Speaker 1: This is Bloomberg Wall Street Week. What's the state of
Speaker 1: corporate governance? The deficit is a real issue. The US
Speaker 1: economy continues to send mixed signals, the financial stories that
Speaker 1: keep our world fed, action to con concerns over dollar liquidity,
Speaker 1: and encouraging China data. The five hundred wealthiest people in
Speaker 1: the world. Through the eyes of the most influential voices
Speaker 1: Larry Summers, the former Treasury Secretary, star Ward, CEO Kevin Johnson,
Speaker 1: SEC Chairman Jay Clayton. Bloomberg wool Street Week with David
Speaker 1: Weston from Bloomberg Radio. Big Brother is doing more than
Speaker 1: just watching. It's spending and regulating and providing liquidity, and
Speaker 1: it's not going away anytime soon. This is Bloomberg Wall
Speaker 1: Street Week. I'm David Weston, I'm from the government, and
Speaker 1: I'm here to help you. Well. That used to be
Speaker 1: a sort of sarcastic joke, but this week Global Wall
Speaker 1: Street got a taste of just how much the government
Speaker 1: is intertwined with our markets and with our businesses. From
Speaker 1: Fed chair j Powell and Treasury Secretary Janet Yellen, reassuring
Speaker 1: markets they'll continue to be there for them. So at
Speaker 1: the FED, we will continue to provide the economy the
Speaker 1: support that it needs for as long as it takes.
Speaker 1: We should be clear eye that that's the whole we're
Speaker 1: digging out of. Two big tech company CEO is being
Speaker 1: taken to the woodshed once again by Congress to state
Speaker 1: governments deciding day today how open their economies will be.
Speaker 1: So it's no surprise that the markets this week basically
Speaker 1: paid attention to the FED and prospects for more spending
Speaker 1: with or without taxes, and prospects for reopening. How does
Speaker 1: an investor make decisions in this world so dependent on
Speaker 1: political risk? We asked our roundtable of Jillian Tet, chair
Speaker 1: of the editorial board and editor at large US at
Speaker 1: the Financial Times, Peter Krauss, chairman and founder of Aperture Investors. Well, David,
Speaker 1: that is a terrific question, because I think a lot
Speaker 1: of investors right now and ordinary people are desperately keen
Speaker 1: that when the pandemic ends, they'll go back to normality,
Speaker 1: and they assume that normality might mean an economic recovery
Speaker 1: and some kind of political peace. We'll go back to
Speaker 1: the kind of analysis of the economy that everyone's tool
Speaker 1: about an NBA and things like that. But I think
Speaker 1: that assuming that political risk is going to disappear after
Speaker 1: the pandemic is probably a big mistake. Because we've seen
Speaker 1: the government intervene in the economy to an astonishing degree
Speaker 1: during the pandemic. The question of how it does or
Speaker 1: does not roll that back could prove to be very
Speaker 1: politically divisive. So, Peter, what about as an investor? As
Speaker 1: I say, this may be oversimplifying it, but it was
Speaker 1: basically be in the market, you'll do fine because the
Speaker 1: government's going to bail you out. Now we're in a
Speaker 1: different world as we look into recovery. How does an
Speaker 1: investor take an account what the Fed may or may
Speaker 1: not do. J Pale seems to saying, just let them
Speaker 1: play right now when it comes to the tenure yield
Speaker 1: and then we have more spending coming out of Congress,
Speaker 1: how does an investor take that on into account or
Speaker 1: do they Well? I want to build on what Jillian said,
Speaker 1: because I think it's a very it's a very significant
Speaker 1: probability that the voter or the populace decides that the
Speaker 1: positive impact of government stimulus in the size and scale
Speaker 1: that it has taken over the last eighteen months is
Speaker 1: a positive and that trying to redistribute wealth into a
Speaker 1: broader base might actually be a good thing. The economy stronger,
Speaker 1: the markets up, interest rates haven't risen that much, Inflation
Speaker 1: is not out of control. I like this, I want
Speaker 1: more of this, and I think Jillian's right on the
Speaker 1: money that that's going to continue. Now. The interesting thing
Speaker 1: about that is that we've been through thirty years of
Speaker 1: declining interest rates. Let me give you a couple of
Speaker 1: facts that I think is interesting. Over the last ten years,
Speaker 1: inflation is one point seven over that last ten years,
Speaker 1: the average US Treasury yield is two point two. That
Speaker 1: is a negative rate of interest real rate of interests
Speaker 1: of fifty basis points. I see positive of fifty basis points.
Speaker 1: You subtract the yield two point two minus the one
Speaker 1: point seven. Okay, So today we have one point seven
Speaker 1: uh tenure at one point six tenure, and we have
Speaker 1: an inflation to trying to get the two. Well, that
Speaker 1: would give us a negative yield. Well, how long we're
Speaker 1: going to have that negative yield? We can't have negative
Speaker 1: yields in a period of prosperity growth, Government stimulus, fiscal stimulus,
Speaker 1: and the things that Jillian is talking about so as
Speaker 1: an investor, the backdrop here is rising rates, rising rates
Speaker 1: secularly over time, and growth, but that will lead to
Speaker 1: periods of inflation, and those periods of inflation will hurt equities,
Speaker 1: they'll hurt bonds. So as an investor, fundamental investing is
Speaker 1: going to become more important. And the backdrop you have
Speaker 1: to assume is growth, higher inflation, higher interest rates. So, Jilian,
Speaker 1: what does that do for overall GDP growth? Where the
Speaker 1: United States but global growth? As practical matter, are you
Speaker 1: looking at increasing GDP growth even without further fiscal stimulus?
Speaker 1: I think absolutely we are heading to a big rebound,
Speaker 1: call it the Roaring twenties if you want to call
Speaker 1: it anything else. And the fact that we're having basically
Speaker 1: a rebound after the pandemic, coinciding with these extraordinarily large
Speaker 1: fiscal support programs and super loose monetary policy is a
Speaker 1: very striking combination. As Peter says, the fact that we
Speaker 1: have negative real rates right now at a time when
Speaker 1: people are forecasting six growth in the US economy is
Speaker 1: astonishing if you want to be charitable, or I would
Speaker 1: say completely nuts um, And I think that the fence
Speaker 1: on the nuts point Julius. Well, I've been open about
Speaker 1: this many times. I think it's completely nuts. I think
Speaker 1: the biggest mistake that's BED made was to be give
Speaker 1: the impression it was time dependent. I it was setting
Speaker 1: Fed policy according to a timeline rather than data dependent,
Speaker 1: i e. Reacting to the data and the fact that
Speaker 1: the Fed keeps indicating it's going to keep rates super
Speaker 1: low until I think it is setting itself up for
Speaker 1: a very nasty accident, because I would agree with Peter
Speaker 1: that there's a chance that the markets are going to
Speaker 1: start putting pressure on the BED to act sooner rather
Speaker 1: than later, and that would really wrong for investors. And
Speaker 1: one quick thing to think about. Everyone's talking about the
Speaker 1: roaring twenties. You know, boom, boom, boom. Isn't that great?
Speaker 1: Remember what the rowing twenties of the pandemic then led
Speaker 1: to MATHI stock market bubble, It burst, huge political upheaval
Speaker 1: and tension, and it's not difficult to imagine that could
Speaker 1: be the kind of scenario that we're heading for again now.
Speaker 1: Thanks to Jillian Tett of the Financial Times and Peter
Speaker 1: Krauss of Aperture Investors, coming up, Turkey makes yet another
Speaker 1: about face on monetary policy. We ask the Dean of
Speaker 1: Emerging Markets Investors, Mark Mobius, what it means for Turkey
Speaker 1: and for others. That's next on Wall Street Week on Bloomberg.
Speaker 1: This is Bloomberg Wall Street Week with David Weston from
Speaker 1: Bloomberg Radio. Turkey's President of Urdawan shook markets again by
Speaker 1: replacing the head of his central bank again, this time
Speaker 1: after just four months on the job. Naji Abal was
Speaker 1: the third central bank chief ousted in less than two years.
Speaker 1: Here's former British Ambassador of Turkey, Sir Peter Westmacott. President
Speaker 1: has headed in his head for a long time that
Speaker 1: high interest rates are a cause of inflation, and most
Speaker 1: orthodox economists think the opposite. Mr Abal's successor, Shahab kab Jolu,
Speaker 1: falls more in line with President Dans unorthodox thinking about
Speaker 1: interest rates and inflation. Well, we were really expecting, given
Speaker 1: the heights that we've seen from the previous sample bank governor,
Speaker 1: that eventually inflation will started going down, and it would
Speaker 1: have if they had maintain policies um and their credibility.
Speaker 1: That's shamilaka On, director of Emerging Market Debt for Alliance Bernstein.
Speaker 1: Cavolo's predecessor raised interest rates by eight hundred seventy five
Speaker 1: basis points in his short tenure, trying to slow Turkey's inflation,
Speaker 1: which runs at about fifteen percent a year, but putting
Speaker 1: a more devilish central bank chief in place. It didn't
Speaker 1: sit well with foreign exchange traders. The lyra plunged as
Speaker 1: much as fifteen percent on the announcement. Here's John Hardy,
Speaker 1: head of FIC strategy at Saxo Bank. If you look
Speaker 1: at how that the behavior in the Leri has been
Speaker 1: versus the rest of emerging markets, it's it's pretty idiosyncratic.
Speaker 1: It's its own story. This isn't the first time that
Speaker 1: the lira has struggled. There was a currency crisis in
Speaker 1: two thousand and eighteen after President Trump double tariffs on
Speaker 1: steel and aluminum imports from Turkey, and it's stabilized only
Speaker 1: after the central bank took rates all the way up
Speaker 1: to two for almost a year. By two nine, rate
Speaker 1: cuts started coming back. Markets didn't like that. Even though
Speaker 1: the new governor has not yet reversed the interest rate hike,
Speaker 1: which was implemented last Thursday, and he has said that
Speaker 1: there won't be a feather adjustment for another three weeks.
Speaker 1: That again was Sir Peter Westmacott, former British ambassador to Turkey.
Speaker 1: In a speech to his ruling party this week, President
Speaker 1: Urdwan tried to win back the trust of international investors,
Speaker 1: assuring them that the recent volatility doesn't reflect Turkey's economy. Again,
Speaker 1: here's Alliance Burns Stein's Shamela Khan. It's going to be
Speaker 1: very hard to get credibility back. I think the best
Speaker 1: they can do is try to stabilize the situation. Um So,
Speaker 1: stability in the situation is probably the most optimistic scenario.
Speaker 1: The central bank game of musical chairs is holding Turkey
Speaker 1: back during an emerging market's revival. Flows into the world
Speaker 1: developing economies have increased tent in the past five years,
Speaker 1: while Turkeys have fallen. It is going to be a
Speaker 1: very selective year for emerging markets, and it will be
Speaker 1: for whisk asses as well. That's Bloomberg Opinion columnist Mohammad L.
Speaker 1: R N. To understand what happened in Turkey and what
Speaker 1: itould mean for investors, we turned to the man who
Speaker 1: pioneered investing in emerging markets, Mark Mobius, partner and co
Speaker 1: founder of Mobius Capital Partners, and he said, it all
Speaker 1: starts with the currency. In all these emerging markets, everybody's
Speaker 1: focused on the currency. I mean the first question I
Speaker 1: get whenever I talk about emerging markets, clients say, what
Speaker 1: about the currency? Is there risking the currency? So, and
Speaker 1: of course the central banks are supposed to be responsible
Speaker 1: for a steady currency in the currency that's not volatile,
Speaker 1: and so whenever you see a central bank being a
Speaker 1: leader being replaced, that creates a panic. Despite the fact
Speaker 1: that if you notice the statement about the new central
Speaker 1: bank the governor in Turkey, his objective will be to
Speaker 1: have a stable lira, Turkish lira. So I think it's
Speaker 1: probably the reaction was overdone. I think it was did
Speaker 1: not make sense to have that kind of reaction, but
Speaker 1: it was expected that whenever you have this kind of change,
Speaker 1: the and see will get weaker. But I don't think
Speaker 1: the leader will continue with this weakness. I think it
Speaker 1: would be steady going forward. How do you protect yourself
Speaker 1: as an investor against currency co operations? What we do
Speaker 1: is we try to look at purchasing power parity is
Speaker 1: one measure and other measures of whether we think the
Speaker 1: currency will get stronger or weaker, and then we if
Speaker 1: we see that the currency is going to get weaker
Speaker 1: or isn't getting weaker. We then make a choice of
Speaker 1: stocks which will benefit from this weakness. So in some
Speaker 1: ways a weak currency can actually help us to perform better.
Speaker 1: So for example, in Turkey, we have one investment in
Speaker 1: the software company that exports its products, so they're getting
Speaker 1: far an exchange coming in and of course their costs
Speaker 1: sound Turkish leader, which is getting weaker. So that's the
Speaker 1: kind of thing we take into a consideration. So we
Speaker 1: try to emphasize that currency can be your helper instead
Speaker 1: of your detractive mark. One of the big subjects in
Speaker 1: the United States, but I think it also applies to
Speaker 1: emerging markets. Is the so called reflation trade? Uh, is
Speaker 1: it coming? Is it here? As it already had its time?
Speaker 1: For example, all prices actually start to come down over
Speaker 1: the last week or two, although they spiked up briefly
Speaker 1: with that Suez issue. What do you make the reflation
Speaker 1: trade as an e M investor? Is this the time
Speaker 1: to go in for the countries and the stocks that
Speaker 1: will benefit from the reflation or not? Well, First of all,
Speaker 1: I believe that looking at what the FETE is doing,
Speaker 1: we're not going to see a big spike in the
Speaker 1: inflation indices that we measure cp I. As you know,
Speaker 1: I'm not a great believer in those, uh, those statistics,
Speaker 1: but anyway, you're not going to see a big spike
Speaker 1: in those numbers. And of course the emerging market countries,
Speaker 1: in fact, the world you're included, looks at the US
Speaker 1: and concludes that paid inflation in America is not going anywhere. Therefore,
Speaker 1: we're not going to get hit with that same kind
Speaker 1: of situation. So the expectation is, first of all, inflation
Speaker 1: will as measured by the CPI will not raise its
Speaker 1: ugly head number one. Number two, the U S style
Speaker 1: will get weaker because of the big spending program that
Speaker 1: the Biden administration has, And of course we're already seen
Speaker 1: emerging market currency is getting stronger against the U style.
Speaker 1: There's been recently a little spike in the U style
Speaker 1: index getting a little stronger, but basically the U style
Speaker 1: index is at a weak point and probably we'll get
Speaker 1: weaker going forward, which again is very good for emerging markets.
Speaker 1: As you look at emerging markets as investments, uh, do
Speaker 1: you divide it up between the investments that are really
Speaker 1: tied to commodities as opposed to those tied to i
Speaker 1: T investment and communications, because typically people talk about North Asia,
Speaker 1: for example, as being much more oriented towards communications i T,
Speaker 1: but some other places like Mexico, like Brazil being more
Speaker 1: tied to commodities. That's a very important question because we
Speaker 1: have investments in Brazil, in South Africa and so forth,
Speaker 1: but we haven't been in the in the commodity area
Speaker 1: at all for a number of reasons. One of course
Speaker 1: is the environmental problem. You know, you have these environment challenges. Nevertheless,
Speaker 1: commodity prices have moved up very dramatically and very nicely.
Speaker 1: But we decided that we're going to focus on technology
Speaker 1: and not only the software but also the hardware. We're
Speaker 1: looking at things like computer I sees the software that
Speaker 1: goes into semiconductors, that sort of thing. The nuts and
Speaker 1: boats because this explosion and technology and the Internet is
Speaker 1: going to be with us for quite some time. Of course,
Speaker 1: it's been accelerated during the COVID crisis, but going forward,
Speaker 1: we're going to see a continuing demand for these goods
Speaker 1: and services. Thanks to Mark Movius and Mavius Capital Partners
Speaker 1: coming up. Text c eos have a showdown on Capitol Hill.
Speaker 1: Former EBSC chairman Tom Wheeler on whether there is a
Speaker 1: regulation that can fix misinformation on social media. That's next
Speaker 1: on Wall Street Week on Bloomberg. This is Bloomberg Wall
Speaker 1: Street Week with David Weston from Bloomberg Radio. The CEOs
Speaker 1: of Facebook, Twitter, and Alphabet faced another round of grilling
Speaker 1: from lawmakers on the subject of disinformation and social media.
Speaker 1: Former FCC chairman Tom Wheeler has seen tech from both
Speaker 1: sides as a regulator and as an investor. We asked
Speaker 1: him whether there was any regulation that could fix misinformation
Speaker 1: on social media. It looks pretty clear that there will
Speaker 1: be something that will be done to deal with the
Speaker 1: issues of information going to children. UM. I was interested
Speaker 1: that um Mark Zuckerberg as he was questioned by Congressman
Speaker 1: Welsh Um seemed to endorse the idea of a new
Speaker 1: digital platform agency, which is something that a group and
Speaker 1: I have been advocating for some time. As you know, UM, So,
Speaker 1: I think that Congress is actually trying to find what
Speaker 1: solutions might be and that for the first time we
Speaker 1: began to hear the ceo s saying that they might
Speaker 1: be receptive. So I wondered, Tom, from your experience Uh,
Speaker 1: can you have a new agency, a digital platform agency,
Speaker 1: really involved in this setting standards, maybe enforcing standards, and
Speaker 1: not curtail innovation, because that's the argument you always hear
Speaker 1: is once you start doing that, you're gonna really squash
Speaker 1: a lot. Innovation. Might not hurt Facebook, but it might
Speaker 1: hurt the next Facebook. That is a really good question,
Speaker 1: and one of the things that we specifically in our
Speaker 1: proposal spent a lot of time on is how do
Speaker 1: you not um slow down innovation or investment. And the
Speaker 1: key to that is that we need to have irregulatory
Speaker 1: structure that relates to the realities of today's digital markets,
Speaker 1: rather than being built around the assumptions of yesterday's what
Speaker 1: worked for yesterday's industrial markets. And then when you stop
Speaker 1: and think about it, the regulation that you and I
Speaker 1: are used to is industrial era concepts, industrial era structures,
Speaker 1: and we're not suggesting that's where you go now that
Speaker 1: those are rigid, sclerotic and can have a negative impact.
Speaker 1: But what we were trying to propose was that there
Speaker 1: needs to be a more agile approach to regulation that
Speaker 1: perhaps has built around the kind of ideas that delivered
Speaker 1: as the technology revolution in the first place. And that's
Speaker 1: standard setting process that you know, you go from three
Speaker 1: G T, four G T, five G and now six
Speaker 1: G that they're working on the standards for to keep
Speaker 1: up with things. That's not the way that regulation industrial
Speaker 1: style of regulation works, but if that can be the
Speaker 1: way that a digital era agile regulation works. Toma strikes
Speaker 1: me as you think about industrial era regulation. Basically we're
Speaker 1: regulating people. I mean, they might have been trains, but
Speaker 1: there was somebody driving the train or setting the price
Speaker 1: for the train. I wonder if that's true here because
Speaker 1: the thing making decision often is an algorithm, is not
Speaker 1: a person. Is that an entirely different way to approach regulation. Yes,
Speaker 1: And what is that algorithm dealing with? It is dealing
Speaker 1: with data, with digital information. So the capital asset of
Speaker 1: the twenty one century is data. How did the companies
Speaker 1: that were before the committee managed to get such a
Speaker 1: choke hold on economic activity was because they control the
Speaker 1: principal asset, and that's data. It's the data that drives
Speaker 1: the algorithms. So just like Rockefeller controlled oil, they can
Speaker 1: troll data and we gotta say, okay, how do we
Speaker 1: make sure that there's inter connection amongst those data? So
Speaker 1: that there's not a series of choke points. At the
Speaker 1: same time, the thrust of the hearing was about, as
Speaker 1: I say, extremism and disinformation, really focusing on the terrible
Speaker 1: events of January six at the Capitol, as well as
Speaker 1: some of the vaccine issues via XX issues about COVID
Speaker 1: nineteen uh. And I wonder whether when it comes to that,
Speaker 1: whether what we're seeing, the things we're objected to, is
Speaker 1: a bug or whether it's a feature. And by that
Speaker 1: I mean this is I understand the algorithms they basically
Speaker 1: designed to say, take the most engaging piece of information, which, unfortunately,
Speaker 1: because we're human, is often the most controversial or the
Speaker 1: most outrageous, and put it up to the top of
Speaker 1: the queue. Is that a basic feature? Can you ever
Speaker 1: fix that problem? Well? It's kind of like Dr Frankenstein,
Speaker 1: isn't it um? You know, you you create these software
Speaker 1: algorithms that then go run off and you don't even
Speaker 1: know what they're doing. So one of the big issues
Speaker 1: you gotta deal with is how do we get insight
Speaker 1: into what the algorithms are doing? How do you understand
Speaker 1: how do you get transparency? You know? Mark Zuckerberg, to
Speaker 1: his credit, keeps saying, well, we've got all of these
Speaker 1: kind of interventions. Okay, that's nice, but we don't have
Speaker 1: measurement for those interventions. We don't have oversight of those interventions.
Speaker 1: We don't know whether they're where you draw the line
Speaker 1: between a pr move and something that's really substantive and uh,
Speaker 1: and that's where we need to be going when we
Speaker 1: talk about an algorithm driven um economy. That was former
Speaker 1: FCC Chairman Tom Wheeler. Coming up. We hear from special
Speaker 1: contributor Larry Summers of Harvard about political risk and economic
Speaker 1: risk and how to tell the difference. That's next on
Speaker 1: Wall Street read on Bloomberg. This is Bloomberg Wall Street
Speaker 1: Week with David Weston from Bloomberg Radio. One of the
Speaker 1: most basic and immediate ways the government can affect the
Speaker 1: economy is through taxes, and this week talk about Texas
Speaker 1: was all the rage with reports to the White House
Speaker 1: is about to propose raising rates on corporations and on
Speaker 1: individuals making more than four dollars, with Secretary Janet yell
Speaker 1: And telling Congress that they needed to raise revenue to
Speaker 1: make long term investments such as infrastructure, and with Senator
Speaker 1: Bernie Sanders interducing legislation to take the corporate tax rate
Speaker 1: right back up to Well, what could all this mean
Speaker 1: for our economy? When it comes to question like that,
Speaker 1: we turned to one place, and that is our special contrader,
Speaker 1: Larry Summers of Harvard for his perspective. So, Larry, give
Speaker 1: us a sense, as an econoist a macro economist, what
Speaker 1: is the right level of taxation? What is it too much?
Speaker 1: I don't think we're near the point where it's too much, David.
Speaker 1: We're looking at huge planned investments, hugely important investments, but
Speaker 1: limits to the economy's capacity and risks of overheating, ultimate
Speaker 1: limits on how much borrowing is possible. So I think
Speaker 1: it would be better if we could pay for as
Speaker 1: much of that investment as possible. And I actually think
Speaker 1: the United States is now in a position where there
Speaker 1: are many ways we can raise tax revenue that will
Speaker 1: actually make the economy function better. As I've said before
Speaker 1: on your show, we could raise over a trillion dollars
Speaker 1: in ways that we make the tax system fairer, in
Speaker 1: ways that would reduce evasion activity, simply by doing a
Speaker 1: good job of enforcing uh the tax law. There are
Speaker 1: plenty of shelters carried interests is just one example ten
Speaker 1: thirty one. Real estate exchanges that avoid capital games UH
Speaker 1: is another. Loopholes in the estate tax is a third.
Speaker 1: There are plenty of examples of provisions that distort resources,
Speaker 1: that cause investments to go into less productive place is
Speaker 1: and at the same time cost the treasury revenue. I
Speaker 1: think there's a lot we can do in cooperation with
Speaker 1: other countries to prevent tax arbitrage across countries um eroding
Speaker 1: our tax collections. There's no reason why income should be
Speaker 1: lost to cyberspace in the twenty one UH century. I
Speaker 1: think that there's no rational economic case for corporate rate
Speaker 1: reductions on the scale that President Trump UH legislative the
Speaker 1: Business Roundtable would have been thrilled to have achieved. UH
Speaker 1: corporate tax rate. There's no case for corporate tax rate.
Speaker 1: So we can raise in the trillions of dollars before
Speaker 1: we do anything that even raises tradeoffs about adverse economic performance,
Speaker 1: and beyond that, even if there is some consequence for
Speaker 1: the economy, taxes enable us to invest Justice Holmes famously
Speaker 1: said taxes are what we pay for civilization. So I
Speaker 1: think phased in when the economy has started to overheat
Speaker 1: there's a compelling case for a much larger level of taxation,
Speaker 1: and I hope the administration will work to achieve it. Lord,
Speaker 1: let's just pick up on one specific point you made,
Speaker 1: that tax arbitrage. Internationally, we heard from Janet Yelling, your
Speaker 1: successor as Secretary of Treasury, this week saying she favors
Speaker 1: a minimum corporate tax, but that should be done in
Speaker 1: coordination with other countries. Would you favor a corporate minimum
Speaker 1: tax if we don't have that corporation coordination, because as
Speaker 1: a practice the matter, is there any chance at all
Speaker 1: we're gonna get it? I think we could. I think
Speaker 1: we should have some kind of corporate minimum tax. I
Speaker 1: think that if you report to your shareholders substantial profits,
Speaker 1: you should pay corporate taxes. And that should be a
Speaker 1: core principle of the way our tax system is designed.
Speaker 1: And that's something we can do, uh, purely domestically. Beyond that,
Speaker 1: I think there's very substantial will in most of the
Speaker 1: other industrial countries for cooperation to go after tax shelters,
Speaker 1: and particularly to go after tax havens. This is something
Speaker 1: that I worked on, uh, frankly, back in the ninety
Speaker 1: nineties when I was Treasury Secretary and we were making
Speaker 1: real progress against tax havens and regulatory UH havens. The
Speaker 1: incoming George W. Bush administration thought that that was somehow
Speaker 1: morally wrong, and so they undid everything that we did.
Speaker 1: But I think that it's time to go after all
Speaker 1: of that again. And I think that there's no question
Speaker 1: that if you look at the tech companies, the Europeans
Speaker 1: are right that there are substantial abuses in which they
Speaker 1: don't pay on a global basis, nearly the tax rate
Speaker 1: that they should on their income. And I think we
Speaker 1: should as a top priority, frankly, as a higher priority
Speaker 1: than any new trade agreement. When we talk about an
Speaker 1: international integration globalization agenda, UH, tax cooperation ought to be
Speaker 1: at the very top of UH that list, along with
Speaker 1: regulatory enforcement to make sure that we don't have regulatory
Speaker 1: races to the bottom. Learn I want to let you
Speaker 1: go before we go back to a subject that you
Speaker 1: and I have talked about before, and that is a
Speaker 1: question of an inflation, because there's talk about whether this
Speaker 1: could be like what we saw in the sixties and seventies,
Speaker 1: particularly during the Vietnam War. We have, for example, your
Speaker 1: fellow O'Connors, Paul Krookman saying it's entirely different because they
Speaker 1: had a long time for that to come, we could
Speaker 1: react to it. We have some banks now saying it
Speaker 1: really is quite different. Do you think that it is
Speaker 1: that different? No. I think the main differences are that
Speaker 1: the fiscal expansion now is three or four times as
Speaker 1: large as l Vj's guns, and butter that the FED
Speaker 1: didn't dream of blowing up its balance sheet running rates
Speaker 1: at zero, saying that it didn't believe in acting in
Speaker 1: advance on inflation in UH that era, that we didn't
Speaker 1: have a flexible currency that UH could decline. So I
Speaker 1: think if there are any differences, the differences are such
Speaker 1: as to make one more concerned UH now. And I
Speaker 1: think the assertion of commentators like Krugman that this took
Speaker 1: a really long time is just wrong. Inflation in some
Speaker 1: months UM had a one handle on it in nineteen
Speaker 1: sixty six, and three years later in nineteen sixty nine,
Speaker 1: and some certain months it had a sex handle. So
Speaker 1: the idea that it can't ratch it up quickly is
Speaker 1: just plain uh wrong. And so there are there are differences.
Speaker 1: We have had a different different history today than the
Speaker 1: history we had before. Nineteen sixty six. But I actually
Speaker 1: think there is many differences suggesting this could be worse,
Speaker 1: as there are suggesting that UH, this UH could be
Speaker 1: UH could be better if you were looking to un
Speaker 1: anchored inflation expectations. How having the FED Chair say that
Speaker 1: the FED is going to have a new regime and
Speaker 1: is no longer sure that overheating the economy leads to inflation,
Speaker 1: and having the administration say we're an entirely new progressive
Speaker 1: era where policy is gonna differ radically from what it
Speaker 1: has been for the last forty years, those would seem
Speaker 1: like the best things you could do if you were
Speaker 1: trying to un anchor um expectations. So it may all
Speaker 1: work out. It may be that a way will be
Speaker 1: found to bring it under control. But as I look
Speaker 1: at three trillion dollars of stimulus, two trillion dollars of
Speaker 1: savings overhang, a major acceleration coming from COVID in the
Speaker 1: rear view mirror rates rates expected by the Federal Reserve
Speaker 1: to be at zero for three years even in a
Speaker 1: booming economy, record growth UH this year, major expansion of
Speaker 1: a FED balance, and much stimulus story. Thank you, thank
Speaker 1: you so much, Wall Street week Special Continual Larry Summers
Speaker 1: at Harvard. Finally, one more thought. A bad day at
Speaker 1: the office. We all have them, those days when nothing
Speaker 1: seems to go right, when as hard as we try,
Speaker 1: it all goes wrong, and we get the blame, whether
Speaker 1: or not it's our fault. So on a week like
Speaker 1: this one, we can take some solace from the fact
Speaker 1: that we're not alone. We could be. For example, the
Speaker 1: revered Chancellor of Germany who declared that she'd shut her
Speaker 1: entire country down, not even letting people go to the
Speaker 1: grocery store for five full days over the Easter weekend,
Speaker 1: only to admit she'd made a bad mistake just thirty
Speaker 1: three hours later. They're not find the idea of a
Speaker 1: so called easter lockdown was a mistake. It had its
Speaker 1: good reasons, but in such a short space of time
Speaker 1: it wasn't possible to implement well enough. And then their
Speaker 1: Senator John Kennedy of Louisiana, who decided to take on
Speaker 1: Treasury Secretary yelling Or for the relatively obscure question of
Speaker 1: increasing special drawing rights for the I m F, only
Speaker 1: to get in a very public disagreement over how they
Speaker 1: work and managed to trigger just about the first public
Speaker 1: display of irritation maybe even anger from secretary yelling that
Speaker 1: just about anybody has ever seen it will have to
Speaker 1: issue treasury bills or UM get to do it, but
Speaker 1: I'm sorry, I'm sorry. But it will also earn interest
Speaker 1: UM on any any amounts that it converts on behalf
Speaker 1: of further countries. But when it comes to a bad
Speaker 1: day at the office, even if your office is on
Speaker 1: a bridge, the prize this week goes to the poor
Speaker 1: captain of the container ship ever given, who managed to
Speaker 1: get a ship carrying twenty thousand containers and it was
Speaker 1: as long as the Empire stapling is high, stuck sideways
Speaker 1: in a narrow part of the Suez Canal, blocking all
Speaker 1: other ships from using the canal. Sure there was this ndstorm,
Speaker 1: Sure there were severe winds, but I'm not sure. History
Speaker 1: always grades on a curve. So whatever may have gone
Speaker 1: wrong for you this week at the office, and I
Speaker 1: hope there was nothing, though I bet there may have
Speaker 1: been something. You can take some comfort and being pretty
Speaker 1: sure you won't go down in history for it. That
Speaker 1: does it for this episode of Wall Street Week. I'm
Speaker 1: David Weston. This is Bloomberg. See you next week,