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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee.

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Speaker 1: We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com and of course on them For the market,

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Speaker 1: we have a really interesting situation. High yield has been

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Speaker 1: decently bid over the last couple of weeks because the

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Speaker 1: FED has stepped in at a time when the energy

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Speaker 1: sector is increasing the under pressure. So what do you

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Speaker 1: do if you're an investor? Will listen to this from Jeffreys.

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Speaker 1: The FED is in danger of making the skill set

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Speaker 1: of investors in credit redundant if the game only becomes

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Speaker 1: front running the next area of debt the FED is

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Speaker 1: going to buy. Let's have that conversation right now, shall

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Speaker 1: we with Jim care and Morgan Stanley Investment Management Fixed

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Speaker 1: income portfolio manager. Jim great to catch up this, sir,

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Speaker 1: Your thoughts on that quote high yield looking dicey, with

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Speaker 1: crude rolling over looking okay, with the said ready to

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Speaker 1: step in. Yeah, So you know, for me, this is

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Speaker 1: a question of of insolvency issues and liquidity problems. So

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Speaker 1: one of the things that we've said over and over

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Speaker 1: and over again is that with the coronavirus is there's

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Speaker 1: created some liquidity problems. We don't want them to turn

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Speaker 1: into a solvency problem. But I do understand the moral

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Speaker 1: hazard aspect of if you are in a business that

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Speaker 1: is a very hypercyclical business, like an energy style business UM,

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Speaker 1: and that's obviously going to be a large percentage of

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Speaker 1: the high yield universe, and if it takes high yield lower,

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Speaker 1: do we always need the FED to come in and

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Speaker 1: run and support it. And I think that the answer

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Speaker 1: is it depends do we want to have oil companies

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Speaker 1: in the US? How important is that into the future?

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Speaker 1: And then how do you triage that you do you

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Speaker 1: pick the best or do you have a way of

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Speaker 1: determining what metric is you know which companies should survive

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Speaker 1: and which shouldn't. Look in the i G Market's what

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Speaker 1: we said is as of March twenty two, if your

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Speaker 1: investment grade UM and your triple B minus are better

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Speaker 1: you felt, and if you fall all the way down

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Speaker 1: to double B minus, the FED will still support those bonds.

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Speaker 1: So yes, there is a little bit of regulatory arbitrage

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Speaker 1: here where if these sectors do start to come under

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Speaker 1: a fair amount of pressure that this might create some

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Speaker 1: fed or some type of government support facility. Um. I

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Speaker 1: think what's important is that that gets triage to just

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Speaker 1: the strongest. It can't just be ubiquitous cover all blanket

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Speaker 1: of Oh, don't worry, We're just gonna buy high yield

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Speaker 1: no matter what, or energy sector no matter what. I

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Speaker 1: think the more important aspect of this is that there

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Speaker 1: has to be a triage ast to which companies get

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Speaker 1: the benefit and which don't. All right, so we're talking should,

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Speaker 1: let's talk will, and let's talk positioning, and a lot

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Speaker 1: of people that I've spoken to are saying, perhaps the

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Speaker 1: rally and jump bonds has gotten a little ahead of itself. Jim,

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Speaker 1: do you agree, Well, I mean it did for technical reasons,

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Speaker 1: just because the double B minuses are going to be bought,

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Speaker 1: you know, with fallen angels from from the investment grade space.

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Speaker 1: So so yes, I I would agree that it took

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Speaker 1: the whole index up. Is a large chunk of it

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Speaker 1: that is very, very vulnerable to the energy sector. So

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Speaker 1: a phrase that we use is which securities are inside

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Speaker 1: the tent and which securities are outside of the tent.

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Speaker 1: The securities that are outside of the tent are which

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Speaker 1: means the tent of policy support, which a lot of

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Speaker 1: it is the high yield sector, in particular in in

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Speaker 1: in the energy sector. And when you see oil prices

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Speaker 1: fall this way, this is going to create a lot

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Speaker 1: of stress. So I don't know that the FED can

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Speaker 1: actually do very very much about this because look what's

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Speaker 1: going on here is we have a drop in global demand.

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Speaker 1: OPEC is not what it used to be in terms

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Speaker 1: of regulating oil prices. So we go back to oil

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Speaker 1: being a boom bus business like it always was. You know,

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Speaker 1: you have oil run up to very very high prices

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Speaker 1: and a lot of people get in the business and

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Speaker 1: then it goes crashing down, a lot of people fall

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Speaker 1: out of the business. And it's a very highly cyclical

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Speaker 1: commodity that was you know, pretty much kept in check

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Speaker 1: by OPEC for a long period of time, but now

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Speaker 1: that's gone. So at this point now it's just the

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Speaker 1: real true supplying demand and dynamics, which can be brutal.

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Speaker 1: Um So investors beware, if you're going to buy, make

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Speaker 1: sure you get a good enough discount to actually take

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Speaker 1: this risk. And that's the key. But in the interim.

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Speaker 1: I think that there are some companies, and it's tied

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Speaker 1: to employment as well, that might need some solvency support

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Speaker 1: at at this point, Jim Karen, you mentioned inside the

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Speaker 1: tent are retirees inside the tent? So that's a great question, right,

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Speaker 1: So so retirees per se are are not necessarily right,

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Speaker 1: so we're talking about sectors in specific securities. But you're right, Tom, Tom,

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Speaker 1: we we can extend this out to moral hazard lengths

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Speaker 1: and say, okay, who should be saved, who shouldn't be saved?

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Speaker 1: And once we get started, when do we stop? And

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Speaker 1: I'm I'm I'm very very much in favor of free markets,

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Speaker 1: and I'm also you know, very much in favor of

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Speaker 1: what the FED does to stabilize markets as well. So

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Speaker 1: what's also critical is that this is temporary and it's targeted.

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Speaker 1: So temporary and targeted are are two things that need

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Speaker 1: to be there. And also there has to be a

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Speaker 1: triage of you know, stronger balance sheets and you know,

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Speaker 1: there's gotta be a cut offline where if if you

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Speaker 1: had a strong balance sheet and that you're being unduly

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Speaker 1: affected because of the coronavirus, then then that's you know,

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Speaker 1: then then maybe you should get some support. But if

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Speaker 1: it's just that, hey, you're in a cyclical business and

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Speaker 1: somebody invested in this business, then you know you're gonna

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Speaker 1: you know, you took the risk, and that's what this is. UM.

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Speaker 1: So there are gonna be losers and they're gonna be

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Speaker 1: some winners, um. And that's our job is to try

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Speaker 1: to figure out what sectors are gonna be the winners

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Speaker 1: and losers. At the start of the year, Gym, to

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Speaker 1: be clear with the audience, you were far more conservative

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Speaker 1: versus the rest of the street and became far more

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Speaker 1: constructive versus the rest of the street over the last

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Speaker 1: month or so. Behind this market rip that we've seen

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Speaker 1: over the last several weeks, can you talk to us

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Speaker 1: about why you're so willing to price in a better

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Speaker 1: future when the data around us tells us a story

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Speaker 1: of gloom and do for the next several months. Yeah,

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Speaker 1: I mean, effectively, we're looking forward right and we're trying

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Speaker 1: to figure out what the market's discounting and how much

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Speaker 1: is actually in the price right now. And and look,

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Speaker 1: the biggest piece of the puzzle that's still missing is

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Speaker 1: what the path of this viruses and and doesn't create

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Speaker 1: another shutdown in the economy and what have you. But

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Speaker 1: if we go on the operating assumption that it doesn't,

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Speaker 1: and if we start to look towards recovery, then we

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Speaker 1: can start to look at certain asset classes. I'm in

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Speaker 1: fixed income, so I'm gonna look at places like investment grade.

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Speaker 1: I'm gonna look at some of the higher uh credit

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Speaker 1: qualities within securitized and even some of the double ds

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Speaker 1: within high yield, and the healthcare sector and industrial sector

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Speaker 1: and paper packaging and you know other things of of

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Speaker 1: of of that area that I think are more real

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Speaker 1: broad economy stories. And I think that when I look

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Speaker 1: at the high yield index, or when I look at

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Speaker 1: the investment grade index and I watched spreads go out

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Speaker 1: to almost four d basis points over to me, that's

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Speaker 1: too much. Now recently spreads have come in you know,

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Speaker 1: quite uh, you know, quite significantly, and maybe it's gone

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Speaker 1: a little too far and it might set back. But

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Speaker 1: the point is is that as long as we start

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Speaker 1: to stabilize and we get the third quarter recovery, fourth

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Speaker 1: quarter recovery writing off the first and second quarter, then

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Speaker 1: I think that earnings start to come back in default

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Speaker 1: risks ultimately start to fall. High yield default risks are

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Speaker 1: in double digits, low double digits, like twelve, depending on

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Speaker 1: who you talk to in which ratings agencies that you're

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Speaker 1: looking at. Um, that may be a relevant statistic if

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Speaker 1: we look at the energy sector, but it might not

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Speaker 1: be relative when we look at it very idiosyncratically named

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Speaker 1: by name, bond by bond. And that's why it's so

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Speaker 1: important right now, Jonathan, that we start to think much

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Speaker 1: more idiosyncratically, much more of a stock picker or bond

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Speaker 1: pickers type of a market as opposed to broad index plays.

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Speaker 1: Is if you buy the index, you're gonna buy a

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Speaker 1: large chunk of things you just don't want. So to

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Speaker 1: be selective is a lot more, is a lot more

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Speaker 1: of what this market is calling for. Jim. It's why

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Speaker 1: to catch you have they set Jim keron that Morgan

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Speaker 1: standing investment management, fixed income portfolio manager. It would be

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Speaker 1: important to go to the optimist in Europe who's so

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Speaker 1: gloomy now I can't believe we let him on air.

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Speaker 1: Eric Nielsen joins us with UNI Credit, usually very optimistic,

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Speaker 1: and Eric, I was thunderstruck by your note and your

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Speaker 1: caution and the European economic experiments through two thousand twenty.

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Speaker 1: What's the distinction here? Why are you so much gloomier

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Speaker 1: than others? Because I think the shut down by governments,

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Speaker 1: this is a man made recession for good reasons, obviously

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Speaker 1: for the health reasons. But this is something we've never

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Speaker 1: seen before, that that I'm aware of. And if you

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Speaker 1: just go through the sectors and think about what basically

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Speaker 1: has been shot down, I find it impossible not to

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Speaker 1: conclude that we at least get a few months of

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Speaker 1: very very deep contraction earty percent of there about. And

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Speaker 1: if you get that, even with a strong recovery in

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Speaker 1: the second half of the year, you get these kind

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Speaker 1: of average GDP numbers were forecasting for Europe thirteen percent down,

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Speaker 1: the US ten percent down. It's almost impossible not to

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Speaker 1: get these tower numbers. The e CP is coming in big,

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Speaker 1: acting quite aggressively. Can you explain to me why the

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Speaker 1: Italian bond market is moving in the other direction on

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Speaker 1: the morning like this morning? No, I can't really, but

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Speaker 1: it is ultimately as you said just before I got

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Speaker 1: on that, that it is a revival of this fear

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Speaker 1: about the euro Zone. Um. I think it is misplaced,

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Speaker 1: but to be honest, I find the Italian government is

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Speaker 1: not doing itself a favor by by sounding so anti

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Speaker 1: European at a time when the e CP is buying

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Speaker 1: all the debt I mean days. This is the debt

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Speaker 1: issue is not an issue at the time, right because

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Speaker 1: the e c P is there and that is common death.

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Speaker 1: So it's so I I fail to see the excitement.

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Speaker 1: And again, as you said, I mean the actual interest

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Speaker 1: rates are absurdly though the speccal widening, but but the

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Speaker 1: buns are deep negative, right, So so that sustainability for

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Speaker 1: me is not a big risk here. Just to clarify,

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Speaker 1: so you don't think that the concept that the euro

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Speaker 1: region will break up or that there won't be some

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Speaker 1: sort of backstab to the currency in its existence. You

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Speaker 1: think that those worries are overblown and not realistic. But

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Speaker 1: you do think that the responses will be insufficient to

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Speaker 1: stave off a very deep and prolonged recession within Europe.

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Speaker 1: Is that correct? Uh? Yes? On to the last step,

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Speaker 1: and you said, I don't think this resertain is going

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Speaker 1: to be long. It's going to be deep, but very brief.

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Speaker 1: So we're talking about a quarter or two and then

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Speaker 1: we probably hopefully see some growth again, and and and then.

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Speaker 1: But I don't think we get back to normal until

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Speaker 1: you know, we get a vaccine or the privtical treatment

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Speaker 1: or something of the disease. Obviously, but I but I,

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Speaker 1: but I don't think it's a deep and long one

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Speaker 1: and get debt to GDP ratios will will rise significantly.

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Speaker 1: But guess what if you're paying one or two percent

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Speaker 1: on your debt in a hundred and seventy of the

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Speaker 1: GDP or whatever doesn't cost you more and what a

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Speaker 1: dred percent cost you a few years ago? Right? It

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Speaker 1: depends how this market is going to treat you, though, Eric,

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Speaker 1: And that's not up to you or I, although you

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Speaker 1: might have some influence on that. Looking at the situation,

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Speaker 1: back to normal, what's normal for Italy? And I don't

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Speaker 1: mean to sound snarky, but as we know, it is

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Speaker 1: something very near to stagnation, not much growth at all.

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Speaker 1: We could have a debt to d DP balance of

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Speaker 1: water a hundred and fifty percent, let's say, when we

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Speaker 1: come out of this, Eric, in a place like Italy,

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Speaker 1: do you not worry that those kind of numbers could

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Speaker 1: spark that kind of aggressive repricing of Italian debt, because

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Speaker 1: let's be clear, Italian debt is not exactly being treated

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Speaker 1: like developed market debt in an environment like this one.

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Speaker 1: It's something like a hybrid between E M and d M.

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Speaker 1: And if the debt fundamentals go against you, Eric, do

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Speaker 1: you know how quickly this can unravel? Yes? This I

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Speaker 1: agree with. This is so I think you put your

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Speaker 1: finger exactly in the right spot. The number one issue

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Speaker 1: for Italy is where growth goes once we are through

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Speaker 1: the trough. If you assume that the that they recover

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Speaker 1: broadly along other European countries, even if I like half

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Speaker 1: of US and lower than others like they've done before,

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Speaker 1: I don't see the big drama. But if Italy were

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Speaker 1: to underperform more substantially and for some period time, we

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Speaker 1: have a problem in our hands. But until then, and

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Speaker 1: this is certainly for the next year or so, the

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Speaker 1: e cps there and buying basically everything. You're right. If

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Speaker 1: investors say you know what, we don't, weally can and

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Speaker 1: I am not persuasive enough to to tell them otherwise.

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Speaker 1: If they leave, then Italy faces the same problem as

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Speaker 1: every single country or company person face this that needs

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Speaker 1: to refinance this debt. You can't do it if people

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Speaker 1: don't want to buy your debt period right, whispers over

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Speaker 1: the weekend Eric Nielsen of worries of inflation. Somewhere out there,

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Speaker 1: inflation will reign supreme Bologne. We've got deflation and disinflation

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Speaker 1: right now. How pronounced will the deflation and disinflation be?

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Speaker 1: Given your forecast, I don't think Tom, that it's going

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Speaker 1: to be that pronounced, because again my forecast is a

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Speaker 1: is a quarter or two and that doesn't drive inflation

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Speaker 1: or deflation longer term. I'll say this. For sure, we

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Speaker 1: get big relative price changes, and I think we have

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Speaker 1: always start to see them now. But the big debate

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Speaker 1: out there is whether all the money printing in Europe

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Speaker 1: and America elsewhere would be inflationary or deflationary. Um Obviously,

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Speaker 1: normally money printing will ultimately become inflationary. But I don't

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Speaker 1: think that to risk either really, And the reason is

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Speaker 1: that I think on every government, both in America and

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Speaker 1: in Europe are still not doing enough to overpower this slowdown,

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Speaker 1: So so beyond risk very little inflation for the next

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Speaker 1: few years. It's a measurement of percent of GDP, and

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Speaker 1: I totally take your point. Arc but on a percent

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Speaker 1: of GDP, what's the appropriate ratio if two or four

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Speaker 1: percent of GDP is not getting it done? Sorry, this

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Speaker 1: is got to the dead or to the deficit. To

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Speaker 1: what the amount of fiscal stimulus there? You know, it's

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Speaker 1: measured quickly. As they're doing two percent or four percent

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Speaker 1: of GDP, what's the appropriate all in number? Right? Rule

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Speaker 1: Team Tom? Yeah, the rule of thumb is that if

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Speaker 1: you get hit by by an external shock of a type,

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Speaker 1: you should do a fiscal stimulus as a percent of

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Speaker 1: GDP roughly equivalent to the drop in GDP. That's a

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Speaker 1: multiplan right now. Remember, while Italy is only doing a

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Speaker 1: little bit, they are doing about twenty percent of GDP

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Speaker 1: in guarantees for companies, so that counts for quite a lot. Also,

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Speaker 1: so you keep you trying to prevent the liquidity crisis

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Speaker 1: from becoming a solvency crisis in the corporate sector. So

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Speaker 1: that's so it's so I still think they're doing too little.

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Speaker 1: And and as we speak, they're working feverishly as we

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Speaker 1: know in Rome on another package of fiscal stimulus. So

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Speaker 1: so more is coming. Yeah, Eric, just taking a step back,

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Speaker 1: you said, do you think that this is going to

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Speaker 1: be a very deep but short recession. I'm wondering when

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Speaker 1: John says, what's the new normal? And I'm wondering not

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Speaker 1: just for Italy but the entire Eurozone when it comes

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Speaker 1: to the unemployment rate, which already was a lot higher

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Speaker 1: than the one in the US heading into this last year,

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Speaker 1: it was seven point six percent on average for the

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Speaker 1: euro Zone forecast for this year, but obviously going to

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Speaker 1: be much higher. What's the new normal for unemployment in Europe?

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Speaker 1: In Europe, Oh God, this is a tough one and

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Speaker 1: I don't know the answer, but I think the the

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Speaker 1: so we very roughly estimate that once we have through

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Speaker 1: this deep through we may have coughed maybe a quarter

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Speaker 1: percentage points of potential growth in Europe because companies will

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Speaker 1: fail unfortunately that shouldn't fail, and that will lift the

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Speaker 1: natural unemployment level a bit, now, can I? Just before

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Speaker 1: we get onto this, also remind you the key reason

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Speaker 1: for the very big difference in unemployment in Europe and

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Speaker 1: in America over the last few years is that in

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Speaker 1: Europe we have had a massive inflow into the labor market.

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Speaker 1: People wanted to get jobs but didn't get them fully,

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Speaker 1: particularly in Spain and some other Southern European countries where

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Speaker 1: in America you have had people leaving the labor market.

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Speaker 1: So if you adjusted for that, go tend back ten

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Speaker 1: years back or something that changes in the in the

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Speaker 1: labor mark size, then it's actually actually quite similar. To

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Speaker 1: be honest, we're gonna leave it there. I have you

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Speaker 1: and the family are doing well. Great to catch out

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Speaker 1: with you this morning, Eric Nelson, that you need gradic

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Speaker 1: Croup Chief Economist. An update is we've tried to do

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Speaker 1: each day from our medical community, the experts that have

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Speaker 1: helped us during this pandemic. One of them is Joshua Sharfstein.

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Speaker 1: He is at the Johns Hopkins University Bloomberg School of

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Speaker 1: Public Health. Of course we must mention Mr Bloomberg is

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Speaker 1: founder of Bloomberg GELPI and also this television and radio

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Speaker 1: UH network as well. It was fun to talk to

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Speaker 1: him today about the improvements that we're seeing in this pandemic.

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Speaker 1: Curious Professor Joshua Sharfstein, what we had seen UH recently

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Speaker 1: in the United States is a plateau, and that is

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Speaker 1: good news because we would clearly were worried about having

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Speaker 1: so many people with severe disease from COVID that it

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Speaker 1: would overwhelm the healthcare system, and there's no question that

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Speaker 1: the healthcare cooks them. In several places such as New

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Speaker 1: York City has been pushed really up to the brink,

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Speaker 1: but been an amazing medical response and extra beds and

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Speaker 1: ventilators and staff coming in, and it looks like the

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Speaker 1: line there is more or less holding, and these hospitals

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Speaker 1: are not getting a lump. So that is a very

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Speaker 1: good news. However, UM, it does not mean that, you know,

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Speaker 1: it's all over. It means that really the long term

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Speaker 1: battle is beginning, and UM, it's very important that not

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Speaker 1: only the current restrictions continued long enough for Peter to

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Speaker 1: really begin to decline, but also that, UM, we have

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Speaker 1: a strategy for slowly reopening the economy. I had a

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Speaker 1: family member over the weekend, Professor Sharfstein, who took the

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Speaker 1: information of a nurse of about age forty dying. Why

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Speaker 1: are nurses dying? Why are doctors dying? While this has

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Speaker 1: been seen all around the world, including in China and

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Speaker 1: Italy and Spain, and it may have to do with

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Speaker 1: the fact that they were exposed to a very large

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Speaker 1: amount of virus. Perhaps before UM, you know, it was

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Speaker 1: known that there was coronavirus in their area or when

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Speaker 1: they were UM unable to get adequate protective equipment, and

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Speaker 1: the amount of virus someone's exposed to generally can influence

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Speaker 1: how well people can fight off the infection. So that's

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Speaker 1: one possible reason why. The other reason is um that

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Speaker 1: there's a certain randomness to the virus Um. There are

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Speaker 1: people in the community who seem um completely at low

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Speaker 1: risk based on what we know, but done the last

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Speaker 1: they get seriously ill or even die. So you know,

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Speaker 1: this is not a guaranteed harmless infection for anyone. Could

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Speaker 1: this be genetic? I know there are a number of studies,

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Speaker 1: um Josh about whether you have a pre genetic position

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Speaker 1: for the virus to get worse. Where are we on

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Speaker 1: that it's possible. I haven't seen any like compelling data

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Speaker 1: specifying which, you know gene Sometimes there are variations in

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Speaker 1: the immune system that can predict vulnerabilities to infection, So

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Speaker 1: you know, I think that would be very interesting if

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Speaker 1: if it's uncovered. I know you were saying that we

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Speaker 1: need to be vigilant against a new surge of cases

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Speaker 1: as we start to lift restrictions. What would be the

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Speaker 1: right way to do this? Do you take a state

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Speaker 1: and the state reopens and you see what happens, or

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Speaker 1: do you look at another country or or you know

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Speaker 1: countries and states comparable in and how they response has been,

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Speaker 1: how the lockdown has been in the number of deaths

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Speaker 1: and infections. So I think there are two things, and

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Speaker 1: there's been a couple of day good reports but have

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Speaker 1: been put out, including why the jumptop and interpare Health

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Speaker 1: Security UM. And the first thing is you have to

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Speaker 1: think about what are the conditions to reopening, what do

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Speaker 1: you want to have in place before we reopen? And

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Speaker 1: the second thing is how do you go about it?

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Speaker 1: And in that first category, what do you want to

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Speaker 1: have in place? Adequate testing, which we don't really yet

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Speaker 1: have to really be able to test people who are sick,

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Speaker 1: even mildly ill UM, as well as enough testing for

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Speaker 1: high risk places like nursing homes. You certainly want to

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Speaker 1: see cases declining substantially for fourteen days UM. You want

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Speaker 1: to you need the public health capacity to respond to

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Speaker 1: positive cases, and you need to make sure that that

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Speaker 1: healthcare system that's been pushed to the brink in some areas,

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Speaker 1: that's really bumped back so that you're able if things

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Speaker 1: go get worse to handle the challenge, and then you

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Speaker 1: got to think about how you're going to open up.

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Speaker 1: And it's not going to be flipping the switch back on.

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Speaker 1: It's going to be slowly turning the dial. And you

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Speaker 1: need to really think through, um, what comes first, what

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Speaker 1: comes second, what comes third, and then between needs stage

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Speaker 1: waiting to make sure that you're not sparking at searching cases.

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Speaker 1: And you know, um, there's some things that may be

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Speaker 1: able to come first, like if they're work places where

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Speaker 1: people don't get it anywhere near each other, um and uh,

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Speaker 1: but then I think that are going to come later,

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Speaker 1: like a big indoor concert that may come the late involved,

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Speaker 1: So you really need to be thoughtful about that. I

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Speaker 1: think you're starting to see in the United States brainwork

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Speaker 1: being discussed like governor um, and I think that will

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Speaker 1: be the load mop to people. Joshua Sharfstein, Professor at

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Speaker 1: the Bloomberg School of Public Health, JOHNS Hopkins University, with

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Speaker 1: Francine Laque and myself this morning as well. Most most

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Speaker 1: informative right now Gideon Rose with us with a monthly

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Speaker 1: review of his wonderful magazine Foreign Affairs. Anybody that listens

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Speaker 1: to this show knows. I adore the magazine, particularly that

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Speaker 1: the fonts actually big, so you can read it with

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Speaker 1: these old eyes this time around. A wonderful important issue

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Speaker 1: on the fire next time and the course this is

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Speaker 1: on the climate change, your climate catastrophe debate. With that

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Speaker 1: said Gideon Rose in his team of lead with a

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Speaker 1: spectacular foreign affairs website looking at the pandemic, getting I

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Speaker 1: want to get one question in on your wonderful new

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Speaker 1: issue before I know Paul wants to get up to

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Speaker 1: date with your thoughts on the pandemic, and that is

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Speaker 1: with the collapse and oil prices, isn't it that much

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Speaker 1: harder to affect climate change? So in one sense absolutely

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Speaker 1: to all sorts of projects that we're based on the

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Speaker 1: economic hiability or doing other kinds of things are are

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Speaker 1: set back and there's less change and so forth. On

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Speaker 1: the other hand, what we are seeing in real time

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Speaker 1: is a great public education lesson in the consequences of

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Speaker 1: mass small changes in individual behavior. There are environmental consequences

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Speaker 1: and actions comparable to hand washing or mask wearing. And

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Speaker 1: just as people now understand the logic but that connects

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Speaker 1: their individual behavior to their personal health, that could easily

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Speaker 1: become something that makes climate policy more plausible in the future,

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Speaker 1: because we now understand global problems needs to be addressed globally,

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Speaker 1: and we understand that our connection to that global problem

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Speaker 1: and the consequences everybody. Whether that will translate into actual

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Speaker 1: political behavior, probably not in the short term, but in

436
00:24:18,000 --> 00:24:22,120
Speaker 1: the longer term, this will make constructive action to prepare

437
00:24:22,160 --> 00:24:26,120
Speaker 1: for and solve crises more likely to happen, rather than less.

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Speaker 1: I believe even with climate so giddy, and I guess

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Speaker 1: one of my concerns as I think about climate change

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Speaker 1: in the world we're living in now, it's it takes

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Speaker 1: a big, big I guess it just gets put on

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Speaker 1: the back burner in a big way. People are just

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Speaker 1: trying to survive. They're trying to deal with this virus.

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Speaker 1: They're trying to think about what it means for their lives,

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Speaker 1: what the post coronavirus world looks like. And I'm concerned that,

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Speaker 1: you know, climate change, even with the younger generation where

447
00:24:49,880 --> 00:24:52,399
Speaker 1: it's they're really passionate about it, it makes peop put

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00:24:52,440 --> 00:24:54,359
Speaker 1: on the back burners. Are concerned that it loses some

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Speaker 1: of the momentum. So I think that obviously would be

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Speaker 1: true for a lot of the activism, and and I

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Speaker 1: think what you're talking about is something that many people fear.

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Speaker 1: But as our issue points out, as the articles in

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Speaker 1: to point out, what really matters now is not mass

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Speaker 1: collective action, is not mass political pressure even which is

455
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Speaker 1: not really going to materialize, but wise policy two basically

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Speaker 1: change the course to flatten the curve of the climate

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Speaker 1: disaster that's looming. And that kind of stuff is equivalent

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Speaker 1: to the public health measures we would have wanted our

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Speaker 1: authorities to take in the months and years before the

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Speaker 1: real pandemic hit. And those kinds of things can still happen.

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Speaker 1: If why is technocrats get entrusted with power, Gideon, I'm

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Speaker 1: looking at it right now now. There was the shots

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Speaker 1: of l A this week, and I saw out in

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Speaker 1: the Twitter sphere and there was a wonderful, hilarious shot

465
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Speaker 1: that with the way the error is cleaned up with

466
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Speaker 1: this pandemic, you can see Sydney from New York. That

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Speaker 1: was hilarious that I'm looking out right now. Get into

468
00:26:01,080 --> 00:26:04,560
Speaker 1: a pretty fancy view of a crystal clear New York.

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Speaker 1: I mean, we're getting a lesson right now in this

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Speaker 1: Within all of the research you do at Foreign Affairs

471
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Speaker 1: What is holding us back from the common sense here

472
00:26:17,080 --> 00:26:20,480
Speaker 1: is just market functions. Isn't it that the hydro carbon

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00:26:20,640 --> 00:26:26,720
Speaker 1: like engines still are cost effective? You're absolutely corrective. You

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00:26:26,800 --> 00:26:32,760
Speaker 1: are market failures that can be addressed through wise public

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Speaker 1: policy at the local and the national and the international

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Speaker 1: and global level. And what we lay out in the

477
00:26:41,200 --> 00:26:43,640
Speaker 1: magazine is a whole variety of things. You have will

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Speaker 1: Bill Nordhouse Nobel Prize winning economists explaining why you need

479
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Speaker 1: to go to a club membership model for international agreements

480
00:26:51,720 --> 00:26:53,960
Speaker 1: rather than the sort of one who currently have that

481
00:26:54,040 --> 00:26:56,280
Speaker 1: allow free riding, And you have everything from that to

482
00:26:56,359 --> 00:26:59,480
Speaker 1: why but businesses and individuals and new but most importantly,

483
00:26:59,640 --> 00:27:02,280
Speaker 1: if you think of this basically as do we want

484
00:27:02,320 --> 00:27:07,200
Speaker 1: to empower going forward the people like Foucher and Birks

485
00:27:07,640 --> 00:27:10,080
Speaker 1: and the ones who we think of as good public

486
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Speaker 1: health technocrasts. There are people like that on climate as well,

487
00:27:14,520 --> 00:27:17,520
Speaker 1: and there are policies that could be followed now that

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Speaker 1: don't involve shutting down the entire world. The question is

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00:27:21,720 --> 00:27:25,520
Speaker 1: will we be able to direct government action, scientific research

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00:27:25,560 --> 00:27:28,760
Speaker 1: and policy to do the equivalence of surging on testing

491
00:27:29,160 --> 00:27:33,040
Speaker 1: in climate related areas, to do the equivalence of development

492
00:27:33,160 --> 00:27:37,359
Speaker 1: of vaccine, speeding up for climate related green technologies. You

493
00:27:37,400 --> 00:27:40,960
Speaker 1: could have a massive government program that would be worthwhile,

494
00:27:41,320 --> 00:27:44,600
Speaker 1: not simply as a jobs program or as a politically

495
00:27:44,680 --> 00:27:47,639
Speaker 1: correct thing, but as something that generated the kind of

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Speaker 1: solutions to the crisis that could have head off the

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Speaker 1: worst outcome. That's what I'm hoping for, whether we'll see

498
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Speaker 1: it or not as anybody's guests. So getting in all

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Speaker 1: the wonderful reporting of Foreign Affairs magazine, what is kind

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Speaker 1: of the takeaway from some of the government response to

501
00:28:02,320 --> 00:28:05,600
Speaker 1: this virus? It's kind of you know, you go from

502
00:28:05,680 --> 00:28:09,399
Speaker 1: China for just a complete lockdown to the U S,

503
00:28:09,440 --> 00:28:11,520
Speaker 1: which it seems to be state by state by state,

504
00:28:11,560 --> 00:28:13,840
Speaker 1: and some of the European economies have been differing in there.

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00:28:14,480 --> 00:28:17,240
Speaker 1: I guess their severity of their locks down. What's kind

506
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Speaker 1: of the takeaway that you're seeing here as this situation develops.

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00:28:21,000 --> 00:28:23,159
Speaker 1: That's a great question. You know. I was rereading the

508
00:28:23,240 --> 00:28:27,159
Speaker 1: issue and all of our coverage of pandemics before this appearance,

509
00:28:27,480 --> 00:28:31,040
Speaker 1: and I managed to depress myself even more because the

510
00:28:31,119 --> 00:28:35,640
Speaker 1: more I look around, the more I see UH government

511
00:28:35,800 --> 00:28:40,120
Speaker 1: failure and leadership failure in so many areas in so

512
00:28:40,200 --> 00:28:43,400
Speaker 1: many regions at so many levels. And yes, of course

513
00:28:43,440 --> 00:28:46,560
Speaker 1: there are wonderful cases of successes, and we all want

514
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Speaker 1: to be like South Korea. But what's notable about the

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00:28:49,560 --> 00:28:51,920
Speaker 1: South Koreas and places like that, at a few of

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Speaker 1: them that there are, it's how few they are and

517
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Speaker 1: how unrealizable you could imagine that being uh in uh

518
00:28:59,320 --> 00:29:02,560
Speaker 1: in a place United States and so many countries have

519
00:29:02,640 --> 00:29:05,719
Speaker 1: done badly. But I'm now wondering the really interesting question

520
00:29:05,880 --> 00:29:09,720
Speaker 1: is not who's gonna do well, it's whose regime is

521
00:29:09,800 --> 00:29:13,640
Speaker 1: so brittle that it will not survive the crisis. Here

522
00:29:13,680 --> 00:29:16,520
Speaker 1: on Bloomberg, you understand that there are a lot of

523
00:29:16,560 --> 00:29:18,640
Speaker 1: companies have had a lot of debts that were zombie

524
00:29:18,640 --> 00:29:21,160
Speaker 1: companies or problem companies, and those are the ones who

525
00:29:21,160 --> 00:29:25,719
Speaker 1: are gonna be the biggest casualties of the crisis economically,

526
00:29:25,720 --> 00:29:27,520
Speaker 1: because they're not going to be strong enough to survive.

527
00:29:27,920 --> 00:29:31,080
Speaker 1: Lots of regimes are going to be facing a reckoning

528
00:29:31,080 --> 00:29:36,200
Speaker 1: when their publics finally embrace the full cost of what's

529
00:29:36,200 --> 00:29:41,560
Speaker 1: happening and how poorly their leaders performed. And when that happens,

530
00:29:41,600 --> 00:29:45,760
Speaker 1: some regimes will be able to desmond and the new themselves,

531
00:29:45,840 --> 00:29:48,200
Speaker 1: and some won't. And that's the interesting thing to watch.

532
00:29:48,320 --> 00:29:52,440
Speaker 1: Everybody is going to do badly. Whose regime will survive

533
00:29:52,600 --> 00:29:54,360
Speaker 1: the win and wing that will come now that the

534
00:29:54,480 --> 00:29:59,360
Speaker 1: tide has run out. Always Eclectic Air Magazine has a

535
00:29:59,520 --> 00:30:04,120
Speaker 1: wonderful article from two from Another Time and Play Secretary

536
00:30:04,160 --> 00:30:07,720
Speaker 1: Baker and Secretary Schultz in their team uh in in

537
00:30:07,800 --> 00:30:11,920
Speaker 1: the Aged View, a view from the Washington Consensus. How

538
00:30:11,960 --> 00:30:16,920
Speaker 1: do they treat the new populism, the death of multilateralism

539
00:30:16,960 --> 00:30:21,720
Speaker 1: we've seen in James Baker and George Schultz's world Well,

540
00:30:21,800 --> 00:30:25,880
Speaker 1: uh Baker and Schultz, writing with Ted Holsted, argue that

541
00:30:26,320 --> 00:30:30,520
Speaker 1: you can actually seed climate change as an opportunity, not

542
00:30:30,680 --> 00:30:34,000
Speaker 1: just a threat, not just a problem, because the United

543
00:30:34,040 --> 00:30:37,440
Speaker 1: States is already at the forefront of green technology and

544
00:30:37,520 --> 00:30:40,480
Speaker 1: has the kind of system that could generate the answers.

545
00:30:40,560 --> 00:30:45,280
Speaker 1: And so they argue using government constructive lead to advance

546
00:30:45,360 --> 00:30:47,480
Speaker 1: and build on the American lead and make the United

547
00:30:47,520 --> 00:30:49,720
Speaker 1: States a pioneer in the center thing. By the way,

548
00:30:49,760 --> 00:30:52,200
Speaker 1: we have an article and the same issue by John

549
00:30:52,200 --> 00:30:55,360
Speaker 1: Podesta and Todd Stern, who handled climate policy in the

550
00:30:55,360 --> 00:30:58,880
Speaker 1: Obama administration, arguing for a whole set of what policies

551
00:30:58,920 --> 00:31:01,880
Speaker 1: would make sense for a climate that is broadly in sync.

552
00:31:02,000 --> 00:31:05,320
Speaker 1: So you have buy partisan support for a kind of

553
00:31:05,560 --> 00:31:08,840
Speaker 1: policy that would be a constructive climate policy that would

554
00:31:08,880 --> 00:31:13,400
Speaker 1: not involve self sacrifice and austerity. But it's possible, but

555
00:31:13,560 --> 00:31:16,960
Speaker 1: positive change. Well getting in a rose. Congratulations on an

556
00:31:17,000 --> 00:31:20,080
Speaker 1: important issue in climate change. In your website on the

557
00:31:20,200 --> 00:31:25,320
Speaker 1: pandemic has been absolutely superb Foreign Affairs Magazine. Thanks for

558
00:31:25,400 --> 00:31:29,800
Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to

559
00:31:29,960 --> 00:31:35,719
Speaker 1: interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer.

560
00:31:36,240 --> 00:31:39,600
Speaker 1: I'm on Twitter at Tom Keane before the podcast. You

561
00:31:39,640 --> 00:31:43,040
Speaker 1: can always catch us worldwide. I'm Bloomberg Radio