WEBVTT - David Woo on What the Economists Got Wrong About the Stimulus 0:00:10.920 --> 0:00:15.040 Hello, and welcome to another episode of the Odd Lots Podcast. 0:00:15.120 --> 0:00:19.360 I'm Joe Wisenthal and I'm Tracy Halloway. Tracy, you see 0:00:19.360 --> 0:00:22.200 that inflation print that we just got, that cp I print? 0:00:22.600 --> 0:00:26.560 I did. I logged on the terminal, especially at eight 0:00:26.640 --> 0:00:29.280 thirty UM in the evening here in Hong Kong to 0:00:29.360 --> 0:00:33.480 watch it, and it looks like we're seeing um moderation 0:00:33.760 --> 0:00:38.040 in the price increases. Yeah. So we are recording this 0:00:38.320 --> 0:00:42.200 on August eleven, and we just had the latest CPI report, 0:00:42.560 --> 0:00:45.960 and indeed it did show some moderation, particularly on a 0:00:46.040 --> 0:00:50.200 sequential basis. Inflation readings the cp I have been quite 0:00:50.240 --> 0:00:53.680 elevated lately by historical standards, and there's this whole debate 0:00:54.040 --> 0:00:57.120 about whether it's transitory or some sort of new regime 0:00:57.200 --> 0:00:59.600 and what's causing it and so forth. We'll get into 0:00:59.600 --> 0:01:02.200 all that, but at least for this one month, and 0:01:02.240 --> 0:01:05.080 at least like on a sequential basis, we definitely saw 0:01:05.160 --> 0:01:08.959 a bit of a deceleration used car prices, which had 0:01:08.959 --> 0:01:11.960 been absolutely soaring. It finally looks like that whole thing 0:01:12.040 --> 0:01:14.960 is topped out a little bit. Yeah, And we've had 0:01:15.000 --> 0:01:19.120 such a heated debate over whether or not inflation is 0:01:19.120 --> 0:01:24.800 transitory or something more permanent. And I think the vociferous 0:01:24.840 --> 0:01:29.600 nous of that debate kind of hints at something wider 0:01:29.640 --> 0:01:33.160 and more fundamental about the economic situation right now, which 0:01:33.240 --> 0:01:37.560 is that we're in a really unusual time. The recession 0:01:37.640 --> 0:01:42.400 that we saw during COVID was basically unlike any others. 0:01:42.640 --> 0:01:45.000 It only lasted for a couple of months. In the 0:01:45.120 --> 0:01:49.320 end um we had record stimulus, and so that kind 0:01:49.320 --> 0:01:52.440 of means that no one's really sure exactly what the 0:01:52.440 --> 0:01:54.880 recovery is going to look like, and it's hard to 0:01:54.960 --> 0:01:58.800 look at previous recoveries in order to make an analogy 0:01:58.880 --> 0:02:02.520 to today. Yeah, and inflation in particular, Like you know, 0:02:02.560 --> 0:02:05.800 we get economic data points literally every day, are virtually 0:02:05.880 --> 0:02:09.640 almost every day, but inflation is one of those that 0:02:09.960 --> 0:02:12.480 really gets people going in a way that other data 0:02:12.520 --> 0:02:15.840 points don't people. You know, we had that recent episode 0:02:15.880 --> 0:02:18.959 with Rico MoManI A. People feel that they feel it 0:02:19.000 --> 0:02:23.160 at the grocery store. They attribute it to policies. When 0:02:23.160 --> 0:02:25.840 it's up, they attributed to policies that they don't like. 0:02:25.919 --> 0:02:28.440 They attribute it to FED, they attributed to spending and 0:02:28.520 --> 0:02:32.919 so forth. Inflation just it gets people going. It does indeed, 0:02:32.960 --> 0:02:35.720 and it's very easy for people to sort of overlay 0:02:36.160 --> 0:02:40.400 their own thoughts and feelings and biases on inflation, so 0:02:40.480 --> 0:02:42.440 people kind of see what they want to see. Um, 0:02:42.480 --> 0:02:45.440 you know, cherry picking the data is something that goes 0:02:45.480 --> 0:02:48.920 on quite a lot. And and again, like in the 0:02:49.000 --> 0:02:52.600 current environment, there is a reason that you would strip 0:02:52.680 --> 0:02:57.640 out some unusual activity and things like used car prices. 0:02:58.400 --> 0:03:00.520 But then you get into the dangerous terror tory of 0:03:00.680 --> 0:03:04.959 are you basically stripping everything out that's actually rising um 0:03:04.960 --> 0:03:08.960 and obscuring what's happening in the market inflation ex inflation. 0:03:09.280 --> 0:03:12.040 All right, Well, I am very excited, you know, I said, Uh, 0:03:12.120 --> 0:03:15.040 you know, inflation always gets people going. I'm very excited 0:03:15.040 --> 0:03:17.720 because we have a guest today who almost never needs 0:03:17.840 --> 0:03:21.280 any uh anything to get him going. Very one. He's 0:03:21.440 --> 0:03:24.320 long been one of my favorite people to interview. Talked 0:03:24.360 --> 0:03:26.360 to him several times on TV, but we've never had 0:03:26.440 --> 0:03:29.160 him on the podcast before. We're gonna be speaking with 0:03:29.360 --> 0:03:31.960 David wu. He was formerly the head of Global Rates, 0:03:31.960 --> 0:03:36.040 Global Effects, Global em fixed income and Economic Research at 0:03:36.040 --> 0:03:39.280 Bank of America. He's a veteran there of ten years 0:03:39.360 --> 0:03:42.560 and recently left and now he's he's a blogger. He's 0:03:42.600 --> 0:03:45.920 like us. Uh, he's a blogger. He has uh David 0:03:45.920 --> 0:03:49.080 wu unbound where he talks about all this stuff, macro things, 0:03:49.120 --> 0:03:51.560 things going on in society, the data and so forth, 0:03:52.080 --> 0:03:54.000 and always one of my favorite people to talk to you, 0:03:54.120 --> 0:03:57.400 so sort of a perfect person to uh kick off 0:03:57.440 --> 0:03:59.840 a sort of like let's take stock of the macros 0:04:00.000 --> 0:04:02.960 suation right now. David, thank you so much for coming 0:04:02.960 --> 0:04:06.720 on odd lots. It's my total pleasure. Thank you for inviting. 0:04:07.160 --> 0:04:09.440 Absolutely it's always a treat to talk to you. David. 0:04:09.520 --> 0:04:12.560 Let's start with that inslation print. I'm sure you have 0:04:12.640 --> 0:04:14.800 been looking at it for the last half hour, as 0:04:14.880 --> 0:04:18.320 have me and Tracy. How would you put it into context? 0:04:18.360 --> 0:04:20.320 What's your take on it? And how does it fit 0:04:20.360 --> 0:04:23.680 more broadly in where you see, uh, the overall inflation 0:04:23.760 --> 0:04:26.840 situation right now in the US. I think, you know, 0:04:27.120 --> 0:04:28.719 I think you know we have to first but put 0:04:28.720 --> 0:04:31.200 things in perspective. I don't think anybody in the right 0:04:31.279 --> 0:04:34.200 mind thought that the sort of six percent seven percent 0:04:34.320 --> 0:04:38.640 inflation was sustainable. Everybody knew, you know, that it had 0:04:38.680 --> 0:04:43.240 to do with these one off factors like use cars, computers, 0:04:43.440 --> 0:04:47.080 you know, things that have been affected by supply chain 0:04:47.560 --> 0:04:52.080 basically breakdown. So therefore the spiking price all to be temporary. 0:04:52.120 --> 0:04:54.719 I supply chain basically came back on track. So the 0:04:54.800 --> 0:04:57.080 question really is, you know, so if it's not six 0:04:57.200 --> 0:04:59.919 or seventh percent, what is it now? The fact is, 0:05:00.200 --> 0:05:04.080 notwithstanding you know, basically the sharp drop in basic inflation 0:05:04.120 --> 0:05:07.320 for use car prices, you know, this month, if you 0:05:07.400 --> 0:05:10.960 look at the core inflation, we're still up zero point three. 0:05:11.839 --> 0:05:14.080 I mean that is an annualized rate of close to 0:05:14.480 --> 0:05:17.599 four percent. I mean that's like higher than anything we've 0:05:17.600 --> 0:05:20.720 ever seen, you know, basically, you know, basically in the 0:05:20.800 --> 0:05:23.520 run up to COVID and more recently. So I would 0:05:23.560 --> 0:05:26.279 say that forget about, like you know, basically, whether it 0:05:26.400 --> 0:05:28.760 is whatever, six or seven, the fact that it is 0:05:28.839 --> 0:05:32.720 even running at three percent, four percent, that's a problem 0:05:33.000 --> 0:05:36.200 because the point here is that the whole world economy 0:05:36.440 --> 0:05:39.719 is currently calibrated on the assumption that the FED phones 0:05:39.760 --> 0:05:41.760 rate is going to remain very very low for a 0:05:41.880 --> 0:05:44.280 very among time. The only way that's going to be 0:05:44.279 --> 0:05:47.000 possible is that the inflation doesn't become a problem. You 0:05:47.040 --> 0:05:49.479 don't need inflation of five or six percent to become 0:05:49.520 --> 0:05:52.640 a problem. All you need inflation at three percent, and 0:05:52.680 --> 0:05:55.520 the FED has got a huge headache ahead of them 0:05:55.560 --> 0:05:58.640 and so with the market. So so let's not beat 0:05:58.720 --> 0:06:01.360 around the bush. I don't read I'm not I'm one 0:06:01.360 --> 0:06:03.680 of these people balding tables saying we're going to see 0:06:03.839 --> 0:06:06.320 your double dis you the inflation any time soon. Given 0:06:06.520 --> 0:06:10.400 that the whole entire market has been gotten used to 0:06:10.440 --> 0:06:12.920 the idea that the inflation was always going to remain 0:06:13.040 --> 0:06:16.320 somewhere belottle two percent, allowing the FED to basically carry 0:06:16.360 --> 0:06:19.640 on with this very commentative stance. If inflation just goes 0:06:19.800 --> 0:06:23.279 above two percent, even just goes to three percent, the 0:06:23.320 --> 0:06:26.200 world is gonna have a huge problem. Um. We've been 0:06:26.200 --> 0:06:29.520 talking a lot about the Fed's new framework on the 0:06:29.520 --> 0:06:33.560 show and the idea of average inflation targeting, and I'm wondering, 0:06:34.160 --> 0:06:37.000 you know, is that something that you buy into in 0:06:37.040 --> 0:06:39.880 the sense that you think the FED is actually going 0:06:39.920 --> 0:06:42.680 to be more flexible um when it comes to inflation. 0:06:42.760 --> 0:06:45.120 Is that something that could maybe buy it a bit 0:06:45.160 --> 0:06:51.360 more time and um put off a rate rise? Tracy, No, Honestly, 0:06:52.000 --> 0:06:55.960 I think the whole averaging inflation was a gimmick. And 0:06:56.000 --> 0:06:59.440 I'll tell you what the gimmick was. The gimmick was 0:06:59.480 --> 0:07:03.240 to baseically help them convince the market to drive interest rates. 0:07:03.279 --> 0:07:06.440 Love right, because they're gonna tell you what, even when 0:07:06.440 --> 0:07:08.200 the inflation goes about two percent, we're not going to 0:07:08.320 --> 0:07:11.760 hike rates anytime soon. Therefore, you know the market. So 0:07:11.880 --> 0:07:14.680 in some sense it was stronger for guidance than what 0:07:14.880 --> 0:07:18.160 y'allin introduced what about five six years ago. The point 0:07:18.240 --> 0:07:20.960 here is the inflation really starts to go up from 0:07:21.000 --> 0:07:23.840 two to three percent, three to four percent, you think 0:07:23.840 --> 0:07:25.800 the Fed is going to be sitting there putting their 0:07:25.800 --> 0:07:29.080 thumbs because they're going to be very nervous about the 0:07:29.120 --> 0:07:33.120 return of inflation expectations. You know, it took just think 0:07:33.160 --> 0:07:36.880 about what Volker had to do to crush inflation expectation 0:07:36.960 --> 0:07:39.960 early in the eighties. It had to basically bring the 0:07:40.040 --> 0:07:44.760 engineer a recession u as economy to crush inflation expectation. 0:07:45.000 --> 0:07:48.840 Inflation expectation, I mean, you know anything, you know, economists 0:07:48.840 --> 0:07:52.280 don't know that much. Honestly, the truth is economists no 0:07:52.440 --> 0:07:55.200 much less than anybody give them credit for. If there's 0:07:55.280 --> 0:07:58.360 one thing they know and they're afraid of is basically 0:07:58.400 --> 0:08:02.280 inflation expectation is like a Pandora's box. Once you open it, 0:08:02.280 --> 0:08:04.560 it's gonna be difficul to close it. So this is 0:08:04.600 --> 0:08:08.160 why if inflation starts to edge higher, forget about the 0:08:08.200 --> 0:08:12.240 whole idea of inflation averaging, inflation target effect will go. 0:08:12.960 --> 0:08:16.360 They will have no choice but to go because they 0:08:16.400 --> 0:08:19.200 realize what will be at that stake, because if they 0:08:19.280 --> 0:08:23.240 don't go, an inflation expectation goes up, and then having 0:08:23.280 --> 0:08:25.000 to bring it down down the road, it's going to 0:08:25.080 --> 0:08:27.679 be that much more costly. This is why I think, 0:08:27.720 --> 0:08:31.280 you know, the whole inflation averaging business was nothing more 0:08:31.320 --> 0:08:34.880 than just empty talk at the end of the day. Well, okay, 0:08:34.960 --> 0:08:37.520 so you can, as we point out, even if you 0:08:37.520 --> 0:08:41.599 strip out used cars, there's sort of this underlying inflationary 0:08:41.720 --> 0:08:46.160 pace right now, that's uh, well above that's enough above 0:08:46.240 --> 0:08:49.559 in your view, enough above two to create a problem. 0:08:49.559 --> 0:08:53.120 How come look, what's the explanation for it? So, I mean, 0:08:53.360 --> 0:08:54.920 you know, we can all look at the data, but 0:08:54.960 --> 0:08:57.599 we need a theory to explain it or to understand 0:08:57.600 --> 0:09:01.240 where it's going. Why is it? Yeah, I mean, Joe, 0:09:01.320 --> 0:09:04.000 you asked that's the right question. That's exactly the right question, 0:09:04.280 --> 0:09:06.000 and I'm going to tell you the answer. I mean, 0:09:06.080 --> 0:09:07.880 for it was worth, you know, I write about it 0:09:07.920 --> 0:09:10.560 actually my big my own blog, which is does right. 0:09:10.960 --> 0:09:13.719 The last twenty years, I don't tell you kaynzie In 0:09:13.760 --> 0:09:17.880 School of Economics has been on the ascendency. I can 0:09:17.880 --> 0:09:19.959 tell you this wasn't always the case because twenty years 0:09:20.000 --> 0:09:22.800 ago when I got my PhD at Columbia and Economics, 0:09:23.000 --> 0:09:25.760 you know, at the time, it was the New Classical 0:09:25.800 --> 0:09:28.920 School of economics that was invoked. And these have been 0:09:28.960 --> 0:09:31.880 the main schools of economics that have been, you know, 0:09:32.559 --> 0:09:35.000 in rivalry for much of the last fifty years. You 0:09:35.000 --> 0:09:38.400 could argue, now, what is the essential difference between the 0:09:38.480 --> 0:09:41.360 Kaynesian school versus the New Classical school New Classical School, 0:09:41.360 --> 0:09:42.960 by the way, it's that you're called Chicago, so we 0:09:43.000 --> 0:09:45.719 can think about it that way. The main difference is 0:09:45.960 --> 0:09:51.000 the kaynzie In school emphasizes negative demand shocks, whereas the 0:09:51.040 --> 0:09:55.880 New Classical School emphasized as negative supply shock. Now, what 0:09:56.040 --> 0:09:59.720 is the negative demand shock. Neither demanding shock is like oh, 0:09:59.760 --> 0:10:04.240 the outcome bubble bursting in two thousands, okay, which unleashed 0:10:04.280 --> 0:10:08.520 this massive negative wealth effect. Negative demand shock is like 0:10:08.520 --> 0:10:12.640 oh September, you know, basically eleven, that crush confidence and 0:10:12.720 --> 0:10:15.680 cause people to pull back their spending. Negative demand shock 0:10:15.880 --> 0:10:18.079 is like what happened in two thousand and eight following 0:10:18.080 --> 0:10:21.480 the collapse eleven Brothers, which basically caused all the banks 0:10:21.480 --> 0:10:24.400 to pull back in terms of their credit lending, which 0:10:24.440 --> 0:10:27.880 basically forced negative demand shock. And then the Kynsians argue 0:10:27.960 --> 0:10:30.600 and right, and so when you have a negative demand shock, 0:10:30.840 --> 0:10:34.680 the right thing to do is to basically engage in 0:10:34.800 --> 0:10:40.280 proactive okay, fiscal and monetary expansion to offset the negative 0:10:40.320 --> 0:10:42.720 demand shock in whe did to bring the coming back 0:10:42.720 --> 0:10:47.480 to for you for employmentquilibrium. This is why the last 0:10:47.520 --> 0:10:51.120 twenty years, the reason why Kynzie in economics is so 0:10:51.200 --> 0:10:54.240 well was because one after another oldie shocks. As I said, 0:10:54.280 --> 0:10:58.000 the dot com bubble bursting September eleven, two thou eight, 0:10:58.040 --> 0:11:01.720 will all negative demand shocks. Now, guess what what is COVID, 0:11:02.000 --> 0:11:05.000 you might ask. I can tell you if if COVID 0:11:05.040 --> 0:11:07.320 is anything at all, is not a negative demand shock 0:11:07.600 --> 0:11:11.240 in my view, is a negative supply shock. And by 0:11:11.280 --> 0:11:13.480 the way, just think about this, I mean, how is 0:11:13.520 --> 0:11:16.680 it affecting supply? I don't tell you right now. For example, 0:11:17.480 --> 0:11:21.440 you look at you know, global freight prices, global freight 0:11:21.559 --> 0:11:24.000 rates for containers going through the roof right now, and 0:11:24.120 --> 0:11:26.840 so it went basically double last year and double already 0:11:26.920 --> 0:11:29.239 this year, showing no signs of moderation. You know why 0:11:29.280 --> 0:11:32.839 because right now in Asia where basically the pandemic is 0:11:32.880 --> 0:11:36.640 basically breaking out once again, and then countries are not 0:11:36.800 --> 0:11:42.520 allowing okay, these containman ships to upload their cargoes. So 0:11:42.600 --> 0:11:45.599 are there results? Thousands of ships right now around the 0:11:45.679 --> 0:11:48.480 world are being stranded at their ports, not being able 0:11:48.480 --> 0:11:52.800 to offload their cargo's information, the sailors, the crew. Now 0:11:53.000 --> 0:11:57.160 that's a negative supply shock to the extent that COVID's actually, 0:11:57.640 --> 0:12:01.840 you know, has basically reduced ability of the economy to 0:12:02.080 --> 0:12:06.680 basically to respond to increase demand. Now, what else is 0:12:06.679 --> 0:12:09.679 basically a negative supply shock? Think about this, all these women. 0:12:09.960 --> 0:12:13.640 We have seen a massive drop in labor participation rate 0:12:13.720 --> 0:12:16.080 of women in the United States in the last basic 0:12:16.120 --> 0:12:18.640 gating months. Why is that they're not even looking for 0:12:18.679 --> 0:12:21.720 a job, these women who just simply left the labor force. 0:12:21.920 --> 0:12:25.600 Because it's very simple because as long as COVID right 0:12:25.640 --> 0:12:28.920 now it's about, there's no vaccine for children. As a result, 0:12:29.000 --> 0:12:31.280 women are now having to stay home to look after 0:12:31.320 --> 0:12:34.439 their young children who cannot go to school. Now, if 0:12:34.440 --> 0:12:36.240 COVID is gonna be here to stay, you know what, 0:12:36.520 --> 0:12:38.720 or that for that matter, if we don't have vaccine 0:12:38.720 --> 0:12:41.920 anytime soon for children, guess what you're gonna see a 0:12:42.040 --> 0:12:45.800 large part of labor force basically disappeared. That's a negative 0:12:45.840 --> 0:12:48.200 supply shock. Let me tell you this. If you look 0:12:48.240 --> 0:12:51.920 at a very basic economics supply and demand shock, which 0:12:51.920 --> 0:12:54.120 all your viewers have heart about, that's why they're listening 0:12:54.120 --> 0:12:58.200 to this program, a negative demand shock is deflation, ay, 0:12:58.480 --> 0:13:02.040 But guess what a negative supply e shock is inflationary. 0:13:02.840 --> 0:13:06.000 Your supply curse moves to the left and push down 0:13:06.040 --> 0:13:09.720 employment and push our prices. So when you are basically 0:13:09.800 --> 0:13:13.640 when the FED and the US government unleashed massive fistical 0:13:13.640 --> 0:13:17.679 stimulus to try to offset a negative supply shock, all 0:13:17.720 --> 0:13:21.200 it's gonna do is basically push up inflation. That is, 0:13:21.280 --> 0:13:23.560 by the way, and I'm telling you this, this is 0:13:23.600 --> 0:13:28.440 why the neo classical school framework thinking about recession about 0:13:28.480 --> 0:13:32.520 prices is the more relevant framework in this particular point 0:13:32.559 --> 0:13:36.160 in time because of COVID. I would say, I'm not 0:13:36.200 --> 0:13:39.720 saying that COVID only is negative supply shock, because maybe 0:13:39.760 --> 0:13:42.040 there's a little bit of negative demand shock at least 0:13:42.080 --> 0:13:45.199 in the beginning when it first hit, when her confidence 0:13:45.240 --> 0:13:47.480 is once so forth. But I think the longerest thing 0:13:47.559 --> 0:13:50.480 drags out, is becoming more of a negative supply shock. 0:13:50.840 --> 0:13:53.840 And then yet the FED and the Biden administration continue 0:13:53.880 --> 0:13:56.600 to respond to COVID as though it were a negative 0:13:56.600 --> 0:13:59.240 demand shock, and that, in my view, is going to 0:13:59.360 --> 0:14:18.920 be a very a very dangerous game to play. Can 0:14:18.960 --> 0:14:22.120 we dive into um the demand side a little bit 0:14:22.160 --> 0:14:25.840 more so? I remember, you know, early last year, people 0:14:25.880 --> 0:14:30.479 were talking about how this would permanently scar consumers, particularly 0:14:30.680 --> 0:14:35.440 in America. You know, this huge global crisis, people losing 0:14:35.440 --> 0:14:38.680 their jobs, having to stay inside, a really sort of 0:14:38.880 --> 0:14:42.160 unique and terrible experience for a lot of people during 0:14:42.160 --> 0:14:46.760 a global pandemic. How would you classify us consumers now? 0:14:46.880 --> 0:14:50.520 Because of anything, it seems like they've emerged on the 0:14:50.560 --> 0:14:54.320 other side of this much more prepared to spend. It 0:14:54.360 --> 0:14:59.640 looks like exactly because the the honest true is crazy. 0:14:59.760 --> 0:15:03.280 The the I mean, the one thing I wouldn't have forecasted. 0:15:03.480 --> 0:15:06.000 I mean, you know, like you have like a Martian 0:15:06.200 --> 0:15:08.760 who just landed on kind of earth looking at what's 0:15:08.760 --> 0:15:12.560 happened last year? I guarantee you nobody, no genius, Okay, 0:15:12.840 --> 0:15:15.480 nobody all price the comments could have predicted what which 0:15:15.520 --> 0:15:19.160 is that somehow, after the biggest basically crisis they hit 0:15:19.200 --> 0:15:23.720 the world in a hundred years, that somehow US household 0:15:23.720 --> 0:15:26.600 balance sheet has improved and their cash flow is improved. 0:15:26.760 --> 0:15:30.200 I don't want to tell you US household net worth 0:15:30.600 --> 0:15:33.080 as a shop disposted income is not all time high 0:15:33.360 --> 0:15:36.640 because we've seen a massive rallying the stock market unbelievably, 0:15:36.880 --> 0:15:40.360 we've seen a massive appreciation in home prices. So as 0:15:40.360 --> 0:15:43.840 a result, Americans who owned stocks and houses are far 0:15:43.960 --> 0:15:47.560 richer today than they worked a year ago. Ironically, at 0:15:47.560 --> 0:15:51.000 the same time, COVID has driven down interest rate as 0:15:51.000 --> 0:15:54.600 a result, debt payment as a sharp disppost, income for 0:15:54.640 --> 0:15:59.040 American is basically at all time look at the same time. Meanwhile, 0:15:59.120 --> 0:16:02.040 if you don't have any money, guess what you know 0:16:02.080 --> 0:16:05.200 what for one thing, the banks are begging you to borrow. 0:16:05.280 --> 0:16:08.240 If you look at answer the Senior Loan office and Sturday, 0:16:08.600 --> 0:16:11.960 the willingness of your field let your money. Credit card 0:16:11.960 --> 0:16:13.680 for people who have no money is at all time 0:16:13.720 --> 0:16:16.000 high right now. On top of that, you know what, 0:16:16.120 --> 0:16:18.240 if you really do have any money, you know what 0:16:18.720 --> 0:16:22.120 Biden has promised to basically make sure you do not 0:16:22.240 --> 0:16:24.320 miss the party right now. You know, I don't have 0:16:24.360 --> 0:16:26.080 to tell you. The big news the last two weeks 0:16:26.360 --> 0:16:29.120 was the fact that, you know what, Biden has decided 0:16:29.160 --> 0:16:33.360 to suspend the moratorium. You basically extend the moratoriament on 0:16:33.480 --> 0:16:37.360 eviction again. If you cannot pay rent, no problem, you 0:16:37.360 --> 0:16:40.080 can stay on and go on a vacation. Meanwhile, okay, 0:16:40.120 --> 0:16:42.040 and worry about paying rent down the road, because we're 0:16:42.040 --> 0:16:44.760 gonna make sure you don't get evicted. Meanwhile, last week, 0:16:44.840 --> 0:16:48.000 of course, they also came under pressure from the liberal 0:16:48.040 --> 0:16:50.560 weight of the Democratic Party. Now you cannot pay your 0:16:50.560 --> 0:16:55.520 student loans. They've also extended the student loans moratorium until 0:16:55.560 --> 0:16:59.720 basically October. So and then now they're talking about maybe 0:17:00.040 --> 0:17:04.960 possibly extending the the enhanced benefits federal basically unemployment trans 0:17:05.000 --> 0:17:07.560 benefit to make sure I mean, think about this, I mean, 0:17:07.600 --> 0:17:10.840 the the amount of benefits that people were getting, including 0:17:10.880 --> 0:17:14.119 the enhanced benefit. Most of the people who lost your 0:17:14.200 --> 0:17:18.040 jobs were actually getting more money from the benefits than 0:17:18.080 --> 0:17:21.280 what they were earning before. So you're telling me which 0:17:21.359 --> 0:17:24.520 American has actually been lost out. Sure, some people have 0:17:24.600 --> 0:17:26.640 lost your family, that kind of thing is all very sad. 0:17:27.440 --> 0:17:33.120 But economically, yeah, basically because of policy which I think 0:17:33.119 --> 0:17:35.400 we're gonna have to pay for dearly down the road, 0:17:35.760 --> 0:17:38.119 has made sure that everybody is better at all. So 0:17:38.280 --> 0:17:41.520 against this factor of yeah, I'm not surprised Americans are 0:17:41.520 --> 0:17:45.679 basically are about to basically spend some serious money. What 0:17:45.720 --> 0:17:47.600 do you what do you mean? So people say that 0:17:47.640 --> 0:17:50.080 a lot we're gonna have to pay for these policies 0:17:50.560 --> 0:17:52.640 down the road, And that's always you know, I've heard 0:17:52.680 --> 0:17:56.280 that all my life, long before COVID or any of these. 0:17:56.359 --> 0:17:58.680 You know, I heard it about TARP, and I heard 0:17:58.720 --> 0:18:01.600 it about all this. What is it means specifically to you? 0:18:01.680 --> 0:18:06.240 Because although it's true that there has been this massive, 0:18:07.000 --> 0:18:10.240 by historical standards physical expansion, some of it is coming 0:18:10.359 --> 0:18:13.040 to an end. We've seen a reduction in the unemployment 0:18:13.119 --> 0:18:16.840 insurance expansion most likely, I think most people do not 0:18:17.080 --> 0:18:20.600 expect that to be continued. I guess there is some debate. 0:18:20.960 --> 0:18:26.240 We still do have a significant employment whole, although that 0:18:26.440 --> 0:18:29.560 does seem, you know, by some estimates, are still eight 0:18:29.600 --> 0:18:32.119 million jobs short of where we would be had it 0:18:32.200 --> 0:18:36.280 not been for the crisis. So what do you actually 0:18:36.440 --> 0:18:39.920 see as the what is paying for it? Look like, 0:18:40.520 --> 0:18:42.760 let's look at the numbers here, so I mean, forget 0:18:42.840 --> 0:18:45.639 about anything else. This's look at two thousand and twenty, 0:18:46.000 --> 0:18:51.720 right two, the global clarmy contracted by three point six percent. Okay, 0:18:51.840 --> 0:18:54.919 the economy was growing about six percent before that. So 0:18:55.040 --> 0:18:57.520 the foregone output last year was about ten percent of 0:18:57.520 --> 0:19:00.879 global GDP, which comes to about nine trail million dollars. Right, 0:19:00.920 --> 0:19:05.719 that was how much global GDP foregone basically loss if 0:19:05.720 --> 0:19:08.040 you like. On top of that, based on the land 0:19:08.080 --> 0:19:12.520 if number, fifteen trillion dollars of fiscal spending has now 0:19:12.560 --> 0:19:15.760 been taken out by governments around the world to finance 0:19:15.840 --> 0:19:20.960 whatever they're firefighting. So fifteen billion, fifteen trillion plus nine trillion, 0:19:21.560 --> 0:19:25.800 four trillion dollars not just for two thousand twenty. You said, well, 0:19:25.840 --> 0:19:28.720 what's what's twenty four trillion dollars? These days we talked 0:19:28.720 --> 0:19:31.439 about trillions as though there were nothing. Let's put that 0:19:31.520 --> 0:19:35.120 in perspective. Okay, let's put that in perspective. I don't 0:19:35.119 --> 0:19:38.359 know people realize this, but you know what, if you 0:19:38.359 --> 0:19:42.040 look at the combined wealth of the two thousand seven 0:19:42.160 --> 0:19:44.879 hundred and fifty five billion years in the world. So 0:19:44.920 --> 0:19:47.000 if you take all the billionaires in the world, you 0:19:47.080 --> 0:19:50.639 add up all their money, it's only thirteen trillion dollars. 0:19:50.680 --> 0:19:53.040 By the way, okay, so even if we were to 0:19:53.160 --> 0:19:56.000 confiscate all the money from all the richest billionaires in 0:19:56.000 --> 0:19:58.600 the world, time enough to basically even fill the whole. Now, 0:19:58.680 --> 0:20:00.879 another way to look at this. You said, well, what 0:20:01.000 --> 0:20:03.800 can you buy with twenty four trillion dollars? You might 0:20:04.320 --> 0:20:06.520 that way. Now think about this. You know you could 0:20:06.600 --> 0:20:10.240 argue today the most you know, the ultimate symbol of 0:20:10.359 --> 0:20:14.840 wealthy days is to buy sports teams and luxury real estate. 0:20:15.119 --> 0:20:19.639 But you know you could buy the fifty most valuable 0:20:19.720 --> 0:20:22.399 teams in the world. I'm talking about like from the 0:20:22.520 --> 0:20:25.239 l A Lakers to I don't know United, you know, 0:20:25.280 --> 0:20:28.040 basically a Manchester United. You can buy the fifty most 0:20:28.080 --> 0:20:31.000 valuable teams in the world for just one and seventy 0:20:31.040 --> 0:20:34.040 billion dollars compared with the twenty four trillion dollars just 0:20:34.080 --> 0:20:36.040 told you. Is the something that you know that costs 0:20:36.080 --> 0:20:38.680 the world? Basically from COVID just in two thousand twenty, 0:20:39.000 --> 0:20:41.720 do you know you can buy all of Manhattan's land 0:20:42.680 --> 0:20:46.800 for one point seven trillion dollars. Again, COVID causes twenty 0:20:46.800 --> 0:20:49.199 four trillion dollars. Do you know what you know what 0:20:49.200 --> 0:20:52.399 it is? I figured it out, you know, you know, 0:20:52.480 --> 0:20:55.560 you know what twenty trillion dollars really mean. With twenty 0:20:55.560 --> 0:21:00.399 four trillion dollars, we can basically feed the seven hundred 0:21:00.520 --> 0:21:03.560 million people in the world who suffer from chronic nourishment. 0:21:04.320 --> 0:21:07.199 We can prove mind clean water and basic sanitation for 0:21:07.320 --> 0:21:11.120 everyone in the world. We can provide education for all 0:21:11.119 --> 0:21:12.920 the children in the world who are not able to 0:21:12.960 --> 0:21:16.480 attend school. On top of that, we can protect all 0:21:16.600 --> 0:21:21.240 the endangerous species from extinction, okay, which only cost is 0:21:21.240 --> 0:21:24.960 about some seventy six billion dollars a year. In other words, 0:21:25.040 --> 0:21:28.280 just the cost of last year is basically forgotten GDP, 0:21:28.400 --> 0:21:32.040 and the fiscal costs is enough to make the world 0:21:32.280 --> 0:21:34.720 a much better place. In other words, the way I 0:21:34.720 --> 0:21:38.640 think about this is, okay, is that now we as 0:21:38.680 --> 0:21:42.359 though that before the crisis, there was nobody went hungry 0:21:42.359 --> 0:21:46.359 at night, nobody went without clean water, all the children 0:21:46.359 --> 0:21:49.960 went to school, animals live in total peace. And now 0:21:50.080 --> 0:21:53.760 guess what after COVID just one year, seven million people 0:21:53.760 --> 0:21:56.119 are going hungry every night based more than a billion 0:21:56.119 --> 0:22:00.119 people don't have these safe water basically about five and 0:22:00.160 --> 0:22:02.439 people are not going to school when they should. And 0:22:02.480 --> 0:22:06.440 then guess what animals are dying left and right. That 0:22:06.600 --> 0:22:09.840 is the cost just in two thousand twenty. Not to 0:22:09.880 --> 0:22:12.960 mention beyond. Now I can tell you something else. You 0:22:13.040 --> 0:22:15.639 might say, well, when are we gonna pay this price? 0:22:16.560 --> 0:22:20.520 That obviously you know is immediately tied to the whole 0:22:20.560 --> 0:22:24.640 inflation story. The reason why yelling, and this is why 0:22:24.760 --> 0:22:27.920 I have no respect for people like yelling. She keeps 0:22:27.920 --> 0:22:29.960 talking about why if interest rates are zero, then there's 0:22:29.960 --> 0:22:31.920 no cast, let's just take on more debt if the 0:22:31.920 --> 0:22:35.040 interest rates zero, But she's assuming that inflation is never 0:22:35.080 --> 0:22:37.440 gonna go back up. I just told you. If COVID 0:22:37.520 --> 0:22:41.040 turns out to be a negative supplying shock, then everything 0:22:41.040 --> 0:22:43.280 they're doing right now is going to be pushing up 0:22:43.359 --> 0:22:47.080 inflation and pushing up the inflation unless they want inflation 0:22:47.119 --> 0:22:48.840 to go out of control, which I don't think they do. 0:22:49.160 --> 0:22:51.600 The fact web no choice, but the race interest rate. 0:22:51.720 --> 0:22:54.160 When they starts to rates an interest rate, that's when 0:22:54.640 --> 0:22:58.639 that's the day we start paying for basically the cost, 0:22:59.280 --> 0:23:01.600 and it's gonna be a big cost. I want to 0:23:01.600 --> 0:23:04.520 ask a slightly different question based on that yell in comment. 0:23:04.680 --> 0:23:07.320 But you know you were at BAMIL for a very 0:23:07.320 --> 0:23:11.240 long time. I think about ten years, and your new 0:23:11.280 --> 0:23:15.880 blog is called David Woo Unbound. Is the suggestion that 0:23:16.760 --> 0:23:18.920 I don't know that you were sort of bound um 0:23:19.000 --> 0:23:21.360 in terms of what you could say when you were 0:23:21.600 --> 0:23:25.320 at Bank of America Maryland, Tracy. You know, let me 0:23:25.320 --> 0:23:27.240 tell you something, you know, you know, you know what 0:23:27.400 --> 0:23:30.639 really basically sort of like the day of reckoning for 0:23:30.680 --> 0:23:32.000 me at Bank a marking, you know, by the way 0:23:32.160 --> 0:23:34.680 you know I mean, I I don't want to say 0:23:34.800 --> 0:23:37.160 I have only good things to say about Bank America. 0:23:37.320 --> 0:23:39.399 I was there for ten years. I did great, The 0:23:39.440 --> 0:23:42.639 bank treated me great. I couldn't be any happier that. 0:23:42.640 --> 0:23:45.320 That's the honest truth. So my leading Bank America has 0:23:45.400 --> 0:23:48.080 nothing to do with how the bank treated me or 0:23:48.119 --> 0:23:50.159 anything like that. I've always thought that they paid me 0:23:50.280 --> 0:23:53.280 much more than actually I was worth. But nevertheless, you 0:23:53.320 --> 0:23:55.880 know what, I'm not going to complain now. I'll tell 0:23:55.920 --> 0:23:57.399 you what really got to me. It's a sort of 0:23:57.480 --> 0:24:00.320 sequence of events, one of which was what been in 0:24:00.400 --> 0:24:04.040 January Febrary, this year now, I don't have to remind you, right, 0:24:04.160 --> 0:24:06.560 you know, the one point whatever six trillion dollar fiscal 0:24:06.560 --> 0:24:09.959 stimulus package that got through very quickly in January, as 0:24:10.000 --> 0:24:13.480 soon as the new administration was warning. Now that one 0:24:13.600 --> 0:24:18.600 point six trillion, I can tell you any reasonable economists 0:24:18.600 --> 0:24:21.080 will tell you it was not just excessive, it was 0:24:21.080 --> 0:24:26.000 probably unnecessary. Now, it's very interesting to me how many 0:24:26.040 --> 0:24:30.080 economists came out speaking up against it. Obviously not a 0:24:30.119 --> 0:24:34.040 single one on All Street, but literally, you know, the 0:24:34.080 --> 0:24:37.080 people who spoke up against it are like Olivia Blanchard, 0:24:37.440 --> 0:24:39.320 who's the former chief economist at the I m F, 0:24:39.359 --> 0:24:41.520 who's not retired, who doesn't guart anymore. I mean, he 0:24:41.560 --> 0:24:43.719 has no he doesn't have to pay the political price 0:24:44.240 --> 0:24:47.439 for saying things that may not be politically correct. I 0:24:47.480 --> 0:24:50.440 can hear you. Who other person can John Cochrane, who 0:24:50.520 --> 0:24:53.560 used to be at Berkeley, who's now whoever institute, who 0:24:53.600 --> 0:24:56.320 has been banished already to the North Pole, if you like, 0:24:56.560 --> 0:25:00.399 who basically wrote about it. In other words, to me, 0:25:00.560 --> 0:25:04.119 what we're shocking in January and February was that we 0:25:04.320 --> 0:25:08.520 just decided to write this massive check that was completely unnecessary, 0:25:08.720 --> 0:25:13.119 and yet not a single academic economists, okay, really spoke 0:25:13.200 --> 0:25:16.440 up with the exception of a few honest and courageous people, 0:25:17.040 --> 0:25:19.760 they didn't mind to be canceled because either they were 0:25:19.760 --> 0:25:22.800 already in the retirement what they were already basically in 0:25:22.880 --> 0:25:25.400 North Pole, they've already been canceled. So from that point 0:25:25.400 --> 0:25:27.479 of view, this is what we was a wake up 0:25:27.480 --> 0:25:30.840 call for me because then I realized that the whole 0:25:30.880 --> 0:25:33.520 canceled culture has gone much too far. I can tell 0:25:33.600 --> 0:25:37.040 you so many of my professor friends, you know, classmates 0:25:37.040 --> 0:25:39.840 at Columbia who are now basically teaching a major university 0:25:39.880 --> 0:25:42.760 IVY league, who tell me they do not there to 0:25:42.920 --> 0:25:45.119 speak up today because they might lose their job, they 0:25:45.200 --> 0:25:48.440 might lose your tenure, they might have students basically complaining 0:25:48.480 --> 0:25:52.840 about them. That is the climate today in America, and 0:25:52.920 --> 0:25:55.720 it is starting, and it was getting onto Wall Street. 0:25:55.800 --> 0:25:57.600 And I said, you know what, I gotta do something 0:25:57.640 --> 0:26:01.200 about this because I benefited from Wall Street. I mean 0:26:01.240 --> 0:26:04.080 I've I've spent twenty years on Wall Street. One thing 0:26:04.160 --> 0:26:07.359 I learned what anything else on Wall Street is the 0:26:07.440 --> 0:26:11.280 Wall Street is about the celebration of differences. Just think 0:26:11.280 --> 0:26:14.040 about this. Every day people are going on your show 0:26:14.600 --> 0:26:18.080 you know, debating about A and B is inclusion going up, 0:26:18.119 --> 0:26:21.320 inclustion going down. You know what Wall Street is about 0:26:21.440 --> 0:26:25.119 the celebration differences. If somebody today is buying Tesla stock 0:26:25.200 --> 0:26:28.760 is because somebody else is selling it. So I wanted basically, 0:26:28.800 --> 0:26:30.760 I decided to set out my own in order to 0:26:30.800 --> 0:26:34.240 basically bring this very important lesson from Wall Street that 0:26:34.320 --> 0:26:36.840 I become. It's been a very big part of my 0:26:36.920 --> 0:26:40.040 success to basically the general public. That's what I want 0:26:40.040 --> 0:26:42.240 to do on this question of like who gets to 0:26:42.280 --> 0:26:45.760 criticize I mean the stimulus. I mean also Larry Summers 0:26:46.119 --> 0:26:48.640 was a critic of some of the size of the spending, 0:26:49.119 --> 0:26:52.520 and of course he continues to have a significant media platform. 0:26:52.640 --> 0:26:58.520 Jason Furman, former official within the Obama administration, critic, also 0:26:58.840 --> 0:27:00.920 listened to I mean, I think that there really are 0:27:01.560 --> 0:27:05.359 economists who, to use your term, they're not banished to 0:27:05.400 --> 0:27:10.320 the North Pole, who have been criticized. But I want to, uh, 0:27:10.359 --> 0:27:12.280 can we just basically answer that question if you read 0:27:13.080 --> 0:27:16.040 for me, Larry Summers has no credibility whatsoever when it 0:27:16.040 --> 0:27:19.080 comes to this, because he has been If you I 0:27:19.119 --> 0:27:20.919 don't tell you, I don't do remind you Joe. You 0:27:20.920 --> 0:27:24.040 remember this is for the last ten years he's been 0:27:24.080 --> 0:27:28.240 advocating mass epistical stimulus. Remember he was the one was 0:27:28.280 --> 0:27:34.920 talking about stagnation does in theory. Why doesn't that give 0:27:35.000 --> 0:27:38.560 him more credibility as someone who No, I don't think so, 0:27:38.640 --> 0:27:41.040 because I would say that they were following his blueprint. 0:27:41.200 --> 0:27:43.879 In fact, if you actually read his Washington Post article, 0:27:44.040 --> 0:27:47.440 it was pussy footing around. It was like it was nothing. 0:27:47.480 --> 0:27:50.399 It was not like, you know, he really came out forcefully. 0:27:50.520 --> 0:27:53.840 He felt that he had to basically say something. That's 0:27:53.920 --> 0:27:57.160 that's the feeling I got, certainly. I you know, again, 0:27:57.200 --> 0:27:58.760 go back to read the article and see if you 0:27:58.840 --> 0:28:02.119 actually Larry summer is it's not someone who puss the 0:28:02.160 --> 0:28:06.120 foot around. He basically make sure that you hear him 0:28:06.240 --> 0:28:08.960 when he speaks. And in the way he wrote that article, 0:28:09.400 --> 0:28:12.680 I thought there were too many ifs. Just going back 0:28:12.720 --> 0:28:15.320 to this question, you say, Okay, they are all these 0:28:15.880 --> 0:28:19.000 critics of the stimulus who had secret felt like they 0:28:19.040 --> 0:28:23.440 couldn't say anything and because of yeah, whatever in your 0:28:23.480 --> 0:28:27.320 in your in your characterization, cancel culture that big said, Okay, 0:28:27.359 --> 0:28:29.480 let's look at what's actually happened. Well, it is true 0:28:29.520 --> 0:28:33.359 that we have had some elevated inflation prints and there's 0:28:33.359 --> 0:28:36.440 probably reason to think, you know that even if there's 0:28:36.480 --> 0:28:39.400 a cool down, UM, we are going to get the UH, 0:28:39.440 --> 0:28:42.240 they may remain as such for a while. We also 0:28:42.280 --> 0:28:46.000 see an extremely robust labor market recovery nearly two million 0:28:46.080 --> 0:28:49.200 jobs in the last two months. We did see a 0:28:49.240 --> 0:28:53.200 massive hit two incomes. And I know that we've focused 0:28:53.200 --> 0:28:56.160 a lot, say on this show, UM about a lot 0:28:56.200 --> 0:28:59.239 of the supply chain disruptions, and we've talked a lot 0:28:59.280 --> 0:29:01.840 about containing ers as well as you have. But on 0:29:01.880 --> 0:29:06.720 the other hand, small business incomes, service sector incomes absolutely 0:29:06.760 --> 0:29:09.880 decimated for several months, and we don't really have the 0:29:09.920 --> 0:29:12.320 counter factual of what it would have looked like without 0:29:12.400 --> 0:29:15.760 the p PP program and the expanded UI, but huge 0:29:15.800 --> 0:29:20.400 swaths of the economy their incomes, at least for the 0:29:20.560 --> 0:29:24.040 for several months after the virus hit would have basically 0:29:24.080 --> 0:29:26.240 gone to zero, and that would have crushed their spending, 0:29:26.280 --> 0:29:27.880 and that would have crushed rents. And you know, you 0:29:27.960 --> 0:29:31.400 talked about some of the UH the eviction moratorium. On 0:29:31.480 --> 0:29:34.080 the other hand, there are millions of landlords who probably 0:29:34.080 --> 0:29:36.360 wouldn't have been able to collect any rent had it 0:29:36.480 --> 0:29:39.800 not been for the UI and some of these programs. 0:29:39.840 --> 0:29:43.000 So why is it not reasonable to say, I mean 0:29:43.400 --> 0:29:47.600 that there were really truly shocks to both the demand 0:29:48.160 --> 0:29:50.760 and supply and whiles, and that the supply side is 0:29:50.800 --> 0:29:54.400 absolutely not sorted out, that the demand side has more 0:29:54.480 --> 0:30:01.560 or less remained uh smooth, thanks to the ongoing fiscal expansion. Right, 0:30:02.000 --> 0:30:04.160 you asked a very good question. And again I don't 0:30:04.160 --> 0:30:08.320 want to sound overly political, I would argue I, in 0:30:08.400 --> 0:30:11.520 my humble opinion, I think Secretary niche was probably the 0:30:11.520 --> 0:30:15.200 best Secretary of US charging we've had very very long time. Okay. 0:30:15.480 --> 0:30:17.120 One of the reasons, I mean that he did a 0:30:17.160 --> 0:30:19.120 lot of great things. He just someone who was just 0:30:19.400 --> 0:30:21.840 obviously a bit of an introverse so he didn't know 0:30:21.880 --> 0:30:24.960 how to basically, you know, do his own pr now. 0:30:25.240 --> 0:30:27.800 And because his association with you know, with Trump, you know, 0:30:27.880 --> 0:30:29.840 people didn't want to give him any credit for anything 0:30:29.880 --> 0:30:31.760 he did. But he was the one who came up 0:30:31.800 --> 0:30:36.520 with p PP. If you think about p p P, Okay, 0:30:36.800 --> 0:30:42.200 p p P was basically a supply side response by 0:30:42.200 --> 0:30:45.640 the last administration, right, because the whole idea was, well, 0:30:45.680 --> 0:30:47.960 these business is gonna go bankrupt, you know, and there's 0:30:48.000 --> 0:30:51.160 a cost two companies going bankrupt because like you know, 0:30:51.200 --> 0:30:53.240 it's easy for companies to go bankrupt, but it would 0:30:53.240 --> 0:30:57.040 be difficult for these companies to come back. Okay. Therefore, 0:30:57.320 --> 0:31:00.560 the whole p VP okay, the payroll BA sickally a 0:31:00.600 --> 0:31:04.040 program was to help small business survive the shock and 0:31:04.120 --> 0:31:07.640 the Minchill also understood that you know what, there will 0:31:07.720 --> 0:31:10.040 be some money that was going to be stolen in 0:31:10.080 --> 0:31:12.440 that process, right because as we know, like a lot 0:31:12.480 --> 0:31:16.280 of companies basically faked there whatever you know, payrolls and 0:31:16.280 --> 0:31:18.120 basically got the money that they shouldn't have. It doesn't 0:31:18.120 --> 0:31:21.480 meanly matter, but that was a good example of a 0:31:21.600 --> 0:31:27.520 supply response to help basically mitigate the real, basically the 0:31:27.600 --> 0:31:31.720 long term cost of the crisis by preventing a large 0:31:31.800 --> 0:31:34.920 number of businesses from simply going bankrupt. That was the 0:31:35.040 --> 0:31:39.560 right policy. But what happened earlier this year when Biden 0:31:39.680 --> 0:31:42.280 and with he basically endorsement of Gallon sentate check to 0:31:42.280 --> 0:31:45.120 everybody again four thousand, two hundred dollars. That is not 0:31:45.560 --> 0:31:49.360 the supply side policy. Especially at the time already US 0:31:49.440 --> 0:31:53.120 household savings was like eight percent, nine percent, ten percent. 0:31:53.400 --> 0:31:56.080 You know, if people had that kind of we're sitting. 0:31:56.560 --> 0:31:58.760 If you look at average saving rings never been higher, 0:31:59.160 --> 0:32:01.440 so a ma kins were sending on so many savings. 0:32:01.480 --> 0:32:04.080 If they were not spending, it was not because they 0:32:04.080 --> 0:32:07.120 didn't have the money, presumably because you know what, there 0:32:07.160 --> 0:32:09.800 was no place to spend it, because you know what, 0:32:09.840 --> 0:32:11.720 they wanted to go out the restaurant. The restaurants were closed. 0:32:11.720 --> 0:32:13.440 Maybe they bought all the computers they have. And you 0:32:13.480 --> 0:32:16.320 can see what's happening right now, by the way, this 0:32:16.560 --> 0:32:19.120 last month, you know, you saw the nonvomparent number last week. 0:32:20.120 --> 0:32:23.360 This is the fourth month in a row the hospitality 0:32:23.400 --> 0:32:27.479 and leisure created more jobs than all the other private 0:32:27.520 --> 0:32:31.280 sectors combined, my friend, because Americans are rushing out to 0:32:31.400 --> 0:32:34.760 basically eat out, to basically hit the road on vacations, 0:32:34.800 --> 0:32:37.600 on and so forth. So from not pointing view again, 0:32:37.920 --> 0:32:40.120 but what I'm saying is this, I'm not saying that 0:32:40.400 --> 0:32:43.600 any fiscal response is wrong. I have no doubt that 0:32:43.720 --> 0:32:48.120 last year the aggressive fiscal response was correct. It was calibrated, 0:32:48.400 --> 0:32:51.160 and I love the PPP program because that made a 0:32:51.200 --> 0:32:53.280 lot of sense to me. And on top of that, 0:32:53.320 --> 0:32:55.880 there was also more assuasion placed on the banks not 0:32:56.040 --> 0:33:00.800 to foreclose. Okay on basically businesses warfa, I'm outter mortgages. 0:33:01.040 --> 0:33:04.920 These was the point side response that was basically pushed 0:33:05.080 --> 0:33:08.560 by the last administration. This administration came in. The first 0:33:08.560 --> 0:33:10.360 thing you want to do is spend more, to give 0:33:10.440 --> 0:33:14.080 people who didn't need the money to spend more. That's 0:33:14.240 --> 0:33:33.400 what I've a problem with. I'd like to widen out 0:33:33.440 --> 0:33:36.360 the conversation a little bit more because we've been focusing 0:33:36.400 --> 0:33:39.440 a lot on the US, But you know, I'm over 0:33:39.440 --> 0:33:42.040 here in Asia and one thing that's been happening here 0:33:42.120 --> 0:33:45.560 is we've seen a resurgence in COVID cases. UM the 0:33:45.600 --> 0:33:51.920 delta variant is spreading in Malaysia, Indonesia, Vietnam, places like that. 0:33:52.440 --> 0:33:56.320 We have some cases in China again, and I'm watching 0:33:56.360 --> 0:33:58.719 the p M I s and they seem to be 0:33:58.840 --> 0:34:03.000 rolling over For are some very important economies in terms 0:34:03.040 --> 0:34:06.880 of the global supply chain, but also potentially demand. And 0:34:06.960 --> 0:34:10.560 even China is getting close to UM that fifty mark 0:34:10.880 --> 0:34:15.680 that is the difference between expansion and contraction. So how 0:34:15.760 --> 0:34:21.440 much does China and broader Asia matter when it comes 0:34:21.680 --> 0:34:25.480 to the global recovery And how much does I guess 0:34:25.560 --> 0:34:31.840 the variations in the economic recovery um complicate the global picture. 0:34:32.560 --> 0:34:35.080 The difference between Asia and the rest of the world 0:34:35.640 --> 0:34:39.480 is very simple. Asia was fighting a different matter in 0:34:39.560 --> 0:34:42.280 the rest of the world. During the entire COVID pandemic. 0:34:43.000 --> 0:34:46.439 You know, an Asia was successful, you know, in terms 0:34:46.480 --> 0:34:49.920 of their strategy coping with COVID by simply, you know, 0:34:50.239 --> 0:34:54.040 pursuing an elimination strategy. Right, don't to tell you great 0:34:54.080 --> 0:34:57.800 examples Taiwan, right and now Australia. I mean, they would 0:34:57.840 --> 0:35:00.560 just they basically shut down the whole countries so that 0:35:00.680 --> 0:35:04.960 it was impossible for anybody to even get in. I 0:35:05.560 --> 0:35:07.359 should know this. My parents live in Taiwan. I can 0:35:07.360 --> 0:35:11.840 tell you it's impossible. So as a result, Asia became 0:35:11.840 --> 0:35:15.960 too complacent. They were able to contain basically keep them 0:35:16.000 --> 0:35:20.840 basically COVID at bay by keeping it outside basically their countries. 0:35:21.280 --> 0:35:24.160 They didn't aggressively trying to get vaccines, and that's of 0:35:24.200 --> 0:35:27.399 course the big story. Right. So and then what it's 0:35:27.440 --> 0:35:30.439 really I've always said, China got super lucky. I don't 0:35:30.440 --> 0:35:33.600 know if China, if you know, if if the virus 0:35:33.800 --> 0:35:36.799 was bio biolologically engineered or now I don't really care. 0:35:37.480 --> 0:35:40.759 What I think is China got really insanely lucky last 0:35:40.840 --> 0:35:45.359 year because we all knew the virus okay, once they 0:35:45.360 --> 0:35:48.360 got out of China on its way to Europe became 0:35:48.800 --> 0:35:52.160 literally a percent more contagious. By the time they started 0:35:52.239 --> 0:35:55.880 to spread in Europe, it had already mutated. It was 0:35:55.920 --> 0:35:59.840 a much more infectious. Basically, virus did anything that Chinese 0:35:59.840 --> 0:36:03.920 had to deal with in last January and Febrary in China. 0:36:04.239 --> 0:36:08.160 And ironically, you know the mutation that has been happening now, 0:36:08.320 --> 0:36:11.040 you know, from basically in Europe, and then you know, 0:36:11.320 --> 0:36:14.440 but you know, the alpha, the beta, the gamma in 0:36:14.480 --> 0:36:19.240 South Africa, Brazil. Now the delta is now finally reaching Asia, 0:36:20.120 --> 0:36:22.920 and all of a sudden, you know, the Asian basic 0:36:22.960 --> 0:36:27.520 elimination strategy doesn't work, and rightly so doesn't work. I 0:36:27.560 --> 0:36:31.319 never thought was gonna work, because now you've got, you know, 0:36:31.400 --> 0:36:35.799 basically the delta, which is fifty more basic contagious than 0:36:35.880 --> 0:36:39.480 the altpha. The alpha was basically add percent more contagious 0:36:39.480 --> 0:36:42.160 in the Chinese. This is what's really going on. But 0:36:42.280 --> 0:36:44.799 I'm not terribly worried about this, and I'll tell you 0:36:44.840 --> 0:36:47.799 why I'm not terribly worried about this. If you look 0:36:47.840 --> 0:36:52.160 at the experience of alpha, gamma, beta, and the delta. 0:36:52.400 --> 0:36:55.200 They all follow a very similar pattern. And you have 0:36:55.400 --> 0:36:58.160 to look at the country's of origin for each of 0:36:58.160 --> 0:37:03.880 these basically variants, okay, and basically in the UK, South Africa, 0:37:03.880 --> 0:37:06.960 and Brazil. Following the outbreak of alpha, beta and gamma. 0:37:07.200 --> 0:37:11.600 In India, which is the home of origin of delta, 0:37:11.960 --> 0:37:15.839 the number of new cases collapsed. And it's pretty fascinating 0:37:15.880 --> 0:37:21.239 because even India, well you've got something like twenty vaccination Okay, 0:37:21.360 --> 0:37:25.080 so that's pretty impressive. The numbers have completely collapsed in India. 0:37:25.320 --> 0:37:28.719 Let's look at the UK. UK is another good example. UK, 0:37:29.080 --> 0:37:31.880 you know, because of the close ties with India, was 0:37:31.960 --> 0:37:35.000 the first western country to get hit by delta. And 0:37:35.040 --> 0:37:37.600 the number of cases basically when flying and guess what, 0:37:37.880 --> 0:37:41.000 it's been coming down a lot more than seventy is 0:37:41.040 --> 0:37:44.759 now stabilizing, Okay. This is also the reason why I 0:37:44.760 --> 0:37:48.000 think the US story is gonna follow very safe similar pattern, 0:37:48.320 --> 0:37:50.120 which is that I think probably the next few weeks 0:37:50.160 --> 0:37:53.760 we all to see basically delta cases also starting to peak. 0:37:54.480 --> 0:37:58.200 In Asia. I think the reason why the economy has 0:37:58.200 --> 0:38:01.800 been hit is because once again, these economies are still 0:38:01.840 --> 0:38:06.359 trying to deal with basically Delta using yesterday's medicine, which 0:38:06.400 --> 0:38:08.920 is by trying to shut down the economy, trying to 0:38:09.080 --> 0:38:12.399 basically limited That is not a winning strategy. The only 0:38:12.520 --> 0:38:15.400 strateogy that works now is to basically And this is 0:38:15.440 --> 0:38:19.359 why I think the UK approach it's going to be 0:38:19.400 --> 0:38:22.080 really really important because I don't tell you UK saw 0:38:22.239 --> 0:38:26.200 massive increase in cases and they decided to basically reopen economy, 0:38:26.400 --> 0:38:30.520 relax all restrictions because they decided, you know what, let's 0:38:30.800 --> 0:38:34.600 elimination strategy doesn't work. Let's just basically pursue a strategy 0:38:34.600 --> 0:38:38.960 of coexistence. Okay, if you get everybody vaccinated, you know what, 0:38:39.760 --> 0:38:41.839 maybe we don't have to close if not many people 0:38:41.840 --> 0:38:43.480 are dying. And in fact, if you look at the 0:38:43.560 --> 0:38:46.200 mortality rate in the UK, it's about point two percent, 0:38:46.280 --> 0:38:49.719 which is about double that of a flu okay for 0:38:50.000 --> 0:38:52.960 vaccinated people. I think that's what it is. So I 0:38:53.000 --> 0:38:57.279 think it's basically ASIA strategy worked in the beginning, it 0:38:57.360 --> 0:39:01.200 stop working once Delta became much more con pages, and 0:39:01.320 --> 0:39:04.319 yet Asia continues to try to basically control it as 0:39:04.360 --> 0:39:07.640 though we were fighting the original virus. I think, just 0:39:07.680 --> 0:39:09.759 like everybody else, there's gonna be a learning curve. I 0:39:09.760 --> 0:39:11.759 think even Asia is gonna get there, and when they 0:39:11.760 --> 0:39:14.839 get there, we're gonna we're gonna decide that maybe we 0:39:14.840 --> 0:39:17.080 can live with this. Now, of course, I want to 0:39:17.080 --> 0:39:19.600 say this one big of course, which is I have 0:39:19.680 --> 0:39:22.000 no idea what's gonna happen later later this year, I 0:39:22.040 --> 0:39:24.480 mean during winter, because I don't tell you Alpha, gamma, 0:39:24.520 --> 0:39:28.959 Delta and basically a gamma all developed during late fall 0:39:29.120 --> 0:39:33.600 and early winter and early spring. The fact that Delta 0:39:33.800 --> 0:39:36.680 became more infectious now that you could basically in a 0:39:36.760 --> 0:39:39.640 defined basically vaccination, I can tell you I'm in Israel 0:39:39.760 --> 0:39:42.319 right now, and then you know the you know, the 0:39:42.360 --> 0:39:45.560 immunity rate is now less than among people who receive 0:39:45.600 --> 0:39:48.959 two shots. Okay, So from that point of who knows 0:39:49.040 --> 0:39:51.399 what's going to be the next mutation is not going 0:39:51.480 --> 0:39:55.120 to basically, you know, basically become not only more contagious 0:39:55.160 --> 0:39:58.600 but also more virulent. That is a different story. But 0:39:58.800 --> 0:40:02.120 right now, given if we're just talking about delta right now, 0:40:02.440 --> 0:40:05.839 I wouldn't want to be basically overly concerned about this. 0:40:05.880 --> 0:40:08.919 Is this being enough to derail the global recovery? Well, 0:40:08.960 --> 0:40:10.919 what let's go back to what does this mean then 0:40:11.280 --> 0:40:14.120 for the supply side, and your view is that by 0:40:14.160 --> 0:40:18.640 and large, the disrupt the disruption COVID is a supply 0:40:18.719 --> 0:40:21.120 side story. And and look, you know, I think if 0:40:21.280 --> 0:40:25.120 any listener to odd lots would to some extent degree 0:40:25.200 --> 0:40:29.600 because we do a lot of episodes on supply side disruption, 0:40:29.760 --> 0:40:32.960 shipping containers, all of that. So to some extent there 0:40:33.040 --> 0:40:35.359 is a large agreement. If you know, we have these 0:40:35.360 --> 0:40:38.280 sort of ongoing waves. We don't know for the mutations 0:40:38.600 --> 0:40:42.040 we you as you say, these sort of like completely 0:40:42.080 --> 0:40:45.400 stamp it out strategy is a failure against a mutation 0:40:45.840 --> 0:40:49.280 is violent as uh that spreads as easily as delta. 0:40:49.960 --> 0:40:53.520 What is the prospect for supply side normalization? Like when 0:40:53.520 --> 0:40:57.600 do we see container rates normalized or what would it 0:40:57.680 --> 0:41:02.239 take for container rates to normalize? Things like at I 0:41:02.239 --> 0:41:05.040 think I think it's gonna depends on different sectors, right, 0:41:05.080 --> 0:41:07.879 you know, obviously, like for example, we all know that 0:41:07.920 --> 0:41:10.960 you know, the supply crunch in semit conductors, Right, that 0:41:11.040 --> 0:41:13.000 was one of the reason why like computer prices went 0:41:13.040 --> 0:41:15.239 through the room. But computer prices starting to come back 0:41:15.239 --> 0:41:18.080 down a bit, Right, That's one of the reasons why 0:41:18.280 --> 0:41:20.480 like use car prices went through the rout because there 0:41:20.480 --> 0:41:22.920 were new no new cars because like certain chips that 0:41:22.960 --> 0:41:25.680 were not available, so that certain new models were not available. 0:41:26.320 --> 0:41:28.719 And then actually what happened this week this month is 0:41:28.800 --> 0:41:31.840 the reason why use car prices started to basically moderate 0:41:31.960 --> 0:41:34.719 prices is because new models are being wrote out. That's why, 0:41:34.760 --> 0:41:36.799 like new car price has been going up. But I 0:41:36.840 --> 0:41:40.120 do think so these these these are temporary shocks. By 0:41:40.160 --> 0:41:42.319 the way, these are temporary supply shows. I'm not too 0:41:42.360 --> 0:41:46.239 worried about them. I'm much more concerned about potential permanent 0:41:46.480 --> 0:41:49.359 supply shock, negative supply shock. What are those. Let's think 0:41:49.400 --> 0:41:52.480 about this number one. As I said before, you know, 0:41:52.960 --> 0:41:56.120 you know, if COVID is gonna be here to stay, Okay, 0:41:56.360 --> 0:41:58.839 if it becomes the new normal, you know what, I 0:41:58.880 --> 0:42:01.040 do think many of women are going to end up 0:42:01.080 --> 0:42:04.040 staying home simply because I do think that starts to 0:42:04.120 --> 0:42:07.040 for younger children. This is going to be a major issue. Okay. 0:42:07.239 --> 0:42:11.040 And then especially not certainly not before the vaccine becomes 0:42:11.080 --> 0:42:13.440 widely available, which may not be the case for many years, 0:42:13.440 --> 0:42:15.319 by the way, who knows. Okay, I can tell you 0:42:15.360 --> 0:42:17.880 that from experience, because my both of my basically had 0:42:18.000 --> 0:42:21.560 daughters in Israel, have very young children, my grand my grandsons, 0:42:21.600 --> 0:42:24.240 you know, they have not been going to kindergarten for 0:42:24.239 --> 0:42:26.799 for a long time. As a result, my both of 0:42:26.840 --> 0:42:29.560 my basically daughters having to quit their job or certainly 0:42:29.600 --> 0:42:31.520 kept back on their work in order to basically look 0:42:31.560 --> 0:42:34.560 after the children. That's one major issue. I think another 0:42:34.600 --> 0:42:37.360 major issue is that COVID, if it's going to be 0:42:37.360 --> 0:42:40.000 here to stay, is also changing the skills that are 0:42:40.080 --> 0:42:44.160 required by employers. Okay, you can see very clearly in 0:42:44.200 --> 0:42:47.000 the data, you know, unemployment rate for basically people with 0:42:47.080 --> 0:42:50.120 college education has pretty much gone back to it's almost 0:42:50.440 --> 0:42:53.080 not exactly, but very close to getting back to what 0:42:53.160 --> 0:42:55.400 we wore before the crisis. Wise, people with only a 0:42:55.480 --> 0:42:58.479 high school degree, that is much less the case, which 0:42:58.520 --> 0:43:00.920 tells you that there's no doubt that it makes a 0:43:00.920 --> 0:43:03.080 big difference whether you can work from home. Well, you 0:43:03.120 --> 0:43:06.240 cannot work from home if you can now, if COVID 0:43:06.320 --> 0:43:09.520 is transforming the economy in terms of the skill requirement, 0:43:09.760 --> 0:43:12.520 a very big part of our labor force may simply 0:43:12.560 --> 0:43:17.720 become unemployable. That's a negative basically supply shock, other supply shocks. 0:43:17.800 --> 0:43:20.399 Think about this, I think you know, there's no doubt 0:43:20.440 --> 0:43:23.279 my mind. You know, one of the things that you know, Joe, 0:43:23.360 --> 0:43:25.359 like I really care a lot about is the US 0:43:25.400 --> 0:43:28.360 trying to trade wark Okay, there is no doubt. Nobody 0:43:28.400 --> 0:43:30.560 wants to say this, but I ain't. In the U 0:43:30.600 --> 0:43:33.720 S China relationship has gotten ten times worse under Biden 0:43:33.760 --> 0:43:36.839 than under Trump, by the way, and there is no doubt. 0:43:36.920 --> 0:43:39.360 I mean, this is why it's actually interesting, Like you 0:43:39.360 --> 0:43:41.800 were thinking, the US county is on fire, the Chinese 0:43:41.880 --> 0:43:45.840 basically is actually struggling the export now in the past, 0:43:46.280 --> 0:43:49.279 including doing two thousand and ten, the two thousand and 0:43:49.320 --> 0:43:51.680 ten two thousand fifting recovery. It's like, well, US was 0:43:51.760 --> 0:43:54.320 growing and then they were sucking all these cheap imports 0:43:54.320 --> 0:43:57.600 from China, therefore kepting basically prices very low. Now there's 0:43:57.640 --> 0:44:02.600 not longly the case, Okay. So basically what worries me 0:44:02.760 --> 0:44:05.680 much more is basically this kind of thing is a 0:44:05.719 --> 0:44:10.160 permanent supply shock that basically shifts the labor supply curve 0:44:10.560 --> 0:44:16.160 basically in and then because of the disruption in global trade, 0:44:16.760 --> 0:44:19.200 a lot of which has become so politicized that I 0:44:19.200 --> 0:44:21.799 don't see we're gonna be able to overcome them anytime soon. 0:44:22.160 --> 0:44:26.000 That is also going to reduce the aggregate supply okay 0:44:26.040 --> 0:44:28.239 for the global economy. So from that point of view, 0:44:28.239 --> 0:44:32.400 a lot of the advantages that were previously associated with 0:44:32.600 --> 0:44:35.239 globalization and so on and so forth, it's just not 0:44:35.280 --> 0:44:37.880 going to help us that much to storm around on 0:44:37.920 --> 0:44:42.400 the inflation front. So I have a dumb question on 0:44:42.440 --> 0:44:45.000 this point. But it's something that, um, I've been thinking 0:44:45.000 --> 0:44:48.120 about because Joe and I have been talking so much 0:44:48.160 --> 0:44:52.560 about the supply issues. So there's this idea of the 0:44:52.600 --> 0:44:56.480 bullwhip effect and that you know, UM, a shortage in 0:44:56.800 --> 0:45:02.360 supplies means that company is going to overorder in the 0:45:02.400 --> 0:45:04.600 next round, and then that leads to sort of over 0:45:04.640 --> 0:45:08.160 capacity and things like that. But I'm wondering, is the 0:45:08.400 --> 0:45:13.680 response to supply issues can that be good for the 0:45:13.719 --> 0:45:18.480 wider economy. For instance, if people decide that China is 0:45:18.520 --> 0:45:22.400 too risky UM for whatever reason, whether it's COVID or 0:45:22.480 --> 0:45:25.919 something like the trade war, and they start building UM 0:45:26.000 --> 0:45:29.400 manufacturing capacity closer to home, like in the US, that 0:45:29.480 --> 0:45:33.440 would seem to potentially be a good thing. You're right, 0:45:33.520 --> 0:45:36.839 I mean, depends for who. But just just just let's 0:45:36.840 --> 0:45:39.600 be very specific. Right, Let's just say right now, you know, 0:45:39.640 --> 0:45:44.400 the US determined to basically shut down the entire semiconductor 0:45:44.760 --> 0:45:48.280 basically production. Okay, trying right, I mean the US decided 0:45:48.320 --> 0:45:49.400 that we don't want to China to be in this 0:45:49.440 --> 0:45:53.040 business all because it's going it threatens the US hegemony 0:45:53.080 --> 0:45:55.120 too much, right, I mean, it's not even at this point, 0:45:55.200 --> 0:45:57.080 it's not even about whether they steal from us, they 0:45:57.080 --> 0:46:00.279 don't steal from us, or they spite from us. Is 0:46:00.280 --> 0:46:02.600 now it's like, well, we don't want them to basically 0:46:02.680 --> 0:46:06.200 threaten our competitive basically our technology gradual morning in the 0:46:06.239 --> 0:46:07.759 space different. We don't want them to be in that 0:46:07.840 --> 0:46:11.680 space period, which means basically, you know what, you have 0:46:11.719 --> 0:46:15.759 to basically build these points somewhere else, right, which means 0:46:15.800 --> 0:46:17.320 some companies that will have to pour a lot of 0:46:17.360 --> 0:46:19.840 money into that, which means, can you imagine in the 0:46:19.840 --> 0:46:23.399 extreme case where everything that we're currently buying from China 0:46:23.560 --> 0:46:26.759 we now have to basically build production capacity somewhere else 0:46:26.800 --> 0:46:28.719 to build the same thing. You don't think that's going 0:46:28.760 --> 0:46:32.360 to be very expensive? I mean sure, I mean you 0:46:32.400 --> 0:46:34.440 know what, you know, you've gotta basically think about that 0:46:34.440 --> 0:46:36.799 from that point of view, which is relative to where 0:46:36.800 --> 0:46:38.879 we are. Because again this comes back to the whole 0:46:38.880 --> 0:46:43.600 inflation story. Okay. The only reason why the stock market 0:46:43.640 --> 0:46:46.400 is trading where is trading right now, the only reason 0:46:46.440 --> 0:46:48.880 why house price has gone up so much when I 0:46:48.920 --> 0:46:51.520 hes talking about today, yesterday, what we're talking about the 0:46:51.600 --> 0:46:55.400 last twenty years, we've seen that massive, okay, rally in 0:46:55.440 --> 0:46:58.720 the stock market, in basically home prices, in wealth in general, 0:46:59.120 --> 0:47:03.640 and that's all because of disinflation as a result of 0:47:03.680 --> 0:47:07.480 globalization that allows center banks around the world to really 0:47:07.520 --> 0:47:11.720 cut interest rates to unbelievably low level. And by cutting 0:47:11.719 --> 0:47:14.279 interest rate the very low level, you are reducing the 0:47:14.400 --> 0:47:18.960 discount rate. Okay, That prices all risk the ass because 0:47:19.000 --> 0:47:23.080 by reducing the future discounted cash flows due to that, 0:47:23.080 --> 0:47:27.520 that's why you've seen this massive as surprise appreciation. Okay. 0:47:27.680 --> 0:47:30.480 So now you're telling me, who cares about that? Who 0:47:30.520 --> 0:47:34.080 cares about the disinflation. Let's embrace a little bit of inflation. 0:47:34.440 --> 0:47:37.799 Then what happens to a surprises you tell me? Okay, 0:47:37.840 --> 0:47:39.920 So from that point of view, you know, the debt, 0:47:40.280 --> 0:47:43.759 the wealth basic explosion of the last twenty years was 0:47:43.840 --> 0:47:47.200 all thanks to you know, globalization, which is about the 0:47:47.239 --> 0:47:50.160 integration of the Chinese economy and the global economy that 0:47:50.280 --> 0:47:53.720 kept global prices low, that allow interest race to globe, 0:47:53.760 --> 0:47:55.640 They allow the kind of you know, you could argue 0:47:55.680 --> 0:47:58.480 with the globalist the elite basically benefits with that because 0:47:58.480 --> 0:48:00.759 they're the ones who's sitting on They almost of the 0:48:00.920 --> 0:48:04.360 wealth that benefits on the price appreciation of these assets. 0:48:04.400 --> 0:48:07.399 But nevertheless, we gotta be very very careful to think 0:48:07.440 --> 0:48:10.560 of That's why Trump, even though he started to trade 0:48:10.600 --> 0:48:14.880 over China, he had a very defined objective. He wanted 0:48:14.960 --> 0:48:18.239 China to play fair. He wanted China to respect US 0:48:18.320 --> 0:48:21.040 intellectual property and right. He wanted you know, all these 0:48:21.040 --> 0:48:24.719 concessions Chinese. And from that point of view, that's why 0:48:24.760 --> 0:48:27.480 I always saw that the first agreement, the Face one Agreement, 0:48:27.480 --> 0:48:29.759 was a very significant agreement. Yeah, I was probably the 0:48:29.760 --> 0:48:31.680 only person on Wall Street to have read the entire 0:48:31.760 --> 0:48:35.040 hundred page document. To me, is still a spectacular agreement. 0:48:35.200 --> 0:48:36.719 I think it should go down to history as one 0:48:36.760 --> 0:48:40.280 of the most important milestones. Unfortunately, Trump lost the election 0:48:40.360 --> 0:48:43.600 and that agreement is not worth nothing, Okay, But the 0:48:43.640 --> 0:48:46.279 point here is that that had a very defined objective 0:48:47.120 --> 0:48:49.560 which could potential should you still put the US in 0:48:49.680 --> 0:48:52.279 China into win win position because of each other. I 0:48:52.320 --> 0:48:54.680 can tell you for the last all throughout two thousand 0:48:54.680 --> 0:48:57.000 and eight nineteen, when I was going to China in 0:48:57.080 --> 0:48:59.680 big corporate offices and government office, people will come up 0:48:59.680 --> 0:49:03.040 to me whispering my ears and no, David Trump is 0:49:03.040 --> 0:49:05.919 a great man. These are Chinese people telling Trumps because 0:49:05.920 --> 0:49:08.720 they're saying that, you know what, reforms had been stalling 0:49:08.760 --> 0:49:11.000 in China for the last ten years under shooting pain 0:49:11.239 --> 0:49:14.759 and thanks to China, thanks to Trump, the pressure is 0:49:14.760 --> 0:49:18.239 on China to once again accelerate reform. And that's what 0:49:18.280 --> 0:49:21.720 Trump did. And this is what people don't realize. Indian 0:49:21.960 --> 0:49:25.640 China agreed to the Phase one agreement because ultimately the 0:49:25.719 --> 0:49:29.360 reformers got back into the driversy because of pressure from Trump. 0:49:29.960 --> 0:49:31.520 And I thought that this was going to lead to 0:49:31.560 --> 0:49:33.840 a basically a happy ending for both sides because the 0:49:33.880 --> 0:49:35.520 name of the day, you know what, that's when we 0:49:35.600 --> 0:49:37.560 that's what we all want me, Tracy, you'll send me 0:49:37.719 --> 0:49:41.720 in Asian. But now with Biden, it's like, wow, gloves 0:49:41.719 --> 0:49:44.120 are off. So from not when we're now moving from 0:49:44.360 --> 0:49:49.799 an economic conflict that was ultimately well defined under the administration, 0:49:49.840 --> 0:49:52.520 that that we were getting close to basically resolving to 0:49:52.680 --> 0:49:56.120 now ideological contests which can never be resolved at this point. 0:49:57.200 --> 0:50:00.400 And that is if you're telling me, if that's you 0:50:00.440 --> 0:50:03.040 want to basically start building all these expensive plans you 0:50:03.200 --> 0:50:05.560 outside China and hire people that got Yeah, you're can 0:50:05.560 --> 0:50:09.320 increase some jobs, but you're gonna create a lot of implation. Well, David, 0:50:09.800 --> 0:50:12.880 like I said at the beginning, it's always interesting speaking 0:50:12.920 --> 0:50:16.920 to you, always provocative and really really appreciate your insight. 0:50:17.160 --> 0:50:20.120 Thanks for coming out an outlot. No, not at all, 0:50:20.200 --> 0:50:23.040 I mean thanks for putting up with me. And you know, 0:50:23.080 --> 0:50:25.279 I love coming on the Bloomberg because I know that 0:50:25.360 --> 0:50:28.759 you guys are willingly to contemplate. You know, there are 0:50:28.800 --> 0:50:31.640 other alternative views out there than the main streams, and 0:50:31.680 --> 0:50:34.319 it's great. Thank you, thank you so much, thank you 0:50:34.360 --> 0:50:48.680 so much. As you know, obviously, uh where to start. 0:50:49.000 --> 0:50:53.279 David has um pretty some you know, out of consensus 0:50:53.320 --> 0:50:55.200 as you you asked a good question, did he feel 0:50:55.200 --> 0:50:58.799 bound previously a sort of out of consensus perspectives on 0:50:58.840 --> 0:51:01.359 a lot of stuff, but you know, on a lot 0:51:01.400 --> 0:51:05.000 of things, like I think his his views are worth taking, 0:51:05.040 --> 0:51:07.719 are worth taking seriously, at least at least several of 0:51:07.760 --> 0:51:11.040 the points are like you know, this is this is 0:51:11.040 --> 0:51:15.560 worth thinking about in debating. I like David wu unbound. Um. 0:51:15.600 --> 0:51:18.359 You know, he was always sort of outspoken um while 0:51:18.400 --> 0:51:20.920 he was a Bank of America Mary Lynch and um. 0:51:21.000 --> 0:51:24.320 He seems to have taken that to a new level 0:51:24.840 --> 0:51:29.040 just then. But so, for instance, his points about China 0:51:29.160 --> 0:51:32.320 kind of decoupling from the global economy, I would totally 0:51:32.360 --> 0:51:38.399 agree that that is an underappreciated um risk or thing 0:51:38.480 --> 0:51:41.040 that is actually happening now in the global market. And 0:51:41.280 --> 0:51:44.480 it reminds me a lot of in early two thousand 0:51:44.560 --> 0:51:49.600 twenty when the COVID outbreak first happened and China basically 0:51:49.640 --> 0:51:53.000 shut down its entire economy, and the US, or at 0:51:53.080 --> 0:51:55.799 least the US markets just ignored it completely and it 0:51:55.920 --> 0:51:58.759 was like, well, we spent the past two or four 0:51:58.840 --> 0:52:04.239 years worrying about the trade war with China, and you know, 0:52:04.400 --> 0:52:06.640 that was all anyone could talk about. And now China 0:52:06.719 --> 0:52:12.480 has basically closed off and US markets are doing absolutely nothing, um, 0:52:12.520 --> 0:52:14.960 not responding to it at all. And eventually they did 0:52:15.040 --> 0:52:17.760 in March, of course, But like I kind of feel 0:52:18.800 --> 0:52:22.160 a similarity with the current situation. It's not going to 0:52:22.280 --> 0:52:25.360 be like as sharp as it was in March but 0:52:25.440 --> 0:52:28.279 I do think at some point people are going to 0:52:28.320 --> 0:52:32.160 wake up to this dynamic. Yeah, no, I I agree, 0:52:32.200 --> 0:52:35.960 And I think your assessment that it has not been 0:52:36.000 --> 0:52:39.000 fully appreciated. I think I saw a tweet from you 0:52:39.120 --> 0:52:41.400 and last night or this morning about some of this 0:52:41.560 --> 0:52:44.440 rolling over in the p M. I s that like, 0:52:44.560 --> 0:52:47.359 just like the sort of like the absolute effect of 0:52:47.520 --> 0:52:52.600 the slowdown and then the ongoing supply chain disruption is 0:52:52.640 --> 0:52:54.960 that that's going to cause. And you know, we joke 0:52:55.040 --> 0:52:57.200 about this, it's not really a joke, but our very 0:52:57.239 --> 0:53:03.080 first episodes we're talking about um COVID as a as 0:53:03.080 --> 0:53:06.200 it supplies shock story. Like the first one we did 0:53:06.800 --> 0:53:10.840 with Dan Wong back in early March or maybe February 0:53:10.880 --> 0:53:13.759 probably February twenty was like, well, what's it gonna mean 0:53:13.800 --> 0:53:17.040 for Apple and so forth? And it's interesting the degree 0:53:17.120 --> 0:53:20.319 to which we just like, oh, it's gonna normalize, and 0:53:20.440 --> 0:53:24.240 you know, container prices are gonna crest and so forth, 0:53:24.600 --> 0:53:26.960 and this idea that well maybe there is like this 0:53:27.080 --> 0:53:29.320 sort of like deeper thing going on that's not about 0:53:29.320 --> 0:53:35.040 the crest. And David's point about how the approaches that 0:53:35.120 --> 0:53:38.440 Asian countries took to completely stamp out the virus in 0:53:38.480 --> 0:53:42.160 the beginning may not be is effective with the UH 0:53:42.480 --> 0:53:48.200 the more transmittable delta variant. Extremely interesting. Yeah. The other 0:53:48.239 --> 0:53:52.920 thing I found interesting was his contrasting of you know, 0:53:53.000 --> 0:53:57.200 a demand side shock or recession versus the supply side, 0:53:57.320 --> 0:54:00.160 and the idea that a lot of the thing that 0:54:00.239 --> 0:54:04.480 policymakers are doing right now end up boosting demand and 0:54:04.520 --> 0:54:08.880 not really solving the supply issues, and so that accelerates inflation. 0:54:09.000 --> 0:54:15.080 That seems like a reasonable risk to me. Yeah, I mean, look, 0:54:15.400 --> 0:54:19.400 I think that I guess the question is, all right, 0:54:19.520 --> 0:54:22.960 we you know, people in all different camps, you know, 0:54:23.000 --> 0:54:27.120 the supply side camp, the more demand focused Kansian camp, 0:54:27.560 --> 0:54:30.400 we all like sort of like point to the same things, right, 0:54:30.480 --> 0:54:33.359 It's like, okay, there's the semiconductors and the containers and 0:54:33.400 --> 0:54:37.320 so forth. The question, I guess is the degree to which, 0:54:37.600 --> 0:54:39.359 I guess we didn't really get into it, but it's 0:54:39.520 --> 0:54:43.680 the degree to which the demand side policies have exacerbated 0:54:44.120 --> 0:54:46.440 the problem. So it's like, Okay, everyone can accept the 0:54:46.440 --> 0:54:48.560 theory supply side shocks and we can see it in 0:54:48.560 --> 0:54:52.880 the data in which categories, but like, you know, alright, 0:54:53.040 --> 0:54:55.520 used cars, was that really because of like stimulus or 0:54:55.560 --> 0:54:59.080 expanded you Y or the chip shortage, etcetera. So there's 0:54:59.120 --> 0:55:02.200 still a question of like waiting of the different factors. 0:55:02.239 --> 0:55:04.880 And look, millions of people did lose their jobs. That 0:55:05.000 --> 0:55:08.520 is a fact. Yeah, yeah, that is very very true. 0:55:08.800 --> 0:55:10.920 Um well, I'm sure this isn't going to be the 0:55:11.000 --> 0:55:14.040 last time we talked about this topic. And of course, 0:55:14.680 --> 0:55:17.080 as you noted in the intro, inflation does tend to 0:55:17.120 --> 0:55:20.799 get people going, especially David Wou. Should we leave it there? 0:55:21.080 --> 0:55:24.719 Let's leave it there. Okay, this has been another episode 0:55:24.760 --> 0:55:27.600 of the Off Thoughts podcast. I'm Tracy Alloway. You can 0:55:27.600 --> 0:55:31.080 follow me on Twitter at Tracy Alloway and I'm Joe 0:55:31.160 --> 0:55:33.879 Why Isn't All? You can follow me on Twitter at 0:55:33.920 --> 0:55:37.040 the Stalwart. Follow our guest David Wu on Twitter. He's 0:55:37.080 --> 0:55:39.960 at David Wu Unbound, although it doesn't look like he's 0:55:39.960 --> 0:55:44.120 ever tweeted, but maybe he'll start. Follow our producer Laura Carlson, 0:55:44.280 --> 0:55:47.360 She's at Laura M. Carlson. Followed the Bloomberg head of 0:55:47.400 --> 0:55:51.399 podcast Francesca Levi at Francesca Today, and check out all 0:55:51.400 --> 0:55:55.040 of our podcasts at Bloomberg under the handle at podcasts. 0:55:55.160 --> 0:56:01.160 Thanks for listening to