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Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.

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Speaker 1: I'm Joe Wisenthal and I'm Tracy Halloway. Tracy, you see

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Speaker 1: that inflation print that we just got, that cp I print?

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Speaker 1: I did. I logged on the terminal, especially at eight

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Speaker 1: thirty UM in the evening here in Hong Kong to

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Speaker 1: watch it, and it looks like we're seeing um moderation

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Speaker 1: in the price increases. Yeah. So we are recording this

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Speaker 1: on August eleven, and we just had the latest CPI report,

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Speaker 1: and indeed it did show some moderation, particularly on a

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Speaker 1: sequential basis. Inflation readings the cp I have been quite

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Speaker 1: elevated lately by historical standards, and there's this whole debate

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Speaker 1: about whether it's transitory or some sort of new regime

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Speaker 1: and what's causing it and so forth. We'll get into

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Speaker 1: all that, but at least for this one month, and

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Speaker 1: at least like on a sequential basis, we definitely saw

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Speaker 1: a bit of a deceleration used car prices, which had

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Speaker 1: been absolutely soaring. It finally looks like that whole thing

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Speaker 1: is topped out a little bit. Yeah, And we've had

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Speaker 1: such a heated debate over whether or not inflation is

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Speaker 1: transitory or something more permanent. And I think the vociferous

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Speaker 1: nous of that debate kind of hints at something wider

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Speaker 1: and more fundamental about the economic situation right now, which

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Speaker 1: is that we're in a really unusual time. The recession

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Speaker 1: that we saw during COVID was basically unlike any others.

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Speaker 1: It only lasted for a couple of months. In the

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Speaker 1: end um we had record stimulus, and so that kind

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Speaker 1: of means that no one's really sure exactly what the

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Speaker 1: recovery is going to look like, and it's hard to

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Speaker 1: look at previous recoveries in order to make an analogy

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Speaker 1: to today. Yeah, and inflation in particular, Like you know,

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Speaker 1: we get economic data points literally every day, are virtually

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Speaker 1: almost every day, but inflation is one of those that

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Speaker 1: really gets people going in a way that other data

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Speaker 1: points don't people. You know, we had that recent episode

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Speaker 1: with Rico MoManI A. People feel that they feel it

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Speaker 1: at the grocery store. They attribute it to policies. When

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Speaker 1: it's up, they attributed to policies that they don't like.

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Speaker 1: They attribute it to FED, they attributed to spending and

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Speaker 1: so forth. Inflation just it gets people going. It does indeed,

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Speaker 1: and it's very easy for people to sort of overlay

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Speaker 1: their own thoughts and feelings and biases on inflation, so

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Speaker 1: people kind of see what they want to see. Um,

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Speaker 1: you know, cherry picking the data is something that goes

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Speaker 1: on quite a lot. And and again, like in the

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Speaker 1: current environment, there is a reason that you would strip

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Speaker 1: out some unusual activity and things like used car prices.

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Speaker 1: But then you get into the dangerous terror tory of

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Speaker 1: are you basically stripping everything out that's actually rising um

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Speaker 1: and obscuring what's happening in the market inflation ex inflation.

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Speaker 1: All right, Well, I am very excited, you know, I said, Uh,

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Speaker 1: you know, inflation always gets people going. I'm very excited

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Speaker 1: because we have a guest today who almost never needs

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Speaker 1: any uh anything to get him going. Very one. He's

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Speaker 1: long been one of my favorite people to interview. Talked

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Speaker 1: to him several times on TV, but we've never had

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Speaker 1: him on the podcast before. We're gonna be speaking with

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Speaker 1: David wu. He was formerly the head of Global Rates,

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Speaker 1: Global Effects, Global em fixed income and Economic Research at

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Speaker 1: Bank of America. He's a veteran there of ten years

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Speaker 1: and recently left and now he's he's a blogger. He's

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Speaker 1: like us. Uh, he's a blogger. He has uh David

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Speaker 1: wu unbound where he talks about all this stuff, macro things,

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Speaker 1: things going on in society, the data and so forth,

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Speaker 1: and always one of my favorite people to talk to you,

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Speaker 1: so sort of a perfect person to uh kick off

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Speaker 1: a sort of like let's take stock of the macros

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Speaker 1: suation right now. David, thank you so much for coming

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Speaker 1: on odd lots. It's my total pleasure. Thank you for inviting.

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Speaker 1: Absolutely it's always a treat to talk to you. David.

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Speaker 1: Let's start with that inslation print. I'm sure you have

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Speaker 1: been looking at it for the last half hour, as

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Speaker 1: have me and Tracy. How would you put it into context?

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Speaker 1: What's your take on it? And how does it fit

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Speaker 1: more broadly in where you see, uh, the overall inflation

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Speaker 1: situation right now in the US. I think, you know,

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Speaker 1: I think you know we have to first but put

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Speaker 1: things in perspective. I don't think anybody in the right

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Speaker 1: mind thought that the sort of six percent seven percent

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Speaker 1: inflation was sustainable. Everybody knew, you know, that it had

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Speaker 1: to do with these one off factors like use cars, computers,

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Speaker 1: you know, things that have been affected by supply chain

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Speaker 1: basically breakdown. So therefore the spiking price all to be temporary.

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Speaker 1: I supply chain basically came back on track. So the

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Speaker 1: question really is, you know, so if it's not six

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Speaker 1: or seventh percent, what is it now? The fact is,

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Speaker 1: notwithstanding you know, basically the sharp drop in basic inflation

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Speaker 1: for use car prices, you know, this month, if you

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Speaker 1: look at the core inflation, we're still up zero point three.

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Speaker 1: I mean that is an annualized rate of close to

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Speaker 1: four percent. I mean that's like higher than anything we've

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Speaker 1: ever seen, you know, basically, you know, basically in the

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Speaker 1: run up to COVID and more recently. So I would

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Speaker 1: say that forget about, like you know, basically, whether it

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Speaker 1: is whatever, six or seven, the fact that it is

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Speaker 1: even running at three percent, four percent, that's a problem

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Speaker 1: because the point here is that the whole world economy

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Speaker 1: is currently calibrated on the assumption that the FED phones

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Speaker 1: rate is going to remain very very low for a

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Speaker 1: very among time. The only way that's going to be

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Speaker 1: possible is that the inflation doesn't become a problem. You

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Speaker 1: don't need inflation of five or six percent to become

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Speaker 1: a problem. All you need inflation at three percent, and

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Speaker 1: the FED has got a huge headache ahead of them

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Speaker 1: and so with the market. So so let's not beat

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Speaker 1: around the bush. I don't read I'm not I'm one

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Speaker 1: of these people balding tables saying we're going to see

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Speaker 1: your double dis you the inflation any time soon. Given

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Speaker 1: that the whole entire market has been gotten used to

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Speaker 1: the idea that the inflation was always going to remain

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Speaker 1: somewhere belottle two percent, allowing the FED to basically carry

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Speaker 1: on with this very commentative stance. If inflation just goes

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Speaker 1: above two percent, even just goes to three percent, the

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Speaker 1: world is gonna have a huge problem. Um. We've been

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Speaker 1: talking a lot about the Fed's new framework on the

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Speaker 1: show and the idea of average inflation targeting, and I'm wondering,

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Speaker 1: you know, is that something that you buy into in

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Speaker 1: the sense that you think the FED is actually going

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Speaker 1: to be more flexible um when it comes to inflation.

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Speaker 1: Is that something that could maybe buy it a bit

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Speaker 1: more time and um put off a rate rise? Tracy, No, Honestly,

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Speaker 1: I think the whole averaging inflation was a gimmick. And

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Speaker 1: I'll tell you what the gimmick was. The gimmick was

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Speaker 1: to baseically help them convince the market to drive interest rates.

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Speaker 1: Love right, because they're gonna tell you what, even when

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Speaker 1: the inflation goes about two percent, we're not going to

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Speaker 1: hike rates anytime soon. Therefore, you know the market. So

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Speaker 1: in some sense it was stronger for guidance than what

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Speaker 1: y'allin introduced what about five six years ago. The point

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Speaker 1: here is the inflation really starts to go up from

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Speaker 1: two to three percent, three to four percent, you think

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Speaker 1: the Fed is going to be sitting there putting their

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Speaker 1: thumbs because they're going to be very nervous about the

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Speaker 1: return of inflation expectations. You know, it took just think

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Speaker 1: about what Volker had to do to crush inflation expectation

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Speaker 1: early in the eighties. It had to basically bring the

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Speaker 1: engineer a recession u as economy to crush inflation expectation.

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Speaker 1: Inflation expectation, I mean, you know anything, you know, economists

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Speaker 1: don't know that much. Honestly, the truth is economists no

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Speaker 1: much less than anybody give them credit for. If there's

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Speaker 1: one thing they know and they're afraid of is basically

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Speaker 1: inflation expectation is like a Pandora's box. Once you open it,

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Speaker 1: it's gonna be difficul to close it. So this is

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Speaker 1: why if inflation starts to edge higher, forget about the

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Speaker 1: whole idea of inflation averaging, inflation target effect will go.

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Speaker 1: They will have no choice but to go because they

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Speaker 1: realize what will be at that stake, because if they

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Speaker 1: don't go, an inflation expectation goes up, and then having

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Speaker 1: to bring it down down the road, it's going to

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Speaker 1: be that much more costly. This is why I think,

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Speaker 1: you know, the whole inflation averaging business was nothing more

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Speaker 1: than just empty talk at the end of the day. Well, okay,

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Speaker 1: so you can, as we point out, even if you

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Speaker 1: strip out used cars, there's sort of this underlying inflationary

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Speaker 1: pace right now, that's uh, well above that's enough above

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Speaker 1: in your view, enough above two to create a problem.

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Speaker 1: How come look, what's the explanation for it? So, I mean,

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Speaker 1: you know, we can all look at the data, but

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Speaker 1: we need a theory to explain it or to understand

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Speaker 1: where it's going. Why is it? Yeah, I mean, Joe,

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Speaker 1: you asked that's the right question. That's exactly the right question,

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Speaker 1: and I'm going to tell you the answer. I mean,

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Speaker 1: for it was worth, you know, I write about it

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Speaker 1: actually my big my own blog, which is does right.

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Speaker 1: The last twenty years, I don't tell you kaynzie In

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Speaker 1: School of Economics has been on the ascendency. I can

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Speaker 1: tell you this wasn't always the case because twenty years

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Speaker 1: ago when I got my PhD at Columbia and Economics,

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Speaker 1: you know, at the time, it was the New Classical

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Speaker 1: School of economics that was invoked. And these have been

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Speaker 1: the main schools of economics that have been, you know,

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Speaker 1: in rivalry for much of the last fifty years. You

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Speaker 1: could argue, now, what is the essential difference between the

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Speaker 1: Kaynesian school versus the New Classical school New Classical School,

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Speaker 1: by the way, it's that you're called Chicago, so we

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Speaker 1: can think about it that way. The main difference is

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Speaker 1: the kaynzie In school emphasizes negative demand shocks, whereas the

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Speaker 1: New Classical School emphasized as negative supply shock. Now, what

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Speaker 1: is the negative demand shock. Neither demanding shock is like oh,

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Speaker 1: the outcome bubble bursting in two thousands, okay, which unleashed

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Speaker 1: this massive negative wealth effect. Negative demand shock is like

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Speaker 1: oh September, you know, basically eleven, that crush confidence and

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Speaker 1: cause people to pull back their spending. Negative demand shock

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Speaker 1: is like what happened in two thousand and eight following

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Speaker 1: the collapse eleven Brothers, which basically caused all the banks

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Speaker 1: to pull back in terms of their credit lending, which

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Speaker 1: basically forced negative demand shock. And then the Kynsians argue

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Speaker 1: and right, and so when you have a negative demand shock,

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Speaker 1: the right thing to do is to basically engage in

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Speaker 1: proactive okay, fiscal and monetary expansion to offset the negative

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Speaker 1: demand shock in whe did to bring the coming back

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Speaker 1: to for you for employmentquilibrium. This is why the last

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Speaker 1: twenty years, the reason why Kynzie in economics is so

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Speaker 1: well was because one after another oldie shocks. As I said,

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Speaker 1: the dot com bubble bursting September eleven, two thou eight,

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Speaker 1: will all negative demand shocks. Now, guess what what is COVID,

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Speaker 1: you might ask. I can tell you if if COVID

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Speaker 1: is anything at all, is not a negative demand shock

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Speaker 1: in my view, is a negative supply shock. And by

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Speaker 1: the way, just think about this, I mean, how is

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Speaker 1: it affecting supply? I don't tell you right now. For example,

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Speaker 1: you look at you know, global freight prices, global freight

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Speaker 1: rates for containers going through the roof right now, and

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Speaker 1: so it went basically double last year and double already

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Speaker 1: this year, showing no signs of moderation. You know why

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Speaker 1: because right now in Asia where basically the pandemic is

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Speaker 1: basically breaking out once again, and then countries are not

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Speaker 1: allowing okay, these containman ships to upload their cargoes. So

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Speaker 1: are there results? Thousands of ships right now around the

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Speaker 1: world are being stranded at their ports, not being able

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Speaker 1: to offload their cargo's information, the sailors, the crew. Now

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Speaker 1: that's a negative supply shock to the extent that COVID's actually,

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Speaker 1: you know, has basically reduced ability of the economy to

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Speaker 1: basically to respond to increase demand. Now, what else is

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Speaker 1: basically a negative supply shock? Think about this, all these women.

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Speaker 1: We have seen a massive drop in labor participation rate

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Speaker 1: of women in the United States in the last basic

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Speaker 1: gating months. Why is that they're not even looking for

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Speaker 1: a job, these women who just simply left the labor force.

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Speaker 1: Because it's very simple because as long as COVID right

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Speaker 1: now it's about, there's no vaccine for children. As a result,

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Speaker 1: women are now having to stay home to look after

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Speaker 1: their young children who cannot go to school. Now, if

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Speaker 1: COVID is gonna be here to stay, you know what,

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Speaker 1: or that for that matter, if we don't have vaccine

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Speaker 1: anytime soon for children, guess what you're gonna see a

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Speaker 1: large part of labor force basically disappeared. That's a negative

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Speaker 1: supply shock. Let me tell you this. If you look

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Speaker 1: at a very basic economics supply and demand shock, which

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Speaker 1: all your viewers have heart about, that's why they're listening

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Speaker 1: to this program, a negative demand shock is deflation, ay,

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Speaker 1: But guess what a negative supply e shock is inflationary.

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Speaker 1: Your supply curse moves to the left and push down

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Speaker 1: employment and push our prices. So when you are basically

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Speaker 1: when the FED and the US government unleashed massive fistical

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Speaker 1: stimulus to try to offset a negative supply shock, all

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Speaker 1: it's gonna do is basically push up inflation. That is,

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Speaker 1: by the way, and I'm telling you this, this is

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Speaker 1: why the neo classical school framework thinking about recession about

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Speaker 1: prices is the more relevant framework in this particular point

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Speaker 1: in time because of COVID. I would say, I'm not

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Speaker 1: saying that COVID only is negative supply shock, because maybe

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Speaker 1: there's a little bit of negative demand shock at least

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Speaker 1: in the beginning when it first hit, when her confidence

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Speaker 1: is once so forth. But I think the longerest thing

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Speaker 1: drags out, is becoming more of a negative supply shock.

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Speaker 1: And then yet the FED and the Biden administration continue

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Speaker 1: to respond to COVID as though it were a negative

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Speaker 1: demand shock, and that, in my view, is going to

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Speaker 1: be a very a very dangerous game to play. Can

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Speaker 1: we dive into um the demand side a little bit

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Speaker 1: more so? I remember, you know, early last year, people

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Speaker 1: were talking about how this would permanently scar consumers, particularly

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Speaker 1: in America. You know, this huge global crisis, people losing

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Speaker 1: their jobs, having to stay inside, a really sort of

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Speaker 1: unique and terrible experience for a lot of people during

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Speaker 1: a global pandemic. How would you classify us consumers now?

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Speaker 1: Because of anything, it seems like they've emerged on the

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Speaker 1: other side of this much more prepared to spend. It

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Speaker 1: looks like exactly because the the honest true is crazy.

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Speaker 1: The the I mean, the one thing I wouldn't have forecasted.

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Speaker 1: I mean, you know, like you have like a Martian

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Speaker 1: who just landed on kind of earth looking at what's

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Speaker 1: happened last year? I guarantee you nobody, no genius, Okay,

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Speaker 1: nobody all price the comments could have predicted what which

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Speaker 1: is that somehow, after the biggest basically crisis they hit

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Speaker 1: the world in a hundred years, that somehow US household

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Speaker 1: balance sheet has improved and their cash flow is improved.

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Speaker 1: I don't want to tell you US household net worth

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Speaker 1: as a shop disposted income is not all time high

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Speaker 1: because we've seen a massive rallying the stock market unbelievably,

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Speaker 1: we've seen a massive appreciation in home prices. So as

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Speaker 1: a result, Americans who owned stocks and houses are far

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Speaker 1: richer today than they worked a year ago. Ironically, at

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Speaker 1: the same time, COVID has driven down interest rate as

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Speaker 1: a result, debt payment as a sharp disppost, income for

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Speaker 1: American is basically at all time look at the same time. Meanwhile,

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Speaker 1: if you don't have any money, guess what you know

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Speaker 1: what for one thing, the banks are begging you to borrow.

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Speaker 1: If you look at answer the Senior Loan office and Sturday,

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Speaker 1: the willingness of your field let your money. Credit card

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Speaker 1: for people who have no money is at all time

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Speaker 1: high right now. On top of that, you know what,

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Speaker 1: if you really do have any money, you know what

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Speaker 1: Biden has promised to basically make sure you do not

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Speaker 1: miss the party right now. You know, I don't have

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Speaker 1: to tell you. The big news the last two weeks

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Speaker 1: was the fact that, you know what, Biden has decided

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Speaker 1: to suspend the moratorium. You basically extend the moratoriament on

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Speaker 1: eviction again. If you cannot pay rent, no problem, you

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Speaker 1: can stay on and go on a vacation. Meanwhile, okay,

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Speaker 1: and worry about paying rent down the road, because we're

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Speaker 1: gonna make sure you don't get evicted. Meanwhile, last week,

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Speaker 1: of course, they also came under pressure from the liberal

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Speaker 1: weight of the Democratic Party. Now you cannot pay your

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Speaker 1: student loans. They've also extended the student loans moratorium until

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Speaker 1: basically October. So and then now they're talking about maybe

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Speaker 1: possibly extending the the enhanced benefits federal basically unemployment trans

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Speaker 1: benefit to make sure I mean, think about this, I mean,

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Speaker 1: the the amount of benefits that people were getting, including

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Speaker 1: the enhanced benefit. Most of the people who lost your

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Speaker 1: jobs were actually getting more money from the benefits than

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Speaker 1: what they were earning before. So you're telling me which

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Speaker 1: American has actually been lost out. Sure, some people have

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Speaker 1: lost your family, that kind of thing is all very sad.

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Speaker 1: But economically, yeah, basically because of policy which I think

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Speaker 1: we're gonna have to pay for dearly down the road,

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Speaker 1: has made sure that everybody is better at all. So

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Speaker 1: against this factor of yeah, I'm not surprised Americans are

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Speaker 1: basically are about to basically spend some serious money. What

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Speaker 1: do you what do you mean? So people say that

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Speaker 1: a lot we're gonna have to pay for these policies

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Speaker 1: down the road, And that's always you know, I've heard

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Speaker 1: that all my life, long before COVID or any of these.

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Speaker 1: You know, I heard it about TARP, and I heard

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Speaker 1: it about all this. What is it means specifically to you?

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Speaker 1: Because although it's true that there has been this massive,

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Speaker 1: by historical standards physical expansion, some of it is coming

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Speaker 1: to an end. We've seen a reduction in the unemployment

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Speaker 1: insurance expansion most likely, I think most people do not

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Speaker 1: expect that to be continued. I guess there is some debate.

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Speaker 1: We still do have a significant employment whole, although that

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Speaker 1: does seem, you know, by some estimates, are still eight

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Speaker 1: million jobs short of where we would be had it

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Speaker 1: not been for the crisis. So what do you actually

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Speaker 1: see as the what is paying for it? Look like,

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Speaker 1: let's look at the numbers here, so I mean, forget

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Speaker 1: about anything else. This's look at two thousand and twenty,

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Speaker 1: right two, the global clarmy contracted by three point six percent. Okay,

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Speaker 1: the economy was growing about six percent before that. So

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Speaker 1: the foregone output last year was about ten percent of

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Speaker 1: global GDP, which comes to about nine trail million dollars. Right,

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Speaker 1: that was how much global GDP foregone basically loss if

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Speaker 1: you like. On top of that, based on the land

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Speaker 1: if number, fifteen trillion dollars of fiscal spending has now

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Speaker 1: been taken out by governments around the world to finance

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Speaker 1: whatever they're firefighting. So fifteen billion, fifteen trillion plus nine trillion,

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Speaker 1: four trillion dollars not just for two thousand twenty. You said, well,

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Speaker 1: what's what's twenty four trillion dollars? These days we talked

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Speaker 1: about trillions as though there were nothing. Let's put that

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Speaker 1: in perspective. Okay, let's put that in perspective. I don't

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Speaker 1: know people realize this, but you know what, if you

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Speaker 1: look at the combined wealth of the two thousand seven

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Speaker 1: hundred and fifty five billion years in the world. So

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Speaker 1: if you take all the billionaires in the world, you

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Speaker 1: add up all their money, it's only thirteen trillion dollars.

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Speaker 1: By the way, okay, so even if we were to

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Speaker 1: confiscate all the money from all the richest billionaires in

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Speaker 1: the world, time enough to basically even fill the whole. Now,

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Speaker 1: another way to look at this. You said, well, what

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Speaker 1: can you buy with twenty four trillion dollars? You might

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Speaker 1: that way. Now think about this. You know you could

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Speaker 1: argue today the most you know, the ultimate symbol of

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Speaker 1: wealthy days is to buy sports teams and luxury real estate.

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Speaker 1: But you know you could buy the fifty most valuable

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Speaker 1: teams in the world. I'm talking about like from the

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Speaker 1: l A Lakers to I don't know United, you know,

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Speaker 1: basically a Manchester United. You can buy the fifty most

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Speaker 1: valuable teams in the world for just one and seventy

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Speaker 1: billion dollars compared with the twenty four trillion dollars just

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Speaker 1: told you. Is the something that you know that costs

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Speaker 1: the world? Basically from COVID just in two thousand twenty,

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Speaker 1: do you know you can buy all of Manhattan's land

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Speaker 1: for one point seven trillion dollars. Again, COVID causes twenty

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Speaker 1: four trillion dollars. Do you know what you know what

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Speaker 1: it is? I figured it out, you know, you know,

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Speaker 1: you know what twenty trillion dollars really mean. With twenty

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Speaker 1: four trillion dollars, we can basically feed the seven hundred

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Speaker 1: million people in the world who suffer from chronic nourishment.

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Speaker 1: We can prove mind clean water and basic sanitation for

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Speaker 1: everyone in the world. We can provide education for all

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Speaker 1: the children in the world who are not able to

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Speaker 1: attend school. On top of that, we can protect all

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Speaker 1: the endangerous species from extinction, okay, which only cost is

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Speaker 1: about some seventy six billion dollars a year. In other words,

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Speaker 1: just the cost of last year is basically forgotten GDP,

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Speaker 1: and the fiscal costs is enough to make the world

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Speaker 1: a much better place. In other words, the way I

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Speaker 1: think about this is, okay, is that now we as

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Speaker 1: though that before the crisis, there was nobody went hungry

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Speaker 1: at night, nobody went without clean water, all the children

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Speaker 1: went to school, animals live in total peace. And now

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Speaker 1: guess what after COVID just one year, seven million people

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Speaker 1: are going hungry every night based more than a billion

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Speaker 1: people don't have these safe water basically about five and

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Speaker 1: people are not going to school when they should. And

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Speaker 1: then guess what animals are dying left and right. That

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Speaker 1: is the cost just in two thousand twenty. Not to

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Speaker 1: mention beyond. Now I can tell you something else. You

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Speaker 1: might say, well, when are we gonna pay this price?

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Speaker 1: That obviously you know is immediately tied to the whole

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Speaker 1: inflation story. The reason why yelling, and this is why

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Speaker 1: I have no respect for people like yelling. She keeps

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Speaker 1: talking about why if interest rates are zero, then there's

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Speaker 1: no cast, let's just take on more debt if the

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Speaker 1: interest rates zero, But she's assuming that inflation is never

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Speaker 1: gonna go back up. I just told you. If COVID

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Speaker 1: turns out to be a negative supplying shock, then everything

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Speaker 1: they're doing right now is going to be pushing up

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Speaker 1: inflation and pushing up the inflation unless they want inflation

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Speaker 1: to go out of control, which I don't think they do.

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Speaker 1: The fact web no choice, but the race interest rate.

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Speaker 1: When they starts to rates an interest rate, that's when

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Speaker 1: that's the day we start paying for basically the cost,

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Speaker 1: and it's gonna be a big cost. I want to

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Speaker 1: ask a slightly different question based on that yell in comment.

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Speaker 1: But you know you were at BAMIL for a very

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Speaker 1: long time. I think about ten years, and your new

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Speaker 1: blog is called David Woo Unbound. Is the suggestion that

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Speaker 1: I don't know that you were sort of bound um

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Speaker 1: in terms of what you could say when you were

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Speaker 1: at Bank of America Maryland, Tracy. You know, let me

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Speaker 1: tell you something, you know, you know, you know what

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Speaker 1: really basically sort of like the day of reckoning for

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Speaker 1: me at Bank a marking, you know, by the way

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Speaker 1: you know I mean, I I don't want to say

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Speaker 1: I have only good things to say about Bank America.

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Speaker 1: I was there for ten years. I did great, The

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Speaker 1: bank treated me great. I couldn't be any happier that.

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Speaker 1: That's the honest truth. So my leading Bank America has

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Speaker 1: nothing to do with how the bank treated me or

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Speaker 1: anything like that. I've always thought that they paid me

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Speaker 1: much more than actually I was worth. But nevertheless, you

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Speaker 1: know what, I'm not going to complain now. I'll tell

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Speaker 1: you what really got to me. It's a sort of

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Speaker 1: sequence of events, one of which was what been in

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Speaker 1: January Febrary, this year now, I don't have to remind you, right,

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Speaker 1: you know, the one point whatever six trillion dollar fiscal

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Speaker 1: stimulus package that got through very quickly in January, as

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Speaker 1: soon as the new administration was warning. Now that one

430
00:24:13,600 --> 00:24:18,600
Speaker 1: point six trillion, I can tell you any reasonable economists

431
00:24:18,600 --> 00:24:21,080
Speaker 1: will tell you it was not just excessive, it was

432
00:24:21,080 --> 00:24:26,000
Speaker 1: probably unnecessary. Now, it's very interesting to me how many

433
00:24:26,040 --> 00:24:30,080
Speaker 1: economists came out speaking up against it. Obviously not a

434
00:24:30,119 --> 00:24:34,040
Speaker 1: single one on All Street, but literally, you know, the

435
00:24:34,080 --> 00:24:37,080
Speaker 1: people who spoke up against it are like Olivia Blanchard,

436
00:24:37,440 --> 00:24:39,320
Speaker 1: who's the former chief economist at the I m F,

437
00:24:39,359 --> 00:24:41,520
Speaker 1: who's not retired, who doesn't guart anymore. I mean, he

438
00:24:41,560 --> 00:24:43,719
Speaker 1: has no he doesn't have to pay the political price

439
00:24:44,240 --> 00:24:47,439
Speaker 1: for saying things that may not be politically correct. I

440
00:24:47,480 --> 00:24:50,440
Speaker 1: can hear you. Who other person can John Cochrane, who

441
00:24:50,520 --> 00:24:53,560
Speaker 1: used to be at Berkeley, who's now whoever institute, who

442
00:24:53,600 --> 00:24:56,320
Speaker 1: has been banished already to the North Pole, if you like,

443
00:24:56,560 --> 00:25:00,399
Speaker 1: who basically wrote about it. In other words, to me,

444
00:25:00,560 --> 00:25:04,119
Speaker 1: what we're shocking in January and February was that we

445
00:25:04,320 --> 00:25:08,520
Speaker 1: just decided to write this massive check that was completely unnecessary,

446
00:25:08,720 --> 00:25:13,119
Speaker 1: and yet not a single academic economists, okay, really spoke

447
00:25:13,200 --> 00:25:16,440
Speaker 1: up with the exception of a few honest and courageous people,

448
00:25:17,040 --> 00:25:19,760
Speaker 1: they didn't mind to be canceled because either they were

449
00:25:19,760 --> 00:25:22,800
Speaker 1: already in the retirement what they were already basically in

450
00:25:22,880 --> 00:25:25,400
Speaker 1: North Pole, they've already been canceled. So from that point

451
00:25:25,400 --> 00:25:27,479
Speaker 1: of view, this is what we was a wake up

452
00:25:27,480 --> 00:25:30,840
Speaker 1: call for me because then I realized that the whole

453
00:25:30,880 --> 00:25:33,520
Speaker 1: canceled culture has gone much too far. I can tell

454
00:25:33,600 --> 00:25:37,040
Speaker 1: you so many of my professor friends, you know, classmates

455
00:25:37,040 --> 00:25:39,840
Speaker 1: at Columbia who are now basically teaching a major university

456
00:25:39,880 --> 00:25:42,760
Speaker 1: IVY league, who tell me they do not there to

457
00:25:42,920 --> 00:25:45,119
Speaker 1: speak up today because they might lose their job, they

458
00:25:45,200 --> 00:25:48,440
Speaker 1: might lose your tenure, they might have students basically complaining

459
00:25:48,480 --> 00:25:52,840
Speaker 1: about them. That is the climate today in America, and

460
00:25:52,920 --> 00:25:55,720
Speaker 1: it is starting, and it was getting onto Wall Street.

461
00:25:55,800 --> 00:25:57,600
Speaker 1: And I said, you know what, I gotta do something

462
00:25:57,640 --> 00:26:01,200
Speaker 1: about this because I benefited from Wall Street. I mean

463
00:26:01,240 --> 00:26:04,080
Speaker 1: I've I've spent twenty years on Wall Street. One thing

464
00:26:04,160 --> 00:26:07,359
Speaker 1: I learned what anything else on Wall Street is the

465
00:26:07,440 --> 00:26:11,280
Speaker 1: Wall Street is about the celebration of differences. Just think

466
00:26:11,280 --> 00:26:14,040
Speaker 1: about this. Every day people are going on your show

467
00:26:14,600 --> 00:26:18,080
Speaker 1: you know, debating about A and B is inclusion going up,

468
00:26:18,119 --> 00:26:21,320
Speaker 1: inclustion going down. You know what Wall Street is about

469
00:26:21,440 --> 00:26:25,119
Speaker 1: the celebration differences. If somebody today is buying Tesla stock

470
00:26:25,200 --> 00:26:28,760
Speaker 1: is because somebody else is selling it. So I wanted basically,

471
00:26:28,800 --> 00:26:30,760
Speaker 1: I decided to set out my own in order to

472
00:26:30,800 --> 00:26:34,240
Speaker 1: basically bring this very important lesson from Wall Street that

473
00:26:34,320 --> 00:26:36,840
Speaker 1: I become. It's been a very big part of my

474
00:26:36,920 --> 00:26:40,040
Speaker 1: success to basically the general public. That's what I want

475
00:26:40,040 --> 00:26:42,240
Speaker 1: to do on this question of like who gets to

476
00:26:42,280 --> 00:26:45,760
Speaker 1: criticize I mean the stimulus. I mean also Larry Summers

477
00:26:46,119 --> 00:26:48,640
Speaker 1: was a critic of some of the size of the spending,

478
00:26:49,119 --> 00:26:52,520
Speaker 1: and of course he continues to have a significant media platform.

479
00:26:52,640 --> 00:26:58,520
Speaker 1: Jason Furman, former official within the Obama administration, critic, also

480
00:26:58,840 --> 00:27:00,920
Speaker 1: listened to I mean, I think that there really are

481
00:27:01,560 --> 00:27:05,359
Speaker 1: economists who, to use your term, they're not banished to

482
00:27:05,400 --> 00:27:10,320
Speaker 1: the North Pole, who have been criticized. But I want to, uh,

483
00:27:10,359 --> 00:27:12,280
Speaker 1: can we just basically answer that question if you read

484
00:27:13,080 --> 00:27:16,040
Speaker 1: for me, Larry Summers has no credibility whatsoever when it

485
00:27:16,040 --> 00:27:19,080
Speaker 1: comes to this, because he has been If you I

486
00:27:19,119 --> 00:27:20,919
Speaker 1: don't tell you, I don't do remind you Joe. You

487
00:27:20,920 --> 00:27:24,040
Speaker 1: remember this is for the last ten years he's been

488
00:27:24,080 --> 00:27:28,240
Speaker 1: advocating mass epistical stimulus. Remember he was the one was

489
00:27:28,280 --> 00:27:34,920
Speaker 1: talking about stagnation does in theory. Why doesn't that give

490
00:27:35,000 --> 00:27:38,560
Speaker 1: him more credibility as someone who No, I don't think so,

491
00:27:38,640 --> 00:27:41,040
Speaker 1: because I would say that they were following his blueprint.

492
00:27:41,200 --> 00:27:43,879
Speaker 1: In fact, if you actually read his Washington Post article,

493
00:27:44,040 --> 00:27:47,440
Speaker 1: it was pussy footing around. It was like it was nothing.

494
00:27:47,480 --> 00:27:50,399
Speaker 1: It was not like, you know, he really came out forcefully.

495
00:27:50,520 --> 00:27:53,840
Speaker 1: He felt that he had to basically say something. That's

496
00:27:53,920 --> 00:27:57,160
Speaker 1: that's the feeling I got, certainly. I you know, again,

497
00:27:57,200 --> 00:27:58,760
Speaker 1: go back to read the article and see if you

498
00:27:58,840 --> 00:28:02,119
Speaker 1: actually Larry summer is it's not someone who puss the

499
00:28:02,160 --> 00:28:06,120
Speaker 1: foot around. He basically make sure that you hear him

500
00:28:06,240 --> 00:28:08,960
Speaker 1: when he speaks. And in the way he wrote that article,

501
00:28:09,400 --> 00:28:12,680
Speaker 1: I thought there were too many ifs. Just going back

502
00:28:12,720 --> 00:28:15,320
Speaker 1: to this question, you say, Okay, they are all these

503
00:28:15,880 --> 00:28:19,000
Speaker 1: critics of the stimulus who had secret felt like they

504
00:28:19,040 --> 00:28:23,440
Speaker 1: couldn't say anything and because of yeah, whatever in your

505
00:28:23,480 --> 00:28:27,320
Speaker 1: in your in your characterization, cancel culture that big said, Okay,

506
00:28:27,359 --> 00:28:29,480
Speaker 1: let's look at what's actually happened. Well, it is true

507
00:28:29,520 --> 00:28:33,359
Speaker 1: that we have had some elevated inflation prints and there's

508
00:28:33,359 --> 00:28:36,440
Speaker 1: probably reason to think, you know that even if there's

509
00:28:36,480 --> 00:28:39,400
Speaker 1: a cool down, UM, we are going to get the UH,

510
00:28:39,440 --> 00:28:42,240
Speaker 1: they may remain as such for a while. We also

511
00:28:42,280 --> 00:28:46,000
Speaker 1: see an extremely robust labor market recovery nearly two million

512
00:28:46,080 --> 00:28:49,200
Speaker 1: jobs in the last two months. We did see a

513
00:28:49,240 --> 00:28:53,200
Speaker 1: massive hit two incomes. And I know that we've focused

514
00:28:53,200 --> 00:28:56,160
Speaker 1: a lot, say on this show, UM about a lot

515
00:28:56,200 --> 00:28:59,239
Speaker 1: of the supply chain disruptions, and we've talked a lot

516
00:28:59,280 --> 00:29:01,840
Speaker 1: about containing ers as well as you have. But on

517
00:29:01,880 --> 00:29:06,720
Speaker 1: the other hand, small business incomes, service sector incomes absolutely

518
00:29:06,760 --> 00:29:09,880
Speaker 1: decimated for several months, and we don't really have the

519
00:29:09,920 --> 00:29:12,320
Speaker 1: counter factual of what it would have looked like without

520
00:29:12,400 --> 00:29:15,760
Speaker 1: the p PP program and the expanded UI, but huge

521
00:29:15,800 --> 00:29:20,400
Speaker 1: swaths of the economy their incomes, at least for the

522
00:29:20,560 --> 00:29:24,040
Speaker 1: for several months after the virus hit would have basically

523
00:29:24,080 --> 00:29:26,240
Speaker 1: gone to zero, and that would have crushed their spending,

524
00:29:26,280 --> 00:29:27,880
Speaker 1: and that would have crushed rents. And you know, you

525
00:29:27,960 --> 00:29:31,400
Speaker 1: talked about some of the UH the eviction moratorium. On

526
00:29:31,480 --> 00:29:34,080
Speaker 1: the other hand, there are millions of landlords who probably

527
00:29:34,080 --> 00:29:36,360
Speaker 1: wouldn't have been able to collect any rent had it

528
00:29:36,480 --> 00:29:39,800
Speaker 1: not been for the UI and some of these programs.

529
00:29:39,840 --> 00:29:43,000
Speaker 1: So why is it not reasonable to say, I mean

530
00:29:43,400 --> 00:29:47,600
Speaker 1: that there were really truly shocks to both the demand

531
00:29:48,160 --> 00:29:50,760
Speaker 1: and supply and whiles, and that the supply side is

532
00:29:50,800 --> 00:29:54,400
Speaker 1: absolutely not sorted out, that the demand side has more

533
00:29:54,480 --> 00:30:01,560
Speaker 1: or less remained uh smooth, thanks to the ongoing fiscal expansion. Right,

534
00:30:02,000 --> 00:30:04,160
Speaker 1: you asked a very good question. And again I don't

535
00:30:04,160 --> 00:30:08,320
Speaker 1: want to sound overly political, I would argue I, in

536
00:30:08,400 --> 00:30:11,520
Speaker 1: my humble opinion, I think Secretary niche was probably the

537
00:30:11,520 --> 00:30:15,200
Speaker 1: best Secretary of US charging we've had very very long time. Okay.

538
00:30:15,480 --> 00:30:17,120
Speaker 1: One of the reasons, I mean that he did a

539
00:30:17,160 --> 00:30:19,120
Speaker 1: lot of great things. He just someone who was just

540
00:30:19,400 --> 00:30:21,840
Speaker 1: obviously a bit of an introverse so he didn't know

541
00:30:21,880 --> 00:30:24,960
Speaker 1: how to basically, you know, do his own pr now.

542
00:30:25,240 --> 00:30:27,800
Speaker 1: And because his association with you know, with Trump, you know,

543
00:30:27,880 --> 00:30:29,840
Speaker 1: people didn't want to give him any credit for anything

544
00:30:29,880 --> 00:30:31,760
Speaker 1: he did. But he was the one who came up

545
00:30:31,800 --> 00:30:36,520
Speaker 1: with p PP. If you think about p p P, Okay,

546
00:30:36,800 --> 00:30:42,200
Speaker 1: p p P was basically a supply side response by

547
00:30:42,200 --> 00:30:45,640
Speaker 1: the last administration, right, because the whole idea was, well,

548
00:30:45,680 --> 00:30:47,960
Speaker 1: these business is gonna go bankrupt, you know, and there's

549
00:30:48,000 --> 00:30:51,160
Speaker 1: a cost two companies going bankrupt because like you know,

550
00:30:51,200 --> 00:30:53,240
Speaker 1: it's easy for companies to go bankrupt, but it would

551
00:30:53,240 --> 00:30:57,040
Speaker 1: be difficult for these companies to come back. Okay. Therefore,

552
00:30:57,320 --> 00:31:00,560
Speaker 1: the whole p VP okay, the payroll BA sickally a

553
00:31:00,600 --> 00:31:04,040
Speaker 1: program was to help small business survive the shock and

554
00:31:04,120 --> 00:31:07,640
Speaker 1: the Minchill also understood that you know what, there will

555
00:31:07,720 --> 00:31:10,040
Speaker 1: be some money that was going to be stolen in

556
00:31:10,080 --> 00:31:12,440
Speaker 1: that process, right because as we know, like a lot

557
00:31:12,480 --> 00:31:16,280
Speaker 1: of companies basically faked there whatever you know, payrolls and

558
00:31:16,280 --> 00:31:18,120
Speaker 1: basically got the money that they shouldn't have. It doesn't

559
00:31:18,120 --> 00:31:21,480
Speaker 1: meanly matter, but that was a good example of a

560
00:31:21,600 --> 00:31:27,520
Speaker 1: supply response to help basically mitigate the real, basically the

561
00:31:27,600 --> 00:31:31,720
Speaker 1: long term cost of the crisis by preventing a large

562
00:31:31,800 --> 00:31:34,920
Speaker 1: number of businesses from simply going bankrupt. That was the

563
00:31:35,040 --> 00:31:39,560
Speaker 1: right policy. But what happened earlier this year when Biden

564
00:31:39,680 --> 00:31:42,280
Speaker 1: and with he basically endorsement of Gallon sentate check to

565
00:31:42,280 --> 00:31:45,120
Speaker 1: everybody again four thousand, two hundred dollars. That is not

566
00:31:45,560 --> 00:31:49,360
Speaker 1: the supply side policy. Especially at the time already US

567
00:31:49,440 --> 00:31:53,120
Speaker 1: household savings was like eight percent, nine percent, ten percent.

568
00:31:53,400 --> 00:31:56,080
Speaker 1: You know, if people had that kind of we're sitting.

569
00:31:56,560 --> 00:31:58,760
Speaker 1: If you look at average saving rings never been higher,

570
00:31:59,160 --> 00:32:01,440
Speaker 1: so a ma kins were sending on so many savings.

571
00:32:01,480 --> 00:32:04,080
Speaker 1: If they were not spending, it was not because they

572
00:32:04,080 --> 00:32:07,120
Speaker 1: didn't have the money, presumably because you know what, there

573
00:32:07,160 --> 00:32:09,800
Speaker 1: was no place to spend it, because you know what,

574
00:32:09,840 --> 00:32:11,720
Speaker 1: they wanted to go out the restaurant. The restaurants were closed.

575
00:32:11,720 --> 00:32:13,440
Speaker 1: Maybe they bought all the computers they have. And you

576
00:32:13,480 --> 00:32:16,320
Speaker 1: can see what's happening right now, by the way, this

577
00:32:16,560 --> 00:32:19,120
Speaker 1: last month, you know, you saw the nonvomparent number last week.

578
00:32:20,120 --> 00:32:23,360
Speaker 1: This is the fourth month in a row the hospitality

579
00:32:23,400 --> 00:32:27,479
Speaker 1: and leisure created more jobs than all the other private

580
00:32:27,520 --> 00:32:31,280
Speaker 1: sectors combined, my friend, because Americans are rushing out to

581
00:32:31,400 --> 00:32:34,760
Speaker 1: basically eat out, to basically hit the road on vacations,

582
00:32:34,800 --> 00:32:37,600
Speaker 1: on and so forth. So from not pointing view again,

583
00:32:37,920 --> 00:32:40,120
Speaker 1: but what I'm saying is this, I'm not saying that

584
00:32:40,400 --> 00:32:43,600
Speaker 1: any fiscal response is wrong. I have no doubt that

585
00:32:43,720 --> 00:32:48,120
Speaker 1: last year the aggressive fiscal response was correct. It was calibrated,

586
00:32:48,400 --> 00:32:51,160
Speaker 1: and I love the PPP program because that made a

587
00:32:51,200 --> 00:32:53,280
Speaker 1: lot of sense to me. And on top of that,

588
00:32:53,320 --> 00:32:55,880
Speaker 1: there was also more assuasion placed on the banks not

589
00:32:56,040 --> 00:33:00,800
Speaker 1: to foreclose. Okay on basically businesses warfa, I'm outter mortgages.

590
00:33:01,040 --> 00:33:04,920
Speaker 1: These was the point side response that was basically pushed

591
00:33:05,080 --> 00:33:08,560
Speaker 1: by the last administration. This administration came in. The first

592
00:33:08,560 --> 00:33:10,360
Speaker 1: thing you want to do is spend more, to give

593
00:33:10,440 --> 00:33:14,080
Speaker 1: people who didn't need the money to spend more. That's

594
00:33:14,240 --> 00:33:33,400
Speaker 1: what I've a problem with. I'd like to widen out

595
00:33:33,440 --> 00:33:36,360
Speaker 1: the conversation a little bit more because we've been focusing

596
00:33:36,400 --> 00:33:39,440
Speaker 1: a lot on the US, But you know, I'm over

597
00:33:39,440 --> 00:33:42,040
Speaker 1: here in Asia and one thing that's been happening here

598
00:33:42,120 --> 00:33:45,560
Speaker 1: is we've seen a resurgence in COVID cases. UM the

599
00:33:45,600 --> 00:33:51,920
Speaker 1: delta variant is spreading in Malaysia, Indonesia, Vietnam, places like that.

600
00:33:52,440 --> 00:33:56,320
Speaker 1: We have some cases in China again, and I'm watching

601
00:33:56,360 --> 00:33:58,719
Speaker 1: the p M I s and they seem to be

602
00:33:58,840 --> 00:34:03,000
Speaker 1: rolling over For are some very important economies in terms

603
00:34:03,040 --> 00:34:06,880
Speaker 1: of the global supply chain, but also potentially demand. And

604
00:34:06,960 --> 00:34:10,560
Speaker 1: even China is getting close to UM that fifty mark

605
00:34:10,880 --> 00:34:15,680
Speaker 1: that is the difference between expansion and contraction. So how

606
00:34:15,760 --> 00:34:21,440
Speaker 1: much does China and broader Asia matter when it comes

607
00:34:21,680 --> 00:34:25,480
Speaker 1: to the global recovery And how much does I guess

608
00:34:25,560 --> 00:34:31,840
Speaker 1: the variations in the economic recovery um complicate the global picture.

609
00:34:32,560 --> 00:34:35,080
Speaker 1: The difference between Asia and the rest of the world

610
00:34:35,640 --> 00:34:39,480
Speaker 1: is very simple. Asia was fighting a different matter in

611
00:34:39,560 --> 00:34:42,280
Speaker 1: the rest of the world. During the entire COVID pandemic.

612
00:34:43,000 --> 00:34:46,439
Speaker 1: You know, an Asia was successful, you know, in terms

613
00:34:46,480 --> 00:34:49,920
Speaker 1: of their strategy coping with COVID by simply, you know,

614
00:34:50,239 --> 00:34:54,040
Speaker 1: pursuing an elimination strategy. Right, don't to tell you great

615
00:34:54,080 --> 00:34:57,800
Speaker 1: examples Taiwan, right and now Australia. I mean, they would

616
00:34:57,840 --> 00:35:00,560
Speaker 1: just they basically shut down the whole countries so that

617
00:35:00,680 --> 00:35:04,960
Speaker 1: it was impossible for anybody to even get in. I

618
00:35:05,560 --> 00:35:07,359
Speaker 1: should know this. My parents live in Taiwan. I can

619
00:35:07,360 --> 00:35:11,840
Speaker 1: tell you it's impossible. So as a result, Asia became

620
00:35:11,840 --> 00:35:15,960
Speaker 1: too complacent. They were able to contain basically keep them

621
00:35:16,000 --> 00:35:20,840
Speaker 1: basically COVID at bay by keeping it outside basically their countries.

622
00:35:21,280 --> 00:35:24,160
Speaker 1: They didn't aggressively trying to get vaccines, and that's of

623
00:35:24,200 --> 00:35:27,399
Speaker 1: course the big story. Right. So and then what it's

624
00:35:27,440 --> 00:35:30,439
Speaker 1: really I've always said, China got super lucky. I don't

625
00:35:30,440 --> 00:35:33,600
Speaker 1: know if China, if you know, if if the virus

626
00:35:33,800 --> 00:35:36,799
Speaker 1: was bio biolologically engineered or now I don't really care.

627
00:35:37,480 --> 00:35:40,759
Speaker 1: What I think is China got really insanely lucky last

628
00:35:40,840 --> 00:35:45,359
Speaker 1: year because we all knew the virus okay, once they

629
00:35:45,360 --> 00:35:48,360
Speaker 1: got out of China on its way to Europe became

630
00:35:48,800 --> 00:35:52,160
Speaker 1: literally a percent more contagious. By the time they started

631
00:35:52,239 --> 00:35:55,880
Speaker 1: to spread in Europe, it had already mutated. It was

632
00:35:55,920 --> 00:35:59,840
Speaker 1: a much more infectious. Basically, virus did anything that Chinese

633
00:35:59,840 --> 00:36:03,920
Speaker 1: had to deal with in last January and Febrary in China.

634
00:36:04,239 --> 00:36:08,160
Speaker 1: And ironically, you know the mutation that has been happening now,

635
00:36:08,320 --> 00:36:11,040
Speaker 1: you know, from basically in Europe, and then you know,

636
00:36:11,320 --> 00:36:14,440
Speaker 1: but you know, the alpha, the beta, the gamma in

637
00:36:14,480 --> 00:36:19,240
Speaker 1: South Africa, Brazil. Now the delta is now finally reaching Asia,

638
00:36:20,120 --> 00:36:22,920
Speaker 1: and all of a sudden, you know, the Asian basic

639
00:36:22,960 --> 00:36:27,520
Speaker 1: elimination strategy doesn't work, and rightly so doesn't work. I

640
00:36:27,560 --> 00:36:31,319
Speaker 1: never thought was gonna work, because now you've got, you know,

641
00:36:31,400 --> 00:36:35,799
Speaker 1: basically the delta, which is fifty more basic contagious than

642
00:36:35,880 --> 00:36:39,480
Speaker 1: the altpha. The alpha was basically add percent more contagious

643
00:36:39,480 --> 00:36:42,160
Speaker 1: in the Chinese. This is what's really going on. But

644
00:36:42,280 --> 00:36:44,799
Speaker 1: I'm not terribly worried about this, and I'll tell you

645
00:36:44,840 --> 00:36:47,799
Speaker 1: why I'm not terribly worried about this. If you look

646
00:36:47,840 --> 00:36:52,160
Speaker 1: at the experience of alpha, gamma, beta, and the delta.

647
00:36:52,400 --> 00:36:55,200
Speaker 1: They all follow a very similar pattern. And you have

648
00:36:55,400 --> 00:36:58,160
Speaker 1: to look at the country's of origin for each of

649
00:36:58,160 --> 00:37:03,880
Speaker 1: these basically variants, okay, and basically in the UK, South Africa,

650
00:37:03,880 --> 00:37:06,960
Speaker 1: and Brazil. Following the outbreak of alpha, beta and gamma.

651
00:37:07,200 --> 00:37:11,600
Speaker 1: In India, which is the home of origin of delta,

652
00:37:11,960 --> 00:37:15,839
Speaker 1: the number of new cases collapsed. And it's pretty fascinating

653
00:37:15,880 --> 00:37:21,239
Speaker 1: because even India, well you've got something like twenty vaccination Okay,

654
00:37:21,360 --> 00:37:25,080
Speaker 1: so that's pretty impressive. The numbers have completely collapsed in India.

655
00:37:25,320 --> 00:37:28,719
Speaker 1: Let's look at the UK. UK is another good example. UK,

656
00:37:29,080 --> 00:37:31,880
Speaker 1: you know, because of the close ties with India, was

657
00:37:31,960 --> 00:37:35,000
Speaker 1: the first western country to get hit by delta. And

658
00:37:35,040 --> 00:37:37,600
Speaker 1: the number of cases basically when flying and guess what,

659
00:37:37,880 --> 00:37:41,000
Speaker 1: it's been coming down a lot more than seventy is

660
00:37:41,040 --> 00:37:44,759
Speaker 1: now stabilizing, Okay. This is also the reason why I

661
00:37:44,760 --> 00:37:48,000
Speaker 1: think the US story is gonna follow very safe similar pattern,

662
00:37:48,320 --> 00:37:50,120
Speaker 1: which is that I think probably the next few weeks

663
00:37:50,160 --> 00:37:53,760
Speaker 1: we all to see basically delta cases also starting to peak.

664
00:37:54,480 --> 00:37:58,200
Speaker 1: In Asia. I think the reason why the economy has

665
00:37:58,200 --> 00:38:01,800
Speaker 1: been hit is because once again, these economies are still

666
00:38:01,840 --> 00:38:06,359
Speaker 1: trying to deal with basically Delta using yesterday's medicine, which

667
00:38:06,400 --> 00:38:08,920
Speaker 1: is by trying to shut down the economy, trying to

668
00:38:09,080 --> 00:38:12,399
Speaker 1: basically limited That is not a winning strategy. The only

669
00:38:12,520 --> 00:38:15,400
Speaker 1: strateogy that works now is to basically And this is

670
00:38:15,440 --> 00:38:19,359
Speaker 1: why I think the UK approach it's going to be

671
00:38:19,400 --> 00:38:22,080
Speaker 1: really really important because I don't tell you UK saw

672
00:38:22,239 --> 00:38:26,200
Speaker 1: massive increase in cases and they decided to basically reopen economy,

673
00:38:26,400 --> 00:38:30,520
Speaker 1: relax all restrictions because they decided, you know what, let's

674
00:38:30,800 --> 00:38:34,600
Speaker 1: elimination strategy doesn't work. Let's just basically pursue a strategy

675
00:38:34,600 --> 00:38:38,960
Speaker 1: of coexistence. Okay, if you get everybody vaccinated, you know what,

676
00:38:39,760 --> 00:38:41,839
Speaker 1: maybe we don't have to close if not many people

677
00:38:41,840 --> 00:38:43,480
Speaker 1: are dying. And in fact, if you look at the

678
00:38:43,560 --> 00:38:46,200
Speaker 1: mortality rate in the UK, it's about point two percent,

679
00:38:46,280 --> 00:38:49,719
Speaker 1: which is about double that of a flu okay for

680
00:38:50,000 --> 00:38:52,960
Speaker 1: vaccinated people. I think that's what it is. So I

681
00:38:53,000 --> 00:38:57,279
Speaker 1: think it's basically ASIA strategy worked in the beginning, it

682
00:38:57,360 --> 00:39:01,200
Speaker 1: stop working once Delta became much more con pages, and

683
00:39:01,320 --> 00:39:04,319
Speaker 1: yet Asia continues to try to basically control it as

684
00:39:04,360 --> 00:39:07,640
Speaker 1: though we were fighting the original virus. I think, just

685
00:39:07,680 --> 00:39:09,759
Speaker 1: like everybody else, there's gonna be a learning curve. I

686
00:39:09,760 --> 00:39:11,759
Speaker 1: think even Asia is gonna get there, and when they

687
00:39:11,760 --> 00:39:14,839
Speaker 1: get there, we're gonna we're gonna decide that maybe we

688
00:39:14,840 --> 00:39:17,080
Speaker 1: can live with this. Now, of course, I want to

689
00:39:17,080 --> 00:39:19,600
Speaker 1: say this one big of course, which is I have

690
00:39:19,680 --> 00:39:22,000
Speaker 1: no idea what's gonna happen later later this year, I

691
00:39:22,040 --> 00:39:24,480
Speaker 1: mean during winter, because I don't tell you Alpha, gamma,

692
00:39:24,520 --> 00:39:28,959
Speaker 1: Delta and basically a gamma all developed during late fall

693
00:39:29,120 --> 00:39:33,600
Speaker 1: and early winter and early spring. The fact that Delta

694
00:39:33,800 --> 00:39:36,680
Speaker 1: became more infectious now that you could basically in a

695
00:39:36,760 --> 00:39:39,640
Speaker 1: defined basically vaccination, I can tell you I'm in Israel

696
00:39:39,760 --> 00:39:42,319
Speaker 1: right now, and then you know the you know, the

697
00:39:42,360 --> 00:39:45,560
Speaker 1: immunity rate is now less than among people who receive

698
00:39:45,600 --> 00:39:48,959
Speaker 1: two shots. Okay, So from that point of who knows

699
00:39:49,040 --> 00:39:51,399
Speaker 1: what's going to be the next mutation is not going

700
00:39:51,480 --> 00:39:55,120
Speaker 1: to basically, you know, basically become not only more contagious

701
00:39:55,160 --> 00:39:58,600
Speaker 1: but also more virulent. That is a different story. But

702
00:39:58,800 --> 00:40:02,120
Speaker 1: right now, given if we're just talking about delta right now,

703
00:40:02,440 --> 00:40:05,839
Speaker 1: I wouldn't want to be basically overly concerned about this.

704
00:40:05,880 --> 00:40:08,919
Speaker 1: Is this being enough to derail the global recovery? Well,

705
00:40:08,960 --> 00:40:10,919
Speaker 1: what let's go back to what does this mean then

706
00:40:11,280 --> 00:40:14,120
Speaker 1: for the supply side, and your view is that by

707
00:40:14,160 --> 00:40:18,640
Speaker 1: and large, the disrupt the disruption COVID is a supply

708
00:40:18,719 --> 00:40:21,120
Speaker 1: side story. And and look, you know, I think if

709
00:40:21,280 --> 00:40:25,120
Speaker 1: any listener to odd lots would to some extent degree

710
00:40:25,200 --> 00:40:29,600
Speaker 1: because we do a lot of episodes on supply side disruption,

711
00:40:29,760 --> 00:40:32,960
Speaker 1: shipping containers, all of that. So to some extent there

712
00:40:33,040 --> 00:40:35,359
Speaker 1: is a large agreement. If you know, we have these

713
00:40:35,360 --> 00:40:38,280
Speaker 1: sort of ongoing waves. We don't know for the mutations

714
00:40:38,600 --> 00:40:42,040
Speaker 1: we you as you say, these sort of like completely

715
00:40:42,080 --> 00:40:45,400
Speaker 1: stamp it out strategy is a failure against a mutation

716
00:40:45,840 --> 00:40:49,280
Speaker 1: is violent as uh that spreads as easily as delta.

717
00:40:49,960 --> 00:40:53,520
Speaker 1: What is the prospect for supply side normalization? Like when

718
00:40:53,520 --> 00:40:57,600
Speaker 1: do we see container rates normalized or what would it

719
00:40:57,680 --> 00:41:02,239
Speaker 1: take for container rates to normalize? Things like at I

720
00:41:02,239 --> 00:41:05,040
Speaker 1: think I think it's gonna depends on different sectors, right,

721
00:41:05,080 --> 00:41:07,879
Speaker 1: you know, obviously, like for example, we all know that

722
00:41:07,920 --> 00:41:10,960
Speaker 1: you know, the supply crunch in semit conductors, Right, that

723
00:41:11,040 --> 00:41:13,000
Speaker 1: was one of the reason why like computer prices went

724
00:41:13,040 --> 00:41:15,239
Speaker 1: through the room. But computer prices starting to come back

725
00:41:15,239 --> 00:41:18,080
Speaker 1: down a bit, Right, That's one of the reasons why

726
00:41:18,280 --> 00:41:20,480
Speaker 1: like use car prices went through the rout because there

727
00:41:20,480 --> 00:41:22,920
Speaker 1: were new no new cars because like certain chips that

728
00:41:22,960 --> 00:41:25,680
Speaker 1: were not available, so that certain new models were not available.

729
00:41:26,320 --> 00:41:28,719
Speaker 1: And then actually what happened this week this month is

730
00:41:28,800 --> 00:41:31,840
Speaker 1: the reason why use car prices started to basically moderate

731
00:41:31,960 --> 00:41:34,719
Speaker 1: prices is because new models are being wrote out. That's why,

732
00:41:34,760 --> 00:41:36,799
Speaker 1: like new car price has been going up. But I

733
00:41:36,840 --> 00:41:40,120
Speaker 1: do think so these these these are temporary shocks. By

734
00:41:40,160 --> 00:41:42,319
Speaker 1: the way, these are temporary supply shows. I'm not too

735
00:41:42,360 --> 00:41:46,239
Speaker 1: worried about them. I'm much more concerned about potential permanent

736
00:41:46,480 --> 00:41:49,359
Speaker 1: supply shock, negative supply shock. What are those. Let's think

737
00:41:49,400 --> 00:41:52,480
Speaker 1: about this number one. As I said before, you know,

738
00:41:52,960 --> 00:41:56,120
Speaker 1: you know, if COVID is gonna be here to stay, Okay,

739
00:41:56,360 --> 00:41:58,839
Speaker 1: if it becomes the new normal, you know what, I

740
00:41:58,880 --> 00:42:01,040
Speaker 1: do think many of women are going to end up

741
00:42:01,080 --> 00:42:04,040
Speaker 1: staying home simply because I do think that starts to

742
00:42:04,120 --> 00:42:07,040
Speaker 1: for younger children. This is going to be a major issue. Okay.

743
00:42:07,239 --> 00:42:11,040
Speaker 1: And then especially not certainly not before the vaccine becomes

744
00:42:11,080 --> 00:42:13,440
Speaker 1: widely available, which may not be the case for many years,

745
00:42:13,440 --> 00:42:15,319
Speaker 1: by the way, who knows. Okay, I can tell you

746
00:42:15,360 --> 00:42:17,880
Speaker 1: that from experience, because my both of my basically had

747
00:42:18,000 --> 00:42:21,560
Speaker 1: daughters in Israel, have very young children, my grand my grandsons,

748
00:42:21,600 --> 00:42:24,240
Speaker 1: you know, they have not been going to kindergarten for

749
00:42:24,239 --> 00:42:26,799
Speaker 1: for a long time. As a result, my both of

750
00:42:26,840 --> 00:42:29,560
Speaker 1: my basically daughters having to quit their job or certainly

751
00:42:29,600 --> 00:42:31,520
Speaker 1: kept back on their work in order to basically look

752
00:42:31,560 --> 00:42:34,560
Speaker 1: after the children. That's one major issue. I think another

753
00:42:34,600 --> 00:42:37,360
Speaker 1: major issue is that COVID, if it's going to be

754
00:42:37,360 --> 00:42:40,000
Speaker 1: here to stay, is also changing the skills that are

755
00:42:40,080 --> 00:42:44,160
Speaker 1: required by employers. Okay, you can see very clearly in

756
00:42:44,200 --> 00:42:47,000
Speaker 1: the data, you know, unemployment rate for basically people with

757
00:42:47,080 --> 00:42:50,120
Speaker 1: college education has pretty much gone back to it's almost

758
00:42:50,440 --> 00:42:53,080
Speaker 1: not exactly, but very close to getting back to what

759
00:42:53,160 --> 00:42:55,400
Speaker 1: we wore before the crisis. Wise, people with only a

760
00:42:55,480 --> 00:42:58,479
Speaker 1: high school degree, that is much less the case, which

761
00:42:58,520 --> 00:43:00,920
Speaker 1: tells you that there's no doubt that it makes a

762
00:43:00,920 --> 00:43:03,080
Speaker 1: big difference whether you can work from home. Well, you

763
00:43:03,120 --> 00:43:06,240
Speaker 1: cannot work from home if you can now, if COVID

764
00:43:06,320 --> 00:43:09,520
Speaker 1: is transforming the economy in terms of the skill requirement,

765
00:43:09,760 --> 00:43:12,520
Speaker 1: a very big part of our labor force may simply

766
00:43:12,560 --> 00:43:17,720
Speaker 1: become unemployable. That's a negative basically supply shock, other supply shocks.

767
00:43:17,800 --> 00:43:20,399
Speaker 1: Think about this, I think you know, there's no doubt

768
00:43:20,440 --> 00:43:23,279
Speaker 1: my mind. You know, one of the things that you know, Joe,

769
00:43:23,360 --> 00:43:25,359
Speaker 1: like I really care a lot about is the US

770
00:43:25,400 --> 00:43:28,360
Speaker 1: trying to trade wark Okay, there is no doubt. Nobody

771
00:43:28,400 --> 00:43:30,560
Speaker 1: wants to say this, but I ain't. In the U

772
00:43:30,600 --> 00:43:33,720
Speaker 1: S China relationship has gotten ten times worse under Biden

773
00:43:33,760 --> 00:43:36,839
Speaker 1: than under Trump, by the way, and there is no doubt.

774
00:43:36,920 --> 00:43:39,360
Speaker 1: I mean, this is why it's actually interesting, Like you

775
00:43:39,360 --> 00:43:41,800
Speaker 1: were thinking, the US county is on fire, the Chinese

776
00:43:41,880 --> 00:43:45,840
Speaker 1: basically is actually struggling the export now in the past,

777
00:43:46,280 --> 00:43:49,279
Speaker 1: including doing two thousand and ten, the two thousand and

778
00:43:49,320 --> 00:43:51,680
Speaker 1: ten two thousand fifting recovery. It's like, well, US was

779
00:43:51,760 --> 00:43:54,320
Speaker 1: growing and then they were sucking all these cheap imports

780
00:43:54,320 --> 00:43:57,600
Speaker 1: from China, therefore kepting basically prices very low. Now there's

781
00:43:57,640 --> 00:44:02,600
Speaker 1: not longly the case, Okay. So basically what worries me

782
00:44:02,760 --> 00:44:05,680
Speaker 1: much more is basically this kind of thing is a

783
00:44:05,719 --> 00:44:10,160
Speaker 1: permanent supply shock that basically shifts the labor supply curve

784
00:44:10,560 --> 00:44:16,160
Speaker 1: basically in and then because of the disruption in global trade,

785
00:44:16,760 --> 00:44:19,200
Speaker 1: a lot of which has become so politicized that I

786
00:44:19,200 --> 00:44:21,799
Speaker 1: don't see we're gonna be able to overcome them anytime soon.

787
00:44:22,160 --> 00:44:26,000
Speaker 1: That is also going to reduce the aggregate supply okay

788
00:44:26,040 --> 00:44:28,239
Speaker 1: for the global economy. So from that point of view,

789
00:44:28,239 --> 00:44:32,400
Speaker 1: a lot of the advantages that were previously associated with

790
00:44:32,600 --> 00:44:35,239
Speaker 1: globalization and so on and so forth, it's just not

791
00:44:35,280 --> 00:44:37,880
Speaker 1: going to help us that much to storm around on

792
00:44:37,920 --> 00:44:42,400
Speaker 1: the inflation front. So I have a dumb question on

793
00:44:42,440 --> 00:44:45,000
Speaker 1: this point. But it's something that, um, I've been thinking

794
00:44:45,000 --> 00:44:48,120
Speaker 1: about because Joe and I have been talking so much

795
00:44:48,160 --> 00:44:52,560
Speaker 1: about the supply issues. So there's this idea of the

796
00:44:52,600 --> 00:44:56,480
Speaker 1: bullwhip effect and that you know, UM, a shortage in

797
00:44:56,800 --> 00:45:02,360
Speaker 1: supplies means that company is going to overorder in the

798
00:45:02,400 --> 00:45:04,600
Speaker 1: next round, and then that leads to sort of over

799
00:45:04,640 --> 00:45:08,160
Speaker 1: capacity and things like that. But I'm wondering, is the

800
00:45:08,400 --> 00:45:13,680
Speaker 1: response to supply issues can that be good for the

801
00:45:13,719 --> 00:45:18,480
Speaker 1: wider economy. For instance, if people decide that China is

802
00:45:18,520 --> 00:45:22,400
Speaker 1: too risky UM for whatever reason, whether it's COVID or

803
00:45:22,480 --> 00:45:25,919
Speaker 1: something like the trade war, and they start building UM

804
00:45:26,000 --> 00:45:29,400
Speaker 1: manufacturing capacity closer to home, like in the US, that

805
00:45:29,480 --> 00:45:33,440
Speaker 1: would seem to potentially be a good thing. You're right,

806
00:45:33,520 --> 00:45:36,839
Speaker 1: I mean, depends for who. But just just just let's

807
00:45:36,840 --> 00:45:39,600
Speaker 1: be very specific. Right, Let's just say right now, you know,

808
00:45:39,640 --> 00:45:44,400
Speaker 1: the US determined to basically shut down the entire semiconductor

809
00:45:44,760 --> 00:45:48,280
Speaker 1: basically production. Okay, trying right, I mean the US decided

810
00:45:48,320 --> 00:45:49,400
Speaker 1: that we don't want to China to be in this

811
00:45:49,440 --> 00:45:53,040
Speaker 1: business all because it's going it threatens the US hegemony

812
00:45:53,080 --> 00:45:55,120
Speaker 1: too much, right, I mean, it's not even at this point,

813
00:45:55,200 --> 00:45:57,080
Speaker 1: it's not even about whether they steal from us, they

814
00:45:57,080 --> 00:46:00,279
Speaker 1: don't steal from us, or they spite from us. Is

815
00:46:00,280 --> 00:46:02,600
Speaker 1: now it's like, well, we don't want them to basically

816
00:46:02,680 --> 00:46:06,200
Speaker 1: threaten our competitive basically our technology gradual morning in the

817
00:46:06,239 --> 00:46:07,759
Speaker 1: space different. We don't want them to be in that

818
00:46:07,840 --> 00:46:11,680
Speaker 1: space period, which means basically, you know what, you have

819
00:46:11,719 --> 00:46:15,759
Speaker 1: to basically build these points somewhere else, right, which means

820
00:46:15,800 --> 00:46:17,320
Speaker 1: some companies that will have to pour a lot of

821
00:46:17,360 --> 00:46:19,840
Speaker 1: money into that, which means, can you imagine in the

822
00:46:19,840 --> 00:46:23,399
Speaker 1: extreme case where everything that we're currently buying from China

823
00:46:23,560 --> 00:46:26,759
Speaker 1: we now have to basically build production capacity somewhere else

824
00:46:26,800 --> 00:46:28,719
Speaker 1: to build the same thing. You don't think that's going

825
00:46:28,760 --> 00:46:32,360
Speaker 1: to be very expensive? I mean sure, I mean you

826
00:46:32,400 --> 00:46:34,440
Speaker 1: know what, you know, you've gotta basically think about that

827
00:46:34,440 --> 00:46:36,799
Speaker 1: from that point of view, which is relative to where

828
00:46:36,800 --> 00:46:38,879
Speaker 1: we are. Because again this comes back to the whole

829
00:46:38,880 --> 00:46:43,600
Speaker 1: inflation story. Okay. The only reason why the stock market

830
00:46:43,640 --> 00:46:46,400
Speaker 1: is trading where is trading right now, the only reason

831
00:46:46,440 --> 00:46:48,880
Speaker 1: why house price has gone up so much when I

832
00:46:48,920 --> 00:46:51,520
Speaker 1: hes talking about today, yesterday, what we're talking about the

833
00:46:51,600 --> 00:46:55,400
Speaker 1: last twenty years, we've seen that massive, okay, rally in

834
00:46:55,440 --> 00:46:58,720
Speaker 1: the stock market, in basically home prices, in wealth in general,

835
00:46:59,120 --> 00:47:03,640
Speaker 1: and that's all because of disinflation as a result of

836
00:47:03,680 --> 00:47:07,480
Speaker 1: globalization that allows center banks around the world to really

837
00:47:07,520 --> 00:47:11,720
Speaker 1: cut interest rates to unbelievably low level. And by cutting

838
00:47:11,719 --> 00:47:14,279
Speaker 1: interest rate the very low level, you are reducing the

839
00:47:14,400 --> 00:47:18,960
Speaker 1: discount rate. Okay, That prices all risk the ass because

840
00:47:19,000 --> 00:47:23,080
Speaker 1: by reducing the future discounted cash flows due to that,

841
00:47:23,080 --> 00:47:27,520
Speaker 1: that's why you've seen this massive as surprise appreciation. Okay.

842
00:47:27,680 --> 00:47:30,480
Speaker 1: So now you're telling me, who cares about that? Who

843
00:47:30,520 --> 00:47:34,080
Speaker 1: cares about the disinflation. Let's embrace a little bit of inflation.

844
00:47:34,440 --> 00:47:37,799
Speaker 1: Then what happens to a surprises you tell me? Okay,

845
00:47:37,840 --> 00:47:39,920
Speaker 1: So from that point of view, you know, the debt,

846
00:47:40,280 --> 00:47:43,759
Speaker 1: the wealth basic explosion of the last twenty years was

847
00:47:43,840 --> 00:47:47,200
Speaker 1: all thanks to you know, globalization, which is about the

848
00:47:47,239 --> 00:47:50,160
Speaker 1: integration of the Chinese economy and the global economy that

849
00:47:50,280 --> 00:47:53,720
Speaker 1: kept global prices low, that allow interest race to globe,

850
00:47:53,760 --> 00:47:55,640
Speaker 1: They allow the kind of you know, you could argue

851
00:47:55,680 --> 00:47:58,480
Speaker 1: with the globalist the elite basically benefits with that because

852
00:47:58,480 --> 00:48:00,759
Speaker 1: they're the ones who's sitting on They almost of the

853
00:48:00,920 --> 00:48:04,360
Speaker 1: wealth that benefits on the price appreciation of these assets.

854
00:48:04,400 --> 00:48:07,399
Speaker 1: But nevertheless, we gotta be very very careful to think

855
00:48:07,440 --> 00:48:10,560
Speaker 1: of That's why Trump, even though he started to trade

856
00:48:10,600 --> 00:48:14,880
Speaker 1: over China, he had a very defined objective. He wanted

857
00:48:14,960 --> 00:48:18,239
Speaker 1: China to play fair. He wanted China to respect US

858
00:48:18,320 --> 00:48:21,040
Speaker 1: intellectual property and right. He wanted you know, all these

859
00:48:21,040 --> 00:48:24,719
Speaker 1: concessions Chinese. And from that point of view, that's why

860
00:48:24,760 --> 00:48:27,480
Speaker 1: I always saw that the first agreement, the Face one Agreement,

861
00:48:27,480 --> 00:48:29,759
Speaker 1: was a very significant agreement. Yeah, I was probably the

862
00:48:29,760 --> 00:48:31,680
Speaker 1: only person on Wall Street to have read the entire

863
00:48:31,760 --> 00:48:35,040
Speaker 1: hundred page document. To me, is still a spectacular agreement.

864
00:48:35,200 --> 00:48:36,719
Speaker 1: I think it should go down to history as one

865
00:48:36,760 --> 00:48:40,280
Speaker 1: of the most important milestones. Unfortunately, Trump lost the election

866
00:48:40,360 --> 00:48:43,600
Speaker 1: and that agreement is not worth nothing, Okay, But the

867
00:48:43,640 --> 00:48:46,279
Speaker 1: point here is that that had a very defined objective

868
00:48:47,120 --> 00:48:49,560
Speaker 1: which could potential should you still put the US in

869
00:48:49,680 --> 00:48:52,279
Speaker 1: China into win win position because of each other. I

870
00:48:52,320 --> 00:48:54,680
Speaker 1: can tell you for the last all throughout two thousand

871
00:48:54,680 --> 00:48:57,000
Speaker 1: and eight nineteen, when I was going to China in

872
00:48:57,080 --> 00:48:59,680
Speaker 1: big corporate offices and government office, people will come up

873
00:48:59,680 --> 00:49:03,040
Speaker 1: to me whispering my ears and no, David Trump is

874
00:49:03,040 --> 00:49:05,919
Speaker 1: a great man. These are Chinese people telling Trumps because

875
00:49:05,920 --> 00:49:08,720
Speaker 1: they're saying that, you know what, reforms had been stalling

876
00:49:08,760 --> 00:49:11,000
Speaker 1: in China for the last ten years under shooting pain

877
00:49:11,239 --> 00:49:14,759
Speaker 1: and thanks to China, thanks to Trump, the pressure is

878
00:49:14,760 --> 00:49:18,239
Speaker 1: on China to once again accelerate reform. And that's what

879
00:49:18,280 --> 00:49:21,720
Speaker 1: Trump did. And this is what people don't realize. Indian

880
00:49:21,960 --> 00:49:25,640
Speaker 1: China agreed to the Phase one agreement because ultimately the

881
00:49:25,719 --> 00:49:29,360
Speaker 1: reformers got back into the driversy because of pressure from Trump.

882
00:49:29,960 --> 00:49:31,520
Speaker 1: And I thought that this was going to lead to

883
00:49:31,560 --> 00:49:33,840
Speaker 1: a basically a happy ending for both sides because the

884
00:49:33,880 --> 00:49:35,520
Speaker 1: name of the day, you know what, that's when we

885
00:49:35,600 --> 00:49:37,560
Speaker 1: that's what we all want me, Tracy, you'll send me

886
00:49:37,719 --> 00:49:41,720
Speaker 1: in Asian. But now with Biden, it's like, wow, gloves

887
00:49:41,719 --> 00:49:44,120
Speaker 1: are off. So from not when we're now moving from

888
00:49:44,360 --> 00:49:49,799
Speaker 1: an economic conflict that was ultimately well defined under the administration,

889
00:49:49,840 --> 00:49:52,520
Speaker 1: that that we were getting close to basically resolving to

890
00:49:52,680 --> 00:49:56,120
Speaker 1: now ideological contests which can never be resolved at this point.

891
00:49:57,200 --> 00:50:00,400
Speaker 1: And that is if you're telling me, if that's you

892
00:50:00,440 --> 00:50:03,040
Speaker 1: want to basically start building all these expensive plans you

893
00:50:03,200 --> 00:50:05,560
Speaker 1: outside China and hire people that got Yeah, you're can

894
00:50:05,560 --> 00:50:09,320
Speaker 1: increase some jobs, but you're gonna create a lot of implation. Well, David,

895
00:50:09,800 --> 00:50:12,880
Speaker 1: like I said at the beginning, it's always interesting speaking

896
00:50:12,920 --> 00:50:16,920
Speaker 1: to you, always provocative and really really appreciate your insight.

897
00:50:17,160 --> 00:50:20,120
Speaker 1: Thanks for coming out an outlot. No, not at all,

898
00:50:20,200 --> 00:50:23,040
Speaker 1: I mean thanks for putting up with me. And you know,

899
00:50:23,080 --> 00:50:25,279
Speaker 1: I love coming on the Bloomberg because I know that

900
00:50:25,360 --> 00:50:28,759
Speaker 1: you guys are willingly to contemplate. You know, there are

901
00:50:28,800 --> 00:50:31,640
Speaker 1: other alternative views out there than the main streams, and

902
00:50:31,680 --> 00:50:34,319
Speaker 1: it's great. Thank you, thank you so much, thank you

903
00:50:34,360 --> 00:50:48,680
Speaker 1: so much. As you know, obviously, uh where to start.

904
00:50:49,000 --> 00:50:53,279
Speaker 1: David has um pretty some you know, out of consensus

905
00:50:53,320 --> 00:50:55,200
Speaker 1: as you you asked a good question, did he feel

906
00:50:55,200 --> 00:50:58,799
Speaker 1: bound previously a sort of out of consensus perspectives on

907
00:50:58,840 --> 00:51:01,359
Speaker 1: a lot of stuff, but you know, on a lot

908
00:51:01,400 --> 00:51:05,000
Speaker 1: of things, like I think his his views are worth taking,

909
00:51:05,040 --> 00:51:07,719
Speaker 1: are worth taking seriously, at least at least several of

910
00:51:07,760 --> 00:51:11,040
Speaker 1: the points are like you know, this is this is

911
00:51:11,040 --> 00:51:15,560
Speaker 1: worth thinking about in debating. I like David wu unbound. Um.

912
00:51:15,600 --> 00:51:18,359
Speaker 1: You know, he was always sort of outspoken um while

913
00:51:18,400 --> 00:51:20,920
Speaker 1: he was a Bank of America Mary Lynch and um.

914
00:51:21,000 --> 00:51:24,320
Speaker 1: He seems to have taken that to a new level

915
00:51:24,840 --> 00:51:29,040
Speaker 1: just then. But so, for instance, his points about China

916
00:51:29,160 --> 00:51:32,320
Speaker 1: kind of decoupling from the global economy, I would totally

917
00:51:32,360 --> 00:51:38,399
Speaker 1: agree that that is an underappreciated um risk or thing

918
00:51:38,480 --> 00:51:41,040
Speaker 1: that is actually happening now in the global market. And

919
00:51:41,280 --> 00:51:44,480
Speaker 1: it reminds me a lot of in early two thousand

920
00:51:44,560 --> 00:51:49,600
Speaker 1: twenty when the COVID outbreak first happened and China basically

921
00:51:49,640 --> 00:51:53,000
Speaker 1: shut down its entire economy, and the US, or at

922
00:51:53,080 --> 00:51:55,799
Speaker 1: least the US markets just ignored it completely and it

923
00:51:55,920 --> 00:51:58,759
Speaker 1: was like, well, we spent the past two or four

924
00:51:58,840 --> 00:52:04,239
Speaker 1: years worrying about the trade war with China, and you know,

925
00:52:04,400 --> 00:52:06,640
Speaker 1: that was all anyone could talk about. And now China

926
00:52:06,719 --> 00:52:12,480
Speaker 1: has basically closed off and US markets are doing absolutely nothing, um,

927
00:52:12,520 --> 00:52:14,960
Speaker 1: not responding to it at all. And eventually they did

928
00:52:15,040 --> 00:52:17,760
Speaker 1: in March, of course, But like I kind of feel

929
00:52:18,800 --> 00:52:22,160
Speaker 1: a similarity with the current situation. It's not going to

930
00:52:22,280 --> 00:52:25,360
Speaker 1: be like as sharp as it was in March but

931
00:52:25,440 --> 00:52:28,279
Speaker 1: I do think at some point people are going to

932
00:52:28,320 --> 00:52:32,160
Speaker 1: wake up to this dynamic. Yeah, no, I I agree,

933
00:52:32,200 --> 00:52:35,960
Speaker 1: And I think your assessment that it has not been

934
00:52:36,000 --> 00:52:39,000
Speaker 1: fully appreciated. I think I saw a tweet from you

935
00:52:39,120 --> 00:52:41,400
Speaker 1: and last night or this morning about some of this

936
00:52:41,560 --> 00:52:44,440
Speaker 1: rolling over in the p M. I s that like,

937
00:52:44,560 --> 00:52:47,359
Speaker 1: just like the sort of like the absolute effect of

938
00:52:47,520 --> 00:52:52,600
Speaker 1: the slowdown and then the ongoing supply chain disruption is

939
00:52:52,640 --> 00:52:54,960
Speaker 1: that that's going to cause. And you know, we joke

940
00:52:55,040 --> 00:52:57,200
Speaker 1: about this, it's not really a joke, but our very

941
00:52:57,239 --> 00:53:03,080
Speaker 1: first episodes we're talking about um COVID as a as

942
00:53:03,080 --> 00:53:06,200
Speaker 1: it supplies shock story. Like the first one we did

943
00:53:06,800 --> 00:53:10,840
Speaker 1: with Dan Wong back in early March or maybe February

944
00:53:10,880 --> 00:53:13,759
Speaker 1: probably February twenty was like, well, what's it gonna mean

945
00:53:13,800 --> 00:53:17,040
Speaker 1: for Apple and so forth? And it's interesting the degree

946
00:53:17,120 --> 00:53:20,319
Speaker 1: to which we just like, oh, it's gonna normalize, and

947
00:53:20,440 --> 00:53:24,240
Speaker 1: you know, container prices are gonna crest and so forth,

948
00:53:24,600 --> 00:53:26,960
Speaker 1: and this idea that well maybe there is like this

949
00:53:27,080 --> 00:53:29,320
Speaker 1: sort of like deeper thing going on that's not about

950
00:53:29,320 --> 00:53:35,040
Speaker 1: the crest. And David's point about how the approaches that

951
00:53:35,120 --> 00:53:38,440
Speaker 1: Asian countries took to completely stamp out the virus in

952
00:53:38,480 --> 00:53:42,160
Speaker 1: the beginning may not be is effective with the UH

953
00:53:42,480 --> 00:53:48,200
Speaker 1: the more transmittable delta variant. Extremely interesting. Yeah. The other

954
00:53:48,239 --> 00:53:52,920
Speaker 1: thing I found interesting was his contrasting of you know,

955
00:53:53,000 --> 00:53:57,200
Speaker 1: a demand side shock or recession versus the supply side,

956
00:53:57,320 --> 00:54:00,160
Speaker 1: and the idea that a lot of the thing that

957
00:54:00,239 --> 00:54:04,480
Speaker 1: policymakers are doing right now end up boosting demand and

958
00:54:04,520 --> 00:54:08,880
Speaker 1: not really solving the supply issues, and so that accelerates inflation.

959
00:54:09,000 --> 00:54:15,080
Speaker 1: That seems like a reasonable risk to me. Yeah, I mean, look,

960
00:54:15,400 --> 00:54:19,400
Speaker 1: I think that I guess the question is, all right,

961
00:54:19,520 --> 00:54:22,960
Speaker 1: we you know, people in all different camps, you know,

962
00:54:23,000 --> 00:54:27,120
Speaker 1: the supply side camp, the more demand focused Kansian camp,

963
00:54:27,560 --> 00:54:30,400
Speaker 1: we all like sort of like point to the same things, right,

964
00:54:30,480 --> 00:54:33,359
Speaker 1: It's like, okay, there's the semiconductors and the containers and

965
00:54:33,400 --> 00:54:37,320
Speaker 1: so forth. The question, I guess is the degree to which,

966
00:54:37,600 --> 00:54:39,359
Speaker 1: I guess we didn't really get into it, but it's

967
00:54:39,520 --> 00:54:43,680
Speaker 1: the degree to which the demand side policies have exacerbated

968
00:54:44,120 --> 00:54:46,440
Speaker 1: the problem. So it's like, Okay, everyone can accept the

969
00:54:46,440 --> 00:54:48,560
Speaker 1: theory supply side shocks and we can see it in

970
00:54:48,560 --> 00:54:52,880
Speaker 1: the data in which categories, but like, you know, alright,

971
00:54:53,040 --> 00:54:55,520
Speaker 1: used cars, was that really because of like stimulus or

972
00:54:55,560 --> 00:54:59,080
Speaker 1: expanded you Y or the chip shortage, etcetera. So there's

973
00:54:59,120 --> 00:55:02,200
Speaker 1: still a question of like waiting of the different factors.

974
00:55:02,239 --> 00:55:04,880
Speaker 1: And look, millions of people did lose their jobs. That

975
00:55:05,000 --> 00:55:08,520
Speaker 1: is a fact. Yeah, yeah, that is very very true.

976
00:55:08,800 --> 00:55:10,920
Speaker 1: Um well, I'm sure this isn't going to be the

977
00:55:11,000 --> 00:55:14,040
Speaker 1: last time we talked about this topic. And of course,

978
00:55:14,680 --> 00:55:17,080
Speaker 1: as you noted in the intro, inflation does tend to

979
00:55:17,120 --> 00:55:20,799
Speaker 1: get people going, especially David Wou. Should we leave it there?

980
00:55:21,080 --> 00:55:24,719
Speaker 1: Let's leave it there. Okay, this has been another episode

981
00:55:24,760 --> 00:55:27,600
Speaker 1: of the Off Thoughts podcast. I'm Tracy Alloway. You can

982
00:55:27,600 --> 00:55:31,080
Speaker 1: follow me on Twitter at Tracy Alloway and I'm Joe

983
00:55:31,160 --> 00:55:33,879
Speaker 1: Why Isn't All? You can follow me on Twitter at

984
00:55:33,920 --> 00:55:37,040
Speaker 1: the Stalwart. Follow our guest David Wu on Twitter. He's

985
00:55:37,080 --> 00:55:39,960
Speaker 1: at David Wu Unbound, although it doesn't look like he's

986
00:55:39,960 --> 00:55:44,120
Speaker 1: ever tweeted, but maybe he'll start. Follow our producer Laura Carlson,

987
00:55:44,280 --> 00:55:47,360
Speaker 1: She's at Laura M. Carlson. Followed the Bloomberg head of

988
00:55:47,400 --> 00:55:51,399
Speaker 1: podcast Francesca Levi at Francesca Today, and check out all

989
00:55:51,400 --> 00:55:55,040
Speaker 1: of our podcasts at Bloomberg under the handle at podcasts.

990
00:55:55,160 --> 00:56:01,160
Speaker 1: Thanks for listening to