1 00:00:00,160 --> 00:00:03,360 Speaker 1: This is Bloomberg Wall Street Week. What's the state of 2 00:00:03,400 --> 00:00:06,360 Speaker 1: corporate governance? The deficit is a real issue. The US 3 00:00:06,400 --> 00:00:09,880 Speaker 1: economy continues to send mixed signals. The financial stories that 4 00:00:10,039 --> 00:00:13,000 Speaker 1: cheap our world fed action to con concerns over dollar 5 00:00:13,039 --> 00:00:16,520 Speaker 1: liquidity and encouraging China data. The five hundred wealthiest people 6 00:00:16,520 --> 00:00:19,560 Speaker 1: in the world. Through the eyes of the most influential voices, 7 00:00:19,880 --> 00:00:22,880 Speaker 1: Larry Summers, the former Treasury Secretary, star Ward CEO, Kevin 8 00:00:22,960 --> 00:00:26,600 Speaker 1: Johnson sec Chairman J Clayton. Bloomberg wool Street Week with 9 00:00:26,760 --> 00:00:31,240 Speaker 1: David Weston from Bloomberg Radio. Don't bring me no bad news. 10 00:00:31,520 --> 00:00:35,160 Speaker 1: Market shrug off, higher consumer prices and even a vaccination 11 00:00:35,200 --> 00:00:38,480 Speaker 1: program put on hold as they see a glass more 12 00:00:38,680 --> 00:00:41,879 Speaker 1: than half full. This is Bloomberg Wall Street Week. I'm 13 00:00:41,960 --> 00:00:44,960 Speaker 1: David Weston. The markets took it all in stride, with 14 00:00:45,040 --> 00:00:47,879 Speaker 1: the banks posting earnings no one could have dreamed of 15 00:00:48,040 --> 00:00:50,199 Speaker 1: just a year ago, and the S and P and 16 00:00:50,360 --> 00:00:54,400 Speaker 1: Dow and NASDAC one all reaching new record highs. Even 17 00:00:54,440 --> 00:00:57,440 Speaker 1: the US Treasury tenure barely blinked on the J and 18 00:00:57,520 --> 00:01:00,160 Speaker 1: J news, with the yield ticking up only for a 19 00:01:00,160 --> 00:01:03,920 Speaker 1: moment and then turning around and dropping the most since February. 20 00:01:04,440 --> 00:01:07,319 Speaker 1: Heelp us understand the market reaction or maybe lack of reaction. 21 00:01:07,520 --> 00:01:09,759 Speaker 1: We're going down by our Wall Street Week round table 22 00:01:09,840 --> 00:01:12,960 Speaker 1: of Nancy Davis, chief investment officer at Quadratic Capital, and 23 00:01:13,000 --> 00:01:15,680 Speaker 1: also Laird Landman. He is a portfolio manager for a 24 00:01:15,720 --> 00:01:19,160 Speaker 1: fixed income at TCW. So welcome both of you. Lead. 25 00:01:19,200 --> 00:01:22,280 Speaker 1: Let me start with you. You are a fixed income guy. 26 00:01:22,560 --> 00:01:24,679 Speaker 1: One of the big questions I think on investor's minds 27 00:01:24,760 --> 00:01:28,360 Speaker 1: right now is inflation. Is it transitory? Is J? Powell 28 00:01:28,400 --> 00:01:30,600 Speaker 1: tells us? Or it could have been more troubling than that. 29 00:01:30,959 --> 00:01:32,640 Speaker 1: If as you look at the fixed income market, what 30 00:01:32,680 --> 00:01:35,360 Speaker 1: do you look at to answer that question? Well, I 31 00:01:35,360 --> 00:01:37,119 Speaker 1: think it's very hard to know what to look at. 32 00:01:37,200 --> 00:01:39,480 Speaker 1: In the sixties, people looked at the Philips curve. In 33 00:01:39,560 --> 00:01:42,720 Speaker 1: the seventies, the theory of monet of inflation was that 34 00:01:42,760 --> 00:01:45,000 Speaker 1: it was monetary in all places you looked at him 35 00:01:45,080 --> 00:01:48,640 Speaker 1: and to growth. UM. In the in the nineties it 36 00:01:48,720 --> 00:01:51,040 Speaker 1: was pce Star. There's been all different models and none 37 00:01:51,040 --> 00:01:54,840 Speaker 1: of them have really worked. UM. Today we're in a 38 00:01:55,040 --> 00:01:58,840 Speaker 1: we're clearly moved into a direction of uh. This this 39 00:01:58,920 --> 00:02:01,720 Speaker 1: modern monetary One of my favorite charts you can pull 40 00:02:01,800 --> 00:02:05,480 Speaker 1: up on your terminal. Is just just chart the budget 41 00:02:05,480 --> 00:02:09,079 Speaker 1: deficit versus the growth in the Fed balance sheet. It's 42 00:02:09,120 --> 00:02:11,560 Speaker 1: a one for one sort of item. So if anyone 43 00:02:11,600 --> 00:02:15,200 Speaker 1: thinks we're not in modern monetary policy world, take a 44 00:02:15,280 --> 00:02:17,960 Speaker 1: hard look at that um and I think that given 45 00:02:17,960 --> 00:02:20,160 Speaker 1: that it's it's going to be very difficult to know 46 00:02:20,600 --> 00:02:23,880 Speaker 1: whether inflation is going to be real or transitory. But 47 00:02:23,919 --> 00:02:26,320 Speaker 1: as we increase the amount of government spending going on, 48 00:02:26,440 --> 00:02:29,240 Speaker 1: and as we move from the government transferring money to 49 00:02:29,280 --> 00:02:33,520 Speaker 1: individuals to actually spending the money themselves, I believe the 50 00:02:33,560 --> 00:02:37,040 Speaker 1: price elasticities will become will change, and you'll actually see 51 00:02:37,080 --> 00:02:40,440 Speaker 1: more persistent inflation. So that's something we're focused on, is 52 00:02:40,480 --> 00:02:44,440 Speaker 1: the idan that government spending does tend to be subject 53 00:02:44,480 --> 00:02:47,840 Speaker 1: to more inflationary pressures, and they will also crowd out 54 00:02:47,880 --> 00:02:50,960 Speaker 1: as they do infrastructure, they're going to crowd out traditional 55 00:02:51,120 --> 00:02:56,760 Speaker 1: commodities like copper, lumber, steel. So Nancy, you actually try 56 00:02:56,800 --> 00:03:00,639 Speaker 1: to hedge against inflation with your eyeball. Yeah, Uh, give 57 00:03:00,720 --> 00:03:02,799 Speaker 1: us as what you look at an inflation because in 58 00:03:02,800 --> 00:03:05,320 Speaker 1: additional one Lard said, for example, you cook money supply. 59 00:03:05,960 --> 00:03:07,600 Speaker 1: I mean, like M two I think is increased by 60 00:03:07,600 --> 00:03:10,080 Speaker 1: more than year every year. I mean, if you if 61 00:03:10,120 --> 00:03:12,760 Speaker 1: you look at the data and you look at what's 62 00:03:12,800 --> 00:03:17,520 Speaker 1: happening in reality, between the FED having an average inflation target, 63 00:03:17,919 --> 00:03:22,280 Speaker 1: between having fiscal spending, between having the FED not even 64 00:03:22,360 --> 00:03:26,280 Speaker 1: thinking about thinking about raising rates UM and UH a 65 00:03:26,360 --> 00:03:29,239 Speaker 1: blue wave right now, and relative to the rest of 66 00:03:29,280 --> 00:03:33,960 Speaker 1: the world really exporting inflation now from emerging market companies 67 00:03:33,960 --> 00:03:39,800 Speaker 1: and countries. I don't know why people wouldn't have inflation 68 00:03:39,960 --> 00:03:42,119 Speaker 1: in their portfolio. To me, it's sort of like why 69 00:03:42,120 --> 00:03:44,640 Speaker 1: would you why would you take a risk and take 70 00:03:44,680 --> 00:03:48,160 Speaker 1: a bet? To me, UM, inflation is actually a bigger 71 00:03:48,280 --> 00:03:52,080 Speaker 1: risk to investors and a recession because if you think 72 00:03:52,120 --> 00:03:55,400 Speaker 1: about what you know, not not healthy normal inflation, but 73 00:03:55,440 --> 00:04:00,400 Speaker 1: if we had runaway inflation, that would decrease our purchasing 74 00:04:00,480 --> 00:04:04,440 Speaker 1: power right UM, the cost of drugs, the cost of housing, 75 00:04:04,520 --> 00:04:08,960 Speaker 1: the cost of travel, especially if we have a weaker dollar. UM. 76 00:04:09,000 --> 00:04:12,680 Speaker 1: To me, I don't see why people are thinking or 77 00:04:12,760 --> 00:04:16,200 Speaker 1: overthinking it. I think you should just have a diversified portfolio. 78 00:04:16,320 --> 00:04:19,800 Speaker 1: And just because we haven't had runaway inflation for many 79 00:04:19,880 --> 00:04:22,440 Speaker 1: years doesn't mean we're not going to have it in 80 00:04:22,440 --> 00:04:25,680 Speaker 1: the future, So learn pick up on what Nancy just said, 81 00:04:26,000 --> 00:04:27,839 Speaker 1: What about the symmetry of the risk? I mean, we 82 00:04:27,880 --> 00:04:31,279 Speaker 1: don't know what's going to happen, obviously, but what about 83 00:04:31,279 --> 00:04:33,839 Speaker 1: the symmetry. Do you think that's a greater risk of 84 00:04:34,240 --> 00:04:38,520 Speaker 1: out of control they'd say, unmoored inflation, or of disinflation 85 00:04:38,560 --> 00:04:40,920 Speaker 1: or even recession. Well, I was trying to be subtle 86 00:04:40,960 --> 00:04:42,880 Speaker 1: in my first answer, so I'll be direct in this 87 00:04:42,920 --> 00:04:45,800 Speaker 1: one and just say I don't think anybody has a 88 00:04:45,839 --> 00:04:48,919 Speaker 1: good model of inflation, and I certainly don't think the 89 00:04:48,960 --> 00:04:51,640 Speaker 1: FED has it. So the notion that the FED targets 90 00:04:51,640 --> 00:04:54,919 Speaker 1: a variable that they don't really have a model to 91 00:04:55,080 --> 00:04:58,159 Speaker 1: understand seems a little absurd on the surface. So I 92 00:04:58,200 --> 00:05:00,839 Speaker 1: do think it leads to a symmetry. And again, just 93 00:05:00,960 --> 00:05:04,839 Speaker 1: look at that chart that I mentioned before, federal federal 94 00:05:05,720 --> 00:05:09,320 Speaker 1: deficits versus the size of the balance sheets? Do it 95 00:05:09,360 --> 00:05:13,880 Speaker 1: across countries? And we're clearly in a new monetary environment, um, 96 00:05:13,920 --> 00:05:16,040 Speaker 1: And so I do think the risk is asymmetric at 97 00:05:16,040 --> 00:05:19,200 Speaker 1: the end of the day, that this new type of 98 00:05:19,240 --> 00:05:24,360 Speaker 1: economic approach may result in inflation that we previously wouldn't 99 00:05:24,360 --> 00:05:26,840 Speaker 1: have understood from our models. And Nancy, one of the 100 00:05:26,880 --> 00:05:29,719 Speaker 1: things that I wonder about is the length of time 101 00:05:29,839 --> 00:05:32,400 Speaker 1: over which we will not know the answer. We had 102 00:05:32,440 --> 00:05:34,640 Speaker 1: an interview with Jim Bullard in the St. Louis FED 103 00:05:34,680 --> 00:05:36,799 Speaker 1: this week, and he said, basically, we're not even gonna 104 00:05:36,880 --> 00:05:39,320 Speaker 1: have numbers. We're gonna rely on inflation until the end 105 00:05:39,320 --> 00:05:41,279 Speaker 1: of the year. As we get these cp A numbers 106 00:05:41,279 --> 00:05:43,800 Speaker 1: and even PC numbers, CORPS PC numbers. We can't trust 107 00:05:43,880 --> 00:05:45,480 Speaker 1: him right now because the base effects and all those 108 00:05:45,480 --> 00:05:48,160 Speaker 1: sort of things. Does that actually increase the risk because 109 00:05:48,200 --> 00:05:51,679 Speaker 1: we're running blind for some period of time, assuming maybe 110 00:05:51,680 --> 00:05:55,240 Speaker 1: contrary to what Larry says, we have a model at all. Well, 111 00:05:55,279 --> 00:05:57,279 Speaker 1: I do think we have to keep in mind that 112 00:05:57,400 --> 00:06:00,680 Speaker 1: all of these whether it's CPI or PC, these are 113 00:06:00,680 --> 00:06:03,880 Speaker 1: all in disease right there. Their baskets of goods and 114 00:06:03,920 --> 00:06:08,240 Speaker 1: services that you know, the FED officials of your labor statistics, 115 00:06:08,279 --> 00:06:10,880 Speaker 1: they're trying to do the best they can with the 116 00:06:10,880 --> 00:06:13,640 Speaker 1: baskets that they've created. But it's almost like if you 117 00:06:14,040 --> 00:06:16,520 Speaker 1: if you own the US equity market, but you have 118 00:06:16,720 --> 00:06:19,640 Speaker 1: the Dala Jones Index and you just say, oh, I'm good, 119 00:06:19,680 --> 00:06:21,960 Speaker 1: I've got it, but you don't have the NASTAC or 120 00:06:22,000 --> 00:06:24,120 Speaker 1: you don't have the Russell. I think there are lots 121 00:06:24,120 --> 00:06:27,600 Speaker 1: of different ways to measure inflation, and and David, that's 122 00:06:27,600 --> 00:06:29,440 Speaker 1: one of the things you know, we tried to do 123 00:06:29,520 --> 00:06:33,240 Speaker 1: with the IBOLL e t F is give another measure 124 00:06:33,440 --> 00:06:38,320 Speaker 1: of inflation expectations. It's not linked to a government entity 125 00:06:38,440 --> 00:06:40,919 Speaker 1: creating an index for it. Thank you so much for 126 00:06:40,920 --> 00:06:44,359 Speaker 1: our Wall Street Week roundtable. Lard Lamon from TCW and 127 00:06:44,440 --> 00:06:48,320 Speaker 1: Nancy Davis from Quadratic Capital. Coming up dealing with high 128 00:06:48,360 --> 00:06:51,120 Speaker 1: tech one problem with the United States and China have 129 00:06:51,160 --> 00:06:54,880 Speaker 1: in common, and former IBM CEO Sam Paulmisano sees the 130 00:06:54,920 --> 00:06:58,760 Speaker 1: differences and the similarities. That's next on Wall Street Week 131 00:06:58,960 --> 00:07:08,040 Speaker 1: on Gloomberg. This is Bloomberg Wall Street Week with David 132 00:07:08,080 --> 00:07:12,240 Speaker 1: Weston from Bloomberg Radio. Big Brother is going after jack 133 00:07:12,280 --> 00:07:15,520 Speaker 1: Mas Tech Empire. As part of a string of crackdowns. 134 00:07:15,560 --> 00:07:18,280 Speaker 1: Beijing and post a record two point eight billion dollar 135 00:07:18,360 --> 00:07:21,800 Speaker 1: fine on ali Baba for abusing its market dominance and 136 00:07:22,000 --> 00:07:25,160 Speaker 1: ordered it to stop making merchants choose between Ali Baba 137 00:07:25,480 --> 00:07:29,080 Speaker 1: and competing platforms. Here's company vice chair and co founder 138 00:07:29,200 --> 00:07:34,320 Speaker 1: Joe Tsi with this uh a penalty decision. Uh we've 139 00:07:35,160 --> 00:07:39,840 Speaker 1: uh you know, received a good guidance on some of 140 00:07:39,880 --> 00:07:43,960 Speaker 1: the specific issues under the anti monopoly law. China also 141 00:07:44,080 --> 00:07:48,280 Speaker 1: ordered an overhaul of ANT Group, which has expanded into payments, banking, 142 00:07:48,400 --> 00:07:51,680 Speaker 1: wealth management and insurance over the years. I didn't think 143 00:07:51,760 --> 00:07:55,480 Speaker 1: the government wants this story to dominate through one and 144 00:07:55,520 --> 00:07:59,040 Speaker 1: specifically they've been guiding media to report on how um 145 00:07:59,160 --> 00:08:01,760 Speaker 1: they the government is pro what they called platform economy. 146 00:08:01,800 --> 00:08:05,000 Speaker 1: There pro the innovation, that's Duncan Clark, chairman of b 147 00:08:05,160 --> 00:08:08,800 Speaker 1: DA China. The revamp leaves Aunt's main businesses in tact, 148 00:08:09,120 --> 00:08:11,480 Speaker 1: but the new directive makes it harder for the firm 149 00:08:11,520 --> 00:08:14,720 Speaker 1: to direct traffic from its payment service Alipay, which has 150 00:08:14,720 --> 00:08:18,880 Speaker 1: a billion users, to other AUNT financial services, including wealth management, 151 00:08:19,000 --> 00:08:23,560 Speaker 1: consumer lending, and even on demand neighborhood services and delivery. 152 00:08:23,680 --> 00:08:27,480 Speaker 1: Here's Rabbi Menon from the Monetary Authority of Singapore and 153 00:08:27,520 --> 00:08:30,800 Speaker 1: our philosophy is simple. If you carry out similar activities, 154 00:08:31,240 --> 00:08:34,920 Speaker 1: similar risks as a bank, then you subject to similar 155 00:08:35,000 --> 00:08:39,079 Speaker 1: rules and similar requirements. This week, Chinese regulators also summoned 156 00:08:39,160 --> 00:08:42,360 Speaker 1: thirty four of the country's largest tech companies, from ten 157 00:08:42,480 --> 00:08:46,319 Speaker 1: Cent to TikTok owner Byte Dance, warning them to curb 158 00:08:46,360 --> 00:08:50,040 Speaker 1: their excesses joining a global rush by governments to regulate 159 00:08:50,080 --> 00:08:54,240 Speaker 1: big tech once again Ali Baba's Joe Tsig. Globally, the 160 00:08:54,320 --> 00:08:59,160 Speaker 1: trend is that regulators will be more keen to look 161 00:08:59,200 --> 00:09:03,400 Speaker 1: at some of the areas where you could have unfair competition. 162 00:09:03,559 --> 00:09:06,240 Speaker 1: Sam Paulmisano knows what it is to run a tech 163 00:09:06,280 --> 00:09:09,280 Speaker 1: giant the government wants to regulate from his time as 164 00:09:09,360 --> 00:09:11,800 Speaker 1: CEO of IBM, when the U. S Government and the 165 00:09:11,840 --> 00:09:15,800 Speaker 1: European Commission we're both pursuing IBM. We asked him to 166 00:09:15,920 --> 00:09:19,240 Speaker 1: evaluate the Chinese moves to restrict big tech and how 167 00:09:19,280 --> 00:09:22,400 Speaker 1: they compare with US efforts. If you go back, I'll 168 00:09:22,400 --> 00:09:24,560 Speaker 1: start with China first and they'll get to the United States. 169 00:09:25,000 --> 00:09:27,359 Speaker 1: But if go back in the early stages of technology 170 00:09:27,520 --> 00:09:31,200 Speaker 1: or in emerging economic opportunities, to view it broadly, government's 171 00:09:31,240 --> 00:09:34,160 Speaker 1: always trying to provide in sentence or clear a path 172 00:09:34,240 --> 00:09:37,920 Speaker 1: for companies, and that started really in fintech in China, 173 00:09:38,400 --> 00:09:40,520 Speaker 1: and basically, you know, I was over there a lot 174 00:09:40,559 --> 00:09:43,080 Speaker 1: when I was working, and it was clear from the 175 00:09:43,120 --> 00:09:45,560 Speaker 1: central banking system that they wanted to be able to 176 00:09:45,600 --> 00:09:48,600 Speaker 1: get more liquidly going to small businesses and the Stono 177 00:09:48,720 --> 00:09:51,520 Speaker 1: state on enterprise banks are really focused on midsize to 178 00:09:51,640 --> 00:09:55,200 Speaker 1: large companies, so they gave a lot of flexibility in 179 00:09:55,200 --> 00:09:58,360 Speaker 1: the regulations. So let these guys get going, and they 180 00:09:58,360 --> 00:10:00,679 Speaker 1: did a phenomenal job. They get really big. Unless they 181 00:10:00,679 --> 00:10:03,120 Speaker 1: get really big, the government decides that we need to 182 00:10:03,120 --> 00:10:05,720 Speaker 1: bring them back into the banking system and therefore create 183 00:10:05,760 --> 00:10:08,840 Speaker 1: the holding company and subject them to more regulation. At 184 00:10:08,840 --> 00:10:10,720 Speaker 1: the time, that really struck me that after there was 185 00:10:10,760 --> 00:10:15,400 Speaker 1: that record fine imposed against Ali Baba, Ali Baba thanked 186 00:10:15,440 --> 00:10:18,080 Speaker 1: the regulators for the fine. I don't remember IBM back 187 00:10:18,080 --> 00:10:22,240 Speaker 1: in your day thanking the federal government for pursuing them. Well, 188 00:10:22,280 --> 00:10:24,880 Speaker 1: you know, we we uh, as I used to say. 189 00:10:24,960 --> 00:10:27,640 Speaker 1: And when I was the CEO, I'm elected every year 190 00:10:27,679 --> 00:10:31,200 Speaker 1: by the shareholders. Uh So it's a different system, you 191 00:10:31,240 --> 00:10:34,400 Speaker 1: know here versus there. Uh But I really mean, I 192 00:10:34,400 --> 00:10:37,160 Speaker 1: mean I could see that. Why if you are operated 193 00:10:37,200 --> 00:10:40,200 Speaker 1: in China, you need to maintain a close relationship and 194 00:10:40,240 --> 00:10:43,080 Speaker 1: partnership with the government because they can impact your business 195 00:10:43,120 --> 00:10:46,560 Speaker 1: either positively negatively, in a very direct way, in a 196 00:10:46,640 --> 00:10:49,040 Speaker 1: very quick and direct way. Does that suggest that China 197 00:10:49,120 --> 00:10:51,559 Speaker 1: may have an easier time, if you can call it easy, 198 00:10:52,240 --> 00:10:55,480 Speaker 1: really getting their control over the big tech companies in 199 00:10:55,559 --> 00:10:58,800 Speaker 1: China because of that different relationship than for example, Washington 200 00:10:58,840 --> 00:11:01,080 Speaker 1: would have with the big tech here in the United States. 201 00:11:01,240 --> 00:11:03,280 Speaker 1: When you think about it, you know, it's not it's 202 00:11:03,320 --> 00:11:05,400 Speaker 1: not it's not a the split government of any way. 203 00:11:05,400 --> 00:11:08,559 Speaker 1: It's a centralized government and complete control. So if she 204 00:11:08,640 --> 00:11:10,640 Speaker 1: usually main decides he does he wants to stop the 205 00:11:10,720 --> 00:11:12,839 Speaker 1: ipl of it. He just stops the I P O 206 00:11:12,880 --> 00:11:14,760 Speaker 1: of a you know, right, they don't have to go 207 00:11:14,800 --> 00:11:17,440 Speaker 1: through the process. There's not checks and balances and those 208 00:11:17,440 --> 00:11:19,880 Speaker 1: sorts of things. So therefore the government does have a 209 00:11:19,920 --> 00:11:22,319 Speaker 1: lot of control and in a lot of a lot 210 00:11:22,320 --> 00:11:25,559 Speaker 1: of the early stage government companies, I should say governments 211 00:11:25,559 --> 00:11:29,400 Speaker 1: are actually active shareholders in those companies UH and over 212 00:11:29,440 --> 00:11:32,160 Speaker 1: time they divest and sometimes they don't. An example be 213 00:11:32,240 --> 00:11:35,280 Speaker 1: Lenovo what we did with UH selling the PC business 214 00:11:35,320 --> 00:11:37,720 Speaker 1: and Lenovo, but at the early stage of that relationship, 215 00:11:37,960 --> 00:11:41,360 Speaker 1: the Chinese government had about share of Lenovo. Now they've 216 00:11:41,360 --> 00:11:44,680 Speaker 1: divested over time, but nonetheless that they come in and 217 00:11:44,720 --> 00:11:47,800 Speaker 1: out of companies. At the same time, President has made 218 00:11:47,800 --> 00:11:49,760 Speaker 1: it very clear he wants to compete in the world 219 00:11:49,800 --> 00:11:51,840 Speaker 1: stage when it comes to tech. He's made that a 220 00:11:51,880 --> 00:11:54,640 Speaker 1: priority of his. Does he have to be somewhat concerned 221 00:11:54,760 --> 00:11:58,800 Speaker 1: about going too far and really curtailing big tech in 222 00:11:58,880 --> 00:12:01,439 Speaker 1: China because it will be as competitive with for example, 223 00:12:01,480 --> 00:12:04,440 Speaker 1: the United States. The kicks needs innovation, right, and there's 224 00:12:04,440 --> 00:12:06,160 Speaker 1: a lot of the areas that they don't have the 225 00:12:06,160 --> 00:12:10,240 Speaker 1: same expertise and experience and take entrepreneurship. I mean, there 226 00:12:10,240 --> 00:12:13,120 Speaker 1: are a lot of great entrepreneurs in China, but not 227 00:12:13,200 --> 00:12:16,640 Speaker 1: necessarily in tech in China. So therefore there's going to 228 00:12:16,760 --> 00:12:20,520 Speaker 1: be a encouragement But I believe by the Chinese government 229 00:12:20,720 --> 00:12:24,200 Speaker 1: for foreign investment in entrepreneurial endeavors, even though in other 230 00:12:24,240 --> 00:12:27,720 Speaker 1: places they're trying to control foreign investment. UM. So you'll 231 00:12:27,760 --> 00:12:32,160 Speaker 1: see this sort of almost like it's uh split perspective 232 00:12:32,240 --> 00:12:35,719 Speaker 1: or split uh interactions. Some areas are gonna say they 233 00:12:35,720 --> 00:12:40,120 Speaker 1: want to uh indigenous innovation, but they need foreign help, uh, 234 00:12:40,160 --> 00:12:42,679 Speaker 1: and that's how they'll pursue it. In my opinion, look 235 00:12:42,720 --> 00:12:45,920 Speaker 1: at Hong Kong, for example, they're getting more controlled Hong Kong, 236 00:12:45,960 --> 00:12:47,880 Speaker 1: but they're putting tax in set ups to attract hedge 237 00:12:47,880 --> 00:12:50,679 Speaker 1: funds and wealthy people to Hong Kong. So you see 238 00:12:50,720 --> 00:12:53,679 Speaker 1: this isn't that aren't they counter counter interests of each other? 239 00:12:53,760 --> 00:12:56,880 Speaker 1: The communist system of socialism, or as attracting hedge funds 240 00:12:56,880 --> 00:12:59,880 Speaker 1: and large wealthy people. Well, they're very pragmatic, you know, 241 00:13:00,080 --> 00:13:02,480 Speaker 1: and depending upon their goals they will adjust. Well, it 242 00:13:02,520 --> 00:13:05,160 Speaker 1: seems thus partly perhaps we're working in Hong Kong because 243 00:13:05,160 --> 00:13:08,720 Speaker 1: you see a lot of new money managers being created 244 00:13:08,720 --> 00:13:11,000 Speaker 1: in Hong Kong and a lot of big banks, including 245 00:13:11,040 --> 00:13:14,040 Speaker 1: US banks, increasing their personnel in Hong Kong despite all 246 00:13:14,040 --> 00:13:16,600 Speaker 1: the civil unrest. There's a during sytums to do that. 247 00:13:16,720 --> 00:13:19,199 Speaker 1: And like you know, companies learn like we learn. You 248 00:13:19,280 --> 00:13:23,320 Speaker 1: operate with any system that you operate within um you know, 249 00:13:23,360 --> 00:13:26,160 Speaker 1: in some ways, and I know this sounds crazy, but 250 00:13:26,200 --> 00:13:30,440 Speaker 1: there's more stability and essentially controls governments than there isn't 251 00:13:30,440 --> 00:13:32,839 Speaker 1: our system because every four years you get a whole 252 00:13:32,880 --> 00:13:35,760 Speaker 1: new set of priorities. So you could argue that once 253 00:13:35,800 --> 00:13:39,240 Speaker 1: you adjust to their systems and you work within their systems, 254 00:13:39,240 --> 00:13:42,840 Speaker 1: there's much more stability over time and from a business perspective, 255 00:13:42,880 --> 00:13:45,000 Speaker 1: give you more certainty of investment. If you go back 256 00:13:45,000 --> 00:13:47,640 Speaker 1: in history, the federal government in the United States has 257 00:13:47,679 --> 00:13:50,680 Speaker 1: tried to regulate technology. IBM certainly they went after they 258 00:13:50,720 --> 00:13:53,040 Speaker 1: went after Microsoft. Do you think looking back and it 259 00:13:53,160 --> 00:13:56,040 Speaker 1: did curtail innovation. You talked about China having to be careful. 260 00:13:56,080 --> 00:13:58,839 Speaker 1: It didn't curtail innovation. There's no doubt about it. If 261 00:13:58,840 --> 00:14:01,120 Speaker 1: you look at all of us went through it. What 262 00:14:01,240 --> 00:14:03,800 Speaker 1: happens is that as you're going through the process, as 263 00:14:03,800 --> 00:14:06,400 Speaker 1: they're trying to split you up or any trust, you 264 00:14:06,440 --> 00:14:09,800 Speaker 1: are so focused on those cases of the government involvement 265 00:14:10,240 --> 00:14:12,839 Speaker 1: you spend you tend to miss shifts in the technology. 266 00:14:13,040 --> 00:14:15,160 Speaker 1: And that happened to have you have the IPM, Microsoft, 267 00:14:15,480 --> 00:14:16,839 Speaker 1: A T and T all of us. I mean you 268 00:14:16,920 --> 00:14:19,200 Speaker 1: just want could hissue of these things and that could 269 00:14:19,200 --> 00:14:22,560 Speaker 1: happen here that the more government involvement that there happens 270 00:14:22,640 --> 00:14:26,600 Speaker 1: to be, you will curtail innovation. Uh, and that's a tradeoff. 271 00:14:26,960 --> 00:14:29,000 Speaker 1: I don't know that governments look at it that way, 272 00:14:29,120 --> 00:14:31,480 Speaker 1: and I really don't think they worry about that because 273 00:14:31,560 --> 00:14:34,720 Speaker 1: their view will be that, look, we created more competitives. 274 00:14:34,720 --> 00:14:37,200 Speaker 1: So yes, your company is not as innovative as it 275 00:14:37,320 --> 00:14:39,360 Speaker 1: was before. We look at all these other companies that 276 00:14:39,400 --> 00:14:42,200 Speaker 1: we're created because we the baby bells in the A 277 00:14:42,280 --> 00:14:45,720 Speaker 1: T example, you know alternatives that IBM, Microsoft in the 278 00:14:45,800 --> 00:14:49,520 Speaker 1: PC into etcetera, etcetera. That was Wall Street. We contributed 279 00:14:49,720 --> 00:14:52,800 Speaker 1: Sam paulms out out coming up how the economy looks 280 00:14:52,800 --> 00:14:55,320 Speaker 1: from the top of one of America's with leading banks. 281 00:14:55,680 --> 00:14:58,720 Speaker 1: We talked with Brian moynihan, a Bank of America. That's 282 00:14:58,760 --> 00:15:06,720 Speaker 1: next on Wall Street Week on Bloomberg. This is Bloomberg 283 00:15:06,760 --> 00:15:11,080 Speaker 1: Wall Street Week with David Weston from Bloomberg Radio. The 284 00:15:11,160 --> 00:15:14,720 Speaker 1: Federal Reserve can putting money into this system by increasing 285 00:15:14,720 --> 00:15:16,800 Speaker 1: the money supply. That if banks are unwilling to lend 286 00:15:16,840 --> 00:15:20,160 Speaker 1: it to corporations because they are afraid of bad loans 287 00:15:20,200 --> 00:15:23,200 Speaker 1: and rescue loans and write offs, then the private economy 288 00:15:23,240 --> 00:15:26,160 Speaker 1: will suffer. That was Pimco's Bill Gross on Wall Street Week. 289 00:15:26,200 --> 00:15:30,040 Speaker 1: Back in this week, bank lending was back in the 290 00:15:30,080 --> 00:15:34,120 Speaker 1: news again as the banks posted eye popping numbers despite 291 00:15:34,360 --> 00:15:38,440 Speaker 1: sluggish loan growth. As in the Federal Reserve has done 292 00:15:38,520 --> 00:15:41,360 Speaker 1: its part in putting money into the system, but this 293 00:15:41,520 --> 00:15:44,440 Speaker 1: time it's not because the banks are reluctant to lend. No, 294 00:15:45,040 --> 00:15:47,280 Speaker 1: this time is that the government has given a lot 295 00:15:47,320 --> 00:15:49,880 Speaker 1: of money to households that have used it to pay 296 00:15:49,880 --> 00:15:53,480 Speaker 1: off debt, leaving less reason to borrow. We talked with 297 00:15:53,520 --> 00:15:55,640 Speaker 1: the head of one of the biggest lenders of the country. 298 00:15:55,640 --> 00:15:58,640 Speaker 1: He's Brian moynihan, a backup America, and we asked him 299 00:15:58,880 --> 00:16:01,520 Speaker 1: what this says about the economy going forward. Yeah, this 300 00:16:01,560 --> 00:16:03,640 Speaker 1: is a healthcare crisis, and the very good news is 301 00:16:03,680 --> 00:16:06,560 Speaker 1: you're seeing the vaccine numbers go up. You're seeing the 302 00:16:06,560 --> 00:16:09,440 Speaker 1: ability then to reopen without the risk that the governments 303 00:16:09,480 --> 00:16:11,880 Speaker 1: can do in the states and cities and towns, and 304 00:16:11,880 --> 00:16:14,800 Speaker 1: you're seeing people move around. So are spending levels for 305 00:16:14,880 --> 00:16:18,120 Speaker 1: our Bank of American consumer customer base or record in 306 00:16:18,120 --> 00:16:21,080 Speaker 1: the first quarter March is the biggest month ever. If 307 00:16:21,120 --> 00:16:24,600 Speaker 1: you go back and compared to nineteen, they're up and 308 00:16:24,640 --> 00:16:26,880 Speaker 1: so divide that by two, it's up ten percent a year, 309 00:16:26,920 --> 00:16:29,080 Speaker 1: which is much faster than they were growing in fifteen 310 00:16:29,080 --> 00:16:32,200 Speaker 1: and sixteen seventeen. So there's a bigger number growing at 311 00:16:32,200 --> 00:16:34,680 Speaker 1: a faster rate. And yet people still have a lot 312 00:16:34,720 --> 00:16:36,640 Speaker 1: of the stimulus in their accounts and haven't spent it. 313 00:16:36,760 --> 00:16:39,120 Speaker 1: So the world still has a group. We have a 314 00:16:39,160 --> 00:16:40,880 Speaker 1: group of Americans and a group of people around the 315 00:16:40,920 --> 00:16:43,040 Speaker 1: world who you know aren't back to work yet, and 316 00:16:43,120 --> 00:16:45,600 Speaker 1: we need to get that done. Whose businesses can't open 317 00:16:45,680 --> 00:16:47,800 Speaker 1: yet because the nature of them. We've got to get 318 00:16:47,840 --> 00:16:50,400 Speaker 1: those done, but a big part of the economy, and 319 00:16:50,440 --> 00:16:53,480 Speaker 1: I think our predictions for economy across over the next 320 00:16:53,480 --> 00:16:55,200 Speaker 1: couple of quarters to be bigger than it was before 321 00:16:55,240 --> 00:16:58,440 Speaker 1: the pandemic is is open and operating, and the consumers 322 00:16:58,480 --> 00:17:00,960 Speaker 1: are spending money, and that's a good news. And then 323 00:17:00,960 --> 00:17:03,560 Speaker 1: when you translate the Bank of America, what you're seeing 324 00:17:03,680 --> 00:17:05,439 Speaker 1: is our depositor way up because that money went into 325 00:17:05,440 --> 00:17:08,560 Speaker 1: people's accounts and it's sitting there. But our loans are 326 00:17:08,640 --> 00:17:11,359 Speaker 1: not as you fell, because largely because people are paying 327 00:17:11,400 --> 00:17:13,720 Speaker 1: us off because they have so much cash sitting around. 328 00:17:13,760 --> 00:17:16,400 Speaker 1: So now the commercial side, we expect that to change. 329 00:17:16,440 --> 00:17:18,879 Speaker 1: The economy growing at seven percent, which is what we predict, 330 00:17:18,880 --> 00:17:21,760 Speaker 1: it would require companies to borrow to service at economy. 331 00:17:22,000 --> 00:17:24,400 Speaker 1: It's just that company has had a lot of cash too. 332 00:17:24,480 --> 00:17:26,640 Speaker 1: So we look for more long growth as year progresses. 333 00:17:26,960 --> 00:17:30,560 Speaker 1: But the good news is the customer consumers in good shape. 334 00:17:30,840 --> 00:17:32,639 Speaker 1: There's an unemployment issue. We've got to get that the 335 00:17:32,640 --> 00:17:34,040 Speaker 1: rest of the way down to where it should be. 336 00:17:34,400 --> 00:17:36,240 Speaker 1: The business has got to get open. That couldn't be. 337 00:17:36,400 --> 00:17:38,959 Speaker 1: But by and large, a big portion economy is up 338 00:17:38,960 --> 00:17:41,239 Speaker 1: and operating very well. Back over here is a very 339 00:17:41,240 --> 00:17:43,880 Speaker 1: special viewpoint into the America coutomy because you have such 340 00:17:43,920 --> 00:17:46,520 Speaker 1: a consumer, such a retail presence, and also the middle 341 00:17:46,560 --> 00:17:49,080 Speaker 1: market you really deal with small and medium sized enterprise 342 00:17:49,080 --> 00:17:51,439 Speaker 1: across the country. Are you see any pickup in the 343 00:17:51,480 --> 00:17:54,720 Speaker 1: borrowing from your medium sized companies yet? If we've sent 344 00:17:54,800 --> 00:17:58,080 Speaker 1: it bump along the bottom usage of our business banking segment, 345 00:17:58,080 --> 00:18:00,400 Speaker 1: which is fifty million under revenue companies in our metal 346 00:18:00,440 --> 00:18:02,520 Speaker 1: market which is to an half billion, we're seeing the 347 00:18:02,560 --> 00:18:05,440 Speaker 1: line US it's really pretty flat. But the goodness is 348 00:18:05,440 --> 00:18:07,560 Speaker 1: a quick going down. We saw in the months during 349 00:18:07,560 --> 00:18:09,400 Speaker 1: the quarter January fe Everry March, it got a little 350 00:18:09,400 --> 00:18:13,760 Speaker 1: stronger origination activity meaning uh, you know, new clients and 351 00:18:13,840 --> 00:18:16,200 Speaker 1: new deals done. Is still is strong. Bodes well for 352 00:18:16,280 --> 00:18:18,280 Speaker 1: the for the year. But but we've got to see 353 00:18:18,280 --> 00:18:20,640 Speaker 1: it comes through um. And that goes back to those 354 00:18:20,680 --> 00:18:22,560 Speaker 1: companies having a lot of cash and had to run 355 00:18:22,680 --> 00:18:24,720 Speaker 1: very efficiently during the crisis because you didn't know what 356 00:18:24,800 --> 00:18:28,520 Speaker 1: happened next and and and now they're gonna be you 357 00:18:28,560 --> 00:18:30,879 Speaker 1: need to start spending money on supplies and things to 358 00:18:31,119 --> 00:18:33,960 Speaker 1: redo their inventory. Now. The one thing I think we 359 00:18:33,960 --> 00:18:35,280 Speaker 1: all have to be mindful is we've got to get 360 00:18:35,320 --> 00:18:38,199 Speaker 1: the trade. The trade is growing fast out you know, 361 00:18:38,280 --> 00:18:40,280 Speaker 1: into the country, but the ports and things still need 362 00:18:40,320 --> 00:18:42,840 Speaker 1: to get straightened out because of just the dynamics of 363 00:18:42,880 --> 00:18:44,920 Speaker 1: the virus and the supply chains are still iron out. 364 00:18:44,920 --> 00:18:46,560 Speaker 1: So I think one of the things I worry about 365 00:18:46,560 --> 00:18:48,840 Speaker 1: from mid sized companies king that they get the supplies 366 00:18:48,920 --> 00:18:50,960 Speaker 1: to do do what they do. So you've heard about 367 00:18:51,000 --> 00:18:53,440 Speaker 1: lumber prices or residant things like that. I think it 368 00:18:53,440 --> 00:18:55,600 Speaker 1: little straight out. We hope it will straight now. But 369 00:18:55,720 --> 00:18:57,800 Speaker 1: that's the next sort of channel outside the healthcare. The 370 00:18:57,840 --> 00:18:59,680 Speaker 1: next challenge to get the supply chains really up in 371 00:18:59,720 --> 00:19:01,920 Speaker 1: oil and greased and running through to serve that fast 372 00:19:01,920 --> 00:19:04,479 Speaker 1: growing economy. So when you're talking about settling down, one 373 00:19:04,480 --> 00:19:07,000 Speaker 1: thing that doesn't seem to be settling down yet the spacks, 374 00:19:07,040 --> 00:19:10,240 Speaker 1: those special purpose acquisition companies. How much of your equity business, 375 00:19:10,240 --> 00:19:12,439 Speaker 1: because you had a pretty robust quarter and equities, how 376 00:19:12,520 --> 00:19:15,320 Speaker 1: much of other SPACs? And do you expect that to continue? Yeah, 377 00:19:15,320 --> 00:19:17,879 Speaker 1: whether it continues not going to do some of the dynamics, 378 00:19:17,880 --> 00:19:20,479 Speaker 1: and we do we do selective ones were not as 379 00:19:20,480 --> 00:19:23,240 Speaker 1: big in the business as other people and and that's fine, 380 00:19:23,280 --> 00:19:26,800 Speaker 1: and in different times we're stronger and investment grade issuance 381 00:19:26,840 --> 00:19:29,400 Speaker 1: and other people are stronger and and spacts, and that's 382 00:19:29,440 --> 00:19:31,520 Speaker 1: fine with us, and we go forward. But you know, 383 00:19:31,560 --> 00:19:34,480 Speaker 1: it seems to be holding on right now. Let's talk 384 00:19:34,480 --> 00:19:38,000 Speaker 1: about yields. The yields have been pushing up on fixed 385 00:19:38,000 --> 00:19:40,360 Speaker 1: income despite the fact that this week actually we had 386 00:19:40,359 --> 00:19:42,919 Speaker 1: a downturn that maybe a flip flip or not. But 387 00:19:43,160 --> 00:19:45,359 Speaker 1: it's really important to Bank of America given the way 388 00:19:45,400 --> 00:19:47,920 Speaker 1: your business works, what the ten year yield on this 389 00:19:48,040 --> 00:19:50,359 Speaker 1: treasury is, and what the yield curve is, the spread 390 00:19:50,359 --> 00:19:53,080 Speaker 1: between the twos and the tens. What are you projecting 391 00:19:53,080 --> 00:19:54,760 Speaker 1: for the rest of the year. Many people think that 392 00:19:54,840 --> 00:19:57,080 Speaker 1: yields are just going to keep marching up. We're all 393 00:19:57,080 --> 00:19:59,760 Speaker 1: projecting that, and so we're up over the ten year, 394 00:19:59,800 --> 00:20:03,040 Speaker 1: got up to one seventy plus. And the reality is 395 00:20:03,080 --> 00:20:06,520 Speaker 1: if the economic activities picking up and and prices are 396 00:20:06,560 --> 00:20:09,560 Speaker 1: picking up what you've seen unemployments going down, you know, 397 00:20:10,200 --> 00:20:12,280 Speaker 1: the yield curve will start to normalize. And you saw 398 00:20:12,320 --> 00:20:14,040 Speaker 1: that start to happen as we came in out of 399 00:20:14,160 --> 00:20:16,920 Speaker 1: last year fourth quarter in the first quarter. That helps 400 00:20:17,000 --> 00:20:19,880 Speaker 1: us because as a curve gets higher, that we can 401 00:20:19,920 --> 00:20:22,240 Speaker 1: make more money from the loans and other things we do. Now, 402 00:20:22,520 --> 00:20:25,040 Speaker 1: what's really important to us, honestly is short rates and 403 00:20:25,080 --> 00:20:27,720 Speaker 1: the questions when the Fed raises rates. The market has 404 00:20:27,720 --> 00:20:30,320 Speaker 1: it pretty well deferred, and they've been clear that they 405 00:20:30,359 --> 00:20:33,400 Speaker 1: want to see the inflation levels. They've share pals talked 406 00:20:33,440 --> 00:20:36,280 Speaker 1: about they want to see the unemployment numbers, and they've 407 00:20:36,280 --> 00:20:38,520 Speaker 1: been clear about that. The question is whether it will 408 00:20:38,560 --> 00:20:41,080 Speaker 1: happen faster than they they have in their projections as 409 00:20:41,119 --> 00:20:43,560 Speaker 1: that even they have projections at six percent plus for 410 00:20:43,560 --> 00:20:47,040 Speaker 1: GDP growth this year, and so we'll see when those rates. 411 00:20:47,080 --> 00:20:49,720 Speaker 1: But that's the that's the quicker route to success for 412 00:20:49,800 --> 00:20:51,560 Speaker 1: us because we have all we have all these no 413 00:20:51,680 --> 00:20:54,760 Speaker 1: interest bearing deposits that instantaneously you're worth more that we 414 00:20:54,760 --> 00:20:56,440 Speaker 1: don't have to do any more work. Thanks the Bank 415 00:20:56,440 --> 00:20:59,840 Speaker 1: of America Chairman and CEO, Brian moynihan. Coming up, we 416 00:21:00,040 --> 00:21:02,280 Speaker 1: wrap up the week with special Wall Street Week contributed 417 00:21:02,440 --> 00:21:05,520 Speaker 1: Larry Summers of Harvard. That's next on Wall Street Week 418 00:21:05,680 --> 00:21:14,520 Speaker 1: on Bloomberg. This is Bloomberg Wall Street Week with David 419 00:21:14,560 --> 00:21:18,040 Speaker 1: Weston from Bloomberg Radio. As we do every week, we're 420 00:21:18,040 --> 00:21:20,920 Speaker 1: gonna wrap up the week with our special contributor. Here's 421 00:21:20,960 --> 00:21:23,679 Speaker 1: Larry Summers, Oh Harvard, Larry, welcome back. Great to have 422 00:21:23,760 --> 00:21:26,120 Speaker 1: you here. Let's talk about inflation. And we've talked about 423 00:21:26,160 --> 00:21:28,600 Speaker 1: on this program. You've talked about elsewhere quite a few times. 424 00:21:28,680 --> 00:21:30,880 Speaker 1: But this week. This week we had the Council Economic 425 00:21:30,920 --> 00:21:34,280 Speaker 1: Advisors put out a blog post, a fairly long essay 426 00:21:34,280 --> 00:21:35,560 Speaker 1: that I'm not sure, but I think it might have 427 00:21:35,600 --> 00:21:37,240 Speaker 1: been responding to you. They think we don't have a 428 00:21:37,280 --> 00:21:39,439 Speaker 1: long term problem. What do you say. I read the 429 00:21:39,520 --> 00:21:44,080 Speaker 1: CEA analysis pretty carefully. I can't say put my mind 430 00:21:44,119 --> 00:21:47,040 Speaker 1: at ease. Here are some things that didn't talk about. 431 00:21:47,600 --> 00:21:51,600 Speaker 1: Didn't talk about the housing market on fire more than 432 00:21:51,640 --> 00:21:55,560 Speaker 1: any time since the statistics were being created. Didn't talk 433 00:21:55,600 --> 00:21:58,840 Speaker 1: about all the employers who reported that they were having 434 00:21:58,880 --> 00:22:03,359 Speaker 1: difficulty finding UH labor, or the fact that the vacancy 435 00:22:03,480 --> 00:22:07,800 Speaker 1: rate is already back to UH normal levels. Didn't talk 436 00:22:07,840 --> 00:22:12,480 Speaker 1: about the purchasing manager surveys would show things UH to 437 00:22:12,600 --> 00:22:18,320 Speaker 1: be an unprecedented territory. Didn't talk about the largest one 438 00:22:18,400 --> 00:22:24,800 Speaker 1: quarter movement upwards in ten year bond yields in UH decades. 439 00:22:25,280 --> 00:22:30,720 Speaker 1: It didn't talk about the consequences for inflation psychology of 440 00:22:30,800 --> 00:22:36,000 Speaker 1: a change in the policy regime, away from preempting inflation 441 00:22:36,560 --> 00:22:41,920 Speaker 1: towards UH pre empting the idea of doing something about 442 00:22:42,480 --> 00:22:47,639 Speaker 1: UH inflation. It argued that there was gonna be a 443 00:22:47,720 --> 00:22:51,320 Speaker 1: variety of transient factors that would lead to high inflation. 444 00:22:52,080 --> 00:22:55,640 Speaker 1: Now it's right about that, but that's a little bit 445 00:22:55,680 --> 00:22:59,119 Speaker 1: like arguing that we're about to have a blizzard, but 446 00:23:00,440 --> 00:23:02,960 Speaker 1: doesn't mean anybody should worry about how bad the winter 447 00:23:04,240 --> 00:23:07,800 Speaker 1: is going to be. So there are no certainties, and 448 00:23:08,240 --> 00:23:13,040 Speaker 1: god knows, economists aren't very good at forecasting UH inflation. 449 00:23:13,640 --> 00:23:17,480 Speaker 1: But if you look at the overheating economy theory of inflation, 450 00:23:17,880 --> 00:23:21,000 Speaker 1: looks like we're headed towards an overheating economy. If you 451 00:23:21,040 --> 00:23:24,919 Speaker 1: look at the monitorius theory of inflation, money aggregates are 452 00:23:24,960 --> 00:23:28,360 Speaker 1: growing at unprecedented rates. If you look at the fiscal 453 00:23:28,440 --> 00:23:35,200 Speaker 1: theory of inflation, we're in an unprecedented UH fiscal experiment. 454 00:23:35,720 --> 00:23:40,119 Speaker 1: So it certainly didn't convince me that one should be 455 00:23:40,200 --> 00:23:44,639 Speaker 1: relaxed about inflation. And David, I have to say that 456 00:23:45,240 --> 00:23:49,520 Speaker 1: the frequency with which people return to this argument and 457 00:23:49,680 --> 00:23:54,800 Speaker 1: debate suggests to me that there is a certain amount 458 00:23:54,840 --> 00:24:01,080 Speaker 1: of discomfort and UH concern out there. But we'll see 459 00:24:01,119 --> 00:24:05,520 Speaker 1: what happens, and I don't think we'll know, uh for 460 00:24:05,960 --> 00:24:13,359 Speaker 1: eighteen months or so, uh what the consequences of the 461 00:24:13,440 --> 00:24:19,879 Speaker 1: experiment we're engaged in are. But so far, nothing's happened 462 00:24:20,359 --> 00:24:25,960 Speaker 1: that has given me any reassurance. And if anything, the 463 00:24:26,000 --> 00:24:31,320 Speaker 1: flow of the numbers has been more rapid than I 464 00:24:31,359 --> 00:24:35,520 Speaker 1: would have expected and more cause for concern. Let's talk 465 00:24:35,520 --> 00:24:38,720 Speaker 1: about growth. Uh. We've long heard about how delightful it 466 00:24:38,800 --> 00:24:41,480 Speaker 1: is to have global synchronized growth. Right now, it doesn't 467 00:24:41,480 --> 00:24:44,679 Speaker 1: look like we're headed there. We have asynchronous growth. We 468 00:24:44,720 --> 00:24:47,720 Speaker 1: certainly have China doing quite well. The United States apparently 469 00:24:47,760 --> 00:24:49,560 Speaker 1: has headed at least for a year or so, into 470 00:24:49,560 --> 00:24:51,760 Speaker 1: pretty robust growth. On the other hand, Europe seems to 471 00:24:51,800 --> 00:24:54,040 Speaker 1: be lagging behind. And then don't even get me started 472 00:24:54,040 --> 00:24:56,239 Speaker 1: about some of the emerging markets. They seem to be 473 00:24:56,280 --> 00:24:58,879 Speaker 1: really suffering quite a bit. What are the risks in 474 00:24:58,960 --> 00:25:03,159 Speaker 1: that kind of asymmetry in the global economy, you know, 475 00:25:03,280 --> 00:25:09,480 Speaker 1: to paraph paraphrase dickens, we may be headed for a 476 00:25:09,520 --> 00:25:13,399 Speaker 1: tale of two worlds, between the US and China on 477 00:25:13,440 --> 00:25:17,600 Speaker 1: the one hand, and large parts of the developing world 478 00:25:18,080 --> 00:25:22,920 Speaker 1: on the other. I heard a debate the other day, 479 00:25:22,960 --> 00:25:25,679 Speaker 1: and it's the most depressing debate I've heard in a 480 00:25:25,720 --> 00:25:29,560 Speaker 1: long time about whether when you look at Latin America 481 00:25:29,720 --> 00:25:33,879 Speaker 1: and Africa and even parts of India, you're gonna be 482 00:25:33,920 --> 00:25:36,879 Speaker 1: looking at a lost decade or you're gonna be looking 483 00:25:36,920 --> 00:25:43,080 Speaker 1: at a lost generation. We just have not seen remotely 484 00:25:43,240 --> 00:25:48,040 Speaker 1: the kind of boldness and imagination that we've seen in 485 00:25:48,240 --> 00:25:52,639 Speaker 1: responding to this with monetary and fiscal policy for the 486 00:25:53,359 --> 00:25:57,119 Speaker 1: rich countries like the United States. In some of the 487 00:25:57,160 --> 00:26:01,840 Speaker 1: poorest countries said to have that kind of effort requires 488 00:26:01,920 --> 00:26:06,640 Speaker 1: the international system to step up, and so far it's 489 00:26:06,760 --> 00:26:11,840 Speaker 1: really stepped up in a rather inadequate way. I think 490 00:26:11,880 --> 00:26:18,520 Speaker 1: this is gonna have huge political consequences for our security, 491 00:26:19,000 --> 00:26:24,840 Speaker 1: not to mention the tragic consequences for millions, if not 492 00:26:25,920 --> 00:26:31,160 Speaker 1: ten millions of people. At the same time. I can 493 00:26:31,480 --> 00:26:33,640 Speaker 1: hear in my head some people up on Capitol Hill, 494 00:26:33,960 --> 00:26:36,560 Speaker 1: I will say, they tend to be Republicans, maybe not exclusively, 495 00:26:36,800 --> 00:26:39,439 Speaker 1: who say, why is that our problem? You heard that 496 00:26:39,480 --> 00:26:41,080 Speaker 1: in some of the exchanges with Janet yell In, the 497 00:26:41,080 --> 00:26:43,480 Speaker 1: Secretary of Treasury actually over the SDR of the Special 498 00:26:43,560 --> 00:26:45,960 Speaker 1: Drawing Rights contest about the a m F, which basically, 499 00:26:45,960 --> 00:26:47,639 Speaker 1: why are we helping out the rest of the world. 500 00:26:48,160 --> 00:26:52,840 Speaker 1: I'll tell you why, because there's one human gene pool. 501 00:26:53,800 --> 00:26:57,439 Speaker 1: The longer this is out there, the more it evolves. 502 00:26:58,440 --> 00:27:02,000 Speaker 1: The more it evolves, the greater the risk that our 503 00:27:02,080 --> 00:27:07,840 Speaker 1: vaccines won't keep us immune and the Americans will start 504 00:27:07,920 --> 00:27:12,600 Speaker 1: dying in large quantity again, that we'll have to lock 505 00:27:12,760 --> 00:27:19,919 Speaker 1: up and closed down again. This is not a charitable endeavor. 506 00:27:20,560 --> 00:27:26,160 Speaker 1: This is forward defense of our global interests. And look, 507 00:27:26,240 --> 00:27:32,040 Speaker 1: I'm I'm as worried as anybody about China. I'm as 508 00:27:32,080 --> 00:27:36,480 Speaker 1: worried about anybody as Russia. But frankly, over the next decade, 509 00:27:36,920 --> 00:27:40,640 Speaker 1: I think we've got more to fear from microbes than 510 00:27:40,680 --> 00:27:43,199 Speaker 1: we do from shijin ping. So let's wrap up this 511 00:27:43,240 --> 00:27:46,200 Speaker 1: week with a lightning around here. If Summer says number one, 512 00:27:46,240 --> 00:27:48,199 Speaker 1: let me ask you, do you think that we'll have 513 00:27:48,280 --> 00:27:51,600 Speaker 1: a ten year yield at three percent before we get 514 00:27:51,640 --> 00:27:54,919 Speaker 1: down to four percent on the unemployment number. It's a race, 515 00:27:55,040 --> 00:27:58,639 Speaker 1: my guesses will get to the four percent unemployment rate first, 516 00:27:58,720 --> 00:28:02,120 Speaker 1: because we'll get to it this year. Uh. And secondly, 517 00:28:02,200 --> 00:28:04,439 Speaker 1: there's a lot of talking about in income, inequality, income 518 00:28:04,480 --> 00:28:06,560 Speaker 1: and wealth and equality this country. It's been great and 519 00:28:06,680 --> 00:28:08,560 Speaker 1: growing for some time. A lot of people say we 520 00:28:08,600 --> 00:28:11,360 Speaker 1: have to fix it, including J. Powell at the Federal Reserve. 521 00:28:11,680 --> 00:28:13,800 Speaker 1: If you're going to really address that issue, can you 522 00:28:13,880 --> 00:28:15,960 Speaker 1: do it through fiscal policy or other means, or do 523 00:28:16,040 --> 00:28:19,080 Speaker 1: you need labor law reform such as President Biden is 524 00:28:19,080 --> 00:28:22,920 Speaker 1: trying to implement. I hesitate ever to use the word need, 525 00:28:23,640 --> 00:28:27,600 Speaker 1: but I'll say this, we sure could use UH labor 526 00:28:27,720 --> 00:28:32,800 Speaker 1: law reform UH in UH this country. I think it's 527 00:28:32,880 --> 00:28:38,800 Speaker 1: something where we Democrats have not been aggressive enough UH 528 00:28:38,960 --> 00:28:45,400 Speaker 1: for a long time. The impunity with which employers can 529 00:28:45,800 --> 00:28:51,200 Speaker 1: break up union organizing efforts and fire union organizers with 530 00:28:51,360 --> 00:28:56,120 Speaker 1: only a slap on the wrist is a national embarrassment 531 00:28:56,760 --> 00:29:01,400 Speaker 1: and it is something that should be changed very quickly. 532 00:29:01,880 --> 00:29:05,120 Speaker 1: Beyond that, we we we need to think about our 533 00:29:05,160 --> 00:29:10,400 Speaker 1: approaches to UH labor bargaining because there's certainly some excesses 534 00:29:10,920 --> 00:29:14,080 Speaker 1: in the other direction, and we need to find some 535 00:29:14,160 --> 00:29:18,440 Speaker 1: new models. But I think we're not going to change 536 00:29:18,520 --> 00:29:25,200 Speaker 1: this fundamentally enough unless we change what's happening in workplaces 537 00:29:25,680 --> 00:29:29,200 Speaker 1: as well as changing national fiscal policies. And finally, there 538 00:29:29,240 --> 00:29:31,360 Speaker 1: are you, of course, word Secretary Treasury age or at 539 00:29:31,360 --> 00:29:32,960 Speaker 1: the end of the week. On Thursday, we heard the 540 00:29:33,040 --> 00:29:35,920 Speaker 1: United States government they're gonna impose new sanctions on Russia 541 00:29:36,240 --> 00:29:39,160 Speaker 1: for that solar wind hack, as well as for inference 542 00:29:39,160 --> 00:29:41,200 Speaker 1: in the election, And part of the sanctions were really 543 00:29:41,200 --> 00:29:45,280 Speaker 1: specifically on Russian sovereign debt. From your experience, is that 544 00:29:45,360 --> 00:29:48,000 Speaker 1: a gesture or could it actually change Russian behavior? How 545 00:29:48,040 --> 00:29:50,400 Speaker 1: effective is that sort of sanction? I think it has 546 00:29:50,800 --> 00:29:55,440 Speaker 1: I think it has some impact. But it's easier to 547 00:29:55,680 --> 00:30:00,000 Speaker 1: be critical of sanctions than it is to identify an alternative. 548 00:30:01,000 --> 00:30:07,080 Speaker 1: When countries do things that are sufficiently wrong from our viewpoint, 549 00:30:08,040 --> 00:30:10,400 Speaker 1: and we don't and we want to do more than talk, 550 00:30:11,160 --> 00:30:13,760 Speaker 1: and God knows we don't want to do anything violent, 551 00:30:14,280 --> 00:30:17,880 Speaker 1: there's a tendency for policy to go to sanctions, and 552 00:30:18,040 --> 00:30:21,240 Speaker 1: it's probably the best of bad alternatives. Okay, thank you 553 00:30:21,320 --> 00:30:23,520 Speaker 1: so very much to our Wall Street Weeks special contrainer 554 00:30:23,720 --> 00:30:28,400 Speaker 1: Larry Summers of Harvard University. Finally, one more thought, Bernie 555 00:30:28,640 --> 00:30:31,760 Speaker 1: made off. This week Wall Street lost one of its 556 00:30:31,760 --> 00:30:34,960 Speaker 1: most infamous villains. We all know the story of the 557 00:30:35,000 --> 00:30:38,520 Speaker 1: man who spent decades building an investment fund that didn't invest, 558 00:30:39,040 --> 00:30:43,320 Speaker 1: who told his investors they were worth sixty five billion dollars. 559 00:30:43,360 --> 00:30:46,040 Speaker 1: That wasn't there who took advantage of the rich and 560 00:30:46,080 --> 00:30:48,360 Speaker 1: the famous, and the not so rich and the not 561 00:30:48,480 --> 00:30:51,840 Speaker 1: so famous, his close friends, and even the endowment of 562 00:30:51,880 --> 00:30:56,280 Speaker 1: the Orthodox University whose board he chaired. This week, Bernie 563 00:30:56,280 --> 00:31:00,800 Speaker 1: Madoff died in prison like Charles Ponzi did seventy years ago. 564 00:31:00,920 --> 00:31:03,960 Speaker 1: The man who gave his name to the scheme made off, copied, 565 00:31:04,200 --> 00:31:06,920 Speaker 1: and then took to a scale no one could have imagined. 566 00:31:07,040 --> 00:31:09,720 Speaker 1: When something as big and as bad as Bernie made 567 00:31:09,760 --> 00:31:12,880 Speaker 1: us crime happens, we all look for some larger meaning. 568 00:31:13,480 --> 00:31:15,720 Speaker 1: Does it show us that we're all gullible, that we're 569 00:31:15,720 --> 00:31:18,360 Speaker 1: all greedy, that we are all too willing to wish 570 00:31:18,360 --> 00:31:21,240 Speaker 1: ourselves to success even when it's too good to be true. 571 00:31:21,720 --> 00:31:23,400 Speaker 1: Does it tell us that no matter how much we 572 00:31:23,440 --> 00:31:27,160 Speaker 1: may regulate, we can never regulate our way to integrity? 573 00:31:27,640 --> 00:31:31,080 Speaker 1: Or maybe, just maybe it's an important reminder that there 574 00:31:31,120 --> 00:31:33,560 Speaker 1: are some people who are out there who and there 575 00:31:33,720 --> 00:31:36,360 Speaker 1: is no other word for it, at evil in their heart. 576 00:31:36,880 --> 00:31:39,640 Speaker 1: But they're rare, and the willingness of the rest of 577 00:31:39,720 --> 00:31:42,720 Speaker 1: us to trust despite knowing they are out there is 578 00:31:42,760 --> 00:31:45,320 Speaker 1: what makes it all work in the end, isn't it 579 00:31:46,720 --> 00:31:48,520 Speaker 1: that does it. For this episode of Wall Street Week, 580 00:31:48,680 --> 00:31:53,160 Speaker 1: I'm David Weston. This is Bloomberg. See you next week.