33:57,480 --> 00:34:01,720
Speaker 9: and I mean it's not actually a source of crime

654
00:34:01,840 --> 00:34:04,520
Speaker 9: or any of the things that he says, but the

655
00:34:04,560 --> 00:34:08,719
Speaker 9: immigration has been a tremendous safety valve has helped to

656
00:34:08,760 --> 00:34:16,080
Speaker 9: contain inflation. And the immigrants, particularly if I might say

657
00:34:16,120 --> 00:34:20,160
Speaker 9: undocumented immigrants, they're not evenly spread across the US economy.

658
00:34:20,320 --> 00:34:24,719
Speaker 9: There a really critical part of the labor force in

659
00:34:24,760 --> 00:34:28,560
Speaker 9: some particular sectors if you want, if you're worried about

660
00:34:28,600 --> 00:34:33,640
Speaker 9: agriculture or meat packing or construction, those are all sectors

661
00:34:33,680 --> 00:34:38,800
Speaker 9: where we have an aging. The native born population is agent.

662
00:34:39,040 --> 00:34:42,640
Speaker 9: The working age native born population is shrinking because we've

663
00:34:42,680 --> 00:34:45,239
Speaker 9: had low fertility for a really long time. So that

664
00:34:45,360 --> 00:34:49,160
Speaker 9: you know, without immigration, we would be basically we would Japan.

665
00:34:49,400 --> 00:34:53,440
Speaker 9: And so from an economic point of view, this is

666
00:34:53,480 --> 00:34:57,080
Speaker 9: a hugely This is a tremendous self owned Paul.

667
00:34:56,960 --> 00:34:59,080
Speaker 1: Krugman with this, we are thrilled to these with us.

668
00:34:59,120 --> 00:35:02,360
Speaker 1: Year was see you in y Qun's Stone Center and

669
00:35:02,440 --> 00:35:08,320
Speaker 1: Socioeconomic Inequality among others and affiliated also with the Yellows,

670
00:35:08,440 --> 00:35:10,360
Speaker 1: I should say, and of course he years at Princeton

671
00:35:11,040 --> 00:35:14,080
Speaker 1: as well. I talked to him about his first paper

672
00:35:14,160 --> 00:35:16,279
Speaker 1: once at Yale, which was in star Trek. This is

673
00:35:16,320 --> 00:35:20,000
Speaker 1: a few years ago, yeah, just after Ricardo. But the

674
00:35:20,040 --> 00:35:22,360
Speaker 1: answer is the laureate Paul Krugman with us, thank you

675
00:35:22,400 --> 00:35:26,560
Speaker 1: for the huge response to Professor Krugman with us this morning. Paul,

676
00:35:26,600 --> 00:35:29,520
Speaker 1: I've said this before, but I guess there can be

677
00:35:29,520 --> 00:35:32,440
Speaker 1: a tour of duty when you win a second Nobel Prize.

678
00:35:33,040 --> 00:35:37,600
Speaker 1: You deserve a second Nobel Prize for your persistent discussion

679
00:35:38,400 --> 00:35:44,440
Speaker 1: of wages and monopsony in America, Folks. Monopsony the model

680
00:35:44,800 --> 00:35:49,319
Speaker 1: is a rubber plantation in Malaysia where the rubber plantation

681
00:35:49,600 --> 00:35:53,520
Speaker 1: sets the price because they have power over all the

682
00:35:53,560 --> 00:35:58,440
Speaker 1: farmers and the rubber trees and the manufacturing process. Professor Krugman,

683
00:35:58,960 --> 00:36:04,360
Speaker 1: how ISoP in America affecting our listeners in our viewers

684
00:36:04,400 --> 00:36:05,080
Speaker 1: on YouTube?

685
00:36:06,320 --> 00:36:09,680
Speaker 9: Oh gosh. I mean, I'm in a way what it's

686
00:36:09,719 --> 00:36:13,799
Speaker 9: telling you. I mean that the main monopsony issue on

687
00:36:14,960 --> 00:36:20,920
Speaker 9: wages is is that it's okay to raise the minimum wage.

688
00:36:21,320 --> 00:36:24,080
Speaker 9: I mean, is this is where we really started to

689
00:36:24,080 --> 00:36:26,359
Speaker 9: take it seriously when you first had the work by

690
00:36:26,400 --> 00:36:30,279
Speaker 9: Cardon Krueger, now replicated by many people, which says that

691
00:36:30,360 --> 00:36:37,640
Speaker 9: local minimum wage increases don't actually reduce employments. It you

692
00:36:38,120 --> 00:36:40,520
Speaker 9: ech on one on one unless you well, I have

693
00:36:40,560 --> 00:36:44,239
Speaker 9: to say, even in my own textbook, we do talk

694
00:36:44,280 --> 00:36:46,759
Speaker 9: through how a minimum wage can reduce employment, but it

695
00:36:46,800 --> 00:36:50,359
Speaker 9: doesn't actually seem to happen in the United States. Now,

696
00:36:50,400 --> 00:36:52,960
Speaker 9: that's because minimum wages are low in the United States.

697
00:36:53,000 --> 00:36:55,120
Speaker 9: And you know, if you if you set the minimum

698
00:36:55,160 --> 00:36:57,880
Speaker 9: wage at forty dollars an hour, even I would accept

699
00:36:57,880 --> 00:37:01,759
Speaker 9: that that would have some employment concept points. But so

700
00:37:01,840 --> 00:37:05,840
Speaker 9: that's the main place where it hurts. Although if you

701
00:37:05,960 --> 00:37:11,320
Speaker 9: are you know, a small, small supplier or something trying

702
00:37:11,360 --> 00:37:15,600
Speaker 9: to pedal your stuff on Amazon, the fact you know

703
00:37:15,640 --> 00:37:20,880
Speaker 9: that you've got a giant Beza size monopsimist certainly affects

704
00:37:20,920 --> 00:37:21,440
Speaker 9: your business.

705
00:37:21,840 --> 00:37:24,319
Speaker 1: I mean, it's very interesting to see Paul Kruman and

706
00:37:24,360 --> 00:37:28,200
Speaker 1: then the conservatives listening. I'm going to frame this Paul

707
00:37:28,560 --> 00:37:33,719
Speaker 1: is a liberality in a way, is a Lockean individualism

708
00:37:34,400 --> 00:37:38,719
Speaker 1: of conservative theory in America. Should we be more like

709
00:37:38,880 --> 00:37:42,560
Speaker 1: Germany flat on their back? Should we be more like Sweden?

710
00:37:42,880 --> 00:37:44,560
Speaker 1: Should we be more like France?

711
00:37:45,840 --> 00:37:48,560
Speaker 9: Well, I mean, ideally we should be more like Denmark,

712
00:37:48,680 --> 00:37:52,680
Speaker 9: which is a place that does strong welfare state, strong

713
00:37:52,840 --> 00:37:57,560
Speaker 9: unions and does it well. It's you know, everybody's got

714
00:37:57,680 --> 00:38:02,200
Speaker 9: one of the things. I've spent many years teaching a

715
00:38:02,200 --> 00:38:08,279
Speaker 9: course versus Princeton than at CuNi on the ecnology of

716
00:38:08,280 --> 00:38:11,319
Speaker 9: the welfare state comparing different countries, and one of the

717
00:38:11,320 --> 00:38:13,319
Speaker 9: things you learn, first of all, the United States has

718
00:38:13,320 --> 00:38:15,799
Speaker 9: a much more We have a much bigger welfare state

719
00:38:15,800 --> 00:38:17,879
Speaker 9: than we like to imagine, but it's much smaller than

720
00:38:17,920 --> 00:38:21,919
Speaker 9: what European countries have. But there's no country that does

721
00:38:21,960 --> 00:38:27,320
Speaker 9: everything right. US healthcare is a nightmare. US retirement system

722
00:38:27,440 --> 00:38:30,600
Speaker 9: is actually pretty good. France it's exactly the opposite. So

723
00:38:32,440 --> 00:38:35,719
Speaker 9: it's not as simple more government is good. I mean,

724
00:38:36,000 --> 00:38:39,120
Speaker 9: I think their conservatives always think that less government is good.

725
00:38:40,040 --> 00:38:43,680
Speaker 9: Liberals progressives never think that more government is automatically good.

726
00:38:44,040 --> 00:38:46,680
Speaker 9: But there are certainly things where we should be doing more,

727
00:38:47,400 --> 00:38:49,960
Speaker 9: and obviously that's on wholes for the next few years,

728
00:38:49,960 --> 00:38:54,000
Speaker 9: but there are lots We can learn a lot from

729
00:38:54,040 --> 00:38:56,000
Speaker 9: other countries. That's one thing I would say to you

730
00:38:56,560 --> 00:39:01,120
Speaker 9: as an international economist. The biggest problem with Americans is

731
00:39:01,160 --> 00:39:03,520
Speaker 9: that we don't actually seem to believe the rest of

732
00:39:03,560 --> 00:39:05,640
Speaker 9: the world exists, and we don't think that we can

733
00:39:05,719 --> 00:39:08,319
Speaker 9: learn lessons from things that other countries do.

734
00:39:08,480 --> 00:39:12,480
Speaker 5: Right, Professor, Most of the market participants that we speak to,

735
00:39:12,520 --> 00:39:14,400
Speaker 5: particularly over the last several months, and they see a

736
00:39:14,480 --> 00:39:17,040
Speaker 5: data point like today's non farm paariles, and they feel

737
00:39:17,040 --> 00:39:20,440
Speaker 5: like the FED is engineered a pretty solid soft landing.

738
00:39:20,840 --> 00:39:24,560
Speaker 5: What concerns you? What worries you about this US economy

739
00:39:24,680 --> 00:39:25,120
Speaker 5: right here?

740
00:39:26,320 --> 00:39:29,359
Speaker 9: I think the US economy as of right now is

741
00:39:29,360 --> 00:39:34,759
Speaker 9: in very good shape. I am worried. You know, I've

742
00:39:34,800 --> 00:39:40,480
Speaker 9: been around a while, and the whole ai fewer. And

743
00:39:40,760 --> 00:39:45,319
Speaker 9: although the money being thrown at that technology gives me

744
00:39:45,400 --> 00:39:50,920
Speaker 9: definite nineteen ninety nine vibes, the sense that we may

745
00:39:50,960 --> 00:39:54,560
Speaker 9: be having even if there's even if the technology does

746
00:39:54,640 --> 00:39:56,160
Speaker 9: do a lot of good stuff, and there are some

747
00:39:56,640 --> 00:40:00,440
Speaker 9: indications that it will, the valuations look awfully and you

748
00:40:00,480 --> 00:40:04,719
Speaker 9: can very easily imagine a kind of two thousand, two

749
00:40:04,760 --> 00:40:08,960
Speaker 9: thousand and one type But the biggest concern for policy,

750
00:40:09,160 --> 00:40:11,839
Speaker 9: I mean, if you actually believe that Trump is going

751
00:40:11,880 --> 00:40:15,239
Speaker 9: to do what he promised in the campaign with these

752
00:40:15,320 --> 00:40:22,000
Speaker 9: massive talents, mass deportations, and let's not forget taking away

753
00:40:22,000 --> 00:40:26,520
Speaker 9: a lot of the Faro reserves independence we are, it's

754
00:40:26,560 --> 00:40:29,799
Speaker 9: not at all hard to see us gratuitously. I mean,

755
00:40:29,800 --> 00:40:31,960
Speaker 9: we're in good shape right now, but we could very

756
00:40:32,000 --> 00:40:36,680
Speaker 9: easily have a gratuitous outbreak of stagflation of America and

757
00:40:36,719 --> 00:40:40,640
Speaker 9: it will be entirely coming top down from the White

758
00:40:40,680 --> 00:40:41,600
Speaker 9: House very quickly.

759
00:40:41,640 --> 00:40:43,600
Speaker 1: Here, Professor Krugman, Paul, we got to do this. A

760
00:40:43,719 --> 00:40:47,000
Speaker 1: Kruman won't come back the sub stack this morning. The

761
00:40:47,160 --> 00:40:51,800
Speaker 1: real threat, the real threat of fake numbers. Paul Krugman,

762
00:40:51,840 --> 00:40:54,960
Speaker 1: are you suggesting the president and his administration will cook

763
00:40:55,000 --> 00:40:55,480
Speaker 1: the books?

764
00:40:56,400 --> 00:40:58,960
Speaker 9: I think that's a very high possibility if you believe

765
00:40:59,000 --> 00:41:01,880
Speaker 9: what I'm saying about inflation. Inflation is actually going to

766
00:41:01,920 --> 00:41:04,880
Speaker 9: go up substantially. And do you really imagine that Trump

767
00:41:05,280 --> 00:41:09,040
Speaker 9: will just sit there at and not say these are

768
00:41:09,400 --> 00:41:12,239
Speaker 9: fake numbers, it's fake news and put pressure on the

769
00:41:12,239 --> 00:41:15,160
Speaker 9: Bureau of Labor Statistics to produce better numbers. I mean,

770
00:41:15,200 --> 00:41:19,040
Speaker 9: we've seen populist regimes do that all over the world.

771
00:41:19,480 --> 00:41:21,840
Speaker 9: Why imagine that it won't happen here? And I know

772
00:41:21,920 --> 00:41:24,759
Speaker 9: that people, you know, people who've had long careers at

773
00:41:24,800 --> 00:41:27,359
Speaker 9: the Bureau of Labor Statistics are really worried about this.

774
00:41:27,840 --> 00:41:29,960
Speaker 9: So I was just saying, you know, flag this, this

775
00:41:30,040 --> 00:41:30,880
Speaker 9: is something to watch.

776
00:41:31,120 --> 00:41:33,319
Speaker 1: Paul, generous of your time. Thank you so much again,

777
00:41:33,360 --> 00:41:35,279
Speaker 1: Paul Krugman. In a New Life, You've got it from

778
00:41:35,320 --> 00:41:36,800
Speaker 1: Adam Two's substick.

779
00:41:42,400 --> 00:41:46,320
Speaker 2: This is the Bloomberg Surveillance Podcast. Listen live each weekday

780
00:41:46,360 --> 00:41:49,160
Speaker 2: starting at seven am Eastern on Apple car Play and

781
00:41:49,200 --> 00:41:51,839
Speaker 2: the Android Auto with the Bloomberg Business app. You can

782
00:41:51,880 --> 00:41:55,080
Speaker 2: also listen live on Amazon Alexa from our flagship New

783
00:41:55,160 --> 00:41:58,760
Speaker 2: York station. Just say Alexa play Bloomberg eleven thirty.

784
00:41:59,120 --> 00:42:03,560
Speaker 1: Our newspapers front pages, in our glory, the Lisa Matteo

785
00:42:03,719 --> 00:42:04,560
Speaker 1: our what do you have?

786
00:42:04,760 --> 00:42:07,000
Speaker 11: Well, we're all about the data, right, So the data

787
00:42:07,080 --> 00:42:12,239
Speaker 11: is showing that Americans tipping less than they have in ye. Yes,

788
00:42:12,400 --> 00:42:16,000
Speaker 11: this is the hot topic because two reasons rising menu

789
00:42:16,040 --> 00:42:18,560
Speaker 11: prices and the other one is people are just getting

790
00:42:18,600 --> 00:42:20,239
Speaker 11: tired of all the prompts. You know, you got to

791
00:42:20,400 --> 00:42:23,160
Speaker 11: screen that the places you didn't get it before.

792
00:42:23,320 --> 00:42:25,960
Speaker 6: No, So here's the here what do you do and

793
00:42:25,960 --> 00:42:29,320
Speaker 6: fast rule? Here you go. If you stand, no tip,

794
00:42:29,560 --> 00:42:33,040
Speaker 6: if you sit tip that easy, that's it. That's it.

795
00:42:33,080 --> 00:42:35,720
Speaker 6: Tell me that doesn't work, like nine out of ten times,

796
00:42:35,920 --> 00:42:37,239
Speaker 6: it's tough. It's like the pressures on.

797
00:42:37,280 --> 00:42:38,960
Speaker 11: You're standing there and they flip the screen.

798
00:42:38,760 --> 00:42:40,000
Speaker 6: And then they're like, what do I do?

799
00:42:40,239 --> 00:42:44,160
Speaker 1: Yep, I have I just hit a wall a year

800
00:42:44,200 --> 00:42:47,360
Speaker 1: ago or so and I just don't tip, sort of

801
00:42:47,400 --> 00:42:48,920
Speaker 1: like standing. I think that's brilliant.

802
00:42:49,000 --> 00:42:52,000
Speaker 6: Yeah, I do, And I tip my local plate, my

803
00:42:52,080 --> 00:42:52,760
Speaker 6: local places.

804
00:42:53,160 --> 00:42:53,279
Speaker 1: Well.

805
00:42:53,320 --> 00:42:55,040
Speaker 6: I tip at a restaurant I always tipped very well.

806
00:42:56,000 --> 00:42:58,600
Speaker 5: Then I round up and my local places where I

807
00:42:58,719 --> 00:43:00,919
Speaker 5: know the servers, where I go all time, I'll tip

808
00:43:01,000 --> 00:43:02,640
Speaker 5: above and beyond that. So I want to walk in

809
00:43:02,640 --> 00:43:04,640
Speaker 5: there and say, Sweeney's a good tipper.

810
00:43:04,800 --> 00:43:08,759
Speaker 1: Right in Paris, I tip big like an ugly American.

811
00:43:08,840 --> 00:43:12,759
Speaker 1: They love me. In London, it's so screwed up the

812
00:43:12,760 --> 00:43:16,440
Speaker 1: weights are. They're ruined by the way they do tipping

813
00:43:16,480 --> 00:43:16,880
Speaker 1: in London.

814
00:43:16,880 --> 00:43:20,080
Speaker 11: It's terrible because they get paid more, right, I'm not that's.

815
00:43:19,840 --> 00:43:22,319
Speaker 1: The gimmick, but I don't buy it. They're getting taken

816
00:43:22,320 --> 00:43:24,200
Speaker 1: to the cleaners in London. Next.

817
00:43:24,360 --> 00:43:26,759
Speaker 11: Okay, we all know the price of beef right on

818
00:43:26,800 --> 00:43:29,080
Speaker 11: the rise, but did you know it could get even

819
00:43:29,120 --> 00:43:32,799
Speaker 11: higher because of freezing temperatures in the corn belt. I

820
00:43:32,880 --> 00:43:33,799
Speaker 11: did not realize that.

821
00:43:33,840 --> 00:43:35,239
Speaker 4: But the Wall Street Journal breaks it.

822
00:43:35,200 --> 00:43:39,120
Speaker 11: Down because colder weather and pastures produce this thing called

823
00:43:39,160 --> 00:43:43,040
Speaker 11: prusick acid in the grass, and if the cattle eat it,

824
00:43:43,120 --> 00:43:46,880
Speaker 11: they can die. So the cattle producers are having to

825
00:43:46,920 --> 00:43:49,640
Speaker 11: regulate what these cattle are eating, and so the cattle

826
00:43:49,680 --> 00:43:53,080
Speaker 11: are losing weight, and so lower weight cattle produces less beef,

827
00:43:53,120 --> 00:43:54,399
Speaker 11: which means the prices are going.

828
00:43:54,400 --> 00:43:54,759
Speaker 4: To go up.

829
00:43:54,840 --> 00:43:57,200
Speaker 6: Right, I watch Yellowstone. I know all about the ranching business,

830
00:43:57,360 --> 00:43:59,560
Speaker 6: and that is a tough business. I don't know why

831
00:43:59,560 --> 00:44:02,160
Speaker 6: these his party souls of people. I mean, there's so

832
00:44:02,280 --> 00:44:03,680
Speaker 6: many issue areas.

833
00:44:03,360 --> 00:44:06,880
Speaker 5: Where you can get screwed in the freaking cattle business.

834
00:44:07,040 --> 00:44:07,759
Speaker 6: That is a tough way.

835
00:44:08,200 --> 00:44:11,480
Speaker 11: It's like a double whomy because the USDA just suspended

836
00:44:11,480 --> 00:44:13,799
Speaker 11: exports of live cattle from Mexico because there was a

837
00:44:13,800 --> 00:44:16,479
Speaker 11: parasite found in those and they haven't lifted it yet,

838
00:44:16,520 --> 00:44:18,920
Speaker 11: so that on top of these freezing temperatures.

839
00:44:19,080 --> 00:44:21,719
Speaker 1: Look, I'm looking at live cattle and the bloomberg gets

840
00:44:21,719 --> 00:44:25,200
Speaker 1: some h I know, I know. It's basically a double

841
00:44:25,880 --> 00:44:27,239
Speaker 1: off the pandemic. Wow.

842
00:44:27,480 --> 00:44:30,160
Speaker 6: Next, Okay, so there's a news I learned something I know,

843
00:44:30,480 --> 00:44:30,920
Speaker 6: or you're going to.

844
00:44:30,960 --> 00:44:33,480
Speaker 11: Learn something here. Okay, there's a new side hustle where

845
00:44:33,480 --> 00:44:37,680
Speaker 11: people are earning about thirty thousand dollars making job referrals

846
00:44:37,719 --> 00:44:40,319
Speaker 11: for strangers. Okay, so stick with me here.

847
00:44:40,480 --> 00:44:40,840
Speaker 7: Okay.

848
00:44:41,239 --> 00:44:44,800
Speaker 11: Companies offer these bonuses, right, so when you refer someone,

849
00:44:44,960 --> 00:44:47,239
Speaker 11: you get a nice bonus. Usually it's someone you know,

850
00:44:47,800 --> 00:44:48,920
Speaker 11: but not anymore.

851
00:44:49,160 --> 00:44:50,359
Speaker 6: One tech worker.

852
00:44:50,120 --> 00:44:53,600
Speaker 11: Told Bloomberg he referred over one thousand job candidates. He

853
00:44:53,680 --> 00:44:57,359
Speaker 11: earned thirty thousand dollars in bonuses. He didn't even know them.

854
00:44:57,520 --> 00:44:59,879
Speaker 11: They were all copied and pasted. And the reason why

855
00:45:00,000 --> 00:45:02,040
Speaker 11: it's so big is because job seekers are going to

856
00:45:02,040 --> 00:45:06,239
Speaker 11: these underground places like blind Glass Door refer market, and

857
00:45:06,280 --> 00:45:09,239
Speaker 11: they're making the connections and people are just saying, hey,

858
00:45:09,440 --> 00:45:10,080
Speaker 11: I'll refer you.

859
00:45:11,080 --> 00:45:12,399
Speaker 1: That's how I got my job.

860
00:45:12,760 --> 00:45:14,960
Speaker 4: No say that.

861
00:45:16,480 --> 00:45:20,319
Speaker 11: And finally I gotta go congestion pricing. Okay, so with this,

862
00:45:20,440 --> 00:45:24,480
Speaker 11: there's no surprise here. Congestion pricing is sparking these fishing scams.

863
00:45:24,960 --> 00:45:28,120
Speaker 11: So now people are getting text messages from toll fishers

864
00:45:28,120 --> 00:45:30,880
Speaker 11: saying that they owe a late fee, and then people

865
00:45:30,880 --> 00:45:33,920
Speaker 11: are clicking on the link going to these websites.

866
00:45:33,920 --> 00:45:35,000
Speaker 1: Thank you. That's important.

867
00:45:35,080 --> 00:45:37,320
Speaker 11: Yeah, so it's very important. They're putting out the warning,

868
00:45:37,440 --> 00:45:38,880
Speaker 11: don't get thirty seconds.

869
00:45:38,880 --> 00:45:42,160
Speaker 1: None of this matters of jobs day. You've detected an

870
00:45:42,200 --> 00:45:43,080
Speaker 1: egg shortage.

871
00:45:43,320 --> 00:45:47,360
Speaker 11: Yes, I went to the supermarket. There were no eggs anywhere.

872
00:45:47,520 --> 00:45:49,880
Speaker 11: I talked to our expert, can fail you who told

873
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Speaker 11: me that this issue gone and.

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Speaker 4: The prices are skyline.

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Speaker 11: The bird floor. Yes, the bird flow, but Ken says,

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Speaker 11: go to Walmart least Teyo.

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Speaker 1: Thank you so much to the newspapers.

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Speaker 2: This is the Bloomberg Surveillance podcast, available on Apple, Spotify,

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Speaker 2: and anywhere else you get your podcasts. Listen live each weekday,

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00:46:11,160 --> 00:46:14,160
Speaker 2: seven to ten am Eastern on Bloomberg dot com, the

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00:46:14,239 --> 00:46:17,960
Speaker 2: iHeartRadio app, tune In, and the Bloomberg Business app. You

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00:46:17,960 --> 00:46:21,120
Speaker 2: can also watch us live every weekday on YouTube and

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Speaker 2: always on the Bloomberg terminal