Speaker 1: Welcome to the Bloomberg Surveillance podcast and I'm Tom Keane.
Speaker 1: Daily we bring you insight from the best in economics, finance, investment,
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Speaker 1: Hass has written my book of the summer, It's The World,
Speaker 1: and I'll make real clear. Take it and throw it
Speaker 1: at any smart mouth college kids you know, and beg
Speaker 1: them to at least read the first hundred and fifty pages,
Speaker 1: which is a tour to force on the Western civilization
Speaker 1: we've all forgotten, or quite frankly, we never took. Ambassador
Speaker 1: has joins us now from the Council on Foreign Relations. Ambassador.
Speaker 1: In your book The World, you write about war between countries.
Speaker 1: Are we now at war with China? No, we're not
Speaker 1: at war with time China. But the entire trajectory of
Speaker 1: this relationship has changed compared to what it was. For
Speaker 1: what unit station China built a relationship fifty years ago.
Speaker 1: We originally worked together against the Soviet Union. Then our
Speaker 1: economic interaction essentially became the foundation of the relationship. That
Speaker 1: economic interaction has now become a source of friction. But
Speaker 1: what you're seeing, particularly on the American side, is a
Speaker 1: real ramping up rhetoric against China at a time China
Speaker 1: is becoming more assertive in its foreign policy. We're not
Speaker 1: at war, but this is a relationship that it seems
Speaker 1: to have lost any positive dimension, any rationale, and increasingly
Speaker 1: it's marked by confrontation. Investador. I want you to go
Speaker 1: to a time and place long ago. James McGregor Burns
Speaker 1: was great about this, about how we developed the State Department,
Speaker 1: how we developed a foreign voice as Americans. Please comment
Speaker 1: on the tone the disc course of our Secretary of
Speaker 1: State this week. To me, it's original really within the
Speaker 1: twentieth century, in this new century, is it? I'm hard pressed,
Speaker 1: uh to find a parallel. Tome. I hear where you're going,
Speaker 1: and I'm sympathetic to what you're saying. Our chief diplomat
Speaker 1: is going out of his way, not just to be undiplomatic,
Speaker 1: there's a time to be that, but to be publicly provocative,
Speaker 1: insulting his counterparts in China. Essentially yesterday, in a speech
Speaker 1: at the Nix Nixon Library, almost de legitimizing and almost
Speaker 1: de legitimizing the current leadership of China. UH and essentially
Speaker 1: it came very close, very close to calling for regime
Speaker 1: change in China. The parallels between his approach to Iran
Speaker 1: and the approach we heard yesterday in China I thought
Speaker 1: were pronounced. You know, Richard, this is really really important.
Speaker 1: The Peace Hotel over in Shanghai yesterday on Twitter put
Speaker 1: out a photograph of their claimed British room where Henry
Speaker 1: Kissinger I believe slept the night before he went to
Speaker 1: Beijing to change history. Are we giving up all that
Speaker 1: was accomplished in the early nineties seventies. I don't know.
Speaker 1: It's too soon to say that. We don't know how
Speaker 1: much of this is tactical, political, to be to be
Speaker 1: blunt in our own context. In the run up to November,
Speaker 1: we'll have to see what happens. But this is extreme.
Speaker 1: This is the idea. By the way, this is ironic
Speaker 1: that the speech took place at the Nixon Library. Nixon
Speaker 1: was willing to find common cause with China despite all
Speaker 1: of our fundamental political and social differences. Yesterday, the secretarire
Speaker 1: State ignored the potential for the United States to work
Speaker 1: together despite our political differences, and instead hart on those differences.
Speaker 1: It's as if he's looking for a fight with China,
Speaker 1: And I think again, this is this relationship. Any time
Speaker 1: you have a relationship between a rising power and existing power,
Speaker 1: know that it's difficult. It calls for really subtle death,
Speaker 1: state craft on both sides, whatever else you want to cause.
Speaker 1: Yesterday's speech, I would not use adjectives like subtle and death.
Speaker 1: Maybe that's the tactic. I don't know, Richard. Something else
Speaker 1: I don't know is what it's the strategy. What is
Speaker 1: the strategy at the moment? Can you identify what it is? No? Certain?
Speaker 1: Uh if. Traditionally in foreign policy, the strategy is to
Speaker 1: change the external behavior of other countries. Now if our goal,
Speaker 1: you know, we could have legitimate goals about changing China's
Speaker 1: approach to trade. We could have goals about getting them
Speaker 1: to ease up in Hong Kong, or not to deal
Speaker 1: with the weakers the way they are, to stop with
Speaker 1: their unilateral claims in the South China. Say, all of
Speaker 1: those would be within the traditional realm of a farm policy.
Speaker 1: That would be a strategy. We would work with our
Speaker 1: allies to bring it about instead, and yesterday's speech, we
Speaker 1: have the Secretary of Stay brating our allies, including Germany,
Speaker 1: and again not making clear what exactly it is we
Speaker 1: want China to do. That is in the realm of
Speaker 1: foreign policy. Richard tom Kine started this asking are we
Speaker 1: at war with China? You said, no, that's a stretch.
Speaker 1: But is that the outcome that we're getting toward. I mean,
Speaker 1: what is sort of the trigger points here and the
Speaker 1: possible tip for TAT escalation That could be a worst
Speaker 1: case scenario we've had now the tip for TAT we
Speaker 1: close used and they closed Chang Do. I would think
Speaker 1: the most dangerous thing for the next few months, UH
Speaker 1: would be an incident in something like the South China.
Speaker 1: Say China has unilateral claims, we correctly do not accept
Speaker 1: their maritime claims. Were sending ships to the region to
Speaker 1: demonstrate we consider these orders to be international. The idea
Speaker 1: that you could have some type of a military incident
Speaker 1: that could then potentially escalate, I don't think is out
Speaker 1: of the question. So for me, the next few months,
Speaker 1: some type of a military incident, and then the question
Speaker 1: is do these two countries have the ability to manage it?
Speaker 1: Do they have a desire to manage it? That I
Speaker 1: would put uh that that to me's the greatest near
Speaker 1: term danger. Richard, do you buy that the Phase one
Speaker 1: trade deal is still on? Well, it's on, it's on
Speaker 1: on paper. It's never been close to being implemented to
Speaker 1: some extent. That's because of the context UH giving to
Speaker 1: the coronavirus. UH. If it's on in paper, there's no
Speaker 1: movement whatsoever towards the Phase two. I think that would
Speaker 1: only change if if Mr Trump were re elected, and
Speaker 1: I think suddenly my guests would be that you see
Speaker 1: a slight winding down of this hostility towards China. If
Speaker 1: he were re elected, there would be a desire for
Speaker 1: some type of a deal that would that would increase
Speaker 1: US exports to China. That's been the sentipiece of his
Speaker 1: foreign policy to essentially try to bring about trade deals
Speaker 1: that increased US exports. But for the time being, nothing's
Speaker 1: going to happen. The Chinese have zero incentive to implement
Speaker 1: the Phase one deal. And that's the ways we wrap
Speaker 1: up this conversation. I think you've touched on something really
Speaker 1: really important. Just reflecting on the thing you've said, Typically
Speaker 1: diplomacy is surgical. You really think out what you're doing
Speaker 1: and work out the whole range of responses the other
Speaker 1: side might respond with. And I have been asking that
Speaker 1: question this week, just how surgical the approach has been
Speaker 1: from this administration. And I think that one thing a
Speaker 1: lot of people are worried about is the prospect the
Speaker 1: scope for an accident in some realm of confrontation with China.
Speaker 1: Where do you see that potentially happening? Well, you're right,
Speaker 1: first of all, is there anything but circle surgical would
Speaker 1: have been? For example, rather than closing the Houston Consulate,
Speaker 1: we might have asked quietly and privately for certain diplomats
Speaker 1: to leave c Y might a place some restrictions on
Speaker 1: certain students. Closing a consulate is the opposite of surgical.
Speaker 1: That that sledge material. Again, I think you'll see heated
Speaker 1: rhetoric for the next few months. I think the most
Speaker 1: two things to look for. One I already mentioned a
Speaker 1: military incident. The other is I wouldn't be shocked given
Speaker 1: Secretary pompeios speech, is you saw if you saw some
Speaker 1: broad actions against members of the Chinese Communist Party. We're
Speaker 1: talking about something like ninety two million people the leadership
Speaker 1: of China. Don't be surprised if you see travel restrictions
Speaker 1: or something like that, which have been talked about basically
Speaker 1: escalating not just the rhetoric, but this attack on the
Speaker 1: leadership structure of China. And I think that's uh, that's
Speaker 1: a possibility. I want to go back to one of
Speaker 1: ambassador houses. Older books were trying to sell them all
Speaker 1: here today. This is a movie. You'll see a Memorial
Speaker 1: Day next year. Foreign policy begins at home, Ambassador House.
Speaker 1: You never imagined a four or five trillion dollar deficit.
Speaker 1: Granted it's off a national disaster. How is our foreign policy,
Speaker 1: our projection to the world changed? With this new massive deficit?
Speaker 1: Raises questions about American competence. It raises questions about the
Speaker 1: role of the dollar as the world's the factor currency,
Speaker 1: as that as its reserve currency. Potentially, UH introduces elements
Speaker 1: of America of vulnerabilities. Is all fine to run these
Speaker 1: deficits when interest rates or historic blows, but even small
Speaker 1: movements up in interest rates would but totally transformed the
Speaker 1: American economic picture. What I think we've done here is
Speaker 1: we have introduced a potential source of vulnerability. It's dead.
Speaker 1: Tom is one of those things that it's fine until
Speaker 1: it's not so. In a sense we're merely going along
Speaker 1: ranking it up at record rates, and that will be
Speaker 1: fine until the day it's not, and that will be
Speaker 1: a real day of recording. But I do think it
Speaker 1: hastens the emergence of of a world not with a
Speaker 1: clear alternative to the dollar, but where the dollar loses
Speaker 1: the near monopoly it has on international transactions. Not to
Speaker 1: be a conversation the next ambassador always fortunate to get
Speaker 1: you on the show. I appreciate it. Time this morning
Speaker 1: Richard Hasse of the Council on Farmer Nations. He is
Speaker 1: the most interesting politician. He's a farm Prime Minister of Latvia,
Speaker 1: providing great leadership out of the financial crisis. Waldis Dombrowski
Speaker 1: brings economics and physics to his duties. Is the European
Speaker 1: Union Commissioner for Financial Services and he helps us pick
Speaker 1: up the debris one weekend from exhaustive meetings in Europe.
Speaker 1: But as I have to broaden out the conversation right
Speaker 1: now to how Europe approaches these new tensions with the
Speaker 1: United States, the new tensions with China. Is there a
Speaker 1: European foreign policy first of all as regards uh the
Speaker 1: international tensions in including international trade, tensions. Uh you use
Speaker 1: UH policy has been a very clear. We are supporting
Speaker 1: and defending multilateral rules based system and this is an
Speaker 1: approach which we are taking in the negotiations with US
Speaker 1: with China. That's why we are not supportive, for example,
Speaker 1: of unilateral more of US in the area of trade.
Speaker 1: But at the same time, we share a number of
Speaker 1: concerns regarding China, including questions on intellectual property rights uh uh,
Speaker 1: forced technology transfer, reciprocity in our trade and investment relationships.
Speaker 1: So there are a number of issues which we seem
Speaker 1: to address, but we think those should be addressed while
Speaker 1: respecting international rules. How do you adapt and adjust to
Speaker 1: the Secretary of State on a tour through London and
Speaker 1: to Denmark and then back over to San Francisco this week,
Speaker 1: the assertive tone of the Trump administration, how do you
Speaker 1: and mrs Mrs Vester you're in arrest, how do you
Speaker 1: adapt to that? In Europe? Well, Uh, First of all,
Speaker 1: as you know, UH, EU and US had its trade attention.
Speaker 1: We managed to reach an agreement avoiding further escalation, and
Speaker 1: currently we are building on that. So one can discuss
Speaker 1: that the tone is assertive, but at the same time
Speaker 1: we are negotiating and we have reached a degree of agreement. Well,
Speaker 1: we know that initially us we're taking unilateral actions like
Speaker 1: unilaterally raising tariffs. We were responding in a kind in
Speaker 1: a proportionate way, but at the end of the day
Speaker 1: we avoided further escalation and reached agreement on which we
Speaker 1: can now build. Commissioner, we've heard a lot from Europe
Speaker 1: about the multilateral response. Can we talk about concrete steps?
Speaker 1: You yourself have talked about the asymmetry and market access
Speaker 1: between Europe and China. You talk about reciprocity as well.
Speaker 1: Can you talk to us about concrete steps. What are
Speaker 1: you doing to get the Chinese Communist Party to change? Well, actually,
Speaker 1: we are currently negotiating with China investment agreement and we
Speaker 1: are currently preparing the next EU China Economic Dialogue to
Speaker 1: discuss exactly these issues, and we hope that we will
Speaker 1: be in a due course actually able to conclude our
Speaker 1: negotiations on investment agreement and the issues we are discussing
Speaker 1: with China in these negotiations are exactly the questions of
Speaker 1: UH access to China's market, reciprocity, investment conditions, non tarift barriers.
Speaker 1: So all these issues are on agenda with our investment
Speaker 1: negotiations with China. Commation how much is the European Union
Speaker 1: working with United States as tensions increase with China in
Speaker 1: both regions. Well, as I said, we share a number
Speaker 1: of concerns of US and we have a similar concerns
Speaker 1: and definitely we are working is US to see how
Speaker 1: most effectively to address these concerns, but we think that
Speaker 1: it should be done with ZILL within multi multilateral framework,
Speaker 1: within the framework of World Trade organization. We know that
Speaker 1: we need a form of World trade organization and we
Speaker 1: are willing to cooperate and coordinate our actions on this
Speaker 1: with US. But what we are saying that one should
Speaker 1: refrain from unilateral actions because it just escalates attentions further
Speaker 1: and at the end of the day, negatively affects international
Speaker 1: trade and negatively affects global economy. Commissioner, thank you for
Speaker 1: addressing the news at the moment, particularly this morning. If
Speaker 1: we can get you to address the news of this
Speaker 1: week for Europe, which was a massive step forward for
Speaker 1: the continent and fiscal integration, can you just walk us
Speaker 1: through next steps from here when we can expect the
Speaker 1: dead issuance from the European Commission over the next several
Speaker 1: months when that money will be raised. Well, indeed, so
Speaker 1: early this week EU Summit decided on the next seven
Speaker 1: years EU budgets, so from twenty one to twenty seven,
Speaker 1: and on the EU Economic Recovery Package worth seven hundred
Speaker 1: fifty billion euros. So this is a major step forward.
Speaker 1: So we welcome this, uh this agreement of the summit. Well,
Speaker 1: there are further procedural steps. Currently we are starting negozlations
Speaker 1: with European Parliament because also European Parliament needs to agree
Speaker 1: today's multi annual budget and the recovery plan. In any case,
Speaker 1: UH we from European Commission side, we consider that it's
Speaker 1: important that negotiations are finalized swiftly uh so that the
Speaker 1: next multi annual EU budget and recovery plan can start
Speaker 1: acting as of January one next year, and that's when
Speaker 1: European Commission also would start the Common Issues of dept
Speaker 1: in order to finance EU Economic Recovery Plan. Even though
Speaker 1: it must be said that some elements we will be
Speaker 1: going to markets already this year because here we are
Speaker 1: talking about economic recovery plan. But we took lots of
Speaker 1: crisis measures in previous months, including for example, one billion
Speaker 1: euros sure program to support employment and unemployment mitigation in
Speaker 1: EU member states, and we will be going to markets
Speaker 1: already this year to finance this program. Commissioner, thank you
Speaker 1: for time this morning. We really appreciate it. Here a
Speaker 1: Bloomberg Payter Oppenheimer Government Sex Chief Global equity strategist teach
Speaker 1: you this now pay the fantastic to catch up with you.
Speaker 1: Would you believe it that Europe comes out of this
Speaker 1: week looking clean, looking good compared to the rest of
Speaker 1: this world. Yeah, what a different decade, HIGs. I guess
Speaker 1: because obviously Europe but was very slow to respond after
Speaker 1: the last crisis in two thousand and eight, and it's series.
Speaker 1: It's suffered a series of major hurdles over the years
Speaker 1: that followed that financial crisis, but it's getting it that
Speaker 1: together from the policy perspective, and as you say in
Speaker 1: your report, the economies were covering quite nicely from this downturn.
Speaker 1: Peter tom King in New York, good morning. You've got
Speaker 1: one of the coolest degrees in the undergraduate world. The
Speaker 1: geography degree, folks from the London School of Economics is
Speaker 1: absolutely legendary. Tell me the geography of cheng Do, how
Speaker 1: far is chein Do emotionally politically from Washington and from Beijing.
Speaker 1: I too, that's a great question. U. My geography didn't
Speaker 1: didn't really stretch to that. But I you know, I
Speaker 1: think this is a reflection of just the growing tensions,
Speaker 1: and so far you're getting one action matched by another.
Speaker 1: But it looks as if these tensions, at least in
Speaker 1: the short term, we're going to increase um and uh,
Speaker 1: you know, this is one of the factors I think
Speaker 1: that will probably where our markets as we move towards
Speaker 1: the U S election of these Peter, what's the calculation
Speaker 1: and how it affects equities because yesterday tensions were also rising,
Speaker 1: the day before also rising, and yet it wasn't affecting
Speaker 1: equity prices. Why today and what going forward will be
Speaker 1: sort of the trigger point for US stock value valuations.
Speaker 1: I think it's it's a very difficult thing to to
Speaker 1: measure the economic impacts because of course we don't know
Speaker 1: entirely what this means in terms of future trade tensions specifically,
Speaker 1: which would have a more direct effects on markets. But
Speaker 1: I think it's one of these things that just increases
Speaker 1: the risk cremium, just the degree of uncertainty we have had,
Speaker 1: of course, a tremendous run in ecting markets as investors
Speaker 1: are looking through what is likely to be the worst
Speaker 1: economic downturn for sixty seventy years into a strong recovery.
Speaker 1: We've already seen that happening, and we've had to boost
Speaker 1: from very strong policy stimulus. And I guess now the
Speaker 1: the you know, the reality of what's likely to still
Speaker 1: be quite a tough geopolitical environment, which indeed was an
Speaker 1: issue that really bored down on empty markets in the
Speaker 1: first half of last year. It is likely to come back.
Speaker 1: So I think this is a bit of sort of
Speaker 1: reality coming back to investors as they reassess the risks
Speaker 1: over the next few months. Peter, do you think they'll
Speaker 1: continue to look through the economic data if it looks
Speaker 1: weaker from here are the signs that we're losing momentum
Speaker 1: here in the US economy or do you think we're
Speaker 1: rolling over again? Yeah, I think there is a bit
Speaker 1: of a lot of momentum with seeing in the in
Speaker 1: the labor market. You know, clearly the rebound from in
Speaker 1: Q three versus Q two is going to look very
Speaker 1: v shaped, and this is true in pretty much all
Speaker 1: parts of the world as you start to get easing
Speaker 1: of lockdowns to varying degrees as an improvement from a
Speaker 1: very very weak base. But I think the question really
Speaker 1: for investors is going to be what's the sort of
Speaker 1: run rate after this. Bear in mind that most economies
Speaker 1: are not going to get back to the levels of
Speaker 1: GDP that we was seeing at the beginning of this
Speaker 1: year until late next year or two, and I think
Speaker 1: that that's sort of more cautious reality, together with the
Speaker 1: geopolitics that you've mentioned, is really going to be one
Speaker 1: of the constraints on risk assets UM over the near term. Well, Peter,
Speaker 1: you're constantly talking to the buy side and investors, so
Speaker 1: give us some insight into those conversations. Do you get
Speaker 1: the sense that anemic growth, so long as that growth
Speaker 1: is positive, that that is sufficient for risk assets? It
Speaker 1: is partly because and you mentioned this just earlier on,
Speaker 1: you know, real interest rates have turned increasingly negatives, and
Speaker 1: that's a positive for risk assets. There's a lack of
Speaker 1: alternatives for guidance has meant that nominal rates are likely
Speaker 1: to remain at zero or close to that lower bound
Speaker 1: for a very long time. And people are are struggling
Speaker 1: to get a return. So although the absolute returns may
Speaker 1: come down from here, there is a willingness I think
Speaker 1: to look more positively at risk assets like equities, and actually, interestingly,
Speaker 1: for the first time for a very long time, there's
Speaker 1: amongst global investors more optimistic view of Europe specifically, which
Speaker 1: has dealt better with this crisis. But it was also
Speaker 1: I think surprised on the upside in terms of the
Speaker 1: coordination of the policy response. I re peter the idea
Speaker 1: of index versus active maybe too fancy for you, but
Speaker 1: maybe we can just say the level of diversification now
Speaker 1: within our equity holdings. Do you want to be over diversified,
Speaker 1: spread it out or do you want to make more
Speaker 1: focused bets? In the late two thousand twenty one, oh,
Speaker 1: I think that, you know, investors of global investors, and
Speaker 1: certainly dollar based investors should be looking at diverse fying more.
Speaker 1: We do believe that the dollar is likely to be
Speaker 1: con further over the coming years as interest rate differentials
Speaker 1: narrow and as as deficits rise in the US, So
Speaker 1: that's one reason for diversifying geographically. But also bear in
Speaker 1: mind the last cycle, the last decade was very extreme
Speaker 1: in terms of differences across geographers, particularly in equities. You know,
Speaker 1: massive out performance of the US. That was justified because
Speaker 1: the US outperforming the rest of the world in terms
Speaker 1: of profit growth, largely because of its dominance in the
Speaker 1: technology sector. It still has dominance in that sect and
Speaker 1: that set is still going to be very important. But
Speaker 1: other areas of the world are catching up a bit.
Speaker 1: They're becoming a little bit more growth orientated themselves, not
Speaker 1: least of which is that's true in Europe. You know,
Speaker 1: when the crisis started a decade or more ago in
Speaker 1: Europe were a quarter of the index that was the
Speaker 1: epicenter of that crisis. They now accounts about seven percent,
Speaker 1: about the same weight as the technology sector. So Europe
Speaker 1: and Asia are getting a little bit more exposed to
Speaker 1: growth and technology themselves, and I think that justifies more
Speaker 1: geographical distribution, and I think probably more focused on out
Speaker 1: opportunities and less on beta, so more on stock picking
Speaker 1: and less on indexes. Peter, given the fact that you
Speaker 1: believe that investors are under invested in Europe, how much
Speaker 1: could it outperform US equity indices over the reindeer of
Speaker 1: the year. Well, if we look out over twelve months
Speaker 1: and you know, if we look at things in common
Speaker 1: currency in dollar terms, we would expect Europe to be
Speaker 1: from these levels going up around where we've got a
Speaker 1: relatively flat return to the smp A. Part of that
Speaker 1: is the difference in in the dividend. You know, Europe
Speaker 1: has a higher yield than the US. Part of it
Speaker 1: is the currency. We actually have the euro going to
Speaker 1: one twenty five over the twelve months against the dollar,
Speaker 1: but some of it is a bit of a catch
Speaker 1: up evaluations. Europe still has evaluation gap, a lower evaluation
Speaker 1: than the US market, and we think with this narrowing
Speaker 1: with premium, with this increased confidence in Europe, that war
Speaker 1: narrow a little bit. From here, Peter, great to catch out,
Speaker 1: but you send up best of the team. Why you're
Speaker 1: Peter Uppenheim in there of government sacks. Thank you very much, said.
Speaker 1: We can speak to one of our leading policy analysts,
Speaker 1: Bessie Stevenson of Michigan right now, of course writing for
Speaker 1: Bloomberg Opinion and our work of course formerly with the
Speaker 1: Department of Labor. Professor Stevenson, good morning, John's got some
Speaker 1: very direct questions on the immediacy of where we are.
Speaker 1: I want to go to your Twitter feed. You have
Speaker 1: a brilliant retweet out on the fact that this is
Speaker 1: a nation that can bail out an airline. In this case,
Speaker 1: it happens to be Delta Airlines. Not cast dispersion there
Speaker 1: versus what we spend on childcare in this nation. How
Speaker 1: did that happen versus how Europe takes care of children. Yeah, so,
Speaker 1: first of all, let me just say I love Delta Airlines,
Speaker 1: so I don't mean to pick on them, but it
Speaker 1: does seem to be completely crazy that Congress cares more
Speaker 1: about saving one airline than the entire childcare industry. And
Speaker 1: the problem is that in the United States we still
Speaker 1: see childcare as a personal problem. Does the women's issue
Speaker 1: of personal Come on? Not even the fat cats like me.
Speaker 1: When the child has to go to nursery school, it's
Speaker 1: like writing a tuition check to Michigan. I mean, come on,
Speaker 1: it's out. Everybody watching this, everybody listening degrees this is
Speaker 1: a busted system. What is the Stevenson response to making
Speaker 1: our childcare on the edge of Spain's. Well, look, this
Speaker 1: thing is we can't say, oh, we need to make
Speaker 1: it cheaper by paying childcare workers less. You couldn't pay
Speaker 1: those folks any less than we are. What we need
Speaker 1: to do is invest as a nation. We have a
Speaker 1: body of research that you know, we could stack as
Speaker 1: high as a building that tells us that investing in
Speaker 1: early childhood education reads huge returns for taxpayers. And what
Speaker 1: people don't understand is if we let our early childhood
Speaker 1: learning and our childcare systems erode during this pandemic, so
Speaker 1: they're not there for us when we come back. It's
Speaker 1: not just the parents are going to suffer, but it's
Speaker 1: those kids who are going to suffer. We're gonna have
Speaker 1: decades of pain that comes from not investing in these
Speaker 1: children talking about leaving their parents. It's so so important.
Speaker 1: This is not just a problem for the people on
Speaker 1: the wrong end of it. It's not about mothers. It's
Speaker 1: not about people without a job who might miss their
Speaker 1: payments at the end of this month. Certainly is about them,
Speaker 1: but it's more than that. It's an economic problem. More
Speaker 1: broadly and LISTA. We always frame this as just the
Speaker 1: problem of the person experiencing it, and if we frame
Speaker 1: it as a broader problem for the economy, surely the
Speaker 1: collective will will be there to do something about it.
Speaker 1: The U. S Census has started to try to quantify
Speaker 1: how big of a problem this is for the economy,
Speaker 1: and actually they released a survey today showing that more
Speaker 1: than eight million Americans were not in work over the
Speaker 1: past month because they had a child who was not
Speaker 1: in school or with childcare. And meanwhile, on the other
Speaker 1: side of that, Betsy, to your point, we have childcare
Speaker 1: centers closing at a very quick rate because they cannot
Speaker 1: stay in business given the fact that they cannot care
Speaker 1: for people's children. What are you hoping to see to
Speaker 1: bridge this gap in the upcoming months And how big
Speaker 1: of a hit could it be on the economy if
Speaker 1: we don't have something to remedy the situation. So the
Speaker 1: permanent closures are the thing that I'm most worried about,
Speaker 1: because they're not going to reopen. We're we're not going
Speaker 1: to get a vaccine, and then the next day they
Speaker 1: brand new childcare center props open. So we have to
Speaker 1: keep those businesses going. We need to make sure that
Speaker 1: we're helping them do the investments they need to do
Speaker 1: to their infrastructure to make childcare safe during the pandemic.
Speaker 1: And then we're going to have to make sure that
Speaker 1: those parents who aren't at work because they're staying home
Speaker 1: with a kid have a way to get back into
Speaker 1: the labor market. Our labor market, you think about, the
Speaker 1: labor market, is a highway. We have lots of off
Speaker 1: ramps for parents, particularly for women, and we don't have
Speaker 1: very many on ramps. And so we're gonna have to
Speaker 1: be hitting this from every front, subsidizing childcare like crazy
Speaker 1: and helping the parents get back to work, and making
Speaker 1: sure that the kids are getting the again that that
Speaker 1: early childhood education. And I think we often start talking
Speaker 1: very directly about who really needs childcare in September versus
Speaker 1: who doesn't. I hear a lot of talk about what
Speaker 1: should open and what shouldn't open, But we're not prioritizing
Speaker 1: the kids and families who need it most. And it's
Speaker 1: time for us to start prioritizing. If we're not gonna
Speaker 1: be able to do it for everybody, let's figure out
Speaker 1: who's gonna be hurt most if we don't get them something. Bessie,
Speaker 1: it's not clear the collective will down in Washington to
Speaker 1: a rest these huge issues is actually there right now.
Speaker 1: Another huge issue, the enhanced unemployment benefits that are set
Speaker 1: to expire month end. Betsy, let me ask this of you.
Speaker 1: Is there any evidence right now the enhanced benefits being
Speaker 1: offered holding back labor supply. Well, I don't think that's
Speaker 1: the quite the right question. What we have is a
Speaker 1: glut of labor supply right now. That's unemployment. We have
Speaker 1: a bunch of people who want jobs who can't get them.
Speaker 1: When you if you create a disincentive for some people
Speaker 1: to take those jobs, that just makes it easier for
Speaker 1: the people who want them to take them. So I
Speaker 1: don't think we have any evidence right now that these
Speaker 1: enhanced benefits are are changing the number of people who
Speaker 1: are employed. That's the real question, right And I don't
Speaker 1: think that if we continue to offer some kind of
Speaker 1: enhanced benefits right now, with unemployment as high as it is,
Speaker 1: with permanent layoffs happening every single day, continually happening, I
Speaker 1: don't think that our problem is that we're paying the
Speaker 1: unemployed too much. Um. Paying the unemployed is actually what's
Speaker 1: keeping the economy going, because that's what's keeping demand stimulated,
Speaker 1: and that's what you know, keeping food on people's tables.
Speaker 1: It's gave a massive lift to consumption over the last
Speaker 1: couple of months, it's undeniable, Betsy. The job number here
Speaker 1: on Wall Street is getting so so difficult to read
Speaker 1: going into the next couple of weeks. Continuing claim suggests
Speaker 1: it might be okay. Initial jobless claim suggests to store
Speaker 1: the high frequency data says things aren't great in many
Speaker 1: states across the sun. Bout how do you view things
Speaker 1: right now? Well? I do think that those claims data
Speaker 1: have been really hard to interpret. They certainly didn't predict
Speaker 1: the last jobs report, and I don't think they're necessarily
Speaker 1: going to tell us about this one. Look what I
Speaker 1: see is I see ongoing permanent layoffs. Those are not
Speaker 1: businesses temporarily shutting down saying, look, we gotta stay safe
Speaker 1: for a month and then'm going to bring you back.
Speaker 1: These are businesses looking ahead at their revenue stream and
Speaker 1: saying I can't afford this payroll over the next year.
Speaker 1: They're letting people go with no intention of bringing them back.
Speaker 1: And those permanent layoffs, those are the people who have
Speaker 1: a much harder time finding work again. So that's what
Speaker 1: I worry the most about. I also think that if
Speaker 1: you look back to what the reference week was like,
Speaker 1: we're talking about the jobs report we're talking about, you know,
Speaker 1: the week that included July twelve. I've thought a lot
Speaker 1: during that week what's going on this week? And what
Speaker 1: I saw was new shutdowns happening in the Southwest, And
Speaker 1: they didn't see a lot of new reopenings, basically people
Speaker 1: who were gonna companies that were going to reopen, bring
Speaker 1: people back, restaurants, things like that. But it mostly happened
Speaker 1: by by June. So I think we're going to see
Speaker 1: a negative number. Um, I don't think it's gonna be
Speaker 1: a big negative number, but I don't think we're gonna
Speaker 1: see the kind of you know, I don't think we're
Speaker 1: gonna see enough people brought back from temporary layoff to
Speaker 1: offset the large numbers of people who are being permanently
Speaker 1: laid off right now, Betsy, this raises a really important question.
Speaker 1: John's been talking about it this morning. Is this a
Speaker 1: deceleration of the recovery or is this a reverse? Is
Speaker 1: this a double dip? And what you're talking about is
Speaker 1: the scope of the second wave, the second order of layoffs,
Speaker 1: enough to throw us into a double dip recession. So
Speaker 1: I don't think of this as a double dip recession, right.
Speaker 1: I think that the data is confusing because temporary lay
Speaker 1: up are not a real recession. The real recession comes
Speaker 1: when people stop spending money and we, uh, we need
Speaker 1: to shed businesses, we need to shed workers because we're
Speaker 1: not bringing enough money in. I don't think we've fully
Speaker 1: seen the scope of our current recession. And what concerns
Speaker 1: me the most is I haven't seen any real recovery.
Speaker 1: What I saw was some businesses trying to reopen. Those
Speaker 1: businesses that reopened, they seem to not exactly be thriving.
Speaker 1: So I don't think that's necessarily a double dip. But
Speaker 1: I don't think we're at the bottom of this thing, Professor.
Speaker 1: One final question, Lisa from New York emails in and says,
Speaker 1: could you ask the professor the profound effect of TikTok
Speaker 1: uck on the children of America? I mean, Professor, what
Speaker 1: do we do about TikTok um? You know, I have
Speaker 1: to say, I myself enjoy Sarah Cooper on TikTok um,
Speaker 1: and I do have my children do seem to like
Speaker 1: ticktok But I'm no expert in media consumption for children.
Speaker 1: I think you just revealed your politics. If people didn't
Speaker 1: know already anyway, Betsy, fantastic to catch up with your
Speaker 1: Sarah Cooper on TikTok Betsy, Greg, Bessie Stevenson. There a
Speaker 1: Bloomberg View columnists joining us, Sam Kennedy with the Boston
Speaker 1: Red Sox and he was intimately involved John in the
Speaker 1: acquisition of a small football team in the United Kingdom. John,
Speaker 1: why don't you pick it up in celebration North of
Speaker 1: Law can tell you Sam, they're having a Red Sox
Speaker 1: co anchor fan that is almost unbearable. Sometimes Liverpool fans
Speaker 1: are equally as unbearable. They've had their moments. Sam, what
Speaker 1: an experience for all of you. Can you walk us
Speaker 1: through what you've learned with this experience Indianata Kingdom with
Speaker 1: English football? Well, we've we've learned a lot. We still
Speaker 1: have a lot more to learn. As you know. It
Speaker 1: is an incredibly global club with following like you've We've
Speaker 1: seen nowhere else. But congratulations to Jurgen Klop and Michael Edwards,
Speaker 1: Billy Hogan everyone at Liverpool that put this club back
Speaker 1: on top of the English Premier League. Quite an achievement
Speaker 1: and we're very excited at Fenway Sports Group and now
Speaker 1: we're hungry for more trophies. As they say, Sam, how
Speaker 1: do you retain talent in Premier League? How do you
Speaker 1: retain talent in Major League Baseball? Well, there's a common theme,
Speaker 1: and that is that we need to generate the resources
Speaker 1: on the business side to be able to go out
Speaker 1: and afford players, whether it's in global football or in
Speaker 1: Major League Baseball, and consistently reinvest our revenues back into
Speaker 1: our baseball operation, our football operation. That's been twenty year
Speaker 1: strategy by John Enry, Tom Warner and Mike Gordon, and
Speaker 1: that will continue as long as these guys own and
Speaker 1: operate these different clubs. We've had our ups and downs. Uh,
Speaker 1: it is an exciting time right now, um for our
Speaker 1: organization and excited to get going over here in the US.
Speaker 1: On the baseball side, the dreaded Los Angeles Dodgers just
Speaker 1: unloaded a salary package to a baseball player I forget
Speaker 1: his name. I'm sorry, let's say I'm I mean, come on,
Speaker 1: there's a pandemic on there's economic slowdown, you've got TV
Speaker 1: revenue issues. You're trying to get bodies in the stands.
Speaker 1: Everybody everywhere else but Fenway and maybe Wrigley Field. Have
Speaker 1: the Dodgers set up a new war of salary. Well,
Speaker 1: congratulations to Bookie Bets. He's an amazing player, a great person.
Speaker 1: We're sorry to see him go with the dreaded Dodgers.
Speaker 1: I think it's a reflection, frankly, of what a great
Speaker 1: job the Dodgers have done managing their payroll. They put
Speaker 1: themselves in this position to be able to make this commitment.
Speaker 1: And if you're going to make a commitment like that,
Speaker 1: Mookie is a guy you want to do it. We
Speaker 1: we tried. That's on us. Unfortunately we were not able
Speaker 1: to come to terms with him, but we do wish
Speaker 1: him well. We don't wish the Dodgers well, however. Well,
Speaker 1: congratulations to all of baseball for starting a curtailed season yesterday.
Speaker 1: But it was sort of a disappointing the game, the
Speaker 1: Nationals manager coming out and saying, it turned out long.
Speaker 1: Let's to put it that way. We just have to
Speaker 1: put this one behind us. Do you think that baseball
Speaker 1: as an industry had a missed opportunity getting this off
Speaker 1: the ground earlier, given the fact that this is not
Speaker 1: a contact sport. You know, I think we started right
Speaker 1: at the right time. Of course, you'd always love more baseball,
Speaker 1: but in terms of dealing with the virus and looking
Speaker 1: at the schedule on the calendar of the different markets
Speaker 1: and the surge and spikes in different areas, Commissioner Manfred
Speaker 1: just deserves the tip of the cap from the whole industry,
Speaker 1: as does Tony Clark for coming together and getting an
Speaker 1: agreement together to to to move forward on health and
Speaker 1: safety protocols. Uh. This is an experiment. It is um
Speaker 1: It is a high wire act, to be sure, but
Speaker 1: the players are taking it seriously. We're taking it seriously
Speaker 1: in our facilities, and now we need to execute and
Speaker 1: we have a really exciting brand of baseball sixty games
Speaker 1: and now an expanded postseason. It'll be great for baseball
Speaker 1: fans around the world. Sam, You've got a relationship with
Speaker 1: legendary stadiums Fenway Park and Field. They're going to be
Speaker 1: empty for the foreseeable future, and surely that changes the business.
Speaker 1: Why you spend money, where you cut money? Sam, talk
Speaker 1: me through that conversation now and what you're planning for
Speaker 1: a season of no fans, two seasons of no fans.
Speaker 1: What does that look like. Yeah, we're planning we have
Speaker 1: our upside, our mid case are are low case. We
Speaker 1: have disaster scenarios. Um you know. Again a credit to
Speaker 1: our ownership group, they continue to invest in the product
Speaker 1: on the field. But in terms of our business, it
Speaker 1: is critical that we get fans back in the stands
Speaker 1: at some point as soon as it is safe and
Speaker 1: the and the government and health officials say we can
Speaker 1: do it both at anfield and if Enway Park. For baseball,
Speaker 1: we rely on gate revenues fifty plus percent of our revenue.
Speaker 1: So as you can imagine, this has been devastating for
Speaker 1: the business. But the country needs sports, the country needs baseball,
Speaker 1: uh and we need to keep going through a pandemic,
Speaker 1: and flexibility is the order of the day. Everyone has
Speaker 1: shown a willing to willingness to be flexible and we'll
Speaker 1: keep doing that and and readjusting our budgets and evaluating
Speaker 1: as we go forward. But what's important is we'll be
Speaker 1: back on the field tonight at Fenway Park. Readjusting your budgets.
Speaker 1: That goes direct to some of the labor negotiations that
Speaker 1: hampered the beginning of this season. How much do you
Speaker 1: expect some of the players to accept accept cuts in
Speaker 1: their wages based on what we've seen so far this year. Yeah, amazingly.
Speaker 1: You know, the players have accepted, um, the fact that
Speaker 1: we're only playing thirty seven and a half percent of
Speaker 1: the games regular season. I believe if we get going
Speaker 1: so they're taking less wages. Everyone in the front office
Speaker 1: US is taking less wages. Uh, it's everywhere. It's a
Speaker 1: reality across our country, across the world. It's a very
Speaker 1: difficult time. None of us have been through a pandemic.
Speaker 1: I hope we never see it again, and I hope
Speaker 1: we get going into knock on Wood. Hopefully a vaccine
Speaker 1: is around the corner. We'll keep our fingers crossed. Sam Kennedy,
Speaker 1: it's your fault. Bring up the camera here. I'm doing
Speaker 1: my hands here, I'm standing outside the battery box doing
Speaker 1: Nomar Garcia part my son's student and brookline Sam, right
Speaker 1: off of Beacon Street into the Nomar thing in the
Speaker 1: batter's box. How are you going to speed up the game?
Speaker 1: How are you going to speed up as Garcia Par's fault?
Speaker 1: How are you going to speed up the game? Uh? Well,
Speaker 1: we need to. We need to keep working at it
Speaker 1: with the players. UM. You know, you can add things
Speaker 1: like a pitch time or a pitch clock. You can
Speaker 1: limit mound business, you can make mold changes. I agree
Speaker 1: with you. It's something that we need to do. We're
Speaker 1: about three hours and eight minutes. Not good. Yeah, be
Speaker 1: great to get back in the two range if at
Speaker 1: all possible. It's a priority for Commissioner Manford and his team. Um,
Speaker 1: and we'll work on it. But at this point, I
Speaker 1: think our fans and all of us are just excited
Speaker 1: to have baseball back. Uh and we'll enjoy having live product,
Speaker 1: live content on television, on radio, on digital platforms. But
Speaker 1: I agree with you, we do want to speed up
Speaker 1: the game. It's a it's a priority, especially as we
Speaker 1: look to connect with that next generation of fans. Hey, Sam,
Speaker 1: great to catch up when you come back soon. I'll
Speaker 1: whisper it. Congratulations for Liverpool. I'm kind of Evost and
Speaker 1: Red Silks than by the Tops. Thanks for listening to
Speaker 1: the Bloomberg Surveillance podcast. Subscribe and listen to interviews on
Speaker 1: Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm
Speaker 1: on Twitter at Tom Keane before the podcast, you can
Speaker 1: always catch us worldwide. I'm Bloomberg Radio