Speaker 1: This is Bloomberg Wall Street Week. Market shruggle, higher consumer prizes.
Speaker 1: The economy is in the process of rebounding. Will the
Speaker 1: utter reserve of its own digital currency? The financial stories
Speaker 1: that sheep our word. Many people think the yells are
Speaker 1: just going to keep marching up. We have more spending
Speaker 1: coming out of Congress. One of the big questions I
Speaker 1: think on investor's mind inflations through the eyes of the
Speaker 1: most influential voices. Larry Summer is the former Treasury Secretary
Speaker 1: Bryan wynhan Beck of America, Will CEO Charlie Sharp Bloomberg
Speaker 1: Wall Street Week with David Weston from Bloomberg Radio. This
Speaker 1: is Bloomberg Wall Street Week. I'm Romain Bostick in for
Speaker 1: David Weston. This week. Professor Stephanie Kelton, author of The
Speaker 1: Deficit myth on economic experimentation. We are in an experimental economy.
Speaker 1: After this crisis, we really saw fiscal policy engage in
Speaker 1: a way that it didn't after the financial crisis. And
Speaker 1: special contributor Larry Summers on the continuation of trade tensions
Speaker 1: between the US and China. I hope there's some kind
Speaker 1: of ongoing channel so as to manage potential crises five
Speaker 1: point four. That's the statistic for the week. It was
Speaker 1: the headline consumer price index number for June, and it
Speaker 1: was the strongest jump in inflation in more than a decade.
Speaker 1: You exclude food and gas, it ends up being the
Speaker 1: biggest jump in three decades. Even if you back out
Speaker 1: the cost to shelter and the cost of use cars,
Speaker 1: the remaining goods and services in the index rose by
Speaker 1: the most in two decades. That CPI report for the
Speaker 1: month of June left no doubt that the US is
Speaker 1: battling a problem of rising prices. What is in doubt
Speaker 1: whether those inflationary pressures will be long lasting or temporary.
Speaker 1: Critics argue inflation is being fanned by the FED, a
Speaker 1: FED that insists on holding interest rates near zero and
Speaker 1: is yet to detail when it will fully scale back
Speaker 1: its multibillion dollar monthly purchases of treasuries and mortgage backed securities.
Speaker 1: Lawmaker's grilled FED chair J. Powell, who defended the current
Speaker 1: standstill on monetary policy. Inflation has increased notably and will
Speaker 1: likely remain elevated coming months before moderating, and even as
Speaker 1: the economy seems to be roaring back, the FIT is
Speaker 1: still concerned that the pre pandemic normal is not here yet.
Speaker 1: While reaching the standard of substantial further progress is still
Speaker 1: a ways off, participants expect that progress will continue. The
Speaker 1: spread of the COVID delta variant is proof of the
Speaker 1: slow slog. It's now the dominant strain in Spain and
Speaker 1: in the UK, and it accounts for almost sixty percent
Speaker 1: of the cases right here in the US, widening the
Speaker 1: gulf between the unvaccinated and vaccinated communities. And while the
Speaker 1: government's central bank waits and sees the big Wall Street banks,
Speaker 1: they show just how complicated things are in this economic recovery.
Speaker 1: Investment banking divisions they're doing well helping corporate clients adjust
Speaker 1: their finances, but revenue growth on most trading desk that's
Speaker 1: been cooling as the market swings subside. And then while
Speaker 1: consumers are spending more and swiping their credit cards more frequently,
Speaker 1: they're also borrowing less money to do so. Joining us
Speaker 1: right now our roundtable, invest Co chief Global market strategist
Speaker 1: Christina Hooper and bloom Intelligence senior analyst Allison Williams joining
Speaker 1: us here today to talk down about what happened really
Speaker 1: this week, and Christina, we really have to start with
Speaker 1: that CPI data, followed by the PPI data, which seemed
Speaker 1: to ratify the guests the fears of a lot of
Speaker 1: people that inflation is certainly real. The big question here
Speaker 1: is whether it's transitory. And I'm wondering whether you at
Speaker 1: all got a little bit rattled by some of the
Speaker 1: data that we saw this week. I actually didn't get
Speaker 1: very rattled at all, Romane, and I'll tell you why. Um,
Speaker 1: we have gone through an extraordinary period in economic history.
Speaker 1: We essentially shut down the economy, UH, and then after
Speaker 1: a very significant period, we reopened it. So we have
Speaker 1: an incredible amount of pent up demand. We have elevated
Speaker 1: household savings. UH. We have lots of liquidity in general
Speaker 1: because we've had very significant fiscal and monetary stimulus, and
Speaker 1: so um, there is a lot of money chasing too
Speaker 1: few goods and services. Now, this int might be higher
Speaker 1: than what FED officials expected, but they have said over
Speaker 1: and over again that they did expect inflation to spike,
Speaker 1: and I think that's key. This is not this should
Speaker 1: not come as a huge surprise. Yes, maybe it's a
Speaker 1: little higher than most expect um, but there's nothing that
Speaker 1: I've seen that changes my mind that this is likely
Speaker 1: mostly transitory inflation, so that so far investors did that
Speaker 1: mean that they should remain pro risk, pro duration absolutely.
Speaker 1: I think what we need to do is take a
Speaker 1: step back and look at where we are in the
Speaker 1: economic cycle, and the US really has just entered the
Speaker 1: expansion phase of the economic cycle. What we know from
Speaker 1: history is that typically that's a period in which risk
Speaker 1: at risk assets outperform UH and UM. Usually it's stocks
Speaker 1: that outperform risky bonds. So it's an environment that I
Speaker 1: think is a positive for the stock market, and I
Speaker 1: expect that monetary policy remains very supportive even if we
Speaker 1: see the start of normalization. So to me, this is
Speaker 1: a time to be risk on. So Allison Williams, a
Speaker 1: lot of people are really sort of trying to get
Speaker 1: a read here on where we stand in the economic cycle.
Speaker 1: This week, of course, we got earnings from all of
Speaker 1: the major US banks here, and usually they kind of
Speaker 1: serve as a barometer, I guess for economic sentiment. What
Speaker 1: do we learn from them this week? I think we
Speaker 1: learned that the economy is very healthy, and to some extent,
Speaker 1: we saw most of the trends that we saw were
Speaker 1: in line with our expected. A couple were a little
Speaker 1: bit outsized, so net interest income continuing to drift lower.
Speaker 1: Credit super strong, UM, great numbers from the bank, not
Speaker 1: just the reserve releases that we read so much about,
Speaker 1: but the underlying credit strong and then UM. When you
Speaker 1: talk about the reserve releases, this is effectively the money
Speaker 1: they were setting aside for bad loans, right, correct, So
Speaker 1: if we think about the reserves UM a year ago,
Speaker 1: banks had no idea, none of us had any idea
Speaker 1: how bad things would get, so they were very conservative
Speaker 1: in terms of setting money aside. As things are getting better,
Speaker 1: they're releasing those reserves and that feeds into the income statement.
Speaker 1: And so there is a lot of volatility when you
Speaker 1: look at the overall EPs numbers, but I think from
Speaker 1: a core trends also generally healthy, although as I said
Speaker 1: that it's it's a little bit of a mix. So
Speaker 1: those banks that rely more on that interest income, like
Speaker 1: a Bank of America or well as far ago, some
Speaker 1: of the regional banks that are covered by Herman chan
Speaker 1: Um really have seen some softness and a lot of
Speaker 1: that is really just due to the lack of borrowing
Speaker 1: our Thanks to Christina Hooper of Investco and Allison Williams
Speaker 1: of Bloomberg Intelligence. Coming up Netflix, it's adding a new
Speaker 1: wrinkle to the streaming wars with its plans to offer
Speaker 1: video games alongside Britain. We talked to the former CNN
Speaker 1: president John Klein about the fight to stand out in
Speaker 1: the streaming world. That's next on Wall Street Week on Bloomberg.
Speaker 1: This is Bloomberg Wall Street Week with David Weston from
Speaker 1: Bloomberg Radio. This is Bloomberg Wall Street Week. I'm Romain
Speaker 1: Bostick in for David weston the lockdowns of boosted Netflix.
Speaker 1: But next week investors will get a chance to see
Speaker 1: whether the streaming giants growth will hold in the post
Speaker 1: pandemic world. We saw dramatic pull in UH for their
Speaker 1: subscriber growth. The bump was enormous. You can't sustain that. Obviously,
Speaker 1: the question was when would that slow down and how
Speaker 1: dramatically would slow down. Well, now we have the answer.
Speaker 1: The key number to watch will be subscriber growth. A
Speaker 1: Bloomberg Intelligence analysis of Censor tower data suggests global demand
Speaker 1: for Netflix is moderating, with the number of downloads in
Speaker 1: May and June were bounding a little from March and
Speaker 1: April when reopenings took a toll on adding new subscribers.
Speaker 1: Netflix has done better than I think many people thought
Speaker 1: in terms of the doctrines. A few banks one the
Speaker 1: competition from Disney and in a T and T and
Speaker 1: others uh two uh international expansions or something of the
Speaker 1: Disney Plus is Netflix's most formidable rival, but the streaming
Speaker 1: service still has a lot of catching up to do.
Speaker 1: Disney Plus had a hundred and three million global subscribers
Speaker 1: that compares the Netflix is two hundred and eight million.
Speaker 1: Disney Plus has a strong presence in Europe and in India,
Speaker 1: where Carrie streaming service hot Star. There's a new Marvel series, Loki,
Speaker 1: which debuted on Disney Plus last month, and that may
Speaker 1: have given the streaming service a last minute subscriber pans
Speaker 1: for the quarter are signed up to. Growth continues both
Speaker 1: domestically and internationally, and I have to say that we've
Speaker 1: now launched a number of markets, I think fifty nine
Speaker 1: markets across the world, and we've not been disappointed yet.
Speaker 1: The streaming world is expected to get even bigger. A
Speaker 1: new PwC report predicts streaming is going to generate ninety
Speaker 1: four billion dollars in revenue by the end of that's
Speaker 1: up from the pandemic. Brought new entrance into the streaming
Speaker 1: wars with the launch of NBC Universal's Peacock and Discovery Plus.
Speaker 1: I think there's only a handful of truly global, you know,
Speaker 1: greater than a hundred million subscriber based type of services
Speaker 1: that can that can exist alright, Netflix setting a high
Speaker 1: bar for its competitors, of course, with that TV and
Speaker 1: film content. Now the streaming giant said to be expanding
Speaker 1: into video games, joining us right now. John Klein, you
Speaker 1: know him, of course as a former president of CNN.
Speaker 1: He's now the co founder of Hanged Media. He knows
Speaker 1: a lot about keeping eyeballs glued to the screen. John.
Speaker 1: Even before this announcement here about the foray into video games,
Speaker 1: we had seen Netflix experiment with live events and merchandizing
Speaker 1: a lot of things that are more than just the
Speaker 1: content of watching a television show or a movie. Here
Speaker 1: is this the future of streaming. This is what it's
Speaker 1: going to be. It's the present of streaming. Because streaming
Speaker 1: has become the central entertainment activity for everybody. H COVID
Speaker 1: helped accelerate that, and that trend is not going away.
Speaker 1: Wait until they start getting into a R and VR,
Speaker 1: and you know, there's been a lot of experiments with
Speaker 1: that all ready, but that's all going to be filtered
Speaker 1: through your streaming service as well, So there's a lot
Speaker 1: more to come. So what does that mean though for
Speaker 1: some of these smaller streaming services. I saw a statistic
Speaker 1: saying that, you know, as of last month, there were
Speaker 1: almost two hundred streaming services available here in the US,
Speaker 1: some of them obviously very niche. And then of course
Speaker 1: you have the big players like Amazon, Apple, Netflix, Disney Plus.
Speaker 1: Here is there room for a niche service that it
Speaker 1: just may be doing one small thing. It's really tricky
Speaker 1: because one thing that we've all seen in the past
Speaker 1: year is that streaming is an incredibly expensive business to
Speaker 1: be in. Disney just announced that they're going to be
Speaker 1: spending thirty billion dollars a year on content for Disney Plus,
Speaker 1: and they thought they were going to be spending about
Speaker 1: half that, and they've realized that they have two seriously
Speaker 1: up the anti. Because you think about your own streaming habits,
Speaker 1: you can binge an entire season of a show and
Speaker 1: one night if you're really into it, and these services
Speaker 1: are all having a scram about to catch up to
Speaker 1: make sure that they're shoveling enough content onto their services.
Speaker 1: That's why you've seen Netflix add so many foreign produced shows.
Speaker 1: I mean, I'll bet you've watched at least one Netflix
Speaker 1: show that had subtitles last year, right, And that's because
Speaker 1: they just kind of ran out of US created content,
Speaker 1: partly due to COVID and partly because consumer habits are
Speaker 1: just out just out of control, and it's going to
Speaker 1: take a lot of resources to catch up to that,
Speaker 1: which means that smaller niche players are going to have
Speaker 1: to add double down on the ultra niche and over
Speaker 1: deliver on their customer acquisition tactics so that the cost
Speaker 1: of acquiring a subscriber drops to make up for the
Speaker 1: the increasing cost of content. But it's gonna be tough.
Speaker 1: Think of it this way. The tech companies have so
Speaker 1: many more resources to deploy against content costs than traditional
Speaker 1: media companies do. Apple alone has a higher market cap
Speaker 1: than a combination of Disney, Netflix, Comcast, Horizon, you know,
Speaker 1: And it's so they can enter this business whole hog,
Speaker 1: and they've barely begun to fight. So it's going to
Speaker 1: be it's going to be a very expensive proposition to
Speaker 1: be in the streaming business. Given the expense of that proposition,
Speaker 1: do you anticipate any sort of meaningful consolidation. I think
Speaker 1: there's going to have to be among the streaming also
Speaker 1: rans or the smaller players. I mean, it just isn't
Speaker 1: going to make sense to some of these companies to
Speaker 1: spend the kind of money that's necessary. For example, if
Speaker 1: your NBC Universal and you're planning to spend seventeen billion
Speaker 1: dollars this year on Peacock, you might pause and say, well,
Speaker 1: first of all, where is that going to come from.
Speaker 1: We're gonna have to cannabalize some of our other core
Speaker 1: businesses and they're gonna have to be willing to do that.
Speaker 1: And will they be you know, will they pull money
Speaker 1: away from the TV networks, from the local TV stations
Speaker 1: that they've got in order to fundness, or might they
Speaker 1: you know what, maybe we ought to pair up with
Speaker 1: somebody like a CBS or or warners. Should we should
Speaker 1: Comcast jump in to the bidding for Warner Media and
Speaker 1: and and grab that away. Well, that raises an interesting
Speaker 1: question here about the future of live television. John. Obviously,
Speaker 1: you ran CNN for our several years out here in
Speaker 1: the US here, and I'm curious, is there still a
Speaker 1: place for live news, live sports in a streaming world
Speaker 1: where we want to see everything on demand. Well, news
Speaker 1: is one of the few areas that that's actually growing
Speaker 1: during the streaming boom, and I think it will continue
Speaker 1: to because it's just a very tough proposition to watch
Speaker 1: news later, you know, on demand, you do want to
Speaker 1: see it as it's unfolding. Sports is gonna evolve because
Speaker 1: it used to be and has been up until now,
Speaker 1: a mainstay of traditional television delivery. But Amazon just paid
Speaker 1: a billion dollars for the rights to Thursday Night Football starting.
Speaker 1: That's the first for a streaming service to pay that
Speaker 1: kind of money, So, uh, you know that that's gonna
Speaker 1: that's that is a bell weather for a big change,
Speaker 1: and I think you're gonna begin to see sports go
Speaker 1: to pay as well. And our thanks to Tap Media
Speaker 1: chairman and former CNN president John Klein coming up here.
Speaker 1: Fed share Pal says central banks can still help get
Speaker 1: the economy back on track, but modern monetary theory experts
Speaker 1: like Stephanie Kelton say holding down rates may not be
Speaker 1: the best way to manage inflation. That's next on Wall
Speaker 1: Street Week on Bloomberg. This is Bloomberg Wall Street Week
Speaker 1: with David Weston from Bloomberg Radio. M Romaine Bostick in
Speaker 1: for David Weston. The FED jumped into action at the
Speaker 1: height of the pandemic, and it helped fill in the
Speaker 1: gap while lawmakers came up with fiscal stimulus plans, but
Speaker 1: FED share j Pal says it's still too soon to
Speaker 1: think about pulling back that aid now. Inflation is jumping
Speaker 1: and the FIT doesn't seem to be in any rush
Speaker 1: to raise rates. Modern monetary theory experts say that is
Speaker 1: not just the FITS responsibility. Fiscal policy should also play
Speaker 1: a role in controlling inflation. Stephanie Kelton, a professor of
Speaker 1: economics at stony Brook University, is a leading expert on MMT.
Speaker 1: She joins us right now, Stephanie, as we speak today,
Speaker 1: all of the debate out there right now is about inflation.
Speaker 1: Is it going to be long lasting or is it
Speaker 1: going to be transitory? When you look at the latest
Speaker 1: data that we got, what type of inflationary pressures are
Speaker 1: you actually seeing yourself? And do you see those as
Speaker 1: being permanent? When I look at the data, what I
Speaker 1: think mostly this looks like are the growing pains of
Speaker 1: an economy that's emerging from a pandemic and reopening. And
Speaker 1: we see a lot of videosyncratic UH pressures and supply
Speaker 1: chain issues and UM backlogs and that sort of stuff.
Speaker 1: So I think, by and large, what it looks like
Speaker 1: to me is the kind of thing that frankly, we
Speaker 1: had ticipated right coming out of the pandemic. And so
Speaker 1: it's pretty hard for me to see the kinds of
Speaker 1: things that I think you would need to be in
Speaker 1: place in order to get this sort of entrenched inflation
Speaker 1: that begins to feed on it. So so I I
Speaker 1: guess I situate myself pretty squarely in the in the
Speaker 1: transitory camp. Yeah, and there's certainly an element of the
Speaker 1: inflationary pressures we have that we're certainly predictable, given just
Speaker 1: how volatile the economic crisis was, the COVID crisis, and
Speaker 1: how volatile things have been coming out of it. Here.
Speaker 1: But as we sort of get to the other side
Speaker 1: of this economic cycle, there's a lot of debate right
Speaker 1: now about additional fiscal spending, additional fiscal stimulus, whatever you
Speaker 1: wanna call it, is it just throwing another log on
Speaker 1: the fire of an economy that's already hot, or is
Speaker 1: this something that maybe has a place here in our
Speaker 1: policy and in the way we spend government money. Well,
Speaker 1: I think it's the ladder. I think that most of
Speaker 1: what we're hearing about right now. Right we're hearing about
Speaker 1: maybe three and a trillion dollar um human infrastructure bill
Speaker 1: coming maybe alongside the more traditional so called heart infrastructure.
Speaker 1: And I don't think the administration is thinking of this
Speaker 1: as as stimulus. I'm certainly not thinking of this as stimulus.
Speaker 1: I'm thinking of this more the way I think they are,
Speaker 1: which is, you know, doing things that will strengthen some
Speaker 1: of the fragility that's been baked into our system by
Speaker 1: you know, longstanding policy decisions were trying to redress, uh
Speaker 1: some things, fix some of the deficits in the real economy,
Speaker 1: and lay a foundation for a really sustainable and inclusive recovery.
Speaker 1: So I think they're looking at this as an opportunity
Speaker 1: to strengthen the social safety net, make investments skin things
Speaker 1: like education and healthcare, just places where we have underinvested
Speaker 1: for decades. And we've heard that message, of course from
Speaker 1: the Biden administration and some of his allies in Congress.
Speaker 1: We've also heard this idea here that sort of inequalities
Speaker 1: need to be addressed, particularly inequalities that we're sort of
Speaker 1: laid bare based on the policies coming out of the
Speaker 1: last big financial crisis in two thousand and eight two
Speaker 1: thousand ten. Here, what type of steps do you think
Speaker 1: that the Biden administration and hopefully Congress can sort of
Speaker 1: take so that we don't repeat some of those same mistakes. Well,
Speaker 1: I think that what we're hearing articulated from the administration
Speaker 1: right is that the goal is to make investments at
Speaker 1: the bottom that grow from the middle out. So instead
Speaker 1: of you know, this sort of top down, trickle down
Speaker 1: sort of uh, you know, policy prescription that we've tried
Speaker 1: again and again uh and and watched fail, that this
Speaker 1: time is different, that this time we want to see
Speaker 1: the government making investments and things like early childhood education
Speaker 1: and the caring economy, um, you know, broadening the scope
Speaker 1: for infrastructure investment, college education, elder care, and and the
Speaker 1: rest of it. So I think, you know, we're looking
Speaker 1: at the potential for millions and millions of good paying jobs,
Speaker 1: many of them for people, in fact, most of them
Speaker 1: for people with um little if any college education. So
Speaker 1: this really is an opportunity to, you know, provide a good,
Speaker 1: solid foundation for a recovery that aims squarely at those
Speaker 1: at the bottom in the middle of the economic income distribution. So,
Speaker 1: professor you mentioned the sort of top down nature of
Speaker 1: economic policy that has been basically the dogma now for
Speaker 1: several decades. A lot of people have bought into it
Speaker 1: on both sides of the political spectrum. There's an argument
Speaker 1: to be made that there has been a spate of
Speaker 1: prosperity in this country that I guess can be attributed
Speaker 1: to that top down policy. Is there a sense here
Speaker 1: that the boom bus cycles we've been through over those
Speaker 1: last few decades since that top down policy became the
Speaker 1: sort of dogma, that that is a contributor to it,
Speaker 1: or is there something else here that maybe we should
Speaker 1: be looking at. Well, I think there's something else. I
Speaker 1: think know. The reality is that we've got a lot
Speaker 1: of studies now, and some pretty big ones that have
Speaker 1: been done looking at the longer term effects of the
Speaker 1: supply side policies, and they really have been a failure.
Speaker 1: These have not been successful policies, and they've been tried
Speaker 1: decades upon decades, and what we've ended up with is
Speaker 1: widening gaps between those at the very top and everybody else.
Speaker 1: Income in wealth, inequalities have widened. We haven't gotten the
Speaker 1: kinds of wage growth and inclusive and sustainable growth for
Speaker 1: the middle class. We've seen middle class jobs and workers
Speaker 1: fall behind for decades. So I think it is time
Speaker 1: to shift gears. Thanks to Stephanie Flanders of Stony Brook
Speaker 1: University and the author of the Deficit Myth. Coming up,
Speaker 1: we wrap up the week with our special contributor Larry
Speaker 1: Summers of Harvard. That's next on Wall Street Week on Bloomberg.
Speaker 1: This is Bloomberg Wall Street Week with David Weston from
Speaker 1: Bloomberg Radio. This is Bloomberg Wall Street Week, arm Romain
Speaker 1: Bostick in for David Weston and now Here to discuss
Speaker 1: some of the economic developments of the week. We're joined
Speaker 1: by our special contributor, economists Larry Summers. Larry, I want
Speaker 1: to start with some developments that occurred towards the end
Speaker 1: of the week. On Friday, we got an advisory out
Speaker 1: of the Biden administration, the Treasury, the State Department, the
Speaker 1: Homeland Security Department, and the Commerce Department, all putting out
Speaker 1: an advisory warning US companies about the risks of doing
Speaker 1: business in Hong Kong, saying the business environment over there
Speaker 1: has deteriorated given China's recent pushup to I guess control
Speaker 1: what goes on in that territory there. The relationship between
Speaker 1: the U S and China, the economic dialogue between the
Speaker 1: U S and China, seems to be getting worse, not better.
Speaker 1: I think that's right. I think there are plenty of
Speaker 1: issues on both sides. You look at many of the
Speaker 1: things that China has done. It's not just Usibly, the
Speaker 1: United States Investment degree meant that China and the EU
Speaker 1: had reached our on the rails China's encountering UH friction
Speaker 1: all over the world. I am concerned about the canceling
Speaker 1: of dialogue. It seems to me that in many ways,
Speaker 1: the more fundamental your disagreements, the more important it is
Speaker 1: that there be some form of UH communications. So I
Speaker 1: don't think we're in any position to have a partnership
Speaker 1: with UH China. We're competing with them in very full
Speaker 1: spectrum ways. But the strategy of not having UH dialogue
Speaker 1: and not being interested in communication, it seems to me,
Speaker 1: is one that UH concerns me and whether it's called
Speaker 1: a strategic economic dialogue, whatever it is UH called, I
Speaker 1: hope there's some kind of ongoing channel so as to
Speaker 1: manage potential crises and so that we're in a position
Speaker 1: to address difficult issues when an if they arise. I
Speaker 1: think we need to recognize that we're in a kind
Speaker 1: of unprecedented situation. When we were UM in a significantly
Speaker 1: adversarial relationship with the Soviet Union, there was vastly less
Speaker 1: interdependence than there is today. And so with this degree
Speaker 1: of disagreement, this degree of interdependence, UH is a new
Speaker 1: kind of relationship, and we're all feeling our way, and
Speaker 1: I'm not counseling us to not aggressively pursue our interests.
Speaker 1: I think we do need a kind of UH firmness
Speaker 1: and directness that we always haven't had, But I I
Speaker 1: do wish we were providing for some continuing conversation. That
Speaker 1: interdependence is certainly a critical difference here between how the
Speaker 1: us UH is dealing with China and how the situation
Speaker 1: it had with the Soviets. I am curious though there
Speaker 1: has been a push here to try to make some
Speaker 1: U S industries a little bit more economically independent from
Speaker 1: the Chinese supply chain here. And obviously we know that
Speaker 1: is a tough thing to do here, given just how
Speaker 1: supply chains are set up here. But do you think
Speaker 1: that there is a case to be made that the
Speaker 1: US can be a more of a manufacturer of its
Speaker 1: own goods, more of an assembler of its own goods,
Speaker 1: and less reliant on China and other foreign nations remain.
Speaker 1: I think one needs to distinguish between security and UH independent. Yes,
Speaker 1: I think we need to be conscious and careful about
Speaker 1: being vulnerable. I think it was a very concern in
Speaker 1: situation that the US couldn't get acces two masks early
Speaker 1: in UH the pandemic, and so yes, I do think
Speaker 1: we need to pay attention to Some people have put
Speaker 1: it just in time as well as UH just in case,
Speaker 1: as much as we pay attention to just in time.
Speaker 1: But does that mean the production needs to be located
Speaker 1: in the United States rather than in countries were allied with,
Speaker 1: like those in Canada and Europe. I think that's a mistake.
Speaker 1: Does that mean that those strategies should be motivated not
Speaker 1: by secure supplies but instead by aspirations to return jobs
Speaker 1: to the United States. I'm not sure that when they're
Speaker 1: framed that way they are particularly sound. I think the
Speaker 1: Trump administration made a serious error to which the Biden
Speaker 1: administration and as I think not uh corrected uh fully
Speaker 1: of forgetting that when you raise the price of inputs,
Speaker 1: you reduced the competitiveness of US producers. And so when
Speaker 1: imported goods are an import to our manufacturing and we
Speaker 1: restrict those imports, we make our manufacturing less uh competitive.
Speaker 1: And so all of that is I think issues that
Speaker 1: we need to recognize. So yes, I would take on
Speaker 1: board the idea of resilience and containing supply chains, but no,
Speaker 1: I surely would not uh frame this in terms of
Speaker 1: maximizing manufacturing jobs. That's a kind of old fashioned Latin
Speaker 1: American notion that didn't work very well in Latin America,
Speaker 1: and I think ultimately over the long term, won't work
Speaker 1: so well here. All right. So the other big development
Speaker 1: this week, of course, was the latest inflation data, the
Speaker 1: CPI numbers and the pp I numbers both running hot,
Speaker 1: both adding to the evidence here that inflation is certainly real.
Speaker 1: J Pal the fetch here was on Capitol Hill for
Speaker 1: his semi annual testimony. He acknowledges. His exact quote was,
Speaker 1: inflation is not moderately above two percent, it's well above
Speaker 1: two percent. But then he did ask and ask his
Speaker 1: own question here, basically is where are we six months
Speaker 1: from now? Basically raising this question about whether the pressures
Speaker 1: or we're seeing out there are transitory, whether they will
Speaker 1: dissipate once some of the supply chain bottlenecks are finally
Speaker 1: worked out here. What's your general view here right now
Speaker 1: on where we stand with these inflation pressures. I think
Speaker 1: most of the observers are framing the question the wrong
Speaker 1: way Room made. They're framing it as is inflation transitory?
Speaker 1: Look the at an annualized rate, the inflation rate was
Speaker 1: eleven this month. Yes, that is transitory. There's no question
Speaker 1: at all that that is transitory. There is no question
Speaker 1: that the figures were pushed up by transitory factors and
Speaker 1: used cars and other things. But that's not the important question.
Speaker 1: The important question is whether of the eleven percent, nine
Speaker 1: percent was transitory, eight percent was transitory, or six or
Speaker 1: seven percent were transitory, six or seven percent was transitory.
Speaker 1: Then we've got inflation running at four or five percent,
Speaker 1: and we've got a real problem. Uh, in the country.
Speaker 1: So one's not addressing the issue usefully simply by remarking
Speaker 1: that there's a lot of transitory inflation. I look at
Speaker 1: what's happening in the labor market, where we've got job
Speaker 1: shortages to UH in terms of the ability to fill
Speaker 1: jobs to an unprecedented degree, where workers are quitting at
Speaker 1: a very large UH rate, and I see real cause
Speaker 1: for concern that waging lation is starting to UH accelerate.
Speaker 1: I look at what's happening in the housing market, where
Speaker 1: everybody I know who's trying to rent a house. Every
Speaker 1: statistic I see, whether it's from San Francisco or from Cincinnati,
Speaker 1: whether it's from New York, or whether it's from rural
Speaker 1: Iowa is saying that the housing market is on fire,
Speaker 1: both for renters and owners. I see none of that
Speaker 1: in the statistics. And it looks to me the statistics
Speaker 1: are the official price INDUSESE and it looks to me
Speaker 1: like either those statistics are wrong or more likely that
Speaker 1: inflation is going to UH come. And so I think
Speaker 1: that inflation is with us thanks to our special contributor,
Speaker 1: Larry Summers of Harvard. Now, finally, one more thought. Next
Speaker 1: week marks the fifty second anniversary of the Apollo eleven
Speaker 1: mission to the Moon, a human setting foot on soil
Speaker 1: other than the Earth's. It was a dramatic culmination of
Speaker 1: your is long space race between the Soviets and the US,
Speaker 1: and while rooted in national security and national pride, it
Speaker 1: ended up being a springboard for technological advancement like we
Speaker 1: had never seen before, a third Industrial Revolution that hastened
Speaker 1: the development of automation and computing, and it laid the
Speaker 1: groundwork for many of the things we take for granted
Speaker 1: today mobile phones, food preservatives, air purifiers, cordless tools, wireless headsets, memory, foam, mattresses.
Speaker 1: So many little things owe directly to one big thing,
Speaker 1: the push to explore space. That push then was led
Speaker 1: by the government, but now a new era of space
Speaker 1: exploration is a foot, and it's being led by private
Speaker 1: industry and private individuals. Bezos, Branson, Musk, billionaire entrepreneurs whose
Speaker 1: ambitions there I say, maybe a little bit less noble
Speaker 1: and much more profit oriented, to be sure, than what
Speaker 1: spawned the nineteen sixties space race. But once you dig
Speaker 1: beneath the billionaire bravado, something important is actually taking place here.
Speaker 1: Real science, real research, real human progress, It's likely no
Speaker 1: coincidence that Bezos chose to stage the first crude mission
Speaker 1: of his Blue Origin space graph for July, the anniversary
Speaker 1: of Neil Armstrong's milestone. Bezos has already compared the spectacle
Speaker 1: of space tourism to the airplane barn stormers of a
Speaker 1: hundred years ago, whose flying acrobatics seemed trivial at the time,
Speaker 1: but they helped fuel public fascination and an acceptance of
Speaker 1: a new and of course now common mode of transportation,
Speaker 1: the airplane. Elon Musk and SpaceX, they've shown you can
Speaker 1: shave millions of dollars off the cost of launches with
Speaker 1: reusable rocket boosters, an idea that was nothing more than
Speaker 1: science fiction just a few decades ago. The experimentation by
Speaker 1: these individuals, along with the continued involvement of the government
Speaker 1: NASA in the US and space agencies in China, Europe, India, Russia,
Speaker 1: the UAE, they're actively leading to scientific advancement in jet propulsion, mining, farming,
Speaker 1: water extraction, laser communication, and radio shielding, all providing valuable
Speaker 1: insight into how humankind could adapt to much harsher environments. Now,
Speaker 1: it's unclear what the endgame is for this renewed push
Speaker 1: to explore the ultimate frontier. But if the nineteen sixty
Speaker 1: Space race was any guide, then the sky is not
Speaker 1: the limit that does it. For this episode of Wall
Speaker 1: Street Week, arm Romaine Bostick, this is Bloomberg.