WEBVTT - Bloomberg Wall Street Week - Year End Edition 0:00:01.520 --> 0:00:04.720 This is Bloomberg Wall Street Week. We turn our attention 0:00:04.880 --> 0:00:08.600 to the markets this week us CPI members reinforcing concerns 0:00:08.600 --> 0:00:11.800 about inflation. The financial stories that sheep are worth a 0:00:11.840 --> 0:00:14.760 really different reaction to mark. Its more indications of just 0:00:14.960 --> 0:00:17.360 how hot the U. S economy really is. Through the 0:00:17.400 --> 0:00:20.759 eyes of the most influential voices. Larry Summers, the former 0:00:20.800 --> 0:00:23.840 Treachery Secretary, Katherine Keating, CEO of d n Y mom 0:00:23.960 --> 0:00:27.240 Sam's l Sharmon and founder of Equatic Group Investment in 0:00:27.320 --> 0:00:34.880 Bloomberg Wall Street Week with David Weston from Bloomberg Radio. Inflation, Ukraine, Climate, China, 0:00:35.360 --> 0:00:38.480 you name it and investors have faced it. In two. 0:00:38.760 --> 0:00:41.440 This is a special year end version of Bloomberg Wall 0:00:41.440 --> 0:00:57.600 Street Week. I'm David Weston. Whatever else you might say 0:00:57.600 --> 0:01:01.640 about two, you cannot in that call it boring. We 0:01:01.760 --> 0:01:04.280 began the year with the first major ground war in 0:01:04.319 --> 0:01:08.080 Europe since World War Two. I would like to remind 0:01:08.120 --> 0:01:11.440 you of the words that United Kingdom already heard. We 0:01:11.480 --> 0:01:14.240 will not give up, We will not lose. We will 0:01:14.240 --> 0:01:17.520 fight till the end at sea, in the air, we 0:01:17.560 --> 0:01:21.200 will continue fighting for our land, whatever the cost. We 0:01:21.240 --> 0:01:24.360 will fight in the forests, in the fields on the shores, 0:01:24.920 --> 0:01:28.679 in the streets, and inflation rising rapidly to test the 0:01:28.720 --> 0:01:32.560 resolve of central bankers all around the world. It's unconditional. 0:01:32.600 --> 0:01:35.440 Our commitment is we really need to restore price stability, 0:01:35.480 --> 0:01:38.600 get inflation back down to two because without that, we're 0:01:38.600 --> 0:01:41.240 not going to be able to have a sustained period 0:01:41.440 --> 0:01:44.520 of maximum employment. With even the Bank of Japan making 0:01:44.560 --> 0:01:47.840 moves that some took as tightening hints, though Governor Coroda 0:01:48.000 --> 0:01:51.240 denied it, the b o J intends to aim for 0:01:51.360 --> 0:01:55.760 price stability by increasing the sustainability of this monetary easing. 0:01:56.200 --> 0:01:59.360 It's not the beginning of an exit strategy. And we 0:01:59.400 --> 0:02:01.960 are in the year dealing with the aftermath of a 0:02:02.000 --> 0:02:05.520 crypto collapse triggered by one of the biggest financial scandals 0:02:05.520 --> 0:02:09.079 of all time, as ft X is in bankruptcy, billions 0:02:09.080 --> 0:02:12.480 of dollars have gone missing, and founder Samuel Bankman Freed 0:02:12.639 --> 0:02:17.600 faces multiple fraud and conspiracy charges. Not sophisticated at all, 0:02:18.480 --> 0:02:21.639 sophisticated perhaps in the way they were able to sort 0:02:21.639 --> 0:02:24.160 of hide it from people, frankly right in front of 0:02:24.200 --> 0:02:27.280 their eyes. Then there were the risks left over from 0:02:27.320 --> 0:02:31.040 the year before, like climate change. We're not in a 0:02:31.040 --> 0:02:35.120 good track right now. The world. It's not serious enough 0:02:35.160 --> 0:02:38.520 about reducing our missions fast enough, and we've had to 0:02:38.560 --> 0:02:41.480 deal with continuing effects of COVID as China pursued a 0:02:41.600 --> 0:02:46.040 zero COVID policy that hurt its economy. What does euro 0:02:46.160 --> 0:02:51.160 COVID policy mean for recession and inflation? And unfortunately it 0:02:51.200 --> 0:02:58.120 means stagflation. Not surprisingly, the markets reacted to all this 0:02:58.320 --> 0:03:01.519 risk with some trepidation, with the stock market moving into 0:03:01.600 --> 0:03:04.440 bear territory. The SMP five at one point was off 0:03:04.480 --> 0:03:07.400 some twenty percent for the year, The NAZAC down over, 0:03:08.680 --> 0:03:11.480 while the yield on the tenure climbed from under two 0:03:11.480 --> 0:03:14.079 percent at the start of the year to hover around 0:03:14.080 --> 0:03:17.280 three point five percent by year's end. Through the ups 0:03:17.320 --> 0:03:19.640 and downs of the year, Wall Street Week invited the 0:03:19.680 --> 0:03:22.880 most experienced experts and investors to rise above the day 0:03:22.880 --> 0:03:25.080 to day and week to week and give us a 0:03:25.120 --> 0:03:28.200 broader perspective on where we are and where we're likely going. 0:03:29.280 --> 0:03:31.920 We begin this year interview with the smart investor, and 0:03:31.919 --> 0:03:34.239 that's the person we're trying to speak to and speak 0:03:34.320 --> 0:03:37.480 with every week, starting with one of the most distinctive 0:03:37.480 --> 0:03:40.119 and successful that there is, Sam's ll of Equity Group 0:03:40.240 --> 0:03:43.560 Investments who told us what tighter money meant for deal flow, 0:03:43.760 --> 0:03:48.360 at least for those with the cash. We're seeing more 0:03:48.440 --> 0:03:55.240 deal flow. We're seeing more situations where companies are having 0:03:55.480 --> 0:04:01.320 difficulty figuring out what to do. Uh. We're seeing situations 0:04:01.320 --> 0:04:07.440 where nine months ago, financing a transaction of X y 0:04:07.560 --> 0:04:11.280 Z size was nothing. You know, it was you know, 0:04:11.880 --> 0:04:17.200 as you said, money was free. Uh, what's changed dramatically? 0:04:17.240 --> 0:04:21.039 I mean, think about the impact of the doubling of 0:04:21.080 --> 0:04:24.840 interest rates in eight weeks double you know, it's just 0:04:25.080 --> 0:04:29.200 eight weeks earlier. Uh, interest rates were you know, two 0:04:29.240 --> 0:04:31.120 and a half to three, and now they're five and 0:04:31.160 --> 0:04:35.840 a half to six. That's an enormous uh change. And 0:04:36.040 --> 0:04:40.279 and and it's gonna slow down everybody's activity. It's gonna 0:04:40.440 --> 0:04:45.720 for sure, uh impact getting deals done. But in our 0:04:45.800 --> 0:04:51.400 particular case, because frankly, I've I've oftentime told the world 0:04:51.440 --> 0:04:55.440 that you know, when I'm liquid, the stock market can't 0:04:55.440 --> 0:04:58.320 go down. It only goes down when I'm ire liquid. 0:04:59.160 --> 0:05:01.480 And here I am sitting there with a level of 0:05:01.520 --> 0:05:06.400 liquidity I've never experienced in my life. Because my focus 0:05:06.800 --> 0:05:09.000 for the last three and a half years has been 0:05:09.600 --> 0:05:14.200 nothing more important than liquidity. So you've got a significant 0:05:14.240 --> 0:05:16.239 deal flow. If anything, it's bigger than it was before. 0:05:16.400 --> 0:05:18.680 What about the quality of deals? Are they different from 0:05:18.680 --> 0:05:21.560 what they were, for example, preach pandemic. I think they 0:05:21.600 --> 0:05:26.440 are because I think they're a little more realistic. I 0:05:26.480 --> 0:05:33.000 think in pre pandemic when money was free, Uh, they 0:05:33.040 --> 0:05:36.760 were transaction. I mean, the whole spack market was. You know, 0:05:37.200 --> 0:05:41.320 we did its back and chose not to take it 0:05:41.400 --> 0:05:44.400 to the next level because when we did this back, 0:05:45.200 --> 0:05:49.120 spac seemed like a very interesting way to in effect 0:05:49.240 --> 0:05:55.480 monetize opportunity. Uh, it very quickly became a highly speculative 0:05:56.120 --> 0:06:02.120 scenario dependent on preposterous valuation shans that ultimately led to 0:06:02.160 --> 0:06:05.800 the crash of the whole spack market. Uh. You know, 0:06:06.680 --> 0:06:10.320 the world has changed a lot since then, and and 0:06:10.400 --> 0:06:15.160 the change is basically modifying what you can do. On 0:06:15.200 --> 0:06:20.280 the other hand, is always demand for capital. Sam's el 0:06:20.360 --> 0:06:23.120 sees an advantage to his liquidity as rates go up. 0:06:23.440 --> 0:06:26.680 Steve Rattner's will It Advisors manages the personal and philanthropic 0:06:26.680 --> 0:06:29.320 funds from Michael Bloomberg. He's the man who founded and 0:06:29.400 --> 0:06:32.400 owns most of the shares in our parent company Steve 0:06:32.520 --> 0:06:35.080 sees some of the same challenges and rising rates, but 0:06:35.200 --> 0:06:38.200 also keeps an eye on the regulatory environment. With a 0:06:38.240 --> 0:06:41.800 Biden administration committed to more regulation, even if it hasn't 0:06:41.839 --> 0:06:46.479 quite gotten there yet, you may see more activity by 0:06:46.520 --> 0:06:49.400 the regulators because they might feel like the clock is 0:06:49.440 --> 0:06:51.560 running out on their tournament office or whatever, and they 0:06:51.600 --> 0:06:53.880 might want to get stuff done. I've been a little 0:06:53.960 --> 0:06:57.479 surprised in that I would expect a very robust regulatory 0:06:57.520 --> 0:07:00.200 environment out of this administration. They have appointed people too, 0:07:00.240 --> 0:07:03.360 many of the top regulatory positions who are very much 0:07:03.400 --> 0:07:05.840 pro regulation, and you can see it's starting to happen 0:07:05.880 --> 0:07:08.360 at the SEC in places like that. So I do 0:07:08.400 --> 0:07:10.320 think you're going to see a lot of regulatory activity 0:07:10.320 --> 0:07:12.320 over the next two years, regardless of what happens in 0:07:12.360 --> 0:07:14.720 the election. One of the things that this administration said 0:07:14.720 --> 0:07:16.400 they really want to go after, if I can put 0:07:16.440 --> 0:07:19.240 it that way, private equity, using things like Clayton next 0:07:19.280 --> 0:07:21.840 Section eight and intellecting directors, things like that. They think 0:07:21.840 --> 0:07:24.440 that there's some and a trust things going on. There 0:07:24.760 --> 0:07:26.720 is there a chilling effect on private equity right now 0:07:26.720 --> 0:07:29.640 because they also have other things. There are headwinds for 0:07:29.720 --> 0:07:32.120 them well The biggest headwind for private equity at the 0:07:32.160 --> 0:07:34.320 moment is the fact that in an environment like this, 0:07:34.880 --> 0:07:37.160 deals tend to slow down or even stop. And you 0:07:37.160 --> 0:07:38.680 can see if you look at the overall M and 0:07:38.720 --> 0:07:41.000 A volumes, how how much slower it is now than 0:07:41.040 --> 0:07:43.800 it was because the sellers all want yesterday's prices, the 0:07:43.800 --> 0:07:46.480 buyers want to pay today or tomorrow's prices. So you 0:07:46.560 --> 0:07:50.320 have a disconnect there. Um. I think I think the 0:07:50.360 --> 0:07:53.119 problem in in general with mergers over the last really 0:07:53.120 --> 0:07:55.800 twenty years or more has been a pretty benign anti 0:07:55.840 --> 0:07:58.160 trust environment. And when I was in when I was 0:07:58.200 --> 0:07:59.920 in the M and A business, clients would come in 0:08:00.000 --> 0:08:01.680 and immediately they want to talk about which of their 0:08:01.720 --> 0:08:05.040 competitors they could buy, and that game I think in 0:08:05.120 --> 0:08:08.040 this environment is starting to wear out, and that and 0:08:08.040 --> 0:08:10.040 and so that relates a bit to private equity in 0:08:10.120 --> 0:08:12.760 terms of their portfolio companies. But I don't think private 0:08:12.800 --> 0:08:17.040 equity in and of itself is an anitrust problem. Steve 0:08:17.120 --> 0:08:21.320 Rattner manages a very large and very diversified portfolio of investments, 0:08:21.400 --> 0:08:25.040 but Jeff Blause, CEO of Related Companies, focuses specifically on 0:08:25.200 --> 0:08:27.840 real estate, running one of the largest firms in the 0:08:27.920 --> 0:08:30.720 United States. He came on Wall Street Week to explain 0:08:30.760 --> 0:08:33.920 what is happening in commercial real estate in the aftermath 0:08:34.040 --> 0:08:38.120 of the pandemic. What we have seen is a real 0:08:38.320 --> 0:08:44.760 dispersion in values between older buildings and brand new buildings. UM. 0:08:44.800 --> 0:08:47.319 And it's not just new, it's new with the right features, 0:08:47.360 --> 0:08:50.640 the right amenities that tenants are looking for today. UM. 0:08:50.679 --> 0:08:54.880 So we're seeing more and more corporations thinking about how 0:08:54.880 --> 0:08:57.360 do they get people back to their office and thinking 0:08:57.360 --> 0:09:02.120 about using the physical space as attraction to bring people back. 0:09:02.480 --> 0:09:04.960 But truthfully, people don't want to go back to old 0:09:05.120 --> 0:09:08.200 kind of quiet offices that are dark and have bad 0:09:08.200 --> 0:09:11.320 air circulation and long weights and the elevators and no amenities. 0:09:11.880 --> 0:09:15.439 So what corporations are doing is investing in their office 0:09:15.440 --> 0:09:19.240 space not for occupancy, but for talent attraction and retention. 0:09:19.760 --> 0:09:22.840 And I think that's where you're really seeing, uh, the 0:09:22.960 --> 0:09:25.720 A buildings and the new buildings that are focused on this, 0:09:25.800 --> 0:09:27.640 that have the right amenities, that have the right H, 0:09:27.760 --> 0:09:31.439 B A C circulation, that have hospitality type services, that 0:09:31.520 --> 0:09:34.360 have great air and light um and the right type 0:09:34.360 --> 0:09:37.400 of build out. The build out in office space is 0:09:37.480 --> 0:09:40.520 changing tremendously where we used to see kind of the 0:09:40.559 --> 0:09:43.440 old mad Max version of a build out with you know, 0:09:43.600 --> 0:09:48.400 private offices on the exterior wall and assistance offices or 0:09:48.520 --> 0:09:52.840 cubes inside. That's really not the way office is built today. 0:09:53.160 --> 0:09:58.200 We're seeing much more collaboration space, teeming space, meeting space, 0:09:58.640 --> 0:10:01.680 food service tables around food where people are using for 0:10:01.760 --> 0:10:05.520 gathering and working as opposed to private offices. So this 0:10:05.559 --> 0:10:09.160 type of office of the future, UM, we think can 0:10:09.200 --> 0:10:12.160 be successful and is successful. The data is there today, 0:10:12.720 --> 0:10:16.640 UM for these new buildings. So we compared brand new 0:10:16.640 --> 0:10:20.640 buildings across markets in the United States, UM, not just 0:10:20.760 --> 0:10:23.760 here in New York, and you look at new modern 0:10:23.800 --> 0:10:26.600 buildings with the right features, the right amenities, and the 0:10:26.679 --> 0:10:31.400 demand for those buildings is tremendous. That was Jeff blau 0:10:31.520 --> 0:10:36.200 CEO of Related Companies. Coming up, we'll take a look 0:10:36.240 --> 0:10:39.920 at what three may have in store for Global Wall Street. 0:10:42.040 --> 0:10:44.760 This is a special year end version of Wall Street 0:10:44.800 --> 0:10:49.560 Week on Bloomberg from New York. Another up day on 0:10:49.600 --> 0:10:53.079 Wall Street. In fact, records to London, UK businesses are 0:10:53.160 --> 0:10:56.199 feeding the effects of part prices to home. The Hanks 0:10:56.240 --> 0:10:59.480 sang down about one point three right now twenty four 0:10:59.600 --> 0:11:03.800 seven Business and market news that expands your worldviewmail always 0:11:03.840 --> 0:11:06.079 nice to see you, French Finance Minister. I'm much more 0:11:06.080 --> 0:11:09.280 concerned about how things slow out of China. Bloomberg Radio, 0:11:09.480 --> 0:11:13.360 the Bloomberg Business App, and Bloomberg Radio dot Com. Bloomberg 0:11:13.640 --> 0:11:20.880 The world is listening. This is Bloomberg Wall Street Week 0:11:21.120 --> 0:11:25.079 with David Weston from Bloomberg Radio. This is a special 0:11:25.200 --> 0:11:27.520 year in the edition of Wall Street Week. I'm David Weston. 0:11:27.840 --> 0:11:30.440 China has loomed large once again this year in the 0:11:30.480 --> 0:11:33.920 thinking of investors as it is pursued a zero COVID policy, 0:11:34.000 --> 0:11:37.120 triggering public resistance to the shutdowns that followed. It is 0:11:37.160 --> 0:11:40.680 seen its growth slow, raising questions for the global economy, 0:11:41.000 --> 0:11:43.040 and in the middle of it all, Presidents she sought 0:11:43.040 --> 0:11:46.680 and god an historic third term at the twentieth Party Congress. 0:11:46.920 --> 0:11:49.520 Debra Layer, vice chair of the Pulse and Institute and 0:11:49.559 --> 0:11:52.840 CEO of Edelman Advisory, has been a pioneer in understanding 0:11:52.920 --> 0:11:56.319 Chinese economic policy since her days in the Trade Representatives 0:11:56.360 --> 0:11:59.800 Office negotiating China's accession to the w t O, and 0:12:00.040 --> 0:12:02.160 she talked to Wall Street Week at the time of 0:12:02.200 --> 0:12:04.920 the Party Congress about the significance of it for us all. 0:12:06.280 --> 0:12:08.880 We are all focused on President g and what's going 0:12:08.960 --> 0:12:11.719 on over in Beijing this week. Give us your sense 0:12:11.760 --> 0:12:13.319 about what we're learning. It strikes me that one of 0:12:13.360 --> 0:12:16.800 the biggest challenges he has is the economy and growing 0:12:16.800 --> 0:12:19.080 the economy. And yet I'm not sure we're hearing much 0:12:19.120 --> 0:12:21.360 about his economic policy. I hear a lot about politics, 0:12:21.440 --> 0:12:25.240 a lot about security, that's right. I mean she Didn'ping 0:12:25.360 --> 0:12:28.120 gave his all important work report at the beginning of 0:12:28.160 --> 0:12:31.640 the planeum, and it gave up a few previews of 0:12:31.720 --> 0:12:33.719 how he's going to start to look at the economy. 0:12:33.920 --> 0:12:37.839 One of the things that he's emphasizing is common prosperity. 0:12:37.920 --> 0:12:42.040 His slogan about how he brings greater equality. Uh. One 0:12:42.080 --> 0:12:45.880 of the things that he's looking at is also how 0:12:45.920 --> 0:12:48.240 the party can continue to play an important role in 0:12:48.240 --> 0:12:51.400 the economy. And also he did give reassurance to foreign 0:12:51.840 --> 0:12:54.680 companies that they will continue to push for market opening 0:12:54.679 --> 0:12:58.559 in key areas. So will we get a sense from 0:12:58.600 --> 0:13:01.040 the personnel that sur ound him of where it might 0:13:01.040 --> 0:13:03.880 be headed, Because as I understand it, eventually we will 0:13:03.880 --> 0:13:06.640 see him come out from behind the curtain. And we 0:13:06.720 --> 0:13:09.560 assume everybody assumes that he will get his third term, 0:13:09.600 --> 0:13:11.880 but there's gonna be a critical question of who's with 0:13:11.960 --> 0:13:15.520 him and he comes out absolutely the important thing. And 0:13:15.559 --> 0:13:18.200 we're all watching for this weekend when the new party 0:13:18.280 --> 0:13:20.679 lineup is going to be announced. There's a lot of 0:13:20.840 --> 0:13:24.040 rumors starting to fly around, although not as many as 0:13:24.040 --> 0:13:27.800 there usually are, But it's a big guessing game because 0:13:27.840 --> 0:13:30.560 that will give us really our first clue into what 0:13:30.880 --> 0:13:32.920 the third term is going to look like. And I 0:13:32.960 --> 0:13:35.920 think there are three important things to watch. One is 0:13:36.000 --> 0:13:38.960 going to be what happens to Lee Ka Chung, the 0:13:39.040 --> 0:13:43.239 current premiere. Does he continue to stay on the Standing Committee. 0:13:43.640 --> 0:13:46.000 He's termed out of staying on as the premiere, but 0:13:46.040 --> 0:13:48.200 could they make him the number two and head of 0:13:48.200 --> 0:13:52.000 the National People's Congress to who will be in the 0:13:52.040 --> 0:13:56.880 lineup to then take the premiere position, And the two 0:13:57.040 --> 0:14:00.440 leading candidates appear to be Wang Yang, who's viewed as 0:14:00.480 --> 0:14:04.920 being more open on the economic issues, and Wang Hunning, 0:14:05.040 --> 0:14:08.360 who really isn't ideologue. And the third to watch is 0:14:08.400 --> 0:14:11.520 what happens to Leoja, who is currently the Vice Premier, 0:14:11.800 --> 0:14:15.040 who's in charge of the economy and finance. Does he 0:14:15.160 --> 0:14:20.200 stay He has good relations with many foreign firms or 0:14:20.640 --> 0:14:24.120 who really comes in to take his portfolio. They were 0:14:24.160 --> 0:14:25.840 one of the things that we watch in the West, 0:14:25.880 --> 0:14:27.600 and we may be right or wrong, and watching it 0:14:27.680 --> 0:14:29.760 is the extent to which the markets in some way 0:14:29.840 --> 0:14:33.200 play a substantial role in economic policy over there. It 0:14:33.240 --> 0:14:36.720 strikes me that it's possible to interpret presidency thus far 0:14:36.880 --> 0:14:38.800 is moving somewhat away from the markets. A lot of 0:14:38.840 --> 0:14:41.960 what do you emphasis right now is ideology, and I 0:14:42.000 --> 0:14:44.480 think it's what he came out of more than perhaps 0:14:44.520 --> 0:14:47.720 we've seen in the past. Absolutely, we're seeing much more 0:14:47.800 --> 0:14:52.240 emphasis on ideology um under Shi Jimping, and if we 0:14:52.360 --> 0:14:55.560 look back under John Zamin, Jack Zaman was saying the 0:14:55.680 --> 0:15:00.080 party is big enough to include business. She takes it 0:15:00.160 --> 0:15:03.360 in a different way. He says the party is all 0:15:03.480 --> 0:15:07.800 encompassing and it should be forced into business, and so 0:15:08.120 --> 0:15:11.320 ideology is playing a much bigger role. Also, we need 0:15:11.400 --> 0:15:14.800 to keep an eye on how she's favorite slogan, common 0:15:14.880 --> 0:15:19.440 prosperity is going to be implemented. China surprisingly is actually 0:15:19.680 --> 0:15:23.760 much more unequal than the United States, and one of 0:15:23.840 --> 0:15:25.800 the things that he's trying to do through this common 0:15:25.880 --> 0:15:29.720 prosperity UH slogan is saying there should be a cap 0:15:29.800 --> 0:15:33.840 on executive salaries. We should be looking at big companies, 0:15:33.920 --> 0:15:37.560 particularly the private sector, giving back to the community, and 0:15:38.640 --> 0:15:41.000 how that's going to be implemented at the same time 0:15:41.080 --> 0:15:43.240 when he's trying to grow the economy, when he's trying 0:15:43.240 --> 0:15:46.520 to encourage entrepreneurship and create jobs. Is going to be 0:15:46.600 --> 0:15:49.240 a very tough thing for him to balance. Well, I 0:15:49.320 --> 0:15:51.880 was going to ask exactly about that debora, because through history, 0:15:52.000 --> 0:15:53.800 a lot of people have said we should have a 0:15:53.960 --> 0:15:57.520 more equality, less inequality, whether it's income or wealth, but 0:15:57.680 --> 0:16:00.080 a lot of attempts to get that done. Actually you 0:16:00.200 --> 0:16:03.200 get in the way of growth overall. Absolutely. I mean 0:16:03.280 --> 0:16:07.040 in China, and we've talked about this before, the overwhelming 0:16:07.200 --> 0:16:10.680 majority of Chinese companies or small and medium sized enterprises, 0:16:10.760 --> 0:16:14.320 it's up into the nineties, they are responsible for about 0:16:14.360 --> 0:16:18.840 six of China's growth and about six of john creation. 0:16:19.280 --> 0:16:21.560 And so if you can't create the right atmosphere for 0:16:21.680 --> 0:16:24.760 them to grow, you're going to have a significant impact 0:16:24.840 --> 0:16:27.800 on China's ability. And right now she's facing a lot 0:16:27.920 --> 0:16:30.560 of headwinds when it comes to the economy. He's got 0:16:30.680 --> 0:16:33.040 issues still to deal with with the real estate market. 0:16:33.080 --> 0:16:35.840 It's one of the only places that Chinese people can invest, 0:16:36.400 --> 0:16:39.120 and obviously housing prices are going down at the moment, 0:16:39.800 --> 0:16:42.760 the world is facing a global recession, and she is 0:16:42.800 --> 0:16:47.560 still very dependent on exports to grow the economy. He 0:16:47.720 --> 0:16:52.240 needs to find a way to unlock consumer spending, and 0:16:52.360 --> 0:16:55.120 that's very hard to do when you don't have confidence 0:16:55.240 --> 0:16:57.880 in the path of the economy, and particularly when you 0:16:57.920 --> 0:17:00.680 don't have the kind of social safety nets in place, 0:17:00.800 --> 0:17:04.480 particularly around health, that make people feel comfortable enough and 0:17:04.560 --> 0:17:07.080 have confidence to spend their money. If you put in 0:17:07.160 --> 0:17:10.560 a longer course of Chinese history, because you've been really 0:17:10.880 --> 0:17:12.719 very active in China for a good long time. Now, 0:17:13.200 --> 0:17:15.280 are we seeing something of a turn back toward male 0:17:15.359 --> 0:17:19.840 and away from Duncho Ping. Well, certainly we're seeing a 0:17:19.960 --> 0:17:23.320 difference in the way that she is governing the economy. 0:17:23.440 --> 0:17:26.600 You know, the Chinese Communist Party has about ninety three 0:17:26.680 --> 0:17:30.240 million members, and to put that in context, that's ten 0:17:30.359 --> 0:17:34.320 million more people than the whole population of Germany. And 0:17:34.440 --> 0:17:36.800 he'd used this as the way to govern the economy, 0:17:37.200 --> 0:17:41.320 and so therefore the party is involved in every aspect. 0:17:42.320 --> 0:17:45.520 As we look at this new leadership coming in, watching 0:17:45.720 --> 0:17:48.720 the ideology versus the technocrats is going to be really 0:17:48.760 --> 0:17:51.880 important and give us a sense of what the government 0:17:52.119 --> 0:17:55.560 appointees which will take place next March, will look like 0:17:56.040 --> 0:17:59.160 and how they're going to approach the economy. Is there 0:17:59.200 --> 0:18:01.800 going to be this this on a more socialist economy 0:18:02.320 --> 0:18:04.240 or are they going to be more emphasis in what 0:18:04.359 --> 0:18:08.040 they call the socialist market economy. The fact that they 0:18:08.080 --> 0:18:11.600 didn't put out the GDP numbers on time, I think 0:18:11.720 --> 0:18:16.480 is very disconcerting. For the world's second largest economy to 0:18:16.640 --> 0:18:22.560 place politics over just the standard transparency and publication of 0:18:22.720 --> 0:18:28.240 data is not an encouraging sign. Debra, looking into your 0:18:28.280 --> 0:18:30.119 crystal ball there, what do you think this might mean 0:18:30.200 --> 0:18:32.399 for US China relations? I mean, it strikes me at 0:18:32.480 --> 0:18:34.719 least that going back five or ten years, a lot 0:18:34.800 --> 0:18:37.680 of it was about economics, it was about trade, things 0:18:37.720 --> 0:18:41.200 like that, increasingly from Beijing but also from Washington. When 0:18:41.240 --> 0:18:44.080 they talk about one another, it's about geopolitics, it's about Taiwan, 0:18:44.160 --> 0:18:47.399 it's about Russia, it's about security in the Asia area. 0:18:48.640 --> 0:18:52.639 We national security definitely dominates the headlines, and there are 0:18:52.760 --> 0:18:55.639 some very serious issues that we're dealing with. I was 0:18:55.760 --> 0:18:57.840 just in the UK and they were telling me Taiwan 0:18:57.920 --> 0:19:00.080 didn't even used to really be on their agen to 0:19:00.240 --> 0:19:03.919 and now they're spending about se at their time. These 0:19:03.960 --> 0:19:07.000 are the China experts focused on this, So those are 0:19:07.080 --> 0:19:10.920 absolutely definite important issues to watch. But I think the 0:19:11.040 --> 0:19:13.159 real story here is going to be what happens with 0:19:13.240 --> 0:19:17.800 the economic and trade relationship. Traditionally it's been the foundation 0:19:17.920 --> 0:19:21.240 of the relationship and it's created the people, the people 0:19:21.359 --> 0:19:25.880 ties and built some levels of trust. Without these exchanges, 0:19:26.520 --> 0:19:30.200 with the Western companies reconsidering both because of the politics, 0:19:30.320 --> 0:19:32.760 but also because of the state of the Chinese economy 0:19:32.800 --> 0:19:36.160 and the complications that have come with dealing with COVID zero, 0:19:36.600 --> 0:19:40.720 they're reconsidering their strategies and not having that level of 0:19:40.800 --> 0:19:43.280 trust I think really is going to have an impact 0:19:43.600 --> 0:19:45.639 and ensure that they're going to continue to be fraught 0:19:45.640 --> 0:19:49.800 relations between the United States and China. That was Debora 0:19:49.840 --> 0:19:53.080 Lair of the Pulse and Institute and Edelman Global Advisory. 0:19:55.000 --> 0:19:57.359 Coming up, we turned to the subject of inflation and 0:19:57.440 --> 0:19:59.960 our special contribute to Law Street Week Larry Summers of 0:20:00.040 --> 0:20:03.280 Harvard who got it early and got it right. That's 0:20:03.359 --> 0:20:08.480 next on Wall Street Week on Bloomberg. This is Bloomberg 0:20:08.520 --> 0:20:12.879 Wall Street Week with David Weston from Bloomberg Radio. This 0:20:13.040 --> 0:20:15.640 is our year end edition of Wall Street Week. I'm 0:20:15.720 --> 0:20:18.960 David Weston, special contributor to Larry Summers of Harvard. Has 0:20:19.000 --> 0:20:21.800 been our Wall Street Week mused throughout the year on 0:20:21.920 --> 0:20:24.920 a range of subjects, but just as two will go 0:20:25.000 --> 0:20:28.200 down as the year inflation came to stay, Larry will 0:20:28.200 --> 0:20:30.680 be remembered as one of the leading economists who saw 0:20:30.760 --> 0:20:33.560 it early and kept insisting something needed to be done. 0:20:33.960 --> 0:20:36.160 Here's Larry in Wall Street Week way back in February. 0:20:38.119 --> 0:20:42.360 I don't understand why people keep being so surprised when 0:20:42.440 --> 0:20:49.040 there's evidence that inflation is entrenched. This confirms, Uh, just 0:20:49.280 --> 0:20:53.200 how far behind the curve the FED has gotten. And 0:20:53.440 --> 0:20:56.680 this along with the fact that it now looks like 0:20:56.840 --> 0:21:01.040 build back batter is in trouble. UH couldn't firms what 0:21:01.240 --> 0:21:05.399 a serious error the excessive stimulus of last March was. 0:21:05.960 --> 0:21:08.600 Here's what I think the FED should do. I think 0:21:08.640 --> 0:21:14.280 the FED should have a special meeting right now to 0:21:14.680 --> 0:21:21.720 end quee. It is nothing short of preposterous that in 0:21:21.760 --> 0:21:26.560 an economy was seven and a half percent inflation in 0:21:26.640 --> 0:21:30.800 an economy with the tightest labor markets we've seen in 0:21:31.320 --> 0:21:36.520 more than two generations that the Central Bank is still 0:21:36.840 --> 0:21:41.360 as we speak, growing its bound sheet, and I think 0:21:41.440 --> 0:21:47.000 the FED could show that at last it really gets 0:21:47.080 --> 0:21:52.720 it by having a special meeting for the purpose of 0:21:53.440 --> 0:21:59.120 simply ending quee. And by May we started to see 0:21:59.160 --> 0:22:02.000 the results. The FED moved towards a series of seventy 0:22:02.240 --> 0:22:05.080 basis point rate hikes, and we asked Laurie whether that 0:22:05.280 --> 0:22:09.280 was enough. Do you think that they really have made 0:22:09.359 --> 0:22:13.120 a turn towards really regaining their credibility when it comes 0:22:13.160 --> 0:22:17.080 to inflation. This is certainly the most dramatic action UH 0:22:17.640 --> 0:22:22.080 they've taken, UH, both the fact of a basis point 0:22:22.240 --> 0:22:25.800 move and what was clearly a calling of an audible 0:22:26.640 --> 0:22:31.520 just before the play at at the meeting, and I 0:22:31.640 --> 0:22:37.040 think that was welcome and appropriate. I still think that 0:22:37.320 --> 0:22:43.960 the Fed and most market participants are underestimating the gravity 0:22:44.359 --> 0:22:49.600 of our situation. UH. The FED moved its forecast by 0:22:49.720 --> 0:22:55.320 an epic amount, both up on inflation and down on 0:22:56.320 --> 0:23:00.399 the economy. But their current view that they're going to 0:23:00.480 --> 0:23:04.520 get to two and a half percent UH inflation or 0:23:04.720 --> 0:23:11.719 below with unemployment just above four strikes me as an 0:23:12.200 --> 0:23:19.480 optimistic tail outcome, not a central tendency in a forecast. 0:23:20.200 --> 0:23:25.400 I think a better judgment is that there's no reduction 0:23:25.680 --> 0:23:33.879 to UH normality without a significant increase in unemployment of 0:23:34.160 --> 0:23:39.800 perhaps two percentage points or more at some point UH 0:23:40.320 --> 0:23:44.640 down the road. And when Chair Pale suggested in July 0:23:45.000 --> 0:23:47.720 that maybe the Fed was already at the neutral rate, 0:23:48.200 --> 0:23:53.080 Larry did not mince words. I think J. Powell said 0:23:53.119 --> 0:23:59.240 things that, to be blunts, were analytically indefensible. He claimed 0:23:59.320 --> 0:24:03.280 twice in his press conference that the Fed was now 0:24:03.520 --> 0:24:08.280 at the neutral UH interest rate, calling it two and 0:24:08.359 --> 0:24:12.600 a half. It's elementary that the level of the neutral 0:24:12.680 --> 0:24:17.000 interest rate depends upon the inflation rate. We've got on 0:24:17.560 --> 0:24:21.119 the most quoted measure, a nine point one percent inflation 0:24:21.280 --> 0:24:25.760 measure he extrapolated off core or something it's four or 0:24:25.840 --> 0:24:33.040