1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 2 00:00:09,240 --> 00:00:13,200 Speaker 1: with Jonathan Ferroll and Lisa Brownwitz. Daily we bring you 3 00:00:13,320 --> 00:00:18,600 Speaker 1: insight from the best and economics, finance, investment, and international relations. 4 00:00:18,960 --> 00:00:23,840 Speaker 1: Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot com, 5 00:00:23,920 --> 00:00:30,600 Speaker 1: and of course, on the Bloomberg Termament. Lawyer Going Far 6 00:00:30,640 --> 00:00:33,120 Speaker 1: Away Jan Hat has made his name at Goldban Sacks 7 00:00:33,440 --> 00:00:37,120 Speaker 1: with a strange phrase called mortgage equity withdrawal. He brought 8 00:00:37,200 --> 00:00:40,680 Speaker 1: market economics to a complete stand still by figuring out 9 00:00:40,760 --> 00:00:43,920 Speaker 1: the flows of our housing market long ago and far 10 00:00:43,960 --> 00:00:46,440 Speaker 1: away in a boom. He is the Golden Sax Chief 11 00:00:46,440 --> 00:00:49,559 Speaker 1: Economist and head of Global Economics. John. We're riveted on 12 00:00:49,600 --> 00:00:51,440 Speaker 1: the FED meeting today. John's going to go to that, 13 00:00:51,479 --> 00:00:54,320 Speaker 1: but I need to go to you on this boom economy. 14 00:00:54,560 --> 00:00:57,720 Speaker 1: You and I have never seen. How does a boom economy? 15 00:00:57,760 --> 00:01:01,200 Speaker 1: How do you perceive? At Golden Sacks, did eight percent 16 00:01:01,360 --> 00:01:04,880 Speaker 1: g d P fades away? Will it be abrupt or 17 00:01:04,920 --> 00:01:08,319 Speaker 1: will it be far more gradual and prosperous than we 18 00:01:08,400 --> 00:01:13,560 Speaker 1: can imagine? I mean, the eight percent forecast is for 19 00:01:13,720 --> 00:01:16,040 Speaker 1: the fourth quarter, and the fourth quarter number in two 20 00:01:16,040 --> 00:01:20,319 Speaker 1: thousand and twenty one, and that's the way the FED 21 00:01:20,400 --> 00:01:23,319 Speaker 1: looks at these numbers as well. We think they will 22 00:01:23,360 --> 00:01:27,280 Speaker 1: obviously upgrade their forecasts sharply as well. We don't think 23 00:01:27,280 --> 00:01:29,520 Speaker 1: as high as that, maybe a little bit over six. 24 00:01:30,040 --> 00:01:34,160 Speaker 1: But in our forecasts two thousand twenty one, very rapid recovery. 25 00:01:34,200 --> 00:01:37,039 Speaker 1: As you say, we've we've never seen these kinds of 26 00:01:37,040 --> 00:01:40,600 Speaker 1: growth rates. But then afterwards, I think the economy is 27 00:01:40,640 --> 00:01:44,440 Speaker 1: going to be much closer to full employment by late 28 00:01:44,520 --> 00:01:47,840 Speaker 1: this year early next year, and so in two thousand, 29 00:01:47,880 --> 00:01:52,520 Speaker 1: twenty two, twenty three we will see no meaningful deceleration. Think, 30 00:01:53,000 --> 00:01:55,640 Speaker 1: you know, maybe three instead of eight on a on 31 00:01:55,680 --> 00:01:59,240 Speaker 1: a que four the Q four basis next year, but 32 00:01:59,560 --> 00:02:02,640 Speaker 1: with an unemployment rate that's then the low four percent 33 00:02:02,840 --> 00:02:08,040 Speaker 1: in all forecasts, and employment rates that have mostly recovered 34 00:02:08,840 --> 00:02:11,160 Speaker 1: the big slot. Just to build on what Tom is 35 00:02:11,200 --> 00:02:15,200 Speaker 1: talking about, this idea of faster and hotter boom but 36 00:02:15,360 --> 00:02:18,040 Speaker 1: a much quicker cycle that Andrew Sheets of Morgan Stanley 37 00:02:18,080 --> 00:02:20,200 Speaker 1: was talking about earlier on the show. What is the 38 00:02:20,280 --> 00:02:23,840 Speaker 1: anatomy of an economy like that? Given the fact that 39 00:02:23,919 --> 00:02:27,160 Speaker 1: markets and frankly economy is often don't move in straight lines, 40 00:02:27,440 --> 00:02:29,760 Speaker 1: that there can be accelerations and there can be busts, 41 00:02:29,880 --> 00:02:32,600 Speaker 1: especially with how high asset prices are. I mean, what 42 00:02:32,720 --> 00:02:35,440 Speaker 1: do you foresee over the next few years as we 43 00:02:35,480 --> 00:02:39,560 Speaker 1: get back to this low flation normal. Well, I think 44 00:02:39,560 --> 00:02:44,840 Speaker 1: we'll see a very frontloaded recovery and then something that's 45 00:02:44,919 --> 00:02:47,720 Speaker 1: more similar to the growth rates that we had pre 46 00:02:47,960 --> 00:02:52,560 Speaker 1: pre pandemic, with potential growth in the two percent range, 47 00:02:52,600 --> 00:02:55,920 Speaker 1: maybe a little bit the law two percent, but that's 48 00:02:55,960 --> 00:02:58,480 Speaker 1: not really the constraint at the moment because we still 49 00:02:58,520 --> 00:03:02,400 Speaker 1: have a lot of spare capacity in the in the economy. 50 00:03:02,600 --> 00:03:05,560 Speaker 1: There could be future shocks, of course post pandemic. There 51 00:03:05,600 --> 00:03:08,720 Speaker 1: will be future shocks post pandemic, but I think in 52 00:03:08,760 --> 00:03:12,120 Speaker 1: the neo darm it's really about making up the lost 53 00:03:12,160 --> 00:03:16,200 Speaker 1: ground from the from the shock of two thousand and twenty, 54 00:03:16,240 --> 00:03:18,119 Speaker 1: and I think we're all positioned for that. So yeah, 55 00:03:18,160 --> 00:03:20,760 Speaker 1: let's have a clinic approaching this conversation a little bit 56 00:03:20,840 --> 00:03:23,639 Speaker 1: later today the decision, the Summary of Economic Projections, the 57 00:03:23,680 --> 00:03:27,240 Speaker 1: news conference as well, youth forecasting above target inflation then 58 00:03:27,280 --> 00:03:29,560 Speaker 1: above two percent at least in the next three years 59 00:03:29,560 --> 00:03:32,120 Speaker 1: at some point in this SEP that comes out a 60 00:03:32,160 --> 00:03:36,600 Speaker 1: little bit later. Yes, we do expect the two thousand 61 00:03:36,680 --> 00:03:41,120 Speaker 1: twenty three number for core PC to go up a tenth. 62 00:03:41,640 --> 00:03:45,480 Speaker 1: Currently as of December showing two point zero. We think 63 00:03:45,480 --> 00:03:48,520 Speaker 1: that probably goes to two point one percent, could even 64 00:03:48,560 --> 00:03:50,920 Speaker 1: go to two point two percent, but I'd be very 65 00:03:50,960 --> 00:03:53,600 Speaker 1: surprised if it's stayed at two. I think they will 66 00:03:53,880 --> 00:03:58,120 Speaker 1: show something above the medium charm target, and that I 67 00:03:58,200 --> 00:04:00,880 Speaker 1: think is then also going to be a reason to 68 00:04:01,040 --> 00:04:04,720 Speaker 1: show one hike by the end of two vols and 69 00:04:04,720 --> 00:04:08,040 Speaker 1: then twenty three. Again, I'm focusing on the medium projection here, 70 00:04:08,560 --> 00:04:10,680 Speaker 1: and of course it's going to be a range of 71 00:04:10,720 --> 00:04:14,160 Speaker 1: different views that will take some time to you know, 72 00:04:14,240 --> 00:04:16,400 Speaker 1: figure out exactly what it means. But I think the 73 00:04:16,440 --> 00:04:19,039 Speaker 1: first in the first instance, markets are going to be 74 00:04:19,080 --> 00:04:21,640 Speaker 1: focused on the medians. So core p c a at 75 00:04:21,760 --> 00:04:25,000 Speaker 1: two one two two for three, the median dot comes 76 00:04:25,080 --> 00:04:28,320 Speaker 1: up one, one hike for three. Then the news conference 77 00:04:28,400 --> 00:04:31,239 Speaker 1: Jan how do you think the chairman shapes the narrative 78 00:04:31,279 --> 00:04:34,680 Speaker 1: coming off the back of those forecasts. I mean, I 79 00:04:34,680 --> 00:04:37,920 Speaker 1: don't think that the story from from Powell is going 80 00:04:37,960 --> 00:04:40,599 Speaker 1: to be all that different from you know, what he 81 00:04:40,680 --> 00:04:43,920 Speaker 1: said a couple of weeks ago in the in the 82 00:04:44,040 --> 00:04:48,159 Speaker 1: in the Wall Street Journal interview where he basically didn't 83 00:04:48,200 --> 00:04:52,760 Speaker 1: want to provide calendar guidance for either tapering or rate 84 00:04:52,880 --> 00:04:56,680 Speaker 1: hikes because the committee has decided to phrase all this 85 00:04:56,760 --> 00:04:59,640 Speaker 1: and outcome based terms. But he did use quite a 86 00:04:59,640 --> 00:05:03,880 Speaker 1: lot of calendar like language about tapering. He said patient, 87 00:05:04,520 --> 00:05:07,919 Speaker 1: he said sometime. He said that there would be plenty 88 00:05:07,920 --> 00:05:11,359 Speaker 1: of notice before they would start the taper. So to me, 89 00:05:11,480 --> 00:05:16,000 Speaker 1: that says tapering in the next couple of quarters very unlikely. 90 00:05:16,800 --> 00:05:19,719 Speaker 1: Late this year as a possibility, but our best guests 91 00:05:19,760 --> 00:05:22,640 Speaker 1: would be early two thousand and twenty two. What would 92 00:05:22,680 --> 00:05:25,640 Speaker 1: you have to see on to change your forecast for 93 00:05:25,720 --> 00:05:27,719 Speaker 1: longer term inflation at a time when you've got the 94 00:05:27,720 --> 00:05:30,960 Speaker 1: likes of Ray Dalio coming out and saying the cash 95 00:05:31,080 --> 00:05:33,360 Speaker 1: is trash and the longer term bonds are going to 96 00:05:33,400 --> 00:05:38,359 Speaker 1: be worthless in the face of accelerating inflation. Well, I 97 00:05:38,360 --> 00:05:42,240 Speaker 1: think there are a number of things to watch. So 98 00:05:42,320 --> 00:05:45,880 Speaker 1: our baseline scenario is that inflation goes up substantially in 99 00:05:45,920 --> 00:05:49,359 Speaker 1: the in the short term that's driven by lapping the 100 00:05:49,440 --> 00:05:53,080 Speaker 1: big declines of early two thousand and twenty. We got 101 00:05:53,080 --> 00:05:55,920 Speaker 1: we get to two point three percent for CORPC in April, 102 00:05:56,240 --> 00:05:58,800 Speaker 1: then it comes back down, and then after that you 103 00:05:58,839 --> 00:06:02,560 Speaker 1: see sort of a gradual acceleration a little above two 104 00:06:02,560 --> 00:06:05,479 Speaker 1: percent by two thousand twenty three, and then somewhere in 105 00:06:05,520 --> 00:06:08,760 Speaker 1: the two and a quarter percent range beyond that, maybe 106 00:06:08,800 --> 00:06:11,400 Speaker 1: a little bit above. So relative to that sort of 107 00:06:11,400 --> 00:06:15,800 Speaker 1: baseline scenario, if you had, you know, a sharp increase 108 00:06:15,839 --> 00:06:18,920 Speaker 1: in inflation expectations, that would certainly be a warning sign, 109 00:06:19,640 --> 00:06:22,960 Speaker 1: probably something that would have to be visible in a 110 00:06:23,080 --> 00:06:27,400 Speaker 1: number of indicators, not just break evens in the bond 111 00:06:27,480 --> 00:06:31,479 Speaker 1: market or or or or household expectations, but but a 112 00:06:31,520 --> 00:06:34,680 Speaker 1: combination of that. You'd certainly be focused on that. If 113 00:06:34,680 --> 00:06:37,960 Speaker 1: you had a really big overheating of the economy with 114 00:06:38,600 --> 00:06:41,800 Speaker 1: you know, employment rates that are far beyond the sort 115 00:06:41,839 --> 00:06:44,000 Speaker 1: of cyclical heights that we've seen in the in the 116 00:06:44,040 --> 00:06:47,000 Speaker 1: past couple of decades, yeah, I think then you'd be 117 00:06:47,000 --> 00:06:50,760 Speaker 1: more worried about bigger wage rice spirals. In our forecast, 118 00:06:51,080 --> 00:06:55,400 Speaker 1: we basically see the sizeable current output gap, the slack 119 00:06:55,480 --> 00:06:59,960 Speaker 1: in the economy being filled in and maybe beyond normal, 120 00:07:00,040 --> 00:07:02,640 Speaker 1: but not dramatically. But if that try not be wrong, 121 00:07:02,839 --> 00:07:05,919 Speaker 1: then obviously we'd have to do that. You're reading my 122 00:07:05,960 --> 00:07:08,200 Speaker 1: mind exactly, And this goes back to the hallmark work 123 00:07:08,200 --> 00:07:10,240 Speaker 1: at Dudley mckelviy you and the rest of the Goldman 124 00:07:10,320 --> 00:07:14,360 Speaker 1: Sex team. Is there a complete underestimation of the elasticity 125 00:07:14,400 --> 00:07:17,360 Speaker 1: of supplies coming on You get a boom economy, the 126 00:07:17,400 --> 00:07:21,200 Speaker 1: animal spirits pick up, the output cap closes up, and 127 00:07:21,240 --> 00:07:25,880 Speaker 1: that's a good and normal thing, right, Yes, absolutely, that's 128 00:07:25,920 --> 00:07:28,560 Speaker 1: a good and normal thing. And there can be too 129 00:07:28,640 --> 00:07:31,400 Speaker 1: much of a good thing, of course, that's that's always 130 00:07:31,400 --> 00:07:34,520 Speaker 1: a possibility you have to consider in our forecasts. It 131 00:07:34,600 --> 00:07:37,280 Speaker 1: doesn't it's not too much of a good thing, it's 132 00:07:37,400 --> 00:07:40,680 Speaker 1: it is a good thing. But I also think you 133 00:07:40,760 --> 00:07:44,480 Speaker 1: make a good point about the potential for supply to 134 00:07:45,080 --> 00:07:47,240 Speaker 1: you know, proved to be a little bit stronger than 135 00:07:47,400 --> 00:07:50,080 Speaker 1: people have built in. I think that's a good point 136 00:07:50,080 --> 00:07:53,640 Speaker 1: as well. And so far the supply side information that 137 00:07:53,680 --> 00:07:56,640 Speaker 1: we've gotten during the pandemic has been I think better 138 00:07:56,720 --> 00:07:59,560 Speaker 1: than than most people would have expected a year ago 139 00:07:59,720 --> 00:08:02,240 Speaker 1: and my months ago. Yeah, we gotta squeeze one more 140 00:08:02,280 --> 00:08:04,560 Speaker 1: in for Chairman Pound in this news conference for you, 141 00:08:04,680 --> 00:08:06,760 Speaker 1: how Michael McKee out a question for the chairman what 142 00:08:06,880 --> 00:08:08,440 Speaker 1: is it right now top of the mind for the 143 00:08:08,440 --> 00:08:14,080 Speaker 1: team of government. I think asking about the you know, 144 00:08:14,520 --> 00:08:19,320 Speaker 1: threshold for for for rate hikes in terms of you 145 00:08:19,360 --> 00:08:22,080 Speaker 1: know where core PC inflation is. I think that is 146 00:08:22,120 --> 00:08:24,800 Speaker 1: going to be the biggest questions or people. Of course 147 00:08:24,840 --> 00:08:28,320 Speaker 1: I've focused on the on the dot plot per se, 148 00:08:28,400 --> 00:08:32,440 Speaker 1: but but even more so perhaps on where rate hikes 149 00:08:32,480 --> 00:08:35,880 Speaker 1: are as a function of where the where the inflation 150 00:08:35,960 --> 00:08:39,720 Speaker 1: numbers are. So, for example, if you had two point 151 00:08:39,840 --> 00:08:43,640 Speaker 1: zero for core PC and the hike, that would be 152 00:08:43,679 --> 00:08:46,280 Speaker 1: viewed as very hawk ish. If you had two point 153 00:08:46,320 --> 00:08:49,280 Speaker 1: two or two point three percent for CORPC and the hike, 154 00:08:49,400 --> 00:08:52,920 Speaker 1: that would actually be pretty devilish. And so I think 155 00:08:53,000 --> 00:08:56,240 Speaker 1: getting into that that relationship, I think it's going to 156 00:08:56,240 --> 00:08:59,360 Speaker 1: be important. John. What's so important here again is I've 157 00:08:59,360 --> 00:09:01,559 Speaker 1: got to get the hats look going. I mean, I'm 158 00:09:01,559 --> 00:09:08,960 Speaker 1: working on it right now. It's the problem. Put it 159 00:09:08,960 --> 00:09:12,199 Speaker 1: back on a catch up. We want to do it again. 160 00:09:13,840 --> 00:09:25,079 Speaker 1: Thank you. There's some important stuff there. We decided a 161 00:09:25,160 --> 00:09:27,160 Speaker 1: number of days ago that our team would go out 162 00:09:27,160 --> 00:09:29,640 Speaker 1: and get the best voices we can. Yantius will join 163 00:09:29,720 --> 00:09:31,640 Speaker 1: us here in a bit. As we move forward to 164 00:09:31,679 --> 00:09:35,160 Speaker 1: the FED Show two PM this afternoon, we start Strong 165 00:09:35,400 --> 00:09:38,800 Speaker 1: or Strongest with Glenn Hubbard of Columbia University to say 166 00:09:38,920 --> 00:09:42,400 Speaker 1: is professor of economics, former consul of Economic Advisors. Chairman, 167 00:09:42,760 --> 00:09:45,000 Speaker 1: doesn't do credit to what he did at the Columbia 168 00:09:45,040 --> 00:09:49,640 Speaker 1: Business School. Is his his tenure there is well. He 169 00:09:49,840 --> 00:09:53,880 Speaker 1: is the most articulate supply side conservative out there. And 170 00:09:53,920 --> 00:09:56,600 Speaker 1: we start strong with Glenn Hubbard. Diana Hubbard, I am 171 00:09:56,640 --> 00:09:59,520 Speaker 1: thrilled to have you on the show to talk about 172 00:09:59,559 --> 00:10:03,680 Speaker 1: the assumption that growth will save us. Your lawyer, colleague, 173 00:10:03,720 --> 00:10:07,439 Speaker 1: Joe Stiglets, would say, over time, over the years, we 174 00:10:07,480 --> 00:10:11,760 Speaker 1: can grow our way out of a five standard deviation deficit. 175 00:10:12,080 --> 00:10:16,679 Speaker 1: Does that math work Well, it really doesn't. For two reasons. 176 00:10:16,800 --> 00:10:20,439 Speaker 1: We will grow very rapidly this year six plus percent. 177 00:10:20,559 --> 00:10:22,920 Speaker 1: That's a challenge for the BED to change its own 178 00:10:23,040 --> 00:10:27,840 Speaker 1: forecast going forward. With the fiscal impulse reversed, we're back 179 00:10:27,880 --> 00:10:31,240 Speaker 1: to more normal rates of growth. Second point, A lot 180 00:10:31,280 --> 00:10:34,720 Speaker 1: of our problems in fiscal policy are a programs that 181 00:10:34,840 --> 00:10:39,040 Speaker 1: just grow on autopop so called entitlement programs. Growth alan 182 00:10:39,200 --> 00:10:41,640 Speaker 1: doesn't save you there. We are going to have to 183 00:10:41,640 --> 00:10:45,679 Speaker 1: have some kind of fiscal consolidation in spending, in taxes 184 00:10:45,800 --> 00:10:48,560 Speaker 1: or dare I say it, inflation. Glen Hoummard, I remember 185 00:10:48,559 --> 00:10:51,240 Speaker 1: in August Thursday of two thousand seven, where we all 186 00:10:51,280 --> 00:10:54,280 Speaker 1: looked at four standard deviation three month T bill four 187 00:10:54,360 --> 00:10:58,000 Speaker 1: standard deviation lieb or we're way out over that, We're 188 00:10:58,000 --> 00:11:02,479 Speaker 1: out to a medical chart of moving on our fiscal policy. 189 00:11:02,880 --> 00:11:06,480 Speaker 1: Does its signal crisis that we're out near six standard 190 00:11:06,480 --> 00:11:11,280 Speaker 1: deviations on deficit to GDP? I don't think it signals 191 00:11:11,320 --> 00:11:13,640 Speaker 1: a crisis, but I think it signals a warning. It's 192 00:11:13,640 --> 00:11:16,720 Speaker 1: not a crisis to the extent this is largely one 193 00:11:16,840 --> 00:11:20,240 Speaker 1: time borrowing, although even there it needs to be smart, 194 00:11:20,320 --> 00:11:22,880 Speaker 1: which I can't entirely say for what we what we've 195 00:11:22,920 --> 00:11:25,680 Speaker 1: just done. Going forward, though, we have to have a 196 00:11:25,720 --> 00:11:29,079 Speaker 1: more sustainable fiscal policy, and that requires taking a hard 197 00:11:29,160 --> 00:11:33,240 Speaker 1: look at promises we're making. For example, many promises being 198 00:11:33,240 --> 00:11:37,120 Speaker 1: made in American Rescue Plan Act aren't paid for going forward. 199 00:11:37,480 --> 00:11:40,079 Speaker 1: Ask what are we gonna do about alright now? Recent 200 00:11:40,080 --> 00:11:43,120 Speaker 1: Washington Post article that you wrote with Alan Blinder, you 201 00:11:43,120 --> 00:11:45,880 Speaker 1: said there are good reasons for running large deficits now 202 00:11:45,960 --> 00:11:48,319 Speaker 1: as long as the spending is well targeted. I get 203 00:11:48,360 --> 00:11:50,319 Speaker 1: the sense that you have some criticisms about what was 204 00:11:50,400 --> 00:11:53,320 Speaker 1: just passed at one point nine trillion dollar stimulus. What 205 00:11:53,600 --> 00:11:57,400 Speaker 1: in there is targeted do you think is appropriate? And 206 00:11:57,440 --> 00:12:00,920 Speaker 1: what do you think is not? Why think a smaller 207 00:12:00,920 --> 00:12:03,720 Speaker 1: bill probably would have done the trick. About a trick, 208 00:12:03,800 --> 00:12:07,960 Speaker 1: I mean making sure we've shored up unemployment insurance, modest 209 00:12:08,000 --> 00:12:12,960 Speaker 1: aid to states, aid to businesses for continuity. Those sorts 210 00:12:12,960 --> 00:12:15,760 Speaker 1: of things make sense to me. Writing checks to people 211 00:12:15,800 --> 00:12:18,280 Speaker 1: who didn't lose their jobs and his wages didn't go 212 00:12:18,360 --> 00:12:23,319 Speaker 1: down is hardly targeting, and it risks ruining firepower for later. 213 00:12:23,760 --> 00:12:25,640 Speaker 1: And of course, part of what's in the bill has 214 00:12:25,800 --> 00:12:28,600 Speaker 1: little to do with the pandemic and is a set 215 00:12:28,600 --> 00:12:31,000 Speaker 1: of social policies. And they may be good, they may 216 00:12:31,040 --> 00:12:33,560 Speaker 1: be bad, but they're not really part of a stimulus, 217 00:12:34,000 --> 00:12:37,480 Speaker 1: limiting firepower for later. Are you talking about possibly the 218 00:12:37,480 --> 00:12:40,840 Speaker 1: Fed's hand being forced with higher inflation than expected? Are 219 00:12:40,880 --> 00:12:44,040 Speaker 1: you talking about it sucking the oxygen out of Washington, 220 00:12:44,120 --> 00:12:47,520 Speaker 1: d C for infrastructure spending in other initiatives. I'm talking 221 00:12:47,559 --> 00:12:50,080 Speaker 1: more of the ladder. I don't expect to fit there 222 00:12:50,080 --> 00:12:53,200 Speaker 1: will be a transitory burst in inflation. I don't expect 223 00:12:53,200 --> 00:12:55,880 Speaker 1: the FED to confront and inflation and crisis as a 224 00:12:55,960 --> 00:12:58,480 Speaker 1: result of this. I think it's a warning and communication 225 00:12:58,600 --> 00:13:01,200 Speaker 1: is important, but I do think it puts at risk 226 00:13:01,440 --> 00:13:05,680 Speaker 1: other physical agenda's President Biden might have, whether it's physical infrastructure, 227 00:13:05,760 --> 00:13:09,240 Speaker 1: whether it's training initiatives to help workers prepare for a 228 00:13:09,280 --> 00:13:12,200 Speaker 1: new economy, all of that could be put at risk 229 00:13:12,240 --> 00:13:15,400 Speaker 1: because of overdoing it here, Glenn, pre pandemic, we lived 230 00:13:15,400 --> 00:13:17,640 Speaker 1: in a world that was very, very shallow growth, and 231 00:13:17,640 --> 00:13:20,760 Speaker 1: it was a very extended cycle as well, low trend growth, 232 00:13:21,040 --> 00:13:23,760 Speaker 1: low inflation, certainly not the kind of inflation to worry about. 233 00:13:24,080 --> 00:13:26,000 Speaker 1: Is there anything in this bill that really disrupts the 234 00:13:26,080 --> 00:13:28,800 Speaker 1: existing trend before the pandemic? Coming out of the pandemic, 235 00:13:30,000 --> 00:13:31,880 Speaker 1: I don't think so much A built this bill, but 236 00:13:31,960 --> 00:13:34,280 Speaker 1: I do think we could be on the verge of 237 00:13:34,360 --> 00:13:38,800 Speaker 1: much better productivity growth going forward, which would presage a 238 00:13:38,880 --> 00:13:42,240 Speaker 1: better growth rate. The risk in this bill and what 239 00:13:42,480 --> 00:13:46,400 Speaker 1: follows on, is that a combination of excessive spending in 240 00:13:46,480 --> 00:13:50,000 Speaker 1: some areas and tax increases to pay for it limit 241 00:13:50,080 --> 00:13:52,000 Speaker 1: that growth. I think that's the risk we're going to 242 00:13:52,080 --> 00:13:53,960 Speaker 1: hear about in the next couple of years. The reason 243 00:13:53,960 --> 00:13:56,400 Speaker 1: I asked this, Glen, is because the last cycle was 244 00:13:56,440 --> 00:13:59,200 Speaker 1: so long and so shallowed, and I'm trying to understand 245 00:13:59,440 --> 00:14:01,840 Speaker 1: as we move three, this one really quickly, particularly in 246 00:14:01,880 --> 00:14:04,600 Speaker 1: financial markets, and if we see that snap back just 247 00:14:04,679 --> 00:14:07,120 Speaker 1: as fast, whether we need to be prepared for short 248 00:14:07,160 --> 00:14:09,640 Speaker 1: psychos again and maybe look past the history of the 249 00:14:09,679 --> 00:14:12,760 Speaker 1: last ten years and looked at what came before. Well, 250 00:14:12,760 --> 00:14:15,400 Speaker 1: I think a law will depend on how policy response 251 00:14:15,440 --> 00:14:18,960 Speaker 1: has developed. So after the global financial prices crisis, we 252 00:14:19,000 --> 00:14:22,920 Speaker 1: did have a fairly sluggish and eventually large policy response, 253 00:14:23,160 --> 00:14:27,480 Speaker 1: but it didn't really reset business people's expectations. Fairly anti 254 00:14:27,560 --> 00:14:31,560 Speaker 1: business regulatory and tax agenda, And so the question is 255 00:14:31,720 --> 00:14:34,120 Speaker 1: will we do that again? I hope not, and I 256 00:14:34,160 --> 00:14:37,160 Speaker 1: don't necessarily think so. I think President Biden has a 257 00:14:37,200 --> 00:14:40,560 Speaker 1: somewhat different agenda, but we'll have to see. Glenn Harberg, 258 00:14:40,680 --> 00:14:44,960 Speaker 1: can we close the inequality that we have? Can we 259 00:14:45,040 --> 00:14:50,480 Speaker 1: close the pandemic induced inequality given modern technology? This is 260 00:14:50,520 --> 00:14:52,840 Speaker 1: something you did at the business school. You lead on 261 00:14:52,880 --> 00:14:56,760 Speaker 1: this for years. We completely understand the technic would not 262 00:14:56,920 --> 00:15:00,960 Speaker 1: understand the technological impulse right now. Are we asking for 263 00:15:01,040 --> 00:15:06,040 Speaker 1: too much from our authorities to close the inequality gap? No? 264 00:15:06,200 --> 00:15:07,760 Speaker 1: I don't think we are. I don't think we can 265 00:15:07,840 --> 00:15:09,840 Speaker 1: quote close it, but I think we can start by 266 00:15:09,880 --> 00:15:13,040 Speaker 1: asking a big question. Given the technological changes, you put 267 00:15:13,040 --> 00:15:17,320 Speaker 1: In and also globalization have disadvantaged some kinds of workers 268 00:15:17,360 --> 00:15:20,280 Speaker 1: while they've advantage most of the rest of us. What 269 00:15:20,360 --> 00:15:22,800 Speaker 1: can we do about that? If I were President Biden 270 00:15:22,840 --> 00:15:26,880 Speaker 1: thinking about quote, infrastructure, I would think about preparing people, 271 00:15:27,400 --> 00:15:31,280 Speaker 1: So that would be focusing on community college and focusing 272 00:15:31,320 --> 00:15:35,240 Speaker 1: on distress communities in a meaningful way. That to me 273 00:15:35,520 --> 00:15:39,240 Speaker 1: is preparation to compete. That's what Adam spitballs all right, Glenn, 274 00:15:39,440 --> 00:15:42,680 Speaker 1: Just to wrap this all together, the underlying fear and markets, 275 00:15:42,720 --> 00:15:45,440 Speaker 1: the underlying debate is really on inflation. And you touched 276 00:15:45,480 --> 00:15:47,280 Speaker 1: on this earlier where you said that you do see 277 00:15:47,280 --> 00:15:49,120 Speaker 1: this more as a transitory phase, or at least that 278 00:15:49,120 --> 00:15:51,200 Speaker 1: that's how the feder will look at it. What would 279 00:15:51,240 --> 00:15:53,400 Speaker 1: you see or what would you have to see to 280 00:15:53,560 --> 00:15:56,120 Speaker 1: shift your opinion to say this time really is different 281 00:15:56,120 --> 00:16:00,000 Speaker 1: in terms of a new inflationary regime where suddenly prices 282 00:16:00,040 --> 00:16:02,440 Speaker 1: start going up at a substantially faster clip for a 283 00:16:02,480 --> 00:16:06,080 Speaker 1: prolonged period. Well, I think exactly as you said, you 284 00:16:06,200 --> 00:16:08,920 Speaker 1: need to see working its way through the system that 285 00:16:09,080 --> 00:16:12,600 Speaker 1: sustained priced increases at all levels and wage pressures to 286 00:16:12,680 --> 00:16:15,280 Speaker 1: follow it. But I'm more worried about in the near 287 00:16:15,480 --> 00:16:18,400 Speaker 1: term is a spill over in the financial fraud in 288 00:16:18,480 --> 00:16:22,720 Speaker 1: the markets more than goods prices and services prices getting 289 00:16:22,720 --> 00:16:24,880 Speaker 1: out of hand. Glenn, always great to catch up, so 290 00:16:25,040 --> 00:16:27,080 Speaker 1: appreciate your time. Thanks for being with us, Glen Hubbard. 291 00:16:27,080 --> 00:16:29,880 Speaker 1: They're the former Council of Economic Advisors chairman, and of 292 00:16:29,920 --> 00:16:39,840 Speaker 1: course Columbia University Professor of economics Andrew Sheets joins us. 293 00:16:39,840 --> 00:16:42,160 Speaker 1: Now more Can Stanley, chief cross assets strategist. That's not 294 00:16:42,160 --> 00:16:44,440 Speaker 1: where we'll start, and true, we're going to start with 295 00:16:44,440 --> 00:16:46,520 Speaker 1: the cycle because you guys have put out a note 296 00:16:46,520 --> 00:16:48,120 Speaker 1: in the last twenty four hours and I touched on 297 00:16:48,160 --> 00:16:50,760 Speaker 1: with Mike Wilson, your colleague, yesterday, and I think it's 298 00:16:50,920 --> 00:16:54,080 Speaker 1: really really important to understand that you are already talking 299 00:16:54,120 --> 00:16:57,240 Speaker 1: about mid cycle dynamics in this market before this economy 300 00:16:57,320 --> 00:17:02,840 Speaker 1: is even reopened and gotten started. Yeah. Thanks, Well, good morning, 301 00:17:03,000 --> 00:17:06,320 Speaker 1: um everyone. And I think that's a really important theme. Obviously, 302 00:17:06,359 --> 00:17:08,879 Speaker 1: there are some near term events, key events today that 303 00:17:08,920 --> 00:17:10,719 Speaker 1: are going on that matter a lot for the market, 304 00:17:11,240 --> 00:17:13,080 Speaker 1: but we do think it's s important to step back 305 00:17:13,280 --> 00:17:16,320 Speaker 1: and think about this cycle. And I do think there 306 00:17:16,320 --> 00:17:19,840 Speaker 1: are a lot of reasons why this cycle could burn hotter, 307 00:17:20,560 --> 00:17:22,879 Speaker 1: but because of that also burned shorter. And that's a 308 00:17:22,960 --> 00:17:25,080 Speaker 1: key theme from us at Morgan Stanley. That's what what 309 00:17:25,320 --> 00:17:27,720 Speaker 1: my colleague Michael Wilson was talking about the other day. 310 00:17:28,320 --> 00:17:30,479 Speaker 1: And I think that means that, you know, the market 311 00:17:30,640 --> 00:17:34,520 Speaker 1: might have to transition from early cycle trades and investment 312 00:17:34,560 --> 00:17:38,400 Speaker 1: strategies to mid cycle or even late cycle strategies much 313 00:17:38,480 --> 00:17:40,600 Speaker 1: faster than one would have done in kind of past 314 00:17:40,920 --> 00:17:44,159 Speaker 1: past market cycles. Andrew, do you agree with me that 315 00:17:44,320 --> 00:17:46,159 Speaker 1: the heart of the matter to the take it to 316 00:17:46,200 --> 00:17:50,280 Speaker 1: the House of Gorman is the calculation by Ellen Zetner 317 00:17:50,440 --> 00:17:53,440 Speaker 1: of when and how the g d P fade occurs. 318 00:17:53,760 --> 00:17:58,080 Speaker 1: That's really the first order condition here, isn't it? Well? 319 00:17:58,119 --> 00:18:00,800 Speaker 1: I I do, and I so think you know, to 320 00:18:00,840 --> 00:18:03,040 Speaker 1: a point you guys were mentioning earlier. I think there 321 00:18:03,119 --> 00:18:06,960 Speaker 1: is a lot of unprecedented um elements of this, right. 322 00:18:06,960 --> 00:18:10,360 Speaker 1: I think you have in some ways a really unique 323 00:18:10,640 --> 00:18:14,239 Speaker 1: demand and supply shock happening together. Right. If I think, 324 00:18:14,280 --> 00:18:17,320 Speaker 1: if you think about that demand curve, you have a 325 00:18:17,400 --> 00:18:20,399 Speaker 1: record high savings rate, You've had a record amount of 326 00:18:20,400 --> 00:18:23,840 Speaker 1: physical stimulus put into the economy in the form of 327 00:18:24,160 --> 00:18:27,359 Speaker 1: checks and other other transfers, and then you have a 328 00:18:27,359 --> 00:18:29,440 Speaker 1: lot of people who for the first time will be 329 00:18:29,520 --> 00:18:32,639 Speaker 1: able to consume goods and services that they have not 330 00:18:32,680 --> 00:18:35,560 Speaker 1: been able to consume before and might be more more willing, 331 00:18:35,640 --> 00:18:38,600 Speaker 1: might be less price sensitive to doing that. So, you know, 332 00:18:38,680 --> 00:18:41,720 Speaker 1: ellen Is Forecasting has an above consensus kind of eight 333 00:18:41,760 --> 00:18:45,760 Speaker 1: point one percent growth number for for for this year. Um, 334 00:18:45,800 --> 00:18:49,000 Speaker 1: you know, we we we're very optimistic around the US 335 00:18:49,080 --> 00:18:51,440 Speaker 1: growth outlook. But but indeed, I think some of the 336 00:18:51,520 --> 00:18:54,320 Speaker 1: question for the outyears is does that start to come 337 00:18:54,600 --> 00:18:56,679 Speaker 1: does that start to come back? And then also I 338 00:18:56,720 --> 00:19:01,080 Speaker 1: think for companies, you know, a very normal cycle dynamic 339 00:19:01,240 --> 00:19:05,640 Speaker 1: is that as the cycle progresses, sometimes you get margin pressure. 340 00:19:05,680 --> 00:19:08,840 Speaker 1: These costs that come through with the economic expansion start 341 00:19:08,880 --> 00:19:11,159 Speaker 1: to hit the bottom line. And so whereas early in 342 00:19:11,160 --> 00:19:14,200 Speaker 1: the cycle, things like small caps do very very well 343 00:19:14,240 --> 00:19:16,960 Speaker 1: because they have very strong operating leverage, they start to 344 00:19:17,000 --> 00:19:19,359 Speaker 1: do less well as the cycle progresses because of some 345 00:19:19,400 --> 00:19:22,320 Speaker 1: of those cost pressures. Andrew, this is a fantastic explanation 346 00:19:22,680 --> 00:19:24,960 Speaker 1: of how we can see that incredible growth that you're 347 00:19:25,040 --> 00:19:27,920 Speaker 1: calling for the Goldman Sacks is calling for well, also 348 00:19:28,040 --> 00:19:30,960 Speaker 1: not seeing long term inflation pick up. When you say 349 00:19:31,000 --> 00:19:33,840 Speaker 1: burn hotter but burn shorter, there is a question when 350 00:19:33,880 --> 00:19:36,160 Speaker 1: do treasury is ten ure Treasury has become a buy 351 00:19:36,560 --> 00:19:39,679 Speaker 1: because of the expectations to this reversion to a slow 352 00:19:39,720 --> 00:19:43,040 Speaker 1: growth world of perhaps even a downturn on the heels 353 00:19:43,040 --> 00:19:47,879 Speaker 1: of this very fast and very hot expansion. Yeah, no, 354 00:19:47,960 --> 00:19:50,280 Speaker 1: I think that's absolutely the right question. So so at 355 00:19:50,280 --> 00:19:53,040 Speaker 1: the moment, you know, our our asset allocation is still 356 00:19:53,119 --> 00:19:57,400 Speaker 1: underweight duration. That being said, are our interest rate strategists, 357 00:19:57,400 --> 00:20:00,200 Speaker 1: you know are forecasting the US tenure to in the 358 00:20:00,280 --> 00:20:03,080 Speaker 1: year at at one point seven percent, so we're very 359 00:20:03,119 --> 00:20:06,120 Speaker 1: close to that number. So I certainly think it's it's 360 00:20:06,160 --> 00:20:08,680 Speaker 1: the right question to ask. And as the yield curve 361 00:20:08,760 --> 00:20:13,320 Speaker 1: is steepened, that the carry the economics of holding treasuries 362 00:20:13,440 --> 00:20:15,760 Speaker 1: is getting a lot better. So you know, I do 363 00:20:15,800 --> 00:20:18,280 Speaker 1: think there's important things to watch. Obviously what we get 364 00:20:18,320 --> 00:20:22,040 Speaker 1: today and what we get out of this question around 365 00:20:22,400 --> 00:20:25,639 Speaker 1: the SLR exemption as I think important, but also I 366 00:20:25,680 --> 00:20:27,600 Speaker 1: think stepping back, I mean to me, one of the 367 00:20:27,600 --> 00:20:32,119 Speaker 1: most fascinating charts is in the entire market is what 368 00:20:32,240 --> 00:20:35,439 Speaker 1: the break even expectation curve looks like. And at the 369 00:20:35,520 --> 00:20:38,000 Speaker 1: moment you know that is the FED could not ask 370 00:20:38,320 --> 00:20:41,640 Speaker 1: for a better set of break even expectations. Inflation expectations 371 00:20:41,720 --> 00:20:44,439 Speaker 1: right there, they're high over the next five years, but 372 00:20:44,480 --> 00:20:47,000 Speaker 1: then they're lower over the next ten years, they're lower 373 00:20:47,000 --> 00:20:49,639 Speaker 1: over the next thirties. So that is not telling the 374 00:20:49,680 --> 00:20:53,040 Speaker 1: story of inflation run out of control. And I think 375 00:20:53,080 --> 00:20:55,320 Speaker 1: that's important for the bond you know, for the bond 376 00:20:55,320 --> 00:20:58,280 Speaker 1: buying story, because I think, you know, essential to kind 377 00:20:58,280 --> 00:21:00,680 Speaker 1: of bonds being a buy for some of those those 378 00:21:00,760 --> 00:21:03,240 Speaker 1: yield curve dynamics to come into play, is the idea 379 00:21:03,320 --> 00:21:04,879 Speaker 1: that we're not going to get something to run out 380 00:21:04,920 --> 00:21:07,160 Speaker 1: of control. I think certainly at the moment, the inflation 381 00:21:07,200 --> 00:21:09,320 Speaker 1: curve is still forecasting and we've got to go to this. 382 00:21:09,400 --> 00:21:11,439 Speaker 1: John Ferrell mentioned it earlier. I mean, I look at 383 00:21:11,480 --> 00:21:15,560 Speaker 1: the heritage of John Randolphin Brown Ultimate Frisbee. Andrew, did 384 00:21:15,640 --> 00:21:19,960 Speaker 1: you do a Brown Ultimate when you were there? I did. 385 00:21:20,080 --> 00:21:23,960 Speaker 1: I'm I'm happy, happy to say I did very good. 386 00:21:24,040 --> 00:21:26,760 Speaker 1: Andrew Sheets, thank you so much, and thank you all 387 00:21:26,760 --> 00:21:38,440 Speaker 1: American Brown Texas was a really important match. Said right now, 388 00:21:38,440 --> 00:21:40,680 Speaker 1: on this FED day, we get perspective from a former 389 00:21:40,720 --> 00:21:43,399 Speaker 1: governor of the Fellow Reserve System, Randall Krosner, at the 390 00:21:43,520 --> 00:21:47,080 Speaker 1: Chicago Booth School, and he has steeped in the history 391 00:21:47,080 --> 00:21:50,480 Speaker 1: of Chicago, from Night to Stigler onto Milton Friedman and 392 00:21:50,600 --> 00:21:53,639 Speaker 1: all of the good work of the modern age. Randy, 393 00:21:53,720 --> 00:21:57,920 Speaker 1: we have fought a pandemic war. Out of World War Two, 394 00:21:58,000 --> 00:22:02,199 Speaker 1: we had fourteen percent inflation, and in nineteen forties seven, 395 00:22:02,600 --> 00:22:06,040 Speaker 1: all of a sudden one percent inflation five six years 396 00:22:06,119 --> 00:22:10,800 Speaker 1: later in nineteen fifty three, the inflation of Trueman. Can 397 00:22:10,840 --> 00:22:13,800 Speaker 1: it be the inflation of Powell? Where we get back 398 00:22:13,840 --> 00:22:17,960 Speaker 1: to normal quicker than we think? Well, I don't think 399 00:22:18,000 --> 00:22:21,040 Speaker 1: that we are going to be seeing some inflationary pressure. 400 00:22:21,520 --> 00:22:26,240 Speaker 1: We certainly see a very very strong, extraordinarily strong fiscal 401 00:22:26,280 --> 00:22:30,639 Speaker 1: stimulus and and obviously a lot of support from the Fed. 402 00:22:31,240 --> 00:22:34,000 Speaker 1: Are we gonna see numbers anywhere close to what you 403 00:22:34,119 --> 00:22:37,320 Speaker 1: just quoted on the highside. I don't think so. But 404 00:22:37,359 --> 00:22:39,680 Speaker 1: I can see a boost up. Well, we see a 405 00:22:39,760 --> 00:22:42,440 Speaker 1: boost up in inflation, and there's this god awful fear 406 00:22:42,480 --> 00:22:46,680 Speaker 1: it's the sixties and seventies inflation of a sustained inflation. 407 00:22:47,160 --> 00:22:51,280 Speaker 1: What is that likelihood? Well, this is this is the 408 00:22:51,359 --> 00:22:55,439 Speaker 1: thing where we u we don't know. Um, We're in 409 00:22:55,440 --> 00:22:58,040 Speaker 1: the unusual situation where the central bank is trying to 410 00:22:58,080 --> 00:23:02,199 Speaker 1: push up inflation expectations and shop inflation. In this context 411 00:23:02,240 --> 00:23:05,720 Speaker 1: of now a potential for a strong boom in the 412 00:23:05,760 --> 00:23:10,000 Speaker 1: economy with the fiscal stimulus, the question is could inflation 413 00:23:10,040 --> 00:23:12,760 Speaker 1: expectations become un angry. The FED has been trying to 414 00:23:12,800 --> 00:23:15,240 Speaker 1: move them up to two. They've been persistently below too 415 00:23:15,320 --> 00:23:17,800 Speaker 1: for the last decade. But when you start moving them up, 416 00:23:18,000 --> 00:23:21,119 Speaker 1: they continue to move up. And that's the uncertainty. So 417 00:23:21,200 --> 00:23:23,160 Speaker 1: much uncertainty right now. Randy, and I want to touch 418 00:23:23,200 --> 00:23:25,320 Speaker 1: on your experience in the Federal Reserve as well. Do 419 00:23:25,359 --> 00:23:27,320 Speaker 1: you think it's the correct approach to take the lessons 420 00:23:27,400 --> 00:23:33,240 Speaker 1: learned from the previous crisis and apply them to this crisis. Well, um, 421 00:23:33,280 --> 00:23:34,920 Speaker 1: there are some things that are similar and some things 422 00:23:34,920 --> 00:23:36,760 Speaker 1: that are different. So I think some of the lessons 423 00:23:36,760 --> 00:23:39,760 Speaker 1: that the FED learners it's incredibly important to provide liquidity. 424 00:23:40,000 --> 00:23:41,680 Speaker 1: So when I was there, we had created all these 425 00:23:41,800 --> 00:23:43,679 Speaker 1: you know, we did the large scale asset purposes and 426 00:23:43,720 --> 00:23:47,320 Speaker 1: all the lending programs. FED immediately stood those up about 427 00:23:47,320 --> 00:23:49,879 Speaker 1: a year ago and it's actually almost the exactly a 428 00:23:49,960 --> 00:23:54,719 Speaker 1: year ago and provided that to the treasure markets were 429 00:23:54,720 --> 00:23:57,840 Speaker 1: functioning to make sure that we were avoiding a financial meltdown. 430 00:23:58,080 --> 00:24:01,680 Speaker 1: That's extremely important. What's new is that m uh, this 431 00:24:02,000 --> 00:24:06,520 Speaker 1: the extent of the fiscal stimulus, and that the restriction 432 00:24:06,640 --> 00:24:10,280 Speaker 1: on on consumption was really policy induced because of all 433 00:24:10,359 --> 00:24:13,400 Speaker 1: the restrictions associated with the pandemic. When those come off 434 00:24:13,520 --> 00:24:16,200 Speaker 1: and combined with the fiscal stimulus, this is really something 435 00:24:16,240 --> 00:24:18,480 Speaker 1: we haven't seen before. So the reason I raised this 436 00:24:18,480 --> 00:24:21,040 Speaker 1: around is because, as you know, your former colleagues have 437 00:24:21,080 --> 00:24:23,760 Speaker 1: been conditioned by the previous cycle to believe they need 438 00:24:23,760 --> 00:24:26,040 Speaker 1: to run this hotter and I'm just wondering whether you 439 00:24:26,080 --> 00:24:28,400 Speaker 1: think they'll be surprised by how quickly things snapped back 440 00:24:29,680 --> 00:24:33,359 Speaker 1: well exactly. That's why this is something that's unusual to 441 00:24:33,480 --> 00:24:37,480 Speaker 1: have a consumption being pent up because policy choices made 442 00:24:37,480 --> 00:24:42,520 Speaker 1: people stay home um and because of concerns about infection 443 00:24:42,920 --> 00:24:45,840 Speaker 1: with the rollout of the vaccine. With people feeling more 444 00:24:45,880 --> 00:24:51,280 Speaker 1: profitable out with policy restrictions being relaxed, plus an unprecedented stimulus, 445 00:24:51,359 --> 00:24:54,679 Speaker 1: you couldn't stand back quite quickly. Professor. There's also a 446 00:24:54,720 --> 00:24:58,040 Speaker 1: concern that the FEDS policy of holding monetary conditions so 447 00:24:58,119 --> 00:25:01,879 Speaker 1: easy do threaten financial stability over the near and frankly 448 00:25:01,920 --> 00:25:04,440 Speaker 1: over the longer term. This idea that asset price inflation 449 00:25:04,880 --> 00:25:07,920 Speaker 1: is very real and very hot. At what point does 450 00:25:07,960 --> 00:25:11,280 Speaker 1: this pose a financial stability risk that the FED really 451 00:25:11,320 --> 00:25:14,840 Speaker 1: cannot ignore? So I think this is something that that 452 00:25:14,920 --> 00:25:17,879 Speaker 1: they're thinking about, but is not the main thing that 453 00:25:17,880 --> 00:25:20,280 Speaker 1: they're focusing on right now. They're they're really focusing on 454 00:25:20,359 --> 00:25:23,280 Speaker 1: making sure that we do have a firm foundation for recovery. 455 00:25:23,600 --> 00:25:26,840 Speaker 1: The less thing that the Chairman Paul wants to do 456 00:25:27,000 --> 00:25:30,199 Speaker 1: is to to sort of spook the markets and have 457 00:25:30,520 --> 00:25:34,960 Speaker 1: financial conditions tight and dramatically have the markets turned south 458 00:25:35,240 --> 00:25:39,000 Speaker 1: before we actually see the boom coming. I think they say, well, 459 00:25:39,000 --> 00:25:41,840 Speaker 1: if we have a boom, then we'll deal with it. Um. 460 00:25:41,880 --> 00:25:44,680 Speaker 1: That could be a very good approach, but it could 461 00:25:44,680 --> 00:25:46,440 Speaker 1: also be one where you're taking a lot of risk 462 00:25:46,480 --> 00:25:49,520 Speaker 1: for infliction expectations to get out of control. Brey, tell 463 00:25:49,560 --> 00:25:51,880 Speaker 1: me about the multipliers. I mean, it's not the micro 464 00:25:51,920 --> 00:25:54,800 Speaker 1: economics of Chicago, but we can go there. Do we 465 00:25:54,880 --> 00:25:58,439 Speaker 1: have any understanding of the multipliers of consumption and the 466 00:25:58,480 --> 00:26:01,440 Speaker 1: rest of the equation or is that truly a mystery 467 00:26:01,800 --> 00:26:04,560 Speaker 1: at this unique time. I think there's a lot of 468 00:26:04,640 --> 00:26:08,560 Speaker 1: uncertainty a path when people make very strong assertions about 469 00:26:08,600 --> 00:26:11,240 Speaker 1: what so called multipliers are that is, when the government 470 00:26:11,240 --> 00:26:13,640 Speaker 1: spends a dollar, how much does that turned into additional 471 00:26:13,680 --> 00:26:16,639 Speaker 1: g D p UM. But again, we don't have a 472 00:26:16,640 --> 00:26:20,400 Speaker 1: lot of experience with this type of UH. This type 473 00:26:20,400 --> 00:26:26,159 Speaker 1: of condition where poised for potentially very big consumption as 474 00:26:26,160 --> 00:26:29,359 Speaker 1: well as production group. Randy, we gotta lead to that, 475 00:26:29,440 --> 00:26:32,119 Speaker 1: Randy Crowson to that University of Chicago, both School of Business, 476 00:26:32,160 --> 00:26:41,040 Speaker 1: Professor of Economics. Thank you, sir. We had a historic 477 00:26:41,119 --> 00:26:44,320 Speaker 1: conversation yesterday with a Mesha Dolgo. He was scathing on 478 00:26:44,359 --> 00:26:48,159 Speaker 1: the European vaccine response. We go American today with Laurence 479 00:26:48,160 --> 00:26:53,760 Speaker 1: Sauer with JOHNS. Hopkins as well, Associate Professor of Emergency Medicine. Lauren, 480 00:26:53,800 --> 00:26:56,600 Speaker 1: I see a lot of percolation that as we open 481 00:26:56,680 --> 00:27:00,640 Speaker 1: up society we may quote unquote Plateau and ours statistics. 482 00:27:01,320 --> 00:27:05,359 Speaker 1: Is that fear valid? I think that fear is valid. 483 00:27:05,520 --> 00:27:08,440 Speaker 1: I think the key is to open up safely exactly. 484 00:27:08,720 --> 00:27:11,480 Speaker 1: You know those words are so important, right. We still 485 00:27:11,520 --> 00:27:13,639 Speaker 1: want to use all of those tools that we've been 486 00:27:13,680 --> 00:27:17,200 Speaker 1: developing over the last year in fighting this pandemic. So 487 00:27:17,520 --> 00:27:20,320 Speaker 1: when we're reopening businesses, can we do it safely with 488 00:27:20,480 --> 00:27:25,280 Speaker 1: good practices about distancing between UM patrons. Can we continue 489 00:27:25,280 --> 00:27:28,200 Speaker 1: to use masks? Can we continue to reinforce those face 490 00:27:28,320 --> 00:27:33,480 Speaker 1: covering requirements even if we're reopening bars, restaurants, other businesses 491 00:27:33,480 --> 00:27:37,159 Speaker 1: in society and especially in schools. Yesterday, Mare de Blasio 492 00:27:37,200 --> 00:27:39,080 Speaker 1: of New York City came out and said, it's really 493 00:27:39,200 --> 00:27:43,640 Speaker 1: unfortunate that cities aren't receiving vaccines directly from the federal government, 494 00:27:43,680 --> 00:27:46,280 Speaker 1: that it has to go through the state. Yes, this 495 00:27:46,359 --> 00:27:48,800 Speaker 1: has to do with the tiff between Andrew Cuomo and 496 00:27:48,840 --> 00:27:51,240 Speaker 1: Mayor to Blasio, and yet this also does highlight a 497 00:27:51,359 --> 00:27:55,480 Speaker 1: key question. Should cities be getting the vaccine directly? Should 498 00:27:55,480 --> 00:28:00,320 Speaker 1: we be getting a better distribution mechanism from the federal government. Yeah, 499 00:28:00,359 --> 00:28:01,879 Speaker 1: I think this is a challenge, not just with the 500 00:28:01,960 --> 00:28:04,600 Speaker 1: vaccine distribution. We saw it with testing. We've seen it 501 00:28:04,640 --> 00:28:07,480 Speaker 1: with a lot of the other health care activities associated 502 00:28:07,520 --> 00:28:10,720 Speaker 1: with this pandemic and healthcare more broadly. In the US, 503 00:28:10,840 --> 00:28:13,320 Speaker 1: we do not have a federal system for healthcare. We 504 00:28:13,400 --> 00:28:17,159 Speaker 1: have a disaggregated healthcare system. It makes national strategies for 505 00:28:17,280 --> 00:28:20,520 Speaker 1: anything really challenging UM and we're seeing that play out 506 00:28:20,520 --> 00:28:23,840 Speaker 1: in real time, and it will only be exacerbated an emergency, right, 507 00:28:23,880 --> 00:28:25,680 Speaker 1: because you have to make rapid decisions, you have to 508 00:28:25,760 --> 00:28:29,320 Speaker 1: rapidly distribute, but you still have to use these existing chains, 509 00:28:29,359 --> 00:28:32,480 Speaker 1: these existing pipelines. And so if you want to get 510 00:28:32,960 --> 00:28:35,199 Speaker 1: vaccine into the hands of the community that has the 511 00:28:35,200 --> 00:28:38,240 Speaker 1: greatest need and can um it knows how to work 512 00:28:38,240 --> 00:28:41,920 Speaker 1: with that community to access them, absolutely go through these processes. 513 00:28:41,960 --> 00:28:44,720 Speaker 1: But um, the way our health care system is set up, 514 00:28:44,920 --> 00:28:47,320 Speaker 1: there are these sort of chains and pipelines that slow 515 00:28:47,360 --> 00:28:49,480 Speaker 1: things down. And let's talk about slot of things down 516 00:28:49,560 --> 00:28:51,680 Speaker 1: right now. The President says, May first, to open up 517 00:28:51,680 --> 00:28:54,360 Speaker 1: eligibility to all adults. Here's what Montana has got to say, 518 00:28:54,560 --> 00:28:58,480 Speaker 1: aprol first high similar story ended a month every other 519 00:28:58,520 --> 00:29:00,160 Speaker 1: state that watches this happen, and I can how you 520 00:29:00,240 --> 00:29:02,160 Speaker 1: living here in New York when I looked in Montana 521 00:29:02,200 --> 00:29:04,280 Speaker 1: at the end of the month and Ohio and start 522 00:29:04,280 --> 00:29:07,080 Speaker 1: to see eligibility wide open for sixteen plus, I'm gonna 523 00:29:07,080 --> 00:29:08,959 Speaker 1: be asking the governor here in New York the same thing. 524 00:29:09,000 --> 00:29:12,160 Speaker 1: Everybody will be asking, why can't we do the same thing. 525 00:29:12,480 --> 00:29:15,120 Speaker 1: What is going gone? What is stopping places like New 526 00:29:15,200 --> 00:29:17,040 Speaker 1: York and others just to do the same thing. Now, 527 00:29:17,320 --> 00:29:21,600 Speaker 1: open up eligibility yeah, I think there's a couple of challenges, right. 528 00:29:21,640 --> 00:29:23,600 Speaker 1: So part of it is the access. How do you 529 00:29:23,640 --> 00:29:26,720 Speaker 1: make sure that you're getting to those most vulnerable communities, 530 00:29:26,720 --> 00:29:28,560 Speaker 1: And that goes back to what we were just talking about. 531 00:29:28,600 --> 00:29:31,560 Speaker 1: Do these states that are that are moving up that timeline, 532 00:29:31,600 --> 00:29:34,719 Speaker 1: do they know how to access their vulnerable populations quicker 533 00:29:35,000 --> 00:29:38,040 Speaker 1: or are they just moving on because they have sort 534 00:29:38,080 --> 00:29:40,320 Speaker 1: of not been able to access those communities and they 535 00:29:40,320 --> 00:29:43,760 Speaker 1: want to get vaccine. More broadly, these disparate decisions about 536 00:29:43,760 --> 00:29:46,320 Speaker 1: how we administer vaccine and how we interpret the A 537 00:29:46,440 --> 00:29:49,840 Speaker 1: C I P guidelines UM are what's leading to these 538 00:29:50,120 --> 00:29:53,440 Speaker 1: changing dates depending on where you are. So it also 539 00:29:53,480 --> 00:29:55,760 Speaker 1: can lead to sort of vaccine shopping, which I think 540 00:29:55,760 --> 00:29:59,240 Speaker 1: we're seeing a little bit in places, especially in more 541 00:29:59,280 --> 00:30:02,360 Speaker 1: well to do play is where people have better access 542 00:30:02,400 --> 00:30:05,760 Speaker 1: because they have multiple residencies, or they meet requirements in 543 00:30:05,800 --> 00:30:08,240 Speaker 1: one area and not on another, and they can relocate 544 00:30:08,320 --> 00:30:11,480 Speaker 1: to access those vaccines. So I think that that may 545 00:30:11,560 --> 00:30:16,840 Speaker 1: first deadline or timeline is exciting and it's reasonable, and 546 00:30:16,880 --> 00:30:18,520 Speaker 1: I think we can get there, but we really have 547 00:30:18,640 --> 00:30:21,760 Speaker 1: to focus on making sure that in communities where access 548 00:30:21,840 --> 00:30:25,160 Speaker 1: is hard or where we're not getting at those most vulnerable, 549 00:30:25,720 --> 00:30:29,360 Speaker 1: hard to reach communities and populations, that that's where we 550 00:30:29,400 --> 00:30:32,360 Speaker 1: target to make sure that we are protecting those who 551 00:30:32,400 --> 00:30:35,640 Speaker 1: need that safety net so much more, Lauren. In some ways, 552 00:30:35,640 --> 00:30:37,560 Speaker 1: these are details, especially when you look at the scene 553 00:30:37,560 --> 00:30:40,760 Speaker 1: in Europe where they're struggling to get even a relatively 554 00:30:40,960 --> 00:30:46,800 Speaker 1: a significant proportion of the population vaccinated. Angela Miracles Advisors 555 00:30:46,880 --> 00:30:49,280 Speaker 1: said today that the biggest economic risk is a third 556 00:30:49,360 --> 00:30:52,400 Speaker 1: wave of the virus in the United States based on 557 00:30:52,440 --> 00:30:55,720 Speaker 1: the vaccination schedule, and that may first pledge, is the 558 00:30:56,240 --> 00:31:00,360 Speaker 1: threat of a third wave off the table. I wouldn't 559 00:31:00,360 --> 00:31:02,720 Speaker 1: say it's off the table. I think we are definitely 560 00:31:02,720 --> 00:31:05,840 Speaker 1: in a better place UM and some would say we're 561 00:31:05,840 --> 00:31:07,960 Speaker 1: in a much better place than UM we thought we 562 00:31:08,000 --> 00:31:11,240 Speaker 1: would be. And especially as we started seeing the B 563 00:31:11,440 --> 00:31:14,520 Speaker 1: one one seven variant enter into the US. UM, we're 564 00:31:14,560 --> 00:31:17,320 Speaker 1: still seeing increasing cases in that variant. And I think 565 00:31:17,320 --> 00:31:19,600 Speaker 1: there's a lot of questions about what will happen in 566 00:31:19,640 --> 00:31:24,040 Speaker 1: the numbers as these rapid reopenings change in places like Texas, 567 00:31:24,080 --> 00:31:27,640 Speaker 1: for example. UM, But right now the numbers are still 568 00:31:27,640 --> 00:31:30,600 Speaker 1: looking good UM and I think the key is to 569 00:31:30,680 --> 00:31:33,960 Speaker 1: hold on to those measures that we have worked so 570 00:31:34,000 --> 00:31:36,840 Speaker 1: hard to implement that we know work as we expand 571 00:31:36,880 --> 00:31:41,400 Speaker 1: vaccination coverage. UM, we're doing a great job I think 572 00:31:41,440 --> 00:31:45,560 Speaker 1: in in getting the numbers of vaccines vaccinees up UM 573 00:31:45,640 --> 00:31:48,200 Speaker 1: and now the key is to do those targeted areas 574 00:31:48,240 --> 00:31:52,280 Speaker 1: that have lower vaccination rates UM to keep those overall 575 00:31:52,400 --> 00:31:55,640 Speaker 1: numbers across the country down. Lauren always appreciate time. Thanks 576 00:31:55,680 --> 00:31:57,320 Speaker 1: for being with us early this morning. Laurence Son that 577 00:31:57,400 --> 00:32:00,400 Speaker 1: John's help Kins a solid ship Professor of emergency to see. 578 00:32:00,840 --> 00:32:04,600 Speaker 1: This is the Bloomberg Surveillance Podcast. Thanks for listening. Join 579 00:32:04,720 --> 00:32:08,040 Speaker 1: us live weekdays from seven to ten am Eastern on 580 00:32:08,160 --> 00:32:12,400 Speaker 1: Bloomberg Radio and on Bloomberg Television each day from six 581 00:32:12,520 --> 00:32:17,360 Speaker 1: to nine am for insight from the best in economics, finance, investment, 582 00:32:17,520 --> 00:32:22,520 Speaker 1: and international relations. And subscribe to the Surveillance podcast on 583 00:32:22,640 --> 00:32:26,440 Speaker 1: Apple podcast, SoundCloud, Bloomberg dot com, and of course on 584 00:32:26,560 --> 00:32:30,680 Speaker 1: the terminal. I'm Tom Keene and this is Bloomberg