Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee.
Speaker 1: We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com and of course on them For the market,
Speaker 1: we have a really interesting situation. High yield has been
Speaker 1: decently bid over the last couple of weeks because the
Speaker 1: FED has stepped in at a time when the energy
Speaker 1: sector is increasing the under pressure. So what do you
Speaker 1: do if you're an investor? Will listen to this from Jeffreys.
Speaker 1: The FED is in danger of making the skill set
Speaker 1: of investors in credit redundant if the game only becomes
Speaker 1: front running the next area of debt the FED is
Speaker 1: going to buy. Let's have that conversation right now, shall
Speaker 1: we with Jim care and Morgan Stanley Investment Management Fixed
Speaker 1: income portfolio manager. Jim great to catch up this, sir,
Speaker 1: Your thoughts on that quote high yield looking dicey, with
Speaker 1: crude rolling over looking okay, with the said ready to
Speaker 1: step in. Yeah, So you know, for me, this is
Speaker 1: a question of of insolvency issues and liquidity problems. So
Speaker 1: one of the things that we've said over and over
Speaker 1: and over again is that with the coronavirus is there's
Speaker 1: created some liquidity problems. We don't want them to turn
Speaker 1: into a solvency problem. But I do understand the moral
Speaker 1: hazard aspect of if you are in a business that
Speaker 1: is a very hypercyclical business, like an energy style business UM,
Speaker 1: and that's obviously going to be a large percentage of
Speaker 1: the high yield universe, and if it takes high yield lower,
Speaker 1: do we always need the FED to come in and
Speaker 1: run and support it. And I think that the answer
Speaker 1: is it depends do we want to have oil companies
Speaker 1: in the US? How important is that into the future?
Speaker 1: And then how do you triage that you do you
Speaker 1: pick the best or do you have a way of
Speaker 1: determining what metric is you know which companies should survive
Speaker 1: and which shouldn't. Look in the i G Market's what
Speaker 1: we said is as of March twenty two, if your
Speaker 1: investment grade UM and your triple B minus are better
Speaker 1: you felt, and if you fall all the way down
Speaker 1: to double B minus, the FED will still support those bonds.
Speaker 1: So yes, there is a little bit of regulatory arbitrage
Speaker 1: here where if these sectors do start to come under
Speaker 1: a fair amount of pressure that this might create some
Speaker 1: fed or some type of government support facility. Um. I
Speaker 1: think what's important is that that gets triage to just
Speaker 1: the strongest. It can't just be ubiquitous cover all blanket
Speaker 1: of Oh, don't worry, We're just gonna buy high yield
Speaker 1: no matter what, or energy sector no matter what. I
Speaker 1: think the more important aspect of this is that there
Speaker 1: has to be a triage ast to which companies get
Speaker 1: the benefit and which don't. All right, so we're talking should,
Speaker 1: let's talk will, and let's talk positioning, and a lot
Speaker 1: of people that I've spoken to are saying, perhaps the
Speaker 1: rally and jump bonds has gotten a little ahead of itself. Jim,
Speaker 1: do you agree, Well, I mean it did for technical reasons,
Speaker 1: just because the double B minuses are going to be bought,
Speaker 1: you know, with fallen angels from from the investment grade space.
Speaker 1: So so yes, I I would agree that it took
Speaker 1: the whole index up. Is a large chunk of it
Speaker 1: that is very, very vulnerable to the energy sector. So
Speaker 1: a phrase that we use is which securities are inside
Speaker 1: the tent and which securities are outside of the tent.
Speaker 1: The securities that are outside of the tent are which
Speaker 1: means the tent of policy support, which a lot of
Speaker 1: it is the high yield sector, in particular in in
Speaker 1: in the energy sector. And when you see oil prices
Speaker 1: fall this way, this is going to create a lot
Speaker 1: of stress. So I don't know that the FED can
Speaker 1: actually do very very much about this because look what's
Speaker 1: going on here is we have a drop in global demand.
Speaker 1: OPEC is not what it used to be in terms
Speaker 1: of regulating oil prices. So we go back to oil
Speaker 1: being a boom bus business like it always was. You know,
Speaker 1: you have oil run up to very very high prices
Speaker 1: and a lot of people get in the business and
Speaker 1: then it goes crashing down, a lot of people fall
Speaker 1: out of the business. And it's a very highly cyclical
Speaker 1: commodity that was you know, pretty much kept in check
Speaker 1: by OPEC for a long period of time, but now
Speaker 1: that's gone. So at this point now it's just the
Speaker 1: real true supplying demand and dynamics, which can be brutal.
Speaker 1: Um So investors beware, if you're going to buy, make
Speaker 1: sure you get a good enough discount to actually take
Speaker 1: this risk. And that's the key. But in the interim.
Speaker 1: I think that there are some companies, and it's tied
Speaker 1: to employment as well, that might need some solvency support
Speaker 1: at at this point, Jim Karen, you mentioned inside the
Speaker 1: tent are retirees inside the tent? So that's a great question, right,
Speaker 1: So so retirees per se are are not necessarily right,
Speaker 1: so we're talking about sectors in specific securities. But you're right, Tom, Tom,
Speaker 1: we we can extend this out to moral hazard lengths
Speaker 1: and say, okay, who should be saved, who shouldn't be saved?
Speaker 1: And once we get started, when do we stop? And
Speaker 1: I'm I'm I'm very very much in favor of free markets,
Speaker 1: and I'm also you know, very much in favor of
Speaker 1: what the FED does to stabilize markets as well. So
Speaker 1: what's also critical is that this is temporary and it's targeted.
Speaker 1: So temporary and targeted are are two things that need
Speaker 1: to be there. And also there has to be a
Speaker 1: triage of you know, stronger balance sheets and you know,
Speaker 1: there's gotta be a cut offline where if if you
Speaker 1: had a strong balance sheet and that you're being unduly
Speaker 1: affected because of the coronavirus, then then that's you know,
Speaker 1: then then maybe you should get some support. But if
Speaker 1: it's just that, hey, you're in a cyclical business and
Speaker 1: somebody invested in this business, then you know you're gonna
Speaker 1: you know, you took the risk, and that's what this is. UM.
Speaker 1: So there are gonna be losers and they're gonna be
Speaker 1: some winners, um. And that's our job is to try
Speaker 1: to figure out what sectors are gonna be the winners
Speaker 1: and losers. At the start of the year, Gym, to
Speaker 1: be clear with the audience, you were far more conservative
Speaker 1: versus the rest of the street and became far more
Speaker 1: constructive versus the rest of the street over the last
Speaker 1: month or so. Behind this market rip that we've seen
Speaker 1: over the last several weeks, can you talk to us
Speaker 1: about why you're so willing to price in a better
Speaker 1: future when the data around us tells us a story
Speaker 1: of gloom and do for the next several months. Yeah,
Speaker 1: I mean, effectively, we're looking forward right and we're trying
Speaker 1: to figure out what the market's discounting and how much
Speaker 1: is actually in the price right now. And and look,
Speaker 1: the biggest piece of the puzzle that's still missing is
Speaker 1: what the path of this viruses and and doesn't create
Speaker 1: another shutdown in the economy and what have you. But
Speaker 1: if we go on the operating assumption that it doesn't,
Speaker 1: and if we start to look towards recovery, then we
Speaker 1: can start to look at certain asset classes. I'm in
Speaker 1: fixed income, so I'm gonna look at places like investment grade.
Speaker 1: I'm gonna look at some of the higher uh credit
Speaker 1: qualities within securitized and even some of the double ds
Speaker 1: within high yield, and the healthcare sector and industrial sector
Speaker 1: and paper packaging and you know other things of of
Speaker 1: of of that area that I think are more real
Speaker 1: broad economy stories. And I think that when I look
Speaker 1: at the high yield index, or when I look at
Speaker 1: the investment grade index and I watched spreads go out
Speaker 1: to almost four d basis points over to me, that's
Speaker 1: too much. Now recently spreads have come in you know,
Speaker 1: quite uh, you know, quite significantly, and maybe it's gone
Speaker 1: a little too far and it might set back. But
Speaker 1: the point is is that as long as we start
Speaker 1: to stabilize and we get the third quarter recovery, fourth
Speaker 1: quarter recovery writing off the first and second quarter, then
Speaker 1: I think that earnings start to come back in default
Speaker 1: risks ultimately start to fall. High yield default risks are
Speaker 1: in double digits, low double digits, like twelve, depending on
Speaker 1: who you talk to in which ratings agencies that you're
Speaker 1: looking at. Um, that may be a relevant statistic if
Speaker 1: we look at the energy sector, but it might not
Speaker 1: be relative when we look at it very idiosyncratically named
Speaker 1: by name, bond by bond. And that's why it's so
Speaker 1: important right now, Jonathan, that we start to think much
Speaker 1: more idiosyncratically, much more of a stock picker or bond
Speaker 1: pickers type of a market as opposed to broad index plays.
Speaker 1: Is if you buy the index, you're gonna buy a
Speaker 1: large chunk of things you just don't want. So to
Speaker 1: be selective is a lot more, is a lot more
Speaker 1: of what this market is calling for. Jim. It's why
Speaker 1: to catch you have they set Jim keron that Morgan
Speaker 1: standing investment management, fixed income portfolio manager. It would be
Speaker 1: important to go to the optimist in Europe who's so
Speaker 1: gloomy now I can't believe we let him on air.
Speaker 1: Eric Nielsen joins us with UNI Credit, usually very optimistic,
Speaker 1: and Eric, I was thunderstruck by your note and your
Speaker 1: caution and the European economic experiments through two thousand twenty.
Speaker 1: What's the distinction here? Why are you so much gloomier
Speaker 1: than others? Because I think the shut down by governments,
Speaker 1: this is a man made recession for good reasons, obviously
Speaker 1: for the health reasons. But this is something we've never
Speaker 1: seen before, that that I'm aware of. And if you
Speaker 1: just go through the sectors and think about what basically
Speaker 1: has been shot down, I find it impossible not to
Speaker 1: conclude that we at least get a few months of
Speaker 1: very very deep contraction earty percent of there about. And
Speaker 1: if you get that, even with a strong recovery in
Speaker 1: the second half of the year, you get these kind
Speaker 1: of average GDP numbers were forecasting for Europe thirteen percent down,
Speaker 1: the US ten percent down. It's almost impossible not to
Speaker 1: get these tower numbers. The e CP is coming in big,
Speaker 1: acting quite aggressively. Can you explain to me why the
Speaker 1: Italian bond market is moving in the other direction on
Speaker 1: the morning like this morning? No, I can't really, but
Speaker 1: it is ultimately as you said just before I got
Speaker 1: on that, that it is a revival of this fear
Speaker 1: about the euro Zone. Um. I think it is misplaced,
Speaker 1: but to be honest, I find the Italian government is
Speaker 1: not doing itself a favor by by sounding so anti
Speaker 1: European at a time when the e CP is buying
Speaker 1: all the debt I mean days. This is the debt
Speaker 1: issue is not an issue at the time, right because
Speaker 1: the e c P is there and that is common death.
Speaker 1: So it's so I I fail to see the excitement.
Speaker 1: And again, as you said, I mean the actual interest
Speaker 1: rates are absurdly though the speccal widening, but but the
Speaker 1: buns are deep negative, right, So so that sustainability for
Speaker 1: me is not a big risk here. Just to clarify,
Speaker 1: so you don't think that the concept that the euro
Speaker 1: region will break up or that there won't be some
Speaker 1: sort of backstab to the currency in its existence. You
Speaker 1: think that those worries are overblown and not realistic. But
Speaker 1: you do think that the responses will be insufficient to
Speaker 1: stave off a very deep and prolonged recession within Europe.
Speaker 1: Is that correct? Uh? Yes? On to the last step,
Speaker 1: and you said, I don't think this resertain is going
Speaker 1: to be long. It's going to be deep, but very brief.
Speaker 1: So we're talking about a quarter or two and then
Speaker 1: we probably hopefully see some growth again, and and and then.
Speaker 1: But I don't think we get back to normal until
Speaker 1: you know, we get a vaccine or the privtical treatment
Speaker 1: or something of the disease. Obviously, but I but I,
Speaker 1: but I don't think it's a deep and long one
Speaker 1: and get debt to GDP ratios will will rise significantly.
Speaker 1: But guess what if you're paying one or two percent
Speaker 1: on your debt in a hundred and seventy of the
Speaker 1: GDP or whatever doesn't cost you more and what a
Speaker 1: dred percent cost you a few years ago? Right? It
Speaker 1: depends how this market is going to treat you, though, Eric,
Speaker 1: And that's not up to you or I, although you
Speaker 1: might have some influence on that. Looking at the situation,
Speaker 1: back to normal, what's normal for Italy? And I don't
Speaker 1: mean to sound snarky, but as we know, it is
Speaker 1: something very near to stagnation, not much growth at all.
Speaker 1: We could have a debt to d DP balance of
Speaker 1: water a hundred and fifty percent, let's say, when we
Speaker 1: come out of this, Eric, in a place like Italy,
Speaker 1: do you not worry that those kind of numbers could
Speaker 1: spark that kind of aggressive repricing of Italian debt, because
Speaker 1: let's be clear, Italian debt is not exactly being treated
Speaker 1: like developed market debt in an environment like this one.
Speaker 1: It's something like a hybrid between E M and d M.
Speaker 1: And if the debt fundamentals go against you, Eric, do
Speaker 1: you know how quickly this can unravel? Yes? This I
Speaker 1: agree with. This is so I think you put your
Speaker 1: finger exactly in the right spot. The number one issue
Speaker 1: for Italy is where growth goes once we are through
Speaker 1: the trough. If you assume that the that they recover
Speaker 1: broadly along other European countries, even if I like half
Speaker 1: of US and lower than others like they've done before,
Speaker 1: I don't see the big drama. But if Italy were
Speaker 1: to underperform more substantially and for some period time, we
Speaker 1: have a problem in our hands. But until then, and
Speaker 1: this is certainly for the next year or so, the
Speaker 1: e cps there and buying basically everything. You're right. If
Speaker 1: investors say you know what, we don't, weally can and
Speaker 1: I am not persuasive enough to to tell them otherwise.
Speaker 1: If they leave, then Italy faces the same problem as
Speaker 1: every single country or company person face this that needs
Speaker 1: to refinance this debt. You can't do it if people
Speaker 1: don't want to buy your debt period right, whispers over
Speaker 1: the weekend Eric Nielsen of worries of inflation. Somewhere out there,
Speaker 1: inflation will reign supreme Bologne. We've got deflation and disinflation
Speaker 1: right now. How pronounced will the deflation and disinflation be?
Speaker 1: Given your forecast, I don't think Tom, that it's going
Speaker 1: to be that pronounced, because again my forecast is a
Speaker 1: is a quarter or two and that doesn't drive inflation
Speaker 1: or deflation longer term. I'll say this. For sure, we
Speaker 1: get big relative price changes, and I think we have
Speaker 1: always start to see them now. But the big debate
Speaker 1: out there is whether all the money printing in Europe
Speaker 1: and America elsewhere would be inflationary or deflationary. Um Obviously,
Speaker 1: normally money printing will ultimately become inflationary. But I don't
Speaker 1: think that to risk either really, And the reason is
Speaker 1: that I think on every government, both in America and
Speaker 1: in Europe are still not doing enough to overpower this slowdown,
Speaker 1: So so beyond risk very little inflation for the next
Speaker 1: few years. It's a measurement of percent of GDP, and
Speaker 1: I totally take your point. Arc but on a percent
Speaker 1: of GDP, what's the appropriate ratio if two or four
Speaker 1: percent of GDP is not getting it done? Sorry, this
Speaker 1: is got to the dead or to the deficit. To
Speaker 1: what the amount of fiscal stimulus there? You know, it's
Speaker 1: measured quickly. As they're doing two percent or four percent
Speaker 1: of GDP, what's the appropriate all in number? Right? Rule
Speaker 1: Team Tom? Yeah, the rule of thumb is that if
Speaker 1: you get hit by by an external shock of a type,
Speaker 1: you should do a fiscal stimulus as a percent of
Speaker 1: GDP roughly equivalent to the drop in GDP. That's a
Speaker 1: multiplan right now. Remember, while Italy is only doing a
Speaker 1: little bit, they are doing about twenty percent of GDP
Speaker 1: in guarantees for companies, so that counts for quite a lot. Also,
Speaker 1: so you keep you trying to prevent the liquidity crisis
Speaker 1: from becoming a solvency crisis in the corporate sector. So
Speaker 1: that's so it's so I still think they're doing too little.
Speaker 1: And and as we speak, they're working feverishly as we
Speaker 1: know in Rome on another package of fiscal stimulus. So
Speaker 1: so more is coming. Yeah, Eric, just taking a step back,
Speaker 1: you said, do you think that this is going to
Speaker 1: be a very deep but short recession. I'm wondering when
Speaker 1: John says, what's the new normal? And I'm wondering not
Speaker 1: just for Italy but the entire Eurozone when it comes
Speaker 1: to the unemployment rate, which already was a lot higher
Speaker 1: than the one in the US heading into this last year,
Speaker 1: it was seven point six percent on average for the
Speaker 1: euro Zone forecast for this year, but obviously going to
Speaker 1: be much higher. What's the new normal for unemployment in Europe?
Speaker 1: In Europe, Oh God, this is a tough one and
Speaker 1: I don't know the answer, but I think the the
Speaker 1: so we very roughly estimate that once we have through
Speaker 1: this deep through we may have coughed maybe a quarter
Speaker 1: percentage points of potential growth in Europe because companies will
Speaker 1: fail unfortunately that shouldn't fail, and that will lift the
Speaker 1: natural unemployment level a bit, now, can I? Just before
Speaker 1: we get onto this, also remind you the key reason
Speaker 1: for the very big difference in unemployment in Europe and
Speaker 1: in America over the last few years is that in
Speaker 1: Europe we have had a massive inflow into the labor market.
Speaker 1: People wanted to get jobs but didn't get them fully,
Speaker 1: particularly in Spain and some other Southern European countries where
Speaker 1: in America you have had people leaving the labor market.
Speaker 1: So if you adjusted for that, go tend back ten
Speaker 1: years back or something that changes in the in the
Speaker 1: labor mark size, then it's actually actually quite similar. To
Speaker 1: be honest, we're gonna leave it there. I have you
Speaker 1: and the family are doing well. Great to catch out
Speaker 1: with you this morning, Eric Nelson, that you need gradic
Speaker 1: Croup Chief Economist. An update is we've tried to do
Speaker 1: each day from our medical community, the experts that have
Speaker 1: helped us during this pandemic. One of them is Joshua Sharfstein.
Speaker 1: He is at the Johns Hopkins University Bloomberg School of
Speaker 1: Public Health. Of course we must mention Mr Bloomberg is
Speaker 1: founder of Bloomberg GELPI and also this television and radio
Speaker 1: UH network as well. It was fun to talk to
Speaker 1: him today about the improvements that we're seeing in this pandemic.
Speaker 1: Curious Professor Joshua Sharfstein, what we had seen UH recently
Speaker 1: in the United States is a plateau, and that is
Speaker 1: good news because we would clearly were worried about having
Speaker 1: so many people with severe disease from COVID that it
Speaker 1: would overwhelm the healthcare system, and there's no question that
Speaker 1: the healthcare cooks them. In several places such as New
Speaker 1: York City has been pushed really up to the brink,
Speaker 1: but been an amazing medical response and extra beds and
Speaker 1: ventilators and staff coming in, and it looks like the
Speaker 1: line there is more or less holding, and these hospitals
Speaker 1: are not getting a lump. So that is a very
Speaker 1: good news. However, UM, it does not mean that, you know,
Speaker 1: it's all over. It means that really the long term
Speaker 1: battle is beginning, and UM, it's very important that not
Speaker 1: only the current restrictions continued long enough for Peter to
Speaker 1: really begin to decline, but also that, UM, we have
Speaker 1: a strategy for slowly reopening the economy. I had a
Speaker 1: family member over the weekend, Professor Sharfstein, who took the
Speaker 1: information of a nurse of about age forty dying. Why
Speaker 1: are nurses dying? Why are doctors dying? While this has
Speaker 1: been seen all around the world, including in China and
Speaker 1: Italy and Spain, and it may have to do with
Speaker 1: the fact that they were exposed to a very large
Speaker 1: amount of virus. Perhaps before UM, you know, it was
Speaker 1: known that there was coronavirus in their area or when
Speaker 1: they were UM unable to get adequate protective equipment, and
Speaker 1: the amount of virus someone's exposed to generally can influence
Speaker 1: how well people can fight off the infection. So that's
Speaker 1: one possible reason why. The other reason is um that
Speaker 1: there's a certain randomness to the virus Um. There are
Speaker 1: people in the community who seem um completely at low
Speaker 1: risk based on what we know, but done the last
Speaker 1: they get seriously ill or even die. So you know,
Speaker 1: this is not a guaranteed harmless infection for anyone. Could
Speaker 1: this be genetic? I know there are a number of studies,
Speaker 1: um Josh about whether you have a pre genetic position
Speaker 1: for the virus to get worse. Where are we on
Speaker 1: that it's possible. I haven't seen any like compelling data
Speaker 1: specifying which, you know gene Sometimes there are variations in
Speaker 1: the immune system that can predict vulnerabilities to infection, So
Speaker 1: you know, I think that would be very interesting if
Speaker 1: if it's uncovered. I know you were saying that we
Speaker 1: need to be vigilant against a new surge of cases
Speaker 1: as we start to lift restrictions. What would be the
Speaker 1: right way to do this? Do you take a state
Speaker 1: and the state reopens and you see what happens, or
Speaker 1: do you look at another country or or you know
Speaker 1: countries and states comparable in and how they response has been,
Speaker 1: how the lockdown has been in the number of deaths
Speaker 1: and infections. So I think there are two things, and
Speaker 1: there's been a couple of day good reports but have
Speaker 1: been put out, including why the jumptop and interpare Health
Speaker 1: Security UM. And the first thing is you have to
Speaker 1: think about what are the conditions to reopening, what do
Speaker 1: you want to have in place before we reopen? And
Speaker 1: the second thing is how do you go about it?
Speaker 1: And in that first category, what do you want to
Speaker 1: have in place? Adequate testing, which we don't really yet
Speaker 1: have to really be able to test people who are sick,
Speaker 1: even mildly ill UM, as well as enough testing for
Speaker 1: high risk places like nursing homes. You certainly want to
Speaker 1: see cases declining substantially for fourteen days UM. You want
Speaker 1: to you need the public health capacity to respond to
Speaker 1: positive cases, and you need to make sure that that
Speaker 1: healthcare system that's been pushed to the brink in some areas,
Speaker 1: that's really bumped back so that you're able if things
Speaker 1: go get worse to handle the challenge, and then you
Speaker 1: got to think about how you're going to open up.
Speaker 1: And it's not going to be flipping the switch back on.
Speaker 1: It's going to be slowly turning the dial. And you
Speaker 1: need to really think through, um, what comes first, what
Speaker 1: comes second, what comes third, and then between needs stage
Speaker 1: waiting to make sure that you're not sparking at searching cases.
Speaker 1: And you know, um, there's some things that may be
Speaker 1: able to come first, like if they're work places where
Speaker 1: people don't get it anywhere near each other, um and uh,
Speaker 1: but then I think that are going to come later,
Speaker 1: like a big indoor concert that may come the late involved,
Speaker 1: So you really need to be thoughtful about that. I
Speaker 1: think you're starting to see in the United States brainwork
Speaker 1: being discussed like governor um, and I think that will
Speaker 1: be the load mop to people. Joshua Sharfstein, Professor at
Speaker 1: the Bloomberg School of Public Health, JOHNS Hopkins University, with
Speaker 1: Francine Laque and myself this morning as well. Most most
Speaker 1: informative right now Gideon Rose with us with a monthly
Speaker 1: review of his wonderful magazine Foreign Affairs. Anybody that listens
Speaker 1: to this show knows. I adore the magazine, particularly that
Speaker 1: the fonts actually big, so you can read it with
Speaker 1: these old eyes this time around. A wonderful important issue
Speaker 1: on the fire next time and the course this is
Speaker 1: on the climate change, your climate catastrophe debate. With that
Speaker 1: said Gideon Rose in his team of lead with a
Speaker 1: spectacular foreign affairs website looking at the pandemic, getting I
Speaker 1: want to get one question in on your wonderful new
Speaker 1: issue before I know Paul wants to get up to
Speaker 1: date with your thoughts on the pandemic, and that is
Speaker 1: with the collapse and oil prices, isn't it that much
Speaker 1: harder to affect climate change? So in one sense absolutely
Speaker 1: to all sorts of projects that we're based on the
Speaker 1: economic hiability or doing other kinds of things are are
Speaker 1: set back and there's less change and so forth. On
Speaker 1: the other hand, what we are seeing in real time
Speaker 1: is a great public education lesson in the consequences of
Speaker 1: mass small changes in individual behavior. There are environmental consequences
Speaker 1: and actions comparable to hand washing or mask wearing. And
Speaker 1: just as people now understand the logic but that connects
Speaker 1: their individual behavior to their personal health, that could easily
Speaker 1: become something that makes climate policy more plausible in the future,
Speaker 1: because we now understand global problems needs to be addressed globally,
Speaker 1: and we understand that our connection to that global problem
Speaker 1: and the consequences everybody. Whether that will translate into actual
Speaker 1: political behavior, probably not in the short term, but in
Speaker 1: the longer term, this will make constructive action to prepare
Speaker 1: for and solve crises more likely to happen, rather than less.
Speaker 1: I believe even with climate so giddy, and I guess
Speaker 1: one of my concerns as I think about climate change
Speaker 1: in the world we're living in now, it's it takes
Speaker 1: a big, big I guess it just gets put on
Speaker 1: the back burner in a big way. People are just
Speaker 1: trying to survive. They're trying to deal with this virus.
Speaker 1: They're trying to think about what it means for their lives,
Speaker 1: what the post coronavirus world looks like. And I'm concerned that,
Speaker 1: you know, climate change, even with the younger generation where
Speaker 1: it's they're really passionate about it, it makes peop put
Speaker 1: on the back burners. Are concerned that it loses some
Speaker 1: of the momentum. So I think that obviously would be
Speaker 1: true for a lot of the activism, and and I
Speaker 1: think what you're talking about is something that many people fear.
Speaker 1: But as our issue points out, as the articles in
Speaker 1: to point out, what really matters now is not mass
Speaker 1: collective action, is not mass political pressure even which is
Speaker 1: not really going to materialize, but wise policy two basically
Speaker 1: change the course to flatten the curve of the climate
Speaker 1: disaster that's looming. And that kind of stuff is equivalent
Speaker 1: to the public health measures we would have wanted our
Speaker 1: authorities to take in the months and years before the
Speaker 1: real pandemic hit. And those kinds of things can still happen.
Speaker 1: If why is technocrats get entrusted with power, Gideon, I'm
Speaker 1: looking at it right now now. There was the shots
Speaker 1: of l A this week, and I saw out in
Speaker 1: the Twitter sphere and there was a wonderful, hilarious shot
Speaker 1: that with the way the error is cleaned up with
Speaker 1: this pandemic, you can see Sydney from New York. That
Speaker 1: was hilarious that I'm looking out right now. Get into
Speaker 1: a pretty fancy view of a crystal clear New York.
Speaker 1: I mean, we're getting a lesson right now in this
Speaker 1: Within all of the research you do at Foreign Affairs
Speaker 1: What is holding us back from the common sense here
Speaker 1: is just market functions. Isn't it that the hydro carbon
Speaker 1: like engines still are cost effective? You're absolutely corrective. You
Speaker 1: are market failures that can be addressed through wise public
Speaker 1: policy at the local and the national and the international
Speaker 1: and global level. And what we lay out in the
Speaker 1: magazine is a whole variety of things. You have will
Speaker 1: Bill Nordhouse Nobel Prize winning economists explaining why you need
Speaker 1: to go to a club membership model for international agreements
Speaker 1: rather than the sort of one who currently have that
Speaker 1: allow free riding, And you have everything from that to
Speaker 1: why but businesses and individuals and new but most importantly,
Speaker 1: if you think of this basically as do we want
Speaker 1: to empower going forward the people like Foucher and Birks
Speaker 1: and the ones who we think of as good public
Speaker 1: health technocrasts. There are people like that on climate as well,
Speaker 1: and there are policies that could be followed now that
Speaker 1: don't involve shutting down the entire world. The question is
Speaker 1: will we be able to direct government action, scientific research
Speaker 1: and policy to do the equivalence of surging on testing
Speaker 1: in climate related areas, to do the equivalence of development
Speaker 1: of vaccine, speeding up for climate related green technologies. You
Speaker 1: could have a massive government program that would be worthwhile,
Speaker 1: not simply as a jobs program or as a politically
Speaker 1: correct thing, but as something that generated the kind of
Speaker 1: solutions to the crisis that could have head off the
Speaker 1: worst outcome. That's what I'm hoping for, whether we'll see
Speaker 1: it or not as anybody's guests. So getting in all
Speaker 1: the wonderful reporting of Foreign Affairs magazine, what is kind
Speaker 1: of the takeaway from some of the government response to
Speaker 1: this virus? It's kind of you know, you go from
Speaker 1: China for just a complete lockdown to the U S,
Speaker 1: which it seems to be state by state by state,
Speaker 1: and some of the European economies have been differing in there.
Speaker 1: I guess their severity of their locks down. What's kind
Speaker 1: of the takeaway that you're seeing here as this situation develops.
Speaker 1: That's a great question. You know. I was rereading the
Speaker 1: issue and all of our coverage of pandemics before this appearance,
Speaker 1: and I managed to depress myself even more because the
Speaker 1: more I look around, the more I see UH government
Speaker 1: failure and leadership failure in so many areas in so
Speaker 1: many regions at so many levels. And yes, of course
Speaker 1: there are wonderful cases of successes, and we all want
Speaker 1: to be like South Korea. But what's notable about the
Speaker 1: South Koreas and places like that, at a few of
Speaker 1: them that there are, it's how few they are and
Speaker 1: how unrealizable you could imagine that being uh in uh
Speaker 1: in a place United States and so many countries have
Speaker 1: done badly. But I'm now wondering the really interesting question
Speaker 1: is not who's gonna do well, it's whose regime is
Speaker 1: so brittle that it will not survive the crisis. Here
Speaker 1: on Bloomberg, you understand that there are a lot of
Speaker 1: companies have had a lot of debts that were zombie
Speaker 1: companies or problem companies, and those are the ones who
Speaker 1: are gonna be the biggest casualties of the crisis economically,
Speaker 1: because they're not going to be strong enough to survive.
Speaker 1: Lots of regimes are going to be facing a reckoning
Speaker 1: when their publics finally embrace the full cost of what's
Speaker 1: happening and how poorly their leaders performed. And when that happens,
Speaker 1: some regimes will be able to desmond and the new themselves,
Speaker 1: and some won't. And that's the interesting thing to watch.
Speaker 1: Everybody is going to do badly. Whose regime will survive
Speaker 1: the win and wing that will come now that the
Speaker 1: tide has run out. Always Eclectic Air Magazine has a
Speaker 1: wonderful article from two from Another Time and Play Secretary
Speaker 1: Baker and Secretary Schultz in their team uh in in
Speaker 1: the Aged View, a view from the Washington Consensus. How
Speaker 1: do they treat the new populism, the death of multilateralism
Speaker 1: we've seen in James Baker and George Schultz's world Well,
Speaker 1: uh Baker and Schultz, writing with Ted Holsted, argue that
Speaker 1: you can actually seed climate change as an opportunity, not
Speaker 1: just a threat, not just a problem, because the United
Speaker 1: States is already at the forefront of green technology and
Speaker 1: has the kind of system that could generate the answers.
Speaker 1: And so they argue using government constructive lead to advance
Speaker 1: and build on the American lead and make the United
Speaker 1: States a pioneer in the center thing. By the way,
Speaker 1: we have an article and the same issue by John
Speaker 1: Podesta and Todd Stern, who handled climate policy in the
Speaker 1: Obama administration, arguing for a whole set of what policies
Speaker 1: would make sense for a climate that is broadly in sync.
Speaker 1: So you have buy partisan support for a kind of
Speaker 1: policy that would be a constructive climate policy that would
Speaker 1: not involve self sacrifice and austerity. But it's possible, but
Speaker 1: positive change. Well getting in a rose. Congratulations on an
Speaker 1: important issue in climate change. In your website on the
Speaker 1: pandemic has been absolutely superb Foreign Affairs Magazine. Thanks for
Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to
Speaker 1: interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer.
Speaker 1: I'm on Twitter at Tom Keane before the podcast. You
Speaker 1: can always catch us worldwide. I'm Bloomberg Radio