WEBVTT - Bloomberg Wall Street Week: Klein, Kelton, Hooper 0:00:00.240 --> 0:00:04.960 This is Bloomberg Wall Street Week. Market shruggle, higher consumer prizes. 0:00:05.040 --> 0:00:07.400 The economy is in the process of rebounding. Will the 0:00:07.480 --> 0:00:10.479 utter reserve of its own digital currency? The financial stories 0:00:10.520 --> 0:00:12.879 that sheep our word. Many people think the yells are 0:00:12.880 --> 0:00:15.080 just going to keep marching up. We have more spending 0:00:15.120 --> 0:00:17.160 coming out of Congress. One of the big questions I 0:00:17.200 --> 0:00:19.880 think on investor's mind inflations through the eyes of the 0:00:19.920 --> 0:00:23.560 most influential voices. Larry Summer is the former Treasury Secretary 0:00:23.640 --> 0:00:27.960 Bryan wynhan Beck of America, Will CEO Charlie Sharp Bloomberg 0:00:28.000 --> 0:00:32.519 Wall Street Week with David Weston from Bloomberg Radio. This 0:00:32.560 --> 0:00:35.080 is Bloomberg Wall Street Week. I'm Romain Bostick in for 0:00:35.200 --> 0:00:38.960 David Weston. This week. Professor Stephanie Kelton, author of The 0:00:39.000 --> 0:00:43.920 Deficit myth on economic experimentation. We are in an experimental economy. 0:00:44.120 --> 0:00:47.680 After this crisis, we really saw fiscal policy engage in 0:00:47.720 --> 0:00:50.879 a way that it didn't after the financial crisis. And 0:00:50.920 --> 0:00:54.920 special contributor Larry Summers on the continuation of trade tensions 0:00:54.920 --> 0:00:59.240 between the US and China. I hope there's some kind 0:00:59.360 --> 0:01:05.399 of ongoing channel so as to manage potential crises five 0:01:05.440 --> 0:01:08.880 point four. That's the statistic for the week. It was 0:01:08.880 --> 0:01:11.240 the headline consumer price index number for June, and it 0:01:11.280 --> 0:01:14.200 was the strongest jump in inflation in more than a decade. 0:01:14.440 --> 0:01:16.679 You exclude food and gas, it ends up being the 0:01:16.680 --> 0:01:19.119 biggest jump in three decades. Even if you back out 0:01:19.160 --> 0:01:21.160 the cost to shelter and the cost of use cars, 0:01:21.560 --> 0:01:24.600 the remaining goods and services in the index rose by 0:01:24.600 --> 0:01:27.679 the most in two decades. That CPI report for the 0:01:27.720 --> 0:01:30.600 month of June left no doubt that the US is 0:01:30.640 --> 0:01:33.720 battling a problem of rising prices. What is in doubt 0:01:34.040 --> 0:01:38.280 whether those inflationary pressures will be long lasting or temporary. 0:01:38.800 --> 0:01:41.600 Critics argue inflation is being fanned by the FED, a 0:01:41.680 --> 0:01:44.399 FED that insists on holding interest rates near zero and 0:01:44.480 --> 0:01:47.160 is yet to detail when it will fully scale back 0:01:47.200 --> 0:01:51.360 its multibillion dollar monthly purchases of treasuries and mortgage backed securities. 0:01:51.800 --> 0:01:54.680 Lawmaker's grilled FED chair J. Powell, who defended the current 0:01:54.720 --> 0:01:58.880 standstill on monetary policy. Inflation has increased notably and will 0:01:58.880 --> 0:02:02.360 likely remain elevated coming months before moderating, and even as 0:02:02.400 --> 0:02:04.520 the economy seems to be roaring back, the FIT is 0:02:04.520 --> 0:02:08.000 still concerned that the pre pandemic normal is not here yet. 0:02:08.280 --> 0:02:11.280 While reaching the standard of substantial further progress is still 0:02:11.360 --> 0:02:15.280 a ways off, participants expect that progress will continue. The 0:02:15.320 --> 0:02:17.520 spread of the COVID delta variant is proof of the 0:02:17.520 --> 0:02:20.640 slow slog. It's now the dominant strain in Spain and 0:02:20.760 --> 0:02:24.000 in the UK, and it accounts for almost sixty percent 0:02:24.560 --> 0:02:27.200 of the cases right here in the US, widening the 0:02:27.200 --> 0:02:31.360 gulf between the unvaccinated and vaccinated communities. And while the 0:02:31.360 --> 0:02:34.760 government's central bank waits and sees the big Wall Street banks, 0:02:34.800 --> 0:02:38.520 they show just how complicated things are in this economic recovery. 0:02:38.720 --> 0:02:42.840 Investment banking divisions they're doing well helping corporate clients adjust 0:02:42.880 --> 0:02:46.160 their finances, but revenue growth on most trading desk that's 0:02:46.200 --> 0:02:49.079 been cooling as the market swings subside. And then while 0:02:49.120 --> 0:02:52.240 consumers are spending more and swiping their credit cards more frequently, 0:02:52.560 --> 0:02:55.400 they're also borrowing less money to do so. Joining us 0:02:55.520 --> 0:02:58.520 right now our roundtable, invest Co chief Global market strategist 0:02:58.560 --> 0:03:02.919 Christina Hooper and bloom Intelligence senior analyst Allison Williams joining 0:03:03.040 --> 0:03:06.520 us here today to talk down about what happened really 0:03:06.560 --> 0:03:09.000 this week, and Christina, we really have to start with 0:03:09.080 --> 0:03:12.400 that CPI data, followed by the PPI data, which seemed 0:03:12.440 --> 0:03:14.760 to ratify the guests the fears of a lot of 0:03:14.800 --> 0:03:18.000 people that inflation is certainly real. The big question here 0:03:18.280 --> 0:03:20.480 is whether it's transitory. And I'm wondering whether you at 0:03:20.480 --> 0:03:22.160 all got a little bit rattled by some of the 0:03:22.240 --> 0:03:25.839 data that we saw this week. I actually didn't get 0:03:25.919 --> 0:03:28.920 very rattled at all, Romane, and I'll tell you why. Um, 0:03:28.960 --> 0:03:32.959 we have gone through an extraordinary period in economic history. 0:03:33.320 --> 0:03:36.960 We essentially shut down the economy, UH, and then after 0:03:37.080 --> 0:03:40.760 a very significant period, we reopened it. So we have 0:03:40.880 --> 0:03:44.680 an incredible amount of pent up demand. We have elevated 0:03:44.720 --> 0:03:48.920 household savings. UH. We have lots of liquidity in general 0:03:48.960 --> 0:03:52.960 because we've had very significant fiscal and monetary stimulus, and 0:03:53.080 --> 0:03:56.760 so um, there is a lot of money chasing too 0:03:56.840 --> 0:04:01.320 few goods and services. Now, this int might be higher 0:04:01.360 --> 0:04:04.800 than what FED officials expected, but they have said over 0:04:04.840 --> 0:04:08.240 and over again that they did expect inflation to spike, 0:04:08.680 --> 0:04:12.320 and I think that's key. This is not this should 0:04:12.320 --> 0:04:14.840 not come as a huge surprise. Yes, maybe it's a 0:04:14.840 --> 0:04:18.400 little higher than most expect um, but there's nothing that 0:04:18.480 --> 0:04:21.920 I've seen that changes my mind that this is likely 0:04:22.400 --> 0:04:26.280 mostly transitory inflation, so that so far investors did that 0:04:26.320 --> 0:04:31.720 mean that they should remain pro risk, pro duration absolutely. 0:04:32.400 --> 0:04:34.320 I think what we need to do is take a 0:04:34.320 --> 0:04:36.320 step back and look at where we are in the 0:04:36.360 --> 0:04:39.960 economic cycle, and the US really has just entered the 0:04:40.040 --> 0:04:43.960 expansion phase of the economic cycle. What we know from 0:04:44.040 --> 0:04:46.880 history is that typically that's a period in which risk 0:04:46.920 --> 0:04:52.440 at risk assets outperform UH and UM. Usually it's stocks 0:04:52.480 --> 0:04:57.720 that outperform risky bonds. So it's an environment that I 0:04:57.760 --> 0:05:02.360 think is a positive for the stock market, and I 0:05:02.440 --> 0:05:06.520 expect that monetary policy remains very supportive even if we 0:05:06.560 --> 0:05:09.080 see the start of normalization. So to me, this is 0:05:09.080 --> 0:05:11.880 a time to be risk on. So Allison Williams, a 0:05:11.880 --> 0:05:13.640 lot of people are really sort of trying to get 0:05:13.640 --> 0:05:16.400 a read here on where we stand in the economic cycle. 0:05:16.480 --> 0:05:18.680 This week, of course, we got earnings from all of 0:05:18.680 --> 0:05:21.800 the major US banks here, and usually they kind of 0:05:21.839 --> 0:05:24.080 serve as a barometer, I guess for economic sentiment. What 0:05:24.120 --> 0:05:25.920 do we learn from them this week? I think we 0:05:26.080 --> 0:05:29.839 learned that the economy is very healthy, and to some extent, 0:05:29.920 --> 0:05:32.360 we saw most of the trends that we saw were 0:05:32.360 --> 0:05:34.479 in line with our expected. A couple were a little 0:05:34.480 --> 0:05:38.360 bit outsized, so net interest income continuing to drift lower. 0:05:38.640 --> 0:05:41.960 Credit super strong, UM, great numbers from the bank, not 0:05:42.080 --> 0:05:44.520 just the reserve releases that we read so much about, 0:05:44.520 --> 0:05:48.479 but the underlying credit strong and then UM. When you 0:05:48.480 --> 0:05:50.719 talk about the reserve releases, this is effectively the money 0:05:50.760 --> 0:05:53.440 they were setting aside for bad loans, right, correct, So 0:05:53.480 --> 0:05:56.599 if we think about the reserves UM a year ago, 0:05:57.120 --> 0:05:59.800 banks had no idea, none of us had any idea 0:05:59.839 --> 0:06:02.240 how bad things would get, so they were very conservative 0:06:02.240 --> 0:06:05.280 in terms of setting money aside. As things are getting better, 0:06:05.520 --> 0:06:09.560 they're releasing those reserves and that feeds into the income statement. 0:06:09.880 --> 0:06:11.720 And so there is a lot of volatility when you 0:06:11.760 --> 0:06:14.360 look at the overall EPs numbers, but I think from 0:06:14.360 --> 0:06:18.880 a core trends also generally healthy, although as I said 0:06:18.880 --> 0:06:20.440 that it's it's a little bit of a mix. So 0:06:20.520 --> 0:06:23.440 those banks that rely more on that interest income, like 0:06:23.480 --> 0:06:25.760 a Bank of America or well as far ago, some 0:06:25.839 --> 0:06:28.000 of the regional banks that are covered by Herman chan 0:06:28.560 --> 0:06:31.320 Um really have seen some softness and a lot of 0:06:31.320 --> 0:06:33.839 that is really just due to the lack of borrowing 0:06:34.440 --> 0:06:37.760 our Thanks to Christina Hooper of Investco and Allison Williams 0:06:37.800 --> 0:06:42.000 of Bloomberg Intelligence. Coming up Netflix, it's adding a new 0:06:42.000 --> 0:06:44.320 wrinkle to the streaming wars with its plans to offer 0:06:44.440 --> 0:06:47.680 video games alongside Britain. We talked to the former CNN 0:06:47.720 --> 0:06:50.400 president John Klein about the fight to stand out in 0:06:50.440 --> 0:06:54.000 the streaming world. That's next on Wall Street Week on Bloomberg. 0:07:01.320 --> 0:07:05.279 This is Bloomberg Wall Street Week with David Weston from 0:07:05.400 --> 0:07:08.560 Bloomberg Radio. This is Bloomberg Wall Street Week. I'm Romain 0:07:08.640 --> 0:07:13.280 Bostick in for David weston the lockdowns of boosted Netflix. 0:07:13.280 --> 0:07:15.600 But next week investors will get a chance to see 0:07:15.640 --> 0:07:18.480 whether the streaming giants growth will hold in the post 0:07:18.560 --> 0:07:22.240 pandemic world. We saw dramatic pull in UH for their 0:07:22.280 --> 0:07:25.920 subscriber growth. The bump was enormous. You can't sustain that. Obviously, 0:07:25.920 --> 0:07:28.360 the question was when would that slow down and how 0:07:28.440 --> 0:07:31.200 dramatically would slow down. Well, now we have the answer. 0:07:31.520 --> 0:07:34.240 The key number to watch will be subscriber growth. A 0:07:34.280 --> 0:07:38.320 Bloomberg Intelligence analysis of Censor tower data suggests global demand 0:07:38.320 --> 0:07:41.000 for Netflix is moderating, with the number of downloads in 0:07:41.080 --> 0:07:43.480 May and June were bounding a little from March and 0:07:43.520 --> 0:07:46.680 April when reopenings took a toll on adding new subscribers. 0:07:46.880 --> 0:07:49.559 Netflix has done better than I think many people thought 0:07:49.600 --> 0:07:52.160 in terms of the doctrines. A few banks one the 0:07:52.240 --> 0:07:55.680 competition from Disney and in a T and T and 0:07:55.760 --> 0:08:00.080 others uh two uh international expansions or something of the 0:08:01.440 --> 0:08:05.080 Disney Plus is Netflix's most formidable rival, but the streaming 0:08:05.120 --> 0:08:06.800 service still has a lot of catching up to do. 0:08:06.960 --> 0:08:10.000 Disney Plus had a hundred and three million global subscribers 0:08:10.160 --> 0:08:12.920 that compares the Netflix is two hundred and eight million. 0:08:13.400 --> 0:08:16.440 Disney Plus has a strong presence in Europe and in India, 0:08:16.480 --> 0:08:20.559 where Carrie streaming service hot Star. There's a new Marvel series, Loki, 0:08:20.760 --> 0:08:23.600 which debuted on Disney Plus last month, and that may 0:08:23.640 --> 0:08:26.320 have given the streaming service a last minute subscriber pans 0:08:26.600 --> 0:08:29.400 for the quarter are signed up to. Growth continues both 0:08:29.440 --> 0:08:32.560 domestically and internationally, and I have to say that we've 0:08:32.600 --> 0:08:35.040 now launched a number of markets, I think fifty nine 0:08:35.040 --> 0:08:38.680 markets across the world, and we've not been disappointed yet. 0:08:38.720 --> 0:08:41.200 The streaming world is expected to get even bigger. A 0:08:41.200 --> 0:08:44.800 new PwC report predicts streaming is going to generate ninety 0:08:44.880 --> 0:08:48.319 four billion dollars in revenue by the end of that's 0:08:48.400 --> 0:08:52.880 up from the pandemic. Brought new entrance into the streaming 0:08:52.880 --> 0:08:57.160 wars with the launch of NBC Universal's Peacock and Discovery Plus. 0:08:57.400 --> 0:09:00.280 I think there's only a handful of truly global, you know, 0:09:00.400 --> 0:09:04.000 greater than a hundred million subscriber based type of services 0:09:04.040 --> 0:09:09.520 that can that can exist alright, Netflix setting a high 0:09:09.520 --> 0:09:11.880 bar for its competitors, of course, with that TV and 0:09:11.920 --> 0:09:14.960 film content. Now the streaming giant said to be expanding 0:09:14.960 --> 0:09:17.560 into video games, joining us right now. John Klein, you 0:09:17.600 --> 0:09:19.720 know him, of course as a former president of CNN. 0:09:19.840 --> 0:09:22.280 He's now the co founder of Hanged Media. He knows 0:09:22.320 --> 0:09:25.400 a lot about keeping eyeballs glued to the screen. John. 0:09:25.440 --> 0:09:29.360 Even before this announcement here about the foray into video games, 0:09:29.360 --> 0:09:33.480 we had seen Netflix experiment with live events and merchandizing 0:09:33.520 --> 0:09:35.920 a lot of things that are more than just the 0:09:36.000 --> 0:09:38.560 content of watching a television show or a movie. Here 0:09:38.840 --> 0:09:41.480 is this the future of streaming. This is what it's 0:09:41.480 --> 0:09:45.440 going to be. It's the present of streaming. Because streaming 0:09:45.480 --> 0:09:51.320 has become the central entertainment activity for everybody. H COVID 0:09:51.320 --> 0:09:54.520 helped accelerate that, and that trend is not going away. 0:09:54.720 --> 0:09:57.720 Wait until they start getting into a R and VR, 0:09:57.800 --> 0:09:59.600 and you know, there's been a lot of experiments with 0:09:59.640 --> 0:10:02.400 that all ready, but that's all going to be filtered 0:10:02.480 --> 0:10:04.600 through your streaming service as well, So there's a lot 0:10:04.640 --> 0:10:06.960 more to come. So what does that mean though for 0:10:07.000 --> 0:10:10.280 some of these smaller streaming services. I saw a statistic 0:10:10.360 --> 0:10:12.559 saying that, you know, as of last month, there were 0:10:12.559 --> 0:10:15.960 almost two hundred streaming services available here in the US, 0:10:16.000 --> 0:10:18.160 some of them obviously very niche. And then of course 0:10:18.160 --> 0:10:22.079 you have the big players like Amazon, Apple, Netflix, Disney Plus. 0:10:22.120 --> 0:10:24.839 Here is there room for a niche service that it 0:10:24.960 --> 0:10:28.680 just may be doing one small thing. It's really tricky 0:10:28.679 --> 0:10:31.520 because one thing that we've all seen in the past 0:10:31.600 --> 0:10:35.560 year is that streaming is an incredibly expensive business to 0:10:35.679 --> 0:10:38.640 be in. Disney just announced that they're going to be 0:10:38.679 --> 0:10:44.000 spending thirty billion dollars a year on content for Disney Plus, 0:10:44.559 --> 0:10:46.839 and they thought they were going to be spending about 0:10:46.840 --> 0:10:49.679 half that, and they've realized that they have two seriously 0:10:49.720 --> 0:10:53.440 up the anti. Because you think about your own streaming habits, 0:10:53.520 --> 0:10:55.760 you can binge an entire season of a show and 0:10:55.880 --> 0:10:59.000 one night if you're really into it, and these services 0:10:59.000 --> 0:11:00.800 are all having a scram about to catch up to 0:11:00.840 --> 0:11:04.319 make sure that they're shoveling enough content onto their services. 0:11:04.440 --> 0:11:09.319 That's why you've seen Netflix add so many foreign produced shows. 0:11:09.679 --> 0:11:11.760 I mean, I'll bet you've watched at least one Netflix 0:11:11.800 --> 0:11:14.959 show that had subtitles last year, right, And that's because 0:11:15.000 --> 0:11:18.720 they just kind of ran out of US created content, 0:11:18.840 --> 0:11:21.920 partly due to COVID and partly because consumer habits are 0:11:22.040 --> 0:11:26.559 just out just out of control, and it's going to 0:11:26.640 --> 0:11:28.600 take a lot of resources to catch up to that, 0:11:28.640 --> 0:11:31.400 which means that smaller niche players are going to have 0:11:31.480 --> 0:11:36.680 to add double down on the ultra niche and over 0:11:36.760 --> 0:11:40.559 deliver on their customer acquisition tactics so that the cost 0:11:40.600 --> 0:11:45.360 of acquiring a subscriber drops to make up for the 0:11:45.360 --> 0:11:48.200 the increasing cost of content. But it's gonna be tough. 0:11:48.360 --> 0:11:51.920 Think of it this way. The tech companies have so 0:11:51.960 --> 0:11:56.439 many more resources to deploy against content costs than traditional 0:11:56.480 --> 0:12:00.240 media companies do. Apple alone has a higher market cap 0:12:00.679 --> 0:12:06.760 than a combination of Disney, Netflix, Comcast, Horizon, you know, 0:12:07.120 --> 0:12:11.280 And it's so they can enter this business whole hog, 0:12:11.440 --> 0:12:14.520 and they've barely begun to fight. So it's going to 0:12:14.600 --> 0:12:17.360 be it's going to be a very expensive proposition to 0:12:17.480 --> 0:12:20.600 be in the streaming business. Given the expense of that proposition, 0:12:20.640 --> 0:12:24.559 do you anticipate any sort of meaningful consolidation. I think 0:12:24.600 --> 0:12:27.720 there's going to have to be among the streaming also 0:12:27.880 --> 0:12:30.360 rans or the smaller players. I mean, it just isn't 0:12:30.400 --> 0:12:33.080 going to make sense to some of these companies to 0:12:33.200 --> 0:12:36.200 spend the kind of money that's necessary. For example, if 0:12:36.200 --> 0:12:39.320 your NBC Universal and you're planning to spend seventeen billion 0:12:39.400 --> 0:12:43.720 dollars this year on Peacock, you might pause and say, well, 0:12:43.840 --> 0:12:45.800 first of all, where is that going to come from. 0:12:45.800 --> 0:12:48.960 We're gonna have to cannabalize some of our other core 0:12:49.040 --> 0:12:51.720 businesses and they're gonna have to be willing to do that. 0:12:51.840 --> 0:12:54.200 And will they be you know, will they pull money 0:12:54.200 --> 0:12:57.480 away from the TV networks, from the local TV stations 0:12:57.559 --> 0:13:00.120 that they've got in order to fundness, or might they 0:13:00.160 --> 0:13:02.439 you know what, maybe we ought to pair up with 0:13:02.520 --> 0:13:06.520 somebody like a CBS or or warners. Should we should 0:13:06.600 --> 0:13:10.080 Comcast jump in to the bidding for Warner Media and 0:13:10.080 --> 0:13:12.280 and and grab that away. Well, that raises an interesting 0:13:12.320 --> 0:13:15.000 question here about the future of live television. John. Obviously, 0:13:15.040 --> 0:13:17.800 you ran CNN for our several years out here in 0:13:17.840 --> 0:13:19.880 the US here, and I'm curious, is there still a 0:13:19.880 --> 0:13:22.880 place for live news, live sports in a streaming world 0:13:22.960 --> 0:13:26.079 where we want to see everything on demand. Well, news 0:13:26.120 --> 0:13:28.600 is one of the few areas that that's actually growing 0:13:28.720 --> 0:13:30.840 during the streaming boom, and I think it will continue 0:13:30.840 --> 0:13:34.240 to because it's just a very tough proposition to watch 0:13:34.280 --> 0:13:37.720 news later, you know, on demand, you do want to 0:13:37.760 --> 0:13:42.720 see it as it's unfolding. Sports is gonna evolve because 0:13:43.360 --> 0:13:45.800 it used to be and has been up until now, 0:13:45.840 --> 0:13:51.320 a mainstay of traditional television delivery. But Amazon just paid 0:13:51.520 --> 0:13:55.200 a billion dollars for the rights to Thursday Night Football starting. 0:13:56.640 --> 0:13:59.439 That's the first for a streaming service to pay that 0:13:59.559 --> 0:14:02.360 kind of money, So, uh, you know that that's gonna 0:14:02.600 --> 0:14:05.720 that's that is a bell weather for a big change, 0:14:05.720 --> 0:14:07.560 and I think you're gonna begin to see sports go 0:14:07.679 --> 0:14:10.240 to pay as well. And our thanks to Tap Media 0:14:10.320 --> 0:14:14.080 chairman and former CNN president John Klein coming up here. 0:14:14.440 --> 0:14:17.000 Fed share Pal says central banks can still help get 0:14:17.040 --> 0:14:20.640 the economy back on track, but modern monetary theory experts 0:14:20.680 --> 0:14:23.560 like Stephanie Kelton say holding down rates may not be 0:14:23.600 --> 0:14:26.760 the best way to manage inflation. That's next on Wall 0:14:26.760 --> 0:14:40.840 Street Week on Bloomberg. This is Bloomberg Wall Street Week 0:14:41.040 --> 0:14:44.960 with David Weston from Bloomberg Radio. M Romaine Bostick in 0:14:45.040 --> 0:14:47.480 for David Weston. The FED jumped into action at the 0:14:47.520 --> 0:14:49.320 height of the pandemic, and it helped fill in the 0:14:49.360 --> 0:14:53.080 gap while lawmakers came up with fiscal stimulus plans, but 0:14:53.160 --> 0:14:56.120 FED share j Pal says it's still too soon to 0:14:56.200 --> 0:15:00.000 think about pulling back that aid now. Inflation is jumping 0:15:00.040 --> 0:15:02.040 and the FIT doesn't seem to be in any rush 0:15:02.080 --> 0:15:06.040 to raise rates. Modern monetary theory experts say that is 0:15:06.080 --> 0:15:10.160 not just the FITS responsibility. Fiscal policy should also play 0:15:10.160 --> 0:15:13.880 a role in controlling inflation. Stephanie Kelton, a professor of 0:15:13.880 --> 0:15:17.720 economics at stony Brook University, is a leading expert on MMT. 0:15:18.120 --> 0:15:20.920 She joins us right now, Stephanie, as we speak today, 0:15:20.920 --> 0:15:23.320 all of the debate out there right now is about inflation. 0:15:23.400 --> 0:15:24.960 Is it going to be long lasting or is it 0:15:25.000 --> 0:15:27.440 going to be transitory? When you look at the latest 0:15:27.480 --> 0:15:30.360 data that we got, what type of inflationary pressures are 0:15:30.400 --> 0:15:32.880 you actually seeing yourself? And do you see those as 0:15:32.960 --> 0:15:37.520 being permanent? When I look at the data, what I 0:15:37.560 --> 0:15:41.280 think mostly this looks like are the growing pains of 0:15:41.320 --> 0:15:45.960 an economy that's emerging from a pandemic and reopening. And 0:15:46.320 --> 0:15:50.160 we see a lot of videosyncratic UH pressures and supply 0:15:50.280 --> 0:15:54.320 chain issues and UM backlogs and that sort of stuff. 0:15:54.360 --> 0:15:56.760 So I think, by and large, what it looks like 0:15:56.840 --> 0:15:59.640 to me is the kind of thing that frankly, we 0:15:59.720 --> 0:16:03.440 had ticipated right coming out of the pandemic. And so 0:16:03.600 --> 0:16:06.800 it's pretty hard for me to see the kinds of 0:16:06.840 --> 0:16:08.960 things that I think you would need to be in 0:16:09.040 --> 0:16:11.960 place in order to get this sort of entrenched inflation 0:16:12.000 --> 0:16:14.960 that begins to feed on it. So so I I 0:16:15.000 --> 0:16:18.840 guess I situate myself pretty squarely in the in the 0:16:18.840 --> 0:16:22.400 transitory camp. Yeah, and there's certainly an element of the 0:16:22.440 --> 0:16:26.240 inflationary pressures we have that we're certainly predictable, given just 0:16:26.320 --> 0:16:29.280 how volatile the economic crisis was, the COVID crisis, and 0:16:29.400 --> 0:16:31.680 how volatile things have been coming out of it. Here. 0:16:32.080 --> 0:16:33.760 But as we sort of get to the other side 0:16:34.440 --> 0:16:37.320 of this economic cycle, there's a lot of debate right 0:16:37.320 --> 0:16:41.400 now about additional fiscal spending, additional fiscal stimulus, whatever you 0:16:41.400 --> 0:16:43.720 wanna call it, is it just throwing another log on 0:16:43.760 --> 0:16:46.480 the fire of an economy that's already hot, or is 0:16:46.520 --> 0:16:49.800 this something that maybe has a place here in our 0:16:49.800 --> 0:16:53.200 policy and in the way we spend government money. Well, 0:16:53.240 --> 0:16:55.520 I think it's the ladder. I think that most of 0:16:55.560 --> 0:16:58.680 what we're hearing about right now. Right we're hearing about 0:16:58.840 --> 0:17:03.880 maybe three and a trillion dollar um human infrastructure bill 0:17:04.080 --> 0:17:08.879 coming maybe alongside the more traditional so called heart infrastructure. 0:17:09.240 --> 0:17:11.960 And I don't think the administration is thinking of this 0:17:12.119 --> 0:17:15.800 as as stimulus. I'm certainly not thinking of this as stimulus. 0:17:15.840 --> 0:17:18.480 I'm thinking of this more the way I think they are, 0:17:18.600 --> 0:17:22.960 which is, you know, doing things that will strengthen some 0:17:23.160 --> 0:17:27.240 of the fragility that's been baked into our system by 0:17:27.280 --> 0:17:32.040 you know, longstanding policy decisions were trying to redress, uh 0:17:32.280 --> 0:17:35.719 some things, fix some of the deficits in the real economy, 0:17:35.880 --> 0:17:41.280 and lay a foundation for a really sustainable and inclusive recovery. 0:17:41.320 --> 0:17:43.840 So I think they're looking at this as an opportunity 0:17:44.240 --> 0:17:47.680 to strengthen the social safety net, make investments skin things 0:17:47.680 --> 0:17:51.800 like education and healthcare, just places where we have underinvested 0:17:51.840 --> 0:17:55.119 for decades. And we've heard that message, of course from 0:17:55.160 --> 0:17:58.520 the Biden administration and some of his allies in Congress. 0:17:59.080 --> 0:18:02.000 We've also heard this idea here that sort of inequalities 0:18:02.040 --> 0:18:05.520 need to be addressed, particularly inequalities that we're sort of 0:18:05.600 --> 0:18:08.480 laid bare based on the policies coming out of the 0:18:08.560 --> 0:18:11.360 last big financial crisis in two thousand and eight two 0:18:11.359 --> 0:18:14.800 thousand ten. Here, what type of steps do you think 0:18:14.800 --> 0:18:17.760 that the Biden administration and hopefully Congress can sort of 0:18:17.800 --> 0:18:21.720 take so that we don't repeat some of those same mistakes. Well, 0:18:21.800 --> 0:18:25.000 I think that what we're hearing articulated from the administration 0:18:25.160 --> 0:18:28.959 right is that the goal is to make investments at 0:18:29.040 --> 0:18:32.480 the bottom that grow from the middle out. So instead 0:18:32.520 --> 0:18:35.320 of you know, this sort of top down, trickle down 0:18:35.520 --> 0:18:39.400 sort of uh, you know, policy prescription that we've tried 0:18:39.480 --> 0:18:42.880 again and again uh and and watched fail, that this 0:18:42.920 --> 0:18:45.480 time is different, that this time we want to see 0:18:45.520 --> 0:18:49.080 the government making investments and things like early childhood education 0:18:49.240 --> 0:18:53.840 and the caring economy, um, you know, broadening the scope 0:18:53.840 --> 0:18:58.560 for infrastructure investment, college education, elder care, and and the 0:18:58.560 --> 0:19:00.520 rest of it. So I think, you know, we're looking 0:19:00.560 --> 0:19:04.680 at the potential for millions and millions of good paying jobs, 0:19:05.160 --> 0:19:07.440 many of them for people, in fact, most of them 0:19:07.440 --> 0:19:11.119 for people with um little if any college education. So 0:19:11.200 --> 0:19:15.879 this really is an opportunity to, you know, provide a good, 0:19:16.240 --> 0:19:20.200 solid foundation for a recovery that aims squarely at those 0:19:20.240 --> 0:19:24.520 at the bottom in the middle of the economic income distribution. So, 0:19:24.560 --> 0:19:27.080 professor you mentioned the sort of top down nature of 0:19:27.119 --> 0:19:30.359 economic policy that has been basically the dogma now for 0:19:30.400 --> 0:19:32.560 several decades. A lot of people have bought into it 0:19:33.200 --> 0:19:35.960 on both sides of the political spectrum. There's an argument 0:19:36.040 --> 0:19:38.119 to be made that there has been a spate of 0:19:38.119 --> 0:19:41.240 prosperity in this country that I guess can be attributed 0:19:41.440 --> 0:19:45.160 to that top down policy. Is there a sense here 0:19:45.200 --> 0:19:48.000 that the boom bus cycles we've been through over those 0:19:48.119 --> 0:19:51.280 last few decades since that top down policy became the 0:19:51.320 --> 0:19:53.879 sort of dogma, that that is a contributor to it, 0:19:54.000 --> 0:19:56.080 or is there something else here that maybe we should 0:19:56.119 --> 0:19:59.679 be looking at. Well, I think there's something else. I 0:19:59.680 --> 0:20:03.080 think know. The reality is that we've got a lot 0:20:03.160 --> 0:20:05.800 of studies now, and some pretty big ones that have 0:20:05.880 --> 0:20:09.960 been done looking at the longer term effects of the 0:20:10.119 --> 0:20:13.360 supply side policies, and they really have been a failure. 0:20:13.600 --> 0:20:16.399 These have not been successful policies, and they've been tried 0:20:16.520 --> 0:20:19.840 decades upon decades, and what we've ended up with is 0:20:20.000 --> 0:20:23.520 widening gaps between those at the very top and everybody else. 0:20:23.600 --> 0:20:27.280 Income in wealth, inequalities have widened. We haven't gotten the 0:20:27.359 --> 0:20:32.120 kinds of wage growth and inclusive and sustainable growth for 0:20:32.280 --> 0:20:35.600 the middle class. We've seen middle class jobs and workers 0:20:35.600 --> 0:20:38.680 fall behind for decades. So I think it is time 0:20:38.760 --> 0:20:41.840 to shift gears. Thanks to Stephanie Flanders of Stony Brook 0:20:41.960 --> 0:20:45.359 University and the author of the Deficit Myth. Coming up, 0:20:45.440 --> 0:20:47.879 we wrap up the week with our special contributor Larry 0:20:47.920 --> 0:20:51.280 Summers of Harvard. That's next on Wall Street Week on Bloomberg. 0:20:57.720 --> 0:21:01.680 This is Bloomberg Wall Street Week with David Weston from 0:21:01.800 --> 0:21:05.200 Bloomberg Radio. This is Bloomberg Wall Street Week, arm Romain 0:21:05.280 --> 0:21:07.840 Bostick in for David Weston and now Here to discuss 0:21:07.920 --> 0:21:10.200 some of the economic developments of the week. We're joined 0:21:10.200 --> 0:21:13.840 by our special contributor, economists Larry Summers. Larry, I want 0:21:13.840 --> 0:21:16.159 to start with some developments that occurred towards the end 0:21:16.160 --> 0:21:18.760 of the week. On Friday, we got an advisory out 0:21:18.760 --> 0:21:21.680 of the Biden administration, the Treasury, the State Department, the 0:21:21.720 --> 0:21:24.959 Homeland Security Department, and the Commerce Department, all putting out 0:21:25.000 --> 0:21:28.760 an advisory warning US companies about the risks of doing 0:21:28.800 --> 0:21:32.080 business in Hong Kong, saying the business environment over there 0:21:32.080 --> 0:21:36.360 has deteriorated given China's recent pushup to I guess control 0:21:36.840 --> 0:21:40.760 what goes on in that territory there. The relationship between 0:21:40.760 --> 0:21:43.639 the U S and China, the economic dialogue between the 0:21:43.720 --> 0:21:47.080 U S and China, seems to be getting worse, not better. 0:21:47.280 --> 0:21:50.040 I think that's right. I think there are plenty of 0:21:50.080 --> 0:21:53.240 issues on both sides. You look at many of the 0:21:53.400 --> 0:21:56.960 things that China has done. It's not just Usibly, the 0:21:57.080 --> 0:22:01.440 United States Investment degree meant that China and the EU 0:22:01.640 --> 0:22:07.440 had reached our on the rails China's encountering UH friction 0:22:08.560 --> 0:22:13.640 all over the world. I am concerned about the canceling 0:22:13.760 --> 0:22:17.919 of dialogue. It seems to me that in many ways, 0:22:18.000 --> 0:22:21.959 the more fundamental your disagreements, the more important it is 0:22:22.040 --> 0:22:26.399 that there be some form of UH communications. So I 0:22:26.400 --> 0:22:28.800 don't think we're in any position to have a partnership 0:22:28.840 --> 0:22:33.320 with UH China. We're competing with them in very full 0:22:33.400 --> 0:22:39.600 spectrum ways. But the strategy of not having UH dialogue 0:22:39.680 --> 0:22:43.640 and not being interested in communication, it seems to me, 0:22:43.840 --> 0:22:48.359 is one that UH concerns me and whether it's called 0:22:48.400 --> 0:22:54.280 a strategic economic dialogue, whatever it is UH called, I 0:22:54.320 --> 0:23:00.159